Broad Street Realty, Inc. - Quarter Report: 2023 June (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


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

For the transition period from to

Commission File Number: 001-09043

BROAD STREET REALTY, INC.

(Exact name of registrant as specified in its charter)


Delaware	36-3361229
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7250 Woodmont Ave, Suite 350 Bethesda, Maryland	20814
(Address of principal executive offices)	(Zip Code)

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

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

None

N/A

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 August 8, 2023, the registrant had 33,135,490 shares of common stock outstanding.

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Condensed and Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
	Signatures	47

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)


	June 30, 2023			December 31, 2022
				(audited)
Assets
Real estate properties
Land	$	54,936		$	67,225
Building and improvements		278,338			300,699
Intangible lease assets		33,979			41,228
Construction in progress		5,349			4,231
Furniture and equipment		1,711			1,711
Less accumulated depreciation and amortization		(44,391	)		(42,047	)
Total real estate properties held for investment, net		329,922			373,047
Real estate held for sale, net		22,418			—
Total real estate properties, net		352,340			373,047

Cash and cash equivalents		14,473			12,356
Restricted cash		5,551			4,675
Straight-line rent receivable		2,593			2,397
Tenant and accounts receivable, net of allowance of $216 and $165, respectively		2,121			1,874
Derivative assets		1,773			3,426
Other assets, net		3,141			4,511
Assets related to real estate held for sale		794			—
Total Assets	$	382,786		$	402,286

Liabilities and Equity
Liabilities
Mortgage and other indebtedness, net (includes $15,931 and $17,895, respectively, at fair value under the fair value option)	$	238,029		$	267,616
Mortgage and other indebtedness related to real estate held for sale, net		14,552			—
Total mortgage and other indebtedness, net		252,581			267,616
Accounts payable and accrued liabilities		12,126			15,411
Unamortized intangible lease liabilities, net		849			1,553
Payables due to related parties		54			44
Deferred tax liabilities		2,276			3,968
Deferred revenue		1,476			1,252
Liabilities related to real estate held for sale		577			—
Total liabilities		269,939			289,844

Commitments and contingencies

Temporary Equity
Redeemable noncontrolling Fortress preferred interest		79,784			73,697

Permanent Equity
Preferred stock, $0.01 par value, 1,000,000 shares authorized: Series A preferred stock, 20,000 shares authorized, 500 shares issued and outstanding at each of June 30, 2023 and December 31, 2022		—			—
Common stock, $0.01 par value, 50,000,000 shares authorized, 33,109,990 and 32,256,974 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		331			323
Additional paid in capital		64,451			72,097
Accumulated deficit		(30,822	)		(33,294	)
Accumulated other comprehensive income		456			56
Total Broad Street Realty, Inc. stockholders' equity		34,416			39,182
Noncontrolling interest		(1,353	)		(437	)
Total permanent equity		33,063			38,745
Total Liabilities, Temporary Equity and Permanent Equity	$	382,786		$	402,286

The accompanying notes are an integral part of these condensed consolidated financial statements.

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenues
Rental income	$	10,257		$	6,938		$	20,465		$	13,665
Commissions		663			1,281			1,519			1,729
Management fees and other income		53			174			121			301
Total revenues		10,973			8,393			22,105			15,695
Operating Expenses
Cost of services		394			900			809			1,273
Depreciation and amortization		5,290			4,094			10,858			8,211
Property operating		3,145			1,913			6,206			3,998
Impairment of real estate assets		167			—			167			—
Impairment of real estate assets held for sale		1,957			—			1,957			—
Real estate related acquisition costs		—			529			—			529
Bad debt expense		24			6			66			35
General and administrative		2,955			2,870			6,626			6,568
Total operating expenses		13,932			10,312			26,689			20,614
Gain on disposal of property		11,619			—			11,619			—
Operating income (loss)		8,660			(1,919	)		7,035			(4,919	)

Other income (expense)
Interest and other income		17			15			30			26
Derivative fair value adjustment		194			805			15			2,570
Net (loss) gain on fair value change of debt held under the fair value option		(1,131	)		—			2,104			—
Interest expense		(4,735	)		(2,685	)		(9,516	)		(5,273	)
Loss on extinguishment of debt		(15	)		—			(15	)		—
Other expense		(13	)		(1	)		(19	)		(6	)
Total other expense		(5,683	)		(1,866	)		(7,401	)		(2,683	)
Net income (loss) before income taxes		2,977			(3,785	)		(366	)		(7,602	)
Income tax benefit		9			887			1,692			1,514
Net income (loss)	$	2,986		$	(2,898	)	$	1,326		$	(6,088	)
Less: Preferred equity return on Fortress preferred equity		(3,569	)		—			(6,996	)		—
Less: Preferred equity accretion to redemption value		(756	)		—			(1,171	)		—
Less: Preferred OP units return		(118	)		—			(230	)		—
Plus: Net loss attributable to noncontrolling interest		132			270			1,146			517
Net loss attributable to common stockholders	$	(1,325	)	$	(2,628	)	$	(5,925	)	$	(5,571	)

Net loss attributable to common stockholders per share
Basic and diluted	$	(0.04	)	$	(0.08	)	$	(0.17	)	$	(0.17	)

Weighted average shares outstanding
Basic and diluted		35,660,560			32,043,824			35,518,179			32,005,410

The accompanying notes are an integral part of these condensed consolidated financial statements.

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023		2022
Net income (loss)	$	2,986		$	(2,898	)	$	1,326	$	(6,088	)
Other comprehensive (loss) income:
Change in fair value due to credit risk on debt held under the fair value option		(1,332	)		—			400		—
Total other comprehensive (loss) income		(1,332	)		—			400		—
Comprehensive income (loss)	$	1,654		$	(2,898	)	$	1,726	$	(6,088	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(in thousands, except share amounts)

(Unaudited)


	Preferred Stock				Common Stock
	Shares		Par Value		Shares			Par Value		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income		Non- controlling Interest			Total Equity
Balance at December 31, 2021		500	$	—		31,873,428		$	319	$	70,022		$	(19,543	)	$	—	$	(2,674	)	$	48,124
Stock-based compensation		—		—		165,700			1		784			—			—		—			785
Tax effect of change in ownership percentage of OP		—		—		—			—		(3	)		—			—		—			(3	)
Net loss		—		—		—			—		—			(2,943	)		—		(247	)		(3,190	)
Balance at March 31, 2022		500		—		32,039,128			320		70,803			(22,486	)		—		(2,921	)		45,716
Issuance of common stock		—		—		60,106			1		184			—			—		(185	)		—
Grants of restricted stock		—		—		138,262			—		—			—			—		—			—
Forfeiture of restricted stock		—		—		(10,923	)		—		—			—			—		—			—
Shares surrendered for taxes upon vesting		—		—		(104	)		—		—			—			—		—			—
Stock-based compensation		—		—		9,708			1		399			—			—		—			400
Net loss		—		—		—			—		—			(2,628	)		—		(270	)		(2,898	)
Balance at June 30, 2022		500	$	—		32,236,177		$	322	$	71,386		$	(25,114	)	$	—	$	(3,376	)	$	43,218


	Preferred Stock				Common Stock
	Shares		Par Value		Shares			Par Value		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Non- controlling Interest			Total Equity
Balance at December 31, 2022		500	$	—		32,256,974		$	323	$	72,097		$	(33,294	)	$	56		$	(437	)	$	38,745
Forfeiture of restricted stock		—		—		(6,695	)		—		—			—			—			—			—
Shares surrendered for taxes upon vesting		—		—		(4,126	)		—		(6	)		—			—			—			(6	)
Stock-based compensation		—		—		166,125			1		213			—			—			—			214
Preferred equity return on preferred equity investment		—		—		—			—		(3,427	)		—			—			—			(3,427	)
Preferred equity accretion		—		—		—			—		(415	)		—			—			—			(415	)
Preferred OP Units return		—		—		—			—		(112	)		—			—			66			(46	)
Other comprehensive income		—		—		—			—		—			—			1,732			—			1,732
Net loss		—		—		—			—		—			(646	)		—			(1,014	)		(1,660	)
Balance at March 31, 2023		500		—		32,412,278			324		68,350			(33,940	)		1,788			(1,385	)		35,137
Grants of restricted stock		—		—		419,618			—		—			—			—			—			—
Forfeiture of restricted stock		—		—		(9,649	)		—		—			—			—			—			—
Stock-based compensation		—		—		287,743			7		544			—			—			—			551
Preferred equity return on preferred equity investment		—		—		—			—		(3,569	)		—			—			—			(3,569	)
Preferred equity accretion		—		—		—			—		(756	)		—			—			—			(756	)
Preferred OP Units return		—		—		—			—		(118	)		—			—			164			46
Other comprehensive loss		—		—		—			—		—			—			(1,332	)		—			(1,332	)
Net income (loss)		—		—		—			—		—			3,118			—			(132	)		2,986
Balance at June 30, 2023		500	$	—		33,109,990		$	331	$	64,451		$	(30,822	)	$	456		$	(1,353	)	$	33,063

The accompanying notes are an integral part of these condensed consolidated financial statements.

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities
Net income (loss)	$	1,326		$	(6,088	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Deferred income taxes		(1,692	)		(1,514	)
Depreciation and amortization		10,858			8,211
Amortization of deferred financing costs and debt discounts		500			760
Amortization and (accretion) of above and below market lease intangibles, net		129			(254	)
Minimum multiple on preferred interests		(331	)		(747	)
Loss on extinguishment of debt		15			—
Gain on disposal of property		(11,619	)		—
Impairment of real estate assets		167			—
Impairment of real estate assets held for sale		1,957			—
Straight-line rent revenue		(734	)		(385	)
Amortization of operating lease right-of-use assets		(20	)		(16	)
Stock-based compensation		765			1,185
Change in fair value of derivatives		(15	)		(2,570	)
Change in fair value of debt held under the fair value option		(2,104	)		—
Bad debt expense		66			35
Changes in operating assets and liabilities
Accounts receivable		(322	)		(232	)
Other assets		918			504
Receivables due from related parties		—			1
Accounts payable and accrued liabilities		(2,535	)		2,027
Payables due to related parties		10			12
Deferred revenues		307			(165	)
Net cash (used in) provided by operating activities		(2,354	)		764
Cash flows from investing activities
Cash received on disposition of real estate		22,369			—
Capitalized pre-acquisition costs, net of refunds		2			50
Capital expenditures for real estate		(3,081	)		(2,039	)
Net cash provided by (used in) investing activities		19,290			(1,989	)
Cash flows from financing activities
Borrowings under debt agreements		8,750			1,750
Repayments under debt agreements		(21,713	)		(1,480	)
Preferred equity return on preferred equity investment		(2,080	)		—
Proceeds related to interest rate swap		2,171			—
Payments related to interest rate swap		(773	)		—
Taxes remitted upon vesting of restricted stock		(6	)		—
Debt origination and discount fees		(292	)		(4	)
Proceeds from related parties		—			783
Payments to related parties		—			(183	)
Net cash (used in) provided by financing activities		(13,943	)		866
Increase (decrease) in cash, cash equivalents, and restricted cash		2,993			(359	)
Cash, cash equivalents and restricted cash at beginning of period		17,031			11,024
Cash, cash equivalents and restricted cash at end of period	$	20,024		$	10,665

The accompanying notes are an integral part of these condensed consolidated financial statements.

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023			2022
Supplemental Cash Flow Information
Interest paid	$	9,169		$	5,028
Taxes paid, net of refunds		13			10

Supplemental disclosure of non-cash investing and financing activities
Capitalized Preferred Return		(4,907	)		—
Accrued Current Preferred Return		(355	)		—
Accrued offering costs		—			457
Accrued capital expenditures for real estate		1,073			370


Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents	$	14,473		$	2,388
Restricted cash		5,551			8,277
Cash, cash equivalents and restricted cash at end of period	$	20,024		$	10,665

The accompanying notes are an integral part of these condensed consolidated financial statements.

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Notes to Interim Condensed Consolidated Financial Statements

Unaudited

June 30, 2023

Note 1 - Organization and Nature of Business

Broad Street Realty, Inc. (the “Company”) is focused on owning and managing essential grocery-anchored and mixed-use assets located in densely populated technology employment hubs and higher education centers within the Mid-Atlantic, Southeast and Colorado markets. As of June 30, 2023, the Company had gross real estate assets of $392.0 million (gross real estate properties less gross real estate intangibles liabilities) in 16 real estate properties. 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, 2023, the Company owned 85.6% of the Class A common units of limited partnership interest in the Operating Partnership (“Common OP units”) and Series A preferred units of limited partnership interest in the Operating Partnership (“Preferred OP units”) and, together with the Common OP units, “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) and operates as a single reporting segment.

Liquidity, Management’s Plan and Going Concern

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. The Company’s projected operating model reflects sufficient cash flow to cover its obligations over the next twelve months, except as noted below.

The Company’s financing is generally comprised of mortgage loans secured by the Company’s properties that typically mature within three to five years of origination. The Company is currently in contact with lenders and brokers in the marketplace to restructure the Company’s debt.

Specifically, as of June 30, 2023, the Company had one mortgage loan with a principal balance outstanding of approximately $11.3 million that matures within twelve months of the date that these condensed consolidated financial statements are issued. If the Company is unable to repay or refinance this mortgage loan, the lender has the right to place the loan in default and ultimately foreclose on the property. Under this circumstance, the Company would not have any further financial obligations to the lender as the estimated market value of this property is in excess of the outstanding loan balance.

In addition, the Basis Term Loan (as defined below) had an outstanding principal balance of $66.9 million as of June 30, 2023 and matures on January 1, 2024, subject to the remaining one-year extension option that is subject to certain conditions, including a material adverse change clause, and approval by the lender. The Company exercised one of the one-year extension options and is in discussions with other parties to refinance the Basis Term Loan with new loans. On May 26, 2023, the Company entered into a purchase and sale agreement to sell one of the properties that secures the Basis Term Loan for $23.1 million. The Company completed the sale on July 20, 2023 and repaid $17.4 million of the outstanding principal balance on the Basis Term Loan with proceeds from the sale. There can be no assurances, however, that the Company will be successful in exercising the remaining extension option or refinancing the Basis Term Loan prior to its maturity. If the Company is unable to extend or refinance the Basis Term Loan prior to maturity, the lender will have the right to place the loan in default and ultimately foreclose on the remaining five properties securing the loan.

If the Company fails to refinance or otherwise repay the Basis Term Loan and contribute the applicable properties to the Eagles Sub-OP (as defined below) by the applicable outside dates (as described below), it would be considered a trigger event under the Eagles Sub-OP Operating Agreement (as defined below), upon which the Fortress Member (as defined below) has certain rights, including the right to cause the Eagles Sub-OP to redeem the Fortress Preferred Interest (as defined below). See Note 9 below.

The Company projects that it will not have sufficient cash available to pay off the Basis Term Loan and the $11.3 million mortgage loan upon maturity and is currently seeking to refinance the loans prior to maturity in January 2024 and June 2024, respectively. Management is in discussions with various lenders to extend or refinance its debt prior to maturity, including the Basis Term Loan. However, there is no assurance that the Company will be able to extend or refinance such debt on favorable terms or at all, which creates substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date that these condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

The Company's access to capital depends upon a number of factors over which the Company has little or no control, including general market conditions, the market's perception of the Company's current and potential future earnings and cash distributions, the Company's current debt levels and the market price of the shares of the Company's common stock. Although the Company's common

stock is quoted on the OTCQX Best Market, an over-the-counter stock market, there is a very limited trading market for the Company's common stock, and if a more active trading market is not developed and sustained, the Company will be limited in its ability to issue equity to fund its capital needs. If the Company cannot obtain capital from third-party sources, the Company may not be able to meet the capital and operating needs of its properties, satisfy its debt service obligations or pay dividends to its stockholders.

Under the Company's debt agreements, the Company is subject to certain covenants. In the event of a default, the lenders could accelerate the timing of payments under the applicable debt obligations and the Company may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all, which would have a material adverse effect on the Company's liquidity, financial condition and results of operations. The Company was in compliance with all covenants under its debt agreements as of June 30, 2023.

Note 2 - Accounting Policies and Related Matters

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim reports. In the opinion of management, the accompanying unaudited condensed 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 unaudited condensed consolidated financial statements and related notes do not include all information and footnotes required by GAAP for annual reports. These interim condensed 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, 2022, included in the Company’s 2022 Annual Report on Form 10-K filed with the SEC on May 1, 2023.

The interim condensed consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries and subsidiaries in which the Company has a controlling interest. All 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, 2022, included in the Company’s 2022 Annual Report on Form 10-K filed with the SEC on May 1, 2023. During the six months ended June 30, 2023, there were no material changes to these policies.

Change in Presentation

The Company has made certain reclassifications to prior period financial statements in order to enhance the comparability with current period condensed consolidated financial statements.

Accounting Guidance

Adoption of Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. Reference rate reform has not had a material impact on any of the Company's existing contracts. The Company will assess future changes in its contracts and the impact of electing to apply the optional practical expedients and exceptions provided by Topic 848 as they occur, but expects their application will not have a material effect on the Company's condensed consolidated financial statements.

In June 2016, FASB issued 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 adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

In March 2022, FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the Current Expected Credit Losses model and enhances the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. The ASU also requires a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. This ASU is effective for the Company for fiscal years, and interim periods within those years, beginning January 1, 2023. The adoption of this standard did not have an impact on the Company's condensed consolidated financial statements and related disclosures.

Note 3 – Real Estate

Real Estate Held for Sale

The Company records properties as held for sale, and any associated mortgages payable, net, as mortgages payable, net, associated with real estate held for sale, on the Company's condensed consolidated balance sheets when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year.

In May 2023, the Company's board of directors and the Fortress Member approved the sale of Dekalb Plaza, and as such, the Company classified the property as real estate held for sale.

On May 23, 2023, the Company determined that the carrying value of the asset group associated with Dekalb Plaza exceeded its fair value, less estimated costs to sell. This real estate held for sale with a carrying amount of $24.4 million was written down to its fair value of $23.1 million, less estimated costs to sell of $0.7 million, resulting in an impairment charge of approximately $2.0 million, which was included in impairment of real estate held for sale in the Company's condensed consolidated statement of operations. Impairment expenses on assets held for sale was $2.0 million for each of the three and six months ended June 30, 2023. On July 20, 2023, the Company completed the sale of Dekalb Plaza for a sales price of $23.1 million in cash.

The following table provides a summary of the major components of assets and liabilities related to real estate held for sale as of June 30, 2023.


(in thousands)	June 30, 2023
Assets held for sale
Real estate property	$	22,418
Accounts receivable, net		9
Straight-line rent receivable, net		407
Other assets		378
Total assets held for sale	$	23,212

Liabilities related to real estate held for sale
Mortgage and other indebtedness	$	14,552
Accounts payable and accrued liabilities		224
Unamortized intangible lease liabilities, net		308
Deferred revenue		45
Total liabilities related to real estate held for sale	$	15,129

Disposal of Real Estate

On June 30, 2023, the Company completed the sale of the Spotswood Valley Square Shopping Center for a sales price of $23.0 million in cash and recognized a net gain of $11.6 million in its condensed consolidated statements of operations. The Company used $11.8 million of the proceeds to repay the mortgage loan secured by Spotswood Valley Square Shopping Center, $2.3 million to redeem the Lamont Street Preferred Interest (as defined below) and $0.6 million in transaction costs.

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, 2023, which includes rental income for the six months ended June 30, 2023 and 2022.


(dollars in thousands)	Number of Properties	Gross Real Estate Assets		Percentage of Total Real Estate Assets			Rental income for the six months ended June 30,
Location	June 30, 2023	June 30, 2023		June 30, 2023			2023		2022
Maryland	6	$	101,203		25.8	%	$	6,078	$	6,061
Virginia	5		197,208		50.3	%		8,703		3,636
Pennsylvania (1)	1		20,923		5.3	%		1,353		1,058
Washington D.C.	1		8,422		2.2	%		303		306
Colorado	3		64,254		16.4	%		4,028		2,604
	16	$	392,010		100.0	%	$	20,465	$	13,665

(1)

Represents Dekalb Plaza, which was sold on July 20, 2023.

Note 4 – Intangibles

The following is a summary of the carrying amount of the Company’s intangible assets and liabilities as of June 30, 2023 and December 31, 2022.


(in thousands)	June 30, 2023			December 31, 2022
Assets:
Above-market leases	$	4,266		$	5,150
Above-market leases accumulated amortization		(2,210	)		(2,199	)
In-place leases		29,713			36,078
In-place leases accumulated amortization		(18,478	)		(18,251	)
Total real estate intangible assets, net	$	13,291		$	20,778

Liabilities
Below-market leases	$	3,226		$	4,992
Below-market leases accumulated amortization		(2,377	)		(3,439	)
Total real estate intangible liabilities, net	$	849		$	1,553

For the three months ended June 30, 2023 and 2022, the Company recognized amortization related to in-place leases of approximately $2.1 million and $1.9 million, respectively, and net amortization related to above-market leases and below-market leases for the three months ended June 30, 2023 and 2022 of approximately $0.1 million and approximately $(0.1) million, respectively, in its condensed consolidated statements of operations.

For the six months ended June 30, 2023 and 2022, the Company recognized amortization related to in-place leases of approximately $4.4 million and $3.8 million, respectively, and net amortization related to above-market leases and below-market leases for the six months ended June 30, 2023 and 2022 of approximately $0.1 million and $(0.3) million, respectively, in its condensed consolidated statements of operations.

The following table represents expected amortization of existing real estate intangible assets and liabilities as of June 30, 2023:


(in thousands)	Amortization of in-place leases		Amortization of above-market leases		Amortization of below-market leases			Total amortization, net
Remainder of 2023	$	1,964	$	355	$	(174	)	$	2,145
2024		2,973		575		(304	)		3,244
2025		2,089		449		(174	)		2,364
2026		1,489		253		(98	)		1,644
2027		962		167		(47	)		1,082
2028		520		112		(26	)		606
Thereafter		1,238		145		(26	)		1,357
Total	$	11,235	$	2,056	$	(849	)	$	12,442

The Company amortizes the value of in-place leases to amortization expense, the value of above-market leases as a reduction of rental income and the value of below-market leases as an increase to rental income over the initial term of the respective leases.

Note 5 - Other Assets

Items included in other assets, net on the Company’s condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 are detailed in the table below:


(in thousands)	June 30, 2023		December 31, 2022
Prepaid assets and deposits	$	399	$	1,722
Leasing commission costs and incentives, net		982		751
Right-of-use assets, net		476		695
Pre-acquisition costs		6		8
Other receivables, net		56		101
Corporate property, net		52		64
Receivables from related parties		1,170		1,170
Total assets	$	3,141	$	4,511

Receivables due from related parties as of June 30, 2023 and December 31, 2022 are described further in Note 15 “Related Party Transactions”.

Note 6 - Accounts Payable and Accrued Liabilities

Items included in accounts payable and accrued liabilities on the Company’s condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 are detailed in the table below:


(in thousands)	June 30, 2023		December 31, 2022
Trade payable	$	842	$	2,476
Security deposit		2,366		2,529
Real estate tax payable		1,063		1,231
Interest payable		1,316		1,570
Derivative liability		937		1,208
Lease payable		499		738
Other		5,103		5,659
Accounts payable and accrued liabilities	$	12,126	$	15,411

Note 7 – Mortgage and Other Indebtedness

The table below details the Company’s debt balance at June 30, 2023 and December 31, 2022:


(dollars in thousands)	Maturity Date	Rate Type	Interest Rate (1)	June 30, 2023				December 31, 2022
Basis Term Loan (net of discount of $38 and $79, respectively)	January 1, 2024	Floating (2)	8.62%	$	67,147		(3), (4)	$	67,086		(3)
Hollinswood Shopping Center Loan	December 1, 2024	LIBOR + 2.25% (5)	4.06%		12,600				12,760
Avondale Shops Loan	June 1, 2025	Fixed	4.00%		2,927				2,985
Vista Shops at Golden Mile Loan (net of discount of $0 and $12, respectively) (6)	June 24, 2024	Fixed	3.83%		11,345				11,478
Brookhill Azalea Shopping Center Loan	January 31, 2025	LIBOR + 2.75%	7.97%		8,747				8,762
Lamar Station Plaza West Loan (net of discount of $82 and $95, respectively)	December 10, 2027	Fixed	5.67%		18,329				18,317
Lamont Street Preferred Interest (net of discount of $0 and $29, respectively) (7)	September 30, 2023	Fixed	13.50%		—				4,241
Highlandtown Village Shopping Center Loan (net of discount of $42 and $14, respectively) (8)	May 10, 2028	SOFR + 2.5%	6.085%		8,708				5,241
Cromwell Field Shopping Center Loan (net of discount of $68 and $77, respectively)	December 22, 2027	Fixed	6.71%		10,122				10,113
Midtown Row Loan (net of discount of $22 and $25, respectively)	December 1, 2027	Fixed	6.48%		75,978				75,975
Midtown Row/Fortress Mezzanine Loan (9)	December 1, 2027	Fixed	12.00%		15,931				17,895
Spotswood Valley Square Shopping Center Loan (net of discount of $0 and $31, respectively)	July 6, 2023	Fixed	4.82%		—				11,849
The Shops at Greenwood Village (net of discount of $85 and $94, respectively)	October 10, 2028	SOFR + 2.85% (10)	5.85%		22,499				22,772
				$	254,333			$	269,474
Unamortized deferred financing costs, net					(1,752	)	(4)		(1,858	)
Total Mortgage and Other Indebtedness				$	252,581			$	267,616

(1)

At June 30, 2023, the floating rate loans tied to the London Inter-Bank Offered Rate (“LIBOR”) were based on the one-month LIBOR rate of 5.22%. Beginning July 1, 2023, one-month LIBOR is no longer published and all remaining debt referencing LIBOR was replaced with SOFR (as defined below).

(2)

The interest rate for the Basis Term Loan is the greater of (i) SOFR plus 3.97% per annum and (ii) 6.125% per annum. On November 23, 2022, the Company entered into an interest rate cap agreement to cap the SOFR interest rate at 4.65% effective January 1, 2023, which replaced the existing interest rate cap agreement that capped the SOFR interest rate at 3.5%.

(3)

The outstanding balance includes $0.3 million of exit fees.

(4)

The outstanding balances of $67.1 million and $(1.8) million include $14.6 million and less than $(0.1) million, respectively, that were reclassified to mortgages related to assets held for sale.

(5)

The Company has entered into an interest rate swap which fixes the interest rate of this loan at 4.06%. On May 3, 2023, the Hollinswood loan agreement was amended to replace LIBOR with SOFR, effective July 1, 2023.

(6)

On June 28, 2023, the Company entered into an agreement to extend the maturity date of this loan to June 24, 2024.

(7)

The outstanding balance includes approximately $0.3 million of indebtedness as of December 31, 2022 related to the Lamont Street Minimum Multiple Amount (as defined below) owed to Lamont Street as described below under the heading “—Lamont Street Preferred Interest.”

(8)

On May 5, 2023, the Company refinanced the Highlandtown Village Shopping Center Loan to extend the maturity date to May 10, 2028 and entered into an interest rate swap which fixes the interest rate of the new loan at 6.085% as described below under the heading “—Mortgage Indebtedness”. The prior loan carried an interest rate of 4.13%.

(9)

The outstanding balance reflects the fair value of the debt.

(10)

On October 6, 2021, the Company entered into an interest rate swap which fixes the interest rate of this loan at 4.082%. On May 1, 2023, the interest rate was amended to replace Prime with SOFR plus a spread of 2.85%. The Company terminated the existing interest rate swap and entered into a new interest rate swap agreement to fix the interest rate at 5.85%.

Basis Term Loan

In December 2019, 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 (“Basis”), 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. Pursuant to the Basis Loan Agreement, the Basis Term Loan is secured by mortgages on the following properties: Coral Hills, Crestview, Dekalb, Midtown Colonial, Midtown Lamonticello and West Broad. The Basis Term Loan initial maturity was January 1, 2023, subject to two one-year extension options, subject to certain conditions. The Company exercised one of the one-year extension options and the maturity date was extended to January 1, 2024. The Basis Loan Agreement was amended and restated on June 29, 2022 to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”). The Basis Term Loan bears interest at a rate equal to the greater of (i) SOFR plus 3.97% per annum and (ii) 6.125% per annum. The Borrowers entered into an interest rate cap agreement that effectively capped the prior-LIBOR rate at 3.50% per annum. On August 1, 2022, the interest rate cap agreement was modified to cap the SOFR rate at 3.50% per annum. The interest rate cap expired on January 1, 2023. On November 23, 2022, the Company entered into an interest rate cap agreement, effective January 1, 2023, to cap the SOFR interest rate at 4.65%. As of June 30, 2023, the effective interest rate of the Basis Term Loan was 8.62% and the outstanding principal balance was $66.9 million.

On July 20, 2023, the Company sold one of the properties, Dekalb, securing the Basis Term Loan and repaid $17.4 million of the outstanding principal balance on the Basis Term Loan with proceeds from the sale.

The Company was in compliance with the Basis Loan Agreement's debt service coverage calculation for the twelve months ended June 30, 2023.

Lamont Street Preferred Interest

In connection with the closing of the Highlandtown and Spotswood acquisitions on May 21, 2021 and June 4, 2021, respectively, Lamont Street Partners LLC (“Lamont Street”) contributed an aggregate of $3.9 million in exchange for a 1.0% preferred membership interest in BSV Highlandtown Investors LLC (“BSV Highlandtown”) and BSV Spotswood Investors LLC (“BSV Spotswood”) designated as Class A units (the “Lamont Street Preferred Interest”).

Lamont Street was entitled to a cumulative annual return of 13.5% (the “Lamont Street Class A Return”), of which 10.0% was paid current and 3.5% was accrued. Lamont Street’s interests were to be redeemed on or before September 30, 2023 (the “Lamont Street Redemption Date”). The Lamont Street Redemption Date could be extended by the Company to September 30, 2024 and September 30, 2025, in each case subject to certain conditions, including the payment of a fee equal to 0.25% of Lamont Street’s net invested capital for the first extension option and a fee of 0.50% of Lamont Street’s net invested capital for the second extension option. If the redemption price was paid on or before the Lamont Street Redemption Date, then the redemption price was equal to (a) all unreturned capital contributions made by Lamont Street, (b) all accrued but unpaid Lamont Street Class A Return, and (c) all costs and other expenses incurred by Lamont Street in connection with the enforcement of its rights under the agreements. Additionally, at the Lamont Street Redemption Date, Lamont Street was entitled to (i) a redemption fee of 0.50% of the capital contributions returned and (ii) an amount equal to (a) the product of (i) the aggregate amount of capital contributions made and (ii) 0.26 less (b) the aggregate amount of Lamont Street Class A Return payments made to Lamont Street (the “Lamont Street Minimum Multiple Amount”).

On May 5, 2023, the Company refinanced the Highlandtown mortgage loan and used a portion of the proceeds to redeem $1.9 million of the Lamont Street Preferred Interest. On June 30, 2023, the Company used a portion of the proceeds from the sale of the Spotswood property to redeem the remaining $2.3 million of the Lamont Street Preferred Interest, which amount includes the remaining Lamont Street Minimum Multiple Amount.

Mortgage Indebtedness

In addition to the indebtedness described above, as of June 30, 2023 and December 31, 2022, the Company had approximately $171.3 million and $180.3 million, respectively, of outstanding mortgage indebtedness secured by individual properties.

On October 6, 2021, the Company entered into a $23.5 million mortgage loan secured by the Greenwood property, which bears interest at prime rate less 0.35% per annum and matures on October 10, 2028. The Company entered into an interest rate swap which fixed the interest rate of the loan at 4.082%. On May 1, 2023, the interest rate was amended to replace Prime with SOFR plus a spread

of 2.85%. The Company terminated the existing interest rate swap agreement and entered into a new interest rate swap agreement which fixes the interest rate of the loan at 5.85%.

On May 3, 2023, the loan agreement for the Company's mortgage loan secured by the Hollinswood property was amended to replace the LIBOR interest rate with SOFR plus a spread of 2.36%.

On May 5, 2023, the Company refinanced the mortgage loan secured by Highlandtown Village Shopping Center. The new loan has a principal balance of $8.7 million, which bears interest at SOFR plus a spread of 2.5% per annum and matures on May 10, 2028. The Company has entered into an interest rate swap which fixes the interest rate of the loan at 6.085%.

Fortress Mezzanine Loan

In connection with the acquisition of Midtown Row, the Company also entered into a $15.0 million mezzanine loan (the “Fortress Mezzanine Loan”) secured by 100% of the membership interests in the entity that owns Midtown Row. The mezzanine loan matures on December 1, 2027. Pursuant to the mezzanine loan agreement, a portion of the interest on the Fortress Mezzanine Loan will be paid in cash (the “Current Interest”) and a portion of the interest will be capitalized and added to the principal amount of the Fortress Mezzanine Loan each month (the “Capitalized Interest” and, together with the Current Interest, the “Mezzanine Loan Interest”). The initial Mezzanine Loan Interest rate is 12% per annum, comprised of a 5% Current Interest rate and a 7% Capitalized Interest rate. The Capitalized Interest rate increases each year by 1%. The Fortress Mezzanine Loan (including a prepayment penalty) will be due and payable in connection with an underwritten public offering by the Company meeting certain conditions (a “Qualified Public Offering”). However, in connection with a Qualified Public Offering, the lender for the Fortress Mezzanine Loan has the right to convert all or a portion of the principal of the Fortress Mezzanine Loan and any prepayment penalty into shares of common stock at a price of $2.00 per share, subject to certain adjustments. The mezzanine loan agreement provides for cross-default in the event of a trigger event under the Eagles Sub-OP Operating Agreement or an event of default under the loan agreement for the Midtown Row mortgage. The Company elected to measure the Fortress Mezzanine Loan at fair value in accordance with the fair value option. The fair value at June 30, 2023 and December 31, 2022 was $15.9 million and $17.9 million, respectively. For the three and six months ended June 30, 2023, the Company recognized a loss of $1.1 million and net gain of $2.1 million, respectively, on fair value change of debt held under the fair value option in the condensed consolidated statements of operations and a loss of $1.3 million and net gain of $0.4 million, respectively, in Change in fair value due to credit risk on debt held under the fair value option in the condensed consolidated statements of comprehensive income (loss). For the three and six months ended June 30, 2023, the Company recognized $0.4 million and $0.9 million, respectively, of interest expense in the condensed consolidated statements of operations, which includes $0.2 million and $0.5 million, respectively, of Capitalized Interest recorded in the condensed consolidated balance sheets.

Debt Maturities

The following table details the Company’s scheduled principal repayments and maturities during each of the next five years and thereafter as of June 30, 2023:


(dollars in thousands)	Amount Due
Remainder of 2023	$	12,072
2024 (1)		81,128
2025		12,197
2026		2,221
2027		118,667
2028		28,111
Thereafter		-
		254,396
Unamortized debt discounts and deferred financing costs, net and fair value option adjustment		(1,815	)
Total	$	252,581

(1)

Includes $17.4 million of debt that was repaid in conjunction with the sale of Dekalb Plaza.

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. The Basis Term Loan bears interest at a rate equal to the greater of (i) SOFR plus 3.97% per annum and (ii) 6.125% per annum. On November 23, 2022, the Company entered into an interest rate cap agreement, effective January 1, 2023, on the full $66.9 million Basis Term Loan to cap the SOFR interest rate at 4.65%. As of June 30, 2023 and December 31, 2022, the effective interest rate of the Basis Term Loan was 8.62% and 6.125%, respectively.

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. On May 3, 2023, the Hollinswood loan agreement was amended to replace LIBOR with SOFR, effective July 1, 2023.

On October 6, 2021, the Company entered into an interest rate swap agreement on the Greenwood Village Loan to fix the interest rate at 4.082%. On May 1, 2023, the Company terminated the existing interest rate swap agreement and entered into a new interest rate swap agreement on the Greenwood Village Loan to fix the interest rate at 5.85%. The Company also received $2.2 million upon the termination of the existing interest rate swap agreement.

On May 5, 2023, the Company entered into an interest rate swap agreement on the Highlandtown Village Shopping Center mortgage loan to fix the interest rate at 6.085%.

The Company recognizes all derivative instruments as assets or liabilities at their fair value in the condensed consolidated balance sheets. Changes in the fair value of the Company’s derivatives that are not designated as hedges or do not meet the criteria of hedge accounting are recognized in earnings. For the three months ended June 30, 2023 and 2022, the Company recognized gains of approximately $0.3 million and $0.8 million, respectively, as a component of “Derivative fair value adjustment” on the condensed consolidated statements of operations. For the six months ended June 30, 2023 and 2022, the Company recognized (losses) gains of approximately $(0.3) million and $2.6 million, respectively, as a component of “Derivative fair value adjustment” on the condensed consolidated statements of operations.

The fair value of the Company’s derivative financial instruments as of June 30, 2023 and December 31, 2022 was an interest rate cap asset of $0.2 million for each period and an interest rate swap asset of approximately $1.5 million and $3.2 million at June 30, 2023 and December 31, 2022, respectively. The interest rate cap asset and interest rate swap asset are included in Derivative assets.

Covenants

The Company’s loan agreements contain customary financial and operating covenants including debt service coverage ratios and aggregate minimum unencumbered cash covenants. As of June 30, 2023, the Company was in compliance with all covenants under its debt agreements.

Note 8 – Commitments and Contingencies

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 condensed consolidated financial condition, results of operations or cash flows.

Note 9 – Fortress Preferred Equity Investment

On November 22, 2022, the Company, the Operating Partnership and Broad Street Eagles JV LLC, a newly formed subsidiary of the Operating Partnership (the “Eagles Sub-OP”), entered into a Preferred Equity Investment Agreement with CF Flyer PE Investor LLC (the “Fortress Member”), an affiliate of Fortress Investment Group LLC, pursuant to which the Fortress Member invested $80.0 million in the Eagles Sub-OP in exchange for a preferred membership interest (such interest, the “Fortress Preferred Interest” and such investment, the “Preferred Equity Investment”). The Company consolidates the Eagles Sub-OP under the guidance set forth in Accounting Standards Codification (“ASC”) 810, Consolidation. The Company evaluated whether the Eagles Sub-OP met the criteria for classification as a variable interest entity (“VIE”) or, alternatively, as a voting interest entity and concluded that that the Eagles Sub-OP met the criteria of a VIE. The Company is considered to have a controlling financial interest in the Eagles Sub-OP because the Company determined that it is the primary beneficiary because it is most closely associated with the Eagles Sub-OP.

the Operating Partnership that indirectly own the following eight properties were not contributed to the Eagles Sub-OP in connection with the closing of the Preferred Equity Investment but are required to be contributed to the Eagles Sub-OP on or prior to the applicable outside dates: (i) Highlandtown, (ii) Spotswood and (iii) the six properties securing the Basis Term Loan (the “Portfolio Excluded Properties”). The outside dates for Highlandtown, the Portfolio Excluded Properties and Spotswood are May 6, 2023, June 30, 2023 and July 6, 2023, respectively. On May 5, 2023, the Operating Partnership contributed to the Eagles Sub-OP its subsidiary that owns Highlandtown. On June 28, 2023, the Fortress Member approved the extension of the Portfolio Excluded Properties outside date from June 30, 2023 to July 31, 2023, and later extended it to August 31, 2023, contingent upon certain items. With the approval of the Fortress Member, on June 30, 2023, the Company sold Spotswood and, on July 20, 2023, sold Dekalb, which was one of the Portfolio Excluded Properties.

Pursuant to the Amended and Restated Limited Liability Company Agreement of the Eagles Sub-OP (the “Eagles Sub-OP Operating Agreement”), the Fortress Member is entitled to monthly distributions, a portion of which is paid in cash (the “Current Preferred Return”) and a portion that accrues on and is added to the Preferred Equity Investment each month (the “Capitalized Preferred Return” and, together with the Current Preferred Return, the “Preferred Return”). The initial Preferred Return is 12% per annum, comprised of a 5% Current Preferred Return and a 7% Capitalized Preferred Return, provided that, until the Portfolio Excluded Properties are contributed to the Eagles Sub-OP, the Capitalized Preferred Return is increased by 4.75%. The Capitalized Preferred Return increases each year by 1%. Commencing on November 22, 2027, the Preferred Return will be 19% per annum, all payable in cash, and will increase an additional 3% each year thereafter. Upon (i) the occurrence of a trigger event under the Eagles Sub-OP Operating Agreement, (ii) during a three-month period in which distributions on the Preferred Equity Investment are not made because such payments would cause a violation of Delaware law or (iii) if a Qualified Public Offering has not occurred on or prior to November 22, 2027, the entire Preferred Return shall accrue at the then-applicable Preferred Return plus 4% and shall be payable monthly in cash. As of June 30, 2023, the Capitalized Preferred Return was approximately $6.0 million and is reflected within Preferred equity investment on the condensed consolidated balance sheets. For the three and six months ended June 30, 2023, the Company recognized $1.1 million and $2.1 million, respectively, of Current Preferred Return, and, for the three and six months ended June 30, 2023, the Company recognized $2.5 million and $4.9 million, respectively, of Capitalized Preferred Return as a reduction to additional paid-in capital in the condensed consolidated statements of equity.

The Fortress Member’s interest in the Eagles Sub-OP under the Eagles Sub-OP Operating Agreement is a financial instrument with both equity and debt characteristics and is classified as mezzanine equity in our accompanying condensed consolidated financial statements. The instrument was initially recognized at fair value net of issuance costs. The Preferred Equity Investment is redeemable at a determinable date (at year five (5), prior to year five if a Qualified Public Offering occurs or at any time so long as the Fortress Mezzanine Loan is repaid in full before or concurrently with such redemption) and therefore, at each subsequent reporting period we will accrete the carrying value to the amount due upon redemption of the Fortress Preferred Interest based on the effective interest method over the remaining term. All financial instruments that are classified as mezzanine equity are evaluated for embedded derivative features by evaluating each feature against the nature of the host instrument (e.g., more equity-like or debt-like). Features identified as embedded derivatives that are material are recognized separately as a derivative asset or liability in the condensed consolidated financial statements. The Company has evaluated the Preferred Equity Investment and determined that its nature is that of a debt host and certain embedded derivatives exist that would require bifurcation on the Company’s condensed consolidated balance sheets. For the three and six months ended June 30, 2023, the Company recognized a loss of $0.1 million and a net gain of $0.3 million, respectively, in derivative fair value adjustment in the condensed consolidated statements of operations. The derivative liability was $0.9 million and $1.2 million at June 30, 2023 and December 31, 2022, respectively, and is reflected in accounts payable and accrued liabilities in the condensed consolidated balance sheets.

The following table summarizes the preferred equity investment activities for the six months ended June 30, 2023.


(thousands)	Preferred Equity Investment
Balance at December 31, 2022	$	73,697
Preferred equity return		4,916
Preferred equity accretion		1,171
Balance at June 30, 2023	$	79,784

Note 10 – Equity

Common Stock

On January 3, 2023, April 3, 2023 and July 3, 2023, the Company issued 166,125, 32,904 and 25,500 shares of common stock, respectively, to its directors. On April 3, 2023, the Company issued 254,839 shares of common stock to Mr. Jacoby in lieu of cash payment of 50% of his bonus pursuant to the cash bonus plan approved by the compensation committee of the Company’s board of directors for the year ended December 31, 2022. The foregoing shares were issued under the Company’s Amended and Restated 2020 Equity Incentive Plan (the “Plan”).

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock, in one or more series, with a $0.01 par value per share, of which 20,000 shares have been designated as Series A preferred stock, $0.01 par value per share (the “Series A preferred stock”).

As of June 30, 2023 and December 31, 2022, the Company had 500 shares of Series A preferred stock outstanding, all of which were assumed from MedAmerica Properties Inc. (“MedAmerica”) upon completion of the initial mergers on December 27, 2019 (the “Initial Mergers”). The holders of Series A preferred stock are entitled to receive, out of funds legally available for that purpose, cumulative, non-compounded cash dividends on each outstanding share of Series A preferred stock at the rate of 10.0% of the $100 per share issuance price (“Series A preferred dividends”). The Series A preferred dividends are payable semiannually to the holders of Series A preferred stock, when and as declared by the Company’s board of directors, on June 30 and December 31 of each year, that shares of Series A preferred stock are outstanding; provided that due and unpaid Series A preferred dividends may be declared and paid on any date declared by the Company’s board of directors. As of June 30, 2023, less than $0.1 million of Series A preferred dividends were undeclared.

Noncontrolling Interest

As of June 30, 2023 and December 31, 2022, the Company owned an 85.6% interest and an 85.3% interest, respectively, in the Operating Partnership. Commencing on the 12-month anniversary of the date on which the Common OP units were issued, each limited partner of the Operating Partnership (other than the Company) has the right, subject to certain terms and conditions, to require the Operating Partnership to redeem all or a portion of the Common 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. Holders of Preferred OP units have the right to convert each Preferred OP unit into one Common OP unit, plus a cash payment for each Preferred OP unit so converted equal to (i) (A) the liquidation preference of the Preferred OP unit at such time, minus (B) $2.00 and (ii) all accrued and unpaid monthly distributions (to the extent not already added to the liquidation preference) (the “Conversion Liquidation Payment”). The liquidation preference means the sum of (i) $2.00 and (ii) the accrued Capitalized Preferred OP Unit Return (as defined below). On the date that the common stock is first listed on the New York Stock Exchange, the NYSE American or the Nasdaq Stock Market, each Preferred OP unit will automatically convert into one Common OP unit and the right to receive the Conversion Liquidation Payment. Pursuant to the amended Agreement of Limited Partnership of the Operating Partnership, a portion of the return on the Preferred OP units will be paid in cash (the “Current Preferred OP Unit Return”) and a portion of the return will accrue on and be added to the liquidation preference of the Preferred OP units each month (the “Capitalized Preferred OP Unit Return” and, together with the Current Preferred OP Unit Return, the “Preferred OP Unit Return”). The initial Preferred OP Unit Return is 12% per annum, comprised of a 5% Current Preferred OP Unit Return and a 7% Capitalized Preferred OP Unit Return. The Capitalized Preferred OP Unit Return increases each year by 1%. After November 23, 2027, the Preferred OP Unit Return will be 19% per annum, all payable in cash, and will increase an additional 3% each year thereafter. The Preferred OP units have no voting rights.

Amended and Restated 2020 Equity Incentive Plan

On September 15, 2021, the Company’s board of directors approved the Plan, which increased the number of shares of the Company’s common stock reserved for issuance under the Plan by 1,500,000 shares, from 3,620,000 shares to 5,120,000 shares. 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 Common OP units. As of June 30, 2023, there were 711,987 shares available for future issuance under the Plan, subject to certain adjustments set forth in 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.

Restricted Stock

Awards of restricted stock are awards of the Company’s common stock that are subject to restrictions on transferability and other restrictions as established by the Company’s compensation committee on the date of grant that are generally subject to forfeiture if employment (or service as a director) terminates prior to vesting. Upon vesting, all restrictions would lapse. Except to the extent restricted under the award agreement, a participant awarded restricted stock will have all of the rights of a stockholder as to those shares, including, without limitation, the right to vote and the right to receive dividends on the shares. The value of the awards is determined based on the market value of the Company’s common stock on the date of grant. The Company expenses the cost of restricted stock ratably over the vesting period.

The following table summarizes the stock-based award activity under the Plan for the six months ended June 30, 2023 and 2022.


	Restricted Stock Awards			Weighted-Average Grant Date Fair Value Per Restricted Stock Award
Outstanding as of December 31, 2022		159,439		$	2.24
Granted		419,618			0.78
Vested		(59,607	)		2.25
Forfeitures		(16,344	)		1.83
Outstanding as of June 30, 2023		503,106		$	1.04


	Restricted Stock Awards			Weighted-Average Grant Date Fair Value Per Restricted Stock Award
Outstanding as of December 31, 2021		237,621		$	1.26
Granted		138,262			2.20
Vested		(172,580	)		0.75
Forfeitures		(10,923	)		2.43
Outstanding as of June 30, 2022		192,380		$	2.03

Of the restricted shares that vested during the six months ended June 30, 2023, 4,126 shares were surrendered by certain employees to satisfy their tax obligations.

Compensation expense related to these share-based payments for each of the three and six months ended June 30, 2023 and 2022 was approximately $0.1 million and was included in general and administrative expenses on the condensed consolidated statements of operations. The remaining unrecognized costs from stock-based awards as of June 30, 2023 was approximately $0.3 million and will be recognized over a weighted-average period of 1.4 years.

On April 3, 2023, the Company granted 419,618 restricted shares of common stock to certain employees, which will vest ratably on January 1, 2024, January 1, 2025, and January 1, 2026, subject to continued service through such dates. The total value of these awards is calculated to be approximately $0.3 million.

Restricted Stock Units

The Company’s restricted stock unit (“RSU”) awards represent the right to receive unrestricted shares of common stock based on the achievement of Company performance objectives as determined by the Company’s compensation committee. Grants of RSUs generally entitle recipients to shares of common stock equal to 0% up to 300% of the number of units granted on the vesting date. RSUs are not eligible to vote or to receive dividends prior to vesting. Dividend equivalents are credited to the recipient and are paid only to the extent that the RSUs vest based on the achievement of the applicable performance objectives.

On October 1, 2021, the Company granted certain employees RSUs with an aggregate target number of 1,220,930 RSUs, of which 0% to 300% will vest based on the Company’s Implied Equity Market Capitalization (defined as (i) the sum of (a) the number of shares of common stock of the Company outstanding and (b) the number of Common OP units outstanding (not including Common OP units held by the Company), in each case, as of the last day of the applicable performance period, multiplied by (ii) the value per share of common stock at the end of the performance period) on December 31, 2024, the end of the performance period, subject to the executive’s continued service on such date. If, however, the maximum amount of the award is not earned as of December 31, 2024, the remaining RSUs may be earned based on the Company’s Implied Equity Market Capitalization as of December 31, 2025. To the extent performance is between any two designated amounts, the percentage of the target award earned will be determined using a straight-line linear interpolation between the two designated amounts. The value of the awards is determined by using a Monte Carlo simulation model in estimating the market value of the RSUs as of the date of grant. The Company expenses the cost of RSUs ratably over the vesting period. On February 28, 2023, 232,558 RSUs were forfeited as a result of an employee’s resignation. The remaining unrecognized costs from RSU awards as of June 30, 2023 was approximately $2.5 million and will be recognized over 2.5 years.

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, 2023 and 2022 are presented in the tables below:


	Number of Shares Underlying Options			Weighted Average Exercise Price Per Share			Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Life		Intrinsic Value
Balance at December 31, 2022		10,000		$	6.00		$	—		0.45	$	—
Options granted		—			—			—		—		—
Options exercised		—			—			—		—		—
Options expired		(10,000	)		(6.00	)		—		—		—
Balance at June 30, 2023		—		$	—		$	—		—	$	—


	Number of Shares Underlying Options		Weighted Average Exercise Price Per Share		Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Life		Intrinsic Value
Balance at December 31, 2021		70,000	$	7.71	$	—		0.76	$	—
Options granted		—		—		—		—		—
Options exercised		—		—		—		—		—
Options expired		—		—		—		—		—
Balance at June 30, 2022		70,000	$	7.71	$	—		0.26	$	—

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 at June 30, 2022 were fully vested at grant date. The intrinsic value was not material. There were no outstanding options at June 30, 2023.

Warrants

On June 4, 2021, the Company issued to Lamont Street warrants to purchase 200,000 shares of the Company’s common stock at an exercise price of $2.50 per share (the “2021 Lamont Warrants”). The 2021 Lamont Warrants were issued in connection with the issuance of the Lamont Street Preferred Interest described in Note 7 under the heading “—Lamont Street Preferred Interest.” The expected life is based on the contractual life of the warrants at the date of grant, which is 4.3 years.

On November 22, 2022, the Company issued to the Fortress Member warrants to purchase 2,560,000 shares of common stock at an exercise price of $0.01 per share, subject to certain adjustments (the “Fortress Warrants”). The Fortress Warrants may be exercised on a cashless basis. The Fortress Warrants will automatically be deemed exercised in full on a cashless basis upon the occurrence of a Qualified Public Offering. The expected life is based on the contractual life of the warrants at the date of grant, which is 10 years.

On November 23, 2022, the Company issued to Lamont Street warrants to purchase 500,000 shares of common stock at an exercise price of $0.01 per share, subject to certain adjustments (the “2022 Lamont Warrants”). The 2022 Lamont Warrants may be exercised on a cashless basis. The expected life is based on the contractual life of the warrants at the date of grant, which is 5 years.

The fair value of the Company's warrants is estimated using the Black-Scholes method at issuance, 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 U.S. Treasury rate of the date of grant.

Note 11 – Revenues

Disaggregated Revenue

The following table represents a disaggregation of revenues from contracts with customers for the three and six months ended June 30, 2023 and 2022 by type of service:


	Topic 606	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	Revenue Recognition	2023		2022		2023		2022
Topic 606 Revenues
Leasing commissions	Point in time	$	517	$	1,055	$	1,335	$	1,357
Property and asset management fees	Over time		29		77		62		147
Sales commissions	Point in time		146		226		184		372
Development fees	Over time		—		—		9		—
Engineering services	Over time		15		46		29		103
Topic 606 Revenue			707		1,404		1,619		1,979
Out of Scope of Topic 606 revenue
Rental income		$	10,257	$	6,938	$	20,465	$	13,665
Sublease income			9		51		21		51
Total Out of Scope of Topic 606 revenue			10,266		6,989		20,486		13,716
Total Revenue		$	10,973	$	8,393	$	22,105	$	15,695

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, 2023 are reflected in the table below. The table below includes amounts related to Dekalb Plaza, which was sold on July 20, 2023.


(in thousands)
Remainder of 2023	$	12,515
2024		23,028
2025		20,426
2026		17,122
2027		14,510
2028		11,095
Thereafter		32,829
Total	$	131,525

Note 12 – 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, warrants, RSUs 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, restricted stock, warrants, RSUs 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. The weighted average number of anti-dilutive convertible preferred stock, restricted stock, RSUs and OP units outstanding for the three and six months ended June 30, 2023 was approximately 7.0 million and 6.9 million, respectively. The weighted average number of anti-dilutive convertible preferred stock, restricted stock, RSUs and OP units outstanding for the three and six months ended June 30, 2022 was approximately 4.2 million and 4.1 million, respectively.

The following table sets forth the computation of earnings per common share for the three and six months ended June 30, 2023 and 2022:


(in thousands, except per share data)	Three Months Ended June 30,						Six Months Ended June 30,
Numerator:	2023			2022			2023			2022
Net income (loss)	$	2,986		$	(2,898	)	$	1,326		$	(6,088	)
Less: Preferred equity return on Fortress preferred equity		(3,569	)		—			(6,996	)		—
Less: Preferred equity accretion to redemption value		(756	)		—			(1,171	)		—
Less: Preferred OP units return		(118	)		—			(230	)		—
Plus: Net loss attributable to noncontrolling interest		132			270			1,146			517
Net loss attributable to common stockholders	$	(1,325	)	$	(2,628	)	$	(5,925	)	$	(5,571	)
Denominator
Basic weighted-average common shares		35,661			32,044			35,518			32,005
Dilutive potential common shares		—			—			—			—
Diluted weighted-average common shares		35,661			32,044			35,518			32,005

Net loss per common share- basic and diluted	$	(0.04	)	$	(0.08	)	$	(0.17	)	$	(0.17	)

Note 13 – Fair Value of Financial Instruments

The Company uses fair value measures to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. GAAP establishes a three-level hierarchy that prioritizes inputs into the valuation techniques used to measure fair value. Fair value measurements associated with assets and liabilities are categorized into one of the following levels of the hierarchy based upon how observable the valuation inputs are that are used in the fair value measurements.

•

Level 1 — The valuation is based upon quoted prices in active markets for identical instruments.

•

Level 2 — The valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs or significant value drivers are observable in active markets.

•

Level 3 — The valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the instrument. Level 3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar methodologies, which incorporates management's own estimates of assumptions that market participants would use in pricing the instrument or valuations that require significant management judgment or estimation.

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 and the Fortress Mezzanine Loan. The following tables present the carrying amounts of these assets and liabilities that are measured at fair value on a recurring basis by instrument type and based upon the level of the fair value hierarchy within which fair value measurements of the Company’s assets and liabilities are categorized:


			Fair Value Measurements
(in thousands)	June 30, 2023		Level 1		Level 2		Level 3
Assets:
Derivative instruments	$	1,773	$	—	$	1,773	$	—

Liabilities:
Derivative instruments (1)	$	937	$	—	$	937	$	—
Fortress Mezzanine Loan		15,931		—		15,931		—

(1)

Derivative liabilities are included in Accounts payable and accrued liabilities on the condensed consolidated balance sheets.


			Fair Value Measurements
(in thousands)	December 31, 2022		Level 1		Level 2		Level 3
Assets:
Derivative instruments	$	3,426	$	—	$	3,426	$	—

Liabilities:
Derivative instruments (1)	$	1,208	$	—	$	1,208	$	—
Fortress Mezzanine Loan		17,895		—		17,895		—

(1)

Derivative liabilities are included in Accounts payable and accrued liabilities on the condensed consolidated balance sheets.

The 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. See Note 7 “—Interest Rate Cap and Interest Rate Swap Agreements” for further discussion regarding the Company’s interest rate cap and interest rate swap agreements.

The Preferred Equity Investment contains embedded features that are required to be bifurcated from the temporary equity-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements under ASC 815, Derivatives and Hedging. The fair value of the embedded derivative liability was valued using a binomial lattice-based model which takes into account variables such as estimated volatility, expected holding period, stock price, the exit fee and the risk-free interest rate. The risk-free interest rate is the five-year treasury rate at the valuation date. This technique incorporates Level 1 and Level 2 inputs.

The Company elected to measure the Fortress Mezzanine Loan at fair value in accordance with the fair value option. The Fortress Mezzanine Loan is a debt host financial instrument containing embedded features which would otherwise be required to be bifurcated from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements under ASC 815, Derivatives and Hedging. The fair value option election for the Fortress Mezzanine Loan is due to the number and complexity of features that would require separate bifurcation absent this election. The fair value of the Fortress Mezzanine Loan is valued using a binomial lattice-based model which takes into account variables such as estimated volatility, expected holding period, stock price, the exit fee and the risk-free interest rate. The risk-free interest rate is the five-year treasury rate at the valuation date. This technique incorporates Level 1 and Level 2 inputs.

Financial Assets and Liabilities Not Carried at Fair Value

The tables below provide information about the carrying amounts and fair values of those financial instruments of the Company for which fair value is not measured on a recurring basis and organizes the information based upon the level of the fair value hierarchy within which fair value measurements are categorized.


	At June 30, 2023
			Fair Value
(in thousands)	Carrying Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	14,473	$	14,473	$	—	$	—
Restricted cash		5,551		5,551		—		—

Liabilities:
Mortgage and other indebtedness, net - variable rate	$	119,701	$	—	$	119,701	$	—
Mortgage and other indebtedness, net - fixed rate		118,701		—		118,135		—


	At December 31, 2022
			Fair Value
(in thousands)	Carrying Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	12,356	$	12,356	$	—	$	—
Restricted cash		4,675		4,675		—		—

Liabilities:
Mortgage and other indebtedness, net - variable rate	$	111,380	$	—	$	111,380	$	—
Mortgage and other indebtedness, net - fixed rate		140,199		—		139,447		—

The carrying amounts of cash and cash equivalents, restricted cash, receivables and payables are reasonable estimates of their fair value as of June 30, 2023 and December 31, 2022 due to the short-term nature of these instruments (Level 1).

At June 30, 2023 and December 31, 2022, the Company’s indebtedness was comprised of borrowings that bear interest at variable and fixed rates. The fair value of the Company’s borrowings under variable rates at June 30, 2023 and December 31, 2022 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, 2023 and December 31, 2022 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.

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 14 – Taxes

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items, such as the net gain on change in fair value of debt held under the fair value option, which are recorded in the interim period. The provision for income taxes for the three months ended June 30, 2023 and 2022 reflects an income tax benefit of less than $0.1 million and approximately $0.9 million, respectively, at an estimated annual effective tax rate of 23.1% and 24.7%, respectively. The provision for income taxes for the six months ended June 30, 2023 and 2022 reflects an income tax benefit of approximately $1.7 million and $1.5 million, respectively, at an estimated annual effective tax rate of 23.1% and 24.7%, respectively. The difference between the Company’s effective tax rate and the federal statutory rate is primarily due to the loss attributable to the Operating Partnership and net gain on change in fair value of debt held under the fair value option, each of which is not subject to tax and state income taxes.

Note 15 – Related Party Transactions

Receivables and Payables

As of each of June 30, 2023 and December 31, 2022, the Company had $1.2 million in receivables due from related parties, included in Other assets, net on the condensed consolidated balance sheets. The $1.2 million at June 30, 2023 and December 31, 2022 relates to the merger pursuant to which the Company acquired Lamar Station Plaza West, including the note receivable due from a related party. Additionally, as of each of June 30, 2023 and December 31, 2022, the Company had approximately less than $0.1 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 condensed consolidated balance sheets. On October 6, 2022, Lamar Station Plaza West, a property managed by the Company and acquired in November 2022, advanced the Company $1.1 million for deposits related to the Company’s financing in November 2022. Such amount is eliminated in consolidation.

Approximately $0.3 million and $0.4 million of the Company’s total revenue for the three and six months ended June 30, 2022, respectively, was generated from related parties. The amount for the three and six months ended June 30, 2023 was de minimis. Additionally, approximately $0.1 million of the Company’s accounts receivable, net balance at December 31, 2022 was owed from related parties. The amount for the six months ended June 30, 2023 was de minimis.

Management Fees

During the six months ended June 30, 2022, the Company provided management services for Lamar Station Plaza West, which was acquired in the fourth quarter of 2022 in the remaining merger, and the Cypress Point property. The Company received a management fee ranging from 3.0% to 4.0% of such properties’ gross income. Messrs. Jacoby, Yockey and Topchy had interests in the entity that owned Lamar Station Plaza West. Messrs. Jacoby, Yockey, Topchy and Neal had interests in the entity that owned the Cypress

Point property. In the third quarter of 2022, the Company terminated the merger related to the Cypress Point property due to the performance of the property.

Tax Protection Agreements

On December 27, 2019, the Company and the Operating Partnership entered into tax protection agreements (the “Initial 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 Messrs. Jacoby, Yockey and Topchy, in connection with their receipt of Common OP units in certain of the Initial Mergers. On April 4, 2023, the Company and the Operating Partnership entered into a tax protection agreement (together with the Initial Tax Protection Agreements, the “Tax Protection Agreements”), with each of the prior investors in BSV Lamont Investors LLC, including Messrs. Jacoby, Yockey and Topchy, in connection with their receipt of Common OP units in the merger whereby the Company acquired Lamar Station Plaza West. Pursuant to the Tax Protection Agreements, until the seventh anniversary of the completion of the applicable merger, 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, Vista Shops at Golden Mile and Lamar Station Plaza West (the “Protected Properties”). Furthermore, until the seventh anniversary of the completion of the applicable merger, 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 Code.

Guarantees

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

Legal Fees

Mr. Spiritos is the managing partner of Shulman Rogers LLP, which represents the Company in certain real estate matters. During the three months ended June 30, 2023 and 2022, the Company paid approximately $0.2 million and $0.1 million, respectively, in legal fees to Shulman Rogers LLP. During the six months ended June 30, 2023 and 2022, the Company paid approximately $0.3 million and $0.2 million, respectively, in legal fees to Shulman Rogers LLP.

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

The following discussion should be read together with the condensed consolidated financial statements and notes thereto appearing elsewhere in 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 Quarterly Report on Form 10-Q (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,” “project,” “seek,” 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 Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022 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:

•

our limited access to capital and our ability to repay, refinance, restructure and/or extend our indebtedness as it becomes due;

•

the substantial rights of the Fortress Member (as defined herein) under the Eagles Sub-OP Operating Agreement (as defined herein), including approval rights over major decisions and repayment and control rights upon the occurrence of a Trigger Event (as defined herein);

•

our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate acquisitions or investments;

•

adverse economic or real estate developments, either nationally or in the markets in which our properties are located;

•

changes in financial markets and interest rates, or to our business or financial condition;

•

the nature and extent of our competition;

•

other factors affecting the retail industry or the real estate industry generally;

•

availability of financing and capital;

•

the performance of our portfolio; and

•

the impact of any financial, accounting, legal or regulatory issues or litigation.

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 Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022 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 SEC 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.

Overview

We are focused on owning and managing essential grocery-anchored and mixed-use assets located in densely populated technology employment hubs and higher education centers within the Mid-Atlantic, Southeast and Colorado markets. As of June 30, 2023, we owned 16 properties. The properties in our portfolio 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. 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.

The table below provides certain information regarding our retail portfolio as of June 30, 2023 and December 31, 2022. For additional information, see “—Our Portfolio.”


	As of			As of
	June 30, 2023			December 31, 2022
Number of properties		16			17
Number of states		5			5
Total square feet (in thousands)		1,835			2,026
Anchor spaces		970			1,104
Inline spaces		865			922
Leased % of rentable square feet (1):
Total portfolio		90.2	%		90.4	%
Anchor spaces		95.8	%		96.3	%
Inline spaces		84.0	%		83.4	%
Occupied % of rentable square feet (1):
Total portfolio		83.8	%		84.0	%
Anchor spaces		89.3	%		89.6	%
Inline spaces		77.7	%		77.3	%
Average remaining lease term (in years) (2)		5.7			5.3
Annualized base rent per leased square feet (3)	$	14.48		$	13.76

(1)

Percent leased is calculated as (a) gross leasable area (“GLA”) of rentable commercial square feet occupied or subject to a lease as of June 30, 2023 or December 31, 2022, as applicable, divided by (b) total GLA as of June 30, 2023 or December 31, 2022, as applicable, expressed as a percentage.

(2)

The average remaining lease term (in years) excludes the future options to extend the term of the lease.

(3)

Annualized base rent per leased square foot is calculated as total annualized base rent divided by leased GLA as of June 30, 2023 or December 31, 2022, as applicable.

We are structured as an “Up-C” corporation with substantially all of our operations conducted through Broad Street Operating Partnership, LP (our “Operating Partnership”) and its direct and indirect subsidiaries. As of June 30, 2023, we owned 85.6% of the Class A common units of limited partnership interest in the Operating Partnership (“Common OP units”) and Series A preferred units of limited partnership interest in the Operating Partnership (“Preferred OP units” and, together with the Common OP units, “OP units”), 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 certain mergers that were part of the previously announced series of mergers (collectively, the “Mergers”) on such date, and we operate as a single reporting segment.

Portfolio Summary

As of June 30, 2023, we owned 16 properties, of which 13 are located in the Mid-Atlantic region and three are located in Colorado. Retail properties comprise our entire portfolio except for a portion of one of our properties (Midtown Row), which includes a student housing property. Our retail properties have 1,835,401 total square feet of GLA. The following table provides additional information about the retail properties in our portfolio as of June 30, 2023.



Property Name	City/State	Year Built / Renovated (1)		GLA		Percent Leased (2)			Total Annualized Base Rent (3)		Annualized Base Rent per Leased SF (4)		Percentage of Total Annualized Base Rent			Gross Real Estate Assets (in thousands)
Avondale Shops	Washington, D.C.	2010			28,308		100.0	%	$	666,769	$	23.55		2.8	%	$	8,422
Brookhill Azalea Shopping Center	Richmond, VA	2012			163,353		88.0	%		1,594,307		11.09		6.7	%		17,506
Coral Hills Shopping Center	Capitol Heights, MD		2012		85,513		100.0	%		1,461,039		17.09		6.1	%		16,502
Crestview Square Shopping Center	Landover Hills, MD		2012		74,694		100.0	%		1,522,117		20.38		6.3	%		18,822
Cromwell Field Shopping Center	Glen Burnie, MD		2020		233,410		88.9	%		2,033,198		9.80		8.5	%		18,977
Dekalb Plaza (5)	East Norriton, PA		2017		178,356		97.8	%		2,056,890		11.79		8.6	%		20,923
The Shops at Greenwood Village	Greenwood Village, CO		2019		198,678		97.2	%		3,426,692		17.75		14.3	%		32,129
Highlandtown Village Shopping Center	Baltimore, MD		1987		57,524		100.0	%		1,091,972		18.98		4.6	%		7,399
Hollinswood Shopping Center	Baltimore, MD		2020		112,642		98.9	%		1,797,552		16.13		7.5	%		24,689
Lamar Station Plaza East	Lakewood, CO		1984		83,819		41.2	%		534,827		15.49		2.2	%		8,716
Lamar Station Plaza West	Lakewood, CO		2016		186,705		100.0	%		2,132,764		11.42		8.9	%		23,409
Midtown Colonial	Williamsburg, VA		2018		98,067		85.7	%		1,011,583		12.04		4.2	%		17,765
Midtown Lamonticello	Williamsburg, VA		2019		63,157		83.9	%		902,866		17.03		3.8	%		16,045
Midtown Row (Retail Portion)	Williamsburg, VA		2021		62,863		29.3	%		488,873		26.58		2.0	%		125,953
Vista Shops at Golden Mile	Frederick, MD		2009		98,761		100.0	%		1,800,843		18.23		7.5	%		14,814
West Broad Commons Shopping Center	Richmond, VA		2017		109,551		95.3	%		1,450,076		13.89		6.0	%		19,939
Total					1,835,401		90.2	%	$	23,972,368	$	14.48		100.0	%	$	392,010

(1)

Represents the most recent year in which a property was built or renovated. For purposes of this table, renovation means significant upgrades, alterations or additions to the property.

(2)

Percent leased is calculated as (a) GLA of rentable commercial square feet occupied or subject to a lease as of June 30, 2023, divided by (b) total GLA, expressed as a percentage. The total percent occupied, which excludes leases that have been signed but not commenced, was 83.8% as of June 30, 2023.

(3)

Total annualized base rent is calculated by multiplying (a) monthly base rent (before abatements) as of June 30, 2023, for leases that had commenced as of such date, by (b) 12. Total annualized base rent does not include tenant reimbursements for real estate taxes, insurance, common area maintenance or other operating expenses.

(4)

Annualized base rent per leased square foot is calculated as total annualized base rent divided by leased GLA as of June 30, 2023.

(5)

On July 20, 2023, we completed the sale of Dekalb Plaza for a purchase price of $23.1 million in cash.

Geographic Concentration

The following table contains information regarding the geographic concentration of the properties in our portfolio as of June 30, 2023, which includes rental income for the six months ended June 30, 2023 and 2022.


(dollars in thousands)	Number of Properties	Gross Real Estate Assets		Percentage of Total Real Estate Assets			Rental income for the six months ended June 30,
Location	June 30, 2023	June 30, 2023		June 30, 2023			2023		2022
Maryland	6	$	101,203		25.8	%	$	6,078	$	6,061
Virginia	5		197,208		50.3	%		8,703		3,636
Pennsylvania (1)	1		20,923		5.3	%		1,353		1,058
Washington D.C.	1		8,422		2.2	%		303		306
Colorado	3		64,254		16.4	%		4,028		2,604
	16	$	392,010		100.0	%	$	20,465	$	13,665

(1)

Represents Dekalb Plaza, which was sold on July 20, 2023.

Critical Accounting Policies

Refer to our audited consolidated financial statements and notes thereto for the year ended December 31, 2022 for a discussion of our accounting policies, including the critical accounting policies of revenue recognition, real estate investments, asset impairment, income taxes, and our accounting policy on consolidation, which are included in our 2022 Annual Report on Form 10-K, which was filed with the SEC on May 1, 2023. During the six months ended June 30, 2023, there were no material changes to these policies. See Note 2 “—Accounting Guidance” to our condensed consolidated financial statements in Item 1 of this report for recently-adopted accounting pronouncements.

Factors that May Impact Future Results of Operations

Rental Income

Growth in rental income will depend on our ability to acquire additional properties that meet our investment criteria and on filling vacancies and increasing rents on the properties in our portfolio. The amount of rental income generated by the properties in our portfolio depends on our ability to renew expiring leases or re-lease space upon the scheduled or unscheduled termination of leases, lease currently available space and maintain or increase rental rates at our properties. Our rental income in future periods could be adversely affected by local, regional, or national economic conditions, an oversupply of or a reduction in demand for retail space, changes in market rental rates, our ability to provide adequate services and maintenance at our properties, fluctuations in interest rates and dispositions of properties. In addition, economic downturns affecting our markets or downturns in our tenants’ businesses that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments to us could adversely affect our ability to maintain or increase rent and occupancy.

Scheduled Lease Expirations

Our ability to re-lease expiring space at rental rates equal to or greater than that of current rental rates will impact our results of operations. Our properties are marketed to smaller tenants that generally desire shorter-term leases. As of June 30, 2023, approximately 43.9% of our portfolio (based on GLA) was leased to tenants occupying less than 10,000 square feet. In addition, as of June 30, 2023, approximately 9.8% of our GLA was vacant and approximately 1.7% of our leases (based on GLA) were scheduled to expire on or before December 31, 2023. 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. If our current tenants do not renew their leases or terminate their leases early, we may be unable to re-lease the space to new tenants on favorable terms or at all. Our vacancy trends will be impacted by new properties that we acquire, which may include properties with higher vacancy where we identified opportunities to increase occupancy.

Acquisitions

Over the long-term, we intend to grow our portfolio through the acquisition of 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. We have established relationships with a wide variety of market participants, including tenants, leasing agents, investment sales brokers, property owners and lenders, in our target markets and beyond, and, over the long-term, we believe that we will have opportunities to acquire properties that meet our investment criteria at attractive prices.

Dispositions

On June 30, 2023, we completed the sale of Spotswood Valley Square Shopping Center for a sales price of $23.0 million in cash and recognized a net gain of $11.6 million in its condensed consolidated statements of operations. On July 20, 2023, we completed the sale of Dekalb Plaza, which was held for sale as of June 30, 2023, for a sales price of $23.1 million in cash.

General and Administrative Expenses

General and administrative expenses include employee compensation costs, professional fees, consulting, and other general administrative expenses. We expect an increase in general and administrative expenses in the future related to stock issuances to employees. We expect that our general and administrative expenses will rise in some measure as our portfolio grows but that such expenses as a percentage of our revenue will decrease over time due to efficiencies and economies of scale.

Capital Expenditures

We incur capital expenditures at our properties that vary in amount and frequency based on each property’s specific needs. We expect our capital expenditures will be for recurring maintenance to ensure our properties are in good working condition, including parking and roof repairs, façade maintenance and general upkeep. We also will incur capital expenditures related to repositioning and refurbishing properties where we have identified opportunities to improve our properties to increase occupancy, and we may incur capital expenditures related to redevelopment or development consistent with our business and growth strategies.

Results of Operations

This section provides a comparative discussion on our results of operations and should be read in conjunction with our condensed consolidated financial statements, including the accompanying notes.

Comparison of the three months ended June 30, 2023 to the three months ended June 30, 2022


	For the Three Months Ended						Change
(dollars in thousands)	June 30, 2023			June 30, 2022			$			%
Revenues
Rental income	$	10,257		$	6,938		$	3,319			48	%
Commissions		663			1,281			(618	)		(48	%)
Management fees and other income		53			174			(121	)		(70	%)
Total revenues		10,973			8,393			2,580			31	%
Operating Expenses
Cost of services		394			900			(506	)		(56	%)
Depreciation and amortization		5,290			4,094			1,196			29	%
Property operating		3,145			1,913			1,232			64	%
Impairment of real estate assets		167			—			167		N/A
Impairment of real estate assets held for sale		1,957			—			1,957		N/A
Real estate related acquisition costs		—			529			(529	)		(100	%)
Bad debt expense		24			6			18			300	%
General and administrative		2,955			2,870			85			3	%
Total operating expenses		13,932			10,312			3,620			35	%
Gain on disposal of property		11,619			—			11,619		N/A
Operating income (loss)		8,660			(1,919	)		10,579			551	%

Other income (expense)
Interest and other income		17			15			2			13	%
Derivative fair value adjustment		194			805			(611	)		(76	%)
Net loss on fair value change of debt held under the fair value option		(1,131	)		—			(1,131	)	N/A
Interest expense		(4,735	)		(2,685	)		(2,050	)		76	%
Loss on extinguishment of debt		(15	)		—			(15	)	N/A
Other expense		(13	)		(1	)		(12	)		1,200	%
Total other expense		(5,683	)		(1,866	)		(3,817	)		205	%
Net income (loss) before income taxes		2,977			(3,785	)		6,762			(179	%)
Income tax benefit		9			887			(878	)		(99	%)
Net income (loss)	$	2,986		$	(2,898	)	$	5,884			(203	%)
Less: Preferred equity return on Fortress preferred equity		(3,569	)		—		$	(3,569	)	N/A
Less: Preferred equity accretion to redemption value		(756	)		—		$	(756	)	N/A
Less: Preferred OP units return		(118	)		—		$	(118	)	N/A
Plus: Net loss attributable to noncontrolling interest		132			270			(138	)		(51	%)
Net loss attributable to common stockholders	$	(1,325	)	$	(2,628	)	$	1,303			(50	%)

Revenues for the three months ended June 30, 2023 increased approximately $2.6 million, or 31%, compared to the three months ended June 30, 2022, as a result of an approximately $3.3 million increase in rental income. This increase was partially offset by approximately $0.6 million and $0.1 million decreases in commissions and management fees and other income, respectively. Rental income primarily increased as a result of the acquisition of two properties in the fourth quarter of 2022, which had aggregate rental income of $3.0 million during the three months ended June 30, 2023. The decrease in commissions is due to a lower transaction volume of leasing. The decrease in management fees and other income is mainly attributable to fees recognized in the second quarter of 2022 related to properties that were acquired in the fourth quarter of 2022.

Total operating expenses for the three months ended June 30, 2023 increased approximately $3.6 million, or 35%, compared to the three months ended June 30, 2022, primarily from: (i) a $2.0 million impairment of real estate assets held for sale as a result of reducing the carrying value of Dekalb Plaza for the amount that exceeded the property's fair value less estimated selling costs, (ii) an increase in depreciation and amortization expense of approximately $1.2 million, primarily related to two properties that were acquired in November 2022 (which comprised $2.0 million of the total depreciation and amortization expense) partially offset by a $0.7 million decrease in amortization of in-place lease tangibles, (iii) an increase in property operating expense of approximately $1.2 million, which is mainly attributable to two properties acquired in the fourth quarter of 2022, and (iv) $0.2 million in impairment of real estate assets

due to early termination of certain leases. These increases were partially offset by approximately $0.5 million of real estate related acquisition costs reflected in the second quarter of 2022 due to writing off pre-acquisition costs related to Midtown Row and the Colfax land parcel and a decrease of $0.5 million related to cost of service.

Gain on disposal of property for the three months ended June 30, 2023 reflects the gain recognized in connection with the sale of Spotswood Valley Square Shopping Center.

The gain on derivative fair value adjustment was approximately $0.2 million for the three months ended June 30, 2023 compared to a gain of approximately $0.8 million for the three months ended June 30, 2022. The decline of $0.6 million was primarily due to a $0.5 million change in the fair value of the interest rate swaps we entered into on November 23, 2022, July 1, 2021 and December 27, 2019 and a $0.1 million change in fair value of the embedded derivative liability relating to the Preferred Equity Investment (as defined below).

Net loss on fair value change of debt held under the fair value option reflects the change in fair value of the Fortress Mezzanine Loan (as defined below) for which we elected the fair value option.

Interest expense for the three months ended June 30, 2023 increased approximately $2.1 million, or 76%, compared to the three months ended June 30, 2022, primarily due to debt that was assumed or originated in connection with two properties that were acquired during the fourth quarter of 2022. We had additional net borrowings of approximately $74.1 million after June 30, 2022.

Income tax benefit for the three months ended June 30, 2023 decreased approximately $0.9 million compared to the three months ended June 30, 2022, which is primarily attributable to the sale of Spotswood Valley Square Shopping Center, partially offset by the distributions to the Fortress Member as well as certain properties generating additional tax losses compared to the prior period.

Preferred equity return on Fortress preferred equity reflects the portion of the distribution to the Fortress Member that is payable in cash and the portion that is accrued and added to the Preferred Equity Investment.

Preferred equity accretion to redemption value reflects the accretion of the carrying value of the Fortress preferred equity to the Redemption amount over the remaining term.

Preferred OP units return reflects the portion of the distribution to holders of the Preferred OP units that are payable in cash and the portion that are accrued and added to the liquidation preference of the Preferred OP units.

Net loss attributable to noncontrolling interest for the three months ended June 30, 2023 decreased $0.1 million compared to the three months ended June 30, 2022. The net loss attributable to noncontrolling interest reflects the proportionate share of the OP units held by outside investors in the operating results of the Operating Partnership.

Comparison of the six months ended June 30, 2023 to the six months ended June 30, 2022


	For the Six Months Ended						Change
(dollars in thousands)	June 30, 2023			June 30, 2022			$			%
Revenues
Rental income	$	20,465		$	13,665		$	6,800			50	%
Commissions		1,519			1,729			(210	)		(12	%)
Management fees and other income		121			301			(180	)		(60	%)
Total revenues		22,105			15,695			6,410			41	%
Operating Expenses
Cost of services		809			1,273			(464	)		(36	%)
Depreciation and amortization		10,858			8,211			2,647			32	%
Property operating		6,206			3,998			2,208			55	%
Impairment of real estate assets		167			—			167		N/A
Impairment of real estate assets held for sale		1,957			—			1,957		N/A
Real estate related acquisition costs		—			529			(529	)		(100	%)
Bad debt expense		66			35			31			89	%
General and administrative		6,626			6,568			58			1	%
Total operating expenses		26,689			20,614			6,075			29	%
Gain on disposal of property		11,619			—			11,619		N/A
Operating income (loss)		7,035			(4,919	)		11,954			243	%

Other income (expense)
Interest and other income		30			26			4			15	%
Derivative fair value adjustment		15			2,570			(2,555	)		(99	%)
Net gain on fair value change of debt held under the fair value option		2,104			—			2,104		N/A
Interest expense		(9,516	)		(5,273	)		(4,243	)		80	%
Loss on extinguishment of debt		(15	)		—			(15	)	N/A
Other expense		(19	)		(6	)		(13	)		217	%
Total other expense		(7,401	)		(2,683	)		(4,718	)		176	%
Net loss before income taxes		(366	)		(7,602	)		7,236			(95	%)
Income tax benefit		1,692			1,514			178			12	%
Net income (loss)	$	1,326		$	(6,088	)	$	7,414			(122	%)
Less: Preferred equity return on Fortress preferred equity		(6,996	)		—			(6,996	)	N/A
Less: Preferred equity accretion to redemption value		(1,171	)		—			(1,171	)	N/A
Less: Preferred OP units return		(230	)		—			(230	)	N/A
Plus: Net loss attributable to noncontrolling interest		1,146			517			629			122	%
Net loss attributable to common stockholders	$	(5,925	)	$	(5,571	)	$	(354	)		6	%

Revenues for the six months ended June 30, 2023 increased approximately $6.4 million, or 41%, compared to the six months ended June 30, 2022, as a result of an approximately $6.8 million increase in rental income. This increase was partially offset by approximately $0.2 million decreases in each of commissions and management fees and other income. Rental income primarily increased as a result of the acquisition of two properties in the fourth quarter of 2022, which had aggregate rental income of $5.6 million during the six months ended June 30, 2023. The decrease in commissions is due to a lower transaction volume of leasing. The decrease in management fees and other income is mainly attributable to fees recognized in the six months ended June 30, 2022 related to properties that were acquired in the fourth quarter of 2022.

Total operating expenses for the six months ended June 30, 2023 increased approximately $6.1 million, or 29%, compared to the six months ended June 30, 2022, primarily from: (i) an increase in depreciation and amortization expense of approximately $2.6 million, primarily related to two properties that were acquired in November 2022 (which comprised $4.0 million of the total depreciation and amortization expense) partially offset by a $1.4 million decrease in amortization of in-place lease tangibles, (ii) a $2.0 million impairment of real estate assets held for sale as a result of reducing the carrying value of Dekalb Plaza for the amount that exceeded the property's fair value less estimated selling costs, (iii) an increase in property operating expense of approximately $2.2 million, which is mainly attributable to two properties acquired in the fourth quarter of 2022 and (iv) $0.2 million in impairment of real estate assets due to early termination of certain leases. These increases were partially offset by approximately $0.5 million of real estate related acquisition costs

reflected in the second quarter of 2022 due to writing off pre-acquisition costs related to Midtown Row and the Colfax land parcel and a decrease of $0.5 million related to cost of service.

Gain on disposal of property for the six months ended June 30, 2023 reflects the gain recognized in connection with the sale of Spotswood Valley Square Shopping Center.

The gain on derivative fair value adjustment was less than $0.1 million for the six months ended June 30, 2023 compared to a gain of approximately $2.6 million for the six months ended June 30, 2022. The decline of $2.6 million was primarily due to a $2.9 million change in the fair value of the interest rate swaps we entered into on November 23, 2022, July 1, 2021 and December 27, 2019 partially offset by a $0.3 million change in fair value of the embedded derivative liability relating to the Preferred Equity Investment.

Net gain on fair value change of debt held under the fair value option reflects the change in fair value of the Fortress Mezzanine Loan for which we elected the fair value option.

Interest expense for the six months ended June 30, 2023 increased approximately $4.2 million, or 80%, compared to the six months ended June 30, 2022, primarily due to debt that was assumed or originated in connection with two properties that were acquired during the fourth quarter of 2022. We had additional net borrowings of approximately $74.1 million after June 30, 2022.

Income tax benefit for the six months ended June 30, 2023 increased approximately $0.2 million compared to the six months ended June 30, 2022, which is primarily attributable to the distributions to the Fortress Member as well as certain properties generating additional tax losses compared to the prior period, partially offset by the sale of the Spotswood Valley Square Shopping Center.

Preferred equity accretion to redemption value reflects the accretion of the carrying value of the Fortress preferred equity to the Redemption amount over the remaining term.

Net loss attributable to noncontrolling interest for the six months ended June 30, 2023 increased $0.6 million compared to the six months ended June 30, 2022. The net loss attributable to noncontrolling interest reflects the proportionate share of the OP units held by outside investors in the operating results of the Operating Partnership.

Non-GAAP Performance Measures

We present the non-GAAP performance measures set forth below. These measures should not be considered as an alternative to, or more meaningful than, net income (calculated in accordance with U.S. generally accepted accounting principles (“GAAP”)) or other GAAP financial measures, as an indicator of financial performance and are not alternatives to, or more meaningful than, cash flow from operating activities (calculated in accordance with GAAP) as a measure of liquidity. Non-GAAP performance measures have limitations as they do not include all items of income and expense that affect operations, and accordingly, should always be considered as supplemental financial results to those calculated in accordance with GAAP. Our computation of these non-GAAP performance measures may differ in certain respects from the methodology utilized by other real estate companies and, therefore, may not be comparable to similarly titled measures presented by other real estate companies. Investors are cautioned that items excluded from these non-GAAP performance measures are relevant to understanding and addressing financial performance.

Funds From Operations and Adjusted Funds from Operations

Funds from operations (“FFO”) is a supplemental non-GAAP financial measure of real estate companies’ operating performance. The National Association of Real Estate Investment Trusts (“Nareit”) defines FFO as follows: net income (loss), computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis.

Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Considering the nature of our business as a real estate owner and operator, we believe that FFO is useful to investors in measuring our operating and financial performance because the definition excludes items included in net income that do not relate to or are not indicative of our operating and financial performance, such as depreciation and amortization related to real estate, and items which can make periodic and peer analysis of operating and financial performance more difficult, such as gains and losses from the sale of certain real estate assets and impairment write-downs of certain real estate assets. Specifically, in excluding real estate related depreciation and amortization and gains and losses from sales of depreciable operating properties, which do not relate

to or are not indicative of operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.

However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or service indebtedness. Also, FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.

Adjusted FFO (“AFFO”) is calculated by excluding the effect of certain items that do not reflect ongoing property operations, including stock-based compensation expense, deferred financing and debt issuance cost amortization, non-real estate depreciation and amortization, straight-line rent, non-cash interest expense and other non-comparable or non-operating items. Management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO.

AFFO is not intended to represent cash flow or liquidity for the period and is only intended to provide an additional measure of our operating performance. We believe that Net income/(loss) is the most directly comparable GAAP financial measure to AFFO. Management believes that AFFO is a widely recognized measure of the operations of real estate companies and presenting AFFO enables investors to assess our performance in comparison to other real estate companies. AFFO should not be considered as an alternative to net income/(loss) (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.

Our reconciliation of net income (loss) to FFO and AFFO for the three and six months ended June 30, 2023 and 2022 is as follows:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(unaudited, dollars in thousands)	2023			2022			2023			2022
Net income (loss)	$	2,986		$	(2,898	)	$	1,326		$	(6,088	)
Gain on disposal of properties		(11,619	)		—			(11,619	)		—
Impairment of real estate assets held for sale		1,957			—			1,957			—
Real estate depreciation and amortization		5,193			4,084			10,716			8,188
Amortization of direct leasing costs		24			10			51			14
FFO attributable to common shares and OP units		(1,459	)		1,196			2,431			2,114
Stock-based compensation expense		551			400			765			1,186
Deferred financing and debt issuance cost amortization		218			377			500			760
Impairment of real estate assets		167			—			167			—
Intangibles amortization		81			(131	)		129			(254	)
Non-real estate depreciation and amortization		76			7			91			12
Non-cash interest expense		367			—			667			—
Recurring capital expenditures		(398	)		(267	)		(406	)		(479	)
Straight-line rent revenue		(288	)		(254	)		(734	)		(385	)
Minimum multiple on preferred interests		(254	)		(376	)		(331	)		(747	)
Non-cash fair value adjustment		937			(805	)		(2,119	)		(2,570	)
AFFO attributable to common shares and OP units	$	(2	)	$	147		$	1,160		$	(363	)

Weighted average shares outstanding to common shares
Diluted		35,660,560			32,043,824			35,518,179			32,005,410

Net loss attributable to common stockholders per share
Diluted (1)	$	(0.04	)	$	(0.08	)	$	(0.17	)	$	(0.17	)

Weighted average shares outstanding to common shares and OP units
Diluted		41,220,856			34,775,558			41,078,475			34,767,031

FFO attributable to common shares and OP units
Diluted (2)	$	(0.04	)	$	0.03		$	0.06		$	0.06

(1)

The weighted average common shares outstanding used to compute net loss per diluted common share only includes the common shares. We have excluded the OP units since the conversion of OP units is anti-dilutive in the computation of diluted net loss per share for the periods presented.

(2)

The weighted average common shares outstanding used to compute FFO per diluted common share includes OP units that were excluded from the computation of diluted net loss per share. Conversion of these OP units is dilutive in the computation of FFO per diluted common share but is anti-dilutive for the computation of diluted EPS for the periods presented.

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDAre

We calculate EBITDAre in accordance with standards established by Nareit and define EBITDAre as net income or loss computed in accordance with GAAP (i) plus depreciation and amortization, interest expense and income tax expense, (ii) plus or minus losses or gains on the disposition of properties, (iii) plus impairment losses and (iv) with appropriate adjustments to reflect our share of EBITDAre of unconsolidated affiliates and consolidated affiliates with non-controlling interests, in each case as applicable. We define Adjusted EBITDAre as EBITDAre plus non-cash stock compensation, non-cash amortization related to above and below market leases and less straight-line rent revenue and non-cash fair value adjustment. Some of the adjustments can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates. EBITDAre and Adjusted EBITDAre are non-GAAP financial measures and should not be viewed as alternatives to net income or loss calculated in accordance with GAAP as a measurement of our operating performance. We believe that EBITDAre and Adjusted EBITDAre are helpful measures because they provide additional information to allow management, investors and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt. We also believe that EBITDAre and Adjusted EBITDAre can help facilitate comparisons of operating performance between periods and with other real estate companies.

Our reconciliation of net income (loss) to EBIDTAre and Adjusted EBITDAre for the three and six months ended June 30, 2023 and 2022 is as follows:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(unaudited, dollars in thousands)	2023			2022			2023			2022
Net income (loss)	$	2,986		$	(2,898	)	$	1,326		$	(6,088	)
Interest expense		4,735			2,685			9,516			5,273
Income tax benefit		(9	)		(887	)		(1,692	)		(1,514	)
Depreciation and amortization expense		5,290			4,094			10,858			8,211
EBITDA		13,002			2,994			20,008			5,882
Gain on sale of real estate		(11,619	)		—			(11,619	)		—
Impairment loss		2,124			—			2,124			—
EBITDAre		3,507			2,994			10,513			5,882
Stock-based compensation expense		551			400			765			1,186
Straight-line rent revenue		(288	)		(254	)		(734	)		(385	)
Amortization of above and below market lease, net		81			(131	)		129			(254	)
Non-cash fair value adjustment		937			(805	)		(2,119	)		(2,570	)
Adjusted EBITDAre	$	4,788		$	2,204		$	8,554		$	9,741

Liquidity and Capital Resources

Overview

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay any outstanding borrowings, fund and maintain our assets and operations and other general business needs.

Our short-term liquidity requirements consist primarily of debt service requirements, operating expenses, recurring capital expenditures (such as repairs and maintenance of our properties), and non-recurring capital expenditures (such as capital improvements and tenant improvements). As of June 30, 2023 and August 8, 2023, we had unrestricted cash and cash equivalents of approximately $14.5 million and $18.5 million, respectively, available for current liquidity needs and restricted cash of approximately $5.6 million and $5.3 million, respectively, which is available for debt service shortfall requirements, certain capital expenditures, real estate taxes and insurance.

As of June 30, 2023, we had one mortgage loan (Vista Shops at Golden Mile Loan) with a principal balance of approximately $11.3 million that will mature within twelve months of the date that the condensed consolidated financial statements included in this report are issued. If we are unable to repay or refinance the mortgage loan, the lender has the right to place the loan in default and ultimately foreclose on the property. Under this circumstance, we would not have any further financial obligation to the lender as the estimated market value of the property is in excess of the outstanding loan balance.

material adverse change clause, and approval by the lender. Management exercised one of the one-year extension options and is in discussions with other parties to refinance the Basis Term Loan with new loans. On May 26, 2023, we entered into a purchase and sale agreement to sell one of the properties that secures the Basis Term Loan for $23.1 million. We completed the sale on July 20, 2023 and repaid $17.4 million of the outstanding principal balance on the Basis Term Loan with proceeds from the sale. There can be no assurances, however, that we will be successful in exercising the remaining extension option or refinancing the Basis Term Loan prior to its maturity. If we are unable to extend or refinance the Basis Term Loan prior to maturity, the lender will have the right to place the loan in default and ultimately foreclose on the remaining five properties securing the loan.

We project that we will not have sufficient cash available to pay off the Basis Term Loan and the $11.3 million mortgage loan upon maturity, and we are currently seeking to refinance the loans prior to maturity in January 2024 and June 2024, respectively. Management is in discussions with various lenders and believes that we will be able to extend, refinance or otherwise repay our debt prior to maturity, including the Basis Term Loan. However, it is possible that we may be unable extend or refinance such debt on favorable terms or at all, which creates substantial doubt about our ability to continue as a going concern for a period of one year after the date that the condensed consolidated financial statements included in this report are issued. The condensed consolidated financial statements included in this report have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Our long-term liquidity requirements are expected to consist primarily of funds necessary for the repayment of debt at or prior to maturity, capital improvements, development and/or redevelopment of properties and property acquisitions. We expect to meet our long-term liquidity requirements through net cash from operations, additional secured and unsecured debt and, subject to market conditions, the issuance of additional shares of common stock, preferred stock or OP units.

Our access to capital depends upon a number of factors over which we have little or no control, including general market conditions, the market’s perception of our current and potential future earnings and cash distributions, our current debt levels and the market price of the shares of our common stock. Although our common stock is quoted on the OTCQX Best Market, there is a very limited trading market for our common stock, and if a more active trading market is not developed and sustained, we will be limited in our ability to issue equity to fund our capital needs. If we cannot obtain capital from third-party sources, we may not be able to meet the capital and operating needs of our properties, satisfy our debt service obligations or pay dividends to our stockholders.

As described below, under our existing debt agreements, we are subject to continuing covenants. In the event of a default, the lenders could accelerate the timing of payments under the applicable debt obligations, and we may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all, which would have a material adverse effect on our liquidity, financial condition and results of operations. As of June 30, 2023, we were in compliance with all of the other covenants under our debt agreements.

Consolidated Indebtedness and Preferred Equity

Indebtedness Summary

The following table sets forth certain information regarding our outstanding indebtedness as of June 30, 2023:


(dollars in thousands)	Maturity Date	Rate Type	Interest Rate (1)	Balance Outstanding at June 30, 2023
Basis Term Loan (net of discount of $38)	January 1, 2024	Floating (2)	8.62%	$	67,147		(3), (4)
Hollinswood Shopping Center Loan	December 1, 2024	LIBOR + 2.25% (5)	4.06%		12,600
Avondale Shops Loan	June 1, 2025	Fixed	4.00%		2,927
Vista Shops at Golden Mile Loan (6)	June 24, 2024	Fixed	3.83%		11,345
Brookhill Azalea Shopping Center Loan	January 31, 2025	LIBOR + 2.75%	7.97%		8,747
Lamar Station Plaza West Loan (net of discount of $82)	December 10, 2027	Fixed	5.67%		18,329
Highlandtown Village Shopping Center Loan (net of discount of $42) (7)	May 10, 2028	SOFR + 2.5%	6.085%		8,708
Cromwell Field Shopping Center Loan (net of discount of $68)	December 22, 2027	Fixed	6.71%		10,122
Midtown Row Loan (net of discount of $22)	December 1, 2027	Fixed	6.48%		75,978
Midtown Row/Fortress Mezzanine Loan (8)	December 1, 2027	Fixed	12.00%		15,931
The Shops at Greenwood Village (net of discount of $85)	October 10, 2028	SOFR + 2.85% (9)	5.85%		22,499
				$	254,333
Unamortized deferred financing costs, net					(1,752	)	(4)
Total Mortgage and Other Indebtedness				$	252,581

(1)

was replaced with SOFR (as defined below).

(2)

The interest rate for the Basis Term Loan is the greater of (i) SOFR plus 3.97% per annum and (ii) 6.125% per annum. On November 23, 2022, we entered into an interest rate cap agreement to cap the SOFR interest rate at 4.65% effective January 1, 2023, which replaced the existing interest rate cap agreement that capped the SOFR interest rate at 3.5%.

(3)

The outstanding balance includes $0.3 million of exit fees.

(4)

The outstanding balances of $67.1 million and $(1.8) million include $14.6 million and less than $(0.1) million, respectively, that were reclassified to mortgages related to assets held for sale.

(5)

We have entered into an interest rate swap which fixes the interest rate of this loan at 4.06%. On May 3, 2023, the Hollinswood loan agreement was amended to replace LIBOR with SOFR, effective July 1, 2023.

(6)

On June 28, 2023, we entered into an agreement to extend the maturity date of this loan to June 24, 2024.

(7)

On May 5, 2023, we refinanced the Highlandtown Village Shopping Center Loan to extend the maturity date to May 10, 2028 and entered into an interest rate swap which fixes the interest rate of the new loan at 6.085% as described below under the heading “—Mortgage Indebtedness”. The prior loan carried an interest rate of 4.13%.

(8)

The outstanding balance reflects the fair value of the debt.

(9)

On October 6, 2021, we entered into an interest rate swap which fixes the interest rate of this loan at 4.082%. On May 1, 2023, the interest rate was amended to replace Prime with SOFR plus a spread of 2.85%. We terminated the existing interest rate swap and entered into a new interest rate swap agreement to fix the interest rate at 5.85%.

Basis Term Loan

In December 2019, six of our 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 (“Basis”), 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. Pursuant to the Basis Loan Agreement, the Basis Term Loan is secured by mortgages on the following properties: Coral Hills, Crestview, Dekalb, Midtown Colonial, Midtown Lamonticello and West Broad. The Basis Term Loan initial maturity was January 1, 2023, subject to two one-year extension options, subject to certain conditions. We exercised one of the one-year extension options and the maturity date was extended to January 1, 2024. The Basis Loan Agreement was amended and restated on June 29, 2022 to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”). The Basis Term Loan bears interest at a rate equal to the greater of (i) SOFR plus 3.97% per annum and (ii) 6.125% per annum. The Borrowers had entered into an interest rate cap agreement that effectively capped the prior-LIBOR rate at 3.50% per annum. On August 1, 2022, the interest rate cap agreement was modified to cap the SOFR rate at 3.50% per annum. The interest rate cap expired on January 1, 2023. On November 23, 2022, we entered into an interest rate cap agreement, effective January 1, 2023, to cap the SOFR interest rate at 4.65%. As of June 30, 2023, the interest rate of the Basis Term Loan was 8.62% and the outstanding principal balance was $66.9 million.

On July 20, 2023, we sold one of the properties, Dekalb, securing the Basis Term Loan and repaid $17.4 million of the outstanding principal balance on the Basis Term Loan with proceeds from the sale.

Certain of 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 securing the Basis Term Loan, 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) the Company's subsidiary serving as the property manager (“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, or (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 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 they collect and retain 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.

The Basis Loan Agreement includes a debt service coverage calculation based on the trailing twelve month's 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 Basis 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 June 30, 2023 was approximately 1.38x.

Lamont Street Preferred Interest

In connection with the closing of the Highlandtown and Spotswood Mergers on May 21, 2021 and June 4, 2021, respectively, Lamont Street Partners LLC (“Lamont Street”) contributed an aggregate of $3.9 million in exchange for a 1.0% preferred membership interest in BSV Highlandtown Investors LLC (“BSV Highlandtown”) and BSV Spotswood Investors LLC (“BSV Spotswood”) designated as Class A units (the “Lamont Street Preferred Interest”).

Lamont Street was entitled to a cumulative annual return of 13.5% (the “Lamont Street Class A Return”), of which 10.0% was paid current and 3.5% was accrued. Lamont Street’s interests were to be redeemed on or before September 30, 2023 (the “Lamont Street Redemption Date”). The Lamont Street Redemption Date could be extended by us to September 30, 2024 and September 30, 2025, in each case subject to certain conditions, including the payment of a fee equal to 0.25% of Lamont Street's net invested capital for the first extension option and a fee of 0.50% of Lamont Street’s net invested capital for the second extension option. If the redemption price was paid on or before the Lamont Street Redemption Date, then the redemption price was equal to (a) all unreturned capital contributions made by Lamont Street, (b) all accrued but unpaid Lamont Street Class A Return and (c) all costs and other expenses incurred by Lamont Street in connection with the enforcement of its rights under the agreements. Additionally, at the Lamont Street Redemption Date, Lamont Street was entitled to (i) a redemption fee of 0.50% of the capital contributions returned and (ii) an amount equal to (a) the product of (i) the aggregate amount of capital contributions made and (ii) 0.26 less (b) the aggregate amount of Lamont Street Class A Return payments made to Lamont Street (the “Lamont Street Minimum Multiple Amount”).

On May 5, 2023, we refinanced the Highlandtown mortgage loan and used a portion of the proceeds to redeem $1.9 million of the Lamont Street Preferred Interest. On June 30, 2023, we used a portion of the proceeds from the sale of the Spotswood property to redeem the remaining $2.3 million of the Lamont Street Preferred Interest, which amount includes the remaining Lamont Street Minimum Multiple Amount.

Other Mortgage Indebtedness

In addition to the indebtedness described above, as of June 30, 2023 and December 31, 2022, we had approximately $171.3 million and $180.3 million, respectively, of outstanding mortgage indebtedness secured by individual properties. The Hollinswood mortgage, Vista Shops mortgage, Brookhill mortgage, Highlandtown mortgage, Cromwell mortgage, Greenwood Village mortgage, Lamar Station Plaza West mortgage and the Midtown Row mortgage require the Company to maintain a minimum debt service coverage ratio (as such term is defined in the respective loan agreements) as follows in the table below.


		Minimum Debt Service Coverage
Hollinswood Shopping Center		1.40 to 1.00
Vista Shops at Golden Mile		1.50 to 1.00
Brookhill Azalea Shopping Center		1.30 to 1.00
Highlandtown Village Shopping Center		1.25 to 1.00
Cromwell Field Shopping Center (1)		1.20 to 1.00
Lamar Station Plaza West (2)		1.30 to 1.00
Midtown Row (2)		1.15 to 1.00
The Shops at Greenwood Village		1.40 to 1.00

(1)

The debt service coverage ratio testing will commence December 31, 2023 with the following requirements: (i) 1.20 to 1.00 as of December 31, 2023; (ii) 1.55 to 1.00 as of December 31, 2024 and (iii) 1.35 to 1.00 as of December 31, 2025 and for the remaining term of the loan.

(2)

We were not required to perform the debt service coverage ratio at June 30, 2023.

On October 6, 2021, we entered into a $23.5 million mortgage loan secured by the Greenwood Village property, which bears interest at prime rate less 0.35% per annum and matures on October 10, 2028. We entered into an interest rate swap which fixes the interest rate of the loan at 4.082%. On May 1, 2023, the interest rate swap was amended to replace Prime with SOFR plus a spread of 2.85%. We terminated the existing interest rate swap agreement and entered into a new interest rate swap agreement which fixes the interest rate of the loan at 5.85%.

On May 3, 2023, the loan agreement for our mortgage loan secured by the Hollinswood property was amended to replace the LIBOR interest rate with SOFR plus a spread of 2.36%.

On May 5, 2023, we refinanced the Highlandtown Village Shopping Center mortgage loan. The new loan has a principal balance of $8.7 million, which bears interest at SOFR plus a spread of 2.5% per annum and matures on May 10, 2028. We have entered into an interest rate swap which fixes the interest rate of the loan at 6.085%.

As of June 30, 2023, we were in compliance with all covenants under our debt agreements.

Fortress Mezzanine Loan

In connection with the acquisition of Midtown Row, we also entered into a $15.0 million mezzanine loan (the “Fortress Mezzanine Loan”) secured by 100% of the membership interests in the entity that owns Midtown Row. The mezzanine loan matures on December 1, 2027. Pursuant to the mezzanine loan agreement, a portion of the interest on the Fortress Mezzanine Loan will be paid in cash (the “Current Interest”) and a portion of the interest will be capitalized and added to the principal amount of the Fortress Mezzanine Loan each month (the “Capitalized Interest” and, together with the Current Interest, the "Mezzanine Loan Interest"). The initial Mezzanine Loan Interest rate is 12% per annum, comprised of a 5% Current Interest rate and a 7% Capitalized Interest rate. The Capitalized Interest rate increases each year by 1%. The Fortress Mezzanine Loan (including a prepayment penalty) will be due and payable in connection with an underwritten public offering by the Company meeting certain conditions (a “Qualified Public Offering”). However, in connection with a Qualified Public Offering, the lender for the Fortress Mezzanine Loan has the right to convert all or a portion of the principal of the Fortress Mezzanine Loan and any prepayment penalty into shares of common stock at a price of $2.00 per share, subject to certain adjustments. The mezzanine loan agreement provides for cross-default in the event of a Trigger Event under the Eagles Sub-OP Operating Agreement or an event of default under the loan agreement for the Midtown Row mortgage.

Interest Rate Derivatives

We may use interest rate derivatives from time to time to manage our exposure to interest rate risks. On December 27, 2019, we entered into an interest rate cap agreement on the full $66.9 million Basis Term Loan to cap the previously variable LIBOR interest rate at 3.5%. On June 29, 2022, the Basis Loan Agreement was amended and restated to replace LIBOR with SOFR. The Basis Term Loan bears interest at a rate equal to the greater of (i) SOFR plus 3.97% per annum and (ii) 6.125% per annum. On August 1, 2022, the interest rate cap for the Basis Term Loan was modified to cap the SOFR rate at 3.5%. The interest rate cap expired on January 1, 2023. On November 23, 2022, we entered into an interest rate cap agreement, effective January 1, 2023, on the full $66.9 million Basis Term Loan to cap the SOFR interest rate at 4.65%. As of June 30, 2023 and December 31, 2022, the interest rate of the Basis Term Loan was 8.62% and 6.125%, respectively.

We 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. On May 3, 2023, the Hollinswood loan agreement was amended to replace LIBOR with SOFR, effective July 1, 2023.

On October 6, 2021, we entered into an interest rate swap agreement on the Greenwood Village loan to fix the interest rate at 4.082%. On May 1, 2023, we terminated the existing interest rate swap agreement and entered into a new interest rate swap agreement on the Greenwood Village loan to fix the interest rate at 5.85%. We also received $2.2 million upon the termination of the existing interest rate swap agreement.

On May 5, 2023, we entered into an interest rate swap agreement on the Highlandtown Village Shopping Center mortgage loan to fix the interest rate at 6.085%.

Since our derivative instruments are not designated as hedges nor do they meet the criteria for hedge accounting, the fair value is recognized in earnings. For the three months ended June 30, 2023 and 2022, we recognized gains of approximately $0.3 million and $0.8 million, respectively, as a component of “Derivative fair value adjustment” on the condensed consolidated statements of operations. For the six months ended June 30, 2023 and 2022, we recognized (losses) gains of approximately $(0.3) million and $2.6 million, respectively, as a component of “Derivative fair value adjustment” on the condensed consolidated statements of operations.

Fortress Preferred Equity Investment

million in the Eagles Sub-OP in exchange for a preferred membership interest (such interest, the “Fortress Preferred Interest” and such investment, the “Preferred Equity Investment”).

In connection with the Preferred Equity Investment, the Operating Partnership and the Fortress Member entered into the Eagles Sub-OP Operating Agreement, and the Operating Partnership contributed to the Eagles Sub-OP its subsidiaries that, directly or indirectly, own Brookhill Azalea Shopping Center, Vista Shops, Hollinswood Shopping Center, Avondale Shops, Greenwood Village Shopping Center and Lamar Station Plaza East in November 2022, as well as Cromwell Field in December 2022. The subsidiaries of the Operating Partnership that indirectly own the following eight properties were not contributed to the Eagles Sub-OP in connection with the closing of the Preferred Equity Investment but are required to be contributed to the Eagles Sub-OP on or prior to the applicable outside dates: (i) Highlandtown, (ii) Spotswood and (iii) the six properties securing the Basis Term Loan (the “Portfolio Excluded Properties” and, collectively with Highlandtown and Spotswood the “Excluded Properties”). The outside dates for Highlandtown, the Portfolio Excluded Properties and Spotswood are May 6, 2023, June 30, 2023 and July 6, 2023, respectively. On May 5, 2023, the Operating Partnership contributed to the Eagles Sub-OP its subsidiary that owns Highlandtown. On June 28, 2023, the Fortress Member approved the extension of the Portfolio Excluded Properties outside date from June 30, 2023 to July 31, 2023, and later extended it to August 31, 2023, contingent upon certain items. With the approval of the Fortress Member, on June 30, 2023, we sold Spotswood and, on July 20, 2023, sold Dekalb Plaza, which was one of the Portfolio Excluded Properties.

Pursuant to the Amended and Restated Limited Liability Company Agreement of the Eagles Sub-OP (the “Eagles Sub-OP Operating Agreement”), the Fortress Member is entitled to monthly distributions, a portion of which is paid in cash (the “Current Preferred Return”) and a portion that accrues on and is added to the Preferred Equity Investment each month (the “Capitalized Preferred Return” and, together with the Current Preferred Return, the “Preferred Return”). The initial Preferred Return is 12% per annum, comprised of a 5% Current Preferred Return and a 7% Capitalized Preferred Return, provided that, until the Portfolio Excluded Properties are contributed to the Eagles Sub-OP, the Capitalized Preferred Return is increased by 4.75%. The Capitalized Preferred Return increases each year by 1%. Commencing on November 22, 2027, the Preferred Return will be 19% per annum, all payable in cash, and will increase an additional 3% each year thereafter. Upon (i) the occurrence of a Trigger Event, (ii) during a three-month period in which distributions on the Preferred Equity Investment are not made because such payments would cause a violation of Delaware law or (iii) if a Qualified Public Offering has not occurred on or prior to November 22, 2027, the entire Preferred Return shall accrue at the then-applicable Preferred Return plus 4% and shall be payable monthly in cash. As of June 30, 2023, the Capitalized Preferred Return was approximately $6.0 million and is reflected within Preferred equity investment on the condensed consolidated balance sheets. For the three and six months ended June 30, 2023, we recognized $1.1 million and $2.1 million, respectively, of Current Preferred Return, and, for the three and six months ended June 30, 2023, we recognized $2.5 million and $4.9 million, respectively, of Capitalized Preferred Return as a reduction to additional paid-in capital in the condensed consolidated statements of equity.

Upon the closing of a Qualified Public Offering, unless earlier redeemed, the Eagles Sub-OP must redeem the entire Fortress Preferred Interest by payment in cash to the Fortress Member of the full Redemption Amount (as defined below), provided that (i) the Eagles Sub-OP may elect, in its discretion, not to redeem $37.5 million of the Preferred Equity Investment and (ii) $25.0 million of the Preferred Equity Investment (less the amount of the Fortress Mezzanine Loan converted into common stock in connection with such Qualified Public Offering, if any) will be converted to shares of common stock at a price of $2.00 per share, subject to certain adjustments. The Operating Partnership may cause the Eagles Sub-OP to redeem the Fortress Preferred Interest in whole (but not in part), by payment in cash to the Fortress Member of the full Redemption Amount, as long as the Fortress Mezzanine Loan is repaid in full before or concurrently with such redemption. The “Redemption Amount” is equal to the sum of: (i) all outstanding loans advanced to the Eagles Sub-OP by the Fortress Member in accordance with the terms of the Eagles Sub-OP Operating Agreement, together with all accrued and unpaid return on such loans; (ii) the unredeemed balance of the Preferred Equity Investment; (iii) an amount equal to the greater of (x) all accrued and unpaid Preferred Return and (y) a 1.40x minimum multiple on the amount of all loans and capital contributions made by the Fortress Member to the Eagles Sub-OP in accordance with the terms of the Eagles Sub-OP Operating Agreement, which minimum multiple shall be reduced to 1.30x upon the consummation of a Qualified Public Offering; and (iv) all other payments, fees, costs and expenses due or payable to the Fortress Member under the Eagles Sub-OP Operating Agreement, including a $10.0 million exit fee unless the Redemption Amount is paid upon or following the completion of a Qualified Public Offering.

The Operating Partnership serves as the managing member of the Eagles Sub-OP. However, the Fortress Member has approval rights over certain Major Actions (as defined in the Eagles Sub-OP Operating Agreement), including, but not limited to (i) the adoption and approval of annual corporate and property budgets, (ii) the amendment, renewal, termination or modification of material contracts, leases over 5,000 square feet and certain loan documents, (iii) the liquidation, dissolution, or winding-up of the Eagles Sub-OP, the Company or any of its subsidiaries, (iv) taking actions of bankruptcy or failing to defend an involuntary bankruptcy action of the Eagles Sub-OP, the Company or any of its subsidiaries, (v) effecting any reorganization or recapitalization of the Eagles Sub-OP, the Company or any of its subsidiaries, (vi) declaring or paying distributions on any equity security of the Eagles Sub-OP, the Company or any of its subsidiaries, subject to certain exceptions, (vii) issuing any equity securities in the Eagles Sub-OP, the Company or any of its subsidiaries, subject to certain exceptions, (viii) conducting a merger or consolidation of the Eagles Sub-OP, the Company or the Operating Partnership or selling substantially all the assets of the Company and its subsidiaries or the Eagles Sub-OP and its subsidiaries, (ix) amending, terminating or otherwise modifying the loans secured by the properties indirectly owned by the Eagles Sub-OP, subject to certain exceptions, (x) incurring additional indebtedness or making prepayments on indebtedness, subject to certain exceptions; (xi)

acquiring any property outside the ordinary course of business of the Company and (xii) selling any property below the minimum release price for such property.

Under the Eagles Sub-OP Operating Agreement, “Trigger Events” include, but are not limited to, the following: (i) fraud, gross negligence, willful misconduct, criminal acts or intentional misappropriation of funds with respect to a property owned by the Company or any of its subsidiaries; (ii) a bankruptcy event with respect to the Company or any of its subsidiaries, except for an involuntary bankruptcy that is dismissed within 90 days of commencement; (iii) a material breach of certain provisions of the Eagles Sub-OP Operating Agreement; (iv) monetary defaults or material non-monetary defaults under the Fortress Mezzanine Loan or the mortgage loans secured by properties owned directly or indirectly by the Eagles Sub-OP (including the Excluded Properties); (v) failure to meet the minimum Total Yield requirements under the Eagles Sub-OP Operating Agreement; (vi) failure to pay the Current Preferred Return (subject to a limited cure period) or failure to make distributions as required by the Eagles Sub-OP Operating Agreement; (vii) the occurrence of a Change of Control (as defined in the Eagles Sub-OP Operating Agreement); (viii) failure to contribute the Excluded Properties and consummate the related transactions by the applicable outside date; (ix) Mr. Jacoby (A) ceasing to be employed as the chief executive officer of the Company, (B) not being activity involved in the management of the Company or (C) failing to hold an aggregate of at least 3,802,594 shares of common stock and OP units, in each case subject to the Company’s right to appoint a replacement chief executive officer reasonably acceptable to the Fortress Member within 90 days; and (x) material breaches or material defaults of the Company, the Operating Partnership or their subsidiaries under certain other agreements related to the Preferred Equity Investment.

Upon the occurrence of a Trigger Event, the Fortress Member has the right to cause the Eagles Sub-OP to redeem the Fortress Preferred Interest by payment to the Fortress Member of the full Redemption Amount upon not less than 90 days prior written notice to the Eagles Sub-OP, unless the Trigger Event is in connection with a Bankruptcy Event, in which case the redemption must occur as of the date of such Trigger Event.

Under certain circumstances, including in the event of a Trigger Event or if a Qualified Public Offering has not occurred by November 22, 2027, the Fortress Member has the right (among other rights) to (i) remove the Operating Partnership as the managing member of the Eagles Sub-OP and to serve as the managing member until the Fortress Member is paid the Redemption Amount, (ii) cause the Eagles Sub-OP to sell one or more properties until the entire Fortress Preferred Interest has been redeemed for the Redemption Amount, (iii) cause the Eagles Sub-OP to use certain reserve accounts to pay the Fortress Member the full Redemption Amount, and (iv) terminate all property management and other service agreements with affiliates of the Company.

The obligations of the Operating Partnership under the Eagles Sub-OP are guaranteed by the Company. In addition, Messrs. Jacoby and Yockey guaranteed the full payment of the Redemption Amount in the event of a bankruptcy event of the Company or its subsidiaries without the consent of the Fortress Member or certain other events that interfere with the rights of the Fortress Member under certain other agreements related to the Preferred Equity Investment.

Cash Flows

The table below sets forth the sources and uses of cash reflected in our condensed consolidated statements of cash flows for the three months ended June 30, 2023 and 2022.


	For the Six Months Ended June 30,
(in thousands)	2023			2022			Change
Cash and cash equivalents and restricted cash at beginning of period	$	17,031		$	11,024		$	6,007
Net cash (used in) provided by operating activities		(2,354	)		764			(3,118	)
Net cash provided by (used in) investing activities		19,290			(1,989	)		21,279
Net cash (used in) provided by financing activities		(13,943	)		866			(14,809	)
Cash and cash equivalents and restricted cash at end of period	$	20,024		$	10,665		$	9,359

Operating Activities- Cash provided by operating activities decreased by approximately $3.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. Operating cash flows were primarily impacted by a net decrease in changes in operating assets and liabilities of approximately $3.8 million, of which approximately $4.7 million was related to the net change in accounts payable. This was partially offset by approximately $0.5 million and $0.4 million related changes to deferred revenues and other assets, respectively.

Investing Activities- Cash used in investing activities during the six months ended June 30, 2023 increased by approximately $21.3 million compared to the six months ended June 30, 2022. This increase resulted primarily from $22.4 million related to the sale of the Spotswood property, partially offset by a $1.0 million increase in capital expenditures for real estate during the six months ended June 30, 2023 as compared to the corresponding period in 2022.

Financing Activities- Cash used in financing activities during the six months ended June 30, 2023 increased by $14.8 million compared to the six months ended June 30, 2022. The increase resulted primarily from (i) the $11.9 million repayment of the Spotswood mortgage loan with proceeds from the sale of the Spotswood property, (ii) the $3.9 million redemption of the Lamont Street preferred interest with proceeds from the sale of the Spotswood property and the refinancing of the mortgage loan secured by Highlandtown and

(iii) $2.1 million of preferred equity return on the Preferred Equity Investment that was reflected in the first six months of 2023. These increases were partially offset by a net increase in the Highlandtown mortgage loan of approximately $3.5 million from the refinance of the loan, net proceeds of $1.4 million related to the Highlandtown interest rate swap and a decrease in scheduled principal payments on loans of approximately $0.8 million as compared to the prior year period.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a “smaller reporting company” as defined in Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As disclosed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2022, management concluded that our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal control over financial reporting. We are in the process of remediating the material weaknesses as of the end of the period covered by this report.

Management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the reporting period covered in this report, as a result of the material weaknesses referred to above. Notwithstanding the identified material weaknesses, our management has concluded that the unaudited condensed consolidated financial statements and related financial information included in this report present fairly in all material respects our financial position, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with GAAP.

Changes in Internal Control Over Financial Reporting

Ongoing Remediation Plan

Under the oversight of the Audit Committee of the Board of Directors, management has continued to implement measures designed to improve our internal control over financial reporting to remediate the identified material weaknesses. The Company’s ongoing remediation efforts have included assessment of existing internal controls, identification of design enhancements, and evaluation of internal and external accounting resources.

As previously disclosed, the Company hired additional internal resources, including a Vice President of Finance and Reporting and has since hired a Controller. The Company engaged outside consultants to assist with various accounting and financial reporting matters and continues to assess the need for hiring of additional accounting and financial reporting resources. Additionally, the Company retained the services of external information technology resources.

Once all appropriately designed controls are implemented, they will need to operate for a sufficient period of time prior to concluding they are operating effectively. As of June 30, 2023, while many of our controls are in place and operating, we have determined that our controls have not been operating for a sufficient period of time to conclude that they are operating effectively. Further, as we continue to evaluate the effectiveness of these controls, they may need further enhancement in order to properly address identified risks.

While we believe that these efforts will improve our internal control over financial reporting, we can provide no assurances that the measures we have taken to date, or that we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various claims and legal actions in the ordinary course of business. We are not currently involved in any material legal proceedings outside the ordinary course of our business.

Item 1A. Risk Factors

There have been no material changes to the risk factors that were disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended June 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits


Exhibit Number		Description
3.1		Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed on April 15, 2010).

3.2		Certificate of Amendment of Certificate of Incorporation (Incorporated by reference to Exhibit 3.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed on March 25, 2015).

3.3		Certificate of Amendment of Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on June 19, 2017).

3.4		Certificate of Amendment of Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on December 27, 2019).

3.5		Certificate of Designation (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on February 5, 2010).

3.6		Amended and Restated Bylaws of Broad Street Realty, Inc. (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on December 27, 2019).

10.1*		Tax Protection Agreement, dated as of April 4, 2023, by and among Broad Street Realty, Inc., Broad Street Operating Partnership, LP and the Initial Protected Partners listed on Schedule 1 of the Agreement.

10.2*		First Amendment to Amended and Restated Limited Liability Company Agreement of Broad Street Eagles JV LLC, dated June 28, 2023, by and between CF Flyer PE Investor LLC and Broad Street Operating Partnership, LP.

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*		Inline XBRL (Extensible Business Reporting Language). The following materials from this Quarterly Report on Form 10-Q for the period ended June 30, 2023, formatted in Inline XBRL: (i) condensed consolidated balance sheets of Broad Street Realty, Inc., (ii) condensed consolidated statements of operations of Broad Street Realty, Inc., (iii) condensed consolidated statements of comprehensive income/(loss) of Broad Street Realty, Inc., (iv) condensed consolidated statements of changes in equity of Broad Street Realty, Inc., (v) condensed consolidated statements of cash flows of Broad Street Realty, Inc. and (vi) notes to condensed consolidated financial statements of Broad Street Realty, Inc. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

104*		Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document

________________________________________

* Filed herewith

** Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	BROAD STREET REALTY, INC.

Date: August 14, 2023	By:	/s/ Michael Z. Jacoby
		Michael Z. Jacoby
		Chief Executive Officer
		(principal executive officer)

Date: August 14, 2023	By:	/s/ Alexander Topchy
		Alexander Topchy
		Chief Financial Officer and Secretary
		(principal financial and accounting officer)