QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||||||||
(Address of principal executive offices) | (Zip code) | |||||||||||||
(Registrant’s telephone number, including area code) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||||||||
None | None | None |
Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | |||||||||||||||||||
Smaller reporting company | Emerging growth company |
September 30, 2020 | December 31, 2019 | ||||||||||
ASSETS | |||||||||||
Real estate assets: | |||||||||||
Land | $ | $ | |||||||||
Buildings, fixtures and improvements | |||||||||||
Intangible lease assets | |||||||||||
Total real estate assets, at cost | |||||||||||
Less: accumulated depreciation and amortization | ( | ( | |||||||||
Total real estate assets, net | |||||||||||
Real estate-related securities | |||||||||||
Loans held-for-investment and related receivables, net | |||||||||||
Less: Allowance for credit losses | ( | ||||||||||
Total loans held-for-investment and related receivables, net | |||||||||||
Cash and cash equivalents | |||||||||||
Restricted cash | |||||||||||
Rents and tenant receivables, net | |||||||||||
Prepaid expenses and other assets | |||||||||||
Deferred costs, net | |||||||||||
Assets held for sale | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Credit facilities, notes payable and repurchase facilities, net | $ | $ | |||||||||
Accrued expenses and accounts payable | |||||||||||
Due to affiliates | |||||||||||
Intangible lease liabilities, net | |||||||||||
Distributions payable | |||||||||||
Derivative liabilities, deferred rental income and other liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies | |||||||||||
Redeemable common stock | |||||||||||
STOCKHOLDERS’ EQUITY | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Capital in excess of par value | |||||||||||
Accumulated distributions in excess of earnings | ( | ( | |||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total stockholders’ equity | |||||||||||
Total liabilities, redeemable common stock and stockholders’ equity | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Rental and other property income | $ | $ | $ | $ | |||||||||||||||||||
Interest income | |||||||||||||||||||||||
Total revenues | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Property operating | |||||||||||||||||||||||
Real estate tax | |||||||||||||||||||||||
Management and advisory fees and expenses | |||||||||||||||||||||||
Merger-related | |||||||||||||||||||||||
Transaction-related | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Impairment | |||||||||||||||||||||||
Provision for credit losses | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Gain on disposition of real estate, net | |||||||||||||||||||||||
Operating income | |||||||||||||||||||||||
Other expense: | |||||||||||||||||||||||
Interest expense and other, net | ( | ( | ( | ( | |||||||||||||||||||
Loss on extinguishment of debt | ( | ( | ( | ( | |||||||||||||||||||
Total other expense | ( | ( | ( | ( | |||||||||||||||||||
Net income (loss) | ( | ||||||||||||||||||||||
Net income allocated to noncontrolling interest | |||||||||||||||||||||||
Net income (loss) attributable to the Company | $ | $ | $ | ( | $ | ||||||||||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||||||||||
Basic and diluted | |||||||||||||||||||||||
Net income (loss) per common share | |||||||||||||||||||||||
Basic and diluted | $ | $ | $ | ( | $ | ||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | $ | ||||||||||||||||||
Other comprehensive income (loss) | |||||||||||||||||||||||
Unrealized gain on real estate-related securities | |||||||||||||||||||||||
Unrealized loss on interest rate swaps | ( | ( | ( | ( | |||||||||||||||||||
Amount of loss (gain) reclassified from other comprehensive income (loss) into income as interest expense and other, net | ( | ( | |||||||||||||||||||||
Total other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
Comprehensive income (loss) | ( | ||||||||||||||||||||||
Comprehensive income allocated to noncontrolling interest | |||||||||||||||||||||||
Comprehensive income (loss) attributable to the Company | $ | $ | $ | ( | $ | ||||||||||||||||||
Common Stock | Capital in Excess of Par Value | Accumulated Distributions in Excess of Earnings | Accumulated Other Comprehensive (Loss) Income | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Number of Shares | Par Value | ||||||||||||||||||||||||||||||||||
Balance as of January 1, 2020 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Cumulative effect of accounting changes | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Issuance of common stock | — | — | |||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Distributions declared on common stock — $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Redemptions of common stock | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
Changes in redeemable common stock | — | — | — | — | |||||||||||||||||||||||||||||||
Comprehensive loss | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||
Balance as of March 31, 2020 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Issuance of common stock | — | — | |||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Distributions declared on common stock — $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Redemptions of common stock | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
Changes in redeemable common stock | — | — | — | — | |||||||||||||||||||||||||||||||
Comprehensive (loss) income | — | — | — | ( | ( | ||||||||||||||||||||||||||||||
Balance as of June 30, 2020 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Issuance of common stock | — | — | |||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Distributions declared on common stock — $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Redemptions of common stock | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
Changes in redeemable common stock | — | — | — | — | |||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | ||||||||||||||||||||||||||||||||
Balance as of September 30, 2020 | $ | $ | $ | ( | $ | ( | $ |
Common Stock | Capital in Excess of Par Value | Accumulated Distributions in Excess of Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Number of Shares | Par Value | ||||||||||||||||||||||||||||||||||
Balance as of January 1, 2019 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
Issuance of common stock | — | — | |||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Distributions declared on common stock — $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Redemptions of common stock | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
Changes in redeemable common stock | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Comprehensive income (loss) | — | — | — | ( | |||||||||||||||||||||||||||||||
Balance as of March 31, 2019 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
Issuance of common stock | — | — | |||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Distributions declared on common stock — $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Redemptions of common stock | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
Changes in redeemable common stock | — | — | — | — | |||||||||||||||||||||||||||||||
Comprehensive income (loss) | — | — | — | ( | ( | ||||||||||||||||||||||||||||||
Balance as of June 30, 2019 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Cumulative effect of accounting changes | — | — | |||||||||||||||||||||||||||||||||
Issuance of common stock | — | — | — | — | |||||||||||||||||||||||||||||||
Distributions declared on common stock — $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Redemptions of common stock | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
Changes in redeemable common stock | — | — | — | — | |||||||||||||||||||||||||||||||
Comprehensive income (loss) | — | — | — | ( | |||||||||||||||||||||||||||||||
Balance as of September 30, 2019 | $ | $ | $ | ( | $ | ( | $ |
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net (loss) income | $ | ( | $ | ||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization, net | |||||||||||
Amortization of deferred financing costs | |||||||||||
Amortization of fair value adjustment of mortgage notes payable assumed | ( | ( | |||||||||
Amortization and accretion on deferred loan fees | ( | ( | |||||||||
Amortization of premiums and discounts on broadly syndicated loans, net | ( | ||||||||||
Amortization of premiums and discounts on real estate-related securities | |||||||||||
Capitalized interest income | ( | ( | |||||||||
Equity-based compensation | |||||||||||
Straight-line rental income | ( | ( | |||||||||
Write-offs for uncollectable lease-related receivables | |||||||||||
Gain on disposition of real estate assets, net | ( | ( | |||||||||
Loss on sale of broadly syndicated loans | |||||||||||
Amortization of gain on swap termination | ( | ( | |||||||||
Impairment of real estate assets | |||||||||||
Provision for credit losses | |||||||||||
Write-off of deferred financing costs | |||||||||||
Changes in assets and liabilities: | |||||||||||
Rents and tenant receivables | ( | ||||||||||
Prepaid expenses and other assets | ( | ||||||||||
Accounts payable and accrued expenses | |||||||||||
Deferred rental income and other liabilities | ( | ( | |||||||||
Due to affiliates | ( | ||||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities: | |||||||||||
Investment in real estate-related securities | ( | ||||||||||
Investment in broadly syndicated loans | ( | ||||||||||
Investment in real estate assets and capital expenditures | ( | ( | |||||||||
Origination and acquisition of loans held-for-investment, net | ( | ( | |||||||||
Principal payments received on loans held-for-investment | |||||||||||
Principal payments received on real estate-related securities | |||||||||||
Origination and exit fees received on loans held-for-investment | |||||||||||
Net proceeds from disposition of real estate assets | |||||||||||
Net proceeds from sale of broadly syndicated loans | |||||||||||
Payment of property escrow deposits | ( | ( | |||||||||
Refund of property escrow deposits | |||||||||||
Proceeds from the settlement of insurance claims | |||||||||||
Net cash (used in) provided by investing activities | ( | ||||||||||
Cash flows from financing activities: | |||||||||||
Redemptions of common stock | ( | ( | |||||||||
Distributions to stockholders | ( | ( | |||||||||
Proceeds from credit facilities and repurchase facilities | |||||||||||
Repayments of credit facilities and notes payable | ( | ( | |||||||||
Payment of loan deposits | ( | ||||||||||
Deferred financing costs paid | ( | ( | |||||||||
Distributions to noncontrolling interest | ( | ||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net decrease in cash and cash equivalents and restricted cash | ( | ( | |||||||||
Cash and cash equivalents and restricted cash, beginning of period | |||||||||||
Cash and cash equivalents and restricted cash, end of period | $ | $ | |||||||||
Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Total cash and cash equivalents and restricted cash | $ | $ |
Buildings | |||||
Site improvements | |||||
Tenant improvements | Lesser of useful life or lease term | ||||
Intangible lease assets | Lease term |
Balance as of September 30, 2020 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
Financial assets: | |||||||||||||||||||||||
CMBS | $ | $ | $ | $ | |||||||||||||||||||
Total financial assets | $ | $ | $ | $ | |||||||||||||||||||
Financial liabilities: | |||||||||||||||||||||||
Interest rate swaps | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Total financial liabilities | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Balance as of December 31, 2019 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
Financial assets: | |||||||||||||||||||||||
Interest rate swaps | $ | $ | $ | $ | |||||||||||||||||||
Total financial assets | $ | $ | $ | $ | |||||||||||||||||||
Financial liability: | |||||||||||||||||||||||
Interest rate swap | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Total financial liability | $ | ( | $ | $ | ( | $ |
CMBS | ||||||||
Beginning Balance, January 1, 2020 | $ | |||||||
Total gains and losses: | ||||||||
Unrealized gain included in other comprehensive income, net | ||||||||
Purchases and payments received: | ||||||||
Purchases | ||||||||
Premiums (discounts), net | ( | |||||||
Principal payments received | ( | |||||||
Ending Balance, September 30, 2020 | $ |
Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
Asset class impaired: | ||||||||||||||
Land | $ | $ | ||||||||||||
Buildings, fixtures and improvements | ||||||||||||||
Intangible lease assets | ||||||||||||||
Intangible lease liabilities | ( | ( | ||||||||||||
Total impairment loss | $ | $ |
2020 Property Acquisitions | |||||
Land | $ | ||||
Buildings, fixtures and improvements | |||||
Acquired in-place leases and other intangibles (1) | |||||
Total purchase price | $ |
2019 Property Acquisition | |||||
Land | $ | ||||
Buildings, fixtures and improvements | |||||
Acquired in-place leases and other intangibles (1) | |||||
Total purchase price | $ |
September 30, 2020 | December 31, 2019 | ||||||||||
Intangible lease assets: | |||||||||||
In-place leases and other intangibles, net of accumulated amortization of $ | |||||||||||
$ | $ | ||||||||||
Acquired above-market leases, net of accumulated amortization of $ | |||||||||||
Total intangible lease assets, net | $ | $ | |||||||||
Intangible lease liabilities: | |||||||||||
Acquired below-market leases, net of accumulated amortization of $ | |||||||||||
$ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
In-place lease and other intangible amortization | $ | $ | $ | $ | |||||||||||||||||||
Above-market lease amortization | $ | $ | $ | $ | |||||||||||||||||||
Below-market lease amortization | $ | $ | $ | $ |
Amortization | ||||||||||||||||||||
In-Place Leases and Other Intangibles | Above-Market Leases | Below-Market Leases | ||||||||||||||||||
Remainder of 2020 | $ | $ | $ | |||||||||||||||||
2021 | ||||||||||||||||||||
2022 | ||||||||||||||||||||
2023 | ||||||||||||||||||||
2024 | ||||||||||||||||||||
Thereafter | ||||||||||||||||||||
Total | $ | $ | $ |
Real Estate-Related Securities | ||||||||||||||||||||
Amortized Cost Basis | Unrealized Gain | Fair Value | ||||||||||||||||||
CMBS | $ | $ | $ | |||||||||||||||||
Total real estate-related securities | $ | $ | $ |
Amortized Cost Basis | Unrealized Gain | Fair Value | ||||||||||||||||||
Real estate-related securities as of January 1, 2020 | $ | $ | $ | |||||||||||||||||
Face value of real estate-related securities acquired | — | |||||||||||||||||||
Premiums and discounts on purchase of real estate-related securities, net of acquisition costs | ( | — | ( | |||||||||||||||||
Amortization of discount (premium) on real estate-related securities | ( | — | ( | |||||||||||||||||
Principal payments received on real estate-related securities | ( | — | ( | |||||||||||||||||
Unrealized gain on real estate-related securities | — | |||||||||||||||||||
Real estate-related securities as of September 30, 2020 | $ | $ | $ |
Available-for-sale securities | ||||||||||||||
Amortized Cost | Estimated Fair Value | |||||||||||||
Due within one year | $ | $ | ||||||||||||
Due after one year through five years | ||||||||||||||
Due after five years through ten years | ||||||||||||||
Due after ten years | ||||||||||||||
Total | $ | $ |
As of September 30, | As of December 31, | |||||||||||||
2020 | 2019 | |||||||||||||
Mezzanine loans | $ | $ | ||||||||||||
Senior loans | ||||||||||||||
Total CRE loans-held-for-investment and related receivables, net | ||||||||||||||
Broadly syndicated loans | ||||||||||||||
Loans-held-for-investment and related receivables, net | $ | $ | ||||||||||||
Less: Allowance for credit losses | $ | ( | $ | |||||||||||
Total loans-held-for-investment and related receivables, net | $ | $ |
CRE Loans (1) (2) | Broadly Syndicated Loans | ||||||||||||||||||||||
September 30, 2020 | December 31, 2019 | September 30, 2020 | December 31, 2019 | ||||||||||||||||||||
Number of loans | |||||||||||||||||||||||
Principal balance | $ | $ | $ | $ | |||||||||||||||||||
Net book value | $ | $ | $ | $ | |||||||||||||||||||
Weighted-average interest rate | % | % | % | % | |||||||||||||||||||
Weighted-average maximum years to maturity |
Principal Balance | Deferred Fees / Other Items (1) | Loan Fees Receivable | Net Book Value | |||||||||||||||||||||||
Balance, December 31, 2019 | $ | $ | ( | $ | $ | |||||||||||||||||||||
Loan originations and acquisitions | ( | |||||||||||||||||||||||||
Cure payments receivable (2) | — | — | ||||||||||||||||||||||||
Sale of loans | ( | — | ( | |||||||||||||||||||||||
Principal repayments received (3) | ( | — | — | ( | ||||||||||||||||||||||
Capitalized interest (4) | — | — | ||||||||||||||||||||||||
Deferred fees and other items | — | ( | ( | ( | ||||||||||||||||||||||
Accretion and amortization of fees and other items | — | — | ||||||||||||||||||||||||
Allowance for credit losses (5) | — | ( | — | ( | ||||||||||||||||||||||
Balance, September 30, 2020 | $ | $ | ( | $ | $ | |||||||||||||||||||||
Mezzanine Loans | Senior Loans | Broadly Syndicated Loans | Total | |||||||||||||||||||||||
Allowance for credit losses as of December 31, 2019 | $ | $ | $ | $ | ||||||||||||||||||||||
Transition adjustment on January 1, 2020 | ||||||||||||||||||||||||||
Provision for credit losses | ||||||||||||||||||||||||||
Allowance for credit losses as of March 31, 2020 | ||||||||||||||||||||||||||
Provision for credit losses | ( | |||||||||||||||||||||||||
Allowance for credit losses as of June 30, 2020 | ||||||||||||||||||||||||||
Provision for credit losses | ||||||||||||||||||||||||||
Allowance for credit losses as of September 30, 2020 | $ | $ | $ | $ |
Amortized Cost of Loans Held-For-Investment by Year of Origination (1) | ||||||||||||||||||||||||||
As of September 30, 2020 | ||||||||||||||||||||||||||
2020 | 2019 | 2018 | Total | |||||||||||||||||||||||
Mezzanine loans by internal risk rating: | ||||||||||||||||||||||||||
1 | $ | $ | $ | $ | ||||||||||||||||||||||
2 | ||||||||||||||||||||||||||
3 | ||||||||||||||||||||||||||
4 | ||||||||||||||||||||||||||
5 | ||||||||||||||||||||||||||
Total mezzanine loans | ||||||||||||||||||||||||||
Senior loans by internal risk rating: | ||||||||||||||||||||||||||
1 | ||||||||||||||||||||||||||
2 | ||||||||||||||||||||||||||
3 | ||||||||||||||||||||||||||
4 | ||||||||||||||||||||||||||
5 | ||||||||||||||||||||||||||
Total senior loans | ||||||||||||||||||||||||||
Broadly syndicated loans by internal risk rating: | ||||||||||||||||||||||||||
1 | ||||||||||||||||||||||||||
2 | ||||||||||||||||||||||||||
3 | ||||||||||||||||||||||||||
4 | ||||||||||||||||||||||||||
5 | ||||||||||||||||||||||||||
Total broadly syndicated loans | ||||||||||||||||||||||||||
Less: Allowance for credit losses | ( | |||||||||||||||||||||||||
Total loans-held-for-investment and related receivables, net | $ | |||||||||||||||||||||||||
Weighted Average Risk Rating (2) |
Outstanding Notional | Fair Value of Liabilities as of | ||||||||||||||||||||||||||||||||||||||||
Balance Sheet | Amount as of | Interest | Effective | Maturity | September 30, | December 31, | |||||||||||||||||||||||||||||||||||
Location | September 30, 2020 | Rates (1) | Dates | Dates | 2020 | 2019 (2) | |||||||||||||||||||||||||||||||||||
Interest Rate Swaps | Derivative liabilities, deferred rental income and other liabilities | $ | 6/29/2016 to 5/27/2020 | 3/15/2021 to 7/1/2021 | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
During the Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||
Balance as of December 31, 2019 | Debt Issuances & Assumptions (1) | Repayments & Modifications (2) | Accretion and (Amortization) | Balance as of September 30, 2020 | |||||||||||||||||||||||||
Fixed rate debt | $ | $ | $ | ( | $ | — | $ | ||||||||||||||||||||||
Credit facilities | — | ||||||||||||||||||||||||||||
Repurchase facilities | — | ||||||||||||||||||||||||||||
Total debt | ( | — | |||||||||||||||||||||||||||
Net premiums (3) | — | — | ( | ||||||||||||||||||||||||||
Deferred costs – credit facility (4) | ( | — | ( | ||||||||||||||||||||||||||
Deferred costs – fixed rate debt | ( | — | (5) | ( | |||||||||||||||||||||||||
Total debt, net | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Principal Repayments | |||||
Remainder of 2020 | $ | ||||
2021 | |||||
2022 | |||||
2023 | |||||
2024 | |||||
Thereafter | |||||
Total | $ |
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Supplemental Disclosures of Non-Cash Investing and Financing Activities: | |||||||||||
Distributions declared and unpaid | $ | $ | |||||||||
Accrued capital expenditures | $ | $ | |||||||||
Accrued deferred financing costs | $ | $ | |||||||||
Interest income capitalized to loans held-for-investment | $ | $ | |||||||||
Common stock issued through distribution reinvestment plan | $ | $ | |||||||||
Change in fair value of interest rate swaps | $ | ( | $ | ( | |||||||
Supplemental Cash Flow Disclosures: | |||||||||||
Interest paid | $ | $ | |||||||||
Cash paid for taxes | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Management fees and expenses | $ | $ | $ | $ | |||||||||||||||||||
Acquisition fees and expenses | $ | $ | $ | $ | |||||||||||||||||||
Disposition fees | $ | $ | $ | $ | |||||||||||||||||||
Advisory fees and expenses | $ | $ | $ | $ | |||||||||||||||||||
Operating expenses | $ | $ | $ | $ |
Future Minimum Rental Income | ||||||||
Remainder of 2020 | $ | |||||||
2021 | ||||||||
2022 | ||||||||
2023 | ||||||||
2024 | ||||||||
Thereafter | ||||||||
Total | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Fixed rental and other property income (1) | $ | $ | $ | $ | |||||||||||||||||||
Variable rental and other property income (2) | |||||||||||||||||||||||
Total rental and other property income | $ | $ | $ | $ |
As of September 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
Number of commercial properties | 380 | 849 | ||||||||||||
Rentable square feet (in thousands) (1) | 17,938 | 25,092 | ||||||||||||
Percentage of rentable square feet leased | 94.3 | % | 96.2 | % | ||||||||||
Percentage of investment-grade tenants (2) | 37.9 | % | 38.3 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Commercial properties acquired | 2 | 1 | 3 | 1 | |||||||||||||||||||
Purchase price of acquired properties (in thousands) | $ | 9,851 | $ | 6,165 | $ | 14,510 | $ | 6,165 | |||||||||||||||
Rentable square feet (in thousands) (1) | 37 | 6 | 56 | 6 |
For the Three Months Ended September 30, | |||||||||||||||||
2020 | 2019 | Change | |||||||||||||||
Net income | $ | 4,179 | $ | 2,573 | $ | 1,606 | |||||||||||
Loss on extinguishment of debt | 89 | 2,302 | (2,213) | ||||||||||||||
Interest expense and other, net | 15,964 | 24,619 | (8,655) | ||||||||||||||
Operating income | 20,232 | 29,494 | (9,262) | ||||||||||||||
Gain on disposition of real estate, net | (3,219) | (5,790) | 2,571 | ||||||||||||||
Provision for credit losses | 7,355 | — | 7,355 | ||||||||||||||
Impairment | 476 | 24,008 | (23,532) | ||||||||||||||
Depreciation and amortization | 19,967 | 26,766 | (6,799) | ||||||||||||||
Transaction-related expenses | 148 | 383 | (235) | ||||||||||||||
Merger-related expenses | 1,207 | — | 1,207 | ||||||||||||||
Management and advisory fees and expenses | 10,934 | 10,852 | 82 | ||||||||||||||
General and administrative expenses | 3,762 | 3,634 | 128 | ||||||||||||||
Interest income | (6,631) | (5,927) | (704) | ||||||||||||||
Net operating income | $ | 54,231 | $ | 83,420 | $ | (29,189) |
Total | Same Store | Non-Same Store | |||||||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended September 30, | For the Three Months Ended September 30, | For the Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||||||||||||||||||||
Rental and other property income | $ | 66,011 | $ | 99,552 | $ | (33,541) | $ | 64,524 | $ | 64,544 | $ | (20) | $ | 1,487 | $ | 35,008 | $ | (33,521) | |||||||||||||||||||||||||||||||||||
Property operating expenses | 5,214 | 7,199 | (1,985) | 5,045 | 5,227 | (182) | 169 | 1,972 | (1,803) | ||||||||||||||||||||||||||||||||||||||||||||
Real estate tax expenses | 6,566 | 8,933 | (2,367) | 6,466 | 6,398 | 68 | 100 | 2,535 | (2,435) | ||||||||||||||||||||||||||||||||||||||||||||
Total property operating expenses | 11,780 | 16,132 | (4,352) | 11,511 | 11,625 | (114) | 269 | 4,507 | (4,238) | ||||||||||||||||||||||||||||||||||||||||||||
Net operating income | $ | 54,231 | $ | 83,420 | $ | (29,189) | $ | 53,013 | $ | 52,919 | $ | 94 | $ | 1,218 | $ | 30,501 | $ | (29,283) |
For the Nine Months Ended September 30, | |||||||||||||||||
2020 | 2019 | Change | |||||||||||||||
Net (loss) income | $ | (11,742) | $ | 20,430 | $ | (32,172) | |||||||||||
Loss on extinguishment of debt | 4,841 | 2,302 | 2,539 | ||||||||||||||
Interest expense and other, net | 47,240 | 75,958 | (28,718) | ||||||||||||||
Operating income | 40,339 | 98,690 | (58,351) | ||||||||||||||
Gain on disposition of real estate, net | (20,120) | (19,190) | (930) | ||||||||||||||
Provision for credit losses | 33,037 | — | 33,037 | ||||||||||||||
Impairment | 15,983 | 57,163 | (41,180) | ||||||||||||||
Depreciation and amortization | 60,486 | 88,900 | (28,414) | ||||||||||||||
Transaction-related expenses | 730 | 2,091 | (1,361) | ||||||||||||||
Merger-related expenses | 1,207 | — | 1,207 | ||||||||||||||
Management and advisory fees and expenses | 33,422 | 31,062 | 2,360 | ||||||||||||||
General and administrative expenses | 11,679 | 10,374 | 1,305 | ||||||||||||||
Interest income | (19,395) | (15,504) | (3,891) | ||||||||||||||
Net operating income | $ | 157,368 | $ | 253,586 | $ | (96,218) |
Total | Same Store | Non-Same Store | |||||||||||||||||||||||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, | For the Nine Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||||||||||||||||||||
Rental and other property income | $ | 194,550 | $ | 304,764 | $ | (110,214) | $ | 187,488 | $ | 195,147 | $ | (7,659) | $ | 7,062 | $ | 109,617 | $ | (102,555) | |||||||||||||||||||||||||||||||||||
Property operating expenses | 16,890 | 23,383 | (6,493) | 15,850 | 17,186 | (1,336) | 1,040 | 6,197 | (5,157) | ||||||||||||||||||||||||||||||||||||||||||||
Real estate tax expenses | 20,292 | 27,795 | (7,503) | 19,517 | 19,330 | 187 | 775 | 8,465 | (7,690) | ||||||||||||||||||||||||||||||||||||||||||||
Total property operating expenses | 37,182 | 51,178 | (13,996) | 35,367 | 36,516 | (1,149) | 1,815 | 14,662 | (12,847) | ||||||||||||||||||||||||||||||||||||||||||||
Net operating income | $ | 157,368 | $ | 253,586 | $ | (96,218) | $ | 152,121 | $ | 158,631 | $ | (6,510) | $ | 5,247 | $ | 94,955 | $ | (89,708) |
Period Commencing | Period Ending | Daily Distribution Amount | ||||||||||||
April 14, 2012 | December 31, 2012 | $0.001707848 | ||||||||||||
January 1, 2013 | December 31, 2015 | $0.001712523 | ||||||||||||
January 1, 2016 | December 31, 2016 | $0.001706776 | ||||||||||||
January 1, 2017 | December 31, 2019 | $0.001711452 | ||||||||||||
January 1, 2020 | March 31, 2020 | $0.001706776 |
Record Date | Distribution Amount | |||||||
April 30, 2020 | $0.0130 | |||||||
May 31, 2020 | $0.0130 | |||||||
June 30, 2020 | $0.0161 | |||||||
July 30, 2020 | $0.0304 | |||||||
August 28, 2020 | $0.0303 | |||||||
September 29, 2020 | $0.0303 | |||||||
October 29, 2020 | $0.0303 | |||||||
November 27, 2020 | $0.0303 |
Nine Months Ended September 30, | |||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Amount | Percent | Amount | Percent | ||||||||||||||||||||
Distributions paid in cash | $ | 62,529 | 65 | % | $ | 83,251 | 57 | % | |||||||||||||||
Distributions reinvested | 34,191 | 35 | % | 62,745 | 43 | % | |||||||||||||||||
Total distributions | $ | 96,720 | 100 | % | $ | 145,996 | 100 | % | |||||||||||||||
Sources of distributions: | |||||||||||||||||||||||
Net cash provided by operating activities (1) (2) | $ | 77,182 | 80 | % | $ | 145,996 | 100 | % | |||||||||||||||
Proceeds from the issuance of common stock | 8,308 | (3) | 9 | % | — | — | % | ||||||||||||||||
Proceeds from the issuance of debt | 11,230 | (4) | 11 | % | — | — | % | ||||||||||||||||
Total sources | $ | 96,720 | 100 | % | $ | 145,996 | 100 | % |
Payments due by period (1) | |||||||||||||||||||||||||||||
Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | |||||||||||||||||||||||||
Principal payments — fixed rate debt (2) | $ | 507,118 | $ | 90,727 | $ | 348,626 | $ | 67,765 | $ | — | |||||||||||||||||||
Interest payments — fixed rate debt (3) | 47,289 | 18,556 | 27,278 | 1,455 | — | ||||||||||||||||||||||||
Principal payments — credit facilities (4) | 1,171,500 | 110,000 | 885,000 | 176,500 | — | ||||||||||||||||||||||||
Interest payments — credit facilities (4) | 61,429 | 35,681 | 21,319 | 4,429 | — | ||||||||||||||||||||||||
Principal payments — repurchase facilities (5) | 174,694 | — | 174,694 | — | — | ||||||||||||||||||||||||
Interest payments — repurchase facilities (5) | 12,915 | 4,532 | 8,383 | — | — | ||||||||||||||||||||||||
Total | $ | 1,974,945 | $ | 259,496 | $ | 1,465,300 | $ | 250,149 | $ | — | |||||||||||||||||||
Balance as of | ||||||||
September 30, 2020 | ||||||||
Credit facilities, notes payable and repurchase facilities, net | $ | 1,849,099 | ||||||
Deferred costs and net premiums (1) | 4,213 | |||||||
Less: Cash and cash equivalents | (175,224) | |||||||
Net debt | $ | 1,678,088 | ||||||
Gross real estate and related assets, net (2) | $ | 3,935,775 | ||||||
Net debt leverage ratio | 42.6 | % |
Nine Months Ended September 30, 2020 | Year Ended December 31, 2019 | ||||||||||||||||||||||
Amount | Percent | Amount | Percent | ||||||||||||||||||||
Distributions paid in cash | $ | 62,529 | 65 | % | $ | 112,083 | 58 | % | |||||||||||||||
Distributions reinvested | 34,191 | 35 | % | 82,388 | 42 | % | |||||||||||||||||
Total distributions | $ | 96,720 | 100 | % | $ | 194,471 | 100 | % | |||||||||||||||
Sources of distributions: | |||||||||||||||||||||||
Net cash provided by operating activities (1) (2) | $ | 77,182 | 80 | % | $ | 194,471 | 100 | % | |||||||||||||||
Proceeds from the issuance of common stock | 8,308 | (3) | 9 | % | — | — | % | ||||||||||||||||
Proceeds from the issuance of debt | 11,230 | (4) | 11 | % | — | — | % | ||||||||||||||||
Total sources | $ | 96,720 | 100 | % | $ | 194,471 | 100 | % |
Period | Total Number of Shares Redeemed | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||||||||||||||||||
July 1, 2020 - July 31, 2020 | 255 | $ | 7.77 | 255 | (1) | ||||||||||||||||||||||||
August 1, 2020 - August 31, 2020 | 1,288,948 | $ | 7.26 | 1,288,948 | (1) | ||||||||||||||||||||||||
September 1, 2020 - September 30, 2020 | — | $ | — | — | (1) | ||||||||||||||||||||||||
Total | 1,289,203 | 1,289,203 | (1) | ||||||||||||||||||||||||||
* | Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish a supplemental copy of any omitted schedule to the SEC upon request. | ||||
** | Filed herewith. | ||||
*** | In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. |
CIM Real Estate Finance Trust, Inc. (Registrant) | |||||||||||
By: | /s/ Nathan D. DeBacker | ||||||||||
Name: | Nathan D. DeBacker | ||||||||||
Title: | Chief Financial Officer and Treasurer (Principal Financial Officer) |
Date: | November 13, 2020 | /s/ Richard S. Ressler | |||||||||
Name: | Richard S. Ressler | ||||||||||
Title: | Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer) |
Date: | November 13, 2020 | /s/ Nathan D. DeBacker | |||||||||
Name: | Nathan D. DeBacker | ||||||||||
Title: | Chief Financial Officer and Treasurer (Principal Financial Officer) |
/s/ Richard S. Ressler | |||||||||||
Name: | Richard S. Ressler | ||||||||||
Title: | Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer) | ||||||||||
/s/ Nathan D. DeBacker | |||||||||||
Name: | Nathan D. DeBacker | ||||||||||
Date: | November 13, 2020 | Title: | Chief Financial Officer and Treasurer (Principal Financial Officer) |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 490,000,000 | 490,000,000 |
Common stock, shares issued (shares) | 309,405,505 | 311,207,725 |
Common stock, shares outstanding (shares) | 309,405,505 | 311,207,725 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenues: | ||||
Rental and other property income | $ 66,011 | $ 99,552 | $ 194,550 | $ 304,764 |
Interest income | 6,631 | 5,927 | 19,395 | 15,504 |
Total revenues | 72,642 | 105,479 | 213,945 | 320,268 |
Operating expenses: | ||||
General and administrative | 3,762 | 3,634 | 11,679 | 10,374 |
Property operating | 5,214 | 7,199 | 16,890 | 23,383 |
Real estate tax | 6,566 | 8,933 | 20,292 | 27,795 |
Management and advisory fees and expenses | 10,934 | 10,852 | 33,422 | 31,062 |
Merger-related | 1,207 | 0 | 1,207 | 0 |
Transaction-related | 148 | 383 | 730 | 2,091 |
Depreciation and amortization | 19,967 | 26,766 | 60,486 | 88,900 |
Impairment | 476 | 24,008 | 15,983 | 57,163 |
Provision for credit losses | 7,355 | 0 | 33,037 | 0 |
Total operating expenses | 55,629 | 81,775 | 193,726 | 240,768 |
Gain on disposition of real estate, net | 3,219 | 5,790 | 20,120 | 19,190 |
Operating income | 20,232 | 29,494 | 40,339 | 98,690 |
Other expense: | ||||
Interest expense and other, net | (15,964) | (24,619) | (47,240) | (75,958) |
Loss on extinguishment of debt | (89) | (2,302) | (4,841) | (2,302) |
Total other expense | (16,053) | (26,921) | (52,081) | (78,260) |
Net income (loss) | 4,179 | 2,573 | (11,742) | 20,430 |
Net income allocated to noncontrolling interest | 0 | 32 | 0 | 99 |
Net income (loss) attributable to the Company | $ 4,179 | $ 2,541 | $ (11,742) | $ 20,331 |
Weighted average number of common shares outstanding: | ||||
Basic and diluted (shares) | 309,694,214 | 311,267,395 | 310,497,436 | 311,322,003 |
Net income (loss) per common share | ||||
Basic and diluted (USD per share) | $ 0.01 | $ 0.01 | $ (0.04) | $ 0.07 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 4,179 | $ 2,573 | $ (11,742) | $ 20,430 |
Other comprehensive income (loss) | ||||
Unrealized gain on real estate-related securities | 41 | 0 | 61 | 0 |
Unrealized loss on interest rate swaps | (35) | (600) | (11,645) | (12,401) |
Amount of loss (gain) reclassified from other comprehensive income (loss) into income as interest expense and other, net | 3,979 | (783) | 8,299 | (3,534) |
Total other comprehensive income (loss) | 3,985 | (1,383) | (3,285) | (15,935) |
Comprehensive income (loss) | 8,164 | 1,190 | (15,027) | 4,495 |
Comprehensive income allocated to noncontrolling interest | 0 | 32 | 0 | 99 |
Comprehensive income (loss) attributable to the Company | $ 8,164 | $ 1,158 | $ (15,027) | $ 4,396 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Parenthetical) - $ / shares |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
|
Statement of Stockholders' Equity [Abstract] | ||||||
Distributions declared on common stock (USD per share) | $ 0.09 | $ 0.04 | $ 0.15 | $ 0.16 | $ 0.16 | $ 0.15 |
ORGANIZATION AND BUSINESS |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BUSINESS | NOTE 1 — ORGANIZATION AND BUSINESS CIM Real Estate Finance Trust, Inc. (the “Company”) is a non-exchange traded real estate investment trust (“REIT”) formed as a Maryland corporation on July 27, 2010, that elected to be taxed, and currently qualifies, as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2012. The Company operates a diversified portfolio of core commercial real estate assets primarily consisting of net leased properties located throughout the United States. As of September 30, 2020, the Company owned 380 properties, comprising 17.9 million rentable square feet of commercial space located in 42 states. As of September 30, 2020, the rentable square feet at these properties was 94.3% leased, including month-to-month agreements, if any. The Company intends to continue to pursue a more diversified investment strategy across the capital structure by balancing the Company’s existing core of commercial real estate assets leased to creditworthy tenants under long-term net leases with a portfolio of commercial mortgage loans and other credit investments in which the Company’s sponsor and its affiliates have expertise. As of September 30, 2020, the Company’s loan portfolio consisted of 173 loans with a net book value of $857.9 million, and investments in real estate-related securities of $75.2 million. Substantially all of the Company’s business is conducted through CIM Real Estate Finance Operating Partnership, LP, a Delaware limited partnership, of which the Company is the sole general partner and owns, directly or indirectly, 100% of the partnership interests. The Company is externally managed by CIM Real Estate Finance Management, LLC, a Delaware limited liability company (“CMFT Management”), which is an affiliate of CIM Group, LLC (“CIM”). CIM is a community-focused real estate and infrastructure owner, operator, developer and lender with multi-disciplinary expertise, including in acquisitions, management, development, leasing, research and capital markets. CIM is headquartered in Los Angeles, California and has offices in Oakland, California; Bethesda, Maryland; Dallas, Texas; New York, New York; Chicago, Illinois; Phoenix, Arizona; Orlando, Florida; Tokyo, Japan; and Atlanta, Georgia. CCO Group, LLC owns and controls CMFT Management, the Company’s advisor, and is the indirect owner of CCO Capital, LLC (“CCO Capital”), the Company’s dealer manager, and CREI Advisors, LLC (“CREI Advisors”), the Company’s property manager. CCO Group, LLC and its subsidiaries (collectively, “CCO Group”) serve as the Company’s sponsor and as a sponsor to Cole Credit Property Trust V, Inc. (“CCPT V”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”), Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”) and CIM Income NAV, Inc. (“CIM Income NAV”). On January 26, 2012, the Company commenced its initial public offering on a “best efforts” basis of up to a maximum of $2.975 billion in shares of common stock (the “Offering”). The Company ceased issuing shares in the Offering on April 4, 2014. At the completion of the Offering, a total of approximately 297.4 million shares of common stock had been issued, including approximately 292.3 million shares of common stock sold to the public pursuant to the primary portion of the Offering and approximately 5.1 million shares of common stock issued pursuant to the distribution reinvestment plan (“DRIP”) portion of the Offering. The remaining approximately 404,000 unsold shares from the Offering were deregistered. The Company registered $247.0 million of shares of common stock under the DRIP (the “Initial DRIP Offering”) pursuant to a Registration Statement on Form S-3 (Registration No. 333-192958), which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 19, 2013 and automatically became effective with the SEC upon filing. The Company ceased issuing shares under the Initial DRIP Offering effective as of June 30, 2016. At the completion of the Initial DRIP Offering, a total of approximately $241.7 million of shares of common stock had been issued. The remaining $5.3 million of unsold shares from the Initial DRIP Offering were deregistered. The Company registered an additional $600.0 million of shares of common stock under the DRIP (the “Secondary DRIP Offering,” and together with the Initial DRIP Offering, the “DRIP Offerings,” and the DRIP Offerings collectively with the Offering, the “Offerings”) pursuant to a Registration Statement on Form S-3 (Registration No. 333-212832), which was filed with the SEC on August 2, 2016 and automatically became effective with the SEC upon filing. The Company began to issue shares under the Secondary DRIP Offering on August 2, 2016 and continued to issue shares under the Secondary DRIP Offering until, on August 30, 2020, the Company’s board of directors (the “Board”) suspended the Secondary DRIP Offering in connection with the entry of the Company into the Merger Agreements (as defined below). The Board establishes an updated estimated per share net asset value (“NAV”) of the Company’s common stock on at least an annual basis for purposes of assisting broker-dealers that participated in the Offering in meeting their customer account reporting obligations under Financial Industry Regulatory Authority Rule 2231. Distributions are reinvested in shares of the Company’s common stock under the DRIP at the estimated per share NAV as determined by the Board. Additionally, the estimated per share NAV as determined by the Board serves as the per share NAV for purposes of the share redemption program. As of September 30, 2020, the estimated per share NAV of the Company’s common stock was $7.31, which was established by the Board on August 11, 2020 using a valuation date of June 30, 2020. Commencing on August 14, 2020, $7.31 served as the per share NAV under the DRIP. The Board previously established a per share NAV as of August 31, 2015, September 30, 2016, December 31, 2016, December 31, 2017, December 31, 2018, December 31, 2019, March 31, 2020 and June 30, 2020. The Company’s estimated per share NAVs are not audited or reviewed by its independent registered public accounting firm. Given the relative stability of the Company’s rent collections and the per share NAV for the quarters ended March 31, 2020 and June 30, 2020, the Board believes that it is in the best interests of the Company and its stockholders to cease incurring the additional costs associated with quarterly valuations and return to updating the Company’s per share NAV on an annual basis in accordance with its valuation policies. Pending Mergers On August 30, 2020, (i) the Company, CCIT III and Thor III Merger Sub, LLC, a wholly owned subsidiary of the Company (“CCIT III Merger Sub”), entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 thereto dated November 3, 2020, the “CCIT III Merger Agreement”), pursuant to which CCIT III will merge with and into CCIT III Merger Sub (the “CCIT III Merger”), and (ii) the Company, CCPT V and Thor V Merger Sub, LLC, a wholly owned subsidiary of CMFT (“CCPT V Merger Sub”, and collectively with the CCIT III Merger Sub, the “Merger Subs”), entered into an Agreement and Plan of Merger (as subsequently amended on each of October 22, 2020, October 24, 2020 and October 29, 2020, the “CCPT V Merger Agreement”, and collectively with the CCIT III Merger Agreement, the “Merger Agreements”), pursuant to which CCPT V will merge with and into CCPT V Merger Sub (the “CCPT V Merger” and collectively with the CCIT III Merger, the “Mergers”). Neither of the Mergers is contingent upon the completion of the other. Subject to the terms and conditions of the Merger Agreements, CCIT III and CCPT V (collectively, the “Target REITs”) will each be merged into a wholly owned subsidiary of the Company. In accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”), the separate existence of each of the Target REITs shall cease at the effective time of the Mergers. At the effective time of the Mergers and subject to the terms and conditions of the Merger Agreements, each issued and outstanding share of common stock of CCIT III and CCPT V will be converted into the right to receive 1.098 and 2.892 shares of the Company’s common stock, $0.01 par value per share, respectively, subject to the treatment of fractional shares in accordance with the Merger Agreements (the “Merger Consideration”). At the effective time of the Mergers and subject to the terms and conditions of the Merger Agreements, each issued and outstanding share of common stock granted under each of the Target REITs’ 2018 Equity Incentive Plan, whether vested or unvested, will be cancelled in exchange for an amount equal to the applicable Merger Consideration. The Merger Agreements contain customary representations, warranties and covenants, including covenants relating to the conduct of each of the Target REITs’ and the Company’s respective businesses during the period between the execution of the Merger Agreements and the completion of the Mergers, subject to certain exceptions. Pursuant to the terms of the Merger Agreements, the Target REITs had a “go shop” period that ended on 11:59 p.m. New York City time on October 7, 2020 (the “Go Shop Period End Time”) during which the Target REITs and its subsidiaries and representatives could initiate, solicit, provide information and enter into discussions concerning proposals relating to alternative business combination transactions. Following the Go Shop Period End Time, the Target REITs and its subsidiaries and representatives may not solicit, provide information or enter into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions set forth in the Merger Agreements. The Merger Agreements also provide that prior to the applicable Stockholder Approval (as defined below), each of the Target REITs’ board of directors may, under specified circumstances, make an Adverse Recommendation Change (as defined in the Merger Agreements), including withdrawing its recommendation of the applicable Merger, subject to complying with certain conditions set forth in the applicable Merger Agreement. The Merger Agreements may be terminated under certain circumstances, including by the applicable Target REIT or the Company if the Mergers have not been consummated on or before 11:59 p.m. New York time on May 30, 2021 (the “Outside Date”), if a final and non-appealable order is entered permanently restraining or otherwise prohibiting the transactions contemplated by the applicable Merger Agreement, if the applicable Stockholder Approval has not been obtained at the applicable Stockholders Meeting or upon a material uncured breach of the respective obligations, covenants or agreements by the other party that would cause the closing conditions in the applicable Merger Agreement not to be satisfied. In addition, each of the Target REITs may terminate its respective Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal (each as defined in the Merger Agreements) at any time prior to receipt by the Target REIT of the Stockholder Approval pursuant to and subject to the terms and conditions of that Merger Agreement. The Company may terminate the Merger Agreements at any time prior to the receipt of the applicable Stockholder Approval, in certain limited circumstances, including upon (i) an Adverse Recommendation Change, (ii) a tender offer or exchange offer that is commenced which the Target REIT Board fails to recommend against or (iii) a breach by the Target REITs, in any material respect, of their obligations under the go shop or no solicitation provisions set forth in the Merger Agreements. If a Merger Agreement is terminated because the Merger was not consummated before the Outside Date or because the Stockholder Approval was not obtained, and (i) an Acquisition Proposal (as defined in that Merger Agreement) has been publicly announced or otherwise communicated to the Target REIT’s stockholders prior to the Stockholders Meeting and (ii) within 12 months after the date of such termination (A) the Target REIT consummates or enters into an agreement (that is thereafter consummated) in respect of an Acquisition Proposal for 50% or more of the Target REIT’s equity or assets or (B) the Target REIT Board recommends or fails to recommend against an Acquisition Proposal structured as a tender or exchange offer for 50% or more of the Target REIT’s equity and such Acquisition Proposal is actually consummated, then CCIT III and CCPT V must pay to the Company a termination fee of $710,000 and $9.85 million, respectively, and up to $130,000 and $1.79 million, respectively, as reimbursement for the Company’s Expenses (as defined in the Merger Agreements). If either of the Merger Agreements is terminated in connection with the applicable Target REIT’s acceptance of a Superior Proposal or making an Adverse Recommendation Change, then CCIT III or CCPT V must pay to the Company a termination fee of $710,000 and $9.85 million, respectively, and up to $130,000 and $1.79 million, respectively, as reimbursement for CMFT’s Expenses, subject to certain exceptions set forth in applicable the Merger Agreement. The obligation of each party to consummate the applicable Merger is subject to a number of customary conditions, including receipt of the approval of the Mergers (and of an amendment to each of the Target REIT’s charter that is required to consummate the Mergers) by holders of a majority of the outstanding shares of the applicable Target REIT’s common stock entitled to vote thereon (the “Stockholder Approval”), delivery of certain documents and legal opinions, the truth and correctness of the representations and warranties of the applicable parties (subject to the materiality standards contained in the applicable Merger Agreement) and the absence of a CCIT III Material Adverse Effect, CCPT V Material Adverse Effect or CMFT Material Adverse Effect (as each term is defined in the applicable Merger Agreement). On August 30, 2020, the Company, CCIT II and CCIT II Merger Sub, entered into the CCIT II Merger Agreement, pursuant to which CCIT II would have merged with and into CCIT II Merger Sub, with CCIT II Merger Sub surviving the merger as the surviving entity such that following the merger, the surviving entity would have continued as a wholly owned subsidiary of the Company. The CCIT II Merger Agreement was subsequently terminated on October 29, 2020 and, as a result, all provisions of the Merger Agreement relating to CCIT II or the CCIT II Merger Agreement are no longer applicable. Concurrently with the entry into the Merger Agreements, each of the Target REITs and its respective advisor entered into a letter agreement (the “Termination Agreement”). Pursuant to each Termination Agreement, the advisory agreement between the applicable Target REIT and its respective advisor (each, an “Advisory Agreement”) will be terminated at the effective time of the applicable Merger. Also pursuant to each Termination Agreement, each of the Target REIT’s respective advisor agreed to waive any subordinated performance fee or disposition fee it otherwise would be entitled to pursuant to the Advisory Agreement related to the applicable Merger. In the event either of the Merger Agreements is terminated in accordance with its terms, the applicable Termination Agreement will be automatically terminated. In connection with the contemplated Mergers, on August 30, 2020, the Board approved the suspension of the DRIP, and, therefore, distributions paid after that date will be paid in cash to all stockholders unless and until the DRIP is reinstated. Additionally, on August 30, 2020, the Board approved the suspension of the Company’s share redemption program, and therefore, no shares will be redeemed from the Company’s stockholders after that date unless and until the share redemption program is reinstated. CCIT II Merger Also on August 30, 2020, the Company, CCIT II and Thor II Merger Sub, LLC, a wholly owned subsidiary of the Company (“CCIT II Merger Sub”), entered into an Agreement and Plan of Merger (the “CCIT II Merger Agreement”), pursuant to which CCIT II would merge with and into CCIT II Merger Sub (the “CCIT II Merger”). At the effective time of the CCIT II Merger and subject to the terms and conditions of the CCIT II Merger Agreement, each issued and outstanding share of common stock of CCIT II would have converted into the right to receive 1.501 shares of the Company’s common stock, $0.01 par value per share, subject to the treatment of fractional shares in accordance with the CCIT II Merger Agreement. The CCIT II Merger Agreement also provided that prior to the approval of the CCIT II Merger by holders of a majority of the outstanding shares of CCIT II common stock entitled to vote thereon (the “CCIT II Stockholder Approval”), CCIT II’s board of directors could, under specified circumstances, make an Adverse Recommendation Change (as defined in the CCIT II Merger Agreement), including withdrawing its recommendation of the CCIT II Merger, subject to complying with certain conditions set forth in the CCIT II Merger Agreement. In addition, CCIT II could terminate the CCIT II Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal (each as defined in the CCIT II Merger Agreement) at any time prior to the CCIT II Stockholder Approval, pursuant to and subject to the terms and conditions of the CCIT II Merger Agreement. Prior to the CCIT II Stockholder Approval, CCIT II received an acquisition proposal that CCIT II’s board of directors determined to be a Superior Proposal. As a result, on October 29, 2020, CCIT II terminated the CCIT II Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal and, as a result, all provisions of the Merger Agreements relating to CCIT II or the CCIT II Merger Agreement are no longer applicable. In accordance with the termination of the CCIT II Merger Agreement, CCIT II paid to the Company a termination fee of $7.38 million and agreed to pay up to $3.69 million as reimbursement for the Company’s expenses.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying condensed consolidated financial statements. Principles of Consolidation and Basis of Presentation The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the SEC regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019, and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The condensed consolidated financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Reclassifications Certain amounts in the Company’s prior period condensed consolidated financial statements have been reclassified to conform to the current period presentation.These reclassifications had no effect on previously reported totals or subtotals. The Company is separately presenting expenses and losses related to the extinguishment of debt of $2.3 million for the nine months ended September 30, 2019, which was previously included in interest expense and other, net in the condensed consolidated statements of operations. The Company is separately presenting the write-offs for uncollectable lease-related receivables of $754,000 for the nine months ended September 30, 2019, which was previously included in straight-line rental income, net in the condensed consolidated statements of cash flows. Additionally, the Company combined investment in real estate assets of $15.2 million and capital expenditures of $6.2 million for the nine months ended September 30, 2019 into a single financial statement line item, investment in real estate assets and capital expenditures, in the condensed consolidated statements of cash flows. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Real Estate Assets Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:
Recoverability of Real Estate Assets The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to: bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, lease concessions and other factors; a significant decrease in a property’s revenues due to lease terminations; vacancies; co-tenancy clauses; reduced lease rates; changes in anticipated holding periods; or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. During the nine months ended September 30, 2020, as part of the Company’s quarterly impairment review procedures, the Company recorded impairment charges of $16.0 million related to ten properties due to revised cash flow estimates as a result of market conditions and one property due to a tenant bankruptcy. The Company’s impairment assessment as of September 30, 2020 was based on the most current information available to the Company, including expected holding periods. If the Company’s expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. The Company cannot provide any assurance that additional material impairment charges with respect to the Company’s real estate assets will not occur during 2020 or in future periods, particularly with respect to any negative impacts to the Company that may result from the economic disruptions caused by the current novel coronavirus (“COVID-19”) pandemic. If the effects of the COVID-19 pandemic cause economic and market conditions to continue to deteriorate or if the Company’s expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. As of September 30, 2020, the Company has not identified any further impairments resulting from COVID-19 related impacts, including as a result of tenant requests for rent relief. The Company generally intends to hold its assets for the long-term; therefore, a temporary change in cash flows due to COVID-19 related impacts alone would not be an indicator of impairment. However, the Company has yet to see the long-term effects of the COVID-19 pandemic on the economy and the extent to which it may impact the Company’s tenants in the future. Indications of a tenant’s inability to continue as a going concern, changes in the Company’s view or strategy relative to a tenant’s business or industry as a result of the economic impacts of the COVID-19 pandemic, or changes in the Company’s long-term hold strategies, could be indicative of an impairment indicator. Accordingly, the Company will continue to monitor circumstances and events in future periods to determine whether the carrying value of the Company’s real estate assets are recoverable. During the nine months ended September 30, 2019, the Company recorded impairment charges of $57.2 million related to 26 properties with revised expected holding periods. The assumptions and uncertainties utilized in the evaluation of the impairment of real estate assets are discussed in detail in Note 3 — Fair Value Measurements. See also Note 4 — Real Estate Assets for further discussion regarding real estate investment activity. Assets Held for Sale When a real estate asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the assets related to the property and estimate its fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs. As of December 31, 2019, the Company expected to sell a substantial portion of its anchored-shopping center portfolio and certain single-tenant properties within the next 24 months, subject to market conditions. In light of current market conditions brought on by the COVID-19 pandemic, the Company cannot provide assurance that these properties will be sold within a 24-month period. As a result, the Company placed 15 properties with a carrying value of $228.4 million that were previously classified as held for sale back in service as real estate assets in the condensed consolidated balance sheets during the nine months ended September 30, 2020. There were no assets identified as held for sale as of September 30, 2020. As of December 31, 2019, the Company identified 29 properties with a carrying value of $351.9 million as held for sale. Disposition of Real Estate Assets Gains and losses from dispositions are recognized once the various criteria relating to the terms of sale and any subsequent involvement by the Company with the asset sold are met. A discontinued operation includes only the disposal of a component of an entity and represents a strategic shift that has (or will have) a major effect on an entity’s financial results. The Company’s property dispositions during the nine months ended September 30, 2020 and 2019 did not qualify for discontinued operations presentation, and, thus, the results of the properties that were sold will remain in operating income, and any associated gains or losses from the disposition are included in gain on disposition of real estate, net. See Note 4 — Real Estate Assets for a discussion of the disposition of individual properties during the nine months ended September 30, 2020. Allocation of Purchase Price of Real Estate Assets Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- and below-market leases and the value of in-place leases and other intangibles, based in each case on their relative fair values. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information. The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could materially impact the Company’s results of operations. Acquisition-related fees and certain acquisition-related expenses related to asset acquisitions are capitalized and allocated to tangible and intangible assets and liabilities, as described above. Restricted Cash The Company had $5.9 million and $7.3 million in restricted cash as of September 30, 2020 and December 31, 2019, respectively. Included in restricted cash was $2.6 million and $3.1 million held by lenders in lockbox accounts, as of September 30, 2020 and December 31, 2019, respectively. As part of certain debt agreements, rents from certain encumbered properties are deposited directly into a lockbox account, from which the monthly debt service payment is disbursed to the lender and the excess is disbursed to the Company. Also included in restricted cash was $3.3 million and $4.2 million held by lenders in escrow accounts for real estate taxes and other lender reserves for certain properties, in accordance with the associated lender’s loan agreement, as of September 30, 2020 and December 31, 2019, respectively. Real Estate-Related Securities Real estate-related securities consists primarily of the Company’s investment in commercial mortgage-backed securities (“CMBS”). The Company determines the appropriate classification for real estate-related securities at the time of purchase and reevaluates such designation as of each balance sheet date. As of September 30, 2020, the Company classified its investments as available-for-sale as the Company is not actively trading the securities; however, the Company may sell them prior to their maturity. These investments are carried at their estimated fair value with unrealized gains and losses reported in other comprehensive income (loss). During the nine months ended September 30, 2020, the Company invested in five CMBS with an estimated aggregate fair value of $75.2 million as of September 30, 2020. The Company monitors its available-for-sale securities for impairment. A loss is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost has resulted from a credit loss or other factors. The Company records impairments related to credit losses through an allowance for credit losses. However, the allowance is limited by the amount that the fair value is less than the amortized cost basis. The Company considers many factors in determining whether a credit loss exists, including, but not limited to, the extent to which the fair value is less than the amortized cost basis, recent events specific to the security, industry or geographic area, the payment structure of the security, the failure of the issuer of the security to make scheduled interest or principal payments, and external credit ratings and recent changes in such ratings. The analysis of determining whether a credit loss exists requires significant judgments and assumptions. The use of alternative judgments and assumptions could result in a different conclusion. The amortized cost of real estate-related securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method and is recorded in the accompanying condensed consolidated statements of operations in interest and other expense, net. Upon the sale of a security, the realized net gain or loss is computed on the specific identification method. Loans Held-for-Investment The Company has acquired, and may continue to acquire, loans related to real estate assets. Additionally, the Company may acquire and originate credit investments, including commercial mortgage loans, mezzanine loans, preferred equity, and other loans and securities related to commercial real estate assets, as well as corporate loan opportunities that are consistent with the Company’s investment strategy and objectives. The Company intends to hold the loans held-for-investment for the foreseeable future or until maturity. Loans held-for-investment are carried on the Company’s condensed consolidated balance sheets at amortized cost, net of any allowance for credit losses. Discounts or premiums, origination fees and exit fees are amortized as a component of interest income using the effective interest method over the life of the respective loans, or on a straight-line basis when it approximates the effective interest method. Loan acquisition fees paid to CMFT Management or its affiliates are expensed as incurred and are included in transaction-related expenses on the accompanying condensed consolidated statements of operations. Upon the sale of a loan, the realized net gain or loss is computed on the specific identification method. Interest earned is either received in cash or capitalized to loans held-for-investment and related receivables, net in the Company’s condensed consolidated balance sheets. Interest is capitalized when certain conditions are met as specified in each loan agreement. During the nine months ended September 30, 2020, the Company recorded $19.4 million in interest income, of which $539,000 was capitalized to loans held-for-investment and related receivables, net. Accrual of interest income is suspended on nonaccrual loans. Loans that are past due 90 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status. Interest collected is recognized on a cash basis by crediting income when received. Loans may be restored to accrual status when all principal and interest are current and full repayment of the remaining contractual principal and interest are reasonably assured. As of September 30, 2020, the Company’s eight mezzanine loans with a net book value of $121.6 million were nonaccrual loans. During the nine months ended September 30, 2020, the Company recorded $565,000 in interest income related to the nonaccrual loans. Allowance for Credit Losses The Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), as further described in “Recent Accounting Pronouncements,” on January 1, 2020. The allowance for credit losses required under ASU 2016-13 reflects the Company’s current estimate of potential credit losses related to the Company’s loans held-for-investment included in the condensed consolidated balance sheets. The initial allowance for credit losses recorded on January 1, 2020 is reflected as a direct charge to retained earnings on the Company’s condensed consolidated statements of stockholders’ equity; however, subsequent changes to the allowance for credit losses are recognized through net income on the Company’s condensed consolidated statements of operations. While ASU 2016-13 does not require any particular method for determining the allowance for credit losses, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the duration of each respective loan. In addition, other than a few narrow exceptions, ASU 2016-13 requires that all financial instruments subject to the credit loss model have some amount of loss reserve to reflect the GAAP principal underlying the credit loss model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors. The Company has elected to use a discounted cash flow model to estimate the allowance for credit losses. This model requires the Company to develop cash flows which project estimated credit losses over the life of the loan and discount these cash flows at the asset’s effective interest rate. The Company then records an allowance for credit losses equal to the difference between the amortized cost basis of the asset and the present value of the expected cash flows. The Company considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that the Company determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral less costs to sell and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that the Company determines foreclosure is not probable, the Company applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. For the Company’s broadly syndicated loans, the Company uses a probability of default and loss given default method using an underlying third-party CMBS/CRE loan database with historical loan losses from 1998 to 2019. The Company may use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data. The Company using the modified retrospective method for all financial assets measured at amortized cost. Prior to adoption, the Company had no allowance for credit losses on its condensed consolidated balance sheets. The Company recorded a cumulative-effective adjustment to the opening retained earnings in its condensed consolidated statement of stockholders’ equity as of January 1, 2020 of $2.0 million. Quarterly, the Company evaluates the risk of all loans and assigns a risk rating based on a variety of factors, grouped as follows: (i) loan and credit structure, including the as-is loan-to-value (“LTV”) ratio and structural features; (ii) quality and stability of real estate value and operating cash flow, including debt yield, dynamics of the geography, property type and local market, physical condition, stability of cash flow, leasing velocity and quality and diversity of tenancy; (iii) performance against underwritten business plan; and (iv) quality, experience and financial condition of sponsor, borrower and guarantor(s). Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from least risk to greatest risk, respectively, which ratings are defined as follows: 1-Outperform — Most satisfactory asset quality and liquidity, good leverage capacity. A “1” rating maintains predictable and strong cash flows from operations. The trends and outlook for the credit's operations, balance sheet, and industry are neutral to favorable. Collateral, if appropriate, exceeds performance metrics; 2-Meets or Exceeds Expectations — Acceptable asset quality, moderate excess liquidity, modest leverage capacity. A “2” rating could have some financial/non-financial weaknesses which are offset by strengths; however, the credit demonstrates an ample current cash flow from operations. The trends and outlook for the credit's operations, balance sheet, and industry are generally positive or neutral. Collateral performance, if appropriate, meets or exceeds substantially all performance metrics included in original or current underwriting / business plan; 3-Satisfactory — Acceptable asset quality, somewhat strained liquidity, minimal leverage capacity. A “3” rating is at times characterized by acceptable cash flows from operations. The trends and conditions of the credit's operations and balance sheet are neutral. Collateral performance, if appropriate, meets or is on track to meet underwriting; business plan can reasonably be achieved; 4-Underperformance — The debt investment possesses credit deficiencies or potential weaknesses which deserve management’s close and continued attention. The portfolio company’s operations and/or balance sheet have demonstrated an adverse trend or deterioration which, while serious, has not reached the point where the liquidation of debt is jeopardized. These weaknesses are generally considered correctable by the borrower in the normal course of business but may weaken the asset or inadequately protect the Company’s credit position if not checked or corrected. Collateral performance, if appropriate, falls short of original underwriting, material differences exist from business plan, or both; technical milestones have been missed; defaults may exist, or may soon occur absent material improvement; and 5-Default/Possibility of Loss — The debt investment is protected inadequately by the current enterprise value or paying capacity of the obligor or of the collateral, if any. The underlying company’s operations has well-defined weaknesses based upon objective evidence, such as recurring or significant decreases in revenues and cash flows. Major variance from business plan; loan covenants or technical milestones have been breached; timely exit from loan via sale or refinancing is questionable; risk of principal loss. Collateral performance, if appropriate, is significantly worse than underwriting. The Company generally assigns a risk rating of “3” to all newly originated or acquired loans-held-for-investment during a most recent quarter, except in the case of specific circumstances warranting an exception. Due to the COVID-19 pandemic and the dislocation it has caused to the national economy, the commercial real estate markets, and the capital markets, the Company’s ability to estimate key inputs for estimating the allowance for credit losses has been materially and adversely impacted. Key inputs to the estimate include, but are not limited to, LTV, debt service coverage ratio, future operating cash flow and performance of collateral properties, the financial strength and liquidity of borrowers and sponsors, capitalization rates and discount rates used to value commercial real estate properties, and observable transactions involving the sale or financing of commercial properties. Estimates made by management are necessarily subject to change due to the lack of observable inputs and uncertainty regarding the duration of the COVID-19 pandemic and its aftereffects. Leases The Company has lease agreements with lease and non-lease components. The Company has elected to not separate non-lease components from lease components for all classes of underlying assets (primarily real estate assets) and will account for the combined components as rental and other property income. Non-lease components included in rental and other property income include certain tenant reimbursements for maintenance services (including common-area maintenance services or “CAM”), real estate taxes, insurance and utilities paid for by the lessor but consumed by the lessee. As a lessor, the Company has further determined that this policy will be effective only on a lease that has been classified as an operating lease and the revenue recognition pattern and timing is the same for both types of components. The Company is not a party to any material leases where it is the lessee. Significant judgments and assumptions are inherent in not only determining if a contract contains a lease, but also the lease classification, terms, payments, and, if needed, discount rates. Judgments include the nature of any options, including if they will be exercised, evaluation of implicit discount rates and the assessment and consideration of “fixed” payments for straight-line rent revenue calculations. The Company has an investment in a real estate property that is subject to a ground lease, for which a lease liability and right of use (“ROU”) asset of $2.5 million was recorded as of September 30, 2020. See Note 15 — Leases for a further discussion regarding this ground lease. Lease costs represent the initial direct costs incurred in the origination, negotiation and processing of a lease agreement. Such costs include outside broker commissions and other independent third-party costs and are amortized over the life of the lease on a straight-line basis. Costs related to salaries and benefits, supervision, administration, unsuccessful origination efforts and other activities not directly related to completed lease agreements are expensed as incurred. Upon successful lease execution, leasing commissions are capitalized. Revenue Recognition Revenue from leasing activities Rental and other property income is primarily derived from fixed contractual payments from operating leases, and therefore, is generally recognized on a straight-line basis over the term of the lease, which typically begins the date the tenant takes control of the space. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. Variable rental and other property income consists primarily of tenant reimbursements for recoverable real estate taxes and operating expenses which are included in rental and other property income in the period when such costs are incurred, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations. The Company defers the recognition of variable rental and other property income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. The Company continually reviews whether collection of lease-related receivables, including any straight-line rent, and current and future operating expense reimbursements from tenants are probable. The determination of whether collectability is probable takes into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Upon the determination that the collectability of a receivable is not probable, the Company will record a reduction to rental and other property income for amounts previously recorded and a decrease in the outstanding receivable. Revenue from leases where collection is deemed to be not probable is recorded on a cash basis until collectability becomes probable. Management’s estimate of the collectability of lease-related receivables is based on the best information available at the time of estimate. The Company does not use a general reserve approach and lease-related receivables are adjusted and taken against rental and other property income only when collectability becomes not probable. During the nine months ended September 30, 2020, the Company identified certain tenants where collection was no longer considered probable. For these tenants, the Company made the determination to record revenue on a cash basis and wrote off total outstanding receivables of $6.7 million for the nine months ended September 30, 2020, which included $1.4 million related to certain tenant reimbursements. These write-offs reduced rental and other property income during the nine months ended September 30, 2020. Revenue from lending activities Interest income from the Company’s loans held-for-investment and real estate-related securities is comprised of interest earned on loans and the accretion and amortization of net loan origination fees and discounts. Interest income on loans is accrued as earned, with the accrual of interest suspended when the related loan becomes a nonaccrual loan. Interest income on the Company’s broadly syndicated loans is accrued as earned beginning on the settlement date. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s condensed consolidated financial statements. In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, which was subsequently amended by ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (“ASU 2018-19”), in November 2018. Subsequently, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-02 to provide additional guidance on the credit losses standard. ASU 2016-13 and the related updates are intended to improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held-for-investment, held-to-maturity debt securities, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2018-19 clarified that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASU No. 2016-02, Leases (Topic 842) (“ASC 842”). ASU 2016-13 and ASU 2018-19 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company adopted ASU 2016-13 during the first quarter of fiscal year 2020. See Note 7 — Loans Held-For-Investment for a further discussion on the impact of the adoption of ASU 2016-13. In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of ASU 2018-13 are to be applied retrospectively, and early adoption is permitted. The Company adopted ASU 2018-13 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In October 2018, the FASB issued ASU No. 2018-16, Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2018-16”). The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes or another acceptable benchmark interest rate. The SOFR is a volume-weighted median interest rate that is calculated daily based on overnight transactions from the prior day’s activity in specified segments of the U.S. Treasury repo market. It has been selected as the preferred replacement for the U.S. dollar London Interbank Offered Rate (“LIBOR”), which will be phased out by the end of 2021. ASU 2018-16 is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2018-16 is required to be adopted on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after the date of adoption. The Company currently uses LIBOR as its benchmark interest rate in the Company’s interest rate swaps associated with the Company’s LIBOR-based variable rate borrowings. The Company has not entered into any new or redesignated hedging relationships on or after the date of adoption of ASU 2018-16. The Company has evaluated the effect of this new benchmark interest rate option, and does not believe this ASU will have a material impact on its condensed consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”). The guidance changes the guidance for determining whether a decision-making fee is a variable interest. Under the new ASU, indirect interests held through related parties under common control will now be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests. Such indirect interests were previously treated the same as direct interests. ASU 2018-17 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company adopted ASU 2018-17 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In April 2020, the FASB issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, many lessors may be required to provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in ASC 842 addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from COVID-19 related impacts. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company has elected to apply this guidance to avoid performing a lease by lease analysis for the lease concessions that (1) were granted as relief due to COVID-19 related impacts and (2) result in the cash flows remaining substantially the same or less than the original contract and will account for these lease concessions as if no changes were made to the leases. During the three and nine months ended September 30, 2020, the Company provided lease concessions, either in the form of rental deferrals or abatements, to certain tenants in response to the impact of the COVID-19 pandemic on those tenants. As of September 30, 2020, the Company had granted rent deferrals of $4.4 million. The deferral of rental payments affects the timing, but not the amount, of the lease payments and resulted in an increase of $4.4 million to the Company’s lease-related receivables balance as of September 30, 2020. Additionally, as of September 30, 2020, the Company had granted rental abatements of $265,000. In addition, the Company entered into lease amendments during the three and nine months ended September 30, 2020 that provided for lease concessions, through rent abatements or rent deferrals, that represented substantive changes to the consideration in the original lease. These lease amendments extended the lease periods ranging from 12 months to 84 months. For these leases, the Company applied the lease modification accounting framework pursuant to ASC 842. As of September 30, 2020, these lease amendments resulted in rent abatements of $2.5 million and deferred rental income of $436,000. As of November 5, 2020, the Company has collected approximately 90% of rental payments billed to tenants during the three months ended September 30, 2020.
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FAIR VALUE MEASUREMENTS | NOTE 3 — FAIR VALUE MEASUREMENTS GAAP defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. GAAP emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows: Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs). Level 3 — Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability. The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities: Real estate-related securities — The Company generally determines the fair value of its real estate-related securities by utilizing broker-dealer quotations, reported trades or valuation estimates from pricing models to determine the reported price. Pricing models for real estate-related securities are generally discounted cash flow models that usually consider the attributes applicable to a particular class of security (e.g., credit rating, seniority), current market data, and estimated cash flows for each class and incorporate deal collateral performance such as prepayment speeds and default rates, as available. Depending upon the significance of the fair value inputs used in determining these fair values, these securities are valued using either Level 2 or Level 3 inputs. As of September 30, 2020, the Company concluded that $65.5 million of real estate-related securities fell under Level 2 and $9.7 million of real estate-related securities fell under Level 3. Credit facilities and notes payable — The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs. These financial instruments are valued using Level 2 inputs. As of September 30, 2020, the estimated fair value of the Company’s debt was $1.84 billion, compared to a carrying value of $1.85 billion. The estimated fair value of the Company’s debt as of December 31, 2019 was $1.60 billion, compared to a carrying value of $1.61 billion. Derivative instruments — The Company’s derivative instruments are comprised of interest rate swaps. All derivative instruments are carried at fair value and are valued using Level 2 inputs. The fair value of these instruments is determined using interest rate market pricing models. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the respective counterparties. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. However, as of September 30, 2020 and December 31, 2019, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. Loans held-for-investment — The Company’s loans held-for-investment are recorded at cost upon origination and adjusted by net loan origination fees and discounts. The Company estimates the fair value of its commercial real estate (“CRE”) loans held-for-investment by performing a present value analysis for the anticipated future cash flows using an appropriate market discount rate taking into consideration the credit risk. As a result, the Company has determined that its CRE loans held-for-investment are classified in Level 3 of the fair value hierarchy. The Company’s broadly syndicated loans are classified as Level 2 or Level 3 depending on the number of market quotations or indicative prices from pricing services that are available, and whether the depth of the market is sufficient to transact at those prices in amounts approximating the Company’s investment position at the measurement date. As of September 30, 2020, $302.1 million and $107.5 million of the Company’s broadly syndicated loans were classified in Level 2 and Level 3 of the fair value hierarchy, respectively. As of September 30, 2020, the estimated fair value of the Company’s loans held-for-investment was $859.3 million, compared to its carrying value of $857.9 million. As of December 31, 2019, the estimated fair value of the Company’s loans held-for-investment was $302.0 million, compared to its carrying value of $301.6 million. Other financial instruments — The Company considers the carrying values of its cash and cash equivalents, restricted cash, tenant receivables, accounts payable and accrued expenses, other liabilities, due to affiliates and distributions payable to approximate their fair values because of the short period of time between their origination and their expected realization as well as their highly-liquid nature. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments. Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, upon disposition of the financial assets and liabilities. As of September 30, 2020 and December 31, 2019, there have been no transfers of financial assets or liabilities between fair value hierarchy levels. Items Measured at Fair Value on a Recurring Basis In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 (in thousands):
The following are reconciliations of the changes in financial assets with Level 3 inputs in the fair value hierarchy for the nine months ended September 30, 2020 (in thousands):
Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges) Certain financial and nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The Company’s process for identifying and recording impairment related to real estate assets and intangible assets is discussed in Note 2 — Summary of Significant Accounting Policies. As discussed in Note 4 — Real Estate Assets, during the nine months ended September 30, 2020, real estate assets related to 11 properties were deemed to be impaired and their carrying values were reduced to an estimated fair value of $71.5 million, resulting in impairment charges of $16.0 million. During the nine months ended September 30, 2019, real estate assets related to 26 properties were deemed to be impaired and their carrying values were reduced to an estimated fair value of $283.1 million, resulting in impairment charges of $57.2 million. The Company estimates fair values using Level 3 inputs and using a combined income and market approach, specifically using discounted cash flow analysis and recent comparable sales transactions. The evaluation of real estate assets for potential impairment requires the Company’s management to exercise significant judgment and to make certain key assumptions, including, but not limited to, the following: (1) terminal capitalization rates; (2) discount rates; (3) the number of years the property will be held; (4) property operating expenses; and (5) re-leasing assumptions, including the number of months to re-lease, market rental income and required tenant improvements. There are inherent uncertainties in making these estimates such as market conditions and the future performance and sustainability of the Company’s tenants. For the Company’s impairment tests for the real estate assets during the nine months ended September 30, 2020, the Company used a range of discount rates from 7.9% to 9.7% and terminal capitalization rates from 7.4% to 9.2%. The following table presents the impairment charges by asset class recorded during the nine months ended September 30, 2020 and 2019 (in thousands):
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REAL ESTATE ASSETS |
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REAL ESTATE ASSETS | NOTE 4 — REAL ESTATE ASSETS 2020 Property Acquisitions During the nine months ended September 30, 2020, the Company acquired three commercial properties for an aggregate purchase price of $14.5 million (the “2020 Property Acquisitions”), which includes $111,000 of external acquisition-related expenses that were capitalized. The Company funded the 2020 Property Acquisitions with proceeds from real estate dispositions and available borrowings. The following table summarizes the purchase price allocation for the 2020 Property Acquisitions (in thousands):
______________________ (1) The amortization period for acquired in-place leases and other intangibles is 14.7 years. 2020 Property Dispositions and Real Estate Assets Held for Sale During the nine months ended September 30, 2020, the Company disposed of 19 properties, consisting of 12 retail properties and seven anchored shopping centers, for an aggregate gross sales price of $199.2 million, resulting in proceeds of $194.7 million after closing costs and disposition fees due to CMFT Management or its affiliates, and recorded a gain of $20.1 million. The Company has no continuing involvement with these properties. The gain on sale of real estate is included in gain on disposition of real estate, net in the condensed consolidated statements of operations. The disposition of these properties did not qualify to be reported as discontinued operations since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of these disposed properties are reflected in the Company’s results from continuing operations for all periods presented through their respective date of disposition. 2020 Impairment The Company performs quarterly impairment review procedures, primarily through continuous monitoring of events and changes in circumstances that could indicate that the carrying value of certain of its real estate assets may not be recoverable. See Note 2 — Summary of Significant Accounting Policies for a discussion of the Company’s accounting policies regarding impairment of real estate assets. During the nine months ended September 30, 2020, 11 properties totaling approximately 699,000 square feet with a carrying value of $87.5 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $71.5 million, resulting in impairment charges of $16.0 million, which were recorded in the condensed consolidated statements of operations. See Note 3 — Fair Value Measurements for a further discussion regarding these impairment charges. 2019 Property Acquisition During the nine months ended September 30, 2019, the Company acquired a 100% interest in one commercial property for an aggregate purchase price of $6.2 million (the “2019 Property Acquisition”), which includes $165,000 of external acquisition-related expenses that were capitalized. The Company funded the 2019 Property Acquisition with proceeds from real estate dispositions and available borrowings. The following table summarizes the purchase price allocation for the 2019 Property Acquisition (in thousands):
______________________ (1) The amortization period for acquired in-place leases and other intangibles is 19.8 years. 2019 Property Dispositions During the nine months ended September 30, 2019, the Company disposed of 43 properties, consisting of 37 retail properties and six anchored shopping centers, excluding a related outparcel of land, for an aggregate gross sales price of $202.3 million, resulting in proceeds of $196.5 million after closing costs and disposition fees due to CMFT Management or its affiliates, and a gain of $19.2 million. The Company has no continuing involvement with these properties. The gain on sale of real estate is included in gain on disposition of real estate, net in the condensed consolidated statements of operations. The disposition of these properties did not qualify to be reported as discontinued operations since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of these disposed properties are reflected in the Company’s results from continuing operations for all periods presented through their respective date of disposition. 2019 Impairment During the nine months ended September 30, 2019, 26 properties totaling approximately 2.6 million square feet with a carrying value of $340.3 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $283.1 million, resulting in impairment charges of $57.2 million, which were recorded in the condensed consolidated statements of operations. See Note 3 — Fair Value Measurements for a further discussion regarding these impairment charges.
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INTANGIBLE LEASE ASSETS AND LIABILITIES |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE LEASE ASSETS AND LIABILITIES | NOTE 5 — INTANGIBLE LEASE ASSETS AND LIABILITIES Intangible lease assets and liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands, except weighted average life remaining):
Amortization of the above-market leases is recorded as a reduction to rental and other property income, and amortization expense for the in-place leases and other intangibles is included in depreciation and amortization in the accompanying condensed consolidated statements of operations. Amortization of below-market leases is recorded as an increase to rental and other property income in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization related to the intangible lease assets and liabilities for the three and nine months ended September 30, 2020 and 2019 (in thousands):
As of September 30, 2020, the estimated amortization relating to the intangible lease assets and liabilities is as follows (in thousands):
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REAL ESTATE-RELATED SECURITIES |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REAL ESTATE-RELATED SECURITIES | NOTE 6 — REAL ESTATE-RELATED SECURITIES During the nine months ended September 30, 2020, the Company invested in five CMBS with an estimated aggregate fair value of $75.2 million as of September 30, 2020. The CMBS mature on various dates from October 2022 through March 2034 and have interest rates ranging from 2.7% to 13.0%. The following is a summary of the Company’s real estate-related securities as of September 30, 2020 (in thousands):
The following table provides the activity for the real estate-related securities during the nine months ended September 30, 2020 (in thousands):
Unrealized gains and losses on real estate-related securities are recorded in other comprehensive income (loss), with a portion of the amount subsequently reclassified into interest expense and other, net in the accompanying condensed consolidated statements of operations as securities are sold and gains and losses are recognized. During the nine months ended September 30, 2020, the Company recorded $61,000 of unrealized gains on its real estate-relates securities. The total unrealized gain on real estate-related securities of $61,000 as of September 30, 2020 is included in accumulated other comprehensive (loss) income in the accompanying condensed consolidated statement of stockholders’ equity. The scheduled maturities of the Company’s real estate-related securities as of September 30, 2020 are as follows (in thousands):
Actual maturities of real estate-related securities can differ from contractual maturities because borrowers on certain corporate credit securities may have the right to prepay their respective debt obligations at any time. In addition, factors such as prepayments and interest rates may affect the yields on such securities. In estimating credit losses related to real estate-related securities, management considers a variety of factors, including (1) whether the Company has the intent to sell the impaired security before the recovery of its amortized cost basis, (2) whether the Company expects to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value, and (3) whether the Company expects to recover the entire amortized cost basis of the security. As of September 30, 2020, the Company had no credit losses related to real estate-related securities.
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LOANS HELD-FOR-INVESTMENT |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOANS HELD-FOR-INVESTMENT | NOTE 7 — LOANS HELD-FOR-INVESTMENT The Company’s loans held-for-investment consisted of the following as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):
During the nine months ended September 30, 2020, the Company invested $475.0 million in broadly syndicated loans. During the same period, the Company sold broadly syndicated loans for an aggregate gross sales price of $27.3 million, resulting in proceeds of $25.8 million after closing costs and a loss of $562,000. The loss was recorded as a decrease to interest expense and other, net in the condensed consolidated statements of operations. As of September 30, 2020, the Company had $42.1 million of unsettled broadly syndicated loan purchases included in cash and cash equivalents in the accompanying condensed consolidated balance sheet. As of September 30, 2020, the Company had $61.8 million of unfunded commitments related to CRE loans held-for-investment, the funding of which is subject to the satisfaction of borrower milestones. These commitments are not reflected in the accompanying condensed consolidated balance sheet. The following table details overall statistics for the Company’s loans held-for-investment as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):
____________________________________ (1) As of September 30, 2020, 100% of the Company’s CRE loans by principal balance earned a floating rate of interest, primarily indexed to U.S. dollar LIBOR. (2) Maximum maturity date assumes all extension options are exercised by the borrower; however, the Company’s CRE loans may be repaid prior to such date. Activity relating to the Company’s loans held-for-investment portfolio was as follows (dollar amounts in thousands):
____________________________________ (1) Other items primarily consist of purchase discounts or premiums, accretion of exit fees and deferred origination expenses. (2) Represents operating expenses paid by the Company on the borrower’s behalf in connection with the foreclosure proceedings that commenced during the three months ended September 30, 2020, as further discussed below in “Allowance for Credit Losses”. (3) Includes the repayment of a $40.8 million senior loan prior to the maturity date. (4) Represents accrued interest on loans whose terms do not require a current cash payment of interest. (5) Includes the initial allowance for credit losses against the loans held-for-investment recorded on January 1, 2020 and the increase in allowance for credit losses related to its loans held-for-investment during the nine months ended September 30, 2020, as further discussed below in “Allowance for Credit Losses”. Allowance for Credit Losses The allowance for credit losses reflects the Company’s current estimate of potential credit losses related to the loans held-for-investment included in the Company’s condensed consolidated balance sheets. Refer to Note 2 — Summary of Significant Accounting Policies for further discussion of the Company’s allowance for credit losses. The following table presents the activity in the Company’s allowance for credit losses by loan type for the three months ended September 30, 2020 (dollar amounts in thousands):
The Company’s initial allowance for credit losses against the loans held-for-investment of $2.0 million recorded on January 1, 2020 is reflected as a direct charge to retained earnings on the Company’s condensed consolidated statements of stockholders’ equity; however, subsequent changes to the allowance for credit losses are recognized through net income on the Company’s condensed consolidated statements of operations. During the nine months ended September 30, 2020, the Company recorded a $33.0 million increase in allowance for credit losses related to its loans held-for-investment, bringing the total allowance for credit losses to $35.0 million as of September 30, 2020. During the year ended December 31, 2019, the borrower on the Company’s eight mezzanine loans, which represents approximately 3.9% of total assets as of September 30, 2020, became delinquent on certain required reserve payments. During the three months ended March 31, 2020, the borrower remained delinquent on the required reserve payments and became delinquent on principal and interest. As a result, the Company recorded an allowance for credit losses on its mezzanine loans of $14.5 million for the three months ended March 31, 2020, which was the difference between the fair value of the collateral and the amortized cost basis of the loans. Additionally, during the three months ended June 30, 2020, the fair value of the collateral, which is based on comparable market sales, further decreased compared to the amortized cost basis and as a result, the Company recorded an additional allowance for credit losses on its mezzanine loans of $6.7 million. During the three months ended September 30, 2020, the Company commenced foreclosure proceedings to take control of the condominium properties in New York securing the mezzanine loans. As a result, the Company recorded an additional net increase of $3.6 million to its provision for loan loss on the four loans to reflect the estimated fair value of the collateral, which included $6.4 million of provision for loan loss associated with a cure payments receivable for operating expenses paid by the Company on the borrower’s behalf during the nine months ended September 30, 2020. As further described in Note 2 — Summary of Significant Accounting Policies, the Company evaluates its loans-held-for-investment portfolio on a quarterly basis. Each quarter, the Company assesses the risk factors of each loan, and assigns a risk rating based on several factors. Factors considered in the assessment include, but are not limited to, loan and credit structure, current LTV, debt yield, collateral performance, and the quality and condition of the sponsor, borrower, and guarantor(s). Loans are rated “1” (less risk) through “5” (greater risk), which ratings are defined in Note 2 — Summary of Significant Accounting Policies. The Company’s primary credit quality indicator is its risk ratings, which are further discussed above. The following table presents the net book value of the Company’s loans-held-for-investment portfolio as of September 30, 2020 by year of origination, loan type, and risk rating (dollar amounts in thousands):
____________________________________ (1) Date loan was originated or acquired by the Company. Origination dates are subsequently updated to reflect material loan modifications. (2) Weighted average risk rating calculated based on carrying value at period end.
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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | NOTE 8 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In the normal course of business, the Company uses certain types of derivative instruments for the purpose of managing or hedging its interest rate risk. During the nine months ended September 30, 2020, one of the Company’s interest rate swap agreements was partially terminated prior to the maturity date, resulting in a loss of $97,000. As a result of the partial termination, the effective date of the interest rate swap agreement was modified to May 27, 2020. The loss was recorded as an increase to interest expense and other, net included in the accompanying consolidated statements of operations. As of September 30, 2020, the Company had three interest rate swap agreements designated as hedging instruments. The following table summarizes the terms of the Company’s interest rate swap agreements designated as hedging instruments as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):
____________________________________ (1)The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of September 30, 2020. (2)As of December 31, 2019, the Company had two interest rate swap agreements in an asset position with a notional amount of $60.0 million and a fair value of $261,000 included in prepaid expenses and other assets on the condensed consolidated balance sheets. Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 3 — Fair Value Measurements. The notional amount under the interest rate swap agreements is an indication of the extent of the Company’s involvement in each instrument, but does not represent exposure to credit, interest rate or market risks. Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges in order to hedge the variability of the anticipated cash flows on its variable rate debt. The change in fair value of the derivative instruments that are designated as hedges is recorded in other comprehensive income (loss), with a portion of the amount subsequently reclassified to interest expense as interest payments are made on the Company’s variable rate debt. For the three and nine months ended September 30, 2020, the amount of losses reclassified from other comprehensive income (loss) as an increase to interest expense was $4.0 million and $8.3 million, respectively. For the three and nine months ended September 30, 2019, the amount of gains reclassified from other comprehensive income (loss) as a decrease to interest expense was $783,000 and $3.5 million, respectively. The total unrealized loss on interest rate swaps of $7.3 million and $3.9 million as of September 30, 2020 and December 31, 2019, respectively, is included in accumulated other comprehensive income (loss) in the accompanying condensed consolidated statement of stockholders’ equity. During the next 12 months, the Company estimates that $7.3 million will be reclassified from other comprehensive income (loss) as an increase to interest expense. The Company includes cash flows from interest rate swap agreements in net cash flows provided by operating activities on its condensed consolidated statements of cash flows, as the Company’s accounting policy is to present cash flows from hedging instruments in the same category in its condensed consolidated statements of cash flows as the category for cash flows from the hedged items. The Company has agreements with each of its derivative counterparties that contain provisions whereby if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its derivative obligations, resulting in an acceleration of payment. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value, inclusive of interest payments and accrued interest, of $8.0 million at September 30, 2020. In addition, the Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. The Company records credit risk valuation adjustments on its interest rate swaps based on the credit quality of the Company and the respective counterparty. There were no termination events or events of default related to the interest rate swaps as of September 30, 2020.
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CREDIT FACILITIES, NOTES PAYABLE AND REPURCHASE FACILITIES |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CREDIT FACILITIES, NOTES PAYABLE AND REPURCHASE FACILITIES | NOTE 9 — CREDIT FACILITIES, NOTES PAYABLE AND REPURCHASE FACILITIES As of September 30, 2020, the Company had $1.8 billion of debt outstanding, including net deferred financing costs, with a weighted average years to maturity of 2.0 years and a weighted average interest rate of 3.3%. The weighted average years to maturity is computed using the scheduled repayment date as specified in each loan agreement where applicable. The weighted average interest rate is computed using the interest rate in effect until the scheduled repayment date. Should a loan not be repaid by its scheduled repayment date, the applicable interest rate will increase as specified in the respective loan agreement. The following table summarizes the debt balances as of September 30, 2020 and December 31, 2019, and the debt activity for the nine months ended September 30, 2020 (in thousands):
____________________________________ (1) Includes deferred financing costs incurred during the period. (2) In connection with the repayment of certain mortgage notes, the Company recognized a loss on extinguishment of debt of $4.8 million during the nine months ended September 30, 2020. (3) Net premiums on mortgage notes payable were recorded upon the assumption of the respective debt instruments. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective debt instruments using the effective-interest method. (4) Deferred costs related to the term portion of the Credit Facility (as defined below). (5) Represents deferred financing costs written off during the period resulting from debt repayments prior to the respective maturity dates. Notes Payable As of September 30, 2020, the fixed rate debt outstanding of $507.1 million included $53.6 million of variable rate debt that is fixed through interest rate swap agreements, which has the effect of fixing the variable interest rates per annum through the maturity date of the variable rate debt. The fixed rate debt has interest rates ranging from 2.6% to 5.0% per annum. The fixed rate debt outstanding matures on various dates from April 5, 2021 through May 10, 2024. The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $860.7 million as of September 30, 2020. Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed. Credit Facilities The Company has a second amended and restated unsecured credit agreement (the “Second Amended and Restated Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent (“JPMorgan Chase”), and the other lenders party thereto that provides for borrowings of up to $1.24 billion as of September 30, 2020, which includes a $885.0 million unsecured term loan (the “Term Loan”) and up to $350.0 million in unsecured revolving loans (the “Revolving Loans” and, collectively with the Term Loan, the “Credit Facility”). The Term Loan matures on March 15, 2022 and the Revolving Loans mature on March 15, 2021; however, the Company has the right to extend the maturity date of the Revolving Loans to March 15, 2022. Depending upon the type of loan specified and overall leverage ratio, the Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month LIBOR multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread ranging from 1.65% to 2.25% or (ii) a base rate, ranging from 0.65% to 1.25%, plus the greater of: (a) JPMorgan Chase’s prime rate; (b) the Federal Funds Effective Rate (as defined in the Second Amended and Restated Credit Agreement) plus 0.50%; or (c) the one-month LIBOR multiplied by the statutory reserve rate plus 1.00%. As of September 30, 2020, there was $110.0 million outstanding under the Revolving Loans at a weighted average interest rate of 1.8%. As of September 30, 2020, the Term Loan outstanding totaled $885.0 million, $811.7 million of which is subject to interest rate swap agreements (the “Swapped Term Loan”). The interest rate swap agreements had the effect of fixing the Eurodollar Rate per annum of the Swapped Term Loan at an all-in rate of 3.7%. As of September 30, 2020, the Company had $995.0 million outstanding under the Credit Facility at a weighted average interest rate of 3.3% and $240.0 million in unused capacity, subject to borrowing availability. The Company had available borrowings of $60.8 million as of September 30, 2020. The Second Amended and Restated Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the Second Amended and Restated Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to the sum of (i) $2.0 billion plus (ii) 75% of the equity issued minus (iii) the aggregate amount of any redemptions or similar transaction from the date of the Second Amended and Restated Credit Agreement, a leverage ratio less than or equal to 60%, a fixed charge coverage ratio greater than 1.50, an unsecured debt to unencumbered asset value ratio equal to or less than 60%, an unsecured debt service coverage ratio greater than 1.75, a secured debt ratio equal to or less than 40% and the amount of secured debt that is recourse debt at no greater than 15% of total asset value. The Company believes it was in compliance with the financial covenants under the Second Amended and Restated Credit Agreement, as well as the financial covenants under the Company’s various fixed and variable rate debt agreements, as of September 30, 2020, with the exception of one mortgage note serviced by JPMorgan Chase where the Company failed to meet the debt service coverage ratio covenant under the mortgage at September 30, 2020, and one mortgage note serviced by Wells Fargo, N.A. (“Wells Fargo”) where the Company failed to meet the debt service coverage ratio covenant under the mortgage at September 30, 2020. Pursuant to the loan agreements, non-compliance with the debt service coverage ratio covenant triggers a cash sweep of the underlying property’s operating cash flow, which was waived by JPMorgan Chase during the nine months ended September 30, 2020. As of September 30, 2020, Wells Fargo had not initiated a cash sweep of the underlying property’s operating cash flow. On December 31, 2019 (the “Closing Date”), CMFT Corporate Credit Securities, LLC, an indirect wholly-owned, bankruptcy-remote subsidiary of the Company, entered into a revolving credit and security agreement (the “Credit and Security Agreement”) with the lenders from time to time parties thereto, Citibank, N.A. (“Citibank”), as administrative agent, CMFT Securities Investments, LLC, a wholly-owned subsidiary of the Company, as equityholder and as collateral manager, Citibank (acting through its Agency & Trust division), as both a collateral agent and as a collateral custodian, and Virtus Group, LP, as collateral administrator. The Credit and Security Agreement provides for borrowings in an aggregate principal amount up to $500.0 million (the “Credit Securities Revolver”), which may be increased from time to time pursuant to the Credit and Security Agreement. As of September 30, 2020, the amounts borrowed and outstanding under the Credit Securities Revolver totaled $176.5 million at a weighted average interest rate of 2.0%. Borrowings under the Credit and Security Agreement will bear interest equal to the three-month LIBOR for the relevant interest period, plus an applicable rate. The applicable rate is 1.70% per annum during the reinvestment period and 2.00% per annum during the amortization period (and, in each case, an additional 2.00% per annum following an event of default under the Credit and Security Agreement). The reinvestment period begins on the Closing Date and concludes on the earlier of (i) the date that is three years after the Closing Date, (ii) the final maturity date and (iii) the date on which the total assets under management of the Company and its wholly-owned subsidiaries is less than $1.25 billion (the “Reinvestment Period”). The final maturity date is the earliest to occur of: (i) the date that the Credit Securities Revolver is paid down and (ii) the second anniversary after the Reinvestment Period concludes. Borrowings under the Credit and Security Agreement are secured by substantially all of the assets held by CMFT Corporate Credit Securities, LLC, which shall primarily consist of broadly-syndicated senior secured loans subject to certain eligibility criteria under the Credit and Security Agreement. Repurchase Facilities On June 4, 2020, CMFT RE Lending RF Sub CB, LLC, an indirect wholly-owned subsidiary of the Company, entered into a Master Repurchase Agreement with Citibank (the “Citibank Repurchase Agreement”), which provides up to $300.0 million of financing primarily through Citibank’s purchase of the Company’s CRE mortgage loans and future funding advances (the “Citibank Repurchase Facility”). Additionally, on September 21, 2020, CMFT RE Lending RF Sub BB, LLC, an indirect wholly-owned subsidiary of the Company, entered into a second Master Repurchase Agreement with Barclays Bank PLC (“Barclays”) (the “Barclays Repurchase Agreement”), which provides up to $500.0 million of financing primarily through Barclays’ purchase of the Company’s CRE mortgage loans and future funding advances (the “Barclays Repurchase Facility”, and collectively with the Citibank Repurchase Facility, the “Repurchase Facilities”). The Citibank Repurchase Agreement and the Barclays Repurchase Agreement (collectively, the “Repurchase Agreements”) provide for simultaneous agreements by Citibank and Barclays to re-sell such purchased CRE mortgage loans back to CMFT RE Lending RF Sub CB, LLC and CMFT RE Lending RF Sub BB, LLC (collectively, the “CMFT Lending Subs”) at a certain future date or upon demand. Advances under the Repurchase Agreements accrue interest at per annum rates based on the one-month LIBOR, plus a spread to be determined on a case-by-case basis between Citibank or Barclays and the CMFT Lending Subs. The Repurchase Facilities mature on various dates between June 4, 2023 and September 21, 2023, with two one-year extension options, subject to certain conditions set forth in the Repurchase Agreements. In connection with the Repurchase Agreements, the Company (as the guarantor) entered into guaranties with Citibank and Barclays (the “Guaranties”), under which the Company agreed to guarantee up to 25% of the CMFT Lending Subs’ obligations under the Repurchase Agreements. As of September 30, 2020, the Company had three senior loans with an aggregate carrying value of $256.1 million financed with $174.7 million under the Repurchase Facilities, $100.2 million of which was financed under the Barclays Repurchase Facility at a weighted average interest rate of 2.9%, and $74.5 million of which was financed under the Citibank Repurchase Facility at a weighted average interest rate of 2.2%. The Repurchase Agreements and the Guaranties contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. In addition, the Guaranties contains financial covenants that require the Company to maintain: (i) minimum liquidity of not less than the lower of (a) $50.0 million and (b) the greater of (A) $10.0 million and (B) 5% of the Company’s recourse indebtedness, as defined in the Guaranties; (ii) minimum consolidated net worth greater than or equal to $1.0 billion plus (a) 75% of the equity issued by the Company following the respective closing dates of the Repurchase Agreements (the “Repurchase Closing Dates”) minus (b) the aggregate amount of any redemptions or similar transaction by the Company from the Repurchase Closing Dates; (iii) maximum leverage ratio of total indebtedness to total equity less than or equal to 80%; and (iv) minimum interest coverage ratio of EBITDA (as defined in the Guaranties) to interest expense equal to or greater than 1.40. The Company believes it was in compliance with the financial covenants under the Repurchase Agreements as of September 30, 2020. Maturities With respect to the $199.7 million of debt maturing within the next 12 months following the date these financial statements are issued, the Company believes cash on hand, proceeds from real estate asset dispositions, net cash provided by operations, borrowings available under the credit facilities or the entry into new financing arrangements will be sufficient in order to meet its debt obligations as they become due. The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to September 30, 2020 (in thousands):
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SUPPLEMENTAL CASH FLOW DISCLOSURES |
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SUPPLEMENTAL CASH FLOW DISCLOSURES | NOTE 10 — SUPPLEMENTAL CASH FLOW DISCLOSURES Supplemental cash flow disclosures for the nine months ended September 30, 2020 and 2019 are as follows (in thousands):
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COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 11 — COMMITMENTS AND CONTINGENCIES Litigation In the ordinary course of business, the Company may become subject to litigation and claims. The Company is not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or of which the Company’s properties are the subject. Unfunded Commitments As of September 30, 2020, the Company had $61.8 million of unfunded commitments related to its existing CRE loans held-for-investment. These commitments are not reflected in the accompanying condensed consolidated balance sheet. Unsettled Broadly Syndicated Loans As of September 30, 2020, the Company had $42.1 million of unsettled broadly syndicated loan acquisitions and $3.5 million of unsettled broadly syndicated loan sales, $28.6 million of which settled subsequent to September 30, 2020. Unsettled acquisitions are included in cash and cash equivalents in the accompanying condensed consolidated balance sheet. Purchase Commitments As of September 30, 2020, the Company had entered into purchase agreements with unaffiliated third-party sellers to acquire a 100% interest in one property, subject to meeting certain criteria, for an aggregate purchase price of $20.8 million, exclusive of closing costs. As of September 30, 2020, the Company had $300,000 of property escrow deposits held by escrow agents in connection with these future property acquisitions, which will be forfeited if the transactions are not completed under certain circumstances. These deposits are included in the accompanying condensed consolidated balance sheets in prepaid expenses and other assets. As of September 30, 2020, none of these escrow deposits had been forfeited. Environmental Matters In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. In addition, the Company may own or acquire certain properties that are subject to environmental remediation. Generally, the seller of the property, the tenant of the property and/or another third party is responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify the Company against future remediation costs. The Company also carries environmental liability insurance on its properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which the Company may be liable. The Company is not aware of any environmental matters which it believes are reasonably likely to have a material effect on its results of operations, financial condition or liquidity. Merger Agreements On August 30, 2020, the Company announced it had entered into the Merger Agreements. In the event the Merger Agreements are terminated in connection with the applicable Target REIT’s acceptance of a Superior Proposal or an Adverse Recommendation Change, then CCIT III and CCPT V must pay to the Company a termination fee of $710,000 and $9.85 million, respectively, and up to $130,000 and $1.79 million, respectively, as reimbursement for the Company’s Expenses (as defined in the applicable Merger Agreements), subject to certain exceptions set forth in the applicable Merger Agreement. If a Merger Agreement is terminated because the applicable Merger was not consummated before the Outside Date or because the applicable Stockholder Approval was not obtained, and (i) an Acquisition Proposal has been publicly announced or otherwise communicated to the Target REIT’s stockholders prior to the Stockholders Meeting and (ii) within 12 months after the date of such termination (A) the applicable Target REIT consummates or enters into an agreement (that is thereafter consummated) in respect of an Acquisition Proposal for 50% or more of the applicable Target REIT’s equity or assets or (B) the board of directors of the applicable Target REIT recommends or fails to recommend against an Acquisition Proposal structured as a tender or exchange offer for 50% or more of the applicable Target REIT’s equity and such Acquisition Proposal is actually consummated, then CCIT III and CCPT V must pay to the Company a termination fee of $710,000 and $9.85 million, respectively, and up to $130,000 and $1.79 million, respectively as reimbursement for CMFT’s Expenses. No such fees were paid as of September 30, 2020. Also on August 30, 2020, the Company entered into the CCIT II Merger Agreement. Prior to the approval of the CCIT II Merger by holders of a majority of the outstanding shares of CCIT II common stock entitled to vote thereon, CCIT II received an acquisition proposal that CCIT II’s board of directors determined to be a Superior Proposal. As a result, on October 29, 2020, CCIT II terminated the CCIT II Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal. In accordance with the termination of the CCIT II Merger Agreement, CCIT II paid to the Company a termination fee of $7.38 million and agreed to pay to the Company the amount of the Company’s expenses incurred in connection with the CCIT II Merger agreement up to $3.69 million.
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RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS |
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RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS | NOTE 12 — RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS The Company has incurred fees and expenses payable to CMFT Management and certain of its affiliates in connection with the acquisition, management and disposition of its assets. On August 20, 2019, the Company and CMFT Management entered into an Amended and Restated Management Agreement (the “Management Agreement”), which amended and restated that certain Advisory Agreement between the parties dated January 24, 2012, as amended (the “Prior Advisory Agreement”). Following the effective date of the Management Agreement, CMFT Management is no longer entitled to receive the advisory fee, acquisition fees, subordinated performance fee, or disposition fees pursuant to the Prior Advisory Agreement, as described below; provided, however, that for the Company’s properties under contract to be sold or specifically identified in a broker agreement as being marketed for sale as of the effective date of the Management Agreement, CMFT Management may be entitled to receive a disposition fee in accordance with the terms of the Prior Advisory Agreement. In addition, CMFT Management generally shall continue to be entitled to reimbursement for costs and expenses to the extent incurred on behalf of the Company in accordance with the Management Agreement; provided, however, that the limits on reimbursement for organization and offering expenses, acquisition expenses and operating expenses as defined and provided in the Prior Advisory Agreement shall no longer be applicable. Management and investment advisory fees Pursuant to the Management Agreement, beginning on August 20, 2019, the Company pays CMFT Management a management fee, payable quarterly in arrears, equal to the greater of (a) $250,000 per annum ($62,500 per quarter) and (b) 1.50% per annum (0.375% per quarter) of the Company’s Equity (as defined in the Management Agreement). On December 6, 2019, CMFT Securities Investments, LLC (“CMFT Securities”), which is a wholly owned subsidiary of the Company, entered into an investment advisory and management agreement (the “Investment Advisory and Management Agreement”) with CIM Capital IC Management, LLC (the “Investment Advisor”). CMFT Securities was formed for the purpose of holding any securities investments made by the Company. The Investment Advisor, a wholly-owned subsidiary of CIM, is registered as an investment advisor under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Pursuant to the Investment Advisory and Management Agreement, the Investment Advisor manages the day-to-day business affairs of CMFT Securities and its investments in corporate credit and real estate-related securities (collectively, the “Managed Assets”), subject to the supervision of the Board. In connection with the services provided by the Investment Advisor, CMFT Securities pays the Investment Advisor an investment advisory fee (the “Investment Advisory Fee”), payable quarterly in arrears, equal to 1.50% per annum (0.375% per quarter) of CMFT Securities’ Equity (as defined in the Investment Advisory and Management Agreement). Because the Managed Assets are excluded from the calculation of management fees payable by the Company to CMFT Management pursuant to the Management Agreement, the total management and advisory fees payable by the Company to its external advisors are not increased as a result of the Investment Advisory and Management Agreement. In addition, the Investment Advisor is eligible to receive a portion of the incentive compensation payable to CMFT Management pursuant to the Management Agreement, as discussed below. In the event that the incentive compensation is earned and payable with respect to any quarter, CMFT Management calculates the portion of the incentive compensation that was attributable to the Managed Assets and payable to the Investment Advisor. Pursuant to the Investment Advisory and Management Agreement, CMFT Securities reimburses the Investment Advisor for costs and expenses incurred by the Investment Advisor on its behalf. In addition, on December 6, 2019, the Investment Advisor entered into a sub-advisory agreement (the “Sub-Advisory Agreement”) with OFS Capital Management, LLC (the “Sub-Advisor”) to act as an investment sub-advisor to CMFT Securities. The Sub-Advisor is registered as an investment adviser under the Advisers Act and is an affiliate of the Investment Advisor. The Sub-Advisor is responsible for providing investment management services with respect to the corporate credit-related securities held by CMFT Securities. On a quarterly basis, the Investment Advisor designates 50% of the sum of the Investment Advisory Fee and incentive compensation payable to the Investment Advisor as sub-advisory fees. Incentive compensation Pursuant to the Management Agreement, beginning on August 20, 2019, CMFT Management is entitled to receive incentive compensation, payable with respect to each quarter, which is generally equal to the excess of (a) the product of (i) 20% and (ii) the excess of (A) Core Earnings (as defined in the Management Agreement) of the Company for the previous 12-month period, over (B) the product of (1) the Company’s Consolidated Equity (as defined in the Management Agreement) in the previous 12-month period, and (2) 7% per annum, over (b) the sum of any incentive compensation paid to CMFT Management with respect to the first three calendar quarters of such previous 12-month period (or such lesser number of completed calendar quarters preceding the applicable period, if applicable). During the three and nine months ended September 30, 2020 and 2019, no incentive compensation fees were incurred. Acquisition fees and expenses Pursuant to the Prior Advisory Agreement, through August 20, 2019, the Company paid CMFT Management or its affiliates acquisition fees of up to 2.0% of: (1) the contract purchase price of each property or asset the Company acquired; (2) the amount paid in respect of the development, construction or improvement of each asset the Company acquired; (3) the purchase price of any loan the Company acquired; and (4) the principal amount of any loan the Company originated. In addition, the Company reimbursed CMFT Management or its affiliates for acquisition-related expenses incurred in the process of acquiring properties, so long as the total acquisition fees and expenses relating to the transaction do not exceed 6.0% of the contract purchase price, unless otherwise approved by a majority of the Board, including a majority of the Company’s independent directors, as commercially competitive, fair and reasonable to the Company. Other transaction-related expenses, such as advisor reimbursements for disposition activities, are expensed as incurred and are included in transaction-related expenses on the condensed consolidated statements of operations. Advisory fees and expenses Pursuant to the Prior Advisory Agreement, through August 20, 2019, the Company paid CMFT Management a monthly advisory fee based upon the Company’s monthly average invested assets, which, effective January 1, 2019, was based on the estimated market value of such assets used to determine the Company’s estimated per share NAV as of December 31, 2018, and for those assets acquired subsequent to December 31, 2018, was based on the purchase price. The monthly advisory fee was equal to the following amounts: (1) an annualized rate of 0.75% paid on the Company’s average invested assets that are between $0 and $2.0 billion; (2) an annualized rate of 0.70% paid on the Company’s average invested assets that are between $2.0 billion and $4.0 billion; and (3) an annualized rate of 0.65% paid on the Company’s average invested assets that are over $4.0 billion. Operating expenses The Company reimburses CMFT Management or its affiliates for certain expenses CMFT Management or its affiliates paid or incurred in connection with the services provided to the Company. Through August 20, 2019, such reimbursements were subject to the limitation that the Company would not reimburse CMFT Management or its affiliates for any amount by which the operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceeded the greater of: (1) 2.0% of average invested assets, or (2) 25.0% of net income excluding any additions to reserves for depreciation or other similar non-cash reserves and excluding any gain from the sale of assets for that period. Pursuant to the Management Agreement, beginning on August 20, 2019, such limits are no longer applicable. The Company will reimburse CMFT Management or its affiliates for salaries and benefits paid to personnel who provide services to the Company including the Company’s executive officers and any portfolio management, acquisitions or investment professionals. Disposition fees Pursuant to the Prior Advisory Agreement, through August 20, 2019, if CMFT Management or its affiliates provided a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more properties (or the Company’s entire portfolio), the Company paid CMFT Management or its affiliates a disposition fee in an amount equal to up to one-half of the real estate or brokerage commission paid by the Company to third parties on the sale of such property, not to exceed 1.0% of the contract price of the property sold; provided, however, in no event would the total disposition fees paid to CMFT Management, its affiliates and unaffiliated third parties exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price. For the Company’s properties under contract to be sold or specifically identified in a broker agreement as being marketed for sale as of August 20, 2019, CMFT Management may be entitled to receive a disposition fee in accordance with the terms of the Prior Advisory Agreement. Subordinated performance fees Pursuant to the Prior Advisory Agreement, through August 20, 2019, if the Company was sold or its assets were liquidated, CMFT Management was entitled to receive a subordinated performance fee equal to 15.0% of the net sale proceeds remaining after stockholders received, from regular distributions plus special distributions paid from proceeds of such sale, a return of their net capital invested and an 8.0% annual cumulative, non-compounded return. Alternatively through August 20, 2019, if the Company’s shares were listed on a national securities exchange, CMFT Management was entitled to a subordinated performance fee equal to 15.0% of the amount by which the market value of the Company’s outstanding stock plus all distributions paid by the Company prior to listing, exceeded the sum of the total amount of capital raised from stockholders and the amount of distributions necessary to generate an 8.0% annual cumulative, non-compounded return to stockholders. As an additional alternative, upon termination of the Prior Advisory Agreement, CMFT Management was entitled to a subordinated performance fee similar to the fee to which CMFT Management would have been entitled had the portfolio been liquidated (based on an independent appraised value of the portfolio) on the date of termination. During the three and nine months ended September 30, 2020 and 2019, no subordinated performance fees were incurred related to any such events. The Company recorded fees and expense reimbursements as shown in the table below for services provided by CMFT Management or its affiliates related to the services described above during the periods indicated (in thousands):
Of the amounts shown above, $12.7 million and $7.4 million had been incurred, but not yet paid, for services provided by CMFT Management or its affiliates in connection with management and operating activities during the nine months ended September 30, 2020 and 2019, respectively, and such amounts were recorded as liabilities of the Company as of such dates. Due to Affiliates As of September 30, 2020 and December 31, 2019, $12.7 million and $14.5 million, respectively, had been incurred primarily for management fees and operating expenses by CMFT Management or its affiliates, but had not yet been reimbursed by the Company. These amounts were included in due to affiliates in the condensed consolidated balance sheets for such periods.
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ECONOMIC DEPENDENCY |
9 Months Ended |
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Sep. 30, 2020 | |
Economic Dependency [Abstract] | |
ECONOMIC DEPENDENCY | NOTE 13 — ECONOMIC DEPENDENCY Under various agreements, the Company has engaged and may in the future engage CMFT Management or its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services and stockholder relations. As a result of these relationships, the Company is dependent upon CMFT Management or its affiliates. In the event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services.
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STOCKHOLDERS’ EQUITY |
9 Months Ended |
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Sep. 30, 2020 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 14 — STOCKHOLDERS’ EQUITY Equity-Based Compensation On August 10, 2018, the Board approved the adoption of the Company’s 2018 Equity Incentive Plan (the “Plan”), under which 400,000 of the Company’s shares of common stock were reserved for issuance and awards of approximately 367,500 shares of common stock are available for future grant as of September 30, 2020. As of September 30, 2020, the Company has granted awards of approximately 6,500 restricted shares to each of the independent members of the Board (approximately 32,500 restricted shares in aggregate) under the Plan. As of September 30, 2020, 14,000 of the restricted shares had vested based on one year of continuous service. The remaining 18,500 shares fully vested in October 2020. The fair value of the Company’s share awards is determined using the Company’s per share NAV on the date of grant. Compensation expense related to these restricted shares is recognized over the vesting period. The Company recorded compensation expense of $40,000 and $120,000 for the three and nine months ended September 30, 2020, respectively, and $34,000 and $98,000 for the three and nine months ended September 30, 2019, respectively, related to these restricted shares which is included in general and administrative expenses in the accompanying condensed consolidated statements of operations. All of the total compensation expense related to these restricted shares was recognized ratably over the period of service prior to October 2020.
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LEASES |
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LEASES | NOTE 15 — LEASES The Company’s real estate assets are leased to tenants under operating leases for which the terms, expirations and extension options vary. The Company’s operating leases do not convey to the lessee the right to purchase the underlying asset upon expiration of the lease period. To determine whether a contract contains a lease, the Company reviews contracts to determine if the agreement conveys the right to control the use of an asset. The Company accounts for lease and non-lease components as a single, combined operating lease component. Non-lease components primarily consist of maintenance services, including CAM, real estate taxes, insurance and utilities paid for by the lessor but consumed by the lessee. Non-lease components are considered to be variable rental and other property income and are recognized in the period incurred. As of September 30, 2020, the leases had a weighted-average remaining term of 8.5 years. Certain leases include 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 negotiated terms and conditions. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of September 30, 2020, the future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows (in thousands):
A certain amount of the Company’s rental and other property income is from tenants with leases which are subject to contingent rent provisions. These contingent rents are subject to the tenant achieving periodic revenues in excess of specified levels. For the three and nine months ended September 30, 2020 and 2019, the amount of the contingent rent earned by the Company was not significant. Rental and other property income during the three and nine months ended September 30, 2020 and 2019 consisted of the following (in thousands):
__________________________________ (1)Consists primarily of fixed contractual payments from operating leases with tenants recognized on a straight-line basis over the lease term, including amortization of acquired above- and below-market leases, and is net of uncollectable lease-related receivables. (2)Consists primarily of tenant reimbursements for recoverable real estate taxes and property operating expenses, and percentage rent. The Company has one property subject to a non-cancelable operating ground lease with a remaining term of 12.9 years. Upon initial , the Company recognized a lease liability (in deferred rental income and other liabilities) and a related ROU asset (in prepaid expenses, derivative assets and other assets) of $2.7 million in the condensed consolidated balance sheets. The lease liability and ROU asset were initially measured at the present value of the future minimum lease payments using a discount rate of 4.3%. This reflects the Company’s incremental borrowing rate, which was calculated based on the interest rate the Company would incur to borrow on a fully collateralized basis over a term similar to the lease. The Company recognized $63,000 and $188,000 of ground lease expense during the three and nine months ended September 30, 2020, respectively, of which $61,000 and $182,000 were paid in cash during the period it was recognized. As of September 30, 2020, the Company’s scheduled future minimum rental payments related to its operating ground lease is approximately $63,000 for the remainder of 2020, $250,000 annually for 2021 through 2025, and $1.9 million thereafter through the maturity date of the lease in August 2033.
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LEASES | NOTE 15 — LEASES The Company’s real estate assets are leased to tenants under operating leases for which the terms, expirations and extension options vary. The Company’s operating leases do not convey to the lessee the right to purchase the underlying asset upon expiration of the lease period. To determine whether a contract contains a lease, the Company reviews contracts to determine if the agreement conveys the right to control the use of an asset. The Company accounts for lease and non-lease components as a single, combined operating lease component. Non-lease components primarily consist of maintenance services, including CAM, real estate taxes, insurance and utilities paid for by the lessor but consumed by the lessee. Non-lease components are considered to be variable rental and other property income and are recognized in the period incurred. As of September 30, 2020, the leases had a weighted-average remaining term of 8.5 years. Certain leases include 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 negotiated terms and conditions. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of September 30, 2020, the future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows (in thousands):
A certain amount of the Company’s rental and other property income is from tenants with leases which are subject to contingent rent provisions. These contingent rents are subject to the tenant achieving periodic revenues in excess of specified levels. For the three and nine months ended September 30, 2020 and 2019, the amount of the contingent rent earned by the Company was not significant. Rental and other property income during the three and nine months ended September 30, 2020 and 2019 consisted of the following (in thousands):
__________________________________ (1)Consists primarily of fixed contractual payments from operating leases with tenants recognized on a straight-line basis over the lease term, including amortization of acquired above- and below-market leases, and is net of uncollectable lease-related receivables. (2)Consists primarily of tenant reimbursements for recoverable real estate taxes and property operating expenses, and percentage rent. The Company has one property subject to a non-cancelable operating ground lease with a remaining term of 12.9 years. Upon initial , the Company recognized a lease liability (in deferred rental income and other liabilities) and a related ROU asset (in prepaid expenses, derivative assets and other assets) of $2.7 million in the condensed consolidated balance sheets. The lease liability and ROU asset were initially measured at the present value of the future minimum lease payments using a discount rate of 4.3%. This reflects the Company’s incremental borrowing rate, which was calculated based on the interest rate the Company would incur to borrow on a fully collateralized basis over a term similar to the lease. The Company recognized $63,000 and $188,000 of ground lease expense during the three and nine months ended September 30, 2020, respectively, of which $61,000 and $182,000 were paid in cash during the period it was recognized. As of September 30, 2020, the Company’s scheduled future minimum rental payments related to its operating ground lease is approximately $63,000 for the remainder of 2020, $250,000 annually for 2021 through 2025, and $1.9 million thereafter through the maturity date of the lease in August 2033.
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SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16 — SUBSEQUENT EVENTS The following events occurred subsequent to September 30, 2020: Broadly Syndicated Loans Subsequent to September 30, 2020, the Company settled $42.2 million of net broadly syndicated loan transactions, $28.6 million of which were traded as of September 30, 2020. Property Disposition Subsequent to September 30, 2020, the Company disposed of one property for an aggregate gross sales price of $7.7 million. The property disposition resulted in proceeds of $7.4 million after closing costs to CMFT Management or its affiliates and a gain of approximately $470,000. The Company has no continuing involvement with this property. Repurchase Facilities Subsequent to September 30, 2020, the Company received borrowings under the Repurchase Facilities in an aggregate amount of $56.2 million. Advances under the Repurchase Agreements accrue interest at per annum rates based on the one-month LIBOR, plus a spread to be determined on a case-by-case basis between Citibank or Barclays and the CMFT Lending Subs, as discussed in Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities. Termination of CCIT II Merger Agreement Prior to the CCIT II Stockholder Approval, CCIT II received an acquisition proposal that CCIT II’s board of directors determined to be a Superior Proposal. As a result, on October 28, 2020, CCIT II terminated the CCIT II Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal. In accordance with the termination of the CCIT II Merger Agreement, CCIT II paid to the Company a termination fee of $7.38 million and agreed to pay the amount of the Company’s expenses incurred in connection with the CCIT II Merger Agreement up to $3.69 million. Amendment to CCIT III Merger Agreement On November 3, 2020, the parties to the CCIT III Merger Agreement entered into Amendment No. 1 to Agreement and Plan of Merger (the “Amendment”), pursuant to which (i) the CCIT III Merger Agreement was amended to increase the exchange ratio set forth therein from 1.093 to 1.098 shares of the Company’s common stock for each share of CCIT III Common Stock (as each term is defined in the CCIT III Merger Agreement) (with such ratio subject to adjustments in accordance with the terms and conditions of the CCIT III Merger Agreement) and (ii) CCIT III irrevocably waived its right to terminate the Merger Agreement set forth in Section 9.1(c)(iii) in relation to the amendment on October 29, 2020 of the CCPT V Merger Agreement to increase the exchange ratio set forth therein. Amendments to CCPT V Merger Agreement On October 22, 2020, the parties to the CCPT V Merger Agreement entered into the First Amendment to Agreement and Plan of Merger, pursuant to which CCPT V was granted an extension under limited circumstances to timely deliver a CCPT V Change Notice (as defined in the CCPT V Merger Agreement) in order for the Go Shop Termination Payment (as defined in the CCPT V Merger Agreement) to be applicable in those circumstances. On October 24, 2020, the parties to the CCPT V Merger Agreement entered into the Second Amendment to Agreement and Plan of Merger, pursuant to which the CCPT V was granted another extension under limited circumstances to timely deliver a CCPT V Change Notice in order for the Go Shop Termination Payment to be applicable in those circumstances. On October 29, 2020, the parties to the CCPT V Merger Agreement entered into Amendment No. 3 to Agreement and Plan of Merger, pursuant to which the CCPT V Merger Agreement was amended to (i) increase the exchange ratio set forth therein from 2.691 to 2.892 shares of the Company’s common stock for each share of CCPT V Common Stock (as each term is defined in the CCPT V Merger Agreement) (with such ratio subject to adjustments in accordance with the terms and conditions of the CCPT V Merger Agreement), (ii) increase the amount of the Full Termination Payment (as defined in the CCPT V Merger Agreement) from $9.17 million to $9.85 million and (iii) increase the maximum amount of Expenses (as defined in the CCPT V Merger Agreement) payable by either by the Company or CCPT V to the other in connection with certain terminations of the CCPT V Merger Agreement from $1.67 million to $1.79 million. Registration Statements on Form S-4 In connection with the Mergers, the Company filed two registration statements on Form S-4 (File Nos. 333-249292 and 333-249294), each of which was declared effective by the SEC on November 10, 2020, that contain a prospectus of the Company. The Mergers are currently anticipated to close by year end 2020.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
Basis of Accounting | The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying condensed consolidated financial statements. | ||||||||||||||||||||||||||||||
Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the SEC regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019, and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The condensed consolidated financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
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Reclassifications | Reclassifications Certain amounts in the Company’s prior period condensed consolidated financial statements have been reclassified to conform to the current period presentation.These reclassifications had no effect on previously reported totals or subtotals.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Real Estate Assets, Recoverability of Real Estate Assets, Assets Held for Sale, and Disposition of Real Estate Assets | Real Estate Assets Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:
Recoverability of Real Estate Assets The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to: bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, lease concessions and other factors; a significant decrease in a property’s revenues due to lease terminations; vacancies; co-tenancy clauses; reduced lease rates; changes in anticipated holding periods; or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions.The Company’s impairment assessment as of September 30, 2020 was based on the most current information available to the Company, including expected holding periods. If the Company’s expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. The Company cannot provide any assurance that additional material impairment charges with respect to the Company’s real estate assets will not occur during 2020 or in future periods, particularly with respect to any negative impacts to the Company that may result from the economic disruptions caused by the current novel coronavirus (“COVID-19”) pandemic. If the effects of the COVID-19 pandemic cause economic and market conditions to continue to deteriorate or if the Company’s expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. As of September 30, 2020, the Company has not identified any further impairments resulting from COVID-19 related impacts, including as a result of tenant requests for rent relief. The Company generally intends to hold its assets for the long-term; therefore, a temporary change in cash flows due to COVID-19 related impacts alone would not be an indicator of impairment. However, the Company has yet to see the long-term effects of the COVID-19 pandemic on the economy and the extent to which it may impact the Company’s tenants in the future. Indications of a tenant’s inability to continue as a going concern, changes in the Company’s view or strategy relative to a tenant’s business or industry as a result of the economic impacts of the COVID-19 pandemic, or changes in the Company’s long-term hold strategies, could be indicative of an impairment indicator. Accordingly, the Company will continue to monitor circumstances and events in future periods to determine whether the carrying value of the Company’s real estate assets are recoverable. The assumptions and uncertainties utilized in the evaluation of the impairment of real estate assets are discussed in detail in Note 3 — Fair Value Measurements. See also Note 4 — Real Estate Assets for further discussion regarding real estate investment activity. Assets Held for SaleWhen a real estate asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the assets related to the property and estimate its fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs. As of December 31, 2019, the Company expected to sell a substantial portion of its anchored-shopping center portfolio and certain single-tenant properties within the next 24 months, subject to market conditions. In light of current market conditions brought on by the COVID-19 pandemic, the Company cannot provide assurance that these properties will be sold within a 24-month period.Disposition of Real Estate AssetsGains and losses from dispositions are recognized once the various criteria relating to the terms of sale and any subsequent involvement by the Company with the asset sold are met. A discontinued operation includes only the disposal of a component of an entity and represents a strategic shift that has (or will have) a major effect on an entity’s financial results. The Company’s property dispositions during the nine months ended September 30, 2020 and 2019 did not qualify for discontinued operations presentation, and, thus, the results of the properties that were sold will remain in operating income, and any associated gains or losses from the disposition are included in gain on disposition of real estate, net.
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Allocation of Purchase Price of Real Estate Assets | Allocation of Purchase Price of Real Estate Assets Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- and below-market leases and the value of in-place leases and other intangibles, based in each case on their relative fair values. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information. The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could materially impact the Company’s results of operations. Acquisition-related fees and certain acquisition-related expenses related to asset acquisitions are capitalized and allocated to tangible and intangible assets and liabilities, as described above.
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Restricted Cash | Restricted CashAs part of certain debt agreements, rents from certain encumbered properties are deposited directly into a lockbox account, from which the monthly debt service payment is disbursed to the lender and the excess is disbursed to the Company. | ||||||||||||||||||||||||||||||
Real Estate-Related Securities | Real Estate-Related SecuritiesReal estate-related securities consists primarily of the Company’s investment in commercial mortgage-backed securities (“CMBS”). The Company determines the appropriate classification for real estate-related securities at the time of purchase and reevaluates such designation as of each balance sheet date. As of September 30, 2020, the Company classified its investments as available-for-sale as the Company is not actively trading the securities; however, the Company may sell them prior to their maturity. These investments are carried at their estimated fair value with unrealized gains and losses reported in other comprehensive income (loss). The Company monitors its available-for-sale securities for impairment. A loss is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost has resulted from a credit loss or other factors. The Company records impairments related to credit losses through an allowance for credit losses. However, the allowance is limited by the amount that the fair value is less than the amortized cost basis. The Company considers many factors in determining whether a credit loss exists, including, but not limited to, the extent to which the fair value is less than the amortized cost basis, recent events specific to the security, industry or geographic area, the payment structure of the security, the failure of the issuer of the security to make scheduled interest or principal payments, and external credit ratings and recent changes in such ratings. The analysis of determining whether a credit loss exists requires significant judgments and assumptions. The use of alternative judgments and assumptions could result in a different conclusion. The amortized cost of real estate-related securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method and is recorded in the accompanying condensed consolidated statements of operations in interest and other expense, net. Upon the sale of a security, the realized net gain or loss is computed on the specific identification method.
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Loans Held-for-Investment | Loans Held-for-Investment The Company has acquired, and may continue to acquire, loans related to real estate assets. Additionally, the Company may acquire and originate credit investments, including commercial mortgage loans, mezzanine loans, preferred equity, and other loans and securities related to commercial real estate assets, as well as corporate loan opportunities that are consistent with the Company’s investment strategy and objectives. The Company intends to hold the loans held-for-investment for the foreseeable future or until maturity. Loans held-for-investment are carried on the Company’s condensed consolidated balance sheets at amortized cost, net of any allowance for credit losses. Discounts or premiums, origination fees and exit fees are amortized as a component of interest income using the effective interest method over the life of the respective loans, or on a straight-line basis when it approximates the effective interest method. Loan acquisition fees paid to CMFT Management or its affiliates are expensed as incurred and are included in transaction-related expenses on the accompanying condensed consolidated statements of operations. Upon the sale of a loan, the realized net gain or loss is computed on the specific identification method. Interest earned is either received in cash or capitalized to loans held-for-investment and related receivables, net in the Company’s condensed consolidated balance sheets. Interest is capitalized when certain conditions are met as specified in each loan agreement.Accrual of interest income is suspended on nonaccrual loans. Loans that are past due 90 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status. Interest collected is recognized on a cash basis by crediting income when received. Loans may be restored to accrual status when all principal and interest are current and full repayment of the remaining contractual principal and interest are reasonably assured.
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Allowance for Credit Losses | Allowance for Credit Losses The Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), as further described in “Recent Accounting Pronouncements,” on January 1, 2020. The allowance for credit losses required under ASU 2016-13 reflects the Company’s current estimate of potential credit losses related to the Company’s loans held-for-investment included in the condensed consolidated balance sheets. The initial allowance for credit losses recorded on January 1, 2020 is reflected as a direct charge to retained earnings on the Company’s condensed consolidated statements of stockholders’ equity; however, subsequent changes to the allowance for credit losses are recognized through net income on the Company’s condensed consolidated statements of operations. While ASU 2016-13 does not require any particular method for determining the allowance for credit losses, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the duration of each respective loan. In addition, other than a few narrow exceptions, ASU 2016-13 requires that all financial instruments subject to the credit loss model have some amount of loss reserve to reflect the GAAP principal underlying the credit loss model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors. The Company has elected to use a discounted cash flow model to estimate the allowance for credit losses. This model requires the Company to develop cash flows which project estimated credit losses over the life of the loan and discount these cash flows at the asset’s effective interest rate. The Company then records an allowance for credit losses equal to the difference between the amortized cost basis of the asset and the present value of the expected cash flows. The Company considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that the Company determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral less costs to sell and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that the Company determines foreclosure is not probable, the Company applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. For the Company’s broadly syndicated loans, the Company uses a probability of default and loss given default method using an underlying third-party CMBS/CRE loan database with historical loan losses from 1998 to 2019. The Company may use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data. The Company using the modified retrospective method for all financial assets measured at amortized cost. Prior to adoption, the Company had no allowance for credit losses on its condensed consolidated balance sheets. The Company recorded a cumulative-effective adjustment to the opening retained earnings in its condensed consolidated statement of stockholders’ equity as of January 1, 2020 of $2.0 million. Quarterly, the Company evaluates the risk of all loans and assigns a risk rating based on a variety of factors, grouped as follows: (i) loan and credit structure, including the as-is loan-to-value (“LTV”) ratio and structural features; (ii) quality and stability of real estate value and operating cash flow, including debt yield, dynamics of the geography, property type and local market, physical condition, stability of cash flow, leasing velocity and quality and diversity of tenancy; (iii) performance against underwritten business plan; and (iv) quality, experience and financial condition of sponsor, borrower and guarantor(s). Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from least risk to greatest risk, respectively, which ratings are defined as follows: 1-Outperform — Most satisfactory asset quality and liquidity, good leverage capacity. A “1” rating maintains predictable and strong cash flows from operations. The trends and outlook for the credit's operations, balance sheet, and industry are neutral to favorable. Collateral, if appropriate, exceeds performance metrics; 2-Meets or Exceeds Expectations — Acceptable asset quality, moderate excess liquidity, modest leverage capacity. A “2” rating could have some financial/non-financial weaknesses which are offset by strengths; however, the credit demonstrates an ample current cash flow from operations. The trends and outlook for the credit's operations, balance sheet, and industry are generally positive or neutral. Collateral performance, if appropriate, meets or exceeds substantially all performance metrics included in original or current underwriting / business plan; 3-Satisfactory — Acceptable asset quality, somewhat strained liquidity, minimal leverage capacity. A “3” rating is at times characterized by acceptable cash flows from operations. The trends and conditions of the credit's operations and balance sheet are neutral. Collateral performance, if appropriate, meets or is on track to meet underwriting; business plan can reasonably be achieved; 4-Underperformance — The debt investment possesses credit deficiencies or potential weaknesses which deserve management’s close and continued attention. The portfolio company’s operations and/or balance sheet have demonstrated an adverse trend or deterioration which, while serious, has not reached the point where the liquidation of debt is jeopardized. These weaknesses are generally considered correctable by the borrower in the normal course of business but may weaken the asset or inadequately protect the Company’s credit position if not checked or corrected. Collateral performance, if appropriate, falls short of original underwriting, material differences exist from business plan, or both; technical milestones have been missed; defaults may exist, or may soon occur absent material improvement; and 5-Default/Possibility of Loss — The debt investment is protected inadequately by the current enterprise value or paying capacity of the obligor or of the collateral, if any. The underlying company’s operations has well-defined weaknesses based upon objective evidence, such as recurring or significant decreases in revenues and cash flows. Major variance from business plan; loan covenants or technical milestones have been breached; timely exit from loan via sale or refinancing is questionable; risk of principal loss. Collateral performance, if appropriate, is significantly worse than underwriting. The Company generally assigns a risk rating of “3” to all newly originated or acquired loans-held-for-investment during a most recent quarter, except in the case of specific circumstances warranting an exception. Due to the COVID-19 pandemic and the dislocation it has caused to the national economy, the commercial real estate markets, and the capital markets, the Company’s ability to estimate key inputs for estimating the allowance for credit losses has been materially and adversely impacted. Key inputs to the estimate include, but are not limited to, LTV, debt service coverage ratio, future operating cash flow and performance of collateral properties, the financial strength and liquidity of borrowers and sponsors, capitalization rates and discount rates used to value commercial real estate properties, and observable transactions involving the sale or financing of commercial properties. Estimates made by management are necessarily subject to change due to the lack of observable inputs and uncertainty regarding the duration of the COVID-19 pandemic and its aftereffects.
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Leases | Leases The Company has lease agreements with lease and non-lease components. The Company has elected to not separate non-lease components from lease components for all classes of underlying assets (primarily real estate assets) and will account for the combined components as rental and other property income. Non-lease components included in rental and other property income include certain tenant reimbursements for maintenance services (including common-area maintenance services or “CAM”), real estate taxes, insurance and utilities paid for by the lessor but consumed by the lessee. As a lessor, the Company has further determined that this policy will be effective only on a lease that has been classified as an operating lease and the revenue recognition pattern and timing is the same for both types of components. The Company is not a party to any material leases where it is the lessee. Significant judgments and assumptions are inherent in not only determining if a contract contains a lease, but also the lease classification, terms, payments, and, if needed, discount rates. Judgments include the nature of any options, including if they will be exercised, evaluation of implicit discount rates and the assessment and consideration of “fixed” payments for straight-line rent revenue calculations. Lease costs represent the initial direct costs incurred in the origination, negotiation and processing of a lease agreement. Such costs include outside broker commissions and other independent third-party costs and are amortized over the life of the lease on a straight-line basis. Costs related to salaries and benefits, supervision, administration, unsuccessful origination efforts and other activities not directly related to completed lease agreements are expensed as incurred. Upon successful lease execution, leasing commissions are capitalized.
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Revenue Recognition | Revenue Recognition Revenue from leasing activities Rental and other property income is primarily derived from fixed contractual payments from operating leases, and therefore, is generally recognized on a straight-line basis over the term of the lease, which typically begins the date the tenant takes control of the space. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. Variable rental and other property income consists primarily of tenant reimbursements for recoverable real estate taxes and operating expenses which are included in rental and other property income in the period when such costs are incurred, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations. The Company defers the recognition of variable rental and other property income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. The Company continually reviews whether collection of lease-related receivables, including any straight-line rent, and current and future operating expense reimbursements from tenants are probable. The determination of whether collectability is probable takes into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Upon the determination that the collectability of a receivable is not probable, the Company will record a reduction to rental and other property income for amounts previously recorded and a decrease in the outstanding receivable. Revenue from leases where collection is deemed to be not probable is recorded on a cash basis until collectability becomes probable. Management’s estimate of the collectability of lease-related receivables is based on the best information available at the time of estimate. The Company does not use a general reserve approach and lease-related receivables are adjusted and taken against rental and other property income only when collectability becomes not probable. Revenue from lending activities Interest income from the Company’s loans held-for-investment and real estate-related securities is comprised of interest earned on loans and the accretion and amortization of net loan origination fees and discounts. Interest income on loans is accrued as earned, with the accrual of interest suspended when the related loan becomes a nonaccrual loan. Interest income on the Company’s broadly syndicated loans is accrued as earned beginning on the settlement date.
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Recent Accounting Pronouncements | Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s condensed consolidated financial statements. In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, which was subsequently amended by ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (“ASU 2018-19”), in November 2018. Subsequently, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-02 to provide additional guidance on the credit losses standard. ASU 2016-13 and the related updates are intended to improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held-for-investment, held-to-maturity debt securities, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2018-19 clarified that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASU No. 2016-02, Leases (Topic 842) (“ASC 842”). ASU 2016-13 and ASU 2018-19 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company adopted ASU 2016-13 during the first quarter of fiscal year 2020. See Note 7 — Loans Held-For-Investment for a further discussion on the impact of the adoption of ASU 2016-13. In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of ASU 2018-13 are to be applied retrospectively, and early adoption is permitted. The Company adopted ASU 2018-13 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In October 2018, the FASB issued ASU No. 2018-16, Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2018-16”). The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes or another acceptable benchmark interest rate. The SOFR is a volume-weighted median interest rate that is calculated daily based on overnight transactions from the prior day’s activity in specified segments of the U.S. Treasury repo market. It has been selected as the preferred replacement for the U.S. dollar London Interbank Offered Rate (“LIBOR”), which will be phased out by the end of 2021. ASU 2018-16 is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2018-16 is required to be adopted on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after the date of adoption. The Company currently uses LIBOR as its benchmark interest rate in the Company’s interest rate swaps associated with the Company’s LIBOR-based variable rate borrowings. The Company has not entered into any new or redesignated hedging relationships on or after the date of adoption of ASU 2018-16. The Company has evaluated the effect of this new benchmark interest rate option, and does not believe this ASU will have a material impact on its condensed consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”). The guidance changes the guidance for determining whether a decision-making fee is a variable interest. Under the new ASU, indirect interests held through related parties under common control will now be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests. Such indirect interests were previously treated the same as direct interests. ASU 2018-17 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company adopted ASU 2018-17 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In April 2020, the FASB issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, many lessors may be required to provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in ASC 842 addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from COVID-19 related impacts. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company has elected to apply this guidance to avoid performing a lease by lease analysis for the lease concessions that (1) were granted as relief due to COVID-19 related impacts and (2) result in the cash flows remaining substantially the same or less than the original contract and will account for these lease concessions as if no changes were made to the leases. During the three and nine months ended September 30, 2020, the Company provided lease concessions, either in the form of rental deferrals or abatements, to certain tenants in response to the impact of the COVID-19 pandemic on those tenants.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
Summary of useful lives of real estate assets | The estimated useful lives of the Company’s real estate assets by class are generally as follows:
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FAIR VALUE MEASUREMENTS (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of the company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis | In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 (in thousands):
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Reconciliation of the changes in liabilities with Level 3 inputs | The following are reconciliations of the changes in financial assets with Level 3 inputs in the fair value hierarchy for the nine months ended September 30, 2020 (in thousands):
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Schedule of impairment charges by asset class | The following table presents the impairment charges by asset class recorded during the nine months ended September 30, 2020 and 2019 (in thousands):
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REAL ESTATE ASSETS (Tables) |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of purchase price allocation for asset acquisition | The following table summarizes the purchase price allocation for the 2020 Property Acquisitions (in thousands):
______________________ (1) The amortization period for acquired in-place leases and other intangibles is 14.7 years. The following table summarizes the purchase price allocation for the 2019 Property Acquisition (in thousands):
______________________ (1) The amortization period for acquired in-place leases and other intangibles is 19.8 years.
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INTANGIBLE LEASE ASSETS AND LIABILITIES (Tables) |
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Schedule of finite-lived intangible assets | Intangible lease assets and liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands, except weighted average life remaining):
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Schedule of finite-lived intangible assets amortization expense | The following table summarizes the amortization related to the intangible lease assets and liabilities for the three and nine months ended September 30, 2020 and 2019 (in thousands):
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Schedule of finite-lived intangible assets, future amortization expense | As of September 30, 2020, the estimated amortization relating to the intangible lease assets and liabilities is as follows (in thousands):
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REAL ESTATE-RELATED SECURITIES (Tables) |
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of securities available for sale | The following is a summary of the Company’s real estate-related securities as of September 30, 2020 (in thousands):
The following table provides the activity for the real estate-related securities during the nine months ended September 30, 2020 (in thousands):
The scheduled maturities of the Company’s real estate-related securities as of September 30, 2020 are as follows (in thousands):
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LOANS HELD-FOR-INVESTMENT (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of allowance for financing receivable | The Company’s loans held-for-investment consisted of the following as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):
The following table details overall statistics for the Company’s loans held-for-investment as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):
____________________________________ (1) As of September 30, 2020, 100% of the Company’s CRE loans by principal balance earned a floating rate of interest, primarily indexed to U.S. dollar LIBOR. (2) Maximum maturity date assumes all extension options are exercised by the borrower; however, the Company’s CRE loans may be repaid prior to such date. Activity relating to the Company’s loans held-for-investment portfolio was as follows (dollar amounts in thousands):
____________________________________ (1) Other items primarily consist of purchase discounts or premiums, accretion of exit fees and deferred origination expenses. (2) Represents operating expenses paid by the Company on the borrower’s behalf in connection with the foreclosure proceedings that commenced during the three months ended September 30, 2020, as further discussed below in “Allowance for Credit Losses”. (3) Includes the repayment of a $40.8 million senior loan prior to the maturity date. (4) Represents accrued interest on loans whose terms do not require a current cash payment of interest. (5) Includes the initial allowance for credit losses against the loans held-for-investment recorded on January 1, 2020 and the increase in allowance for credit losses related to its loans held-for-investment during the nine months ended September 30, 2020, as further discussed below in “Allowance for Credit Losses”. The following table presents the activity in the Company’s allowance for credit losses by loan type for the three months ended September 30, 2020 (dollar amounts in thousands):
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Schedule of financing receivable credit quality indicators | The following table presents the net book value of the Company’s loans-held-for-investment portfolio as of September 30, 2020 by year of origination, loan type, and risk rating (dollar amounts in thousands):
____________________________________ (1) Date loan was originated or acquired by the Company. Origination dates are subsequently updated to reflect material loan modifications. (2) Weighted average risk rating calculated based on carrying value at period end.
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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of derivative instruments | The following table summarizes the terms of the Company’s interest rate swap agreements designated as hedging instruments as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):
____________________________________ (1)The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of September 30, 2020. (2)As of December 31, 2019, the Company had two interest rate swap agreements in an asset position with a notional amount of $60.0 million and a fair value of $261,000 included in prepaid expenses and other assets on the condensed consolidated balance sheets.
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CREDIT FACILITIES, NOTES PAYABLE AND REPURCHASE FACILITIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The following table summarizes the debt balances as of September 30, 2020 and December 31, 2019, and the debt activity for the nine months ended September 30, 2020 (in thousands):
____________________________________ (1) Includes deferred financing costs incurred during the period. (2) In connection with the repayment of certain mortgage notes, the Company recognized a loss on extinguishment of debt of $4.8 million during the nine months ended September 30, 2020. (3) Net premiums on mortgage notes payable were recorded upon the assumption of the respective debt instruments. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective debt instruments using the effective-interest method. (4) Deferred costs related to the term portion of the Credit Facility (as defined below). (5) Represents deferred financing costs written off during the period resulting from debt repayments prior to the respective maturity dates.
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Schedule of maturities of long-term debt | The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to September 30, 2020 (in thousands):
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SUPPLEMENTAL CASH FLOW DISCLOSURES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of supplemental cash flow disclosures | Supplemental cash flow disclosures for the nine months ended September 30, 2020 and 2019 are as follows (in thousands):
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RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions | The Company recorded fees and expense reimbursements as shown in the table below for services provided by CMFT Management or its affiliates related to the services described above during the periods indicated (in thousands):
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LEASES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum rental income for operating leases - ASC 842 | As of September 30, 2020, the future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows (in thousands):
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Schedule of components of lease income | Rental and other property income during the three and nine months ended September 30, 2020 and 2019 consisted of the following (in thousands):
__________________________________ (1)Consists primarily of fixed contractual payments from operating leases with tenants recognized on a straight-line basis over the lease term, including amortization of acquired above- and below-market leases, and is net of uncollectable lease-related receivables. (2)Consists primarily of tenant reimbursements for recoverable real estate taxes and property operating expenses, and percentage rent.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Reclassifications) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Accounting Policies [Abstract] | ||||
Loss on extinguishment of debt | $ 89 | $ 2,302 | $ 4,841 | $ 2,302 |
Provision for credit losses | $ 6,700 | 754 | ||
Investment in real estate assets | 15,200 | |||
Real estate development and capital expenditures | $ 6,200 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Real Estate Assets) (Details) |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Buildings | |
Real Estate Properties [Line Items] | |
Useful life | 40 years |
Site improvements | |
Real Estate Properties [Line Items] | |
Useful life | 15 years |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Recoverability of Real Estate Assets) (Details) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020
USD ($)
property
|
Sep. 30, 2019
USD ($)
property
|
|
Real Estate [Line Items] | ||
Impairment of real estate assets | $ | $ 15,983 | $ 57,163 |
Revised Expected Holding Properties | ||
Real Estate [Line Items] | ||
Number of properties | 10 | 26 |
Vacant | ||
Real Estate [Line Items] | ||
Number of properties | 1 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Assets Held for Sale) (Details) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2020
USD ($)
property
|
Dec. 31, 2019
USD ($)
property
|
|
Real Estate [Line Items] | ||
Expected period of sale | 24 months | 24 months |
Number of real estate reclassified from held for sale | property | 15 | |
Real estate held for sale placed back in service | $ | $ 228,400,000 | |
Assets held for sale | $ | $ 0 | $ 351,900,000 |
Number of real estate property held for sale | property | 29 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Restricted Cash) (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
---|---|---|---|
Restricted Cash and Cash Equivalents Items [Line Items] | |||
Restricted cash | $ 5,925 | $ 7,331 | $ 11,381 |
Restricted cash, held by lenders in lockbox accounts | |||
Restricted Cash and Cash Equivalents Items [Line Items] | |||
Restricted cash | 2,600 | 3,100 | |
Restricted cash, held by lenders in escrow | |||
Restricted Cash and Cash Equivalents Items [Line Items] | |||
Restricted cash | $ 3,300 | $ 4,200 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Real Estate-Related Securities) (Details) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020
USD ($)
investment
|
Dec. 31, 2019
USD ($)
|
|
Debt Securities, Available-for-sale [Line Items] | ||
Real estate-related securities | $ 75,212 | $ 0 |
CMBS | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of debt instruments | investment | 5 | |
Real estate-related securities | $ 75,212 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Loans Held-for-Investments) (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020
USD ($)
loan
|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2020
USD ($)
loan
|
Sep. 30, 2019
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
Loans and Leases Receivable Disclosure [Line Items] | |||||
Interest income | $ 6,631 | $ 5,927 | $ 19,395 | $ 15,504 | |
Capitalized interest | 539 | ||||
Loans receivable, net amount | $ 857,856 | 857,856 | $ 301,630 | ||
Interest income on nonaccrual loans | $ 565 | ||||
Mezzanine Loans | |||||
Loans and Leases Receivable Disclosure [Line Items] | |||||
Number of nonaccrual loans | loan | 8 | 8 | |||
Loans receivable, net amount | $ 121,600 | $ 121,600 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Allowance for Credit Losses) (Details) - USD ($) |
9 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Jan. 01, 2020 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Accounting Standards Update [Extensible List] | us-gaap:AccountingStandardsUpdate201602Member | us-gaap:AccountingStandardsUpdate201613Member | |||
Allowance for credit losses | $ 35,039,000 | $ 0 | $ 27,684,000 | $ 19,779,000 | |
Cumulative Effect, Period Of Adoption, Adjustment | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Allowance for credit losses | $ 2,002,000 | $ 2,000,000.0 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Leases) (Details) - ASU 2016-02 - USD ($) $ in Millions |
Sep. 30, 2020 |
Jan. 01, 2019 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Lease liability | $ 2.5 | $ 2.7 |
Right-of-use asset | $ 2.5 | $ 2.7 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Revenue Recognition) (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Disaggregation of Revenue [Line Items] | ||
Accounts receivable write off | $ 6,700 | $ 754 |
Tenant Reimbursements | ||
Disaggregation of Revenue [Line Items] | ||
Accounts receivable write off | $ 1,400 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Other) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 05, 2020 |
Sep. 30, 2020 |
Sep. 30, 2020 |
Sep. 30, 2020 |
|
Unusual or Infrequent Item, or Both [Line Items] | ||||
Rent deferral request granted | $ 4,400 | $ 4,400 | $ 4,400 | |
Allowance increase | 4,400 | |||
Additional granted rental abatements | 265 | 265 | 265 | |
Granted rent abatements | 2,500 | 2,500 | 2,500 | |
Rent deferral due to lease term adjustment | $ 436 | $ 436 | $ 436 | |
Subsequent event | ||||
Unusual or Infrequent Item, or Both [Line Items] | ||||
Percent of rental payments collected | 90.00% | |||
Minimum | ||||
Unusual or Infrequent Item, or Both [Line Items] | ||||
Lease amendment extension term | 12 months | 12 months | ||
Maximum | ||||
Unusual or Infrequent Item, or Both [Line Items] | ||||
Lease amendment extension term | 84 months | 84 months |
FAIR VALUE MEASUREMENTS (Level 3 reconciliation) (Details) - CMBS $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2020
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Beginning Balance, January 1, 2020 | $ 0 |
Total gains and losses: | |
Unrealized gain included in other comprehensive income, net | 0 |
Purchases and payments received: | |
Purchases | 26,883 |
Premiums (discounts), net | (17,150) |
Principal payments received | (12) |
Ending Balance, September 30, 2020 | $ 9,721 |
FAIR VALUE MEASUREMENTS (Impairment Charges) (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Impairment of real estate assets | $ 15,983 | $ 57,163 |
Land | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Impairment of real estate assets | 3,595 | 10,006 |
Buildings, fixtures and improvements | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Impairment of real estate assets | 11,737 | 44,249 |
Intangible lease assets | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Impairment of real estate assets | 696 | 3,159 |
Intangible lease liabilities | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Impairment of intangible lease liability | $ (45) | $ (251) |
REAL ESTATE ASSETS (Property Acquisition - Narrative) (Details) $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2020
USD ($)
property
|
Sep. 30, 2019
USD ($)
property
|
Dec. 31, 2019
USD ($)
|
|
Real Estate [Line Items] | |||
Total real estate assets, at cost | $ 3,032,920 | $ 2,843,438 | |
Commercial property | |||
Real Estate [Line Items] | |||
Number of properties acquired | property | 3 | 1 | |
2020 Property Acquisitions | |||
Real Estate [Line Items] | |||
Total real estate assets, at cost | $ 14,510 | ||
Acquisition related costs | $ 111 | ||
2019 Property Acquisition | |||
Real Estate [Line Items] | |||
Total real estate assets, at cost | $ 6,165 | ||
Acquisition related costs | $ 165 | ||
Real Investment Property, Percent Acquired | 100.00% |
REAL ESTATE ASSETS (Purchase Price Allocation) (Details) - USD ($) $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
Real Estate [Line Items] | |||
Land | $ 730,912 | $ 700,210 | |
Buildings, fixtures and improvements | 1,979,787 | 1,830,101 | |
Intangible lease assets | 322,221 | 313,127 | |
Total real estate assets, at cost | 3,032,920 | $ 2,843,438 | |
2020 Property Acquisitions | |||
Real Estate [Line Items] | |||
Land | 4,677 | ||
Buildings, fixtures and improvements | 8,415 | ||
Total real estate assets, at cost | 14,510 | ||
2019 Property Acquisition | |||
Real Estate [Line Items] | |||
Land | $ 1,501 | ||
Buildings, fixtures and improvements | 3,804 | ||
Total real estate assets, at cost | 6,165 | ||
Acquired in-place leases and other intangibles | 2020 Property Acquisitions | |||
Real Estate [Line Items] | |||
Intangible lease assets | $ 1,418 | ||
Useful life | 14 years 8 months 12 days | ||
Acquired in-place leases and other intangibles | 2019 Property Acquisition | |||
Real Estate [Line Items] | |||
Intangible lease assets | $ 860 | ||
Useful life | 19 years 9 months 18 days |
REAL ESTATE ASSETS (Impairment) (Details) ft² in Thousands, $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020
USD ($)
ft²
property
|
Sep. 30, 2019
USD ($)
ft²
property
|
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Number of properties impaired | property | 11 | 26 |
Area of real estate property impaired (sq ft) | ft² | 699 | 2,600 |
Impairment of real estate assets | $ 15,983 | $ 57,163 |
Carrying Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Real estate asset deemed to be impaired | 87,500 | 340,300 |
Estimate of Fair Value Measurement | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Real estate asset deemed to be impaired | $ 71,500 | $ 283,100 |
INTANGIBLE LEASE ASSETS AND LIABILITIES (Components) (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
|
Intangible lease assets: | ||
Intangible leased assets | $ 169,138 | $ 182,147 |
Intangible lease liabilities: | ||
Below market leases net of amortization | 17,257 | 20,523 |
Below market lease, accumulated amortization | $ 31,445 | $ 25,800 |
Below market lease, weighted average useful life | 6 years 7 months 6 days | 7 years 3 months 18 days |
In-place leases and other intangibles | ||
Intangible lease assets: | ||
Intangible leased assets | $ 152,991 | $ 164,724 |
Accumulated amortization | $ 131,018 | $ 111,670 |
Useful life | 9 years 9 months 18 days | 10 years 4 months 24 days |
Acquired above-market leases | ||
Intangible lease assets: | ||
Intangible leased assets | $ 16,147 | $ 17,423 |
Accumulated amortization | $ 22,065 | $ 19,310 |
Useful life | 7 years 6 months | 7 years 10 months 24 days |
INTANGIBLE LEASE ASSETS AND LIABILITIES (Schedule of Finite-Lived Intangible Assets Amortization Expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Finite-Lived Intangible Assets [Line Items] | ||||
Below-market lease amortization | $ 1,273 | $ 1,470 | $ 3,939 | $ 4,952 |
In-place leases and other intangibles | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | 5,837 | 8,006 | 17,392 | 26,360 |
Above-market leases | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 772 | $ 1,029 | $ 2,409 | $ 3,496 |
INTANGIBLE LEASE ASSETS AND LIABILITIES (Estimated Amortization of Intangible Lease Assets) (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Amortiztaion, In-Place Leases and Other Intangibles, Above-Market Leases | ||
Total | $ 169,138 | $ 182,147 |
Amortization, Below-Market Leases | ||
Remainder of 2020 | 1,204 | |
2021 | 3,001 | |
2022 | 2,509 | |
2023 | 2,160 | |
2024 | 1,645 | |
Thereafter | 6,738 | |
Total | 17,257 | 20,523 |
In-Place Leases and Other Intangibles | ||
Amortiztaion, In-Place Leases and Other Intangibles, Above-Market Leases | ||
Remainder of 2020 | 5,365 | |
2021 | 19,287 | |
2022 | 18,014 | |
2023 | 15,981 | |
2024 | 14,174 | |
Thereafter | 80,170 | |
Total | 152,991 | 164,724 |
Above-Market Leases | ||
Amortiztaion, In-Place Leases and Other Intangibles, Above-Market Leases | ||
Remainder of 2020 | 691 | |
2021 | 2,287 | |
2022 | 2,133 | |
2023 | 1,872 | |
2024 | 1,411 | |
Thereafter | 7,753 | |
Total | $ 16,147 | $ 17,423 |
REAL ESTATE-RELATED SECURITIES (Narrative) (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2020
USD ($)
investment
|
Dec. 31, 2019
USD ($)
|
|
Debt Instrument [Line Items] | ||
Real estate-related securities | $ 75,212,000 | $ 0 |
Unrealized gain | 61,000 | |
Credit losses | $ 0 | |
CMBS | ||
Debt Instrument [Line Items] | ||
Number of debt instruments | investment | 5 | |
Real estate-related securities | $ 75,212,000 | 0 |
Unrealized gain on real estate-related securities | 61,000 | |
Unrealized gain | $ 61,000 | $ 0 |
Minimum | CMBS | ||
Debt Instrument [Line Items] | ||
Stated interest rate | 2.70% | |
Maximum | CMBS | ||
Debt Instrument [Line Items] | ||
Stated interest rate | 13.00% |
REAL ESTATE-RELATED SECURITIES (Summary of Real Estate Securities) (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost Basis | $ 75,151 | |
Unrealized Gain | 61 | |
Fair Value | 75,212 | $ 0 |
CMBS | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost Basis | 75,151 | 0 |
Unrealized Gain | 61 | 0 |
Fair Value | $ 75,212 | $ 0 |
REAL ESTATE-RELATED SECURITIES (The Scheduled Maturities of Real Estate-Related Securities) (Details) - CMBS $ in Thousands |
Sep. 30, 2020
USD ($)
|
---|---|
Available-for-sale securities, Amortized Cost | |
Due within one year | $ 0 |
Due after one year through five years | 65,430 |
Due after five years through ten years | 0 |
Due after ten years | 9,721 |
Total | 75,151 |
Available-for-sale securities, Estimated Fair Value | |
Due within one year | 0 |
Due after one year through five years | 65,491 |
Due after five years through ten years | 0 |
Due after ten years | 9,721 |
Total | $ 75,212 |
LOANS HELD-FOR-INVESTMENT (Statistics) (Details) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2020
USD ($)
loan
|
Dec. 31, 2019
USD ($)
loan
|
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Number of loans | loan | 173 | |
Net book value | $ 857,856 | $ 301,630 |
Loans receivable with variable rate of interest | 100.00% | |
CRE Loans | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Number of loans | loan | 12 | 11 |
Principal balance | $ 473,834 | $ 297,357 |
Net book value | $ 447,008 | $ 298,880 |
Weighted-average interest rate | 7.60% | 8.90% |
Weighted-average maximum years to maturity | 2 years 6 months | 2 years 10 months 24 days |
Broadly Syndicated Loans | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Number of loans | loan | 161 | 1 |
Principal balance | $ 422,771 | $ 2,750 |
Net book value | $ 410,848 | $ 2,750 |
Weighted-average interest rate | 3.80% | 4.50% |
Weighted-average maximum years to maturity | 4 years 9 months 18 days | 5 years 2 months 12 days |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Narrative) (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020
USD ($)
derivative
|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2020
USD ($)
derivative
contract
|
Sep. 30, 2019
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
Derivatives, Fair Value [Line Items] | |||||
Amount of gain (loss) reclassified from other comprehensive income (loss) into income as interest expense and other, net | $ (3,979) | $ 783 | $ (8,299) | $ 3,534 | |
Interest rate cash flow hedge gain (loss) to be reclassified during next 12 months | $ 7,300 | $ 7,300 | |||
Interest Rate Swap | |||||
Derivatives, Fair Value [Line Items] | |||||
Number of instruments terminated | contract | 1 | ||||
Loss on derivative | $ (97) | ||||
Number of interest rate derivatives held | derivative | 3 | 3 | |||
Total unrealized loss on interest rate swap | $ 7,300 | $ 7,300 | $ 3,900 | ||
Interest Rate Swap | Cash Flow Hedging | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative liability, event of default, termination amount | $ 8,000 | $ 8,000 |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Schedule of Derivative Instruments) (Details) $ in Thousands |
Sep. 30, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
swap_agreement
|
---|---|---|
Minimum | ||
Derivative [Line Items] | ||
Interest Rates | 2.55% | |
Maximum | ||
Derivative [Line Items] | ||
Interest Rates | 3.67% | |
Interest rate swaps | Cash Flow Hedging | Derivative liabilities, deferred rental income and other liabilities | ||
Derivative [Line Items] | ||
Outstanding Notional Amount | $ 865,266 | |
Fair Value of Liabilities | $ (7,255) | $ (4,181) |
Interest rate swaps | Cash Flow Hedging | Prepaid expenses and other current assets | ||
Derivative [Line Items] | ||
Outstanding Notional Amount | 60,000 | |
Fair value of assets | $ 261 | |
Designated as Hedging Instrument | Interest rate swaps | Prepaid expenses and other current assets | ||
Derivative [Line Items] | ||
Derivative, number of instruments held | swap_agreement | 2 |
CREDIT FACILITIES, NOTES PAYABLE AND REPURCHASE FACILITIES (Schedule of Maturities of Long-term Debt) (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Principal Repayments | ||
Remainder of 2020 | $ 134 | |
2021 | 201,301 | |
2022 | 913,963 | |
2023 | 493,649 | |
2024 | 244,265 | |
Thereafter | 0 | |
Total | $ 1,853,312 | $ 1,611,261 |
SUPPLEMENTAL CASH FLOW DISCLOSURES (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Supplemental Disclosures of Non-Cash Investing and Financing Activities: | ||
Distributions declared and unpaid | $ 9,375 | $ 15,979 |
Accrued capital expenditures | 365 | 919 |
Accrued deferred financing costs | 251 | 0 |
Interest income capitalized to loans held-for-investment | 539 | 7,428 |
Common stock issued through distribution reinvestment plan | 34,191 | 62,745 |
Change in fair value of interest rate swaps | (3,335) | (15,921) |
Supplemental Cash Flow Disclosures: | ||
Interest paid | 45,297 | 74,127 |
Cash paid for taxes | $ 1,555 | $ 414 |
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Management and investment advisory fees) (Details) - USD ($) |
Dec. 06, 2019 |
Aug. 20, 2019 |
---|---|---|
Related Party Transaction [Line Items] | ||
Investment advisory fee, percent per quarter | $ 0.00375 | |
Advisors | ||
Related Party Transaction [Line Items] | ||
Management fee per annum | $ 250,000 | |
Management fee per quarter | $ 62,500 | |
Management fee percent per annum | 1.50% | |
Management fee percent per quarter | 0.375% | |
Investment advisory fee, percent per annum | 0.0150 | |
Investment sub-advisory fees, percent per quarter | $ 0.50 |
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Incentive Compensation) (Details) - Advisors - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Aug. 20, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Related Party Transaction [Line Items] | |||||
Incentive compensation. in excess of product, quarterly percentage | 20.00% | ||||
Incentive compensation. in excess of product, annualized percentage | 7.00% | ||||
Incentive compensation fees | $ 0 | $ 0 | $ 0 | $ 0 |
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Acquisition Fees and Expenses) (Details) - Advisors - Acquisition fees and expenses - Maximum |
Aug. 20, 2019 |
---|---|
Related Party Transaction [Line Items] | |
Acquisition and advisory fee (up to) | 2.00% |
Acquisition fees and expenses, reimbursement (up to) | 6.00% |
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Operating Expenses) (Details) - Advisors |
Aug. 20, 2019 |
---|---|
Related Party Transaction [Line Items] | |
Operating expense reimbursement, percent of average invested assets | 2.00% |
Operating expense reimbursement, percent of net income | 25.00% |
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Disposition Fees) (Details) - Advisors |
Aug. 20, 2019 |
---|---|
Brokerage Commission Fee | Maximum | |
Related Party Transaction [Line Items] | |
Commissions performance and other fees | 50.00% |
Property sales commission | |
Related Party Transaction [Line Items] | |
Commissions performance and other fees | 1.00% |
Property portfolio | |
Related Party Transaction [Line Items] | |
Commissions performance and other fees | 6.00% |
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Due to Affiliates) (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Related Party Transaction [Line Items] | ||
Due to affiliates | $ 12,718 | $ 14,458 |
Advisors | ||
Related Party Transaction [Line Items] | ||
Due to affiliates | $ 12,700 | $ 14,500 |
LEASES (Future Minimum Rental Income) (Details) $ in Thousands |
Sep. 30, 2020
USD ($)
|
---|---|
Future Minimum Rental Income | |
Remainder of 2020 | $ 59,603 |
2021 | 209,891 |
2022 | 199,840 |
2023 | 182,714 |
2024 | 164,376 |
Thereafter | 1,098,230 |
Total | $ 1,914,654 |
LEASES (Schedule of Components of Lease Income) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Leases [Abstract] | ||||
Fixed rental and other property income | $ 56,300 | $ 86,565 | $ 164,396 | $ 263,867 |
Variable rental and other property income | 9,711 | 12,987 | 30,154 | 40,897 |
Total rental and other property income | $ 66,011 | $ 99,552 | $ 194,550 | $ 304,764 |
SUBSEQUENT EVENTS (Broadly Syndicated Loans) (Details) - Broadly Syndicated Loans - USD ($) |
1 Months Ended | 9 Months Ended |
---|---|---|
Nov. 13, 2020 |
Sep. 30, 2020 |
|
Subsequent Event [Line Items] | ||
Loans settled | $ 28,600,000 | |
Subsequent event | ||
Subsequent Event [Line Items] | ||
Debt settled | $ 42,200,000 | |
Loans settled | $ 28,600,000 |
SUBSEQUENT EVENTS (Property Disposition) (Details) $ in Thousands |
1 Months Ended | 9 Months Ended | |
---|---|---|---|
Nov. 13, 2020
USD ($)
property
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2019
USD ($)
|
|
Subsequent Event [Line Items] | |||
Net proceeds from disposition of real estate assets | $ 194,691 | $ 196,480 | |
Gain (loss) on sale of properties | $ 20,120 | $ 19,190 | |
Subsequent event | |||
Subsequent Event [Line Items] | |||
Number of properties disposed | property | 1 | ||
Aggregate gross sales price | $ 7,700 | ||
Net proceeds from disposition of real estate assets | 7,400 | ||
Gain (loss) on sale of properties | $ 470 |
SUBSEQUENT EVENTS (Repurchase Facilities) (Details) - Credit facilities - Affiliated Entity - Subsequent event $ in Millions |
1 Months Ended |
---|---|
Nov. 13, 2020
USD ($)
| |
Citibank | |
Subsequent Event [Line Items] | |
Proceeds from lines of credit | $ 56.2 |
Barclays bank | |
Subsequent Event [Line Items] | |
Proceeds from lines of credit | $ 56.2 |
SUBSEQUENT EVENTS (Termination of CCIT Two Merger Agreement) (Details) - CCIT II - Subsequent event - USD ($) $ in Thousands |
Oct. 29, 2020 |
Oct. 28, 2020 |
---|---|---|
Loss Contingencies [Line Items] | ||
Termination fees | $ 7,380 | $ 7,380 |
Reimbursement expenses (up to) | $ 3,690 | $ 3,690 |
SUBSEQUENT EVENTS (Amendment to CCIT III Merger Agreement) (Details) - shares |
Nov. 03, 2020 |
Nov. 02, 2020 |
---|---|---|
Subsequent event | CCIT III | ||
Subsequent Event [Line Items] | ||
Conversion ratio (shares) | 1.098 | 1.093 |
SUBSEQUENT EVENTS (Amendments to CCPT V Merger Agreement) (Details) - CCPT V - USD ($) $ in Thousands |
Oct. 29, 2020 |
Oct. 28, 2020 |
Aug. 30, 2020 |
---|---|---|---|
Loss Contingencies [Line Items] | |||
Termination fees | $ 9,850 | ||
Reimbursement expenses (up to) | $ 1,790 | ||
Subsequent event | |||
Loss Contingencies [Line Items] | |||
Conversion ratio (shares) | 2.892 | 2.691 | |
Termination fees | $ 9,850 | $ 9,170 | |
Reimbursement expenses (up to) | $ 1,790 | $ 1,670 |
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