Broad Street Realty, Inc. - Quarter Report: 2020 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2020

OR

For the transition period from               to

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:

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, a 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 April 8, 2021, the registrant had 22,624,679 shares of common stock outstanding.

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Table of Contents

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

See accompanying notes to interim consolidated financial statements.

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BROAD STREET REALTY, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

See accompanying notes to interim consolidated financial statements.

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BROAD STREET REALTY, INC. AND SUBSIDIARIES

Consolidated Statements of Equity

(in thousands, except share amounts)

(Unaudited)

See accompanying notes to interim consolidated financial statements.

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BROAD STREET REALTY, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

See accompanying notes to interim consolidated financial statements.

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BROAD STREET REALTY, INC. AND SUBSIDIARIES

Notes to Interim Consolidated Financial Statements

Unaudited

June 30, 2020

Note 1 - Organization and Nature of Business

Broad Street Realty, Inc. (the “Company”) is 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 June 30, 2020, the Company had real estate assets of $176.8 million, gross, in ten real estate properties and a parcel of land on which another shopping center is located. In addition, the Company provides commercial real estate brokerage services for its own portfolio and third-party office, industrial and retail operators and tenants.

The Company is structured as an “Up-C” corporation with substantially all of its operations conducted through Broad Street Operating Partnership, LP (the “Operating Partnership”) and its direct and indirect subsidiaries. As of June 30, 2020, the Company owned 88.4% of the units of limited partnership interest in its Operating Partnership (“OP units”) and is the sole member of the sole general partner of the Operating Partnership. The Company began operating in its current structure on December 27, 2019 upon the completion of the Initial Mergers (as defined below). As described further below, the financial statements presented herein for all periods prior to December 27, 2019 are those of Broad Street Realty, LLC (“BSR”). References herein to “the Company” for periods prior to December 27, 2019 refer to BSR.

Prior to the Initial Mergers, BSR was a real estate management and brokerage company, which was 50% owned by Michael Z. Jacoby, the Company’s chairman and chief executive officer, and 50% owned by Thomas M. Yockey, one of the Company’s directors. BSR provided property management services for the substantial majority of the properties in the Company’s portfolio and the additional properties to be acquired by the Company upon the completion of the additional Mergers (as defined below). BSR also provided real estate brokerage services for the properties acquired or to be acquired by the Company as well as for third parties. BSR owned no real property, so all of its revenues were derived from its property management and brokerage businesses. The properties acquired by the Company in the Initial Mergers and to be acquired in the additional Mergers were or are owned by 17 separate entities (the “Broad Street Entities”). Prior to the Initial Mergers, Broad Street Ventures, LLC (“BSV”) served, directly or indirectly and either alone or with co-managers or co-managing members as the manager or managing member of each of the Broad Street Entities.

Merger with MedAmerica Properties Inc.

On May 28, 2019, MedAmerica Properties Inc. and certain of its subsidiaries (“MedAmerica”) entered into 19 separate agreements and plans of merger (collectively, the “Merger Agreements”) with each of BSR, BSV and each of the Broad Street Entities. The Merger Agreements relate to a series of 19 mergers (“Mergers”) whereby BSR, BSV and each Broad Street Entity has or will become subsidiaries of the Company.

On December 27, 2019 (the “Merger Date”), the Company completed 11 of the Mergers (the “Initial Mergers”), including the Mergers with BSR and BSV and the Mergers with nine Broad Street Entities. Upon completion of the Initial Mergers, MedAmerica’s name was changed to “Broad Street Realty, Inc.”

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

The Merger between BSR and a wholly owned subsidiary of MedAmerica was accounted for as a reverse acquisition and recapitalization, with BSR being treated as the accounting acquirer. As a result, these consolidated financial statements reflect the financial condition, the results of operations and cash flows of BSR prior to the Merger Date. Subsequent to the Merger Date, the information relates to the consolidated entities of Broad Street Realty, Inc. All share and per share amounts in the consolidated financial statements and related notes have been retroactively adjusted for all periods presented to give effect to the exchange ratio applied in connection with the Merger. As OP units were issued as consideration for the BSR Merger, the activities of BSR have been adjusted to reflect a noncontrolling interest in the Company for all periods presented.

The Mergers with the Broad Street Entities that have closed were accounted for as asset acquisitions.

As consideration for the Mergers that have closed as of the date of the issuance of these financial statements, the Company has issued an aggregate 19,660,911 shares of common stock and 2,827,904 OP units to prior investors in the Broad Street Entities party to the Mergers. 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 of the date of the issuance of these financial statements, there are six Mergers that have not been completed. The Company expects to issue an aggregate of 10,400,779 shares of common stock and 573,529 OP units as consideration for the additional Mergers as agreed to in the merger agreements. Until the closing of the remaining Mergers, the Company will continue to manage these six properties and receive management fees.

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Liquidity and Management’s Plan

The Company’s properties 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 due to the COVID-19 pandemic. The Company’s rental revenue and operating results depend significantly on the occupancy levels at its properties and the ability of its tenants to meet their rent and other obligations to the Company, and the government-imposed measures, coupled with customers reducing their purchasing activity in light of health concerns or personal financial distress, have resulted in significant disruptions to the Company and its tenants’ businesses. The Company has observed the impact of COVID-19 manifest in the form of temporary closures or significantly limited operations among its 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. The Company believes the ongoing effects of the COVID-19 pandemic on its operations have had, and will continue to have, a material negative impact on its financial results and liquidity, and such negative impact may continue beyond the containment of the pandemic.

Additionally, the Company has been delayed in closing the remaining six Mergers, has been unable to meet and anticipates being unable to meet certain debt covenants included in the Company’s loan agreements, and has certain debt maturities occurring within the next twelve months. Specifically, as described further in Note 5 under the heading “—Forbearance Agreements and Debt Amendments”, the Company was in default of the debt service coverage ratio included in the Lamar Station Plaza East mortgage upon assumption of the mortgage with the closing of the property merger in July 2020. The Company entered into a first modification agreement with the lender upon assumption of the mortgage in which the lender agreed to forbear enforcement of the events of default subject to certain conditions. The Company expected to remain in default of the debt service coverage ratio as of December 31, 2020 and did not expect to meet all of the conditions included in the first modification agreement; therefore, the Company entered into a second modification agreement in November 2020 in which the lender agreed to forbear enforcement of the events of default subject to certain conditions which the Company has subsequently met.

The Company has developed a plan and has taken a number of proactive measures to manage the impacts of the COVID-19 pandemic on its operations and liquidity, including the following:

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As of December 31, 2020, the Company had mortgages on two properties with principal balances outstanding of approximately $12.3 million that mature during the next 12 months. During the first quarter of 2021, the Company refinanced the approximately $8.9 million Vista Shops mortgage loan as described in Note 5 under the heading “—2021 Debt Agreements and Modifications”. The Company does not project that it will have sufficient cash available to pay off the $3.4 million Lamar Station Plaza East mortgage upon maturity and is currently in discussions with the lender to exercise a 12-month extension for the mortgage. There can be no assurances that the Company will be successful on the extension or refinance of the mortgage on favorable terms or at all. If the Company is unable to extend or refinance this mortgage, the lender has the right to place their loan in default and ultimately foreclose on the property, in which case the property could be sold and the sale proceeds would be used to pay off the loan. Under this circumstance, the Company would not have any further financial obligations to the lender as the value of this property is in excess of the outstanding mortgage balance.

Based on the measures described above, the Company believes that it is probable that it will be able to generate sufficient liquidity to satisfy its obligations for the next twelve months.

Note 2 - Accounting Policies and Related Matters

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of its financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for a full year. The consolidated financial statements and related notes do not include all information and footnotes required by GAAP for annual reports. These interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2019, included in the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2020.

The interim consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries and subsidiaries in which the Company has a controlling interest. All material intercompany transactions and balances have been eliminated in consolidation.

For information about significant accounting policies, refer to the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s 2019 Annual Report on Form 10-K filed with the SEC on December 22, 2020. During the six months ended June 30, 2020, there were no material changes to these policies except as noted below.

Reclassifications

Certain reclassifications have been made to the consolidated balance sheet as of December 31, 2019 to conform to the 2020 presentation.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The standard also requires additional disclosures related to significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio.  Operating lease receivables are excluded from the scope of this guidance. The amended guidance is effective for the Company for fiscal years, and interim periods within those years, beginning January 1, 2023. The Company is evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply elections as applicable as changes in the market occur.

In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the coronavirus pandemic (“COVID-19”). Prior to issuance of the Lease Modification Q&A, the Company would have to determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A clarifies that entities may elect not to evaluate whether lease-related relief provided to mitigate the economic effects of COVID-19 is a lease modification under Accounting Standards Codification (“ASC”) 842. Instead, an entity that elects not to evaluate whether a concession directly related to COVID-19 is a modification can then elect whether

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to apply the modification guidance (i.e., assume relief was always contemplated by the contract or assume the relief was not contemplated by the contract), with such election applied consistently to leases with similar characteristics and similar circumstances. The Company evaluated its election on a disaggregated basis, with such election applied consistently to leases with similar characteristics and similar circumstances.

Beginning in April 2020, the Company provided lease concessions to certain tenants in response to the impact of COVID-19, in the form of rent deferrals. The Company has made an election to account for such lease concessions consistent with how those concessions would be accounted for under ASC 842 if enforceable rights and obligations for those concessions had already existed in the leases. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the Company’s rights as lessor, including concessions that results in total payments required by the modified lease being substantially the same or less than total payments required by the original lease.

Substantially all of the Company’s concessions to date provide for a deferral of payments with no substantive changes to the consideration in the original lease. These deferrals affect the timing, but not the amount, of the lease payments. The Company is accounting for these deferrals as if no changes to the lease were made. Under this accounting, the Company increases its receivables as tenant payments accrue and continues to recognize rental income. The Company accounted for forgiven rents as a reduction to rental income in the period the rent was forgiven.

Note 3 – Real Estate

2020 Real Estate Acquisitions

On January 10, 2020, the Company completed the acquisition of the fee-simple interest in the land that the Cromwell Field Shopping Center is located on under a leasehold interest for approximately $2.3 million, which includes less than $0.1 million of transaction costs that were capitalized since this transaction was accounted for as an asset acquisition. Upon acquisition of the land, the Company leased the land to the owner of the Cromwell Field Shopping Center pursuant to a ground lease. Once the Company completes the Merger to acquire the Cromwell Field Shopping Center leasehold interest, the ground lease will be terminated. The Company has a mortgage on the land of approximately $1.4 million.

On July 2, 2020, the Company completed the Merger to acquire Lamar Station Plaza East. Total consideration for the property included the issuance of 884,143 common shares, the payment of approximately $0.2 million in cash to the prior investors and approximately $0.1 million of transaction costs that were capitalized since the transaction was accounted for as an asset acquisition. The Company assumed a $2.5 million mortgage on the property and, on July 2, 2020, entered into a loan modification agreement that increased the maximum principal amount available under the assumed loan agreement to $4.1 million. Additional discussion of this loan modification agreement is included in Note 5 under the heading “—Forbearance Agreements and Debt Amendments”.  

Concentrations of Credit Risks

The following table contains information regarding the geographic concentration of the properties in the Company’s portfolio as of June 30, 2020, which includes rental income for the six months ended June 30, 2020 (dollars in thousands). The Company did not own any properties and therefore did not have any rental income during the six months ended June 30, 2019.

⁽¹⁾ Rental income for the six months ended June 30, 2020 includes less than $0.1 million of ground rental revenue under the ground lease for the parcel of land acquired in January 2020 as described above under the heading “—2020 Real Estate Acquisitions”.  

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Note 4 - Other Assets

Items included in other assets, net on the Company’s consolidated balance sheets as of June 30, 2020 and December 31, 2019 are detailed in the table below (dollars in thousands):

Receivables due from related parties as of June 30, 2020 and December 31, 2019 are described further in Note 12 “Related Party Transactions”.

Note 5 – Debt

The table below details the Company’s debt balance at June 30, 2020 and December 31, 2019 (in thousands):

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Basis Term Loan

On December 27, 2019, in connection with the closing of the Initial Mergers, six of the Company’s subsidiaries, as borrowers (collectively, the “Borrowers”), and Big Real Estate Finance I, LLC, a subsidiary of a real estate fund managed by Basis Management Group, LLC, as lender (the “Basis Lender”), entered into a loan agreement (the “Basis Loan Agreement”) pursuant to which the Basis Lender made a senior secured term loan of up to $66.9 million (the “Basis Term Loan”) to the Borrowers, of which $63.8 million was drawn at closing and was outstanding as of June 30, 2020. Pursuant to the Basis Loan Agreement, the Basis Term Loan is secured by mortgages on the following properties that were acquired in connection with the closing of the Initial Mergers: Coral Hills, Crestview, Dekalb, Midtown Colonial, Midtown Lamonticello and West Broad. The Basis Term Loan matures on January 1, 2023, subject to two one-year extension options, subject to certain conditions. The Basis Term Loan bears interest at a rate equal to the greater of (i) LIBOR plus 3.850% per annum and (ii) 6.125% per annum. The Borrowers have entered into an interest rate cap that effectively caps LIBOR at 3.50% per annum. As of June 30, 2020, the interest rate of the Basis Term Loan was 6.125%.

The Company used the proceeds from the Basis Term Loan to repay indebtedness securing properties acquired in the Initial Mergers and for general corporate purposes, including the payment of certain transaction costs.

The Borrowers’ obligations under the Basis Loan Agreement are guaranteed by the Company and by Michael Z. Jacoby, the Company’s chairman and chief executive officer, and Thomas M. Yockey, a director of the Company. The Company has agreed to indemnify Mr. Yockey for any losses he incurs as a result of his guarantee of the Basis Term Loan.

The Basis Loan Agreement contains certain customary representations and warranties and affirmative negative and restrictive covenants, including certain property related covenants for the properties owned by the Sub-OP, including a requirement that certain capital improvements be made. The Basis Lender has certain approval rights over amendments or renewals of material leases (as defined in the Basis Loan Agreement) and property management agreements for the properties securing the Basis Term Loan.

If (i) an event of default exists, (ii) BSR or any other subsidiary of the Company serving as property manager for one of the secured parties becomes bankrupt, insolvent or a debtor in an insolvency proceeding, or there is a change of control of BSR or such other subsidiary without approval by the Basis Lender, (iii) a default occurs under the applicable management agreement, (iv) the property manager has engaged in fraud, willful misconduct, misappropriation of funds or is grossly negligent with regard to the applicable property, the Basis Lender may require a Borrower to replace BSR or such other subsidiary of the Company as the property manager and hire a third party manager approved by the Basis Lender to manage the applicable property.

The Borrowers are generally prohibited from selling the properties securing the Basis Term Loan and the Company is prohibited from transferring any interest in any of the Borrowers, in each case without consent from the Basis Lender. The Company is prohibited from engaging in transactions that would result in a Change in Control (as defined in the Basis Loan Agreement) of the Company. Under the Basis Loan Agreement, among other things, it is deemed a Change in Control if Michael Z. Jacoby ceases to be the chairman and chief executive officer of the Company and actively involved in the daily activities and operations of the Company and the Borrowers and a competent and experienced person is not approved by the Basis Lender to replace Mr. Jacoby within 90 days of him ceasing to serve in such roles.

The Basis Loan Agreement provides for standard events of default, including nonpayment of principal and other amounts when due, non-performance of covenants, breach of representations and warranties, certain bankruptcy or insolvency events and changes in control. If an event of default occurs and is continuing under the Basis Loan Agreement, the Basis Lender may, among other things, require the immediate payment of all amounts owed thereunder.

In addition, if there is a default by the Company under the MVB Loan (as defined below), by Mr. Jacoby under his guarantee of the MVB Loan or by Mr. Jacoby under a certain personal loan as long as he has pledged OP units as collateral for such loan, and such default has not been waived or cured, then the Basis Lender will have the right to sweep the Borrowers’ cash account in which collects retains rental payments from the properties securing the Basis Term Loan on a daily basis in order for the Basis Lender to create a cash reserve that will serve as collateral for the Basis Term Loan.

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The Basis Loan Agreement includes a debt service coverage calculation based on the trailing twelve months results which includes an adjustment for tenants that are more than one-month delinquent in paying rent. A debt service coverage ratio below 1.10x is a Cash Trap Trigger Event (as defined in the loan agreement), which gives the Basis Lender the right to institute a cash management period until the trigger is cured. A debt service coverage ratio below 1.05x for two consecutive calendar quarters gives the Basis Lender the right to remove the Company as manager of the properties. The debt service coverage calculation for the twelve months ended December 31, 2020, the first period effective for the Company, was approximately 1.19x

Basis Preferred Interest

On December 27, 2019, the Operating Partnership and Big BSP Investments, LLC, a subsidiary of a real estate fund managed by Basis Management Group, LLC (the “Preferred Investor”), entered into an amended and restated operating agreement (the “Sub-OP Operating Agreement”) of the Broad Street Big First OP LLC (the “Sub-OP”), a subsidiary of the Operating Partnership. Pursuant to the Sub-OP Operating Agreement, among other things, the Preferred Investor committed to make an investment of up to $10.7 million in the Sub-OP, of which $6.9 million had been funded as of June 30, 2020, in exchange for a 1.0% membership interest in the Sub-OP designated as Class A units.

Pursuant to the Sub-OP Operating Agreement, the Preferred Investor is entitled to a cumulative annual return of 14.0% on its initial capital contribution (the “Class A Return”), and the Preferred Investor will be entitled to a 20% return (the “Enhanced Class A Return”) on any capital contribution made to the Sub-OP in excess of the $10.7 million commitment. The Preferred Investor’s interests must be redeemed on or before the earlier of: (i) January 1, 2023 and (ii) the date on which the Basis Term Loan is paid in full (the “Redemption Date”). The Redemption Date may be extended to December 31, 2023 and December 31, 2024, in each case subject to certain conditions, including the payment of a fee equal to 0.25% of the Preferred Investor’s net invested capital for the first extension option and a fee of 0.50% of the Preferred Investor’s net invested capital for the second extension option. If the redemption price is paid on or before the Redemption Date, then the redemption price will be equal to (a) all unreturned capital contributions made by the Preferred Investor, (b) all accrued but unpaid Class A Return, (c) all accrued but unpaid Enhanced Class A Return and (d) all costs and other expenses incurred by the Preferred Investor in connection with the enforcement of its rights under the Sub-OP Operating Agreement. Additionally, at the Redemption Date, the Preferred Investor is entitled to an amount equal to (a) the product of (i) the aggregate amount of capital contributions made and (ii) 0.4, less (b) the aggregate amount of Class A return payments made to the Preferred Investor (the “Minimum Multiple Amount”). As of June 30, 2020 and December 31, 2019, the Minimum Multiple Amount was approximately $2.3 million and $2.8 million, respectively, which is included as indebtedness on the consolidated balance sheet.

The Operating Partnership serves as the managing member of the Sub-OP. However, the Preferred Investor has approval rights over certain major decisions (as defined in the Sub-OP Operating Agreement), including, but not limited to, (i) the incurrence of new indebtedness or modification of existing indebtedness by the Sub-OP or its direct or indirect subsidiaries, (ii) capital expenditures over $250,000, (iii) any proposed change to a property directly or indirectly owned by the Sub-OP, (iv) direct or indirect acquisitions of new properties, (v) the sale or other disposition of any property directly or indirectly owned by the Sub-OP, (v) the issuance of additional membership interests in the Sub-OP, (vi) the entry into any new material lease or any amendment to an existing material lease and (vii) decisions regarding the dissolution, winding up or liquidation of the Sub-OP or the filing of any bankruptcy petition by the Sub-OP.

Under certain circumstances, including in the event that the Preferred Investor’s interests are not redeemed on or prior to the Redemption Date (as it may be extended), the Preferred Investor may remove the Operating Partnership as the manager of the Sub-OP and as the manager for each of the property-owning entities held under the Sub-OP.

The obligations of the Operating Partnership under the Sub-OP Operating Agreement are guaranteed by the Company, Mr. Jacoby, the Company’s chairman and chief executive officer, and Mr. Yockey, a director of the Company. The Company has agreed to indemnify Mr. Yockey for any losses he incurs as a result of this guarantee.

The Preferred Investor’s interests in the Sub-OP under the Sub-OP Operating Agreement are mandatorily redeemable, and, as a result, are characterized as indebtedness in the accompanying consolidated financial statements.

MVB Loan

On December 27, 2019, in connection with the closing of the Initial Mergers, the Company, the Operating Partnership and BSR entered into a loan agreement (the “MVB Loan Agreement”) with MVB Bank, Inc. (“MVB”) with respect to a $6.5 million loan consisting of a $4.5 million term loan (the “MVB Term Loan”) and a $2.0 million revolving credit facility (the “MVB Revolver”). The MVB Term Loan matures on December 27, 2022 and the MVB Revolver had an original maturity date of December 27, 2020, which has been extended to December 27, 2022 under the terms described below under the heading “—Forbearance Agreements and Debt Amendments”. The MVB Term Loan has a fixed interest rate of 6.75% per annum. The MVB Revolver carries an interest rate of the greater of (i) Prime Rate plus 1.5% and (ii) 6.75%.

The Company has no additional availability under the MVB Term Loan and the MVB Revolver as of June 30, 2020.

The MVB Loan Agreement is secured by certain personal property of the Company, the Operating Partnership and BSR. In addition, Mr. Jacoby has pledged the shares of the Company’s common stock and OP units received as consideration in the Initial

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Mergers as collateral under the MVB Loan Agreement. The obligations of the Company and the Operating Partnership under the MVB Loan Agreement are guaranteed by a subsidiary of the Company and Michael Z. Jacoby, in his individual capacity.

The MVB Loan Agreement contains certain customary representations and warranties and affirmative and negative covenants. The MVB Loan Agreement also requires the Company to maintain (as such terms are defined in the MVB Loan Agreement) (i) a debt service coverage ratio of at least 1.30 to 1.00, (ii) an EBITDA to consolidated funded debt ratio of at least 8.0%, (iii) an aggregate minimum unencumbered cash, including funds available under other lines of credit, of greater than $5.0 million (the “Minimum Liquidity Requirement”), and (iv) one or more deposit accounts with MVB with an aggregate minimum balance of $3.0 million (the “Deposit Requirement”). The failure to comply with the Deposit Requirement is not a default under the MVB Loan Agreement but will increase the interest rate under the MVB Term Loan and MVB Revolver by 1.0% until the Deposit Requirement has been satisfied. See “—Forbearance Agreements and Debt Amendments” for amendments to these covenants and compliance dates.

The MVB Loan Agreement provides for standard events of default, including nonpayment of principal and other amounts when due, non-performance of covenants, breach of representations and warranties, certain bankruptcy or insolvency events and changes in control. If an event of default occurs and is continuing under the MVB Loan Agreement, MVB may, among other things, require the immediate payment of all amounts owed thereunder.

Mortgage Indebtedness

In addition to the indebtedness described above, as of June 30, 2020 and December 31, 2019, the Company had approximately $33.4 million and $32.1 million, respectively, of outstanding mortgage indebtedness secured by individual properties. The Hollinswood mortgage, Vista mortgage, and Brookhill mortgage require the Company to maintain a debt service coverage ratio (as such terms are defined in the respective Loan Agreements) of at least 1.40 to 1.00, 1.35 to 1.00 and 1.35 to 1.00, respectively.

Forbearance Agreements and Debt Amendments

During the second quarter of 2020, the lenders for the Company’s mortgage loans secured by the Brookhill, Hollinswood and Vista properties agreed to defer payments of principal and interest for three months, and the lender for the Company’s mortgage loan secured by the Avondale property agreed to require interest-only payments for four months. Additionally, during the second quarter of 2020, the lender under the MVB Loan Agreement agreed to require interest-only payments for three months and deferred covenant tests until March 31, 2021.  Subsequent to the initial payment deferral, during the third quarter of 2020, the Company’s lender for the mortgage loans secured by Hollinswood and Vista agreed to defer payments of principal and interest for another three months. The deferred amounts for the Hollinswood mortgage loan are due in six equal monthly installments beginning in November 2020. The deferred amounts for all other loans will be due at loan maturity.

On June 16, 2020, the Preferred Investor made two additional capital contributions available to the Sub-OP in the aggregate amount of approximately $2.9 million, which is classified as debt. The two capital contributions consisted of: (i) a $2.4 million capital contribution to the Sub-OP that the Sub-OP contributed to the Borrowers for purposes of making debt service payments under the Basis Loan Agreement and (ii) a $0.5 million capital contribution to the Sub-OP that the Sub-OP contributed to certain of its other property owning subsidiaries for purposes of making debt service payments on mortgage debt secured by the properties owned by such subsidiaries and making payments of the Class A return due to the Preferred Investor pursuant to the Sub-OP Operating Agreement. The Preferred Investor is entitled to a cumulative annual return of 13.0% on the additional capital contributions. As described below under the heading “—2021 Debt Agreements and Modifications,” the Company expects to repay approximately $0.8 million of these funds with the proceeds from the Vista mortgage refinance. As of the date of these financial statements, there was approximately $1.2 million remaining available to the Company from these capital contributions which is included in restricted cash.  

As described above under the heading “—Merger with MedAmerica Properties Inc.”, in July 2020 the Company completed the Merger to acquire Lamar Station Plaza East, which included the assumption of $2.5 million in debt. Additionally, in connection with the Merger, the Company entered into a loan modification agreement, which increased the maximum principal amount available under the assumed loan agreement to $4.1 million. The loan was in default of the debt service coverage ratio (as defined in the loan agreement) upon the Company’s assumption of the loan agreement. In connection with the loan modification agreement, the lender agreed to forbear enforcement of the event of default subject to the Company’s satisfaction of certain conditions, including (i) execution of a lease agreement with a specified tenant on or before January 1, 2021, (ii) issuance of a certificate of occupancy for a specified tenant on or before January 1, 2021, and (iii) delivery of subordination, nondisturbance and attornment agreements on or before October 2, 2020 for specified tenants. If the Company did not satisfy these conditions the Lender’s forbearance would terminate. The Company did not meet the above conditions. The Company entered into a second loan modification agreement effective November 2020 in which the lender to agreed to forbear enforcement of the events of default subject to the Company’s satisfaction of certain conditions including (i) issuance of a certificate of occupancy for a specified tenant on or before January 31, 2021 and (ii) the specified tenant has taken full possession and occupancy of the space on or before January 31, 2021. The Company met both conditions required by the second loan modification.

In December 2020, the Company entered into an amendment to the MVB Loan Agreement, which extended the maturity date of the MVB Revolver to December 27, 2021 and in March 2021, the Company entered into another amendment to the MVB Loan Agreement which further extended the maturity date of the MVB Revolver to December 27, 2022. The amendments also eliminate the revolving nature of the facility, require monthly principal payments as calculated over a 10-year amortization schedule and require the

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repayment of $250,000 on each of the following dates (a) the earlier of March 31, 2021 or the closing of the Company’s pending mergers of the Highlandtown and Spotswood properties, (b) the earlier of September 30, 2021 or the closing of the Company’s pending merger of the Greenwood property (c) March 31, 2022, and (d) September 30, 2022. The payment owed by March 31, 2021 has been paid. Additionally, the amendments (i) deferred testing for covenants related to the Deposit Requirement, Minimum Liquidity Requirement and debt service coverage ratio covenant until June 30, 2021, (ii) deferred testing for the covenant related to the Company’s EBITDA to consolidated funded debt ratio until December 31, 2021, (iii) modified the debt service coverage ratio to 1.00 to 1 and (iv) modified the Minimum Liquidity Requirement to $3.0 million.

As discussed above, due to the COVID-19 pandemic, the Company entered into loan modifications on various debt instruments which deferred principal and interest payments or required interest-only payments for a period ranging from three to six months. Due to the terms of the modifications, the Company determined that some of these modifications met the criteria for troubled debt restructurings under the accounting standards. No gain or loss was recognized as the carrying amount of the original loans were not greater than the undiscounted cash flows of the modified loans. The Company accounted for the change prospectively using the new effective interest rates of the loans.

PPP Loans

On April 20, 2020, a wholly owned subsidiary of the Company entered into a promissory note (the “PPP Note”) with MVB with respect to an unsecured loan of approximately $0.8 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”), which was established under the CARES Act and is administered by the U.S. Small Business Administration (the “SBA”). The PPP Loan bears interest at a rate of 1.0% per year. During the first quarter of 2021, the Company received forgiveness for its entire balance of the PPP Loan from the SBA, which will be recognized as a gain on debt extinguishment in the Company’s statement of operations in 2021.   

On March 18, 2021, a wholly owned subsidiary of the Company entered into a promissory note (the “Second PPP Note”) with MVB with respect to an unsecured loan of approximately $0.8 million (the “Second PPP Loan”) pursuant to the PPP. The Second PPP Loan bears interest at a rate of 1.0% per year. The Second PPP Note contains certain events of default relating to, among other things, failure to make any payment when due and material adverse changes in the borrower’s financial condition. The occurrence of an event of default, following any applicable cure period, would permit MVB to declare the unpaid principal, accrued and unpaid interest and all other amounts payable under the PPP Note to be immediately due and payable.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of a loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs and certain mortgage interest, rent and utility expenses. The terms of any forgiveness may also be subject to further requirements under any regulations and guidelines the SBA may adopt. The Company can provide no assurances that it will obtain forgiveness of the Second PPP Loan in whole or in part. If the Company does not obtain forgiveness it is required to make equal monthly payments of principal and interest to repay the loan in full upon maturity on March 18, 2026.

2021 Debt Agreements and Modifications

In March 2021, the Company completed the refinance of the approximately $8.9 million Vista Shops mortgage loan. The new loan has a principal balance of $11.7 million, matures in June 2023, and carries an interest rate 3.83% per annum. The Company deposited approximately $1.9 million of the proceeds from the refinance with the Basis Lender. The Company is in negotiations with the Basis Lender as to the application of the deposit which will be applied as follows unless another agreement is made between the Basis Lender and the Company: (i) repay approximately $0.8 million of the outstanding principal balance on the capital contributions, which are treated as debt, provided to the Company in June 2020 under the Basis Preferred Interest as described above under the heading “—Forbearance Agreements and Debt Amendments”, (ii) pay off approximately $0.2 million in accrued interest on these funds and (iii) contribute approximately $0.9 million into an escrow account with the Basis Lender which will either be released to us for certain capital expenditures or used to pay down the outstanding principal balance of the capital contributions upon satisfaction of certain conditions.

Deferred Financing Costs and Debt Discounts

The total amount of deferred financing costs associated with the Company’s debt as of June 30, 2020 and December 31, 2019 was $1.3 million, gross ($1.1 million, net) and $1.3 million, gross ($1.3 million, net), respectively. Debt discounts associated with the Company’s debt as of June 30, 2020 and December 31, 2019 was $1.4 million, gross ($1.1 million, net) and $1.3 million, gross ($1.3 million, net), respectively. Deferred financing costs and debt discounts are netted against the debt balance outstanding on the Company’s consolidated balance sheet and will be amortized to interest expense through the maturity date of the related debt.

The Company recognized amortization expense of deferred financing costs and debt discounts, included in interest expense on the consolidated statement of operations, of approximately $0.2 million and $0.4 million for the three and six months ended June 30, 2020. The Company did not recognize any amortization expense of deferred financing costs and debt discounts during the three and six months ended June 30, 2019.

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Interest Rate Cap and Interest Rate Swap Agreements

To mitigate exposure to interest rate risk, the Company entered into an interest rate cap agreement, effective December 27, 2019, on the full $66.9 million Basis Term Loan to cap the variable LIBOR interest rate at 3.5%. The Basis Term Loan bears interest at a rate equal to the greater of (i) LIBOR plus 3.850% per annum and (ii) 6.125% per annum. As of June 30, 2020, the interest rate of the Basis Term Loan was 6.125%. The Company also entered into two interest rate swap agreements on the Hollinswood Loan to fix the interest rate at 4.06%. The swap agreements are effective as of December 27, 2019 on the outstanding balance of $10.2 million and on July 1, 2021 for the additional availability of $3.0 million under the Hollinswood Loan.

The Company recognizes all derivative instruments as assets or liabilities at their fair value in the consolidated balance sheets. The changes in the fair value of the Company’s derivatives, which do not qualify for hedge accounting, are recognized in earnings. For the three and six months ended June 30, 2020, the Company recognized approximately $0.1 million and $0.7 million in expense related to fair value adjustments on derivatives. The Company did not have any derivative instruments during the three and six months ended June 30, 2019.

The fair value of the Company’s derivative financial instruments as of June 30, 2020 and December 31, 2019 was an interest rate cap asset of less than $0.1 million for each period and an interest rate swap liability of approximately $0.8 million and $0.1 million, respectively. The interest rate cap asset is included in Other assets, net and the interest rate swap liability is included in Accounts payable and accrued expenses on the consolidated balance sheet, respectively.

Covenants

The Company’s loan agreements contain customary financial and operating covenants including debt service coverage ratios and aggregate minimum unencumbered cash covenants. As described above under the heading “—Forbearance Agreements and Debt Amendments”, the lender under the MVB Loan Agreement deferred covenant tests until June 30, 2021 and December 31, 2021. As of June 30, 2020, and throughout 2020, the Company was in compliance with all of the covenants under our debt agreements except for the debt service coverage ratio covenant under the Lamar Station Plaza East mortgage which was assumed in July 2020 as described above under the heading “—Forbearance Agreements and Debt Amendments.”

Note 6 - Commitments and Contingencies

Commitments

As detailed in Note 1 under the heading “—Merger with MedAmerica Properties Inc.” there are six Mergers that have not been completed. 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 earn management fees.

Contingencies

Impact of COVID-19

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including the impact on its tenants and rental revenue. The Company has observed the impact of COVID-19 manifest in the form of temporary closures or significantly limited operations among its 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. In some cases, the Company may have to restructure tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to the Company as those currently in place. In addition, lease renewals and new leasing activity are expected to be adversely impacted as businesses delay executing leases amidst the immediate and uncertain future economic impacts of the COVID-19 pandemic. The extent of the COVID-19 pandemic’s effect on the Company’s future operational and financial performance, financial condition and liquidity will depend on future developments, including the duration and intensity of the pandemic, the timing and effectiveness of COVID-19 vaccines and treatments, the duration of government measures to mitigate the pandemic and how quickly and to what extent normal economic and operating conditions can resume, all of which are uncertain and difficult to predict. Given this uncertainty, the Company cannot accurately predict the effect on future periods, but the Company expects the pandemic and the related government measures to have an adverse impact on its financial condition, liquidity, results of operations and cash flows and the impact could be material.

Beginning in April 2020 and through the date of these financial statements, the Company has entered into lease modifications that deferred approximately $0.4 million of contractual revenue and waived approximately $0.3 million of contractual revenue. To date, the weighted average payback period of deferred rent is approximately seven months which commences at various times beginning in July 2020 through June 2021. Rent deferrals to date may not be indicative of rent deferrals in any future period.

CARES Act

On March 27, 2020, President Trump signed into law the CARES Act, which, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative

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minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.

It also appropriated funds for the SBA PPP loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19. The Company received funds under the PPP as described in Note 5 under the heading (“—PPP Loans”). Additionally, the Company has utilized the deferred payment of the employer portions of social security taxes that would otherwise be due from March 27, 2020 through December 31, 2020, without penalty or interest charges.

Litigation

From time to time, the Company or its properties may be subject to claims and suits in the ordinary course of business. The Company’s lessees and borrowers have indemnified, and are obligated to continue to indemnify, the Company against all liabilities arising from the operations of the properties and are further obligated to indemnify it against environmental or title problems affecting the real estate underlying such facilities. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on its consolidated financial condition, results of operations or cash flows.

Note 7 - Equity  

Noncontrolling Interest

As of June 30, 2020, the Company owned an 88.4% interest in the Operating Partnership and investors in the Broad Street Entities receiving OP units as consideration for the Initial Mergers collectively owned an 11.6% interest in the Operating Partnership. Commencing on the 12-month anniversary of the date on which the OP units were issued, each limited partner of the Operating Partnership (other than the Company) will have the right, subject to certain terms and conditions, to require the Operating Partnership to redeem all or a portion of the OP units held by such limited partner in exchange for cash based on the market price of the Company’s common stock or, at the Company’s option and sole discretion, for shares of the Company’s common stock on a one-for-one basis.

2020 Equity Incentive Plan

On January 16, 2020, the board of directors of the Company approved the Broad Street Realty, Inc. 2020 Equity Incentive Plan (the “Plan”). Pursuant to the Plan, the Company may issue equity-based awards to directors, officers, employees, independent contractors and other eligible persons. The Plan provides for the grant of stock options, share awards (including restricted stock and restricted stock units), share appreciation rights, dividend equivalent rights, performance awards, annual cash incentive awards and other equity based awards, including LTIP units, which are convertible on a one-for-one basis into OP units. A total of 3,620,000 shares of the Company’s common stock are available for issuance under the Plan. Each share subject to an award granted under the Plan will reduce the available shares under the Plan on a one-for-one basis. The Plan is administered by the compensation committee of the Company’s board of directors. As of June 30, 2020, there were no awards outstanding under the Plan.

On December 31, 2020, the Company granted an aggregate of 153,200 restricted shares of common stock to its directors. The compensation expense related to these grants is approximately $0.1 million and will be recognized over a weighted-average period of one year beginning on the grant date.

Option Awards

In connection with the completion of the Initial Mergers, the Company assumed option awards previously issued to directors and officers of MedAmerica. Details of these options for the six months ended June 30, 2020 are presented in the table below. The Company did not have any option awards during the six months ended June 30, 2019.

The fair values of stock options are estimated using the Black-Scholes method, which takes into account variables such as estimated volatility, expected holding period, dividend yield, and the risk-free interest rate. The risk-free interest rate is the five-year treasury rate at the date of grant. The expected life is based on the contractual life of the options at the date of grant. All 70,000 outstanding options were fully vested at grant date. The exercise price of the outstanding options exceeded the closing price of the Company’s common stock at June 30, 2020. The intrinsic value is not material.

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Note 8 – Revenues

Disaggregated Revenue

The following tables represents a disaggregation of revenues from contracts with customers for the three and six months ended June 30, 2020 and 2019 by type of service (dollars in thousands):

Leasing Operations

Minimum cash rental payments due to the Company in future periods under executed non-cancelable operating leases in place for the Company’s properties as of June 30, 2020 are as follows (dollars in thousands):

Note 9 - Earnings per Share

Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the period.  Diluted earnings per share is determined based on the weighted average number of shares outstanding during the period combined with the incremental average shares that would have been outstanding assuming the conversion of all potentially dilutive common shares into common shares as of the earliest date possible. Potentially dilutive securities include stock options, convertible preferred stock, restricted stock, and OP units, which, subject to certain terms and conditions, may be tendered for redemption by the holder thereof for cash based on the market price of the Company’s common stock or, at the Company’s option and sole discretion, for shares of the Company’s common stock on a one-for-one basis. Stock options, convertible preferred stock, and OP units have been omitted from the Company’s denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the denominator would have no dilutive impact due to the net loss position.

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The following table sets forth the computation of earnings per common share for the three and six months ended June 30, 2020 and 2019 (amounts in thousands, except per share amounts):

Note 10 - Fair Value of Financial Instruments

Financial Assets and Liabilities Measured at Fair Value

The Company’s financial assets and liabilities measured at fair value on a recurring basis currently include derivative financial instruments. These derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs. The market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation model for interest rate caps and interest rate swaps are observable in active markets and are classified as Level 2 in the hierarchy. The fair value of the Company’s interest rate cap, which is included in Other assets, net on the consolidated balance sheets was less than $0.1 million at both June 30, 2020 and December 31, 2019. The fair value of the Company’s interest rate swap liabilities, which are included in Accounts payable and accrued liabilities on the consolidated balance sheets, was approximately $0.8 million and $0.1 million at June 30, 2020 and December 31, 2019, respectively. See Note 5 “—Interest Rate Cap and Interest Rate Swap Agreements” for further discussion regarding the Company’s interest rate cap and interest rate swap agreements.

Financial Assets and Liabilities Not Carried at Fair Value

The carrying amounts of cash and cash equivalents, restricted cash, receivables and payables are reasonable estimates of their fair value as of June 30, 2020 and December 31, 2019, respectively, due to their short-term nature of these instruments (Level 1).

At June 30, 2020 and December 31, 2019, the Company’s indebtedness was comprised of borrowings that bear interest at LIBOR plus a margin and borrowings at fixed rates. The fair value of the Company’s $93.9 and $93.8 million in borrowings under variable rates at June 30, 2020 and December 31, 2019, respectively, approximate their carrying values as the debt is at variable rates currently available and resets on a monthly basis.

The fair value of the Company’s fixed rate debt as of June 30, 2020 and December 31, 2019 is estimated by using Level 2 inputs such as discounting the estimated future cash flows using current market rates for similar loans that would be made to borrowers with similar credit ratings and for the same remaining maturities. As of June 30, 2020, the fair value of the Company’s $21.8 million fixed rate debt was estimated to be approximately $22.4 million. As of December 31, 2019, the fair value of the Company’s $17.2 million fixed rate debt was estimated to be approximately $17.2 million.

Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement at such fair value amounts may not be possible.

Note 11 – Taxes

The provision for income taxes for the three and six months ended June 30, 2020 reflects an income tax benefit of approximately $0.8 million and $1.6 million, respectively, at an effective tax rate of 24% for each period. The difference between the Company’s effective tax rate and the federal statutory rate is primarily due to the loss attributable to the partnership not subject to tax and state income taxes.

Until the completion of the Mergers on December 27, 2019 as described above under the heading “—Merger with MedAmerica Properties Inc.”, the Company was structured as a limited liability company and was treated as a partnership for U.S. federal and state income purposes. As such, any taxes are the responsibility of the members, and accordingly no provisions for federal or state income taxes were recorded for the Company during the three and six months ended June 30, 2019.

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Note 12 – Related Party Transactions

Receivables and Payables

As of June 30, 2020, the Company had less than $0.1 million in receivables due from related parties, included in Other assets, net on the consolidated balance sheet, which relates to receivables due from properties managed by the Company which were provided to the properties for working capital. Additionally, the Company had $0.7 million in payables due to properties managed by the Company related to amounts borrowed by the Company for working capital which are reflected in Payables due to related parties on the consolidated balance sheet.

As of December 31, 2019, the Company had $0.5 million in receivables due from related parties, included in Other assets, net on the consolidated balance sheet, which relates to receivables due from properties managed by the Company which were provided to the properties for working capital. Additionally, the Company had $1.1 million in payables due to properties managed by the Company related to amounts borrowed by the Company for working capital, which are reflected in Payables due to related parties on the consolidated balance sheet.

Approximately $0.4 million and $0.8 million of the Company’s total revenue for the three and six months ended June 30, 2020, respectively, was generated from related parties. Approximately $0.8 million and $1.4 million of the Company’s total revenue for the three and six months ended June 30, 2019, respectively, was generated from related parties. Additionally, approximately $0.5 million and $0.3 million of the Company’s accounts receivable, net balance at June 30, 2020 and December 31, 2019, respectively, was owed from related parties.

During 2019, the Company agreed to pay $1.5 million of consideration to Mr. Yockey in exchange for repurchasing a portion of his ownership interest in BSR prior to the Mergers. Approximately $1.0 million of this consideration was paid to Mr. Yockey in January 2020 and the remaining $0.5 million is included in accounts payable and accrued expenses on the consolidated balance sheet as of June 30, 2020.

The Mergers

As consideration in the Mergers that have closed as of the date of these financial statements, as a result of their interests in the Broad Street Entities party to such Mergers, (i) Mr. Jacoby received 2,004,146 shares of the Company’s common stock and 856,805 OP units, (ii) Mr. Yockey received 2,004,146 shares of the Company’s common stock and 420,523 OP units, (iii) Alexander Topchy, the Company’s Chief Financial Officer, received an aggregate of 96,281 shares of the Company’s common stock and 48,320 OP units and (iv) Daniel J.W. Neal, a member of the Company’s Board of Directors, received, directly or indirectly, 521,996 shares of the Company’s 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 the Company’s common stock and 136,213 OP units, (ii) Mr. Yockey will receive an aggregate of approximately 547,513 shares of the Company’s common stock and 136,213 OP units, (iii) Mr. Topchy will receive 43,001 shares of the Company’s common stock and 14,338 OP units and (iv) Mr. Neal will receive, directly or indirectly, an aggregate of approximately 361,127 shares of the Company’s common stock.

Management Fees

The Company provides management services for the seven properties to be acquired as of June 30, 2020 in the remaining Mergers. For each property, the Company receives a management fee ranging from 3.0% to 4.0% of such property’s gross income. As described above, Messrs. Jacoby, Yockey, Topchy and Neal have interests in some or all of the Broad Street Entities that own the seven properties.

Messrs. Jacoby and Yockey, along with Mr. Topchy, Jeffrey H. Foster, a member of the Company’s Board of Directors, and Aras Holden, the Company’s vice president of asset management and acquisitions, collectively own an interest in BBL Current Investors LLC (“BBL”). BBL intends to redevelop a property adjacent to the Company’s Midtown Colonial property into a mixed-use facility with retail on the ground floor and multi-family above. When the redevelopment is complete, the Company will manage the retail portion of the property and will receive management fees from BBL. However, the Company will have no ownership interest in the property.

Ground Lease

As described in Note 3 under the heading “—2020 Real Estate Acquisitions”, the Company acquired the fee-simple interest in the land that the Cromwell Field Shopping Center, a property managed by the Company, is located on under a leasehold interest. The Company leases the land to the owner of the Cromwell Field Shopping Center pursuant to a ground lease and recognized approximately $36,000 and $0.1 million of revenue under the ground lease for the three and six months ended June 30, 2020, respectively.

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Tax Protection Agreements

On December 27, 2019, pursuant to the Merger Agreements, the Company and the Operating Partnership entered into tax protection agreements (the “Tax Protection Agreements”) with each of the prior investors in BSV Colonial Investor LLC, BSV Lamonticello Investors LLC and BSV Patrick Street Member LLC, including Mr.. Jacoby, Mr. Yockey and Mr. Topchy, in connection with their receipt of OP units in certain of the Initial Mergers. Pursuant to the Tax Protection Agreements, until the seventh anniversary of the completion of the Initial Mergers, the Company and the Operating Partnership may be required to indemnify the other parties thereto for their tax liabilities related to built-in gain that exists with respect to the properties known as Midtown Colonial, Midtown Lamonticello and Vista Shops at Golden Mile (the “Protected Properties”). Furthermore, until the seventh anniversary of the completion of the Initial Mergers, the Company and the Operating Partnership will be required to use commercially reasonable efforts to avoid any event, including a sale of the Protected Properties, that triggers built-in gain to the other parties to the Tax Protection Agreements, subject to certain exceptions, including like-kind exchanges under Section 1031 of the Internal Revenue Code.

Guarantees

The Company’s subsidiaries’ obligations under the Basis Term Loan Agreement, the Sub-OP Operating Agreement, and the Brookhill mortgage loan are guaranteed by Mr. Jacoby and Mr. Yockey. We have agreed to indemnify Mr. Yockey for any losses he incurs as a result of his guarantee of the Basis Term Loan, the Sub-OP Operating Agreement, and the Brookhill mortgage loan. Mr. Jacoby is also a guarantor under the MVB Loan Agreement and the Cromwell land loan.

Consulting Agreement

The Company has engaged Timbergate Ventures, LLC, an entity wholly owned by Mr. Yockey, as a consultant for a two-year term beginning December 27, 2019. Pursuant to this arrangement, the Company pays Timbergate Ventures, LLC a consulting fee of $0.2 million per year. During the three and six months ended June 30, 2020, approximately $50,000 and $0.1 million, respectively, was recorded in general and administrative expenses related to this consulting agreement.

Legal Fees

Samuel M. Spiritos, a member of the Company’s Board of Directors, is the managing partner of Shulman Rogers LLP, which represents the Company in certain real estate matters, including with matters related to the Mergers. During each of the three and six months ended June 30, 2020, the Company paid less than $0.1 million in legal fees to Shulman Rogers LLP. During each of the three and six months ended June 30, 2019, the Company paid less than $0.1 million in legal fees to Shulman Rogers LLP.

Note 13 – Subsequent Events

2020 Real Estate Acquisitions

As described in Note 3 under the heading “—2020 Real Estate Acquisitions”, on July 2, 2020, the Company closed one Merger whereby it acquired Lamar Station Plaza East.

Forbearance Agreements and Debt Amendments

As described in Note 5 under the heading “—Forbearance Agreements and Debt Amendments”, the Company amended various debt agreements with its lenders, which resulted in temporary deferral of payments and additional capital contributions to the Company.

2021 Debt Amendments

The Company completed debt modifications as described in Note 5 under the heading “—2021 Debt Agreements and Modifications”.

PPP Loans

As described in Note 5 under the heading “—PPP Loans”, during the first quarter of 2021 the Company received forgiveness for the entire balance of the PPP Loan received in April 2020 from the SBA. Additionally, in March 2021, the Company received a Second PPP Loan from the SBA.

2020 Restricted Stock Awards

As described in Note 7 under the heading “—2020 Equity Incentive Plan”, on December 31, 2020, the Company granted an aggregate of 153,200 restricted shares of common stock to its directors.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the consolidated financial statements and notes thereto appearing elsewhere is this report. References to “we,” “our,” “us,” and “Company” refer to Broad Street Realty, Inc., together with its consolidated subsidiaries.

Forward-Looking Statements

We make statements in this report 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. You are cautioned to not place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Factors that may impact forward-looking statements include, among others, the following:

See Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion of these and other risks, as well as the risks, uncertainties and other factors discussed in this report and identified in other documents we file with the Securities and Exchange Commission from time to time. You should carefully consider these risks before making any investment decisions in the Company. New risks and uncertainties may also emerge from time to time that could materially and adversely affect us.

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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 June 30, 2020, 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, other than working to close the remaining six Mergers, 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.

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 June 30, 2020, we owned 88.4% of the OP units in our Operating Partnership, and we are the sole member of the sole general partner of our Operating Partnership.

We began operating in our current structure on December 27, 2019 upon the completion of the Initial Mergers. As described further below, the financial statements presented herein for all periods prior to December 27, 2019 are those of BSR. References in this section to “the Company,” “we,” “our” and “us” for periods prior to December 27, 2019 refer to Broad Street Realty, LLC (“BSR”) and thereafter to Broad Street Realty, Inc., together with its consolidated subsidiaries.

Prior the Initial Mergers, BSR was a real estate management and brokerage company, which was 50% owned by Michael Z. Jacoby, the Company’s chairman and chief executive officer, and 50% owned by Thomas M. Yockey, one of the Company’s directors. BSR provided property management services for the substantial majority of the properties in the Company’s current portfolio and the additional properties to be acquired by the Company upon the completion of the additional Mergers. BSR also provided real estate brokerage services for the properties acquired or to be acquired by the Company as well as for third party clients. BSR owned no real property, so all of its revenues were derived from its property management and brokerage businesses. The properties acquired by the Company in the Initial Mergers and to be acquired in the additional Mergers were or are owned by the Broad Street Entities.

Mergers with MedAmerica Properties Inc.

On December 27, 2019 (the “Merger Date”), subsidiaries of MedAmerica Properties Inc. completed the 11 Initial Mergers, including the Mergers with BSR and Broad Street Ventures, LLC (“BSV”) and Mergers with nine Broad Street Entities. 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. In addition, upon completion of the Initial Mergers, MedAmerica’s name was changed to “Broad Street Realty, Inc.”

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 prior investors in the Broad Street Entities party to the Mergers. 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.

The Merger between BSR and a wholly owned subsidiary of MedAmerica was accounted for as a reverse acquisition and recapitalization, with BSR being treated as the accounting acquirer. As a result, the consolidated financial statements included in this Quarterly Report on Form 10-Q reflect the financial condition, the results of operations and cash flows of BSR prior to the Merger Date. Subsequent to the Merger Date, the information relates to Broad Street Realty, Inc. and its consolidated subsidiaries. BSR derived substantially all of its revenue from third-party management and brokerage fees, and, as described further below, we will derive the substantial majority of our revenue from rental payments on our owned properties. In addition, we have substantially more indebtedness than BSR did prior to the completion of the Initial Mergers.

As of the date of this report, there are six Mergers that have not been completed. 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

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

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restrictions on freedom of movement and business operations, such as travel bans, border closings, business closures, quarantines and shelter-in-place or similar orders. The extent of the COVID-19 pandemic’s effect on our future operational and financial performance, financial condition and liquidity will depend on future developments, including the duration and intensity of the pandemic, the timing and effectiveness of COVID-19 vaccines and treatments, the duration of government measures to mitigate the pandemic and how quickly and to what extent normal economic and operating conditions can resume, all of which are uncertain and difficult to predict. Given this uncertainty, we cannot accurately predict the effect on future periods.

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, 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.

As of April 8, 2021:

Collections and rent deferrals to date may not be indicative of collections or rent deferrals in any future period. We expect that our rent collections will continue to be below our tenants’ contractual rent obligations for so long as governmental orders require non-essential businesses to operate on a limited basis and residents to stay at home, which will adversely impact our results of operations. Even after governmental restrictions are lifted, our tenants may continue to be impacted by economic conditions resulting from COVID-19 or public perception of the risk of COVID-19, which could adversely affect foot traffic to our tenants’ businesses and our tenants’ ability to adequately staff their businesses. If the impacts of the pandemic continue, we expect that certain tenants will experience greater financial distress, which could result in additional tenants being unable to pay contractual rent (including deferred rent) on a timely basis, or at all, additional requests for rental relief, early lease terminations, tenant bankruptcies, decreases in occupancy, reductions in rent, or increases in rent concessions or other accommodations. In some cases, we may have to restructure tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to us as those currently in place. In addition, lease renewals and new leasing activity are expected to be adversely impacted as businesses delay executing leases amidst the immediate and uncertain future economic impacts of the COVID-19 pandemic. These factors also may adversely affect the value of our properties. The extent of such impacts will depend on future developments, which are highly uncertain and cannot be predicted. 

In addition, as of the date of this Quarterly Report, substantially all of our employees were working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business. Furthermore, our ability to close the remaining six Mergers has been adversely impacted by the market and other disruptions related to the COVID-19 pandemic, including delays in obtaining consent from the requisite lenders.

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We have taken a number of proactive measures to maintain the strength of our business and manage the impacts of the COVID-19 pandemic on our operations and liquidity, including the following:

We will continue to actively monitor the implications of the COVID-19 pandemic on our and our tenants’ businesses and may take further actions to alter our business practices if we determine that such changes are in the best interests of our employees, tenants and stockholders, or as required by federal, state or local authorities.

Portfolio Summary

As of June 30, 2020, our portfolio was comprised of ten retail properties and a parcel of land on which another shopping center is located, all of which are located in the Mid-Atlantic region, consisting of 1,012,834 total square feet of gross leasable area (“GLA”). The following table provides additional information about the properties in our portfolio (dollars in thousands).