Noncontrolling Interests

9 Months Ended

Sep. 30, 2023

Noncontrolling interests represent limited partnership interests in the Operating Partnership in which the Company is the general partner.

As of September 30, 2023, noncontrolling interests were approximately 8.8% of total shares and 8.9% of weighted average shares outstanding (both measures assuming OP Units were converted to common shares). The Company classified OP Units exchanged for limited partnership interests issued in conjunction with contributed assets and in connection with the internalization of management of the Company in December 2018 (the “Self-Administration Transaction”), as noncontrolling interests, which are presented as a component of permanent equity, except as discussed below.

Any noncontrolling interest that fails to qualify as permanent equity has been reclassified as temporary equity and adjusted to the greater of (a) the carrying amount or (b) its redemption value as of the end of the period in which the determination is made.

As of September 30, 2023, the limited partners of the Operating Partnership owned approximately 3.5 million OP Units, which were issued to then affiliated parties and unaffiliated third parties in exchange for the contribution of certain properties to the Company and in connection with the Self-Administration Transaction, and approximately 0.02 million OP Units were issued unrelated to property contributions.

As of September 30, 2023, all limited partners of the Operating Partnership (See Noncontrolling Interest Subject to Redemption below) had an Exchange Right (as defined below), pursuant to which, if exercised, the Operating Partnership would be required to redeem their OP Units for cash equal to the value of an equivalent number of common shares as calculated pursuant to the limited partnership agreement and applicable contribution agreement (the “Exchange Right”). If a limited partner of the Operating Partnership exercises an Exchange Right, the Company, as general partner of the Operating Partnership, may, in its sole and absolute discretion, elect to either (i) purchase the OP units for cash equal to the value of an equivalent number of common shares as calculated pursuant to the limited partnership agreement and applicable contribution agreement or (ii) purchase such limited partner’s OP Units by issuing common shares of the Company for the OP Units redeemed pursuant to the limited partnership agreement and applicable contribution agreement, subject to certain transfer and ownership limitations included in the Company’s charter and the limited partnership agreement.

The following summarizes the activity for noncontrolling interests recorded as equity for the nine months ended September 30, 2023 and year ended December 31, 2022:


	Nine Months Ended September 30, 2023		Year Ended December 31, 2022
Beginning balance	$	174,655	$	218,653
Reclass of noncontrolling interest subject to redemption	10		957
Exchange of noncontrolling interests	(6,550)		—
Reclass of redeemable non-controlling interest	3,801		—
Distributions to noncontrolling interests	(2,990)		(10,942)
Allocated distributions to noncontrolling interests subject to redemption	(3)		(17)
Allocated net loss	(52,677)		(39,714)
Allocated other comprehensive income (loss)	(300)		5,718
Ending balance	$	115,946	$	174,655

Noncontrolling interests subject to redemption

Prior to the Listing, OP Units issued pursuant to the Will Partners Contribution were not included in permanent equity on the consolidated balance sheets, because the limited partners holding these OP Units could cause the general partner to redeem the OP Units for the cash value, and the Company could not elect to purchase such limited partner’s OP Units by issuing common shares of the Company for the OP Units redeemed. Accordingly, prior to Listing, the general partner of the Operating Partnership did not control these redemptions and these OP Units were presented on the consolidated balance sheets as noncontrolling interest subject to redemption at their redeemable value, and the net income (loss) and distributions attributed to

these limited partners are allocated proportionately between common shareholders and other noncontrolling interests that are not considered redeemable.

Effective as of the Listing, and subsequently as of September 30, 2023, all OP Units are subject to the same redemption process as all other OP Units (i.e., can be redeemed for cash or, the Company can elect to purchase these OP Units by issuing common shares) as described above. The Company intends to redeem all OP Units for common shares.

Redemption of OP units from Self-Administration Transaction

In connection with the Self-Administration Transaction, Griffin Capital, LLC (“GC LLC”), an entity controlled by our former Executive Chairman, Kevin A. Shields, and an affiliate of our Predecessor’s sponsor, Griffin Capital Company, LLC “GCC LLC”), received OP units (approximately 2.7 million taking into effect the 9 to 1 reverse split) as consideration in exchange for the sale to our Predecessor of the advisory, asset management and property management business of Griffin Capital Real Estate Company, LLC (“GRECO”). GC LLC assigned approximately 50% of the OP units received in connection with the Self-Administration Transaction to then participants in GC LLC’s long-term incentive plan. Mr. Shields is the plan administrator of such long-term incentive plan.

As previously disclosed, certain of our current and former employees and executive officers, including Michael Escalante, our Chief Executive Officer, and Javier Bitar, our Chief Financial Officer and Treasurer, were employed by affiliates of GC LLC prior to the Self-Administration Transaction and are therefore participants in a long-term incentive plan of GC LLC that made grants to such participants in connection with services rendered prior to the Self-Administration Transaction. Participants in GC LLC’s long-term incentive plan, including Messrs. Escalante and Bitar, are entitled to receive distributions from the long-term incentive plan in the form of either cash, common shares, or other property, or a combination thereof, as elected by the plan administrator.

The Listing requires that certain awards under GC LLC’s long-term incentive plan be settled during the fourth quarter 2023 and in four annual installments thereafter, unless waived or modified. As described above, in connection with the settlement of GC LLC’s long-term incentive plan, the plan administrator may choose to distribute cash, common shares, or other property, or a combination thereof, as elected by the plan administrator. If the plan administrator elects to redeem the OP units GC LLC received in connection with the Self-Administration Transaction pursuant to the terms of our Operating Partnership’s operating agreement, we intend to satisfy such redemption request with our common shares. If such a redemption occurs in the fourth quarter of 2023 and the plan administrator determines to distribute only common shares to plan participants, then, pursuant to the terms of the GC LLC long-term incentive plan, GC LLC would distribute 56,266 common shares to Mr. Escalante and 2,000 common shares to Mr. Bitar in connection with the redemption in the fourth quarter of 2023. The redemption of OP units and distribution of common shares would have no economically dilutive effect on our common shareholders.