| MORTGAGE NOTES PAYABLE |
7.
MORTGAGE NOTES PAYABLE
Mortgage
notes payable consist of the following:
SCHEDULE
OF MORTGAGE NOTES PAYABLE
| | |
Principal as of | | |
| |
| | |
|
| | |
June 30, | | |
December 31, | | |
Loan | |
Interest | | |
|
| Mortgage note property | |
2026 | | |
2025 | | |
Type | |
Rate (1) | | |
Maturity |
| Dakota Center (2) | |
$ | - | | |
$ | 8,739,687 | | |
Fixed | |
| 4.74 | % | |
7/6/2024 |
| Arapahoe Service Center | |
| 8,602,574 | | |
| 8,670,000 | | |
Fixed | |
| 6.75 | % | |
12/5/2029 |
| One Park Centre | |
| 6,074,378 | | |
| 6,096,528 | | |
Fixed | |
| 6.83 | % | |
9/1/2030 |
| Genesis Plaza | |
| 6,207,197 | | |
| 6,235,986 | | |
Fixed | |
| 7.07 | % | |
9/1/2029 |
| Shea Center II (3) | |
| 16,353,296 | | |
| 16,353,296 | | |
Fixed | |
| 4.92 | % | |
1/5/2026 |
| West Fargo Industrial | |
| 5,750,000 | | |
| 5,750,000 | | |
Fixed | |
| 7.14 | % | |
7/6/2029 |
| Grand Pacific Center | |
| 6,299,068 | | |
| 6,360,819 | | |
Fixed | |
| 6.35 | % | |
5/10/2033 |
| Baltimore | |
| 5,670,000 | | |
| 5,670,000 | | |
Fixed | |
| 4.67 | % | |
4/6/2032 |
| Mandolin | |
| 3,405,624 | | |
| 3,440,873 | | |
Fixed | |
| 4.35 | % | |
4/20/2029 |
| Subtotal, Presidio Property Trust, Inc. Properties | |
$ | 58,362,137 | | |
$ | 67,317,189 | | |
| |
| | | |
|
| Model Home mortgage notes (4) | |
| 22,495,913 | | |
| 25,604,494 | | |
Fixed | |
| 5.76%
- 8.00 | % | |
2026 - 2030 |
| Mortgage Notes Payable | |
$ | 80,858,050 | | |
$ | 92,921,683 | | |
| |
| | | |
|
| Unamortized loan costs | |
| (716,120 | ) | |
| (847,316 | ) | |
| |
| | | |
|
| Mortgage Notes Payable, net | |
$ | 80,141,930 | | |
$ | 92,074,367 | | |
| |
| | | |
|
| (1) |
Interest
rates as of June 30, 2026. |
| |
|
| (2) |
The
non-recourse loan on the Dakota Center property matured on July 6, 2024. During December 2024, the lender agreed to the broker the Company
would use to sell the property to settle the non-recourse debt. During July 2025, the lender approved a purchase offer from a third party
for $5,125,000. On January 14, 2026, the Company completed the disposition of Dakota Center property securing nonrecourse mortgage debt
that had been in default. The lender controlled and approved the disposition process and accepted the proceeds from the sale in full
satisfaction of the outstanding debt obligation. The Company recognized a gain on disposition of approximately $3.4 million, consisting
primarily of the extinguishment of nonrecourse debt obligations and derecognition of the related net liabilities associated with the
property. |
| |
|
| (3) |
During
January 2026, the Company received notice that the Company’s failure to repay in full by January 5, 2026 the indebtedness related to
the loan agreement governing Shea Center II had triggered a default event. On February 13, 2026, the Company received notification that
the Shea Center II property governed by the non-recourse loan agreement was moved into receivership and the lender has started the foreclosure
process. The foreclosure sale took place on July 1, 2026, with the property going to Argentic Services Company LP, who acquired the property
by placing a minimum credit bid valued at $12.0 million, and no cash consideration was exchanged. The lender holds approximately $2.4
million in restricted cash, some of which is being utilized by the receiver to operate the property. Please see Note 16 Subsequent
Events for additional information. |
| |
|
| (4) |
As
of June 30, 2026, there were 6 model homes included as real estate assets held for sale. Our model homes have stand-alone mortgage notes
at interest rates ranging from 5.92% to 8.00% per annum as of June 30, 2026. |
The
loan agreement between NetREIT Model, Homes, Inc. (“NRMH”) and its Lender has a covenant for a Fixed Charge Coverage Ratio
(“FCCR”) as defined for NRMH as of any date that equals (a) the sum of (i) EBITDA for the period ended as of such date minus
(ii) distributions for the period ended as of such date divided by (b) the sum of (i) principal payments paid for the period ended as
of such date plus (ii) interest expense for period ended as of such date. The FCCR is to be no less than 1.10 to 1.00, tested at the
end of each fiscal quarter. As of June 30, 2026, NRMH was in compliance with this covenant. The Company and standalone subsidiaries have
other various quarterly and annual reporting requirements to the individual property lenders and the Company is in compliance with all
material conditions and covenants on those mortgage notes payable as of June 30, 2026, with the exception for Shea Center II’s loan maturity.
As
of April 24, 2026, the Company amended its agreement with Origin Bank (the lender) through its partnership with Dubose Model Home Investors
#207, LP. The terms of the new amendment decrease the floor interest rate by 1.5 percentage points from its original value while requiring
that the Company and DMH#207 LP maintain liquid assets of $200,000 on a quarterly basis, starting June 30, 2026.
Scheduled
principal payments of mortgage notes payable were as follows as of June 30, 2026:
SCHEDULE
OF PRINCIPAL PAYMENTS OF MORTGAGE NOTES PAYABLE
| | |
Commercial | | |
Model | | |
Total | |
| | |
Properties | | |
Homes | | |
Principal | |
| Years ending December 31: | |
Notes Payable | | |
Notes Payable | | |
Payments | |
| 2026 (1) | |
$ | 16,571,973 | | |
$ | 2,705,025 | | |
$ | 19,276,998 | |
| 2027 | |
| 463,715 | | |
| 2,158,521 | | |
| 2,622,236 | |
| 2028 | |
| 454,843 | | |
| 6,780,085 | | |
| 7,234,928 | |
| 2029 | |
| 23,498,247 | | |
| 5,322,460 | | |
| 28,820,707 | |
| 2030 | |
| 5,812,731 | | |
| 5,529,822 | | |
| 11,342,553 | |
| Thereafter | |
| 11,560,628 | | |
| — | | |
| 11,560,628 | |
| Total | |
$ | 58,362,137 | | |
$ | 22,495,913 | | |
$ | 80,858,050 | |
| (1) | | The Shea Center
II non-recourse loan totaling $16,353,296 was due in January 2026 and is included in the 2026 total for Commercial Properties Notes Payable
listed above. |
|
7.
MORTGAGE NOTES PAYABLE
Mortgage
notes payable consist of the following:
SCHEDULE
OF MORTGAGE NOTES PAYABLE
| |
|
Principal
as of |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December
31, |
|
|
December
31, |
|
|
Loan |
|
|
Interest |
|
|
|
|
|
| Mortgage
note property |
|
2025 |
|
|
2024 |
|
|
Type |
|
|
Rate
(1) |
|
|
Maturity |
|
| Dakota
Center (2) |
|
|
8,739,687 |
|
|
$ |
9,091,395 |
|
|
Fixed |
|
|
|
4.74 |
% |
|
7/6/2024 |
|
| Research
Parkway (3) |
|
- |
|
|
1,526,860 |
|
|
Fixed |
|
|
N/A |
|
|
N/A |
|
| Arapahoe
Service Center |
|
|
8,670,000 |
|
|
|
8,670,000 |
|
|
Fixed |
|
|
|
6.75 |
% |
|
12/5/2029 |
|
| Union
Town Center (3) |
|
- |
|
|
7,709,746 |
|
|
Fixed |
|
|
N/A |
|
|
N/A |
|
| One
Park Centre |
|
|
6,096,528 |
|
|
|
5,919,517 |
|
|
Fixed |
|
|
|
6.83 |
% |
|
9/1/2030 |
|
| Genesis
Plaza |
|
|
6,235,986 |
|
|
|
5,813,843 |
|
|
Fixed |
|
|
|
7.07 |
% |
|
9/1/2029 |
|
| Shea
Center II (4) |
|
|
16,353,296 |
|
|
|
16,660,803 |
|
|
Fixed |
|
|
|
4.92 |
% |
|
1/5/2026 |
|
| West
Fargo Industrial |
|
|
5,750,000 |
|
|
|
5,750,000 |
|
|
Fixed |
|
|
|
7.14 |
% |
|
7/6/2029 |
|
| Grand
Pacific Center |
|
|
6,360,819 |
|
|
|
6,460,405 |
|
|
Fixed |
|
|
|
6.35 |
% |
|
5/10/2033 |
|
| Baltimore |
|
|
5,670,000 |
|
|
|
5,670,000 |
|
|
Fixed |
|
|
|
4.67 |
% |
|
4/6/2032 |
|
| Mandolin |
|
|
3,440,873 |
|
|
|
3,508,702 |
|
|
Fixed |
|
|
|
4.35 |
% |
|
|
4/20/2029 |
|
| Subtotal,
Presidio Property Trust, Inc. Properties |
|
$ |
67,317,189 |
|
|
$ |
76,781,271 |
|
|
|
|
|
|
|
|
|
|
|
|
| Model
Home mortgage notes (5) |
|
|
25,604,494 |
|
|
|
26,060,798 |
|
|
Fixed |
|
|
|
5.94%
- 8.00% |
|
|
2025
- 2030 |
|
| Mortgage
Notes Payable |
|
$ |
92,921,683 |
|
|
$ |
102,842,069 |
|
|
|
|
|
|
|
|
|
|
|
|
| Unamortized
loan costs |
|
|
(847,316 |
) |
|
|
(747,975 |
) |
|
|
|
|
|
|
|
|
|
|
|
| Mortgage
Notes Payable, net |
|
$ |
92,074,367 |
|
|
$ |
102,094,094 |
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Interest
rates as of December 31, 2025. |
| (2) |
The
non-recourse loan on the Dakota Center property matured on July 6, 2024. During December 2024, the lender agreed to
the broker the Company would use to sell the property to settle the non-recourse debt. As of December 31, 2025, the property
was included in the real estate assets held for sale, net on the consolidated balance sheet. During July 2025, the lender
approved a purchase offer from a third party for $5,125,000. The property was subsequently sold as of January 2026. See
Note 4. Real Estate Assets above for further discussion on impairment of the property. |
| (3) |
These
properties were sold during February 2025 and their loan balances were paid in full. |
| (4) |
During
the year ended December 31, 2025, the Company impaired Shea Center II for a total of approximately $2.5 million after low
property occupancy triggered a cash management event under the terms of the loan agreement. Subsequent to the year ended December
31, 2025, the Company received a notice that the Company’s failure to repay in full by January 5, 2026 the indebtedness
related to the loan agreement governing Shea Center II had triggered a default event. The Company has received notification that
the Shea Center II property governed by this agreement will be moved into receivership, which will fulfill its obligation for this
non-recourse loan. |
| (5) |
As
of December 31, 2025, there were 5five model homes included as real estate assets held for sale. Our model homes have stand-alone
mortgage notes at interest rates ranging from 5.94% to 8.0% per annum as of December 31, 2025. |
The
loan agreement between NetREIT Model, Homes, Inc. (“NRMH”) and its lender has a covenant for a Fixed Charge Coverage Ratio,
(“FCCR”) as defined for NRMH as of any date that equals (a) the sum of (i) EBITDA for the period ended as of such date minus
(ii) distributions for the period ended as of such date divided by (b) the sum of (ii) principal payments paid for the period ended as
of such date plus (iii) interest expense for period ended as of such date. The FCCR is to be no less than 1.10 to 1.00,
tested at the end of each fiscal quarter. As of December 31, 2025, NRMH was in compliance with this covenant. The Company and
standalone subsidiaries have other various quarterly and annual reporting requirements to the individual property lenders and is in compliance
with all material conditions and covenants on those mortgage notes payable as of December 31, 2025 with the exception of Dakota
Center’s loan maturity and Shea Center’s DSCR coverage.
Scheduled
principal payments of mortgage notes payable were as follows as of December 31, 2025:
SCHEDULE
OF PRINCIPAL PAYMENTS OF MORTGAGE NOTES PAYABLE
| |
|
Commercial |
|
|
Model |
|
|
|
|
|
| |
|
Properties |
|
|
Homes |
|
|
Total
Principal |
|
| Years
ending December 31: |
|
Notes
Payable |
|
|
Notes
Payable |
|
|
Payments |
|
| 2026 |
|
$ |
25,504,041 |
|
|
$ |
4,469,150 |
|
|
$ |
29,973,191 |
|
| 2027 |
|
|
463,715 |
|
|
|
1,251,371 |
|
|
|
1,715,086 |
|
| 2028 |
|
|
454,843 |
|
|
|
8,169,780 |
|
|
|
8,624,623 |
|
| 2029 |
|
|
23,497,197 |
|
|
|
5,870,293 |
|
|
|
29,367,490 |
|
| 2030 |
|
|
5,812,792 |
|
|
|
5,843,900 |
|
|
|
11,656,692 |
|
| Thereafter |
|
|
11,584,601 |
|
|
|
— |
|
|
|
11,584,601 |
|
| Total |
|
$ |
67,317,189 |
|
|
$ |
25,604,494 |
|
|
$ |
92,921,683 |
|
|