STRATEGIC REALTY TRUST, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The following discussion and analysis should be read in conjunction with our
accompanying consolidated financial statements and the notes thereto.


As used herein, the terms "we," "our," "us," and "Company" refer to Strategic
Realty Trust, Inc., and, as required by context, Strategic Realty Operating
Partnership, L.P., a Delaware limited partnership, which we refer to as our
"operating partnership" or "OP", and to their respective subsidiaries.
References to "shares" and "our common stock" refer to the shares of our common
stock.

Special Note Regarding Forward-Looking Statements


Certain statements included in this Quarterly Report on Form 10-Q 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 within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). These statements are only predictions. We
caution that forward-looking statements are not guarantees. Actual events or our
investments and results of operations could differ materially from those
expressed or implied in any 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. The following are some of the risks and uncertainties, although not
all of the risks and uncertainties, that could cause our actual results to
differ materially from those presented in our forward-looking statements:

•The potential adverse effect of the ongoing public health crisis of the novel
coronavirus disease (COVID-19) pandemic, or any future pandemic, epidemic or
outbreak of infectious disease, on the financial condition, results of
operations, cash flows and performance of the Company and its tenants, the real
estate market, in particular with respect to retail commercial properties and
the global economy and financial markets.

•Our executive officers and certain other key real estate professionals are also
officers, directors, managers, key professionals and/or holders of a direct or
indirect controlling interest in our advisor. As a result, they face conflicts
of interest, including conflicts created by our advisor's compensation
arrangements with us and conflicts in allocating time among us and other
programs and business activities.

•We are uncertain of our sources for funding our future capital needs. If we
cannot obtain debt or equity financing on acceptable terms, our ability to
continue to acquire real properties or other real estate-related assets, fund or
expand our operations and pay distributions to our stockholders will be
adversely affected.

•We depend on tenants for our revenue and, accordingly, our revenue is dependent
upon the success and economic viability of our tenants. Revenues from our
properties could decrease due to a reduction in tenants (caused by factors
including, but not limited to, tenant defaults, tenant insolvency, early
termination of tenant leases and non-renewal of existing tenant leases) and/or
lower rental rates, making it more difficult for us to meet our financial
obligations, including debt service and our ability to pay distributions to our
stockholders.

•All our assets are concentrated in one state and in urban retail properties,
any adverse economic, real estate or business conditions in this geographic area
or in the urban retail market could affect our operating results and our ability
to pay distributions to our stockholders.

•Our current and future investments in real estate and other real estate-related
investments may be affected by unfavorable real estate market and general
economic conditions, which could decrease the value of those assets and reduce
the investment return to our stockholders. Revenues from our properties could
decrease. Such events would make it more difficult for us to meet our debt
service obligations and limit our ability to pay distributions to our
stockholders.

•Certain of our debt obligations have variable interest rates with interest and
related payments that vary with the movement of LIBOR or other indices.
Increases in these indices could increase the amount of our debt payments and
limit our ability to pay distributions to our stockholders.
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All forward-looking statements should be read in light of the risks identified
in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December
31, 2021 (the "2021 Annual Report on Form 10-K"). 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
Quarterly Report on Form 10-Q, and the risk that actual results will differ
materially from the expectations expressed herein will increase with the passage
of time. Moreover, you should interpret many of the risks identified in this
Quarterly Report, as well as the risks set forth above, as being heightened as a
result of the ongoing and numerous adverse impacts of the COVID-19 pandemic.
Except as otherwise required by the federal securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements made
after the date of this Quarterly Report on Form 10-Q, whether as a result of new
information, future events, changed circumstances or any other reason. In light
of the significant uncertainties inherent in the forward-looking statements
included in this Quarterly Report on Form 10-Q, and the risks described in Part
I, Item 1A of the 2021 Annual Report on Form 10-K, the inclusion of such
forward-looking statements should not be regarded as a representation by us or
any other person that the objectives and plans set forth in this Quarterly
Report on Form 10-Q will be achieved.
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Overview


We are a Maryland corporation that was formed on September 18, 2008, to invest
in and manage a portfolio of income-producing retail properties, located in the
United States, real estate-owning entities and real estate-related assets,
including the investment in or origination of mortgage, mezzanine, bridge and
other loans related to commercial real estate. During the first quarter of 2016,
we also invested, through joint ventures, in two significant retail projects
under development, one of which was substantially completed during the year
ended December 31, 2020. We have elected to be taxed as a real estate investment
trust ("REIT") for federal income tax purposes, commencing with the taxable year
ended December 31, 2009, and we have operated and intend to continue to operate
in such a manner. We own substantially all of our assets and conduct our
operations through our operating partnership, of which we are the sole general
partner. We also own a majority of the outstanding limited partner interests in
the operating partnership.

Since our inception, our business has been managed by an external advisor. We do
not have direct employees and all management and administrative personnel
responsible for conducting our business are employed by our advisor. Currently
we are externally managed and advised by SRT Advisor, LLC, a Delaware limited
liability company (the "Advisor") pursuant to an advisory agreement with the
Advisor (the "Advisory Agreement") initially executed on August 10, 2013, and
subsequently renewed every year through 2022. The current term of the Advisory
Agreement terminates on August 9, 2022. The Advisor is an affiliate of PUR
Management LLC, which is an affiliate of L3 Capital, LLC. L3 Capital, LLC is a
real estate investment firm focused on institutional quality, value-add, prime
urban retail and mixed-use investment within first tier U.S. metropolitan
markets.

Impact of COVID-19


Since March 2020, COVID-19 and the efforts to contain its spread have
significantly impacted the global economy, the U.S. economy, the economies of
the local markets throughout California in which our properties are
predominately located, and the broader financial markets. Nearly every industry
has been impacted directly or indirectly, and the U.S. retail market has come
under severe pressure due to numerous factors, including preventative measures
taken by local, state and federal authorities to alleviate the public health
crisis such as mandatory business closures, quarantines, restrictions on travel
and shelter-in-place or stay-at-home orders. California, where all of our
properties are located instituted various measures that required closure of
retail businesses or limited the ability of our tenants to operate their
businesses. As of June 30, 2021, the state of California lifted COVID-19 related
restrictions. However, there remains uncertainty as to whether customers will
re-engage with retail tenants at pre-pandemic levels. As a result of the
containment measures instituted in response to the pandemic, some of our tenants
have been experiencing hardships, as they were unable to operate at full
capacity until the middle of June 2021.

We believe that the COVID-19 outbreak has and could continue to negatively
impact our financial condition and results of operations, including but not
limited to, declines in real estate rental revenues, the inability to sell
certain properties at a favorable price, and a decrease in construction and
leasing activity.

To mitigate the impact of COVID-19 on our operations and liquidity, we have
taken a number of proactive measures, which include the following:


•We are in constant communication with our tenants and have assisted tenants in
identifying local, state and federal resources that may be available to support
their businesses and employees during the pandemic, including stimulus funds
that may be available under the Coronavirus Aid, Relief, and Economic Security
Act of 2020.

•We believe we will be able to service our debts and pay for our ongoing general
and administrative expenses for the foreseeable future. As of March 31, 2022, we
have approximately $2.1 million in cash and cash equivalents. In addition, we
had approximately $0.5 million of restricted cash (funds held by the lenders for
property taxes, insurance, tenant improvements, leasing commissions, capital
expenditures, rollover reserves and other financing needs).

•On December 30, 2021, we obtained a $4.0 million unsecured loan (the "Unsecured
Loan") from PUR Holdings Lender, LLC, an affiliate of the Advisor. The Unsecured
Loan has a term of 12 months with an interest rate of 7.0% per annum,
compounding monthly with the ability to pay-off during the term of the loan. The
Unsecured Loan requires draw downs in increments of no less than approximately
$0.3 million. The Unsecured Loan will be due and payable upon the earlier of 12
months or the termination of the Advisory Agreement by us. On March 15, 2022, we
and PUR Holdings Lender, LLC, amended the loan agreement to allow for an
extension of the maturity date of the Unsecured Loan by six months, from
December 30, 2022 to June 30, 2023, if we provide PUR Holdings Lender, LLC, with
notice, pay an extension fee, and no event of default has occurred. The
Unsecured Loan is guaranteed by us. As of March 31, 2022, the Unsecured Loan had
an outstanding balance of approximately $2.4 million.
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•The SRT Loan is secured by six of our core urban properties in Los Angeles and
San Francisco. The SRT Loan does not have restrictive covenants and ongoing debt
coverage ratios that could trigger a default caused by tenants not paying rent
or seeking rent relief.

•As of March 31, 2022, we were in compliance with all the terms of the Wilshire
Construction Loan (as defined below), which was scheduled to mature on May 10,
2022, with options to extend for two additional twelve-month periods, subject to
certain conditions. The lender for the Wilshire Construction Loan has informed
us that the maturity date will be extended to September 22, 2022. Similarly, as
of March 31, 2022, we were in compliance with the Sunset & Gardner Loan (as
defined below), which matures on October 31, 2022.

•We are actively exploring options should cash flow from operations not
sufficiently improve, such as a sale of one or more assets that are not
generating positive cash flow.


•To further preserve cash and liquidity, we suspended our Amended and Restated
Share Redemption Program (the "SRP"), effective on May 21, 2020. The SRP will
remain suspended and no further redemptions will be made unless and until our
board of directors (the "Board") approves the resumption of the SRP. In
addition, on March 27, 2020, the board of directors suspended the payment of any
dividend for the quarter ending March 31, 2020, and will reconsider future
dividend payments on a quarter-by-quarter basis. Dividend payments were not
reinstated as of March 31, 2022.

Given the uncertainty of the COVID-19 pandemic's impact on our business, the
full extent of the financial impact cannot be reasonably estimated at this time.
There remains uncertainty with respect to the demand for retail space and the
success of our tenants given the potential change in consumer behavior as a
result of the COVID-19 pandemic.

Property Portfolio


As of March 31, 2022, our wholly-owned property portfolio included six retail
properties, excluding a land parcel, which we refer to as "our properties" or
"our portfolio," comprising an aggregate of approximately 27,000 square feet of
multi-tenant, commercial retail space located in one state. We purchased our
properties for an aggregate purchase price of approximately $35.3 million. As of
March 31, 2022 approximately 86% of our wholly-owned real estate investments
were leased (based on rentable square footage), with a weighted-average
remaining lease term of approximately 8.0 years. As of December 31, 2021,
approximately 86% of our portfolio was leased (based on rentable square footage
as of December 31, 2021), with a weighted-average remaining lease term of
approximately 6.3 years.


(dollars in thousands)                                                                                                Effective                                        Original
                                                                  Rentable Square              Percent                Rent (3)                       Date              Purchase
Property Name (1)                         Location                      Feet                 Leased (2)            (per Sq. Foot)                  Acquired              Price     Debt (4)

Wholly-owned Real Estate Investments

400 Grove Street                   San Francisco, CA                   2,000                         100  %       $        48.00                      6/14/2016       $  2,890          $  1,450
8 Octavia Street                   San Francisco, CA                   3,640                          47  %                63.41                      6/14/2016          2,740             1,500
Fulton Shops                       San Francisco, CA                   3,758                          50  %                61.20                      7/27/2016          4,595             2,200
450 Hayes                          San Francisco, CA                   3,724                         100  %                98.97                     12/22/2016          7,567             3,650
388 Fulton                         San Francisco, CA                   3,110                         100  %                72.28                       1/4/2017          4,195             2,300
Silver Lake                        Los Angeles, CA                    10,497                         100  %                84.15                      1/11/2017         13,300             6,900
                                                                      26,729                                                                                            35,287            18,000

Real Estate Investments owned through Joint Ventures
3032 Wilshire Property

             Santa Monica, CA                   12,208                          42  %                94.71                       3/8/2016         13,500            12,711
                                                                      38,937                                                                                          $ 48,787          $ 30,711

(1)List of properties does not include a residual parcel at Topaz Marketplace as
of March 31, 2022.

(2)Percentage is based on leased rentable square feet of each property as of
March 31, 2022.


(3)Effective rent per square foot is calculated by dividing the annualized March
31, 2022 contractual base rent by the total square feet occupied at the
property. The contractual base rent does not include other items such as tenant
concessions (e.g., free rent), percentage rent, and expense recoveries.
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(4) Debt represents the outstanding balance as of March 31, 2022, and excludes
reclassification of approximately $0.2 million deferred financing costs, net, as
a contra-liability. For more information on our financing, refer to Note 7.
"Notes Payable, Net" to our condensed consolidated financial statements included
in this Quarterly Report.

Properties Under Development

As of March 31, 2022, we had one property under development in Hollywood,
California
. This development project is still in the planning phase and
construction has not commenced.

Results of Operations

Comparison of the three months ended March 31, 2022, versus the three months
ended March 31, 2021.

The following table provides summary information about our results of operations
for the three months ended March 31, 2022 and 2021 (amounts in thousands):


                                                 Three Months Ended
                                                     March 31,
                                                  2022             2021     

$ Change % Change

  Rental revenue and reimbursements        $      734            $  715     

$ 19 2.7 %

  Operating and maintenance expenses              485               506     

(21) (4.2) %

  General and administrative expenses             437               410     

27 6.6 %

  Depreciation and amortization expenses          294               357           (63)       (17.6) %

  Interest expense                                320               313             7          2.2  %

  Net loss                                 $     (802)           $ (871)     $     69         (7.9) %

Our results of operations for the three months March 31, 2022, are not
necessarily indicative of those expected in future periods.

Revenue

The increase in revenue during the three months ended March 31, 2022, compared
to the same period in 2021, was primarily due to the expiration of rent
concessions provided to our tenants as a result of the COVID-19 pandemic.
Increase partially offset by the sale of Shops at Turkey Creek.

Operating and maintenance expenses


Operating and maintenance expenses decreased during the three months ended March
31, 2022, compared to the same periods in 2021, primarily due to lower bad debt
reserves and the of sale of Shops at Turkey Creek. Increase partially offset by
higher security and legal costs.

General and administrative expenses

General and administrative expenses increased during the three months ended
March 31, 2022, compared to the same period in 2021, primarily due to higher
audit and other professional fees.

Depreciation and amortization expenses

Depreciation and amortization expenses decreased during the three months ended
March 31, 2022, compared to the same periods in 2021, primarily due to the
impairment charge incurred during the year ended December 31, 2021 at the
Wilshire Property.

Interest expense

Interest expense increased during the three months ended March 31, 2022,
compared to the same period in 2021, primarily due to higher deferred loan fee
amortization and interest expense related to the Unsecured Loan.

Liquidity and Capital Resources


Since our inception, our principal demand for funds has been for the acquisition
of real estate, the payment of operating expenses and interest on our
outstanding indebtedness, the payment of distributions to our stockholders and
investments in unconsolidated joint ventures and development properties. Prior
to the termination of our initial public offering in February 2013 we used
offering proceeds to fund our acquisition activities and our other cash needs.
Currently we have used and expect to continue to use debt financing, net sales
proceeds and cash flow from operations to fund our cash needs.
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As of March 31, 2022, our cash and cash equivalents were approximately $2.1
million and we had $0.5 million of restricted cash (funds held by the lenders
for property taxes, insurance, tenant improvements, leasing commissions, capital
expenditures, rollover reserves and other financing needs).

Our aggregate borrowings, secured and unsecured, are reviewed by our board of
directors at least quarterly. Under our Articles of Amendment and Restatement,
as amended, which we refer to as our "charter," we are prohibited from borrowing
in excess of 300% of the value of our net assets. Net assets for purposes of
this calculation is defined to be our total assets (other than intangibles),
valued at cost prior to deducting depreciation, reserves for bad debts and other
non-cash reserves, less total liabilities. However, we may temporarily borrow in
excess of these amounts if such excess is approved by a majority of the
independent directors and disclosed to stockholders in our next quarterly
report, along with an explanation for such excess. As of March 31, 2022 and
December 31, 2021, our borrowings were approximately 125.7% and 120.2%,
respectively, of the carrying value of our net assets.

The following table summarizes, for the periods indicated, selected items in our
condensed consolidated statements of cash flows (amounts in thousands):

                                                              Three Months Ended
                                                                   March 31,
                                                            2022                 2021             $ Change
Net cash provided by (used in):
Operating activities                                  $     (824)            $    (679)         $     (145)
Investing activities                                        (510)                 (462)                (48)
Financing activities                                       1,502                     -               1,502

Net increase (decrease) in cash, cash equivalents and
restricted cash

                                       $      168            

$ (1,141)

Cash Flows from Operating Activities


The change in cash flows from operating activities was primarily due to lower
provisions for losses on tenant receivables and the payment of accounts payable
and accrued expenses related to repair work at the Silverlake Property and
building improvements at the Wilshire Property during the three months ended
March 31, 2022 as compared to the same period in 2021.

Cash Flows from Investing Activities


Cash flows used in investing activities during the three months ended March 31,
2022 and 2021, primarily consisted of $0.4 million of additional investment in
the Sunset and Gardner Joint Venture, respectively.

Cash Flows from Financing Activities


Cash flows provided by financing activities during the three months ended March
31, 2022, primarily consisted of proceeds of approximately $1.4 million from a
draw down on the Unsecured Loan from PUR Holdings Lender, LLC, an affiliate of
the Advisor. Additional cash provided by construction loan proceeds of
approximately $0.2 million.

Short-term Liquidity and Capital Resources


Our principal short-term demand for funds is for the payment of operating
expenses and the payment on our outstanding indebtedness. To date, our cash
needs for operations have been funded by cash provided by property operations,
the sales of properties, debt refinancing, and the sale of shares of our common
stock. We may fund our short-term operating cash needs from operations, from the
sales of properties and from debt.

On December 30, 2021, in order to fund our short-term liquidity needs we
obtained a $4.0 million Unsecured Loan from PUR Holdings Lender, LLC, an
affiliate of the Advisor. The Unsecured Loan has a term of 12 months with an
interest rate of 7.0% per annum, compounding monthly with the ability to pay-off
during the term of the loan. The Unsecured Loan requires draw downs in
increments of no less than approximately $0.3 million. The Unsecured Loan will
be due and payable upon the earlier of 12 months or the termination of the
Advisory Agreement by us. On March 15, 2022, we and PUR Holdings Lender, LLC,
amended the loan agreement to allow for an extension of the maturity date of the
Unsecured Loan by six months, from December 30, 2022 to June 30, 2023, if we
provide PUR Holdings Lender, LLC, with notice, pay an extension fee, and no
event of default has occurred. The Unsecured Loan is guaranteed by us.
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Long-term Liquidity and Capital Resources


On a long-term basis, our principal demand for funds will be for real estate and
real estate-related investments, additional investment in our development
projects and the payment of acquisition-related expenses, operating expenses,
distributions to stockholders, future redemptions of shares and interest and
principal payments on current and future indebtedness. Generally, we intend to
meet cash needs for items other than acquisitions and acquisition-related
expenses from our cash flow from operations, debt and sales of properties. On a
long-term basis, we expect that substantially all cash generated from operations
will be used to pay distributions to our stockholders after satisfying our
operating expenses including interest and principal payments. We may consider
future public offerings or private placements of equity. Refer to Note 7. "Notes
Payable, Net" to our condensed consolidated financial statements included in
this Quarterly Report on Form 10-Q for additional information on the maturity
dates and terms of our outstanding indebtedness.

Our ability to access capital on favorable terms as well as to use cash from
operations to continue to meet our liquidity needs could be affected by the
effects of the COVID-19 pandemic. The full impact of the COVID-19 pandemic on
our rental revenue and, as a result, future cash from operations cannot be
determined at present.

We believe that our cash on hand, along with other potential aforementioned
sources of liquidity that we may be able to obtain, will be sufficient to fund
our working capital needs and debt obligations for at least the next twelve
months and beyond. However, this forward-looking statement is subject to a
number of uncertainties, including with respect to the duration of the COVID-19
pandemic, and there can be no guarantee that we will be successful with our
plan. Moreover, over the long term, if our cash flow from operations does not
increase from current levels, we may have to address a liquidity deficiency. We
are actively exploring options should cash flow from operations not sufficiently
improve, such as a sale of one or more assets that are not generating positive
cash flow or the sale of equity to an institutional investor.

Recent Financing Transactions

Multi-Property Secured Financing

On December 24, 2019, we entered into a Loan Agreement (the “SRT Loan
Agreement”) with PFP Holding Company, LLC (the “SRT Lender”) for a non-recourse
secured loan (the “SRT Loan”).


The SRT Loan is secured by first deeds of trust on our five San Francisco assets
(Fulton Shops, 8 Octavia, 400 Grove, 450 Hayes and 388 Fulton Street) as well as
our Silverlake Collection located in Los Angeles. The SRT Loan matures on
January 9, 2023. We have an option to extend the term of the loan for two
additional twelve-month periods, subject to the satisfaction of certain
covenants and conditions contained in the SRT Loan Agreement. We have the right
to prepay the SRT Loan in whole at any time or in part from time to time,
subject to the payment of yield maintenance payments if such prepayment occurs
in the first 18 months of the loan term, calculated through the 18th monthly
payment date, as well as certain expenses, costs or liabilities potentially
incurred by the SRT Lender as a result of the prepayment and subject to certain
other conditions contained in the loan documents. Individual properties may be
released from the SRT Loan collateral in connection with bona fide third-party
sales, subject to compliance with certain covenants and conditions contained in
the SRT Loan Agreement. Any prepayment or repayment on or before the first 12
months of the loan term in connection with a bona fide third-party sale of a
property securing the SRT Loan shall only require the payment of yield
maintenance payments calculated through the 12th monthly payment date.

As of March 31, 2022, the SRT Loan had a principal balance of approximately
$18.0 million. The SRT Loan is a floating LIBOR rate loan which bears interest
at 30-day LIBOR (with a floor of 1.50%) plus 2.80%. The default rate is equal to
5% above the rate that otherwise would be in effect. Monthly payments are
interest-only with the entire principal balance and all outstanding interest due
at maturity.

Pursuant to the SRT Loan, we must comply with certain matters contained in the
loan documents including but not limited to, (i) requirements to deliver audited
and unaudited financial statements, SEC filings, tax returns, pro forma budgets,
and quarterly compliance certificates, and (ii) minimum limits on our liquidity
and tangible net worth. The SRT Loan contains customary covenants, including,
without limitation, covenants with respect to maintenance of properties and
insurance, compliance with laws and environmental matters, covenants limiting or
prohibiting the creation of liens, and transactions with affiliates.

In connection with the SRT Loan, we executed customary non-recourse carveout and
environmental guaranties, together with limited additional assurances with
regard to the condominium structures of the San Francisco assets.

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Loans Secured by Properties


On May 7, 2019, we refinanced and repaid our financing with Lone Oak Fund, LLC
with a new construction loan from ReadyCap Commercial, LLC (the "Lender") (the
"Wilshire Construction Loan"). As of March 31, 2022, the Wilshire Construction
Loan had a principal balance of approximately $12.7 million, with future funding
available up to a total of approximately $13.9 million, and bears an interest
rate of 1-month LIBOR (with a floor of 2.467%) plus an interest margin of 4.25%
per annum, payable monthly. The Wilshire Construction Loan was scheduled to
mature on May 10, 2022, with options to extend for two additional twelve-month
periods, subject to certain conditions as stated in the loan agreement. The
lender has informed us that the maturity date will be extended to September 22,
2022. The Wilshire Construction Loan is secured by a first Deed of Trust on the
Wilshire Property. We executed a guaranty that guaranties that the loan interest
reserve amounts are kept in compliance with the terms of the loan agreement. The
Lender also required that a principal in the upstream owner of our joint venture
partner in the Wilshire Joint Venture (the "Guarantor"), guarantees performance
of borrower's obligations under the loan agreement with respect to the
completion of capital improvements to the property. We executed an Indemnity
Agreement in favor of the Guarantor against liability under that completion
guaranty except to the extent caused by gross negligence or willful misconduct,
as well as for liabilities incurred under the Environmental Indemnity Agreement
executed by the Guarantor in favor of the Lender. We used working capital funds
of approximately $3.1 million to repay the difference between the Wilshire
Construction Loan initial advance and the prior loan, to pay transaction costs,
as well as to fund certain required interest and construction reserves.

Loans Secured by Properties Under Development


On October 29, 2018, we entered into a loan agreement with Lone Oak Fund, LLC
(the "Sunset & Gardner Loan"). The Sunset & Gardner Loan has a principal balance
of approximately $8.7 million, and had an interest rate of 6.9% per annum. The
original Sunset & Gardner Loan agreement matured on October 31, 2019. We
extended the Sunset & Gardner Loan for an additional twelve-month period under
the same terms, with an interest rate of 6.5% per annum. On July 31, 2020, we
extended the Sunset & Gardner Loan for an additional twelve-month period under
the same terms, with an interest rate of 7.3% per annum. On July 21, 2021, we
extended the Sunset & Gardner Loan for an additional twelve-month period under
the same terms, with an interest rate of 7.9% per annum. The new maturity date
is October 31, 2022. The Sunset & Gardner Loan is secured by a first Deed of
Trust on the Sunset & Gardner Property.

Loan with Affiliate


On December 30, 2021, we obtained a $4.0 million unsecured loan (the "Unsecured
Loan") from PUR Holdings Lender, LLC, an affiliate of the Advisor. The Unsecured
Loan has a term of 12 months with an interest rate of 7.0% per annum,
compounding monthly with the ability to pay-off during the term of the loan. The
Unsecured Loan requires draw downs in increments of no less than approximately
$0.3 million. The Unsecured Loan will be due and payable upon the earlier of 12
months or the termination of the Advisory Agreement by us. The Unsecured Loan is
guaranteed by us. On March 15, 2022, we and PUR Holdings Lender, LLC, amended
the loan agreement to allow for an extension of the maturity date of the
Unsecured Loan by six months, from December 30, 2022 to June 30, 2023, if we
provide PUR Holdings Lender, LLC, with notice, pay an extension fee, and no
event of default has occurred. As of March 31, 2022 the Unsecured Loan had an
outstanding balance of approximately $2.4 million.

Guidelines on Total Operating Expenses


We reimburse our Advisor for some expenses paid or incurred by our Advisor in
connection with the services provided to us, except that we will not reimburse
our Advisor for any amount by which our total operating expenses at the end of
the four preceding fiscal quarters exceed the greater of (1) 2% of our average
invested assets, as defined in our charter; and (2) 25% of our net income, as
defined in our charter, or the "2%/25% Guidelines" unless a majority of our
independent directors determines that such excess expenses are justified based
on unusual and non-recurring factors. For the three months ended March 31, 2022
and 2021, our total operating expenses did not exceed the 2%/25% Guidelines.

Our Advisory Agreement provides that the Advisor shall not be required to
reimburse to us any operating expenses incurred during a given period that
exceed the applicable limit on "Total Operating Expenses" (as defined in the
Advisory Agreement) to the extent that such excess operating expenses are
incurred as a result of certain unusual and non-recurring factors approved by
our board of directors, including some related to the execution of our
investment strategy as directed by our board of directors.
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Inflation


The majority of our leases at our properties contain inflation protection
provisions applicable to reimbursement billings for common area maintenance
charges, real estate tax and insurance reimbursements on a per square foot
basis, or in some cases, annual reimbursement of operating expenses above a
certain per square foot allowance. We expect to include similar provisions in
our future tenant leases designed to protect us from the impact of inflation.
Due to the generally long-term nature of these leases, annual rent increases, as
well as rents received from acquired leases, may not be sufficient to cover
inflation and rent may be below market rates.

REIT Compliance


To qualify as a REIT for tax purposes, we are required to annually distribute at
least 90% of our REIT taxable income, subject to certain adjustments, to our
stockholders. We must also meet certain asset and income tests, as well as other
requirements. If we fail to qualify as a REIT in any taxable year, we will be
subject to federal income tax (including any applicable alternative minimum tax)
on our taxable income at regular corporate rates and generally will not be
permitted to qualify for treatment as a REIT for federal income tax purposes for
the four taxable years following the year during which our REIT qualification is
lost unless the IRS grants us relief under certain statutory provisions. Such an
event could materially adversely affect our net income and net cash available
for distribution to our stockholders.

Quarterly Distributions


As set forth above, in order to qualify as a REIT, we are required to distribute
at least 90% of our annual REIT taxable income, subject to certain adjustments,
to our stockholders. Our board of directors will continue to evaluate the amount
of future quarterly distributions based on our operational cash needs.

Some or all of our distributions have been paid, and in the future may continue
to be paid, from sources other than cash flows from operations.


In light of the COVID-19 pandemic, its impact on the economy and the related
future uncertainty, on March 27, 2020, our board of directors determined to
suspend the payment of any dividend for the quarters ending March 31, 2020, and
to reconsider future dividend payments on a quarter by quarter basis. Dividend
payments were not reinstated as of March 31, 2022.

Funds From Operations


Funds from operations ("FFO") is a supplemental non-GAAP financial measure of a
real estate company's operating performance. The National Association of Real
Estate Investment Trusts, or "NAREIT", an industry trade group, has promulgated
this supplemental performance measure and defines FFO as net income, computed in
accordance with GAAP, plus real estate related depreciation and amortization and
excluding extraordinary items and gains and losses on the sale of real estate,
and after adjustments for unconsolidated joint ventures (adjustments for
unconsolidated partnerships and joint ventures are calculated to reflect FFO.)
It is important to note that not only is FFO not equivalent to our net income or
loss as determined under GAAP, it also does not represent cash flows from
operating activities in accordance with GAAP. FFO should not be considered an
alternative to net income as an indication of our performance, nor is FFO
necessarily indicative of cash flow as a measure of liquidity or our ability to
fund cash needs, including the payment of distributions.

We consider FFO to be a meaningful, additional measure of operating performance
and one that is an appropriate supplemental disclosure for an equity REIT due to
its widespread acceptance and use within the REIT and analyst communities.
Comparison of our presentation of FFO to similarly titled measures for other
REITs may not necessarily be meaningful due to possible differences in the
application of the NAREIT definition used by such REITs.
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Our calculation of FFO attributable to common shares and Common Units and the
reconciliation of net income (loss) to FFO is as follows (amounts in thousands,
except shares and per share amounts):

                                                                           Three Months Ended
                                                                                March 31,
FFO                                                                                  2022                  2021
Net loss                                                                        $       (802)         $       (871)
Adjustments:

Depreciation of real estate                                                              250                   310
Amortization of in-place leases and leasing costs                                         44                    47

FFO attributable to common shares and Common Units (1)                      

$ (508) $ (514)


FFO per share and Common Unit (1)                                           

$ (0.05) $ (0.05)


Weighted average common shares and units outstanding (1)                          10,957,289            10,957,204


(1)Our common units have the right to convert a unit into common stock for a
one-to-one conversion. Therefore, we are including the related non-controlling
interest income/loss attributable to common units in the computation of FFO and
including the common units together with weighted average shares outstanding for
the computation of FFO per share and common unit.

Related Party Transactions and Agreements


We are currently party to the Advisory Agreement, pursuant to which the Advisor
manages our business in exchange for specified fees paid for services related to
the investment of funds in real estate and real estate-related investments,
management of our investments and for other services. Refer to Note 11. "Related
Party Transactions" to our condensed consolidated financial statements included
in this Quarterly Report on Form 10-Q for a discussion of the Advisory Agreement
and other related party transactions, agreements and fees.

Critical Accounting Policies and Estimates


Our interim unaudited condensed consolidated financial statements have been
prepared in accordance with GAAP and in conjunction with the rules and
regulations of the SEC. The preparation of our financial statements requires
significant management judgments, assumptions and estimates about matters that
are inherently uncertain. These judgments affect the reported amounts of assets
and liabilities and our disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenue and
expenses during the reporting periods. With different estimates or assumptions,
materially different amounts could be reported in our financial statements.
Additionally, other companies may utilize different estimates that may impact
the comparability of our results of operations to those of companies in similar
businesses. A discussion of additional accounting policies that management
considers critical in that they involve significant management judgments,
assumptions and estimates is included in our 2021 Annual Report on Form 10-K.

Subsequent Events

We evaluate subsequent events up until the date the condensed consolidated
financial statements are issued.

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