UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
FORM 10-Q
_________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 000-54376
_________________________________
STRATEGIC REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
_________________________________
Maryland
90-0413866
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer Identification No.)
 
 
66 Bovet Road, Suite 100
San Mateo, California, 94402
(650) 343-9300
(Address of Principal Executive Offices; Zip Code)
(Registrant’s Telephone Number, Including Area Code)
_________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý     No   ¨
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨    (Do not check if a smaller reporting company)
Smaller reporting company
ý
 
 
 
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   ý
As of August 6, 2018 , there were 10,963,416 shares of the registrant’s common stock issued and outstanding.



STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
 
Page
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 


Table of Contents

PART I
FINANCIAL INFORMATION
The accompanying interim unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2018, have been prepared by Strategic Realty Trust, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2017, as filed with the SEC on March 23, 2018 (the “2017 Annual Report on Form 10-K”). The interim unaudited condensed consolidated financial statements herein should also be read in conjunction with the Notes to Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q. The results of operations for the three and six months ended June 30, 2018, are not necessarily indicative of the operating results expected for the full year. The information furnished in the Company’s accompanying unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of operations, equity, and cash flows reflects all adjustments that, in management’s opinion, are necessary for a fair presentation of the aforementioned financial statements. Such adjustments are of a normal recurring nature.

3
Table of Contents

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share amounts)
(unaudited)
 
June 30,
 
December 31,
 
2018
 
2017
ASSETS
 
 
 
Investments in real estate
 
 
 
Land
$
13,801

 
$
14,020

Building and improvements
29,447

 
30,825

Tenant improvements
1,307

 
1,188

 
44,555

 
46,033

Accumulated depreciation
(2,845
)
 
(2,579
)
Investments in real estate, net
41,710

 
43,454

Properties under development and development costs
 
 
 
Land
25,851

 
25,851

Buildings
578

 
585

Development costs
11,808

 
9,609

Properties under development and development costs
38,237

 
36,045

Cash, cash equivalents and restricted cash
3,989

 
3,902

Prepaid expenses and other assets, net
269

 
200

Tenant receivables, net of $23 and $0 bad debt reserve
693

 
1,007

Investments in unconsolidated joint ventures
2,626

 
2,705

Lease intangibles, net
1,839

 
2,061

Assets held for sale
21,083

 
20,646

Deferred financing costs, net
979

 
1,258

TOTAL ASSETS (1)
$
111,425

 
$
111,278

LIABILITIES AND EQUITY
 
 
 
LIABILITIES
 
 
 
Notes payable, net
$
40,081

 
$
42,223

Accounts payable and accrued expenses
2,204

 
2,006

Amounts due to affiliates
21

 
21

Other liabilities
307

 
387

Liabilities related to assets held for sale
14,172

 
13,017

Below-market lease liabilities, net
402

 
438

Deferred gain on sale of properties to unconsolidated joint venture
—

 
668

TOTAL LIABILITIES (1)
57,187

 
58,760

Commitments and contingencies (Note 13)


 


EQUITY
 
 
 
Stockholders’ equity
 
 
 
Preferred stock, $0.01 par value; 50,000,000 shares authorized, none issued and outstanding
—

 
—

Common stock, $0.01 par value; 400,000,000 shares authorized; 10,963,416 and 10,988,438 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
111

 
111

Additional paid-in capital
95,940

 
96,097

Accumulated deficit
(42,890
)
 
(44,741
)
Total stockholders’ equity
53,161

 
51,467

Non-controlling interests
1,077

 
1,051

TOTAL EQUITY
54,238

 
52,518

TOTAL LIABILITIES AND EQUITY
$
111,425

 
$
111,278

(1)
As of June 30, 2018 and December 31, 2017 , includes approximately $39.3 million and $37.2 million , respectively, of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and approximately $18.2 million and $19.6 million , respectively, of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. Refer to Note 5. “Variable Interest Entities”.
See accompanying notes to condensed consolidated financial statements.

4
Table of Contents

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares and per share amounts)
(unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
Rental and reimbursements
$
1,834

 
$
2,225

 
$
3,587

 
$
4,865

 
 
 
 
 
 
 
 
Expense:
 
 
 
 
 
 
 
Operating and maintenance
615

 
760

 
1,265


1,706

General and administrative
449

 
500

 
896


995

Depreciation and amortization
341

 
824

 
699


1,786

Transaction expense
30

 
3

 
32


85

Interest expense
249

 
481

 
520


1,056

 
1,684

 
2,568

 
3,412

 
5,628

Operating income (loss)
150

 
(343
)
 
175

 
(763
)
 
 
 
 
 
 
 
 
Other income (loss):
 
 
 
 
 
 
 
Equity in loss of unconsolidated joint ventures
(43
)
 
(37
)
 
(45
)
 
(5
)
Net gain on disposal of real estate
2,448

 
2,545

 
2,448

 
9,131

Loss on extinguishment of debt
—

 
(80
)
 
—

 
(80
)
Income before income taxes
2,555

 
2,085

 
2,578

 
8,283

Income taxes
(24
)
 
(83
)
 
(24
)

(102
)
Net income
2,531


2,002

 
2,554

 
8,181

Net income attributable to non-controlling interests
53

 
76

 
54

 
306

Net income attributable to common stockholders
$
2,478

 
$
1,926

 
$
2,500

 
$
7,875

 
 
 
 
 
 
 
 
Earnings per common share - basic and diluted
$
0.23

 
$
0.18

 
$
0.23

 
$
0.72

 
 
 
 
 
 
 
 
Weighted average shares outstanding used to calculate earnings per common share - basic and diluted
10,977,718

 
10,905,453

 
10,982,892

 
10,921,364

See accompanying notes to condensed consolidated financial statements.

5
Table of Contents

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(in thousands, except shares)
(unaudited)
 
Number of
Shares
 
Par Value
 
Additional
Paid-in Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
Non-controlling
Interests
 
Total
Equity
BALANCE — December 31, 2017
10,988,438

 
$
111

 
$
96,097

 
$
(44,741
)
 
$
51,467

 
$
1,051

 
$
52,518

Redemption of common shares
(25,022
)
 
—

 
(157
)
 
—

 
(157
)
 
—

 
(157
)
Quarterly distributions
—

 
—

 
—

 
(1,317
)
 
(1,317
)
 
(28
)
 
(1,345
)
Cumulative effect from change in accounting principle (Note 2)
—

 
—

 
—

 
668

 
668

 
—

 
668

Net income
—

 
—

 
—

 
2,500

 
2,500

 
54

 
2,554

BALANCE — June 30, 2018
10,963,416

 
$
111

 
$
95,940

 
$
(42,890
)
 
$
53,161

 
$
1,077

 
$
54,238

See accompanying notes to condensed consolidated financial statements.

6
Table of Contents

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Six Months Ended June 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
2,554

 
$
8,181

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Net gain on disposal of real estate
(2,448
)
 
(9,131
)
Loss on extinguishment of debt
—

 
80

Equity in loss of unconsolidated joint ventures
45

 
5

Straight-line rent
(70
)
 
(90
)
Amortization of deferred costs
292

 
260

Depreciation and amortization
699

 
1,786

Amortization of above and below-market leases
(29
)
 
(104
)
Bad debt expense
39

 
31

Changes in operating assets and liabilities:
 
 
 
Prepaid expenses and other assets
(69
)
 
837

Tenant receivables
316

 
378

Accounts payable and accrued expenses
(47
)
 
(490
)
Amounts due to affiliates
—

 
(111
)
Other liabilities
(80
)
 
106

Net cash provided by operating activities
1,202

 
1,738

 
 
 
 
Cash flows from investing activities:
 
 
 
Net proceeds from the sale of real estate
3,928

 
32,398

Acquisition of real estate
—

 
(17,812
)
Investment in properties under development and development costs
(2,180
)
 
(2,339
)
Improvements, capital expenditures, and leasing costs
(126
)
 
(790
)
Investments in unconsolidated joint ventures
(77
)
 
—

Distributions from unconsolidated joint ventures
111

 
1,998

Net cash provided by investing activities
1,656

 
13,455

 
 
 
 
Cash flows from financing activities:
 
 
 
Redemption of common shares
(157
)
 
(443
)
Quarterly distributions
(1,346
)
 
(1,361
)
Proceeds from notes payable
4,100

 
28,700

Repayment of notes payable
(4,978
)
 
(41,889
)
Payment of penalties associated with early repayment of notes payable
—

 
(1
)
Payment of loan fees from investments in consolidated variable interest entities
(377
)
 
(197
)
Payment of loan fees and financing costs
(13
)
 
(1,314
)
Net cash used in financing activities
(2,771
)
 
(16,505
)
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
87

 
(1,312
)
Cash, cash equivalents and restricted cash – beginning of period
3,902

 
7,858

Cash, cash equivalents and restricted cash – end of period
$
3,989

 
$
6,546

 
 
 
 
Supplemental disclosure of non-cash investing and financing activities and other cash flow information:
 
 
 
Distributions declared but not paid
$
672

 
$
677

Change in accrued liabilities capitalized to investment in development
(256
)
 
5

Change to accrued mortgage note payable interest capitalized to investment in development
(5
)
 
2

Amortization of deferred loan fees capitalized to investment in development
268

 
296

Changes in capital improvements, accrued but not paid
502

 
—

Cumulative effect from change in accounting principle
668

 
—

Cash paid for interest, net of amounts capitalized
222

 
818

See accompanying notes to condensed consolidated financial statements.

7
Table of Contents

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ORGANIZATION AND BUSINESS
Strategic Realty Trust, Inc. (the “Company”) was formed on September 18, 2008, as a Maryland corporation. Effective August 22, 2013, the Company changed its name from TNP Strategic Retail Trust, Inc. to Strategic Realty Trust, Inc. The Company believes it qualifies as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and has elected REIT status beginning with the taxable year ended December 31, 2009, the year in which the Company began material operations.
Since the Company’s inception, its business has been managed by an external advisor. The Company has no direct employees and all management and administrative personnel responsible for conducting the Company’s business are employed by its advisor. Currently, the Company is externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed every year through 2018. The current term of the Advisory Agreement terminates on August 10, 2019. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.
Substantially all of the Company’s business is conducted through Strategic Realty Operating Partnership, L.P. (the “OP”). During the Company’s initial public offering (“Offering”), as the Company accepted subscriptions for shares of its common stock, it transferred substantially all of the net proceeds of the Offering to the OP as a capital contribution. The Company is the sole general partner of the OP. As of both June 30, 2018 and December 31, 2017 , the Company owned 97.9% of the limited partnership interests in the OP.
The Company’s principal demand for funds has been for the acquisition of real estate assets, the payment of operating expenses, interest on outstanding indebtedness, the payment of distributions to stockholders, and investments in unconsolidated joint ventures as well as development of properties. Substantially all of the proceeds of the completed Offering have been used to fund investments in real properties and other real estate-related assets, for payment of operating expenses, for payment of interest, for payment of various fees and expenses, such as acquisition fees and management fees, and for payment of distributions to stockholders. The Company’s available capital resources, cash and cash equivalents on hand and sources of liquidity are currently limited. The Company expects its future cash needs will be funded using cash from operations, future asset sales, debt financing and the proceeds to the Company from any sale of equity that it may conduct in the future.
The Company invests in and manages a portfolio of income-producing retail properties, located in the United States, real estate-owning entities and real estate-related assets, including the investment in or origination of mortgage, mezzanine, bridge and other loans related to commercial real estate. The Company has invested directly, and indirectly through joint ventures, in a portfolio of income-producing retail properties located throughout the United States, with a focus on grocery anchored multi-tenant retail centers, including neighborhood, community and lifestyle shopping centers, multi-tenant shopping centers and free standing single-tenant retail properties. During the first quarter of 2016, the Company invested, through joint ventures, in two significant retail projects under development.
As of June 30, 2018 , in addition to the development projects, the Company’s portfolio of properties was comprised of 10 properties, including three properties held for sale, with approximately 295,000 rentable square feet of retail space located in four states. As of June 30, 2018 , the rentable space at the Company’s retail properties was 94% leased.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X.
The interim unaudited condensed consolidated financial statements include the accounts of the Company, the OP, their direct and indirect owned subsidiaries, and the accounts of joint ventures that are determined to be variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions are eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to

8
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

present fairly the Company’s condensed consolidated financial position, results of operations and cash flows have been included.
The Company evaluates the need to consolidate joint ventures and variable interest entities based on standards set forth in ASC Topic 810, Consolidation (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of June 30, 2018 and December 31, 2017 , the Company held ownership interests in two unconsolidated joint ventures. Refer to Note 4. “Investments in Unconsolidated Joint Ventures” for additional information. As of June 30, 2018 and December 31, 2017 , the Company held variable interests in two variable interest entities and consolidated those entities. Refer to Note 5. “Variable Interest Entities” for additional information.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents represent current bank accounts and other bank deposits free of encumbrances and having maturity dates of three months or less from the respective dates of deposit. The Company limits cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk in cash.
Restricted cash includes escrow accounts for real property taxes, insurance, capital expenditures and tenant improvements, debt service and leasing costs held by lenders.
In November 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-18, Restricted Cash, which amends (Topic 230), Statement of Cash Flows (“ASU 2016-18”) . ASU 2016-18 requires that a statement of cash flows explains the change during the reporting period in the total of cash, cash equivalents, and restricted cash or restricted cash equivalents. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. ASU 2016-18 requires adoption using a retrospective transition method. The Company adopted ASU 2016-18 on January 1, 2018. As a result of adopting ASU 2016-18, the Company revised the presentation of cash, cash equivalents and restricted cash on the condensed consolidated balance sheets and condensed consolidated statements of cash flows for all the periods presented. Upon adoption of ASU 2016-18, the Company recorded a decrease of  $0.3 million  in net cash provided by operating activities and $0.7 million in net cash provided by investing activities for the six months ended June 30, 2017 , related to reclassifying the changes in the restricted cash balance from operating activities and investing activities to the cash, cash equivalents and restricted cash balances on the condensed consolidated statements of cash flows.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the condensed consolidated balance sheet that sum to the total of the same such amounts shown on the condensed consolidated statement of cash flows (amounts in thousands):
 
June 30, 2018
 
December 31, 2017
Cash and cash equivalents
$
3,126

 
$
3,086

Restricted cash
863

 
816

Total cash, cash equivalents, and restricted cash
$
3,989

 
$
3,902

Revenue Recognition
Revenues include minimum rents, expense recoveries and percentage rental payments. Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased property. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:
•
whether the lease stipulates how a tenant improvement allowance may be spent;
•
whether the amount of a tenant improvement allowance is in excess of market rates;
•
whether the tenant or landlord retains legal title to the improvements at the end of the lease term;
•
whether the tenant improvements are unique to the tenant or general-purpose in nature; and

9
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

•
whether the tenant improvements are expected to have any residual value at the end of the lease.
For leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectability is reasonably assured. Recognizing rental income on a straight-line basis for leases results in recognized revenue amounts which differ from those that are contractually due from tenants on a cash basis. If the Company determines the collectability of straight-line rents is not reasonably assured, the Company limits future recognition to amounts contractually owed and paid, and, when appropriate, establishes an allowance for estimated losses.
The Company maintains an allowance for doubtful accounts, including an allowance for straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. The Company monitors the liquidity and creditworthiness of its tenants on an ongoing basis. For straight-line rent amounts, the Company’s assessment is based on amounts estimated to be recoverable over the term of the lease. The Company’s straight-line rent receivable (not including receivables on property held for sale), which is included in tenant receivables, net, on the condensed consolidated balance sheets, was approximately $0.5 million at both June 30, 2018 and December 31, 2017.
Certain leases contain provisions that require the payment of additional rents based on the respective tenants’ sales volume (contingent or percentage rent) and substantially all contain provisions that require reimbursement of the tenants’ allocable real estate taxes, insurance and common area maintenance costs (“CAM”). Revenue based on percentage of tenants’ sales is recognized only after the tenant exceeds its sales breakpoint. Revenue from tenant reimbursements of taxes, insurance and CAM is recognized in the period that the applicable costs are incurred in accordance with the lease agreement.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which was added to the ASC under Topic 606 (“ASC 606”). ASC 606 outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. As the Company’s revenues are primarily generated through leasing arrangements, the Company’s revenues fall outside the scope of this standard. As part of ASU 2014-09, ASC 610-20, Gains and Losses from Derecognition of Nonfinancial Assets , (“ASC 610-20”) was issued. ASC 610-20 provided guidance for recognizing gains and losses from the transfer of nonfinancial assets, which includes the sale of real estate.
In February 2017, the FASB issued ASU No. 2017-05, Other Income-Gains and Losses for the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2017-05 amends the guidance on nonfinancial assets in ASC 610-20. The amendments clarify that (i) a financial asset is within the scope of ASC 610-20 if it meets the definition of an in-substance nonfinancial asset and may include nonfinancial assets transferred within a legal entity to a counter-party, (ii) an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counter-party and de-recognize each asset when a counter-party obtains control of it, and (iii) an entity should allocate consideration to each distinct asset by applying the guidance in ASC 606 on allocating the transaction price to performance obligations. Further, ASU 2017-05 provides guidance on accounting for partial sales of nonfinancial assets.
Effective January 1, 2018, the Company applied the provisions of ASC 610-20, for gains on sale of real estate, and recognizes any gains at the time control of a property is transferred and when it is probable that substantially all of the related consideration will be collected. As a result of adopting ASC 610-20, using the modified retrospective method, the sales criteria in ASC 360, Property, Plant, and Equipment , no longer applied. As such, the Company recognized $0.7 million  of deferred gains related to sales of properties to the SGO Joint Venture through a cumulative effect adjustment to accumulated deficit. Other than the cumulative effect adjustment relating to such deferred gains, the adoption of ASC 606 and ASC 610-20 did not have an impact on the Company’s condensed consolidated financial statements.
Reclassifications
Certain prior period amounts have been reclassified to conform with current period’s presentation as a result of adoption of ASU 2016-18. See Cash, Cash Equivalents and Restricted Cash section above for discussion of the impact of these reclassifications.
Recent Accounting Pronouncements
The FASB issued the following ASUs which could have potential impact to the Company’s condensed consolidated financial statements:
In August 2016, the FASB issued ASU No. 2016-15,  Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing diversity in practice. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. ASU 2016-15 will require adoption on a retrospective basis. The Company

10
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

adopted ASU 2016-15 on January 1, 2018. Adoption of ASU 2016-15 did not have an impact on the Company’s condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 requires a financial asset, measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Adjustments resulting from adopting ASU 2016-13 shall be applied through a cumulative-effect adjustment to retained earnings. The adoption of ASU 2016-13 will not have an impact on the Company’s condensed consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,  Leases (Topic 842) (“ASU 2016-02”).   ASU 2016-02 requires entities to recognize lease assets and lease liabilities on the consolidated balance sheet and disclose key information about leasing arrangements. The guidance retains a distinction between finance leases and operating leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. The accounting applied by a lessor is largely unchanged from that applied under the previous guidance. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. On January 5, 2018, the FASB also issued an Exposure Draft proposing to amend ASU 2016-02, which would provide lessors with a practical expedient, by class of underlying assets, to not separate non-lease components from the related lease components and, instead, to account for those components as a single lease component, if certain criteria are met. The amendments in this guidance and the related Exposure Draft are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. The Company believes that the adoption of ASU 2016-02 will not change the accounting for operating leases on its condensed consolidated balance sheets. The Company expects to utilize the practical expedients proposed in the Exposure Draft as part of its adoption of ASU 2016-02.
3. REAL ESTATE INVESTMENTS
Sale of Property
On June 21, 2018, the Company consummated the disposition of a portion of Topaz Marketplace, located in Hesperia, California, for a sales price of approximately  $4.2 million in cash. The Company used the net proceeds from the sale of a portion of Topaz Marketplace to repay  $4.0 million of the outstanding balance on its line of credit. The sale of the property did not represent a strategic shift that will have a major effect on the Company’s operations and financial results and its results of operations were not reported as discontinued operations on the Company’s condensed consolidated financial statements. The disposition of a portion of Topaz Marketplace resulted in a gain of $2.4 million , which was included on the Company’s condensed consolidated statement of operations.
The following table summarizes net operating income related to the disposed portion of Topaz Marketplace, which is included in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2018 and 2017 (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Operating income
$
51

 
$
47

 
$
97

 
$
86

Assets Held for Sale and Liabilities Related to Assets Held for Sale
At June 30, 2018 and December 31, 2017 , Florissant Marketplace, located in Florissant, Missouri, Ensenada Square, located in Arlington, Texas, and Shops at Turkey Creek, located in Knoxville, Tennessee, were classified as held for sale in the condensed consolidated balance sheets.
Since the sale of these properties does not represent a strategic shift that will have a major effect on the Company’s operations and financial results, the results of operations of these properties were not reported as discontinued operations in the Company’s condensed consolidated financial statements. Initially, the Company intends to use the net proceeds from the sales of these properties to repay a portion of the outstanding balance on its line of credit. The Company anticipates the sales of these properties will occur within one year from  June 30, 2018 . The Company’s condensed consolidated statements of operations include net operating income of approximately  $0.5 million and $4 thousand  for the three months ended  June 30,

11
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

2018  and  2017 , respectively, and $1.0 million and $0.1 million for the six months ended June 30, 2018 and 2017 , related to the assets held for sale.
The major classes of assets and liabilities related to assets held for sale included in the condensed consolidated balance sheets are as follows (amounts in thousands):
 
June 30,
 
December 31,
 
2018
 
2017
ASSETS
 
 
 
Investments in real estate
 
 
 
Land
$
5,248

 
$
5,248

Building and improvements
17,544

 
17,522

Tenant improvements
1,607

 
1,189

 
24,399

 
23,959

Accumulated depreciation
(5,178
)
 
(5,178
)
Investments in real estate, net
19,221

 
18,781

Tenant receivables, net
226

 
248

Lease intangibles, net
1,636

 
1,617

Assets held for sale
$
21,083

 
$
20,646

LIABILITIES
 
 
 
Notes payable
$
11,904

 
$
10,749

Below-market lease intangibles, net
2,268

 
2,268

Liabilities related to assets held for sale
$
14,172

 
$
13,017

Amounts above are being presented at their carrying value, which the Company believes to be lower than their estimated fair value less costs to sell.
4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The following table summarizes the Company’s investments in unconsolidated joint ventures as of June 30, 2018 and December 31, 2017 (amounts in thousands):
 
 
 
 
Ownership Interest
 
Investment
Joint Venture
 
Date of Investment
 
June 30,
2018
 
December 31,
2017
 
June 30,
2018
 
December 31,
2017
SGO Retail Acquisitions Venture, LLC
 
3/11/2015
 
19
%
 
19
%
 
$
991

 
$
978

SGO MN Retail Acquisitions Venture, LLC
 
9/30/2015
 
10
%
 
10
%
 
1,635

 
1,727

Total
 
 
 
 
 
 
 
$
2,626

 
$
2,705

The Company’s off-balance sheet arrangements consist primarily of investments in the joint ventures as set forth in the table above. The joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint ventures’ debts are secured by a first mortgage, are without recourse to the joint venture members, and do not represent a liability of the members other than carve-out guarantees for certain matters such as environmental conditions, misuse of funds and material misrepresentations. As of June 30, 2018 and December 31, 2017 , the Company has provided carve-out guarantees in connection with the two aforementioned unconsolidated joint ventures; in connection with those carve-out guarantees, the Company has certain rights of recovery from the joint venture members.
5. VARIABLE INTEREST ENTITIES
The Company has variable interests in, and is the primary beneficiary of, variable interest entities (“VIEs”) through its investments in (i) the Gelson’s Joint Venture and (ii) the 3032 Wilshire Joint Venture (both as defined below). The Company has consolidated the accounts of these variable interest entities.
On April 27, 2018, the Company made an additional contribution of $0.8 million to the Gelson’s Joint Venture.
On April 23, 2018, the Company made an additional contribution of $1.0 million to the Gelson’s Joint Venture.

12
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

On March 21, 2018, the Company made an additional contribution of $0.9 million to the Wilshire Joint Venture.
The following reflects the aggregate assets and liabilities of the Gelson’s Joint Venture and the Wilshire Joint Venture, which were consolidated by the Company, as of June 30, 2018 and December 31, 2017 (amounts in thousands):
 
June 30,
 
December 31,
 
2018
 
2017
ASSETS
 
 
 
Properties under development and development costs:
 
 
 
Land
$
25,851

 
$
25,851

Buildings
578

 
585

Development costs
11,808

 
9,609

Properties under development and development costs
38,237

 
36,045

Cash, cash equivalents and restricted cash
1,018

 
1,099

Prepaid expenses and other assets, net
3

 
9

Lease intangibles, net
4

 
—

TOTAL ASSETS (1)
$
39,262

 
$
37,153

 
 
 
 
LIABILITIES
 
 
 
Notes payable, net (2)
$
18,007

 
$
19,116

Accounts payable and accrued expenses
217

 
478

Amounts due to affiliates
9

 
9

Other liabilities
9

 
9

TOTAL LIABILITIES
$
18,242

 
$
19,612

(1)
The assets of the Gelson’s Joint Venture and Wilshire Joint Venture can be used only to settle obligations of the respective consolidated joint ventures.
(2)
As of June 30, 2018 and December 31, 2017 , includes reclassification of approximately $0.2 million and $0.1 million , respectively, of deferred financing costs, net, as a contra-liability. The creditors of the consolidated joint ventures do not have recourse to the general credit of the Company. The notes payable of the consolidated joint ventures are not guaranteed by the Company.
6. FUTURE MINIMUM RENTAL INCOME
Operating Leases
The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of June 30, 2018 , the leases at the Company’s properties, excluding properties classified as held for sale, have remaining terms (excluding options to extend) of up to 13.4 years with a weighted-average remaining term (excluding options to extend) of approximately 5.9 years . The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying condensed consolidated balance sheets and totaled approximately $0.2 million as of both June 30, 2018 and December 31, 2017 .

13
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

As of June 30, 2018 , the future minimum rental income from the Company’s properties under non-cancelable operating leases, excluding properties classified as held for sale, was as follows (amounts in thousands):
Remainder of 2018
$
1,166

2019
2,395

2020
2,229

2021
1,989

2022
2,006

Thereafter
8,215

Total
$
18,000

7. LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES, NET
As of June 30, 2018 and December 31, 2017 , the Company’s acquired lease intangibles and below-market lease liabilities were as follows (amounts in thousands):
 
Lease Intangibles
 
Below-Market Lease Liabilities
 
June 30,
2018
 
December 31,
2017
 
June 30,
2018
 
December 31,
2017
Cost
$
2,494

 
$
2,783

 
$
(526
)
 
$
(571
)
Accumulated amortization
(655
)
 
(722
)
 
124

 
133

Total
$
1,839

 
$
2,061

 
$
(402
)
 
$
(438
)
The Company’s amortization of lease intangibles and below-market lease liabilities for the three and six months ended June 30, 2018 and 2017 , were as follows (amounts in thousands): 
 
Lease Intangibles
 
Below-Market Lease Liabilities
 
Three Months Ended
June 30,
 
Three Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Amortization
$
(75
)
 
$
(225
)
 
$
16

 
$
57

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease Intangibles
 
Below-Market Lease Liabilities
 
Six Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Amortization
$
(158
)
 
$
(596
)
 
$
33

 
$
136

 
8. NOTES PAYABLE, NET
Line of Credit
The Company’s line of credit is a revolving credit facility with an initial maximum aggregate commitment of $30.0 million . Effective February 15, 2017, the Company’s line of credit was refinanced to increase the maximum aggregate commitment under the credit facility from $30.0 million to $60.0 million . The credit facility matures on February 15, 2020 . Each loan made pursuant to the credit facility will be either a LIBOR rate loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay the lender an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum, if the usage under the the Company’s line of credit is less than or equal to 50% of the line of credit amount, and 0.20% per annum if the usage under the Company’s line of credit is greater than 50% of the line of credit amount. The Company is providing a guaranty of all of its obligations under the Company’s line of credit and all other loan documents.
As of June 30, 2018 and December 31, 2017, the Company’s line of credit had an outstanding principal balance of $22.1 million and $23.1 million , respectively. These balances exclude $11.9 million and $10.7 million which have been classified as held for sale as of June 30, 2018 and December 31, 2017, respectively. As of June 30, 2018 and December 31, 2017, the

14
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Company’s line of credit was secured by Topaz Marketplace, 8 Octavia Street, 400 Grove Street, the Fulton Shops, 450 Hayes, 388 Fulton, Silver Lake, Florissant Marketplace, Ensenada Square and The Shops at Turkey Creek.
Mortgage Loans Secured by Properties Under Development
In connection with the Company’s investment in the Wilshire Joint Venture and the acquisition of the Wilshire Property, the Company has consolidated borrowings of $8.5 million (the “Wilshire Loan”). The Wilshire Loan bears interest at a rate of 9.5% plus 30 -day LIBOR with a minimum of 10.0% per annum, payable monthly, commencing on April 1, 2016. The loan was scheduled to mature on March 7, 2017, with an option for two additional six-month periods, subject to certain conditions as stated in the loan agreement. All conditions to extensions were met, and on March 7, 2017, the Company exercised the option to extend the loan until September 7, 2017 . On August 29, 2017, the Company exercised the remaining option to extend the loan for an additional six months. The extension was scheduled to mature on March 7, 2018. The Company extended the loan, with the same terms, for an additional six months, effective March 7, 2018. The new maturity date is September 7, 2018 . The Company intends to explore all available financing options, including a further extension of the loan with the current lender prior to its maturity date. The loan is secured by, among other things, a lien on the Wilshire development project and other collateral as defined in the loan agreement.
In connection with the Company’s investment in the Gelson’s Joint Venture and the acquisition of the Gelson’s Property, the Company has consolidated borrowings of $9.7 million (the “Gelson’s Loan”). The Gelson’s Loan bears interest at a rate of 9.25% plus 30 -day LIBOR with a minimum of 9.5% per annum, payable monthly, commencing on April 1, 2016. The loan was scheduled to mature on January 27, 2017 , with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. Those conditions were not met, but the Company negotiated a six month extension of the term on January 27, 2017 to mature on July 27, 2017. The Company negotiated a nine month extension of the term on July 27, 2017. The extension was scheduled to mature on April 27, 2018. On April 23, 2018, the Company made a mandatory principal payment of $1.0 million . The Company extended the loan, for an additional six months, effective April 26, 2018. The new maturity date is October 27, 2018 . The Company intends to explore all available financing options, including a further extension of the loan with the current lender prior to its maturity date. The loan is secured by, among other things, a lien on the Gelson’s development project and other joint venture collateral as defined in the loan agreement.
The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of June 30, 2018 (amounts in thousands): 
Remainder of 2018
$
18,200

2019
—

2020
33,978

   Total (1)
$
52,178

(1)
Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of $0.2 million deferred financing costs, net.
During the three months ended June 30, 2018 and 2017 , the Company incurred and expensed approximately $0.2 million and $0.5 million , respectively, of interest costs, which included the amortization of deferred financing costs of approximately $0.1 million for each period. Also during each of the three months ended June 30, 2018 and 2017 , the Company incurred and capitalized approximately $1.0 million of interest expense related to the variable interest entities, which included the amortization of deferred financing costs of approximately $0.2 million for each period.
During the six months ended June 30, 2018 and 2017 , the Company incurred and expensed approximately $0.5 million and $1.1 million , respectively, of interest costs, which included the amortization of deferred financing costs of approximately $0.3 million for each period. Also during the six months ended June 30, 2018 and 2017 , the Company incurred and capitalized approximately $1.9 million and $1.6 million , respectively, of interest expense related to the variable interest entities, which included amortization of deferred financing costs of approximately $0.3 million for each period.
As of both June 30, 2018 and December 31, 2017 , interest expense payable was approximately $0.3 million , including an amount related to the variable interest entities of approximately $0.2 million for each period.
9. FAIR VALUE DISCLOSURES
Certain financial assets and liabilities are measured at fair value on a recurring basis. The Company determines fair value using the following hierarchy:

15
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

•
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•
Level 3: prices or valuation techniques where little or no market data is available for inputs that are significant to the fair value measurement.
The Company believes the total carrying values reflected on its condensed consolidated balance sheets for cash, cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses, amounts due to affiliates, mortgage loans secured by properties under development, and the Company’s line of credit reasonably approximate their fair values due to their short-term nature.
As part of the Company’s ongoing evaluation of the Company’s real estate portfolio, the Company estimates the fair value of its investments in real estate by obtaining outside independent appraisals on all of the properties. The appraised values are compared with the carrying values of its real estate portfolio to determine if there are indications of impairment.
For both the three and six months ended June 30, 2018 and June 30, 2017 , the Company did not record any impairment losses.
10. EQUITY
 Share Redemption Program
On April 1, 2015, the Company’s board of directors approved the reinstatement of the share redemption program (which had been suspended since January 15, 2013) and adopted an Amended and Restated Share Redemption Program (the “SRP”). The SRP was subsequently amended on August 7, 2015 and August 10, 2016.
On October 5, 2016, the board of directors approved, pursuant to Section 3(a) of the SRP, an additional $0.5 million of funds available for the redemption of shares in connection with the death of a stockholder. 
On August 2, 2017, the board of directors of the Company approved, pursuant to Section 3(a) of the SRP, an additional $1.0 million of funds available for the redemption of shares in connection with the death of a stockholder.
The following table summarizes share redemption activity during the three and six months ended June 30, 2018 and 2017 (amounts in thousands, except shares):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Shares of common stock redeemed
14,710

 
37,820

 
25,022

 
69,695

Purchase price
$
92

 
$
241

 
$
157

 
$
443

Cumulatively, through June 30, 2018 , the Company has redeemed 637,137 shares sold in the Offering and/or its dividend reinvestment plan for $4.7 million .
Quarterly Distributions
In order to qualify as a REIT, the Company is required to distribute at least 90% of its annual REIT taxable income, subject to certain adjustments, to its stockholders. Some or all of the Company’s distributions have been paid, and in the future may continue to be paid from sources other than cash flows from operations.
Under the terms of the amended Key Bank credit facility, the Company may pay distributions to its investors so long as the total amount paid does not exceed 100% of the cumulative Adjusted Funds From Operations plus up to an additional $2.0 million of the Company’s net proceeds from property dispositions, as defined in the amended Company’s line of credit; provided, however, that the Company is not restricted from making any distributions necessary in order to maintain its status as a REIT. The Company’s board of directors evaluates the Company’s ability to make quarterly distributions based on the Company’s operational cash needs.

16
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following tables set forth the quarterly distributions declared to the Company’s common stockholders and Common Unit holders for the six months ended June 30, 2018 , and the year ended December 31, 2017 (amounts in thousands, except per share amounts):
 
Distribution Record
Date
 
Distribution
Payable
Date
 
Distribution Per Share of Common Stock /
Common Unit
 
Total Common
Stockholders
Distribution
 
Total Common
Unit Holders
Distribution
 
Total
Distribution
First Quarter 2018
3/31/2018
 
4/30/2018
 
$
0.06

 
$
659

 
$
14

 
$
673

Second Quarter 2018
6/30/2018
 
7/31/2018
 
0.06

 
658

 
14

 
672

Total
 
 
 
 
 
 
$
1,317

 
$
28

 
$
1,345

 
Distribution Record
Date
 
Distribution
Payable
Date
 
Distribution Per Share of Common Stock /
Common Unit
 
Total Common
Stockholders
Distribution
 
Total Common
Unit Holders
Distribution
 
Total
Distribution
First Quarter 2017
3/31/2017
 
4/28/2017
 
$
0.06

 
$
655

 
$
25

 
$
680

Second Quarter 2017
6/30/2017
 
7/31/2017
 
0.06

 
652

 
25

 
677

Third Quarter 2017
9/30/2017
 
10/31/2017
 
0.06

 
660

 
16

 
676

Fourth Quarter 2017
12/31/2017
 
1/31/2018
 
0.06

 
659

 
14

 
673

Total
 
 
 
 
 
 
$
2,626

 
$
80

 
$
2,706

 
11. EARNINGS PER SHARE
Earnings per share (“EPS”) is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested shares, if dilutive, is computed using the treasury stock method. The Company applies the two-class method for determining EPS as its outstanding shares of non-vested restricted stock are considered participating securities as dividend payments are not forfeited even if the underlying award does not vest. There was no unvested stock as of June 30, 2018 . The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS.
The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share for the three and six months ended June 30, 2018 and 2017 (amounts in thousands, except shares and per share amounts):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Numerator - basic and diluted
 
 
 
 
 
 
 
Net income
$
2,531

 
$
2,002

 
$
2,554

 
$
8,181

Net income attributable to non-controlling interests
53

 
76

 
54

 
306

Net income attributable to common shares
$
2,478

 
$
1,926

 
$
2,500

 
$
7,875

Denominator - basic and diluted
 
 
 
 
 
 
 
Basic weighted average common shares
10,977,718

 
10,905,453

 
10,982,892

 
10,921,364

Common Units (1)
—

 
—

 
—

 
—

Diluted weighted average common shares
10,977,718

 
10,905,453

 
10,982,892

 
10,921,364

Earnings per common share - basic and diluted
 
 
 
 
 
 
 
Net earnings attributable to common shares
$
0.23

 
$
0.18

 
$
0.23

 
$
0.72

(1)
The effect of 235,194 convertible Common Units pursuant to the redemption rights outlined in the Company’s registration statement on Form S-11 have not been included as they would not be dilutive.

17
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

12. RELATED PARTY TRANSACTIONS
On August 7, 2013, the Company entered into the Advisory Agreement with the Advisor. The Advisory Agreement with the Advisor was renewed for an additional 12 months, beginning on August 10, 2018. The Advisor manages the Company’s business as the Company’s external advisor pursuant to the Advisory Agreement. Pursuant to the Advisory Agreement, the Company will pay the Advisor specified fees for services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services.
On March 11, 2015, the Company, through a wholly-owned subsidiary, entered into the Limited Liability Company Agreement of SGO Retail Acquisitions Venture, LLC to form the SGO Joint Venture. On September 30, 2015, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of SGO MN Retail Acquisitions Venture, LLC to form the SGO MN Joint Venture. For additional information regarding the SGO Joint Venture and the SGO MN Joint Venture, refer to Note 4. “Investments in Unconsolidated Joint Ventures.”
Summary of Related Party Fees
The following table sets forth the Advisor related party costs incurred and payable by the Company for the periods presented (amounts in thousands):
 
 
Incurred
 
Payable as of
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
June 30,
 
December 31,
Expensed
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Financing coordination fees
 
$
30

 
$
—

 
$
30

 
$
—

 
$
—

 
$
—

Asset management fees
 
188

 
205

 
379

 
435

 
—

 
—

Reimbursement of operating expenses
 
36

 
57

 
81

 
99

 
—

 
—

Property management fees
 
67

 
87

 
147

 
200

 
21

 
21

Disposition fees
 
52

 
186

 
54

 
430

 
—

 
—

Total
 
$
373

 
$
535

 
$
691

 
$
1,164

 
$
21

 
$
21

 
 
 
 
 
 
 
 
 
 
 
 
 
Capitalized
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition fees
 
$
18

 
$
—

 
$
46

 
$
194

 
$
—

 
$
—

Leasing fees
 
2

 
8

 
4

 
65

 
—

 
—

Legal leasing fees
 
3

 
23

 
8

 
51

 
—

 
—

Construction management fees
 
4

 
—

 
5

 
—

 
—

 
—

Financing coordination fees
 
97

 
—

 
182

 
707

 
—

 
—

Total
 
$
124

 
$
31

 
$
245

 
$
1,017

 
$
—

 
$
—

Acquisition Fees
Under the Advisory Agreement, the Advisor is entitled to receive an acquisition fee equal to 1% of (1) the cost of each investment acquired directly by the Company or (2) the Company’s allocable cost of an investment acquired pursuant to a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments. An acquisition fee is capitalized by the Company when the related transaction does not qualify as a business combination; otherwise an acquisition fee is expensed.
Financing Coordination Fees
Under the Advisory Agreement, the Advisor is entitled to receive a financing coordination fee equal to 1% of the amount made available and/or outstanding under any (1) financing obtained or assumed, directly or indirectly, by the Company or the OP and used to acquire or originate investments, or (2) the refinancing of any financing obtained or assumed, directly or indirectly, by the Company or the OP.

18
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Asset Management Fees
Under the Advisory Agreement, the Advisor is entitled to receive an asset management fee equal to a monthly fee of one-twelfth (1/12th) of 0.6% of the higher of (1) aggregate cost on a GAAP basis (before non-cash reserves and depreciation) of all investments the Company owns, including any debt attributable to such investments, or (2) the fair market value of the Company’s investments (before non-cash reserves and depreciation) if the board of directors has authorized the estimate of a fair market value of the Company’s investments; provided, however, that the asset management fee will not be less than $250,000 in the aggregate during any one calendar year.
Reimbursement of Operating Expenses
The Company reimburses the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company’s total operating expenses (including the asset management fee described below) at the end of the four preceding fiscal quarters exceeded the greater of (1)  2% of its average invested assets (as defined in the Company’s Articles of Amendment and Restatement (the “Charter”)); or (2)  25% of its net income (as defined in the Charter) determined without reduction for any additions to depreciation, bad debts or other similar non-cash expenses and excluding any gain from the sale of the Company’s assets for that period (the “2%/25% Guideline”). The Advisor is required to reimburse the Company quarterly for any amounts by which total operating expenses exceed the 2%/25% Guideline in the previous expense year that the independent directors do not approve. The Company will not reimburse the Advisor for any of its personnel costs or other overhead costs except for customary reimbursements for personnel costs under property management agreements entered into between the OP and the Advisor or its affiliates. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of the 2%/25% Guideline if a majority of the independent directors determine that such excess expenses are justified based on unusual and non-recurring factors.
For the three and six months ended June 30, 2018 and 2017 , the Company’s total operating expenses (as defined in the Charter) did not exceed the 2%/25% Guideline.
Property Management Fees
Under the property management agreements between the Company and Glenborough, Glenborough is entitled to receive property management fees calculated at a maximum of up to 4% of the properties’ gross revenue. The property management agreements with Glenborough have been renewed for an additional 12 months, beginning on August 10, 2018. Property management agreements with Glenborough automatically renew every year, unless expressly terminated.
Disposition Fees
Under the Advisory Agreement, if the Advisor or its affiliates provide a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of a real property, the Advisor or its affiliates may be paid disposition fees up to 50% of a customary and competitive real estate commission, but not to exceed 3% of the contract sales price of each property sold.
Leasing Fees
Under the property management agreements, Glenborough is entitled to receive a separate fee for the leases of new tenants, and for expansions, extensions and renewals of existing tenants in an amount not to exceed the fee customarily charged by similarly situated parties rendering similar services in the same geographic area for similar properties.
Legal Leasing Fees
Under the property management agreements, Glenborough is entitled to receive a market-based legal leasing fee for the negotiation and production of new leases, renewals, and amendments.
Construction Management Fees
In connection with the construction or repair in or about a property, the property manager is responsible for coordinating and facilitating the planning and the performance of all construction and is entitled to receive a fee equal to 5% of the hard costs for the project in question.

19
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Related-Party Fees Paid by the Unconsolidated Joint Ventures
The unconsolidated joint ventures are party to certain agreements with Glenborough for services related to the investment of funds and management of the joint ventures’ investments, as well as the day-to-day management, operation and maintenance of the properties owned by the joint ventures. The joint ventures pay fees to Glenborough for these services. For the three months ended June 30, 2018 and 2017 , the SGO Joint Venture recognized related party fees and reimbursements of $84 thousand and $48 thousand , respectively. For both the six months ended June 30, 2018 and 2017 , the SGO Joint Venture recognized related party fees and reimbursements of $0.1 million . For both the three months ended June 30, 2018 and 2017 , the SGO MN Joint Venture recognized related party fees and reimbursements of $0.2 million . For the six months ended June 30, 2018 and 2017 , the SGO MN Joint Venture recognized related party fees and reimbursements of $0.5 million and $0.4 million , respectively.The related-party amounts consist of property management, asset management, leasing commission, legal leasing, construction management fees and salary reimbursements.
13. COMMITMENTS AND CONTINGENCIES
Economic Dependency
The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments, management of the daily operations of the Company’s real estate and real estate-related investment portfolio, and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services to the Company, the Company will 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. The Company is not aware of any environmental liability that could have a material adverse effect on its condensed consolidated 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 properties could result in future environmental liabilities.
14. SUBSEQUENT EVENTS
Sale of Held for Sale Property
On July 17, 2018, the Company consummated the disposition of Ensenada Square, located in Arlington, Texas, for a sales price of approximately $5.8 million in cash. A portion of the proceeds was used to pay down amounts outstanding under the Company’s line of credit.
Distributions
On May 10, 2018, the Company’s board of directors declared a second quarter distribution in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of June 30, 2018. The distribution was paid on July 31, 2018.

20


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q and in our audited consolidated financial statements and the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission, or SEC, on March 23, 2018, which we refer to herein as our “2017 Annual Report on Form 10-K.”
As used herein, the terms “we,” “our,” “us,” and “Company” refer to Strategic Realty Trust, Inc., formerly TNP Strategic Retail Trust, Inc., and, as required by context, Strategic Realty Operating Partnership, L.P., formerly TNP Strategic Retail Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “operating partnership” or “OP”, and to their respective subsidiaries. References to “shares” and “our common stock” refer to the shares of our common stock. 
Special Note Regarding Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.
The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
•
Our executive officers and certain other key real estate professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor. As a result, they face conflicts of interest, including conflicts created by our advisor’s compensation arrangements with us and conflicts in allocating time among us and other programs and business activities.
•
We are uncertain of our sources for funding our future capital needs. If we cannot obtain debt or equity financing on acceptable terms, our ability to continue to acquire real properties or other real estate-related assets, fund or expand our operations and pay distributions to our stockholders will be adversely affected.
•
We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants. Revenues from our properties could decrease due to a reduction in tenants (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for us to meet our financial obligations, including debt service and our ability to pay distributions to our stockholders.
•
Our current and future investments in real estate and other real estate-related investments may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders. Revenues from our properties could decrease. Such events would make it more difficult for us to meet our debt service obligations and limit our ability to pay distributions to our stockholders.
•
Certain of our debt obligations have variable interest rates with interest and related payments that vary with the movement of LIBOR or other indices. Increases in these indices could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.

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All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of our 2017 Annual Report on Form 10-K. Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon on any forward-looking statements included herein. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report on Form 10-Q, and the risks described in Part I, Item 1A of our 2017 Annual Report on Form 10-K, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report on Form 10-Q will be achieved.

22
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Overview
We are a Maryland corporation that was formed on September 18, 2008, to invest in and manage a portfolio of income-producing retail properties, located in the United States, real estate-owning entities and real estate-related assets, including the investment in or origination of mortgage, mezzanine, bridge and other loans related to commercial real estate. During the first quarter of 2016, we also invested, through joint ventures, in two significant retail projects under development. We have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes, commencing with the taxable year ended December 31, 2009, and we have operated and intend to continue to operate in such a manner. We own substantially all of our assets and conduct our operations through our operating partnership, of which we are the sole general partner. We also own a majority of the outstanding limited partner interests in the operating partnership.
Since our inception, our business has been managed by an external advisor. We do not have direct employees and all management and administrative personnel responsible for conducting our business are employed by our advisor. Currently we are externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed every year through 2018. The current term of the Advisory Agreement terminates on August 10, 2019. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.
Property Portfolio
As of June 30, 2018 , our property portfolio included 10 retail properties, including three properties held for sale, which we refer to as “our properties” or “our portfolio,” comprising an aggregate of approximately 295,000 square feet of single- and multi-tenant, commercial retail space located in four states. We purchased our properties for an aggregate purchase price of approximately $71.7 million . As of June 30, 2018 and December 31, 2017 , approximately 94% and 96% of our portfolio was leased (based on rentable square footage), respectively, with a weighted-average remaining lease term of approximately 5.9 years and 7.0 years, respectively.
(dollars in thousands)
 
 
 
Rentable Square Feet (1)
 
Percent Leased  (2)
 
Effective
Rent  (3)
(Sq. Foot)
 
Date
Acquired
 
Original
Purchase
 Price (4) (5)
Property Name
 
Location
 
 
 
 
 
Topaz Marketplace
 
Hesperia, CA
 
43,199

 
80
%
 
$
20.20

 
9/23/2011
 
$
11,880

400 Grove Street
 
San Francisco, CA
 
2,000

 
100
%
 
60.00

 
6/14/2016
 
2,890

8 Octavia Street
 
San Francisco, CA
 
3,640

 
47
%
 
43.95

 
6/14/2016
 
2,740

Fulton Shops
 
San Francisco, CA
 
3,758

 
100
%
 
56.51

 
7/27/2016
 
4,595

450 Hayes
 
San Francisco, CA
 
3,724

 
100
%
 
89.82

 
12/22/2016
 
7,567

388 Fulton
 
San Fancisco, CA
 
3,110

 
100
%
 
64.22

 
1/4/2017
 
4,195

Silver Lake
 
Los Angeles, CA
 
10,497

 
100
%
 
64.85

 
1/11/2017
 
13,300

 
 
 
 
69,928

 
 
 
 
 
 
 
47,167

 
 
 
 
 
 
 
 
 
 
 
 
 
Properties Held for Sale
 
 
 
 
 
 
 
 
 
 
Ensenada Square
 
Arlington, TX
 
62,628

 
100
%
 
7.72

 
2/27/2012
 
5,025

Florissant Marketplace
 
Florissant, MO
 
146,257

 
95
%
 
10.25

 
5/16/2012
 
15,250

Shops at Turkey Creek
 
Knoxville, TN
 
16,324

 
100
%
 
27.94

 
3/12/2012
 
4,300

 
 
 
 
225,209

 
 
 
 
 
 
 
24,575

 
 
 
 
295,137

 
 
 
 
 
 
 
$
71,742

(1)
Square feet includes improvements made on ground leases at the property.
(2)
Percentage is based on leased rentable square feet of each property as of June 30, 2018 .

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(3)
Effective rent per square foot is calculated by dividing the annualized June 2018 contractual base rent by the total square feet occupied at the property. The contractual base rent does not include other items such as tenant concessions (e.g., free rent), percentage rent, and expense recoveries.
(4)
The purchase price for Shops at Turkey Creek includes the issuance of common units in our operating partnership to the sellers.
(5)
The original purchase price for Topaz Marketplace was reduced to reflect a pad sale during the second quarter of 2018.
Properties Under Development
As of June 30, 2018 , we had two properties under development. The properties are identified in the following table (dollar amounts in thousands):
Properties Under Development
 
Location
 
Estimated
Completion Date
 
Estimated
Expected
Square Feet
 
Debt
Wilshire Property
 
Santa Monica, CA
 
February, 2019
 
12,500

 
$
8,500

Gelson’s Property
 
Hollywood, CA
 
December, 2019
 
37,000

 
9,700

Total
 
 
 
 
 
49,500

 
$
18,200

Unconsolidated Joint Ventures
As of June 30, 2018 , our portfolio included investments in two unconsolidated joint ventures, which own, in aggregate, seven retail centers, comprising an aggregate of approximately 591,000 square feet and located in four states.

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Table of Contents

Results of Operations
Comparison of the three and six months ended June 30, 2018 , versus the three and six months ended June 30, 2017 .
The following table provides summary information about our results of operations for the three and six months ended June 30, 2018 and 2017 (amounts in thousands):
 
Three Months Ended
June 30,
 
 
 
 
 
2018
 
2017
 
$ Change
 
% Change
Rental revenue and reimbursements
$
1,834

 
$
2,225

 
$
(391
)
 
(17.6
)%
Operating and maintenance expenses
615

 
760

 
(145
)
 
(19.1
)%
General and administrative expenses
449

 
500

 
(51
)
 
(10.2
)%
Depreciation and amortization expenses
341

 
824

 
(483
)
 
(58.6
)%
Transaction expense
30

 
3

 
27

 
900.0
 %
Interest expense
249

 
481

 
(232
)
 
(48.2
)%
Operating income (loss)
150

 
(343
)
 
493

 
(143.7
)%
Other income, net
2,405

 
2,428

 
(23
)
 
(0.9
)%
Income taxes
(24
)
 
(83
)
 
59

 
(71.1
)%
Net income
$
2,531

 
$
2,002

 
$
529

 
26.4
 %
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
2018
 
2017
 
$ Change
 
% Change
Rental revenue and reimbursements
$
3,587

 
$
4,865

 
$
(1,278
)
 
(26.3
)%
Operating and maintenance expenses
1,265

 
1,706

 
(441
)
 
(25.8
)%
General and administrative expenses
896

 
995

 
(99
)
 
(9.9
)%
Depreciation and amortization expenses
699

 
1,786

 
(1,087
)
 
(60.9
)%
Transaction expense
32

 
85

 
(53
)
 
(62.4
)%
Interest expense
520

 
1,056

 
(536
)
 
(50.8
)%
Operating loss
175

 
(763
)
 
938

 
(122.9
)%
Other income, net
2,403

 
9,046

 
(6,643
)
 
(73.4
)%
Income taxes
(24
)
 
(102
)
 
78

 
(76.5
)%
Net income (loss)
$
2,554

 
$
8,181

 
$
(5,627
)
 
(68.8
)%
Our results of operations for the three and six months ended June 30, 2018 , are not necessarily indicative of those expected in future periods.
Revenue
The decrease in revenue during the three and six months ended June 30, 2018 , compared to the same periods in 2017 , was primarily due to the sales of Woodland West Marketplace in April 2017, Cochran Bypass in October 2017 and Morningside Marketplace in November 2017.
Operating and maintenance expenses 
Operating and maintenance expenses decreased during the three and six months ended June 30, 2018 , when compared to the same periods in 2017 , which corresponds to the decrease in revenue.
General and administrative expenses
General and administrative expenses decreased during the three and six months ended June 30, 2018 , compared to the same periods in 2017 , primarily due to lower asset management fees, lower professional tax fees and lower audit fees.
Depreciation and amortization expenses
Depreciation and amortization expenses decreased during the three and six months ended June 30, 2018 , compared to the same periods in 2017 , primarily due to the classification of Ensenada Square, Florissant Marketplace, and Shops at Turkey

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Creek as held for sale during the fourth quarter of 2017. The sales of a portion of Topaz Marketplace, Cochran Bypass and Morningside Marketplace also contributed to the decrease.
Transaction expense
Transaction expense incurred during the three and six months ended June 30, 2018, as compared to the same period in 2017 was primarily due to payment of financing fees related to the extension of a loan held by one of our unconsolidated joint ventures.
Interest expense
Interest expense decreased during the three and six months of 2018, compared to the same periods in 2017, due to decreases in debt balances as a result of using the proceeds from property dispositions activities to repay debt.
Other income (loss), net
Other income, net for the three and six months ended June 30, 2018 , primarily consisted of approximately $2.4 million related to the gain on sale of a portion of Topaz Marketplace in June 2018. Other income, net for the three months ended June 30, 2017, primarily consisted of approximately $2.5 million related to the gain on sale of Woodland West Marketplace in April 2017. For the six months ended June 30, 2017, other income, net, primarily consisted of approximately $9.1 million related to the gain on sale of Pinehurst Square East in January 2017 and Woodland West Marketplace in April 2017, as well as the recognition of deferred gain resulting from the first quarter of 2017 sale by SGO Retail Acquisitions Venture, LLC (“SGO Joint Venture”) of Aurora Commons.
Income taxes
In addition to various state tax payments, we may from time-to-time incur federal tax, due to our election to treat one of our subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Internal Revenue Code. A TRS is subject to federal and state income taxes.
Liquidity and Capital Resources
Since our inception, our principal demand for funds has been for the acquisition of real estate, the payment of operating expenses and interest on our outstanding indebtedness, the payment of distributions to our stockholders and investments in unconsolidated joint ventures and development properties. On February 7, 2013, we ceased offering shares of our common stock in our primary offering and under our distribution reinvestment plan. As a result of the termination of our initial public offering, offering proceeds from the sale of our securities are not currently available to fund our cash needs. We have used and expect to continue to use debt financing, net sales proceeds and cash flow from operations to fund our cash needs.
As of June 30, 2018 , our cash and cash equivalents were approximately $3.1 million and our restricted cash (funds held by the lenders for property taxes, insurance, tenant improvements, leasing commissions, capital expenditures, rollover reserves and other financing needs) was approximately $0.9 million . For properties with lender reserves, we may draw upon such reserves to fund the specific needs for which the funds were established.
Our aggregate borrowings, secured and unsecured, are reviewed by our board of directors at least quarterly. Under our Articles of Amendment and Restatement, as amended, which we refer to as our “charter,” we are prohibited from borrowing in excess of 300% of the value of our net assets. Net assets for purposes of this calculation is defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation, reserves for bad debts and other non-cash reserves, less total liabilities. However, we may temporarily borrow in excess of these amounts if such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with an explanation for such excess. As of June 30, 2018 and December 31, 2017 , our borrowings were approximately 88.7% and 93.7%, respectively, of the carrying value of our net assets.

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Table of Contents

The following table summarizes, for the periods indicated, selected items in our condensed consolidated statements of cash flows (amounts in thousands):
 
Six Months Ended
June 30,
 
 
 
2018
 
2017
 
$ Change
Net cash provided by (used in):
 
 
 
 
 
Operating activities
$
1,202

 
$
1,738

 
$
(536
)
Investing activities
1,656

 
13,455

 
(11,799
)
Financing activities
(2,771
)
 
(16,505
)
 
13,734

Net increase (decrease) in cash, cash equivalents and restricted cash
$
87

 
$
(1,312
)
 
 
Cash Flows from Operating Activities
The decrease in cash flows from operating activities was primarily due to a significant decrease in deposit balances resulting from the closing of the acquisitions of 388 Fulton and Silver Lake during the first quarter of 2017, which was partially offset by an increase in accrued expenses due to tenant improvement reimbursements that were accrued during the second quarter of 2018.
Cash Flows from Investing Activities
Cash flows from investing activities during the six months ended June 30, 2018, primarily consisted of proceeds from the disposition of a portion of Topaz Marketplace of approximately $3.9 million , partially offset by our aggregate additional $2.2 million investments in the Wilshire and Gelson’s Joint Ventures. Cash flows from investing activities during the six months ended June 30, 2017, primarily consisted of proceeds from the disposition of Pinehurst Square East and Woodland West Marketplace of approximately $32.4 million , partially offset by our aggregate $17.8 million in acquisitions of 388 Fulton and Silver Lake in January 2017.
Cash Flows from Financing Activities
Cash flows used in financing activities during the six months ended June 30, 2018 , primarily consisted of repayment of our debt balances and our quarterly dividend payments of approximately $5.0 million and $1.3 million , respectively, partially offset by proceeds of approximately $4.1 million from draws on our line of credit. Cash flows used in financing activities during the six months ended June 30, 2017, primarily consisted of repayment of our debt balances of approximately $41.9 million , partially offset by proceeds of approximately $28.7 million from draws on our line of credit.
Short-term Liquidity and Capital Resources
Our principal short-term demand for funds is for the payment of operating expenses, the payment of principal and interest on our outstanding indebtedness and distributions. To date, our cash needs for operations have been covered from cash provided by property operations, the sales of properties and the sale of shares of our common stock. We may fund our short-term operating cash needs from operations, from the sales of properties and from debt.
Long-term Liquidity and Capital Resources
On a long-term basis, our principal demand for funds will be for real estate and real estate-related investments and the payment of acquisition-related expenses, operating expenses, distributions to stockholders, future redemptions of shares and interest and principal payments on current and future indebtedness. Generally, we intend to meet cash needs for items other than acquisitions and acquisition-related expenses from our cash flow from operations, debt and sales of properties. On a long-term basis, we expect that substantially all cash generated from operations will be used to pay distributions to our stockholders after satisfying our operating expenses including interest and principal payments. We may consider future public offerings or private placements of equity. Refer to Note 8. “Notes Payable, Net” to our interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on the maturity dates and terms of our outstanding indebtedness.

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Mortgage Loans Secured by Properties Under Development
In connection with our investment in the Wilshire Joint Venture and the acquisition of the Wilshire Property, we have consolidated borrowings of $8.5 million (the “Wilshire Loan”). The Wilshire Loan bears interest at a rate of 9.5% plus 30 -day LIBOR with a minimum of 10.0% per annum, payable monthly, commencing on April 1, 2016. The loan was scheduled to mature on March 7, 2017, with an option for two additional six-month periods, subject to certain conditions as stated in the loan agreement. All conditions to extensions were met, and on March 7, 2017, we exercised the option to extend the loan until September 7, 2017 . On August 29, 2017, we exercised the remaining option to extend the loan for an additional six months. The extension was scheduled to mature on March 7, 2018. We extended the loan, with the same terms, for an additional six months, effective March 7, 2018. The new maturity date is September 7, 2018 . We intend to explore all available financing options, including a further extension of the loan with the current lender prior to its maturity date. The loan is secured by, among other things, a lien on the Wilshire development project and other collateral as defined in the loan agreement.
In connection with our investment in the Gelson’s Joint Venture and the acquisition of the Gelson’s Property, we have consolidated borrowings of $9.7 million (the “Gelson’s Loan”). The Gelson’s Loan bears interest at a rate of 9.25% plus 30 -day LIBOR with a minimum of 9.5% per annum, payable monthly, commencing on April 1, 2016. The loan was scheduled to mature on January 27, 2017 , with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. Those conditions were not met, but we negotiated a six month extension of the term on January 27, 2017 to mature on July 27, 2017. We negotiated a nine month extension of the term on July 27, 2017. The extension was scheduled to mature on April 27, 2018. On April 23, 2018, we made a mandatory principal payment of $1.0 million . We extended the loan, for an additional six months, effective April 26, 2018. The new maturity date is October 27, 2018 . We intend to explore all available financing options, including a further extension of the loan with the current lender prior to its maturity date. The loan is secured by, among other things, a lien on the Gelson’s development project and other joint venture collateral as defined in the loan agreement.
Interim Financial Information
The financial information as of and for the period ended June 30, 2018, included in this Quarterly Report on Form 10-Q is unaudited, but includes all adjustments (consisting of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of our financial position and operating results for the three and six months ended June 30, 2018. These interim unaudited condensed consolidated financial statements do not include all disclosures required by GAAP for complete consolidated financial statements. Interim results of operations are not necessarily indicative of the results to be expected for the full year; and such results may be less favorable. Our accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 2017 Annual Report on Form 10-K.
Guidelines on Total Operating Expenses
We reimburse our Advisor for some expenses paid or incurred by our Advisor in connection with the services provided to us, except that we will not reimburse our Advisor for any amount by which our total operating expenses at the end of the four preceding fiscal quarters exceed the greater of (1) 2% of our average invested assets, as defined in our charter; and (2) 25% of our net income, as defined in our charter, or the “2%/25% Guidelines” unless a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the six months ended June 30, 2018 and 2017 , our total operating expenses did not exceed the 2%/25% Guidelines.
On August 2, 2018, we entered into the Sixth Amendment to the Advisory Agreement. The Advisory Agreement Amendment provides that the Advisor shall not be required to reimburse to us any operating expenses incurred during a given period that exceed the applicable limit on “Total Operating Expenses” (as defined in the Advisory Agreement) to the extent that such excess operating expenses are incurred as a result of certain unusual and non-recurring factors approved by our board of directors, including some related to the execution of our investment strategy as directed by our board of directors. 
Inflation
The majority of our leases at our properties contain inflation protection provisions applicable to reimbursement billings for common area maintenance charges, real estate tax and insurance reimbursements on a per square foot basis, or in some cases, annual reimbursement of operating expenses above a certain per square foot allowance. We expect to include similar provisions in our future tenant leases designed to protect us from the impact of inflation. Due to the generally long-term nature of these leases, annual rent increases, as well as rents received from acquired leases, may not be sufficient to cover inflation and rent may be below market rates.

28


REIT Compliance
To qualify as a REIT for tax purposes, we are required to annually distribute at least 90% of our REIT taxable income, subject to certain adjustments, to our stockholders. We must also meet certain asset and income tests, as well as other requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which our REIT qualification is lost unless the IRS grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders.
Quarterly Distributions
As set forth above, in order to qualify as a REIT, we are required to distribute at least 90% of our annual REIT taxable income, subject to certain adjustments, to our stockholders.
Under the terms of the Key Bank credit facility, we may pay distributions to our stockholders so long as the total amount paid does not exceed certain thresholds specified in the Key Bank credit facility; provided, however, that we are not restricted from making any distributions necessary in order to maintain our status as a REIT. Our board of directors will continue to evaluate the amount of future quarterly distributions based on our operational cash needs.
Some or all of our distributions have been paid, and in the future may continue to be paid, from sources other than cash flows from operations.
The following tables set forth the quarterly distributions declared to our common stockholders and common unit holders for the six months ended June 30, 2018 and the year ended December 31, 2017 (amounts in thousands, except per share amounts):
 
Distribution Record
Date
 
Distribution
Payable
Date
 
Distribution Per Share of Common Stock /
Common Unit
 
Total Common
Stockholders
Distribution
 
Total Common
Unit Holders
Distribution
 
Total
Distribution
First Quarter 2018
3/31/2018
 
4/30/2018
 
$
0.06

 
$
659

 
$
14

 
$
673

Second Quarter 2018
6/30/2018
 
7/31/2018
 
0.06

 
658

 
14

 
672

Total
 
 
 
 
 
 
$
1,317

 
$
28

 
$
1,345

 
Distribution Record
Date
 
Distribution
Payable
Date
 
Distribution Per Share of Common Stock /
Common Unit
 
Total Common
Stockholders
Distribution
 
Total Common
Unit Holders
Distribution
 
Total
Distribution
First Quarter 2017
3/31/2017
 
4/28/2017
 
$
0.06

 
$
655

 
$
25

 
$
680

Second Quarter 2017
6/30/2017
 
7/31/2017
 
0.06

 
652

 
25

 
677

Third Quarter 2017
9/30/2017
 
10/31/2017
 
0.06

 
660

 
16

 
676

Fourth Quarter 2017
12/31/2017
 
1/31/2018
 
0.06

 
659

 
14

 
673

Total
 
 
 
 
 
 
$
2,626

 
$
80

 
$
2,706

 
Funds From Operations
Funds from operations (“FFO”) is a supplemental non-GAAP financial measure of a real estate company’s operating performance. The National Association of Real Estate Investment Trusts, or “NAREIT”, an industry trade group, has promulgated this supplemental performance measure and defines FFO as net income, computed in accordance with GAAP, plus real estate related depreciation and amortization and excluding extraordinary items and gains and losses on the sale of real estate, and after adjustments for unconsolidated joint ventures (adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO.) It is important to note that not only is FFO not equivalent to our net income or loss as determined under GAAP, it also does not represent cash flows from operating activities in accordance with GAAP.  FFO should not be considered an alternative to net income as an indication of our performance, nor is FFO necessarily indicative of cash flow as a measure of liquidity or our ability to fund cash needs, including the payment of distributions.

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We consider FFO to be a meaningful, additional measure of operating performance and one that is an appropriate supplemental disclosure for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.
Our calculation of FFO attributable to common shares and Common Units and the reconciliation of net income (loss) to FFO is as follows (amounts in thousands, except shares and per share amounts):
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
FFO
 
2018
 
2017
 
2018
 
2017
Net income
 
$
2,531

 
$
2,002

 
$
2,554

 
$
8,181

Adjustments:
 
 
 
 
 
 
 
 
Gain on disposal of assets
 
(2,448
)
 
(2,545
)
 
(2,448
)
 
(9,131
)
Adjustment to reflect FFO of unconsolidated joint ventures
 
107

 
132

 
183

 
212

Depreciation of real estate
 
267

 
615

 
545

 
1,222

Amortization of in-place leases and leasing costs
 
74

 
209

 
154

 
564

FFO attributable to common shares and Common Units (1)
 
$
531

 
$
413

 
$
988

 
$
1,048

 
 
 
 
 
 
 
 
 
FFO per share and Common Unit (1)
 
$
0.05

 
$
0.04

 
$
0.09

 
$
0.09

 
 
 
 
 
 
 
 
 
Weighted average common shares and units outstanding (1)
 
11,212,912

 
11,327,761

 
11,218,086

 
11,343,672

(1)
Our common units have the right to convert a unit into common stock for a one-to-one conversion. Therefore, we are including the related non-controlling interest income/loss attributable to common units in the computation of FFO and including the common units together with weighted average shares outstanding for the computation of FFO per share and common unit.
Related Party Transactions and Agreements
We are currently party to the Advisory Agreement, pursuant to which the Advisor manages our business in exchange for specified fees paid for services related to the investment of funds in real estate and real estate-related investments, management of our investments and for other services. Refer to Note 12. “Related Party Transactions” to our interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the Advisory Agreement and other related party transactions, agreements and fees.  
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements consist primarily of our investments in joint ventures and are described in Note 4. “Investments in Unconsolidated Joint Ventures” in the notes to the interim unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q. Our joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint ventures’ debts are secured by a first mortgage, are without recourse to the joint venture partners, and do not represent a liability of the partners other than carve-out guarantees for certain matters such as environmental conditions, misuse of funds and material misrepresentations. As of June 30, 2018 , we have provided carve-out guarantees in connection with our two unconsolidated joint ventures; in connection with those carve-out guarantees we have certain rights of recovery from our joint venture partners. 
Critical Accounting Policies
Our interim unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. Other than the critical accounting policy discussed below, a discussion of additional accounting policies that

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management considers critical in that they involve significant management judgments, assumptions and estimates is included in our 2017 Annual Report on Form 10-K.
Revenue Recognition
Revenues include minimum rents, expense recoveries and percentage rental payments. Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased property. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:
•
whether the lease stipulates how a tenant improvement allowance may be spent;
•
whether the amount of a tenant improvement allowance is in excess of market rates;
•
whether the tenant or landlord retains legal title to the improvements at the end of the lease term;
•
whether the tenant improvements are unique to the tenant or general-purpose in nature; and
•
whether the tenant improvements are expected to have any residual value at the end of the lease term.
For leases with minimum scheduled rent increases, we recognize income on a straight-line basis over the lease term when collectability is reasonably assured. Recognizing rental income on a straight-line basis for leases results in reported revenue amounts which differ from those that are contractually due from tenants. If we determine that collectability of straight-line rents is not reasonably assured, we limit future recognition to amounts contractually owed and paid, and, when appropriate, establish an allowance for estimated losses.
We maintain an allowance for doubtful accounts, including an allowance for straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. We monitor the liquidity and creditworthiness of our tenants on an ongoing basis. For straight-line rent amounts, our assessment is based on amounts estimated to be recoverable over the term of the lease.
Certain leases contain provisions that require the payment of additional rents based on the respective tenants’ sales volume (contingent or percentage rent) and substantially all contain provisions that require reimbursement of the tenants’ allocable real estate taxes, insurance and common area maintenance costs (“CAM”). Revenue based on percentage of tenants’ sales is recognized only after the tenant exceeds its sales breakpoint. Revenue from tenant reimbursements of taxes, CAM and insurance is recognized in the period that the applicable costs are incurred in accordance with the lease agreement.
In May 2014, the Financial Accounting Standards Board issued ASU 2014-09. ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. As our revenues are primarily generated through leasing arrangements, our revenues fall out of the scope of this standard. Effective January 1, 2018, we applied the provisions of Accounting Standards Codification 610-20, Gains and Losses From the Derecognition of Nonfinancial Assets (“ASC 610-20”), for gains on sale of real estate, and recognizes any gains at the time control of a property is transferred and when it is probable that substantially all of the related consideration will be collected. As a result of adopting ASC 610-20, using the modified retrospective method, the sales criteria in ASC 360,  Property, Plant, and Equipment, no longer applied. As such, we recognized $0.7 million  of deferred gains relating to sales of properties to the SGO Joint Venture through a cumulative effect adjustment to accumulated deficit. Other than the cumulative effect adjustment relating to such deferred gains, the adoption of Accounting Standards Codification 606, Revenue From Contracts with Customers (“ASC 606”) and ASC 610-20 did not have an impact on our condensed consolidated financial statements.
Subsequent Events
Sale of Held for Sale Property
On July 17, 2018, we consummated the disposition of Ensenada Square, located in Arlington, Texas, for a sales price of approximately $5.8 million in cash. A portion of the proceeds was used to pay down amounts outstanding under our line of credit.

31


Distributions
On May 10, 2018, our board of directors declared a second quarter distribution in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of June 30, 2018. The distribution was paid on July 31, 2018.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted as permitted under rules applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this report, management, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon, and as of the date of, the evaluation, our chief executive officer and chief financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2018 , that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Omitted as permitted under rules applicable to smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the period covered by this Quarterly Report on Form 10-Q, we did not issue any equity securities that were not registered under the Securities Act of 1933, as amended.
Share Redemption Program
On April 1, 2015, our board of directors approved the reinstatement of the share redemption program (which had been suspended since January 15, 2013) and adopted an Amended and Restated Share Redemption Program (the “SRP”). Under the SRP, only shares submitted for repurchase in connection with the death or “qualifying disability” (as defined in the SRP) of a stockholder are eligible for repurchase by us. The number of shares to be redeemed is limited to the lesser of (i) a total of $2.0 million for redemptions sought upon a stockholder’s death and a total of $1.0 million for redemptions sought upon a stockholder’s qualifying disability, and (ii) 5% of the number of shares of our common stock outstanding during the prior calendar year. Share repurchases pursuant to the SRP are made at our sole discretion. We reserve the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the SRP.
The redemption price for shares that are redeemed is 100% of our most recent estimated net asset value per share as of the applicable redemption date. A redemption request must be made within one year after the stockholder’s death or disability, unless such death or disability occurred between January 15, 2013 and April 1, 2015, when the share redemption program was suspended. Redemption requests due to the death or disability of a stockholder that occurred during such time period, were required to be submitted on or before April 1, 2016.
The SRP provides that any request to redeem less than $5 thousand worth of shares will be treated as a request to redeem all of the stockholder’s shares. If we cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If we do not completely satisfy a redemption request in one quarter, we will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. We may increase or decrease the amount of funding available for redemptions under the SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter.
The other material terms of the SRP are consistent with the terms of the share redemption program that was in effect immediately prior to January 15, 2013.
On August 7, 2015, the board of directors approved the amendment and restatement of the SRP (the “First A&R SRP”). Under the First A&R SRP, the redemption date with respect to third quarter 2015 redemptions was November 10, 2015 or the next practicable date as the Chief Executive Officer determined so that redemptions with respect to the third quarter of 2015 were delayed until after the payment date for a special distribution. With this revision, stockholders who were to have 100% of their shares redeemed were not left holding a small number of shares from the Special Distribution after the date of the redemption of their shares. The other material terms of the First A&R SRP were consistent with the terms of the SRP.
On August 10, 2016, our board of directors authorized our management to prepare and implement an amendment and restatement of the SRP (the “Second A&R SRP”) to revise the definition of disability under the SRP. The Second A&R SRP became effective August 26, 2016. Under the Second A&R SRP, a person is deemed to be disabled and therefore eligible to redeem shares pursuant to the Second A&R SRP if they are disabled pursuant to the definition of “disability” in the Internal Revenue Code of 1986, as amended, at the time that the person’s written redemption request is received by us. The other material terms of the Second A&R SRP are consistent with the terms of the First A&R SRP.

33


On August 2, 2017, our board of directors approved, pursuant to Section 3(a) of the SRP, an additional $1.0 million of funds available for the redemption of shares in connection with the death of a stockholder.
During the quarter ended June 30, 2018 , we redeemed shares as follows:
Period
 
Total Number of
Shares Redeemed (1)
 
Average Price
Paid per Share
 
Total Number of Shares
Purchased as Part of a
Publicly Announced Plan
or Program 
 
Approximate Dollar Value of
Shares That May Yet be
Redeemed Under the Program (2)
April 2018
 
—

 
$
—

 
—

 
$
985,737

May 2018
 
—

 
—

 
—

 
985,737

June 2018
 
14,710

 
6.27

 
14,710

 
893,504

Total
 
14,710

 
 

 
14,710

 
 
(1)
All of our purchases of equity securities during the quarter ended June 30, 2018 , were made pursuant to the SRP.
(2)
We currently limit the dollar value and number of shares that may yet be repurchased under the SRP as described above.
Cumulatively, through June 30, 2018 , we have redeemed 637,137 shares for $4.7 million .
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

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ITEM 5. OTHER INFORMATION
As of the three months ended June 30, 2018 , all items required to be disclosed under Form 8-K were reported under Form 8-K.

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ITEM 6. EXHIBITS
The exhibits listed on the Exhibit Index (following the signatures section of this Quarterly Report on Form 10-Q) are included herewith, or incorporated herein by reference.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on August 10, 2018 .
 
Strategic Realty Trust, Inc.
 
 
 
By:
/s/ Andrew Batinovich
 
 
Andrew Batinovich
 
 
Chief Executive Officer, Corporate Secretary and Director
(Principal Executive Officer)
 
 
 
 
By:
/s/ Terri Garnick
 
 
Terri Garnick
 
 
Chief Financial Officer
(Principal Financial and Accounting Officer)

Table of Contents

EXHIBIT INDEX
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the six months ended June 30, 2018 (and are numbered in accordance with Item 601 of Regulation S-K). 
 
 
 
 
 
 
Incorporated by Reference
Exhibit No.
 
Description
 
Filed
Herewith
 
Form/File No.
 
Filing Date
 
 
 
 
 
 
 
 
 
 
Articles of Amendment and Restatement of TNP Strategic Retail Trust, Inc. 
 
 
 
S-11/
No. 333-154975
 
7/10/2009
 
 
 
 
 
 
 
 
 
 
Articles of Amendment, dated August 22, 2013 
 
 
 
8-K
 
8/26/2013
 
 
 
 
 
 
 
 
 
 
Articles Supplementary, dated November 1, 2013
 
 
 
8-K
 
11/4/2013
 
 
 
 
 
 
 
 
 
 
Articles Supplementary, dated January 22, 2014 
 
 
 
8-K
 
1/28/2014
 
 
 
 
 
 
 
 
 
 
Third Amended and Restated Bylaws of Strategic Realty Trust, Inc. 
 
 
 
8-K
 
1/28/2014
 
 
 
 
 
 
 
 
 
 
Letter Agreement with Buchanan Mortgage, dated April 20, 2018
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Purchase and Sale Agreement by and between Ginger Investors, LLC and SRT Secured Topaz, LLC, dated May 18, 2018
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Strategic Realty Trust, Inc. Amended and Restated Share Redemption Program Adopted August 26, 2016
 
 
 
8-K
 
8/30/2016
 
 
 
 
 
 
 
 
 
 
Fifth Amendment to the Advisory Agreement, dated July 19, 2018
 
 
 
8-K
 
7/20/2018
 
 
 
 
 
 
 
 
 
 
Sixth Amendment to the Advisory Agreement, dated August 2, 2018
 
 
 
8-K
 
8/3/2018
 
 
 
 
 
 
 
 
 
101.INS
 
XBRL Instance Document
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
X
 
 
 
 


38

 

 


PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS

THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (“ Agreement ”) is dated as of May 18, 2018 (the “ Effective Date ”), by and between SRT SECURED TOPAZ, LLC , a Delaware limited liability company (“ Seller ”), and GINGER INVESTORS, LLC , a California limited liability company, or its permitted assignee (“ Buyer ”).
Recitals
A .    Buyer desires to acquire the Property from Seller and Seller desires to sell the Property to Buyer, upon the terms and subject to the conditions set forth in this Agreement. The Property consists of and includes the Land and Improvements (the Real Property), the Lease, the Personal Property and the General Intangibles (as each such term is defined in Addendum 1 attached hereto).
NOW, THEREFORE , in consideration of the premises, the mutual representations, warranties, covenants and agreements hereinafter contained, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged and intending to be legally bound, the Parties hereby agree as follows:
1. Definitions . Capitalized terms used in this Agreement shall have the meanings set forth in Addendum I attached hereto.
2. Agreement to Purchase and Sell . Subject to and upon the terms and conditions herein set forth and the representations and warranties contained herein, Seller agrees to sell the Property to Buyer, and Buyer agrees to purchase the Property from Seller.
3. Consideration . Seller and Buyer agree that the total Consideration for the Property shall be Four Million One Hundred Sixty Thousand and No/100ths Dollars ($4,160,000.00).
(a)      Deposit; Additional Deposit; Balance of Consideration . The Consideration shall comprise the following components:
(i)      Initial Earnest Money Deposit; Remaining Earnest Money Deposit . Within two (2) Business Days of the Effective Date, Buyer shall deposit the Initial Earnest Money Deposit in escrow with the Title Company. If Buyer notifies Seller in writing on or before the end of the Due Diligence Period of Buyer’s election to proceed to close pursuant to the terms hereof, Buyer shall deposit the Remaining Earnest Money Deposit with the Title Company within two (2) Business Days after the Approval Date. At Buyer’s request made to the Title Company the Earnest Money shall be held in a federally insured interest-bearing account and interest accruing thereon shall be for the account of Buyer; provided, however, Buyer shall be solely responsible for any costs or fees associated with such account and such account shall permit immediate withdrawal of funds without penalty. In the event the transaction


Purchase and Sale Agreement
Page 1 of 32
941120.4


contemplated hereby is consummated, the Earnest Money plus interest accrued thereon while held by the Title Company shall be credited against Buyer’s payment obligations under this Agreement.
(ii)      Cash . Immediately available funds, in an amount equal to the Consideration, less the Earnest Money and the Non-Refundable Payment.
(b)      Non-Refundable Payment . Promptly after receipt of the Earnest Money, as consideration for Seller’s agreement to the terms of Section 4 , below, and as a condition precedent to the effectiveness of this Agreement, the Title Company shall deliver directly to Seller from the Earnest Money Deposit, in cash or by wire transfer, immediately available funds in the amount of One Hundred and No/100ths Dollars ($100.00) (the “ Non-Refundable Payment ”), as consideration for Buyer’s rights under Section 4 of this Agreement and Seller’s execution and delivery of this Agreement. The Non-Refundable Payment shall be fully earned and retained by Seller immediately upon receipt and, notwithstanding any provisions of this Agreement to the contrary, the Non-Refundable Payment shall not be returned to Buyer in any circumstance but shall be applicable to the Consideration at the Close of Escrow. Buyer acknowledges that Seller would not have agreed to the terms of Section 4 of this Agreement had Buyer not made the Non-Refundable Payment to Seller on the terms set forth in this Section 3(b) .
(c)      No Financing Contingency . Buyer acknowledges and agrees that the acquisition of the Property by Buyer is not conditioned upon Buyer obtaining financing for all or any portion of the Purchase Price. Notwithstanding the foregoing sentence, Seller agrees to reasonably cooperate with Buyer, at no cost to Seller, in accommodating the reasonable requests of Buyer related to Buyer’s financing; provided, however, Seller shall not be obligated to (i) provide any affidavits, certifications, statements, representations or warranties to or for the benefit of Buyer’s lender, about Seller, the Property or any aspect thereof, except as otherwise required in this Agreement, (ii) incur or undertake additional or other liability or obligation beyond those set forth in this Agreement, or to Buyer’s lender, even if such liability or obligation currently exists under this Agreement, to Buyer; (ii) take any action inconsistent with the terms of this Agreement or any action which, if taken, would effectively modify the terms of this Agreement. For the avoidance of doubt and by way of example, if Buyer’s lender requests a form of tenant estoppel other than that which is called for under the terms of this Agreement, and Seller accommodates such request, such accommodation shall not modify the terms of this Agreement applicable to tenant estoppels. Seller’s cooperation in or accommodation of Buyer’s requests relating to its financing does not create or imply that Buyer’s financing or any component thereof is a Buyer Closing Condition, and Buyer expressly waives the right to asset any such claim premised on Seller’s cooperation with Buyer or Buyer’s lender.
4. Buyer’s Due Diligence . As more fully provided below, Seller agrees to and will assist and cooperate with Buyer in obtaining access to the Property and certain documents relating thereto for purposes of inspection and due diligence.


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(a)      Physical Inspection of the Property . At any time(s) reasonably requested by Buyer following the Effective Date and prior to Closing, Seller shall afford Buyer and its authorized representatives reasonable access to the Property for purposes of satisfying Buyer with respect to the suitability of the Property for Buyer’s purposes, the representations, warranties and covenants of Seller contained herein and the satisfaction of any conditions precedent to the Closing; provided, however, that Buyer shall not disturb or interfere with the rights of any Tenant. Buyer shall provide Seller with notice on a Business Day not less than twenty-four (24) hours prior to any such inspections, and Seller, at its election, shall have the right to have a representative present during any such investigations. Seller shall have the right at all times to have a representative of Seller accompany any of Buyer or Buyer’s Agents while such persons are on the Property. Buyer may conduct Tenant interviews, provided Buyer has given Seller notice on a Business Day not less than twenty-four (24) hours prior to any such interview, and provided further that Seller shall have the right to be present at all such interviews. Notices to Seller pursuant to this Section 4(a) may be delivered orally (if made in person, and not via voicemail, to Alan Shapiro at 650-581-7606), or by email (if made to Alan Shapiro at alan.shapiro@glenborough.com and no “out of office” response or other response indicating delivery failure or Mr. Shapiro’s unavailability is generated).
(b)      Physical Testing . Buyer shall not conduct or allow any Physical Testing without Seller’s prior written consent, which consent may be withheld at Seller’s sole and absolute discretion. Buyer shall provide Seller with notice not less than three (3) Business Days prior to the commencement of any Physical Testing, and if approved by Seller, Seller shall have the right to have its own consultant present for any such work. Buyer acknowledges and agrees that Seller’s review of Buyer’s work plan is solely for the purpose of protecting Seller’s interests, and shall not be deemed to create any liability of any kind on the part of Seller in connection with such review that, for example, the work plan is adequate or appropriate for any purpose or complies with applicable legal requirements. All Physical Testing and all other work and investigations shall be performed in compliance with all local, state and federal laws, rules and regulations, including, without limitation, any and all permits required thereunder, all of which shall be at the sole cost and expense of Buyer.
(c)      Damage; Indemnity . Notwithstanding anything in this Agreement to the contrary, any entry upon, inspection, or investigation of the Property by Buyer or Buyer’s Agents, whether performed before or after the Effective Date, shall be performed at the sole risk and expense of Buyer, and Buyer shall be solely and absolutely responsible for the acts or omissions of Buyer and any of Buyer’s Agents. Furthermore, Buyer shall protect, indemnify, defend and hold Seller, and its successors, assigns, and affiliates harmless from and against any and all losses, damages (whether general, consequential, punitive or otherwise), liabilities, claims, causes of action, judgments, costs and legal or other expenses (including, but not limited to, reasonable attorneys’ fees and costs) (collectively, “ Access Claims ”) suffered or incurred by any or all of such indemnified Parties to the extent resulting from (i) any act or omission of Buyer or Buyer’s Agents in connection with entry upon the Property by Buyer or Buyer’s Agents, or the activities, studies or investigations conducted at, to or on the Property by Buyer or Buyer’s Agents, or (ii) any breach on the part of Buyer of its obligations under this Section 4 . If, at any time prior to Closing, Buyer or Buyer’s Agents


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cause any damage to the Property, Buyer shall, at its sole expense, promptly restore the Property to substantially the same condition as existed immediately prior to the occurrence of such damage, as reasonably determined by Seller. Buyer’s obligation to indemnify, defend and hold Seller harmless shall not apply to matters to the extent arising or resulting from (i) the mere discovery by Buyer of any pre-existing defects in the Property (except to the extent Buyer or Buyer’s Agents exacerbate any such pre-existing condition or such discovery is made in violation of the terms of this Agreement pertaining to Physical Testing); or (ii) the discovery by Buyer of any Hazardous Materials within, on or adjacent to the Property that were not released or deposited by Buyer or any of Buyer’s Agents (except to the extent that Buyer or Buyer’s Agents exacerbate the scope or effect of, or cause additional or further release of, any such Hazardous Materials, or such discovery is made in violation of the terms of this Agreement pertaining to Physical Testing). Buyer’s obligations under this Section 4 shall survive the termination of this Agreement or the Closing, as the case may be, notwithstanding any other provisions herein to the contrary, and shall not be limited by the terms of Section 14(c) . Buyer shall, at all times, keep the Property free and clear of any mechanics’, materialmen’s or design professional’s claims or liens arising out of or relating to Buyer’s or Buyer’s Agents’ investigations of the Property, whether occurring before or after the Effective Date.
(d)      Liability Insurance . Prior to any entry onto the Property by Buyer or Buyer’s Agents, Buyer shall provide Seller written evidence that Buyer has procured comprehensive general liability insurance specific to the Property (or with the requisite limits dedicated to the Property) on an “occurrence” form policy covering (at a minimum) (i) the activities of Buyer and Buyer’s Agents on the Property during the period from the Effective Date through the Closing Date; and (ii) Buyer’s indemnity obligation under this Agreement. Such policy shall provide for a combined single limit in the minimum amount of $1,000,000, be issued by a company authorized to do business in the State in which the Property is located and have a deductible not to exceed $25,000. Seller shall be named as an additional insured under all such liability insurance and Buyer shall deliver to Seller a copy of the insurer’s endorsements which name Seller as an additional insured and provide for contractual liability coverage, prior to any entry onto the Property by Buyer or Buyer’s Agents. In addition, and prior to any entry onto the Property by Buyer or Buyer’s Agents, Buyer shall deliver to Seller ACORD certificates evidencing that the insurance required under this section is in full force and effect.
(e)      Delivery of Documents and Records . On or before the Effective Date, Seller delivered the Due Diligence Materials to an electronic data room and provided Buyer with access to the electronic data room. Except as specifically set forth herein, Seller makes no representations or warranties as to the truth, accuracy or completeness of any materials, data or other information supplied to Buyer in connection with Buyer’s inspection of the Property (e.g., that such materials are complete, accurate, or the final version thereof, or that all such materials are in the Seller’s possession). It is the Parties’ express understanding and agreement that such materials are provided only for Buyer’s convenience in making its own examination and determination prior to the Approval Date, as to whether or not it wishes to purchase the Property, and, in doing so, Buyer shall rely exclusively on its own independent


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investigation and evaluation of every aspect of the Property and, except as expressly set forth herein, not on any materials supplied by Seller. Buyer expressly disclaims any intent to rely on any such materials provided to it by Seller in connection with its own inspections and agrees that it shall rely solely on its own independently developed or verified information. Buyer agrees that delivery may be accomplished by access to the Due Diligence Materials in an electronic data room established by Seller or Seller’s Broker.
(f)      Contacts with Property Managers . At any time reasonably requested by Buyer following the Effective Date and prior to Closing, Buyer may contact and interview the property manager/leasing agent(s) for the Property on a Business Day, provided Buyer shall give Seller written notice on a Business Day not less than forty-eight (48) hours in advance of the time Buyer desires to conduct such interview, and Seller or its representative may be present during such interview. Notices to Seller pursuant to this subsection may be delivered orally (if made in person, and not via voicemail, to Alan Shapiro at 650-581-7606), or by email (if made to Alan Shapiro at alan.shapiro@glenborough.com and no “out of office” response or other response indicating delivery failure or Mr. Shapiro’s unavailability is generated).
(g)      Service Contracts . Seller will terminate all Service Contracts with respect to the Property as of the Closing Date, and will be responsible for and shall pay all amounts owing under such Service Contracts.
(h)      Approval of Title . Promptly after the Effective Date, Seller shall request that the Title Company deliver to Buyer a Preliminary Title Report with links to or copies of any underlying exceptions or documents referenced therein. No later than six (6) days prior to the end of the Due Diligence Period, Buyer shall advise Seller what exceptions to title, if any, will be accepted by Buyer. Seller shall have three (3) days after receipt of Buyer’s objections to give to Buyer: (A) written notice that Seller will remove such objectionable exceptions on or before the Closing Date; or (B) written notice that Seller elects not to cause such exceptions to be removed. Seller’s failure to give notice to Buyer within the three (3) Business Day period shall be deemed to be Seller’s election not to cause such exceptions to be removed. If Seller gives Buyer notice or is otherwise deemed to have elected to proceed under clause (B), Buyer shall have until the earlier of (i) three (3) days after receipt of Seller’s actual or deemed notice as to Seller’s unwillingness to cause such exceptions to be removed, or (ii) the end of the Due Diligence Period, to elect to proceed with the transaction or terminate this Agreement. If Buyer fails to give Seller notice of its election on or before the expiration of such period, Buyer shall be deemed to have elected to terminate this Agreement. If Seller gives notice pursuant to clause (A) and fails to remove any such objectionable exceptions from title prior to the Closing Date, and Buyer is unwilling to take title subject thereto, Buyer shall have the right to elect to terminate this Agreement and Section 14(a) shall apply. Notwithstanding the foregoing, Buyer shall be deemed to have objected to any lien encumbering the Property that secures the payment of money, such as mechanics’ liens, materialmen’s liens and judgment liens, and the liens of deeds of trust and mortgages (collectively, “ Monetary Liens ”), unless Buyer otherwise notifies Seller in writing. Monetary Liens shall not include non-delinquent assessments or bond amounts encumbering


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the Property and reflected in the tax bills for the Property, non-delinquent property taxes or assessments, or non-delinquent dues, costs or assessments under declarations, reciprocal easements, or other covenants, conditions or restrictions to which the Property is subject. Seller hereby agrees to remove at or before the Closing and shall cause the Property to be delivered free and clear of, Monetary Liens caused by Seller, subject in the case of the lien in favor of the Existing Lender, to the Existing Lender’s consent to the release of the Property from the lien. Buyer agrees that “removal” of an exception shall include the Title Company’s willingness to endorse over such exception or provide affirmative assurance to Buyer of no loss or damage to Buyer from such exception.
(i)      New Exceptions . In the event the Title Company notifies Buyer of any New Exceptions to title after the Approval Date, Buyer shall have two (2) Business Days in which to notify Seller of its approval or disapproval of such New Exception. Failure to deliver notice of approval of such New Exception shall be deemed disapproval of the New Exception. If Buyer disapproves such New Exception, Seller shall notify Buyer within two (2) Business Days thereafter whether or not Seller can or will cause the removal of such New Exception. Failure to deliver such notice by Seller shall be deemed Seller’s refusal to cause the removal of such New Exception. If Seller is unwilling or unable to cause the removal of such New Exception, Buyer shall have the right within two (2) Business Days thereafter in which to waive such objection to title and proceed to Closing, or terminate this Agreement, in which case Section 14(a) shall apply. Failure by Buyer to deliver notice of waiver shall be deemed Buyer's objection to title and election to terminate this Agreement. Buyer agrees that “removal” of a New Exception shall include the Title Company’s willingness to endorse over such exception or provide affirmative assurance to Buyer of no loss or damage to Buyer from such New Exception.
(j)      Survey . Seller has provided Buyer with a copy of an ALTA/NSPS survey of the Property (the “ Survey ”) completed in 2015, prior to the creation of the Property as a separate legal parcel by recordation of the Parcel Map. If Buyer elects ALTA extended coverage title insurance, with survey coverage, Buyer shall have the right, at its cost, to update, modify, amend or re-certify the Survey as necessary in order for the Title Company to delete the survey exception from the Title Policy or to otherwise satisfy Buyer’s objectives. Seller will consent to the use and update of such Survey by Buyer, at Buyer’s cost. Buyer shall have the right to object to any matters shown in the Survey no later than three (3) days prior to the end of the Due Diligence Period in accordance with Section 4(h) . The receipt of a Survey shall not be a condition precedent to Buyer’s obligation to close the escrow.
(k)      Title Commitment during Due Diligence Period . Buyer shall use diligent, good faith efforts to obtain from the Title Company no later than the end of the Due Diligence Period, such assurances and commitments as to policy form, coverage and endorsements as Buyer may request for the Title Policy. Delivery of the Approval Notice to Seller prior to the end of the Due Diligence Period shall constitute Buyer’s approval of matters affecting title to the Property, including any such matters as are shown on the Survey, subject to Buyer’s rights under Section 4(h) and any New Exceptions. Buyer may elect to obtain an owner’s ALTA extended coverage title insurance policy, and such endorsements as Buyer


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may require, at Buyer’s cost. Seller shall execute and deliver to the Title Company the form of owner’s title affidavit set forth in Exhibit G to this Agreement. It shall be a condition to Buyer’s obligation to close the Escrow that the Title Company not be unwilling or unable to deliver to Buyer as of the Closing its irrevocable commitment to issue to Buyer its Title Policy consistent in all material respects with the commitment, if any, made by the Title Company as of the Approval Date, subject to New Exceptions approved by Buyer. For the avoidance of doubt, and without limiting the foregoing, if, as of the delivery of the Approval Notice, Buyer is negotiating with the Title Company as to the terms, coverage or endorsements to the Title Policy, it shall not be a condition to Buyer’s obligation to close Escrow that the Title Company agree to such requests by Buyer or provide the coverage or assurances sought by Buyer. If, prior to the Approval Date, Buyer fails to obtain a commitment from the Title Company generally or as to any particular exception or term of the Title Policy sought by Buyer, Buyer shall be deemed, as of the Approval Date, to have waived objections to such matters (notwithstanding any further efforts to address such issues with the Title Company, and notwithstanding any agreement by Seller to cooperate with Buyer or the Title Company in addressing such matters) and approved all exceptions to title other than Monetary Liens and subsequent New Exceptions.
(l)      Buyer’s Right to Terminate . At any time up to and including the Approval Date, Buyer has the unqualified right to terminate this Agreement for any reason or no reason and obtain a full refund of the Earnest Money (and any interest thereon), subject to Buyer’s obligations to return Due Diligence Materials to Seller as provided in the Section entitled “Conditions to Closing.” On or before the end of the Due Diligence Period, if Buyer is satisfied with its due diligence review of the Property and matters affecting the Property and wishes to proceed with the acquisition of the Property under this Agreement, Buyer shall give the Seller written notice of its approval of the Property and election to proceed under this Agreement (the “ Approval Notice ”). If Buyer fails to deliver an Approval Notice to Seller on or before the end of the Due Diligence Period, Buyer shall be deemed to have elected to terminate this Agreement, the Agreement shall automatically terminate as of the end of the Due Diligence Period, and Buyer’s Earnest Money (and any interest thereon) shall immediately be returned to Buyer. If Buyer timely delivers its Approval Notice to Seller and timely deposits the Remaining Earnest Money with the Escrow Holder, the Earnest Money shall become non-refundable to Buyer except as specifically set forth herein.
(m)      Natural Hazard Disclosure Statement. Promptly after the Effective Date, Seller shall cause a third party vendor to prepare and deliver to Seller, for transmittal to Buyer, a Natural Hazards Disclosure Statement pertaining to each Property. Buyer acknowledges and agrees that notwithstanding express language in such report to the contrary, Seller makes no representations or warranties as to the truth, accuracy or completeness of such report or any information contained in such report, and Buyer shall rely on its own investigation and due diligence as to the completeness or accuracy of such report and any information contained therein.
5. Conditions to Closing .


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(a)      Buyer Closing Conditions . The conditions set forth in this Section 5(a) are conditions precedent to Buyer’s obligation to acquire the Property (“ Buyer Closing Conditions ”). The Buyer Closing Conditions are intended solely for the benefit of Buyer. If any of the Buyer Closing Conditions is not satisfied, Buyer shall have the right in its sole discretion either to waive the Buyer Closing Condition and proceed with the acquisition of the Property without adjustment to the Consideration or terminate this Agreement by written notice to Seller and the Title Company.
(i)      Representations and Warranties; Performance . The representations and warranties of the Seller contained in Addendum II shall be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date, and Seller shall have timely performed all obligations and covenants of Seller under this Agreement requiring performance prior to the Closing.
(ii)      Title Company Commitment . The Title Company shall not have withdrawn or modified in any material respect its commitment made as of the Approval Date (if any), to issue the Title Policy at the Closing, subject to New Exceptions approved by Buyer.
(iii)      Tenant Estoppel . Seller shall have delivered to Buyer the Tenant Estoppel on or before five (5) days prior to the Closing Date, as required under Section 8 hereunder.
(b)      Seller Closing Conditions . The conditions set forth in this Section 5(b) are conditions precedent to Seller’s obligation to sell the Property (“ Seller Closing Conditions ”). The Seller Closing Conditions are intended solely for the benefit of Seller. If any of the Seller Closing Conditions is not satisfied, Seller shall have the right in its sole discretion either to waive the Seller Closing Condition and proceed with the transaction or terminate this Agreement by written notice to Buyer and the Title Company.
(i)      Lender Consent and Agreement . The Existing Lender shall have confirmed in writing to Seller that all conditions to the release of the Property from the lien of such lender’s deed of trust have been satisfied, and the Existing Lender shall have released its lien on the Property.
(ii)      Representations and Warranties; Performance . The representations and warranties of Buyer contained herein shall be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date, and Buyer shall have timely performed all covenants and obligations of Buyer under this Agreement requiring performance prior to the Closing.
(c)      Deemed Approval of Conditions . In the event that any Party having the right of cancellation hereunder based on failure of a condition precedent set forth herein does not inform the other Party and Title Company in writing of the failure of any condition precedent made for the benefit of such Party prior to the Closing, such failure shall be deemed to have been waived, effective as of the Closing; provided that a Party shall not be deemed to have


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waived any claim for breach of any representation or warranty by the other Party unless such Party has Actual Knowledge of such breach prior to Closing, in which case such Party shall be deemed to have waived any claim for breach of any representation or warranty of the other Party premised on the event, occurrence or circumstance of which such Party had Actual Knowledge prior to the Closing.
(d)      Return of Materials . Upon termination of this Agreement and the escrow for failure of a condition precedent or upon termination by Buyer prior to the end of the Due Diligence Period, and upon Seller’s written request, Buyer shall return to Seller or otherwise delete or destroy all Due Diligence Materials delivered to Buyer by Seller.
6. Closing and Escrow .
(a)      Closing . The Closing shall occur through the Title Company on the Closing Date.
(b)      Deposit of Agreement and Escrow Instructions . The Parties shall promptly deposit a fully executed copy of this Agreement with Title Company and this Agreement shall serve as escrow instructions to Title Company for consummation of the transactions contemplated hereby. Title Company is not a party to this Agreement and its execution and acknowledgement of this Agreement is solely for the purpose of acknowledging receipt of a copy of this Agreement, and is not a condition to the effectiveness of this Agreement as between Buyer and Seller. The Parties agree to execute such additional escrow instructions as may be appropriate to enable Title Company to comply with the terms of this Agreement; provided, however, that in the event of any conflict between the provisions of this Agreement and any supplementary escrow instructions, the terms of this Agreement shall control unless such supplementary instructions are signed by both Buyer and Seller and a contrary intent is expressly indicated in such supplementary instructions. Seller and Buyer hereby designate Title Company as the “reporting person” for the transaction pursuant to Section 6045(e) of the Internal Revenue Code and the regulations promulgated thereunder.
(c)      Seller’s Deliveries to Escrow . At or before the Closing, Seller shall deliver to the Title Company, in escrow, the following:
(i)      the original duly executed and acknowledged Deed;
(ii)      a duly executed original Assignment of Leases;
(iii)      a duly executed original Bill of Sale;
(iv)      a duly executed original Assignment of General Intangibles;
(v)      a FIRPTA affidavit (in the form attached as Exhibit E ) pursuant to Section 1445(b)(2) of the Internal Revenue Code of 1986, and on which Buyer is entitled to rely, that Seller is not a foreign person within the meaning of Section 1445(f)(3) of the Internal Revenue Code, and any equivalents required by the state in which the Property is located;


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(vi)      any other instruments, records or correspondence called for hereunder which have not previously been delivered.
Seller shall instruct the Title Company to deliver a conformed copy of the original Deed, and the originals of the other, foregoing documents, to Buyer upon Closing.
(d)      Seller’s Deliveries to Buyer .
(i)      Deliveries at Closing . At or before the Closing, Seller shall deliver to Buyer the following:
a)      a Rent Roll dated as of the first day of the month in which the Closing Date occurs;
b)      subject to Seller’s obligations in Section 8 , a duly executed original Tenant Estoppel, to the extent required hereunder;
c)      one original form notice to Tenant, informing it of this transaction; and
d)      all keys, combinations and electronic passwords to the Property.
(ii)      Deliveries After Closing . Promptly after closing, Seller shall deliver to Buyer the following, to the extent they have not already been delivered:
a)      originals of the Lease, to the extent available; and
b)      any other instruments, records or correspondence called for hereunder which have not previously been delivered, to the extent available.
(e)      Buyer’s Deliveries to Escrow . At or before the Closing, Buyer shall deliver or cause to be delivered in escrow to the Title Company the following:
(i)      a duly executed Assignment of Leases;
(ii)      a duly executed Assignment of General Intangibles; and
(iii)      the Cash.
(f)      Deposit of Other Instruments . Seller and Buyer shall each deposit such other instruments as are reasonably required by Title Company or otherwise required to close the escrow and consummate the transactions described herein in accordance with the terms hereof.
7. Closing Adjustments and Prorations . With respect to the Property, the following adjustments shall be made, and the following procedures shall be followed:


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(a)      Basis of Prorations . All prorations shall be calculated as of 12:01 a.m. on the Closing Date, on the basis of a 365-day year.
(b)      Items Not to be Prorated . There shall be no prorations or adjustments of any kind with respect to:
(i)      Insurance Premiums . Buyer shall be responsible to obtain insurance covering such risks as Buyer deems necessary or appropriate, commencing as of the Closing Date.
(ii)      Delinquent Rents for Full Months Prior to the Month in which the Closing Occurred . Delinquent Rents for full months prior to the month in which the Closing occurred shall remain the property of Seller, and Buyer shall have no claim thereto, whether collected before or after the Closing. Seller shall have the right to take collection measures against Tenant (including litigation), however Seller shall not seek any remedy which would interfere with Tenant’s continued occupancy and full use of its premises under Tenant’s Lease, or Buyer’s rights to receive Rents with respect to any period from or after the Closing Date. In the event that Buyer collects any delinquent Rents relating to any period before the Closing Date, Buyer shall promptly pay such amounts (less Buyer’s commercially reasonable expenses incurred in connection therewith) over to Seller in accordance with the procedures set forth in subsection (d) below. Buyer shall use commercially reasonable efforts to collect such amounts due from Tenant; provided that Buyer shall not be required to interfere with Tenant’s continued occupancy and full use of its premises under Tenant’s Lease, or Buyer’s rights to receive Rents or Additional Rent with respect to any period beginning on the Closing Date
(iii)      Additional Rents Relating to Full or Partial Months Prior to the Closing Date . If Additional Rents relating to full or partial months prior to the Closing Date are not finally adjusted between Seller and Tenant until after the Closing Date, then any refund to which Tenant may be entitled shall be the obligation of Seller, and any additional amounts due from Tenant for such period shall be the property of Seller. Buyer shall have no obligation with respect to any such refund due to Tenant and no claim to any such amounts due from Tenant, except that Buyer shall promptly pay to Seller any such delinquent Additional Rent amounts as it actually collects (less Buyer’s commercially reasonable expenses incurred in connection therewith), in accordance with the procedures set forth in subsection (d) below. Seller shall have the right to take collection measures against any delinquency on the part of Tenant (including litigation), however Seller shall not seek any remedy which would interfere with Tenant’s continued occupancy and full use of its premises under Tenant’s Lease, or Buyer’s rights to receive Rent with respect to any period from or after the Closing Date. If Seller receives any refund of expenses paid prior to the Closing and relating to a period prior to the Closing, and such expenses were reimbursed in whole or in part by Tenant, Seller shall refund to Tenant its share of any such refund. Buyer shall use commercially reasonable efforts to collect such


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amounts due from Tenant; provided that Buyer shall not be required to interfere with Tenant’s continued occupancy and full use of its premises under Tenant’s Lease, or Buyer’s rights to receive Rent or Additional Rent with respect to any period beginning on the Closing Date.
(c)      Closing Adjustments . At least five (5) days prior to Closing, Seller shall prepare and deliver to Buyer for review, comment and agreement, a proration statement for the Property, and each Party shall be credited or charged at the Closing, in accordance with the following:
(i)      Rents and Additional Rents . Seller shall account to Buyer for any Rents and Additional Rents actually collected by Seller for the rental period in which the Closing occurs, and Buyer shall be credited for its pro rata share.
(ii)      Expenses .
a)      Prepaid Expenses . To the extent Expenses have been paid prior to the Closing Date for the rental period in which the Closing occurs, Seller shall account to Buyer for such prepaid Expenses, and Seller shall be credited for the amount of such prepaid Expenses applicable to the period after the Closing Date.
b)      Unpaid Expenses . To the extent Expenses relating to the rental period in which the Closing occurs are unpaid as of the Closing Date but are ascertainable, Buyer shall be credited for Seller’s pro rata share of such Expenses for the period prior to the Closing Date.
(iii)      Property Taxes . Subject to the limitations described in this subsection, the Title Company shall pro-rate real property taxes and any special assessments (collectively, “ Property Taxes ”) based on the most recent available tax bills.
a)      Pre-Paid Property Taxes . The County required, in connection with the recordation of the parcel map creating the Property as a separate, legal parcel, that Seller pre-pay estimated Property Taxes for the Real Property and the center of which the Real Property is a part, for tax year 2018-2019 in the amount of $104,300 (“ Pre-Paid Property Taxes ”). The Pre-Paid Property Taxes include an estimate for the Real Property in the amount of $46,173.01 (the “ Allocated Share ”). At the Closing, Buyer shall reimburse Seller for the full amount of its Allocated Share of Pre-Paid Property Taxes.
b)      Post-Closing Adjustment . Property Taxes for tax year 2017-2018 shall be subject to a post-Closing adjustment once the actual tax bills are available (to the extent that the same are not available at Closing for the period in which the Closing occurs). Property Taxes for tax year 2018-2019 shall be subject to a post-Closing adjustment once the actual tax bills for the Property (as subdivided by the Parcel Map) are available. Notwithstanding


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anything herein to the contrary, Buyer shall be solely responsible for any increased taxes resulting from the change in ownership of the Property from Seller to Buyer or resulting from an increased tax levy based upon the Consideration paid hereunder. This subsection shall survive the Closing.
(d)      Post-Closing Adjustments . After the Closing Date, Seller and Buyer shall make post-Closing adjustments in accordance with the following:
(i)      Non-delinquent Rents . If either Buyer or Seller collects any non-delinquent Rents or Additional Rents applicable to the month in which the Closing occurred, such Rents or Additional Rents shall be prorated as of the Closing Date and paid to the Party entitled thereto within ten (10) days after receipt.
(ii)      Delinquent Rents for month in which the Closing occurred . If either Buyer or Seller collects any Rents or Additional Rents that were delinquent as of the Closing Date and that relate to the rental period in which the Closing occurred, then such Rents or Additional Rents shall be applied in the following order of priority: first, to reimburse Buyer or Seller for all reasonable out-of-pocket, third-party collection costs actually incurred by Buyer or Seller in collecting such Rents or Additional Rents (including the portion thereof relating to the period after the Closing Date); second, to satisfy Tenant’s Rent or Additional Rent obligations relating to the period after the Closing Date; and third, to satisfy such delinquent Rent or Additional Rent obligations relating to the period prior to the Closing Date. Seller shall have the right to take collection measures against any delinquency on the part of Tenant (including litigation), however Seller shall not seek any remedy which would interfere with Tenant’s continued occupancy and full use of its premises under Tenant’s Lease, or Buyer’s rights to receive Rent with respect to any period from or after the Closing Date. Buyer shall use commercially reasonable efforts to collect such amounts due from Tenant; provided that Buyer shall not be required to interfere with Tenant’s continued occupancy and full use of its premises under Tenant’s Lease, or Buyer’s rights to receive Rent or Additional Rent with respect to any period beginning on the Closing Date.
(iii)      Expenses . With respect to any invoice received by Buyer or Seller after the Closing Date for Expenses that relate to the period in which the Closing occurred and for which a proration was not made at the Closing pursuant to the proration statement delivered to Buyer by Seller prior to the Closing, the Party receiving such invoice shall give the other Party written notice of such invoice, and the other Party shall have thirty (30) days to review and approve the accuracy of any such invoice. If the Parties agree that the invoice is accurate and should be paid, Seller shall compute Seller’s pro rata share, write a check for that amount in favor of the vendor, and then send the invoice and check to Buyer, in which case Buyer agrees that it will pay for its share and forward the invoice and the two payments to the vendor.
(iv)      Payment of 2018 Expenses by Tenant; True Up . To the extent that Seller has actually collected any portion of Expenses from Tenant under the Lease as


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Additional Rents for calendar year 2018, Seller may retain all such Additional Rents in amounts not to exceed Tenant’s share of Expenses actually paid, as determined by the 2018 Stub Reconciliation (defined below) to the extent such Additional Rents reflect Tenant’s share of Expenses through the Closing Date. Any Additional Rents collected by Seller from Tenant that apply to Tenant’s share of Expenses for any period after the Closing Date shall be credited to Buyer and charged to Seller’s account at Closing (or, if not discovered until after Closing, then promptly thereafter as part of the 2018 Stub Reconciliation). Within sixty (60) days after the Closing, Seller shall prepare and deliver to Buyer a reconciliation Expense statement for the period from and after January 1, 2018, to but not including the Closing Date (the “ 2018 Stub Reconciliation ”). If the 2018 Stub Reconciliation evidences that Seller under-collected Expenses from Tenant for such period, Buyer shall pay such amounts to Seller within thirty (30) days after Tenant pays same (less Buyer’s commercially reasonable, out-of-pocket expenses incurred in connection therewith). If the 2018 Stub Reconciliation evidences that Seller has over-collected Additional Rent from Tenant for such period and Buyer did not receive a credit at Closing for the Expenses to which such Additional Rents applies, Seller shall pay such over-collected amounts to Buyer within thirty (30) days after delivery of the 2018 Stub Reconciliation, and Buyer shall thereafter be responsible for making reimbursement to Tenant or applying the same to Expenses in accordance with the Lease. The 2018 Stub Reconciliation shall be final and binding on the parties as to 2018 Additional Rent and shall not be subject to modification or adjustment based on subsequent or later reconciliations prepared by Buyer or required under the Lease.
(v)      Survival of Obligations . The obligations of Seller and Buyer under the Subsection entitled “Post-Closing Adjustments” shall survive the Closing for a period of six (6) months from the Closing Date, at which point all such adjustments shall be made in a final accounting and all prorations hereunder shall be deemed final for all purposes; provided, however, the final true-up of 2018 Additional Rent shall be based on the 2018 Stub Reconciliation, and the Property Tax post-closing adjustment in Section 7(c)(iii) shall survive the Closing without regard to such 6-month limitation.
(e)      Allocation of Closing Costs . Closing costs shall be allocated as set forth below:
(i)      Escrow charges: 50% to Buyer and 50% to Seller.
(ii)      Recording fees for Deed: 100% to Seller.
(iii)      Title insurance premium for the Title Policy: 100% to Seller for the premium for standard owner’s coverage in the amount of the Purchase Price. Buyer shall be solely responsible for the cost of survey and extended coverage and all endorsements other than endorsements obtained by Seller to remove exceptions Seller agrees to remove, which shall be at Seller’s cost.
(iv)      Transfer taxes: 100% to Seller.


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(v)      Survey costs: 100% to Seller for the initial Survey; 100% to Buyer for updates, modifications and certification.
(vi)      Attorneys’ Fees: Each party to pay its own fees.
(vii)      Other: According to custom where the Property is located.
8. Tenant Estoppel . Seller shall use all reasonable efforts to obtain a Tenant Estoppel from Tenant. Seller shall use commercially reasonable efforts to deliver a Tenant Estoppel to Buyer no later than ten (10) days prior the Closing Date, however, it shall be a condition to Buyer’s obligation to close the acquisition of the Property that not later than five (5) days prior to the Closing Date, Seller shall have delivered to Buyer an executed Tenant Estoppel substantially in the form attached hereto as Exhibit F , which shall (i) be dated no earlier than forty-five (45) days prior to the Closing Date, (ii) not conflict with the information in the most recent Rent Roll, (iii) allege (to Tenant’s knowledge) no defaults, offsets, or claims against Seller, and (iv) allege no facts that are inconsistent in any material respect with the representations and warranties of Seller in this Agreement or the Due Diligence Materials provided by Seller to Buyer.
9. Transfer of Property “As Is” .
(a) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER MADE IN THIS AGREEMENT AND THE TRANSACTION DOCUMENTS (AS DEFINED IN ADDENDUM 1), BUYER, FOR ITSELF, ITS AGENTS, AFFILIATES, SUCCESSORS AND ASSIGNS, ACKNOWLEDGES THAT NO SELLER RELATED PARTY HAS MADE ANY ORAL OR WRITTEN REPRESENTATIONS, WARRANTIES, PROMISES OR GUARANTEES WHATSOEVER TO BUYER, WHETHER EXPRESS OR IMPLIED, REGARDING THE PROPERTY OR ANY CONSTITUENT ELEMENT OF THE PROPERTY (INCLUDING THE LAND, IMPROVEMENTS AND LEASE) AND, IN PARTICULAR, NO SUCH REPRESENTATIONS, WARRANTIES, GUARANTIES OR PROMISES HAVE BEEN MADE WITH RESPECT TO THE PHYSICAL CONDITION OR OPERATION OF THE PROPERTY, TITLE TO OR THE BOUNDARIES OF THE PROPERTY, SOIL CONDITIONS, THE ENVIRONMENTAL CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE PRESENCE, DISCOVERY, RELEASE, THREATENED RELEASE OR REMOVAL OF HAZARDOUS MATERIALS (INCLUDING, WITHOUT LIMITATION, THE PRESENCE OF ASBESTOS OR ASBESTOS CONTAINING MATERIALS), THE ACTUAL OR PROJECTED REVENUE AND EXPENSES FOR THE PROPERTY, THE ZONING AND OTHER LAWS, REGULATIONS OR RULES APPLICABLE TO THE PROPERTY OR THE COMPLIANCE OF THE PROPERTY THEREWITH, THE AVAILABILITY OR ADEQUACY OF ENTITLEMENTS OR APPROVALS FOR DEVELOPMENT OF THE PROPERTY OR ANY PORTION THEREOF, THE USE OR OCCUPANCY OF THE PROPERTY OR ANY PART THEREOF, OR ANY OTHER MATTER OR THING AFFECTING OR RELATED TO THE PROPERTY OR THE TRANSACTIONS CONTEMPLATED HEREBY, EXCEPT AS, AND SOLELY TO THE EXTENT, SPECIFICALLY SET FORTH IN THIS AGREEMENT. EXCEPT FOR ITS RELIANCE ON THE REPRESENTATIONS AND WARRANTIES OF SELLER


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SPECIFICALLY SET FORTH HEREIN AND SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, BUYER AGREES TO ACCEPT THE PROPERTY “ AS IS, WHERE-IS, AND WITH ALL FAULTS ” IN ITS PRESENT CONDITION, SUBJECT IN THE CASE OF THE REAL PROPERTY TO REASONABLE USE, WEAR AND TEAR, BETWEEN THE DATE HEREOF AND THE CLOSING DATE, AND FURTHER AGREES THAT EXCEPT FOR ANY BREACH OF ITS REPRESENTATIONS AND WARRANTIES SPECIFICALLY SET FORTH HEREIN, SELLER SHALL NOT BE LIABLE FOR ANY LATENT DEFECTS IN THE PROPERTY OR BOUND IN ANY MANNER WHATSOEVER BY ANY GUARANTEES, PROMISES, PROJECTIONS, OPERATING OR PERFORMANCE STATEMENTS, SETUPS OR OTHER INFORMATION PERTAINING TO THE PROPERTY MADE, FURNISHED OR CLAIMED TO HAVE BEEN MADE OR FURNISHED BY SELLER OR ANY SELLER RELATED PARTY, WHETHER ORALLY OR IN WRITING.
(a)      Buyer’s delivery of an Approval Notice is Buyer’s acknowledgement that it will have reviewed or have had adequate time and opportunity to review the Due Diligence Materials and conduct its diligence review of the Property and matters affecting the Property.
(b)      Buyer further acknowledges that certain of the Due Diligence Materials may have been prepared by parties other than Seller (or a Seller Related Party) and Seller makes no representation or warranty of any kind whatsoever, express or implied, as to the accuracy or completeness of any Due Diligence Materials prepared by third parties.
(c)      Buyer acknowledges that it has not relied upon any representations or warranties by Seller or any Seller Related Party not specifically set forth herein, and has entered into this Agreement after having made and relied solely on its own independent investigation, inspections, analyses, appraisals and evaluations of facts and circumstances.
(d)      Buyer is an experienced purchaser of commercial real properties, and has retained, or has access to, advisors and consultants sophisticated in the purchase of commercial real property. Buyer and its advisors have experience in acquiring, owning and operating real property in the nature of the Property. Buyer is familiar with the risks associated with sale transactions that involve purchases based on limited information, representations and disclosures. Buyer understands and is freely taking all risks involved in connection with this transaction.
(e)      Buyer acknowledges that, except as specifically set forth herein, Seller hereby specifically disclaims any warranty or guaranty, oral or written, implied or arising by operation of law, and any warranty of condition, habitability, merchantability or fitness for a particular purpose, in respect to the Property.
(f)      Except for those matters expressly set forth in this Agreement to survive the Closing and except for Seller’s representations and warranties in this Agreement and the Transaction Documents, and the agreements of Seller and Buyer set forth in the Transaction Documents or otherwise entered into at the Closing, Buyer agrees that Buyer’s acceptance of the Deed shall be and be deemed to be an agreement by Buyer that Seller has fully performed,


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discharged and complied with all of Seller’s obligations, covenants and agreements hereunder and that Seller shall have no further liability with respect thereto.
(g)      AS A MATERIAL INDUCEMENT TO SELLER TO AGREE TO SELL THE PROPERTY TO BUYER AND TO EXECUTE THIS AGREEMENT, EXCEPT TO THE EXTENT SPECIFICALLY PROVIDED TO THE CONTRARY HEREIN OR IN THE DEED AND OTHER INSTRUMENTS TO BE EXECUTED AND DELIVERED BY SELLER AT THE CLOSING, OR ANY ACTION FOR BREACH OF ANY REPRESENTATION, WARRANTY AND/OR COVENANT OF SELLER SPECIFICALLY SET FORTH HEREIN, BUYER, FOR ITSELF AND ITS AGENTS, AFFILIATES, SUCCESSORS AND ASSIGNS, HEREBY WAIVES, RELEASES, ACQUITS AND FOREVER DISCHARGES THE SELLER RELATED PARTIES FROM ALL CLAIMS, CAUSES OF ACTION, DEMANDS, LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEY’S FEES AND DISBURSEMENTS WHETHER SUIT IS INSTITUTED OR NOT) WHICH BUYER HAS OR MAY HAVE IN THE FUTURE ON ACCOUNT OF OR IN ANY WAY ARISING OUT OF THE PROPERTY OR ANY OF ITS CONSTITUENT ELEMENTS (INCLUDING THE LAND, THE IMPROVEMENTS, THE PERSONAL PROPERTY, THE GENERAL INTANGIBLES, THE CONTRACTS AND THE LEASE), INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO (I) ALL MATTERS DESCRIBED IN SUBPARAGRAPH (A), ABOVE AS ACCEPTED BY BUYER IN “AS IS, WHERE IS, WITH ALL FAULTS” CONDITION, (II) THE STRUCTURAL AND PHYSICAL CONDITION OF THE REAL PROPERTY OR ITS SURROUNDINGS, (III) THE FINANCIAL CONDITION OF THE OPERATION OF THE PROPERTY EITHER BEFORE OR AFTER THE CLOSING DATE, (IV) ANY LAW, ORDINANCE, RULE, REGULATION, RESTRICTION OR LEGAL REQUIREMENT WHICH IS NOW OR MAY HEREAFTER BE APPLICABLE TO THE PROPERTY, (V) THE FINANCIAL CONDITION OR STATUS OF TENANT OR TENANCY FOR THE PROPERTY, (VI) THE ENVIRONMENTAL CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE PRESENCE, DISCOVERY OR REMOVAL OF ANY HAZARDOUS MATERIALS IN, AT, ABOUT OR UNDER THE PROPERTY OR THE APPLICABILITY TO THE PROPERTY OF ANY ENVIRONMENTAL LAWS, AS SUCH ACTS MAY BE AMENDED FROM TIME TO TIME, OR ANY OTHER FEDERAL, STATE OR LOCAL STATUTE OR REGULATION RELATING TO ENVIRONMENTAL CONTAMINATION AT, IN OR UNDER THE PROPERTY, (VII) THE PRESENCE OR CONDITION OF UNDERGROUND STORAGE TANKS AT THE PROPERTY, OR THEIR COMPLIANCE WITH APPLICABLE LAWS, (VIII) ANY OTHER CONDITIONS, INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL AND OTHER PHYSICAL CONDITIONS, AFFECTING THE PROPERTY WHETHER THE SAME ARE A RESULT OF NEGLIGENCE OR OTHERWISE, INCLUDING SPECIFICALLY, BUT WITHOUT LIMITATION, ANY CLAIM FOR INDEMNIFICATION OR CONTRIBUTION ARISING UNDER ENVIRONMENTAL LAWS (AS DEFINED IN ADDENDUM I ), WHETHER ARISING BASED ON EVENTS THAT OCCURRED BEFORE, DURING, OR AFTER SELLER’S PERIOD OF OWNERSHIP OF THE PROPERTY AND WHETHER BASED ON THEORIES OF INDEMNIFICATION, CONTRIBUTION OR OTHERWISE. THE


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RELEASE SET FORTH IN THIS SECTION SPECIFICALLY INCLUDES, WITHOUT LIMITATION, ANY CLAIMS UNDER ENVIRONMENTAL LAWS (AS DEFINED IN ADDENDUM I ) OR UNDER THE AMERICANS WITH DISABILITIES ACT OF 1990, AS ANY OF THOSE LAWS MAY BE AMENDED FROM TIME TO TIME AND ANY REGULATIONS, ORDERS, RULES OF PROCEDURES OR GUIDELINES PROMULGATED IN CONNECTION WITH SUCH LAWS, REGARDLESS OF WHETHER THEY ARE IN EXISTENCE ON THE DATE OF THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING, SELLER SHALL REMAIN LIABLE FOR, AND BUYER DOES NOT WAIVE OR RELEASE CLAIMS BASED ON FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF SELLER OR ANY SELLER RELATED PARTY. BUYER SHALL NOT MAKE OR INSTITUTE ANY CLAIMS AGAINST ANY OF THE SELLER RELATED PARTIES WHICH ARE INCONSISTENT WITH THE FOREGOING. BUYER AGREES THAT THIS RELEASE SHALL BE GIVEN FULL FORCE AND EFFECT ACCORDING TO EACH OF ITS EXPRESSED TERMS AND PROVISIONS. THIS RELEASE INCLUDES CLAIMS OF WHICH BUYER IS PRESENTLY UNAWARE OR WHICH BUYER DOES NOT PRESENTLY SUSPECT TO EXIST, WHICH IF KNOWN BY BUYER, WOULD MATERIALLY AFFECT BUYER’S RELEASE TO SELLER. ACCORDINGLY, AND WITHOUT LIMITING THE FOREGOING, BUYER HEREBY WAIVES CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN TO HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”
IN THIS CONNECTION AND TO THE MAXIMUM EXTENT PERMITTED BY LAW, BUYER AGREES AND ACKNOWLEDGES THAT FACTUAL MATTERS NOW UNKNOWN TO IT MAY HAVE GIVEN OR MAY HEREAFTER GIVE RISE TO CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES, COSTS, LOSSES AND EXPENSES WHICH ARE PRESENTLY UNKNOWN, UNANTICIPATED AND UNSUSPECTED, AND BUYER FURTHER AGREES AND ACKNOWLEDGES THAT THE WAIVERS AND RELEASES HEREIN HAVE BEEN NEGOTIATED AND AGREED UPON IN LIGHT OF THAT REALIZATION AND THAT BUYER NEVERTHELESS HEREBY INTENDS TO RELEASE, DISCHARGE, AND ACQUIT THE SELLER RELATED PARTIES FROM ANY SUCH UNKNOWN CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES, COSTS, LOSSES AND EXPENSES EXCEPT TO THE EXTENT CAUSED BY FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF SELLER OR ANY SELLER RELATED PARTY. BUYER ACKNOWLEDGES THAT BUYER HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF BUYER’S SELECTION AND BUYER IS GRANTING THIS RELEASE OF ITS OWN VOLITION AND AFTER CONSULTATION WITH BUYER’S COUNSEL. BUYER ACKNOWLEDGES THAT BUYER HAS CAREFULLY


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REVIEWED THIS SECTION 9 AND DISCUSSED ITS IMPORT WITH LEGAL COUNSEL AND THAT THE PROVISIONS OF THIS SECTION 9 ARE A MATERIAL PART OF THIS AGREEMENT.
Buyer’s Initials ______
(h)      In no event shall Seller be liable to Buyer for any incidental, special, exemplary, punitive or consequential damages, including, without limitation, loss of profits or revenue, interference with business operations, loss of tenants, lenders, investors, buyers, diminution in value of the Property, or inability to use the Property, due to the condition of the Property.
(i)      THIS SECTION 9 SHALL SURVIVE CLOSING AND DELIVERY OF THE DEED, OR TERMINATION OF THIS AGREEMENT, AND SHALL BE DEEMED INCORPORATED BY REFERENCE AND MADE A PART OF ALL DOCUMENTS DELIVERED BY SELLER TO BUYER IN CONNECTION WITH THE SALE OF THE PROPERTY.
10. Seller’s Representations and Warranties . Seller represents and warrants to Buyer the matters set forth on Addendum II , which is incorporated herein by this reference as though fully set forth herein. Other than as expressly contained in this Agreement and Addendum II , Seller makes no representations or warranties of any kind relating to the Property or its condition or fitness. Buyer is entitled to rely on Seller’s representations and warranties notwithstanding Buyer’s inspection and investigation of the Property, except to the extent that Buyer has Actual Knowledge on or before the Closing Date that any such representation or warranty is inaccurate in any material respect, and such inaccuracy did not result from a Seller R&W Breach (as defined below). Seller shall promptly notify Buyer if, prior to the Closing, Seller has Actual Knowledge that any representation or warranty of Seller was inaccurate in any material respect on the Effective Date (a “ Seller R&W Breach ”), or was true when given on the Effective Date but became inaccurate in any material respect after the Effective Date (a “ Seller R&W Change ”). If, prior to the Closing, Buyer has Actual Knowledge (whether from Seller or its own investigation) that a Seller R&W Breach has occurred and Seller is unable to cure such Seller R&W Breach within ten (10) days after notice from Buyer of such R&W Breach, such Seller R&W Breach shall be a default on the part of Seller, and Buyer, in its sole discretion, shall have the right, as its sole and exclusive remedies, to (i) terminate this Agreement, upon which termination the Earnest Money (plus interest earned thereon) shall be returned to Buyer, and if such Seller R&W Breach has resulted in a loss in excess of the Material Damage Floor, Seller shall pay the Expense Reimbursement to Buyer within ten (10) Business Days after delivery to Seller of reasonable evidence of the loss sustained by Buyer and a statement of Buyer’s reimbursable expenses, in which case the Parties shall have no further rights or obligations under this Agreement except for those rights and obligations which expressly survive termination of this Agreement, or (ii) waive such Seller R&W Breach and proceed to Closing. If, prior to the Closing, Buyer has Actual Knowledge (whether from Seller or its own investigation) that a Seller R&W Change has occurred, such Seller R&W Change was not caused by a material breach by Seller of its covenants under this Agreement or by an affirmative, intentional act on the part of Seller which caused such representation and warranty to become inaccurate in any material respect, and Seller is unable within ten (10) days after notice from Buyer of such R&W Change to


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eliminate such inaccuracy, Buyer shall have the right, as its sole and exclusive remedy, to (i) terminate this Agreement, upon which termination the Earnest Money (plus interest earned thereon) shall be returned to Buyer and the Parties shall have no further rights or obligations under this Agreement except for those rights and obligations which expressly survive termination of this Agreement, or (ii) waive such Seller R&W Change and proceed to Closing. If, however, such Seller R&W Change was caused by a material breach by Seller of its covenants under this Agreement or by an affirmative, intentional act on the part of Seller which caused such representation and warranty to become inaccurate in any material respect, such Seller R&W Change shall constitute a Seller R&W Breach, and if Seller is unable to cure such Seller R&W Breach within ten (10) days after notice from Buyer of such Seller R&W Breach, such Seller R&W Breach shall be a default on the part of Seller, and Buyer, in its sole discretion, shall have the right, as its sole and exclusive remedies, to (i) terminate this Agreement, upon which termination the Earnest Money (plus interest earned thereon) shall be returned to Buyer, and if such Seller R&W Breach has resulted in a loss in excess of the Material Damage Floor, Seller shall pay the Expense Reimbursement to Buyer within ten (10) Business Days after delivery to Seller of reasonable evidence of the loss sustained by Buyer and a statement of Buyer’s reimbursable expenses, in which case the Parties shall have no further rights or obligations under this Agreement except for those rights and obligations which expressly survive termination of this Agreement, or (ii) waive such Seller R&W Breach and proceed to Closing. If, prior to the Closing, Buyer has Actual Knowledge that any representation or warranty of Seller is inaccurate in any material respect and Buyer consummates the Closing, such representation or warranty shall be deemed modified by Buyer’s Actual Knowledge. Seller shall be liable to Buyer for a breach by Seller of any one or more of the representations and warranties of Seller made herein, only if (i) the breach thereof is first discovered subsequent to Closing, (ii) the claim thereon is asserted by Buyer to Seller in writing on or before the date one hundred eighty (180) days after Closing, and (iii) the amount of any such loss, cost, liability, damage and expense suffered by Purchaser (when aggregated with all other amounts for which Seller may be liable in connection with breaches of its representations, warranties or covenants under this Agreement) shall exceed the Material Damage Floor. In no event shall the amount of any such loss, cost, liability, damage and expense for which Seller shall be liable under this Section 10 (when aggregated with all other damages for which Seller may be liable in connection with breaches of its representations, warranties or covenants under this Agreement) exceed the Material Damage Ceiling.
11. Buyer’s Representations and Warranties . Buyer hereby represents and warrants, as of the Effective Date and as of the Closing Date, to Seller as follows:
(a)      Buyer is duly organized, validly existing and in good standing under the laws of the State of its formation, and as of the Closing will be qualified to do business in the State in which the Property is located.
(b)      Buyer has full power and authority to execute and deliver this Agreement and to perform all of the terms and conditions hereof to be performed by Buyer and to consummate the transactions contemplated hereby. This Agreement and all documents executed by Buyer which are to be delivered to Seller at Closing have been duly executed and delivered by Buyer and are or at the time of Closing will be the legal, valid and binding obligation of Buyer and enforceable against Buyer in accordance with its or their respective terms, except


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as the enforcement thereof may be limited by applicable Creditors’ Rights Laws. Buyer is not presently subject to any bankruptcy, insolvency, reorganization, moratorium, or similar proceeding.
(c)      The entities and individuals executing this Agreement and the instruments referenced herein on behalf of Buyer and its constituent entities, if any, have the legal power, right and actual authority to bind Buyer to the terms and conditions hereof and thereof.
(d)      Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated by this Agreement, nor the compliance with the terms and conditions hereof will violate or conflict, in any material respect, with any provision of Buyer’s organizational documents or to Buyer’s Actual Knowledge any statute, regulation or rule, or, to Buyer’s Actual Knowledge, any injunction, judgment, order, decree, ruling, charge or other restrictions of any government, governmental agency or court to which Buyer is subject, and which violation or conflict would have a material adverse effect on Buyer. Buyer is not a party to any contract or subject to any other legal restriction that would prevent fulfillment by Buyer of all of the terms and conditions of this Agreement or compliance with any of the obligations under it.
(e)      To Buyer’s Actual Knowledge all material consents required from any governmental authority or third party in connection with the execution and delivery of this Agreement by Buyer or the consummation by Buyer of the transactions contemplated hereby have been made or obtained or shall have been made or obtained by the Closing Date. Complete and correct copies of all such consents shall be delivered to Seller.
(f)      Buyer has made (or will make prior to the Closing Date) an independent investigation with regard to the Property, will have ascertained to its satisfaction the extent to which the Property complies with applicable zoning, building, environmental, health and safety and all other laws codes and regulations, and Buyer’s intended use thereof, including without limitation, review and/or approval of matters disclosed by Seller pursuant to this Agreement.
(g)      There is no litigation pending or, to Buyer’s Actual Knowledge, threatened, against Buyer or any basis therefor that might materially and detrimentally affect the ability of Buyer to perform its obligations under this Agreement. Buyer shall notify Seller promptly of any such litigation of which Buyer becomes aware.
(h)      Buyer is not, nor is any person who owns a controlling interest in or otherwise controls Buyer, (a) listed on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control (“ OFAC ”), Department of the Treasury, and/or on any other similar list maintained by the OFAC pursuant to any authorizing statute, Executive Order or regulation (collectively, “ OFAC Laws and Regulations ”); or (b) a person either (i) included within the term “designated national” as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (ii) designated under Sections 1(a), 1(b), 1(c) or 1(d) of Executive Order No. 13224 (Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), 66 Fed. Reg. 49079 (effective September 24, 2001, and published September 25, 2001) or similarly designated


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under any related enabling legislation or any other similar Executive Orders (collectively, the “ Executive Orders ”). Neither Buyer nor any of its principals or affiliates is (x) a person or entity with which Seller is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, or that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Orders, or (y) is directly or indirectly affiliated or associated with a person or entity listed in the preceding clause (x). To the best knowledge of Buyer, neither Buyer nor any of its principals or affiliates, nor any brokers or other agents acting in any capacity in connection with the transactions contemplated herein (I) directly or indirectly deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Orders, (II) directly or indirectly engages in any transaction in violation of any Laws relating to drug trafficking, money laundering or predicate crimes to money laundering or (III) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. As used herein, “ Anti-Terrorism Law ” means the OFAC Laws and Regulations, the Executive Orders and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001), as amended.
12. Risk of Loss .
(a)      Notice of Loss . If, prior to the Closing Date, any portion of the Property suffers a Minor or Major Loss, Seller shall immediately notify Buyer of that fact, which notice shall include sufficient detail to apprise Buyer of the current status of the Property following such loss.
(b)      Minor Loss . Buyer’s obligations hereunder shall not be affected by the occurrence of a Minor Loss, provided that: (i) upon the Closing, there shall be a credit against the Consideration equal to the amount of any insurance proceeds or condemnation awards collected by Seller as a result of such Minor Loss (net of any amounts applied to restoration and reasonable expenses incurred by Seller in collecting such proceeds or awards), plus the amount of any insurance deductible; or (ii) insurance or condemnation proceeds available to Seller are sufficient to cover the cost of restoration and the insurance carrier has admitted liability for the payment of such costs. If the proceeds or awards have not been collected as of the Closing, then Seller’s right, title and interest to such proceeds or awards shall be and are deemed to be assigned to Buyer at the Closing, together with a credit against the Consideration in the amount of any insurance deductible. This provision shall not limit any of the Buyer’s repair obligations under the Lease. If there is a Minor Loss and insurance coverage as set forth above is not available, Buyer shall have the same rights as if it was a Major Loss.
(c)      Major Loss . In the event of a Major Loss, Buyer may, at its option to be exercised by written notice to Seller within twenty (20) days of Seller’s notice to Buyer of the occurrence thereof, elect to either (i) terminate this Agreement, or (ii) consummate the acquisition of the Property for the full Consideration, subject to the following. If Buyer


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elects to proceed with the acquisition of the Property, then the Closing shall be postponed if necessary, to occur on the later of the then-scheduled Closing Date or the date which is ten (10) Business Days after Buyer makes such election and, upon the Closing, Buyer shall be given a credit against the Consideration equal to the amount of any insurance proceeds or condemnation awards collected by Seller as a result of such Major Loss (net of any amounts applied to restoration and reasonable expenses incurred by Seller in collecting such proceeds or awards), plus the amount of any insurance deductible. If the proceeds or awards have not been collected as of the Closing, then Seller’s right, title and interest to such proceeds or awards shall be assigned to Buyer, and Seller will cooperate with Buyer as reasonably requested by Buyer in the collection of such proceeds or award. If Buyer fails to give Seller notice within such twenty (20)-day period, then Buyer will be deemed to have elected to terminate this Agreement. If the Agreement is not terminated, Buyer shall be responsible for performance by Buyer as “landlord” under the Lease, including any repair obligations of landlord, and nothing herein shall limit Buyer’s repair obligations or other obligations under the Lease.
13. Seller’s Continued Operation of the Property .
(a)      General . Except as otherwise contemplated or permitted by this Agreement or approved by Buyer in writing, from the Effective Date to the Closing Date, Seller will operate, maintain and repair the Property in a prudent manner, in the ordinary course of business, on an arm’s-length basis and consistent with its past practices.
(b)      Actions Requiring Buyer’s Consent . Notwithstanding the above terms of this Section, from the Approval Date until the Closing Date, Seller shall not, without the prior written approval of Buyer, which approval shall not be unreasonably withheld or delayed, take any of the following actions except as required by law or existing contractual obligations of Seller:
(i)      Leases . Terminate the Lease; or modify or waive any material term of the Lease; or
(ii)      Contracts . Except for the Amended Declaration or as otherwise permitted under this Agreement, enter into any contract with respect to the Property that will survive the Closing and be binding on Buyer or the Property after the Closing.
(c)      Amended CC&Rs . Seller has provided Buyer with a copy of the Amended and Restated Declaration of Covenants, Conditions and Restrictions And Grant of Reciprocal Easements (the “ Amended Declaration ”) as part of the Due Diligence Materials. Seller shall have the right to record the Amended Declaration in the official records of the County.
14. Non-Consummation of the Transaction . If the transaction is not consummated on or before the Closing Date, the following provisions shall apply:
(a)      No Default . If the purchase and sale of the Property under this Agreement is not consummated for a reason other than a default by one of the Parties, then (i) the Title Company


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and each Party shall return to the depositor thereof the Earnest Money and all other funds and items which were deposited hereunder (except that Seller shall retain the Non-Refundable Payment); and (ii) Seller and Buyer shall each bear one-half of any Escrow cancellation charges, if any. Any return of funds or other items by the Title Company or any Party as provided herein shall not relieve either Party of any liability it may have for its wrongful failure to close.
(b)      Default by Seller . If the transaction is not consummated as a result of a default by Seller, then Buyer, as its sole and only remedies hereunder, to the exclusion of all other potential remedies under this Agreement, at law or in equity, may either (i) terminate this Agreement by delivery of notice of termination to Seller, whereupon (A) the Earnest Money plus interest accrued thereon shall be immediately returned to Buyer, and (B) Seller shall pay to Buyer its Expense Reimbursement, in which case neither Party shall have any further rights or obligations hereunder other than those rights and obligations which expressly survive termination of this Agreement; or (ii) continue this Agreement pending Buyer’s action for specific performance, provided, however, that any such action for specific performance shall not include as an alternative remedy an action for damages and shall be filed and served by Buyer within thirty (30) days of the date which is the later of (x) the termination of this Agreement by Seller, or (y) the date on which Buyer has Actual Knowledge of the event or occurrence comprising the alleged default on the part of Seller, it being the intent of the Parties hereto that any failure of Buyer to meet the time deadline set for filing shall be deemed to be Buyer’s election to waive and relinquish any rights to enforce specific performance of this Agreement (and, in such case, subclause (i) above shall govern). In the event Buyer files an action for specific performance in accordance with subparagraph (ii) above and Seller prevails in such action, then in addition to its obligations under Section 15(l) below, Buyer shall be obligated to pay to Seller an amount equal to the Specific Performance Amount as liquidated damages in order to compensate Seller for actual costs, damages and losses, as well as lost opportunity costs, suffered by Seller due to its inability to sell the Property to a third party pending the resolution of Buyer’s specific performance action. Buyer acknowledges that the damages suffered by Seller due to a delay in selling the Property are difficult to determine and that the Specific Performance Amount has been agreed upon, after negotiation, as the parties’ reasonable estimate of such Seller’s damages. Notwithstanding anything to the contrary in this Agreement, (i) in no event shall Seller be liable to Buyer in connection with any breach or default on the part of Seller under this Agreement for any incidental, special, exemplary, punitive or consequential damages, including, without limitation, loss of profits or revenue, interference with business operations, loss of tenants, lenders, investors, buyers, diminution in value of the Property, or inability to use the Property, and (ii) in no event or circumstance shall any of the members, partners, employees, representatives, officers,


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directors, agents, advisors, property management company, affiliated or related entities of Seller or Seller’s property management company (collectively, the “ Seller Parties ”) have any personal liability under this Agreement.
Buyer’s Initials         
(c)      Default by Buyer . If the Closing does not occur as a result of a default by Buyer, then (i) Buyer shall pay all escrow cancellation charges, (ii) to the extent it has not previously been delivered to Seller, the Title Company shall deliver the Earnest Money to Seller as its full and complete liquidated damages and its sole and exclusive remedy for Buyer’s default (provided that this provision shall not limit the Seller’s right to enforce Buyer’s obligations pursuant to Sections 4(c) , 15(f) and 15(l) , and to obtain monetary damages from Buyer pursuant to those provisions above and beyond any amounts collected pursuant to this liquidated damages provision), and (iii) this Agreement shall terminate. If the transaction is not consummated because of a default by Buyer, the Earnest Money together with the interest accrued thereon shall be paid to and retained by Seller as liquidated damages. THE PARTIES HAVE AGREED THAT SELLER’S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY BUYER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES’ REASONABLE ESTIMATE OF SELLER’S DAMAGES (IN ADDITION TO ANY FEES AND COSTS TO WHICH SELLER IS ENTITLED UNDER SECTION 15(l)) AND AS SELLER’S EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER; PROVIDED, HOWEVER, NOTHING HEREIN SHALL RELIEVE BUYER OF THE INDEMNITY OBLIGATIONS OF BUYER UNDER SECTIONS 4(c) AND 15(f), WHICH EXPRESSLY SURVIVE THE TERMINATION OF THIS AGREEMENT. Notwithstanding anything to the contrary contained in this Section 14(c), in the event of (i) Buyer’s default under this Agreement, (ii) a termination of this Agreement by Buyer, or (iii) a termination of this Agreement by Seller as a result of a default on the part of Buyer, Seller shall have all remedies available at law or in equity if subsequent to or in connection with any of the foregoing events in subphrases (i), (ii) or (iii) Buyer or any Person related to or affiliated with Buyer asserts any claims or right to the Property that (x) delays or prevents Seller from having clear, indefeasible, and marketable title to the Property or (y) constitutes slander of title to the Property. In all other events, Seller’s remedies shall be limited to those described in this Section 14(c) and Sections 4(c) , 15(f) and 15(l) hereof. If Closing is consummated, Seller shall have all remedies available at law or in equity in the event Buyer fails to perform any obligation of Buyer under this Agreement.
INITIALS: Seller _____ Buyer _____
15. Miscellaneous


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(a)      Disclosure of Transaction . Except as may be permitted in Section 15(o) below, prior to Closing neither Party shall publicly announce or discuss the execution of this Agreement or the transaction contemplated hereby without the prior written consent of the other Party, which shall not be unreasonably withheld. Notwithstanding the foregoing, nothing herein shall limit or restrict any public announcement or notification which Seller or any Affiliate is required to make under the applicable provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended and the rules and regulations adopted by the Securities and Exchange Commission thereunder.
(b)      Possession . Possession of the Property shall be delivered to Buyer upon the Closing.
(c)      Force Majeure. Seller’s corporate headquarters are located in San Mateo, California. If during the term of this Agreement, there occurs a Force Majeure Event (a fire or other casualty, act of God, riot or other civil disturbance, or any other event out of the control of Seller that prevents Seller from having access to and use of its headquarters facility for the conduct of its operations), Seller shall have the right, exercisable by written notice to Buyer within five (5) Business Days of the date of the Force Majeure Event, to extend any period for Seller’s performance hereunder by a period of time equal to the time that Seller reasonably anticipates that it will be unable to use its headquarters, but not to exceed fourteen (14) days.
(d)      Tax Protest . If, as a result of any tax protest or otherwise, there is any refund or reduction of real property or other tax or assessment relating to the Property applicable to the period prior to Closing, Seller shall be entitled to receive or retain such refund or the benefit of such reduction, less equitable prorated costs of collection and subject to the rights of Tenant under the Lease as to any such refunds. To the extent any such tax protest or proceeding is ongoing as of the Closing, Seller shall have the right, but not the obligation, to continue to pursue such protest or proceeding following the Closing, but only to the extent that it applies to the pre-Closing tax periods.
(e)      Notices . Any notice, consent or approval required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given upon (i) delivery of email on a Business Day between the hours of 9:00 a.m. and 5:00 p.m. local time at the location of the recipient’s mailing address (otherwise, the next following Business Day) (provided that such email contains in all uppercase letters the words “OFFICIAL NOTICE” in the subject line and generates no “out of office receipt” or other message that such delivery was ineffective or delayed), (ii) personal delivery, (iii) confirmed telecopy delivery on a Business Day between the hours of 9:00 a.m. and 5:00 p.m. local time at the location of the Property (otherwise, the next following Business Day), (iv) one (1) Business Day after being deposited with Federal Express, DHL Worldwide Express or another reliable overnight courier service prior to the specified delivery deadline for next-day service, specifying an address to which such courier makes overnight deliveries, or (v) two (2) Business Days after being deposited in the United States mail, registered or certified mail, postage prepaid, return receipt required, and addressed as indicated below, or such other address as either Party may from time to time specify in writing to the other. A notice, consent or approval sent in the


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above manner by counsel to a Party (whether or not identified below as a “copy to” recipient) shall constitute effective delivery of such notice, consent or approval and shall be binding on such Party as if sent by such Party.
If to Buyer:
If to Seller:
 
 
Ginger Investors, LLC
18934 Carmel Crest Drive
Tarzana, CA 91357
Attention: Vic Vahe Vartanian
Fax No. 818-698-6419
Email: vicv@gingerinvestors.com
SRT Secured Topaz, LLC
c/o Glenborough, LLC
66 Bovet Road, Suite 100
San Mateo, CA 94402
Attention: Alan Shapiro
Fax No.: 650-343-9690
Email: alan.shapiro@glenborough.com
 
 
with a copy to:
with a copy to:

Patrick C. McGarrigle, Esq.
McGarrigle Kenney & Zampiello, APC
9600 Topanga Canyon Blvd.
Suite 200
Chatsworth, CA 91311
Fax No. 818-998-3344

SRT Secured Topaz, LLC
c/o Glenborough, LLC
66 Bovet Road, Suite 100
San Mateo, CA 94402
Attention: G. Lee Burns, Jr.
Fax No.: 650-343-9690
Email: chip.burns@glenborough.com

(f)      Brokers and Finder . Seller has engaged Seller’s Broker to act as Seller’s representative in this transaction, and Seller has sole responsibility for the payment of any amounts due to Seller’s Broker as a result of this transaction, pursuant to a separate written agreement. Buyer has engaged Buyer’s Broker as Buyer’s representative in this transaction. Any commission or finder’s fee due to Buyer’s Broker shall be paid from the amount payable by Seller to Seller’s Broker, pursuant to separate written agreement between Buyer’s Broker and Seller’s Broker (the “ Commission Split ”). Any commission or finder’s fee due to Buyer’s Broker in excess of the Commission Split and claimed through Buyer shall be the responsibility of Buyer. Except as set forth in the preceding sentences of this paragraph, neither Party has had any contact or dealings regarding the Property, or any communication in connection with the subject matter of this transaction through any real estate broker or other person who can claim a right to a commission or finder’s fee in connection with the transactions contemplated in this Agreement. In the event that any broker or finder perfects a claim for a commission or finder’s fee based upon any such contact, dealings or communication, the Party through whom the broker or finder makes its claim shall be responsible for said commission or fee and shall indemnify and hold harmless the other Party from and against all liabilities, losses, costs and expenses (including reasonable attorneys’ fees) arising in connection with such claim for a commission or finder’s fee. The provisions of this subsection shall survive the Closing or the termination of this Agreement.
(g)      Successors and Assigns . Subject to the following, this Agreement shall be binding upon, and inure to the benefit of, the Parties and their respective successors, heirs, administrators and assigns. Buyer shall have the right, (i) with notice to Seller, but without


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Seller’s consent, to assign this Agreement to an Affiliate of Buyer, and (ii) with notice to Seller, and subject to receipt of Seller’s prior written consent, at Seller’s sole and absolute discretion, to assign its right, title and interest in and to this Agreement to one or more assignees other than an Affiliate of Buyer, at any time before the Closing Date. Any such assignee(s) shall execute and deliver to Seller a written assignment prepared by Seller and reasonably acceptable to Buyer, pursuant to which such assignee assumes all obligations of Buyer, without releasing Buyer from any obligation hereunder. Seller shall have the right, with notice to Buyer but without Buyer’s consent, to transfer the Property to an Affiliate of Seller and in connection therewith, assign its interest in this Agreement.
(h)      Amendments . Except as otherwise provided herein, this Agreement may be amended or modified only by a written instrument executed by Seller and Buyer.
(i)      Governing Law . The substantive laws of the State of California, without reference to its conflict of law provisions, will govern the validity, construction, and enforcement of this Agreement and the Transaction Documents.
(j)      Merger of Prior Agreements . This Agreement and the Addenda, Exhibits and Schedules hereto constitute the entire agreement between the Parties and supersede all prior agreements and understandings between the Parties relating to the subject matter hereof.
(k)      Time for Performance . Any time deadlines contained herein shall be calculated by reference to calendar days unless otherwise specifically noted. For notice purposes hereunder, days shall be deemed to end at 5:00 P.M. California time. In the event that any time periods for performance hereunder fall on a day that is not a Business Day, the date for performance shall be the next following Business Day.
(l)      Enforcement . If either Party fails to perform any of its obligations under this Agreement or if a dispute arises between the Parties concerning the meaning or interpretation of any provision of this Agreement, then the defaulting Party or the Party not prevailing in such dispute shall pay any and all costs and expenses incurred by the other Party on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, arbitration or court costs and attorneys’ fees and disbursements. Any such attorneys’ fees and other expenses incurred by either Party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys’ fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment.
(m)      Time of the Essence . THE TIME FRAMES AND DEADLINES FOR PERFORMANCE IN THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, THE TIME FRAMES AND DEADLINES SET FORTH IN SECTIONS 2, 3 AND 4 WITH RESPECT TO THE EARNEST MONEY, TITLE APPROVAL AND DILIGENCE REVIEW) HAVE BEEN NEGOTIATED BY THE PARTIES AND ARE A MATERIAL PART OF THE CONSIDERATION BETWEEN THE PARTIES. THE PARTIES HERETO AGREE THAT TIME IS OF THE ESSENCE WITH RESPECT TO THIS AGREEMENT,


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AND ALL OF THE TIME FRAMES AND DEADLINES SET FORTH IN THIS AGREEMENT.
INITIALS: Seller _____ Buyer _____
(n)      Severability . If any provision of this Agreement, or the application thereof to any person, place, or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, the remainder of this Agreement and such provisions as applied to other persons, places and circumstances shall remain in full force and effect.
(o)      Confidentiality . Buyer and Seller shall each maintain as confidential any and all material or information about the other, or in the case of Buyer and its agents, employees, consultants and contractors, about the Property, and shall not disclose such information to any third party, except, in the case of information about the Property or the Seller, to Buyer’s investment bankers, investors, lender or prospective lenders, insurance and reinsurance firms, attorneys, environmental assessment and remediation service firms and consultants, as may be reasonably required for the consummation of this transaction and/or as required by law.
(p)      Counterparts . This Agreement may be executed in counterparts or duplicate originals, each of which shall be deemed an original but all or which together shall constitute as one and the same instrument, and which shall be the official and governing version in the interpretation of this Agreement. This Agreement may be executed and delivered by facsimile or electronic transmission and the Parties agree that such facsimile or electronic (e.g., pdf) execution and delivery shall have the same force and effect as delivery of an original document with original signatures, and that each Party may use such facsimile or electronic signatures as evidence of the execution and delivery of this Agreement by the Parties to the same extent that an original signature could be used.
(q)      Joint and Several Liability . If Buyer is composed of more than one Person, then each such Person comprising Buyer shall be jointly and severally liable for the obligations, covenants and agreements created by or arising out of this Agreement.
(r)      Addenda, Exhibits and Schedules . All addenda, exhibits and schedules referred to herein are, unless otherwise indicated, incorporated herein by this reference as though set forth herein in full. The Exhibits, Addenda and Schedules to this Agreement are:
Exhibit A – Deed
Exhibit B – Assignment and Assumption of Leases
Exhibit C – Bill of Sale
Exhibit D – Assignment and Assumption of Service Contracts, Warranties and other General Intangibles
Exhibit E – Certificate of Transferor Other than an Individual (FIRPTA Affidavit)
Exhibit F – Form of Tenant Estoppel
Exhibit G – Form of Seller Title Affidavit



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Addendum I – Definitions
Addendum II – Seller’s Representations and Warranties

Schedule 1 – Due Diligence Materials
Schedule 2 – Description of Land
Schedule 3 – Assumed Service Contracts
Schedule 4 – Environmental Reports
Schedule 5 – Rent Roll
Schedule 6 – Exceptions to Seller Representations and Warranties
(s)      Construction . Headings at the beginning of each section and subsection are solely for the convenience of the Parties and are not a part of the Agreement. Whenever required by the context of this Agreement, the singular shall include the plural and the masculine shall include the feminine and vice versa. This Agreement shall not be construed as if it had been prepared by one of the Parties, but rather as if both Parties had prepared the same.
(t)      Tax Free Exchange . As an accommodation to Buyer, Seller agrees to cooperate with Buyer to accomplish an I.R.C. Section 1031 like kind tax deferred exchange, provided that the following terms and conditions are met; (i) Buyer shall give Seller notice of any desired exchange not later than five (5) days prior to the Closing Date; (ii) Seller shall in no way be liable for any additional costs, fees and/or expenses relating to the exchange; (iii) if, for whatever reason, the Closing does not occur, Seller shall have no responsibility or liability to the third party involved in the exchange transaction, if any; and (iv) Seller shall not be required to make any representations or warranties nor assume or incur any obligations or personal liability whatsoever in connection with the exchange transaction. Buyer indemnifies and agrees to hold Seller and each Seller Related Party harmless from and against any and all causes, claims, demands, liabilities, costs and expenses, including attorneys’ fees, as a result of or in connection with any such exchange. As an accommodation to Seller, Buyer agrees to cooperate with Seller to accomplish an I.R.C. Section 1031 like kind tax deferred exchange, provided that the following terms and conditions are met; (i) Seller shall give Buyer notice of any desired exchange not later than five (5) days prior to the Closing Date; (ii) Buyer shall in no way be liable for any additional costs, fees and/or expenses relating to the exchange; (iii) if, for whatever reason, the Closing does not occur, Buyer shall have no responsibility or liability to the third party involved in the exchange transaction, if any; and (iv) Buyer shall not be required to make any representations or warranties nor assume or incur any obligations or personal liability whatsoever in connection with the exchange transaction. Seller indemnifies and agrees to hold Buyer harmless from and against any and all causes, claims, demands, liabilities, costs and expenses, including attorneys’ fees, as a result of or in connection with any such exchange.
[Signatures on following page]





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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.

SELLER :

SRT SECURED TOPAZ, LLC ,
a Delaware limited liability company

By:                         
Name:                     
Title:                         


BUYER :

GINGER INVESTORS, LLC ,
a California limited liability company


By:                         
Name:                     
Title:                         





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First American Title Insurance Company
The undersigned executes this Agreement for the purpose of acknowledging its agreement to serve as escrow agent in accordance with the terms of this Agreement and to acknowledge receipt of a fully executed copy of the Agreement.
First American Title Insurance Company
By:    ________________________
Its:    ________________________





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941120.4


EXHIBIT A

DEED


First American Title Company
Escrow No.          

RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO:
            
            
            
Attention:              
MAIL TAX STATEMENTS TO:
              
              
                        

 
 
 
APN Nos:                              (Space above this line for Recorder’s use)

GRANT DEED

Documentary Transfer Tax is $_____________
XX     Computed on the full value of the property conveyed; OR
___    Computed on the full value less liens & encumbrances remaining at time of sale.
___    unincorporated area, or           City of _______________

FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,

SRT SECURED TOPAZ, LLC , a Delaware limited liability company,

HEREBY GRANTS TO:
, a                  ,

the following real property situated in the City of _______________, County of _______________, State of California:

As set forth in Exhibit A , attached hereto and made a part hereof;

TOGETHER WITH all easements, rights, privileges and appurtenances thereto or in any way appertaining, and all improvements thereon, and





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Exhibit A – Deed
Page 1 of 3

938345.1


SUBJECT TO (1) nondelinquent taxes and assessments; and (2) all other covenants, conditions, and restrictions, reservations, rights, rights of way, easements, encumbrances, liens, in title matters of record or visible from an inspection of the property or which an accurate survey of the property would disclose.

Executed as of __________________________, 2018.



GRANTOR :

SRT SECURED TOPAZ, LLC ,
a Delaware limited liability company



By:     [EXHIBIT – DO NOT SIGN]        
Name:                     
Title:                         


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Exhibit A – Deed
Page 2 of 3

941120.4


ACKNOWLEDGMENT



A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.







State of                  )
)    ss.
County of                  )


On                          , before me,                          (here insert name and title of officer), personally appeared                                      , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person (s), or the entity(ies) upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing is true and correct.

WITNESS my hand and official seal.



________________________________            [Seal]







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Exhibit A – Deed
Page 3 of 3

941120.4


EXHIBIT A
TO DEED

REAL PROPERTY DESCRIPTION






Purchase and Sale Agreement
Exhibit A – Deed
Exhibit A – Real Property Description
941120.4


EXHIBIT B
ASSIGNMENT AND ASSUMPTION OF LEASES


THIS ASSIGNMENT AND ASSUMPTION OF LEASES (“ Assignment ”) dated as of __________, 2018, is entered into by and between SRT SECURED TOPAZ, LLC,
a Delaware limited liability company (“ Assignor ”), and ____________________________ a _________________________ (“ Assignee ”).

W I T N E S S E T H:

WHEREAS, Assignor is the lessor under certain leases executed with respect to that certain real property commonly known as 14135 Main Street, Hesperia, CA (the “ Property ”), as more fully described in Exhibit A attached hereto, which leases are described in the Rent Roll attached hereto as Schedule 1 (the “ Leases ”); and

WHEREAS, Assignor has entered into that certain Purchase and Sale Agreement (the “ Agreement ”) by which title to the Property is being transferred to Assignee; and

WHEREAS, Assignor desires to assign its interest as lessor in the Leases to Assignee, and Assignee desires to accept the assignment thereof;

NOW, THEREFORE, in consideration of the promises and conditions contained herein, the Parties hereby agree as follows:

1. Effective as of the Closing Date (as defined in the Agreement), Assignor hereby assigns to Assignee all of its right, title and interest in and to the Leases, and any guarantees related thereto, and Assignee hereby accepts such assignment and agrees to assume the obligations of Landlord under the Leases; provided, however, Assignor hereby indemnifies and holds Assignee harmless from any action, cause of action, loss, cost, claim or expense, including without limitation reasonable attorneys’ fees arising out of or related to a breach or default on the part of Assignor as Landlord under the Leases occurring before the date of this Assignment. Assignee hereby indemnifies and holds Assignor harmless from any action, cause of action, loss, cost, claim or expense, including without limitation reasonable attorneys’ fees arising out of or related to a breach or default on the part of Assignee as Landlord under the Leases occurring on or after the date of this Assignment. Notwithstanding the foregoing, if Assignee acquires the Property and (i) any Tenant Estoppel delivered to Assignee on or before the Closing identifies any event, occurrence or matter (whether or not characterized as a breach, default or failure to perform on the part of Assignor) as to which Assignor is or would be required to indemnify Assignee hereunder if such event, occurrence or matter would, with the passage of time or notice or both, constitute a breach, default or failure to perform under such Lease on the part of Assignor, or (ii) Assignee had knowledge as of or prior to the Closing of any event, occurrence or matter (whether or not characterized as a breach, default or failure to perform on the part of Assignor) as to which Assignor is or would be required to indemnify Assignee hereunder if such event, occurrence or matter would, with the passage of time


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Exhibit B – Assignment and Assumption of Leases
Page 1 of 3
941120.4


or notice or both, constitute a breach, default or failure to perform under such Lease on the part of Assignor, then in either such instance Assignor shall not be responsible for, or obligated to indemnify or hold Assignee harmless from any such event, occurrence or matter or the resulting breach, default or failure to perform.
    
2. If either Party hereto fails to perform any of its obligations under this Assignment or if a dispute arises between the Parties hereto concerning the meaning or interpretation of any provision of this Assignment, then the defaulting Party or the Party not prevailing in such dispute shall pay any and all costs and expenses incurred by the other Party on account of such default and/or in enforcing or establishing its rights hereunder including, without limitation, court costs and attorneys’ fees and disbursements. Any such attorneys’ fees and other expenses incurred by either Party in enforcing a judgment in its favor under this Assignment shall be recoverable separately from and in addition to any other amount included in such judgment and such attorneys’ fees obligation is intended to be severable from the other provisions of this Assignment and to survive and not be merged into any such judgment.

3. This Assignment shall be binding on and inure to the benefit of the Parties hereto, their heirs, executors, administrators, successors in interest and assigns.

4. The substantive laws of the State of California, without reference to its conflict of law provisions, will govern the validity, construction, and enforcement of this Assignment.

5. This Assignment may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Capitalized terms used but not defined in this Assignment have the meaning given to such terms in the Agreement.


[Signatures on following page]



Purchase and Sale Agreement
Exhibit B – Assignment and Assumption of Leases
Page 2 of 3
941120.4


IN WITNESS WHEREOF Assignor and Assignee have executed this Assignment the day and year first above written.

ASSIGNOR :

SRT SECURED TOPAZ, LLC ,
a Delaware limited liability company



By:     [EXHIBIT – DO NOT SIGN]        
Name:                     
Title:                         


ASSIGNEE :

,
a                         


By:     [EXHIBIT – DO NOT SIGN]        
Name:                         
Title:                         





Purchase and Sale Agreement
Exhibit B – Assignment and Assumption of Leases
Page 3 of 3
941120.4


EXHIBIT A
TO ASSIGNMENT AND ASSUMPTION OF LEASES

REAL PROPERTY DESCRIPTION






Purchase and Sale Agreement
Exhibit B – Assignment and Assumption of Leases
Exhibit A – Real Property Description
941120.4


SCHEDULE 1
TO ASSIGNMENT AND ASSUMPTION OF LEASES

RENT ROLL







Purchase and Sale Agreement
Exhibit B – Assignment and Assumption of Leases
Schedule 1 – Rent Roll
941120.4


EXHIBIT C

BILL OF SALE


For good and valuable consideration the receipt of which is hereby acknowledged, SRT SECURED TOPAZ, LLC, a Delaware limited liability company (“ Transferor ”), does hereby sell, transfer, and convey to _________________________ , a _________________ (“ Transferee ”) all personal property owned by Transferor and located on or in or used in connection with the Real Property located at 14135 Main Street, Hesperia, CA, including, without limitation, those items described in Schedule 1 attached hereto (collectively, the “ Personal Property ”), pursuant to that certain Purchase and Sale Agreement between Transferor and Transferee for the purchase and sale of the Real Property (the “ Agreement ”). Transferor is conveying the Personal Property to Transferee free and clear of free of any lien or encumbrance thereon except as previously disclosed to and accepted by Transferee. Capitalized terms used but not defined in this Bill of Sale have the meaning given to such terms in the Agreement.

Transferor makes no representation or warranty regarding the condition, merchantability, fitness or usefulness of the Personal Property, and Transferee acknowledges and agrees that it is acquiring the Personal Property in its AS-IS, WHERE-IS, WITH ALL FAULTS CONDITION, WITHOUT WARRANTY, EITHER EXPRESS OR IMPLIED, except that all of the Personal Property will be free of all liens and encumbrances.

This Bill of Sale shall be binding upon and inure to the benefit of the successors and assigns of Transferor and Transferee.

The substantive laws of the State of California, without reference to its conflict of law provisions, will govern the validity, construction, and enforcement of this Bill of Sale.

This Bill of Sale may be executed in one or more counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same instrument.

Dated: ____________________, 2018.


[Signatures on following page]



Purchase and Sale Agreement
Exhibit C – Bill of Sale
Page 1 of 2
941120.4


TRANSFEROR :

SRT SECURED TOPAZ, LLC ,
a Delaware limited liability company


By:     [EXHIBIT – DO NOT SIGN]        
Name:                     
Title:                         


TRANSFEREE :

,
a                         


By:     [EXHIBIT – DO NOT SIGN]        
Name:                         
Title:                         





Purchase and Sale Agreement
Exhibit C – Bill of Sale
Page 2 of 2
941120.4


SCHEDULE 1
TO BILL OF SALE

PERSONAL PROPERTY






Purchase and Sale Agreement
Exhibit C – Bill of Sale
Schedule 1 – Personal Property
941120.4


EXHIBIT D

ASSIGNMENT AND ASSUMPTION OF WARRANTIES
AND OTHER GENERAL INTANGIBLES


This Assignment and Assumption of Warranties and Other General Intangibles (“ Assignment ”) is made and entered into as of ________, 2018, by SRT SECURED TOPAZ, LLC, a Delaware limited liability company (“ Assignor ”), to _________________________, a ________________ (“ Assignee ”), pursuant to that certain Purchase and Sale Agreement (the “ Agreement ”) between Assignor and Assignee relating to the real property owned by Assignor and located at 14135 Main Street, Hesperia, CA. Capitalized terms used but not defined in this Assignment have the meaning given to such terms in the Agreement.

1.    For good and valuable consideration, the receipt of which is hereby acknowledged, effective as of the Closing Date (as defined in the Agreement), Assignor hereby assigns and transfers unto Assignee the following:

(a)    a non-exclusive right to and interest in all warranties and guaranties made by or received from any third party with respect to any building, building component, structure, fixture, machinery, equipment, or material situated on, contained in any building or other improvement situated on that certain real property described in Exhibit A attached hereto including, without limitation, those warranties and guaranties listed in Schedule 1 attached hereto (collectively, “ Warranties ”), but only to the extent such Warranties apply specifically to the improvements on the Real Property; provided however, that to the extent there are any third party costs, expenses or fees in connection with the assignment of any Warranties, including, without limitation, reliance fees or transfer fees, Seller shall not be obligated to assign such Warranties to Buyer unless Buyer pays all such costs, expenses and fees.

(b)    Assignor’s right, title and interest in and to any General Intangibles (as defined in the Agreement), but only if and to the extent such General Intangibles relate to the Real Property and not to any other property.

Assignor and Assignee further hereby agree and covenant as follows:

2.    If either Party hereto fails to perform any of its obligations under this Assignment or if a dispute arises between the Parties hereto concerning the meaning or interpretation of any provision of this Assignment, then the defaulting Party or the Party not prevailing in such dispute shall pay any and all costs and expenses incurred by the other Party on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, court costs and attorneys’ fees and disbursements. Any such attorneys’ fees and other expenses incurred by either Party in enforcing a judgment in its favor under this Assignment shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys, fees obligation is intended to be severable from the other provisions of this Assignment and to survive and not be merged into any such judgment.


Purchase and Sale Agreement
Exhibit D – Assignment and Assumption of Warranties and Other General Intangibles
Page 1 of 3
941120.4



3.    Assignor hereby covenants that Assignor will, at any time and from time to time, upon written request therefor, execute and deliver to Assignee any new or confirmatory instruments which Assignee may reasonably request in order to fully assign, transfer to and vest in Assignee, and to protect Assignee’s right, title and interest in and to, any of the items assigned herein or to otherwise realize upon or enjoy such rights in and to those items.

4.    This Assignment shall be binding on and inure to the benefit of the Parties hereto, their heirs, executors, administrators, successors in interest and assigns.

5.    The substantive laws of the State of California, without reference to its conflict of law provisions, will govern the validity, construction, and enforcement of this Assignment.

6.    This Assignment may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.


[Signatures on following page]





Purchase and Sale Agreement
Exhibit D – Assignment and Assumption of Warranties and Other General Intangibles
Page 2 of 3
941120.4


IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment the day and year first above written.

ASSIGNOR :

SRT SECURED TOPAZ, LLC ,
a Delaware limited liability company


By:     [EXHIBIT – DO NOT SIGN]        
Name:                     
Title:                         


ASSIGNEE:

,
a                         


By:     [EXHIBIT – DO NOT SIGN]        
Name:                         
Title:                         






Purchase and Sale Agreement
Exhibit D – Assignment and Assumption of Warranties and Other General Intangibles
Page 3 of 3
 
941120.4


EXHIBIT A
TO
ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS, WARRANTIES
AND OTHER GENERAL INTANGIBLES

REAL PROPERTY DESCRIPTION






Purchase and Sale Agreement
Exhibit D – Assignment and Assumption of Warranties, Service Contracts and Other General Intangibles
Exhibit A – Real Property Description
941120.4


SCHEDULE 1
TO
ASSIGNMENT AND ASSUMPTION OF WARRANTIES,
SERVICE CONTRACTS AND OTHER GENERAL INTANGIBLES

WARRANTIES AND GUARANTIES






Purchase and Sale Agreement
Exhibit D – Assignment and Assumption of Warranties and Other General Intangibles
Schedule 1 – Warranties and Guaranties
941120.4


SCHEDULE 2
TO
ASSIGNMENT AND ASSUMPTION OF WARRANTIES,
SERVICE CONTRACTS AND OTHER GENERAL INTANGIBLES

SERVICE CONTRACTS






Purchase and Sale Agreement
Exhibit D – Assignment and Assumption of Warranties and other General Intangibles
Schedule 2 – Service Contracts
 
941120.4


EXHIBIT E

CERTIFICATE OF TRANSFEROR
OTHER THAN AN INDIVIDUAL
(FIRPTA AFFIDAVIT)


Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform _______________________________, a __________________________, the transferee of certain real property located at 14135 Main Street, Hesperia, CA, that withholding of tax is not required upon the disposition of such U.S. real property interest by SRT SECURED TOPAZ, LLC, a Delaware limited liability company and wholly owned subsidiary of STRATEGIC REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“ Transferor ”), the undersigned hereby certifies the following on behalf of Transferor:

1.    Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);

2.    Transferor is not a disregarded entity as defined in Income Tax Regulations §1.1445-2(b)(2)(iii);

3.    Transferor’s U.S. employer identification number is __________; and

4.
Transferor’s office address is:    c/o Glenborough, LLC
66 Bovet Road, Suite 100
San Mateo, CA 94402

Transferor understands that this certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalty of perjury, I declare that I have examined this certificate and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of Transferor.

Dated: ______________________, 2018.

[EXHIBIT – DO NOT SIGN]        
                                                     
on behalf of:

__________________________,
a _________________________



Purchase and Sale Agreement
Exhibit E – Certificate of Transferor Other than an Individual (FIRPTA Affidavit)
941120.4


EXHIBIT F

FORM OF TENANT ESTOPPEL


ESTOPPEL CERTIFICATE
THIS ESTOPPEL CERTIFICATE is made as of                      , by Total Renal Care, Inc. in connection with that certain Lease Agreement dated June 25, 2007 and First Amendment to Freestanding Building Lease dated August 1, 2017 by and between TOTAL RENAL CARE, INC., a California corporation, as Tenant and SRT SECURED TOPAZ, LLC, a Delaware limited liability company, as successor-in-interest to Hesperia- Main Street, LLC, as Landlord (the "Lease") for the premises located at 14135 Main Street, Hesperia, California 92345 (the "Premises").
Tenant hereby certifies to the best of Tenant's knowledge to Landlord and ______________________________, as follows:
1.      The Lease is now in full force and effect and has not been amended, modified, or assigned except as noted above. There are no other oral or written agreements or understandings between Landlord and Tenant relating to the Premises. As of the date hereof, the Lease is in full force and effect.
2.      To Tenant's knowledge and belief, the information set forth below is true and correct as of the date hereof:
(a) Approximate square footage of the Premises: 7,500 rentable square feet.
(a) Monthly installment of Rent as of the date hereof: $19,571.60.
(b) Commencement Date: August 31, 2008.
(c) Termination date: August 31, 2028.
(d) Security deposit: None.
(e) Prepaid rent in the amount of: None.
(f) Renewal Options: Three periods of five years each.
3.      To the best of Tenant's actual knowledge and belief, without inquiry or investigation, there exists no default, or breach on the part of either Tenant or Landlord under the Lease.
4.      There are no credits, defenses, or offsets to the enforcement of the Lease, except as set forth in the Lease.
5.      No rent has been or will be paid more than 30 days in advance.


Purchase and Sale Agreement
Exhibit F – Form of Tenant Estoppel
Page 1 of 2
941120.4


(g)
6.      All legal notices to Tenant shall be sent to:
Tenant:     Total Renal Care, Inc.
c/o DaVita HealthCare Partners Inc.
Attention: Real Estate Legal
2000 16th Street
Denver, CO 80202
With a copy to:     relegal@davita.com
Subject: Facility #2278, Hesperia, CA
IN WITNESS WHEREOF, Tenant has executed this Estoppel Certificate as of the date first above written.


TENANT :

TOTAL RENAL CARE, INC .,
a California corporation



By:                          
Name:    Amy DeColibus
Title:    Assistant General Counsel






Purchase and Sale Agreement
Exhibit F – Form of Tenant Estoppel
Page 2 of 2
941120.4


EXHIBIT G

FORM OF SELLER’S TITLE AFFIDAVIT

Date: _________, 201_
Commitment Number: NCS-___________ (the “Commitment”)

To the actual knowledge of SRT SECURED TOPAZ, LLC, a Delaware limited liability company (“ Company ”), the following is hereby certified to First American Title Insurance Company (“ Title Company ”) with respect to the land described in the above Commitment.

1.
The undersigned is the _________________ of the Company.
2.
There have been no:
a.
Bankruptcy proceedings involving the Company or dissolution proceeding involving the Company during the time the Company had any interest in the premises described in Exhibit A (“Land”), except as follows: ___________________.
b.
Tax liens filed against the Company, except as follows:                  ;
c.
Unsatisfied judgments of record against the Company, nor any actions pending in any courts, which affect the Land, except as follows:              .
3.
There has/have been no labor or materials furnished to the Land at the request of the Company in the past 180 days and there are no plans for any labor or materials to be furnished to the Land at the request of the Company, except as follows:                  .
4.
There are no unrecorded contracts, leases, easements or other agreements or interest relating to the Land except the leases shown on the rent roll attached hereto as Exhibit B , which the undersigned certifies is a true and correct copy of the Company’s rent roll, except as follows:                      .
5.
There are no persons in possession of any portion of the Land other than pursuant to a recorded document except tenants pursuant to the leases shown on the rent roll attached hereto as Exhibit B , except as follows:                  .
6.
There are no encroachments or boundary line questions affecting the Land of which the undersigned has knowledge, other than as shown on any survey delivered to the Title Company for purposes of issuance of an ALTA Owner’s Policy, except as follows:                  .
Affiant makes this Affidavit for the purpose of inducing First American Title Insurance Company to issue its policy of title insurance to ___________________________, a ____________________________ (“Purchaser”) and Purchaser’s lender, ________________________, a __________________ (“Lender”). This Affidavit may be relied on solely by First American Title Insurance Company in connection with the issuance of title policies to Purchaser and Lender, and does not constitute or contain representations, warranties or statements on which Purchaser or Lender may rely.


Purchase and Sale Agreement
Exhibit G – Form of Seller’s Title Affidavit
Page 1 of 2
941120.4


The term “Actual Knowledge” of the undersigned, or references to the “knowledge” of the undersigned means the current, actual knowledge of _______________ as of the date of this affidavit, upon due inquiry but without imputation of matters of record or constructive knowledge. The undersigned represents that _________________ is the person most likely to have current, actual knowledge of the matters described in this affidavit.

By:                      
Name:                     
Title:                      [of _____________________, a _________________, Manager/Member of the Company]





Purchase and Sale Agreement
Exhibit G – Form of Seller’s Title Affidavit
Page 2 of 2
941120.4


Exhibit A
Land Description
Real property in the City of _______________, County of _____________, State of ___________________, described as follows:






Purchase and Sale Agreement
Exhibit H – Form of Seller’s Title Affidavit
Exhibit A – Land Description
941120.4


Exhibit B
Rent Roll
(See following pages)






Purchase and Sale Agreement
Exhibit G – Form of Seller’s Title Affidavit
Exhibit B – Rent Roll
941120.4


ADDENDUM I

DEFINITIONS
Terms used in this Agreement shall have the meanings set forth below:
1.
2018 Stub Reconciliation . As defined in Section 7(d)(v) of the Agreement.
2.
Actual Knowledge of Buyer (or Buyer’s Actual Knowledge.) The knowledge of any Responsible Individual of Buyer, without duty of inquiry; provided that so qualifying Buyer’s knowledge shall in no event give rise to any personal liability on the part of the Responsible Individual, on account of any breach of any representation and warranty of Buyer herein. Actual Knowledge shall not include constructive knowledge, imputed knowledge, or knowledge Buyer or such Responsible Individual do not have but could have obtained through further investigation or inquiry.
3.
Actual Knowledge of Seller (or Seller’s Actual Knowledge.) The knowledge of any Responsible Individual of Seller, without duty of inquiry; provided that so qualifying Seller’s knowledge shall in no event give rise to any personal liability on the part of the Responsible Individual, on account of any breach of any representation and warranty of Seller herein. Actual Knowledge shall not include constructive knowledge, imputed knowledge, or knowledge Seller or such Responsible Individual do not have but could have obtained through further investigation or inquiry.
4.
Additional Rents . All amounts, other than Fixed Rents, due from Tenant under any Lease, including without limitation, percentage rents, escalation charges for real estate taxes, parking charges, marketing fund charges, reimbursement of Expenses, maintenance escalation rents or charges, cost of living increases or other charges of a similar nature, if any, and any additional charges and expenses payable under any Lease.
5.
Affiliate . Any Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with another Person, or any successor to a Person owned by the Persons controlling the predecessor to such successor. An affiliate of a Person includes any officer, director, managing member, member or general partner, and any record or beneficial owner of more than 10% of any class of ownership interests in such Person.
6.
Agreement . This Agreement between Seller and Buyer, including all Addenda, Schedules and Exhibits attached hereto and incorporated herein by reference.
7.
Approval Date. The Business Day on or prior to the end of the Due Diligence Period on which Buyer delivers its Approval Notice to Seller.
8.
Approval Notice . Buyer’s notice delivered to Seller (if at all) under Section 4(l) of the Agreement.


Purchase and Sale Agreement
Addendum I – Definitions
Page 1 of 7
941120.4


9.
Assignment of Leases . An Assignment and Assumption of Leases in the form attached to this Agreement as Exhibit B .
10.
Assignment of General Intangibles . An Assignment and Assumption of Warranties and Other General Intangibles in the form attached to this Agreement as Exhibit D .
11.
Bill of Sale . A Bill of Sale in the form attached to this Agreement as Exhibit C .
12.
Business Day . Any day other than a Saturday, Sunday or holiday on which Bank of America, N.A., located in San Francisco, California, is authorized or required by law to close for business.
13.
Buyer . The “Buyer” in the preamble to this Agreement, or its permitted assignee.
14.
Buyer’s Agents . The employees, agents, contractors, consultants, officers, directors, representatives, managers and members of Buyer or its Affiliates, and such other Persons as are acting under the direction of, or on behalf of, Buyer or any Affiliate of Buyer.
15.
Buyer’s Broker . CBRE, Inc.
16.
Buyer Closing Conditions . Conditions precedent to Buyer’s obligation to consummate this transaction, as set forth in Section 5(a) .
17.
Cash . Immediately available funds to be paid by Buyer at the Closing, as provided in the Section entitled “Consideration”.
18.
Closing . The delivery of the Deed and the other documents required to be delivered hereunder and the payment of the Consideration.
19.
Closing Date . Forty-five (45) days after delivery of an Approval Notice, or earlier, upon mutual agreement of the Parties.
20.
Consideration . The total consideration to be paid by Buyer to Seller as described in the Section entitled “Consideration.”
21.
Contracts . The service contracts, construction contracts for work in progress, any warranties thereunder, management contracts, unrecorded reciprocal easement agreements, operating agreements, maintenance agreements, franchise agreements and other similar agreements relating to the Property.
22.
Creditors’ Rights Laws . All bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally, as well as general equitable principles whether or not the enforcement thereof is considered to be a proceeding at law or in equity.
23.
Day . The term “day” used herein and not capitalized means a calendar day.



Purchase and Sale Agreement
Addendum I – Definitions
Page 2 of 7
941120.4


24.
Deed . A deed in the form attached to this Agreement as Exhibit A .
25.
Due Diligence Materials . The materials described in Schedule 1 to this Agreement.
26.
Due Diligence Period. A period of time commencing on the Effective Date and ending at 5:00 p.m., California time, on June 7, 2018.
27.
Earnest Money . The aggregate of the Initial Earnest Money Deposit and the Remaining Earnest Money Deposit.
28.
Effective Date. The date set forth in the preamble to this Agreement, which is the date upon which this Agreement a copy of this Agreement executed by both Seller and Buyer has been exchanged by email transmittal of a signed, pdf copy.
29.
Environmental Laws . All federal, state, local or administrative agency ordinances, laws, rules, regulations, orders or requirements relating to Hazardous Materials.
30.
Environmental Reports . All environmental reports and investigations relating to the Property which are available to Seller, which are listed on Schedule 4 to this Agreement.
31.
Existing Lender . Keybank, N.A., as lead agent.
32.
Expenses . All operating expenses normal to the operation and maintenance of the Property, including without limitation: Property Taxes; current installments of any improvement bonds or assessments which are a lien on the Property or which are pending and may become a lien on the Property; water, sewer and utility charges; amounts payable under any Contract for any period in which the Closing occurs; and permits, licenses and inspection fees. Expenses shall not include expenses which are of a capital nature.
33.
Expense Reimbursement. That amount necessary to reimburse Buyer for all of its out-of-pocket, third-party costs and expenses related to the transactions contemplated by this Agreement, including, without limitation, to consultants and for third‐party reports, for legal fees incurred in connection with negotiating and entering into a letter of intent, non-disclosure agreement, or other preliminary document, and this Agreement, up to a maximum, in the aggregate, of Thirty Thousand and No/100ths Dollars ($30,000).
34.
Fixed Rents. The fixed periodic payments under any Lease.
35.
General Intangibles . All general intangibles relating solely to the design, development, operation, management and use of the Real Property, including (i) certificates of occupancy, zoning variances, building, use or other permits, approvals, authorizations, licenses and consents obtained from any governmental authority or other person for the development, use, operation or management of the Real Property; (ii) engineering reports, architectural drawings, plans and specifications relating specifically to the Real Property; and (iii) Seller’s right, title and interest in and to any and all of the following to the extent related to the Real Property, and assignable: trademarks, service marks, logos or other source and business identifiers, trademark registration and applications for registration used at or relating to the


Purchase and Sale Agreement
Addendum I – Definitions
Page 3 of 7
941120.4


Real Property and any written agreement granting to Seller any right to use any trademark or trademark registration at or in connection with the Real Property. For the avoidance of doubt, the general intangibles do not include, and expressly exclude, any and all general intangibles to the extent they relate in whole or in part to properties other than the Real Property.
36.
Hazardous Materials . Any substance which is (a) designated, defined, classified or regulated as a hazardous substance, hazardous material, hazardous waste, toxic substance, pollutant or contaminant under any federal or state law or regulation, (b) a petroleum hydrocarbon, including crude oil or any fraction thereof and all petroleum products, (c) PCBs, (d) asbestos or asbestos-containing products, (e) a flammable explosive, (f) an infectious material, (g) a radioactive material, (h) a carcinogenic, or (i) a reproductive toxicant.
37.
Improvements . All buildings, parking lots, parking garages, signs, walks and walkways, fixtures and equipment and all other improvements located at or on or affixed to the Land to the full extent that such items are owned by Seller and constitute realty under the laws of the state in which the Land is located.
38.
Initial Earnest Money Deposit . The initial earnest money deposit(s) paid by Buyer pursuant to the Section entitled “Consideration,” in the amount(s) of One Hundred Thousand and No/100ths Dollars ($100,000.00).
39.
Land . The land described in Schedule 2 to this Agreement, together with all appurtenances thereto, including without limitation easements and mineral and water rights.
40.
Laws . All Environmental Laws, zoning and land use laws, and other local, state and federal laws and regulations applicable to the Property, the Parties, and/or the transactions contemplated by this Agreement.
41.
Lease . The lease for the Tenant listed in the Rent Roll.
42.
Leasing Commission . Commissions payable to brokers or other Persons in connection with leasing space in the Property and for which the landlord is obligated under any Lease, or for which Seller is obligated under any agreement made by Seller with any such Person.
43.
Major Loss. Any damage or destruction to, or condemnation of, any Real Property as to which the cost to repair, or the value of the portion taken, as the case may be, exceeds Three Hundred Fifty Thousand and No/100ths Dollars ($350,000.00).
44.
Material Damage Ceiling. Damage in the aggregate of Four Hundred Thousand and No/100ths Dollars ($400,000.00) suffered by Buyer as a result of any inaccuracy or breach of any representation or warranty or covenant (on a cumulative basis and not per occurrence) by Seller hereunder.
45.
Material Damage Floor . Damage in excess of Forty Thousand and No/100ths Dollars ($40,000.00) suffered by Buyer as a result of any inaccuracy or breach of any representation or warranty or covenant (on a cumulative basis and not per occurrence) by Seller hereunder.


Purchase and Sale Agreement
Addendum I – Definitions
Page 4 of 7
941120.4


46.
Minor Loss. Damage or destruction to, or condemnation of, any Real Property that is not a Major Loss.
47.
Monetary Liens. As defined in the Section entitled “Approval of Title.”
48.
New Exception. An exception to title to the Real Property that is not (i) included in or referenced in any preliminary report delivered to Buyer prior to the Approval Date, or in any exception document delivered to Buyer by the Title Company prior to the Approval Date, (ii) disclosed to Buyer in any of the Due Diligence Materials, (iii) shown on or referenced in the Survey, (iv) caused by Buyer or any of Buyer’s Agents, or (v) previously approved in writing by Buyer or any of Buyer’s Agents.
49.
Non-Refundable Payment . See Section 3(b) .
50.
Parcel Map . That certain Final Parcel Map No. 19858 recorded in the official records of the County as document no. 2018-0146759, in Book 250, Pages 37-38, on April 24, 2018.
51.
Parties. Buyer and Seller.
52.
Permitted Exceptions . The Lease and the exceptions to title approved by Buyer during the Due Diligence Period, pursuant to the title review procedure set forth in the Agreement.
53.
Person . An individual, partnership, corporation, business trust, joint stock company, limited liability company, trust, unincorporated association, joint venture or governmental authority.
54.
Personal Property . All of Seller’s right, title and interest in and to the personal property and any interest therein owned by Seller or held directly for the benefit of Seller, if any, located on the Real Property and used in the operation or maintenance of the Real Property.
55.
Physical Testing . Any physically intrusive, invasive or destructive testing or investigation (however characterized) of, on or under the Property or any portion or part thereof, for the presence or absence of Hazardous Materials, or for other purposes, including, without limitation, by (i) taking, sampling or testing groundwater or soils, (ii) air quality sampling or testing, or (iii) probing, cutting, penetrating, removing or otherwise disturbing any interior or exterior feature of the Land or Improvements in order to sample, test, observe or monitor normally inaccessible areas, components, features or systems.
56.
Property. The Real Property, the Lease, the Personal Property, the General Intangibles, and the Contracts (excluding Contracts to be terminated by Seller pursuant to this Agreement).
57.
Property Taxes. As defined in Section 7(c)(ii)(c) , entitled “Property Taxes.”
58.
Real Property . The Land and Improvements.
59.
Remaining Earnest Money Deposit . The additional earnest money deposit(s) paid by Buyer on or after the Approval Date pursuant to the Section entitled “Consideration”, in the amount of One Hundred Fifty Thousand and No/100ths Dollars ($150,000.00)


Purchase and Sale Agreement
Addendum I – Definitions
Page 5 of 7
941120.4


60.
Rent Roll . The list of each of the tenants under leases as of the date of this Agreement, attached to this Agreement as Schedule 5 .
61.
Rents . Fixed Rents and Additional Rents.
62.
Responsible Individuals . With respect to Buyer: Vic Vahe Vartanian; and with respect to Seller: Alan Shapiro.
63.
Seller . The “Seller” in the preamble to this Agreement.
64.
Seller Related Party . Seller, any Affiliate of Seller, and any of its or their respective shareholders, partners, members, managers, officers, directors, employees, contractors, agents, attorneys or other representatives of Seller.
65.
Seller’s Broker . CBRE, Inc.
66.
Seller Closing Conditions . Conditions precedent to Seller’s obligation to consummate this transaction, as set forth in Section 5(b) .
67.
Service Contracts . All Contracts involving ongoing services and periodic payment therefor, as distinguished from franchise agreements, easements, guarantees, warranties and the like.
68.
Specific Performance Amount . Fifty Thousand and No/100ths Dollars ($50,000.00).
69.
Survey . That certain Land Title Survey of the Property delivered to Buyer with the Due Diligence Materials.
70.
Tenant . The tenant listed on the Rent Roll.
71.
Tenant Estoppel . An estoppel certificates in the form attached to this Agreement as Exhibit F (or on such other form as may be prescribed in the Tenant Lease), to be provided by Seller as provided in the Section entitled “Tenant Estoppel.”
72.
Tenant Improvement Allowances . Tenant improvement allowances and/or tenant improvement costs which the landlord is responsible to pay to Tenant or reimburse to Tenant under its Lease.
73.
Title Company . First American Title Insurance Company – National Commercial Services, at its office located at 2755 Campus Drive, Suite 125, San Mateo, CA 94403; Attention: Erwin J. Broekhuis, Commercial Escrow Officer, (650) 356-1729 (direct), email ebroekhuis@firstam.com.
74.
Title Policy . An owner’s standard coverage ALTA title policy, issued by Title Company in the amount of the Consideration, showing title vested in Buyer subject only to the Permitted Exceptions.


Purchase and Sale Agreement
Addendum I – Definitions
Page 6 of 7
941120.4


75.
Transaction Documents . The Deed, Bill of Sale, Assignment of General Intangibles, Assignment of Leases, and any and all other agreements entered into by the Parties in connection with the Closing.





Purchase and Sale Agreement
Addendum I – Definitions
Page 7 of 7
941120.4


ADDENDUM II

SELLER’S REPRESENTATIONS AND WARRANTIES
Seller hereby represents and warrants to Buyer as follows:
A. Organization and Authorization
1.      Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and is qualified to do business in the state of where the Property is located.
2.      Seller has full power and authority to execute and deliver this Agreement and to perform all of the terms and conditions hereof to be performed by Seller and to consummate the transactions contemplated hereby. This Agreement and all documents executed by Seller which are to be delivered to Buyer at Closing have been duly executed and delivered by Seller and are or at the time of Closing will be the legal, valid and binding obligation of Seller and is enforceable against Seller in accordance with its terms, except as the enforcement thereof may be limited by applicable Creditors’ Rights Laws. Seller is not presently subject to any bankruptcy, insolvency, reorganization, moratorium, or similar proceeding.
3.      The individuals and entities executing this Agreement and the instruments referenced herein on behalf of Seller and its constituent entities, if any, have the legal power, right and actual authority to bind Seller to the terms and conditions hereof and thereof.
4.      Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated by this Agreement, nor the compliance with the terms and conditions hereof will violate or conflict, in any material respect, with any provision of Seller’s organizational documents or to Seller’s Actual Knowledge any statute, regulation or rule, or, to Seller’s Actual Knowledge, any injunction, judgment, order, decree, ruling, charge or other restrictions of any government, governmental agency or court to which Seller is subject, and which violation or conflict would have a material adverse effect on Seller. Seller is not a party to any contract or subject to any other legal restriction that would prevent fulfillment by Seller of all of the terms and conditions of this Agreement or compliance with any of the obligations under it.
B. Title Matters
1.      Possession; No Transfers . There are no adverse or other parties in possession of the Property, or any part thereof, with the consent of Seller except Seller and Tenant. Seller has not granted to any Person any license, easement, lease, or other right relating to the use or possession of the Property or any part thereof, except Tenant or as set forth in the matters shown of record.



Purchase and Sale Agreement
Addendum II – Seller’s Representations and Warranties
Page 1 of 4
 
941120.4


C. Property Condition, Use and Compliance
1.      Compliance with Laws . Except as set forth on Schedule 6 to this Agreement, to Seller’s Actual Knowledge, Seller has not received written notice that the use or operation of the Property is in violation of any applicable Laws.
2.      No Regulatory Proceedings . Except as set forth on Schedule 6 to this Agreement, to Seller’s Actual Knowledge, Seller has not received any written notice of any condemnation, environmental, zoning or other land-use regulation proceedings that have been instituted, or are planned to be instituted, which directly identify any of the Property, nor has Seller received written notice of any special assessment proceedings affecting any of the Property. Seller shall notify Buyer promptly of any such proceedings of which any Seller becomes aware prior to Closing.
3.      Environmental Matters. To the Actual Knowledge of Seller and except as set forth in the Due Diligence Materials, there are no Hazardous Materials on or under the Property in violation of Environmental Laws or which would require remediation or mitigation under Environmental Laws.
D. The Lease
1.      Rent Roll . The Rent Roll attached hereto completely and accurately reflects the material terms and conditions of the Lease in all material respects as of its date. Except as disclosed on the Rent Roll, to the Actual Knowledge of Seller, there are no other tenants at the Property with Seller’s consent, and no Rents under the Lease have been collected in advance of the current month. The Rent Roll shall be updated at the Closing to reflect any changes which occur after the Effective Date.
2.      Security Deposit . Tenant did not pay a security deposit to Landlord.
3.      Lease. Except as set forth in Schedule 6 to this Agreement: (i) the Lease has not been modified or amended except as set forth on the Rent Roll; (ii) Seller has provided to Buyer a complete copy of the Lease identified on the Rent Roll; (iii) to Seller’s Actual Knowledge, Seller is not in default under the Lease and Tenant has delivered no written notice to Seller of a default on the part of Seller under the Lease, (iv) to Seller’s Actual Knowledge, Tenant is not in default under the Lease, (v) Tenant has not asserted any defense or set-off against the payment of rent in connection with the Lease and has not contested any tax, operating cost or other escalation payments or occupancy charges payable under the Lease. The landlord under the Lease is not obligated to complete or pay for any improvements, or to advance any tenant allowance, except for improvements and allowances fully paid for or advanced prior to the Effective Date and except as disclosed in the Due Diligence Documents. To the extent Buyer is delivered a Tenant Estoppel as to the Lease, such Tenant Estoppel shall supersede and replace this Section D.3 and the representations of Seller in this Section D.3 shall not apply to the Lease or Tenant.
E. Other Matters


Purchase and Sale Agreement
Addendum II – Seller’s Representations and Warranties
Page 2 of 4
 
941120.4


1.      No Litigation . Except as set forth on Schedule 6 to this Agreement there is no litigation pending or, to Seller’s Actual Knowledge, threatened: (i) against Seller that arises out of the ownership of the Property or that might materially and detrimentally affect the value or the use or operation of any of the Property for its intended purpose or the ability of such Seller to perform its obligations under this Agreement; or (ii) by Seller against any Tenant. Seller shall notify Buyer promptly of any such litigation of which Seller becomes aware before Closing.
2.      No Contracts for Improvements . Except as set forth on Schedule 6 to this Agreement and in connection with any new leases executed after the Effective Date and prior to Closing, at the time of Closing there will be no outstanding written or oral contracts made by Seller for any improvements to the Property which have not been fully paid for and Seller shall cause to be discharged all mechanics’ and materialmen’s liens arising from any labor or materials furnished to the Property prior to the time of Closing under contracts for such labor or materials made by Seller.
3.      Exhibits and Schedules . The Schedules attached hereto, as provided by or on behalf of Seller, completely and correctly present in all material respects the information required by this Agreement to be set forth therein, provided, however, that as set forth in more detail in the Agreement, Seller makes no representation or warranty as to the completeness or accuracy of any materials contained in the Schedules that have been prepared by third parties unrelated to Seller.
4.      Seller Not a Foreign Person . Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code.
5.      Patriot Act . Seller is not, nor is any person who owns a controlling interest in or otherwise controls Seller, (a) listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC, Department of the Treasury, and/or on any other similar list maintained by the OFAC pursuant to any OFAC Laws and Regulations; or (b) a person either (i) included within the term “designated national” as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (ii) designated under any Executive Orders. Neither Seller nor any of its principals or affiliates is (x) a person or entity with which Buyer is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, or that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Orders, or (y) is directly or indirectly affiliated or associated with a person or entity listed in the preceding clause (x). To the best knowledge of Seller, neither Seller nor any of its principals or affiliates, nor any brokers or other agents acting in any capacity in connection with the transactions contemplated herein (I) directly or indirectly deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Orders, (II) directly or indirectly engages in any transaction in violation of any Laws relating to drug trafficking, money laundering or predicate crimes to money laundering or (III) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.


Purchase and Sale Agreement
Addendum II – Seller’s Representations and Warranties
Page 3 of 4
 
941120.4


6.      Seller’s Due Diligence Materials . To the Actual Knowledge of Seller, the Due Diligence Materials delivered to Buyer pursuant to this Agreement are complete, true and correct copies of the Due Diligence Materials in Seller’s possession.
F. Miscellaneous
1.      Timeliness of Representations and Warranties . All representations and warranties set forth herein shall be deemed to be given as of the Effective Date and the Closing Date unless Seller otherwise notifies Buyer in writing prior to the Closing.
2.      Materiality Limitation. Buyer shall not be entitled to any right or remedy for any inaccuracy in or breach of any representation, warranty or covenant under this Agreement or any conveyance document unless the amount of damages proximately caused thereby exceeds the Material Damage Floor, and in no event shall the damages for which Seller is liable hereunder for any such inaccuracies or breaches exceed in the aggregate the Material Damage Ceiling.
3.      Continuation and Survival of Representations and Warranties, Etc . All representations and warranties by the respective Parties contained herein or made in writing pursuant to this Agreement are intended to and shall remain true and correct as of the time of Closing, shall be deemed to be material, and, together with all conditions, covenants and indemnities made by the respective Parties contained herein or made in writing pursuant to this Agreement (except as otherwise expressly limited or expanded by the terms of this Agreement), shall survive the execution and delivery of this Agreement and shall survive the Closing for a period of six (6) months after the Closing, or, to the extent the context requires, beyond any termination of this Agreement for a period of six (6) months. Any claim for breach of a representation and warranty given hereunder must be filed and served within such six (6) month period, or be deemed waived and released.



Purchase and Sale Agreement
Addendum II – Seller’s Representations and Warranties
Page 4 of 4
 
941120.4


SCHEDULE 1

TOPAZ - DAVITA
DUE DILIGENCE MATERIALS
•
ALTA Survey
o
Preliminary ALTA/ACSM Land Title Survey prepared by American Surveying & Mapping dated September 11, 2015
•
Parcel Map
o
Parcel Map 19858
•
CAM
o
2017 Actual Recovery Schedules
•
Certificate of Occupancy
•
Certificate of Insurance-DaVita
•
CC&Rs
o
Amendment to Declaration of Covenants Conditions and Restrictions dated as of April 25, 2018
•
Environmental
◦
Phase I Environmental Site Assessment prepared by Partner Engineering and Science, Inc., dated September 11, 2015
◦
Phase I Environmental Site Assessment prepared by Partner Engineering and Science, Inc., dated October 20, 2011
•
Leases
o
Total Renal Care, Inc. dba DaVita
§
Freestanding Building Lease dated June 25, 2007
§
First Amendment to Freestanding Building Lease dated August 1, 2017
•
Property Taxes
o
APN: 3057-121-19 for year July 1, 2017 to June 30, 2018
o      San Bernardino County Tax Collector paid receipt dated March 26, 2018, $34,551.07.
•
Rent Roll
o
Rent Roll dated April 1, 2018
•
Seismic Risk Assessment Report
o
Prepared by Partner Engineering and Science, Inc., dated September 11, 2015
•
Title
o
First American Title-Preliminary Report dated January 31, 2018



Purchase and Sale Agreement
Schedule 1 – Due Diligence Materials
Page 1 of 1
941120.4


SCHEDULE 2

DESCRIPTION OF LAND




Real property in the City of Hesperia, County of San Bernardino, State of California, described as
follows:

PARCEL ONE:

PARCEL 1 OF PARCEL MAP NO. 19858, RECORDED IN BOOK 250, PAGES 37 AND 38 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA.

PARCEL TWO:

EASEMENTS AS CREATED BY THAT CERTAIN DOCUMENT ENTITLED "AMENDMENT TO DECLARATION OF COVENANTS CONDITIONS AND RESTRICTIONS DATED AS OF APRIL 25, 2018 AND RECORDED MAY 15, 2018 AS INSTRUMENT NO. 2018-0175958 OF OFFICIAL RECORDS.

[NOTE: SUBJECT TO REVIEW BY TITLE COMPANY AND DESIGNATION OF NEW APN]


Purchase and Sale Agreement
Schedule 2 – Description of Land
941120.4


SCHEDULE 3

ASSUMED SERVICE CONTRACTS








Purchase and Sale Agreement
Schedule 3 – Assumed Service Contracts

941120.4


SCHEDULE 4

ENVIRONMENTAL REPORTS


Phase I Environmental Site Assessment prepared by Partner Engineering and Science, Inc, dated September 11, 2015
Phase I Environmental Site Assessment prepared by Partner Engineering and Science, Inc, dated October 20, 2011





Purchase and Sale Agreement
Schedule 4 – Environmental Reports
941120.4


SCHEDULE 5
RENT ROLL
A102TOPAZDAVITAIMAGE102.JPG



Purchase and Sale Agreement
Schedule 5 – Rent Roll
Page 1 of 1
941120.4


SCHEDULE 6

EXCEPTIONS TO SELLER REPRESENTATIONS AND WARRANTIES


None.






Purchase and Sale Agreement
Schedule 6 – Exceptions To Seller Representations And Warranties
941120.4


EXHIBIT 31.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Andrew Batinovich, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2018
 
/s/ Andrew Batinovich
 
Andrew Batinovich
 
Chief Executive Officer, Corporate Secretary and Director
 
(Principal Executive Officer)




EXHIBIT 31.2
 
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Terri Garnick, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc.; 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2018
 
/s/ Terri Garnick
 
Terri Garnick
 
Chief Financial Officer
 
(Principal Financial and Accounting Officer)




EXHIBIT 32.1
 
 
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002
 
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc. (the “Company”) for the period ended June 30, 2018 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Executive Officer of the Company, certifies, to his knowledge, that:
 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 10, 2018
 
/s/ Andrew Batinovich
 
Andrew Batinovich
 
Chief Executive Officer, Corporate Secretary and Director
 
(Principal Executive Officer)




EXHIBIT 32.2
 
 
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc. (the “Company”) for the period ended June 30, 2018 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Financial Officer of the Company, certifies, to her knowledge, that:
 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 10, 2018
 
/s/ Terri Garnick
 
Terri Garnick
 
Chief Financial Officer
 
(Principal Financial and Accounting Officer)