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EX-21.1 - Parking REIT, Inc.ex_21-1.htm
EX-31.2 - Parking REIT, Inc.ex_31-2.htm
EX-31.1 - Parking REIT, Inc.ex_31-1.htm
EX-32 - Parking REIT, Inc.ex_32.htm
EX-10.21 - Parking REIT, Inc.ex_10-21.htm
EX-10.20 - Parking REIT, Inc.ex_10-20.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

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: 333-205893


THE PARKING REIT, INC.
(Exact name of registrant as specified in its charter)

MARYLAND
 
47-3945882
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)

2965 S. Jones #C1-100, Las Vegas, NV 89146
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (702) 534-5577

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

None
 
None
(Title of each class)
 
(Name of each exchange on which registered)

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

None
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [   ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [   ] No [X]

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 [X] 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 [X] No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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 [  ]
(Do not check if a smaller reporting company)
Smaller reporting company [ X  ]
Emerging growth company [ X  ]

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 Act).  Yes [   ] No [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.

There is no established market for the Registrant's shares of common stock. On May 29, 2018, the board of directors of the Registrant approved an estimated net asset value per share of the Registrant's common stock of $24.61. There were approximately 2,559,286 shares of common stock held by non-affiliates at June 30, 2017, the last business day of the registrant's most recently completed second fiscal quarter.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Class
   
Number of Shares Outstanding
As of June 21, 2018
Common Stock, $0.0001 Par Value
   
6,550,200




TABLE OF CONTENTS

     
Page
 
PART I
     
 
 
 
 
 
 
       
PART II
     
 
 
 
 
 
 
 
 
       
PART III
     
 
 
 
 
 
       
PART IV
     
 
 
     132
    EXHIBIT INDEX  133

 
Special Note Regarding Forward-Looking Statements
 
Certain statements included in this annual report on Form 10-K (this "Annual 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 our 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 our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our 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 our operations and future prospects include, but are not limited to:

·
the fact that we have a limited operating history, as our property operations began in 2016;
·
the fact that we have experienced net losses since inception and may continue to experience additional losses;
·
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;
·
changes in economic conditions generally and the real estate and debt markets specifically;
·
legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts  ("REITs");
·
potential damage and costs arising from natural disasters, terrorism and other extraordinary events, including extraordinary events affecting parking facilities included in our portfolio;
·
risks inherent in the real estate business, including ability to secure leases or parking management contracts at favorable terms, tenant defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments;
·
competitive factors that may limit our ability to make investments or attract and retain tenants;
·
our ability to generate sufficient cash flows to pay distributions to our stockholders;
·
our reliance on our Advisor and its employees to manage our business;
·
our failure to obtain our status as a REIT and maintain it in the future;
·
our ability to successfully integrate pending transactions and implement our operating strategy;
·
our ability to list our shares of common stock on a national securities exchange or complete another liquidity event;
·
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;
·
changes to generally accepted accounting principles, or GAAP; and
·
potential adverse impacts from the recent changes to the U.S. tax laws.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon on any forward-looking statements included herein. All forward-looking statements are made as of the date of this Annual 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 Annual 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 Annual 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 Annual Report will be achieved.

This Annual Report may include market data and forecasts with respect to the REIT industry. Although the Company is responsible for all of the disclosure contained in this Annual Report, in some cases the Company relies on and refers to market data and certain industry forecasts that were obtained from third party surveys, market research, consultant surveys, publicly available information and industry publications and surveys that the Company believes to be reliable.


PART I

ITEM 1. BUSINESS

General

The Parking REIT, Inc., formerly known as MVP REIT II, Inc. (the "Company," "we," "us" or "our"), is a Maryland corporation formed on May 4, 2015 and intends to qualify as a REIT for U.S. federal income tax purposes upon the filing of the federal tax return for the year ended December 31, 2017. The Company believes that it has been organized and has operated in a manner that has enabled it to qualify as a REIT commencing with the taxable year ended December 31, 2017; however, if the Company is unable to meet the REIT qualification for the year ended December 31, 2017, the Company will continue to operate as a C corporation for U.S. federal income tax purposes. As of December 31, 2016, the Company ceased all selling efforts for the initial public offering (the "Common Stock Offering") of its common stock, $0.0001 par value per share, at $25.00 per share, pursuant to a registration statement on Form S-11 (No. 333-205893) filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"). The Company accepted additional subscriptions through March 31, 2017, the last day of the Common Stock Offering.

The Company was formed to focus primarily on investments in parking facilities, including parking lots, parking garages and other parking structures throughout the United States and Canada. To a lesser extent, the Company may also invest in properties other than parking facilities.

The Company is the sole general partner of MVP REIT II Operating Partnership, LP, a Delaware limited partnership (the "Operating Partnership"). The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership. The Company's wholly owned subsidiary, MVP REIT II Holdings, LLC, is the sole limited partner of the Operating Partnership. The operating agreement provides that the Operating Partnership is operated in a manner that enables the Company to (1) satisfy the requirements to qualify and maintain qualification as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership is not classified as a "publicly traded partnership" for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the "Code"), which classification could result in the Operating Partnership being taxed as a corporation.

The Company utilizes an Umbrella Partnership Real Estate Investment Trust ("UPREIT") structure to enable the Company to acquire real property in exchange for limited partnership interests in the Operating Partnership from owners who desire to defer taxable gain that would otherwise normally be recognized by them upon the disposition of their real property or transfer of their real property to the Company in exchange for shares of the Company's common stock or cash.

As part of the Company's initial capitalization, 8,000 shares of common stock were sold for $200,000 to MVP Capital Partners II, LLC (the "Sponsor"), the Company's sponsor. The Sponsor is owned 60% by Vestin Realty Mortgage II, Inc., a Maryland corporation that trades on the OTC pink sheets ("VRM II"), and 40% by Vestin Realty Mortgage I, Inc., a Maryland corporation that trades on the OTC pink sheets ("VRM I"), and both VRM II and VRM I were managed by Vestin Mortgage, LLC, a Nevada limited liability company ("Vestin Mortgage"), which was wholly owned by Michael V. Shustek prior to being internalized in January 2018.

The Company's advisor is MVP Realty Advisors, LLC, dba The Parking REIT Advisors (the "Advisor"), a Nevada limited liability company, which is owned 60% by VRM II and 40% by VRM I. The Advisor is responsible for managing the Company's affairs on a day-to-day basis and for identifying and making investments on the Company's behalf pursuant to a second amended and restated advisory agreement among the Company, the Operating Partnership and the Advisor (the "Amended and Restated Advisory Agreement"), which became effective upon consummation of the Merger (as such term is defined below). As of June 21, 2018, the Company had no paid employees.

Merger of MVP REIT with Merger Sub, LLC

On May 26, 2017, the Company, MVP REIT, Inc., a Maryland corporation ("MVP I"), MVP Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company ("Merger Sub"), and the Advisor entered into an agreement and plan of merger (the "Merger Agreement"), pursuant to which MVP I would merge with and into Merger Sub (the "Merger").

On December 15, 2017 (the "Closing Date"), the Merger was consummated. The Certificate of Merger contemplated by the Merger Agreement was filed with the Secretary of State of the State of Delaware, the Articles of Merger contemplated by the Merger Agreement were filed with the State Department of Assessments and Taxation of Maryland and the Merger became effective at 12:30 pm Eastern time on the Closing Date.

Following the Merger, the Company contributed 100% of its equity interests in Merger Sub to the Operating Partnership. The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership and will be advised by the Advisor.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each outstanding share of MVP I's common stock, $0.001 par value per share (the "MVP I Common Stock"), was automatically cancelled and retired, and converted into the right to receive 0.365 shares of common stock of the Company.  Holders of shares of MVP I Common Stock received cash in lieu of fractional shares. A total of approximately 3.9 million shares of Company common stock were issued to former MVP I stockholders, and former MVP I stockholders, following the Merger, owned approximately 59.7% of the Company's common stock. In addition, the Company paid $3.6 million to the Advisor for an Advisor Acquisition Payment (as such term is defined in the Termination Agreement (as discussed below)).

The Company was subsequently renamed "The Parking REIT, Inc." as set forth in the articles of amendment in connection with the Merger.

Investment Objectives

The Company's primary investment objectives are to:

·
preserve, protect and return stockholders' capital contributions;
·
provide periodic distributions once the Company has acquired a substantial portfolio of investments; and
·
realize growth in the value of the Company's investments.

The Company cannot assure stockholders that the Company will attain these objectives or that the value of the Company's assets will not decrease. Furthermore, within the investment objectives and policies, the Advisor has substantial discretion with respect to the selection of specific investments and the purchase and sale of the Company's assets. The Company's board of directors will review investment policies at least annually to determine whether the investment policies continue to be in the best interests of stockholders.

The charter does not require the Company to consummate a transaction to provide liquidity to stockholders on any certain date or at all; therefore, the Company may continue indefinitely without pursuing or consummating any liquidity transaction. The Company from time to time evaluates liquidity alternatives. To comply with its amended credit agreement, the Company will file an application to list its common stock on a national securities exchange by July 31, 2018, and the Company will seek to obtain approval of the listing application by August 31, 2018 and complete the listing by September 30, 2018.  However, there can be no assurance that the Company will cause a liquidity event to occur within such time frame or at all.

Please see "Item 5. Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities - Market Information" for more information.

Investment Strategy

The Company's investment strategy focuses, and will continue to focus, primarily on acquiring, owning and managing parking facilities, including parking lots, parking garages and other parking structures throughout the United States and Canada. To a lesser extent, the Company may also invest in properties other than parking facilities. No more than 10% of the proceeds of the Common Stock Offering were used for investment in Canadian properties.

Parking Facilities

The Company believes parking facilities possess attractive characteristics not found in other commercial real estate investments, including the following:
·
generally, can be leased to any number of parking operators, which gives the property owner flexibility and potential pricing power
·
if a tenant in a facility terminates a lease, replacement operators can generally be found quickly, minimizing any dark period;
·
generally, no leasing commissions;
·
generally, no tenant improvement requirements;
·
lease structures that generate stable revenues and present opportunities for renegotiation;
·
during the recent recession, parking revenues remained resilient;
·
trend toward automation, which helps to reduce cash theft and operating costs, thereby improving the Company's net operating income;
·
generally, have the ability to terminate parking leases upon sale of the  real estate;

·
relatively low capital expenditures, compared to other real estate assets;
·
in light of the relatively low up-front costs, an enhanced opportunity for geographic diversification;
·
generally, favorable supply and demand fundamentals, which may create favorable pricing pressure; and
·
historically, a large and fragmented industry, which presents unique opportunities for consolidation and growth.

The Company intends to focus primarily on investing in income-producing parking lots and garages with air rights in central business districts. The Company generally seeks geographically-targeted investments that present key drivers, which are expected to generate steady 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 demand drivers:

·
Downtown core
·
Government buildings and courthouses
·
Sporting venues
·
Hospitals
·
Hotels

Other Real Property Investments

The Company may also seek to invest in properties other than parking facilities. The Company may also enter into various leases for these properties. The terms and conditions of any lease the Company enters into with the Company's tenants may vary substantially. However, the Company expects that leases will be the type customarily used between landlords and tenants in the geographic area where the property is located.

Investment Criteria

The Company will focus on acquiring properties that meet the following criteria:

·
properties that generate current cash flow;
·
properties that are located in populated metropolitan areas; and
·
while the Company may acquire properties that require renovation, the Company will only do so if the Company anticipates the properties will produce income within 12 months of the Company's acquisition.

The foregoing criteria are guidelines, and the Advisor and the Company's board of directors may vary from these guidelines to acquire properties which they believe represent value opportunities.

The Advisor has substantial discretion with respect to the selection of specific properties. The Company's board of directors has delegated to the Advisor the authority to make certain decisions regarding investments consistent with the investment guidelines and borrowing policies approved by the Company's board of directors and subject to the limitations in the charter, the Amended and Restated Advisory Agreement, and the direction and oversight of the Company's board of directors. There is no limitation on the number, size or type of properties that the Company may acquire or on the percentage of net offering proceeds that may be invested in any particular property type or single property. The number and mix of properties will depend upon real estate market conditions and other circumstances existing at the time of acquisition. Moreover, depending upon real estate market conditions, economic changes and other developments, the Company's board of directors may change the targeted investment focus or supplement that focus to include other targeted investments from time to time without stockholder consent.

Concentration

The Company had 14 parking tenants as of December 31, 2017 and six parking tenants as of December 31, 2016. One tenant, SP Plus Corporation (Nasdaq: SP) ("SP+"), represented 54.8% of the Company's base parking rental revenue for the year ended December 31, 2017.

SP+ is one of the largest providers of parking management in the United States.  As of December 31, 2017, SP+ managed approximately 3,600 locations in North America.

Below is a table that summarizes parking rent by tenant for the years ended December 31, 2017 and 2016

   
For the Year Ended December 31,
Parking Tenant
 
2017
 
2016
SP+
 
54.8%
 
43.2%
iPark Services
 
12.9%
 
1.6%
Premier Parking
 
7.7%
 
14.7%
Interstate Parking
 
6.2%
 
17.2%
Miller Parking*
 
4.5%
 
--
Lanier Parking Solutions
 
4.1%
 
--
St. Louis Parking
 
4.1%
 
--
Riverside Parking
 
2.2%
 
5.9%
ABM**
 
2.1%
 
17.4%
ISOM Mgmt.
 
1.0%
 
--
Denison
 
0.2%
 
--
PCAM, LLC
 
0.1%
 
--
BEST PARK
 
0.1%
 
--
Denver School
 
<0.1%
 
--
Secure
 
<0.1%
 
--

* Revenue for Miller parking represents a settlement received by MVP Detroit Center Garage, LLC of approximately $408,000 for the operations of the garage through January 2017, at which time SP+ assumed operations under a longer-term lease agreement.

** Through February 28, 2017, MVP San Jose 88 Garage, LLC was subject to a parking management agreement with ABM and received revenue of $110,000. Starting on March 1, 2017, this property was leased to Lanier Parking Solutions.

In addition, the Company had concentrations in various cities based on parking rental revenue for the years ended December 2017 and 2016, as well as concentrations in various cities based on the real estate the Company owned as of December 31, 2017 and 2016. The below tables summarize this information by city.

City Concentration for Parking Rental Revenue
   
For the Year Ended December 31,
   
2017
 
2016
Detroit
 
39.4%
 
--
Houston
 
12.9%
 
1.6%
Cleveland
 
11.8%
 
34.3%
Nashville
 
7.7%
 
14.7%
St. Paul
 
6.2%
 
17.2%
St. Louis
 
5.9%
 
6.8%
San Jose
 
5.3%
 
8.2%
Cincinnati
 
4.3%
 
9.2%
Louisville
 
2.2%
 
5.9%
Lubbock
 
1.0%
 
--
Fort Worth
 
0.7%
 
--
Canton
 
0.5%
 
2.1%
Indianapolis
 
0.5%
 
--
Minneapolis
 
0.4%
 
--
Milwaukee
 
0.3%
 
--
St. Louis
 
0.3%
 
--
Bridgeport
 
0.2%
 
--
Memphis
 
0.1%
 
--
Kansas City
 
0.1%
 
--
Denver
 
0.1%
 
--
Ft. Lauderdale
 
0.1%
 
--
Wildwood
 
<0.1%
 
--
Clarksburg
 
<0.1%
 
--


Real Estate Investment Concentration by City
   
As of December 31,
   
2017
 
2016
Detroit
 
18.8%
 
--
Houston
 
12.7%
 
10.5%
Fort Worth
 
9.4%
 
--
Cincinnati
 
9.1%
 
8.5%
St Louis
 
7.0%
 
5.7%
Indianapolis
 
6.2%
 
--
Minneapolis
 
5.6%
 
3.8%
Cleveland
 
5.6%
 
22.2%
Milwaukee
 
4.0%
 
--
Nashville
 
4.0%
 
17.4%
Lubbock
 
3.7%
 
--
St Paul
 
2.9%
 
1.5%
Bridgeport
 
2.8%
 
15.4%
Memphis
 
1.7%
 
--
San Jose
 
1.3%
 
6.8%
Ft. Lauderdale
 
1.2%
 
--
Denver
 
1.1%
 
1.1%
Louisville
 
1.1%
 
5.8%
Kansas City
 
0.9%
 
--
Wildwood
 
0.5%
 
--
Clarksburg
 
0.2%
 
--
Canton
 
0.2%
 
1.3%

During the last week of August 2017, Houston, Texas experienced major flooding due to Hurricane Harvey.  This resulted in limited access to the Houston area and a shutdown of most business and government operations. Our parking garage and parking lots located in Houston, Texas experienced minimal damage during this time and experienced no loss in base rental income.

Economic Dependency

Under various agreements, the Company has engaged or will engage the Advisor and its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company's Common Stock or preferred stock available for issuance, as well as other administrative responsibilities for the Company, including accounting services and investor relations. The Company may also depend upon VRM I and VRM II, the owners of the Advisor, or other related parties to continue to support and fund the Company's costs and expenses.

As a result of these relationships, the Company is dependent upon the Advisor and its affiliates, including VRM I and VRM II. In the event that these companies are unable to provide the Company with the respective services, the Company may be required to find alternative providers of these services.

Competition

The Company is unaware of any REITs in the United States or Canada that invest predominantly in parking facilities; nevertheless, the Company has significant competition with respect to the acquisition of real property. Competitors include other REITs, owners and managers of parking facilities, private investment funds, hedge funds and other investors, many of which have significantly greater resources.  The Company may not be able to compete successfully for investments. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If the Company pays higher prices for investments the returns will be lower, and the value of assets may not increase or may decrease significantly below the amount paid for such assets.

Any parking facilities acquired or invested in by the Company will face intense competition, which may adversely affect rental and fee income. The Company believes that competition in parking facility operations is intense. The relatively low cost of entry has led to a strongly competitive, fragmented market consisting of competitors ranging from single facility operators to large regional and national multi-facility operators, including several public companies. In addition, any parking facilities acquired may compete with building owners that provide on-site paid parking. Many of the competitors have more experience in owning and operating parking facilities. Moreover, some of the competitors will have greater capital resources, greater cash reserves, less demanding rules governing distributions to stockholders and a greater ability to borrow funds. Competition for investments may reduce the number of suitable investment opportunities available, may increase acquisition costs and may reduce demand for parking facilities, all of which may adversely affect operating results.

Income Taxes

The Company has been organized and conducts its operations to qualify as a REIT under Sections 856 to 860 of the Code.  The Company expects to qualify as a REIT commencing with the taxable year ending December 31, 2017. A REIT is generally not subject to federal income tax on that portion of its REIT taxable income, which is distributed to its stockholders, provided that at least 90% of such taxable income is distributed and provided that certain other requirements are met. The Company's REIT taxable income may substantially exceed or be less than the Company's net income as determined based on GAAP because differences in GAAP and taxable net income consist primarily of allowances for loan losses or doubtful account, write-downs on real estate held for sale, amortization of deferred financing cost, capital gains and losses and deferred income.

A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained on audit, including resolutions of any related appeals or litigation process, based on the technical merits. Based on the Company's evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition on the financial statements. The net income tax provision for the year ended December 31, 2017 was approximately zero.

Regulations

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 intends to obtain all permits and approvals necessary under current law to operate the Company's investments.

Environmental

Investments in real property create the potential for environmental liability on the part of the owner or operator of such real property. If hazardous substances are discovered on or emanating from a property, the owner or operator of the property may be held strictly liable for all costs and liabilities relating to such hazardous substances. We have obtained a Phase I environmental study (which involves inspection without soil sampling or ground water analysis) conducted by independent environmental consultants on each of our properties and, in certain instances, have conducted additional investigation, including a Phase II environmental assessment. Furthermore, we have adopted a policy of conducting a Phase I environmental study on each property we acquire and an additional investigation as warrant.

We believe that we are in compliance, in all material respects, with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. Furthermore, we have not been notified by any governmental authority of any noncompliance, liability or other claim in connection with any of our properties.

Employees

As of June 21, 2018, the Company did not have any employees. Rather, the Company relies on employees of the Advisor and its affiliates, subject to the supervision of the Company's board of directors, to manage the Company's day-to-day activities, implement the Company's investment strategy and provide management, acquisition, advisory and administrative services.

Available Information

The Company is subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, as a result, files the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC from time to time. The SEC maintains a website (http://www.sec.gov) that contains the Company's annual, quarterly and current reports, proxy and information statements and other information the Company files electronically with the SEC from time to time. Access to these filings is free of charge and can be accessed on the Company's website, www.theparkingreit.com. The information on, or accessible through, the Company's website is not incorporated into and does not constitute a part of this Annual Report or any other report or document the Company files with or furnishes to the SEC from time to time.

ITEM 1A. RISK FACTORS

The following are some of the risks and uncertainties that could cause the Company's actual results to differ materially from those presented in the forward-looking statements. The risks and uncertainties described below are not the only ones the Company faces but do represent those risks and uncertainties that the Company believes are material. Additional risks and uncertainties not presently known or that are currently deemed immaterial may also harm the business.

Risks Related to an Investment in the Company

Shares of our common stock are illiquid. No public market currently exists for our shares, and our charter does not require us to liquidate our assets or list our shares on an exchange by any specified date, or at all. It will be difficult for stockholders to sell shares, and if stockholders are able to sell shares, it will likely be at a substantial discount. If we are able to list our shares on an exchange, the trading volume and market price of our common stock may be volatile and could decline substantially after listing.

There is no current public market for our shares, and our charter does not require us to liquidate our assets or list our shares on an exchange by any specified date, or at all. Our charter limits stockholders' ability to transfer or sell shares unless the prospective stockholder meets the applicable suitability and minimum purchase standards. Our charter also prohibits the ownership of more than 9.8% in value of the aggregate of our outstanding capital stock or more than 9.8% in value or number, whichever is more restrictive, of the aggregate of our outstanding common stock unless exempted prospectively or retroactively by our board of directors. These restrictions may inhibit large investors from desiring to purchase stockholders shares. Moreover, our share repurchase program includes numerous restrictions that limit stockholders ability to sell shares to us, and our board of directors may amend, suspend or terminate our share repurchase program without stockholder approval upon 30 days' written prior notice. It will be difficult for stockholders to sell shares promptly or at all. If stockholders are able to sell shares, stockholders will likely have to sell them at a substantial discount to their purchase price. It is also likely that stockholders shares would not be accepted as the primary collateral for a loan.

In addition, if we are successful in listing our shares of common stock on a national securities exchange by September 30, 2018 as required by our amended credit agreement, we cannot assure stockholders that the market price of our common stock will not fluctuate or decline significantly after listing, including as a result of factors unrelated to our operating performance or prospects. Some of the factors that could negatively affect the market price or increase the volatility of our common stock after listing include:

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our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects;

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equity issuances by us (including the issuances of shares of our common stock upon the redemption of all of our outstanding Series A and Series 1 preferred stock within 30 days after the initial listing date as required by our amended credit agreement), or share resales by our stockholders, or the perception that such issuances or resales may occur;

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the performance of other similar companies;

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changes in accounting principles;

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passage of legislation or other regulatory developments that adversely affect us or our industry; and

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publication of research reports about us or the real estate industry;

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changes in market valuations of similar companies;

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adverse market reaction to any increased indebtedness we incur in the future;

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additions to or departures of our key personnel;

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speculation in the press or investment community;

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our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts;

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increases in market interest rates, which may lead investors to seek alternative investments paying higher dividends or interest, or to demand a higher distribution yield for our common stock, and which would result in increased interest expense on our variable rate debt, if any;

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failure to maintain our REIT qualification;

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price and volume fluctuations in the stock market generally; and

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general market and economic conditions, including the current state of the credit and capital markets, and political conditions.

While our board of directors may evaluate transactions providing liquidity for our stockholders from time to time, subject to then prevailing market conditions, there can be no assurance that we will effect a liquidity event. If we do not successfully implement a liquidity transaction, a stockholder may have to hold his or her investment for an indefinite period.

From time to time, subject to then prevailing market conditions, our board of directors may consider various forms of liquidity, each of which is referred to as a liquidity event, including, but not limited to: (1) the sale of all or substantially all of our assets; (2) the sale or a merger in a transaction that would provide our stockholders with cash and/or securities of a publicly traded company, which may be an affiliate; or (3) the listing of our common stock on a national securities exchange.

To comply with our amended credit agreement covenants, we will file an application to list our common stock on a national securities exchange by July 31, 2018.  Although we will seek to obtain approval of the listing application by August 31, 2018 and complete the listing by September 30, 2018, there can be no assurance that we will cause a liquidity event to occur within such time frame or at all. If we do not successfully implement a liquidity transaction, our shares of common stock may continue to be illiquid and stockholders may, for an indefinite period of time, be unable to convert their investments to cash easily and could suffer losses on their investments.

Moreover, our charter contains other restrictions on the ownership and transfer of our securities as described under "Description of Capital Stock—Restrictions on Ownership and Transfer of Shares—Ownership Limit." These restrictions may also inhibit our stockholders' ability to sell their shares of our common stock promptly or at all.

We have a limited operating history which makes our future performance difficult to predict.

We were formed on May 4, 2015, and we have a limited operating history. Stockholders should not assume that our performance will be similar to the past performance of other real estate investment programs sponsored by our Sponsor or the parent of our Sponsor. Our lack of an operating history increases the risk and uncertainty that stockholders face in making an investment in our shares.

We have experienced net losses in the past, and we may experience additional net losses in the future.
Historically, we have experienced net losses (calculated in accordance with GAAP), and we may not be profitable or realize growth in the value of our investments. Many of our losses can be attributed to start-up costs, depreciation and amortization, as well as acquisition expenses incurred in connection with purchasing properties or making other investments. For a further discussion of our operational history and the factors affecting our net losses, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this Annual Report and our accompanying consolidated financial statements and notes thereto.
Our cash distributions are not guaranteed and may fluctuate.
As previously disclosed, our board of directors unanimously authorized a suspension of our cash distributions and stock dividends to holders of our common stock, effective as of March 22, 2018. Our board is focused on preserving capital in order to maintain sufficient liquidity to continue to operate the business and maintain compliance with debt covenants, including minimum liquidity covenants and to seek to enhance our value for stockholders through potential future acquisitions. We expect that cash retained by the suspension of cash distributions will allow us to continue to pursue investment opportunities while also preparing for a possible liquidity event in the future. Our board will continue to evaluate our performance and expects to assess our distribution policy quarterly.  There can be no assurance that we will resume payment of distributions to common stockholders at any time in the future, that any acquisitions will be completed on an attractive basis, or at all, or that any liquidity event will occur or when such event may occur.

In determining whether to authorize a resumption in the payment of distributions to common stockholders or make such future distributions and the amounts, our board of directors will consider all relevant factors, including the amount of cash available for distribution, capital expenditure and reserve requirements and general operational requirements. We cannot assure you that we will consistently be able to generate sufficient available cash flow to resume distributions on our common shares nor can we assure you that sufficient cash will be available to resume distributions to you. With limited prior operations, if we resume distributions, we cannot predict the amount of distributions you may receive, and we may be unable to pay, maintain or increase distributions over time. Our inability to acquire additional properties or make real estate-related investments or operate profitably may have a negative effect on our ability to generate sufficient cash flow from operations to pay distributions on our shares.

We have paid, and may continue to pay, our distributions from sources other than cash flow from operations, which has reduced the funds available for the acquisition of properties and may reduce our stockholders' overall return.

As of December 31, 2017, we have paid all of our cash distributions from sources other than cash flow from operations, including proceeds from issuance of our Common Stock Offering or under our distribution reinvestment plan. Our organization documents permit us to pay distributions from any source, including offering proceeds, borrowings or sales of assets. We have not placed a cap on the use of offering or other proceeds to fund distributions. Our distribution policy is to fund the payment of regular distributions to our stockholders from cash flow from our operations.  However, we may not generate sufficient cash flow from operations to fund distributions.  Therefore, we may need to continue to utilize proceeds from the sale of securities, borrow funds or request that our Advisor, in its discretion, defer its receipt of fees and reimbursement of expenses in order to make cash distributions. We can give no assurance that we will be able to pay distributions solely from our funds from operations in the future. If we continue to pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and stockholder overall return may be reduced.

Because we have paid, and may continue to pay, our cash distributions from sources other than cash flow from operations, such distributions may not reflect the current performance of our real property investments or our current operating cash flows and may constitute a return of capital or taxable gain from the sale or exchange of property.
Our long-term strategy is to fund the payment of monthly distributions to our stockholders entirely from our funds from operations. However, during the early stages of our operations, we have utilized offering proceeds to make cash distributions. Because the amount we pay out in distributions may exceed our cash flow from operations, the amount of distributions paid at any given time may not reflect the current performance of our real property investments or our current cash flow from operations. To the extent distributions exceed cash flow from operations, distributions may be treated as a return of capital (rather than a return on capital) and could reduce a stockholder's basis in our common stock. A reduction in a stockholder's basis in our common stock could result in the stockholder recognizing more gain upon the disposition of his or her shares, which in turn could result in greater taxable income to such stockholder. In addition, in the event that we are unable to consistently fund monthly distributions to stockholders entirely from our cash flow from operations, the value of a stockholder's shares upon any future listing of our common stock, the sale of our assets or any other liquidity event may be reduced.

We depend upon the Advisor to find suitable investments. If it is unable to do so, we may not be able to achieve our investment objectives or pay distributions.

Our ability to achieve our investment objectives and to pay distributions depends upon the performance of the Advisor in the acquisition of our investments, including the determination of any financing arrangements. Stockholders will have no opportunity to evaluate the economic merits or the terms of our investments before and must rely entirely on the management abilities of the Advisor and the oversight of our board of directors. We cannot assure stockholders that the Advisor will be successful in obtaining suitable investments on financially attractive terms or that, if the Advisor makes investments on our behalf, our objectives will be achieved.

Our Sponsor and its other affiliated entities also rely on the Advisor's real estate, finance and securities professionals, including Michael V. Shustek, to identify investment opportunities. To the extent that the Advisor's real estate, finance and securities professionals face competing demands upon their time in instances when we have capital ready for investment, we may face delays in execution of our investment strategy. Delays we encounter in the selection and acquisition of income-producing assets would likely limit our ability to pay distributions to our stockholders and lower their overall returns.
Our future results will suffer if we do not effectively manage our expanded portfolio and operations.
As discussed above, we entered into the Merger Agreement with MVP I, Merger Sub, the Advisor and us, pursuant to which, on December 15, 2017, MVP I was merged with and into Merger Sub, and the Merger was thus consummated and became effective on such date.

Following the consummation of the Merger, we have an expanded portfolio and operations and, subject to market conditions, the availability of capital and other factors, we intend to continue to expand our operations through additional acquisitions and other strategic transactions, some of which may involve complex challenges. Our future success will depend, in part, upon the Advisor's ability to manage our expansion opportunities, integrate new operations into our existing business in an efficient and timely manner, successfully monitor our operations, costs, regulatory compliance and service quality, and maintain other necessary internal controls. We cannot assure you that our expansion or acquisition opportunities will be successful, or that we will realize our expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.

We may change our targeted investments and investment guidelines without stockholder consent.

Our board of directors may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments in our current portfolio.  Changes to our investment guidelines must be approved by our board of directors, including a majority of our independent directors. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of shares of our common stock and our ability to make distributions to stockholders.

The value of a share of our common stock may be diluted if we continue to pay stock dividends.

Our board of directors has authorized and declared, and may continue to authorize and declare, special stock dividends if and when the Company elects to resume the payment of distributions to our common stockholders. While our objective is to acquire assets that appreciate in value, there can be no assurance that assets we acquire will appreciate in value. With the declaration of stock dividends, early investors will receive more shares for the same cash investment than later investors. Because they own more shares, upon our sale or liquidation, these early investors will receive more sales proceeds or liquidating distributions relative to their invested capital compared to later investors. Furthermore, unless our assets appreciate in an amount sufficient to offset the dilutive effect of the prior stock dividends, the value per share for later investors purchasing our stock will be below the value per share of earlier investors.

Any adverse changes in the Advisor's financial condition or our relationship with the Advisor or its affiliates could hinder our operating performance and the return on investment.

We have engaged the Advisor to manage our operations and our portfolio of real property investments. Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of the Advisor and its affiliates as well as the Advisor's real estate, finance and securities professionals in the identification and acquisition of investments, the determination of any financing arrangements, the management of our assets and operation of our day-to-day activities. We also depend upon VRM I and VRM II, the owners of the Advisor, to continue to support and fund our costs and expenses. Any adverse changes in the Advisor's financial condition or our relationship with the Advisor, its owners or its other affiliates could hinder the Advisor's ability to successfully manage our operations and our portfolio of investments.   If the Advisor and its affiliates, including VRM I and VRM II, are unable to meet their obligations, we might be required to find a successor advisor, which could result in a significant disruption of our business and would likely adversely affect the value of your investment in us.

Legal matters involving Mr. Shustek or entities controlled by or affiliated with Mr. Shustek could adversely affect our relationship with our Advisor and distract our officers from attending to the Company's business, either of which could have a material adverse effect on the Company.

The Financial Industry Regulatory Authority, Inc. ("FINRA") is currently conducting an investigation of MVP American Securities ("AMS"), a firm that was previously a registered broker-dealer.  AMS is indirectly owned by Michael Shustek, our Chairman and Chief Executive Officer, who was also a registered principal of AMS.  AMS, acting primarily in a wholesaler capacity, participated in the sale of our shares in connection with our initial public offering and in connection with the initial public offering of MVP REIT I.  FINRA has stated that the investigation is to determine if there have been violations of the federal securities laws or the rules of FINRA and other self-regulatory organizations. However, FINRA has not identified the specific potential violations that are the focus of the investigation.

A number of the information requests received by AMS from FINRA relate to compliance with the limitations in FINRA rules on underwriting compensation and offering and organizational expenses. The Company believes that aggregate underwriting compensation in its initial public offering and the initial public offering of MVP REIT I, as computed in accordance with FINRA rules, exceeded the applicable limits permitted by FINRA rules.  However, MVP REIT I only paid slightly in excess of 3% of its offering proceeds for underwriting compensation and the Company did not pay any portion of such expenses. The bulk of the underwriting compensation was paid by the Sponsor or the Advisor.  The Company does not believe that its total offering and organizational expenses or the offering and organizational expenses of MVP REIT I exceeded the applicable limits. The FINRA investigation is continuing, and the Company cannot predict its outcome.  However, it is possible that FINRA will seek to impose penalties on AMS and/or its registered principals.

As previously disclosed, in February 2018, the audit committee (the "Audit Committee") of our board of directors engaged independent legal counsel to conduct an internal investigation arising from the Audit Committee's receipt of allegations from an employee of the Advisor, regarding possible wrongdoing by our Chairman and Chief Executive Officer, relating to potentially inaccurate disclosures by AMS to FINRA in connection with the FINRA investigation, and potential inaccuracies in personal financial statements of Mr. Shustek that were provided to one or more of the Company's lenders in connection with mortgage loans or guarantees where Mr. Shustek is a personal non-recourse carve-out guarantor.  The allegations of possible wrongdoing did not involve the Company's financial statements or accounting procedures.  The Audit Committee commenced the internal investigation and engaged independent legal counsel promptly upon becoming aware of the allegations.

On April 27, 2018, the Audit Committee concluded its internal investigation and reported to our board of directors on the matters raised by the Advisor's employee as well as certain recommendations made by the Audit Committee.  Based upon the information made available to it, the Audit Committee determined that Mr. Shustek did not exercise proper judgment and appropriate oversight in connection with the initial submission of underwriting compensation information to FINRA and the CEO's personal financial statements to the Company's lenders, which resulted in the submission of inaccurate information to FINRA and the Company's lenders.  As part of its analysis, the Audit Committee also took into consideration the fact that (i)  AMS had corrected the information provided to FINRA regarding underwriting compensation before the Advisor's employee made the report to the Audit Committee and (ii) Mr. Shustek provided corrected updated personal financial statements to the Company's lenders upon being made aware of the inaccuracies in the previously submitted personal financial statements.

In addition, in May 2016, VRM II reported in its quarterly report on Form 10-Q that it had recently learned its federal income tax return for 2013 incorrectly reported income that it had not received.  The tax return, which was prepared by an outside accounting firm, reported income of approximately $11,137,000, which had the effect of erroneously reducing VRM II's net operating losses ("NOLs") by approximately $11,000,000.  In early 2016, upon becoming aware of the inaccuracies contained in the 2013 federal income tax return, VRM II filed corrected tax returns and immediately terminated its relationship with the outside accounting firm.

The outside accounting firm that had prepared the tax return provided bookkeeping and tax accounting services to VRM II and its affiliates, including the Company, but was not engaged as the outside auditor for VRM II or the Company.  Prior to February 27, 2015 various employees of an affiliate of the outside accounting firm acted as the chief financial officer for the Company and MVP REIT I.  In addition, a manager of the accounting firm served as President of MVP REIT I from January 2016 to March 2016.

VRM II's audit committee, with the assistance of its outside counsel, conducted a review of the matter.  The review was limited by the fact that certain individuals associated with the outside accounting firm were not willing to speak with the audit committee or its counsel.  Based on the information available to it, the audit committee concluded that VRM II's tax return for 2013 was changed by persons associated with the outside accounting firm, without the authorization or involvement of any officers or employees of VRM II.

The Company is aware that certain persons associated with the outside accounting firm have been indicted on matters unrelated to the Company, VRM II or any of their affiliates These individuals include a former director of MVP REIT I, who resigned his position as a director of the Company and its affiliates in February 2016, and the Company's former Chief Financial Officer, who was employed by the Company beginning in March 8, 2013 and ending on February 27, 2015. The Company believes that criminal and civil investigations are continuing with respect to such individuals and other persons associated with the outside accounting firm.  No individual currently associated with the Company, the Advisor or their affiliates has been notified that they are targets or subjects of any such investigation.  However, we can give no assurances regarding the future course of the investigation.

The pendency of investigations or legal proceedings involving AMS, or any of the current officers or employees of the Advisor could harm the reputation of the Company and may distract our management from attending to the Company's business.  The adverse publicity arising out of the pendency of such investigations or proceedings, or concerns about the distraction resulting from such matters, could result in the independent members of our board of directors determining that it is necessary or appropriate to terminate our relationship with the Advisor.  Termination of the Advisor, the loss of key personnel of our Advisor or circumstances causing such personnel to otherwise become unavailable to manage our business, would result in the loss of experience, skill, resources, relationships and contacts of individuals that we believe are  important to our investment and operating strategies.    Moreover, in the event that the Amended and Restated Advisory Agreement is terminated for any reason, we are prohibited under the Amended and Restated Advisory Agreement from soliciting or hiring the employees of the Advisor or any of its affiliates for one year after such termination, and we may need to pay the Advisor significant amounts to waive such prohibition.  Additionally, if we are unable to hire certain key officers and employees of our Advisor to internally manage the Company, we would need to engage a new advisor to perform the functions currently performed by the Advisor, and there can be no assurances that we would be successful in identifying and engaging a new advisor timely or on terms similar those in the Amended and Restated Advisory Agreement or that the new advisor would successfully manage our business.  These investigations could inhibit the Company's ability to attract any equity, or the amount of equity capital required to meet its lender obligations.  Furthermore, these investigations could adversely affect the valuation the Company.

Commencing on May 29, 2018, if we resume our share repurchase plan, we will base the repurchase prices for shares of our common stock at a price equal to our NAV per share. Our NAV will be based upon subjective judgments, assumptions and opinions about future events, and may not be accurate. As a result, our NAV per share may not reflect the amount that a stockholder might receive for his or her shares in a market transaction.

Commencing on May 29, 2018 (the "Valuation Date"), if we resume our share repurchase plan, we will base the repurchase prices for shares of our common stock on our NAV per share. On May 29, 2018, we announced an estimated NAV of approximately $161.2 million or $24.61 per common share as of May 29, 2018. The Advisor will be responsible for calculating our NAV no less frequently than annually. Our NAV will be calculated by estimating the market value of our assets and liabilities, many of which may be illiquid. Our board of directors will review the Advisor's NAV calculation. In connection with our NAV calculation, we expect that an independent valuation expert will appraise our portfolio and that the Advisor will review each appraisal. The Advisor will also determine the valuation of our portfolio and will compare each appraisal to its own determinations. If in the Advisor's opinion the appraisals are materially higher or lower than the Advisor's determinations of value, the Advisor will discuss the appraisals with the independent valuation expert. If the Advisor determines that the appraisals are still materially higher or lower than its valuations, a valuation committee, comprised of our independent directors, will review the appraisals and valuations, and make a final determination of value. Although the valuations of our portfolio will be approved by our board of directors, the valuations may not be precise because the valuation methodologies used to value a portfolio involve subjective judgments, assumptions and opinions about future events. Any resulting disparity may benefit existing stockholders or new purchasers of our shares of common stock.

A stockholder's ability to have his or her common shares repurchased is limited under our share repurchase program, and if a stockholder is unable to have his or her common shares repurchased, it may be at a price that is less than the price the stockholder paid for the common shares and the then-current market value of the common shares.

On May 29, 2018, our board of directors suspended our share repurchase program, or SRP, other than for repurchases in connection with a shareholder's death.  Our board may in the future reinstate the SRP, although there is no assurance as to if or when this will happen.  Even if we reinstate our SRP, our SRP contains significant restrictions and limitations. For example, stockholders must generally hold their shares for a minimum of two years before they can participate in our SRP. Further, we presently intend to limit the number of shares to be repurchased during any calendar quarter to not more than 5% of the weighted average of the number of shares of our common stock outstanding on December 31st of the prior calendar year. Repurchases will be funded solely from the net proceeds from the sale of shares under the Company's distribution reinvestment plan ("DRIP") in the prior calendar year. Our board of directors may also limit the amounts available for repurchase at any time in its sole discretion. In addition, our board of directors may, in its sole discretion, amend, suspend or terminate the SRP at any time upon 30 days' prior notice. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination of our SRP.

As a result of these limitations, the repurchase price a stockholder may receive upon any such repurchase may not be indicative of the price our stockholders would receive if our common shares were actively traded or if we were liquidated, and a stockholder should not assume that he or she will be able to sell all or any portion of his or her common shares back to us pursuant to our SRP, if we elect to resume the SRP, or to third parties at a price that reflects the then current market value of the common shares or at all.

We disclose funds from operations ("FFO"), a non- GAAP financial measure, in communications with investors, including documents filed with the SEC; however, FFO is not equivalent to our net income or loss as determined under GAAP, and our computation of FFO may not be comparable to other REITs.

One of our objectives is to provide cash distributions to our stockholders from cash generated by our operations determined under GAAP. Cash generated from operations is not equivalent to our net income from continuing operations as determined under GAAP. One non- GAAP supplemental performance measure that we consider due to the certain unique operating characteristics of real estate companies is known as FFO. The National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, promulgated this measure, which it believes more accurately reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income computed in accordance with GAAP, excluding gains or losses from sales of property, plus depreciation and amortization on real property and after adjustments for unconsolidated partnerships and joint ventures in which we hold an interest. In addition, NAREIT has recently clarified its computation of FFO, which includes adding back real estate impairment charges for all periods presented; however, under GAAP, impairment charges reduce net income. While impairment charges are added back in the calculation of FFO, we caution that due to the fact that impairments to the value of any property are typically based on estimated future undiscounted cash flows compared to current carrying value, declines in the undiscounted cash flows which led to the impairment charges reflect declines in property operating performance which may be permanent.

The calculation of FFO may vary from entity to entity since capitalization and expense policies tend to vary from entity to entity. Items that are capitalized do not impact FFO, whereas items that are expensed reduce FFO. Consequently, our presentation of FFO may not be comparable to other similarly titled measures presented by other REITs. FFO does not represent cash flows from operations as defined by GAAP, it is not indicative of cash available to fund all cash flow needs nor is it indicative of liquidity, including our ability to pay distributions, and should not be considered as an alternative to net income, as determined in accordance with GAAP, for purposes of evaluating our operating performance. Management uses the calculation of FFO for several reasons. We use FFO to compare our operating performance to that of other REITs. Additionally, we compute FFO as part of our acquisition process to determine whether a proposed investment will satisfy our investment objectives.

The historical cost accounting rules used for real estate assets require, among other things, straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical cost accounting for depreciation may be less informative than FFO. We believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our operating performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs.

However, FFO should not be construed to be equivalent to or a substitute for the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non- GAAP FFO measures and the adjustments to GAAP in calculating FFO. Furthermore, FFO is not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations calculated in accordance with GAAP, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders.

FFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. The exclusion of impairments limits the usefulness of FFO as a historical operating performance measure since an impairment indicates that the property's operating performance may have been permanently affected. FFO is not a useful measure in evaluating NAV because impairments are taken into account in determining NAV but not in determining FFO.

Future securities class action lawsuits, governmental investigations and regulatory oversight may result in increased expenses or harm our financial results.

As a result of regulatory inquiries or other regulatory actions, we, our Advisor or its personnel may become subject to lawsuits. Our ability to access capital markets, including commercial debt markets, could be negatively impacted by unfavorable, or the possibility of unfavorable, outcomes to lawsuits or adverse regulatory actions.

We, our Advisor and its personnel may be subject to regulatory inquiries, which could continue to result in costs and personnel time commitment to respond. We, our Advisor and its personnel may also be subject to additional investigations and action by governing regulatory agencies as a result of our activities, which could result in costs to respond and fines or changes in our business practices, any of which could have a material adverse effect on our financial condition, results of operations, liquidity and capital resources and cash flow.

We depend on our Advisor to manage our affairs.  The loss of key personnel by our Advisor or a disruption in our relationship with the Advisor could have a material adverse effect upon our ability to conduct and manage our business.

We depend upon our Advisor and its personnel to manager our business.  Our future success depends in large part on the Advisor's ability to hire and retain a sufficient number of qualified personnel.

The loss of services of one or more members of the  Advisor's key personnel, or the Advisor's inability to attract and retain highly qualified personnel, could adversely affect our business, diminish our investment opportunities and weaken our relationships with lenders, business partners, parking facility operators and managers and other industry personnel, which could materially adversely affect our business, financial condition, results of operations and ability to make distributions to our stockholders and the value of our common stock.

We have the right to terminate the Advisor's services upon 60 days' notice.  However, if we terminate the Advisor, we are contractually bound not to hire its personnel without the Advisor's consent for a period of one year from the date of termination. This restriction could make it difficult for us to conduct operations after termination of the Advisor, and may act as a constraint on our authority to terminate the Advisor.

We will face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology networks and related systems.

We will face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our information technology, or IT, networks and related systems. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems will be essential to the operation of our business and our ability to perform day-to-day operations, and, in some cases, may be critical to the operations of certain of our tenants. There can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or other significant disruption involving our IT networks and related systems could adversely impact our financial condition, results of operations, cash flow and our ability to satisfy our debt service obligations and to pay distributions to our stockholders.

Risks Related to Our Investments

We may acquire properties in parts of the United States and Canada where we do not have extensive experience.

We intend to explore acquisitions of properties throughout the United States and Canada. We may not possess familiarity with the dynamics and prevailing conditions of any geographic market we enter, which could adversely affect our ability to successfully expand into or operate within those markets. For example, markets may have different insurance practices, reimbursement rates and local real estate, zoning and development regulations than those with which we are familiar. We may find ourselves more dependent on third parties in new markets because our distance could hinder our ability to directly and efficiently identify suitable investments or manage properties in distant markets. We may not be successful in identifying suitable properties or other assets which meet our acquisition or development criteria or in consummating acquisitions or investments on satisfactory terms or at all for a number of reasons, including, among other things, unsatisfactory results of our due diligence investigations, failure to obtain financing on acceptable terms for the acquisition or development and our misjudgment of the value of the opportunities. We may also be unable to successfully integrate the operations of acquired properties, maintain consistent standards, controls, policies and procedures or realize the anticipated benefits of the acquisitions within the anticipated timeframe or at all. If we are unsuccessful in expanding into new markets, it could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Our revenues will be significantly influenced by demand for parking facilities generally, and a decrease in such demand would likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.

We have decided that the focus for our portfolio of investments and acquisitions will be parking facilities. A decrease in the demand for parking facilities, or other developments adversely affecting such sectors of the property market would likely have a more pronounced effect on our financial performance than if we owned a more diversified real estate portfolio.  If adverse economic conditions reduce discretionary spending, business travel or other economic activity that fuels demand for parking services, our revenues could be reduced. In addition, our parking facilities tend to be concentrated in urban areas. Users of our parking facilities include workers who commute by car to their places of employment in these urban centers. The return on our investments could be materially adversely affected to the extent that weak economic conditions or demographic factors result in the elimination of jobs and high unemployment in these urban areas. In addition, increased unemployment levels, the movement of white-collar jobs from urban centers to suburbs or out of North America entirely. Increased office vacancies in urban areas, movement toward home office alternatives or lower consumer spending could reduce consumer demand for parking, which could adversely impact our revenues and financial condition. Moreover, changing lifestyles and technology innovations also may decrease the need for parking spaces, thereby decreasing the demand for parking facilities. The need for parking spaces, for example, may decrease as the public increases its use of livery service companies and ride sharing companies or elects to take public transit for their transportation needs. Future technology innovations, such as driverless vehicles, also may decrease the need for parking spaces. It is also possible that cities could enact new or additional measures such as higher tolls, increased taxes and vehicle occupancy requirements in certain circumstances, to encourage car-pooling and the use of mass transit, all of which could adversely impact the demand for parking.  Weather conditions, such as hurricanes, snow, flooding or severe weather storms, and other natural disasters and acts of terrorism could also disrupt our parking facilities and further reduce the demand for parking.  These and other developments affecting the demand for parking could have a material, adverse effect on the value of our properties as well as our revenues and our distributions to stockholders.

Any parking facilities we acquire or invest in will face intense competition, which may adversely affect rental and fee income.

We believe that competition in parking facility operations is intense. The relatively low cost of entry has led to a strongly competitive, highly fragmented market consisting of competitors ranging from single facility operators to large regional and national multi-facility operators, including several public companies. In addition, any parking facilities we acquire may compete with building owners that provide on-site paid parking. Many of the competitors have more experience than we do in owning and operating parking facilities. Moreover, some of our competitors will have greater capital resources, greater cash reserves, less demanding rules governing distributions to stockholders and a greater ability to borrow funds. Competition for investments may reduce the number of suitable investment opportunities available to us, may increase acquisition costs and may reduce demand for parking facilities, all of which may adversely affect our operating results. Additionally, an economic slowdown in a particular market could have a negative effect on our parking fee revenues.

If competitors build new facilities that compete with our facilities or offer space at rates below the rates we charge, our lessees may lose potential or existing customers and may be pressured to discount their rates to retain business and to reduce rents paid to us. As a result, our ability to make distributions to stockholders may be impaired. In addition, increased competition for customers may require us to make capital improvements to facilities that we would not otherwise make, which could reduce cash available for distribution to our stockholders.

Our leases expose us to certain risks.

We net lease our parking facilities to lessees that will either offer parking services to the public or provide parking to their employees. We rely upon the lessee to manage and conduct the daily operations of the facilities. In addition, under a net lease arrangement, the lessee is generally responsible for taxes and fees at a leased location. The loss or renewal on less favorable terms of a substantial number of leases, or a breach, default or other failure to perform by a lessee under a lease, could have a material adverse effect on our business, financial condition and results of operations. A material reduction in the rental income associated with the leases (or an increase in anticipated expenses to the extent we are responsible for such expenses) also could have a material adverse effect on our business, financial condition and results of operations.

Our investments in real estate will be subject to the risks typically associated with real estate.

We invest directly in real estate. We will not know whether the values of properties that we own directly will remain at the levels existing on the dates of acquisition. If the values of properties we own drop, our risk will increase because of the lower value of the real estate. In this manner, real estate values could impact the value of our real estate investments. Therefore, our investments will be subject to the risks typically associated with real estate.

The value of real estate may be adversely affected by a number of risks, including:

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natural disasters such as hurricanes, earthquakes and floods;
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acts of war or terrorism, including the consequences of terrorist attacks;
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adverse changes in national and local economic and real estate conditions;
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an oversupply of (or a reduction in demand for) space in the areas where particular properties are located and the attractiveness of particular properties to prospective tenants;
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changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance therewith and the potential for liability under applicable laws;
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costs of remediation and liabilities associated with environmental conditions affecting properties; and
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the potential for uninsured or underinsured property losses.
Our potential investments in real estate secured loans will be subject to risks typically associated with such investments.
Although we expect to continue investing predominantly in parking facilities, we also expect to continue one of MVP I's investment strategies of seeking investments in real estate secured loans as potential non-core assets to supplement our investment portfolio. Any such investments will be subject to risks typically associated with real estate secured loans, including, but not limited to, the following:

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Real estate secured loans are secured by real property and are subject to risks of delinquency and foreclosure. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower's ability to repay the loan may be impaired.
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Any real estate secured loans we may invest in will be at risk of defaults caused by conditions beyond our control, including local and other economic conditions affecting real estate values and interest rate levels. We will not know whether the values of the property securing the real estate secured loans will remain at the levels existing on the dates of acquisition of such loans. If the values of the underlying properties drop, our risk will increase because of the lower value of the security associated with such loans.
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In the event of any default under a real estate secured loan held by us, we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of such loan, which could have a material adverse effect on our cash flow from operations.
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Foreclosure of a real estate secured loan can be an expensive and lengthy process that could have a substantial negative effect on our anticipated return on the foreclosed loan. In addition, if we acquire property by foreclosure following defaults under any of our real estate secured loans, we will have the economic and liability risks as the owner, including, among other things, insurance costs, costs of maintenance and taxes relating to any property acquired through the foreclosure process.
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Any real estate secured loans we make will be subject to interest rate fluctuations that could reduce our returns as compared to market interest rates.
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Returns on any loan investments may be limited by costs incurred to comply with extensive regulation imposed by federal, state and local authorities and judicial and administrative decisions.

A small number of our parking tenants account for a significant percentage of our total rental revenues, and the failure of any of these tenants to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations.

The successful performance of our investments is materially dependent on the financial stability of our parking tenants. We had 14 parking tenants as of December 31, 2017. Approximately 69.5% of our parking rental revenues for the year ended December 31, 2017 were generated by only two of those tenants, SP+ (54.8%) and iPark Services (12.9%). Rent payment defaults by SP+, iPark Services or other significant tenants or declines in their operating performance could materially and adversely affect our business, financial condition and results of operations. In the event of a payment default by one or more of our significant parking tenants, including SP+ and iPark Services, we may experience delays in enforcing our rights and may incur substantial costs in protecting our investments and re-leasing our parking facilities. Further, we cannot assure you that we will be able to re-lease the parking facilities for the rent previously received, or at all, or that lease terminations will not cause us to sell the facilities at a loss. The result of any of the foregoing risks could materially and adversely affect our business, financial condition, results of operations.

Competition with third parties in acquiring and operating our investments may reduce our profitability and the return on a stockholder's investment.

We have significant competition with respect to our acquisition of assets with many other companies, including other REITs, owners and managers of parking facilities, private investment funds, hedge funds and other investors, many of which have greater resources than us. We may not be able to compete successfully for investments. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If we pay higher prices for investments, our returns will be lower, and the value of our assets may not increase or may decrease significantly below the amount we paid for such assets. If such events occur, a stockholder may experience a lower return on his or her investment.

We will compete with numerous other persons to attract tenants to real property we acquire. These persons or entities may have greater experience and financial strength than us. There is no assurance that we will be able to attract tenants on favorable terms, if at all. For example, our competitors may be willing to offer space at rental rates below our rates, causing us to lose existing or potential tenants and pressuring us to reduce our rental rates to retain existing tenants or convince new tenants to lease space at our properties. Each of these factors could adversely affect our results of operations, financial condition, value of our investments and ability to pay distributions.


Real property will be subject to property taxes that may increase in the future, which could adversely affect our cash flow.

Real property is subject to real property taxes that may increase as tax rates change and as real property is assessed or reassessed by taxing authorities. We anticipate that certain of our leases will generally provide that the property taxes, or increases in property taxes, are charged to the lessees as an expense related to the real property that they occupy, while other leases will generally provide that we are responsible for such taxes. In any case, we are ultimately responsible for payment of the taxes to the applicable government authorities. If real property taxes increase, tenants may be unable to make the required tax payments, ultimately requiring us to pay the taxes even if otherwise stated under the terms of the lease. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the real property and the real property may be subject to a tax sale. In addition, we will generally be responsible for real property taxes related to any vacant space.

Our parking facilities also may be subject to sales and parking taxes and, to the extent we are unable to require compliance by our lessee or manager of such regulations, or to the extent a lessee or manager fails to comply with such regulations, we may be obligated to withhold and remit such taxes, or a direct assessment may be imposed upon us for failure to remit sales/parking taxes or failure to file the appropriate tax return.

Uninsured losses or premiums for insurance coverage relating to real property may adversely affect stockholder returns.

Our real properties may incur casualty losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders sometimes require property owners to purchase specific coverage against terrorism as a condition for providing mortgage loans. These policies may not be available at a reasonable cost, if at all, which could inhibit our ability to finance or refinance real property we may hold. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. Changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our real property incurs a casualty loss which is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, we cannot assure stockholders that funding will be available to us for repair or reconstruction of damaged real property in the future.

Actions of joint venture partners could negatively impact our performance.

We may enter into joint ventures with third parties, including with entities that are affiliated with the Advisor. We may also purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements with the sellers of the properties, affiliates of the sellers, developers or other persons. Such investments may involve risks not otherwise present with a direct investment in real estate, including, for example:

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the possibility that our venture partner or co-tenant in an investment might become bankrupt or fail to fund their required capital contributions;
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that the venture partner or co-tenant may at any time have economic or business interests or goals which are, or which become, inconsistent with our business interests or goals;
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that such venture partner or co-tenant may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives;
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the possibility that we may incur liabilities as a result of an action taken by such venture partner;
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that disputes between us and a venture partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business;
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the possibility that if we have a right of first refusal or buy/sell right to buy out a co-venturer, co-owner or partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so; or
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the possibility that we may not be able to sell our interest in the joint venture if we desire to exit the joint venture.

Under certain joint venture arrangements, neither party has the power to control the joint venture, potentially resulting in an impasse in decision-making, which might have a negative influence on the joint venture and decrease potential returns to stockholders. In addition, to the extent that our venture partner or co-tenant is an affiliate of the Advisor, certain conflicts of interest will exist.


Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations.

From time to time, we may seek to acquire multiple properties in a single transaction. Portfolio acquisitions are more complex and expensive than single property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition. Portfolio acquisitions may also result in us owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio. In these situations, if we are unable to identify another person or entity to acquire the unwanted properties, we may be required to operate or attempt to dispose of these properties. To acquire multiple properties in a single transaction, we may be required to accumulate a large amount of cash. We would expect the returns that we earn on such cash to be less than the ultimate returns on real property, therefore accumulating such cash could reduce our funds available for distributions. Any of the foregoing events may have an adverse effect on our operations.

Our costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.

All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liabilities on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.

Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, operations of our parking facilities and other tenant operations, the existing condition of land when we buy it, operations in the vicinity of our real property, such as the presence of underground storage tanks, oil leaks and other vehicle discharge, or activities of unrelated third parties may affect our real property. There are also various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply, and which may subject us to liability in the form of fines or damages for noncompliance. In connection with the acquisition and ownership of real property, we may be exposed to such costs in connection with such regulations. The cost of defending against environmental claims, of any damages or fines we must pay, of compliance with environmental regulatory requirements or of remediating any contaminated real property could materially adversely affect our business, lower the value of our assets or results of operations and, consequently, lower the amounts available for distribution to our stockholders.

Real property investments may contain or develop harmful mold or suffer from other indoor air quality issues, which could lead to liability for adverse health effects or property damage or cost for remediation.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants can allegedly cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our real property investments could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants or to increase ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants or others if property damage or personal injury occurs.

The costs associated with complying with the Americans with Disabilities Act may reduce the amount of cash available for distribution to our stockholders.

Investment in real property may be subject to the Americans with Disabilities Act of 1990, as amended, or ADA. Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The ADA has separate compliance requirements for "public accommodations" and "commercial facilities" that generally require that buildings and services be made accessible and available to people with disabilities. With respect to the properties we acquire, the ADA's requirements could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Any monies we use to comply with the ADA will reduce the amount of cash available for distribution to our stockholders.
Real property is an illiquid investment, and we may be unable to adjust our portfolio in response to changes in economic or other conditions or sell a property if or when we decide to do so.

Real property is an illiquid investment. We may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any real property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real property. Also, we may acquire real properties that are subject to contractual "lock-out" provisions that could restrict our ability to dispose of the real property for a period of time.

We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure stockholders that we will have funds available to correct such defects or to make such improvements.

In acquiring a real property, we may agree to restrictions that prohibit the sale of that real property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real property. Our real properties may also be subject to resale restrictions. All these provisions would restrict our ability to sell a property, which could reduce the amount of cash available for distribution to our stockholders.

The bankruptcy, insolvency or other loss of a significant lessee or parking facility manager may adversely impact our operations and our ability to pay distributions to our stockholders.

A single lessee accounted for a significant portion of our parking base rental revenue as of December 31, 2017. See "Item 1. Business–Investment Strategy–Concentration" for more information.  The inability of any of our significant lessee or parking managers to pay rent or fees, as applicable, or a decision by a significant lessee or parking manager to terminate a lease or management agreement prior to, or at the conclusion of, their term or any other loss of a significant lessee or parking manager could have a significant negative impact on our results of operations or financial condition if a suitable replacement lessee or manager is not secured in a timely manner. The bankruptcy, insolvency or other loss of a significant lessee or parking facility manager may have an adverse impact on our income and our ability to pay distributions to our stockholders. Generally, under bankruptcy law, a debtor tenant has 120 days to exercise the option of assuming or rejecting the obligations under any unexpired lease for nonresidential real property, which period may be extended once by the bankruptcy court. If the tenant assumes its lease, the tenant must cure all defaults under the lease and may be required to provide adequate assurance of its future performance under the lease. If the tenant rejects the lease, we will have a claim against the tenant's bankruptcy estate. Although rent owing for the period between filing for bankruptcy and rejection of the lease may be afforded administrative expense priority and paid in full, pre-bankruptcy arrears and amounts owing under the remaining term of the lease will be afforded general unsecured claim status (absent collateral securing the claim). Moreover, amounts owing under the remaining term of the lease will be capped. Other than equity and subordinated claims, general unsecured claims are the last claims paid in a bankruptcy and therefore funds may not be available to pay such claims in full.

Declines in the market values of our investments may adversely affect periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.

Some of our assets will be classified for accounting purposes as "available-for-sale." These investments are carried at estimated fair value, and temporary changes in the market values of those assets will be directly charged or credited to stockholders' equity without impacting net income on the income statement. Moreover, if we determine that a decline in the estimated fair value of an available-for-sale security falls below its amortized value and is not temporary, we will recognize a loss on that security on the income statement, which will reduce our earnings in the period recognized.

A decline in the market value of our assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.

Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.

Market values of our investments may decline for a number of reasons, such as changes in prevailing market rates, increases in defaults, increases in voluntary prepayments for those investments that we have that are subject to prepayment risk, widening of credit spreads and downgrades of ratings of the securities by ratings agencies.

Risks Related to Our Financing Strategy

We may not be able to access financing sources on attractive terms or at all, which could adversely affect our ability to execute our business plan.

We have and intend to continue to finance our assets with outside capital. We may also periodically use short-term financing to complete planned development projects, perform renovations to our properties, make stockholder distributions or share redemptions in periods of fluctuating income from our properties.

Our access to sources of financing will depend upon a number of factors, over which we have little or no control, including:

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general market conditions;
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a financing source's view of the quality of our assets;
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a financing source's perception of our financial condition and growth potential; and
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our current and potential future earnings and cash distributions.

We do not know whether any sources of capital will be available to us in the future on terms that are acceptable to us, if at all. If we cannot obtain sufficient capital on acceptable terms, our businesses and our ability to operate could be materially adversely impacted.

We have broad authority to incur debt, and high debt levels could hinder our ability to make distributions, expose us to the risk of default under our debt obligations and decrease the value of a stockholder's investment.

Our charter does not limit us from incurring debt until our borrowings would exceed 300% of our net assets. Further, we can increase our borrowings in excess of 300% of our net assets if a majority of our independent directors approve such increase and the justification for such excess borrowing is disclosed to our stockholders in our next quarterly report. Our board of directors is required to review our debt levels at least quarterly. High debt levels and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:

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our cash flows may be insufficient to meet our required principal, interest charges and debt service payments;
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we may be unable to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to meet operational needs or to capitalize upon emerging acquisitions ;
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we may be unable to refinance our debt at maturity or the refinancing terms may be less favorable than the terms of our original debt;
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we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, investment acquisition opportunities, stockholder distributions or other purposes;
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we may be forced to dispose of one or more of our properties, possibly on unfavorable terms or in violation of certain covenants to which we may be subject under our debt agreements;
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we may default on our obligations, in which case the lenders or mortgagees may have the right to foreclose on any properties that secure the loans or collect rents and other income from our properties;
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we may violate restrictive covenants in our loan documents, which would result in events of default under our loan documents that may entitle the lenders to accelerate our debt obligations or reduce our ability to pay, or prohibit us from paying, distributions to our stockholders;
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our default under any loan with cross default provisions could result in a default on other outstanding debt; and
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our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will outpace increases in financing costs.

If any one of these events were to occur, our financial condition, results of operations and cash flows and ability to operate could be materially adversely affected. Furthermore, foreclosures could create taxable income without accompanying cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code and limit the amount of cash we have available to distribute, which could result in a decline in the value of a stockholder's investment.


We expect to use credit facilities to finance our investments, which may require us to provide additional collateral and significantly impact our liquidity position.

On December 29, 2017, we, through our Operating Partnership, entered into a credit agreement with KeyBank, National Association as the administrative agent and KeyBanc Capital Markets as the lead arranger.  Pursuant to the credit agreement, we were provided with a $50 million senior secured revolving credit facility.  The credit facility is comprised of a borrowing base revolving credit facility with a maturity date of January 3, 2021, subject to two one-year extensions, and a working capital revolving credit facility with a maturity date of January 4, 2019. The credit facility contains an accordion feature that allows our Operating Partnership, subject to certain conditions, to obtain in the aggregate up to $350 million in revolving or term loan commitments. The credit agreement is collateralized by first priority or equivalent security interests in the capital stock of, or other equity interests in, certain of our subsidiaries.

We have used a portion of this credit facility to refinance our prior $30 million revolving credit facility and $6 million bridge loan facility, and expect to use this credit facility and potential other credit facilities to finance some of our investments and for working capital and general corporate purposes. In a weakening economic environment, we would generally expect credit quality to decline, resulting in a higher likelihood that the lenders would require partial repayment from us, which could be substantial. Posting additional collateral to support our credit facilities could significantly reduce our liquidity and limit our ability to leverage our assets. In the event we do not have sufficient liquidity to meet such requirements, lending institutions can accelerate our indebtedness, which could have a material adverse effect on our business and operations.

Lenders have required and may continue to require us to enter into restrictive covenants relating to our operations, which could limit our flexibility to achieve our investment objectives and our ability to make distributions to our stockholders.

When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage a property, discontinue insurance coverage, or replace the Advisor or members of our management team. In addition, loan documents may limit our ability to replace a property's property manager or terminate certain operating or lease agreements related to a property. For example, our existing credit agreement contains customary affirmative and negative covenants (which are in some cases subject to certain exceptions), including, but not limited to, restrictions on the ability to incur additional indebtedness, create liens, make certain investments, make certain dividends and related distributions, prepay certain debt, engage in affiliate transactions, enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions, and dispose of assets or subsidiaries. These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives and could result in us being limited in the amount of distributions we would be permitted to make on our common stock.

If we breach covenants under our existing credit facility and other indebtedness, we could be held in default under such loans, which could accelerate our repayment date and materially adversely affect our financial condition, results of operations and cash flows.

In addition to customary representations, warranties, covenants, and indemnities, our existing credit agreement requires us to comply with various financial covenants, including a maximum consolidated leverage ratio,  minimum fixed charge coverage ratio, minimum tangible net worth, maximum secured debt ratio, maximum secured recourse debt ratio, maximum unhedged variable rate debt, maximum payout ratio, minimum liquidity and minimum pool properties, in each case, as defined and measured at the end of each calendar quarter in accordance with our existing credit agreement.

In June 2018, we entered into an amendment and waiver to our existing credit agreement.  As further described in the section entitled, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources," pursuant to the amendment and waiver, among other things, the Lenders agree to waive the Borrowers' breach of the fixed charge coverage ratio for the period ended March 31, 2018, and the Borrowers' requirement to comply with the fixed charge coverage ratio for the period ended June 30, 2018 and September 30, 2018, and the Guarantor's breach of the financial reporting obligations under the credit agreement for the periods ended December 31, 2017 and March 31, 2018.

We expect to be in compliance with all covenants under our existing credit agreement, as amended, upon the filing of our quarterly report on Form 10-Q for the quarter ended March 31, 2018 with the SEC.

Our failure to comply with any of the above covenants in future periods, as well as the other covenants under our existing credit agreement described above, will constitute an event of default under our existing credit agreement and, if not cured or waived, will likely result in:

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acceleration of all of our debt under our existing credit facility (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all;
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our inability to borrow unused amounts under our existing credit facility and other financing arrangements, even if we are current in payments on borrowings under those arrangements;  and/or
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the loss of some or all of our assets to foreclosure or sale.

Further, our existing credit agreement contains cross default provisions, which could result in a default on our other outstanding debt.

Any such event of default, termination of commitments, acceleration of payments due to the lenders under our existing credit agreement, cross-default under our other outstanding debt, or foreclosure of our assets would have a material adverse effect on our financial condition, results of operations and cash flows and ability to continue to operate and make distributions to our stockholders. A default also could limit significantly our financing alternatives, which could cause us to curtail our investment activities and/or dispose of assets.  A default could also make it difficult for us to satisfy the qualification requirements necessary to maintain our status as a REIT for U.S. federal income tax purposes.  It is also possible that we could become involved in litigation related to matters concerning the loan, and such litigation could result in significant costs to us.

Instability in the debt markets may make it more difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire and the amount of cash distributions we can make to our stockholders.

If mortgage debt is unavailable on reasonable terms as a result of increased interest rates or other factors, we may not be able to finance the initial purchase of properties. In addition, if we place mortgage debt on properties, we run the risk of being unable to refinance such debt when the loans come due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance debt, our income could be reduced. We may be unable to refinance debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us, or could result in the foreclosure of such properties. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to stockholders and may hinder our ability to raise more capital by issuing securities or by borrowing more money.

Interest rates have begun to increase, which could increase the amount of our debt payments and negatively impact our operating results.

Interest we pay on our debt obligations will reduce cash available for distributions. If we incur variable rate debt, increases in interest rates would increase our interest costs and increase the cost of refinancing existing debt and issuing new debt, which could limit our growth prospects, reduce our cash flows and our ability to make distributions to stockholders. If we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments. The effect of prolonged interest rate increases could materially adversely impact our ability to make acquisitions and develop properties.

Failure to hedge effectively against interest rate changes may materially adversely affect our business, financial condition, results of operations and ability to make distributions to our stockholders.

We currently have, and may incur in the future, debt that bears interest at variable rates. An increase in interest rates would increase our interest costs to the extent we have not effectively hedged against such increase, which could adversely affect our cash flows and results of operations. Subject to our qualification and maintaining our qualification as a REIT for U.S. federal income tax purposes and our exemption from registration under the Investment Company Act of 1940, as amended (the "Investment Company Act"), we may manage and mitigate our exposure to interest rate risk attributable to variable-rate debt by using interest rate swap arrangements, interest rate cap agreements and other derivatives. The goal of any interest rate management strategy that we may adopt is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets. However, these derivatives themselves expose us to various risks, including the risk that: (i) counterparties may fail to honor their obligations under these arrangements; (ii) the credit quality of the counterparties owing money under these arrangements may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transactions; (iii) the duration of the hedging transactions may not match the duration of the related liability; (iv) these arrangements may not be effective in reducing our exposure to interest rate changes; and (v) these arrangements may actually result in higher interest rates than we would otherwise have. Moreover, no hedging activity can completely insulate us from the risks associated with changes in interest rates. Failure to hedge effectively against interest rate changes may materially adversely affect our business, financial condition, results of operations and ability to make distributions to our stockholders.

Certain loans are and may be secured by mortgages on our properties and if we default under our loans, we may lose properties through foreclosure.

We have obtained, and intend to continue to obtain, loans that are secured by mortgages on our properties, and we may obtain additional loans evidenced by promissory notes secured by mortgages on our properties. As a general policy, we will seek to obtain mortgages securing indebtedness which encumber only the particular property to which the indebtedness relates, but recourse on these loans may include all of our assets. If recourse on any loan incurred by us to acquire or refinance any particular property includes all of our assets, the equity in other properties could be reduced or eliminated through foreclosure on that loan. If a loan is secured by a mortgage on a single property, we could lose that property through foreclosure if we default on that loan. We may also give full or partial guarantees to lenders of mortgage debt to the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgage contains cross collateralization or cross default provisions, a default on a single property could affect multiple properties. In addition, for tax purposes, a foreclosure on any of our properties that is subject to a nonrecourse mortgage loan would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code. Further, if we default under a loan, it is possible that we could become involved in litigation related to matters concerning the loan, and such litigation could result in significant costs to us which could affect distributions to stockholders or lower our working capital reserves or our overall value.

Risks Related to Conflicts of Interest

Our executive officers and the Advisor's key real estate, finance and securities professionals will face conflicts of interest caused by our compensation arrangements with the Advisor and its affiliates, which could result in actions that are not in the long-term best interests of our company.

Our executive officers and the Advisor's key real estate, finance and securities professionals are also officers, directors, managers and/or key professionals of our Sponsor, our affiliated selling agent and other affiliated entities. The Advisor, our affiliated selling agent and other affiliated entities receive substantial fees from us. These fees could influence the advice given to us by the key personnel of the Advisor and its affiliates. Among other matters, these compensation arrangements could affect their judgment with respect to:

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the continuation, renewal or enforcement of our agreements with the Advisor, our affiliated selling agent and other affiliated entities, including the Amended and Restated Advisory Agreement and the selling agreements with our selling agents;
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public offerings of equity by us, which would enable our affiliated selling agent to earn additional selling commissions and the Advisor to earn additional acquisition and asset management fees;
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acquisitions of investments for us by affiliates, which entitle the Advisor to acquisition and asset management fees and, in the case of acquisitions of real property from other affiliated entities, might entitle affiliates of the Advisor to disposition fees in connection with services for the seller;
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real property sales, since the asset management fees payable to the Advisor will decrease;
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sales of real property, which entitle the Advisor to disposition fees;
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borrowings to acquire investments, which borrowings will increase the asset management fees payable to the Advisor;
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determining the compensation paid to employees for services provided to the Company, which could be influenced in part by whether the Advisor is reimbursed by the Company for the related salaries and benefits;
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if the Company seeks to internalize management functions, which internalization could result in the Company retaining some of the Advisor's and its affiliates' key officers and employees for compensation that is greater than that which they currently earn or which could require additional payments to affiliates of the Advisor to purchase the assets and operations of the Advisor and its affiliates; and
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if and when the Company seeks to list its common stock on a national securities exchange, sell or transfer substantially all of its assets, stock or business, or complete another liquidity event, which could be influenced in part by the reimbursements and other payments, if any, that the Advisor may seek in connection with any such liquidity event

The fees the Advisor receives in connection with transactions involving the acquisition of an asset are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. Additionally, the payment of certain fees may influence the Advisor to recommend transactions with respect to the sale of a property or properties that may not be in our best interest at the time. Investments with higher net operating income growth potential are generally riskier or more speculative. In evaluating investments and other management strategies, the opportunity to earn fees may lead the Advisor to place undue emphasis on criteria relating to its compensation at the expense of other criteria, such as the preservation of capital, to achieve higher short-term compensation. Considerations relating to our affiliates' compensation from us and other affiliates could result in decisions that are not in the best interests of our stockholders, which could hurt our ability to pay distributions to stockholders or result in a decline in the value of their investment.

In addition, the fees being paid to the Advisor, our affiliated selling agent and other affiliates for services they provide for us were not determined of an arm's length basis. As a result, the fees have been determined without the benefit of arm's length negotiations of the type normally conducted between unrelated parties and may be in excess of amounts that we would otherwise pay to third parties for such services.

The Advisor's real estate, finance and securities professionals acting on behalf of the Advisor will face competing demands relating to their time, and this may cause our operations and a stockholder's investment to suffer.

Our Sponsor and other affiliated entities rely on many of the same real estate, finance and securities professionals as the Advisor, including Mr. Shustek, for the day-to-day operation of our business. Mr. Shustek is also an executive officer of other affiliated entities. As a result of his interests in other affiliated entities and the fact that he engages in and will continue to engage in other business activities on behalf of himself and others, Mr. Shustek will face conflicts of interest in allocating his time among us, our Sponsor and other affiliated entities and other business activities in which he is involved. These conflicts of interest could result in declines in the returns on our investments and the value of a stockholder's investment.

The Advisor may have conflicting fiduciary obligations if we enter into joint ventures or engage in other transactions with its affiliates. As a result, in any such transaction we may not have the benefit of arm's-length negotiations of the type normally conducted between unrelated parties.

We have co-invested in property together with one or more of our affiliates, including with the owners of the Advisor, VRM I and VRM II. We may make additional co-investments in real estate or real estate-secured loans with our affiliates or through a joint venture with their affiliates. In these circumstances, the Advisor will have a conflict of interest when fulfilling its fiduciary obligation to us. In any such transaction, we would not have the benefit of arm's-length negotiations of the type normally conducted between unrelated parties.

Our executive officers and the Advisor's key real estate, finance and securities professionals face conflicts of interest related to their positions and interests in our affiliates, which could hinder our ability to execute our business strategy and to generate returns to stockholders.

Our executive officers and the Advisor's key real estate, finance and securities professionals are also executive officers, directors, managers and key professionals of AMS and/or other affiliated entities. As a result, they owe duties to each of these entities, their members and limited partners and these investors, which duties may from time to time conflict with the fiduciary duties that they owe to us and our stockholders. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. Conflicts with our business and interests are most likely to arise from involvement in activities related to (a) allocation of new investments and management time and services between us and the other entities, (b) the timing and terms of the investment in or sale of an asset, (c) development of our properties by affiliates of the Advisor, (d) investments with affiliates of the Advisor, (e) compensation to the Advisor and its affiliates, and (f) our relationship generally with the Advisor. The loyalties of these individuals to other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to stockholders and to maintain or increase the value of our assets.

Further, our directors and officers, our Sponsor, the Advisor, Mr. Shustek and any of their respective affiliates, employees and agents are not prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition or sale of real estate investments or that otherwise compete with us.

We may purchase real property and other real estate-related assets from third parties who have existing or previous business relationships with affiliates of the Advisor, and, as a result, in any such transaction, we may not have the benefit of arm's-length negotiations of the type normally conducted between unrelated parties.

We may purchase real property and other real estate-related assets from third parties that have existing or previous business relationships with affiliates of the Advisor. The officers, directors or employees of the Advisor and its affiliates may have a conflict in representing our interests in these transactions on the one hand and the interests of such affiliates in preserving or furthering their respective relationships on the other hand. In any such transaction, we will not have the benefit of arm's-length negotiations of the type normally conducted between unrelated parties, and the purchase price or fees paid by us may be in excess of amounts that we would otherwise pay to third parties.
Provisions in the Amended and Restated Advisory Agreement may discourage the Advisor from selling or acquiring properties.
While our prior Advisory Agreement provided for the payment of certain acquisition and disposition fees in connection with certain purchases and sales of assets, our Amended and Restated Advisory Agreement, which became effective upon consummation of the Merger, removes these provisions and instead provides only for the payment to the Advisor of asset management fees. Thus, the Advisor may not pursue the acquisition of a property even if it could obtain an otherwise favorable purchase or sale price for such property.

A stockholder's interest in us could be diluted and we could incur other significant costs associated with being self-managed if we internalize our management functions.

Our board of directors may decide in the future to internalize our management functions. If we do so, we may elect to negotiate to acquire the Advisor's assets and the personnel that the Advisor utilizes to perform services on its behalf for us. The payment of such consideration could result in dilution of a stockholder's interest and could reduce the income per share attributable to a stockholder's investment. Additionally, although we would no longer bear the costs of the various fees and expenses we expect to pay to the Advisor under the Amended and Restated Advisory Agreement, our direct expenses would include general and administrative costs, including legal, accounting and other expenses related to corporate governance, SEC reporting and compliance. We would also employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances as well as incur the compensation and benefits costs of our officers and other employees and consultants. We may issue equity awards to officers, employees and consultants, which awards would decrease our net income and FFO and may further dilute a stockholder's investment. We cannot reasonably estimate the amount of advisory fees we would save or the costs we would incur if we become self-managed. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to the Advisor, our income per share would be lower as a result of the internalization than it otherwise would have been, potentially decreasing the amount of cash available to distribute to our stockholders and the value of our shares.

Internalization transactions involving the acquisition of advisors affiliated with entity sponsors have also, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant amounts of money defending claims which would reduce the amount of cash available for us to originate or acquire assets and to pay distributions. If we internalize our management functions, we could have difficulty integrating these functions as a stand-alone entity. Currently, the Advisor and its affiliates perform asset management and general and administrative functions, including accounting and financial reporting, for multiple entities. These personnel have substantial know-how and experience which provides us with economies of scale. We may fail to properly identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity. Certain key employees may not become employees of the Advisor but may instead remain employees of the Sponsor or its affiliates. In addition, the Amended and Restated Advisory Agreement provides that we will not solicit or hire the employees of the Advisor or any of its affiliates during the term of the respective agreement and for a one-year period thereafter. As a result, our board of directors, including a majority of our independent directors, may determine that it is appropriate for us to pay the Advisor consideration in order to cause it to relinquish these restrictive covenants and allow us to hire certain personnel who were performing services for us prior to the internalization.  However, no transaction with our Advisor may be undertaken unless our board of directors (including a majority of the independent directors) approves the transaction as fair and reasonable to us and on terms and conditions no less favorable to us than those available from unaffiliated third parties.

An inability to manage an internalization transaction effectively could thus result in our incurring excess costs and suffering deficiencies in our disclosure controls and procedures or our internal control over financial reporting. Such deficiencies could cause us to incur additional costs, and our management's attention could be diverted from most effectively managing our investments.

Our UPREIT structure may result in potential conflicts of interest with limited partners in our Operating Partnership whose interests may not be aligned with those of our stockholders.

Limited partners of our Operating Partnership may receive the right to vote on certain amendments to the Operating Partnership agreement, as well as on certain other matters. Persons holding such voting rights may exercise them in a manner that conflicts with the interests of our stockholders. As general partner of our Operating Partnership, we are obligated to act in a manner that is in the best interest of all partners of our Operating Partnership. Circumstances may arise in the future when the interests of limited partners in our Operating Partnership may conflict with the interests of our stockholders. These conflicts may be resolved in a manner stockholders do not believe are in their best interest.

Risks Related to Our Corporate Structure

Our rights and the rights of our stockholders to recover claims against directors, including our independent directors, and our officers are limited, which could reduce a stockholder's and our recovery against them if they negligently cause us to incur losses.

Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter generally provides that, subject to the limitations under Maryland law, no director or officer will be liable to us or our stockholders for monetary damages and that we must generally indemnify directors and officers for losses unless, in the case of independent directors, they are grossly negligent or engage in willful misconduct or, in the case of non-independent directors or officers, they are negligent or engage in misconduct. As a result, a stockholder and we may have more limited rights against our directors and officers than might otherwise exist under common law, which could reduce a stockholder's and our recovery from these persons if they act in a negligent manner. In addition, we may be obligated to fund the defense costs incurred by our directors (as well as by our officers, employees and agents) in some cases, which would decrease the cash otherwise available for distribution to stockholders.

Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary or appropriate to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Code, among other purposes, our charter generally prohibits a person from beneficially or constructively owning more than 9.8% in value of the aggregate of our outstanding shares of capital stock or more than 9.8% in value or number of shares, whichever is more restrictive, of the aggregate of our outstanding common stock, unless exempted, prospectively or retroactively, by our board of directors. This limit can generally be waived and adjusted by our board of directors prospectively or retroactively. The ownership limit may have the effect of precluding a change in control of us by a third party, even if such change in control would be in the interest of the our stockholders (and even if such change in control would not reasonably jeopardize our REIT status). This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock. In addition, these provisions may also decrease a stockholder's ability to sell their shares of our common stock.

Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.

Our board of directors may classify or reclassify any unissued shares of common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of repurchase of any such classes or series of stock. Thus, our board of directors could authorize the issuance of shares of a class or series of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of our stockholders. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to our stockholders. However, the issuance of preferred stock must be approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or to independent legal counsel.


We are not and do not plan to be registered as an investment company under the Investment Company Act, and therefore we will not be subject to the requirements imposed and stockholder protections provided by the Investment Company Act; maintaining an exemption from registration may limit or otherwise affect our investment choices.

None of us, our Operating Partnership, or any of our subsidiaries are registered or intend to register as an investment company under the Investment Company Act. Our Operating Partnership's and subsidiaries' investments in real estate will represent the substantial majority of our total asset mix. In order for us not to be subject to regulation under the Investment Company Act, we engage, through our Operating Partnership and our wholly and majority-owned subsidiaries, primarily in the business of buying real estate. These investments must be made within a year after our public offering ends.

If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

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limitations on capital structure;
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restrictions on specified investments;
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prohibitions on transactions with affiliates; and
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compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. We are organized as a holding company that conducts its businesses primarily through our Operating Partnership and its subsidiaries. We believe none of us, our Operating Partnership or our subsidiaries will be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because none of us, our Operating Partnership or our subsidiaries will engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through our Operating Partnership's wholly owned or majority-owned subsidiaries, we and our Operating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real property.

Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer's total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to herein as the 40% test. Excluded from the term "investment securities," among other things, are (i) U.S. government securities and (ii) securities issued by majority-owned subsidiaries that are (a) not themselves investment companies and (b) not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act relating to private investment companies. We believe that we, our Operating Partnership and the subsidiaries of our Operating Partnership will each comply with the 40% test as we have invested in real property, rather than in securities, through our wholly and majority-owned subsidiaries. As our subsidiaries will be investing either solely or primarily in real property, they would be outside of the definition of "investment company" under Section 3(a)(1)(C) of the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through our Operating Partnership, which in turn is a holding company conducting its business of investing in real property through wholly-owned or majority-owned subsidiaries. We have monitored and will continue to monitor our holdings to ensure continuing and ongoing compliance with the 40% test.

Even if the value of investment securities held by one of our subsidiaries were to exceed 40% of the value of its total assets, we expect that subsidiary to be able to rely on the exception from the definition of an investment company under Section 3(c)(5)(C) of the Investment Company Act, which is available for entities "primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate." Section 3(c)(5)(C), as interpreted by the SEC staff, requires each of our subsidiaries relying on this exception to invest at least 55% of its portfolio in "mortgage and other liens on and interests in real estate," which we refer to herein as qualifying real estate assets, and maintain at least 80% of its assets in qualifying real estate assets or other real estate-related assets. The remaining 20% of the portfolio can consist of miscellaneous assets.

For purposes of the exclusions provided by Sections 3(c)(5)(C), we will classify our investments based in large measure on no-action letters issued by the SEC staff and other SEC interpretive guidance and, in the absence of SEC guidance, on our view of what constitutes a qualifying real estate asset and a real estate related asset. Although we intend to monitor our portfolio periodically and prior to each investment acquisition and disposition, there can be no assurance that we will be able to maintain this exclusion for each of these subsidiaries. It is not certain whether or to what extent the SEC or its staff in the future may modify its interpretive guidance to narrow the ability of issuers to rely on the exemption from registration provided by Section 3(c)(5)(C). Any such future guidance may affect our ability to rely on this exception.

Although we intend to monitor our portfolio periodically and prior to each investment acquisition and disposition, there can be no assurance that we, our Operating Partnership or our subsidiaries will be able to maintain this exemption from registration for us and each of our subsidiaries. If the SEC or its staff does not agree with our determinations, we may be required to adjust our activities or those of our subsidiaries.

In the event that we, or our Operating Partnership, were to acquire assets that could make either entity fall within the definition of investment company under Section 3(a)(1)(C) of the Investment Company Act, we believe that we would still qualify for the exception from the definition of "investment company" provided by Section 3(c)(6). Although the SEC or its staff has issued little interpretive guidance with respect to Section 3(c)(6), we believe that we and our Operating Partnership may rely on Section 3(c)(6) if 55% of the assets of our Operating Partnership consist of, and at least 55% of the income of our Operating Partnership is derived from, qualifying real estate assets owned by wholly owned or majority-owned subsidiaries of our Operating Partnership.

Qualification for this exemption will limit our ability to make certain investments. To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon such tests and/or exceptions, we may be required to adjust our strategy accordingly. Any additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the strategies we have chosen.

Further, if we, our Operating Partnership or our subsidiaries are required to register as investment companies under the Investment Company Act, our investment options may be limited by various limitations, such as those mentioned above, and we or our subsidiaries would be subjected to a complex regulatory scheme, the costs of compliance with which can be high.

We are an "emerging growth company" under the federal securities laws and will be subject to reduced public company reporting requirements.

In April 2012, President Obama signed into law the Jumpstart Our Business Startups Act, or the JOBS Act. We are an "emerging growth company," as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies."

We could remain an "emerging growth company" for up to five years, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues equals or exceeds $1 billion, (2) December 31 of the fiscal year that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months or (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

Under the JOBS Act, emerging growth companies are not required to (1) provide an auditor's attestation report on management's assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (2) comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (3) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise, (4) provide certain disclosure regarding executive compensation required of larger public companies or (5) hold stockholder advisory votes on executive compensation. Certain of these exemptions are inapplicable to us because of our structure as an externally managed REIT, and we have not made a decision as to whether to take advantage of any or all of the JOBS Act exemptions that applicable to us.

In addition, the JOBS Act provides that an "emerging growth company" can take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of such extended transition period. Since we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to subsequently elect to instead comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.


Stockholders will have limited control over changes in our policies and operations, which increases the uncertainty and risks a stockholder faces.

Our board of directors determines our major policies, including our policies regarding growth, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under the Maryland General Corporation Law (the "MGCL") and our charter, our stockholders have a right to vote only on limited matters. Our board of directors' broad discretion in setting policies and our stockholders' inability to exert control over those policies increase the uncertainty and risks a stockholder faces.

Stockholder's interest in us will be diluted if we issue additional shares.

Stockholders do not have preemptive rights to any shares issued by us in the future. Our charter currently has authorized 100,000,000 shares of capital stock. Of the total number of shares of capital stock authorized, 98,999,000 shares are classified as common stock, par value $0.0001 per share, 1,000,000 shares are classified as preferred stock, par value $0.0001 per share, within which (i) 97,000 shares are classified and designated as Series 1 Convertible Redeemable Preferred Stock, and (ii) 50,000 shares are classified and designated as Series A Convertible Redeemable Preferred Stock, and 1,000 shares are classified as convertible stock, par value $0.0001 per share. Subject to any limitations set forth under Maryland law, our board of directors may amend our charter from time to time to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series, or classify or reclassify any unissued shares into other classes or series of stock without the necessity of obtaining stockholder approval.

Our board of directors is authorized, without stockholder approval, to cause us to issue additional shares of our common stock or to raise capital through the issuance of additional preferred stock (including equity or debt securities convertible into preferred stock), options, warrants and other rights, on such terms and for such consideration as our board of directors in its sole discretion may determine.  We may issue additional shares of common stock, convertible debt or preferred stock pursuant to a subsequent public offering or a private placement, or to sellers of properties we directly or indirectly acquire instead of, or in addition to, cash consideration. Any such issuance could result in dilution of our stockholders' equity in us.

In particular, stockholders, including those who acquired shares of common stock in our Common Stock Offering, have no rights to buy any additional shares of stock or other securities if we issue new shares of stock or other securities. Stockholders who do not participate in any future stock issuances will experience dilution in the percentage of the issued and outstanding stock they own. In addition, depending on the terms and pricing of any additional offerings and the value of our investments, stockholders also may experience dilution in the book value and fair mark value of, and the amount of distributions paid on, their shares.
 
Our charter also authorizes our board of directors, without stockholder approval, to designate and issue any classes or series of preferred stock (including equity or debt securities convertible into preferred stock) and to set or change the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions and qualifications or terms or conditions of redemption of each class or series of shares so issued. Because our board of directors has the power to establish the preferences and rights of each class or series of preferred stock, it may afford the holders of any series or class of preferred stock preferences, powers, and rights senior to the rights of holders of common stock or preferred stock.

Under this power, our board of directors has created the Series A preferred stock and the Series 1 preferred stock, each of which ranks senior to our common stock with respect to the payment of dividends and rights upon liquidation, dissolution or winding up.  Specifically, payment of any distribution preferences on the Series A preferred stock, Series 1 preferred stock, or any future series of preferred stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of our preferred stock are entitled to receive a preference payment if we liquidate, dissolve, or wind up before any payment is made to the common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. Holders of our preferred stock will have the right to require us to convert their shares into shares of our common stock. The conversion of our preferred stock into common stock may further dilute the ownership interest of our common stockholders. Following a Listing Event (as defined below), we also have the right, but not the obligation, to redeem the Series A preferred stock and Series 1 preferred stock. To comply with our amended credit agreement, we will redeem all of the outstanding shares of the Series A preferred stock and Series 1 preferred stock and pay the entire redemption price in the form of shares of our common stock, within 30 days after the completion of the listing of our common stock on a national securities exchange.  We intend to file a listing application by July 31, 2018 and complete the listing by September 30, 2018, although no assurances can be given that a listing will be completed within such timeframe or at all. The redemption price per share of preferred stock is equal to $1,000 plus accrued but unpaid dividends through the date of redemption.  The number of shares of our common stock to be issued upon the redemption of the Series A preferred stock and the Series 1 preferred stock will be determined based on the volume weighed average closing price of our common stock for the 20 trading days immediately after the date of initial listing.  Accordingly, the payment of the redemption payments in the form of shares of our common stock may further dilute the ownership interest of our common stockholders.

Although the dollar amounts of such payments are unknown, the number of shares to be issued in connection with such payments may fluctuate based on the price of our common stock. If we elect to redeem any of our preferred stock with cash, the exercise of such rights may reduce the availability of our funds for investment purposes or to pay for distributions on our common stock. A Listing Event is defined in the Articles Supplementary for the Series A preferred stock and Series 1 preferred stock as an liquidity event involving the listing of our shares of common stock on national securities exchange or a merger or other transaction in which our stockholders will receive shares listed on a national securities exchange as consideration in exchange for their shares in us.

Any sales or perceived sales in the public market of shares of our common stock issuable upon the conversion or redemption of our preferred stock could adversely affect prevailing market prices of shares of our common stock. The issuance of common stock upon any conversion or redemption of our preferred stock also may have the effect of reducing our net income per share (or increasing our net loss per share). In addition, if a Listing Event occurs, the existence of our preferred stock may encourage short selling by market participants because the existence of redemption payments could depress the market price of shares of our common stock.

Payment of fees to the Advisor and its affiliates will reduce cash available for investment and distribution and increases the risk that stockholders will not be able to recover the amount of their investment in our shares.

The Advisor and its affiliates perform services for us in connection with the selection, acquisition and management of our investments. We pay them substantial fees for these services, which will result in immediate dilution to the value of a stockholder's investment and will reduce the amount of cash available for investment or distribution to stockholders. We may increase the compensation we pay to the Advisor subject to approval by our board of directors, including the independent directors, and other limitations in our charter, which would further dilute a stockholder's investment and the amount of cash available for investment or distribution to stockholders. We may also maintain a working capital reserve. As a result, stockholders will only receive a full return of their invested capital if we either (1) sell our assets or our company for a sufficient amount in excess of the original purchase price of our assets or (2) the market value of our company after we list our shares of common stock on a national securities exchange is substantially in excess of the original purchase price of our assets. Moreover, these fees increase the risk that the amount available for distribution to common stockholders upon a liquidation of our portfolio would be less than the purchase price of the shares of our common stock. These substantial fees and other payments also increase the risk that stockholders will not be able to resell their shares at a profit, even if our shares of common stock are listed on a national securities exchange.

Our board of directors could opt into certain provisions of the MGCL relating to deterring or defending hostile takeovers in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.

Under Maryland law, "business combinations" between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder and thereafter may only be consummated if approved by two supermajority votes of our stockholders. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Pursuant to the Maryland Business Combination Act, our board of directors has exempted any business combinations between us and any person. Consequently, the five-year prohibition and the super-majority vote requirements do not apply to business combinations between us and any person. As a result, such parties may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the supermajority vote requirements and the other provisions in the statute. Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of shares of our stock. There can be no assurance that these resolutions or exemptions will not be amended or eliminated at any time in the future.

Our charter includes a provision that may discourage a person from launching a mini-tender offer for our shares.

Our charter provides that any tender offer made by a person, including any "mini-tender" offer, must comply with most provisions of Regulation 14D of the Exchange Act. A "mini-tender offer" is a public, open offer to all stockholders to buy their stock during a specified period of time that will result in the bidder owning less than 5% of the class of securities upon completion of the mini-tender offer process. Absent such a provision in our charter, mini-tender offers for shares of our common stock would not be subject to Regulation 14D of the Exchange Act. Tender offers, by contrast, result in the bidder owning more than 5% of the class of securities and are automatically subject to Regulation 14D of the Exchange Act. Pursuant to our charter, the offeror must provide our company notice of such tender offer at least 10 business days before initiating the tender offer. If the offeror does not comply with these requirements, no stockholder may transfer shares of our common stock to such offeror unless such stockholder shall have first offered such shares to us for purchase at the tender offer price. In addition, the non-complying offeror shall be responsible for all of our expenses in connection with such offeror's noncompliance. This provision of our charter may discourage a person from initiating a mini-tender offer for our shares and prevent stockholders from receiving a premium price for their shares in such a transaction.

Federal Income Tax Risks

Failure to maintain our status as a REIT could adversely affect our operations and our ability to make distributions.

We intend to qualify as a REIT for federal income tax purposes, commencing with the taxable year ended December 31, 2017. Although we have received an opinion of counsel with respect to our qualification as a REIT, investors should be aware, among other things, that such opinion does not bind the Internal Revenue Service (the "IRS") and was based on certain representations as to factual matters and covenants made by us. Both the validity of such opinion and our qualification as a REIT will depend on our satisfaction of numerous requirements (some on an annual and quarterly basis) established under highly technical and complex provisions of the Code, for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. Importantly, as of the date hereof we have a limited operating history and both the opinion and any other assessment regarding our qualification as a REIT depends on projections regarding our future activities and we can provide no assurances we would qualify or maintain our qualification as a REIT for federal income tax purposes.

In addition, a failure by MVP I., before its merger with and into us, to qualify as a REIT could prevent us, as a successor to MVP I, from being taxed as a REIT for the four taxable years following the year during which MVP I's qualification as a REIT was lost. We are considered a successor to MVP I because the former stockholders of MVP I owned, after the merger, 50% or more in value of the outstanding shares of our stock.  While the Code provides a "reasonable cause" exception to this general rule, we can provide no assurances we would qualify for such exception if MVP I failed to qualify as a REIT prior to the merger.

If we were to fail to qualify or maintain our status as a REIT for any taxable year, or if our board of directors determined to revoke our REIT election, we would be subject to U.S. federal income tax on our taxable income at corporate rates. In addition, we would be disqualified from treatment as a REIT for the four taxable years following the year in which we lose our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, absent IRS relief, distributions to stockholders would no longer be deductible in computing our taxable income, and we would no longer be required to make distributions. To the extent that distributions had been made in anticipation of our qualifying as a REIT, we might be required to borrow funds or liquidate some investments in order to pay the applicable corporate income tax.

Lastly, it is possible that future economic, market, legal, tax or other considerations may cause our board of directors to determine that it is no longer in our best interest to continue to be qualified as a REIT and recommend that we revoke our REIT election.

Our leases must be respected as such for U.S. federal income tax purposes in order for us to qualify as a REIT.

In order for us to qualify as a REIT, at least 75% of our gross income each year must consist of real estate-related income, including rents from real property. Income from operation of our parking facilities will not be treated as rents from real property. Accordingly, we will lease our parking facilities to lessees that will operate the facilities. If such leases were recharacterized as management contracts for U.S. federal income tax purposes or otherwise as an arrangement other than a lease, we could fail to qualify as a REIT.

To qualify as a REIT, we must meet annual distribution requirements, which may result in us distributing amounts that may otherwise be used for our operations or having to borrow funds.

To obtain the favorable tax treatment accorded to REITs, we normally will be required each year to distribute dividends to our stockholders equal to at least 90% of our REIT taxable income, determined without regard to the dividends-paid deduction and by excluding net capital gains. We will be subject to U.S. federal income tax on our undistributed taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on acquisitions of properties, and it is possible that we might be required to borrow funds or sell assets to fund these distributions. We may not always be able to make distributions sufficient to meet the annual distribution requirements and to avoid corporate income and excise taxes.


From time to time, we may generate taxable income greater than our income for financial reporting purposes, or differences in timing between the recognition of taxable income and the actual receipt of cash may occur, for example, from (i) the effect of non-deductible capital expenditures, (ii) the creation of reserves, (iii) the recognition of original issue discount or (iv) required debt amortization payments. If we do not have other funds available in these situations, it might be necessary to arrange for short-term, or possibly long-term, borrowings, or to pay dividends in the form of our shares or other taxable in-kind distributions of property. We may need to borrow funds at times when the market conditions are unfavorable. Such borrowings could increase our costs and reduce the value of a stockholder's investment. In the event in-kind distributions are made, a stockholder's tax liabilities associated with an investment in our common stock for a given year may exceed the amount of cash we distribute to a stockholder during such year. Distributions in kind shall not be permitted, except for distributions of readily marketable securities, distributions of beneficial interests in a liquidating trust established for the dissolution of the corporation and the liquidation of its assets in accordance with the terms of the charter or distributions in which (a) the board advises each stockholder of the risks associated with direct ownership of the property, (b) the board offers each stockholder the election of receiving such in-kind distributions and (c) in-kind distributions are made only to those stockholders that accept such offer.

Stockholders may have current tax liability on distributions if they elect to reinvest in our shares.

Our stockholders who elect to participate in the Company's DRIP, and who are subject to U.S. federal income taxation laws, will incur a tax liability on an amount equal to the fair market value on the relevant distribution date of the shares of our common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the cash distributions used to purchase those shares of common stock. As a result, if a stockholder is not a tax-exempt entity, such stockholder may have to use funds from other sources to pay its tax liability on the value of the common stock received.

Dividends payable by REITs generally do not qualify for the reduced tax rates that apply to other corporate dividends.

The maximum U.S. federal income tax rate for dividends payable by corporations to domestic stockholders that are individuals, trusts or estates is generally 20%. Dividends from REITs, however, generally continue to be taxed at the normal ordinary income rate applicable to the individual recipient, rather than the 20% preferential rate. For taxable years prior to 2026, individual stockholders are generally allowed to deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations. Nevertheless, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations, which could adversely affect the value of the stock of REITs, including our common stock.

In certain circumstances, we may be subject to federal, state and local taxes as a REIT, which would reduce our cash available for distribution to stockholders.

Even if we qualify and maintain our status as a REIT, we may be subject to U.S. federal income taxes or state taxes. For example, net income from a "prohibited transaction," generally sales of property held primarily for sale to customers in the ordinary course of business, will be subject to a 100% tax. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We may also decide to retain capital gains we earn from the sale or other disposition of our property and pay income tax directly on such gains. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns to claim refunds. We may also be subject to state and local taxes on our income or property, either directly or at the level of the companies through which we indirectly own our assets. Any U.S. federal or state taxes we pay will reduce our cash available for distribution to stockholders.


Distributions to tax-exempt investors may be classified as unrelated business taxable income.

Neither ordinary nor capital gain distributions with respect to our common stock nor gain from the sale of common stock should generally constitute unrelated business taxable income to a tax-exempt investor. However, there are certain exceptions to this rule. In particular:

·
Part of the income and gain recognized by certain qualified employee pension trusts with respect to our common stock may be treated as unrelated business taxable income if shares of our common stock are predominately held by qualified employee pension trusts, and we are required to rely on a special look-through rule for purposes of meeting one of the REIT share ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as unrelated business taxable income;
·
Part of the income and gain recognized by a tax-exempt investor with respect to our common stock would constitute unrelated business taxable income if the investor incurs debt in order to acquire the common stock;
·
Part or all of the income or gain recognized with respect to our common stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from federal income taxation under Sections 501(c)(7), (9), (17), or (20) of the Code may be treated as unrelated business taxable income.

Investments in other REITs and real estate partnerships could subject us to the tax risks associated with the tax status of such entities.

We may invest in the securities of other REITs and real estate partnerships. Such investments are subject to the risk that any such REIT or partnership may fail to satisfy the requirements to qualify as a REIT or a partnership, as the case may be, in any given taxable year. In the case of a REIT, such failure would subject such entity to taxation as a corporation, may require such REIT to incur indebtedness to pay its tax liabilities, may reduce its ability to make distributions to us, and may render it ineligible to elect REIT status prior to the fifth taxable year following the year in which it fails to so qualify. In the case of a partnership, such failure could subject such partnership to an entity level tax and reduce the entity's ability to make distributions to us. In addition, such failures could, depending on the circumstances, jeopardize our ability to qualify as a REIT.

Complying with the REIT requirements may impact our ability to maximize profits.

To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of shares of our common stock. We may be required to forego attractive investments or liquidate otherwise attractive investments to comply with such tests. We also may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

Complying with the REIT requirements may force us to liquidate otherwise attractive investments.

To qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate-related assets. The remainder of our investments (other than government securities and qualified real estate-related assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, no more than 5% of the value of our assets (other than government securities and qualified real estate-related assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries and no more than 25% of the value of our total assets can be represented by "nonqualified publicly offered REIT debt instruments." If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments to maintain REIT status. Such action may subject the REIT to the tax on prohibited transactions, discussed below.

Liquidation of assets may jeopardize our REIT status.

To continue to qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to satisfy our obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our status as a REIT, or we may be subject to a 100% tax on any resulting gain if we sell assets that are treated as dealer property or inventory.


Certain of our business activities are potentially subject to the prohibited transaction tax, which could reduce the return on a stockholder's investment.

Our ability to dispose of property during the first few years following acquisition is restricted to a substantial extent as a result of our REIT status. Under applicable provisions of the Code regarding prohibited transactions by REITs, we will be subject to a 100% tax on any gain realized on the sale or other disposition of any property (other than foreclosure property) we own, directly or through any subsidiary entity, including our Operating Partnership, but excluding our taxable REIT subsidiaries, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the 100% prohibited transaction tax by (1) conducting activities that may otherwise be considered prohibited transactions through a taxable REIT subsidiary, (2) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary other than a taxable REIT subsidiary, will be treated as a prohibited transaction or (3) structuring certain dispositions of our properties to comply with certain safe harbors available under the Code for properties held for at least two years. However, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including our Operating Partnership, other than our taxable REIT subsidiaries, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.

Recharacterization of sale-leaseback transactions may cause us to lose our REIT status.

We may purchase real property and lease it back to the sellers of such property. We cannot assure stockholders that the IRS will not challenge any characterization of such a lease as a "true lease," which would allow us to be treated as the owner of the property for federal income tax purposes. In the event that any such sale-leaseback transaction is challenged and recharacterized as a financing transaction or loan for federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the REIT qualification "asset tests" or the "income tests" and, consequently, lose our REIT status. Alternatively, the amount of our REIT taxable income could be recalculated, which might also cause us to fail to meet the distribution requirement for a taxable year.

The stock ownership limit imposed by the Code for REITs and our charter may restrict our business combination opportunities.

To qualify as a REIT under the Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of any taxable year after our first year in which we qualify as a REIT. Our charter, with certain exceptions, authorizes our board of directors to take the actions that are necessary or appropriate to preserve our qualification as a REIT. Unless an exemption is granted prospectively or retroactively by our board of directors, no person (as defined to include entities) may own more than 9.8% in value of the aggregate of our outstanding shares of capital stock or more than 9.8%, in value or in number of shares, whichever is more restrictive, of the aggregate of our outstanding shares of common stock. Generally, this limit can be waived and adjusted by the board of directors. In addition, our charter will generally prohibit beneficial or constructive ownership of shares of our capital stock by any person that owns, actually or constructively, an interest in any of our tenants that would cause us to own, actually or constructively, 10% or more of any of our tenants. Our board of directors may grant an exemption from the 9.8% ownership limit prospectively or retroactively in its sole discretion, subject to such conditions, representations and undertakings as required by our charter or as it may determine. These and other ownership limitations in our charter are common in REIT charters and are intended, among other purposes, to assist us in complying with the tax law requirements and to minimize administrative burdens. However, these ownership limits and the other restrictions on ownership and transfer in our charter might also delay or prevent a transaction or a change in our control that might involve a premium price for our stock or otherwise be in the best interests of our stockholders.

Non-U.S. investors may be subject to FIRPTA on the sale of common stock if we are unable to qualify as a domestically controlled REIT.

A non-U.S. person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to a tax under the Foreign Investment in Real Property Tax Act of 1980, or "FIRPTA," on the gain recognized on the disposition. FIRPTA does not apply, however, to the disposition of stock in a REIT if the REIT is a "domestically controlled REIT." A domestically controlled REIT is a REIT in which, at all times during a specified testing period, less than 50% in value of its shares is held directly or indirectly by non-U.S. holders. There can be no assurance that we will qualify as a domestically controlled REIT.

If we were to fail to so qualify, gain realized by a foreign investor on a sale of our common stock would be subject to FIRPTA unless our common stock was traded on an established securities market and the non-U.S. investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock. We are not currently traded on an established securities market, nor can we provide any assurance as to whether or when we will be traded on an established securities market.

Qualifying as a REIT involves highly technical and complex provisions of the Code.

Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stock ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT may depend in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

Recent changes to the U.S. tax laws could have a significant negative impact on our business operations, financial condition and earnings and on our tenants and investors.

The current U.S. administration included as part of its agenda a potential reform of U.S. tax laws. On December 20, 2017, the House of Representatives and the Senate passed a reconciled version of a tax reform bill, and the President signed the tax reform bill into law on December 22, 2017 (the "Tax Reform Legislation"). Among other things, the Tax Reform Legislation:

·
Reduces the corporate income tax rate from 35% to 21%;
·
Generally, allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT;
·
Allows an immediate 100% deduction of the cost of certain capital asset investments, subject to a phase-down of the deduction percentage;
·
Restricts the deductibility of interest expense by businesses except, among others, real property businesses;
·
Changes the recovery periods for certain real property and building improvements;
·
Restricts the benefits of like-kind exchanges that defer capital gains for tax purposes to exchanges of real property;
·
Eliminates the corporate alternative minimum tax; and
·
Implements a one-time deemed repatriation tax on corporate profits (at a rate of 15.5 percent on cash assets and 8 percent on noncash assets) held offshore, which profits are not to be taken into account for purposes of the REIT gross income tests.

Many of the provisions in the Tax Reform Legislation expire in seven years (at the end of 2025). As a result of the changes to U.S. federal tax laws implemented by the Tax Reform Legislation, our taxable income and the amount of distributions to our stockholders required in order to maintain our REIT status, and our relative tax advantage as a REIT, may significantly change.

The Tax Reform Legislation is a far-reaching and complex revision to the U.S. federal income tax laws with disparate and, in some cases, countervailing impacts on different categories of taxpayers and industries, and will require subsequent rulemaking in a number of areas.  The long-term impact of the Tax Reform Legislation on us, our investors, our tenants and the real estate industry cannot be reliably predicted at this early stage of the new law's implementation. Furthermore, the Tax Reform Legislation may negatively impact certain of our tenants' operating results, financial condition, and future business plans.  There can be no assurance that the Tax Reform Legislation will not negatively impact our operating results, financial condition, and future business operations.  Additionally, the Tax Reform Legislation may be adverse to certain of our stockholders and other investors. Prospective investors are urged to consult their tax advisors regarding the effect of the changes to the U.S. federal tax laws on an investment in our shares and other securities.


ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

During February 2018, the Company moved its headquarters from 8880 West Sunset Road, Suite 340, Las Vegas, Nevada 89148 to 2965 S. Jones #C1-100, Las Vegas, NV 89146.

As of December 31, 2017, the Company held 43 properties. These acquisitions were funded with proceeds from the Common Stock Offering, through the issuance of the Company's common stock and the Company's Series A and Series 1 preferred stock, debt financing and the Merger.

The following map and table sets forth the property name, percentage owned, location and other information with respect to the parking lots and/or facilities that the Company had acquired as of December 31, 2017:


The location marks are based on dollar amounts the Company paid for each property at the time of purchase in relation to total purchases held at the time of filing.

Property Name
Location
Acquisition Date
Property Type
# Spaces
Property Size (Acres)
Retail Sq. Ft
 Initial Aggregate Acquisition Price
% Owned
MVP Cleveland West 9th (1)
Cleveland, OH
5/11/2016
Lot
260
2.00
N/A
$5,675,000
100%
33740 Crown Colony (1)
Cleveland, OH
5/17/2016
Lot
82
0.54
N/A
$3,030,000
100%
MVP San Jose 88 Garage
San Jose, CA
6/15/2016
Garage
328
1.33
N/A
$3,576,000
100%
MCI 1372 Street
Canton, OH
7/8/2016
Lot
66
0.44
N/A
$700,000
100%
MVP Cincinnati Race Street Garage
Cincinnati, OH
7/8/2016
Garage
350
0.63
N/A
$4,500,000
100%
MVP St. Louis Washington
St Louis, MO
7/18/2016
Lot
63
0.39
N/A
$3,000,000
100%
MVP St. Paul Holiday Garage
St Paul, MN
8/12/2016
Garage
285
0.85
N/A
$8,200,000
100%
MVP Louisville Station Broadway
Louisville, KY
8/23/2016
Lot
165
1.25
N/A
$3,050,000
100%
White Front Garage Partners
Nashville, TN
9/30/2016
Garage
155
0.26
N/A
$11,496,000
100%
Cleveland Lincoln Garage Owners
Cleveland, OH
10/19/2016
Garage
536
1.14
45,272
$7,317,000
100%
MVP Houston Preston Lot
Houston, TX
11/22/2016
Lot
46
0.23
N/A
$2,800,000
100%
MVP Houston San Jacinto Lot
Houston, TX
11/22/2016
Lot
85
0.65
240
$3,200,000
100%
MVP Detroit Center Garage
Detroit, MI
1/10/2017
Garage
1,275
1.28
N/A
$55,000,000
100%
St. Louis Broadway
St Louis, MO
2/1/2017
Lot
161
0.96
N/A
$2,400,000
100%
St. Louis Seventh & Cerre
St Louis, MO
2/1/2017
Lot
174
1.06
N/A
$3,300,000
100%
MVP Preferred Parking
Houston, TX
6/29/2017
Garage
500
0.75
784
$20,500,000
100%
MVP Raider Park Garage
Lubbock, TX
11/21/2017
Garage
1,495
2.15
20,536
$11,000,000
100%
MVP PF Ft. Lauderdale (2)
Ft. Lauderdale, FL
12/15/2017
Lot
66
0.75
4,017
$3,423,000
100%
MVP PF Kansas City (2)
Kansas City, MO
12/15/2017
Lot
164
1.18
N/A
$1,812,000
100%
MVP PF Memphis Poplar (2)
Memphis, TN
12/15/2017
Lot
125
0.86
N/A
$3,735,000
100%
MVP PF Memphis Court (2)
Memphis, TN
12/15/2017
Lot
37
0.41
N/A
$1,208,000
100%
MVP PF St. Louis 2013 (2)
St Louis, MO
12/15/2017
Lot
179
1.22
N/A
$5,145,000
100%
Mabley Place Garage (2)
Cincinnati, OH
12/15/2017
Garage
775
0.9
8,400
$21,142,000
83%
MVP Denver Sherman (2)
Denver, CO
12/15/2017
Lot
28
0.14
N/A
$705,000
100%
MVP Fort Worth Taylor (2)
Fort Worth, TX
12/15/2017
Garage
1,013
1.18
11,828
$27,658,000
100%
MVP Milwaukee Old World (2)
Milwaukee, WI
12/15/2017
Lot
54
0.26
N/A
$2,044,000
100%
MVP St. Louis Convention Plaza (2)
St. Louis, MO
12/15/2017
Lot
221
1.26
N/A
$3,091,000
100%
MVP Houston Saks Garage (2)
Houston, TX
12/15/2017
Garage
265
0.36
5,000
$10,391,000
100%
MVP St. Louis Lucas (2)
St. Louis, MO
12/15/2017
Lot
202
1.07
N/A
$3,695,000
100%
MVP Milwaukee Wells (2)
Milwaukee, WI
12/15/2017
Lot
100
0.95
N/A
$4,873,000
100%
MVP Wildwood NJ Lot 1 (2) (3)
Wildwood, NJ
12/15/2017
Lot
29
0.26
N/A
$745,000
100%
MVP Wildwood NJ Lot 2 (2) (3)
Wildwood, NJ
12/15/2017
Lot
45
0.31
N/A
$886,000
100%
MVP Indianapolis City Park (2)
Indianapolis, IN
12/15/2017
Garage
370
0.47
N/A
$10,813,000
100%
MVP KC Cherry Lot (2)
Kansas City, MO
12/15/2017
Lot
84
0.6
N/A
$987,000
100%
MVP Indianapolis WA Street (2)
Indianapolis, IN
12/15/2017
Lot
150
1.07
N/A
$5,749,000
100%
MVP Minneapolis Venture (2)
Minneapolis, MN
12/15/2017
For Sale
185
2.48
N/A
$6,543,000
100%
MVP Indianapolis Meridian (2)
Indianapolis, IN
12/15/2017
Lot
39
0.24
N/A
$1,601,000
100%
MVP Milwaukee Clybourn (2)
Milwaukee, WI
12/15/2017
Lot
15
0.06
N/A
$262,000
100%
MVP Milwaukee Arena Lot (2)
Milwaukee, WI
12/15/2017
Lot
75
1.11
N/A
$4,632,000
100%
MVP Clarksburg Lot (2)
Clarksburg, WV
12/15/2017
Lot
94
0.81
N/A
$715,000
100%
MVP Denver Sherman 1935 (2)
Denver, CO
12/15/2017
Lot
72
0.43
N/A
$2,534,000
100%
MVP Bridgeport Fairfield (2)
Bridgeport, CT
12/15/2017
Garage
878
1.01
4,349
$8,256,000
100%
Minneapolis City Parking (2)
Minneapolis, MN
12/15/2017
Lot
270
1.98
N/A
$9,838,000
100%

(1) These properties are held by West 9th St. Properties II, LLC.
(2) These properties were acquired as a result of the Merger.
(3) These properties are held by MVP Wildwood NJ Lot, LLC.

All of the Company's parking facilities were fully leased to parking operators as of December 31, 2017.


ITEM 3. LEGAL PROCEEDINGS

From time to time in the ordinary course of business, the Company or its subsidiaries may become subject to legal proceedings, claims or disputes. As of June 21, 2018, neither the Company nor any of its subsidiaries was a party to any material pending legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company's shares of common stock are not currently listed on a national securities exchange or any over-the-counter market.   The Company does not expect shares to become listed in the near future, and they may not become listed at all.   The charter does not require the board of directors to pursue a liquidity event. Due to the uncertainties of market conditions in the future, the Company believes setting finite dates for possible, but uncertain, liquidity events may result in actions not necessarily in the best interests or within the expectations of the Company's stockholders. The Company expects that the Company's board of directors, in the exercise of its duties to stockholders, will determine to pursue a liquidity event when it believes that then-current market conditions are favorable for a liquidity event, and that such a transaction is in the best interests of stockholders. A liquidity event could include (1) the sale of all or substantially all assets either on a portfolio basis or individually followed by a liquidation, in which the net proceeds are distributed to stockholders, (2) a merger or another transaction approved by the board of directors in which stockholders will receive cash and/or shares of a publicly traded company or (3) a listing of shares on a national securities exchange.   In the exercise of its duties to stockholders, the Company's board of directors has determined that, in connection with amendments to the Company's existing credit agreement, it is in the best interests of the Company stockholders to pursue a listing of its shares of common stock on a national securities exchange.  To comply with its amended credit agreement, the Company will file an application to list its common stock on a national securities exchange by July 31, 2018, and the Company will seek to obtain approval of the listing application by August 31, 2018 and complete the listing by September 30, 2018.  However, there can be no assurance that the Company will cause a liquidity event to occur within such time frame or at all. The amended credit agreement also requires that the Company redeem all of its outstanding Series A preferred stock and Series 1 preferred stock within 30 days after the listing and pay the entire redemption price in the form of shares of the Company's common stock.  Please see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources" for more information.

In order for members of FINRA and their associated persons to have participated in the offering and sale of the Company's common shares or to participate in any future offering of common shares, the Company is required pursuant to FINRA Rule 5110 to disclose in each Annual Report distributed to stockholders a per share estimated value of the Company's common shares, the method by which it was developed and the date of the data used to develop the estimated value. In addition, the Advisor must prepare annual statements of estimated share values to assist fiduciaries of retirement plans subject to the annual reporting requirements of ERISA in the preparation of their reports relating to an investment in the Company's common shares. For these purposes, the estimated value of shares shall be deemed to be $25.00 per share as of December 31, 2017. The basis for this valuation is the net investment amount of the Company's shares, which is based on the "amount available for investment" percentage shown in the estimated use of proceeds table in the prospectus for the Common Stock Offering.

On May 29, 2018 the Company announced an estimated per common share net asset value ("NAV") of approximately $161.2 million or $24.61 per common share as of May 29, 2018. The estimated per common share NAV was based on the estimated value of the REIT's assets less the estimated value of the Company's liabilities, divided by the approximate number of shares outstanding on a fully diluted basis, calculated as of May 29, 2018.

Stockholder Information

As of June 21, 2018, there were 3,774 holders of record of the Company's common shares and 52 and 625 holders of record of the Company's Series A and Series 1 preferred shares, respectively. The number of stockholders is based on the records of the Company's transfer agent.


Distribution Policy

In order to qualify as a REIT, the Company is required to distribute 90% of its annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). The board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on the Company's financial condition and such other factors as the Company's board of directors deems relevant.

On January 22, 2016, the Company announced that its first payment of its monthly cash distribution of $0.0625 per share and monthly stock dividend of $0.0625 per share, based on a purchase price of $25.00 per common share, is payable to stockholders of record as of January 24, 2016. The cash distribution and stock dividend were paid on February 10, 2016. The Company will declare distributions based on a record date on the 24th of each month, and the Company expects to pay distributions on the 10th day of the following month (or the next business day if the 10th is not a business day), monthly in arrears. 

As previously disclosed, the Company's board of directors unanimously authorized a suspension of cash distributions and stock dividends to holders of common stock, effective as of March 22, 2018. The Company's board of directors is focused on preserving capital in order to maintain sufficient liquidity to continue to operate the business and maintain compliance with debt covenants, including minimum liquidity covenants and to seek to enhance value for stockholders through potential future acquisitions.  The Company expects that cash retained by the suspension of cash distributions will allow the Company to continue to pursue investment opportunities while also preparing for a possible liquidity event in the future.  The Company's board of directors will continue to evaluate our performance and expects to assess the Company's distribution policy quarterly.

There can be no assurance that the Company will resume payment of distributions and dividends to common stockholders at any time in the future, that any acquisitions will be completed on an attractive basis, or at all, or that any liquidity event will occur or when such event may occur.  Moreover, even if the Company resumes the payment of distributions and dividends to common stockholders, there can be no assurance that such distributions and dividends will be paid at any particular rate, and the Company's board of directors may at any time change the distribution and dividend rate or suspend payment of distributions and dividends again if it determines that such action is in the best interest of the Company and its stockholders.

If the Company does not have sufficient cash flow from operations to make required distributions, the Company may need to borrow funds, request that the Advisor, in its discretion, defer its receipt of fees and reimbursements of expenses or, to the extent necessary, utilize offering proceeds in order to make cash distributions. At the end of each calendar quarter, the Company will provide notice to the stockholders identifying the source or sources of the distribution payments made in the quarter then ended. If the Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available for investments and the stockholder's overall return will be reduced. If the aggregate amount of cash distributions in any given year exceeds the amount of the Company's current and accumulated earnings and profits, a stockholder's share of such excess amount (i) first will be a return on capital, reducing such stockholder's tax basis in its stock, but not below zero, and (ii) thereafter, will result in gain from the sale or exchange of such stock.

From inception through December 31, 2017, the Company has paid approximately $3.0 million in distributions, including approximately $1.8 million in DRIP distributions to the Company's stockholders, all of which have been paid from offering proceeds and constituted a return of capital.  The Company may pay distributions from sources other than cash flow from operations, including proceeds from the Common Stock Offering, the sale of assets, or borrowings.  The Company has no limits on the amounts it may pay from such sources. If the Company continues to pay 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.

Please see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Distributions" for more information on distributions.

Distribution Reinvestment Plan

The Company currently has a distribution reinvestment plan pursuant to which the Company's common stockholders may elect to have distributions on their common shares, if any, automatically reinvested in additional shares of the Company's common stock. The Company ceased payment of distributions on March 22, 2018 and as such there are currently no distributions to invest in the DRIP. Prior to the suspension of distributions and the NAV calculation, stockholders purchased common stock under the DRIP at a price equal to $25 per common share. In the event that distributions are reinstated and the DRIP is ongoing, the purchase price per DRIP share will be equal to the Company's NAV per common share. The Company announced an NAV per common share of $24.61 effective as of May 29, 2018. The Company may amend the plan to offer shares at such prices as the Company determines necessary or appropriate to ensure the Company's dividends are not "preferential" for incomes tax purposes. No sales commissions will be paid in connection with shares purchased pursuant to the Company's distribution reinvestment plan.

Investors participating in the Company's distribution reinvestment plan may purchase fractional shares. If sufficient shares of the Company's common stock are not available for issuance under the Company's distribution reinvestment plan, the Company will remit excess distributions in cash to the participants. If a stockholder elects to participate in the distribution reinvestment plan, the stockholder must agree that, if at any time the stockholder fails to meet the applicable investor suitability standards or cannot make the other investor representations or warranties set forth in the then current prospectus, the subscription agreement or the Company's articles relating to such investment, the stockholder will promptly notify us in writing of that fact.

Stockholders purchasing common stock pursuant to the distribution reinvestment plan will have the same rights and will be treated in the same manner as if such common stock were purchased pursuant to the Common Stock Offering.

At least quarterly, the Company will provide each participant a confirmation showing the amount of the distributions reinvested in the Company's shares during the covered period, the number of shares of the Company's common stock owned at the beginning of the covered period, and the total number of shares of common stock owned at the end of the covered period. The Company has the discretion not to provide a distribution reinvestment plan, and a majority of the Company's board of directors may amend, suspend or terminate the Company's distribution reinvestment plan for any reason (except that the Company may not amend the DRIP to eliminate a participant's ability to withdraw from the plan) at any time upon 10 days' prior notice to the participants. A stockholder's participation in the plan will also be terminated to the extent that a reinvestment of the stockholder's distributions in the Company's common stock would cause the percentage ownership limitation contained in the Company's charter to be exceeded. Otherwise, unless the stockholder terminates the stockholder's participation in the Company's distribution reinvestment plan in writing, the stockholder's participation will continue even if the shares to be issued under the plan are registered in a future registration. The stockholder may terminate the Stockholder's participation in the distribution reinvestment plan at any time by providing us with 10 days' written notice. A withdrawal from participation in the distribution reinvestment plan will be effective only with respect to distributions paid more than 30 days after receipt of written notice. Generally, a transfer of common stock will terminate the stockholder's participation in the distribution reinvestment plan as of the first day of the month in which the transfer is effective.

If the stockholder participates in the Company's distribution reinvestment plan and is subject to federal income taxation, the stockholder will incur a tax liability for distributions allocated to the stockholder even though the stockholder has elected not to receive the distributions in cash, but rather to have the distributions withheld and reinvested in the Company's common stock. Specifically, the stockholder will be treated as if the stockholder have received the distribution from us in cash and then applied such distribution to the purchase of additional shares of the Company's common stock. The stockholder will be taxed on the amount of such distribution as ordinary income to the extent such distribution is from current or accumulated earnings and profits, unless the Company has designated all or a portion of the distribution as a capital gain distribution. In addition, the difference between the public offering price of the Company's shares and the amount paid for shares purchased pursuant to the Company's distribution reinvestment plan may be deemed to be taxable as income to participants in the plan. Please see "Risk Factors — Federal Income Tax Risks — Stockholders may have current tax liability on distributions if they elect to reinvest in our shares."

Notwithstanding any of the foregoing, an investor's participation in the Company's distribution reinvestment plan will terminate automatically if the Company dishonors, or partially dishonors, any requests by such investor to redeem the Company's shares of common stock in accordance with the Company's share repurchase program. The Company will notify investors of any such automatic termination from the Company's distribution reinvestment plan.

The Company has issued a total of 72,111 shares of common stock under the DRIP as of December 31, 2017.

Share Repurchase Program

The Company has a Share Repurchase Program ("SRP") that enables the Company's stockholders to sell their shares to the Company. Under the SRP, the Company's stockholders may request that the Company redeem all or any portion, subject to certain minimum conditions described below, if such repurchase does not impair the Company's capital or operations.

On May 29, 2018, the Company's Board of Directors suspended the SRP, other than for repurchases in connection with a shareholder's death, as further described below.


Prior to the time that the Company's shares are listed on a national securities exchange, the repurchase price per share will depend on the length of time investors have held such shares as follows: no repurchases for the first two years unless shares are being repurchased in connection with a stockholder's death or disability (as defined in the Code).  Repurchase requests made in connection with the death or disability of a stockholder will be repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, or once the Company has established an estimated NAV per share, 100% of such amount as determined by the Company's board of directors, subject to any special distributions previously made to the Company's stockholders. With respect to all other repurchases, prior to the date that the Company establishes an estimated value per share of common stock, the purchase price will be 95.0% of the purchase price paid for the shares, if redeemed at any time between the second and third anniversaries of the purchase date, and 97.0% of the purchase price paid if redeemed after the third anniversary.  After the Company establishes an estimated NAV per share of common stock, the purchase price will be 95.0% of the NAV per share for the shares, if redeemed at any time between the second and third anniversaries of the purchase date, 97.0% of the NAV per share if redeemed at any time between the third and fifth anniversaries, and 100.0% of the NAV per share if redeemed after the fifth anniversary. In the event that the Company does not have sufficient funds available to repurchase all of the shares for which repurchase requests have been submitted in any quarter, the Company will repurchase the shares on a pro rata basis on the repurchase date. The SRP will be terminated if the Company's shares become listed for trading on a national securities exchange or if the Company's board of directors determines that it is in the Company's best interest to terminate the SRP.

On May 29, 2018, the Company established a NAV equal to $24.61 per common share.

The Company is not obligated to repurchase shares of common stock under the share repurchase program. The number of shares to be repurchased during the calendar quarter is limited to the lesser of: (i) 5% of the weighted average number of shares outstanding during the prior calendar year, and (ii) those repurchases that could be funded from the net proceeds of the sale of shares under the DRIP in the prior calendar year plus such additional funds as may be reserved for that purpose by the Company's board of directors; provided, however, that the above volume limitations shall not apply to repurchases requested in connection with the death or qualifying disability of a stockholder. Because of these limitations, the Company cannot guarantee that the Company will be able to accommodate all repurchase requests.

The Company will repurchase shares as of March 31, June 30, September 30, and December 31 of each year. If and when the SRP is reinstated each stockholder whose repurchase request is approved will receive the repurchase payment approximately 30 days following the end of the applicable quarter, effective as of the last day of such quarter.  The Company refers to the last day of such quarter as the repurchase date.  If funds available for the Company's share repurchase program are not sufficient to accommodate all requests, shares will be repurchased as follows: (i) first, repurchases due to the death of a stockholder, on the basis of the date of the request for repurchase; (ii) next, in the discretion of the Company's board of directors, repurchases because of other involuntary exigent circumstances, such as bankruptcy; (iii) next, repurchases of shares held by stockholders subject to a mandatory distribution requirement under the stockholder's IRA; and (iv) finally, all other repurchase requests based upon the postmark of receipt. If the Stockholder's repurchase request is not honored during a repurchase period, the Stockholder will be required to resubmit the request to have it considered in a subsequent repurchase period.

The board of directors may, in its sole discretion, terminate, suspend or amend the share repurchase program upon 30 days' written notice without stockholder approval if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the stockholders. Among other things, the Company may amend the plan to repurchase shares at prices different from those described above for the purpose of ensuring the Company's dividends are not "preferential" for incomes tax purposes.  Any notice of a termination, suspension or amendment of the share repurchase program will be made via a report on Form 8-K filed with the SEC at least 30 days prior to the effective date of such termination, suspension or amendment.  The board of directors may also limit the amounts available for repurchase at any time in its sole discretion.  Notwithstanding the foregoing, the share repurchase program will terminate if the shares of common stock are listed on a national securities exchange.

On October 27, 2016, the Company filed a Current Report on Form 8-K announcing, among other things, an amendment to the SRP providing for participation in the SRP by any holder of the Company's Series A Convertible Redeemable Preferred Stock, or any future board-authorized series or class of preferred stock that is convertible into common stock of the Company. Under the amendment, which became effective on November 26, 2016, a preferred stock holder may participate in the SRP by converting its preferred stock into common stock of the Company and submitting such common shares for repurchase. The time period, for purposes of determining how long such stockholder has held the common shares submitted for repurchase, begins as of the date such preferred stockholder acquired the underlying preferred shares that were converted into common shares and submitted for repurchase.


On February 7, 2018, the Company filed a Current Report on Form 8-K stating that the board of directors has determined that the Merger and the issuance of the Company's common stock as consideration for the Merger qualifies as an involuntary exigent circumstance under the SRP. As a result, shares of common stock that, when combined with the holding period of the related MVP I Common Stock, have been held for the Two-Year Holding Period (as such term is defined in the SRP), are eligible to participate in the SRP subject to the other requirements and limitations of the SRP.   In addition, the issuance date for any shares of MVP I Common Stock issued pursuant to the MVP REIT, Inc. Distribution Reinvestment Plan shall be deemed to be the same date as the issuance of the shares of MVP I Common Stock to which such shares relate.

On May 29, 2018, the Company filed a Current Report on Form 8-K stating that the Company's board of directors suspended its SRP, other than for repurchases in connection with a shareholder's death. In accordance with the SRP, the suspension of the SRP will take effect on June 28, 2018 which is 30 days after the date of the Form 8-K providing notice of the suspension.  The Company plans to utilize the cash savings to further its business operations. The Company's Board of Directors may in the future reinstate the SRP, although there is no assurance as to if or when this will happen.

As of the date of this filing, 25,814 shares have been redeemed.

Recent Sales of Unregistered Securities

On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock ("Series 1"), par value $0.0001 per share.  On April 7, 2017, the Company commenced the private placement of shares of Series 1, and warrants to acquire the Company's common stock, to accredited investors.  During the fourth quarter of 2017, the Company had raised approximately $15.2 million, net of offering costs, in the Series 1 private placements and had issued 16,344 Series 1 shares and warrants to acquire 568,890 shares of its common stock issued and outstanding.

The Series 1 preferred stock and warrants have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Company is relying on the private placement exemption from registration provided by Section 4(a)(2) of the Securities Act and by Rule 506(b) of Regulation D promulgated thereunder by the SEC. The Company has filed file a Form D with the SEC in accordance with the requirements of Regulation D.

On January 31, 2018 the Company closed the Series 1 offering.

Use of Offering Proceeds

On October 22, 2015, the Company's registration statement on Form S-11 (No. 333-205893) registering a public offering of up to $550,000,000 in shares of the Company's common stock was declared effective under the Securities Act, and the Company commenced the Common Stock Offering. The Company offered up to 20,000,000 shares of its common stock to the public in the Common Stock Offering at $25.00 per share and continues to offer up to 2,000,000 shares of its common stock pursuant to the distribution reinvestment plan at $25.00 per share. The Company entered into selling agreements with AMS and other non-affiliated selling agents to distribute shares of the Company's common stock to its clients. As of December 31, 2016, the Company ceased all selling efforts for the Common Stock Offering but accepted additional subscriptions through March 31, 2017.

As of June 21, 2018, the Company had 6,550,200 shares of common stock issued and outstanding, 2,862 shares of preferred Series A stock outstanding and 39,810 shares of preferred Series 1 stock outstanding for total gross proceeds of approximately $176.4 million, less offering costs.

The following is a table of summary of offering proceeds from inception through December 31, 2017:

Type
 
Number of Shares Preferred
   
Number of Shares Common
   
Value
 
Issuance of common stock
   
--
     
2,451,238
   
$
61,281,000
 
DRIP shares
   
--
     
72,111
     
1,779,000
 
Issuance of Series A preferred stock
   
2,862
     
--
     
2,544,000
 
Issuance of Series 1 preferred stock
   
29,789
     
--
     
26,892,000
 
Dividend shares
   
--
     
121,147
     
3,028,000
 
Distributions
   
--
     
--
     
(3,688,000
)
Deferred offering costs
   
--
     
--
     
(1,086,000
)
Contribution from Advisor
   
--
     
--
     
1,147,000
 
Shares added for Merger
   
--
     
3,887,513
     
85,701,000
 
    Total
   
32,651
     
6,532,009
   
$
177,598,000
 

From October 22, 2015 through December 31, 2017, the Company incurred organization and offering costs in connection with the issuance and distribution of the registered securities of approximately $1.1 million, which were paid to unrelated parties by the Sponsor. From October 22, 2015 through December 31, 2017, the net proceeds to the Company from its offerings, after deducting the total expenses and deferred offering costs incurred and paid by the Company as described above, were $177.6 million. A majority of these proceeds were used, along with other sources of debt financing, to make investments in parking facilities, and the Company's portion of the total purchase price for these parking facilities was approximately $290.0 million, which includes its $2.8 million investment in the DST. In addition, a portion of these proceeds were used to make cash distributions of approximately $1.2 million to the Company's stockholders.  The ratio of the costs of raising capital to the capital raised is approximately 0.6%.

Long-Term Incentive Plan

The Company's board of directors has adopted a long-term incentive plan which the Company may use to attract and retain qualified directors, officers, employees and consultants. The Company's long-term incentive plan will offer these individuals an opportunity to participate in the Company's growth through awards in the form of, or based on, the Company's common stock. We currently anticipate that we will not issue awards under the Company's long-term incentive plan, although we may do so in the future, including possible equity grants to the Company's independent directors as a form of compensation.

The long-term incentive plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Company's affiliates selected by the board of directors for participation in our long-term incentive plan. Stock options granted under the long-term incentive plan will not exceed an amount equal to 10% of the outstanding shares of our common stock on the date of grant of any such stock options. Stock options may not have an exercise price that is less than the fair market value of a share of our common stock on the date of grant.

Our board of directors or a committee appointed by our board of directors will administer the long-term incentive plan, with sole authority to determine all of the terms and conditions of the awards, including whether the grant, vesting or settlement of awards may be subject to the attainment of one or more performance goals. No awards will be granted under the long-term incentive plan if the grant or vesting of the awards would jeopardize our status as a REIT under the Code or otherwise violate the ownership and transfer restrictions imposed under our charter. Unless otherwise determined by our board of directors, no award granted under the long-term incentive plan will be transferable except through the laws of descent and distribution.

The Company has authorized and reserved an aggregate maximum number of 500,000 common shares for issuance under the long-term incentive plan. In the event of a transaction between us and our stockholders that causes the per-share value of our common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash dividend), the share authorization limits under the long-term incentive plan will be adjusted proportionately and the board of directors will make such adjustments to the long-term incentive plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend or a combination or consolidation of the outstanding shares of common stock into a lesser number of shares, the authorization limits under the long-term incentive plan will automatically be adjusted proportionately and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price.

Our board of directors may in its sole discretion at any time determine that all or a portion of a participant's awards will become fully vested. The board may discriminate among participants or among awards in exercising such discretion. The long-term incentive plan will automatically expire on the tenth anniversary of the date on which it is approved by our board of directors and stockholders, unless extended or earlier terminated by our board of directors. Our board of directors may terminate the long-term incentive plan at any time. The expiration or other termination of the long-term incentive plan will not, without the participant's consent, have an adverse impact on any award that is outstanding at the time the long-term incentive plan expires or is terminated. Our board of directors may amend the long-term incentive plan at any time, but no amendment will adversely affect any award without the participant's consent and no amendment to the long-term incentive plan will be effective without the approval of our stockholders if such approval is required by any law, regulation or rule applicable to the long-term incentive plan. During the years ended December 31, 2017 and 2016, no grants have been made under the long-term incentive plan.

ITEM 6. SELECTED FINANCIAL DATA

Not required for a smaller reporting company.


ITEM 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Parking REIT, Inc., formerly known as MVP REIT II, Inc., is a Maryland corporation formed on May 4, 2015 and intends to qualify as a REIT for U.S. federal income tax purposes upon the filing of the federal tax return for the year ended December 31, 2017. The Company believes that it has been organized and has operated in a manner that has enabled it to qualify as a REIT commencing with the taxable year ending December 31, 2017; however, if the Company is unable to meet the REIT qualification for 2017, the Company will continue to operate as a C corporation for U.S. federal income tax purposes. As of December 31, 2016, the Company ceased all selling efforts for the Common Stock Offering of its common stock, $0.0001 par value per share, at $25.00 per share, pursuant to a registration statement on Form S-11 (No. 333-205893) filed with the SEC under the Securities Act. The Company accepted additional subscriptions through March 31, 2017, the last day of the Common Stock Offering.

On October 27, 2016, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock. The Company commenced the private placement of the shares of Series A, together with warrants to acquire the Company's common stock, to accredited investors on November 1, 2016 and closed the offering on March 24, 2017. As of December 31, 2017, the Company raised approximately $2.7 million, net of offering costs, in the Series A private placements and has 2,862 shares of Series A issued and outstanding.

On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock ("Series 1"), par value $0.0001 per share.  On April 7, 2017, the Company commenced the private placement of shares of Series 1, together with warrants to acquire the Company's common stock, to accredited investors.  As of December 31, 2017, the Company had raised gross proceeds of approximately $27.4 million, net of offering costs, in the Series 1 private placements and had 29,789 shares of Series 1 issued and outstanding. On January 31, 2018, the Company closed the Series 1 offering.

The Company was formed to focus primarily on investments in parking facilities, including parking lots, parking garages and other parking structures throughout the United States and Canada. No more than 10% of the proceeds of the Common Stock Offering will be used for investment in Canadian properties. The Company currently has no investments in Canada. To a lesser extent, the Company may also invest in properties other than parking facilities.

The Company is the sole general partner of the Operating Partnership. The Company intends to own substantially all of its assets and conduct its operations through the Operating Partnership. The Company's wholly owned subsidiary, MVP REIT II Holdings, LLC, is the sole limited partner of the Operating Partnership. The operating agreement provides that the Operating Partnership is operated in a manner that enables the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership is not classified as a "publicly traded partnership" for purposes of Section 7704 of the Code, which classification could result in the Operating Partnership being taxed as a corporation.

The Company utilizes an UPREIT structure to enable the Company to acquire real property in exchange for limited partnership interests in the Company's Operating Partnership from owners who desire to defer taxable gain that would otherwise normally be recognized by them upon the disposition of their real property or transfer of their real property to the Company in exchange for shares of the Company's common stock or cash.

As part of the Company's initial capitalization, 8,000 shares of common stock were sold for $200,000 to the Sponsor. The Sponsor is owned 60% by VRM II and 40% by VRM I, which were both managed by Vestin Mortgage prior to being internalized in January 2018.

The Company's Advisor is owned 60% by VRM II and 40% by VRM I. The Advisor is responsible for managing the Company's affairs on a day-to-day basis and for identifying and making investments on the Company's behalf pursuant to the Amended and Restated Advisory Agreement. As of June 21, 2018, the Company had no paid employees.


The following table is a summary of the acquisitions for the year ended December 31, 2017:

Property
Location
Date Acquired
Property Type
# Spaces
Size / Acreage
Retail Sq. Ft.
Property Purchase Price
% Owned
MVP Detroit Center Garage
Detroit, MI
01/10/2017
Garage
1,275
1.28
N/A
$55,000,000
100%
St Louis Broadway
St Louis, MO
02/01/2017
Lot
161
0.96
N/A
$2,400,000
100 %
St Louis Seventh & Cerre
St Louis, MO
02/01/2017
Lot
174
1.02
N/A
$3,300,000
100%
MVP Preferred Parking
Houston, TX
06/29/2017
Garage/Lot
521
1.00
784
$20,500,000
100%
MVP Raider Park Garage
Lubbock, TX
11/21/2017
Garage
1,495
2.15
20,536
$11,000,000
100%

The following table is a summary of the properties acquired in the merger on December 15, 2017:

Property Name
Location
Property Type
# Spaces
Size / Acreage
Retail Sq. Ft
Purchase Price Allocation in Merger
% Owned
MVP PF Ft. Lauderdale 2013
Ft. Lauderdale, FL
Lot
66
0.75
4,017
$3,423,000
100%
MVP PF Kansas City 2013
Kansas City, MO
Lot
164
1.18
N/A
$1,812,000
100%
MVP PF Memphis Poplar 2013,
Memphis, TN
Lot
125
0.86
N/A
$3,735,000
100%
MVP PF Memphis Court 2013
Memphis, TN
Lot
37
0.41
N/A
$1,208,000
100%
MVP PF St. Louis 2013
St Louis, MO
Lot
179
1.22
N/A
$5,145,000
100%
Mabley Place Garage
Cincinnati, OH
Garage
775
0.9
8,400
$21,142,000
83%
MVP Denver Sherman
Denver, CO
Lot
28
0.14
N/A
$705,000
100%
MVP Fort Worth Taylor
Fort Worth, TX
Garage
1,013
1.18
11,828
$27,658,000
100%
MVP Milwaukee Old World
Milwaukee, WI
Lot
54
0.26
N/A
$2,044,000
100%
MVP St. Louis Convention Plaza
St. Louis, MO
Lot
221
1.26
N/A
$3,091,000
100%
MVP Houston Saks Garage
Houston, TX
Garage
265
0.36
5,000
$10,391,000
100%
MVP St. Louis Lucas
St. Louis, MO
Lot
202
1.07
N/A
$3,695,000
100%
MVP Milwaukee Wells
Milwaukee, WI
Lot
100
0.95
N/A
$4,873,000
100%
MVP Wildwood NJ Lot 1 (1)
Wildwood, NJ
Lot
29
0.26
N/A
$745,000
100%
MVP Wildwood NJ Lot 2 (1)
Wildwood, NJ
Lot
45
0.31
N/A
$886,000
100%
MVP Indianapolis City Park
Indianapolis, IN
Garage
370
0.47
N/A
$10,813,000
100%
MVP KC Cherry Lot
Kansas City, MO
Lot
84
0.6
N/A
$987,000
100%
MVP Indianapolis WA Street Lot
Indianapolis, IN
Lot
141
1.07
N/A
$5,749,000
100%
Minneapolis City Parking
Minneapolis, MN
Lot
268
1.98
N/A
$9,838,000
100%
MVP Minneapolis Venture
Minneapolis, MN
For Sale Lot
185
2.48
N/A
$6,543,000
100%
MVP Indianapolis Meridian Lot
Indianapolis, IN
Lot
36
0.24
N/A
$1,601,000
100%
MVP Milwaukee Clybourn
Milwaukee, WI
Lot
15
0.06
N/A
$262,000
100%
MVP Milwaukee Arena Lot
Milwaukee, WI
Lot
75
1.11
N/A
$4,632,000
100%
MVP Clarksburg Lot
Clarksburg, WV
Lot
94
0.81
N/A
$715,000
100%
MVP Denver Sherman 1935
Denver, CO
Lot
72
0.43
N/A
$2,534,000
100%
MVP Bridgeport Fairfield Garage
Bridgeport, CT
Garage
878
1.01
4,349
$8,256,000
100%

(1)
These properties are held by a single LLC.

As of December 31, 2017, the Company had investments in the following facilities:

Parking Facility
Date Acquired
Type
Zoning
Height Restriction
The Parking REIT % Owned
3rd Party % Owned
Property Purchase Price
MVP Cleveland West 9th
5/11/2016
Lot
CBD LLR-B4
175 Feet
100%
0%
$5,675,000
33740 Crown Colony
5/17/2016
Lot
LLR-D5
250 Feet
100%
0%
$3,030,000
MVP San Jose 88 Garage
6/15/2016
Garage
DC
N/A
100%
0%
$3,576,000
MCI 1372 Street
7/8/2016
Lot
B-5
375 Feet
100%
0%
$700,000
MVP Cincinnati Race Street Garage
7/8/2016
Garage
DD-A
500 Feet
100%
0%
$4,500,000
MVP St. Louis Washington
7/18/2016
Lot
CBD I
100 Feet
100%
0%
$3,000,000

(Table continued)
MVP St. Paul Holiday Garage
8/12/2016
Garage
B-5
Unlimited
100%
0%
$8,200,000
MVP Louisville Station Broadway
8/23/2016
Lot
CBD I
Unlimited
100%
0%
$3,050,000
White Front Garage Partners
9/30/2016
Garage
CBD I
Unlimited
100%
0%
$11,496,000
Cleveland Lincoln Garage Owners
10/19/2016
Garage
SI / GR-E5
250 Feet
100%
0%
$7,317,000
MVP Houston Preston Lot
11/22/2016
Lot
NONE
Unlimited
100%
0%
$2,800,000
MVP Houston San Jacinto Lot
11/22/2016
Lot
NONE
Unlimited
100%
0%
$3,200,000
MVP Detroit Center Garage
1/10/2017
Garage
PD
Unlimited
100%
0%
$55,000,000
St. Louis Broadway Group
2/1/2017
Lot
CBD I
200 Feet
100%
0%
$2,400,000
St. Louis Seventh & Cerre
2/1/2017
Lot
CBD I
200 Feet
100%
0%
$3,300,000
MVP St. Louis Cardinal Lot, DST *
5/31/2017
Lot
L
200 Feet
51%
49%
$11,350,000
MVP Preferred Parking (Preston)
6/29/2017
Garage
NONE
Unlimited
100%
0%
$16,500,000
MVP Preferred Parking (Congress)
6/29/2017
Lot
NONE
Unlimited
100%
0%
$4,000,000
MVP Raider Park Garage
11/21/2017
Garage
IHC
40 Feet
100%
0%
$11,000,000
MVP PF Ft. Lauderdale 2013
12/15/2017
Lot
RAC-CC
150 Feet
100%
0%
$3,423,000
MVP PF Memphis Court 2013
12/15/2017
Lot
CBD
Unlimited
100%
0%
$1,208,000
MVP PF Memphis Poplar 2013
12/15/2017
Lot
CBD
Unlimited
100%
0%
$3,735,000
MVP PF Kansas City 2013
12/15/2017
Lot
B4-5
Unlimited
100%
0%
$1,812,000
MVP PF St. Louis 2013
12/15/2017
Lot
I (CBD)
200 Feet
100%
0%
$5,145,000
Mabley Place Garage
12/15/2017
Garage
DD-A
510 Feet
83%
17%
$21,142,000
MVP Denver Sherman
12/15/2017
Lot
CMX-16
200 Feet
100%
0%
$705,000
MVP Fort Worth Taylor
12/15/2017
Garage
CBD-H
Unlimited
100%
0%
$27,658,000
MVP Milwaukee Old World
12/15/2017
Lot
C9-E
40 Feet
100%
0%
$2,044,000
MVP St. Louis Convention Plaza
12/15/2017
Lot
I (CBD)
200 Feet
100%
0%
$3,091,000
MVP Houston Saks Garage
12/15/2017
Garage
N/A
Unlimited
100%
0%
$10,391,000
MVP St. Louis Lucas
12/15/2017
Lot
I (CBD)
200 Feet
100%
0%
$3,695,000
MVP Milwaukee Wells
12/15/2017
Lot
C9-E
40 Feet
100%
0%
$4,873,000
MVP Wildwood NJ Lot 1
12/15/2017
Lot
T/E
35 Feet
100%
0%
$745,000
MVP Wildwood NJ Lot 2
12/15/2017
Lot
T/E
35 Feet
100%
0%
$886,000
MVP Indianapolis City Park
12/15/2017
Garage
CBD-1 RC
Unlimited
100%
0%
$10,813,000
MVP KC Cherry Lot
12/15/2017
Lot
UR
Per Plan
100%
0%
$987,000
MVP Indianapolis WA Street Lot
12/15/2017
Lot
CBD-2
Unlimited
100%
0%
$5,749,000
MVP Minneapolis Venture
12/15/2017
Lot
B4C-1
Unlimited
100%
0%
$6,543,000
MVP Indianapolis Meridian Lot
12/15/2017
Lot
CBD-2/RC
Unlimited
100%
0%
$1,601,000
MVP Milwaukee Clybourn
12/15/2017
Lot
C9F(A)
30 Feet
100%
0%
$262,000
MVP Milwaukee Arena
12/15/2017
Lot
RED
40 Feet
100%
0%
$4,632,000
MVP Clarksburg Lot
12/15/2017
Lot
BPO
60 Feet
100%
0%
$715,000
MVP Denver Sherman 1935
12/15/2017
Lot
CMX-16
200 Feet
100%
0%
$2,534,000
MVP Bridgeport Fairfield Garage
12/15/2017
Garage
DVD-CORE
65 Feet
100%
0%
$8,256,000
Minneapolis City Parking
12/15/2017
Lot
B4C-1
Unlimited
100%
0%
$9,838,000

* The Company acquired a 51.0% interest in MVP St. Louis Cardinal Lot, DST, a Delaware statutory trust, or MVP St Louis, for approximately $2.8 million. MVP St. Louis purchased the St. Louis parking lot from an unrelated third party for a purchase price of $11,350,000, plus payment of closing costs, financing costs (related to a $6.0 million note payable secured by the property), and related transactional costs. MVP St. Louis used the Company's investment to fund a portion of the purchase price for the property. The remaining 49% of the equity portion was funded through short-term investments by the Advisor, which were then later sold to unrelated third parties in the private placement of beneficial interest in MVP St. Louis DST.

During February 2018, the Company, through MVP New Orleans Rampart, LLC ("MVP New Orleans"), an entity owned by the Company, closed on the purchase of a parking lot consisting of approximately 78 parking spaces, located in New Orleans, Louisiana, for the purchase price of $8.0 million plus closing costs. The parking lot will be operated by 342 N. Rampart, LLC.


The Company believes that it operated in a manner necessary for qualification as a REIT for the year ended December 31, 2017. The Company is neither a mutual fund nor an investment company within the meaning of the Investment Company Act nor subject to any regulation thereunder. As a REIT, the Company is required to have a December 31 fiscal year end. As a REIT, the Company will generally not be subject to federal income tax on that portion of its REIT taxable income that is distributed to stockholders. Among other requirements, REITs are required to satisfy certain gross income and asset tests, which may affect the composition of assets the Company acquires with the proceeds of the Common Stock Offering. In addition, REITs are required to distribute to stockholders at least 90% of their annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain).

If the Company does not qualify as a REIT for the tax year ended December 31, 2017, the Company will continue to file as a C corporation, and deferred tax assets and liabilities will be established for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for the deferred tax assets is provided if we believe that it is more likely than not that we will not realize the tax benefit of deferred tax assets based on the available evidence at the time the determination is made. For the tax year ended December 31, 2017, the Company concluded that, due to our cumulative book losses, a valuation allowance should be recorded against our net deferred tax assets.

The Company's board of directors will at all times have ultimate oversight and policy-making authority over the Company, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to the Company's Amended and Restated Advisory Agreement, however, the Company's board of directors has delegated to the Advisor the authority to manage the Company's day-to-day business, in accordance with the Company's investment objectives, strategy, guidelines, policies and limitations. VRM II owns 60% of the Advisor, and the remaining 40% is owned by VRM I; both were managed by Vestin Mortgage until such entity was internalized in January 2018. The Company's Sponsor is owned 60% by VRM II and 40% by VRM I, which were both managed by Vestin Mortgage prior to being internalized in January 2018. The Company also sold 5,000 shares of common stock directly to VRM II.

VRM I and VRM II are engaged primarily in the business of investing in commercial real estate and loans secured by commercial real estate. As the owners of the Advisor, VRM I and VRM II may benefit from any fees and other compensation that the Company pays to the Advisor under the Amended and Restated Advisory Agreement. In this regard, the Company notes that the Advisor has agreed to waive certain fees and expenses it otherwise would be entitled under the Amended and Restated Advisory Agreement.  Please refer to Note E – Related Party Transactions and Arrangements – Fees and Expenses Paid in Connection With the Operations of the Company in Part II, Item 8 Financial Statements of this Annual Report for more information.  If the owners of the Advisor determine that such waivers are no longer in the best interests of their stockholders or otherwise refuse to grant future waivers of fees or expenses if requested by the Company, then the Company's operating expenses could increase significantly, which could adversely affect the Company's results of operations and the amount of distributions to stockholders.

In addition, the Company may compete against VRM I and VRM II, both of which are managed by affiliates of the Company's Sponsor, for the acquisition of investments. The Company believes this potential conflict is mitigated, in part, by the Company's focus on parking facilities as its core investments, while the investment strategy of VRM I and VRM II focuses on acquiring office buildings and other commercial real estate and loans secured by commercial real estate.

For additional discussion regarding potential conflicts of interests, please see "Item 1A. Risk Factors—Risks Related to Conflicts of Interest" and "Item 13 – Certain Relationships and Related Transactions, and Director Independence" in this Annual Report.

In October 2016, the board of directors appointed a special committee to evaluate liquidity options. After consideration, in January 2017, the special committee of the board of directors decided to explore a merger with MVP I.

On May 26, 2017, the Company, MVI I, Merger Sub and the Advisor entered into the Merger Agreement. Subject to the terms and conditions of the Merger Agreement, MVP I merged with and into Merger Sub on December 15, 2017, with Merger Sub surviving the Merger such that following the Merger, Merger Sub continued as a wholly owned subsidiary of the Company. The Merger is intended to qualify as a "reorganization" under, and within the meaning of, Section 368(a) of the Code. The combined company was subsequently renamed "The Parking REIT, Inc."

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each outstanding share of MVP I Common Stock was automatically cancelled and retired, and converted into the right to receive 0.365 shares of common stock of the Company.  Holders of shares of MVP I Common Stock received cash in lieu of fractional shares.


At the effective time of the Merger, each share of MVP I Common Stock, if any, then held by any wholly owned subsidiary of MVP I or by the Company or any of its wholly owned subsidiaries became no longer outstanding and was automatically retired and ceased to exist, and no consideration was paid, nor will any other payment or right inure or be made with respect to such shares of MVP I Common Stock in connection with or as a consequence of the Merger.  In addition, each share of MVP I's Non-Participating, Non-Voting Convertible Stock, $0.001 par value per share ("MVP I Convertible Stock"), all 1,000 of which were held by the Advisor, were automatically retired and ceased to exist, and no consideration was paid, nor will any other payment or right inure or be made with respect to such shares of MVP I Convertible Stock in connection with or as a consequence of the Merger.

Pursuant to the Merger Agreement, the Company's board of directors  increased the number of directors to eight from five prior to the Merger, and Nicholas Nilsen, Robert J. Aalberts and Shawn Nelson, previous directors of MVP I, were elected to the board of directors.

Amended and Restated Advisory Agreement

Concurrently with the entry into the Merger Agreement, on May 26, 2017, the Company, the Operating Partnership and the Advisor entered into the Amended and Restated Advisory Agreement, which became effective at the effective time of the Merger.  The Amended and Restated Advisory Agreement sets forth the terms and conditions upon which we appoint the Advisor to serve as our advisor.  The Amended and Restated Advisory Agreement amended the Company's existing advisory agreement, dated October 5, 2015, to provide for, among other amendments, (i) elimination of acquisition fees, disposition fees and subordinated performance fees and (ii) the payment of an asset management fee by the Company to the Advisor calculated and paid monthly in an amount equal to one-twelfth of 1.1% of the (a) cost of each asset then held by the Company, without deduction for depreciation, bad debts or other non-cash reserves, or (b) the Company's proportionate share thereof in the case of an investment made through a joint venture or other co-ownership arrangement excluding (only for clause (b)) debt financing on the investment.  Pursuant to the Amended and Restated Advisory Agreement, the asset management fee may not exceed the Asset Management Fee Cap until the earlier of such time, if ever, that (i) the Company holds assets with an Appraised Value (as defined Amended and Restated Advisory Agreement) equal to or in excess of $500,000,000 or (ii) the Company reports AFFO (as defined in the Amended and Restated Advisory Agreement) equal to or greater than $0.3125 per share of Company Common Stock (an amount intended to reflect a 5% or greater annualized return on $25.00 per share of the Company's common stock) (the "Per Share Amount") for two consecutive quarters, on a fully diluted basis.  All amounts of the asset management fee in excess of the Asset Management Fee Cap, plus interest thereon at a rate of 3.5% per annum, will be due and payable by the Company no later than ninety (90) days after the earlier of the date that (i) the Company holds assets with an Appraised Value equal to or in excess of $500,000,000 or (ii) the Company reports AFFO per share of the Company's common stock equal to or greater than the Per Share Amount for two consecutive quarters, on a fully diluted basis.

In addition, the Amended and Restated Advisory Agreement contains customary indemnification provisions for the Advisor and its affiliates for all liabilities, claims, damages or losses arising in the performance of their duties under the Amended and Restated Advisory Agreement, as well as related expenses, including reasonable attorneys' fees. Further, in the event that the Amended and Restated Advisory Agreement is terminated for any reason, the Company is prohibited under the Amended and Restated Advisory Agreement from directly or indirectly soliciting or hiring the employees of the Advisor or any of its affiliates for one year after such termination, and the Company may need to pay the Advisor significant amounts to waive such prohibition.  The Company is also prohibited from intentionally interfering with, or enticing away, the relationship of the Advisor or its affiliates with any person who, during the term of the Amended and Restated Advisory Agreement or the preceding one-year period, was a tenant, co-investor, co-developer, joint venture or other customer of the Advisor or its affiliates.  The Amended and Restated Advisory Agreement have an initial term of one year from the effective date, and may be renewed for an unlimited number of successive one-year terms upon the parties' mutual consent.

Termination Agreement
 
Concurrently with the entry into the Merger Agreement, on May 26, 2017, the Company, MVP I, the Advisor and the Operating Partnership entered into a termination and fee agreement (the "Termination Agreement"). Pursuant to the Termination Agreement, at the effective time of the Merger, the Advisory Agreement, dated September 25, 2012, as amended, among MVP I and the Advisor was terminated, and the Company paid the Advisor an Advisor Acquisition Payment (as such term is defined in the Termination Agreement) of approximately $3.6 million, which was the only fee payable to the Advisor in connection with the Merger.

The foregoing description of the Merger Agreement, the Amended and Restated Advisory Agreement and the Termination Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the applicable agreements, each of which is filed with as an exhibit to the Company's Current Report on Form 8-K filed with the SEC on May 31, 2017.


Amended Charter

In connection with the Merger, at the Company's annual stockholders' meeting held on September 27, 2017, the Company's stockholders approved, among other matters, the amendment and restatement of its charter (the "Amended Charter").  As described in more detail in the final proxy statement distributed to our stockholders for the annual meeting, the Amended Charter is primarily intended to accomplish two objectives in connection with the possible listing of the Company's common stock after the closing of the Merger: (1) to remove provisions of our charter that the Company believes may unnecessarily restrict our ability to take advantage of further opportunities for liquidity events or are redundant with or otherwise addressed or permitted to be addressed under Maryland law and (2) to amend certain provisions in a manner that the Company believes would be more suitable for becoming a publicly-traded REIT.

The Amended Charter will become effective upon its filing with the State Department of Assessments and Taxation of Maryland. The Company expects to file the proposed Amended Charter immediately before the Company's common stock becomes listed for trading on a national securities exchange. This means that the changes to the charter will not be effective unless and until we complete an exchange listing.

Review of the Company's Policies

The Company's board of directors, including the independent directors, have reviewed the policies described in this Annual Report and determined that they are in the best interest of the Company's stockholders because: (1) they increase the likelihood that the Company will be able to acquire a diversified portfolio of income producing properties, thereby reducing risk in its portfolio; (2) the Company's executive officers, directors and affiliates of the Advisor have expertise with the type of real estate investments the Company seeks; and (3) borrowings should enable the Company to purchase assets and earn rental income more quickly, thereby increasing the likelihood of generating income for the Company's stockholders and preserving stockholder capital.

Results of Operations for the year ended December 31, 2017 compared to the year ended December 31, 2016.

The Company began purchasing properties in May 2016 and the results of operations below reflect start-up costs as well as acquisition expenses incurred in connection with purchasing properties as the Company seeks to deploy the Company's proceeds from the Common Stock Offering.  The Company expects that income and expenses related to the Company's portfolio will increase in future years as a result of owning the properties acquired for a full year and as a result of anticipated future acquisitions of real estate and real estate-related assets.  The results of operations described below may not be indicative of future results of operations.

   
For the Years Ended December 31,
 
   
2017
   
2016
 
Revenue
                       
Parking base rent
 
$
8,603,000
     
82.8
%
 
$
1,091,000
     
68.1
%
Retail rent
   
91,000
     
0.9
%
   
8,000
     
0.5
%
Management Agreement (a)
   
518,000
     
5.0
%
   
503,000
     
31.4
%
Percentage rent (b)(c)
   
1,173,000
     
11.3
%
   
--
     
--
 
Total revenues
 
$
10,385,000
     
100
%
 
$
1,602,000
     
100
%

a)
During January 2017, MVP Detroit Center Garage, LLC ("MVP Detroit") received a settlement amount from the previous operator of approximately $408,000 for the operations of the garage until SP+ assumed operations under a longer-term lease agreement. Through February 28, 2017, the San Jose 88 Garage was subject to a parking management agreement and the rental income of $110,000 represents the gross revenues generated by the property. Operating expenses for this property are included in Operations and Maintenance.  Starting on March 1, 2017, this property was leased to a national parking operator, with an annual base rent of $450,000 per year.

b)
During December 2017, MVP Detroit signed its third amendment to its lease with SP+ to set the percentage rent trigger amounts and periods from 80% of $5,000,000 over the first 12 months to the following:

 80% over $833,333 from February 2017 to March 2017
 80% over $1,250,000 from April 2017 to June 2017
 80% over $2,500,000 from July 2017 to December 2017
 Thereafter, percentage rent trigger will be quarterly.

As a result of this amendment, MVP Detroit earned approximately $1,123,000 in percentage rent from February 2017 to December 2017.

c)
In September 2017, White Front Garage Partners recorded approximately $16,000 in percentage rent in accordance with the lease agreement between White Front Garage Partners and Premier Parking.

In May 2017 and June 2017, MCI 1372 Street recorded approximately $3,000 and $6,000, respectively, in percentage rent.

In December 2017, MVP PF 2013 St. Louis, LLC recorded approximately $25,000 in percentage rent.

Total rental revenue earned, including percentage rent, from our consolidated parking facilities which have continued operations, totaled approximately $10.4 million for the year ended December 31, 2017, compared to total revenues of $1.6 million from our consolidated properties for the year ended December 31, 2016. All of the properties held as of December 31, 2016 were purchased in May 2016 or later, not providing a full twelve months' worth of rental income in 2016. The increase in rental revenues and the number of properties held is a result of the Company's planned and continued growth through acquisitions of new properties and the Merger of the Company and MVP I. In particular, the acquisition of the $55.0 million garage in Detroit, which accounted for a large portion of the increase, generating approximately $4.7 million in rental income to the Company during the year ended December 31, 2017.

The Company expects to see a substantial increase in revenue related to the 25 consolidated parking facilities that were acquired through the Merger with MVP I on December 15, 2017. As the Company continues to acquire new properties, by means of equity raises and debt financing, we expect to see our rental revenue to continue to grow year over year. Approximately $0.4 million in revenue was recorded related to the merged assets for the year ended December 31, 2017.

For additional information see Note I - Acquisitions in the notes to the consolidated financial statements included in Part II, Item 8 Financial Statements of this Annual Report.

During the last week of August 2017, Houston, Texas experienced major flooding due to Hurricane Harvey.  This resulted in limited access to the Houston area and a shutdown of most business and government operations.  Our parking garage and parking lots located in Houston, Texas experienced minimal damage during this time and experienced no loss in base rental income.

Since a majority of the Company's property leases call for additional percentage rent, the Company monitors the gross revenue generated by each property on a monthly basis. The higher the property's gross revenue the higher the Company's potential percentage rent. The graph below shows the comparison of the Company's monthly rental income to the gross revenue generated by the properties.


   
For the Years Ended December 31,
 
   
2017
   
2016
 
Operating expenses
           
Property taxes
 
$
677,000
   
$
65,000
 
Property operating expense
   
981,000
     
395,000
 
Asset management expense-related party
   
1,259,000
     
197,000
 
General and administrative
   
1,897,000
     
1,049,000
 
Merger costs
   
6,216,000
     
--
 
Acquisition expenses
   
2,695,000
     
2,472,000
 
Acquisition expenses – related party
   
1,957,000
     
1,229,000
 
Seminar
   
--
     
16,000
 
Depreciation
   
2,036,000
     
195,000
 
Total operating expenses
 
$
17,718,000
   
$
5,618,000
 

Operating expenses for the year ended December 31, 2017 increased by approximately $12.1 million, as compared to the year ended December 31, 2016.  A significant portion of this increase ($6.2 million) was attributable to costs relating to the Merger.  The balance of the increase in expenses is primarily attributable to the Company's growth in investments in parking facilities. During the year ended December 31, 2017, the Company acquired a controlling interest in five parking facilities, unrelated to the Merger, totaling approximately $92.2 million, as compared to 12 properties totaling approximately $54.4 million during the year ended December 31, 2016. The increase in acquisitions resulted in increased property taxes, other property operating expense, asset management fees, acquisitions expenses and depreciation.  As the Company continues to acquire new properties, by means of the equity raises and debt financing, we expect to see our operations and maintenance and depreciation expenses grow.

   
For the Years Ended December 31,
 
   
2017
   
2016
 
Other income (expense)
           
Interest expense
 
$
(4,651,000
)
 
$
(154,000
)
Distribution income – related party
   
189,000
     
34,000
 
Gain from sale of investment
   
1,200,000
     
--
 
Gain from acquisition of real estate-equity method
   
180,000
     
--
 
Loss from assets held for sale
           
(19,000
)
Income from DST
   
105,000
     
--
 
Income from investment in equity method investee
   
19,000
     
3,000
 
Total other expense
 
$
(2,958,000
)
 
$
(136,000
)

The increase in interest expense for the year ended December 31, 2017, as compared to 2016, is related to the Company's increased use of debt to acquire properties. To maximize the use of our cash, the Company will continue to look for opportunities to utilize financing on future acquisitions, including with the use of our line of credit with KeyBank or permanent debt at the time of acquisitions.  The interest expense will vary based on the amount of our borrowings and current interest rates at the time of financing.  The Company will seek to secure appropriate leverage with the lowest interest rate available to us.  The terms of the loans will greatly depend on the quality of the property, the credit worthiness of the tenant and the amount of income the property is able to generate through our parking leases.  There is no assurance, however, that the Company will be able to secure additional financing on favorable terms or at all. Interest expense recorded for the year ended December 31, 2017 includes loan amortization costs. Total loan amortization cost for the years ended December 31, 2017 and 2016 was approximately $1.6 million and $0.3 million, respectively.

For additional information see Note J – Line of Credit and Note K – Notes Payable in the notes to the consolidated financial statements included in Part II, Item 8 Financial Statements of this Annual Report.


Funds from Operations and Modified Funds from Operations

The Advisor believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient. Additionally, publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, the Company believes that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases.

In order to provide a more complete understanding of the operating performance of a REIT, NAREIT promulgated a measure known as FFO. FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, adding back asset impairment write-downs, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships and joint ventures. Because FFO calculations exclude such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, the Company believes that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of the Company's performance relative to the Company's competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than the Company does, making comparisons less meaningful.

The Investment Program Association ("IPA") issued Practice Guideline 2010-01 (the "IPA MFFO Guideline") on November 2, 2010, which extended financial measures to include modified funds from operations ("MFFO"). In computing MFFO, FFO is adjusted for certain non-operating cash items such as acquisition fees and expenses and certain non-cash items such as straight-line rent, amortization of in-place lease valuations, amortization of discounts and premiums on debt investments, nonrecurring impairments of real estate-related investments, mark-to-market adjustments included in net income (loss), and nonrecurring gains or losses included in net income (loss) from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. Management is responsible for managing interest rate, hedge and foreign exchange risk. To achieve the Company's objectives, the Company may borrow at fixed rates or variable rates. In order to mitigate the Company's interest rate risk on certain financial instruments, if any, the Company may enter into interest rate cap agreements and in order to mitigate the Company's risk to foreign currency exposure, if any, the Company may enter into foreign currency hedges. The Company views fair value adjustments of derivatives, impairment charges and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Additionally, the Company believes it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations, assessments regarding general market conditions, and the specific performance of properties owned, which can change over time.


No less frequently than annually, the Company evaluates events and changes in circumstances that could indicate that the carrying amounts of real estate and related intangible assets may not be recoverable. When indicators of potential impairment are present, the Company assesses whether the carrying value of the assets will be recovered through the future undiscounted operating cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) expected from the use of the assets and the eventual disposition. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of MFFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of the Company's operations, it could be difficult to recover any impairment charges through operational net revenues or cash flows prior to any liquidity event.  The Company adopted the IPA MFFO Guideline as management believes that MFFO is a helpful indicator of the Company's on-going portfolio performance. More specifically, MFFO isolates the financial results of the REIT's operations. MFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, MFFO for the period presented may not be indicative of future results or the Company's future ability to pay the Company's dividends. By providing FFO and MFFO, the Company presents information that assists investors in aligning their analysis with management's analysis of long-term operating activities. MFFO also allows for a comparison of the performance of the Company's portfolio with other REITs that are not currently engaging in acquisitions, as well as a comparison of the Company's performance with that of other non-traded REITs, as MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and the Company believe often used by analysts and investors for comparison purposes. As explained below, management's evaluation of the Company's operating performance excludes items considered in the calculation of MFFO based on the following economic considerations:

·
Straight-line rent. Most of the Company's leases provide for periodic minimum rent payment increases throughout the term of the lease. In accordance with GAAP, these periodic minimum rent payment increases during the term of a lease are recorded to rental revenue on a straight-line basis in order to reconcile the difference between accrual and cash basis accounting. As straight-line rent is a GAAP non-cash adjustment and is included in historical earnings, it is added back to FFO to arrive at MFFO as a means of determining operating results of the Company's portfolio.

·
Amortization of in-place lease valuation. As this item is a cash flow adjustment made to net income in calculating the cash flows provided by (used in) operating activities, it is added back to FFO to arrive at MFFO as a means of determining operating results of the Company's portfolio.

·
Acquisition-related costs. The Company was organized primarily with the purpose of acquiring or investing in income-producing real property in order to generate operational income and cash flow that will allow us to provide regular cash distributions to the Company's stockholders. In the process, the Company incurs non-reimbursable affiliated and non-affiliated acquisition-related costs, which in accordance with GAAP, are expensed as incurred and are included in the determination of income (loss) from operations and net income (loss). These costs have been and will continue to be funded with cash proceeds from the Offering or included as a component of the amount borrowed to acquire such real estate. If the Company acquires a property after all offering proceeds from the Offering have been invested, there will not be any offering proceeds to pay the corresponding acquisition-related costs. Accordingly, unless the Advisor determines to waive the payment of any then-outstanding acquisition-related costs otherwise payable to the Advisor, such costs will be paid from additional debt, operational earnings or cash flow, net proceeds from the sale of properties, or ancillary cash flows. In evaluating the performance of the Company's portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments from the investments' revenues and expenses. Acquisition-related costs may negatively affect the Company's operating results, cash flows from operating activities and cash available to fund distributions during periods in which properties are acquired, as the proceeds to fund these costs would otherwise be invested in other real estate related assets. By excluding acquisition-related costs, MFFO may not provide an accurate indicator of the Company's operating performance during periods in which acquisitions are made. However, it can provide an indication of the Company's on-going ability to generate cash flow from operations and continue as a going concern after the Company ceases to acquire properties on a frequent and regular basis, which can be compared to the MFFO of other non-listed REITs that have completed their acquisition activity and have similar operating characteristics to the Company. Management believes that excluding these costs from MFFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management.


For all of these reasons, the Company believes the non-GAAP measures of FFO and MFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of the Company's real estate portfolio. However, a material limitation associated with FFO and MFFO is that they are not indicative of the Company's cash available to fund distributions since other uses of cash, such as capital expenditures at the Company's properties and principal payments of debt, are not deducted when calculating FFO and MFFO. Additionally, MFFO has limitations as a performance measure in an offering such as the Company's where the price of a share of common stock is a stated value. The use of MFFO as a measure of long-term operating performance on value is also limited if the Company does not continue to operate under the Company's current business plan as noted above. MFFO is useful in assisting management and investors in assessing the Company's ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods, and in particular, after the Common Stock Offering and acquisition stages are complete and NAV is disclosed. However, MFFO is not a useful measure in evaluating NAV because impairments are taken into account in determining NAV but not in determining MFFO. Therefore, FFO and MFFO should not be viewed as more prominent a measure of performance than income (loss) from operations, net income (loss) or to cash flows from operating activities and each should be reviewed in connection with GAAP measurements.

None of the SEC, NAREIT or any other organization has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate MFFO and its use as a non-GAAP performance measure. In the future, the SEC or NAREIT may decide to standardize the allowable exclusions across the REIT industry, and the Company may have to adjust the calculation and characterization of this non-GAAP measure.

The Company's calculation of FFO and MFFO attributable to shareholders is presented in the following table for the years ended December 31, 2017 and 2016:

   
For the Years Ended December 31,
 
   
2017
   
2016
 
Net loss attributable to The Parking REIT, Inc. common shareholders
 
$
(10,751,000
)
 
$
(4,268,000
)
Add (Subtract):
               
Gain on Sale of real estate
   
(1,200,000
)
   
--
 
Depreciation and Amortization of real estate assets
   
2,036,000
     
195,000
 
FFO
 
$
(9,915,000
)
 
$
(4,073,000
)
Add:
               
Acquisition fees and expenses to non-affiliates
   
2,695,000
     
2,472,000
 
Acquisition fees and expenses to affiliates
   
1,957,000
     
1,229,000
 
Acquisition / Merger costs
   
6,216,000
     
--
 
MFFO attributable to The Parking REIT, Inc. shareholders
 
$
953,000
   
$
(372,000
)
Distributions paid to Common Shareholders
 
$
2,296,000
   
$
732,000
 

Liquidity and Capital Resources

The Company commenced operations on December 30, 2015.

The Company's principal demand for funds is for the acquisition of real estate assets, the payment of operating expenses, capital expenditures, interest on the Company's outstanding indebtedness and the payment of distributions to the Company's stockholders. Over time, the Company intends to generally fund its operating expenses from its cash flow from operations. The cash required for acquisitions and investments in real estate is funded primarily from the sale of shares of the Company's preferred stock and common stock, including those offered for sale through the Company's distribution reinvestment plan, dispositions of properties in the Company's portfolio and through third party financing and the assumption of debt on acquired properties.

The Company may seek to raise additional funds through equity financings, such as private placements of its preferred stock, as well as through additional debt financing.  As of December 31, 2017, the Company had raised approximately $2.7 million in funds from the private placements of Series A Convertible Redeemable Preferred Stock and approximately $27.4 million in funds from the private placements of Series 1 Convertible Redeemable Preferred Stock. The Company continued to raise additional funds through private placements of Series 1 Convertible Redeemable Preferred Stock until January 31, 2018, at which time the Preferred Series 1 offering was closed.

As of December 31, 2017, the Company's debt consisted of approximately $123.8 million in fixed rate debt and $22.3 million in variable rate debt, net of loan issuance costs.

Net cash used in operating activities for the year ended December 31, 2017 totaled approximately $16.6 million. Operating cash flows were used for the payment of normal operating expenses such as management fees, insurance, accounting fees and legal bills.  Net cash used in investing activities totaled approximately $88.4 million and mainly consisted of purchase of investments in real estate totaling $92.2 million (with proceeds from non-controlling interest totaling $5.1 million and use of deposits from prior periods totaling $3.9 million), building improvements of approximately $3.2 million, additional investment in Houston Preston of approximately $1.0 million and the purchase of an investment in a DST for $2.8 million. Net cash provided by financing activities totaled approximately $108.6 million and mainly consisted of proceeds from notes payable of approximately $77.8 million, proceeds from the Company's KeyBank line of credit of approximately $64.4 million, proceeds from issuance of preferred stock of approximately $29.4 million, proceeds from issuance of common stock of approximately $4.9 million, netted with payments on the KeyBank line of credit of approximately $53.6 million, distributions to non-controlling interests of approximately $1.9 million, payments on notes payable of approximately $11.5 million and distributions to stockholders of approximately $1.6 million.

Net cash used in operating activities for the year ended December 31, 2016 totaled approximately $3.6 million.  Operating cash flows were used for the payment of normal operating expenses.  Net cash used in investing activities totaled approximately $59.4 million and consisted of investments in real estate of approximately $53.7 million, investment in equity method investee of approximately $1.2 million, investments in cost method investees of approximately $2.0 million, investment in cost method investees held for sale of approximately $0.8 million and security deposits on future acquisitions of approximately $4.6 million. Net cash provided by financing activities totaled approximately $65.7 million and consisted of proceeds from issuance of common stock of approximately $54.0 million, proceeds from notes payable related to a cost method investment property of approximately $6.5 million, distributions of approximately $2.6 million and payments on notes payable of approximately $0.2 million.

On October 5, 2016, the Company, through its Operating Partnership, and MVP I (the "REITs"), through a wholly owned subsidiary (the "Borrowers"), entered into a credit agreement (the "Unsecured Credit Agreement") with KeyBank, National Association ("KeyBank") as the administrative agent and KeyBank Capital Markets ("KeyBank Capital Markets") as the lead arranger. Pursuant to the Unsecured Credit Agreement, the Borrowers were provided with a $30 million unsecured credit facility (the "Unsecured Credit Facility"), which could be increased up to $100 million, in minimum increments of $10 million.  The Unsecured Credit Facility had an initial term of two years, maturing on October 5, 2018, and could be extended for a one-year period if certain conditions were met and upon payment of an extension fee.  The Unsecured Credit Facility had an interest rate calculated based on LIBOR Rate plus 2.25% or Base Rate plus 1.25%, both as provided in the Unsecured Credit Agreement.  The Base Rate was calculated as the greater of (i) the KeyBank Prime rate or (ii) the Federal Funds rate plus ½ of 1%.  Payments under the Unsecured Credit Facility were interest only and were due on the first day of each quarter.  The obligations of the Borrowers of the Unsecured Credit Agreement were joint and several.  The REITs entered into cross-indemnification provisions with respect to their joint and several obligations under the Unsecured Credit Agreement.

On June 26, 2017, the REITs, each through a wholly owned subsidiary, the Operating Partnership and MVP Real Estate Holdings, LLC (together, the "Borrowers"), entered into a credit agreement (the "Working Capital Credit Agreement") with KeyBank as the administrative agent and KeyBanc Capital Markets as the lead arranger. Pursuant to the Working Capital Credit Agreement, the Borrowers were provided with a $6.0 million credit facility (the "Total Commitment"), which could be increased up to $10 million, in minimum increments of $1 million.  The Total Commitment had an initial term of six months, maturing on December 26, 2017. In October 2017, the term was extended to March 31, 2018.  The Working Capital Credit Agreement had an interest rate calculated based on LIBOR Rate plus 4.5% or Base Rate plus 3.5%, both as provided in the Working Capital Credit Agreement.  The Base Rate was calculated as the greater of (i) the KeyBank Prime rate or (ii) the Federal Funds rate plus ½ of 1%.  Payments under the Working Capital Credit Facility require 100% of the net proceeds of all capital events and equity issuances by the REITs within five business days of receipt.  The obligations of the Borrowers of the Unsecured Credit Agreement were joint and several. The REITs entered into cross-indemnification provisions with respect to their joint and several obligations under the Unsecured Credit Agreement.

On December 29, 2017, in connection with entering into the New Credit Agreement (as such term is defined below), the Operating Partnership and the Company terminated the existing credit facilities. The Operating Partnership repaid in full all amounts outstanding under the existing credit facilities with the proceeds from the New Credit Agreement. No prepayments fees or early termination penalties were incurred in connection with terminating the existing credit facilities.

On December 29, 2017, the Operating Partnership entered into a Credit Agreement (the "New Credit Agreement") with the lenders party thereto (the "Lenders"), KeyBank as administrative agent (the "Administrative Agent"), and KeyBanc Capital Markets as lead arranger. The New Credit Agreement provides for a $50 million senior secured revolving credit facility (the "Revolving Credit Facility"), which consists of a borrowing base revolving credit facility (the "BB Revolving Credit Facility") and a working capital revolving credit facility (the "WC Revolving Credit Facility").  The New Credit Agreement also provides the Operating Partnership with the option to increase the size of the Revolving Credit Facility and/or establish one or more new pari passu term loan facilities (each, a "Term Loan Facility") up to an aggregate commitment or principal amount of up to $350 million, subject to certain limitations. The BB Revolving Credit Facility and any Term Loan Facility mature on January 3, 2021, with two twelve-month extension options subject to certain conditions set forth in the New Credit Agreement, which, if exercised by the Operating Partnership, would extend the maturity date to January 3, 2023.  The WC Revolving Credit Facility matures on January 4, 2019, unless earlier terminated by the Operating Partnership.


In connection with our Unsecured Credit Agreement, the Borrowers were required to maintain a minimum liquidity requirement of $2.0 million. The Company maintained compliance to this lender requirement through December 29, 2017, when the amount outstanding under the Unsecured Credit Agreement was paid in full.

In addition, the loan with Bank of America for the MVP Detroit garage requires the Company to maintain $2.3 million in liquidity at all times, which is defined as unencumbered cash and cash equivalents. As of June 21, 2018, the Company was in compliance with this lender requirement.

Borrowings under the New Credit Agreement bear interest at a rate equal to the sum of a Margin (as such term is defined below) plus either a rate based on LIBOR for 1, 2 or 3 months or a base rate determined by reference to the highest of (1) the Administrative Agent's prime lending rate, (2) the federal funds effective rate plus 0.50% and (3) the LIBOR rate that would be payable on such day for a LIBOR rate loan with a one-month interest period plus 1.00%.  For the BB Revolving Credit Facility and any Term Loan Facility, the Margin is determined by the consolidated leverage ratio until the Operating Partnership achieves a senior unsecured credit rating of BBB-/Baa3 from S&P or Moody's at which time the Operating Partnership may elect to use an alternative pricing grid. The Margin for the BB Revolving Credit Facility ranges from 0.75% to 1.50% in the case of base rate loans, and 1.75% to 2.50%, in the case of LIBOR rate loans. The Margin for the Term Loan Facility ranges from 0.70% to 1.45%, in the case of base rate loans, and 1.70% to 2.450%, in the case of LIBOR rate loans. The Margin as of the date of effectiveness of the New Credit Agreement is (1) in respect of BB Revolving Credit Facility, 1.50%, in the case of base rate loans, and 2.50%, in the case of LIBOR rate loans, and (2) in respect of any Term Loan Facility, 1.45%, in the case of base rate loans, and 2.45%, in the case of LIBOR rate loans.  For the WC Revolving Credit Facility, the Margin is 3.00% in the case of base rate loans, and 4.00% in the case of LIBOR rate loans.

The Company will experience a relative decrease in liquidity as proceeds from its debt or equity financings are used to acquire and operate assets and may experience a temporary, relative increase in liquidity if and when investments are sold, to the extent such sales generate proceeds that are available for additional investments. The Advisor may, but is not required to, establish working capital reserves from proceeds from the Common Stock Offering of cash flow generated by the Company's investments or out of proceeds from the sale of investments. The Company does not anticipate establishing a general working capital reserve; however, the Company may establish capital reserves with respect to particular investments. The Company also may, 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 also may require working capital reserves.

In connection with the Company's New Credit Agreement, the Borrowers are required to maintain a minimum liquidity requirement of $2.0 million or 1.0% of the parking asset value, which was defined as the sum of unencumbered cash and cash equivalents of the Borrowers and their Subsidiaries.

The Company's existing credit agreement also requires the Company to comply with various financial and other covenants.  In addition, the failure of Mr. Shustek to be a non-member manager of the Advisor or for the Advisor to continue to manage the Company is an event of default under approximately $71 million of the Company's secured mortgage debt.  Please see, for more information, "Risk Factors – Risks Related to Our Financing Strategy – If we breach covenants under our existing credit facility and other indebtedness, we could be held in default under such loans, which could accelerate our repayment date and materially adversely affect our financial condition, results of operations and cash flows."

On June 19, 2018, the Company (as "Guarantor"), the Borrowers and the Lenders entered into an amendment and waiver to the New Credit Agreement.  Pursuant to the amendment and waiver, the Lenders agreed to waive the Borrowers' breach of the fixed charge coverage ratio for the period ended March 31, 2018, and the Borrowers' requirement to comply with the fixed charge coverage ratio for the period ended June 30, 2018 and September 30, 2018, and the Guarantor's breach of the financial reporting obligations under the credit agreement for the periods ended December 31, 2017 and March 31, 2018.  Pursuant to the amendment and waiver, the Lenders, the Borrowers and the Company (as Guarantor) also agreed to the following, among other changes:

·
the Fixed Charge Coverage Ratio shall not be less than (i) at any time on or prior to June 30, 2019, 1.35:1.00, and (ii) at any time thereafter, 1.60:1.00;
·
the Lenders shall advance approximately $27.4 million to fund the Borrowers' acquisition costs of pending property purchases;
·
the Borrowers shall make mandatory principal payments on the WC Revolving Credit Facility in the amounts and at the times scheduled therein;
·
the WC Revolving Credit Facility shall be reduced to $16.1 million and the Lenders' obligations to make WC Revolving Loans shall be terminated;
·
the Company shall file to list and register its common stock on the New York Stock Exchange or other recognized exchange in the United States by no later than July 31, 2018, obtain approval of such listing application by August 31, 2018 and complete the listing by September 30, 2018;

·
the Company shall redeem all of its outstanding Series A and Series 1 preferred stock and pay the entire redemption price in the form of shares of the Company's common stock (as is permitted by the articles supplementary governing each series of preferred stock), within 30 days after the completion of the listing of its common stock on a national securities exchange;
·
the Company shall make no cash distributions to its preferred shareholders after the earlier of (i) 30 days after the completion of the public listing or (ii) September 30, 2018;
·
the collateral under the existing credit facility shall include certain recently purchased properties and Borrowers shall not be entitled to release any collateral prior to the retirement in full of the WC Revolving Credit Facility; and
·
prior to the retirement of the WC Revolving Credit Facility, management fees paid by the Company to the Advisor shall not exceed $200,000 per quarter.

To the extent that the working capital reserve is insufficient to satisfy the Company's cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing. In addition, subject to certain exceptions and limitations, the Company may incur indebtedness in connection with the acquisition of any real estate asset, refinance the debt thereon, arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of financing or refinancing in additional properties.

Going Concern Evaluation

In connection with preparing consolidated financial statements for the year ended December 31, 2017, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company's ability to continue as a going concern within one year from the date that the financial statements are issued.

The Company considered the following:

·
Net losses of $11.4 million and $4.3 million for the years ended December 31, 2017 and 2016, respectively.
·
Negative cash flow from operating activities for 2017 and 2016.
Ordinarily, conditions or events that raises substantial doubt about an entity's ability to continue as a going concern relate to the entity's ability to meet its obligations as they become due.
The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued by considering the following:

·
The Company raised approximately $142 million and $34 million of debt and equity financing, respectively, during the year ended December 31, 2017.
·
The Company has historically raised funds from debt and equity financings.
·
As a result of the Company's restructurings that were implemented during the year ended December 31, 2017, the Company's cost structure is now in line with its future revenue projections.
In addition to the recent capital raised in 2017, management also believes that the Company will generate enough cash from operations to satisfy its obligations for the next twelve months from the issuance date.

The Company will take one or more of the following actions if it starts to trend unfavorably to its internal profitability and cash flow projections, in order to mitigate conditions or events that would raise substantial doubt about its ability to continue as a going concern:

·
Implement additional restructuring and cost reductions.
·
Raise additional capital through short-term loans.
·
Raise additional capital by placing secured mortgage debt on unencumbered assets.
·
Raise additional capital through a private placement.
·
Dispose of one or more assets.
At December 31, 2017, the Company had $8.5 million in cash and cash equivalents.

Management is not aware of any additional material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting the Company's targeted portfolio, the U.S. parking facility industry, which may reasonably be expected to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of the Company's assets.


In addition to making investments in accordance with the Company's investment objectives, the Company expects to use its capital resources to make certain payments to the Advisor and the selling agent(s). During the acquisition and development stage, the Company expects to make payments to the Advisor in connection with the selection or purchase of investments, the management of the Company's assets and costs incurred by the Advisor in providing services to us. For a discussion of the compensation to be paid to the Advisor, see "Fees and Expenses Paid in Connection with the Operations of the Company", included in Note E — Related Party Transactions and Arrangements Part II, Item 8 Financial Statements of this Annual Report for more information. The Amended and Restated Advisory Agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of the Advisor and the Company's board of directors.

Management Compensation Summary

The following table summarizes all compensation and fees incurred by us and paid or payable to the Advisor and its affiliates in connection with the Company's organization operations for the years ended December 31, 2017 and 2016.

   
For the Years Ended December 31,
 
   
2017
   
2016
 
Acquisition Fees
 
$
1,957,000
   
$
1,229,000
 
Asset Management Fees
   
1,259,000
     
197,000
 
Merger Fees
   
3,600,000
     
--
 
Total
 
$
6,816,000
   
$
1,426,000
 

Distributions and Stock Dividends

The Company intends to make regular cash and stock distributions to its common stockholders and cash distributions to its Series A preferred stock and Series 1 preferred stock, typically on a monthly basis. The actual amount and timing of distributions will be determined by the Company's board of directors in its discretion and typically will depend on the amount of funds available for distribution, which is impacted by current and projected cash requirements, tax considerations and other factors. As a result, the Company's distribution rate and payment frequency may vary from time to time and could be reduced from current levels. However, to qualify as a REIT for federal income tax purposes, the Company must make distributions equal to at least 90% of its REIT taxable income each year.

Common Stock

On October 23, 2015, the Company announced that its board of directors has approved a plan for payment of initial monthly cash distributions of $0.0625 per share and monthly stock dividends $0.0625 per share, based on a purchase price of $25.00 per common share, commencing after the Company breaks escrow upon receiving subscriptions for the minimum offering amount of $2 million. The initial cash distribution and stock dividend were paid on February 10, 2016 to stockholders of record as of January 24, 2016. The initial cash distributions were paid from offering proceeds rather than funds from operations and therefore may represent a return of capital.  There can be no assurance that distributions and dividends will continue to be paid at this rate. The Company's board of directors may at any time change the distribution and dividend rate or suspend payment of distributions and dividends if it determines that such action is in the best interest of the Company and its stockholders.  The Company expects that its board of directors will continue to authorize, and it will declare, distributions based on a record date on the 24th of each month, and it expects to continue to pay distributions on the 10th day of the following month (or the next business day if the 10th is not a business day), monthly in arrears. The Company has not established a minimum distribution level, and its charter does not require that it make distributions to its stockholders; however, the Company anticipates the payment of monthly distributions. The Company may also make special stock dividends. 

From inception through December 31, 2017, the Company had paid approximately $1.2 million in cash, issued 72,111 shares of its common stock as DRIP and issued 121,147 shares of its common stock as dividend in distributions to the Company's stockholders.  All of the cash distributions were paid from offering proceeds and constituted a return of capital.  The Company's total distributions paid for the period presented, the sources of such distributions, the cash flows provided by (used in) operations and the number of shares of common stock issued pursuant to the Company's DRIP are detailed below.


To date, all distributions were paid from offering proceeds and therefore may represent a return of capital.

   
Distributions Paid in Cash
   
Distributions Paid through DRIP
   
Total
Distributions Paid
   
Cash Flows Used in Operations (GAAP basis)
 
1st Quarter, 2017
 
$
161,000
   
$
285,000
   
$
446,000
   
$
(3,672,000
)
2nd Quarter, 2017
   
168,000
     
306,000
     
474,000
     
(3,943,000
)
3rd Quarter, 2017
   
172,000
     
309,000
     
481,000
     
(2,329,000
)
4th Quarter, 2017
   
178,000
     
310,000
     
488,000
     
(6,678,000
)
Total 2017
 
$
679,000
   
$
1,210,000
   
$
1,889,000
   
$
(16,622,000
)

   
Distributions Paid in Cash
   
Distributions Paid through DRIP
   
Total
Distributions Paid
   
Cash Flows Used in Operations (GAAP basis)
 
1st Quarter, 2016
 
$
10,000
   
$
14,000
   
$
24,000
   
$
(134,000
)
2nd Quarter, 2016
   
47,000
     
67,000
     
114,000
     
(435,000
)
3rd Quarter, 2016
   
85,000
     
136,000
     
221,000
     
(1,181,000
)
4th Quarter, 2016
   
132,000
     
241,000
     
373,000
     
(1,894,000
)
Total 2016
 
$
274,000
   
$
458,000
   
$
732,000
   
$
(3,644,000
)

As of December 31, 2017, the Company had declared $952,000 in distributions for Common stockholders, $679,000 of which has been paid. The Company had also issued 121,147 shares of its common stock as dividend distributions made to the Company's stockholders and 72,111 shares through the DRIP.

Preferred Series A Stock

The Company offered up to $50 million in shares of the Company's Series A Convertible Redeemable Preferred Stock ("Series A"), par value $0.0001 per share, together with warrants to acquire the Company's common stock, in a Regulation D 506(c) private placement to accredited investors. In connection with the private placement, on October 27, 2016, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock. The Company commenced the private placement of the Shares to accredited investors on November 1, 2016 and closed the offering on March 24, 2017.  The Company raised approximately $2.5 million, net of offering costs, in the Series A private placements.

The offering price was $1,000 per share.  In addition, each investor in the Series A received, for every $1,000 in shares subscribed by such investor, 30 detachable warrants to purchase shares of the Company's common stock if the Company's common stock is listed on a national securities exchange.  The warrants' exercise price is equal to 110% of the volume weighted average closing stock price of the Company's common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of June 21, 2018, there were 84,510 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event.  These warrants will expire five years from the 90th day after the occurrence of a listing event.

For additional information see Note R — Preferred Stock and Warrants in Part II, Item 8 Financial Statements of this Annual Report for a discussion of the various related party transactions, agreements and fees.

From inception through December 31, 2017, the Company has paid approximately $128,000 in distributions for Series A stockholders.

   
Total Series A
Distributions Paid
   
Cash Flows Used in Operations (GAAP basis)
 
1st Quarter, 2017
 
$
5,000
   
$
(3,672,000
)
2nd Quarter, 2017
   
41,000
     
(3,943,000
)
3rd Quarter, 2017
   
41,000
     
(2,329,000
)
4th Quarter, 2017
   
41,000
     
(6,678,000
)
Total 2017
 
$
128,000
   
$
(16,622,000
)

As of December 31, 2017, the Company had declared $142,000 in distributions for Series A stockholders, $128,000 of which had been paid.


To comply with its amended credit agreement, the Company will make no cash distributions to its Series A stockholders after the earlier of (i) 30 days after the completion of the listing of the Company's common stock on a national securities exchange or (ii) September 30, 2018.  The Company will file an application to list its common stock on a national securities exchange by July 31, 2018, and the Company will seek to obtain approval of the listing application by August 31, 2018 and complete the listing by September 30, 2018.  Upon listing, the Company also will redeem all of its outstanding Series A preferred stock and pay the entire redemption price in the form of shares of the Company's common stock, based on the volume weight average price per share of the Company's common stock for the 20 trading days immediately after the commencement of listing.  However, there can be no assurance that the Company will cause a listing to occur within such time frame or at all.

Preferred Series 1 Stock

On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock ("Series 1"), par value $0.0001 per share.  On April 7, 2017, the Company commenced the Regulation D 506(b) private placement of shares of Series 1, together with warrants to acquire the Company's common stock, to accredited investors. On January 31, 2018, the Company closed this offering. As of June 21, 2018, the Company had raised approximately $36.5 million, net of offering costs, in the Series 1 private placements and had 39,810 shares of Series 1 issued and outstanding.

The offering price is $1,000 per share.  In addition, each investor in the Series 1 will receive, for every $1,000 in shares subscribed by such investor, 35 detachable warrants to purchase shares of the Company's common stock if the Company's common stock is listed on a national securities exchange. The warrants' exercise price is equal to 110% of the volume weighted average closing stock price of the Company's common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of June 21, 2018, there were 1,382,675 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event.  These warrants will expire five years from the 90th day after the occurrence of a listing event.

For additional information see Note R — Preferred Stock and Warrants in Part II, Item 8 Financial Statements of this Annual Report for a discussion of the various related party transactions, agreements and fees.

From inception through December 31, 2017, the Company has paid $380,000 in distributions for Series 1 stockholders.

   
Total Series 1
Distributions Paid
   
Cash Flows Used in Operations (GAAP basis)
 
1st Quarter, 2017
 
$
--
   
$
(3,672,000
)
2nd Quarter, 2017
   
14,000
     
(3,943,000
)
3rd Quarter, 2017
   
98,000
     
(2,329,000
)
4th Quarter, 2017
   
268,000
     
(6,678,000
)
Total 2017
 
$
380,000
   
$
(16,622,000
)

As of December 31, 2017, the Company had declared $518,000 in distributions for Series 1 stockholders, $380,000 of which had been paid.

To comply with its amended credit agreement, the Company will make no cash distributions to its Series 1 stockholders after the earlier of (i) 30 days after the completion of the listing of the Company's common stock on a national securities exchange or (ii) September 30, 2018.  The Company will file an application to list its common stock on a national securities exchange by July 31, 2018, and the Company will seek to obtain approval of the listing application by August 31, 2018 and complete the listing by September 30, 2018.  Upon listing, the Company also will redeem all of its outstanding Series 1 preferred stock and pay the entire redemption price in the form of shares of the Company's common stock, based on the volume weight average price per share of the Company's common stock for the 20 trading days immediately after the commencement of listing.  However, there can be no assurance that the Company will cause a listing to occur within such time frame or at all.

The Company may not generate sufficient cash flow from operations to fully fund distributions. All or a portion of the distributions may be paid from other sources, such as cash flows from equity offerings, financing activities, borrowings, cash advances from the Advisor, 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 continues to pay 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 a number of 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.

Related-Party Transactions and Arrangements

The Company has entered into agreements with affiliates of its Sponsor, whereby the Company will pay certain fees or reimbursements to the Advisor or its affiliates in connection with, among other things, acquisition and financing activities, asset management services and reimbursement of operating and offering related costs. For additional information see Note E — Related Party Transactions and Arrangements in in Part II, Item 8 Financial Statements of this Annual Report for a discussion of the various related party transactions, agreements and fees.

On November 5, 2016, the Company purchased 338,409 shares of MVP I's common stock from an unrelated third party for $3.0 million or $8.865 per share. During the years ended December 31, 2017 and 2016, the Company received approximately $189,000 and $34,000, respectively, in stock distributions, related to the Company's ownership of MVP I common stock.

At the effective time of the Merger, 174,026 shares of MVP I Common Stock held by the Company was retired.

Inflation

The Company expects to include provisions in its tenant leases designed to protect the Company from the impact of inflation. These provisions will include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance. Due to the generally long-term nature of these leases, annual rent increases may not be sufficient to cover inflation and rent may be below market.

Income Taxes

The Company is organized and conducts operations to qualify as a REIT under Sections 856 to 860 of the Code and to comply with the provisions of the Code with respect thereto.  A REIT is generally not subject to federal income tax on that portion of its REIT taxable income, which is distributed to its stockholders, provided that at least 90% of such taxable income is distributed and provided that certain other requirements are met.  Our REIT taxable income may substantially exceed or be less than our net income as determined based on GAAP because differences in GAAP and taxable net income consist primarily of allowances for loan losses or doubtful account, write-downs on real estate held for sale, amortization of deferred financing cost, capital gains and losses, and deferred income.

If the Company does not qualify as a REIT for the tax year ended December 31, 2017, it will file as a C corporation and deferred tax assets and liabilities will be established for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for the deferred tax assets is provided if the Company believes that it is more likely than not that it will not realize the tax benefit of deferred tax assets based on the available evidence at the time the determination is made. For the tax year ended December 31, 2017, the Company believes that it is more likely than not that it will not realize the benefits of its deferred tax assets, and thus a valuation allowance should be recorded against its net deferred tax assets.


The Company will be electing to be treated as a REIT for the tax year beginning January 1, 2017 and ending December 31, 2017 and believes that it has been organized and has operated during 2017 in such a manner to meet the qualifications to be treated as a REIT for federal and state income tax purposes.  During 2016, the Company was subject to U.S. federal and state income taxes and filed income tax returns as a C corporation.  As such, the Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company uses a two-step approach to recognize and measure uncertain tax positions.  The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolutions of related appeals or litigation processes, if any.  The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement.  The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus, the Company has not recorded any uncertain tax positions as of December 31, 2017.

A full valuation allowance for deferred tax assets was provided since the Company believes that it is more likely than not that it will not realize the benefits of its deferred tax assets. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets will more likely than not be realized. The Company would generally report any change in the valuation allowance through its income statement in the period in which such changes in circumstances occur.

As a REIT, the Company will generally not be subject to corporate level federal income taxes on earnings distributed to our stockholders, and therefore may not realize deferred tax assets arising during the Company's pre-2017 periods before the Company became a REIT.  The Company intends to distribute at least 100% of its taxable income annually and intends to do so for the tax year ending December 31, 2017 and future periods. The Company owns and rents real estate in various states and municipalities within the United States, and, as a result, the Company or one or more of its subsidiaries may have income or other tax return filing requirements, and may be subject to income or franchise taxes, in state and municipal jurisdictions.

The Company has a net deferred tax asset of $1.6 million which is subject to a full valuation allowance and thus is not recorded on the Company's balance sheet. The deferred tax asset is primarily made up of net operating losses and capitalized acquisition costs which are deducted for book but capitalized for tax purposes. If the Company makes a REIT election, the net operating losses will not be available to offset future income; however, they may be used to offset any built-in gains. Due to the valuation allowance, the Company's effective rate is approximately 0%.

REIT Compliance

The Company intends to qualify as a REIT for federal income tax purposes for the year ended December 31, 2017, and therefore the Company generally will not be subject to federal income tax on income that the Company distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, including and after the taxable year in which the Company initially elects to be taxed as a REIT, the Company will be subject to federal income tax on the taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is denied. Failing to qualify as a REIT could materially and adversely affect the Company's net income.

To qualify as a REIT for tax purposes, the Company will be required to distribute at least 90% of its REIT taxable income to the Company's stockholders. The Company must also meet certain asset and income tests, as well as other requirements. The Company will monitor the business and transactions that may potentially impact the Company's REIT status. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on the taxable income at regular corporate rates.

Off-Balance Sheet Arrangements

Series A Preferred Stock

Each investor in the Series A received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 30 shares of the Company's common stock if the Company's common stock is listed on a national securities exchange.  The warrants' exercise price is equal to 110% of the volume weighted average closing stock price of the Company's common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of December 31, 2017, there were detachable warrants that may be exercised for 84,510 shares of the Company's common stock after the 90th day following the occurrence of a listing event.  These potential warrants will expire five years from the 90th day after the occurrence of a listing event.  If all the potential warrants outstanding at December 31, 2017 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to us would be approximately $2.1 million and we would as a result issue an additional 84,510 shares of common stock.

For additional information see "— Liquidity and Capital Resources" and "—Preferred Series A Stock" above and Note R — Preferred Stock and Warrants in in Part II, Item 8 Financial Statements of this Annual Report for a discussion of the various related party transactions, agreements and fees.

Series 1 Preferred Stock

Each investor in the Series 1 received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 35 shares of the Company's common stock if the Company's common stock is listed on a national securities exchange.  The warrants' exercise price is equal to 110% of the volume weighted average closing stock price of the Company's common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of December 31, 2017, there were detachable warrants that may be exercised for approximately 1,035,755 shares of the Company's common stock after the 90th day following the occurrence of a listing event.  These potential warrants will expire five years from the 90th day after the occurrence of a listing event.  If all the potential warrants outstanding at December 31, 2017 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, we would issue an additional 1,035,755 shares of common stock and would receive gross proceeds of approximately $25.9 million.

For additional information see "— Liquidity and Capital Resources" and "—Preferred Series A Stock" above and Note R — Preferred Stock and Warrants in in Part II, Item 8 Financial Statements of this Annual Report for a discussion of the various related party transactions, agreements and fees.

Critical Accounting Policies

The Company's accounting policies have been established in conformity with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management's judgment or interpretation of the facts and circumstances relating to various transactions is different, it is possible that different accounting policies will be applied, or different amounts of assets, liabilities, revenues and expenses will be recorded, resulting in a different presentation of the financial statements or different amounts reported in the financial statements.

Additionally, other companies may utilize different estimates that may impact comparability of the Company's results of operations to those of companies in similar businesses. Below is a discussion of the accounting policies that management considers to be most critical once the Company commences significant operations. These policies require complex judgment in their application or estimates about matters that are inherently uncertain.

Real Estate Investments

Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five years for fixtures and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.

The Company is required to make subjective assessments as to the useful lives of the Company's properties for purposes of determining the amount of depreciation to record on an annual basis with respect to the Company's investments in real estate. These assessments have a direct impact on the Company's net income because if the Company were to shorten the expected useful lives of the Company's investments in real estate, the Company would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

The Company is required to present the operations related to properties that have been sold, or properties that are intended to be sold, as discontinued operations in the statement of operations for all periods presented. Properties that are intended to be sold are to be designated as "held for sale" on the balance sheet.

Purchase Price Allocation

The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third parties or on the Company's analysis of comparable properties in the Company's portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable.

The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by the Company in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized.  Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease. The capitalized below-market lease values will be amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, the Company initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.

The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on the Company's evaluation of the specific characteristics of each tenant's lease and the Company's overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of the Company's existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant's credit quality and expectations of lease renewals, among other factors.

The value of in-place leases is amortized to expense over the initial term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event, does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.

In making estimates of fair values for purposes of allocating purchase price, the Company will utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company will also consider information obtained about each property as a result of the pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.

Deferred Costs

Deferred costs may consist of deferred financing costs, deferred offering costs and deferred leasing costs. Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These costs are amortized over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Contractual Obligations

As of December 31, 2017, our contractual obligations consisted of the mortgage notes secured by our acquired properties and the Revolving Credit Facilities:

Contractual Obligations
 
Total
   
Less than 1 year
   
1-3 years
   
3-5 years
   
More than 5 years
 
Long-term debt obligations
 
$
125,666,000
   
$
1,925,000
   
$
8,160,000
   
$
4,964,000
   
$
110,617,000
 
Lines of credit:
   
--
     
--
     
--
     
--
     
--
 
Interest
   
--
     
--
     
--
     
--
     
--
 
Principal
   
22,757,000
     
22,757,000
     
--
     
--
     
--
 
Total
 
$
148,423,000
   
$
24,682,000
   
$
8,160,000
   
$
4,964,000
   
$
110,617,000
 

Contractual obligations table amount does not reflect the unamortized loan issuance costs of approximately $1.9 million for notes payable and approximately $0.5 million for the line of credit as of December 31, 2017.


Subsequent Events

See Note S — Subsequent Events in in Part II, Item 8 Financial Statements of this Annual Report for a discussion of the various subsequent events.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for a smaller reporting company.

ITEM 8. FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

 
Page
 
 
   
FINANCIAL STATEMENTS
 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
The Parking REIT, Inc.
 
Opinion on the Financial Statements
 
We have audited the accompanying consolidated balance sheets of The Parking REIT, Inc. and Subsidiaries (the "Company") as of December 31, 2017 and 2016, and the related consolidated statements of operations, changes in equity, and cash flows for each of the two years in the period ended December 31, 2017, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
 
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 

/s/ RBSM LLP

We have served as the Company's auditors since 2015.
 
New York, New York
June 21, 2018


THE PARKING REIT, INC.
CONSOLIDATED BALANCE SHEETS

   
As of December 31
 
   
2017
   
2016
 
ASSETS
 
Investments in real estate
           
Land and improvements
 
$