UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 31, 2020
BLACK CREEK DIVERSIFIED PROPERTY FUND INC.
(Exact Name of Registrant as Specified in its Charter)
|
|
|
|
|
|
|
Maryland |
|
000-52596 |
|
30-0309068 |
|
(State or other jurisdiction of incorporation) |
|
(Commission File No.) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
|
518 Seventeenth Street, 17th Floor, Denver, CO |
|
80202 |
|
(Address of Principal Executive Offices) |
|
(Zip Code) |
(303) 228-2200
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 7.01 Regulation FD Disclosure.
On August 14, 2020, Black Creek Diversified Property Fund Inc. (referred to herein as the “Company,” “we,” “our,” or “us”), issued a letter to its stockholders regarding the views of the Company and Black Creek Group, LLC, an affiliate of the Company’s sponsor, on the impact of the novel coronavirus (“COVID-19”) pandemic on the commercial real estate industry and the Company. A copy of the letter is attached as Exhibit 99.2 to this Current Report on Form 8-K. The information in this Item 7.01 and Exhibit 99.2 attached hereto is being furnished, not filed, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Item 8.01 Other Events.
Most Recent Transaction Price and Net Asset Value Per Share
September 1, 2020 Transaction Price
The transaction price for each share class of our common stock for subscriptions accepted (and distribution reinvestment plan issuances) as of September 1, 2020 (and redemptions as of August 31, 2020) is as follows:
|
|
|
|
|
|
Share Class |
|
Transaction Price (per share) |
|
|
Class T |
|
$ |
7.5062 |
|
Class S |
|
|
7.5062 |
|
Class D |
|
|
7.5062 |
|
Class I |
|
|
7.5062 |
|
Class E |
|
|
7.5062 |
The transaction price for each of our share classes is equal to such class’s NAV per share as of July 31, 2020. A calculation of the NAV per share is set forth below. The purchase price of our common stock for each share class equals the transaction price of such class, plus applicable upfront selling commissions and dealer manager fees.
July 31, 2020 NAV Per Share
Our board of directors, including a majority of our independent directors, has adopted valuation procedures, as amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of our NAV. Our most recent NAV per share for each share class, which is updated as of the last calendar day of each month, is posted on our website at www.blackcreekdiversified.com and is also available on our toll-free, automated telephone line at (888) 310-9352. Please see our valuation procedures filed with our most recent Quarterly Report on Form 10-Q, including important disclosure regarding real property valuations provided by Altus Group U.S Inc. (the “Independent Valuation Advisor”). All parties engaged by us in the calculation of our NAV, including the external advisor, are subject to the oversight of our board of directors. Generally, all of our real properties are appraised each calendar month by the Independent Valuation Advisor, with such appraisals reviewed by our external advisor. Additionally, each real property is appraised by a third-party appraiser at least once per calendar year, as described in our valuation procedures.
As used below, “Fund Interests” means our outstanding shares of common stock, along with the partnership units in our operating partnership (“OP Units”) held by third parties, and “Aggregate Fund NAV” means the NAV of all of the Fund Interests.
The following table sets forth the components of total NAV as of July 31, 2020 and June 30, 2020:
The following table sets forth the NAV per Fund Interest as of July 31, 2020 and June 30, 2020:
Under GAAP, we record liabilities for ongoing distribution fees (i) that we currently owe Black Creek Capital Markets, LLC (the “Dealer Manager”) under the terms of our dealer manager agreement and (ii) for an estimate that we may pay to the Dealer Manager in future periods for shares of our common stock. As of July 31, 2020, we estimated approximately $14.8 million of ongoing distribution fees were potentially payable to the Dealer Manager. We do not deduct the liability for estimated future distribution fees in our calculation of NAV since we intend for our NAV to reflect our estimated value on the date that we determine our NAV. Accordingly, our estimated NAV at any given time does not include consideration of any estimated future distribution fees that may become payable after such date.
The valuations of our real property as of July 31, 2020 were provided by the Independent Valuation Advisor in accordance with our valuation procedures. Certain key assumptions that were used by the Independent Valuation Advisor in the discounted cash flow analysis are set forth in the following table based on weighted-averages by property type.
A change in the exit capitalization and discount rates used would impact the calculation of the value of our real properties. For example, assuming all other factors remain constant, the changes listed below would result in the following effects on the value of our real properties:
Forward-Looking Statements
This Current Report on Form 8-K includes certain statements that are intended to be deemed “forward-looking statements” within the meaning of, and to be covered by the safe harbor provisions contained in, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or other similar words or terms. These statements are based on certain assumptions and analyses made in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate. Such statements are subject to a number of assumptions, risks and uncertainties that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Among the factors that may cause results to vary are the negative impact of COVID-19 on our financial condition and results of operations being more significant than expected, the negative impact of COVID-19 on our customers being more significant than expected, general economic and business (particularly real estate and capital market) conditions being less favorable than expected, the business opportunities that may be presented to and pursued by us, changes in laws or regulations (including changes to laws governing the taxation of real estate investment trusts (“REITs”)), risk of acquisitions, availability and creditworthiness of prospective tenants, availability of capital (debt and equity), interest rate fluctuations, competition, supply and demand for properties in current and any proposed market areas in which we invest, our tenants’ ability and willingness to pay rent at current or increased levels, accounting principles, policies and guidelines applicable to REITs, environmental, regulatory and/or safety requirements, tenant bankruptcies and defaults, the availability and cost of comprehensive insurance, including coverage for terrorist acts, and other factors, many of which are beyond our control. For a further discussion of these factors and other risk factors that could lead to actual results materially different from those described in the forward-looking statements, see “Risk Factors” under Item 1A of Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2019 and subsequent periodic and current reports filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
Black Creek Diversified Property Fund Inc. |
|
|
August 14, 2020 |
|
|
|
|
By: |
/s/ LAINIE P. MINNICK |
|
|
|
Lainie P. Minnick
|
Exhibit 99.1
CONSENT OF INDEPENDENT VALUATION FIRM
We hereby consent to the reference to our name and the description of our role in the valuation process described in the heading “July 31, 2020 NAV Per Share” in the Current Report on Form 8-K of Black Creek Diversified Property Fund Inc., filed by the Black Creek Diversified Property Fund Inc. with the Securities and Exchange Commission on the date hereof, being incorporated by reference in (i) the Registration Statement on Form S-3 (No. 333-230311) of Black Creek Diversified Property Fund Inc., and the related prospectus, and (ii) the Registration Statement on Form S-8 (No. 333-194237) of Black Creek Diversified Property Fund Inc. We also hereby consent to the same information and the reference to our name in the heading “Experts” being included in the prospectus related to the Registration Statement on Form S-11 (File No. 333-222630) of Black Creek Diversified Property Fund Inc. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933.
|
|
|
|
|
|
|
/s/ Altus Group U.S. Inc. |
|
|
|
Altus Group U.S. Inc. |
|
August 14, 2020 |
|
|
Exhibit 99.2
August 14, 2020
Dear Valued Shareholders,
As we begin the second half of the year, we want to continue providing you with real-time updates regarding the performance of Black Creek Diversified Property Fund (DPF).
DPF’s total return for the month ending July 31, 2020 was 0.47%, comprised of a monthly distribution of $0.03125 per share, which is equivalent to an annualized yield of 5.00%1, and an NAV per share increase of $0.01 to $7.51 per share. This results in a trailing one-year total return of 7.76% and a 6.66% annualized return since NAV inception, with less volatility than stock and bond markets2. The primary drivers of our increase in NAV per share were appreciation in four assets based on third-party appraisals completed during the month and an executed industrial lease renewal at a rate that was well above prior assumptions.
We continue to maintain a healthy balance sheet, with higher-than-normal liquidity and lower-than-normal leverage at 34.5%3 given broader market conditions. In addition, our industrial, multifamily, grocery-anchored retail and office properties located in high-quality non-Central Business District submarkets remain resilient. Importantly, we believe the higher yields that defensive, income-producing real estate offer relative to most fixed income alternatives create compelling investments in today’s environment.
Alongside continued focus on safety for both our tenants and their customers, rent collections remain a top priority for our asset management team. We are encouraged by the uptick in our month-over-month collections and significant reductions in rent relief requests since the onset of COVID in early April. We have collected 94.1% of total July rent to date across sectors, and have received or deferred 95.6% of total July rent to date across sectors after accounting for forbearance agreements that we chose to execute with many of our otherwise successful tenants, allowing them to defer certain rent until 2021.
More specifically, collections in our office, industrial and multifamily properties remained strong, with July collections to date of 97.5%, 98.2% and 95.8%, respectively, before accounting for forbearance agreements. July collections for our retail portfolio are 88.9% to date before accounting for forbearance agreements, which is up considerably from 84.5% for the second quarter to date. After accounting for forbearance agreements, to date we have received or deferred 92.3% of July rent otherwise due for our retail portfolio. Even with the rise in COVID cases recently, 99.7% of our retail tenants are open for business with increased curbside pick-up and utilization of outdoor space as visitor traffic continues to increase.
Although leasing activity has slowed in certain real estate sectors, our portfolio remains 93.5% leased with a weighted average lease term of 5.0 years4, average annual contractual rent escalations of 2.2%5 and 457 commercial tenants who are well diversified by industry – all of which we believe create stability and resiliency during these uncertain times. Further, our net asset value already takes into consideration certain COVID-related adjustments such as reduced rent collections and tapered rent growth, as well as delays in vacancy lease-up that are projected to continue through the remainder of 2020. Our real property valuation process is administered by our Independent Valuation Advisor, Altus Group, who is responsible for overseeing the valuation of over $500 billion of institutional real estate throughout the U.S.
The gradual uptick in capital markets activity that we witnessed towards the end of the second quarter has continued into July. While COVID has not caused meaningful price discounts in the types of high-quality assets we are looking to acquire, we maintain our conviction to acquire more defensive multifamily and industrial properties throughout the remainder of the year, with a heightened focus on underlying tenancy, credit and durability of income. We believe we are well positioned to do so given our strong balance sheet, low leverage and considerable liquidity, creating a competitive advantage in the marketplace.
With so much uncertainty amidst the pandemic and its ongoing recovery, we appreciate the trust you have placed in DPF. While much remains unknown regarding the duration of the recovery, we remain confident in our disciplined management strategy, investment team, asset base and underlying tenant composition and remain available should you have any questions or want to discuss our portfolio further.
Sincerely,
The Black Creek Team
Forward-Looking Statements
This letter includes certain statements that are intended to be deemed “forward-looking statements” within the meaning of, and to be covered by the safe harbor provisions contained in, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or other similar words or terms. These statements are based on certain assumptions and analyses made in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate. Such statements are subject to a number of assumptions, risks and uncertainties that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Among the factors that may cause results to vary are the negative impact of COVID-19 on our financial condition and results of operations being more significant than expected, the negative impact of COVID-19 on our tenants being more significant than expected, general economic and business (particularly real estate and capital market) conditions being less favorable than expected, the business opportunities that may be presented to and pursued by us, changes in laws or regulations (including changes to laws governing the taxation of real estate investment trusts (“REITs”)), risk of acquisitions, availability and creditworthiness of prospective tenants, availability of capital (debt and equity), interest rate fluctuations, competition, supply and demand for properties in current and any proposed market areas in which we invest, our tenants’ ability and willingness to pay rent at current or increased levels, accounting principles, policies and guidelines applicable to REITs, environmental, regulatory and/or safety requirements, tenant bankruptcies and defaults, the availability and cost of comprehensive insurance, including coverage for terrorist acts, and other factors, many of which are beyond our control. For a further discussion of these factors and other risk factors that could lead to actual results materially different from those described in the forward-looking statements, see “Risk Factors” under Item 1A of Part 1 of DPF’s Annual Report on Form 10-K for the year ended December 31, 2019 and subsequent periodic and current reports filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.
1 Represents annualized distribution rate for Class I shares. Annualized distribution rate for Class S shares is 4.15%, for class T shares is 4.15%, for class D shares is 4.75% and for Class E shares is 5.00%. Reflects the current quarter’s distribution annualized minus distribution fees annualized, if applicable, and divided by NAV. The amount of distributions DPF may make is uncertain and is not guaranteed.
2 Total returns presented are based on the historical NAV and distributions per share of Class I shares. Performance varies by share class. For the month ended July 31, 2020, Class S shares (without sales load) returned 0.39%, Class S shares (with sales load) returned -3.00%, Class T shares (without sales load) returned 0.39%, Class T shares (with sales load) returned -3.00%, Class D shares returned 0.44%, and Class E shares returned 0.47%. During the same trailing one-year period, Class S shares (without sales load) returned 6.85%, Class S shares (with sales load) returned 3.24%, Class T shares (without sales load) returned 6.85%, Class T shares (with sales load) returned 3.24%, Class D shares returned 7.49%, and Class E shares returned 7.76%. During the same since NAV inception period, Class S shares (without sales load) returned 5.67% annualized, Class S shares (with sales load) returned 5.27% annualized, Class T shares (without sales load) returned 5.67% annualized, Class T shares (with sales load) returned 5.27% annualized, Class D shares returned 6.23% annualized, and Class E shares returned 6.72% annualized.
The historical returns since “NAV inception” show share performance since September 30, 2012, which is when DPF first sold Class A, W and I shares after converting to a NAV REIT on July 12, 2012. Subsequently, as a result of a share restructuring effective as of September 1, 2017, DPF’s outstanding Class A, W and I shares changed to Class T, Class D and a new version of Class I shares, respectively. DPF also created a new Class S share, with the same NAV per share and class-specific expenses as Class T shares. Accordingly, the presented returns of Class T and Class S shares reflect the performance of Class A shares since NAV inception through the restructuring date; the return of Class D shares shown reflects the performance of Class W shares since NAV inception through the restructuring date; and the return of the new version of Class I shares reflects the performance of the prior Class I shares since NAV inception through the restructuring date. In connection with the restructuring, DPF also revised its fee structure with its advisor and dealer manager and its NAV methodology, which will affect returns going forward. Please see DPF’s definitive proxy statement filed with the Securities and Exchange Commission on June 7, 2017, for more information about the fee changes and our pro forma estimates of how those fee changes would have affected returns on DPF shares in the years 2013-2016. Investors in DPF’s fixed price offerings prior to NAV inception on 09/30/12 are likely to have a lower return. Since NAV inception returns are annualized utilizing a compounding method consistent with the IPA Practice Guideline 2018.
The returns have been prepared using unaudited data and valuations of the underlying investments in DPF’s portfolio, which are estimates of fair value and form the basis for DPF’s NAV. Valuations based upon unaudited or estimated reports from the underlying investments may be subject to later adjustments or revisions, may not correspond to realized value and may not accurately reflect the price at which assets could be liquidated on any given day.
3 Calculated as outstanding principal balance of our property-level and corporate-level debt less cash and cash equivalents, divided by the fair value of our real property and debt-related investments not associated with the DST Program (determined in accordance with our valuation procedures). Amounts represent balances as of July 31, 2020.
4 Amount excludes our multi-family properties as the majority of leases at such properties expire within 12 months.
5 Amount excludes our multi-family properties as the majority of leases at such properties expire within 12 months.