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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Maryland
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27-3148022
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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|
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2325 East Camelback Road, 10
th
Floor
Phoenix, Arizona 85016
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(602) 778-8700
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(Address of principal executive offices; zip code)
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(Registrant’s telephone number, including area code)
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
|
x
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Item 1.
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Financial Statements
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
ASSETS
|
|
|
|
||||
Real estate assets:
|
|
|
|
||||
Land
|
$
|
1,190,130
|
|
|
$
|
1,193,029
|
|
Buildings, fixtures and improvements
|
3,362,700
|
|
|
3,371,563
|
|
||
Intangible lease assets
|
582,760
|
|
|
589,930
|
|
||
Total real estate assets, at cost
|
5,135,590
|
|
|
5,154,522
|
|
||
Less: accumulated depreciation and amortization
|
(630,863
|
)
|
|
(526,976
|
)
|
||
Total real estate assets, net
|
4,504,727
|
|
|
4,627,546
|
|
||
Cash and cash equivalents
|
3,609
|
|
|
4,745
|
|
||
Restricted cash
|
10,301
|
|
|
9,098
|
|
||
Rents and tenant receivables, net
|
78,449
|
|
|
71,859
|
|
||
Due from affiliates
|
—
|
|
|
56
|
|
||
Derivative assets, prepaid expenses, revenue bonds and other assets
|
27,265
|
|
|
12,351
|
|
||
Deferred costs, net
|
2,325
|
|
|
3,034
|
|
||
Total assets
|
$
|
4,626,676
|
|
|
$
|
4,728,689
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Notes payable and credit facility, net
|
$
|
2,452,927
|
|
|
$
|
2,471,763
|
|
Accounts payable and accrued expenses
|
31,941
|
|
|
24,635
|
|
||
Due to affiliates
|
2,623
|
|
|
1,984
|
|
||
Intangible lease liabilities, net
|
38,428
|
|
|
45,572
|
|
||
Distributions payable
|
15,987
|
|
|
16,531
|
|
||
Deferred rental income and other liabilities
|
9,545
|
|
|
11,539
|
|
||
Total liabilities
|
2,551,451
|
|
|
2,572,024
|
|
||
Commitments and contingencies
|
|
|
|
||||
Redeemable common stock and noncontrolling interest
|
184,975
|
|
|
186,453
|
|
||
STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value per share; 490,000,000 shares authorized, 311,440,413 and 311,582,319 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively
|
3,114
|
|
|
3,116
|
|
||
Capital in excess of par value
|
2,607,297
|
|
|
2,607,300
|
|
||
Accumulated distributions in excess of earnings
|
(741,161
|
)
|
|
(646,834
|
)
|
||
Accumulated other comprehensive income
|
21,000
|
|
|
6,630
|
|
||
Total stockholders’ equity
|
1,890,250
|
|
|
1,970,212
|
|
||
Total liabilities, redeemable common stock, noncontrolling interest and stockholders’ equity
|
$
|
4,626,676
|
|
|
$
|
4,728,689
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
91,771
|
|
|
$
|
94,103
|
|
|
$
|
279,028
|
|
|
$
|
278,354
|
|
Tenant reimbursement income
|
13,934
|
|
|
12,921
|
|
|
43,575
|
|
|
37,954
|
|
||||
Total revenues
|
105,705
|
|
|
107,024
|
|
|
322,603
|
|
|
316,308
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
General and administrative
|
3,678
|
|
|
3,270
|
|
|
10,748
|
|
|
10,301
|
|
||||
Property operating
|
7,154
|
|
|
7,345
|
|
|
22,213
|
|
|
20,881
|
|
||||
Real estate tax
|
9,597
|
|
|
9,276
|
|
|
28,614
|
|
|
27,646
|
|
||||
Advisory fees and expenses
|
10,917
|
|
|
11,149
|
|
|
32,360
|
|
|
32,863
|
|
||||
Acquisition-related
|
306
|
|
|
110
|
|
|
509
|
|
|
1,520
|
|
||||
Depreciation and amortization
|
34,290
|
|
|
36,461
|
|
|
106,772
|
|
|
106,145
|
|
||||
Impairment
|
—
|
|
|
1,658
|
|
|
—
|
|
|
1,658
|
|
||||
Total operating expenses
|
65,942
|
|
|
69,269
|
|
|
201,216
|
|
|
201,014
|
|
||||
Operating income
|
39,763
|
|
|
37,755
|
|
|
121,387
|
|
|
115,294
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense and other, net
|
(24,687
|
)
|
|
(23,335
|
)
|
|
(71,664
|
)
|
|
(67,968
|
)
|
||||
Income before real estate dispositions
|
15,076
|
|
|
14,420
|
|
|
49,723
|
|
|
47,326
|
|
||||
(Loss) gain on disposition of real estate, net
|
(171
|
)
|
|
15,349
|
|
|
2,080
|
|
|
16,801
|
|
||||
Net income
|
14,905
|
|
|
29,769
|
|
|
51,803
|
|
|
64,127
|
|
||||
Net income allocated to noncontrolling interest
|
33
|
|
|
33
|
|
|
100
|
|
|
99
|
|
||||
Net income attributable to the Company
|
$
|
14,872
|
|
|
$
|
29,736
|
|
|
$
|
51,703
|
|
|
$
|
64,028
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
311,426,766
|
|
|
311,649,032
|
|
|
311,504,309
|
|
|
311,698,622
|
|
||||
Net income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
0.05
|
|
|
$
|
0.10
|
|
|
$
|
0.17
|
|
|
$
|
0.21
|
|
Distributions declared per common share
|
$
|
0.16
|
|
|
$
|
0.16
|
|
|
$
|
0.47
|
|
|
$
|
0.47
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income
|
$
|
14,905
|
|
|
$
|
29,769
|
|
|
$
|
51,803
|
|
|
$
|
64,127
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) on interest rate swaps
|
2,770
|
|
|
99
|
|
|
17,106
|
|
|
(2,175
|
)
|
||||
Amount of (gain) loss reclassified from other comprehensive income into income as interest expense and other, net
|
(1,223
|
)
|
|
447
|
|
|
(3,224
|
)
|
|
2,857
|
|
||||
Total other comprehensive income
|
1,547
|
|
|
546
|
|
|
13,882
|
|
|
682
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive income
|
16,452
|
|
|
30,315
|
|
|
65,685
|
|
|
64,809
|
|
||||
Comprehensive income allocated to noncontrolling interest
|
33
|
|
|
33
|
|
|
100
|
|
|
99
|
|
||||
Comprehensive income attributable to the Company
|
$
|
16,419
|
|
|
$
|
30,282
|
|
|
$
|
65,585
|
|
|
$
|
64,710
|
|
|
Common Stock
|
|
Capital in Excess
of Par Value
|
|
Accumulated
Distributions in Excess of Earnings
|
|
Accumulated
Other Comprehensive Income |
|
Total
Stockholders’
Equity
|
|||||||||||||
|
Number of
Shares
|
|
Par Value
|
|
||||||||||||||||||
Balance, January 1, 2018
|
311,582,319
|
|
|
$
|
3,116
|
|
|
$
|
2,607,300
|
|
|
$
|
(646,834
|
)
|
|
$
|
6,630
|
|
|
$
|
1,970,212
|
|
Cumulative effect of accounting changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(488
|
)
|
|
488
|
|
|
—
|
|
|||||
Issuance of common stock
|
7,275,582
|
|
|
73
|
|
|
69,763
|
|
|
—
|
|
|
—
|
|
|
69,836
|
|
|||||
Distributions declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(145,542
|
)
|
|
—
|
|
|
(145,542
|
)
|
|||||
Redemptions of common stock
|
(7,417,488
|
)
|
|
(75
|
)
|
|
(71,144
|
)
|
|
—
|
|
|
—
|
|
|
(71,219
|
)
|
|||||
Changes in redeemable common stock
|
—
|
|
|
—
|
|
|
1,378
|
|
|
—
|
|
|
—
|
|
|
1,378
|
|
|||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
51,703
|
|
|
13,882
|
|
|
65,585
|
|
|||||
Balance, September 30, 2018
|
311,440,413
|
|
|
$
|
3,114
|
|
|
$
|
2,607,297
|
|
|
$
|
(741,161
|
)
|
|
$
|
21,000
|
|
|
$
|
1,890,250
|
|
|
Nine Months Ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
51,803
|
|
|
$
|
64,127
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization, net
|
105,540
|
|
|
104,220
|
|
||
Amortization of deferred financing costs
|
4,028
|
|
|
3,958
|
|
||
Amortization of fair value adjustment of mortgage notes payable assumed
|
(66
|
)
|
|
(64
|
)
|
||
Straight-line rental income
|
(6,280
|
)
|
|
(7,651
|
)
|
||
Bad debt expense
|
226
|
|
|
1,637
|
|
||
Impairment of real estate assets
|
—
|
|
|
1,658
|
|
||
Fair value adjustment to contingent consideration
|
—
|
|
|
(337
|
)
|
||
Ineffectiveness of interest rate swaps
|
—
|
|
|
(80
|
)
|
||
Write-off of deferred financing costs
|
—
|
|
|
896
|
|
||
Gain on disposition of real estate assets, net
|
(2,080
|
)
|
|
(16,801
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Rents and tenant receivables
|
(505
|
)
|
|
1,667
|
|
||
Prepaid expenses and other assets
|
(1,478
|
)
|
|
(1,503
|
)
|
||
Accounts payable and accrued expenses
|
7,221
|
|
|
7,819
|
|
||
Deferred rental income and other liabilities
|
(1,788
|
)
|
|
47
|
|
||
Due from affiliates
|
56
|
|
|
54
|
|
||
Due to affiliates
|
639
|
|
|
(1,549
|
)
|
||
Net cash provided by operating activities
|
157,316
|
|
|
158,098
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Investment in real estate assets and capital expenditures
|
(6,087
|
)
|
|
(309,412
|
)
|
||
Investment in revenue bonds
|
—
|
|
|
(2,081
|
)
|
||
Proceeds from disposition of real estate assets
|
18,356
|
|
|
97,154
|
|
||
Payment of property escrow deposits
|
—
|
|
|
(11,416
|
)
|
||
Refund of property escrow deposits
|
—
|
|
|
11,666
|
|
||
Proceeds from the settlement of insurance claims
|
240
|
|
|
60
|
|
||
Net cash provided by (used in) investing activities
|
12,509
|
|
|
(214,029
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Redemptions of common stock
|
(71,219
|
)
|
|
(78,623
|
)
|
||
Distributions to stockholders
|
(76,250
|
)
|
|
(69,270
|
)
|
||
Proceeds from notes payable and credit facility
|
138,000
|
|
|
1,514,706
|
|
||
Repayments of notes payable and credit facility
|
(160,089
|
)
|
|
(1,300,001
|
)
|
||
Payment of loan deposits
|
—
|
|
|
(1,064
|
)
|
||
Refund of loan deposits
|
—
|
|
|
1,064
|
|
||
Deferred financing costs paid
|
—
|
|
|
(13,228
|
)
|
||
Distributions to noncontrolling interest
|
(200
|
)
|
|
(214
|
)
|
||
Net cash (used in) provided by financing activities
|
(169,758
|
)
|
|
53,370
|
|
||
Net increase (decrease) in cash and cash equivalents and restricted cash
|
67
|
|
|
(2,561
|
)
|
||
Cash and cash equivalents and restricted cash, beginning of period
|
13,843
|
|
|
17,794
|
|
||
Cash and cash equivalents and restricted cash, end of period
|
$
|
13,910
|
|
|
$
|
15,233
|
|
Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,609
|
|
|
$
|
4,231
|
|
Restricted cash
|
10,301
|
|
|
11,002
|
|
||
Total cash and cash equivalents and restricted cash
|
$
|
13,910
|
|
|
$
|
15,233
|
|
|
Balance as of
September 30, 2018 |
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
$
|
21,000
|
|
|
$
|
—
|
|
|
$
|
21,000
|
|
|
$
|
—
|
|
Total financial assets
|
$
|
21,000
|
|
|
$
|
—
|
|
|
$
|
21,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
|
Balance as of
December 31, 2017 |
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
$
|
7,324
|
|
|
$
|
—
|
|
|
$
|
7,324
|
|
|
$
|
—
|
|
Total financial assets
|
$
|
7,324
|
|
|
$
|
—
|
|
|
$
|
7,324
|
|
|
$
|
—
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
$
|
(206
|
)
|
|
$
|
—
|
|
|
$
|
(206
|
)
|
|
$
|
—
|
|
Total financial liabilities
|
$
|
(206
|
)
|
|
$
|
—
|
|
|
$
|
(206
|
)
|
|
$
|
—
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
||
Beginning Balance, December 31, 2017
|
|
$
|
2,067
|
|
Revenue bond payments received
|
|
(5
|
)
|
|
Ending Balance, September 30, 2018
|
|
$
|
2,062
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
||
Beginning Balance, December 31, 2016
|
|
$
|
(337
|
)
|
Purchases and fair value adjustments:
|
|
|
||
Revenue bond purchases
|
|
2,081
|
|
|
Contingent consideration fair value adjustments
|
|
337
|
|
|
Ending Balance, September 30, 2017
|
|
$
|
2,081
|
|
|
|
Nine Months Ended
|
||||||
|
|
September 30, 2018
|
|
September 30, 2017
|
||||
Asset class impaired:
|
|
|
|
|
||||
Land
|
|
$
|
—
|
|
|
$
|
375
|
|
Buildings, fixtures and improvements
|
|
—
|
|
|
887
|
|
||
Intangible lease assets
|
|
—
|
|
|
396
|
|
||
Total impairment loss
|
|
$
|
—
|
|
|
$
|
1,658
|
|
|
2017 Acquisitions
|
||
Real estate assets:
|
|
||
Purchase price of asset acquisitions
|
$
|
245,138
|
|
Purchase price of business combinations
|
55,386
|
|
|
Total purchase price of real estate assets acquired
(1)
|
$
|
300,524
|
|
(1)
|
The weighted average amortization period for the 2017 Acquisitions is
16.6
years for acquired in-place leases and other intangibles,
13.6
years for acquired above-market leases and
8.5
years
for acquired intangible lease liabilities.
|
|
2017 Asset Acquisitions
|
||
Land
|
$
|
32,583
|
|
Buildings, fixtures and improvements
|
173,681
|
|
|
Acquired in-place leases and other intangibles
|
36,733
|
|
|
Acquired above-market leases
|
3,624
|
|
|
Revenue bonds
|
2,081
|
|
|
Intangible lease liabilities
|
(3,564
|
)
|
|
Total purchase price
|
$
|
245,138
|
|
|
2017 Business Combination Acquisitions
|
||
Land
|
$
|
9,873
|
|
Buildings, fixtures and improvements
|
41,186
|
|
|
Acquired in-place leases and other intangibles
|
5,974
|
|
|
Acquired above-market leases
|
988
|
|
|
Intangible lease liabilities
|
(2,635
|
)
|
|
Total purchase price
|
$
|
55,386
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Pro forma basis:
|
|
|
|
|
|
|
|
||||||||
Revenue
|
$
|
107,024
|
|
|
$
|
103,140
|
|
|
$
|
316,619
|
|
|
$
|
306,864
|
|
Net income
|
$
|
29,736
|
|
|
$
|
18,374
|
|
|
$
|
65,114
|
|
|
$
|
56,740
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
In-place leases and other intangibles, net of accumulated amortization of $195,804 and $166,874, respectively (with a weighted average life remaining of 10.0 years and 10.5 years, respectively)
|
|
|
|
||||
$
|
320,165
|
|
|
$
|
355,683
|
|
|
Acquired above-market leases, net of accumulated amortization of $30,260 and $25,626, respectively (with a weighted average life remaining of 8.3 years and 8.7 years, respectively)
|
|
|
|
||||
36,531
|
|
|
41,747
|
|
|||
|
$
|
356,696
|
|
|
$
|
397,430
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
In-place lease and other intangible amortization
|
$
|
10,464
|
|
|
$
|
12,567
|
|
|
$
|
35,077
|
|
|
$
|
35,402
|
|
Above-market lease amortization
|
$
|
1,514
|
|
|
$
|
1,877
|
|
|
$
|
5,217
|
|
|
$
|
5,498
|
|
|
|
Amortization Expense
|
||||||
|
|
In-Place Leases and
Other Intangibles
|
|
Above-Market Leases
|
||||
Remainder of 2018
|
|
$
|
10,498
|
|
|
$
|
1,573
|
|
2019
|
|
$
|
38,164
|
|
|
$
|
5,190
|
|
2020
|
|
$
|
35,830
|
|
|
$
|
4,614
|
|
2021
|
|
$
|
32,409
|
|
|
$
|
3,991
|
|
2022
|
|
$
|
30,281
|
|
|
$
|
3,663
|
|
|
|
|
Outstanding Notional
|
|
|
|
|
|
|
|
Fair Value of Assets
|
||
|
Balance Sheet
|
|
Amount as of
|
|
Interest
|
|
Effective
|
|
Maturity
|
|
September 30,
|
|
December 31,
|
|
Location
|
|
September 30, 2018
|
|
Rates
(1)
|
|
Dates
|
|
Dates
|
|
2018
|
|
2017
|
Interest Rate Swaps
|
Derivative assets, prepaid expenses, revenue bonds and other assets
|
(2)
|
$1,005,066
|
|
2.55% to 4.75%
|
|
8/23/2013 to 8/15/2018
|
|
3/1/2019 to 7/1/2021
|
|
$21,000
|
|
$4,717
|
(1)
|
The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of
September 30, 2018
.
|
(2)
|
As of December 31, 2017,
two
of the interest rate swaps, with an aggregate outstanding notional amount of
$38.7 million
, were in a liability position with an aggregate fair value balance of
$206,000
and are included in deferred rental income and other liabilities in the accompanying condensed consolidated balance sheets.
|
|
|
|
During the Nine Months Ended September 30, 2018
|
|
|
||||||||||||||
|
Balance as of December 31, 2017
|
|
Debt Issuances & Assumptions
(1)
|
|
Repayments
|
|
Accretion and (Amortization)
|
|
Balance as of
September 30, 2018 |
||||||||||
Fixed rate debt
|
$
|
1,217,377
|
|
|
$
|
—
|
|
|
$
|
(24,089
|
)
|
|
$
|
—
|
|
|
$
|
1,193,288
|
|
Variable rate debt
|
20,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,500
|
|
|||||
Credit facility
|
1,251,000
|
|
|
138,000
|
|
|
(136,000
|
)
|
|
—
|
|
|
1,253,000
|
|
|||||
Total debt
|
2,488,877
|
|
|
138,000
|
|
|
(160,089
|
)
|
|
—
|
|
|
2,466,788
|
|
|||||
Net premiums
(2)
|
419
|
|
|
—
|
|
|
—
|
|
|
(66
|
)
|
|
353
|
|
|||||
Deferred costs
(3)
|
(17,533
|
)
|
|
—
|
|
|
—
|
|
|
3,319
|
|
|
(14,214
|
)
|
|||||
Total debt, net
|
$
|
2,471,763
|
|
|
$
|
138,000
|
|
|
$
|
(160,089
|
)
|
|
$
|
3,253
|
|
|
$
|
2,452,927
|
|
(1)
|
Includes deferred financing costs incurred during the period.
|
(2)
|
Net premiums on mortgage notes payable were recorded upon the assumption of the respective debt instruments. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective debt instruments using the effective-interest method.
|
(3)
|
Deferred costs relate to mortgage notes payable and the term portion of the Credit Facility (as defined below).
|
|
Principal Repayments
|
||
Remainder of 2018
|
$
|
122
|
|
2019
|
49,799
|
|
|
2020
|
333,215
|
|
|
2021
|
303,603
|
|
|
2022
|
1,092,464
|
|
|
Thereafter
|
687,585
|
|
|
Total
|
$
|
2,466,788
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Acquired below-market leases, net of accumulated amortization of $37,306 and $31,330, respectively (with a weighted average life remaining of 7.0 years and 7.5 years, respectively)
|
|
|
|
||||
$
|
38,428
|
|
|
$
|
45,572
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Amortization of below-market leases
|
$
|
2,151
|
|
|
$
|
2,898
|
|
|
$
|
6,494
|
|
|
$
|
7,469
|
|
|
|
Amortization of Below-Market Leases
|
||
Remainder of 2018
|
|
$
|
2,093
|
|
2019
|
|
$
|
7,404
|
|
2020
|
|
$
|
6,600
|
|
2021
|
|
$
|
4,479
|
|
2022
|
|
$
|
3,724
|
|
|
Nine Months Ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
|
|
|
|
||||
Distributions declared and unpaid
|
$
|
15,987
|
|
|
$
|
16,001
|
|
Accrued capital expenditures
|
$
|
277
|
|
|
$
|
535
|
|
Common stock issued through distribution reinvestment plan
|
$
|
69,836
|
|
|
$
|
76,851
|
|
Change in fair value of interest rate swaps
|
$
|
13,882
|
|
|
$
|
682
|
|
Supplemental Cash Flow Disclosures:
|
|
|
|
||||
Interest paid
|
$
|
68,626
|
|
|
$
|
63,045
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Acquisition fees and expenses
|
$
|
305
|
|
|
$
|
2,338
|
|
|
$
|
503
|
|
|
$
|
6,336
|
|
Advisory fees and expenses
|
$
|
10,917
|
|
|
$
|
11,149
|
|
|
$
|
32,360
|
|
|
$
|
32,863
|
|
Operating expenses
|
$
|
1,458
|
|
|
$
|
1,072
|
|
|
$
|
3,944
|
|
|
$
|
3,495
|
|
|
Future Minimum Rental Income
|
|||
Remainder of 2018
|
$
|
89,403
|
|
|
2019
|
354,069
|
|
||
2020
|
343,312
|
|
||
2021
|
326,513
|
|
||
2022
|
309,891
|
|
||
Thereafter
|
1,976,690
|
|
||
Total
|
$
|
3,399,878
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.
|
•
|
We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.
|
•
|
Our properties, intangible assets and other assets may be subject to impairment charges.
|
•
|
We could be subject to unexpected costs or unexpected liabilities that may arise from potential dispositions and may be unable to dispose of properties on advantageous terms.
|
•
|
We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties and we may be unable to acquire, dispose of, or lease properties on advantageous terms.
|
•
|
We could be subject to risks associated with bankruptcies or insolvencies of tenants or from tenant defaults generally.
|
•
|
We have substantial indebtedness, which may affect our ability to pay distributions, and expose us to interest rate fluctuation risk and the risk of default under our debt obligations.
|
•
|
We may be affected by the incurrence of additional secured or unsecured debt.
|
•
|
We may not be able to maintain profitability.
|
•
|
We may not generate cash flows sufficient to pay our distributions to stockholders or meet our debt service obligations.
|
•
|
We may be affected by risks resulting from losses in excess of insured limits.
|
•
|
We may fail to remain qualified as a REIT for U.S. federal income tax purposes.
|
•
|
Our advisor has the right to terminate the advisory agreement upon 60 days’ written notice without cause or penalty.
|
•
|
Disposed of
13
retail properties for an aggregate sales price of
$19.0 million
.
|
•
|
Total debt
decreased
by
$22.1 million
, from
$2.49 billion
to
$2.47 billion
.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Commercial properties acquired
|
|
—
|
|
|
13
|
|
|
—
|
|
|
40
|
|
||||
Purchase price of acquired properties (in thousands)
|
|
$
|
—
|
|
|
$
|
113,857
|
|
|
$
|
—
|
|
|
$
|
300,524
|
|
Rentable square feet (in thousands)
(1)
|
|
—
|
|
|
516
|
|
|
—
|
|
|
1,352
|
|
|
|
Three Months Ended September 30,
|
|
2018 vs. 2017 Increase (Decrease)
|
|
Nine Months Ended September 30,
|
|
2018 vs. 2017 Increase (Decrease)
|
||||||||||||||||
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|
||||||||||||||
Total revenues
|
|
$
|
105,705
|
|
|
$
|
107,024
|
|
|
$
|
(1,319
|
)
|
|
$
|
322,603
|
|
|
$
|
316,308
|
|
|
$
|
6,295
|
|
General and administrative expenses
|
|
$
|
3,678
|
|
|
$
|
3,270
|
|
|
$
|
408
|
|
|
$
|
10,748
|
|
|
$
|
10,301
|
|
|
$
|
447
|
|
Property operating expenses
|
|
$
|
7,154
|
|
|
$
|
7,345
|
|
|
$
|
(191
|
)
|
|
$
|
22,213
|
|
|
$
|
20,881
|
|
|
$
|
1,332
|
|
Real estate tax expenses
|
|
$
|
9,597
|
|
|
$
|
9,276
|
|
|
$
|
321
|
|
|
$
|
28,614
|
|
|
$
|
27,646
|
|
|
$
|
968
|
|
Advisory fees and expenses
|
|
$
|
10,917
|
|
|
$
|
11,149
|
|
|
$
|
(232
|
)
|
|
$
|
32,360
|
|
|
$
|
32,863
|
|
|
$
|
(503
|
)
|
Acquisition-related expenses
|
|
$
|
306
|
|
|
$
|
110
|
|
|
$
|
196
|
|
|
$
|
509
|
|
|
$
|
1,520
|
|
|
$
|
(1,011
|
)
|
Depreciation and amortization
|
|
$
|
34,290
|
|
|
$
|
36,461
|
|
|
$
|
(2,171
|
)
|
|
$
|
106,772
|
|
|
$
|
106,145
|
|
|
$
|
627
|
|
Operating income
|
|
$
|
39,763
|
|
|
$
|
37,755
|
|
|
$
|
2,008
|
|
|
$
|
121,387
|
|
|
$
|
115,294
|
|
|
$
|
6,093
|
|
Interest expense and other, net
|
|
$
|
24,687
|
|
|
$
|
23,335
|
|
|
$
|
1,352
|
|
|
$
|
71,664
|
|
|
$
|
67,968
|
|
|
$
|
3,696
|
|
Net income attributable to the Company
|
|
$
|
14,872
|
|
|
$
|
29,736
|
|
|
$
|
(14,864
|
)
|
|
$
|
51,703
|
|
|
$
|
64,028
|
|
|
$
|
(12,325
|
)
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
||||||||||
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
||||||
Distributions paid in cash
|
$
|
76,250
|
|
|
52
|
%
|
|
$
|
69,270
|
|
|
47
|
%
|
Distributions reinvested
|
69,836
|
|
|
48
|
%
|
|
76,851
|
|
|
53
|
%
|
||
Total distributions
|
$
|
146,086
|
|
|
100
|
%
|
|
$
|
146,121
|
|
|
100
|
%
|
Sources of distributions:
|
|
|
|
|
|
|
|
||||||
Net cash provided by operating activities
(1)
|
$
|
146,086
|
|
|
100
|
%
|
|
$
|
146,121
|
|
|
100
|
%
|
(1)
|
Net cash provided by operating activities for the nine months ended September 30, 2018 and 2017 was
$157.3 million
and
$158.1 million
, respectively.
|
|
Payments due by period
(1)
|
||||||||||||||||||
|
Total
|
|
Less Than 1
Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More Than
5 Years
|
||||||||||
Principal payments — fixed rate debt
(2)
|
$
|
1,193,288
|
|
|
$
|
49,793
|
|
|
$
|
411,987
|
|
|
$
|
487,608
|
|
|
$
|
243,900
|
|
Interest payments — fixed rate debt
(3)
|
181,281
|
|
|
47,188
|
|
|
73,822
|
|
|
50,849
|
|
|
9,422
|
|
|||||
Principal payments — variable rate debt
|
20,500
|
|
|
—
|
|
|
20,500
|
|
|
—
|
|
|
—
|
|
|||||
Interest payments — variable rate debt
(4)
|
1,556
|
|
|
1,104
|
|
|
452
|
|
|
—
|
|
|
—
|
|
|||||
Principal payments — credit facility
|
1,253,000
|
|
|
—
|
|
|
203,000
|
|
|
1,050,000
|
|
|
—
|
|
|||||
Interest payments — credit facility
(5)
|
159,426
|
|
|
48,364
|
|
|
92,699
|
|
|
18,363
|
|
|
—
|
|
|||||
Total
|
$
|
2,809,051
|
|
|
$
|
146,449
|
|
|
$
|
802,460
|
|
|
$
|
1,606,820
|
|
|
$
|
253,322
|
|
(1)
|
The table does not include amounts due to CR IV Advisors or its affiliates pursuant to our advisory agreement because such amounts are not fixed and determinable.
|
(2)
|
Principal payment amounts reflect actual payments based on the face amount of notes payable secured by our wholly-owned properties, which excludes the fair value adjustment, net of amortization, of mortgage notes assumed of
$353,000
as of
September 30, 2018
.
|
(3)
|
As of
September 30, 2018
, we had
$193.4 million
of variable rate debt effectively fixed through the use of interest rate swap agreements. We used the effective interest rates fixed under our interest rate swap agreements to calculate the debt payment obligations in future periods.
|
(4)
|
As of
September 30, 2018
, we had variable rate debt outstanding of
$20.5 million
with a weighted average interest rate of
5.4%
. We used the weighted average interest rate to calculate the debt payment obligations in future periods.
|
(5)
|
As of
September 30, 2018
, the Term Loan outstanding totaled
$1.05 billion
,
$811.7 million
of which is subject to interest rate swap agreements. As of
September 30, 2018
, the weighted average all-in interest rate for the Swapped Term Loan was
3.8%
. The remaining
$441.3 million
outstanding under the Credit Facility had a weighted average interest rate of
4.0%
as of
September 30, 2018
.
|
|
|
Balance as of
|
||
|
|
September 30, 2018
|
||
Notes payable and credit facility, net
|
|
$
|
2,452,927
|
|
Deferred costs and net premiums
(1)
|
|
13,861
|
|
|
Less: Cash and cash equivalents
|
|
(3,609
|
)
|
|
Net debt
|
|
$
|
2,463,179
|
|
|
|
|
||
Gross real estate assets, net
(2)
|
|
$
|
5,059,856
|
|
Net debt leverage ratio
|
|
48.7
|
%
|
•
|
Recoverability of Real Estate Assets; and
|
•
|
Allocation of Purchase Price of Real Estate Assets.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number
of Shares
Redeemed
|
|
Average Price
Paid per Share
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
|
|
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
|
|||||
July 1, 2018 - July 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
(1)
|
|
August 1, 2018 - August 31, 2018
|
|
2,481,396
|
|
|
$
|
9.37
|
|
|
2,481,396
|
|
|
(1)
|
|
September 1, 2018 - September 30, 2018
|
|
9,661
|
|
|
$
|
9.37
|
|
|
9,661
|
|
|
(1)
|
|
Total
|
|
2,491,057
|
|
|
|
|
2,491,057
|
|
|
(1)
|
(1)
|
A description of the maximum number of shares that may be purchased under our share redemption program is included in the narrative preceding this table.
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
Exhibit No.
|
Description
|
3.1
|
|
3.2
|
|
3.3
|
|
3.4
|
|
3.5
|
|
3.6
|
|
3.7
|
|
4.1
|
|
10.1*
|
|
31.1*
|
|
31.2*
|
|
32.1**
|
|
101.INS*
|
XBRL Instance Document.
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
|
*
|
Filed herewith.
|
**
|
In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
|
|
|
Cole Credit Property Trust IV, Inc.
(Registrant)
|
|
|
|||
By:
|
|
/s/ Nathan D. DeBacker
|
|
Name:
|
|
Nathan D. DeBacker
|
|
Title:
|
|
Chief Financial Officer and Treasurer
(Principal Financial Officer)
|
1.
|
GENERAL
|
2.
|
AWARDS UNDER THE PLAN
|
3.
|
MISCELLANEOUS
|
4.
|
CHANGE OF CONTROL OF COMPANY
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Cole Credit Property Trust IV, 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(s) 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:
|
5.
|
The registrant’s other certifying officer(s) 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):
|
Date:
|
November 13, 2018
|
/s/ Richard S. Ressler
|
|
|
|
Name:
|
Richard S. Ressler
|
|
|
Title:
|
Chief Executive Officer and President
(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Cole Credit Property Trust IV, 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(s) 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:
|
5.
|
The registrant’s other certifying officer(s) 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):
|
Date:
|
November 13, 2018
|
/s/ Nathan D. DeBacker
|
|
|
|
Name:
|
Nathan D. DeBacker
|
|
|
Title:
|
Chief Financial Officer and Treasurer
(Principal Financial Officer)
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the period ended
September 30, 2018
(the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
/s/ Richard S. Ressler
|
|
|
|
Name:
|
Richard S. Ressler
|
|
|
Title:
|
Chief Executive Officer and President
(Principal Executive Officer)
|
|
|
|
|
|
|
/s/ Nathan D. DeBacker
|
|
|
|
Name:
|
Nathan D. DeBacker
|
Date:
|
November 13, 2018
|
Title:
|
Chief Financial Officer and Treasurer
(Principal Financial Officer)
|