10-Q: Hubilu Venture Reports Q3 Loss Amid Rising Costs

Hubilu Venture Corporation reported a significant net loss for the nine months ended September 30, 2025, driven by increased operating expenses and interest costs, despite acquiring new properties.

Summary

• Hubilu Venture Corporation, a real estate consulting and asset management company specializing in student housing and corporate income properties in Los Angeles, reported its financial results for the three and nine months ended September 30, 2025.
• For the nine months ended September 30, 2025, the company incurred a net loss of $450,373, a substantial decline from a net income of $3,785 in the same period of 2024.
• Rental revenue decreased by 5% to $1,588,731 for the nine months ended September 30, 2025, compared to $1,666,452 in the prior year, attributed to decreased rental rates and occupancies.
• Total operating expenses increased by 26% to $954,249 for the nine months ended September 30, 2025, up from $756,548 in 2024, primarily due to higher property management costs, property taxes, repairs, maintenance, and depreciation.
• Interest expense surged by 33% to $1,084,202 for the nine months ended September 30, 2025, compared to $828,461 in the prior year.
• The company acquired two new properties in Q3 2025, located at 417 W 52nd Place ($525,000) and 1460 Exposition Blvd. ($520,000), bringing its total properties under management to thirty-five.
• As of September 30, 2025, the company had an accumulated deficit of $2,757,513 and negative working capital of $2,194,095, raising substantial doubt about its ability to continue as a going concern.
• Cash on hand increased to $107,252 as of September 30, 2025, from $9,799 at December 31, 2024, largely due to financing activities.

Sentiment

Score: 3

Explanation: The company faces significant financial challenges, including a substantial net loss, declining rental revenue, and a going concern warning. While cash on hand improved and new properties were acquired, these positives are overshadowed by increased expenses, high interest costs, and material weaknesses in internal controls. The need for additional capital and the uncertainty of achieving profitability contribute to a negative sentiment.

Positives

• Cash on hand significantly increased to $107,252 as of September 30, 2025, from $9,799 at December 31, 2024.
• The company continued to expand its real estate portfolio, acquiring two new properties in Q3 2025, bringing the total to 35 properties under management.
• Working capital deficit improved from $(2,582,595) at December 31, 2024, to $(2,194,095) at September 30, 2025.
• Salaries and benefits expenses decreased by 54% for the three months ended September 30, 2025, and by 27% for the nine months ended September 30, 2025, due to decreased compensation paid to the vice president.

Negatives

• The company reported a net loss of $450,373 for the nine months ended September 30, 2025, a significant deterioration from a net income of $3,785 in the prior year.
• Rental revenue decreased by 5% for the nine months ended September 30, 2025, due to lower rental rates and occupancies.
• Net operating income decreased by $275,423 for the nine months ended September 30, 2025, compared to the prior year.
• Interest expense increased substantially by $255,741 for the nine months ended September 30, 2025, reflecting higher debt levels and potentially higher interest rates.
• General and administrative expenses increased by 68% for the nine months ended September 30, 2025, primarily due to higher property management costs.
• Property tax expense increased by 37% for the nine months ended September 30, 2025, due to the acquisition of additional properties.
• Repairs and maintenance expense increased by 40% for the nine months ended September 30, 2025, due to greater repairs on certain properties.
• The company incurred a $26,716 loss on early extinguishment of debt during the nine months ended September 30, 2025.

Risks

• The company has incurred recurring losses from operations, resulting in an accumulated deficit of $2,757,513 and negative working capital of $2,194,095, which raises substantial doubt about its ability to continue as a going concern.
• Cash on hand of $107,252 as of September 30, 2025, may not be sufficient to sustain operations for the next twelve months.
• The ability to acquire new properties and increase revenues is largely dependent on the success in raising additional capital, with no assurance of achieving these objectives.
• Material weaknesses in internal controls were identified, including inadequate segregation of duties due to limited personnel, failure to identify multiple journal entries, and lack of a formal control process for related party transactions.
• The company's accounting staff lacks sufficient technical accounting knowledge relating to income taxes and complex US GAAP matters.
• Projections of internal control effectiveness are subject to the risk that controls may become inadequate due to changing conditions or deteriorating compliance.

Future Outlook

Management is actively working to increase occupancy rates to boost revenues and is seeking additional sources of capital to fund short-term operations. They believe these efforts will contribute to achieving profitability. The company also plans to implement additional qualified personnel and modify financial controls by the end of the 2025 fiscal year to address identified material weaknesses.

Management Comments

• Management is actively working to increase occupancy rates to increase revenues.
• The company is currently seeking additional sources of capital to fund short term operations.
• Management believes these factors will contribute to achieving profitability.
• The ability to acquire new properties and increase revenues is largely dependent on our success in raising additional capital.
• We plan to implement the appointment of additional qualified personnel to address inadequate segregation of duties and implement modifications to our financial controls to address such inadequacies, by the end of our 2025 fiscal year as resources allow.

Industry Context

Hubilu Venture Corporation operates in the niche market of student housing and corporate income properties in the Los Angeles area, specifically targeting locations near the USC Campus and Metro/subway stations. This strategy aims to capitalize on high demand and increasing rents in these areas. The company's focus on acquiring multiple properties within a small radius suggests an attempt to leverage economies of scale and property management efficiencies, a common strategy in fragmented real estate markets.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess the company's performance against global benchmarks. As a smaller reporting company, such detailed comparisons are not typically mandated.
• The company's strategy of acquiring properties near university campuses and transit hubs is a recognized approach in urban real estate for stable rental income, but the financial performance indicates challenges in execution or market conditions.

Corporate Governance

Legal Proceedings

• The company is not currently a party to any pending legal proceedings that are believed to have a material adverse effect on its financial condition, cash flows, or results of operations.

Related Party Transactions

• Jacaranda Investments, Inc. provided total advances of $474,271 as of September 30, 2025. These advances are unsecured and lack contractual interest rates or repayment terms, with imputed interest charges recorded.
• Esteban Coaloa, a preferred stock holder, loaned the company $655,000 via an All Inclusive Trust Deed on April 10, 2017, for the purchase of 2909 S. Catalina Street.
• Jacaranda3 Investments, Inc., owned by David Behrend (President), loaned the company $250,000 on March 7, 2025, for 1650 S. Rimpau Blvd, and $183,200 on June 1, 2025, for 1434 W. 22nd Street.

Stakeholder Impact

• Shareholders: Face significant risk due to recurring losses, a going concern warning, and potential dilution from future capital raises. The accumulated deficit has increased, and net loss per common share is negative.
• Creditors: The company's high total liabilities ($25,293,715) and negative working capital ($2,194,095) indicate elevated credit risk, especially given the going concern doubt.
• Employees: The decrease in salaries and benefits suggests potential impact on compensation or staffing levels, though the filing notes a decrease in compensation to the vice president.
• Customers (Tenants): Decreased rental rates and occupancies could indicate competitive pressures or market softening, potentially affecting tenant acquisition and retention strategies.

Next Steps

• Actively work to increase occupancy rates to boost revenues.
• Seek additional sources of capital to fund short-term operations.
• Implement the appointment of additional qualified personnel to address inadequate segregation of duties by the end of the 2025 fiscal year.
• Implement modifications to financial controls to address identified inadequacies by the end of the 2025 fiscal year.

Key Dates

Recommendation

The company's financial health has significantly deteriorated, marked by a substantial net loss, declining rental revenue, and an 85% drop in cash from operations. The explicit 'going concern' warning, coupled with a large accumulated deficit and negative working capital, indicates severe liquidity and solvency issues. Furthermore, identified material weaknesses in internal controls raise serious concerns about financial reporting reliability and corporate governance. While the company is acquiring properties, the increasing interest expense and inability to generate positive net income suggest that the current business model is unsustainable without significant intervention. The reliance on future capital raises in such a distressed state makes the investment highly speculative and risky, warranting a strong sell recommendation for any existing holdings.

Keywords

Real Estate, Student Housing, Los Angeles Properties, Property Management, SEC Filing, 10-Q, Financial Results, Quarterly Report, Debt Financing, Going Concern, Internal Controls, Rental Income, Property Acquisitions