x | 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 |
Maryland | 46-1958593 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
2325 East Camelback Road, 10th Floor Phoenix, Arizona 85016 | (602) 778-8700 |
(Address of principal executive offices; zip code) | (Registrant’s telephone number, including area code) |
Large accelerated filer | ¨ | Accelerated filer | ¨ | Non-accelerated filer | x | ||
Smaller reporting company | ¨ | Emerging growth company | ¨ |
September 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Real estate assets: | |||||||
Land | $ | 151,868 | $ | 142,986 | |||
Buildings and improvements | 448,503 | 416,850 | |||||
Intangible lease assets | 83,537 | 79,268 | |||||
Total real estate assets, at cost | 683,908 | 639,104 | |||||
Less: accumulated depreciation and amortization | (60,449 | ) | (46,196 | ) | |||
Total real estate assets, net | 623,459 | 592,908 | |||||
Cash and cash equivalents | 1,032 | 1,173 | |||||
Restricted cash | 387 | 346 | |||||
Derivative assets, prepaid expenses and other assets | 2,160 | 1,546 | |||||
Rents and tenant receivables, net | 8,263 | 7,021 | |||||
Deferred costs, net | 994 | 183 | |||||
Total assets | $ | 636,295 | $ | 603,177 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Credit facility and notes payable, net | $ | 332,854 | $ | 308,559 | |||
Accounts payable and accrued expenses | 3,861 | 2,969 | |||||
Due to affiliates | 2,147 | 1,787 | |||||
Intangible lease liabilities, net | 3,569 | 4,019 | |||||
Distributions payable | 2,120 | 2,049 | |||||
Deferred rental income and other liabilities | 1,033 | 1,133 | |||||
Total liabilities | 345,584 | 320,516 | |||||
Commitments and contingencies | |||||||
Redeemable common stock | 10,493 | 10,243 | |||||
STOCKHOLDERS’ EQUITY | |||||||
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding | — | — | |||||
Class A common stock, $0.01 par value per share; 245,000,000 shares authorized, 14,824,364 and 14,241,888 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | 148 | 142 | |||||
Class T common stock, $0.01 par value per share; 245,000,000 shares authorized, 1,853,106 and 1,347,920 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | 19 | 13 | |||||
Capital in excess of par value | 365,004 | 341,472 | |||||
Accumulated distributions in excess of earnings | (86,553 | ) | (70,022 | ) | |||
Accumulated other comprehensive income | 1,600 | 813 | |||||
Total stockholders’ equity | 280,218 | 272,418 | |||||
Total liabilities, redeemable common stock and stockholders’ equity | $ | 636,295 | $ | 603,177 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Rental income | $ | 12,133 | $ | 10,303 | $ | 35,449 | $ | 29,022 | |||||||
Tenant reimbursement income | 1,832 | 1,446 | 5,164 | 3,558 | |||||||||||
Total revenues | 13,965 | 11,749 | 40,613 | 32,580 | |||||||||||
Operating expenses: | |||||||||||||||
General and administrative | 1,176 | 1,135 | 3,412 | 3,362 | |||||||||||
Property operating | 938 | 491 | 2,230 | 1,560 | |||||||||||
Real estate tax | 1,157 | 1,012 | 3,492 | 2,617 | |||||||||||
Advisory fees and expenses | 1,584 | 1,389 | 4,603 | 3,965 | |||||||||||
Acquisition-related | 52 | 35 | 187 | 527 | |||||||||||
Depreciation and amortization | 4,664 | 4,009 | 13,944 | 11,159 | |||||||||||
Total operating expenses | 9,571 | 8,071 | 27,868 | 23,190 | |||||||||||
Operating income | 4,394 | 3,678 | 12,745 | 9,390 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense and other, net | (3,502 | ) | (2,960 | ) | (10,440 | ) | (8,324 | ) | |||||||
Net income | $ | 892 | $ | 718 | $ | 2,305 | $ | 1,066 | |||||||
Class A Common Stock: | |||||||||||||||
Net income | $ | 882 | $ | 724 | $ | 2,321 | $ | 1,136 | |||||||
Basic and diluted weighted average number of common shares outstanding | 14,760,585 | 13,989,986 | 14,561,171 | 13,284,274 | |||||||||||
Basic and diluted net income per common share | $ | 0.06 | $ | 0.05 | $ | 0.16 | $ | 0.09 | |||||||
Distributions declared per common share | $ | 0.40 | $ | 0.40 | $ | 1.18 | $ | 1.18 | |||||||
Class T Common Stock: | |||||||||||||||
Net income (loss) | $ | 10 | $ | (6 | ) | $ | (16 | ) | $ | (70 | ) | ||||
Basic and diluted weighted average number of common shares outstanding | 1,794,938 | 981,505 | 1,638,680 | 703,375 | |||||||||||
Basic and diluted net income (loss) per common share | $ | 0.01 | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.10 | ) | ||||
Distributions declared per common share | $ | 0.40 | $ | 0.40 | $ | 1.18 | $ | 1.18 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 892 | $ | 718 | $ | 2,305 | $ | 1,066 | |||||||
Other comprehensive income | |||||||||||||||
Unrealized gain on interest rate swaps | 476 | 52 | 845 | 81 | |||||||||||
Amount of (gain) loss reclassified from other comprehensive income into income as interest expense and other, net | (17 | ) | 110 | (90 | ) | 567 | |||||||||
Total other comprehensive income | 459 | 162 | 755 | 648 | |||||||||||
Total comprehensive income | $ | 1,351 | $ | 880 | $ | 3,060 | $ | 1,714 |
Class A Common Stock | Class T Common Stock | Capital in Excess of Par Value | Accumulated Distributions in Excess of Earnings | Accumulated Other Comprehensive Income | Total Stockholders’ Equity | ||||||||||||||||||||||||
Number of Shares | Par Value | Number of Shares | Par Value | ||||||||||||||||||||||||||
Balance, January 1, 2018 | 14,241,888 | $ | 142 | 1,347,920 | $ | 13 | $ | 341,472 | $ | (70,022 | ) | $ | 813 | $ | 272,418 | ||||||||||||||
Cumulative effect of accounting changes | — | — | — | — | — | (32 | ) | 32 | — | ||||||||||||||||||||
Issuance of common stock | 960,340 | 10 | 506,344 | 6 | 35,218 | — | — | 35,234 | |||||||||||||||||||||
Distributions declared | — | — | — | — | — | (18,804 | ) | — | (18,804 | ) | |||||||||||||||||||
Commissions on stock sales and related dealer manager fees | — | — | — | — | (1,748 | ) | — | — | (1,748 | ) | |||||||||||||||||||
Other offering costs | — | — | — | — | (708 | ) | — | — | (708 | ) | |||||||||||||||||||
Distribution and stockholder servicing fees | — | — | — | — | (448 | ) | — | — | (448 | ) | |||||||||||||||||||
Redemptions of common stock | (377,864 | ) | (4 | ) | (1,158 | ) | — | (8,532 | ) | — | — | (8,536 | ) | ||||||||||||||||
Changes in redeemable common stock | — | — | — | — | (250 | ) | — | — | (250 | ) | |||||||||||||||||||
Comprehensive income | — | — | — | — | — | 2,305 | 755 | 3,060 | |||||||||||||||||||||
Balance, September 30, 2018 | 14,824,364 | $ | 148 | 1,853,106 | $ | 19 | $ | 365,004 | $ | (86,553 | ) | $ | 1,600 | $ | 280,218 |
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 2,305 | $ | 1,066 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization, net | 14,122 | 11,364 | |||||
Bad debt expense | 14 | 9 | |||||
Straight-line rental income | (1,207 | ) | (1,150 | ) | |||
Amortization of deferred financing costs | 669 | 818 | |||||
Write-off of deferred financing costs | 148 | — | |||||
Gain on extinguishment of debt | — | (108 | ) | ||||
Changes in assets and liabilities: | |||||||
Rents and tenant receivables | (49 | ) | (239 | ) | |||
Prepaid expenses and other assets | (98 | ) | (524 | ) | |||
Accounts payable and accrued expenses | 947 | 2,019 | |||||
Deferred rental income and other liabilities | (100 | ) | (338 | ) | |||
Due to affiliates | 182 | (492 | ) | ||||
Due from affiliates | 14 | — | |||||
Net cash provided by operating activities | 16,947 | 12,425 | |||||
Cash flows from investing activities: | |||||||
Investment in real estate assets and capital expenditures | (45,178 | ) | (103,477 | ) | |||
Payment of property escrow deposits | (325 | ) | (3,025 | ) | |||
Refund of property escrow deposits | 550 | 3,259 | |||||
Net cash used in investing activities | (44,953 | ) | (103,243 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of common stock | 26,448 | 64,559 | |||||
Redemptions of common stock | (8,536 | ) | (3,733 | ) | |||
Offering costs on issuance of common stock | (2,456 | ) | (6,193 | ) | |||
Distribution and stockholder servicing fees paid | (270 | ) | (123 | ) | |||
Proceeds from credit facility and notes payable | 270,000 | 102,200 | |||||
Repayments of credit facility and notes payable | (244,500 | ) | (73,950 | ) | |||
Distributions to investors | (9,947 | ) | (8,341 | ) | |||
Deferred financing costs paid | (2,833 | ) | (412 | ) | |||
Net cash provided by financing activities | 27,906 | 74,007 | |||||
Net decrease in cash and cash equivalents and restricted cash | (100 | ) | (16,811 | ) | |||
Cash and cash equivalents and restricted cash, beginning of period | 1,519 | 19,255 | |||||
Cash and cash equivalents and restricted cash, end of period | $ | 1,419 | $ | 2,444 | |||
Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets: | |||||||
Cash and cash equivalents | $ | 1,032 | $ | 2,097 | |||
Restricted cash | 387 | 347 | |||||
Total cash and cash equivalents and restricted cash | $ | 1,419 | $ | 2,444 | |||
Supplemental disclosures of non-cash investing and financing activities: | |||||||
Distributions declared and unpaid | $ | 2,120 | $ | 1,947 | |||
Change in accrued distribution and stockholder servicing fees | $ | 449 | $ | 779 | |||
Accrued capital expenditures | $ | 15 | $ | 177 | |||
Common stock issued through distribution reinvestment plan | $ | 8,786 | $ | 7,881 | |||
Change in fair value of interest rate swaps | $ | 755 | $ | 648 | |||
Supplemental cash flow disclosures: | |||||||
Interest paid | $ | 9,673 | $ | 7,533 |
Buildings | 40 years |
Site improvements | 15 years |
Tenant improvements | Lesser of useful life or lease term |
Intangible lease assets | Lease term |
Balance as of | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
September 30, 2018 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Financial assets: | ||||||||||||||||
Interest rate swaps | $ | 1,600 | $ | — | $ | 1,600 | $ | — | ||||||||
Balance as of | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
December 31, 2017 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Financial assets: | ||||||||||||||||
Interest rate swaps | $ | 845 | $ | — | $ | 845 | $ | — |
2018 Asset Acquisitions | |||
Land | $ | 8,882 | |
Buildings and improvements | 30,505 | ||
Acquired in-place leases and other intangibles (1) | 4,437 | ||
Total purchase price | $ | 43,824 |
(1) | The weighted average amortization period for acquired in-place leases and other intangibles was 17.4 years for the 2018 Asset Acquisitions. |
2017 Acquisitions | |||
Real estate assets: | |||
Purchase price of asset acquisitions | $ | 88,547 | |
Purchase price of business combinations | 14,878 | ||
Total purchase price of real estate assets acquired (1) | $ | 103,425 |
(1) | The weighted average amortization period for the 2017 Acquisitions was 13.9 years for acquired in-place leases and other intangibles, 16.6 years for acquired above-market leases and 12.9 years for acquired intangible lease liabilities. |
2017 Asset Acquisitions | |||
Land | $ | 21,037 | |
Buildings and improvements | 47,958 | ||
Acquired in-place leases and other intangibles | 18,758 | ||
Acquired above-market leases | 1,665 | ||
Intangible lease liabilities | (871 | ) | |
Total purchase price | $ | 88,547 |
2017 Business Combination Acquisitions | |||
Land | $ | 2,099 | |
Buildings and improvements | 11,342 | ||
Acquired in-place leases and other intangibles | 1,437 | ||
Total purchase price | $ | 14,878 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Pro forma basis (unaudited): | |||||||||||||||
Revenue | $ | 11,749 | $ | 10,325 | $ | 32,779 | $ | 31,103 | |||||||
Net income (loss) | $ | 718 | $ | (102 | ) | $ | 1,567 | $ | (1,559 | ) |
September 30, 2018 | December 31, 2017 | |||||||
In-place leases and other intangibles, net of accumulated amortization of $18,259 and $13,899, respectively (with a weighted average life remaining of 11.0 years and 11.3 years, respectively) | $ | 56,442 | $ | 56,443 | ||||
Acquired above-market leases, net of accumulated amortization of $3,056 and $2,519, respectively (with a weighted average life remaining of 11.2 years and 11.8 years, respectively) | 5,780 | 6,407 | ||||||
$ | 62,222 | $ | 62,850 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
In-place lease and other intangible amortization | $ | 1,469 | $ | 1,328 | $ | 4,587 | $ | 3,558 | |||||||
Above-market lease amortization | $ | 166 | $ | 211 | $ | 628 | $ | 617 |
Amortization Expense | ||||||||
In-Place Leases and Other Intangibles | Above-Market Leases | |||||||
Remainder of 2018 | $ | 1,482 | $ | 183 | ||||
2019 | $ | 5,699 | $ | 591 | ||||
2020 | $ | 5,492 | $ | 538 | ||||
2021 | $ | 5,430 | $ | 523 | ||||
2022 | $ | 5,233 | $ | 511 |
Balance Sheet Location | Outstanding Notional Amount as of | Interest Rate (1) | Effective Date | Maturity Date | Fair Value of Assets as of | ||||||||||||||
September 30, 2018 | September 30, 2018 | December 31, 2017 | |||||||||||||||||
Interest Rate Swaps | Derivative assets, prepaid expenses and other assets | $ | 241,100 | 3.22% to 4.45% | 12/31/2015 to 5/23/2018 | 4/25/2019 to 3/28/2022 | $ | 1,600 | $ | 845 |
During the Nine Months Ended September 30, 2018 | ||||||||||||||||||||
Balance as of December 31, 2017 | Debt Issuance, Net (1) | Repayments and Modifications | Accretion | Balance as of September 30, 2018 | ||||||||||||||||
Credit facility | $ | 217,000 | $ | 270,000 | $ | (244,500 | ) | $ | — | $ | 242,500 | |||||||||
Fixed rate debt | 92,600 | — | — | — | 92,600 | |||||||||||||||
Total debt | 309,600 | 270,000 | (244,500 | ) | — | 335,100 | ||||||||||||||
Deferred costs (2) | (1,041 | ) | (1,730 | ) | 125 | 400 | (2,246 | ) | ||||||||||||
Total debt, net | $ | 308,559 | $ | 268,270 | $ | (244,375 | ) | $ | 400 | $ | 332,854 |
Principal Repayments | |||
Remainder of 2018 | $ | — | |
2019 | — | ||
2020 | 388 | ||
2021 | 68,009 | ||
2022 | 22,928 | ||
Thereafter | 243,775 | ||
Total | $ | 335,100 |
September 30, 2018 | December 31, 2017 | ||||||
Acquired below-market leases, net of accumulated amortization of $2,081 and $1,678, respectively (with a weighted average life remaining of 7.5 years and 7.9 years, respectively) | $ | 3,569 | $ | 4,019 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Below-market lease amortization | $ | 147 | $ | 133 | $ | 450 | $ | 412 |
Amortization of Below-Market Leases | ||||
Remainder of 2018 | $ | 146 | ||
2019 | $ | 555 | ||
2020 | $ | 479 | ||
2021 | $ | 460 | ||
2022 | $ | 380 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Selling commissions | $ | 298 | $ | 813 | $ | 1,215 | $ | 3,441 | |||||||
Dealer manager fees | $ | 158 | $ | 322 | $ | 533 | $ | 1,298 | |||||||
Other organization and offering expenses | $ | 218 | $ | 378 | $ | 708 | $ | 1,454 | |||||||
Distribution and stockholder servicing fees (1) | $ | 97 | $ | 56 | $ | 270 | $ | 123 | |||||||
Acquisition fees and expenses | $ | 52 | $ | 915 | $ | 1,250 | $ | 2,332 | |||||||
Advisory fees and expenses | $ | 1,584 | $ | 1,389 | $ | 4,603 | $ | 3,965 | |||||||
Operating expenses | $ | 487 | $ | 522 | $ | 1,625 | $ | 1,594 |
(1) | Amounts are calculated for the respective period in accordance with the dealer manager agreement and exclude the estimated liability for future distribution and stockholder servicing fees payable to CCO Capital of $1.3 million, which is included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. |
Future Minimum Rental Income | |||
Remainder of 2018 | $ | 12,641 | |
2019 | 48,013 | ||
2020 | 47,325 | ||
2021 | 46,723 | ||
2022 | 45,122 | ||
Thereafter | 322,650 | ||
Total | $ | 522,474 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all. |
• | We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties. |
• | Our properties, intangible assets and other assets may be subject to impairment charges. |
• | We could be subject to unexpected costs or unexpected liabilities that may arise from potential dispositions and may be unable to dispose of properties on advantageous terms. |
• | We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties and we may be unable to acquire, dispose of, or lease properties on advantageous terms. |
• | We could be subject to risks associated with bankruptcies or insolvencies of tenants or from tenant defaults generally. |
• | We have substantial indebtedness, which may affect our ability to pay distributions, and expose us to interest rate fluctuation risk and the risk of default under our debt obligations. |
• | We may be affected by the incurrence of additional secured or unsecured debt. |
• | We may not be able to maintain profitability. |
• | We may not generate cash flows sufficient to pay our distributions to stockholders or meet our debt service obligations. |
• | We may be affected by risks resulting from losses in excess of insured limits. |
• | We may fail to remain qualified as a REIT for U.S. federal income tax purposes. |
• | Our sponsor may be unable to fully reestablish the financial network, which previously supported real estate investment trusts sponsored by our sponsor, and/or regain the prior level of transaction and capital raising volume achieved by such real estate investment trusts. |
• | We are subject to risks that may affect capital raising volume as a result of increased regulatory changes. |
• | Our advisor has the right to terminate the advisory agreement upon 60 days’ written notice without cause or penalty. |
• | Acquired four properties for an aggregate purchase price of $43.8 million. |
• | Issued approximately 1.5 million shares of common stock in the Offerings for aggregate proceeds of $35.4 million ($23.3 million in Class A Shares and $12.1 million in Class T Shares) before organization and offering costs, selling commissions and dealer manager fees of $2.5 million. |
• | Entered into a new credit agreement that increased the allowable borrowings and extended the maturity dates associated with the original modified credit agreement. |
• | Total debt increased by $25.5 million, from $309.6 million to $335.1 million. |
As of September 30, | |||||
2018 | 2017 | ||||
Number of commercial properties | 140 | 131 | |||
Rentable square feet (in thousands) (1) | 3,359 | 3,014 | |||
Percentage of rentable square feet leased | 98.9 | % | 98.8 | % | |
Percentage of investment-grade tenants (2) | 38.8 | % | 36.9 | % |
(1) | Includes square feet of buildings on land parcels subject to ground leases. |
(2) | Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC (“Standard & Poor’s”) or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc. (“Moody’s”). The ratings may reflect those assigned by Standard & Poor’s or Moody’s to the lease guarantor or the parent company, as applicable. The weighted average credit rating is weighted based on annualized rental income, and is for only those tenants rated by Standard & Poor’s. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Commercial properties acquired | — | 4 | 4 | 15 | |||||||||||
Purchase price of acquired properties (in thousands) | $ | — | $ | 46,741 | $ | 43,824 | $ | 103,425 | |||||||
Rentable square feet (in thousands) (1) | — | 283 | 175 | 482 |
(1) | Includes square feet of buildings on land parcels subject to ground leases. |
Three Months Ended September 30, | 2018 vs 2017 Increase (Decrease) | Nine Months Ended September 30, | 2018 vs 2017 Increase (Decrease) | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
Total revenues | $ | 13,965 | $ | 11,749 | $ | 2,216 | $ | 40,613 | $ | 32,580 | $ | 8,033 | ||||||||||||
General and administrative expenses | $ | 1,176 | $ | 1,135 | $ | 41 | $ | 3,412 | $ | 3,362 | $ | 50 | ||||||||||||
Property operating expenses | $ | 938 | $ | 491 | $ | 447 | $ | 2,230 | $ | 1,560 | $ | 670 | ||||||||||||
Real estate tax expenses | $ | 1,157 | $ | 1,012 | $ | 145 | $ | 3,492 | $ | 2,617 | $ | 875 | ||||||||||||
Advisory fees and expenses | $ | 1,584 | $ | 1,389 | $ | 195 | $ | 4,603 | $ | 3,965 | $ | 638 | ||||||||||||
Acquisition-related expenses | $ | 52 | $ | 35 | $ | 17 | $ | 187 | $ | 527 | $ | (340 | ) | |||||||||||
Depreciation and amortization | $ | 4,664 | $ | 4,009 | $ | 655 | $ | 13,944 | $ | 11,159 | $ | 2,785 | ||||||||||||
Operating income | $ | 4,394 | $ | 3,678 | $ | 716 | $ | 12,745 | $ | 9,390 | $ | 3,355 | ||||||||||||
Interest expense and other, net | $ | 3,502 | $ | 2,960 | $ | 542 | $ | 10,440 | $ | 8,324 | $ | 2,116 | ||||||||||||
Net income | $ | 892 | $ | 718 | $ | 174 | $ | 2,305 | $ | 1,066 | $ | 1,239 |
Number of Properties | Three Months Ended September 30, | Increase (Decrease) | ||||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||||||
Rental income – as reported | $ | 12,133 | $ | 10,303 | $ | 1,830 | 18 | % | ||||||||||
Less: Amortization (1) | (19 | ) | (78 | ) | 59 | (76 | )% | |||||||||||
Less: Straight-line rental income | 431 | 574 | (143 | ) | (25 | )% | ||||||||||||
Total contract rental revenue | 11,721 | 9,807 | 1,914 | 20 | % | |||||||||||||
Less: “Non-same store” properties | 13 | 2,067 | 299 | 1,768 | 591 | % | ||||||||||||
“Same store” properties | 127 | $ | 9,654 | $ | 9,508 | $ | 146 | 1.5 | % |
Number of Properties | Nine Months Ended September 30, | Increase (Decrease) | ||||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||||||
Rental income – as reported | $ | 35,449 | $ | 29,022 | $ | 6,427 | 22 | % | ||||||||||
Less: Amortization (1) | (178 | ) | (205 | ) | 27 | (13 | )% | |||||||||||
Less: Straight-line rental income | 1,207 | 1,150 | 57 | 5 | % | |||||||||||||
Total contract rental revenue | 34,420 | 28,077 | 6,343 | 23 | % | |||||||||||||
Less: “Non-same store” properties | 24 | 8,323 | 1,921 | 6,402 | 333 | % | ||||||||||||
“Same store” properties | 116 | $ | 26,097 | $ | 26,156 | $ | (59 | ) | (0.2 | )% |
Nine Months Ended September 30, | |||||||||||||
2018 | 2017 | ||||||||||||
Amount | Percent | Amount | Percent | ||||||||||
Distributions paid in cash | $ | 9,947 | 53 | % | $ | 8,341 | 51 | % | |||||
Distributions reinvested | 8,786 | 47 | % | 7,881 | 49 | % | |||||||
Total distributions | $ | 18,733 | 100 | % | $ | 16,222 | 100 | % | |||||
Source of distributions: | |||||||||||||
Net cash provided by operating activities (1) | $ | 16,947 | 90 | % | $ | 12,425 | 77 | % | |||||
Proceeds from issuance of common stock (2) | — | — | % | 3,797 | 23 | % | |||||||
Proceeds from the issuance of debt | 1,786 | 10 | % | — | — | ||||||||
Total sources | $ | 18,733 | 100 | % | $ | 16,222 | 100 | % |
Payments due by period (1) | ||||||||||||||||||||
Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | ||||||||||||||||
Principal payments – credit facility | $ | 242,500 | $ | — | $ | — | $ | 242,500 | $ | — | ||||||||||
Interest payments – credit facility (2) | 40,579 | 9,212 | 18,500 | 12,867 | — | |||||||||||||||
Principal payments – fixed rate debt (3) | 92,600 | — | 21,792 | 47,366 | 23,442 | |||||||||||||||
Interest payments – fixed rate debt (4) | 14,130 | 3,750 | 6,989 | 2,154 | 1,237 | |||||||||||||||
Total | $ | 389,809 | $ | 12,962 | $ | 47,281 | $ | 304,887 | $ | 24,679 |
(1) | The table does not include amounts due to CR V Advisors or its affiliates pursuant to our advisory agreement because such amounts are not fixed and determinable. |
(2) | As of September 30, 2018, the Term Loans outstanding totaled $220.0 million, all of which is subject to interest rate swap agreements. As of September 30, 2018, the weighted average interest rate for the Swapped Term Loan was 3.8%. The remaining $22.5 million outstanding under the Credit Facility had a weighted average interest rate of 3.9% as of September 30, 2018. |
(3) | Principal payment amounts reflect actual payments based on the face amount of notes payable that are secured by our wholly-owned properties. |
(4) | As of September 30, 2018, we had $21.1 million of variable rate debt effectively fixed through the use of interest rate swap agreements. We used the effective interest rates fixed under our interest rate swap agreements to calculate the debt payment obligations in future periods. |
Balance as of September 30, 2018 | |||
Credit facility and notes payable, net | $ | 332,854 | |
Deferred costs and net premiums (1) | 2,246 | ||
Less: Cash and cash equivalents | (1,032 | ) | |
Net debt | $ | 334,068 | |
Gross real estate assets, net (2) | $ | 678,258 | |
Net debt leverage ratio | 49.3 | % |
• | Recoverability of Real Estate Assets; and |
• | Allocation of Purchase Price of Real Estate Assets. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Nine Months Ended September 30, 2018 | Year Ended December 31, 2017 | ||||||||||||
Amount | Percent | Amount | Percent | ||||||||||
Distributions paid in cash | $ | 9,947 | 53 | % | $ | 11,468 | 52 | % | |||||
Distributions reinvested | 8,786 | 47 | % | 10,696 | 48 | % | |||||||
Total distributions | $ | 18,733 | 100 | % | $ | 22,164 | 100 | % | |||||
Source of distributions: | |||||||||||||
Net cash provided by operating activities (1) | $ | 16,947 | 90 | % | $ | 16,033 | 72 | % | |||||
Proceeds from issuance of common stock (2) | — | — | % | 6,026 | 27 | % | |||||||
Proceeds from the issuance of debt | 1,786 | 10 | % | 105 | 1 | % | |||||||
Total sources | $ | 18,733 | 100 | % | $ | 22,164 | 100 | % |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
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, 2018 – July 31, 2018 | |||||||||||||
Class A Shares | — | $ | — | — | (1) | ||||||||
Class T Shares | — | $ | — | — | (1) | ||||||||
August 1, 2018 – August 31, 2018 | |||||||||||||
Class A Shares | 132,419 | $ | 22.07 | 132,419 | (1) | ||||||||
Class T Shares | 366 | $ | 21.36 | 366 | (1) | ||||||||
September 1, 2018 – September 30, 2018 | |||||||||||||
Class A Shares | — | $ | — | — | (1) | ||||||||
Class T Shares | — | $ | — | — | (1) | ||||||||
Total | 132,785 | 132,785 | (1) |
(1) | A description of the maximum number of shares that may be purchased under our share redemption program is included in the narrative preceding this table. |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
Item 6. | Exhibits |
Exhibit No. | Description |
3.1 | |
3.2 | |
3.3 | |
3.4 | |
3.5 | |
3.6 | |
4.1 | |
4.2 | |
4.3 | |
10.1* | |
31.1* | |
31.2* | |
32.1** | |
101.INS* | XBRL Instance Document. |
101.SCH* | XBRL Taxonomy Extension Schema Document. |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. |
* | 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. |
Cole Credit Property Trust V, Inc. | ||
(Registrant) | ||
By: | /s/ Nathan D. DeBacker | |
Name: | Nathan D. DeBacker | |
Title: | Chief Financial Officer and Treasurer | |
(Principal Financial Officer) |
1. | GENERAL |
2. | AWARDS UNDER THE PLAN |
3. | MISCELLANEOUS |
4. | CHANGE OF CONTROL OF COMPANY |
1. | I have reviewed this Quarterly Report on Form 10-Q of Cole Credit Property Trust V, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
Date: | November 13, 2018 | /s/ Avraham Shemesh | |
Name: | Avraham Shemesh | ||
Title: | Chief Executive Officer and President (Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Cole Credit Property Trust V, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
Date: | November 13, 2018 | /s/ Nathan D. DeBacker | |
Name: | Nathan D. DeBacker | ||
Title: | Chief Financial Officer and Treasurer (Principal Financial Officer) |
(i) | the accompanying Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Avraham Shemesh | |||
Name: | Avraham Shemesh | ||
Title: | Chief Executive Officer and President (Principal Executive Officer) | ||
/s/ Nathan D. DeBacker | |||
Name: | Nathan D. DeBacker | ||
Date: | November 13, 2018 | Title: | Chief Financial Officer and Treasurer (Principal Financial Officer) |
Document and Entity Information - shares shares in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 07, 2018 |
|
Document Information [Line Items] | ||
Entity Registrant Name | Cole Credit Property Trust V, Inc. | |
Entity Central Index Key | 0001580988 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Class A Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding (shares) | 14.9 | |
Class T Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding (shares) | 1.9 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
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 |
Class A Common Stock | ||
Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 245,000,000 | 245,000,000 |
Common stock, shares issued (shares) | 14,824,364 | 14,241,888 |
Common stock, shares outstanding (shares) | 14,824,364 | 14,241,888 |
Class T Common Stock | ||
Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 245,000,000 | 245,000,000 |
Common stock, shares issued (shares) | 1,853,106 | 1,347,920 |
Common stock, shares outstanding (shares) | 1,853,106 | 1,347,920 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 892 | $ 718 | $ 2,305 | $ 1,066 |
Other comprehensive income | ||||
Unrealized gain on interest rate swaps | 476 | 52 | 845 | 81 |
Amount of (gain) loss reclassified from other comprehensive income into income as interest expense and other, net | (17) | 110 | (90) | 567 |
Total other comprehensive income | 459 | 162 | 755 | 648 |
Total comprehensive income | $ 1,351 | $ 880 | $ 3,060 | $ 1,714 |
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2018 - USD ($) $ in Thousands |
Total |
Class A Common Stock |
Class T Common Stock |
Common Stock
Class A Common Stock
|
Common Stock
Class T Common Stock
|
Capital in Excess of Par Value |
Accumulated Distributions in Excess of Earnings |
Accumulated Other Comprehensive Income |
---|---|---|---|---|---|---|---|---|
Balance (shares) at Dec. 31, 2017 | 14,241,888 | 1,347,920 | 14,241,888 | 1,347,920 | ||||
Balance at Dec. 31, 2017 | $ 272,418 | $ 142 | $ 13 | $ 341,472 | $ (70,022) | $ 813 | ||
Cumulative effect of accounting changes at Dec. 31, 2017 | (32) | 32 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance of common stock (shares) | 960,340 | 506,344 | ||||||
Issuance of common stock | 35,234 | $ 10 | $ 6 | 35,218 | ||||
Distributions declared | (18,804) | (18,804) | ||||||
Commissions on stock sales and related dealer manager fees | (1,748) | (1,748) | ||||||
Other offering costs | (708) | (708) | ||||||
Distribution and stockholder servicing fees | (448) | (448) | ||||||
Redemptions of common stock (shares) | (377,864) | (1,158) | ||||||
Redemptions of common stock | (8,536) | $ (4) | $ 0 | (8,532) | ||||
Changes in redeemable common stock | (250) | (250) | ||||||
Comprehensive income | 3,060 | 2,305 | 755 | |||||
Balance (shares) at Sep. 30, 2018 | 14,824,364 | 1,853,106 | 14,824,364 | 1,853,106 | ||||
Balance at Sep. 30, 2018 | $ 280,218 | $ 148 | $ 19 | $ 365,004 | $ (86,553) | $ 1,600 |
Organization and Business |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BUSINESS | ORGANIZATION AND BUSINESS Cole Credit Property Trust V, Inc. (the “Company”) is a Maryland corporation, incorporated on December 12, 2012, that elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2014. The Company is the sole general partner of and owns, directly or indirectly, 100% of the partnership interests in Cole Operating Partnership V, LP, a Delaware limited partnership. On November 13, 2017, VEREIT Operating Partnership, L.P. (“VEREIT OP”), a former affiliated entity of the Company’s sponsor, CCO Group (as defined below), entered into a Purchase and Sale Agreement with CCA Acquisition, LLC (“CCA”), a newly-formed affiliate of CIM Group, LLC (“CIM”), pursuant to which CCA agreed to acquire all of the issued and outstanding shares of common stock of Cole Capital Advisors, Inc., the direct or indirect owner of Cole REIT Advisors V, LLC (“CR V Advisors”), Cole Capital Corporation and CREI Advisors, LLC (“CREI Advisors”), the Company’s external advisor, dealer manager and property manager, respectively (the “Transaction”). On February 1, 2018, the Transaction was completed. Immediately following the completion of the Transaction, Cole Capital Advisors, Inc. and the Company’s dealer manager were each converted into Delaware limited liability companies, Cole Capital Advisors, Inc.’s name was changed to CCO Group, LLC, and the dealer manager’s name was changed to CCO Capital, LLC (“CCO Capital”). As a result of the Transaction, CIM owns and/or controls CCO Group, LLC and its subsidiaries (collectively, “CCO Group”), and CCO Group, LLC owns and controls CR V Advisors, CCO Capital and CREI Advisors, the Company’s external advisor, dealer manager for the Offerings (as defined below) and property manager, respectively. In addition, as part of the Transaction, VEREIT OP and CCO Group, LLC entered into a services agreement (the “Services Agreement”) pursuant to which VEREIT OP is obligated to provide certain services to CCO Group and to the Company, Cole Credit Property Trust IV, Inc. (“CCPT IV”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”), Cole Office & Industrial (CCIT III), Inc. (“CCIT III”) and Cole Real Estate Income Strategy (Daily NAV), Inc. (“Cole Income NAV Strategy”) (CCPT IV, CCIT II, CCIT III, Cole Income NAV Strategy and the Company, collectively, the “Cole REITs®”), including operational real estate support. VEREIT OP is obligated to provide such services through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by any of the Cole REITs with respect to its 2018 fiscal year) (the “Initial Services Term”) and is obligated to provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC. Despite the indirect change of ownership and control of the Company’s advisor, dealer manager, property manager and sponsor, the Company expects that, during the Initial Services Term of the Services Agreement, the advisory, dealer manager and property management services it receives will continue without any material changes in personnel (except as supplemented by the management oversight of CIM personnel) or material change in service procedures. CCO Group, LLC is evaluating and intends to effectuate during the Initial Services Term of the Services Agreement an appropriate transition of VEREIT OP’s services under the Services Agreement to other CIM affiliates or third parties with the goal of ensuring continuity and minimizing disruption. Pursuant to a Registration Statement on Form S-11 (Registration No. 333-189891) under the Securities Act of 1933, as amended (the “Securities Act”), and declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on March 17, 2014, the Company commenced its initial public offering (the “Initial Offering”) on a “best efforts” basis of up to a maximum of $2.975 billion in shares of a single class of common stock. The Initial Offering initially offered up to a maximum of $2.5 billion in shares of a single class of common stock (now referred to as Class A Shares as defined below) in the primary offering, as well as up to $475.0 million in additional shares pursuant to a distribution reinvestment plan (the “Original DRIP”). In March 2016, the Company reclassified a portion of its unissued Class A common stock (“Class A Shares”) as Class T common stock (“Class T Shares”) and commenced sales of Class T Shares thereafter upon receipt of the required regulatory approvals. Pursuant to a Registration Statement on Form S-11 (Registration No. 333-215274) under the Securities Act and declared effective by the SEC on August 1, 2017, the Company commenced a follow-on offering on a “best efforts” basis (the “Follow-on Offering,” and collectively with the Initial Offering, the “Offerings”) of up to an aggregate of $1.2 billion in Class A Shares and Class T Shares in the primary portion of the Follow-on Offering (up to $660.0 million in Class A Shares and up to $540.0 million in Class T Shares) and an additional $300.0 million in shares of common stock pursuant to the second amended and restated distribution reinvestment plan (the “Second Amended and Restated DRIP” and collectively with the Original DRIP and the first amended and restated distribution and reinvestment plan, the “DRIP”). The Company reserves the right to reallocate the shares offered among the classes of shares and between the primary offering and the Second Amended and Restated DRIP. On March 29, 2018, the Company announced that its board of directors (the “Board”) established an updated estimated per share net asset value (“NAV”) of its common stock, as of December 31, 2017, of $22.18 per share for both Class A Shares and Class T Shares. As a result, commencing on March 29, 2018, the Company is offering Class A Shares in its primary portion of the Follow-on Offering for $24.37 per share, Class T Shares in its primary portion of the Follow-on Offering for $23.35 per share and Class A Shares and Class T Shares in its Second Amended and Restated DRIP for $22.18 per share. Additionally, as of March 29, 2018, $22.18 per share serves as the estimated per share NAV for purposes of the share redemption program. The Board establishes an updated per share NAV of the Company’s common stock on an annual basis for purposes of assisting broker-dealers that participated in the Offerings in meeting their customer account reporting obligations under National Association of Securities Dealers Conduct Rule 2340, having previously established a per share NAV as of February 29, 2016 and December 31, 2016. As of September 30, 2018, the Company had issued approximately 17.8 million shares of common stock in the Offerings, including 1.5 million shares issued in DRIP, for gross offering proceeds of $444.8 million ($398.7 million in Class A Shares and $46.1 million in Class T Shares) before organization and offering costs, selling commissions, and dealer manager fees of $41.8 million. In addition, as of September 30, 2018, the Company paid distribution and stockholder servicing fees for Class T Shares sold in the primary portion of the Offerings of $483,000 and accrued an estimated liability for future distribution and stockholder servicing fees payable of $1.3 million. The Company has used, and intends to continue using, substantially all of the net proceeds from the Offerings to acquire and operate a diversified portfolio of commercial real estate assets primarily consisting of net leased properties located throughout the United States. The properties primarily will be single tenant properties leased to national and regional creditworthy tenants. The Company expects that the properties typically will be subject to long-term triple-net or double-net leases, which means the tenant will be obligated to pay for most of the expenses of maintaining the property. As of September 30, 2018, the Company owned 140 properties, comprising 3.4 million rentable square feet of commercial space located in 33 states. As of September 30, 2018, the rentable space at these properties was 98.9% leased, including month-to-month agreements, if any. |
Summary of Significant Accounting Policies |
9 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||
Accounting Policies [Abstract] | |||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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, 2017, and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. 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. In connection with the adoption of Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, transfers to or from restricted cash, which have previously been shown in the Company’s investing activities section of the condensed consolidated statements of cash flows, are now required to be shown as part of the total change in cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows. This change resulted in a decrease in cash flows from investing activities of $253,000 during the nine months ended September 30, 2017. The Company adopted ASU 2017-12, as defined in “Recent Accounting Pronouncements,” during the first quarter of fiscal year 2018. Accordingly, for the nine months ended September 30, 2018, the Company recorded a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of accumulated distributions in excess of earnings of $32,000. 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, rental 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 will be determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the nine months ended September 30, 2018 or 2017. The Company is in the process of determining if anticipated holding periods for certain properties may materially differ from the initial intended holding periods for such properties, which could result in an impairment charge in the future. 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. There were no assets identified as held for sale as of September 30, 2018 or December 31, 2017. 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 respective 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. In April 2017, the Company elected to early adopt ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Beginning in April 2017, all real estate acquisitions qualified as asset acquisitions and, as such, acquisition-related fees and certain acquisition-related expenses related to these asset acquisitions were capitalized and allocated to tangible and intangible assets and liabilities, as described above. Prior to the adoption of ASU 2017-01 in April 2017, all of the Company’s real estate acquisitions were accounted for as business combinations, and as such, acquisition-related expenses related to these business combination acquisitions were expensed as incurred. Prior to April 2017, acquisition-related expenses in the Company’s condensed consolidated statements of operations primarily consisted of legal, deed transfer and other costs related to real estate purchase transactions, including costs incurred for deals that were not consummated. The Company expects its future acquisitions to qualify as asset acquisitions and, as such, the Company will allocate the purchase price to acquired tangible assets and identified intangible assets and liabilities on a relative fair value basis. Restricted Cash The Company had $387,000 and $346,000 in restricted cash as of September 30, 2018 and December 31, 2017, respectively. Included in restricted cash was $94,000 held by lenders in lockbox accounts as of December 31, 2017. No such amounts were included in restricted cash as of September 30, 2018. As part of certain debt agreements, rent from certain of the Company’s tenants is deposited directly into a lockbox account, from which the monthly debt service payments are disbursed to the lender and the excess funds are disbursed to the Company. Restricted cash also included $293,000 and $2,000 held by lenders in escrow accounts in accordance with the associated lender’s loan agreement as of September 30, 2018 and December 31, 2017, respectively, as well as $94,000 and $250,000 in lender cash management accounts as of September 30, 2018 and December 31, 2017, respectively. Revenue Recognition Certain properties have leases where the minimum rental payment increases during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis when earned and collectability is reasonably assured. 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. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred. Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) Topic 605 and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company records revenue for real estate taxes and insurance reimbursed by its tenants on the leased properties, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations as the Company has concluded it is the primary obligor. The Company has identified its revenue streams as rental income from leasing arrangements and tenant reimbursement income, which are outside of the scope of Topic 606. The Company adopted ASU 2014-09 using the modified retrospective approach and determined it did not have a material impact on the Company’s condensed consolidated financial statements. The Company continually reviews receivables related to rent, including any straight-line rent, and current and future operating expense reimbursements from tenants, and determines their collectability by taking 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. In the event that the collectability of a receivable is uncertain, the Company will record an increase in the allowance for uncollectible accounts. As of September 30, 2018 and December 31, 2017, the Company had an allowance for uncollectible accounts of $18,000 and $40,000, respectively. Earnings (Loss) and Distributions Per Share The Company has two classes of common stock. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which can result in different earnings per share for each of the classes. Under the two-class method, earnings per share of each class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. The distributed earnings to Class T Share common stockholders represents distributions declared less the distribution and stockholder servicing fees. Diluted income (loss) per share considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three and nine months ended September 30, 2018 and 2017. Distributions per share are calculated based on the authorized daily distribution rate. 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 February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The amendments in this update require that most lease obligations be recognized as a right of use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 and subsequent amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The guidance, including optional practical expedients, should be implemented for the earliest period presented using a modified retrospective approach. The Company is currently in the process of finalizing its assessment of its inventory of leases that will be impacted by adoption of the new guidance. The Company does not expect the adoption to have a material impact on the accounting treatment of the Company’s net leases, which are the primary source of the Company’s revenues. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The targeted amendments in this ASU are designed to help simplify certain aspects of hedge accounting and result in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. ASU 2017-12 applies to the Company’s interest rate swaps designated as cash flow hedges. ASU 2017-12 requires all changes in the fair value of highly effective cash flow hedges to be recorded in accumulated other comprehensive income. Under current GAAP, the ineffective portion of the change in fair value of cash flow hedges is recognized directly in earnings. This eliminates the requirement to separately measure and disclose ineffectiveness for qualifying cash flow hedges. ASU 2017-12 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. ASU 2017-12 is required to be adopted using a modified retrospective approach with early adoption permitted. The Company early adopted ASU 2017-12 during the first quarter of fiscal year 2018. Accordingly, during the nine months ended September 30, 2018, the Company recorded a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of accumulated distributions in excess of earnings of $32,000. 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 the ASU are to be applied retrospectively, and early adoption is permitted. The Company is evaluating the impact of this ASU's adoption, and does not believe this ASU will have a material impact on its condensed consolidated financial statements. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | 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: Credit facility 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, 2018, the estimated fair value of the Company’s debt was $334.7 million, compared to a carrying value of $335.1 million. The estimated fair value of the Company’s debt was $311.4 million as of December 31, 2017, compared to a carrying value of $309.6 million. 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, 2018 and December 31, 2017, 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. 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, 2018 and December 31, 2017, there have been no transfers of financial assets or liabilities between fair value hierarchy levels. 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, 2018 and December 31, 2017 (in thousands):
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Real Estate Assets |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REAL ESTATE ASSETS | REAL ESTATE ASSETS 2018 Property Acquisitions During the nine months ended September 30, 2018, the Company acquired four commercial properties for an aggregate purchase price of $43.8 million (the “2018 Asset Acquisitions”), which includes $1.3 million of external acquisition-related expenses that were capitalized in accordance with ASU 2017-01. Prior to the adoption of ASU 2017-01 in April 2017, costs related to property acquisitions were expensed as incurred. The Company funded the 2018 Asset Acquisitions with net proceeds from the Follow-on Offering and available borrowings. The following table summarizes the purchase price allocation for the 2018 Asset Acquisitions purchased during the nine months ended September 30, 2018 (in thousands):
2017 Property Acquisitions During the nine months ended September 30, 2017, the Company acquired 15 commercial properties for an aggregate purchase price of $103.4 million (the “2017 Acquisitions”), of which 13 were determined to be asset acquisitions and two were accounted for as business combinations as they were acquired prior to the adoption of ASU 2017-01 in April 2017. The Company funded the 2017 Acquisitions with net proceeds from the Offerings and available borrowings. The following table summarizes the consideration transferred for the properties purchased during the nine months ended September 30, 2017 (in thousands):
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During the nine months ended September 30, 2017, the Company acquired 13 commercial properties for an aggregate purchase price of $88.5 million, which were accounted for as asset acquisitions (the “2017 Asset Acquisitions”). The aggregate purchase price includes $2.6 million of external acquisition-related expenses that were capitalized in accordance with ASU 2017-01. Prior to the adoption of ASU 2017-01, costs related to property acquisitions were expensed as incurred. The following table summarizes the purchase price allocation for the 2017 Asset Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):
During the nine months ended September 30, 2017, the Company acquired two commercial properties for an aggregate purchase price of $14.9 million, which were accounted for as business combinations (the “2017 Business Combination Acquisitions”). The Company allocated the purchase price of these properties to the fair value of the assets acquired. The following table summarizes the purchase price allocation for the 2017 Business Combination Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):
The Company recorded revenue of $285,000 and $652,000, respectively, and net income of $170,000 and a net loss of $25,000, respectively, for the three and nine months ended September 30, 2017, related to the 2017 Business Combination Acquisitions. In addition, the Company recorded $407,000 of acquisition-related expenses for the nine months ended September 30, 2017, which is included in acquisition-related expenses on the condensed consolidated statements of operations. The following table summarizes selected financial information of the Company as if all of the 2017 Business Combination Acquisitions were completed on January 1, 2016 for each period presented below. The table below presents the Company’s estimated revenue and net income (loss), on a pro forma basis, for the three and nine months ended September 30, 2017 and 2016 (in thousands):
The unaudited pro forma information for the nine months ended September 30, 2017 was adjusted to exclude $407,000 of acquisition-related fees and expenses recorded during the period related to the 2017 Business Combination Acquisitions. Accordingly, these costs were instead recognized in the pro forma information for the nine months ended September 30, 2016. The unaudited pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of the period, nor does it purport to represent the results of future operations. |
Intangible Lease Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE LEASE ASSETS | INTANGIBLE LEASE ASSETS Intangible lease assets as of September 30, 2018 and December 31, 2017 consisted of the following (in thousands, except weighted average life):
Amortization of the above-market leases is recorded as a reduction to rental revenue, 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. The following table summarizes the amortization expense related to the intangible lease assets for the three and nine months ended September 30, 2018 and 2017 (in thousands):
As of September 30, 2018, the estimated amortization expense relating to the intangible lease assets is as follows (in thousands):
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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 | 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, 2018, the Company entered into one interest rate swap agreement. As of September 30, 2018, the Company had three interest rate swap agreements. The following table summarizes the terms of the Company’s executed interest rate swap agreements designated as hedging instruments as of September 30, 2018 and December 31, 2017 (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, 2018. 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, 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, 2018, the amounts reclassified were a gain of $17,000 and $90,000, respectively. For the three and nine months ended September 30, 2017, the amounts reclassified were a loss of $110,000 and $567,000, respectively. During the next 12 months, the Company estimates that an additional $681,000 will be reclassified from other comprehensive income as a decrease to interest expense. The Company classifies cash flows from interest rate swap agreements as net cash provided by operating activities on the 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 the condensed consolidated statements of cash flows as the category for cash flows from 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 an aggregate termination value, inclusive of interest payments and accrued interest. As of September 30, 2018, all derivatives were in an asset position. Therefore, there was no termination value as of September 30, 2018. 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, 2018. |
Notes Payable and Credit Facility |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE AND CREDIT FACILITY | NOTES PAYABLE AND CREDIT FACILITY As of September 30, 2018, the Company had $332.9 million of debt outstanding, including net deferred financing costs, with weighted average years to maturity of 4.2 years and a weighted average interest rate of 3.8%. 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 until the extended maturity date. The following table summarizes the debt balances as of September 30, 2018 and December 31, 2017, and the debt activity for the nine months ended September 30, 2018 (in thousands):
______________________ (1) Includes deferred financing costs incurred during the period. (2) Deferred costs relate to mortgage notes payable and the term portion of the Credit Facility, as defined below. As of September 30, 2018, the fixed rate debt outstanding of $92.6 million included $21.1 million of variable rate debt that is fixed through interest rate swap agreements, which has the effect of fixing the variable interest rate per annum through the maturity date of the variable rate debt. The fixed rate debt has interest rates ranging from 3.5% to 4.5% per annum. The fixed rate debt outstanding matures on various dates from February 2021 to December 2024. The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $156.5 million as of September 30, 2018. Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed. During the nine months ended September 30, 2018, the Company entered into a new credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent, and the other lenders party thereto, and repaid the then-existing credit agreement dated April 25, 2014. The Credit Agreement allows for borrowings of up to $350.0 million (the “Credit Facility”). The Credit Facility includes $220.0 million in term loans (the “Term Loans”) and up to $130.0 million in revolving loans (the “Revolving Loans”). The Term Loans mature on March 27, 2023 and the Revolving Loans mature on March 28, 2022; however the Company may elect to extend the maturity date of the Revolving Loans to March 28, 2023 subject to satisfying certain conditions described in the Credit Agreement. 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 London Interbank Offered Rate (“LIBOR”) multiplied by the statutory reserve rate (the “Adjusted LIBO Rate”) for the interest period plus an applicable rate ranging from 1.30% to 1.70%; or (ii) a base rate ranging from 0.30% to 0.70%, plus the greater of: (a) JPMorgan Chase’s Prime Rate (as defined in the Credit Agreement); (b) the NYFRB Rate (as defined in the Credit Agreement) plus 0.50%; or (c) the Adjusted LIBO Rate for a period of one month plus 1.0%. As of September 30, 2018, the amounts outstanding under the Revolving Loans totaled $22.5 million at a weighted average interest rate of 3.9%. As of September 30, 2018, the amounts outstanding under the Term Loans totaled $220.0 million, all of which was subject to interest rate swap agreements (the “Swapped Term Loan”). The interest rate swap agreements had the effect of fixing the Adjusted LIBO Rate per annum of the Swapped Term Loan. As of September 30, 2018, the all-in rate for the Swapped Term Loan was 3.8%. The Company had $242.5 million of debt outstanding under the Credit Facility as of September 30, 2018 at a weighted average interest rate of 3.8% and $107.5 million in unused capacity, subject to borrowing availability. The Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the Credit Agreement requires the Company to maintain a minimum consolidated net worth not less than $225.0 million plus 75% of the equity interests issued by the Company, a net leverage ratio less than or equal to 60%, a fixed charge coverage ratio equal to or 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 recourse debt not greater than 15% of total asset value. The Company believes it was in compliance with the financial covenants of the Credit Agreement, as well as the financial covenants under the Company’s various fixed and variable rate debt agreements as of September 30, 2018. Maturities The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to September 30, 2018 (in thousands):
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Intangible Lease Liabilities |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Lease Liabilities | INTANGIBLE LEASE LIABILITIES Intangible lease liabilities consisted of the following as of September 30, 2018 and December 31, 2017 (in thousands, except weighted average life remaining amounts):
Amortization of below-market leases is recorded as an increase to rental revenue in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization of the intangible lease liabilities for the three and nine months ended September 30, 2018 and 2017 (in thousands):
As of September 30, 2018, the estimated amortization of the intangible lease liabilities is as follows (in thousands):
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Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 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. 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. |
Related-Party Transactions and Arrangements |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS | RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS The Company has incurred commissions, fees and expenses payable to CR V Advisors and certain of its affiliates in connection with the Offerings and the acquisition, management and disposition of its assets. Selling commissions and dealer manager fees In connection with the Offerings, CCO Capital, the Company’s dealer manager, which is affiliated with CR V Advisors, receives selling commissions of up to 7.0% and 3.0% of gross offering proceeds from the primary portion of the Offerings for Class A Shares and Class T Shares, respectively, and before reallowance of selling commissions earned by participating broker-dealers. The Company has been advised that CCO Capital intends to reallow 100% of selling commissions earned to participating broker-dealers. In addition, CCO Capital receives 2.0% of gross offering proceeds from the primary portion of the Offerings for both Class A Shares and Class T Shares as a dealer manager fee. CCO Capital, in its sole discretion, may reallow all or a portion of its dealer manager fee to participating broker-dealers. No selling commissions or dealer manager fees are paid to CCO Capital or other participating broker-dealers with respect to shares sold pursuant to the DRIP. Other organization and offering expenses All other organization and offering expenses associated with the sale of the Company’s common stock (excluding selling commissions, dealer manager fees and distribution and stockholder servicing fees) are paid by CR V Advisors or its affiliates and are reimbursed by the Company up to 2.0% of aggregate gross offering proceeds. A portion of the other organization and offering expenses may be considered to be underwriting compensation. As of September 30, 2018, CR V Advisors had paid organization and offering expenses in excess of 2.0% of aggregate gross offering proceeds in connection with the Offerings. These excess amounts were not included in the condensed consolidated financial statements of the Company because such amounts were not a liability of the Company as they exceeded 2.0% of gross proceeds from the Offerings. As the Company raises additional proceeds from the Offerings, these excess amounts may become payable. Distribution and stockholder servicing fees Through October 4, 2016, the Company paid CCO Capital a distribution and stockholder servicing fee for Class T Shares that was calculated on a daily basis in the amount of 1/365th of 0.8% of the estimated per share NAV of the Class T Shares sold in the primary portion of the Initial Offering. Beginning on October 5, 2016, the distribution and stockholder servicing fee is calculated on a daily basis in an amount equal to 1/365th of 1.0% of the estimated per share NAV of the Class T Shares sold in the primary portion of the Offerings. The distribution and stockholder servicing fee is paid monthly in arrears from cash flow from operations or, if the Company’s cash flow from operations is not sufficient to pay the distribution and stockholder servicing fee, from borrowings in anticipation of future cash flow. An estimated liability for future distribution and stockholder servicing fees payable to CCO Capital is recognized at the time each Class T Share is sold and included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. The Company will cease paying the distribution and stockholder servicing fee with respect to Class T Shares at the earliest of (i) the end of the month in which the total distribution and stockholder servicing fees paid by a stockholder within his or her individual account would be equal to 4.0% of the stockholder’s total gross investment amount at the time of the purchase of the primary Class T Shares held in such account, or a lower limit agreed upon between the dealer manager and the participating broker-dealer at the time such Class T Shares were sold; (ii) the date on which the aggregate underwriting compensation from all sources equals 10.0% of the gross proceeds from the sale of the Company’s shares, excluding shares sold pursuant to the DRIP; (iii) the fourth anniversary of the last day of the month in which the offering in which such Class T Shares were purchased (excluding the offering of shares pursuant to the DRIP) terminates; (iv) the date such Class T Share is no longer outstanding; and (v) the date the Company effects a liquidity event. CCO Capital may, in its discretion, reallow to participating broker-dealers all or a portion of the distribution and stockholder servicing fee for services that such participating broker-dealers perform. At the time the Company ceases paying the distribution and stockholder servicing fee with respect to an outstanding Class T Share pursuant to the provisions above, such Class T Share will convert into a number of Class A Shares (including any fractional shares) with an equivalent net asset value as such Class T Share. The Company cannot predict when this will occur. No distribution and stockholder servicing fees are paid to CCO Capital or other participating broker-dealers with respect to shares sold pursuant to the DRIP. Acquisition fees and expenses The Company pays CR V Advisors or its affiliates acquisition fees of up to 2.0% of: (1) the contract purchase price of each property or asset the Company acquires; (2) the amount paid in respect of the development, construction or improvement of each asset the Company acquires; (3) the purchase price of any loan the Company acquires; and (4) the principal amount of any loan the Company originates. In addition, the Company reimburses CR V Advisors or its affiliates for insourced expenses incurred in the process of acquiring a property or the origination or acquisition of a loan, which are fixed on an annual basis at 0.5% of the contract purchase price of each property and 0.5% of the amount advanced for a loan or other investment, which will be prorated for any partial calendar year; provided, that acquisition expenses are not included in the contract purchase price of the property. Additionally, CR V Advisors or its affiliates are reimbursed for third-party 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. Advisory fees and expenses Pursuant to the advisory agreement with CR V Advisors, the Company pays CR V Advisors a monthly advisory fee based upon the Company’s monthly average asset value, which, effective January 1, 2018, is based on the estimated market value of such assets used to determine the Company’s estimated per share NAV as of December 31, 2017, as discussed in Note 1 — Organization and Business, and for those assets acquired subsequent to December 31, 2017, is based on the purchase price. The monthly advisory fee is equal to the following amounts: (1) an annualized rate of 0.75% paid on the Company’s average asset value that is between $0 and $2.0 billion; (2) an annualized rate of 0.70% paid on the Company’s average asset value that is between $2.0 billion and $4.0 billion; and (3) an annualized rate of 0.65% paid on the Company’s average asset value that is over $4.0 billion. Operating expenses The Company reimburses CR V Advisors, or its affiliates, for the expenses they paid or incurred in connection with the advisory and administrative services provided to the Company, subject to the limitation that the Company will not reimburse CR V Advisors or its affiliates for any amount by which the operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceed the greater of: (1) 2.0% of average invested assets, or (2) 25.0% of net income excluding any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of assets for that period. The Company will not reimburse CR V Advisors or its affiliates for the salaries and benefits paid to personnel in connection with the services for which CR V Advisors or its affiliates receive acquisition fees, and the Company will not reimburse CR V Advisors for salaries and benefits paid to the Company’s executive officers. Disposition fees If CR V Advisors or its affiliates provide 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 will pay CR V Advisors 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 may the total disposition fees paid to CR V Advisors, 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. In addition, if CR V Advisors or its affiliates provides 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 assets other than properties, the Company may separately compensate CR V Advisors or its affiliates at such rates and in such amounts as the Board, including a majority of the Company’s independent directors, and CR V Advisors agree upon, not to exceed an amount equal to 1.0% of the contract price of the assets sold. During the three and nine months ended September 30, 2018 and 2017, no disposition fees were incurred for any such services provided by CR V Advisors or its affiliates. Subordinated performance fees The Company will pay a subordinated performance fee in connection with one of the following alternative events: (1) if the Company’s shares are listed on a national securities exchange, CR V Advisors, or its affiliates, will be entitled to a subordinated performance fee equal to 15.0% of the amount, if any, by which (i) the market value of the Company’s outstanding stock plus distributions paid by the Company prior to listing, exceeds (ii) the sum of the total amount of capital raised from stockholders and the amount of distributions necessary to generate a 6.0% annual cumulative, non-compounded return to stockholders; (2) if the Company is sold or its assets are liquidated, CR V Advisors will be entitled to a subordinated performance fee equal to 15.0% of the net sale proceeds remaining after stockholders have received, from regular distributions plus special distributions paid from proceeds of such sale, a return of their net capital invested and a 6.0% annual cumulative, non-compounded return; or (3) upon termination of the advisory agreement, CR V Advisors may be entitled to a subordinated performance fee similar to the fee to which it 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, 2018 and 2017, no subordinated performance fees were incurred related to any such events. The Company incurred commissions, fees and expense reimbursements as shown in the table below for services provided by CR V Advisors and its affiliates related to the services described above during the periods indicated (in thousands):
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Services Agreement Pursuant to the Services Agreement, VEREIT OP, which is affiliated with one of the Company’s directors, is obligated to provide certain services to CCO Group and to the Company, including operational real estate support. The Company is not a party to the Services Agreement. See Note 11 — Economic Dependency for a discussion of the Services Agreement. Due to/from Affiliates As of September 30, 2018 and December 31, 2017, $2.1 million and $1.8 million, respectively, were recorded for services and expenses incurred, but not yet reimbursed to CR V Advisors, or its affiliates. The amounts are primarily for advisory fees and operating expenses and distribution and stockholder servicing fees payable to CCO Capital. These amounts were included in due to affiliates in the condensed consolidated balance sheets for such periods. As of December 31, 2017, $14,000 was due from CR V Advisors or its affiliates related to amounts received by affiliates of the advisor which were due to the Company. No such amounts were due to the Company as of September 30, 2018. |
Economic Dependency |
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Sep. 30, 2018 | |
Economic Dependency [Abstract] | |
ECONOMIC DEPENDENCY | ECONOMIC DEPENDENCY Under various agreements, the Company has engaged and may in the future engage CR V Advisors 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, the sale of shares of the Company’s common stock available for issuance, 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 CR V Advisors 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. Services Agreement Pursuant to the Services Agreement, VEREIT OP is obligated to provide certain services to CCO Group and to the Company, including operational real estate support. VEREIT OP is obligated to provide such services through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by any of the Cole REITs with respect to its 2018 fiscal year) and is obligated provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC. Despite the indirect change of ownership and control of the Company’s advisor, dealer manager, property manager and sponsor, the Company expects that, during the Initial Services Term of the Services Agreement, the advisory, dealer manager and property management services the Company receives will continue without any material changes in personnel (except as supplemented by the management oversight of CIM personnel) or material change in service procedures. During the Initial Services Term of the Services Agreement, CCO Group, LLC intends to evaluate and effectuate an appropriate transition of VEREIT OP’s services under the Services Agreement to other CIM affiliates or third parties with the goal of ensuring continuity and minimizing disruption. |
Operating Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Operating Leases | OPERATING LEASES The Company’s real estate assets are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2018, the leases had a weighted-average remaining term of 10.3 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 terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. The future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options, as of September 30, 2018, was as follows (in thousands):
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Subsequent Events |
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Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS The following events occurred subsequent to September 30, 2018: Redemption of Shares of Common Stock Subsequent to September 30, 2018, the Company redeemed approximately 135,000 shares for $3.0 million at an average per share price of $22.05 pursuant to the Company’s share redemption program. Management, in its discretion, limited the amount of shares redeemed for the three months ended September 30, 2018 to an amount equal to net proceeds the Company received from the sale of shares in the DRIP during the respective period. The remaining redemption requests received during the three months ended September 30, 2018 totaling approximately 295,000 shares went unfulfilled. Acquisition of Real Estate Assets Subsequent to September 30, 2018, the Company acquired one commercial property for an aggregate purchase price of $15.1 million, which was accounted for as an asset acquisition. The acquisition was funded with net proceeds from the Follow-On Offering and available borrowings. The Company has not completed its initial purchase price allocation with respect to this property and therefore cannot provide similar disclosures to those included in Note 4 — Real Estate Assets in these condensed consolidated financial statements for this property. |
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 |
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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, 2017, and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. 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. In connection with the adoption of Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, transfers to or from restricted cash, which have previously been shown in the Company’s investing activities section of the condensed consolidated statements of cash flows, are now required to be shown as part of the total change in cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows. This change resulted in a decrease in cash flows from investing activities of $253,000 during the nine months ended September 30, 2017. The Company adopted ASU 2017-12, as defined in “Recent Accounting Pronouncements,” during the first quarter of fiscal year 2018. Accordingly, for the nine months ended September 30, 2018, the Company recorded a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of accumulated distributions in excess of earnings of $32,000. |
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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 and Assets Held for Sale | 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, rental 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 will be determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the nine months ended September 30, 2018 or 2017. The Company is in the process of determining if anticipated holding periods for certain properties may materially differ from the initial intended holding periods for such properties, which could result in an impairment charge in the future. 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. |
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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 respective 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. In April 2017, the Company elected to early adopt ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Beginning in April 2017, all real estate acquisitions qualified as asset acquisitions and, as such, acquisition-related fees and certain acquisition-related expenses related to these asset acquisitions were capitalized and allocated to tangible and intangible assets and liabilities, as described above. Prior to the adoption of ASU 2017-01 in April 2017, all of the Company’s real estate acquisitions were accounted for as business combinations, and as such, acquisition-related expenses related to these business combination acquisitions were expensed as incurred. Prior to April 2017, acquisition-related expenses in the Company’s condensed consolidated statements of operations primarily consisted of legal, deed transfer and other costs related to real estate purchase transactions, including costs incurred for deals that were not consummated. The Company expects its future acquisitions to qualify as asset acquisitions and, as such, the Company will allocate the purchase price to acquired tangible assets and identified intangible assets and liabilities on a relative fair value basis. |
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Restricted Cash | Restricted Cash The Company had $387,000 and $346,000 in restricted cash as of September 30, 2018 and December 31, 2017, respectively. Included in restricted cash was $94,000 held by lenders in lockbox accounts as of December 31, 2017. No such amounts were included in restricted cash as of September 30, 2018. As part of certain debt agreements, rent from certain of the Company’s tenants is deposited directly into a lockbox account, from which the monthly debt service payments are disbursed to the lender and the excess funds are disbursed to the Company. |
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Revenue Recognition | Revenue Recognition Certain properties have leases where the minimum rental payment increases during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis when earned and collectability is reasonably assured. 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. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred. Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) Topic 605 and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company records revenue for real estate taxes and insurance reimbursed by its tenants on the leased properties, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations as the Company has concluded it is the primary obligor. The Company has identified its revenue streams as rental income from leasing arrangements and tenant reimbursement income, which are outside of the scope of Topic 606. The Company adopted ASU 2014-09 using the modified retrospective approach and determined it did not have a material impact on the Company’s condensed consolidated financial statements. The Company continually reviews receivables related to rent, including any straight-line rent, and current and future operating expense reimbursements from tenants, and determines their collectability by taking 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. In the event that the collectability of a receivable is uncertain, the Company will record an increase in the allowance for uncollectible accounts. |
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Earnings (Loss) and Distributions Per Share | Earnings (Loss) and Distributions Per Share The Company has two classes of common stock. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which can result in different earnings per share for each of the classes. Under the two-class method, earnings per share of each class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. The distributed earnings to Class T Share common stockholders represents distributions declared less the distribution and stockholder servicing fees. Diluted income (loss) per share considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three and nine months ended September 30, 2018 and 2017. Distributions per share are calculated based on the authorized daily distribution rate. |
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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 February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The amendments in this update require that most lease obligations be recognized as a right of use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 and subsequent amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The guidance, including optional practical expedients, should be implemented for the earliest period presented using a modified retrospective approach. The Company is currently in the process of finalizing its assessment of its inventory of leases that will be impacted by adoption of the new guidance. The Company does not expect the adoption to have a material impact on the accounting treatment of the Company’s net leases, which are the primary source of the Company’s revenues. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The targeted amendments in this ASU are designed to help simplify certain aspects of hedge accounting and result in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. ASU 2017-12 applies to the Company’s interest rate swaps designated as cash flow hedges. ASU 2017-12 requires all changes in the fair value of highly effective cash flow hedges to be recorded in accumulated other comprehensive income. Under current GAAP, the ineffective portion of the change in fair value of cash flow hedges is recognized directly in earnings. This eliminates the requirement to separately measure and disclose ineffectiveness for qualifying cash flow hedges. ASU 2017-12 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. ASU 2017-12 is required to be adopted using a modified retrospective approach with early adoption permitted. The Company early adopted ASU 2017-12 during the first quarter of fiscal year 2018. Accordingly, during the nine months ended September 30, 2018, the Company recorded a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of accumulated distributions in excess of earnings of $32,000. 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 the ASU are to be applied retrospectively, and early adoption is permitted. The Company is evaluating the impact of this ASU's adoption, and does not believe this ASU will have a material impact on its condensed consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
9 Months Ended | ||||||||||||
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Sep. 30, 2018 | |||||||||||||
Accounting Policies [Abstract] | |||||||||||||
Investment in and Valuation of Real Estate and Related Assets | The estimated useful lives of the Company’s real estate assets by class are generally as follows:
|
Fair Value Measurements (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Financial Assets and Liabilities 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, 2018 and December 31, 2017 (in thousands):
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Real Estate Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the consideration transferred for the properties purchased during the nine months ended September 30, 2017 (in thousands):
______________________
The following table summarizes the purchase price allocation for the 2017 Business Combination Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):
The following table summarizes the purchase price allocation for the 2018 Asset Acquisitions purchased during the nine months ended September 30, 2018 (in thousands):
The following table summarizes the purchase price allocation for the 2017 Asset Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):
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Business Acquisition, Pro Forma Information | The table below presents the Company’s estimated revenue and net income (loss), on a pro forma basis, for the three and nine months ended September 30, 2017 and 2016 (in thousands):
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Intangible Lease Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of finite-lived intangible assets | Intangible lease assets as of September 30, 2018 and December 31, 2017 consisted of the following (in thousands, except weighted average life):
|
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Schedule of finite-lived intangible assets amortization expense | The following table summarizes the amortization expense related to the intangible lease assets for the three and nine months ended September 30, 2018 and 2017 (in thousands):
|
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Schedule of finite-lived intangible assets, future amortization expense | As of September 30, 2018, the estimated amortization expense relating to the intangible lease assets is as follows (in thousands):
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Derivative Instruments and Hedging Activities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments | The following table summarizes the terms of the Company’s executed interest rate swap agreements designated as hedging instruments as of September 30, 2018 and December 31, 2017 (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, 2018. |
Notes Payable and Credit Facility (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | The following table summarizes the debt balances as of September 30, 2018 and December 31, 2017, and the debt activity for the nine months ended September 30, 2018 (in thousands):
______________________ (1) Includes deferred financing costs incurred during the period. (2) Deferred costs relate to mortgage notes payable and the term portion of the Credit Facility, as defined below. |
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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, 2018 (in thousands):
|
Intangible Lease Liabilities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of finite-lived intangible liabilities | Intangible lease liabilities consisted of the following as of September 30, 2018 and December 31, 2017 (in thousands, except weighted average life remaining amounts):
|
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Schedule of amortization expense of below market lease | The following table summarizes the amortization of the intangible lease liabilities for the three and nine months ended September 30, 2018 and 2017 (in thousands):
|
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Schedule of finite-lived intangible liabilities, future amortization expense | As of September 30, 2018, the estimated amortization of the intangible lease liabilities is as follows (in thousands):
|
Related-Party Transactions and Arrangements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | The Company incurred commissions, fees and expense reimbursements as shown in the table below for services provided by CR V Advisors and its affiliates related to the services described above during the periods indicated (in thousands):
______________________
|
Operating Leases (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum rental payments for operating leases | The future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options, as of September 30, 2018, was as follows (in thousands):
|
Organization and Business (Real Estate) (Details) ft² in Millions |
Sep. 30, 2018
ft²
state
property
|
---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of owned properties (property) | property | 140 |
Rentable square feet (sqft) | ft² | 3.4 |
Number of states in which entity owns properties (state) | state | 33 |
Percentage of rentable space leased (percent) | 98.90% |
Summary of Significant Accounting Policies (Reclassifications) (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Decrease in net cash used in investing activities | $ 44,953 | $ 103,243 |
ASU 2016-18 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Decrease in net cash used in investing activities | $ 253 | |
ASU 2017-12 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Adjustment to opening balance of accumulated distributions in excess of earnings | $ (32) |
Summary of Significant Accounting Policies (Real Estate) (Details) - USD ($) |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
Real Estate | |||
Impairment of real estate | $ 0 | $ 0 | |
Real estate held-for-sale | $ 0 | $ 0 | |
Building | |||
Real Estate | |||
Useful life | 40 years | ||
Site Improvements | |||
Real Estate | |||
Useful life | 15 years |
Summary of Significant Accounting Policies (Restricted Cash) (Details) - USD ($) |
Sep. 30, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
---|---|---|---|
Restricted Cash and Cash Equivalents | |||
Restricted cash | $ 387,000 | $ 346,000 | $ 347,000 |
Restricted Lockbox Accounts | |||
Restricted Cash and Cash Equivalents | |||
Restricted cash | 0 | 94,000 | |
Escrow Deposits | |||
Restricted Cash and Cash Equivalents | |||
Restricted cash | 293,000 | 2,000 | |
Lender Cash Management Accounts | |||
Restricted Cash and Cash Equivalents | |||
Restricted cash | $ 94,000 | $ 250,000 |
Summary of Significant Accounting Policies (Other) (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2018
USD ($)
class_of_stock
shares
|
Sep. 30, 2017
shares
|
Sep. 30, 2018
USD ($)
class_of_stock
shares
|
Sep. 30, 2017
shares
|
Dec. 31, 2017
USD ($)
|
|
Revenue Recognition | |||||
Allowance for doubtful accounts | $ | $ 18 | $ 18 | $ 40 | ||
Earnings Per Share | |||||
Number of classes of common stock | class_of_stock | 2 | 2 | |||
Potentially dilutive share equivalents (shares) | shares | 0 | 0 | 0 | 0 |
Fair Value Measurements (Narrative) (Details) - Fair value, measurements, recurring - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Estimate of fair value | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Debt outstanding | $ 334.7 | $ 311.4 |
Carrying value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Debt outstanding | $ 335.1 | $ 309.6 |
Fair Value Measurements - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - Fair value, measurements, recurring - Interest Rate Swap - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Financial asset: Interest rate swap | $ 1,600 | $ 845 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Financial asset: Interest rate swap | 0 | 0 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Financial asset: Interest rate swap | 1,600 | 845 |
Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Financial asset: Interest rate swap | $ 0 | $ 0 |
Real Estate Assets (Purchase Price of Real Estate Investment) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
---|---|---|---|
Real Estate [Line Items] | |||
Purchase price of asset acquisitions | $ 103,400 | ||
Total real estate assets, at cost | $ 683,908 | $ 639,104 | 103,425 |
2017 Asset Acquisitions | |||
Real Estate [Line Items] | |||
Purchase price of asset acquisitions | 88,547 | ||
Acquisitions, 2017 | |||
Real Estate [Line Items] | |||
Purchase price of business combinations | $ 14,878 |
Real Estate Assets (Business Acquisition, Pro Forma Information) (Details) - Acquisitions, 2017 - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Pro forma basis (unaudited) | ||||
Revenue | $ 11,749 | $ 10,325 | $ 32,779 | $ 31,103 |
Net income (loss) | $ 718 | $ (102) | $ 1,567 | $ (1,559) |
Intangible Lease Assets (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Finite-Lived Intangible Assets [Line Items] | ||
Intangible leased assets | $ 62,222 | $ 62,850 |
Acquired in-place leases and other intangibles | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible leased assets | 56,442 | 56,443 |
Accumulated amortization | $ 18,259 | $ 13,899 |
Useful life | 11 years | 11 years 3 months 18 days |
Acquired above-market leases | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible leased assets | $ 5,780 | $ 6,407 |
Accumulated amortization | $ 3,056 | $ 2,519 |
Useful life | 11 years 2 months | 11 years 9 months 18 days |
Intangible Lease Assets (Schedule of finite-lived intangible assets amortization expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Acquired in-place leases and other intangibles | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 1,469 | $ 1,328 | $ 4,587 | $ 3,558 |
Acquired above-market leases | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 166 | $ 211 | $ 628 | $ 617 |
Intangible Lease Assets (Estimated Amortization of Intangible lease assets) (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Acquired in-place leases and other intangibles | |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |
Remainder of 2018 | $ 1,482 |
2019 | 5,699 |
2020 | 5,492 |
2021 | 5,430 |
2022 | 5,233 |
Acquired above-market leases | |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |
Remainder of 2018 | 183 |
2019 | 591 |
2020 | 538 |
2021 | 523 |
2022 | $ 511 |
Derivative Instruments and Hedging Activities (Narrative) (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018
USD ($)
derivative
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2018
USD ($)
derivative
|
Sep. 30, 2017
USD ($)
|
|
Derivatives, Fair Value [Line Items] | ||||
Amount of gain (loss) reclassified from other comprehensive income into income as interest expense | $ | $ 17 | $ (110) | $ 90 | $ (567) |
Interest Rate Swap | ||||
Derivatives, Fair Value [Line Items] | ||||
Derivative, number of instruments entered into (derivative) | derivative | 1 | |||
Derivative, number of instruments held (derivative) | derivative | 3 | 3 | ||
Interest Rate Swap | Cash Flow Hedging | Interest Expense | ||||
Derivatives, Fair Value [Line Items] | ||||
Interest rate cash flow hedge gain (loss) to be reclassified during next twelve months | $ | $ 681 | $ 681 |
Derivative Instruments and Hedging Activities (Schedule of Derivative Instruments) (Details) - Cash Flow Hedging - Interest Rate Swap - Derivative assets, prepaid expenses and other assets - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Outstanding Notional Amount | $ 241,100 | |
Fair Value of Assets | $ 1,600 | $ 845 |
Minimum | ||
Derivatives, Fair Value [Line Items] | ||
Interest rate (percent) | 3.22% | |
Maximum | ||
Derivatives, Fair Value [Line Items] | ||
Interest rate (percent) | 4.45% |
Notes Payable and Credit Facility (Fixed Rate Debt Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 335,100 | $ 309,600 |
Fixed rate debt | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 92,600 | |
Debt instrument, collateral amount | $ 156,500 | |
Minimum | Fixed rate debt | ||
Debt Instrument [Line Items] | ||
Debt instrument interest rate (percent) | 3.50% | |
Maximum | Fixed rate debt | ||
Debt Instrument [Line Items] | ||
Debt instrument interest rate (percent) | 4.45% | |
Interest Rate Swap | Variable Rate Debt | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 21,100 |
Notes Payable and Credit Facility (Schedule of Maturities of Long-term Debt) (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Disclosure [Abstract] | ||
Remainder of 2018 | $ 0 | |
2019 | 0 | |
2020 | 388 | |
2021 | 68,009 | |
2022 | 22,928 | |
Thereafter | 243,775 | |
Total | $ 335,100 | $ 309,600 |
Intangible Lease Liabilities (Schedule of lease liabilities) (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Other Liabilities Disclosure [Abstract] | ||
Below market leases net of amortization | $ 3,569 | $ 4,019 |
Below market lease, accumulated amortization | $ 2,081 | $ 1,678 |
Below market lease, weighted average useful life | 7 years 6 months | 7 years 10 months 24 days |
Intangible Lease Liabilities (Schedule of amortization expense of below market lease) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Other Liabilities Disclosure [Abstract] | ||||
Amortization of below market lease | $ 147 | $ 133 | $ 450 | $ 412 |
Intangible Lease Liabilities (Schedule of future amortization expense) (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Below Market Lease, Amortization Income, Maturity Schedule [Abstract] | |
Remainder of 2018 | $ 146 |
2019 | 555 |
2020 | 479 |
2021 | 460 |
2022 | $ 380 |
Related-Party Transactions and Arrangements (Selling commissions and dealer manager fees) (Details) - Dealer manager |
Sep. 30, 2018 |
---|---|
Selling commissions | |
Related Party Transaction [Line Items] | |
Expenses reallowed (percentage) | 100.00% |
Selling commissions | Class A Common Stock | Maximum | |
Related Party Transaction [Line Items] | |
Commissions percentage on stock sales and related dealer manager fees | 7.00% |
Selling commissions | Class T Common Stock | Maximum | |
Related Party Transaction [Line Items] | |
Commissions percentage on stock sales and related dealer manager fees | 3.00% |
Dealer manager fee | Class A Common Stock | |
Related Party Transaction [Line Items] | |
Commissions percentage on stock sales and related dealer manager fees | 2.00% |
Dealer manager fee | Class T Common Stock | |
Related Party Transaction [Line Items] | |
Commissions percentage on stock sales and related dealer manager fees | 2.00% |
Related-Party Transactions and Arrangements (Other organization and offering expenses) (Details) - Advisors - Other organization and offering expenses |
Sep. 30, 2018 |
---|---|
Related Party Transaction [Line Items] | |
Organization and offering expense (percent) | 2.00% |
Maximum | |
Related Party Transaction [Line Items] | |
Organization and offering expense (percent) | 2.00% |
Related-Party Transactions and Arrangements (Distribution and stockholder servicing fees) (Details) - Advisors |
Oct. 05, 2016 |
Oct. 04, 2016 |
Sep. 30, 2018 |
---|---|---|---|
Class T Common Stock | |||
Related Party Transaction [Line Items] | |||
Distribution and stockholder servicing fee, percentage of net asset value, daily accrual rate | 0.00274% | 0.00219% | |
Distribution and stockholder servicing fees | |||
Related Party Transaction [Line Items] | |||
Related party transaction, daily distribution and servicing fee, termination of payments threshold, percentage of Total Gross Investment | 4.00% | ||
Related party transaction, daily distribution and servicing fee, termination of payments threshold, percentage of gross proceeds from shares in offering | 10.00% |
Related-Party Transactions and Arrangements (Acquisition fees and expenses) (Details) - Advisors - Acquisition fees and expenses |
Sep. 30, 2018 |
---|---|
Related Party Transaction [Line Items] | |
Acquisition and advisory fee (percent) | 2.00% |
Related party, reimbursement fixed annual percentage of the contract purchase price | 0.50% |
Acquisition fees and expenses reimbursement percent | 6.00% |
Related-Party Transactions and Arrangements (Operating expenses) (Details) - Advisors - Minimum |
Sep. 30, 2018 |
---|---|
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 - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Brokerage commission fee | Maximum | ||||
Related Party Transaction [Line Items] | ||||
Commissions performance and other fees percent | 50.00% | 50.00% | ||
Property sales commission | ||||
Related Party Transaction [Line Items] | ||||
Commissions performance and other fees percent | 1.00% | 1.00% | ||
Related party transaction, expenses from transactions with related party | $ 0 | $ 0 | $ 0 | $ 0 |
Property portfolio | Maximum | ||||
Related Party Transaction [Line Items] | ||||
Commissions performance and other fees percent | 6.00% | 6.00% |
Related-Party Transactions and Arrangements (Subordinated performance fees) (Details) - Advisors |
Sep. 30, 2018 |
---|---|
Related Party Transaction [Line Items] | |
Cumulative noncompounded annual return | 6.00% |
Subordinate Performance Fees On Event of Sale of Company | |
Related Party Transaction [Line Items] | |
Commissions performance and other fees percent | 15.00% |
Subordinate Performance Fees For Listing | |
Related Party Transaction [Line Items] | |
Commissions performance and other fees percent | 15.00% |
Related-Party Transactions and Arrangements (Due to/from Affiliates) (Details) - USD ($) |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Related Party Transactions [Abstract] | ||
Due to affiliates | $ 2,147,000 | $ 1,787,000 |
Due from affiliates | $ 0 | $ 14,000 |
Operating Leases (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
Operating lease, weighted average remaining lease term | 10 years 3 months |
Operating Leases, Future Minimum Payments Receivable [Abstract] | |
Remainder of 2018 | $ 12,641 |
2019 | 48,013 |
2020 | 47,325 |
2021 | 46,723 |
2022 | 45,122 |
Thereafter | 322,650 |
Total | $ 522,474 |
Subsequent Events Narrative (Details) $ / shares in Units, shares in Thousands, $ in Thousands |
1 Months Ended | 9 Months Ended | |
---|---|---|---|
Nov. 13, 2018
USD ($)
property
$ / shares
shares
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2017
property
|
|
Subsequent Event [Line Items] | |||
Redemptions of common stock | $ 8,536 | ||
Number of properties acquired | property | 15 | ||
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Redemptions of common stock (shares) | shares | 135 | ||
Redemptions of common stock | $ 3,000 | ||
Stock redeemed or called during period, average price per share (USD per share) | $ / shares | $ 22.05 | ||
Share redemption program requests or redemptions unfulfilled (in shares) | shares | 295 | ||
Number of properties acquired | property | 1 | ||
Aggregate purchase price of acquired real estate assets | $ 15,100 |
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