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-eight (28) years to one hundred-thirty-two (132) years with total rent yet to be collected (without regard to CPI and appraisal adjustments) under the lease by tenant ranging from $19.7 million to $363.8 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:

At December 31, 2021, the Company had cash and cash equivalents of $1,443,000. At December 31, 2021 and 2020, cash equivalents consist of a money market account totaling $1,355,000 and $1,555,000, respectively. The Company and its subsidiary each maintain checking account 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 rent adjustments for the last two year were:



 Parcel     Monthly    Effective Date of Increase            Type of
 Number     Increase                                       Adjustment
Parcel 20    $2,800           June 1, 2020          Base ground rent increase
Parcel 9     $1,575          April 1, 2021          Base ground rent increase

On July 30, 2020, the Company received notice that the tenant of Parcel 6C exercised its right to terminate the ground lease effective August 29, 2020. On the termination date, the annual rent on Parcel 6C was $220,000 and the annual real estate taxes paid by the tenant were $311,000. Upon termination, the real estate taxes became an obligation of the Company effective with the taxes assessed as on December 31, 2020. The Company believed that the assessed value of Parcel 6C as agreed to by the City of Providence ("City") and the former tenant of Parcel 6C pursuant to a Tax Stabilization Agreement ("TSA") was much greater than similar parcels in the Capital Center area. Negotiations with the City to reduce the


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assessment were initially unsuccessful. Accordingly, the Company filed a complaint against the Providence Tax Assessor in Rhode Island Superior Court asserting that the Company was not a party to the TSA and that the assessed value should be determined based on the value of other Parcels in the Capital Center Area. On December 20, 2021, the Company and the City entered into a consent judgment that dissolved the TSA upon the termination of the ground lease between the Company and the tenant and provided that the taxes assessed on December 31, 2020 would be based on the assessed value as determined by the firm engaged by the City, Vision Government Solutions, Inc. The adjusted assessed value is significantly less than the assessed value provided in the TSA and results in an annual property tax expense of $160,000.

Through February 23, 2022 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 coronavirus (COVID-19) pandemic has had a significant adverse impact on Metropark. The Company does not know when or if Metropark's operations will return to normal. Metropark has not fully paid the rent since April 2020. The total rent arrearage as of December 31, 2021 is $766,000 and has been fully reserved by the Company. On July 31, 2020, Metropark and the Company entered into an agreement for 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 its lease. Upon resumption of regularly scheduled rent payments, Metropark and the Company will share fifty (50) percent of the 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. Until resumption of regularly scheduled rent payments, the Company will continue to recognize Metropark's rent on a cash basis.

The Company expects that revenue from Metropark will continue to be recognized on a cash basis for a significant portion of 2022.

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, 2021, the Company's accrual for the remaining cost of remediation was $358,000 of which $87,000 is expected to be incurred in 2022. The Terminal Sale Agreement also contained a cost sharing provision for a breasting dolphin whereby any costs incurred in connection with the construction of the breasting dolphin in excess of the initial estimate of $1,040,000 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, the Company received a demand letter from Sprague asserting that it was owed $427,000, which amount represents 50% of the actual costs incurred ($1,894,008) in excess of $1,040,000. The Company asserts that its obligation cannot exceed $104,000. On June 17, 2021 the Company and Sprague met with a mediator to review Sprague's claim. Mediation was unsuccessful and on July 15, 2021, Sprague commenced an action against the Company in the Rhode Island Superior Court seeking monetary damages of $427,000, interest and attorney's fees. 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 2021, 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, 2021 Compared to Year Ended December 31, 2020:

Revenue, leasing increased $223,000 from 2020 due to the recognition of deferred revenue associated with the termination of the Parcel 20 lease ($293,000), rent from the tenants of Parcel 20 effective November 1, 2021 ($28,000) and by an increase in rent (contractual and contingent) from tenants ($95,000) offset by a decrease in rent associated with Metropark ($46,000) and the termination of the Parcel 6C lease ($147,000).

Operating expenses increased $279,000 due principally to: increased property tax expense resulting from the termination of the Parcel 6C lease ($107,000) and Parcel 20 lease ($134,000) and an increase in expenses principally related to the on-going operations of Steeple Street Building ($38,000).

General and administrative expense increased $111,000 due principally to an increase in legal fees associated with the Sprague breasting dolphin litigation and other legal matters ($137,000), a net increase in various other expenses ($27,000) offset by a decrease in accounting fees ($53,000).

For the years ended December 31, 2021 and 2020, the Company's effective income tax rate is 28% and 27%, respectively.


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