Notes to Consolidated Financial Statements
(Unaudited)
1. Organization and Business Purpose
Brookfield Real Estate Income Trust Inc. (formerly Oaktree Real Estate Income Trust, Inc.) (the “Company”) was formed on July 27, 2017 as a Maryland corporation and has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2019. The Company invests primarily in high-quality real estate properties in desirable locations - primarily income-producing U.S. commercial real estate with upside potential through active asset management. To a lesser extent, the Company invests in real estate-related investments, including real estate-related debt and real estate-related securities. The Company is the sole general partner of Brookfield REIT Operating Partnership L.P. (the “Operating Partnership”). Substantially all of the Company's business is conducted through the Operating Partnership. The Company and the Operating Partnership are externally managed by Brookfield REIT Adviser LLC (the “Adviser”), an affiliate of Brookfield Asset Management Inc. (together with its affiliates, “Brookfield”). Prior to the Adviser Transition (as defined below) that occurred on November 2, 2021, the Company was externally managed by Oaktree Fund Advisors, LLC (the “Oaktree Adviser” or the "Sub-Adviser"), an affiliate of Oaktree Capital Management, L.P. (“Oaktree”).
On July 15, 2021, the Company entered into an adviser transition agreement (the “Adviser Transition Agreement”) with the Adviser and the Oaktree Adviser. On November 2, 2021, pursuant to the terms of the Adviser Transition Agreement, among other things, the Company (i) accepted the resignation of the Oaktree Adviser as its external adviser under the previous advisory agreement between the Company and the Oaktree Adviser, and (ii) entered into a new advisory agreement (the “Advisory Agreement”) with the Adviser (together, with the related transactions authorized by the Company’s board of directors or otherwise contemplated in connection with the Company’s entry into the Adviser Transition Agreement, referred to collectively as the “Adviser Transition”).
In addition, on November 2, 2021, the Company, the Adviser and the Operating Partnership entered into sub-advisory agreements with the Oaktree Adviser, pursuant to which the Oaktree Adviser (i) manages certain of the Company’s real estate properties and real estate-related debt investments that were acquired by the Company prior to the Adviser Transition and (ii) selects and manages the Company’s liquid assets.
The Company had previously registered with the Securities and Exchange Commission (the “SEC”) its initial public offering of up to $2,000,000,000 in shares of common stock (the "Previous Offering"), which was initially declared effective on April 30, 2018 and terminated on November 2, 2021. The Company subsequently registered a follow-on offering with the SEC of up to $7,500,000,000 in shares of common stock, consisting of up to $6,000,000,000 in shares in its primary offering and up to $1,500,000,000 in shares pursuant to its distribution reinvestment plan, which was declared effective on November 2, 2021 (the “Current Offering” and with the Previous Offering, the "Offering").
The Company is offering to the public any combination of four classes of shares of its common stock, Class T shares, Class S shares, Class D shares and Class I shares, with a dollar value up to the maximum offering amount. The publicly offered share classes have different upfront selling commissions, dealer manager fees and ongoing stockholder servicing fees. The purchase price per share for each class of common stock varies and generally equals the Company’s prior month’s net asset value (“NAV”) per share, as determined monthly, plus applicable upfront selling commissions and dealer manager fees. The Company intends to continue selling shares on a monthly basis.
In addition to the Offering, the Company is conducting private offerings of Class I and Class C shares to feeder vehicles that offer interests in such vehicles to non-U.S. persons. The offer and sale of Class I and Class C shares to the feeder vehicles is exempt from the registration provisions of the Securities Act of 1933, as amended (the "Securities Act") by virtue of Section 4(a)(2) and Regulation S thereunder. The Company is also offering Class E shares to Brookfield and certain of its affiliates in one or more private offerings. The offer and sale of Class E shares is exempt from the registration provisions of the Securities Act by virtue of Section 4(a)(2).
As of March 31, 2022, the Company owned 18 investments in real estate, one investment in an unconsolidated real-estate venture, four investments in real estate-related loans, and three investments in floating-rate commercial mortgage backed securities ("CMBS").
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. All significant intercompany balances and transactions have been eliminated in consolidation. Certain comparative figures have been reclassified to conform to the current year presentation. These statements
reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC.
The Company consolidates all entities in which it retains a controlling financial interest through majority ownership or voting rights and entities that meet the definition of a variable interest entity (“VIE”) for which it is deemed to be the primary beneficiary. The Company is the primary beneficiary of a VIE when it has (i) the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE, or the right to receive benefits from the VIE that potentially could be significant to the VIE. The Operating Partnership is considered to be a VIE. The Company consolidates the Operating Partnership because it has the ability to direct the most significant activities of the entities as its sole general partner. The Company also consolidates all VIEs for which it is the primary beneficiary. Where the Company does not have the power to direct the activities of the VIE that most significantly impact its economic performance, the Company's interest for those partially owned entities are accounted for using the equity method of accounting. Equity method investments for which the Company has not elected a fair value option ("FVO") are initially recorded at cost and subsequently adjusted for the Company's pro-rata share of net income, contributions, and distributions. When the Company elects the FVO, the Company records its share of net asset value of the entity and any related unrealized gains and losses.
The Operating Partnership and the Company's joint ventures are considered to be VIEs. The Company consolidates these entities, excluding its equity method investments, because it has the ability to direct the most significant activities of the entities such as purchases, dispositions, financings, budgets, and overall operating plans.
For consolidated joint ventures, the non-controlling partner's share of the assets, liabilities, and operations of each joint venture is included in non-controlling interests as equity of the Company. The non-controlling joint venture partner's interest is generally computed at the joint venture partner's ownership percentage. Certain of the joint ventures formed by the Company provide the other partner a profits interest based on certain internal rate of return hurdles being achieved. Any profits interest due to the other partner is reported within non-controlling interest.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities and accrued expenses at the date of the balance sheet. The Company believes the estimates and assumptions underlying the consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2022.
Investments in Real Estate
In accordance with the guidance for business combinations, the Company determines whether the acquisition of a property qualifies as a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the property acquired does not constitute a business, the Company accounts for the transaction as an asset acquisition. The guidance for business combinations states that when substantially all of the fair value of the gross assets to be acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset or set of assets is not a business.
The Company evaluates each real estate acquisition to determine whether the integrated set of acquired assets and activities meets the definition of a business. Generally, acquisitions of real estate or in-substance real estate are not expected to meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. All property acquisitions to date have been accounted for as asset acquisitions because substantially all of the fair value was concentrated in the land, buildings and related intangible assets.
The Company capitalizes acquisition-related costs associated with asset acquisitions. Upon acquisition of a property, the Company assesses the fair value of the acquired tangible and intangible assets (including land, buildings, tenant improvements, above- or below-market leases, acquired in-place leases, and other intangible assets and assumed liabilities) and allocates the purchase price to the acquired assets and assumed liabilities. The Company assesses and considers fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that it deems appropriate, as well as other available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known and anticipated trends, and market and economic conditions.
The estimated fair value of acquired in-place leases include the costs the Company would have incurred to lease the properties to their occupancy levels at the date of acquisition. Such estimates include the fair value of leasing commissions, legal costs and other direct costs that would be incurred to lease the properties to such occupancy levels. The Company evaluates avoided costs over the time period over which occupancy levels at the date of acquisition would be achieved had the property been acquired
vacant. Such evaluation includes an estimate of the net market-based rental revenues and net operating costs (primarily consisting of real estate taxes, insurance and utilities) that would be incurred during the lease-up period. Acquired in-place leases are amortized over the remaining lease terms as a component of depreciation and amortization expense.
For acquired in-place leases, above- and below-market lease values are recorded based on the present value (using an interest rate that reflects the risks associated with the lease acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates for the corresponding in-place leases. The values of acquired above- and below-market leases are amortized over the terms of the related leases and recognized as either increases (for below-market leases) or decreases (for above-market leases) to rental revenue. Should a tenant terminate its lease, the unamortized portion of the in-place lease value is charged to amortization expense and the unamortized portion of the above- or below-market lease value is charged to rental revenue.
Significant improvements to properties are capitalized and depreciated over their estimated useful life. Expenditures for ordinary repairs and maintenance are expensed to operations as incurred.
The cost of buildings and improvements includes the purchase price of the Company’s properties and any acquisition-related costs, along with any subsequent improvements to such properties. The Company’s investments in real estate are stated at cost and are generally depreciated on a straight-line basis over the estimated useful lives of the assets as follows:
| | | | | | | | |
| Description | | Depreciable Life |
| Building | | 30-40 years |
| Building and site improvements | | 5-21 years |
| Furniture, fixtures and equipment | | 1-9 years |
| Tenant improvements | | Shorter of estimated useful life or lease term |
| In-place lease intangibles | | Over lease term |
| Above and below market leases | | Over lease term |
| Lease origination costs | | Over lease term |
| Present value of tax abatement savings | | Over tax abatement period |
When assets are sold or retired, their costs and related accumulated depreciation are removed from the accounts with the resulting gains or losses reflected in net income or loss for the period.
The Company's management reviews its real estate properties for impairment when there is an event or change in circumstances that indicates an impaired value. In reviewing the portfolio, the Company's management examines the type of asset, the economic situation in the area in which the asset is located, the economic situation in the industry in which the tenant is involved and the timeliness of the payments made by the tenant under its lease, changes in holding period, as well as any current correspondence that may have been had with the tenant, including property inspection reports. For each real estate asset for which indicators of impairment are identified, the Company performs a recoverability analysis that compares future undiscounted cash flows expected to result from the Company's use and eventual disposition of the asset to its carrying value. If the undiscounted cash flow analysis yields an amount which is less than the asset's carrying amount, an impairment loss will be recorded equal to the amount by which the carrying value of the asset exceeds its estimated fair value. Since cash flows on real estate properties considered to be “long-lived assets to be held and used” are considered on an undiscounted basis to determine whether an asset has been impaired, the Company’s strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material to the Company’s results. During the periods presented, no such impairment occurred.
Assets Held for Sale
The Company classifies the assets and liabilities related to its real estate investments as held for sale when a sale is probable to occur within one year. The Company considers a sale to be probable when a binding contract has been executed, the buyer has posted a non-refundable deposit, and there are limited contingencies to closing. The Company classifies held for sale assets and liabilities at the lower of depreciated cost or fair value less closing costs. There were no properties held for sale as of March 31, 2022 and December 31, 2021.
Investments in Unconsolidated Entities
Investments in unconsolidated entities are initially recorded at cost and subsequently adjusted for the Company’s pro-rata share of net income, contributions, and distributions. The Company’s investments in unconsolidated entities are periodically assessed for impairment and an impairment loss would be recorded when the fair value of the investment falls below the carrying value and such decline is determined to be other-than-temporary.
The Company has elected the FVO for its investment in unconsolidated entities and therefore reports this investment at fair value. As such, the resulting unrealized gains and losses are recorded as a component of Unrealized gain on investments, net on the Company's Consolidated Statements of Operations.
Investments in Real Estate-Related Loans and Securities
Real estate-related loans that the Company has the intent and ability to hold for the foreseeable future are classified as held for investment. Originated loans are recorded at amortized cost, or outstanding unpaid principal balance less net deferred loan fees. Net deferred loan fees include unamortized origination and other fees charged to the borrower less direct incremental loan origination costs incurred by the Company. Purchased loans are recorded at amortized cost, or unpaid principal balance plus purchase premium or less unamortized discount. Costs to purchase loans are expensed as incurred.
Interest income related to the Company's loans is recognized based upon contractual interest rate and unpaid principal balance of the loans as a component of Income from real estate-related loans and securities on the accompanying Consolidated Statements of Operations. Net deferred loan fees on originated loans are deferred and amortized as adjustments to interest income over the expected life of the loans using the effective yield method. Premium or discount on purchased loans are amortized as adjustments to interest income over the expected life of the loans using the effective yield method. When a loan is prepaid, prepayment fees and any excess of proceeds over the carrying amount of the loan are recognized as additional interest income.
The Company assesses its real estate-related loans for impairment and loans are considered to be impaired when it is probable that the Company will not be able to collect all amounts due in accordance with contractual terms, including consideration of the underlying collateral value. As of March 31, 2022, each of the Company’s real estate-related loans was performing in accordance with its contractual terms and no impairment loss has been recognized.
The Company has elected to classify its real estate debt securities as trading securities and carry such investments at fair value. As such, the resulting unrealized gains and losses of such securities are recorded as a component of Unrealized gain on investments, net on the Company’s Consolidated Statements of Operations. Interest income from trading securities is recognized based on the stated terms of the security. Interest income from real estate-related debt securities is recorded as a component of Income from real estate-related loans and securities on the accompanying Consolidated Statements of Operations.
Revenue Recognition
Rental revenue primarily consists of base rent arising from tenant leases at the Company’s properties. Base rent is recognized on a straight-line basis over the life of the lease, including any rent steps or abatement provisions. The Company begins to recognize revenue upon the acquisition of the related property or when a tenant takes possession of the leased space. Other rental revenues include amounts due from tenants for costs related to common area maintenance, real estate taxes, and other recoverable costs included in lease agreements. The Company recognizes the reimbursement of such costs incurred as tenant reimbursement income.
The Company evaluates the collectability of receivables related to rental revenue on an individual lease basis. In making this determination, the Company considers the length of time a receivable has been outstanding, tenant credit-worthiness, payment history, available information about the financial condition of the tenant, and current economic trends, among other factors. Tenant receivables that are deemed uncollectible are recognized as a reduction to rental revenue.
Cash and Cash Equivalents
Cash and cash equivalents represent cash held in banks, cash on hand, and liquid investments with original maturities of three months or less. The Company may have bank balances in excess of federally insured amounts; however, the Company deposits its cash and cash equivalents with high credit-quality institutions to minimize credit risk exposure.
Restricted Cash
Restricted cash primarily consists of cash received for subscriptions prior to the date in which the subscriptions are effective, which is held in a bank account controlled by the Company's transfer agent but in the name of the Company. The remaining balance of restricted cash primarily consists of amounts in escrow related to real estate taxes, construction reserves and insurance in connection with mortgages at certain of the Company's property and tenant security deposits.
Foreign Currency
In the normal course of business, the Company makes investments in real estate outside the United States ("U.S.") through subsidiaries that have a non-U.S. dollar functional currency. Non-U.S. dollar denominated assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the prevailing exchange rate at the reporting date and income, expenses, gains, and losses are translated at the average exchange rate over the applicable period. Gains and losses from translation of foreign denominated transactions into U.S. dollars are included in current results of operations as a component of Unrealized gain on investments, net on the Company’s Consolidated Statements of Operations.
Deferred Charges
The Company’s deferred charges include financing and leasing costs. Deferred financing costs include legal, structuring, and other loan costs incurred by the Company for its financing agreements. Deferred financing costs related to the Company’s mortgage notes and term loans are recorded as an offset to the related liability and amortized over the term of the applicable financing instruments. Deferred financing costs related to the Company’s revolving credit facility are recorded as a component of Other Assets on the Company’s Consolidated Balance Sheets and amortized over the term of the applicable financing agreements. Deferred leasing costs incurred in connection with new leases, which consist primarily of brokerage and legal fees, are recorded as a component of Other Assets on the Company’s Consolidated Balance Sheets and amortized over the life of the related lease.
Derivative Instruments
In the normal course of business, the Company is exposed to the effect of interest rate changes and, with regard to its non-U.S. investments, changes in foreign currency exchange rates. The Company seeks to manage these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate and currency rate risk. These financial instruments may include interest-rate swaps and other derivative contracts.
The Company recognizes all derivatives as either assets or liabilities in the accompanying Consolidated Balance Sheets and measures those instruments at fair value. Changes in the fair values of the Company's derivatives are recorded in current-period earnings as a component of Unrealized gain on investments, net on the accompanying Consolidated Statements of Operations. As of March 31, 2022, the Company had one interest-rate cap, one currency swap contract and one interest-rate swap contract. The derivatives are accounted for as freestanding and changes in fair value are recorded in current-period earnings.
Fair Value Measurement
Under normal market conditions, the fair value of an investment is the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Additionally, there is a hierarchal framework that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and the state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following levels within the fair value hierarchy:
Level 1 — quoted prices are available in active markets for identical investments as of the measurement date. The Company does not adjust the quoted price for these investments.
Level 2 — quoted prices are available in markets that are not active or model inputs are based on inputs that are either directly or indirectly observable as of the measurement date.
Level 3 — pricing inputs are unobservable and include instances where there is minimal, if any, market activity for the investment. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.
Valuation of Assets and Liabilities Measured at Fair Value
The Company's investments in real estate-related securities are reported at fair value. The Company generally determines the fair value of its investments in real estate-related securities by utilizing third-party pricing service providers. In determining the value of a particular investment, the pricing service providers may use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models to determine the reported price. The pricing service providers’ internal models for securities such as real estate debt generally consider the attributes applicable to a particular class of the security (e.g., credit rating, seniority), current market data, and estimated cash flows for each class and incorporate deal collateral performance such as prepayment speeds and default rates, as available. The inputs used in determining the Company’s real estate-related securities reported at fair value are considered Level 2.
The Company's derivative financial instruments are reported at fair value. The fair value of the Company's interest rate swap is determined using a discounted cash flow analysis based on the terms of the contract and the forward interest rate curve adjusted for the Company's nonperformance risk. The fair value of the Company’s interest rate cap is determined using models developed by the respective counterparty as well as third-party pricing service providers that use as their basis readily
observable market parameters (such as forward yield curves and credit default swap data). The fair value of the Company’s foreign currency swap is determined by comparing the contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying instruments. The inputs used in determining the Company’s derivative financial instruments reported at fair value are considered Level 2.
The Company has elected the FVO for its equity method investment and therefore, reports this investment at fair value. As such, the resulting unrealized gains and losses are recorded as a component of Unrealized gain on investments, net on the Company’s Consolidated Statements of Operations. The Company separately values the assets and liabilities of the equity method investment. To determine the fair value of the assets of the equity method investments, the Company utilizes a discounted cash flow methodology, taking into consideration various factors including discount rate and exit capitalization rate. The Company determines the fair value of the indebtedness of the equity method investment by modeling the cash flows required by the debt agreements and discounting them back to the present value using an estimated market yield. Additionally, the Company considers current market rates and conditions by evaluating similar borrowing agreements with comparable loan-to-value ratios and credit profiles. After the fair value of the assets and liabilities are determined, the Company applies its ownership interest to the net asset value and reflects this amount as its equity method investment at fair value. The inputs used in determining the Company’s equity method investment carried at fair value are considered Level 3.
The Company's carrying values of cash and cash equivalents, restricted cash, accounts receivable and other receivables, accounts payable, accrued liabilities and other liabilities approximate fair value because of the short-term nature of these instruments.
The following table details the Company’s assets measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | | | | | | | | | |
| Investments in real estate-related securities | $ | — | | | $ | 16,401,173 | | | $ | — | | | $ | 16,401,173 | | | $ | — | | | $ | 19,511,008 | | | $ | — | | | $ | 19,511,008 | |
| Investment in unconsolidated entities | — | | | — | | | 104,778,146 | | | 104,778,146 | | | — | | | — | | | 100,839,817 | | | 100,839,817 | |
| Derivatives | — | | | 4,489,374 | | | — | | | 4,489,374 | | | — | | | 1,430,697 | | | — | | | 1,430,697 | |
| Total | $ | — | | | $ | 20,890,547 | | | $ | 104,778,146 | | | $ | 125,668,693 | | | $ | — | | | $ | 20,941,705 | | | $ | 100,839,817 | | | $ | 121,781,522 | |
The following table details the Company's assets measured at fair value on a recurring basis using Level 3 inputs:
| | | | | |
| Investment in unconsolidated entities |
| Balance as of December 31, 2021 | $ | 100,839,817 | |
| Included in net income | |
| Unrealized gain included in income from unconsolidated entities | 3,938,329 | |
| Balance as of March 31, 2022 | $ | 104,778,146 | |
Valuation of Liabilities Not Measured at Fair Value
The fair value of the Company’s indebtedness is estimated by modeling the cash flows required by the Company’s debt agreements and discounting them back to the present value using an appropriate discount rate. Additionally, the Company considers current market rate and conditions by evaluating similar borrowing agreements with comparable loan-to-value ratios and credit profiles. The inputs used in determining the fair value of the Company’s indebtedness are considered Level 3. As of March 31, 2022, the fair value of the Company’s mortgage loans, secured credit facility, and revolving credit facility was approximately $7.3 million below the outstanding principal balance.
Income Taxes
The Company qualifies to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), for U.S. federal income tax purposes. The Company generally will not be subject to federal corporate income tax to the extent it distributes 90% of its taxable income to its stockholders. REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.
The Company has formed wholly-owned subsidiaries that are taxed as taxable REIT subsidiaries (“TRSs”) that are subject to taxation at the federal, state and local levels, as applicable. In general, a TRS may perform additional services for our tenants
and generally may engage in any real estate or non-real estate-related business. The Company will account for applicable income taxes by utilizing the asset and liability method. As such, the Company will record deferred tax assets and liabilities for the future tax consequences resulting from the difference between the carrying value of existing assets and liabilities and their respective tax basis. A valuation allowance for deferred tax assets is provided if the Company believes all or some portion of the deferred tax asset my not be realized.
As of December 31, 2021, 2020 and 2019, the Company had net operating losses (“NOLs”) of $4.0 million, $3.2 million, and $0.4 million, respectively. The Company has not recorded a deferred tax asset in the accompanying Consolidated Financial Statements with respect to its NOLs since it is unlikely such benefits will be realized.
Organization and Offering Expenses
As of March 31, 2022 and December 31, 2021, the Adviser and its affiliates had incurred approximately $9.3 million and $8.4 million, respectively, of organization and offering expenses on the Company's behalf, which will be reimbursed ratably over a 60 month period following July 6, 2022.
Organizational expenses are expensed as incurred and offering expenses are reflected as a reduction of additional paid-in capital as such amounts will be reimbursed to the Adviser or its affiliates from the gross proceeds of the Offering. Any amount due to the Adviser but not paid are recorded as Due to affiliates on the accompanying Consolidated Balance Sheets.
Earnings Per Share
The Company uses the two-class method in calculating earnings per share ("EPS") when it issues securities other than common stock that contractually entitle the holder to participate in dividends and earnings of the Company when, and if, the Company declares dividends on its common stock. Basic earnings per share ("Basic EPS") for the Company's common stock are computed by dividing net income allocable to common shareholders by the weighted average number of shares of common stock outstanding for the period, respectively. Diluted earnings per share ("Diluted EPS") is calculated similarly, however, it reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower earnings per share amount.
The Company includes unvested shares of restricted stock in the computation of diluted EPS by using the more dilutive of the two-class method or treasury stock method. Any anti-dilutive securities are excluded from the diluted EPS calculation. For the three months ended March 31, 2022 and 2021, there were no dilutive participating securities.
Segment Reporting
The Company operates in six reportable segments: multifamily properties, office properties, logistics properties, alternative properties, investments in unconsolidated entities and real estate-related loans and securities. The Company allocates resources and evaluates results based on the performance of each segment individually. The Company believes that segment net operating income is the key performance metric that captures the unique operating characteristics of each segment.
Stockholder Servicing Fee
The Company has entered into a dealer manager agreement with Brookfield Oaktree Wealth Solutions LLC, a registered broker-dealer affiliated with the Adviser (“Dealer Manager”), to serve as the dealer manager for the Current Offering. The Dealer Manager is entitled to receive upfront selling commissions and dealer manager fees up to 3.5% of the transaction price and ongoing stockholder servicing fees of 0.85% per annum of the aggregate NAV for outstanding Class S and Class T shares with a limit up to, in the aggregate, 8.75% of the gross proceeds from such shares. The Dealer Manager is entitled to receive upfront selling commissions up to 1.5% of the transaction price and ongoing stockholder servicing fees of 0.25% per annum of the aggregate NAV for outstanding Class D shares with a limit up to, in the aggregate, 8.75% of the gross proceeds from such shares. There are no upfront selling commissions, dealer manager fees and ongoing stockholder servicing fees with respect to Class I shares.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments to amend the accounting for credit losses for certain financial instruments. The standard replaced the incurred loss impairment methodology pursuant to GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. As of January 1, 2022, the Company adopted this guidance and it did not have a material impact on the Company’s Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-02 - Leases (Topic 842), and related ASU's subsequently issued (collectively, "ASC 842"), which requires lessees to classify leases as either finance or operating leases based on certain criteria and record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for
sales-type leases, direct financing leases and operating leases. As of January 1, 2022, the Company adopted the lease guidance. The Company’s rental revenue primarily consists of base rent arising from tenant leases at the Company’s properties under operating leases. The Company elected to apply the practical expedient available under ASC 842, for all classes of assets, not to segregate the lease components from the non-lease components when accounting for operating leases. Since the lease component is the predominant component under each of these leases, combined revenues from both the lease and non-lease components are accounted for in accordance with ASC 842 and reported as rental revenues in the accompanying Consolidated Statements of Operations. As of March 31, 2022, the Company had no investments in real estate subject to ground leases and has therefore not recorded any right-of-use assets and lease liabilities in the Company's Consolidated Financial Statements.
In March 2020, the FASB issued guidance which provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offer Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally may be elected over time through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through March 31, 2022, but will continue to evaluate the possible adoption (including potential impact) of any such expedients or exceptions during the effective period as circumstances evolve.
3. Investments in Real Estate
As of March 31, 2022 and December 31, 2021, investments in real estate, net, consisted of the following:
| | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| Building and building improvements | | $ | 1,131,760,174 | | | $ | 874,834,206 | |
| Land | | 204,969,323 | | | 164,901,074 | |
| Tenant improvements | | 46,372,431 | | | 35,591,724 | |
| Furniture, fixtures and equipment | | 5,834,844 | | | 11,061,146 | |
| Accumulated depreciation | | (29,433,096) | | | (20,629,840) | |
| Investments in real estate, net | | $ | 1,359,503,676 | | | $ | 1,065,758,310 | |
Acquisitions
During the three months ended March 31, 2022, the Company acquired $306.6 million of real estate investments, which were comprised of two multifamily properties, two logistics properties and 148 single-family rental properties.
During the year ended December 31, 2021, the Company acquired $852.9 million of real estate investments, which were comprised of five multifamily properties, three logistics properties, one alternative property and 14 single-family rental properties.
The following table provides further details of the properties acquired during the three months ended March 31, 2022 and year ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment | | Ownership Interest | | Location | | Type | | Acquisition Date | | Square Feet/Units | | Purchase Price(1) |
| 1110 Key Federal Hill | | 100% | | Baltimore, MD | | Multifamily | | September 2021 | | 224 | | $ | 75,152,886 | |
| Domain | | 100% | | Orlando, FL | | Multifamily | | November 2021 | | 324 | | 74,157,027 | |
| The Burnham | | 100% | | Nashville, TN | | Multifamily | | November 2021 | | 328 | | 129,057,027 | |
| 6123-6227 Monroe Court | | 100% | | Morton Grove, IL | | Logistics | | November 2021 | | 208,000 | | 17,264,728 | |
| 8400 Westphalia Road | | 100% | | Upper Marlboro, MD | | Logistics | | November 2021 | | 100,000 | | 27,960,931 | |
| McLane Distribution Center | | 100% | | Lakeland, FL | | Logistics | | November 2021 | | 211,000 | | 26,754,957 | |
| Flats on Front | | 100% | | Wilmington , NC | | Multifamily | | December 2021 | | 273 | | 97,728,205 | |
| Verso Apartments | | 100% | | Beaverton, OR | | Multifamily | | December 2021 | | 172 | | 74,215,860 | |
| DreamWorks Animation Studios | | 100% | | Glendale, CA | | Alternatives | | December 2021 | | 497,000 | | 326,743,229 | |
| Single Family Rental Portfolio | | 100% | | Various | | Alternatives | | Various 2021 | | 14 | | 3,839,927 | |
| 2626 South Side Flats | | 100% | | Pittsburgh, PA | | Multifamily | | January 2022 | | 264 | | 92,459,116 | |
| 2003 Beaver Road | | 100% | | Landover, MD | | Logistics | | February 2022 | | 38,000 | | 9,646,428 | |
| 187 Bartram Parkway | | 100% | | Franklin, IN | | Logistics | | February 2022 | | 300,000 | | 28,911,945 | |
| The Parker | | 100% | | Alexandria, VA | | Multifamily | | March 2022 | | 360 | | 136,778,942 | |
| Single Family Rental Portfolio | | 100% | | Various | | Alternatives | | Various 2022 | | 148 | | 38,819,045 | |
| | | | | | | | | | | | $ | 1,159,490,253 | |
| | | | | |
| (1) | Purchase price is inclusive of closing costs. |
The following table summarizes the purchase price allocation of the properties acquired during the three months ended March 31, 2022 and year ended December 31, 2021:
| | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| Building and building improvements | | $ | 252,794,991 | | | $ | 660,098,315 | |
| Land and land improvements | | 43,057,425 | | | 145,611,087 | |
| Tenant improvements | | 1,232,492 | | | 24,991,410 | |
| Furniture, fixtures and equipment | | 3,275,488 | | | 6,307,805 | |
| In-place lease intangibles | | 3,810,079 | | | 32,518,944 | |
| Lease origination costs | | 901,606 | | | 8,534,907 | |
| Tax abatement intangible | | 2,194,578 | | | 3,054,438 | |
| Above-market lease intangibles | | 64,995 | | | 178,101 | |
| Below-market lease intangibles | | (454,469) | | | (28,420,233) | |
Total purchase price(1) | | 306,877,185 | | | 852,874,774 | |
Assumed debt(2) | | — | | | 132,550,000 | |
| Net purchase price | | $ | 306,877,185 | | | $ | 720,324,774 | |
| | | | | |
| (1) | Purchase price is inclusive of closing costs. |
| (2) | Refer to Note 9 for additional details on the Company’s mortgage loans and indebtedness. |
4. Investments in Unconsolidated Entities
The Company holds an investment in an unconsolidated joint venture that it has elected to account for using the FVO, as the Company’s ownership interest in each joint venture does not meet the requirements for consolidation.
On November 2, 2021, the Company acquired a 20% interest in Principal Place, an office property located in London, United Kingdom, through an indirect interest in the joint venture that owns the property. As of March 31, 2022 and December 31, 2021, the fair value of the Company's interest in Principal Place was $104.8 million and $100.8 million, respectively.
On November 2, 2021, the Company sold its ownership interest in Ezlyn, a multifamily property, to an affiliate of the Oaktree Adviser for $8.6 million in cash and a $33.8 million preferred equity interest in an affiliate of Oaktree. In connection with the Ezlyn disposition, the Company recognized a realized gain on sale of $19.5 million and recorded the preferred equity interest using the equity method of accounting. On December 31, 2021, the Company assigned $5.0 million of its preferred equity interest to the affiliate of the Oaktree Adviser for $5.0 million of cash. As of December 31, 2021, the Company's carrying value of its preferred equity interest was $28.8 million. On January 18, 2022, the Company assigned its remaining $28.8 million preferred equity interest to the affiliate of the Oaktree Adviser for $28.8 million.
As of March 31, 2022 and December 31, 2021, investments in unconsolidated entities were $104.8 million and $129.7 million, respectively.
The following table provides the summarized financial information of our unconsolidated joint venture in Principal Place as of and for the periods set forth below:
| | | | | | | | | | | |
| As of March 31, 2022 | | As of December 31, 2021 |
| Total Assets | $ | 1,107,256,138 | | | $ | 1,133,943,189 | |
| Total Liabilities | 625,688,338 | | | 640,809,702 | |
| Total Equity | $ | 481,567,800 | | | $ | 493,133,487 | |
| | | | | | | | | | | |
| For the period
three months ended
March 31, 2022 | | For the period
November 2, 2021
through December 31, 2021 |
| Total Revenues | $ | 13,418,880 | | | $ | 5,891,879 | |
| Total Expenses | 13,811,010 | | | 9,285,693 | |
| Net Loss | $ | (392,130) | | | $ | (3,393,814) | |
5. Intangibles
The gross carrying amount and accumulated amortization of the Company's intangible assets consisted of the following as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | |
| Intangible assets: | March 31, 2022 | | December 31, 2021 |
| In-place lease intangibles | $ | 45,019,828 | | | $ | 41,209,749 | |
| Lease origination costs | 13,712,217 | | | 12,610,735 | |
| Lease inducements | 1,708,038 | | | 1,708,038 | |
| Tax intangibles | 5,249,016 | | | 3,054,438 | |
| Above-market lease intangibles | 248,849 | | | 183,854 | |
| Total intangible assets | 65,937,948 | | | 58,766,814 | |
| Accumulated amortization: | | | |
| In-place lease intangibles | (11,999,485) | | | (8,082,379) | |
| Lease origination costs | (1,280,931) | | | (972,556) | |
| Lease inducements | (597,059) | | | (533,673) | |
| Tax intangibles | (201,240) | | | (20,544) | |
| Above-market lease intangibles | (5,753) | | | (5,753) | |
| Total accumulated amortization | (14,084,468) | | | (9,614,905) | |
| Intangible assets, net | $ | 51,853,480 | | | $ | 49,151,909 | |
| | | |
| Intangible liabilities: | | | |
| Below-market lease intangibles | $ | (28,975,168) | | | $ | (28,520,699) | |
| Accumulated amortization | 470,123 | | | 136,314 | |
| Intangible liabilities, net | $ | (28,505,045) | | | $ | (28,384,385) | |
The weighted average amortization periods of the acquired in-place lease intangibles, above-market lease intangibles and below-market lease intangibles is 217 months.
The following table details the Company's future amortization of intangible assets:
| | | | | |
| Amortization |
| For the remainder of 2022 | $ | 7,175,605 | |
| 2023 | 4,896,276 | |
| 2024 | 4,312,729 | |
| 2025 | 4,030,785 | |
| 2026 | 3,578,118 | |
| 2027 | 3,260,791 | |
| Thereafter | 24,599,176 | |
| Total | $ | 51,853,480 | |
The following table details the Company's future amortization of intangible liabilities:
| | | | | |
| Amortization |
| For the remainder of 2022 | $ | (1,019,583) | |
| 2023 | (1,348,228) | |
| 2024 | (1,344,533) | |
| 2025 | (1,339,796) | |
| 2026 | (1,332,185) | |
| 2027 | (1,327,356) | |
| Thereafter | (20,793,364) | |
| Total | $ | (28,505,045) | |
6. Investments in Real Estate-Related Loans and Securities
The following table summarizes the components of investments in real estate-related loans and securities as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| Real estate-related loans | | $ | 34,129,035 | | | $ | 35,563,370 | |
| Real estate-related securities | | 16,401,173 | | | 19,511,008 | |
| Total investments in real estate-related loans and securities | | $ | 50,530,208 | | | $ | 55,074,378 | |
The following tables detail the Company's real estate-related loan investments as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | As of March 31, 2022 |
| Investment | | Collateral | | Interest Rate(1) | | Maturity Date | | Payment Terms | | Face Amount | | Unamortized Discount | | Carrying Amount |
| IMC/AMC Bond Investment | | International Markets Center
AmericasMart Atlanta | | L+6.15% | | December 2023 | | Principal due at maturity | | $ | 25,000,000 | | | $ | (142,536) | | | $ | 24,857,464 | |
111 Montgomery(2) | | The 111 Montgomery Street Condominium
Brooklyn, New York | | L+7.00% | | February 2024 | | Principal due at maturity | | 1,012,452 | | | (71,091) | | | 941,361 | |
The Avery Senior Loan(2) | | The Avery Condominium
San Francisco, California | | L+7.30% | | February 2024 | | Principal due at maturity | | 6,771,573 | | | (50,131) | | | 6,721,442 | |
The Avery Mezzanine Loan(2) | | The Avery Condominium
San Francisco, California | | L+12.50% | | February 2024 | | Principal due at maturity | | 1,620,013 | | | (11,245) | | | 1,608,768 | |
| | | | | | | | | | $ | 34,404,038 | | | $ | (275,003) | | | $ | 34,129,035 | |
| | | | | |
| (1) | | The term "L" refers to the one-month US dollar-denominated LIBOR. As of March 31, 2022, one-month LIBOR was equal to 0.45%. |
| (2) | | The Company’s investment is held through its membership interest in an entity which aggregates the Company’s interest with interests held by other funds managed by the Sub-Adviser. The Company has been allocated its proportionate share of the loan based on its membership interest in the aggregating entity. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | As of December 31, 2021 |
| Investment | | Collateral | | Interest Rate(1) | | Maturity Date | | Payment Terms | | Face Amount | | Unamortized Discount | | Carrying Amount |
| IMC/AMC Bond Investment | | International Markets Center
AmericasMart Atlanta | | L+6.15% | | December 2023 | | Principal due at maturity | | $ | 25,000,000 | | | $ | (163,601) | | | $ | 24,836,399 | |
111 Montgomery(2) | | The 111 Montgomery Street Condominium
Brooklyn, New York | | L+7.00% | | February 2024 | | Principal due at maturity | | 1,439,853 | | | (91,409) | | | 1,348,444 | |
The Avery Senior Loan(2) | | The Avery Condominium
San Francisco, California | | L+7.30% | | February 2024 | | Principal due at maturity | | 7,655,908 | | | (65,170) | | | 7,590,738 | |
The Avery Mezzanine Loan(2) | | The Avery Condominium
San Francisco, California | | L+12.50% | | February 2024 | | Principal due at maturity | | 1,802,408 | | | (14,619) | | | 1,787,789 | |
| | | | | | | | | | $ | 35,898,169 | | | $ | (334,799) | | | $ | 35,563,370 | |
| | | | | |
| (1) | | The term "L" refers to the one-month US dollar-denominated LIBOR. As of December 31, 2021, one-month LIBOR was equal to 0.10%. |
| (2) | | The Company’s investment is held through its membership interest in an entity which aggregates the Company’s interest with interests held by other funds managed by the Sub-Adviser. The Company has been allocated its proportionate share of the loan based on its membership interest in the aggregating entity. |
On February 2, 2021, the Company funded $4.1 million to acquire an interest in an entity that holds a first mortgage loan investment (the "Montgomery Loan") in the 111 Montgomery Condominium, a 156 unit condominium tower located in Brooklyn, New York. The Montgomery Loan is secured by the 111 Montgomery Condominium development and bears interest at a floating rate of 7.0% over the one-month LIBOR. During the three months ended March 31, 2022 and year ended December 31, 2021, the Company received net repayments of $0.5 million and $2.7 million, respectively.
On February 21, 2021, the Company funded $10.3 million to acquire an interest in an entity that holds a first mortgage loan investment (the "Avery Senior Loan") in the Avery Condominium, a 548 unit condominium and luxury apartment tower located in San Francisco, California. The Avery Senior Loan is secured by the Avery Condominium development and bears interest at a floating rate of 7.3% over the one-month LIBOR. During the three months ended March 31, 2022 and year ended December 31, 2021, the Company received net repayments of $0.9 million and $2.6 million, respectively.
On February 21, 2021, the Company funded $2.3 million to acquire an interest in an entity that holds a mezzanine mortgage loan investment (the "Avery Mezzanine Loan") in the Avery Condominium, a 548 unit condominium and luxury apartment
tower located in San Francisco, California. The Avery Mezzanine Loan is secured by the Avery Condominium development and bears interest at a floating rate of 12.5% over the one-month LIBOR. During the three months ended March 31, 2022 and year ended December 31, 2021, the Company received net repayments of $0.2 million and $0.5 million, respectively.
The following tables detail the Company's investments in real estate-related securities as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 |
| Type of Security | | Number of Positions | | Weighted Average Coupon(1) | | Weighted Average Maturity Date(2) | | Face Amount | | Cost Basis | | Fair Value |
| CMBS | | 3 | | L+4.20% | | September 2030 | | $ | 16,600,000 | | | $ | 15,372,730 | | | $ | 16,401,173 | |
| Total investments in real estate-related securities | | | | | | | | $ | 16,600,000 | | | $ | 15,372,730 | | | $ | 16,401,173 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| Type of Security | | Number of Positions | | Weighted Average Coupon(1) | | Weighted Average Maturity Date(2) | | Face Amount | | Cost Basis | | Fair Value |
| CMBS | | 4 | | L+4.00% | | February 2030 | | $ | 19,760,000 | | | $ | 17,790,125 | | | $ | 19,511,008 | |
| Total investments in real estate-related securities | | | | | | | | $ | 19,760,000 | | | $ | 17,790,125 | | | $ | 19,511,008 | |
| | | | | |
| (1) | The term "L" refers to the one-month US dollar-denominated LIBOR. As of March 31, 2022 and December 31, 2021, one-month LIBOR was equal to 0.45% and 0.10% respectively. Fixed rate CMBS real estate loans are reflected as a spread over the relevant floating benchmark rates for purposes of the weighted-averages. |
| (2) | Weighted average maturity date is based on the fully extended maturity date of the instruments. |
During the three months ended March 31, 2022, the Company recorded net unrealized loss and net realized gains on its real estate-related securities investments of $0.7 million and $0.7 million, respectively. During the three months ended March 31, 2021, the Company recorded net unrealized gains and net realized gains on its real estate-related securities investments of $1.7 million and $2.0 million, respectively. Such amounts are recorded as components of Other income (expense) on the Company's Consolidated Statements of Operations.
7. Accounts and Other Receivables and Other Assets
The following table summarizes the components of accounts and other receivables and other assets as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | |
| Receivables | March 31, 2022 | | December 31, 2021 |
| Accounts receivable | $ | 1,923,798 | | | $ | 1,258,307 | |
| Straight-line rent receivable | 2,909,721 | | | 2,252,699 | |
| Interest receivable | 358,609 | | | 293,873 | |
| Allowance for doubtful accounts | (61,185) | | | (48,768) | |
| Total accounts and other receivables, net | $ | 5,130,943 | | | $ | 3,756,111 | |
| | | |
| | | |
| Other assets | March 31, 2022 | | December 31, 2021 |
| Deposits | $ | 10,083,459 | | | $ | 6,808,716 | |
| Prepaid expenses | 3,161,028 | | | 2,181,765 | |
| Capitalized fees, net | 13,196 | | | 13,292 | |
Derivatives(1) | 4,489,374 | | | 1,430,697 | |
| Interest Rate Cap | 76,394 | | | 83,561 | |
| Total other assets | $ | 17,823,451 | | | $ | 10,518,031 | |
| | | | | |
| (1) | | Represents an interest rate swap on the Two Liberty mortgage loan and a foreign currency swap related to the Company's non-U.S. investment. The notional amount of the interest rate swap is $33.8 million and the derivative matures in August 2024. Two Liberty receives a floating rate of one-month USD LIBOR and pays a fixed rate of 0.7225%. The notional amount of the foreign currency swap is £73.3 million GBP and the derivative settled in May 2022, at which time the Company entered into a three-month foreign currency swap at the same notional amount. |
8. Accounts Payable, Accrued Expenses and Other Liabilities
The following table summarizes the components of accounts payable, accrued expenses and other liabilities as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| | | |
| Real estate taxes payable | $ | 1,952,007 | | | $ | 2,350,065 | |
| Accounts payable and accrued expenses | 10,764,672 | | | 6,615,746 | |
| Prepaid rent | 933,868 | | | 1,044,844 | |
| Accrued interest expense | 477,803 | | | 509,213 | |
| Tenant security deposits | 1,756,286 | | | 1,286,365 | |
| Distribution payable | 1,566,867 | | | 2,822,987 | |
| Stock repurchases payable | 748,257 | | | 1,593,971 | |
| Total accounts payable, accrued expenses and other liabilities | $ | 18,199,760 | | | $ | 16,223,191 | |
9. Mortgage Loans and Indebtedness
The following table summarizes the components of mortgage loans and indebtedness as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Principal Balance Outstanding |
| Indebtedness | | Interest Rate(1) | | Maturity Date | | March 31, 2022 | | December 31, 2021 |
| Anzio Apartments mortgage loan | | L+1.59% | | May 2029 | | $ | 44,400,000 | | | $ | 44,400,000 | |
| Two Liberty Center mortgage loan | | L+1.50% | | August 2024 | | 62,085,155 | | | 62,085,155 | |
| Lakes at West Covina mortgage loan | | L+1.55% | | February 2025 | | 25,603,855 | | | 25,603,855 | |
| Arbors of Las Colinas mortgage loan | | SOFR+2.24% | | January 2031 | | 45,950,000 | | | 45,950,000 | |
| 1110 Key Federal Hill mortgage loan | | 2.34% | | October 2028 | | 51,520,000 | | | 51,520,000 | |
Domain mortgage loan(2) | | SOFR+1.50% | | December 2026 | | 48,700,000 | | | 48,700,000 | |
| DreamWorks Animation Studios mortgage loan | | 3.20% | | March 2029 | | 212,200,000 | | | 214,750,000 | |
| Secured Multifamily Term Loan | | SOFR+1.70% | | March 2025 | | 372,760,000 | | | — | |
Secured Credit Facility(2)(3) | | L + 1.95% | | November 2022 | | 92,803,618 | | | 244,401,821 | |
| Affiliate Line of Credit | | L + 2.25% | | November 2022 | | 50,000,000 | | | 105,000,000 | |
| Total indebtedness | | | | | | 1,006,022,628 | | | 842,410,831 | |
| Less: deferred financing costs, net | | | | | | (6,597,666) | | | (3,617,611) | |
| Total indebtedness, net | | | | | | $ | 999,424,962 | | | $ | 838,793,220 | |
| | | | | |
| (1) | The term "L" refers to the one-month US dollar-denominated LIBOR. As of March 31, 2022 and December 31, 2021, one-month LIBOR was equal to 0.45% and 0.10%, respectively. The term "SOFR" refers to the Secured Overnight Financing Rate. As of March 31, 2022 and December 31, 2021, SOFR was 0.29% and 0.05%, respectively. |
| (2) | The Company assumed debt totaling $132.6 million in connection with the acquisition of Domain and The Burnham. The debt was refinanced in November 2021 with a $48.7 million mortgage loan secured by Domain and a $83.9 million borrowing on the Secured Credit Facility secured by The Burnham. |
| (3) | As of March 31, 2022, borrowings on the Secured Credit Facility were secured by the following properties: 8400 Westphalia Road, 6123-6227 Monroe Court, McLane Distribution Center, 2003 Beaver Road, 187 Bartram Parkway and certain properties in the Single Family Rental Portfolio. As of December 31, 2021, borrowings on the Secured Credit Facility were secured by the following properties: The Burnham, Flats on Front, Verso Apartments, 8400 Westphalia Road, 6123-6227 Monroe Court, and McLane Distribution Center. The facility has a one-year extension option to November 9, 2023, subject to certain conditions. |
The following table presents the future principal payments due under the Company's mortgage loans as of March 31, 2022:
| | | | | | | | |
| Year | | Amount |
| For the remainder of 2022 | | $ | 142,803,618 | |
| 2023 | | — | |
| 2024 | | 62,493,944 | |
| 2025 | | 399,146,172 | |
| 2026 | | 50,236,044 | |
| 2027 | | 1,668,716 | |
| Thereafter | | 349,674,134 | |
| Total | | $ | 1,006,022,628 | |
The mortgage loans and secured credit facility are subject to various financial and operational covenants. These covenants require the Company to maintain certain financial ratios, which may include leverage, debt yield, and debt service coverage, among others. As of March 31, 2022, the Company is in compliance with all of its loan covenants that could result in a default under such agreements. At Two Liberty Center, cash flows from the property are currently held in a restricted cash account due to a debt service coverage ratio requirement.
Mortgage Loans
During the three months ended March 31, 2022 and year ended December 31, 2021, the Company financed $212.2 million and $315.0 million, respectively, in mortgage loans related to its properties, which were subject to customary terms and conditions. During the three months ended March 31, 2022 and the year ended December 31, 2021, the Company repaid $214.8 million and $53.0 million, respectively, of mortgage loans.
Secured Multifamily Term Loan
In March 2022, the Company entered into a term loan (the "Secured Multifamily Term Loan") providing for a senior secured loan secured by certain multifamily properties. As of March 31, 2022, borrowings on the Secured Multifamily Term Loan are secured by The Burnham, Flats on Front, Verso Apartments, 2626 South Side Flats and The Parker. The Secured Multifamily Term Loan matures on March 21, 2025 and has two one-year extension options to March 21, 2026 and March 31, 2027, subject to certain conditions.
Secured Credit Facility
In November 2021, the Company entered into a credit agreement (the "Secured Credit Facility") providing for a senior secured credit facility to be used for the acquisition or refinancing of properties. Borrowings on the Secured Credit Facility are secured by certain properties in the Company's portfolio. The initial maximum aggregate principal amount of the facility was $250.0 million, which was increased to $500.0 million on March 9, 2022. The Secured Credit Facility matures on November 9, 2022, and has a one-year extension option to November 9, 2023, subject to certain conditions. Borrowings under the Secured Credit Facility bears interest at a rate of LIBOR plus 1.95%. As of March 31, 2022 and December 31, 2021, there were $92.8 million and $244.4 million, respectively, of outstanding borrowings on the Secured Credit Facility.
Affiliate Line of Credit
In November 2021, the Company entered into a revolving line of credit with an affiliate of Brookfield (the "Affiliate Line of Credit"), providing for a discretionary, unsecured, uncommitted credit facility in a maximum aggregate principal amount of $125.0 million. The credit agreement expires on November 2, 2022, subject to one-year extension options requiring the lender's approval. Borrowings under the credit agreement bear interest at a rate of the then-current rate offered by a third-party lender for a similar product, or, if no such rate is available, LIBOR plus 2.25%. As of March 31, 2022 and December 31, 2021, there were $50.0 million and $105.0 million, respectively, of outstanding borrowings on the Affiliate Line of Credit.
10. Related Party Transactions
Advisory Agreement
Pursuant to the advisory agreement, the Adviser is entitled to an annual management fee equal to 1.25% of the Company’s NAV on its Class C, Class D, Class I, Class S and Class T common shares (no management fee is paid on the Class E common shares), payable monthly, as compensation for the services it provides to the Company. Prior to the Adviser Transition, the Oaktree Adviser was entitled to an annual management fee equal to 1.00% of the Company's NAV, payable monthly, as compensation for the services it provides to the Company. The management fee can be paid, at the Adviser’s election, in cash or shares of the Company's common stock. To date, the Adviser, and previously the Oaktree Adviser, has elected to receive the management fee in shares of the Company’s common stock.
During the three months ended March 31, 2022 and 2021, management fees earned by the Adviser and the Oaktree Adviser were $1.2 million and $0.6 million, respectively.
The Adviser, and prior to the Adviser Transition the Oaktree Adviser, is entitled to a performance fee based on the total return of the Company’s Class C, Class D, Class I, Class S and Class T common shares (no performance fee is paid on the Class E common shares). Total return is defined as distributions paid or accrued plus the change in the Company’s NAV, adjusted for subscriptions and repurchases. Pursuant to the Advisory Agreement, the performance fee is equal to 12.5% of the total return in excess of a 5% total return (after recouping any loss carryforward amount), subject to a catch-up. The performance fee becomes payable at the end of each calendar year and can be paid, at the Adviser’s election, in cash, or shares of the Company's common stock.
During the three months ended March 31, 2022 and 2021, performance fees earned by the Adviser and the Oaktree Adviser were $3.5 million and $0.6 million, respectively, which is recognized as Performance fee in the Company's Consolidated Statements of Operations.
Sub-Adviser Agreements
The Adviser has engaged the Sub-Adviser to (i) perform the functions related to selecting and managing the Company's liquid assets, including real estate-related debt securities, (the "Liquid Sleeve") pursuant to a sub-advisory agreement (the "Liquidity Sleeve Sub-Advisory Agreement") and (ii) manage the Oaktree Option Investments pursuant to a separate sub-advisory agreement (the "Oaktree Assets Sub-Advisory Agreement" and together with the Liquidity Sleeve Sub-Advisory Agreement, the “Sub-Advisory Agreements”).
Pursuant to the Liquidity Sleeve Sub-Advisory Agreement, the Sub-Adviser provides services related to the acquisition, management and disposition of the Liquidity Sleeve in accordance with our investment objectives, strategy, guidelines, policies and limitations. Pursuant to the Oaktree Assets Sub-Advisory Agreement, the Sub-Adviser manages the Oaktree Option Investments. The fees paid to the Sub-Adviser pursuant to the Sub-Advisory Agreements will not be paid by the Company, but will instead be paid by the Adviser out of the management and performance fees that the Company pays to the Adviser.
The Sub-Adviser earns management and performance fees pursuant to the terms of the Sub-Adviser Agreement. These fees are paid by the Adviser out of the management and performance fees by the Advisor; therefore no management or performance fees related to the Sub-Advisory Agreements have been recognized in the accompanying Consolidated Statements of Operations.
Dealer Manager Agreement
The Company has engaged the Dealer Manager, a registered broker dealer affiliated with the Adviser, as the dealer manager for the Current Offering. The Company pays to the Dealer Manager selling commissions, dealer manager fees and stockholder servicing fees in connection with sales of the Company’s common stock in the Current Offering. The Company accrues the full amount of the future stockholder servicing fees payable to the Dealer Manager for Class S, Class T, and Class D shares up to the 8.75% of gross proceeds limit at the time such shares are sold. The Dealer Manager has entered into agreements with the selected dealers distributing the Company’s shares in the Offering, which provide, among other things, for the re-allowance of the full amount of the selling commissions and dealer manager fees and all or a portion of the stockholder servicing fees received by the Dealer Manager to such selected dealers.
Acquisition of Investments
On November 2, 2021, the Company acquired two multifamily properties and a 20% interest in a joint venture that owns an office property (the "Brookfield Portfolio") from an affiliate of Brookfield. The Company issued 2,088,833 shares of Class E common stock and 12,380,554 Class E units in the Operating Partnership ("Class E OP Units") as consideration for the acquisitions. The aggregate consideration was $173.2 million, which was equal to the fair value of the net assets of the Brookfield Portfolio based on third-party appraisals of the properties.
Disposition of Investments
On November 2, 2021, the Company sold its interest in a multifamily property, Ezlyn, to an affiliate of the Oaktree Adviser for $105 million. The sale price was equal to the most recently appraised value from a third-party appraiser obtained by the Company in connection with determining the Company's NAV. The Company received net proceeds of $42.4 million, which consisted of $8.6 million of cash and a $33.8 million preferred equity interest in an affiliate of Oaktree. On December 31, 2021, the Company assigned $5.0 million of its preferred equity interest to the affiliate of the Oaktree Adviser for $5.0 million of cash. On January 18, 2022, the Company assigned its remaining $28.8 million preferred equity interest to the affiliate of the Oaktree Adviser for $28.8 million.
On November 26, 2021, the Company sold a real estate-related loan, Atlantis Mezzanine Loan, to an affiliate of Brookfield for $25.0 million. The sale price was equal to the most recently appraised value from a third-party appraiser obtained by the Company in connection with determining the Company's NAV.
Advanced Organization and Offering Costs
The Adviser has agreed to advance all of the Company's organization and offering expenses on its behalf (other than upfront selling commissions, dealer manager fees and stockholder servicing fees) through July 6, 2022. The Company will reimburse the Adviser for all such advanced expenses ratably over 60 months commencing July 6, 2022. We will reimburse the Adviser for any organization and offering expenses that it incurs on our behalf as and when incurred after July 6, 2022. As part of the Adviser Transition, the Adviser has acquired the Sub-Adviser’s receivable related to the organization and offering expenses previously incurred by the Sub-Adviser and is to be reimbursed therefor.
Affiliate Line of Credit
In November 2021, the Company entered into the Affiliate Line of Credit, providing for a discretionary, unsecured, uncommitted credit facility in a maximum aggregate principal amount of $125.0 million. The credit agreement expires on November 2, 2022, subject to one-year extension options requiring the lender's approval. Borrowings under the credit agreement bear interest at a rate of the then-current rate offered by a third-party lender for a similar product, or, if no such rate is available, LIBOR plus 2.25%. As of March 31, 2022 and December 31, 2021, the Company incurred interest at a rate of LIBOR plus 2.25%. As of March 31, 2022 and December 31, 2021 there were $50.0 million and $105.0 million, respectively, of outstanding borrowings on the Affiliate Line of Credit.
Oaktree Line of Credit
On June 5, 2020, the Company entered into a line of credit (the “Oaktree Credit Agreement”) with Oaktree Fund GP I, L.P. (“Oaktree Lender”), an affiliate of Oaktree, providing for a discretionary, unsecured, uncommitted credit facility in a maximum aggregate principal amount of $125.0 million. Borrowings under the Oaktree Credit Agreement incurred interest at a rate of the then-current rate offered by a third-party lender, or, if no such rate is available, LIBOR plus 2.25%. The Oaktree Credit Agreement was terminated on November 2, 2021, the date of the Adviser Transition.
Brookfield Repurchase Agreement
An affiliate of Brookfield (the "Brookfield Investor") was issued shares of the Company's common stock and Class E OP Units in connection with its contribution of certain properties on November 2, 2021. The Company and the Operating Partnership have entered into a repurchase arrangement with the Brookfield Investor (the "Brookfield Repurchase Agreement") pursuant to which the Company and the Operating Partnership will offer to repurchase shares of common stock or Operating Partnership units from the Brookfield Investor at a price per unit equal to the most recently determined NAV per share or unit immediately prior to each repurchase. The Brookfield Investor has agreed to not seek repurchase of the shares of common stock and Operating Partnership units that it owns if doing so would bring the value of its equity holdings in the Company and the Operating Partnership below $50 million. In addition, the Brookfield Investor has agreed to hold all of the shares of common stock and Operating Partnership units that it received in consideration for the contribution of the Brookfield Portfolio until the earlier of (i) the first date that the Company's NAV reaches $1.5 billion and (ii) the date that is the third anniversary of November 2, 2021. Following such date, the Brookfield Investor may cause the Company to repurchase its shares and Operating Partnership units (above the $50 million minimum), in an amount equal to the sum of (a) the amount available under the Company's share repurchase plan’s 2% monthly and 5% quarterly caps (after accounting for third-party investor repurchases) and (b) 25% of the amount by which net proceeds from the Offering and the Company's private offerings of common stock for a given month exceed the amount of repurchases for such month pursuant to the Company's share repurchase plan. The Company will not effect any such repurchase during any month in which the full amount of all shares requested to be repurchased by third-party investors under the share repurchase plan is not repurchased. During the three months ended March 31, 2022, the Company and the Operating Partnership did not repurchase any shares or Operating Partnership units from the Brookfield Investor as part of the Brookfield Repurchase Agreement.
Oaktree Repurchase Agreement
On September 11, 2019, the board of directors of the Company, including a majority of the independent directors, adopted an arrangement with the Oaktree Investor (the "Oaktree Repurchase Agreement") to repurchase any shares of the Company’s Class I common stock that Oaktree Investor, an affiliate of the Oaktree Adviser, acquired prior to the breaking of escrow in the Initial Public Offering. The board of directors approved the Oaktree Repurchase Agreement in recognition of the Oaktree Investor’s intent to subscribe for shares of the Company’s Class I common stock in an amount such that, together with all other subscriptions for the Company’s common stock, the escrow minimum offering amount would be satisfied. As of December 6, 2019, the Company satisfied the minimum offering requirement and the Company’s board of directors authorized the release of proceeds from escrow. As of such date, the escrow agent released gross proceeds of approximately $150.0 million (including approximately $86.9 million that was funded by the Oaktree Investor) to the Company in connection with the sale of shares of the Company’s common stock. Under the Oaktree Repurchase Agreement, subject to certain limitations, on the last calendar day of each month the Company will offer to repurchase shares of its common stock from the Oaktree Investor in an aggregate dollar amount (the “Monthly Repurchase Amount”) equal to (i) the net proceeds from new subscriptions that month less (ii) the aggregate repurchase price (excluding any amount of the aggregate repurchase price paid using cash flow from operations not used to pay distributions) of shares repurchased by the Company that month from investors pursuant to the Company’s existing share repurchase plan. In addition to the Monthly Repurchase Amount for the applicable month, the Company will offer to repurchase any Monthly Repurchase Amounts from prior months that have not yet been repurchased. The price per share for each repurchase from the Oaktree Investor will be the lesser of (a) the $10.00 per share initial cost of the shares and (b) the transaction price in effect for the Class I shares at the time of repurchase. The repurchase arrangement is not subject to any time limit and will continue until the Company has repurchased all of the Oaktree Investor’s shares. During the three months ended March 31, 2021, the Company repurchased 1,680,450 shares for $13.8 million from the Oaktree Investor. On July 31, 2021, the Company repurchased the remaining shares subject to the Oaktree Repurchase Agreement and there are no shares outstanding subject to the Oaktree Repurchase Agreement.
Option Investment Purchase Agreement
The Company entered into an Option Investments Purchase Agreement with Oaktree on November 2, 2021, pursuant to which Oaktree will have the right to purchase the Operating Partnership’s entire interest in four properties (Anzio Apartments, Arbors of Las Colinas, Two Liberty Center, and Lakes at West Covina), four real estate-related loan investments (IMC/AMC Bond Investment, 111 Montgomery, The Avery Senior Loan, The Avery Mezzanine Loan), and one real estate-related security investment (BX 2019 IMC G). Oaktree will have the right to purchase these investments for a period of 12 months following the earlier of (i) 18 months after November 2, 2021, the date of completion of the Adviser Transition, and (ii) the date on which the Company notifies Oaktree that it has issued in the aggregate $1 billion of our common stock to non-affiliates since November 2, 2021, at a price equal to the fair value of the applicable Option Investments, as determined in connection with the Company's most recently determined NAV immediately prior to the closing of such purchase. As of March 31, 2022, the conditions to commence the option period have not occurred.
Brookfield Subscription Agreement
On November 30, 2021, the Operating Partnership and the Brookfield Investor entered into a subscription agreement (the “Subscription Agreement”) pursuant to which the Brookfield Investor agreed to purchase up to $83 million in Class E OP Units upon the request of the general partner of the Operating Partnership, of which the Company is the sole member. The Class E OP Units purchased by the Brookfield Investor pursuant to the Subscription Agreement will not be subject to the Brookfield Repurchase Agreement. Pursuant to the Subscription Agreement, the general partner of the Operating Partnership, of which the Company is the sole member, has agreed to waive the twelve-month holding period set forth in Section 8.5(a) of the partnership agreement of the Operating Partnership with respect to Class E OP Units purchased by the Brookfield Investor pursuant to the Subscription Agreement. The Brookfield Investor will have the right to cause the Operating Partnership to redeem all or a portion of the Class E OP Units it purchases pursuant to the Subscription Agreement for, at the sole discretion of the general partner, shares of common stock, cash or a combination of both. On December 1, 2021, the Brookfield Investor was issued 3,756,480 Class E OP Units in exchange for $45 million. On January 3, 2022, the Brookfield Investor was issued 3,075,006 Class E OP Units in exchange for $38 million.
Affiliate Service Provider Expenses
The Company may retain certain of the Adviser’s affiliates for necessary services relating to the Company’s investments or its operations, including any administrative services, construction, special servicing, leasing, development, property oversight and other property management services, as well as services related to group purchasing, healthcare, consulting/brokerage, capital markets/credit origination, loan servicing, property, title and/or other types of insurance, management consulting and other similar operational matters. Any such arrangements will be at market terms and rates.
The Company has engaged Brookfield Properties, an affiliate of Brookfield, to provide operational services (including, without limitation, property management, construction and project management and leasing) and corporate support services (including, without limitation, accounting and administrative services) for the Company. For the three months ended March 31, 2022, the Company incurred $1,639,169 of expenses in connection with the services provided by Brookfield Properties. There were no services provided by Brookfield Properties to the Company for the three months ended March 31, 2021.
Captive Insurance Company
BPG Bermuda Insurance Limited ("BAM Insurance Captive"), an affiliate of Brookfield, provides multifamily property and liability insurance for certain of the Company's multifamily properties. For the three months ended March 31, 2022, the Company paid BAM Insurance Captive $45,262 for insurance premiums at six multifamily properties. There were no premiums paid to BAM Insurance Captive for the period ended March 31, 2021.
Affiliate Title Service Provider
Horizon Land Services (“Horizon”), an affiliate of Brookfield, provides title insurance for certain of our properties. Horizon acts as an agent for one or more underwriters in issuing title policies and/or providing support services in connection with investments by the Company. For the three months ended March 31, 2022, the Company paid Horizon $151,074 for title services for six properties. There were no services provided by Horizon to the Company for the three months ended March 31, 2021.
Due to Affiliates
The following table details the components of due to affiliates:
| | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| Accrued stockholder servicing fee | | $ | 18,613,189 | | | $ | 14,219,258 | |
| Stock repurchase payable to Oaktree Adviser for management and performance fees | | — | | | 6,682,115 | |
| Advanced organization and offering costs | | 14,320,728 | | | 12,022,148 | |
| Accrued performance fee | | 3,513,190 | | | — | |
| Accrued performance participation allocation | | — | | | 2,345,920 | |
| OP Units Distributions Payable | | 1,387,119 | | | — | |
| Accrued management fee | | 1,196,264 | | | 620,706 | |
| | | | |
| Total | | $ | 39,030,490 | | | $ | 35,890,147 | |
11. Stockholders’ Equity and Redeemable Non-controlling Interests
Authorized Capital
On April 30, 2018, the SEC declared effective the Company’s registration statement on Form S-11 for the Previous Offering. On November 2, 2021, the SEC declared effective the Company’s registration statement on Form S-11 (File No. 333-255557) for the Current Offering of up to $6,000,000,000 in shares in its primary offering and up to $1,500,000,000 in shares pursuant to its distribution reinvestment plan. The Previous Offering terminated upon the commencement of the Current Offering. Pursuant to the Current Offering, the Company is offering to sell any combination of four classes of shares of its common stock, Class T shares, Class S shares, Class D shares and Class I shares, with a dollar value up to the maximum offering amount. The share classes have different upfront selling commissions, dealer manager fees and ongoing stockholder servicing fees. The Company is also offering Class I, Class C and Class E shares in private offerings exempt from registration. Other than the differences in upfront selling commissions, dealer manager fees, ongoing stockholder servicing fees, management fees and performance fees, each class of common stock has the same economic and voting rights.
| | | | | | | | | | | | | | | | | |
| Classification | | No. of
Authorized Shares | | Par Value
Per Share |
| Preferred stock | | 50,000,000 | | $ | 0.01 |
| Class T common stock | | 225,000,000 | | $ | 0.01 |
| Class S common stock | | 225,000,000 | | $ | 0.01 |
| Class D common stock | | 100,000,000 | | $ | 0.01 |
| Class C common stock | | 100,000,000 | | $ | 0.01 |
| Class E common stock | | 100,000,000 | | $ | 0.00 |
| Class I common stock | | 250,000,000 | | $ | 0.01 |
| | 1,050,000,000 | | |
Common Stock
The following table details the movement in the Company's outstanding shares of common stock: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2022 |
| Class S | | Class I | | Class C | | Class E | | Total |
| December 31, 2021 | 20,045,775 | | | 2,825,208 | | | 1,644,303 | | | 2,097,971 | | | 26,613,257 | |
| Common stock issued | 4,512,735 | | | 1,080,373 | | | 1,834,972 | | | 391,437 | | | 7,819,517 | |
| Distribution reinvestment | 157,884 | | | 17,049 | | | — | | | 31,949 | | | 206,882 | |
Independent directors' restricted stock vested(1) | — | | | — | | | — | | | — | | | — | |
| Common stock repurchased | (28,145) | | | (34,230) | | | — | | | — | | | (62,375) | |
| March 31, 2022 | 24,688,249 | | | 3,888,400 | | | 3,479,275 | | | 2,521,357 | | | 34,577,281 | |
As of March 31, 2022, no Class T or Class D shares had been issued.
Distributions
The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with GAAP, to its stockholders each year to comply with the REIT provisions of the Code.
Each class of the Company's common stock receives the same aggregate gross distribution per share. The net distribution varies for each class based on the applicable stockholder servicing fee and management fees, which are deducted from the monthly distribution per share.
The following table details the net distribution for each of our share classes for three months ended March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Declaration Date | | Class S Shares | | Class I Shares | | Class C Shares | | Class E Shares | | Class T Shares | | Class D Shares |
| January 28, 2022 | | $ | 0.0459 | | | $ | 0.0546 | | | $ | 0.0547 | | | $ | 0.0676 | | | $ | — | | | $ | — | |
| March 1, 2022 | | 0.0473 | | | 0.0552 | | | 0.0553 | | | 0.0683 | | | — | | | — | |
| March 30, 2022 | | 0.0478 | | | 0.0568 | | | 0.0569 | | | 0.0703 | | | — | | | — | |
| Total | | $ | 0.1410 | | | $ | 0.1666 | | | $ | 0.1669 | | | $ | 0.2062 | | | $ | — | | | $ | — | |
As of March 31, 2022, no Class T or Class D shares had been issued.
Distribution Reinvestment Plan
The Company has adopted a distribution reinvestment plan whereby stockholders (other than Alabama, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Jersey, North Carolina, Ohio, Oregon, Vermont and Washington investors) will have their cash distributions automatically reinvested in additional shares of common stock unless they elect to receive their distributions in cash. Alabama, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Jersey, North Carolina, Ohio, Oregon, Vermont and Washington investors will automatically receive their distributions in cash unless they elect to have their cash distributions reinvested in additional shares of the Company’s common stock. The per share purchase price for shares purchased pursuant to the distribution reinvestment plan will be equal to the offering price before upfront selling commissions and dealer manager fees (the “transaction price”) at the time the distribution is payable, which will generally be equal to the Company’s prior month’s NAV per share for that share class. Stockholders will not pay upfront selling commissions or dealer manager fees when purchasing shares pursuant to the distribution reinvestment plan. The stockholder servicing fees with respect to shares of the Company’s Class T shares, Class S shares and Class D shares are calculated based on the NAV for those shares and may reduce the NAV or, alternatively, the distributions payable with respect to shares of each such class, including shares issued in respect of distributions on such shares under the distribution reinvestment plan. During the three months ended March 31, 2022 and 2021, the Company reinvested $2.6 million and $0.9 million of distributions for 206,882 and 89,013 shares of common stock, respectively.
Non-controlling Interests Attributable to Preferred Shareholders
Certain subsidiaries of the Company have elected to be treated as REITs for U.S. federal income tax purpose. These subsidiaries have issued preferred non-voting shares to be held by investors to ensure compliance with the Code requirement that REITs have at least 100 shareholders. The preferred shares have a price of $1,000 and carry a 12.5% annual dividend payable annually. As of March 31, 2022, there were $375,000 of preferred non-voting shares outstanding.
Redeemable Non-controlling Interest
The Brookfield Investor holds Class E OP Units in connection with its contribution of certain properties on November 2, 2021, and subsequent cash contributions to the Operating Partnership. Because the Brookfield Investor has the ability to redeem its Class E OP Units for Class E shares or cash, subject to certain restrictions, the Company has classified these Class E OP Units as Redeemable non-controlling interest in mezzanine equity on the Company’s Consolidated Balance Sheets. The Redeemable Non-controlling Interest is recorded at the greater of the carrying amount, adjusted for its share of the allocation of income or loss and dividends, or the redemption value, which is equivalent to fair value, of such units at the end of each measurement period. As the redemption value was greater than the adjusted carrying value at March 31, 2022, the Company recorded an allocation adjustment of $20.9 million between Additional paid-in capital and Redeemable non-controlling interest.
The following table summarizes the Redeemable non-controlling interest activity for the quarter ended March 31, 2022. There were no Redeemable non-controlling interests for the quarter ended March 31, 2021:
| | | | | | | | |
| | March 31, 2022 |
| Balance at beginning of the year | | $ | 200,085,855 | |
| Limited Partner Asset Contributions | | — | |
| Limited Partner Cash Contribution | | 38,000,000 | |
| 2021 Advisor Performance Participation Fee | | 2,345,920 | |
| Repurchases | | — | |
| GAAP Income Allocation | | (975,024) | |
| Distributions | | (4,022,084) | |
| Distributions Reinvested | | 3,507,671 | |
| Fair Value Allocation | | 20,870,838 | |
| Balance at the end of the quarter | | $ | 259,813,176 | |
Share Repurchase Plan
The Company has adopted a share repurchase plan, whereby on a monthly basis, stockholders may request that the Company repurchase all or any portion of their shares. The Company may choose to repurchase all, some or none of the shares that have been requested to be repurchased at the end of any particular month, in its discretion, subject to any limitations in the share repurchase plan. The total amount of aggregate repurchases of Class T, Class S, Class D, and Class I shares will be limited to 2% of the aggregate NAV per month and 5% of the aggregate NAV per calendar quarter. Shares would be repurchased at a price equal to the transaction price on the applicable repurchase date, subject to any early repurchase deduction. Shares that have not been outstanding for at least one year would be repurchased at 98% of the transaction price. Due to the illiquid nature of investments in real estate, the Company may not have sufficient liquid resources to fund repurchase requests and has established limitations on the amount of funds the Company may use for repurchases during any calendar month and quarter. Further, the Company’s board of directors may modify or suspend the share repurchase plan.
During the three months ended March 31, 2022 and 2021, the Company repurchased 62,375 and 194,556 shares of common stock representing a total of $0.8 million and $2.0 million, respectively. During the three months ended March 31, 2022 and 2021, the Company repurchased 0 and 1,380,450 shares of common stock representing a total of $0 and $13.8 million, respectively, from the Oaktree Investor pursuant to the Oaktree Repurchase Agreement. The Company had no unfulfilled repurchase requests during the three months ended March 31, 2022 and 2021.
12. Commitments and Contingencies
From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2022, the Company was not subject to any material litigation nor was the Company aware of any material litigation threatened against it.
13. Leases
The Company’s rental revenue primarily consists of rent earned from operating leases at the Company’s multifamily, office, logistics and alternatives properties. Leases at the Company’s office, logistics and certain alternatives properties generally include a fixed base rent and certain leases also contain a variable component. The variable component of the Company’s operating leases at its office, logistics and certain alternatives properties primarily consist of the reimbursement of operating expenses such as real estate taxes, insurance, and common area maintenance costs. Rental revenue earned from leases at the Company’s multifamily and single-family rental properties primarily consist of a fixed base rent and certain leases contain a variable component that allows for the pass-through of certain operating expenses such as utilities.
The following table details the components of operating lease income from leases in which the Company is the lessor:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| Fixed lease payments | $ | 20,253,187 | | | $ | 6,850,110 | |
| Variable lease payments | 1,406,975 | | | 380,938 | |
| Total rental revenues | $ | 21,660,162 | | | $ | 7,231,048 | |
The following table details the undiscounted future minimum rents the Company expects to receive for its logistics, alternative, and office properties as of March 31, 2022. The table below excludes our multifamily and single family rental properties as substantially all leases are shorter term in nature.
| | | | | | | | |
| Year | | Future Minimum Rents |
| 2022 (remaining) | | $ | 23,494,525 | |
| 2023 | | 31,000,613 | |
| 2024 | | 28,022,915 | |
| 2025 | | 26,894,354 | |
| 2026 | | 24,232,189 | |
| Thereafter | | 162,620,901 | |
| Total | | $ | 296,265,497 | |
14. Segment Reporting
The Company operates in six reportable segments: multifamily, office, logistics, alternatives, investments in unconsolidated entities and real estate-related loans and securities. The Company allocates resources and evaluates results based on the performance of each segment individually. The Company believes that segment net operating income is the key performance metric that captures the unique operating characteristics of each segment.
The following table sets forth the total assets by segment:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Multifamily | $ | 817,407,750 | | | $ | 583,308,458 | |
| Office | 126,468,508 | | | 126,966,165 | |
| Logistics | 111,865,465 | | | 74,038,737 | |
| Alternatives | 373,467,764 | | | 332,796,506 | |
| Investments in unconsolidated entities | 104,778,146 | | | 129,671,086 | |
| Real estate-related loans and securities | 50,530,208 | | | 55,074,378 | |
| Other (Corporate) | 100,743,399 | | | 72,858,109 | |
| Total assets | $ | 1,685,261,240 | | | $ | 1,374,713,439 | |
The following table sets forth the financial results by segment for the three months ended March 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | |
| Multifamily | Office | Logistics | Alternatives | Investments in unconsolidated entities | Real estate-related loans and securities | Total |
| Revenues: | | | | | | | |
| Rental revenues | $ | 12,163,535 | | $ | 3,202,721 | | $ | 1,299,106 | | $ | 4,994,800 | | $ | — | | $ | — | | $ | 21,660,162 | |
| Other revenues | 1,693,376 | | 180,384 | | 12 | | 18,820 | | — | | — | | 1,892,592 | |
| Total revenues | 13,856,911 | | 3,383,105 | | 1,299,118 | | 5,013,620 | | — | | — | | 23,552,754 | |
| | | | | | | |
| Expenses: | | | | | | | |
| Rental property operating | 5,382,043 | | 1,329,575 | | 510,537 | | 687,563 | | 12,702 | | — | | 7,922,420 | |
| Total expenses | 5,382,043 | | 1,329,575 | | 510,537 | | 687,563 | | 12,702 | | — | | 7,922,420 | |
| Segment net operating income | $ | 8,474,868 | | $ | 2,053,530 | | $ | 788,581 | | $ | 4,326,057 | | $ | (12,702) | | $ | — | | $ | 15,630,334 | |
| | | | | | | |
| Income from real estate-related loans and securities | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 1,070,707 | | $ | 1,070,707 | |
| Realized gain on real estate investments | — | | — | | — | | — | | — | | 668,760 | | 668,760 | |
| Unrealized gain (loss) on investments | — | | — | | — | | — | | 6,960,632 | | (169,708) | | 6,790,924 | |
| Depreciation and amortization | 8,182,256 | | 1,691,123 | | 911,277 | | 2,410,535 | | — | | — | | 13,195,191 | |
| General and administrative expenses | | | | | | | 1,990,188 | |
| | | | | | | |
| Management fee | | | | | | | 1,196,264 | |
| Performance fee | | | | | | | 3,513,191 | |
| | | | | | | |
| Interest expense | | | | | | | 6,723,096 | |
| | | | | | | |
| Net loss | | | | | | | (2,457,205) | |
| Net income attributable to non-controlling interests in third party joint ventures | | | | | | | (5,800) | |
| Net loss attributable to redeemable non-controlling interests | | | | | | | 975,024 | |
| Net loss attributable to stockholders | | | | | | | $ | (1,487,981) | |
The following table sets forth the financial results by segment for the three months ended March 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Multifamily | | Office | | | | | | | | Real estate-related loans and securities | | Total |
| Revenues: | | | | | | | | | | | | | |
| Rental revenues | $ | 4,241,407 | | | $ | 2,989,641 | | | | | | | | | $ | — | | | $ | 7,231,048 | |
| Other revenues | 278,251 | | | 103,194 | | | | | | | | | — | | | 381,445 | |
| Total revenues | 4,519,658 | | | 3,092,835 | | | | | | | | | — | | | 7,612,493 | |
| | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | |
| Rental property operating | 1,996,526 | | | 1,318,500 | | | | | | | | | — | | | 3,315,026 | |
| Total expenses | 1,996,526 | | | 1,318,500 | | | | | | | | | — | | | 3,315,026 | |
| Segment net operating income | $ | 2,523,132 | | | $ | 1,774,335 | | $ | — | | | | | | | | $ | — | | $ | — | | $ | 4,297,467 | |
| | | | | | | | | | | | | |
| Income from real estate-related loans and securities | $ | — | | | $ | — | | | | | | | | | $ | 1,202,332 | | | $ | 1,202,332 | |
| Realized gain on real estate investments | — | | | — | | | | | | | | | 980,665 | | | 980,665 | |
| Unrealized gain (loss) on investments | 393,225 | | | — | | | | | | | | | (405,652) | | | (12,427) | |
| Depreciation and amortization | 2,584,149 | | | 1,740,337 | | | | | | | | | — | | | 4,324,486 | |
| General and administrative expenses | | | | | | | | | | | | | 1,015,798 | |
| | | | | | | | | | | | | |
| Management fee | | | | | | | | | | | | | 554,049 | |
| Performance fee | | | | | | | | | | | | | 573,823 | |
| | | | | | | | | | | | | |
| Interest expense | | | | | | | | | | | | | 1,372,457 | |
| | | | | | | | | | | | | |
| Net loss | | | | | | | | | | | | | (1,372,576) | |
| Net income attributable to non-controlling interests | | | | | | | | | | | | | 125,278 | |
| Net loss attributable to stockholders | | | | | | | | | | | | | $ | (1,247,298) | |
15. Subsequent Events
The Company has evaluated events from March 31, 2022, through the date the financial statements were issued.
Acquisitions
•The Company acquired one multifamily property for $158.0 million, exclusive of closing costs.
Status of the Offering
As of May 16, 2022, the Company had sold an aggregate of 42,119,650 shares of its common stock (consisting of 28,424,980 Class S shares, 4,630,988 Class I shares, 6,335,034 Class C shares and 2,728,648 Class E shares) in the Offering resulting in net proceeds of $477,022,420 to the Company as payment for such shares.
