10-Q 1 rpt10q-2018q3.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, 2018
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 every Interactive Data File required to be submitted 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 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
x
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, 2018, the registrant had 3,607,335 shares of Class A common stock, $.01 par value, outstanding, 5,770,270 shares of Class I common stock, $.01 par value, outstanding, 564,664 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, 2018

TABLE OF CONTENTS
 
 


2


PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RREEF PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
 
September 30, 2018 (unaudited)
 
December 31, 2017
ASSETS

 

Investment in real estate assets:

 

Land
$
46,658,955

 
$
37,238,612

Buildings and improvements, less accumulated depreciation of $14,740,905 and $11,476,041, respectively
97,204,810

 
92,160,948

Furniture, fixtures and equipment, less accumulated depreciation of $272,423 and $211,727, respectively
246,802

 
239,225

Acquired intangible lease assets, less accumulated amortization of $18,488,151 and $15,510,271, respectively
22,058,686

 
21,285,063

Total investment in real estate assets, net
166,169,253

 
150,923,848

Investment in marketable securities
15,697,601

 
10,046,177

Total investment in real estate assets and marketable securities, net
181,866,854

 
160,970,025

Cash and cash equivalents
3,521,462

 
2,441,853

Receivables, net of allowance for doubtful accounts of $20,526 and $9,586, respectively
2,473,886

 
2,615,939

Deferred leasing costs, net of amortization of $320,947 and $201,108, respectively
2,169,888

 
1,833,527

Prepaid and other assets
1,537,301

 
1,454,988

Total assets
$
191,569,391

 
$
169,316,332

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Line of credit, net
$
66,929,809

 
$
63,022,061

Mortgage loans payable, net
27,280,925

 
27,254,431

Accounts payable and accrued expenses
1,731,432

 
768,049

Due to affiliates
3,971,994

 
4,375,191

Note to affiliate, net of unamortized discount of $1,401,165 and $1,509,753, respectively
7,548,835


7,440,247

Acquired below market lease intangibles, less accumulated amortization of $3,331,253 and $3,016,239, respectively
5,807,515

 
5,667,516

Distributions payable
311,496

 
258,542

Other liabilities
1,122,082

 
1,190,779

Total liabilities
114,704,088

 
109,976,816

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; 3,811,496 and 3,666,927 issued and outstanding, respectively
38,115

 
36,670

Class I common stock, $0.01 par value; 200,000,000 shares authorized; 5,620,297 and 4,352,050 issued and outstanding, respectively
56,203

 
43,521

Class T common stock, $0.01 par value; 250,000,000 shares authorized; 540,436 and 71,316 issued and outstanding, respectively
5,404

 
713

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
110,644,957

 
86,813,276

Deficit
(33,879,376
)
 
(28,290,303
)
Accumulated other comprehensive income

 
735,639

Total stockholders' equity
76,865,303

 
59,339,516

Total liabilities and stockholders' equity
$
191,569,391

 
$
169,316,332

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,
 
2018
 
2017
 
2018
 
2017
Revenues

 
 
 
 
 
 
Rental and other property income
$
4,302,433

 
$
3,819,417

 
$
11,969,709

 
$
11,400,901

Tenant reimbursement income
688,482

 
540,528

 
1,907,590

 
1,608,351

Investment income on marketable securities
136,832

 
84,836

 
345,609

 
205,692

Total revenues
5,127,747

 
4,444,781

 
14,222,908

 
13,214,944

Expenses

 
 
 
 
 

General and administrative expenses
434,501

 
407,787

 
1,441,290

 
1,272,533

Property operating expenses
1,597,997

 
1,446,432

 
4,348,090

 
4,093,912

Advisory fees
542,353

 
623,670

 
1,211,569

 
1,128,071

Depreciation
1,162,905

 
1,085,483

 
3,325,560

 
3,253,971

Amortization
1,125,428

 
933,854

 
2,938,390

 
2,794,203

Total operating expenses
4,863,184

 
4,497,226

 
13,264,899

 
12,542,690

Net realized gain (loss) upon sale of marketable securities
201,769

 
(25,389
)
 
(206,763
)
 
22,407

Net unrealized (loss) gain on investment in marketable securities
(201,223
)
 

 
280,022

 

Operating income (loss)
265,109

 
(77,834
)
 
1,031,268

 
694,661

Interest expense
(1,012,974
)
 
(910,512
)
 
(2,800,888
)
 
(2,622,446
)
Net loss
$
(747,865
)
 
$
(988,346
)
 
$
(1,769,620
)
 
$
(1,927,785
)


 
 
 

 
 
Basic and diluted net loss per share of Class A common stock
$
(0.08
)
 
$
(0.12
)
 
$
(0.20
)
 
$
(0.24
)
Basic and diluted net loss per share of Class I common stock
$
(0.08
)
 
$
(0.13
)
 
$
(0.20
)
 
$
(0.26
)
Basic and diluted net loss per share of Class T common stock
$
(0.07
)
 
$
(0.10
)
 
$
(0.19
)
 
$
(0.22
)

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,
 
2018
 
2017
 
2018
 
2017
Net loss
$
(747,865
)
 
$
(988,346
)
 
$
(1,769,620
)
 
$
(1,927,785
)
Other comprehensive (loss) gain for the three and nine months ended September 30, 2017:

 

 

 

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

 
25,389

 

 
(22,407
)
Unrealized (loss) gain on marketable securities for the three and nine months ended September 30, 2017

 
(37,393
)
 

 
24,921

Total other comprehensive (loss) gain for the three and nine months ended September 30, 2017

 
(12,004
)
 

 
2,514

Comprehensive loss
$
(747,865
)
 
$
(1,000,350
)
 
$
(1,769,620
)
 
$
(1,925,271
)

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, 2017

$

 
3,666,927

$
36,670

 
4,352,050

$
43,521

 
71,316

$
713

 

$

 

$

 
$
86,813,276

 
$
(28,290,303
)
 
$
735,639

 
$
59,339,516

Cumulative effect adjustment for change in accounting principle (see Note 2)


 


 


 


 


 


 

 
735,639

 
(735,639
)
 

Balance, January 1, 2018, as adjusted


 
3,666,927

36,670

 
4,352,050

43,521

 
71,316

713

 


 


 
86,813,276

 
(27,554,664
)
 

 
59,339,516

Issuance of common stock


 
310,128

3,101

 
1,358,532

13,585

 
465,918

4,659

 


 


 
30,251,334

 

 

 
30,272,679

Issuance of common stock through the distribution reinvestment plan


 
69,115

691

 
72,179

722

 
3,202

32

 


 


 
2,013,350

 

 

 
2,014,795

Redemption of common stock


 
(234,674
)
(2,347
)
 
(162,464
)
(1,625
)
 


 


 


 
(5,512,904
)
 

 

 
(5,516,876
)
Distributions to investors


 


 


 


 


 


 

 
(4,555,092
)
 

 
(4,555,092
)
Other offering costs


 


 


 


 


 


 
(2,920,099
)
 

 

 
(2,920,099
)
Net loss


 


 


 


 


 


 

 
(1,769,620
)
 

 
(1,769,620
)
Balance, September 30, 2018

$

 
3,811,496

$
38,115

 
5,620,297

$
56,203

 
540,436

$
5,404

 

$

 

$

 
$
110,644,957

 
$
(33,879,376
)
 
$

 
$
76,865,303


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,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net loss
$
(1,769,620
)
 
$
(1,927,785
)
Adjustments to reconcile net loss to net cash provided by operating activities:

 

Depreciation
3,325,560

 
3,253,971

Net realized loss (gain) upon sale of marketable securities
206,763

 
(22,407
)
Net unrealized gain on marketable securities
(280,022
)
 

Amortization of intangible lease assets and liabilities
2,782,705

 
2,680,086

Amortization of deferred financing costs
216,648

 
358,978

Allowance for doubtful accounts
10,940

 
16,458

Straight line rent
52,691

 
(450,710
)
Amortization of discount on note to affiliate
108,588

 
106,508

Changes in assets and liabilities:

 

Receivables
(56,477
)
 
77,291

Deferred leasing costs
(346,169
)
 
(93,211
)
Prepaid and other assets
(5,020
)
 
(32,156
)
Accounts payable and accrued expenses
557,347

 
(1,164,539
)
Other liabilities
(161,521
)
 
(31,977
)
Due to affiliates
(331,611
)
 
87,094

Net cash provided by operating activities
4,310,802

 
2,857,601

Cash flows from investing activities:

 

Investment in real estate and related assets
(20,618,450
)
 

Improvements to real estate assets
(103,163
)
 
(119,755
)
Investment in marketable securities
(22,178,430
)
 
(12,161,827
)
Proceeds from sale of marketable securities
16,555,574

 
10,997,483

Net cash used in investing activities
(26,344,469
)
 
(1,284,099
)
Cash flows from financing activities:

 

Proceeds from line of credit
19,900,000

 
3,250,000

Repayments of line of credit
(15,500,000
)
 
(3,950,000
)
Proceeds from issuance of common stock
30,376,055

 
10,353,815

Payment of financing costs
(682,407
)
 

Payment of offering costs
(2,976,153
)
 
(2,305,716
)
Distributions to investors
(4,502,138
)
 
(3,862,541
)
Redemption of common stock
(5,516,876
)
 
(5,751,172
)
Common stock issued through the distribution reinvestment plan
2,014,795

 
1,638,756

Net cash provided by (used in) financing activities
23,113,276

 
(626,858
)
Net increase in cash and cash equivalents
1,079,609

 
946,644

Cash and cash equivalents, beginning of period
2,441,853

 
1,493,256

Cash and cash equivalents, end of period
$
3,521,462

 
$
2,439,900


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:
2018
 
2017
Distributions declared and unpaid
$
311,496


$
248,375

Net unrealized gain on marketable securities, nine months ended September 30, 2017


2,514

Purchases of marketable securities not yet paid
26,312


60,460

Proceeds from sale of marketable securities not yet received
41,746


30,480

Proceeds from issuance of common stock not yet received
118,624


189,575

Accrued offering costs not yet paid
1,536,975

 
907,648

Capital expenditures not yet paid
144,850

 

Supplemental Cash Flow Disclosures:

 

Interest paid
$
2,412,657


$
2,091,318

 
 
 
 
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
$
20,842,319

 
$

Other liabilities assumed
(223,869
)
 

Investment in real estate and related assets
$
20,618,450

 
$


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


8


RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(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 apartment 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.

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.

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

9

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


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, 2018 except for the adoption of Accounting Standards Updates ("ASU") noted below in Note 2. The interim financial data as of September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017 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.

Real Estate Investments and Lease Intangibles
    
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 previous implementation guidance, real estate was broadly interpreted to be a business, which required, 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 consolidated balance sheet. The Company adopted ASU 2017-01 on its effective date of January 1, 2018, which did not have an impact on the Company's consolidated financial statements. Acquisitions of real estate investments after January 1, 2018 will be evaluated based on ASU 2017-01 and may result in the capitalization of acquisition related costs for those acquisitions deemed to be asset acquisitions.

Investments in Marketable Securities

Effective January 1, 2018, the Company adopted ASU 2016-01, Financial Statements - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, which improves certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 revised the accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. Since the Company's inception and prior to adoption of ASU 2016-01, 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. Beginning January 1, 2018, the net unrealized change in the fair value of the Company's investments in marketable securities is recorded in earnings as part of operating income or loss.

The Company adopted ASU 2016-01 using a modified retrospective approach that resulted in recording, on January 1, 2018, a cumulative effect adjustment of $735,639 of net unrealized gain on its investments in marketable securities as of December 31, 2017 into deficit in the accompanying consolidated financial statements.

10

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)



The Company has reclassified the $25,389 of net realized loss and $22,407 of net realized gain upon sale of marketable securities on the accompanying consolidated statement of operations for the three and nine months ended September 30, 2017, respectively, to include it in operating income or loss for comparative purposes. This reclassification has not changed the Company's net loss for the three and nine months ended September 30, 2017.

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 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, 2018 and December 31, 2017, the Company has accrued $2,869,271 and $2,238,576, respectively, in Trailing Fees to be payable in the future, which was included in due to affiliates on the consolidated balance sheets.

Revenue Recognition

In May 2014, the 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. The Company adopted ASU 2014-09, as amended, on its effective of January 1, 2018, using the cumulative effect adjustment

11

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


method in the period of adoption. The adoption of ASU 2014-09 did not have a material impact on the Company's consolidated financial statements.

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 8), 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. Since the Company’s inception, the Company has not issued any participating securities.

Concentration of Credit Risk

As of September 30, 2018 and December 31, 2017, 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.

Recent Accounting Pronouncements

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, in July 2018, FASB issued ASU 2018-11, Leases (Topic 842) - Targeted Improvements. Under ASU 2018-11, a lessor may elect a practical expedient to not separate lease and non-lease components of a lease and instead account for them as a single component if two criteria are met: (1) the timing and pattern of transfer of the non-lease component(s) and associated lease component are the same, and (2) the lease component, if accounted for separately, would be classified as an operating lease. Furthermore, the combined component will be accounted for under the new revenue recognition guidance of ASU 2014-09 if the non-lease components are the predominant component of the combined component. Otherwise, the combined component will be accounted for under the lease guidance of ASU 2016-02.

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, 2018, the Company is not a lessee under any lease contracts. As of September 30, 2018, 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 and subsequent amendments on its consolidated financial statements but currently does not expect adoption of ASU 2016-02 to have a material impact.

In August 2018, FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to Disclosure Requirements for Fair Value Measurement. ASU 2018-13 changes the fair value measurement disclosure requirements of ASC 820 by eliminating, modifying or adding certain disclosure requirements for fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods therein. However, ASU 2018-13 allows an entity to early adopt the provisions regarding eliminating or modifying certain disclosures while not adopting the provisions regarding additional

12

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


disclosures until the effective date of the ASU. The Company is evaluating the impact of ASU 2018-13 but does not expect a material change to its fair value disclosures.

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 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 $67,500,000 and $63,100,000 at September 30, 2018 and December 31, 2017, respectively. The Company estimated the fair value of the Company's mortgage loans payable at $25,985,182 and $26,610,378 as of September 30, 2018 and December 31, 2017, 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 and $2,400,000 as of September 30, 2018 and December 31, 2017, respectively.
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 three real estate properties during the three and nine months ended September 30, 2018 and no real estate property during the three and nine months ended September 30, 2017.

On July 17, 2018, the Company acquired three industrial properties located in Miami, Florida ("Miami Industrial") for a purchase price of $20,700,000 (excluding closing costs). The acquisition was funded with proceeds from the Offering and by borrowing $19,900,000 under the Company's line of credit. Miami Industrial consists of

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RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


three warehouse distribution buildings totaling 289,919 square feet fully leased to three tenants, with one tenant per building.

All leases at Miami Industrial have been classified as operating leases. Under ASU 2017-01, the transaction was determined to be an asset acquisition, resulting in the Company's capitalization of $142,319 of acquisition related costs. The Company's allocation of the purchase price (including acquisition related costs) of Miami Industrial is as follows:
 
Miami Industrial
Land
$
9,420,343

Building and improvements
8,125,485

Acquired in-place leases
3,751,504

Acquired below-market leases
(455,013
)
Total purchase price
$
20,842,319


The Company recorded revenues and net loss related to Miami Industrial, acquired during the three and nine months ended September 30, 2018 as follows:
 
Three and Nine Months Ended September 30, 2018
Revenues
$
416,727

Net loss
(117,213
)

The Company’s estimated revenues and net loss, on a pro forma basis (as if the acquisition of Miami Industrial was completed on January 1, 2017), for the three and nine months ended September 30, 2018 are as follows:
 
Three Months Ended September 30, 2018
Nine Months Ended September 30, 2018
Revenues
$
5,207,968

$
15,210,628

Net loss
(777,281
)
(2,131,800
)
Basic and diluted net loss per share of Class A common stock
$
(0.08
)
$
(0.24
)
Basic and diluted net loss per share of Class I common stock
$
(0.08
)
$
(0.25
)
Basic and diluted net loss per share of Class T common stock
$
(0.07
)
$
(0.23
)

The pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of period presented, nor does it purport to represent the results of future operations.

NOTE 5 — RENTALS UNDER OPERATING LEASES

As of September 30, 2018, the Company owned four office properties (including one medical office property), two retail properties and four industrial properties with a total of twenty-one tenants, and one student housing property with 316 beds. As of September 30, 2017, the Company owned four office properties (including one medical office property), two retail properties and one industrial property with a total of nineteen tenants, and one student housing property with 316 beds. All leases at the Company's properties have been classified as operating

14

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


leases. The Company's rental and other property income from its real estate investments for the three and nine months ended September 30, 2018 and 2017 is comprised of the following:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Rental revenue
$
3,979,066

 
$
3,714,023

 
$
11,866,716

 
$
10,836,073

Straight-line revenue
257,840

 
67,638

 
(52,691
)
 
450,710

Above- and below-market lease amortization, net
91,650

 
63,878

 
233,200

 
191,634

Lease incentive amortization
(26,123
)
 
(26,122
)
 
(77,516
)
 
(77,516
)
Rental and other property income
$
4,302,433

 
$
3,819,417

 
$
11,969,709

 
$
11,400,901

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, 2018 and 2017 are shown below.
 
 
Percent of actual gross rental revenues
Property
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
Flats at Carrs Hill, Athens, GA
 
16.2
%
 
16.7
%
Loudoun Gateway, Sterling, VA
 
14.8

 
16.2

Allied Drive, Dedham, MA
 
14.6

 
15.9

Anaheim Hills Office Plaza, Anaheim, CA
 
11.7

 
12.5

Terra Nova Plaza, Chula Vista, CA
 
11.1

 
11.9

Commerce Corner, Logan Township, NJ
 
10.5

 
10.4

Total
 
78.9
%
 
83.6
%
 
 
 
 
 
 
 
Percent of actual gross rental revenues
Tenant
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
Orbital ATK Inc. - Loudoun Gateway
 
14.8
%
 
16.2
%
New England Baptist Hospital - Allied Drive
 
12.6

 
13.5

Total
 
27.4
%
 
29.7
%
 

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RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


 
 
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
%
The Company's tenants representing more than 10% of in-place annualized base rental revenues as of September 30, 2018 and 2017 were as follows:
 
 
Percent of in-place annualized base rental revenues as of
Property
 
September 30, 2018
 
September 30, 2017
Orbital ATK Inc. - Loudoun Gateway
 
17.5
%
 
18.7
%
New England Baptist Hospital - Allied Drive
 
9.9

 
10.7

Total
 
27.4
%
 
29.4
%

NOTE 6 — MARKETABLE SECURITIES

The following is a summary of the Company's marketable securities held as of September 30, 2018 and December 31, 2017, which consisted entirely of publicly-traded shares of common stock in REITs as of each date. All marketable securities held as of December 31, 2017 were available-for-sale securities and none were considered impaired on an other-than-temporary basis. Pursuant to ASU 2016-01 adopted by the Company (see Note 2), beginning on January 1, 2018, changes in fair value of the Company's investments in marketable securities are recorded in earnings.
 
September 30, 2018
 
December 31, 2017
Marketable securities—cost
$
14,681,940

 
$
9,310,538

   Unrealized gains
1,091,409

 
832,651

   Unrealized losses
(75,748
)
 
(97,012
)
Net unrealized gain
1,015,661

 
735,639

Marketable securities—fair value
$
15,697,601

 
$
10,046,177


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, 2018 and 2017, marketable securities sold

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RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


generated proceeds of $5,468,743 and $3,030,317, respectively, resulting in gross realized gains of $297,496 and $110,632, respectively, and gross realized losses of $95,727 and $136,021, respectively. During the nine months ended September 30, 2018 and 2017, marketable securities sold generated proceeds of $16,524,051 and $10,943,630, respectively, resulting in gross realized gains of $508,338 and $480,574, respectively, and gross realized losses of $715,101 and $458,167, respectively.

NOTE 7 — 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 had 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. As of December 31, 2017, the outstanding balance was $63,100,000 and the weighted average interest rate was 3.16%. As of December 31, 2017, the maximum borrowing capacity was $69,900,795, and the Company was in compliance with all covenants.

On February 27, 2018, the Company, as guarantor, and certain of the wholly-owned subsidiaries of the Operating Partnership, as co-borrowers, entered into an amended and restated secured revolving credit facility (the “Revised Wells Fargo Line of Credit”) with Wells Fargo Bank, National Association, as administrative agent, and other lending institutions that may become parties to the credit agreement. The Revised Wells Fargo Line of Credit has a three-year term maturing February 27, 2021. The Company has two one-year extension options following the initial term subject to satisfaction of certain conditions and payment of applicable extension fees.

The interest rate under the Revised Wells Fargo Line of Credit is based on the 1-month London Inter-bank Offered Rate ("LIBOR") with a spread of 160 to 180 basis points depending on the debt yield as defined in the agreement. In addition, the Revised 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 $200,000,000 upon satisfaction of specified conditions. Each requested expansion must be for at least $25,000,000 and may result in the Revised Wells Fargo Line of Credit being syndicated. As of September 30, 2018, the outstanding balance was $67,500,000 and the weighted average interest rate was 3.76%.

At any time, the borrowing capacity under the Revised 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 10% based on the in-place net operating income of the collateral pool as defined, or (3) the maximum capacity of the Revised Wells Fargo Line of Credit. Proceeds from the Revised 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, 2018, the Company's maximum borrowing capacity was $95,510,154.

The Revised 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, 2018.

Nationwide Life Insurance Loan


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RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


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

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 line of credit and mortgage loans payable as of September 30, 2018 and December 31, 2017:
 
September 30, 2018
 
December 31, 2017
Line of credit
$
67,500,000

 
$
63,100,000

Deduct: Deferred financing costs, less accumulated amortization
(570,191
)
 
(77,939
)
Line of credit, net
$
66,929,809

 
$
63,022,061

 
 
 
 
Mortgage loans payable
$
27,500,000

 
$
27,500,000

Deduct: Deferred financing costs, less accumulated amortization
(219,075
)
 
(245,569
)
Mortgage loans payable, net
$
27,280,925

 
$
27,254,431


Aggregate future principal payments of mortgage loans payable as of September 30, 2018 are as follows:
Year
 
Amount
Remainder of 2018
 
$

2019
 
253,331

2020
 
262,106

2021
 
271,185

2022
 
280,578

Thereafter
 
26,432,800

Total
 
$
27,500,000


NOTE 8 — 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

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RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


independent directors. The Advisory Agreement has a current expiration date of January 20, 2020. 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 comprised of 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 (the “Hurdle Amount”), RREEF America will receive up to 10% of the aggregate total return allocable to such class with a Catch-Up (defined below) calculated as follows: first, if the total return for the applicable period exceeds the Hurdle Amount, 25% of such total return in excess of the Hurdle Amount (the “Excess Profits”) until the total return reaches 10% (commonly referred to as a “Catch-Up”); and second, to the extent there are remaining Excess Profits, 10% of such remaining Excess Profits. 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.
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 any interim date 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 September 30, 2018 to be sufficiently probable to warrant recognition of a performance component as of September 30, 2018 in the Company's consolidated financial statements. The fixed component earned by RREEF America, and the performance component recognized by the Company, for the three and nine months ended September 30, 2018 and 2017, are shown below.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Fixed component
$
332,353

 
$
270,369

 
$
911,568

 
$
774,770

Performance component
210,000

 
353,301

 
300,000

 
353,301

 
$
542,353

 
$
623,670

 
$
1,211,568

 
$
1,128,071


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

19

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


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, 2018 and 2017, RREEF America incurred $69,742 and $63,329 of reimbursable operating expenses and offering costs, respectively, that were subject to reimbursement under the Advisory Agreement. For the nine months ended September 30, 2018 and 2017, RREEF America incurred $233,940 and $204,819 of reimbursable operating expenses and offering costs, respectively, that were subject to reimbursement under the Advisory Agreement. As of September 30, 2018 and December 31, 2017, the Company had a payable to RREEF America of $76,525 and $58,874, respectively, of operating expenses and offering costs 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, 2018 and 2017, the Company reimbursed RREEF America $232,686 and $232,686, respectively. For the nine months ended September 30, 2018 and 2017, the Company reimbursed RREEF America $690,471 and $690,473, respectively.
The amount of Deferred O&O payable to RREEF America is shown below.
 
 
September 30, 2018
 
December 31, 2017
Total Deferred O&O
 
$
4,618,318

 
$
4,618,318

Cumulative reimbursements made to RREEF America
 
(4,380,573
)
 
(3,690,102
)
Remaining Deferred O&O reimbursable to RREEF America
 
$
237,745

 
$
928,216


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 date upon which the aggregate Expense Payments by RREEF America reached $9,200,000. As of 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. The Company has not received any Expense Payments since December 31, 2015.
In accordance with the Expense Support Agreement, the Company was to reimburse RREEF America $250,000 per quarter (the "Quarterly Reimbursement"), representing a non-interest bearing note due to RREEF America ("Note to Affiliate") which was subject to the imputation of interest. In accordance therewith, on 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.

20

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


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 in the form of the Note to Affiliate. Beginning the 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, 2018 and 2017, the Company amortized $36,371 and $35,675, respectively, of the discount on the Note to Affiliate into interest expense. For the nine months ended September 30, 2018 and 2017, the Company amortized $108,588 and $106,508, 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

On July 1, 2016, the Company and its Operating Partnership entered into a new dealer manager agreement (the "Dealer Manager Agreement") with DWS Distributors, Inc. (formerly known as Deutsche 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, 2018 and December 31, 2017, the Company has accrued $80,554 and $67,279, respectively, in Trailing Fees currently payable to the Dealer Manager, and $2,869,271 and $2,238,576, 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. The Company also pays the Dealer Manager upfront selling commissions and upfront dealer manager fees in connection with its Offerings, as applicable. For the three months ended September 30, 2018 and 2017, the Dealer Manager earned upfront selling commissions and upfront dealer manager fees totaling $277,077 and $41,466, respectively. For the nine months ended September 30, 2018 and 2017, the Dealer Manager earned upfront selling commissions and upfront dealer manager fees totaling $441,406 and $76,700, respectively.

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 or the Dealer Manager, 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 months ended September 30, 2018 and 2017, the Dealer Manager incurred $67,000 and $80,000, respectively, in such costs on behalf of the Company. For the nine months ended September 30, 2018 and 2017, the Dealer Manager incurred $287,823 and $228,203, respectively, in such costs on behalf of the Company. As of September 30, 2018 and December 31, 2017, the Company had payable to the Dealer Manager $295,343 and $315,622, 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, 2018
(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, 2018 and December 31, 2017
$
4,618,318

 
$
3,775,369

 
$
7,031,029

 
$
15,424,716

(1) Includes $913,132 and $1,355,890 of estimated accrued Trailing Fees payable in the future as of September 30, 2018 and December 31, 2017, respectively.

As of September 30, 2018, in the Follow-On Public Offering, the Company had raised $57,800,338 in gross proceeds and incurred total organization and offering costs of $6,090,879, including estimated accrued Trailing Fees payable in the future of $1,956,139.
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, 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, 2018, total operating expenses of the Company were $3,604,820 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, 2018 and December 31, 2017, the Company owed its affiliates the following amounts:

22

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


 
September 30, 2018
 
December 31, 2017
Deferred O&O
$
237,745

 
$
928,216

Reimbursable under the Advisory Agreement
76,525

 
58,874

Reimbursable under the Dealer Manager Agreement
295,343

 
315,622

Advisory fees
412,555

 
766,624

Accrued Trailing Fees
2,949,826

 
2,305,855

Due to affiliates
$
3,971,994

 
$
4,375,191

 
 
 
 
Note to Affiliate
$
8,950,000

 
$
8,950,000

Unamortized discount
(1,401,165
)
 
(1,509,753
)
Note to Affiliate, net of unamortized discount
$
7,548,835

 
$
7,440,247


NOTE 9 — 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 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. 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.


23

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(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, 2018
(Unaudited)


During the three and nine months ended September 30, 2018 and 2017, redemptions were as shown below. The Company funded these redemptions with cash flow from operations, proceeds from its public offerings or borrowings on the 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, 2018
 
Shares
 
Weighted Average Share Price
 
Amount
Class A
 
95,496

 
$
13.98

 
$
1,334,534

Class I
 
44,865

 
14.08

 
631,873

Class T
 

 

 


Nine Months Ended September 30, 2018
 
Shares
 
Weighted Average Share Price
 
Amount
Class A
 
234,674

 
$
13.87

 
$
3,254,765

Class I
 
162,464

 
13.96

 
2,262,111

Class T
 

 

 


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.
    
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 10 - NET INCOME (LOSS) PER SHARE

The Company computes net income (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 8) which may impact the net income (loss) of each class of common stock differently. The performance component for three and nine months ended September 30, 2018 and 2017, and the impact on each class of common stock, are shown below.

25

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


In periods where no performance component of the advisory fee is recognized in the Company’s consolidated statement of operations, the net income (loss) per share will be the same for each class of common stock.
Basic and diluted net income (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 income (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 income (loss) per share for each of the Company’s Class A, Class I and Class T common stock.



Three Months Ended September 30, 2018


Class A

Class I

Class T
Basic and diluted net loss per share:






 
Allocation of net loss before performance fee
 
$
(216,006
)
 
$
(297,490
)
 
$
(24,369
)

Allocation of performance fees

(81,961
)

(124,068
)

(3,971
)

Total numerator

$
(297,967
)

$
(421,558
)

$
(28,340
)

Denominator - weighted average number of common shares outstanding

3,777,836


5,202,959


426,209

Basic and diluted net loss per share:

$
(0.08
)

$
(0.08
)

$
(0.07
)











Nine Months Ended September 30, 2018


Class A

Class I

Class T
Basic and diluted net loss per share:






 
Allocation of net loss before performance fee
 
$
(623,732
)
 
$
(808,987
)
 
$
(36,901
)

Allocation of performance fees

(117,087
)

(177,240
)

(5,673
)

Total numerator

$
(740,819
)

$
(986,227
)

$
(42,574
)

Denominator - weighted average number of common shares outstanding

3,719,098


4,823,708


220,030

Basic and diluted net loss per share:

$
(0.20
)

$
(0.20
)

$
(0.19
)

26

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(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
)

NOTE 11 — 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 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 the first three quarters of 2018 and 2017 and for the nine months ended September 30, 2018 and 2017.

27

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


 
Three Months Ended
 
Nine Months Ended September 30, 2018
 
March 31, 2018
 
June 30, 2018
 
September 30, 2018
 
Declared daily distribution rate, before adjustment for class-specific fees
$
0.00189004

 
$
0.00190140

 
$
0.00192261

 
 
Distributions paid or payable in cash
$
780,511

 
$
831,391

 
$
928,395

 
$
2,540,297

Distributions reinvested
619,468

 
661,799

 
733,528

 
2,014,795

Distributions declared
$
1,399,979

 
$
1,493,190

 
$
1,661,923

 
$
4,555,092

Class A Shares issued upon reinvestment
22,714

 
22,901

 
23,500

 
69,115

Class I Shares issued upon reinvestment
21,479

 
23,520

 
27,180

 
72,179

Class T Shares issued upon reinvestment
678

 
976

 
1,548

 
3,202


 
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


Shown below are details by share class of the Company's distributions for each of the first three quarters of 2018 and 2017 and for the nine months ended September 30, 2018 and 2017.

 
Three Months Ended
 
Nine Months Ended September 30, 2018
 
March 31, 2018
 
June 30, 2018
 
September 30, 2018
 
Class A
$
593,300

 
$
603,263

 
$
631,342

 
$
1,827,905

Class I
794,033

 
865,555

 
960,012

 
2,619,600

Class T
12,646

 
24,372

 
70,569

 
107,587

Distributions declared
$
1,399,979

 
$
1,493,190

 
$
1,661,923

 
$
4,555,092



28

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


 
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


NOTE 12 — 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.

Net worth and similar taxes paid to certain states where the Company owns real estate properties were $88 and $14,209 for the three months ended September 30, 2018 and 2017, respectively. The net worth and similar taxes paid to certain states where the Company owns real estate properties were $23,338 and $36,415 for the nine months ended September 30, 2018 and 2017, respectively.


29

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


NOTE 13 — SEGMENT INFORMATION

For the nine months ended September 30, 2018 and 2017, 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, 2018 and December 31, 2017 and net income (loss) for the three and nine months ended September 30, 2018 and 2017.
 
 
Real Estate Properties
 
Real Estate Equity Securities
 
Total
Carrying value as of September 30, 2018
$
166,169,253

 
$
15,697,601

 
$
181,866,854

 
 
 
 
 
 
 
Reconciliation to total assets of September 30 , 2018
 
 
 
 
 
Carrying value per reportable segments
 
 
 
 
$
181,866,854

 
Corporate level assets
 
 
 
 
9,702,537

 
Total assets
 
 
 
 
$
191,569,391

 
 
 
 
 
 
 
Carrying value as of December 31, 2017
$
150,923,848

 
$
10,046,177

 
$
160,970,025

 
 
 
 
 
 
 
Reconciliation to total assets of December 31, 2017
 
 
 
 
 
Carrying value per reportable segments
 
 
 
 
$
160,970,025

 
Corporate level assets
 
 
 
 
8,346,307

 
Total assets
 
 
 
 
$
169,316,332


30

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


Three Months Ended September 30, 2018
Real Estate Properties

Real Estate Equity Securities

Total
Rental and other property income
$
4,302,433

 
$

 
$
4,302,433

Tenant reimbursement income
688,482

 

 
688,482

Investment income on marketable securities


 
136,832

 
136,832

Total revenues
4,990,915

 
136,832

 
5,127,747

Segment operating expenses
1,597,996

 
14,319

 
1,612,315

Net realized gain upon sale of marketable securities

 
201,769

 
201,769

Net unrealized loss on investment in marketable securities(1)

 
(201,223
)
 
(201,223
)
Operating income - segments
$
3,392,919

 
$
123,059

 
$
3,515,978

(1) Net unrealized gain or loss on investment in marketable securities included pursuant to adoption of ASU 2016-01. See Note 2.
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017
 
 
 
 
 
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

Segment operating expenses
1,446,432

 
12,341

 
1,458,773

Net realized loss upon sale of marketable securities

 
(25,389
)
 
(25,389
)
Operating income - segments
$
2,913,513

 
$
47,106

 
$
2,960,619

 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
Reconciliation to net loss
 
 
2018
 
2017
Operating income - segments

 
$
3,515,978

 
$
2,960,619

General and administrative expenses
 
 
(420,183
)
 
(395,446
)
Advisory expenses
 
 
(542,353
)
 
(623,670
)
Depreciation
 
 
(1,162,905
)
 
(1,085,483
)
Amortization
 
 
(1,125,428
)
 
(933,854
)
Operating income (loss)
 
 
265,109

 
(77,834
)
Interest expense
 
 
(1,012,974
)
 
(910,512
)
Net loss
 
 
$
(747,865
)
 
$
(988,346
)

31

RREEF PROPERTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
September 30, 2018
(Unaudited)


Nine Months Ended September 30, 2018
Real Estate Properties
 
Real Estate Equity Securities
 
Total
 
Rental and other property income
$
11,969,709

 
$

 
$
11,969,709

 
Tenant reimbursement income
1,907,590

 

 
1,907,590

 
Investment income on marketable securities

 
345,609

 
345,609

 
Total revenues
13,877,299

 
345,609

 
14,222,908

 
Segment operating expenses
4,348,090

 
37,198

 
4,385,288

 
Net realized loss upon sale of marketable securities
 
 
(206,763
)
 
(206,763
)
 
Net unrealized gain on investment in marketable securities
 
 
280,022

 
280,022

Operating income - segments
$
9,529,209

 
$
381,670

 
$
9,910,879

 
 
 
 
 
 
 
Nine Months Ended September 30, 2017
 
 
 
 
 
 
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

 
Segment operating expenses
4,093,912

 
27,673

 
4,121,585

 
Net realized gain upon sale of marketable securities
 
 
22,407

 
22,407

Operating income - segments
$
8,915,340

 
$
200,426

 
$
9,115,766

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
Reconciliation to net loss
 
 
2018
 
2017
Operating income - segments