Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2024

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2.      Summary of Significant Accounting Policies

Investment Properties

The Company has adopted Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805), which clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revised framework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. As a result, all of the Company’s acquisitions to date qualified as asset acquisitions and the Company expects future acquisitions of operating properties to qualify as asset acquisitions.  Accordingly, third-party transaction costs associated with these acquisitions have been and will be

capitalized, while internal acquisition costs will continue to be expensed.

Accounting Standards Codification (“ASC”) 805 mandates that “an acquiring entity shall allocate the cost of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at date of acquisition.” ASC 805 results in an allocation of acquisition costs to both tangible and intangible assets associated with income producing real estate. Tangible assets include land, buildings, site improvements, tenant improvements and furniture, fixtures and equipment, while intangible assets include the value of in-place leases, lease origination costs (leasing commissions and tenant improvements), legal and marketing costs and leasehold assets and liabilities (above or below market leases), among others.

The Company uses independent, third-party consultants to assist management with its ASC 805 evaluations. The Company determines fair value based on accepted valuation methodologies including the cost, market, and income capitalization approaches. The purchase price is allocated to the tangible and intangible assets identified in the evaluation.

The Company records depreciation on buildings and improvements utilizing the straight-line method over the estimated useful life of the asset, generally 4 to 42 years. The Company reviews depreciable lives of investment properties periodically and makes adjustments to reflect a shorter economic life, when necessary. Capitalized leasing commissions and tenant improvements incurred and paid by the Company subsequent to the acquisition of the investment property are amortized utilizing the straight-line method over the term of the related lease. Amounts allocated to buildings are depreciated over the estimated remaining life of the acquired building or related improvements.

Acquisition and closing costs are capitalized as part of each tangible asset on a pro rata basis. Improvements and major repairs and maintenance are capitalized when the repair and maintenance substantially extend the useful life, increase capacity or improve the efficiency of the asset. All other repair and maintenance costs are expensed as incurred.

Assets Held for Sale

The Company may decide to sell properties that are held as investment properties. The accounting treatment for the disposal of long-lived assets is covered by ASC 360.  Under this guidance, the Company records the assets associated with these properties, and any associated mortgages payable, as held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year.  Delays in the time required to complete a sale do not preclude a long-lived asset from continuing to be classified as held for sale beyond the initial one-year period if the delay is caused by events or circumstances beyond an entity’s control and there is sufficient evidence that the entity remains committed to a qualifying plan to sell the long-lived asset.  

Properties classified as held for sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. When the carrying value exceeds the fair value, less estimated costs to sell, an impairment charge is recognized. The Company determines fair value based on the three-level valuation hierarchy for fair value measurement.  Level 1 inputs are quoted prices in active markets for identical assets or liabilities.  Level 2 inputs are quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

During November 2023, the Company committed to a plan to sell an asset group associated with the Hanover Square Shopping Center Property that included the land, site improvements, building, building improvements and tenant improvements. As a result, as of December 1, 2023, the Company reclassified these assets, and the related mortgage payable, net, for the Hanover Square Shopping Center Property as assets held for sale and liabilities associated with assets held for sale, respectively. Under ASC 360, depreciation of assets held for sale is discontinued, so no further depreciation or amortization was recorded subsequent to December 1, 2023.  The Company believed that the fair value, less estimated costs to sell, exceeded the Company’s carrying cost, so the Company did not record any impairment of assets held for sale related to the Hanover Square Shopping Center Property for any periods, including the three months ended March 31, 2024 and the year ended December 31, 2023, the periods during which the Hanover Square Shopping Center Property was classified as assets held for sale.  The Company sold the Hanover Square Shopping Center on March 13, 2024.  

Intangible Assets and Liabilities, net

The Company determines, through the ASC 805 evaluation, the above and below market lease intangibles upon acquiring a property. Intangible assets (or liabilities) such as above or below-market leases and in-place lease value are recorded at fair value and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. The Company amortizes amounts allocated to tenant improvements, in-place lease assets and other lease-related intangibles over the remaining life of the underlying leases. The analysis is conducted on a lease-by-lease basis.

Details of the deferred costs, net of amortization, arising from the Company’s purchases of its retail center properties, flex center properties and STNL properties are as follows:

		September 30, 2024
		(unaudited)	December 31, 2023
Intangible Assets, net
Leasing commissions	$	843,627	$	912,040
Legal and marketing costs		79,358		104,791
Above market leases		71,502		106,907
Net leasehold asset		1,453,878		1,592,808
	$	2,448,365	$	2,716,546
Intangible Liabilities, net
Below market leases	$	(1,736,263)	$	(1,865,310)

Capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases. Adjustments to rental revenue related to the above and below market leases during the three and nine months ended September 30, 2024 and 2023, respectively, were as follows:

	For the three months ended				For the nine months ended
	September 30,				September 30,
		2024		2023		2024		2023
		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Amortization of above market leases	$	(7,074)	$	(23,717)	$	(35,405)	$	(75,437)
Amortization of below market leases		71,241		88,586		228,803		287,341
	$	64,167	$	64,869	$	193,398	$	211,904

Amortization of lease origination costs, leases in place and legal and marketing costs represent a component of depreciation and amortization expense. Amortization related to these intangible assets during the three and nine months ended September 30, 2024 and 2023, respectively, were as follows:

	For the three months ended				For the nine months ended
	September 30,				September 30,
		2024		2023		2024		2023
		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Leasing commissions	$	(42,887)	$	(53,754)	$	(135,097)	$	(165,542)
Legal and marketing costs		(8,276)		(14,745)		(30,375)		(46,406)
Net leasehold asset		(94,735)		(147,788)		(313,141)		(478,345)
	$	(145,898)	$	(216,287)	$	(478,613)	$	(690,293)

As of September 30, 2024 and December 31, 2023, the Company’s accumulated amortization of lease origination costs, leases in place and legal and marketing costs totaled $2,092,772 and $2,204,404, respectively. During the three and nine months ended September 30, 2024, the Company wrote off $196,103 and $590,245, respectively, in accumulated amortization related to fully amortized intangible assets, and $0 and $0, respectively, in accumulated amortization related to the write off of intangible assets related to the early terminated leases, discussed below.

Future amortization of above and below market leases, lease origination costs, leases in place, legal and marketing costs and tenant relationships is as follows:

		For the
		remaining three
		months ending
		December 31,
	2024		2025		2026		2027		2028		2029-2041		Total
Intangible Assets
Leasing commissions	$	41,246	$	154,496	$	116,510	$	97,592	$	76,167	$	357,616	$	843,627
Legal and marketing costs		7,064		24,456		13,842		8,599		5,886		19,511		79,358
Above market leases		5,445		21,292		15,629		14,543		10,114		4,479		71,502
Net leasehold asset		89,357		318,667		223,495		177,171		128,963		516,225		1,453,878
	$	143,112	$	518,911	$	369,476	$	297,905	$	221,130	$	897,831	$	2,448,365
Intangible Liabilities
Below market leases	$	(67,407)	$	(227,108)	$	(192,535)	$	(175,625)	$	(153,615)	$	(919,973)	$	(1,736,263)

Impairment

No loss on impairment was recorded during the three and nine months ended September 30, 2024. During the three and nine months ended September 30, 2023, the Company recorded a loss on impairment of $0 and $50,859, respectively, resulting from the events described below.  

Investment Properties

The Company reviews its investment properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable, but at least annually. These circumstances include, but are not limited to, declines in the property’s cash flows, occupancy and fair market value. The Company measures any impairment of an investment property when the estimated undiscounted cash flows plus its residual value is less than the carrying value of the property. To the extent impairment has occurred, the Company charges to income the excess of the carrying value of the property over its estimated fair value. The Company estimates fair value using unobservable data such as projected future operating income, estimated capitalization rates, or multiples, leasing prospects and local market information. The Company may decide to sell properties that are held for use and the sale prices of these properties may differ from their carrying values. The Company did not record any impairment adjustments to its investment properties resulting from events or changes in circumstances during the three and nine months ended September 30, 2024 and 2023, that would result in the projected value of the Company’s investment properties being below their carrying value.  

However, during the nine months ended September 30, 2023, a tenant defaulted on its lease and abandoned its premises.  The Company determined that the carrying value of capitalized leasing commissions associated with this lease which were recorded as a component of investment properties on the Company’s condensed consolidated balance sheets should be written off, and the Company recorded a loss on impairment of $5,873 for the nine months ended September 30, 2023.  Additionally, during the nine months ended September 30, 2023, the Company agreed to allow a second tenant to terminate its lease early.  The Company determined that the carrying value of capitalized tenant improvements associated with this lease which were recorded as a component of investment properties on the Company’s condensed consolidated balance sheets should be written off, and the Company recorded a loss on impairment of $8,655 for the nine months ended September 30, 2023.  These amounts are included in the loss on impairment reported on the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2023. No such loss on impairment was recorded for the three months ended September 30, 2023 or for the three and nine months ended September 30, 2024.

Intangible Assets

The Company also reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of its intangible assets may not be recoverable, but at least annually.  During the nine months ended September 30, 2023, the tenant discussed in the paragraph immediately above terminated its lease early. The Company determined that the carrying value of the intangible assets and liabilities, net, associated with this lease that were recorded as part of the purchase of this property should be written off. As a result, for the nine months ended September 30, 2023, the Company recorded a loss on impairment related to intangible

assets of $26,896.  This amount is included in the loss on impairment reported on the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2023. No such loss on impairment was recorded for the three months ended September 30, 2023 or for the three and nine months ended September 30, 2024.  

Unbilled Rent

The Company also reviews the unbilled rent asset recorded on the Company’s condensed consolidated balance sheets for impairment to determine if any amounts may not be recoverable.  During the nine months ended September 30, 2023, the Company wrote off $9,435 in unbilled rent related to the two tenants discussed above.  These amounts are included in the loss on impairment reported on the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2023.  No such amounts were recorded for the three months ended September 30, 2023 or for the three and nine months ended September 30, 2024.  

Conditional Asset Retirement Obligation

A conditional asset retirement obligation represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement depends on a future event that may or may not be within the Company’s control. Currently, the Company does not have any conditional asset retirement obligations. However, any such obligations identified in the future would result in the Company recording a liability if the fair value of the obligation can be reasonably estimated. Environmental studies conducted at the time the Company acquired its properties did not reveal any material environmental liabilities, and the Company is unaware of any subsequent environmental matters that would have created a material liability.

The Company believes that its properties are currently in material compliance with applicable environmental, as well as non-environmental, statutory and regulatory requirements. The Company did not record any conditional asset retirement obligation liabilities during the three and nine months ended September 30, 2024 and 2023, respectively.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash and cash equivalents. Cash equivalents are carried at cost, which approximates fair value. Cash equivalents consist primarily of bank operating accounts and money markets. Financial instruments that potentially subject the Company to concentrations of credit risk include its cash and equivalents and its trade accounts receivable.

The Company places its cash and cash equivalents and any restricted cash held by the Company on deposit with financial institutions in the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company’s credit loss in the event of failure of these financial institutions is represented by the difference between the FDIC limit and the total amounts on deposit. Management monitors the financial institutions’ credit worthiness in conjunction with balances on deposit to minimize risk. As of September 30, 2024, the Company held four cash accounts at a single financial institution with combined balances that exceeded the FDIC limit by $2,245,752.  As of December 31, 2023, the Company held two cash accounts at a single financial institution with combined balances that exceeded the FDIC limit by $1,366,872.

Restricted cash represents amounts held by the Company for tenant security deposits, escrow deposits held by lenders for real estate tax, insurance, and operating reserves, and capital reserves held by lenders for investment property capital improvements.

Tenant security deposits are restricted cash balances held by the Company to offset potential damages, unpaid rent or other unmet conditions of its tenant leases. As of September 30, 2024 and December 31, 2023, the Company reported $248,110 and $260,898, respectively, in security deposits held as restricted cash.

Escrow deposits are restricted cash balances held by lenders for real estate taxes and insurance premiums. As of September 30, 2024 and December 31, 2023, the Company reported $427,960 and $191,139, respectively, in escrow deposits.

Capital reserves are restricted cash balances held by lenders for capital improvements, leasing commissions and tenant improvements. As of September 30, 2024 and December 31, 2023, the Company reported $1,171,256 and $1,122,965, respectively, in capital property reserves.

	September 30, 2024		December 31,
Property and Purpose of Reserve	(unaudited)		2023
Ashley Plaza Property – maintenance and leasing cost reserve		514,547		439,404
Brookfield Center Property – maintenance and leasing cost reserve		124,737		91,491
Franklin Square Property – leasing costs		531,972		441,360
Hanover Square Property – operating reserve		—		150,710
Total	$	1,171,256	$	1,122,965

Share Retirement

ASC 505-30-30-8 provides guidance on accounting for share retirement and establishes two alternative methods for accounting for the purchase price paid in excess of par value.  The Company has elected the method by which the excess between par value and the purchase price, including costs and fees, is recorded to additional paid in capital on the Company’s condensed consolidated balance sheets. During the three and nine months ended September 30, 2024, the Company repurchased 2,830 shares of common stock, $0.01 par value per share (“Common Shares”) at a total cost of $32,467, including $62 in fees associated with this transaction, and at an average price of $11.45 per Common Share (excluding the impact of fees). Of the total repurchase price, $28 was recorded to Common Shares and the difference, $32,439, was recorded to additional paid in capital on the Company’s condensed consolidated balance sheet. No such amounts were recorded during the three and nine months ended September 30, 2023.

Revenue Recognition

Retail, Flex Center and STNL Property Revenues

The Company recognizes minimum rents from its retail center properties, flex center properties and STNL properties on a straight-line basis over the terms of the respective leases which results in an unbilled rent asset being recorded on the condensed consolidated balance sheets. As of September 30, 2024 and December 31, 2023, the Company reported $1,077,746 and $1,109,782, respectively, in unbilled rent.

The Company’s leases generally require the tenant to reimburse the Company for a substantial portion of its expenses incurred in operating, maintaining, repairing, insuring and managing the shopping center and common areas (collectively defined as Common Area Maintenance or “CAM” expenses). The Company includes these reimbursements, along with other revenue derived from late fees and seasonal events, on the condensed consolidated statements of operations under the captions “Retail center property revenues”, “Flex center property revenues”, and “Single tenant net lease asset revenues”.  (See Recent Accounting Pronouncements, below.) This significantly reduces the Company’s exposure to increases in costs and operating expenses resulting from inflation or other outside factors. The Company accrues reimbursements from tenants for recoverable portions of all these expenses as revenue in the period the applicable expenditures are incurred. The Company calculates the tenant’s share of operating costs by multiplying the total amount of the operating costs by a fraction, the numerator of which is the total number of square feet being leased by the tenant, and the denominator of which is the average total square footage of all leasable buildings at the property. The Company also receives payments for these reimbursements from substantially all its tenants on a monthly basis throughout the year.

The Company recognizes differences between previously estimated recoveries and the final billed amounts in the year in which the amounts become final. Since these differences are determined annually under the leases and accrued as of December 31 in the year earned, no such revenues were recognized during the three and nine months ended September 30, 2024 and 2023.  

The Company recognizes lease termination fees in the period that the lease is terminated and collection of the fees is reasonably assured. Upon early lease termination, any unrecovered intangibles and other assets are written off as a loss on impairment.  (See Impairment, above.)  The Company did not receive any lease termination fees during the three and nine months ended September 30, 2024 and 2023.

Management Restructuring Expenses

On July 18, 2023, the Company and the Operating Partnership entered into a Termination Agreement with the Manager, William R. Elliott and Thomas E. Messier, which provided for the immediate termination of the Management Agreement and, among other things, aggregate payments of $1,602,717 in settlement of all amounts payable under the Management Agreement (consisting of a $1,250,000 termination fee and a $352,717 deferred acquisition fee which represented acquisition fees that had been earned during 2022, but deferred under a deferral agreement).  For the three and nine months ended September 30, 2023, the Company recorded $1,452,904 and $1,846,329 in management restructuring expenses, which included the payment of the termination fee, and legal and other expenses associated with the Board’s Special Committee’s (consisting of the Board’s independent directors) exploration of strategic alternatives, as management restructuring expenses on its condensed consolidated statement of operations in accordance with ASC 420-10-S99.  The payment of the deferred acquisition fee was recorded as a reduction in accounts payable and accrued liabilities on the Company’s condensed consolidated balance sheet.  For the three and nine months ended September 30, 2023, the Company recorded $151,917 and $545,342, respectively, in legal fees associated with the work of the Special Committee as management restructuring expenses and for the three and nine months ended September 30, 2023, the Company recorded $50,987  in expenses associated with the guaranty substitutions (see note 5, below) as management restructuring expenses.  No such expenses were recorded for the three and nine months ended September 30, 2024.

Rent and other receivables

Rent and other receivables include tenant receivables related to base rents and tenant reimbursements. Rent and other receivables do not include receivables attributable to recording rents on a straight-line basis, which are included in unbilled rent, discussed above. The Company determines an allowance for the uncollectible portion of accrued rents and accounts receivable based upon customer credit worthiness (including expected recovery of a claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. The Company considers a receivable past due once it becomes delinquent per the terms of the lease. A past due receivable triggers certain events such as notices, fees and other allowable and required actions per the lease. As of September 30, 2024 and December 31, 2023, the Company’s allowance for uncollectible rent totaled $31,145 and $13,413, respectively, which are comprised of amounts specifically identified based on management’s review of individual tenants’ outstanding receivables.  Management determined that no additional general reserve is considered necessary as of September 30, 2024 and December 31, 2023, respectively.

Income Taxes

Beginning with the Company’s taxable year ended December 31, 2017, the REIT has elected to be taxed as a real estate investment trust for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code and applicable Treasury regulations relating to REIT qualification. In order to maintain this REIT status, the regulations require the Company to distribute at least 90% of its taxable income to stockholders and meet certain other asset and income tests, as well as other requirements. If the Company fails to qualify as a REIT, it will be subject to tax at regular corporate rates for the years in which it fails to qualify. If the Company loses its REIT status it could not elect to be taxed as a REIT for five years unless the Company’s failure to qualify was due to reasonable cause and certain other conditions were satisfied.

Management has evaluated the effect of the guidance provided by GAAP on Accounting for Uncertainty of Income Taxes and has determined that the Company had no uncertain income tax positions.

Use of Estimates

The Company has made estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and revenues and expenses during the reported period. The Company’s actual results could differ from these estimates.

Noncontrolling Interests

The ownership interests not held by the REIT are considered noncontrolling interests. There are three elements of noncontrolling interests in the capital structure of the Company. These noncontrolling interests have been reported in equity on the condensed consolidated balance sheets but separate from the Company’s equity. On the condensed consolidated statements of operations, the subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests. The Company’s condensed consolidated statements of changes in stockholders’ equity includes beginning balances, activity for the period and ending balances for stockholders’ equity, noncontrolling interests and total equity.

The first noncontrolling interest is in the Hanover Square Property (consisting of both the Hanover Square Shopping Center and the Hanover Square Outparcel) in which the Company owned an 84% tenancy in common interest through its subsidiary and an outside party owned a 16% tenancy in common interest, prior to the Hanover Square Transactions. Prior to the Hanover Square Transactions, the Hanover Square Property’s net (loss) income was allocated to the noncontrolling ownership interest based on its 16% ownership. During the three and nine months ended September 30, 2024, 16% of the Hanover Square Property’s net (loss) income of ($2,495) and $2,837,047, respectively, or ($399) and $453,928, respectively, was allocated to the noncontrolling ownership interest. During the three and nine months ended September 30, 2023, 16% of the Hanover Square Property’s net loss of $1,408 and $9,265, respectively, or $225 and $1,482, respectively, was allocated to the noncontrolling ownership interest.

The second noncontrolling interest is in the Parkway Property, in which the Company owns an 82% tenancy in common interest through its subsidiary and an outside party owns an 18% tenancy in common interest. The Parkway Property's net income is allocated to the noncontrolling ownership interest based on its 18% ownership. During the three and nine months ended September 30, 2024, 18% of the Parkway Property's net loss of $91,095 and $50,990, respectively, or $16,397 and $9,178, respectively, was allocated to the noncontrolling ownership interest.  During the three and nine months ended September 30, 2023, 18% of the Parkway Property’s net income of $12,215 and $56,005, respectively, or $2,199 and $10,081, respectively, was allocated to the noncontrolling ownership interest.

The third noncontrolling ownership interest consists of the common units of the Operating Partnership (the “Operating Partnership Units”) that are not held by the REIT.  In 2017, 7,812 Operating Partnership Units were issued in a 721 exchange, which allows the exchange of interests in real property for units in the operating partnership of a real estate investment trust. The members of a selling limited liability company invested $1,175,000 in the Operating Partnership in exchange for 7,812 Operating Partnership Units. Additionally, effective on January 1, 2020, 5,865 Operating Partnership Units were issued in exchange for approximately 3.45% of the noncontrolling owner’s tenant in common interest in the Hampton Inn Property, a property that was formerly owned by the Company. On August 31, 2020, a holder of Operating Partnership Units converted 332 Operating Partnership Units into shares of the Company’s common stock, $0.01 par value per share (“Common Shares”). On January 18, 2024, the Company issued 19,348 Operating Partnership Units to Francis P. Kavanaugh, representing a portion of his 2024 compensation.  On February 16, 2024, the Company redeemed for cash the 5,865 Operating Partnership Units that were issued to the Hampton Inn Property noncontrolling owner.  On March 27, 2024, the Company issued 208,695 Operating Partnership Units as consideration for the purchase of the Citibank Property. On May 30, 2024, the Company redeemed 1,330 Operating Partnership Units for cash.  As of September 30, 2024 and December 31, 2023, there were 234,194 and 13,346 Operating Partnership Units outstanding, respectively, not held by the REIT. As of September 30, 2024 and December 31, 2023, respectively, 6,150 and 13,346 of the Operating Partnership Units not held by the REIT were convertible to Common Shares.  Outstanding Operating Partnership Units have been adjusted for the Reverse Stock Split (as defined below).  (See Note 7, below).

The Operating Partnership Units not held by the REIT represent 17.35% and 1.19% of the outstanding Operating Partnership Units as of September 30, 2024 and December 31, 2023. The noncontrolling interest percentage is calculated at any point in time by dividing the number of Operating Partnership Units not owned by the Company by the total number of Operating Partnership Units outstanding. The noncontrolling interest ownership percentage will change as additional Common Shares are issued by the REIT, or additional Operating Partnerships Units are issued or as Operating Partnership Units are exchanged for Common Shares. During periods when the Operating Partnership’s noncontrolling interest changes, the noncontrolling ownership interest is calculated based on the weighted average Operating Partnership noncontrolling ownership interest during that period. The Operating Partnership’s net income (loss) is allocated to the noncontrolling Operating Partnership Unit holders based on their ownership interest.

During the three and nine months ended September 30, 2024, a weighted average of 17.34% and 5.75% of the Operating Partnership’s net income of $148,995 and $2,832,266, respectively, or $25,843 and $162,828, respectively, was allocated to the noncontrolling Operating Partnership Unit holders.  During the three and nine months ended September 30, 2023, a weighted average

of 1.19% of the Operating Partnership’s net income (loss) of $41,437 and ($241,898), respectively, or $493 and ($2,878), respectively, was allocated to the noncontrolling Operating Partnership Unit holders.

Reclassifications

Operating Segments

Effective January 1, 2024, the Company established STNL assets as a third operating segment.  The Ashley Plaza Property consists of three separate parcels including a parcel with the main shopping center building, the East Coast Wings Parcel and the T-Mobile Parcel.  Effective for the periods after January 1, 2024, the Company reports revenues from the East Coast Wings Parcel and the T-Mobile Parcel as STNL property revenues, and expenses associated with these two parcels as STNL property expenses.  For the periods prior to January 1, 2024, the Company has reclassified the revenues and expenses associated with these two parcels that were previously recorded as retail center property revenues and retail center property expenses as STNL property revenues and STNL property expenses, respectively.  Specifically, for the three and nine months ended September 30, 2023, the Company reclassified $56,306 and $168,897, respectively, that was previously recorded as retail center property revenues to single tenant net lease revenues, and $7,696 and $23,174, respectively, that was previously recorded as retail center property expenses to single tenant net lease expenses.  These reclassifications had no impact on total revenues, total expenses or net income (loss).  

Outstanding Shares

All per share amounts, Common Shares outstanding, Operating Partnership Units outstanding, and stock-based compensation amounts for all periods presented reflect the Company’s one-for-eight reverse stock split (the “2023 Reverse Stock Split”), which was effective May 3, 2023 (see Completion of 1-for-8 Reverse Stock Split under Note 7, below) and the Company’s one-for-ten reverse stock split (the “2024 Reverse Stock Split”) and five-for-one forward stock split (the “Forward Stock Split”) which were both effective July 2, 2024 (see Completion of 1-for-10 Reverse Stock Split and 5-for-1 Forward Stock Split under Note 7, below.)  The effect of the 2024 Reverse Stock Split and the Forward Stock Split are retroactively applied in the accompanying condensed consolidated financial statements and these Notes to Unaudited Condensed Consolidated Financial Statements.  

Recent Accounting Pronouncements

Upcoming Accounting Pronouncements

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):  Improvements to Reportable Segment Disclosures.  The objective of ASU 2023-07 is to improve reportable segment disclosures by public companies, primarily by requiring enhanced disclosures about significant segment expenses.  Under the updates in this guidance, companies are required to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.  Additionally, a total for all other expenses that are not determined to be significant segment expenses must be separately presented for each reported measure of segment profit or loss for the corresponding reporting periods, and a description of the expenses included in that total must be provided in the disclosure.  The updated guidance also requires disclosure of the title and position of the chief operating decision maker and an explanation of how the company’s reported measure(s) of segment profit or loss are used in assessing segment performance and deciding how to allocate the company’s resources.  ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, which means that the Company will be required to include the enhanced disclosures beginning with its consolidated financial statements for the year ending December 31, 2024.  The guidance must be applied retrospectively, and early adoption is permitted.  As discussed in Note 10 below, the Company has reportable segments for retail center properties, flex center properties and STNL properties, and it previously had a reportable segment for hotel properties.  The Company is currently evaluating the new disclosure requirements in ASU 2023-07 to determine the impact on its consolidated financial statements.

Evaluation of the Company’s Ability to Continue as a Going Concern

Under the accounting guidance related to the presentation of financial statements, the Company is required to evaluate, on a quarterly basis, whether or not the entity’s current financial condition, including its sources of liquidity at the date that the condensed consolidated financial statements are issued, will enable the entity to meet its obligations as they come due arising within one year of the date of the issuance of the Company’s condensed consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the entity will be able to continue as a going concern. The Company’s condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The redemption date of the Company’s mandatorily redeemable preferred stock is February 19, 2025 (the “Mandatory Redemption Date”).  On October 23, 2024, the Company issued a notice of its intent to redeem 140,000 shares of the mandatorily redeemable preferred stock on November 25, 2024 (see Note 11, below).  The Company plans to use the $2,000,000 proceeds from the private placement of Operating Partnership Units (see note 11, below) and $1,500,000 in cash on hand to fund this redemption.  

The Company is exploring options to redeem the remaining 60,000 shares of the mandatorily redeemable preferred stock prior to the Mandatory Redemption Date but may require additional liquidity to fund the redemption.  The Company expects to be able to generate this liquidity from a number of sources, including cash on hand, forecasted future cash flows for the periods prior to the Mandatory Redemption Date, additional private placement issuances of Common Shares and/or Operating Partnership Units, and careful management of the Company’s capital expenditures during the periods prior to the Mandatory Redemption Date.  

In applying applicable accounting guidance, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows, the Company’s obligations due over the next twelve months as well as the Company’s recurring business operating expenses.  The Company concludes that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of these condensed consolidated financial statements within the parameters set forth in the accounting guidance.