SQFT: Strengthening Balance Sheet; MURF Seeking Initial Business Combination Candidates

By M. Marin

NASDAQ:SQFT

READ THE FULL SQFT RESEARCH REPORT

MURF IBC could create upside for SQFT

Presidio Property Trust’s (NASDAQ:SQFT) sponsored special purpose acquisition company (SPAC), Murphy Canyon Acquisition Corp. (NASDAQ:MURF), is designed to facilitate a merger or business combination with another real estate company. MURF closed its IPO in 1Q22, raising $132.3 million. MURF began to evaluate potential acquisition candidates in the real estate industry and targets its initial business combination (IBC) within the first year of the IPO, depending on market conditions. SQFT, as the sponsor, holds about a 23.5% stake, which gives the company exposure to the potential upside of MURF’s valuation. The company is an internally-managed REIT that has a diversified portfolio of commercial and industrial properties and model homes.

View extension of maturities as a positive

Separately, SQFT has fully repaid its loan on its 300 NP office property in North Dakota, maintaining its strategy of opportunistically deleveraging the balance sheet. With this repayment, SQFT eliminated 2022 debt maturities and has no major debt maturities before mid-2024. The company had cash & equivalents and restricted cash of $22.5 million at the end of 1Q22, up from $14.7 million at year-end 2021.

The company’s strategy to strengthen its balance sheet enables SQFT to focus on growing and upgrading its real estate portfolio, depending on market conditions. At the end of 1Q22, SQFT had about $126.9 million in net real estate assets following divestitures of commercial properties and model homes in 2021-1Q22. This compared to about $145.3 million at the end of 1Q21.

Portfolio additions continue, as lease demand remains strong

Presidio continued to refresh and upgrade its real estate portfolio during 1Q22, acquiring four model homes for roughly $2.4 million and divesting World Plaza for roughly $10.0 million and 11 model homes for roughly $5.6 million.

The company collected 92% of total tenant billings, including 100% collections among SQFT’s retail tenants. The company signed 15 office, retail, and industrial leases in 1Q22, of which seven were with new tenants and eight were renewals with existing tenants.

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