UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2021~~2022

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission File No. 000-52596

~~BLACK CREEK~~~~DIVERSIFIED~~~~PROPERTY~~~~FUND~~ARES REAL ESTATE INCOME TRUST INC.

(Exact name of registrant as specified in its charter)


Maryland	30-0309068
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~518~~One Tabor Center, 1200 Seventeenth Street, ~~17th Floor~~Suite 2900 , Denver, CO	80202
(Address of principal executive offices) 518 Seventeenth Street, 17^th Floor, Denver, CO80202 (Former name or address, if changed from last report)	(Zip Code)

Registrant’s telephone number, including area code: (303) 228-2200

Securities registered pursuant to Section 12(b) of the Act: None

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐	Smaller reporting company	☐
Non-accelerated filer	☒			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 4, 2021,~~August 5, 2022, there were ~~15,452,925~~23,611,264 shares of the registrant’s Class T common stock, ~~34,065,634~~47,462,301 shares of the registrant’s Class S common stock, ~~6,384,703~~7,930,514 shares of the registrant’s Class D common stock, ~~52,893,075~~67,433,776 shares of the registrant’s Class I common stock and ~~56,629,226~~54,063,048 shares of the registrant’s Class E common stock outstanding.

Table of Contents

~~BLACK CREEK DIVERSIFIED PROPERTY FUND~~ARES REAL ESTATE INCOME TRUST INC.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021	3
	Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	5
	Condensed Consolidated Statements of Equity for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	78
	Notes to Condensed Consolidated Financial Statements (unaudited)	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2425
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4446
Item 5.	Other Information	4547
Item 6.	Exhibits	4749

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

~~BLACK CREEK DIVERSIFIED PROPERTY FUND~~ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of

September 30,

December 31,
(in thousands, except per share data)

2021

2020

(Unaudited)

ASSETS




Net investment in real estate properties

$
2,196,663

$
1,954,573
Debt-related investments, net

47,804

49,628
Cash and cash equivalents

12,463

11,266
Restricted cash

10,533

10,468
DST Program Loans

58,276

45,229
Other assets

52,404

40,396
Total assets

$
2,378,143

$
2,111,560
LIABILITIES AND EQUITY


Liabilities


Accounts payable and accrued expenses

$
51,060

$
40,371
Debt, net

919,185

965,305
Intangible lease liabilities, net

51,536

40,457
Financing obligations, net

623,050

502,533
Other liabilities

66,370

61,205
Total liabilities

1,711,201

1,609,871
Commitments and contingencies (Note 12)


Redeemable noncontrolling interest

8,624

3,798
Equity

Stockholders’ equity:

Preferred stock, $0.01 par value—200,000 shares authorized, NaN issued and outstanding

—

—
Class E common stock, $0.01 par value—500,000 shares authorized, 57,259 shares and 60,873 shares issued and outstanding, respectively

573

609
Class T common stock, $0.01 par value—500,000 shares authorized, 13,682 shares and 9,831 shares issued and outstanding, respectively

137

98
Class S common stock, $0.01 par value—500,000 shares authorized, 32,148 shares and 23,516 shares issued and outstanding, respectively

321

235
Class D common stock, $0.01 par value—500,000 shares authorized, 5,990 shares and 4,098 shares issued and outstanding, respectively

60

41
Class I common stock, $0.01 par value—500,000 shares authorized, 51,306 shares and 44,723 shares issued and outstanding, respectively

513

447
Additional paid-in capital

1,389,823

1,269,146
Distributions in excess of earnings

(859,050)

(841,496)
Accumulated other comprehensive loss

(18,289)

(27,431)
Total stockholders’ equity

514,088

401,649
Noncontrolling interests

144,230

96,242
Total equity

658,318

497,891
Total liabilities and equity

$
2,378,143

$
2,111,560


	As of
	June 30,		December 31,
(in thousands, except per share data)	2022		2021
	(Unaudited)
ASSETS
Net investment in real estate properties	$	3,659,577	$	2,589,826
Investment in unconsolidated joint venture partnerships		105,404		57,425
Debt-related investments, net		108,206		105,752
Cash and cash equivalents		19,529		10,605
Restricted cash		4,909		3,747
DST Program Loans		86,706		62,123
Other assets		57,732		56,397
Assets held for sale		0		105,096
Total assets	$	4,042,063	$	2,990,971
LIABILITIES AND EQUITY
Liabilities
Accounts payable and accrued expenses	$	60,423	$	38,182
Debt, net		1,765,292		1,363,234
Intangible lease liabilities, net		46,605		47,499
Financing obligations, net		1,052,194		661,075
Other liabilities		98,452		89,817
Liabilities related to assets held for sale		0		5,744
Total liabilities		3,022,966		2,205,551
Commitments and contingencies (Note 13)
Redeemable noncontrolling interest		18,164		8,994
Equity
Stockholders’ equity:
Preferred stock, $0.01 par value—200,000 shares authorized, NaN issued and outstanding		—		—
Class T common stock, $0.01 par value—500,000 shares authorized, 21,672 shares and 16,425 shares issued and outstanding, respectively		217		164
Class S common stock, $0.01 par value—500,000 shares authorized, 46,163 shares and 35,757 shares issued and outstanding, respectively		462		358
Class D common stock, $0.01 par value—500,000 shares authorized, 7,947 shares and 6,749 shares issued and outstanding, respectively		79		67
Class I common stock, $0.01 par value—500,000 shares authorized, 64,741 shares and 54,406 shares issued and outstanding, respectively		647		544
Class E common stock, $0.01 par value—500,000 shares authorized, 54,578 shares and 56,328 shares issued and outstanding, respectively		546		563
Additional paid-in capital		1,655,295		1,457,296
Distributions in excess of earnings		(882,795)		(865,844)
Accumulated other comprehensive loss		(1,703)		(13,418)
Total stockholders’ equity		772,748		579,730
Noncontrolling interests		228,185		196,696
Total equity		1,000,933		776,426
Total liabilities and equity	$	4,042,063	$	2,990,971

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~BLACK CREEK DIVERSIFIED PROPERTY FUND~~ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

(in thousands, except per share data)

2021

2020

2021

2020

Revenues:









Rental revenues

$
53,596

$
44,129

$
152,657

$
132,995

Debt-related income

2,298

981

6,741

1,181

Total revenues

55,894

45,110

159,398

134,176

Operating expenses:





Rental expenses

17,842

15,881

52,318

45,792

Real estate-related depreciation and amortization

18,821

15,649

52,728

44,558

General and administrative expenses

2,183

1,977

6,582

5,769

Advisory fees, related party

5,480

4,210

15,389

12,666

Performance participation allocation

3,774

1,333

7,769

3,343

Acquisition costs and reimbursements

738

240

1,451

842

Litigation expense

0

2,500

0

2,500

Impairment of real estate property

0

0

758

0

Total operating expenses

48,838

41,790

136,995

115,470

Other expenses (income):





Interest expense

17,866

15,290

51,477

42,930

Gain on sale of real estate property

(25,979)

0

(53,321)

(2,192)

Other income

(524)

(262)

(1,274)

(619)

Total other expenses (income)

(8,637)

15,028

(3,118)

40,119

Net income (loss)

15,693

(11,708)

25,521

(21,413)

Net (income) loss attributable to redeemable noncontrolling interests

(99)

39

(169)

71

Net (income) loss attributable to noncontrolling interests

(1,654)

839

(2,430)

1,515

Net income (loss) attributable to common stockholders

$
13,940

$
(10,830)

$
22,922

$
(19,827)

Weighted-average shares outstanding—basic

157,025

141,682

151,045

142,216

Weighted-average shares outstanding—diluted

176,777

153,166

168,475

153,665

Net income (loss) attributable to common stockholders per common share—basic and diluted

$
0.09

$
(0.08)

$
0.15

$
(0.14)


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)	2022		2021		2022		2021
Revenues:
Rental revenues	$	73,494	$	48,629	$	135,999	$	99,061
Debt-related income		846		2,319		4,314		4,443
Total revenues		74,340		50,948		140,313		103,504
Operating expenses:
Rental expenses		24,896		16,914		46,210		34,476
Real estate-related depreciation and amortization		36,903		17,174		64,354		33,907
General and administrative expenses		2,594		2,181		4,631		4,399
Advisory fees		8,227		5,085		15,370		9,909
Performance participation allocation		6,186		2,246		18,379		3,995
Acquisition costs and reimbursements		1,093		346		2,722		713
Impairment of real estate property		—		—		—		758
Total operating expenses		79,899		43,946		151,666		88,157
Other expenses (income):
Equity in income from unconsolidated joint venture partnerships		(1,718)		—		(708)		—
Interest expense		33,774		17,048		58,184		33,611
Gain on sale of real estate property		(29,643)		—		(83,524)		(27,342)
Gain on extinguishment of debt and financing commitments, net		8		—		8		—
Other income		(1,413)		(476)		(3,540)		(750)
Total other expenses (income)		1,008		16,572		(29,580)		5,519
Net (loss) income		(6,567)		(9,570)		18,227		9,828
Net loss (income) attributable to redeemable noncontrolling interests		60		64		(186)		(70)
Net loss (income) attributable to noncontrolling interests		919		923		(2,618)		(776)
Net (loss) income attributable to common stockholders	$	(5,588)	$	(8,583)	$	15,423	$	8,982
Weighted-average shares outstanding—basic		191,158		150,126		184,878		148,005
Weighted-average shares outstanding—diluted		224,857		167,387		217,806		164,255
Net (loss) income attributable to common stockholders per common share—basic and diluted	$	(0.03)	$	(0.06)	$	0.08	$	0.06

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~BLACK CREEK DIVERSIFIED PROPERTY FUND~~ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

(in thousands)

2021

2020

2021

2020

Net income (loss)

$
15,693

$
(11,708)

$
25,521

$
(21,413)

Change from cash flow hedging derivatives

2,313

2,278

10,259

(16,874)

Comprehensive income (loss)

18,006

(9,430)

35,780

(38,287)

Comprehensive (income) loss attributable to redeemable noncontrolling interests

(114)

31

(239)

126

Comprehensive (income) loss attributable to noncontrolling interests

(1,940)

678

(3,477)

2,769

Comprehensive income (loss) attributable to common stockholders

$
15,952

$
(8,721)

$
32,064

$
(35,392)


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Net (loss) income	$	(6,567)	$	(9,570)	$	18,227	$	9,828
Change from cash flow hedging activities		1,819		2,031		13,813		7,946
Comprehensive (loss) income		(4,748)		(7,539)		32,040		17,774
Comprehensive loss (income) attributable to redeemable noncontrolling interests		43		50		(322)		(125)
Comprehensive loss (income) attributable to noncontrolling interests		680		701		(4,580)		(1,537)
Comprehensive (loss) income attributable to common stockholders	$	(4,025)	$	(6,788)	$	27,138	$	16,112

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~BLACK CREEK DIVERSIFIED PROPERTY FUND~~ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


	Stockholders’ Equity
									Accumulated
				Additional			Distributions		Other
	Common Stock			Paid-in			in Excess of		Comprehensive		Noncontrolling		Total
(in thousands)	Shares	Amount		Capital		��	Earnings		Income (Loss)		Interests		Equity
FOR THE THREE MONTHS ENDED JUNE 30, 2021
Balance as of March 31, 2021	147,292	$	1,473	$	1,298,328		$	(837,019)	$	(22,096)	$	119,665	$	560,351
Net loss (excluding $64 attributable to redeemable noncontrolling interest)	—		—		—			(8,583)		—		(923)		(9,506)
Change from cash flow hedging activities (excluding $14 attributable to redeemable noncontrolling interest)	—		—		—			—		1,795		222		2,017
Issuance of common stock	7,161		71		54,859			—		—		—		54,930
Share-based compensation	—		—		38			—		—		—		38
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs	—		—		(1,269)			—		—		—		(1,269)
Trailing distribution fees	—		—		(2,826)			655		—		—		(2,171)
Redemptions of common stock	(2,432)		(24)		(18,427)			—		—		—		(18,451)
Issuances of OP Units for DST Interests	—		—		—			—		—		—		—
Distributions declared on common stock and noncontrolling interests (excludes $105 attributable to redeemable noncontrolling interest)	—		—		—			(14,074)		—		(1,520)		(15,594)
Redemption value allocation adjustment to redeemable noncontrolling interest	—		—		(233)			—		—		—		(233)
Redemptions of noncontrolling interests	—		—		(57)			—		—		(1,138)		(1,195)
Balance as of June 30, 2021	152,021	$	1,520	$	1,330,413		$	(859,021)	$	(20,301)	$	116,306	$	568,917
FOR THE THREE MONTHS ENDED JUNE 30, 2022
Balance as of March 31, 2022	182,042	$	1,820	$	1,551,814		$	(860,546)	$	(3,266)	$	232,692	$	922,514
Net loss (excluding $60 attributable to redeemable noncontrolling interest)	—		—		—			(5,588)				(919)		(6,507)
Change from cash flow hedging activities (excluding $17 attributable to redeemable noncontrolling interest)	—		—		—			—		1,563		239		1,802
Issuance of common stock	14,679		147		127,869			—		—		—		128,016
Share-based compensation	—		—		50			—		—		—		50
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs	—		—		(3,821)			—		—		—		(3,821)
Trailing distribution fees	—		—		(5,335)			1,259		—		—		(4,076)
Redemptions of common stock	(1,620)		(16)		(13,929)			—		—				(13,945)
Issuances of OP Units for DST Interests	—		—		—			—		—		—		—
Other noncontrolling interests net distributions	—		—		—			—		—		(40)		(40)
Distributions declared on common stock and noncontrolling interests (excludes $191 attributable to redeemable noncontrolling interest)	—		—		—			(17,920)				(2,966)		(20,886)
Redemption value allocation adjustment to redeemable noncontrolling interest	—		—		(1,114)			—		—		—		(1,114)
Redemptions of noncontrolling interests	—		—		(239)			—		—		(821)		(1,060)
Balance as of June 30, 2022	195,101	$	1,951	$	1,655,295		$	(882,795)	$	(1,703)	$	228,185	$	1,000,933

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

Stockholders’ Equity

Accumulated

Additional

Distributions

Other

Common Stock

Paid-in

in Excess of

Comprehensive

Noncontrolling

Total
(in thousands)

Shares

Amount

Capital

Earnings

Income (Loss)

Interests

Equity
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020

Balance as of June 30, 2020

141,775

$
1,418

$
1,263,091

$
(809,999)

$
(32,336)

$
83,166

$
505,340
Net loss (excluding $39 attributable to redeemable noncontrolling interest)

—

—

—

(10,830)

—

(839)

(11,669)
Unrealized gain from derivative instruments (excluding $8 attributable to redeemable noncontrolling interest)

—

—

—

—

2,109

161

2,270
Issuance of common stock, net of offering costs

2,835

27

19,862

—

—

—

19,889
Share-based compensation, net of forfeitures

4

—

32

—

—

—

32
Redemptions of common stock

(2,806)

(28)

(21,025)

—

—

—

(21,053)
Amortization of share-based compensation

—

—

21

—

—

—

21
Distributions declared on common stock and noncontrolling interests, net of distribution fees (excludes $47 attributable to redeemable noncontrolling interest)

—

—

—

(12,769)

—

(1,029)

(13,798)
Redemption value allocation adjustment to redeemable noncontrolling interest

—

—

(88)

—

—

—

(88)
Redemptions of noncontrolling interests

—

—

(7)

—

—

(15)

(22)
Balance as of September 30, 2020

141,808

$
1,417

$
1,261,886

$
(833,598)

$
(30,227)

$
81,444

$
480,922
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021

Balance as of June 30, 2021

152,021

$
1,520

$
1,330,413

$
(859,021)

$
(20,301)

$
116,306

$
568,917
Net income (excluding $99 attributable to redeemable noncontrolling interest)

—

—

—

13,940

—

1,654

15,594
Unrealized gain from derivative instruments (excluding $15 attributable to redeemable noncontrolling interest)

—

—

—

—

2,012

286

2,298
Issuance of common stock, net of offering costs

10,268

103

75,114

—

—

—

75,217
Share-based compensation, net of forfeitures

21

—

160

—

—

—

160
Redemptions of common stock

(1,925)

(19)

(14,731)

—

—

—

(14,750)
Amortization of share-based compensation

—

—

(100)

—

—

—

(100)
Issuances of OP Units for DST Interests

—

—

—

—

—

31,788

31,788
Distributions declared on common stock and noncontrolling interests, net of distribution fees (excludes $106 attributable to redeemable noncontrolling interest)

—

—

(759)

(13,969)

—

(4,000)

(18,728)
Redemption value allocation adjustment to redeemable noncontrolling interest

—

—

(108)

—

—

—

(108)
Redemptions of noncontrolling interests

—

—

(166)

—

—

(1,804)

(1,970)
Balance as of September 30, 2021

160,385

$
1,604

$
1,389,823

$
(859,050)

$
(18,289)

$
144,230

$
658,318
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

Balance as of December 31, 2019

140,480

$
1,405

$
1,257,147

$
(775,259)

$
(14,662)

$
81,657

$
550,288
Net loss (excluding $71 attributable to redeemable noncontrolling interest)

—

—

—

(19,827)

—

(1,515)

(21,342)
Unrealized loss from derivative instruments (excluding $55 attributable to redeemable noncontrolling interest)

—

—

—

—

(15,565)

(1,254)

(16,819)
Issuance of common stock, net of offering costs

12,916

128

92,222

—

—

—

92,350
Share-based compensation, net of forfeitures

20

—

150

—

—

—

150
Redemptions of common stock

(11,608)

(116)

(86,949)

—

—

—

(87,065)
Amortization of share-based compensation

—

—

58

—

—

—

58
Issuances of OP Units for DST Interests

—

—

—

—

—

11,233

11,233
Distributions declared on common stock and noncontrolling interests, net of distribution fees (excludes $141 attributable to redeemable noncontrolling interest)

—

—

—

(38,512)

—

(3,079)

(41,591)
Redemption value allocation adjustment to redeemable noncontrolling interest

—

—

(281)

—

—

—

(281)
Redemptions of noncontrolling interests

—

—

(461)

—

—

(5,598)

(6,059)
Balance as of September 30, 2020

141,808

$
1,417

$
1,261,886

$
(833,598)

$
(30,227)

$
81,444

$
480,922
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Balance as of December 31, 2020

143,041

$
1,430

$
1,269,146

$
(841,496)

$
(27,431)

$
96,242

$
497,891
Net income (excluding $169 attributable to redeemable noncontrolling interest)

—

—

—

22,922

—

2,430

25,352
Unrealized gain from derivative instruments (excluding $70 attributable to redeemable noncontrolling interest)

—

—

—

—

9,142

1,047

10,189
Issuance of common stock, net of offering costs

23,916

239

173,196

—

—

—

173,435
Share-based compensation, net of forfeitures

29

—

217

—

—

—

217
Redemptions of common stock

(6,601)

(65)

(50,065)

—

—

—

(50,130)
Amortization of share-based compensation

—

—

(72)

—

—

`
—

(72)
Issuances of OP Units for DST Interests

—

—

—

—

—

57,729

57,729
Distributions declared on common stock and noncontrolling interests, net of distribution fees (excludes $314 attributable to redeemable noncontrolling interest)

—

—

(2,001)

(40,476)

—

(9,231)

(51,708)
Redemption value allocation adjustment to redeemable noncontrolling interest

—

—

(293)

—

—

—

(293)
Redemptions of noncontrolling interests

—

—

(305)

—

—

(3,987)

(4,292)
Balance as of September 30, 2021

160,385

$
1,604

$
1,389,823

$
(859,050)

$
(18,289)

$
144,230

$
658,318


	Stockholders’ Equity
								Accumulated
				Additional		Distributions		Other
	Common Stock			Paid-in		in Excess of		Comprehensive		Noncontrolling		Total
(in thousands)	Shares	Amount		Capital		Earnings		Income (Loss)		Interests		Equity
FOR THE SIX MONTHS ENDED JUNE 30, 2021
Balance as of December 31, 2020	143,041	$	1,430	$	1,269,146	$	(841,496)	$	(27,431)	$	96,242	$	497,891
Net income (excluding $70 attributable to redeemable noncontrolling interest)	—		—		—		8,982		—		776		9,758
Change from cash flow hedging activities (excluding $55 attributable to redeemable noncontrolling interest)	—		—		—		—		7,130		761		7,891
Issuance of common stock	13,648		136		104,148		—		—		—		104,284
Share-based compensation	8		—		85		—		—		—		85
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs	—		—		(2,300)		—		—		—		(2,300)
Trailing distribution fees	—		—		(5,008)		1,241		—		(2,404)		(6,171)
Redemptions of common stock	(4,676)		(46)		(35,334)		—		—		—		(35,380)
Issuances of OP Units for DST Interests	—		—		—		—		—		25,941		25,941
Distributions declared on common stock and noncontrolling interests (excludes $208 attributable to redeemable noncontrolling interest)	—		—		—		(27,748)		—		(2,827)		(30,575)
Redemption value allocation adjustment to redeemable noncontrolling interest	—		—		(185)		—		—		—		(185)
Redemptions of noncontrolling interests	—		—		(139)		—		—		(2,183)		(2,322)
Balance as of June 30, 2021	152,021	$	1,520	$	1,330,413	$	(859,021)	$	(20,301)	$	116,306	$	568,917
FOR THE SIX MONTHS ENDED JUNE 30, 2022
Balance as of December 31, 2021	169,665	$	1,696	$	1,457,296	$	(865,844)	$	(13,418)	$	196,696	$	776,426
Net income (excluding $186 attributable to redeemable noncontrolling interest)	—		—		—		15,423				2,618		18,041
Change from cash flow hedging activities (excluding $136 attributable to redeemable noncontrolling interest)	—		—		—		—		11,715		1,962		13,677
Issuance of common stock	28,844		289		244,237		—		—		—		244,526
Share-based compensation	—		—		100		—		—		—		100
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs	—		—		(5,401)		—		—		—		(5,401)
Trailing distribution fees	—		—		(10,372)		2,289		—		(3,823)		(11,906)
Redemptions of common stock	(3,408)		(34)		(28,466)		—		—				(28,500)
Issuances of OP Units for DST Interests	—		—		—		—		—		39,441		39,441
Other noncontrolling interests net distributions	—		—		—		—		—		(23)		(23)
Distributions declared on common stock and noncontrolling interests (excludes $351 attributable to redeemable noncontrolling interest)	—		—		—		(34,663)		—		(5,824)		(40,487)
Redemption value allocation adjustment to redeemable noncontrolling interest	—		—		(1,596)		—		—				(1,596)
Redemptions of noncontrolling interests	—		—		(503)		—		—		(2,862)		(3,365)
Balance as of June 30, 2022	195,101	$	1,951	$	1,655,295	$	(882,795)	$	(1,703)	$	228,185	$	1,000,933

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~BLACK CREEK DIVERSIFIED PROPERTY FUND~~ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Nine Months Ended September 30,
(in thousands)

2021

2020
Operating activities:




Net income (loss)

$
25,521

$
(21,413)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Real estate-related depreciation and amortization

52,728

44,558
Straight-line rent and amortization of above- and below-market leases

(6,759)

(6,177)
Gain on sale of real estate property

(53,321)

(2,192)
Impairment of real estate property

758

0
Other

10,991

9,220
Changes in operating assets and liabilities

8,832

4,851
Net cash provided by operating activities

38,750

28,847
Investing activities:


Real estate acquisitions

(346,480)

(162,114)
Capital expenditures

(22,725)

(28,659)
Proceeds from disposition of real estate property

141,360

2,752
Principal collections on debt-related investments

2,405

129
Investment in debt-related investments

(402)

(45,539)
Other

(333)

(3,355)
Net cash used in investing activities

(226,175)

(236,786)
Financing activities:


Repayments of mortgage notes

(26,241)

(2,223)
Net repayments of line of credit

(21,000)

0
Redemptions of common stock

(50,130)

(87,065)
Distributions paid to common stockholders

(23,002)

(22,527)
Proceeds from issuance of common stock

166,750

81,932
Proceeds from financing obligations, net

163,018

179,592
Offering costs for issuance of common stock and private placements

(8,689)

(7,331)
Distributions paid to noncontrolling interest holders and redeemable noncontrolling interest holders

(4,550)

(3,189)
Redemption of OP Unit holder interests

(4,292)

(6,059)
Other

(3,177)

(6,533)
Net cash provided by financing activities

188,687

126,597
Net increase (decrease) in cash, cash equivalents and restricted cash

1,262

(81,342)
Cash, cash equivalents and restricted cash, at beginning of period

21,734

107,782
Cash, cash equivalents and restricted cash, at end of period

$
22,996

$
26,440


	For the Six Months Ended June 30,
(in thousands)	2022		2021
Operating activities:
Net income	$	18,227	$	9,828
Adjustments to reconcile net income to net cash provided by operating activities:
Real estate-related depreciation and amortization		64,354		33,907
Straight-line rent and amortization of above- and below-market leases		(4,018)		(3,177)
Gain on sale of real estate property		(83,524)		(27,342)
Performance participation allocation		18,379		3,995
Equity in income of unconsolidated joint venture partnership		(708)		0
Impairment of real estate property		0		758
Amortization of debt and financing obligation costs		7,478		6,104
Amortization of UPREIT valuation adjustment		8,686		(282)
Other		1,463		(3,245)
Changes in operating assets and liabilities		19,283		1,317
Net cash provided by operating activities		49,620		21,863
Investing activities:
Real estate acquisitions		(1,180,365)		(162,664)
Capital expenditures		(13,960)		(14,840)
Proceeds from disposition of real estate property		251,822		48,960
Principal collections on debt-related investments		1,336		2,406
Investment in unconsolidated joint venture partnerships		(47,904)		0
Investment in debt-related investments		(3,655)		(402)
Other		(48)		(10)
Net cash used in investing activities		(992,774)		(126,550)
Financing activities:
Repayments of mortgage notes		(1,157)		(1,597)
Net proceeds from (repayments of) line of credit		127,000		(23,000)
Proceeds from term loan		275,000		0
Redemptions of common stock		(28,500)		(35,380)
Distributions paid to common stockholders, redeemable noncontrolling interest holders and noncontrolling interest holders		(23,274)		(18,041)
Proceeds from issuance of common stock		230,603		93,179
Proceeds from financing obligations, net		393,330		100,302
Offering costs for issuance of common stock and private placements		(8,667)		(5,376)
Redemption of noncontrolling interests		(3,365)		(2,322)
Redemption of redeemable noncontrolling interests		(7,724)		0
Deferred financing costs paid		(6)		0
Other		0		(2,464)
Net cash provided by financing activities		953,240		105,301
Net increase in cash, cash equivalents and restricted cash		10,086		614
Cash, cash equivalents and restricted cash, at beginning of period		14,352		21,734
Cash, cash equivalents and restricted cash, at end of period	$	24,438	$	22,348

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~BLACK CREEK DIVERSIFIED PROPERTY FUND~~ARES REAL ESTATE INCOME TRUST INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

Unless the context otherwise requires, the “Company,” “we,” ~~“our,”~~“our” or “us” refers to ~~Black Creek Diversified Property Fund~~Ares Real Estate Income Trust Inc. and its consolidated subsidiaries. The Company is externally managed by its advisor. On July 1, 2021, Ares Management Corporation (“Ares”) closed on the acquisition of the U.S. real estate investment advisory and distribution business of Black Creek Group, including the Company’s former advisor, Black Creek Diversified Property Advisors LLC (the “Former Advisor”). As a result of the closing of this transaction, Ares Commercial Real Estate Management LLC became the Company’s new advisor (the “New Advisor”). Ares did not acquire the Company’s former sponsor, Black Creek Diversified Property Advisors Group LLC (the “Former Sponsor”), and the Company now considers the Ares real estate group (“AREG”) to be its Sponsor. ~~See Note 8 for additional information regarding this transaction.~~ References to the “Advisor” throughout this report mean Black Creek Diversified Property Advisors LLC for periods prior to July 1, 2021 and Ares Commercial Real Estate Management LLC for periods thereafter.

The accompanying unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain disclosures normally included in the annual audited financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been omitted. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the SEC on March 5, 14, 2022 (“2021 ~~(“2020~~ Form 10-K”).

As used herein, the term “commercial” refers to our office, retail and industrial properties or customers, as applicable.

Reclassifications

Certain items in our condensed consolidated statements of operations, condensed consolidated statements of equity and condensed consolidated statements of cash flows for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 have been reclassified to conform to the ~~2021~~2022 presentation. ~~Acquisition costs and reimbursements have been reclassified from general and administrative expenses to be shown separately on one line item on the condensed consolidated statements of operations.~~

~~Recently Adopted Accounting Standards~~

~~In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion~~

2. INVESTMENTS IN REAL ESTATE PROPERTIES

The following table summarizes our consolidated investments in real estate properties and ~~Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), which updates various codification topics~~excludes properties classified as held for sale. Refer to ~~simplify the accounting guidance~~“Note 3” for ~~certain financial instruments with characteristics of liabilities and equity, with a specific focus on convertible instruments and the derivative scope exception~~detail relating to our real estate properties held for contracts in an entity’s own equity. ASU 2020-06 is effective for annual and interim reporting periods beginning after December 15, 2021, with early adoption permitted for annual and interim reporting periods beginning after December 15, 2020. We adopted this standard as of the reporting period beginning January 1, 2021. The adoption did not have a material effect on our condensed consolidated financial statements.sale.

In January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848)” (“ASU 2021-01”) to refine the scope of ASU 2020-04 and clarify the guidance as part of FASB’s ongoing monitoring of global reference rate reform activities. The ASU extends the guidance to provide optional expedients and exceptions for applying GAAP to derivative contracts if certain criteria are met. The amendments only apply to derivative contracts that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2021-01 is effective for annual and interim reporting periods beginning after March 12, 2020, with early adoption permitted, through December 31, 2022. The expedients and exceptions do not apply to derivative contracts entered into after December 31, 2022. We adopted this standard immediately upon its issuance. The adoption did not have a material effect on our condensed consolidated financial statements.


	As of,
(in thousands)	June 30, 2022		December 31, 2021
Land	$	699,259	$	583,728
Buildings and improvements		3,137,777		2,180,358
Intangible lease assets		317,840		284,128
Right of use asset		13,637		13,637
Investment in real estate properties		4,168,513		3,061,851
Accumulated depreciation and amortization		(508,936)		(472,025)
Net investment in real estate properties	$	3,659,577	$	2,589,826

Table of Contents

~~2. INVESTMENTS IN REAL ESTATE PROPERTIES~~

~~The following table summarizes our consolidated investments in real estate properties:~~

As of
(in thousands)

September 30, 2021

December 31, 2020
Land

$
574,254

$
476,442
Buildings and improvements

1,840,097

1,689,474
Intangible lease assets

293,075

289,762
Investment in real estate properties

2,707,426

2,455,678
Accumulated depreciation and amortization

(510,763)

(501,105)
Net investment in real estate properties

$
2,196,663

$
1,954,573

Acquisitions

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we acquired 100% of the following properties, all of which were determined to be asset acquisitions:

($ in thousands)

Property Type

Acquisition Date

Total Purchase Price (1)
Radar Distribution Center LLC

Industrial

3/31/2021

$
49,168
Intermountain SC

Industrial

6/30/2021

61,057
Airway Logistics

Industrial

7/9/2021

24,238
Greenwood Business Center

Industrial

8/2/2021

16,803
25 Linden Industrial Center

Industrial

8/31/2021

17,061
Little Orchard Business Park

Industrial

9/8/2021

96,559
Tustin Business Center

Industrial

9/22/2021

33,285
Barrow Crossing

Retail

6/22/2021

50,205
Total acquisitions





$
348,376


($ in thousands)	Property Type	Acquisition Date	Total Purchase Price (1)
2022 Acquisitions:
Skye 750	Residential	1/5/2022	$	92,845
Arabelle City Center	Residential	4/12/2022		156,781
Dallas Cityline	Residential	4/13/2022		111,093
Dallas Wycliff	Residential	4/13/2022		94,083
Dallas Maple District	Residential	4/13/2022		93,089
San Vance	Residential	4/13/2022		77,586
San Stone Oak	Residential	4/13/2022		72,605
General Washington IC	Industrial	1/7/2022		11,051
Western Foods Center	Industrial	1/14/2022		39,298
Orlando I & II LC	Industrial	2/17/2022		94,759
Orlando III & IV LC	Industrial	2/17/2022		42,347
Orlando V LC	Industrial	2/17/2022		34,828
Orlando VI LC	Industrial	2/17/2022		28,694
Orlando VII LC	Industrial	2/17/2022		23,532
1403 Gillingham Lane	Industrial	6/10/2022		20,550
Industrial Drive IC	Industrial	6/17/2022		4,018
Glen Afton IC	Industrial	6/17/2022		22,036
East 56th Ave IC	Industrial	6/17/2022		19,041
Brockton IC	Industrial	6/17/2022		6,522
Pine Vista IC	Industrial	6/17/2022		18,790
Tri-County Parkway IC	Industrial	6/17/2022		12,784
Miami NW 114th IC	Industrial	6/17/2022		12,022
North Harney IC	Industrial	6/17/2022		8,026
Wes Warren Drive IC	Industrial	6/17/2022		7,515
Enterprise Way IC	Industrial	6/17/2022		6,519
New Albany IC	Industrial	6/17/2022		17,544
Maplewood Drive IC	Industrial	6/17/2022		5,514
1801 N. 5th Street	Industrial	6/24/2022		23,305
350 Carter Road	Office	4/27/2022		31,256
Total 2022 acquisitions			$	1,188,033

(1)	Total purchase price is equal to the total consideration paid plus any debt assumed at fair value. There was 0 debt assumed in connection with the ~~2021~~2022 acquisitions.

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we allocated the purchase price of our acquisitions to land, building and intangible lease assets and liabilities as follows:


	For the Nine Months Ended		For the Six Months Ended
($ in thousands)	September 30, 2021		June 30, 2022
Land	$	116,421	$	152,767
Building		217,341		999,305
Intangible lease assets		27,103		41,439
Above-market lease assets		1,317		696
Below-market lease liabilities		(13,806)		(6,174)
Total purchase price (1)	$	348,376	$	1,188,033

(1)	There was 0 debt assumed in connection with the ~~2021~~2022 acquisitions.

The weighted-average amortization period for the intangible lease assets and liabilities acquired in connection with our acquisitions during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, as of the respective date of each acquisition, was ~~8.9~~5.2 years.

~~Dispositions~~

During the nine months ended September 30, 2021, we sold 1 retail property, 1 industrial property, and 2 office properties for net proceeds of approximately $141.4 million. We recorded a net gain on sale of approximately $53.3 million.

~~During the nine months ended September 30, 2020, we sold 1 retail outparcel for net proceeds of approximately $2.8 million. We recorded a net gain on sale of approximately $2.2 million.~~

910

Table of Contents

Dispositions

During the six months ended June 30, 2022, we sold 5 retail properties, 1 office property and 1 retail land parcel for net proceeds of approximately $251.8 million. We recorded a net gain on sale of approximately $83.5 million.

During the six months ended June 30, 2021, we sold 1 retail property and 1 industrial property for net proceeds of approximately $49.0 million. We recorded a net gain on sale of approximately $27.3 million.

Intangible Lease Assets and Liabilities

Intangible lease assets and liabilities, excluding properties classified as held for sale, as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 include the following:


	As of September 30, 2021						As of December 31, 2020						As of June 30, 2022						As of December 31, 2021
			Accumulated						Accumulated						Accumulated						Accumulated
(in thousands)	Gross		Amortization		Net		Gross		Amortization		Net		Gross		Amortization		Net		Gross		Amortization		Net
Intangible lease assets	$	269,956	$	(202,569)	$	67,387	$	266,242	$	(214,055)	$	52,187	$	294,941	$	(198,710)	$	96,231	$	261,401	$	(186,820)	$	74,581
Above-market lease assets		23,119		(19,825)		3,294		23,520		(21,216)		2,304		22,899		(19,337)		3,562		22,727		(19,507)		3,220
Below-market lease liabilities		(92,475)		40,939		(51,536)		(79,891)		39,434		(40,457)		(78,286)		31,681		(46,605)		(80,206)		32,707		(47,499)

Rental Revenue Adjustments and Depreciation and Amortization Expense

The following table summarizes straight-line rent adjustments, amortization recognized as an increase (decrease) to rental revenues from above- and below-market lease assets and liabilities, and real estate-related depreciation and amortization expense:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020		2022		2021		2022		2021
Increase (decrease) to rental revenue:
Straight-line rent adjustments	$	2,798	$	1,322	$	4,667	$	3,947	$	1,240	$	693	$	1,966	$	1,869
Above-market lease amortization		(138)		(157)		(327)		(275)		(185)		(87)		(354)		(189)
Below-market lease amortization		922		781		2,419		2,505		1,210		746		2,406		1,497
Real estate-related depreciation and amortization:
Depreciation expense	$	15,332	$	12,406	$	42,740	$	34,660	$	25,349	$	14,054	$	45,547	$	27,408
Intangible lease asset amortization		3,489		3,243		9,988		9,898		11,554		3,120		18,807		6,499

Real Estate Property Impairment

During the ~~nine~~six months ended ~~September~~June 30, 2021, we recorded non-cash impairment charges of $0.8 million related to a retail property located in the ~~Manomet, Massachusetts~~Greater Boston market, which was disposed of in March 2021. Prior to the disposition, we reevaluated the fair value of the property and determined that the net book value of the property exceeded the respective contract sales price less costs to sell the property, resulting in the impairment.

3. ASSETS HELD FOR SALE

We classify a property as held for sale when certain criteria are met, in accordance with GAAP. Assets classified as held for sale are expected to be sold to a third party. At such time the property meets the held for sale criteria, the respective assets and liabilities are presented separately in the consolidated balance sheets and depreciation is no longer recognized. Assets held for sale are reported at the lower of their carrying amount or their estimated fair value less the costs to sell the assets.

Table of Contents

As of December 31, 2021, we had 1 retail property (Bandera Road) and 1 office property (1^st Avenue) that met the criteria to be classified as held for sale. Both properties were sold in the first quarter of 2022. The following table summarizes the amounts held for sale as of June 30, 2022 and December 31, 2021:


	As of
(in thousands)	June 30, 2022		December 31, 2021
Net investment in real estate properties	$	—	$	101,690
Other assets		—		3,406
Assets held for sale	$	—	$	105,096
Accounts payable and accrued expenses	$	—	$	3,172
Intangible lease liabilities, net		—		995
Other liabilities		—		1,577
Liabilities related to assets held for sale	$	—	$	5,744

4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURE PARTNERSHIPS

On November 30, 2021, we acquired interests in 2 joint venture partnerships, Pathfinder Core AREIT JV NNN Holdings, LLC (“Net Lease JV I”) and Pathfinder Core AREIT Net Lease Aggregator LLC (“Net Lease JV II”), for purposes of investing in properties across the U.S. with triple net lease agreements. On December 21, 2021, we also acquired interests in another joint venture partnership, AREIT-McDowell Vue Parent LLC (“Vue 1400 JV”), with third party investors for purposes of acquiring a 316 unit residential property in West Palm Beach, Florida. We record our investments in these joint venture partnerships under the equity method on our consolidated balance sheets as we have the ability to exercise significant influence in each partnership but do not have control of the entities.

The following table summarizes our investments in unconsolidated joint venture partnerships as of June 30, 2022 and December 31, 2021:


				Investment in Unconsolidated Joint
		��	Ownership	Venture Partnerships as of
($ in thousands)	Segment		Percentage	June 30, 2022		December 31, 2021
Vue 1400 JV	Residential		85%	$	25,845	$	26,117
Net Lease JV I	Net Lease		50%		16,393		16,267
Net Lease JV II	Net Lease		50%		63,166		15,041
Total investment in unconsolidated joint venture partnerships				$	105,404	$	57,425

3.5. DEBT

A summary of our consolidated debt is as follows:


	Weighted-Average									Weighted-Average
	Effective Interest Rate as of					Balance as of				Effective Interest Rate as of					Balance as of
	September 30,		December 31,			September 30,		December 31,		June 30,		December 31,			June 30,		December 31,
($ in thousands)	2021		2020		Current Maturity Date	2021		2020		2022		2021		Current Maturity Date	2022		2021
Line of credit (1)	1.48	%	1.54	%	January 2023	$	85,000	$	106,000	3.04	%	1.35	%	November 2025	$	383,000	$	256,000
Term loan (2)	3.26		3.27		January 2024		325,000		325,000	3.24		3.16		November 2026		400,000		325,000
Term loan (3)	3.29		3.29		February 2022		200,000		200,000	2.99		3.19		January 2027		400,000		200,000
Fixed-rate mortgage notes ~~(4)~~	3.68		3.55		October 2022 - December 2029		150,346		210,544	3.48		3.49		October 2022 - May 2031		380,797		381,954
Floating-rate mortgage note ~~(5)~~(4)	2.34		2.50		November 2021 - January 2022		160,957		127,000	3.92		2.26		October 2024 - October 2026		207,600		207,600
Total principal amount / weighted-average ~~(6)~~(5)	3.01	%	3.04	%		$	921,303	$	968,544	3.27	%	2.78	%		$	1,771,397	$	1,370,554
Less: unamortized debt issuance costs						$	(2,769)	$	(4,083)						$	(15,030)	$	(16,762)
Add: mark-to-market adjustment on assumed debt							651		844
Add: unamortized mark-to-market adjustment on assumed debt																8,925		9,442
Total debt, net						$	919,185	$	965,305						$	1,765,292	$	1,363,234
Gross book value of properties encumbered by debt						$	557,103	$	584,637						$	966,932	$	981,927

~~(1)~~

The effective interest rate is calculated based on the London Interbank Offered Rate (“LIBOR”), plus a margin ranging from 1.30% to 2.10%, depending on our consolidated leverage ratio. As of September 30, 2021, the unused and available portions under the line of credit were approximately $365.0 million and $252.6 million, respectively. The line of credit is available for

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(1)

The effective interest rate is calculated based on the London Interbank Offered Rate (“LIBOR”), plus a margin ranging from 1.25% to 2.00%, depending on our consolidated leverage ratio. As of June 30, 2022, the unused and available portions under the line of credit were approximately $317.0 million and $316.8 million, respectively. The line of credit is available for general business purposes including, but not limited to, refinancing of existing indebtedness and financing the acquisition of permitted investments, including commercial properties.

(2)

The effective interest rate is calculated based on LIBOR, plus a margin ranging from ~~1.25%~~1.20% to ~~2.05%~~1.90%, depending on our consolidated leverage ratio. Total commitments for this term loan are ~~$325.0~~$400.0 million. ~~There are 0 amounts unused or available under this term loan as of September 30, 2021.~~ The weighted-average interest rate is the all-in interest rate, including the effects of interest rate swap agreements relating to approximately $300.0 million in borrowings under this term loan.

(3)

The effective interest rate is calculated based on LIBOR, plus a margin ranging from ~~1.25%~~1.20% to ~~2.05%~~1.90%, depending on our consolidated leverage ratio. Total commitments for this term loan are ~~$200.0~~$400.0 million. ~~There are 0 amounts unused or available under this term loan as of September 30, 2021. The weighted-average interest rate is the all-in interest rate and is fixed through interest swap agreements.~~

(4)

The amount outstanding as of December 31, 2020 includes a $49.8 million floating-rate mortgage note that is subject to an interest rate spread of 1.65% over one-month LIBOR, which we had effectively fixed using an interest rate swap at 2.85% until the designated cash flow hedge expired in July 2021.

~~(5)~~

The effective interest rate is calculated based on LIBOR plus a margin. As of ~~September~~both June 30, 2022 and December 31, 2021, our floating-rate mortgage notes were subject to interest rate spreads ranging from ~~1.65%~~1.55% to ~~2.25%. As of December 31, 2020, our floating-rate mortgage note was subject to an interest rate spread of 2.25%~~2.50%.

~~(6)~~(5)

The weighted-average remaining term of our consolidated borrowings was approximately ~~1.9~~4.3 years as of ~~September~~June 30, ~~2021,~~2022, excluding the impact of certain extension options.

As of ~~September~~June 30, ~~2021,~~2022, the principal payments due on our ~~outstanding~~consolidated debt during each of the next five years and thereafter were as follows:


(in thousands)	Line of Credit		Term Loans		Mortgage Notes		Total		Line of Credit (1)		Term Loans		Mortgage Notes		Total
Remainder of 2021	$	0	$	0	$	33,957	$	33,957
2022 (1)		0		200,000		127,951		327,951
2023 (2)		85,000		0		0		85,000
Remainder of 2022									$	0	$	0	$	455	$	455
2023										0		0		1,463		1,463
2024		0		325,000		0		325,000		0		0		129,265		129,265
2025		0		0		70,000		70,000		383,000		0		72,360		455,360
2026										0		400,000		84,214		484,214
Thereafter		0		0		79,395		79,395		0		400,000		300,640		700,640
Total principal payments	$	85,000	$	525,000	$	311,303	$	921,303	$	383,000	$	800,000	$	588,397	$	1,771,397

(1)	~~The term of this term loan may be extended pursuant to 2 one-year extension options, subject to certain conditions.~~

~~(2)~~

The term of the line of credit may be extended pursuant to 2 six-month extension options, subject to certain conditions.

In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee (“ARRC”), which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR in derivatives and other financial contracts. ~~We are not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets.~~ Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

LIBOR is expected to be phased out or modified by June ~~2023, and the writing of contracts using LIBOR is expected to stop by the end of 2021.~~2023. As of ~~September~~June 30, ~~2021,~~2022, our line of credit, ~~and our~~ term loans ~~are~~and certain of our ~~only indebtedness with~~mortgage notes have initial or extended maturity dates beyond 2023 ~~that have~~with exposure to LIBOR. The agreements governing ~~the line of credit and term~~these loans provide procedures for determining a replacement or alternative base rate in the event that LIBOR is discontinued. However, there can be no assurances as to whether such replacement or alternative base rate will be more or less favorable than LIBOR. We intend to monitor the developments with respect to the ~~potential~~ phasing out of LIBOR after 2023 and work with our lenders to seek to ensure any transition away from LIBOR will have minimal impact on our financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR. In July 2022, we amended our credit facility and changed the calculation of our effective interest rate to replace LIBOR with SOFR.

Debt Covenants

Our line of credit, term loans and mortgage note agreements contain various property-level covenants, including customary affirmative and negative covenants. In addition, the line of credit and term loan agreements contain certain corporate-level financial covenants, including leverage ratio, fixed charge coverage ratio, and tangible net worth thresholds. We were in compliance with our debt covenants as of June 30, 2022.

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~~covenants, including leverage ratio, fixed charge coverage ratio, and tangible net worth thresholds. We were in compliance with our debt covenants as of September 30, 2021.~~

Derivative Instruments

To manage interest rate risk for certain of our variable-rate debt, we use interest rate derivative instruments as part of our risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by either providing a fixed interest rate or capping the variable interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the interest rate swap agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable amounts from a counterparty at the end of each period in which the interest rate exceeds the agreed fixed price. Interest rate caps are not designated as hedges. Certain of our variable-rate borrowings are not hedged, and therefore, to an extent, we have ongoing exposure to interest rate movements.

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss is recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) on the condensed consolidated balance sheets and is reclassified into earnings as interest expense for the same period that the hedged transaction affects earnings, which is when the interest expense is recognized on the related debt. During the next 12 months, we estimate that approximately ~~$7.4~~$2.9 million will be reclassified as an ~~increase~~decrease to interest expense related to active effective hedges of existing floating-rate ~~debt,~~debt. Our interest rate cap derivative instruments are not designated as hedges and therefore, changes in fair value must be recognized through income. As a result, in periods with high interest rate volatility, we estimate that approximately $0.1 million will be reclassified as an increase to interest expense related to terminated hedges where the likelihood of the originally hedged interest payments remains probable.may experience significant fluctuations in our net income (loss).

The following table summarizes the location and fair value of our consolidated derivative instruments on our condensed consolidated balance sheets:


	Number of			Fair Value		Number of			Fair Value
($ in thousands)	Contracts	Notional Amount		Other Liabilities		Contracts	Notional Amount (1)			Other Assets	Other Liabilities
As of September 30, 2021
As of June 30, 2022
Interest rate swaps	13	$	500,000	$	16,696	12	$	300,000	$	4,735	$	2,019
Interest rate caps	1		127,000		0	2		207,600		2,690		0
Total derivative instruments	14	$	627,000	$	16,696	14	$	507,600	$	7,425	$	2,019
As of December 31, 2020
As of December 31, 2021
Interest rate swaps	14	$	549,849	$	26,916	13	$	500,000	$	164	$	11,236
Interest rate caps	1		127,000		0	2		207,600		159		0
Total derivative instruments	15	$	676,849	$	26,916	15	$	707,600	$	323	$	11,236

(1)	Excludes $350.0 million of notional amount for 5 interest rate swaps entered into in June 2022 with an effective date in July 2022.

The following table presents the effect of our consolidated derivative instruments on our condensed consolidated financial statements:


	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(in thousands)	2021		2020		2021		2020		2022		2021		2022		2021
Derivative instruments designated as cash flow hedges:
(Loss) gain recognized in AOCI	$	(224)	$	(292)	$	2,519	$	(22,022)
Gain (loss) recognized in AOCI									$	787	$	(600)	$	10,862	$	2,743
Amount reclassified from AOCI into interest expense		2,537		2,570		7,740		5,148		1,032		2,631		2,951		5,203
Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded		17,866		15,290		51,477		42,930		33,774		17,048		58,184		33,611
Derivative instruments not designated as cash flow hedges:
Loss recognized in income	$	0	$	(1)	$	(13)	$	(13)
Gain (loss) recognized in income									$	982	$	—	$	2,532	$	(13)

4.6. DST PROGRAM

We have a program to raise capital through private placement offerings by selling beneficial interests (the “DST Interests”) in specific Delaware statutory trusts holding real properties (the “DST Program”). During the nine months ended September 30, 2021 and 2020, we sold approximately $188.0 million and $202.3 million, respectively, in gross interests related to the DST Program, including interests financed by the DST Program Loans (as defined below), and incurred rent obligations of approximately $20.7 million and $13.7 million, respectively, under our master lease agreements with investors who are participating in the DST Program. Additionally, during the nine months ended September 30, 2021 and 2020, 7.6 million partnership units (“OP Units”) in our operating partnership, Black Creek Diversified Property Operating Partnership LP (the “Operating Partnership”) and 1.5 million OP Units, respectively were

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issued in exchange for DST Interests, for a net investment of $57.7 million and $11.3 million, respectively, in accordance with our Umbrella Partnership Real Estate Investment Trust (“UPREIT”) structure.

In order to facilitate additional capital raise through the DST Program, we have made and may continue to offer loans (“DST Program Loans”) to finance a portion of the sale of DST Interests to potential investors. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were approximately ~~$58.3~~$86.7 million and ~~$45.2~~$62.1 million, respectively, of outstanding DST Program Loans that we have made to partially finance the sale of DST Interests. Of the $188.0 million and $202.3 million, respectively, of gross interests sold during the nine months ended September 30, 2021 and 2020, $17.1 million and $22.7 million, respectively, were financed by DST Program Loans. We include our investments in DST Program Loans separately on our condensed consolidated balance sheets in the ~~“DST~~DST Program ~~Loans”~~Loans line item and we include income earned from DST Program Loans in ~~“other income”~~other income on our

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condensed consolidated statements of operations. We do not have a significant credit concentration with any individual purchaser as a result of DST Program Loans.

The following table presents our DST Program activity for the three and six months ended June 30, 2022 and 2021:


		For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)		2022		2021		2022		2021
DST Interests sold	$	161,861	$	63,107	$	442,663	$	114,923
DST Interests financed by DST Program Loans		13,205		6,764		28,032		11,756
Income earned from DST Program Loans (1)		833		538		1,501		1,009
Rent obligation incurred under master lease agreements (2)		11,603		6,862		20,857		13,336

(1) Included in other income and expenses on condensed consolidated statements of operations.

(2) Included in interest expense on condensed consolidated statements of operations.

Additionally, during the six months ended June 30, 2022 and 2021, 4.8 million partnership units (“OP Units”) in our operating partnership, AREIT Operating Partnership LP (the “Operating Partnership”) and 3.4 million OP Units, respectively were issued in exchange for DST Interests, for a net investment of $39.4 million and $25.9 million, respectively, in accordance with our Umbrella Partnership Real Estate Investment Trust (“UPREIT”) structure.

5.7. FAIR VALUE

We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of the amounts that we would realize upon disposition.

Fair Value Measurements on a Recurring Basis

The following table presents our financial instruments measured at fair value on a recurring basis:


			��					Total								Total
(in thousands)	Level 1			Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value
As of September 30, 2021
As of June 30, 2022
Assets:
Derivative instruments										$	0	$	7,425	$	0	$	7,425
Total assets measured at fair value										$	0	$	7,425	$	0	$	7,425
Liabilities:
Derivative instruments	$	0		$	16,696	$	0	$	16,696	$	0	$	2,019	$	0	$	2,019
Total liabilities measured at fair value	$	0		$	16,696	$	0	$	16,696	$	0	$	2,019	$	0	$	2,019
As of December 31, 2020
As of December 31, 2021
Assets:
Derivative instruments										$	0	$	323	$	0	$	323
Total assets measured at fair value										$	0	$	323	$	0	$	323
Liabilities:
Derivative instruments	$	0		$	26,916	$	0	$	26,916	$	0	$	11,236	$	0	$	11,236
Total liabilities measured at fair value	$	0		$	26,916	$	0	$	26,916	$	0	$	11,236	$	0	$	11,236

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Derivative Instruments. The derivative instruments are interest rate swaps and an interest rate ~~cap~~caps whose fair value is estimated using market-standard valuation models. Such models involve using market-based observable inputs, including interest rate curves. We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and respective counterparty’s nonperformance risk in the fair value measurements, which we have concluded are not material to the valuation. Due to these derivative instruments being unique and not actively traded, the fair value is classified as Level 2. See ~~“Note 3” above~~Item 3 below for further discussion of our derivative instruments.

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Nonrecurring Fair Value Measurements

As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the fair values of cash and cash equivalents, restricted cash, tenant receivables, accounts payable and accrued expenses, and distributions payable approximate their carrying values because of the short-term nature of

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these instruments. The table below includes fair values for certain of our financial instruments for which it is practicable to estimate fair value. The carrying values and fair values of these financial instruments were as follows:


	As of September 30, 2021				As of December 31, 2020				As of June 30, 2022				As of December 31, 2021
	Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair
(in thousands)	Value (1)		Value		Value (1)		Value		Value (1)		Value		Value (1)		Value
Assets:
Debt-related investments	$	47,883	$	47,883	$	49,885	$	49,584	$	108,782	$	108,782	$	106,463	$	106,463
DST Program Loans		58,276		58,276		45,229		45,229		86,706		85,344		62,123		62,123
Liabilities:
Line of credit	$	85,000	$	85,000	$	106,000	$	105,592	$	383,000	$	383,000	$	256,000	$	256,000
Term loans		525,000		525,000		525,000		521,945		800,000		798,603		525,000		525,000
Mortgage notes		311,303		313,614		337,544		336,336		588,397		552,816		589,554		600,467

(1)	The carrying value reflects the principal amount outstanding.

~~6. STOCKHOLDERS’~~8. EQUITY

Public ~~Offering~~Offerings

~~A summary~~We intend to conduct a continuous public offering that will not have a predetermined duration, subject to continued compliance with the rules and regulations of the SEC and applicable state laws. On May 3, 2022, the SEC declared our registration statement on Form S-11 with respect to our fourth public offering of up to $10.0 billion of shares of its common stock effective, and the fourth public offering commenced the same day. We ceased selling shares of our common stock under our third public ~~offerings (including~~offering of up to $3.0 billion of shares ~~sold through~~immediately upon the effectiveness of the registration statement for the fourth public offering. Under the fourth public offering, we are offering up to $8.5 billion of shares of our common stock in the primary offering and up to $1.5 billion of shares of our common stock pursuant to our distribution reinvestment plan, in any combination of Class T shares, Class D shares, Class S shares, and Class I shares. We may reallocate amounts between the primary offering and distribution reinvestment plan.

Pursuant to our public offerings, we offered and continue to offer shares of our common stock at the “transaction price,” plus applicable upfront selling commissions and dealer manager fees. The “transaction price” generally is equal to the net asset value (“NAV”) per share of our common stock most recently disclosed. Our NAV per share is calculated as of the last calendar day of each month for each of our outstanding classes of stock, and will be available generally within 15 calendar days after the end of the applicable month. Shares issued pursuant to our distribution reinvestment plan ~~(“DRIP”)) for~~are offered at the ~~nine~~transaction price, as indicated above, in effect on the distribution date. We may update a previously disclosed transaction price in cases where we believe there has been a material change (positive or negative) to our NAV per share relative to the most recently disclosed monthly NAV per share.

During the six months ended ~~September~~June 30, ~~2021, is as follows:~~2022, we raised gross proceeds of approximately $244.5 million from the sale of approximately 28.8 million shares of our common stock in our ongoing public offerings, including proceeds from our distribution reinvestment plan of approximately $13.9 million.

(in thousands)

Class T

Class S

Class D

Class I

Class E

Total
Amount of gross proceeds raised:

Primary offering

$
31,724

$
68,283

$
15,367

$
51,376

$
0

$
166,750
DRIP

1,430

3,377

655

6,266

5,274

17,002
Total offering

$
33,154

$
71,660

$
16,022

$
57,642

$
5,274

$
183,752
Number of shares sold:












Primary offering

3,826

8,873

2,024

6,956

0

21,679
DRIP

188

444

86

824

695

2,237
Total offering

4,014

9,317

2,110

7,780

695

23,916

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Common Stock

The following table describes the changes in each class of common shares during the periods presented below:


	Class T	Class S	Class D	Class I	Class E	Total	Class T	Class S	Class D	Class I	Class E	Total
(in thousands)	Shares	Shares	Shares	Shares	Shares	Shares	Shares	Shares	Shares	Shares	Shares	Shares
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020
Balance as of June 30, 2020	8,510	21,870	3,783	44,311	63,301	141,775
FOR THE THREE MONTHS ENDED JUNE 30, 2021
Balance as of March 31, 2021							10,369	26,443	4,899	46,169	59,412	147,292
Issuance of common stock:
Primary shares	602	668	151	709	0	2,130	1,378	2,719	640	1,680	0	6,417
Distribution reinvestment plan	51	119	23	262	250	705	61	147	29	277	230	744
Share-based compensation	0	0	0	4	0	4	0	0	0	0	0	0
Redemptions of common stock	(22)	(419)	(38)	(856)	(1,471)	(2,806)	(56)	(351)	(59)	(441)	(1,525)	(2,432)
Balance as of September 30, 2020	9,141	22,238	3,919	44,430	62,080	141,808
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021
Conversions							(60)	0	0	60	0	0
Balance as of June 30, 2021	11,692	28,958	5,509	47,745	58,117	152,021	11,692	28,958	5,509	47,745	58,117	152,021
FOR THE THREE MONTHS ENDED JUNE 30, 2022
Balance as of March 31, 2022							19,007	40,489	7,662	59,433	55,451	182,042
Issuance of common stock:
Primary shares	1,985	3,245	568	3,700	0	9,498	2,634	5,663	388	5,165	0	13,850
Distribution reinvestment plan	69	162	32	282	225	770	100	200	38	305	186	829
Share-based compensation	0	0	0	21	0	21	0	0	0	0	0	0
Redemptions of common stock	(64)	(217)	(119)	(442)	(1,083)	(1,925)	(30)	(189)	(141)	(201)	(1,059)	(1,620)
Balance as of September 30, 2021	13,682	32,148	5,990	51,306	57,259	160,385
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
Balance as of December 31, 2019	5,852	20,593	3,499	43,732	66,804	140,480
Issuance of common stock:
Primary shares	3,322	3,083	508	3,869	0	10,782
Distribution reinvestment plan	132	353	69	804	776	2,134
Share-based compensation	0	0	0	20	0	20
Redemptions of common stock	(165)	(1,791)	(157)	(3,995)	(5,500)	(11,608)
Balance as of September 30, 2020	9,141	22,238	3,919	44,430	62,080	141,808
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
Conversions							(39)	0	0	39	0	0
Balance as of June 30, 2022							21,672	46,163	7,947	64,741	54,578	195,101
FOR THE SIX MONTHS ENDED JUNE 30, 2021
Balance as of December 31, 2020	9,831	23,516	4,098	44,723	60,873	143,041	9,831	23,516	4,098	44,723	60,873	143,041
Issuance of common stock:
Primary shares	3,826	8,873	2,024	6,956	0	21,679	1,916	5,628	1,456	3,181	0	12,181
Distribution reinvestment plan	188	444	86	824	695	2,237	119	282	54	542	470	1,467
Share-based compensation	0	0	0	29	0	29	0	0	0	8	0	8
Redemptions of common stock	(163)	(685)	(218)	(1,226)	(4,309)	(6,601)	(99)	(468)	(99)	(784)	(3,226)	(4,676)
Balance as of September 30, 2021	13,682	32,148	5,990	51,306	57,259	160,385
Conversions							(75)	0	0	75	0	0
Balance as of June 30, 2021							11,692	28,958	5,509	47,745	58,117	152,021
FOR THE SIX MONTHS ENDED JUNE 30, 2022
Balance as of December 31, 2021							16,425	35,757	6,749	54,406	56,328	169,665
Issuance of common stock:
Primary shares							5,189	10,324	1,493	10,183	0	27,189
Distribution reinvestment plan							192	393	75	607	388	1,655
Share-based compensation							0	0	0	0	0	0
Redemptions of common stock							(33)	(311)	(370)	(556)	(2,138)	(3,408)
Conversions							(101)	0	0	101	0	0
Balance as of June 30, 2022							21,672	46,163	7,947	64,741	54,578	195,101

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Distributions

The following table summarizes our distribution activity (including distributions to noncontrolling interests and distributions reinvested in shares of our common stock) for the periods below:


	Amount										Amount
			Common Stock										Common Stock
	Declared per		Distributions		Other Cash		Reinvested in		Total		Declared per		Distributions		Other Cash		Reinvested in		Distribution		Gross
(in thousands, except per share data)	Common Share (1)		Paid in Cash		Distributions (2)		Shares		Distributions		Common Share (1)		Paid in Cash		Distributions (2)		Shares		Fees (3)		Distributions (4)
2021
2022
March 31	$	0.09375	$	7,562	$	2,010	$	5,526	$	15,098	$	0.09375	$	8,837	$	3,018	$	6,876	$	1,030	$	19,761
June 30		0.09375		7,696		2,266		5,723		15,685		0.09375		9,299		3,157		7,362		1,259		21,077
September 30		0.09375		7,984		2,613		5,985		16,582
Total	$	0.28125	$	23,242	$	6,889	$	17,234	$	47,365	$	0.18750	$	18,136	$	6,175	$	14,238	$	2,289	$	40,838
2020
2021
March 31	$	0.09375	$	7,533	$	1,499	$	5,360	$	14,392	$	0.09375	$	7,562	$	1,424	$	5,526	$	586	$	15,098
June 30		0.09375		7,539		1,611		5,316		14,466		0.09375		7,696		1,611		5,723		655		15,685
September 30		0.09375		7,482		1,592		5,282		14,356		0.09375		7,984		1,854		5,985		759		16,582
December 31		0.09375		7,464		1,750		5,347		14,561		0.09375		8,265		2,446		6,361		885		17,957
Total	$	0.37500	$	30,018	$	6,452	$	21,305	$	57,775	$	0.37500	$	31,507	$	7,335	$	23,595	$	2,885	$	65,322

(1)

Amount reflects the total gross quarterly distribution rate ~~subject~~authorized by our board of directors per Class T share, per Class S share, per Class D share, per Class I share, and per Class E share of common stock. Distributions were declared and paid as of monthly record dates. These monthly distributions have been aggregated and presented on a quarterly basis. The distributions on Class T shares, Class S shares and Class D shares of common stock are reduced by the respective distribution fees that are payable with respect to ~~adjustment for class-specific fees.~~Class T shares, Class S shares and Class D shares.

(2)

~~Includes other cash distributions consisting~~Consists of ~~(i)~~distribution fees paid to Ares Wealth Management Solutions, LLC (the “Dealer Manager”) with respect to OP Units and distributions paid to holders of OP ~~Units;~~Units and ~~(ii) ongoing distribution~~other noncontrolling interest holders.

(3)

Distribution fees are paid monthly to the ~~dealer manager for~~Dealer Manager, with respect to Class T shares, Class S shares and Class D shares issued in the primary portion of our public offerings ~~Ares Wealth Management Solutions, LLC (formerly known as Black Creek Capital Markets, LLC,~~only. All or a portion of these amounts will be retained by, or reallowed (paid) to, participating broker-dealers and servicing broker-dealers.

(4)

Gross distributions are total distributions before the ~~“Dealer Manager”), with respect~~deduction of any distribution fees relating to ~~certain classes~~Class T shares, Class S shares and Class D shares issued in the primary portion of our ~~shares. See “Note 8” for further detail regarding the current and historical ongoing distribution fees.~~public offerings.

Redemptions and Repurchases

Below is a summary of redemptions and repurchases pursuant to our share redemption program for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021. Our board of directors may modify ~~suspend~~ or ~~terminate~~suspend our current share redemption programs if it deems such action to be in the best interest of our stockholders.


	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
(in thousands, except for per share data)	2021			2020			2022			2021
Number of shares requested for redemption or repurchase		6,601			11,608			3,408			4,676
Number of shares redeemed or repurchased		6,601			11,608			3,408			4,676
% of shares requested that were redeemed or repurchased		100.0	%		100.0	%		100.0	%		100.0	%
Aggregate dollar amount of shares redeemed or repurchased							$	28,500		$	35,380
Average redemption or repurchase price per share	$	7.59		$	7.50		$	8.37		$	7.57

9. REDEEMABLE NONCONTROLLING INTERESTS

The Operating Partnership’s net income and loss will generally be allocated to the general partner and the limited partners in accordance with the respective percentage interest in the OP Units issued by the Operating Partnership.

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~~7. REDEEMABLE NONCONTROLLING INTERESTS~~

The Operating Partnership issued OP Units to the Advisor and Former Sponsor as payment of the performance participation allocation (also referred to as the performance component of the advisory fee) pursuant to the amended and restated advisory agreement, by and among the Company, the Operating Partnership and our Advisor. The Advisor and Former Sponsor subsequently transferred these OP Units to its members or their ~~affiliates.~~affiliates or redeemed for cash. We have classified these OP Units as redeemable noncontrolling interests in mezzanine equity on the condensed consolidated balance sheets due to the fact that, as provided in the agreement of limited partnership of the Operating Partnership (the “Partnership Agreement”), the limited partners who hold these OP Units have the ability to tender the OP Units at any time irrespective of the period that they have held such OP Units, and the Operating Partnership is required to satisfy such redemption for cash unless such cash redemption would be prohibited by applicable law or the Partnership Agreement, in which case such OP Units will be redeemed for shares of the Company’s common stock of the class corresponding to the class of such OP Units. The redeemable noncontrolling interests are recorded at the greater of the carrying amount, adjusted for its share of the allocation of income or loss and dividends, or the redemption value, which is equivalent to fair value, of such OP Units at the end of each measurement period.

The following table summarizes the redeemable noncontrolling interests activity for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:

($ in thousands)

As of December 31, 2019

$
0

Settlement of 2019 performance participation allocation (1)

3,776

Distributions declared on redeemable noncontrolling interests

(141)

Net loss attributable to redeemable noncontrolling interests

(71)

Change from cash flow hedging activities attributable to redeemable noncontrolling interests

(55)

Redemption value allocation adjustment to redeemable noncontrolling interests

281

As of September 30, 2020

$
3,790

As of December 31, 2020

$
3,798

Settlement of 2020 performance participation allocation (2)

4,608

Distributions declared on redeemable noncontrolling interests

(314)

Net income attributable to redeemable noncontrolling interests

169

Change from cash flow hedging activities attributable to redeemable noncontrolling interests

70

Redemption value allocation adjustment to redeemable noncontrolling interests

293

As of September 30, 2021

$
8,624


	For the Six Months Ended June 30,
($ in thousands)	2022		2021
Balance at beginning of the year	$	8,994	$	3,798
Settlement of prior year performance participation allocation (1)		15,327		4,608
Distributions to redeemable noncontrolling interests		(351)		(208)
Redemptions to redeemable noncontrolling interests (2)		(7,724)		0
Net income attributable to redeemable noncontrolling interests		186		70
Change from cash flow hedging activities attributable to redeemable noncontrolling interests		136		55
Redemption value allocation adjustment to redeemable noncontrolling interests		1,596		185
Ending balance	$	18,164	$	8,508

(1)

The ~~2019~~2021 performance participation allocation in the amount of ~~$3.8~~$15.3 million became payable ~~to the Former Sponsor~~ on December 31, ~~2019. At the Advisor’s election, it~~2021, and was ~~paid in the form of~~issued as 1.9 million Class I OP Units ~~valued at $3.8 million (based on~~in January 2022. At the ~~NAV per unit as~~direction of ~~December 31, 2019), which were issued~~the Advisor and in light of our Former Sponsor having been the holder of a separate series of partnership interests in the Operating Partnership with special distribution rights (the “Special Units”) for the first six months of 2021, the holder of the Special Units designated 465,000 of these Class I OP Units to an entity owned indirectly by our Chairman, Mr. Mulvihill, and 465,000 of these Class I OP Units to an entity owned indirectly by a member of our Former Sponsor. The holder of the Special Units transferred 945,000 Class I OP Units to the ~~Former Sponsor in January 2020 and subsequently transferred to its members or their affiliates.~~

~~(2)~~

Advisor thereafter. The 2020 performance participation allocation in the amount of $4.6 million became payable to the Former Sponsor, as the former holder of the Special Units, on December 31, 2020. At the Former Advisor’s election, it was paid in the form of Class I OP Units valued at $4.6 million (based on the NAV per unit as of December 31, 2020), which were issued to the Former Sponsor in January 2021 and subsequently transferred to its members or their affiliates.

(2)	At the request of the Advisor, the Operating Partnership redeemed all Class I OP Units issued to the Advisor in January 2022 for $7.7 million.

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8.10. RELATED PARTY TRANSACTIONS

Summary of Fees and Expenses

The table below summarizes the fees and expenses incurred by us for services provided by the Advisor and its affiliates, and by the Dealer Manager related to the services the Dealer Manager provided in connection with our public offerings and any related amounts payable:



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				Payable as of				For the Three Months Ended June 30,				For the Six Months Ended June 30,				Payable as of
(in thousands)	2021		2020		2021		2020		September 30, 2021		December 31, 2020		2022		2021		2022		2021		June 30, 2022		December 31, 2021
Selling commissions and dealer manager fees (1)	$	845	$	226	$	1,866	$	1,216	$	0	$	0	$	1,556	$	615	$	2,866	$	1,021	$	—	$	—
Ongoing distribution fees (1)(2)		788		515		2,064		1,482		291		188		1,270		673		2,329		1,276		547		394
Advisory fees - fixed component		5,480		4,210		15,389		12,666		1,893		1,547
Advisory fees—fixed component														8,227		5,085		15,370		9,909		2,817		2,094
Performance participation allocation		3,774		1,333		7,769		3,343		7,769		4,608		6,186		2,246		18,379		3,995		18,379		15,327
Other expense reimbursements— Advisor (3)(4)		2,950		2,691		8,783		7,271		3,804		2,112
Other expense reimbursements—Advisor (3)(4)														3,206		2,792		5,346		5,833		7,908		1,443
Other expense reimbursements—Dealer Manager		107		45		249		431		0		0		143		84		170		142		170		—
Property accounting fee (5)														303		—		303		—		303		—
DST Program selling commissions, dealer manager and distribution fees (1)		3,106		547		6,422		3,044		236		0		5,660		1,921		13,184		3,316		268		219
Other DST Program related costs—Advisor (3)		1,710		515		3,978		3,084		82		0
Other DST Program related costs—Advisor (4)														3,478		1,249		8,400		2,268		143		87
Total	$	18,760	$	10,082	$	46,520	$	32,537	$	14,075	$	8,455	$	30,029	$	14,665	$	66,347	$	27,760	$	30,535	$	19,564

(1)	All or a portion of these amounts will be retained by, or reallowed (paid) to, participating broker-dealers and servicing broker-dealers.

(2)

The distribution fees ~~accrue daily and~~ are payable monthly in arrears. Additionally, we accrue for future estimated amounts payable related to ongoing distribution fees. The future estimated amounts payable of approximately ~~$26.4~~$46.0 million and ~~$15.5~~$34.1 million as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, are included in other liabilities on the consolidated balance sheets.

(3)	~~Includes costs reimbursed to the Advisor related to the DST Program.~~

~~(4)~~

Other expense reimbursements include certain expenses incurred for organization and offering, acquisition and general administrative services provided to us under the advisory agreement, including, but not limited to, certain expenses described after this footnote, allocated rent paid to both third parties and affiliates of our Advisor, equipment, utilities, insurance, travel and entertainment.

(4)	Includes costs reimbursed to the Advisor related to the DST Program.

(5)

The cost of the property management fee, including the property accounting fee, is generally borne by the tenant or tenants at each real property, either via a direct reimbursement to us or, in the case of tenants subject to a gross lease, as part of the lease cost. In certain circumstances, we may pay for a portion of the property management fee, including the property accounting fee, without reimbursement from the tenant or tenants at a real property.

Certain of the expense reimbursements described in the table above include a portion of the compensation expenses of officers and employees of the Advisor or its affiliates related to activities for which the Advisor did not otherwise receive a separate fee. Amounts incurred related to these compensation expenses for the three months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020~~2021 were approximately ~~$2.6~~$2.9 million and ~~$2.1~~$2.2 million, respectively. Amounts incurred related to these compensation expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020~~2021 were approximately ~~$7.3~~$5.4 million and ~~$5.8~~$4.7 million, ~~respectively.~~respectively No reimbursement is made for compensation of our named executive officers unless the named executive officer is providing stockholder services, as outlined in the advisory agreement.

~~Acquisition Expense Reimbursements.~~Property-Level Accounting Services. Pursuant to the Advisory Agreement ~~subject to certain limitations,~~(2022) effective as of May 1, 2022, we have agreed to ~~reimburse~~pay the Advisor ~~for all acquisition expenses incurred on our behalf~~a property accounting fee in connection with providing services related to accounting for real property operations, including the selection and acquisition of properties, real estate-related assets, and other investments, whether or not such investments are acquired. As these expense reimbursements were not directly attributable to a specified property, they were expensed as incurred on the condensed consolidated statements of operations.

~~Completion~~maintenance of the ~~Transaction~~real property’s books and records in accordance with ~~Ares~~

~~On July 1, 2021, Ares Management Corporation (“Ares”) closed on~~GAAP and our policies, procedures, and internal controls, in a timely manner, and the ~~acquisition~~processing of ~~Black Creek Group’s U.S.~~ real ~~estate investment advisory~~property-related cash receipts and distribution business, including Black Creek Diversified Property Advisors LLC, the Company’s Former Advisor (the “Transaction”). On the same date, the Company’s Former Advisor assigned the advisory agreementdisbursements. The property accounting fee is equal to the ~~Company’s New Advisor. Ares did not acquire~~difference between: (i) the property management fee charged with respect to each real property, which reflects the market rate for all real property management services, including property-level accounting services, based on rates charged for similar properties within the region or market in which the real property is located, and (ii) the amount paid to third-party property management firms for property management services, which fee is based on an arm’s length negotiation with a third party property management service provider (the difference between (i) and (ii), the “property accounting fee”).

Performance Participation Allocation

As used below, “Fund Interests” means our outstanding shares of common stock, along with OP Units, which may be or were held directly or indirectly by the Advisor, the Former Sponsor, members or affiliates of the Former Sponsor, and ~~the Company now considers the Ares real estate group to be the Company’s sponsor.~~third parties.

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~~Ares intends~~The performance participation allocation is a performance-based amount that will be paid to ~~continue to operate~~ the ~~business of Black Creek Group consistent with past practice. The principals of Black Creek Group,~~Advisor. This amount is calculated on the ~~rest~~basis of the ~~management team~~overall investment return provided to holders of Fund Interests (i.e., our outstanding shares and OP Units held by third-party investors) in any calendar year such that the ~~Company’s current officers~~Advisor will receive the lesser of (1) 12.5% of (a) the annual total return amount less (b) any loss carryforward, and (2) the amount equal to (x) the annual total return amount, less (y) any loss carryforward, less (z) the amount needed to achieve an annual total return amount equal to 5% of the NAV per Fund Interest at the beginning of such year (the “Hurdle Amount”). The foregoing calculations are ~~expected~~calculated on a per Fund Interest basis and multiplied by the weighted-average Fund Interests outstanding during the year. In no event will the performance participation allocation be less than zero. Accordingly, if the annual total return amount exceeds the Hurdle Amount plus the amount of any loss carryforward, then the Advisor will earn a performance participation allocation equal to ~~continue~~100% of such excess, but limited to ~~serve~~12.5% of the annual total return amount that is in ~~their roles with respect to~~excess of the ~~Company~~loss carryforward.

The allocation of the performance participation interest is ultimately determined at the end of each calendar year and will be paid in Class I OP units or cash, at the election of the Advisor. As the performance hurdle was achieved as of both June 30, 2022 and 2021, we recognized approximately $6.2 million and $2.2 million for the foreseeable future, although a member of Ares’ personnel has joined the Company’s board of directors and members of Ares’ personnel have joined the Advisor’s investment committee. Any changes to the Company’s management team or investment policies will require approval of the Company’s board of directors. Although such changes may be made in the future, no such changes have been approved at this time.

~~Advisory Agreement~~

On July 1, 2021, in connection with the Transaction, the Company and the Operating Partnership entered into the Second Amended and Restated Advisory Agreement (2021) (the “Advisory Agreement”) with the New Advisor. The Advisory Agreement amends and restates the Amended and Restated Advisory Agreement (2021) (the “Prior Advisory Agreement”) to, among other things, reflect the assignment of the Advisor’s rights and obligations under the Prior Advisory Agreement to the New Advisor. The term of the Advisory Agreement ends on Aprilthree months ended June 30, 2022 ~~subject to renewals by mutual consent~~and 2021, respectively, and $18.4 million and $4.0 million for the six months ended June 30, 2022 and 2021, respectively, of ~~the parties for an unlimited number~~performance participation allocation expense in our condensed consolidated statements of ~~successive one-year periods. The terms of the Advisory Agreement are otherwise substantially the same as the terms of the Prior Advisory Agreement.~~

~~Limited Partnership Agreement~~

On July 1, 2021, in connection with the Transaction, the Company, on behalf of itself as general partner and on behalf of the limited partners thereto other than the special limited partner, entered into the Tenth Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Limited Partnership Agreement”). The Limited Partnership Agreement amends and restates the Ninth Amended and Restated Limited Partnership Agreement of the Operating Partnership, dated as of December 20, 2019, as amended by Amendment No. 1 dated as of December 8, 2020 (the “Prior Limited Partnership Agreement”) in order to reflect the assignment and transfer of all of the special partnership units to the New Advisor. The terms of the Limited Partnership Agreement are otherwise substantially the same as the terms of the Prior Limited Partnership Agreement.operations.

9.11. NET INCOME (LOSS) PER COMMON SHARE

The computation of our basic and diluted net income (loss) per share attributable to common stockholders is as follows:



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share data)	2021		2020		2021		2020		2022		2021		2022			2021
Net income (loss) attributable to common stockholders—basic	$	13,940	$	(10,830)	$	22,922	$	(19,827)
Net income (loss) attributable to redeemable OP Units		99		(39)		169		(71)
Net income (loss) attributable to OP Units		1,654		(839)		2,430		(1,515)
Net income (loss) attributable to common stockholders—diluted	$	15,693	$	(11,708)	$	25,521	$	(21,413)
Net (loss) income attributable to common stockholders—basic									$	(5,588)	$	(8,583)	$	15,423		$	8,982
Net (loss) income attributable to redeemable noncontrolling interests										(60)		(64)		186			70
Net (loss) income attributable to noncontrolling interests										(919)		(923)		2,618	��		776
Net (loss) income attributable to common stockholders—diluted									$	(6,567)	$	(9,570)	$	18,227		$	9,828
Weighted-average shares outstanding—basic		157,025		141,682		151,045		142,216		191,158		150,126		184,878			148,005
Incremental weighted-average shares effect of conversion of OP Units		19,752		11,484		17,430		11,449
Incremental weighted-average shares effect of conversion of noncontrolling interests										33,699		17,261		32,928			16,250
Weighted-average shares outstanding—diluted		176,777		153,166		168,475		153,665		224,857		167,387		217,806			164,255
Net income (loss) per share attributable to common stockholders:
Net (loss) income per share attributable to common stockholders:
Basic	$	0.09	$	(0.08)	$	0.15	$	(0.14)	$	(0.03)	$	(0.06)	$	0.08		$	0.06
Diluted	$	0.09	$	(0.08)	$	0.15	$	(0.14)	$	(0.03)	$	(0.06)	$	0.08		$	0.06

12. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information and disclosure of non-cash investing and financing activities is as follows:


	For the Six Months Ended
	June 30,
(in thousands)	2022		2021
Distributions reinvested in common stock	$	13,922	$	11,105
Change in accrued future ongoing distribution fees		11,908		6,158
Net increase in DST Program Loans receivable through DST Program capital raising		28,032		11,756
Settlement of DST Program Loans through issuance of OP Units		3,299		209
Redeemable noncontrolling interest issued as settlement of performance participation allocation		15,327		4,608
Issuances of OP Units for DST Interests		39,441		25,941

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~~10. SUPPLEMENTAL CASH FLOW INFORMATION~~

~~Supplemental cash flow information and disclosure of non-cash investing and financing activities is as follows:~~

For the Nine Months Ended

September 30,
(in thousands)

2021

2020
Distributions reinvested in common stock

$
17,001

$
15,972
Change in accrued future ongoing distribution fees

10,864

335
Increase in DST Program Loans receivable through DST Program capital raising

17,105

22,700
Redeemable noncontrolling interest issued as settlement of performance participation allocation

4,608

3,776
Redemption value allocation adjustment to redeemable noncontrolling interest

293

281
Mortgage notes assumed on real estate acquisitions at fair value

0

9,834
Issuances of OP Units for DST Interests

57,729

11,240

Restricted Cash

Restricted cash consists of lender and property-related escrow accounts. The following table presents the components of the beginning of period and end of period cash, cash equivalents and restricted cash reported within the condensed consolidated statements of cash flows:


	For the Nine Months Ended				For the Six Months Ended
	September 30,				June 30,
(in thousands)	2021		2020		2022		2021
Beginning of period:
Cash and cash equivalents	$	11,266	$	97,772	$	10,605	$	11,266
Restricted cash		10,468		10,010		3,747		10,468
Cash, cash equivalents and restricted cash	$	21,734	$	107,782	$	14,352	$	21,734
End of period:
Cash and cash equivalents	$	12,463	$	16,124	$	19,529	$	11,784
Restricted cash		10,533		10,316		4,909		10,564
Cash, cash equivalents and restricted cash	$	22,996	$	26,440	$	24,438	$	22,348

~~Table of Contents~~

~~11. SIGNIFICANT RISKS AND UNCERTAINTIES~~

~~Significant Risks and Uncertainties~~

Currently, one of the most significant risks and uncertainties is the adverse effect of the current novel coronavirus (COVID-19) pandemic. A number of our customers previously announced temporary closures of their stores and requested rent deferral or rent abatement during the pandemic, particularly in early 2020.

~~The COVID-19 pandemic could have material and adverse effects on our financial condition, results of operations and cash flows in the near term due to, but not limited to, the following:~~

●

reduced economic activity could severely impact our customers’ businesses, financial condition and liquidity and could cause customers to be unable to fully meet their obligations to us or to otherwise seek modifications of such obligations, resulting in increases in uncollectible receivables and reductions in rental income;

●

~~the negative financial impact of the pandemic could impact our future compliance with financial covenants of our credit facility and other debt agreements; and~~

●

~~weaker economic conditions could cause us to recognize impairment in value of our tangible or intangible assets.~~

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our customers and business partners. While COVID-19 has not had a material effect on our condensed consolidated financial statements during the year ended December 31, 2020 and the nine months ended September 30, 2021 and the vaccination rates in the United States are encouraging, we are unable to predict the impact that the COVID-19 pandemic and the vaccination rates in the United States will have on our future financial condition, results of operations and cash flows due to numerous uncertainties and the impact could be material. The extent to which the COVID-19 pandemic impacts our operations and those of our customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

~~12.~~

13. COMMITMENTS AND CONTINGENCIES

Litigation

~~From time to time, we may be involved in various claims~~We and ~~legal actions arising in~~ the ~~ordinary course of business. As of September 30, 2021, we were~~Operating Partnership are not presently involved in any material ~~legal proceedings.~~litigation nor, to our knowledge, is any material litigation threatened against us or our investments.

Environmental Matters

A majority of the properties we acquire are subject to environmental reviews either by us or the previous owners. In addition, we may incur environmental remediation costs associated with certain land parcels we may acquire in connection with the development of the land. We have acquired certain properties in urban and industrial areas that may have been leased to or previously owned by commercial and industrial companies that discharged hazardous materials. We may purchase various environmental insurance policies to mitigate our exposure to environmental liabilities. We are not aware of any environmental liabilities that we believe would have a material adverse effect on our business, financial condition, or results of operations as of ~~September~~June 30, ~~2021.~~2022.

~~13.~~14. SEGMENT FINANCIAL INFORMATION

Our 4 reportable segments are office, retail, residential and industrial. Factors used to determine our reportable segments include the physical and economic characteristics of our properties and the related operating activities. Our chief operating decision makers rely on net operating income, among other factors, to make decisions about allocating resources and assessing segment performance. Net operating income is the key performance metric that captures the unique operating characteristics of each segment. ~~Items~~Net investment in real estate properties, restricted cash, tenant receivables, straight-line rent receivables, and other assets directly assignable to a property are allocated to the segment groupings. Corporate items that are not directly assignable to a ~~segment,~~property, such as ~~certain corporate items,~~investment in unconsolidated joint venture partnerships, debt-related investments and DST Program Loans, are not allocated to segment groupings, but are reflected as reconciling items.

The following table reflects our total consolidated assets by business segment as of June 30, 2022 and December 31, 2021:


	As of
(in thousands)	June 30, 2022		December 31, 2021 (1)
Assets:
Office properties	$	365,378	$	335,811
Retail properties		558,072		639,584
Residential properties		1,514,570		837,491
Industrial properties		1,277,062		826,353
Corporate		326,981		351,732
Total assets	$	4,042,063	$	2,990,971

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~~The following table reflects our total assets by business segment as of September 30, 2021 and December 31, 2020:~~

As of
(in thousands)

September 30, 2021

December 31, 2020
Assets:

Office properties

$
387,423

$
459,646
Retail properties

712,769

670,455
Residential properties

356,234

363,322
Industrial properties

740,237

461,150
Corporate

181,480

156,987
Total assets

$
2,378,143

$
2,111,560

(1)

As of December 31, 2021, amounts held for sale are included in the corporate grouping. Refer to “Note 3” for further detail.

The following table sets forth ~~the~~consolidated financial results by segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


(in thousands)	Office		Retail		Residential		Industrial		Consolidated		Office		Retail		Residential		Industrial		Consolidated
For the Three Months Ended September 30, 2021
For the Three Months Ended June 30, 2022
Rental revenues	$	16,887	$	18,679	$	7,237	$	10,793	$	53,596	$	13,148	$	16,509	$	25,824	$	18,013	$	73,494
Rental expenses		(7,111)		(4,660)		(3,257)		(2,814)		(17,842)		(5,772)		(3,776)		(11,059)		(4,289)		(24,896)
Net operating income	$	9,776	$	14,019	$	3,980	$	7,979	$	35,754	$	7,376	$	12,733	$	14,765	$	13,724	$	48,598
Real estate-related depreciation and amortization	$	4,945	$	5,336	$	2,283	$	6,257	$	18,821	$	4,243	$	4,474	$	16,038	$	12,148	$	36,903
For the Three Months Ended September 30, 2020
For the Three Months Ended June 30, 2021
Rental revenues	$	16,237	$	17,310	$	4,351	$	6,231	$	44,129	$	15,953	$	17,010	$	7,008	$	8,658	$	48,629
Rental expenses		(7,748)		(4,535)		(2,282)		(1,316)		(15,881)		(7,496)		(4,292)		(3,167)		(1,959)		(16,914)
Net operating income	$	8,489	$	12,775	$	2,069	$	4,915	$	28,248	$	8,457	$	12,718	$	3,841	$	6,699	$	31,715
Real estate-related depreciation and amortization	$	4,851	$	5,309	$	2,234	$	3,255	$	15,649	$	5,000	$	4,482	$	2,589	$	5,103	$	17,174
For the Nine Months Ended September 30, 2021
For the Six Months Ended June 30, 2022
Rental revenues	$	49,663	$	53,600	$	20,885	$	28,509	$	152,657	$	26,780	$	33,576	$	42,178	$	33,465	$	135,999
Rental expenses		(22,116)		(13,854)		(9,666)		(6,682)		(52,318)		(11,963)		(8,405)		(18,004)		(7,838)		(46,210)
Net operating income	$	27,547	$	39,746	$	11,219	$	21,827	$	100,339	$	14,817	$	25,171	$	24,174	$	25,627	$	89,789
Real estate-related depreciation and amortization	$	14,814	$	14,445	$	7,612	$	15,857	$	52,728	$	8,240	$	9,128	$	24,392	$	22,594	$	64,354
For the Nine Months Ended September 30, 2020
For the Six Months Ended June 30, 2021
Rental revenues	$	48,988	$	53,053	$	14,591	$	16,363	$	132,995	$	32,776	$	34,921	$	13,648	$	17,716	$	99,061
Rental expenses		(23,061)		(12,561)		(6,638)		(3,532)		(45,792)		(15,005)		(9,194)		(6,409)		(3,868)		(34,476)
Net operating income	$	25,927	$	40,492	$	7,953	$	12,831	$	87,203	$	17,771	$	25,727	$	7,239	$	13,848	$	64,585
Real estate-related depreciation and amortization	$	14,676	$	14,867	$	6,560	$	8,455	$	44,558	$	9,869	$	9,109	$	5,329	$	9,600	$	33,907

We consider net operating income to be an appropriate supplemental performance measure and believe net operating income provides useful information to our investors regarding our financial condition and results of operations because net operating income reflects the operating performance of our properties and excludes certain items that are not considered to be controllable in connection with the management of the properties, such as real estate-related depreciation and amortization, general and administrative expenses, advisory fees, impairment charges, interest expense, gains on sale of properties, other income and expense, gains and losses on the extinguishment of debt and noncontrolling interests. However, net operating income should not be viewed as an alternative measure of our financial performance since it excludes such items, which could materially impact our results of operations. Further, our net operating income may not be comparable to that of other real estate companies, as they may use different methodologies for calculating net operating income. Therefore, we believe net income, as defined by GAAP, to be the most appropriate measure to evaluate our overall financial performance.

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The following table is a reconciliation of our reported net income (loss) attributable to common stockholders to our net operating income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(in thousands)	2021		2020		2021		2020		2022		2021		2022		2021
Net income (loss) attributable to common stockholders	$	13,940	$	(10,830)	$	22,922	$	(19,827)
Net (loss) income attributable to common stockholders									$	(5,588)	$	(8,583)	$	15,423	$	8,982
Debt-related income		(2,298)		(981)		(6,741)		(1,181)		(846)		(2,319)		(4,314)		(4,443)
Real estate-related depreciation and amortization		18,821		15,649		52,728		44,558		36,903		17,174		64,354		33,907
General and administrative expenses		2,183		1,977		6,582		5,769		2,594		2,181		4,631		4,399
Advisory fees, related party		5,480		4,210		15,389		12,666		8,227		5,085		15,370		9,909
Performance participation allocation		3,774		1,333		7,769		3,343		6,186		2,246		18,379		3,995
Acquisition costs and reimbursements		738		240		1,451		842		1,093		346		2,722		713
Litigation expense		0		2,500		0		2,500
Impairment of real estate property		0		0		758		0		0		0		0		758
Equity in income from unconsolidated joint venture partnerships										(1,718)		0		(708)		0
Other income		(524)		(262)		(1,274)		(619)		(1,413)		(476)		(3,540)		(750)
Interest expense		17,866		15,290		51,477		42,930		33,774		17,048		58,184		33,611
Gain on sale of real estate property		(25,979)		0		(53,321)		(2,192)		(29,643)		0		(83,524)		(27,342)
Net income (loss) attributable to redeemable noncontrolling interests		99		(39)		169		(71)
Net income (loss) attributable to noncontrolling interests		1,654		(839)		2,430		(1,515)
Gain on extinguishment of debt and financing commitments, net										8		0		8		0
Net (loss) income attributable to redeemable noncontrolling interests										(60)		(64)		186		70
Net (loss) income attributable to noncontrolling interests										(919)		(923)		2,618		776
Net operating income	$	35,754	$	28,248	$	100,339	$	87,203	$	48,598	$	31,715	$	89,789	$	64,585

1415. SUBSEQUENT EVENTS

~~Purchase~~We performed a review of ~~Membership Interests~~

~~On October 20, 2021, we acquired a majority interest~~events subsequent to the condensed consolidated balance sheet date through the date the condensed consolidated financial statements were issued and determined that there were no such events requiring recognition or disclosure in ~~an entity that owns a residential property in Tucson, Arizona, which is a student housing property, for a total contractual purchase price of approximately $124.0 million.~~

~~Acquisition of Property~~

Subsequent to September 30, 2021, we acquired (excluding properties related to our DST Program) 1 industrial property located in Burlington, New Jersey for a purchase price of approximately $6.4 million.

~~Acquisition Under Contract~~

~~On November 3, 2021, we entered into a contract to acquire~~ an ~~industrial property located in Houston, Texas with a purchase price of approximately $17.4 million. There can be no assurance that we will complete~~ the ~~acquisition of the property under contract.~~

~~Agreement to Sell Property~~

~~On October 29, 2021, we entered into an agreement to sell~~ a retail property located in Portsmouth, New Hampshire (“Durgin Square”) to an unrelated third party for a gross sales price of approximately $40.5 million. Our accounting basis (net of accumulated depreciation and amortization) for this real estate property as of September 30, 2021 was approximately $21.7 million. There can be no assurance that we will complete the disposition of the property under this agreement.

condensed consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References to the terms “we,” ~~“our,”~~“our” or “us” refer to ~~Black Creek Diversified Property Fund~~Ares Real Estate Income Trust Inc. and its consolidated subsidiaries. The following discussion and analysis should be read together with our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” Such forward-looking statements relate to, without limitation, our future capital expenditures, distributions, acquisitions and dispositions (including the amount and nature thereof), other developments and trends of the real estate industry, business strategies, and the expansion and growth of our operations. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements are subject to a number of assumptions, risks and uncertainties which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or the negative of these words, or other similar words or terms. Readers are cautioned not to place undue reliance on these forward-looking statements.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

●

the impact of macroeconomic trends, such as the unemployment rate, availability of credit, impact of inflation, rising interest rates, the conflict in Ukraine and the COVID-19 pandemic, which may have a negative effect on the following, among other things:

●

the fundamentals of our business, including overall market occupancy, space utilization for our tenants, who we refer to as customers from time-to-time herein, and rental rates;

●

the financial condition of our customers, some of which are retail, financial, legal and other professional firms, our lenders, and institutions that hold our cash balances and short-term investments, which may expose us to increased risks of breach or default by these parties;

●

customers’ ability to pay rent on their leases or our ability to re-lease space that is or becomes vacant; and

●

the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis;

●

general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on customers’ financial condition, and competition from other developers, owners and operators of real estate);

●

our ability to effectively raise and deploy proceeds from our ongoing public offerings;

●

risks associated with the demand for liquidity under our share redemption program and our ability to meet such demand;

●

risks associated with the availability and terms of debt and equity financing and the use of debt to fund acquisitions and developments, including the risk associated with interest rates impacting the cost and/or availability of financing;

●

the business opportunities that may be presented to and pursued by us, changes in laws or regulations (including changes to laws governing the taxation of real estate investment trusts (“REITs”));

●

~~challenges related~~the failure to ~~the integration of~~successfully integrate Black Creek Group into the business, operations and corporate culture of Ares, ~~the allocation of corporate resources,~~ and ~~the retention of~~to retain Black Creek Group personnel ~~which could adversely impact our business and reduce the synergies that we expect to benefit from as a result of the~~following Ares’ acquisition of Black Creek Group’s U.S. real estate investment advisory and distribution business ~~by Ares;~~in July 2021;

●

conflicts of interest arising out of our relationships with the Sponsor, the Advisor, and their affiliates;

●

changes in accounting principles, policies and guidelines applicable to REITs;

●

environmental, regulatory and/or safety requirements; and

●

the availability and cost of comprehensive insurance, including coverage for terrorist acts.

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For further discussion of these and other factors, see Part I, Item 1A, “Risk Factors” in our ~~2020~~2021 Form ~~10-K, as supplemented by our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.~~10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.

OVERVIEW

General

~~Black Creek Diversified Property Fund~~Ares Real Estate Income Trust Inc. is a NAV-based perpetual life REIT that was formed on April 11, 2005, as a Maryland corporation. We are primarily focused on investing in and operating a diverse portfolio of real property. As of ~~September~~June 30, ~~2021,~~2022, our real property portfolio consisted of 6190 properties, totaling approximately ~~12.6~~18.5 million square feet located in 2833 markets throughout the U.S. We also owned 115 properties through our unconsolidated joint venture partnerships as of June 30, 2022. Unless otherwise noted, these unconsolidated properties are excluded from the presentation of our portfolio data herein.

We have operated and elected to be treated as a REIT for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2006, and we intend to continue to operate in accordance with the requirements for qualification as a REIT. We utilize an ~~Umbrella Partnership Real Estate Investment Trust (“UPREIT”)~~UPREIT organizational structure to hold all or substantially all of our assets through the Operating Partnership.

As a NAV-based perpetual life REIT, we intend to conduct ongoing public primary offerings of our common stock on a perpetual basis. We also intend to conduct an ongoing distribution reinvestment plan offering for our stockholders to reinvest distributions in our shares. From time to time, we intend to file new registration statements on Form S-11 with the SEC to register additional shares of common stock so that we may continuously offer shares of common stock pursuant to Rule 415 under the Securities Act. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we raised ~~$166.8~~$230.6 million of gross proceeds from the sale of common stock in our ongoing public primary offerings and ~~$17.0~~$13.9 million from the sale of common stock under our distribution reinvestment plan. See “Note 68 to the Condensed Consolidated Financial Statements” for more information about our public offerings.

Additionally, we have a program to raise capital through private placement offerings by selling DST Interests. These private placement offerings are exempt from registration requirements pursuant to Section 4(a)(2) of the Securities Act. We anticipate that these interests may serve as replacement properties for investors seeking to complete like-kind exchange transactions under Section 1031 of the Code. Similar to our prior private placement offerings, we expect that the DST Program will give us the opportunity to expand and diversify our capital raise strategies by offering what we believe to be an attractive and unique investment product for investors that may be seeking replacement properties to complete like-kind exchange transactions under Section 1031 of the Code. We also ~~make loans (“~~offer DST Program ~~Loans”)~~Loans to finance a portion of the sale of DST Interests to certain purchasers of the interests in the Delaware statutory trusts to finance no more than 50% of the purchase price payable upon their acquisition of such interests. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we sold ~~$188.0~~$442.7 million of gross interests related to the DST Program, ~~$17.1~~$28.0 million of which were financed by DST Program Loans. See “Note 4”6 to the Condensed Consolidated Financial Statements” for additional detail regarding the DST Program.

We currently operate in four reportable segments: office, retail, residential and industrial. The following table summarizes our real property portfolio by segment as of ~~September~~June 30, ~~2021:~~2022:


						Average													Average
				% of Total		Effective Annual						% of					% of Total		Effective Annual						% of
($ and square feet in thousands,	Number of	Number of	Rentable	Rentable		Base Rent per		%		Aggregate		Aggregate		Number of	Number of	Rentable	Rentable		Base Rent per		%		Aggregate		Aggregate
except for per square foot data)	Markets (1)	Real Properties	Square Feet	Square Feet		Square Foot (2)		Leased		Fair Value		Fair Value		Markets (1)	Real Properties	Square Feet	Square Feet		Square Foot (2)		Leased		Fair Value		Fair Value
Office properties	7	7	1,716	13.7	%	$	34.16	82.6	%	$	663,250	23.0	%	7	7	1,542	8.3	%	$	34.06	75.9	%	$	601,450	13.1	%
Retail properties	9	26	3,343	26.6			18.59	94.1			967,450	33.6		8	19	2,481	13.4			19.25	95.5			755,850	16.4
Residential properties	4	4	1,222	9.7			24.06	95.5			401,450	14.0		8	14	4,194	22.7			26.08	94.3			1,678,350	36.4
Industrial properties	19	24	6,292	50.0			5.78	98.4			845,400	29.4		28	50	10,297	55.6			5.78	99.0			1,572,750	34.1
Total real property portfolio	28	61	12,573	100.0	%	$	14.34	94.8	%	$	2,877,550	100.0	%	33	90	18,514	100.0	%	$	13.99	95.6	%	$	4,608,400	100.0	%

(1)	Reflects the number of unique markets by segment and in total. As such, the total number of markets does not equal the sum of the number of markets by segment as certain segments are located in the same market.

(2)	Amount calculated as total annualized base rent, which includes the impact of any contractual tenant concessions (cash basis) per the terms of the lease, divided by total lease square footage as of ~~September~~June 30, ~~2021.~~2022.

We currently focus our investment activities primarily across the major U.S. property sectors (industrial, residential (which includes and/or may include multi-family and other types of rental housing such as manufactured, student, and single family rental housing), office (which includes and/or may include medical office and life science laboratories) and retail). To a lesser extent, we strategically

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~~We will continue~~invest in and/or intend to ~~focus our investment activities on expanding a high-quality, diversified real property portfolio throughout~~invest in geographies outside of the U.S. ~~Although we generally target investments in four~~ ~~primary property categories (office, retail, residential~~, which may include Canada, the United Kingdom, Europe and ~~industrial), our charter~~other foreign jurisdictions, and ~~bylaws do not preclude us from investing~~ in other ~~types of commercial property,~~sectors such as triple net lease, real estate debt ~~or real estate-related equity securities.~~(which may include mortgages and subordinated interests) and infrastructure, to create a diversified blend of current income and long-term value appreciation. Our near-term investment strategy is likely to prioritize new investments in the industrial and residential sectors due to relatively attractive fundamental conditions. Recently, we were focused on selling certain office and retail assets. The disposition of these properties has helped us to increase our current allocation to residential and industrial real estate assets and liquidity to pursue new investment opportunities. However, there can be no assurance that we will be successful in our investment strategy, including with respect to any particular asset class. We also intend to continue to hold an allocation of properties in the office and retail sectors, the latter of which is largely grocery-anchored. To a lesser extent we may invest in other types of real estate including, but not limited to, hospitality, medical offices, manufactured housing, student housing and unimproved land, however we have no investments in these sectors currently. Additionally, to provide diversification to our portfolio, we may continue to invest in real estate-related debt, which will generally include mortgage loans secured by real estate, mezzanine debt, loans associated with our DST Program and other related investments. While we are not currently investing in real estate-related securities, should we decide to invest in real estate-related securities, any such investments generally will focus on debt or equity issued by public and private real estate companies and certain other securities, with the primary goal of such investments being preservation of liquidity in support of our share redemption program, while also seeking income, potential for capital appreciation and further portfolio diversification.

Net Asset Value

Our board of directors, including a majority of our independent directors, has adopted valuation procedures, as amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of our NAV. With the approval of our board of directors, including a majority of our independent directors, we have engaged Altus Group U.S. Inc., a third-party valuation firm, to serve as our independent valuation advisor ~~(‘‘~~(“Altus ~~Group’’~~Group” or the “Independent Valuation Advisor”) with respect to ~~providing monthly real property appraisals, reviewing annual third-party real property appraisals, reviewing the internal valuations of debt-related assets and liabilities performed by our Advisor,~~ helping us administer the valuation and review process for the real properties in our portfolio, providing monthly real property appraisals, reviewing annual third-party real property appraisals, providing monthly valuations of our debt-related assets (excluding DST Program Loans), reviewing the internal valuations of DST Program Loans and debt-related liabilities performed by our Advisor, providing quarterly valuations of our properties subject to master lease obligations associated with the DST Program, and assisting in the development and review of our valuation procedures. As part of this process, our Advisor reviews the estimates of the values of our real property portfolio, real estate-related assets, and other assets and liabilities within our portfolio for consistency with our valuation guidelines and the overall reasonableness of the valuation conclusions, and informs our board of directors of its conclusions. Although third-party appraisal firms, the Independent Valuation Advisor, or other pricing sources may consider any comments received from us or our Advisor or other valuation sources for their individual valuations, the final estimated fair values of our real properties are determined by the Independent Valuation Advisor and the final estimates of fair values of our real estate-related assets, our other assets, and our liabilities are determined by the applicable pricing source (which may, in certain instances be our Advisor or an affiliate of Ares), subject to the oversight of our board of directors. With respect to the valuation of our real properties, the Independent Valuation Advisor provides our board of directors with periodic valuation reports and is available to meet with our board of directors to review valuation information, as well as our valuation guidelines and the operation and results of the valuation and review process generally. Excluding real properties that are bought or sold during a given calendar year, unconsolidated real properties held through joint ventures or partnerships are valued by a third-party appraiser at least once per calendar year. For valuations during interim periods, either our Advisor will determine the estimated fair value of the real properties owned by unconsolidated affiliates or we will utilize interim valuations determined pursuant to valuation policies and procedures for such joint ventures or partnerships. All parties engaged by us in connection with our valuation procedures, including the Independent Valuation Advisor, ALPS Fund Services Inc. (“ALPS”), and our Advisor, are subject to the oversight of our board of directors. Our board of directors has the right to engage additional valuation firms and pricing sources to review the valuation process or valuations, if deemed appropriate. At least once each calendar year our board of directors, including a majority of our independent directors, reviews the appropriateness of our valuation procedures with input from the Independent Valuation Advisor. From time to time our board of directors, including a majority of our independent directors, may adopt changes to the valuation procedures if it: (1) determines that such changes are likely to result in a more accurate reflection of NAV or a more efficient or less costly procedure for the determination of NAV without having a material adverse effect on the accuracy of such determination; or (2) otherwise reasonably believes a change is appropriate for the determination of NAV. We will publicly announce material changes to our valuation procedures. See Exhibit 4.4 of this Quarterly Report on Form 10-Q for a more detailed description of our valuation procedures, including important disclosure regarding real property valuations provided by the Independent Valuation Advisor.

Our valuation procedures, which address specifically each category of our assets and liabilities and are applied separately from the preparation of our financial statements in accordance with GAAP, involve adjustments from historical cost. There are certain factors which cause NAV to be different from total equity or stockholders’ equity on a GAAP basis. Most significantly, the valuation of our real assets, which is the largest component of our NAV calculation, is provided to us by the Independent Valuation Advisor. For GAAP purposes, these assets are generally recorded at depreciated or amortized cost. Another example that will cause our NAV to differ from our GAAP total equity or stockholders’ equity is the straight-lining of rent, which results in a receivable for GAAP purposes that is not included in the determination of our NAV. The fair values of our assets and certain liabilities are determined using widely accepted methodologies and, as appropriate, the GAAP principles within the FASB Accounting Standards Codification under Topic 820, Fair Value Measurements and Disclosures and are used by ALPS in calculating our NAV per share. However, our valuation procedures and our NAV are not subject to GAAP and will not be subject to independent audit. We did not develop our valuation procedures with the intention of complying with fair value concepts under GAAP and, therefore, there could be differences

~~Table of Contents~~

between our fair values and the fair values derived from the principal market or most advantageous market concepts of establishing fair value under GAAP. The aggregate real property valuation of ~~$2.88~~$4.61 billion compares to a GAAP basis of real properties (net of intangible lease liabilities and before accumulated amortization and depreciation) of ~~$2.61~~$4.09 billion, representing a difference of approximately ~~$262.6~~$518.2 million, or ~~10.0%~~12.7%.

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As used below, “Fund Interests” means our outstanding shares of common stock, along with OP Units, which may be or were held directly or indirectly by the Advisor, the Former Sponsor, members or affiliates of the Former Sponsor, and third parties, and “Aggregate Fund NAV” means the NAV of all the Fund Interests.

The following table sets forth the components of Aggregate Fund NAV as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


	As of				As of
(in thousands)	September 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Investments in office properties	$	663,250	$	753,950	$	601,450	$	668,700
Investments in retail properties		967,450		906,100		755,850		890,700
Investments in residential properties		401,450		388,350		1,678,350		907,000
Investments in industrial properties		845,400		516,100		1,572,750		983,700
Total investment in real estate properties		2,877,550		2,564,500		4,608,400		3,450,100
Investment in unconsolidated joint venture partnerships						117,100		57,425
Debt-related investments		47,883		49,584		108,782		106,463
DST Program Loans		58,276		45,229		85,344		62,123
Total investments		2,983,709		2,659,313		4,919,626		3,676,111
Cash and cash equivalents		12,463		11,266		19,529		10,605
Restricted cash		10,533		10,468		4,909		3,747
Other assets		32,392		27,987		51,724		53,361
Line of credit, term loans and mortgage notes		(921,303)		(968,544)		(1,780,321)		(1,370,554)
Financing obligations associated with our DST Program		(629,670)		(507,204)		(1,088,407)		(682,748)
Other liabilities		(56,679)		(46,729)		(77,874)		(53,639)
Accrued performance participation allocation		(7,769)		(4,608)		(18,379)		(15,327)
Accrued advisory fees		(1,880)		(1,548)		(2,819)		(2,097)
Noncontrolling interests in consolidated joint venture partnerships						(1,255)		(1,176)
Aggregate Fund NAV	$	1,421,796	$	1,180,401	$	2,026,733	$	1,618,283
Total Fund Interests outstanding		181,499		156,527		228,744		197,960

The following table sets forth the NAV per Fund Interest as of ~~September~~June 30, ~~2021:~~2022:


			Class T		Class S		Class D		Class I		Class E		OP				Class T		Class S		Class D		Class I		Class E		OP
(in thousands, except per Fund Interest data)	Total		Shares		Shares		Shares		Shares		Shares		Units		Total		Shares		Shares		Shares		Shares		Shares		Units
Monthly NAV	$	1,421,796	$	107,177	$	251,836	$	46,923	$	401,916	$	448,546	$	165,398	$	2,026,733	$	192,016	$	409,016	$	70,412	$	573,626	$	483,581	$	298,082
Fund Interests outstanding		181,499		13,682		32,148		5,990		51,306		57,259		21,114		228,744		21,672		46,163		7,947		64,741		54,578		33,643
NAV Per Fund Interest	$	7.83	$	7.83	$	7.83	$	7.83	$	7.83	$	7.83	$	7.83	$	8.86	$	8.86	$	8.86	$	8.86	$	8.86	$	8.86	$	8.86

Under GAAP, we record liabilities for ongoing distribution fees that (i) we currently owe the Dealer Manager under the terms of our dealer manager agreement and (ii) we estimate we may pay to the Dealer Manager in future periods for ~~shares of~~ our ~~common stock.~~Fund Interests. As of ~~September~~June 30, ~~2021,~~2022, we estimated approximately ~~$26.4~~$46.0 million of ongoing distribution fees were potentially payable to the Dealer Manager. We do not deduct the liability for estimated future distribution fees in our calculation of NAV since we intend for our NAV to reflect our estimated value on the date that we determine our NAV. Accordingly, our estimated NAV at any given time does not include consideration of any estimated future distribution fees that may become payable after such date.

We include no discounts to our NAV for the illiquid nature of our shares, including the limitations on our stockholders’ ability to redeem shares under our share redemption program and our ability to ~~suspend~~modify or ~~terminate~~suspend our share redemption program at any time. Our NAV generally does not consider exit costs (e.g. selling costs and commissions related to the sale of a property) that would likely be incurred if our assets and liabilities were liquidated or sold today. While we may use market pricing concepts to value individual components of our NAV, our per share NAV is not derived from the market pricing information of open-end real estate funds listed on stock exchanges.

Our NAV is not a representation, warranty or guarantee that: (i) we would fully realize our NAV upon a sale of our assets; (ii) shares of our common stock would trade at our per share NAV on a national securities exchange; and (iii) a stockholder would be able to realize the per share NAV if such stockholder attempted to sell his or her shares to a third party.

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The valuations of our real properties as of ~~September~~June 30, ~~2021,~~2022, excluding certain newly acquired properties that are currently held at cost which we believe reflects the fair value of such properties, were provided by the Independent Valuation Advisor in accordance with our valuation procedures. Certain key assumptions that were used by the Independent Valuation Advisor in the discounted cash flow analysis are set forth in the following table based on weighted-averages by property type.


									Weighted-										Weighted-
	Office		Retail		Residential		Industrial		Average Basis		Office		Retail		Residential		Industrial		Average Basis
Exit capitalization rate	6.18	%	6.25	%	5.07	%	5.18	%	5.76	%	6.06	%	6.24	%	4.64	%	4.81	%	5.16	%
Discount rate / internal rate of return	6.68	%	6.82	%	6.07	%	5.89	%	6.42	%	6.60	%	6.85	%	5.93	%	5.82	%	6.14	%
Average holding period (years)	9.6		10.0		10.0		10.0		9.9		9.6		10.0		10.0		10.1		10.0

A change in the exit capitalization and discount rates used would impact the calculation of the value of our real property. For example, assuming all other factors remain constant, the changes listed below would result in the following effects on the value of our real properties, excluding certain newly acquired properties that are currently held at cost which we believe reflects the fair value of such properties:


	Hypothetical									Weighted-		Hypothetical									Weighted-
Input	Change	Office		Retail		Residential		Industrial		Average Values		Change	Office		Retail		Residential		Industrial		Average Values
Exit capitalization rate (weighted-average)	0.25% decrease	2.98	%	2.51	%	3.37	%	3.54	%	3.03	%	0.25% decrease	3.04	%	2.51	%	3.82	%	3.93	%	3.52	%
	0.25% increase	(2.74)	%	(2.31)	%	(3.06)	%	(3.21)	%	(2.77)	%	0.25% increase	(2.79)	%	(2.31)	%	(3.43)	%	(3.54)	%	(3.19)	%
Discount rate (weighted-average)	0.25% decrease	2.04	%	1.91	%	2.00	%	2.05	%	1.99	%	0.25% decrease	2.05	%	1.90	%	2.03	%	2.11	%	2.04	%
	0.25% increase	(1.99)	%	(1.86)	%	(1.96)	%	(2.00)	%	(1.94)	%	0.25% increase	(2.00)	%	(1.86)	%	(1.98)	%	(2.06)	%	(1.99)	%

From September 30, 2017 through November 30, 2019, we valued our debt-related investments and real estate-related liabilities generally in accordance with fair value standards under GAAP. Beginning with our valuation for December 31, 2019, our property-level mortgages and corporate-level credit facilities that are intended to be held to maturity (which for fixed rate debt not subject to interest rate hedges may be the date near maturity at which time the debt will be eligible for prepayment at par for purposes herein), including those subject to interest rate hedges, were valued at par (i.e. at their respective outstanding balances). In addition, because we utilize interest rate hedges to stabilize interest payments (i.e. to fix all-in interest rates through interest rate swaps or to limit interest rate exposure through interest rate caps) on individual loans, each loan and associated interest rate hedge is treated as one financial instrument which is valued at par if intended to be held to maturity. This policy of valuing at par applies regardless of whether any given interest rate hedge is considered as an asset or liability for GAAP purposes. Notwithstanding, if we acquire an investment and assume associated in-place debt from the seller that is above-or below-market, then consistent with how we recognize assumed debt for GAAP purposes when acquiring an asset with pre-existing debt in place, the liabilities used in the determination of our NAV will include the market value of such debt based on market value as of the closing date. The associated premium or discount on such debt as of closing that is reflected in our liabilities will then be amortized through loan maturity. Per our valuation policy, the corresponding investment is valued on an unlevered basis for purposes of determining NAV. Accordingly, all else equal, we would not recognize an immediate gain or loss to our NAV upon acquisition of an investment whereby we assume associated pre-existing debt that is above- or below-market. As of June 30, 2022, we classified all of our debt as intended to be held to maturity, and our liabilities included mark-to-market adjustments for pre-existing debt that we assumed upon acquisition. We currently estimate the fair value of our debt (inclusive of associated interest rate hedges) that was intended to be held to maturity as of ~~September~~June 30, ~~2021~~2022 was ~~$19.0~~$52.4 million ~~higher~~lower than ~~par~~the carrying value used for purposes of calculating our NAV (as described above) for such debt in ~~aggregate,~~aggregate; meaning that if we used the fair value of our debt rather than ~~par~~the carrying value used for purposes of calculating our NAV (and treated the associated hedge as part of the same financial instrument), our NAV would have been ~~lower~~higher by approximately ~~$19.0~~$52.4 million, or ~~$0.10~~$0.23 per share, not taking into account all of the other items that impact our monthly NAV, as of ~~September~~June 30, 2021. As of September 30, 2021, we classified all of our debt as intended to be held to maturity. See “Performance” below for further information concerning the impact of interest rate movements on our total shareholder returns assuming we were to include the mark-to-market adjustments for all borrowing-related interest rate hedge and debt instruments.2022.

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Reconciliation of Stockholders’ Equity and Noncontrolling Interests to NAV

The following table reconciles stockholders’ equity and noncontrolling interests per our condensed consolidated balance sheet to our NAV as of ~~September~~June 30, ~~2021:~~2022:


(in thousands)	As of September 30, 2021		As of June 30, 2022
Total stockholder's equity	$	514,088	$	772,748
Noncontrolling interests		144,230		228,185
Total equity under GAAP		658,318		1,000,933

Adjustments:
Accrued distribution fee (1)		26,352		45,972
Unrealized net real estate, debt and interest rate hedge appreciation (depreciation) (2)		273,405		487,465
Accumulated depreciation and amortization (3)		469,824		477,255
Other adjustments (4)		(6,103)		15,108
Aggregate Fund NAV	$	1,421,796	$	2,026,733

(1)

Accrued distribution fee represents the accrual for the full cost of the distribution fee for Class T, Class S, and Class D shares. Under GAAP, we accrued the full cost of the distribution fee payable over the life of each share (assuming such share remains outstanding the length of time required to pay the maximum distribution fee) as an offering cost at the time we sold the Class T, Class S, and Class D shares. For purposes of calculating the NAV, we recognize the distribution fee as a reduction of NAV on a monthly basis when such fee is paid and do not deduct the liability for estimated future distribution fees that may become payable after the date as of which our NAV is calculated.

(2)

Our real estate and real estate-related investments are presented as historical cost in our condensed consolidated financial statements. Additionally, our mortgage notes, term loans and line of credit are presented at their carrying value in our condensed consolidated financial statements. As such, any increases of decreases in the fair market value of our real estate and real estate-related investments or our debt instruments are not included in our GAAP results. For purposes of determining our NAV, our real estate and real estate-related investments and certain of our debt are recorded at fair value. Notwithstanding, our property-level mortgages and corporate-level credit facilities that are intended to be held to maturity, including those subject to interest rates hedges, are valued at par (i.e. at their respective outstanding balances).

(3)	We depreciate our investments in real estate and amortize certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not recorded for purposes of determining our NAV.

(4)

Includes (i) straight-line rent receivables, which are recorded in accordance with GAAP but not recorded for purposes of determining our NAV (ii) redeemable noncontrolling interests related to our OP Units, which are included in our determination of NAV but not included in total equity, and (iii) other minor adjustments.

Performance

Our NAV increased from ~~$7.54~~$8.17 per share as of December 31, ~~2020~~2021 to ~~$7.83~~$8.86 per share as of ~~September~~June 30, ~~2021.~~2022. The increase in NAV was primarily driven by performance of our real estate portfolio, including the dispositions of one office property, five retail properties, and a retail ~~property, an industrial property, and two office properties~~land parcel for net proceeds of approximately ~~$141.4~~$251.8 million, which resulted in an increase to NAV, as well as the acquisitions of ~~seven~~21 industrial properties, seven residential properties, and one life science property for an aggregate contractual purchase price of ~~$295.4 million and one retail property for a contractual purchase price of $50.0 million,~~$1.2 billion, which have been accretive to portfolio returns. Additionally, strong leasing and above-average market rent growth in the industrial and residential sectors have driven performance.

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Effective December 31, 2019, our board of directors approved amendments to our valuation procedures which revised the way we value property-level mortgages, corporate-level credit facilities and associated interest rate hedges when loans, including associated interest rate hedges, are intended to be held to maturity, effectively eliminating all mark-to-market adjustments for such loans and hedges from the calculation of our NAV. The following table summarizes the impact of interest rate movements on our share class returns assuming we continued to include the mark-to-market adjustments for all borrowing-related interest rate hedge and debt instruments beginning with the December 31, 2019 NAV:


					One-Year						Since NAV						One-Year						Since NAV
	Trailing				(Trailing		Three-Year		Five-Year		Inception		Trailing				(Trailing		Three-Year		Five-Year		Inception
(as of September 30, 2021) (1)	Three-Months		Year-to-Date		12-Months)		Annualized		Annualized		Annualized (2)
(as of June 30, 2022) (1)													Three-Months		Year-to-Date		12-Months)		Annualized		Annualized		Annualized (2)
Class T Share Total Return (with upfront selling commissions and dealer manager fees) (3)	(0.21)	%	3.47	%	4.79	%	4.36	%	4.48	%	6.03	%	(0.64)	%	6.59	%	16.00	%	9.78	%	7.02	%	7.27	%
Adjusted Class T Share Total Return (with upfront selling commissions and dealer manager fees) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	(0.14)	%	3.96	%	5.34	%	4.09	%	4.31	%	5.94	%	0.14	%	9.89	%	19.62	%	10.59	%	7.49	%	7.51	%
Difference	(0.07)	%	(0.49)	%	(0.55)	%	0.27	%	0.17	%	0.09	%	(0.78)	%	(3.30)	%	(3.62)	%	(0.81)	%	(0.47)	%	(0.24)	%

Class T Share Total Return (without upfront selling commissions and dealer manager fees) (3)	3.29	%	7.10	%	8.46	%	5.57	%	5.12	%	6.18	%	2.84	%	10.32	%	20.06	%	11.05	%	7.67	%	7.41	%
Adjusted Class T Share Total Return (without upfront selling commissions and dealer manager fees) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	3.36	%	7.60	%	9.03	%	5.29	%	4.95	%	6.09	%	3.65	%	13.73	%	23.81	%	11.87	%	8.15	%	7.65	%
Difference	(0.07)	%	(0.50)	%	(0.57)	%	0.28	%	0.17	%	0.09	%	(0.81)	%	(3.41)	%	(3.75)	%	(0.82)	%	(0.48)	%	(0.24)	%

Class S Share Total Return (with upfront selling commissions and dealer manager fees) (3)	(0.21)	%	3.47	%	4.79	%	4.36	%	4.48	%	6.03	%	(0.64)	%	6.59	%	16.00	%	9.78	%	7.02	%	7.27	%
Adjusted Class S Share Total Return (with upfront selling commissions and dealer manager fees) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	(0.14)	%	3.96	%	5.34	%	4.09	%	4.31	%	5.94	%	0.14	%	9.89	%	19.62	%	10.59	%	7.49	%	7.51	%
Difference	(0.07)	%	(0.49)	%	(0.55)	%	0.27	%	0.17	%	0.09	%	(0.78)	%	(3.30)	%	(3.62)	%	(0.81)	%	(0.47)	%	(0.24)	%

Class S Share Total Return (without upfront selling commissions and dealer manager fees) (3)	3.29	%	7.10	%	8.46	%	5.57	%	5.12	%	6.18	%	2.84	%	10.32	%	20.06	%	11.05	%	7.67	%	7.41	%
Adjusted Class S Share Total Return (without upfront selling commissions and dealer manager fees) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	3.36	%	7.60	%	9.03	%	5.29	%	4.95	%	6.09	%	3.65	%	13.73	%	23.81	%	11.87	%	8.15	%	7.65	%
Difference	(0.07)	%	(0.50)	%	(0.57)	%	0.28	%	0.17	%	0.09	%	(0.81)	%	(3.41)	%	(3.75)	%	(0.82)	%	(0.48)	%	(0.24)	%

Class D Share Total Return (3)	3.44	%	7.58	%	9.11	%	6.20	%	5.73	%	6.55	%	2.99	%	10.65	%	20.78	%	11.72	%	8.32	%	7.73	%
Adjusted Class D Share Total Return (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	3.52	%	8.08	%	9.69	%	5.92	%	5.56	%	6.45	%	3.80	%	14.07	%	24.55	%	12.54	%	8.79	%	7.97	%
Difference	(0.08)	%	(0.50)	%	(0.58)	%	0.28	%	0.17	%	0.10	%	(0.81)	%	(3.42)	%	(3.77)	%	(0.82)	%	(0.47)	%	(0.24)	%

Class I Share Total Return (3)	3.51	%	7.78	%	9.38	%	6.47	%	6.04	%	6.96	%	3.05	%	10.79	%	21.08	%	11.99	%	8.59	%	8.13	%
Adjusted Class I Share Total Return (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	3.58	%	8.29	%	9.96	%	6.19	%	5.87	%	6.86	%	3.87	%	14.21	%	24.86	%	12.82	%	9.07	%	8.37	%
Difference	(0.07)	%	(0.51)	%	(0.58)	%	0.28	%	0.17	%	0.10	%	(0.82)	%	(3.42)	%	(3.78)	%	(0.83)	%	(0.48)	%	(0.24)	%

Class E Share Return Total Return (3)	3.51	%	7.78	%	9.38	%	6.47	%	6.06	%	7.01	%	3.05	%	10.79	%	21.08	%	11.99	%	8.60	%	8.18	%
Adjusted Class E Share Total Return (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	3.58	%	8.29	%	9.96	%	6.19	%	5.89	%	6.92	%	3.87	%	14.21	%	24.86	%	12.82	%	9.08	%	8.42	%
Difference	(0.07)	%	(0.51)	%	(0.58)	%	0.28	%	0.17	%	0.09	%	(0.82)	%	(3.42)	%	(3.78)	%	(0.83)	%	(0.48)	%	(0.24)	%

(1)

Performance is measured by total return, which includes income and appreciation (i.e., distributions and changes in NAV) and is a compound rate of return that assumes reinvestment of all distributions for the respective time period, and excludes upfront selling commissions and dealer manager fees paid by investors, except for returns noted “with upfront selling commissions and dealer

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manager fees” (“Total Return”). Past performance is not a guarantee of future results. Current performance may be higher or lower than the performance data quoted.

(2)	NAV inception was September 30, 2012, which is when we first sold shares of our common stock after converting to an NAV-based REIT on July 12, 2012. Investors in our fixed price offerings prior to NAV inception on September 30, 2012 are likely to have a lower return.

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(3)

The Total Returns presented are based on actual NAVs at which stockholders transacted, calculated pursuant to our valuation procedures. From NAV inception to November 30, 2019, these NAVs reflected mark-to-market adjustments on our borrowing-related interest rate hedge positions; and from September 1, 2017 to November 30, 2019, these NAVs also reflected mark-to-market adjustments on our borrowing-related debt instruments. Prior to September 1, 2017, our valuation policies dictated marking borrowing-related debt instruments to par except in certain circumstances; therefore, we did not formally track mark-to-market adjustments on our borrowing-related debt instruments during such time.

(4)

The Adjusted Total Returns presented are based on adjusted NAVs calculated as if we had continued to mark our hedge and debt instruments to market following a policy change to largely exclude borrowing-related interest rate hedge and debt marks to market from our NAV calculations (except in certain circumstances pursuant to our valuation procedures), beginning with our NAV calculated as of December 31, 2019 NAV. Therefore, the NAVs used in the calculation are identical to those presented per Note (3) above from NAV inception through November 30, 2019. The adjusted NAVs include the incremental impacts to advisory fees and performance fees; however, the adjusted NAVs are not assumed to have impacted any share purchase or redemption. For calculation purposes, transactions were assumed to occur at the adjusted NAVs.

Inflation and Rising Interest Rates

In the United States, inflation is at a 40-year high, and its impact on the U.S. economy and the impact of any measures that may be taken by government officials to curb inflation remain uncertain. Beginning in March of 2022, the United States Federal Reserve began raising the federal funds rate in an effort to curb inflation. As a result, interest rates and costs of borrowing have risen dramatically. The Federal Reserve’s action, coupled with other macroeconomic factors, may trigger a recession in the United States, globally, or both. In addition, periods of excessive or prolonged inflation and rising interest rates may negatively impact our customers’ businesses, resulting in increased vacancy, concessions or bad debt expense, which may adversely and materially affect our net operating income and NAV. These factors may also impact our customers’ ability to pay contractual rent, or where applicable expense reimbursements, requiring us to absorb a larger share of operating expenses. In combination with a potential U.S. and/or global recession, we may also experience a slowdown in the rate of increase in rental rates or a decrease in rental rates over time, which may adversely and materially affect our net operating income and NAV. In addition, rising interest rates may have other detrimental effects on our business. For example, rising interest rates could restrict our liquidity based on certain financial covenant requirements as well as our inability to refinance maturing debt in part or in full as it comes due depending on rates at such time. A rise in interest rates could also increase capitalization rates and make alternative interest bearing and other investments more attractive and, therefore, potentially lower the relative value of our existing real estate investments and our NAV. Finally, the combined impact of increased interest rates and a potential recession could cause prospective investors to become reluctant to purchase our shares or existing investors to redeem their shares, thus curtailing our ability to purchase new accretive, real estate investments that satisfy our investment criteria. We continue to monitor the uncertainty surrounding inflation and rising interest rates and the impact that these factors may have on the U.S. economy and on our business.

Conflict in Ukraine

The conflict between Russia and Ukraine has increased the disruption, instability and volatility in global markets and industries. We do not have any investments in Russia, Belarus or Ukraine. Therefore, to date, we have not been materially impacted by the actions of the Russian government. Market disruptions in a single country could cause a worsening of conditions on a regional and even global level, as economic problems in a single country can significantly impact other markets and economies. While the direct impact on us of Russia's invasion of Ukraine is limited, we are being affected by increases in the price of oil as a result of sanctions on Russia, which contributes to overall inflation and increased costs. The ongoing conflict could cause increased volatility in the economies and financial markets of countries throughout the region, or even globally. We continue to monitor the uncertainty surrounding the extent and duration of this ongoing conflict and the impact that it may have on the global economy and on our business.

Impacts of COVID-19

With respect to COVID-19, we are continuing to assess impacts to our portfolio and commercial real estate more broadly. Our properties have not experienced the same level of stress and valuation declines seen within harder hit sectors in which we are not invested such as hospitality, gaming, senior housing or shopping malls, nor do we have any investments in real estate securities which have experienced significant volatility. Where appropriate, we have restructured leases and may restructure additional leases to provide temporary rent relief needed by certain customers while positioning ourselves to recapture abated rent over time. This, coupled with various government stimulus efforts designed to help smaller businesses in this environment, has helped us recover a significant portion of 2020 deferred rent in 2021. We can provide no assurances that we will be able to collect rent at the same level that we did prior to the pandemic going forward. Furthermore, we can provide no assurances that we will be able to recover unpaid rent. As of ~~September~~June 30, ~~2021,~~2022, contractual rent collections are consistent with average annual collections prior to the pandemic. In addition, we are pleased to report that our retail portfolio as a whole has remained stable, and many of our customers are successfully supplementing their in-store sales with e-commerce and curbside pick-up.

We remain an active buyer of institutional quality, income-producing and defensive real estate, particularly within the industrial and residential sectors which we believe should provide increased appreciation potential for the fund over time and complement our retail and office investment allocations that provide for higher income potential. Accordingly, asduring the six months ended June 30, 2022,

Table of ~~September 30, 2021,~~ Contents

we directly acquired 21 industrial properties, seven ~~industrial~~residential properties, and one ~~grocery-anchored retail~~office property, specifically a life science property, in ~~2021~~2022 for an aggregate contractual purchase price of ~~$345.4 million.~~$1.2 billion.

RESULTS OF OPERATIONS

Summary of ~~2021~~2022 Activities

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we completed the following activities:

●

We acquired 21 industrial properties, seven ~~industrial~~residential properties, and one ~~grocery-anchored retail~~office property, specifically a life science property comprising ~~1.8~~5.7 million square feet for an aggregate contractual purchase price of approximately ~~$345.4 million.~~$1.2 billion.

●

We sold five retail properties, one ~~industrial property, one retail~~office property, and ~~two office properties~~a retail land parcel for net proceeds of approximately ~~$141.4~~$251.8 million and recorded a net gain on sale of approximately ~~$53.3~~$83.5 million related to the sale of ~~our industrial and office properties, and an impairment of $0.8 million related to the sale of our retail property.~~these properties.

●

We leased approximately ~~1.4 million~~613,000 square feet of our commercial properties, which included ~~520,000~~271,000 square feet of new leases and ~~887,000~~342,000 square feet of renewals. Additionally, our residential rent increases on new lease trade outs and renewals averaged 21% and 18%, respectively, during the second quarter of 2022 (excluding residential properties acquired during the second quarter of 2022). We are currently ~~94.8% leased~~95.2% occupied (95.6% leased) as of ~~September~~June 30, ~~2021,~~2022, as compared to ~~93.1%~~94.0% occupied (94.6% leased) as of December 31, ~~2020.~~2021.

●

We decreased our leverage ratio from ~~37.1%~~37.6% as of December 31, ~~2020,~~2021, to ~~31.5%~~36.2% as of ~~September~~June 30, ~~2021.~~2022. Our leverage ratio for reporting purposes is calculated as the outstanding principal balance of our borrowings divided by the fair value of our real property and debt-related investments not associated with the DST Program (determined in accordance with our valuation procedures). By calculating the leverage ratio net of cash and cash equivalents (based on the outstanding principal balance of our borrowings less cash and cash ~~equivalents)~~equivalents divided by the fair value of our ~~leverage ratio decreased from 36.6% as of December 31, 2020, to 31.1% as of September 30, 2021.~~real property, net investment in unconsolidated joint venture partnerships and debt-related investments not associated with the DST Program (determined in accordance with our valuation procedures).

~~Table of Contents~~

●

We raised ~~$166.8~~$230.6 million of gross proceeds from the sale of common stock in our ongoing public primary offerings and ~~$17.0~~$13.9 million from the sale of common stock under our distribution reinvestment plan. Additionally, we raised ~~$188.0~~$442.7 million of gross capital through private placement offerings by selling DST Interests, ~~$17.1~~$28.0 million of which were financed by DST Program Loans.

●

We redeemed ~~6.6~~3.4 million shares of common stock at a weighted-average purchase price of ~~$7.59~~$8.37 per share for an aggregate amount of ~~$50.1~~$28.5 million.

●

We entered into five interest rate swap agreements with a notional amount of $350.0 million that become effective in July 2022.

3233

Table of Contents

Results for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared to ~~the Same~~Prior Periods ~~in 2020~~

The following table summarizes our results of operations for the three ~~and nine~~ months ended ~~September~~June 30, ~~2021,~~2022, as compared to the ~~same periods in 2020.~~three months ended March 31, 2022 and six months ended June 30, 2022, as compared to the six months ended June 30, 2021. We evaluate the performance of consolidated operating properties we own and manage using a same store analysis because the population of properties in this analysis is consistent from period to period, thereby eliminating the effects of any material changes in the composition of the aggregate portfolio on performance measures. We have defined the same store portfolio to include consolidated operating properties owned for the entirety of both the current and prior reporting periods for which the operations had been stabilized. Other operating properties not meeting the same store criteria are reflected in the non-same store portfolio. The same store operating portfolio for the ~~three-month periods~~three months ended June 30, 2022 as compared to the three months ended March 31, 2022 presented below includes 4762 properties totaling 8.9 million square feet owned as of July 1, 2020, which portfolio represented 70.8% of total rentable square feet as of September 30, 2021. The same store operating portfolio for the nine-month periods presented below includes 43 properties totaling approximately 7.612.8 million square feet owned as of January 1, ~~2020,~~2022, which ~~portfolio~~ represented ~~60.6%~~69.2% of total rentable square feet as of ~~September~~June 30, ~~2021.~~2022. The same store operating portfolio for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 presented below includes 46 properties totaling approximately 9.6 million square feet owned as of January 1, 2021, which represented 51.9% of total rentable square feet as of June 30, 2022.


	For the Three Months Ended						Change			For the Six Months Ended						Change
($ in thousands, except per square foot data)	June 30, 2022			March 31, 2022			$		%	June 30, 2022			June 30, 2021			$		%
Rental revenues:
Same store properties	$	57,289		$	56,407		$	882	1.6	$	85,012		$	82,116		$	2,896	3.5	%
Non-same store properties		16,205			6,098			10,107	NM		50,987			16,945			34,042	NM
Total rental revenues		73,494			62,505			10,989	17.6		135,999			99,061			36,938	37.3
Rental expenses:
Same store properties		(18,943)			(19,161)			218	1.1		(28,685)			(27,654)			(1,031)	(3.7)
Non-same store properties		(5,953)			(2,153)			(3,800)	NM		(17,525)			(6,822)			(10,703)	NM
Total rental expenses		(24,896)			(21,314)			(3,582)	(16.8)		(46,210)			(34,476)			(11,734)	(34.0)
Net operating income:
Same store properties		38,346			37,246			1,100	3.0		56,327			54,462			1,865	3.4
Non-same store properties		10,252			3,945			6,307	NM		33,462			10,123			23,339	NM
Total net operating income		48,598			41,191			7,407	18.0		89,789			64,585			25,204	39.0
Other income and (expenses):
Debt-related income		846			3,468			(2,622)	(75.6)		4,314			4,443			(129)	(2.9)
Real estate-related depreciation and amortization		(36,903)			(27,451)			(9,452)	(34.4)		(64,354)			(33,907)			(30,447)	(89.8)
General and administrative expenses		(2,594)			(2,037)			(557)	(27.3)		(4,631)			(4,399)			(232)	(5.3)
Advisory fees, related party		(8,227)			(7,144)			(1,083)	(15.2)		(15,370)			(9,909)			(5,461)	(55.1)
Performance participation allocation		(6,186)			(12,192)			6,006	49.3		(18,379)			(3,995)			(14,384)	NM
Acquisition costs and reimbursements		(1,093)			(1,629)			536	32.9		(2,722)			(713)			(2,009)	NM
Impairment of real estate property		—			—			—	—		—			(758)			758	100.0
Equity in income (loss) from unconsolidated joint venture partnerships		1,718			(1,010)			2,728	NM		708			—			708	—
Interest expense		(33,774)			(24,410)			(9,364)	(38.4)		(58,184)			(33,611)			(24,573)	(73.1)
Gain on sale of real estate property		29,643			53,881			(24,238)	(45.0)		83,524			27,342			56,182	NM
Gain on extinguishment of debt and financing commitments, net		(8)			—			(8)	(100.0)		(8)			—			(8)	(100.0)
Other income		1,413			2,127			(714)	(33.6)		3,540			750			2,790	NM
Total other (expenses) income		(55,165)			(16,397)			(38,768)	NM		(71,562)			(54,757)			(16,805)	(30.7)
Net income		(6,567)			24,794			(31,361)	NM		18,227			9,828			8,399	85.5
Net income attributable to redeemable noncontrolling interests		60			(246)			306	NM		(186)			(70)			(116)	NM
Net income attributable to noncontrolling interests		919			(3,537)			4,456	NM		(2,618)			(776)			(1,842)	NM
Net income attributable to common stockholders	$	(5,588)		$	21,011		$	(26,599)	NM	$	15,423		$	8,982		$	6,441	71.7
Same store supplemental data:
Same store average percentage occupied		93.4	%		93.6	%					92.8	%		93.8	%
Same store average annualized base rent per square foot	$	15.19		$	14.23					$	14.18		$	14.44

NM = Not meaningful

3334

Table of Contents

For the Three Months Ended

For the Nine Months Ended


September 30,

Change

September 30,

Change

($ in thousands, except per square foot data)

2021

2020

$

%

2021

2020

$

%

Rental revenues:

















Same store properties

$
44,607

$
40,596

$
4,011

9.9

$
121,442

$
117,835

$
3,607

3.1
%
Non-same store properties

8,989

3,533

5,456

NM

31,215

15,160

16,055

NM

Total rental revenues

53,596

44,129

9,467

21.5

152,657

132,995

19,662

14.8

Rental expenses:

















Same store properties

(14,994)

(14,500)

(494)

(3.4)

(42,070)

(40,454)

(1,616)

(4.0)

Non-same store properties

(2,848)

(1,381)

(1,467)

NM

(10,248)

(5,338)

(4,910)

(92.0)

Total rental expenses

(17,842)

(15,881)

(1,961)

(12.3)

(52,318)

(45,792)

(6,526)

(14.3)

Net operating income:

















Same store properties

29,613

26,096

3,517

13.5

79,372

77,381

1,991

2.6

Non-same store properties

6,141

2,152

3,989

NM

20,967

9,822

11,145

NM

Total net operating income

35,754

28,248

7,506

26.6

100,339

87,203

13,136

15.1

Other income and (expenses):

















Debt-related income

2,298

981

1,317

NM

6,741

1,181

5,560

NM

Real estate-related depreciation and amortization

(18,821)

(15,649)

(3,172)

(20.3)

(52,728)

(44,558)

(8,170)

(18.3)

General and administrative expenses

(2,183)

(1,977)

(206)

(10.4)

(6,582)

(5,769)

(813)

(14.1)

Advisory fees, related party

(5,480)

(4,210)

(1,270)

(30.2)

(15,389)

(12,666)

(2,723)

(21.5)

Performance participation allocation

(3,774)

(1,333)

(2,441)

NM

(7,769)

(3,343)

(4,426)

NM

Acquisition costs and reimbursements

(738)

(240)

(498)

NM

(1,451)

(842)

(609)

(72.3)

Litigation expense

—

(2,500)

2,500

NM

—

(2,500)

2,500

NM

Impairment of real estate property

—

—

—

—

(758)

—

(758)

NM

Interest expense

(17,866)

(15,290)

(2,576)

(16.8)

(51,477)

(42,930)

(8,547)

(19.9)

Gain on sale of real estate property

25,979

—

25,979

NM

53,321

2,192

51,129

NM

Other income

524

262

262

100.0

1,274

619

655

NM

Total other (expenses) income

(20,061)

(39,956)

19,895

49.8

(74,818)

(108,616)

33,798

31.1

Net income (loss)

15,693

(11,708)

27,401

NM

25,521

(21,413)

46,934

NM

Net (income) loss attributable to redeemable noncontrolling interests

(99)

39

(138)

NM

(169)

71

(240)

NM

Net (income) loss attributable to noncontrolling interests

(1,654)

839

(2,493)

NM

(2,430)

1,515

(3,945)

NM

Net income (loss) attributable to common stockholders

$
13,940

$
(10,830)

$
24,770

NM

$
22,922

$
(19,827)

$
42,749

NM

Same store supplemental data:

















Same store average percentage leased

94.0
%

93.3
%





92.7
%

92.8
%





Same store average annualized base rent per square foot

$
15.95

$
15.41





$
17.72

$
17.61

~~NM = Not meaningful~~

Rental Revenues. Rental revenues are comprised of rental income, straight-line rent, and amortization of above- and below-market lease assets and liabilities. Total rental revenues increased by ~~$9.5~~$11.0 million and ~~$19.7~~$36.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, as compared to the ~~same periods in 2020.~~three and six months ended March 31, 2022 and June 30, 2021, respectively. For the three ~~and nine~~ months ended ~~September~~June 30, ~~2021,~~2022, same store revenues increased ~~$4.0~~by $0.9 million, ~~and $3.6 million, respectively,~~ as compared to the ~~same periods in 2020,~~three months ended March 31, 2022, primarily driven by ~~a termination fee received at our Bala Pointe office property~~increased occupancy and ~~increased occupancy~~rental rates at certain of our ~~office, retail,~~residential and industrial properties in 2022. For the six months ended June 30, 2022, same store revenues increased by $2.9 million, as compared to the six months June 30, 2021, primarily driven by increased market rents and reduced rent concessions at the residential properties in ~~2021.~~the second quarter of 2022. Non-same store revenue increased by ~~$5.5~~$10.1 million and ~~$16.1~~$34.0 million for the three and ~~nine~~six months ended

~~Table of Contents~~

~~September~~ June 30, ~~2021, respectively,~~2022, as compared to the ~~same periods in 2020,~~three months and six months ended March 31, 2022 and June 30, 2021, respectively, as a result of net positive acquisition activity, with acquisitions primarily in the industrial and residential segments ~~after accounting for~~and dispositions primarily in the office ~~segment.~~and retail segments.

The following table presents the components of our consolidated rental revenues:


	For the Three Months Ended September 30,				Change				For the Nine Months Ended September 30,				Change				For the Three Months Ended				Change				For the Six Months Ended June 30,				Change
(in thousands)	2021		2020		$		%		2021		2020		$		%		June 30, 2022		March 31, 2022		$		%		2022		2021		$		%
Rental income	$	50,014	$	42,183	$	7,831	18.6	%	$	145,898	$	126,818	$	19,080	15.0	%	$	71,229	$	60,752	$	10,477	17.2	%	$	131,981	$	95,884	$	36,097	37.6	%
Straight-line rent		2,798		1,322		1,476	111.6			4,667		3,947		720	18.2			1,240		726		514	70.8			1,966		1,869		97	5.2
Amortization of above- and below-market intangibles		784		624		160	25.6			2,092		2,230		(138)	(6.2)			1,025		1,027		(2)	(0.2)			2,052		1,308		744	56.9
Total rental revenues	$	53,596	$	44,129	$	9,467	21.5	%	$	152,657	$	132,995	$	19,662	14.8	%	$	73,494	$	62,505	$	10,989	17.6	%	$	135,999	$	99,061	$	36,938	37.3	%

Rental Expenses. Rental expenses include certain property operating expenses typically reimbursed by our customers, such as real estate taxes, property insurance, property management fees, repair and maintenance, and include certain non-recoverable expenses, such as consulting services and roof repairs. Total rental expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 increased by ~~$2.0~~$3.6 million and ~~$6.5~~$11.7 million, ~~respectively,~~ as compared to the ~~same periods in 2020,~~three and six months ended March 31, 2022 and June 30, 2021, respectively, primarily due to (i) an increase in non-same store rental expenses as a result of our acquisition activity since January 1, ~~2020,~~2021, which was partially offset by our disposition activity since January 1, ~~2020;~~2021; and (ii) increased real estate tax expense driven by net acquisition activity and operating expenses associated with certain ~~properties; and (iii) increased repairs and maintenance expense, including snow removal and parking lot repairs incurred during the second quarter of 2021.~~properties.

The following table presents the various components of our rental expenses:


	For the Three Months Ended								For the Nine Months Ended								For the Three Months Ended								For the Six Months Ended
	September 30,				Change				September 30,				Change				June 30,		March 31		Change				June 30,				Change
(in thousands)	2021		2020		$		%		2021		2020		$		%		2022		2022		$		%		2022		2021		$		%
Real estate taxes	$	7,148	$	5,966	$	1,182	19.8	%	$	21,191	$	18,234	$	2,957	16.2	%	$	10,718	$	8,822	$	1,896	21.5	%	$	19,540	$	14,043	$	5,497	39.1	%
Repairs and maintenance		4,319		4,030		289	7.2			14,001		11,520		2,481	21.5			5,200		4,883		317	6.5			10,083		9,682		401	4.1
Utilities		1,888		1,696		192	11.3			5,305		4,585		720	15.7			2,484		2,530		(46)	(1.8)			5,014		3,417		1,597	46.7
Property management fees		1,282		1,104		178	16.1			3,689		3,159		530	16.8			1,723		1,561		162	10.4			3,284		2,407		877	36.4
Insurance		661		483		178	36.9			1,782		1,360		422	31.0			1,254		958		296	30.9			2,212		1,121		1,091	97.3
Other		2,544		2,602		(58)	(2.2)			6,350		6,934		(584)	(8.4)			3,517		2,560		957	37.4			6,077		3,806		2,271	59.7
Total rental expenses	$	17,842	$	15,881	$	1,961	12.3	%	$	52,318	$	45,792	$	6,526	14.3	%	$	24,896	$	21,314	$	3,582	16.8	%	$	46,210	$	34,476	$	11,734	34.0	%

Other Income and Expenses. The net amount of other expenses ~~decreased~~increased by ~~$19.9~~$38.8 million ~~and $33.8 million, respectively,~~ for the three ~~and nine~~ months ended ~~September~~June 30, ~~2021, respectively,~~2022, as compared to the ~~same periods in 2020,~~three months ended March 31, 2022, primarily as a result of (i) ~~larger gains on 2021 dispositions;~~a decrease in gain from disposition of $24.2 million (ii)~~increased interest income earned on debt-related investments in 2021; and (iii) litigation expense incurred during 2020.These drivers were partially offset by~~ ~~(i)~~ an increase in real estate-related depreciation and amortization of $9.5 million driven by our net acquisition ~~activity~~activity; and ~~lease termination amortization; (ii)~~(iii) an increase in interest expense of $9.4 million driven by higher interest expense on financing obligations associated with an increase in the sale of interests related to our DST ~~Program; and (iii) an increase~~Program.

The net amount of other expenses increased $16.8 million for the six months ended June 30, 2022, as compared to the same period in ~~base advisory fees, driven by an increase in NAV, and~~2021, primarily as a result of (i) an increase in performance participation allocation of $14.4 million driven by the increased performance of our ~~portfolio.~~portfolio; (ii) an increase in real estate-related depreciation and amortization of $30.4 million driven by our net acquisition activity and lease termination amortization; and (iii) an increase in interest expense of $24.6 million driven by higher interest expense on financing obligations associated with an increase in the sale of interests related to our DST Program. The increase in these expenses was partially offset by an increase in gain from dispositions of $56.2 million.

Segment Summary for the Three and ~~Nine Months Ended September~~Six months ended June 30, ~~2021~~2022 Compared to ~~the Same~~Prior Periods ~~in 2020~~

Our segments are based on our internal reporting of operating results used to assess performance based on the type of our properties. Our markets are aggregated into four reportable segments: office, retail, residential and industrial. These segments are comprised of the markets by which management and its operating teams conduct and monitor business. See “Note 1314 to the Condensed

Table of Contents

Consolidated Financial Statements” for further information on our segments. Management considers rental revenues and net operating income (“NOI”) aggregated by segment to be the appropriate way to analyze performance. See “Additional Measures of Performance”

~~Table of Contents~~

below for detail regarding the use of NOI. The following table summarizes certain operating trends in our consolidated same store properties by segment:


	For the Three Months Ended										For the Nine Months Ended										For the Three Months Ended										For the Six Months Ended
	September 30,						Change				September 30,						Change				June 30,			March 31			Change				June 30,						Change
($ in thousands, except per square foot data)	2021			2020				$	%		2021			2020			$		%		2022			2022				$	%		2022			2021			$		%
Rental revenues:
Office	$	15,954		$	14,000		$	1,954	14.0	%	$	44,322		$	42,152		$	2,170	5.1	%	$	12,508		$	12,771		$	(263)	(2.1)	%	$	25,278		$	25,029		$	249	1.0	%
Retail		17,475			16,831			644	3.8			49,631			49,154			477	1.0			15,060			14,970			90	0.6			27,413			26,758			655	2.4
Residential		5,320			4,350			970	22.3			15,273			14,591			682	4.7			15,673			14,811			862	5.8			15,810			13,648			2,162	15.8
Industrial		5,858			5,415			443	8.2			12,216			11,938			278	2.3			14,048			13,855			193	1.4			16,511			16,681			(170)	(1.0)
Total same store rental revenues		44,607			40,596			4,011	9.9			121,442			117,835			3,607	3.1			57,289			56,407			882	1.6			85,012			82,116			2,896	3.5
Non-same store properties		8,989			3,533			5,456	NM			31,215			15,160			16,055	NM			16,205			6,098			10,107	NM			50,987			16,945			34,042	NM
Total rental revenues	$	53,596		$	44,129		$	9,467	21.5	%	$	152,657		$	132,995		$	19,662	14.8	%	$	73,494		$	62,505		$	10,989	17.6	%	$	135,999		$	99,061		$	36,938	37.3	%
NOI:
Office	$	9,398		$	7,504		$	1,894	25.2	%	$	25,027		$	22,932		$	2,095	9.1	%	$	7,014		$	7,118		$	(104)	(1.5)	%	$	14,132		$	14,292		$	(160)	(1.1)	%
Retail		13,128			12,341			787	6.4			37,084			37,402			(318)	(0.9)			11,528			10,995			533	4.8			20,497			19,987			510	2.6
Residential		3,019			2,068			951	46.0			8,440			7,952			488	6.1			9,131			8,433			698	8.3			9,180			7,239			1,941	26.8
Industrial		4,068			4,183			(115)	(2.7)			8,821			9,095			(274)	(3.0)			10,673			10,700			(27)	(0.3)			12,518			12,944			(426)	(3.3)
Total same store NOI		29,613			26,096			3,517	13.5			79,372			77,381			1,991	2.6			38,346			37,246			1,100	3.0			56,327			54,462			1,865	3.4
Non-same store properties		6,141			2,152			3,989	NM			20,967			9,822			11,145	NM			10,252			3,945			6,307	NM			33,462			10,123			23,339	NM
Total NOI	$	35,754		$	28,248		$	7,506	26.6	%	$	100,339		$	87,203		$	13,136	15.1	%	$	48,598		$	41,191		$	7,407	18.0	%	$	89,789		$	64,585		$	25,204	39.0	%
Same store average percentage leased:
Same store average percentage occupied:
Office		82.8	%		83.2	%						81.6	%		83.6	%						76.1	%		78.4	%						77.2	%		81.1	%
Retail		93.8			93.7							93.8			94.3							93.3			92.5							93.0			92.0
Residential		95.4			86.6							94.1			87.8							92.2			93.0							95.5			94.9
Industrial		99.8			100.0							99.5			100.0							97.6			97.6							96.8			98.2
Same store average annualized base rent per square foot:
Office	$	31.00		$	30.99						$	31.71		$	31.46						$	34.67		$	34.62						$	34.14		$	34.89
Retail		18.75			17.96							18.76			18.45							19.25			19.25							20.00			20.28
Residential		23.93			21.80							23.12			23.70							29.36			28.19							22.96			23.27
Industrial		4.94			4.93							5.41			5.33							6.18			5.90							4.58			4.85

NM = Not meaningful

Office Segment. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, our office segment same store NOI ~~increased~~decreased by ~~$1.9~~$0.1 million and ~~$2.1~~$0.2 million, respectively, as compared to the ~~same periods in 2020,~~three and six months ended March 31, 2022 and June 30, 2021, respectively, primarily due to areduced termination fee ~~received~~revenue at our Bala Pointe property, which was partially offset by increased parking and ~~increased occupancy~~administration fee revenue and decreased operating expenses at our 3 Second Street property.

Retail Segment. For the three and six months ended ~~September~~June 30, ~~2021,~~2022, our retail segment same store NOI increased by ~~$0.8~~$0.5 million and $0.5 million as compared to the ~~same period in 2020,~~three and six months ended March 31, 2022 and June 30, 2021, respectively, primarily due to decreased bad debt expense for one tenant at our Suniland Shopping Center property in the second quarter of 2022, as well as increased occupancy ~~and reduced operating expenses~~ at certain properties ~~in 2021. For the nine months ended September 30, 2021, our retail segment same store NOI remained relatively consistent as compared to the same period in 2020.~~during 2022.

Residential Segment. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, our residential segment same store NOI increased by ~~$1.0~~$0.7 million and ~~$0.5~~$1.9 million, respectively, as compared to the ~~same periods in 2020,~~three and six months ended March 31, 2022 and June 30, 2021, respectively, primarily due to increased ~~occupancy~~market rents and reduced rent concessions at certain of our ~~residential~~ properties during the ~~third~~second quarter of ~~2021.~~2022.

Industrial Segment. For the three months ended June 30, 2022, our industrial segment same store NOI remained consistent as compared to the three months ended March 31, 2022. For the six months ended June 30, 2022, our industrial segment same store NOI decreased by $0.4 million as compared to the six months ended June 30, 2021, primarily due to reduced occupancy at our Kaiser Business Center property.

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~~Industrial Segment.~~ For the three and nine months ended September 30, 2021, our industrial segment same store NOI decreased by $0.1 million and $0.3 million, respectively, as compared to the same periods in 2020, primarily due to increased operating expenses specifically related to bad debt expense at our Kaiser Business Center property.

ADDITIONAL MEASURES OF PERFORMANCE

Net Income and NOI

We define NOI as GAAP rental revenues less GAAP rental expenses. We consider NOI to be an appropriate supplemental performance measure and believe NOI provides useful information to our investors regarding our results of operations because NOI reflects the operating performance of our properties and excludes certain items that are not considered to be controllable in connection with the management of the properties, such as real estate-related depreciation and amortization, general and administrative expenses, advisory fees, impairment charges, interest expense, gains on sale of properties, other income and expense, gains and losses on the extinguishment of debt and noncontrolling interests. However, NOI should not be viewed as an alternative measure of our financial performance since it excludes such items, which could materially impact our results of operations. Further, our NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating NOI. Therefore, we believe net income (loss), as defined by GAAP, to be the most appropriate measure to evaluate our overall financial performance. Refer to “Results of Operations—Results for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared to ~~the Same Periods in 2020”~~Prior Periods” above for a reconciliation of our GAAP net income (loss) to NOI for the three ~~and nine~~ months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~March 31, 2022, and for the six months ended June 30, 2022 and June 30, 2021.

Funds From Operations (“FFO”)

We believe that FFO, in addition to net income (loss) and cash flows from operating activities as defined by GAAP, are useful supplemental performance measures that our management uses to evaluate our consolidated operating performance. However, this supplemental, non-GAAP measure should not be considered as an alternative to net income (loss) or to cash flows from operating activities as an indication of our performance and is not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders. No single measure can provide users of financial information with sufficient information and only our disclosures read as a whole can be relied upon to adequately portray our financial position, liquidity, and results of operations. In addition, other REITs may define FFO and similar measures differently and choose to treat certain accounting line items in a manner different from us due to specific differences in investment and operating strategy or for other reasons.

FFO. As defined by the National Association of Real Estate Investment Trusts (“NAREIT”), FFO is a non-GAAP measure that excludes certain items such as real estate-related depreciation and amortization. We believe FFO is a meaningful supplemental measure of our operating performance that is useful to investors because depreciation and amortization in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. By excluding gains or losses on the sale of assets, we believe FFO provides a helpful additional measure of our consolidated operating performance on a comparative basis. We use FFO as an indication of our consolidated operating performance and as a guide to making decisions about future investments.

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The following unaudited table presents a reconciliation of GAAP net income (loss) to NAREIT FFO:


	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(in thousands, except per share data)	2021		2020		2021		2020		2022		2021		2022		2021
GAAP net income (loss) attributable to common stockholders	$	13,940	$	(10,830)	$	22,922	$	(19,827)	$	(5,588)	$	(8,583)	$	15,423	$	8,982
GAAP net income (loss) per common share—basic and diluted	$	0.09	$	(0.08)	$	0.15	$	(0.14)	$	(0.03)	$	(0.06)	$	0.08	$	0.06
Reconciliation of GAAP net income (loss) to NAREIT FFO:
GAAP net income (loss) attributable to common stockholders	$	13,940	$	(10,830)	$	22,922	$	(19,827)	$	(5,588)	$	(8,583)	$	15,423	$	8,982
Real estate-related depreciation and amortization		18,821		15,649		52,728		44,558		36,903		17,174		64,354		33,907
Impairment of real estate property		—		—		758		—		—		—		—		758
Gain on sale of real estate property		(25,979)		—		(53,321)		(2,192)		(29,643)		—		(83,524)		(27,342)
Noncontrolling interests’ share of net income (loss)		1,654		(839)		2,430		(1,515)		(919)		(923)		2,618		776
Redeemable noncontrolling interests' share of net income (loss)		99		(39)		169		(71)		(60)		(64)		186		70
Noncontrolling interests’ share of NAREIT FFO		(898)		(282)		(2,470)		(1,467)		(66)		(736)		196		(1,572)
Redeemable noncontrolling interests' share of NAREIT FFO		(54)		(13)		(171)		(69)		(7)		(51)		9		(117)
NAREIT FFO attributable to common stockholders—basic		7,583		3,646		23,045		19,417		620		6,817		(738)		15,462
NAREIT FFO attributable to OP Units		952		295		2,641		1,536
NAREIT FFO attributable to noncontrolling interests										73		787		(205)		1,689
NAREIT FFO	$	8,535	$	3,941	$	25,686	$	20,953	$	693	$	7,604	$	(943)	$	17,151
Weighted-average shares outstanding—basic		157,025		141,682		151,045		142,216		191,158		150,126		184,878		148,005
Weighted-average shares outstanding—diluted		176,777		153,166		168,475		153,665		224,857		167,387		217,806		164,255
NAREIT FFO per common share—basic and diluted	$	0.05	$	0.03	$	0.15	$	0.14	$	0.00	$	0.05	$	(0.00)	$	0.10

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our primary sources of capital for meeting our cash requirements include debt financings, cash generated from operating activities, net proceeds from our public and private offerings, and asset sales. Our principal uses of funds are distributions to our stockholders, payments under our debt obligations, redemption payments, acquisition of properties and other investments, and capital expenditures. Over time, we intend to fund a majority of our cash needs, including the repayment of debt and capital expenditures, from operating cash flows and refinancings. As of ~~September~~June 30, ~~2021,~~2022, we had approximately ~~$361.0~~$0.9 million of borrowings coming due in the next 12 months, including scheduled amortization payments. Of this amount, $200.0 million relates to a term loan that matures in February 2022, and may be extended pursuant to two one-year extension options, subject to certain conditions, including the payment of an extension fee. We expect to be able to repay our principal obligations over the next 12 months and beyond through operating cash flows, refinancings and/or disposition proceeds. Additionally, given the increase in market volatility, increased interest rates, high inflation and the potential recessionary environment, we may experience a decreased pace of net proceeds raised from our public offering, reducing our ability to purchase assets, which may similarly delay the returns generated from our investments and affect our NAV.

Our Advisor, subject to the oversight of our board of directors and, under certain circumstances, the investment committee or other committees established by our board of directors, will evaluate potential acquisitions or dispositions and will engage in negotiations with buyers, sellers and lenders on our behalf. Pending investment in property, debt, or other investments, we may decide to temporarily invest any unused proceeds from our public offerings in certain investments that are expected to yield lower returns than those earned on real estate assets. These lower returns may affect our NAV and our ability to make distributions to our stockholders. Potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from our public and private offerings, proceeds from the sale of assets, and undistributed funds from operations.

~~The global pandemic and resulting shut down~~As of large parts of the U.S. economy has created significant uncertainty and enhanced investment risk across many asset classes, including real estate. The COVID-19 pandemic could have a material adverse effect on our financial condition, results of operations and cash flows as the reduced economic activity severely impacts certain of our customers’ businesses, financial condition and liquidity and may cause certain customers to be unable to meet their obligations to us in full. However, as of SeptemberJune 30, ~~2021,~~2022, contractual rent collections are consistent with average annual collections prior to the pandemic. We are pleased with these collections given the pandemic’s significant impacts on the broader economy, thus reflecting the relatively defensive nature of our assets.

As of ~~September~~June 30, ~~2021,~~2022, our financial position was strong with ~~31.5%~~36.2% leverage, ~~or 31.1% leverage net~~calculated as outstanding principal balance of ~~$12.5 million of~~our borrowings less cash and cash ~~equivalents.~~equivalents divided by the fair value of our real property, net investment in our unconsolidated joint venture partnerships and debt-related investments not associated with the DST Program (determined in accordance with our valuation procedures). In addition, our consolidated portfolio was ~~94.8% leased~~95.2% occupied (95.6% leased) as of ~~September~~June 30, ~~2021~~2022 and is diversified across 6190 properties totaling ~~12.6~~18.5 million square feet across 2833 geographic markets. Our properties contain a diverse roster of ~~480~~395 commercial customers, large and

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small, and has an allocation based on fair value of real estate properties as determined by our NAV calculation of ~~23.0% office, 33.6%~~34.1% industrial, 36.4% residential, 16.4% retail which is primarily grocery-anchored, ~~29.4% industrial,~~ and ~~14.0% residential.~~13.1% office.

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We believe that our cash on-hand, anticipated net offering proceeds, proceeds from our line of credit, and other financing and disposition activities should be sufficient to meet our anticipated future acquisition, operating, debt service, distribution and redemption requirements.

Cash Flows. The following table summarizes our cash flows for the following periods:


	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
(in thousands)	2021		2020		$ Change		2022		2021		$ Change
Total cash provided by (used in):
Operating activities	$	38,750	$	28,847	$	9,903	$	49,620	$	21,863	$	27,757
Investing activities		(226,175)		(236,786)		10,611		(992,774)		(126,550)		(866,224)
Financing activities		188,687		126,597		62,090		953,240		105,301		847,939
Net increase (decrease) in cash, cash equivalents and restricted cash	$	1,262	$	(81,342)	$	82,604
Net (decrease) increase in cash, cash equivalents and restricted cash							$	10,086	$	614	$	9,472

Net cash provided by operating activities increased by approximately ~~$9.9~~$27.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to the same period in ~~2020,~~2021, primarily due to ~~net~~growth in our property operations as a result of our acquisition activity ~~which was partially offset by~~ ~~an increase in interest expense due to our increasing rent obligations resulting from our DST Program and~~ ~~an increase in performance-based fees paid to~~over the ~~Advisor in 2021.~~last year.

Net cash used in investing activities ~~decreased~~increased by approximately ~~$10.6~~$866.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to the same period in ~~2020,~~2021, primarily due to (i) an increase in ~~net disposition proceeds~~acquisition activity of ~~$138.6 million received in 2021~~$1.0 billion; and (ii) investment activity related to our investment in unconsolidated joint venture partnerships for $47.9 million that we entered into in the ~~sale~~fourth quarter of one retail property, one industrial property, and two office properties, as compared to the sale of one retail outparcel during the corresponding period in 2020; (ii) cash paid to acquire a debt-related investment during 2020 of $45.5 million; and (iii) $5.9 million of lower capital expenditure activity.2021. These drivers were partially offset by ~~a $184.4 million~~an increase in ~~acquisition activity during the nine months ended September 30, 2021, as compared to the same period in 2020.~~net disposition proceeds of $202.9 million.

Net cash provided by financing activities increased by approximately ~~$62.1~~$847.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to the same period in ~~2020,~~2021, primarily due to an increase in net offering activity from our DST Program and public offering of ~~$66.9~~$427.2 million and ~~a decrease of redemptions of $38.7 million. These drivers were partially offset by a $45.0 million net~~an increase in ~~repayments~~net borrowing activity of ~~the line of credit and mortgage notes during the nine months ended September 30, 2021, compared to the same period in 2020.~~$425.4 million.

Capital Resources and Uses of Liquidity

In addition to our cash and cash equivalents balances available, our capital resources and uses of liquidity are as follows:

Line of Credit and Term Loans. As of ~~September~~June 30, ~~2021,~~2022, we had an aggregate of ~~$975.0 million~~$1.5 billion of commitments under our unsecured credit ~~agreements,~~agreement, including ~~$450.0~~$700.0 million under our line of credit and ~~$525.0~~$800.0 million under our two term loans. As of that date, we had: (i) ~~$85.0~~$383.0 million outstanding under our line of credit; and (ii) ~~$525.0~~$800.0 million outstanding under our term loans. The weighted-average effective interest rate across all of our unsecured borrowings is ~~3.02%~~3.09%, which includes the effect of the interest rate swap agreements related to ~~$500.0~~$300.0 million in borrowings under our term loans.

~~The~~As of June 30, 2022, the unused and available portions under our line of credit were ~~$365.0~~$317.0 million and ~~$252.6~~$316.8 million, respectively. Our ~~$450.0~~$700.0 million line of credit matures in ~~January 2023,~~November 2025, and may be extended pursuant to two six-month extension options, subject to certain conditions, including the payment of extension fees. One $400.0 million term loan matures in November 2026, with no extension option available. Our ~~$325.0~~other $400.0 million term loan matures in January ~~2024,~~2027, with no extension option available. ~~Our $200.0 million term loan matures in February 2022, and may be extended pursuant to two one-year extension options, subject to certain conditions, including the payment of an extension fee.~~ Our line of credit borrowings are available for general corporate purposes, including but not limited to the refinancing of other debt, payment of redemptions, acquisition and operation of permitted investments. Refer to “Note 35 to the Condensed Consolidated Financial Statements” for additional information regarding our line of credit and term loans.

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as its preferred alternative rate for LIBOR in derivatives and other financial contracts. ~~We are not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets.~~ Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

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intend to monitor the developments with respect to the ~~potential~~ phasing out of LIBOR after 2023 and work with our lenders to seek to ensure any transition away from LIBOR will have minimal impact on our financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR.

Mortgage Notes. As of ~~September~~June 30, ~~2021,~~2022, we had property-level borrowings of approximately ~~$311.3~~$588.4 million outstanding with a weighted-average remaining term of approximately ~~2.5~~4.8 years. These borrowings are secured by mortgages or deeds of trust and related assignments and security interests in the collateralized properties, and had a weighted-average interest rate of ~~2.99%~~3.63%. Refer to “Note 35 to the Condensed Consolidated Financial Statements” for additional information regarding the mortgage notes.

Debt Covenants. Our line of credit, term loan and mortgage note agreements contain various property-level covenants, including customary affirmative and negative covenants. In addition, our line of credit and term loan agreements contain certain corporate level financial covenants, including leverage ratio, fixed charge coverage ratio, and tangible net worth thresholds. These covenants may limit our ability to incur additional debt, or to pay distributions. We were in compliance with our debt covenants as of ~~September~~June 30, ~~2021.~~2022.

Leverage. We use financial leverage to provide additional funds to support our investment activities. We may finance a portion of the purchase price of any real estate asset that we acquire with borrowings on short or long-term basis from banks, life insurance companies and other lenders. We calculate our leverage for reporting purposes as the outstanding principal balance of our borrowings less cash and cash equivalents divided by the fair value of our real property, net investment in our unconsolidated joint venture partnerships and debt-related investments not associated with the DST Program (determined in accordance with our valuation procedures). We had leverage of ~~31.5%~~36.2% as of ~~September~~June 30, ~~2021.~~2022. Our current ~~target~~ leverage ~~ratio~~target is between 40-60%. Although we will generally work to maintain our targeted leverage ratio, there are no assurances that we will maintain the targeted range disclosed above or achieve any other leverage ratio that we may target in the future. Due to the increase in interest rates in 2022, increased market volatility, and the potential of a global recession in the near-term, the cost of financing or refinancing our purchase of assets may affect returns generated by our investments. Additionally, these factors may cause our borrowing capacity to be reduced, which could similarly delay or reduce benefits to our stockholders.

Offering Proceeds. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the amount of aggregate gross proceeds raised from our public offerings (including shares issued pursuant to the distribution reinvestment plan) was ~~$183.8~~$244.5 million ($~~171.4~~228.8 million net of direct selling costs).

Distributions. To obtain the favorable tax treatment accorded to REITs, we normally will be required each year to distribute to our stockholders at least 90% of our real estate investment trust taxable income, determined without regard to the deduction for distributions paid and by excluding net capital gains. The payment of distributions is determined by our board of directors and may be adjusted at its discretion at any time. Distribution levels are set by our board of directors at a level it believes to be appropriate and sustainable based upon a review of a variety of factors including the current and anticipated market conditions, current and anticipated future performance and make-up of our investments, our overall financial projections and expected future cash needs. We intend to continue to make distributions on a monthly basis.

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The following table outlines sources used, as determined on a GAAP basis, to pay total gross distributions (which are paid in cash or reinvested in shares of our common stock through our distribution reinvestment plan) for the periods indicated below:


	For the Three Months Ended June 30, 2022				For the Three Months Ended June 30, 2021
(in thousands)	Amount		Percentage		Amount		Percentage
Distributions
Paid in cash (1)	$	13,715	65.1	%	$	9,962	63.5	%
Reinvested in shares		7,362	34.9			5,723	36.5
Total (2)	$	21,077	100.0	%	$	15,685	100.0	%
Sources of Cash Distributions
Cash flows from operating activities	$	13,715	100.0	%	$	9,962	100.0	%
Borrowings		—	—			—	—
Total (2)	$	13,715	100.0	%	$	9,962	100.0	%

Amount

Source of Distributions Paid in Cash

Declared

Total Cash



per





Flows from

Cash Flows from

(in thousands, except per share

Common

Reinvested in

Total

Operating

Operating



data)

Share (1)

Paid in Cash (2)

Shares

Distributions

Activities (3)

Activities

Borrowings

2021























March 31

$
0.09375

$
9,572

63.4
%
$
5,526

36.6
%
$
15,098

$
7,659

$
7,659

80.0
%
$
1,913

20.0
%
June 30

0.09375

9,962

63.5

5,723

36.5

15,685

14,204

9,962

100.0

—

—

September 30

0.09375

10,597

63.9

5,985

36.1

16,582

16,887

10,597

100.0

—

—

Total

$
0.28125

$
30,131

63.6
%
$
17,234

36.4
%
$
47,365

$
38,750

$
28,218

93.7
%
$
1,913

6.3
%
2020























March 31

$
0.09375

$
9,032

62.8
%
$
5,360

37.2
%
$
14,392

$
7,455

$
7,455

82.5
%
$
1,577

17.5
%
June 30

0.09375

9,150

63.3

5,316

36.7

14,466

11,384

9,150

100.0

—

—

September 30

0.09375

9,074

63.2

5,282

36.8

14,356

10,008

9,074

100.0

—

—

December 31

0.09375

9,214

63.3

5,347

36.7

14,561

12,281

9,214

100.0

—

—

Total

$
0.37500

$
36,470

63.1
%
$
21,305

36.9
%
$
57,775

$
41,128

$
34,893

95.7
%
$
1,577

4.3
%


	For the Six Months Ended June 30, 2022				For the Six Months Ended June 30, 2021
(in thousands)	Amount		Percentage		Amount		Percentage
Distributions
Paid in cash (1)	$	26,600	65.1	%	$	19,534	63.5	%
Reinvested in shares		14,238	34.9			11,249	36.5
Total (2)	$	40,838	100.0	%	$	30,783	100.0	%
Sources of Cash Distributions
Cash flows from operating activities	$	26,600	100.0	%	$	19,534	100.0	%
Borrowings		—	—			—	—
Total (2)	$	26,600	100.0	%	$	19,534	100.0	%

(1)	Amount reflects the total quarterly distribution rate, subject to adjustment for class-specific fees. Distributions were declared and paid as of monthly record dates. These monthly distributions have been aggregated and presented on a quarterly basis.

~~(2)~~

Includes other cash distributions consisting ofof: (i) distributions paid to ~~OP Unit~~noncontrolling interest holders; and (ii) ongoing distribution fees paid to the Dealer Manager with respect to Class T, Class S and Class D shares.

~~(3)~~(2)

~~During the first quarter~~Includes distributions paid to holders of each calendar year, we typically generate lower cash flows from operating activities than the other quarters of the years, all else equal, as a result of annual payments of operating expenses that are due during the first quarter. Such annual payments due in the first quarter include annual bonus reimbursements and certain property taxes in jurisdictions that require one annual payment.OP Units for redeemable noncontrolling interests.

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, our FFO was ~~$8.5~~$0.7 million, or ~~51.5%~~3.3% of our total distributions, and ~~$3.9~~$7.6 million, or ~~27.5%~~48.5% of our total distributions, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, our FFO was ~~$25.7~~a $0.9 million loss, or ~~54.2%~~2.3% of our total distributions and ~~$21.0~~$17.2 million, or ~~48.5%~~55.7% of our total distributions, respectively. FFO is a non-GAAP operating metric and should not be used as a liquidity measure. However, management believes the relationship between FFO and distributions may be meaningful for investors to better understand the sustainability of our operating performance compared to distributions made. Refer to “Additional Measures of Performance” above for the definition of FFO, as well as a detailed reconciliation of our GAAP net income (loss) to FFO.

Redemptions. Below is a summary of redemptions and repurchases pursuant to our share redemption program for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021. Our board of directors may modify ~~suspend~~ or ~~terminate~~suspend our current share redemption programs if it deems such action to be in the best interest of our stockholders. Refer to Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds—Share Redemption Program” for detail regarding our share redemption program.


	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
(in thousands, except for per share data)	2021			2020			2022			2021
Number of shares requested for redemption or repurchase		6,601			11,608			3,408			4,676
Number of shares redeemed or repurchased		6,601			11,608			3,408			4,676
% of shares requested that were redeemed or repurchased		100.0	%		100.0	%		100.0	%		100.0	%
Aggregate dollar amount of shares redeemed or repurchased							$	28,500		$	35,380
Average redemption or repurchase price per share	$	7.59		$	7.50		$	8.37		$	7.57

For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, we received and redeemed in full eligible redemption requests for an aggregate amount of approximately ~~$50.1~~$28.5 million and ~~$87.1~~$35.4 million, respectively, which we redeemed using cash flows from operating activities in excess of our distributions paid in cash, cash on hand, proceeds from our public offerings, proceeds from the disposition of properties, and borrowings under our revolving line of credit. We generally repay funds borrowed from our revolving line of credit from a variety of sources including: cash flows from operating activities in excess of our distributions; proceeds from our public offerings; proceeds from the disposition of properties; and other longer-term borrowings.

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SUBSEQUENT EVENTS

~~Purchase of Membership Interests~~

On October 20, 2021, we acquired a majority interest in an entity that owns a residential property in Tucson, Arizona, which is a student housing property, for a total contractual purchase price of approximately $124.0 million.

~~Acquisition of Property~~

~~Subsequent~~See “Note 15 to ~~September 30, 2021, we acquired (excluding properties related to our DST Program) one industrial property located in Burlington, New Jersey for a purchase price of approximately $6.4 million.~~

~~Acquisition Under Contract~~

On November 3, 2021, we entered into a contract to acquire an industrial property located in Houston, Texas with a purchase price of approximately $17.4 million. There can be no assurance that we will complete the ~~acquisition of the property under contract.~~

~~Agreement to Sell Property~~

On October 29, 2021, we entered into an agreement to sell a retail property located in Portsmouth, New Hampshire (“Durgin Square”) to an unrelated third party for a gross sales price of approximately $40.5 million. Our accounting basis (net of accumulated depreciation and amortization) for this real estate property as of September 30, 2021 was approximately $21.7 million. There can be no assurance that we will complete the disposition of the property under this agreement.

~~CONTRACTUAL OBLIGATIONS~~

~~A summary of future obligations as of December 31, 2020 was disclosed in our 2020 Form 10-K. Except as otherwise disclosed in “Note 3 to the Condensed~~ Consolidated Financial Statements” ~~relating to our debt obligations, there were no material changes outside the ordinary course of business.~~

~~OFF-BALANCE SHEET ARRANGEMENTS~~for information regarding subsequent events

As of September 30, 2021, we had no material off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources..

CRITICAL ACCOUNTING ESTIMATES

Our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our unaudited condensed consolidated financial statements requires significant management judgments, assumptions, and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our 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 our condensed consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. For a detailed description of our critical accounting estimates, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2020~~2021 Form 10-K. As of ~~September~~June 30, ~~2021,~~2022, our critical accounting estimates have not changed from those described in our ~~2020~~2021 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We ~~are~~have been and may continue to be exposed to the impact of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows, and optimize overall borrowing costs. To achieve these objectives, we often plan to borrow on a fixed interest rate basis for longer-term debt and utilize interest rate swap and cap agreements on certain variable interest rate debt in order to limit the effects of changes in interest rates on our results of operations. As of ~~September~~June 30, ~~2021,~~2022, our debt instruments consisted of borrowings under our line of credit, term loans and mortgage notes.

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Fixed Interest Rate Debt. As of ~~September~~June 30, ~~2021,~~2022, our fixed interest rate debt consisted of ~~$150.3~~$380.8 million under our mortgage notes and ~~$500.0~~$300.0 million of borrowings under our term loans that were effectively fixed through the use of interest rate swaps. In total, our fixed interest rate debt represented ~~70.6%~~38.4% of our total consolidated debt as of ~~September~~June 30, ~~2021.~~2022. When taking into account the five interest rate swap agreements with a notional amount of $350.0 million, which we entered into in June 2022 and have effective dates in July 2022, an additional $350.0 million of our borrowings under our terms loans become effectively fixed, which would bring our total fixed interest rate debt to 58.2% of our total consolidated borrowings as of June 30, 2022. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed interest rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes could affect the fair value of our fixed interest rate debt. As of ~~September~~June 30, ~~2021,~~2022, the fair value and the carrying value of our consolidated fixed interest rate debt, excluding the values of any associated hedges, was ~~$652.7~~$652.2 million and ~~$650.3~~$680.8 million, respectively. The fair value estimate of this debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated on ~~September~~June 30, ~~2021.~~2022. Given we generally expect to hold our fixed interest rate debt instruments to maturity or when they otherwise open up for prepayment at par, and the amounts due under such debt instruments should be limited to the outstanding principal balance and any accrued and unpaid interest at such time, we do not expect that the resulting change in fair value of our fixed interest rate debt instruments due to market fluctuations in interest rates, would have a significant impact on our operating cash flows.

Variable Interest Rate Debt. As of ~~September~~June 30, ~~2021,~~2022, our consolidated variable interest rate debt consisted of ~~$85.0~~$383.0 million of borrowings under our line of credit, ~~$25.0~~$500.0 million of borrowings under our term loans and ~~$161.0~~$207.6 million under our mortgage notes, which represented ~~29.4%~~61.6% of our total consolidated debt. When taking into account the five interest rate swap agreements with a notional amount of $350.0 million, which we entered into in June 2022 and have effective dates in July 2022, an additional $350.0 million of our borrowings under our terms loans become effectively fixed, which would lower our total variable interest rate debt to 41.8% of our total consolidated borrowings as of June 30, 2022. Interest rate changes on the variable portion of our consolidated variable-rate debt could impact our future earnings and cash flows, but would not necessarily affect the fair value of such debt. As of ~~September~~June 30, ~~2021,~~2022, we were exposed to market risks related to fluctuations in interest rates on ~~$271.0~~$1.1 billion of consolidated borrowings; however, $207.6 million of ~~consolidated borrowings.~~these borrowings is capped through the use of two interest rate cap agreements and an additional $350.0 million will be effectively fixed in July 2022 through the interest rate swaps referenced above. A hypothetical 25 basis points increase in the all-in rate on the outstanding balance of our consolidated variable interest rate debt as of ~~September~~June 30, ~~2021,~~2022, would increase our annual interest expense by approximately ~~$0.7 million.~~$2.7 million, not taking into account the changes to interest rate expense related to the interest rate swaps referenced above with effective dates in July 2022.

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Derivative Instruments. As of ~~September~~June 30, ~~2021,~~2022, we had 14 outstanding and effective derivative instruments, with a total notional amount of ~~$627.0~~$507.6 million. In addition, we had five derivative instruments with effective dates in July 2022 and a notional amount of $350.0 million. These derivative instruments were comprised of interest rate swaps and interest rate caps that were designed to mitigate the risk of future interest rate increases by either providing a fixed interest rate or capping the variable interest rate for a limited, pre-determined period of time. See “Note 35 to the Condensed Consolidated Financial Statements” for further detail on our derivative instruments. We are exposed to credit risk of the counterparty to our interest rate cap and swap agreements in the event of non-performance under the terms of the agreements. If we were not able to replace these caps or swaps in the event of non-performance by the counterparty, we would be subject to variability of the interest rate on the amount outstanding under our debt that is fixed or capped through the use of the swaps or caps, respectively.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the direction of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September~~June 30, ~~2021.~~2022. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of ~~September~~June 30, ~~2021,~~2022, our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~three~~six months ended ~~September~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting to date as a result of many of the employees of our Advisor and its affiliates working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 pandemic on our internal controls to minimize the impact to their design and operating effectiveness.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A, “Risk Factors” of our ~~2020~~2021 Form 10-K, as supplemented by our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which could materially affect our business, financial condition, and/or future results. The risks described in our ~~2020~~2021 Form 10-K, as supplemented by our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.

With the exception of the risk factors set forth below, which updates and supplements the risk factors disclosed in our 2021 Form 10-K, there have been no material changes to the risk factors disclosed in our 2021 Form 10-K.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

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~~There~~Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland shall be the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders with respect to our company, our directors, our officers or our employees (we note we currently have no employees). This choice of forum provision does not apply to claims under the Securities Act, the Exchange Act, any other claim for which the federal courts have exclusive jurisdiction or any action or proceeding against us arising out of, or in connection with, the sale of securities or out of violation of state securities laws. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers or employees, which may discourage meritorious claims from being asserted against us and our directors, officers and employees. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations. We adopted this provision because we believe it makes it less likely that we will be forced to incur the expense of defending duplicative actions in multiple forums and less likely that plaintiffs’ attorneys will be able to employ such litigation to coerce us into otherwise unjustified settlements, and we believe the risk of a court declining to enforce this provision is remote, as the General Assembly of Maryland has specifically amended the Maryland General Corporation Law to authorize the adoption of such provisions.

Inflation, increased interest rates or deflation may adversely affect our financial condition and results of operations.

Although neither inflation nor deflation has materially impacted our operations in the recent past, inflation is at a 40-year high and beginning in March of 2022, the Federal Reserve began raising the federal funds rate in an effort to curb inflation. The Federal Reserve’s action, coupled with other macroeconomic factors, may trigger a recession in the United States, globally, or both. Increased inflation and interest rates could have an adverse impact on our floating rate mortgages, our ability to borrow money, and general and administrative expenses, as these costs could increase at a rate higher than our rental and other revenue. Increases in the costs of owning and operating our properties due to inflation could reduce our net operating income and our NAV to the extent such increases are not reimbursed or paid by our customers. If we are materially impacted by increasing inflation because, for example, inflationary increases in costs are not sufficiently offset by the contractual rent increases and operating expense reimbursement provisions or escalations in the leases with our customers, we may implement measures to conserve cash or preserve liquidity. Such measures could include deferring investments, reducing or suspending the number of shares redeemed under our share redemption program and reducing or suspending distributions we make to our stockholders, which may adversely and materially affect our net operating income and NAV. Because our residential portfolio assets typically have lease terms of one year or less and do not have pass through expenses, these adverse impacts may be heightened for our residential properties if we are unable to increase rent and/or maintain occupancy. In addition, due to rising interest rates, we may experience restrictions in our liquidity based on certain financial covenant requirements as well as our inability to refinance maturing debt in part or in full as it comes due depending on rates at such time and experience higher debt service costs and reduced yields relative to cost of debt. If we are unable to find alternative credit arrangements or other funding in a high interest environment, our business needs may not be adequately met.

In addition, customers and potential customers of our properties may be adversely impacted by inflation and rising interest rates, which could negatively impact our customers’ ability to pay rent and demand for our properties. Such adverse impacts on our customers may cause increased vacancies, which may add pressure to lower rents and increase our expenditures for re-leasing. Inflation could also have an adverse effect on consumer spending which could impact our customers’ operations and, in turn, demand for our properties. Conversely, deflation could lead to downward pressure on rents and other sources of income.

We are dependent on our customers for revenue, and our inability to lease our properties or to collect rent from our customers will adversely affect our results of operations, NAV and returns to our stockholders.

Our revenues from our property investments are dependent on our ability to lease our properties and the creditworthiness of our customers and would be adversely affected by the loss of or default by one or more significant lessees. Furthermore, certain of our assets may utilize leases with payments directly related to customer sales, where some or all of the amount of rent that we charge a customer is calculated as a percentage of such customer’s revenues over a fixed period of time, and a reduction in sales can reduce the amount of the lease payments required to be made to us by customers leasing space in such assets. Much of our

customer base is comprised of non-rated and non-investment grade customers. The success of our properties depends on the financial stability of such customers. The financial results of our customers can depend on several factors, including but not limited to the general business environment, interest rates, inflation, the availability of credit, taxation and overall consumer confidence.

In addition, our ability to increase our revenues and operating income partially depends on steady growth of demand for the products and services offered by the customers located in the assets that we own and manage. A drop in demand, as a result of a slowdown in the U.S. and global economy or otherwise, could result in a reduction in performance of our customers and consequently, adversely affect our results of operations, NAV and returns to our stockholders.

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If indicators of impairment exist in any of our properties, for example, we experience negative operating trends such as prolonged vacancies or operating losses, we may not recover some or all of our investment.

Lease payment defaults by customers could impact operating results, causing us to lower our NAV, reduce the amount of distributions to our stockholders, or could force us to find an alternative source of funding to pay any mortgage loan interest or principal, taxes, or other obligations relating to the property. In the event of a customer default, we may also experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property. If a lease is terminated, the value of the property may be immediately and negatively affected and we may be unable to lease the property for the rent previously received or at all or sell the property without incurring a loss.

Some of our properties may be leased to a single or significant customer and, accordingly, may be suited to the particular or unique needs of such customer. We may have difficulty replacing such a customer if the floor plan of the vacant space limits the types of businesses that can use the space without major renovation. In addition, the resale value of the property could be diminished because the market value of a particular property will depend principally upon the value of the leases of such property.

As of June 30, 2022, our top five customers represented 11.4% of our total annualized base rent of our portfolio, our top ten customers represented 16.7% of our total annualized base rent of our portfolio and there were no customers that individually represented more than 5.0% of our total annualized base rent of our portfolio. Our results of operations are currently substantially dependent on our top customers, and any downturn in their business could have a material adverse effect on operations. In addition, certain of our properties are occupied by a single customer, and as a result, the success of those properties depends on the financial stability of that customer. Adverse impacts to such customers, businesses or operators, including as a result of changes in market or economic conditions, natural disasters, outbreaks of an infectious disease, pandemic or any other serious public health concern, political events or other factors that may impact the operation of these properties, may have negative effects on our business and financial results. As a result, some of our customers have been, ~~no material changes~~and may in the future be, required to suspend operations at our properties for what could be an extended period of time. Further, if such customers default under their leases, we may not be able to promptly enter into a new lease or operating arrangement for such properties, rental rates or other terms under any new leases or operating arrangement may be less favorable than the terms of the current lease or operating arrangement or we may be required to make capital improvements to such properties for a new customer, any of which could adversely impact our operating results.

Changes in global, national, regional or local economic, demographic, political, real estate or capital market conditions, including periods of generally deteriorating real estate industry fundamentals, may adversely affect our results of operations and returns to our stockholders.

We are subject to risks generally incident to the ~~risk~~ownership of property, including changes in global, national, regional or local economic, demographic, political, real estate, or capital market conditions and other factors ~~disclosed~~particular to the locations of the respective property investments. We are unable to predict future changes in these market conditions. For example, an economic downturn or a rise in interest rates could make it more difficult for us to lease properties or dispose of them and cause rental rates or future contractual rate increases to fall, which may adversely and materially affect our ~~2020 Form 10-K,~~net operating income and NAV. In addition, rising interest rates could also increase capitalization rates and make alternative interest bearing and other investments more attractive and, therefore, potentially lower the relative value of our existing real estate investments and our NAV. These macroeconomic factors may cause investors to become reluctant to purchase our shares or existing investors to redeem their shares, curtailing our ability to purchase new accretive real estate investments that satisfy our investment criteria.

In addition, we believe the risks associated with our business and the value of our properties are more severe during periods of economic slowdown or recession if these periods are accompanied by deteriorating fundamentals and declining values in the real estate industry. Because all of our debt-related investments outstanding as ~~supplemented~~of June 30, 2022 and debt-related investments we may make in the future might consist of mortgages secured by property, these same conditions could also adversely affect the underlying borrowers and collateral of assets that we own. Declining real estate values and deteriorating real estate fundamentals would also likely reduce the level of new mortgage loan originations, since borrowers often use increases in the value of their existing properties to support the purchase of, or investment in, additional properties. Furthermore, borrowers may not be able to pay principal and interest on such loans. Declining real estate values would also significantly increase the likelihood that we would incur losses on our ~~Quarterly Reports~~debt investments in the event of a default because the value of our collateral may be insufficient to cover some or all of our basis in the investment.

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In the future, we may record impairments of properties, significant other-than-temporary impairment charges related to our real estate-related securities holdings, and provisions for losses on ~~Form 10-Q.~~

our debt-related investments, if any. To the extent that there is a general economic slowdown or real estate fundamentals deteriorate, such factors could have a significant and adverse impact on our revenues, results from operations, value of our properties, financial condition, liquidity, overall business prospects and ultimately our ability to make distributions to our stockholders.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Redemption Program

While stockholders may request on a monthly basis that we redeem all or any portion of their shares pursuant to our share redemption program, we are not obligated to redeem any shares and may choose to redeem only some, or even none, of the shares that have been requested to be redeemed in any particular month, in our discretion. In addition, our ability to fulfill redemption requests is subject to a number of limitations. As a result, share redemptions may not be available each month. Under our share redemption program, to the extent we choose to redeem shares in any particular month, we will only redeem shares as of the last calendar day of that month (each such date, a “Redemption Date”). Shares redeemed on the Redemption Date remain outstanding on the Redemption Date and are no longer outstanding on the day following the Redemption Date. Redemptions will be made at the transaction price in effect on the Redemption Date, except that shares that have not been outstanding for at least one year will be redeemed at 95% of the transaction price (an “Early Redemption Deduction”). The Early Redemption Deduction may be waived in certain circumstances including: (i) in the case of redemption requests arising from the death or qualified disability of the holder; (ii) in the event that a stockholder’s shares are redeemed because the stockholder has failed to maintain the $2,000 minimum account balance or (iii) with respect to shares purchased through our distribution reinvestment plan. To have his or her shares redeemed, a stockholder’s redemption request and required documentation must be received in good order by 4:00 p.m. (Eastern time) on the second to last business day of the applicable month. Settlements of share redemptions will be made within three business days of the Redemption Date. An investor may withdraw its redemption request by notifying the transfer agent before 4:00 p.m. (Eastern time) on the last business day of the applicable month.

The total amount of aggregate redemptions of Class T, Class S, Class D, Class I and Class E shares (based on the price at which the shares are redeemed) will be limited during each calendar month to 2% of the aggregate NAV of all classes as of the last calendar day of the previous quarter and in each calendar quarter will be limited to 5% of the aggregate NAV of all classes of shares as of the last calendar day of the previous calendar quarter; provided, however, that every month and quarter each class of our common stock will be allocated capacity within such aggregate limit to allow stockholders in such class to either (a) redeem shares (based on the price at which the shares are redeemed) equal to at least 2% of the aggregate NAV of such share class as of the last calendar day of the previous quarter, or, if more limiting, (b) redeem shares (based on the price at which the shares are redeemed) over the course of a given quarter equal to at least 5% of the aggregate NAV of such share class as of the last calendar day of the previous quarter (collectively referred to herein as the “2% and 5% limits”), which in the second and third months of a quarter could be less than 2% of the NAV of such share class. In the event that we determine to redeem some but not all of the shares submitted for redemption during any month, shares redeemed at the end of the month will be redeemed on a pro rata basis. Even if the class-specific allocations are exceeded for a class, the program may offer such class additional capacity under the aggregate program limits. Redemptions and pro rata treatment, if necessary, will first be applied within the class-specific allocated capacity and then applied on an aggregate basis to the extent there is remaining capacity. All unsatisfied redemption requests must be resubmitted after the start of the next month or quarter, or upon the recommencement of the share redemption program, as applicable.

For both the aggregate and class-specific allocations described above, (i) provided that the share redemption program has been operating and not suspended for the first month of a given quarter and that all properly submitted redemption requests were satisfied, any unused capacity for that month will carry over to the second month and (ii) provided that the share redemption program has been operating and not suspended for the first two months of a given quarter and that all properly submitted redemption requests were satisfied, any unused capacity for those two months will carry over to the third month. In no event will such carry-over capacity permit the redemption of shares with aggregate value (based on the redemption price per share for the month the redemption is effected) in excess of 5% of the combined NAV of all classes of shares as of the last calendar day of the previous calendar quarter (provided that for these purposes redemptions may be measured on a net basis as described in the paragraph below).

We currently measure the foregoing redemption allocations and limitations based on net redemptions during a month or quarter, as applicable. The term “net redemptions” means, during the applicable period, the excess of our share redemptions (capital outflows) over the proceeds from the sale of our shares (capital inflows). Net redemptions for the class-specific allocations will be based only on the capital inflows and outflows of that class, while net redemptions for the overall program limits would be based on capital inflows and outflows of all classes. Thus, for any given calendar quarter, the maximum amount of redemptions during that quarter will be equal to (i) 5% of the combined NAV of all classes of shares as of the last calendar day of the previous calendar quarter, plus

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(ii) proceeds from sales of new shares in this offering (including purchases pursuant to our distribution reinvestment plan) and the Class E distribution reinvestment plan offering since the beginning of the current calendar quarter. The same would apply for a

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given month, except that redemptions in a month would be subject to the 2% limit described above (subject to potential carry-over capacity), and netting would be measured on a monthly basis. With respect to future periods, our board of directors may choose whether the allocations and limitations will be applied to “gross redemptions,” i.e., without netting against capital inflows, rather than to net redemptions. If redemptions for a given month or quarter are measured on a gross basis rather than on a net basis, the redemption limitations could limit the amount of shares redeemed in a given month or quarter despite our receiving a net capital inflow for that month or quarter. In order for our board of directors to change the application of the allocations and limitations from net redemptions to gross redemptions or vice versa, we will provide notice to stockholders in a prospectus supplement or special or periodic report filed by us, as well as in a press release or on our website, at least 10 days before the first business day of the quarter for which the new test will apply. The determination to measure redemptions on a gross basis, or vice versa, will only be made for an entire quarter, and not particular months within a quarter.

Although the vast majority of our assets consist of properties that cannot generally be readily liquidated on short notice without impacting our ability to realize full value upon their disposition, we intend to maintain a number of sources of liquidity including (i) cash equivalents (e.g. money market funds), other short-term investments, U.S. government securities, agency securities and liquid real estate-related securities and (ii) one or more borrowing facilities. We may fund redemptions from any available source of funds, including operating cash flows, borrowings, proceeds from this offering and/or sales of our assets.

Should redemption requests, in our judgment, place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the company as a whole, or should we otherwise determine that investing our liquid assets in real properties or other illiquid investments rather than redeeming our shares is in the best interests of the company as a whole, then we may choose to redeem fewer shares than have been requested to be redeemed, or none at all. Further, our board of directors may modify ~~suspend~~ or ~~terminate~~suspend our share redemption program if it deems such action to be in our best interest and the best interest of our stockholders. If the transaction price for the applicable month is not made available by the tenth business day prior to the last business day of the month (or is changed after such date), then no redemption requests will be accepted for such month and stockholders who wish to have their shares redeemed the following month must resubmit their redemption requests. The above description of the share redemption program is a summary of certain of the terms of the share redemption program. Please see the full text of the share redemption program, which is incorporated by reference as Exhibit 4.2 to this Quarterly Report on Form 10-Q, for all the terms and conditions.

The table below summarizes the redemption activity for the three months ended ~~September~~June 30, ~~2021,~~2022, for which all eligible redemption requests were redeemed in full:


				Total Number of Shares	Maximum Number of				Total Number of Shares	Maximum Number of
				Redeemed as Part of	Shares That May Yet Be				Redeemed as Part of	Shares That May Yet Be
	Total Number of	Average Price		Publicly Announced	Redeemed Pursuant	Total Number of	Average Price		Publicly Announced	Redeemed Pursuant
(shares in thousands)	Shares Redeemed	Paid Per Share (1)		Plans or Programs (2)	to the Program (3)	Shares Redeemed	Paid Per Share (1)		Plans or Programs	to the Program (2)
For the Month Ended:
July 31, 2021	502	$	7.63	423	—
August 31, 2021	648		7.65	648	—
September 30, 2021 (4)	775		7.69	775	—
April 30, 2022						722	$	8.45	722	—
May 31, 2022						439		8.67	439	—
June 30, 2022 (3)						459		8.82	459	—
Total	1,925	$	7.66	1,846	—	1,620	$	8.61	1,620	—

(1)	Amount represents the average price paid to investors upon redemption.

(2)	~~In July 2021, 78,881 shares were redeemed for an average price per share of $7.66 pursuant to privately negotiated transactions.~~

~~(3)~~

We limit the number of shares that may be redeemed under the share redemption program as described above.

~~(4)~~(3)

Redemption requests accepted in ~~September 2021~~June 2022 are considered redeemed on ~~October~~July 1, ~~2021~~2022 and are not included in the table above.

ITEM 5. OTHER INFORMATION

~~Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act~~

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act, require an issuer to disclose in its annual and quarterly reports whether it or any of its affiliates have knowingly engaged in specified activities or transactions relating to Iran. We are required to include certain disclosures in our periodic reports if we or any of our “affiliates” (as defined in Rule 12b-2 under the Exchange Act) knowingly engaged in certain specified activities, transactions or dealings relating to Iran or with certain individuals or entities targeted by United States’ economic sanctions during the period covered by the report. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law. Neither we nor any of our controlled affiliates or subsidiaries knowingly engaged in any of the specified activities relating to Iran or

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otherwise engaged in any activities associated with Iran during the reporting period. However, because the SEC defines the term “affiliate” broadly, it includes any person or entity that is under common control with us as well as any entity that controls us or is controlled by us. The description that follows has been provided to us by Ares.

On January 31, 2019, funds and accounts managed by Ares’ European direct lending strategy (together, the “Ares funds”) collectively acquired a 32% equity stake in Daisy Group Limited (“Daisy”). Daisy is a provider of communication services to businesses based in the United Kingdom. The Ares funds do not hold a majority equity interest in Daisy and do not have the right to appoint a majority of directors to Daisy’s board of directors.

Subsequent to completion of the Ares funds’ investment in Daisy, in connection with Ares’ routine quarterly survey of its investment funds’ portfolio companies, Daisy informed the Ares funds that it has customer contracts with Melli Bank Plc, Persia International Bank Plc and Bank Saderat PLC. Melli Bank Plc, Persia International Bank Plc and Bank Saderat PLC have been designated by the Office of Foreign Assets Control within the U.S. Department of Treasury pursuant to Executive Order 13324. Daisy generated a total of £84,806 in annual revenues (less than 0.02% of Daisy’s annual revenues) from its dealings with Melli Bank Plc, Persia International Bank Plc and Bank Saderat PLC and de minimis net profits. Daisy entered into the customer contracts with Melli Bank Plc, Persia International Bank Plc and Bank Saderat PLC prior to the Ares funds’ investment in Daisy.

Daisy has given notice of termination of the contracts to Melli Bank Plc, Persia International Bank Plc and Bank Saderat PLC. Following termination of the contracts, Daisy does not intend to engage in any further dealings or transactions with Melli Bank Plc, Persia International Bank Plc or Bank Saderat PLC.

Distribution Reinvestment Plan Suitability Requirement

Pursuant to the terms of our distribution reinvestment plan (“DRP”), participants in the DRP must promptly notify us if at any time they fail to meet the current suitability requirements for making an investment in us.

The current suitability standards require that Class E stockholders participating in the DRP other than investors in Arizona, California, Ohio and Oregon have either:

●

a net worth (exclusive of home, home furnishings and automobiles) of $150,000 or more; or

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●

a net worth (exclusive of home, home furnishings and automobiles) of at least $45,000 and had during the last tax year, or estimate that such investor will have during the current tax year, a minimum of $45,000 annual gross income.

The current suitability standards require that Class E stockholders participating in the DRP in Arizona, California, Ohio and Oregon have either:

●

a net worth (exclusive of home, home furnishings and automobiles) of $250,000 or more; or

●

a net worth (exclusive of home, home furnishings and automobiles) of at least $70,000 and had during the last tax year, or estimate that such investor will have during the current tax year, a minimum of $70,000 annual gross income.

In addition, Class E stockholders participating in the DRP in Ohio and Oregon must have a net worth of at least 10 times their investment in us and any of our affiliates. The current suitability standards for Class T, Class S, Class D and Class I stockholders participating in the DRP are listed in the section entitled “Suitability Standards” in our current Class T, Class S, Class D and Class I public offering prospectus on file at www.sec.gov and on our website at ~~www.blackcreekdiversified.com.~~blackcreekgroup.com/investment-solutions/AREIT.

Stockholders can notify us of any changes to their ability to meet the suitability requirements or change their DRP election by contacting us at ~~Black Creek Diversified Property Fund~~Ares Real Estate Income Trust Inc., Investor Relations, ~~518~~1200 17th Street, Suite ~~1700,~~2900, Denver, Colorado 80202, Telephone: (303) 228-2200.

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ITEM 6. EXHIBITS

Exhibit Number		Description

3.1		Articles of Restatement. Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K filed with the SEC on March 21, 2012.

3.2		Articles of Amendment (name change). Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on July 12, 2012.

3.3		Articles Supplementary (Class A shares). Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on July 12, 2012.

3.4		Articles Supplementary (Class W shares). Incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K filed with the SEC on July 12, 2012.

3.5		Articles Supplementary (Class I shares). Incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K filed with the SEC on July 12, 2012.

3.6		Certificate of Correction to Articles of Restatement. Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on March 26, 2014.

3.7		Certificate of Correction to Articles of Restatement. Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on August 30, 2016.

3.8		Articles of Amendment (revised terms of share classes). Incorporated by reference to Exhibit 3.8 to the Post-Effective Amendment No. 10 to Registration Statement on Form S-11 (File No. 333-197767) filed with the SEC on September 1, 2017.

3.9		Articles of Amendment (name change). Incorporated by reference to Exhibit 3.9 to the Post-Effective Amendment No. 10 to Registration Statement on Form S-11 (File No. 333-197767) filed with the SEC on September 1, 2017.

3.10		~~Eighth~~Ninth Amended and Restated Bylaws. Incorporated by reference to Exhibit ~~3.10~~3.2 to the ~~Annual~~Current Report on Form ~~10-K~~8-K filed with the SEC on ~~March 5, 2020.~~December 3, 2021.

3.11		Articles of Amendment ~~No. 1 to Bylaws.~~(name change). Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on ~~April 1, 2020.~~December 3, 2021.

4.1		Fifth Amended and Restated Distribution Reinvestment Plan. Incorporated by reference to Appendix B to the Pre-Effective Amendment No. 1 to Registration Statement on Form S-11 (File No. 333-222630) filed with the SEC on August 17, 2018.

4.2		~~Second~~Third Amended and Restated Share Redemption Program effective as of December ~~10, 2018.~~1, 2021. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on December ~~14, 2018.~~3, 2021.

4.3		Statement regarding transfer restrictions, preferences, limitations and rights of holders of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates). Incorporated by reference to Exhibit 4.5 to the Post-Effective Amendment No. 10 to Registration Statement on Form S-11 (File No. 333-197767) filed with the SEC on September 1, 2017.

4.4		Valuation Procedures. Incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K filed with the SEC on ~~June~~March 15, ~~2021.~~2022.

4.5		Multiple Class Plan. Incorporated by reference to Exhibit 4.5 to the Quarterly Report on Form 10-Q filed with the SEC on August 12, ~~2019.~~2019.

~~10.1~~10.1*		~~Second~~ Real Estate Purchase and Sale Agreement, dated April 7, 2022, between AREIT Acquisitions LLC and BES Wycliff Fund X, LLC, BES Wycliff Fund XI, LLC, AGE Dallas Wycliff LLC, Axis Linden LLC, J-L XXI Wycliff, LLC, BES Axis 110 Fund XII, LLC, BES Axis 110 Fund XIII, LLC, BES Axis 110 Investor M, LLC, BES Axis 110 Investor H, LLC, BES Axis 110 Investor R, LLC, BES Maple Fund X LLC, BES Maple Fund XI LLC, BES Maple Fund XII LLC, Beverly 95th Street Properties II, LLC, BES Savannah Oaks Fund XII, LLC, BES Savannah Oaks Fund XIII, LLC, BES Stone Oak XII, LLC, BES Stone Oak XIII, LLC, BES Stone Oak Investor CL, LLC, and BES Stone Oak Investor ENS-1 LLC.

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Exhibit Number		Description

10.2		Amended and Restated Advisory Agreement ~~(2021)~~(2022) among Ares Real Estate Income Trust Inc., ~~effective as of July 1, 2021.~~AREIT Operating Partnership LP and Ares Commercial Real Estate Management LLC. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on ~~July 1, 2021~~.

~~10.2~~		Tenth Amended and Restated Limited Partnership Agreement of Black Creek Diversified Property Operating Partnership LP, dated as of July 1, 2021. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on July 1, 2021May 5, 2022.

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Exhibit Number		~~Description~~


32.1*		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1*		Consent of Altus Group U.S. Inc.

101		The following materials from ~~Black Creek Diversified Property Fund~~Ares Real Estate Income Trust Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021,~~2022, filed on ~~November 10, 2021,~~August 11, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed or furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		~~BLACK CREEK DIVERSIFIED PROPERTY FUND~~ARES REAL ESTATE INCOME TRUST INC.

~~November 10, 2021~~August 11, 2022	By:	/s/ JEFFREY W. TAYLOR
		Jeffrey W. Taylor ~~Managing Director,~~Partner, Co-President (Principal Executive Officer)

~~November 10, 2021~~August 11, 2022	By:	/s/ LAINIE P. MINNICK
		Lainie P. Minnick Managing Director, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

4951


($ in thousands)
As of December 31, 2019	$	0
Settlement of 2019 performance participation allocation (1)		3,776
Distributions declared on redeemable noncontrolling interests		(141)
Net loss attributable to redeemable noncontrolling interests		(71)
Change from cash flow hedging activities attributable to redeemable noncontrolling interests		(55)
Redemption value allocation adjustment to redeemable noncontrolling interests		281
As of September 30, 2020	$	3,790

As of December 31, 2020	$	3,798
Settlement of 2020 performance participation allocation (2)		4,608
Distributions declared on redeemable noncontrolling interests		(314)
Net income attributable to redeemable noncontrolling interests		169
Change from cash flow hedging activities attributable to redeemable noncontrolling interests		70
Redemption value allocation adjustment to redeemable noncontrolling interests		293
As of September 30, 2021	$	8,624


	Amount														Source of Distributions Paid in Cash
	Declared												Total Cash
	per												Flows from		Cash Flows from
(in thousands, except per share	Common						Reinvested in				Total		Operating		Operating
data)	Share (1)		Paid in Cash (2)				Shares				Distributions		Activities (3)		Activities				Borrowings
2021
March 31	$	0.09375	$	9,572	63.4	%	$	5,526	36.6	%	$	15,098	$	7,659	$	7,659	80.0	%	$	1,913	20.0	%
June 30		0.09375		9,962	63.5			5,723	36.5			15,685		14,204		9,962	100.0			—	—
September 30		0.09375		10,597	63.9			5,985	36.1			16,582		16,887		10,597	100.0			—	—
Total	$	0.28125	$	30,131	63.6	%	$	17,234	36.4	%	$	47,365	$	38,750	$	28,218	93.7	%	$	1,913	6.3	%
2020
March 31	$	0.09375	$	9,032	62.8	%	$	5,360	37.2	%	$	14,392	$	7,455	$	7,455	82.5	%	$	1,577	17.5	%
June 30		0.09375		9,150	63.3			5,316	36.7			14,466		11,384		9,150	100.0			—	—
September 30		0.09375		9,074	63.2			5,282	36.8			14,356		10,008		9,074	100.0			—	—
December 31		0.09375		9,214	63.3			5,347	36.7			14,561		12,281		9,214	100.0			—	—
Total	$	0.37500	$	36,470	63.1	%	$	21,305	36.9	%	$	57,775	$	41,128	$	34,893	95.7	%	$	1,577	4.3	%