FILED PURSUANT TO RULE 424(B)(3)

REGISTRATION NO. 333-217924

PHILLIPS EDISON GROCERY CENTER REIT III, INC.

SUPPLEMENT NO. 5 DATED NOVEMBER 14, 2018

TO THE PROSPECTUS DATED MAY 8, 2018

This prospectus supplement, or this Supplement No. 5, is part of the prospectus of Phillips Edison Grocery Center REIT III, Inc., or the Company, dated May 8, 2018, or the Prospectus, as supplemented by Supplement No. 1 to the Prospectus dated May 18, 2018, Supplement No. 2 to the Prospectus dated July 26, 2018, Supplement No. 3 to the Prospectus dated August 17, 2018, and Supplement No. 4 to the Prospectus dated November 5, 2018. Unless the context suggests otherwise, the terms “we,” “us,” and “our” used herein refer to the Company, together with its consolidated subsidiaries. The purposes of this Supplement No. 5 are to provide:

• the status of this public offering;

• information regarding the completion of property dispositions to a joint venture formed between The Northwestern Mutual Life Insurance Company and us in exchange for cash and an ownership interest in the joint venture;

• amendments to our revolving credit facility agreement;

• changes to the composition of our board of directors;

• “Management’s Discussion and Analysis of Financial Condition and Results of Operations” similar to that filed in our quarterly Report on Form 10-Q for the period ended September 30, 2018, filed November 13, 2018; and

• our unaudited consolidated financial statements and the notes thereto as of September 30, 2018 and December 31, 2017 and for the three and nine months ended September 30, 2018 and 2017.

Status of the Offering

On May 8, 2018, we commenced this public offering of up to $1.7 billion of shares of our Class T and Class I common stock, including up to $0.2 billion of shares of our Class T and Class I common stock pursuant to our distribution reinvestment plan. As of November 9, 2018, we have received aggregate gross offering proceeds of approximately $0.4 million related to the sale of approximately 32,000 and 5,000 shares of Class T and Class I common stock, respectively, in this public offering, including less than 100 shares of Class T and Class I common stock, respectively, sold under our distribution reinvestment plan for a nominal amount of additional gross offering proceeds. Accordingly, as of November 9, 2018, we had $1.699 billion of common stock available for sale in this public offering. Through November 9, 2018, we have received aggregate gross offering proceeds of approximately $57.2 million from the sale of Class T and Class I shares in this public offering and Class A shares in our private offering, which commenced in October 2016 and terminated in February 2018.

Joint Venture with The Northwestern Mutual Life Insurance Company

On November 9, 2018, we closed the transaction contemplated by the Contribution Agreement between us and The Northwestern Mutual Life Insurance Company (“Investor Member”) entered into on November 2, 2018, and (i) we contributed all of our ownership interests in three grocery-anchored shopping center properties (the “Properties”) to a joint venture entity (the “Joint Venture”) formed between Investor Member and us in exchange for approximately $42 million in cash and a 10% ownership interest in the Joint Venture and (ii) Investor Member made an initial capital contribution to the Joint Venture equal to approximately $42 million in cash in exchange for a 90% ownership interest in the Joint Venture (together, the “Transaction”). The Properties contributed were Albertville Crossing in Albertville, Minnesota; St. Cloud Station in Saint Cloud, Florida; and Rolling Meadows Station in Rolling Meadows, Illinois. The Properties were valued by the parties at their original cost to us plus acquisition fees and expenses, leasing commissions, tenant improvements and other capital expenditures. In connection with the closing of the Transaction, we entered into a limited liability company agreement and an amendment to our advisory agreement on the terms described in Supplement No. 4 to the Prospectus.

Revolving Credit Facility

On March 30, 2017, we and our subsidiaries entered into a Credit Agreement with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent. On November 9, 2018, in connection with the closing of the Transaction, we entered into the First Amendment to Credit Agreement to permit consummation of the Transaction under the Credit Agreement and to revise certain terms and conditions of the Credit Agreement related to financial metrics to reflect an adjustment for the disposition of the Properties to the Joint Venture. In addition, pursuant to the terms of the Credit Agreement, effective November 9, 2018, we reduced the size of our revolving credit facility from $250 million to $125 million.

Board Composition

On November 13, 2018, David W. Garrison resigned from the board of directors, effective November 14, 2018, in anticipation of joining our sponsor’s board of directors upon the closing of the proposed merger between our sponsor and Phillips Edison Grocery Center REIT II, Inc. In addition, on November 13, 2018, our board of directors elected Toan Huynh and Mark D. McDade as independent directors of the Company. Ms. Huynh and Mr. McDade will serve as members of the Audit Committee and Conflicts Committee. The biographical descriptions below set forth certain information with respect to Ms. Huynh and Mr. McDade. The board has identified specific attributes of each director that the board has determined qualify that person for service on the board.

Toan Huynh joined our board on November 13, 2018. She currently spends time as an Entrepreneur in Residence at a leading global bank where she supports their internal innovation agenda and as a Partner for Information Venture Partners, a Toronto-based venture fund focusing on early stage enterprise and software-as-a service technologies for the financial services industry. In addition, she has served as Managing Director - Cloud First Applications Financial Services & Insurance at Accenture since 2015, running may of their innovation programs including the launch of their Innovation Liquid Studio in New York City and the Fintech Innovation Lab, in collaboration with the Partnership Fund for New York. From 2008 to 2015, Ms. Huynh was the co-founder of GlobalOne/CloudSherpas,

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a boutique cloud advisory and brokerage firm of 1300 that was sold to Accenture in 2015. She was responsible for growing the footprint of the business across financial services and insurance clients globally as well as developing products and software assets to align to client’s digital agenda. Prior to that, she was Practice Director at Princeton Softech, an IBM Company, from 2006 to 2007 and was Vice President, Global e-Technology Services at Citigroup Private Bank from 2003 to 2005. From 1997 to 2003 she held various positions in the financial services practice group at PricewaterhouseCoopers LLP. Ms. Huynh also serves on the Board of Directors of Bankers Financial Group, a mid-sized holding company with over $500 million in assets and is on the Advisory Board for select fintech and startups. She received a Bachelor in Economics and International Relations from the University of Pennsylvania and a Masters Certificate in International Economics from Kyung Hee University, South Korea.

Among the factors that led to the Board’s recommendation that Ms. Huynh serve as a director are her comprehensive experience as an entrepreneur, adviser and investor in technology startups, her extensive background in designing and implementing innovation-focused transformation programs, and her strong leadership skills.

Mark D. McDade joined our Board on November 13, 2018. He served as one of the directors of Phillips Edison Grocery Center REIT II, Inc., another Phillips Edison-sponsored REIT, from its inception in 2013 to November 2018. Mr. McDade has served as Executive Vice President of Established Brands, Solutions and Supply for UCB since February 2013. He also served as Chief Operating Officer of UCB, SA, located in Brussels, Belgium, until January 2017. From April 2008 to February 2013, Mr. McDade served as Executive Vice President of Global Operations for UCB. From 2002 until late 2007, Mr. McDade served as Chief Executive Officer and a director of PDL Biopharma Inc., an antibody-based biopharmaceutical company located in Redwood City, California. Prior to 2002, he served as Chief Executive Officer of Signature Bioscience Inc., located in San Francisco, California. Mr. McDade was founder and a director of Corixa Corporation, where he served as Chief Operating Officer from September 1994 to December 1998 and as President and Chief Operating Officer from January 1999 until his departure in late 2000 to join Signature Bioscience Inc. Before Corixa Corporation, Mr. McDade was Chief Operating Officer of Boehringer Mannheim Therapeutics, the bio-pharmaceutical division of Corange Ltd., and prior to that he held several positions at Sandoz Ltd., including in business development, product management and general management. Mr. McDade received his Bachelor of Arts from Dartmouth College and his Master of Business Administration from Harvard Business School.

Among the factors that led to the Board’s recommendation that Mr. McDade serve as a director are his integrity, judgment, leadership skills, commercial business experience, public company director experience, and independence from management and our sponsor and its affiliates.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All references to “Notes” throughout the document refer to the footnotes to the consolidated financial statements.

Overview

Organization—We were formed as a Maryland corporation on April 15, 2016, and have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2017.

We completed a private placement offering of shares of Class A common stock on a “reasonable best efforts” basis to accredited investors. We ceased the private offering during the first quarter of 2018. Pursuant to our Registration Statement, declared effective on May 8, 2018, we are offering $1.5 million in shares of common stock in the Primary Offering, consisting of two classes of shares: Class T and Class I, at purchase prices of $10.42 per share and $10.00 per share, respectively, with discounts available to some categories of investors with respect to Class T shares. In addition, we are also offering $200 million in Class A, Class T, and Class I shares of our common stock pursuant to the distribution reinvestment plan (“DRIP”) at a price of $9.80 per share. The Dealer Manager is responsible for marketing our shares in the Public Offering.

We intend to invest primarily in well-occupied, grocery-anchored neighborhood and community shopping centers leased to a mix of national and regional creditworthy retailers selling necessity-based goods and services in strong demographic markets throughout the United States. In addition, we may invest in other retail properties including power and lifestyle shopping centers, multi-tenant shopping centers, free-standing single-tenant retail properties, and other real estate and real estate-related loans and securities depending on real estate market conditions and investment opportunities that we determine are in the best interests of our stockholders. As of September 30, 2018, we owned five real estate properties acquired from third parties unaffiliated with us or our Advisor.

Joint Venture with Northwestern Mutual—On November 9, 2018, we entered into a joint venture with The Northwestern Mutual Life Insurance Company (“Northwestern Mutual”). We contributed all of our ownership interests in three grocery-anchored shopping center properties to the joint venture in exchange for approximately $42 million in cash and a 10% ownership interest in the joint venture, and Northwestern Mutual made an initial capital contribution to the joint venture equal to approximately $42 million in cash in exchange for a 90% ownership interest in the joint venture.

Equity Raise Activity—During the private placement offering, we raised $57.7 million in gross offering proceeds from the issuance of 5.9 million Class A shares, inclusive of the DRIP. As of September 30, 2018, through the Primary Offering we had raised $8,000 in gross offering proceeds from the issuance of Class I shares, inclusive of the DRIP, $0.5 million in gross offering proceeds from the issuance of Class A shares pursuant to the DRIP, and $0.1 million in gross offering proceeds from the issuance of Class T shares.

Portfolio—Below are statistical highlights of our portfolio:

	Total Portfolio as of September 30, 2018		Property Acquisitions During the Nine Months Ended September 30, 2018
Number of properties	5		2
Number of states	4		2
Total square feet (in thousands)	471		189
Leased % of rentable square feet	93.8	%	93.5	%
Average remaining lease term (in years)(1)	4.3		5.7

⁽¹⁾  The average remaining lease term in years excludes future options to extend the term of the lease.

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Lease Expirations—The following table lists, on an aggregate basis, all of the scheduled lease expirations after September 30, 2018, for each of the next ten years and thereafter for our five shopping centers. The chart shows the leased square feet and annual base rent (“ABR”) represented by the applicable lease expiration year:

Subsequent to September 30, 2018, we renewed approximately 3,600 total square feet and $88,152 of total ABR of the leases expiring.

Portfolio Tenancy—Prior to the acquisition of each property, we assess the suitability of the grocery-anchor tenant and other tenants in light of our investment objectives, namely, preserving capital and providing stable cash flows for distributions. Generally, we assess the strength of the tenant by consideration of company factors, such as its financial strength and market share in the geographic area of the shopping center, as well as location-specific factors, such as the store’s sales, local competition, and demographics. When assessing the tenancy of the non-anchor space at the shopping center, we consider the tenant mix at each shopping center in light of our portfolio, the proportion of national and national franchise tenants, the creditworthiness of specific tenants, and the timing of lease expirations. When evaluating non-national tenancy, we attempt to obtain credit enhancements to leases, which typically come in the form of deposits and/or guarantees from one or more individuals.

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We define national tenants as those tenants that operate in at least three states. Regional tenants are defined as those tenants that have at least three locations. The following charts present the composition of our portfolio by tenant type as of September 30, 2018:

The following charts present the composition of our portfolio by tenant industry as of September 30, 2018:

The following table presents our primary anchor tenants, grouped according to parent company, by ABR as of September 30, 2018 (dollars and square feet are presented in thousands):

Tenant	ABR		% of ABR		Leased Square Feet	% of Leased Square Feet		Number of Locations(1)
Grocery
Publix Super Markets	$	932	16.6	%	99	22.4	%	2
Coborn's	639		11.4	%	58	13.2	%	1
Albertsons Companies	617		11.0	%	62	14.1	%	1
	2,188		39.0	%	219	49.7	%	4
Other
T.J. Maxx	305		5.4	%	32	7.3	%	1
	$	2,493	44.4	%	251	57.0	%	5

⁽¹⁾  Number of locations excludes auxiliary leases with grocery anchors such as fuel stations and liquor stores.

Results of Operations

We owned five properties as of September 30, 2018, and one property as of September 30, 2017. Unless otherwise discussed below, year-over-year comparative differences for the three and nine months ended September 30, 2018 and 2017, are almost entirely attributable to the number of properties owned and the length of ownership of these properties.

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Summary of Operating Activities for the Three Months Ended September 30, 2018 and 2017

(dollars are presented in thousands, except per share amounts)	2018			2017			Favorable (Unfavorable) Changes
Total revenues	$	1,916		$	348		$	1,568
Property operating expenses	(324		)	(49		)	(275		)
Real estate tax expenses	(424		)	(40		)	(384		)
General and administrative expenses	(492		)	(171		)	(321		)
Depreciation and amortization	(856		)	(148		)	(708		)
Interest expense	(530		)	(337		)	(193		)
Other expense, net	(38		)	—			(38		)
Net loss	$	(748	)	$	(397	)	$	(351	)
Net loss per share—basic and diluted	$	(0.12	)	$	(0.19	)	$	0.07

Total revenues—The $1.6 million increase in total revenues was primarily related to the properties acquired in the fourth quarter of 2017 and during 2018. We renewed three leases with a weighted average term of 5.2 years with $136,000 in annual rent, which was an 11.3% increase in rent per square foot over the previous leases.

General and administrative expenses—The $0.3 million increase in general and administrative expenses was primarily attributable to a $0.2 million increase in third-party legal, accounting, board of directors, and travel costs associated with the administration of the fund since entering into the Public Offering. The remaining $0.1 million increase was due to higher asset management fees paid as a result of the additional properties acquired in 2017 and 2018.

Summary of Operating Activities for the Nine Months Ended September 30, 2018 and 2017

(dollars are presented in thousands, except per share amounts)	2018			2017			Favorable (Unfavorable) Changes
Total revenues	$	4,922		$	1,062		$	3,860
Property operating expenses	(794		)	(153		)	(641		)
Real estate tax expenses	(1,138		)	(136		)	(1,002		)
General and administrative expenses	(1,439		)	(607		)	(832		)
Depreciation and amortization	(2,123		)	(443		)	(1,680		)
Interest expense	(1,224		)	(855		)	(369		)
Other expense, net	(126		)	—			(126		)
Net loss	$	(1,922	)	$	(1,132	)	$	(790	)
Net loss per share—basic and diluted	$	(0.32	)	$	(0.90	)	$	0.58

Total revenues—The $3.9 million increase in total revenues was primarily related to the properties acquired in 2018 and the second half of 2017. During the nine months ended September 30, 2018, we executed three new leases with $0.1 million in annual rent for an average term of 4.8 years. We also renewed five leases for an average term of 4.9 years with $0.2 million in annual rent, which was a 14.3% increase in rent per square foot over the previous leases.

General and administrative expenses—The $0.8 million increase in general and administrative expenses was primarily attributable to a $0.5 million increase in third-party legal, accounting, board of directors, and travel costs associated with the administration of the fund, since entering into the Public Offering, as well as a $0.3 million increase in asset management fees paid as a result of the additional properties acquired in 2017 and 2018.

Interest expense— The $0.4 million increase in interest expense is primarily a result of additional borrowings required for property acquisitions, as well as the associated fees for the revolving credit facility entered into in March 2017.

We generally expect our revenues and expenses to increase in future years as a result of owning the properties acquired in 2017 and 2018 for a full year and the acquisition of additional properties. Although we expect our general and administrative expenses to increase, we expect such expenses to decrease as a percentage of our revenues.

Non-GAAP Measures

Net Operating Income—We present Net Operating Income (“NOI”) as a supplemental measure of our performance. We define NOI as total operating revenues less property operating expenses, real estate taxes, and non-cash revenue items. We believe that NOI provides useful information to our investors about our financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income.

NOI should not be viewed as an alternative measure of our financial performance since it only highlights the operating income and costs on properties. NOI does not reflect the impact of general and administrative expenses, acquisition expenses, interest expense, depreciation and amortization, other income, or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materially impact our results from operations.

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The table below is a comparison of NOI for the three and nine months ended September 30, 2018 and 2017:

	Three Months Ended				Favorable (Unfavorable) Changes			Nine Months Ended				Favorable (Unfavorable) Changes
	September 30,							September 30,
(dollars presented in thousands)	2018		2017					2018		2017
Revenues:
Rental income(1)	$	1,330	$	257	$	1,073		$	3,314	$	770	$	2,544
Tenant recovery income	547		76		471			1,467		247		1,220
Other property income	7		2		5			21		5		16
Total revenues	1,884		335		1,549			4,802		1,022		3,780
Operating Expenses:
Property operating expenses	324		49		(275		)	794		153		(641		)
Real estate taxes	424		40		(384		)	1,138		136		(1,002		)
Total operating expenses	748		89		(659		)	1,932		289		(1,643		)
Total NOI	$	1,136	$	246	$	890		$	2,870	$	733	$	2,137

⁽¹⁾  Excludes lease buy-out income and non-cash rental income adjustments related to straight-line rental income and amortization of above- and below-market leases.

Below is a reconciliation of Net Loss to NOI for the three and nine months ended September 30, 2018 and 2017:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars presented in thousands)	2018			2017			2018			2017
Net loss:	$	(748	)	$	(397	)	$	(1,922	)	$	(1,132	)
Adjusted to exclude:
Non-cash rental income adjustments	(32		)	(13		)	(120		)	(40		)
General and administrative expenses	492			171			1,439			607
Depreciation and amortization	856			148			2,123			443
Interest expense, net	530			337			1,224			855
Other income, net	38			—			126			—
NOI	$	1,136		$	246		$	2,870		$	733

Funds from Operations and Modified Funds from Operations—Funds from Operations (“FFO”) is a non-GAAP performance financial measure that is widely recognized as a measure of REIT operating performance. We use FFO as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be net income (loss) attributable to common shareholders computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis.

Modified Funds from Operations (“MFFO”) is an additional performance financial measure used by us as FFO includes certain non-comparable items that affect our performance over time. MFFO excludes the following items:

• acquisition fees and expenses;

• non-cash rental income adjustments for straight-line rent amounts, both income and expense, and amortization of above- or below-market intangible lease assets and liabilities;

• amortization of discounts and premiums on debt investments;

• gains or losses from the early extinguishment of debt;

• gains or losses on the extinguishment of derivatives, except where the trading of such instruments is a fundamental attribute of our operations;

• gains or losses related to fair value adjustments for derivatives not qualifying for hedge accounting;

• gains or losses related to consolidation from, or deconsolidation to, equity accounting; and

• adjustments related to the above items for unconsolidated entities in the application of equity accounting.

We believe that MFFO is helpful in assisting management and investors with the assessment of the sustainability of operating performance in future periods. Neither FFO nor MFFO should be considered as an alternative to net income (loss) or income (loss) from continuing operations under GAAP, nor as an indication of our liquidity, nor is either of these measures indicative of funds available to fund our cash needs, including our ability to fund distributions. MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business plan in the manner currently contemplated.

Accordingly, FFO and MFFO should be reviewed in connection with other GAAP measurements. FFO and MFFO should not be viewed as more prominent measures of performance than our net income or cash flows from operations prepared in accordance with GAAP. Our FFO and MFFO as presented may not be comparable to amounts calculated by other REITs.

The following section presents our calculation of FFO and MFFO and provides additional information related to our operations. As a result of the timing of the commencement of our initial public offering and our active real estate acquisitions, FFO and MFFO are not relevant to a discussion comparing operations for the periods presented. We expect revenues and expenses to increase in future periods as we acquire additional investments.

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As a result of the timing of the commencement of our initial public offering and our active real estate acquisitions, FFO and MFFO are not relevant to a discussion comparing operations for the periods presented. We expect revenues and expenses to increase in future periods as we acquire additional investments.

The following table presents our calculation of FFO and MFFO and provides additional information related to our operations:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars presented in thousands, except per share amounts)	2018			2017			2018			2017
Calculation of FFO
Net loss	$	(748	)	$	(397	)	$	(1,922	)	$	(1,132	)
Adjustments:
Depreciation and amortization of real estate assets	856			148			2,123			443
FFO	$	108		$	(249	)	$	201		$	(689	)
Calculation of MFFO
FFO	$	108		$	(249	)	$	201		$	(689	)
Adjustments:
Non-cash rental income adjustments	(32		)	(13		)	(120		)	(40		)
Acquisition expenses	38			—			142			2
MFFO	$	114		$	(262	)	$	223		$	(727	)
Earnings per common share:
Weighted-average common shares outstanding -    basic and diluted	6,383			2,103			6,097			1,256
FFO per share - basic and diluted	$	0.02		$	(0.12	)	$	0.03		$	(0.55	)
MFFO per share - basic and diluted	$	0.02		$	(0.12	)	$	0.04		$	(0.58	)

Liquidity and Capital Resources

General—Aside from standard operating expenses, we expect our principal cash demands to be for:

• investments in real estate;

• capital expenditures and leasing costs;

• cash distributions to stockholders; and

• interest payments on our outstanding indebtedness.

We expect our primary sources of liquidity to be:

• proceeds from our Public Offering;

• proceeds received from the Northwestern Mutual joint venture;

• proceeds from our unsecured revolving credit facility;

• reinvested distributions;

• available, unrestricted cash and cash equivalents; and

• operating cash flows.

In conjunction with the joint venture we entered into with Northwestern Mutual on November 9, 2018, we paid off the current outstanding principal balance of $28 million on our revolving credit facility. We utilized a portion of the approximately $42 million in proceeds received in exchange for the contribution of our ownership interests in three grocery-anchored shopping centers to make this paydown. We anticipate using the remaining proceeds from our contribution to fund future acquisitions of real estate assets (See Note 10). We believe our sources of cash will provide adequate liquidity to fund our obligations.

As of September 30, 2018, we had cash and cash equivalents of $1.5 million, a net decrease of $1.2 million for the nine month period, as discussed below.

Below is a summary of our cash flow activity for the nine months ended September 30, 2018 and 2017:

(dollars are presented in thousands)	2018			2017			Favorable (Unfavorable) Change
Net cash provided by (used in) operating activities	$	376		$	(626	)	$	1,002
Net cash used in investing activities	(33,094		)	(99		)	(32,995		)
Net cash provided by financing activities	31,551			4,838			26,713

Operating Activities—Our net cash provided by (used in) operating activities was primarily impacted by the following:

• Property operations—Most of our operating cash comes from rental and tenant recovery income, and is offset by property operating expenses, real estate taxes, and property-specific general and administrative costs. Our change in cash flows from property operations primarily results from owning a larger portfolio year-over-year, and is expected to increase as we continue to acquire new properties.

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• Working capital— Our working capital changes over the same period in 2017 are largely a result of owning four additional properties.

Investing Activities—Our net cash used in investing activities was primarily impacted by the following:

• Real estate acquisitions—During the nine months ended September 30, 2018, we acquired two grocery-anchored shopping centers for a total cash outlay of $32.6 million. During the same period in 2017, we had no acquisitions.

• Capital expenditures—We invest capital into leasing our properties and maintaining or improving the condition of our properties. During the nine months ended September 30, 2018, cash used for capital expenditures increased by $0.5 million over the same period in 2017, largely due to the properties acquired after September 30, 2017.

Financing Activities—Net cash provided by financing activities were primarily impacted by the following:

• Issuance of common stock and payment of offering costs—We ceased offering Class A shares in the private offering during the first quarter of 2018. On May 8, 2018, we began offering Class T and Class I shares to the public in the Primary Offering. During the nine months ended September 30, 2018, our proceeds from issuing common stock decreased by $4.9 million over the same period in 2017, offset by a $0.4 million decrease in our payments for offering costs related to selling commissions and dealer manager fees.

• Debt borrowings/payments and related deferred financing costs—During the nine months ended September 30, 2018, we executed a $19.0 million net draw on our revolving credit facility. During the nine months ended September 30, 2017, we paid $2.2 million in loan closing costs to enter into our revolving credit facility. The borrowing capacity on our revolving credit facility was $44.2 million as of September 30, 2018.

• Cash distributions paid to stockholders—As a result of issuing additional common stock, cash used for distributions increased by $1.2 million during the nine months ended September 30, 2018, when compared to the same period in 2017.

Activity related to distributions to our stockholders for the nine months ended September 30, 2018 and 2017, was as follows:

(dollars are presented in thousands)	2018			2017
Gross distributions paid	$	2,639		$	462
Distributions reinvested through DRIP	1,107			142
Net cash distributions	$	1,532		$	320
Net loss	$	(1,922	)	$	(1,132	)
Net cash provided by (used in) operating activities	$	376		$	(626	)
FFO(1)	$	201		$	(689	)

⁽¹⁾ See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Funds from Operations and Modified Funds from Operations for the definition of FFO, information regarding why we present FFO, as well as for a reconciliation of this non-GAAP financial measure to Net Loss.

We expect to pay distributions monthly unless our results of operations, our general financial condition, general economic conditions or other factors, as determined by the board, make it imprudent to do so. The timing and amount of distributions is determined by our board and is influenced in part by our intention to comply with REIT requirements of the Internal Revenue Code.

In order to qualify as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to U.S. federal income tax on the income that we distribute to our stockholders each year. However, we may be subject to certain state and local taxes on our income, property, or net worth, respectively, and to federal income and excise taxes on our undistributed income.

We have not established a minimum distribution level, and our charter does not require that our board of directors approves distributions to our stockholders.

Critical Accounting Policies and Estimates

Below is a discussion of our critical accounting policies and estimates. Our accounting policies have been established to conform with GAAP. We consider these policies critical because they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Real Estate Assets—We assess the acquisition-date fair values of all tangible assets, identifiable intangibles, and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis and replacement cost) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant.

We generally determine the value of construction in progress based upon the replacement cost. However, for certain acquired properties that are part of a ground-up development, we determine fair value by using the same valuation approach as for all other properties and deducting the estimated cost to complete the development. During the remaining construction period, we capitalize interest expense until the development has reached substantial completion. Construction in progress, including capitalized interest, is not depreciated until the development has reached substantial completion.

We record above-market and below-market lease values for acquired properties based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. We amortize any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease. We also include fixed-rate renewal options in our calculation of the fair value of below-market leases and the periods over which such leases are amortized. If a tenant has a unilateral option to renew a below-market lease, we include such an option in the calculation of the fair value of such lease and the period over which the lease is amortized if we determine that the tenant has a financial incentive and wherewithal to exercise such option.

S-9

Intangible assets also include the value of in-place leases, which represents the estimated value of the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. Acquired in-place lease value is amortized to depreciation and amortization expense over the average remaining non-cancelable terms of the respective in-place leases.

We estimate the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease-up periods, considering current market conditions. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses, and estimates of lost rentals at market rates during the expected lease-up periods.

Estimates of the fair values of the tangible assets, identifiable intangibles, and assumed liabilities require us to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate estimates would result in an incorrect valuation of our acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of our net income.

We calculate the fair value of assumed long-term debt by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which we approximate based on the rate at which we would expect to incur a replacement instrument on the date of acquisition, and recognize any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument.

Generally, our real estate acquisition activity is classified as asset acquisitions. As a result, most acquisition-related costs have been capitalized and will be amortized over the life of the related assets.

Impairment of Real Estate and Related Intangible Assets—We monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets may be impaired. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets may be greater than fair value, we will assess the recoverability, considering recent operating results, expected net operating cash flow, and plans for future operations. If, based on this analysis of undiscounted cash flows, we do not believe that we will be able to recover the carrying value of the real estate and related intangible assets, we would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets as defined by ASC 360, Property, Plant, and Equipment. Particular examples of events and changes in circumstances that could indicate potential impairments are significant decreases in occupancy, rental income, operating income, and market values.

Revenue Recognition—We recognize minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the terms of the related leases, and we include amounts expected to be received in later years in deferred rents receivable. Our policy for percentage rental income is to defer recognition of contingent rental income until the specified target (i.e., breakpoint) that triggers the contingent rental income is achieved.

We record property operating expense reimbursements due from tenants for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred. We make certain assumptions and judgments in estimating the reimbursements at the end of each reporting period. We do not expect the actual results to differ materially from the estimated reimbursement.

We make estimates of the collectability of our tenant receivables related to base rents, expense reimbursements, and other revenue or income. We specifically analyze accounts receivable and historical bad debts, customer creditworthiness, current economic trends, and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, we will make estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. These estimates have a direct impact on our net income because a higher bad debt reserve results in less net income.

We record lease termination income if there is a signed termination letter agreement, all of the conditions of the agreement have been met, collectability is reasonably assured and the tenant is no longer occupying the property. Upon early lease termination, we provide for losses related to unrecovered intangibles and other assets.

Effective January 1, 2018, we adopted the guidance of ASC 610-20, which applies to sales or transfers to non-customers of non-financial assets, or in substance, nonfinancial assets that do not meet the definition of a business. Generally, our sales of real estate would be considered a sale of a non-financial asset as defined by ASC 610-20.

ASC 610-20 refers to the revenue recognition principles under ASU 2014-09. Under ASC 610-20, if we determine we do not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, we would de-recognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.

Impact of Recently Issued Accounting Pronouncements—Refer to Note 2 in this quarterly report on Form 10-Q for discussion of the impact of recently issued accounting pronouncements.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	S-12
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017	S-13
Consolidated Statements of Equity for the Nine Months Ended September 30, 2018 and 2017	S-14
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	S-15
Notes to Consolidated Financial Statements	S-16

S-11

PHILLIPS EDISON GROCERY CENTER REIT III, INC.

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(Unaudited)

(In thousands, except per share amounts)

	September 30, 2018			December 31, 2017
ASSETS
Investment in real estate:
Land and improvements	$	23,253		$	12,122
Building and improvements	44,405			25,439
Acquired in-place lease assets	7,758			4,686
Acquired above-market lease assets	2,057			1,779
Total investment in real estate assets	77,473			44,026
Accumulated depreciation and amortization	(2,911		)	(684		)
Total investment in real estate assets, net	74,562			43,342
Cash and cash equivalents	1,492			2,659
Deferred financing expense, net of accumulated amortization of $851 and $448, respectively	1,299			1,702
Other assets, net	1,702			973
Total assets	$	79,055		$	48,676
LIABILITIES AND EQUITY
Liabilities:
Debt obligation	$	28,000		$	9,000
Acquired below-market lease liabilities, net	2,537			2,314
Accounts payable – affiliates	4,422			2,157
Accounts payable and other liabilities	2,740			2,157
Total liabilities	37,699			15,628
Commitments and contingencies (Note 6)	—			—
Equity:
Preferred stock, $0.01 par value per share, 10,000 shares authorized, and none
issued and outstanding at September 30, 2018 and December 31, 2017	—			—
Common stock - Class A, $0.01 par value per share, 75,000 and 1,000,000 shares authorized, 6,387
and 4,502 shares issued and outstanding, at September 30, 2018 and December 31, 2017, respectively	64			45
Common stock - Class T, $0.01 par value per share, 750,000 and zero shares authorized, ten and zero
shares issued and outstanding, at September 30, 2018 and December 31, 2017, respectively	—			—
Common stock - Class I, $0.01 par value per share, 75,000 and zero shares authorized, one and zero
shares issued and outstanding, at September 30, 2018 and December 31, 2017, respectively	—			—
Stock dividends to be distributed	—			644
Additional paid-in capital	53,930			38,836
Accumulated deficit	(12,638		)	(6,477		)
Total equity	41,356			33,048
Total liabilities and equity	$	79,055		$	48,676

See notes to consolidated financial statements.

S-12

PHILLIPS EDISON GROCERY CENTER REIT III, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues:
Rental income	$	1,362		$	270		$	3,434		$	810
Tenant recovery income	547			76			1,467			247
Other property income	7			2			21			5
Total revenues	1,916			348			4,922			1,062
Expenses:
Property operating	324			49			794			153
Real estate taxes	424			40			1,138			136
General and administrative	492			171			1,439			607
Depreciation and amortization	856			148			2,123			443
Total expenses	2,096			408			5,494			1,339
Other:
Interest expense	(530		)	(337		)	(1,224		)	(855		)
Other expense, net	(38		)	—			(126		)	—
Net loss	$	(748	)	$	(397	)	$	(1,922	)	$	(1,132	)
Earnings per common share:
Loss per share - basic and diluted	$	(0.12	)	$	(0.19	)	$	(0.32	)	$	(0.90	)
Weighted-average common shares outstanding:
Basic and diluted	6,383			2,103			6,097			1,256

See notes to consolidated financial statements.

S-13

PHILLIPS EDISON GROCERY CENTER REIT III, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 and 2017

(Unaudited)

(In thousands, except per share amounts)

	Common Stock Par Value						Additional Paid-in Capital			Stock Dividend to be Distributed			Accumulated Deficit			Total Equity
	Class A		Class T		Class I
Balance at January 1, 2017	$	4	$	—	$	—	$	3,911		$	56		$	(226	)	$	3,745
Issuance of common stock	21		—		—		20,609			(56		)	—			20,574
Distribution Reinvestment Plan (“DRIP”)	—		—		—		142			—			—			142
Common distributions declared, $0.45 per share	—		—		—		—			—			(565		)	(565		)
Stock dividends declared, 0.1338 shares per share	2		—		—		1,308			365			(1,675		)	—
Offering costs	—		—		—		(3,875		)	—			—			(3,875		)
Net loss	—		—		—		—			—			(1,132		)	(1,132		)
Balance at September 30, 2017	$	27	$	—	$	—	$	22,095		$	365		$	(3,598	)	$	18,889
Balance at January 1, 2018	$	45	$	—	$	—	$	38,836		$	644		$	(6,477	)	$	33,048
Issuance of common stock	16		—		—		16,306			(644		)	—			15,678
Share repurchases	—		—		—		(113		)	—			—			(113		)
DRIP	1		—		—		1,106			—			—			1,107
Common distributions declared, $0.45 per share	—		—		—		—			—			(2,738		)	(2,738		)
Stock dividends declared, 0.0289 shares per share	2		—		—		1,499			—			(1,501		)	—
Offering costs	—		—		—		(3,704		)	—			—			(3,704		)
Net loss	—		—		—		—			—			(1,922		)	(1,922		)
Balance at September 30, 2018	$	64	$	—	$	—	$	53,930		$	—		$	(12,638	)	$	41,356

See notes to consolidated financial statements.

S-14

PHILLIPS EDISON GROCERY CENTER REIT III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(Unaudited) (In thousands)        

	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,922	)	$	(1,132	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	2,123			443
Amortization of deferred financing expense	403			314
Non-cash rental income adjustments	(120		)	(40		)
Changes in operating assets and liabilities:
Accounts receivable, net	(246		)	(197		)
Other assets	(360		)	(9		)
Accounts payable and other liabilities	457			410
Accounts receivable and payable - affiliates	41			(415		)
Net cash provided by (used in) operating activities	376			(626		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions	(32,629		)	(99		)
Capital expenditures	(465		)	—
Net cash used in investing activities	(33,094		)	(99		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in credit facility borrowings	19,000			—
Proceeds from issuance of common stock	15,678			20,574
Payments of deferred financing expenses	—			(2,151		)
Distributions paid, net of DRIP	(1,532		)	(320		)
Repurchases of common stock	(113		)	—
Payment of offering costs	(1,482		)	(1,875		)
Payment of notes payable - affiliates	—			(11,390		)
Net cash provided by financing activities	31,551			4,838
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(1,167		)	4,113
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
Beginning of period	2,659			790
End of period	$	1,492		$	4,903
SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid for interest	$	751		$	403
Accrued capital expenditures and acquisition costs	63			147
Change in offering costs payable	2,222			1,961
Change in distributions payable	99			103
Stock dividends distributed	—			725
Distributions reinvested	1,107			142

See notes to consolidated financial statements.

S-15

Phillips Edison Grocery Center REIT III, Inc.

Notes to Consolidated Financial Statements

(Dollars and shares in thousands)

1. ORGANIZATION

Phillips Edison Grocery Center REIT III, Inc. (“we,” the “Company,” “our,” or “us”) was formed as a Maryland corporation in April 2016. Substantially all of our business is conducted through Phillips Edison Grocery Center Operating Partnership III, L.P. (“Operating Partnership”), a Delaware limited partnership formed in July 2016. We are a limited partner of the Operating Partnership, and our wholly owned subsidiary, Phillips Edison Grocery Center OP GP III LLC, is the sole general partner of the Operating Partnership.

We completed a private placement offering of shares of Class A common stock on a “reasonable best efforts” basis to accredited investors and ceased offering Class A shares in the private offering during the first quarter of 2018. During the private placement offering, we raised $57,683 in gross offering proceeds from the issuance of 5,859 Class A shares, inclusive of the DRIP.

Pursuant to our Registration Statement on Form S-11 (SEC Registration No. 333-217924), as amended (“Registration Statement”), declared effective on May 8, 2018, we are offering to the public (“Public Offering”) $1,500,000 in shares of common stock in the primary offering, consisting of two classes of shares, Class T and Class I, at purchase prices of $10.42 per share and $10.00 per share, respectively, with discounts available to some categories of investors with respect to Class T shares (“Primary Offering”). In addition, we are also offering $200,000 in Class A, Class T, and Class I shares of our common stock pursuant to the DRIP at a price of $9.80 per share. For more detail on the DRIP, see Note 7. We are offering any combination of Class T and Class I shares in the Primary Offering and any combination of Class A, Class T, and Class I shares through the DRIP. We reserve the right to reallocate shares between the Primary Offering and the DRIP. We have retained Griffin Capital Securities, LLC (“Dealer Manager”) to serve as the dealer manager of the Public Offering, which commenced May 8, 2018. The Dealer Manager is responsible for marketing our shares in the Public Offering. As of September 30, 2018, through the Primary Offering we had raised $8 in gross offering proceeds from the issuance of Class I shares, inclusive of the DRIP, $535 in gross offering proceeds from the issuance of Class A shares pursuant to the DRIP, and $100 in gross offering proceeds from the issuance of Class T shares.

Our property managers are owned by Phillips Edison & Company, Inc. and its subsidiaries (“PECO” or “Manager”). Our advisor is PECO-Griffin REIT Advisor, LLC (“Advisor”), a limited liability company that was formed in the state of Delaware in May 2016, and is jointly owned by PECO and Griffin Capital Corporation (“Griffin sponsor”). We have entered into an Amended and Restated Advisory Agreement (“Advisory Agreement”), which makes the Advisor ultimately responsible for the management of our day-to-day activities and the implementation of our investment strategy.

We intend to invest primarily in well-occupied, grocery-anchored neighborhood and community shopping centers leased to a mix of national and regional creditworthy retailers selling necessity-based goods and services in strong demographic markets throughout the United States. In addition, we may invest in other retail properties including power and lifestyle shopping centers, multi-tenant shopping centers, free-standing single-tenant retail properties, and other real estate and real estate-related loans and securities depending on real estate market conditions and investment opportunities that we determine are in the best interests of our stockholders.

As of September 30, 2018, we owned fee simple interests in five grocery-anchored shopping centers acquired from third parties unaffiliated with us or our Advisor.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation-The accompanying consolidated financial statements have been prepared pursuant to accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include our accounts and the accounts of our consolidated subsidiaries (over which we exercise financial and operating control). All intercompany balances and transactions are eliminated upon consolidation.

Partially-Owned Entities-If we determine that we are an owner in a variable-interest entity (“VIE”), and we hold a controlling financial interest, then we will consolidate the entity as the primary beneficiary. For a partially-owned entity determined not to be a VIE, we analyze rights held by each partner to determine which would be the consolidating party. We will generally consolidate entities (in the absence of other factors when determining control) when we have over a 50% ownership interest in the entity. We will assess our interests in VIEs on an ongoing basis to determine whether or not we are the primary beneficiary. However, we will also evaluate who controls the entity even in circumstances in which we have greater than a 50% ownership interest. If we do not control the entity due to the lack of decision-making abilities, we will not consolidate the entity. We have determined that the Operating Partnership is considered a VIE. We are the primary beneficiary of the VIE, and our partnership interest is considered a majority voting interest. As such, we have consolidated the Operating Partnership and its subsidiaries.

Use of Estimates-The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. For example, significant estimates and assumptions have been made with respect to the useful lives of assets; recoverable amounts of receivables; initial valuations of tangible and intangible assets and liabilities and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions; and other fair value measurement assessments required for the preparation of the consolidated financial statements. Actual results could differ from those estimates.

Cash and Cash Equivalents-We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value and may consist of investments in money market accounts. The cash and cash equivalent balances at one or more of our financial institutions exceeds the Federal Depository Insurance Corporation insurance coverage.

Investment in Property and Lease Intangibles-Real estate assets are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method. The estimated useful lives for computing depreciation are generally not to exceed 5-7 years for furniture, fixtures and equipment, 15 years

S-16

for land improvements, and 30 years for buildings and building improvements. Tenant improvements are amortized over the shorter of the respective lease term or the expected useful life of the asset. Major replacements that extend the useful lives of the assets are capitalized, and maintenance and repair costs are expensed as incurred.

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the individual property may not be recoverable. In such an event, a comparison will be made of the projected operating cash flows of each property on an undiscounted basis to the carrying amount of such property. If deemed unrecoverable on an undiscounted basis, such carrying amount would be adjusted, if necessary, to estimated fair values to reflect impairment in the value of the asset. We recorded no impairments as of September 30, 2018 and December 31, 2017.

The results of operations of acquired properties are included in our results of operations from their respective dates of acquisition. The acquisition-date fair values of all tangible assets, identifiable intangibles, and assumed liabilities are assessed using methods (e.g., discounted cash flow analysis and replacement cost) that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant. Unless otherwise disclosed, properties acquired are classified as asset acquisitions. As a result, most acquisition-related costs are capitalized and allocated to the tangible and identifiable intangible assets based on their respective acquisition-date fair values, and amortized over the same useful lives of the respective tangible and identifiable intangible assets.

The fair values of buildings and improvements are determined on an as-if-vacant basis. The estimated fair value of acquired in-place leases is the cost we would have incurred to lease the properties to the occupancy level of the properties at the date of acquisition. Such estimates include leasing commissions, legal costs, and other direct costs that would be incurred to lease the properties to such occupancy levels. Additionally, we evaluate the time period over which such occupancy levels would be achieved. Such evaluation includes an estimate of the net market-based rental revenues, net operating costs (primarily consisting of real estate taxes, insurance and utilities), and capital expenditures that would be incurred during the lease-up period. Acquired in-place leases as of the date of acquisition are amortized over the weighted-average remaining lease terms.

Acquired above- and below-market lease values are recorded based on the present value (using discount rates that reflect the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of the market lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values are amortized as adjustments to rental income over the remaining terms of the respective leases. We also consider fixed rate renewal options in our calculation of the fair value of below-market leases and the periods over which such leases are amortized. If a tenant has a unilateral option to renew a below-market lease and we determine that the tenant has a financial incentive to exercise such option, we include such an option in the calculation of the fair value of such lease and the period over which the lease is amortized.

We estimate the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease-up periods, considering current market conditions. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods.

We estimate the fair value of assumed mortgage notes payable based upon indications of then-current market pricing for similar types of debt with similar maturities. Assumed mortgage notes payable are initially recorded at their estimated fair value as of the assumption date, and the difference between such estimated fair value and the note’s outstanding principal balance is amortized over the life of the mortgage note payable as an adjustment to interest expense.

Deferred Financing Expenses-Deferred financing expenses are capitalized and amortized on a straight-line basis over the term of the related financing arrangement, which approximates the effective interest method. Deferred financing costs related to term loan facilities and mortgages will be recorded in Debt Obligation, while deferred financing costs related to our revolving credit facility are recorded in Deferred Financing Expense, Net, on our consolidated balance sheets.

Other Assets, Net-Other Assets, Net on our consolidated balance sheets consists primarily of accounts receivable, prepaid expenses, and deferred rent receivable. Prepaid expenses and deferred rent receivable are amortized using the straight-line method over the terms of the respective agreements.

Fair Value Measurement-Accounting Standards Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”) defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement. Fair value is defined by ASC 820 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. 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 we have 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, only used to the extent that observable inputs are not available, reflect our assumptions about the pricing of an asset or liability.

Considerable judgment is necessary to develop estimated fair values of financial and non-financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we did or could actually realize upon disposition of the financial assets and liabilities previously sold or currently held.

S-17

The following describes the methods we use to estimate the fair value of our financial and non-financial assets and liabilities:

Cash and Cash Equivalents, Accounts Receivable, and Accounts Payable-We consider the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization.

Real Estate Investments-The purchase prices of the investment properties, including related lease intangible assets and liabilities, were allocated at estimated fair value based on Level 3 inputs, such as discount rates, capitalization rates, comparable sales, replacement costs, income and expense growth rates, and current market rents and allowances as determined by management.

Debt Obligation-We estimate the fair value of our debt by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by our lenders using Level 3 inputs. The discount rate used approximates current lending rates for loans or groups of loans with similar maturities and credit quality, assuming the debt is outstanding through maturity and considering the debt’s collateral (if applicable). We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed.

Repurchases of Common Stock-We offer a share repurchase program (“SRP”) which may provide a limited opportunity for stockholders to have their shares repurchased subject to approval and certain limitations and restrictions (see Note 7). We account for approved requests to repurchase shares as liabilities to be reported at settlement value.

The maximum amount of common stock that we may redeem, at the stockholder’s election, during any calendar year is limited, among other things, to 5% of the weighted-average number of shares outstanding during the prior calendar year. The maximum amount is reduced each reporting period by the current year share redemptions to date. In addition, the cash available for repurchases on any particular date is generally limited to the proceeds from the DRIP during the preceding four fiscal quarters, less amounts already used for repurchases since the beginning of that period. The board of directors may, in its sole discretion, amend, suspend, or terminate the share repurchase program at any time upon 30 days’ written notice. In addition, the board of directors reserves the right, in its sole discretion, to reject any request for repurchase.

Revenue Recognition-The majority of our revenue is lease revenue from our wholly-owned properties, which is accounted for under ASC 840, Leases. We commence revenue recognition on our leases based on a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. The determination of who is the owner, for accounting purposes, of the tenant improvements determines the nature of the leased asset and when revenue recognition under a lease begins. If we are the owner, for accounting purposes, of the tenant improvements, then the leased asset is the finished space, and revenue recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete.

If we conclude that we are not the owner, for accounting purposes, of the tenant improvements (the lessee is the owner), then the leased asset is the unimproved space and any tenant allowances funded under the lease are treated as lease incentives, which reduce revenue recognized over the term of the lease. In these circumstances, we begin revenue recognition when the lessee takes possession of the unimproved space to construct their own improvements. We consider a number of different factors in evaluating whether we or the lessee is the owner of the tenant improvements for accounting purposes. These factors include:

• whether the lease stipulates how and on what a tenant improvement allowance may be spent;

• whether the tenant or landlord retains legal title to the improvements;

• the uniqueness of the improvements;

• the expected economic life of the tenant improvements relative to the length of the lease; and

• who constructs or directs the construction of the improvements.

We recognize rental income on a straight-line basis over the term of each lease that includes periodic and determinable adjustments to rent. The difference between rental income earned on a straight-line basis and the cash rent due under the provisions of the lease agreements is recorded as deferred rent receivable and is included as a component of other assets. Due to the impact of the straight-line adjustments, rental income generally will be greater than the cash collected in the early years and will be less than the cash collected in the later years of a lease. For percentage rental income, we defer recognition of contingent rental income until the specified target (i.e. breakpoint) that triggers the contingent rental income is achieved.

Reimbursements from tenants for recoverable real estate tax and operating expenses are accrued as revenue in the period in which the applicable expenses are incurred. We make certain assumptions and judgments in estimating the reimbursements at the end of each reporting period. We do not expect the actual results to materially differ from the estimated reimbursements.

We periodically review the collectability of outstanding receivables. Allowances will be taken for those balances that we deem to be uncollectible, including any amounts relating to straight-line rent receivables and/or receivables for recoverable expenses.

We record lease termination income if there is a signed termination agreement, all of the conditions of the agreement have been met, collectability is reasonably assured and the tenant is no longer occupying the property. Upon early lease termination, we provide for losses related to unrecovered tenant-specific intangibles and other assets.

Effective January 1, 2018, we adopted the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”), which applies to sales or transfers to non-customers of non-financial assets, or in substance, nonfinancial assets that do not meet the definition of a business. Generally, our sales of real estate would be considered a sale of a non-financial asset as defined by ASC 610-20.

ASC 610-20 refers to the revenue recognition principles under Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASC 610-20, if we determine we do not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, we would de-recognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.

Income Taxes-We have elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), beginning with the taxable year ended December 31, 2017. Our qualification and taxation as a REIT depends on our ability, on a continuing basis, to meet certain organizational and operational qualification requirements imposed upon REITs by the Code. If we fail to qualify as a REIT for any reason in a taxable year, we will be subject to tax on our taxable income at regular corporate rates. We would not be able to deduct distributions paid to stockholders in any year in

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which we fail to qualify as a REIT. We will also be disqualified for the four taxable years following the year during which qualification was lost unless we are entitled to relief under specific statutory provisions. Additionally, GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken, or expected to be taken, in a tax return. A tax position may only be recognized in the consolidated financial statements if it is more likely than not that the tax position will be sustained upon examination. We believe it is more likely than not that our tax positions will be sustained in any tax examinations.

Notwithstanding our qualification as a REIT, we may be subject to certain state and local taxes on our income or properties. In addition, our consolidated financial statements include the operations of one wholly owned subsidiary that has jointly elected to be treated as a Taxable REIT Subsidiary (“TRS”) and is subject to U.S. federal, state and local income taxes at regular corporate tax rates.

Organization and Offering Costs-The Advisor has paid and will pay organization and offering costs on our behalf. Pursuant to the terms of our current Advisory Agreement, we will generally reimburse the Advisor for these costs and future offering costs it or any of its affiliates may incur on our behalf in connection with the private placement of our Class A shares and Public Offering of Class T and Class I shares. Organization and offering costs consist of all expenses (other than selling commissions, dealer manager fees, and stockholder servicing fees) to be paid by us in connection with the offering, including our legal, accounting, printing, mailing, filing and registration fees, and other accountable offering costs including (a) legal, tax, accounting and escrow fees, (b) expenses for printing, engraving, amending, supplementing and mailing, (c) distribution costs, (d) compensation to employees of the Advisor while engaged in registering, marketing and wholesaling our common stock or providing administrative services relating thereto, (e) telegraph and telephone costs, (f) all advertising and marketing expenses (including the costs related to investor and broker-dealer sales meetings), (g) charges of transfer agents, registrars, trustees, escrow holders, depositories, and experts, (h) fees, expenses and taxes related to the filing, registration and qualification of the sale of our common stock under federal and state laws, including accountants’ and attorneys’ fees and other accountable offering costs, (i) amounts to reimburse the Advisor for all marketing related costs and expenses such as compensation to and direct expenses of the Advisor’s employees or employees of the Advisor’s affiliates in connection with registering and marketing our common stock, (j) travel and entertainment expenses related to the offering and marketing of our common stock, (k) facilities and technology costs and other costs and expenses associated with the offering and ownership of our common stock and to facilitate the marketing of our common stock, including web site design and management, (l) costs and expenses of conducting training and educational conferences and seminars, (m) costs and expenses of attending broker-dealer sponsored retail seminars or conferences, and (n) payment or reimbursement of bona fide due diligence expenses, including compensation to employees while engaged in the provision or support of bona fide due diligence services.

All organization and offering costs incurred in connection with the private placement had been billed to us by the Advisor as of September 30, 2018 and December 31, 2017. In connection with the Public Offering, the Advisor will pay organization and offering costs up to 1% of gross offering proceeds from the Primary Offering, which the Advisor intends to recoup through the receipt of a contingent advisor payment (see Note 8). We will reimburse the Advisor for any amounts in excess of 1% up to a maximum of 3.5% of gross offering proceeds from the Primary Offering.

Organization and offering costs that have been billed to us by the Advisor as of September 30, 2018 and December 31, 2017, are recorded in Accounts Payable - Affiliates on the consolidated balance sheets. Whether additional organization and offering costs will be billed to us is at the discretion of the Advisor and will likely depend on the success of our Public Offering. We will evaluate organization and offering costs incurred by the Advisor at the end of each period to determine if the amounts incurred represent a liability to us based on the applicable facts and circumstances.

When recognized by us, organizational expenses will be expensed as incurred, and offering costs will be recorded as a reduction to stockholders’ equity as such amounts will be reimbursed to the Advisor or its affiliates from the gross proceeds of the Public Offering.

Earnings Per Share-Earnings per share is calculated based on the weighted-average number of common shares outstanding during each period. All classes of common stock are allocated net income (loss) at the same rate per share and receive the same distributions per share. Diluted earnings per share considers the effect of any potentially dilutive share equivalents, of which we had none for the three and nine months ended September 30, 2018 and 2017.

Segment Reporting-We internally evaluate the operating performance of our portfolio of properties and currently do not differentiate properties by geography, size, or type. As operating performance is reviewed at a portfolio level rather than at a property level, our entire portfolio of properties is considered one operating segment. Accordingly, we did not report any other segment disclosures for the three and nine months ended September 30, 2018.

Impact of Recently Issued Accounting Pronouncements-The following table provides a brief description of newly adopted accounting pronouncements and their effect on our consolidated financial statements:

Standard	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Sub-topic 610-20)	This update amends existing guidance in order to provide consistency in accounting for the derecognition of a business or non-profit activity.	January 1, 2018	We did not record any cumulative adjustment in connection with the adoption of the new pronouncement as we determined that these changes did not have any impact on our consolidated financial statements.
ASU 2016-15, Statement of Cash Flows (Topic 230); ASU 2016-18, Statement of Cash Flows (Topic 230)	These updates address the presentation of eight specific cash receipts and cash payments on the statement of cash flows as well as clarify the classification and presentation of restricted cash on the statement of cash flows.	January 1, 2018	As we have no restricted cash, there was no impact on our consolidated statement of cash flows for all periods presented.
ASU 2014-09, Revenue from Contracts with Customers (Topic 606)	This update outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU 2014-09 states that “an entity recognizes revenue to depict 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.” While ASU 2014-09 specifically references contracts with customers, it also applies to certain other transactions such as the sale of real estate or equipment. Expanded quantitative and qualitative disclosures are also required for contracts subject to ASU 2014-09.	January 1, 2018	The majority of our revenue is lease revenue from our wholly-owned properties. We record these amounts as Rental Income and Tenant Recovery Income on the consolidated statements of operations. These revenue amounts are excluded from the scope of ASU 2014-09. As a result, the adoption of ASU 2014-09 did not result in any adjusting entries to prior periods as our revenue recognition related to these revenues aligned with the updated guidance.

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The following table provides a brief description of recent accounting pronouncements that could have a material effect on our consolidated financial statements:

Standard	Description	Date of Adoption	Effect on the Consolidated Financial Statements or Other Significant Matters
ASU 2018-13, Fair Value Measurement (Topic 820)	This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. Early adoption is permitted.	January 1, 2019	We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements.
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update is effective for public entities in fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted after December 15, 2018.	January 1, 2020	We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements.
ASU 2016-02, Leases (Topic 842); ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Leases (Topic 842): Targeted Improvements	These updates amend existing guidance by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Early adoption is permitted as of the original effective date.	January 1, 2019	We are currently evaluating the impact the adoption of these standards will have on our consolidated financial statements. We have identified areas within our accounting policies we believe could be impacted by the new standard. This standard impacts the lessor’s ability to capitalize certain costs related to leasing, which will result in a reduction in the amount of execution costs currently being capitalized in connection with leasing activities and an increase to our Property Operating expenses. The standard will also require new disclosures within the accompanying notes to the consolidated financial statements. We expect to adopt the practical expedients available for implementation under the standard. By adopting these practical expedients, we will not be required to reassess (i) whether an expired or existing contract meets the definition of a lease; (ii) the lease classification at the adoption date for existing leases; and (iii) whether the costs previously capitalized as initial direct costs would continue to be amortized. This allows us to continue to account for our leases where we are the lessee as operating leases, however, any new or renewed leases may be classified as financing leases. We currently have an immaterial number of leases of this type. We also expect to recognize right of use assets and lease liability on our consolidated balance sheets related to certain leases where we are the lessee. In July 2018, the FASB issued ASU 2018-11. The update allows lessors to use a practical expedient to account for non-lease components and related lease components as a single lease component instead of accounting for them separately, if certain conditions are met. We expect to utilize this practical expedient We will continue to evaluate the effect the adoption of these ASUs will have on our consolidated financial statements. However, we currently believe that the adoption will not have a material impact for operating leases where we are a lessor and will continue to record revenues from rental properties for our operating leases on a straight-line basis. We are still evaluating the impact for leases where we are the lessee.

3. REAL ESTATE ACQUISITIONS

Our real estate assets acquired during the nine months ended September 30, 2018, were as follows:

Property Name	Location	Anchor Tenant	Acquisition Date	Purchase Price		Leased % of Rentable Square Feet at Acquisition
Albertville Crossing	Albertville, MN	Coborn’s	2/21/2018	$	13,156	89.7%
Sudbury Crossing	Sudbury, MA	TJ Maxx(1)	7/24/2018	19,473		97.6%

⁽¹⁾  We do no not own the portion of the shopping center that contains the grocery anchor, which is Sudbury Farms (Roche Bros.).

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During the nine months ended September 30, 2017, we did not acquire any properties.

The fair value and weighted-average useful lives for in-place, above-market, and below-market lease intangibles acquired during the nine months ended September 30, 2018, are as follows (useful life in years):

	Fair Value			Weighted-Average Useful Life
Acquired in-place leases	$	3,071		7
Acquired above-market leases	278			6
Acquired below-market leases	(326		)	12

4. ACQUIRED INTANGIBLE LEASES

Acquired intangible lease assets and liabilities consisted of the following amounts as of September 30,2018 and December 31, 2017:

	September 30, 2018			December 31, 2017
In-place leases	$	7,758		$	4,686
Above-market leases	2,057			1,779
Total intangible lease assets	9,815			6,465
Accumulated amortization	(778		)	(124		)
Net intangible lease assets	$	9,037		$	6,341
Below-market liabilities	$	2,688		$	2,362
Accumulated amortization	(151		)	(48		)
Net below-market lease liabilities	$	2,537		$	2,314

Summarized below is the amortization recorded on the intangible assets and liabilities for the periods ended September 30,2018 and 2017:

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2018			2017			2018			2017
In-place leases	$	233		$	24		$	542		$	72
Above-market leases	43			2			113			5
Below-market leases	(38		)	(11		)	(103		)	(31		)

Estimated future amortization of the respective acquired intangible lease assets and liabilities as of September 30,2018, for each of the next five years is as follows:

Year	In-Place Leases		Above-Market Leases		Below- Market Leases
Remaining 2018	$	233	$	43	$	(38	)
2019	1,005		178		(153		)
2020	1,005		178		(153		)
2021	1,005		178		(153		)
2022	930		178		(153		)

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5. DEBT OBLIGATION

As of September 30, 2018 we had an unsecured $250 million revolving credit facility, with an interest rate spread over LIBOR based on our leverage ratio. The revolving credit facility requires interest-only payments until it matures in March 2021 and has two six-month extension options. Due to borrowing base restrictions included in the loan agreement, the borrowing capacity on the revolving credit facility was $44.2 million and $24.0 million as of September 30, 2018 and December 31, 2017, respectively. On November 9, 2018, we reduced the size of our revolving credit facility from $250 million to $125 million.

The interest rate on our debt approximated the market interest rate, and as such, the fair value and recorded value of our debt were both $28,000 on September 30, 2018, and $9,000 on December 31, 2017.

The following is a summary of the outstanding principal balance of our debt obligation and corresponding interest rate as of September 30, 2018 and December 31, 2017:

	September 30, 2018			December 31, 2017
Outstanding principal balance	$	28,000		$	9,000
Interest rate	4.3		%	3.6		%

Gross borrowings under our revolving credit facility were $47.0 million and gross payments on our revolving credit facility were $28.0 million during the nine months ended September 30, 2018.

6. COMMITMENTS AND CONTINGENCIES

Litigation-We may become involved in various claims and litigation matters arising in the ordinary course of business, some of which may involve claims for damages. Many of these matters are covered by insurance, although they may nevertheless be subject to deductibles or retentions. There are no material legal proceedings pending, or known to be contemplated, against us.

Environmental Matters-In connection with the ownership and operation of real estate, we may potentially be liable for costs and damages related to environmental matters. In addition, we 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 us against future remediation costs. We also carry environmental liability insurance on our 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 we may be liable. We are not aware of any environmental matters which we believe are reasonably likely to have a material effect on our consolidated financial statements.

7. EQUITY

General—The holders of all classes of common stock are entitled to one vote per share on all matters voted on by stockholders, including election of the board of directors. Our charter does not provide for cumulative voting in the election of directors, but does permit our board of directors to create classes of common stock and to establish the rights of each class of common stock. The differences among the classes of common stock relate to upfront selling commissions, dealer manager fees, and ongoing stockholder servicing fees. See Note 8 for more detail.

Common Stock Activity—The following table summarizes our common stock activity for the nine months ended September 30, 2018:

	Common Stock
	Class A		Class T	Class I	Total
Balance at January 1, 2018	4,502		—	—	4,502
Common stock issued	1,566		10	1	1,577
Cash distributions reinvested	115		—	—	115
Shares repurchased(1)	(11	)	—	—	(11	)
Stock dividends	215		—	—	215
Balance at September 30, 2018	6,387		10	1	6,398

⁽¹⁾  In accordance with the terms of our SRP, all share repurchases completed were sought upon a stockholder’s death, “qualifying disability,” or “determination of incompetence.”

The following table summarizes our common stock activity for the nine months ended September 30, 2017:

	Common Stock
	Class A
Balance at January 1, 2017	435
Common stock issued	2,072
Cash distributions reinvested	15
Stock dividends	138
Balance at September 30, 2017	2,660

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Distributions and Stock Dividends—We have adopted a DRIP that allows stockholders to reinvest cash distributions in additional shares of our common stock at a price equal to $9.80 per share. Prior to the commencement of the Public Offering in May 2018, the DRIP price was $9.50 per share. During the private offering, our board of directors declared and issued stock dividends in the amount of 0.0004901961 shares per day per share to Class A stockholders of record during the period from December 1, 2016 through February 28, 2018. We are no longer issuing any such stock dividends to our Class A stockholders. Cash distributions are paid to stockholders of record based on the number of daily shares owned by each stockholder during the period covered by the declaration. Such distributions are issued on the first business day after the end of each month.

Share Repurchase Program—Our SRP may provide a limited opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations, at a price equal to or at a discount from the purchase price paid for the shares being repurchased. The cash available for repurchases on any particular date will generally be limited to the proceeds from the DRIP during the preceding four fiscal quarters, less amounts already used for repurchases since the beginning of that period. The board of directors reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase or amend, suspend, or terminate the program.

8. RELATED PARTY TRANSACTIONS

Economic Dependency—We are dependent on the Advisor, the Manager, and their respective affiliates for certain services that are essential to us, including asset acquisition and disposition decisions, asset management, operating and leasing of our properties, and other general and administrative responsibilities. PECO owns a partial interest in the Advisor and wholly owns our property managers. In the event that the Advisor, the Manager, and/or their respective affiliates are unable to provide such services, we would be required to find alternative service providers, which could result in higher costs and expenses.

Advisor—The Advisor is responsible for the management of our day-to-day activities and the implementation of our investment strategy.

Acquisition Fee—We pay the Advisor an acquisition fee related to services provided in connection with the selection and purchase or origination of real estate and real estate-related investments. The acquisition fee is equal to an amount up to 2% of the contract purchase price of each property we acquire or originate, including any debt attributable to such investments.

Organization and Offering Costs, Contingent Advisor Payment, and Holdback—Under the terms of the Advisory Agreement, we are to reimburse the Advisor for cumulative organization and offering costs and future organization and offering costs it may incur on our behalf. All organization and offering costs incurred in connection with the private placement and public offering had been billed to us by the Advisor as of September 30, 2018. In connection with the Public Offering, the Advisor will pay organization and offering costs up to 1% of gross offering proceeds from the Primary Offering, which the Advisor intends to recoup through the receipt of a contingent advisor payment. We will reimburse the Advisor for any amounts in excess of 1% up to a maximum of 3.5% of gross offering proceeds from the Primary Offering.

During the Public Offering, we may pay the Advisor an additional contingent advisor payment of 2.15% of the contract purchase price of each property or other real estate investments we acquire. The reimbursement of organization and offering costs as well as the contingent advisor payment are subject to the contingent advisor payment holdback. As a result of the holdback, reimbursements for the initial $4,500 paid by the Advisor to fund the dealer manager fee and other organization and offering costs related to the Public Offering, shall be retained by us until the termination of the Public Offering, at which time such amount shall be paid to the Advisor or its affiliates. As of September 30, 2018, the contingent advisor payment holdback had not been reached; therefore, no reimbursement had been made to the Advisor.

Amounts related to organization and offering costs and the contingent advisor payment as of September 30, 2018 and December 31, 2017, were as follows:

	September 30, 2018	December 31, 2017
Organization and offering costs liability for private placement	2,304	2,000
Amounts subject to contingent advisor holdback:
Organization and offering costs liability for Public Offering	1,912	—

Asset Management Fee—We pay the Advisor a monthly asset management fee in connection with the ongoing management and monitoring of the performance of our investments. The asset management fee is paid monthly in an amount of one-twelfth of 1% of the cost of our assets, which is equal to the purchase price, acquisition expenses, capital expenditures, and other customarily capitalized costs, but excludes acquisition fees, as of the last day of the preceding monthly period. The Advisor may elect to receive the asset management fee in cash, units of the Operating Partnership (“OP units”), common stock, or any combination thereof. All asset management fees paid during the nine months ended September 30, 2018 and 2017, were paid in cash.

Disposition Fee—We will pay the Advisor or its affiliates for substantial assistance in connection with the sale of properties or other investments a disposition fee in an amount equal to 2% of the contract sales price of each property or other investment sold. Whether the Advisor or its affiliates have provided substantial assistance to us in connection with the sale of an asset is determined by a majority vote of the board of directors, including a majority of independent directors. Substantial assistance in connection with the sale of a property includes the Advisor or its affiliates’ preparation of an investment package for the property (including a new investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a list of prospective buyers, a structural report, and exhibits) or such other substantial services performed by the Advisor or its affiliates in connection with a sale. The disposition fee may be paid in addition to real estate commissions paid to non-affiliates, provided that the total disposition fee and real estate commission together do not exceed an amount equal to the lesser of (i) 6% of the contract sales price of each property sold or (ii) a competitive real estate commission rate. For the nine months ended September 30, 2018 and 2017, we incurred no disposition fees as we did not sell any properties.

Acquisition Expenses—We reimburse the Advisor for direct expenses incurred, including certain personnel costs, related to sourcing, selecting, evaluating, and acquiring assets on our behalf.

General and Administrative Expenses—As of September 30, 2018 and December 31, 2017, we owed the Advisor $7 and $13, respectively, for general and administrative expenses paid on our behalf.

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Summarized below are the fees earned by and the expenses reimbursable to the Advisor, except for unpaid general and administrative expenses, which we disclosed above, for the periods ended September 30, 2018 and 2017, and any related amounts unpaid as of September 30, 2018 and December 31, 2017:

	Three Months Ended  September 30,				Nine Months Ended  September 30,				Unpaid Amount as of
									September 30,		December 31,
	2018		2017		2018		2017		2018		2017
Acquisition fees(1)	$	379	$	—	$	635	$	—	$	—	$	—
Acquisition expenses(1)	38		—		108		—		—		—
Asset management fees(2)	183		37		440		110		61		72
Organization and offering costs(3)	213		62		2,222		1,960		4,222		2,000
Total	$	813	$	99	$	3,405	$	2,070	$	4,283	$	2,072

⁽¹⁾  The majority of acquisition fees and expenses are capitalized and allocated to the related investment in real estate assets on the consolidated balance sheets based on the acquisition-date fair values of the respective assets and liabilities acquired.

⁽²⁾  Asset management fees are presented as General and Administrative on the consolidated statements of operations.

⁽³⁾  Organization and offering costs are charged against equity.

Manager—Our real property is managed and leased by the Manager. The Manager also manages real properties acquired by PECO affiliates and other third parties.

Property Management Fee—We pay to the Manager a monthly property management fee equal to 4% of the gross receipts of each property managed by the Manager.

Leasing Commissions—In addition to the property management fee, if the Manager provides leasing services with respect to a property, we will pay the Manager leasing fees in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable services in the same geographic location of the applicable property.

Construction Management and Development Fees—If we engage the Manager to provide construction management or development services with respect to a particular property, we will pay a construction management fee or a development fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the property.

Expenses and Reimbursements—The Manager hires, directs and establishes policies for employees who have direct responsibility for the operations of each real property it manages, which may include, but is not limited to, on-site managers and building and maintenance personnel. Certain employees of the Manager may be employed on a part-time basis and may also be employed by us or certain of our affiliates. The Manager also directs the purchase of equipment and supplies and will supervise all maintenance activity. We reimburse the costs and expenses incurred by the Manager on our behalf, including employee compensation, legal, travel and other out-of-pocket expenses that are directly related to the management of specific properties, as well as fees and expenses of third-party accountants.

Summarized below are the fees earned by and the expenses reimbursable to the Manager for the periods ended September 30, 2018 and 2017, and any related amounts unpaid as of September 30, 2018 and December 31, 2017:

	Three Months Ended  September 30,				Nine Months Ended  September 30,				Unpaid Amount as of
									September 30,		December 31,
	2018		2017		2018		2017		2018		2017
Property management fees(1)	$	75	$	11	$	190	$	37	$	29	$	—
Leasing commissions(2)	34		—		88		4		6		—
Construction management fees(2)	14		—		71		—		4		2
Other fees and reimbursements(3)	71		45		171		141		92		70
Total	$	194	$	56	$	520	$	182	$	131	$	72

⁽¹⁾  The property management fees are included in Property Operating on the consolidated statements of operations.

⁽²⁾  Leasing commissions paid for leases with terms less than one year are expensed and included in Depreciation and Amortization on the consolidated statements of operations. Leasing commissions paid for leases with terms greater than one year, and construction management fees, are capitalized and amortized over the life of the related leases or assets.

⁽³⁾  Other fees and reimbursements are included in Property Operating and General and Administrative on the consolidated statements of operations based on the nature of the expense.

Dealer Manager—The Dealer Manager is a Delaware limited liability company and has been a member firm of the Financial Industry Regulatory Authority, Inc. (“FINRA”) since 1995. The Dealer Manager is under common ownership with our Griffin sponsor and will provide certain sales, promotional, and marketing services in connection with the distribution of the shares of common stock offered under our offering. The following table summarizes the reimbursement rates of dealer manager fees, selling commissions, and stockholder servicing fees for Class T and Class I shares of common stock for the

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Primary Offering, as well as the Class A shares sold during the private offering:

	T Shares	I Shares	A Shares
Dealer manager fees	The fee will be up to 3% of gross offering proceeds from the Primary Offering, of which 1% of gross offering proceeds will be funded by us, with the remaining amounts funded by the Advisor.	The fee will be up to 1.5% of gross offering proceeds from the Primary Offering, all of which will be funded by the Advisor.	3% of gross offering proceeds
Selling commissions	Up to 3% of gross offering proceeds	N/A	7% of gross offering proceeds
Stockholder servicing fees	The fee will accrue daily at an annual rate of 1.0% of the most recent purchase price per share of Class T sold in the Primary Offering, up to a maximum of 4.0% in the aggregate.	N/A	N/A

The following table summarizes the dealer manager fees, selling commissions, and stockholder servicing fees for shares of common stock as of September 30, 2018 and 2017:

	Three Months Ended  September 30,				Nine Months Ended  September 30,					Unpaid Amount as of
										September 30,		December 31,
	2018		2017		2018			2017		2018		2017
Dealer manager fees	$	3	$	750	$	1,685		$	1,177	$	2	$	—
Selling commissions	3		154		(211		)	742		—		—
Stockholder servicing fees(1)	4		—		4			—		4		—

⁽¹⁾  Stockholder servicing fees are included in Offering Costs on the consolidated statements of equity and included in Accounts Payable-Affiliates on the consolidated balance sheets. We will accrue the full cost of the stockholder servicing fee as an offering cost at the time each Class T share is sold during the Public Offering.

Share Purchases by Advisor—Our Advisor has made an initial investment in us through the purchase of 22 shares of our Class A common stock. The Advisor may not sell any of these shares while serving as the Advisor. As of September 30, 2018, the Advisor owned 28 shares of our Class A common stock.

9. OPERATING LEASES

The terms and expirations of our operating leases with our tenants vary. The lease agreements frequently contain options to extend the terms of leases and other terms and conditions as negotiated. We retain substantially all of the risks and benefits of ownership of the real estate assets leased to tenants.

Approximate future rentals to be received under non-cancelable operating leases in effect at September 30, 2018, assuming no new or renegotiated leases or option extensions on lease agreements, are as follows:

Year	Amount
Remaining 2018	$	1,399
2019	5,284
2020	4,529
2021	3,426
2022	3,115
2023 and thereafter	10,176
Total	$	27,929

Our major tenants include Publix Super Markets, Coborn’s, and Albertsons Companies, which comprised 16.6%, 11.4%, and 11.0% respectively, of our aggregate annualized base rent (“ABR”) as of September 30, 2018. As a result, the tenant concentration of our portfolio makes it particularly susceptible to adverse economic developments for those tenants.

10. SUBSEQUENT EVENTS

Distributions—Cash distributions equal to a daily amount of $0.0016438356 per share of all classes of common stock outstanding were paid subsequent to September 30, 2018, to the stockholders of record from September 1, 2018 through October 31, 2018, as follows:

Distribution Period	Record Date	Date Distribution Paid	Gross Amount of Distribution Paid		Distribution Reinvested through the DRIP		Net Cash Distribution
September 1, 2018 through September 30, 2018	9/28/2018	10/1/2018	$	315	$	124	$	191
October 1, 2018 through October 31, 2018	10/31/2018	11/1/2018	326		126		200

On November 13, 2018, our board of directors authorized cash distributions to all classes of common stockholders of record from December 1, 2018 through February 28, 2019 in a daily amount of $0.0016438356 per share.

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Joint Venture with The Northwestern Mutual Life Insurance Company—OnNovember 9, 2018, we entered into a joint venture with The Northwestern Mutual Life Insurance Company (“Northwestern Mutual”). We contributed all of our ownership interests in three grocery-anchored shopping center properties to the joint venture in exchange for approximately $42 million in cash and a 10% ownership interest in the joint venture, and Northwestern Mutual made an initial capital contribution to the joint venture equal to approximately $42 million in cash in exchange for a 90% ownership interest in the joint venture.

Revolving Credit Facility Amendment—On November 9, 2018, we reduced the size of our revolving credit facility from $250 million to $125 million.

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