Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Oct. 31, 2019 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | Rich Uncles Real Estate Investment Trust I | |
Entity Central Index Key | 0001672754 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 8,344,729 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Current Reporting Status | Yes |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Real estate property investments: | ||
Land | $ 29,247,323 | $ 29,691,680 |
Buildings and improvements | 96,209,944 | 97,752,787 |
Tenant origination and absorption costs | 12,033,433 | 12,701,634 |
Total investments in real estate property | 137,490,700 | 140,146,101 |
Accumulated depreciation and amortization | (18,282,945) | (15,070,564) |
Total real estate investments, net | 119,207,755 | 125,075,537 |
Cash and cash equivalents | 2,795,626 | 2,914,005 |
Restricted cash | 92,684 | 462,140 |
Tenant receivables | 1,794,809 | 1,707,835 |
Above-market lease intangibles, net | 755,372 | 781,862 |
Interest rate swap derivative assets | 31,420 | 404,267 |
Other assets | 46,917 | 176,511 |
Total assets | 124,724,583 | 131,522,157 |
Liabilities and Shareholders’ Equity | ||
Mortgage notes payable, net | 61,840,703 | 61,446,068 |
Accounts payable, accrued and other liabilities | 2,258,560 | 1,419,222 |
Sales deposit liability | 0 | 1,000,000 |
Share repurchases payable | 0 | 880,404 |
Below-market lease intangibles, net | 2,460,720 | 3,105,843 |
Due to affiliates | 0 | 59,992 |
Interest rate swap derivative liabilities | 65,857 | 0 |
Total liabilities | 66,625,840 | 67,911,529 |
Commitments and contingencies | ||
Redeemable common stock | 0 | 163,572 |
Shareholders' Equity | ||
Common stock, par value $0.01 per share, 10,000,000 shares authorized, 8,344,729 and 8,390,776 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively | 83,447 | 83,908 |
Additional paid-in-capital | 83,441,189 | 82,890,895 |
Cumulative distributions and net losses | (25,425,893) | (19,527,747) |
Total shareholders’ equity | 58,098,743 | 63,447,056 |
Total liabilities and shareholders’ equity | $ 124,724,583 | $ 131,522,157 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Par Value (in USD per share) | $ 0.01 | $ 0.01 |
Shares Authorized (in shares) | 10,000,000 | 10,000,000 |
Shares Issued (in shares) | 8,344,729 | 8,390,776 |
Shares Outstanding (in shares) | 8,344,729 | 8,390,776 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Rental income | $ 3,302,347 | $ 3,293,384 | $ 9,868,701 | $ 9,889,765 |
Expenses: | ||||
Fees to affiliates | 287,562 | 271,263 | 886,786 | 856,743 |
General and administrative | 851,721 | 230,299 | 1,452,538 | 760,559 |
Depreciation and amortization | 1,450,227 | 1,424,669 | 4,336,641 | 4,282,006 |
Interest expense | 828,987 | 714,138 | 2,674,383 | 1,830,849 |
Property expenses | 607,706 | 631,985 | 1,811,557 | 1,903,165 |
Impairment of real estate investment property | 0 | 0 | 0 | 862,190 |
Total expenses | 4,026,203 | 3,272,354 | 11,161,905 | 10,495,512 |
Other income: | ||||
Gain on disposal of real estate investment | 0 | 0 | 113,773 | 0 |
Net (loss) income | $ (723,856) | $ 21,030 | $ (1,179,431) | $ (605,747) |
Net (loss) income per share, basic and diluted (in USD per share) | $ (0.09) | $ 0 | $ (0.14) | $ (0.07) |
Weighted-average number of common shares outstanding, basic and diluted (in shares) | 8,342,328 | 8,389,726 | 8,369,004 | 8,403,649 |
Dividends declared per common share (in USD per share) | $ 0.1875 | $ 0.1875 | $ 0.5625 | $ 0.5625 |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Shareholders' Equity (Unaudited) - USD ($) | Total | Common Stock | Additional Paid-in- Capital | Cumulative Distributions and Net Losses |
Beginning balance (in shares) at Dec. 31, 2017 | 8,358,254 | |||
Beginning balance at Dec. 31, 2017 | $ 70,086,370 | $ 83,583 | $ 82,350,273 | $ (12,347,486) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Issuance of common stock (in shares) | 299,568 | |||
Issuance of common stock | 3,190,204 | $ 2,995 | 3,187,209 | |
Stock compensation expense (in shares) | 12,900 | |||
Stock compensation expense | 137,514 | $ 129 | 137,385 | |
Reclassifications from redeemable common stock | 187,572 | 187,572 | ||
Repurchase of common stock (in shares) | (303,033) | |||
Repurchase of common stock | (3,189,931) | $ (3,030) | (3,186,901) | |
Dividends declared | (4,715,616) | (4,715,616) | ||
Net (loss) income | (605,747) | (605,747) | ||
Endig balance (in shares) at Sep. 30, 2018 | 8,367,689 | |||
Ending balance at Sep. 30, 2018 | 65,090,366 | $ 83,677 | 82,675,538 | (17,668,849) |
Beginning balance (in shares) at Jun. 30, 2018 | 8,395,239 | |||
Beginning balance at Jun. 30, 2018 | 66,487,474 | $ 83,952 | 82,519,638 | (16,116,116) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Issuance of common stock (in shares) | 99,585 | |||
Issuance of common stock | 1,061,579 | $ 996 | 1,060,583 | |
Stock compensation expense (in shares) | 4,800 | |||
Stock compensation expense | 51,168 | $ 48 | 51,120 | |
Reclassifications from redeemable common stock | 449,298 | 449,298 | ||
Repurchase of common stock (in shares) | (131,935) | |||
Repurchase of common stock | (1,406,420) | $ (1,319) | (1,405,101) | |
Dividends declared | (1,573,763) | (1,573,763) | ||
Net (loss) income | 21,030 | 21,030 | ||
Endig balance (in shares) at Sep. 30, 2018 | 8,367,689 | |||
Ending balance at Sep. 30, 2018 | 65,090,366 | $ 83,677 | 82,675,538 | (17,668,849) |
Beginning balance (in shares) at Dec. 31, 2018 | 8,390,776 | |||
Beginning balance at Dec. 31, 2018 | 63,447,056 | $ 83,908 | 82,890,895 | (19,527,747) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Issuance of common stock (in shares) | 99,097 | |||
Issuance of common stock | 1,047,460 | $ 991 | 1,046,469 | |
Stock compensation expense (in shares) | 14,900 | |||
Stock compensation expense | 157,500 | $ 148 | 157,352 | |
Reclassifications from redeemable common stock | 1,043,976 | 1,043,976 | ||
Repurchase of common stock (in shares) | (160,044) | |||
Repurchase of common stock | (1,699,103) | $ (1,600) | (1,697,503) | |
Dividends declared | (4,718,715) | (4,718,715) | ||
Net (loss) income | (1,179,431) | (1,179,431) | ||
Endig balance (in shares) at Sep. 30, 2019 | 8,344,729 | |||
Ending balance at Sep. 30, 2019 | 58,098,743 | $ 83,447 | 83,441,189 | (25,425,893) |
Beginning balance (in shares) at Jun. 30, 2019 | 8,337,161 | |||
Beginning balance at Jun. 30, 2019 | 60,305,821 | $ 83,372 | 83,361,265 | (23,138,816) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Stock compensation expense (in shares) | 7,568 | |||
Stock compensation expense | 79,999 | $ 75 | 79,924 | |
Dividends declared | (1,563,221) | (1,563,221) | ||
Net (loss) income | (723,856) | (723,856) | ||
Endig balance (in shares) at Sep. 30, 2019 | 8,344,729 | |||
Ending balance at Sep. 30, 2019 | $ 58,098,743 | $ 83,447 | $ 83,441,189 | $ (25,425,893) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (1,179,431) | $ (605,747) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 4,336,641 | 4,282,006 |
Provision for doubtful accounts | 0 | 64,944 |
Stock compensation expense | 157,500 | 137,514 |
Amortization of deferred rents | (108,918) | (257,731) |
Amortization of deferred financing costs | 305,022 | 259,344 |
Amortization of above-market leases | 26,490 | 26,490 |
Amortization of below-market leases | (645,123) | (645,123) |
Impairment of real estate investment, net | 0 | 862,190 |
Gain on disposal of real estate investment | (113,773) | 0 |
Unrealized loss (gain) on interest rate swap valuation | 438,704 | (357,520) |
Changes in operating assets and liabilities: | ||
Decrease (increase) in tenant receivables | 12,884 | (61,808) |
Decrease (increase) in other assets | 129,594 | (93,604) |
Increase in accounts payable, accrued and other liabilities | 946,057 | 281,114 |
(Decrease) increase in due to affiliates | (59,992) | 44,434 |
Net cash provided by operating activities | 4,245,655 | 3,936,503 |
Cash Flows from Investing Activities: | ||
Additions to existing real estate investments | (310,644) | (423,631) |
Repayment of refundable sales deposit | (1,000,000) | 0 |
Net cash used in investing activities | (1,310,644) | (423,631) |
Cash Flows from Financing Activities: | ||
Proceeds from mortgage note payable | 3,000,000 | 0 |
Repayments of mortgage notes payable | (927,624) | (901,298) |
Payment of deferred financing costs to third parties | (94,864) | 0 |
Payments of deferred financing costs to affiliates | (30,000) | 0 |
Refundable loan deposit | 0 | (10,000) |
Payment of offering costs to affiliates | 0 | (95,612) |
Repurchase of common stock | (1,699,103) | (3,189,931) |
Dividends paid to common shareholders | (3,671,255) | (1,525,412) |
Net cash used in financing activities | (3,422,846) | (5,722,253) |
Net decrease in cash, cash equivalents and restricted cash | (487,835) | (2,209,381) |
Cash, cash equivalents and restricted cash, beginning of period | 3,376,145 | 6,027,807 |
Cash, cash equivalents and restricted cash, end of period | 2,888,310 | 3,818,426 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid for interest | 2,123,202 | 1,870,216 |
Supplemental Schedule of Noncash Investing and Financing Activities: | ||
Reclassifications from redeemable common stock | 1,043,976 | 187,572 |
(Decrease) increase in share redemptions payable | (880,404) | 244,902 |
Reinvested dividends from common shareholders | $ 1,047,460 | $ 3,190,204 |
BUSINESS AND ORGANIZATION
BUSINESS AND ORGANIZATION | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Business and Organization | 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 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. As of December 31, 2018 , the Company held a 70.14% interest in one property subject to a tenancy-in-common agreement. On May 9, 2019, the Company purchased the remaining 29.86% interest in this property, resulting in full 100% ownership as further described in Note 5. The Company is externally managed by its advisor and sponsor, BrixInvest, LLC (f/k/a Rich Uncles, LLC) ("BrixInvest" or the "Advisor") whose members include Aaron S. Halfacre, the Company’s Chief Executive Officer and President, and Ray Wirta, the Company's Chairman of the Board of Trust Managers (the "Board"). 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, 2020. 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. The Advisor also serves, directly or through an affiliate, as the advisor and sponsor for affiliated companies RW Holdings NNN REIT, Inc. ("NNN REIT") and BRIX REIT, Inc. On January 11, 2019, the Company’s Board approved and established an estimated net asset value ("NAV") per share of the Company’s common stock of $10.57 (unaudited). Effective January 14, 2019, the purchase price per share of the Company’s common stock in the Company’s dividend reinvestment plan and share repurchase plan changed from $10.66 (unaudited) to $10.57 (unaudited). Pending Merger Transaction The following information summarizes certain of the more detailed information that appears in the Joint Proxy Statement and Prospectus dated October 22, 2019 (the “Joint Proxy Statement”) filed by the Company with the SEC on Schedule 14A on October 22, 2019 and as Exhibit 2.1 to this Quarterly Report on Form 10-Q. In January 2019, the Company announced that it had commenced a review of strategic alternatives to include the marketing of its entire 20-property real estate portfolio for disposition by sale, merger or other transaction structure, subject to the approval of its shareholders. Numerous potential acquirors participated in a public multi-round bidding process directed by Cushman & Wakefield. The bidding process resulted in a short list of bidders submitting acquisition bids to a special committee of the Company's independent trust managers (the "Special Committee"), for review, which bidders included RW Holdings NNN REIT, Inc. ("NNN REIT") an affiliated real estate investment trust that is sponsored by the Company's Advisor. Following a review of all bids, the Special Committee commenced an exclusive due diligence process with NNN REIT in order to determine whether a potential transaction might result. NNN REIT currently owns 25 single tenant operating retail, office and industrial assets, one parcel of land, a 72.7% interest in an operating office asset and approximately 4.8% of the Company's shares. On September 20, 2019 the Company announced that it had entered into an agreement and plan of merger (the "Merger Agreement") pursuant to which a business combination would be effected by its merger with a subsidiary of NNN REIT (the "Merger") and the Company's existence would cease. The Merger is subject to certain closing conditions, including the approval of the Merger by both the Company's shareholders and NNN REIT’s stockholders, as discussed below. The Merger is expected to close as soon as practicable following the Company's special meeting of shareholders, which is scheduled to be held on December 17, 2019 (the "Special Meeting") and the satisfaction of the closing conditions. The combined company following the Merger will retain the name “RW Holdings NNN REIT, Inc.” The Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each of the Company's common shares (the “REIT I Common Shares”) issued and outstanding immediately prior to the effective time of the Merger (other than REIT I Common Shares owned by NNN REIT or any wholly-owned subsidiary of NNN REIT) will be automatically canceled and retired, and converted into the right to receive one share of Class C common stock of NNN REIT (the “Class C Common Stock”), with any fractional REIT I Common Shares converted into a corresponding number of fractional shares of Class C Common Stock. On October 22, 2019, the Company filed the Joint Proxy Statement on Schedule 14A with the U.S. Securities and Exchange Commission (the “SEC”) with NNN REIT relating to the Company's special meeting of shareholders to be held to vote on the Merger and a related amendment to the Company's Declaration of Trust (the "Amendment"). Shareholders of record on October 21, 2019 are eligible to vote on the proposal to approve the Merger and the Amendment. The Company suspended the redemptions of common stock under its share repurchase program in January 2019 and suspended its dividend reinvestment plan in April 2019. Redemptions through December 15, 2018 were paid in January 2019 and redemptions through the January 2019 suspension were paid in April 2019. All subsequent dividend payments have been or will be paid in cash. The suspension of the dividend reinvestment plan will remain in place until such time that a determination can be made by the Board pertaining to the ultimate resolution of the pending Merger. If the Merger is approved, the amount of future distributions, and the declaration and payment thereof, and whether or not to reinstate the dividend reinvestment plan will be determined by the board of directors of the post-Merger company (the "Combined Company" after consideration of the Combined Company’s financial condition and such other factors as the board of directors of the Combined Company deems relevant. During the pendency of the Special Meeting, and thereafter if the Merger is not approved, the Company’s operating performance and the timing and amount of future distributions is subject to risks and uncertainties as described under “Risk Factors” Part II, Item 1A below, in the Joint Proxy Statement and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 . |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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 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, 2018 audited consolidated financial statements included in the Company’s Form 10-K filed with the SEC on March 27, 2019. The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated 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, 2018 condensed consolidated balance sheet included herein was derived from the audited consolidated 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 Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an existing price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy, which is based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value, is as follows: Level 1: quoted prices in active markets for identical assets or liabilities; Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 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 values 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 and property tax impounds. Other Comprehensive Income (Loss) For all periods presented, other comprehensive income (loss) is the same as net income (loss). Reclassifications Certain prior period revenue account balances in the unaudited condensed consolidated statement of operations have been reclassified to conform with the current period presentation. The reclassifications had no impact on net income. Per Share Data Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share of common stock equals basic earnings (loss) per share of common stock as there were no potentially dilutive securities outstanding during the three and nine months ended September 30, 2019 and 2018 . 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. The following are the Company’s updated significant accounting policies that have been affected by the adoption of Topic 842 as discussed below in New Accounting Standards Issued and Adopted: Revenue Recognition The Company recognizes rental income, tenant reimbursements and other lease-related revenue when all of the following criteria are met: (i) the agreement has been fully executed and delivered, (ii) services have been rendered, (iii) the amount is fixed or determinable and (iv) payment has been received or the collectability of the amount due is probable. Lease termination fees are amortized over the remaining lease term, if applicable. If there is no remaining lease term, they are recognized when received and realized. Minimum annual rental revenues are recognized in rental income on a straight-line basis over the non-cancellable term of the related lease. The recognition of rental income commences when the tenant takes possession or controls the physical use of the leased property. In order for the tenant to take possession, the leased property must be substantially complete and ready for its intended use. In order to determine whether the leased property is substantially complete and ready for its intended use, the Company begins by determining whether the Company or the tenant owns the tenant improvements, if the lease agreement provides for tenant improvements. Tenant improvement ownership is determined based on various factors including, but not limited to: • whether the lease stipulates how a tenant improvement allowance may be spent; • whether the amount of a tenant improvement allowance is in excess of market rates; • whether the tenant or landlord retains legal title to the improvements at the end of the lease term; • whether the tenant improvements are unique to the tenant or general-purpose in nature; and • whether the tenant improvements are expected to have any residual value at the end of the lease. When the Company concludes that it is the owner of tenant improvements, rental income recognition begins when the tenant takes possession of the completed property, which is generally when Company-owned tenant improvements are substantially complete. In addition, when the Company concludes that it is the owner of tenant improvements, the Company records the costs to construct the tenant improvements, including costs paid for or reimbursed by the tenants, as a capital asset. For these tenant improvements, the Company records the amount funded by or reimbursed by the tenants as deferred revenue, which is amortized on a straight-line basis as additional rental income over the term of the related lease. When the Company concludes that the tenant is the owner of tenant improvements, rental income recognition begins when the tenant takes possession or controls the physical use of the leased property. Any tenant improvement allowance (including amounts that the tenant can take in the form of cash or a credit against its rent) that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. In addition, when the Company concludes that the tenant is the owner of tenant improvements for accounting purposes, the Company records its contribution towards such improvements as a lease incentive, which is included in deferred leasing costs and acquisition-related intangible assets, net in the unaudited condensed consolidated balance sheets and amortized as a reduction to rental income on a straight-line basis over the term of the related lease. Tenant Reimbursements Tenant reimbursements, consisting of amounts due from tenants for common area maintenance, property taxes and other recoverable costs, are recognized in rental income in the period the recoverable costs are incurred. Tenant reimbursements are recorded on a gross basis when the Company pays the associated costs directly to third-party vendors and is reimbursed subsequently by the tenants. Allowances for Tenant and Deferred Rent Receivables The Company carries its tenant and deferred rent receivables net of allowances for amounts that may not be collected. Prior to the Company’s adoption of Topic 842 on January 1, 2019, the allowances are increased or decreased through provision for bad debts in the Company’s unaudited condensed consolidated statement of operations. Upon the adoption of Topic 842 on January 1, 2019, the determination of the adequacy of the Company's allowances for tenant and deferred rent receivables includes a binary assessment of whether the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any current and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination. For tenant and deferred rent receivables deemed probable of collection, the Company may also record an allowance under other authoritative GAAP depending upon the Company’s evaluation of the individual receivables, specific credit enhancements, current economic conditions, and other relevant factors. Such allowances are recorded as increases or decreases through rental income in the Company’s consolidated statements of operations. Based on the Company’s evaluation as of September 30, 2019 and December 31, 2018 , the Company determined that its tenant and deferred rent receivables are probable of collection. Recent Accounting Pronouncements New Accounting Standards Issued and Adopted Effective January 1, 2019, the Company adopted Financial Accounting Standards Board ("FASB") ASU No. 2016-02 "Leases (Topic 842)" and the related FASB ASU Nos. 2018-10, 2018-11, 2018-20 and 2019-01, which provide practical expedients, technical corrections and improvements for certain aspects of ASU 2016-02, on a modified retrospective basis (collectively "Topic 842"). Topic 842 establishes a single comprehensive model for entities to use in accounting for leases and supersedes the existing leasing guidance. Topic 842 applies to all entities that enter into leases. Lessees are required to report assets and liabilities that arise from leases. Lessor accounting has largely remained unchanged; however, certain refinements were made to conform with revenue recognition guidance, specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. The Company currently does not have any exposure to Topic 842 from the perspective of a lessee as the operating lease is borne by the Sponsor. The Company's exposure to Topic 842 is primarily as a lessor. The Company has elected to apply the applicable practical expedients provided by Topic 842. Lessor Accounting As a lessor, the Company’s leases with tenants generally provide for the lease of real estate properties, as well as common area maintenance, property taxes and other recoverable costs. Under Topic 842, the lease of space is considered a lease component while the common area maintenance, property taxes and other recoverable costs billings are considered nonlease components, which fall under revenue recognition guidance in Topic 606. However, upon adopting the guidance in Topic 842, the Company determined that its tenant leases met the criteria to apply the practical expedient provided by ASU 2018-11 to recognize the lease and non-lease components together as one single component. This conclusion was based on the consideration that 1) the timing and pattern of transfer of the nonlease components and associated lease component are the same, and 2) the lease component, if accounted for separately, would be classified as an operating lease. As the lease of properties is the predominant component of the Company’s leasing arrangements, the Company accounted for all lease and nonlease components as one-single component under Topic 842. As a result, the adoption of Topic 842 did not have any impact on the Company’s timing or pattern of recognition of rental revenues as compared to previous guidance. To reflect recognition as one lease component, rental income and tenant reimbursements and other lease related property income that meet the requirements of the practical expedient provided by ASU 2018-11 have been combined under rental income subsequent to the adoption of Topic 842 for the three and nine months ended September 30, 2019 in the Company’s unaudited condensed consolidated statements of operations. The Company also made conforming reclassifications for the prior year’s tenant reimbursements. For the three month periods ended September 30, 2019 and 2018 , tenant reimbursements included in rental income amounted to $568,745 and $552,276 , respectively, and for the nine month periods ended September 30, 2019 and 2018 , tenant reimbursements included in rental income amounted to $1,669,100 and $1,667,132 , respectively. Prior to the adoption of Topic 842, lessor costs for certain services directly reimbursed by tenants have already been presented by the Company on a gross basis in revenues and expenses. Leasing Costs Upon adoption of Topic 842, the Company elected to apply the package of practical expedients provided and did not reassess the following as of January 1, 2019: 1) whether any expired or existing contracts are leases or contain leases; 2) the lease classification for any expired or existing leases; and 3) initial direct costs for any existing leases. Under Topic 842, initial direct costs for both lessees and lessors would include only those costs that are incremental to the arrangement and would not have been incurred if the lease had not been obtained. As a result, beginning January 1, 2019, the Company will no longer capitalize internal leasing costs and third-party legal leasing costs and will instead expense these costs as incurred. These expenses will be included in legal leasing costs under general and administrative expenses in the unaudited condensed consolidated statements of operations. During the three and nine months ended September 30, 2019 , the Company did not incur any indirect leasing costs which would have been capitalized prior to the adoption of Topic 842. The election of the package of practical expedients described above permits us to continue to account for our leases that commenced before January 1, 2019 under the previously existing lease accounting guidance for the remainder of their lease terms, and to apply the new lease accounting guidance to leases commencing or modified after January 1, 2019. Allowances for Tenant and Deferred Rent Receivables Upon the adoption of Topic 842 on January 1, 2019, the Company’s determination of the adequacy of its allowances for tenant receivables includes a binary assessment of whether or not the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination. In addition, for tenant and deferred rent receivables deemed probable of collection the Company also may record an allowance under other authoritative GAAP depending upon the Company’s evaluation of the individual receivables, specific credit enhancements, current economic conditions, and other relevant factors. Such allowances are recorded as increases or decreases through rental income in the Company’s unaudited condensed consolidated statements of operations. New Accounting Standards Recently Issued and Not Yet Adopted 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 consolidated financial statements. |
CONDENSED CONSOLIDATED BALANC_3
CONDENSED CONSOLIDATED BALANCE SHEETS DETAILS | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Condensed Consolidated Balance Sheet Details | CONDENSED CONSOLIDATED BALANCE SHEETS DETAILS Tenant Receivables Tenant receivables, net consisted of the following: September 30, December 31, Straight-line rent $ 1,499,134 $ 1,399,276 Tenant rent 92,050 200,301 Unbilled tenant reimbursements 203,625 108,258 Total $ 1,794,809 $ 1,707,835 Accounts Payable, Accrued and Other Liabilities Accounts payable, accrued and other liabilities were comprised of the following: September 30, December 31, Accounts payable $ 45,611 $ 52,057 Accrued expenses (a) 1,237,146 184,441 Accrued interest payable 223,238 288,437 Unearned rent 482,459 624,181 Tenant security deposits 270,106 270,106 Total $ 2,258,560 $ 1,419,222 (a) Accrued expenses as of September 30, 2019 include $674,832 for Merger expenses, including $500,000 paid to SunTrust Robinson Humphrey, Inc. (SunTrust") in October 2019 for the fairness opinion that they provided to the Special Committee in September 2019, along with SunTrust's legal fees and other expenses, plus legal fees for the Special Committee's legal counsel. |
REAL ESTATE PROPERTY INVESTMENT
REAL ESTATE PROPERTY INVESTMENTS | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Real Estate Property Investments | REAL ESTATE PROPERTY INVESTMENTS The following table provides summary information regarding the Company’s 20 real estate investments as of September 30, 2019 : Property Location Acquisition Date Property Type Land, Building and Improvements Tenant Origination and Absorption Costs Accumulated Depreciation and Amortization Total Real Estate Investments, Net Chevron Gas Station San Jose, CA 5/29/2015 Retail $ 2,775,000 $ — $ (169,586 ) $ 2,605,414 Levins Sacramento, CA 8/19/2015 Industrial 3,750,000 2,500 (878,826 ) 2,873,674 Chevron Gas Station (Note 5) Roseville, CA 9/30/2015 Retail 2,800,000 — (386,243 ) 2,413,757 Island Pacific Supermarket Elk Grove, CA 10/1/2015 Retail 3,151,461 568,539 (634,347 ) 3,085,653 Dollar General Bakersfield, CA 11/11/2015 Retail 4,632,567 689,020 (744,153 ) 4,577,434 Rite Aid Lake Elsinore, CA 12/7/2015 Retail 6,663,446 968,285 (904,592 ) 6,727,139 PMI Preclinical San Carlos, CA 12/9/2015 Industrial 8,920,000 — (779,577 ) 8,140,423 EcoThrift Sacramento, CA 3/17/2016 Retail 4,496,993 541,729 (858,090 ) 4,180,632 GSA (MSHA) Vacaville, CA 4/5/2016 Office 3,011,583 456,645 (495,084 ) 2,973,144 PreK San Antonio San Antonio, TX 4/8/2016 Retail 11,851,540 1,593,451 (3,157,856 ) 10,287,135 Dollar Tree Morrow, GA 4/22/2016 Retail 1,312,491 206,844 (322,782 ) 1,196,553 Dinan Cars Morgan Hill, CA 6/21/2016 Industrial 4,651,845 654,155 (1,251,587 ) 4,054,413 Solar Turbines San Diego, CA 7/21/2016 Office 5,738,978 389,718 (629,078 ) 5,499,618 Amec Foster San Diego, CA 7/21/2016 Industrial 7,010,799 485,533 (796,376 ) 6,699,956 ITW Rippey El Dorado, CA 8/18/2016 Industrial 6,299,982 407,316 (926,714 ) 5,780,584 Dollar General Big Spring Big Spring, TX 11/4/2016 Retail 1,161,647 112,958 (87,326 ) 1,187,279 Gap Rocklin, CA 12/1/2016 Office 7,220,909 677,192 (892,853 ) 7,005,248 L-3 Communications San Diego, CA 12/23/2016 Industrial 11,084,072 961,107 (1,127,548 ) 10,917,631 Sutter Health Rancho Cordova, CA 3/15/2017 Office 24,256,632 2,870,258 (2,945,416 ) 24,181,474 Walgreens Santa Maria, CA 6/29/2017 Retail 4,667,322 448,183 (294,911 ) 4,820,594 $ 125,457,267 $ 12,033,433 $ (18,282,945 ) $ 119,207,755 Current Year Acquisitions and Dispositions There were no property acquisitions during the nine months ended September 30, 2019 and 2018 . See Note 5 regarding an increase in Chevron Gas Station in Roseville, CA ownership from 70.14% to 100% . See Note 6 regarding the March 13, 2019 foreclosure sale of a property previously held in Antioch, California. Operating Leases The Company’s real estate properties are primarily leased to tenants under triple-net or double-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 news 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, 2019 , the aggregate future minimum contractual rental income due under the Company’s non-cancelable operating leases, excluding any renewal periods, are as follows: October through December 2019 $ 2,511,047 2020 10,173,108 2021 9,184,307 2022 7,638,623 2023 5,866,735 2024 5,351,961 Thereafter 22,433,451 $ 63,159,232 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, 2019 and 2018 was as follows: Property and Location Three Months Ended Three Months Ended September 30, 2018 Revenue Percentage of Total Revenue Revenue Percentage of Total Revenue Sutter Health, Rancho Cordova, CA $ 659,936 20.2 % $ 663,998 20.2 % PreK San Antonio, San Antonio, TX $ 400,359 12.2 % $ 386,681 11.7 % Property and Location Nine Months Ended Nine Months Ended Revenue Percentage of Total Revenue Revenue Percentage of Total Revenue Sutter Health, Rancho Cordova, CA $ 1,983,965 20.2 % $ 2,039,643 20.6 % PreK San Antonio, San Antonio, TX $ 1,219,672 12.5 % $ 1,242,782 12.6 % Asset Concentration The Company’s portfolio’s asset concentration (greater than 10% of total assets) as of September 30, 2019 and December 31, 2018 were as follows: September 30, 2019 December 31, 2018 Property and Location Net Carrying Percentage of Net Carrying Value Percentage of Total Assets Sutter Health, Rancho Cordova, CA $ 24,181,474 19.4 % $ 25,050,613 19.0 % Intangibles As of September 30, 2019 , the Company’s intangibles were as follows: Tenant Origination and Absorption Costs Above-Market Lease Intangibles Below-Market Lease Intangibles Cost $ 12,033,433 $ 872,408 $ (5,296,683 ) Accumulated amortization (4,961,085 ) (117,036 ) 2,835,963 Net amount $ 7,072,348 $ 755,372 $ (2,460,720 ) Amortization of intangible assets over the next five years is expected to be as follows: Tenant Origination and Absorption Costs Above-Market Lease Intangibles Below-Market Lease Intangibles October through December 2019 $ 391,005 $ 8,830 $ (215,041 ) 2020 1,563,083 35,320 (860,165 ) 2021 1,563,083 35,320 (667,541 ) 2022 832,144 35,320 (201,982 ) 2023 687,474 35,320 (113,651 ) 2024 479,057 35,320 (113,651 ) Thereafter 1,556,502 569,942 (288,689 ) Total $ 7,072,348 $ 755,372 $ (2,460,720 ) Weighted average remaining amortization period 8.1 years 12.4 years 4.2 years |
SALE AND REPURCHASE OF INTEREST
SALE AND REPURCHASE OF INTEREST IN REAL ESTATE INVESTMENT PROPERTY | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Sale and Repurchase of Interest in Real Estate Investment Property | SALE AND REPURCHASE OF INTEREST IN REAL ESTATE INVESTMENT PROPERTY In March 2016, the Company entered into a tenancy-in-common agreement and sold an undivided 29.86% interest in the Chevron Gas Station located in Roseville, CA for $1,000,000 . The purchaser had the right to require the Company to repurchase their interest in the property during the period from March 1, 2018 through March 1, 2019 for the same amount as the sale. Therefore, the sale did not qualify for sales recognition under ASC 360 for financial reporting purposes and the transaction was 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. Following the purchaser's notice of exercise of the put option in the tenancy-in-common agreement on February 21, 2019, the Company and the owner of the 29.86% tenant-in-common interest in the property entered into a purchase and sale agreement whereby the Company agreed to acquire the 29.86% tenant-in-common interest in the property for $1,000,000 no later than May 9, 2019. The transaction was completed on May 9, 2019 and the Company now owns 100% of this Roseville, CA property. The sales deposit liability of $1,000,000 was presented on the December 31, 2018 condensed consolidated balance sheet. The interest expense recorded as a result of this transaction was $0 and $13,751 for the three months ended September 30, 2019 and 2018 , respectively, and $18,334 and $41,252 for the nine months ended September 30, 2019 and 2018 , respectively (see Note 7). |
DISPOSAL OF REAL ESTATE INVESTM
DISPOSAL OF REAL ESTATE INVESTMENT PROPERTY | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Disposal of Real Estate Investment Property | DISPOSAL OF REAL ESTATE INVESTMENT PROPERTY The Company’s Antioch, California property, which was previously leased primarily by Chase Bank until December 31, 2017 , was relinquished in a foreclosure sale on March 13, 2019. As of the foreclosure date, the Antioch, California property had a net book value of $1,850,845 and a related mortgage loan balance of $1,964,618 , including accrued interest and expected costs of foreclosure proceedings. During the first quarter of 2019 , the Company recorded the difference of $113,773 betwe en the net book value of the property foreclosed and the net carrying value of the mortgage loan as gain on disposal of real estate investment in other income in the Company's condensed consolidated statement of operations. The Company had previously determined that due to the decline in expected rental rates and difficulties re-leasing the 5,660 square feet of space at the Antioch, California property, it was necessary to record an impairment charge of $862,190 for the nine months ended September 30, 2018 . The impairment charge was 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. Having not reached any agreement with the lender when the August 2018 mortgage payment came due, the Company’s special purpose subsidiary defaulted on the mortgage loan. The book value of the Antioch property after the impairment charge was less than 2.0% of the Company’s total investments in real estate property. The loan in default was 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 did not cross-default any of these other loans. The Company continued to accrue default interest and penalties, as well as property taxes, insurance and the lender’s legal fees and costs through the foreclosure process. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Debt | DEBT Mortgage Notes Payable As of September 30, 2019 and December 31, 2018 , the Company’s mortgage notes payable consisted of the following: Collateral 2019 Principal Amount 2018 Principal Amount Contractual Interest Rate (1) Effective Interest Rate (1) Loan Maturity Chase Bank and Great Clips $ — $ 1,866,364 4.37% 4.37 % 2/5/2019 Levins 2,091,487 2,125,703 One-month LIBOR + 1.81% 3.74 % 1/5/2021 Island Pacific Supermarket 1,901,859 1,932,973 One-month LIBOR + 1.81% 3.74 % 1/5/2021 Dollar General Bakersfield 2,338,007 2,378,106 One-month LIBOR + 1.90% 3.38 % 3/5/2021 Rite Aid 3,681,078 3,744,915 One-month LIBOR + 1.75% 3.25 % 5/5/2021 PMI Preclinical 4,142,833 4,213,887 One-month LIBOR + 1.90% 3.38 % 3/5/2021 EcoThrift 2,655,472 2,703,239 One-month LIBOR + 1.75% 2.96 % 7/5/2021 GSA (MSHA) 1,807,294 1,839,454 One-month LIBOR + 1.75% 3.00 % 8/5/2021 PreK San Antonio 5,165,587 5,239,125 4.25% 4.25 % 12/1/2021 Dinan Cars 2,724,641 2,764,937 One-month LIBOR + 1.75% 4.02 % 1/5/2022 Solar Turbines, Amec Foster, ITW Rippey 9,488,970 9,648,214 3.35% 3.35 % 11/1/2026 Dollar General Big Spring 613,653 621,737 4.69% 4.69 % 3/13/2022 Gap 3,661,749 3,714,623 4.15% 4.15 % 8/1/2023 L-3 Communications 5,309,254 5,380,085 4.50% 4.50 % 4/1/2022 Sutter Health 14,217,156 14,419,666 4.50% 4.50 % 3/9/2024 Walgreens 3,000,000 — One-month LIBOR + 5.00% 7.50 % 5/6/2020 Total mortgage notes payable 62,799,040 62,593,028 Less unamortized deferred financing costs (958,337 ) (1,146,960 ) Mortgage notes payable, net $ 61,840,703 $ 61,446,068 (1) Contractual interest rate represents the interest rate in effect under the mortgage notes payable as of September 30, 2019 . Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2019 (consisting of the contractual interest rate and the effect of the interest rate swap, if applicable) (see Note 8). The Company’s independent trust managers and the board of trust managers have set the Company’s maximum leverage ratio at 50% . Factors considered in setting the leverage ratio include 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. As of September 30, 2019 , the Company's leverage ratio was approximately 46% . The mortgage notes payable provide for monthly payments of principal and interest and 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 was in compliance with all terms and conditions of the mortgage loan agreements as of September 30, 2019 and December 31, 2018 . As discussed in Note 6, the Company relinquished the Chase Bank/Great Clips property in Antioch, California in a foreclosure sale on March 13, 2019 which discharged the related mortgage note payable including accrued interest. As of the foreclosure date, the Antioch, California property had a net book value of $1,850,845 and a related mortgage loan balance of $1,964,618 , including accrued interest and expected costs of foreclosure proceedings. During the first nine months of 2019 , the Company recorded the difference of $113,773 between the net book value of the property foreclosed and the net carrying value of the mortgage loan as gain on disposal of real estate investment in other income in the Company's unaudited condensed consolidated statement of operations. The following were the face value, carrying amount and fair value of the Company’s mortgage notes payable (Level 3 measurement): September 30, 2019 December 31, 2018 Face value Carrying value Fair value Face Value Carrying Value Fair Value $ 62,799,040 $ 61,840,703 $ 63,412,918 $ 62,593,028 $ 61,446,068 $ 61,283,165 Disclosures of the fair values of financial instruments are based on pertinent information available to the Company as of September 30, 2019 and December 31, 2018 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 following summarizes the future principal payments on the Company’s mortgage notes payable as of September 30, 2019 : October through December 2019 $ 305,282 2020 4,286,152 2021 23,878,718 2022 8,888,775 2023 3,967,628 2024 13,219,282 Thereafter 8,253,203 Total principal 62,799,040 Less deferred financing costs, net (958,337 ) Net principal $ 61,840,703 Interest Expense The following is a reconciliation of the components of interest expense for the three and nine months ended September 30, 2019 and 2018 : Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Mortgage notes payable: Interest expense incurred $ 693,774 $ 680,468 $ 2,040,218 $ 1,930,036 Amortization of deferred financing costs 114,888 86,448 305,022 259,344 Loss (gain) on interest rate swaps (1) 20,325 (66,529 ) 310,809 (399,783 ) Sales deposit liability: Interest expense (see Note 5) — 13,751 18,334 41,252 Total interest expense $ 828,987 $ 714,138 $ 2,674,383 $ 1,830,849 (1) Includes unrealized loss (gain) on interest rate swaps of $54,538 and $(40,149) for the three months ended September 30, 2019 and 2018 , respectively, and $438,704 and $(357,520) for the nine months ended September 30, 2019 and 2018 , respectively (see Note 8). Accrued interest receivable, net of $6,959 and $12,432 at September 30, 2019 and December 31, 2018 , respectively, represents the unsettled portion of the interest rate swaps for the period from the most recent settlement date through respective balance sheet dates. |
INTEREST RATE SWAP DERIVATIVES
INTEREST RATE SWAP DERIVATIVES | 9 Months Ended |
Sep. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Interest Rate Swap Derivatives | 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 notional amount of the Company's interest rate swap derivative instruments 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. The following table summarizes the notional amount and other information related to the Company’s interest rate swap derivative instruments as of September 30, 2019 and December 31, 2018 : Derivative Instruments September 30, 2019 December 31, 2018 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 $ 21,342,671 One-month LIBOR/Fixed at 1.21%-2.28% 3.42 % 1.6 years 8 $ 21,703,214 One-month LIBOR/Fixed at 1.21%-2.28% 3.42 % 2.4 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, 2019 . The following table sets forth the fair value of the Company’s derivative instruments (Level 2 measurement), as well as their classification in the unaudited condensed consolidated balance sheets: Derivative Instrument September 30, 2019 December 31, 2018 Balance Sheet Location Number of Instruments Fair Value Number of Instruments Fair Value Interest Rate Swaps Asset - Interest rate swap derivatives, at fair value 5 $ 31,420 8 $ 404,267 Interest Rate Swaps Liability - Interest rate swap derivatives, at fair value 3 $ (65,857 ) — $ — The change in fair value of a derivative instrument that is not designated as a cash flow hedge is recorded as interest expense in the accompanying unaudited condensed consolidated statements of operations. None of the Company’s derivatives at September 30, 2019 or December 31, 2018 were designated as hedging instruments; therefore, the net unrealized loss (gain) recognized on interest rate swaps of $54,538 and $(40,149) for the three months ended September 30, 2019 and 2018 , respectively, and $438,704 and $(357,520) for the nine months ended September 30, 2019 and 2018 , respectively, was recorded as a component of loss (gain) on interest rate swap (see Note 7). |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS The costs incurred by the Company pursuant to the Advisory Agreement for the three and nine months ended September 30, 2019 and 2018 , as well as the related amount payable as of December 31, 2018 , are included in the table below. The amount payable is presented in the unaudited condensed consolidated balance sheets as "Due to affiliates." Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 September 30, 2019 September 30, 2018 September 30, 2018 December 31, 2018 Incurred Incurred Receivable Payable Incurred Incurred Receivable Payable Expensed: Asset management fees $ 197,562 $ 616,786 $ — $ — $ 203,763 $ 607,728 $ — $ — Reimbursable operating expense 90,000 270,000 — — 67,500 249,015 — — Fees to affiliates 287,562 886,786 — — 271,263 856,743 — — Property management fees* 25,571 76,668 — — 25,763 74,670 — — Trust managers and officers insurance and other reimbursements ** 39,269 129,785 — — 18,413 67,079 — 59,992 Reimbursable organizational and offering expenses — — — — 31,847 95,612 — — Capitalized: Financing coordination fees — 30,000 — — — — — — $ — $ — $ — $ 59,992 * Property management fees are included in "property expenses" in the accompanying unaudited condensed consolidated statements of operations. ** Trust managers and officers insurance and other reimbursements are classified within general and administrative expenses in the unaudited condensed consolidated statements of operations. Organizational and Offering Expenses During the Company’s offering of its common stock, which was terminated in July 2016, and for the dividend reinvestment plan which continued after the offering termination, 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 reimbursed the Advisor for organizational and offering expenses up to 3.0% of gross offering proceeds. As of December 31, 2018 , the Advisor had incurred organizational and offering expenses of $2,796,198 , which amount was less than the 3.0% of the gross offering proceeds received by the Company as of December 31, 2018 . Therefore, the Company has reimbursed the Advisor for all of these organization and offering expenses, representing the Company's maximum liability. Acquisition Fees The Company pays the Advisor an acquisition fee in an amount equal to 2.0% 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. The Company paid a $20,000 acquisition fee during the third quarter of 2019 in connection with the repurchase of the 29.86% tenant-in-common interest in the Chevron property described in Note 5. Since this acquisition is a repurchase transaction, the Company recorded the related acquisition fee as an expense and was reflected in fees to affiliates in the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2019 . Asset Management Fees 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. See " Loan from a Related Party" below for a discussion of the temporary deferral of asset management fees in April 2019. Financing Coordination Fees 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. The Company paid a $30,000 financing fee during the third quarter of 2019 in connection with the $3,000,000 bridge loan (see Note 7) and recorded a corresponding deferred financing cost which was presented net of accumulated amortization in the unaudited condensed consolidated balance sheet as a reduction to mortgage notes payable as of September 30, 2019. 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. See " Loan from a Related Party" below for a discussion of the temporary deferral of property management fees in April 2019. 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 6.0% 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. Operating expenses for the four fiscal quarters ended September 30, 2019 did not exceed the 2% / 25% Limitation. Related Party Investment in the Company The investment in the Company by NNN REIT totaled 403,980 shares, or an approximate 4.8% ownership interest, as of September 30, 2019 and December 31, 2018 . Loan from a Related Party On April 24, 2019, the Company obtained a $200,000 short-term loan from Mr. Wirta, the Company's Chairman of the Board, at an annual interest rate of 10% . This loan was repaid, along with accrued interest of $768 on May 8, 2019. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 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 $63,000 and $207,000 in tenant improvements as of September 30, 2019 and December 31, 2018 , respectively, for a certain property. At September 30, 2019 and December 31, 2018 , the Company had $92,684 and $462,140 , respectively, of restricted cash held by a lender to fund tenant improvements for this property. Legal and Regulatory 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. Beginning in 2017, the SEC conducted an investigation of the Company's Advisor and REITs that are affiliated with the Advisor. Recently, the Company’s Advisor proposed a settlement of the investigation to the SEC and, on September 26, 2019, the SEC accepted the settlement and entered an order (the “Order”) instituting proceedings against the Advisor pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act. The Company is not a party to the settlement and understands that the staff of the enforcement division of the SEC did not recommend any action against the Company. Under the settlement, the Advisor, without denying or admitting any substantive findings in the Order, consented to entry of the Order, finding violations by it of Section 5(b)(1) of the Securities Act and Section 15(a) of the Exchange Act. The Order does not find that the Sponsor violated any anti-fraud provisions of the federal securities laws or any other law and does not find any criminal violations or any scienter based violation involving the offer and sale of securities. Under the terms of the Order, the Advisor (i) agreed to cease-and-desist from committing or causing any future violations of Section 5(b) of the Securities Act and Section 15(a) of the Exchange Act, (ii) paid to the SEC a civil money penalty in the amount of $300,000 , and (iii) agreed to undertake that any real estate investment trust which is or was formed, organized, or advised by it, including the Company, will not distribute securities except through a registered broker-dealer. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS The Company evaluates subsequent events up until the date the unaudited condensed consolidated financial statements are issued. Dividends On October 14, 2019, the Company’s Board declared dividends based on daily record dates for the period July 1, 2019 through September 30, 2019 at a rate of $0.00203804 per share per day, or $1,564,219 , on the outstanding shares of the Company’s common stock, which the Company paid in cash on October 25, 2019. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | 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 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, 2018 audited consolidated financial statements included in the Company’s Form 10-K filed with the SEC on March 27, 2019. The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated 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, 2018 condensed consolidated balance sheet included herein was derived from the audited consolidated financial statements but does not include all disclosures or notes required by GAAP for complete financial statements. |
Use of Estimates | 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 | Fair Value Disclosures Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an existing price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy, which is based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value, is as follows: Level 1: quoted prices in active markets for identical assets or liabilities; Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 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 values 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 Restricted cash is comprised of funds which are restricted for tenant improvements and property tax impounds. |
Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) For all periods presented, other comprehensive income (loss) is the same as net income (loss). |
Reclassifications | Reclassifications Certain prior period revenue account balances in the unaudited condensed consolidated statement of operations have been reclassified to conform with the current period presentation. The reclassifications had no impact on net income. |
Per Share Data | Per Share Data Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share of common stock equals basic earnings (loss) per share of common stock as there were no potentially dilutive securities outstanding during the three and nine months ended September 30, 2019 and 2018 . |
Impairment of Investment in Real Estate Property | 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. |
Revenue Recognition | Revenue Recognition The Company recognizes rental income, tenant reimbursements and other lease-related revenue when all of the following criteria are met: (i) the agreement has been fully executed and delivered, (ii) services have been rendered, (iii) the amount is fixed or determinable and (iv) payment has been received or the collectability of the amount due is probable. Lease termination fees are amortized over the remaining lease term, if applicable. If there is no remaining lease term, they are recognized when received and realized. Minimum annual rental revenues are recognized in rental income on a straight-line basis over the non-cancellable term of the related lease. The recognition of rental income commences when the tenant takes possession or controls the physical use of the leased property. In order for the tenant to take possession, the leased property must be substantially complete and ready for its intended use. In order to determine whether the leased property is substantially complete and ready for its intended use, the Company begins by determining whether the Company or the tenant owns the tenant improvements, if the lease agreement provides for tenant improvements. Tenant improvement ownership is determined based on various factors including, but not limited to: • whether the lease stipulates how a tenant improvement allowance may be spent; • whether the amount of a tenant improvement allowance is in excess of market rates; • whether the tenant or landlord retains legal title to the improvements at the end of the lease term; • whether the tenant improvements are unique to the tenant or general-purpose in nature; and • whether the tenant improvements are expected to have any residual value at the end of the lease. When the Company concludes that it is the owner of tenant improvements, rental income recognition begins when the tenant takes possession of the completed property, which is generally when Company-owned tenant improvements are substantially complete. In addition, when the Company concludes that it is the owner of tenant improvements, the Company records the costs to construct the tenant improvements, including costs paid for or reimbursed by the tenants, as a capital asset. For these tenant improvements, the Company records the amount funded by or reimbursed by the tenants as deferred revenue, which is amortized on a straight-line basis as additional rental income over the term of the related lease. When the Company concludes that the tenant is the owner of tenant improvements, rental income recognition begins when the tenant takes possession or controls the physical use of the leased property. Any tenant improvement allowance (including amounts that the tenant can take in the form of cash or a credit against its rent) that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. In addition, when the Company concludes that the tenant is the owner of tenant improvements for accounting purposes, the Company records its contribution towards such improvements as a lease incentive, which is included in deferred leasing costs and acquisition-related intangible assets, net in the unaudited condensed consolidated balance sheets and amortized as a reduction to rental income on a straight-line basis over the term of the related lease. |
Real Estate | Tenant Reimbursements Tenant reimbursements, consisting of amounts due from tenants for common area maintenance, property taxes and other recoverable costs, are recognized in rental income in the period the recoverable costs are incurred. Tenant reimbursements are recorded on a gross basis when the Company pays the associated costs directly to third-party vendors and is reimbursed subsequently by the tenants. Allowances for Tenant and Deferred Rent Receivables The Company carries its tenant and deferred rent receivables net of allowances for amounts that may not be collected. Prior to the Company’s adoption of Topic 842 on January 1, 2019, the allowances are increased or decreased through provision for bad debts in the Company’s unaudited condensed consolidated statement of operations. Upon the adoption of Topic 842 on January 1, 2019, the determination of the adequacy of the Company's allowances for tenant and deferred rent receivables includes a binary assessment of whether the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any current and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination. For tenant and deferred rent receivables deemed probable of collection, the Company may also record an allowance under other authoritative GAAP depending upon the Company’s evaluation of the individual receivables, specific credit enhancements, current economic conditions, and other relevant factors. Such allowances are recorded as increases or decreases through rental income in the Company’s consolidated statements of operations. Based on the Company’s evaluation as of September 30, 2019 and December 31, 2018 , the Company determined that its tenant and deferred rent receivables are probable of collection. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements New Accounting Standards Issued and Adopted Effective January 1, 2019, the Company adopted Financial Accounting Standards Board ("FASB") ASU No. 2016-02 "Leases (Topic 842)" and the related FASB ASU Nos. 2018-10, 2018-11, 2018-20 and 2019-01, which provide practical expedients, technical corrections and improvements for certain aspects of ASU 2016-02, on a modified retrospective basis (collectively "Topic 842"). Topic 842 establishes a single comprehensive model for entities to use in accounting for leases and supersedes the existing leasing guidance. Topic 842 applies to all entities that enter into leases. Lessees are required to report assets and liabilities that arise from leases. Lessor accounting has largely remained unchanged; however, certain refinements were made to conform with revenue recognition guidance, specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. The Company currently does not have any exposure to Topic 842 from the perspective of a lessee as the operating lease is borne by the Sponsor. The Company's exposure to Topic 842 is primarily as a lessor. The Company has elected to apply the applicable practical expedients provided by Topic 842. Lessor Accounting As a lessor, the Company’s leases with tenants generally provide for the lease of real estate properties, as well as common area maintenance, property taxes and other recoverable costs. Under Topic 842, the lease of space is considered a lease component while the common area maintenance, property taxes and other recoverable costs billings are considered nonlease components, which fall under revenue recognition guidance in Topic 606. However, upon adopting the guidance in Topic 842, the Company determined that its tenant leases met the criteria to apply the practical expedient provided by ASU 2018-11 to recognize the lease and non-lease components together as one single component. This conclusion was based on the consideration that 1) the timing and pattern of transfer of the nonlease components and associated lease component are the same, and 2) the lease component, if accounted for separately, would be classified as an operating lease. As the lease of properties is the predominant component of the Company’s leasing arrangements, the Company accounted for all lease and nonlease components as one-single component under Topic 842. As a result, the adoption of Topic 842 did not have any impact on the Company’s timing or pattern of recognition of rental revenues as compared to previous guidance. To reflect recognition as one lease component, rental income and tenant reimbursements and other lease related property income that meet the requirements of the practical expedient provided by ASU 2018-11 have been combined under rental income subsequent to the adoption of Topic 842 for the three and nine months ended September 30, 2019 in the Company’s unaudited condensed consolidated statements of operations. The Company also made conforming reclassifications for the prior year’s tenant reimbursements. For the three month periods ended September 30, 2019 and 2018 , tenant reimbursements included in rental income amounted to $568,745 and $552,276 , respectively, and for the nine month periods ended September 30, 2019 and 2018 , tenant reimbursements included in rental income amounted to $1,669,100 and $1,667,132 , respectively. Prior to the adoption of Topic 842, lessor costs for certain services directly reimbursed by tenants have already been presented by the Company on a gross basis in revenues and expenses. Leasing Costs Upon adoption of Topic 842, the Company elected to apply the package of practical expedients provided and did not reassess the following as of January 1, 2019: 1) whether any expired or existing contracts are leases or contain leases; 2) the lease classification for any expired or existing leases; and 3) initial direct costs for any existing leases. Under Topic 842, initial direct costs for both lessees and lessors would include only those costs that are incremental to the arrangement and would not have been incurred if the lease had not been obtained. As a result, beginning January 1, 2019, the Company will no longer capitalize internal leasing costs and third-party legal leasing costs and will instead expense these costs as incurred. These expenses will be included in legal leasing costs under general and administrative expenses in the unaudited condensed consolidated statements of operations. During the three and nine months ended September 30, 2019 , the Company did not incur any indirect leasing costs which would have been capitalized prior to the adoption of Topic 842. The election of the package of practical expedients described above permits us to continue to account for our leases that commenced before January 1, 2019 under the previously existing lease accounting guidance for the remainder of their lease terms, and to apply the new lease accounting guidance to leases commencing or modified after January 1, 2019. Allowances for Tenant and Deferred Rent Receivables Upon the adoption of Topic 842 on January 1, 2019, the Company’s determination of the adequacy of its allowances for tenant receivables includes a binary assessment of whether or not the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination. In addition, for tenant and deferred rent receivables deemed probable of collection the Company also may record an allowance under other authoritative GAAP depending upon the Company’s evaluation of the individual receivables, specific credit enhancements, current economic conditions, and other relevant factors. Such allowances are recorded as increases or decreases through rental income in the Company’s unaudited condensed consolidated statements of operations. New Accounting Standards Recently Issued and Not Yet Adopted 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 consolidated financial statements. |
CONDENSED CONSOLIDATED BALANC_4
CONDENSED CONSOLIDATED BALANCE SHEETS DETAILS - (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Tenant Receivables | Tenant receivables, net consisted of the following: September 30, December 31, Straight-line rent $ 1,499,134 $ 1,399,276 Tenant rent 92,050 200,301 Unbilled tenant reimbursements 203,625 108,258 Total $ 1,794,809 $ 1,707,835 |
Accounts Payable, Accrued and Other Liabilities | Accounts payable, accrued and other liabilities were comprised of the following: September 30, December 31, Accounts payable $ 45,611 $ 52,057 Accrued expenses (a) 1,237,146 184,441 Accrued interest payable 223,238 288,437 Unearned rent 482,459 624,181 Tenant security deposits 270,106 270,106 Total $ 2,258,560 $ 1,419,222 (a) Accrued expenses as of September 30, 2019 include $674,832 for Merger expenses, including $500,000 paid to SunTrust Robinson Humphrey, Inc. (SunTrust") in October 2019 for the fairness opinion that they provided to the Special Committee in September 2019, along with SunTrust's legal fees and other expenses, plus legal fees for the Special Committee's legal counsel. |
REAL ESTATE PROPERTY INVESTME_2
REAL ESTATE PROPERTY INVESTMENTS - (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Real Estate Properties | The following table provides summary information regarding the Company’s 20 real estate investments as of September 30, 2019 : Property Location Acquisition Date Property Type Land, Building and Improvements Tenant Origination and Absorption Costs Accumulated Depreciation and Amortization Total Real Estate Investments, Net Chevron Gas Station San Jose, CA 5/29/2015 Retail $ 2,775,000 $ — $ (169,586 ) $ 2,605,414 Levins Sacramento, CA 8/19/2015 Industrial 3,750,000 2,500 (878,826 ) 2,873,674 Chevron Gas Station (Note 5) Roseville, CA 9/30/2015 Retail 2,800,000 — (386,243 ) 2,413,757 Island Pacific Supermarket Elk Grove, CA 10/1/2015 Retail 3,151,461 568,539 (634,347 ) 3,085,653 Dollar General Bakersfield, CA 11/11/2015 Retail 4,632,567 689,020 (744,153 ) 4,577,434 Rite Aid Lake Elsinore, CA 12/7/2015 Retail 6,663,446 968,285 (904,592 ) 6,727,139 PMI Preclinical San Carlos, CA 12/9/2015 Industrial 8,920,000 — (779,577 ) 8,140,423 EcoThrift Sacramento, CA 3/17/2016 Retail 4,496,993 541,729 (858,090 ) 4,180,632 GSA (MSHA) Vacaville, CA 4/5/2016 Office 3,011,583 456,645 (495,084 ) 2,973,144 PreK San Antonio San Antonio, TX 4/8/2016 Retail 11,851,540 1,593,451 (3,157,856 ) 10,287,135 Dollar Tree Morrow, GA 4/22/2016 Retail 1,312,491 206,844 (322,782 ) 1,196,553 Dinan Cars Morgan Hill, CA 6/21/2016 Industrial 4,651,845 654,155 (1,251,587 ) 4,054,413 Solar Turbines San Diego, CA 7/21/2016 Office 5,738,978 389,718 (629,078 ) 5,499,618 Amec Foster San Diego, CA 7/21/2016 Industrial 7,010,799 485,533 (796,376 ) 6,699,956 ITW Rippey El Dorado, CA 8/18/2016 Industrial 6,299,982 407,316 (926,714 ) 5,780,584 Dollar General Big Spring Big Spring, TX 11/4/2016 Retail 1,161,647 112,958 (87,326 ) 1,187,279 Gap Rocklin, CA 12/1/2016 Office 7,220,909 677,192 (892,853 ) 7,005,248 L-3 Communications San Diego, CA 12/23/2016 Industrial 11,084,072 961,107 (1,127,548 ) 10,917,631 Sutter Health Rancho Cordova, CA 3/15/2017 Office 24,256,632 2,870,258 (2,945,416 ) 24,181,474 Walgreens Santa Maria, CA 6/29/2017 Retail 4,667,322 448,183 (294,911 ) 4,820,594 $ 125,457,267 $ 12,033,433 $ (18,282,945 ) $ 119,207,755 |
Payments | As of September 30, 2019 , the aggregate future minimum contractual rental income due under the Company’s non-cancelable operating leases, excluding any renewal periods, are as follows: October through December 2019 $ 2,511,047 2020 10,173,108 2021 9,184,307 2022 7,638,623 2023 5,866,735 2024 5,351,961 Thereafter 22,433,451 $ 63,159,232 |
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, 2019 and 2018 was as follows: Property and Location Three Months Ended Three Months Ended September 30, 2018 Revenue Percentage of Total Revenue Revenue Percentage of Total Revenue Sutter Health, Rancho Cordova, CA $ 659,936 20.2 % $ 663,998 20.2 % PreK San Antonio, San Antonio, TX $ 400,359 12.2 % $ 386,681 11.7 % Property and Location Nine Months Ended Nine Months Ended Revenue Percentage of Total Revenue Revenue Percentage of Total Revenue Sutter Health, Rancho Cordova, CA $ 1,983,965 20.2 % $ 2,039,643 20.6 % PreK San Antonio, San Antonio, TX $ 1,219,672 12.5 % $ 1,242,782 12.6 % |
Asset Concentration | The Company’s portfolio’s asset concentration (greater than 10% of total assets) as of September 30, 2019 and December 31, 2018 were as follows: September 30, 2019 December 31, 2018 Property and Location Net Carrying Percentage of Net Carrying Value Percentage of Total Assets Sutter Health, Rancho Cordova, CA $ 24,181,474 19.4 % $ 25,050,613 19.0 % |
Intangible Assets | As of September 30, 2019 , the Company’s intangibles were as follows: Tenant Origination and Absorption Costs Above-Market Lease Intangibles Below-Market Lease Intangibles Cost $ 12,033,433 $ 872,408 $ (5,296,683 ) Accumulated amortization (4,961,085 ) (117,036 ) 2,835,963 Net amount $ 7,072,348 $ 755,372 $ (2,460,720 ) |
Intangible Assets, Future Amortization Expense | Amortization of intangible assets over the next five years is expected to be as follows: Tenant Origination and Absorption Costs Above-Market Lease Intangibles Below-Market Lease Intangibles October through December 2019 $ 391,005 $ 8,830 $ (215,041 ) 2020 1,563,083 35,320 (860,165 ) 2021 1,563,083 35,320 (667,541 ) 2022 832,144 35,320 (201,982 ) 2023 687,474 35,320 (113,651 ) 2024 479,057 35,320 (113,651 ) Thereafter 1,556,502 569,942 (288,689 ) Total $ 7,072,348 $ 755,372 $ (2,460,720 ) Weighted average remaining amortization period 8.1 years 12.4 years 4.2 years |
DEBT - (Tables)
DEBT - (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Debt Instruments | As of September 30, 2019 and December 31, 2018 , the Company’s mortgage notes payable consisted of the following: Collateral 2019 Principal Amount 2018 Principal Amount Contractual Interest Rate (1) Effective Interest Rate (1) Loan Maturity Chase Bank and Great Clips $ — $ 1,866,364 4.37% 4.37 % 2/5/2019 Levins 2,091,487 2,125,703 One-month LIBOR + 1.81% 3.74 % 1/5/2021 Island Pacific Supermarket 1,901,859 1,932,973 One-month LIBOR + 1.81% 3.74 % 1/5/2021 Dollar General Bakersfield 2,338,007 2,378,106 One-month LIBOR + 1.90% 3.38 % 3/5/2021 Rite Aid 3,681,078 3,744,915 One-month LIBOR + 1.75% 3.25 % 5/5/2021 PMI Preclinical 4,142,833 4,213,887 One-month LIBOR + 1.90% 3.38 % 3/5/2021 EcoThrift 2,655,472 2,703,239 One-month LIBOR + 1.75% 2.96 % 7/5/2021 GSA (MSHA) 1,807,294 1,839,454 One-month LIBOR + 1.75% 3.00 % 8/5/2021 PreK San Antonio 5,165,587 5,239,125 4.25% 4.25 % 12/1/2021 Dinan Cars 2,724,641 2,764,937 One-month LIBOR + 1.75% 4.02 % 1/5/2022 Solar Turbines, Amec Foster, ITW Rippey 9,488,970 9,648,214 3.35% 3.35 % 11/1/2026 Dollar General Big Spring 613,653 621,737 4.69% 4.69 % 3/13/2022 Gap 3,661,749 3,714,623 4.15% 4.15 % 8/1/2023 L-3 Communications 5,309,254 5,380,085 4.50% 4.50 % 4/1/2022 Sutter Health 14,217,156 14,419,666 4.50% 4.50 % 3/9/2024 Walgreens 3,000,000 — One-month LIBOR + 5.00% 7.50 % 5/6/2020 Total mortgage notes payable 62,799,040 62,593,028 Less unamortized deferred financing costs (958,337 ) (1,146,960 ) Mortgage notes payable, net $ 61,840,703 $ 61,446,068 (1) Contractual interest rate represents the interest rate in effect under the mortgage notes payable as of September 30, 2019 . Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2019 (consisting of the contractual interest rate and the effect of the interest rate swap, if applicable) (see Note 8). |
Balance Sheet Grouping | The following were the face value, carrying amount and fair value of the Company’s mortgage notes payable (Level 3 measurement): September 30, 2019 December 31, 2018 Face value Carrying value Fair value Face Value Carrying Value Fair Value $ 62,799,040 $ 61,840,703 $ 63,412,918 $ 62,593,028 $ 61,446,068 $ 61,283,165 |
Maturities of Long-term Debt | The following summarizes the future principal payments on the Company’s mortgage notes payable as of September 30, 2019 : October through December 2019 $ 305,282 2020 4,286,152 2021 23,878,718 2022 8,888,775 2023 3,967,628 2024 13,219,282 Thereafter 8,253,203 Total principal 62,799,040 Less deferred financing costs, net (958,337 ) Net principal $ 61,840,703 |
Interest Expenses | The following is a reconciliation of the components of interest expense for the three and nine months ended September 30, 2019 and 2018 : Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Mortgage notes payable: Interest expense incurred $ 693,774 $ 680,468 $ 2,040,218 $ 1,930,036 Amortization of deferred financing costs 114,888 86,448 305,022 259,344 Loss (gain) on interest rate swaps (1) 20,325 (66,529 ) 310,809 (399,783 ) Sales deposit liability: Interest expense (see Note 5) — 13,751 18,334 41,252 Total interest expense $ 828,987 $ 714,138 $ 2,674,383 $ 1,830,849 (1) Includes unrealized loss (gain) on interest rate swaps of $54,538 and $(40,149) for the three months ended September 30, 2019 and 2018 , respectively, and $438,704 and $(357,520) for the nine months ended September 30, 2019 and 2018 , respectively (see Note 8). Accrued interest receivable, net of $6,959 and $12,432 at September 30, 2019 and December 31, 2018 , respectively, represents the unsettled portion of the interest rate swaps for the period from the most recent settlement date through respective balance sheet dates. |
INTEREST RATE SWAP DERIVATIVES
INTEREST RATE SWAP DERIVATIVES - (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | The following table summarizes the notional amount and other information related to the Company’s interest rate swap derivative instruments as of September 30, 2019 and December 31, 2018 : Derivative Instruments September 30, 2019 December 31, 2018 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 $ 21,342,671 One-month LIBOR/Fixed at 1.21%-2.28% 3.42 % 1.6 years 8 $ 21,703,214 One-month LIBOR/Fixed at 1.21%-2.28% 3.42 % 2.4 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, 2019 . |
Instruments in Statement of Financial Position | The following table sets forth the fair value of the Company’s derivative instruments (Level 2 measurement), as well as their classification in the unaudited condensed consolidated balance sheets: Derivative Instrument September 30, 2019 December 31, 2018 Balance Sheet Location Number of Instruments Fair Value Number of Instruments Fair Value Interest Rate Swaps Asset - Interest rate swap derivatives, at fair value 5 $ 31,420 8 $ 404,267 Interest Rate Swaps Liability - Interest rate swap derivatives, at fair value 3 $ (65,857 ) — $ — |
RELATED PARTY TRANSACTIONS - (T
RELATED PARTY TRANSACTIONS - (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | The amount payable is presented in the unaudited condensed consolidated balance sheets as "Due to affiliates." Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 September 30, 2019 September 30, 2018 September 30, 2018 December 31, 2018 Incurred Incurred Receivable Payable Incurred Incurred Receivable Payable Expensed: Asset management fees $ 197,562 $ 616,786 $ — $ — $ 203,763 $ 607,728 $ — $ — Reimbursable operating expense 90,000 270,000 — — 67,500 249,015 — — Fees to affiliates 287,562 886,786 — — 271,263 856,743 — — Property management fees* 25,571 76,668 — — 25,763 74,670 — — Trust managers and officers insurance and other reimbursements ** 39,269 129,785 — — 18,413 67,079 — 59,992 Reimbursable organizational and offering expenses — — — — 31,847 95,612 — — Capitalized: Financing coordination fees — 30,000 — — — — — — $ — $ — $ — $ 59,992 * Property management fees are included in "property expenses" in the accompanying unaudited condensed consolidated statements of operations. ** Trust managers and officers insurance and other reimbursements are classified within general and administrative expenses in the unaudited condensed consolidated statements of operations. |
BUSINESS AND ORGANIZATION - Nar
BUSINESS AND ORGANIZATION - Narative (Details) | 9 Months Ended | ||||
Sep. 30, 2019property | May 09, 2019 | Jan. 14, 2019property$ / shares | Jan. 11, 2019$ / shares | Dec. 31, 2018 | |
Business And Organization [Line Items] | |||||
Ownership percentage (as a percent) | 20.00% | ||||
Renewal term (in years) | 1 year | ||||
Number of real estate properties | 20 | ||||
RW Holdings NNN REIT Inc. | |||||
Business And Organization [Line Items] | |||||
Ownership percentage (as a percent) | 4.80% | 4.80% | |||
Number of real estate properties | 25 | ||||
RW Holdings NNN REIT Inc. | Land | |||||
Business And Organization [Line Items] | |||||
Number of real estate properties | 1 | ||||
Rich Uncles Real Estate Investment Trust I | |||||
Business And Organization [Line Items] | |||||
Noncontrolling ownership percentage (as a percent) | 29.86% | 70.14% | |||
Net asset value (in USD per share) | $ / shares | $ 10.57 | $ 10.66 | |||
Rich Uncles Real Estate Investment Trust I | RW Holdings NNN REIT Inc. | |||||
Business And Organization [Line Items] | |||||
Noncontrolling ownership percentage (as a percent) | 4.80% | ||||
Rich Uncles Real Estate Investment Trust I | RW Holdings NNN REIT Inc. | Operating Office Asset | Real Estate Investment | |||||
Business And Organization [Line Items] | |||||
Ownership percentage (as a percent) | 72.70% |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narative (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Accounting Policies [Abstract] | ||||
Tenant reimbursement | $ 568,745 | $ 552,276 | $ 1,669,100 | $ 1,667,132 |
CONDENSED CONSOLIDATED BALANC_5
CONDENSED CONSOLIDATED BALANCE SHEETS DETAILS - Narrative (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Tenant receivables, net: | ||
Straight-line rent | $ 1,499,134 | $ 1,399,276 |
Tenant rent | 92,050 | 200,301 |
Unbilled tenant reimbursements | 203,625 | 108,258 |
Total | 1,794,809 | 1,707,835 |
Accounts payable, accrued and other liabilities: | ||
Accounts payable | 45,611 | 52,057 |
Accrued expenses | 1,237,146 | 184,441 |
Accrued interest payable | 223,238 | 288,437 |
Unearned rent | 482,459 | 624,181 |
Tenant security deposits | 270,106 | 270,106 |
Total | 2,258,560 | $ 1,419,222 |
Accrued professional fees | 674,832 | |
SunTrust | ||
Accounts payable, accrued and other liabilities: | ||
Accrued professional fees | $ 500,000 |
REAL ESTATE PROPERTY INVESTME_3
REAL ESTATE PROPERTY INVESTMENTS - Real Estate Properties (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Real Estate [Line Items] | ||
Land, building and improvements | $ 125,457,267 | |
Tenant origination and absorption costs | 12,033,433 | $ 12,701,634 |
Accumulated depreciation and amortization | (18,282,945) | (15,070,564) |
Total real estate investments, net | 119,207,755 | $ 125,075,537 |
Retail | San Jose, CA | Chevron Gas Station | ||
Real Estate [Line Items] | ||
Land, building and improvements | 2,775,000 | |
Tenant origination and absorption costs | 0 | |
Accumulated depreciation and amortization | (169,586) | |
Total real estate investments, net | 2,605,414 | |
Retail | Sacramento, CA | EcoThrift | ||
Real Estate [Line Items] | ||
Land, building and improvements | 4,496,993 | |
Tenant origination and absorption costs | 541,729 | |
Accumulated depreciation and amortization | (858,090) | |
Total real estate investments, net | 4,180,632 | |
Retail | Roseville, CA | Chevron Gas Station | ||
Real Estate [Line Items] | ||
Land, building and improvements | 2,800,000 | |
Tenant origination and absorption costs | 0 | |
Accumulated depreciation and amortization | (386,243) | |
Total real estate investments, net | 2,413,757 | |
Retail | Elk Grove, CA | Island Pacific Supermarket | ||
Real Estate [Line Items] | ||
Land, building and improvements | 3,151,461 | |
Tenant origination and absorption costs | 568,539 | |
Accumulated depreciation and amortization | (634,347) | |
Total real estate investments, net | 3,085,653 | |
Retail | Bakersfield, CA | Dollar General | ||
Real Estate [Line Items] | ||
Land, building and improvements | 4,632,567 | |
Tenant origination and absorption costs | 689,020 | |
Accumulated depreciation and amortization | (744,153) | |
Total real estate investments, net | 4,577,434 | |
Retail | Lake Elsinore, CA | Rite Aid | ||
Real Estate [Line Items] | ||
Land, building and improvements | 6,663,446 | |
Tenant origination and absorption costs | 968,285 | |
Accumulated depreciation and amortization | (904,592) | |
Total real estate investments, net | 6,727,139 | |
Retail | San Antonio, TX | PreK San Antonio | ||
Real Estate [Line Items] | ||
Land, building and improvements | 11,851,540 | |
Tenant origination and absorption costs | 1,593,451 | |
Accumulated depreciation and amortization | (3,157,856) | |
Total real estate investments, net | 10,287,135 | |
Retail | Morrow, GA | Dollar Tree | ||
Real Estate [Line Items] | ||
Land, building and improvements | 1,312,491 | |
Tenant origination and absorption costs | 206,844 | |
Accumulated depreciation and amortization | (322,782) | |
Total real estate investments, net | 1,196,553 | |
Retail | Big Spring, TX | Dollar General Big Spring | ||
Real Estate [Line Items] | ||
Land, building and improvements | 1,161,647 | |
Tenant origination and absorption costs | 112,958 | |
Accumulated depreciation and amortization | (87,326) | |
Total real estate investments, net | 1,187,279 | |
Retail | Santa Maria, CA | Walgreens | ||
Real Estate [Line Items] | ||
Land, building and improvements | 4,667,322 | |
Tenant origination and absorption costs | 448,183 | |
Accumulated depreciation and amortization | (294,911) | |
Total real estate investments, net | 4,820,594 | |
Office | Vacaville, CA | GSA (MSHA) | ||
Real Estate [Line Items] | ||
Land, building and improvements | 3,011,583 | |
Tenant origination and absorption costs | 456,645 | |
Accumulated depreciation and amortization | (495,084) | |
Total real estate investments, net | 2,973,144 | |
Office | San Diego, CA | Solar Turbines | ||
Real Estate [Line Items] | ||
Land, building and improvements | 5,738,978 | |
Tenant origination and absorption costs | 389,718 | |
Accumulated depreciation and amortization | (629,078) | |
Total real estate investments, net | 5,499,618 | |
Office | Rocklin, CA | Gap | ||
Real Estate [Line Items] | ||
Land, building and improvements | 7,220,909 | |
Tenant origination and absorption costs | 677,192 | |
Accumulated depreciation and amortization | (892,853) | |
Total real estate investments, net | 7,005,248 | |
Office | Rancho Cordova, CA | Sutter Health | ||
Real Estate [Line Items] | ||
Land, building and improvements | 24,256,632 | |
Tenant origination and absorption costs | 2,870,258 | |
Accumulated depreciation and amortization | (2,945,416) | |
Total real estate investments, net | 24,181,474 | |
Industrial | Sacramento, CA | Levins | ||
Real Estate [Line Items] | ||
Land, building and improvements | 3,750,000 | |
Tenant origination and absorption costs | 2,500 | |
Accumulated depreciation and amortization | (878,826) | |
Total real estate investments, net | 2,873,674 | |
Industrial | San Carlos, CA | PMI Preclinical | ||
Real Estate [Line Items] | ||
Land, building and improvements | 8,920,000 | |
Tenant origination and absorption costs | 0 | |
Accumulated depreciation and amortization | (779,577) | |
Total real estate investments, net | 8,140,423 | |
Industrial | Morgan Hill, CA | Dinan Cars | ||
Real Estate [Line Items] | ||
Land, building and improvements | 4,651,845 | |
Tenant origination and absorption costs | 654,155 | |
Accumulated depreciation and amortization | (1,251,587) | |
Total real estate investments, net | 4,054,413 | |
Industrial | San Diego, CA | Amec Foster | ||
Real Estate [Line Items] | ||
Land, building and improvements | 7,010,799 | |
Tenant origination and absorption costs | 485,533 | |
Accumulated depreciation and amortization | (796,376) | |
Total real estate investments, net | 6,699,956 | |
Industrial | San Diego, CA | L-3 Communications | ||
Real Estate [Line Items] | ||
Land, building and improvements | 11,084,072 | |
Tenant origination and absorption costs | 961,107 | |
Accumulated depreciation and amortization | (1,127,548) | |
Total real estate investments, net | 10,917,631 | |
Industrial | El Dorado, CA | ITW Rippey | ||
Real Estate [Line Items] | ||
Land, building and improvements | 6,299,982 | |
Tenant origination and absorption costs | 407,316 | |
Accumulated depreciation and amortization | (926,714) | |
Total real estate investments, net | $ 5,780,584 |
REAL ESTATE PROPERTY INVESTME_4
REAL ESTATE PROPERTY INVESTMENTS - Payments (Details) | Sep. 30, 2019USD ($) |
Real Estate [Abstract] | |
October through December 2019 | $ 2,511,047 |
2020 | 10,173,108 |
2021 | 9,184,307 |
2022 | 7,638,623 |
2023 | 5,866,735 |
2024 | 5,351,961 |
Thereafter | 22,433,451 |
Total | $ 63,159,232 |
REAL ESTATE PROPERTY INVESTME_5
REAL ESTATE PROPERTY INVESTMENTS - Revenue Concentration (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Real Estate [Line Items] | ||||
Revenue | $ 3,302,347 | $ 3,293,384 | $ 9,868,701 | $ 9,889,765 |
Sutter Health | Rancho Cordova, CA | ||||
Real Estate [Line Items] | ||||
Revenue | $ 659,936 | $ 663,998 | $ 1,983,965 | $ 2,039,643 |
Percentage of total revenue (as a percent) | 20.20% | 20.20% | 20.20% | 20.60% |
PreK San Antonio | San Antonio, TX | ||||
Real Estate [Line Items] | ||||
Revenue | $ 400,359 | $ 386,681 | $ 1,219,672 | $ 1,242,782 |
Percentage of total revenue (as a percent) | 12.20% | 11.70% | 12.50% | 12.60% |
REAL ESTATE PROPERTY INVESTME_6
REAL ESTATE PROPERTY INVESTMENTS - Asset Concentration (Details) - Sutter Health - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Real Estate [Line Items] | ||
Net carrying value | $ 24,181,474 | $ 25,050,613 |
Percentage of total assets (as a percent) | 19.40% | 19.00% |
- Intangible Assets (Details)
- Intangible Assets (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Below-Market Lease Intangibles | ||
Cost | $ (5,296,683) | |
Accumulated amortization | 2,835,963 | |
Net amount | (2,460,720) | $ (3,105,843) |
Tenant Origination and Absorption Costs | ||
Finite-Lived Intangible Assets, Net | ||
Cost | 12,033,433 | |
Accumulated amortization | (4,961,085) | |
Total | 7,072,348 | |
Above-Market Lease Intangibles | ||
Finite-Lived Intangible Assets, Net | ||
Cost | 872,408 | |
Accumulated amortization | (117,036) | |
Total | $ 755,372 |
REAL ESTATE PROPERTY INVESTME_7
REAL ESTATE PROPERTY INVESTMENTS - Intangible Assets, Future Amortization Expense (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Below-Market Lease Intangibles | ||
Net amount | $ (2,460,720) | $ (3,105,843) |
Tenant Origination and Absorption Costs | ||
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule | ||
October through December 2019 | 391,005 | |
2020 | 1,563,083 | |
2021 | 1,563,083 | |
2022 | 832,144 | |
2023 | 687,474 | |
2024 | 479,057 | |
Thereafter | 1,556,502 | |
Total | $ 7,072,348 | |
Below-Market Lease Intangibles | ||
Weighted average remaining amortization period (in years) | 8 years 1 month 5 days | |
Above-Market Lease Intangibles | ||
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule | ||
October through December 2019 | $ 8,830 | |
2020 | 35,320 | |
2021 | 35,320 | |
2022 | 35,320 | |
2023 | 35,320 | |
2024 | 35,320 | |
Thereafter | 569,942 | |
Total | $ 755,372 | |
Below-Market Lease Intangibles | ||
Weighted average remaining amortization period (in years) | 12 years 4 months 12 days | |
Below-Market Lease Intangibles | ||
Below-Market Lease Intangibles | ||
October through December 2019 | $ (215,041) | |
2020 | (860,165) | |
2021 | (667,541) | |
2022 | (201,982) | |
2023 | (113,651) | |
2024 | (113,651) | |
Thereafter | (288,689) | |
Net amount | $ (2,460,720) | |
Weighted average remaining amortization period (in years) | 4 years 2 months 26 days |
REAL ESTATE PROPERTY INVESTME_8
REAL ESTATE PROPERTY INVESTMENTS - Narative (Details) - property | Sep. 30, 2019 | Sep. 29, 2019 | Feb. 21, 2019 | Mar. 31, 2016 |
Real Estate [Line Items] | ||||
Number of properties | 20 | |||
Ownership percentage (as a percent) | 20.00% | |||
Chevron Gas Station | ||||
Real Estate [Line Items] | ||||
Ownership percentage (as a percent) | 100.00% | 70.14% | 29.86% | 29.86% |
SALE AND REPURCHASE OF INTERE_2
SALE AND REPURCHASE OF INTEREST IN REAL ESTATE INVESTMENT PROPERTY - Narrative (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
Mar. 31, 2016 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | May 09, 2019 | Feb. 21, 2019 | Dec. 31, 2018 | |
Investment [Line Items] | |||||||||
Ownership percentage (as a percent) | 20.00% | 20.00% | |||||||
Proceeds from sale of real estate | $ 1,000,000 | ||||||||
Sales deposit liability | $ 0 | $ 0 | $ 1,000,000 | $ 1,000,000 | |||||
Interest expense | $ 0 | $ 13,751 | $ 18,334 | $ 41,252 | |||||
Chevron Gas Station | |||||||||
Investment [Line Items] | |||||||||
Ownership percentage (as a percent) | 29.86% | 100.00% | 100.00% | 70.14% | 29.86% |
DISPOSAL OF REAL ESTATE INVES_2
DISPOSAL OF REAL ESTATE INVESTMENT PROPERTY - Narrative (Details) | 9 Months Ended | ||||
Sep. 30, 2019USD ($)subsidiary | Sep. 30, 2018USD ($)ft² | Mar. 31, 2019USD ($) | Mar. 13, 2019USD ($) | Dec. 31, 2018USD ($) | |
Real Estate [Line Items] | |||||
Land, building and improvements | $ 125,457,267 | ||||
Real estate investments, net | 119,207,755 | $ 125,075,537 | |||
Disposal group, deferred gain on disposal | $ 113,773 | $ 113,773 | |||
Feet of space (in sqft) | ft² | 5,660 | ||||
Number of subsidiaries with loans from same lender (in subsidiaries) | subsidiary | 8 | ||||
Antioch, CA | |||||
Real Estate [Line Items] | |||||
Land, building and improvements | $ 1,850,845 | ||||
Real estate investments, net | $ 1,964,618 | ||||
Impairment | $ 862,190 | ||||
Percent of total real estate investments (as a percent) | 2.00% | 1.00% |
DEBT - Debt Instruments (Detail
DEBT - Debt Instruments (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Debt Instrument [Line Items] | ||
Mortgage notes payable, net | $ 61,840,703 | $ 61,446,068 |
Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | 62,799,040 | 62,593,028 |
Less unamortized deferred financing costs | (958,337) | (1,146,960) |
Mortgage notes payable, net | 61,840,703 | 61,446,068 |
Chase Bank Great Clips | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 0 | 1,866,364 |
Contractual interest rate, stated (as a percent) | 4.37% | |
Effective interest rate (as a percent) | 4.37% | |
Levins | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 2,091,487 | 2,125,703 |
Effective interest rate (as a percent) | 3.74% | |
Island Pacific Supermarket | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 1,901,859 | 1,932,973 |
Effective interest rate (as a percent) | 3.74% | |
Dollar General | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 2,338,007 | 2,378,106 |
Effective interest rate (as a percent) | 3.38% | |
Rite Aid | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 3,681,078 | 3,744,915 |
Effective interest rate (as a percent) | 3.25% | |
PMI Preclinical | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 4,142,833 | 4,213,887 |
Effective interest rate (as a percent) | 3.38% | |
EcoThrift | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 2,655,472 | 2,703,239 |
Effective interest rate (as a percent) | 2.96% | |
GSA (MSHA) | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 1,807,294 | 1,839,454 |
Effective interest rate (as a percent) | 3.00% | |
PreK San Antonio | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 5,165,587 | 5,239,125 |
Contractual interest rate, stated (as a percent) | 4.25% | |
Effective interest rate (as a percent) | 4.25% | |
Dinan Cars | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 2,724,641 | 2,764,937 |
Effective interest rate (as a percent) | 4.02% | |
ITW Ripley, Solar Turbines, Amec Foster | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 9,488,970 | 9,648,214 |
Contractual interest rate, stated (as a percent) | 3.35% | |
Effective interest rate (as a percent) | 3.35% | |
Dollar General Big Spring | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 613,653 | 621,737 |
Contractual interest rate, stated (as a percent) | 4.69% | |
Effective interest rate (as a percent) | 4.69% | |
Gap | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 3,661,749 | 3,714,623 |
Contractual interest rate, stated (as a percent) | 4.15% | |
Effective interest rate (as a percent) | 4.15% | |
L-3 Communications | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 5,309,254 | 5,380,085 |
Contractual interest rate, stated (as a percent) | 4.50% | |
Effective interest rate (as a percent) | 4.50% | |
Sutter Health | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 14,217,156 | 14,419,666 |
Contractual interest rate, stated (as a percent) | 4.50% | |
Effective interest rate (as a percent) | 4.50% | |
Walgreens | Mortgages | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable principal amount | $ 3,000,000 | $ 0 |
Effective interest rate (as a percent) | 7.50% | |
(LIBOR) | Levins | ||
Debt Instrument [Line Items] | ||
Contractual interest rate, variable (as a percent) | 1.81% | |
(LIBOR) | Island Pacific Supermarket | ||
Debt Instrument [Line Items] | ||
Contractual interest rate, variable (as a percent) | 1.81% | |
(LIBOR) | Dollar General | ||
Debt Instrument [Line Items] | ||
Contractual interest rate, variable (as a percent) | 1.90% | |
(LIBOR) | Rite Aid | ||
Debt Instrument [Line Items] | ||
Contractual interest rate, variable (as a percent) | 1.75% | |
(LIBOR) | PMI Preclinical | ||
Debt Instrument [Line Items] | ||
Contractual interest rate, variable (as a percent) | 1.90% | |
(LIBOR) | EcoThrift | ||
Debt Instrument [Line Items] | ||
Contractual interest rate, variable (as a percent) | 1.75% | |
(LIBOR) | GSA (MSHA) | ||
Debt Instrument [Line Items] | ||
Contractual interest rate, variable (as a percent) | 1.75% | |
(LIBOR) | Dinan Cars | ||
Debt Instrument [Line Items] | ||
Contractual interest rate, variable (as a percent) | 1.75% | |
(LIBOR) | Walgreens | ||
Debt Instrument [Line Items] | ||
Contractual interest rate, variable (as a percent) | 5.00% |
DEBT - Balance Sheet Grouping (
DEBT - Balance Sheet Grouping (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Debt Disclosure [Abstract] | ||
Face value | $ 62,799,040 | $ 62,593,028 |
Carrying value | 61,840,703 | 61,446,068 |
Fair value | $ 63,412,918 | $ 61,283,165 |
- Maturities of Long-term Debt
- Maturities of Long-term Debt (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | ||
Net principal | $ 61,840,703 | $ 61,446,068 |
Secured Debt | ||
Debt Instrument [Line Items] | ||
October through December 2019 | 305,282 | |
2020 | 4,286,152 | |
2021 | 23,878,718 | |
2022 | 8,888,775 | |
2023 | 3,967,628 | |
2024 | 13,219,282 | |
Thereafter | 8,253,203 | |
Total principal | 62,799,040 | |
Less deferred financing costs, net | (958,337) | |
Net principal | $ 61,840,703 |
DEBT - Interest Expenses (Detai
DEBT - Interest Expenses (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Debt Instrument, Redemption [Line Items] | |||||
Unrealized loss (gain) on interest rate swap valuation | $ 54,538 | $ (40,149) | $ 438,704 | $ (357,520) | |
Accrued interest receivable | 6,959 | 6,959 | $ 12,432 | ||
Interest expense | 0 | 13,751 | 18,334 | 41,252 | |
Total interest expense | 828,987 | 714,138 | 2,674,383 | 1,830,849 | |
Sales deposit liability: | |||||
Debt Instrument, Redemption [Line Items] | |||||
Interest expense | 0 | 13,751 | 18,334 | 41,252 | |
Mortgage notes payable: | |||||
Debt Instrument, Redemption [Line Items] | |||||
Interest expense incurred | 693,774 | 680,468 | 2,040,218 | 1,930,036 | |
Amortization of deferred financing costs | 114,888 | 86,448 | 305,022 | 259,344 | |
Loss (gain) on interest rate swaps | $ 20,325 | $ (66,529) | $ 310,809 | $ (399,783) |
DEBT - Narrative (Details)
DEBT - Narrative (Details) - USD ($) | Sep. 30, 2019 | Mar. 31, 2019 | Mar. 13, 2019 | Dec. 31, 2018 |
Long-term Purchase Commitment [Line Items] | ||||
Supplementary leverage ratio (as a percent) | 46.00% | |||
Land, building and improvements | $ 125,457,267 | |||
Real estate investments, net | 119,207,755 | $ 125,075,537 | ||
Disposal group, deferred gain on disposal | $ 113,773 | $ 113,773 | ||
Maximum | ||||
Long-term Purchase Commitment [Line Items] | ||||
Supplementary leverage ratio (as a percent) | 50.00% | |||
Antioch, CA | ||||
Long-term Purchase Commitment [Line Items] | ||||
Land, building and improvements | $ 1,850,845 | |||
Real estate investments, net | $ 1,964,618 |
INTEREST RATE SWAP DERIVATIVE_2
INTEREST RATE SWAP DERIVATIVES - Derivative Instruments (Details) - Interest Rate Swap | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019USD ($)instrument | Dec. 31, 2018USD ($)instrument | |
Derivative [Line Items] | ||
Number of instruments | instrument | 8 | 8 |
Notional amount | $ 21,342,671 | $ 21,703,214 |
Weighted average fixed pay rate (as a percent) | 3.42% | 3.42% |
Weighted average remaining term (in years) | 1 year 7 months 9 days | 2 years 5 months 6 days |
Minimum | ||
Derivative [Line Items] | ||
Notional amount | $ 20,546,330 | |
(LIBOR) | Minimum | ||
Derivative [Line Items] | ||
Fixed interest rate (as a percent) | 1.21% | 1.21% |
(LIBOR) | Maximum | ||
Derivative [Line Items] | ||
Fixed interest rate (as a percent) | 2.28% | 2.28% |
INTEREST RATE SWAP DERIVATIVE_3
INTEREST RATE SWAP DERIVATIVES - Instruments in Statement of Financial Position (Details) | Sep. 30, 2019USD ($)instrument | Dec. 31, 2018USD ($)instrument |
Derivative [Line Items] | ||
Fair value | $ | $ 31,420 | $ 404,267 |
Interest Rate Swap | ||
Derivative [Line Items] | ||
Number of instruments | instrument | 8 | 8 |
Assets | Interest Rate Swap | ||
Derivative [Line Items] | ||
Number of instruments | instrument | 5 | 8 |
Fair value | $ | $ 31,420 | $ 404,267 |
Liability | Interest Rate Swap | ||
Derivative [Line Items] | ||
Number of instruments | instrument | 3 | 0 |
Fair value | $ | $ (65,857) | $ 0 |
INTEREST RATE SWAP DERIVATIVE_4
INTEREST RATE SWAP DERIVATIVES - Narrative (Details ) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Derivative [Line Items] | ||||
Unrealized loss (gain) on interest rate swap valuation | $ 54,538 | $ (40,149) | $ 438,704 | $ (357,520) |
Interest Rate Swap | ||||
Derivative [Line Items] | ||||
Unrealized loss (gain) on interest rate swap valuation | $ 54,538 | $ (40,149) | $ 438,704 | $ (357,520) |
RELATED PARTY TRANSACTIONS - Re
RELATED PARTY TRANSACTIONS - Related Party Transactions (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Related Party Transaction [Line Items] | |||||
Receivable | $ 0 | $ 0 | $ 0 | ||
Payable | 0 | 0 | 59,992 | ||
Asset management fees | |||||
Related Party Transaction [Line Items] | |||||
Incurred | 197,562 | $ 203,763 | 616,786 | $ 607,728 | |
Receivable | 0 | 0 | 0 | ||
Payable | 0 | 0 | 0 | ||
Reimbursable operating expense | |||||
Related Party Transaction [Line Items] | |||||
Incurred | 90,000 | 67,500 | 270,000 | 249,015 | |
Receivable | 0 | 0 | 0 | ||
Payable | 0 | 0 | 0 | ||
Fees to affiliates | |||||
Related Party Transaction [Line Items] | |||||
Incurred | 287,562 | 271,263 | 886,786 | 856,743 | |
Receivable | 0 | 0 | 0 | ||
Payable | 0 | 0 | 0 | ||
Property management fees | |||||
Related Party Transaction [Line Items] | |||||
Incurred | 25,571 | 25,763 | 76,668 | 74,670 | |
Receivable | 0 | 0 | 0 | ||
Payable | 0 | 0 | 0 | ||
Trust managers and officers insurance and other reimbursements | |||||
Related Party Transaction [Line Items] | |||||
Incurred | 39,269 | 18,413 | 129,785 | 67,079 | |
Receivable | 0 | 0 | 0 | ||
Payable | 0 | 0 | 59,992 | ||
Reimbursable organizational and offering expenses | |||||
Related Party Transaction [Line Items] | |||||
Incurred | 0 | 31,847 | 0 | 95,612 | |
Receivable | 0 | 0 | 0 | ||
Payable | 0 | 0 | 0 | ||
Financing coordination fees | |||||
Related Party Transaction [Line Items] | |||||
Incurred | 0 | $ 0 | 30,000 | $ 0 | |
Receivable | 0 | 0 | 0 | ||
Payable | $ 0 | $ 0 | $ 0 |
RELATED PARTY TRANSACTIONS - Na
RELATED PARTY TRANSACTIONS - Narrative (Details) - USD ($) | May 08, 2019 | Apr. 24, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 |
Related Party Transaction [Line Items] | |||||||
Financing fee | $ 30,000 | ||||||
Bridge loan | $ 3,000,000 | $ 3,000,000 | |||||
Organization and offering expenses | $ 2,796,198 | ||||||
Ownership percentage (as a percent) | 20.00% | 20.00% | |||||
Organizational and offering expenses | |||||||
Related Party Transaction [Line Items] | |||||||
Expenses from transactions with related party | $ 0 | $ 31,847 | $ 0 | $ 95,612 | |||
Acquisition fees | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 2.00% | ||||||
Asset management fees | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 0.05% | ||||||
Expenses from transactions with related party | 197,562 | 203,763 | $ 616,786 | 607,728 | |||
Financing coordination fees | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 1.00% | ||||||
Property management fees | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 1.50% | ||||||
Expenses from transactions with related party | 25,571 | $ 25,763 | $ 76,668 | $ 74,670 | |||
Disposition fees | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 3.00% | ||||||
Leasing commission fees | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 3.00% | ||||||
Operating expense reimbursement | |||||||
Related Party Transaction [Line Items] | |||||||
Expense reimbursement percentage (as a percent) | 2.00% | ||||||
Expense reimbursement percentage to net income (as a percent) | 25.00% | ||||||
Advisor or Affiliates | Organizational and offering expenses | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 3.00% | ||||||
Advisor or Affiliates | Leasing commission fees | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 6.00% | ||||||
Board of Directors Chairman | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 10.00% | ||||||
Due from (to) related party | $ 200,000 | ||||||
Interest expense | $ 768 | ||||||
Maximum | Acquisition fees | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 6.00% | ||||||
Maximum | Disposition fees | |||||||
Related Party Transaction [Line Items] | |||||||
Related party transaction (as a percent) | 6.00% | ||||||
Chevron Gas Station | |||||||
Related Party Transaction [Line Items] | |||||||
Acquisition fees | $ 20,000 | ||||||
Percentage of share in property owned (as a percent) | 29.86% | ||||||
RW Holdings NNN REIT Inc. | |||||||
Related Party Transaction [Line Items] | |||||||
Investment owned (in shares) | 403,980 | 403,980 | 403,980 | ||||
Ownership percentage (as a percent) | 4.80% | 4.80% | 4.80% |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Narrative (Details) - USD ($) | Sep. 26, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Commitments and Contingencies Disclosure [Abstract] | |||
Payments for tenant improvements | $ 63,000 | $ 207,000 | |
Restricted cash | $ 92,684 | $ 462,140 | |
Payments for legal settlements | $ 300,000 |
SUBSEQUENT EVENTS - Narrative (
SUBSEQUENT EVENTS - Narrative (Details ) - Subsequent Event | Oct. 14, 2019USD ($)$ / shares |
Subsequent Event [Line Items] | |
Dividends payable (in USD per share) | $ / shares | $ 0.00203804 |
Dividends payable | $ | $ 1,564,219 |