Broad Street Realty, Inc. SEC 10-Q Report

Broad Street Realty, Inc., a company specializing in owning and managing essential grocery-anchored and mixed-use assets, has released its Form 10-Q report for the nine months ended September 30, 2024. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the current market environment.

Financial Highlights

The key financial metrics for Broad Street Realty, Inc. for the nine months ended September 30, 2024, are as follows:

• Total Revenues: $30.4 million, a decrease from $32.2 million for the same period in 2023.
• Operating Gain (Loss): $(1.3) million, down from $5.1 million for the same period in 2023.
• Net Loss: $(12.7) million, an increase from $(3.8) million for the same period in 2023.
• Net Loss Attributable to Common Stockholders: $(22.5) million, up from $(13.8) million for the same period in 2023.
• Net Loss Attributable to Common Stockholders Per Share - Basic and Diluted: $(0.63), an increase from $(0.39) for the same period in 2023.

Business Highlights

Broad Street Realty, Inc. reported the following business performance metrics as of September 30, 2024:

• Portfolio Overview: The company owned 15 properties, primarily retail spaces, totaling 1,919,000 square feet, including 1,657,000 square feet of retail space and 262,000 square feet of residential space. The portfolio spans Maryland, Virginia, Washington D.C., and Colorado.
• Occupancy Rates: The total portfolio had a leased rate of 90.7% and an occupied rate of 89.3%. The retail segment had a leased rate of 88.9% and an occupied rate of 87.1%, while the residential segment maintained a 100% occupancy rate.
• Geographical Performance: Rental income for the nine months ended September 30, 2024, was highest in Virginia at $11.8 million, followed by Maryland at $9.9 million, Colorado at $6.2 million, and Washington D.C. at $0.6 million.
• Retail Portfolio Details: The retail properties include anchor spaces (854,000 square feet) and inline spaces (803,000 square feet). The anchor spaces had a leased rate of 95.1%, while the inline spaces had a leased rate of 82.2%. The weighted average remaining lease term for the retail portfolio was 5.6 years.
• Residential Performance: The residential units at Midtown Row had a monthly base rent per bed of $1,277.51, translating to an annualized base rent per leased square foot of $36.23.
• New Leases and Renewals: The company focused on filling vacancies and renewing leases, contributing to an increase in the total portfolio's leased rate from 90.1% at the end of 2023 to 90.7% as of September 30, 2024.
• Future Outlook: The company plans to continue focusing on acquiring strategically positioned properties in densely populated technology employment hubs and higher education centers within the Mid-Atlantic, Southeast, and Colorado markets. Additionally, efforts are being made to refinance existing mortgage loans maturing in the next twelve months.

Strategic Initiatives

Broad Street Realty, Inc. has outlined several strategic initiatives and capital management activities:

• Strategic Focus: The company is focused on owning and managing essential grocery-anchored and mixed-use assets in densely populated technology employment hubs and higher education centers within the Mid-Atlantic, Southeast, and Colorado markets. The company is actively seeking to acquire additional properties that meet its investment criteria.
• Refinancing Activities: The company refinanced the Vista Shops at Golden Mile Loan to extend the maturity date to February 8, 2029, and secured a new $19.2 million loan for Midtown Colonial and Midtown Lamonticello, which was used to pay off the Basis Term Loan. Additionally, the company is in discussions with lenders to refinance three mortgage loans maturing within the next twelve months.
• Capital Management: The company has been actively managing its debt and equity structure. It paid off the Basis Term Loan with proceeds from a new mortgage loan and entered into various interest rate swap agreements to mitigate exposure to interest rate risk. The company also issued common stock to directors in lieu of cash retainers and in connection with the redemption of OP units. Furthermore, the company has been managing its preferred equity investment with the Fortress Member, which includes monthly distributions and accretion to redemption value. The company has also been involved in stock-based compensation activities, granting restricted stock and restricted stock units to employees and directors.
• Future Outlook: Broad Street Realty, Inc. plans to continue its strategy of acquiring strategically positioned properties in established and developing neighborhoods. The company is focused on refinancing its existing debt to extend maturities and improve liquidity. Management is in discussions with lenders to refinance three mortgage loans maturing in January, March, and June 2025. The company also aims to maintain compliance with all debt covenants and manage its capital structure to support growth initiatives. Additionally, the company is exploring opportunities to enhance its portfolio through strategic acquisitions and effective capital management.

Challenges and Risks

Broad Street Realty, Inc. faces several challenges and risks, as outlined in the report:

• Limited Access to Capital: The company faces challenges in accessing capital, which could impact its ability to repay, refinance, restructure, and/or extend its indebtedness as it becomes due. This is critical as the company has several loans maturing within the next twelve months.
• Fortress Member’s Rights: The substantial rights of the Fortress Member under the Eagles Sub-OP Operating Agreement pose significant risks. If a Trigger Event occurs, the Fortress Member can remove the Operating Partnership as the managing member, sell properties, use reserve accounts to pay the Redemption Amount, and terminate property management agreements. This could have a material adverse effect on the company.
• Economic and Real Estate Market Conditions: Adverse economic or real estate developments, either nationally or in the markets where the company’s properties are located, could negatively impact the company’s performance. This includes changes in financial markets, interest rates, and the overall business or financial condition.
• Competition and Market Saturation: The nature and extent of competition in the retail and real estate industry could affect the company’s ability to maintain or increase rental income and occupancy rates.
• Operational Performance: The performance of the company’s portfolio, including the ability to renew expiring leases, re-lease space, and increase rents, is crucial. Economic downturns or downturns in tenants’ businesses could impair the company’s ability to maintain or increase rent and occupancy.
• Scheduled Lease Expirations: The company’s ability to re-lease expiring space at rental rates equal to or greater than current rates will impact future results. Approximately 11.1% of the company’s GLA was vacant as of September 30, 2024, and 0.2% of leases are scheduled to expire by December 31, 2024.
• Acquisitions and Growth Strategy: The company’s long-term growth strategy involves acquiring additional properties. However, the ability to identify, underwrite, finance, consummate, and integrate acquisitions or investments is uncertain and poses a risk.
• General and Administrative Expenses: As the portfolio grows, general and administrative expenses are expected to rise, although efficiencies and economies of scale may offset this increase over time.
• Capital Expenditures: The company incurs capital expenditures for property maintenance, repositioning, refurbishing, and potential redevelopment. These expenditures vary based on each property’s specific needs and could impact financial performance.
• Impact of Financial, Accounting, Legal, or Regulatory Issues: Any financial, accounting, legal, or regulatory issues or litigation could adversely affect the company.

SEC Filing: Broad Street Realty, Inc. [ BRST ] - 10-Q - Nov. 13, 2024