FORM 10-Q
| ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2017
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
STRATEGIC REALTY TRUST, INC.
| Maryland | 90-0413866 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. EmployerIdentification No.) | |
66 Bovet Road, Suite 100 San Mateo, California, 94402 | (650) 343-9300 | |
| (Address of Principal Executive Offices; Zip Code) | (Registrant’s Telephone Number, Including Area Code) | |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xý No ¨
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | |
| Emerging growth company | ¨ | ||
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EX-10-1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
As of March 31, a bargain purchase gain. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Significant renovations and improvements that improve or extend the useful lives of statements. approximately $19.2 million in cash. The Company used the net proceeds from the sale of Pinehurst Square East to repay $18.4 million of the outstanding balance on its credit facility with KeyBank. The sale of the thousands): follows (amounts in thousands): 2016 (amounts in thousands): Pursuant to the Wilshire Joint Venture Agreement, 3032 Wilshire SM follows (amounts in thousands): NET follows (amounts in thousands): follows (amounts in thousands): approximately $0.2 million and $86 thousand, respectively. nature. 2016 (amounts in thousands): 2017 and 2016 (amounts in thousands, except shares): 12. RELATED PARTY TRANSACTIONS Origination Fees Fees Fees Fees 9, 2017. Fees Leasing Fees Fees Fees by the end of July 2017. Properties Since our inception, our business has been managed by an external advisor. We 2016. (amounts in thousands): 2017. January 2017. purchase of 450 Hayes. April 2016. December 31, 2015. The over accrual was determined to be immaterial and was the result of finalizing, in 2016, the calculation of taxes owed for 2015. cash flows (amounts in thousands): cash outstanding at December 31, 2016. Gelson's Joint Ventures. Woodland West Marketplace. (amounts in thousands, except per share amounts): Our calculation of FFO attributable to common shares and Common Units and the reconciliation of net income (loss) to FFO is as in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of June 30, 2017. We expect to pay this distribution by the end of July 2017. Properties were required to be submitted on or before April 1, 2016.2016,2017, have been prepared by Strategic Realty Trust, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2015,2016, as filed with the SEC on March 30, 201624, 2017 (the “2015“2016 Annual Report on Form 10-K”). The condensed consolidated financial statements herein should also be read in conjunction with the Notes to Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q. The results of operations for the three months ended March 31, 20162017, are not necessarily indicative of the operating results expected for the full year. The information furnished in the Company’s accompanying unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of operations, equity, and cash flows reflects all adjustments that, are, in management’s opinion, are necessary for a fair presentation of the aforementioned financial statements. Such adjustments are of a normal recurring nature.1CONDENSED(Unaudited) March 31, 2016 December 31, 2015 ASSETS Investments in real estate Land $ 15,981,000 $ 15,981,000 Building and improvements 56,158,000 56,158,000 Tenant improvements 3,577,000 3,676,000 75,716,000 75,815,000 Accumulated depreciation (10,612,000 ) (10,068,000 ) Investments in real estate, net 65,104,000 65,747,000 Properties under development and development costs Land 25,851,000 - Buildings 613,000 - Development costs 901,000 - Properties under development and development costs 27,365,000 - Cash and cash equivalents 3,414,000 8,793,000 Restricted cash 6,025,000 2,693,000 Prepaid expenses and other assets, net 558,000 731,000 Tenant receivables, net 1,212,000 1,664,000 Investments in unconsolidated joint ventures 6,645,000 6,902,000 Lease intangibles, net 4,081,000 4,290,000 Assets held for sale 9,752,000 9,769,000 Deferred financing costs, net 487,000 579,000 TOTAL ASSETS $ 124,643,000 $ 101,168,000 LIABILITIES AND EQUITY LIABILITIES Notes payable, net $ 58,509,000 $ 34,052,000 Accounts payable and accrued expenses 1,145,000 1,486,000 Amounts due to affiliates 184,000 49,000 Other liabilities 1,090,000 1,479,000 Liabilities related to assets held for sale 6,859,000 6,909,000 Below market lease intangibles, net 3,231,000 3,303,000 Deferred gain on sale of properties to unconsolidated joint venture 1,227,000 1,225,000 TOTAL LIABILITIES 72,245,000 48,503,000 Commitments and contingencies (Note 13) EQUITY Stockholders' equity Preferred stock, $0.01 par value; 50,000,000 shares authorized, none issued and outstanding - - Common stock, $0.01 par value; 400,000,000 shares authorized; 11,007,227 and 11,037,948 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively 111,000 111,000 Additional paid-in capital 96,482,000 96,684,000 Accumulated deficit (46,187,000 ) (46,124,000 ) Total stockholders' equity 50,406,000 50,671,000 Non-controlling interests 1,992,000 1,994,000 TOTAL EQUITY 52,398,000 52,665,000 TOTAL LIABILITIES AND EQUITY $ 124,643,000 $ 101,168,000 March 31, December 31, 2017 2016 ASSETS Investments in real estate Land $ 22,365 $ 15,510 Building and improvements 57,395 47,810 Tenant improvements 2,926 2,307 82,686 65,627 Accumulated depreciation (8,770 ) (8,163 ) Investments in real estate, net 73,916 57,464 Properties under development and development costs Land 25,851 25,851 Buildings 597 601 Development costs 5,645 4,377 Properties under development and development costs 32,093 30,829 Cash and cash equivalents 3,030 3,130 Restricted cash 3,867 4,728 Prepaid expenses and other assets, net 283 1,070 Tenant receivables, net of $72 and $38 bad debt reserve 912 1,269 Investments in unconsolidated joint ventures 2,795 4,761 Lease intangibles, net 4,616 3,825 Assets held for sale 11,697 24,157 Deferred financing costs, net 1,486 264 $ 134,695 $ 131,497 LIABILITIES AND EQUITY LIABILITIES Notes payable, net $ 61,734 $ 54,304 Accounts payable and accrued expenses 1,888 2,955 Amounts due to affiliates 114 111 Other liabilities 585 461 Liabilities related to assets held for sale 14,116 22,182 Below-market lease liabilities, net 3,061 3,049 Deferred gain on sale of properties to unconsolidated joint venture 668 1,202 82,166 84,264 Commitments and contingencies (Note 13) EQUITY Stockholders’ equity Preferred stock, $0.01 par value; 50,000,000 shares authorized, none issued and outstanding — — Common stock, $0.01 par value; 400,000,000 shares authorized; 10,906,370 and 10,938,245 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively 111 111 Additional paid-in capital 95,829 96,032 Accumulated deficit (45,382 ) (50,676 ) Total stockholders’ equity 50,558 45,467 Non-controlling interests 1,971 1,766 TOTAL EQUITY 52,529 47,233 TOTAL LIABILITIES AND EQUITY $ 134,695 $ 131,497 (1) As of March 31, 2017 and December 31, 2016, includes approximately $34.4 million and $32.8 million, respectively, of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and approximately $19.6 million and $19.9 million, respectively, of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. Refer to Note 5. “Variable Interest Entities”. 2(Unaudited) Three Months Ended March 31, 2016 2015 Revenue: Rental and reimbursements $ 2,708,000 $ 4,804,000 Expense: Operating and maintenance 937,000 1,775,000 General and administrative 396,000 766,000 Depreciation and amortization 870,000 1,868,000 Transaction expense 4,000 - Interest expense 600,000 1,694,000 2,807,000 6,103,000 Operating loss (99,000 ) (1,299,000 ) Other income (loss): Equity in income (losses) of unconsolidated joint ventures 26,000 (129,000 ) Gain on disposal of real estate 9,000 4,783,000 Loss on extinguishment of debt (1,000 ) (233,000 ) Net income (loss) (65,000 ) 3,122,000 Net income (loss) (65,000 ) 3,122,000 Net income (loss) attributable to non-controlling interests (2,000 ) 261,000 Net income (loss) attributable to common stockholders $ (63,000 ) $ 2,861,000 Earnings (loss) per common share ̶ basic and diluted $ (0.01 ) $ 0.26 Weighted average shares outstanding used to calculate earnings (loss) per common share - basic and diluted 11,037,189 10,969,714 Three Months Ended March 31, 2017 2016 Revenue: Rental and reimbursements $ 2,640 $ 2,708 Expense: Operating and maintenance 946 945 General and administrative 495 482 Depreciation and amortization 962 870 Transaction expense 82 4 Interest expense 575 600 3,060 2,901 Operating loss (420 ) (193 ) Other income (loss): Equity in income of unconsolidated joint ventures 32 26 Net gain on disposal of real estate 6,586 8 Income (loss) before income taxes 6,198 (159 ) Income taxes (19 ) 94 Net income (loss) 6,179 (65 ) Net income (loss) attributable to non-controlling interests 230 (2 ) Net income (loss) attributable to common stockholders $ 5,949 $ (63 ) Earnings (loss) per common share - basic and diluted $ 0.54 $ (0.01 ) Weighted average shares outstanding used to calculate earnings (loss) per common share - basic and diluted 10,937,451 11,037,189 3(Unaudited) Total Number of Additional Accumulated Stockholders' Non-controlling Total Shares Par Value Paid-in Capital Deficit Equity Interests Equity BALANCE — December 31, 2015 11,037,948 $ 111,000 $ 96,684,000 $ (46,124,000 ) $ 50,671,000 $ 1,994,000 $ 52,665,000 Redemption of common shares (30,721 ) - (202,000 ) - (202,000 ) - (202,000 ) Net loss - - - (63,000 ) (63,000 ) (2,000 ) (65,000 ) BALANCE — March 31, 2016 11,007,227 $ 111,000 $ 96,482,000 $ (46,187,000 ) $ 50,406,000 $ 1,992,000 $ 52,398,000 Par Value BALANCE — December 31, 2016 10,938,245 $ 111 $ 96,032 $ (50,676 ) $ 45,467 $ 1,766 $ 47,233 Redemption of common shares (31,875 ) — (203 ) — (203 ) — (203 ) Quarterly distributions — — — (655 ) (655 ) (25 ) (680 ) Net income — — — 5,949 5,949 230 6,179 BALANCE — March 31, 2017 10,906,370 $ 111 $ 95,829 $ (45,382 ) $ 50,558 $ 1,971 $ 52,529 4(Unaudited) Three Months Ended March 31, 2016 2015 Cash flows from operating activities: Net income (loss) $ (65,000 ) $ 3,122,000 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Net gain on disposal of real estate (9,000 ) (4,783,000 ) Loss on extinguishment of debt 1,000 233,000 Equity in (income) loss of unconsolidated joint ventures (26,000 ) 129,000 Straight-line rent (26,000 ) (30,000 ) Amortization of deferred costs and notes payable premium/discount 120,000 127,000 Depreciation and amortization 870,000 1,868,000 Amortization of above and below-market leases (47,000 ) (15,000 ) Bad debt expense 3,000 11,000 Changes in operating assets and liabilities: Prepaid expenses and other assets 189,000 83,000 Tenant receivables 476,000 (227,000 ) Accounts payable and accrued expenses 347,000 (635,000 ) Amounts due to affiliates 135,000 62,000 Other liabilities (389,000 ) 216,000 Net change in restricted cash for operational expenditures 166,000 (849,000 ) Net cash provided by (used in) operating activities 1,745,000 (688,000 ) Cash flows from investing activities: Net proceeds from the sale of real estate 9,000 53,136,000 Investment in properties under development and costs of development (27,280,000 ) - Improvements, capital expenditures, and leasing costs (42,000 ) (480,000 ) Investments in unconsolidated joint ventures - (4,555,000 ) Issuance of note receivable - (7,000,000 ) Distributions from unconsolidated joint ventures 283,000 - Net change in restricted cash from investments in consolidated variable interest entities (3,458,000 ) - Net change in restricted cash for capital expenditures (40,000 ) (147,000 ) Net cash provided by (used in) investing activities (30,528,000 ) 40,954,000 Cash flows from financing activities: Redemption of member interests - (2,102,000 ) Redemption of common shares (202,000 ) - Quartertly distributions (688,000 ) (747,000 ) Proceeds from notes and loan payable 25,200,000 - Payment of loan fees and financing costs (712,000 ) - Repayment of notes payable (194,000 ) (36,663,000 ) Net cash provided by (used in) financing activities 23,404,000 (39,512,000 ) Net increase (decrease) in cash and cash equivalents (5,379,000 ) 754,000 Cash and cash equivalents – beginning of period 8,793,000 3,211,000 Cash and cash equivalents – end of period $ 3,414,000 $ 3,965,000 Supplemental disclosure of non-cash investing and financing activities: Distributions declared but not paid $ - $ 685,000 Cash paid for interest, net of amounts capitalized $ 490,000 $ 2,426,000 Three Months Ended March 31, 2017 2016 Cash flows from operating activities: Net income (loss) $ 6,179 $ (65 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Net gain on disposal of real estate (6,586 ) (8 ) Equity in income of unconsolidated joint ventures (32 ) (26 ) Straight-line rent (22 ) (26 ) Amortization of deferred costs 114 120 Depreciation and amortization 962 870 Amortization of above and below-market leases (63 ) (47 ) Bad debt expense 33 3 Changes in operating assets and liabilities: Prepaid expenses and other assets 787 189 Tenant receivables 339 476 Accounts payable and accrued expenses (692 ) (257 ) Amounts due to affiliates 3 135 Other liabilities 124 (116 ) Net change in restricted cash for operational expenditures 850 166 Net cash provided by operating activities 1,996 1,414 Cash flows from investing activities: Net proceeds from the sale of real estate 18,543 9 Acquisition of real estate (17,783 ) — Investment in properties under development and development costs (1,437 ) (26,949 ) Improvements, capital expenditures, and leasing costs (383 ) (42 ) Distributions from unconsolidated joint ventures 1,998 283 Net change in restricted cash from investments in consolidated variable interest entities (291 ) (3,458 ) Net change in restricted cash for capital expenditures 302 (40 ) Net cash provided by (used in) investing activities 949 (30,197 ) Cash flows from financing activities: Redemption of common shares (203 ) (202 ) Quarterly distributions (681 ) (688 ) Proceeds from notes payable 27,400 25,200 Repayment of notes payable (28,050 ) (194 ) Payment of loan fees from investments in consolidated variable interest entities (197 ) (712 ) Payment of loan fees and financing costs (1,314 ) — Net cash provided by (used in) financing activities (3,045 ) 23,404 Net decrease in cash and cash equivalents (100 ) (5,379 ) Cash and cash equivalents – beginning of period 3,130 8,793 Cash and cash equivalents – end of period $ 3,030 $ 3,414 Supplemental disclosure of non-cash investing and financing activities and other cash flow information: Distributions declared but not paid $ 680 $ — Change in accrued liabilities capitalized to investment in development (377 ) 331 Change to accrued mortgage note payable interest capitalized to investment in development 3 — Amortization of deferred loan fees capitalized to investment in development 201 85 Cash paid for interest, net of amounts capitalized 442 490 5(Unaudited) The Company was initially capitalized by the sale of shares of common stock to Thompson National Properties, LLC (“TNP LLC”) on October 16, 2008.On November 4, 2008, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of 100,000,000 shares of our common stock to the public in our primary offering at $10.00 per share and a maximum of 10,526,316 shares of its common stock to the Company’s stockholders at $9.50 per share pursuant to its distribution reinvestment plan (“DRIP”) (collectively, the “Offering”). On August 7, 2009, the SEC declared the registration statement effective and the Company commenced the Offering. On February 7, 2013, the Company terminated the Offering and ceased offering shares of common stock in the primary offering and under the DRIP. As of the termination of the Offering, the Company had accepted subscriptions for, and issued, 10,688,940 shares of common stock in the Offering for gross offering proceeds of $104,700,000 and 391,182 shares of common stock pursuant to the DRIP for gross offering proceeds of $3,620,000. The Company also granted 50,000 shares of restricted stock and issued 273,729 common shares to pay a portion of a special distribution made to stockholders in 2015 to preserve REIT status based on underreporting of federal taxable income in 2011 (the “Special Distribution”). Cumulatively, through March 31, 2016, the Company has redeemed 396,624 shares of common stock sold in the Offering for $3,197,000.As a result of the termination of the Offering, offering proceeds are not currently available to fund the Company’s cash needs, and will not be available unless the Company engages in an offering of its securities.advisor, and theadvisor. The Company has no direct employees and all management and administrative personnel responsible for conducting the Company’s business are employed by its advisor. Currently, the Company is externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed in August 2014, August 2015 and August 2015.2016. The current term of the Advisory Agreement terminates on August 10, 2016.2017. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.Offering,Company’s initial public offering (“Offering”), as the Company accepted subscriptions for shares of its common stock, it transferred substantially all of the net proceeds of the Offering to the OP as a capital contribution. The Company is the sole general partner of the OP. As of both March 31, 20162017 and December 31, 2015,2016, the Company owned 96.2%96.3% of the limited partnership interestinterests in the OP.ventures.ventures as well as development of properties. Substantially all of the proceeds of the completed Offering have been used to fund investments in real properties and other real estate-related assets, for payment of operating expenses, for payment of interest, for payment of various fees and expenses, such as acquisition fees and management fees, and for payment of distributions to stockholders. The Company’s available capital resources, cash and cash equivalents on hand and sources of liquidity are currently limited. The Company expects its future cash needs will be funded using cash from operations, future asset sales, debt financing and the proceeds to the Company from any sale of equity that it may conduct in the future.InDuring the first quarter of 2016, the Company invested, through joint ventures, in two significant retail projects under development.6On January 7, 2016, the Company invested in a joint venture with Sunset & Gardner Investors, LLC, a subsidiary of Cadence Capital Investments, LLC (the “Gelson’s Joint Venture”). The Gelson’s Joint Venture acquired property located at the corner of Sunset Boulevard and Gardner in Hollywood, California (the “Gelson’s Property”) for a build to suit grocery store for Gelson’s Market. On March 7, 2016, the Company invested in a joint venture with 3032 Wilshire Investors, LLC (the “Wilshire Joint Venture”) to fund the acquisition of certain property located in 3032 Wilshire Boulevard and 1210 Berkeley Street in Santa Monica, California (the “Wilshire Property”). The Wilshire Joint Venture intends to redevelop, reposition and re-lease the Wilshire Property. Together, the Gelson’s Property and Wilshire Property are referred to as “Properties Under Development.”On September 30, 2015, the Company, through wholly-owned subsidiaries, formed a joint venture (the “SGO MN Joint Venture”) with MN Retail Grand Avenue Partners, LLC, a subsidiary of Oaktree Real Estate Opportunities Fund V.I. L.P. (“Oaktree”) and GLB SGO MN, LLC, a wholly-owned subsidiary of Glenborough Property Partners, LLC (“GPP”). GPP is an affiliate of the Advisor and the Company’s property manager. On March 11, 2015, the Company, through a wholly-owned subsidiary, formed a joint venture (the “SGO Joint Venture”) with Grocery Retail Grand Avenue Partners, LLC, a subsidiary of Oaktree, and GLB SGO, LLC, a wholly-owned subsidiary of GPP. These joint ventures own property types similar to properties that are directly owned by the Company.2016,2017, in addition to the development projects, the Company’s portfolio of properties was comprised of 913 properties, including 1one property held for sale, with approximately 766,000601,000 rentable square feet of retail space located in 7five states. As of March 31, 2016,2017, the rentable space at the Company’s retail properties including the property held for sale, which was 89% leased.for interim financial statements as contained within the Financial Accounting Standards BoardBoard’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC,Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X.(“ (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of March 31, 2017 and December 31, 2016, the Company held ownership interests in two unconsolidated joint ventures. Refer to Note 4, “Investments in Unconsolidated Joint Ventures” for additional information. As of March 31, 2017 and December 31, 2016, the Company held variable interests in the Gelson’s Joint Venture and Wilshire Joint Venture,two variable interest entities and consolidated those entities (seeentities. Refer to Note 5.5, “Variable Interest Entities” for additional information).Non-Controlling InterestsThe Company’s non-controlling interests are comprised primarilyinformation.common units ina Business (“ASU 2017-01”) that clarifies the OP (“Common Units”) and, until its redemption on March 12, 2015, the membership interest in SRT Secured Holdings, LLC (“Secured Holdings”), one of the Company’s subsidiaries. The Company accountsframework for non-controlling interests in accordance with ASC 810. In accordance with ASC 810, the Company reports non-controlling interests in subsidiaries within equity in the condensed consolidated financial statements, but separate from stockholders’ equity. Net income (loss) attributable to non-controlling interests is presented as a reduction from net income (loss) in calculating net income (loss) attributable to common stockholders on the condensed consolidated statement of operations. Acquisitions or dispositions of non-controlling interests that do not result in a change of control are accounted for as equity transactions. In addition, ASC 810 requires that a parent company recognize a gain or loss in the Company’s results of operations when a subsidiary is deconsolidated upon a change in control. In accordance with ASC 480-10,Distinguishing Liabilities from Equity, non-controlling interests that are determined to be redeemable are carried at their fair value or redemption value as of the balance sheet date and reported as liabilities or temporary equity depending on their terms. The Company periodically evaluates individual non-controlling interests for the ability to continue to recognize the non-controlling interest as permanent equity in the condensed consolidated balance sheets. Any non-controlling interest that fails to qualify as permanent equity will be reclassified as liabilities or temporary equity. All non-controlling interests at March 31, 2016 and December 31, 2015 qualified as permanent equity.7Use of EstimatesThe preparation of the Company’s condensed consolidated financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amountsdetermining whether an integrated set of assets and liabilities and the Company’s disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in the Company’s condensed consolidated financial statements, and actual results could differ from the estimates or assumptions used by management. Additionally, other companies may utilize different estimates that may impact the comparability of the Company’s condensed consolidated results of operations to those of companies in similar businesses. The Company considers significant estimates to include the carrying amounts and recoverability of investments in real estate, impairments, real estate acquisition purchase price allocations, allowance for doubtful accounts, estimated useful lives to determine depreciation and amortization and fair value determinations, among others.Cash and Cash EquivalentsCash and cash equivalents represent current bank accounts and other bank deposits free of encumbrances and having maturity dates of three months or less from the respective dates of deposit. The Company limits cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk in cash.Restricted CashRestricted cash includes escrow accounts for real property taxes, insurance, capital expenditures and tenant improvements, debt service and leasing costs held by lenders.Revenue RecognitionRevenues include minimum rents, expense recoveries and percentage rental payments. Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased property. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:whether the lease stipulates how a tenant improvement allowance may be spent;whether the amount of a tenant improvement allowance is in excess of market rates;whether the tenant or landlord retains legal title to the improvements at the end of the lease term;whether the tenant improvements are unique to the tenant or general-purpose in nature; and8whether the tenant improvements are expected to have any residual value at the end of the lease.For leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectability is reasonably assured. Recognizing rental income on a straight-line basis for leases results in recognized revenue amounts which differ from those that are contractually due from tenants on a cash basis. If the Company determines the collectability of straight-line rents is not reasonably assured, the Company limits future recognition to amounts contractually owed and paid, and, when appropriate, establishes an allowance for estimated losses.The Company maintains an allowance for doubtful accounts, including an allowance for straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. The Company monitors the liquidity and creditworthiness of its tenants on an ongoing basis. For straight-line rent amounts, the Company’s assessment is based on amounts estimated to be recoverable over the term of the lease. The Company’s straight-line rent receivable (not including receivables on property held for sale), which is included in tenant receivables, net, on the condensed consolidated balance sheets, was $618,000 and $592,000 at March 31, 2016 and December 31, 2015, respectively.Certain leases contain provisions that require the payment of additional rents based on the respective tenants’ sales volume (contingent or percentage rent) and substantially all contain provisions that require reimbursement of the tenants’ allocable real estate taxes, insurance and common area maintenance costs (“CAM”). Revenue based on percentage of tenants’ sales is recognized only after the tenant exceeds its sales breakpoint. Revenue from tenant reimbursements of taxes, insurance and CAM is recognized in the period that the applicable costs are incurred in accordance with the lease agreement.The Company recognizes gains or losses on sales of real estate in accordance with ASC 360,Property, Plant, and Equipment (“ASC 360”). Gains are not recognized and are deferred until (a) a sale has been consummated; (b) the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; (c) the Company’s receivable, if any, is not subject to future subordination; and (d) the Company has transferred to the buyer the usual risks and reward of ownership, and the Company does not have a substantial continuing involvement with the property. As of March 31, 2016, deferred gain on the sale of properties to the SGO Joint Venture was $1.2 million.Valuation of Accounts ReceivablesThe Company makes estimates of the collectability of its tenant receivables related to base rents, including deferred rents receivable, expense reimbursements and other revenue or income.The Company analyzes tenant receivables, deferred rent receivable, 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, the Company 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. When a tenant is in bankruptcy, the Company will record a bad debt reserve for the tenant’s receivable balance and generally will not recognize subsequent rental revenue until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments.Concentration of Credit RiskA concentration of credit risk arises in the Company’s business when a nationally or regionally-based tenant occupies a substantial amount of space in multiple properties owned by the Company. In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual rent payments to the Company, exposing the Company to potential losses in rental revenue, expense recoveries, and percentage rent. Generally, the Company does not obtain security deposits from the nationally-based or regionally-based tenants in support of their lease obligations to the Company. The Company regularly monitors its tenant base to assess potential concentrations of credit risk. As of March 31, 2016, excluding property classified as held for sale, Ralph’s Grocery accounted for 10% of the Company’s annual minimum rent. As of March 31, 2016, there was no outstanding receivable from Ralph’s Grocery.9Business CombinationsThe Company records the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination when the acquired propertyactivities meets the definition of a business. AssetsThe revised framework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. in a business combination are generally measured at their acquisition-date fair values, including tenant improvements and identifiable intangible assets or liabilities. Tenant improvements recognized represent the tangible assets associated with the existing leases valued on a relative fair value basis at the acquisition date. Tenant improvements are classified as assets under investments in real estate and are depreciated over the remaining lease terms. Identifiable intangible assets and liabilities relate to the value of in-place operating leases which come in three forms: (1) leasing commissions and legal costs, which represent the value associated with “cost avoidance” of acquiring in-place leases, such as lease commissions paid under terms generally experienced in markets in which the Company operates; (2) value of in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased; and (3) above- or below-market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks. The value of in-place leases is recorded in acquired lease intangibles and amortized over the remaining lease term. Above- or below-market-rate leases are classified in acquired lease intangibles, or in acquired below-market lease intangibles, depending on whether the contractual terms are above- or below-market. Above-market leases are amortized asbasis. As a decrease to rental revenue over the remaining non-cancelable terms of the respective leases and below-market leases are amortized as an increase to rental revenue over the remaining initial lease term and any fixed rate renewal periods, if applicable.Acquisition costs are expensed as incurred. Costs incurred in pursuit of targeted properties forresult, asset acquisitions do not yet closed or those determined to no longer be viable and costs incurred which are expected to result in future period disposalsthe recognition of property not currently classified as held for sale properties have been expensed and are also classified in the condensed consolidated statements of operations as transaction expenses.Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions 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 assumptions would result in an incorrect valuation of the Company’s acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of the Company’s results of operations. These allocations also impact depreciation expense, amortization expense and gainsgoodwill or losses recorded on future sales of properties.Reportable SegmentsASC 280,Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has one reportable segment, income-producing retail properties, which consists of activities related to investing in real estate. The retail properties are geographically diversified throughout the United States, and the Company evaluates operating performance on an overall portfolio level.Investments in Real EstateReal property is recorded at estimated fair value at time of acquisition with subsequent additions at cost, less accumulated depreciation and amortization. Costs include those related to acquisition, development and construction, including tenant improvements, interest incurred during development, costs of pre-development and certain direct and indirect costs of development. Years Buildings and improvements 5 - 30 years Tenant improvements 1 - 36 years 10Properties Under DevelopmentThe initial cost of properties under development includes the acquisition cost of the property, direct development Acquisition costs and borrowing costs directly attributablerelated to the development. Borrowing costs associated with direct expenditures on properties under development are capitalized. The amount of capitalized borrowing costs is determined by reference to borrowings specific to the project, where relevant. Borrowing costsasset acquisitions are capitalized from the commencement of the development until the date of practical completion where the property is substantially ready for its intended use. Capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. Practical completion is when the property is capable of operating in the manner intended by management.Interest on projects during periods of development is capitalized until the project is ready for its intended use based on interest rates in place during the development period. The amount of interest capitalized during the three months ended March 31, 2016, was $328,000.Impairment of Long-lived AssetsThe Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its investments in real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying valuecondensed consolidated balance sheets.relatedother intangible assets may not be recoverable, the Company assesses the recoverability by estimating whether the Company will recover the carrying value of the real estate and related intangible assets through its undiscounted future cash flows (excluding interest) and its eventual disposition. If, based on this analysis, the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the investments in real estate and related intangible assets. Key inputs that the Company estimates in this analysis include projected rental rates, capital expenditures, property sale capitalization rates, and expected holding period of the property.The Company evaluates its equity investments for impairment in accordance with ASC 320,Investments – Debt and Securities (“ASC 320”). ASC 320 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss.The Company continually monitors its properties under development for impairment. Estimates of future cash flows used to test the recoverability of properties under development are based on their expected service potential when development is substantially complete. Those estimates include cash flows associated with all future expenditures necessary to develop the properties under development, including interest payments that will be capitalized as part of the cost of the properties under development.The Company did not record any impairment losses for the three months ended March 31, 2016 and 2015.Assets Held for Sale and Discontinued OperationsWhen certain criteria are met, long-lived assets are classified as held for sale and are reported at the lower of their carrying value or their fair value, less costs to sell, and are no longer depreciated. For property sales prior to May 1, 2014, discontinued operations is a component of an entity that has either been disposed of or is deemed to be held for sale and (i) the operations and cash flows of the component have been eliminated from ongoing operations as a result of the disposal transaction and (ii) the entity does not have any significant continuing involvement in the operations of the component after the disposal transaction. For property sales on or after May 1, 2014, a disposal of a component of an entity is required to be reported as discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. See Note 3. “Real Estate Investments” for a discussion of property sales and discontinued operations.Fair Value MeasurementsUnder GAAP, the Company is required to measure or disclose certain financial instrumentsliabilities) at fair value as of the acquisition date. Acquisition costs related to the business combinations were expensed as incurred.recurring basis. In addition,statement of cash flows explain the Companychange during the reporting period in the total of cash, cash equivalents, andrestricted cash or restricted cash equivalents. ASU 2016-18 is required to measure other financial instruments and balances at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair valueeffective for fiscal years beginning after December 15, 2017. Early adoption is defined as the price that would be received upon the sale of an asset or paid to transfer a liabilitypermitted, including adoption in an orderly transaction between market participants at the measurement date.interim period. ASU 2016-18 will require adoption using a retrospective transition method. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:11Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that areadoption will not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; andLevel 3: prices or valuation techniques where little or no market data is available for inputs that are significant to the fair value measurement.When available, the Company utilizes quoted market prices or other observable inputs (Level 2 inputs), such as interest rates or yield curves, from independent third-party sources to determine fair value and classify such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to use significant judgment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third-party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for an asset owned by it to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and external appraisals) and establishes a fair value by assigning weights to the various valuation sources. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets; or (ii) a present value technique that considers the future cash flows based on contractual obligations discounted by observed or estimated market rates of comparable liabilities. The use of contractual cash flows with regard to amount and timing significantly reduces the judgment applied in arriving at fair value.Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.The Company considers the following factors to be indicators of an inactive market: (1) there are few recent transactions; (2) price quotations are not based on current information; (3) price quotations vary substantially either over time or among market makers (for example, some brokered markets); (4) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability; (5) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with the Company’s estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability; (6) there is a wide bid-ask spread or significant increase in the bid-ask spread; (7) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities; and (8) little information is released publicly (for example, a principal-to-principal market).The Company considers the following factors to be indicators of non-orderly transactions: (1) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions; (2) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant; (3) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced); and (4) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.12Deferred Financing CostsDeferred financing costs represent commitment fees, loan fees, legal fees and other third-party costs associated with obtaining financing. These costs are amortized over the terms of the respective financing agreements using the straight-line method which approximates the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financings that do not close are expensed in the period in which it is determined that the financing will not close.The Company presents deferred financing costs, net of accumulated amortization, as a contra-liability that reduces the carrying amount of the associated note payable, rather than as a deferred asset. Deferred financing costs related to a line-of-credit arrangement are presented on the balance sheet as a deferred asset, regardless of whether there were any outstanding borrowings at period-end.Accounting for Investments in Unconsolidated Joint VenturesThe Company accounts for its current investments in unconsolidated joint ventures under the equity method of accounting. Under the equity method of accounting, the Company records its initial investment in a joint venture at cost and subsequently adjusts the cost for the Company’s share of the joint venture’s income or loss and cash contributions and distributions each period. See Note 4. “Investments in Unconsolidated Joint Ventures” for a discussion of the Company’s investments in joint ventures.The Company monitors its investments in unconsolidated joint ventures periodically for impairment. No impairment indicators were identified and no impairment losses were recorded during the three months ended March, 31, 2016.Income TaxesThe Company has elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (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). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company believes that it is organized and operates in such a manner as to qualify for treatment as a REIT. Even if the Company qualifies as a REIT, it may be subject to certain state or local income taxes, and to U.S. federal income and excise taxes on its undistributed income.The Company evaluates tax positions taken in the condensed consolidated financial statements under the interpretation for accounting for uncertainty in income taxes. As a result of this evaluation, the Company may recognize a tax benefit from an uncertain tax position only if it is “more-likely-than-not” that the tax position will be sustained on examination by taxing authorities.When necessary, deferred income taxes are recognized in certain taxable entities. Deferred income tax is generally a function of the period’s temporary differences (items that are treated differently for tax purposes than for financial reporting purposes). A valuation allowance for deferred income tax assets is provided if all or some portion of the deferred income tax asset may not be realized. Any increase or decrease in the valuation allowance is generally included in deferred income tax expense.The Company’s tax returns remain subject to examination and consequently, the taxability of the distributions is subject to change.2015, the Company estimated it could owe alternative minimum state/federal taxes totaling approximately $200,000 and this amount was accrued and included in expense as of December 31, 2015. During the three months ended March 31,October 2016, the Company finalized its calculation of taxes owed for 2015, which was less than the recorded accrual, resulting in a reversal of $111,000 and payment of $89,000. The amount of over accrual was immaterial.13Earnings Per ShareBasic earnings per share (“EPS”) is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested shares, if dilutive, is computed using the treasury stock method. The Company accounts for non-vested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) as participating securities, which are included in the computation of earnings per share pursuant to the two-class method. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS.ReclassificationsAssets sold or held for sale and related liabilities have been reclassified on the condensed consolidated balance sheets. For operating properties sold prior to May 1, 2014, the related operating results have been reclassified from continuing to discontinued operations on the condensed consolidated statements of operations. For operating properties sold on or after May 1, 2014, the related operating results remain in continuing operations on the condensed consolidated statements of operations unless the sold properties represent a strategic shift that have had (or will have) a major effect on the Company’s operations and financial results.As of March 31, 2016, in respect to the Company’s adoption of ASU No. 2015-03,Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs (“ASU No. 2015-03”), the Company reclassified $938,000 of deferred financing costs, net of accumulated amortization, as a contra-liability to notes payable on the condensed consolidated balance sheet, and $127,000 of deferred financing costs related to property held for sale, net of accumulated amortization, as a contra-liability to liabilities held for sale on the condensed consolidated balance sheet. ASU 2015-03 requires retrospective application, wherein the balance sheet of each period presented should be adjusted to reflect the effects of the new guidance. Accordingly, for comparative purposes herein, the Company reclassified the December 31, 2015 balance of $339,000 of deferred financing costs, net of accumulated amortization, as a contra-liability to notes payable in the condensed consolidated balance sheet, and $127,000 of deferred financing costs, net of accumulated amortization, as a contra-liability to liabilities held for sale on the condensed consolidated balance sheet.Newly Adopted Accounting PronouncementsThe Company adopted ASU No. 2015-03 on a retrospective basis, effective for the quarter ended March 31, 2016. The amendments in ASU No. 2015-03 require debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. ASU No. 2015-03 is limited to the presentation of debt issuance costs and does not affect the recognition and measurement of debt issuance costs. The adoption of ASU No. 2015-03 would change the presentation of debt issuance costs as the Company presents debt issuance costs as deferred financing costs, net on the accompanying condensed consolidated balance sheets. ASU No. 2015-03 does not address how debt issuance costs related to line-of-credit arrangements should be presented on the balance sheet or amortized. Given this absence of authoritative guidance within ASU 2015-03, the FASB issued ASU No. 2015-15,Interest – Imputation2016-17, Interest (Subtopic 835-30), Presentation and Subsequent Measurementa variable interest entity should treat indirect interest in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of Debt Issuance Costs Associatedthat variable interest entity. ASU 2016-17 is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted, including adoption in an interim period. ASU 2016-17 will require adoption using the retrospective transition method beginning with Line-of-Credit Arrangements, Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting,the fiscal year in which clarifies that the SEC Staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Effectiveamendments in ASU No. 2015-02 were initially applied. The Company adopted ASU 2016-17 beginning January 2016, the Company presents deferred financing costs, net, as a contra-liability in periods when there is an associated debt liability on the balance sheet, rather than as a deferred asset. If no associated debt liability is recorded on the balance sheet, deferred financing costs will be presented as a deferred asset.1, 2017. The adoption of ASU 2015-03 did not have a material impact on the Company’s consolidated financial statements.The Company adopted ASU No. 2015-16, (Business Combinations (Topic 805),Simplifying the Accounting for Measurement-Period Adjustment(“ASU 2015-16”), effective for the quarter ended March 31, 2016. The amendments in ASU 2015-16 require an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Further, the acquirer is required to record, in the financial statements for the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Entities must also present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current period earnings by the line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The guidance should be applied prospectively and early adoption is permitted.The adoption of ASU 2015-162016-17 had no impact on the Company’s condensed consolidated financial statements.14Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09,Revenue from Contracts with Customers(“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. In August 2015, the FASB issued ASU No. 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which effectively defers the adoption of ASU 2014-09 to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2016. Companies may apply either a full retrospective or a modified retrospective approach to adopt this guidance.In March 2016, the FASB issued ASU No. 2016-08,Revenue from Contracts with Customers2016-15, Statement of Cash Flows (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amended the principal versus agent guidance in the new revenue standard230) Classification of Certain Cash Receipts and is intended to result in more consistent application and reduce the cost and complexity of applying the new standard. Additionally, in April 2016, the FASB issued ASU No. 2016-10,Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and LicensingCash Payments (“ASU 2016-10”), which amended the guidance to clarify accounting for licenses of intellectual property and to clarify the guidance on performance obligations.The Company is currently evaluating the transition methods and the impact of the guidance on its condensed consolidated financial statements.In August 2014, the FASB issued ASU No. 2014-15,Presentation of Financial Statements – Going Concern(“ASU 2014-15”2016-15”). ASU 2014-15 provides guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new guidance requires that management evaluate for each annual and interim reporting period whether conditions exist that give rise to substantial doubt about the entity’s ability to continue as a going concern within one year from the financial statement issuance date, and if so, provide related disclosures. Disclosures are only required if conditions give rise to substantial doubt, whether or not the substantial doubt is alleviated by management’s plans. No disclosures are required2016-15 addresses eight specific to going concern uncertainties if an assessment of the conditions does not give rise to substantial doubt. Substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the financial statement issuance date. The guidance is effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not anticipate that the adoption of this guidance will have a material impact on the Company's condensed consolidated financial statements.In January 2016, the FASB issued ASU No. 2016-01,Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities(“ASU 2016-01”). ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordancecash flow issues with the fair value option for financial instruments; requires separate presentationobjective of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securitiesreducing diversity in combination with the entity’s other deferred tax assets.practice. ASU 2016-012016-15 is effective for fiscal years beginning after December 15, 2017, and2017. Early adoption is permitted, including adoption in an interim periods within thoseperiod. ASU 2016-15 will require adoption on a retrospective basis. The Company is currently evaluating the impact the application of ASU 2016-15 will have on its condensed consolidated financial statements.years.years beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Adjustments resulting from adopting ASU 2016-13 shall be applied through a cumulative-effect adjustment to retained earnings. The Company is currently evaluating the impact of the guidance on its condensed consolidated financial statements.(“(“ASU 2016-02”).ASU 2016-02 requires entities to recognize lease assets and lease liabilities on the condensed consolidated balance sheet and disclosing key information about leasing arrangements. The guidance retains a distinction between finance leases and operating leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. The accounting applied by a lessor is largely unchanged from that applied under the previous guidance. The amendments in this guidance are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. The Company is currently evaluating the impact of the guidance on its condensed consolidated financial statements.MarchMay 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with2016-07,Investments – Equity Method2016-08, ASU No. 2016-09 and Joint Ventures (Topic 323): SimplifyingASU No. 2016-12, which provide interpretive clarifications on the Transition tonew guidance in Topic 606. As the Equity MethodCompany’s revenues are primarily generated through leasing arrangements, which are scoped out of Accounting (“ASU 2016-07”). The purpose ofthis standard, the amendment is to eliminate the requirement that when an investment uses the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by step basis as if the equity method had been in effect during all previous periods that the investment had been held. For public entities, the amendments in ASU 2016-07 are effective for interim and annual reporting periods beginning after December 15, 2016. The Company does not anticipate thatexpect the adoption of this guidance willASU 2014-09 to have ana significant impact on the Company's condensed consolidatedits financial statements.15diddrew down $4.0 million on its credit facility with KeyBank to fund this acquisition.have any propertyaffiliated with the Company or the Advisor. Silver Lake is comprised of two boutique retail buildings totaling approximately 10,497 square feet of retail space. The aggregate purchase price of Silver Lake was approximately $13.3 million subject to customary closing costs and proration adjustments. The Company drew down $11.0 million on its credit facility with KeyBank to fund this acquisition.forand allocated the total cash consideration to the individual assets and liabilities acquired on a relative fair value basis.20162017, the Company incurred $0.3 million of acquisition-related costs. These costs were capitalized and 2015. For property acquisitions of the Company’s consolidated variable interests, referallocated to Note. 5 “Variable Interest Entities.”2016land and buildings acquired on a relative fair value basis.The Company did not sell any properties for the three months ended March 31, 2016.2015 Sale of PropertiesMarch 11, 2015,January 6, 2017, the Company soldconsummated the following three propertiesdisposition of Pinehurst Square East, located in Bismarck, North Dakota, for the aggregate grossa sales price of $53.6 million:Property Location Acquisition Date Gross
Sales Price Original
Purchase Price(1) Osceola Village Kissimmee, Florida 10/11/2011 $ 22,000,000 $ 21,800,000 (2) Constitution Trail Normal, Illinois 10/21/2011 23,100,000 18,000,000 Aurora Commons Aurora, Ohio 3/20/2012 8,500,000 7,000,000 Total $ 53,600,000 $ 46,800,000 (1)The original purchase price amounts do not include acquisition fees.(2)The original purchase price for Osceola Village included an additional pad which was sold for $875,000 prior to this transaction.three propertiesproperty did not represent a strategic shift that will have a major effect on the Company’s operations and financial results and its results of operations were not reported as discontinued operations on the Company’s condensed consolidated financial statements. The disposition of Pinehurst Square East resulted in a result,gain of $6.1 million, which was not included in discontinuedon the Company’s condensed consolidated statement of operations. The Company’s condensed consolidated statements of operations include net operating income of approximately $8 thousand and $0.2 million for the three months ended March 31, 2017 and 2016, respectively, related to Pinehurst Square East.2015.2017 and 2016, adjusted to give effect to the above sale transaction as if it had been completed at the beginning of 2017 and 2016, respectively. The Company’s condensed consolidated statementpro forma financial information is presented for information purposes only, and may not be indicative of what actual results of operations includes net operating losseswould have been had the transaction occurred at the beginning of $289,000 for the three months ended March 31, 2015, relating2017 and 2016, respectively, nor does it purport to therepresent results of operations for the three sold properties.The sale of Osceola Village, Constitution Trail and Aurora Commons (the “SGO Properties”) was completedfuture periods (amounts in connection with the formation of the SGO Joint Venture. The three properties were sold to the SGO Joint Venture, and the closing of the sale was conditioned on the Company receiving a 19% membership interest in the SGO Joint Venture. In exchange for this 19% membership interest, the Company contributed $4.5 million to the SGO Joint Venture, which amount was credited against the Company’s proceeds from the sale of the three properties to the SGO Joint Venture. Of the net sales proceeds from the sale of the aforementioned properties, $36.4 million was used by the Company to retire the debt associated with the sold properties (Pro Forma) Three Months Ended March 31, 2017 2016 Rental and reimbursement revenues $ 2,591 $ 2,216 Net income 6,170 5,750 Net income attributable to common stockholders 5,940 5,533 Net income attributable to common shares - basic and diluted $ 0.54 $ 0.50 2016 and December 31, 2015, Bloomingdale Hills,2017, Woodland West Marketplace, located in Riverside, Florida,Arlington, Texas, was classified as held for sale in the condensed consolidated balance sheet. Since the sale of thethis property does not represent a strategic shift that will have a major effect on the Company’s operations and financial results, itsthe results of operations wasof this property were not reported as discontinued operations on the Company’s financial statements. See Note. 14 “Subsequent Events”On April 17, 2017, the Company consummated the disposition of Woodland West Marketplace for a sales price of approximately $14.6 million and used the net proceeds from the sale to repay a portion of Bloomingdale Hills after quarter-end.the outstanding balance on its credit facility with KeyBank. The Company’s condensed consolidated statements of operations include net operating income of $83,000approximately $0.1 million for the three months ended March 31, 2017, and net operating loss of $15,000$32 thousand for the three months ended March 31, 2016, and 2015, respectively, related to the assets held for sale.16at March 31, 2016 and December 31, 2015 wereare as follows: March 31, 2016 December 31, 2015 ASSETS Investments in real estate Land $ 4,718,000 $ 4,718,000 Building and improvements 4,697,000 4,697,000 Tenant improvements 499,000 499,000 9,914,000 9,914,000 Accumulated depreciation (891,000 ) (891,000 ) Investments in real estate, net 9,023,000 9,023,000 Lease intangibles, net 694,000 694,000 Tenant receivables, net 35,000 36,000 Prepaid expenses - 16,000 Assets held for sale $ 9,752,000 $ 9,769,000 LIABILITIES Notes payable, net(1) 5,218,000 5,268,000 Below market lease intangibles, net 1,625,000 1,625,000 Other liabilities 16,000 16,000 Liabilities related to assets held for sale $ 6,859,000 $ 6,909,000 (1)Includes $127,000 reclassification of deferred financing costs, net of accumulated amortization, as a contra-liability to notes payable, as of March 31, 2016 and December 31, 2015. March 31, December 31, 2017 2016 ASSETS Investments in real estate Land $ 2,449 $ 5,718 Building and improvements 10,132 20,261 Tenant improvements 668 1,283 13,249 27,262 Accumulated depreciation (2,274 ) (4,257 ) Investments in real estate, net 10,975 23,005 Tenant receivables, net 89 135 Lease intangibles, net 633 1,017 Assets held for sale $ 11,697 $ 24,157 LIABILITIES Notes payable $ 13,731 $ 21,783 Below-market lease intangibles, net 385 399 Liabilities related to assets held for sale $ 14,116 $ 22,182 wereare being presented at their carrying valuesvalue, which the Company believedbelieves to be lower than their estimated fair value less costs to sell.20162017, and December 31, 2015: Ownership Interest Investment at Joint Venture Date of
Investment March 31,
2016 December 31,
2015 March 31,
2016 December 31,
2015 SGO Retail Acquisitions Venture, LLC 3/11/2015 19 % 19 % $ 3,967,000 $ 4,098,000 SGO MN Retail Acquisitions Venture, LLC 9/30/2015 10 % 10 % 2,678,000 2,804,000 Total $ 6,645,000 $ 6,902,000 Ownership Interest Investment Joint Venture Date of Investment March 31,
2017 December 31,
2016 March 31,
2017 December 31,
2016SGO Retail Acquisitions Venture, LLC 3/11/2015 19 % 19 % $ 1,081 $ 3,052 SGO MN Retail Acquisitions Venture, LLC 9/30/2015 10 % 10 % 1,714 1,709 Total $ 2,795 $ 4,761 17Venture.Venture (both as defined below). The Company has consolidated the accounts of these variable interest entities. For further information, refer to Note 2. “Summary of Significant Accounting Policies,” under “Principles of Consolidation and Basis of Presentation.”thea joint venture (the” Gelson’s Joint VentureVenture”) with Sunset & Gardner LA, LLC (“S&G LA” and, together with the Company, the “Gelson’s Members”), a subsidiary of Cadence Capital Investments, LLC (“Cadence”). Cadence is a real estate development and investment firm focused on commercial properties. They offer high-quality, market-driven developments, and have expertise in market planning and site selection build to suit and small center developments, redevelopment and repositioninghas agreed to contributecontributed cash in an amount up to $7$7.0 million in initial capital contributions and $700,000has agreed to contribute $0.7 million in subsequent capital contributions to the Gelson’s Joint Venture. In May 2016, the Company made an additional capital contribution of $0.2 million to the Gelson’s Joint Venture. In January 2017, the Company made another capital contribution of $0.8 million to the Gelson’s Joint Venture. S&G LA contributed its rights to acquire the real property, its interest under a 20 year lease with Gelson’s Markets (the “Gelson’s Lease”) and agreed to provide certain management and development services.$10,700,000,$10.7 million, to purchase property located at the corner of Sunset Boulevard and Gardner in Hollywood, California for a build-to-suit grocery store for Gelson’s PropertyMarkets (the “Gelson’s Property”) from a third party seller, for a total purchase price of $12,950,000.approximately $13.0 million. The Gelson’s Joint Venture intends to proceed with obtaining all required governmental approvals and entitlements to replace the existing improvements on the property with a build to suitbuild-to-suit grocery store for Gelson’s Markets with an expected size of approximately 38,000 square feet. Gelson’s Markets was founded in 1951 and is recognized as one of the nation’s premier supermarket chains. Gelson’s Markets currently has 1824 locations throughout Southern California.will managemanages and conductconducts the day-to-day operations and affairs of the Gelson’s Joint Venture, subject to certain major decisions set forth in the Gelson’s Joint Venture Agreement that require the consent of all the Gelson’s Members. Income, losses and distributions willare generally be allocated based on the Gelson’s Members’ respective capital and profits interests. Additionally, in certain circumstances described in the Gelson’s Joint Venture Agreement, the Company may be required to make additional capital contributions to the Joint Venture, in proportion to the Gelson’s Members’ respective ownership interests. Until the Company has received back its capital contribution and specified preferred returns, all distributions go to the Company; thereafter, the Gelson’s Joint Venture will distribute the profits 50% to the Company and 50% to S&G LA.wholly ownedwholly-owned subsidiaries, entered into the Limited Liability Company Agreement of 3032 Wilshire Investors, LLC (the “Wilshire Joint Venture Agreement”) to form the Wilshirea joint venture (the “Wilshire Joint VentureVenture”) with 3032 Wilshire SM, LLC, a subsidiary of Cadence (together with the Company, the “Wilshire Members”).$500,000$0.5 million and $100,000,$0.1 million, respectively, toward the acquisition of certain property located at 3032 Wilshire Boulevard and 1210 Berkeley Street in Santa Monica, California (the “Wilshire Property”). The Wilshire Joint Venture is in the process of redeveloping and repositioning, and intends to re-lease the Wilshire Property. On March 7, 2016, the Company contributed $5,700,000$5.7 million to the Wilshire Joint Venture. In May 2016, the Company made an additional capital contribution of $0.3 million to the Wilshire Joint Venture. In January 2017 and February 2017, the Company made two additional contributions of $0.3 million and $0.6 million, respectively, to the Wilshire Joint Venture. The Wilshire Joint Venture Agreement provides for the ownership and operation of certain real property by the Wilshire Joint Venture, in which the Company owns a 100% capital interest and a 50% profits interest.$8,500,000,$8.5 million, to acquire the Wilshire Property from a third partythird-party seller, for a total purchase price of $13,500,000.$13.5 million. The Wilshire Joint Venture is repositioning, and intends to reposition and re-lease the existing improvements on the property.18will managemanages and conductconducts the day-to-day operations and affairs of the Wilshire Joint Venture, subject to certain major decisions set forth in the Wilshire Joint Venture Agreement that require the consent of all the Wilshire Members. Income, losses and distributions willare generally be allocated based on the Wilshire Members’ respective capital and profits interests. Additionally, in certain circumstances described in the Wilshire Joint Venture Agreement, the Company may be required to make additional capital contributions to the Wilshire Joint Venture, in proportion to the Wilshire Members’ respective ownership interests. Until the Company has received back its capital contribution and specified preferred returns, all distributions go to the Company; thereafter, the Wilshire Joint Venture will distribute the profits 50% to the Company and 50% to 3032 Wilshire SM.2016: March 31, 2016 ASSETS Properties under development and development costs: Land $ 25,851,000 Building 613,000 Development costs 901,000 Properties under development and development costs 27,365,000 Loan reserves 3,458,000 Cash and cash equivalents 67,000 Prepaid expenses and deposits 36,000 Accounts receivable 11,000 TOTAL ASSETS (1) $ 30,937,000 LIABILITIES Notes payable, net (2) $ 18,573,000 Accrued liabilities 331,000 Security deposits 40,000 TOTAL LIABILITIES $ 18,944,000 March 31, 2017 December 31, 2016 ASSETS Properties under development and development costs: Land $ 25,851 $ 25,851 Buildings 597 601 Development costs 5,645 4,377 Properties under development and development costs 32,093 30,829 Restricted cash 1,956 1,666 Cash and cash equivalents 317 334 Prepaid expenses and other assets, net 19 14 Tenant receivables, net — 1 $ 34,385 $ 32,844 LIABILITIES $ 19,106 $ 19,103 Accounts payable and accrued expenses 432 806 Amounts due to affiliates 9 9 Other liabilities 27 27 TOTAL LIABILITIES $ 19,574 $ 19,945 (1) The assets of the Gelson’s Joint Venture and Wilshire Joint Venture can be used only to settle obligations of the respective consolidated joint ventures. (2) Includes $627,000As of both March 31, 2017 and December 31, 2016, includes reclassification of approximately $0.1 million, respectively, of deferred financing costs, net, as a contra-liability. The creditors of the consolidated joint ventures do not have recourse to the general credit of the Company. The notes payable of the consolidated joint ventures are not guaranteed by the Company.2016,2017, the leases at the Company’s properties have remaining terms (excluding options to extend) of up to 2019 years with a weighted-average remaining term (excluding options to extend) of 5approximately five years. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying condensed consolidated balance sheets and totaled $171,000 and $175,000approximately $0.3 million as of March 31, 20162017 and $0.2 million as of December 31, 2015, respectively.
2016.192016,2017, the future minimum rental income from the Company’s properties under non-cancelable operating leases, excluding properties held for sale, was as follows:April 1 through remainder of 2016 $ 5,374,000 2017 6,346,000 2018 5,266,000 2019 4,664,000 2020 3,887,000 Thereafter 7,739,000 Total $ 33,276,000 Remainder of 2017 $ 4,575 2018 5,669 2019 5,384 2020 4,944 2021 4,184 Thereafter 14,310 Total $ 39,066 ACQUIRED LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES,20162017 and December 31, 2015,2016, the Company’s acquired lease intangibles and below-market lease liabilities were as follows: Lease Intangibles Below-Market Lease Liabilities March 31, 2016 December 31, 2015 March 31, 2016 December 31, 2015 Cost $ 7,775,000 $ 8,089,000 $ (4,346,000 ) $ (4,463,000 ) Accumulated amortization (3,694,000 ) (3,799,000 ) 1,115,000 1,160,000 Total $ 4,081,000 $ 4,290,000 $ (3,231,000 ) $ (3,303,000 ) Lease Intangibles Below-Market Lease Liabilities March 31,
2017 December 31,
2016 March 31,
2017 December 31,
2016Cost $ 8,154 $ 7,000 $ (3,953 ) $ (3,904 ) Accumulated amortization (3,538 ) (3,175 ) 892 855 Total $ 4,616 $ 3,825 $ (3,061 ) $ (3,049 ) 20162017 and 2015,2016, were as follows: Lease Intangibles Below-Market Lease Liabilities Three Months Ended March 31, Three Months Ended March 31, 2016 2015 2016 2015 Amortization $ (251,000 ) $ (593,000 ) $ 72,000 $ 117,000 Lease Intangibles Below-Market Lease Liabilities Three Months Ended
March 31, Three Months Ended
March 31, 2017 2016 2017 2016 Amortization $ (371 ) $ (251 ) $ 79 $ 72 20162017 and December 31, 2015,2016, the Company’s notes payable, net, excluding long-term debt associatedcredit facility balances with assetsKeyBank which arehave been classified as held for sale, consisted of the following: Principal Balance Interest Rates At March 31, 2016 December 31, 2015 March 31, 2016 KeyBank credit facility(1) $ 6,000,000 $ - 2.94% Secured term loans 24,595,000 24,701,000 5.10% Mortgage loans 9,652,000 9,690,000 5.63% Mortgage loans secured by properties under development(2) 19,200,000 - 9.5% - 10.0% Deferred financing costs, net(3) (938,000 ) (339,000 ) n/a $ 58,509,000 $ 34,052,000 Principal Balance Interest Rates At March 31, 2017 December 31, 2016 March 31, 2017 $ 18,668 $ 11,150 1.92 % Secured term loans 24,163 24,277 5.10 % 19,200 19,200 9.5% - 10.0% (297 ) (323 ) n/a $ 61,734 $ 54,304 (1) The KeyBank credit facility is a revolving credit facility with an initial maximum aggregate commitment of $30,000,000$30.0 million (the “Facility Amount”). SubjectEffective February 15, 2017, the KeyBank credit facility was refinanced to certain terms and conditions contained inincrease the loan documents,maximum aggregate commitment under the Company may request that the Facility Amount be increasedcredit facility from $30.0 million to a maximum of $60,000,000.$60.0 million. The KeyBank credit facility matures on August 4, 2017.February 15, 2020. Each loan made pursuant to the Amended and Restated Credit FacilityKey Bank credit facility will be either a LIBOR rate loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay KeyBank an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum, if the usage under the KeyBank credit facility is less than or equal to 50% of the Facility Amount, and 0.20% per annum if the usage under the Amended and Restated Credit Facility is greater than 50% of the Facility Amount. The Company is providing a guaranty of all of its obligations under the KeyBank credit facility and all other loan documents in connection with the KeyBank credit facility.documents. As of March 31, 2016, the KeyBank credit facility was secured by Pinehurst Square and Topaz Marketplace. For information regarding recent draws under the Amended and Restated Credit Facility, see “– Recent Financing Transactions - KeyBank Credit Facility.”20(2) Comprised of $10,700,000$10.7 million and $8,500,000$8.5 million associated with the Company’s investment in the Gelson’s Joint Venture and the Wilshire Joint Venture, respectively.(3) Reclassification of deferred financing costs, net of accumulated depreciation,amortization, as a contra-liability in accordance with ASU 2015-03.contra-liability.20162017 and 2015,2016, the Company incurred and expensed $600,000approximately $0.6 million and $1,694,000,$0.6 million, respectively, of interest costs, which included the amortization and write-off of deferred financing costs of $121,000 and $162,000, respectively.approximately $0.1 million for each period. Also during the three months ended March 31, 2017 and 2016, the Company incurred and capitalized $328,000approximately $0.9 million and $0.3 million, respectively, of interest expense related to the variable interest entities, which included the amortization of deferred financing costs of $86,000.20162017 and December 31, 2015,2016, interest expense payable was $337,000 and $199,000, respectively,approximately $0.4 million, including an amount related to the variable interest entities of $149,000approximately $0.2 million as of March 31, 2017 and December 31, 2016.2016: Amount April 1 through remainder of 2016 $ 434,000 2017 35,185,000 2018 473,000 2019 23,355,000 Total(1) $ 59,447,000 Remainder of 2017 $ 19,535 2018 473 2019 23,355 2020 18,668 $ 62,031 (1) Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of $938,000$0.3 million deferred financing costs, net. under the Amended and Restated Credit Facility and used the proceeds to invest in the Wilshire Joint Venture.$8,500,000$8.5 million (the “Wilshire Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and 3032 Wilshire Investors, LLC (as the borrower). The Wilshire Loan bears interest at a rate of 10.0% per annum, payable monthly, commencing on April 1, 2016. The loan matureswas scheduled to mature on March 7, 2017, with an option for antwo additional six-month period,periods, subject to certain conditions as stated in the loan agreement. All conditions to extensions were$10,700,000$10.7 million (the “Gelson’s Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and Sunset and Gardner Investors, LLC (as the borrower). The Gelson’s Loan bears interest at a rate of 9.50%9.5% per annum, payable monthly, commencing on April 1, 2016. The loan matureswas scheduled to mature on January 27, 2017, with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. Those conditions were not met, but the Company negotiated a six month extension of the term on January 27, 2017. The new maturity date is July 27, 2017. The loan is secured by, among other things, a lien on the Gelson’s development project and other joint venture collateral as defined in the loan agreement.21 reasonably approximate the fair values for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, and amounts due to affiliates reasonably approximate their fair values due to their short-term nature, except for the Company’s notes payable, which are disclosed below.related to continuing operations as of March 31, 20162017 and December 31, 2015:March 31, 2016 Carrying Value (1) Fair Value(2) Notes Payable $ 58,509,000 $ 59,163,000 December 31, 2015 Carrying Value(1) Fair Value(2) Notes Payable $ 34,052,000 $ 34,760,000 March 31,
2017 December 31,
2016 March 31,
2017 December 31,
2016Notes payable, net $ 61,734 $ 54,304 $ 61,906 $ 54,781 (1) The carrying value of the Company’s notes payable represents the outstanding principal as of March 31, 20162017, and December 31, 2015.2016. The carrying values and fair values of the notes payable include the reclassification of deferred financing costs, net, of $938,000 and $339,000,approximately $0.3 million as a contra-liability, as of both March 31, 20162017 and December 31, 2015, respectively.2016.(2) The estimated fair value of the notes payable is based upon the indicative market prices of the Company’s notes payable based on prevailing market interest rates. 10. EQUITYCommon StockUnderArticlesongoing evaluation of Amendment and Restatement (the “Charter”),the Company’s real estate portfolio, the Company hasestimates the authority to issue 400,000,000 shares of common stock. All shares of common stock have a parfair value of $0.01 per share.On February 7, 2013, the Company terminated the Offering and ceased offering its securities. The Company sold 10,688,940 shares of common stockinvestments in its primary offering for gross offering proceeds of $104,700,000, sold 391,182 shares of common stock under the DRIP for gross offering proceeds of $3,600,000, granted 50,000 shares of restricted stock and issued 273,729 common shares to pay a portionreal estate by obtaining outside independent appraisals on all of the Special Distribution. Cumulatively, throughproperties. The appraised values are compared with the carrying values of its real estate portfolio to determine if there are indications of impairment.has redeemed 396,624 shares sold in the Offering for $3,197,000.Common Units and Special UnitsThe Company’s prior advisor, TNP Strategic Retail Advisor, LLC, invested $1,000 in the OP in exchange for Common Unitsdid not record any impairment losses.“Amended“SRP”). The SRP was subsequently amended on August 7, 2015 and Restated SRP”). UnderAugust 10, 2016.Amended and Restatedboard of directors approved, pursuant to Section 3(a) of SRP, onlyan additional $0.5 million of funds available for the redemption of shares submitted for repurchase in connection with the death or “qualifying disability” (as defined in the Amended and Restated SRP) of a stockholder are eligible for repurchase by the Company. stockholder. number of shares to be redeemed is limited to the lesser of (i) a total of $2,000,000 for redemptions sought upon a stockholder’s death and a total of $1,000,000 for redemptions sought upon a stockholder’s qualifying disability, and (ii) 5% of the number of shares of the Company’s common stock outstanding during the prior calendar year. Share repurchases pursuant to thefollowing table summarizes share redemption program are made at the sole discretion of the Company. The Company reserves the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the Amended and Restated SRP.The redemption price for shares that are redeemed is 100% of the Company’s most recent estimated net asset value per share as of the applicable redemption date. A redemption request must be made within one year after the stockholder’s death or disability, unless such death or disability occurred between January 15, 2013 and April 1, 2015, when the share redemption program was suspended. Any stockholder whose death or disability occurred during this time period must submit their redemption request within one year after the adoption of the Amended and Restated SRP.23The Amended and Restated SRP provides that any request to redeem less than $5,000 worth of shares will be treated as a request to redeem all of the stockholder’s shares. If the Company cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If the Company does not completely satisfy a redemption request in one quarter, it will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. The Company may increase or decrease the amount of funding available for redemptions under the Amended and Restated SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter.The other material terms of the Amended and Restated SRP are consistent with the terms of the share redemption program that was in effect immediately prior to January 15, 2013.On August 7, 2015, the board of directors approved the amendment and restatement of the Amended and Restated SRP (the “Second Amended and Restated SRP” and, together with the Amended and Restated SRP, the “SRP”). Under the Second Amended and Restated SRP, the redemption date with respect to third quarter 2015 redemptions was November 10, 2015 or the next practicable date as the Chief Executive Officer determined so that redemptions with respect to the third quarter of 2015 were delayed until after the payment date for the Special Distribution. With this revision, stockholders who were to have 100% of their shares redeemed were not left holding a small number of shares from the Special Distribution after the date of the redemption of their shares. The other material terms of the Second Amended and Restated SRP are consistent with the terms of the Amended and Restated SRP. During the three months ended March 31, 2016, the Company redeemed 30,721 shares of common stock for $202,000 under the SRP. The Company did not redeem any sharesactivity during the three months ended March 31, 2015. Three Months Ended
March 31, 2017 2016 Shares of common stock redeemed 31,875 30,721 Purchase price $ 203 $ 202 Amended and Restated Credit Facility,amended Key Bank credit facility, the Company may pay distributions to its investors so long as the total amount paid does not exceed 100% of the cumulative Adjusted Funds From Operations plus up to an additional $2.0 million of the Company’s net proceeds from property dispositions, as defined in the amended KeyBank credit facility; provided, however, that the Company is not restricted from making any distributions necessary in order to maintain its status as a REIT. The Company’s board of directors evaluates the Company’s ability to make quarterly distributions based on the Company’s operational cash needs.year ended December 31, 2015. Distributions to its common stockholders and common unit holders for the three months ended March 31, 2016 were declared subsequent to March2017 and the year ended December 31, 2016 as described(amounts in Note 14. “Subsequent Events.” Distribution
Record
Date Distribution
Payable
Date Distribution Per
Share of
Common Stock /
Common Unit Total Common
Stockholders
Distribution Total Common
Unit Holders
Distribution Total
Distribution First Quarter 2015 3/31/2015 4/30/2015 $ 0.06 $ 658,000 $ 26,000 $ 684,000 Second Quarter 2015 6/30/2015 7/30/2015 $ 0.06 654,000 26,000 680,000 Third Quarter 2015 9/30/2015 10/31/2015 $ 0.06 654,000 26,000 680,000 Fourth Quarter 2015 12/31/2015 1/30/2016 $ 0.06 661,000 25,000 686,000 Total $ 2,627,000 $ 103,000 $ 2,730,000
thousands, except per share amounts):24 First Quarter 2017 3/31/2017 4/28/2017 $ 0.06 $ 655 $ 25 $ 680 First Quarter 2016 3/31/2016 4/29/2016 $ 0.06 $ 660 $ 26 $ 686 Second Quarter 2016 7/7/2016 7/29/2016 0.06 661 25 686 Third Quarter 2016 9/30/2016 10/31/2016 0.06 659 25 684 Fourth Quarter 2016 12/30/2016 1/31/2017 0.06 656 25 681 Total $ 2,636 $ 101 $ 2,737 iswas no unvested stock as of March 31, 2016.2017. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS.2015: For the Three Months Ended March 31, 2016 2015 Numerator - basic and diluted Net income (loss) from continuing operations $ (65,000 ) $ 3,122,000 Net income (loss) attributable to non-controlling interests (2,000 ) 261,000 Net income (loss) attributable to common shares $ (63,000 ) $ 2,861,000 Denominator - basic and diluted Basic weighted average common shares 11,037,189 10,969,714 Effect of dilutive securities - - Common Units(1) - - Diluted weighted average common shares 11,037,189 10,969,714 Earnings (loss) per common share - basic and diluted Net earnings (loss) attributable to common shares $ (0.01 ) $ 0.26 Three Months Ended March 31, 2017 2016 Numerator - basic and diluted Net income (loss) $ 6,179 $ (65 ) Net income (loss) attributable to non-controlling interests 230 (2 ) Net income (loss) attributable to common shares $ 5,949 $ (63 ) Denominator - basic and diluted Basic weighted average common shares 10,937,451 11,037,189 — — Diluted weighted average common shares 10,937,451 11,037,189 Earnings (loss) per common share - basic and diluted Net earnings (loss) attributable to common shares $ 0.54 $ (0.01 ) (1) The effect of 431,896422,308 convertible Common Units pursuant to the redemption rights outlined in the Company’s registration statement on Form S-11 have not been included as they would not be dilutive.3, 2015,10, 2016, the Advisory Agreement with the Advisor was renewed for an additional twelve months, beginning on August 10, 2015.2016. The Advisor manages the Company’s business as the Company’s external advisor pursuant to the Advisory Agreement. Pursuant to the Advisory Agreement, the Company will pay the Advisor specified fees for services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services.On July 9, 2013, SRT Manager, an affiliate of Advisor, acquired an initial 12% membership interest in SRT Holdings, the Company’s wholly-owned subsidiary. Following the Constitution Transaction on August 4, 2014 (see Note 8. “Notes Payable”), SRT Manager’s membership interests in SRT Holdings decreased to 8.33%. In March 2015, SRT Holdings paid SRT Manager $2,102,000 in full redemption of SRT Manager’s 8.33% membership interest in SRT Holdings.On January 24, 2014, GPP purchased 22,222 and 111,111 shares of the Company from TNP LLC and Sharon D. Thompson, respectively, for $8.00 per share. The share purchase transaction was part of a larger settlement of issues relating to the 2013 annual meeting proxy contest and was not considered an arm’s length transaction. Therefore, the share purchase price may not reflect a market price or value for such securities (see Note 10. “Equity”).seerefer to Note 4. “Investments in Unconsolidated Joint Ventures.”presented:Advisorpresented (amounts in thousands): Incurred Payable as of Three Months Ended March 31, March 31, December 31, Expensed 2017 2016 2017 2016 Acquisition fees $ — $ 2 $ — $ 80 Asset management fees 230 217 79 — Reimbursement of operating expenses 42 50 4 — Property management fees 113 124 31 2 Disposition fees 244 — — 29 Total $ 629 $ 393 $ 114 $ 111 Capitalized Acquisition fees $ 194 $ 273 $ — $ — Leasing fees 57 10 — — Legal leasing fees 27 12 — — Construction management fees — 1 — — Financing coordination fees 707 — — — Total $ 985 $ 296 $ — $ — Incurred Payable as of Three Months Ended March 31, March 31, December 31, Expensed 2016 2015 2016 2015 Acquisition fees $ 2,000 $ - $ - $ - Asset management fees 217,000 320,000 - 19,000 Reimbursement of operating expenses 50,000 - 8,000 27,000 Property management fees 124,000 201,000 37,000 3,000 Disposition fees - 525,000 - - Guaranty fees(1) - 1,000 - - Total $ 393,000 $ 1,047,000 $ 45,000 $ 49,000 Capitalized Acquisition fees $ 273,000 $ - $ 139,000 $ - Leasing fees 10,000 27,000 - - Legal leasing fees 12,000 38,000 - - Construction management fees 1,000 5,000 - - Total $ 296,000 $ 70,000 $ 139,000 $ - (1)Guaranty fees were paid by the Company to its prior advisor, TNP Strategic Retail Advisor, LLC.Acquisition Fee1.0%1% of (1) the cost of each investment acquired directly by the Company or (2) the Company’s allocable cost of an investment acquired pursuant to a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments. An acquisition fee is capitalized by the Company when the related transaction does not qualityqualify as a business combination.
combination; otherwise an acquisition fee is expensed.26Fee1.0%1% of the amount funded by the Company to acquire or originate real estate-related loans, including any acquisition expenses related to such investment and any debt used to fund the acquisition or origination of the real estate-related loans. The Company will not pay an origination fee to the Advisor with respect to any transaction pursuant to which it is required to pay the Advisor an acquisition fee.Feeinvestments;investments, or (2) the refinancing of any financing obtained or assumed, directly or indirectly, by the Company or the OP.Feeinvestments;investments, or (2) the fair market value of the Company’s investments (before non-cash reserves and deprecation)depreciation) if the board of directors has authorized the estimate of a fair market value of the Company’s investments; provided, however, that the asset management fee will not be less than $250,000 in the aggregate during any one calendar year.Charter)Company’s Articles of Amendment and Restatement (the “Charter”)); or (2) 25% of its net income (as defined in the Charter) determined without reduction for any additions to depreciation, bad debts or other similar non-cash expenses and excluding any gain from the sale of the Company’s assets for that period (the “2%/25% Guideline”). The Advisor is required to reimburse the Company quarterly for any amounts by which total operating expenses exceed the 2%/25% Guideline in the previous expense year that the independent directors do not approve. The Company will not reimburse the Advisor for any of its personnel costs or other overhead costs except for customary reimbursements for personnel costs under property management agreements entered into between the OP and the Advisor or its affiliates. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of the 2%/25% Guideline if a majority of the independent directors determine that such excess expenses are justified based on unusual and non-recurring factors.20162017 and 2015,2016, the Company’s total operating expenses (as defined in the Charter) did not exceed the 2%/25% Guideline.Feehave been renewed for an additional twelve months, beginningare subject to review and renewal on August 10, 2015.Fee27Guaranty FeesIn connection with certain acquisition financings, the Company’s former chairman and former co-chief executive officer and/or TNP LLC had executed certain guaranty agreements to the respective lenders. As consideration for such guaranty, the Company entered into a reimbursement and fee agreement to provide for an upfront payment and an annual guaranty fee payment for the duration of the guarantee period. In March 2015, the Company retired the outstanding notes payable related to Osceola Village resulting in the expiration of the remaining guaranty agreement.FeeFeeFeeTheFor the three months ended March 31, 2017 and 2016, the SGO Joint Venture recognized related party fees and reimbursements of $0.1 million and $0.2 million, respectively. For both the three months ended March 31, 2017 and 2016, the SGO MN Joint Venture recognized related-partyrelated party fees and reimbursements of approximately $150,000 and $234,000, respectively, for the three months ended March 31, 2016.$0.2 million. The related-party amounts consist of property management, asset management, leasing commission, legal leasing, construction management fees and salary reimbursements.28First Quarter Distribution6, 2016,28, 2017, the Company declaredpaid a first quarter distribution in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of March 31, 2016,2017, totaling $686,000.approximately $0.7 million.was paid on April 29, 2016.Property and Payment of Mortgage Loan4, 2016,17, 2017, the Company consummated the disposition of Bloomingdale Hills forWoodland West Marketplace at a sales price of approximately $9.2 million in cash,$14.6 million. The Company used the net proceeds from the sale of Woodland West Marketplace to repay a portion of which was used to pay off the related $5.3 million mortgage loan and $3 million of which was used to pay downoutstanding balance on the line of credit.Entry into a Material Definitive AgreementOn May 4, 2016, the Company, through an indirect subsidiary, entered into three separate purchase agreements to acquire three retail properties located in San Francisco, California (the “San Francisco Properties”) from each of Octavia Gateway Holdings, LLC, Grove Street Hayes Valley, LLC and Hayes Street Hayes Valley LLC, each a Delaware limited liability company and each a subsidiary of DDG Partners LLC. The sellers are not affiliated with the Company or its external advisor. The San Francisco Properties encompass an aggregate of six retail condominiums with an aggregate of 9,121 square feet of retail space. The aggregate purchase price of the San Francisco Properties is approximately $13.7 million plus closing costs.Pursuant to the agreements, the Company made aggregate earnest money deposits of $425,000 to the sellers on May 6, 2016. There can be no assurance that the Company will complete the acquisition of any or all of the San Francisco Properties. In some circumstances, if the Company fails to complete the acquisitions, it may forfeit up to $425,000 of earnest money.ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS2015,2016, as filed with the Securities and Exchange Commission, or SEC, on March 30, 2016,24, 2017, which we refer to herein as our “2015“2016 Annual Report on Form 10-K.”·Our executive officers and certain other key real estate professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor. As a result, they face conflicts of interest, including conflicts created by our advisor’s compensation arrangements with us and conflicts in allocating time among us and other programs and business activities.·Our initial public offering has terminated and we are uncertain of our sources for funding our future capital needs. If we cannot obtain debt or equity financing on acceptable terms, our ability to continue to acquire real properties or other real estate-related assets, fund or expand our operations and pay distributions to our stockholders will be adversely affected.29·We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants. Revenues from our properties could decrease due to a reduction in tenants (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for us to meet our financial obligations, including debt service and our ability to pay distributions to our stockholders.·Our current and future investments in real estate and other real estate-related investments may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders. Revenues from our properties could decrease. Such events would make it more difficult for us to meet our debt service obligations and limit our ability to pay distributions to our stockholders.·Certain of our debt obligations have variable interest rates with interest and related payments that vary with the movement of LIBOR or other indices. Increases in these indices could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.20152016 Annual Report on Form 10-K. Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon on any forward-looking statements included herein. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward lookingforward-looking statements included in this Quarterly Report on Form 10-Q, and the risks described in Part I, Item 1A of our 20152016 Annual Report on Form 10-K, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report on Form 10-Q will be achieved. We have no paid employees.On November 4, 2008, we filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) for our initial public offering of up to 100,000,000 shares of our common stock at $10.00 per share in our primary offering and up to 10,526,316 shares of our common stock to our stockholders at $9.50 per share pursuant to our distribution reinvestment plan (“DRIP”) (collectively, the “Offering”). On August 7, 2009, the SEC declared our registration statement effective and we commenced our initial public offering. On February 7, 2013, we terminated our initial public offering and ceased offering shares of our common stock in our primary offering and under our distribution reinvestment plan.As of February 2013 when we terminated the initial public offering, we had accepted subscriptions for, and issued, 10,688,940 shares of common stock in the initial public offering for gross offering proceeds of $104,700,000, and 391,182 shares of common stock pursuant to the DRIP for gross offering proceeds of $3,620,000. Cumulatively, through March 31, 2016, we have redeemed 396,624 shares of common stock sold in the Offering for $3,197,000. We have also granted 50,000 shares of restricted stock and we issued 273,729 shares of common stock to pay a portion of a special distribution made to stockholders in 2015 to preserve REIT status based on underreporting of federal taxable income in 2011 (the “Special Distribution”).Due to short-term liquidity issues and defaults under certain of our loan agreements, we suspended our share redemption program, including with respect to redemptions upon death and disability, effective as of January 15, 2013. On April 1, 2015, our board of directors approved the reinstatement of the share redemption program and adopted the Amended and Restated Share Redemption Program (the “Amended and Restated SRP”). For more information regarding our share redemption program, see Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds – Share Redemption Program.” Cumulatively, through March 31, 2016, we have redeemed 396,624 shares of common stock sold in the Offering for $3,197,000.30no longerdo not have direct employees and all management and administrative personnel responsible for conducting our business are employed by our advisor. Currently we are externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed in August 2014, August 2015 and August 2015.2016. The current term of the Advisory Agreement terminates on August 10, 2016.2017. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.2016,2017, our property portfolio included 913 retail properties, including 1one property classified as held for sale, which we refer to as “our properties” or ��our“our portfolio,” comprising an aggregate of approximately 766,000601,000 square feet of single- and multi-tenant, commercial retail space located in 7five states. We purchased our properties for an aggregate purchase price of $96,960,000.approximately $108.7 million. As of March 31, 20162017 and December 31, 2015,2016, there was $39,592,000approximately $24.2 million and $39,786,000approximately $33.8 million of indebtedness on our properties, respectively, including indebtedness on our held for sale property.respectively. As of March 31, 20162017 and December 31, 2015,2016, approximately 89% and 90%91% of our portfolio was leased (based on rentable square footage), respectively, with weighted-average remaining lease termsterm of approximately 5 years as of both period ends. Rentable
Square Percent Effective
Rent (3) Anchor Date Original
Purchase Property Name Location Feet (1) Leased (2) (Sq. Foot) Tenant Acquired Price(4) Debt (5) Real Estate Investments Pinehurst Square Bismarck, ND 114,102 95 % $ 14.35 TJ Maxx 5/26/11 $ 15,000,000 $ - Cochran Bypass Chester, SC 45,817 100 % $ 5.24 Bi-Lo 7/14/11 2,585,000 1,506,000 Topaz Marketplace Hesperia, CA 50,699 62 % $ 24.49 n/a 9/23/11 13,500,000 - Morningside Marketplace Fontana, CA 76,923 96 % $ 15.66 Ralphs 1/9/12 18,050,000 8,592,000 Woodland West Marketplace Arlington, TX 175,258 70 % $ 9.46 Randall's 2/3/12 13,950,000 9,652,000 Ensenada Square Arlington, TX 62,628 100 % $ 7.28 Kroger 2/27/12 5,025,000 2,980,000 Shops at Turkey Creek Knoxville, TN 16,324 100 % $ 27.20 n/a 3/12/12 4,300,000 2,696,000 Florissant Marketplace Florissant, MO 146,257 100 % $ 9.70 Gold's Gym 5/16/12 15,250,000 8,821,000 688,008 87,660,000 34,247,000 Property Held for Sale Bloomingdale Hills Riverside, FL 78,442 94 % $ 8.50 Walmart 6/18/12 9,300,000 5,345,000 (6) 766,450 $ 96,960,000 $ 39,592,000 (dollars in thousands) Property Name Location Cochran Bypass Chester, SC 45,817 100 % $ 5.11 Bi-Lo Store 7/14/2011 $ 2,585 $ 1,479 Topaz Marketplace Hesperia, CA 50,699 77 % 22.14 n/a 9/23/2011 13,500 — Morningside Marketplace Fontana, CA 76,923 96 % 16.25 Ralph's 1/9/2012 18,050 8,441 Ensenada Square Arlington, TX 62,628 100 % 7.62 Kroger 2/27/2012 5,025 2,927 Shops at Turkey Creek Knoxville, TN 16,324 100 % 27.33 n/a 3/12/2012 4,300 2,649 Florissant Marketplace Florissant, MO 146,257 98 % 9.87 Schnuck's 5/16/2012 15,250 8,666 400 Grove Street San Francisco, CA 2,000 100 % 60.00 n/a 6/14/2016 2,890 — 8 Octavia Street San Francisco, CA 3,640 100 % 34.92 n/a 6/14/2016 2,740 — Fulton Shops San Francisco, CA 3,758 100 % 55.07 n/a 7/27/2016 4,595 — 450 Hayes San Francisco, CA 3,724 100 % 89.82 n/a 12/22/2016 8,020 — 388 Fulton San Fancisco, CA 3,110 100 % 63.05 n/a 1/4/2017 4,500 — Silver Lake Los Angeles, CA 10,497 100 % 62.96 n/a 1/11/2017 13,300 — 425,377 94,755 24,162 Property Held for Sale Woodland West Marketplace Arlington, TX 175,258 73 % 9.40 Randall's 2/3/2012 13,950 — 175,258 13,950 — 600,635 $ 108,705 $ 24,162 (1) Square feet includes improvements made on ground leases at the property. (2) Percentage is based on leased rentable square feet of each property as of March 31, 2016.2017.(3) Effective rent per square foot is calculated by dividing the annualized March 20162017 contractual base rent by the total square feet occupied at the property. The contractual base rent does not include other items such as tenant concessions (e.g., free rent), percentage rent, and expense recoveries.(4) The purchase price for Pinehurst Square and Shops at Turkey Creek includes the issuance of common units in our operating partnership to the sellers.31(5) Debt represents the outstanding balance as of March 31, 2016,2017, and excludes reclassification of $311,000approximately $0.2 million deferred financing costs, net, as a contra-liability. For more information on our financing, seerefer to Note 8. “Notes Payable”Payable, Net” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. As of March 31, 2017, the KeyBank credit facility principal balance of $32.4 million was secured by Topaz Marketplace, 8 Octavia Street, 400 Grove Street, the Fulton Shops, 450 Hayes, 388 Fulton, Silver Lake and Woodland West Marketplace. For information regarding recent draws under the Key Bank credit facility, see “– Recent Financing Transactions - KeyBank Credit Facility.”(6)Debt of Bloomingdale Hills excludes reclassification of $127,000 deferred financing costs, net, as a contra-liability.2016,2017, we had 2two properties under development. The properties are identified in the following table: Estimated Estimated Expected Properties Under Development Completion Date Square Feet Debt(1) 3032 Wilshire and 1210 Berkeley Street, Santa Monica, California November, 2017 9,400 $ 8,500,000 Sunset Boulevard and Gardner, Hollywood, California March, 2018 38,000 10,700,000 Total 47,400 $ 19,200,000 Properties Under Development Location Wilshire Property Santa Monica, CA November, 2017 12,500 $ 8,500 Gelson’s Property Hollywood, CA March, 2018 37,000 10,700 Total 49,500 $ 19,200 (1) Debt excludes reclassification of $627,000approximately $0.1 million deferred financing costs, net, as a contra-liability.2016,2017, versus the three months ended March 31, 2015and 2015: Three Months Ended March 31, Increase Percentage 2016 2015 (Decrease) Change Rental revenue and reimbursements $ 2,708,000 $ 4,804,000 $ (2,096,000 ) (43.6 )% Operating and maintenance expenses (937,000 ) (1,775,000 ) (838,000 ) (47.2 )% General and administrative expenses (396,000 ) (766,000 ) (370,000 ) (48.3 )% Depreciation and amortization expenses (870,000 ) (1,868,000 ) (998,000 ) (53.4 )% Transaction expense (4,000 ) - 4,000 100.0 % Interest expense (600,000 ) (1,694,000 ) (1,094,000 ) (64.6 )% Operating loss (99,000 ) (1,299,000 ) (1,200,000 ) (92.4 )% Other income, net 34,000 4,421,000 (4,387,000 ) (99.2 )% Net income (loss) $ (65,000 ) $ 3,122,000 $ 3,187,000 (102.1 )% Three Months Ended March 31, 2017 2016 $ Change % Change Rental revenue and reimbursements $ 2,640 $ 2,708 $ (68 ) (2.5 )% Operating and maintenance expenses 946 945 1 0.1 % General and administrative expenses 495 482 13 2.7 % Depreciation and amortization expenses 962 870 92 10.6 % Transaction expense 82 4 78 1,950.0 % Interest expense 575 600 (25 ) (4.2 )% Operating loss (420 ) (193 ) (227 ) 117.6 % Other income, net 6,618 34 6,584 19,364.7 % Income taxes (19 ) 94 (113 ) (120.2 )% Net income (loss) $ 6,179 $ (65 ) $ 6,244 (9,606.2 )% 2016,2017, are not necessarily indicative of those expected in future periods.Aurora Commons, Constitution Trail,Bloomingdale Hills in April 2016 and Osceola VillagePinehurst Square East in March 2015,January of 2017, partially offset by revenue from the acquisitions of 8 Octavia, 400 Grove, Fulton Shops, 450 Hayes in 2016, and Northgate Plaza, Moreno Marketplace388 Fulton and Summit Point in October 2015. The saleSilver Lake during the first quarter of the three properties in March 2015 was completed in connection with the formation of the SGO Joint Venture (as defined in Note 1. “Organization and Business” and further described in Note 4. “Investments in Unconsolidated Joint Ventures” to the condensed consolidated financial statements contained within this Quarterly Report on From 10-Q).The decrease in operatingwas primarily attributedremained relatively flat during the three months ended March 31, 2017, when compared to the sale of Aurora Commons, Constitution Trail, and Osceola Villagesame period in March 2015, and the sales of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015.
2016.32decreaseslight increase in general and administrative expenses during the three months ended March 31, 2017, compared to the same period in 2016 was primarily due to lowerincreased asset management fees as a result of property acquisitions in 2016 due to the sale of Aurora Commons, Constitution Trail, and Osceola Village in March 2015 and the salesfirst quarter of Northgate Plaza, Moreno Marketplace2017, partially offset by dispositions of Bloomingdale Hills in April 2016 and Summit PointPinehurst Square East in October 2015, and a decrease in legal expenses with the resolution of the class action lawsuit in 2015.decreaseincrease in depreciation and amortization expenses during the three months ended March 31, 2017, compared to the same period in 2016 was attributeddue to acquisitions of new properties during 2016 and the first quarter of 2017, partially offset by the sale of Aurora Commons, Constitution Trail, and Osceola VillagePinehurst Square East in March 2015,January of 2017, and the salesclassification of Northgate Plaza, MorenoWoodland West Marketplace and Summit Pointas held for sale during the first quarter of 2017.October 2015.Transaction expenseTransaction expense representstransaction fees during the three months ended March 31, 2017 as compared to the same period in 2016 was primarily due to the expensing of third-party consulting fees related to the exploration of a potential equity transaction, as well as the acquisition fees forwe incurred as a result of our additional investment in the SGO MN Joint Venture, as described in Note 4. “Investments in Unconsolidated Joint Ventures” to our consolidated financial statements included in this Quarterly Report on Form 10-Q.pay-offspay-off using the proceeds from the salessale of Aurora Commons, Constitution Trail, and Osceola VillageBloomingdale Hills in March 2015, and the sales of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015. Other incomeof $4,421,000 fornetperiodthree months ended March 31, 2015,2017, compared to the same period in 2016 primarily consisteddue to the gain of approximately $6.1 million from the sale of Pinehurst Square East in January 2017, as well as the recognition of deferred gain resulting from the first quarter of 2017 sale by the SGO Joint Venture of propertiesAurora Commons.March 2015. The $34,000 in otherany real estate business and certain non-real estate businesses, subject to certain limitations under the Internal Revenue Code. A TRS is subject to federal and state income fortaxes. For the periodthree months ended March 31, 2016, income taxes primarily representsincluded the equityreversal of an over accrual of estimated alternative minimum state/federal taxes, which was accrued and included in lossesexpenses as of unconsolidated joint ventures.DRIP.distribution reinvestment plan. As a result of the termination of our initial public offering, offering proceeds from the sale of our securities are not currently available to fund our cash needs. We have used and expect to continue to use debt financing, net sales proceeds and cash flow from operations to fund our cash needs.During the three months ended March 31, 2016, we utilized the net proceeds from the fourth quarter 2015 disposition of our properties (remaining after paydown of debt) to invest in the Gelson’s Joint Venture and the Wilshire Joint Venture.2016,2017, our cash and cash equivalents were $3,414,000approximately $3.0 million and our restricted cash (funds held by the lenders for property taxes, insurance, tenant improvements, leasing commissions, capital expenditures, rollover reserves and other financing needs) was $6,025,000.approximately $3.9 million. For properties with such lender reserves, we may draw upon such reserves to fund the specific needs for which the funds were established.20162017 and December 31, 2015,2016, our borrowings were approximately 111.7%108.8% and 65.3%105.2%, respectively, of the carrying value of our net assets.33Condensed Consolidated Statementscondensed consolidated statements of Cash Flows: Three Months Ended March 31, Increase 2016 2015 (Decrease) Net cash provided by (used in): Operating activities $ 1,745,000 $ (688,000 ) $ 2,433,000 Investing activities (30,528,000 ) 40,954,000 (71,482,000 ) Financing activities 23,404,000 (39,512,000 ) 62,916,000 Net increase (decrease) in cash and cash equivalents $ (5,379,000 ) $ 754,000 2017 2016 $ Change Net cash provided by (used in): Operating activities $ 1,996 $ 1,414 $ 582 Investing activities 949 (30,197 ) 31,146 Financing activities (3,045 ) 23,404 (26,449 ) Net decrease in cash and cash equivalents $ (100 ) $ (5,379 ) net cash provided byflows from operating activities was primarily due to changes in operating asset and liability balances of $2,100,000 involving collection of tenant receivables and disbursement by lendersa release of restricted cash.increasechange in net cash used inflows from investing activities was primarily due to the net proceeds from the disposition of Pinehurst Square East of approximately $18.5 million, partially offset by our investmentsaggregate $17.8 million acquisition of 388 Fulton and Silver Lake in the Wilshire and Gelson’s Joint Ventures, consisting of land and building under development and development costs, totaling $27,280,000January 2017. Cash flows from investing activities during the three months ended March 31, 2016 compared to net proceedsconsisted of $53,066,000our aggregate $26.9 million investments in the three months ended March 31, 2015, before the pay down of debt, from the sale of Aurora Commons, Constitution trailWilshire and Osceola Village.increasechange in net cash provided byflows from financing activities was primarily due to loan proceeds during the three months ended March 31, 2016, totaling $25,200,0002017, was primarily due to an increase in pay down of debt of approximately $27.9 million in connection with our investments in the Wilshirepay down of a portion of the KeyBank credit facility as a result of the disposition of Pinehurst Square East and Gelson’s Joint Ventures, comparedthe pay down of the debt related to the paydown of debt in the amount of $36,370,000 in the three months ended March 31, 2015 resulting from the sales of Aurora Commons, Constitution Trail and Osceola Village.SeeRefer to Note 8. “Notes Payable”Payable, Net” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on the maturity dates and terms of our outstanding indebtedness.34 under the Amended and Restated Credit Facility and used the proceeds to invest in the Wilshire Joint Venture.the Company haswe have consolidated borrowings of $8,500,000$8.5 million (the “Wilshire Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and 3032 Wilshire Investors, LLC (as the borrower). The Wilshire Loan bears interest at a rate of 10.0% per annum, payable monthly, commencing on April 1, 2016. The loan matureswas scheduled to mature on March 7, 2017, with an option for antwo additional six-month period,periods, subject to certain conditions as stated in the loan agreement. All conditions to extensions were met, and on March 7, 2017, we exercised the option to extend the loan for six months. The new maturity date is September 7, 2017. The loan is secured by, among other things, a lien on the Wilshire development project and other collateral as defined in the loan agreement.the Company haswe have consolidated borrowings of $10,700,000$10.7 million (the “Gelson’s Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and Sunset and Gardner Investors, LLC (as the borrower). The Gelson’s Loan bears interest at a rate of 9.50%9.5% per annum, payable monthly, commencing on April 1, 2016. The loan matureswas scheduled to mature on January 27, 2017, with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. Those conditions were not met, but we negotiated a six month extension of the term on January 27, 2017. The new maturity date is July 27, 2017. The loan is secured by, among other things, a lien on the Gelson’s development project and other joint venture collateral as defined in the loan agreement.2016,2017, included in this Quarterly Report on Form 10-Q is unaudited, but includes all adjustments (consisting of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of our financial position and operating results for the three months ended March 31, 2016.2017. These interim unaudited condensed consolidated financial statements do not include all disclosures required by GAAP for complete consolidated financial statements. Interim results of operations are not necessarily indicative of the results to be expected for the full year; and such results may be less favorable. Our accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 20152016 Annual Report on Form 10-K. In 2015, we made the Special Distribution to stockholders to preserve our REIT status based on underreporting of federal taxable income in 2011.35InAmended and Restated Credit Facility,Key Bank credit facility, we may pay distributions to our stockholders so long as the total amount paid does not exceed certain thresholds specified in the Amended and Restated Credit FacilityKey Bank credit facility; provided, however, that we are not restricted from making any distributions necessary in order to maintain our status as a REIT. Our board of directors will continue to evaluate the amount of future quarterly distributions based on our operational cash needs.year ended December 31, 2015. Distributions to our common stockholders and common unit holders for the three months ended March 31, 2017 and the year ended December 31, 2016 were declared subsequent to March 31, 2016. Distribution
Record
Date Distribution
Payable
Date Distribution Per
Share of
Common Stock /
Common Unit Total Common
Stockholders
Distribution Total Common
Unit Holders
Distribution Total
Distribution First Quarter 2015 3/31/2015 4/30/2015 $ 0.06 $ 658,000 $ 26,000 $ 684,000 Second Quarter 2015 6/30/2015 7/30/2015 $ 0.06 654,000 26,000 680,000 Third Quarter 2015 9/30/2015 10/30/2015 $ 0.06 654,000 26,000 680,000 Fourth Quarter 2015 12/31/2015 1/30/2016 $ 0.06 661,000 25,000 686,000 Total $ 2,627,000 $ 103,000 $ 2,730,000 First Quarter 2017 3/31/2017 4/28/2017 $ 0.06 $ 655 $ 25 $ 680 First Quarter 2016 3/31/2016 4/29/2016 $ 0.06 $ 660 $ 26 $ 686 Second Quarter 2016 7/7/2016 7/29/2016 0.06 661 25 686 Third Quarter 2016 9/30/2016 10/31/2016 0.06 659 25 684 Fourth Quarter 2016 12/30/2016 1/31/2017 0.06 656 25 681 Total $ 2,636 $ 101 $ 2,737 inan indication of our performance, nor is FFO necessarily indicative of cash flow as a measure of liquidity or our ability to fund cash needs, including the payment of distributions.36follows:FFO 2016 2015 Net income (loss)(1) $ (65,000 ) $ 3,122,000 Adjustments (2): Net income related to membership interest - (93,000 ) Gain on disposal of assets (9,000 ) (4,685,000 ) Adjustment to reflect FFO of unconsolidated joint ventures 204,000 18,000 Depreciation of real estate 644,000 1,345,000 Amortization of in-place leases and other intangibles 226,000 504,000 FFO attributable to common shares and Common Units $ 1,000,000 $ 211,000 FFO per share/Common Unit $ 0.09 $ 0.02 Weighted average common shares outstanding - basic 11,469,085 11,401,610 Three Months Ended
March 31,FFO 2017 2016 $ 6,179 $ (65 ) Adjustments: Gain on disposal of assets (6,586 ) (9 ) Adjustment to reflect FFO of unconsolidated joint ventures 80 204 Depreciation of real estate 607 644 Amortization of in-place leases and other intangibles 355 226 FFO attributable to common shares and Common Units $ 635 $ 1,000 FFO per share and Common Unit $ 0.06 $ 0.09 Weighted average common shares and units outstanding 11,359,759 11,469,085 (1) Our Common Unitscommon units have the right to convert a unit into common stock for a one-to-one conversion. Therefore, we are including the related non-controlling interest income/loss attributable to Common Unitscommon units in the computation of FFO and including the Common Unitscommon units together with weighted average shares outstanding for the computation of FFO per share and Common Unit.common unit.(2)Where applicable, adjustments exclude amounts attributable to membership interest.2016,2017, we have provided carve-out guarantees in connection with our two unconsolidated joint ventures; in connection with those carve-out guarantees we have certain rights of recovery from our joint venture partners.AOther than the critical accounting policy discussed below, a discussion of theadditional accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our 20152016 Annual Report on Form 10-K. 37YearsBuildings and improvements 5 - 30 years Tenant improvements 1 - 36 years Quarterly 6, 2016,28, 2017, we declaredpaid a first quarter distribution in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of March 31, 2016,2017, totaling $686,000. Theapproximately $0.7 million.was paid on April 29, 2016.Property and Payment of Mortgage Loan4, 2016,17, 2017, we consummated the disposition of Bloomingdale Hills forWoodland West Marketplace at a sales price of approximately $9.2 million in cash,$14.6 million. We used the net proceeds from the sale of Woodland West Marketplace to repay a portion of which was used to pay off the related $5.3 million mortgage loan and $3 million of which was used to pay downoutstanding balance on the line of credit.Entry into a Material Definitive AgreementOn May 4, 2016, we, through an indirect subsidiary, entered into three separate purchase agreements to acquire three retail properties located in San Francisco, California (the “San Francisco Properties”) from each of Octavia Gateway Holdings, LLC, Grove Street Hayes Valley, LLC and Hayes Street Hayes Valley LLC, each a Delaware limited liability company and each a subsidiary of DDG Partners LLC. The sellers are not affiliated with us or our external advisor. The San Francisco Properties encompass an aggregate of six retail condominiums with an aggregate of 9,121 square feet of retail space. The aggregate purchase price of the San Francisco Properties is approximately $13.7 million plus closing costs.Pursuant to the agreements, we made aggregate earnest money deposits of $425,000 to the sellers on May 6, 2016. There can be no assurance that we will complete the acquisition of any or all of the San Francisco Properties. In some circumstances, if we fail to complete the acquisitions, we may forfeit up to $425,000 of earnest money.ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4.CONTROLS AND PROCEDURESfirst quarter ended March 31, 20162017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.38PART II.OTHER INFORMATIONITEM 1.LEGAL PROCEEDINGSITEM 1A.RISK FACTORSITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS“Amended and Restated SRP”“SRP”). Under the Amended and Restated SRP, only shares submitted for repurchase in connection with the death or “qualifying disability” (as defined in the Amended and Restated SRP) of a stockholder are eligible for repurchase by us. The number of shares to be redeemed is limited to the lesser of (i) a total of $2,000,000$2.0 million for redemptions sought upon a stockholder’s death and a total of $1,000,000$1.0 million for redemptions sought upon a stockholder’s qualifying disability, and (ii) 5% of the weighted average of the number of shares of our common stock outstanding during the prior calendar year. Share repurchases pursuant to the share redemption programSRP are made at our sole discretion. We reserve the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the Amended and Restated SRP.Any stockholder whoseRedemption requests due to the death or disability of a Company stockholder that occurred during thissuch time period, must submit their redemption request within one year after the adoption of the Amended and Restated SRP. Amended and Restated SRP provides that any request to redeem less than $5,000$5 thousand worth of shares will be treated as a request to redeem all of the stockholder’s shares. If we cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If we do not completely satisfy a redemption request in one quarter, we will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. We may increase or decrease the amount of funding available for redemptions under the Amended and Restated SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter. Amended and Restated SRP are consistent with the terms of the share redemption program that was in effect immediately prior to January 15, 2013.August 7, 2015,October 5, 2016, our board of directors approved, the amendment and restatementpursuant to Section 3(a) of the Amended and Restated SRP, (the “Second Amended and Restated SRP” and, together with the Amended and Restated SRP, the “SRP”). Under the Second Amended and Restated SRP, the redemption date with respect to third quarter 2015 redemptions was November 10, 2015 or the next practicable date as our Chief Executive Officer determined so that redemptions with respect to the third quarteran additional $0.5 million of 2015 were delayed until after the payment datefunds available for the Special Distribution. With this revision, stockholders who were to have 100% of their shares redeemed were not left holding a small number of shares from the Special Distribution after the date of the redemption of their shares. The other material terms of the Second Amended and Restated SRP are consistentshares in connection with the termsdeath of the Amended and Restated SRP.
a stockholder. 392016,2017, we redeemed shares as follows: Total Number of Shares Purchased as Part of a Approximate Dollar Value of Total Number of Average Price Publicly Announced Plan Shares That May Yet be Period Shares Redeemed(1) Paid per Share or Program(2) Redeemed Under the Program(3) January 2016 - $ - - $ 1,617,866 February 2016 - $ - - $ 1,617,866 March 2016 30,721 $ 6.56 30,721 $ 1,416,420 Total 30,721 30,721 Period January 2017 — $ — — $ 915,158 February 2017 — — — 915,158 March 2017 31,875 6.36 31,875 712,431 Total 31,875 31,875 (1) All of our purchases of equity securities during the three months ended March 31, 2016,2017, were made pursuant to the SRP.(2)We previously announced a share redemption program in connection with the Offering. The program, was suspended in January 2013 and reinstated by the board of directors in April 2015. For additional information regarding the SRP, see the disclosure above.(3)(2)We currently limit the dollar value and number of shares that may yet be repurchased under the SRP as described above. SRP as described above.ITEM 3.DEFAULTS UPON SENIOR SECURITIESITEM 4.MINE SAFETY DISCLOSURESITEM 5.OTHER INFORMATION2016,2017, all items required to be disclosed under Form 8-K were reported under Form 8-K.ITEM 6.EXHIBITS4013, 2016.11, 2017. Strategic Realty Trust, Inc. By: /s/ Andrew Batinovich Andrew Batinovich By: /s/ Terri Garnick Terri Garnick 4120162017 (and are numbered in accordance with Item 601 of Regulation S-K).Exhibit No. Incorporated by Reference Exhibit No. Description Form/File No. Filing Date 3.1.1 Articles of Amendment and Restatement of TNP Strategic Retail Trust, Inc. (incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment 5 to the Company’s Registration Statement on Form S-11 (No. 333-154975))333-1549757/10/2009 3.1.2 Articles of Amendment, dated August 22, 2013 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on August 26, 2013)8/26/2013 3.1.3 Articles Supplementary, dated November 1, 2013 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 4, 2013)11/4/2013 3.1.4 Articles Supplementary, dated January 22, 2014 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 28, 2014)1/28/2014 3.2 Third Amended and Restated Bylaws of Strategic Realty Trust, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on January 28, 2014)1/28/2014 10.1 OperatingThe Purchase and Sale Agreement by and among the Members and Manager ofbetween Sunset & GardnerTriangle Investors, LLC and Strategic Realty Operating Partnership, LP, dated January 7,November 21, 2016.X 10.2 LoanThe Purchase and Sale Agreement by and between Buchanan MortgageTNP SRT Woodland West Holdings LLC and Sunset & Gardner Investors LLC,ORDA CORP., a Texas corporation, dated January 26, 2016.31, 2017.X 10.3 Second Amended and Restated Revolving Credit Agreement among Strategic Realty Operating Partnership, L.P., SRT Secured Holdings, LLC, KeyBank National Association, as administrative agent, and KeyBanc Capital Markets, LLC, as sole lead bookrunner and sole lead arranger, dated February 15, 2017 X 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 99.1 Strategic Realty Trust, Inc. Amended and Restated Share Redemption Program Adopted April 1, 2015 (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form August 26, 20168-K filed on April 9, 2015)8/30/2016 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema Document X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB XBRL Taxonomy Extension Label Linkbase Document X 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X