UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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

 

Or

 

☐ 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: 001-08594

 

PRESIDENTIAL REALTY CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware   13-1954619
(State or Other Jurisdiction of
Incorporation or Organization)		   (I.R.S. Employer
Identification No.)

 

530 Seventh Avenue, Suite 407

New York, NY 10018

(Address of Principal Executive Office)

 

Registrant’s Telephone Number, Including Area Code:  (914) 948-1300

 

N/A

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A Common Stock par value $.00001   PDNLA   N/A
Class B Common Stock par value $.00001   PDNLB    

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☒
  Emerging growth company ☐

 

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 ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of July 31, 2023, there were 442,533 shares of Class A common stock and 4,746,147 shares of Class B common stock outstanding.

 

 

 

 

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES 

 

Index to Form 10-Q

For the Quarterly Period Ended

June 30, 2023

 

    Page
     
Part I Financial Information (Unaudited)
     
Item 1. Financial Statements
  Consolidated Balance Sheets (Unaudited) 1
  Consolidated Statements of Operations (Unaudited) 2
  Consolidated Statements of Cash Flows (Unaudited) 4
  Notes to Consolidated 5
  Financial Statements (Unaudited)  
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 21
Item 4. Controls and Procedures 21
     
Part II Other Information 22
     
Item 1. Legal Proceedings 22
Item 6. Exhibits 22

 

i

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS      

 

   June 30,   December 31, 
   2023   2022 
  (Unaudited)     
Assets        
Real estate  $1,655,350   $1,626,860 
Less: accumulated depreciation   989,995    959,637 
           
Net real estate   665,355    667,223 
Investment in Avalon Jubilee, LLC   
-
    
-
 
Prepaid expenses   28,830    78,771 
Other receivables (net of valuation allowance of $1,417 at June 30, 2023 and $3,500 at December 31, 2022)   22,820    28,001 
Cash   152,781    154,331 
Mortgage escrow   167,162    81,091 
Other assets   27,857    12,857 
Total Assets  $1,064,805   $1,022,274 
           
Liabilities and Equity          
           
Liabilities:          
Mortgage payable, net  $1,430,920   $1,445,878 
Accounts payable and accrued liabilities   597,428    540,013 
Other liabilities   51,507    57,453 
           
Total Liabilities   2,079,855    2,043,344 
           
Presidential Stockholders’ Deficit:          
Common stock: par value $.00001 per share          

 

   June 30,
2023		   December 31,
2022		         
Class A                
Authorized:   700,000    700,000           
Issued and Outstanding:
   442,533    442,533    4    4 
Class B                    
Authorized:   999,300,000    999,300,000           
Issued and Outstanding:
   4,746,147    4,746,147    47    47 
Additional paid-in capital             8,122,108    8,122,108 
Accumulated deficit             (9,137,209)   (9,143,229)
Total Stockholders’ Deficit             (1,015,050)   (1,021,070)
                     
Total Liabilities and Stockholders’ Deficit            $1,064,805   $1,022,274 

 

See notes to the consolidated financial statements.

 

1

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

   Three months ended
June 30,		   Six months ended
June 30,		 
   Unaudited   Unaudited 
   2023   2022   2023   2022 
Revenues:                
Rental  $285,837   $278,475    576,820    552,773 
Total Revenue   285,837    278,475    576,820    552,773 
                     
Costs and Expenses:                    
General and administrative   71,915    111,374    143,083    280,789 
                     
Rental property:                    
Operating expenses   147,952    124,271    327,982    298,424 
Interest expense and amortization of mortgage costs   26,299    26,978    52,528    53,655 
Real estate taxes   8,440    9,738    16,880    19,477 
Depreciation on real estate   15,427    12,108    30,358    26,548 
                     
Total Costs and Expenses   270,033    284,469    570,831    678,893 
                     
Other Income:                    
Investment income   15    3    31    6 
                     
Net income (loss)   15,819    (5,991)  $6,020   $(126,114)
                     
Net income (loss) per Common Share -basic  $0.00   $(0.00)  $0.00   $(0.02)
Net income (loss) per Common Share -diluted  $0.00   $(0.00)  $0.00   $(0.02)
Weighted Average Number of Shares Outstanding                    
basic   5,188,680    5,188,680    5,188,680    5,188,680 
diluted   5,188,680    5,188,680    5,188,680    5,188,680 

  

See notes to the consolidated financial statements.

 

2

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (Unaudited)

 

   Common
Stock		   Additional
Paid-in
Capital		   Accumulated
Deficit		   Total
Stockholders’
Deficit		 
Balance at December 31, 2022  $51   $8,122,108   $(9,143,229)  $(1,021,070)
                     
Net loss   
-
    
-
    (9,799)   (9,799)
                     
Balance at March 31, 2023   51    8,122,108    (9,153,028)   (1,030,869)
                     
Net income             15,819    15,819 
                     
Balance June 30, 2023   51    8,122,108    (9,137,209)   (1,015,050)
                     
Balance at December 31, 2021  $51   $8,122,108   $(9,023,541)  $(901,382)
                     
Net loss   
-
    
-
    (120,123)   (120,123)
                     
Balance at March 31, 2022   51    8,122,108    (9,143,664)   (1,021,505)
                     
Net loss             (5,991)   (5,991)
                     
Balance June 30, 2022   51    8,122,108    (9,149,655)   (1,027,496)

 

See notes to the consolidated financial statements.

 

3

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

  

For the six months

ended

 
   June 30, 
   2023   2022 
   Unaudited   Unaudited 
         
Net income (loss)  $6,020   $(126,114)
           
Adjustments to reconcile net loss to net cash flow from operating activities:          
Depreciation and amortization   38,225    34,414 
Bad debt   
-
    15 
Changes in assets and liabilities:          
Decrease (increase) in:          
Other receivables   5,181    (2,572)
Prepaid expenses   49,941    56,105 
Other assets   (15,000)   21 
Increase (decreases) in:          
Accounts payable and accrued liabilities   57,415    110,317 
Other liabilities   (5,946)   (11,569)
           
Total adjustments   129,816    186,731 
           
Net cash flow provided by operating activities   135,836    60,617 
           
Cash Flows from Investing Activities:          
Payments disbursed for capital improvements   (28,490)   (24,479)
           
Net cash flow used in investing activities   (28,490)   (24,479)
           
Cash Flows from Financing Activities:          
Principal payments on mortgage debt   (22,825)   (21,485)
           
Net cash flow used in financing activities   (22,825)   (21,485)
           
Net increase in cash and restricted cash   84,521    14,653 
           
Cash and restricted cash, Beginning of period   235,422    284,632 
           
Cash and restricted cash, End of Period (1)  $319,943   $299,285 
Supplemental cash flow information:          
Interest paid in cash  $44,662   $45,353 

 

(1)This line item includes restricted cash of $167,162 and $127,189 at June 30, 2023 and 2022, respectively. these amount are presented in the “mortgage escrow” caption on the accompanying consolidated balance sheets.

 

See notes to the consolidated financial statements.

 

4

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

1.Organization and Summary of Significant Accounting Policies

 

Organization

 

Presidential Realty Corporation (“Presidential” or the “Company”) is operated as a self-administrated, self-managed Real Estate Investment Trust (“REIT”). The Company is engaged principally in the ownership of income producing real estate. Presidential operates in a single business segment, investments in real estate related assets.

 

Basis of Presentation

 

At June 30, 2023, the Company has had a history of operating losses and working capital deficiency, which have been detrimental to our operations and could potentially affect our ability to meet our obligations and continue as a going concern. Our ability to continue as a going concern is dependent upon the successful execution of strategies to achieve profitability and increase working capital by raising debt and/or equity. The accompanying financial statements do not include any adjustments that may result from this uncertainty.

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2022 filed on March 31, 2023.

 

Real Estate

 

Real estate is stated at cost. Generally, depreciation is provided on the straight-line method over the assets estimated useful lives, which range from twenty to thirty-nine years for buildings and improvements and from three to ten years for furniture and equipment. Maintenance and repairs are charged to operations as incurred and renewals and replacements are capitalized. The Company reviews each of its property investments for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment of properties is determined to exist when estimated amounts recoverable through future operations on an undiscounted basis are below the properties carrying value. If a property is determined to be impaired, it is written down to its estimated fair value. As of June 30, 2023 and December 31, 2022, the Company did not identify any indicators of impairment.

 

Principles of Consolidation

 

The Company consolidates variable interest entities (VIEs) for which it is the primary beneficiary, generally as a result of having the power to direct the activities that most significantly affect the VIE’s economic performance and holding variable interest that convey to the Company the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

 

The accompanying consolidated financial statements include the accounts of Presidential Realty Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

 

Investments in Joint Venture

 

The Company has an equity investment in a joint venture and accounts for this investment using the fair value method of accounting.

 

5

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

1.Organization and Summary of Significant Accounting Policies (Continued)

 

Revenue Recognition

 

Rental revenues include revenues from the leasing of space at our Mapletree Property, which primarily consist of monthly base rents in addition to the reimbursement of utilities. Other rental revenues, which are included as a component of rental revenue, primarily include fees related to build-out or other services performed by the Company on the property.

 

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (ASC 606) effective January 1, 2018, and its adoption did not have a material effect on the consolidated financial statements, as the majority of the Company’s revenue is recognized under ASC 840, Leases, and subsequently ASU 2016-02, Leases (ASC 842), upon its adoption, which are scoped out of ASC 606. ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires us to recognize for certain of our revenue sources the transfer of promised goods or services to customers in an amount that reflects the consideration we are entitled to in exchange for those goods or services. The Company’s other rental revenues recognized in accordance with ASC 606 are recognized over time as the performance obligations are satisfied. Such revenues are not material to the consolidated financial statements.

 

The Company adopted ASC 842 effective January 1, 2019, and its adoption did not have a material effect on the consolidated financial statements. As a lessor, the adoption of ASC 842 (as amended by subsequent ASUs) did not change the timing of revenue recognition of the Company’s rental revenues. Revenues from the leasing of space at our property to tenants includes (i) lease components, including fixed and variable lease payments, and nonlease components which include reimbursement of electric expense and (ii) reimbursement of real estate taxes. As lessor, we have elected to combine the lease and nonlease components of our operating lease agreements and account for the components as a single lease component in accordance with ASC 842.

 

Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease, together with renewal options that are reasonably certain of being exercised. We commence rental revenue recognition when the underlying asset is available for use by the lessee. Revenue derived from the reimbursement of real estate taxes and electric expense are generally recognized in the same period as the related expenses are incurred, which did not change as a result of the adoption of ASC 842.

 

The Company assesses the collectability of lease receivables (including future minimum rental payments) both at commencement and throughout the lease term. If our assessment of collectability changes during the lease term, any difference between the revenue that would have been received under the straight-line method and the lease payments that have been collected will be recognized as a current period adjustment to rental revenue. Rental revenue associated with leases where collectability has been deemed less than probable is recognized on a cash basis in accordance with ASC 842. 

 

Allowance for Doubtful Accounts

 

The Company assesses the collectability of amounts due from tenants and other receivables, using indicators such as past-due accounts, the nature and age of the receivable, the payment history and the ability of the tenant or debtor to meet its payment obligations. Management’s estimate of allowances for doubtful accounts is subject to revision as these factors change. Any subsequent recovery of tenant receivable that were previously reserved is recorded as a reduction in the allowance of bad debt. As of June 30, 2023 and December 31, 2022, the allowance relating to tenant receivables was $1,417 and $3,500, respectively.

 

6

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

1.Organization and Summary of Significant Accounting Policies (Continued)

 

Net Income (Loss) Per Share

 

Basic net income (loss) per share data is computed by dividing net income (loss) by the weighted average number of shares of Class A and Class B common stock outstanding (excluding non-vested shares) during each period. Diluted net income (loss) per share is computed by dividing net income by the weighted average shares outstanding, including the dilutive effect, if any, of non-vested shares. For the three and six months ended June 30, 2023 and 2022, the weighted average shares outstanding as used in the calculation of diluted loss per share do not include 550,000, of outstanding stock options, as their inclusion would be antidilutive.

 

Cash and cash equivalents

 

Cash includes cash on hand, cash in banks and cash in money market funds. Cash equivalents represent short-term, highly liquid investment which are readily convertible to cash and have maturities of three months or less.

 

Management Estimates

 

The consolidated financial statements have been prepared in accordance with GAAP. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and the reported amounts of income and expense for the reporting period. Actual results could differ from those estimates.

 

Accounting for Stock Awards

 

The Company recognizes the cost of employee and non-employee services received in exchange for awards of equity instruments as stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the fair value of the stock award and options, is recognized as an expense, less expected forfeitures, over the requisite service period, which typically equals the vesting period. Stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 was $0.

 

Accounting for Income Taxes

 

The Company accounts for income taxes utilizing the asset and liability approach requiring the recognition of deferred tax assets and liabilities for the expected future tax consequences of net operating loss carryforwards and temporary differences between the basis of assets and liabilities for financial reporting purposes and tax purposes and for net operating loss and other carryforwards. A valuation allowance is provided for deferred tax assets based on the likelihood of realization.

 

The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

 

7

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

1.Organization and Summary of Significant Accounting Policies (Continued)

 

The Company operates in multiple tax jurisdictions within the United States of America. The Company remains subject to examination in all tax jurisdictions until the applicable statutes of limitation expire. As of June 30, 2023, the tax years after 2020 remain subject to examination. The Company did not record any unrecognized tax positions for the three and six months ended June 30, 2023 and 2022.

 

Mortgage costs

 

The Company amortizes mortgage costs over the life of the loan.

 

Recent Accounting Pronouncements Adopted

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”). Under the prior model, losses were recognized only as they were incurred. The new model is applicable to all financial instruments that are not accounted for at fair value through net income. The standard is effective for fiscal years beginning after December 15, 2022, for public entities qualifying as smaller reporting companies. The adoption did not have a material effect on the consolidated financial statements.

 

2.Real Estate

 

Real estate is comprised of the following:

 

   June 30,
2023		   December 31,
2022		 
         
Land  $79,100   $79,100 
Buildings   1,507,453    1,478,963 
Furniture and equipment   68,797    68,797 
           
Total  $1,655,350   $1,626,860 

 

Rental revenue is from our Mapletree Property which constituted all of the rental revenue for the Company for the three and six months ended June 30, 2023 and 2022.

 

3.Investment in Partnership

 

We own a 31.3333% interest in Avalon Jubilee, LLC (the Avalon Property) with an aggregate fair value of $0. The Company has elected the fair value option versus accounting under the equity method as the fair value better represents the Company’s expected realization of this investment.

 

On June 30, 2023 and December 31, 2022 the Avalon Property consists of 19 finished, single-family subdivision lots and approximately 21.42 acres of subsequent phases of undeveloped land in Los Lunas, New Mexico.

 

8

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

4.Mortgage Debt

 

On July 28, 2015, Palmer-Mapletree LLC, a wholly-owned subsidiary of the Company entered into a Loan Agreement (the “Loan Agreement”) with Natixis Real Estate Capital LLC providing for a mortgage loan in the principal amount of $1,750,000 (the “Loan”) at an interest rate of 6.031%. Loan proceeds of $934,794 were used to repay the prior mortgage loan and line of credit on the Mapletree Property. Loan proceeds of $123,757 were set aside for capital improvements and reserves for the property. We received net proceeds of $585,125. The Loan matures on August 5, 2025 and requires monthly principal and interest payments of $11,308 and escrows for insurance, taxes and capital improvements. Escrow balances are considered restricted cash. The mortgage is presented net of unamortized Mortgage costs, the outstanding balance of the loan and loan costs were as follows:

 

   Mortgage   Unamortized   Interest 
   Balance   mortgage Costs   Expense 
             
June 30, 2023  $1,463,366   $32,446   $44,662 
                
December 31, 2022  $1,486,191   $40,313   $91,885 

 

The Company is required to maintain certain financial covenants on the mortgage. The Company was in compliance with the covenants on June 30, 2023 and December 31, 2022.

 

Future maturities of mortgage payments are as follows:

 

2023  $24,023 
2024   50,269 
2025  $1,389,074 

 

5.Income Taxes

 

Presidential has elected to qualify as a Real Estate Investment Trust under the Internal Revenue Code. A REIT which distributes at least 90% of its real estate investment trust taxable income to its shareholders each year by the end of the following year and which meets certain other conditions will not be taxed on any of its taxable income as long as they distribute the required amounts to its shareholders.

 

ASC 740 prescribes a more likely than not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken. If the Company’s tax position in relation to a transaction was not likely to be upheld, the Company would be required to record the accrual for the tax and interest thereon. As of June 30, 2023, the tax years that remain open to examination by the federal, state, and local taxing authorities are the 2020 – 2022 tax years and the Company was not required to accrue any liability for those tax years.

 

The Company has accumulated a net operating loss carry forward of approximately $21,280,000. These net operating losses may be available in future years to reduce taxable income when and if it is generated. These loss carryforwards begin to expire in 2027 and are available to offset 100% of taxable income. Net operating losses generated in 2018 and thereafter will be available to offset 80% of taxable income beginning in 2021. Under the Cares Act, taxpayers with NOLs arising in tax years beginning in 2018, 2019 and 2020 can carry them back five years.

 

For the six months ended June 30, 2023, the Company had taxable income of approximately $39,000 and $.01 per share which was all ordinary income, before utilization of net operating loss carry forwards.

 

9

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

6.Commitments, Contingencies, Concentrations and Related parties

 

A) Related Parties

 

1)Executive Employment Agreements

 

Nickolas W. Jekogian III –Mr. Jekogian is employed by the Company as the Chief Executive Officer on a month-to-month basis until such time as otherwise determined by the Company in its sole discretion. Mr. Jekogian has not received any salary for the three and six months ended June 30, 2023 and 2022, and we do not anticipate paying him any salary during the remainder of 2023.

 

Alexander Ludwig - Mr. Ludwig, is employed by the Company as the President, Chief Operating Officer and Principal Financial Officer. Mr. Ludwig has not received any salary for the three and six months ended June 30, 2023 and 2022, and we do not anticipate paying him any salary during the remainder of 2023.

 

2)Property Management Agreement

 

On November 8, 2011, the Company and Signature Community Management LLC (“Signature”), (an entity owned by our CEO) entered into a Property Management Agreement pursuant to which the Company retained Signature as the exclusive, managing and leasing agent for the Company’s Mapletree Property. Signature receives compensation of 5% of monthly rental income actually received from tenants at the Mapletree Property. The Property Management Agreement renewed for a one-year term on November 8, 2022 and will automatically renew for one-year terms until it is terminated by either party upon written notice. The Company incurred management fees of $13,103 and $12,059, and $25,555 and $22,651 for the three and six months ended June 30, 2023 and 2022, respectively.

 

The balance unpaid to Signature at June 30, 2023 and December 31, 2022, for management fees was $133,994 and $114,799, respectively and is recorded in accounts payable and accrued liabilities.

 

3)Asset Management Agreement

 

On November 8, 2011, the Company entered into an Asset Management Agreement with Signature Community Investment Group LLC (“SCIG”), (an entity owned by our CEO) pursuant to which the Company engaged SCIG to oversee the Mapletree Property. SCIG receives an asset management fee of 1.5% of the monthly gross rental revenues collected for the Mapletree Property. The Asset Management Agreement renewed for a one-year term on November 8, 2022 and will automatically renew for one-year terms until it is terminated by either party upon written notice. The Company incurred asset management fees of $3,931 and $3,688 and $7,667 and $6,866 for the three and six months ended June 30, 2023 and 2022 , respectively.

 

The balance unpaid to SCIG at June 30, 2023 and December 31, 2022, for asset management fees was $59,996 and $52,329, respectively, and is recorded in account payable and accrued liabilities.

 

10

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

6.Commitments, Contingencies, Concentrations and Related parties (continued)

 

B) Legal Proceedings

 

In the ordinary course of business, we may be subject to litigation from time to time. Except as discussed below, there is no current, pending or, to our knowledge, threatened litigation or administrative action to which we are a party or of which our property is the subject (including litigation or actions involving our officers, directors, affiliates, or other key personnel, or holders of record or beneficially of more than 5% of any class of our voting securities, or any associate of such party) which in our opinion has, or is expected to have, a material adverse effect upon our business, prospects, financial condition or operations.

 

There is pending in the Supreme Court of the state of New York county of New York (Index No. 656191/2017) an action entitled MLF3 NWJ LLC filed in October of 2017, against Nickolas W. Jekogian, III, Presidential Realty Corporation, Presidential Realty Operating Partnership LP, First Capital Real Estate Trust Incorporated, First Capital Real Estate Operating Partnership, Nickolas W. Jekogian, JR. as trustee of The BBJ Family Irrevocable Trust, Alexander Ludwig, Signature Group Advisors LLC, Richard Brandt, Marjorie Feder as Executrix of the Estate of Robert Feder, Jeffrey F. Joseph, Jeffrey Rogers.

 

The litigation is related to actions taken by Mr. Jekogian individually on a real estate project and personal guarantee that predated his involvement with the Company.  The Plaintiff had received a judgment against Mr. Jekogian for approximately $1,500,000, in addition to attorneys’ fees, and had filed a lien on assets owned individually by Mr. Jekogian including certain options and warrants to purchase stock in the Company.   When the Company entered into the Contribution Agreement with FC REIT in January of 2017, Mr. Jekogian surrendered these options and warrants to purchase stock in the Company as part of the transaction.    The Plaintiff is arguing that they had a lien on Mr. Jekogian’s options and warrants in the Company and that the actions taken by the Company, its Officers and Directors, in entering into the Contribution Agreement with FC REIT fraudulently conveyed their interests in the options and warrants owned by Mr. Jekogian and damaged their position.    The Company, its Officers and Directors, named in this action had no involvement in this personal matter relating to Mr. Jekogian and answered the complaint in February of 2018 stating that it had no merit. Since that time, the Company has received no additional notification that the action against the Company, its Officers and Directors is moving forward.   The Company believes that as to the Company, Officers and Directors, the claims have no merit.

 

C) Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to concentrations of credit risk.

 

Three tenants accounted for 13.5%, 15.3% and 29% of the Company’s accounts receivable as of June 30, 2023.

 

Four tenants accounted for 20%, 15%, 14% and 12% of the Company’s accounts receivable as of December 31, 2022.

 

The Company generally maintains its cash in money market funds with financial institutions. Although the Company may maintain balances at these institutions in excess of the FDIC insurance limit, the Company does not anticipate and has not experienced any losses.

 

11

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

7.Common Stock

 

The Class A and Class B common stock of Presidential has identical rights except that the holders of Class A common stock are entitled to elect two-thirds of the Board of Directors and the holders of the Class B common stock are entitled to elect one-third of the Board of Directors.

 

8.Stock-based Compensation

 

On August 15, 2012, the stockholders approved the 2012 Incentive Plan which reserves 1,000,000 shares of Class B common stock for distribution to executive officers (including executive officers who are also directors), employees, directors, independent agents, consultants and attorneys in accordance with the 2012 Plan’s terms. The 2012 Plan provides for the grant of any or all of the following types of awards (collectively, “Awards”): (a) stock options and (b) restricted stock. Awards may be granted singly, in combination, or in tandem, as determined by the Compensation Committee. The maximum number of shares of Class B common stock with respect to which incentive stock options may be granted to any one individual in any calendar year shall not exceed $100,000 in fair market value as determined at the time of grant. If any outstanding Award is canceled, forfeited, delivered to us as payment for the exercise price or surrendered to us for tax withholding purposes, shares of Class B common stock allocable to such Award may again be available for Awards under the 2012 Incentive Plan.

 

The following summarizes the outstanding and vested stock option activity as of June 30, 2023 and December 31, 2022:

 

   Shares
Underling
Options		   Weighted
Average
Exercise Price
(per share)		   Weighted
Average
Remaining
Contractual
Term
(in years)		 
             
Outstanding at December 31, 2022   550,000   $0.00    5 
                
Granted   
 
    
 
           
Forfeited and expired   
 
    
 
      
Outstanding at June 30, 2023   550,000   $ 0.00    4 

 

9.Fair Value Measurements

 

ASC 820 defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). The standards generally require the use of one or more valuation techniques that include the market, income or cost approaches. The standards also establish market or observable inputs as the preferred source of values when using such valuation techniques, followed by assumptions based on hypothetical transactions in the absence of market inputs. ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – 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 whose inputs are observable or whose significant value drivers are observable. and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in our assessment of fair value. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of our financial and non-financial assets and liabilities. Accordingly, our fair value estimates, which are made at the end of each reporting period, may be different than the amounts that may ultimately be realized upon sale or disposition of these assets.

 

12

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

9.Fair Value Measurements (Continued)

 

Non-Financial Assets Measured at Fair Value on a Recurring Basis

 

The Non-Financial asset that is measured at fair value on our consolidated balance sheet consists of a real estate partnership investment. The tables below aggregate the fair values of the non-financial assets by their levels in the fair value hierarchy.

 

    As of June 30, 2023 
    Total    Level 1    Level 2    Level 3 
Investment in Avalon Jubilee, LLC  $
-
   $
-
   $
-
   $
-
 

 

    As of December 31, 2022 
    Total    Level 1    Level 2    Level 3 
Investment in Avalon Jubilee, LLC  $
-
   $
-
   $
-
   $
-
 

 

Investment in Avalon Jubilee, LLC

 

Significant unobservable quantitative inputs used in determining the fair value of each investment include capitalization rates and discount rates. These rates are based on the location, type and nature of each property, current and anticipated market conditions, and industry publications. Significant unobservable quantitative inputs in the table below were utilized in determining the fair value of this real estate partnership investment.

 

    Range 
    June 30,
2023		    December 31,
2022		 
Unobservable Quantitative Input          
Discount rates   16% to 20%    16% to 20% 

 

The inputs above are subject to change based on changes in economic and market conditions and/or changes in use or timing of exit. Changes in discount rates and terminal capitalization rates result in increases or decreases in the fair values of the investment. The discount rates encompass, among other things, uncertainties in the valuation models with respect to terminal capitalization rates and the amount and timing of cash flows. Therefore, a change in the fair value of the investment resulting from a change in the terminal capitalization rate may be partially offset by a change in the discount rate. It is not possible for us to predict the effect of future economic or market conditions on our estimated fair values. The table below summarizes the changes in the fair value of real estate investments that are classified as Level 3.

 

   June 30,
2023		   December 31,
2022		 
         
Beginning Balance  $  -0-   $       -0- 
Net unrealized gain(loss) on held investment   -0-    -0- 
Purchase /additional funding   -0-    -0- 
Ending balance  $-0-   $-0- 

 

13

 

 

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

 

 

9.Fair Value Measurements (Continued)

 

The carrying amounts of cash and cash equivalents, escrow, deposits and other assets and receivables and accrued expenses and other liabilities are not measured at fair value on a recurring basis but are considered to be recorded at amounts that approximate fair value.

 

At June 30, 2023, the $1,448,645 estimated fair value of the Company’s mortgage payable is less than the $1,463,366 carrying value (before unamortized deferred financing costs of $32,446), assuming a blended market interest rate of 6.5% based on the 2.2 year remaining term to maturity of the mortgage

 

At December 31, 2022, the $1,469,639 estimated fair value of the Company’s mortgage payable is less than the $1,486,191 carrying value (before unamortized deferred financing costs of $40,313), assuming a blended market interest rate of 6.5% based on the 2.8 year remaining term to maturity of the mortgage.

 

The fair value of the Company’s mortgages payable is estimated using unobservable inputs such as available market information and discounted cash flow analysis based on borrowing rates the Company believes it could obtain with similar terms and maturities. These fair value measurements fall within Level 3 of the fair value hierarchy.

 

Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

 

10.Restricted Cash

 

Restricted cash represents funds held for specific purposes and are therefore not available for general corporate purposes. The mortgage escrow reflected on the consolidated balance sheets represents funds that are held by the Company specifically for capital improvements, insurance and real estate taxes on the Mapletree Property.

 

11.Future Minimum Annual Base Rents

 

Future minimum annual base rental revenue for the next five years for commercial real estate owned at June 30, 2023, and subject to non-cancelable operating leases is as follows:

 

2023  $328,710 
2024   206,425 
2025   165,477 
2026   86,199 
2027   27,300 
Thereafter   
-
 
Total  $814,111 

 

14

 

 

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

 

Forward-Looking Statements

 

This report contains statements that do not relate to historical facts, but are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to future events or trends, our future prospects and proposed development or business strategies, among other things. These statements can generally (although not always) be identified by their use of terms and phrases such as anticipate, appear, believe, continue, could, estimate, expect, indicate, intend, may, plan, possible, predict, project, pursue, will, would and other similar terms and phrases, as well as the use of the future tense. Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date hereof, and forward-looking statements in documents incorporated by reference speak only as of the date of those documents. Unless otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

 

We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct. You should understand that the following important factors could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

 

  ● our ability to implement plans for growth;

 

  ● our ability to finance the acquisition of new real estate assets;

 

  ● our ability to manage growth;

 

  ● our ability to generate operating liquidity;

 

  ● our ability to attract and maintain tenants for our rental properties;

 

  ● the demand for rental properties and the creditworthiness of tenants;

 

  ● financial results for 2023 and beyond;

 

  ● future acquisitions and dispositions of assets;

 

  ● future development and redevelopment opportunities;

 

  ● future issuances of capital stock;

 

  ● market and industry trends;

 

15

 

 

  ● interest rates;

 

  ● the outcome and impact of any litigation;

 

  ● operating performance including statements relating to creating value for stockholders;

 

  ● governmental actions and initiatives;

 

  ● environmental and safety requirements;

 

  ● the form, timing and/or amount of dividend distributions in future periods.

 

Any forward-looking statements are based upon management’s beliefs, assumptions and expectations of our future performance, taking into account information currently available. These beliefs, assumptions and expectations may change as a result of possible events or factors, not all of which are known. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in forward-looking statements. Actual results may vary from forward-looking statements due to, but not limited to, the following:

 

  ● the availability and terms of capital and financing;

 

  ● the ability to refinance or repay indebtedness as it matures;

 

  ● the failure of purchase, sale, or other contracts to ultimately close;

 

  ● the failure to achieve anticipated benefits from acquisitions and investments or from dispositions;

 

  ● the potential dilutive effect of common or preferred stock offerings;

 

  ● the impact of future financing arrangements including secured and unsecured indebtedness;

 

  ● the availability of buyers and pricing with respect to the disposition of assets;

 

  ● risks and uncertainties related to national and local economic conditions, the real estate industry in general, and the commercial real estate markets in particular;

 

  ● leasing risks, including the ability to obtain new tenants or renew expiring tenants, the ability to lease newly developed and/or recently acquired space, and the risk of declining leasing rates;

 

  ● the adverse change in the financial condition of one or more of our major tenants;

 

  ● volatility in interest rates and insurance rates;

 

  ● competition from other developers or investors;

 

16

 

 

  ● the risks associated with real estate developments (such as zoning approval, receipt of required permits, construction delays, cost overruns, and leasing risk);

 

  ● the loss of key personnel;

 

  ● the potential liability for uninsured losses, condemnation, or environmental issues;

 

  ● the potential liability for a failure to meet regulatory requirements;

 

  ● the financial condition and liquidity of, or disputes with, joint venture partners;

 

  ● any failure to comply with debt covenants under credit agreements;

 

  ● any failure to continue to qualify for taxation as a real estate investment trust and meet regulatory requirements;

 

  ● risks associated with the COVID 19 Pandemic;

 

  ● potential changes to tax legislation;

 

  ● potential changes to state, local or federal regulations applicable to our business;

 

  ● changes in demand for properties;

 

  ● risks associated with the acquisition, development, expansion, leasing and management of properties;

 

  ● significant costs related to condemnation, or environmental issues;

 

  ● those additional risks and factors discussed in reports filed with the Securities and Exchange Commission (“SEC”) by us.

 

In light of these risks and uncertainties, we may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in Part I Item 1A — Risk Factors of the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Those factors and the other risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations, or investments we may make. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements.

 

You should read this Quarterly Report on Form 10-Q in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (including the documents incorporated by reference therein) completely and with the understanding that our actual future results may be materially different from what we expect. These forward-looking statements speak only as of the date of this report. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, even if experience or future developments make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law.

 

17

 

 

Overview

 

We own 100% of the Mapletree Industrial Center located in Palmer, Massachusetts. This is a multi-tenant rental facility which was originally the Wickwire-Spencer Wire Mill until 1970 at which time it became rental space. The property consists of 31 buildings located on approximately 48 acres. Major tenants include Creative Material Technologies office and lab, Consolidated Lumber Transport office, Australian natural Soapworks, ESSROC Materials (a Portland cement distributor), Michael Houle, JP Mc Carthy & Sons and American Cable Assembly. The property offers traditional office space and industrial/warehouse space along with vacant land with rail access ready for development. The buildings comprise a total of 420,797 square feet, of which 318,780 is rented.

 

We own a 31.3333% non-controlling joint venture partnership interest in Avalon Jubilee LLC located in Los Lunas, New Mexico. The Avalon Property consists of 19 finished, single-family subdivision lots and approximately 21.42 acres of subsequent phases of undeveloped land in Los Lunas, New Mexico. 

 

We outsource the management of the Mapletree Industrial Center to Signature Community Management LLC (“Signature”) and our asset management to Signature Community Investment Group LLC (“SCIG”), companies owned by our CEO. We accrued a management fee of $25,555 and an asset management fee of $7,667 for the six months ended June 30, 2023.

 

We obtain funds for working capital and investment from our available cash, operating activities, and refinancing of mortgage loans on our real estate.

 

On July 28, 2015, Palmer-Mapletree LLC, a wholly-owned subsidiary of the Company entered into a Loan Agreement (the “Loan Agreement”) with Natixis Real Estate Capital LLC providing for a mortgage loan in the principal amount of $1,750,000 (the “Loan”) at an interest rate of 6.031%. $934,794 of the loan proceeds were used to repay the prior mortgage loan and line of credit on the Mapletree Property. $123,757 of the Loan proceeds was set aside for capital improvements and reserves for the property. We received net proceeds of $585,125. The Loan matures on August 5, 2025 and requires monthly principal and interest payments of $11,308 and escrows for insurance, taxes and capital improvements. Escrow balances are considered restricted cash. The Company was in compliance with the loan covenants at June 30, 2023.

 

Critical Accounting Policies

 

In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required to make estimates and assumptions that affect the financial statements and disclosures. These estimates require difficult, complex and subjective judgments. Management has discussed with the Audit Committee the implementation of the critical accounting policies described below and the estimates required with respect to such policies.

 

Real Estate

 

Real estate is carried at cost, net of accumulated depreciation. Additions and improvements are capitalized whereas repairs and maintenance are charged to rental property operating expenses as incurred. Depreciation is generally provided on the straight-line method over the estimated useful life of the asset. The useful life of each property, as well as the allocation of the costs associated with a property to its various components, requires estimates by management. If management incorrectly estimates the allocation of those costs or incorrectly estimates the useful lives of its real estate, depreciation expense may be miscalculated.

 

The Company reviews its properties for impairment if events or changes in circumstances warrant. If impairment were to occur, the property would be written down to its estimated fair value. The Company assesses the recoverability of its investment in real estate based on undiscounted cash flow estimates. The future estimated cash flows of a property are based on current rental revenues and operating expenses, as well as the current local economic climate affecting the property. Considerable judgment is required in making these estimates and changes in these estimates could cause the estimated cash flows to change and impairment could occur. As of June 30, 2023, the Company’s net real estate was carried at $665,355.

 

18

 

 

Rental Revenue Recognition

 

Rental revenues include revenues from the leasing of space at our Mapletree Property, which primarily consist of monthly base rents in addition to the reimbursement of utilities. Other rental revenues, which are included as a component of rental revenue, primarily include fees related to build-out or other services performed by the Company on the property.

 

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (ASC 606) effective January 1, 2018, and its adoption did not have a material effect on the consolidated financial statements, as the majority of the Company’s revenue is recognized under ASC 840, Leases, and subsequently ASC 842, Leases, upon its adoption, which are scoped out of ASC 606. ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contract with customers and supersedes most of the existing revenue recognition guidance. This standard requires us to recognize for certain of our revenue sources the transfer of promised goods or services to customers in an amount that reflects the consideration we are entitled to in exchange for those goods or services. The Company’s other rental revenues recognized in accordance with ASC 606 are recognized over time as the performance obligations are satisfied. Such revenues are not material to the consolidated financial statements.

 

Revenues from the leasing of space at our property to tenants includes (i) lease components, including fixed and variable lease payments, and nonlease components which include reimbursement of electric expense and (ii) reimbursement of real estate taxes. As lessor, we have elected to combine the lease and nonlease components of our operating lease agreements and account for the components as a single lease component in accordance with ASC 842.

 

Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease, together with renewal options that are reasonably certain of being exercised. We commence rental revenue recognition when the underlying asset is available for use by the lessee. Revenue derived from the reimbursement of real estate taxes and electric expense are generally recognized in the same period as the related expenses are incurred, which did not change as a result of the adoption of ASU 2016-02.

 

The Company assesses the collectability of lease receivables (including future minimum rental payments) both at commencement and throughout the lease term. If our assessment of collectability changes during the lease term, any difference between the revenue that would have been received under the straight-line method and the lease payments that have been collected will be recognized as a current period adjustment to rental revenue. Rental revenue associated with leases where collectability has been deemed less than probable is recognized on a cash basis in accordance with ASC 842. 

 

Allowance for Doubtful Accounts

 

The Company assesses the collectability of amounts due from tenants and other receivables, using indicators such as past-due accounts, the nature and age of the receivable, the payment history and the ability of the tenant or debtor to meet its payment obligations. Management’s estimate of allowances for doubtful accounts is subject to revision as these factors change. Any subsequent recovery of tenant receivables that were previously reserved is recorded as a reduction in the allowance of bad debt. As of June 30, 2023 and December 31, 2022, the allowance relating to tenant receivables was $1,417 and $3,500, respectively.

 

Investments in Joint Venture

 

The Company has an equity investment in a joint venture and accounts for this investment using the fair value method of accounting.

 

Income Taxes

 

We operate in a manner intended to enable us to continue to qualify as a Real Estate Investment Trust under Sections 856 to 860 of the Code. Under those sections, a REIT which meets certain requirements is not subject to Federal income tax on that portion of its taxable income, which is distributed to its shareholders, if at least 90% of its REIT taxable income (exclusive of capital gains) is so distributed. As a result of using our ordinary tax loss carry forwards in 2022 there was no requirement to make a distribution in 2023. In addition, no provision for income taxes was required at December 31, 2022. If the Company fails to distribute the required amounts of income to its shareholders, or otherwise fails to meet the REIT requirements, we would fail to qualify as a REIT and substantial adverse tax consequences could result. We believe that we will not be required to pay a dividend in 2023 to maintain our REIT status.

 

19

 

 

Results of Operations

 

Results of Operations for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 as follows:

 

   2023   2022 
Total revenue  $285,837   $278,475 
General and administrative expenses  $71,915   $111,374 
Operating expenses  $147,952   $124,271 
           
Net Income (loss)  $15,819   $(5,991)

 

Revenues increased by $7,362 for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, as a result of increased rental rates at the Mapletree Property.

 

Net income for the three months ended June 30, 2023 was $15,819 compared to a net loss of $5,991 for the three months ended June 30, 2022, an increase of $21,810. The increase was comprised of: (i) lower general and administrative expenses of approximately $40,000 due to a decrease in professional fees (ii) increase in rental revenue of approximately $7,000, offset by increased operating costs at the Mapletree Property of approximately $24,000. Professional fees were higher for the three months ended June 30, 2022 due to the exploration of strategic growth transactions for the Company.

 

Results of Operations for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 as follows:

 

   2023   2022 
Total revenue  $576,820   $552,773 
General and administrative expenses  $143,083   $280,789 
Operating expenses  $327,982   $298,424 
           
Net Income (loss)  $6,020   $(126,114)

 

Revenues increased by $24,047 for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, as a result of increased rental rates at the Mapletree Property.

 

Net income for the six months ended June 30, 2023 was $6,020 compared to a net loss of $126,114 for the six months ended June 30, 2022, an increase of $132,134. The increase was comprised of: (i) lower general and administrative expenses of approximately $138,000 due to a decrease in professional fees (ii) increase in rental revenue of approximately $24,000, offset by increased operating costs at the Mapletree Property of approximately $30,000. Professional fees were higher for the six months ended June 30, 2022 due to the exploration of strategic growth transactions for the Company.

 

20

 

 

Balance Sheet

 

June 30, 2023 compared to December 31, 2022

 

Net real estate decreased by $1,868 due to capital improvements of $28,490, during the six months ended June 30, 2023, offset by depreciation expense of $30,358 on the Mapletree Property.

 

Prepaid expenses decreased by $49,941 primarily due to the timing of payments on both directors and officer’s insurance premiums and insurance on the Mapletree Property.

 

Mortgage escrow increased $86,071 due to the timing of payments of insurance and improvement payments on the Mapletree Property.

 

Accounts payable and accrued liabilities increased by $57,415 primarily due to the accrual of our property and asset management fees to Signature and SCIG and accrued professional fees.

 

Other liabilities decreased $5,946 due to decreased security deposits and prepaid rent.

 

Liquidity and Capital Resources

 

We obtain funds for working capital and investment from our available cash.

 

On June 30, 2023, we had $152,781 in available cash, a decrease of $1,550 from $154,331 available at December 31, 2022. This decrease in cash and cash equivalents was due to cash provided by operating activities of $135,836, cash used in investing activities of $28,490, and cash used in financing activities of $22,825.

 

Operating Activities

 

Cash from operating activities includes net cash received from rental property operations. For the three months ended June 30, 2023, cash received from interest on cash balances was $31. Net cash received from rental property operations was approximately $579,000 at June 30, 2023. Net cash received from rental property operations is before additions and improvements and mortgage amortization.

 

Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

None

 

Item 4. Controls and Procedures

 

  (a) Evaluation of Disclosure Controls and Procedures

 

The Company, under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, herein referred to as the Exchange Act) as of the end of the period covered by this report. The purpose of disclosure controls is to ensure that information required to be disclosed in our reports filed with or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings and ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms.

 

  (b) Changes in Internal Control over Financial Reporting

 

The principal executive officer and principal financial officer also conducted an evaluation of internal control over financial reporting, herein referred to as internal control, to determine whether any changes in internal control occurred during the three months ended June 30, 2023 that may have materially affected, or which are reasonably likely to materially affect internal control. Based on that evaluation, there has been no change in the Company’s internal control during the three months ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

21

 

 

PART II OTHER INFORMATION

 

Item 1. Legal Proceedings

 

In the ordinary course of business, we may be subject to litigation from time to time. Except as discussed below, there is no current, pending or, to our knowledge, threatened litigation or administrative action to which we are a party or of which our property is the subject (including litigation or actions involving our officers, directors, affiliates, or other key personnel, or holders of record or beneficially of more than 5% of any class of our voting securities, or any associate of such party) which in our opinion has, or is expected to have, a material adverse effect upon our business, prospects, financial condition or operations.

 

There is pending in the Supreme Court of the state of New York county of New York (Index No. 656191/2017) an action entitled MLF3 NWJ LLC filed in October of 2017, against Nickolas W. Jekogian, III, Presidential Realty Corporation, Presidential Realty Operating Partnership LP, First Capital Real Estate Trust Incorporated, First Capital Real Estate Operating Partnership, Nickolas W. Jekogian, JR. as trustee of The BBJ Family Irrevocable Trust, Alexander Ludwig, Signature Group Advisors LLC, Richard Brandt, Marjorie Feder as Executrix of the Estate of Robert Feder, Jeffrey F. Joseph, Jeffrey Rogers.

 

The litigation is related to actions taken by Mr. Jekogian individually on a real estate project and personal guarantee that predated his involvement with the Company.  The Plaintiff had received a judgment against Mr. Jekogian for approximately $1,500,000, in addition to attorneys’ fees, and had filed a lien on assets owned individually by Mr. Jekogian including certain options and warrants to purchase stock in the Company.  When the Company entered into the Contribution Agreement with FC REIT in January of 2017, Mr. Jekogian surrendered these options and warrants to purchase stock in the Company as part of the transaction.  The Plaintiff is arguing that they had a lien on Mr. Jekogian’s options and warrants in the Company and that the actions taken by the Company, its Officers and Directors, in entering into the Contribution Agreement with FC REIT fraudulently conveyed their interests in the options and warrants owned by Mr. Jekogian and damaged their position.   The Company, its Officers and Directors, named in this action had no involvement in this personal matter relating to Mr. Jekogian and answered the complaint in February of 2018 stating that it had no merit.  Since that time, the Company has received no additional notification that the action against the Company, its Officers and Directors is moving forward.  The Company believes that as to the Company, Officers and Directors, the claims have no merit.

 

Item 6. Exhibits

 

31.1   Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2   Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1   Certification of Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2   Certification of Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Schema
101.CAL   Inline XBRL Taxonomy Calculation Linkbase
101.DEF   Inline XBRL Definition Linkbase
101.LAB   Inline Taxonomy Label Linkbase
101.PRE   Inline XBRL Taxonomy Presentation Linkbase
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

22

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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 on the 14th day of August, 2023.

 

  PRESIDENTIAL REALTY CORPORATION
     
  By:  /s/ Nickolas W. Jekogian
   

Nickolas Jekogian

Chief Executive Officer and
Chairman of the Board

   
  By: /s/ Alexander Ludwig
    Alexander Ludwig
    President, Chief Operating Officer and
Principal Financial Officer

 

 

23 

 

 

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Exhibit 31.1

 

PRESIDENTIAL REALTY CORPORATION

CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Nickolas Jekogian, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2023 of Presidential Realty Corporation;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2023

   
/s/ Nickolas W. Jekogian  
Nickolas W. Jekogian  
Chief Executive Officer  

Exhibit 31.2

 

PRESIDENTIAL REALTY CORPORATION

CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Alexander Ludwig, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2023 of Presidential Realty Corporation;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2023

   
/s/ Alexander Ludwig  
Alexander Ludwig  
President, Chief Operating Officer and
Principal Financial Officer		  

 

Exhibit 32.1

 

PRESIDENTIAL REALTY CORPORATION

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Presidential Realty Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2023 (the “Report”), I, Nickolas Jekogian, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1)The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

/S/ Nickolas W. Jekogian  
Nickolas W. Jekogian  
Chief Executive Officer  
(Principal Executive Officer)  
Date: August 14, 2023  

 

Exhibit 32.2

 

PRESIDENTIAL REALTY CORPORATION

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Presidential Realty Corporation (the “Company”) on Form 10-Q for the period June 30, 2023 (the “Report”), I, Alexander Ludwig, President, Chief Operating Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1)The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

/S/ Alexander Ludwig  
Alexander Ludwig  
President, Chief Operating Officer and
Principal Financial Officer		  
Date: August 14, 2023  

v3.23.2
Document And Entity Information - shares
 6 Months Ended
Jun. 30, 2023
Jul. 31, 2023
Document Information Line Items    
Entity Registrant Name PRESIDENTIAL REALTY CORP/DE/  
Document Type 10-Q  
Current Fiscal Year End Date --12-31  
Amendment Flag false  
Entity Central Index Key 0000731245  
Entity Current Reporting Status Yes  
Entity Filer Category Non-accelerated Filer  
Document Period End Date Jun. 30, 2023  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q2  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 001-08594  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 13-1954619  
Entity Address, Address Line One 530 Seventh Avenue  
Entity Address, Address Line Two Suite 407  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10018  
City Area Code (914)  
Local Phone Number 948-1300  
Entity Interactive Data Current Yes  
Class A Common Stock par value $.00001    
Document Information Line Items    
Trading Symbol PDNLA  
Title of 12(b) Security Class A Common Stock par value $.00001  
Security Exchange Name NONE  
Class B Common Stock par value $.00001    
Document Information Line Items    
Trading Symbol PDNLB  
Title of 12(b) Security Class B Common Stock par value $.00001  
Class A Common Stock    
Document Information Line Items    
Entity Common Stock, Shares Outstanding   442,533
Class B Common Stock    
Document Information Line Items    
Entity Common Stock, Shares Outstanding   4,746,147
v3.23.2
Consolidated Balance Sheets - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Assets    
Real estate $ 1,655,350 $ 1,626,860
Less: accumulated depreciation 989,995 959,637
Net real estate 665,355 667,223
Investment in Avalon Jubilee, LLC
Prepaid expenses 28,830 78,771
Other receivables (net of valuation allowance of $1,417 at June 30, 2023 and $3,500 at December 31, 2022) 22,820 28,001
Cash 152,781 154,331
Mortgage escrow 167,162 81,091
Other assets 27,857 12,857
Total Assets 1,064,805 1,022,274
Liabilities:    
Mortgage payable, net 1,430,920 1,445,878
Accounts payable and accrued liabilities 597,428 540,013
Other liabilities 51,507 57,453
Total Liabilities 2,079,855 2,043,344
Presidential Stockholders’ Deficit:    
Class A Issued and Outstanding 4 4
Class B Issued and Outstanding 47 47
Additional paid-in capital 8,122,108 8,122,108
Accumulated deficit (9,137,209) (9,143,229)
Total Stockholders’ Deficit (1,015,050) (1,021,070)
Total Liabilities and Stockholders’ Deficit $ 1,064,805 $ 1,022,274
v3.23.2
Consolidated Balance Sheets (Parentheticals) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Other receivables net of valuation allowance (in Dollars) $ 1,417 $ 3,500
Class A Common Stock    
Common stock par value (in Dollars per share) $ 0.00001 $ 0.00001
Common stock share authorized 700,000 700,000
Common stock share issued 442,533 442,533
Common stock share outstanding 442,533 442,533
Class B Common Stock    
Common stock par value (in Dollars per share) $ 0.00001 $ 0.00001
Common stock share authorized 999,300,000 999,300,000
Common stock share issued 4,746,147 4,746,147
Common stock share outstanding 4,746,147 4,746,147
v3.23.2
Consolidated Statements of Operations Unaudited - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Revenues:        
Rental $ 285,837 $ 278,475 $ 576,820 $ 552,773
Total Revenue 285,837 278,475 576,820 552,773
Costs and Expenses:        
General and administrative 71,915 111,374 143,083 280,789
Rental property:        
Operating expenses 147,952 124,271 327,982 298,424
Interest expense and amortization of mortgage costs 26,299 26,978 52,528 53,655
Real estate taxes 8,440 9,738 16,880 19,477
Depreciation on real estate 15,427 12,108 30,358 26,548
Total Costs and Expenses 270,033 284,469 570,831 678,893
Other Income:        
Investment income 15 3 31 6
Net income (loss) $ 15,819 $ (5,991) $ 6,020 $ (126,114)
Net income (loss) per Common Share -basic (in Dollars per share) $ 0 $ 0 $ 0 $ (0.02)
Net income (loss) per Common Share -diluted (in Dollars per share) $ 0 $ 0 $ 0 $ (0.02)
Weighted Average Number of Shares Outstanding        
basic (in Shares) 5,188,680 5,188,680 5,188,680 5,188,680
diluted (in Shares) 5,188,680 5,188,680 5,188,680 5,188,680
v3.23.2
Consolidated Statements of Stockholders’ Deficit (Unaudited) - USD ($)
Common Stock
Additional Paid-in Capital
Accumulated Deficit
Total
Balance at Dec. 31, 2021 $ 51 $ 8,122,108 $ (9,023,541) $ (901,382)
Net income (loss) (120,123) (120,123)
Balance at Mar. 31, 2022 51 8,122,108 (9,143,664) (1,021,505)
Balance at Dec. 31, 2021 51 8,122,108 (9,023,541) (901,382)
Net income (loss)       (126,114)
Balance at Jun. 30, 2022 51 8,122,108 (9,149,655) (1,027,496)
Balance at Mar. 31, 2022 51 8,122,108 (9,143,664) (1,021,505)
Net income (loss)     (5,991) (5,991)
Balance at Jun. 30, 2022 51 8,122,108 (9,149,655) (1,027,496)
Balance at Dec. 31, 2022 51 8,122,108 (9,143,229) (1,021,070)
Net income (loss) (9,799) (9,799)
Balance at Mar. 31, 2023 51 8,122,108 (9,153,028) (1,030,869)
Balance at Dec. 31, 2022 51 8,122,108 (9,143,229) (1,021,070)
Net income (loss)       6,020
Balance at Jun. 30, 2023 51 8,122,108 (9,137,209) (1,015,050)
Balance at Mar. 31, 2023 51 8,122,108 (9,153,028) (1,030,869)
Net income (loss)     15,819 15,819
Balance at Jun. 30, 2023 $ 51 $ 8,122,108 $ (9,137,209) $ (1,015,050)
v3.23.2
Consolidated Statements of Cash Flows Unaudited - USD ($)
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Statement of Cash Flows [Abstract]    
Net income (loss) $ 6,020 $ (126,114)
Adjustments to reconcile net loss to net cash flow from operating activities:    
Depreciation and amortization 38,225 34,414
Bad debt 15
Decrease (increase) in:    
Other receivables 5,181 (2,572)
Prepaid expenses 49,941 56,105
Other assets (15,000) 21
Increase (decreases) in:    
Accounts payable and accrued liabilities 57,415 110,317
Other liabilities (5,946) (11,569)
Total adjustments 129,816 186,731
Net cash flow provided by operating activities 135,836 60,617
Cash Flows from Investing Activities:    
Payments disbursed for capital improvements (28,490) (24,479)
Net cash flow used in investing activities (28,490) (24,479)
Cash Flows from Financing Activities:    
Principal payments on mortgage debt (22,825) (21,485)
Net cash flow used in financing activities (22,825) (21,485)
Net increase in cash and restricted cash 84,521 14,653
Cash and restricted cash, Beginning of period 235,422 284,632
Cash and restricted cash, End of Period [1] 319,943 299,285
Supplemental cash flow information:    
Interest paid in cash $ 44,662 $ 45,353
[1] This line item includes restricted cash of $167,162 and $127,189 at June 30, 2023 and 2022, respectively. these amount are presented in the “mortgage escrow” caption on the accompanying consolidated balance sheets.
v3.23.2
Organization and Summary of Significant Accounting Policies
 6 Months Ended
Jun. 30, 2023
Organization and Summary of Significant Accounting Policies [Abstract]  
Organization and Summary of Significant Accounting Policies
1.Organization and Summary of Significant Accounting Policies

 

Organization

 

Presidential Realty Corporation (“Presidential” or the “Company”) is operated as a self-administrated, self-managed Real Estate Investment Trust (“REIT”). The Company is engaged principally in the ownership of income producing real estate. Presidential operates in a single business segment, investments in real estate related assets.

 

Basis of Presentation

 

At June 30, 2023, the Company has had a history of operating losses and working capital deficiency, which have been detrimental to our operations and could potentially affect our ability to meet our obligations and continue as a going concern. Our ability to continue as a going concern is dependent upon the successful execution of strategies to achieve profitability and increase working capital by raising debt and/or equity. The accompanying financial statements do not include any adjustments that may result from this uncertainty.

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2022 filed on March 31, 2023.

 

Real Estate

 

Real estate is stated at cost. Generally, depreciation is provided on the straight-line method over the assets estimated useful lives, which range from twenty to thirty-nine years for buildings and improvements and from three to ten years for furniture and equipment. Maintenance and repairs are charged to operations as incurred and renewals and replacements are capitalized. The Company reviews each of its property investments for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment of properties is determined to exist when estimated amounts recoverable through future operations on an undiscounted basis are below the properties carrying value. If a property is determined to be impaired, it is written down to its estimated fair value. As of June 30, 2023 and December 31, 2022, the Company did not identify any indicators of impairment.

 

Principles of Consolidation

 

The Company consolidates variable interest entities (VIEs) for which it is the primary beneficiary, generally as a result of having the power to direct the activities that most significantly affect the VIE’s economic performance and holding variable interest that convey to the Company the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

 

The accompanying consolidated financial statements include the accounts of Presidential Realty Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

 

Investments in Joint Venture

 

The Company has an equity investment in a joint venture and accounts for this investment using the fair value method of accounting.

 

Revenue Recognition

 

Rental revenues include revenues from the leasing of space at our Mapletree Property, which primarily consist of monthly base rents in addition to the reimbursement of utilities. Other rental revenues, which are included as a component of rental revenue, primarily include fees related to build-out or other services performed by the Company on the property.

 

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (ASC 606) effective January 1, 2018, and its adoption did not have a material effect on the consolidated financial statements, as the majority of the Company’s revenue is recognized under ASC 840, Leases, and subsequently ASU 2016-02, Leases (ASC 842), upon its adoption, which are scoped out of ASC 606. ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires us to recognize for certain of our revenue sources the transfer of promised goods or services to customers in an amount that reflects the consideration we are entitled to in exchange for those goods or services. The Company’s other rental revenues recognized in accordance with ASC 606 are recognized over time as the performance obligations are satisfied. Such revenues are not material to the consolidated financial statements.

 

The Company adopted ASC 842 effective January 1, 2019, and its adoption did not have a material effect on the consolidated financial statements. As a lessor, the adoption of ASC 842 (as amended by subsequent ASUs) did not change the timing of revenue recognition of the Company’s rental revenues. Revenues from the leasing of space at our property to tenants includes (i) lease components, including fixed and variable lease payments, and nonlease components which include reimbursement of electric expense and (ii) reimbursement of real estate taxes. As lessor, we have elected to combine the lease and nonlease components of our operating lease agreements and account for the components as a single lease component in accordance with ASC 842.

 

Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease, together with renewal options that are reasonably certain of being exercised. We commence rental revenue recognition when the underlying asset is available for use by the lessee. Revenue derived from the reimbursement of real estate taxes and electric expense are generally recognized in the same period as the related expenses are incurred, which did not change as a result of the adoption of ASC 842.

 

The Company assesses the collectability of lease receivables (including future minimum rental payments) both at commencement and throughout the lease term. If our assessment of collectability changes during the lease term, any difference between the revenue that would have been received under the straight-line method and the lease payments that have been collected will be recognized as a current period adjustment to rental revenue. Rental revenue associated with leases where collectability has been deemed less than probable is recognized on a cash basis in accordance with ASC 842. 

 

Allowance for Doubtful Accounts

 

The Company assesses the collectability of amounts due from tenants and other receivables, using indicators such as past-due accounts, the nature and age of the receivable, the payment history and the ability of the tenant or debtor to meet its payment obligations. Management’s estimate of allowances for doubtful accounts is subject to revision as these factors change. Any subsequent recovery of tenant receivable that were previously reserved is recorded as a reduction in the allowance of bad debt. As of June 30, 2023 and December 31, 2022, the allowance relating to tenant receivables was $1,417 and $3,500, respectively.

 

Net Income (Loss) Per Share

 

Basic net income (loss) per share data is computed by dividing net income (loss) by the weighted average number of shares of Class A and Class B common stock outstanding (excluding non-vested shares) during each period. Diluted net income (loss) per share is computed by dividing net income by the weighted average shares outstanding, including the dilutive effect, if any, of non-vested shares. For the three and six months ended June 30, 2023 and 2022, the weighted average shares outstanding as used in the calculation of diluted loss per share do not include 550,000, of outstanding stock options, as their inclusion would be antidilutive.

 

Cash and cash equivalents

 

Cash includes cash on hand, cash in banks and cash in money market funds. Cash equivalents represent short-term, highly liquid investment which are readily convertible to cash and have maturities of three months or less.

 

Management Estimates

 

The consolidated financial statements have been prepared in accordance with GAAP. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and the reported amounts of income and expense for the reporting period. Actual results could differ from those estimates.

 

Accounting for Stock Awards

 

The Company recognizes the cost of employee and non-employee services received in exchange for awards of equity instruments as stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the fair value of the stock award and options, is recognized as an expense, less expected forfeitures, over the requisite service period, which typically equals the vesting period. Stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 was $0.

 

Accounting for Income Taxes

 

The Company accounts for income taxes utilizing the asset and liability approach requiring the recognition of deferred tax assets and liabilities for the expected future tax consequences of net operating loss carryforwards and temporary differences between the basis of assets and liabilities for financial reporting purposes and tax purposes and for net operating loss and other carryforwards. A valuation allowance is provided for deferred tax assets based on the likelihood of realization.

 

The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

 

The Company operates in multiple tax jurisdictions within the United States of America. The Company remains subject to examination in all tax jurisdictions until the applicable statutes of limitation expire. As of June 30, 2023, the tax years after 2020 remain subject to examination. The Company did not record any unrecognized tax positions for the three and six months ended June 30, 2023 and 2022.

 

Mortgage costs

 

The Company amortizes mortgage costs over the life of the loan.

 

Recent Accounting Pronouncements Adopted

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”). Under the prior model, losses were recognized only as they were incurred. The new model is applicable to all financial instruments that are not accounted for at fair value through net income. The standard is effective for fiscal years beginning after December 15, 2022, for public entities qualifying as smaller reporting companies. The adoption did not have a material effect on the consolidated financial statements.
v3.23.2
Real Estate
 6 Months Ended
Jun. 30, 2023
Real Estate [Abstract]  
Real Estate
2.Real Estate

 

Real estate is comprised of the following:

 

   June 30,
2023		   December 31,
2022		 
         
Land  $79,100   $79,100 
Buildings   1,507,453    1,478,963 
Furniture and equipment   68,797    68,797 
           
Total  $1,655,350   $1,626,860 

 

Rental revenue is from our Mapletree Property which constituted all of the rental revenue for the Company for the three and six months ended June 30, 2023 and 2022.
v3.23.2
Investment in Partnership
 6 Months Ended
Jun. 30, 2023
Investment in Partnership [Abstract]  
Investment in Partnership
3.Investment in Partnership

 

We own a 31.3333% interest in Avalon Jubilee, LLC (the Avalon Property) with an aggregate fair value of $0. The Company has elected the fair value option versus accounting under the equity method as the fair value better represents the Company’s expected realization of this investment.

 

On June 30, 2023 and December 31, 2022 the Avalon Property consists of 19 finished, single-family subdivision lots and approximately 21.42 acres of subsequent phases of undeveloped land in Los Lunas, New Mexico.
v3.23.2
Mortgage Debt
 6 Months Ended
Jun. 30, 2023
Mortgage Debt [Abstract]  
Mortgage Debt
4.Mortgage Debt

 

On July 28, 2015, Palmer-Mapletree LLC, a wholly-owned subsidiary of the Company entered into a Loan Agreement (the “Loan Agreement”) with Natixis Real Estate Capital LLC providing for a mortgage loan in the principal amount of $1,750,000 (the “Loan”) at an interest rate of 6.031%. Loan proceeds of $934,794 were used to repay the prior mortgage loan and line of credit on the Mapletree Property. Loan proceeds of $123,757 were set aside for capital improvements and reserves for the property. We received net proceeds of $585,125. The Loan matures on August 5, 2025 and requires monthly principal and interest payments of $11,308 and escrows for insurance, taxes and capital improvements. Escrow balances are considered restricted cash. The mortgage is presented net of unamortized Mortgage costs, the outstanding balance of the loan and loan costs were as follows:

 

   Mortgage   Unamortized   Interest 
   Balance   mortgage Costs   Expense 
             
June 30, 2023  $1,463,366   $32,446   $44,662 
                
December 31, 2022  $1,486,191   $40,313   $91,885 

 

The Company is required to maintain certain financial covenants on the mortgage. The Company was in compliance with the covenants on June 30, 2023 and December 31, 2022.

 

Future maturities of mortgage payments are as follows:

 

2023  $24,023 
2024   50,269 
2025  $1,389,074 
v3.23.2
Income Taxes
 6 Months Ended
Jun. 30, 2023
Income Taxes [Abstract]  
Income Taxes
5.Income Taxes

 

Presidential has elected to qualify as a Real Estate Investment Trust under the Internal Revenue Code. A REIT which distributes at least 90% of its real estate investment trust taxable income to its shareholders each year by the end of the following year and which meets certain other conditions will not be taxed on any of its taxable income as long as they distribute the required amounts to its shareholders.

 

ASC 740 prescribes a more likely than not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken. If the Company’s tax position in relation to a transaction was not likely to be upheld, the Company would be required to record the accrual for the tax and interest thereon. As of June 30, 2023, the tax years that remain open to examination by the federal, state, and local taxing authorities are the 2020 – 2022 tax years and the Company was not required to accrue any liability for those tax years.

 

The Company has accumulated a net operating loss carry forward of approximately $21,280,000. These net operating losses may be available in future years to reduce taxable income when and if it is generated. These loss carryforwards begin to expire in 2027 and are available to offset 100% of taxable income. Net operating losses generated in 2018 and thereafter will be available to offset 80% of taxable income beginning in 2021. Under the Cares Act, taxpayers with NOLs arising in tax years beginning in 2018, 2019 and 2020 can carry them back five years.

 

For the six months ended June 30, 2023, the Company had taxable income of approximately $39,000 and $.01 per share which was all ordinary income, before utilization of net operating loss carry forwards.
v3.23.2
Commitments, Contingencies, Concentrations and Related parties
 6 Months Ended
Jun. 30, 2023
Commitments, Contingencies, Concentrations and Related parties [Abstract]  
Commitments, Contingencies, Concentrations and Related parties
6.Commitments, Contingencies, Concentrations and Related parties

 

A) Related Parties

 

1)Executive Employment Agreements

 

Nickolas W. Jekogian III –Mr. Jekogian is employed by the Company as the Chief Executive Officer on a month-to-month basis until such time as otherwise determined by the Company in its sole discretion. Mr. Jekogian has not received any salary for the three and six months ended June 30, 2023 and 2022, and we do not anticipate paying him any salary during the remainder of 2023.

 

Alexander Ludwig - Mr. Ludwig, is employed by the Company as the President, Chief Operating Officer and Principal Financial Officer. Mr. Ludwig has not received any salary for the three and six months ended June 30, 2023 and 2022, and we do not anticipate paying him any salary during the remainder of 2023.

 

2)Property Management Agreement

 

On November 8, 2011, the Company and Signature Community Management LLC (“Signature”), (an entity owned by our CEO) entered into a Property Management Agreement pursuant to which the Company retained Signature as the exclusive, managing and leasing agent for the Company’s Mapletree Property. Signature receives compensation of 5% of monthly rental income actually received from tenants at the Mapletree Property. The Property Management Agreement renewed for a one-year term on November 8, 2022 and will automatically renew for one-year terms until it is terminated by either party upon written notice. The Company incurred management fees of $13,103 and $12,059, and $25,555 and $22,651 for the three and six months ended June 30, 2023 and 2022, respectively.

 

The balance unpaid to Signature at June 30, 2023 and December 31, 2022, for management fees was $133,994 and $114,799, respectively and is recorded in accounts payable and accrued liabilities.

 

3)Asset Management Agreement

 

On November 8, 2011, the Company entered into an Asset Management Agreement with Signature Community Investment Group LLC (“SCIG”), (an entity owned by our CEO) pursuant to which the Company engaged SCIG to oversee the Mapletree Property. SCIG receives an asset management fee of 1.5% of the monthly gross rental revenues collected for the Mapletree Property. The Asset Management Agreement renewed for a one-year term on November 8, 2022 and will automatically renew for one-year terms until it is terminated by either party upon written notice. The Company incurred asset management fees of $3,931 and $3,688 and $7,667 and $6,866 for the three and six months ended June 30, 2023 and 2022 , respectively.

 

The balance unpaid to SCIG at June 30, 2023 and December 31, 2022, for asset management fees was $59,996 and $52,329, respectively, and is recorded in account payable and accrued liabilities.

 

B) Legal Proceedings

 

In the ordinary course of business, we may be subject to litigation from time to time. Except as discussed below, there is no current, pending or, to our knowledge, threatened litigation or administrative action to which we are a party or of which our property is the subject (including litigation or actions involving our officers, directors, affiliates, or other key personnel, or holders of record or beneficially of more than 5% of any class of our voting securities, or any associate of such party) which in our opinion has, or is expected to have, a material adverse effect upon our business, prospects, financial condition or operations.

 

There is pending in the Supreme Court of the state of New York county of New York (Index No. 656191/2017) an action entitled MLF3 NWJ LLC filed in October of 2017, against Nickolas W. Jekogian, III, Presidential Realty Corporation, Presidential Realty Operating Partnership LP, First Capital Real Estate Trust Incorporated, First Capital Real Estate Operating Partnership, Nickolas W. Jekogian, JR. as trustee of The BBJ Family Irrevocable Trust, Alexander Ludwig, Signature Group Advisors LLC, Richard Brandt, Marjorie Feder as Executrix of the Estate of Robert Feder, Jeffrey F. Joseph, Jeffrey Rogers.

 

The litigation is related to actions taken by Mr. Jekogian individually on a real estate project and personal guarantee that predated his involvement with the Company.  The Plaintiff had received a judgment against Mr. Jekogian for approximately $1,500,000, in addition to attorneys’ fees, and had filed a lien on assets owned individually by Mr. Jekogian including certain options and warrants to purchase stock in the Company.   When the Company entered into the Contribution Agreement with FC REIT in January of 2017, Mr. Jekogian surrendered these options and warrants to purchase stock in the Company as part of the transaction.    The Plaintiff is arguing that they had a lien on Mr. Jekogian’s options and warrants in the Company and that the actions taken by the Company, its Officers and Directors, in entering into the Contribution Agreement with FC REIT fraudulently conveyed their interests in the options and warrants owned by Mr. Jekogian and damaged their position.    The Company, its Officers and Directors, named in this action had no involvement in this personal matter relating to Mr. Jekogian and answered the complaint in February of 2018 stating that it had no merit. Since that time, the Company has received no additional notification that the action against the Company, its Officers and Directors is moving forward.   The Company believes that as to the Company, Officers and Directors, the claims have no merit.

 

C) Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to concentrations of credit risk.

 

Three tenants accounted for 13.5%, 15.3% and 29% of the Company’s accounts receivable as of June 30, 2023.

 

Four tenants accounted for 20%, 15%, 14% and 12% of the Company’s accounts receivable as of December 31, 2022.

 

The Company generally maintains its cash in money market funds with financial institutions. Although the Company may maintain balances at these institutions in excess of the FDIC insurance limit, the Company does not anticipate and has not experienced any losses.
v3.23.2
Common Stock
 6 Months Ended
Jun. 30, 2023
Common Stock [Abstract]  
Common Stock
7.Common Stock

 

The Class A and Class B common stock of Presidential has identical rights except that the holders of Class A common stock are entitled to elect two-thirds of the Board of Directors and the holders of the Class B common stock are entitled to elect one-third of the Board of Directors.
v3.23.2
Stock-Based Compensation
 6 Months Ended
Jun. 30, 2023
Stock-Based Compensation [Abstract]  
Stock-based Compensation
8.Stock-based Compensation

 

On August 15, 2012, the stockholders approved the 2012 Incentive Plan which reserves 1,000,000 shares of Class B common stock for distribution to executive officers (including executive officers who are also directors), employees, directors, independent agents, consultants and attorneys in accordance with the 2012 Plan’s terms. The 2012 Plan provides for the grant of any or all of the following types of awards (collectively, “Awards”): (a) stock options and (b) restricted stock. Awards may be granted singly, in combination, or in tandem, as determined by the Compensation Committee. The maximum number of shares of Class B common stock with respect to which incentive stock options may be granted to any one individual in any calendar year shall not exceed $100,000 in fair market value as determined at the time of grant. If any outstanding Award is canceled, forfeited, delivered to us as payment for the exercise price or surrendered to us for tax withholding purposes, shares of Class B common stock allocable to such Award may again be available for Awards under the 2012 Incentive Plan.

 

The following summarizes the outstanding and vested stock option activity as of June 30, 2023 and December 31, 2022:

 

   Shares
Underling
Options		   Weighted
Average
Exercise Price
(per share)		   Weighted
Average
Remaining
Contractual
Term
(in years)		 
             
Outstanding at December 31, 2022   550,000   $0.00    5 
                
Granted   
 
    
 
           
Forfeited and expired   
 
    
 
      
Outstanding at June 30, 2023   550,000   $ 0.00    4 
v3.23.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2023
Fair Value Measurements [Abstract]  
Fair Value Measurements
9.Fair Value Measurements

 

ASC 820 defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). The standards generally require the use of one or more valuation techniques that include the market, income or cost approaches. The standards also establish market or observable inputs as the preferred source of values when using such valuation techniques, followed by assumptions based on hypothetical transactions in the absence of market inputs. ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – 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 whose inputs are observable or whose significant value drivers are observable. and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in our assessment of fair value. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of our financial and non-financial assets and liabilities. Accordingly, our fair value estimates, which are made at the end of each reporting period, may be different than the amounts that may ultimately be realized upon sale or disposition of these assets.

 

Non-Financial Assets Measured at Fair Value on a Recurring Basis

 

The Non-Financial asset that is measured at fair value on our consolidated balance sheet consists of a real estate partnership investment. The tables below aggregate the fair values of the non-financial assets by their levels in the fair value hierarchy.

 

    As of June 30, 2023 
    Total    Level 1    Level 2    Level 3 
Investment in Avalon Jubilee, LLC  $
-
   $
-
   $
-
   $
-
 

 

    As of December 31, 2022 
    Total    Level 1    Level 2    Level 3 
Investment in Avalon Jubilee, LLC  $
-
   $
-
   $
-
   $
-
 

 

Investment in Avalon Jubilee, LLC

 

Significant unobservable quantitative inputs used in determining the fair value of each investment include capitalization rates and discount rates. These rates are based on the location, type and nature of each property, current and anticipated market conditions, and industry publications. Significant unobservable quantitative inputs in the table below were utilized in determining the fair value of this real estate partnership investment.

 

    Range 
    June 30,
2023		    December 31,
2022		 
Unobservable Quantitative Input          
Discount rates   16% to 20%    16% to 20% 

 

The inputs above are subject to change based on changes in economic and market conditions and/or changes in use or timing of exit. Changes in discount rates and terminal capitalization rates result in increases or decreases in the fair values of the investment. The discount rates encompass, among other things, uncertainties in the valuation models with respect to terminal capitalization rates and the amount and timing of cash flows. Therefore, a change in the fair value of the investment resulting from a change in the terminal capitalization rate may be partially offset by a change in the discount rate. It is not possible for us to predict the effect of future economic or market conditions on our estimated fair values. The table below summarizes the changes in the fair value of real estate investments that are classified as Level 3.

 

   June 30,
2023		   December 31,
2022		 
         
Beginning Balance  $  -0-   $       -0- 
Net unrealized gain(loss) on held investment   -0-    -0- 
Purchase /additional funding   -0-    -0- 
Ending balance  $-0-   $-0- 

 

The carrying amounts of cash and cash equivalents, escrow, deposits and other assets and receivables and accrued expenses and other liabilities are not measured at fair value on a recurring basis but are considered to be recorded at amounts that approximate fair value.

 

At June 30, 2023, the $1,448,645 estimated fair value of the Company’s mortgage payable is less than the $1,463,366 carrying value (before unamortized deferred financing costs of $32,446), assuming a blended market interest rate of 6.5% based on the 2.2 year remaining term to maturity of the mortgage

 

At December 31, 2022, the $1,469,639 estimated fair value of the Company’s mortgage payable is less than the $1,486,191 carrying value (before unamortized deferred financing costs of $40,313), assuming a blended market interest rate of 6.5% based on the 2.8 year remaining term to maturity of the mortgage.

 

The fair value of the Company’s mortgages payable is estimated using unobservable inputs such as available market information and discounted cash flow analysis based on borrowing rates the Company believes it could obtain with similar terms and maturities. These fair value measurements fall within Level 3 of the fair value hierarchy.

 

Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
v3.23.2
Restricted Cash
 6 Months Ended
Jun. 30, 2023
Restricted Cash [Abstract]  
Restricted Cash
10.Restricted Cash

 

Restricted cash represents funds held for specific purposes and are therefore not available for general corporate purposes. The mortgage escrow reflected on the consolidated balance sheets represents funds that are held by the Company specifically for capital improvements, insurance and real estate taxes on the Mapletree Property.
v3.23.2
Future Minimum Annual Base Rents
 6 Months Ended
Jun. 30, 2023
Future Minimum Annual Base Rents [Abstract]  
Future Minimum Annual Base Rents
11.Future Minimum Annual Base Rents

 

Future minimum annual base rental revenue for the next five years for commercial real estate owned at June 30, 2023, and subject to non-cancelable operating leases is as follows:

 

2023  $328,710 
2024   206,425 
2025   165,477 
2026   86,199 
2027   27,300 
Thereafter   
-
 
Total  $814,111 
v3.23.2
Accounting Policies, by Policy (Policies)
 6 Months Ended
Jun. 30, 2023
Organization and Summary of Significant Accounting Policies [Abstract]  
Organization

Organization

Presidential Realty Corporation (“Presidential” or the “Company”) is operated as a self-administrated, self-managed Real Estate Investment Trust (“REIT”). The Company is engaged principally in the ownership of income producing real estate. Presidential operates in a single business segment, investments in real estate related assets.
Basis of Presentation

Basis of Presentation

At June 30, 2023, the Company has had a history of operating losses and working capital deficiency, which have been detrimental to our operations and could potentially affect our ability to meet our obligations and continue as a going concern. Our ability to continue as a going concern is dependent upon the successful execution of strategies to achieve profitability and increase working capital by raising debt and/or equity. The accompanying financial statements do not include any adjustments that may result from this uncertainty.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2022 filed on March 31, 2023.
Real Estate

Real Estate

Real estate is stated at cost. Generally, depreciation is provided on the straight-line method over the assets estimated useful lives, which range from twenty to thirty-nine years for buildings and improvements and from three to ten years for furniture and equipment. Maintenance and repairs are charged to operations as incurred and renewals and replacements are capitalized. The Company reviews each of its property investments for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment of properties is determined to exist when estimated amounts recoverable through future operations on an undiscounted basis are below the properties carrying value. If a property is determined to be impaired, it is written down to its estimated fair value. As of June 30, 2023 and December 31, 2022, the Company did not identify any indicators of impairment.
Principles of Consolidation

Principles of Consolidation

The Company consolidates variable interest entities (VIEs) for which it is the primary beneficiary, generally as a result of having the power to direct the activities that most significantly affect the VIE’s economic performance and holding variable interest that convey to the Company the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

The accompanying consolidated financial statements include the accounts of Presidential Realty Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Investments in Joint Venture

Investments in Joint Venture

The Company has an equity investment in a joint venture and accounts for this investment using the fair value method of accounting.

 
Revenue Recognition

Revenue Recognition

Rental revenues include revenues from the leasing of space at our Mapletree Property, which primarily consist of monthly base rents in addition to the reimbursement of utilities. Other rental revenues, which are included as a component of rental revenue, primarily include fees related to build-out or other services performed by the Company on the property.

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (ASC 606) effective January 1, 2018, and its adoption did not have a material effect on the consolidated financial statements, as the majority of the Company’s revenue is recognized under ASC 840, Leases, and subsequently ASU 2016-02, Leases (ASC 842), upon its adoption, which are scoped out of ASC 606. ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires us to recognize for certain of our revenue sources the transfer of promised goods or services to customers in an amount that reflects the consideration we are entitled to in exchange for those goods or services. The Company’s other rental revenues recognized in accordance with ASC 606 are recognized over time as the performance obligations are satisfied. Such revenues are not material to the consolidated financial statements.

The Company adopted ASC 842 effective January 1, 2019, and its adoption did not have a material effect on the consolidated financial statements. As a lessor, the adoption of ASC 842 (as amended by subsequent ASUs) did not change the timing of revenue recognition of the Company’s rental revenues. Revenues from the leasing of space at our property to tenants includes (i) lease components, including fixed and variable lease payments, and nonlease components which include reimbursement of electric expense and (ii) reimbursement of real estate taxes. As lessor, we have elected to combine the lease and nonlease components of our operating lease agreements and account for the components as a single lease component in accordance with ASC 842.

Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease, together with renewal options that are reasonably certain of being exercised. We commence rental revenue recognition when the underlying asset is available for use by the lessee. Revenue derived from the reimbursement of real estate taxes and electric expense are generally recognized in the same period as the related expenses are incurred, which did not change as a result of the adoption of ASC 842.

The Company assesses the collectability of lease receivables (including future minimum rental payments) both at commencement and throughout the lease term. If our assessment of collectability changes during the lease term, any difference between the revenue that would have been received under the straight-line method and the lease payments that have been collected will be recognized as a current period adjustment to rental revenue. Rental revenue associated with leases where collectability has been deemed less than probable is recognized on a cash basis in accordance with ASC 842. 
Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company assesses the collectability of amounts due from tenants and other receivables, using indicators such as past-due accounts, the nature and age of the receivable, the payment history and the ability of the tenant or debtor to meet its payment obligations. Management’s estimate of allowances for doubtful accounts is subject to revision as these factors change. Any subsequent recovery of tenant receivable that were previously reserved is recorded as a reduction in the allowance of bad debt. As of June 30, 2023 and December 31, 2022, the allowance relating to tenant receivables was $1,417 and $3,500, respectively.

 
Net Income (Loss) Per Share

Net Income (Loss) Per Share

Basic net income (loss) per share data is computed by dividing net income (loss) by the weighted average number of shares of Class A and Class B common stock outstanding (excluding non-vested shares) during each period. Diluted net income (loss) per share is computed by dividing net income by the weighted average shares outstanding, including the dilutive effect, if any, of non-vested shares. For the three and six months ended June 30, 2023 and 2022, the weighted average shares outstanding as used in the calculation of diluted loss per share do not include 550,000, of outstanding stock options, as their inclusion would be antidilutive.
Cash and cash equivalents

Cash and cash equivalents

Cash includes cash on hand, cash in banks and cash in money market funds. Cash equivalents represent short-term, highly liquid investment which are readily convertible to cash and have maturities of three months or less.
Management Estimates

Management Estimates

The consolidated financial statements have been prepared in accordance with GAAP. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and the reported amounts of income and expense for the reporting period. Actual results could differ from those estimates.
Accounting for Stock Awards

Accounting for Stock Awards

The Company recognizes the cost of employee and non-employee services received in exchange for awards of equity instruments as stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the fair value of the stock award and options, is recognized as an expense, less expected forfeitures, over the requisite service period, which typically equals the vesting period. Stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 was $0.
Accounting for Income Taxes

Accounting for Income Taxes

The Company accounts for income taxes utilizing the asset and liability approach requiring the recognition of deferred tax assets and liabilities for the expected future tax consequences of net operating loss carryforwards and temporary differences between the basis of assets and liabilities for financial reporting purposes and tax purposes and for net operating loss and other carryforwards. A valuation allowance is provided for deferred tax assets based on the likelihood of realization.

The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

 

The Company operates in multiple tax jurisdictions within the United States of America. The Company remains subject to examination in all tax jurisdictions until the applicable statutes of limitation expire. As of June 30, 2023, the tax years after 2020 remain subject to examination. The Company did not record any unrecognized tax positions for the three and six months ended June 30, 2023 and 2022.
Mortgage costs

Mortgage costs

The Company amortizes mortgage costs over the life of the loan.
Recent Accounting Pronouncements Adopted

Recent Accounting Pronouncements Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”). Under the prior model, losses were recognized only as they were incurred. The new model is applicable to all financial instruments that are not accounted for at fair value through net income. The standard is effective for fiscal years beginning after December 15, 2022, for public entities qualifying as smaller reporting companies. The adoption did not have a material effect on the consolidated financial statements.
v3.23.2
Real Estate (Tables)
 6 Months Ended
Jun. 30, 2023
Real Estate [Abstract]  
Schedule of Real Estate is Comprised Real estate is comprised of the following:
   June 30,
2023		   December 31,
2022		 
         
Land  $79,100   $79,100 
Buildings   1,507,453    1,478,963 
Furniture and equipment   68,797    68,797 
           
Total  $1,655,350   $1,626,860 
v3.23.2
Mortgage Debt (Tables)
 6 Months Ended
Jun. 30, 2023
Mortgage Debt [Abstract]  
Schedule of Mortgage and Unamortized Mortgage Costs The mortgage is presented net of unamortized Mortgage costs, the outstanding balance of the loan and loan costs were as follows:
   Mortgage   Unamortized   Interest 
   Balance   mortgage Costs   Expense 
             
June 30, 2023  $1,463,366   $32,446   $44,662 
                
December 31, 2022  $1,486,191   $40,313   $91,885 
Schedule of Maturities of Mortgage Payments Future maturities of mortgage payments are as follows:
2023  $24,023 
2024   50,269 
2025  $1,389,074 
v3.23.2
Stock-Based Compensation (Tables)
 6 Months Ended
Jun. 30, 2023
Stock-Based Compensation [Abstract]  
Schedule of Summarizes the Outstanding and Vested Stock Option Activity The following summarizes the outstanding and vested stock option activity as of June 30, 2023 and December 31, 2022:
   Shares
Underling
Options		   Weighted
Average
Exercise Price
(per share)		   Weighted
Average
Remaining
Contractual
Term
(in years)		 
             
Outstanding at December 31, 2022   550,000   $0.00    5 
                
Granted   
 
    
 
           
Forfeited and expired   
 
    
 
      
Outstanding at June 30, 2023   550,000   $ 0.00    4 
v3.23.2
Fair Value Measurements (Tables)
 6 Months Ended
Jun. 30, 2023
Fair Value Measurements [Abstract]  
Schedule of Aggregate Fair Values of the Non-Financial Assets by Their Levels in the Fair Value Hierarchy The tables below aggregate the fair values of the non-financial assets by their levels in the fair value hierarchy.
    As of June 30, 2023 
    Total    Level 1    Level 2    Level 3 
Investment in Avalon Jubilee, LLC  $
-
   $
-
   $
-
   $
-
 
    As of December 31, 2022 
    Total    Level 1    Level 2    Level 3 
Investment in Avalon Jubilee, LLC  $
-
   $
-
   $
-
   $
-
 
Schedule of Determining the Fair Value of This Real Estate Partnership Investment Significant unobservable quantitative inputs in the table below were utilized in determining the fair value of this real estate partnership investment.
    Range 
    June 30,
2023		    December 31,
2022		 
Unobservable Quantitative Input          
Discount rates   16% to 20%    16% to 20% 
Schedule of Changes in the Fair Value of Real Estate Investments That are Classified as Level 3 The table below summarizes the changes in the fair value of real estate investments that are classified as Level 3.
   June 30,
2023		   December 31,
2022		 
         
Beginning Balance  $  -0-   $       -0- 
Net unrealized gain(loss) on held investment   -0-    -0- 
Purchase /additional funding   -0-    -0- 
Ending balance  $-0-   $-0- 

 
v3.23.2
Future Minimum Annual Base Rents (Tables)
 6 Months Ended
Jun. 30, 2023
Future Minimum Annual Base Rents [Abstract]  
Schedule of Future Minimum Annual Base Rental Revenue for the Next Five Years for Commercial Real Estate Owned Future minimum annual base rental revenue for the next five years for commercial real estate owned at June 30, 2023, and subject to non-cancelable operating leases is as follows:
2023  $328,710 
2024   206,425 
2025   165,477 
2026   86,199 
2027   27,300 
Thereafter   
-
 
Total  $814,111 
v3.23.2
Organization and Summary of Significant Accounting Policies (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Organization and Summary of Significant Accounting Policies (Details) [Line Items]          
Tenant receivable $ 1,417   $ 1,417   $ 3,500
Weighted average shares outstanding (in Shares) 550,000   550,000    
Stock-based compensation expense $ 0 $ 0 $ 0 $ 0  
Income tax benefits     50.00%    
Buildings and Improvements [Member] | Minimum [Member]          
Organization and Summary of Significant Accounting Policies (Details) [Line Items]          
Assets estimated useful life     20 years    
Buildings and Improvements [Member] | Maximum [Member]          
Organization and Summary of Significant Accounting Policies (Details) [Line Items]          
Assets estimated useful life     39 years    
Furniture and Equipment [Member] | Minimum [Member]          
Organization and Summary of Significant Accounting Policies (Details) [Line Items]          
Assets estimated useful life     3 years    
Furniture and Equipment [Member] | Maximum [Member]          
Organization and Summary of Significant Accounting Policies (Details) [Line Items]          
Assets estimated useful life     10 years    
v3.23.2
Real Estate (Details) - Schedule of Real Estate is Comprised - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Schedule of Real Estate is Comprised [Abstract]    
Land $ 79,100 $ 79,100
Buildings 1,507,453 1,478,963
Furniture and equipment 68,797 68,797
Total $ 1,655,350 $ 1,626,860
v3.23.2
Investment in Partnership (Details)
 6 Months Ended
Jun. 30, 2023
USD ($)
Investment in Partnership [Abstract]  
Interest owned 31.3333%
Aggregate fair value $ 0
Avalon property, description On June 30, 2023 and December 31, 2022 the Avalon Property consists of 19 finished, single-family subdivision lots and approximately 21.42 acres of subsequent phases of undeveloped land in Los Lunas, New Mexico.
v3.23.2
Mortgage Debt (Details)
 1 Months Ended
Jul. 28, 2015
USD ($)
Mortgage Debt [Abstract]  
Principal amount $ 1,750,000
Debt interest rate 6.031%
Loan proceeds $ 934,794
Capital improvements and reserves 123,757
Net proceeds 585,125
Principal and interest payments $ 11,308
v3.23.2
Mortgage Debt (Details) - Schedule of Mortgage and Unamortized Mortgage Costs - USD ($)
 6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Schedule of Mortgage and Unamortized Mortgage Costs [Abstract]    
Mortgage Balance $ 1,463,366 $ 1,486,191
Unamortized mortgage Costs 32,446 40,313
Interest Expense $ 44,662 $ 91,885
v3.23.2
Mortgage Debt (Details) - Schedule of Maturities of Mortgage Payments
Jun. 30, 2023
USD ($)
Schedule of Maturities of Mortgage Payments [Abstract]  
2023 $ 24,023
2024 50,269
2025 $ 1,389,074
v3.23.2
Income Taxes (Details)
 6 Months Ended
Jun. 30, 2023
USD ($)
$ / shares
Income Taxes [Abstract]  
Real estate investment percentage 90.00%
Net operating loss carry forward (in Dollars) | $ $ 21,280,000
Operating loss taxable income description These net operating losses may be available in future years to reduce taxable income when and if it is generated. These loss carryforwards begin to expire in 2027 and are available to offset 100% of taxable income. Net operating losses generated in 2018 and thereafter will be available to offset 80% of taxable income beginning in 2021. Under the Cares Act, taxpayers with NOLs arising in tax years beginning in 2018, 2019 and 2020 can carry them back five years.
Taxable income per share $ 39,000
Taxable income per share $ 0.01
v3.23.2
Commitments, Contingencies, Concentrations and Related parties (Details) - USD ($)
 3 Months Ended 6 Months Ended 12 Months Ended
Nov. 08, 2011
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Commitments, Contingencies, Concentrations and Related parties (Details) [Line Items]            
Property management fee   $ 133,994   $ 133,994   $ 114,799
Voting securities beneficial, percentage       5.00%    
Property Management Agreement [Member]            
Commitments, Contingencies, Concentrations and Related parties (Details) [Line Items]            
Monthly rental income from tenants, percentage 5.00%          
Management fees   13,103 $ 12,059 $ 25,555 $ 22,651  
Asset Management Arrangement [Member]            
Commitments, Contingencies, Concentrations and Related parties (Details) [Line Items]            
Management fees   3,931 $ 3,688 7,667 $ 6,866  
Property management fee   $ 59,996   $ 59,996   $ 52,329
Asset management fee percentage 1.50%          
Description of agreement term       The Asset Management Agreement renewed for a one-year term on November 8, 2022 and will automatically renew for one-year terms until it is terminated by either party upon written notice.    
Accounts Receivable [Member] | Tenants One [Member]            
Commitments, Contingencies, Concentrations and Related parties (Details) [Line Items]            
Concentration of risk, percentage       13.50%   20.00%
Accounts Receivable [Member] | Tenants Two [Member]            
Commitments, Contingencies, Concentrations and Related parties (Details) [Line Items]            
Concentration of risk, percentage       15.30%   15.00%
Accounts Receivable [Member] | Tenants Three [Member]            
Commitments, Contingencies, Concentrations and Related parties (Details) [Line Items]            
Concentration of risk, percentage       29.00%   14.00%
Accounts Receivable [Member] | Tenants Four [Member]            
Commitments, Contingencies, Concentrations and Related parties (Details) [Line Items]            
Concentration of risk, percentage           12.00%
Mr. Jekogian [Member]            
Commitments, Contingencies, Concentrations and Related parties (Details) [Line Items]            
Attorneys fees       $ 1,500,000    
v3.23.2
Stock-Based Compensation (Details) - Class B Common Stock 2012 Incentive Plan [Member]
Aug. 15, 2012
USD ($)
shares
Stock-Based Compensation (Details) [Line Items]  
Reserves shares | shares 1,000,000
Fair market value | $ $ 100,000
v3.23.2
Stock-Based Compensation (Details) - Schedule of Summarizes the Outstanding and Vested Stock Option Activity
 6 Months Ended
Jun. 30, 2023
$ / shares
shares
Schedule of Summarizes the Outstanding and Vested Stock Option Activity [Abstract]  
Shares Underling Options Outstanding Beginning Balance | shares 550,000
Weighted Average Exercise Price (per share) Outstanding Beginning Balance | $ / shares $ 0
Weighted Average Remaining Contractual Term (in years) Outstanding Beginning Balance 5 years
Shares Underling Options Granted | shares
Weighted Average Exercise Price (per share) Granted | $ / shares
Shares Underling Options Forfeited and expired | shares
Weighted Average Exercise Price (per share) Forfeited and expired | $ / shares
Shares Underling Options Outstanding Ending Balance | shares 550,000
Weighted Average Exercise Price (per share) Outstanding Ending Balance | $ / shares $ 0
Weighted Average Remaining Contractual Term (in years) Ending Balance 4 years
v3.23.2
Fair Value Measurements (Details) - USD ($)
 6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Fair Value Measurements [Abstract]    
Estimated fair value of mortgages payable $ 1,448,645 $ 1,469,639
Mortgages carrying value 1,463,366 1,486,191
Unamortized deferred financing costs $ 32,446 $ 40,313
Market interest rate 6.50% 6.50%
Mortgage maturity term 2 years 2 months 12 days 2 years 9 months 18 days
v3.23.2
Fair Value Measurements (Details) - Schedule of Aggregate Fair Values of the Non-Financial Assets by Their Levels in the Fair Value Hierarchy - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Fair Value Measurements (Details) - Schedule of Aggregate Fair Values of the Non-Financial Assets by Their Levels in the Fair Value Hierarchy [Line Items]    
Investment in Avalon Jubilee, LLC
Level 1 [Member]    
Fair Value Measurements (Details) - Schedule of Aggregate Fair Values of the Non-Financial Assets by Their Levels in the Fair Value Hierarchy [Line Items]    
Investment in Avalon Jubilee, LLC
Level 2 [Member]    
Fair Value Measurements (Details) - Schedule of Aggregate Fair Values of the Non-Financial Assets by Their Levels in the Fair Value Hierarchy [Line Items]    
Investment in Avalon Jubilee, LLC
Level 3 [Member]    
Fair Value Measurements (Details) - Schedule of Aggregate Fair Values of the Non-Financial Assets by Their Levels in the Fair Value Hierarchy [Line Items]    
Investment in Avalon Jubilee, LLC
v3.23.2
Fair Value Measurements (Details) - Schedule of Determining the Fair Value of This Real Estate Partnership Investment
Jun. 30, 2023
Dec. 31, 2022
Minimum [Member]    
Unobservable Quantitative Input    
Discount rates 16.00% 16.00%
Maximum [Member]    
Unobservable Quantitative Input    
Discount rates 20.00% 20.00%
v3.23.2
Fair Value Measurements (Details) - Schedule of Changes in the Fair Value of Real Estate Investments That are Classified as Level 3 - USD ($)
 6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Schedule of Changes in the Fair Value of Real Estate Investments That are Classified as Level 3 [Abstract]    
Beginning Balance $ 0 $ 0
Net unrealized gain(loss) on held investment 0 0
Purchase /additional funding 0 0
Ending balance $ 0 $ 0
v3.23.2
Future Minimum Annual Base Rents (Details) - Schedule of Future Minimum Annual Base Rental Revenue for the Next Five Years for Commercial Real Estate Owned
 6 Months Ended
Jun. 30, 2023
USD ($)
Schedule of Future Minimum Annual Base Rental Revenue for the Next Five Years for Commercial Real Estate Owned [Abstract]  
2023 $ 328,710
2024 206,425
2025 165,477
2026 86,199
2027 27,300
Thereafter
Total $ 814,111
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