|
|
|
|
Maryland
|
|
81-0862795
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
332 S Michigan Avenue, Ninth Floor
Chicago, Illinois
|
|
60604
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
Large accelerated filer
o
|
|
Accelerated filer
o
|
|
Non-accelerated filer
þ
|
|
Smaller reporting company
þ
|
|
Emerging Growth Company
þ
|
Title of each class
|
|
Trading Symbol
|
|
Name of each exchange on which registered
|
Common Stock
|
|
N/A
|
|
N/A
|
|
|
|
|
|
Part I - Financial Information
|
|
|
|
|
Item 1.
|
Condensed Consolidated Financial Statements (unaudited)
|
|
|
Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018
|
|
|
Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018
|
|
|
Condensed Consolidated Statements of Equity for the three months ended March 31, 2019 and 2018
|
|
|
Condensed Consolidated Statements of Cash Flow for the three months ended March 31, 2019 and 2018
|
|
|
Notes to Condensed Consolidated Financial Statements
|
|
|
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
Item 4.
|
Controls and Procedures
|
|
|
|
|
|
Part II - Other Information
|
|
Item 1.
|
Legal Proceedings
|
|
Item 1A.
|
Risk Factors
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
Item 3.
|
Defaults Upon Senior Securities
|
|
Item 4.
|
Mine Safety Disclosures
|
|
Item 5.
|
Other Information
|
|
Item 6.
|
Exhibits
|
|
|
Exhibit Index
|
|
|
Signatures
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(Unaudited)
|
|
|||||
Assets
|
|
|
|
||||
Investment properties
|
|
|
|
||||
Land
|
$
|
75,999
|
|
|
$
|
72,630
|
|
Building and other improvements
|
257,012
|
|
|
241,897
|
|
||
Construction in progress
|
41
|
|
|
32
|
|
||
Total
|
333,052
|
|
|
314,559
|
|
||
Less accumulated depreciation
|
(75,236
|
)
|
|
(72,822
|
)
|
||
Net investment properties
|
257,816
|
|
|
241,737
|
|
||
Cash and cash equivalents
|
99,990
|
|
|
80,512
|
|
||
Restricted cash and escrows
|
3,695
|
|
|
3,229
|
|
||
Accounts and rents receivable (net of allowance of $1,156 and $1,161)
|
6,494
|
|
|
5,861
|
|
||
Intangible assets, net
|
467
|
|
|
408
|
|
||
Deferred costs and other assets
|
4,212
|
|
|
4,233
|
|
||
Total assets
|
$
|
372,674
|
|
|
$
|
335,980
|
|
Liabilities
|
|
|
|
||||
Debt, net
|
$
|
74,871
|
|
|
$
|
34,953
|
|
Accounts payable and accrued expenses
|
7,883
|
|
|
11,653
|
|
||
Intangible liabilities, net
|
2,890
|
|
|
3,004
|
|
||
Other liabilities
|
2,020
|
|
|
2,270
|
|
||
Total liabilities
|
87,664
|
|
|
51,880
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders
’
Equity
|
|
|
|
||||
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 875,589,393 and 871,688,704 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
|
8,756
|
|
|
8,717
|
|
||
Additional paid-in capital
|
1,408,828
|
|
|
1,407,502
|
|
||
Accumulated distributions in excess of net income
|
(1,132,574
|
)
|
|
(1,132,119
|
)
|
||
Total stockholders’ equity
|
285,010
|
|
|
284,100
|
|
||
Total liabilities and stockholders' equity
|
$
|
372,674
|
|
|
$
|
335,980
|
|
|
|
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenues
|
|
|
|
||||
Rental income
|
$
|
10,141
|
|
|
$
|
10,466
|
|
Other property income
|
116
|
|
|
179
|
|
||
Total revenues
|
$
|
10,257
|
|
|
$
|
10,645
|
|
Expenses
|
|
|
|
||||
Property operating expenses
|
1,904
|
|
|
2,304
|
|
||
Real estate taxes
|
1,306
|
|
|
1,474
|
|
||
Depreciation and amortization
|
2,730
|
|
|
3,131
|
|
||
General and administrative expenses
|
4,383
|
|
|
4,179
|
|
||
Total expenses
|
10,323
|
|
|
11,088
|
|
||
Gain on sale of investment properties, net
|
—
|
|
|
25
|
|
||
Loss from operations
|
$
|
(66
|
)
|
|
$
|
(418
|
)
|
Interest income
|
369
|
|
|
133
|
|
||
Interest expense
|
(758
|
)
|
|
(706
|
)
|
||
Loss before income taxes
|
(455
|
)
|
|
(991
|
)
|
||
Income tax benefit
|
—
|
|
|
155
|
|
||
Net loss
|
$
|
(455
|
)
|
|
$
|
(836
|
)
|
Net loss per common share, basic and diluted
|
$
|
—
|
|
|
$
|
—
|
|
Weighted average number of common shares outstanding, basic and diluted
|
873,379,003
|
|
|
870,102,100
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Accumulated
Distributions in Excess of Net Income |
|
Total
|
|||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance at January 1, 2018
|
868,423,581
|
|
|
$
|
8,684
|
|
|
$
|
1,406,460
|
|
|
$
|
(1,157,047
|
)
|
|
$
|
258,097
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(836
|
)
|
|
(836
|
)
|
||||
Share-based compensation
|
3,078,425
|
|
|
31
|
|
|
985
|
|
|
1
|
|
|
1,017
|
|
||||
Common stock repurchased and retired
|
(116,334
|
)
|
|
$
|
(1
|
)
|
|
$
|
(40
|
)
|
|
$
|
—
|
|
|
$
|
(41
|
)
|
Balance at March 31, 2018
|
871,385,672
|
|
|
$
|
8,714
|
|
|
$
|
1,407,405
|
|
|
$
|
(1,157,882
|
)
|
|
$
|
258,237
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance at January 1, 2019
|
871,688,704
|
|
|
$
|
8,717
|
|
|
$
|
1,407,502
|
|
|
$
|
(1,132,119
|
)
|
|
$
|
284,100
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(455
|
)
|
|
(455
|
)
|
||||
Share-based compensation
|
3,900,689
|
|
|
$
|
39
|
|
|
$
|
1,326
|
|
|
$
|
—
|
|
|
$
|
1,365
|
|
Balance at March 31, 2019
|
875,589,393
|
|
|
$
|
8,756
|
|
|
$
|
1,408,828
|
|
|
$
|
(1,132,574
|
)
|
|
$
|
285,010
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(455
|
)
|
|
$
|
(836
|
)
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
2,730
|
|
|
3,129
|
|
||
Amortization of above and below market leases, net
|
(113
|
)
|
|
(103
|
)
|
||
Amortization of debt discounts and financing costs
|
38
|
|
|
21
|
|
||
Straight-line rental income
|
(392
|
)
|
|
(54
|
)
|
||
Gain on sale of investment properties, net
|
—
|
|
|
(25
|
)
|
||
Non-cash stock-based compensation expense
|
1,994
|
|
|
1,851
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts and rents receivable
|
(242
|
)
|
|
(425
|
)
|
||
Deferred costs and other assets
|
(35
|
)
|
|
(386
|
)
|
||
Accounts payable and accrued expenses
|
(3,279
|
)
|
|
(2,128
|
)
|
||
Other liabilities
|
(250
|
)
|
|
84
|
|
||
Net cash flows (used in) provided by operating activities
|
$
|
(4
|
)
|
|
$
|
1,128
|
|
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures and tenant improvements
|
(118
|
)
|
|
(634
|
)
|
||
Acquisition of investment properties, net
|
(7,621
|
)
|
|
—
|
|
||
Proceeds from sale of investment properties
|
—
|
|
|
60
|
|
||
Payment of leasing fees
|
(17
|
)
|
|
(219
|
)
|
||
Net cash flows used in investing activities
|
$
|
(7,756
|
)
|
|
$
|
(793
|
)
|
Cash flows from financing activities:
|
|
|
|
||||
Payment of debt issuance costs
|
(392
|
)
|
|
—
|
|
||
Proceeds from credit agreement
|
29,375
|
|
|
—
|
|
||
Principal payments of mortgage debt
|
(159
|
)
|
|
(273
|
)
|
||
Payment for tax withholding for share-based compensation
|
(1,120
|
)
|
|
(876
|
)
|
||
Net cash flows provided by (used in) financing activities
|
$
|
27,704
|
|
|
$
|
(1,149
|
)
|
Net increase (decrease) in cash and cash equivalents
|
$
|
19,944
|
|
|
$
|
(814
|
)
|
Cash, cash equivalents and restricted cash, at beginning of period
|
83,741
|
|
|
56,007
|
|
||
Cash, cash equivalents and restricted cash, at end of period
|
$
|
103,685
|
|
|
$
|
55,193
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
556
|
|
|
$
|
687
|
|
Cash paid for taxes
|
$
|
16
|
|
|
$
|
85
|
|
Supplemental schedule of non-cash investing and financing activities:
|
|
|
|
||||
Non-cash accruals for capital expense and investment in development
|
$
|
—
|
|
|
$
|
427
|
|
Lease assets and liabilities arising from the recognition of right-of-use assets
|
$
|
303
|
|
|
$
|
—
|
|
Assumption of mortgage debt on acquired properties
|
$
|
11,449
|
|
|
$
|
—
|
|
•
|
whether the lease stipulates how and on what a tenant improvement allowance may be spent;
|
•
|
whether the tenant or landlord retains legal title to the improvements;
|
•
|
the uniqueness of the improvements;
|
•
|
the expected economic life of the tenant improvements relative to the length of the lease; and
|
•
|
who constructs or directs the construction of the improvements.
|
•
|
Estimate the value of the property “as if vacant” as of the acquisition date;
|
•
|
Allocate the value of the property among land, building, and other building improvements and determine the associated useful life for each;
|
•
|
Calculate the value and associated life of above- and below-market leases on a tenant-by-tenant basis. The difference between the contractual rental rates and our estimate of market rental rates is measured over a period equal to the remaining term of the leases (using a discount rate which reflects the risks associated with the leases acquired, including geographical location, size of leased area, tenant profile and credit risk);
|
•
|
Estimate the fair value of the tenant improvements, legal expenses and leasing commissions incurred to obtain the leases and calculate the associated useful life for each;
|
•
|
Estimate the fair value of assumed debt, if any, and value the favorable or unfavorable debt position acquired; and
|
•
|
Estimate the intangible value of the in-place leases based on lease execution costs of similar leases as well as lost rent payments during an assumed lease-up period and their associated useful lives on a tenant-by-tenant basis.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Cash and cash equivalents
|
$
|
99,990
|
|
|
$
|
80,512
|
|
Restricted cash
|
3,695
|
|
|
3,229
|
|
||
Total cash, cash equivalents and restricted cash
|
$
|
103,685
|
|
|
$
|
83,741
|
|
2019
|
$
|
20,985
|
|
2020
|
17,426
|
|
|
2021
|
14,130
|
|
|
2022
|
11,507
|
|
|
2023
|
10,439
|
|
|
Thereafter
|
36,382
|
|
|
Total
|
$
|
110,869
|
|
2019
|
$
|
27,551
|
|
2020
|
17,323
|
|
|
2021
|
14,014
|
|
|
2022
|
11,423
|
|
|
2023
|
10,358
|
|
|
Thereafter
|
36,357
|
|
|
Total
|
$
|
117,026
|
|
2019
|
$
|
16
|
|
2020
|
21
|
|
|
2021
|
21
|
|
|
2022
|
21
|
|
|
2023
|
21
|
|
|
2024
|
21
|
|
|
Thereafter
|
373
|
|
|
|
494
|
|
|
Imputed interest
|
(191
|
)
|
|
Lease liability
|
$
|
303
|
|
2019
|
$
|
21
|
|
2020
|
21
|
|
|
2021
|
21
|
|
|
2022
|
21
|
|
|
2023
|
21
|
|
|
2024
|
21
|
|
|
Thereafter
|
373
|
|
|
Total
|
$
|
499
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Accrued real estate taxes
|
$
|
5,837
|
|
|
$
|
5,669
|
|
Accrued compensation
|
950
|
|
|
3,232
|
|
||
Accrued interest payable
|
283
|
|
|
119
|
|
||
Other accrued expenses
|
813
|
|
|
2,633
|
|
||
|
$
|
7,883
|
|
|
$
|
11,653
|
|
For the year ended December 31,
|
As of March 31, 2019
|
|
Weighted average interest rate
|
|||
2019
|
—
|
|
|
—
|
%
|
|
2020
|
—
|
|
|
—
|
%
|
|
2021
|
—
|
|
|
—
|
%
|
|
2022
|
9,314
|
|
|
5.24
|
%
|
|
Thereafter
|
67,026
|
|
|
4.39
|
%
|
|
Total
|
$
|
76,340
|
|
|
4.49
|
%
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
|
•
|
Level 2 - Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
|
•
|
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
||||||||
Debt
|
$
|
76,340
|
|
|
$
|
79,738
|
|
|
$
|
35,443
|
|
|
$
|
35,222
|
|
|
Total
|
|
Net Lease
|
|
Retail
|
|
Multi-Tenant
Office |
|
Multi-family
|
|
Other
|
||||||||||||
Rental income
|
$
|
10,141
|
|
|
$
|
3,180
|
|
|
$
|
4,992
|
|
|
$
|
753
|
|
|
$
|
1,216
|
|
|
$
|
—
|
|
Other property income
|
116
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
95
|
|
|
—
|
|
||||||
Total income
|
10,257
|
|
|
3,180
|
|
|
5,013
|
|
|
753
|
|
|
1,311
|
|
|
—
|
|
||||||
Operating expenses
|
3,210
|
|
|
157
|
|
|
2,167
|
|
|
175
|
|
|
553
|
|
|
158
|
|
||||||
Net operating income (loss)
|
$
|
7,047
|
|
|
$
|
3,023
|
|
|
$
|
2,846
|
|
|
$
|
578
|
|
|
$
|
758
|
|
|
$
|
(158
|
)
|
Non-allocated expenses (a)
|
(7,113
|
)
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other income and expenses (b)
|
(389
|
)
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss
|
$
|
(455
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Real estate assets, net (c)
|
$
|
258,284
|
|
|
$
|
35,927
|
|
|
$
|
113,941
|
|
|
$
|
26,808
|
|
|
$
|
72,130
|
|
|
$
|
9,478
|
|
Non-segmented assets (d)
|
114,390
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets
|
$
|
372,674
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures
|
$
|
118
|
|
|
—
|
|
|
95
|
|
|
8
|
|
|
15
|
|
|
—
|
|
(a)
|
Non-allocated expenses consist of general and administrative expenses and depreciation and amortization.
|
(b)
|
Other income and expenses consists of interest income and interest expense
|
(c)
|
Real estate assets include intangible assets, net of amortization.
|
(d)
|
Non-segmented assets include cash and cash equivalents, restricted cash and escrows, accounts and rents receivable and deferred costs and other assets
|
|
Total
|
|
Net Lease
|
|
Retail
|
|
Multi-Tenant
Office |
|
Multi-family
|
|
Other
|
||||||||||||
Rental income
|
$
|
10,466
|
|
|
$
|
3,185
|
|
|
$
|
6,063
|
|
|
$
|
921
|
|
|
$
|
297
|
|
|
$
|
—
|
|
Other property income
|
179
|
|
|
—
|
|
|
9
|
|
|
87
|
|
|
83
|
|
|
—
|
|
||||||
Total income
|
10,645
|
|
|
3,185
|
|
|
6,072
|
|
|
1,008
|
|
|
380
|
|
|
—
|
|
||||||
Operating expenses
|
3,778
|
|
|
189
|
|
|
2,425
|
|
|
757
|
|
|
184
|
|
|
223
|
|
||||||
Net operating income (loss)
|
$
|
6,867
|
|
|
$
|
2,996
|
|
|
$
|
3,647
|
|
|
$
|
251
|
|
|
$
|
196
|
|
|
$
|
(223
|
)
|
Non-allocated expenses (a)
|
(7,310
|
)
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other income and expenses (b)
|
(418
|
)
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gain on sale of investment properties (c)
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss
|
$
|
(836
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Real estate assets, net (d)
|
$
|
264,030
|
|
|
$
|
42,024
|
|
|
$
|
146,652
|
|
|
$
|
46,461
|
|
|
$
|
19,239
|
|
|
$
|
9,654
|
|
Non-segmented assets (e)
|
63,327
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets
|
$
|
327,357
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures
|
$
|
634
|
|
|
—
|
|
|
466
|
|
|
135
|
|
|
—
|
|
|
33
|
|
(a)
|
Non-allocated expenses consist of general and administrative expenses and depreciation and amortization.
|
(b)
|
Other income and expenses consist of other income, interest income, interest expense and income tax expense.
|
(c)
|
Gain on the sale of investment properties is related to a parcel of
one
retail asset
|
(d)
|
Real estate assets include intangible assets, net of amortization.
|
(e)
|
Non-segmented assets include cash and cash equivalents, restricted cash and escrows, accounts and rents receivable and deferred costs and other assets
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Numerator:
|
|
|
|
||||
Net loss
|
$
|
(455
|
)
|
|
$
|
(836
|
)
|
|
|
|
|
||||
Denominator:
|
|
|
|
||||
Weighted average shares outstanding - Basic and Diluted
|
873,379,003
|
|
|
870,102,100
|
|
||
|
|
|
|
||||
Basic and diluted earnings per share:
|
|
|
|
||||
Loss per share
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Non-Vested stock awards
|
|
Stock Awards
|
|
Weighted Average Grant Date Fair Value
|
|||
Balance at January 1, 2019
|
|
2,121,212
|
|
|
$
|
0.33
|
|
Granted
|
|
5,814,286
|
|
|
0.35
|
|
|
Vested
|
|
(7,100,000
|
)
|
|
0.35
|
|
|
Other
(1)
|
|
(121,212
|
)
|
|
—
|
|
|
Balance at March 31, 2019
|
|
714,286
|
|
|
$
|
0.35
|
|
(1)
Represents the change in the number of shares granted in 2018 based on an estimated net asset value per share of $0.33 and the actual shares vested in 2019 based on an estimated net asset value per share of $0.35.
|
|
As of March 31,
|
||||||
|
2019
|
|
2018
|
||||
Economic occupancy
(a)
|
91.3
|
%
|
|
82.6
|
%
|
||
Rent per square foot
(b)
|
$
|
16.26
|
|
|
$
|
15.41
|
|
(a)
|
Economic occupancy is defined as the percentage of total gross leasable area for which a tenant is obligated to pay rent under the terms of its lease agreement, regardless of the actual use or occupation by the tenant of the area being leased. Actual use may be less than economic square footage.
|
(b)
|
Rent per square foot is computed as annualized rent divided by the total occupied square footage at the end of the period. Annualized rent is computed as revenue for the last month of the period multiplied by twelve months. Annualized rent includes the effect of rent abatements, lease inducements and straight-line rent GAAP adjustments.
|
|
(in thousands)
|
|||||||||||||
|
Three Months Ended March 31,
|
|||||||||||||
|
2019
|
|
2018
|
|
Increase (Decrease)
|
|||||||||
Net loss
|
$
|
(455
|
)
|
|
$
|
(836
|
)
|
|
$
|
(381
|
)
|
|
45.6
|
%
|
|
(in thousands)
|
|||||||||||||
|
For the Three months ended March 31,
|
|||||||||||||
|
2019
|
|
2018
|
|
Increase (Decrease)
|
|||||||||
Income:
|
|
|
|
|
|
|
|
|||||||
Rental income
|
$
|
10,141
|
|
|
$
|
10,466
|
|
|
$
|
(325
|
)
|
|
(3.1
|
)%
|
Other property income
|
116
|
|
|
179
|
|
|
(63
|
)
|
|
(35.2
|
)%
|
|||
Total revenues
|
10,257
|
|
|
10,645
|
|
|
(388
|
)
|
|
(3.6
|
)%
|
|||
|
|
|
|
|
|
|
|
|||||||
Operating Expenses:
|
|
|
|
|
|
|
|
|||||||
Property operating expenses
|
1,904
|
|
|
2,304
|
|
|
(400
|
)
|
|
(17.4
|
)%
|
|||
Real estate taxes
|
1,306
|
|
|
1,474
|
|
|
(168
|
)
|
|
(11.4
|
)%
|
|||
Depreciation and amortization
|
2,730
|
|
|
3,131
|
|
|
(401
|
)
|
|
(12.8
|
)%
|
|||
General and administrative expenses
|
4,383
|
|
|
4,179
|
|
|
204
|
|
|
4.9
|
%
|
|
(in thousands)
|
|||||||||||||
|
For the Three months ended March 31,
|
|||||||||||||
|
2019
|
|
2018
|
|
Increase (Decrease)
|
|||||||||
Non-operating income and expenses:
|
|
|
|
|
|
|
|
|||||||
Interest income
|
$
|
369
|
|
|
$
|
133
|
|
|
$
|
236
|
|
|
177.4
|
%
|
Gain on sale of investment properties, net
|
—
|
|
|
25
|
|
|
(25
|
)
|
|
(100.0
|
)%
|
|||
Interest expense
|
(758
|
)
|
|
(706
|
)
|
|
52
|
|
|
(7.4
|
)%
|
|||
Income tax benefit
|
—
|
|
|
155
|
|
|
(155
|
)
|
|
(100.0
|
)%
|
Lease Expiration Year
|
Number of
Expiring Leases
|
|
Gross Leasable Area (GLA) of
Expiring Leases
(Sq. Ft.)
|
|
Annualized
Rent of
Expiring Leases
(in thousands)
|
|
Percent of Total
GLA
|
|
Percent of Total
Annualized
Rent
|
|
Expiring
Rent/Square
Foot
|
||||||||
2019
|
15
|
|
|
91,723
|
|
|
$
|
1,386,484
|
|
|
4.4
|
%
|
|
4.1
|
%
|
|
$
|
15.12
|
|
2020
|
37
|
|
|
531,851
|
|
|
13,731,988
|
|
|
25.4
|
%
|
|
41.0
|
%
|
|
25.82
|
|
||
2021
|
19
|
|
|
232,760
|
|
|
3,200,978
|
|
|
11.1
|
%
|
|
9.6
|
%
|
|
13.75
|
|
||
2022
|
11
|
|
|
220,410
|
|
|
3,033,395
|
|
|
10.5
|
%
|
|
9.1
|
%
|
|
13.76
|
|
||
2023
|
10
|
|
|
54,906
|
|
|
726,976
|
|
|
2.6
|
%
|
|
2.2
|
%
|
|
13.24
|
|
||
2024
|
9
|
|
|
170,064
|
|
|
1,903,043
|
|
|
8.1
|
%
|
|
5.7
|
%
|
|
11.19
|
|
||
2025
|
7
|
|
|
40,109
|
|
|
552,632
|
|
|
1.9
|
%
|
|
1.6
|
%
|
|
13.78
|
|
||
2026
|
9
|
|
|
36,655
|
|
|
821,449
|
|
|
1.8
|
%
|
|
2.5
|
%
|
|
22.41
|
|
||
2027
|
5
|
|
|
595,816
|
|
|
5,685,929
|
|
|
28.5
|
%
|
|
17.0
|
%
|
|
9.54
|
|
||
2028
|
7
|
|
|
38,459
|
|
|
883,988
|
|
|
1.8
|
%
|
|
2.6
|
%
|
|
22.99
|
|
||
MTM
|
3
|
|
|
12,125
|
|
|
178,625
|
|
|
0.6
|
%
|
|
0.5
|
%
|
|
14.73
|
|
||
Thereafter
|
8
|
|
|
68,953
|
|
|
1,400
|
|
|
3.3
|
%
|
|
4.2
|
%
|
|
20.31
|
|
||
Grand Total
|
140
|
|
|
2,093,831
|
|
|
$
|
33,506
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
16.00
|
|
|
# of Leases
|
|
Gross Leasable
Area
|
|
Rent
per square foot
|
|
Weighted
Average
Lease Term
|
|||||
New
|
2
|
|
|
7,967
|
|
|
$
|
18.72
|
|
|
5.96
|
|
Renewals
|
2
|
|
|
43,000
|
|
|
$
|
10.62
|
|
|
5.00
|
|
Total
|
4
|
|
|
50,967
|
|
|
$
|
11.89
|
|
|
5.15
|
|
•
|
to pay the operating expenses of our assets;
|
•
|
to pay our general and administrative expenses;
|
•
|
to pay for acquisitions;
|
•
|
to pay for capital commitments;
|
•
|
to fund distributions;
|
•
|
to service or pay-down our debt; and
|
•
|
to fund capital expenditures and leasing related costs.
|
•
|
cash flows from our investment assets;
|
•
|
proceeds from sales of assets; and
|
•
|
proceeds from debt.
|
Debt maturing during the year
ended December 31,
|
As of March 31, 2019
|
|
Weighted average
interest rate, fixed
|
|||
2019
|
$
|
—
|
|
|
—
|
%
|
2020
|
—
|
|
|
—
|
%
|
|
2021
|
—
|
|
|
—
|
%
|
|
2022
|
9,314
|
|
|
5.24
|
%
|
|
Thereafter
|
67,026
|
|
|
4.39
|
%
|
|
Total
|
$
|
76,340
|
|
|
4.49
|
%
|
|
(in thousands)
|
||||||
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Net cash flows (used in) provided by operating activities
|
$
|
(4
|
)
|
|
$
|
1,128
|
|
Net cash flows used in investing activities
|
(7,756
|
)
|
|
(793
|
)
|
||
Net cash flows provided by (used in) financing activities
|
27,704
|
|
|
(1,149
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
19,944
|
|
|
(814
|
)
|
||
Cash, cash equivalents and restricted cash, at beginning of period
|
83,741
|
|
|
56,007
|
|
||
Cash, cash equivalents and restricted cash, at end of period
|
$
|
103,685
|
|
|
$
|
55,193
|
|
|
As of
|
||||||
|
March 31, 2019
|
|
December 31, 2018
|
||||
Balance Sheet Data:
|
|
|
|
||||
Total assets
|
$
|
372,674
|
|
|
$
|
335,980
|
|
Debt, net
|
$
|
74,871
|
|
|
$
|
34,953
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Operating Data:
|
|
|
|
||||
Total revenues
|
$
|
10,257
|
|
|
$
|
10,645
|
|
Net loss
|
$
|
(455
|
)
|
|
$
|
(836
|
)
|
Net loss per common share, basic and diluted
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Balance Sheet Data:
|
|
|
|
||||
Cash, cash equivalents and restricted cash
|
$
|
103,685
|
|
|
$
|
55,193
|
|
Long-term obligations (a)
|
$
|
76,340
|
|
|
$
|
55,612
|
|
Supplemental Measures (unaudited):
|
|
|
|
||||
Funds from operations and adjusted funds from operations
|
$
|
2,275
|
|
|
$
|
2,268
|
|
Cash Flow Data:
|
|
|
|
||||
Net cash flows (used in) provided by operating activities
|
$
|
(4
|
)
|
|
$
|
1,128
|
|
Net cash flows used in investing activities
|
$
|
(7,756
|
)
|
|
$
|
(793
|
)
|
Net cash flows provided by (used in) financing activities
|
$
|
27,704
|
|
|
$
|
(1,149
|
)
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Net loss
|
$
|
(455
|
)
|
|
$
|
(836
|
)
|
Depreciation and amortization
|
2,730
|
|
|
3,131
|
|
||
Gain on sale of investment properties, net
|
—
|
|
|
(25
|
)
|
||
Funds from operations and adjusted funds from operations
|
$
|
2,275
|
|
|
$
|
2,268
|
|
EXHIBIT NO.
|
|
DESCRIPTION
|
|
Articles of Amendment and Restatement of Highlands REIT, Inc. (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8, filed with the Securities and Exchange Commission on April 27, 2016)
|
|
|
Amended and Restated Bylaws of Highlands REIT, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 28, 2016)
|
|
|
Agreement of Purchase and Sale, dated February 13, 2019, by and among MB Lincoln Mall, LLC, as seller, and Lincoln Mall Owner, LLC., as purchaser
|
|
|
Credit Agreement, dated February 15, 2019, by and among Highlands REIT, Inc., a Maryland corporation, as borrower, and certain of its subsidiaries, as guarantors, The Huntington National Bank, certain other lending institutions party thereto, as lenders, and The Huntington National Bank, as administrative agent and as issuing lender, lead arranger, book manager and syndication agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 21, 2019)
|
|
|
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Link Document
|
*
|
Filed as part of this Quarterly Report on Form 10-Q.
|
Signature
|
Title
|
Date
|
/s/ Richard Vance
|
President and Chief Executive Officer (Principal Executive Officer)
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May 10, 2019
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Richard Vance
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/s/ Paul Melkus
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Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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May 10, 2019
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Paul Melkus
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EXHIBIT B
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LEASE INFORMATION, RENT ROLL AND SECURITY DEPOSITS
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EXHIBIT K
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ASSIGNMENT AND ASSUMPTION OF LEASES AND SECUITY DEPOSITS
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EXHIBIT L
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ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS AND EQUIPMENT LEASES
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1.
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Liability for Misrepresentations
.
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(a)
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Subject to the provisions of
Section 6.2(b)
below, if Purchaser obtains actual knowledge, at or prior to Closing, that any representation of Seller shall fail to be true in any material respect as of the Effective Date or as of the Closing Date, as the case may be, Purchaser's remedies shall be either (i) to terminate this Agreement and receive the return of the Deposit together with an amount necessary to reimburse Purchaser for any and all third party costs and expenses actually incurred by Purchaser in connection with the proposed purchase of the Property, including, without limitation, attorneys’ fees, title and survey charges, loan commitment fees and due diligence costs in an amount not to exceed One Hundred Thousand and 00/100 Dollars ($100,000.00) (the “
Termination Payment
”), and upon the receipt of same, this Agreement shall be null and void and of no further force or effect and, except for those provisions expressly stated to survive the termination of this Agreement, neither party shall have any rights or obligations against or to the other or (ii) waive such misrepresentation and proceed to Closing. If the Closing shall take place without Purchaser making an objection to an untrue representation of which Purchaser shall have actual knowledge, Purchaser shall be deemed to have waived all liability of Seller by reason of such untrue representation. Notwithstanding anything in this Agreement to the contrary, in no event shall Seller be liable to Purchaser for the Termination Payment, or be deemed to be in default hereunder by reason of, any breach of representation or warranty which results from any change that occurs between the Effective Date and the Closing Date if such results from a fact or circumstances that is either (x) expressly permitted under the terms of this Agreement or approved by Purchaser after the Effective Date in accordance with this Agreement; (y) was not caused by Seller, or (z) is beyond the reasonable control of Seller to prevent, and such shall constitute the non-fulfillment of a condition precedent to Purchaser obligations at the Closing, and Purchaser shall have the right to terminate this Agreement, in which event the Deposit shall be returned to Purchaser, and neither party shall have further obligations to the other party except to the extent such obligations expressly survive termination pursuant to the terms hereof.
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(b)
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The provisions of this
Section 6.2
shall survive the Closing or termination of this Agreement.
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(1)
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with respect to Section 4.7 of each Co-Tenancy Lease:
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(i)
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changing all references therein to “K-Mart” and its approximate location to: “Target” and its current location; and
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(a)
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The security deposits and any interest accrued thereon (by way of a credit against the Purchase Price);
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13.13
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Property Information and Confidentiality
.
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Highlands REIT, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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May 10, 2019
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/s/ Richard Vance
|
|
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Name: Richard Vance
|
|
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Title: President and Chief Executive Officer (Principal Executive Officer)
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Highlands REIT, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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May 10, 2019
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/s/ Paul Melkus
|
|
|
Name: Paul Melkus
|
|
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Title: Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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May 10, 2019
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/s/ Richard Vance
|
|
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Name: Richard Vance
|
|
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Title: President and Chief Executive Officer (Principal Executive Officer)
|
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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May 10, 2019
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/s/ Paul Melkus
|
|
|
Name: Paul Melkus
|
|
|
Title: Executive Vice President and Chief Financial Officer (Principal Financial Officer)
|