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): May 31, 2021
Black Creek Industrial REIT IV Inc.
(Exact name of registrant as specified in its charter)
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Maryland |
000-56032 |
47-1592886 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
518 Seventeenth Street, 17th Floor
Denver, CO 80202
(Address of principal executive offices)
(303) 228-2200
(Registrant’s telephone number, including area code)
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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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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 1.01. Entry into a Material Definitive Agreement
Redemption of Interests in BTC I and BTC I Portfolio Split
Prior to the Transaction (defined below), Black Creek Industrial REIT IV Inc. (the “Company,” “we,” “us” or “our”), indirectly through certain of our subsidiaries, owned a minority ownership interest in Build-To-Core Industrial Partnership I LP (“BTC I Partnership”). Specifically, pursuant to that certain Fourth Amended and Restated Agreement of Limited Partnership of BTC I, dated as of December 31, 2016, as amended (the “BTC I Partnership Agreement”), among two of our indirect subsidiaries, IPT BTC I GP LLC (“BTC I GP”) and IPT BTC I LP LLC (“BTC I LP” and, together with the BTC I GP, the “BCI IV Parties”), QR Master Holdings USA II LP (the “QR Limited Partner”), and Industrial Property Advisors Sub I LLC, an affiliate of our advisor, BCI IV Advisors LLC (the “Advisor”), that is indirectly owned by the Chairman of our board of directors (the “Special LP”), BTC I GP was the general partner of, and owned an 8.9% partnership interest in, BTC I and BTC I LP was a limited partner of, and owned a 17.9% partnership interest in, BTC I. In addition, prior to the Transaction, the QR Limited Partner was a limited partner of, and owned a 72.0% partnership interest in, BTC I and the Special LP was a special limited partner of, and owned a 1.2% partnership interest in, BTC I.
Prior to the Transaction, the BTC I portfolio consisted of 44 buildings totaling approximately 12.1 million square feet (the “BTC I Portfolio”).
The parties to the BTC I Partnership Agreement determined to split up the portfolio in an equitable manner based on a review of a variety of factors, including without limitation, markets, customers, and asset characteristics, such that following the split, we and the QR Limited Partner (together with certain of its affiliates) each own a 100% interest in approximately half of the BTC I Portfolio (excluding the Special LP Property (defined below), which was distributed to the Special LP, as described below). The parties structured the transaction as a series of steps that ultimately resulted in the redemption of the partnership interests of each of BTC I GP, BTC I LP and the Special LP (the “Redeemed Interests”) in exchange for the distribution of certain BTC I assets that are of equivalent value to the net asset value of the Redeemed Interests (collectively, the “Transaction”). The value of the assets distributed pursuant to the Transaction was based on the most recent appraised value of the assets determined by a third party appraisal firm. The effective date of the Transaction is June 15, 2021 (the “Effective Date”).
Our incremental additional investment to effect the Transaction was approximately $580 million, exclusive of transaction costs but inclusive of the repayment of approximately $175 million of debt on the real properties in which we acquired a 100% interest. As a result of the Transaction, we own a 100% interest in 22 buildings that were previously part of the BTC I Portfolio, totaling approximately 5.4 million square feet (the “BCI IV Properties”). The BCI IV Properties are 93% leased with a weighted average lease term of 5.6 years and are not encumbered with debt. In addition, as a result of the Transaction, the QR Limited Partner and certain of its affiliates own a 100% interest in 21 buildings that were previously part of the BTC I Portfolio (the “QR Properties”), totaling approximately 6.4 million square feet, and the Special LP owns a 100% interest in one building that was previously part of the BTC I portfolio, totaling approximately 0.3 million square feet (the “Special LP Property”). We and the Special Limited Partner have no further interest in BTC I as a result of the Transaction. The QR Limited Partner and certain of its affiliates (the “QR Parties”) will be the sole owners of BTC I.
In order to effect the Transaction, we, through certain of our subsidiaries, entered into the following material agreements:
● | Master Transaction Agreement by and between the BCI IV Parties and the QR Limited Partner, dated as of the Effective Date, pursuant to which the parties make certain representations, warranties and covenants regarding the Transaction. The BCI IV Parties make certain customary representations and warranties to the QR Limited Partner, including without limitation, representations and warranties regarding the BTC I Partnership, certain of its subsidiaries and the QR Properties. These representations and warranties survive for a period of nine months following the Effective Date and are subject to aggregate liability caps. In addition, the agreement provides that the obligations of the parties with respect to any breach of the BTC I Partnership Agreement that occurred prior to the Effective Date will not be released and will survive the closing of the Transaction. |
● | Distribution and Redemption Agreement by and between the BCI IV Parties and BTC I, dated as of the Effective Date, pursuant to which the BCI IV Parties’ interests in BTC I were redeemed in exchange for the distribution by BTC I to the BCI IV Parties of 100% of the interests in REIT B (defined below), a subsidiary of BTC I that owns certain of the BCI IV Properties. Pursuant to the agreement, each of the BCI IV Parties made customary representations and warranties to BTC I regarding the BCI IV Parties’ Redeemed Interests. |
● | Membership Interest Purchase Agreement by and between BTC I REIT B LLC (“REIT B”) and BTC I REIT A LLC (“REIT A”), dated as of the Effective Date, pursuant to which REIT B acquired the balance of the BCI IV Properties which were |
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owned, through subsidiaries, by REIT A prior to the Transaction. REIT A is a wholly-owned subsidiary of BTC I and, prior to the Transaction, REIT B was an indirect, wholly-owned subsidiary of BTC I. |
● | Contribution, Distribution and Redemption Agreement by and between BTC I and the Special LP, dated as of the Effective Date, pursuant to which the Special LP made a cash contribution to BTC I of approximately $10.7 million to facilitate the Transaction, causing its partnership interest in BTC I to be equal to the value of the Special LP Property. Immediately following the Special LP’s cash contribution, the Special LP’s interest in BTC I was redeemed in exchange for the distribution by BTC I to the Special LP of 100% of the interest in the entity that owns the Special LP Property. Pursuant to the agreement, the Special LP made customary representations and warranties to BTC I regarding the Special LP’s Redeemed Interests. |
The above descriptions are qualified in their entirety by reference to the full text of the applicable agreement, each of which is incorporated by reference herein and filed herewith as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively.
Prior to the Transaction, Industrial Property Advisors Sub II LLC (the “BTC I Service Provider”), provided acquisition and asset management services and, to the extent applicable, development management and development oversight services (the “Management Services”) to BTC I. The BTC I Service Provider is owned by an affiliate of our Advisor. Our Advisor is indirectly owned and/or controlled by our Chairman and certain other individuals who indirectly own our sponsor. In connection with and immediately following the Transaction, the QR Parties, as the sole owners of BTC I, caused BTC I to enter into a management agreement with the BTC I Service Provider, pursuant to which the BTC I Service Provider will provide the Management Services to BTC I with respect to the QR Properties, on substantially the same terms as it had provided such services prior to the Transaction (the “Management Agreement”). The BTC I Service Provider will earn acquisition and development fees, asset management fees and development management fees as consideration for providing the services under the Management Agreement. The Management Agreement has a term of thirty months, provided that BTC I can terminate the Management Agreement without cause upon 90 days’ notice beginning six months after the Effective Date. Pursuant to the Management Agreement, if BTC I terminates the Management Agreement, it will pay to the BTC I Service Provider all fees that otherwise would have been payable under the Management Agreement with respect to all real properties that are considered “completed projects” (defined as industrial property projects with respect to which the improvements constructed thereon consisting of the building core and shell have been substantially completed). In addition, if a completed project is sold prior to the expiration or termination of the Management Agreement, BTC I will pay to the BTC I Service Provider all fees that otherwise would have been payable under the Management Agreement with respect to such project, unless the sale resulted from an unsolicited third party offer to purchase such project.
Item 8.01 Other Events.
Most Recent Transaction Price and Net Asset Value Per Share
July 1, 2021 Transaction Price
The transaction price for each share class of our common stock for subscriptions to be accepted as of July 1, 2021 (and distribution reinvestment plan issuances following the close of business on June 30, 2021 and share redemptions as of June 30, 2021) is as follows:
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Transaction Price |
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Share Class |
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(per share) |
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Class T |
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$ |
10.3608 |
Class W |
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$ |
10.3608 |
Class I |
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$ |
10.3608 |
The transaction price for each of our share classes is equal to such class’s net asset value (“NAV”) per share as of May 31, 2021. 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.
May 31, 2021 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.blackcreekindustrialiv.com and is also available on our toll-free, automated telephone line at (888) 310-9352. With the approval of our board of directors, including a majority of our independent directors, we have engaged Altus Group U.S. Inc., a third-party valuation firm, to serve as our independent valuation advisor (“Altus Group” or the “Independent Valuation Advisor”) with respect to
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providing monthly real property appraisals, reviewing annual third-party real property appraisals, reviewing the internal valuations of debt-related assets and liabilities performed by our Advisor, helping us administer the valuation and review process for the real properties in our portfolio, and assisting in the development and review of our valuation procedures. As part of this process, our Advisor reviews the estimates of the values of our real property portfolio, real estate-related assets, and other assets and liabilities within our portfolio for consistency with our valuation guidelines and the overall reasonableness of the valuation conclusions, and informs our board of directors of its conclusions. Although third-party appraisal firms, the Independent Valuation Advisor, or other pricing sources may consider any comments received from us or our Advisor or other valuation sources for their individual valuations, the final estimated fair values of our real properties are determined by the Independent Valuation Advisor and the final estimates of fair values of our real estate-related assets, our other assets, and our liabilities are determined by the applicable pricing source, subject to the oversight of our board of directors. With respect to the valuation of our real properties, the Independent Valuation Advisor provides our board of directors with periodic valuation reports and is available to meet with our board of directors to review valuation information, as well as our valuation guidelines and the operation and results of the valuation and review process generally. Unconsolidated real properties held through joint ventures or partnerships are valued by such joint ventures or partnerships according to their valuation procedures. At least once per calendar year, each unconsolidated real property asset will be appraised by a third-party appraiser. If the valuation procedures of the applicable joint ventures or partnerships do not accommodate a monthly determination of the fair value of real properties, the Advisor will determine the estimated fair value of the unconsolidated real properties for those interim periods. All parties engaged by us in connection with our valuation procedures, including the Independent Valuation Advisor, ALPS Fund Services Inc. (“ALPS”), and our Advisor, are subject to the oversight of our board of directors. Our board of directors has the right to engage additional valuation firms and pricing sources to review the valuation process or valuations, if deemed appropriate. At least once each calendar year our board of directors, including a majority of our independent directors, reviews the appropriateness of our valuation procedures with input from the Independent Valuation Advisor. From time to time our board of directors, including a majority of our independent directors, may adopt changes to the valuation procedures if it: (1) determines that such changes are likely to result in a more accurate reflection of NAV or a more efficient or less costly procedure for the determination of NAV without having a material adverse effect on the accuracy of such determination; or (2) otherwise reasonably believes a change is appropriate for the determination of NAV. We will publicly announce material changes to our valuation procedures. Please see our valuation procedures filed with this Current Report on Form 8-K, for a more detailed description of our valuation procedures, including important disclosure regarding real property valuations provided by the Independent Valuation Advisor.
Our valuation procedures, which address specifically each category of our assets and liabilities and are applied separately from the preparation of our financial statements in accordance with generally accepted accounting principles (“GAAP”), involve adjustments from historical cost. There are certain factors which cause NAV to be different from total equity or stockholders’ equity on a GAAP basis. Most significantly, the valuation of our real assets, which is the largest component of our NAV calculation, is provided to us by the Independent Valuation Advisor. For GAAP purposes, these assets are generally recorded at depreciated or amortized cost. Another example that will cause our NAV to differ from our GAAP total equity or stockholders’ equity is the straight-lining of rent, which results in a receivable for GAAP purposes that is not included in the determination of our NAV. The fair values of our assets and certain liabilities are determined using widely accepted methodologies and, as appropriate, the GAAP principles within the FASB Accounting Standards Codification under Topic 820, Fair Value Measurements and Disclosures and are used by ALPS in calculating our NAV per share. However, our valuation procedures and our NAV are not subject to GAAP and will not be subject to independent audit. We did not develop our valuation procedures with the intention of complying with fair value concepts under GAAP and, therefore, there could be differences between our fair values and the fair values derived from the principal market or most advantageous market concepts of establishing fair value under GAAP.
As used below, “Fund Interests” means our outstanding shares of common stock, along with the partnership units in our operating partnership (“OP Units”), which may be held directly or indirectly by the Advisor, BCI IV Advisors Group LLC and third parties, and “Aggregate Fund NAV” means the NAV of all the Fund Interests.
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The following table sets forth the components of Aggregate Fund NAV as of May 31, 2021 and April 30, 2021:
The following table sets forth the NAV per Fund Interest as of May 31, 2021 and April 30, 2021:
Under GAAP, we record liabilities for ongoing distribution fees that (i) we currently owe Black Creek Capital Markets, LLC (the “Dealer Manager”) under the terms of the dealer manager agreement and (ii) we estimate we may pay to the Dealer Manager in future periods for shares of our common stock. As of May 31, 2021, we estimated approximately $56.3 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.
Investment in unconsolidated joint venture partnerships as of May 31, 2021 includes a minority interest discount on the real property valuation component of the unconsolidated joint venture valuations to account for the restricted salability or transferability of those real properties given our minority ownership interests in BTC I Partnership and Build-To-Core Industrial Partnership II LP (“BTC II Partnership”). We estimate the fair value of our minority ownership interests in the BTC I Partnership and the BTC II Partnership as of May 31, 2021 would have been $22.0 million higher if a minority discount had not been applied, meaning that if we used the estimated fair value without the application of the minority discount, our NAV as of May 31, 2021 would have been higher by approximately $22.0 million, or $0.12 per share, not taking into account all of the other items that impact our monthly NAV. Due to the Transaction (defined above), we have adjusted certain assumptions regarding the liquidity discount and the portion of the total discount associated with the BTC I Portfolio will be eliminated as of the effective date of the Transaction, thereby having a positive impact on our NAV, not taking into account all of the other items that impact our monthly NAV or that offset the impact of the partial elimination of the discount to some extent, such as transaction expenses associated with any strategic alternative.
We include no discounts to our NAV for the illiquid nature of our shares, including the limitations on our stockholders’ ability to redeem shares under our share redemption program and our ability to suspend or terminate our share redemption program at any time. Our NAV generally does not consider exit costs (e.g. selling costs and commissions related to the sale of a property) that would likely be incurred if our assets and liabilities were liquidated or sold today. While we may use market pricing concepts to value individual components of our NAV, our per share NAV is not derived from the market pricing information of open-end real estate funds listed on stock exchanges.
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Our NAV is not a representation, warranty or guarantee that: (i) we would fully realize our NAV upon a sale of our assets; (ii) shares of our common stock would trade at our per share NAV on a national securities exchange; and (iii) a stockholder would be able to realize the per share NAV if such stockholder attempted to sell his or her shares to a third party.
The valuations of our real properties as of May 31, 2021 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:
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Weighted- |
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Average Basis |
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Exit capitalization rate |
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5.2 |
% |
Discount rate / internal rate of return |
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6.3 |
% |
Average holding period (years) |
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10.2 |
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A change in the exit capitalization and discount rates used would impact the calculation of the value of our real property. 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:
From November 1, 2017 through January 31, 2020, we valued our debt-related investments and real estate-related liabilities generally in accordance with fair value standards under GAAP. Beginning with our valuation for February 29, 2020, our property-level mortgages and corporate-level credit facilities that are intended to be held to maturity (which for fixed rate debt not subject to interest rate hedges may be the date near maturity at which time the debt will be eligible for prepayment at par for purposes herein), including those subject to interest rate hedges, were valued at par (i.e. at their respective outstanding balances). In addition, because we utilize interest rate hedges to stabilize interest payments (i.e. to fix all-in interest rates through interest rate swaps or to limit interest rate exposure through interest rate caps) on individual loans, each loan and associated interest rate hedge is treated as one financial instrument which is valued at par if intended to be held to maturity. This policy of valuing at par applies regardless of whether any given interest rate hedge is considered as an asset or liability for GAAP purposes. As of May 31, 2021, we classified all of our debt as intended to be held to maturity.
May 2021 Distributions
We have declared monthly distributions for each class of our common stock. To date, each class of our common stock has received the same gross distribution per share. Monthly gross distributions were $0.0454 per share for each share class for the month of May 2021 and were paid to all stockholders of record as of the close of business on May 31, 2021. The net distribution per share is calculated as the gross distribution per share less any distribution fees that are payable monthly with respect to Class T shares and Class W shares. Since distribution fees are not paid with respect to Class I shares, the net distributions payable with respect to Class I shares are equal to the gross distributions payable with respect to Class I shares. The table below details the net distributions for each class of our common stock for the period presented:
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Net Distributions per Share |
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Class T |
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Class W |
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Class I |
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Month |
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Pay Date |
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Share |
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Share |
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Share |
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May 2021 |
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6/1/2021 |
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$ |
0.038 |
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$ |
0.041 |
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$ |
0.045 |
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Update on Assets
As of May 31, 2021, we had $2.5 billion in assets under management (calculated as fair value of investment in industrial properties and fair value of investment in unconsolidated joint venture partnerships, plus cash and cash equivalents), and our leverage ratio was approximately 23.8% (calculated as our total borrowings outstanding divided by the fair value of our real property plus our net investment in unconsolidated joint venture partnerships plus cash and cash equivalents).
As of May 31, 2021, we owned and managed, either directly or through our minority ownership interests in our joint venture partnerships (which are presented as if we own a 100% interest), a total real estate portfolio that included 136 industrial buildings totaling approximately 31.2 million square feet located in 23 markets throughout the U.S., with 217 customers, and was 88.0% occupied (93.8% leased) with a weighted-average remaining lease term (based on square feet) of 4.8 years. The occupied rate reflects the square footage with a paying customer in place. The leased rate includes the occupied square footage and additional square footage with leases in place that have not yet commenced. As of May 31, 2021, our total real estate portfolio included:
● | 130 industrial buildings totaling approximately 30.2 million square feet comprised our operating portfolio, which includes stabilized properties, and was 90.6% occupied (95.2% leased); and |
● | Six industrial buildings totaling approximately 1.0 million square feet comprised our value-add portfolio, which includes buildings acquired with the intention to reposition or redevelop, or buildings recently completed which have not yet reached stabilization. We generally consider a building to be stabilized on the earlier to occur of the first anniversary of a building’s shell completion or a building achieving 90% occupancy. |
Of our total portfolio, we owned and managed 67 buildings totaling approximately 17.3 million square feet through our minority ownership interests in our joint venture partnerships. In addition, as of May 31, 2021, through our minority joint venture partnerships, we owned and managed 14 buildings either under construction or in the pre-construction phase totaling approximately 4.7 million square feet.
During the month ended May 31, 2021, we directly acquired one building comprised of approximately 0.1 million square feet for an aggregate total purchase price of approximately $24.5 million. Additionally, during the month ended May 31, 2021, we leased approximately 1.3 million square feet within our total portfolio, which included 0.9 million square feet of new and future leases and 0.4 million square feet of renewals.
The following table sets forth the top ten geographic allocations of our real estate portfolio based on fair value as of May 31, 2021:
(1) | Represents our total portfolio of owned and managed properties, including our consolidated and unconsolidated properties. Unconsolidated properties are those owned through our minority ownership interests in our joint venture partnerships. Unconsolidated properties are presented based on our effective ownership interests. |
(2) | Includes 14 buildings that are either under construction or in the pre-construction phase that are owned through our minority ownership interests in our joint venture partnerships. |
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Net Asset Value Calculation and Valuation Procedures
Effective as of June 8, 2021, our board of directors amended our Net Asset Value Calculation and Valuation Procedures (the “Valuation Procedures”), in order to, among other things, clarify certain of the procedures followed in the calculation of the NAV and the role of Altus Group U.S. Inc., as our Independent Valuation Advisor.
The new Valuation Procedures have been filed as an exhibit to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
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Description |
10.1* |
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10.2* |
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10.3* |
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10.4* |
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99.1 |
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99.2 |
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* We have omitted certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K and will furnish supplementally to the SEC copies of any of the omitted schedules and exhibits upon request by the SEC.
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, 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 and include, without limitation, statements regarding the estimates and assumptions used in the calculation of our NAV per Fund Interest. 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, 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 customers, 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 customers’ 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, customer 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, 2020 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.
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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.
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BLACK CREEK INDUSTRIAL REIT IV INC. |
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June 15, 2021 |
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By: |
/s/ SCOTT A. SEAGER |
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Name: Scott A. Seager |
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Title: Senior Vice President, Chief Financial Officer and Treasurer |
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Exhibit 10.1
Article I CONSTRUCTION3
Section 1.1References and Rules of Construction3
Article II REPRESENTATIONS AND WARRANTIES OF BCI4
Section 2.1The Partnership4
Section 2.2REIT A6
Section 2.3REIT A Retained Entities7
Section 2.4REIT A 1031 Property Owner9
Section 2.5Subject Properties11
Section 2.6BCI GP13
Section 2.7BCI LP14
Article III REPRESENTATIONS AND WARRANTIES OF QR15
Section 3.1Organization and Existence15
Section 3.2Power and Authority15
Section 3.3No Violations15
Article IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES15
Section 4.1Anti-Terrorism and Money Laundering Provisions15
Section 4.2QR Loan16
Section 4.3Availability of Records16
Section 4.4Survival16
Article V INDEMNIFICATION16
Section 5.1Indemnities16
Section 5.2Limitations on Liability16
Section 5.3Losses18
Section 5.4Provisions18
Section 5.5Insurance18
Section 5.6Knowledge of QR18
Section 5.7BCI Knowledge Parties18
Section 5.8Claims19
Article VI GENERAL PROVISIONS20
Section 6.1Notices20
Section 6.2Counterparts; Electronic Signatures21
Section 6.3Entire Agreement; No Third-Party Beneficiaries21
Section 6.4Amendments and Waivers22
Section 6.5Severability22
Section 6.6Governing Law22
Section 6.7Consent to Jurisdiction; Waiver of Jury Trial22
Section 6.8Assignment23
Section 6.9Non-Recourse23
Section 6.10Exhibits and Schedules23
Section 6.11Publicity and Confidentiality23
Section 6.12No Release under Partnership Agreement24
Section 6.13Costs24
Section 6.14Survival24
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MASTER TRANSACTION AGREEMENT
THIS MASTER TRANSACTION AGREEMENT (this “Agreement”), dated as of June 15, 2021 (the “Effective Date”), is by and between IPT BTC I GP LLC, a Delaware limited liability company (“BCI GP”), IPT BTC I LP LLC, a Delaware limited liability company (“BCI LP”, and, individually and collectively, together with BCI GP, “BCI”), and QR Master Holdings USA II LP, a Manitoba limited partnership (“QR”). Each of BCI GP, BCI LP and QR are collectively referred to herein as the “Parties” and individually referred to herein as a “Party”.
RECITALS
WHEREAS, prior to the Effective Date, pursuant to that certain Fourth Amended and Restated Limited Partnership Agreement of Build-To-Core Industrial Partnership I LP (the “Partnership”) dated as of December 30, 2016 (as amended, the “Partnership Agreement”), BCI GP was the general partner of the Partnership, and BCI LP and QR were each a limited partner in the partnership together with Industrial Property Advisors Sub I LLC, a Delaware limited liability company (the “Special LP”);
WHEREAS, QR Global Finance LP, a Manitoba limited partnership (“QR Lender”), has made a loan to the Partnership in the principal amount of $244,996,000 (the “QR Loan”) which is evidenced by that certain Promissory Note dated June 14, 2021 made by the Partnership in favor of QR Lender in the original principal amount of the amount of the QR Loan (the “Note”);
WHEREAS, on the Effective Date, but prior to the execution of this Agreement and in the following order: (i) the Partnership, by making a capital contribution in the amount of the QR Loan to BTC Intermediate Holdco LP, a Delaware limited partnership (“BTC Holdco”), caused a capital contribution to be made to BTC I REIT B LLC, a Delaware limited liability company (“REIT B”) in the amount of the QR Loan (the “Partnership REIT B Contribution”); (iii) BTC I REIT A LLC, a Delaware limited liability company (“REIT A”), caused a distribution to be made to the Partnership of (1) 100% of the limited liability company membership interests in IPT Cutten Road DC GP LLC, a Delaware limited liability company, which is the 0.10% general partner of IPT Cutten Road DC LP, a Delaware limited partnership (the “Cutten Fee Owner”), the fee owner of that certain real property commonly known as 11833 Cutten Road, Houston, Texas, and (2) a 99.9% limited partnership interest in the Cutten Fee Owner (collectively, the “Cutten Road Interests”); (iv) the Partnership redeemed 100% of the Special LP’s limited partnership interest in the Partnership in exchange for the distribution from the Partnership to Special LP of the Cutten Road Interests, upon which the Special LP ceased to be a partner in the Partnership, all as more particularly described in that certain Contribution, Distribution and Redemption Agreement entered into by the Partnership and the Special LP dated as of the Effective Date; (v) QR BTC GP LLC, a Delaware limited liability company (“New QR GP”), was admitted to the Partnership as a general partner holding a 0.0% general partnership interest therein, and QR Industrial LP, a Delaware limited partnership (“New QR LP”), was admitted to the Partnership as a limited partner holding a 0.2% limited partnership interest therein, in each case pursuant to an amendment to the Partnership Agreement; (vi) the Partnership redeemed 100% of BCI GP’s general partnership interest in the partnership and 100% of BCI LP’s limited partnership interest in the Partnership in exchange for the distribution from the Partnership to BCI GP and BCI LP (pro rata in proportion to BCI GP’s and BCI LP’s respective partnership interests in the Partnership) of 100% of the
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common limited liability company membership interests in REIT B, all as more particularly described in that certain Distribution and Redemption Agreement entered into by the Partnership, BCI GP and BCI LP dated as of the Effective Date; and (vii) the Partnership assigned its 100% limited partnership interest in BTC Holdco to BCI GP (the transactions described in clauses (i) – (vii) being the “Partnership Restructuring”);
WHEREAS, prior to the Effective Date and prior to the Partnership Restructuring, the Partnership owned, indirectly, 100% of the common limited liability company membership interests in REIT B;
WHEREAS, as of the Effective Date, but prior to the closing under the Purchase Agreements (defined below), REIT B owns (i) 100% of the limited liability company membership interests in IPT Commerce IC LLC, a Delaware limited liability company (the “Commerce IC Property Owner”), which in turn, prior to the closing under the 1031 Purchase Agreement (defined below), owns 100% of the fee simple interest in the real property set forth opposite its name on Exhibit A attached hereto (the “Commerce IC Property”) and (ii) a 99.9% limited partnership interest in IPT FAA DC LP, a Delaware limited partnership (the “FAA DC Property Owner”), which in turn, prior to the closing under the 1031 Purchase Agreement, owns 100% of the fee simple interest in the real property set forth opposite its name on Exhibit A attached hereto (the “FAA DC Property” and together with the Commerce IC Property, the “REIT B 1031 Properties”) and (iii) 100% of the limited liability company interests in IPT FAA DC GP LLC, a Delaware limited liability company, which in turn owns a 0.1% general partnership interest in FAA DC Property Owner;
WHEREAS, the Partnership owned prior to the Partnership Restructuring, and continues to own following the Partnership Restructuring, 100% of the common limited liability company membership interests in REIT A;
WHEREAS, REIT A currently has outstanding one hundred and twenty two (122) 12% Class A Preferred Units (the “Preferred Units”);
WHEREAS, as of the Effective Date, but prior to the closing under the Purchase Agreements, REIT A owns (i) 100% of the limited liability company membership interests in IPT Otay Logistics Center LLC, a Delaware limited liability company (the “REIT A 1031 Property Owner”), which in turn owns 100% of the of the fee simple interest in the real property identified on Exhibit B attached hereto (the “REIT A 1031 Property”), (ii) 100% of the limited liability company membership interests in the Delaware limited liability companies identified on Exhibit C attached hereto (the “REIT A Transfer Interests”) and (iii) 100% of the limited liability company membership interests and limited partnership interests (collectively, the “REIT A Retained Interests”) in the Delaware limited liability companies and Delaware limited partnerships identified on Exhibit D attached hereto (the “REIT A Retained Entities” and together with REIT A and the REIT A 1031 Property Owner, collectively the “Partnership Retained Entities”);
WHEREAS, REIT A owns, indirectly through the REIT A Retained Entities, 100% of the fee simple interest in the real properties identified on Exhibit D attached hereto (the “REIT A Retained Properties” and together with the REIT B 1031 Properties, the “Subject Properties”); and
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WHEREAS, pursuant to that certain Membership Interest Purchase Agreement dated as of the Effective Date by and between REIT B and REIT A (the “Interest Purchase Agreement”), on the Effective Date and concurrently with the execution of this Agreement, (i) REIT B will pay certain cash consideration to REIT A (the “Interest Purchase Price”) and (ii) in exchange for such cash consideration, REIT A will assign all of its right, title and interest in and to the REIT A Transfer Interests to REIT B or one or more of REIT B’s designees;
WHEREAS, pursuant to that certain Purchase and Sale Agreement dated as of the Effective Date by and between REIT B and REIT A (the “1031 Purchase Agreement” and together with the Interest Purchase Agreement, the “Purchase Agreements”), on the Effective Date REIT A 1031 Property Owner will sell the REIT A 1031 Property to a wholly-owned subsidiary of REIT B and Commerce IC Property Owner and FAA DC Property Owner will each sell their respective REIT B 1031 Properties to one or more wholly-owned subsidiaries of REIT A;
WHEREAS, as a condition to REIT A’s entry into Purchase Agreements and REIT A’s consummation of the closings thereunder, QR requires that BCI enter into this Agreement, and in consideration of REIT A’s entry into the Purchase Agreements and REIT A’s consummation of the closings thereunder, BCI has agreed to enter into this Agreement;
WHEREAS, as a condition to REIT B’s entry into the Purchase Agreements and REIT B’s consummation of the closings thereunder, BCI requires that QR enter into this Agreement, and in consideration of REIT B’s entry into the Purchase Agreements and REIT B’s consummation of the closings thereunder, QR has agreed to enter into this Agreement; and
WHEREAS, each Party has been advised by the other Parties and acknowledges that such other Parties would not be entering into this Agreement or any agreement relating to this Agreement without the representations, warranties and covenants which are being made and agreed to herein by each Party and that each Party is entering into this Agreement in reliance on such representations, warranties and covenants.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:
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“shall.” References to days mean calendar days unless otherwise specified. The words “this Article,” “this Section,” and “this subsection,” and words of similar import, refer only to the Article, Section or subsection hereof in which such words occur. The word “including” (in its various forms) means including without limitation. All references to “$” or “dollars” shall be deemed references to United States dollars. Each accounting term not defined herein, and each accounting term partly defined herein, to the extent not defined, will have the meaning given to it under United States GAAP. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. References to any agreement (including this Agreement) shall mean such agreement as it may be amended, supplemented or otherwise modified from time to time.
BCI hereby represents and warrants to QR as of the Effective Date, as follows:
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In this Agreement, “Action” means any written claim, action, cause of action or suit (whether in contract, tort or otherwise), litigation (whether at law or in equity, whether civil or criminal), controversy, assessment, arbitration, investigation, hearing, charge, complaint, demand, notice or proceeding (including condemnation proceedings, eminent domain proceedings or similar actions or proceedings) to, from, by or before any Governmental Authority. In this Agreement, “Governmental Authority” means any United States federal, state or local government, or political subdivision thereof, or any foreign governmental entity entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, including any court or tribunal (or any department, bureau or division thereof), or any arbitrator or arbitral body.
In this Agreement, “Contract” means, with respect to any person or entity, any contract, agreement, deed, mortgage, lease (including the Leases), license, commitment, promise, undertaking, arrangement, performance bond, warranty obligation or understanding, whether written or oral and whether express or implied, or other document or instrument (including any document or instrument evidencing or otherwise relating to any debt), to which or by which such person or entity is a party or otherwise subject or bound or to which or by which any property, business, operation or right of such person or entity is subject or bound. The term “Contracts” shall include, without limitation, utility contracts, management contracts, construction contracts, maintenance and service contracts, parking contracts, equipment leases and brokerage and leasing agreements, and other agreements related to the construction, ownership, use, operation, occupancy, maintenance or development of any property.
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In this Agreement, “Organizational Documents” means collectively: (A) the certificate of formation, articles of organization or certificate of limited partnership for such entity (as applicable); (B) the operating agreement, limited liability company agreement, or limited partnership agreement for such entity (as applicable); and (C) any certificate of qualification or foreign entity registration for such entity (together with all supplements, amendments and modifications related to any of the foregoing).
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QR hereby represents and warrants to BCI as of the Effective Date as follows:
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prior to the Effective Date or thereafter disclosed in writing to QR specifically in response to a request by QR or its counsel, (c) were set forth in any memoranda, reports or notices delivered to QR pursuant the Partnership Agreement or otherwise consented to, approved or proposed by QR under or pursuant to the Partnership Agreement or in respect of the business and affairs of the Partnership and (d) are set forth in the schedules and exhibits attached to this Agreement (directly or by incorporation by reference) and (ii) BCI shall have no liability hereunder with respect to any change in facts or circumstances resulting solely from actions or omissions of the Partnership and its subsidiaries caused by QR, New QR GP or New QR LP following the Partnership Restructuring.
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(a) |
if to BCI, to: Jeff Latier and Nick Thigpen Black Creek Group 518 17th Street, Suite 1700 Denver, Colorado 80202 Email: jeff.latier@blackcreekgroup nick.thigpen@blackcreekgroup.com |
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and: Joshua J. Widoff, Esq. Black Creek Group 518 17th Street, Suite 1700 Denver, Colorado 80202 Email: josh.widoff@blackcreekgroup |
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with a copy (which shall not constitute notice) to: Jennifer M. Morgan King & Spalding LLP 1185 Avenue of the Americas 34th Floor New York, New York 10036 Email: jmorgan@kslaw.com |
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and: L. Wayne Pressgrove, Jr. King & Spalding LLP 1180 Peachtree Street, NE Atlanta, Georgia 30309 Email: wpressgrove@kslaw.com |
(b) |
if to QR, to: c/o QuadReal Property Group 1330 Avenue of the Americas, Suite 2900 New York, New York 10019 Attention: Jameson Weber Email:jameson.weber@quadreal.com |
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and: c/o QuadReal Property Group 666 Burrard Street, Suite 800 Vancouver, BC V6C 2X8 Attention: Chief Legal Officer Email: chief.legal.officer@quadreal.com |
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with a copy (which shall not constitute notice) to: Cox, Castle & Nicholson LLP 2029 Century Park East, Suite 2100 Los Angeles, California 90067 Attention:Douglas P. Snyder Email: dsnyder@coxcastle.com |
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agreements and understandings (including any offer letters or term sheets), both written and oral, between the Parties with respect to the subject matter of this Agreement. The execution and delivery of this Agreement is not intended to confer any rights or remedies upon any Person not a party to this Agreement, other than the Parties or any Person entitled to indemnification under Article V with respect to the provisions therein. Subject to Section 5.2(d), no Party shall be liable or bound to any other Party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein or in the Partnership Agreement. For the avoidance of doubt, the Parties hereto acknowledge and agree that, except as expressly set forth herein, this Agreement does not limit, modify or amend the terms and provisions of the Partnership Agreement, which remains in full force and effect.
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covenant that nothing in this Section 6.11 shall prevent any such Party from disclosing or accessing any information otherwise deemed confidential under this section (a) in connection with that Party’s enforcement of its rights hereunder; (b) pursuant to any legal requirement, any statutory reporting requirement or any accounting or auditing disclosure requirement, (c) in connection with any filings with the U.S. Securities and Exchange Commission as such Party determines is advisable or required consistent with such Party’s and its affiliates’ past practices (by way of example and not limitation, 8K or other filings), (d) in connection with performance by either Party of its obligations under this Agreement; or (e) to potential investors, investors, participants or assignees in or of the transactions contemplated by this Agreement or such Party’s rights therein.
[Remainder of page intentionally left blank,
signatures commence on following page]
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IN WITNESS WHEREOF, each of the Parties has caused this Master Transaction Agreement to be signed by a duly authorized officer as of the Effective Date.
BCI GP:
IPT BTC I GP LLC, a Delaware limited liability company
By: |
IPT Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Portfolio Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Operating Partnership LP, a Delaware limited partnership, its sole member |
By: |
Black Creek Industrial REIT IV Inc., a Maryland corporation, its general partner |
By: /s/ Scott Seager
Name: Scott Seager
Title: Senior Vice President, Chief Financial Officer and Treasurer
[Signatures continue on following page]
BCI LP:
IPT BTC I LP LLC, a Delaware limited liability company
By: |
IPT Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Portfolio Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Operating Partnership LP, a Delaware limited partnership, its sole member |
By: |
Black Creek Industrial REIT IV Inc., a Maryland corporation, its general partner |
By: /s/ Scott Seager
Name: Scott Seager
Title: Senior Vice President, Chief Financial Officer and Treasurer
[Signatures continue on following page]
[Signatures continued from prior page]
QR:
QR MASTER HOLDINGS USA II LP, a Manitoba limited partnership
By: |
QR USA GP Inc., a Canadian corporation, its general partner |
By: /s/ Jonathan Dubois-Phillips
Name: Jonathan Dubois-Phillips
Title: President
By: /s/ Stephen Barnett
Name: Stephen Barnett
Title: Vice President
[End of signatures]
Exhibit 10.2
DISTRIBUTION AND REDEMPTION AGREEMENT
THIS DISTRIBUTION AND REDEMPTION AGREEMENT (this “Agreement”), dated as of June 15, 2021 (the “Effective Date”), is made and entered into by and between Build-To-Core Industrial Partnership I LP, a Delaware limited partnership (the “Partnership”), IPT BTC I GP LLC, a Delaware limited liability company (“BCI GP”) and IPT BTC I LP LLC, a Delaware limited liability company (“BCI LP” and together with BCI GP, the “BCI Parties”). Each of the Partnership, BCI GP and BCI LP are collectively referred to herein as the “Parties” and individually referred to herein as a “Party”. Each of QR Master Holdings USA II LP, a Manitoba limited partnership (“QR”), QR BTC GP LLC, a Delaware limited liability company (“New QR GP”), and QR Industrial LP, a Delaware limited partnership (“New QR LP”), as a partner in the Partnership, has executed a joinder to this Agreement for the limited purpose of consenting to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder and, solely with respect to QR, to agree to its indemnification and tax matters rights and obligations under Section 4 of this Agreement. BCI OP has executed a joinder to this Agreement for the exclusive purpose of agreeing to be bound jointly and severally with each BCI Party solely with respect to the indemnification obligations of each BCI Party under Section 4(c) of this Agreement. Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Partnership Agreement (as defined below).
RECITALS
WHEREAS, pursuant to that certain Fourth Amended and Restated Limited Partnership Agreement of Partnership dated as of December 30, 2016 (as amended, the “Partnership Agreement”), BCI GP owns an 8.961% partnership interest in the Partnership as a general partner of the Partnership (the “BCI GP Interest”) and BCI LP owns an 18.106 % limited partnership interest in the Partnership;
WHEREAS, the Partnership owns 100% of the limited partnership interests (the “Holdco LP Interests”) in BTC Intermediate Holdco LP, a Delaware limited partnership (“Holdco”) and BCI GP is the non-economic general partner of Holdco;
WHEREAS, as of the date hereof, Holdco owns 100% of the common limited liability company membership interests (the “Subject Interests”) in BTC I REIT B LLC, a Delaware limited liability company (“REIT B”);
WHEREAS, on the Effective Date but prior to the Closing (defined below), the Partnership will contribute cash to REIT B in an amount equal to $244,996,000 (the “REIT B Cash Contribution”);
WHEREAS, the Partnership owns 100% of the common limited liability company membership interests in BTC I REIT A LLC, a Delaware limited liability (“REIT A”);
WHEREAS, the Partnership’s interests in REIT A and REIT B constitute substantially all of the assets of the Partnership;
WHEREAS, in accordance with this Agreement: (i) BCI GP, in its capacity as the general partner of Holdco, will cause Holdco to distribute the Subject Interests to the Partnership; (ii) the
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Partnership will distribute the Subject Interests to the BCI Parties as more particularly described herein; and (iii) the Partnership will redeem the BCI GP Interest and the BCI LP Interest (clauses (i) – (iii) being the “Transaction”); and
WHEREAS; each of the Partnership and the BCI Parties desire for the Transaction to occur.
NOW, THEREFORE, in consideration of the promises and the mutual agreements and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the Parties agree as follows:
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BCI OP has executed a joinder to this Agreement for the exclusive purpose of agreeing to be bound jointly and severally with each BCI Party solely with respect each BCI Party’s indemnification obligations under this Section 4(c).
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[signature page follows]
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IN WITNESS WHEREOF, the undersigned parties have executed this Distribution and Redemption Agreement as of the Effective Date.
BCI GP:
IPT BTC I GP llc, a Delaware limited liability company
By: |
IPT Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Portfolio Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Operating Partnership LP, a Delaware limited partnership, its sole member |
By: |
Black Creek Industrial REIT IV Inc., a Maryland corporation, its general partner |
By: /s/ Scott Seager
Name: Scott Seager
Title: Senior Vice President, Chief Financial Officer and Treasurer
[Signatures continue on following page]
[Signatures continued from previous page]
BCI LP:
IPT BTC I LP llc, a Delaware limited liability company
By: |
IPT Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Portfolio Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Operating Partnership LP, a Delaware limited partnership, its sole member |
By: |
Black Creek Industrial REIT IV Inc., a Maryland corporation, its general partner |
By: /s/ Scott Seager
Name: Scott Seager
Title: Senior Vice President, Chief Financial Officer and Treasurer
[Signatures continue on following page]
[Signatures continued from previous page]
PARTNERSHIP:
Build-to-core industrial partnership i lp, a Delaware limited partnership
By: |
IPT BTC I GP LLC, a Delaware limited liability company, its general partner |
By: |
IPT Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Portfolio Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Operating Partnership LP, a Delaware limited partnership, its sole member |
By: |
Black Creek Industrial REIT IV Inc., a Maryland corporation, its general partner |
By: /s/ Scott Seager
Name: Scott Seager
Title: Senior Vice President, Chief Financial Officer and Treasurer
[Signatures continue on following page]
[Signatures continued from previous page]
JOINDER
The undersigned, being a partner in the Partnership, hereby (i) consents to the execution and delivery of this Agreement and the consummation of the Transaction and the Closing and (ii) acknowledges and agrees to its indemnification and tax matters rights and obligations under Section 4 of this Agreement.
QR:
QR Master Holdings USA II LP, a Manitoba limited partnership
By: |
QR USA GP Inc., a Canadian corporation, its general partner |
By: /s/ Jonathan Dubois-Phillips
Name: Jonathan Dubois-Phillips
Title: President
By: /s/ Stephen Barnett
Name: Stephen Barnett
Title: Vice President
[Signatures continue on following page]
[Signatures continued from previous page]
JOINDER
The undersigned, each being a partner in the Partnership, hereby consents to the execution and delivery of this Agreement and the consummation of the Transaction and the Closing.
NEW QR GP:
QR BTC GP LLC, a Delaware limited liability company
By: /s/ Jonathan Dubois-Phillips
Name: Jonathan Dubois-Phillips
Title: President
By: /s/ Stephen Barnett
Name: Stephen Barnett
Title: Vice President
NEW QR LP:
QR Industrial LP, a Delaware limited partnership
By: |
QR Industrial GP LLC, a Delaware limited liability company |
By: /s/ Jonathan Dubois-Phillips
Name: Jonathan Dubois-Phillips
Title: President
By: /s/ Stephen Barnett
Name: Stephen Barnett
Title: Vice President
[Signatures continue on following page]
JOINDER
The undersigned has executed this joinder to this Agreement for the exclusive purpose of agreeing to be bound jointly and severally with each BCI Party solely with respect to the indemnification obligations of each BCI Party under Section 4(c) of this Agreement.
BCI OP:
BCI IV Operating Partnership LP, a Delaware limited partnership
By: |
Black Creek Industrial REIT IV Inc., a Maryland corporation, its general partner |
By: /s/ Scott Seager
Name: Scott Seager
Title: Senior Vice President, Chief Financial Officer and Treasurer
[End of signatures]
Exhibit 10.3
MEMBERSHIP INTEREST PURCHASE AGREEMENT
By and Between
BTC I REIT B LLC
and
BTC I REIT A LLC
MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) dated as of June 15, 2021 (the “Effective Date”), is by and between BTC I REIT B LLC, a Delaware limited liability company (“REIT B”), and BTC I REIT A LLC, a Delaware limited liability company (“REIT A”).
RECITALS:
A.REIT A owns the limited liability company membership interests (the “Subject Membership Interests”) in the Delaware limited liability companies, in each case identified on Exhibit A attached hereto (the “Subject Entities”).
B.REIT A owns, indirectly through the ownership of the Subject Entities, 100% of the fee simple interests in the real properties identified on Exhibit A attached hereto (collectively, the “Subject Properties”, and each, a “Subject Property”).
C.REIT A desires to assign the Subject Membership Interests to REIT B and REIT B desires to acquire (or cause its direct or indirect owners to acquire) the Subject Membership Interests.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and promises set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
AGREEMENT:
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If to REIT B, to: c/o Black Creek Group 518 17th Street, 17th Floor Denver, Colorado 80202 Attention: Jeff Latier and Nick Thigpen Email:jeff.latier@blackcreekgroup.com and nick.thigpen@blackcreekgroup.com |
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With a copy to: c/o Black Creek Group 518 17th Street, 17th Floor Denver, Colorado 80202 Attention: Joshua J. Widoff Email:josh.widoff@blackcreekgroup.com |
And to: King & Spalding LLP 1185 Avenue of the Americas 34th Floor New York, New York 10036 Attention: Jennifer M. Morgan Email:jmorgan@kslaw.com |
And to: L. Wayne Pressgrove, Jr. King & Spalding LLP 1180 Peachtree Street, NE Atlanta, Georgia 30309 Attention: L. Wayne Pressgrove, Jr. Email:wpressgrove@kslaw.com |
If to REIT A, to: c/o QuadReal Property Group 1330 Avenue of the Americas, Suite 2900 New York, New York 10019 Attention: Jameson Weber Email:jameson.weber@quadreal.com |
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And to: c/o QuadReal Property Group 666 Burrard Street, Suite 800 Vancouver, BC V6C 2X8 Attention: Chief Legal Officer Email: chief.legal.officer@quadreal.com And to: Cox, Castle & Nicholson LLP 2029 Century Park East, Suite 2100 Los Angeles, California 90067 Attention: Douglas P. Snyder Email: dsnyder@coxcastle.com |
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[signature page follows]
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IN WITNESS WHEREOF, the Parties have caused this Membership Interest Purchase Agreement to be executed and delivered as of the date first above written.
REIT B:
BTC I REIT B LLC, a Delaware limited liability company
By: |
IPT BTC I GP LLC, a Delaware limited liability company, its manager |
By: |
IPT Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Portfolio Real Estate Holdco LLC, a Delaware limited liability company, its sole member |
By: |
BCI IV Operating Partnership LP, a Delaware limited partnership, its sole member |
By: |
Black Creek Industrial REIT IV Inc., a Maryland corporation, its general partner |
By: /s/ Scott Seager
Name: Scott Seager
Title: Senior Vice President, Chief
Financial Officer and Treasurer
[Signatures continue on following page]
REIT A:
BTC I REIT A LLC, a Delaware limited liability company
By: |
Build-to-Core Industrial Partnership I LP, a Delaware limited partnership, its manager |
By: |
QR BTC GP LLC, a Delaware limited liability company, its general partner |
By: /s/ Jonathan Dubois-Phillips
Name:Jonathan Dubois-Phillips
Title:President
By: /s/ Stephen Barnett
Name:Stephen Barnett
Title:Vice President
Exhibit 10.4
CONTRIBUTION, DISTRIBUTION AND REDEMPTION AGREEMENT
THIS CONTRIBUTION, DISTRIBUTION AND REDEMPTION AGREEMENT (this “Agreement”), dated as of June 15, 2021 (the “Effective Date”), is made and entered into by and between Build-To-Core Industrial Partnership I LP, a Delaware limited partnership (the “Partnership”) and Industrial Property Advisors Sub I LLC, a Delaware limited liability company (“Special LP”). Each of the Partnership and Special LP are collectively referred to herein as the “Parties” and individually referred to herein as a “Party”. Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Partnership Agreement (as defined below).
RECITALS
WHEREAS, pursuant to that certain Fourth Amended and Restated Limited Partnership Agreement of Build-To-Core Industrial Partnership I LP dated as of December 30, 2016 (as amended, the “Partnership Agreement”), entered into by IPT BTC I GP LLC, a Delaware limited liability company, as general partner, IPT BTC I LP LLC, a Delaware limited liability company, as a limited partner, QR Master Holdings USA II LP, a Manitoba limited partnership, as a limited partner, and Special LP, as a limited partner, Special LP owns a 1.21132% limited partnership interest in the Partnership subject to the terms therein (the “Special LP Interests”);
WHEREAS, as of the date hereof, the Partnership owns 100% of the common limited liability company membership interests in BTC I REIT A LLC, a Delaware limited liability company (“REIT A”);
WHEREAS, as of the date hereof, REIT A owns (i) 100% of the limited liability company membership interests (the “Cutten GP Membership Interests”) in IPT Cutten Road DC GP LLC, a Delaware limited liability company (“Cutten GP”), which in turn owns a 0.10% general partnership interest in IPT Cutten Road DC LP, a Delaware limited partnership (“Cutten Fee Owner”) and (ii) a 99.90% limited partnership interest (the “Cutten LP Interests” and together with the Cutten GP Membership Interests, the “Subject Interests”) in Cutten Fee Owner;
WHEREAS, as of the date hereof, Cutten Fee Owner owns 100% of the fee simple interest in that certain real property commonly known as 11833 Cutten Road, Houston, Texas (the “Cutten Road Property”), which is held subject to a triple net lease;
WHEREAS, consistent with the holding in Revenue Ruling 2004-77, 2004-2 C.B. 119, each of Cutten GP and Cutten Fee Owner is currently disregarded as an entity separate from REIT A for U.S. federal income tax purposes;
WHEREAS, in accordance with this Agreement: (i) Special LP will contribute to the Partnership cash in the amount of $10,706,000 (the “Make-Whole Contribution”); (ii) the Partnership will cause REIT A to distribute the Subject Interests to the Partnership; (iii) the Partnership will distribute the Subject Interests to the Special LP; and (iv) the Partnership will redeem the Special LP Interests (the transactions described in clauses (i) – (iv) being collectively referred to herein as the “Transaction”);
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WHEREAS, in connection with this Agreement, each of Partnership and Special LP has entered into that certain Memorandum of Understanding dated as of the date hereof (the “MOU”), which in the case of Special LP was joined for the limited purpose of ensuring that purchase price adjustments required to be made under this Agreement are determined on a basis consistent with that of adjustments required to be made under other agreements to which Partnership is a party; and
WHEREAS, each of the Partnership and the Special LP desire for the Transaction to occur.
NOW, THEREFORE, in consideration of the promises and the mutual agreements and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the Parties agree as follows:
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AND AFTER CONSULTING WITH (OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH) COUNSEL OF ITS OWN CHOOSING AS TO THE MEANING OF THIS WAIVER.
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Agreement or default by another Party shall constitute a waiver of such Party’s right to enforce any provision of this Agreement or to take any such action.
[Signature pages follow]
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IN WITNESS WHEREOF, the undersigned Parties have executed this Contribution, Distribution and Redemption Agreement as of the Effective Date.
SPECIAL LP:
INdustrial property advisors sub i llc,
a Delaware limited liability company
By:Cutten Road, LP, a Colorado limited partnership,
its sole member
By:CR GP, LLC, a Colorado limited liability company,
its general partner
By:/s/ Evan H. Zucker
Name:Evan H. Zucker
Title:Manager
PARTNERSHIP:
Build-to-core industrial partnership i lp,
a Delaware limited partnership
By:IPT BTC I GP LLC, a Delaware limited liability company,
its general partner
By: IPT Real Estate Holdco LLC,
a Delaware limited liability company,
its sole member
By: BCI IV Portfolio Real Estate Holdco LLC,
a Delaware limited liability company,
its sole member
By: BCI IV Operating Partnership LP,
a Delaware limited partnership,
its sole member
By: Black Creek Industrial REIT IV Inc.,
a Maryland corporation,
its general partner
By: /s/ Scott Seager
Name: Scott Seager
Title: |
Senior Vice President, Chief Financial |
Officer and Treasurer
CONSENT
The undersigned, each being a partner of the Partnership, hereby consent to this Agreement, the Transaction and the Closing hereunder.
GENERAL PARTNER:
IPT BTC I GP LLC,
a Delaware limited liability company
By: IPT Real Estate Holdco LLC,
a Delaware limited liability company,
its sole member
By: BCI IV Portfolio Real Estate Holdco LLC,
a Delaware limited liability company,
its sole member
By: BCI IV Operating Partnership LP,
a Delaware limited partnership,
its sole member
By: Black Creek Industrial REIT IV Inc.,
a Maryland corporation,
its general partner
By: /s/ Scott Seager
Name: Scott Seager
Title: |
Senior Vice President, Chief Financial |
Officer and Treasurer
LIMITED PARTNERS:
IPT BTC I LP LLC,
a Delaware limited liability company
By: IPT Real Estate Holdco LLC,
a Delaware limited liability company,
its sole member
By: BCI IV Portfolio Real Estate Holdco LLC,
a Delaware limited liability company,
its sole member
By: BCI IV Operating Partnership LP,
a Delaware limited partnership,
its sole member
By: Black Creek Industrial REIT IV Inc.,
a Maryland corporation,
its general partner
By: /s/ Scott Seager
Name: Scott Seager
Title: |
Senior Vice President, Chief Financial |
Officer and Treasurer
QR MASTER HOLDINGS USA II LP,
a Manitoba limited partnership
By:QR USA GP Inc.,
a Canadian corporation,
its general partner
By: /s/ Jonathan Dubois-Phillips
Name: Jonathan Dubois-Phillips
Title: President
By: /s/ Stephen Barnett
Name: Stephen Barnett
Title: Vice President
Exhibit 99.1
CONSENT OF INDEPENDENT VALUATION FIRM
We hereby consent to the references to our name and the description of our role in the valuation process described in the heading “May 31, 2021 NAV Per Share” in the Current Report on Form 8-K of Black Creek Industrial REIT IV Inc. (the “Company”), filed by the Company with the Securities and Exchange Commission on the date hereof, being included or incorporated by reference in the Company’s Registration Statement on Form S-8 (File No. 333-228818). 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. |
June 15, 2021 |
|
Altus Group U.S. Inc. |
Exhibit 99.2
NET ASSET VALUE CALCULATION AND VALUATION PROCEDURES
Overview
Our board of directors, including a majority of our independent directors, has adopted these 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 net asset value (“NAV”). As a public company, we are required to issue financial statements generally based on historical cost in accordance with Generally Accepted Accounting Principles (“GAAP”). To calculate our NAV for the purpose of establishing a purchase and redemption price for our shares, we have adopted policies and procedures, which adjust the values of certain of our assets and liabilities from historical cost to fair value, as described below. As a result, our NAV may differ from the amount reported as stockholders’ equity on the face of our financial statements prepared in accordance with GAAP. The fair values of our assets and certain liabilities are determined using widely accepted methodologies and, as appropriate, the GAAP principles within the Financial Accounting Standards Board Accounting Standards Codification under Topic 820, Fair Value Measurements and Disclosures and are used by ALPS Fund Services Inc. (“ALPS”) in calculating our NAV and NAV per share. However, our valuation procedures and our NAV are not subject to GAAP and will not be subject to independent audit. Our NAV may differ from total equity or stockholders’ equity reflected on our audited financial statements, even if we are required to adopt a fair value basis of accounting for GAAP financial statement purposes in the future. Furthermore, no rule or regulation requires that we calculate NAV in a certain way. Although we believe our NAV calculation methodologies are consistent with standard industry principles, there is no established practice among public real estate investment trusts (“REITs”), whether listed or not, for calculating NAV in order to establish a purchase and redemption price. As a result, other public REITs may use different methodologies or assumptions to determine NAV.
Independent Valuation Advisor
With the approval of our board of directors, including a majority of our independent directors, we have engaged Altus Group U.S. Inc. (“Altus Group” or the “Independent Valuation Advisor”) with respect to providing monthly real property appraisals, reviewing annual third-party real property appraisals, reviewing the internal valuations of debt-related assets and liabilities of BCI IV Advisors LLC (the “Advisor”), helping us administer the valuation and review process described under “Real Property” below for the real properties in our portfolio, and assisting in the development and review of the valuation procedures contained herein. Altus Group is a multidisciplinary provider of independent, commercial real estate appraisal, consulting, technology, and advisory services with multiple offices around the world, including in the United States, Canada, Europe and Asia Pacific. Altus Group is not affiliated with us or the Advisor. The compensation we pay to our Independent Valuation Advisor is not based on the estimated values of our assets or liabilities. Our board of directors, including a majority of our independent
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directors, may replace our Independent Valuation Advisor at any time. We will promptly disclose any changes to the identity or role of our Independent Valuation Advisor in a prospectus and in reports we publicly file with the Securities and Exchange Commission.
Altus Group discharges its responsibilities with respect to real property appraisals in accordance with our real property valuation procedures described below and with the oversight of our board of directors. Our board of directors is not involved in the day-to-day valuation of the real properties in our portfolio, but periodically receives and reviews such information about the valuations of the real properties as it deems necessary to exercise its oversight responsibility. While our Independent Valuation Advisor is responsible for providing monthly appraisals of our real properties and reviews of third-party appraisals, our Independent Valuation Advisor is not responsible for nor does it prepare our monthly NAV.
Our Independent Valuation Advisor performs other roles under our valuation procedures as described herein and may be engaged to provide additional services, including providing an independent appraisal of any of our other assets or liabilities (contingent or otherwise). Our Independent Valuation Advisor may, from time to time, perform other commercial real estate and financial advisory services for our Advisor and its related parties, or in transactions related to the properties that are the subject of appraisals being performed for us, or otherwise, so long as such other services do not adversely affect the independence of the applicable appraiser as certified in the applicable appraisal report or the independence of our Independent Valuation Advisor.
Valuation of Consolidated Assets and Liabilities
Our NAV will reflect our pro rata ownership share of the fair values of certain consolidated assets and liabilities, as described below.
Real Property
The overarching principle of the real property appraisal process is to produce real property appraisals that represent credible estimates of fair value. The estimate of fair value developed in the appraisals of our real properties may not always reflect the value of, or may materially differ from, the value at which we would agree to buy or sell such assets. Further, we do not undertake to disclose the value at which we would be willing to buy or sell our real properties to any prospective or existing investor.
Each real property is appraised by a third-party appraiser (“Third-Party Appraisal Firm”) at least once per calendar year and reviewed by the Advisor and our Independent Valuation Advisor. We seek to schedule the appraisals by Third-Party Appraisal Firms evenly throughout the calendar year, such that an approximately equal portion of the real properties in our portfolio are appraised by a Third-Party Appraisal Firm each month, although we may have more or fewer appraisals in an individual month. In its review, our Independent Valuation Advisor, will provide an opinion as to the reasonableness of each appraisal report from Third-Party Appraisal Firms as well as provide a second, independent appraisal as part of its regular monthly appraisal duties, as described below.
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Valuation discrepancies between the appraisal provided by the Third-Party Appraisal Firm and the appraisal provided by our Independent Valuation Advisor are subject to our valuation dispute resolution procedures. Under these procedures, if the Third-Party Appraisal Firm and our Independent Valuation Advisor are unable to reconcile the key differences between the two appraisals, we will use the appraisal from our Independent Valuation Advisor in the calculation of our NAV until a new appraisal from a different Third-Party Appraisal Firm is obtained, reviewed for reasonableness by the Independent Valuation Advisor and used as the appraised value. In no event will a calendar year pass without having each real property appraised by a Third-Party Appraisal Firm unless such asset is being bought or sold in such calendar year.
Additionally, each real property is appraised each calendar month by our Independent Valuation Advisor, and such appraisals are reviewed by the Advisor. As described above, our Independent Valuation Advisor will review the appraisals from the Third-Party Appraisal Firms and provide an opinion as to the reasonableness of each appraisal report before reflecting any valuation change in its monthly appraisals of the real properties in our portfolio.
Notwithstanding, newly acquired real properties are initially valued at cost, which is expected to represent fair value at that time. Each newly acquired real property will be appraised by the Independent Valuation Advisor within three months following the month of acquisition, and thereafter will be subject to the regular monthly appraisal process described above. Additionally, each newly acquired real property will first be appraised by a Third-Party Appraisal Firm in the calendar year following the year of acquisition.
All appraisals are performed in accordance with the Uniform Standards of Professional Appraisal Practices, or USPAP, the real estate appraisal industry standards created by The Appraisal Foundation and the Code of Ethics & Standards of Professional Practice of the Appraised Institute. Each appraisal must be reviewed, approved, and signed by an individual with the professional MAI (Member of the Appraisal Institute) designation of the Appraisal Institute. Real property appraisals are reported on a free-and-clear basis (for example, no mortgage), irrespective of any property-level financing that may be in place. Such property-level debt or other financing ultimately are factored in and do impact our NAV in a manner described in more detail below.
We rely on the income approach as the primary methodology used by the Third Party Appraisal Firms and our Independent Valuation Advisor (together, the “Independent Appraisal Firms”) in valuing the real properties in our portfolio, whereby value is derived by determining the present value of a real property’s future cash flows (for example, discounted cash flow analysis). Consistent with industry practices, the income approach incorporates subjective judgments regarding comparable property rental rates and operating expense data, the appropriate capitalization and discount rates, and projections of future income and expenses based on market derived data and trends. Other methodologies that may also be used to value properties include sales comparisons and cost approaches. Because the real property appraisals involve significant
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professional judgment in the application of both observable and unobservable inputs, the estimated fair values of our real properties may differ from their actual realizable values or future appraised values. Our real property valuations may not reflect the liquidation value or net realizable value of our real properties because the valuations performed by our Independent Appraisal Firms involve subjective judgments about competitive market behavior and do not reflect transaction costs that would be incurred if we were to dispose of our real properties today. Transaction costs related to an acquisition or disposition will generally be factored into our NAV no later than the closing date for such transaction, and in some circumstances such as when an asset is anticipated to be acquired or disposed, we may factor into our NAV calculation a portion of the potential transaction price and related closing costs given the likelihood that the transaction will close.
Our Independent Appraisal Firms request and collect all reasonably available information that they deem relevant in valuing the real properties in our portfolio from a variety of sources including, but not limited to information from management and other information derived through our Independent Appraisal Firm’s database and other industry and market data. The Independent Appraisal Firms rely in part on property-level information provided by the Advisor, including: (i) historical and budgeted operating revenues and expenses of the property; (ii) lease agreements on the property; and (iii) information regarding recent or planned capital expenditures.
In conducting their investigation and analyses, our Independent Appraisal Firms take into account customary and accepted financial and commercial procedures and considerations as they deem relevant, which may include, without limitation, the review of documents, materials and information relevant to valuing the real properties that are provided by us or our Advisor. Although our Independent Appraisal Firms may review the information supplied or otherwise made available by us or our Advisor for reasonableness, they assume and rely upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to them by any other party and do not undertake any duty or responsibility to verify independently any of such information. With respect to operating or financial forecasts and other information and data to be provided to or otherwise to be reviewed by or discussed with our Independent Appraisal Firms, our Independent Appraisal Firms assume that such forecasts and other information and data were reasonably prepared in good faith reflecting the best currently available estimates and judgments of our management, board of directors and Advisor, and rely upon us to advise our Independent Appraisal Firms promptly if any material information previously provided becomes inaccurate or is required to be updated during the valuation period.
In performing their analyses, our Independent Appraisal Firms make numerous other assumptions with respect to the behavior of market participants, industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond their control and our control, as well as certain factual matters. For example, unless specifically informed to the contrary, our Independent Appraisal Firms may assume that we have clear and marketable title to each real property valued, that no title defects exist, that improvements were made in accordance with law, that no hazardous materials are present or were present previously,
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that no deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density or shape are pending or being considered. Furthermore, our Independent Appraisal Firms’ analysis, opinions and conclusions are necessarily based upon market, economic, financial and other circumstances and conditions existing at or prior to the appraisal, and any material change in such circumstances and conditions may affect our Independent Appraisal Firms’ analysis and conclusions. Our Independent Appraisal Firms’ appraisal reports may contain other assumptions, qualifications and limitations set forth in the respective appraisal reports that qualify the analysis, opinions and conclusions set forth therein.
Our Independent Appraisal Firms’ valuation reports are addressed solely to us and not to the public, may not be relied upon by any other person to establish an estimated value of our common stock, and will not constitute a recommendation to any person to purchase or sell any shares of our common stock. In preparing their appraisal reports, our Independent Appraisal Firms do not solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of our company.
Upon becoming aware of the occurrence of a material event impacting a real property, the Advisor will promptly notify our Independent Valuation Advisor. Our Independent Valuation Advisor determines the appropriate adjustment, if any, to be made to its estimated fair value of the real property during a given month and then updates its appraisal on the asset. For example, changes to underlying property fundamentals and overall market conditions, which may include: (i) an unexpected termination or renewal of a material lease; (ii) a material change in vacancy levels; (iii) an unanticipated structural or environmental event at a real property; or (iv) material capital markets events, any of which may cause the value of a real property to change materially. Furthermore, the values of our real properties are determined on an unencumbered basis. The effect of any property-level debt on our NAV is discussed further below.
Investments in land and development assets will be valued by our Independent Valuation Advisor monthly at estimated fair value. Land cost and other factors such as the status of land entitlements, permitting, jurisdictional approvals, estimated overall development completion, and estimated development profit are considered in determining estimates of fair value. Upon the earlier of three months following the month of stabilization or twelve months after substantial completion, we will obtain an appraisal from a Third-Party Appraisal Firm, and thereafter the valuation process will follow the regular valuation process described above.
Real Estate-Related Assets and Other Assets
Publicly traded debt and publicly traded equity securities related to real estate (collectively, “Real Estate-Related Assets”) that are not restricted as to salability or transferability are fair valued monthly based on publicly available information. Generally, to the extent the information is available, such Real Estate-Related Assets are valued at the last trade of such securities that was executed at or prior to closing on the valuation day or, in the absence of such trade, the last ‘‘bid’’
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price. The value of these Real Estate-Related Assets that are restricted as to salability or transferability may be adjusted by the pricing source for a liquidity discount. In determining the amount of such discount, consideration is given to the nature and length of such restriction and the relative volatility of the market price of the asset.
Other assets include, but may not be limited to, derivatives (other than interest rate hedges), credit rated government securities, cash and cash equivalents and accounts receivable. Estimates of the fair values of other assets are determined using widely accepted methodologies and, where available, on the basis of publicly available pricing quotations and information.
Other assets also include individual investments in mortgages, mortgage participations, mezzanine loans, and loans associated with our DST Program (as described under the “Valuation of Assets and Liabilities Associated with the DST Program” heading below) that are included in our determination of NAV at estimated fair value using widely accepted valuation methodologies.
Pursuant to our valuation procedures, our board of directors, including a majority of our independent directors, approves the pricing sources of our Real Estate-Related Assets and other assets. In general, these sources are third parties other than our Advisor. However, we may utilize the Advisor or a Black Creek Group LLC affiliate as a pricing source if the asset is not considered material to the Company or there are no other pricing sources reasonably available, and provided that our board of directors, including a majority of our independent directors, must approve the initial valuation performed by our Advisor and any subsequent material adjustments made by our Advisor. The Independent Valuation Advisor generally does not act as the third-party pricing source for these assets, although it may, under certain circumstances, be engaged to do so.
Liabilities, Excluding Property-Level Mortgages, Corporate-Level Credit Facilities and Interest Rate Hedges
Except as noted below, we include an estimate of the fair values of our liabilities as part of our NAV calculation. These liabilities include, but may not be limited to, fees and reimbursements payable to the Advisor and its affiliates, accounts payable and accrued expenses, and other liabilities. Pursuant to our valuation procedures, our board of directors, including a majority of our independent directors, approves the pricing sources of our liabilities which may include third parties or our Advisor or its affiliates.
Under applicable GAAP, we record liabilities for 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 our Dealer Manager in future periods. However, 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.
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The estimated fair values of these liabilities may be determined by our Advisor or another suitable pricing source. Our Independent Valuation Advisor is not responsible for appraising or reviewing these liabilities.
Liabilities - Property-Level Mortgages, Corporate-Level Credit Facilities and Interest Rate Hedges
Our property-level mortgages and corporate-level credit facilities that are intended to be held to maturity, including those subject to interest rates hedges, are valued at par (i.e. at their respective outstanding balances) by the Advisor. Because we often utilize interest rate hedges to stabilize interest payments (i.e. to fix all-in interest rates through interest rate swaps or to limit interest rate exposure through interest rate caps) on individual loans, each loan and associated interest rate hedge are treated as one financial instrument which are valued at par if intended to be held to maturity (which for fixed rate debt not subject to interest rate hedges may be the date near maturity at which time the debt will be eligible for prepayment at par for purposes herein). This policy of valuing at par will apply regardless of whether any given interest rate hedge is considered as an asset or liability for GAAP purposes.
Our property-level mortgages and corporate-level credit facilities that are not intended to be held to maturity (in conjunction with any associated interest rate hedges that are not intended to be held to maturity) are fair valued by the Advisor using widely accepted valuation methodologies based on information provided by various qualified third-party valuation experts and data sources. Our Independent Valuation Advisor will review the Advisor’s fair value estimates for the property-level mortgages and corporate-level credit facilities that are not intended to be held to maturity, excluding any impacts from interest rate hedges.
Estimated prepayment penalties will not factor into the valuation of our debt unless an interest rate hedge is definitively not intended to be held to maturity, in which case a hedge mark to market adjustment will be made at such time using a third-party pricing source.
Debt that is not intended to be held to maturity means any property-level mortgages that we definitively intend to prepay in association with any asset considered as held-for-sale from a GAAP perspective, other property-level mortgages or corporate-level credit facilities that we definitively intend to prepay, or any interest rate hedge that we definitively intend to terminate.
In addition, for non-recourse mortgages and interest rate hedges, the combined value of the net liability for each mortgage and associated interest rate hedge is limited to the value of the underlying asset(s), so as to not make the equity of such asset(s) less than zero.
Costs and expenses incurred to secure such financings are amortized over the life of the applicable loan. Unless costs can be specifically identified, we allocate the financing costs and expenses incurred with obtaining multiple loans that are not directly related to any single loan among the applicable loans, generally pro rata based on the amount of proceeds from each loan.
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Valuation of Assets and Liabilities Associated with the DST Program
We have initiated a program (the “DST Program”) to raise capital in private placements through the sale of beneficial interests in specific Delaware statutory trusts holding real properties (each a “DST Property” and collectively, the “DST Properties”). DST Properties may be sourced from real properties currently indirectly owned by BCI IV Operating Partnership LP (the “Operating Partnership”) or may be newly acquired. Pursuant to the DST Program, we, through a subsidiary of our Operating Partnership, will hold a long-term leasehold interest in each DST Property pursuant to a master lease that is guaranteed by the Operating Partnership, while third-party investors own some or all of the DST Property through a Delaware statutory trust. Under the master lease, the Operating Partnership acts as a landlord to the occupying tenants and is responsible for subleasing the DST Property to such tenants, which means that we bear the risk that the underlying cash flow received by us from the DST Property may be less than the master lease payments made by us. Additionally, the Operating Partnership will retain a fair market value purchase option giving it the right, but not the obligation, to acquire the beneficial interests in the Delaware statutory trusts from the investors at a later time in exchange for units in the Operating Partnership (the “FMV Option”).
Due to our continuing involvement with the DST Properties through the master lease arrangements and the FMV Options, we will include DST Properties in our determination of NAV at fair market value in the same manner as described under “Real Property” above. In addition, the cash received by us or a loan made by us in exchange for the sale of interests in a DST Property will be valued as assets and shall initially equal the value of the real property subject to the master lease, which will be valued as a liability. Accordingly, the sale of interests in a DST Property has no initial net effect to our NAV. Thereafter, our Independent Valuation Advisor will value the real property subject to the master lease liability quarterly using a discounted cash flow methodology. Therefore, any differences between the fair value of the underlying real property and the fair value of the real property subject to the master lease obligations will accrue into our NAV not less frequently than quarterly. The Advisor will value any loan assets used to purchase interests in the DST Program using the same methodology used to value our other debt investments, with such values reviewed for reasonableness by our Independent Valuation Advisor.
Estimated NAV of Unconsolidated Investments
Unconsolidated real properties held through joint ventures or partnerships are valued according to the valuation procedures set by such joint ventures or partnerships. At least once per calendar year, each unconsolidated real property will be appraised by a Third-Party Appraisal Firm. If the valuation procedures of the applicable joint ventures or partnerships do not accommodate a monthly determination of the fair value of real property, the Advisor will determine the estimated fair value of the unconsolidated real properties for those interim periods. The Advisor will also determine on a monthly basis the fair value of any other applicable assets
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and liabilities of the joint venture using similar practices that we utilize for our consolidated portfolio.
Once the associated fair values of assets and liabilities are determined, the value of our interest in any joint venture or partnership is then determined by using a hypothetical liquidation calculation based on our ownership percentage of the joint venture or partnership’s estimated NAV. If deemed an appropriate alternative to fair valuing applicable assets and liabilities individually, unconsolidated assets and liabilities held in a joint venture or partnership that acquires multiple real properties over time may be valued as a single investment. The value of our interest in any joint venture or partnership that is a minority interest or is restricted as to salability or transferability may reflect or be adjusted for a minority or liquidity discount. In determining the amount of such discount, consideration may be given to a variety of factors, including, without limitation, the nature and length of such restriction.
Our Independent Valuation Advisor is not responsible for providing monthly appraisals of unconsolidated real properties, reviewing third-party appraisals of unconsolidated real properties, or valuing our unconsolidated investments per these valuation procedures; however, it may be engaged to do so.
Probability-Weighted Adjustments
In certain circumstances, such as in an acquisition or disposition process, we may be aware of a contingency or contingencies that could impact the value of our assets, liabilities, income or expenses for purposes of our NAV calculation. For example, we may be party to an agreement to sell a property at a value different from the property value being used in our current NAV calculation. The same agreement may require the buyer to assume a related mortgage loan with a fair value that is different from the value of the loan being used in our current NAV calculation. The transaction may also involve costs for brokers, transfer taxes, and other items upon a successful closing. The Advisor may take such contingencies into account when determining the values of certain components of our NAV (such as the carrying value of our liabilities or expense accruals) for purposes of our NAV calculation. These adjustments may be made either in whole or in part over a period of time, and the Advisor may take into account (a) the estimated probability of the contingencies occurring and (b) the estimated impact to NAV if the contingencies were to occur when determining the timing and magnitude of any adjustments to NAV.
NAV and NAV per Share Calculation
Our NAV per share is calculated as of the last calendar day of each month for each of our outstanding classes of stock, and is available generally within 15 calendar days after the end of the applicable month. Our NAV per share is calculated by ALPS, a third-party firm approved by our board of directors, including a majority of our independent directors. Our board of directors, including a majority of our independent directors, may replace ALPS or any other party involved
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in our valuation procedures with another party, including our Advisor, if it is deemed appropriate to do so.
Each month, before taking into consideration accrued dividends or class-specific distribution fee accruals, any change in the aggregate NAV (the “Aggregate Fund NAV”) of our outstanding shares of common stock, along with the partnerhship units of our Operating Partnership (“OP Units”) held by third parties (collectively, “Fund Interests”) from the prior month (whether an increase or decrease) is allocated among each class or series of Fund Interest based on each class’s or series’s relative percentage of the previous Aggregate Fund NAV. Changes in the Aggregate Fund NAV reflect factors including, but not limited to, unrealized/realized gains (losses) on the value of our real property portfolio, increases or decreases in Real Estate-Related Assets and other assets and liabilities, and monthly accruals for income and expenses (including accruals for performance based fees, if any, advisory fees and distribution fees) and distributions to investors.
Our most significant source of income is property-level net operating income. We accrue revenues and expenses on a monthly basis based on actual leases and operating expenses in that month. For the first month following a real property acquisition, we will calculate and accrue net operating income with respect to such property based on the performance of the property before the acquisition and the contractual arrangements in place at the time of the acquisition, as identified and reviewed through our due diligence and underwriting process in connection with the acquisition. For NAV calculation purposes, organization and offering costs incurred as part of our corporate-level expenses related to our primary offering reduce NAV as incurred. Organization and offering costs incurred as part of our corporate-level expenses related to the DST Program reduce NAV on a monthly basis over a two-year period following the completion of each DST Program offering.
Following the calculation and allocation of changes in the Aggregate Fund NAV as described above, NAV for each class is adjusted for accrued dividends and ongoing distribution fees that are currently payable, to determine the monthly NAV. Ongoing distribution fees are allocated on a class-specific basis and borne by all holders of the applicable class. These class-specific fees may differ for each class, even when the NAV of each class is the same. We normally expect that the allocation of ongoing distribution fees on a class-specific basis will result in different amounts of distributions being paid with respect to each class of shares. However, if no distributions are authorized for a certain period, or if they are authorized in an amount less than the allocation of class-specific fees with respect to such period, then pursuant to these valuation procedures, the class-specific fee allocations may lower the NAV of a share class. Therefore, as a result of the different ongoing fees allocable to each share class, each share class could have a different NAV per share. If the NAV of our classes are different, then changes to our assets and liabilities that are allocable based on NAV may also be different for each class. Because the purchase price of shares in the primary offering is equal to the transaction price, which generally equals the most recently disclosed monthly NAV per share, plus the upfront selling commissions and dealer manager fees,
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which are effectively paid by purchasers of shares at the time of purchase, the upfront selling commissions and dealer manager fees have no effect on the NAV of any class.
NAV per share for each class is calculated by dividing such class’s NAV at the end of each month by the number of shares outstanding for that class on such day.
NAV of our Operating Partnership and OP Units
Our valuation procedures include the following methodology to determine the monthly NAV of our Operating Partnership and the OP Units. Our Operating Partnership has certain classes or series of OP Units that are each economically equivalent to a corresponding class of shares. Accordingly, on the last day of each month, for such classes or series of OP Units, the NAV per OP Unit equals the NAV per share of the corresponding class. Certain other classes or series of OP Units may not be economically equivalent to a class of shares. The NAV of these classes or series of OP Units shall initially be set at a specified value, and thereafter adjusted as described above under “NAV and NAV per Share Calculation” as if they were a separate class of shares, taking into account their specific economic terms (specifically, their specific dividends and ongoing distribution fees). The NAV of our Operating Partnership on the last day of each month equals the sum of the NAVs of each outstanding OP Unit on such day.
Oversight by our Board of Directors
All parties engaged by us in connection with our valuation procedures, including Altus Group, ALPS and our Advisor, are subject to the oversight of our board of directors. As part of this process, our Advisor reviews the estimates of the fair values of our real properties, Real Estate-Related Assets, and other assets and liabilities within our portfolio for consistency with our valuation guidelines and the overall reasonableness of the valuation conclusions, and informs our board of directors of its conclusions. Although Third-Party Appraisal Firms, our Independent Valuation Advisor, or other pricing sources may consider any comments received from us or our Advisor or other valuation sources for their individual valuations, the final estimated fair values of our real properties are determined by our Independent Valuation Advisor, and the final estimates of fair values of our Real Estate-Related Assets,our other assets, and our liabilities are determined by the applicable pricing source as described above. With respect to the valuation of our real properties, our Independent Valuation Advisor provides our board of directors with periodic valuation reports and is available to meet with our board of directors to review valuation information, as well as our valuation guidelines and the operation and results of the valuation process generally. Our board of directors has the right to engage additional valuation firms and pricing sources to review the valuation process or valuations, if deemed appropriate.
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Review of and Changes to Our Valuation Procedures
At least once each calendar year, our board of directors, including a majority of our independent directors, reviews the appropriateness of our valuation procedures with input from our Independent Valuation Advisor.
From time to time, our board of directors, including a majority of our independent directors, may adopt changes to the valuation procedures if it: (1) determines that such changes are likely to result in a more accurate reflection of NAV or a more efficient or less costly procedure for the determination of NAV without having a material adverse effect on the accuracy of such determination; or (2) otherwise reasonably believes a change is appropriate for the determination of NAV.
We will publicly announce material changes to our valuation procedures.
Limitations on the Calculation of NAV
The most significant component of our NAV consists of the estimated fair values of real properties and, as with any real property valuation protocol, the estimated fair values of real properties are based on a number of judgments, assumptions or opinions about future events that may or may not prove to be correct. The use of different judgments, assumptions or opinions could result in a different estimate of the value of our real properties. Although the methodologies contained in the valuation procedures are designed to operate reliably within a wide variety of circumstances, it is possible that in certain unanticipated situations or after the occurrence of certain extraordinary events (such as a terrorist attack or an act of nature), our ability to implement and coordinate our NAV procedures may be impaired or delayed, including in circumstances where there is a delay in accessing or receiving information from vendors or other reporting agents. Further, the NAV per share should not be viewed as being determinative of the value of our common stock that may be received in a sale to a third party or the value at which our stock would trade on a national stock exchange. Our board of directors may suspend this offering and the share redemption program if it determines that the calculation of NAV may be materially incorrect or there is a condition that restricts the valuation of a material portion of our assets.
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