Presidio Property Trust, Inc. Material Event - What You Need to Know

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1. The Big News: Dividend Suspension on Preferred Stock

Presidio Property Trust, Inc. (ticker: SQFT) is making a critical move that directly impacts investors in its 9.375% Series D Cumulative Redeemable Perpetual Preferred Stock (ticker: SQFTP). The company has suspended monthly dividend payments on these shares, effective immediately.

• When it starts: This suspension begins with the January 2026 dividend payment, which would have typically been paid on February 15, 2026.
• Why it matters: This isn't just a minor adjustment; it's a critical cash-saving measure designed to save the company approximately $2.3 million annually.
• The "Cumulative" Advantage: For preferred shareholders, the "cumulative" feature of their stock offers a crucial protection: unpaid dividends will still accrue (add up) at a rate of $0.19531 per share each month. This means if Presidio ever resumes payments, it must first pay all accumulated missed dividends. However, the company provides no guarantee on when or if these accrued dividends will be paid, or when regular monthly payments might restart. The board will reassess future payments quarterly.

Presidio announced this news on January 28, 2026, through a filing with the Securities and Exchange Commission (SEC).

2. Why This Happened: A Deep Dive into Presidio's Challenges

The company's Chairman and CEO, Jack Heilbron, provided a stark explanation, highlighting severe market conditions and a strategic pivot.

• The Office Market Crisis: The extremely challenging market for office buildings stands as the primary driver. Office properties represent a substantial portion of Presidio's commercial portfolio. Heilbron specifically noted that delinquency rates in commercial mortgage-backed securities (CMBS) tied to office properties now exceed those seen during the 2008 financial crisis. This signals a deep and widespread downturn, as many office building owners struggle to make their loan payments.
• Inability to Sell Assets: Given this weak market, Presidio finds itself unable to sell its office buildings profitably and "realize our equity." Attempting sales now would likely result in significant losses, further harming the company's financial health.
• Critical Need for Cash Conservation: Facing these headwinds, the company prioritizes reducing operating expenses and preserving cash. The dividend suspension represents a direct and significant step toward bolstering liquidity and navigating the current environment.
• Strategic Shift to "Model Home Portfolio": To adapt, Presidio plans to accelerate its focus on growing its "Model Home portfolio." This segment involves leasing homes to builders for use as sales centers and models – a business line generally considered more stable, less capital-intensive, and less exposed to the volatility of traditional commercial real estate. The company didn't provide much detail about the current size or financial contribution of this "Model Home portfolio" in the filing. Also, a clear plan for their existing office properties, beyond just holding them, wasn't fully laid out, though they hint at gradually moving away from that troubled sector.

3. Who's Affected and Why It Matters

This move signals significant financial stress and has broad implications:

• Preferred Stock Investors (SQFTP Holders): This represents a direct and immediate hit to their expected income. Investors often choose preferred stock for its stable, predictable dividend. While dividends accrue, the loss of immediate cash flow and the uncertainty of future payments fundamentally alter the investment's risk profile and value proposition. Before this suspension, the 9.375% annual dividend offered a significant yield; its cessation will likely cause a substantial drop in the stock's market price.
• Common Stock Investors (SQFT Holders): This is a major red flag. While Presidio has not paid a common stock dividend for some time, the suspension of preferred dividends indicates severe financial distress. It suggests deeper underlying issues that could impact the company's long-term viability and will almost certainly exert downward pressure on the common stock price.
• The Company Itself: This decision underscores Presidio's liquidity challenges and the difficult market conditions it faces. It can damage the company's reputation, potentially making it harder to attract new capital, secure favorable financing, or even retain tenants in its commercial properties. It also highlights the urgency of their strategic shift.
• Lenders and Creditors: Entities that have lent money to Presidio will scrutinize this development closely. A dividend suspension can signal potential difficulties in meeting other financial obligations, including debt payments and covenants, leading to increased risk assessment and potentially higher borrowing costs in the future.

4. What Happens Next: Outlook and Key Risks

Immediately, expect significant volatility and likely price drops for both SQFTP and SQFT as the market digests this news.

Looking ahead, investors should monitor several key areas:

• Execution of the Strategic Shift: How quickly and effectively can Presidio grow its Model Home portfolio? What are the specific targets, timelines, and capital requirements for this expansion?
• Office Portfolio Management: What is the long-term plan for their existing office properties? Will they attempt to sell at a loss, redevelop, or simply hold and manage through the downturn? The lack of a clear strategy for this segment is a significant concern.
• Financial Performance & Liquidity: Investors will need to watch for any updates on the company's cash position, operating expenses, and overall profitability. While the $2.3 million in annual savings is a start, the company didn't provide further financial details (like current cash reserves or debt maturity schedules), making it hard to assess how long these savings can sustain them.
• Dividend Reinstatement: The board's quarterly reassessments will be critical. What specific financial improvements or market recoveries would trigger the resumption of preferred dividends or the payment of accrued amounts?
• Broader Market Risks: Beyond the office market, Presidio remains exposed to general economic downturns, rising interest rates (which impact borrowing costs and property valuations), and potential tenant defaults across its remaining commercial properties.

5. Practical Takeaways for Investors

• Serious Red Flag: Dividend suspensions, especially for preferred stock, are a strong indicator of financial distress and should prompt a thorough re-evaluation of your investment.
• Expect Price Volatility: Both preferred (SQFTP) and common (SQFT) stock are likely to experience significant negative price reactions.
• Re-evaluate Your Investment Thesis: If you own Presidio stock, this event fundamentally alters the company's risk profile and potential for future returns. Consider if it still aligns with your investment goals, particularly given the challenges in commercial real estate and the company's strategic pivot.
• Understand Accrual, But Don't Rely on It: While preferred dividends accrue, there's no guarantee of when or if they will be paid. This introduces significant uncertainty and reduces the immediate value of the "cumulative" feature.
• Lack of Specific Financial Guidance: The summary lacks concrete financial targets or a detailed timeline for their strategic shift, which adds to the uncertainty and risk.