POS AM 1 d486635dposam.htm POST-EFFECTIVE AMENDMENT NO. 3 TO FORM S-11 Post-Effective Amendment No. 3 to Form S-11

As filed with the Securities and Exchange Commission on January 8, 2018

Registration No. 333-214130

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Post-Effective Amendment No. 3

to

FORM S-11

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

 

 

Rodin Global Property Trust, Inc.

(Exact name of registrant as specified in its charter)

 

 

110 E. 59th Street

New York, NY 10022

(212) 938-5000

(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)

 

 

Rodin Global Property Advisors, LLC

Jason Emala

110 E. 59th Street

New York, NY 10022

(212) 938-5000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

Joseph A. Herz, Esq.

Greenberg Traurig, LLP

200 Park Avenue

New York, NY 10166

(212) 801-9200

 

Stephen M. Merkel

Cantor Fitzgerald Investors, LLC

499 Park Avenue

New York, NY 10022

(212) 938-5000

 

 


Approximate date of commencement of proposed sale to public: As soon as practicable after the effectiveness of the registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ☐

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ☐

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      Accelerated filer  
Non-accelerated filer   ☒  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

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 7(a)(2)(B) of the Securities Act .  ☒

The registrant hereby amends this post-effective amendment to the above referenced registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


This Post-Effective Amendment No. 3 consists of the following:

 

1. Supplement No. 7, dated January 8, 2018, which supersedes and replaces all prior supplements;

 

2. The Registrant’s Prospectus dated March 23, 2017;

 

3. Part II; and

 

4. Signatures.


RODIN GLOBAL PROPERTY TRUST, INC.

SUPPLEMENT NO. 7 DATED JANUARY 8, 2018

TO THE PROSPECTUS DATED MARCH 23, 2017

This Supplement No. 7 supplements, and should be read in conjunction with, our prospectus dated March 23, 2017, and supersedes and replaces all prior supplements to our prospectus. Defined terms used in this Supplement shall have the meaning given to them in the prospectus unless the context otherwise requires. The purpose of this Supplement No. 7 is to disclose:

 

    the status of our initial public offering;

 

    the declaration of distributions;

 

    certain operating information, including a real estate investment summary and selected financial data;

 

    compensation paid to our Advisor and our dealer manager;

 

    our net asset value as of September 30, 2017 for our Class A Shares, Class T Shares and Class I Shares;

 

    the new offering prices of our Class A Shares, Class T Shares and Class I Shares;

 

    our engagement of an Independent Valuation Firm;

 

    our acquisitions;

 

    information regarding our borrowings;

 

    an update to our suitability standards;

 

    an update to the “Market Opportunity” section of our prospectus;

 

    an update to the “Conflicts of Interest” section of our prospectus;

 

    an update to the “Investment Objectives and Criteria” section of our prospectus;

 

    an update to the “Description of Shares” section of our prospectus;

 

    an update to our management compensation tables;

 

    an update to the “Estimated Use of Proceeds” section of our prospectus; and

 

    our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017 and September 30, 2017.

 

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Status of Our Initial Public Offering

We commenced our initial public offering of $1.25 billion in shares of common stock on March 23, 2017, of which up to $1.0 billion in Class A, Class T and Class I shares are being offered pursuant to our primary offering and up to $250 million in shares are being offered pursuant to our distribution reinvestment plan, or DRP. We refer to our primary offering and our DRP collectively as our offering. On May 18, 2017, we satisfied the minimum offering requirement as a result of the purchase of $2.0 million of Class I Shares by our sponsor and we commenced operations.

As of January 5, 2018, we had issued 884,540 shares of our common stock (consisting of 477,546 Class A Shares, 240,698 Class T Shares and 166,296 Class I Shares) in our offering for gross proceeds of approximately $22.7 million. As of January 5, 2018, $1.24 billion of shares remained available for sale pursuant to our offering. Our primary offering is expected to terminate on March 23, 2019, unless extended by our board of directors as permitted under applicable law and regulations.

Declaration of Distributions

On November 8, 2017, our board of directors authorized, and we declared, distributions for the period from November 15, 2017 to February 14, 2018, in an amount equal to $0.004253787 per day. Distributions will be payable by the 5th business day following each month end to stockholders of record at the close of business each day during the prior month. We expect to declare distributions for the period from February 15, 2018 to May 14, 2018 on February 14, 2018 in connection with the publication of our estimated net asset value.

The following table summarizes our distributions declared during the nine months ended September 30, 2017.

 

     Nine Months Ended September 30, 2017  
     Amount      Percent  

Distributions

     

Paid in cash

   $ 38,326        47

Payable

   $ 36,710        45

Reinvested in shares

   $ 6,927        8

Total

   $ 81,963        100

Sources of Distributions

     

Operating cash flows

   $ 62,578        76

Offering proceeds

   $ 19,385        24

Total

   $ 81,963        100

Real Estate Investment Summary

Real Estate Portfolio

As of January 5, 2018, we owned interests in 8 real properties as described below:

 

Portfolio

  Ownership
Percentage
    Number of
Properties
     Square
Feet
     Remaining
Lease Term
    Annualized
Rental
Income(1)
    Purchase
Price(1)
 

Walgreens Grand Rapids

    100     1        14,552        14.5 years (2)    $ 500,000     $ 7,936,508  

CF Net Lease Portfolio IV DST

    72.07     7        103,537        13.9 years     $ 2,195,958 (3)    $ 13,847,646  

 

(1) Reflects the annualized rental income and purchase price for entire portfolio as opposed to an adjusted amount to reflect our current ownership percentage.
(2) Reflects number of years remaining until tenant’s first termination option.
(3) First 5 lease years.

 

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Future Lease Expirations

As of January 5, 2018, we had no leases expiring within the next 10 years.

Tenant Concentration

As of January 5, 2018, 100% of our real properties are leased to Walgreen Co.

Selected Financial Data

The following tables show selected financial data as of and for the nine months ended September 30, 2017:

 

Balance Sheet Data:

   As of September 30,
2017
 

Investment in real estate, net of accumulated depreciation

   $ 6,663,959  

Investment in real estate-related assets

   $ 4,601,531  

Total assets

   $ 13,628,404  

Total liabilities

   $ 5,656,906  

Total stockholders’ equity

   $ 7,971,498  

Operating Data:

   Nine Months Ended
September 30,
2017
 

Total revenues

   $ 105,248  

Total operating expenses

   $ 1,080,290  

Total other income (expense)

   $ (22,373

Net income (loss)

   $ (997,415

Net income (loss) per common share — basic and diluted

   $ (10.36

Cash Flow Data:

   Nine Months Ended
September 30,
2017
 

Net cash provided by operating activities

   $ 63,122  

Net cash used in investing activities

   $ (12,599,247

Net cash provided by financing activities

   $ 12,947,577  

 

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Compensation Paid to Our Advisor and Our Dealer Manager

The following table summarizes fees and expenses incurred to our Advisor and our dealer manager by the Company for the nine months ended September 30, 2017 and for the period February 2, 2016 through December 31, 2016:

 

     Financial Statement
Location
     Due to related
parties as of
December 31,
2016
     Nine months ended
September 30, 2017
     Due to related
parties as of
September 30,
2017
 

Type of Fee or Reimbursement

         Incurred      Paid     

Management Fees

              

Asset management fees

     Management fees      $ —        $ 30,101      $ —        $ 30,101  

Property management and oversight fees

     Management fees        —          1,673        —          1,673  

Organization, Offering and Operating Expense Reimbursements

              

Operating expenses

    

General and
administrative
expenses
 
 
 
     —          813,819        —          813,819  

Organization expenses

    

General and
administrative
expenses
 
 
 
     —          1,690        —          1,690  

Offering costs

    
Additional
paid-in capital
 
 
     —          92,745        —          92,745  

Commissions and Fees

              

Selling commissions and dealer manager fees, net

    


Additional
paid-in capital

 
 
     —          222,070        222,070        —    

Distribution fees

    
Additional
paid-in capital
 
 
     —          78,843        544        78,299  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

      $ —        $ 1,240,941      $ 222,614      $ 1,018,327  
     

 

 

    

 

 

    

 

 

    

 

 

 

Net Asset Value

On November 8, 2017 our board of directors approved an estimated net asset value as of September 30, 2017 of $24.89 per share for Class A Shares and Class I Shares and $24.88 per share for Class T Shares. The calculation of our estimated net asset value was performed by Robert A. Stanger & Co., Inc., our independent valuation firm, in accordance with the procedures described in the “Net Asset Value Calculation and Valuation Procedures” section of our prospectus. Although our independent valuation firm performs the calculation of our estimated net asset value, our board of directors is solely responsible for the determination of our estimated net asset value.

The determination of NAV involves a number of assumptions and judgments, including estimates of the Advisor’s interest in disposition proceeds (if any). These assumptions and judgments may prove to be inaccurate. There can be no assurance that a stockholder would realize $24.89 per share of Class A and I common stock or $24.88 for Class T common stock if the Company were to liquidate or engage in another type of liquidity event today. In particular, the Company’s September 30, 2017 NAV is not based on a full appraisal of the fair market value of the Company’s real estate portfolio at that date and does not consider fees or expenses that may be incurred in providing a liquidity event. We believe the methodology of determining the Company’s NAV conforms to the Investment Program Association’s Practice Guideline for Valuations of Publicly Registered Non-Listed REITs (April 2013) and is prepared in accordance with the procedure described in the “Net Asset Value Calculation and Valuation Procedures” section of the Company’s prospectus. In addition, the Company’s board of directors periodically reviews the Company’s NAV policies and procedures.

 

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The purchase price per share for each class of the Company’s common stock will generally equal the prior quarter’s NAV per share, as determined quarterly, plus applicable selling commissions and dealer manager fees. The NAV for each class of shares is based on the value of the Company’s assets and the deduction of any liabilities, and any distribution fees applicable to such class of shares.

The following table provides a breakdown of the major components of the Company’s NAV:

 

Components of NAV

   September 30,
2017
 

Investment in real estate

   $ 7,936,508  

Investment in real estate-related assets

     5,805,102  

Cash and cash equivalents

     612,453  

Other assets

     452,795  

Debt obligations

     (4,500,000

Due to related parties

     (845,593

Accounts payable and other liabilities

     (218,702

Distribution fee payable the following month(1)

     (942

Sponsor Support repayment / special unit holder interest in liquidation

     —    
  

 

 

 

Net Asset Value

   $ 9,241,621  
  

 

 

 

Number of outstanding shares

     371,334  
  

 

 

 

Note:

 

(1) Distribution fee only relates to Class T Shares.

 

NAV Per Share

   Class A
Shares
     Class T
Shares
     Class I
Shares
     Total  

Total Gross Assets at Fair Value

   $ 5,924,513      $ 3,118,606      $ 5,763,739      $ 14,806,858  

Distribution fees due and payable

     —          (942      —          (942

Debt obligations

     (1,800,536      (947,787      (1,751,677      (4,500,000

Due to related parties

     (338,338      (178,098      (329,157      (845,593

Accounts payable and other liabilities

     (87,507      (46,063      (85,132      (218,702
  

 

 

    

 

 

    

 

 

    

 

 

 

Quarterly NAV

   $ 3,698,132      $ 1,945,716      $ 3,597,773      $ 9,241,621  

Number of outstanding shares

     148,578        78,210        144,546        371,334  
  

 

 

    

 

 

    

 

 

    

NAV per share

   $ 24.89      $ 24.88      $ 24.89     
  

 

 

    

 

 

    

 

 

    

The following table reconciles stockholders’ equity per the Company’s consolidated balance sheet to the Company’s NAV:

 

Reconciliation of Stockholders’ Equity to NAV

   September 30,
2017
 

Stockholders’ equity under U.S. GAAP

   $ 7,971,498  

Adjustments:

  

Unrealized appreciation of real estate-related assets

     1,203,571  

Organization and offering costs

     94,435  

Acquisition costs

     (82,739

Deferred financing costs

     (81,936

Accrued distribution fee(1)

     77,357  

Accumulated depreciation and amortization

     59,435  
  

 

 

 

NAV

   $ 9,241,621  
  

 

 

 

Note:

 

(1) Accrued distribution fee only relates to Class T Shares.

 

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The following details the adjustments to reconcile GAAP stockholders’ equity to the Company’s NAV:

Unrealized appreciation of real estate-related assets

Our investments in real estate-related assets are presented at historical cost, including acquisition costs, in our GAAP consolidated financial statements. As such, any increases in the fair market value of our investments in real estate are not included in our GAAP results. For purposes of determining our NAV, our investments in real estate are recorded at fair value.

Organization and offering costs

Our advisor has agreed to pay the Initial O&O costs on our behalf through May 18, 2018, the Escrow Break Anniversary. Such costs will be reimbursed to our advisor, ratably, by us, over 36 months beginning on May 19, 2018, subject to a maximum of 1% of gross offering proceeds of the IPO. Under U.S. GAAP, our reimbursement liability pertaining to the Initial O&O costs is recorded as Due to related parties in our consolidated balance sheet. For NAV, such costs will be recognized as a reduction in NAV as they are reimbursed.

Acquisition costs

We capitalize acquisition costs incurred with the acquisition of its investment in real estate in accordance with GAAP. Such acquisition costs are not included in the value of real estate investments for purposes of determining NAV.

Deferred financing costs

Costs incurred in connection with obtaining financing are capitalized and amortized over the term of the related loan in accordance with GAAP. Such deferred financing costs are not included in the value of debt for purposes of determining NAV.

Accrued distribution fee

Accrued distribution fee represents the accrual for the full cost of the distribution fee for Class T Shares. Under U.S. GAAP we accrued the full cost of the distribution fee as an offering cost at the time it sells the Class T Shares. For purposes of NAV we recognize the distribution fee as a reduction of NAV on a quarterly basis as such fee is paid.

Accumulated depreciation and amortization

We depreciate our investments in real estate and amortizes certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not considered for purposes of determining NAV.

Sensitivity Analysis

Assuming all other factors remain unchanged, the table below presents the estimated increase or decrease to our September 30, 2017 NAV for a change in the going-in capitalization rate used in the DST Properties Appraisal together with a 5% change in the discount rates used to value our long-term debt and the DST Properties Mortgage Debt:

 

Sensitivity Analysis

   Range of NAV (Class A & I)     Range of NAV (Class T)  
     Low     Concluded     High     Low     Concluded     High  

Estimated Per Share NAV

   $ 22.64     $ 24.89     $ 27.10     $ 22.63     $ 24.88     $ 27.09  

Capitalization Rate — DST Properties

     5.78     5.50     5.23     5.78     5.50     5.23

Discount Rate — Long-Term Debt

     4.37     4.16     3.95     4.37     4.16     3.95

Discount Rate — DST Properties Mortgage Debt

     4.94     4.70     4.47     4.94     4.70     4.47

 

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Offering Prices

On November 8, 2017, our board of directors approved new offering prices for our Class A Shares, Class T Shares and Class I Shares. The offering prices in connection with our primary offering are equal to the estimated net asset value for such class of common stock plus applicable upfront selling commissions and dealer manager fees, less applicable support from our sponsor of a portion of selling commissions and dealer manager fees. The offering prices in connection with our DRP are equal to the estimated net asset value for such class of common stock. The offering prices became effective on November 21, 2017.

The offering prices in our primary offering are set forth below:

 

     Offering Price  

Class A Shares

   $ 26.20  

Class T Shares

   $ 25.39

Class I Shares

   $ 24.89  

 

* This amount has been rounded to the nearest whole cent and the actual per share offering price for the Class T Shares is $25.3878.

Independent Valuation Firm

With the approval of our board of directors, including a majority of our independent directors, we engaged Robert A. Stanger & Co., Inc. to serve as our independent valuation firm with respect to the quarterly valuation of our assets and liabilities and the calculation of our estimated net asset value. As such all references in our prospectus to the term “Independent Valuation Firm” shall refer to Robert A. Stanger & Co., Inc. In addition, the following paragraph is added under the heading “Experts” in our prospectus:

“The statements included in our prospectus in the section titled “Net Asset Value Calculation and Valuation Procedures” relating to the role of our independent valuation firm, have been reviewed by Robert A. Stanger & Co., Inc., an independent valuation firm, and are included in our prospectus given the authority of such firm as experts in property valuations and appraisals.”

Acquisitions

CF Net Lease Portfolio IV DST Interests

On September 1, 2017, we began acquiring, through our operating partnership, beneficial interests, or the Interests, in CF Net Lease Portfolio IV DST, or the DST, a Delaware statutory trust. As of January 5, 2018, we have purchased Interests representing approximately 72.07% of the DST for an aggregate purchase price of $9.98 million. Prior to the acquisition of the Interests, the DST was an indirect wholly-owned subsidiary of our sponsor, Cantor Fitzgerald Investors, LLC, or CFI. Each Interest represents a 0.0072214% ownership of the DST.

On November 15, 2016, the DST acquired the fee simple interest in seven retail properties, or the DST Properties, for a total purchase price of $36,317,830, including related acquisition expenses. The purchase price was comprised of $13,822,646 in equity and $22,495,184 in proceeds from the DST Loan (as defined below). The acquisition of the Interests by us has been structured such that the total purchase price for 100% of the Interests equals the equity portion of the purchase price paid by CFI and its affiliates to acquire the DST Properties plus $25,000 (reflecting the DST’s current cash reserves).

We acquired the Interests in a private placement. Cantor Fitzgerald & Co. acted as a broker dealer in connection with the private placement, but did not receive any compensation in connection therewith. The proceeds from the purchase of the Interests were paid by the DST to an affiliate of CFI. The acquisition of the

 

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Interests and the related transactions were unanimously approved by our board of directors, including our independent directors. We funded the acquisition of the Interests with cash from this offering. We intend, but are not obligated, to purchase 100% of the Interests.

DST Properties

The DST acquired the DST Properties from Walgreen Co., or Walgreens, a subsidiary of Walgreens Boots Alliance Inc. (NASDAQ: WBA) in a sale-leaseback transaction.

The DST Properties are 100% leased to Walgreens. Walgreens is rated investment grade by Moody’s and Standard & Poor’s. In addition to base rent, the leases require the tenant to pay substantially all operating expenses, including repairs and maintenance as well as real estate taxes.

The lease for each DST Property has an initial term of 15 years commencing on November 15, 2016, and expiring on November 30, 2031. Each lease will automatically renew for 12 consecutive periods of five years each unless Walgreens notifies the lessor in writing on or before the date that is 12 months prior to the commencement of any such renewal term that Walgreens does not wish to renew the applicable lease. Separate and apart from the renewal options, for the initial term or any renewal term of each applicable lease, Walgreens may extend the term until the following January 31st by providing the lessor with written notice no later than four months prior to the end of the then-current term. Walgreens will pay fixed base rent for the first five lease years with 5.0% increases over the preceding lease year’s base rent at five year intervals for the first 35 lease years. Commencing on the 36th lease year and every five years thereafter, base rent will be set at fair market value rent.

The following table provides information about the DST Properties relating to their location, rentable square feet, and annualized rental income.

 

Location

   Rentable Square Feet        Annualized Rental Income    
(first 5 lease years)
 

Allendale, Michigan

   14,695    $ 343,175      ($ 23.35/sq. ft.)  

Cincinnati, Ohio

   14,815    $ 317,138      ($ 21.41/sq. ft.)  

Edmond, Oklahoma

   14,471    $ 291,424      ($ 20.14/sq. ft.)  

Lawton, Oklahoma

   15,050    $ 304,095      ($ 20.21/sq. ft.)  

Marquette, Michigan

   14,990    $ 333,116      ($ 22.22/sq. ft.)  

McAlester, Oklahoma

   14,796    $ 288,528      ($ 19.50/sq. ft.)  

Russellville, Arkansas

   14,720    $ 318,482      ($ 21.64/sq. ft.)  

Total

   103,537    $ 2,195,958      ($ 21.21/sq. ft.)  

DST Loan

On November 15, 2016, in connection with the purchase of the DST Properties, the DST entered into a loan agreement, or the DST Loan, with Citigroup Global Markets Realty Corp. with an outstanding principal amount of $22,495,184. The DST Loan provides for monthly interest payments and bears interest at an initial fixed rate of 4.593% per annum (based on a 360-day year). The DST Loan matures on December 1, 2031 and may be prepaid (a) subject to customary yield maintenance provisions on or after January 2, 2019 and (b) without penalty on or after September 2, 2026; provided that in each case the DST Loan may be prepaid in whole, but not in part. The anticipated repayment date of the DST Loan is December 1, 2026, or the Anticipated Repayment Date. Commencing on September 1, 2026, excess cash flow generated by the DST Properties will be held as additional security for the DST Loan. To the extent the DST Loan has not been repaid by the Anticipated Repayment Date, excess cash flow from the DST Properties will be applied to the repayment of the outstanding principal and the DST Loan will bear interest at an increased rate of three percent per annum plus the greater of (a) 4.593% and (b) the ten year swap yield as of the first business day after the Anticipated Repayment Date. The DST Loan contains customary events of default. As is customary in such financings, if an event of default occurs under the DST Loan, the lender may accelerate the repayment of the outstanding principal amount and exercise

 

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other remedies subject, in certain instances, to the expiration of an applicable cure period. CF Real Estate Holdings, LLC, or the Guarantor, an affiliate of CFI, has guaranteed (x) any losses that the lender may incur as a result of the occurrence of certain bad acts of the borrower and (y) the repayment of the DST Loan upon the occurrence of certain other significant events, including bankruptcy. Additionally, the Guarantor has agreed to indemnify the lender against certain potential environmental liabilities.

Trust Manager

The DST is managed by its trust manager, CF Net Lease Portfolio Manager IV, LLC, or the Trust Manager, and owners of Interests have no voting rights with respect to the DST. In connection with our acquisition of the Interests, CF DST Holdings, LLC, a wholly-owned subsidiary of CFI, intends to transfer all of the equity interests of the Trust Manager to us, pending lender approval. Following the transfer, we will manage the DST, subject to certain limited rights to be retained by CFI so long as it or its subsidiaries own any Interests and so long as the Guarantor is a guarantor with respect to the DST Loan.

Financial Statements

On December 26, 2017, we filed with the Securities and Exchange Commission an 8-K/A containing certain audited financial information with respect to the DST Properties, which is included in Annex A to this Supplement, and certain pro forma financial information with respect to the DST Properties, which is included in Annex B to this Supplement.

In addition, the following paragraph is added under the heading “Experts” in our prospectus:

“The statement of revenues and certain expenses of CF Net Lease Portfolio IV DST for the period from November 15, 2016 (commencement) through December 31, 2016, presented in accordance with accounting principles generally accepted in the United States of America and for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933 of the Securities and Exchange Commission as described in Note 2 to the financial statements, and is not intended to be a complete presentation of the CF Net Lease Portfolio IV DST’s revenues and expenses, have been audited by EisnerAmper LLP, independent registered public accounting firm, as stated in their report which is incorporated herein. Such financial statements have been incorporated herein in reliance on the report of such firm given upon their authority as experts in accounting and auditing.”

Walgreens Store—Grand Rapids, Michigan

On July 11, 2017, we acquired, through a wholly-owned subsidiary of our operating partnership, the fee simple interest in a retail property, or the GR Property, located in Grand Rapids, MI at a contract purchase price of $7,936,508.00, exclusive of closing costs. We acquired the GR Property from Barnes Development Walker, LLC, an unaffiliated third party.

The GR Property is 100% leased to Walgreens, a subsidiary of Walgreens Boots Alliance Inc. (NASDAQ: WBA). Walgreens is rated investment grade by Moody’s and Standards & Poor’s. The lease is net whereby the tenant is required to pay substantially all operating expenses, including all costs to maintain and repair the roof and structure of the building, in addition to base rent. As of the date of the acquisition of the GR Property, there were four pharmacies within a two mile radius of the GR Property, which is generally considered the primary trade area for a drug store retailer.

 

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The following table provides information about the GR Property relating to the lease commencement and termination dates, rentable square feet, annualized rental income, rental escalations and tenant termination options.

 

Lease
Commencement
Date

 

Lease

Termination

Date

 

Rentable

Square Feet

 

Annualized

Rental Income

 

Rental

Escalations

 

Tenant

Termination
Options

July 30, 2007   July 31, 2082   14,552  

$500,000

($34.36 per

square foot)

  None  

On July 31, 2032

and every

5 years thereafter

We funded the acquisition of the GR Property using proceeds from our offering and a loan from UBS AG described in the “Information Regarding our Borrowings” section of this Supplement.

The GR Property will be managed by RDN Property Management, LLC, an affiliate of our sponsor, pursuant to a property management agreement.

Real estate taxes assessed with respect to the GR Property for 2016 were approximately $46,676.11. Real estate taxes are reimbursed by the tenants under the terms of the lease. The federal tax basis of the property will approximate the purchase price. We will calculate depreciation expense for federal income tax purposes by using the straight-line method. For federal income tax purposes, we depreciate buildings and improvements based upon estimated useful lives of 40 years and furniture, fixtures, equipment and site improvements for 5 to 20 years. We believe that the GR Property is adequately covered by insurance.

Information Regarding our Borrowings

UBS Loan

On July 11, 2017, in connection with the purchase of the GR Property, a wholly-owned subsidiary of our operating partnership entered into a loan agreement, or the GR Loan, with UBS AG with an outstanding principal amount of $4,500,000. The GR Loan provides for monthly interest payments and bears interest at an initial fixed rate of 4.1064% per annum. The GR Loan matures on June 30, 2032 and may be prepaid (a) subject to customary yield maintenance provisions on or after August 6, 2018 and (b) without penalty on or after April 6, 2027; provided that in each case the GR Loan may be prepaid in whole, but not in part. The anticipated repayment date of the GR Loan is July 6, 2027 (the “Anticipated Repayment Date”). Commencing on January 6, 2027, excess cash flow generated by the GR Property will be held as additional security for the GR Loan. To the extent the GR Loan has not been repaid by the Anticipated Repayment Date, excess cash flow from the GR Property will be applied to the repayment of the outstanding principal and the GR Loan will bear interest at an increased rate of three percent per annum plus the greater of (a) 4.1064% and (b) the ten year swap yield as of the first business day after the Anticipated Repayment Date. The GR Loan contains customary events of default. As is customary in such financings, if an event of default occurs under the GR Loan, the lender may accelerate the repayment of the outstanding principal amount and exercise other remedies subject, in certain instances, to the expiration of an applicable cure period. CF Real Estate Holdings, LLC, or the Guarantor, an affiliate of our sponsor, has guaranteed (x) any losses that the lender may incur as a result of the occurrence of certain bad acts of the borrower and (y) the repayment of the GR Loan upon the occurrence of certain other significant events, including bankruptcy. Additionally, the Guarantor has agreed to indemnify the lender against certain environmental liabilities.

Update to Suitability Standards

The following suitability standard is hereby supersedes and replaces the suitability standard for Massachusetts investors in the “Suitability Standards” section of our prospectus:

 

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MassachusettsMassachusetts investors may not invest more than 10% of their liquid net worth in this and other illiquid direct participation programs. Liquid net worth is that portion of an investor’s net worth (assets minus liabilities) that is comprised of cash, cash equivalents and readily marketable securities.

Update to Market Opportunity

The following disclosure supersedes and replaces the disclosure under the heading “Market Opportunity” on page 123 of our prospectus:

MARKET OPPORTUNITY

Unless otherwise indicated, all information in this Market Opportunity section is comprised of the market study prepared by Rosen Consulting Group, or RCG, a national commercial real estate advisory company in April 2017. Forecasts prepared by RCG are based on data (including third-party data), models and experience of various professionals, and are based on various assumptions, all of which are subject to change without notice. There is no assurance any of the forecasts will be achieved. We believe the data utilized by RCG that is contained in this section is reliable, but we have not independently verified this information. The statements contained in this section are based on current expectations and beliefs concerning future developments and their potential effects on us and speak only as of the date of such statements.

Current Market Conditions

The commercial real estate market has steadily recovered from the recent recession. The economic expansion of the past few years provided a boost to demand for most commercial real estate property sectors. While new construction accelerated, particularly for multifamily product, occupancy rates and achievable rents increased for commercial real estate in many markets across the country. RCG expects that the improved operating conditions will continue to drive commercial real estate investment activity.

The moderate level of job creation continued throughout the past several years. In 2016, national employment increased by more than 2.2 million jobs. In 2015, national employment expanded by more than 2.7 million jobs, an increase of more than 1.9%. From 2011 to 2016, nearly 14.5 million jobs were created across the country. The improved business climate drove corporate expansions and absorption of commercial real estate space, while improved job prospects led many households to unbundle from shared living situations and occupy rental apartments as evidenced by approximately 1.3 million new household formations in 2016, according to data from the Census Bureau and RCG.

U.S. Household Formation

 

LOGO

 

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Unemployment Rate by Country

 

LOGO

Note: Credit rating in parentheses.

Economic conditions in Europe improved slightly, primarily in northern and western Europe. Monetary stimulus programs continued to provide capital liquidity to the European market, and the unemployment rate in several countries began to decrease in the past year.

Investment volume accelerated in recent years and should remain elevated through the near term. Aggregate commercial real estate transaction volume increased to $546.3 billion in 2015, an increase of 26.2% from the previous year, according to Real Capital Analytics. In 2016, economic volatility helped to moderate real estate acquisition activity to $493.7 billion. From 2012 to 2015, transaction volume increased at a steady pace, averaging approximately 24% per year. The initial recovery in investment volume focused on core assets in primary markets, but broadened in the past several quarters with increased activity in secondary and tertiary markets. RCG believes that commercial real estate investment activity should continue to improve through the near term as commercial real estate operating conditions remain favorable.

 

S-12


U.S. Commercial Real Estate Transaction Volume

 

LOGO

Operating conditions continued to improve for most commercial real estate sectors. With tenants occupying additional space or apartment units, the average rent continued to increase. The average rent increased for most commercial property sectors since 2012, led by the apartment sector where the average rent began to recover in 2010. Tenant demand has steadily risen in cities throughout the country and the absorption of vacant space continues to drive moderate rent growth.

 

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U.S. Change in Asking Rent

 

LOGO

U.S. Cap Rates

 

LOGO

The improving commercial real estate investment volume combined with strengthened operating conditions have positively impacted commercial real estate investment returns. In 2016, the National Council of Real Estate Investment Fiduciaries, or NCREIF, property index increased by 8.0% year-over-year. From 2010 through 2015, the NCREIF index returns averaged 12.3% per year. At the end of 2016, the value of publicly listed real estate in the United States was 10% below the previous peak. In Europe, real estate investment has yet to fully recover from the previous downturn. The value of publicly listed real estate in Europe remains approximately 48% below the previous peak.

 

S-14


NCREIF Index Returns

 

LOGO

FTSE EPRA/NAREIT Index Performance

 

LOGO

Net Lease Real Estate

Net lease real estate is a uniquely structured investment that minimizes involvement by the property owner for typical property management responsibilities. In net leased properties, tenants typically assume the majority or all of the expense of property taxes, insurance, maintenance, sometimes including capital expenditures, and utilities, in addition to paying rent. For operationally significant and other corporate locations, typical net leases can have initial terms of ten years, and sometimes longer, with multiple options to extend the lease.

 

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Comparatively, multitenant commercial real estate properties under gross leases often have average lease terms between five and ten years with shorter or fewer options to extend. The long-term leases in net lease assets can eliminate or minimize costs associated with re-tenanting a property. The lengthy lease terms combined with rent structure can provide a stable net income to an owner and minimize the effects of inflation on operating expenses and economic downturns on property investments, but there can be no assurance that this will be the case.

Beyond the minimal operating expenses and potential for stable income stream, net lease real estate occupied by credit tenants is similar to a corporate bond. The tenant rent payments are contractually established in the lease, including escalations during the initial term and/or during subsequent renewal periods. The net lease real estate investor may also be better able to assess the risk of a particular tenant through a corporate credit history or rating, similar to the process in which a corporate bond investor may be able to assess the creditworthiness of the issuer. Furthermore, if the tenant relocates or permanently goes out of business, the real estate asset may hold some value, and possibly a substantial value depending upon the location and quality of the property. Finally, the tax benefits currently afforded real estate investors flows through to the owner of the property, and not the tenant, which further benefits the owner of net lease real estate.

Global Commercial Real Estate—$29 Trillion

 

LOGO

Size of the Net Lease Market

Ownership of net lease real estate remains fragmented and the size of the market is constantly evolving. The universe of net lease properties changes as owner/occupiers sell or buy buildings and occupiers lease space. While the exact size of the net lease market is difficult to determine, as a proxy for the potential size of the net lease market, RCG estimates that real estate owned by corporate owner/occupiers ranges in value between $1.5 trillion and more than $2.0 trillion. Additionally, as corporate occupiers open new locations, including retail storefronts, distribution centers and corporate offices, the pool of net lease properties can expand. Highlighting this expansionary trend, in the most recent fiscal years, respectively, national pharmacies opened approximately 300 new stores, national auto parts retailers opened more than 500 locations, and national dollar stores opened nearly 1,300 new stores, each potentially increasing the pool of investable net lease properties. The large amount of property owned and occupied by corporate tenants, combined with the ability for these firms to monetize real assets to fund business operations, may indicate that there is a substantial investable pool of net lease properties.

North America, and primarily the United States, accounts for the majority share of the approximately $29 trillion global commercial real estate market, according to Savills. Europe accounts for 28% of the global

 

S-16


value of commercial real estate. The United States and European Union comprise $34.2 trillion of global GDP, or 46%. Further highlighting the significant economic components in the United States and Europe, these two regions account for 266 of the Fortune Global 500. The large size of the real estate market in the United States and Europe, as well as the large share of global economic activity, highlight the deep pool of potential investment opportunities for operationally significant net lease assets in these regions.

Global GDP

 

LOGO

Access to debt capital for corporate entities vary based on fluctuations in financial market activity. Following the recent recession, corporate access to debt was severely limited and corporate bond issuance fell by nearly two-thirds in 2008 from the prior three-year average, and remains 41% lower than the pre-recession peak. While some of the limitations on corporate financing have eased, access to capital may still be limited for some firms and a large share of companies continue to monetize owned real estate assets through sale-leaseback transactions. Even as interest rates are low currently, the regulatory environment for commercial bank lending and somewhat restrictive conditions for other forms of corporate finance may persist. These financing constraints for businesses should drive more firms to conduct sale-leasebacks of operationally significant facilities. As these firms monetize assets, the investable universe of net lease real estate may continue to expand, although there can be no assurance that this will be the case.

 

S-17


U.S. Corporate Bond Issuance

 

LOGO

The contractual in-place rents of net lease real estate typically provide greater stability of rental income than multitenant real estate investments. During the recent recession, the average rent in net lease properties increased the greatest amount compared with other real estate sectors, reflecting the potential stability provided by net lease real estate investments.

U.S. Average Change in Rent

 

LOGO

The unique characteristics of net lease real estate, namely the fixed rental income, extended lease terms and minimal property management requirements, may allow investors to minimize volatility and vacancy risk associated with other commercial real estate investments. The stability, when combined with high quality assets occupied by headquarters or operationally significant locations of credit quality tenants, can lead to attractive real estate investments through market cycles.

 

S-18


Similar to the difficulties in assessing the absolute size of the investable universe of net lease real estate, it is difficult to assess the aggregate volume of investment in net lease real estate assets. As a proxy, transaction volume of properties occupied by a single tenant can be a useful indicator of activity as a large share of these properties are net lease assets. In 2016, single tenant transaction volume reached more than $56 billion. In the previous two years, activity totaled more than $117.2 billion. The income stability combined with expected appreciation of underlying asset values continued to drive a high level of investment in the net lease real estate segment.

U.S. Single Tenant Transaction Volume

 

LOGO

Relative to sovereign and corporate bond yields, the spread to single tenant cap rates remained relatively stable near or above the long-term average even as the average cap rate fell in recent years. By December 2016, the single tenant cap rate spread to BBB corporate bond yields narrowed to 205 basis points, wider than the average since 2001 of 173 basis points. Similarly, the cap rate spread to the 10-year Treasury yield narrowed to 391 basis points, compared to the long-term average since 2001 of 408 basis points. As single tenant cap rates are indicative of trends in the net lease segment, RCG believes that net lease properties may provide opportunities for more stable income than some corporate bonds while priced at higher spreads.

 

S-19


U.S. Single Tenant Cap Rate Spread to 10-Year Treasury Bond

 

LOGO

U.S. Single Tenant Cap Rate Spread to BBB Corporate Bond

 

LOGO

Update to Conflicts of Interest

The following disclosure shall be included under the section “Conflicts of Interest—Charter Provisions and Other Policies Relating to Conflicts of Interest” on page 102 of our prospectus:

Corporate Opportunities. Our board of directors has adopted a resolution that provides, subject to certain exceptions, that none of the Cantor Companies or their respective affiliates, our directors or any person our directors control will be required to refrain directly or indirectly from engaging in any business opportunities, including any business opportunities in the same or similar business activities or lines of business in which we or any of our affiliates may from time to time be engaged or propose to engage, or from competing with us, and that

 

S-20


we renounce any interest or expectancy in, or in being offered an opportunity to participate in, any such business opportunities, unless offered to a person solely in his or her capacity as one of our directors or officers and intended exclusively for us or any of our subsidiaries.

Update to Investment Objectives and Criteria

The following disclosure supersedes and replaces the seventh bullet under the section “Investment Objectives and Criteria—Charter-imposed Investment Limitations” on page 119 of our prospectus:

 

    acquire equity securities unless a majority of the board of directors (including a majority of our independent directors) not otherwise interested in the transaction approves such investment as being fair, competitive and commercially reasonable, provided that this limitation does not apply to (i) acquisitions effected through the purchase of all of the equity securities of an existing entity or (ii) the investment in wholly owned subsidiaries of ours;

Update to Description of Shares

The following disclosure supersedes and replaces the first paragraph under the section “Description of Shares—Meetings and Special Voting Requirements” on page 176 of our prospectus:

An annual meeting of our stockholders will be held each year, at least 30 days after delivery of our annual report. Special meetings of stockholders may be called by a majority of our directors, a majority of our independent directors, our chairman of the board, our chief executive officer or our president and must be called by our secretary to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast at least 10% of the votes entitled to be cast on such matter at the special meeting. Upon receipt of a written request of such stockholders stating the purpose of the special meeting, our secretary will provide all of our stockholders written notice of the meeting and the purpose of such meeting within ten days after receipt of such request. The meeting must be held not less than 15 days or more than 60 days after the distribution of the notice of the meeting, at a time and place specified in the request, or if none is specified, at a time and place convenient to stockholders. The presence in person or by proxy of stockholders entitled to cast 50% of all the votes entitled to be cast at any stockholder meeting constitutes a quorum. Unless otherwise provided by the Maryland General Corporation Law or our charter, the affirmative vote of a majority of all votes cast is necessary to take stockholder action. With respect to the election of directors, each candidate nominated for election to the board of directors must receive a majority of the votes present, in person or by proxy, in order to be elected. Therefore, if a nominee receives fewer “for” votes than “withhold” votes in an election, then the nominee will not be elected.

Update to Management Compensation Tables

The following disclosure supersedes and replaces the second to last paragraph in the “Liquidation/Listing Stage—Special Units – Rodin Global Property Trust OP Holdings, LLC” section of the compensation table which appears in both the section titled “Prospectus Summary—Compensation to Our Advisor and its Affiliates” on page 14 and the section titled “Management Compensation” on page 96 of our prospectus:

In addition, prior to any such redemption, Rodin Global Property Trust OP Holdings, LLC as the holder of special units, may be entitled to receive distributions equal to 15% of our net cash flows, whether from the disposition of assets or refinancings, but only after (i) our stockholders have received in the aggregate, cumulative distributions equal to their invested capital plus a 6% cumulative, non-compounded annual pre-tax return on such invested capital and (ii) our sponsor or its affiliates have received reimbursement for the payment of certain selling commissions and dealer manager fees.

 

S-21


Update to Estimated Use of Proceeds

The following disclosure supersedes and replaces footnote number five of the table for the use of proceeds with respect to Class T Shares under the section “Estimated Use of Proceeds” on page 71 of our prospectus:

 

(5) In addition to the selling commissions and dealer manager fees, we will pay our dealer manager distribution fees in an annual amount equal to 1.0% of the gross offering price per share (or, if we are no longer offering shares in a public offering, the most recently published per share NAV of Class T Shares) calculated on outstanding Class T Shares purchased in our primary offering. The distribution fee will accrue daily and be paid monthly in arrears. The distribution fees are ongoing fees that are not paid at the time of purchase. We will not pay any distribution fees on shares sold pursuant to our distribution reinvestment plan. We will cease paying distribution fees with respect to each Class T Share on the earliest to occur of the following: (i) a listing of shares of our common stock on a national securities exchange; (ii) such Class T Share is no longer being outstanding; (iii) the dealer manager’s determination that total underwriting compensation from all sources, including dealer manager fees, selling commissions (including sponsor support of 1.0% of selling commissions and all of dealer manager fees), distribution fees and any other underwriting compensation paid to participating broker dealers with respect to all Class A Shares, Class T Shares and Class I Shares would be in excess of 10% of the gross proceeds of our primary offering; or (iv) the end of the month in which the transfer agent, on our behalf, determines that total underwriting compensation with respect to the Class T Shares held by a stockholder within his or her particular account, including dealer manager fees, sales commissions, and distribution fees, would be in excess of 10% of the total gross offering price at the time of the investment in the primary Class T Shares held in such account. We cannot predict if or when this will occur. All Class T Shares will automatically convert into Class A Shares upon a listing of shares of our common stock on a national securities exchange. With respect to item (iv) above, all of the Class T Shares held in a stockholder’s account will automatically convert into Class A Shares as of the last calendar day of the month in which the transfer agent determines that the 10% limit on a particular Class T Share account was reached. With respect to the conversion of Class T Shares into Class A Shares, each Class T Share will convert into an equivalent number of Class A Shares based on the respective net asset value per share for each class. We currently expect that the conversion will be on a one-for-one basis, as we expect the net asset value per share of each Class A Share and Class T Share to be the same, except in the unlikely event that the distribution fees payable by us exceed the amount otherwise available for distribution to holders of Class T Shares in a particular period (prior to the deduction of the distribution fees), in which case the excess will be accrued as a reduction to the net asset value per share of each Class T Share. Although we cannot predict the length of time over which this fee will be paid due to potential changes in the estimated net asset value of our Class T Shares, this fee would be paid over approximately 4 years from the date of purchase, assuming a constant per share offering price or estimated net asset value, as applicable, of $25.51 per Class T Share. See “Description of Shares.” If $1.0 billion in shares (consisting of $400 million in Class A Shares, at $26.32 per share, $500 million in Class T Shares, at $25.51 per share and $100 million in Class I Shares, at $25.00 per share) is sold in this offering, then the maximum amount of distribution fees payable to our dealer manager is estimated to be $20 million, before the 10% underwriting compensation limit is reached. The distributions fees are not intended to be a use of offering proceeds, although there can be no assurance that this will be the case. Accordingly, distribution fees are not included in the above table.

Quarterly Reports

On November 14, 2017, we filed with the Securities and Exchange Commission our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, a copy of which is attached to this Supplement as Annex C (without exhibits). On August 11, 2017, we filed with the Securities and Exchange Commission our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, a copy of which is attached to this Supplement as Annex D (without exhibits). On May 12, 2017, we filed with the Securities and Exchange Commission our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, a copy of which is attached to this Supplement as Annex E (without exhibits).

 

S-22


Annex A


CF NET LEASE PORTFOLIO IV DST

INDEX

 

     Page  

Report of Independent Auditors

     1  

Statements of Revenues and Certain Expenses for the Nine Months Ended September 30, 2017 (unaudited)

and for the Period from November  15, 2016 (commencement) through December 31, 2016

     2  

Notes to Statements of Revenues and Certain Expenses

     3-4  


INDEPENDENT AUDITORS’ REPORT

To the Members of CF Net Lease Portfolio IV DST

Report on the Financial Statements

We have audited the accompanying financial statements of CF Net Lease Portfolio IV DST (the “Company”), which comprise the statement of revenues and certain expenses for the period from November 15, 2016 (commencement) through December 31, 2016, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America and for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933 of the Securities and Exchange Commission as described in Note 2 to the accompanying financial statements, and is not intended to be a complete presentation of the Company’s revenues and expenses; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the revenues and certain expenses of CF Net Lease Portfolio IV DST for the period from November 15, 2016 (commencement) through December 31, 2016 in accordance with accounting principles generally accepted in the United States of America and for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933 of the Securities and Exchange Commission as described in Note 2 to the accompanying financial statements, and is not intended to be a complete presentation of the Company’s revenues and expenses.

/s/ EisnerAmper LLP

EISNERAMPER LLP

New York, New York

December 19, 2017


CF NET LEASE PORTFOLIO IV DST

STATEMENTS OF REVENUES AND CERTAIN EXPENSES

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED) AND FOR THE

PERIOD FROM NOVEMBER 15, 2016 (COMMENCEMENT) THROUGH DECEMBER 31, 2016

 

     For the Nine Months
Ended September 30, 2017

(unaudited)
     For the Period from
November 15, 2016
(commencement)
through December 31,
2016
 

Revenues

     

Rental revenue

   $ 1,742,812      $ 296,923  
  

 

 

    

 

 

 

Total revenues

     1,742,812        296,923  
  

 

 

    

 

 

 

Certain Expenses:

     

Interest expense

     783,513        134,891  
  

 

 

    

 

 

 

Total certain expenses

     783,513        134,891  
  

 

 

    

 

 

 

Revenues in excess of certain expenses

   $ 959,299      $ 162,032  
  

 

 

    

 

 

 

 

 

 

 

See accompanying notes to Statements of Revenues and Certain Expenses

 

2


CF Net Lease Portfolio IV DST

Notes to Statements of Revenues and Certain Expenses

 

1. Organization

On November 15, 2016 (commencement), CF Net Lease Portfolio IV DST (the “DST”) purchased seven retail properties (the “DST Properties”) located primarily in the Midwest United States. The DST Properties have been leased-back to Walgreen Co. (“Walgreens”) pursuant to new 15-year triple-net leases. Each lease will automatically renew for 12 consecutive periods of five years each unless Walgreens notifies the lessor in writing on or before the date that is 12 months prior to the commencement of any such renewal term that Walgreens does not wish to renew the applicable lease.

The following table provides information about the DST Properties relating to their location, rentable square feet, and annualized rental income.

 

Location

   Rentable Square Feet      Annualized Rental Income
(first 5 lease years)
 

Allendale, Michigan

     14,695      $ 343,175  

Cincinnati, Ohio

     14,815      $ 317,138  

Edmond, Oklahoma

     14,471      $ 291,424  

Lawton, Oklahoma

     15,050      $ 304,095  

Marquette, Michigan

     14,990      $ 333,116  

McAlester, Oklahoma

     14,796      $ 288,528  

Russellville, Arkansas

     14,720      $ 318,482  
  

 

 

    

 

 

 

Total

     103,537      $ 2,195,958  
  

 

 

    

 

 

 

On September 1, 2017, the DST sold its first beneficial interest to an operating partnership of Rodin Global Property Trust, Inc. (“Rodin”), a related party. As of September 30, 2017, the DST sold 4,580 beneficial interests (the “Interests”) for a cumulative price of $4,580,000. Prior to the sale of the Interests, the DST was an indirect wholly-owned subsidiary of Rodin’s sponsor, Cantor Fitzgerald Investors, LLC (“CFI”). Each Interest represents a 0.0072214% ownership of the DST and the Interests sold to Rodin represented approximately 33.07% of the DST as of September 30, 2017.

2. Basis of Presentation

The accompanying statements of revenues and certain expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statements are not representative of the actual operations for the periods presented as revenues and certain expenses, which may not be directly attributable to the revenues and expenses expected to be incurred in the future operations of the DST, have been excluded. Such items include interest income, depreciation, amortization, management fees, and insurance expense.

3. Summary of Significant Accounting Policies

Revenue Recognition

The DST recognizes rental revenue from Walgreens on a straight-line basis over the lease term when collectability is reasonably assured and Walgreens has taken possession or controls the physical use of the leased asset.

Interest Expense

The DST recognizes interest expense associated with the $22,495,184 mortgage note payable which has an interest rate of 4.593%.

 

3


CF Net Lease Portfolio IV DST

Notes to Statements of Revenues and Certain Expenses

 

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenues and certain expenses during the reporting periods to present the statements of revenues and certain expenses in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Actual results could differ from those estimates.

4. Future Minimum Rents

The estimated future minimum rents the DST expects to receive from the DST Properties under noncancelable operating leases, excluding renewal options, for each of the next five years and thereafter through the end of the primary term, as of September 30, 2017 (unaudited) is as follows:

 

Year

   Future Minimum Rents  

2017 (remaining)

   $ 548,990  

2018

     2,195,958  

2019

     2,195,958  

2020

     2,195,958  

2021

     2,209,683  

Thereafter

     23,582,122  
  

 

 

 

Total

   $ 32,928,669  
  

 

 

 

Under the triple net lease arrangement, Walgreens is responsible for all real estate tax payments, operating expenses and other related costs. These operating expenses are excluded from the amounts above.

5. Tenant Concentrations

For the Nine Months Ended September 30, 2017 (unaudited), and for the Period from November 15, 2016 (commencement) through December 31, 2016, one tenant, Walgreens, represented 100% of the DST’s rental revenues.

6. Commitments and Contingencies

The DST is presently not subject to material litigation, nor, to management’s knowledge, is any material litigation threatened against the DST.

7. Interim Unaudited Combined Statement of Revenues and Certain Expenses

The Statement of Revenues and Certain Expenses for the nine months ended September 30, 2017 is unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the Statement of Revenues and Certain Expenses for this interim period have been included. The results of the interim period are not necessarily indicative of the results to be obtained for a full fiscal year.

8. Subsequent Events

The DST has evaluated all events or transactions through December 19, 2017, the date the financial statements were available to be issued.

Subsequent to September 30, 2017, the DST has sold 4,800 additional Interests, for a cumulative price of $4,800,000, to a related party, Rodin, and as of December 19, 2017, the DST has a total of 9,380 Interests outstanding owned by Rodin.

 

4


Annex B


The following pro forma condensed consolidated financial statements have been prepared to disclose certain specific information with regards to a real estate acquisition and the related sale of shares in the Offering (defined as the initial public offering and distribution reinvestment program, collectively, the “Offering”) completed by Rodin Global Property Trust, Inc. (the “Company”). The pro forma financial statements have been compiled and presented in accordance with Article 11 of Securities and Exchange Commission (the “SEC”) Regulation S-X.

The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Company’s Registration Statement on Form S-11 filed with the SEC on March 21, 2017 and the audited financial statements for the Company contained therein and the Company’s Quarterly Report on Form 10-Q for the Nine Months Ended September 30, 2017, filed with the SEC on November 14, 2017.

The accompanying unaudited Pro Forma Condensed Consolidated Balance Sheet presents our historical financial information as of September 30, 2017, as adjusted for: (i) the additional purchase of beneficial interests (“Interests”) in CF Net Lease Portfolio DST IV (the “DST”), as described below, and (ii) the sale of shares in the Offering to fund the acquisition, as defined below, as if these transactions had occurred on November 15, 2016.

The accompanying unaudited Pro Forma Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 2017 and for the Year ended December 31, 2016, combines the Company’s historical operations with the effects of the purchase of the Interests and sale of common shares described below, as if those transactions had occurred as of November 15, 2016.

During the three months ended September 30, 2017, the Company, through its operating partnership, acquired 4,580 Interests, for a purchase price of $4,580,000. Prior to the acquisition of the Interests, the DST was an indirect wholly-owned subsidiary of the Company’s Sponsor, Cantor Fitzgerald Investors, LLC (“CFI”). Each Interest represents a 0.0072214% ownership of the DST and the Interests purchased by the Company represented approximately 33.07% of the DST as of September 30, 2017.

On November 15, 2016, the DST acquired the fee simple interest in seven retail properties (the “DST Properties”), for a total purchase price of $36,317,830, including related acquisition expenses. The purchase price was comprised of $13,822,646 in equity and $22,495,184 in proceeds from the debt financing. The acquisition of the Interests by the Company has been structured such that the total purchase price for 100% of the Interests equals the equity portion of the purchase price paid by CFI and its affiliates to acquire the DST Properties plus $25,000 (reflecting the DST’s current cash reserves). The Company acquired the Interests in a private placement. Cantor Fitzgerald & Co., a related party, acted as a broker-dealer in connection with the private placement, but did not receive any compensation in connection therewith.

The Company funded the acquisition of the Interests with cash from its ongoing Offering. The Company intends, but is not obligated, to purchase 100% of the Interests. On October 6, 2017, the Company acquired an additional 1,000 Interests for $1,000,000. As of October 6, 2017 the acquisition was deemed to be significant as defined by SEC Rule S-X 3.14, the Company’s ownership of the DST at that time represented a $5,580,000 investment representing approximately 40.30% of the DST.

The unaudited Pro Forma Condensed Consolidated Statements of Operations have been prepared by the Company’s management based upon the Company’s historical financial statements, certain historical financial information of the DST, and certain equity method accounting entries related to the acquisition of the Interests. These pro forma statements may not be indicative of the results that actually would have occurred if these transactions had been in effect on the dates indicated, nor do they purport to represent our future financial results. The accompanying unaudited Pro Forma Condensed Consolidated Statements of Operations do not contemplate certain amounts that are not readily determinable, such as additional general and administrative expenses that are probable, or interest income that would be earned on cash balances.


Rodin Global Property Trust, Inc.

Pro Forma Condensed Consolidated Balance Sheet

As of September 30, 2017

(Unaudited)

 

     Rodin Global
Property Trust,
Inc. (a)
    Pro Forma
CF Net Lease
Portfolio

IV DST
Investment
Income

Adjustments
    Pro Forma
CF Net Lease
Portfolio

IV DST
Acquisition
Adjustments
    Pro Forma
Rodin Global
Property Trust,
Inc.
 

Assets

        

Investment in real estate, net of accumulated depreciation of $39,241

   $ 6,663,959     $ —       $ —       $ 6,663,959  

Investment in real estate-related assets

     4,601,531       (21,531 )(b)      1,000,000 (d)      5,580,000  

Intangible assets, net of accumulated amortization of $18,381

     1,297,666       —         —         1,297,666  

Cash and cash equivalents

     612,453       388,635 (c)      (1,000,000 )(d)      1,088  

Stock subscriptions receivable

     419,547       —         —         419,547  

Prepaid expenses and other assets

     6,642       —         —         6,642  

Due from related party

     26,606       —         —         26,606  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 13,628,404     $ 367,104     $ —       $ 13,995,508  
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Equity

        

Liabilities

        

Loan payable, net of deferred financing costs of $80,123

   $ 4,419,877     $ —       $ —       $ 4,419,877  

Accounts payable and accrued expenses

     171,726       —         —         171,726  

Accrued interest payable

     10,266       —         —         10,266  

Distributions payable

     36,710       —         —         36,710  

Due to related parties

     1,018,327       —         —         1,018,327  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     5,656,906       —         —         5,656,906  
  

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ equity

        

Controlling interest

        

Preferred stock, $0.01 par value per share, 50,000,000 and 0 shares authorized, and 0 issued and outstanding at September 30, 2017 and December 31, 2016, respectively

     —         —         —         —    

Class A common stock, $0.01 par value per share, 160,000,000 and 300,000 shares authorized, and 148,578 and 8,180 issued and outstanding at September 30, 2017 and December 31, 2016, respectively

     1,486       —         —         1,486  

Class T common stock, $0.01 par value per share, 200,000,000 and 0 shares authorized, and 78,210 and 0 issued and outstanding at September 30, 2017 and December 31, 2016, respectively

     782       —         —         782  

Class I common stock, $0.01 par value per share, 40,000,000 and 0 shares authorized, and 144,546 and 0 issued and outstanding at September 30, 2017 and December 31, 2016, respectively

     1,445       —         —         1,445  

Additional paid-in capital

     9,046,163       —         —         9,046,163  

Accumulated deficit and cumulative distributions

     (1,079,378     367,104       —         (712,274
  

 

 

   

 

 

   

 

 

   

 

 

 

Total controlling interest

     7,970,498       367,104       —         8,337,602  

Non-controlling interests in subsidiaries

     1,000       —         —         1,000  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     7,971,498       367,104       —         8,338,602  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 13,628,404     $ 367,104     $ —       $ 13,995,508  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Reflects the historical Consolidated Balance Sheet of the Company for the period indicated as presented in the Company’s Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission on November 14, 2017.
(b) The reversal of income from investment in real estate-related assets during the third quarter of 2017 and the Company’s interest in CF Net Lease Portfolio IV DST which was accounted for under the equity method of accounting at September 30, 2017, due to the Pro-Forma effect of ownership occurring at an earlier date, as displayed in item (c).
(c) Represents the pro-forma effect of income from investment in real estate-related assets received from CF Net Lease Portfolio IV DST based on acquisition on November 15, 2016.
(d) Displays the pro-forma effect of the purchase of additional beneficial interests in CF Net Lease Portfolio IV DST on November 15, 2016.

 

The accompanying notes are an integral part of this pro forma condensed consolidated financial statement.

 

3


Rodin Global Property Trust, Inc.

Pro Forma Condensed Consolidated Statement of Operations

For the Nine Months Ended September 30, 2017

(Unaudited)

 

     Rodin Global
Property Trust,
Inc. (a)
    Pro Forma
CF Net Lease
Portfolio

IV DST
Investment
Income

Adjustment
    Pro Forma
CF Net Lease
Portfolio

IV DST
Investment
Income

Adjustment
    Pro Forma
Rodin Global
Property Trust,
Inc.
 

Revenues

        

Rental revenues

   $ 105,248     $ —       $ —       $ 105,248  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     105,248       —         —         105,248  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

General and administrative expenses

     997,205       —         —         997,205  

Depreciation and amortization

     51,311       —           51,311  

Management fees

     31,774       —         —         31,774  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     1,080,290       —         —         1,080,290  

Other income (expense):

        

Income from investment in real estate-related assets

     21,531       (21,531 )(b)      330,990 (c)      330,990  

Interest expense

     (43,904     —         —         (43,904
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (22,373     (21,531     330,990       287,086  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (997,415     (21,531     330,990       (687,956

Net income (loss) attributable to non-controlling interest

     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common stockholders

   $ (997,415   $ (21,531   $ 330,990     $ (687,956
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding

     96,271           238,980 (d) 
  

 

 

       

 

 

 

Net income (loss) per common share — basic and diluted

   $ (10.36       $ (2.88
  

 

 

       

 

 

 

 

(a) Reflects the historical Consolidated Statement of Operations of the Company for the period indicated as presented in the Company’s Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission on November 14, 2017.
(b) The reversal of income from investment in real estate-related assets during the third quarter of 2017 and the Company’s interest in CF Net Lease Portfolio IV DST which was accounted for under the equity method of accounting at September 30, 2017, due to the Pro-Forma effect of ownership occurring at an earlier date, as displayed in item (c).
(c) Represents the pro-forma effect of income from investment in real estate-related assets received from CF Net Lease Portfolio IV DST based on acquisition on November 15, 2016.
(d) The pro forma weighted average shares of common stock outstanding for the nine months ended September 30, 2017 was calculated as if the number of shares issued during the Offering through September 30, 2017 to fund the DST acquisition were issued on November 15, 2016.

The accompanying notes are an integral part of this pro forma condensed consolidated financial statement.

 

 

4


Rodin Global Property Trust, Inc.

Pro Forma Condensed Consolidated Statement of Operations

For the Period from February 2, 2016 (formation) through December 31, 2016

(Unaudited)

 

     Rodin Global
Property Trust,
Inc. (a)
     Pro Forma
CF Net Lease
Portfolio

IV DST
Investment
Income

Adjustment
    Pro forma
Adjustments
     Pro Forma
Rodin Global
Property Trust,
Inc.
 

Revenues

          

Rental revenues

   $ —        $ —       $ —        $ —    
  

 

 

    

 

 

   

 

 

    

 

 

 

Total revenues

     —          —         —          —    
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating expenses:

          

General and administrative expenses

     —          —         —          —    

Depreciation and amortization

     —          —         —          —    

Management fees

     —          —         —          —    
  

 

 

    

 

 

   

 

 

    

 

 

 

Total operating expenses

     —          —         —          —    

Other income (expense):

          

Income from investment in real estate-related assets

     —          57,645 (b)      —          57,645  

Interest expense

     —          —         —          —    
  

 

 

    

 

 

   

 

 

    

 

 

 

Total other income (expense)

     —          57,645       —          57,645  
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income (loss)

     —          57,645       —          57,645  

Net income (loss) attributable to non-controlling interest

     —          —         —          —    
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income (loss) attributable to common stockholders

   $ —        $ 57,645     $ —        $ 57,645  
  

 

 

    

 

 

   

 

 

    

 

 

 

Weighted average shares outstanding

     8,180             35,495 (c) 
  

 

 

         

 

 

 

Net income (loss) per common share — basic and diluted

   $ —             $ 1.62  
  

 

 

         

 

 

 

 

(a) Represents the historical Consolidated Statement of Operations for the period indicated as presented in the Company’s Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission on November 14, 2017. As noted in the Quarterly Reports, Rodin was formed and capitalized on February 2, 2016 and real estate operations did not commence until 2017.
(b) Represents the pro-forma effect of income from investment in real estate-related assets received from CF Net Lease Portfolio IV DST based on acquisition on November 15, 2016.
(c) The pro forma weighted average shares of common stock outstanding for the period February 2, 2016 (commencement) through December 31, 2016 was calculated as if the number of shares issued during the Offering through September 30, 2017 to fund the DST acquisition were issued on November 15, 2016.

 

 

 

The accompanying notes are an integral part of this pro forma condensed consolidated financial statement.

 

 

 

5


Annex C


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

 

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: 333-214130

 

 

Rodin Global Property Trust, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   81-1310268

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

110 E. 59th Street, New York, NY   10022
(Address of principal executive offices)   (Zip Code)

(212) 938-5000

(Registrant’s telephone number, including area code)

 

 

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  ☒     No  ☐

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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      Accelerated filer  
Non-accelerated filer   ☒  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

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.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 10, 2017, the registrant had 314,722 Class A shares, 154,547 Class I shares, and 152,398 Class T shares of $0.01 par value common stock outstanding.

 

 

 


RODIN GLOBAL PROPERTY TRUST, INC.

TABLE OF CONTENTS

 

     Page  

PART I - FINANCIAL INFORMATION

     3  

Item 1. Financial Statements (Unaudited)

     3  

Consolidated Balance Sheets as of September  30, 2017 and December 31, 2016

     3  

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017 and for the Three Months Ended September 30, 2016 and for the Period February 2, 2016 (date of initial capitalization) through September 30, 2016

     4  

Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2017 and for the Period February 2, 2016 (date of initial capitalization) through December 31, 2016

     5  

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and for the Period February 2, 2016 (date of initial capitalization) through September 30, 2016

     6  

Notes to Consolidated Financial Statements

     7  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     28  

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     47  

Item 4. Controls and Procedures.

     48  

PART II - OTHER INFORMATION

     49  

Item 1. Legal Proceedings.

     49  

Item 1A. Risk Factors.

     49  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     49  

Item 3. Defaults Upon Senior Securities.

     50  

Item 4. Mine Safety Disclosures.

     50  

Item 5. Other Information.

     50  

Item 6. Exhibits.

     50  

Signatures

     52  

 

2


PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

RODIN GLOBAL PROPERTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     September 30, 2017     December 31, 2016  

Assets

    

Investment in real estate, net of accumulated depreciation of $39,241

   $ 6,663,959     $ —    

Investment in real estate-related assets

     4,601,531       —    

Intangible assets, net of accumulated amortization of $18,381

     1,297,666       —    

Cash and cash equivalents

     612,453       201,001  

Stock subscriptions receivable

     419,547       —    

Prepaid expenses and other assets

     6,642       —    

Due from related party

     26,606       —    
  

 

 

   

 

 

 

Total assets

   $ 13,628,404     $ 201,001  
  

 

 

   

 

 

 

Liabilities and Equity

    

Liabilities

    

Loan payable, net of deferred financing costs of $80,123

   $ 4,419,877     $ —    

Accounts payable and accrued expenses

     171,726       —    

Accrued interest payable

     10,266       —    

Distributions payable

     36,710       —    

Due to related parties

     1,018,327       —    
  

 

 

   

 

 

 

Total liabilities

     5,656,906       —    
  

 

 

   

 

 

 

Stockholders’ equity

    

Controlling interest

    

Preferred stock, $0.01 par value per share, 50,000,000 and 0 shares authorized, and 0 issued and outstanding at September 30, 2017 and December 31, 2016, respectively

     —         —    

Class A common stock, $0.01 par value per share, 160,000,000 and 300,000 shares authorized, and 148,578 and 8,180 issued and outstanding at September 30, 2017 and December 31, 2016, respectively

     1,486       82  

Class T common stock, $0.01 par value per share, 200,000,000 and 0 shares authorized, and 78,210 and 0 issued and outstanding at September 30, 2017 and December 31, 2016, respectively

     782       —    

Class I common stock, $0.01 par value per share, 40,000,000 and 0 shares authorized, and 144,546 and 0 issued and outstanding at September 30, 2017 and December 31, 2016, respectively

     1,445       —    

Additional paid-in capital

     9,046,163       199,919  

Accumulated deficit and cumulative distributions

     (1,079,378     —    
  

 

 

   

 

 

 

Total controlling interest

     7,970,498       200,001  

Non-controlling interests in subsidiaries

     1,000       1,000  
  

 

 

   

 

 

 

Total stockholders’ equity

     7,971,498       201,001  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 13,628,404     $ 201,001  
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

3


RODIN GLOBAL PROPERTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     For the Three Months
Ended September 30,
     For the Nine Months
Ended September 30,

2017
    For the Period February 2,
2016 (date of initial
capitalization) through
September 30, 2016
 
     2017     2016       

Revenues

         

Rental revenues

   $ 105,248     $ —        $ 105,248     $ —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenues

     105,248       —          105,248       —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating expenses:

         

General and administrative expenses

     965,327       —          997,205       —    

Depreciation and amortization

     51,311       —          51,311       —    

Management fees

     31,774       —          31,774       —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expenses

     1,048,412       —          1,080,290       —    

Other income (expense):

         

Income from investment in real estate-related assets

     21,531       —          21,531       —    

Interest expense

     (43,904     —          (43,904     —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Total other income (expense)

     (22,373     —          (22,373     —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

     (965,537     —          (997,415     —    

Net income (loss) attributable to non-controlling interest

     —         —          —         —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to common stockholders

   $ (965,537   $ —        $ (997,415   $ —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Weighted average shares outstanding

     231,757       8,180        96,271       8,180  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) per common share - basic and diluted

   $ (4.17   $ —        $ (10.36   $ —    
  

 

 

   

 

 

    

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

4


RODIN GLOBAL PROPERTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

 

    Stockholders’ Equity              
    Common Stock     Additional
Paid-In
Capital
    Accumulated
Deficit and

Cumulative
Distributions
             
    Class A     Class T     Class I         Non-
controlling
interest
    Total
Equity
 
    Shares     Amount     Shares     Amount     Shares     Amount          

Balance as of February 2, 2016

    8,180     $ 82       —       $ —         —       $ —       $ 199,919     $ —       $ 1,000     $ 201,001  

Common stock

    —         —         —         —         —         —         —         —         —         —    

Distribution reinvestment

    —         —         —         —         —         —         —         —         —         —    

Offering costs

    —         —         —         —         —         —         —         —         —         —    

Net income (loss)

    —         —         —         —         —         —         —         —         —         —    

Distributions declared on common stock

    —         —         —         —         —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2016

    8,180     $ 82       —       $ —         —       $ —       $ 199,919     $ —       $ 1,000     $ 201,001  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Stockholders’ Equity              
    Common Stock     Additional
Paid-In
Capital
    Accumulated
Deficit and

Cumulative
Distributions
             
    Class A     Class T     Class I         Non-
controlling
interest
    Total
Equity
 
    Shares     Amount     Shares     Amount     Shares     Amount          

Balance as of January 1, 2017

    8,180     $ 82       —       $ —         —       $ —       $ 199,919     $ —       $ 1,000     $ 201,001  

Common stock

    140,191       1,402       78,182       782       144,501       1,445       9,232,913       —         —         9,236,542  

Distribution reinvestment

    207       2       28       —         45       —         6,925       —         —         6,927  

Offering costs

    —         —         —         —         —         —         (393,594     —         —         (393,594

Net income (loss)

    —         —         —         —         —         —         —         (997,415     —         (997,415

Distributions declared on common stock

    —         —         —         —         —         —         —         (81,963     —         (81,963
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of September 30, 2017

    148,578     $ 1,486       78,210     $ 782       144,546     $ 1,445     $ 9,046,163     $ (1,079,378   $ 1,000     $ 7,971,498  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

5


RODIN GLOBAL PROPERTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     For the Nine Months
Ended September 30,
2017
    For the Period February 2,
2016 (date of initial
capitalization) through
September 30, 2016
 

Cash flows from operating activities:

    

Net income (loss)

   $ (997,415   $ —    

Adjustments to reconcile net loss to net cash provided by operating activities:

       —    

Depreciation and amortization

     51,311       —    

Amortization of above-market lease intangibles

     6,311       —    

Amortization of deferred financing costs

     1,813       —    

Income from investment in real estate-related assets

     (21,531     —    

Changes in assets and liabilities:

       —    

(Increase) in prepaid expenses and other assets

     (6,642     —    

Increase in accounts payable

     171,726       —    

Increase in accrued interest payable

     10,266       —    

Increase in due to related parties

     847,283       —    
  

 

 

   

 

 

 

Net cash provided by operating activities

     63,122       —    
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisition of real estate

     (8,019,247     —    

Purchase of interest in real estate-related assets

     (4,580,000     —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (12,599,247     —    
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock, net

     8,567,839       —    

Borrowing from loan payable

     4,500,000       —    

Payment of deferred financing costs

     (81,936     —    

Distributions

     (38,326     —    
  

 

 

   

 

 

 

Net cash provided by financing activities

     12,947,577       —    
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     411,452       —    

Cash and cash equivalents, at beginning of period

   $ 201,001     $ 201,001  
  

 

 

   

 

 

 

Cash and cash equivalents, at end of period

   $ 612,453     $ 201,001  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid for interest

   $ 31,825     $ —    
  

 

 

   

 

 

 

Non-cash financing activities:

    

Distributions payable

   $ 36,710     $ —    
  

 

 

   

 

 

 

Distribution reinvestment

   $ 6,927     $ —    
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

6


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Organization and Business Purpose

Rodin Global Property Trust, Inc. (the “Company”) was formed on February 2, 2016 as a Maryland corporation with the expectation to qualify as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes beginning with the taxable year ending December 31, 2017. The Company’s consolidated financial statements include Rodin Global Property Trust Operating Partnership, L.P. (the “Operating Partnership”) and its operating subsidiaries. Substantially all of the Company’s business is expected to be conducted through the Operating Partnership, a Delaware partnership formed on February 11, 2016. The Company is the sole general and limited partner of the Operating Partnership. Unless the context otherwise requires, the “Company” refers to the Company and the Operating Partnership.

On February 2, 2016, the Company was capitalized with a $200,001 investment by the Company’s sponsor, Cantor Fitzgerald Investors, LLC (“CFI”) through the purchase of 8,180 Class A shares of common stock. In addition, a wholly owned subsidiary of CFI, Rodin Global Property Trust OP Holdings, LLC (the “Special Unit Holder”), has invested $1,000 in the Operating Partnership and has been issued a special class of limited partnership units (“Special Units”), which is recorded as a non-controlling interest on the consolidated balance sheet as of September 30, 2017. On May 18, 2017, the Company satisfied the minimum offering requirement as a result of CFI’s purchase of $2.0 million in Class I shares (the “Minimum Offering Requirement”).

The Company is a commercial real estate company formed to invest in and manage a diversified portfolio of income-producing commercial properties and other real estate-related assets. The Company intends to invest primarily in the acquisition of single-tenant net leased commercial properties located in the U.S., United Kingdom and other European countries. The Company may also originate and invest in loans related to net leased commercial properties and invest in commercial real estate-related securities.

As of September 30, 2017, the Company owned one property located in Grand Rapids, Michigan (the “GR Property”), and an interest in a Delaware Statutory Trust (“DST”), which owns seven properties (individually a “DST Property” and collectively the “DST Properties”) through an investment in real estate-related assets (See Note 3 and Note 6).

The Company is externally managed by Rodin Global Property Advisors, LLC (the “Advisor”), a Delaware limited liability company and wholly owned subsidiary of CFI. CFI is a wholly owned subsidiary of CFIM Holdings, LLC, which is a wholly owned subsidiary of Cantor Fitzgerald, L.P. (“CFLP”).

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements are presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with U.S. GAAP.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the balance sheet. Management believes that the estimates utilized in preparing the consolidated balance sheets are reasonable. As such, actual results could differ from those estimates.

 

7


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and any single member limited liability companies or other entities which are consolidated in accordance with U.S. GAAP. The Company consolidates Variable Interest Entities (“VIE”), where it is the primary beneficiary and voting interest entities which are generally majority owned or otherwise controlled by the Company. All significant intercompany balances are eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less.

Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist primarily of prepaid insurance and other prepaid operating expenses.

Investment in Real Estate, net

Real estate assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate assets consist of the costs of acquisition, including certain acquisition-related expenses, major improvements and betterments that extend the useful life of the real estate assets and leasing costs. All repairs and maintenance costs are expensed as incurred. In 2017, the Company early adopted Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company’s investment in real estate qualifies as an asset acquisition, and as such, certain acquisition-related expenses are capitalized.

Upon the acquisition of real estate properties, the Company allocates the purchase price in accordance with ASU 2017-01, to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- and/or below-market leases and the value of in-place leases, based in each case on their respective fair values. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.

The Company considers the period of future benefit of each respective asset to determine its appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:

 

Description

   Depreciable Life

Buildings

   39 years

Site improvements

   Over lease term

Intangible lease assets

   Over lease term

 

8


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could materially impact the Company’s results of operations.

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to, bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors, a significant decrease in a property’s revenues due to lease terminations, vacancies, co-tenancy clauses, reduced lease rates or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment losses were recorded during the nine months ended September 30, 2017 after the Company assessed the recoverability of its assets.

Investment in Real Estate-Related Assets

The Company accounts for its investment in real estate-related assets under the equity method of accounting. Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of preferred returns and allocation formulas, if any, as described in such governing documents. Equity method investments are recognized using a cost accumulation model in which the investment is recognized based on the cost to the investor, which includes acquisition related expenses. Investments in unconsolidated real estate-related assets are periodically reviewed for impairment based on projected cash flows from the underlying investment. If an impairment is identified, the carrying value of the investment will be reduced to the anticipated recoverable amount. As of September 30, 2017, no impairment has been identified.

Variable Interest Entities

The Company determines if an entity is a VIE in accordance with U.S. GAAP. For an entity in which the Company has acquired an interest, the entity will be considered a VIE if both of the following characteristics are not met: 1) the equity investors in the entity have the characteristics of a controlling financial interest and 2) the equity investors’ total investment at risk is sufficient to finance the entity’s activities without additional subordinated financial support. The Company makes judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, then a quantitative analysis, if necessary. A qualitative analysis is generally based on a review of the design of the entity, including its control structure and decision-making abilities, and also its financial structure. In a quantitative analysis, the Company would incorporate various estimates, including estimated future cash flows, assumed hold periods and capitalization/discount rates.

If an entity is determined to be a VIE, the Company then determines whether to consolidate the entity as the primary beneficiary. The primary beneficiary has both (i) the authority to direct the activities that most significantly impact the VIE’s economic performance and (ii) the right to receive economic benefits from the VIE that could potentially be significant to the VIE and, in the event of economic losses, the obligation to absorb the losses.

 

9


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The Company evaluates all of its significant investments in real estate-related assets to determine if they are VIEs utilizing judgments and estimates that are inherently subjective. If different judgments or estimates were used for these evaluations, it could result in differing conclusions as to whether or not an entity is a VIE and whether or not to consolidate such entity. As of September 30, 2017, the Company concluded that it did have an investment in a VIE and because the Company is not the primary beneficiary, it will not consolidate such entity, as described in further detail in Note 10.

Voting Interest Entities

A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company will not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party. The Company will perform on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.

Deferred Financing Costs

Costs incurred in connection with obtaining financing are capitalized and amortized over the term of the related loan on a straight-line basis, which approximates the effective interest method. The carrying value of the deferred financing costs at September 30, 2017 and December 31, 2016 was $80,123 and $0, respectively which is net of accumulated amortization of $1,813 and $0, respectively, and recorded as an offset to the related debt. For the nine months ended September 30, 2017 and the period February 2, 2016 through December 31, 2016 amortization of deferred financing costs was $1,813 and $0, respectively, and is included in Interest expense on the accompanying statement of operations.

Revenue Recognition

Rental revenue is recognized on a straight-line basis over the life of the respective leases.

Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents. At times, balances with any one financial institution may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company believes it mitigates this risk by investing its cash with high-credit quality financial institutions.

The GR Property and DST Properties are 100% leased to Walgreen Co. (“Walgreens”), a subsidiary of Walgreens Boots Alliance Inc. (NASDAQ: WBA). If Walgreens were to default on its obligation subject to each lease, it could negatively affect returns at the portfolio level. The Company believes it mitigates this risk by employing a comprehensive set of controls around acquisitions which include detailed due diligence of all lessees. In addition, the company monitors published credit ratings of its tenants. Walgreens is rated investment grade by Moody’s and Standard & Poor’s.

 

10


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Stock Subscriptions Receivable

As prescribed by Accounting Standards Codification (“ASC”) 505, Stock subscriptions receivable represent the purchase of common stock for which the Company has not yet received payment from the purchaser. As of September 30, 2017 and December 31, 2016, the amount of stock subscriptions receivable was $419,547 and $0, respectively. The amount outstanding was received by the Company on October 2, 2017.

Due from Related Party

Due from related party represents amounts owed to the Company by CFI pursuant to the terms of the Sponsor Support Agreement for the reimbursement of selling commissions and marketing fees, which at September 30, 2017 and December 31, 2016 was $26,606 and $0, respectively. The amount outstanding was received by the Company on October 3, 2017.

Due to Related Parties

Due to related parties is comprised of amounts contractually owed by the Company to certain related parties under the terms of such related party agreements, which at September 30, 2017 and December 31, 2016 was $1,018,327 and $0, respectively (See Note 9).

Organization and Offering Costs

The Advisor has agreed to pay, on behalf of the Company, all organizational and offering costs (including legal, accounting, and other costs attributable to the Company’s organization and offering, but excluding upfront selling commissions, dealer manager fees and distribution fees) (“Initial O&O Costs”) through the first anniversary of the date on which the Company satisfies the Minimum Offering Requirement, which will be May 18, 2018 (the “Escrow Break Anniversary”). Following the Escrow Break Anniversary, the Company will reimburse the Advisor for payment of organization and offering costs ratably over a 36-month period; provided, however, that the Company shall not be obligated to pay any amounts that as a result of such payment would cause the aggregate payments for organization and offering costs (less selling commissions, dealer manager fees and distribution fees) paid to the Advisor to exceed 1% of gross proceeds of the Initial Public Offering (“IPO”), defined as the sale of class A, I, and T shares after the date which the minimum offering requirement was met, excluding shares sold pursuant to the distribution reinvestment plan (the “DRP”), as of such payment date. Any amounts not reimbursed in any period shall be included in determining any reimbursement liability for a subsequent period.

As of September 30, 2017 and December 31, 2016, the Advisor has incurred Initial O&O Costs on the Company’s behalf of $3,681,410 and $1,376,618, respectively. As of September 30, 2017 and December 31, 2016, the Company is obligated to reimburse the Advisor for Initial O&O costs in the amount of $94,435 and $0, respectively, which is included within Due to related parties in the accompanying consolidated balance sheets. As of September 30, 2017 and December 31, 2016, organizational costs of $1,690 and $0 were expensed and offering costs of $92,745 and $0 were charged to stockholders’ equity. The Company’s reimbursement liability for these amounts will be paid ratably over 36-months beginning on the Escrow Break Anniversary.

Income Taxes

The Company intends to elect to be taxed as a REIT and to comply with the related provisions under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ending December 31, 2017. Accordingly,

 

11


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. The Company expects to have little or no taxable income prior to electing REIT status. To qualify as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. The Company may also be subject to certain state, local and franchise taxes. If the Company fails to meet these requirements, it will be subject to U.S. federal income tax, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders.

Earnings Per Share

Basic net income (loss) per share of common stock is determined by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. All classes of common stock are allocated net income (loss) at the same rate per share.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers (Topic 606).” Beginning January 1, 2018, companies will be required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also includes additional disclosure requirements. The new standard can be adopted either retrospectively to prior reporting periods presented or as a cumulative effect adjustment as of the date of adoption. The Company is currently evaluating the overall impact that ASU 2014-09 will have on the Company’s financial statements, as well as the method of adoption. Based on the Company’s preliminary assessment, the Company does not anticipate that the adoption of the new revenue recognition standard would change the timing of revenue recognition.

In February 2016, the FASB issued ASU 2016-02, “Leases,” which will require organizations that lease assets to recognize the assets and liabilities for the rights and obligations created by those leases on their balance sheet. Additional disclosure regarding a company’s leasing activities will also be expanded under the new guidance. For public entities, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and requires a modified retrospective transition. The Company is currently evaluating the overall impact of this pronouncement on its consolidated financial statements from both a lessor and lessee standpoint.

In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business,” which addresses the definition of a business and provides a framework to determine if an asset or group of assets to be acquired is not a business. The standard clarifies that when substantially all of the fair value of the gross assets to be acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset or set of assets is not a business. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, but early adoption is permitted. The Company has elected to early adopt this pronouncement.

Note 3 — Investment in Real Estate

2017 Property Acquisition

On July 11, 2017, the Company, through a wholly-owned subsidiary of its Operating Partnership, acquired the fee simple interest in the GR Property located at 3596 Alpine Avenue, Grand Rapids, MI. The GR Property is

 

12


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

14,552 square feet, and annualized rental income the Company earns from the GR Property is $500,000. The total acquisition cost was comprised of $3,436,508 in equity, $82,739 in capitalized acquisition related costs, and $4,500,000 in proceeds from a note payable (See Note 7).

The GR Property is 100% leased to Walgreens, which is rated investment grade by Moody’s and Standard & Poor’s. The lease is a triple net lease whereby the tenant is required to pay substantially all operating expenses, including all costs to maintain and repair the roof and structure of the building, as well as property taxes, in addition to base rent.

The initial term of the lease commenced in 2007 and is 75 years with termination options every 5 years beginning on July 31, 2032.

The following table summarizes the acquisition cost allocation for the GR Property:

 

     3596 Alpine Avenue  

Building and building improvements

   $ 5,769,179  

Land

     934,021  

In-place lease intangibles

     864,148  

Above-market lease intangibles

     451,899  
  

 

 

 

Total acquisition cost

   $ 8,019,247  
  

 

 

 

Investment in real estate, net consisted of the following at September 30, 2017:

 

     September 30, 2017  

Building and building improvements

   $ 5,769,179  

Land

     934,021  
  

 

 

 

Total

     6,703,200  

Accumulated depreciation

     (39,241
  

 

 

 

Investment in real estate, net

   $ 6,663,959  
  

 

 

 

Note 4 — Intangibles

The amortization of acquired above-market and/or below-market leases is recorded as an adjustment to rental revenue on the consolidated statements of operations. For the nine months ended September 30, 2017 and the period February 2, 2016 through December 31, 2016, the amount of such amortization included as a decrease to rental income was approximately $6,311 and $0, respectively. The amortization of in-place leases is recorded as an adjustment to depreciation and amortization expense on the consolidated statements of operations. For the nine months ended September 30, 2017 and the period February 2, 2016 through December 31, 2016, the amount of such amortization was approximately $12,070 and $0, respectively.

 

13


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The gross carrying amount and accumulated amortization of the Company’s intangible assets and liabilities consisted of the following:

 

     September 30, 2017  

Intangible assets:

  

In-place lease intangibles

   $ 864,148  

Above-market lease intangibles

     451,899  
  

 

 

 

Total intangible assets

     1,316,047  

Accumulated amortization:

  

In-place lease amortization

     (12,070

Above-market lease amortization

     (6,311
  

 

 

 

Total accumulated amortization

     (18,381
  

 

 

 

Intangible assets, net

   $ 1,297,666  
  

 

 

 

The estimated future amortization on the Company’s intangibles for each of the next five years and thereafter as of September 30, 2017 is as follows:

 

Year

   In-place Lease
Intangibles
     Above-market Lease
Intangibles
     Total  

2017 (remaining)

   $ 14,484      $ 7,573      $ 22,057  

2018

     57,932        30,295        88,227  

2019

     57,932        30,295        88,227  

2020

     57,932        30,295        88,227  

2021

     57,932        30,295        88,227  

Thereafter

     605,866        316,835        922,701  
  

 

 

    

 

 

    

 

 

 
   $ 852,078      $ 445,588      $ 1,297,666  
  

 

 

    

 

 

    

 

 

 

Note 5 — Five Year Minimum Rental Payments

The estimated future minimum rents the Company expects to receive for the GR Property for each of the next five years and thereafter through the end of the primary term as of September 30, 2017 is as follows:

 

Year

   Future Minimum Rents  

2017 (remaining)

   $ 125,000  

2018

     500,000  

2019

     500,000  

2020

     500,000  

2021

     500,000  

Thereafter

     5,249,991  
  

 

 

 

Total

   $ 7,374,991  
  

 

 

 

Note 6 — Investment in Real Estate-Related Assets

CF Net Lease Portfolio IV DST Interests

During the three months ended September 30, 2017, the Company, through its operating partnership, acquired 4,580 beneficial interests (the “Interests”) in the DST, for a purchase price of $4,580,000. Prior to the acquisition

 

14


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

of the Interests, the DST was an indirect wholly-owned subsidiary of CFI. Each Interest represents a 0.0072214% ownership of the DST and the Interests purchased by the Company represented approximately 33.07% of the DST as of September 30, 2017.

On November 15, 2016, the DST acquired the fee simple interest in seven retail properties, the DST Properties, for a total purchase price of $36,317,830, including related acquisition expenses. The purchase price was comprised of $13,822,646 in equity and $22,495,184 in proceeds from the DST Loan (as defined below). The acquisition of the Interests by the Company has been structured such that the total purchase price for 100% of the Interests equals the equity portion of the purchase price paid by CFI and its affiliates to acquire the DST Properties plus $25,000 (reflecting the DST’s current cash reserves).

The Company acquired the Interests in a private placement. Cantor Fitzgerald & Co., a related party, acted as a broker-dealer in connection with the private placement, but did not receive any compensation in connection therewith.

The Company funded the acquisition of the Interests with cash from its ongoing Offering (defined as the IPO and DRP, collectively, the “Offering”). The Company intends, but is not obligated, to purchase 100% of the Interests.

DST Properties

The DST acquired the DST Properties from Walgreens in a sale-leaseback transaction.

The DST Properties are 100% leased to Walgreens. Walgreens is rated investment grade by Moody’s and Standard & Poor’s. In addition to base rent, the leases require the tenant to pay substantially all operating expenses, including repairs and maintenance, as well as real estate taxes.

The lease for each DST Property has an initial term of 15 years commencing on November 15, 2016, and expiring on November 30, 2031. Each lease will automatically renew for 12 consecutive periods of five years each unless Walgreens notifies the lessor in writing on or before the date that is 12 months prior to the commencement of any such renewal term that Walgreens does not wish to renew the applicable lease. Separate and apart from the renewal options, for the initial term or any renewal term of each applicable lease, Walgreens may extend the term until the following January 31st by providing the lessor with written notice no later than four months prior to the end of the then-current term. Walgreens will pay fixed base rent for the first five lease years with 5.0% increases over the preceding lease year’s base rent at five year intervals for the first 35 lease years. Commencing on the 36th lease year and every five years thereafter, base rent will be set at fair market value rent.

 

15


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The following table provides information about the DST Properties relating to their location, rentable square feet, and annualized rental income.

 

Location

   Rentable Square Feet      Annualized Rental Income
(first 5 lease years)
 

Allendale, Michigan

     14,695      $ 343,175  

Cincinnati, Ohio

     14,815      $ 317,138  

Edmond, Oklahoma

     14,471      $ 291,424  

Lawton, Oklahoma

     15,050      $ 304,095  

Marquette, Michigan

     14,990      $ 333,116  

McAlester, Oklahoma

     14,796      $ 288,528  

Russellville, Arkansas

     14,720      $ 318,482  
  

 

 

    

 

 

 

Total

     103,537      $ 2,195,958  
  

 

 

    

 

 

 

The estimated future minimum rents associated with the DST Properties for each of the next five years and through the end of the primary term as of September 30, 2017 is as follows:

 

Year

   Future Minimum Rents  

2017 (remaining)

   $ 548,990  

2018

     2,195,958  

2019

     2,195,958  

2020

     2,195,958  

2021

     2,209,683  

Thereafter

     23,582,122  
  

 

 

 

Total

   $ 32,928,669  
  

 

 

 

DST Loan

On November 15, 2016, in connection with the purchase of the DST Properties, the DST entered into a loan agreement (the “DST Loan”) with Citigroup Global Markets Realty Corp. with an outstanding principal amount of $22,495,184. The DST Loan provides for monthly interest payments and bears interest at an initial fixed rate of 4.593% per annum (based on a 360-day year). The DST Loan matures on December 1, 2031 and may be prepaid (a) subject to customary yield maintenance provisions on or after January 2, 2019 and (b) without penalty on or after September 2, 2026; provided that in each case the DST Loan may be prepaid in whole, but not in part. The anticipated repayment date of the DST Loan is December 1, 2026 (the “Anticipated Repayment Date”). Commencing on September 1, 2026, excess cash flow generated by the DST Properties will be held as additional security for the DST Loan. To the extent the DST Loan has not been repaid by the Anticipated Repayment Date, excess cash flow from the DST Properties will be applied to the repayment of the outstanding principal and the DST Loan will bear interest at an increased rate of three percent per annum plus the greater of (a) 4.593% and (b) the ten year swap yield as of the first business day after the Anticipated Repayment Date. The DST Loan contains customary events of default. As is customary in such financings, if an event of default occurs under the DST Loan, the lender may accelerate the repayment of the outstanding principal amount and exercise other remedies subject, in certain instances, to the expiration of an applicable cure period. CF Real Estate Holdings, LLC (the “Guarantor”), an affiliate of CFI, has guaranteed (x) any losses that the lender may incur as a result of the occurrence of certain bad acts of the borrower and (y) the repayment of the DST Loan upon the occurrence of certain other significant events, including bankruptcy. Additionally, the Guarantor has agreed to indemnify the lender against certain potential environmental liabilities.

 

16


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Trust Manager

The DST is managed by its trust manager, CF Net Lease Portfolio Manager IV, LLC (the “Trust Manager”), and owners of Interests have no voting rights with respect to the DST. In connection with the acquisition of the Interests by the Company, CF DST Holdings, LLC, a wholly-owned subsidiary of CFI, intends to transfer all of the equity interests of the Trust Manager to the Company, pending servicer (with respect to the debt) approval. Following the transfer, the Company will manage the DST, subject to certain limited rights to be retained by CFI so long as it or its subsidiaries own any Interests and so long as the Guarantor is a guarantor with respect to the DST Loan.

Note 7 — Loan Payable

On July 11, 2017, in connection with the purchase of the GR Property (refer to Note 3), a wholly-owned subsidiary of the Operating Partnership entered into a loan agreement (the “GR Loan”) with UBS AG with an outstanding principal amount of $4,500,000. The GR Loan provides for monthly interest payments which accrue through the 10th of each month. The GR Loan bears interest at an initial fixed rate of 4.1064% per annum through the anticipated repayment date July 6, 2027 and thereafter at a revised interest rate of 3.0% per annum plus the greater of the initial interest rate or the 10 year swap yield through the maturity date June 30, 2032. As of September 30, 2017 and December 31, 2016, the Company’s Loan payable balance on the consolidated balance sheets totals $4,419,877 and $0, net of deferred financing costs, respectively. As of September 30, 2017 and December 31, 2016 deferred financing costs totaled $80,123 and $0, net of accumulated amortization of $1,813 and zero, respectively which has been accounted for within Interest expense on the consolidated statements of operations.

Information on the Company’s Loan payable as of September 30, 2017 is as follows:

 

Description

   Amount  

Principal amount of loan

   $ 4,500,000  

Less: Deferred financing costs, net of accumulated amortization of $1,813

     (80,123
  

 

 

 

Loan payable, net of deferred financing costs

   $ 4,419,877  
  

 

 

 

For the nine months ended September 30, 2017 and for the period February 2, 2016 through September 30, 2016, the Company incurred $42,091 and $0, respectively, of interest expense which is included within Interest expense on the consolidated balance sheet. As of September 30, 2017, $10,266 remains unpaid and is recorded as Accrued interest payable on the Company’s consolidated balance sheet.

The following table presents the future principal payment due under the Company’s GR Loan agreement as of September 30, 2017:

 

Year

   Amount  

2017 (remaining)

   $ —    

2018

     —    

2019

     —    

2020

     —    

2021

     —    

Thereafter

     4,500,000  
  

 

 

 

Total

   $ 4,500,000  
  

 

 

 

 

17


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 8 — Stockholders’ Equity

Initial Public Offering

On October 17, 2016, the Company filed a registration statement with the SEC on Form S-11 in connection with the IPO of up to $1.25 billion in shares of common stock, consisting of up to $1.0 billion in shares in its IPO and up to $250 million in shares pursuant to its DRP. The registration statement was subsequently declared effective on March 23, 2017. On May 18, 2017, the Company satisfied the Minimum Offering Requirement for the Offering as a result of CFI’s purchase of $2.0 million in Class I shares.

The Company determines its net asset value as of the end of each quarter, as the Minimum Offering Requirement of $2.0 million has been satisfied. Net Asset Value (“NAV”), as defined, is consistent with the Company’s prospectus and excludes any Initial O&O costs, with such costs to be reflected in the Company’s NAV to the extent the Company reimburses the Advisor for these costs. As of September 30, 2017, the per share purchase price for shares of common stock in the IPO was $25.94 per Class A share, $25.14 per Class T share, and $24.64 per Class I share. The price for each class of shares of common stock in the Company’s DRP was $24.64. The Company’s board of directors adjusts the offering prices of each class of shares such that the purchase price per share for each class equals the NAV per share as of the most recent valuation date, as determined on a quarterly basis, plus applicable upfront selling commissions and dealer manager fees, less applicable support from CFI of a portion of selling commissions and dealer manager fees.

The Company’s shares of common stock consist of Class A shares, Class T shares and Class I shares, all of which are collectively referred to herein as shares of common stock. As of September 30, 2017, the Company’s total number of authorized common shares was 400,000,000 consisting of 160,000,000 of Class A authorized common shares, 200,000,000 of Class T authorized common shares and 40,000,000 of Class I authorized common shares. The Company has the right to reallocate the shares of common stock offered between the Company’s IPO and the Company’s DRP. The Class A shares, Class T shares and Class I shares have identical rights and privileges, including identical voting rights, but have different upfront selling commissions and dealer manager fees and the Class T shares have an ongoing distribution fee. The per share amount of distributions on Class T shares is lower than the per share amount of distributions on Class A shares and Class I shares because of the on-going distribution fee that is payable with respect to Class T shares sold in the IPO.

CFI pays a portion of selling commissions and all of the dealer manager fees (“Sponsor Support”), up to a total of 4.0% of gross offering proceeds from the sale of Class A shares and Class T shares, and up to a total of 1.5% of gross offering proceeds from the sale of Class I shares, incurred in connection with the Offering. Selling commissions and dealer manager fees are presented net of Sponsor Support on the Company’s consolidated statements of stockholders’ equity. The Company will reimburse Sponsor Support (i) immediately prior to or upon the occurrence of a liquidity event, including (A) the listing of the Company’s common stock on a national securities exchange or (B) a merger, consolidation or a sale of substantially all of the Company’s assets or any similar transaction or any transaction pursuant to which a majority of the Company’s board of directors then in office are replaced or removed, or (ii) upon the termination of the advisory agreement by the Company or by the Advisor. In each such case, the Company will only reimburse CFI after the Company has fully invested the proceeds from the Offering and the Company’s stockholders have received, or are deemed to have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such invested capital.

The Company also has 50 million shares of preferred stock, $0.01 par value, authorized. No shares of preferred stock are issued or outstanding.

 

18


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Cantor Fitzgerald & Co. (the “Dealer Manager”), a related party, provides dealer manager services in connection with the Offering. The Offering is a best efforts offering, which means that the Dealer Manager is not required to sell any specific number or dollar amount of shares of common stock in the Offering, but will use its best efforts to sell the shares of common stock. The Offering is a continuous offering that will end no later than two years after the effective date of the Offering, or March 23, 2019, unless extended by the Company’s board of directors for up to an additional one year or beyond, as permitted by the Securities and Exchange Commission. The Company may continue to offer shares through the reinvestment plan after the IPO terminates until the Company has sold $250 million in shares through the DRP.

As of September 30, 2017, the Company had sold 363,154 shares of its common stock (consisting of 140,398 Class A shares, 78,210 Class T shares and 144,546 Class I shares) in the Offering for aggregate net proceeds of $8,942,556. As of December 31, 2016, the Offering had not commenced, therefore, 0 shares of common stock were sold in the Offering and the Company received aggregate net proceeds of $0.

Distributions

The Company’s board of directors has authorized, and the Company has declared, distributions for the period from July 11, 2017 to November 14, 2017, in an amount equal to $0.004253787 per day per share of Class A common stock, Class I common stock and Class T common stock, less, for holders of the shares of Class T common stock, the distribution fees that are payable with respect to shares of Class T common stock. The distributions are payable by the 5th business day following each month end to stockholders of record at the close of business each day during the prior month.

The amount of distribution payable to the Company stockholders is determined by the board of directors and is dependent on a number of factors, including funds available for distribution, the Company’s financial condition, capital expenditure requirements, requirements of Maryland law and annual distribution requirements needed to qualify and maintain its status as a REIT. The Company board of directors may reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.

To ensure that the Company has sufficient funds to cover cash distributions authorized and declared during the Offering, the Company and CFI entered into a distribution support agreement. The terms of the agreement provide that in the event that cash distributions exceed modified funds from operations (“MFFO”), defined as a supplemental measure to reflect the operating performance of a non-traded REIT, for any calendar quarter through March 23, 2019, CFI shall purchase Class I shares from the Company in an amount equal to the distribution shortfall, up to $5,000,000 (less the amount from any shares purchased by CFI in order to satisfy the Minimum Offering Requirement).

As of September 30, 2017, the Company has declared distributions of $81,963, of which $36,710 remains payable and has been recorded as distribution payable on the accompanying consolidated balance sheet. All of the unpaid distributions as of September 30, 2017 were paid on October 6, 2017. As of September 30, 2017, distributions reinvested pursuant to the Company’s DRP are $6,927.

Redemptions

After stockholders have held their shares for at least one year, stockholders may be able to have their shares repurchased by the Company pursuant to the share repurchase program. The Company will repurchase shares at a price equal to, or at a discount from, NAV per share of the share class being repurchased subject to certain holding period requirements which effect the repurchase price as a percentage of NAV.

 

19


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The share repurchase program includes numerous restrictions that limit stockholders’ ability to have their shares repurchased. Unless the Company’s board of directors determines otherwise, the funds available for repurchases in each quarter will be limited to the funds received from the DRP in the prior quarter. The board of directors has complete discretion to determine whether all of such funds from the prior quarter’s DRP will be applied to repurchases in the following quarter, whether such funds are needed for other purposes or whether additional funds from other sources may be used for repurchases. Further, during any calendar year, the Company may repurchase no more than 5% of the weighted-average number of shares outstanding during the prior calendar year. The Company also has no obligation to repurchase shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. The Company may amend, suspend or terminate the program for any reason upon 10 business days’ notice.

The Company has not received any requests to repurchase any shares of common stock as of September 30, 2017.

Non-controlling Interest

The Special Unit Holder has invested $1,000 in the Operating Partnership and has been issued a special class of limited partnership units as part of the overall consideration for the services to be provided by the advisor. This investment has been recorded as non-controlling interest on the consolidated balance sheets as of September 30, 2017 and December 31, 2016, respectively.

Note 9 — Related Party Transactions

DST Interests

During the three months ended September 30, 2017, the Company, through its operating partnership, acquired 4,580 of the Interests in the DST, a Delaware statutory trust, for a purchase price of $4,580,000. Prior to the acquisition of the Interests, the DST was an indirect wholly-owned subsidiary of CFI.

Fees and Expenses

Pursuant to the advisory agreement between the Company and the Advisor, and subject to certain restrictions and limitations, the Advisor will be responsible for managing the Company’s affairs on a day-to-day basis and for identifying, originating, acquiring and managing investments on behalf of the Company. For providing such services, the Advisor will receive fees and reimbursements from the Company. The following summarizes these fees and reimbursements.

Organization and Offering Expenses. The Company will reimburse the Advisor and its affiliates for organization and offering costs it incurs on the Company’s behalf but only to the extent that the reimbursement does not cause the selling commissions, the dealer manager fee and the other organization and offering expenses borne by the Company to exceed 15.0% of gross offering proceeds of the IPO as of the date of the reimbursement. If the Company raises the maximum offering amount in the IPO and under the DRP, the Company estimates organization and offering expenses (other than upfront selling commissions, dealer manager fees and distribution fees), in the aggregate, to be to be 1% of gross offering proceeds of the IPO. These organization and offering costs include all costs (other than upfront selling commissions, dealer manager fees and distribution fees) to be paid by the Company in connection with the initial set up of the organization of the Company as well as the Offering, including legal, accounting, printing, mailing and filing fees, charges of the transfer agent, charges of

 

20


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

the Advisor for administrative services related to the issuance of shares in the Offering, reimbursement of bona fide due diligence expenses of broker-dealers, and reimbursement of the Advisor for costs in connection with preparing supplemental sales materials. The Advisor has agreed to advance all of the organization and offering expenses on the Company’s behalf (other than selling commissions, dealer manager fees and distribution fees) through the Escrow Break Anniversary. The Company will reimburse the Advisor for such costs ratably over the 36 months following the Escrow Break Anniversary; provided that the Company will not be obligated to reimburse any amounts that as a result of such payment would cause the aggregate payments for organization and offering costs paid to the Advisor to exceed 1% of gross offering proceeds of the IPO as of such reimbursement date. For purposes of calculating the NAV, the organization and offering costs paid by the Advisor through the Escrow Break Anniversary will not be reflected in the NAV until the Company reimburses the Advisor for these costs. As of September 30, 2017 and December 31, 2016, the Advisor had incurred $3,681,410 and $1,376,618, respectively, of organization and offering costs (other than upfront selling commissions, dealer manager fees and distribution fees) on behalf of the Company. The amount the Company is liable for is limited to 1% of gross offering proceeds of the IPO, which at September 30, 2017 and December 31, 2016 is $94,435 and $0, respectively, and is included within Due to related parties in the accompanying consolidated balance sheet at September 30, 2017 and December 31, 2016. As of September 30, 2017 and December 31, 2016, organizational costs of $1,690 and $0 were expensed and offering costs of $92,745 and $0 were charged to stockholders’ equity. The Company’s reimbursement liability for these amounts will be paid ratably over 36-months beginning on the Escrow Break Anniversary.

Acquisition Expenses. The Company does not intend to pay the Advisor any acquisition fees in connection with making investments. The Company will, however, provide reimbursement of customary acquisition expenses (including expenses relating to potential investments that the Company does not close), such as legal fees and expenses (including fees of in-house counsel of affiliates and other affiliated service providers that provide resources to the Company), costs of due diligence (including, as necessary, updated appraisals, surveys and environmental site assessments), travel and communication expenses, accounting fees and expenses and other closing costs and miscellaneous expenses relating to the acquisition or origination of the Company’s investments. While most of the acquisition expenses are expected to be paid to third parties, a portion of the out-of-pocket acquisition expenses may be paid or reimbursed to the Advisor or its affiliates. The Advisor has not incurred any reimbursable acquisition expenses on behalf of the Company for the nine months ended September 30, 2017 and the period February 2, 2016 through December 31, 2016. As of December 31, 2016, the amount of distribution fees accrued by the Company was $0.

Distribution Fees. Distribution fees are payable to the Dealer Manager with respect to the Company’s Class T shares only, all or a portion of which may be re-allowed by the Dealer Manager to participating broker-dealers. The distribution fees accrue daily and are calculated on outstanding Class T shares issued in the IPO in an amount equal to 1.0% per annum of (i) the gross offering price per Class T share in the IPO, or (ii) if the Company is no longer offering shares in a public offering, the most recently published per share NAV of Class T shares. The distribution fee will be payable monthly in arrears and will be paid on a continuous basis from year to year. As of September 30, 2017, the Company has paid distribution fees of $544. As of September 30, 2017 the company has incurred a liability of $78,299 which is included within Due to related parties on the consolidated balance sheets, $942 of which was due as of September 30, 2017 and paid on October 6, 2017.

The Company will cease paying distribution fees with respect to each Class T share on the earliest to occur of the following: (i) a listing of shares of common stock on a national securities exchange; (ii) such Class T share is no longer outstanding; (iii) the Dealer Manager’s determination that total underwriting compensation from all sources, including dealer manager fees, sales commissions, distribution fees and any other underwriting compensation paid with respect to all Class A shares, Class T shares and Class I shares would be in excess of

 

21


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

10.0% of the gross proceeds of the IPO; or (iv) the end of the month in which the transfer agent, on the Company’s behalf, determines that total underwriting compensation with respect to the Class T shares held by a stockholder within his or her particular account, including dealer manager fees, sales commissions and distribution fees, would be in excess of 10.0% of the total gross offering price at the time of the investment in the Class T shares held in such account.

The Company will not pay any distribution fees on shares sold pursuant to the Company’s DRP. The amount available for distributions on all Class T shares will be reduced by the amount of distribution fees payable with respect to the Class T shares issued in the IPO such that all Class T shares will receive the same per share distributions.

Asset Management Fees. Asset management fees are due to the Advisor and consist of monthly fees equal to one-twelfth of 1.25% of the cost of the Company’s investments at the end of each month. In the case of investments made through joint ventures, the asset management fee will be determined based on the Company’s proportionate share of the underlying investment. For the nine months ended September 30, 2017, the Company incurred $30,101 in asset management fees, all of which remains unpaid and is included with Due to related parties in the accompanying consolidated balance sheet. The asset management fee is included within Management fees on the consolidated statement of operations. There were no such amounts incurred during the period February 2, 2016 through December 31, 2016.

Other Operating Expenses. The Company will reimburse the Advisor’s costs of providing administrative services, subject to the limitation that the Company generally will not reimburse the Advisor for any amount by which the total operating expenses at the end of the four preceding fiscal quarters exceeds the greater of (i) 2.0% of average invested assets (as defined in the advisory agreement) and (ii) 25.0% of net income other than any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of investments for that period. After the end of any fiscal quarter for which the total operating expenses exceed this 2%/25% limitation for the four fiscal quarters then ended, if the Company’s independent directors exercise their right to conclude that this excess was justified, this fact will be disclosed in writing to the holders of shares of the Company’s common stock within 60 days. If the independent directors do not determine such excess expenses are justified, the Advisor is required to reimburse the Company, at the end of the four preceding fiscal quarters, by the amount that the Company’s aggregate annual total operating expenses paid or incurred exceed this 2%/25% limitation. The 2%/25% limitation does not come into effect until July 1, 2018.

For the nine months ended September 30, 2017 and for the period February 2, 2016 through December 31, 2016, the Company has incurred reimbursable operating expenses of $813,819 and $0, respectively. These expenses are included within General and administrative expenses on the accompanying consolidated statement of operations. These expenses include personnel and related employment costs incurred by the Advisor or its Affiliates in performing the services described in the advisory agreement, including but not limited to reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services. The Company is not obligated to reimburse the Advisor for costs of such employees of the Advisor or its affiliates to the extent that such employees (A) perform services for which the Advisor receives acquisition fees or disposition fees or (B) serve as executive officers of the Company. At September 30, 2017, all of these expenses remain unpaid and are included within Due to related parties on the consolidated balance sheet.

Property Management and Oversight Fees. If the Advisor or an affiliate is a property manager with respect to a particular property, the Company will pay property management fees of 1.5% of gross revenues received for management of the Company’s properties located in the U.S. and 2.0% of gross revenues received for management of the Company’s properties located outside of the U.S. For services in overseeing property

 

22


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

management services provided by any person or entity that is not an affiliate of the Advisor, the Company will pay the Advisor or an affiliate an oversight fee equal to 1.0% of the gross revenues of the property managed. Neither the Advisor nor its affiliates will be paid an oversight fee if the Company contracts with a third party to provide property management services for fees greater than (i) 1.5% of gross revenues received for management of the Company’s properties located in the U.S. or (ii) 2.0% of gross revenues received for management of the Company’s properties located outside of the U.S. For the nine months ended September 30, 2017, the Company incurred property management fees of $1,673, which is included within Management fees on the consolidated statement of operations. The Property management fee is unpaid and is included with Due to related parties in the accompanying consolidated balance sheet at September 30, 2017. There were no such amounts incurred during the period February 2, 2016 through December 31, 2016.

Leasing Commissions. If the Advisor or an affiliate is the Company’s primary leasing agent, then the Company will pay customary leasing fees in amount that is usual and customary in that geographic area for that type of property. For the nine months ended September 30, 2017, no such amounts have been incurred by the Company.

Refinancing Coordination Fee. If the Advisor provides services in connection with the refinancing of any debt that the Company obtains and uses to finance properties or other permitted investments, or refinancing of any debt that is assumed, directly or indirectly, in connection with the acquisition of properties or other permitted investments, the Company will pay the Advisor a refinancing coordination fee equal to 0.75% of the amount available or outstanding under such refinancing or assumed debt. Refinancing shall also include restructuring, workouts or other recapitalization of any debt. As of September 30, 2017, no such amounts have been incurred by the Company.

Disposition Fees. For substantial assistance in connection with the sale of investments and based on the services provided, as determined by the independent directors, the Company will pay a disposition fee in an amount equal to 2.0% of the contract sales price of each real property or other investment sold; provided, however, in no event may the disposition fee paid to the Advisor or its affiliates, when added to the real estate commissions paid to unaffiliated third parties, exceed the lesser of a competitive real estate commission or an amount equal to 6.0% of the contract sales price. If the Company takes ownership of a property as a result of a workout or foreclosure of a debt investment, the Company will pay a disposition fee upon the sale of such property.

The Company will not pay a disposition fee upon the maturity, prepayment, workout, modification or extension of a debt investment unless there is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of: (i) 1.0% of the principal amount of the debt prior to such transaction; or (ii) the amount of the fee paid by the borrower in connection with such transaction. For the nine months ended September 30, 2017, no such amounts have been incurred by the Company.

Selling Commissions and Dealer Manager Fees

The Dealer Manager is a registered broker-dealer affiliated with CFI. The Company entered into an agreement with the Dealer Manager and is obligated to pay various commissions and fees with respect to the Class A, Class T and Class I shares distributed in the Offering. For providing such services, the Dealer Manager will receive fees. CFI will pay a portion of selling commissions and all of the dealer manager fees, up to a total of 4.0% of gross offering proceeds from the sale of Class A shares and Class T shares, as well as 1.5% of Class I shares, incurred in connection with the Offering. The Company will reimburse such expenses (i) immediately prior to or upon the occurrence of a liquidity event, including (A) the listing of the Company’s common stock on a national securities exchange or (B) a merger, consolidation or a sale of substantially all of the Company’s

 

23


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

assets or any similar transaction or any transaction pursuant to which a majority of the Company’s board of directors then in office are replaced or removed, or (ii) upon the termination of the advisory agreement by the Company or by the Advisor. In each such case, the Company only will reimburse CFI after the Company has fully invested the proceeds from the Offering and the Company’s stockholders have received, or are deemed to have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such invested capital. As of September 30, 2017, the likelihood, probability and timing of each of the possible occurrences or events listed in the preceding sentences (i) and (ii) in this paragraph are individually and collectively uncertain. Additionally, whether or not the Company will have fully invested the proceeds from the Offering and also whether the Company’s stockholders will have received, or are deemed to have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6% cumulative, non-compound annual pre-tax return on such invested capital at the time of any such occurrence or event is also uncertain. To date, CFI has paid Sponsor Support totaling $224,961 which will be subject to reimbursement by the Company to CFI in the event of these highly conditional circumstances. The following summarizes these fees:

Selling Commissions. Selling commissions payable to the Dealer Manager consist of (i) up to 1.0% of gross offering proceeds paid by CFI for Class A shares and Class T shares and (ii) up to 5.0% and 2.0% of gross offering proceeds from the sale of Class A shares and Class T shares, respectively, in the IPO. All or a portion of such selling commissions may be re-allowed to participating broker-dealers. No selling commissions will be payable with respect to Class I shares. For the nine months ended September 30, 2017, the Company incurred $278,310 of selling commissions, which is included within Additional paid-in capital on the consolidated balance sheet. At September 30, 2017, $56,240 of Sponsor Support has been recorded and $42,656 has been reimbursed by CFI. On October 3, 2017, the Company received the remaining Sponsor Support payment due of $13,584 related to the nine month period ended September 30, 2017. There were no such amounts incurred during the period February 2, 2016 through December 31, 2016.

Dealer Manager Fees. Dealer manager fees payable to the Dealer Manager consist of up to 3.0% of gross offering proceeds from the sale of Class A shares and Class T shares sold in the IPO and up to 1.5% of gross offering proceeds from the sale of Class I shares sold in the IPO, all of which will be paid by CFI. A portion of such dealer manager fees may be re-allowed to participating broker-dealers as a marketing fee. For the nine months ended September 30, 2017, the Company recorded $168,721 of dealer manager fees, which is included within Additional paid-in capital on the consolidated balance sheet. All of the Sponsor Support related to dealer manager fees have been recorded and $155,699 has been reimbursed by CFI as of September 30, 2017. On October 3, 2017, the Company received the remaining Sponsor Support payment due of $13,022 related to the period ended September 30, 2017 as it relates to dealer manager fees. There were no such amounts incurred during the period February 2, 2016 through December 31, 2016.

 

24


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The following table summarizes the above mentioned fees and expenses incurred by the Company for the nine months ended September 30, 2017 and for the period February 2, 2016 through December 31, 2016:

 

     Financial Statement
Location
     Due to related
parties as of
December 31,
2016
     Nine months ended
September 30, 2017
     Due to related
parties as of
September 30,
2017
 

Type of Fee or Reimbursement

         Incurred      Paid     

Management Fees

              

Asset management fees

     Management fees      $ —        $ 30,101      $ —        $ 30,101  

Property management and oversight fees

     Management fees        —          1,673        —          1,673  

Organization, Offering and Operating Expense Reimbursements

              

Operating expenses

    

General and
administrative
expenses
 
 
 
     —          813,819        —          813,819  

Organization expenses

    

General and
administrative
expenses
 
 
 
     —          1,690        —          1,690  

Offering costs

    
Additional
paid-in capital
 
 
     —          92,745        —          92,745  

Commissions and Fees

              

Selling commissions and dealer manager fees, net

    


Additional
paid-in capital

 
 
     —          222,070        222,070        —    

Distribution fees

    
Additional
paid-in capital
 
 
     —          78,843        544        78,299  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

      $ —        $ 1,240,941      $ 222,614      $ 1,018,327  
     

 

 

    

 

 

    

 

 

    

 

 

 

Note 10 — Variable Interest Entities

As of September 30, 2017, the Company has identified a VIE, in which the Company has determined itself not to be the primary beneficiary. Therefore, the Company has not consolidated such VIE. As of September 30, 2017, the Company’s maximum exposure to loss from its interest in a VIE includes $4,601,531 related to the investment in real estate-related assets.

Note 11 — Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the sale of the Company’s shares of capital stock, acquisition and disposition decisions and certain other responsibilities. In the event that the Advisor is unable or unwilling to provide such services, the Company would be required to find alternative service providers.

Note 12 — Commitments and Contingencies

As of September 30, 2017 and December 31, 2016, the Company was not subject to litigation nor was the Company aware of any material litigation pending against it.

 

25


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 13 — Fair Value Measurements

Under normal market conditions, the fair value of an investment is the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Additionally, there is a hierarchal framework that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and the state of the market place, including the existence and transparency of transactions between market participants. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following levels within the fair value hierarchy:

Level 1 measurement — quoted prices are available in active markets for identical investments as of the measurement date. The Company does not adjust the quoted price for these investments.

Level 2 measurement — quoted prices are available in markets that are not active or model inputs are based on inputs that are either directly or indirectly observable as of the measurement date.

Level 3 measurement — pricing inputs are unobservable and include instances where there is minimal, if any, market activity for the investment. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:

Loan payable — The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. The current period liabilities’ carrying and fair values exclude net deferred financing costs. These financial instruments are valued using Level 2 inputs. As of September 30, 2017, the estimated fair value of the Company’s debt approximate its carrying value of $4,500,000 (gross of deferred financing costs). The Company did not have any outstanding debt at December 31, 2016.

Other financial instruments — The Company considers the carrying values of its Cash and cash equivalents, restricted cash, Stock subscriptions receivable, Prepaid expenses and other assets, Accounts payable and accrued expenses, other liabilities, due from related party, due to related parties and distributions payable to approximate their fair values because of the short period of time between their origination and their expected realization as well as their highly-liquid nature. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments.

Note 14 — Subsequent Events

Additional Purchase of Interest in Real Estate-Related Assets

The Company purchased 4,800 additional interests in the DST totaling $4,800,000. As of November 14, 2017, the Company’s interest in the DST was 67.74%.

 

26


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Status of the Offering

As of November 10, 2017, the Company had sold an aggregate of 613,487 shares of its common stock (consisting of 306,542 Class A shares, 152,398 Class T shares, and 154,547 Class I shares) in the Offering resulting in net proceeds of $15,036,399 to the Company as payment for such shares.

Distributions

On November 8, 2017, the Company’s board of directors authorized, and the Company declared, distributions for November 2017, December 2017, and January 2018, based on an amount equal to $0.004253787 per day per share of Class A common stock, Class I common stock and Class T common stock, less, for holders of the shares of Class T common stock, the distribution fees that are payable with respect to shares of Class T common stock.

 

27


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical data, this discussion contains forward-looking statements about Rodin Global Property Trust, Inc.’s (the “Company”) business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. The Company’s actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed under “Risk Factors” in the Company’s Registration Statement on Form S-11 (File No. 333-214130) (the “Registration Statement”) and elsewhere in this Quarterly Report on Form 10-Q. The Company does not undertake to revise or update any forward-looking statements.

Forward-Looking Statements

This Form 10-Q contains forward-looking statements about the Company’s business, including, in particular, statements about the Company’s plans, strategies and objectives. You can generally identify forward-looking statements by the Company’s use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. These statements include the Company’s plans and objectives for future operations, including plans and objectives relating to future growth and availability of funds, and are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to these statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond the Company’s control. Although the Company believes the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate and the Company’s actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements. In light of the significant uncertainties inherent in these forward looking statements, the inclusion of this information should not be regarded as a representation by the Company or any other person that the Company’s objectives and plans, which the Company considers to be reasonable, will be achieved.

Factors that could cause the Company’s results to be materially different include, but are not limited to the following:

 

    the Company’s ability to successfully raise capital in the Initial Public Offering (“IPO”), defined as the sale of class A, I, and T shares after the date the minimum offering requirement had been met, excluding shares sold pursuant to the distribution reinvestment plan, and up to $250 million in shares pursuant to its distribution reinvestment plan (“DRP”) (the IPO and the DRP collectively, the “Offering”);

 

    the Company’s dependence on the resources and personnel of Rodin Global Property Advisors, LLC (the “Advisor”), Cantor Fitzgerald Investors, LLC (“CFI”), and their affiliates, including the Advisor’s ability to source and close on attractive investment opportunities on the Company’s behalf;

 

    the performance of the Advisor and CFI;

 

    the Company’s ability to deploy capital quickly and successfully and achieve a diversified portfolio consistent with target asset classes;

 

    the Company’s ability to access financing for its investments;

 

    the Company’s liquidity;

 

    the Company’s ability to make distributions to its stockholders, including from sources other than cash flow from operations;

 

    the effect of paying distributions to stockholders from sources other than cash flow provided by operations;

 

    the lack of a public trading market for the Company’s shares;

 

28


    the impact of economic conditions on the tenants, borrowers and others who the Company depends on to make payments to it;

 

    the Advisor’s ability to attract and retain sufficient personnel to support growth and operations;

 

    the Company’s limited operating history;

 

    difficulties in economic conditions generally and the real estate, debt, and securities markets specifically;

 

    changes in the Company’s business or investment strategy;

 

    environmental compliance costs and liabilities;

 

    any failure in the Advisor’s due diligence to identify all relevant facts in the Company’s underwriting process or otherwise;

 

    the impact of market and other conditions influencing the availability of equity versus debt investments and performance of the Company’s investments relative to its expectations and the impact on the actual return on invested equity, as well as the cash provided by these investments;

 

    defaults on or non-renewal of leases by tenants, lease renewals at lower than expected rent, or failure to lease properties at all or on favorable rents and terms;

 

    the degree and nature of the Company’s competition;

 

    risks associated with using debt to fund the Company’s business activities, including re-financing and interest rate risks;

 

    illiquidity of investments in the Company’s portfolio;

 

    the Company’s ability to finance its transactions;

 

    the effectiveness of the Company’s risk management systems;

 

    the Company’s ability to realize current and expected returns over the life of its investments;

 

    the Company’s ability to maintain effective internal controls;

 

    regulatory requirements with respect to the Company’s business, as well as the related cost of compliance;

 

    the Company’s ability to qualify and maintain its qualification as a REIT for U.S. federal income tax purposes and limitations imposed on the Company’s business by its status as a REIT;

 

    changes in laws or regulations governing various aspects of the Company’s business and non-traded REITs generally, including, but not limited to, changes implemented by the Department of Labor or FINRA and changes to laws governing the taxation of REITs;

 

    the Company’s ability to maintain its exemption from registration under the Investment Company Act;

 

    general volatility in domestic and international capital markets and economies;

 

    effect of regulatory actions, litigation and contractual claims against the Company and its affiliates, including the potential settlement and litigation of such claims;

 

    the impact of any conflicts arising among the Company and CFI and its affiliates;

 

    the adequacy of the Company’s cash reserves and working capital;

 

    increases in interest rates, operating costs, or greater than expected capital expenditures;

 

    the timing of cash flows, if any, from the Company’s investments; and

 

    other risks associated with investing in the Company’s targeted investments.

 

29


The foregoing list of factors is not exhaustive. Factors that could have a material adverse effect on the Company’s operations and future prospects are set forth in “Risk Factors” section of the Company’s Registration Statement on Form S-11 (File No. 333-214130). The factors set forth in the Risk Factors section could cause the Company’s actual results to differ significantly from those contained in any forward-looking statement contained in this report.

Overview

The Company is a Maryland corporation that intends to qualify as a real estate investment trust (“REIT”) beginning with the taxable year ending December 31, 2017. The Company is externally managed by the Advisor, a Delaware limited liability company and wholly-owned subsidiary of the Company’s sponsor, CFI. The Company is a commercial real estate company formed to invest in and manage a diversified portfolio of income-producing commercial properties and other real estate-related assets. The Company intends to invest primarily in the acquisition of single-tenant net leased commercial properties located in the United States (“U.S.”), United Kingdom and other European countries.

The Company was incorporated in the State of Maryland on February 2, 2016 under the name Rodin Global Access Property Trust, Inc. On September 12, 2016, the Company changed its name to Rodin Global Property Trust, Inc.

The Company plans to own substantially all of its assets and conduct its operations through Rodin Global Property Trust Operating Partnership, LP (the “Operating Partnership”). The Company is the sole general partner and limited partner of the Operating Partnership and CFI’s wholly owned subsidiary, Rodin Global Property Trust OP Holdings, LLC (the “Special Unit Holder”), is the sole special unit holder of the Operating Partnership.

On February 2, 2016, the Company was capitalized with a $201,001 investment by CFI. The Company has registered with the Securities and Exchange Commission (“SEC”) an offering of up to $1.25 billion in shares of common stock, consisting of up to $1.0 billion in shares in the Company’s IPO and up to $250 million in shares pursuant to its DRP. The Company’s Registration Statement was declared effective by the SEC on March 23, 2017. On May 18, 2017, the Company satisfied the minimum offering requirement for the Offering (the “Minimum Offering Requirement”) as a result of the purchase of $2.0 million in Class I shares by CFI. As of November 10, 2017, the Company had sold 305,676 Class A shares, 152,117 Class T shares, and 154,445 Class I shares of common stock in the IPO, as well as 866 Class A shares, 281 Class T shares, and 102 Class I shares in the DRP for aggregate net proceeds of $15,036,399.

The Company determines its NAV as of the end of each quarter. The board of directors adjusts the offering prices of each class of shares such that the purchase price per share for each class equals the NAV per share as of the most recent valuation date, as determined on a quarterly basis, plus applicable upfront selling commissions and dealer manager fees, less applicable Sponsor Support. The Company intends to publish any adjustment to the NAV and the corresponding adjustments to the offering prices of its shares ordinarily within 45 days after the end of the applicable fiscal quarter. As of September 30, 2017, the Company’s NAV was $24.89 per Class A share, $24.88 per Class T share and $24.89 per Class I share. Accordingly, effective November 21, 2017, the new offering price will be $26.20 per Class A share, $25.39 per Class T share and $24.89 per Class I share. For further discussion of the Company’s NAV calculation, please see “ — Net Asset Value”.

The Company intends to invest primarily in the acquisition of single-tenant net leased commercial properties. The Company may also originate and invest in loans related to net leased commercial properties and invest in commercial real estate-related securities. All properties will be acquired by the Company and managed by the Advisor. The number and type of properties or real estate-related securities that the Company acquires will depend upon real estate market conditions, the amount of proceeds the Company raises in its offerings and other circumstances existing at the time the Company is acquiring such assets. As of September 30, 2017, the

 

30


Company owned one property located in Grand Rapids, Michigan (the “GR Property”), and acquired an interest in a Delaware Statutory Trust (“DST”), which owns seven properties through an investment in real estate-related assets (individually a “DST Property” and collectively the “DST Properties”).

The Company has no direct employees and has retained the Advisor to manage its affairs on a day-to-day basis. The Advisor’s responsibilities include, but are not limited to, providing real estate-related services, including services related to originating investments, negotiating financing, and providing property-level asset management services, property management services, leasing and construction oversight services and disposition services, as needed. The Advisor is a wholly owned subsidiary of CFI and therefore, the Advisor and CFI are related parties. The Advisor and its affiliates receive, as applicable, compensation, fees and expense reimbursements for services related to the investment and management of the Company’s assets. Such entities receive fees, distributions and other compensation during the offering, acquisition, operational and liquidation stages.

The Company is not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting real estate generally, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from acquiring properties or real estate-related securities, other than those referred to in the Registration Statement.

Operating Highlights

Q3 2017 Activity

 

    Acquired the GR Property for an aggregate acquisition cost of approximately $8.0 million

 

    Acquired an approximate 33.07% beneficial interest in a DST for approximately $4.6 million from an indirect wholly owned subsidiary of CFI

 

    Issued approximately 274,098 shares of common stock in the Offering for gross proceeds of approximately $7.0 million

 

    Total debt increased by approximately $4.5 million, from $0 to $4.5 million

Portfolio Information

Acquisition of Real Estate

On July 11, 2017, the Company, through a wholly-owned subsidiary of its Operating Partnership, acquired the fee simple interest in the GR Property located at 3596 Alpine Avenue, Grand Rapids, MI. The Company acquired the GR Property from an unrelated third party not affiliated with the Company.

See below for information regarding the acquisition:

 

Location:

  

Grand Rapids, MI

Sector:

  

Retail

Acquisition Date:

  

July 2017

Acquisition Cost:

  

$8,019,247

Sq. Feet:

  

14,552 sq. ft.

Lease

The GR Property is 100% leased to Walgreen Co. (“Walgreens”), a subsidiary of Walgreens Boots Alliance Inc. (NASDAQ: WBA). Walgreens is rated investment grade by Moody’s and Standards & Poor’s. The lease is a triple net lease whereby the tenant is required to pay substantially all operating expenses, including all costs to maintain and repair the roof and structure of the building, as well as property taxes, in addition to base rent.

 

31


The following table provides information about the GR Property relating to the lease commencement and termination dates, rentable square feet, annualized rental income, rental escalations and tenant termination options.

 

Lease Commencement Date

   Lease Termination
Date
   Rentable Square
Feet
   Annualized Rental
Income
   Rental
Escalations
   Tenant
Termination
Options

July 30, 2007

   July 31, 2082    14,552    $500,000    None    On July 31, 2032
and every 5 years
thereafter

Investment in Real Estate-Related Assets

During the third quarter, the Company, through its operating partnership, acquired 4,580 beneficial interests (the “Interests”) in CF Net Lease Portfolio IV DST, a Delaware Statutory Trust (the “DST”), for a purchase price of $4,580,000. Prior to the acquisition of the Interests, the DST was an indirect wholly-owned subsidiary of CFI. Each Interest represents a 0.0072214% ownership of the DST and the Interests purchased by the Company represented approximately 33.07% of the DST as of September 30, 2017.

Results of Operations

Revenue

The Company’s revenues consist primarily of rental income from triple net leased commercial properties. The Company also may incur certain operating expenses that are subject to reimbursement by its tenants, which would result in tenant reimbursement income.

The increase in revenue of approximately $105,248 for both the three and nine months ended September 30, 2017, as compared to the same periods in 2016, was primarily due to the acquisition of one rental income-producing property, the GR Property, subsequent to June 30, 2017. Rental income from the GR Property accounted for 100% and 100% of our total revenue for the three and nine months ended September 30, 2017. The Company did not have any rental income for the three and nine months ended September 30, 2016 as it had not commenced operations.

General and Administrative Expenses

The general and administrative expense consist primarily of operating expense reimbursements to the Advisor, accounting fees and other professional fees.

The increase in general and administrative expenses of $965,327 and $997,205 during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016, was primarily due to increases in operating expense reimbursements to the Advisor relating to mostly, the ongoing business of the Company.

Management Fees

Pursuant to the advisory agreement with the Advisor and based upon the amount of the Company’s current invested assets, the Company is required to pay to the Advisor a monthly asset management fee and may pay a monthly property management fee to the Advisor or affiliate of the Advisor, if the Advisor or such affiliate serves as a property manager with respect to a particular property. Additionally, the Company may be required to reimburse certain expenses incurred by the Advisor in providing such asset management services, subject to limitations as set forth in the advisory agreement.

 

32


The increase in management fees of $31,774 during the three and nine months ended September 30, 2017, as compared to the same periods in 2016, was due to an increase in the Company’s average invested assets of $11,265,490 over the three and nine months ended September 30, 2017, compared to $0 over the three and nine months ended September 30, 2016.

Depreciation and Amortization

The increase in depreciation and amortization expenses of $51,311 for both the three and nine months ended September 30, 2017, as compared to the same periods in 2016, was primarily due to the acquisition of the GR Property. The Company did not incur any depreciation and amortization expenses during the three and nine months ended September 30, 2016.

Interest Expense

The increase in interest expense, net of $43,904 during the three and nine months ended September 30, 2017, as compared to the same period in 2016, was primarily due to an increase in the aggregate amount of debt outstanding of approximately $4.5 million during the three months ended September 30, 2017 as compared to $0 during the three and nine months ended September 30, 2016.

Interest expense also includes amortization of deferred financing costs.

Income from Investment in Real Estate-Related Assets

Income from investment in real estate-related assets is earned on the Company’s investment in the DST.

The increase in income from investment in real estate-related assets of $21,531 during the three and nine months ended September 30, 2017, as compared to the same period in 2016, was primarily due to an increase in the Company’s share of the real estate-related assets’ net income. The Company had no income from real estate-related assets in 2016.

Funds from Operations and Modified Funds from Operations

The Company defines modified funds from operations (“MFFO”) in accordance with the definition established by the Investment Program Association, or IPA. The Company’s computation of MFFO may not be comparable to other REITs that do not calculate MFFO using the current IPA definition. MFFO is calculated using funds from operations (“FFO”). The Company computes FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss (computed in accordance with accounting principles generally accepted in the United States, or U.S. GAAP), excluding gains or losses from sales of depreciable properties, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, impairment charges on depreciable property owned directly or indirectly and after adjustments for unconsolidated/uncombined partnerships and joint ventures. FFO, as defined by NAREIT, is a computation made by analysts and investors to measure a real estate company’s cash flow generated by operations. The Company’s computation of FFO may not be comparable to other REITs that do not calculate FFO in accordance with the current NAREIT definition. MFFO excludes from FFO the following items:

 

    acquisition fees and expenses;

 

    straight-line rent and amortization of above or below intangible lease assets and liabilities;

 

    amortization of discounts, premiums and fees on debt investments;

 

    non-recurring impairment of real estate-related investments;

 

    realized gains (losses) from the early extinguishment of debt;

 

33


    realized gains (losses) on the extinguishment or sales of hedges, foreign exchange, securities and other derivative holdings except where the trading of such instruments is a fundamental attribute of our business;

 

    unrealized gains (losses) from fair value adjustments on real estate securities, including CMBS and other securities, interest rate swaps and other derivatives not deemed hedges and foreign exchange holdings;

 

    unrealized gains (losses) from the consolidation from, or deconsolidation to, equity accounting;

 

    adjustments related to contingent purchase price obligations; and

 

    adjustments for consolidated and unconsolidated partnerships and joint ventures calculated to reflect MFFO on the same basis as above.

FFO and MFFO should not be considered as an alternative to net income (determined in accordance with U.S. GAAP) as an indication of performance. In addition, FFO and MFFO do not represent cash generated from operating activities determined in accordance with U.S. GAAP and are not a measure of liquidity. FFO and MFFO should be considered in conjunction with reported net income and cash flows from operations computed in accordance with U.S. GAAP, as presented in the financial statements.

The following table presents a reconciliation of FFO to net loss:

 

     Nine Months Ended
September 30, 2017
 

Net Loss

   $ (997,415

Adjustments:

  

Real estate depreciation and amortization

     51,311  
  

 

 

 

Funds from Operations

   $ (946,104
  

 

 

 

The following table presents a reconciliation of FFO to MFFO:

 

     Nine Months Ended
September 30, 2017
 

Funds from Operations

   $ (946,104

Adjustments:

  

Amortization of above-market lease intangibles

     6,311  

Acquisition expenses

     4,815  

Other real estate investment related amortization

     4,441  

Organization expenses

     1,690  
  

 

 

 

Modified Funds from Operations

   $ (928,847
  

 

 

 

Net Asset Value

On November 8, 2017 the Company’s board of directors approved an estimated NAV as of September 30, 2017 of $24.89 per share for Class A and I, and $24.88 for Class T. The calculation of the Company’s estimated NAV was performed by Robert A. Stanger & Co., Inc. (“Stanger”), its independent valuation firm, in accordance with the procedures described in the “Net Asset Value Calculation and Valuation Procedures” section of the Company’s prospectus and under the oversight of the Company’s board of directors. Although the independent valuation firm performs the calculation of the Company’s estimated NAV, the Company’s board of directors is solely responsible for the determination of the Company’s estimated NAV.

 

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Summary of Methodology

In accordance with our current valuation procedures, our NAV was based in part upon the acquisition price paid (before acquisition fees and expenses) of our investment in real estate, the estimated market value of our real estate-related DST investment and the fair market value of our loan payable, as outlined in more detail below.

Estimated Market Value of Unconsolidated Real Estate-Related DST Investment

While the Company’s investment in the DST occurred in the quarter-ended September 30, 2017, the basis of such investment was the price paid for the DST Properties in November 2016. Given the time between the DST’s investment in the DST Properties and the current valuation date for our NAV, the Advisor, with the Company’s board of director’s consent, determined that an appraisal of the DST Properties and an estimate of the mortgage debt encumbering the DST Properties at or around the NAV valuation date was appropriate in determining the value of the Company’s DST investment.

DST Properties Appraisal

The Company engaged an appraisal firm licensed in the states in which the DST Properties are located to provide its appraised market value of each of the DST Properties as of June 2017 (the “DST Property Appraisals”). The DST Property Appraisals were prepared utilizing both a direct capitalization analysis and a sales comparison approach. The direct capitalization analysis was given primary consideration in the value conclusion within the DST Property Appraisals, with the sales comparison approach providing supporting analyses. The capitalization rates applied in the direct capitalization analysis were based upon several factors, including property type, location and age; terms of the leases encumbering the DST Properties; lessee credit quality; industry surveys and data, information on capitalization rates from sale transactions of properties similar to the DST Properties; and other factors deemed appropriate. The capitalization rate applied to the estimated net operating income for the 12-month period following the DST Property Appraisals’ valuation date was 5.50%, producing an aggregate value of the DST Properties (before reflecting the Company’s ownership interest in the DST) of approximately $39,870,000.

DST Properties Mortgage Debt

Stanger performed a valuation of the mortgage debt encumbering the DST Properties in a manner as outlined below in “Fair Value of Long-Term Debt” and subject to the assumptions and limiting conditions contained therein. The discount rate applied to the future debt payments of the mortgage debt encumbering the DST Properties was 4.70%, producing a fair value estimate of the mortgage debt encumbering the DST Properties of $22,426,138, before reflecting the Company’s ownership interest in the DST.

In performing the calculation of the NAV, Stanger then added the other tangible net assets of the DST to the appraised value of the DST Properties less the estimated value of the DST Properties Mortgage Debt and multiplied the resulting total by the Company’s ownership interest in the DST (approximately 33.07%) to produce the value of the Company’s investment in the DST as of the valuation date.

Fair Value of Long Term Debt

Stanger performed a valuation of the property-level debt by reviewing available market data for comparable liabilities and applying a selected discount rate to the stream of future debt payments. The discount rate was selected based on several factors including U.S. Treasury yields as of the valuation date, as well as loan-specific items such as loan-to-value ratio, debt service coverage ratio, collateral property location, age, type, lease term and lessee credit quality, prepayment terms, and maturity and loan origination date. The discount rate applied to the future debt payments of our long-term debt was approximately 4.16%. Stanger’s valuation of the long-term debt is based in part on the acquisition price (before fees and expenses) of the direct real estate investment

 

35


associated with such long-term debt as well as certain other assumptions and limiting conditions, including: (i) Stanger was provided with loan documents and other factual loan information by the Advisor and has relied upon and assumed that such information is correct in all material respects and no warranty is given by Stanger as to the accuracy of such information; (ii) the collateral property is assumed to be free and clear of liens (other than the mortgage being valued); (iii) information furnished by others, upon which all or portions of Stanger’s value opinion is based, is believed to be reliable but has not been verified, and no warranty is given as to the accuracy of such information; and (iv) the mortgage is assumed to be salable, transferable or assumable between parties and is further assumed not to be in default. Stanger’s opinion of the long-term debt value was predicated on the above assumptions.

Estimated NAV

In performing the calculation of the estimated NAV, Stanger added the acquisition price paid (before acquisition costs and fees) of the direct real estate investment, the estimated value of the investment in the DST and other tangible assets, consisting of cash and equivalents, receivables and prepaid assets and subtracted the estimated fair market value of the long-term debt and other tangible liabilities, consisting of Accounts payable and accrued expenses, but excluding amounts owed to the Advisor for reimbursement of O&O (consistent with our valuation procedures), and consideration of any other amounts due to the Advisor or affiliates for repayment of the Sponsor Support or amounts due to the Special Unit Holder upon a liquidation of the Company to produce an estimated NAV as of September 30, 2017 of $24.89 per share for Class A and I, and $24.88 for Class T shares.

The determination of NAV involves a number of assumptions and judgments, including estimates of the Advisor’s interest in disposition proceeds (if any). These assumptions and judgments may prove to be inaccurate. There can be no assurance that a stockholder would realize $24.89 per share of Class A and I common stock or $24.88 for Class T common stock if the Company were to liquidate or engage in another type of liquidity event today. In particular, the Company’s September 30, 2017 NAV is not based on an appraisal of the fair market value of the Company’s real estate portfolio at that date and does not consider fees or expenses that may be incurred in providing a liquidity event. We believe the methodology of determining the Company’s NAV conforms to the Investment Program Association’s Practice Guideline for Valuations of Publicly Registered Non-Listed REITs (April 2013) and is prepared in accordance with the procedure described in the “Net Asset Value Calculation and Valuation Procedures” section of the Company’s prospectus. In addition, the Company’s board of directors periodically reviews the Company’s NAV policies and procedures.

The purchase price per share for each class of the Company’s common stock will generally equal the prior quarter’s NAV per share, as determined quarterly, plus applicable selling commissions and dealer manager fees. The NAV for each class of shares is based on the value of the Company’s assets and the deduction of any liabilities, and any distribution fees applicable to such class of shares.

 

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The following table provides a breakdown of the major components of the Company’s NAV:

 

Components of NAV

   September 30, 2017  

Investment in real estate

   $ 7,936,508  

Investment in real estate-related assets

     5,805,102  

Cash and cash equivalents

     612,453  

Other assets

     452,795  

Debt obligations

     (4,500,000

Due to related parties

     (845,593

Accounts payable and other liabilities

     (218,702

Distribution fee payable the following month(1)

     (942

Sponsor Support repayment / special unit holder interest in liquidation

     —    
  

 

 

 

Net Asset Value

   $ 9,241,621  
  

 

 

 

Number of outstanding shares

     371,334  
  

 

 

 

 

Note: (1) Distribution fee only relates to Class T shares.

 

NAV Per Share

   Class A
Shares
     Class T
Shares
     Class I
Shares
     Total  

Total Gross Assets at Fair Value

   $ 5,924,513      $ 3,118,606      $ 5,763,739      $ 14,806,858  

Distribution fees due and payable

     —          (942      —          (942

Debt obligations

     (1,800,536      (947,787      (1,751,677      (4,500,000

Due to related parties

     (338,338      (178,098      (329,157      (845,593

Accounts payable and other liabilities

     (87,507      (46,063      (85,132      (218,702
  

 

 

    

 

 

    

 

 

    

 

 

 

Quarterly NAV

   $ 3,698,132      $ 1,945,716      $ 3,597,773      $ 9,241,621  

Number of outstanding shares

     148,578        78,210        144,546        371,334  
  

 

 

    

 

 

    

 

 

    

NAV per share

   $ 24.89      $ 24.88      $ 24.89     
  

 

 

    

 

 

    

 

 

    

The following table reconciles stockholders’ equity per the Company’s consolidated balance sheet to the Company’s NAV:

 

Reconciliation of Stockholders’ Equity to NAV

   September 30,
2017
 

Stockholders’ equity under U.S. GAAP

   $ 7,971,498  

Adjustments:

  

Unrealized appreciation of real estate-related assets

     1,203,571  

Organization and offering costs

     94,435  

Acquisition costs

     (82,739

Deferred financing costs

     (81,936

Accrued distribution fee(1)

     77,357  

Accumulated depreciation and amortization

     59,435  
  

 

 

 

NAV

   $ 9,241,621  
  

 

 

 

 

Note: (1) Accrued distribution fee only relates to Class T shares.

 

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The following details the adjustments to reconcile GAAP stockholders’ equity to the Company’s NAV:

Unrealized appreciation of real estate-related assets

Our investments in real estate-related assets are presented at historical cost, including acquisition costs, in our GAAP consolidated financial statements. As such, any increases in the fair market value of our investments in real estate are not included in our GAAP results. For purposes of determining our NAV, our investments in real estate are recorded at fair value.

Organization and offering costs

The Advisor has agreed to pay the Initial O&O costs on the Company’s behalf through May 18, 2018, the Escrow Break Anniversary. Such costs will be reimbursed to the Advisor, ratably, by the Company, over 36 months beginning on May 19, 2018, subject to a maximum of 1% of gross offering proceeds of the IPO. Under U.S. GAAP, the Company’s reimbursement liability pertaining to the Initial O&O costs is recorded as Due to related parties in the Company’s consolidated balance sheet. For NAV, such costs will be recognized as a reduction in NAV as they are reimbursed.

Acquisition costs

The Company capitalizes acquisition costs incurred with the acquisition of its investment in real estate in accordance with GAAP. Such acquisition costs are not included in the value of real estate investments for purposes of determining NAV.

Deferred financing costs

Costs incurred in connection with obtaining financing are capitalized and amortized over the term of the related loan in accordance with GAAP. Such deferred financing costs are not included in the value of debt for purposes of determining NAV.

Accrued distribution fee

Accrued distribution fee represents the accrual for the full cost of the distribution fee for Class T shares. Under U.S. GAAP the Company accrued the full cost of the distribution fee as an offering cost at the time it sells the Class T shares. For purposes of NAV the Company recognizes the distribution fee as a reduction of NAV on a quarterly basis as such fee is paid.

Accumulated depreciation and amortization

The Company depreciates its investments in real estate and amortizes certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not considered for purposes of determining NAV.

Sensitivity Analysis

Assuming all other factors remain unchanged, the table below presents the estimated increase or decrease to our September 30, 2017 NAV for a change in the going-in capitalization rate used in the DST Properties Appraisal together with a 5% change in the discount rates used to value our long-term debt and the DST Properties Mortgage Debt:

 

Sensitivity Analysis

   Range of NAV (Class A & I)     Range of NAV (Class T)  
     Low     Concluded     High     Low     Concluded     High  

Estimated Per Share NAV

   $ 22.64     $ 24.89     $ 27.10     $ 22.63     $ 24.88     $ 27.09  

Capitalization Rate - DST Properties

     5.78     5.50     5.23     5.78     5.50     5.23

Discount Rate - Long-Term Debt

     4.37     4.16     3.95     4.37     4.16     3.95

Discount Rate - DST Properties Mortgage Debt

     4.94     4.70     4.47     4.94     4.70     4.47

 

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Liquidity and Capital Resources

The Company is dependent upon the net proceeds from the Offering to conduct its principal operations. The Company will obtain the capital required to purchase real estate and real estate-related investments and conduct its operations from the proceeds of the Offering, any future offerings, from secured or unsecured financings from banks and other lenders and from any undistributed funds from its operations.

If the Company is unable to raise substantial funds in the Offering, it will make fewer investments resulting in less diversification in terms of the type, number and size of investments it makes and the value of an investment in the Company will fluctuate with the performance of the limited assets it acquires. Further, the Company will have certain fixed operating expenses, including certain expenses as a REIT, regardless of whether it is able to raise substantial funds in the Offering. The Company’s inability to raise substantial funds would increase its fixed operating expenses as a percentage of gross income, reducing its net income and limiting its ability to make distributions.

The Company uses debt financing as a source of capital. The Company’s charter limits the Company from incurring debt if the Company’s borrowings exceed 300% of the cost of the Company’s net assets, which is estimated to approximate 75% of the cost of its tangible assets (before deducting depreciation or other non-cash reserves), though the Company may exceed this limit under certain circumstances. Once the Company has fully deployed the proceeds of the Offering, the Company expects its debt financing and other liabilities may likely be approximately 50% of the cost of its tangible assets (before adjusting for depreciation or other non-cash reserves), although it may exceed this level during the offering stage.

On July 11, 2017, in connection with the purchase of the GR Property, a wholly-owned subsidiary of the Operating Partnership entered into a loan agreement (the “GR Loan”) with UBS AG with an outstanding principal amount of $4,500,000. As of September 30, 2017, the carrying amount of the GR Loan on the consolidated balance sheets is $4,419,877, which is net of $80,123 of deferred financing costs. The GR Loan provides for monthly interest payments and bears interest at an initial fixed rate of 4.1064% per annum through the anticipated repayment date, July 6, 2027, and thereafter at a revised interest rate of 3.0% per annum plus the greater of the initial interest rate or the 10 year swap yield through the maturity date, June 30, 2032. As of September 30, 2017, the Company’s debt ratio is 46.4%.

In addition to making investments in accordance with its investment objectives, the Company uses its capital resources to make certain payments to the Advisor and Cantor Fitzgerald & Co. (the “Dealer Manager”). In conjunction with the IPO, payments are made to the Dealer Manager for selling commissions, dealer manager fees, and distribution fee payments. With regards to the total organization and offering costs, including selling commissions, dealer manager fees, distribution fees and reimbursement of other organization and offering costs, will not exceed 15% of the gross proceeds of the Offering, including proceeds from sales of shares under the Company’s DRP. Additionally, the Company expects to make payments to the Advisor in connection with the management of its assets and costs incurred by the Advisor in providing services to the Company.

The Company anticipates that over time adequate cash will be generated from operations to fund its operating and administrative expenses, continuing debt service obligations and the payment of distributions. However, the Company’s ability to finance its operations is subject to some uncertainties. The Company’s ability to generate working capital is dependent on its ability to attract and retain tenants, investments that generate cash flow, and the economic and business environments of the various markets in which the Company’s properties will be located. The Company’s ability to sell its assets is partially dependent upon the state of real estate markets and the ability of purchasers to obtain financing at reasonable commercial rates. In general, the Company policy is to pay distributions from cash flow from operations but should operations not be sufficient to fund cash distributions, the Company has entered into a distribution support agreement with CFI to purchase up to $5 million in Class I shares from the Company (less the amount of any shares purchased by CFI in order to satisfy the Minimum Offering Requirement, through March 23, 2019, to provide additional cash support

 

39


distributions (the “Distribution Support Agreement”). However, if the Company has not generated sufficient cash flow from its operations and other sources, such as from the Distribution Support Agreement, or the Advisor’s deferral, suspension and/or waiver of its fees and expense reimbursements, to fund distributions, the Company may use the proceeds from the Offering for such purposes. Moreover, the Company’s board of directors may change its policy to generally pay distributions from cash flow from operations, in its sole discretion, at any time.

Cash Flows

The following table provides a breakdown of the net change in the Company’s cash and cash equivalents:

 

     Nine Months Ended
September 30, 2017
 

Cash flows from operating activities

   $ 63,122  

Cash flows from investing activities

     (12,599,247

Cash flows from financing activities

     12,947,577  
  

 

 

 

Increase in cash and cash equivalents

   $ 411,452  
  

 

 

 

Operating Activities

During the nine months ended September 30, 2017, net cash provided by operating activities increased $63,122, compared to $0 of net cash provided by operating activities for the nine months ended September 30, 2016. The change was primarily due to the acquisition of a rental income-producing property, the GR Property, subsequent to September 30, 2016, a net increase in working capital accounts of $1.02 million, an increase in depreciation and amortization expenses related to real estate assets and liabilities and deferred financing costs totaling $0.06 million, offset by an increase in income from real estate-related assets of $0.02 million and an increase in net loss of $1.00 million (see “ — Results of Operations”).

Investing Activities

Net cash used in investing activities increased $12.6 million to $12.6 million for the nine months ended September 30, 2017, compared to $0 for the nine months ended September 30, 2016. The increase was primarily due to the acquisition of the GR Property for an aggregate acquisition cost of $8.0 million and the purchase of an interest in real estate-related assets of $4.6 million during the nine months ended September 30, 2017.

Financing Activities

During the nine months ended September 30, 2017, net cash provided by financing activities was $12.9 million, compared to net cash provided by financing activities of $0 million for the nine months ended September 30, 2016. The change was primarily due to proceeds from common stock issued of $8.6 million and the issuance of a loan payable of $4.5 million.

Distributions

On June 15, 2017, the Company’s board of directors authorized, and the Company declared, distributions for July 2017, based on an amount equal to $0.004253787 per day per share of Class A common stock, Class I common stock and Class T common stock, less, for holders of the shares of Class T common stock, the distribution fees that are payable with respect to shares of Class T common stock. The distributions began to accrue on July 11, 2017. On August 14, 2017, the Company’s board of directors authorized, and the Company declared, distributions for the period from August 2017 to November 14, 2017, in an amount equal to $0.004253787 per day. The distributions are payable by the 5th business day following each month end to stockholders of record at the close of business each day during the prior month.

 

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The amount of distributions payable to the Company’s stockholders is determined by the board of directors and is dependent on a number of factors, including funds available for distribution, the Company’s financial condition, capital expenditure requirements, requirements of Maryland law and annual distribution requirements needed to qualify and maintain its status as a REIT. The Company board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore distribution payments are not assured.

Under the terms of the Distribution Support Agreement, if the cash distributions the Company pays for any calendar quarter exceed the Company’s MFFO for such quarter, CFI will purchase Class I shares following the end of such calendar quarter for a purchase price equal to the amount by which the distributions paid on such shares exceed the MFFO for such quarter. In such instance, the Company may be paying distributions from proceeds of the shares purchased by CFI or its affiliates, not from cash flow from operations. Class I shares purchased by CFI pursuant to the Distribution Support Agreement will be eligible to receive all distributions payable by the Company with respect to Class I shares.

The following table summarizes our distributions declared during the nine months ended September 30, 2017. From February 2, 2016 (date of the Company’s initial capitalization) through September 30, 2016, the Company had not commenced principal operations and as such, no distributions were made during this period.

 

     Nine Months Ended
September 30, 2017
 
     Amount      Percent  

Distributions

     

Paid in cash

   $ 38,326        47

Payable

     36,710        45

Reinvested in shares

     6,927        8
  

 

 

    

 

 

 

Total distributions

   $ 81,963        100
  

 

 

    

 

 

 

Sources of Distributions:

     

Operating cash flows

   $ 62,578        76

Offering proceeds

     19,385        24
  

 

 

    

 

 

 

Total sources of distributions

   $ 81,963        100
  

 

 

    

 

 

 

From inception through September 30, 2017, the Company declared $81,963 of distributions to its shareholders (including those reinvested in shares pursuant to the DRP), compared to the Company’s total aggregate FFO loss of $946,104 and the Company’s total aggregate net loss of $997,415 for that period. During our offering and investment stages, the Company incurs certain acquisition-related expenses in connection with its real estate investments, which are recorded as reductions to net income (loss) and FFO. From inception through September 30, 2017, we incurred acquisition related expenses totaling $82,739.

Election as a REIT

The Company intends to elect and qualify to be taxed as a REIT under Sections 856 through 860 of the Code, effective for the Company’s taxable year ending December 31, 2017. The Company believes that it will be organized and will operate in such a manner as to qualify for taxation as a REIT under the Code. The Company intends to operate in such a manner to qualify for taxation as a REIT, but no assurance can be given that the Company will operate in a manner so as to qualify or remain qualified as a REIT. In order to qualify and continue to qualify for taxation as a REIT, the Company must distribute annually at least 90% of the Company’s REIT taxable income. REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, as well as federal income and excise taxes on its undistributed income.

 

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Critical Accounting Policies

Below is a discussion of the accounting policies that management believes are critical to the Company’s principal operations. The Company considers these policies critical because they involve significant judgments and assumptions, and they require estimates about matters that are inherently uncertain and they are important for understanding and evaluating the Company’s reported financial results. The accounting policies have been established to conform with generally accepted accounting principles in the United States (“U.S. GAAP”). The preparation of the financial statements in accordance with U.S. GAAP requires management to use judgments in the application of such policies. These judgments affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in the Company’s financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of the Company’s results of operations to those of companies in similar businesses.

Reimbursement of Organization and Offering Costs

The Advisor has agreed to pay, on behalf of the Company, all organizational and offering costs (including legal, accounting, and other costs attributable to the Company’s organization and offering, but excluding upfront selling commissions, dealer manager fees and distribution fees) (“Initial O&O Costs”) through the Escrow Break Anniversary. The Company is not required to reimburse the Advisor for payment of the Initial O&O Costs prior to the Escrow Break Anniversary. Following the Escrow Break Anniversary, the Company will reimburse the Advisor for payment of the Initial O&O Costs ratably over a 36-month period; provided, however, that the Company shall not be obligated to pay any amounts that as a result of such payment would cause the aggregate payments for Initial O&O Costs (less selling commissions, dealer manager fees and distribution fees) paid to the Advisor to exceed 1% of gross offering proceeds of the IPO as of such payment date. Any amounts not reimbursed in any period shall be included in determining any reimbursement for a subsequent period.

Variable Interest Entities

A Variable Interest Entity (“VIE”) is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases the qualitative analysis on the Company’s review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company will reassess the initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company will determine whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for us or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the Company’s business activities and other interests. The Company will reassess the determination of whether it is the primary beneficiary of a VIE each reporting period. Significant judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIE’s and general market conditions. As of September 30, 2017, the Company concluded that it did have an investment in a VIE and because the Company is not the primary beneficiary it will not consolidate such entities, as described in

 

42


“Note 10 — Variable Interest Entities” in its accompanying consolidated financial statements included in Part I Item 1. “Financial Statements — Notes to Consolidated Financial Statements”.

Voting Interest Entities

A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company will not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party. The Company will perform on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.

Accounting for Investments

Operating Real Estate

Operating real estate will be carried at historical cost less accumulated depreciation. The Company follows the purchase method for an acquisition of operating real estate, where the purchase price is allocated to tangible assets such as land, building, tenant and land improvements and other identified intangibles. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their useful life. Ordinary repairs and maintenance will be expensed as incurred. Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets.

Real Estate Debt Investments

Real estate debt investments will be generally intended to be held to maturity and, accordingly, will be carried at cost, net of unamortized loan fees, premium, discount and unfunded commitments. Real estate debt investments that are deemed to be impaired will be carried at amortized cost less a loan loss reserve, if deemed appropriate. Real estate debt investments where the Company does not have the intent to hold the loan for the foreseeable future or until its expected payoff will be classified as held for sale and recorded at the lower of cost or estimated value.

Real Estate Securities

The Company will classify its real estate securities investments as available for sale on the acquisition date, which will be carried at fair value. Unrealized gains (losses) will be recorded as a component of accumulated other comprehensive income, or OCI. However, the Company may elect the fair value option for certain of its available for sale securities, and as a result, any unrealized gains (losses) on such securities are recorded in earnings.

Investments in Real Estate-Related Assets

Non-controlling, unconsolidated ownership interests in an entity may be accounted for using the equity method, at fair value or the cost method. Under the equity method, the investment will be adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities will be recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of preferred returns and allocation formulas, if any, as described in such governing documents. Equity

 

43


method investments will be recognized using a cost accumulation model in which the investment will be recognized based on the cost to the investor, which includes acquisition expenses. Acquisition expenses incurred directly in connection with the investment in a joint venture will be capitalized and amortized using the straight-line method over the estimated useful life of the underlying joint venture assets. The Company may account for an investment in an unconsolidated entity at fair value by electing the fair value option. The company will record the change in fair value for its share of the projected future cash flow of such investments from one period to another in earnings. Any change in fair value attributed to market related assumptions will be considered unrealized gain (loss). The Company may account for an investment that does not qualify for equity method accounting or for which the fair value option was not elected using the cost method if the Company determines the investment is insignificant to the unconsolidated entity. Under the cost method, equity in earnings is recorded as dividends are received to the extent they are not considered a return of capital, which is recorded as a reduction of cost of the investment.

Fair Value Option

The fair value option provides an election that allows a company to irrevocably elect fair value for certain financial assets and liabilities on an instrument-by-instrument basis at initial recognition. The Company will generally not elect the fair value option for its assets and liabilities. However, it may elect to apply the fair value option for certain investments. Any change in fair value for assets and liabilities for which the election is made is recognized in earnings.

Fair Value Measurement

The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and categorized into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded at fair value on the Company’s consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

 

Level 1. Quoted prices for identical assets or liabilities in an active market.

 

Level 2. Financial assets and liabilities whose values are based on the following:

 

  a) Quoted prices for similar assets or liabilities in active markets.

 

  b) Quoted prices for identical or similar assets or liabilities in non-active markets.

 

  c) Pricing models whose inputs are observable for substantially the full term of the asset or liability.

 

  d) Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

 

Level 3. Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

Financial assets and liabilities recorded at fair value on a recurring or non-recurring basis will be classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Management will determine that prices are representative of fair value and assign the appropriate level in the fair value hierarchy through a review of available data, including observable and unobservable inputs, recent transactions, as well as its knowledge and experience of the market.

 

44


Revenue Recognition

Operating Real Estate

Rental and other income from operating real estate is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rentals and expense reimbursements to be paid in monthly installments. Rental income from leases is recognized on a straight-line basis over the term of the respective leases.

Real Estate Debt Investments

Interest income will be recognized on an accrual basis and any related premium, discount, origination costs and fees will be amortized over the life of the investment using the effective interest method. The amortization will be reflected as an adjustment to interest income in earnings. The amortization of a premium or accretion of a discount will be discontinued if such loan is reclassified to held for sale.

Credit Losses and Impairment on Investments

Operating Real Estate

The Company’s real estate portfolio will be reviewed on a periodic basis, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if management’s estimate of the aggregate expected future undiscounted cash flow generated by the property is less than the carrying value. In conducting this review, management considers global macroeconomic factors, real estate sector conditions and asset specific and other factors including the tenant’s financial well being. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value and recorded in impairment on operating real estate in the Company’s consolidated statements of operations. An allowance for a doubtful account for a tenant receivable is established based on a periodic review of aged receivables resulting from estimated losses due to the inability of tenants to make required rent and other payments contractually due. Additionally, the Company establishes, on a current basis, an allowance for future tenant credit losses on unbilled rent receivable based on an evaluation of the collectability of such amounts.

Real Estate Debt Investments

Loans will be considered impaired when, based on current information and events, it is probable that the Company will not be able to collect principal and interest amounts due according to the contractual terms. The Company will assess the credit quality of the portfolio and adequacy of loan loss reserves on a periodic basis. Significant judgment of management will be required in this analysis. The Company will consider the estimated net recoverable value of the loan as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and tenants and the competitive situation of the area where the underlying collateral is located. Because this determination will be based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the loan, a loan loss reserve will be recorded with a corresponding charge to provision for loan losses. The loan loss reserve for each loan will be maintained at a level that is determined to be adequate by management to absorb probable losses.

Income recognition will be suspended for a loan at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments will be applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in

 

45


doubt, contractual interest will be recorded as interest income when received, under the cash basis method until an accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. A loan will be written off when it is no longer realizable and/or legally discharged.

Real Estate Securities

Real estate securities for which the fair value option is elected will not be evaluated for other-than-temporary impairment, or OTTI, as any change in fair value will be recorded in earnings.

Real estate securities for which the fair value option is not elected will be evaluated for OTTI periodically. Impairment of a security will be considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a security has been deemed to be other-than-temporarily impaired due to (i) or (ii), the security is written down to its fair value and an OTTI is recognized in earnings. In the case of (iii), the security is written down to its fair value and the amount of OTTI is then bifurcated into: (a) the amount related to expected credit losses and (b) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses will be recognized in earnings. The remaining OTTI related to the valuation adjustment will be recognized as a component of accumulated OCI. Once the OTTI is recorded, this will become the new amortized cost basis, and the difference between the expected cash flows and the new amortized cost basis will be accreted through interest income.

Real estate securities which are not high-credit quality will be considered to have an OTTI if the security has an unrealized loss and there has been an adverse change in expected cash flow. The amount of OTTI will then be bifurcated as discussed above.

Income Taxes

The Company intends to elect to be taxed as a REIT and to comply with the related provisions under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ending December 31, 2017. As a REIT, the Company will not be subject to U.S. federal income tax with respect to the portion of the Company’s income that meets certain criteria and is distributed annually to stockholders. The Company intends to operate in a manner that allows it to meet the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. The Company will monitor the business and transactions that may potentially impact the Company’s REIT status. If the Company were to fail to meet these requirements, it could be subject to U.S. federal income tax on the Company’s taxable income at regular corporate rates. The Company would not be able to deduct distributions paid to stockholders in any year in which it fails to qualify as a REIT. The Company would also be disqualified for the four taxable years following the year during which qualification was lost unless the Company was entitled to relief under specific statutory provisions.

Recent Accounting Pronouncements

For recent accounting pronouncements, refer to “Note 2 — Summary of Significant Accounting Policies” in the accompanying consolidated financial statements included in Part I Item 1. “Financial Statements — Notes to Consolidated Financial Statements”.

Emerging Growth Company

The Company is and will remain an “Emerging Growth Company,” as defined in the JOBS Act, until the earliest to occur of (i) the last day of the fiscal year during which the Company’s total annual gross revenues equal or exceed $1 billion (subject to adjustment for inflation); (ii) the last day of the fiscal year following the fifth anniversary of the IPO; (iii) the date on which the Company has, during the previous three-year period, issued

 

46


more than $1 billion in non-convertible debt; or (iv) the date on which the Company is deemed a large accelerated filer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Additionally, the Company is eligible to take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in the Company’s periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. The Company has chosen to “opt out” of that extended transition period and as a result the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that the Company’s decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. Otherwise, the Company has not yet made a decision whether to take advantage of any or all of the exemptions available to it under the JOBS Act.

Inflation

Some of the Company’s leases with tenants may contain provisions designed to mitigate the adverse impact of inflation. These provisions generally increase rental rates during the term of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). The Company may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions. However, the Company’s net leases will generally require the tenant to pay its allocable share of operating expenses, which may include common area maintenance costs, real estate taxes and insurance. This may reduce the Company’s exposure to increases in costs and operating expenses resulting from inflation.

Off-Balance Sheet Arrangements

As of September 30, 2017, the Company had no off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the Company’s financial condition, revenue and expenses, results of operations, liquidity, capital expenditures, or capital resources.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. The Company’s interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to manage overall borrowing costs. To achieve these objectives, from time to time, the Company may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate interest rate risk with respect to various debt instruments. The Company would not hold or issue these derivative contracts for trading or speculative purposes. As of September 30, 2017, there are no such hedging contract outstanding. The Company does not have any foreign operations and thus is not exposed to foreign currency fluctuations.

Interest Rate Risk

As of September 30, 2017, the Company had fixed rate debt of $4.5 million, and therefore, is not exposed to interest rate changes in LIBOR.

Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet

 

47


contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company is subject to tenant, geographic and industry concentrations. Any downturn of the economic conditions in one or more of these tenants, states or industries could result in a material reduction the Company’s cash flows or material losses to the Company. At September 30, 2017, all of the properties are 100% leased to Walgreens.

The factors considered in determining the credit risk of the Company’s tenants include, but are not limited to: payment history; credit status and change in status (credit ratings for public companies are used as a primary metric); change in tenant space needs (i.e., expansion/downsize); tenant financial performance; economic conditions in a specific geographic region; and industry specific credit considerations. The credit risk of the Company’s portfolio is reduced by the high quality of the Company’s existing tenant base, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of the Company’s portfolio to identify potential problem tenants.

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q was made under the supervision and with the participation of the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon this evaluation, the CEO and CFO have concluded that the disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

 

48


PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business. As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company is not a party to any material pending legal proceedings.

 

Item 1A. Risk Factors.

The Company has disclosed under the heading “Risk Factors” in its Registration Statement on Form S-11 (File No. 333-214130), filed with the SEC, risk factors which materially affect its business, financial condition or results of operations. There have been no material changes from the risk factors previously disclosed. You should carefully consider the risk factors set forth in the Registration Statement and the other information set forth elsewhere in this Quarterly Report on Form 10-Q. You should be aware that these risk factors and other information may not describe every risk facing the Company. Additional risks and uncertainties not currently known to the Company or that management currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Registered Securities.

Unregistered Sales of Equity Securities

None.

Use of Proceeds

On March 23, 2017, the Company’s Registrations Statement on Form S-11 (File No. 333-214310), was declared effective by the SEC. On May 18, 2017, the Company satisfied the Minimum Offering Requirement as a result of CFI purchasing $2.0 million in Class I shares at $25.00 per share. As of September 30, 2017, the current NAV per share of each class of the Company’s common stock was $24.89 per Class A share, $24.88 per Class T share and $24.89 per Class I share, plus applicable selling commissions and dealer manager fees. Effective November 21, 2017, the new offering price will be $26.20 per Class A share, $25.39 per Class T share and $24.89 per Class I share.

From the commencement of the Offering through September 30, 2017, the Company used proceeds of $4,580,000 to purchase an interest in real estate-related assets, $3,436,508 to make an acquisition of real estate, and $82,739 to pay acquisition costs incurred in connection with the purchases.

As of September 30, 2017, the Company issued the following shares of common stock and raised the following gross proceeds in connection with the Offering:

 

     Shares
sold
     Gross offering
proceeds
 

Offering

     363,154      $ 9,243,469  

For the period from the commencement of the Offering through September 30, 2017, the Company issued 363,154 shares of common stock generating total gross proceeds of $9,243,469.

During this time, the Company also incurred $222,070 in selling commissions net of Sponsor Support, and incurred $78,843 of distribution fees, in connection with the issuance and distribution of our registered securities.

The net proceeds received from the Offering, after deducting the total expenses incurred as described above, were $8,942,556. Consequently, as of September 30, 2017 the ending cash and cash equivalents balance increased by $411,452, and the Company recorded an increase in receivables of $446,153.

 

49


Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

During the nine months ended September 30, 2017, the Company did not receive any requests to repurchase any shares of common stock.

 

Item 3. Defaults Upon Senior Securities.

None.

 

Item 4. Mine Safety Disclosures.

Not applicable.

 

Item 5. Other Information.

None.

 

Item 6. Exhibits.

The exhibits listed below are included, or incorporated by reference, in this Quarterly Report on Form 10-Q.

 

50


EXHIBITS INDEX

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (and are numbered in accordance with Item 601 of Regulation S-K).

 

Exhibit

No.

  

Description

  3.1    Second Articles of Amendment and Restatement of Rodin Global Property Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 12, 2017)
  3.2    Second Amended and Restated Bylaws of Rodin Global Property Trust, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 12, 2017)
  4.1    Form of Subscription Agreement (incorporated by reference to Exhibit 4.1 to the Company’s Pre-Effective Amendment No. 2 to Form S-11 (File No. 333-214130), filed with the SEC on March 21, 2017)
  4.2    Form of Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.2 to the Company’s Pre-Effective Amendment No. 2 to Form S-11 (File No. 333-214130), filed with the SEC on March 21, 2017)
10.1    Agreement of Purchase and Sale by and between Barnes Development Walker, LLC and Cantor Real Estate Investment Management Investments, LLC dated May 16, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 12, 2017)
10.2    Loan Agreement between 3596 Alpine Ave, LLC and UBS AG dated July 11, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on July 12, 2017)
31.1*    Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*    Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*    Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*    XBRL (eXtensible Business Reporting Language). As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act and Section 18 of the Exchange Act

 

* Filed herewith

 

51


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

RODIN GLOBAL PROPERTY TRUST, INC.
By:  

/s/ Howard W. Lutnick

 

Howard W. Lutnick

Chief Executive Officer and Chairman of the Board of Directors

(Principal Executive Officer)

By:  

/s/ Steve Bisgay

 

Steve Bisgay

Chief Financial Officer

  (Principal Financial Officer and Principal Accounting Officer)

Dated: November 14, 2017

 

52


Annex D


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

OR

 

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: 333-214130

 

 

Rodin Global Property Trust, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   81-1310268

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

110 E. 59th Street, New York, NY   10022
(Address of principal executive offices)   (Zip Code)

(212) 938-5000

(Registrant’s telephone number, including area code)

 

 

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  ☒    No  ☐

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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      Accelerated filer  
Non-accelerated filer   ☒  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

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.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 10, 2017, the registrant had 52,684 Class A shares, 144,418 Class I shares, and 13,478 Class T shares of $0.01 par value common stock outstanding.

 

 

 


RODIN GLOBAL PROPERTY TRUST, INC.

TABLE OF CONTENTS

 

     Page  

PART I - FINANCIAL INFORMATION

  

Item 1. Financial Statements (unaudited)

  

Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016

     4  

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2017 and for the Three Months Ended June 30, 2016 and for the Period February 2, 2016 (date of initial capitalization) through June 30, 2016

     5  

Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2017 and for the Period February 2, 2016 (date of initial capitalization) through December 31, 2016

     6  

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and for the Period February 2, 2016 (date of initial capitalization) through June 30, 2016

     7  

Notes to Consolidated Financial Statements

     8  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     18  

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     30  

Item 4. Controls and Procedures.

     30  

PART II - OTHER INFORMATION

     31  

Item 1. Legal Proceedings.

     31  

Item 1A. Risk Factors.

     31  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     31  

Item 3. Defaults Upon Senior Securities.

     32  

Item 4. Mine Safety Disclosures.

     32  

Item 5. Other Information.

     32  

Item 6. Exhibits.

     32  

Signatures

     33  


PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

RODIN GLOBAL PROPERTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     June 30, 2017     December 31, 2016  

Assets

    

Cash and cash equivalents

   $ 2,406,934     $ 201,001  

Stock subscriptions receivable

     18,800       —    

Due from related party

     1,666       —    
  

 

 

   

 

 

 

Total assets

   $ 2,427,400     $ 201,001  
  

 

 

   

 

 

 

Liabilities and Equity

    

Liabilities

    

Accounts payable

   $ 31,110     $ —    

Due to related parties

     28,500       —    
  

 

 

   

 

 

 

Total liabilities

     59,610       —    
  

 

 

   

 

 

 

Stockholders’ equity

    

Controlling interest

    

Preferred stock, $0.01 par value per share, 50,000,000 and 0 shares authorized, and 0 issued and outstanding at June 30, 2017 and December 31, 2016, respectively

     —         —    

Class A common stock, $0.01 par value per share, 160,000,000 and 300,000 shares authorized, and 10,536 and 8,180 issued and outstanding at June 30, 2017 and December 31, 2016, respectively

     106       82  

Class T common stock, $0.01 par value per share, 200,000,000 and 0 shares authorized, and 4,100 and 0 issued and outstanding at June 30, 2017 and December 31, 2016, respectively

     41       —    

Class I common stock, $0.01 par value per share, 40,000,000 and 0 shares authorized, and 82,600 and 0 issued and outstanding at June 30, 2017 and December 31, 2016, respectively

     826       —    

Additional paid-in capital

     2,397,695       199,919  

Retained earnings (accumulated deficit)

     (31,878     —    
  

 

 

   

 

 

 

Total controlling interest

     2,366,790       200,001  

Non-controlling interests in subsidiaries

     1,000       1,000  
  

 

 

   

 

 

 

Total stockholders’ equity

     2,367,790       201,001  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,427,400     $ 201,001  
  

 

 

   

 

 

 

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

 

4


RODIN GLOBAL PROPERTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     For the Three Months
Ended June 30,
     For the Six Months
Ended June 30,
2017
    For the Period February 2,
2016 (date of initial
capitalization) through

June 30, 2016
 
     2017     2016       

Revenues

         

Rental revenues

   $ —       $ —        $ —       $ —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenues

     —         —          —         —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating expenses:

         

General and administrative expenses

     31,878       —          31,878       —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expenses

     31,878       —          31,878       —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

     (31,878     —          (31,878     —    

Net income (loss) attributable to non-controlling interest

     —         —          —         —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to common stockholders

   $ (31,878   $ —        $ (31,878   $ —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Weighted average shares outstanding

     48,969       8,180        28,686       8,180  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) per common share - basic and diluted

   $ (0.65   $ —        $ (1.11   $ —    
  

 

 

   

 

 

    

 

 

   

 

 

 

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

 

5


RODIN GLOBAL PROPERTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

 

    Stockholders’ Equity              
    Common Stock     Additional
Paid-In
Capital
                   
    Class A     Class T     Class I       Accumulated
Deficit
    Non-controlling
interest
    Total
Equity
 
    Shares     Amount     Shares     Amount     Shares     Amount          

Balance as of February 2, 2016

    8,180     $ 82       —       $ —         —       $ —       $ 199,919     $ —       $ 1,000     $ 201,001  

Common stock issued

    —         —         —         —         —         —         —         —         —         —    

Offering costs

    —         —         —         —         —         —         —         —         —         —    

Net income (loss)

    —         —         —         —         —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2016

    8,180     $ 82       —       $ —         —       $ —       $ 199,919     $ —       $ 1,000     $ 201,001  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Stockholders’ Equity              
    Common Stock     Additional
Paid-In
Capital
                   
    Class A     Class T     Class I       Accumulated
Deficit
    Non-controlling
interest
    Total
Equity
 
    Shares     Amount     Shares     Amount     Shares     Amount          

Balance as of January 1, 2017

    8,180     $ 82       —       $ —         —       $ —       $ 199,919     $ —       $ 1,000     $ 201,001  

Common stock issued

    2,356       24       4,100       41       82,600       826       2,230,700       —         —         2,231,591  

Offering costs

    —         —         —         —         —         —         (32,924     —         —         (32,924

Net income (loss)

    —         —         —         —         —         —         —         (31,878     —         (31,878
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2017

    10,536     $ 106       4,100     $ 41       82,600     $ 826     $ 2,397,695     $ (31,878   $ 1,000     $ 2,367,790  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

6


RODIN GLOBAL PROPERTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     For the Six Months
Ended June 30,
2017
    For the Period February 2,
2016 (date of initial
capitalization) through
June 30, 2016
 

Cash flows from operating activities:

    

Net income (loss)

   $ (31,878   $ —    

Changes in assets and liabilities:

    

Increase in accounts payable

     31,110       —    

Increase in due to related parties

     768    
  

 

 

   

 

 

 

Net cash provided by operating activities

     —         —    
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock, net

     2,205,933       —    
  

 

 

   

 

 

 

Net cash provided by financing activities

     2,205,933       —    
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     2,205,933       —    

Cash and cash equivalents, at beginning of period

   $ 201,001     $ 201,001  
  

 

 

   

 

 

 

Cash and cash equivalents, at end of period

   $ 2,406,934     $ 201,001  
  

 

 

   

 

 

 

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

 

7


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Organization and Business Purpose

Rodin Global Property Trust, Inc. (the “Company”) was formed on February 2, 2016 as a Maryland corporation with the expectation to qualify as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes. The Company’s consolidated financial statements include Rodin Global Property Trust Operating Partnership, L.P. (the “Operating Partnership”). Substantially all of the Company’s business is expected to be conducted through the Operating Partnership, a Delaware partnership formed on February 11, 2016. The Company is the sole general and limited partner of the Operating Partnership. Unless the context otherwise requires, the “Company” refers to the Company and the Operating Partnership.

On February 2, 2016, the Company was capitalized with a $200,001 investment by Cantor Fitzgerald Investors, LLC (the “Sponsor”) through the purchase of 8,180 Class A shares of common stock. In addition, a wholly owned subsidiary of the Sponsor, Rodin Global Property Trust OP Holdings, LLC (the “Special Unit Holder”), has invested $1,000 in the Operating Partnership and has been issued a special class of limited partnership units (“Special Units”), which is recorded as a non-controlling interest on the consolidated balance sheet as of June 30, 2017. On May 18, 2017, the Company satisfied the minimum offering requirement for the Offering (the “Minimum Offering Requirement”) as a result of the Sponsor’s purchase of $2.0 million in Class I shares.

The Company is a commercial real estate company formed to invest in and manage a diversified portfolio of income-producing commercial properties and other real estate-related assets. The Company intends to invest primarily in the acquisition of single-tenant net leased commercial properties located in the U.S., United Kingdom and other European countries.

As of June 30, 2017, the Company had not acquired any properties or other assets.

The Company is externally managed by Rodin Global Property Advisors, LLC (the “Advisor”), a Delaware limited liability company and wholly owned subsidiary of the Sponsor. The Sponsor is a wholly owned subsidiary of CFIM Holdings, LLC, which is a wholly owned subsidiary of Cantor Fitzgerald, L.P. (“CFLP”).

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements are presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with U.S. GAAP.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the balance sheet. Management believes that the estimates utilized in preparing the consolidated balance sheets are reasonable. As such, actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and its consolidated subsidiaries. The Company consolidates variable interest entities, or VIEs, where it is the primary

 

8


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

beneficiary and voting interest entities which are generally majority owned or otherwise controlled by the Company. All significant intercompany balances are eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. At times, balances with any one financial institution may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company believes it mitigates this risk by investing its cash with high-credit quality financial institutions.

Stock Subscriptions Receivable

Stock subscriptions receivable represent the purchase of stock for which the Company has not yet received payment from the purchaser. As of June 30, 2017 and December 31, 2016, the amount of stock subscriptions receivable was $18,800 and $0, respectively. The amount outstanding was received by the Company on July 6, 2017.

Due from Related Party

Due from related party represents amounts owed to the Company by the Sponsor for the reimbursement of selling commissions and marketing fees, which at June 30, 2017 and December 31, 2016 was $1,666 and $0, respectively.

Due to Related Parties

Due to related parties is comprised of amounts contractually owed by the Company to certain related parties under the terms of such related party agreements, which at June 30, 2017 and December 31, 2016 was $28,500 and $0, respectively. The amounts represent $24,316 relating to the reimbursement of organizational and offering costs to the Advisor and $4,184 relating to the distribution fees payable to Cantor Fitzgerald & Co. (the “Dealer Manager”), respectively.

Organization and Offering Costs

The Advisor has agreed to pay, on behalf of the Company, all organizational and offering costs (including legal, accounting, and other costs attributable to the Company’s organization and offering, but excluding upfront selling commissions, dealer manager fees and distribution fees) (“Initial O&O Costs”) through the first anniversary of the date on which the Company satisfies the Minimum Offering Requirement (the “Escrow Break Anniversary”). Following the Escrow Break Anniversary, the Company will reimburse the Advisor for payment of the organization and offering costs ratably over a 36-month period; provided, however, that the Company shall not be obligated to pay any amounts that as a result of such payment would cause the aggregate payments for organization and offering costs (less selling commissions, dealer manager fees and distribution fees) paid to the Advisor to exceed 1% of gross offering proceeds of the Offering as of such payment date. Any amounts not reimbursed in any period shall be included in determining any reimbursement liability for a subsequent period.

 

9


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

As of June 30, 2017 and December 31, 2016, the Advisor has incurred Initial O&O Costs on the Company’s behalf of $2,389,254 and $1,376,618, respectively. As of June 30, 2017 and December 31, 2016, the Company is obligated to reimburse the Advisor for Initial O&O costs in the amount of $24,316 and $0, respectively, which is included within Due to Related Parties in the accompanying consolidated balance sheets. As of June 30, 2017 and December 31, 2016, organizational costs of $768 and $0 were expensed and offering costs of $23,548 and $0 were charged to stockholders’ equity. The Company’s reimbursement liability for these amounts will be paid ratably over 36-months beginning in May, 2018.

Income Taxes

The Company intends to elect to be taxed as a REIT and to comply with the related provisions under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ending December 31, 2017. Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. The Company expects to have little or no taxable income prior to electing REIT status. To qualify as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. The Company may also be subject to certain state, local and franchise taxes. If the Company fails to meet these requirements, it will be subject to U.S. federal income tax, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders.

Earnings Per Share

Basic net income (loss) per share of common stock is determined by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. All classes of common stock are allocated net income (loss) at the same rate per share.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers (Topic 606).” Beginning January 1, 2018, companies will be required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also includes additional disclosure requirements. The new standard can be adopted either retrospectively to prior reporting periods presented or as a cumulative effect adjustment as of the date of adoption. The Company is currently evaluating the overall impact that ASU 2014-09 will have on the Company’s financial statements, as well as the method of adoption. Based on the Company’s preliminary assessment, the adoption of the new revenue recognition standard may accelerate the timing of revenue recognition where future contingencies exist.

In February 2016, the FASB issued ASU 2016-02, “Leases,” which will require organizations that lease assets to recognize the assets and liabilities for the rights and obligations created by those leases on their balance sheet. Additional disclosure regarding a company’s leasing activities will also be expanded under the new guidance. For public entities, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and requires a modified retrospective transition. The Company is currently evaluating the overall impact of this pronouncement on its consolidated financial statements from both a lessor and lessee standpoint.

In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business,” which addresses the definition of a business and provides a framework to determine if an asset or group of assets to be acquired is not

 

10


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

a business. The standard clarifies that when substantially all of the fair value of the gross assets to be acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset or set of assets is not a business. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, but early adoption is permitted. The Company has elected to early adopt this pronouncement.

Note 3 – Stockholders’ Equity

Initial Public Offering

On October 17, 2016, the Company filed a registration statement with the SEC on Form S-11 in connection with the initial public offering of up to $1.25 billion in shares of common stock, consisting of up to $1.0 billion in shares in its primary offering and up to $250 million in shares pursuant to is distribution reinvestment plan (the “Offering”). The registration statement was subsequently declared effective on March 23, 2017. On May 18, 2017, the Company satisfied the Minimum Offering Requirement for the Offering as a result of the Sponsor’s purchase of $2.0 million in Class I shares.

The Company determines its net asset value (“NAV”) as of the end of each quarter; commencing with the quarter ended June 30, 2017, as the Minimum Offering Requirement of $2.0 million had been satisfied. NAV, as defined, is consistent with the Company’s prospectus and excludes any Initial O&O costs, with such costs to be reflected in the Company’s NAV when the Company reimburses the Advisor for these costs. Prior to determining its NAV, the per share purchase price for shares of common stock in the Company’s primary offering was $26.32 per Class A Share, $25.51 per Class T Share and $25.00 per Class I Share. The price for each class of shares of common stock in the Company’s distribution reinvestment plan is $25.00. The Company’s board of directors adjusts the offering prices of each class of shares such that the purchase price per share for each class equals the NAV per share as of the most recent valuation date, as determined on a quarterly basis, plus applicable upfront selling commissions and dealer manager fees, less applicable support from the Sponsor of a portion of selling commissions and dealer manager fees.

The Company’s shares of common stock consist of Class A shares, Class T shares and Class I shares, all of which are collectively referred to herein as shares of common stock. As of June 30, 2017, the Company’s total number of authorized common shares was 400,000,000 consisting of 160,000,000 of Class A authorized common shares, 200,000,000 of Class T authorized common shares and 40,000,000 of Class I authorized common shares. The Company has the right to reallocate the shares of common stock offered between the Company’s primary offering and the Company’s distribution reinvestment plan. The Class A shares, Class T shares and Class I shares have identical rights and privileges, including identical voting rights, but have different upfront selling commissions and dealer manager fees and the Class T shares have an ongoing distribution fee. The per share amount of distributions on Class T shares is lower than the per share amount of distributions on Class A shares and Class I shares because of the on-going distribution fee that is payable with respect to Class T shares sold in the primary Offering.

The Sponsor pays a portion of selling commissions and all of the dealer manager fees (“Sponsor Support”), up to a total of 4.0% of gross offering proceeds from the sale of Class A shares, Class T shares and Class I shares, incurred in connection with the Offering. Selling commissions and dealer manager fees are presented net of Sponsor Support on the Company’s consolidated statements of equity. The Company will reimburse such expenses (i) immediately prior to or upon the occurrence of a liquidity event, including (A) the listing of the Company’s common stock on a national securities exchange or (B) a merger, consolidation or a sale of substantially all of the Company’s assets or any similar transaction or any transaction pursuant to which a majority of the Company’s board of directors then in office are replaced or removed, or (ii) upon the termination of the advisory agreement by the Company or by the Advisor. In each such case, the Company will only

 

11


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

reimburse the Sponsor after the Company has fully invested the proceeds from the Offering and the Company’s stockholders have received, or are deemed to have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such invested capital.

The Company also has 50 million shares of preferred stock, $0.01 par value, authorized. No shares of preferred stock are issued or outstanding.

The Dealer Manager, a related party, provides dealer manager services in connection with the Offering. The Offering is a best efforts offering, which means that the Dealer Manager is not required to sell any specific number or dollar amount of shares of common stock in the Offering, but will use its best efforts to sell the shares of common stock. The Offering is a continuous offering that will end no later than two years after the effective date of the Offering, or March 23, 2019, unless extended by the Company’s board of directors for up to an additional one year or beyond, as permitted by the Securities and Exchange Commission. The Company may continue to offer shares through the reinvestment plan after the primary offering terminates until the Company has sold $250 million in shares through the distribution reinvestment plan.

As of June 30, 2017, the Company had sold 97,236 shares of its common stock (consisting of 10,536 Class A shares, 4,100 Class T shares and 82,600 Class I shares) in the Offering for aggregate net proceeds of $2,426,400. As of December 31, 2016, the Company had sold 8,180 shares of its common stock (consisting of 8,180 Class A shares, 0 Class T shares and 0 Class I shares) in the Offering for aggregate net proceeds of $200,001.

Distributions

On June 15, 2017, the Company’s board of directors authorized, and the Company declared, distributions for July 2017, based on an amount equal to $0.004253787 per day per share of Class A common stock, Class I common stock and Class T common stock, less, for holders of the shares of Class T common stock, the distribution fees that are payable with respect to shares of Class T common stock. The distributions begin to accrue on July 11, 2017. The distributions are payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month.

The amount of distribution payable to the Company stockholders will be determined by the board of directors and is dependent on a number of factors, including funds available for distribution, the Company’s financial condition, capital expenditure requirements, requirements of Maryland law and annual distribution requirements needed to qualify and maintain its status as a REIT. The Company board of directors may reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.

To ensure that the Company has sufficient funds to cover cash distributions authorized and declared during the Offering, the Company and Sponsor entered into a distribution support agreement. The terms of the agreement provide that in the event that cash distributions exceed modified funds from operations (“MFFO”), defined as a supplemental measure to reflect the operating performance of a non-traded REIT, for any calendar quarter through March 23, 2019, the Sponsor shall purchase Class I shares from the Company in an amount equal to the distribution shortfall, up to $5,000,000 (less the amount from any shares purchased by the Sponsor in order to satisfy the Minimum Offering Requirement).

Redemptions

The Company has not redeemed any shares of its common stock as of June 30, 2017.

 

12


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

After stockholders have held their shares for at least one year, stockholders may be able to have their shares repurchased by the Company pursuant to the share repurchase program. The Company will repurchase shares at a price equal to, or at a discount from, NAV per share of the share class being repurchased subject to certain holding period requirements which effect the repurchase price as a percentage of NAV.

The share repurchase program includes numerous restrictions that limit stockholders’ ability to have their shares repurchased. Unless the Company’s board of directors determines otherwise, the funds available for repurchases in each quarter will be limited to the funds received from the distribution reinvestment plan in the prior quarter. The board of directors has complete discretion to determine whether all of such funds from the prior quarter’s distribution reinvestment plan will be applied to repurchases in the following quarter, whether such funds are needed for other purposes or whether additional funds from other sources may be used for repurchases. Further, during any calendar year, the Company may repurchase no more than 5% of the weighted-average number of shares outstanding during the prior calendar year. The Company also has no obligation to repurchase shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. The Company may amend, suspend or terminate the program for any reason upon 10 business days’ notice.

Non-controlling Interest

The Special Unit Holder has invested $1,000 in the Operating Partnership and has been issued a special class of limited partnership units as part of the overall consideration for the services to be provided by the advisor. This investment has been recorded as non-controlling interest on the consolidated balance sheets as of June 30, 2017 and December 31, 2016, respectively.

Note 4 – Related Party Transactions

Pursuant to the advisory agreement between the Company and the Advisor, and subject to certain restrictions and limitations, the Advisor will be responsible for managing the Company’s affairs on a day-to-day basis and for identifying, originating, acquiring and managing investments on behalf of the Company. For providing such services, the Advisor will receive fees and reimbursements from the Company. The following summarizes these fees and reimbursements.

Organization and Offering Expenses. The Company will reimburse the Advisor and its affiliates for organization and offering costs it incurs on the Company’s behalf but only to the extent that the reimbursement does not cause the selling commissions, the dealer manager fee and the other organization and offering expenses borne by the Company to exceed 15.0% of gross offering proceeds as of the date of the reimbursement. If the Company raises the maximum offering amount in the primary Offering and under the distribution reinvestment plan, the Company estimates organization and offering expenses (other than selling commissions, dealer manager fees and distribution fees), in the aggregate, to be $12,500,000 or 1% of gross offering proceeds. These organization and offering costs include all costs (other than selling commissions, dealer manager fees and distribution fees) to be paid by the Company in connection with the Offering, including legal, accounting, printing, mailing and filing fees, charges of the transfer agent, charges of the Advisor for administrative services related to the issuance of shares in the Offering, reimbursement of bona fide due diligence expenses of broker-dealers, and reimbursement of the Advisor for costs in connection with preparing supplemental sales materials. The Advisor has agreed to advance all of the organization and offering expenses on the Company’s behalf (other than selling commissions, dealer manager fees and distribution fees) through the Escrow Break Anniversary. The Company will reimburse the Advisor for such costs ratably over the 36 months following the Escrow Break Anniversary; provided that the Company will not be obligated to pay any amounts that as a result of such

 

13


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

payment would cause the aggregate payments for organization and offering costs paid by the Advisor to exceed 1% of gross offering proceeds as of such payment date. For purposes of calculating the NAV, the organization and offering costs paid by the Advisor through the Escrow Break Anniversary will not be reflected in the NAV until the Company reimburses the Advisor for these costs. As of June 30, 2017 and December 31, 2016, the Advisor had incurred $2,389,254 and $1,376,618, respectively, of organization and offering costs (other than selling commissions, dealer manager fees and distribution fees) on behalf of the Company. The amount the Company is liable for is limited to 1% of gross offering proceeds of the Offering, which at June 30, 2017 and December 31, 2016 is $24,316 and $0, respectively, and is included within Due to Related Parties in the accompanying consolidated balance sheet at June 30, 2017.

Acquisition Expenses. The Company does not intend to pay the Advisor any acquisition fees in connection with making investments. The Company will, however, provide reimbursement of customary acquisition expenses (including expenses relating to potential investments that the Company does not close), such as legal fees and expenses (including fees of in-house counsel of affiliates and other affiliated service providers that provide resources to the Company), costs of due diligence (including, as necessary, updated appraisals, surveys and environmental site assessments), travel and communication expenses, accounting fees and expenses and other closing costs and miscellaneous expenses relating to the acquisition or origination of the Company’s investments. While most of the acquisition expenses are expected to be paid to third parties, a portion of the out-of-pocket acquisition expenses may be paid or reimbursed to the Advisor or its affiliates.

Distribution Fees. Distribution fees are payable to the Dealer Manager with respect to the Company’s Class T shares only, all or a portion of which may be reallowed by the Dealer Manager to participating broker dealers. The distribution fees accrue daily and are calculated on outstanding Class T shares issued in the primary Offering in an amount equal to 1.0% per annum of (i) the gross offering price per Class T share in the primary Offering, or (ii) if the Company is no longer offering shares in a public offering, the most recently published per share NAV of Class T shares. The distribution fee will be payable monthly in arrears and will be paid on a continuous basis from year to year.

The Company will cease paying distribution fees with respect to each Class T share on the earliest to occur of the following: (i) a listing of shares of common stock on a national securities exchange; (ii) such Class T share is no longer outstanding; (iii) the Dealer Manager’s determination that total underwriting compensation from all sources, including dealer manager fees, sales commissions, distribution fees and any other underwriting compensation paid with respect to all Class A shares, Class T shares and Class I shares would be in excess of 10.0% of the gross proceeds of the primary Offering; or (iv) the end of the month in which the transfer agent, on the Company’s behalf, determines that total underwriting compensation with respect to the Class T primary shares held by a stockholder within his or her particular account, including dealer manager fees, sales commissions and distribution fees, would be in excess of 10.0% of the total gross offering price at the time of the investment in the primary Class T shares held in such account.

The Company will not pay any distribution fees on shares sold pursuant to the Company’s distribution reinvestment plan. The amount available for distributions on all Class T shares will be reduced by the amount of distribution fees payable with respect to the Class T shares issued in the primary Offering such that all Class T shares will receive the same per share distributions. As of June 30, 2017, the amount of distribution fees accrued by the Company is $4,184 and is included within Due to Related Parties in the accompanying consolidated balance sheet at June 30, 2017.

Asset Management Fees. Asset management fees consist of monthly fees equal to one-twelfth of 1.25% of the cost of the Company’s investments at the end of each month. In the case of investments made through joint

 

14


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

ventures, the asset management fee will be determined based on the Company’s proportionate share of the underlying investment.

Other Operating Expenses. The Company will reimburse the Advisor’s costs of providing administrative services, subject to the limitation that the Company generally will not reimburse the Advisor for any amount by which the total operating expenses at the end of the four preceding fiscal quarters exceeds the greater of (i) 2.0% of average invested assets (as defined in the advisory agreement) and (ii) 25.0% of net income other than any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of investments for that period. After the end of any fiscal quarter for which the total operating expenses exceed this 2%/25% limitation for the four fiscal quarters then ended, if the Company’s independent directors exercise their right to conclude that this excess was justified, this fact will be disclosed in writing to the holders of shares of the Company’s common stock within 60 days. If the independent directors do not determine such excess expenses are justified, the Advisor is required to reimburse the Company, at the end of the four preceding fiscal quarters, by the amount that the Company’s aggregate annual total operating expenses paid or incurred exceed this 2%/25% limitation. As of June 30, 2017, no operating expenses have been reimbursed by the Company to the Advisor.

Additionally, the Company will reimburse the Advisor for personnel costs in connection with other services; however, the Company will not reimburse the Advisor for (a) personnel costs in connection with the services for which the Advisor earns disposition fees, or (b) the salaries and benefits of the Company’s named executive officers.

Property Management and Oversight Fees. If the Advisor or an affiliate is a property manager with respect to a particular property, the Company will pay property management fees of 1.5% of gross revenues received for management of the Company’s properties located in the U.S. and 2.0% of gross revenues received for management of the Company’s properties located outside of the U.S. For services in overseeing property management services provided by any person or entity that is not an affiliate of the Advisor, the Company will pay the Advisor or an affiliate an oversight fee equal to 1.0% of the gross revenues of the property managed. Neither the Advisor nor its affiliates will be paid an oversight fee if the Company contracts with a third party to provide property management services for fees greater than (i) 1.5% of gross revenues received for management of the Company’s properties located in the U.S. or (ii) 2.0% of gross revenues received for management of the Company’s properties located outside of the U.S.

Leasing Commissions. If the Advisor or an affiliate is the Company’s primary leasing agent, then the Company will pay customary leasing fees in amount that is usual and customary in that geographic area for that type of property.

Refinancing Coordination Fee. If the Advisor provides services in connection with the refinancing of any debt that the Company obtains and uses to finance properties or other permitted investments, or refinancing of any debt that is assumed, directly or indirectly, in connection with the acquisition of properties or other permitted investments, the Company will pay the Advisor a refinancing coordination fee equal to 0.75% of the amount available or outstanding under such refinancing or assumed debt. Refinancing shall also include restructuring, workouts or other recapitalization of any debt.

Disposition Fees. For substantial assistance in connection with the sale of investments and based on the services provided, as determined by the independent directors, the Company will pay a disposition fee in an amount equal to 2.0% of the contract sales price of each real property or other investment sold; provided, however, in no event may the disposition fee paid to the Advisor or its affiliates, when added to the real estate commissions paid to

 

15


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

unaffiliated third parties, exceed the lesser of a competitive real estate commission or an amount equal to 6.0% of the contract sales price. If the Company takes ownership of a property as a result of a workout or foreclosure of a debt investment, the Company will pay a disposition fee upon the sale of such property.

The Company will not pay a disposition fee upon the maturity, prepayment, workout, modification or extension of a debt investment unless there is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of: (i) 1.0% of the principal amount of the debt prior to such transaction; or (ii) the amount of the fee paid by the borrower in connection with such transaction.

Cantor Fitzgerald & Co. serves as the Dealer Manager for the Offering. The Dealer Manager is a registered broker-dealer affiliated with the Sponsor. The Company entered into an agreement with the Dealer Manager and is obligated to pay various commissions and fees with respect to the Class A, Class T and Class I shares distributed in the Offering.

For providing such services, the Dealer Manager will receive fees. The following summarizes these fees:

Selling Commissions. Selling commissions payable to the Dealer Manager consist of (i) up to 1.0% of gross offering proceeds paid by the Sponsor for Class A shares and Class T shares and (ii) up to 5.0% and 2.0% of gross offering proceeds from the sale of Class A shares and Class T shares, respectively, in the primary Offering. All or a portion of such selling commissions may be re-allowed to participating broker dealers. No selling commissions will be payable with respect to Class I Shares. During the periods ended June 30, 2017 and December 31, 2016, the Company incurred $6,858 and $0 of selling commissions, respectively. The Company has received the sponsor support payment due in the amount of $1,666 related to the period ended June 30, 2017.

Dealer Manager Fees. Dealer manager fees payable to the Dealer Manager consist of up to 3.0% of gross offering proceeds from the sale of Class A shares and Class T shares sold in the primary Offering and up to 1.5% of gross offering proceeds from the sale of Class I shares sold in the primary Offering, all of which will be paid by the Sponsor. A portion of such dealer manager fees may be re-allowed to participating broker dealers as a marketing fee. During the six months ended June 30, 2017 and 2016, the Company incurred $4,998 and $0 of dealer manager fees, respectively, of which $4,998 has been reimbursed by the Sponsor.

The Sponsor will pay a portion of selling commissions and all of the dealer manager fees, up to a total of 4.0% of gross offering proceeds from the sale of Class A shares, Class T shares and Class I shares, incurred in connection with the Offering. The Company will reimburse such expenses (i) immediately prior to or upon the occurrence of a liquidity event, including (A) the listing of the Company’s common stock on a national securities exchange or (B) a merger, consolidation or a sale of substantially all of the Company’s assets or any similar transaction or any transaction pursuant to which a majority of the Company’s board of directors then in office are replaced or removed, or (ii) upon the termination of the advisory agreement by the Company or by the Advisor. In each such case, the Company only will reimburse the Sponsor after the Company has fully invested the proceeds from the Offering and the Company’s stockholders have received, or are deemed to have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such invested capital. As of June 30, 2017 and December 31, 2016, the amount owed to the Company by the Sponsor for such fees is $1,666 and $0, respectively, and is included within Due from Related Party in the accompanying consolidated balance sheet.

Note 5 – Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the sale of the Company’s shares of capital stock, acquisition and disposition decisions and certain

 

16


RODIN GLOBAL PROPERTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

other responsibilities. In the event that the Advisor is unable or unwilling to provide such services, the Company would be required to find alternative service providers.

Note 6 – Commitments and Contingencies

As of June 30, 2017 and December 31, 2016, the Company was not subject to litigation nor was the Company aware of any material litigation pending against it.

Note 7 – Subsequent Events

Real Estate Acquisition

On July 11, 2017, the Company, through a wholly-owned subsidiary of its Operating Partnership, acquired the fee simple interest in a retail property (the “Property”) located in Grand Rapids, MI at a contract purchase price of $7,936,508, exclusive of closing costs. The Company acquired the Property from Barnes Development Walker, LLC (the “Seller”). Seller is a third party and not affiliated with the Company.

The Property is 100% leased to Walgreen Co. (“Walgreens”), a subsidiary of Walgreens Boots Alliance Inc. (NASDAQ: WBA). Walgreens is rated investment grade by Moody’s and Standards & Poor’s. The lease is net whereby the tenant is required to pay substantially all operating expenses, including all costs to maintain and repair the roof and structure of the building, in addition to base rent.

On July 11, 2017, in connection with the purchase of the Property, a wholly-owned subsidiary of the Operating Partnership entered into a loan agreement (the “Loan”) with UBS AG with an outstanding principal amount of $4,500,000. The Loan provides for monthly interest payments and bears interest at an initial fixed rate of 4.1064% per annum through the anticipated repayment date July 6, 2027 and thereafter at a revised interest rate of 3.0% per annum plus the greater of the initial interest rate or the 10 year swap yield through the maturity date June 30, 2032.

Status of the Offering

As of August 10, 2017, the Company had sold an aggregate of 210,580 shares of its common stock (consisting of 52,684 Class A shares, 13,478 Class T shares, and 144,418 Class I shares) in the Offering resulting in net proceeds of $5,259,794 to the Company as payment for such shares.

 

17


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical data, this discussion contains forward-looking statements about Rodin Global Property Trust, Inc.’s (the “Company”) business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. The Company’s actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed under “Risk Factors” in the Company’s Registration Statement on Form S-11 (File No. 333-214130) (the “Registration Statement”) and elsewhere in this Quarterly Report on Form 10-Q. The Company does not undertake to revise or update any forward-looking statements.

Forward-Looking Statements

This Form 10-Q contains forward-looking statements about the Company’s business, including, in particular, statements about the Company’s plans, strategies and objectives. You can generally identify forward-looking statements by the Company’s use of forward-looking terminology such as “may” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. These statements include the Company’s plans and objectives for future operations, including plans and objectives relating to future growth and availability of funds, and are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to these statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond the Company’s control. Although the Company believes the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate and the Company’s actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements. In light of the significant uncertainties inherent in these forward looking statements, the inclusion of this information should not be regarded as a representation by the Company or any other person that the Company’s objectives and plans, which the Company considers to be reasonable, will be achieved.

Factors that could cause the Company’s results to be materially different include, but are not limited to the following:

 

    the Company’s ability to successfully raise capital in the initial public offering (the “Offering”);

 

    the Company’s dependence on the resources and personnel of Rodin Global Property Advisors, LLC (the “Advisor”), Cantor Fitzgerald Investors, LLC (the “Sponsor”) and their affiliates, including the Advisor’s ability to source and close on attractive investment opportunities on the Company’s behalf;

 

    the performance of the Advisor and the Sponsor;

 

    the Company’s ability to deploy capital quickly and successfully and achieve a diversified portfolio consistent with target asset classes;

 

    the Company’s ability to access financing for its investments;

 

    the Company’s liquidity;

 

    the Company’s ability to make distributions to its stockholders, including from sources other than cash flow from operations;

 

    the effect of paying distributions to stockholders from sources other than cash flow provided by operations;

 

    the lack of a public trading market for the Company’s shares;

 

    the impact of economic conditions on the tenants, borrowers and others who the Company depends on to make payments to it;

 

18


    the Advisor’s ability to attract and retain sufficient personnel to support growth and operations;

 

    the Company’s limited operating history;

 

    difficulties in economic conditions generally and the real estate, debt, and securities markets specifically;

 

    changes in the Company’s business or investment strategy;

 

    environmental compliance costs and liabilities;

 

    any failure in the Advisor’s due diligence to identify all relevant facts in the Company’s underwriting process or otherwise;

 

    the impact of market and other conditions influencing the availability of equity versus debt investments and performance of the Company’s investments relative to its expectations and the impact on the actual return on invested equity, as well as the cash provided by these investments;

 

    defaults on or non-renewal of leases by tenants, lease renewals at lower than expected rent, or failure to lease properties at all or on favorable rents and terms;

 

    the degree and nature of the Company’s competition;

 

    risks associated with using debt to fund the Company’s business activities, including re-financing and interest rate risks;

 

    illiquidity of investments in the Company’s portfolio;

 

    the Company’s ability to finance its transactions;

 

    the effectiveness of the Company’s risk management systems;

 

    availability of opportunities, including the Advisor’s ability to source and close on income-producing commercial properties and other real estate-related assets;

 

    the Company’s ability to realize current and expected returns over the life of its investments;

 

    the Company’s ability to maintain effective internal controls;

 

    regulatory requirements with respect to the Company’s business, as well as the related cost of compliance;

 

    the Company’s ability to qualify and maintain its qualification as a REIT for federal income tax purposes and limitations imposed on the Company’s business by its status as a REIT;

 

    changes in laws or regulations governing various aspects of the Company’s business and non-traded REITs generally, including, but not limited to, changes implemented by the Department of Labor or FINRA and changes to laws governing the taxation of REITs;

 

    the Company’s ability to maintain its exemption from registration under the Investment Company Act;

 

    general volatility in domestic and international capital markets and economies;

 

    effect of regulatory actions, litigation and contractual claims against the Company and its affiliates, including the potential settlement and litigation of such claims;

 

    the impact of any conflicts arising among the Company and the Sponsor and its affiliates;