REAL ESTATE INVESTMENTS

6 Months Ended

Mar. 31, 2020

Real Estate [Abstract]

REAL ESTATE INVESTMENTS

NOTE 3 – REAL ESTATE INVESTMENTS

On October 10, 2019, we purchased a newly constructed 616,000 square foot industrial building, situated on 78.6 acres, located in the Indianapolis, IN Metropolitan Statistical Area (MSA). The building is 100% net-leased to Amazon.com Services, Inc. for 15 years through August 2034. The lease is guaranteed by Amazon.com, Inc. The purchase price was $81.5 million. We obtained an 18 year, fully-amortizing mortgage loan of $52.5 million at a fixed interest rate of 4.27%. Annual rental revenue over the remaining term of the lease averages $5.0 million.

On March 30, 2020, we purchased a newly constructed 153,000 square foot industrial building, situated on 24.2 acres, located in the Columbus, OH MSA. The building is 100% net-leased to Magna Seating of America, Inc. for 10 years through January 2030. The purchase price was $17.9 million. We obtained a 10 year, fully-amortizing mortgage loan of $9.4 million at a fixed interest rate of 3.47%. Annual rental revenue over the remaining term of the lease averages $1.2 million.

Amazon.com, Inc. and Magna Seating of America, Inc.’s ultimate parent, Magna International Inc. are publicly-owned companies and financial information related to these entities are available at the SEC’s website, www.sec.gov. The references in this report to the SEC’s website are not intended to and do not include, or incorporate by reference into this report, the information on the www.sec.gov website.

We evaluated the property acquisitions which took place during the six months ended March 31, 2020, to determine whether an integrated set of assets and activities meets the definition of a business, pursuant to ASU 2017-01. Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. Accordingly, we accounted for the properties purchased during fiscal 2020 as asset acquisitions and allocated the total cash consideration, including transaction costs of approximately $49,000, to the individual assets acquired on a relative fair value basis. There were no liabilities assumed in these acquisitions.

The financial information set forth below summarizes our purchase price allocation for these properties acquired during the six months ended March 31, 2020 that is accounted for as an asset acquisition (in thousands):

Land	$	5,798
Building		91,124
In-Place Leases		2,502

The following table summarizes the operating results included in our consolidated statements of income (loss) for the properties acquired during the three and six months ended March 31, 2020 (in thousands):

	Three Months Ended 03/31/2020		Six Months Ended 03/31/2020
Rental Revenues	$	1,243	$	2,370
Net Income Attributable to Common Shareholders		194		478

Proforma information

The following unaudited pro-forma condensed financial information has been prepared utilizing our historical financial statements and the effect of additional revenue and expenses generated from properties acquired and expanded during fiscal 2020 to date, and during fiscal 2019, assuming that the acquisitions and completed expansions had occurred as of October 1, 2018, after giving effect to certain adjustments including: (a) Rental Revenue adjustments resulting from the straight-lining of scheduled rent increases, (b) Interest Expense resulting from the assumed increase in Fixed Rate Mortgage Notes Payable and Loans Payable related to the new acquisitions, and (c) Depreciation Expense related to the new acquisitions and expansions. Furthermore, the net proceeds raised from our Dividend Reinvestment and Stock Purchase Plan (the DRIP) were used to fund property acquisitions and expansions and therefore, the weighted average shares outstanding used in calculating the pro forma Basic and Diluted Net Income (Loss) per Share Attributable to Common Shareholders has been adjusted to account for the increase in shares raised through the DRIP, as if all the shares raised had occurred on October 1, 2018. Additionally, the net proceeds raised from the issuance of our 6.125% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share (6.125% Series C Preferred Stock), through our At-The-Market Sales Agreement Program were used to help fund property acquisitions and, therefore, the pro forma preferred dividend has been adjusted to account for its effect on pro-forma Net Income (Loss) Attributable to Common Shareholders as if all the preferred stock issuances had occurred on October 1, 2018.

The unaudited pro forma condensed financial information is not indicative of the results of operations that would have been achieved had the acquisitions and expansions reflected herein been consummated on the dates indicated or that will be achieved in the future.

	Three Months Ended (in thousands, except per share amounts)
	3/31/2020				3/31/2019
	As Reported		Pro-forma		As Reported		Pro-forma
Rental Revenue	$	35,114	$	35,407	$	32,934	$	35,064
Net Income (Loss) Attributable to Common Shareholders	$	(75,078)	$	(74,933)	$	23,821	$	22,517
Basic and Diluted Net Income (Loss) per Share Attributable to Common Shareholders	$	(0.77)	$	(0.77)	$	0.26	$	0.23

	Six Months Ended (in thousands, except per share amounts)
	3/31/2020				3/31/2019
	As Reported		Pro-forma		As Reported		Pro-forma
Rental Revenue	$	69,983	$	70,692	$	65,551	$	70,100
Net Income (Loss) Attributable to Common Shareholders	$	(71,551)	$	(71,065)	$	(8,543)	$	(9,968)
Basic and Diluted Net Income (Loss) per Share Attributable to Common Shareholders	$	(0.73)	$	(0.73)	$	(0.09)	$	(0.10)

Tenant Concentration

We have a concentration of FedEx Corporation (FDX) and FDX subsidiary-leased properties, consisting of 60 separate stand-alone leases covering 10.4 million square feet as of March 31, 2020 and 61 separate stand-alone leases covering 10.5 million square feet as of March 31, 2019. In this period of unprecedented turbulence, the services of FedEx are essential in keeping supply chains moving and in delivering critically needed relief aid throughout the world. As of March 31, 2020, the 60 separate stand-alone leases that are leased to FDX and FDX subsidiaries are located in 25 different states and have a weighted average lease maturity of 8.2 years. The percentage of FDX and its subsidiaries leased square footage to the total of our rental space was 45% (5% to FDX and 40% to FDX subsidiaries) as of March 31, 2020 and 49% (5% to FDX and 44% to FDX subsidiaries) as of March 31, 2019. As of March 31, 2020, the only tenants that leased 5% or more of our total square footage were FDX and its subsidiaries and Amazon.com Services, Inc., which consists of four separate stand-alone leases for properties located in four different states, containing 1.4 million total square feet, comprising approximately 6% of our total rental square feet. None of our properties are subject to a master lease or any cross-collateralization agreements.

Annualized Rental and Reimbursement Revenue from FDX and its subsidiaries is estimated to be approximately 55% (5% to FDX and 50% to FDX subsidiaries) of total Rental and Reimbursement Revenue for fiscal 2020, and was 60% (5% to FDX and 55% to FDX subsidiaries) of total Rental and Reimbursement Revenue for fiscal 2019. The only tenants estimated to comprise 5% or more of our total Rental and Reimbursement Revenue during the six months ended March 31, 2020 were FDX and its subsidiaries and Amazon.com Services, Inc., which is estimated to be 7% of our Annualized Rental and Reimbursement Revenue. For the six months ended March 31, 2019, no tenant, other than FDX and its subsidiaries, accounted for 5% or more of our total Rental and Reimbursement Revenue.

FDX and Amazon.com, Inc. are publicly-owned companies and financial information related to these entities are available at the SEC’s website, www.sec.gov. FDX and Amazon.com, Inc. are rated “BBB” and “AA-”, respectively by S&P Global Ratings (www.standardandpoors.com) and are rated “Baa2” and “A2”, respectively by Moody’s (www.moodys.com), which are both considered “Investment Grade” ratings. The references in this report to the SEC’s website, S&P Global Ratings’ website and Moody’s website are not intended to and do not include, or incorporate by reference into this report, the information of FDX, Amazon.com, Inc., S&P Global Ratings or Moody’s on such websites.