Broad Street Realty, Inc. - Annual Report: 2019 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2019

OR

Commission File Number 001-09043

BROAD STREET REALTY, INC.

(Exact name of Registrant as specified in its Charter)

Registrant’s telephone number, including area code: (301) 828-1200

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value per share

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  YES ☐ NO ☒

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 ☐ NO ☒

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).  YES ☐ NO ☒

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES ☐ NO ☒

As of June 28, 2019 the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $9,215,305, based on the closing sales price per share of $3.53 as reported on the OTC Markets, Inc.

On December 18, 2020, the registrant had a total of 22,471,479 shares of common stock outstanding.

BROAD STREET REALTY, INC.

TABLE OF CONTENTS

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FORWARD LOOKING STATEMENTS

We make statements in this Annual Report on Form 10‑K that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). These forward-looking statements include, without limitation, statements about our estimates, expectations, predictions and forecasts of our future business plans and financial and operating performance and/or results, as well as statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. When we use the words “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” or similar expressions or their negatives, as well as statements in future tense, we intend to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance, and our actual financial and operating results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such differences are described in the section entitled “Risk Factors” in this report and in other documents that we file from time to time with the Securities and Exchange Commission (the “SEC”), which factors include, without limitation, the following:

Given these uncertainties, undue reliance should not be placed on our forward-looking statements. We assume no duty or responsibility to publicly update or revise any forward-looking statement that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events. We urge you to review the disclosures concerning risks in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report and in other filings we make with the SEC from time to time.

Summary Risk Factors

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. These risks are discussed more fully in Item 1A. Risk Factors herein. These risks include, but are not limited to, the following:

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PART I

The following description of the business of Broad Street Realty, Inc. should be read in conjunction with the information included elsewhere in this Annual Report on Form 10‑K for the year ended December 31, 2019 (this “report”). Unless the context indicates otherwise, references to “Broad Street,” “we,” “the Company,” “our” and “us” for periods prior to December 27, 2019 refer to Broad Street Realty, LLC and thereafter refer to the activities of and the assets and liabilities of the business and operations of Broad Street Realty, Inc. together with its consolidated subsidiaries, including Broad Street Operating Partnership, LP (the or our “Operating Partnership”), of which we are the sole member of the sole general partner.

ITEM 1. BUSINESS

Overview

We are a fully integrated real estate company that owns, operates, develops and redevelops primarily grocery-anchored shopping centers and street retail-based properties in the Mid-Atlantic and Denver, Colorado markets. As of December 31, 2019, we owned ten properties with an additional seven properties under contract to be acquired. The properties in our portfolio and the properties we have under contract are dispersed in sub-markets that we believe generally have high population densities, high traffic counts, good visibility and accessibility, which provide our tenants with attractive locations to serve the necessity-based needs of the surrounding communities. Although we have paused acquisition and investment activity due to the impact of the COVID-19 pandemic, over the long-term, we intend to focus on acquiring additional strategically positioned properties in established and developing neighborhoods primarily leased to necessity-based tenants that meet the needs of the surrounding communities in our existing markets, as well as acquiring properties in new markets that meet our investment criteria, including the Southeastern United States. In addition, we provide commercial real estate brokerage services for our own portfolio and third-party office, industrial and retail operators and tenants.

As described further below, we succeeded to the business of Broad Street Realty, LLC (“BSR”) and began operations in our current structure on December 27, 2019. BSR was founded by Michael Z. Jacoby, our chairman and chief executive officer, and Thomas M. Yockey, a member of our board of directors. Prior to the Initial Mergers (as defined below), BSR provided third-party management and brokerage services for a portfolio of separately owned retail real estate properties. Our current structure provides for a fully-integrated platform of property ownership combined with BSR’s management and brokerage business, which we believe positions the Company for growth.

We are structured as an “Up-C” corporation with substantially all of our operations conducted through our Operating Partnership and its direct and indirect subsidiaries. As of December 31, 2019, we owned 88.4% of the units of limited partnership interest in our Operating Partnership (“OP units”), and we are the sole member of the sole general partner of our Operating Partnership.

History

The Company was originally organized under the laws of the Commonwealth of Massachusetts in 1985, under the name VMS Hotel Investment Trust, for the purpose of investing in mortgage loans. The Company was subsequently reorganized as a Delaware corporation in 1987 and changed its name to B.H.I.T. Inc. In 2010, the Company changed its name from B.H.I.T. Inc. to Banyan Rail Services Inc. From 2009 to 2012, the Company experienced severe losses from an operating subsidiary in the rail services sector. In 2016, after exploring various industries and researching numerous companies, the Company’s board of directors elected to pursue investing in commercial real estate.  In 2017, the Company changed its name to MedAmerica Properties Inc., and had limited operations until the time of the closing of the Initial Mergers. Immediately prior to the completion of the Initial Mergers, the Company filed an amendment to its certificate of incorporation to change its name to Broad Street Realty, Inc.

The Mergers

On May 28, 2019, the Company and certain of its subsidiaries entered into 19 separate agreements and plans of merger (collectively, the “Merger Agreements”) with each of BSR, Broad Street Ventures, LLC (“BSV”) and each of BSV Avondale LLC, BSV Colonial Investor LLC, BSV Coral Hills Investors LLC, BSV Crestview Square LLC, BSV Cromwell Parent LLC, BSV Cypress Point Investors LLC, BSV Dekalb LLC, BSV Greenwood

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Investors LLC, BSV Highlandtown Investors LLC, BSV Hollinswood LLC, BSV Lamont Investors LLC, BSV Lamonticello Investors LLC, BSV LSP East Investors LLC, BSV Patrick Street Member LLC, BSV Premier Brookhill LLC, BSV Spotswood Investors LLC and BSV West Broad Investors LLC (collectively with BSR and BSV, the “Broad Street Entities”). The Merger Agreements relate to a series of 19 mergers (“Mergers”) whereby BSR, BSV and each Broad Street Entity have or will become subsidiaries of the Company.

On December 27, 2019, the Company completed 11 of the Mergers (the “Initial Mergers”), including the Mergers with BSR and BSV and Mergers with nine other Broad Street Entities. As a result, the Company succeeded to the business operations of BSR and BSV and acquired nine properties that are described further elsewhere in this Annual Report on Form 10-K. See “—Our Portfolio” below. Effective immediately upon the completion of the Initial Mergers and in accordance with the Merger Agreements, four members of the Company’s board of directors resigned and five new members designated by BSR were added to the board of directors. Two existing directors continued as members of the board of directors. Upon completion of the Initial Mergers and in accordance with the Merger Agreements, Mr. Jacoby was appointed as the chairman and chief executive officer of the Company, Alexander Topchy was appointed as the chief financial officer of the Company, and each of the employees of BSR became employees of the Company.

On December 31, 2019, the Company completed one additional Merger whereby it acquired the Brookhill Azalea Shopping Center. On July 2, 2020, the Company closed one Merger whereby it acquired Lamar Station Plaza East.

As consideration for the Mergers that have closed as of the date of this report, the Company has issued an aggregate of 19,660,911 shares of common stock and 2,827,904 OP units to investors in the Broad Street Entities for which the Mergers have closed. In addition, certain prior investors in the Broad Street Entities received an aggregate of approximately $1.1 million in cash as a portion of the consideration for the Mergers.

As consideration in the Mergers as a result of their interests in the Broad Street Entities for which the Mergers have closed as of the date of this report, (i) Mr. Jacoby received 2,004,146 shares of common stock and 856,805 OP units, (ii) Mr. Yockey received 2,004,146 shares of common stock and 420,523 OP units and (iii) Daniel J.W. Neal, a member of our Board of Directors, received, directly or indirectly, 521,996 shares of common stock. As consideration in the remaining six Mergers as a result of their interests in the remaining Broad Street Entities, (i) Mr. Jacoby will receive an aggregate of approximately 547,513 shares of common stock and 136,213 OP units, (ii) Mr. Yockey will receive an aggregate of approximately 547,513 shares of common stock and 136,213 OP units and (iii) Mr. Neal will receive, directly or indirectly, an aggregate of approximately 361,127 shares of common stock.

As of the date of this report, there are six Mergers that have not been completed. See “—Our Portfolio—Pending Mergers” below. The Company will issue an aggregate of 10,400,779 shares of common stock and 573,529 OP units as consideration for the additional Mergers. Until the closing of the remaining Mergers, the Company will continue to manage these six properties and receive management fees.

Impact of COVID-19

For information regarding the impact of COVID-19 on our business and measures we have taken in response, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of COVID-19” and “Risk Factors—Risks Related to Our Business and Properties—The ongoing COVID-19 pandemic and measures intended to mitigate its spread could have a material adverse effect on our business, results of operations, cash flows and financial condition.”

Our Portfolio

As of December 31, 2019, we owned 10 retail properties, all of which are located in the Mid-Atlantic region, consisting of 1,012,861 total square feet of gross leasable area (“GLA”). The following table provides additional information about the properties in our portfolio.

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Tenant Diversification

The following table sets forth information about the 20 largest tenants in our portfolio, based upon annualized base rent, as of December 31, 2019.

Lease Distribution

The following table sets forth information relating to the distribution of leases in our portfolio, based on GLA, as of December 31, 2019.

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Geographic Concentration

The following table sets forth information regarding the geographic concentration of our portfolio as of December 31, 2019.

Lease Expirations

The following table sets forth a summary schedule of the lease expirations in our portfolio for leases in place as of December 31, 2019 for the ten calendar years from 2020 to 2029 and thereafter, assuming no exercise of renewal options or early termination rights.

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Description of Properties

Avondale Shops, Washington D.C.

Avondale is a strip retail property located in the northeast region of Washington D.C. at the signalized intersection of Michigan Avenue and Eastern Avenue.  The property has 28,044 square feet of GLA and, as of December 31, 2019, was 86.1% leased to eight tenants and accounted for 4.6% of our total annualized base rent.   The anchor tenant, Dollar Tree, represents approximately 29.3% of Avondale’s total annualized base rent as of December 31, 2019 and its lease expires in May 2027.

Brookhill Azalea Shopping Center, Richmond, Virginia

Brookhill is a retail center located on the border of the City of Richmond and its northern suburbs in close proximity to major transportation corridors Interstate 95, U.S. Route 1 and U.S. Route 301.  The property is located adjacent to major retail demand drivers Walmart and CVS Pharmacy.  The property has 163,030 square feet of GLA and, as of December 31, 2019, was 81.7% leased to 24 tenants and accounted for 10.5% of our total annualized base rent.  The anchor tenant, Food Lion, represented 23.5% of Brookhill’s total annualized base rent as of December 31, 2019 and its lease expires in January 2025.  Other notable national tenants include Dollar General, Aarons Rents and Kentucky Fried Chicken. The property management for Brookhill is performed by a third-party manager that is responsible for the day-to-day aspects of managing Brookhill, including collecting rents, maintaining the property in good working order and providing us with periodic property condition reports and leasing pipeline updates. We are responsible for the back office management of Brookhill, including processing rental payments and accounting functions.

Coral Hills Shopping Center, Capitol Heights, Maryland

Coral Hills is a retail center located in the densely populated Capitol Heights neighborhood, which is blocks from the Washington D.C. metro line and has excellent visibility along Marlboro Pike with large pylons. The property is anchored by Shoppers Food Warehouse and is adjacent to McDonalds and across the street from a CVS Pharmacy.  The property has 85,928 square feet of GLA and, as of December 31, 2019, was 100.0% leased to 16 tenants and accounted for 10.8% of our total annualized base rent. Shoppers Food Warehouse represented 24.7% of Coral Hill’s total annualized base rent as of December 31, 2019 and its lease expires in February 2026. Other notable national tenants include Family Dollar and AutoZone.

Crestview Square, Landover Hills, Maryland

Crestview is located in a densely populated suburban market near the Hyattsville Arts District and University of Maryland College Park campus.  The property is located less than a mile from major regional transportation corridors, including Interstate 295 and U.S. Route 50.  The property has prominent pylon signage at the signalized intersection for Annapolis Road and Cooper Lane and is in close proximity to national retailers Walmart and McDonalds.  The property has 74,694 square feet of GLA and, as of December 31, 2019, was 100% leased to 20 tenants and accounted for 11.9% of our total annualized base rent.  The anchor tenant, Value Village, represented 18.6% of Crestview’s total annualized base rent as of December 31, 2019 and its lease expires in September 2024.

Dekalb Plaza, East Norriton, Pennsylvania

Dekalb is a retail center located in a Philadelphia suburb.  The property is located at a major signalized intersection of Dekalb Pike and West Germantown Pike and is positioned in close proximity to Walmart and T.J. Maxx and across the street from Suburban Community Hospital, part of the national Prime Healthcare system.  The property has 178,815 square feet of GLA and, as of December 31, 2019, was 81.5% leased to 12 tenants and accounted for 12.6% of our total annualized base rent.  The anchor tenant, Big Lots, represented 18.3% of Dekalb’s

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total annualized base rent as of December 31, 2019 and its lease expires in January 2025.  Other notable tenants include Crunch Fitness, Urban Air trampoline and adventure park, Goodwill and Chick-fil-A.

The following tables set forth certain information with respect to Dekalb Plaza as of December 31, 2019.

Significant Tenants

Lease Expirations

Occupancy Rate and Base Rent

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Hollinswood Shopping Center, Baltimore, Maryland

Hollinswood is a retail center located in suburban Baltimore, Maryland. The property has 112,698 of GLA and, as of December 31, 2019, was 84.3% leased to 22 tenants and accounted for 12.3% of our total annualized base rent. The anchor tenant, LA Mart, represented 19.6% of Hollinswood’s total annualized base rent as of December 31, 2019 and its lease expires in October 2030. Other notable tenants include Dollar Tree, Advance Auto, Dollar General and a Royal Farms convenience and gas center.

The following tables set forth certain information with respect to Hollinswood Shopping Center as of December 31, 2019.

Significant Tenants

Lease Expirations

Occupancy Rate and Base Rent

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Midtown Colonial, Williamsburg, Virginia

Midtown Colonial is a retail center located in Williamsburg, Virginia.  The property is part of the Midtown Row redevelopment which will create a mixed-use town center in Williamsburg, Virginia. The property is located adjacent to The College of William & Mary, within minutes of the campus center, and is situated at signalized intersections along Monticello Avenue.  The property has 98,043 square feet of GLA and, as of December 31, 2019, was 70.3% leased to five tenants and accounted for 5.1% of our total annualized base rent.  The property is under-occupied at this time as it is currently undergoing re-leasing as the property re-development nears completion.  The anchor tenant, Food Lion, accounted for 30.2% of Midtown Colonial’s total annualized base rent as of December 31, 2019 and its lease expires in November 2028. See “Risk Factors—Risks Related to Our Organizational Structure—Certain of our director, officers and employees have outside business interests that present conflicts of interest with us and may adversely affect our business.”

Midtown Lamonticello, Williamsburg, Virginia

Midtown Lamonticello is a retail center located in Williamsburg, Virginia. The property is located directly across the street from The College of William & Mary, within minutes of the campus center.  It is situated at a signalized intersection along Monticello Avenue that is shared with our Midtown Colonial property.  The property has 63,173 square feet of GLA and, as of December 31, 2019, was 94.9% leased to 11 tenants and accounted for 8.7% of our total annualized base rent.  The anchor tenant, Earth Fare, accounted for 44.9% of Midtown Lamonticello’s total annualized base rent as of December 31, 2019 and its lease was scheduled to expire in June 2038. On February 3, 2020, Earth Fare filed for bankruptcy and announced that it was closing all of its stores. Earth Fare was purchased out of bankruptcy with plans to reopen several of the shuttered stores, including the location at Midtown Lamonticello. We have entered into a new ten-year lease agreement with Earth Fare at an initial base rent of $15.00 per square foot and a rent commencement date of November 1, 2020. Ace Hardware was relocated from the Midtown Colonial location to Midtown Lamonticello and rent commenced in January 2019.  

Vista Shops at Golden Mile, Frederick, Maryland

Vista is a retail center located in Frederick, Maryland. The property is accessible from the main retail thoroughfare West Patrick Street, also known as “The Golden Mile,” and in close proximity to Interstate 270.  The property has 98,885 square feet of GLA and, as of December 31, 2019, was 91.4% leased to 21 tenants and accounted for 13.0% of our total annualized base rent.  The anchor tenant, Aldi grocer, has been on site for over 10 years. Aldi accounted for 14.0% of Vista’s total annualized base rent as of December 31, 2019 and its lease expires in December 2023.  Aldi’s lease was originally scheduled to expire in 2018 and the term was extended and the base rental rate was increased by 26%. Other notable tenants include Planet Fitness, Dollar Tree and Care Veterinary Center, owned by Pathway Vet Alliance, which operates over 150 locations.

West Broad Commons, Richmond, Virginia

West Broad is a retail center located in the suburbs of Richmond, Virginia.  The property is located at a signalized intersection along West Broad Street and in close proximity to Costco, McDonalds, Sam’s Club and Guitar Center.  The property has 109,551 square feet of GLA and, as of December 31, 2019, was 91.6% leased to 16 tenants and accounted for 10.5% of our total annualized base rent.  The anchor tenant, New Grand Mart, is a specialty grocer with four locations in the metro Washington D.C. region and two in Richmond, Virginia. New Grand Mart accounted for 32.6% of West Broad’s total annualized base rent as of December 31, 2019 and its lease expires in December 2027.

The following tables set forth certain information with respect to West Broad Commons as of December 31, 2019.

Significant Tenants

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Lease Expirations

Occupancy Rate and Base Rent

Recently Completed Merger

The following table provides certain information as of December 31, 2019 with respect to the property that we acquired subsequent to December 31, 2019. This property fits the Company’s investment criteria with the potential to add value through repositioning and redeveloping the property. As of December 31, 2019, the property was at 60% occupancy. The Company has been in advanced discussions with prospective tenants that represent approximately 30% of the GLA of the property.

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Pending Mergers

The following table provides certain information as of December 31, 2019 with respect to the six properties that are under contract to be acquired pursuant to the six Mergers that have not closed as of the date of this report. We will continue to serve as the third-party manager of each of these properties until the applicable Merger closes.

Investment Criteria

When evaluating potential property acquisitions or development opportunities, we consider, among other things, the following:

Projected Risk and Returns:  We evaluate the projected investment returns in relation to our cost of capital as well as the anticipated risk to achieve these returns, in order to provide our stockholders and OP unit holders with appropriate risk-adjusted rates of return.

Value Creation:  We evaluate the projected value creation at each property through repositioning, refurbishing and redevelopment.  Our goal is to create long-term value and achieve the projected returns we underwrite at each property.

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Tenants and Tenant Mix:  We assess the quality of tenants at each location including their sales performance and creditworthiness in order to provide our stockholders and OP unit holders with appropriate risk-adjusted rates of return.  We evaluate each property to ensure a complementary mix of tenants that drive overall sales at each location.  

Demographics:  We assess certain demographic information at each property location, including daytime population, households, household incomes, education levels, population and income trends for the market, as well as local economic drivers.

Competition:  We assess the competitive retail environment at each location, including GLA per capita, competition for existing and potential tenants, the number of existing competing properties and the potential for additional competing properties through development or the repositioning or redevelopment of existing properties.  

Access and Visibility:  We evaluate each property’s accessibility from main thoroughfares and the potential for new, widened or realigned roadways within the property trade area, which may affect consumer accessibility and shopping patterns.  We generally seek to acquire properties that have signalized ingress and egress, which we believe increases the ability of consumers to safely access our properties.  We also assess the existing signage and the ability to renovate or add new signage to ensure appropriate sight lines for consumers to view the tenants at each of our property locations.

Owned Property Performance:  In markets where we own retail properties, we assess the performance of those properties in order to evaluate the potential performance of to-be-acquired or developed properties.  We seek to acquire or develop properties in our existing markets that are complementary to our existing properties.

Physical Condition:  We assess the physical condition of each property in order to determine the useful remaining life, required capital expenditures and the property cost relative to replacement cost.  We often seek to acquire properties at below replacement cost, which we believe allows us to reposition, refurbish or redevelop a property and command higher rents relative to the market and deliver attractive risk-adjusted returns for our stockholders.  

Property Management and Brokerage Business

We manage or co-manage the properties in our portfolio, the six properties that are under contract to be acquired pursuant to the Mergers that have not closed as of the date of this report and three other properties. We also lease all of our owned and managed properties but do utilize third-party leasing companies to augment our staff on a limited basis. Our asset and property management teams directly oversee the properties in our portfolio and our third-party managed properties and seek to increase our operating cash flows through the success of our leasing, property management and asset management functions. Our property management functions include the oversight of all day-to-day operations of our properties as well as the coordination and oversight of tenant improvements and building services. Our internal leasing team identifies prospective tenants, assists in the negotiation of leases, provides statements as to the income and expenses applicable to each such property, monitors monthly lease payments, periodically verifies tenant payment of real estate taxes and insurance coverage and periodically inspects each such property and tenants’ sales records, where applicable. We do not pay property management fees other than for the on-site property management of the Brookhill property.

We receive fees for any third-party property management, brokerage or leasing services. We represent primarily commercial tenants for their office and retail real estate needs, either for lease transactions or purchase and sale transactions.  We will continue to receive property-management fees for the six properties that are under contract to be acquired pursuant to the Mergers that have not closed as of the date of this report. These fees will cease once the Mergers are closed.

We intend to increase cash flows through cost efficient property operations and leasing strategies designed to capture market rental growth from the renewal of below-market leases at higher rates and/or recruitment of new quality tenants. We carefully monitor property expenses and manage how we incur and bill expenses to our tenants. We aggressively seek to renegotiate and extend any existing leases that are below market at market rates. Although we maintain ongoing dialogue with our tenants, we generally raise the issue of renewal at least 12 months prior to lease renewal often providing concessions for early renewal. We also aggressively pursue new tenants for any vacant space. As necessary, we may use third-party leasing agents in attracting tenants. Our use of third-party brokerage firms is based on their demonstrated track record and knowledge of the sub-markets in which our properties are located.

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We define small tenants as those leasing less than 10,000 square feet and we have tailored our management and leasing approach to deal with the unique needs of these smaller tenants.  As of December 31, 2019, of the 155 leases on our owned properties, 132 are leased to small tenants representing 41.6% of our portfolio GLA and 57.2% of our total annualized base rent.   We believe that our ability to act quickly allows us to capture those tenants that are unable or unwilling to wait a substantial period of time for a lease to be approved. We are able to examine the credit of a potential tenant during the lease negotiation process and efficiently finalize the terms of the lease. Smaller tenants generally pay a premium per square foot to occupy smaller spaces. As of December 31, 2019, this base rent premium averaged 92% over what larger tenants in our portfolio pay on a weighted average per square foot basis.  

Terms of Leases

We typically lease our properties to tenants on either a triple-net or modified gross basis. Our triple net leases provide that the tenant is generally responsible for reimbursing us for the cost of all maintenance and minor repairs, property taxes and insurance relating to its leased space and most other operating expenses. We perform common area maintenance, and the related cost is reimbursed by the tenant. Utilities and other premises-specific costs are typically paid directly by the tenant. Our modified gross leases provide that the tenant pays us a base rent and we are responsible for the payment of all property expenses.  In our modified gross leases, we typically negotiate that a proportional share of increases in expenses such as real estate taxes, sales and use taxes, special assessments, utilities, insurance and building repairs, and other building operation and management costs that exceed a base rate, are reimbursed to us by the tenant. The leases for the properties in our portfolio have remaining lease terms that range from month-to-month to over 10 years, with a weighted average remaining lease term of 6.2 years as of December 31, 2019 based on GLA. Anchor tenant leases are typically for 10 to 20 years, with one or more renewal options available to the lessee upon expiration of the initial lease term. By contrast, smaller store leases are typically negotiated for five-year terms. The longer terms of major tenant leases serve to protect us against significant vacancies and to ensure the presence of strong tenants that draw consumers to our centers. The shorter terms of smaller store leases allow us under appropriate circumstances to adjust rental rates periodically and, where possible, upgrade or adjust the overall tenant mix.  

Tenant Underwriting

We use a number of industry credit rating services to determine the creditworthiness of potential tenants and any personal guarantor or corporate guarantor of each potential tenant. In addition, we review tenants’ business plans and financial models and compare those to the reports we receive from the credit rating services. We have established leasing guidelines to use in evaluating prospective tenants and proposed lease terms and conditions. For existing tenants looking to extend with us, we look at their past payment record.

Competition

We believe that the market for retail properties and financially stable tenants has historically been extremely competitive and has become even more competitive as a result of the current retail environment. We compete with a number of other real estate investors, including domestic and foreign corporations and financial institutions, publicly traded and privately held real estate investment trusts and other real estate companies, private institutional investment funds, investment banking firms, life insurance companies and pension funds, some of which have greater financial resources than we do.

In operating and managing our properties, we compete for tenants based upon a number of factors including, but not limited to, location, rental rates, security, flexibility, expertise to design space to meet prospective tenants’ needs and the manner in which the property is operated, maintained and marketed. As leases at our properties expire, we may encounter significant competition to renew or re-lease space in light of the large number of competing properties within the markets in which we operate. As a result, we may be required to provide rent concessions, incur costs for tenant improvements and other inducements or we may not be able to timely lease vacant space, all of which would adversely impact our results of operations. In light of the current economic conditions, we have had to utilize rent concessions and undertake tenant improvements to a greater extent than we historically have.

We also face competition when pursuing acquisition, development and redevelopment opportunities. Our competitors may be able to pay more for acquisitions, have more funds for development and redevelopment, may have private access to opportunities not available to us and otherwise be in a better position to acquire, develop or redevelop a commercial property. Competition may also have the effect of reducing the number of suitable acquisition, development or redevelopment opportunities available to us, increasing the price required to consummate an acquisition, development or redevelopment opportunity and generally reducing the demand for commercial space in our geographic markets. Similarly, should we decide to dispose of a property, we may compete

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with third-party sellers of similar types of commercial properties for suitable purchasers, which may result in our receiving lower net proceeds from a sale or in our not being able to dispose of such property at a time of our choosing.

Regulatory Matters

General

The properties in our portfolio are, and any properties we acquire in the future will be, subject to various covenants, laws, ordinances and regulations, including regulations relating to common areas and fire and safety requirements. We believe that each of the properties in our portfolio has the necessary permits and approvals to operate our business.

Environmental Regulations

Under various federal, state and local environmental laws, ordinances and regulations, a current or former owner or operator of real property may be liable for the cost to remove or remediate hazardous or toxic substances, waste or petroleum products at, on, under, from or in such property. These costs could be substantial, and liability under these laws may attach whether or not the owner or operator knew of, or was responsible for, the presence of such contamination. Even if more than one person may have been responsible for the contamination, each liable party may be held entirely responsible for all of the clean-up costs incurred (i.e., the liability may be joint and several). In addition, third parties may sue the current or former owner or operator of a property for damages based on personal injury, natural resources or property damage and/or for other costs, including investigation and clean-up costs, resulting from the environmental contamination. The presence of contamination on one of our properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the contamination, or otherwise adversely affect our ability to redevelop, sell or lease the property or borrow using the property as collateral. In addition, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants. We also may be liable for the costs of remediating contamination at off-site disposal or treatment facilities when we arrange for disposal or treatment of hazardous substances at such facilities, without regard to whether we comply with environmental laws in doing so.

Some of our properties may be adjacent to or near other properties used for industrial or commercial purposes or that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances. Releases from these properties could impact our properties. In addition, certain of our properties are currently used, have been used and may be used in the future by others, including former owners or tenants of our properties, for commercial or industrial activities, e.g., gas stations and dry cleaners, that may release petroleum products or other hazardous or toxic substances at our properties or to surrounding properties.

We have previously obtained Phase I Environmental Site Assessments or similar environmental audits from an independent environmental consultant for all the properties in our portfolio and the properties under contract to be acquired. A Phase I Environmental Site Assessment is a written report that identifies existing or potential environmental conditions associated with a particular property. These environmental site assessments generally involve a review of records, interviews and visual inspection of the property; however, they have a limited scope (e.g., they do not include soil sampling or ground water analysis) and may not reveal all potential environmental liabilities. Further, material environmental conditions may have arisen after the review was completed or may arise in the future, and future laws, ordinances or regulations may impose additional material environmental liability beyond what was known at the time the site assessment was conducted. While environmental assessments conducted prior to acquiring our properties have not revealed, nor are we aware of, any environmental liability that we believe will have a material adverse effect on our operations, certain properties that we have acquired contain, or contained, uses that could have impacted our properties, including dry-cleaning establishments utilizing solvents or gas stations. Where we believed it was warranted, subsurface investigations or samplings of building materials were undertaken with respect to these and other properties. To date, the costs associated with these investigations and any subsequent remedial measures taken to address any identified impacts have not resulted in material costs. Prior to purchasing property in the future, we plan on conducting Phase I Environmental Site Assessments and other environmental investigations, if warranted.

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Our properties and the tenants of our properties are subject to various federal, state and local environmental, health and safety laws, including laws governing the management of waste, underground and aboveground storage tanks, local fire safety requirements and local land use and zoning regulations. For example, some of our tenants handle regulated substances or waste as part of their operations on our properties. Noncompliance with these environmental, health and safety laws could subject us or our tenants to liability. These environmental liabilities could affect a tenant’s ability to make rental payments to us. Moreover, changes in laws could increase the potential costs of compliance with environmental, health and/or safety laws, including increasing liability for noncompliance or requiring significant unanticipated expenditures. We are not presently aware of any instances of material non-compliance with environmental, health and safety laws at our properties, and we believe that we have all permits and approvals necessary under current law to operate our properties.

As the owner or operator of real property, we may also incur liability based on various building conditions. For example, buildings and other structures on properties that we currently own or operate or those we acquire or operate in the future contain, may contain or may have contained asbestos-containing material (“ACM”). Environmental, health and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with those requirements. These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, renovation or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage sustained as a result of exposure to ACM or releases of ACM into the environment. We are not presently aware of any material liabilities related to building conditions, including any instances of material non-compliance with asbestos requirements or any material liabilities related to asbestos.

In addition, our properties 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 costs 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 properties 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, employees of our tenants or others if property damage or personal injury occurs. We are not presently aware of any material adverse indoor air quality issues at our properties.

Americans with Disabilities Act of 1990

Under the ADA, all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. Compliance with the ADA might require removal of structural barriers to handicapped access in certain public areas where such removal is “readily achievable.” We believe that our properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. Noncompliance with the ADA, however, could result in the imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate in this respect.

Insurance

We believe that each of our properties is covered by adequate fire, flood, earthquake, wind (as deemed necessary or as required by our lenders) and property insurance, as well as commercial liability insurance. We also carry terrorism insurance at levels we believe are commercially reasonable. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of coverage and industry practice, and in the opinion of our management, the properties in our portfolio are adequately insured. Furthermore, we believe that our businesses and assets are likewise adequately insured against casualty loss and third-party liabilities. The cost of such insurance is passed through to tenants to the extent possible. We expect to maintain this type of insurance coverage and to obtain similar coverage with respect to any additional properties that we acquire in the future, including the properties in our acquisition portfolio. We will not carry insurance for generally uninsured losses such as loss from riots, war or acts of God.

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Employees

We have a company-wide commitment to a set of core principles—Teamwork, Respect, Integrity, Balance, Accountability and Leadership, or TRIBAL. We believe our TRIBAL principles lead to greater employee retention, collaboration and efficiency, which will improve our ability to provide high quality service to our tenants and deliver attractive risk-adjusted returns to our stockholders.

As of the date of this report, we have 44 employees, all of which are full time employees.

Corporate Information

Our principal executive office is located at 7250 Woodmont Avenue, Suite 350, Bethesda, Maryland 20814. The telephone number for our principal executive office is (301) 828-1200. We maintain a website located at broadstreetrealty.com. The information on, or accessible through, our website is not incorporated into and does not constitute a part of this Annual Report on Form 10-K or any other report or document we file with or furnish to the SEC.

Available Information

We file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports with the SEC. You may obtain copies of these documents by accessing the SEC’s website at www.sec.gov. In addition, as soon as reasonably practicable after such materials are furnished to the SEC, we make copies of these documents available to the public free of charge through our website or by contacting our Corporate Secretary at the address set forth above under “—Corporate Information.”

ITEM 1A. RISK FACTORS

Set forth below are the risks that we believe are material to our stockholders. You should carefully consider the following risks in evaluating our Company and our business. The occurrence of any of the following risks could materially adversely impact our financial condition, results of operations, cash flows, the market price of shares of our common stock and our ability to, among other things, satisfy our debt service obligations and to make distributions to our stockholders, which in turn could cause our stockholders to lose all or a part of their investment. Some statements in this report, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K.

Risks Related to Our Business and Properties

The ongoing COVID-19 pandemic and measures intended to mitigate its spread could have a material adverse effect on our business, results of operations, cash flows and financial condition.

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic and, on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to mitigate its spread, including restrictions on freedom of movement and business operations, such as travel bans, border closings, business closures, quarantines and shelter-in-place or similar orders.

All of our properties, as well as our headquarters and other offices, are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate. Our rental revenue and operating results depend significantly on the occupancy levels at our properties and the ability of our tenants to meet their rent and other obligations to us, and the government-imposed measures in response to the COVID-19 pandemic, coupled with customers reducing their purchasing activity in light of health concerns or personal financial distress, have resulted in significant disruptions to our and our tenants’ businesses. We have observed the impact of COVID-19 manifest in the form of temporary closures or significantly limited operations among our tenants, with the exception of tenants operating in certain “essential” businesses, which has resulted, and may in the future result in, a decline in on-time rental payments and increased requests from tenants for temporary rental relief. Although our tenants were open and operational at least on a limited basis (e.g., restaurants providing only carryout service) as of the date of this report, many areas are experiencing new closures or restrictions subsequent to re-opening and no assurance can be given that such closures or restrictions will not continue to occur. As of December 18, 2020, we have collected, deferred, and forgiven, respectively, the percentage of contractual

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revenue (base rent and expense reimbursements) due each month from April 2020 through November 2020 as outlined in the table below.