MOBILE INFRASTRUCTURE CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The following is a financial review and analysis of the Company's financial
condition and results of operations for the three and nine months ended
September 30, 2022 and 2021. This discussion and analysis should be read in
conjunction with the accompanying consolidated financial statements and the
notes thereto and Management's Discussion and Analysis of Financial Conditions
and Results of Operations in the Company's annual report on Form 10-K for the
year ended December 31, 2021. As used herein, the terms "we," "our" and "us"
refer to Mobile Infrastructure Corporation, and, as required by context, Mobile
Infra Operating Partnership, L.P., formerly known as MVP REIT II Operating
Partnership, LP, which the Company refers to as the "Operating Partnership," and
to their subsidiaries.



Forward-Looking Statements



Certain statements included in this quarterly report on Form 10-Q (this
"Quarterly Report") that are not historical facts (including any statements
concerning investment objectives, other plans and objectives of management for
future operations or economic performance, or assumptions or forecasts related
thereto) are forward-looking statements. Forward-looking statements are
typically identified by the use of terms such as "may," "should," "expect,"
"could," "intend," "plan," "anticipate," "estimate," "believe," "continue,"
"predict," "potential" or the negative of such terms and other comparable
terminology.



The forward-looking statements included herein are based upon the Company's
current expectations, plans, estimates, assumptions and beliefs, which involve
numerous risks and uncertainties. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Although the Company believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, the actual
results and performance could differ materially from those set forth in the
forward-looking statements. Factors which could have a material adverse effect
on operations and future prospects include, but are not limited to:



πŸ‡§πŸ‡· the fact that the Company has limited history, as the Company was formed in

2015;

πŸ‡§πŸ‡· the ability of Mobile Infrastructure Trusta maryland real estate investment

trust (“MIT”), to consummate the initial public offering (the “MIT IPO”) of

its common shares of beneficial interest, $0.0001 par value per share and the

Company’s and MIT’s ability to consummate the merger and the transactions

contemplated by the Amended and Restated Agreement and Plan of Merger, dated

as of September 26, 2022 (the “Merger Agreement”), by and between the Company

and MIT (the “Merger”) and realize the anticipated benefits of the MIT IPO and

    the Merger;


  ? the Company's ability to complete a liquidity event;

πŸ‡§πŸ‡· the Company’s ability to generate sufficient cash flows to pay distributions

to the Company’s stockholders;

πŸ‡§πŸ‡· the impact on our business and those of our tenants from epidemics, pandemics

or outbreaks of an illness, disease or virus (including COVID-19), including

lockdowns and similar mandates;

πŸ‡§πŸ‡· the fact that the Company has experienced net losses since inception and may

continue to experience additional losses;

πŸ‡§πŸ‡· changes in economic conditions generally and the real estate and debt markets

    specifically, including economic trends impacting parking facilities;


  ? risks inherent in the real estate business, including tenant defaults,
    potential liability relating to environmental matters and the lack of
    liquidity of real estate investments;

πŸ‡§πŸ‡· competitive factors that may limit the Company’s ability to make investments

or attract and retain tenants;

πŸ‡§πŸ‡· the ability of leases under our New Lease Structure (as defined below) to

provide increases in same property rental revenue as compared to our prior

leases;

πŸ‡§πŸ‡· the Company’s ability to achieve its investment strategy or increase the value

    of its portfolio;


  ? the loss of key personnel could have a material adverse effect upon the
    Company's ability to conduct and manage the Company's business;

πŸ‡§πŸ‡· the performance of properties the Company has acquired or may acquire or loans

the Company has made or may make that are secured by real property;

πŸ‡§πŸ‡· the Company’s ability to successfully integrate pending acquisitions and

transactions and implement an operating strategy;

πŸ‡§πŸ‡· potential damage and costs arising from natural disasters, terrorism and other

    extraordinary events, including extraordinary events affecting parking
    facilities included in the Company's portfolio;


  ? the Company's ability to act on its pipeline of acquisitions;




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πŸ‡§πŸ‡· the availability of capital and debt financing generally, and any failure to

    obtain debt financing at favorable terms or a failure to satisfy the
    conditions, covenants and requirements of that debt;


  ? changes in interest rates;

πŸ‡§πŸ‡· the Company’s ability to negotiate amendments or extensions to existing debt

agreements;

πŸ‡§πŸ‡· the Company’s loss of REIT status and ability to remedy its loss of REIT

    status under U.S. federal income tax law;


  ? potential adverse impacts from changes to the U.S. tax laws; and

πŸ‡§πŸ‡· changes to generally accepted accounting principles in the United Statesor

    GAAP.




Any of the assumptions underlying the forward-looking statements included herein
could be inaccurate, and undue reliance should not be placed upon any
forward-looking statements included herein. All forward-looking statements are
made as of the date of this Quarterly Report, and the risk that actual results
will differ materially from the expectations expressed herein will increase with
the passage of time. Except as otherwise required by the federal securities
laws, the Company undertakes no obligation to publicly update or revise any
forward looking statements made after the date of this Quarterly Report, whether
as a result of new information, future events, changed circumstances or any
other reason. In light of the significant uncertainties inherent in the forward
looking statements included in this Quarterly Report, the inclusion of such
forward-looking statements should not be regarded as a representation by us or
any other person that the objectives and plans set forth in this Quarterly
Report will be achieved.



Overview


The Company focuses on acquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United StatesπŸ‡§πŸ‡· The Company targets both parking garage and surface lot properties primarily in top 50 US Metropolitan Statistical Areas (“MSAs”), with proximity to key demand drivers, such as commerce, events and venues, government and institutions, hospitality and multifamily central business districts.




As of September 30, 2022, the Company owned 44 parking facilities in 22 separate
markets throughout the United States, with a total of 15,750 parking spaces and
approximately 5.4 million square feet. As of September 30, 2022, the Company
also owned approximately 0.2 million square feet of commercial space adjacent to
its parking facilities.



Management of the Company has been focused on the undertaking of four strategic
objectives to reposition the Company for its next phase of growth and a
potential liquidity event. The Company converted all management contracts back
to leases under the New Lease Structure effective as of January 1, 2022, so that
the Company once again has qualifying income from a REIT-test perspective
beginning in 2022. The second objective was to focus on the balance sheet and
the Company's upcoming debt maturities. During the first quarter, the Company
extended maturities and refinanced 2022 maturities with a revolving credit
facility from KeyBank, which greatly improved the cost of interest on that debt.
Management's third objective was to focus heavily on the performance of each
asset, working with the operators to create a business plan for each asset to
improve cash flow and rental income to the Company. Those business plans were
finalized in the first quarter of 2022 and are currently being implemented with
our tenant-operators. The Company anticipates that asset-level performance will
continue to improve through 2022. Finally, management continues to focus on the
fourth objective which is the remediation of REIT status for the Company and
evaluating options for a potential liquidity event, including a potential
listing on a national securities exchange.



On September 26, 2022, the Company and MIT entered into the Merger Agreement,
which amended and restated the Agreement and Plan of Merger, dated as of May 27,
2022, pursuant to which, at the effective time, the Company will merge with and
into MIT, with MIT continuing as the surviving entity resulting from the Merger.
See Note A - Organization and Business Operations in Part I, Item 1 - Notes to
the Consolidated Financial Statements of this Quarterly Report for further
information regarding the Merger.



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Objectives



The Company closed on the Transaction (as defined in Part I, Item 1 - Notes to
the Consolidated Financial Statements Note A - Organization and Business
Operations) on August 25, 2021, which resulted in a new management team. Over
the next twelve months management will be focused predominantly on the
following:



β€’ Continuing to identify paths for remediation of REIT status;

β€’ Working with the third-party operators to optimize the performance of the

Company’s parking facilities and other assets to move towards cash flow

positivity;

β€’ Reducing corporate overhead to move the Company towards profitability; and

  β€’ Pursuing options for refinancing near-term debt maturities.




The Company's strategic plan includes pursuing acquisitions as well as a
potential liquidity event, which may include a potential listing event or other
alternatives intended to provide the Company scale and capacity to grow beyond
its current asset base.



Since the closing of the Transaction, our new management team has been working
closely with our tenants to evaluate capital requirements of the assets, with a
view to understanding current and future demand drivers of those assets. The
Company has been implementing its proprietary technology which provides
real-time information on the performance of assets. Going forward under the New
Lease Structure (as defined below), the Company is involved with capital
expenditures related to upgrades and optimization of our parking facilities,
including but not limited to gate arm systems, lighting, and large capital
improvements to structure and concrete. We expect to maintain an active dialogue
with our tenants for the betterment of the Company's portfolio.



Investment Strategy & Criteria




Because of our new management team's long experience in the parking industry,
the Company often receives off-market calls for parking facilities that are not
yet being marketed for sale, as well as have early notices on properties just
getting ready to be marketed. As such, the Company has a pipeline of
acquisitions that is both bespoke and actionable, that the Company believes are
off-market and largely unavailable to our competitors. The Company intends to
continue to consolidate the industry through acquisitions, partnering with both
owners and operator tenants, to create a meaningful pipeline and scale.



The Company's investment strategy has historically focused primarily on
acquiring, owning and leasing parking facilities, including parking lots,
parking garages and other parking structures throughout the United States. The
Company has historically focused primarily on investing in income-producing
parking lots and garages with air rights in MSAs. In expanding the Company's
portfolio, the Company will seek geographically diverse investments that address
multiple key demand drivers and demonstrate consistent consumer use that are
expected to generate positive cash flows and provide greater predictability
during periods of economic uncertainty. Such targeted investments include, but
are not limited to, parking facilities near one or more of the following key
demand drivers:



  β€’ Commerce
  β€’ Events and venues
  β€’ Government and institutions
  β€’ Hospitality
  β€’ Multifamily central business districts



The Company generally targets parking facilities that are near multiple key demand drivers so as not to be solely reliant on a single source of income. Parking garages in downtown cores constitute a large portion of the Company’s parking facilities as they serve multiple key demand drivers.




As a result of the COVID-19 pandemic, such key demand drivers have been and are
expected to be diminished for an indeterminate period of time with an uneven
return of the office workforce for downtown cores across our properties.



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The Company works closely with our current tenants to understand the return to
each individual market, both as the Company considers the key demand drivers of
the Company's current assets, as well as new assets that the Company may
consider acquiring as part of our investment strategy. The Company's deep
relationships with key tenants help facilitate collaboration with respect to our
portfolio.



The Company is focused on acquiring properties that are expected to generate
positive cash flow, located in populated MSAs and expected to produce income
within 12 months of the properties' acquisition. The Company intends to acquire
under-managed parking facilities and collaborate with its tenants to implement a
tailored, value-add approach that includes fostering the implementation of
identified value levers and mitigating risk exposure, while fostering local
business relationships to derive market knowledge and connectivity.



In the event of a future acquisition of properties, the Company would expect the
foregoing criteria to serve as guidelines; however, management and the Company's
Board of Directors may vary from these guidelines to acquire properties which
they believe represent value or growth opportunities.



The Company's investments are subject to various federal, state, local and
foreign laws, ordinances and regulations, including, among other things, zoning
regulations, land use controls, environmental controls relating to air and water
quality, noise pollution and indirect environmental impacts such as increased
motor vehicle activity. The Company has obtained or intends to obtain all
permits and approvals necessary under current law to operate its investments.



The Company cannot assure you that the Company will attain investment objectives
or that the value of the Company's assets will not decrease. The Company's Board
of Directors reviews the Company's investment policies at least annually to
determine whether the Company's investment policies continue to be in the best
interests of the Company's stockholders.



See Note A - Organization and Business Operations in Part I, Item 1 - Notes to
the Consolidated Financial Statements of this Quarterly Report for information
on the Company's recapitalization.



Trends and Other Factors Affecting Our Business

Various trends and other factors affect or have affected the Company’s operating results, including:




The COVID-19 Pandemic



The ongoing COVID-19 pandemic has significantly adversely impacted global
economic activity, contributing to significant volatility. The return to
normalized movement is relatively uneven among markets and industries, which has
impacted the performance of our assets, as many of the Company's properties are
located in urban centers, near government buildings, entertainment centers, or
hotels. While the employment level in the United States has nearly returned to
2019 levels, many companies continue to deploy a work-from-home or hybrid remote
strategy for employees. We anticipate that a hybrid work structure for
traditional central business district office workers will be the normalized
state going-forward. This has impacted the performance of many of our assets
that have office exposure and underscores the importance of a multi-key demand
driver strategy in repositioning current and/or acquiring new assets. During
2020 and 2021, many state and local governments restricted public gatherings and
implemented social distancing measures, which has, in some cases, eliminated or
severely reduced the demand for parking. State governments and other authorities
have been increasingly lifting or modifying some of these measures, which will
encourage greater movement around and between cities. Should public
health restrictions be reinstated, the Company's rental revenue may continue to
be adversely affected by other pandemics and may be further materially adversely
affected to the extent that economic conditions result in the elimination of
jobs or the migration of jobs from the urban centers where the Company's parking
facilities are situated to other locations. In particular, a majority of the
Company's property leases call for additional percentage rent, which will be
adversely impacted by a decline in the demand for parking. However, we see
increasing demand for multi-use assets that have exposure to entertainment and
sporting venues or have exposure to driving travel through hotel relationships.
As restrictions continue to lift across the United States, we anticipate a
return to normal, in particular a return to driving vacations, which may
positively impact the longer-term outlook of central business districts.



The COVID-19 pandemic has had, and may continue to have, a material adverse
effect on the Company's business, financial condition, results of operations,
cash flows, liquidity and ability to satisfy debt service obligations, and its
duration and ultimate lasting impact is unknown. The Company's business,
financial condition, results of operations, cash flows, liquidity and ability to
satisfy debt service obligations may continue to be negatively impacted as a
result of the COVID-19 pandemic and may remain at depressed levels compared to
pre-COVID-19 pandemic levels for an extended period.



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The Company's 2020 and 2021 annual financial results were more severely impacted
by the COVID-19 pandemic in comparison with the financial results during the
first nine months of 2022. In response to the COVID-19 pandemic, the
Company entered into certain lease amendments and new lease agreements with
tenants and operators during 2020. Under these lease amendments and agreements,
the tenants operated parking facilities on the Company's behalf and paid their
operating expenses from gross parking revenue and was required to remit an
agreed upon percentage of the remainder to the Company instead of base rent
payments. Revenues from these properties were recorded as management income,
which did not constitute qualifying REIT income for purposes of the annual REIT
gross income tests, and, as a result, the Company was not in compliance with the
annual REIT income tests for its taxable year ended December 31, 2020.
Accordingly, the Company did not qualify as a REIT in 2020 and has been taxed as
a C corporation beginning with its taxable year ended December 31, 2020. The
Company converted these lease amendments and new lease agreements to the New
Lease Structure as defined below and does not expect to recognize any management
income from the New Lease Structure described below going forward.



Fuel Prices



Increased fuel prices may adversely affect the Company's operating environment
and costs. Fuel prices have a direct impact on the ability and frequency of
consumers to engage in activities related to transportation. Increases in the
price of fuel may result in higher transportation costs and adversely affect
consumer use at the Company's parking garages. Increases in fuel costs also can
lead to other non-recoverable, direct expense increases to the Company through,
for example, increased costs of energy. Increases in energy costs for the
Company's tenants are typically recovered from lessees, although the
Company's share of energy costs increases as a result of lower occupancies, and
higher operating cost reimbursements impact the ability to increase underlying
rents. Rising fuel prices also may increase the cost of construction and the
cost of materials that are petroleum-based, thus affecting the development of
the Company's existing assets or tenants' ongoing development projects.



The Company's 2020 and 2021 annual financial results and the financial results
for the nine months ended September 30, 2022 were not impacted by the recent
increase in fuel prices in the United States. The Company cannot predict the
extent and duration of the increase in fuel prices or its economic impact.
Further, the extent and strength of any economic recovery, and/or when fuel
prices decline is uncertain and subject to various factors and conditions. As a
result, the Company's results of operations and balance sheets may not be
indicative of future operating results or of its future financial condition.



Results of Operations for the three months ended September 30, 2022compared to the three months ended September 30, 2021 (dollars in thousands):



                                  For the Three Months Ended September 30,
                              2022             2021        $ Change      % Change
Revenues
Base rental income         $    2,173       $    3,285     $  (1,112 )       (33.9 )%
Management income                   -            1,290        (1,290 )      (100.0 )%
Percentage rental income        6,245            1,203         5,042         419.1 %
Total revenues             $    8,418       $    5,778     $   2,640          45.7 %




Base rental income



The decrease in base rental income for the three months ended September 30, 2022
compared to the same period in 2021 is due to (1) a $1.3 million decrease in
rental income from our same store properties as a result of restructuring most
of our leases and management contracts to a new lease structure which
require tenants to pay a lower base rent (typically $500-$1,000 per month) (the
"New Lease Structure"), partially offset by (2) a $0.3 million increase in base
rental income related to five parking facilities acquired in the third and
fourth quarters of 2021 and one property acquired during the second quarter of
2022 and (3) a $0.2 million increase for base rental income recognized through a
consolidated VIE entity that prior to August 25, 2021 was accounted for under
the equity method of accounting. The Company defines same store properties as
those that were owned and consolidated for the full period in both comparison
periods.



Management income



The $1.3 million decrease in management income for the three months ended
September 30, 2022 compared to the same period in 2021 is due to the
restructuring of management contracts to the New Lease Structure.  Management
income for 2021 reflects income from 14 management contracts that existed as of
September 30, 2021. As of September 30, 2022, there are no management contracts
in effect.



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Percentage rental income



The $5.0 million increase in percentage rent income is due to (1) a $2.6 million
increase from our same store properties as a result of an increase in the demand
for parking across our portfolio as well as the impact of our New Lease
Structure whereby we are recognizing a higher percentage of parking revenues
generated at our properties, and (2) a $2.4 million increase related to five
parking facilities acquired in the third and fourth quarters of 2021 and one
property acquired during the second quarter of 2022. Under the New Lease
Structure in addition to base rent we recognize percentage rent equal to a
designated percentage, typically ninety percent (90%), of the amount by which
gross revenues at the property during any lease year exceed a negotiated base
amount.



The demand for event parking has increased during 2022 as a result of Major
League Baseball and National Basketball Association producing full seasons with
limited, if any, restrictions on capacity at sporting venues compared to the
prior year restrictions due to COVID-19.  This demand positively affects several
our properties in St. Louis, Minneapolis, Houston and Milwaukee. The demand for
event parking has also increased in our markets where theatres, festivals, and
other gatherings have resumed during 2022.



Additionally, the demand for hotel parking has increased in key markets such as
Chicago, Detroit, Denver and Cincinnati, driven by the corresponding increase in
events, vacation, and business travel during 2022.



                                                    For the Three Months Ended September 30,
                                              2022             2021           $ Change       % Change
Operating expenses
Property taxes                             $    1,912       $    1,119       $      793           70.9 %
Property operating expense                        501              338              163           48.2 %
General and administrative                      2,455            1,805              650           36.0 %
Professional fees                                 525              413              112           27.1 %
Organizational, offering and other costs        2,168                -            2,168          100.0 %
Depreciation and amortization expenses          2,137            1,437              700           48.7 %
Total operating expenses                   $    9,698       $    5,112       $    4,586           89.7 %




Property taxes



The $0.8 million increase in property taxes during the three months ended
September 30, 2022 compared to September 30, 2021 is attributable primarily to
(1) approximately $0.7 million related to new acquisitions, including the
five properties acquired during the third and fourth quarters of 2021 and one
property acquired during the second quarter of 2022 and (2) the New Lease
Structure, which increased the property tax burden on the Company as it is
solely responsible for the property tax payments under the New Lease Structure.



Property operating expense



The $0.2 million increase in property operating expense during the three months
ended September 30, 2022 compared to September 30, 2021 is attributable
primarily to increased insurance, professional services related to engineering
surveys and other operating expenses attributable to the five properties
acquired during the third and fourth quarters of 2021 and one property acquired
during the second quarter of 2022.



General and administrative



The $0.7 million increase in general and administrative expenses during
the three months ended September 30, 2022 compared to September 30, 2021 is
primarily attributable to non-cash compensation cost for performance units
granted on May 27, 2022 of approximately $1.1 million which was partially offset
by a decrease in corporate directors and officers insurance of approximately
$0.4 million.



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Professional fees



Professional fees increased by approximately $0.1 million during the three
months ended September 30, 2022 compared to September 30, 2021. The increase was
primarily due to insurance proceeds received in 2021 to reimburse the Company
for legal fees for claims made against the director and officer insurance
policy, partially offset by a decrease in legal fees of approximately $0.5
million.



Organizational, offering and other costs

During the three months ended September 30, 2022the Company incurred approximately $2.2 million in organizational and offering costs in connection with the Merger and other transactions primarily attributable to legal and accounting fees.

Depreciation and amortization expenses




The $0.7 million increase in depreciation and amortization expenses during
the three months ended September 30, 2022 compared to September 30, 2021 is due
to the five properties acquired during the third and fourth quarters of 2021,
the one property acquired during the second quarter of 2022, and the $4.0
million of technology acquired as a result of the Transaction.



                                                  For the Three Months Ended September 30,
                                              2022            2021        $ Change       % Change
Other income (expense)
Interest expense                           $   (3,387 )     $  (2,487 )   $    (900 )         36.2 %
Loss on sale of real estate                       (52 )             -           (52 )        100.0 %
Settlement of deferred management
internalization                                     -          10,040       (10,040 )       (100.0 )%
Transaction expenses                                -         (12,224 )      12,224         (100.0 )%
Gain on consolidation of DST                        -             360          (360 )       (100.0 )%
Other income                                      123               5           118         2369.2 %
Total other expense                        $   (3,316 )     $  (4,306 )   $     990          (23.0 )%




Interest expense



The increase in interest expense of approximately $0.9 million during the three
months ended September 30, 2022 compared to the same period in the prior year
is primarily attributable to (1) $1.5 million of third quarter 2022 interest
expense on the Company's Revolving Credit Facility (which includes $0.5 million
of non-cash fee amortization), and (2) interest expense on loans assumed as part
of the Transaction, partially offset by the repayment of $56.1 million of
mortgage loans during the second quarter of 2022.



Loss on sale of investment in real estate

On September 1, 2022the Company sold a parking lot located in Canton, Ohio (“Canton Lot”) for $0.7 millionresulting in a loss on sale of real estate of approximately $0.1 millionπŸ‡§πŸ‡·

Gain on consolidation of DST




The gain on consolidation of DST is the result of consolidating our investment
in MVP St. Louis Cardinal Lot, DST, beginning in the third quarter of 2021which
was previously accounted for under the equity method of accounting.



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Settlement of deferred management internalization and Transaction expenses




As of the closing of the Transaction, expenses of approximately $12.2 million,
including investment banking, legal, lender consent and employee severance
costs, and the settlement of the deferred management internalization liability
of $10.0 million were recorded in transaction expenses and settlement of
deferred management internalization, respectively.



Results of Operations for the nine months ended September 30, 2022compared to the nine months ended September 30, 2021 (dollars in thousands):



                                   For the Nine Months Ended September 30,
                              2022             2021        $ Change       % Change
Revenues
Base rental income         $     6,346       $   9,570     $  (3,224 )        (33.7 )%
Management income                  427           2,294        (1,867 )        (81.4 )%
Percentage rental income        15,430           1,443        13,987          969.3 %
Total revenues             $    22,203       $  13,307     $   8,896           66.8 %




Base rental income



The decrease in base rental income for the nine months ended September 30, 2022
compared to the same period in 2021 is due to (1) a $3.9 million decrease in
rental income from our same store properties as a result of restructuring most
of our leases and management contracts to the New Lease Structure which require
tenants to pay a lower base rent (typically $500-$1,000 per month), partially
offset by (2) a $0.9 million increase in base rental income related to five
parking facilities acquired in the third and fourth quarters of 2021 and one
property acquired during the second quarter of 2022 and (3) a $0.6 million
increase for base rental income recognized through a consolidated VIE entity
that prior to August 25, 2021 was accounted for under the equity method of
accounting.



Management income



The $1.9 million decrease in management income for the nine months ended
September 30, 2022 compared to the same period in 2021 is due to the
restructuring of management contracts to the New Lease Structure.  Management
income for 2021 reflects income from 14 management contracts that existed as of
September 30, 2021.  The management income for 2022 reflects collections from
the remaining management contracts which were converted to the New Lease
Structure at the beginning of 2022.  As of September 30, 2022, there are no
management contracts in effect.



Percentage rental income



The $14.0 million increase in percentage rent income is due to (1) a $8.2
million increase from our same store properties as a result of an increase in
the demand for parking across our portfolio as well as the impact of our New
Lease Structure whereby we are recognizing a higher percentage of parking
revenues generated at our properties, and (2) a $5.7 million increase related to
five parking facilities acquired in the third and fourth quarters of 2021 and
one property acquired during the second quarter of 2022. Under the New Lease
Structure in addition to base rent we recognize percentage rent equal to a
designated percentage, typically ninety percent (90%), of the amount by which
gross revenues at the property during any lease year exceed a negotiated base
amount.



The demand for event parking has increased during 2022 as a result of Major
League Baseball and National Basketball Association producing full seasons with
limited, if any, restrictions on capacity at sporting venues compared to the
prior year restrictions due to COVID-19.  This demand positively affects several
our properties in St. Louis, Minneapolis, Houston and Milwaukee. The demand for
event parking has also increased in our markets where theatres, festivals, and
other gatherings have resumed during 2022.



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Additionally, the demand for hotel parking has increased in key markets such as
Chicago, Detroit, Denver and Cincinnati, driven by the corresponding increase in
events, vacation, and business travel during 2022.



                                                    For the Nine Months Ended September 30,
                                              2022              2021         $ Change       % Change
Operating expenses
Property taxes                             $     5,592       $    3,421     $    2,171           63.5 %
Property operating expense                       2,069              894          1,175          131.4 %
General and administrative                       5,843            4,665          1,178           25.3 %
Professional fees                                2,087            2,243           (156 )         (7.0 )%
Organizational, offering and other costs         4,693                -          4,693          100.0 %
Depreciation and amortization expenses           6,125            3,953          2,172           54.9 %
Total operating expenses                   $    26,409       $   15,176     $   11,233           74.0 %




Property taxes



The $2.2 million increase in property taxes during the nine months ended
September 30, 2022 compared to September 30, 2021 is attributable primarily to
(1) approximately $2.0 related to new acquisitions, including the
five properties acquired during the third and fourth quarters of 2021 and one
property acquired during the second quarter of 2022 and (2) the New Lease
Structure, which increased the property tax burden on the Company as it is
solely responsible for the property tax payments under the New Lease Structure.



Property operating expense



The $1.2 million increase in property operating expense during the nine months
ended September 30, 2022 compared to September 30, 2021 is attributable
primarily to increased insurance, professional services related to engineering
surveys and other operating expenses attributable to the five properties
acquired during the third and fourth quarters of 2021 and one property acquired
during the second quarter of 2022.



General and administrative



The $1.2 million increase in general and administrative expenses during the
nine months ended September 30, 2022 compared to September 30, 2021 is primarily
attributable to an increase in payroll and related expenses of approximately
$0.4 million, non-cash compensation cost for performance units granted on May
27, 2022 of approximately $1.5 million, and an increase in travel and other
office related expenses of approximately $0.1 million. This was partially offset
by a decrease in corporate directors and officers insurance of approximately
$1.0 million.



Professional fees



Professional fees decreased by approximately $0.2 million during the nine months
ended September 30, 2022 compared to September 30, 2021, primarily due to legal
fees incurred in connection with the settlement of previously disclosed
investigations, partially offset by insurance proceeds received in 2021 to
reimburse the Company for legal fees for claims made against the director and
officer insurance policy.


Organizational, offering and other costs

During the nine months ended September 30, 2022the Company incurred approximately $4.7 million in organizational and offering costs in connection with the Merger and other transaction primarily attributable to legal and accounting fees.




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Depreciation and amortization expenses




The $2.2 million increase in depreciation and amortization expenses during the
nine months ended September 30, 2022 compared to September 30, 2021 is primarily
due to the five properties acquired during the third and fourth quarters of
2021, one property acquired during the second quarter of 2022, and the $4.0
million of technology acquired as a result of the Transaction.



                                                  For the Nine Months Ended September 30,
                                              2022           2021        $ Change       % Change
Other income (expense)
Interest expense                           $   (9,094 )    $  (6,783 )   $  (2,311 )         34.1 %
Other income                                      153              5           148         2969.2 %
Loss on sale of real estate                       (52 )            -           (52 )        100.0 %
PPP loan forgiveness                              328            348           (20 )         (5.7 )%
Settlement of deferred management
internalization                                     -         10,040       (10,040 )       (100.0 )%
Gain on consolidation of DST                        -            360          (360 )       (100.0 )%
Transaction expenses                                -        (12,224 )      12,224         (100.0 )%
Total other expense                        $   (8,665 )    $  (8,254 )   $    (411 )          5.0 %




Interest expense



The increase in interest expense of approximately $2.3 million during the
nine months ended September 30, 2022 compared to the same period in the prior
year is primarily attributable to (1) $2.5 million of interest expense on the
Company's Revolving Credit Facility (which includes non-cash fee amortization of
$1.0 million), (2) interest expense on new loans assumed as part of the
Transaction, partially offset by the repayment of $56.1 million of mortgage
loans during the second quarter of 2022.



Loss on sale of investment in real estate

On September 1, 2022the Company sold the Canton Lot for $0.7 millionresulting in a loss on sale of real estate of approximately $0.1 millionπŸ‡§πŸ‡·



PPP loan forgiveness



During May 2021, the Company received notification from the U.S. Small Business
Administration ("SBA") stating that the first-round paycheck protection program
loan was forgiven in full in the amount of $348,000. During April 2022, the
Company received notification from the SBA stating that the
second-round paycheck protection program loan was forgiven in full in the amount
of $328,000. The forgiveness of these loans was recognized in the consolidated
statements of operations in the month they were forgiven.



Gain on consolidation of DST



The gain on consolidation of DST is the result of consolidating our investment
in MVP St. Louis Cardinal Lot, DST, beginning in the third quarter of 2021which
was previously accounted for under the equity method of accounting.



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Settlement of deferred management internalization and Transaction expenses




As of the closing of the Transaction, transaction expenses of approximately
$12.2 million, including investment banking, legal, lender consent and employee
severance costs, and the settlement of the deferred management internalization
liability of $10.0 million were recorded in transaction expenses and settlement
of deferred management internalization, respectively.



Liquidity and Capital Resources




Effective March 29, 2022, the Company secured a $75.0 million Revolving Credit
Facility with a $75.0 million accordion feature (the "Revolving Credit
Facility") with KeyBanc Capital Markets, as lead arranger, and KeyBank National
Association, as administrative agent. During the second quarter of 2022, the
Company drew on $73.7 million of the available $75.0 million for the repayment
of debt maturities. The $75.0 million accordion feature of the Revolving Credit
Facility can be utilized for acquisitions, capital expenditures and other
working capital requirements.



The Company's principal source of funds to meet our operating expenses, pay debt
service obligations and make distributions to our stockholders will be rents
from tenants at the Company's parking facilities. Although the Company has no
present intention to do so, the Company also may sell properties that the
Company owns or place mortgages on properties that the Company owns to raise
capital.


The Company has no commercial paper outstanding, nor have we entered into any swaps or hedges.

The Company’s short-term and long-term liquidity needs will consist primarily of funds necessary for payments of indebtedness, acquisitions of assets, development of properties, and capital expenditures. Existing development activities expected to be completed in the near-term are expected to cost approximately $2.2 millionπŸ‡§πŸ‡·



Going Concern



The accompanying consolidated financial statements are prepared in accordance
with generally accepted accounting principles applicable to a going concern,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business.



The Company has incurred net losses since its inception and anticipates net
losses for the near future. As of September 30, 2022, the Company was in
compliance with all applicable covenants in agreements governing its debt.
However, based on the Company's projected financial performance for the
twelve-month period subsequent to the date of the filing of this Quarterly
Report on Form 10-Q, the Company currently projects that it will not be in
compliance with a financial covenant under the Company's Revolving Credit
Facility, as defined in Note F, Revolving Credit Facility, prior to the maturity
date, which would result in an event of default. Such a default would allow the
lender under the Revolving Credit Facility to accelerate the maturity of the
debt, which carries a balance of $73.7 million as of September 30, 2022, making
it due and payable at that time. Further, if our independent auditor includes an
explanatory paragraph regarding our ability to continue as a "going concern" in
its report on our financial statements for the year ending December 31, 2022,
this may accelerate a default under our Revolving Credit Facility to the first
quarter of 2023 at the time our financial statements for the year ending
December 31, 2022 are filed. The Company does not currently have sufficient cash
on hand, liquidity or projected future cash flows to repay these outstanding
amounts upon an event of default. These conditions and events raise substantial
doubt about the Company's ability to continue as a going concern.



In response to these conditions, management’s plans include the following:

1. Capitalizing on recent business development initiatives that we anticipate will

improve total revenues through increased utilization of our parking assets and

in many cases at higher average ticket rates.

2. Management is budgeting reduced overhead costs in 2023 through the reduction or

elimination of certain controllable expenses.

3. The Company is pursuing further amendments and/or extensions with respect to

     the Revolving Credit Facility, including waivers of noncompliance with
     covenants.

4. The Company is pursuing certain potential capital raise or liquidity events,

     including the Merger as described above.



However, there can be no assurance that the Company will be successful in completing any of these options. As a result, management’s plans cannot be considered probable and thus does not alleviate substantial doubt about the Company’s ability to continue as a going concern.




The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the amounts
of liabilities that might result from the outcome of this uncertainty.



Sources and Uses of Cash


The following table summarizes our cash flows for the nine months ended
September 30, 2022 and 2021 (dollars in thousands):



                                                           For the Nine Months Ended September
                                                                           30,
                                                               2022                  2021

Net cash provided by (used in) operating activities $2,359

      $     (15,826 )
Net cash used in investing activities                      $     (19,359 )       $      (3,598 )
Net cash provided by financing activities                  $      12,887         $      29,601




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Comparison of the nine months ended September 30, 2022 to the nine months ended
September 30, 2021πŸ‡§πŸ‡·




The Company's cash and cash equivalents and restricted cash were approximately
$12.6 million as of September 30, 2022, which was a decrease of approximately
$5.6 million from the balance of $18.2 million as of September 30, 2021.



Cash flows from operating activities




Net cash provided by operating activities for the nine months ended September
30, 2022 was approximately $2.4 million, compared to approximately $15.8 million
used in operating activities for the nine months ended September 30, 2021. The
increase in cash provided by operating activities was primarily attributable to
a $8.9 million increase in revenue (partially offset by an increase of $2.2
million and $1.2 million in property taxes and property operating expense,
respectively), plus an increase in accounts payable resulting from
organizational, offering and other costs related to the Merger. The net cash
used in operating activities during the nine months ended September 30, 2021 was
primarily attributable to Transaction expenses of approximately $12.2 million.



Cash flows from investing activities




Net cash used in investing activities for the nine months ended September 30,
2022 was approximately $19.4 million compared to approximately $3.6 million for
the nine months ended September 30, 2021. The increase is primarily attributable
to the acquisition of a $17.6 million parking garage in June 2022 as well as
routine and strategic capital expenditures.



Cash flows from financing activities




Net cash provided by financing activities for the nine months ended September
30, 2022 was approximately $12.9 million compared to approximately
$29.6 million for the nine months ended September 30, 2021. The cash provided by
financing activities during the nine months ended September 30, 2022 was
primarily attributable to proceeds from the Revolving Credit Facility of $73.7
million. This was partially offset by the repayment of $55.1 million of notes
payable and the payment of loan fees on the Revolving Credit Facility and
extension of certain other notes payable. The cash provided by financing
activities during the nine months ended September 30, 2021 was primarily
attributable to the cash contribution at the closing of the Transaction.



Company Indebtedness



On March 29, 2022, the Company entered into the Credit Agreement which includes
a $75.0 million revolving credit facility. During 2022, the Company used $73.7
million of available capacity to refinance certain of the Company's current
loans for various properties and to finance the acquisition of a parking garage
in June 2022.  The remaining capacity of $1.3 million will also be available for
our general corporate purposes, including liquidity, acquisitions and working
capital. The Company borrows under the Revolving Credit Facility in U.S.
dollars and expects borrowings to bear interest at a floating rate based upon a
Secured Overnight Financing Rate, or SOFR, benchmark rate or an alternate base
rate, plus a margin of between 1.75% and 3.00%, with respect to SOFR loans, or
0.75% to 2.00%, with respect to base rate loans, based on the leverage ratio as
calculated pursuant to our Revolving Credit Facility.



The obligations under the Credit Agreement underlying the Revolving Credit
Facility are guaranteed by the Company and other guarantors. The Credit
Agreement contains customary representations, warranties, conditions to
borrowing, covenants and events of default, including certain covenants that
limit or restrict, subject to certain exceptions, the ability of the Company,
the Operating Partnership and other subsidiaries to sell or transfer assets,
enter into a merger or consolidate with another company, create liens, make
investments or acquisitions or incur certain indebtedness.  The Credit Agreement
also includes financial covenants that require the Company to (i) maintain a
total leverage ratio not to exceed 65.0%, (ii) not to exceed certain fixed
charge coverage ratios, and (iii) maintain a certain tangible net worth.



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As of September 30, 2022πŸ‡§πŸ‡· $73.7 million was outstanding under the Revolving Credit Facility.




On November 17, 2022, the Company executed an amendment to Credit Agreement
which extends the maturity of the Revolving Credit Facility to April 1, 2024,
amends certain financial covenants through the new term, and adds a requirement
for the Company to use diligent efforts to pursue an equity raise or liquidity
event by March 31, 2023.  In connection with this extension, the Company will
owe an extension fee of $375,000.  When paid, the extension fee will be deferred
and amortized over the new term of the Revolving Credit Facility.



The Company's loan with Bank of America, N.A. for the MVP Detroit Center Garage,
LLC ("MVP Detroit") garage requires the Company to maintain approximately $2.3
million in liquidity at all times, which is defined as unencumbered cash and
cash equivalents. As of the date of this filing, the Company was in compliance
with this lender requirement.


The Company may establish capital reserves with respect to particular investments. The Company may also, but is not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds in non-liquidating sale transactions. Working capital reserves are typically utilized to fund tenant improvements, leasing commissions and major capital expenditures. The Company’s lenders may also require working capital reserves.




Over time, management intends to both extend and sculpt our maturity wall, so
that our maturities are spread over multiple years. As of the date of this
filing, the Company has significant commercial mortgage-backed securities
("CMBS") debt with prohibitive defeasance, which will limit our ability to
refinance our CMBS debt prior to the maturity date or any permitted prepayment
date. As our loans approach maturity, we will assess the lowest cost, most
flexible options available to the Company and refinance those loans accordingly.
Our intent over the mid-term period is to work with lending relationships to
maintain a revolver that can address upcoming maturities, should market
conditions not permit us to refinance with longer-term debt.



On July 5, 2022, VRMI merged with and into Suncrest Holdings, LLC ("Suncrest"),
an entity managed by an entity majority owned and controlled by Michael Shustek,
the Company's former Chief Executive Officer. On July 11, 2022, Suncrest
assigned and sold five of the six notes issued originally by VRMI to certain of
the subsidiaries of the Company (collectively, the "VRMI Notes") to VRMII. As a
result, the obligations of Company subsidiaries under the five VRMI Notes,
including all repayment obligations, are now owed to VRMII. All of the loans
evidenced by the VRMI Notes mature and are payable in full on August 25, 2022.
However, in August 2022, the Company extended the term of the VRMI Notes to
August 2023. In connection with this extension, the coupon rate was increased
from 7.0% to 7.5% and the Company paid the lender a $0.6 million extension fee.



Distributions and Stock Dividends




On March 22, 2018, the Company suspended the payment of distributions on its
shares of common stock, par value $0.0001 per share (the "Common Stock"). There
can be no assurance that cash distributions to the Company's common stockholders
will be resumed in the future. The actual amount and timing of distributions, if
any, will be determined by the Company's Board of Directors in its discretion
and typically will depend on various factors that the Company's Board of
Directors deems relevant.



The Company is not currently and may not in the future generate sufficient cash
flow from operations to fully fund distributions. The Company does not currently
anticipate that it will be able to resume the payment of distributions.
However, if distributions do resume, all or a portion of the distributions may
be paid from other sources, such as cash flows from equity offerings, financing
activities, borrowings, or by way of waiver or deferral of fees. The Company has
not established any limit on the extent to which distributions could be funded
from these other sources. Accordingly, the amount of distributions paid may not
reflect current cash flow from operations and distributions may include a return
of capital, (rather than a return on capital). If the Company pays distributions
from sources other than cash flow from operations, the funds available to the
Company for investments would be reduced and the share value may be diluted. The
level of distributions will be determined by the Board of Directors and depend
on several factors including current and projected liquidity requirements,
anticipated operating cash flows and tax considerations, and other relevant
items deemed applicable by the Board of Directors.



The Company did not repurchase any of its shares during the nine months ended
September 30, 2022. During the nine months ended September 30, 2022, the Company
did not pay dividends on its shares of Common Stock and does not intend to pay
dividends on its shares of Common Stock in 2022. No cash dividends can be made
on the Common Stock until the preferred distributions are paid.



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Dividend Reinvestment Plan



From inception through March 22, 2018, when the Company suspended payment of
distributions on Common Stock, the Company had paid approximately $1.8 million
in cash, issued 83,437 shares of its Common Stock pursuant to its Dividend
Reinvestment Plan ("DRIP") and issued 153,826 shares of its Common Stock in
distributions to the Company's stockholders. All of the cash distributions were
paid from offering proceeds and constituted a return of capital.



Preferred Stock



On March 24, 2020, the Company's Board of Directors unanimously authorized the
suspension of the payment of distributions on the Series A Convertible
Redeemable Preferred Stock ("Series A Preferred Stock"), par value $0.0001 per
share, and Series 1 Convertible Redeemable Preferred Stock ("Series 1 Preferred
Stock" and, together with the Series A Preferred Stock, "Preferred Stock"), par
value $0.0001 per share; however, such distributions will continue to accrue in
accordance with the terms of the Series A Preferred Stock and Series 1 Preferred
Stock.


As of September 30, 2022 and 2021, approximately $0.6 million and $0.3 million of accrued and unpaid Series A Preferred Stock distributions, respectively, are included in accounts payable and accrued liabilities on the consolidated balance sheet.




As of September 30, 2022 and 2021, approximately $7.2 million and $4.4 million
of accrued and unpaid Series 1 Preferred Stock distributions, respectively, are
included in accounts payable and accrued liabilities on the consolidated balance
sheet.



Common Stock Warrants



On August 25, 2021, in connection with the Closing, the Company entered into a
warrant agreement (the "Warrant Agreement") pursuant to which it issued warrants
(the "Warrants") to Color Up to purchase up to 1,702,128 shares of Common Stock,
at an exercise price of $11.75 per share for an aggregate cash purchase price of
up to $20.0 million (the "Common Stock Warrants"). Each whole Common Stock
Warrant entitles the registered holder thereof to purchase one whole share of
Common Stock at a price of $11.75 per share (the "Warrant Price"), subject to
customary adjustments, at any time following a "Liquidity Event," which is
defined as an initial public offering and/or Listing of the Common Stock on the
Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock
Exchange. The Common Stock Warrants will expire five years after the date of the
Warrant Agreement.



The Company assesses its warrants as either equity or a liability based upon the
characteristics and provisions of each instrument.  Warrants classified as
equity are recorded at fair value as of the date of issuance on the Company's
balance sheet and no further adjustments to their valuation are made.
Management estimates the fair value of these warrants using option pricing
models and assumptions that are based on the individual characteristics of the
warrants or other instruments on the valuation date, as well as assumptions for
future financings, expected volatility, expected life, yield and risk-free
interest rate. As of September 30, 2022, all outstanding warrants issued by the
Company were classified as equity.



Critical Accounting Policies



Our 2021 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange
Commission (the "SEC") on March 30, 2022, contains a description of our critical
accounting policies and estimates, including those relating to real estate
investments and acquisitions. There have been no significant changes to our
critical accounting policies during 2022.



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