Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Oct. 31, 2018 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | Rich Uncles Real Estate Investment Trust I | |
Entity Central Index Key | 1,672,754 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 8,386,696 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Real estate investments: | ||
Land | $ 29,691,680 | $ 29,896,957 |
Buildings and improvements | 97,617,118 | 97,857,500 |
Tenant origination and absorption costs | 12,706,234 | 12,699,134 |
Total investments in real estate property | 140,015,032 | 140,453,591 |
Accumulated depreciation and amortization | (13,568,927) | (9,286,921) |
Total investments in real estate property, net | 126,446,105 | 131,166,670 |
Cash and cash equivalents | 3,356,286 | 5,565,667 |
Restricted cash | 462,140 | 462,140 |
Tenant receivables, net | 1,749,533 | 1,494,938 |
Above-market lease intangibles, net | 790,692 | 817,182 |
Interest rate swap derivatives | 659,972 | 321,450 |
Other assets | 128,811 | 25,207 |
Total assets | 133,593,539 | 139,853,254 |
Liabilities and Shareholders' Equity | ||
Mortgage notes payable, net | 61,635,433 | 62,277,387 |
Accounts payable, accrued and other liabilities | 1,535,746 | 1,254,632 |
Sales deposit liability (Note 5) | 1,000,000 | 1,000,000 |
Share repurchase payable | 857,001 | 612,099 |
Below-market lease intangibles, net | 3,320,885 | 3,966,008 |
Due to affiliates (Note 9) | 340 | 51,518 |
Interest rate swap derivatives | 0 | 18,998 |
Total liabilities | 68,349,405 | 69,180,642 |
Commitments and contingencies (Note 10) | ||
Redeemable common stock | 153,768 | 586,242 |
Equity | ||
Common stock, par value $0.01 per share, 10,000,000 shares authorized, 8,367,689 and 8,358,254 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | 83,677 | 83,583 |
Additional paid-in-capital | 82,675,538 | 82,350,273 |
Cumulative distributions and net losses | (17,668,849) | (12,347,486) |
Total shareholders' equity | 65,090,366 | 70,086,370 |
Total liabilities and shareholders' equity | $ 133,593,539 | $ 139,853,254 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Common Stock, Shares, Issued | 8,367,689 | 8,358,254 |
Common Stock, Shares, Outstanding | 8,367,689 | 8,358,254 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues: | ||||
Rental income | $ 2,741,108 | $ 2,757,348 | $ 8,222,633 | $ 7,897,962 |
Tenant reimbursements | 552,276 | 541,801 | 1,667,132 | 1,635,404 |
Total revenue | 3,293,384 | 3,299,149 | 9,889,765 | 9,533,366 |
Expenses: | ||||
Fees to affiliates (Note 9) | 271,263 | 234,585 | 856,743 | 590,178 |
General and administrative | 230,299 | 236,179 | 760,559 | 623,962 |
Depreciation and amortization | 1,424,669 | 1,481,521 | 4,282,006 | 4,151,949 |
Interest expense | 714,138 | 733,811 | 1,830,849 | 1,956,754 |
Property expenses | 631,985 | 602,584 | 1,903,165 | 1,616,988 |
Impairment of real estate investment property (Note 4) | 0 | 0 | 862,190 | 0 |
Total expenses | 3,272,354 | 3,288,680 | 10,495,512 | 8,939,831 |
Other income: | ||||
Interest income | 0 | 0 | 0 | 838 |
Gain on sale of real estate investment property, net (Note 6) | 0 | 0 | 0 | 747,957 |
Total other income | 0 | 0 | 0 | 748,795 |
Net income (loss) | $ 21,030 | $ 10,469 | $ (605,747) | $ 1,342,330 |
Net income (loss) per share, basic and diluted | $ 0 | $ 0 | $ (0.07) | $ 0.16 |
Weighted-average number of common shares outstanding, basic and diluted | 8,389,726 | 8,365,137 | 8,403,649 | 8,354,141 |
Dividends declared per common share | $ 0.1875 | $ 0.1875 | $ 0.5625 | $ 0.5625 |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Shareholders' Equity - 9 months ended Sep. 30, 2018 - USD ($) | Total | Common Stock [Member] | Additional Paid -in- Capital [Member] | Cumulative Distributions and Net Losses [Member] |
Balance at Dec. 31, 2017 | $ 70,086,370 | $ 83,583 | $ 82,350,273 | $ (12,347,486) |
Balance (in shares) at Dec. 31, 2017 | 8,358,254 | |||
Issuance of common stock | 3,190,204 | $ 2,995 | 3,187,209 | 0 |
Issuance of common stock (in shares) | 299,568 | |||
Stock compensation expense | 137,514 | $ 129 | 137,385 | 0 |
Stock compensation expense (in shares) | 12,900 | |||
Reclassifications from redeemable common stock | 187,572 | $ 0 | 187,572 | 0 |
Repurchase of common stock | (3,189,931) | $ (3,030) | (3,186,901) | 0 |
Repurchase of common stock (in shares) | (303,033) | |||
Dividends declared | (4,715,616) | $ 0 | 0 | (4,715,616) |
Net loss | (605,747) | 0 | 0 | (605,747) |
Balance at Sep. 30, 2018 | $ 65,090,366 | $ 83,677 | $ 82,675,538 | $ (17,668,849) |
Balance (in shares) at Sep. 30, 2018 | 8,367,689 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash Flows from Operating Activities: | ||
Net (loss) income | $ (605,747) | $ 1,342,330 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation and amortization | 4,282,006 | 4,151,949 |
Provision for doubtful accounts | 64,944 | 0 |
Stock compensation expense | 137,514 | 106,000 |
Deferred rents | (257,731) | (488,560) |
Amortization of deferred financing costs | 259,344 | 224,383 |
Amortization of above-market leases | 26,490 | 23,096 |
Amortization of below-market leases | (645,123) | (657,010) |
Impairment of real estate investment property | 862,190 | 0 |
Gain on sale of real estate investment, net | 0 | (747,957) |
Unrealized gain on interest rate swap valuation | (357,520) | (47,278) |
Expensed organization and offering costs | 0 | 98,349 |
Changes in operating assets and liabilities: | ||
Tenant receivables | (61,808) | (368,834) |
Other assets | (93,604) | (14,904) |
Accounts payable, accrued and other liabilities | 281,114 | 763,820 |
Due to affiliates | 44,434 | (476,286) |
Net cash provided by operating activities | 3,936,503 | 3,909,098 |
Cash Flows from Investing Activities: | ||
Acquisitions of real estate investments | 0 | (30,699,222) |
Additions to existing real estate investments | (423,631) | (1,501,764) |
Payment of acquisition fees and costs | 0 | (622,319) |
Payment of seller holdback | 0 | (250,000) |
Refundable purchase deposits | 0 | (250,000) |
Net proceeds from sale of real estate investment property | 0 | 3,196,480 |
Net cash used in investing activities | (423,631) | (30,126,825) |
Cash Flows from Financing Activities: | ||
Proceeds from mortgage notes payable | 0 | 24,865,612 |
Repayments of mortgage notes payable | (901,298) | (788,348) |
Refundable loan deposits | (10,000) | (85,380) |
Payments of deferred financing costs to third parties | 0 | (558,723) |
Payment of offering costs to affiliates | (95,612) | (110,948) |
Repurchase of common stock | (3,189,931) | (2,620,429) |
Dividends paid to common shareholders | (1,525,412) | (1,398,742) |
Net cash (used in) provided by financing activities | (5,722,253) | 19,303,042 |
Net decrease in cash, cash equivalents and restricted cash | (2,209,381) | (6,914,685) |
Cash, cash equivalents and restricted cash, beginning of period | 6,027,807 | 13,465,152 |
Cash, cash equivalents and restricted cash, end of period | 3,818,426 | 6,550,467 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid for interest | 1,870,216 | 1,661,822 |
Supplemental Schedule of Noncash Investing and Financing Activities: | ||
Reclassifications (from) to redeemable common stock | (187,572) | 277,083 |
Increase in share redemptions payable | 244,902 | 360,778 |
Reinvested dividends from common shareholders | 3,190,204 | 3,278,324 |
Purchase deposits applied to acquisition of real estate | 0 | 1,500,000 |
Security deposits assumed and prorations from acquisitions | $ 0 | $ 107,029 |
BUSINESS AND ORGANIZATION
BUSINESS AND ORGANIZATION | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Business Description and Basis of Presentation [Text Block] | NOTE 1. BUSINESS AND ORGANIZATION Rich Uncles Real Estate Investment Trust I (the “Company”) was formed on March 7, 2012. The Company is an unincorporated real estate investment trust (“REIT’) under the laws of the State of California. The Company elected to be taxed as a REIT for U.S. federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, beginning with the year ended December 31, 2014. The Company was formed primarily to invest in single-tenant income-producing corporate properties located in California and that are leased to creditworthy tenants under long-term net leases, however, the Company may invest up to 20% of the net proceeds of its offering in properties located outside of California. The Company’s goal is to generate current income for investors and long-term capital appreciation in the value of its properties. The Company holds its investments directly and/or through special purpose wholly-owned limited liability companies or other subsidiaries. The Company holds a 70.14% interest in one property subject to a tenancy-in-common agreement. The Company is externally managed by its advisor and sponsor, BrixInvest, LLC, formerly Rich Uncles LLC (the “Advisor” or the “Sponsor”) whose members include Harold Hofer and Ray Wirta, the Company’s Chief Executive Officer and President and Chairman of the Board of Trust Managers, respectively. The Advisor is a Delaware limited liability company registered to do business in California. The Company has entered into an agreement (the “Advisory Agreement”) with the Advisor. The current term of the Advisory Agreement is scheduled to expire on May 10, 2019. The Advisory Agreement may be renewed for an unlimited number of successive one-year periods upon the mutual consent of the Company and the Advisor. The Advisory Agreement is terminable by a majority of the Company’s independent trust managers or the Advisor on 60 days’ written notice with or without cause. Upon termination of the Advisory Agreement, the Advisor may be entitled to a termination fee. On January 18, 2018, the Company’s board of trust managers approved and established an estimated net asset value (“NAV”) per share of the Company’s common stock of $10.66. Effective January 19, 2018, the purchase price per share of the Company’s common stock in the Company’s dividend reinvestment plan and share repurchase plan increased from $10.00 to $10.66. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies [Text Block] | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, which is responsible for their integrity and objectivity. These unaudited condensed consolidated financial statements should be read in conjunction with the December 31, 2017 audited consolidated financial statements included in the Company’s Form 10-K filed with the SEC on April 2, 2018. The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which are normal and recurring, necessary to fairly state its financial position, results of operations and cash flows. All significant intercompany balances and transactions are eliminated in consolidation. The December 31, 2017 condensed consolidated balance sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements. Use of Estimates The preparation of the condensed consolidated financial statements and accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates. Fair Value Disclosures The fair value for certain financial instruments is derived using a combination of market quotes, pricing models, and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instrument for which it is practicable to estimate the fair value: Cash and cash equivalents, restricted cash, tenant receivables, other assets, accounts payable, accrued and other liabilities, sales deposit liability, share repurchase payable and due to affiliates: These balances approximate their fair values due to the short nature of these items. Derivative Instruments : The Company’s derivative instruments are presented at fair value in the accompanying consolidated balance sheets. The valuation of these instruments is determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair value of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit risks to the contracts, are incorporated in the fair values to account for potential nonperformance risk. Mortgage Notes Payable: The fair value of the Company’s mortgage notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs. Restricted Cash Restricted cash is comprised of funds which are restricted for tenant improvements . Other Comprehensive Income (Loss) For all periods presented, other comprehensive income (loss) is the same as net income (loss). Per Share Data Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share of common stock equals basic earnings per share of common stock as there were no potentially dilutive securities outstanding during the three and nine months ended September 30, 2018 and 2017. Impairment of Investment in Real Estate Property The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of real estate assets may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of real estate assets may not be recoverable, management assesses whether the carrying value of the assets will be recovered through the future undiscounted operating cash flows expected from the use of and eventual disposition of the property. If, based on the analysis, the Company does not believe that it will be able to recover the carrying value of the asset, the Company will record an impairment charge to the extent the carrying value exceeds the estimated fair value of the asset. As more fully discussed in Note 4, the Company recorded an impairment charge of $862,190 related to its Antioch, California property during the second quarter of 2018. The impairment charge was less than 1% of the Company’s investments in real estate property as of June 30, 2018, the date of impairment. Reclassifications Certain prior year revenue account balances in the statement of operations have been reclassified to conform with the current year presentation. The reclassifications had no impact on net income. Recent Accounting Pronouncements New Accounting Standards Issued and Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09, as amended, requires an entity to use a five-step model to determine when to recognize revenue from customer contracts in an effort to increase consistency and comparability throughout global capital markets and across industries. ASU 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry specific guidance throughout the Industry Topics of the Codification. This ASU requires an entity to recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and to provide certain additional disclosures. The Company has evaluated each of its revenue streams and their related accounting policies under ASU 2014-09. Rental income and tenant reimbursements earned from leasing its real estate properties are excluded from ASU 2014-09 and are assessed with the adoption of the ASU for leases as discussed below. The Company adopted ASU 2014-09 beginning January 1, 2018 and utilized the modified retrospective basis. The adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements. However, future real estate sales contracts will qualify as sales to noncustomers. The Company will assess and implement any future recognition of gain or loss on sales of properties according to the provisions of ASU 2014-09. New Accounting Standards Recently Issued and Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The amendments in ASU 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. Under ASU 2016-02, the accounting applied by a lessor is largely unchanged from that applied under Topic 840 leases. The large majority of operating leases shall remain classified as operating leases and lessors should continue to recognize rental income for those leases on a straight-line basis over the lease term. ASU 2016-02 may impact the timing, recognition, presentation and disclosures related to the Company’s tenant reimbursements earned from leasing its real estate properties, although the Company does not expect a significant impact. ASU 2016-02 is effective for the Company on January 1, 2019. The Company expects to adopt the practical expedients available for implementation under ASU 2016-02. By adopting the practical expedients, the Company will not be required to reassess (i) whether an expired or existing contract meets the definition of a lease and (ii) the lease classification at the adoption date for expired or existing leases. ASU 2016-02 will also require new disclosures within the notes to its consolidated financial statements. The Company does not expect the adoption of ASU 2016-02 will have a material impact on the Company’s consolidated financial position, results of operations or cash flows. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements (“ASU No. 2018-11”). ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met. Upon adoption of the lease accounting standard under Topic 842, the Company expects to adopt this practical expedient, specifically related to its tenant reimbursements which would otherwise be accounted for under the new revenue recognition standard. The Company believes the two conditions have been met for tenant reimbursements as 1) the timing and pattern of transfer of the nonlease components and associated lease components are the same and 2) the lease component would be classified as an operating lease. In addition, ASU No. 2018-11 provides an additional optional transition method to allow entities to apply the new lease accounting standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. An entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease accounting standard will continue to be reported under the current lease accounting standards of Topic 840. The Company expects to adopt this transition method upon adoption of the lease accounting standard of Topic 842 on January 1, 2019. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement (“ASU No. 2018-13”). ASU No. 2018-13 removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation processes for Level 3 fair value measurements. It also adds a requirement to disclose changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and to disclose the range and weighted average of significant unobservable inputs used to develop recurring and nonrecurring Level 3 fair value measurements. For certain unobservable inputs, entities may disclose other quantitative information in lieu of the weighted average if the other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop the Level 3 fair value measurement. In addition, public entities are required to provide information about the measurement uncertainty of recurring Level 3 fair value measurements from the use of significant unobservable inputs if those inputs reasonably could have been different at the reporting date. ASU 2016-02 is effective for the Company beginning January 1, 2020. Entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company is still evaluating the impact of adopting ASU No. 2018-13 on its financial statements. |
CONDENSED CONSOLIDATED BALANC_3
CONDENSED CONSOLIDATED BALANCE SHEETS DETAILS | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Supplemental Balance Sheet Disclosures [Text Block] | NOTE 3. CONDENSED CONSOLIDATED BALANCE SHEETS DETAILS Tenant Receivables, Net Tenant receivables, net consisted of the following: September 30, 2018 December 31, 2017 Straight-line rent $ 1,339,811 $ 1,082,080 Tenant rent 128,671 301,588 Unbilled tenant reimbursements 281,051 93,420 Other — 76,178 1,749,533 1,553,266 Less allowance for doubtful accounts — (58,328 ) Net $ 1,749,533 $ 1,494,938 Accounts Payable, Accrued and Other Liabilities Accounts payable, accrued and other liabilities were comprised of the following: September 30, 2018 December 31, 2017 Accounts payable $ 39,845 $ 45,029 Accrued expenses 586,233 205,774 Accrued interest payable 240,039 215,700 Unearned rent 399,523 518,023 Tenant security deposits 270,106 270,106 Total $ 1,535,746 $ 1,254,632 |
REAL ESTATE INVESTMENTS
REAL ESTATE INVESTMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Real Estate [Abstract] | |
Real Estate Disclosure [Text Block] | NOTE 4. REAL ESTATE INVESTMENTS The following table provides summary information regarding the Company’s 21 real estate investments as of September 30, 2018: Property Location Acquisition Date Property Type Land, Building and Improvements Tenant Origination and Absorption Costs Accumulated Depreciation and Amortization Total Real Estate Investments, Net Chase Bank and Great Clips (1) Antioch, CA 8/22/2014 Retail $ 2,297,845 $ 668,201 $ (1,108,473 ) $ 1,857,573 Chevron Gas Station San Jose, CA 5/29/2015 Retail 2,775,000 — (130,824 ) 2,644,176 Levins Sacramento, CA 8/19/2015 Industrial 3,750,000 7,100 (665,913 ) 3,091,187 Chevron Gas Station (see Note 5) Roseville, CA 9/30/2015 Retail 2,800,000 — (290,678 ) 2,509,322 Island Pacific Supermarket Elk Grove, CA 10/1/2015 Retail 3,151,460 568,539 (494,017 ) 3,225,982 Dollar General Bakersfield, CA 11/11/2015 Retail 4,632,567 689,020 (552,114 ) 4,769,473 Rite Aid Lake Elsinore, CA 12/7/2015 Retail 6,663,446 968,285 (666,016 ) 6,965,715 PMI Preclinical San Carlos, CA 12/9/2015 Industrial 8,920,000 — (573,974 ) 8,346,026 EcoThrift Sacramento, CA 3/17/2016 Retail 4,486,993 541,729 (615,607 ) 4,413,115 GSA (MSHA) Vacaville, CA 4/5/2016 Office 2,998,232 456,645 (355,136 ) 3,099,741 PreK San Antonio San Antonio, TX 4/8/2016 Retail 11,851,540 1,593,451 (2,244,741 ) 11,200,250 Dollar Tree Morrow, GA 4/22/2016 Retail 1,295,879 206,844 (228,465 ) 1,274,258 Dinan Cars Morgan Hill, CA 6/21/2016 Industrial 4,651,845 654,155 (871,358 ) 4,434,642 Solar Turbines San Diego, CA 7/21/2016 Office 5,738,978 389,718 (423,988 ) 5,704,708 Amec Foster San Diego, CA 7/21/2016 Industrial 7,010,799 485,533 (515,975 ) 6,980,357 ITW Rippey El Dorado, CA 8/18/2016 Industrial 6,178,204 407,316 (626,369 ) 5,959,151 Dollar General Big Spring Big Spring, TX 11/4/2016 Retail 1,161,647 112,958 (56,951 ) 1,217,654 Gap Rocklin, CA 12/1/2016 Office 7,220,909 677,192 (572,677 ) 7,325,424 L-3 Communications San Diego, CA 12/23/2016 Industrial 10,799,500 961,107 (639,846 ) 11,120,761 Sutter Health Rancho Cordova, CA 3/15/2017 Office 24,256,632 2,870,258 (1,786,564 ) 25,340,326 Walgreens Santa Maria, CA 6/29/2017 Retail 4,667,322 448,183 (149,241 ) 4,966,264 $ 127,308,798 $ 12,706,234 $ (13,568,927 ) $ 126,446,105 (1) See following impairment charge discussion. Impairment Charge During the second quarter of 2018, the Company learned that it was unlikely that a single tenant would be interested in leasing the 5,660 square feet of space at the Antioch, California property that was previously leased by Chase Bank. While the Company had received expressions of interest from potential tenants, they were all interested in smaller spaces at lower rental rates which would have required the Company to invest in substantial tenant improvements to subdivide the space. The Company’s special purpose subsidiary that owns this property notified the lender on July 13, 2018 that it is unwilling to make such additional improvements in the Antioch, California property unless it could restructure the existing mortgage which matures in February 2019, or payoff the mortgage at a discount, as discussed in Note 7. Having not reached any agreement with the lender when the August 2018 mortgage payment came due, the Company’s special purpose subsidiary notified the lender on August 9, 2018 that it was defaulting on the mortgage loan which had a balance of $1,869,536 as of June 30, 2018, and that it intended to surrender the property to the lender unless an acceptable agreement could be reached. The book value of the Antioch property after the impairment charge is less than 2.0% of the Company’s total investments in real estate property. Given the decline in expected rental rates for the Antioch, California property, the Company concluded that it was necessary to record an impairment charge of $862,190 as of June 30, 2018, which is less than 1% of the Company’s total investments in real estate property, based on the estimated fair value of the real estate which approximated the then outstanding balance of the existing mortgage loan. This impairment charge is reflected in the Company’s results of operations for the nine months ended September 30, 2018. Notice of Default On September 28, 2018, the Company received a notice of default and election to sell under deed of trust (the “Notice”) dated September 19, 2018 for the Antioch, California property from an agent for the lender. The Notice was filed for recording in the Office of the Recorder of Contra Costa County, California on September 24, 2018. While the Company was given a 90-day cure period from the date of record before a sale date of the Antioch, California property may be set, the Company does not plan to cure the default. The loan in default is non-recourse to the Company (except for property taxes, insurance and the lender’s legal fees and other costs incurred prior to the date of foreclosure) and, while eight of the Company’s other special purpose property owner subsidiaries have mortgage loans with this lender, none of those loans are cross-collateralized with the Antioch property loan and the Company’s special purpose subsidiary’s default on that loan does not cross-default any of these other loans. The Company is continuing to accrue default interest, penalties as well as property taxes, insurance and the lender’s legal fees and costs. Current Year Acquisitions or Dispositions There were no acquisitions or dispositions during the nine months ended September 30, 2018. Operating Leases The Company’s real estate properties are primarily leased to tenants under triple-net leases for which terms and expirations vary. The Company monitors the credit of all tenants to stay abreast of any material changes in credit quality. The Company monitors tenant credit by (1) reviewing the credit ratings of tenants (or their parent companies or lease guarantors) that are rated by national recognized rating agencies; (2) reviewing financial statements and related metrics and information that are publicly available or that are required to be provided pursuant to the lease; (3) monitoring new reports and press releases regarding the tenants (or their parent companies or lease guarantors), and their underlying business and industry; and (4) monitoring the timeliness of rent collections. As of September 30, 2018, the future minimum contractual rental income due under the Company’s non-cancelable operating leases, excluding any renewal periods, are as follows: October through December 2018 $ 2,472,538 2019 10,008,899 2020 10,197,455 2021 9,220,308 2022 7,674,625 2023 5,884,134 Thereafter 27,901,568 $ 73,359,527 Revenue Concentration The Company’s revenue concentration based on tenants representing greater than 10% of total revenues for the three and nine months ended September 30, 2018 is as follows: Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Property and Location Revenue Percentage of Total Revenue Revenue Percentage of Total Revenue Sutter Health, Rancho Cordova, CA $ 663,998 20.2 % $ 2,039,643 20.6 % ITW Rippey, El Dorado, CA $ 517,309 15.7 % $ 1,508,718 15.3 % PreK San Antonio, San Antonio, TX $ 386,681 11.7 % $ 1,242,782 12.6 % Asset Concentration The Company’s portfolio’s asset concentration (greater than 10% of total assets) for the fiscal period September 30, 2018 was as follows: Property and Location Net Carrying Value Percentage of Total Assets Sutter Health, Rancho Cordova, CA $ 1,920,911 19.0 % Intangibles As of September 30, 2018, the Company’s intangibles were as follows: Tenant Origination and Absorption Costs Above-Market Leases Below-Market Leases Cost $ 12,706,234 $ 872,408 $ (5,349,909 ) Accumulated amortization (4,019,601 ) (81,716 ) 2,029,024 Net amount $ 8,686,633 $ 790,692 $ (3,320,885 ) The intangible assets and liabilities acquired in connection with these acquisitions have a weighted average amortization period of approximately 9.2 years as of September 30, 2018. Amortization of intangible assets over the next five years is expected to be as follows: Tenant Origination and Absorption Costs Above-Market Leases Below-Market Leases October through December 2018 $ 384,423 $ 8,830 $ (215,041 ) 2019 1,537,689 35,320 (860,165 ) 2020 1,537,689 35,320 (860,165 ) 2021 1,290,572 35,320 (667,541 ) 2022 1,067,822 35,320 (201,982 ) 2023 683,378 35,320 (113,651 ) Thereafter 2,185,060 605,262 (402,340 ) Total $ 8,686,633 $ 790,692 $ (3,320,885 ) Weighted average remaining amortization period 7.7 years 35.3 years 4.9 years |
SALE OF INTEREST IN REAL ESTATE
SALE OF INTEREST IN REAL ESTATE INVESTMENT PROPERTY | 9 Months Ended |
Sep. 30, 2018 | |
Real Estate [Abstract] | |
Disposal Of Interest In Real Estate Property [Text Block] | NOTE 5. SALE OF INTEREST IN REAL ESTATE INVESTMENT PROPERTY In March 2016, the Company entered into a tenancy-in-common agreement related to and sold an undivided 29.86% interest in the Chevron Gas Station located in Roseville, CA for $1,000,000. The purchaser has the right to require the Company to repurchase their interest in the property during the period from March 1, 2018 through March 1, 2019. Therefore, the sale does not qualify for sales recognition under ASC 360 for financial reporting purposes and the transaction is accounted for as a financing transaction. The proceeds received from the purchaser were recorded as a sales deposit liability and the payments to the purchaser for their share of the property’s operations were recorded as interest expense. As of September 30, 2018 and December 31, 2017, sales deposit liability amounted to $1,000,000 at both balance sheet dates. The interest expense recorded as a result of this transaction was $13,751 for each of the three months ended September 30, 2018 and 2017 and $41,252 for each of the nine months ended September 30, 2018 and 2017 (see Note 7). The sale will qualify as a sale for financial reporting if the right to require the Company to repurchase the 29.86% interest in the property expires on March 1, 2019 without being exercised. |
SALE OF REAL ESTATE INVESTMENT
SALE OF REAL ESTATE INVESTMENT PROPERTY | 9 Months Ended |
Sep. 30, 2018 | |
Real Estate [Abstract] | |
Disposal Of Real Estate Investment Property [Text Block] | NOTE 6. SALE OF REAL ESTATE INVESTMENT PROPERTY On April 27, 2017, the Company sold the Chevron Gas Station property in Rancho Cordova, CA to a third party for $3,434,000 which was paid in cash. The sale resulted in a gain of $747,957 for financial reporting purposes, which was net of the $103,020 disposition fee the Advisor earned in connection with this transaction (see Note 9). The Company entered into a 1031 exchange to defer the taxable gain of approximately $900,000 on the transaction. The 1031 exchange was completed when the Company purchased the Walgreens property on June 29, 2017. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt Disclosure [Text Block] | NOTE 7. DEBT Mortgage Notes Payable As of September 30, 2018, the Company’s mortgage notes payable consisted of the following: Collateral Principal Amount Deferred Financing Costs Net Balance Contractual Interest Rate (1) Effective Interest Rate (1) Loan Maturity Chase Bank and Great Clips $ 1,866,364 $ (13,414 ) $ 1,852,950 4.37% fixed 4.37 % 2/5/2019 Levins 2,136,966 (27,157 ) 2,109,809 One-month LIBOR + 1.93% 3.74 % 1/5/2021 Island Pacific Supermarket 1,943,215 (28,862 ) 1,914,353 One-month LIBOR + 1.93% 3.74 % 1/5/2021 Dollar General 2,391,318 (44,634 ) 2,346,684 One-month LIBOR + 1.48% 3.38 % 3/5/2021 Rite Aid 3,765,956 (84,221 ) 3,681,735 One-month LIBOR + 1.50% 3.25 % 5/5/2021 PMI Preclinical 4,237,297 (102,455 ) 4,134,842 One-month LIBOR + 1.48% 3.38 % 3/5/2021 EcoThrift 2,718,997 (68,265 ) 2,650,732 One-month LIBOR + 1.21% 2.96 % 7/5/2021 GSA (MSHA) 1,850,062 (52,917 ) 1,797,145 One-month LIBOR + 1.25% 3.00 % 8/5/2021 PreK San Antonio 5,263,315 (131,579 ) 5,131,736 4.25% fixed 4.25 % 12/1/2021 Dinan Cars 2,778,198 (65,353 ) 2,712,845 One-month LIBOR + 2.27% 4.02 % 1/5/2022 Solar Turbines, Amec Foster, ITW Rippey 9,700,694 (238,380 ) 9,462,314 3.35% fixed 3.35 % 11/1/2026 Dollar General Big Spring 624,262 (24,252 ) 600,010 4.69% fixed 4.69 % 3/13/2022 Gap 3,732,019 (86,667 ) 3,645,352 4.15% fixed 4.15 % 8/1/2023 L-3 Communications 5,403,380 (111,786 ) 5,291,594 4.50% fixed 4.50 % 4/1/2022 Sutter Health 14,486,336 (183,004 ) 14,303,332 4.50% fixed 4.50 % 3/9/2024 Total $ 62,898,379 $ (1,262,946 ) $ 61,635,433 (1) Contractual interest rate represents the interest rate in effect under the mortgage notes payable as of September 30, 2018. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2018 (consisting of the contractual interest rate and the effect of the interest rate swap, if applicable) (see Note 8 for information regarding the Company’s derivative instruments). On August 3, 2018, the Company’s independent trust managers and the board of trust managers approved an increase in the Company’s maximum leverage ratio from 45% to 50%. Factors considered in approving the increase in the leverage ratio included the moderate level of 50% leverage, current economic and market conditions, the relative cost of debt and equity capital, the ability of our properties to generate sufficient cash flow to cover debt service requirements and other similar factors. The mortgage notes payable provide for monthly payments of principal and interest. The mortgage loans payable have balloon payments that are due at loan maturity. Pursuant to the terms of the mortgage notes payable agreements, the Company is subject to certain financial loan covenants. The Company is in compliance with all terms and conditions of the mortgage loan agreements, with the exception of the Chase Bank and Great Clips loan (Antioch, California) for which the Company did not make the August 5, 2018 or subsequent mortgage payments. As discussed in Note 4, during the second quarter of 2018, the Company recorded an impairment charge of $862,190 related to its investment in the property in Antioch, California due to the expiration of the Chase Bank lease term at December 31, 2017 and subsequent difficulties encountered by the Company during the second quarter in its efforts to re-lease the property at acceptable rent rates and without incurring substantial potential tenant improvement costs. The book value of the Antioch property after the impairment charge is less than 2.0% of the Company’s total investments in real estate property. On July 13, 2018, the Company’s special purpose subsidiary that owns the Antioch, California property initiated discussions with the mortgage lender regarding the potential restructuring of the mortgage loan on the property which had a balance of $1,869,536 as of June 30, 2018 and matures on February 5, 2019, or the potential to repay the loan at a discount. Given that potential rent rates for prospective tenants of the property are significantly less than the rent previously received from Chase Bank and the significant investment in tenant improvements that would be required to attract new tenants, the Company’s special purpose subsidiary informed the lender that it would need to reach an agreement to either pay the loan off at a significant discount or restructure the loan with terms that would be economically viable to the Company’s special purpose subsidiary under current market conditions. Since no agreement had been reached on how to restructure this loan on August 9, 2018, the Company’s special purpose subsidiary that owns the Antioch property notified the lender that it had defaulted on the mortgage loan and intends to surrender the property to the lender. The loan in default is non-recourse to the Company (except for property taxes, insurance and the lender’s legal fees and other costs incurred prior to the date of foreclosure) and, while eight of the Company’s other special purpose property owner subsidiaries have mortgage loans with this lender, none of those loans are cross-collateralized with the Antioch property loan and the Company’s special purpose subsidiary’s default on that loan does not cross-default any of these other loans. On September 28, 2018, the Company received a notice of default and election to sell under deed of trust dated September 19, 2018 for the Antioch, California property from an agent for the lender. The Notice was filed for recording in the Office of the Recorder of Contra Costa County, California on September 24, 2018. While the Company was given a 90-day cure period from the date of record before a sale date of the Antioch, California property may be set , the Company does not plan to cure the default . The following were the face value, carrying amount and fair value of the Company’s mortgage notes payable (Level 3 measurement): September 30, 2018 December 31, 2017 Face value Carrying value Fair value Face Value Carrying Value Fair Value $ 62,898,379 $ 61,635,433 $ 60,716,753 $ 63,799,678 $ 62,277,387 $ 62,258,532 Disclosures of the fair values of financial instruments are based on pertinent information available to the Company as of September 30, 2018 and December 31, 2017 and require a significant amount of judgment. Low levels of transaction volume for certain financial instruments have made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different. The actual value could be materially different from the Company’s estimate of value. The following summarizes the future principal payments on the Company’s mortgage notes payable as of September 30, 2018: October through December 2018 (1) $ 2,170,408 2019 1,241,696 2020 1,286,396 2021 23,878,964 2022 8,888,653 2023 3,965,722 Thereafter 21,466,540 Total principal $ 62,898,379 (1) Reflects the acceleration of Chase Bank and Great Clips loan given the default described above. Interest Expense The following is a reconciliation of the components of interest expense for the three and nine months ended September 30, 2018 and 2017: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Mortgage notes payable Interest expense incurred (1) $ 654,087 $ 662,835 $ 1,887,773 $ 1,738,397 Amortization of deferred financing costs 86,448 78,607 259,344 224,383 Unrealized gain on interest rate swaps (see Note 8) (40,149 ) (21,382 ) (357,520 ) (47,278 ) Sales deposit liability (see Note 5) 13,751 13,751 41,252 41,252 Total interest expense $ 714,137 $ 733,811 $ 1,830,849 $ 1,956,754 (1) For the three months ended September 30, 2018 and 2017, interest expense included $(24,762) and $24,899 of monthly (reductions) payments to settle the Company’s interest rate swaps and $(30,557) and $108,293 for the nine months ended September 30, 2018 and 2017, respectively. Accrued interest receivable (payable) includes $7,793 and $(3,913) at September 30, 2018 and December 31, 2017, respectively, representing the unsettled portion of the interest rate swap valuation from the most recent settlement date through September 30, 2018 and December 31, 2017, respectively. |
INTEREST RATE SWAP DERIVATIVES
INTEREST RATE SWAP DERIVATIVES | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | NOTE 8. INTEREST RATE SWAP DERIVATIVES The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes. The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate mortgage notes payable. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero. The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of September 30, 2018 and December 31, 2017. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks: September 30, 2018 December 31, 2017 Derivative Instruments Number of Instru- ments Notional Amount (1) Reference Rate Weighted Average Fixed pay rate Weighted Average Remaining Term Number of Instru- ments Notional Amount (1) Reference Rate Weighted Average Fixed pay rate Weighted Average Remaining Term Interest Rate Swap Derivatives 8 $ 21,822,008 One-month LIBOR/Fixed at 1.21%-2.28% 3.42 % 2.60 years 8 $ 22,170,310 One-month LIBOR/Fixed at 1.21%-2.28% 3.42 % 3.35 years (1) The notional amount of the Company’s swaps decreases each month to correspond to the outstanding principal balance on the related mortgage. The maximum notional amount is shown above. The minimum notional amount (outstanding principal balance at the maturity date) is $20,546,330 as of September 30, 2018. The following table sets forth the fair value of the Company’s derivative instruments (Level 2 measurement), as well as their classification in the consolidated balance sheets: September 30, 2018 December 31, 2017 Derivative Instrument Balance Sheet Location Number of Instruments Fair Value Number of Instruments Fair Value Interest Rate Swaps Asset - Interest rate swap derivatives, at fair value 8 $ 659,972 7 $ 321,450 Interest Rate Swaps Liability – Interest rate swap derivatives, at fair value — $ — 1 $ (18,998 ) The change in fair value of a derivative instrument that is not designated as a cash flow hedge for financial accounting purposes is recorded as interest expense in the condensed consolidated statements of operations. None of the Company’s derivatives at September 30, 2018 nor December 31, 2017 were designated as hedging instruments, therefore the net unrealized (gain) loss recognized on interest rate swaps of $(40,149) and $(21,382) was recorded as a (decrease) increase in interest expense for the three months ended September 30, 2018 and 2017, respectively, and $(357,520) and $(47,278) was recorded as a decrease in interest expense for the nine months ended September 30, 2018 and 2017, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions Disclosure [Text Block] | NOTE 9. RELATED PARTY TRANSACTIONS The costs incurred by the Company pursuant to the Advisory Agreement for the three and nine months ended September 30, 2018 and 2017, as well as the related amounts of payable or receivable as of September 30, 2018 and December 31, 2017 are included in the table below. The amounts payable or receivable are presented in the unaudited condensed consolidated balance sheets as “Due to Affiliates” and “Due from Affiliates.” Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 2018 September 30, 2018 September 30, 2017 December 31,2017 Incurred Incurred Receivable Payable Incurred Incurred Receivable Payable Expensed: Asset management fees $ 203,763 $ 607,728 $ — $ — $ 199,724 $ 555,317 $ — $ 3,513 Other operating expense reimbursement — — — — — — — 47,948 Reimbursable operating expense 67,500 249,015 — — 34,861 34,861 — — Fees to affiliates 271,263 856,743 — — 234,585 590,178 — — Property management fees* 25,763 74,670 — 340 24,776 67,419 — — Disposition fees** — — — — — 103,020 — — Reimbursable organizational and offering expenses 31,847 95,612 — — 33,108 98,349 — 57 Capitalized: Acquisition fees — — — — 28,956 671,270 — — Financing coordination fees — — — — — 100,156 — — Other: Due to (from) advisor for costs advanced 18,413 67,079 — — 17,269 17,269 — — $ — $ 340 $ — $ 51,518 * Property management fees are included in “property expenses” in the accompanying condensed consolidated statements of operations. ** Disposition fees for the nine months ended September 30, 2017 are presented as a reduction of gain on sale of real estate investment property (see Note 6). Organizational and Offering Expenses During the Company’s offering of its common stock which was terminated in July 2016, the Company was obligated to reimburse the Advisor or its affiliates for organizational and offering expenses paid by the Advisor on behalf of the Company. The Company reimburses the Advisor for organizational and offering expenses up to 3.0% of gross offering proceeds. As of September 30, 2018, the Advisor had incurred organizational and offering expenses of $2,796,198, which amount was in excess of 3.0% of the gross offering proceeds received by the Company as of September 30, 2018. Subsequently, the Company received additional gross offering proceeds pursuant to its dividend reinvestment plan (the “Plan”), and the Company reimbursed the Advisor for these excess organization and offering expenses. Through September 30, 2018 and December 31, 2017, the Company has reimbursed the Advisor $2,783,019 and $2,687,407, respectively, for organizational and offering expenses. The Company’s maximum liability for organizational and offering costs through September 30, 2018 and December 31, 2017 was $2,783,019 and $2,687,350, respectively, of which $0 and $57 remained payable at September 30, 2018 and December 31, 2017, respectively. The Company reimbursed the Advisor for the final $13,179 subsequent to September 30, 2018, in connection with share sales pursuant to the Plan. Acquisition Fees The Company pays the Advisor an acquisition fee in an amount equal 3.0% of Company’s contract purchase price of its properties. The total of all acquisition fees and acquisition costs must be reasonable and not exceed 6.0% of the contract price of the properties. However, a majority of the trust managers (including a majority of the independent trust managers) not otherwise interested in an acquisition transaction may approve fees in excess of these limits if they determine the transaction to be commercially competitive, fair and reasonable to the Company. Asset Management Fee The Company pays the Advisor as compensation for the advisory services rendered, a monthly fee in an amount equal to 0.05% of the Company’s Average Invested Assets, as defined (the “Asset Management Fee”), as of the end of the preceding month. The Asset Management Fee is payable monthly on the last business day of such month. The Asset Management Fee, which must be reasonable in the determination of the Company’s independent trust managers at least annually, may or may not be taken, in whole or in part as to any year, in the sole discretion of the Advisor. All or any portion of the Asset Management Fee not paid as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine. Financing Coordination Fee Other than with respect to any mortgage or other financing related to a property that is concurrent with its acquisition, if the Advisor or an affiliate provides a substantial amount of the services (as determined by a majority of the Company’s independent trust managers) in connection with the post-acquisition financing or refinancing of any debt that the Company obtains relative to a property, then the Company will pay to the Advisor or such affiliate a financing coordination fee equal to 1.0% of the amount of such financing. Property Management Fees If the Advisor or any of its affiliates provides a substantial amount of the property management services (as determined by a majority of the Company’s independent trust managers) for the Company’s properties, then the Company pays the Advisor or such affiliate a property management fee equal to 1.5% of gross revenues from the properties managed. The Company also will reimburse the Advisor and any of its affiliates for property-level expenses that such person pays or incurs on behalf of the Company, including salaries, bonuses and benefits of persons employed by such person, except for the salaries, bonuses and benefits of persons who also serve as one of the Company’s executive officers or as an executive officer of such person. The Advisor or its affiliate may subcontract the performance of its property management duties to third parties and pay all or a portion of its property management fee to the third parties with whom it contracts for these services. Disposition Fees For substantial assistance in connection with the sale of properties, the Company pays the Advisor or one of its affiliates 3.0% of the contract sales price, as defined, of each property sold; provided, however, that if, in connection with such disposition, commissions are paid to third parties unaffiliated with the Company’s Advisor or its affiliates, the disposition fees paid to its Advisor, its affiliates and unaffiliated third parties may not exceed the lesser of the competitive real estate commission or 6% of the contract sales price. Leasing Commission Fees If the Advisor or any of its affiliates provides a substantial amount of the services (as determined by a majority of the Company’s independent trust managers) in connection with the Company’s leasing of its properties to unaffiliated third parties, then the Company shall pay to the Advisor or such affiliate leasing commissions equal to 6.0% of the rents due pursuant to such lease for the first ten years of the lease term; provided, however (i) if the term of the lease is less than ten years, such commission percentage will apply to the full term of the lease and (ii) any rents due under a renewal of a lease of an existing tenant upon expiration of the initial lease agreement (including any extensions provided for thereunder) shall accrue a commission of 3.0% in lieu of the aforementioned 6.0% commission. Operating Expense Reimbursement Total operating expenses of the Company are limited to the greater of 2% of average invested assets or 25% of net income for the four most recently completed fiscal quarters (the “2%/25% Limitation”). If the Company exceeds the 2%/25% Limitation, the Advisor must reimburse the Company the amount by which the aggregate total operating expenses exceeds the limitation, or the Company must obtain a waiver from the Company’s conflicts committee, which is comprised of its independent trust managers. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, reserves for bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company, as determined by GAAP, that are in any way related to the Company’s operation including Asset Management Fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based upon increases in net asset value (“NAV”) per share; (f) acquisition fees and acquisition expenses (including expenses, relating to potential investments that the Company does not close); and (h) disposition fees on the sale of real property and other expenses connected with the acquisition, disposition and ownership of real estate interests or other property (other than disposition fees on the sale of assets other than real property), including the costs of insurance premiums, legal services, maintenance, repair and improvement of real property. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies Disclosure [Text Block] | NOTE 10. COMMITMENTS AND CONTINGENCIES Economic Dependency The Company depends on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of real estate property investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event the Advisor is unable to provide the respective services, the Company would be required to obtain such services from other sources. Environmental As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the property could result in future environmental liabilities. Tenant Improvements Pursuant to lease agreements, the Company has an obligation to pay for an aggregate of $395,599 and $553,088 in tenant improvements as of September 30, 2018 and December 31, 2017, respectively, for one property. At September 30, 2018 and December 31, 2017, the Company had $462,140 of restricted cash held by a lender as of both balance sheet dates to fund tenant improvements for this property. Legal Matters From time to time, the Company may become party to legal proceedings that arise in the ordinary course of its business. The Company is not a party to any legal proceeding, nor is the Company aware of any pending or threatened litigation that could have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. The SEC is conducting an investigation related to the advertising and sale of securities by a REIT affiliated with the Company in connection with the early stage of its stock offering. The investigation is a non-public fact-finding inquiry. It is neither an allegation of wrongdoing nor a finding that violations of law have occurred. In connection with the investigation, the Company and certain affiliates have received and responded to subpoenas from the SEC requesting documents and other information related to these offerings. The SEC’s investigation is ongoing, and the Company has cooperated and intends to continue to cooperate with the SEC in this matter. The Company is unable to predict the likely outcome of the investigation or determine its potential impact, if any, on the Company. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | NOTE 11. SUBSEQUENT EVENTS The Company evaluates subsequent events up until the date the unaudited condensed consolidated financial statements are issued. Dividends On October 25, 2018, the Company’s board of trust managers declared dividends based on daily record dates for the period July 1, 2018 through September 30, 2018 at a rate of $0.00203804 per share per day, or $1,568,049, on the outstanding shares of the Company’s common stock, which the Company paid on October 25, 2018. Of the $1,568,049 declared dividends, $1,059,111 was reinvested through the Company’s Plan. Repurchase of Common Stock Subsequent to September 30, 2018, the Company repurchased 80,394 shares for $857,001. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Consolidation, Policy [Policy Text Block] | Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, which is responsible for their integrity and objectivity. These unaudited condensed consolidated financial statements should be read in conjunction with the December 31, 2017 audited consolidated financial statements included in the Company’s Form 10-K filed with the SEC on April 2, 2018. The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which are normal and recurring, necessary to fairly state its financial position, results of operations and cash flows. All significant intercompany balances and transactions are eliminated in consolidation. The December 31, 2017 condensed consolidated balance sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements. |
Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of the condensed consolidated financial statements and accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates. |
Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value Disclosures The fair value for certain financial instruments is derived using a combination of market quotes, pricing models, and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instrument for which it is practicable to estimate the fair value: Cash and cash equivalents, restricted cash, tenant receivables, other assets, accounts payable, accrued and other liabilities, sales deposit liability, share repurchase payable and due to affiliates: These balances approximate their fair values due to the short nature of these items. Derivative Instruments : The Company’s derivative instruments are presented at fair value in the accompanying consolidated balance sheets. The valuation of these instruments is determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair value of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit risks to the contracts, are incorporated in the fair values to account for potential nonperformance risk. Mortgage Notes Payable: The fair value of the Company’s mortgage notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs. |
Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | Restricted Cash Restricted cash is comprised of funds which are restricted for tenant improvements . |
Comprehensive Income, Policy [Policy Text Block] | Other Comprehensive Income (Loss) For all periods presented, other comprehensive income (loss) is the same as net income (loss). |
Earnings Per Share, Policy [Policy Text Block] | Per Share Data Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share of common stock equals basic earnings per share of common stock as there were no potentially dilutive securities outstanding during the three and nine months ended September 30, 2018 and 2017. |
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Impairment of Investment in Real Estate Property The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of real estate assets may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of real estate assets may not be recoverable, management assesses whether the carrying value of the assets will be recovered through the future undiscounted operating cash flows expected from the use of and eventual disposition of the property. If, based on the analysis, the Company does not believe that it will be able to recover the carrying value of the asset, the Company will record an impairment charge to the extent the carrying value exceeds the estimated fair value of the asset. As more fully discussed in Note 4, the Company recorded an impairment charge of $862,190 related to its Antioch, California property during the second quarter of 2018. The impairment charge was less than 1% of the Company’s investments in real estate property as of June 30, 2018, the date of impairment. |
Reclassification, Policy [Policy Text Block] | Reclassifications Certain prior year revenue account balances in the statement of operations have been reclassified to conform with the current year presentation. The reclassifications had no impact on net income. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements New Accounting Standards Issued and Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09, as amended, requires an entity to use a five-step model to determine when to recognize revenue from customer contracts in an effort to increase consistency and comparability throughout global capital markets and across industries. ASU 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry specific guidance throughout the Industry Topics of the Codification. This ASU requires an entity to recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and to provide certain additional disclosures. The Company has evaluated each of its revenue streams and their related accounting policies under ASU 2014-09. Rental income and tenant reimbursements earned from leasing its real estate properties are excluded from ASU 2014-09 and are assessed with the adoption of the ASU for leases as discussed below. The Company adopted ASU 2014-09 beginning January 1, 2018 and utilized the modified retrospective basis. The adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements. However, future real estate sales contracts will qualify as sales to noncustomers. The Company will assess and implement any future recognition of gain or loss on sales of properties according to the provisions of ASU 2014-09. New Accounting Standards Recently Issued and Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The amendments in ASU 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. Under ASU 2016-02, the accounting applied by a lessor is largely unchanged from that applied under Topic 840 leases. The large majority of operating leases shall remain classified as operating leases and lessors should continue to recognize rental income for those leases on a straight-line basis over the lease term. ASU 2016-02 may impact the timing, recognition, presentation and disclosures related to the Company’s tenant reimbursements earned from leasing its real estate properties, although the Company does not expect a significant impact. ASU 2016-02 is effective for the Company on January 1, 2019. The Company expects to adopt the practical expedients available for implementation under ASU 2016-02. By adopting the practical expedients, the Company will not be required to reassess (i) whether an expired or existing contract meets the definition of a lease and (ii) the lease classification at the adoption date for expired or existing leases. ASU 2016-02 will also require new disclosures within the notes to its consolidated financial statements. The Company does not expect the adoption of ASU 2016-02 will have a material impact on the Company’s consolidated financial position, results of operations or cash flows. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements (“ASU No. 2018-11”). ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met. Upon adoption of the lease accounting standard under Topic 842, the Company expects to adopt this practical expedient, specifically related to its tenant reimbursements which would otherwise be accounted for under the new revenue recognition standard. The Company believes the two conditions have been met for tenant reimbursements as 1) the timing and pattern of transfer of the nonlease components and associated lease components are the same and 2) the lease component would be classified as an operating lease. In addition, ASU No. 2018-11 provides an additional optional transition method to allow entities to apply the new lease accounting standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. An entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease accounting standard will continue to be reported under the current lease accounting standards of Topic 840. The Company expects to adopt this transition method upon adoption of the lease accounting standard of Topic 842 on January 1, 2019. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement (“ASU No. 2018-13”). ASU No. 2018-13 removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation processes for Level 3 fair value measurements. It also adds a requirement to disclose changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and to disclose the range and weighted average of significant unobservable inputs used to develop recurring and nonrecurring Level 3 fair value measurements. For certain unobservable inputs, entities may disclose other quantitative information in lieu of the weighted average if the other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop the Level 3 fair value measurement. In addition, public entities are required to provide information about the measurement uncertainty of recurring Level 3 fair value measurements from the use of significant unobservable inputs if those inputs reasonably could have been different at the reporting date. ASU 2016-02 is effective for the Company beginning January 1, 2020. Entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company is still evaluating the impact of adopting ASU No. 2018-13 on its financial statements. |
CONDENSED CONSOLIDATED BALANC_4
CONDENSED CONSOLIDATED BALANCE SHEETS DETAILS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Tenant Receivables [Table Text Block] | September 30, 2018 December 31, 2017 Straight-line rent $ 1,339,811 $ 1,082,080 Tenant rent 128,671 301,588 Unbilled tenant reimbursements 281,051 93,420 Other — 76,178 1,749,533 1,553,266 Less allowance for doubtful accounts — (58,328 ) Net $ 1,749,533 $ 1,494,938 |
Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] | September 30, 2018 December 31, 2017 Accounts payable $ 39,845 $ 45,029 Accrued expenses 586,233 205,774 Accrued interest payable 240,039 215,700 Unearned rent 399,523 518,023 Tenant security deposits 270,106 270,106 Total $ 1,535,746 $ 1,254,632 |
REAL ESTATE INVESTMENTS (Tables
REAL ESTATE INVESTMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Real Estate [Abstract] | |
Schedule of Real Estate Properties [Table Text Block] | The following table provides summary information regarding the Company’s 21 real estate investments as of September 30, 2018: Property Location Acquisition Date Property Type Land, Building and Improvements Tenant Origination and Absorption Costs Accumulated Depreciation and Amortization Total Real Estate Investments, Net Chase Bank and Great Clips (1) Antioch, CA 8/22/2014 Retail $ 2,297,845 $ 668,201 $ (1,108,473 ) $ 1,857,573 Chevron Gas Station San Jose, CA 5/29/2015 Retail 2,775,000 — (130,824 ) 2,644,176 Levins Sacramento, CA 8/19/2015 Industrial 3,750,000 7,100 (665,913 ) 3,091,187 Chevron Gas Station (see Note 5) Roseville, CA 9/30/2015 Retail 2,800,000 — (290,678 ) 2,509,322 Island Pacific Supermarket Elk Grove, CA 10/1/2015 Retail 3,151,460 568,539 (494,017 ) 3,225,982 Dollar General Bakersfield, CA 11/11/2015 Retail 4,632,567 689,020 (552,114 ) 4,769,473 Rite Aid Lake Elsinore, CA 12/7/2015 Retail 6,663,446 968,285 (666,016 ) 6,965,715 PMI Preclinical San Carlos, CA 12/9/2015 Industrial 8,920,000 — (573,974 ) 8,346,026 EcoThrift Sacramento, CA 3/17/2016 Retail 4,486,993 541,729 (615,607 ) 4,413,115 GSA (MSHA) Vacaville, CA 4/5/2016 Office 2,998,232 456,645 (355,136 ) 3,099,741 PreK San Antonio San Antonio, TX 4/8/2016 Retail 11,851,540 1,593,451 (2,244,741 ) 11,200,250 Dollar Tree Morrow, GA 4/22/2016 Retail 1,295,879 206,844 (228,465 ) 1,274,258 Dinan Cars Morgan Hill, CA 6/21/2016 Industrial 4,651,845 654,155 (871,358 ) 4,434,642 Solar Turbines San Diego, CA 7/21/2016 Office 5,738,978 389,718 (423,988 ) 5,704,708 Amec Foster San Diego, CA 7/21/2016 Industrial 7,010,799 485,533 (515,975 ) 6,980,357 ITW Rippey El Dorado, CA 8/18/2016 Industrial 6,178,204 407,316 (626,369 ) 5,959,151 Dollar General Big Spring Big Spring, TX 11/4/2016 Retail 1,161,647 112,958 (56,951 ) 1,217,654 Gap Rocklin, CA 12/1/2016 Office 7,220,909 677,192 (572,677 ) 7,325,424 L-3 Communications San Diego, CA 12/23/2016 Industrial 10,799,500 961,107 (639,846 ) 11,120,761 Sutter Health Rancho Cordova, CA 3/15/2017 Office 24,256,632 2,870,258 (1,786,564 ) 25,340,326 Walgreens Santa Maria, CA 6/29/2017 Retail 4,667,322 448,183 (149,241 ) 4,966,264 $ 127,308,798 $ 12,706,234 $ (13,568,927 ) $ 126,446,105 (1) See following impairment charge discussion. |
Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] | As of September 30, 2018, the future minimum contractual rental income due under the Company’s non-cancelable operating leases, excluding any renewal periods, are as follows: October through December 2018 $ 2,472,538 2019 10,008,899 2020 10,197,455 2021 9,220,308 2022 7,674,625 2023 5,884,134 Thereafter 27,901,568 $ 73,359,527 |
Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block] | The Company’s revenue concentration based on tenants representing greater than 10% of total revenues for the three and nine months ended September 30, 2018 is as follows: Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Property and Location Revenue Percentage of Total Revenue Revenue Percentage of Total Revenue Sutter Health, Rancho Cordova, CA $ 663,998 20.2 % $ 2,039,643 20.6 % ITW Rippey, El Dorado, CA $ 517,309 15.7 % $ 1,508,718 15.3 % PreK San Antonio, San Antonio, TX $ 386,681 11.7 % $ 1,242,782 12.6 % |
Schedule Of Asset Portfolio Concentration [Table Text Block] | The Company’s portfolio’s asset concentration (greater than 10% of total assets) for the fiscal period September 30, 2018 was as follows: Property and Location Net Carrying Value Percentage of Total Assets Sutter Health, Rancho Cordova, CA $ 1,920,911 19.0 % |
Schedule of Finite-Lived Intangible Assets [Table Text Block] | As of September 30, 2018, the Company’s intangibles were as follows: Tenant Origination and Absorption Costs Above-Market Leases Below-Market Leases Cost $ 12,706,234 $ 872,408 $ (5,349,909 ) Accumulated amortization (4,019,601 ) (81,716 ) 2,029,024 Net amount $ 8,686,633 $ 790,692 $ (3,320,885 ) |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] | The intangible assets and liabilities acquired in connection with these acquisitions have a weighted average amortization period of approximately 9.2 years as of September 30, 2018. Amortization of intangible assets over the next five years is expected to be as follows: Tenant Origination and Absorption Costs Above-Market Leases Below-Market Leases October through December 2018 $ 384,423 $ 8,830 $ (215,041 ) 2019 1,537,689 35,320 (860,165 ) 2020 1,537,689 35,320 (860,165 ) 2021 1,290,572 35,320 (667,541 ) 2022 1,067,822 35,320 (201,982 ) 2023 683,378 35,320 (113,651 ) Thereafter 2,185,060 605,262 (402,340 ) Total $ 8,686,633 $ 790,692 $ (3,320,885 ) Weighted average remaining amortization period 7.7 years 35.3 years 4.9 years |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments [Table Text Block] | As of September 30, 2018, the Company’s mortgage notes payable consisted of the following: Collateral Principal Amount Deferred Financing Costs Net Balance Contractual Interest Rate (1) Effective Interest Rate (1) Loan Maturity Chase Bank and Great Clips $ 1,866,364 $ (13,414 ) $ 1,852,950 4.37% fixed 4.37 % 2/5/2019 Levins 2,136,966 (27,157 ) 2,109,809 One-month LIBOR + 1.93% 3.74 % 1/5/2021 Island Pacific Supermarket 1,943,215 (28,862 ) 1,914,353 One-month LIBOR + 1.93% 3.74 % 1/5/2021 Dollar General 2,391,318 (44,634 ) 2,346,684 One-month LIBOR + 1.48% 3.38 % 3/5/2021 Rite Aid 3,765,956 (84,221 ) 3,681,735 One-month LIBOR + 1.50% 3.25 % 5/5/2021 PMI Preclinical 4,237,297 (102,455 ) 4,134,842 One-month LIBOR + 1.48% 3.38 % 3/5/2021 EcoThrift 2,718,997 (68,265 ) 2,650,732 One-month LIBOR + 1.21% 2.96 % 7/5/2021 GSA (MSHA) 1,850,062 (52,917 ) 1,797,145 One-month LIBOR + 1.25% 3.00 % 8/5/2021 PreK San Antonio 5,263,315 (131,579 ) 5,131,736 4.25% fixed 4.25 % 12/1/2021 Dinan Cars 2,778,198 (65,353 ) 2,712,845 One-month LIBOR + 2.27% 4.02 % 1/5/2022 Solar Turbines, Amec Foster, ITW Rippey 9,700,694 (238,380 ) 9,462,314 3.35% fixed 3.35 % 11/1/2026 Dollar General Big Spring 624,262 (24,252 ) 600,010 4.69% fixed 4.69 % 3/13/2022 Gap 3,732,019 (86,667 ) 3,645,352 4.15% fixed 4.15 % 8/1/2023 L-3 Communications 5,403,380 (111,786 ) 5,291,594 4.50% fixed 4.50 % 4/1/2022 Sutter Health 14,486,336 (183,004 ) 14,303,332 4.50% fixed 4.50 % 3/9/2024 Total $ 62,898,379 $ (1,262,946 ) $ 61,635,433 (1) Contractual interest rate represents the interest rate in effect under the mortgage notes payable as of September 30, 2018. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2018 (consisting of the contractual interest rate and the effect of the interest rate swap, if applicable) (see Note 8 for information regarding the Company’s derivative instruments). |
Fair Value, by Balance Sheet Grouping [Table Text Block] | The following were the face value, carrying amount and fair value of the Company’s mortgage notes payable (Level 3 measurement): September 30, 2018 December 31, 2017 Face value Carrying value Fair value Face Value Carrying Value Fair Value $ 62,898,379 $ 61,635,433 $ 60,716,753 $ 63,799,678 $ 62,277,387 $ 62,258,532 |
Schedule of Maturities of Long-term Debt [Table Text Block] | The following summarizes the future principal payments on the Company’s mortgage notes payable as of September 30, 2018: October through December 2018 (1) $ 2,170,408 2019 1,241,696 2020 1,286,396 2021 23,878,964 2022 8,888,653 2023 3,965,722 Thereafter 21,466,540 Total principal $ 62,898,379 (1) Reflects the acceleration of Chase Bank and Great Clips loan given the default described above. |
Schedule Of Interest Expenses Reconciliation [Table Text Block] | The following is a reconciliation of the components of interest expense for the three and nine months ended September 30, 2018 and 2017: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Mortgage notes payable Interest expense incurred (1) $ 654,087 $ 662,835 $ 1,887,773 $ 1,738,397 Amortization of deferred financing costs 86,448 78,607 259,344 224,383 Unrealized gain on interest rate swaps (see Note 8) (40,149 ) (21,382 ) (357,520 ) (47,278 ) Sales deposit liability (see Note 5) 13,751 13,751 41,252 41,252 Total interest expense $ 714,137 $ 733,811 $ 1,830,849 $ 1,956,754 (1) For the three months ended September 30, 2018 and 2017, interest expense included $(24,762) and $24,899 of monthly (reductions) payments to settle the Company’s interest rate swaps and $(30,557) and $108,293 for the nine months ended September 30, 2018 and 2017, respectively. Accrued interest receivable (payable) includes $7,793 and $(3,913) at September 30, 2018 and December 31, 2017, respectively, representing the unsettled portion of the interest rate swap valuation from the most recent settlement date through September 30, 2018 and December 31, 2017, respectively. |
INTEREST RATE SWAP DERIVATIVES
INTEREST RATE SWAP DERIVATIVES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments [Table Text Block] | The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of September 30, 2018 and December 31, 2017. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks: September 30, 2018 December 31, 2017 Derivative Instruments Number of Instru- ments Notional Amount (1) Reference Rate Weighted Average Fixed pay rate Weighted Average Remaining Term Number of Instru- ments Notional Amount (1) Reference Rate Weighted Average Fixed pay rate Weighted Average Remaining Term Interest Rate Swap Derivatives 8 $ 21,822,008 One-month LIBOR/Fixed at 1.21%-2.28% 3.42 % 2.60 years 8 $ 22,170,310 One-month LIBOR/Fixed at 1.21%-2.28% 3.42 % 3.35 years (1) The notional amount of the Company’s swaps decreases each month to correspond to the outstanding principal balance on the related mortgage. The maximum notional amount is shown above. The minimum notional amount (outstanding principal balance at the maturity date) is $20,546,330 as of September 30, 2018. |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] | The following table sets forth the fair value of the Company’s derivative instruments (Level 2 measurement), as well as their classification in the consolidated balance sheets: September 30, 2018 December 31, 2017 Derivative Instrument Balance Sheet Location Number of Instruments Fair Value Number of Instruments Fair Value Interest Rate Swaps Asset - Interest rate swap derivatives, at fair value 8 $ 659,972 7 $ 321,450 Interest Rate Swaps Liability – Interest rate swap derivatives, at fair value — $ — 1 $ (18,998 ) |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions [Table Text Block] | The costs incurred by the Company pursuant to the Advisory Agreement for the three and nine months ended September 30, 2018 and 2017, as well as the related amounts of payable or receivable as of September 30, 2018 and December 31, 2017 are included in the table below. The amounts payable or receivable are presented in the unaudited condensed consolidated balance sheets as “Due to Affiliates” and “Due from Affiliates.” Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 2018 September 30, 2018 September 30, 2017 December 31,2017 Incurred Incurred Receivable Payable Incurred Incurred Receivable Payable Expensed: Asset management fees $ 203,763 $ 607,728 $ — $ — $ 199,724 $ 555,317 $ — $ 3,513 Other operating expense reimbursement — — — — — — — 47,948 Reimbursable operating expense 67,500 249,015 — — 34,861 34,861 — — Fees to affiliates 271,263 856,743 — — 234,585 590,178 — — Property management fees* 25,763 74,670 — 340 24,776 67,419 — — Disposition fees** — — — — — 103,020 — — Reimbursable organizational and offering expenses 31,847 95,612 — — 33,108 98,349 — 57 Capitalized: Acquisition fees — — — — 28,956 671,270 — — Financing coordination fees — — — — — 100,156 — — Other: Due to (from) advisor for costs advanced 18,413 67,079 — — 17,269 17,269 — — $ — $ 340 $ — $ 51,518 * Property management fees are included in “property expenses” in the accompanying condensed consolidated statements of operations. ** Disposition fees for the nine months ended September 30, 2017 are presented as a reduction of gain on sale of real estate investment property (see Note 6). |
BUSINESS AND ORGANIZATION (Deta
BUSINESS AND ORGANIZATION (Details Textual) - Rich Uncles Real Estate Investment Trust I [Member] - $ / shares | Sep. 30, 2018 | Jan. 19, 2018 | Jan. 18, 2018 |
Noncontrolling Interest, Ownership Percentage by Parent | 70.14% | ||
Net Asset Value Per Share | $ 10.66 | $ 10 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Impairment of Real Estate | $ 0 | $ 862,190 | $ 0 | $ 862,190 | $ 0 |
CONDENSED CONSOLIDATED BALANC_5
CONDENSED CONSOLIDATED BALANCE SHEETS DETAILS (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Tenant receivables, net: | ||
Straight-line rent | $ 1,339,811 | $ 1,082,080 |
Tenant rent | 128,671 | 301,588 |
Unbilled tenant reimbursements | 281,051 | 93,420 |
Other | 0 | 76,178 |
Accounts Receivable, Gross | 1,749,533 | 1,553,266 |
Less allowance for doubtful accounts | 0 | (58,328) |
Net | 1,749,533 | 1,494,938 |
Accounts payable, accrued and other liabilities: | ||
Accounts payable | 39,845 | 45,029 |
Accrued expenses | 586,233 | 205,774 |
Accrued interest payable | 240,039 | 215,700 |
Unearned rent | 399,523 | 518,023 |
Tenant security deposits | 270,106 | 270,106 |
Total | $ 1,535,746 | $ 1,254,632 |
REAL ESTATE INVESTMENTS (Detail
REAL ESTATE INVESTMENTS (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Dec. 31, 2017 | ||
Land Building and Improvements | $ 127,308,798 | ||
Tenant Origination and Absorption Costs | 12,706,234 | $ 12,699,134 | |
Accumulated Depreciation and Amortization | (13,568,927) | (9,286,921) | |
Total real Estate Investments, Net | $ 126,446,105 | $ 131,166,670 | |
Chase Bank & Great Clips [Member] | Antioch, CA [Member] | Retail Site [Member] | |||
Acquisition Date | [1] | Aug. 22, 2014 | |
Land Building and Improvements | [1] | $ 2,297,845 | |
Tenant Origination and Absorption Costs | [1] | 668,201 | |
Accumulated Depreciation and Amortization | [1] | (1,108,473) | |
Total real Estate Investments, Net | [1] | $ 1,857,573 | |
Chevron Gas Station [Member] | San Jose, CA [Member] | Retail Site [Member] | |||
Acquisition Date | May 29, 2015 | ||
Land Building and Improvements | $ 2,775,000 | ||
Tenant Origination and Absorption Costs | 0 | ||
Accumulated Depreciation and Amortization | (130,824) | ||
Total real Estate Investments, Net | $ 2,644,176 | ||
Chevron Gas Station [Member] | Roseville, CA [Member] | Retail Site [Member] | |||
Acquisition Date | Sep. 30, 2015 | ||
Land Building and Improvements | $ 2,800,000 | ||
Tenant Origination and Absorption Costs | 0 | ||
Accumulated Depreciation and Amortization | (290,678) | ||
Total real Estate Investments, Net | $ 2,509,322 | ||
Levins [Member] | Sacramento, CA [Member] | Industrial Property [Member] | |||
Acquisition Date | Aug. 19, 2015 | ||
Land Building and Improvements | $ 3,750,000 | ||
Tenant Origination and Absorption Costs | 7,100 | ||
Accumulated Depreciation and Amortization | (665,913) | ||
Total real Estate Investments, Net | $ 3,091,187 | ||
Island Pacific Supermarket [Member] | Elk Grove, CA [Member] | Retail Site [Member] | |||
Acquisition Date | Oct. 1, 2015 | ||
Land Building and Improvements | $ 3,151,460 | ||
Tenant Origination and Absorption Costs | 568,539 | ||
Accumulated Depreciation and Amortization | (494,017) | ||
Total real Estate Investments, Net | $ 3,225,982 | ||
Dollar General [Member] | Bakersfield, CA [Member] | Retail Site [Member] | |||
Acquisition Date | Nov. 11, 2015 | ||
Land Building and Improvements | $ 4,632,567 | ||
Tenant Origination and Absorption Costs | 689,020 | ||
Accumulated Depreciation and Amortization | (552,114) | ||
Total real Estate Investments, Net | $ 4,769,473 | ||
Rite Aid [Member] | Lake Elsinore, CA [Member] | Retail Site [Member] | |||
Acquisition Date | Dec. 7, 2015 | ||
Land Building and Improvements | $ 6,663,446 | ||
Tenant Origination and Absorption Costs | 968,285 | ||
Accumulated Depreciation and Amortization | (666,016) | ||
Total real Estate Investments, Net | $ 6,965,715 | ||
PMI Preclinical [Member] | San Carlos, CA [Member] | Industrial Property [Member] | |||
Acquisition Date | Dec. 9, 2015 | ||
Land Building and Improvements | $ 8,920,000 | ||
Tenant Origination and Absorption Costs | 0 | ||
Accumulated Depreciation and Amortization | (573,974) | ||
Total real Estate Investments, Net | $ 8,346,026 | ||
EcoThrift [Member] | Sacramento, CA [Member] | Retail Site [Member] | |||
Acquisition Date | Mar. 17, 2016 | ||
Land Building and Improvements | $ 4,486,993 | ||
Tenant Origination and Absorption Costs | 541,729 | ||
Accumulated Depreciation and Amortization | (615,607) | ||
Total real Estate Investments, Net | $ 4,413,115 | ||
GSA MSHA [Member] | Vacaville, CA [Member] | Office Building [Member] | |||
Acquisition Date | Apr. 5, 2016 | ||
Land Building and Improvements | $ 2,998,232 | ||
Tenant Origination and Absorption Costs | 456,645 | ||
Accumulated Depreciation and Amortization | (355,136) | ||
Total real Estate Investments, Net | $ 3,099,741 | ||
PreK San Antonio [Member] | San Antonio, TX [Member] | Retail Site [Member] | |||
Acquisition Date | Apr. 8, 2016 | ||
Land Building and Improvements | $ 11,851,540 | ||
Tenant Origination and Absorption Costs | 1,593,451 | ||
Accumulated Depreciation and Amortization | (2,244,741) | ||
Total real Estate Investments, Net | $ 11,200,250 | ||
Dollar Tree [Member] | Morrow, GA [Member] | Retail Site [Member] | |||
Acquisition Date | Apr. 22, 2016 | ||
Land Building and Improvements | $ 1,295,879 | ||
Tenant Origination and Absorption Costs | 206,844 | ||
Accumulated Depreciation and Amortization | (228,465) | ||
Total real Estate Investments, Net | $ 1,274,258 | ||
Dinan Cars [Member] | Morgan Hill, CA [Member] | Industrial Property [Member] | |||
Acquisition Date | Jun. 21, 2016 | ||
Land Building and Improvements | $ 4,651,845 | ||
Tenant Origination and Absorption Costs | 654,155 | ||
Accumulated Depreciation and Amortization | (871,358) | ||
Total real Estate Investments, Net | $ 4,434,642 | ||
ITW Rippey [Member] | El Dorado, CA [Member] | Industrial Property [Member] | |||
Acquisition Date | Aug. 18, 2016 | ||
Land Building and Improvements | $ 6,178,204 | ||
Tenant Origination and Absorption Costs | 407,316 | ||
Accumulated Depreciation and Amortization | (626,369) | ||
Total real Estate Investments, Net | $ 5,959,151 | ||
Solar Turbines [Member] | San Diego, CA [Member] | Office Building [Member] | |||
Acquisition Date | Jul. 21, 2016 | ||
Land Building and Improvements | $ 5,738,978 | ||
Tenant Origination and Absorption Costs | 389,718 | ||
Accumulated Depreciation and Amortization | (423,988) | ||
Total real Estate Investments, Net | $ 5,704,708 | ||
Amec Foster [Member] | San Diego, CA [Member] | Industrial Property [Member] | |||
Acquisition Date | Jul. 21, 2016 | ||
Land Building and Improvements | $ 7,010,799 | ||
Tenant Origination and Absorption Costs | 485,533 | ||
Accumulated Depreciation and Amortization | (515,975) | ||
Total real Estate Investments, Net | $ 6,980,357 | ||
Dollar General Big Spring [Member] | Big Spring, TX [Member] | Retail Site [Member] | |||
Acquisition Date | Nov. 4, 2016 | ||
Land Building and Improvements | $ 1,161,647 | ||
Tenant Origination and Absorption Costs | 112,958 | ||
Accumulated Depreciation and Amortization | (56,951) | ||
Total real Estate Investments, Net | $ 1,217,654 | ||
Gap [Member] | Rocklin, CA [Member] | Office Building [Member] | |||
Acquisition Date | Dec. 1, 2016 | ||
Land Building and Improvements | $ 7,220,909 | ||
Tenant Origination and Absorption Costs | 677,192 | ||
Accumulated Depreciation and Amortization | (572,677) | ||
Total real Estate Investments, Net | $ 7,325,424 | ||
L-3 Communications [Member] | San Diego, CA [Member] | Industrial Property [Member] | |||
Acquisition Date | Dec. 23, 2016 | ||
Land Building and Improvements | $ 10,799,500 | ||
Tenant Origination and Absorption Costs | 961,107 | ||
Accumulated Depreciation and Amortization | (639,846) | ||
Total real Estate Investments, Net | $ 11,120,761 | ||
Sutter Health [Member] | Rancho Cordova, CA [Member] | Office Building [Member] | |||
Acquisition Date | Mar. 15, 2017 | ||
Land Building and Improvements | $ 24,256,632 | ||
Tenant Origination and Absorption Costs | 2,870,258 | ||
Accumulated Depreciation and Amortization | (1,786,564) | ||
Total real Estate Investments, Net | $ 25,340,326 | ||
Walgreens [Member] | Santa Maria, CA [Member] | Retail Site [Member] | |||
Acquisition Date | Jun. 29, 2017 | ||
Land Building and Improvements | $ 4,667,322 | ||
Tenant Origination and Absorption Costs | 448,183 | ||
Accumulated Depreciation and Amortization | (149,241) | ||
Total real Estate Investments, Net | $ 4,966,264 | ||
[1] | See following impairment charge discussion. |
REAL ESTATE INVESTMENTS (Deta_2
REAL ESTATE INVESTMENTS (Details 1) | Sep. 30, 2018USD ($) |
October through December 2018 | $ 2,472,538 |
2,019 | 10,008,899 |
2,020 | 10,197,455 |
2,021 | 9,220,308 |
2,022 | 7,674,625 |
2,023 | 5,884,134 |
Thereafter | 27,901,568 |
Operating Leases, Future Minimum Payments Receivable | $ 73,359,527 |
REAL ESTATE INVESTMENTS (Deta_3
REAL ESTATE INVESTMENTS (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue | $ 2,741,108 | $ 2,757,348 | $ 8,222,633 | $ 7,897,962 |
San Antonio, TX [Member] | PreK San Antonio [Member] | ||||
Revenue | $ 386,681 | $ 1,242,782 | ||
Percentage of Total Revenue | 11.70% | 12.60% | ||
Rancho Cordova, CA [Member] | Sutter Health [Member] | ||||
Revenue | $ 663,998 | $ 2,039,643 | ||
Percentage of Total Revenue | 20.20% | 20.60% | ||
El Dorado, CA [Member] | ITW Rippey [Member] | ||||
Revenue | $ 517,309 | $ 1,508,718 | ||
Percentage of Total Revenue | 15.70% | 15.30% |
REAL ESTATE INVESTMENTS (Deta_4
REAL ESTATE INVESTMENTS (Details 3) - Sutter Health [Member] | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Net Carrying Value | $ 1,920,911 |
Percentage of Total Assets | 19.00% |
REAL ESTATE INVESTMENTS (Deta_5
REAL ESTATE INVESTMENTS (Details 4) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Below-Market Leases, Cost | $ (5,349,909) | |
Below-Market Leases, Accumulated amortization | 2,029,024 | |
Below-Market Leases, Net Amount | (3,320,885) | $ (3,966,008) |
Tenant Origination and Absorption Costs [Member] | ||
Finite-Lived Intangible Assets, Cost | 12,706,234 | |
Finite-Lived Intangible Assets, Accumulated Amortization | (4,019,601) | |
Finite-Lived Intangible Assets, Net Amount | 8,686,633 | |
Above-Market Leases [Member] | ||
Finite-Lived Intangible Assets, Cost | 872,408 | |
Finite-Lived Intangible Assets, Accumulated Amortization | (81,716) | |
Finite-Lived Intangible Assets, Net Amount | $ 790,692 |
REAL ESTATE INVESTMENTS (Deta_6
REAL ESTATE INVESTMENTS (Details 5) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Below-Market Leases | $ (3,320,885) | $ (3,966,008) |
Tenant Origination and Absorption Costs [Member] | ||
October through December 2018 | 384,423 | |
2,019 | 1,537,689 | |
2,020 | 1,537,689 | |
2,021 | 1,290,572 | |
2,022 | 1,067,822 | |
2,023 | 683,378 | |
Thereafter | 2,185,060 | |
Finite-Lived Intangible Assets, Net | $ 8,686,633 | |
Weighted average remaining amortization period | 7 years 8 months 12 days | |
Above-Market Leases [Member] | ||
October through December 2018 | $ 8,830 | |
2,019 | 35,320 | |
2,020 | 35,320 | |
2,021 | 35,320 | |
2,022 | 35,320 | |
2,023 | 35,320 | |
Thereafter | 605,262 | |
Finite-Lived Intangible Assets, Net | $ 790,692 | |
Weighted average remaining amortization period | 35 years 3 months 18 days | |
Below-Market Leases [Member] | ||
Weighted average remaining amortization period | 4 years 10 months 24 days | |
October through December 2018 | $ (215,041) | |
2,019 | (860,165) | |
2,020 | (860,165) | |
2,021 | (667,541) | |
2,022 | (201,982) | |
2,023 | (113,651) | |
Thereafter | (402,340) | |
Below-Market Leases | $ (3,320,885) |
REAL ESTATE INVESTMENTS (Deta_7
REAL ESTATE INVESTMENTS (Details Textual) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2018USD ($) | Sep. 30, 2018USD ($)ft² | Jun. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($)ft² | Sep. 30, 2017USD ($) | |
Finite-Lived Intangible Asset, Useful Life | 9 years 2 months 12 days | |||||
Impairment of Real Estate | $ 0 | $ 862,190 | $ 0 | $ 862,190 | $ 0 | |
Long-term Debt, Gross | $ 62,898,379 | $ 62,898,379 | ||||
Antioch [Member] | ||||||
Impairment of Real Estate | $ 862,190 | |||||
Long-term Debt, Gross | $ 1,869,536 | $ 1,869,536 | ||||
Area of Land | ft² | 5,660 | 5,660 | ||||
Property Management Fee, Percent Fee | 1.00% |
SALE OF INTEREST IN REAL ESTA_2
SALE OF INTEREST IN REAL ESTATE INVESTMENT PROPERTY (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2016 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Proceeds from Sale of Real Estate | $ 1,000,000 | |||||
Interest Expense, Customer Deposits | $ 13,751 | $ 13,751 | $ 41,252 | $ 41,252 | ||
Contract with Customer, Liability, Current | $ 1,000,000 | $ 1,000,000 | $ 1,000,000 | |||
Chevron Gas Station [Member] | ||||||
Equity Method Investment, Ownership Percentage | 29.86% | 29.86% | 29.86% |
SALE OF REAL ESTATE INVESTMEN_2
SALE OF REAL ESTATE INVESTMENT PROPERTY (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Apr. 27, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Proceeds from Sale of Real Estate Held-for-investment | $ 0 | $ 3,196,480 | |||
Gains (Losses) on Sales of Investment Real Estate | $ 0 | $ 0 | $ 0 | $ 747,957 | |
Deferred Taxable Gain On Sale Of Real Estate | $ 900,000 | ||||
Chevron Gas Station [Member] | |||||
Proceeds from Sale of Real Estate Held-for-investment | 3,434,000 | ||||
Gains (Losses) on Sales of Investment Real Estate | 747,957 | ||||
Deferred Taxable Gain On Sale Of Real Estate | $ 103,020 |
DEBT (Details)
DEBT (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Dec. 31, 2017 | ||
Principal Amount | $ 62,898,379 | ||
Deferred Financing Costs | (1,262,946) | ||
Net Balance | 61,635,433 | $ 62,277,387 | |
Mortgages [Member] | Chase Bank & Great Clips [Member] | |||
Principal Amount | 1,866,364 | ||
Deferred Financing Costs | (13,414) | ||
Net Balance | $ 1,852,950 | ||
Contractual Interest Rate | [1] | 4.37% fixed | |
Effective Interest Rate | [1] | 4.37% | |
Loan Maturity | Feb. 5, 2019 | ||
Mortgages [Member] | Levins [Member] | |||
Principal Amount | $ 2,136,966 | ||
Deferred Financing Costs | (27,157) | ||
Net Balance | $ 2,109,809 | ||
Contractual Interest Rate | [1] | One-month LIBOR + 1.93% | |
Effective Interest Rate | [1] | 3.74% | |
Loan Maturity | Jan. 5, 2021 | ||
Mortgages [Member] | Island Pacific Supermarket [Member] | |||
Principal Amount | $ 1,943,215 | ||
Deferred Financing Costs | (28,862) | ||
Net Balance | $ 1,914,353 | ||
Contractual Interest Rate | [1] | One-month LIBOR + 1.93% | |
Effective Interest Rate | [1] | 3.74% | |
Loan Maturity | Jan. 5, 2021 | ||
Mortgages [Member] | Dollar General [Member] | |||
Principal Amount | $ 2,391,318 | ||
Deferred Financing Costs | (44,634) | ||
Net Balance | $ 2,346,684 | ||
Contractual Interest Rate | [1] | One-month LIBOR + 1.48% | |
Effective Interest Rate | [1] | 3.38% | |
Loan Maturity | Mar. 5, 2021 | ||
Mortgages [Member] | Rite Aid [Member] | |||
Principal Amount | $ 3,765,956 | ||
Deferred Financing Costs | (84,221) | ||
Net Balance | $ 3,681,735 | ||
Contractual Interest Rate | [1] | One-month LIBOR + 1.50% | |
Effective Interest Rate | [1] | 3.25% | |
Loan Maturity | May 5, 2021 | ||
Mortgages [Member] | PMI Preclinical [Member] | |||
Principal Amount | $ 4,237,297 | ||
Deferred Financing Costs | (102,455) | ||
Net Balance | $ 4,134,842 | ||
Contractual Interest Rate | [1] | One-month LIBOR + 1.48% | |
Effective Interest Rate | [1] | 3.38% | |
Loan Maturity | Mar. 5, 2021 | ||
Mortgages [Member] | EcoThrift [Member] | |||
Principal Amount | $ 2,718,997 | ||
Deferred Financing Costs | (68,265) | ||
Net Balance | $ 2,650,732 | ||
Contractual Interest Rate | [1] | One-month LIBOR + 1.21% | |
Effective Interest Rate | [1] | 2.96% | |
Loan Maturity | Jul. 5, 2021 | ||
Mortgages [Member] | PreK San Antonio [Member] | |||
Principal Amount | $ 5,263,315 | ||
Deferred Financing Costs | (131,579) | ||
Net Balance | $ 5,131,736 | ||
Contractual Interest Rate | [1] | 4.25% fixed | |
Effective Interest Rate | [1] | 4.25% | |
Loan Maturity | Dec. 1, 2021 | ||
Mortgages [Member] | GSA (MSHA) [Member] | |||
Principal Amount | $ 1,850,062 | ||
Deferred Financing Costs | (52,917) | ||
Net Balance | $ 1,797,145 | ||
Contractual Interest Rate | [1] | One-month LIBOR + 1.25% | |
Effective Interest Rate | [1] | 3.00% | |
Loan Maturity | Aug. 5, 2021 | ||
Mortgages [Member] | Dinan Cars [Member] | |||
Principal Amount | $ 2,778,198 | ||
Deferred Financing Costs | (65,353) | ||
Net Balance | $ 2,712,845 | ||
Contractual Interest Rate | [1] | One-month LIBOR + 2.27% | |
Effective Interest Rate | [1] | 4.02% | |
Loan Maturity | Jan. 5, 2022 | ||
Mortgages [Member] | ITW Rippey, Solar Turbines, Amec Foster [Member] | |||
Principal Amount | $ 9,700,694 | ||
Deferred Financing Costs | (238,380) | ||
Net Balance | $ 9,462,314 | ||
Contractual Interest Rate | [1] | 3.35% fixed | |
Effective Interest Rate | [1] | 3.35% | |
Loan Maturity | Nov. 1, 2026 | ||
Mortgages [Member] | Dollar General Big Spring [Member] | |||
Principal Amount | $ 624,262 | ||
Deferred Financing Costs | (24,252) | ||
Net Balance | $ 600,010 | ||
Contractual Interest Rate | [1] | 4.69% fixed | |
Effective Interest Rate | [1] | 4.69% | |
Loan Maturity | Mar. 13, 2022 | ||
Mortgages [Member] | L-3 Communications [Member] | |||
Principal Amount | $ 5,403,380 | ||
Deferred Financing Costs | (111,786) | ||
Net Balance | $ 5,291,594 | ||
Contractual Interest Rate | [1] | 4.50% fixed | |
Effective Interest Rate | [1] | 4.50% | |
Loan Maturity | Apr. 1, 2022 | ||
Mortgages [Member] | Sutter Health [Member] | |||
Principal Amount | $ 14,486,336 | ||
Deferred Financing Costs | (183,004) | ||
Net Balance | $ 14,303,332 | ||
Contractual Interest Rate | [1] | 4.50% fixed | |
Effective Interest Rate | [1] | 4.50% | |
Loan Maturity | Mar. 9, 2024 | ||
Mortgages [Member] | Gap [Member] | |||
Principal Amount | $ 3,732,019 | ||
Deferred Financing Costs | (86,667) | ||
Net Balance | $ 3,645,352 | ||
Contractual Interest Rate | [1] | 4.15% fixed | |
Effective Interest Rate | [1] | 4.15% | |
Loan Maturity | Aug. 1, 2023 | ||
[1] | Contractual interest rate represents the interest rate in effect under the mortgage notes payable as of September 30, 2018. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2018 (consisting of the contractual interest rate and the effect of the interest rate swap, if applicable) (see Note 8 for information regarding the Company’s derivative instruments). |
DEBT (Details 1)
DEBT (Details 1) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Face Value | $ 62,898,379 | $ 63,799,678 |
Carrying Amount | 61,635,433 | 62,277,387 |
Fair Value | $ 60,716,753 | $ 62,258,532 |
DEBT (Details 2)
DEBT (Details 2) | Sep. 30, 2018USD ($) | |
Total | $ 62,898,379 | |
Secured Debt [Member] | ||
October through December 2018 | 2,170,408 | [1] |
2,019 | 1,241,696 | [1] |
2,020 | 1,286,396 | [1] |
2,021 | 23,878,964 | [1] |
2,022 | 8,888,653 | [1] |
2,023 | 3,965,722 | [1] |
Thereafter | 21,466,540 | [1] |
Total | $ 62,898,379 | [1] |
[1] | Reflects the acceleration of Chase Bank and Great Clips loan given the default described above. |
DEBT (Details 3)
DEBT (Details 3) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | ||
Unrealized (gain) loss on interest rate swaps (see Note 8) | $ 357,520 | $ 47,278 | |||
Sales deposit liability (see Note 5) | $ 13,751 | $ 13,751 | 41,252 | 41,252 | |
Total interest expense | 714,138 | 733,811 | 1,830,849 | 1,956,754 | |
Unsecured Debt [Member] | |||||
Sales deposit liability (see Note 5) | 13,751 | 13,751 | 41,252 | 41,252 | |
Total interest expense | 714,137 | 733,811 | 1,830,849 | 1,956,754 | |
Secured Debt [Member] | |||||
Interest expense incurred (1) | [1] | 654,087 | 662,835 | 1,887,773 | 1,738,397 |
Amortization of deferred financing costs | 86,448 | 78,607 | 259,344 | 224,383 | |
Unrealized (gain) loss on interest rate swaps (see Note 8) | $ (40,149) | $ (21,382) | $ (357,520) | $ (47,278) | |
[1] | For the three months ended September 30, 2018 and 2017, interest expense included $(24,762) and $24,899 of monthly (reductions) payments to settle the Company’s interest rate swaps and $(30,557) and $108,293 for the nine months ended September 30, 2018 and 2017, respectively. Accrued interest receivable (payable) includes $7,793 and $(3,913) at September 30, 2018 and December 31, 2017, respectively, representing the unsettled portion of the interest rate swap valuation from the most recent settlement date through September 30, 2018 and December 31, 2017, respectively. |
DEBT (Details Textual)
DEBT (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Aug. 03, 2018 | Dec. 31, 2017 | |
Interest Expenses, Interest Rate Swap | $ (24,762) | $ 24,899 | $ (30,557) | $ 108,293 | |||
Accrued interest receivable (payable) | 7,793 | 7,793 | $ (3,913) | ||||
Impairment of Real Estate | $ 0 | $ 862,190 | $ 0 | $ 862,190 | $ 0 | ||
Maximum [Member] | |||||||
Supplementary Leverage Ratio | 50.00% | ||||||
Minimum [Member] | |||||||
Supplementary Leverage Ratio | 45.00% | ||||||
Antioch, CA [Member] | |||||||
Impairment of Real Estate | 862,190 | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate | $ 1,869,536 |
INTEREST RATE SWAP DERIVATIVE_2
INTEREST RATE SWAP DERIVATIVES (Details) - Interest Rate Swap Derivatives [Member] | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018USD ($) | Dec. 31, 2017USD ($) | ||
Derivative Instruments, Number of Instruments | 8 | 8 | |
Derivative Instruments, Notional Amount | [1] | $ 21,822,008 | $ 22,170,310 |
Derivative Instruments, Reference Rate | One-month LIBOR/Fixed at 1.21%-2.28% | One-month LIBOR/Fixed at 1.21%-2.28% | |
Derivative Instruments, Weighted Average Fixed Pay Rate | 3.42% | 3.42% | |
Derivative Instruments, Weighted Average Remaining Term | 2 years 7 months 6 days | 3 years 4 months 6 days | |
[1] | The notional amount of the Company’s swaps decreases each month to correspond to the outstanding principal balance on the related mortgage. The maximum notional amount is shown above. The minimum notional amount (outstanding principal balance at the maturity date) is $20,546,330 as of September 30, 2018. |
INTEREST RATE SWAP DERIVATIVE_3
INTEREST RATE SWAP DERIVATIVES (Details 1) | 9 Months Ended | |
Sep. 30, 2018USD ($) | Dec. 31, 2017USD ($) | |
Derivative Instrument, Fair Value | $ 0 | $ 18,998 |
Interest Rate Swap [Member] | ||
Derivative Instruments, Number of Instruments | 8 | 8 |
Interest Rate Swap [Member] | Liability [Member] | ||
Derivative Instrument, Balance Sheet Location | Liability - Interest rate swap derivatives, at fair value | |
Derivative Instruments, Number of Instruments | 0 | 1 |
Derivative Instrument, Fair Value | $ 0 | $ (18,998) |
Interest Rate Swap [Member] | Assets [Member] | ||
Derivative Instrument, Balance Sheet Location | Asset - Interest rate swap derivatives, at fair value | |
Derivative Instruments, Number of Instruments | 8 | 7 |
Derivative Instrument, Fair Value | $ 659,972 | $ 321,450 |
INTEREST RATE SWAP DERIVATIVE_4
INTEREST RATE SWAP DERIVATIVES (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | ||
Unrealized (Gain) Loss on Derivatives | $ 357,520 | $ 47,278 | ||||
Interest Rate Swap [Member] | ||||||
Derivative, Notional Amount | [1] | $ 21,822,008 | 21,822,008 | $ 22,170,310 | ||
Unrealized (Gain) Loss on Derivatives | (40,149) | $ (21,382) | (357,520) | $ (47,278) | ||
Minimum [Member] | Interest Rate Swap [Member] | ||||||
Derivative, Notional Amount | $ 20,546,330 | $ 20,546,330 | ||||
[1] | The notional amount of the Company’s swaps decreases each month to correspond to the outstanding principal balance on the related mortgage. The maximum notional amount is shown above. The minimum notional amount (outstanding principal balance at the maturity date) is $20,546,330 as of September 30, 2018. |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | ||
Due to Related Parties | $ 340 | $ 340 | $ 51,518 | |||
Due from Related Parties | 0 | 0 | 0 | |||
Advisor fees, Acquisition fees [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | 0 | $ 28,956 | 0 | $ 671,270 | ||
Due to Related Parties | 0 | 0 | 0 | |||
Due from Related Parties | 0 | 0 | 0 | |||
Advisor fees, Asset management fees [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | 203,763 | 199,724 | 607,728 | 555,317 | ||
Due to Related Parties | 0 | 0 | 3,513 | |||
Due from Related Parties | 0 | 0 | 0 | |||
Advisor fees, Property management fees [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | [1] | 25,763 | 24,776 | 74,670 | 67,419 | |
Due to Related Parties | [1] | 340 | 340 | 0 | ||
Due from Related Parties | [1] | 0 | 0 | 0 | ||
Other operating expense reimbursement [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | 0 | 0 | 0 | 0 | ||
Due to Related Parties | 0 | 0 | 47,948 | |||
Due from Related Parties | 0 | 0 | 0 | |||
Reimbursable organizational and offering expenses [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | 31,847 | 33,108 | 95,612 | 98,349 | ||
Due to Related Parties | 0 | 0 | 57 | |||
Due from Related Parties | 0 | 0 | 0 | |||
Fees To Affliates [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | 271,263 | 234,585 | 856,743 | 590,178 | ||
Due to Related Parties | 0 | 0 | 0 | |||
Due from Related Parties | 0 | 0 | 0 | |||
Financing Coordination Fees [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | 0 | 0 | 0 | 100,156 | ||
Due to Related Parties | 0 | 0 | 0 | |||
Due from Related Parties | 0 | 0 | 0 | |||
Advisor Fees, Reimbursable operating expenses [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | 67,500 | 34,861 | 249,015 | 34,861 | ||
Due to Related Parties | 0 | 0 | 0 | |||
Due from Related Parties | 0 | 0 | 0 | |||
Advisor fees, Disposition fees [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | [2] | 0 | 0 | 0 | 103,020 | |
Due to Related Parties | [2] | 0 | 0 | 0 | ||
Due from Related Parties | [2] | 0 | 0 | 0 | ||
Due To Other [Member] | ||||||
Related Party Transaction, Expenses from Transactions with Related Party | 18,413 | $ 17,269 | 67,079 | $ 17,269 | ||
Due to Related Parties | 0 | 0 | 0 | |||
Due from Related Parties | $ 0 | $ 0 | $ 0 | |||
[1] | Property management fees are included in “property expenses” in the accompanying condensed consolidated statements of operations. | |||||
[2] | Disposition fees for the nine months ended September 30, 2017 are presented as a reduction of gain on sale of real estate investment property (see Note 6). |
RELATED PARTY TRANSACTIONS (D_2
RELATED PARTY TRANSACTIONS (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Nov. 14, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | ||
Organization and Offering Expenses | $ 2,796,198 | $ 2,796,198 | |||||
Subsequent Event [Member] | |||||||
Reimbursement expense | $ 13,179 | ||||||
Organization and Offering Expenses [Member] | |||||||
Related Party Transaction, Expenses from Transactions with Related Party | 2,783,019 | $ 2,687,350 | |||||
Organization and Offering Expenses Payable | 0 | 0 | 57 | ||||
Advisor fees, Acquisition fees [Member] | |||||||
Related Party Transaction, Expenses from Transactions with Related Party | 0 | $ 28,956 | $ 0 | $ 671,270 | |||
Related Party Transaction, Rate | 3.00% | ||||||
Advisor fees, Acquisition fees [Member] | Maximum [Member] | |||||||
Related Party Transaction, Rate | 6.00% | ||||||
Advisor fees, Asset management fees [Member] | |||||||
Related Party Transaction, Expenses from Transactions with Related Party | 203,763 | 199,724 | $ 607,728 | 555,317 | |||
Related Party Transaction, Rate | 0.05% | ||||||
Advisor fees, Financing fee [Member] | |||||||
Related Party Transaction, Rate | 1.00% | ||||||
Advisor fees, Property management fees [Member] | |||||||
Related Party Transaction, Expenses from Transactions with Related Party | [1] | 25,763 | 24,776 | $ 74,670 | 67,419 | ||
Related Party Transaction, Rate | 1.50% | ||||||
Advisor fees, Disposition fees [Member] | |||||||
Related Party Transaction, Expenses from Transactions with Related Party | [2] | $ 0 | $ 0 | $ 0 | $ 103,020 | ||
Related Party Transaction, Rate | 6.00% | ||||||
Leasing Commission Fees [Member] | |||||||
Related Party Transaction, Rate | 3.00% | ||||||
Operating Expenses [Member] | |||||||
Related Party Transaction, Expense Reimbursement Percentage to Average Invested Assets | 2.00% | ||||||
Related Party Transaction, Expense Reimbursement Percentage to Net Income | 25.00% | ||||||
Rich Uncles, LLC [Member] | |||||||
Repayments of Related Party Debt | $ 2,783,019 | $ 2,687,407 | |||||
Advisor or Affiliates [Member] | Advisor fees, Disposition fees [Member] | |||||||
Related Party Transaction, Rate | 3.00% | ||||||
Advisor or Affiliates [Member] | Leasing Commission Fees [Member] | |||||||
Related Party Transaction, Rate | 6.00% | ||||||
[1] | Property management fees are included in “property expenses” in the accompanying condensed consolidated statements of operations. | ||||||
[2] | Disposition fees for the nine months ended September 30, 2017 are presented as a reduction of gain on sale of real estate investment property (see Note 6). |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Textual) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Payments for Tenant Improvements | $ 395,599 | $ 553,088 |
Restricted Cash and Cash Equivalents | $ 462,140 | $ 462,140 |
SUBSEQUENT EVENTS (Details Text
SUBSEQUENT EVENTS (Details Textual) - USD ($) | 1 Months Ended | 9 Months Ended | |
Oct. 25, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | |
Share Repurchase Payable | $ 857,001 | $ 612,099 | |
Mortgages [Member] | |||
Stock Repurchased During Period, Shares | 80,394 | ||
Share Repurchase Payable | $ 857,001 | ||
Subsequent Event [Member] | |||
Dividends Payable, Amount Per Share | $ 0.00203804 | ||
Dividends Payable | $ 1,568,049 | ||
Dividend Reinvested | $ 1,059,111 |