10-Q 1 rpt10q-2017q3.htm 10-Q Document

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
Form 10-Q
_________________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____

Commission file number 000-55598
__________________________________________ 
RREEF Property Trust, Inc.
(Exact name of registrant as specified in its charter)
__________________________________________
Maryland
45-4478978
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification Number)
 
 
345 Park Avenue, 26th Floor, New York, NY 10154
(212) 454-6260
(Address of principal executive offices; zip code)
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 ________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o  (Do not check if smaller reporting company)
Smaller reporting company
x
 
 
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

As of November 8, 2017, the registrant had 3,690,317 shares of Class A common stock, $.01 par value, outstanding, 4,236,482 shares of Class I common stock, $.01 par value, outstanding, 51,267 shares of Class T common stock, $.01 par value, outstanding, and no shares of Class D common stock, $.01 par value, or Class N common stock, $.01 par value, outstanding.
 
 
 
 
 



RREEF PROPERTY TRUST, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended September 30, 2017

TABLE OF CONTENTS
 
 


2


PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RREEF PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
 
September 30, 2017 (unaudited)
 
December 31, 2016
ASSETS

 

Investment in real estate assets:

 

Land
$
37,238,612

 
$
37,238,612

Buildings and improvements, less accumulated depreciation of $10,411,016 and $7,224,763, respectively
93,106,965

 
96,237,173

Furniture, fixtures and equipment, less accumulated depreciation of $192,470 and $124,752, respectively
266,252

 
270,260

Acquired intangible lease assets, less accumulated amortization of $14,567,142 and $11,703,672, respectively
22,228,192

 
25,091,662

Total investment in real estate assets, net
152,840,021

 
158,837,707

Investment in marketable securities
9,805,875

 
8,609,212

Total investment in real estate assets and marketable securities, net
162,645,896

 
167,446,919

Cash and cash equivalents
2,439,900

 
1,493,256

Receivables, net of allowance for doubtful accounts of $17,591 and $1,133, respectively
2,331,274

 
1,857,590

Deferred leasing costs, net of amortization of $158,651 and $47,159, respectively
1,872,484

 
1,872,817

Prepaid and other assets
1,561,021

 
1,518,865

Total assets
$
170,850,575

 
$
174,189,447

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Line of credit, net
$
64,310,016

 
$
64,677,532

Mortgage loans payable, net
27,245,600

 
27,219,106

Accounts payable and accrued expenses
1,216,262

 
2,409,307

Due to affiliates
4,469,259

 
4,844,917

Note to affiliate, net of unamortized discount of $1,545,600 and $1,652,108, respectively
7,404,400


7,297,892

Acquired below market lease intangibles, less accumulated amortization of $2,918,015 and $2,623,139, respectively
5,765,740

 
6,060,616

Distributions payable
248,375

 
239,897

Other liabilities
1,130,826

 
1,168,665

Total liabilities
111,790,478

 
113,917,932

Stockholders' Equity:

 

Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued

 

Class A common stock, $0.01 par value; 200,000,000 shares authorized; 3,684,816 and 3,646,919 issued and outstanding, respectively
36,848

 
36,469

Class I common stock, $0.01 par value; 200,000,000 shares authorized; 4,181,651 and 3,780,836 issued and outstanding, respectively
41,816

 
37,809

Class T common stock, $0.01 par value; 250,000,000 shares authorized; 37,675 and 4,043 issued and outstanding, respectively
377

 
40

Class D common stock, $0.01 par value; 50,000,000 shares authorized; none issued

 

Class N common stock, $0.01 par value; 300,000,000 shares authorized; none issued

 

Additional paid-in capital
84,574,878

 
79,994,729

Deficit
(26,101,787
)
 
(20,302,983
)
Accumulated other comprehensive income
507,965

 
505,451

Total stockholders' equity
59,060,097

 
60,271,515

Total liabilities and stockholders' equity
$
170,850,575

 
$
174,189,447

The accompanying notes are an integral part of these consolidated financial statements.

3


RREEF PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Revenues

 
 
 
 
 
 
Rental and other property income
$
3,819,417

 
$
4,811,868

 
$
11,400,901

 
$
11,310,771

Tenant reimbursement income
540,528

 
298,642

 
1,608,351

 
938,783

Investment income on marketable securities
84,836

 
100,314

 
205,692

 
364,643

Total revenues
4,444,781

 
5,210,824

 
13,214,944

 
12,614,197

Expenses

 
 
 
 
 

General and administrative expenses
407,787

 
484,966

 
1,272,533

 
1,594,622

Property operating expenses
1,446,432

 
1,196,943

 
4,093,912

 
3,760,305

Advisory fees
623,670

 
445,066

 
1,128,071

 
869,794

Acquisition related expenses

 
158,762

 

 
158,762

Depreciation
1,085,483

 
920,562

 
3,253,971

 
2,740,942

Amortization
933,854

 
2,946,851

 
2,794,203

 
5,860,724

Total operating expenses
4,497,226

 
6,153,150

 
12,542,690

 
14,985,149

Operating (loss) income
(52,445
)
 
(942,326
)
 
672,254

 
(2,370,952
)
Interest expense
(910,512
)
 
(541,561
)
 
(2,622,446
)
 
(1,657,922
)
Net realized (loss) gain on sale of marketable securities
(25,389
)
 
243,689

 
22,407

 
372,736

Net loss
$
(988,346
)
 
$
(1,240,198
)
 
$
(1,927,785
)
 
$
(3,656,138
)


 
 
 

 
 
Basic and diluted net loss per share of Class A common stock
$
(0.12
)
 
$
(0.17
)
 
$
(0.24
)
 
$
(0.54
)
Basic and diluted net loss per share of Class I common stock
$
(0.13
)
 
$
(0.18
)
 
$
(0.26
)
 
$
(0.55
)
Basic and diluted net loss per share of Class T common stock
$
(0.10
)
 
$
(0.22
)
 
$
(0.22
)
 
$
(0.59
)

The accompanying notes are an integral part of these consolidated financial statements.



4


RREEF PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net loss
$
(988,346
)
 
$
(1,240,198
)
 
$
(1,927,785
)
 
$
(3,656,138
)
Other comprehensive (loss) income:

 

 

 

Reclassification of previous unrealized loss (gain) on marketable securities into net realized gain (loss)
25,389

 
(243,689
)
 
(22,407
)
 
(372,736
)
Unrealized (loss) gain on marketable securities
(37,393
)
 
(342,239
)
 
24,921

 
321,914

Total other comprehensive (loss) income
(12,004
)
 
(585,928
)
 
2,514

 
(50,822
)
Comprehensive loss
$
(1,000,350
)
 
$
(1,826,126
)
 
$
(1,925,271
)
 
$
(3,706,960
)

The accompanying notes are an integral part of these consolidated financial statements.


5


RREEF PROPERTY TRUST, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)

 
Preferred Stock

Class A Common Stock

Class I Common Stock

Class T Common Stock

Class D Common Stock

Class N Common Stock

Additional Paid-in Capital

Deficit

Accumulated Other Comprehensive Income

Total
Stockholders'
Equity
 
Number of
Shares
Par
Value

Number of
Shares
Par
Value

Number of
Shares
Par
Value

Number of
Shares
Par
Value

Number of
Shares
Par
Value

Number of
Shares
Par
Value




Balance, December 31, 2016

$


3,646,919

$
36,469


3,780,836

$
37,809


4,043

$
40



$



$


$
79,994,729


$
(20,302,983
)

$
505,451


$
60,271,515

Issuance of common stock



147,071

1,471


591,874

5,919


37,658

377








10,527,048






10,534,815

Issuance of common stock through the distribution reinvestment plan



71,022

710


50,749

506


17









1,637,540






1,638,756

Redemption of common stock



(180,196
)
(1,802
)

(241,808
)
(2,418
)

(4,043
)
(40
)







(5,746,912
)





(5,751,172
)
Distributions to investors




















(3,871,019
)



(3,871,019
)
Dealer - manager fees


















(386,723
)





(386,723
)
Other offering costs


















(1,450,804
)





(1,450,804
)
Comprehensive income (loss)




















(1,927,785
)

2,514


(1,925,271
)
Balance, September 30, 2017

$

 
3,684,816

$
36,848

 
4,181,651

$
41,816

 
37,675

$
377



$

 

$

 
$
84,574,878

 
$
(26,101,787
)
 
$
507,965

 
$
59,060,097


The accompanying notes are an integral part of these consolidated financial statements.



6


RREEF PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Nine Months Ended September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net loss
$
(1,927,785
)
 
$
(3,656,138
)
Adjustments to reconcile net loss to net cash provided by operating activities:

 

Depreciation
3,253,971

 
2,740,942

Net realized gain on sale of marketable securities
(22,407
)
 
(372,736
)
Amortization of intangible lease assets and liabilities
2,680,086

 
4,110,016

Amortization of deferred financing costs
358,978

 
257,159

Allowance for doubtful accounts
16,458

 
27,726

Straight line rent
(450,710
)
 
(210,205
)
Amortization of discount on note to affiliate
106,508


174,610

Changes in assets and liabilities:

 

    Receivables
77,291

 
49,593

    Deferred leasing costs
(93,211
)
 
(156,475
)
    Prepaid and other assets
(32,156
)
 
(152,468
)
    Accounts payable and accrued expenses
(1,164,539
)
 
706,810

    Other liabilities
(31,977
)
 
(156,867
)
    Due to affiliates
87,094

 
342,288

Net cash provided by operating activities
2,857,601

 
3,704,255

Cash flows from investing activities:

 

Investment in real estate and related assets

 
(33,761,415
)
Improvements to real estate assets
(119,755
)
 
(74,935
)
Investment in marketable securities
(12,161,827
)
 
(9,456,559
)
Proceeds from sale of marketable securities
10,997,483

 
10,355,353

Net cash used in investing activities
(1,284,099
)
 
(32,937,556
)
Cash flows from financing activities:

 

Proceeds from line of credit
3,250,000

 
36,100,000

Proceeds from mortgage loans payable

 
14,500,000

Repayments of line of credit
(3,950,000
)

(28,000,000
)
Proceeds from issuance of common stock
10,353,815

 
23,050,771

Payment of offering costs
(2,305,716
)
 
(4,178,368
)
Repayment of note to affiliate


(250,000
)
Distributions to investors
(3,862,541
)
 
(3,277,931
)
Redemption of common stock
(5,751,172
)

(9,460,625
)
Common stock issued through the distribution reinvestment plan
1,638,756

 
1,368,305

Deferred financing costs

 
(322,007
)
Net cash (used in) provided by financing activities
(626,858
)
 
29,530,145

Net increase in cash and cash equivalents
946,644

 
296,844

Cash and cash equivalents, beginning of period
1,493,256

 
1,936,870

Cash and cash equivalents, end of period
$
2,439,900

 
$
2,233,714


The accompanying notes are an integral part of these consolidated financial statements.


7


RREEF PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(Unaudited)

 
Nine Months Ended September 30,
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
2017
 
2016
Distributions declared and unpaid
$
248,375


$
218,600

Unrealized gain/(loss) on marketable securities
2,514


(50,822
)
Purchases of marketable securities not yet paid
60,460


786,477

Proceeds from sale of marketable securities not yet received
30,480


65,643

Proceeds from issuance of common stock not yet received
189,575



Discount on note to affiliate


1,861,880

Accrued offering costs not yet paid
907,648


687,257

 
 
 
 
Supplemental Cash Flow Disclosures:

 

Interest paid
$
2,091,318


$
1,164,346

 
 
 
 
In connection with the purchase of investments in real estate and related assets, the Company also assumed certain non-real estate assets and liabilities:

 

Purchase price
$

 
$
34,000,000

Prepaid and other assets assumed

 
(7,055
)
Other liabilities assumed

 
(231,530
)
Investment in real estate and related assets
$

 
$
33,761,415


The accompanying notes are an integral part of these consolidated financial statements.


8


RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)

NOTE 1 — ORGANIZATION
RREEF Property Trust, Inc. (the “Company”) was formed on February 7, 2012 as a Maryland corporation and has elected to qualify as a real estate investment trust (“REIT”) for federal income tax purposes. Substantially all of the Company's business is conducted through RREEF Property Operating Partnership, LP, the Company's operating partnership (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership. RREEF Property OP Holder, LLC (the “OP Holder”), a wholly-owned subsidiary of the Company, is the limited partner of the Operating Partnership. As the Company completes the settlement for purchase orders for shares of its common stock in its continuous public offering, it will continue to transfer substantially all of the proceeds to the Operating Partnership.
The Company was organized to invest primarily in a diversified portfolio consisting primarily of high quality, income-producing commercial real estate located in the United States, including, without limitation, office, industrial, retail and multifamily properties (“Real Estate Properties”). Although the Company intends to invest primarily in Real Estate Properties, it also intends to acquire common and preferred stock of REITs and other real estate companies (“Real Estate Equity Securities”) and debt investments backed principally by real estate (“Real Estate Loans” and, together with Real Estate Equity Securities, “Real Estate-Related Assets”).
On January 3, 2013, the Securities and Exchange Commission ("SEC") declared effective the Company's registration statement on Form S-11 (File No. 333-180356), filed under the Securities Act of 1933, as amended (the "Initial Registration Statement"). On May 30, 2013, RREEF America L.L.C., a Delaware limited liability company (“RREEF America”), the Company's sponsor and advisor, purchased $10,000,000 of the Company's Class I common stock, $0.01 par value per share ("Class I Shares"), and the Company’s board of directors authorized the release of the escrowed funds to the Company, thereby allowing the Company to commence operations.

On January 15, 2016, the Company filed articles supplementary to its articles of incorporation to add a newly-designated Class D common stock, $0.01 par value per share ("Class D Shares"). On January 20, 2016, the Company commenced a private offering of up to a maximum of $350,000,000 in Class D Shares (the "Private Offering," and together with the Follow-On Public Offering (defined below), the "Offerings").

On July 12, 2016, the SEC declared effective the Company's registration statement on Form S-11 (File No. 333-208751), filed under the Securities Act of 1933, as amended (the "Registration Statement"). Pursuant to the Registration Statement, the Company is offering for sale up to $2,100,000,000 of shares of its Class A common stock, $0.01 par value per share ("Class A Shares"), Class I Shares, and Class T common stock, $0.01 par value per share ("Class T Shares"), in its primary offering and up to $200,000,000 of Class A Shares, Class I Shares, Class N common stock, $0.01 par value per share ("Class N Shares") and Class T Shares pursuant to its distribution reinvestment plan, to be sold on a "best efforts" basis for the Company's follow-on public offering (the "Follow-On Public Offering"). The Company's initial public offering terminated upon the commencement of the Follow-On Public Offering.

Class T Shares contain a conversion feature whereby upon the occurrence of a specified event (generally related to a Class T stockholder's account having incurred a maximum of 8.5% of underwriting compensation), Class T Shares owned in a shareholder's Class T account for a given offering will automatically convert to Class N Shares.
Shares of the Company’s common stock are sold at the Company’s net asset value (“NAV”) per share, plus, for Class A, T and D Shares only, applicable selling commissions. Each class of shares may have a different NAV per share because of certain class-specific fees. NAV per share is calculated by dividing the NAV at the end of each business day for each class by the number of shares outstanding for that class on such day.


9

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


The Company's NAV per share for its Class A, Class I and Class T Shares is posted to the Company's website at www.rreefpropertytrust.com after the stock market close each business day. Additionally, the Company's NAV per share for its Class A, Class I and Class T Shares is published daily via NASDAQ's Mutual Fund Quotation System under the symbols ZRPTAX, ZRPTIX and ZRPTTX for its Class A Shares, Class I Shares and Class T Shares, respectively.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), the authoritative reference for U.S. generally accepted accounting principles (“GAAP”). There have been no significant changes to the Company's significant accounting policies during the nine months ended September 30, 2017. The interim financial data as of September 30, 2017 and for the nine months ended September 30, 2017 and 2016 is unaudited. In our opinion, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Organization and Offering Costs

Organizational expenses and other expenses which do not qualify as offering costs are expensed as incurred. Offering costs are those costs incurred by the Company, RREEF America and its affiliates on behalf of the Company which relate directly to the Company’s activities of raising capital in the Offerings, preparing for the Offerings, the qualification and registration of the Offerings and the marketing and distribution of the Company’s shares. This includes, but is not limited to, accounting and legal fees, including the legal fees of the dealer manager for the public offerings, costs for registration statement amendments and prospectus supplements, printing, mailing and distribution costs, filing fees, amounts to reimburse RREEF America as the Company’s advisor or its affiliates for the salaries of employees and other costs in connection with preparing supplemental sales literature, amounts to reimburse the dealer manager for amounts that it may pay to reimburse the bona fide due diligence expenses of any participating broker-dealers supported by detailed and itemized invoices, telecommunication costs, fees of the transfer agent, registrars, trustees, depositories and experts, the cost of educational conferences held by the Company (including the travel, meal and lodging costs of registered representatives of any participating broker-dealers) and attendance fees and cost reimbursement for employees of affiliates to attend retail seminars conducted by broker-dealers. Offering costs will be paid from the proceeds of the Offerings. These costs will be treated as a reduction of the total proceeds. Total organization and offering costs incurred by the Company with respect to a particular Offering will not exceed 15% of the gross proceeds from such particular Offering. In addition, the Company will not reimburse RREEF America or the dealer manager for any underwriting compensation (a subset of organization and offering costs) which would cause the Company’s total underwriting compensation to exceed 10% of the gross proceeds from the primary portion of a particular offering.

Included in offering costs are (1) distribution fees paid on a trailing basis at the rate of (a) 0.50% per annum on the NAV of the outstanding Class A Shares, and (b) 1.00% per annum for approximately three years on the NAV of the outstanding Class T Shares, and (2) dealer manager fees paid on a trailing basis at the rate of 0.55% per annum on the NAV of the outstanding Class A and Class I Shares (collectively, the "Trailing Fees"). The Trailing Fees are computed daily based on the respective NAV of each share class as of the beginning of each day and paid monthly. However, at each reporting date, the Company accrues an estimate for the amount of Trailing Fees that ultimately may be paid on the outstanding shares. Such estimate reflects the Company's assumptions for certain variables, including future redemptions, share price appreciation and the total gross proceeds raised or to be raised during each Offering. In addition, the estimated accrual for future Trailing Fees as of a given reporting date may be reduced by

10

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


the aforementioned limits on total organization and offering costs and total underwriting compensation. Changes in this estimate will be recorded prospectively as an adjustment to additional paid-in capital. As of September 30, 2017 and December 31, 2016, the Company has accrued $2,349,798 and $2,352,711, respectively, in Trailing Fees to be payable in the future, which was included in due to affiliates on the consolidated balance sheets.

Net Earnings or Loss Per Share

Net earnings or loss per share is calculated using the two-class method. The two-class method is utilized when an entity (1) has different classes of common stock that participate differently in net earnings or loss, or (2) has issued participating securities, which are securities that participate in distributions separately from the entity’s common stock. Pursuant to the advisory agreement between the Company and its advisor (see Note 7), the advisor may earn a performance component of the advisory fee which is calculated separately for each class of common stock which therefore may result in a different allocation of net earnings or loss to each class of common stock. From the Company’s inception through September 30, 2017, the Company has not issued any participating securities.

Concentration of Credit Risk

As of September 30, 2017 and December 31, 2016, the Company had cash on deposit at multiple financial institutions which were in excess of federally insured levels. The Company limits significant cash holdings to accounts held by financial institutions with a high credit standing. Therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits.
As of September 30, 2017 and 2016, the Company owned four office properties, two retail properties and one industrial property with a total of nineteen tenants and one student housing property with 316 beds. Percentages of gross rental revenues by property and tenant representing more than 10% of the Company's total gross rental revenues (rental and other property income and tenant reimbursement income) for the three and nine months ended September 30, 2017 and 2016 are shown below.
 
 
Percent of actual gross rental revenues
Property
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
Flats at Carrs Hill, Athens, GA
 
17.7
%
 
17.4
%
Loudoun Gateway, Sterling, VA
 
16.7
%
 
17.3
%
Allied Drive, Dedham, MA
 
15.7
%
 
16.2
%
Terra Nova Plaza, Chula Vista, CA
 
13.0
%
 
12.5
%
Anaheim Hills Office Plaza, Anaheim, CA
 
12.9
%
 
12.6
%
Commerce Corner, Logan Township, NJ
 
10.6
%
 
10.4
%
Total
 
86.6
%
 
86.4
%
 
 
 
 
 
 
 
Percent of actual gross rental revenues
Tenant
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
Orbital ATK Inc. - Loudoun Gateway
 
16.7
%
 
17.3
%
New England Baptist Hospital - Allied Drive
 
13.4
%
 
13.7
%
Total
 
30.1
%
 
31.0
%



11

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)



 
 
Percent of actual gross rental revenues
Property
 
Three Months Ended September 30, 2016
 
Nine Months Ended September 30, 2016
Terra Nova Plaza, Chula Vista, CA
 
42.4
%
 
26.0
%
Loudoun Gateway, Sterling VA
 
13.7
%
 
18.4
%
Flats at Carrs Hill, Athens GA
 
13.7
%
 
17.3
%
Anaheim Hills Office Plaza, Anaheim CA
 
10.4
%
 
13.0
%
Commerce Corner, Logan Township, NJ
 
8.4
%
 
10.7
%
Total
 
88.6
%
 
85.4
%
 
 
 
 
 
 
 
Percent of actual gross rental revenues
Tenant
 
Three Months Ended September 30, 2016
 
Nine Months Ended September 30, 2016
The Sports Authority, Inc - Terra Nova Plaza 1
 
37.1
%
 
19.2
%
Orbital ATK Inc. -Loudoun Gateway
 
13.7
%
 
18.4
%
Total
 
50.8
%
 
37.6
%
1 On March 2, 2016, The Sports Authority, Inc., a tenant at Terra Nova Plaza, declared bankruptcy. On June 29, 2016, Dick's Sporting Goods, Inc. won the right at auction to assume and/or negotiate a new lease for the space occupied by The Sports Authority, Inc. On September 2, 2016, the Company entered into a 10-year lease with Dick's Sporting Goods, Inc. for the space previously occupied by The Sports Authority, Inc. On September 26, 2016, the lease with Dick's Sporting Goods, Inc. was formally approved by the court administering the bankruptcy proceedings of The Sports Authority, Inc., at which time Dick's Sporting Goods, Inc. became the tenant, effectively terminating the lease with The Sports Authority, Inc. In connection therewith, all outstanding receivables related to The Sports Authority, Inc., including $315,548 of accounts receivable and $228,208 of deferred rent receivable which were previously reserved, were fully written off. In addition, the Company also fully amortized the remaining acquired intangible lease assets and acquired below market lease intangible related to The Sports Authority, Inc. lease, the effect of which added approximately $1,898,000 to amortization expense and approximately $1,499,000 to rental and other property income on the Company's consolidated statement of operations for the three and nine months ended September 30, 2016. The additional acquired below market lease revenue of $1,499,000is included in the concentration tables above.

The Company's tenants representing more than 10% of in-place annualized base rental revenues as of September 30, 2017 and 2016 were as follows:
 
 
Percent of in-place annualized base rental revenues as of
Tenant
 
September 30, 2017
 
September 30, 2016
Orbital ATK Inc. - Loudoun Gateway
 
18.7
%
 
19.7
%
New England Baptist Hospital - Allied Drive
 
10.7
%
 
11.7
%
Total
 
29.4
%
 
31.4
%

Recent Accounting Pronouncements

In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-01, Financial Statements - Overall (Subtopic 825-10) - Recognition and Measurement of Financial

12

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


Assets and Financial Liabilities. ASU 2016-01 amends the guidance on the classification and measurement of financial instruments. Although ASU 2016-01 retains many current requirements, it significantly revises an entity’s accounting related to investments in equity securities, excluding those accounted for under the equity method of accounting or those that result in consolidation of the investee. Under ASU 2016-01, investments in equity securities that fall within the scope of ASU 2016-01 will be measured at fair value, with changes in fair value recognized in net earnings. Since the Company's inception, it has accounted for its investments in equity securities as available for sale securities, with unrealized changes in fair value recognized in other comprehensive income or loss. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective on January 1, 2018. Upon adoption, the Company will be required to record the amount of net unrealized gain or loss on its investments in marketable securities as of December 31, 2017 in earnings via a cumulative effect adjustment.

In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows, (Topic 230): Classification of Cash Receipts and Cash Payments, which identifies the principles for the classification of eight specific types of cash flow with the objective of providing specific guidance on these specified cash flows. The cash flows that may be pertinent to the Company in the future include debt prepayment or debt extinguishment costs, contingent consideration of payments made after a business combination, proceeds from the settlement of insurance claims and distributions received. In addition, ASU 2016-15 also specifies the classification of cash flows for payments made under zero-coupon debt instruments, such as the Company's note to affiliate on its consolidated balance sheet as of September 30, 2017. During the year ended December 31, 2016, the Company made one payment of $250,000 to its advisor under the note to affiliate. Under ASU 2016-15, the portion of such payment representing the imputed interest expense, which was $91,726, would be included in cash flows from operating activities. Under current GAAP, the entire payment of $250,000 was reported as a financing activity. ASU 2016-15 will become effective on January 1, 2018. Upon adoption, ASU 2016-15 must be applied retrospectively, implying that prior periods presented should be adjusted to conform to ASU 2016-15, unless to do so would be impracticable. Aside from the reclassification related to the aforementioned payment to RREEF America under the note to affiliate, the Company does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements.

In January 2017, FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, the intent of which is to assist entities with evaluating whether transactions should be accounted for as acquisitions (and dispositions) of assets or businesses. Under the current implementation guidance, real estate has broadly been interpreted to be a business, which requires, among other things, that acquisition related costs be expensed at the time of acquisition. The amendments in ASU 2017-01 provide a screen to determine when a set of identifiable assets is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. Generally, a real estate asset and its related leases will be considered a single identifiable asset and therefore will not meet the definition of a business. If the real estate and related leases in an acquisition are determined to be an asset and not a business, then the acquisition related costs would be capitalized onto the balance sheet. ASU 2017-01 is effective on January 1, 2018. Adoption of ASU 2017-01 is not expected to have an impact on the Company's consolidated financial statements, but may affect transactions in real estate that occur after adoption.

In May 2014, FASB issued ASU 2014-09, Revenue From Contracts With Customers. ASU 2014-09 requires entities to recognize revenue in their financial statements in a manner that depicts the transfer of the promised goods or services to its customers in an amount that reflects the consideration to which the entity is entitled at the time of transfer of those goods or services. As a result, the amount and timing of revenue recognition may be affected. However, certain types of contracts are excluded from the provisions of ASU 2014-09, including leases. Other types of real estate related contracts, such as for dispositions or development of real estate, will be impacted by ASU 2014-09. In addition, ASU 2014-09 requires additional disclosures regarding revenue recognition. ASU 2014-09, as amended, becomes effective on January 1, 2018. Upon adoption, ASU 2014-09 must be applied retrospectively either (a) to each prior reporting period presented, or (b) with a cumulative effect adjustment. The Company intends to adopt ASU 2014-09 via a cumulative effect adjustment in the period of adoption. The Company is still evaluating the impact of ASU 2014-09 on its consolidated financial statements but currently does not expect adoption of ASU 2014-09 to have a material impact.

13

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)



In February 2016, FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessors to identify the lease and non-lease components contained within each lease. Common area maintenance reimbursements within a real estate lease under ASU 2016-02 are considered a non-lease component and as such, would have to be evaluated under the revenue recognition guidance of ASU 2014-09. However, based on recent interpretations, for real estate leases in place at the date of adoption of ASU 2016-02, common area maintenance reimbursements will continue to be accounted for under the current guidance of ASC Topic 840 until such leases expire or are amended. Accordingly, only real estate leases entered into after the date of adoption of ASU 2016-02 would require an evaluation of the common area maintenance reimbursements as non-lease components under ASU 2014-09. ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to 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. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. As of September 30, 2017, the Company is not a lessee under any lease contracts. As of September 30, 2017, all of the Company's leases are classified as operating leases, and it is expected that such leases will continue to be classified as operating leases under ASU 2016-02. The Company intends to adopt ASU 2016-02 when it is effective on January 1, 2019. The Company is still evaluating the impact of ASU 2016-02 on its consolidated financial statements but currently does not expect adoption of ASU 2016-02 to have a material impact.

Correction of Immaterial Error
 
During 2017, the Company identified an immaterial presentation and disclosure error related to net loss per share.  Previously, the Company had not been applying the two-class method for reporting net loss per share.  The Company has determined that reporting net loss per share under the two-class method is appropriate.  The net loss per share disclosed on the Company’s consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016 has been presented using the two-class method for each class of common stock which had shares outstanding for the periods presented.  The net loss per share for the three and nine months ended September 30, 2016 were previously calculated without the use of the two-class method and were reported as net losses per share of $0.18 and $0.54, respectively, for all classes of outstanding shares combined. Note 9 within this quarterly report on Form 10-Q discloses the application of the two-class method, including the calculation of net loss per share for each class of common stock which had shares outstanding during the relevant periods. 

NOTE 3 — FAIR VALUE MEASUREMENTS
Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, FASB ASC 820, Fair Value Measurement and Disclosures, establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are the unobservable inputs for the asset or liability, which are typically based on an entity's own assumption, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on input from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value

14

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company's investments in marketable securities are valued using Level 1 inputs as the securities are publicly traded on major stock exchanges.
FASB ASC 825-10-65-1 requires the Company to disclose fair value information for all financial instruments for which it is practicable to estimate fair value, whether or not recognized in the consolidated balance sheets. Fair value of lines of credit and mortgage loans payable is determined using Level 2 inputs and a discounted cash flow approach with an interest rate and other assumptions that approximate current market conditions. The carrying amount of the Company's line of credit, exclusive of deferred financing costs, approximated its fair value of $64,500,000 and $65,200,000 at September 30, 2017 and December 31, 2016, respectively. The Company estimated the fair value of the Company's mortgage loans payable at $26,652,137 and $25,942,141 as of September 30, 2017 and December 31, 2016, respectively.
The fair value of the Company's note to affiliate is determined using Level 3 inputs and a discounted cash flow approach with an interest rate and other assumptions that estimate current market conditions. The Company has estimated the fair value of its note to affiliate at approximately $2,600,000 as of September 30, 2017 and December 31, 2016.
The Company's financial instruments, other than those referred to above, are generally short-term in nature and contain minimal credit risk. These instruments consist of cash and cash equivalents, accounts and other receivables and accounts payable. The carrying amounts of these assets and liabilities in the consolidated balance sheets approximate their fair value.

NOTE 4 — REAL ESTATE INVESTMENTS
The Company acquired no real estate property during the nine months ended September 30, 2017 and one real estate property during the three and nine months ended September 30, 2016. The Company's rental and other property income for the three and nine months ended September 30, 2017 and 2016 is comprised of the following:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Rental revenue
$
3,714,023

 
$
3,084,073

 
$
10,836,073

 
$
9,121,649

Straight line revenue
67,638

 
149,178

 
450,710

 
438,413

Above- and below-market lease amortization, net
63,878

 
1,578,617

 
191,634

 
1,750,709

Lease incentive amortization
(26,122
)
 

 
(77,516
)
 

Rental and other property income
$
3,819,417

 
$
4,811,868

 
$
11,400,901

 
$
11,310,771


On September 27, 2016, the Company acquired Allied Drive, a two-story, 64,127 square foot medical office building located in Dedham, Massachusetts. The purchase price for this acquisition was $34,000,000, exclusive of closing costs. The Company funded the acquisition with cash on hand and by borrowing $32,400,000 from the Company's line of credit with Wells Fargo Bank. Of the $32,400,000 borrowed, $13,136,600 was from existing borrowing capacity on previously acquired properties, and $19,263,400 was allocated to Allied Drive.

All leases at the Company's properties have been classified as operating leases. The Company allocated the purchase price of the Company's properties acquired during the nine months ended September 30, 2016 as follows:


15

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


 
2016 Acquisition
 
Allied Drive
Land
$
5,483,925

Building and improvements
19,807,646

Acquired in-place leases
8,861,624

Acquired above-market leases
2,022

Acquired below-market leases
(155,217
)
Total purchase price
$
34,000,000


The Company recorded revenues and net income related to the properties acquired during the three and nine months ended September 30, 2016 as follows:
 
Three and Nine Months Ended September 30, 2016
Revenues
$
20,592

Net loss
(177,393
)
The Company's estimated revenues and net loss, on a pro forma basis, as if the acquisition of Allied Drive was completed on January 1, 2015, for the three and nine months ended September 30, 2016 are as follows:

 
Three Months Ended September 30, 2016
 
Nine Months Ended September 30, 2016
Revenues
$
5,818,589

 
$
14,437,492

Net loss
(1,185,122
)
 
(3,887,293
)

NOTE 5 — MARKETABLE SECURITIES
The following is a summary of the Company's marketable securities held as of September 30, 2017 and December 31, 2016, which consisted entirely of publicly-traded shares of common stock in REITs as of each date. All marketable securities held as of September 30, 2017 and December 31, 2016 were available-for-sale securities and none were considered impaired on an other-than-temporary basis.
 
September 30, 2017
 
December 31, 2016
Marketable securities—cost
$
9,297,910

 
$
8,103,761

   Unrealized gains
656,128

 
652,417

   Unrealized losses
(148,163
)
 
(146,966
)
Net unrealized gain
507,965

 
505,451

Marketable securities—fair value
$
9,805,875

 
$
8,609,212


Upon the sale of a particular security, the realized net gain or loss is computed assuming the shares with the highest cost are sold first. During the three months ended September 30, 2017 and 2016, marketable securities sold generated proceeds of $3,030,317 and $4,548,731, respectively, resulting in gross realized gains of $110,632 and $405,650, respectively, and gross realized losses of $136,021 and $161,961, respectively. During the nine months ended September 30, 2017 and 2016, marketable securities sold generated proceeds of $10,943,630 and

16

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


$10,403,385, respectively, resulting in gross realized gains of $480,574 and $808,071, respectively, and gross realized losses of $458,167 and $435,335, respectively.

NOTE 6 — NOTES PAYABLE
Wells Fargo Line of Credit

On March 6, 2015, the Company, as guarantor, and the wholly-owned subsidiaries of the Operating Partnership, as co-borrowers, entered into a secured revolving line of credit arrangement (the “Wells Fargo Line of Credit”) pursuant to a credit agreement with Wells Fargo Bank, National Association, as administrative agent, and other lending institutions that may become parties to the credit agreement. The Wells Fargo Line of Credit has a three-year term set to mature on March 6, 2018 with two one-year extension options exercisable by the Company upon satisfaction of certain conditions and payment of applicable extension fees. Each one-year extension is exercisable between 45 and 120 days prior to the then scheduled maturity. Subject to then current market conditions, the Company plans to extend the line of credit prior to the maturity date using available cash flow to meet the requirements for extension. The interest rate under the Wells Fargo Line of Credit is based on the 1-month LIBOR with a spread of 170 to 190 basis points depending on the debt yield as defined in the agreement. In addition, the Wells Fargo Line of Credit has a maximum capacity of $100,000,000 and is expandable by the Company up to a maximum capacity of $150,000,000 upon satisfaction of specified conditions. Each requested expansion must be for at least $25,000,000 and may result in the Wells Fargo Line of Credit being syndicated. As of September 30, 2017 and December 31, 2016, the outstanding balance was $64,500,000 and $65,200,000, respectively, and the weighted average interest rate was 2.93% and 2.40%, respectively.

At any time, the borrowing capacity under the Wells Fargo Line of Credit is based on the lesser of (1) an amount equal to 65% of the aggregate value of the properties in the collateral pool as determined by lender appraisals, (2) an amount that results in a minimum debt yield of 11% based on the in-place net operating income of the collateral pool as defined, or (3) the maximum capacity of the Wells Fargo Line of Credit. Proceeds from the Wells Fargo Line of Credit can be used to fund acquisitions, redeem shares pursuant to the Company's redemption plan and for any other corporate purpose. As of September 30, 2017 and December 31, 2016, the Company's maximum borrowing capacity was $80,357,195 and $65,800,970, respectively.

The Wells Fargo Line of Credit agreement contains customary representations, warranties, borrowing conditions and affirmative, negative and financial covenants, including that there must be at least five properties in the collateral pool at all times and that the collateral pool must also meet specified concentration provisions, unless waived by the lender. In addition, the Company, as guarantor, must meet tangible net worth hurdles. The Company was in compliance with all financial covenants as of September 30, 2017 and December 31, 2016.

Nationwide Life Insurance Loan

On March 1, 2016, RPT Flats at Carrs Hill, LLC, a wholly-owned subsidiary of the Operating Partnership, entered into a credit agreement with Nationwide Life Insurance Company (the "Nationwide Loan"). Proceeds of $14,500,000 obtained from the Nationwide Loan were used to repay outstanding balances under the Wells Fargo Line of Credit, thereby releasing The Flats at Carrs Hill from the Wells Fargo Line of Credit. The Nationwide Loan is a secured, fully non-recourse loan with a term of ten years with no extension options. The Nationwide Loan carries a fixed interest rate of 3.63% and requires monthly interest-only payments of $43,862 during the entire term.

Hartford Life Insurance Loan


17

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


On December 1, 2016, RPT 1109 Commerce Boulevard, LLC, a wholly-owned subsidiary of the Operating Partnership, entered into a credit agreement with Hartford Life Insurance Company (the "Hartford Loan"). Proceeds of $13,000,000 obtained from the Hartford Loan were used to repay outstanding balances under the Wells Fargo Line of Credit, thereby releasing Commerce Corner from the Wells Fargo Line of Credit. The Hartford Loan is a secured, fully non-recourse loan with a term of seven years with no extension options. The Hartford Loan carries a fixed interest rate of 3.41% with interest-only payments for the first 24 months of the term, then principal and interest payments for the remainder of the term based upon a 30-year amortization schedule.

The following is a reconciliation of the carrying amount of the of the Wells Fargo Line of Credit and mortgage loans payable as of September 30, 2017 and December 31, 2016:
 
September 30, 2017
 
December 31, 2016
Line of credit
$
64,500,000

 
$
65,200,000

Deduct: Deferred financing costs, less accumulated amortization
(189,984
)
 
(522,468
)
Line of credit, net
$
64,310,016

 
$
64,677,532

 
 
 
 
Mortgage loans payable
$
27,500,000

 
$
27,500,000

Deduct: Deferred financing costs, less accumulated amortization
(254,400
)
 
(280,894
)
Mortgage loans payable, net
$
27,245,600

 
$
27,219,106


NOTE 7 — RELATED PARTY ARRANGEMENTS

Advisory Agreement

RREEF America is entitled to compensation and reimbursements in connection with the management of the Company's investments in accordance with an advisory agreement between RREEF America and the Company (the "Advisory Agreement"). The Advisory Agreement has a one-year term and is renewable annually upon the review and approval of the Company's board of directors, including the approval of a majority of the Company's independent directors. The Advisory Agreement has a current expiration date of January 20, 2019. There is no limit to the number of terms for which the Advisory Agreement can be renewed.
Fees

Under the Advisory Agreement, RREEF America can earn an advisory fee split between two components as described below.
1.
The fixed component accrues daily in an amount equal to 1/365th of 1.0% of the NAV of the outstanding shares of each class of common stock for such day. The fixed component of the advisory fee is payable monthly in arrears.
2.
The performance component is calculated for each class of common stock on the basis of the total return to stockholders and is measured by the total distributions per share declared to such class plus the change in the NAV per share for such class. For any calendar year in which the total return per share allocable to a class exceeds 6% per annum, RREEF America will receive 25% of the excess total return allocable to that class; provided, however, that in no event will the performance component exceed 10% of the aggregate total return allocable to such class for such year. The performance component earned by RREEF America for each class is subject to certain other adjustments which do not apply unless the NAV per share is below $12.00 per share. The performance component is payable annually in arrears.

18

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


The performance component is calculated daily on a year-to-date basis by reference to a proration of the per annum hurdle as of the date of calculation. Any resulting performance component as of a given date is deducted from the published NAV per share for such date. At each interim balance sheet date, the Company considers the estimated performance component that is probable to be due as of the end of the current calendar year in assessing whether the calculated performance component as of the interim balance sheet date meets the threshold for recognition in accordance with GAAP in the Company's consolidated financial statements. The ultimate amount of the performance component as of the end of the current calendar year, if any, may be more or less than the amount recognized by the Company as of September 30, 2017 and will depend on a variety of factors, including but not limited to, the performance of the Company's investments, interest rates, capital raise and redemptions. The Company considers the estimated performance component as of December 31, 2017 to be sufficiently probable to warrant recognition of the calculated performance component as of September 30, 2017 in the Company's consolidated financial statements. The fixed component earned by RREEF America, and the calculated performance component, for the three and nine months ended September 30, 2017 and 2016, are shown below.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Fixed component
$
270,369

 
$
233,596

 
$
774,770

 
$
658,324

Performance component
353,301

 
211,470

 
353,301

 
211,470

 
$
623,670

 
$
445,066

 
$
1,128,071

 
$
869,794


Expense Reimbursements

Under the Advisory Agreement, RREEF America is entitled to reimbursement of certain costs incurred by RREEF America or its affiliates that were not incurred under the Expense Support Agreement, as described below. Costs eligible for reimbursement, if they were not incurred under the Expense Support Agreement, include most third-party operating expenses, salaries and related costs of RREEF America's employees who perform services for the Company (but not those employees for which RREEF America earns a separate fee or those employees who are executive officers of the Company) and travel related costs for RREEF America's employees who incur such costs on behalf of the Company. Reimbursement payments to RREEF America are subject to the limitations described below under "Reimbursement Limitations."

For the three months ended September 30, 2017 and 2016, RREEF America incurred $63,329 and $55,836 of reimbursable operating expenses, respectively, that were subject to reimbursement under the Advisory Agreement. For the nine months ended September 30, 2017 and 2016, RREEF America incurred $204,819 and $215,763 of reimbursable operating expenses, respectively, that were subject to the terms and conditions of the Advisory Agreement. As of September 30, 2017 and December 31, 2016, the Company had a payable to RREEF America of $76,210 and $72,200, respectively, of operating expenses reimbursable under the Advisory Agreement.

Organization and Offering Costs

Under the Advisory Agreement, RREEF America agreed to pay all of the Company’s organization and offering costs incurred through January 3, 2013. In addition, RREEF America agreed to pay certain of the Company’s organization and offering costs from January 3, 2013 through January 3, 2014 that were incurred in connection with certain offering related activities. In total, RREEF America incurred $4,618,318 of these costs (the “Deferred O&O”) on behalf of the Company from the Company’s inception through January 3, 2014. Pursuant to the Advisory Agreement, the Company began reimbursing RREEF America monthly for the Deferred O&O on a pro rata basis over 60 months beginning in January 2014. However, if the Advisory Agreement is terminated by RREEF America, then the unpaid balance of the Deferred O&O is payable to RREEF America within 30 days. For the three months ended September 30, 2017 and 2016, the Company reimbursed RREEF America $232,686 and $232,686, respectively. For the nine months ended September 30, 2017 and 2016, the Company reimbursed RREEF America $690,473 and $693,001, respectively.

19

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


The amount of Deferred O&O payable to RREEF America is shown below.
 
 
September 30, 2017
 
December 31, 2016
Total Deferred O&O
 
$
4,618,318

 
$
4,618,318

Cumulative reimbursements made to RREEF America
 
(3,457,416
)
 
(2,766,943
)
Remaining Deferred O&O reimbursable to RREEF America
 
$
1,160,902

 
$
1,851,375


Expense Support Agreement
Pursuant to the terms of the expense support agreement, as most recently amended on January 20, 2016 (the "Expense Support Agreement"), RREEF America agreed to defer reimbursement of certain expenses related to the Company's operations that RREEF America has incurred that are not part of the Deferred O&O described above and, therefore, are in addition to the Deferred O&O amount (the “Expense Payments”). The Expense Payments include organization and offering costs and operating expenses as described above under the Advisory Agreement. RREEF America incurred these expenses until the earlier of (i) the date the Company raised $200,000,000 in aggregate gross proceeds from the Offerings or (ii) the date upon which the aggregate Expense Payments by RREEF America exceed $9,200,000. Through December 31, 2015, the Company had incurred a total of $9,200,000 in Expense Payments in addition to the $4,618,318 of Deferred O&O noted above. The balance of $9,200,000 in Expense Payments consisted of $3,775,369 in organization and offering costs related to the Company's initial public offering, $195,450 of offering costs for the Private Offering and $5,229,181 in operating expenses.
As the maximum amount of Expense Payments has been reached, the Company is no longer eligible to receive Expense Payments from RREEF America and has not received any Expense Payments since December 31, 2015. In addition, under the Expense Support Agreement, RREEF America agreed to defer reimbursement of Expense Payments until the first calendar quarter of the first calendar year that follows the earlier of (1) the quarter in which the Company surpasses $200,000,000 in aggregate gross proceeds from the Offering or (2) the date upon which the aggregate Expense Payments by RREEF America exceed $9,200,000. Pursuant to this provisions, reimbursement of the Expense Payments was triggered in January 2016, for which the Company would reimburse RREEF America $250,000 per quarter (the "Quarterly Reimbursement").
The Quarterly Reimbursements were scheduled to continue until RREEF America was fully repaid for all Expense Payments. In accordance with the quarterly reimbursement schedule, the Company's obligation to reimburse RREEF America represented a non-interest bearing note due to RREEF America ("Note to Affiliate") which is subject to the imputation of interest. In accordance therewith, as of January 1, 2016, the Company recorded a discount on the Note to Affiliate equal to the difference between the $9,200,000 face amount and the present value of the contractual reimbursements using an estimated market interest rate of 5.0%. The Company estimated the market interest rate based on how an independent market participant would evaluate the note in addition to considering other financing options available to the Company. The amount of the Quarterly Reimbursement is subject to adjustment in amount or timing as described in the Expense Support Agreement. However, the provisions altering the amount or timing of the Quarterly Reimbursement are contingent on future events not within the Company's control and which cannot be reasonably estimated. Accordingly, these contingencies were not considered in determining the present value of the Note to Affiliate as of January 1, 2016. As of January 1, 2016, the Company recorded a discount on the Note to Affiliate in the amount of $1,861,880 which was to be amortized to interest expense over the contractual reimbursement period using the effective interest method. For the three months ended March 31, 2016, the Company made one payment of $250,000 to RREEF America.
On April 25, 2016, the Company and RREEF America entered into a letter agreement that amended certain provisions of the Advisory Agreement and the Expense Support Agreement (the "Letter Agreement"). The Letter Agreement provides, in part, that the Company's obligations to reimburse RREEF America for Expense Payments under the Expense Support Agreement are suspended until the first calendar month following the month in which the Company has reached $500,000,000 in offering proceeds from the offerings (the "ESA Commencement Date"). The Company currently owes $8,950,000 to RREEF America under the Expense Support Agreement. Beginning the

20

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


month following the ESA Commencement Date, the Company will make monthly reimbursement payments to RREEF America in the amount of $416,667 for the first 12 months and $329,166 for the second 12 months, subject to monthly reimbursement payment limitations described in the Letter Agreement. The execution of the Letter Agreement represented a modification of the Note to Affiliate, and as such, the unamortized discount on the Note to Affiliate as of April 25, 2016 is instead being amortized over the estimated repayment period pursuant to the Letter Agreement. In accordance therewith, the Company is amortizing the remaining discount using an interest rate of 1.93%. For the three months ended September 30, 2017 and 2016, the Company amortized $35,675 and $34,992, respectively, of the discount on the Note to Affiliate into interest expense. For the nine months ended September 30, 2017 and 2016, the Company amortized $106,508 and $174,610, respectively, of the discount on the Note to Affiliate into interest expense.
In addition, pursuant to the Letter Agreement, if RREEF America is serving as the Company's advisor at the time that the Company or the Operating Partnership undertakes a liquidation, the Company's remaining obligations to reimburse RREEF America for the unpaid Deferred O&O under the Advisory Agreement and the unreimbursed Expense Payments under the Expense Support Agreement shall be waived.

Dealer Manager Agreement

Effective July 1, 2016, the Company and the Operating Partnership terminated the amended and restated dealer manager agreement, dated as of January 26, 2016, with SC Distributors, Inc. On July 1, 2016, the Company and its Operating Partnership entered into a new dealer manager agreement (the "Dealer Manager Agreement") with Deutsche AM Distributors, Inc., an affiliate of the Company's sponsor and advisor (the "Dealer Manager"). The Dealer Manager Agreement governs the distribution by the Dealer Manager of the Company’s Class A Shares, Class I Shares, Class N Shares and Class T Shares in the Follow-On Public Offering and any subsequent registered public offering. In connection with the ongoing Trailing Fees to be paid in the future, the Company and the Dealer Manager entered into an agreement whereby the Company will pay to the Dealer Manager the Trailing Fees that are attributable to the Company's shares issued in the Company's initial public offering that remain outstanding. In addition, the Company is obligated to pay to the Dealer Manager Trailing Fees that are attributable to the Company's shares issued in the Follow-On Public Offering. As of September 30, 2017 and December 31, 2016, the Company has accrued $62,943 and $60,514, respectively, in Trailing Fees currently payable to the Dealer Manager, and $2,349,798 and $2,352,711, respectively, in Trailing Fees estimated to become payable in the future to the Dealer Manager, both of which are included in due to affiliates on the consolidated balance sheets. We also pay the Dealer Manager upfront selling commissions and upfront dealer manager fees in connection with our Offerings, as applicable. For the three and nine months ended September 30, 2017, the Dealer Manager earned upfront selling commissions and upfront dealer manager fees totaling $41,466 and $76,700, respectively. For the three months ended September 30, 2016, which were the first three months of the engagement of the Dealer Manager, the Dealer Manager earned upfront selling commissions and upfront dealer manager fees totaling $3,641.

Under the Dealer Manager Agreement, the Company is obligated to reimburse the Dealer Manager for certain offering costs incurred by the Dealer Manager on the Company's behalf, including but not limited to broker-dealer sponsorships, attendance fees for retail seminars conducted by broker-dealers, and travel costs for certain personnel of the Dealer Manager who are dedicated to the distribution of the Company's shares of common stock. For the three and nine months ended September 30, 2017, the Dealer Manager incurred $80,000 and $228,203, respectively, in such costs on behalf of the Company. For the three months ended September 30, 2016, which were the first three months of the engagement of the Dealer Manager, the Dealer Manager incurred $96,235 in such costs on behalf of the Company. As of September 30, 2017 and December 31, 2016, the Company had payable to the Dealer Manager $378,335 and $150,132, respectively, of such costs which was included in due to affiliates on the consolidated balance sheets.


21

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


Reimbursement Limitations

Organization and Offering Costs
The Company will not reimburse RREEF America under the Advisory Agreement or the Expense Support Agreement and will not reimburse the Dealer Manager under the Dealer Manager Agreement for any organization and offering costs which would cause the Company's total organization and offering costs with respect to a public offering to exceed 15% of the gross proceeds from such public offering. Further, the Company will not reimburse RREEF America or the Dealer Manager for any underwriting compensation (a subset of organization and offering costs) which would cause the Company's total underwriting compensation with respect to a public offering to exceed 10% of the gross proceeds from the primary portion of such public offering. The Company raised $102,831,442 in gross proceeds from its initial public offering that ended on June 30, 2016. A summary of the Company's total organization and offering costs for its initial public offering is shown below.
 
Deferred O&O - RREEF America
 
Expense Payments - O&O Portion
 
Other organization and offering costs (1)
 
Total organization and offering costs
Balance, September 30, 2017 and December 31, 2016
$
4,618,318

 
$
3,775,369

 
$
7,031,029

 
$
15,424,716

(1) Includes $1,517,149 and $2,010,409 of estimated accrued Trailing Fees payable in the future as of September 30, 2017 and December 31, 2016, respectively.

As of September 30, 2017, in the Follow-On Public Offering, the Company had raised $19,461,166 in gross proceeds and incurred total organization and offering costs of $2,807,881, including estimated accrued Trailing Fees payable in the future of $832,649.
Operating Expenses
Pursuant to the Company’s charter, the Company may reimburse RREEF America, at the end of each fiscal quarter, for total operating expenses incurred by RREEF America, whether under the Expense Support Agreement or otherwise. However, commencing with the quarter ended June 30, 2014, the Company may not reimburse RREEF America at the end of any fiscal quarter for total operating expenses (as defined in the Company’s charter) that, in the four consecutive fiscal quarters then ended, exceed the greater of 2% of average invested assets or 25% of net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of the Company's assets for that period (the “2%/25% Guidelines”). Notwithstanding the foregoing, the Company may reimburse RREEF America for expenses in excess of the 2%/25% Guidelines if a majority of the Company’s independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the four fiscal quarters ended September 30, 2017, total operating expenses of the Company were $3,166,863 which did not exceed the amount prescribed by the 2%/25% Guidelines.
Due to Affiliates and Note to Affiliate
In accordance with all the above, as of September 30, 2017 and December 31, 2016, the Company owed its affiliates the following amounts:

22

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


 
September 30, 2017
 
December 31, 2016
Deferred O&O
$
1,160,902

 
$
1,851,375

Reimbursable under the advisory agreement
76,210

 
72,200

Reimbursable under Dealer Manager Agreement
378,335

 
150,132

Advisory fees
441,071

 
357,985

Accrued Trailing Fees
2,412,741

 
2,413,225

Due to affiliates
$
4,469,259

 
$
4,844,917

 
 
 
 
Note to Affiliate
$
8,950,000

 
$
8,950,000

Unamortized discount
(1,545,600
)
 
(1,652,108
)
Note to Affiliate, net of unamortized discount
$
7,404,400

 
$
7,297,892


NOTE 8 — CAPITALIZATION

Under the Company's charter, as most recently amended on February 16, 2017, the Company has the authority to issue 1,000,000,000 shares of common stock and 50,000,000 shares of preferred stock. All shares of such stock have a par value of $0.01 per share. The Company's authorized shares of common stock are allocated between classes as follows:
Common Stock
 
No. of Authorized Shares
Class A Shares
 
200,000,000

Class I Shares
 
200,000,000

Class T Shares
 
250,000,000

Class D Shares
 
50,000,000

Class N Shares
 
300,000,000

 
 
1,000,000,000


Class A Shares are subject to selling commissions of up to 3% of the purchase price, and annual dealer manager fees of 0.55% and distribution fees of 0.50% of NAV, both paid on a trailing basis. Class I Shares are subject to annual dealer manager fees of 0.55% of NAV paid in a trailing basis, but are not subject to any selling commissions or distribution fees. Class T Shares are subject to selling commissions of up to 3% of the purchase price, an up-front dealer manager fee of 2.50% of the purchase price, and annual distribution fees of 1.0% of NAV paid on a trailing basis for approximately three years. Class D shares sold in the Private Offering are subject to selling commissions of up to 1.0% of the purchase price, but do not incur any dealer manager or distribution fees.

Class N Shares are not sold in the primary Follow-On Public Offering, but will be issued upon conversion of an investor's Class T Shares once (i) the investor's Class T Share account for a given offering has incurred a maximum of 8.5% of commissions, dealer manager fees and distribution fees; (ii) the total underwriting compensation from whatever source with respect to the Follow-On Public Offering exceeds 10% of the gross proceeds from the primary portion of the Follow-On Public Offering; (iii) a listing of the Class N Shares; or (iv) the Company's merger or consolidation with or into another entity or the sale or other disposition of all or substantially all of the Company's assets. The Company's board of directors is authorized to amend its charter from time to time, without the approval of the stockholders, to increase or decrease the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue.


23

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


Distribution Reinvestment Plan

The Company has adopted a distribution reinvestment plan that allows stockholders to have the cash distributions attributable to the class of shares that the stockholder owns automatically invested in additional shares of the same class. Shares are offered pursuant to the Company's distribution reinvestment plan at the NAV per share applicable to that class, calculated as of the distribution date and after giving effect to all distributions. Stockholders who elect to participate in the distribution reinvestment plan, and who are subject to U.S. federal income taxation laws, will incur a tax liability on an amount equal to the fair value on the relevant distribution date of the shares of the Company's common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the distributions used to purchase those shares of the Company's common stock in cash.

Redemption Plan

In an effort to provide the Company's stockholders with liquidity in respect of their investment in shares of the Company's common stock, the Company has adopted a redemption plan whereby on a daily basis stockholders may request the redemption of all or any portion of their shares. The redemption price per share is equal to the Company's NAV per share of the class of shares being redeemed on the date of redemption, subject to a short-term trading discount, if applicable. The total amount of redemptions in any calendar quarter will be limited to shares whose aggregate value (based on the redemption price per share on the date of the redemption) is equal to 5% of the Company's combined NAV for all classes of shares as of the last day of the previous calendar quarter. In addition, if redemptions do not reach the 5% limit in a calendar quarter, the unused portion generally will be carried over to the next quarter and not any subsequent quarter, except that the maximum amount of redemptions during any quarter may never exceed 10% of the combined NAV for all classes of shares as of the last day of the previous calendar quarter. If the quarterly volume limitation is reached on or before the third business day of a calendar quarter, redemption requests during the next quarter will be satisfied on a stockholder by stockholder basis, which the Company refers to as a per stockholder allocation, instead of a first-come, first-served basis. Pursuant to the per stockholder allocation, each stockholder would be allowed to request redemption at any time during such quarter of a total number of shares not to exceed 5% of the shares of common stock the stockholder held as of the end of the prior quarter. The per stockholder allocation requirement will remain in effect for each succeeding quarter for which the total redemptions for the immediately preceding quarter exceeded 4% of the Company's NAV on the last business day of such preceding quarter. If total redemptions during a quarter for which the per stockholder allocation applies are equal to or less than 4% of the Company's NAV on the last business day of such preceding quarter, then redemptions will again be satisfied on a first-come, first-served basis for the next succeeding quarter and each quarter thereafter.

Each redemption request will be evaluated by the Company in consideration of rules and regulations promulgated by the Internal Revenue Service with respect to dividend equivalent redemptions. Redemptions that may be considered dividend equivalent redemptions may adversely affect the Company or its stockholders. Accordingly, the Company may reject any redemption request that it reasonably believes may be treated as a dividend equivalent redemption.

While there is no minimum holding period, shares redeemed within 365 days of the date of the investor's initial purchase of the Company's shares will be redeemed at the Company's NAV per share of the class of shares being redeemed on the date of redemption less a short-term trading discount equal to 2% of the gross proceeds otherwise payable with respect to the redemption.

In the event that any stockholder fails to maintain a minimum balance of $500 worth of shares of common stock, the Company may redeem all of the shares held by that stockholder at the redemption price per share in effect on the date it is determined that the stockholder has failed to meet the minimum balance, less the short-term trading discount of 2%, if applicable. Minimum account redemptions will apply even in the event that the failure to meet the minimum balance is caused solely by a decline in the Company's NAV.


24

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


During the three and nine months ended September 30, 2017 and 2016, redemptions were as shown below. The Company funded these redemptions with cash flow from operations, proceeds from its public offerings or borrowings on the Wells Fargo Line of Credit. The weighted average redemption prices are shown before allowing for any applicable 2% short-term trading discounts.
Three Months Ended September 30, 2017
 
Shares
 
Weighted Average Share Price
 
Amount
Class A
 
89,747

 
$
13.48

 
$
1,209,895

Class I
 
179,284

 
13.59

 
2,435,188

Class T
 

 

 


Nine Months Ended September 30, 2017
 
Shares
 
Weighted Average Share Price
 
Amount
Class A
 
180,196

 
$
13.40

 
$
2,414,334

Class I
 
241,808

 
13.54

 
3,275,020

Class T
 
4,043

*
15.29

 
61,818

* Repurchased in private transactions.
 
 

Three Months Ended September 30, 2016
 
Shares
 
Weighted Average Share Price
 
Amount
Class A
 
66,024

 
$
13.11

 
$
865,575

Class I
 
35,247

 
13.19

 
464,908

Class T
 

 

 


Nine Months Ended September 30, 2016
 
Shares
 
Weighted Average Share Price
 
Amount
Class A
 
653,648

 
$
12.90

 
$
8,432,059

Class I
 
78,535

 
13.13

 
1,031,165

Class T
 

 

 


The Company's board of directors has the discretion to suspend or modify the redemption plan at any time, including in circumstances in which it (1) determines that such action is in the best interest of the Company's stockholders, (2) determines that it is necessary due to regulatory changes or changes in law or (3) becomes aware of undisclosed material information that it believes should be publicly disclosed before shares are redeemed. In addition, the Company's board of directors may suspend the Offerings and the redemption plan, if it determines that the calculation of NAV is materially incorrect or there is a condition that restricts the valuation of a material portion of the Company's assets. If the board of directors materially amends (including any reduction of the quarterly limit) or suspends the redemption plan during any quarter, other than any temporary suspension to address certain external events unrelated to the Company's business, any unused portion of that quarter’s 5% limit will not be carried forward to the next quarter or any subsequent quarter.

NOTE 9 - NET LOSS PER SHARE

The Company computes net earnings or loss per share of Class A, Class I and Class T common stock using the two-class method. RREEF America may earn a performance component of the advisory fee (see Note 7) which may impact the net earnings or loss of each class of common stock differently. The calculated performance component for the three and nine months ended September 30, 2017 and 2016, and the impact on each class of common stock, are shown below. In periods where no performance component of the advisory fee is recognized in the Company’s

25

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


consolidated statement of operations, the net earnings or loss per share will be the same for each class of common stock.
Basic and diluted net loss per share for each class of common stock is computed using the weighted-average number of common shares outstanding during the period for each class of common stock. The Company has not issued any dilutive or potentially dilutive securities, and thus the basic and diluted net loss per share for a given class of common stock is the same for each period presented.
The following table sets forth the computation of basic and diluted net loss per share for each of the Company’s Class A, Class I and Class T common stock.




26

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)





Three Months Ended September 30, 2017


Class A

Class I

Class T
Basic and diluted net loss per share:






 
Allocation of net loss before performance fee
 
$
(294,674
)
 
$
(339,812
)
 
$
(559
)

Allocation of performance fees

(132,219
)

(220,958
)

(124
)

Total Numerator

$
(426,893
)

$
(560,770
)

$
(683
)

Denominator - weighted average number of common shares outstanding

3,677,266


4,240,550


6,982

Basic and diluted net loss per share:

$
(0.12
)

$
(0.13
)

$
(0.10
)











Nine Months Ended September 30, 2017


Class A

Class I

Class T
Basic and diluted net loss per share:






 
Allocation of net loss before performance fee
 
$
(750,645
)
 
$
(822,413
)
 
$
(1,426
)

Allocation of performance fees

(132,219
)

(220,958
)

(124
)

Total Numerator

$
(882,864
)

$
(1,043,371
)

$
(1,550
)

Denominator - weighted average number of common shares outstanding

3,675,618


4,027,040


6,982

Basic and diluted net loss per share:

$
(0.24
)

$
(0.26
)

$
(0.22
)











Three Months Ended September 30, 2016


Class A

Class I

Class T
Basic and diluted net loss per share:






 
Allocation of net loss before performance fee
 
$
(530,578
)
 
$
(497,560
)
 
$
(590
)

Allocation of performance fees

(83,960
)

(127,195
)

(315
)

Total Numerator

$
(614,538
)

$
(624,755
)

$
(905
)

Denominator - weighted average number of common shares outstanding

3,634,486


3,408,307


4,043

Basic and diluted net loss per share:

$
(0.17
)

$
(0.18
)

$
(0.22
)







Nine Months Ended September 30, 2016


Class A

Class I

Class T
Basic and diluted net loss per share:






 
Allocation of net loss before performance fee
 
$
(1,772,635
)
 
$
(1,669,977
)
 
$
(2,056
)

Allocation of performance fees

(83,960
)

(127,195
)

(315
)

Total Numerator
 
$
(1,856,595
)
 
$
(1,797,172
)
 
$
(2,371
)

Denominator - weighted average number of common shares outstanding

3,462,769


3,262,233


4,016

Basic and diluted net loss per share:

$
(0.54
)

$
(0.55
)

$
(0.59
)

NOTE 10 — DISTRIBUTIONS

In order to qualify as a REIT, the Company is required, among other things, to make distributions each taxable year of at least 90% of its taxable income determined without regard to the dividends-paid deduction and excluding net capital gains, and to meet certain tests regarding the nature of the Company's income and assets. The Company

27

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


expects that its board of directors will continue to declare distributions with a daily record date, payable monthly in arrears. Any distributions the Company makes will be at the discretion of its board of directors, considering factors such as its earnings, cash flow, capital needs and general financial condition and the requirements of Maryland law. The Company commenced operations on May 30, 2013 and elected taxation as a REIT for the year ended December 31, 2013. Distributions for each month are payable on or before the first business day of the following month. However, any distributions reinvested by the stockholders in accordance with the Company's dividend reinvestment plan are reinvested at the per share NAV of the same class determined at the close of business on the last business day of the month in which the distributions were accrued.
Shown below are details of the Company's distributions for each of the first three quarters of 2017 and 2016 and for the nine months ended September 30, 2017 and 2016.
 
Three Months Ended
 
Nine Months Ended September 30, 2017
 
March 31, 2017
 
June 30, 2017
 
September 30, 2017
 
Declared daily distribution rate, before adjustment for class-specific fees
$
0.00183555

 
$
0.00183207

 
$
0.00185445

 
 
Distributions paid or payable in cash
$
716,755

 
$
742,522

 
$
772,986

 
$
2,232,263

Distributions reinvested
518,614

 
541,538

 
578,604

 
1,638,756

Distributions declared
$
1,235,369

 
$
1,284,060

 
$
1,351,590

 
$
3,871,019

Class A Shares issued upon reinvestment
23,567

 
23,806

 
23,649

 
71,022

Class I Shares issued upon reinvestment
15,152

 
16,611

 
18,986

 
50,749

Class T Shares issued upon reinvestment

 

 
17

 
17


 
Three Months Ended
 
Nine Months Ended September 30, 2016
 
March 31, 2016
 
June 30, 2016
 
September 30, 2016
 
Declared daily distribution rate, before adjustment for class-specific fees
$
0.00179534

 
$
0.00177203

 
$
0.00181182

 
 
Distributions paid or payable in cash
$
633,913

 
$
631,394

 
$
670,484

 
$
1,935,791

Distributions reinvested
407,009

 
457,276

 
504,020

 
1,368,305

Distributions declared
$
1,040,922

 
$
1,088,670

 
$
1,174,504

 
$
3,304,096

Class A Shares issued upon reinvestment
18,860

 
21,726

 
24,151

 
64,737

Class I Shares issued upon reinvestment
12,476

 
13,284

 
14,159

 
39,919

Class T Shares issued upon reinvestment

 

 

 




28

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


Shown below are details by share class of the Company's distributions for each of the first three quarters of 2017 and 2016 and for the nine months ended September 30, 2017 and 2016.
 
Three Months Ended
 
Nine Months Ended September 30, 2017
 
March 31, 2017
 
June 30, 2017
 
September 30, 2017
 
Class A
$
572,184

 
$
584,416

 
$
594,252

 
$
1,750,852

Class I
662,918

 
699,644

 
756,964

 
2,119,526

Class T
267

 

 
374

 
641

Distributions declared
$
1,235,369

 
$
1,284,060

 
$
1,351,590

 
$
3,871,019


 
Three Months Ended
 
Nine Months Ended September 30, 2016
 
March 31, 2016
 
June 30, 2016
 
September 30, 2016
 
Class A
$
514,436

 
$
527,591

 
$
576,747

 
$
1,618,774

Class I
526,378

 
560,470

 
597,120

 
1,683,968

Class T
108

 
609

 
637

 
1,354

Distributions declared
$
1,040,922

 
1,088,670

 
1,174,504

 
$
3,304,096


NOTE 11 — INCOME TAXES

The Company believes that it has operated in such a manner to qualify to be taxed as a REIT for federal income tax purposes beginning with the taxable year ended December 31, 2013, when it first elected REIT status. In each calendar year that the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal income tax to the extent it meets certain criteria and distributes its REIT taxable income to its stockholders. Distributions declared and paid by the Company may consist of ordinary income, qualifying dividends, return of capital, capital gains or a combination thereof. The characterization of the distributions into these various components will impact how the distributions are taxable to the stockholder who received them. Distributions that constitute a return of capital generally are non-taxable and will reduce the stockholder's basis in the shares. The characterization of the distributions is generally determined during the month of January following the close of the tax year.

NOTE 12 — SEGMENT INFORMATION

For the nine months ended September 30, 2017 and 2016, the Company had two segments with reportable information: Real Estate Properties and Real Estate Equity Securities. The Company organizes and analyzes the operations and results of each of these segments independently, due to inherently different considerations for each segment. Such considerations include, but are not limited to, the nature and characteristics of the investment and investment strategies and objectives. The following tables set forth the carrying value, revenue and the components of operating income of the Company's segments reconciled to total assets as of September 30, 2017 and December 31, 2016 and net loss for the three and nine months ended September 30, 2017 and 2016.

29

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


 
 
Real Estate Properties
 
Real Estate Equity Securities
 
Total
Carrying value as of September 30, 2017
$
152,840,021

 
$
9,805,875

 
$
162,645,896

 
 
 
 
 
 
 
Reconciliation to total assets of September 30, 2017
 
 
 
 
 
Carrying value per reportable segments
 
 
 
 
$
162,645,896

 
Corporate level assets
 
 
 
 
8,204,679

 
Total assets
 
 
 
 
$
170,850,575

 
 
 
 
 
 
 
Carrying value as of December 31, 2016
$
158,837,707

 
$
8,609,212

 
$
167,446,919

 
 
 
 
 
 
 
Reconciliation to total assets of December 31, 2016
 
 
 
 
 
Carrying value per reportable segments
 
 
 
 
$
167,446,919

 
Corporate level assets
 
 
 
 
6,742,528

 
Total assets
 
 
 
 
$
174,189,447


30

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


Three Months Ended September 30, 2017
Real Estate Properties

Real Estate Equity Securities

Total
Revenues
 
 
 
 
 
 
Rental and other property income
$
3,819,417

 
$

 
$
3,819,417

 
Tenant reimbursement income
540,528

 

 
540,528

 
Investment income on marketable securities

 
84,836

 
84,836

 
Total revenues
4,359,945

 
84,836

 
4,444,781

Operating expenses
 
 
 
 
 
 
Property operating expenses
1,446,432

 

 
1,446,432

 
Total segment operating expenses
1,446,432

 

 
1,446,432

Operating income - segments
$
2,913,513

 
$
84,836

 
$
2,998,349

 
 
 
 
 
 
Three Months Ending September 30, 2016
 
 
 
 
 
Revenues

 

 


Rental and other property income
$
4,811,868

 
$

 
$
4,811,868


Tenant reimbursement income
298,642

 

 
298,642


Investment income on marketable securities

 
100,314

 
100,314


Total revenues
5,110,510

 
100,314

 
5,210,824

Operating expenses

 

 


Property operating expenses
1,196,943

 

 
1,196,943


Total segment operating expenses
1,196,943

 

 
1,196,943

Operating income - Segments
$
3,913,567

 
$
100,314

 
$
4,013,881

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
Reconciliation to net loss
 
 
2017
 
2016
Operating income - segments

 
$
2,998,349

 
$
4,013,881

 
General and administrative expenses
 
 
(407,787
)
 
(484,966
)
 
Advisory expenses
 
 
(623,670
)
 
(445,066
)
 
Acquisition related expenses
 
 

 
(158,762
)
 
Depreciation
 
 
(1,085,483
)
 
(920,562
)
 
Amortization
 
 
(933,854
)
 
(2,946,851
)
Operating loss
 
 
(52,445
)
 
(942,326
)
 
Interest expense
 
 
(910,512
)
 
(541,561
)
 
Net realized gain (loss) upon sale of marketable securities
 
(25,389
)
 
243,689

Net loss
 
 
$
(988,346
)
 
$
(1,240,198
)







31

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2017
(Unaudited)


 
 
 
 
 
 
 
Nine Months Ended September 30, 2017
Real Estate Properties
 
Real Estate Equity Securities
 
Total
Revenues
 
 
 
 
 
 
Rental and other property income
$
11,400,901

 
$

 
$
11,400,901

 
Tenant reimbursement income
1,608,351

 

 
1,608,351

 
Investment income on marketable securities

 
205,692

 
205,692

 
Total revenues
13,009,252

 
205,692

 
13,214,944

Operating expenses
 
 
 
 
 
 
Property operating expenses
4,093,912

 

 
4,093,912

 
Total segment operating expenses
4,093,912

 

 
4,093,912

Operating income - Segments
$
8,915,340

 
$
205,692

 
$
9,121,032

 
 
 
 
 
 
 
Nine Months Ended September 30, 2016
 
 
 
 
 
Revenues
 
 
 
 
 
 
Rental and other property income
$
11,310,771

 
$

 
$
11,310,771

 
Tenant reimbursement income
938,783

 

 
938,783

 
Investment income on marketable securities

 
364,643

 
364,643

 
Total revenues
12,249,554

 
364,643

 
12,614,197

Operating expenses
 
 
 
 
 
 
Property operating expenses
3,760,305

 

 
3,760,305

 
Total segment operating expenses
3,760,305

 

 
3,760,305

Operating income - Segments
$
8,489,249

 
$
364,643

 
$
8,853,892

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
Reconciliation to net loss
 
 
2017
 
2016
Operating income - segments