ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland | 90-0413866 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
66 Bovet Road, Suite 100 San Mateo, California, 94402 | (650) 343-9300 |
(Address of Principal Executive Offices; Zip Code) | (Registrant’s Telephone Number, Including Area Code) |
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ý | Smaller reporting company | ý |
Emerging growth company | ¨ |
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Item 6. | ||
March 31, | December 31, | ||||||
2019 | 2018 | ||||||
ASSETS | |||||||
Investments in real estate | |||||||
Land | $ | 15,217 | $ | 15,217 | |||
Building and improvements | 31,697 | 31,697 | |||||
Tenant improvements | 1,524 | 1,479 | |||||
48,438 | 48,393 | ||||||
Accumulated depreciation | (4,216 | ) | (3,917 | ) | |||
Investments in real estate, net | 44,222 | 44,476 | |||||
Properties under development and development costs | |||||||
Land | 25,851 | 25,851 | |||||
Buildings | 566 | 570 | |||||
Development costs | 14,739 | 13,813 | |||||
Properties under development and development costs | 41,156 | 40,234 | |||||
Cash, cash equivalents and restricted cash | 3,254 | 3,347 | |||||
Prepaid expenses and other assets, net | 105 | 137 | |||||
Tenant receivables, net of $40 and $40 bad debt reserve | 1,122 | 1,084 | |||||
Investments in unconsolidated joint ventures | 2,719 | 2,701 | |||||
Lease intangibles, net | 1,810 | 1,890 | |||||
Deferred financing costs, net | 578 | 736 | |||||
TOTAL ASSETS (1) | $ | 94,966 | $ | 94,605 | |||
LIABILITIES AND EQUITY | |||||||
LIABILITIES | |||||||
Notes payable, net | $ | 36,063 | $ | 34,536 | |||
Accounts payable and accrued expenses | 1,310 | 1,224 | |||||
Amounts due to affiliates | 12 | 30 | |||||
Other liabilities | 258 | 375 | |||||
Below-market lease liabilities, net | 355 | 370 | |||||
TOTAL LIABILITIES (1) | 37,998 | 36,535 | |||||
Commitments and contingencies (Note 12) | |||||||
EQUITY | |||||||
Stockholders’ equity | |||||||
Preferred stock, $0.01 par value; 50,000,000 shares authorized, none issued and outstanding | — | — | |||||
Common stock, $0.01 par value; 400,000,000 shares authorized; 10,842,444 and 10,863,299 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 110 | 110 | |||||
Additional paid-in capital | 95,210 | 95,336 | |||||
Accumulated deficit | (39,501 | ) | (38,546 | ) | |||
Total stockholders’ equity | 55,819 | 56,900 | |||||
Non-controlling interests | 1,149 | 1,170 | |||||
TOTAL EQUITY | 56,968 | 58,070 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 94,966 | $ | 94,605 |
(1) | As of March 31, 2019 and December 31, 2018, includes approximately $41.6 million and $40.5 million, respectively, of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and approximately $17.5 million and $17.3 million, respectively, of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. Refer to Note 4. “Variable Interest Entities”. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Revenue: | |||||||
Rental and reimbursements | $ | 944 | $ | 1,753 | |||
Expense: | |||||||
Operating and maintenance | 270 | 650 | |||||
General and administrative | 399 | 447 | |||||
Depreciation and amortization | 377 | 358 | |||||
Transaction expense | — | 2 | |||||
Interest expense | 189 | 271 | |||||
1,235 | 1,728 | ||||||
Operating income (loss) | (291 | ) | 25 | ||||
Other loss: | |||||||
Equity in loss of unconsolidated joint ventures | (20 | ) | (2 | ) | |||
Net income (loss) | (311 | ) | 23 | ||||
Net income (loss) attributable to non-controlling interests | (7 | ) | 1 | ||||
Net income (loss) attributable to common stockholders | $ | (304 | ) | $ | 22 | ||
Earnings (loss) per common share - basic and diluted | $ | (0.03 | ) | $ | — | ||
Weighted average shares outstanding used to calculate earnings (loss) per common share - basic and diluted | 10,862,806 | 10,988,124 |
Three Months Ended March 31, 2019 and 2018 | ||||||||||||||||||||||||||
Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||
BALANCE — December 31, 2018 | 10,863,299 | $ | 110 | $ | 95,336 | $ | (38,546 | ) | $ | 56,900 | $ | 1,170 | $ | 58,070 | ||||||||||||
Redemption of common shares | (20,855 | ) | — | (126 | ) | — | (126 | ) | — | (126 | ) | |||||||||||||||
Quarterly distributions | — | — | — | (651 | ) | (651 | ) | (14 | ) | (665 | ) | |||||||||||||||
Net loss | — | — | — | (304 | ) | (304 | ) | (7 | ) | (311 | ) | |||||||||||||||
BALANCE — March 31, 2019 | 10,842,444 | $ | 110 | $ | 95,210 | $ | (39,501 | ) | $ | 55,819 | $ | 1,149 | $ | 56,968 | ||||||||||||
BALANCE — December 31, 2017 | 10,988,438 | $ | 111 | $ | 96,097 | $ | (44,741 | ) | $ | 51,467 | $ | 1,051 | $ | 52,518 | ||||||||||||
Redemption of common shares | (10,312 | ) | — | (65 | ) | — | (65 | ) | — | (65 | ) | |||||||||||||||
Quarterly distributions | — | — | — | (659 | ) | (659 | ) | (14 | ) | (673 | ) | |||||||||||||||
Cumulative effect from change in accounting principle | — | — | — | 668 | 668 | — | 668 | |||||||||||||||||||
Net income | — | — | — | 22 | 22 | 1 | 23 | |||||||||||||||||||
BALANCE — March 31, 2018 | 10,978,126 | $ | 111 | $ | 96,032 | $ | (44,710 | ) | $ | 51,433 | $ | 1,038 | $ | 52,471 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | (311 | ) | $ | 23 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Equity in loss of unconsolidated joint ventures | 20 | 2 | |||||
Straight-line rent | (27 | ) | (25 | ) | |||
Amortization of deferred costs | 158 | 145 | |||||
Depreciation and amortization | 377 | 358 | |||||
Amortization of above and below-market leases | (5 | ) | (15 | ) | |||
Bad debt expense | — | 30 | |||||
Changes in operating assets and liabilities: | |||||||
Prepaid expenses and other assets | 32 | (168 | ) | ||||
Tenant receivables | (11 | ) | 298 | ||||
Accounts payable and accrued expenses | (22 | ) | (267 | ) | |||
Amounts due to affiliates | (18 | ) | 1 | ||||
Other liabilities | (117 | ) | 24 | ||||
Net cash provided by operating activities | 76 | 406 | |||||
Cash flows from investing activities: | |||||||
Investment in properties under development and development costs | (724 | ) | (1,222 | ) | |||
Improvements, capital expenditures, and leasing costs | (53 | ) | (33 | ) | |||
Investments in unconsolidated joint ventures | (38 | ) | — | ||||
Distributions from unconsolidated joint ventures | — | 111 | |||||
Net cash used in investing activities | (815 | ) | (1,144 | ) | |||
Cash flows from financing activities: | |||||||
Redemption of common shares | (126 | ) | (65 | ) | |||
Quarterly distributions | (666 | ) | (673 | ) | |||
Proceeds from notes payable | 1,500 | 1,600 | |||||
Payment of loan fees from investments in consolidated variable interest entities | (62 | ) | (91 | ) | |||
Net cash provided by financing activities | 646 | 771 | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (93 | ) | 33 | ||||
Cash, cash equivalents and restricted cash – beginning of period | 3,347 | 3,902 | |||||
Cash, cash equivalents and restricted cash – end of period | $ | 3,254 | $ | 3,935 | |||
Supplemental disclosure of non-cash investing and financing activities and other cash flow information: | |||||||
Distributions declared but not paid | $ | 665 | $ | 673 | |||
Change in accrued liabilities capitalized to investment in development | 109 | (155 | ) | ||||
Change to accrued mortgage note payable interest capitalized to investment in development | — | 6 | |||||
Amortization of deferred loan fees capitalized to investment in development | 89 | 101 | |||||
Cumulative effect from change in accounting principle | — | 668 | |||||
Cash paid for interest, net of amounts capitalized | 57 | 111 |
Ownership Interest | Investment | |||||||||||||||
Joint Venture | Date of Investment | March 31, 2019 | December 31, 2018 | March 31, 2019 | December 31, 2018 | |||||||||||
SGO Retail Acquisitions Venture, LLC | 3/11/2015 | 19 | % | 19 | % | $ | 1,149 | $ | 1,128 | |||||||
SGO MN Retail Acquisitions Venture, LLC | 9/30/2015 | 10 | % | 10 | % | 1,570 | 1,573 | |||||||||
Total | $ | 2,719 | $ | 2,701 |
March 31, | December 31, | ||||||
2019 | 2018 | ||||||
ASSETS | |||||||
Properties under development and development costs: | |||||||
Land | $ | 25,851 | $ | 25,851 | |||
Buildings | 566 | 570 | |||||
Development costs | 14,739 | 13,813 | |||||
Properties under development and development costs | 41,156 | 40,234 | |||||
Cash, cash equivalents and restricted cash | 386 | 276 | |||||
Prepaid expenses and other assets, net | 6 | 9 | |||||
Lease intangibles, net | 4 | 4 | |||||
TOTAL ASSETS (1) | $ | 41,552 | $ | 40,523 | |||
LIABILITIES | |||||||
Notes payable, net (2) | $ | 17,193 | $ | 17,166 | |||
Accounts payable and accrued expenses | 241 | 132 | |||||
Amounts due to affiliates | 9 | 8 | |||||
Other liabilities | 9 | 9 | |||||
TOTAL LIABILITIES | $ | 17,452 | $ | 17,315 |
(1) | The assets of the Sunset & Gardner Joint Venture and Wilshire Joint Venture can be used only to settle obligations of the respective consolidated joint ventures. |
(2) | As of both, March 31, 2019 and December 31, 2018, includes reclassification of approximately $0.3 million of deferred financing costs, net, as a contra-liability. The creditors of the consolidated joint ventures do not have recourse to the general credit of the Company. The notes payable of the consolidated joint ventures are not guaranteed by the Company. |
Three Months Ended March 31, 2019 | |||
Lease income - operating leases | $ | 702 | |
Variable lease income (1) | 242 | ||
Rental and reimbursements income | $ | 944 |
(1) | Primarily includes tenant reimbursements for real estate taxes, insurance and common area maintenance. |
Remainder of 2019 | $ | 2,088 | |
2020 | 2,625 | ||
2021 | 2,365 | ||
2022 | 2,353 | ||
2023 | 2,316 | ||
Thereafter | 7,750 | ||
Total | $ | 19,497 |
Lease Intangibles | Below-Market Lease Liabilities | ||||||||||||||
March 31, 2019 | December 31, 2018 | March 31, 2019 | December 31, 2018 | ||||||||||||
Cost | $ | 3,038 | $ | 3,030 | $ | (526 | ) | $ | (526 | ) | |||||
Accumulated amortization | (1,228 | ) | (1,140 | ) | 171 | 156 | |||||||||
Total | $ | 1,810 | $ | 1,890 | $ | (355 | ) | $ | (370 | ) |
Lease Intangibles | Below-Market Lease Liabilities | ||||||||||||||
Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Amortization | $ | (89 | ) | $ | (83 | ) | $ | 16 | $ | 17 |
Remainder of 2019 | $ | 17,450 | |
2020 | 18,870 | ||
Total (1) | $ | 36,320 |
(1) | Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of $0.3 million deferred financing costs, net. |
• | Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; |
• | Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and |
• | Level 3: prices or valuation techniques where little or no market data is available for inputs that are significant to the fair value measurement. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Shares of common stock redeemed | 20,855 | 10,312 | |||||
Purchase price | $ | 126 | $ | 65 |
Distribution Record Date | Distribution Payable Date | Distribution Per Share of Common Stock / Common Unit | Total Common Stockholders Distribution | Total Common Unit Holders Distribution | Total Distribution | ||||||||||||||
First Quarter 2019 | 3/31/2019 | 4/30/2019 | $ | 0.06 | $ | 651 | $ | 14 | $ | 665 |
Distribution Record Date | Distribution Payable Date | Distribution Per Share of Common Stock / Common Unit | Total Common Stockholders Distribution | Total Common Unit Holders Distribution | Total Distribution | ||||||||||||||
First Quarter 2018 | 3/31/2018 | 4/30/2018 | $ | 0.06 | $ | 659 | $ | 14 | $ | 673 | |||||||||
Second Quarter 2018 | 6/30/2018 | 7/31/2018 | 0.06 | 658 | 14 | 672 | |||||||||||||
Third Quarter 2018 | 9/30/2018 | 10/31/2018 | 0.06 | 656 | 14 | 670 | |||||||||||||
Fourth Quarter 2018 | 12/31/2018 | 1/31/2019 | 0.06 | 652 | 14 | 666 | |||||||||||||
Total | $ | 2,625 | $ | 56 | $ | 2,681 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Numerator - basic and diluted | |||||||
Net income (loss) | $ | (311 | ) | $ | 23 | ||
Net income (loss) attributable to non-controlling interests | (7 | ) | 1 | ||||
Net income (loss) attributable to common shares | $ | (304 | ) | $ | 22 | ||
Denominator - basic and diluted | |||||||
Basic weighted average common shares | 10,862,806 | 10,988,124 | |||||
Common Units (1) | — | — | |||||
Diluted weighted average common shares | 10,862,806 | 10,988,124 | |||||
Earnings (loss) per common share - basic and diluted | |||||||
Net earnings (loss) attributable to common shares | $ | (0.03 | ) | $ | — |
(1) | The effect of 235,194 convertible Common Units pursuant to the redemption rights outlined in the Company’s registration statement on Form S-11 have not been included as they would not be dilutive. |
Incurred | Payable as of | |||||||||||||||
Three Months Ended March 31, | March 31, | December 31, | ||||||||||||||
Expensed | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Asset management fees | $ | 157 | $ | 191 | $ | — | $ | — | ||||||||
Reimbursement of operating expenses | 11 | 45 | — | — | ||||||||||||
Property management fees | 29 | 80 | 12 | 30 | ||||||||||||
Disposition fees | — | 2 | — | — | ||||||||||||
Total | $ | 197 | $ | 318 | $ | 12 | $ | 30 | ||||||||
Capitalized | ||||||||||||||||
Acquisition fees | $ | 7 | $ | 28 | $ | — | $ | — | ||||||||
Leasing fees | — | 1 | — | — | ||||||||||||
Legal leasing fees | — | 5 | — | — | ||||||||||||
Construction management fees | — | 1 | — | — | ||||||||||||
Financing coordination fees | — | 85 | — | — | ||||||||||||
Total | $ | 7 | $ | 120 | $ | — | $ | — |
• | 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. |
• | A significant portion of our assets are concentrated in one geographic area 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. |
(dollars in thousands) | Rentable Square Feet | Percent Leased (1) | Effective Rent (2) (per Sq. Foot) | Date Acquired | Original Purchase Price (3) (4) | |||||||||||||
Property Name | Location | |||||||||||||||||
Topaz Marketplace | Hesperia, CA | 43,199 | 100 | % | $ | 21.77 | 9/23/2011 | $ | 11,880 | |||||||||
Shops at Turkey Creek | Knoxville, TN | 16,324 | 61 | % | 29.59 | 3/12/2012 | 4,300 | |||||||||||
400 Grove Street | San Francisco, CA | 2,000 | 100 | % | 61.50 | 6/14/2016 | 2,890 | |||||||||||
8 Octavia Street | San Francisco, CA | 3,640 | 47 | % | 43.95 | 6/14/2016 | 2,740 | |||||||||||
Fulton Shops | San Francisco, CA | 3,758 | 100 | % | 56.78 | 7/27/2016 | 4,595 | |||||||||||
450 Hayes | San Francisco, CA | 3,724 | 100 | % | 93.08 | 12/22/2016 | 7,567 | |||||||||||
388 Fulton | San Francisco, CA | 3,110 | 100 | % | 66.15 | 1/4/2017 | 4,195 | |||||||||||
Silver Lake | Los Angeles, CA | 10,497 | 100 | % | 66.79 | 1/11/2017 | 13,300 | |||||||||||
86,252 | $ | 51,467 |
(1) | Percentage is based on leased rentable square feet of each property as of March 31, 2019. |
(2) | Effective rent per square foot is calculated by dividing the annualized March 2019 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. |
(3) | The purchase price for Shops at Turkey Creek includes the issuance of common units in our operating partnership to the sellers. |
(4) | The original purchase price for Topaz Marketplace was reduced to reflect a pad sale during the second quarter of 2018. |
Properties Under Development | Location | Estimated Completion Date | Estimated Expected Square Feet | Debt | |||||||
Wilshire Property | Santa Monica, CA | September, 2019 | 12,500 | $ | 8,750 | ||||||
Sunset & Gardner Property | Hollywood, CA | January, 2021 | 37,000 | 8,700 | |||||||
Total | 49,500 | $ | 17,450 |
Three Months Ended March 31, | ||||||||||||||
2019 | 2018 | $ Change | % Change | |||||||||||
Rental revenue and reimbursements | $ | 944 | $ | 1,753 | $ | (809 | ) | (46.1 | )% | |||||
Operating and maintenance expenses | 270 | 650 | (380 | ) | (58.5 | )% | ||||||||
General and administrative expenses | 399 | 447 | (48 | ) | (10.7 | )% | ||||||||
Depreciation and amortization expenses | 377 | 358 | 19 | 5.3 | % | |||||||||
Transaction expense | — | 2 | (2 | ) | (100.0 | )% | ||||||||
Interest expense | 189 | 271 | (82 | ) | (30.3 | )% | ||||||||
Operating income (loss) | (291 | ) | 25 | (316 | ) | (1,264.0 | )% | |||||||
Other loss, net | (20 | ) | (2 | ) | (18 | ) | 900.0 | % | ||||||
Net income (loss) | $ | (311 | ) | $ | 23 | $ | (334 | ) | (1,452.2 | )% |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | $ Change | |||||||||
Net cash provided by (used in): | |||||||||||
Operating activities | $ | 76 | $ | 406 | $ | (330 | ) | ||||
Investing activities | (815 | ) | (1,144 | ) | 329 | ||||||
Financing activities | 646 | 771 | (125 | ) | |||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (93 | ) | $ | 33 |
Distribution Record Date | Distribution Payable Date | Distribution Per Share of Common Stock / Common Unit | Total Common Stockholders Distribution | Total Common Unit Holders Distribution | Total Distribution | ||||||||||||||
First Quarter 2019 | 3/31/2019 | 4/30/2019 | $ | 0.06 | $ | 651 | $ | 14 | $ | 665 |
Distribution Record Date | Distribution Payable Date | Distribution Per Share of Common Stock / Common Unit | Total Common Stockholders Distribution | Total Common Unit Holders Distribution | Total Distribution | ||||||||||||||
First Quarter 2018 | 3/31/2018 | 4/30/2018 | $ | 0.06 | $ | 659 | $ | 14 | $ | 673 | |||||||||
Second Quarter 2018 | 6/30/2018 | 7/31/2018 | 0.06 | 658 | 14 | 672 | |||||||||||||
Third Quarter 2018 | 9/30/2018 | 10/31/2018 | 0.06 | 656 | 14 | 670 | |||||||||||||
Fourth Quarter 2018 | 12/31/2018 | 1/31/2019 | 0.06 | 652 | 14 | 666 | |||||||||||||
Total | $ | 2,625 | $ | 56 | $ | 2,681 |
Three Months Ended March 31, | ||||||||
FFO | 2019 | 2018 | ||||||
Net income (loss) | $ | (311 | ) | $ | 23 | |||
Adjustments: | ||||||||
Adjustment to reflect FFO of unconsolidated joint ventures | 78 | 76 | ||||||
Depreciation of real estate | 299 | 278 | ||||||
Amortization of in-place leases and leasing costs | 78 | 80 | ||||||
FFO attributable to common shares and Common Units (1) | $ | 144 | $ | 457 | ||||
FFO per share and Common Unit (1) | $ | 0.01 | $ | 0.04 | ||||
Weighted average common shares and units outstanding (1) | 11,098,000 | 11,223,318 |
(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. |
Period | Total Number of Shares Redeemed (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program | Approximate Dollar Value of Shares That May Yet be Redeemed Under the Program (2) | ||||||||||
January 2019 | — | $ | — | — | $ | 288,793 | ||||||||
February 2019 | — | — | — | 288,793 | ||||||||||
March 2019 | 20,855 | 6.04 | 20,855 | 162,831 | ||||||||||
Total | 20,855 | 20,855 |
(1) | All of our purchases of equity securities during the quarter ended March 31, 2019, were made pursuant to the SRP. |
(2) | We currently limit the dollar value and number of shares that may yet be repurchased under the SRP as described above. |
Strategic Realty Trust, Inc. | ||
By: | /s/ Andrew Batinovich | |
Andrew Batinovich | ||
Chief Executive Officer, Corporate Secretary and Director (Principal Executive Officer) | ||
By: | /s/ M. Bradley Kettmann | |
M. Bradley Kettmann | ||
Chief Financial Officer (Principal Financial Officer) |
Incorporated by Reference | ||||||||
Exhibit No. | Description | Filed Herewith | Form/File No. | Filing Date | ||||
Articles of Amendment and Restatement of TNP Strategic Retail Trust, Inc. | S-11/ No. 333-154975 | 7/10/2009 | ||||||
Articles of Amendment, dated August 22, 2013 | 8-K | 8/26/2013 | ||||||
Articles Supplementary, dated November 1, 2013 | 8-K | 11/4/2013 | ||||||
Articles Supplementary, dated January 22, 2014 | 8-K | 1/28/2014 | ||||||
Third Amended and Restated Bylaws of Strategic Realty Trust, Inc. | 8-K | 1/28/2014 | ||||||
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | |||||||
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | |||||||
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | |||||||
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | |||||||
Strategic Realty Trust, Inc. Amended and Restated Share Redemption Program Adopted August 26, 2016 | 8-K | 8/30/2016 | ||||||
101.INS | XBRL Instance Document | X | ||||||
101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | ||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X |
1. | I have reviewed this Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Andrew Batinovich | |
Andrew Batinovich | |
Chief Executive Officer, Corporate Secretary and Director | |
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ M. Bradley Kettmann | |
M. Bradley Kettmann | |
Chief Financial Officer | |
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Andrew Batinovich | |
Andrew Batinovich | |
Chief Executive Officer, Corporate Secretary and Director | |
(Principal Executive Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ M. Bradley Kettmann | |
M. Bradley Kettmann | |
Chief Financial Officer | |
(Principal Financial Officer) |
Document And Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 06, 2019 |
|
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | Strategic Realty Trust, Inc. | |
Entity Central Index Key | 0001446371 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 10,840,762 |
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Investments in real estate | ||||||||||
Land | $ 15,217 | $ 15,217 | ||||||||
Building and improvements | 31,697 | 31,697 | ||||||||
Tenant improvements | 1,524 | 1,479 | ||||||||
Investments in real estate, gross | 48,438 | 48,393 | ||||||||
Accumulated depreciation | (4,216) | (3,917) | ||||||||
Investments in real estate, net | 44,222 | 44,476 | ||||||||
Properties under development and development costs | ||||||||||
Land | 25,851 | 25,851 | ||||||||
Buildings | 566 | 570 | ||||||||
Development costs | 14,739 | 13,813 | ||||||||
Properties under development and development costs | 41,156 | 40,234 | ||||||||
Cash, cash equivalents and restricted cash | 3,254 | 3,347 | ||||||||
Prepaid expenses and other assets, net | 105 | 137 | ||||||||
Tenant receivables, net of $40 and $40 bad debt reserve | 1,122 | 1,084 | ||||||||
Investments in unconsolidated joint ventures | 2,719 | 2,701 | ||||||||
Lease intangibles, net | 1,810 | 1,890 | ||||||||
Deferred financing costs, net | 578 | 736 | ||||||||
TOTAL ASSETS (1) | 94,966 | [1] | 94,605 | |||||||
LIABILITIES | ||||||||||
Notes payable, net | 36,063 | 34,536 | ||||||||
Accounts payable and accrued expenses | 1,310 | 1,224 | ||||||||
Amounts due to affiliates | 12 | 30 | ||||||||
Other liabilities | 258 | 375 | ||||||||
Below-market lease liabilities, net | 355 | 370 | ||||||||
TOTAL LIABILITIES (1) | 37,998 | 36,535 | ||||||||
Commitments and contingencies (Note 12) | ||||||||||
EQUITY | ||||||||||
Preferred stock, $0.01 par value; 50,000,000 shares authorized, none issued and outstanding | 0 | 0 | ||||||||
Common stock, $0.01 par value; 400,000,000 shares authorized; 10,842,444 and 10,863,299 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 110 | 110 | ||||||||
Additional paid-in capital | 95,210 | 95,336 | ||||||||
Accumulated deficit | (39,501) | (38,546) | ||||||||
Total stockholders’ equity | 55,819 | 56,900 | ||||||||
Non-controlling interests | 1,149 | 1,170 | ||||||||
TOTAL EQUITY | 56,968 | 58,070 | ||||||||
TOTAL LIABILITIES AND EQUITY | 94,966 | 94,605 | ||||||||
Variable Interest Entity, Primary Beneficiary [Member] | ||||||||||
Properties under development and development costs | ||||||||||
Land | 25,851 | 25,851 | ||||||||
Buildings | 566 | 570 | ||||||||
Development costs | 14,739 | 13,813 | ||||||||
Properties under development and development costs | 41,156 | 40,234 | ||||||||
Cash, cash equivalents and restricted cash | 386 | 276 | ||||||||
Prepaid expenses and other assets, net | 6 | 9 | ||||||||
Lease intangibles, net | 4 | 4 | ||||||||
TOTAL ASSETS (1) | [2] | 41,552 | 40,523 | |||||||
LIABILITIES | ||||||||||
Notes payable, net | [3] | 17,193 | 17,166 | |||||||
Accounts payable and accrued expenses | 241 | 132 | ||||||||
Amounts due to affiliates | 9 | 8 | ||||||||
Other liabilities | 9 | 9 | ||||||||
TOTAL LIABILITIES (1) | $ 17,452 | $ 17,315 | ||||||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Preferred stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | |
Common stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 400,000,000 | 400,000,000 |
Common stock, shares issued | 10,842,444 | 10,863,299 |
Common stock, shares outstanding | 10,842,444 | 10,863,299 |
Bad debt reserve | $ 40 | $ 40 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Revenue: | ||
Rental and reimbursements | $ 944 | $ 1,753 |
Expense: | ||
Operating and maintenance | 270 | 650 |
General and administrative | 399 | 447 |
Depreciation and amortization | 377 | 358 |
Transaction expense | 0 | 2 |
Interest expense | 189 | 271 |
Total expense | 1,235 | 1,728 |
Operating income (loss) | (291) | 25 |
Other loss: | ||
Equity in loss of unconsolidated joint ventures | (20) | (2) |
Net income (loss) | (311) | 23 |
Net income (loss) attributable to non-controlling interests | (7) | 1 |
Net income (loss) attributable to common stockholders | $ (304) | $ 22 |
Earnings (loss) per common share - basic and diluted | $ (0.03) | $ 0.00 |
Weighted average shares outstanding used to calculate earnings (loss) per common share - basic and diluted | 10,862,806 | 10,988,124 |
CONDENSED CONSOLIDATED STATEMENT OF EQUITY - USD ($) |
Total |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Non-controlling Interests |
Total Stockholders' Equity |
---|---|---|---|---|---|---|
BALANCE at Dec. 31, 2017 | $ 52,518,000 | $ 111,000 | $ 96,097,000 | $ (44,741,000) | $ 1,051,000 | $ 51,467,000 |
BALANCE (in shares) at Dec. 31, 2017 | 10,988,438 | |||||
Redemption of common shares (in shares) | (10,312) | |||||
Redemption of common shares, value | (65,000) | $ 0 | (65,000) | 0 | 0 | (65,000) |
Stock Dividends, Shares | 0 | |||||
Quarterly distributions | (673,000) | $ 0 | 0 | (659,000) | (14,000) | (659,000) |
Cumulative effect from change in accounting principle | 668,000 | 0 | 0 | 668,000 | 0 | 668,000 |
Net income (loss) | 23,000 | 0 | 0 | 22,000 | 1,000 | 22,000 |
BALANCE at Mar. 31, 2018 | 52,471,000 | $ 111,000 | 96,032,000 | (44,710,000) | 1,038,000 | 51,433,000 |
BALANCE (in shares) at Mar. 31, 2018 | 10,978,126 | |||||
BALANCE at Dec. 31, 2018 | 58,070,000 | $ 110,000 | 95,336,000 | (38,546,000) | 1,170,000 | 56,900,000 |
BALANCE (in shares) at Dec. 31, 2018 | 10,863,299 | |||||
Redemption of common shares (in shares) | (20,855) | |||||
Redemption of common shares, value | (126,000) | $ 0 | (126,000) | 0 | 0 | (126,000) |
Stock Dividends, Shares | 0 | |||||
Quarterly distributions | (665,000) | $ 0 | 0 | (651,000) | (14,000) | (651,000) |
Cumulative effect from change in accounting principle | 0 | |||||
Net income (loss) | (311,000) | 0 | 0 | (304,000) | (7,000) | (304,000) |
BALANCE at Mar. 31, 2019 | $ 56,968,000 | $ 110,000 | $ 95,210,000 | $ (39,501,000) | $ 1,149,000 | $ 55,819,000 |
BALANCE (in shares) at Mar. 31, 2019 | 10,842,444 |
ORGANIZATION AND BUSINESS |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BUSINESS | ORGANIZATION AND BUSINESS Strategic Realty Trust, Inc. (the “Company”) was formed on September 18, 2008, as a Maryland corporation. Effective August 22, 2013, the Company changed its name from TNP Strategic Retail Trust, Inc. to Strategic Realty Trust, Inc. The Company believes it qualifies as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and has elected REIT status beginning with the taxable year ended December 31, 2009, the year in which the Company began material operations. Since the Company’s inception, its business has been managed by an external advisor. The Company has no direct employees and all management and administrative personnel responsible for conducting the Company’s business are employed by its advisor. Currently, the Company is 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 2018. The current term of the Advisory Agreement terminates on August 10, 2019. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties. Substantially all of the Company’s business is conducted through Strategic Realty Operating Partnership, L.P. (the “OP”). During the Company’s initial public offering (“Offering”), as the Company accepted subscriptions for shares of its common stock, it transferred substantially all of the net proceeds of the Offering to the OP as a capital contribution. The Company is the sole general partner of the OP. As of both March 31, 2019 and December 31, 2018, the Company owned 97.9% of the limited partnership interests in the OP. The Company’s principal demand for funds has been for the acquisition of real estate assets, the payment of operating expenses, interest on outstanding indebtedness, the payment of distributions to stockholders, and investments in unconsolidated joint ventures as well as development of properties. Substantially all of the proceeds of the completed Offering have been used to fund investments in real properties and other real estate-related assets, for payment of operating expenses, for payment of interest, for payment of various fees and expenses, such as acquisition fees and management fees, and for payment of distributions to stockholders. The Company’s available capital resources, cash and cash equivalents on hand and sources of liquidity are currently limited. The Company expects its future cash needs will be funded using cash from operations, future asset sales, debt financing and the proceeds to the Company from any sale of equity that it may conduct in the future. The Company invests in and manages 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. The Company has invested directly, and indirectly through joint ventures, in a portfolio of income-producing retail properties located throughout the United States, with a focus on grocery anchored multi-tenant retail centers, including neighborhood, community and lifestyle shopping centers, multi-tenant shopping centers and free standing single-tenant retail properties. During the first quarter of 2016, the Company invested, through joint ventures, in two significant retail projects under development. As of March 31, 2019, in addition to the development projects, the Company’s portfolio of properties was comprised of 8 properties, with approximately 86,000 rentable square feet of retail space located in two states. As of March 31, 2019, the rentable space at the Company’s retail properties was 90% leased. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Basis of Presentation The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. The interim unaudited condensed consolidated financial statements include the accounts of the Company, the OP, their direct and indirect owned subsidiaries, and the accounts of joint ventures that are determined to be variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions are eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s condensed consolidated financial position, results of operations and cash flows have been included. The Company evaluates the need to consolidate joint ventures and variable interest entities based on standards set forth in ASC Topic 810, Consolidation (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of March 31, 2019 and December 31, 2018, the Company held ownership interests in two unconsolidated joint ventures. Refer to Note 3. “Investments in Unconsolidated Joint Ventures” for additional information. As of March 31, 2019 and December 31, 2018, the Company held variable interests in two variable interest entities and consolidated those entities. Refer to Note 4. “Variable Interest Entities” for additional information. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents represent current bank accounts and other bank deposits free of encumbrances and having maturity dates of three months or less from the respective dates of deposit. The Company limits cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk in cash. Restricted cash includes escrow accounts for real property taxes, insurance, capital expenditures and tenant improvements, debt service and leasing costs held by lenders. As of both March 31, 2019 and December 31, 2018, the Company had no restricted cash to report on its condensed consolidated balance sheets. Recent Accounting Pronouncements The FASB issued the following ASUs which could have potential impact to the Company’s condensed consolidated financial statements: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures upon issuance of ASU 2018-13 and delayed adoption of the additional disclosures until the effective date. The adoption of ASU 2018-13 will not have an impact on the Company’s condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 requires a financial asset, measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Adjustments resulting from adopting ASU 2016-13 shall be applied through a cumulative-effect adjustment to retained earnings. The adoption of ASU 2016-13 will not have an impact on the Company’s condensed consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires entities to recognize lease assets and lease liabilities on the consolidated balance sheet and disclose key information about leasing arrangements. The guidance retains a distinction between finance leases and operating leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. The accounting applied by a lessor is largely unchanged from that applied under Accounting Standards Codification (“ASC”) 840. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using the modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply under ASC 842. The amendments in this guidance are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-02 (as amended by subsequent ASUs) effective January 1, 2019 utilizing the practical expedients described in ASU 2018-11. The Company has elected the lessor practical expedient to not separate common area maintenance and reimbursement of real estate taxes from the associated lease for all existing and new leases as the timing and pattern of payments and associated lease payments are the same. The timing of revenue recognition remains the same for the Company’s existing leases and new leases. Revenues related to the Company’s leases continue to be reported on one line in the presentation within the statement of income as a result of electing this lessor practical expedient. The Company continues to capitalize its direct leasing costs. These costs are incurred as a result of obtaining new leases, and renewing leases, and are paid to the Company’s Advisor. Additionally, the Company is not a lessee of real estate or equipment, as it is externally managed by its Advisor. |
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES | INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES The following table summarizes the Company’s investments in unconsolidated joint ventures as of March 31, 2019 and December 31, 2018 (amounts in thousands):
The Company’s off-balance sheet arrangements consist primarily of investments in the joint ventures as set forth in the table above. The joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint ventures’ debts are secured by a first mortgage, are without recourse to the joint venture members, and do not represent a liability of the members other than carve-out guarantees for certain matters such as environmental conditions, misuse of funds and material misrepresentations. As of March 31, 2019 and December 31, 2018, the Company has provided carve-out guarantees in connection with the two aforementioned unconsolidated joint ventures; in connection with those carve-out guarantees, the Company has certain rights of recovery from the joint venture members. |
VARIABLE INTEREST ENTITIES |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES The Company has variable interests in, and is the primary beneficiary of, variable interest entities (“VIEs”) through its investments in (i) the Sunset & Gardner Joint Venture (formerly known as Gelson’s Joint Venture) and (ii) the 3032 Wilshire Joint Venture (both defined below). The Company has consolidated the accounts of these variable interest entities. Through March 31, 2019, post the initial capital contributions, the Company made additional capital contributions totaling $5.6 million and $3.2 million, respectively, to the Sunset & Gardner Joint Venture and Wilshire Joint Venture. The following reflects the aggregate assets and liabilities of the Sunset & Gardner Joint Venture and the Wilshire Joint Venture, which were consolidated by the Company, as of March 31, 2019 and December 31, 2018 (amounts in thousands):
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LEASES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Leases, Future Minimum Payments Receivable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FUTURE MINIMUM RENTAL INCOME | Operating Leases The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of March 31, 2019, the leases at the Company’s properties have remaining terms (excluding options to extend) of up to 12.7 years with a weighted-average remaining term (excluding options to extend) of approximately 5.7 years. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying condensed consolidated balance sheets and totaled approximately $0.2 million as of both March 31, 2019 and December 31, 2018. The following table presents the components of income from real estate operations for the three months ended March 31, 2019 (amounts in thousands):
As of March 31, 2019, the future minimum rental income from the Company’s properties under non-cancelable operating leases was as follows (amounts in thousands):
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LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES |
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Finite-Lived Intangible Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUIRED LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES | LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES, NET As of March 31, 2019 and December 31, 2018, the Company’s acquired lease intangibles and below-market lease liabilities were as follows (amounts in thousands):
The Company’s amortization of lease intangibles and below-market lease liabilities for the three months ended March 31, 2019 and 2018, were as follows (amounts in thousands):
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NOTES PAYABLE, NET |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||
NOTES PAYABLE | NOTES PAYABLE, NET Line of Credit The Company’s line of credit is a revolving credit facility with an initial maximum aggregate commitment of $30.0 million. Effective February 15, 2017, the Company’s line of credit was refinanced to increase the maximum aggregate commitment under the credit facility from $30.0 million to $60.0 million. The credit facility matures on February 15, 2020. Each loan made pursuant to the credit facility will be either a LIBOR loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay the lender an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum, if the usage under the Company’s line of credit is less than or equal to 50% of the line of credit amount, and 0.20% per annum if the usage under the Company’s line of credit is greater than 50% of the line of credit amount. The Company is providing a guaranty of all of its obligations under the Company’s line of credit and all other loan documents. As of March 31, 2019 and December 31, 2018, the Company’s line of credit had an outstanding principal balance of $18.9 million and $17.4 million, respectively. As of March 31, 2019 and December 31, 2018, the Company’s line of credit was secured by Topaz Marketplace, 8 Octavia Street, 400 Grove Street, the Fulton Shops, 450 Hayes, 388 Fulton, Silver Lake, and The Shops at Turkey Creek. Mortgage Loans Secured by Properties Under Development On August 31, 2018, the Company refinanced and repaid its initial financing with a new loan from Lone Oak Fund LLC (the “Wilshire Loan”). The Wilshire Loan has a principal balance of approximately $8.8 million, and bears an interest rate of 6.9% per annum, payable monthly, commencing on September 1, 2018. The Wilshire Loan is scheduled to mature on September 30, 2019. The Company intends to explore all available financing options prior to the loan’s maturity date. The Wilshire Loan is secured by a first Deed of Trust on the property. On October 29, 2018, the Company refinanced and repaid its initial financing with a new loan from Lone Oak Fund LLC (the “Sunset & Gardner Loan”). The Sunset & Gardner Loan has a principal balance of approximately $8.7 million, and bears an interest rate of 6.9% per annum. The Sunset & Gardner Loan is scheduled to mature on October 31, 2019. The Company intends to explore all available financing options prior to the loan’s maturity date. The Sunset & Gardner Loan is secured by a first Deed of Trust on the property. The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of March 31, 2019 (amounts in thousands):
During the three months ended March 31, 2019 and 2018, the Company incurred and expensed approximately $0.2 million and $0.3 million, respectively, of interest costs, which included the amortization of deferred financing costs of approximately $0.2 million and $0.1 million, respectively, for each period. Also during the three months ended March 31, 2019 and 2018, the Company incurred and capitalized approximately $0.6 million and $0.9 million, respectively, of interest expense related to the variable interest entities, which included amortization of deferred financing costs of approximately $68 thousand and $0.1 million, respectively, for each period. As of both March 31, 2019 and December 31, 2018, interest expense payable was approximately $0.2 million, including an amount related to the variable interest entities of approximately $0.1 million, for each period. |
FAIR VALUE DISCLOSURES |
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Fair Value Disclosures [Abstract] | |||||||||||||
FAIR VALUE DISCLOSURES | FAIR VALUE DISCLOSURES Certain financial assets and liabilities are measured at fair value on a recurring basis. The Company determines fair value using the following hierarchy:
The Company believes the total carrying values reflected on its condensed consolidated balance sheets for cash, cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses, amounts due to affiliates, mortgage loans secured by properties under development, and the Company’s line of credit reasonably approximate their fair values due to their short-term nature. As part of the Company’s ongoing evaluation of the Company’s real estate portfolio, the Company estimates the fair value of its investments in real estate by obtaining outside independent appraisals on all of the operating properties. The appraised values are compared with the carrying values of its real estate portfolio to determine if there are indications of impairment. For both the three months ended March 31, 2019 and 2018, the Company did not record any impairment losses. |
EQUITY |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY | EQUITY Share Redemption Program On April 1, 2015, the Company’s board of directors approved the reinstatement of the share redemption program (which had been suspended since January 15, 2013) and adopted the SRP. Under the SRP, only shares submitted for repurchase in connection with the death or “qualifying disability” (as defined in the SRP) of a stockholder are eligible for repurchase by the Company. Under the current SRP, as amended to date, the number of shares to be redeemed is limited to the lesser of (i) a total of $3.5 million for redemptions sought upon a stockholder’s death and a total of $1.0 million for redemptions sought upon a stockholder’s qualifying disability, and (ii) 5% of the weighted-average number of shares of the Company’s common stock outstanding during the prior calendar year. Share repurchases pursuant to the SRP are made at the sole discretion of the Company. The Company reserves the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the SRP. The redemption price for shares that are redeemed is 100% of the Company’s most recent estimated net asset value per share as of the applicable redemption date. A redemption request must be made within one year after the stockholder’s death or disability. The SRP provides that any request to redeem less than $5 thousand worth of shares will be treated as a request to redeem all of the stockholder’s shares. If the Company cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If the Company does not completely satisfy a redemption request in one quarter, it will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. The Company may increase or decrease the amount of funding available for redemptions under the SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter. The following table summarizes share redemption activity during the three months ended March 31, 2019 and 2018 (amounts in thousands, except shares):
As stated above, cumulatively, through March 31, 2019, pursuant to the Original Share Redemption Program and the SRP, the Company has redeemed 758,109 shares sold in the Offering and/or its dividend reinvestment plan for $5.5 million. Quarterly Distributions In order to qualify as a REIT, the Company is required to distribute at least 90% of its annual REIT taxable income, subject to certain adjustments, to its stockholders. Some or all of the Company’s distributions have been paid, and in the future may continue to be paid from sources other than cash flows from operations. Under the terms of the amended credit facility, the Company may pay distributions to its investors so long as the total amount paid does not exceed 100% of the cumulative Adjusted Funds From Operations plus up to an additional $2.0 million of the Company’s net proceeds from property dispositions, as defined in the amended Company’s line of credit; provided, however, that the Company is not restricted from making any distributions necessary in order to maintain its status as a REIT. The Company’s board of directors evaluates the Company’s ability to make quarterly distributions based on the Company’s operational cash needs. The following tables set forth the quarterly distributions declared to the Company’s common stockholders and Common Unit holders for the three months ended March 31, 2019, and the year ended 2018 (amounts in thousands, except per share amounts):
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EARNINGS PER SHARE |
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EARNINGS PER SHARE | EARNINGS PER SHARE EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested shares, if dilutive, is computed using the treasury stock method. The Company applies the two-class method for determining EPS as its outstanding shares of non-vested restricted stock are considered participating securities as dividend payments are not forfeited even if the underlying award does not vest. There was no unvested stock as of March 31, 2019. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS. The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share for the three months ended March 31, 2019 and 2018 (amounts in thousands, except shares and per share amounts):
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RELATED PARTY TRANSACTIONS |
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RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS On August 7, 2013, the Company entered into the Advisory Agreement with the Advisor, which has been renewed for successive terms with a current expiration date of August 9, 2019. The Advisor manages the Company’s business as the Company’s external advisor pursuant to the Advisory Agreement. Pursuant to the Advisory Agreement, the Company will pay the Advisor specified fees for services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services. On March 11, 2015, the Company, through a wholly-owned subsidiary, entered into the Limited Liability Company Agreement of SGO Retail Acquisitions Venture, LLC to form the SGO Joint Venture. On September 30, 2015, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of SGO MN Retail Acquisitions Venture, LLC to form the SGO MN Joint Venture. For additional information regarding the SGO Joint Venture and the SGO MN Joint Venture, refer to Note 3. “Investments in Unconsolidated Joint Ventures.” Summary of Related Party Fees The following table sets forth the Advisor related party costs incurred and payable by the Company for the periods presented (amounts in thousands):
Acquisition Fees Under the Advisory Agreement, the Advisor is entitled to receive an acquisition fee equal to 1% of (1) the cost of each investment acquired directly by the Company or (2) the Company’s allocable cost of an investment acquired pursuant to a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments. An acquisition fee is capitalized by the Company when the related transaction does not qualify as a business combination; otherwise an acquisition fee is expensed. Financing Coordination Fees Under the Advisory Agreement, the Advisor is entitled to receive a financing coordination fee equal to 1% of the amount made available and/or outstanding under any (1) financing obtained or assumed, directly or indirectly, by the Company or the OP and used to acquire or originate investments, or (2) the refinancing of any financing obtained or assumed, directly or indirectly, by the Company or the OP. Asset Management Fees Under the Advisory Agreement, the Advisor is entitled to receive an asset management fee equal to a monthly fee of one-twelfth (1/12th) of 0.6% of the higher of (1) aggregate cost on a GAAP basis (before non-cash reserves and depreciation) of all investments the Company owns, including any debt attributable to such investments, or (2) the fair market value of the Company’s investments (before non-cash reserves and depreciation) if the board of directors has authorized the estimate of a fair market value of the Company’s investments; provided, however, that the asset management fee will not be less than $250,000 in the aggregate during any one calendar year. Reimbursement of Operating Expenses The Company reimburses the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company’s total operating expenses (including the asset management fee described below) at the end of the four preceding fiscal quarters exceeded the greater of (1) 2% of its average invested assets (as defined in the Company’s Articles of Amendment and Restatement (the “Charter”)); or (2) 25% of its net income (as defined in the Charter) determined without reduction for any additions to depreciation, bad debts or other similar non-cash expenses and excluding any gain from the sale of the Company’s assets for that period (the “2%/25% Guideline”). The Advisor is required to reimburse the Company quarterly for any amounts by which total operating expenses exceed the 2%/25% Guideline in the previous expense year that the independent directors do not approve. The Company will not reimburse the Advisor for any of its personnel costs or other overhead costs except for customary reimbursements for personnel costs under property management agreements entered into between the OP and the Advisor or its affiliates. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of the 2%/25% Guideline if a majority of the independent directors determine that such excess expenses are justified based on unusual and non-recurring factors. Pursuant to an amendment to the Advisory Agreement entered on August 2, 2018, the board of directors, including a majority of the independent directors identified certain unusual and non-recurring factors that would justify reimbursement to the Advisor of amounts in excess of the 2%/25% Guidelines and confirmed that the Advisor would not be obligated to reimburse the Company for these excess amounts to the extent the excess was caused by such factors. For the three months ended March 31, 2019 and 2018, the Company’s total operating expenses (as defined in the Charter) did not exceed the 2%/25% Guideline. Property Management Fees Under the property management agreements between the Company and Glenborough, Glenborough is entitled to receive property management fees calculated at a maximum of up to 4% of the properties’ gross revenue. The property management agreements with Glenborough have been renewed for an additional 12 months, beginning on August 10, 2018. Property management agreements with Glenborough automatically renew every year, unless expressly terminated. Disposition Fees Under the Advisory Agreement, if the Advisor or its affiliates provide a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of a real property, the Advisor or its affiliates may be paid disposition fees up to 50% of a customary and competitive real estate commission, but not to exceed 3% of the contract sales price of each property sold. Leasing Fees Under the property management agreements, Glenborough is entitled to receive a separate fee for the leases of new tenants, and for expansions, extensions and renewals of existing tenants in an amount not to exceed the fee customarily charged by similarly situated parties rendering similar services in the same geographic area for similar properties. Legal Leasing Fees Under the property management agreements, Glenborough is entitled to receive a market-based legal leasing fee for the negotiation and production of new leases, renewals, and amendments. Construction Management Fees In connection with the construction or repair in or about a property, the property manager is responsible for coordinating and facilitating the planning and the performance of all construction and is entitled to receive a fee equal to 5% of the hard costs for the project in question. Related-Party Fees Paid by the Unconsolidated Joint Ventures The unconsolidated joint ventures are party to certain agreements with Glenborough for services related to the investment of funds and management of the joint ventures’ investments, as well as the day-to-day management, operation and maintenance of the properties owned by the joint ventures. The joint ventures pay fees to Glenborough for these services. For the three months ended March 31, 2019 and 2018, the SGO Joint Venture recognized related party fees and reimbursements of $57 thousand and $46 thousand, respectively. For the three months ended March 31, 2019 and 2018, the SGO MN Joint Venture recognized related party fees and reimbursements of $0.1 million and $0.2 million, respectively.The related-party amounts consist of property management, asset management, leasing commission, legal leasing, construction management fees and salary reimbursements. |
COMMITMENTS AND CONTINGENCIES |
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Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Economic Dependency The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments, management of the daily operations of the Company’s real estate and real estate-related investment portfolio, and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services to the Company, the Company will be required to obtain such services from other sources. Environmental As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its condensed consolidated financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities. |
SUBSEQUENT EVENTS SUBSEQUENT EVENTS |
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Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | SUBSEQUENT EVENTS Loans Secured by Properties Under Development On May 7, 2019, the Company refinanced and repaid its current financing with a new construction loan from ReadyCap Commercial, LLC (the “Lender”) (the “Wilshire Construction Loan”). The Wilshire Construction Loan has a principal balance of approximately $7.1 million, with future funding availability up to a total of approximately $13.9 million, and bears an interest rate of 1-month LIBOR plus an interest margin of 4.25% per annum, payable monthly. The Wilshire Loan is 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 Wilshire Construction Loan is secured by, a first Deed of Trust on the property. The Company 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 William R. Rothacker (“Rothacker”), an upstream owner of the Company’s joint venture partner in the Wilshire Joint Venture, guarantees performance of all of borrower’s obligations under the loan agreement with respect to the completion of capital improvements to the property. The Company has executed an Indemnity Agreement in favor of Rothacker 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 Rothacker in favor of the Lender. The Company used working capital funds of approximately $3.1 million to repay the difference between the new construction loan initial advance and the prior loan, to pay transaction costs, as well as to fund certain required interest and construction reserves. Distributions On March 14, 2019, the Company’s board of directors declared a first quarter distribution in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of March 31, 2019. The distribution was paid on April 30, 2019. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. The interim unaudited condensed consolidated financial statements include the accounts of the Company, the OP, their direct and indirect owned subsidiaries, and the accounts of joint ventures that are determined to be variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions are eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s condensed consolidated financial position, results of operations and cash flows have been included. The Company evaluates the need to consolidate joint ventures and variable interest entities based on standards set forth in ASC Topic 810, Consolidation (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of March 31, 2019 and December 31, 2018, the Company held ownership interests in two unconsolidated joint ventures. Refer to Note 3. “Investments in Unconsolidated Joint Ventures” for additional information. As of March 31, 2019 and December 31, 2018, the Company held variable interests in two variable interest entities and consolidated those entities. Refer to Note 4. “Variable Interest Entities” for additional information. |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents represent current bank accounts and other bank deposits free of encumbrances and having maturity dates of three months or less from the respective dates of deposit. The Company limits cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk in cash. Restricted cash includes escrow accounts for real property taxes, insurance, capital expenditures and tenant improvements, debt service and leasing costs held by lenders. As of both March 31, 2019 and December 31, 2018, the Company had no restricted cash to report on its condensed consolidated balance sheets. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The FASB issued the following ASUs which could have potential impact to the Company’s condensed consolidated financial statements: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures upon issuance of ASU 2018-13 and delayed adoption of the additional disclosures until the effective date. The adoption of ASU 2018-13 will not have an impact on the Company’s condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 requires a financial asset, measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Adjustments resulting from adopting ASU 2016-13 shall be applied through a cumulative-effect adjustment to retained earnings. The adoption of ASU 2016-13 will not have an impact on the Company’s condensed consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires entities to recognize lease assets and lease liabilities on the consolidated balance sheet and disclose key information about leasing arrangements. The guidance retains a distinction between finance leases and operating leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. The accounting applied by a lessor is largely unchanged from that applied under Accounting Standards Codification (“ASC”) 840. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using the modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply under ASC 842. The amendments in this guidance are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-02 (as amended by subsequent ASUs) effective January 1, 2019 utilizing the practical expedients described in ASU 2018-11. The Company has elected the lessor practical expedient to not separate common area maintenance and reimbursement of real estate taxes from the associated lease for all existing and new leases as the timing and pattern of payments and associated lease payments are the same. The timing of revenue recognition remains the same for the Company’s existing leases and new leases. Revenues related to the Company’s leases continue to be reported on one line in the presentation within the statement of income as a result of electing this lessor practical expedient. The Company continues to capitalize its direct leasing costs. These costs are incurred as a result of obtaining new leases, and renewing leases, and are paid to the Company’s Advisor. Additionally, the Company is not a lessee of real estate or equipment, as it is externally managed by its Advisor. |
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Investment in Unconsolidated Joint Ventures | The following table summarizes the Company’s investments in unconsolidated joint ventures as of March 31, 2019 and December 31, 2018 (amounts in thousands):
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VARIABLE INTEREST ENTITIES (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Variable Interest Entities | The following reflects the aggregate assets and liabilities of the Sunset & Gardner Joint Venture and the Wilshire Joint Venture, which were consolidated by the Company, as of March 31, 2019 and December 31, 2018 (amounts in thousands):
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LEASES (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||
Operating Leased Assets [Line Items] | |||||||||||||||||||||||||||||||||||||
Operating Lease, Lease Income [Table Text Block] | The following table presents the components of income from real estate operations for the three months ended March 31, 2019 (amounts in thousands):
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Schedule of Future Minimum Rental Receivable For Operating Leases | As of March 31, 2019, the future minimum rental income from the Company’s properties under non-cancelable operating leases was as follows (amounts in thousands):
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LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES (Tables) |
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Finite-Lived Intangible Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired Lease Intangibles and Below Market Lease Liabilities | As of March 31, 2019 and December 31, 2018, the Company’s acquired lease intangibles and below-market lease liabilities were as follows (amounts in thousands):
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Amortization Of Finite Lease Intangibles and Below-Market Lease Liabilities | The Company’s amortization of lease intangibles and below-market lease liabilities for the three months ended March 31, 2019 and 2018, were as follows (amounts in thousands):
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NOTES PAYABLE, NET (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||
Schedule of maturities for notes payable outstanding | The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of March 31, 2019 (amounts in thousands):
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EQUITY (Tables) |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Redemption Program | The following table summarizes share redemption activity during the three months ended March 31, 2019 and 2018 (amounts in thousands, except shares):
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Distributions declared and paid | The following tables set forth the quarterly distributions declared to the Company’s common stockholders and Common Unit holders for the three months ended March 31, 2019, and the year ended 2018 (amounts in thousands, except per share amounts):
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EARNINGS PER SHARE (Tables) |
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Company's basic and diluted (loss)earnings per share | The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share for the three months ended March 31, 2019 and 2018 (amounts in thousands, except shares and per share amounts):
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RELATED PARTY TRANSACTIONS (Tables) |
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Related Party Transaction, Due from (to) Related Party [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | The following table sets forth the Advisor related party costs incurred and payable by the Company for the periods presented (amounts in thousands):
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ORGANIZATION AND BUSINESS (Details Textual) - ft² ft² in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
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Real Estate Properties [Line Items] | ||
Partnership Interest Ownership Percentage | 97.90% | 97.90% |
Number of Real Estate Properties | 8 | |
Net Rentable Area | 86 | |
Number of States in which Entity Operates | 2 | |
Percent of Real Estate Properties Leased | 90.00% |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash, Cash Equivalents and Restricted Cash (Details) |
Mar. 31, 2019
USD ($)
|
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Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract] | |
Restricted Cash | $ 0 |
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES Unconsolidated Joint Ventures Summary (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Schedule of Equity Method Investments [Line Items] | ||
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures | $ 2,719 | $ 2,701 |
SGO Joint Venture [Member] | ||
Schedule of Equity Method Investments [Line Items] | ||
Equity Method Investment, Ownership Percentage | 19.00% | 19.00% |
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures | $ 1,149 | $ 1,128 |
SGO MN Retail Acquisition Venture LLC [Member] | ||
Schedule of Equity Method Investments [Line Items] | ||
Equity Method Investment, Ownership Percentage | 10.00% | 10.00% |
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures | $ 1,570 | $ 1,573 |
VARIABLE INTEREST ENTITIES (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||||||||
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Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Payments to Acquire Interest in Joint Venture | $ 38 | $ 0 | ||||||||||
Properties under development and development costs: | ||||||||||||
Land | 25,851 | $ 25,851 | ||||||||||
Buildings | 566 | 570 | ||||||||||
Development costs | 14,739 | 13,813 | ||||||||||
Properties under development and development costs | 41,156 | 40,234 | ||||||||||
Cash, cash equivalents and restricted cash | 3,254 | $ 3,935 | 3,347 | $ 3,902 | ||||||||
Prepaid expenses and other assets, net | 105 | 137 | ||||||||||
Lease intangibles, net | 1,810 | 1,890 | ||||||||||
TOTAL ASSETS (1) | 94,966 | [1] | 94,605 | |||||||||
LIABILITIES | ||||||||||||
Notes payable, net | 36,063 | 34,536 | ||||||||||
Accounts payable and accrued expenses | 1,310 | 1,224 | ||||||||||
Amounts due to affiliates | 12 | 30 | ||||||||||
Other liabilities | 258 | 375 | ||||||||||
TOTAL LIABILITIES (1) | 37,998 | 36,535 | ||||||||||
Variable Interest Entity, Primary Beneficiary [Member] | ||||||||||||
Properties under development and development costs: | ||||||||||||
Land | 25,851 | 25,851 | ||||||||||
Buildings | 566 | 570 | ||||||||||
Development costs | 14,739 | 13,813 | ||||||||||
Properties under development and development costs | 41,156 | 40,234 | ||||||||||
Cash, cash equivalents and restricted cash | 386 | 276 | ||||||||||
Prepaid expenses and other assets, net | 6 | 9 | ||||||||||
Lease intangibles, net | 4 | 4 | ||||||||||
TOTAL ASSETS (1) | [2] | 41,552 | 40,523 | |||||||||
LIABILITIES | ||||||||||||
Notes payable, net | [3] | 17,193 | 17,166 | |||||||||
Accounts payable and accrued expenses | 241 | 132 | ||||||||||
Amounts due to affiliates | 9 | 8 | ||||||||||
Other liabilities | 9 | 9 | ||||||||||
TOTAL LIABILITIES (1) | 17,452 | 17,315 | ||||||||||
Deferred Costs | 300 | $ 300 | ||||||||||
Subsequent Contributuion [Member] | Sunset and Gardner Joint Venture [Member] | ||||||||||||
Payments to Acquire Interest in Joint Venture | 5,600 | |||||||||||
Subsequent Contributuion [Member] | Wilshire Joint Venture [Member] | ||||||||||||
Payments to Acquire Interest in Joint Venture | $ 3,200 | |||||||||||
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LEASES (Details Textual) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases [Abstract] | ||
Lessee, Operating Lease, Term of Contract | 12 years 8 months 5 days | |
Operating Leases Weighted Average Remaining Term | 5 years 8 months 12 days | |
Security Deposit | $ 0.2 | $ 0.2 |
LEASES LEASES (Income from Real Estate Operations) (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
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Leases [Abstract] | ||||
Lease income - operating leases | $ 702 | |||
Variable lease income (1) | [1] | 242 | ||
Rental and reimbursements income | $ 944 | $ 1,753 | ||
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LEASES (Future Minimum Lease Payments) (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Operating Leases, Future Minimum Payments Receivable [Abstract] | |
Remainder of 2019 | $ 2,088 |
2020 | 2,625 |
2021 | 2,365 |
2022 | 2,353 |
2023 | 2,316 |
Thereafter | 7,750 |
Total | $ 19,497 |
LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Finite-Lived Intangible Assets, Net [Abstract] | ||
Lease Intangibles, Cost | $ 3,038 | $ 3,030 |
Lease Intangibles, Accumulated amortization | (1,228) | (1,140) |
Lease intangibles, net | 1,810 | 1,890 |
Below - Market Lease Liabilities, Cost | (526) | (526) |
Below - Market Lease Liabilities, Accumulated amortization | 171 | 156 |
Below Market Lease, Net | $ (355) | $ (370) |
LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES LEASE INTANGIBLE AND BELOW-MARKET LEASE AMORTIZATION (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Amortization [Abstract] | ||
Amortization of Intangible Assets | $ (89) | $ (83) |
Amortization of Below-Market Lease Liabilities | $ 16 | $ 17 |
NOTES PAYABLE, NET (Line Of Credit) (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Feb. 15, 2017 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Secured Line of Credit [Member] | |||
Debt Instrument [Line Items] | |||
Long-term Debt, Gross | $ 18.9 | $ 17.4 | |
Secured Line of Credit [Member] | |||
Debt Instrument [Line Items] | |||
Line of Credit Facility, Current Borrowing Capacity | $ 60.0 | ||
Line of Credit Facility, Maximum Borrowing Capacity | $ 30.0 | ||
Line of Credit Facility, Expiration Date | Feb. 15, 2020 | ||
Usage Under Credit Facility | 50.00% | ||
Secured Line of Credit [Member] | Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.20% | ||
Secured Line of Credit [Member] | Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.30% |
NOTES PAYABLE, NET (Mortgage Loans Secured by Properties Under Development) (Details) $ in Millions |
3 Months Ended |
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Mar. 31, 2019
USD ($)
| |
Wilshire Joint Venture [Member] | |
Short-term Debt [Line Items] | |
Proceeds from Loan Originations | $ 8.8 |
Interest Rate | 6.90% |
Debt Instrument, Maturity Date | Sep. 30, 2019 |
Sunset and Gardner Joint Venture [Member] | |
Short-term Debt [Line Items] | |
Proceeds from Loan Originations | $ 8.7 |
Interest Rate | 6.90% |
Debt Instrument, Maturity Date | Oct. 31, 2019 |
NOTES PAYABLE, NET (Future Principal Payments) (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Schedule of maturities for notes payable outstanding | |
Remainder of 2019 | $ 17,450 |
2020 | 18,870 |
Total (1) | 36,320 |
Accounting Standard Update 2015-03 [Member] | |
Debt Instrument [Line Items] | |
Deferred Costs | $ 300 |
NOTES PAYABLE, NET NOTES PAYABLE, NET (Interest Expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Debt Instrument [Line Items] | |||
Interest Expense | $ 189 | $ 271 | |
Amortization of Debt Issuance Costs | 200 | 100 | |
Interest Payable | 200 | $ 200 | |
Variable Interest Entity, Primary Beneficiary [Member] | |||
Debt Instrument [Line Items] | |||
Amortization of Debt Issuance Costs | 68 | 100 | |
Interest Costs Capitalized | 600 | $ 900 | |
Interest Payable | $ 100 | $ 100 |
EQUITY (Share Redemption) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Class of Stock [Line Items] | ||
Stock Redeemed or Called During Period, Value | $ 126 | $ 65 |
Common Stock Outstanding Percentage | 5.00% | |
Redemption Price for Shares Percentage | 100.00% | |
Share Redemption Amount Minimum Limit | $ 5 | |
Common Stock | ||
Class of Stock [Line Items] | ||
Stock Redeemed or Called During Period, Shares | 20,855 | 10,312 |
Stock Redeemed or Called During Period, Value | $ 126 | $ 65 |
Cumulative stock redeemed to date, shares | 758,109 | |
Cumulative stock redeemed to date, value | $ 5,500 | |
Death of a shareholder [Member] | ||
Class of Stock [Line Items] | ||
Stock Repurchase Program, Authorized Amount | 3,500 | |
Disability of a Shareholder [Member] | ||
Class of Stock [Line Items] | ||
Stock Repurchase Program, Authorized Amount | $ 1,000 |
EQUITY EQUITY (Quarterly Distribution (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Dividends [Line Items] | ||||||
Minimum Percentage of Taxable Income Distributed to Shareholders | 90.00% | |||||
Dividends Payable, Date Declared | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | |
Dividends Payable, Date to be Paid | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | |
Common Stock, Dividends, Per Share, Declared | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 | |
Total Common Stockholders Distribution | $ 651 | $ 652 | $ 656 | $ 658 | $ 659 | $ 2,625 |
Total Common Unit Holders Distribution | 14 | 14 | 14 | 14 | 14 | 56 |
Total Distribution | $ 665 | $ 666 | $ 670 | $ 672 | $ 673 | $ 2,681 |
Maximum [Member] | ||||||
Dividends [Line Items] | ||||||
Distribution Limit, percentage | 100.00% | |||||
Distribution Limit, value | $ 2,000 |
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|||
Numerator - basic and diluted | ||||
Net income (loss) | $ (311) | $ 23 | ||
Net income (loss) attributable to non-controlling interests | (7) | 1 | ||
Net income (loss) attributable to common shares | $ (304) | $ 22 | ||
Denominator - basic and diluted | ||||
Basic weighted average common shares | 10,862,806 | 10,988,124 | ||
Common Units (1) | [1] | 0 | 0 | |
Diluted weighted average common shares | 10,862,806 | 10,988,124 | ||
Earnings (loss) per common share - basic and diluted | ||||
Net earnings (loss) attributable to common shares | $ (0.03) | $ 0.00 | ||
|
EARNINGS PER SHARE (Details Textual) |
3 Months Ended |
---|---|
Mar. 31, 2019
shares
| |
Earnings Per Share [Abstract] | |
Antidiluted Convertible Common Units of Redemption | 235,194 |
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