Black Creek Diversified Property Fund 10-Q 2019 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________

FORM 10-Q

_______________________________________

(Mark One)

ý QuarterlyReportPursuanttoSection 13or15(d) oftheSecuritiesExchangeActof1934

For the quarterly period endedMarch 31, 2019

Or

☐ 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 CREEKDIVERSIFIEDPROPERTYFUNDINC.

(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 Seventeenth Street, 17th Floor Denver, CO	80202
(Address of principal executive offices)	(Zip Code)

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

_______________________________________

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  ý    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  ý    No  ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See 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	ý			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   ý

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

As of May 8, 2019, there were 3,755,427 shares of the registrant’s Class T common stock, 16,661,967 shares of the registrant’s Class S common stock, 3,053,699 shares of the registrant’s Class D common stock, 40,165,777 shares of the registrant’s Class I common stock and 73,229,364 shares of the registrant’s Class E common stock outstanding.

BLACK CREEK DIVERSIFIED PROPERTY FUND INC.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2019 and 2018 (unaudited)	5
	Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2019 and 2018 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 5.	Other Information	35
Item 6.	Exhibits	36

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BLACK CREEK DIVERSIFIED PROPERTY FUND INC.

CONDENSED CONSOLIDATEDBALANCE SHEETS

໿

	As of
(in thousands, except per share data)	March 31, 2019			December 31, 2018
	(Unaudited)
ASSETS
Net investment in real estate properties	$	1,380,868		$	1,507,112
Debt-related investments, net	2,697			10,680
Cash and cash equivalents	13,058			10,008
Restricted cash	6,607			7,030
Other assets	43,404			46,272
Assets held for sale	144,561			—
Total assets	$	1,591,195		$	1,581,102
LIABILITIES AND EQUITY
Liabilities
Accounts payable and accrued expenses	$	21,782		$	31,580
Debt, net	896,896			1,001,298
Intangible lease liabilities, net	46,014			47,196
Financing obligations, net	78,213			52,336
Other liabilities	32,083			37,679
Liabilities related to assets held for sale	102,737			—
Total liabilities	1,177,725			1,170,089
Commitments and contingencies (Note 11)
Equity
Stockholders’ equity:
Preferred stock, $0.01 par value—200,000 shares authorized, none issued and outstanding	—			—
Class E common stock, $0.01 par value—500,000 shares authorized, 75,191 shares and 77,390 shares issued and outstanding, respectively	752			774
Class T common stock, $0.01 par value—500,000 shares authorized, 3,261 shares and 2,783 shares issued and outstanding, respectively	33			28
Class S common stock, $0.01 par value—500,000 shares authorized, 13,815 shares and 10,516 shares issued and outstanding, respectively	138			105
Class D common stock, $0.01 par value—500,000 shares authorized, 2,986 shares and 2,778 shares issued and outstanding, respectively	30			28
Class I common stock, $0.01 par value—500,000 shares authorized, 38,501 shares and 37,385 shares issued and outstanding, respectively	385			374
Additional paid-in capital	1,217,952			1,199,736
Distributions in excess of earnings	(876,446		)	(867,849		)
Accumulated other comprehensive (loss) income	(5,495		)	522
Total stockholders’ equity	337,349			333,718
Noncontrolling interests	76,121			77,295
Total equity	413,470			411,013
Total liabilities and equity	$	1,591,195		$	1,581,102

See accompanying Notes to Condensed Consolidated Financial Statements.

3

BLACK CREEK DIVERSIFIED PROPERTY FUND INC.

CONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended March 31,
(in thousands, except per share data)	2019			2018
Revenues:
Rental revenues	$	50,571		$	44,454
Debt-related income	123			173
Total revenues	50,694			44,627
Operating expenses:
Rental expenses	16,069			15,830
Real estate-related depreciation and amortization	14,243			13,813
General and administrative expenses	2,044			2,534
Advisory fees, related party	3,128			3,679
Impairment of real estate property	—			6,800
Total operating expenses	35,484			42,656
Other (expenses) income:
Interest expense	(13,374		)	(11,240		)
Gain on sale of real estate property	1,191			—
Gain on extinguishment of debt and financing commitments, net	1,002			—
Other expenses	(143		)	(122		)
Total other expenses	(11,324		)	(11,362		)
Net income (loss)	3,886			(9,391		)
Net (income) loss attributable to noncontrolling interests	(284		)	756
Net income (loss) attributable to common stockholders	$	3,602		$	(8,635	)
Weighted-average shares outstanding—basic	132,847			128,946
Weighted-average shares outstanding—diluted	143,329			140,252
Net income (loss) attributable to common stockholders per common share—basic and diluted	$	0.03		$	(0.07	)

See accompanying Notes to Condensed Consolidated Financial Statements.

4

BLACK CREEK DIVERSIFIED PROPERTY FUND INC.

CONDENSED CONSOLIDATEDSTATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	For the Three Months Ended March 31,
(in thousands)	2019			2018
Net income (loss)	$	3,886		$	(9,391	)
Change from cash flow hedging derivatives	(6,493		)	4,675
Comprehensive loss	(2,607		)	(4,716		)
Comprehensive loss attributable to noncontrolling interests	192			394
Comprehensive loss attributable to common stockholders	$	(2,415	)	$	(4,322	)

See accompanying Notes to Condensed Consolidated Financial Statements.

5

BLACK CREEK DIVERSIFIED PROPERTY FUND INC.

CONDENSED CONSOLIDATEDSTATEMENTS OF EQUITY

(Unaudited)

	Stockholders’ Equity
						Additional Paid-in Capital			Distributions in Excess of Earnings			Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interests			Total Equity
	Common Stock
(in thousands)	Shares		Amount
Balance as of December 31, 2017	132,466		$	1,325		$	1,224,061		$	(818,608	)	$	(909	)	$	86,857		$	492,726
Adoption of ASU 2017-12	—		—			—			(213		)	213			—			—
Adjusted balance as of January 1, 2018	132,466		1,325			1,224,061			(818,821		)	(696		)	86,857			492,726
Net loss	—		—			—			(8,635		)	—			(756		)	(9,391		)
Unrealized gain from derivative instruments	—		—			—			—			4,313			362			4,675
Issuance of common stock, net of offering costs	3,271		33			22,285			—			—			—			22,318
Share-based compensation, net of forfeitures	38		—			281			—			—			—			281
Redemptions of common stock	(7,315	)	(73		)	(54,293		)	—			—			—			(54,366		)
Amortization of share-based compensation	—		—			18			—			—			—			18
Distributions declared on common stock and noncontrolling interests	—		—			—			(12,041		)	—			(1,060		)	(13,101		)
Redemptions of noncontrolling interests	—		—			(90		)	—			—			(523		)	(613		)
Balance as of March 31, 2018	128,460		$	1,285		$	1,192,262		$	(839,497	)	$	3,617		$	84,880		$	442,547
Balance as of December 31, 2018	130,852		$	1,309		$	1,199,736		$	(867,849	)	$	522		$	77,295		$	411,013
Net income	—		—			—			3,602			—			284			3,886
Unrealized loss from derivative instruments	—		—			—			—			(6,017		)	(476		)	(6,493		)
Issuance of common stock, net of offering costs	5,827		59			40,000			—			—			—			40,059
Share-based compensation, net of forfeitures	26		—			188			—			—			—			188
Redemptions of common stock	(2,951	)	(30		)	(21,953		)	—			—			—			(21,983		)
Amortization of share-based compensation	—		—			(19		)	—			—			—			(19		)
Distributions declared on common stock and noncontrolling interests	—		—			—			(12,199		)	—			(982		)	(13,181		)
Balance as of March 31, 2019	133,754		$	1,338		$	1,217,952		$	(876,446	)	$	(5,495	)	$	76,121		$	413,470

See accompanying Notes to Condensed Consolidated Financial Statements.

6

BLACK CREEK DIVERSIFIED PROPERTY FUND INC.

CONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS

(Unaudited)

	For the Three Months Ended March 31,
(in thousands)	2019			2018
Operating activities:
Net income (loss)	$	3,886		$	(9,391	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Real estate-related depreciation and amortization	14,243			13,813
Gain on sale of real estate property	(1,191		)	—
Impairment of real estate property	—			6,800
Gain on extinguishment of debt and financing commitments, net	(1,002		)	—
Other	(2,567		)	(1,347		)
Changes in operating assets and liabilities	(7,745		)	(593		)
Net cash provided by operating activities	5,624			9,282
Investing activities:
Real estate acquisitions	(20,351		)	—
Capital expenditures	(14,507		)	(6,509		)
Proceeds from disposition of real estate property	2,338			—
Principal collections on debt-related investments	7,979			—
Other	10			104
Net cash used in investing activities	(24,531		)	(6,405		)
Financing activities:
Repayments of mortgage notes	(33,086		)	(405		)
Net proceeds from line of credit	156,000			44,000
Repayment of term loan	(125,000		)	—
Redemptions of common stock	(21,983		)	(54,366		)
Distributions on common stock	(7,197		)	(7,233		)
Proceeds from issuance of common stock	38,970			19,711
Proceeds from financing obligations	23,369			2,160
Offering costs for issuance of common stock and private placements	(2,623		)	(2,159		)
Distributions to noncontrolling interest holders	(982		)	(1,048		)
Redemption of OP Unit holder interests	—			(614		)
Other	(5,934		)	(609		)
Net cash provided by (used in) financing activities	21,534			(563		)
Net increase in cash, cash equivalents and restricted cash	2,627			2,314
Cash, cash equivalents and restricted cash, at beginning of period	17,038			19,016
Cash, cash equivalents and restricted cash, at end of period	$	19,665		$	21,330

See accompanying Notes to Condensed Consolidated Financial Statements.

7

BLACK CREEK DIVERSIFIED PROPERTY FUND INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

Unless the context otherwise requires, the “Company,” “we,” “our,” or “us” refers to Black Creek Diversified Property Fund Inc. and its consolidated subsidiaries.

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, 2018, filed with the SEC on March 6, 2019 (“2018 Form 10-K”).

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Subtopic 842)” (“ASU 2016-02”), which provides guidance for greater transparency in financial reporting by organizations that lease assets such as real estate, airplanes and manufacturing equipment by requiring such organizations to recognize lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard also requires new disclosures within the notes accompanying the consolidated financial statements. Additional guidance and targeted improvements to ASU 2016-02 were made through the issuance of supplemental ASUs. In January 2018, the FASB issued ASU No. 2018-01, “Leases (Subtopic 842): Land Easement Practical Expedient for Transition to Topic 842” (“ASU 2018-01”), which updated ASU 2016-02 to include land easements under the updated guidance, including the option to elect the practical expedient discussed above. In December 2018, the FASB issued ASU No. 2018-20, “Narrow—Scope Improvements for Lessors” (“ASU 2018-20”), which updated 2016-02 by providing the option to elect a practical expedient for lessors to exclude sales and other similar taxes from the transaction price of the contract, allows lessors to exclude from revenue and expense lessor costs paid directly to a third party by lessees, and clarifies lessors’ accounting for variable payments related to both lease and non-lease components. In March 2019, the FASB issued ASU No. 2019-01, “Leases (Topic 842): Codification Improvements” (“ASU 2019-01”), which updates ASU 2016-02 to clarify that entities are not required to provide interim disclosures related to their adoption of ASU 2016-02 as required for other accounting changes and error corrections.

We adopted ASU 2016-02 and its supplemental ASUs when they became effective for us, as of the reporting period beginning January 1, 2019, and we elected the practical expedients available for implementation under the standards. Under the practical expedients election, we were not required to reassess: (i) whether an expired or existing contract met the definition of a lease; (ii) the lease classification at January 1, 2019 for existing leases; and (iii) whether costs previously capitalized as initial direct costs would continue to be amortized. We also adopted the practical expedient that allowed us to not separate tenant reimbursement revenue from rental revenue if certain criteria were met. We assessed the criteria and concluded that the timing and pattern of transfer for rental revenue and the related tenant reimbursement revenue are the same and the lease component, if accounted for separately, would be classified as an operating lease. As such, we account for and presented rental revenue and tenant reimbursement revenue as a single component in the condensed consolidated statements of operations. The adoption of these standards did not have a material effect on our condensed consolidated financial statements.

8

2. INVESTMENTS IN REAL ESTATE PROPERTIES

The following table summarizes our consolidated investments in real estate properties and excludes properties classified as held for sale. Refer to “Note 3” for detail relating to our real estate properties held for sale.

	As of
(in thousands)	March 31, 2019			December 31, 2018
Land	$	385,187		$	421,531
Buildings and improvements	1,180,568			1,271,773
Intangible lease assets	301,054			315,429
Investment in real estate properties	1,866,809			2,008,733
Accumulated depreciation and amortization	(485,941		)	(501,621		)
Net investment in real estate properties	$	1,380,868		$	1,507,112

Intangible Lease Assets and Liabilities

Intangible lease assets and liabilities, excluding properties classified as held for sale, as of March 31, 2019 and December 31, 2018 include the following:

	March 31, 2019									December 31, 2018
(in thousands)	Gross			Accumulated Amortization			Net			Gross			Accumulated Amortization			Net
Intangible lease assets	$	268,708		$	(229,561	)	$	39,147		$	282,961		$	(238,768	)	$	44,193
Above-market lease assets	32,346			(31,595		)	751			32,468			(31,382		)	1,086
Below-market lease liabilities	(80,162		)	34,148			(46,014		)	(82,060		)	34,864			(47,196		)

Rental Revenue 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 March 31,
(in thousands)	2019			2018
Increase (decrease) to rental revenue:
Straight-line rent adjustments	$	4,182		$	2,362
Above-market lease amortization	(336		)	(184		)
Below-market lease amortization	1,047			1,251
Real estate-related depreciation and amortization:
Depreciation expense	$	9,561		$	9,280
Intangible lease asset amortization	4,682			4,533

9

Future Minimum Rentals

Future minimum base rental payments, which equal the cash basis of monthly contractual rent, owed to us from our tenants under the terms of non-cancelable operating and ground leases in effect as of March 31, 2019, excluding rental revenues from the potential renewal or replacement of existing leases, were as follows for the next five years and thereafter:

	As of
(in thousands)	March 31, 2019		December 31, 2018
2019	$	99,380	$	133,999
2020	123,946		116,145
2021	112,505		104,997
2022	94,009		88,136
2023	79,913		74,661
Thereafter	317,684		323,040
Total	$	827,437	$	840,978

Real Estate Property Impairment

We did not record an impairment related to any of our consolidated real estate properties during the three months ended March 31, 2019. During the three months ended March 31, 2018, we recorded a $6.8 million non-cash impairment charge related to a retail property located in the Jacksonville, Florida market, which was disposed of in October 2018. The impairment was a result of a shortened hold period based on the consideration of potential disposition options for the property, which ultimately resulted in the reduction of our estimated future cash flows below our net book value.

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 condensed 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.

As of March 31, 2019, we had two office properties that met the criteria to be classified as held for sale. The following table summarizes the amounts held for sale as of March 31, 2019. We subsequently sold both office properties. See “Note 12” for additional information regarding these dispositions.

	As of
(in thousands)	March 31, 2019		December 31, 2018
Net investment in real estate properties	$	141,689	$	—
Other assets	2,872		—
Assets held for sale	$	144,561	$	—
Accounts payable and accrued expenses	$	578	$	—
Debt, net	97,686		—
Intangible lease liabilities, net	152		—
Other liabilities	4,321		—
Liabilities related to assets held for sale	$	102,737	$	—

10

4. DEBT

A summary of our debt is as follows:

	Weighted-Average Effective Interest Rate as of					Balance as of
($ in thousands)	March 31, 2019		December 31, 2018		Maturity Date	March 31, 2019			December 31, 2018
Line of credit (1)	3.99	%	4.05	%	January 2023	$	287,000		$	131,000
Term loan (2)	3.11	%	3.52	%	January 2024	150,000			275,000
Term loan (3)	3.39	%	3.79	%	February 2022	200,000			200,000
Fixed-rate mortgage notes (4)	3.68	%	3.57	%	September 2021 - December 2029	140,846			173,932
Floating-rate mortgage notes (5)	4.74	%	4.97	%	January 2020	127,000			225,600
Total principal amount / weighted-average	3.77	%	3.98	%		$	904,846		$	1,005,532
Less unamortized debt issuance costs						$	(8,307	)	$	(4,627	)
Add mark-to-market adjustment on assumed debt						357			393
Total debt, net (excluding debt related to assets held for sale)						$	896,896		$	1,001,298
Floating-rate mortgage notes related to assets held for sale (6)	5.24	%	—	%	September 2020	$	98,600		$	—
Total principal amount / weighted-average (including debt related to assets held for sale) (7)	3.91	%	3.98	%		$	1,003,446		$	1,005,532
Gross book value of properties encumbered by debt (8)						$	562,809		$	598,978

(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 March 31, 2019, the unused and available portions under the line of credit were approximately $163.0 million and $63.1 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% to 2.05%, depending on our consolidated leverage ratio. The Company has the ability to increase borrowings under this term loan by an additional $175.0 million for total commitments of $325.0 million. As of March 31, 2019, both the unused and available portions under the term loan were approximately $175.0 million. The weighted-average interest rate is the all-in interest rate and is fixed through interest swap agreements with respect to the funded portion only.

(3) The effective interest rate is calculated based on LIBOR, plus a margin ranging from 1.25% to 2.05%, depending on our consolidated leverage ratio. The weighted-average interest rate is the all-in interest rate and is fixed through interest swap agreements.

(4) The amount outstanding as of March 31, 2019 includes a $51.8 million floating-rate mortgage note that was subject to an interest rate spread of 1.65% over one-month LIBOR, which we have effectively fixed using an interest rate swap at 2.85% until the designated cash flow hedge expires in July 2021. This mortgage note matures in August 2023.

(5) The effective interest rate is calculated based on LIBOR plus a margin. As of March 31, 2019 and December 31, 2018, our floating-rate mortgage notes were subject to a weighted-average interest rate spread of 2.25% and 2.47%, respectively.

(6) Amount represents principal balance outstanding. Refer to “Note 3” for further detail relating to our assets held for sale.

(7) The weighted-average remaining term of our borrowings (including borrowings related to assets held for sale) was approximately 3.4 years as of March 31, 2019, excluding the impact of certain extension options.

(8) Amount includes the gross book value of properties classified as held for sale that are encumbered by debt.

11

As of March 31, 2019, the principal payments due on our debt (including debt related to assets held for sale) during each of the next five years and thereafter were as follows:

(in thousands)	Line of Credit		Term Loans		Mortgage Notes (1)		Total
Remainder of 2019	$	—	$	—	$	1,989	$	1,989
2020	—		—		228,366		228,366
2021	—		—		11,627		11,627
2022 (2)	—		200,000		2,478		202,478
2023 (3)	287,000		—		47,967		334,967
Thereafter	—		150,000		74,019		224,019
Total principal payments	$	287,000	$	350,000	$	366,446	$	1,003,446

(1) Includes a $127.0 million floating-rate mortgage note expiring in January 2020, which may be extended pursuant to two one-year extension options, subject to certain conditions.

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

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

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 March 31, 2019.

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.

During the next 12 months, we estimate that approximately $2.1 million will be reclassified as a decrease to interest expense related to active effective hedges of existing floating-rate debt, and 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.

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

				Fair Value
($ in thousands)	Number of Contracts	Notional Amount		Other Assets		Other Liabilities
March 31, 2019
Interest rate swaps (1)	14	$	601,849	$	3,019	$	6,177
Interest rate caps	4	338,450		1		—
Total derivative instruments	18	$	940,299	$	3,020	$	6,177
December 31, 2018
Interest rate swaps	15	$	634,565	$	6,692	$	3,220
Interest rate caps	4	338,450		25		—
Total derivative instruments	19	$	973,015	$	6,717	$	3,220

(1) Includes four interest rate swaps with a combined notional amount of $200.0 million that will become effective in January 2020.

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

	For the Three Months Ended March 31,
(in thousands)	2019			2018
Derivative instruments designated as cash flow hedges:
(Loss) gain recognized in AOCI	$	(4,707	)	$	3,971
(Gain) loss reclassified from AOCI into interest expense	(412		)	704
Gain reclassified from AOCI due to hedged transactions becoming probable of not occurring	(1,374		)	—
Total interest expense on the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded	13,374			11,240
Derivative instruments not designated as cash flow hedges:
(Loss) gain recognized in income	$	(24	)	$	53

5. 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:

(in thousands)	Level 1		Level 2		Level 3		Total Fair Value
March 31, 2019
Assets:
Derivative instruments	$	—	$	3,020	$	—	$	3,020
Total assets measured at fair value	$	—	$	3,020	$	—	$	3,020
Liabilities:
Derivative instruments	$	—	$	6,177	$	—	$	6,177
Total liabilities measured at fair value	$	—	$	6,177	$	—	$	6,177
December 31, 2018
Assets:
Derivative instruments	$	—	$	6,717	$	—	$	6,717
Total assets measured at fair value	$	—	$	6,717	$	—	$	6,717
Liabilities:
Derivative instruments	$	—	$	3,220	$	—	$	3,220
Total liabilities measured at fair value	$	—	$	3,220	$	—	$	3,220

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 interest rate 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 4” above for further discussion of our derivative instruments.

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Nonrecurring Fair Value Measurements

As of March 31, 2019 and December 31, 2018, the fair values of cash and cash equivalents, tenant receivables, due from/to affiliates, accounts payable and accrued liabilities, and distributions payable approximate their carrying values because of the short-term nature of 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:

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	As of March 31, 2019				As of December 31, 2018
(in thousands)	Carrying Value (1)		Fair Value		Carrying Value (1)		Fair Value
Assets:
Debt-related investments	$	2,702	$	2,729	$	10,682	$	10,709
Liabilities:
Line of credit	$	287,000	$	287,000	$	131,000	$	131,000
Term loans	350,000		350,000		475,000		475,000
Mortgage notes	366,446		365,326		399,532		398,117

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

6. STOCKHOLDERS’ EQUITY

Public Offering

A summary of our public offerings (including shares sold through the primary offering and distribution reinvestment plan (“DRIP”)) for the three months ended March 31, 2019, is as follows:

(in thousands)	Class T		Class S		Class D		Class I		Class E		Total
Amount of gross proceeds raised:
Primary offering	$	3,637	$	24,517	$	1,810	$	9,006	$	—	$	38,970
DRIP	135		479		143		1,866		2,318		4,941
Total offering	$	3,772	$	24,996	$	1,953	$	10,872	$	2,318	$	43,911
Number of shares sold:
Primary offering	474		3,239		244		1,208		—		5,165
DRIP	18		64		19		249		312		662
Total offering	492		3,303		263		1,457		312		5,827

Common Stock

The following table describes the changes in each class of common shares during the three months ended March 31, 2019:

(in thousands)	Class T Shares		Class S Shares		Class D Shares		Class I Shares		Class E Shares		Total Shares
Balances, December 31, 2017	2,062		64		2,510		34,135		93,695		132,466
Issuance of common stock:
Primary shares	67		1,524		23		1,016		—		2,630
Distribution reinvestment plan	16		2		16		235		372		641
Share-based compensation	—		—		—		38		—		38
Redemptions of common stock	(37	)	—		(56	)	(1,607	)	(5,615	)	(7,315	)
Balances, March 31, 2018	2,108		1,590		2,493		33,817		88,452		128,460
Balances, December 31, 2018	2,783		10,516		2,778		37,385		77,390		130,852
Issuance of common stock:
Primary shares	474		3,239		244		1,208		—		5,165
Distribution reinvestment plan	18		64		19		249		312		662
Share-based compensation	—		—		—		26		—		26
Redemptions of common stock	(14	)	(4	)	(55	)	(367	)	(2,511	)	(2,951	)
Balances, March 31, 2019	3,261		13,815		2,986		38,501		75,191		133,754

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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 quarters ended below:

	Amount
(in thousands, except per share data)	Declared per Common Share (1)		Common Stock Distributions Paid in Cash		Other Cash Distributions (2)		Reinvested in Shares		Total Distributions
2019
March 31	$	0.09375	$	7,198	$	1,244	$	4,997	$	13,439
Total	$	0.09375	$	7,198	$	1,244	$	4,997	$	13,439
2018
March 31	$	0.09375	$	7,240	$	1,127	$	4,789	$	13,156
June 30	0.09375		7,137		1,221		4,710		13,068
September 30	0.09375		7,157		1,174		4,738		13,069
December 31	0.09375		7,180		1,202		4,814		13,196
Total	$	0.37500	$	28,714	$	4,724	$	19,051	$	52,489

(1) Amount reflects the total quarterly distribution rate, subject to adjustment for class-specific fees.

(2) Includes other cash distributions consisting of: (i) distributions paid to holders of partnership units (“OP Units”) in Black Creek Diversified Property Operating Partnership LP (the “Operating Partnership”); (ii) regular distributions made to our former joint venture partners; and (iii) ongoing distribution fees paid to Black Creek Capital Markets, LLC (the “Dealer Manager”) with respect to certain classes of our shares. See “Note 7” for further detail regarding the current and historical ongoing distribution fees.

Redemptions and Repurchases

Below is a summary of redemptions and repurchases pursuant to our share redemption program for the three months ended March 31, 2019 and 2018. Our board of directors may modify, suspend or terminate our current share redemption programs if it deems such action to be in the best interest of our stockholders.

	For the Three Months Ended March 31,
(in thousands, except for per share data)	2019			2018
Number of shares requested for redemption or repurchase	2,951			7,315
Number of shares redeemed or repurchased	2,951			7,315
% of shares requested that were redeemed or repurchased	100.0		%	100.0		%
Average redemption or repurchase price per share	$	7.45		$	7.43

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7. RELATED PARTY TRANSACTIONS

Summary of Fees and Expenses

The following table summarizes the fees and expenses incurred by us for services provided by Black Creek Diversified Property Advisors LLC (the “Advisor”) and its affiliates, and by the Dealer Manager, and any related amounts payable:

	For the Three Months Ended March 31,				Payable as of
(in thousands)	2019		2018		March 31, 2019		December 31, 2018
Upfront selling commissions (1)	$	485	$	136	$	—	$	—
Ongoing distribution fees (1)	256		55		95		76
Advisory fees	2,905		3,640		1,000		3,225
Other expense reimbursements—Advisor	2,345		2,401		431		1,411
Other expense reimbursements—Dealer Manager	247		72		—		—
DST Program advisory fees	223		39		—		—
DST Program selling commissions	494		108		—		—
DST Program dealer manager fees	115		32		—		—
DST Program other reimbursements—Dealer Manager	201		10		—		—
DST Program facilitation and loan origination fees	421		—		—		—
Total	$	7,692	$	6,493	$	1,526	$	4,712

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

Company Restricted Stock Units (“Company RSUs”)

The table below summarizes the unvested Company RSUs as of March 31, 2019:

(in thousands, except per share data)	Grant Date	Vesting Date	Number of Unvested Shares	Grant Date Net Asset Value (“NAV”) per Class I Share
Company RSUs	2/4/2016	4/15/2019	57	$	7.41

8. 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 March 31,
(in thousands, except per share data)	2019		2018
Net income (loss) attributable to common stockholders—basic	$	3,602	$	(8,635	)
Net income (loss) attributable to OP Units	284		(756		)
Net income (loss) attributable to common stockholders—diluted	$	3,886	$	(9,391	)
Weighted-average shares outstanding—basic	132,847		128,946
Incremental weighted-average shares effect of conversion of OP Units	10,482		11,306
Weighted-average shares outstanding—diluted	143,329		140,252
Net income (loss) per share attributable to common stockholders:
Basic	$	0.03	$	(0.07	)
Diluted	$	0.03	$	(0.07	)

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9. SUPPLEMENTAL CASH FLOW INFORMATION

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

	For the Three Months Ended March 31,
(in thousands)	2019		2018
Distributions reinvested in common stock	$	4,941	$	4,774
Change in accrued future ongoing distribution fees	1,903		896

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 Three Months Ended March 31,
(in thousands)	2019		2018
Beginning of period:
Cash and cash equivalents	$	10,008	$	10,475
Restricted cash	7,030		8,541
Cash, cash equivalents and restricted cash	$	17,038	$	19,016
End of period:
Cash and cash equivalents	$	13,058	$	13,989
Restricted cash	6,607		7,341
Cash, cash equivalents and restricted cash	$	19,665	$	21,330

10. COMMITMENTS AND CONTINGENCIES

We and the Operating Partnership are not presently involved in any material 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 March 31, 2019.

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11. SEGMENT FINANCIAL INFORMATION

Our three reportable segments are office, retail 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 primarily on net operating income 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 that are not directly assignable to a segment, such as certain corporate items, are not allocated but reflected as reconciling items.

The following table reflects our total assets by business segment as of March 31, 2019 and December 31, 2018:

	As of
(in thousands)	March 31, 2019		December 31, 2018
Assets:
Office (1)	$	723,828	$	724,875
Retail	667,440		671,007
Industrial	131,290		111,230
Corporate	68,637		73,990
Total assets	$	1,591,195	$	1,581,102

(1) As of March 31, 2019, amount includes properties classified as held for sale. Refer to “Note 3” for further detail.

The following table sets forth the financial results by segment for the three months ended March 31, 2019 and 2018:  

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(in thousands)	Office			Retail			Industrial			Consolidated
Three Months Ended March 31, 2019
Rental revenues	$	29,724		$	18,047		$	2,800		$	50,571
Rental expenses	(10,860		)	(4,558		)	(651		)	(16,069		)
Net operating income	$	18,864		$	13,489		$	2,149		$	34,502
Real estate-related depreciation and amortization	$	8,175		$	4,723		$	1,345		$	14,243
Three Months Ended March 31, 2018
Rental revenues	$	24,425		$	18,599		$	1,430		$	44,454
Rental expenses	(11,007		)	(4,598		)	(225		)	(15,830		)
Net operating income	$	13,418		$	14,001		$	1,205		$	28,624
Real estate-related depreciation and amortization	$	7,885		$	5,290		$	638		$	13,813

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 months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
(in thousands)	2019			2018
Net income (loss) attributable to common stockholders	$	3,602		$	(8,635	)
Debt-related income	(123		)	(173		)
Real estate-related depreciation and amortization	14,243			13,813
General and administrative expenses	2,044			2,534
Advisory fees, related party	3,128			3,679
Impairment of real estate property	—			6,800
Other expense	143			122
Interest expense	13,374			11,240
Gain on sale of real estate property	(1,191		)	—
Gain on extinguishment of debt and financing commitments, net	(1,002		)	—
Net income (loss) attributable to noncontrolling interests	284			(756		)
Net operating income	$	34,502		$	28,624

12. SUBSEQUENT EVENTS

Disposition of Property

On April 16, 2019, we sold to an unrelated third party an office property located in Austin, Texas (“Rialto”) that was classified as held for sale as of March 31, 2019, for gross proceeds of approximately $46.9 million. Our accounting basis (net of accumulated depreciation and amortization) for this real estate property as of the closing date was approximately $33.2 million.

On May 6, 2019, we sold to an unrelated third party an office property located in San Francisco, California (“655 Montgomery”) that was classified as held for sale as of March 31, 2019, for gross proceeds of approximately $191.5 million. In addition, upon closing of this transaction, we prepaid the mortgage note and mezzanine loan that was secured by a pledge of ownership interests in this property. As of the date of closing, the mortgage note and mezzanine loan had an aggregate outstanding principal balance of approximately $98.6 million with a weighted-average variable interest rate of 5.23%. Our accounting basis (net of accumulated depreciation and amortization) for this real estate property as of the closing date was approximately $108.5 million.

Acquisition Under Contract

On May 6, 2019, we entered into a contract to acquire a multi-family property located in Rockville, Maryland with a purchase price of approximately $93.5 million. There can be no assurance that we will complete the acquisition of the property under contract.

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

References to the terms “we,” “our,” or “us” refer to Black Creek Diversified Property Fund 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 and availability of credit, which may have a negative effect on the following, among other things:

• the fundamentals of our business, including overall market occupancy, tenant space utilization, and rental rates;

• the financial condition of our tenants, some of which are 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; 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 tenants’ 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”));

• conflicts of interest arising out of our relationships with Black Creek Diversified Property Advisors Group LLC (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.

For further discussion of these and other factors, see Item 1A, “Risk Factors” in our 2018 Form 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.

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OVERVIEW

General

Black Creek Diversified Property Fund 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 March 31, 2019, our real estate portfolio consisted of 48 properties, which includes two properties classified as held for sale and five properties that are part of the DST Program (as defined below), totaling approximately 7.9 million square feet located in 18 markets throughout the U.S., with 495 tenants.

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”) 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 three months ended March 31, 2019, we raised $39.0 million of gross proceeds from the sale of common stock in our ongoing public primary offerings and $4.9 million from the sale of common stock under our distribution reinvestment plan. See “Note 6 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 beneficial interests in specific Delaware statutory trusts holding real properties (the “DST Program”). 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. During the three months ended March 31, 2019, we raised $26.7 million from the sale of interests related to the DST Program.

We currently operate in three reportable segments: office, retail and industrial. The following table summarizes our real estate portfolio (including properties classified as held for sale) by segment as of March 31, 2019:

($ and square feet in thousands)	Number of Markets (1)	Number of Properties	Rentable Square Feet	% Leased		Aggregate Fair Value		% of Aggregate Fair Value
Office properties	11	14	3,004	84.6	%	$	1,117,200	52.4	%
Retail properties	7	28	3,075	92.1		864,050		40.6
Industrial properties	6	6	1,839	99.5		149,050		7.0
Total real estate portfolio	18	48	7,918	91.0	%	$	2,130,300	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.

We will continue to focus our investment activities on expanding a high-quality, diversified real estate portfolio throughout the U.S. Although we generally target investments in four primary property categories (office, retail, industrial and multifamily), our charter and bylaws do not preclude us from investing in other types of commercial property, real estate debt, or real estate-related equity securities. Our near-term investment strategy is likely to prioritize new investments in the industrial and multifamily sectors due to attractive fundamental conditions. We have been focused on selling certain office and retail assets. The disposition of these properties has helped us to increase our current allocation to industrial real estate assets and liquidity to pursue new investment opportunities. However, there can be no assurance that we will be successful in this investment strategy, including with respect to any particular asset class. To a lesser extent we may invest in other types of real estate including, but not limited to, hospitality, medical offices, student housing and unimproved land. We currently do not intend to invest in these other types of real estate. 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 and other related investments. Any investments in real estate-related securities generally will focus on equity issued by public and private

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real estate companies and certain other securities, with the primary goal of such investments being the preservation of liquidity in support of our share redemption program.

Net Asset Value

Our board of directors, including a majority of our independent directors, has adopted valuation procedures that contain a comprehensive set of methodologies to be used in connection with the calculation of our NAV. One fundamental element of the valuation process, the valuation of our real property portfolio, is managed by Altus Group U.S., Inc., an independent valuation firm (the “Independent Valuation Firm”) approved by our board of directors, including a majority of our independent directors. All parties engaged by us in the calculation of our NAV, including the Advisor, are subject to the oversight of our board of directors. As part of this process, our Advisor reviews the estimates of the values of our real property portfolio and real estate-related assets for consistency with our valuation guidelines and the overall reasonableness of the valuation conclusions, and informs our board of directors of its conclusions (as needed, but at least once per year as part of their annual review, described below). Although our Independent Valuation Firm or other pricing sources may consider any comments received from us or our Advisor to their individual valuations, the final estimated values of our real properties or certain other assets and liabilities are determined by the Independent Valuation Firm or other pricing source. Our Independent Valuation Firm 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 process generally. 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. Every month our senior management team and Altus hold an NAV committee meeting to review the prior month’s adjustments to NAV and discuss any possible changes to the NAV policies and procedures which may be recommended to the board of directors. The information reviewed by this committee is summarized for the audit committee. 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 respect to the valuation of our properties, the Independent Valuation Firm provides the board of directors with periodic valuation reports. From time to time our board of directors, including a majority of our independent directors, may adopt changes to the valuation procedures if it (i) 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 (ii) otherwise reasonably believes a change is appropriate for the determination of NAV. We will publicly announce material changes to our valuation procedures or the identity or role of the Independent Valuation Firm. 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 Firm.

As used below, “Fund Interests” means our outstanding shares of common stock, along with the OP Units held by third parties, and “Aggregate Fund NAV” means the NAV of all of the Fund Interests.

The following table sets forth the components of total NAV as of March 31, 2019 and December 31, 2018.

	As of
(in thousands)	March 31, 2019			December 31, 2018
Office properties	$	1,117,200		$	1,107,500
Retail properties	864,050			862,000
Industrial properties	149,050			128,400
Total investments	$	2,130,300		$	2,097,900
Cash and other assets, net of other liabilities	(73,177		)	(42,576		)
Debt obligations	(1,002,326		)	(1,004,117		)
Aggregate Fund NAV	$	1,054,797		$	1,051,207
Total Fund Interests outstanding	144,236			141,334

The following table shows the NAV per Fund Interest as of March 31, 2019:

(in thousands, except per Fund Interest data)	Total		Class T Shares		Class S Shares		Class D Shares		Class I Shares		Class E Shares		Class E OP Units
As of March 31, 2019
Monthly NAV	$	1,054,797	$	23,845	$	101,030	$	21,838	$	281,559	$	549,867	$	76,658
Fund Interests outstanding	144,236		3,261		13,815		2,986		38,501		75,191		10,482
NAV Per Fund Interest	$	7.31	$	7.31	$	7.31	$	7.31	$	7.31	$	7.31	$	7.31

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When the fair value of our real estate assets is calculated for the purposes of determining our NAV per share, the calculation is done using widely accepted methodologies and, as appropriate, the GAAP principles within the FASB Accounting Standards Codification under Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). However, our valuation procedures and our NAV are not subject to GAAP and will not be subject to independent audit.

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 net book value on a GAAP basis. Most significantly, the valuation of our real estate assets, which is the largest component of our NAV calculation, is provided to us by the Independent Valuation Firm on a monthly basis. For GAAP purposes, these assets are generally recorded at depreciated or amortized cost. In addition, we value our debt-related investments and real estate-related liabilities generally in accordance with fair value standards under GAAP. Other examples that will cause our NAV to differ from our GAAP net book value include the straight-lining of rent, which results in a receivable for GAAP purposes that is not included in the determination of our NAV. Third party appraisers may value our individual real estate assets using appraisal standards that deviate from fair value standards under GAAP. The use of such appraisal standards may cause our NAV to deviate from GAAP fair value principles. We did not develop our valuation procedures with the intention of complying with fair value concepts under GAAP and, therefore, there could be differences between our fair values and the fair values derived from the principal market or most advantageous market concepts of establishing fair value under GAAP.

Under GAAP, we record liabilities for ongoing distribution fees (i) that we currently owe the Dealer Manager under the terms of our Dealer Manager agreement and (ii) for an estimate that we may pay to the Dealer Manager in future periods for shares of our common stock. As of March 31, 2019, we estimated approximately $9.8 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, our ability to redeem shares under our share redemption program and our ability to suspend or terminate 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.

Please note that 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.

The valuation for our real properties as of March 31, 2019 was provided by the Independent Valuation Firm in accordance with our valuation procedures and determined starting with the appraised value. The aggregate real property valuation of $2.1 billion compares to a GAAP basis of real properties, including assets held for sale, (net of intangible lease liabilities and before accumulated amortization and depreciation) of $1.96 billion, representing an increase of approximately $173.9 million or 8.9%. Certain key assumptions that were used by the Independent Valuation Firm in the discounted cash flow analysis are set forth in the following table based on weighted-averages by property type. 

	Office		Retail		Industrial		Weighted-Average Basis
Exit capitalization rate	6.40	%	6.41	%	6.13	%	6.39	%
Discount rate / internal rate of return (“IRR”)	7.19	%	6.94	%	7.07	%	7.09	%
Annual market rent growth rate	3.02	%	2.91	%	3.00	%	2.97	%
Average holding period (years)	10.0		10.0		10.0		10.0

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A change in the rates used would impact the calculation of the value of our real properties. 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:

Input	Hypothetical Change	Office		Retail		Industrial		Weighted-Average Values
Exit capitalization rate (weighted-average)	0.25% decrease	2.76	%	2.45	%	2.85	%	2.64	%
	0.25% increase	(2.55	)%	(2.26	)%	(2.62	)%	(2.44	)%
Discount rate (weighted-average)	0.25% decrease	2.03	%	1.93	%	1.96	%	1.98	%
	0.25% increase	(1.98	)%	(1.88	)%	(1.92	)%	(1.94	)%

The valuation of our debt obligations as of March 31, 2019 was in accordance with fair value standards under GAAP. The key assumption used in the discounted cash flow analysis was the market interest rate. Market interest rates relating to the underlying debt obligations are based on unobservable Level 3 inputs, which we have determined to be our best estimate of current market interest rates of similar instruments. The weighted-average market interest rate used in the March 31, 2019 valuation was 4.12%.

A change in the market interest rates used would impact the calculation of the fair value of our debt obligations. For example, assuming all other factors remain constant, a decrease in the weighted-average market interest rate of 0.25% would increase the fair value of our debt obligations by approximately 0.17%. Alternatively, assuming all other factors remain constant, an increase in the weighted-average market interest rate of 0.25% would decrease the fair value of our debt obligations by approximately 0.58%.

Our hedge instruments are valued based on market expectations of future interest rates (the “forward interest rate curve”). All else equal, an upward shift in the forward interest rate curve would increase the value of our current hedge positions, resulting in a positive impact to our NAV, and a downward shift in the forward interest rate curve would decrease the value of our current hedge positions, resulting in a negative impact to our NAV.

RESULTS OF OPERATIONS

Summary of 2019 Activities

During the three months ended March 31, 2019, we completed the following activities:

• Our NAV decreased from $7.44 per share as of December 31, 2018 to $7.31 per share as of March 31, 2019, primarily due to the upcoming disposition of 655 Montgomery, whereby the contracted sales price net of expected selling costs is lower than the fair value at which we were carrying the asset in accordance with our NAV calculation and valuation procedures. Refer to “Subsequent Events” for additional information relating to the disposition of 655 Montgomery. Additionally, the interest rate yield curve shifted during the quarter, lowering the market value of our interest rate derivative instruments. The timing of valuation changes recorded in our NAV will not necessarily be the same for charges recorded on our condensed consolidated financial statements prepared pursuant to GAAP.

• We acquired one industrial property comprising 0.2 million square feet for an aggregate purchase price of $20.6 million.

• We sold one outparcel for net proceeds of $2.3 million. We recorded a total net gain of $1.2 million.

• In January 2019, we amended and restated our existing senior unsecured credit agreements, aggregating $875.0 million, by entering into a $450.0 million line of credit and $525.0 million under our two term loans, for an aggregate $975.0 million of commitments.

• We decreased our leverage ratio from 47.7% as of December 31, 2018, to 47.0% as of March 31, 2019. Our leverage ratio for reporting purposes is calculated as the outstanding principal balance of our property-level and corporate-level debt divided by the fair value of our real property and debt-related investments (determined in accordance with our valuation procedures). 

• We leased approximately 386,000 square feet, which included 94,000 square feet of new leases and 292,000 square feet of renewals. This leasing activity contributed to the increase in our real estate portfolio’s leased percentage from 90.6% as of December 31, 2018 to 91.0% as of March 31, 2019.

• We redeemed 3.0 million shares of common stock at a weighted-average purchase price of $7.45 per share for an aggregate amount of $22.0 million.

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Results for the Three Months Ended March 31, 2019 Compared to the Same Period in 2018

The following table summarizes our results of operations for the three months ended March 31, 2019, as compared to the three months ended March 31, 2018. 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 periods presented below reflect properties owned as of January 1, 2018. The same store operating portfolio for the periods presented below include 45 properties totaling approximately 7.1 million square feet, which portfolio represented 90.3% of total rentable square feet as of March 31, 2019.

	For the Three Months Ended March 31,
($ in thousands, except per square foot data)	2019			2018			$ Change			% Change
Rental revenues:
Same store properties	$	49,227		$	43,830		$	5,397		12.3	%
Non-same store properties	1,344			624			720			115.4
Total rental revenues	50,571			44,454			6,117			13.8
Rental expenses:
Same store properties	(15,574		)	(15,283		)	(291		)	1.9
Non-same store properties	(495		)	(547		)	52			(9.5	)
Total rental expenses	(16,069		)	(15,830		)	(239		)	1.5
Net operating income:
Same store properties	33,653			28,547			5,106			17.9
Non-same store properties	849			77			772			1,002.6
Total net operating income	34,502			28,624			5,878			20.5
Other income and (expenses):
Debt-related income	123			173			(50		)	(28.9	)
Real estate-related depreciation and amortization	(14,243		)	(13,813		)	(430		)	3.1
General and administrative expenses	(2,044		)	(2,534		)	490			(19.3	)
Advisory fees, related party	(3,128		)	(3,679		)	551			(15.0	)
Impairment of real estate property	—			(6,800		)	6,800			100.0
Interest expense	(13,374		)	(11,240		)	(2,134		)	19.0
Gain on sale of real estate property	1,191			—			1,191			—
Gain on extinguishment of debt and financing commitments, net	1,002			—			1,002			—
Other expense	(143		)	(122		)	(21		)	17.2
Total other expenses	(30,616		)	(38,015		)	7,399			(19.5	)
Net income (loss)	3,886			(9,391		)	13,277			(141.4	)
Net (income) loss attributable to noncontrolling interests	(284		)	756			(1,040		)	(137.6	)
Net income (loss) attributable to common stockholders	$	3,602		$	(8,635	)	$	12,237		(141.7	)%
Same store supplemental data:
Same store average percentage leased	90.3		%	89.8		%
Same store average annualized base rent per square foot	$	21.02		$	19.03

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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 grew by $6.1 million for the three months ended March 31, 2019, as compared to the same period in 2018. This growth was attributable to a $5.4 million increase in same store rental revenues that was primarily driven by two lease terminations that resulted in a $4.4 million increase in rental revenues for the three months ended March 31, 2019. The lease terminations were comprised of: (i) $14.0 million of consideration received in June 2018 at our Campus Road Office Center property, which is amortized in to rental revenues on a straight-line basis through April 2019; and (ii) $1.2 million of consideration received in November 2018 at our Venture Corporate Center office property, which is amortized in to rental revenues on a straight-line basis through May 2019. The square footage terminated at Campus Road Office was subsequently leased in May 2019. The increase in total rental revenues is also attributable to an increase in average percentage leased at our Park Place office property, which is included in the same store operating portfolio. The remaining increase is explained through our non-same store operating portfolio increase in rental revenues, which was primarily due to our two real property acquisitions during 2018 and one acquisition during 2019.

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

	For the Three Months Ended March 31,
(in thousands)	2019		2018		$ Change			% Change
Rental income	$	44,586	$	39,716	$	4,870		12.3	%
Straight-line rent	4,182		2,362		1,820			77.1
Amortization of above- and below-market intangibles	711		1,067		(356		)	(33.4	)
Other	1,092		1,309		(217		)	(16.6	)
Total rental revenues	$	50,571	$	44,454	$	6,117		13.8	%

Rental Expenses. Rental expenses include certain property operating expenses typically reimbursed by our tenants, 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 increased slightly by $0.2 million for the three months ended March 31, 2019, as compared to the same period in 2018, primarily due to an increase in average percentage leased at our Park Place office property during the three months ended March 31, 2018.

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

	For the Three Months Ended March 31,
(in thousands)	2019		2018		$ Change			% Change
Real estate taxes	$	6,087	$	6,129	$	(42	)	(0.7	)%
Repairs and maintenance	5,144		5,165		(21		)	(0.4	)
Utilities	1,849		1,756		93			5.3
Property management fees	1,072		1,008		64			6.3
Insurance	351		330		21			6.4
Other	1,566		1,442		124			8.6
Total rental expenses	$	16,069	$	15,830	$	239		1.5	%

Other Expenses. Other expenses decreased by $7.4 million for the three months ended March 31, 2019, as compared to the same period in 2018, primarily due to:

• Impairment of real estate property of $6.8 million recorded during the three months ended March 31, 2018.

• Gain on sale of real estate property of $1.2 million recorded during the three months ended March 31, 2019.

• Net gain on extinguishment of debt and financing commitments of $1.0 million recorded during the three months ended March 31, 2019.

• These decreases in other expenses were partially offset by an increase in interest expense of $2.1 million during the three months ended March 31, 2019, as compared to the same period in 2018, that was primarily attributable to higher interest rates associated with our variable-rate debt and higher interest expense on financing obligations associated with an increase in the sale of interests related to our DST Program.

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Segment Summary for the Three Months Ended March 31, 2019 Compared to the Same Period in 2018

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 three reportable segments: office, retail and industrial. These segments are comprised of the markets by which management and its operating teams conduct and monitor business. See “Note 11 to the Condensed 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” below for detail regarding the use of NOI. The following table summarizes certain operating trends in our consolidated properties by segment:

	For the Three Months Ended March 31,
(in thousands)	2019			2018			$ Change			% Change
Rental revenues:
Office	$	29,724		$	24,173		$	5,551		23.0	%
Retail	18,037			18,226			(189		)	(1.0	)
Industrial	1,466			1,431			35			2.4
Total same store rental revenues	49,227			43,830			5,397			12.3
Non-same store properties	1,344			624			720			115.4
Total rental revenues	$	50,571		$	44,454		$	6,117		13.8	%
NOI:
Office	$	18,862		$	13,517		$	5,345		39.5	%
Retail	13,482			13,815			(333		)	(2.4	)
Industrial	1,309			1,215			94			7.7
Total same store NOI	33,653			28,547			5,106			17.9
Non-same store properties	849			77			772			1,002.6
Total NOI	$	34,502		$	28,624		$	5,878		20.5	%
Same store average percentage leased:
Office	84.4		%	81.3		%
Retail	92.7			94.6
Industrial	100.0			100.0
Same store average annualized base rent per square foot:
Office	$	30.80		$	26.56
Retail	18.50			18.07
Industrial	4.61			4.49

Office Segment. Our office segment same store NOI increased $5.3 million for the three months ended March 31, 2019, as compared to the same period in 2018, primarily as a result of the two lease terminations and increase in average percentage leased at our Park Place office property, as discussed above.

Retail Segment. Our retail segment same store NOI decreased $0.3 million for the three months ended March 31, 2019, as compared to the same period in 2018, primarily due to an early termination fee received at our Manomet retail property during the first quarter of 2018 and two lease expirations at our Braintree retail property in September 2018.

Industrial Segment. Our industrial segment same store NOI remained relatively constant between the periods under comparison.

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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 financial condition and 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, 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 Months Ended March 31, 2019 Compared to the Same Period in 2018” above for a reconciliation of our GAAP net (loss) income to NOI for the three months ended March 31, 2019.

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 potentially other 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.

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

	For the Three Months Ended March 31,
(in thousands, except per share data)	2019			2018
GAAP net income (loss) attributable to common stockholders	$	3,602		$	(8,635	)
GAAP net income (loss) per common share—basic and diluted	$	0.03		$	(0.07	)
Reconciliation of GAAP net income (loss) to NAREIT FFO:
GAAP net income (loss) attributable to common stockholders	$	3,602		$	(8,635	)
Real estate-related depreciation and amortization	14,243			13,813
Impairment of real estate property	—			6,800
Gain on sale of real estate property	(1,191		)	—
Noncontrolling interests’ share of net income (loss)	284			(756		)
Noncontrolling interests’ share of NAREIT FFO	(1,239		)	(906		)
NAREIT FFO attributable to common stockholders—basic	15,699			10,316
NAREIT FFO attributable to OP Units	1,239			905
NAREIT FFO	$	16,938		$	11,221
Weighted-average shares outstanding—basic	132,847			128,946
Weighted-average shares outstanding—diluted	143,329			140,252
NAREIT FFO per common share—basic and diluted	$	0.12		$	0.08

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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 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 March 31, 2019, we had approximately $129.7 million of borrowings maturing in the next 12 months. Of this amount, $127.0 million relates to a mortgage note secured by our 3 Second Street office property, which may be extended pursuant to two one-year extension options, subject to certain conditions. We expect to be able to repay our principal obligations over the next 12 months from operating cash flows and through refinancings.

The 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 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 offerings, proceeds from the sale of assets, and undistributed funds from operations.

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 Three Months Ended March 31,
(in thousands)	2019			2018
Total cash provided by (used in):
Operating activities	$	5,624		$	9,282
Investing activities	(24,531		)	(6,405		)
Financing activities	21,534			(563		)
Net increase in cash	$	2,627		$	2,314

Net cash provided by operating activities decreased by approximately $3.7 million for the three months ended March 31, 2019, compared to the same period in 2018, primarily as a result of a decrease in working capital including payment of the 2018 performance-based fee in 2019. We did not earn a performance-based fee in 2017 that would have been paid in 2018. This was partially offset by an increase in property operations.

Net cash used in investing activities increased by approximately $18.1 million for the three months ended March 31, 2019, compared to the same period in 2018, primarily due to our industrial property acquisition, as discussed above.

Net cash used in financing activities of $0.6 million for the three months ended March 31, 2018 changed by approximately $22.1 million to $21.5 million of net cash provided by financing activities for the three months ended March 31, 2019. The change from net cash used in financing activities to net cash provided by financing activities was primarily attributable to an increase in net offering activity and a decrease in redemptions, partially offset by a decrease in net borrowing activity, driven by the repayment of a mortgage note and a portion of a term loan that was partially offset by an increase in net proceeds from our line of credit.

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 March 31, 2019, we had an aggregate of $975.0 million of commitments under our credit agreements, including $450.0 million under our line of credit and $525.0 million under our two term loans. As of that date, we had: (i) approximately $287.0 million outstanding under our line of credit with a weighted-average effective interest rate of 3.99%; and (ii) $350.0 million outstanding under our term loans with a weighted-average effective interest rate of 3.27%, which were effectively fixed through the use of interest rate swaps.

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The unused and available portions under our line of credit were $163.0 million and $63.1 million, respectively. Our $450.0 million line of credit matures in January 2023, and may be extended pursuant to two six-month extension options, subject to certain conditions, including the payment of an extension fee. Our $150.0 million term loan had an additional $175.0 million of unused and available borrowings and matures in January 2024, 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 and term loan 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 4 to the Condensed Consolidated Financial Statements” for additional information regarding our line of credit and term loans.

Mortgage Notes. As of March 31, 2019, we had property-level borrowings (including mortgage notes related to assets held for sale) of approximately $366.4 million outstanding with a weighted-average remaining term of approximately 2.8 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 4.47%, which includes the effects of interest rate swap agreements related to a $51.8 million variable-rate mortgage note. Refer to “Note 4 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 March 31, 2019.

Offering Proceeds. For the three months ended March 31, 2019, the amount of aggregate gross proceeds raised from our public offerings (including shares issued pursuant to the distribution reinvestment plan) was $43.9 million ($40.1 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.

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:

	Amount												Source of Distributions								Total Cash Flows from Operating Activities
(in thousands, except per share data)	Declared per Common Share (1)		Paid in Cash (2)				Reinvested in Shares				Total Distributions		Cash Flows from Operating Activities				Borrowings
2019
March 31	$	0.09375	$	8,442	62.8	%	$	4,997	37.2	%	$	13,439	$	5,624	41.8	%	$	7,815	58.2	%	$	5,624
Total	$	0.09375	$	8,442	62.8	%	$	4,997	37.2	%	$	13,439	$	5,624	41.8	%	$	7,815	58.2	%	$	5,624
2018
March 31	$	0.09375	$	8,367	63.6	%	$	4,789	36.4	%	$	13,156	$	9,282	70.6	%	$	3,874	29.4	%	$	9,282
June 30	0.09375		8,358		64.0		4,710		36.0		13,068		13,068		100.0		—		—		28,734
September 30	0.09375		8,331		63.7		4,738		36.3		13,069		13,069		100.0		—		—		14,563
December 31	0.09375		8,382		63.5		4,814		36.5		13,196		13,196		100.0		—		—		14,937
Total	$	0.37500	$	33,438	63.7	%	$	19,051	36.3	%	$	52,489	$	48,615	92.6	%	$	3,874	7.4	%	$	67,516

(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 of: (i) distributions paid to OP Unit holders; (ii) regular distributions made to our former joint venture partners; and (iii) ongoing distribution fees paid to the Dealer Manager with respect to Class T, Class S and Class D shares.

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For the three months ended March 31, 2019 and 2018, our FFO was $16.9 million, or 126.0% of our total distributions, and $11.2 million, or 85.3% 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 to FFO.

Redemptions. Below is a summary of redemptions and repurchases pursuant to our share redemption program for the three months ended March 31, 2019 and 2018. Our board of directors may modify, suspend or terminate 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 Three Months Ended March 31,
(in thousands, except for per share data)	2019			2018
Number of shares requested for redemption or repurchase	2,951			7,315
Number of shares redeemed or repurchased	2,951			7,315
% of shares requested that were redeemed or repurchased	100.0		%	100.0		%
Average redemption or repurchase price per share	$	7.45		$	7.43

We funded these redemptions from borrowings under our revolving line of credit. We generally repay funds borrowed from our revolving line of credit from a variety of sources including: operating cash flows in excess of our distributions, proceeds from our public offerings, proceeds from the disposition of properties, and other longer-term borrowings.

SUBSEQUENT EVENTS

Disposition of Property

On April 16, 2019, we sold to an unrelated third party an office property located in Austin, Texas (“Rialto”) that was classified as held for sale as of March 31, 2019, for gross proceeds of approximately $46.9 million. Our accounting basis (net of accumulated depreciation and amortization) for this real estate property as of the closing date was approximately $33.2 million.

On May 6, 2019, we sold to an unrelated third party an office property located in San Francisco, California (“655 Montgomery”) that was classified as held for sale as of March 31, 2019, for gross proceeds of approximately $191.5 million. In addition, upon closing of this transaction, we prepaid the mortgage note and mezzanine loan that was secured by a pledge of ownership interests in this property. As of the date of closing, the mortgage note and mezzanine loan had an aggregate outstanding principal balance of approximately $98.6 million with a weighted-average variable interest rate of 5.23%. Our accounting basis (net of accumulated depreciation and amortization) for this real estate property as of the closing date was approximately $108.5 million.

Acquisition Under Contract

On May 6, 2019, we entered into a contract to acquire a multi-family property located in Rockville, Maryland with a purchase price of approximately $93.5 million. There can be no assurance that we will complete the acquisition of the property under contract.

CONTRACTUAL OBLIGATIONS

A summary of future obligations as of December 31, 2018 was disclosed in our 2018 Form 10-K. Except as otherwise disclosed in “Note 4 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

As of March 31, 2019, 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.

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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 2018 Form 10-K. As of March 31, 2019, our critical accounting estimates have not changed from those described in our 2018 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are 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 plan to borrow on a fixed interest rate basis for longer-term debt and utilize interest rate swap 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 March 31, 2019, our debt instruments consisted of borrowings under our line of credit, term loans, and mortgage notes.

Fixed Interest Rate Debt. As of March 31, 2019, our fixed interest rate debt consisted of $140.8 million under our mortgage notes, which included a $51.8 million variable-rate mortgage note that we effectively fixed through the use of an interest rate swap until the designated cash flow hedge expires in July 2021; and $350.0 million under our term loans that were effectively fixed through the use of interest rate swaps. In total, our fixed interest rate debt represented 48.9% of our total consolidated debt as of March 31, 2019. 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 March 31, 2019, the fair value and the carrying value of our fixed interest rate debt was $489.7 million and $490.8 million, respectively. The fair value estimate of our fixed interest rate 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 March 31, 2019. 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 March 31, 2019, our consolidated variable interest rate debt consisted of $287.0 million of borrowings under our line of credit and $225.6 million under our mortgage notes (including variable-rate mortgage notes related to assets held for sale), which represented 51.1% of our total consolidated debt. Interest rate changes on our variable-rate debt could impact our future earnings and cash flows, but would not necessarily affect the fair value of such debt. As of March 31, 2019, we were exposed to market risks related to fluctuations in interest rates on $512.6 million of consolidated borrowings. A hypothetical 10% change in the average interest rate on the outstanding balance of our variable interest rate debt as of March 31, 2019, would change our annual interest expense by approximately $1.3 million.

Derivative Instruments. As of March 31, 2019, we had 18 outstanding derivative instruments with a total notional amount of $940.3 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 4 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.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer and Chief 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 March 31, 2019. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2019, 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 months ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

There are no material changes to the risk factors disclosed in our 2018 Form 10-K.

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

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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 (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 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 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 March 31, 2019:

For the Month Ended	Total Number of Shares Redeemed	Average Price Paid per Share		Total Number of Shares Redeemed as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Redeemed Pursuant to the Program (1)
January 31, 2019	955	$	7.52	955	—
February 28, 2019	1,188	7.47		1,188	—
March 31, 2019	808	7.32		808	—
Total	2,951	$	7.45	2,951	—

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

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ITEM 5. OTHER INFORMATION

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

• 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.

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 Inc., Investor Relations, 518 17th Street, Suite 1700, 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	Seventh Amended and Restated Bylaws. Incorporated by reference to Exhibit 3.10 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.
4.1	Fifth Amended and Restated Distribution Reinvestment Plan. Incorporated by reference to Appendix B 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.
4.2	Amended and Restated Share Redemption Program. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on October 13, 2017.
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 4.6 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.
4.5	Multiple Class Plan. Incorporated by reference to Exhibit 4.7 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.
10.1	Second Amended and Restated Advisory Agreement 2018. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 7, 2019.
10.2	Seventh Amended and Restated Operating Partnership Agreement. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on January 7, 2019.
10.3	Eighth Amended and Restated Operating Partnership Agreement. Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-3D (File No. 333-230311), filed with the SEC on March 15, 2019.
10.4	Second Amended and Restated Credit and Term Loan Agreement. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 16, 2019.
10.5	Credit Agreement. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on January 16, 2019.
10.6	Purchase and Sale Contract between DPF 655 Montgomery LP and BCAL 655 Montgomery Property LLC, dated February 8, 2019. Incorporated by reference to Exhibit 10.36 to the Post-Effective Amendment No. 9 to the Registration Statement on Form S-11 (File No. 333-222630), filed with the SEC on April 16, 2019.

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Exhibit Number	Description
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.
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.
101.1	The following materials from Black Creek Diversified Property Fund Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed on May 14, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Loss; (iv) Condensed Consolidated Statements of Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements.

_________________

*    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 INC.
Date: May 14, 2019	By:	/s/ DWIGHT L. MERRIMAN III
		Dwight L. Merriman III Managing Director, Chief Executive Officer (Principal Executive Officer)
Date: May 14, 2019	By:	/s/ LAINIE P. MINNICK
		Lainie P. Minnick Managing Director, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

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