Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The following discussion of our financial condition and results of operations excludes the results of our discontinued operations unless otherwise noted. See Note 8, "Discontinued operations and environmental incident" in the accompanying Consolidated Financial Statements for further discussion of these operations.



1.
Overview:

Critical accounting policies:

The Securities and Exchange Commission ("SEC") has issued guidance for the disclosure of "critical accounting policies." The SEC defines such policies as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The Company's significant accounting policies are described in Note 2 in the accompanying Consolidated Financial Statements. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. Management believes that the Company's revenue recognition policy for long-term leases with scheduled rent increases meets the SEC definition of "critical."

The Company's long-term leases (land and billboard) have original terms of 30 to 149 years. The Company follows GAAP in accounting for its leases by recognizing rental income on the straight-line basis over the term of the leases. Where the straight-line income exceeds the actual contractual payments ("Excess"), the Company evaluates the collectability of the entire stream of remaining lease payments on a lease-by-lease basis. If the remaining lease payments are not deemed to be probable of collection, in accordance with GAAP, lease revenue is recorded at the lower of straight-line rental income or the contractual amount paid.

The number of years remaining on the Company's leases range from twenty-seven (27) years to one hundred-thirty-one (131) years with total rents yet to be collected from tenants (without regard to CPI and appraisal adjustments) under the lease ranging from $19.5 million to $363.4 million. Given the length of the remaining lease term and the magnitude of the amount yet to be collected, along with the consideration of other factors, the Company has concluded that the remaining stream of lease payments is not probable of collection and as such, reports lease revenue based on the contractual amount paid.

2.

Liquidity and capital resources:

Historically, the Company generates adequate liquidity to fund its operations.

Cash and cash commitments:

The Company had cash and cash equivalents of $1,476,000 and $1,443,000 at December 31, 2022 and 2021, respectively, inclusive of a money market account totaling $1,273,000 and $1,355,000 in each of the aforementioned years. The Company and its subsidiary each maintain checking accounts and one money market account in a financial institution which is insured by the Federal Deposit Insurance Corporation to a maximum of $250,000. The Company periodically evaluates the financial stability of the financial institutions at which the Company's funds are held.

Under the terms of each applicable long-term land lease, the contractual adjustments for the last two years were:



 Parcel     Monthly    Effective Date of Increase            Type of
 Number     Increase                                       Adjustment
Parcel 9     $1,575          April 1, 2021          Base ground rent increase
Parcel 7A    $2,539          April 1, 2022          Base ground rent increase

The City of Providence ("City") conducted a City-wide property revaluation for 2022. This revaluation increased the assessed value of the Company's parcels that are available for lease by 26.5%, resulting in an annual property tax increase of $139,000 that was to be borne entirely by the Company. The Company's appeal of the assessed values for certain of its parcels was successful and resulted in a reduction of the assessed value to an amount less than the 2021 assessed value and in an annual property tax reduction in 2022 taxes as originally assessed of $165,000, which amount was recorded in the fourth quarter of 2022.

Through February 17, 2023 all tenants have paid their monthly rent in accordance with their lease agreements except for Metropark, the tenant that operates public parking on the Company's undeveloped parcels other than Parcel 6C. The Company continues to report revenue from Metropark on a cash basis as the move by many companies to a hybrid workplace model has reduced demand for parking spaces. Metropark has not fully paid the rent per the original lease agreement executed in 2017 since April 2020. On July 31, 2020, Metropark and the Company entered into an agreement for


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revenue sharing at various percentages until parking revenues received by Metropark equal or exceed $70,000 per month whereupon Metropark would be obligated to resume regularly scheduled rental payments under the 2017 lease. Upon resumption of regularly scheduled rent payments, Metropark and the Company will share fifty (50) percent of the monthly revenue in excess of $70,000 until the arrearage has been paid in full. If prior to payment in full of the arrearage one or more of the lots is removed from the Metropark lease for development, the amount of the then unpaid arrearage in the ratio of the number of parking spaces on the removed lot to the total parking spaces on all lots prior to such lot's removal shall be deemed paid in full. At December 31, 2022 the total rent arrearage is $1,031,000 and has been fully reserved. The Company does not know when or if Metropark's operations will return to pre-pandemic levels.

The Company expects that revenue from Metropark will continue to be recognized on a cash basis for a significant portion of 2023.

The Terminal Sale Agreement and related documentation provides that the Company is required to secure an approved remediation plan and to remediate contamination caused by a leak in 1994 from a storage tank at the Terminal. At December 31, 2022, the Company's accrual for the remaining cost of remediation was $406,000 of which $132,000 is expected to be expended in 2023. The Terminal Sale Agreement also contained a cost sharing provision for a breasting dolphin whereby any construction costs in excess of the contract cost of construction would be borne equally by Sprague and the Company subject to certain limitations, including, in the Company's opinion, a 20% cap on the increase from the initial estimate subject to the sharing arrangement. In November 2019, Sprague asserted that it was owed $427,000 and the Company asserted that its obligation under the Agreement could not exceed $104,000. Mediation efforts were unsuccessful and in July 2021, Sprague commenced an action against the Company in the Rhode Island Superior Court (Superior Court) seeking monetary damages of $427,000, plus interest and attorney's fees. In December 2022, the Superior Court denied Sprague's Motion for Summary Judgment filed in September 2022 and granted in part and denied in part the Company's Cross Motion for Summary Judgment also filed in September 2022. The Company anticipates that the matter will go to trial late in 2023 or early in 2024. The Company intends to vigorously defend against the claims being asserted by Sprague. See Note 8, "Discontinued operations and environmental incident" in the accompanying Consolidated Financial Statements.

In 2022, the Company declared and paid dividends of $1,848,000 or $0.28 per share.

The declaration of future dividends will depend on future earnings and financial performance.



3.
Results of operations:

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021:

Leasing revenue increased $265,000 from 2021 due to a full year of operations associated with Parcel 20 ($273,000), an increase in cash collections from Metropark ($161,000) and an increase in rent (contractual and contingent) from tenants ($168,000) offset by a decrease in revenue associated with the termination of the Parcel 20 lease ($337,000).

Operating expenses increased $76,000 due principally to costs associated with the operations of Steeple Street Building ($91,000) and offset by a decrease in property taxes resulting from the appeal ($15,000).

General and administrative expense decreased $83,000 due principally to a decrease in professional fees ($74,000) and a net decrease in various other expenses ($9,000).

For the years ended December 31, 2022 and 2021, the Company's effective income tax rate from continuing operations is 27% and 28%, respectively.


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