DEBT (Q2)

6 Months Ended

12 Months Ended

Jun. 30, 2019

Dec. 31, 2018

Debt Disclosure [Abstract]

DEBT

NOTE 6. DEBT

Mortgage Notes Payable

As of June 30, 2019 and December 31, 2018, the Company’s mortgage notes payable consisted of the following:

Collateral	Principal Amount June 30, 2019			Principal Amount December 31, 2018			Contractual Interest Rate (1)			Effective Interest Rate (1)			Loan Maturity
Accredo/Walgreen properties	$	6,925,661		$	6,996,469			3.95	%		3.95	%	7/1/2021
Dana property		4,592,001			4,632,398			4.56	%		4.56	%	4/1/2023
Six Dollar General properties		3,852,196			3,885,334			4.69	%		4.69	%	4/1/2022
Wyndham property (2)		5,769,600			5,820,600		One-month LIBOR+2.05%				4.34	%	6/5/2027
Williams Sonoma property (2)		4,573,200			4,615,800		One-month LIBOR+2.05%				4.05	%	6/5/2022
Omnicare property		4,311,660			4,349,963			4.36	%		4.36	%	5/1/2026
Harley property		6,808,386			6,868,254			4.25	%		4.25	%	9/1/2024
Northrop Grumman property		5,738,558			5,809,367			4.40	%		4.40	%	3/2/2021
EMCOR property		2,887,126			2,911,577			4.35	%		4.35	%	12/1/2024
exp US Services property		3,416,049			3,446,493			(3	)		4.25	%	11/17/2024
Husqvarna property		6,379,182			6,379,182			(4	)		4.60	%	2/20/2028
AvAir property		14,575,000			14,575,000			(5	)		4.84	%	3/27/2028
3M property		8,350,000			8,360,000		One-month LIBOR+2.25%				5.09	%	3/29/2023
Cummins property		8,519,800			8,530,000		One-month LIBOR+2.25%				5.16	%	4/4/2023
24 Hour Fitness property (6)		6,333,666			8,900,000			4.64	%		4.64	%	4/1/2049
Texas Health property (7)		—			4,842,500		One-month LIBOR+4.30%				6.56	%	3/13/2019
Bon Secours property		5,250,000			5,250,000			5.41	%		5.41	%	9/15/2026
Costco property		18,850,000			18,850,000			4.85	%		4.85	%	1/1/2030
Total mortgage notes payable		117,132,085			125,022,937
Less unamortized deferred financing costs		(2,099,104	)		(2,313,629	)
	$	115,032,981		$	122,709,308

(1) Contractual interest rate represents the interest rate in effect under the mortgage note payable as of June 30, 2019. Effective interest rate is calculated as the actual interest rate in effect as of June 30, 2019 consisting of the contractual interest rate and the effect of the interest rate swap, if applicable. For further information regarding the Company’s derivative instruments, see Note 7.

(2) The loans on each of the Williams Sonoma and Wyndham properties (collectively, the "Property") located in Summerlin, Nevada were originated by Nevada State Bank ("Bank"). The loans are collateralized by a deed of trust and a security agreement with assignment of rents and fixture filing. In addition, the individual loans are subject to a cross collateralization and cross default agreement whereby any default under, or failure to comply with the terms of any one or both of the loans, is an event of default under the terms of both loans. The value of the Property must be in an amount sufficient to maintain a loan to value ratio of no more than 60%. If the loan to value ratio is ever more than 60%, the borrower shall, upon the Bank’s written demand, reduce the principal balance of the loans so that the loan to value ratio is no more than 60%.

(3) The initial contractual interest rate is 4.25% and starting November 18, 2022, the interest rate is T-Bill index plus 3.25%.

(4) The initial contractual interest rate is 4.60% for the first five years and starting February 21, 2023, the interest rate is the greater of 4.60% or five-year Treasury Constant Maturity ("TCM") plus 2.45% for the second five years.

(5) The initial contractual interest rate is 4.84% for the first five-years and starting March 28, 2023, the interest rate is the greater of 4.60% or five-year TCM plus 2.45% for the second five-years.

(6) The loan refinancing on March 7, 2019 reduced the principal amount outstanding and the rate and extended the maturity. The interest rate for the note payable outstanding as of June 30, 2019 adjusts in the 133rd, 253rd and 313th months.

(7) The loan was fully repaid on the March 13, 2019 maturity date.

The following were the face value, carrying amount and fair value of the Company’s mortgage notes payable (Level 3 measurement):

	June 30, 2019						December 31, 2018
	Face Value		Carrying Value		Fair Value		Face value		Carrying Value		Fair Value
Mortgage notes payable	$	117,132,085	$	115,032,981	$	123,128,492	$	125,022,937	$	122,709,308	$	123,821,490

Disclosures of the fair values of financial instruments are based on pertinent information available to the Company as of the period end and require a significant amount of judgment. The actual value could be materially different from the Company’s estimate of value.

Unsecured Credit Facility

The Company, together with the Operating Partnership and NNN LP ("Borrowers"), has a Business Loan Agreement and Promissory Note (the "Unsecured Credit Facility") with Pacific Mercantile Bank ("Lender"). The Unsecured Credit Facility was a revolving unsecured line of credit for a maximum principal amount of $9,000,000 and was scheduled to mature on January 26, 2019, unless earlier terminated. The Borrowers received extensions of the Unsecured Credit Facility through April 30, 2019. On April 30, 2019, Borrowers entered into a new Loan Agreement (the "New Credit Facility") with Lender. The New Credit Facility replaces the $9,000,000 unsecured line of credit with Lender, which expired on April 30, 2019. The New Credit Facility is a revolving unsecured line of credit for a maximum principal amount of $10,000,000 and matures on October 1, 2020, unless earlier terminated. The New Credit Facility has similar terms to the expired facility.

The New Credit Facility is secured by a continuing guaranty executed by the Company’s Sponsor and Advisor, along with springing guaranties executed by Raymond E. Wirta, Chairman of the Board of the Company, and a trust belonging to Mr. Wirta, each in the amount of $10,000,000. Mr. Wirta’s guaranties become effective upon certain triggering events, including the failure by Borrowers to pay one or more subsequent advances within 90 days of disbursement or an event of default under the New Credit Facility.

Under the terms of the New Credit Facility, Borrowers pay a variable rate of interest on outstanding amounts equal to one (1) percentage point over an independent index published in The Wall Street Journal based on the highest rate on corporate loans posted by at least 75% of the largest banks (the "Index"). The interest rate was 6.50% as of June 30, 2019 and December 31, 2018.

The New Credit Facility contains customary representations, warranties and covenants. The Company’s ability to borrow under the New Credit Facility is subject to its ongoing compliance with various affirmative and negative covenants, including with respect to indebtedness, guaranties, mergers and asset sales, liens, dividends, corporate existence and financial reporting obligations. The New Credit Facility also contains customary events of default, including, without limitation, nonpayment of principal, interest, fees or other amounts when due, violation of covenants, breaches of representations or warranties and change of ownership. Upon the occurrence of an event of default, Lender may accelerate the repayment of amounts outstanding under the New Credit Facility and exercise other remedies subject, in certain instances, to the expiration of an applicable cure period.

As of June 30, 2019 and December 31, 2018 the Company had $0 and $9,000,000 of outstanding borrowings, respectively, under the New Credit Facility and Unsecured Credit Facility, as then in effect.

All Debt Agreements

Pursuant to the terms of mortgage notes payable on certain of the Company’s properties and the Unsecured Credit Facility, the Company and/or the Borrowers are subject to certain financial loan covenants. The Company and/or the Borrowers were in compliance with all terms and conditions of the applicable loan agreements as of June 30, 2019.

The following summarizes the future principal repayments of the Company’s mortgage notes payable and New Credit Facility as of June 30, 2019:

	Mortgage Note Payable			New Credit Facility		Total
July through December 2019	$	637,333		$	—	$	637,333
2020		1,523,095			—		1,523,095
2021		8,223,343			—		8,223,343
2022		14,617,593			—		14,617,593
2023		21,247,852			—		21,247,852
2024		12,966,778			—		12,966,778
Thereafter		57,916,091			—		57,916,091
Total principal		117,132,085			—		117,132,085
Less: Deferred financing costs, net		(2,099,104	)		—		(2,099,104	)
Net principal	$	115,032,981		$	—	$	115,032,981

Interest Expense

The following is a reconciliation of the components of interest expense for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Mortgage notes payable:
Interest expense	$	1,368,662	$	996,756	$	2,845,158	$	1,822,477
Amortization of deferred financing costs		109,071		98,648		379,593		505,534
Loss (gain) on interest rate swaps (1)		562,571		15,877		890,385		(213,389	)
Unsecured credit facility:
Interest expense		27,918		83,408		111,436		166,397
Amortization of deferred financing costs		8,503		8,571		10,503		12,857
Total interest expense	$	2,076,725	$	1,203,260	$	4,237,075	$	2,293,876

(1)          Includes unrealized loss (gain) on interest rate swaps of $553,490 and $6,235 for the three months ended June 30, 2019 and 2018, respectively, and $874,016 and $(220,571) for the six months ended June 30, 2019 and 2018, respectively, (see Note 7). Accrued interest payable, net of $4,208 and $5,950 at June 30, 2019 and December 31, 2018, respectively, represents the unsettled portion of the interest rate swaps from the last settlement period through the respective balance sheet dates.

NOTE 6. DEBT

Mortgage Notes Payable

As of December 31, 2018 and 2017, the Company’s mortgage notes payable consisted of the following:

Collateral	2018 Principal Balance			2017 Principal Balance			Contractual Interest Rate (1)			Effective Interest Rate (1)			Loan Maturity
Accredo Health/Walgreen properties	$	6,996,469		$	7,133,966			3.95	%		3.95	%	7/1/2021
Dana property		4,632,398			4,709,889			4.56	%		4.56	%	4/1/2023
Six Dollar General properties		3,885,334			3,951,846			4.69	%		4.69	%	4/1/2022
Wyndham property (2)		5,820,600			5,920,800		One-month LIBOR+2.05%				4.34	%	6/5/2027
Williams Sonoma property (2)		4,615,800			4,699,200		One-month LIBOR+2.05%				4.34	%	6/5/2022
Omnicare property		4,349,963			4,423,574			4.36	%		4.36	%	5/1/2026
Harley property		6,868,254			6,983,418			4.25	%		4.25	%	9/1/2024
Northrop Grumman property		5,809,367			5,945,655			4.40	%		4.40	%	3/2/2021
EMCOR property		2,911,577			2,955,000			4.35	%		4.35	%	12/1/2024
exp US Services property		3,446,493			3,505,061			(4	)		4.25	%	11/17/2024
Husqvarna property		6,379,182			—			(5	)		4.60	%	2/20/2028
AvAir property (3)		14,575,000			12,000,000			(6	)		4.84	%	3/27/2028
3M property		8,360,000			—		One-month LIBOR +2.25%				5.09	%	3/29/2023
Cummins property		8,530,000			—		One-month LIBOR +2.25%				5.16	%	4/4/2023
24 Hour Fitness property		8,900,000			—		One-month LIBOR +4.30%				6.56	%	3/17/2019
Texas Health property		4,842,500			—		One-month LIBOR +4.30%				6.56	%	3/13/2019
Bon Secours property		5,250,000			—			5.41	%		5.41	%	9/15/2026
Costco property		18,850,000			—			4.85	%		4.85	%	1/1/2030
Total mortgage notes payable		125,022,937			62,228,409
Less unamortized deferred financing costs		(2,313,629	)		(1,741,106	)
Mortgage notes payable, net	$	122,709,308		$	60,487,303

(1) Contractual interest rate represents the interest rate in effect under the mortgage note payable as of December 31, 2018. Effective interest rate is calculated as the actual interest rate in effect as of December 31, 2018 (consisting of the contractual interest rate and the effect of the interest rate swap, if applicable). For further information regarding the Company’s derivative instruments (see Note 7).

(2) The notes on each of the Williams Sonoma and Wyndham properties (collectively, the “Property”) located in Summerlin, Nevada were originated by Nevada State Bank (“Bank”). The notes are collateralized by a deed of trust and a security agreement with assignment of rents and fixture filing. In addition, the individual loans are subject to a cross collateralization and cross default agreement whereby any default under, or failure to comply with the terms of any one or both of the notes is an event of default under the terms of both notes. The value of the property must be in an amount sufficient to maintain a loan to value ratio of no more than 60%. If the note to value ratio is ever more than 60%, the borrower shall, upon the Bank’s written demand, reduce the principal balance of the notes so that the note to value ratio is no more than 60%.

(3) On March 27, 2018, the Company refinanced the mortgage note payable as of December 31, 2017 with a new note for $14,575,000 through a nonaffiliated lender. The note is secured by the AvAir property and it matures on March 27, 2028.

(4) The initial contractual interest rate is 4.25% and starting November 18, 2022, the interest rate is T-Bill index plus 3.25%.

(5) The initial contractual interest rate is 4.60% for the first five years and the greater of 4.60% or five-year Treasury Constant Maturity (“TCM”) plus 2.45% for the second five years.

(6) The initial contractual interest rate for the note payable outstanding as of December 31, 2018 is 4.84% for the first five-years and the greater of 4.60% or five-year TCM plus 2.45% for the second five-years.

(7) On March 7, 2019, the Company refinanced the mortgage note payable as of March 17, 2019 with a new note for $6,350,000 through a nonaffiliated lender. The new note is secured by the 24 Hour Fitness property and it matures on March 7, 2049.

(8) On March 13, 2019, the Company repaid this mortgage note payable with borrowings under its unsecured line of credit.

The following were the face value, carrying amount and fair value of the Company’s mortgage notes payable as of December (Level 3 measurement):

	2018						2017
	Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value
Mortgage notes payable	$	125,022,937	$	122,709,308	$	123,821,490	$	62,228,409	$	60,487,303	$	62,363,284

Disclosures of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and require a significant amount of judgment. The actual value could be materially different from the Company’s estimate of value.

Unsecured Credit Facility

On February 1, 2018, the Company, together with the Operating Partnership and Rich Uncles NNN LP, LLC (“Borrowers”), entered into a Business Loan Agreement and Promissory Note (the “Unsecured Credit Facility”) with Pacific Mercantile Bank (“Lender”). The Unsecured Credit Facility replaced the $12,000,000 unsecured line of credit with Lender, which expired on January 26, 2018 (the “Former Credit Facility”). The Unsecured Credit Facility is a revolving unsecured line of credit for a maximum principal amount of $9,000,000 and was scheduled to mature on January 26, 2019, unless earlier terminated. Under the terms of the Unsecured Credit Facility, Borrowers pay a variable rate of interest on outstanding amounts equal to one (1) percentage point over an independent index published in The Wall Street Journal based on the highest rate on corporate loans posted by at least 75% of the largest banks (the “Index”). Based upon the Index as of the date of the Unsecured Credit Facility, the interest rate under the Unsecured Credit Facility was 6.5% as of December 31, 2018. The Borrowers received extensions of the Unsecured Credit Facility until April 30, 2019 as discussed in Note 10.

The Unsecured Credit Facility contains customary representations, warranties and covenants, which are substantially similar to those in the Former Credit Facility. The Company’s ability to borrow under the Unsecured Credit Facility will be subject to its ongoing compliance with various affirmative and negative covenants, including with respect to indebtedness, guaranties, mergers and asset sales, liens, dividends, corporate existence and financial obligations.

The Unsecured Credit Facility also contains customary events of default, including, without limitation, nonpayment of principal, interest, fees or other amounts when due, violation of covenants, breaches of representations or warranties and change of ownership. Upon the occurrence of an event of default, Lender may accelerate the repayment of amounts outstanding under the Unsecured Credit Facility and exercise other remedies subject, in certain instances, to the expiration of an applicable cure period.

The Unsecured Credit Facility is secured by guaranties executed by Raymond E. Wirta, Chairman of the Board of the Company, a trust belonging to Mr. Wirta, Harold C. Hofer, and a trust belonging to Mr. Hofer, each in the amount of $9,000,000. Such guaranties become effective upon certain triggering events, including an event of default under the Unsecured Credit Facility and the failure by Borrowers to pay one or more subsequent advances within 90 days of disbursement.

As of December 31, 2018, the Company’s current Unsecured Credit Facility had total outstanding borrowings of $9,000,000. As of December 31, 2017, the Company’s Former Credit Facility had total outstanding borrowings of $12,000,000.

All Debt Agreements

Pursuant to the terms of mortgage notes payable on certain of the Company’s properties and the Unsecured Credit Facility, the Company and/or the Borrowers are subject to certain financial loan covenants. The Company and/or the Borrowers were in compliance with all terms and conditions of the applicable loan agreements as of December 31, 2018.

The following summarizes the future principal repayments of the Company’s mortgage notes payable and Unsecured Credit Facility as of December 31, 2018:

	Mortgage Notes Payable			Unsecured Credit Facility			Total
2019	$	14,852,271		$	9,000,000	(1)	$	23,852,271
2020		1,435,312			—			1,435,312
2021		8,130,359			—			8,130,359
2022		14,516,126			—			14,516,126
2023		21,115,026			—			21,115,026
Thereafter		64,973,843			—			64,973,843
Total principal		125,022,937			9,000,000			134,022,937
Deferred financing costs, net		(2,313,629	)		(2,000	)		(2,315,629	)
Total	$	122,709,308		$	8,998,000		$	131,707,308

(1) The maturity date of the outstanding borrowings under the Company's Unsecured Credit Facility was extended to April 30, 2019, as discussed in Note 10.

Interest Expense

The following is a reconciliation of the components of interest expense:

	Year Ended December 31,
	2018		2017
Mortgage notes payable:
Interest expense	$	4,065,686	$	1,191,351
Amortization of deferred financing costs		897,535		168,546
Loss (gain) on interest rate swaps (1)		261,198		(1,668	)
Unsecured credit facility:
Interest expense		323,409		248,637
Amortization of deferred financing costs		30,000		1,118
Forfeited loan fee		—		30,000
Total interest expense	$	5,577,828	$	1,637,984

(1) Includes unrealized loss (gain) on interest rate swaps of $157,613 and $(7,899) for years ended December 31, 2018 and 2017, respectively, (see Note 7). Accrued interest payable of $7,649 and $6,231 at December 31, 2018 and 2017, respectively, represents the unsettled portion of the interest rate swaps for the period from origination of the interest rate swap through the respective balance sheet dates.