INVESTMENT IN UNCONSOLIDATED ENTITY

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

The Company’s investment in unconsolidated entity as of September 30, 2020 and December 31, 2019 is as follows:


	September 30, 2020		December 31, 2019
The TIC Interest	$	10,085,476	$	10,388,588

As discussed in Note 3, REIT I merged with and into the Company on December 31, 2019. The Company’s income (loss) from investments in unconsolidated entities for the three and nine months ended September 30, 2020 and 2019, is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
The TIC Interest	$	92,617	$	72,613	$	239,028	$	224,676
REIT I	—		(35,043)		—		(57,118)
	$	92,617	$	37,570	$	239,028	$	167,558

TIC Interest

During 2017, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired an approximate 72.7% interest in an office property in San Clara, California. The remaining approximate 27.3% of undivided interest in the Santa Clara property is held by Hagg Lane II, LLC (an approximate 23.4% interest) and Hagg Lane III, LLC (an approximate 3.9% interest). The manager of Hagg Lane II, LLC and Hagg Lane III, LLC became a member of the Company's board of directors in December 2019. The Santa Clara property does not qualify as a variable interest entity and consolidation is not required as the Company’s TIC Interest does not control the property. Therefore, the Company accounts for the TIC Interest using the equity method. The Company receives approximately 72.7% of the cash flow distributions and recognizes approximately 72.7% of the results of operations. During the three months ended September 30, 2020 and 2019, the Company received $207,950 and $221,739 in cash distributions, respectively, and during the nine months ended September 30, 2020 and 2019, the Company received $542,140 and $495,357 in cash distributions, respectively.

The following is summarized financial information for the Santa Clara property as of September 30, 2020 and December 31, 2019 and for the three and nine months ended September 30, 2020 and 2019:


	September 30, 2020		December 31, 2019
Assets:
Real estate investments, net	$	30,156,162	$	30,858,240
Cash and cash equivalents	356,848		275,760
Other assets	192,251		228,770
Total assets	$	30,705,261	$	31,362,770
Liabilities:
Mortgage notes payable	$	13,555,271	$	13,746,635
Below-market lease, net	2,843,570		2,953,360
Other liabilities	129,110		68,587
Total liabilities	16,527,951		16,768,582
Total equity	14,177,310		14,594,188
Total liabilities and equity	$	30,705,261	$	31,362,770


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Total revenues	$	697,851	$	672,011	$	2,047,424	$	2,032,004
Expenses:
Interest expense	141,935		144,329		424,544		430,215
Depreciation and amortization	250,015		248,136		749,913		744,408
Other expenses	178,522		179,680		544,225		548,378
Total expenses	570,472		572,145		1,718,682		1,723,001
Net income	$	127,379	$	99,866	$	328,742	$	309,003

REIT I

Prior to the Merger on December 31, 2019, the Company had an approximate 4.8% ownership interest in REIT I. The Company recorded its share of loss of REIT I based on REIT I’s results of operations for the three and nine months ended September 30, 2019. During the three and nine months ended September 30, 2019, the Company received $75,746 and $220,858, respectively, in cash distributions related to its interest in REIT I. The following is REIT I's summarized results of operations for the three and nine months ended September 30, 2019:


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Total revenues	$	3,302,347	$	9,868,701
Expenses:
Depreciation and amortization	1,450,227		4,336,641
Interest expense	828,987		2,674,383
Other expenses	1,746,989		4,150,881
Total expenses	4,026,203		11,161,905
Other income:
Other income (1)	—		113,773
Net loss	$	(723,856)	$	(1,179,431)

(1) The gain on disposal of real estate investment property of $113,773 during the nine months ended September 30, 2019 was due to the higher mortgage loan balance and related interest payable for the Antioch, California Chase property compared to its net book value when it was relinquished in a foreclosure sale on March 13, 2019.