UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~September 30, 2017~~March 31, 2020



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

For the transition period from to

Commission file number 000-54376

STRATEGIC REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)



Maryland		90-0413866
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

~~66 Bovet Road, Suite 100~~ P.O. Box 5049
San Mateo, ~~California, 94402~~	~~(650) 343-9300~~California	94402
(Address of Principal Executive ~~Offices; Zip Code)~~Offices)		(~~Registrant’s Telephone Number, Including Area~~Zip Code)

(650) 343-9300

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

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 ý No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, 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 ý No ¨☐

Indicate by check mark whether the registrant is a large accelerated ~~filed,~~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. ~~(Check one):~~



Large accelerated filer	¨☐	Accelerated filer	¨☐

Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~ ý	Smaller reporting company	ý☒

		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 ý

As of ~~November 1, 2017,~~May 6, 2020, there were ~~11,012,726~~10,739,814 shares of the registrant’s common stock issued and outstanding.

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

TABLE OF CONTENTS



		Page

PART I — FINANCIAL INFORMATION		3

Item 1.	Unaudited Condensed Consolidated Financial Statements	4

	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019	4

	Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	5

	Condensed Consolidated ~~Statement~~Statements of Equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and 2019	6

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2520

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3830

Item 4.	Controls and Procedures	3830

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	3931

Item 1A.	Risk Factors	3931

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3931

Item 3.	Defaults Upon Senior Securities	4032

Item 4.	Mine Safety Disclosures	4032

Item 5.	Other Information	4133

Item 6.	Exhibits	4234

Signatures		4335

PART I

FINANCIAL INFORMATION

The accompanying interim unaudited condensed consolidated financial statements as of and for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, have been prepared by Strategic Realty Trust, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, ~~2016,~~2019, as filed with the SEC on March ~~24, 2017~~18, 2020 (the ~~“2016~~“2019 Annual Report on Form 10-K”). The interim unaudited condensed consolidated financial statements herein should also be read in conjunction with the Notes to Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q. The results of operations for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, are not necessarily indicative of the operating results expected for the full year. The information furnished in the Company’s accompanying unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of operations, equity, and cash flows reflects all adjustments that, in management’s opinion, are necessary for a fair presentation of the aforementioned financial statements. Such adjustments are of a normal recurring nature.

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

~~CONDENDSED~~CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and per share amounts)

(unaudited)


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2020			2019
ASSETS
Investments in real estate
Land	$	16,451		$	15,510		$	13,791		$	13,536
Building and improvements	36,649			47,810			23,732			23,732
Tenant improvements	1,599			2,307			1,418			1,264
	54,699			65,627			38,941			38,532
Accumulated depreciation	(3,840		)	(8,163		)	(3,548		)	(3,308		)
Investments in real estate, net	50,859			57,464			35,393			35,224
Properties under development and development costs
Land	25,851			25,851			25,851			25,851
Buildings	589			601			550			554
Development costs	8,346			4,377			23,037			20,813
Properties under development and development costs	34,786			30,829			49,438			47,218
Cash and cash equivalents	3,645			3,130
Restricted cash	4,180			4,728
Cash, cash equivalents and restricted cash							6,306			7,241
Prepaid expenses and other assets, net	250			1,070			242			114
Tenant receivables, net of $5 and $38 bad debt reserve	763			1,269
Investments in unconsolidated joint ventures	2,739			4,761
Tenant receivables, net of $128 and $14 bad debt reserve							697			727
Lease intangibles, net	2,642			3,825			1,347			1,321
Assets held for sale	24,668			24,157			—			9,216
Deferred financing costs, net	1,164			264			—			105
TOTAL ASSETS ⁽¹⁾	$	125,696		$	131,497		$	93,423		$	101,166
LIABILITIES AND EQUITY
LIABILITIES
Notes payable, net	$	45,473		$	54,304		$	35,649		$	33,927
Accounts payable and accrued expenses	2,612			2,955			1,686			2,404
Amounts due to affiliates	2,538			111			71			140
Other liabilities	548			461			148			180
Liabilities related to assets held for sale	20,445			22,182			—			8,939
Below-market lease liabilities, net	819			3,049			281			296
Deferred gain on sale of properties to unconsolidated joint venture	668			1,202
TOTAL LIABILITIES ⁽¹⁾	73,103			84,264			37,835			45,886
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 12)
EQUITY
Stockholders’ equity
Preferred stock, $0.01 par value; 50,000,000 shares authorized, none issued and outstanding	—			—			—			—
Common stock, $0.01 par value; 400,000,000 shares authorized; 11,012,726 and 10,938,245 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	111			111
Common stock, $0.01 par value; 400,000,000 shares authorized; 10,739,814 and 10,759,721 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively							110			110
Additional paid-in capital	96,283			96,032			94,602			94,719
Accumulated deficit	(44,985		)	(50,676		)	(40,154		)	(40,571		)
Total stockholders’ equity	51,409			45,467			54,558			54,258
Non-controlling interests	1,184			1,766			1,030			1,022
TOTAL EQUITY	52,593			47,233			55,588			55,280
TOTAL LIABILITIES AND EQUITY	$	125,696		$	131,497		$	93,423		$	101,166

(1)

As of ~~September 30, 2017,~~March 31, 2020 and December 31, ~~2016,~~2019, includes approximately ~~$36.9~~$50.2 million and ~~$32.8~~$49.4 million, respectively, of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and approximately ~~$19.6~~$19.9 million and ~~$19.9~~$18.5 million, respectively, of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. Refer to Note 5.4. “Variable Interest Entities”.

See accompanying notes to condensed consolidated financial statements.

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except shares and per share amounts)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Revenue:
Rental and reimbursements	$	2,219		$	2,647		$	7,084		$	7,837		$	807		$	944

Expense:
Operating and maintenance	848			949			2,554			2,787			450			270
General and administrative	483			623			1,478			1,691			405			399
Depreciation and amortization	653			907			2,439			2,628			301			377
Transaction expense	—			165			85			445
Interest expense	449			550			1,505			1,660			171			189
	2,433			3,194			8,061			9,211			1,327			1,235
Operating loss	(214		)	(547		)	(977		)	(1,374		)	(520		)	(291		)

Other income (loss):
Equity in income (loss) of unconsolidated joint ventures	(19		)	16			(24		)	318
Equity in loss of unconsolidated joint ventures													—			(20		)
Net gain on disposal of real estate	—			—			9,131			614			947			—
Loss on extinguishment of debt	—			—			(80		)	(966		)
Income (loss) before income taxes	(233		)	(531		)	8,050			(1,408		)	427			(311		)
Income taxes	3			(19		)	(99		)	(153		)	(2		)	—
Net income (loss)	(230		)	(550		)	7,951			(1,561		)	425			(311		)
Net income (loss) attributable to non-controlling interests	(13		)	(21		)	293			(58		)	8			(7)
Net income (loss) attributable to common stockholders	$	(217	)	$	(529	)	$	7,658		$	(1,503	)	$	417		$	(304	)

Earnings (loss) per common share - basic and diluted	$	(0.02	)	$	(0.05	)	$	0.70		$	(0.14	)	$	0.04		$	(0.03	)

Weighted average shares outstanding used to calculate earnings (loss) per common share - basic and diluted	10,885,095			11,007,864			10,909,141			11,017,654			10,759,198			10,862,806

See accompanying notes to condensed consolidated financial statements.

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF EQUITY

(in thousands, except shares)

(unaudited)


	Number of Shares		Par Value		Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity			Non-controlling Interests			Total Equity			Number of Shares		Par Value		Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity			Non-controlling Interests			Total Equity
BALANCE — December 31, 2016	10,938,245		$	111	$	96,032		$	(50,676	)	$	45,467		$	1,766		$	47,233
Conversion of OP units to common shares	162,409		—		809			—			809			(809		)	—
BALANCE — December 31, 2019																				10,759,721		$	110	$	94,719		$	(40,571	)	$	54,258		$	1,022		$	55,280
Redemption of common shares																				(19,907	)	—		(117		)	—			(117		)	—			(117		)
Net income																				—		—		—			417			417			8			425
BALANCE — March 31, 2020																				10,739,814		$	110	$	94,602		$	(40,154	)	$	54,558		$	1,030		$	55,588

BALANCE — December 31, 2018																				10,863,299		$	110	$	95,336		$	(38,546	)	$	56,900		$	1,170		$	58,070
Redemption of common shares	(87,928	)	—		(558		)	—			(558		)	—			(558		)	(20,855	)	—		(126		)	—			(126		)	—			(126		)
Quarterly distributions	—		—		—			(1,967		)	(1,967		)	(66		)	(2,033		)	—		—		—			(651		)	(651		)	(14		)	(665		)
Net income	—		—		—			7,658			7,658			293			7,951
BALANCE — September 30, 2017	11,012,726		$	111	$	96,283		$	(44,985	)	$	51,409		$	1,184		$	52,593
Net loss																				—		—		—			(304		)	(304		)	(7		)	(311		)
BALANCE — March 31, 2019																				10,842,444		$	110	$	95,210		$	(39,501	)	$	55,819		$	1,149		$	56,968

See accompanying notes to condensed consolidated financial statements.

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
Cash flows from operating activities:
Net income (loss)	$	7,951		$	(1,561	)	$	425		$	(311	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net gain on disposal of real estate	(9,131		)	(614		)	(947		)	—
Loss on extinguishment of debt	80			966
Equity in income (loss) of unconsolidated joint ventures	24			(318		)
Equity in loss of unconsolidated joint ventures							—			20
Straight-line rent	(179		)	(102		)	(14		)	(27		)
Amortization of deferred costs	404			381			171			158
Depreciation and amortization	2,439			2,628			301			377
Amortization of above and below-market leases	(129		)	(147		)	(13		)	(5		)
Bad debt expense	20			23
Provision for losses on tenant receivable							168			—
Changes in operating assets and liabilities:
Prepaid expenses and other assets	803			(290		)	(128		)	32
Tenant receivables	288			462			(119		)	(11		)
Accounts payable and accrued expenses	(118		)	533			(153		)	(22		)
Amounts due to affiliates	(73		)	(47		)	(69		)	(18		)
Other liabilities	87			(117		)	(32		)	(117		)
Net change in restricted cash for operational expenditures	131			(554		)
Net cash provided by operating activities	2,597			1,243
Net cash provided by (used in) operating activities							(410		)	76

Cash flows from investing activities:
Net proceeds from the sale of real estate	32,398			8,737
Acquisition of real estate	(17,812		)	(10,225		)
Proceeds from the sale of real estate							9,920			—
Investment in properties under development and development costs	(3,810		)	(28,538		)	(2,485		)	(724		)
Improvements, capital expenditures, and leasing costs	(1,110		)	(289		)	(279		)	(53		)
Distributions from unconsolidated joint ventures	1,998			1,223
Net change in restricted cash from investments in consolidated variable interest entities	8			(3,458		)
Net change in restricted cash for capital expenditures	409			981
Investments in unconsolidated joint ventures							—			(38		)
Net cash provided by (used in) investing activities	12,081			(31,569		)	7,156			(815		)

Cash flows from financing activities:
Redemption of common shares	(558		)	(466		)	(117		)	(126		)
Quarterly distributions	(2,038		)	(2,058		)	(220		)	(666		)
Proceeds from notes payable	29,700			38,400			1,590			1,500
Repayment of notes payable	(41,999		)	(8,823		)	(8,927		)	—
Loan proceeds from an affiliate	2,500			—
Payment of penalties associated with early repayment of notes payable	(1		)	(839		)
Payment of loan fees from investments in consolidated variable interest entities	(453		)	(719		)	—			(62		)
Payment of loan fees and financing costs	(1,314		)	(69		)	(7		)	—
Net cash provided by (used in) financing activities	(14,163		)	25,426			(7,681		)	646

Net increase (decrease) in cash and cash equivalents	515			(4,900		)
Cash and cash equivalents – beginning of period	3,130			8,793
Cash and cash equivalents – end of period	$	3,645		$	3,893
Net decrease in cash, cash equivalents and restricted cash							(935		)	(93		)
Cash, cash equivalents and restricted cash – beginning of period							7,241			3,347
Cash, cash equivalents and restricted cash – end of period							$	6,306		$	3,254

Supplemental disclosure of non-cash investing and financing activities and other cash flow information:
Distributions declared but not paid	$	676		$	684		$	—		$	665
Change in accrued liabilities capitalized to investment in development	(225		)	346			(353		)	109
Change to accrued mortgage note payable interest capitalized to investment in development	5			159			15			—
Amortization of deferred loan fees capitalized to investment in development	367			443			73			89
Changes in capital improvements, accrued but not paid							(7		)	—
Cash paid for interest, net of amounts capitalized	1,110			1,121			13			57

See accompanying notes to condensed consolidated financial statements.

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION AND BUSINESS

Strategic Realty Trust, Inc. (the “Company”) was formed on September 18, 2008, as a Maryland corporation. Effective August 22, 2013, the Company changed its name from TNP Strategic Retail Trust, Inc. to Strategic Realty Trust, Inc. The Company believes it qualifies as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and has elected REIT status beginning with the taxable year ended December 31, 2009, the year in which the Company began material operations.

Since the Company’s inception, its business has been managed by an external advisor. The Company has no direct employees and all management and administrative personnel responsible for conducting the Company’s business are employed by its advisor. Currently, the Company is externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed every ~~year.~~year through 2019. The current term of the Advisory Agreement terminates on August ~~10, 2018.~~9, 2020. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.

Substantially all of the Company’s business is conducted through Strategic Realty Operating Partnership, L.P. (the “OP”). During the Company’s initial public offering (“Offering”), as the Company accepted subscriptions for shares of its common stock, it transferred substantially all of the net proceeds of the Offering to the OP as a capital contribution. The Company is the sole general partner of the OP. As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the Company owned ~~97.7%~~98.0% and ~~96.3%~~98.0%, respectively, of the limited partnership interests in the OP.

The Company’s principal demand for funds has been for the acquisition of real estate assets, the payment of operating expenses, interest on outstanding indebtedness, the payment of distributions to stockholders, and investments in ~~unconsolidated joint ventures as well as~~ development of properties. Substantially all of the proceeds of the completed Offering have been used to fund investments in real properties and other real estate-related assets, for payment of operating expenses, for payment of interest, for payment of various fees and expenses, such as acquisition fees and management fees, and for payment of distributions to stockholders. The Company’s available capital resources, cash and cash equivalents on hand and sources of liquidity are currently limited. The Company expects its future cash needs will be funded using cash from operations, future asset sales, debt financing and the proceeds to the Company from any sale of equity that it may conduct in the future.

The Company invests in and manages a portfolio of income-producing retail properties, located in the United States, real estate-owning entities and real estate-related ~~assets, including the investment in or origination of mortgage, mezzanine, bridge and other loans related to commercial real estate.~~assets. The Company has invested directly, and indirectly through joint ventures, in a portfolio of income-producing retail properties located throughout the United States, with a focus on grocery anchored multi-tenant retail centers, including neighborhood, community and lifestyle shopping centers, multi-tenant shopping centers and free standing single-tenant retail properties. During the first quarter of 2016, the Company invested, through joint ventures, in two significant retail projects under development.

As of ~~September 30, 2017,~~March 31, 2020, in addition to the development projects, the Company’s portfolio of properties was comprised of 127 properties ~~including 3 properties held for sale,~~ with approximately ~~425,000~~43,000 rentable square feet of retail space located in ~~five states.~~2 states, as well as an improved land parcel. As of ~~September 30, 2017,~~March 31, 2020, the rentable space at the Company’s retail properties was ~~97%~~81% leased.

COVID-19 Pandemic

Currently, one of the most significant risks and uncertainties facing the Company, the retail industry, the real estate industry and the economy generally is the potential adverse effect of the ongoing public health crisis of the novel coronavirus disease (COVID-19) pandemic. The full extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Refer to Note 13 for additional information.

Table of Contents

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form ~~10-Q~~10-K and Regulation S-X.

The interim unaudited condensed consolidated financial statements include the accounts of the Company, the OP, their direct and indirect owned subsidiaries, and the accounts of joint ventures that are determined to be variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions are eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s condensed consolidated financial position, results of operations and cash flows have been included.

~~Table of Contents~~

~~STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

The Company evaluates the need to consolidate joint ventures and variable interest entities based on standards set forth in ASC Topic 810, Consolidation (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of ~~September 30, 2017~~March 31, 2020 and December 31, 2016, the Company held ownership interests in two unconsolidated joint ventures. Refer to Note 4, “Investments in Unconsolidated Joint Ventures” for additional information. As of September 30, 2017 and December 31, 2016,2019, the Company held variable interests in two variable interest entities and consolidated those entities. Refer to Note 5,4. “Variable Interest Entities” for additional information.

~~Investments~~Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents represent current bank accounts and other bank deposits free of encumbrances and having maturity dates of three months or less from the respective dates of deposit. The Company limits cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk in ~~Real Estate~~cash.

~~In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ ~~(“ASU 2017-01”) that clarifies the framework~~Restricted cash includes escrow accounts for ~~determining whether an integrated set of assets~~real property taxes, insurance, capital expenditures and ~~activities meets the definition of a business. The revised framework establishes a screen for determining whether an integrated set of assets~~tenant improvements, debt service and activities is a business and narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. leasing costs held by lenders.

The ~~Company elected to early adopt ASU 2017-01 for the reporting period beginning January 1, 2017. As~~following table provides a ~~result~~reconciliation of adopting ASU 2017-01, the Company’s acquisitions of properties beginning January 1, 2017, were evaluated under the new guidance. The acquisitions occurring during 2017 were determined to be asset acquisitions, as they did not meet the revised definition of a business.

~~Evaluation of business combination or asset acquisition:~~

~~The Company evaluates each acquisition of real estate to determine if the integrated set of assets~~cash, cash equivalents, and activities acquired meet the definition of a business and need to be accounted for as a business combination. If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:

~~• Substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets; or~~

• The integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e. revenue generated before and after the transaction).

~~An acquired process is considered substantive if:~~

• The process includes an organized workforce (or includes an acquired contract that provides access to an organized workforce), that is skilled, knowledgeable, and experienced in performing the process;

~~• The process cannot be replaced without significant cost, effort, or delay; or~~

~~• The process is considered unique or scarce.~~

Generally, the Company expects that acquisitions of real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets), or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.

~~In asset acquisitions, the purchase consideration, including acquisition costs, is allocated to the individual assets acquired and liabilities assumed~~restricted cash reported on ~~a relative fair value basis. As a result, asset acquisitions do not result in the recognition of goodwill or a bargain purchase gain.~~

~~Depreciation and amortization is computed using a straight-line method over the estimated useful lives of the assets as follows:~~



	~~Years~~
~~Buildings and improvements~~	~~5 - 30 years~~
~~Tenant improvements~~	~~1 - 36 years~~

Tenant improvement costs recorded as capital assets are depreciated over the tenant’s remaining lease term, which the Company has determined approximates the useful life of the improvement. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Significant renovations and improvements that improve or extend the useful lives of

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~~STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~assets are capitalized. Acquisition costs related to asset acquisitions are capitalized in~~ the condensed consolidated balance ~~sheets.~~

~~For acquisitions of real estate prior~~sheets that sum to the adoption of ASU 2017-01, which were generally accounted for as business combinations, the Company recognized the assets acquired (including the intangible value of acquired above- or below-market leases, acquired in-place leases and other intangible assets or liabilities) at fair value astotal of the ~~acquisition date. Acquisition costs related to the business combinations were expensed as incurred.~~

~~Reclassifications~~

~~Certain prior period~~same such amounts ~~have been reclassified to conform with current period’s presentation. The reclassifications had no effect~~shown on the ~~Company’s~~condensed consolidated ~~financial condition, results~~statement of ~~operations, or~~ cash ~~flows.~~flows (amounts in thousands):



	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	5,361	$	6,119
Restricted cash	945		1,122
Total cash, cash equivalents, and restricted cash	$	6,306	$	7,241

Recent Accounting Pronouncements

The FASB issued the following ASUs, which could have potential impact to the Company’s condensed consolidated financial statements:

In ~~November 2016,~~August 2018, the FASB issued ASU No. ~~2016-18,~~ ~~Restricted Cash,~~ ~~which amends~~ (2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic ~~230), Statement of Cash Flows~~ (“820. ASU ~~2016-18”)~~. ~~ASU 2016-18 requires that a statement of cash flows explains the change during the reporting period in the total of cash, cash equivalents, andrestricted cash or restricted cash equivalents. ASU 2016-18~~2018-13 is effective for fiscal years beginning after December 15, ~~2017.~~2019. Early adoption is permitted ~~including~~for any removed or modified disclosures upon issuance of ASU 2018-13 and delayed adoption ~~in an interim period. ASU 2016-18 will require adoption using a retrospective transition method. The adoption will not have a material effect on~~of the ~~Company’s condensed consolidated financial statements.~~

~~In October 2016,~~additional disclosures until the ~~FASB issued ASU No. 2016-17,~~ ~~Consolidation (Topic 810), Interests Held through related Parties That Are under Common Control~~ (“ASU 2016-17”). ASU 2016-17 changes how a reporting entity that is a single decision maker of a variable interest entity should treat indirect interest in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that variable interest entity. ASU 2016-17 is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted, including adoption in an interim period. ASU 2016-17 will require adoption using the retrospective transition method beginning with the fiscal year in which the amendments in ASU No. 2015-02 were initially applied.date. The Company adopted ASU ~~2016-17 beginning~~2018-13 effective January 1, ~~2017.~~2020. The adoption of ASU ~~2016-17 had no impact on the Company’s condensed consolidated financial statements.~~

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments~~ (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing diversity in practice. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. ASU 2016-15 will require adoption on a retrospective basis. The application of ASU 2016-15 is2018-13 did not ~~expected to~~ have an impact on the Company’s condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 requires a financial asset, measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 iswas effective for fiscal years beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Adjustments resulting from adopting ASU 2016-13 shall be applied through a cumulative-effect adjustment to retained earnings. ~~The adoption of ASU 2016-13 will not have an effect on the Company’s condensed consolidated financial statements.~~

In ~~February 2016,~~November 2019, the FASB issued ASU No. ~~2016-02,~~ 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates (“ASU ~~2016-02”~~2019-10”).ASU ~~2016-02 requires entities~~2019-10 extended the mandatory effective date for smaller reporting companies to recognize lease assets and lease liabilities on the condensed consolidated balance sheet and disclose key information about leasing arrangements. The guidance retains a distinction between finance leases and operating leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. The accounting applied by a lessor is largely unchanged from that applied under the previous guidance. The amendments in this guidance are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.2022. The ~~modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. The Company believes that the~~ adoption of ASU 2016-02 will not change the accounting for operating leases on its condensed consolidated balance sheets. The Company expects that certain non-lease components will need to be accounted for separately from the lease components, with the lease components continuing to be recognized on a straight-line

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(unaudited)

~~basis over the term of the lease and certain non-lease components being accounted for under the new revenue recognition guidance in ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(“ASU 2014-09”) discussed below.~~

~~In May 2014, the FASB issued ASU 2014-09. ASU 2014-09 outlines a single comprehensive model for entities~~Financial Instruments - Credit Losses is not expected to ~~use in accounting for revenues arising from contracts with customers. In August 2015, the FASB issued ASU No. 2015-14,~~ ~~Revenue from Contracts with Customers(Topic 606): Deferral of the Effective Date~~, which effectively defers the adoption of ASU 2014-09 to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2016. Companies may apply either a full retrospective or a modified retrospective approach to adopt this guidance. In 2016, the FASB issued ASU No. 2016-08, ASU No. 2016-09 and ASU No. 2016-12, which provide interpretive clarificationshave an impact on the ~~new guidance in Topic 606. The~~ Company’s revenues are primarily generated through leasing arrangements. As such, management believes the Company’s revenue from leasing arrangements falls out of the scope of this standard and does not expect the adoption of ASU 2014-09 to have a significant impact on itscondensed consolidated financial statements. ~~The Company believes, that its revenue stream from non-lease components, which is comprised of common area maintenance reimbursements, may be impacted by the adoption of ASU 2014-09.~~

3. REAL ESTATE INVESTMENTS

~~Acquisition of Properties~~

On January 4, 2017, the Company purchased certain property located in the Hayes Valley neighborhood at 388 Fulton Street in San Francisco, California (“388 Fulton”). The seller was not affiliated with the Company or the Advisor. 388 Fulton is comprised of two leased commercial condominiums with an aggregate of 3,110 square feet of retail space. The aggregate purchase price of 388 Fulton was approximately $4.2 million, subject to customary closing costs and proration adjustments. The Company drew down $4.0 million on its line of credit to fund this acquisition.

On January 11, 2017, the Company purchased certain property located in the Silver Lake neighborhood of Los Angeles, California (“Silver Lake”). The seller was not affiliated with the Company or the Advisor. Silver Lake is comprised of two boutique retail buildings totaling approximately 10,497 square feet of retail space. The aggregate purchase price of Silver Lake was approximately $13.3 million subject to customary closing costs and proration adjustments. The Company drew down $11.0 million on its line of credit to fund this acquisition.

The Company evaluated the above transactions under the new framework pursuant to ASU 2017-01, which the Company early-adopted effective January 1, 2017. Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. Refer to Note 2. “Summary of Significant Accounting Policies” for further details. Accordingly, the Company accounted for the purchases of Silver Lake and 388 Fulton as asset acquisitions and allocated the total cash consideration to the individual assets and liabilities acquired on a relative fair value basis.

For the nine months ended September 30, 2017, the Company incurred $0.3 million, respectively, of acquisition-related costs. These costs were capitalized and allocated to land and buildings acquired on a relative fair value basis. The Company did not incur acquisition-related costs during the three months ended September 30, 2017.

~~2017~~ Sale of Properties

On ~~April 17, 2017,~~February 10, 2020, the Company consummated the disposition of ~~Woodland West~~Topaz Marketplace, located in ~~Arlington, Texas,~~Hesperia, California, for ~~a sales price of~~ approximately ~~$14.6~~$10.5 million in cash. The Company used the net proceeds from the sale ~~of Woodland West Marketplace~~ to repay ~~$13.7 million of~~ the ~~outstanding balance on its~~ line of ~~credit.~~credit in its entirety. The disposition of Topaz Marketplace resulted in a gain of approximately $0.9 million, which was included in the Company’s condensed consolidated statement of operations. The Company retained a residual land parcel, that is an improved drive-thru pad.

Since the sale of ~~the~~this property ~~did~~does not represent a strategic shift that will have a major effect on the Company’s operations and financial results, ~~and its~~the results of operations of this property were not reported as discontinued operations onin the Company’s condensed consolidated financial statements. ~~The disposition of Woodland West Marketplace resulted in a gain of $2.5 million, which was included on the Company’s condensed consolidated statement of operations.~~

~~On January 6, 2017, the Company consummated the disposition of Pinehurst Square East, located in Bismarck, North Dakota, for a sales price of approximately $19.2 million in cash.~~ The Company used the net proceeds from the sale of ~~Pinehurst Square East~~this property to repay ~~$18.4 million of~~ the outstanding balance on its line of credit. The sale of the property did not represent a strategic shift that will have a major effect on the Company’s operations and financial results and its results of operations were not reported as discontinued operations on the Company’s condensed consolidated financial statements. The disposition of Pinehurst Square East resulted in a gain of $6.1 million, which was included on the Company’s condensed consolidated statement of operations.

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~~STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

The ~~following table summarizes net operating income (loss) related to Pinehurst Square East and Woodland West Marketplace, that is included in the~~ Company’s condensed consolidated statements of operations include net operating income of approximately $52 thousand and $82 thousand for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016 (amounts in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Pinehurst Square East Woodland West Marketplace Pinehurst Square East Woodland West Marketplace Pinehurst Square East Woodland West Marketplace Pinehurst Square East Woodland West Marketplace
Operating income (loss) $ 4
$ (4 ) $ 234
$ (73 ) $ 20
$ 188
$ 697
$ (160 )
2019, respectively, related to Topaz Marketplace.

Pro Forma Financial Information

The pro forma financial information below is based upon the Company’s historical condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, adjusted to give effect to the above sale ~~transactions~~transaction as if ~~they~~it had been completed at the beginning of ~~2017~~2020 and ~~2016,~~2019, respectively. The pro forma financial information is presented for information purposes only, and may not be indicative of what actual results of operations would have been had the transaction occurred at the beginning of ~~2017~~2020 and ~~2016,~~2019, respectively, nor does it purport to represent results of operations for future periods (amounts in thousands, except per share amounts):



	(Pro Forma)
	Three Months Ended March 31,
	2020		2019
Rental and reimbursement revenues	$	689	$	726
Net income	373		555
Net income attributable to common stockholders	366		544

Net income per share, attributable to common shares - basic and diluted	$	0.03	$	0.05

(Pro Forma)
Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Rental and reimbursement revenues $ 2,221
$ 1,767
$ 6,587
$ 5,177
Net income (loss) (230 ) (712 ) 7,743
6,501
Net income (loss) attributable to common stockholders (212 ) (903 ) 7,457
6,260

Net income (loss) per share, attributable to common shares - basic and diluted $ (0.02 ) $ (0.08 ) $ 0.68
$ 0.57

Assets Held for Sale and Liabilities Related to Assets Held for Sale

~~At September 30, 2017, Cochran Bypass,~~Assets and liabilities related to Shops at Turkey Creek, located in ~~Chester, SC, Florissant Marketplace, located in Florissant, MO, and Morningside Marketplace, located in Fontana, CA,~~Knoxville, Tennessee, were previously classified as held for sale, as the Company was in contract to sell the property. The buyer canceled the contract due to the uncertainty related to COVID-19. As a result, as of March 31, 2020, Shops at Turkey Creek no longer met certain criteria to be classified as held for sale. As such, all related assets, net of depreciation and liabilities were recorded within the relevant categories in the condensed consolidated balance sheet. ~~Since~~

Additionally, as of March 31, 2020, the sale of these properties does not represent a strategic shift that will have a major effect on the Company’s operations and financial results, the results of operations of these properties were not reported as discontinued operations on the Company’s financial statements. The Company intends to use the net proceeds from the sale of these properties to retire the outstanding debt associated with these properties, with the remainderresidual land parcel at Topaz Marketplace, located in Hesperia, California, no longer met certain criteria to be ~~added to working capital. The Company anticipates~~classified as held for sale. As such, the sales of these three properties will occur within one year from September 30, 2017. The Company’s condensed consolidated statements of operations include net operating income of approximately $0.3 million, $0.4 million, $0.1 million, and $48 thousand for the three and nine months ended September 30, 2017 and 2016, respectively,value related to the ~~assets held for sale.~~parcel was recorded within the relevant line item in the condensed consolidated balance sheet.

~~At December 31, 2016, Pinehurst Square East, located in Bismarck, North Dakota, and Woodland West Marketplace, located in Arlington, Texas,~~There were no assets classified as held for sale in the condensed consolidated balance sheet. As previously disclosed, the Company consummated the disposition of Pinehurst Square East on January 6, 2017 and Woodland West Marketplace on April 17, 2017.

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~~STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~The major classes of assets and liabilities related to assets held for sale included in the condensed consolidated balance sheets are as follows (amounts in thousands):~~

September 30, December 31,
2017 2016
ASSETS
Investments in real estate
Land $ 5,932
$ 5,718
Building and improvements 20,767
20,261
Tenant improvements 1,861
1,283
28,560
27,262
Accumulated depreciation (6,043 ) (4,257 )
Investments in real estate, net 22,517
23,005
Tenant receivables, net 370
135
Lease intangibles, net 1,781
1,017
Assets held for sale $ 24,668
$ 24,157
LIABILITIES
Notes payable $ 18,298
$ 21,783
Below-market lease intangibles, net 2,147
399
Liabilities related to assets held for sale $ 20,445
$ 22,182

~~Amounts above are being presented~~ at ~~their carrying value, which the Company believes to be lower than their estimated fair value less costs to sell.~~March 31, 2020.

4. ~~INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES~~

~~The following table summarizes the Company’s investments in unconsolidated joint ventures as of September 30, 2017, and December 31, 2016 (amounts in thousands):~~

Ownership Interest Investment
Joint Venture Date of Investment September 30,
2017 December 31,
2016 September 30,
2017 December 31,
2016
SGO Retail Acquisitions Venture, LLC 3/11/2015 19 % 19 % $ 1,007
$ 3,052
SGO MN Retail Acquisitions Venture, LLC 9/30/2015 10 % 10 % 1,732
1,709
Total $ 2,739
$ 4,761

The Company’s off-balance sheet arrangements consist primarily of investments in the joint ventures as set forth in the table above. The joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint ventures’ debts are secured by a first mortgage, are without recourse to the joint venture members, and do not represent a liability of the members other than carve-out guarantees for certain matters such as environmental conditions, misuse of funds and material misrepresentations. As of September 30, 2017 and December 31, 2016, the Company has provided carve-out guarantees in connection with the two aforementioned unconsolidated joint ventures; in connection with those carve-out guarantees, the Company has certain rights of recovery from the joint venture members.

5. VARIABLE INTEREST ENTITIES

The Company has variable interests in, and is the primary beneficiary of, variable interest entities (“VIEs”) through its investments in (i) the Sunset & Gardner Joint Venture (formerly known as Gelson’s Joint ~~Venture~~Venture) and (ii) the 3032 Wilshire Joint ~~Venture (both as defined below).~~Venture. The Company has consolidated the accounts of these variable interest entities.

~~Gelson’s Joint Venture~~

On January 7, 2016, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of Sunset & Gardner Investors, LLC (the “Gelson’s Joint Venture Agreement”) to form a joint venture (the” Gelson’s Joint Venture”) with Sunset & Gardner LA, LLC (“S&G LA” and, together with the Company, the “Gelson’s Members”), a subsidiary of Cadence Capital Investments, LLC (“Cadence”).

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~~The Gelson’s Joint Venture Agreement provides for~~Through March 31, 2020, post the ownership and operation of certain real property by the Gelson’s Joint Venture, in which the Company owns a 100% capital interest and a 50% profits interest. In exchange for ownership in the Gelson’s Joint Venture, the Company contributed cash in an amount up to $7.0 million in initial capital contributions, ~~and has agreed to contribute $0.7 million in subsequent capital contributions to the Gelson’s Joint Venture. In May 2016,~~ the Company made an additional capital ~~contribution of $0.2~~contributions totaling approximately $6.6 million and $6.9 million to the Gelson’s Joint Venture. In January 2017 and July 2017, the Company made two additional capital contributions of $0.8 million and $1.3 million, respectively, to the Gelson’s Joint Venture. S&G LA contributed its rights to acquire the real property, its interest under a 20-year lease with Gelson’s Markets (the “Gelson’s Lease”) and agreed to provide certain management and development services.

~~On January 28, 2016, the Gelson’s~~Sunset & Gardner Joint Venture ~~used the capital contributions of the Company, together with the proceeds of a loan in the amount of $10.7 million, to purchase property located at the corner of Sunset Boulevard~~ and Gardner in Hollywood, California for a build-to-suit grocery store for Gelson’s Markets (the “Gelson’s Property”) from a third party seller, for a total purchase price of approximately $13.0 million. The Gelson’s Joint Venture intends to proceed with obtaining all required governmental approvals and entitlements to replace the existing improvements on the property with a build-to-suit grocery store for Gelson’s Markets with an expected size of approximately 38,000 square feet. Gelson’s Markets was founded in 1951 and is recognized as one of the nation’s premier supermarket chains. Gelson’s Markets currently has 24 locations throughout Southern California.

Pursuant to the Gelson’s Joint Venture Agreement, S&G LA manages and conducts the day-to-day operations and affairs of the Gelson’s Joint Venture, subject to certain major decisions set forth in the Gelson’s Joint Venture Agreement that require the consent of all the Gelson’s Members. Income, losses and distributions are generally allocated based on the Gelson’s Members’ respective capital and profits interests. Additionally, in certain circumstances described in the Gelson’s Joint Venture Agreement, the Company may be required to make additional capital contributions to the Joint Venture, in proportion to the Gelson’s Members’ respective ownership interests. Until the Company has received back its capital contribution and specified preferred returns, all distributions go to the Company; thereafter, the Gelson’s Joint Venture will distribute the profits 50% to the Company and 50% to S&G LA.

~~3032 Wilshire Joint Venture~~

On December 21, 2015, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of 3032 Wilshire Investors, LLC (the “Wilshire Joint Venture Agreement”) to form a joint venture (the “Wilshire Joint Venture”) with 3032 Wilshire SM, LLC, a subsidiary of Cadence (together with the Company, the “Wilshire Members”).

On December 14, 2015 and January 5, 2016, the Company paid deposits in the amounts of $0.5 million and $0.1 million, respectively, toward the acquisition of certain property located at 3032 Wilshire Boulevard and 1210 Berkeley Street in Santa Monica, California (the “Wilshire Property”). The Wilshire Joint Venture, is in the process of redeveloping and repositioning, and intends to re-lease the Wilshire Property. On March 7, 2016, the Company contributed $5.7 million to the Wilshire Joint Venture. In May 2016, the Company made an additional capital contribution of $0.3 million to the Wilshire Joint Venture. In January 2017, February 2017 and August 2017, the Company made three additional contributions of $0.3 million, $0.6 million and $0.7 million, respectively, to the Wilshire Joint Venture. The Wilshire Joint Venture Agreement provides for the ownership and operation of certain real property by the Wilshire Joint Venture, in which the Company owns a 100% capital interest and a 50% profits interest.

On March 8, 2016, the Wilshire Joint Venture used the deposits and capital contribution of the Company, together with the proceeds of a loan in the amount of $8.5 million, to acquire the Wilshire Property from a third-party seller, for a total purchase price of $13.5 million. The Wilshire Joint Venture is repositioning, and intends to re-lease the existing improvements on the property.

Pursuant to the Wilshire Joint Venture Agreement, 3032 Wilshire SM manages and conducts the day-to-day operations and affairs of the Wilshire Joint Venture, subject to certain major decisions set forth in the Wilshire Joint Venture Agreement that require the consent of all the Wilshire Members. Income, losses and distributions are generally allocated based on the Wilshire Members’ respective capital and profits interests. Additionally, in certain circumstances described in the Wilshire Joint Venture Agreement, the Company may be required to make additional capital contributions to the Wilshire Joint Venture, in proportion to the Wilshire Members’ respective ownership interests. Until the Company has received back its capital contribution and specified preferred returns, all distributions go to the Company; thereafter, the Wilshire Joint Venture will distribute the profits 50% to the Company and 50% to 3032 Wilshire SM.

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~~STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

respectively.

The following reflects the aggregate assets and liabilities of the ~~Gelson’s~~Sunset & Gardner Joint Venture and the Wilshire Joint Venture, which were consolidated by the Company, as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 (amounts in thousands):


					March 31,		December 31,
	September 30, 2017		December 31, 2016		2020		2019
ASSETS
Properties under development and development costs:
Land	$	25,851	$	25,851	$	25,851	$	25,851
Buildings	589		601		550		554
Development costs	8,346		4,377		23,037		20,813
Properties under development and development costs	34,786		30,829		49,438		47,218
Restricted cash	1,658		1,666
Cash and cash equivalents	458		334
Cash, cash equivalents and restricted cash					634		2,154
Prepaid expenses and other assets, net	12		14		87		7
Tenant receivables, net	—		1
Lease intangibles, net					73		4
TOTAL ASSETS ⁽¹⁾	$	36,914	$	32,844	$	50,232	$	49,383

LIABILITIES
Notes payable, net ⁽²⁾	$	19,016	$	19,103	$	18,375	$	16,713
Accounts payable and accrued expenses	586		806		1,410		1,702
Amounts due to affiliates	9		9		65		111
Other liabilities	9		27		5		5
TOTAL LIABILITIES	$	19,620	$	19,945	$	19,855	$	18,531


(1)	The assets of the ~~Gelson’s~~Sunset & Gardner Joint Venture and Wilshire Joint Venture can be used only to settle obligations of the respective consolidated joint ventures.

(2)

As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, includes reclassification of approximately ~~$0.2~~$0.4 million and ~~$0.1~~$0.5 million, respectively, of deferred financing costs, net, as a contra-liability. The creditors of the consolidated joint ventures do not have recourse to the general credit of the Company. The notes payable of the ~~consolidated joint ventures are~~Wilshire Joint Venture is partially guaranteed by the Company, refer to Note 7, “Notes Payable, Net”. The notes payable of the Sunset & Gardner Joint Venture is not guaranteed by the Company.

~~6. FUTURE MINIMUM RENTAL INCOME~~5. LEASES

Operating Leases

The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of ~~September 30, 2017,~~March 31, 2020, the leases at the Company’s properties, excluding properties classified as held for sale, have remaining terms (excluding options to extend) of up to 1411.7 years with a weighted-average remaining term (excluding options to extend) of approximately 56.8 years. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying condensed consolidated balance sheets and totaled approximately ~~$0.3~~$0.1 million ~~as of September 30, 2017~~ and $0.2 million as of March 31, 2020 and December 31, ~~2016.~~2019, respectively.

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(unaudited)

The following table presents the components of income from real estate operations for the three months ended March 31, 2020 and 2019 (amounts in thousands):



	Three Months Ended March 31,
	2020		2019
Lease income - operating leases	$	636	$	702
Variable lease income⁽¹⁾	171		242
Rental and reimbursements income	$	807	$	944


(1)	Primarily includes tenant reimbursements for real estate taxes, insurance and common area maintenance.

As of ~~September 30, 2017,~~March 31, 2020, the future minimum rental income from the Company’s properties under non-cancelable operating leases, ~~excluding properties classified as held for sale,~~ was as follows (amounts in thousands):



Remainder of 2020	$	1,515
2021	2,036
2022	2,053
2023	2,078
2024	2,031
Thereafter	5,813
Total	$	15,526

Remainder of 2017 $ 828
2018 3,134
2019 3,110
2020 2,953
2021 2,603
Thereafter 13,915
Total $ 26,543

7.6. LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES, NET

As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the Company’s acquired lease intangibles and below-market lease liabilities, were as follows (amounts in thousands):



	Lease Intangibles						Below-Market Lease Liabilities
	March 31, 2020			December 31, 2019			March 31, 2020			December 31, 2019
Cost	$	2,173		$	2,084		$	(492	)	$	(492	)
Accumulated amortization	(826		)	(763		)	211			196
Total	$	1,347		$	1,321		$	(281	)	$	(296	)

Lease Intangibles Below-Market Lease Liabilities
September 30,
2017 December 31,
2016 September 30,
2017 December 31,
2016
Cost $ 3,780
$ 7,000
$ (1,029 ) $ (3,904 )
Accumulated amortization (1,138 ) (3,175 ) 210
855
Total $ 2,642
$ 3,825
$ (819 ) $ (3,049 )

The Company’s amortization of lease intangibles and below-market lease liabilities for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, were as follows (amounts in thousands):

Lease Intangibles Below-Market Lease Liabilities
Three Months Ended
September 30, Three Months Ended
September 30,
2017 2016 2017 2016
Amortization $ (164 ) $ (248 ) $ 40
$ 74

Lease Intangibles Below-Market Lease Liabilities
Nine Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Amortization $ (761 ) $ (734 ) $ 176
$ 214



	Lease Intangibles						Below-Market Lease Liabilities
	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2020		2019
Amortization	$	(63	)	$	(89	)	$	15	$	16

8.7. NOTES PAYABLE, NET

AsMulti-Property Secured Financing

On December 24th, the Company entered into a Loan Agreement (the “SRT Loan Agreement”) with PFP Holding Company, LLC (the “SRT Lender”) for a non-recourse secured loan (the “SRT Loan”).

The SRT Loan is secured by first deeds of ~~September 30, 2017 and December 31, 2016,~~trust on the Company’s ~~notes payable, net, excluding secured~~five San Francisco assets (Fulton Shops, 8 Octavia, 400 Grove, 450 Hayes and 388 Fulton Street) as well as the Company’s Silverlake Collection located in Los Angeles. Proceeds from the SRT Loan were used by the Company to pay down the Company’s credit facility and in connection with such payment, the properties referenced above were released from liens related to that credit facility. The SRT Loan matures on January 9, 2023. The Company has an option to extend the term ~~loans balances which have been classified as held for sale, consisted~~ of the ~~following (amounts~~loan for two additional twelve-month periods, subject to the satisfaction of certain covenants and conditions contained in ~~thousands):~~the SRT Loan Agreement. The Company has the right to prepay the SRT Loan in whole at any time or in part from time to time, subject to the payment of yield maintenance payments if such prepayment

Principal Balance Interest Rates At
September 30, 2017 December 31, 2016 September 30, 2017
Line of credit ⁽¹⁾
$ 20,968
$ 11,150
3.81 %
Secured term loan 5,525
24,277
5.10 %
Mortgage loans secured by properties under development ⁽²⁾
19,200
19,200
9.5% - 10.0%
Deferred financing costs, net ⁽³⁾
(220 ) (323 ) n/a
$ 45,473
$ 54,304


~~(1)~~	The Company’s line of credit is a revolving credit facility with an initial maximum aggregate commitment of $30.0 million (the “Facility Amount”). Effective February 15, 2017, the Company’s line of credit was refinanced to increase

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

occurs in the first 18 months of the loan term, calculated through the 18th monthly payment date, as well as certain expenses, costs or liabilities potentially incurred by the SRT Lender as a result of the prepayment and subject to certain other conditions contained in the loan documents. Individual properties may be released from the SRT Loan collateral in connection with bona fide third-party sales, subject to compliance with certain covenants and conditions contained in the SRT Loan Agreement. Any prepayment or repayment on or before the first 12 months of the loan term in connection with a bona fide third-party sale of a property securing the SRT Loan shall only require the payment of yield maintenance payments calculated through the 12th monthly payment date.

As of March 31, 2020, the SRT Loan had a principal balance of approximately $18.0 million. The SRT Loan is a floating LIBOR rate loan which bears interest at 30-day LIBOR (with a floor of 1.50%) plus 2.80%. The default rate is equal to 5% above the rate that otherwise would be in effect. Monthly payments are interest-only with the entire principal balance and all outstanding interest due at maturity.

Pursuant to the SRT Loan, the Company must comply with certain matters contained in the loan documents including but not limited to, (i) requirements to deliver audited and unaudited financial statements, SEC filings, tax returns, pro forma budgets, and quarterly compliance certificates, and (ii) minimum limits on the Company’s liquidity and tangible net worth. The SRT Loan contains customary covenants, including, without limitation, covenants with respect to maintenance of properties and insurance, compliance with laws and environmental matters, covenants limiting or prohibiting the creation of liens, and transactions with affiliates. At March 31, 2020, the Company was in compliance with the covenants in effect as of that date.

In connection with the SRT Loan, the Company executed customary non-recourse carveout and environmental guaranties, together with limited additional assurances with regard to the condominium structures of the San Francisco assets.

Line of Credit

On February 10, 2020, the Company used proceeds from the sale of Topaz Marketplace to repay the line of credit in its entirety. The line of credit expired of its own accord on February 15, 2020, with no balance outstanding. As part of the payoff, Shops at Turkey Creek was released from the line of credit.

Effective January 8, 2020, the Company elected to permanently reduce the maximum aggregate commitment under its line of credit from $30.0 million to $10.5 million. All other terms of the credit facility remained the same.

The Company’s line of credit was a revolving credit facility with an initial maximum aggregate commitment of $30.0 million. Effective February 15, 2017, the Company’s line of credit was refinanced to increase the maximum aggregate commitment under the credit facility from $30.0 million to $60.0 million. The credit facility ~~matures~~matured on February 15, ~~2020.~~2020. Each loan made pursuant to the ~~Key Bank~~ credit facility will be either a LIBOR ~~rate~~ loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company ~~will pay~~paid the lender an unused commitment fee, quarterly in arrears, which ~~will accrue~~was accrued at 0.30% per annum, if the usage under the ~~the~~ Company’s line of credit iswas less than or equal to 50% of the line of credit amount, and 0.20% per annum if the usage under the Company’s line of credit iswas greater than 50% of the line of credit amount. The Company iswas providing a guaranty of all of its obligations under the Company’s line of ~~credit and all other loan documents. As of September 30, 2017,~~credit. Effective November 7, 2019, the ~~Company’s~~Company elected to permanently reduce the maximum aggregate commitment under its line of credit ~~was~~from $60.0 million to $30.0 million. All other terms of the credit facility remained the same.

Loans Secured by Properties Under Development

On May 7, 2019, the Company refinanced and repaid its financing from Loan Oak Fund, LLC with a new construction loan from ReadyCap Commercial, LLC (the “Lender”) (the “Wilshire Construction Loan”). As of March 31, 2020, the Wilshire Construction Loan had a principal balance of approximately $10.1 million, with future funding availability up to a total of approximately $13.9 million, and bears an interest rate of 1-month LIBOR plus an interest margin of 4.25% per annum, payable monthly. The Wilshire Loan is scheduled to mature on May 10, 2022, with options to extend for two additional twelve-month periods, subject to certain conditions as stated in the loan agreement. The Wilshire Construction Loan is secured by ~~Topaz Marketplace, 8 Octavia Street, 400 Grove Street,~~a first Deed of Trust on the ~~Fulton Shops, 450 Hayes, 388 Fulton, and Silver Lake. For information regarding recent draws~~property. The Company executed a guaranty that guaranties that the loan interest reserve amounts are kept in compliance with the terms of the loan agreement. The Lender also required that a principal in the upstream owner of the Company’s joint venture partner in the Wilshire Joint Venture (the “Guarantor”), guarantees performance of borrower’s obligations under the ~~Company’s line~~loan agreement with respect to the completion of ~~credit, see “– Recent Financing Transactions~~capital improvements to the property. The ~~Company’s Line~~Company executed an Indemnity Agreement in favor of ~~Credit” below.~~


~~(2)~~	~~Comprised of $10.7 million and $8.5 million associated with the Company’s investment in the Gelson’s Joint Venture and the Wilshire Joint Venture, respectively.~~


~~(3)~~	~~Reclassification of deferred financing costs, net of accumulated amortization, as a contra-liability.~~

~~During~~ the ~~three months ended September 30, 2017~~Guarantor against liability under that completion guaranty except to the extent caused by gross negligence or willful misconduct, as well as for liabilities incurred under the Environmental Indemnity Agreement executed by the Guarantor in favor of the Lender. The Company used working capital funds of approximately $3.1 million to repay the difference between the Wilshire Construction Loan initial advance and ~~2016,~~the prior loan, to pay transaction costs, as well as to fund certain required interest and construction reserves.

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On October 29, 2018, the Company ~~incurred and expensed~~entered into a loan agreement with Lone Oak Fund, LLC (the “Sunset & Gardner Loan”). The Sunset & Gardner Loan has a principal balance of approximately ~~$0.4~~$8.7 million, and ~~$0.6 million, respectively,~~bears an interest rate of ~~interest costs, which included~~6.9% per annum. The Sunset & Gardner Loan was scheduled to mature on October 31, 2019. The Company extended the ~~amortization~~Sunset & Gardner Loan for an additional twelve month period under the same terms. The new maturity date is October 31, 2020. The Sunset & Gardner Loan is secured by a first Deed of ~~deferred financing costs of approximately $0.1 million for each period. Also during both~~Trust on the three months ended September 30, 2017 and 2016, the Company incurred and capitalized approximately $0.8 million of interest expense related to the variable interest entities, which included the amortization of deferred financing costs of approximately $0.1 million and $0.2 million, respectively, for each period.

During the nine months ended September 30, 2017 and 2016, the Company incurred and expensed approximately $1.5 million and $1.7 million, respectively, of interest costs, which included the amortization of deferred financing costs of approximately $0.4 million for both periods. Also during the nine months ended September 30, 2017 and 2016, the Company incurred and capitalized approximately $2.5 million and $2.0 million~~, respectively, of interest expense related to the variable interest entities, which included the amortization of deferred financing costs of approximately $0.4 million for both periods.~~

As of both September 30, 2017 and December 31, 2016, interest expense payable was approximately $0.4 million, including an amount related to the variable interest entities of approximately $0.2 million.property.

The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of ~~September 30, 2017~~March 31, 2020 (amounts in thousands):

Remainder of 2017 $ 354
2018 20,661
2019 3,710
2020 20,968
Total ⁽¹⁾
$ 45,693



Remainder of 2020	$	8,700
2021	—
2022	10,084
2023	18,000
Total ⁽¹⁾	$	36,784


(1)	Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of ~~$0.2~~$1.1 million deferred financing costs, net.

~~Recent Financing Transactions~~

~~Line of Credit~~

During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020, the Company incurred and ~~2016,~~expensed approximately $0.2 million of interest costs, which consisted of amortization of deferred financing costs. During the ~~following transactions occurred under the Company’s line of credit:~~

~~Nine~~three months ended ~~September 30, 2017:~~

~~On January 4, 2017,~~March 31, 2019, the Company ~~drew $4.0~~incurred and expensed approximately $0.2 million of interest costs, which primarily consisted of amortization of deferred financing costs. Also during the three months months ended March 31, 2020 and 2019, the Company incurred and capitalized approximately $0.4 million and ~~used~~$0.6 million, respectively, of interest expense related to the ~~proceeds to acquire 388 Fulton.~~

~~On January 6, 2017, the Company consummated the disposition~~variable interest entities, which included amortization of ~~Pinehurst Square East, located in Bismarck, North Dakota, for a sales price~~deferred financing costs of approximately ~~$19.2~~$80 thousand and $68 thousand, respectively, for each period.

As of both March 31, 2020 and December 31, 2019, interest expense payable was approximately $0.2 million, ~~in cash, $18.4 million of which was used to pay down the Company’s line of credit.~~

~~On January 11, 2017, the Company drew $11.0 million and used the proceeds to acquire Silver Lake.~~

~~On January 27, 2017, the Company drew $1.0 million and used the proceeds for working capital.~~

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~~STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~On February 28, 2017, the Company drew $9.8 million and used the proceeds to pay off the mortgage loan~~including an amount related to ~~Woodland West Marketplace.~~

~~On February 28, 2017,~~ the ~~Company drew $0.6 million and used the proceeds to pay certain costs for the refinancing of the Company’s line of credit.~~

~~On March 29, 2017, the Company drew $1.0 million and used the proceeds for working capital.~~

~~On April 17, 2017, the Company consummated the disposition of Woodland West Marketplace, located in Arlington, Texas, for a sales price~~variable interest entities of approximately ~~$14.6~~$0.1 million, ~~in cash, $13.7 million of which was used to pay down the Company’s line of credit.~~

~~On June 28, 2017, the Company drew $1.3 million and used the proceeds~~ for ~~working capital.~~

~~On August 22, 2017, the Company drew~~ ~~$1.0 million~~ ~~and used the proceeds for working capital.~~

~~Nine months ended September 30, 2016:~~

~~On March 7, 2016, the Company drew $6.0 million and used the proceeds to invest in the Wilshire Joint Venture.~~

On April 4, 2016, the Company consummated the disposition of Bloomingdale Hills, located in Riverside, Florida, for a sales price of approximately $9.2 million in cash, $3.0 million of which was used to pay down the line of credit.

~~On June 9, 2016, the Company drew $7.5 million and used the majority of the proceeds to acquire 8 Octavia and 400 Grove.~~

~~On July 25, 2016, the Company drew $4.7 million and used the majority of the proceeds to acquire the Fulton Shops.~~

~~On September 29, 2016, the Company drew $1.0 million and used the proceeds for working capital.~~

~~Mortgage Loans Secured by Properties Under Development~~

In connection with the Company’s investment in the Wilshire Joint Venture and the acquisition of the Wilshire Property, the Company has consolidated borrowings of $8.5 million (the “Wilshire Loan”). The Wilshire Loan bears interest at a rate of 10.0% per annum, payable monthly, commencing on April 1, 2016. The loan was scheduled to mature on March 7, 2017, with an option for two additional six-month periods, subject to certain conditions as stated in the loan agreement. All conditions to extensions were met, and on March 7, 2017, the Company exercised the option to extend the loan until September 7, 2017. On August 29, 2017, the Company exercised the remaining option to extend the loan for an additional six months. The new maturity date is March 7, 2018. The loan is secured by, among other things, a lien on the Wilshire development project and other collateral as defined in the loan agreement.

In connection with the Company’s investment in the Gelson’s Joint Venture and the acquisition of the Gelson’s Property, the Company has consolidated borrowings of $10.7 million (the “Gelson’s Loan”). The Gelson’s Loan bears interest at a rate of 9.5% per annum, payable monthly, commencing on April 1, 2016. The loan was scheduled to mature on January 27, 2017, with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. Those conditions were not met, but the Company negotiated a six month extension of the term on January 27, 2017 to mature on July 27, 2017. The Company negotiated a nine month extension of the term on July 27, 2017. The new maturity date is April 27, 2018. The loan is secured by, among other things, a lien on the Gelson’s development project and other joint venture collateral as defined in the loan agreement.each period.

9.8. FAIR VALUE DISCLOSURES

Certain financial assets and liabilities are measured at fair value on a recurring basis. The Company determines fair value using the following hierarchy:

Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

Level 3: prices or valuation techniques where little or no market data is available for inputs that are significant to the fair value measurement.

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~~STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

The Company believes the total carrying values reflected on its ~~condensed~~ consolidated balance sheets for cash, ~~and~~ cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses, ~~and~~ amounts due to affiliates, mortgage loan and construction loan secured by properties under development, and the Company’s multi-property secured financing, reasonably ~~approximate~~approximated their fair values ~~due to their short-term nature.~~

~~The fair value of the Company’s notes payable is estimated using a present value technique~~ based on ~~contractual cash flows~~their nature, terms, and ~~management’s observations of~~interest rates that approximate current market ~~interest~~ rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. The Company significantly reduces the amount of judgment and subjectivity in its fair value determination through the use of cash flow inputs that are based on contractual obligations. Discount rates are determined by observing interest rates published by independent market participants for comparable instruments. The Company classifies these inputs as Level 2 inputs.

~~The following table provides the carrying values and fair values of the Company’s notes payable as of September 30, 2017 and December~~at March 31, ~~2016 (amounts in thousands):~~2020.

Carrying Value ⁽¹⁾

Fair Value ^{(1) (2)}
September 30,
2017 December 31,
2016 September 30,
2017 December 31,
2016
Notes payable, net $ 45,473
$ 54,304
$ 45,530
$ 54,781


~~(1)~~	The carrying value of the Company’s notes payable represents the outstanding principal as of September 30, 2017, and December 31, 2016. The carrying values and fair values of the notes payable include the reclassification of deferred financing costs, net, of approximately $0.2 million and $0.3 million, respectively, as a contra-liability, as of September 30, 2017 and December 31, 2016.


~~(2)~~	~~The estimated fair value of the notes payable is based upon the indicative market prices of the Company’s notes payable based on prevailing market interest rates.~~

As part of the Company’s ongoing evaluation of the Company’s real estate portfolio, the Company estimates the fair value of its investments in real estate by obtaining outside independent appraisals on all of the operating properties. The appraised values are compared with the carrying values of its real estate portfolio to determine if there are indications of impairment.

For both the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, the Company did not record any impairment losses.

~~10.~~9. EQUITY

~~Common Units of the OP~~

During the three months ended September 30, 2017, certain holders of Common Units of the OP elected to convert their common units of the OP into the Company’s common shares on a one-for-one basis. As a result, 162,409 common units were converted to common shares for an aggregate basis of approximately $0.8 million.

Share Redemption Program

On April 1, 2015, the Company’s board of directors approved the reinstatement of the share redemption program (which had been suspended since January 15, 2013) and adopted anthe Amended and Restated Share Redemption Program (the “SRP”). ~~The SRP was subsequently amended on August 7, 2015 and August 10, 2016.~~

~~On October 5, 2016, the board of directors approved, pursuant to Section 3(a) of~~Under the SRP, ~~an additional $0.5 million of funds available~~only shares submitted for ~~the redemption of shares~~repurchase in connection with the death ~~of a stockholder.~~ or “qualifying disability” (as defined in the

On August 2, 2017, the board of directors of the Company approved, pursuant to Section 3(a) of the SRP, an additional $1.0 million of funds available for the redemption of shares in connection with the death of a stockholder.

~~The following table summarizes share redemption activity during the three and nine months ended September 30, 2017 and 2016 (amounts in thousands, except shares):~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Shares of common stock redeemed 18,233
33,054
87,928
71,922
Purchase price $ 114
$ 210
$ 558
$ 466

1914

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

~~Cumulatively,~~SRP) of a stockholder are eligible for repurchase by the Company. Under the current SRP, as amended to date, the number of shares to be redeemed is limited to the lesser of (i) a total of $3.8 million for redemptions sought upon a stockholder’s death and a total of $1.2 million for redemptions sought upon a stockholder’s qualifying disability, and (ii) 5% of the weighted-average number of shares of the Company’s common stock outstanding during the prior calendar year. Share repurchases pursuant to the SRP are made at the sole discretion of the Company. The Company reserves the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the SRP.

The redemption price for shares that are redeemed is 100% of the Company’s most recent estimated net asset value per share as of the applicable redemption date. A redemption request must be made within one year after the stockholder’s death or disability.

The SRP provides that any request to redeem less than $5,000 worth of shares will be treated as a request to redeem all of the stockholder’s shares. If the Company cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If the Company does not completely satisfy a redemption request in one quarter, it will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. The Company may increase or decrease the amount of funding available for redemptions under the SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter.

The following table summarizes share redemption activity during the three months ended March 31, 2020 and 2019 (amounts in thousands, except shares):



	Three Months Ended March 31,
	2020		2019
Shares of common stock redeemed	19,907		20,855
Purchase price	$	117	$	126

As stated above, cumulatively, through ~~September 30, 2017,~~March 31, 2020, pursuant to the Original Share Redemption Program and the Amended and Restated SRP, the Company has redeemed ~~563,122~~878,458 shares sold in the Offering and/or its dividend reinvestment plan for ~~$4.3~~$6.2 million.

Quarterly Distributions

In order to qualify as a REIT, the Company is required to distribute at least 90% of its annual REIT taxable income, subject to certain adjustments, to its stockholders. Some or all of the Company’s distributions have been paid, and in the future may continue to be paid from sources other than cash flows from operations.

Under the terms of the amended Key Bank credit facility, the Company may pay distributions to its investors so long as the total amount paid does not exceed 100% of the cumulative Adjusted Funds From Operations plus up to an additional $2.0 million of the Company’s net proceeds from property dispositions, as defined in the amended Company’s line of credit; provided, however, that the Company is not restricted from making any distributions necessary in order to maintain its status as a REIT. The Company’s board of directors evaluates the Company’s ability to make quarterly distributions based on the Company’s operational cash needs.

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In light of the COVID-19 pandemic, its impact on the economy and the related future uncertainty, on March 27, 2020, the board of directors of the Company voted to suspend the payment of any dividend for the quarter ending March 31, 2020, and to reconsider future dividend payments on a quarter by quarter basis as more information becomes available on the impact of COVID-19 and related impact to the Company.

The following ~~tables~~table set forth the quarterly distributions declared to the Company’s common stockholders and Common Unit holders for the ~~nine months ended September 30, 2017, and the~~ year ended ~~December 31, 2016~~2019 (amounts in thousands, except per share amounts):



	Distribution Record Date	Distribution Payable Date	Distribution Per Share of Common Stock / Common Unit		Total Common Stockholders Distribution		Total Common Unit Holders Distribution		Total Distribution
First Quarter 2019	3/31/2019	4/30/2019	$	0.06	$	651	$	14	$	665
Second Quarter 2019	6/30/2019	7/31/2019	0.06		648		14		662
Third Quarter 2019	9/30/2019	10/31/2019	0.06		646		13		659
Fourth Quarter 2019	12/31/2019	1/31/2020	0.02		215		5		220
Total					$	2,160	$	46	$	2,206

Distribution Record
Date

Distribution
Payable
Date

Distribution Per Share of Common Stock /
Common Unit

Total Common
Stockholders
Distribution

Total Common
Unit Holders
Distribution

Total
Distribution
First Quarter 2017 3/31/2017 4/28/2017 $ 0.06
$ 655
$ 25
$ 680
Second Quarter 2017 6/30/2017 �� 7/31/2017 0.06
652
25
677
Third Quarter 2017 9/30/2017 10/31/2017 0.06
660
16
676
Total $ 1,967
$ 66
$ 2,033

Distribution Record
Date

Distribution
Payable
Date

Distribution Per Share of Common Stock /
Common Unit

Total Common
Stockholders
Distribution

Total Common
Unit Holders
Distribution

Total
Distribution
First Quarter 2016 3/31/2016 4/29/2016 $ 0.06
$ 660
$ 26
$ 686
Second Quarter 2016 7/7/2016 7/29/2016 0.06
661
25
686
Third Quarter 2016 9/30/2016 10/31/2016 0.06
659
25
684
Fourth Quarter 2016 12/30/2016 1/31/2017 0.06
656
25
681
Total $ 2,636
$ 101
$ 2,737

~~11.~~10. EARNINGS PER SHARE

~~Earnings per share (“EPS”)~~EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested shares, if dilutive, is computed using the treasury stock method. The Company applies the two-class method for determining EPS as its outstanding shares of non-vested restricted stock are considered participating securities as dividend payments are not forfeited even if the underlying award does not vest. There was no unvested stock as of ~~September 30, 2017.~~March 31, 2020. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS.

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~~STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

The following table sets forth the computation of the Company’s basic and diluted earnings ~~(loss)~~ per share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (amounts in thousands, except shares and per share amounts):


	Three Months Ended September 30,						Nine Months Ended September 30,					Three Months Ended March 31,
	2017			2016			2017		2016			2020		2019
Numerator - basic and diluted
Net income (loss)	$	(230	)	$	(550	)	$	7,951	$	(1,561	)	$	425	$	(311	)
Net income (loss) attributable to non-controlling interests	(13		)	(21		)	293		(58		)	8		(7		)
Net income (loss) attributable to common shares	$	(217	)	$	(529	)	$	7,658	$	(1,503	)	$	417	$	(304	)
Denominator - basic and diluted
Basic weighted average common shares	10,885,095			11,007,864			10,909,141		11,017,654			10,759,198		10,862,806
Common Units ⁽¹⁾	—			—			—		—			—		—
Diluted weighted average common shares	10,885,095			11,007,864			10,909,141		11,017,654			10,759,198		10,862,806
Earnings (loss) per common share - basic and diluted
Net earnings (loss) attributable to common shares	$	(0.02	)	$	(0.05	)	$	0.70	$	(0.14	)	$	0.04	$	(0.03	)


(1)	The effect of ~~259,899~~217,475 convertible Common Units pursuant to the redemption rights outlined in the Company’s registration statement on Form S-11 have not been included as they would not be dilutive.

~~12.~~11. RELATED PARTY TRANSACTIONS

On August 7, 2013, the Company entered into the Advisory Agreement with the ~~Advisor. On July 25, 2017, the Advisory Agreement with the~~ Advisor, ~~was~~which has been renewed for ~~an additional twelve months, beginning on~~successive terms with a current expiration date of August ~~10, 2017.~~9, 2020. The Advisor manages the Company’s business as the Company’s external advisor pursuant to the Advisory Agreement. Pursuant to the Advisory Agreement, the Company will pay the Advisor specified fees for services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services.

On March 11, 2015, the Company, through a wholly-owned subsidiary, entered into the Limited Liability Company Agreement of SGO Retail Acquisitions Venture, LLC to form the SGO Joint Venture. On September 30, 2015, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of SGO MN Retail Acquisitions Venture, LLC to form the SGO MN Joint Venture. For additional information regarding the SGO Joint Venture and the SGO MN Joint Venture, refer to Note 4. “Investments in Unconsolidated Joint Ventures.”

On September 27, 2017, the Company, through the OP, entered into a $2.5 million working capital short-term loan (the “Bridge Loan”) with Glenborough Property Partners, LLC, an affiliate of the Advisor. The Bridge Loan is scheduled to mature on March 31, 2018, at which point the outstanding balance of the principal and all accrued and unpaid interest will be due and payable. The Bridge loan incurs interest at an adjustable rate equal to the KeyBank prime rate. Interest is payable monthly in arrears. The Company has the right to prepay the Bridge Loan at any time in whole or in part without premium or penalty. There are no other loan fees or financing coordination fees paid or payable in connection with this loan. During the three months ended September 30, 2017, the Company incurred $1 thousand of interest expense related to the Bridge Loan.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Summary of Related Party Fees

The following table sets forth the Advisor related party costs incurred and payable by the Company for the periods presented (amounts in thousands):



	Incurred				Payable as of
	Three Months Ended March 31,				March 31,		December 31,
Expensed	2020		2019		2020		2019
Asset management fees	$	167	$	157	$	—	$	—
Reimbursement of operating expenses	6		11		—		—
Property management fees	21		29		6		7
Disposition fees	157		—		—		—
Total	$	351	$	197	$	6	$	7

Capitalized
Acquisition fees	$	6	$	7	$	—	$	—
Leasing fees	39		—		—		—
Legal leasing fees	8		—		—		—
Construction management fees	66		—		65		111
Financing coordination fees	—		—		—		22
Total	$	119	$	7	$	65	$	133

Incurred Payable as of Payable as of
Three Months Ended
September 30, Nine Months Ended
September 30, September 30, December 31,
Expensed 2017 2016 2017 2016 2017 2016
Acquisition fees $ —
$ 46
$ —
$ 104
$ —
$ 80
Asset management fees 232
227
667
673
—
—
Reimbursement of operating expenses 73
49
173
146
—
—
Property management fees 81
99
280
319
37
2
Disposition fees —
—
430
115
—
29
Total $ 386
$ 421
$ 1,550
$ 1,357
$ 37
$ 111

Capitalized
Acquisition fees $ —
$ —
$ 194
$ 273
$ —
$ —
Leasing fees 80
49
145
152
—
—
Legal leasing fees 35
12
86
45
—
—
Construction management fees 19
—
19
2
—
—
Financing coordination fees 107
—
814
—
—
—
Total $ 241
$ 61
$ 1,258
$ 472
$ —
$ —

Acquisition Fees

Under the Advisory Agreement, the Advisor is entitled to receive an acquisition fee equal to 1% of (1) the cost of each investment acquired directly by the Company or (2) the Company’s allocable cost of an investment acquired pursuant to a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments. An acquisition fee is capitalized by the Company when the related transaction does not qualify as a business combination; otherwise an acquisition fee is expensed.

~~Origination Fees~~

Under the Advisory Agreement, the Advisor is entitled to receive an origination fee equal to 1% of the amount funded by the Company to acquire or originate real estate-related loans, including any acquisition expenses related to such investment and any debt used to fund the acquisition or origination of the real estate-related loans. The Company will not pay an origination fee to the Advisor with respect to any transaction pursuant to which it is required to pay the Advisor an acquisition fee.

Financing Coordination Fees

Under the Advisory Agreement, the Advisor is entitled to receive a financing coordination fee equal to 1% of the amount made available and/or outstanding under any (1) financing obtained or assumed, directly or indirectly, by the Company or the OP and used to acquire or originate investments, or (2) the refinancing of any financing obtained or assumed, directly or indirectly, by the Company or the OP.

Asset Management Fees

Under the Advisory Agreement, the Advisor is entitled to receive an asset management fee equal to a monthly fee of one-twelfth (1/12th) of 0.6% of the higher of (1) aggregate cost on a GAAP basis (before non-cash reserves and depreciation) of all investments the Company owns, including any debt attributable to such investments, or (2) the fair market value of the Company’s investments (before non-cash reserves and depreciation) if the board of directors has authorized the estimate of a fair market value of the Company’s investments; provided, however, that the asset management fee will not be less than $250,000 in the aggregate during any one calendar year.

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Reimbursement of Operating Expenses

The Company reimburses the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company’s total operating expenses (including the asset management fee described below) at the end of the four preceding fiscal quarters exceeded the greater of (1) 2% of its average invested assets (as defined in the Company’s Articles of Amendment and Restatement (the “Charter”)); or (2) 25% of its net income (as defined in the Charter) determined without reduction for any additions to depreciation, bad debts or other similar non-cash expenses and excluding any gain from the sale of the Company’s assets for that period (the “2%/25% Guideline”). The Advisor is required to reimburse the Company quarterly for any amounts by which total operating expenses exceed the 2%/25% Guideline in the previous expense year that the independent directors do not approve. The Company will not reimburse the Advisor for any of its personnel costs or other overhead costs except for customary reimbursements for personnel costs under property management agreements entered into between the OP and the Advisor or its affiliates. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of the 2%/25% Guideline if a majority of the independent directors determine that such excess expenses are justified based on unusual and non-recurring factors. Pursuant to an amendment to the Advisory Agreement entered on August 2, 2018, the board of directors, including a majority of the independent directors identified certain unusual and non-recurring factors that would justify reimbursement to the Advisor of amounts in excess of the 2%/25% Guidelines and confirmed that the Advisor would not be obligated to reimburse the Company for these excess amounts to the extent the excess was caused by such factors.

For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, the Company’s total operating expenses (as defined in the Charter) did not exceed the 2%/25% Guideline.

Property Management Fees

Under the property management agreements between the Company and Glenborough, Glenborough is entitled to receive property management fees calculated at a maximum of up to 4% of the properties’ gross revenue. The property management agreements with Glenborough have been renewed for an additional ~~twelve~~12 months, beginning on August 10, ~~2017.~~2019. Property management agreements with Glenborough automatically renew every year, unless expressly terminated.

Disposition Fees

Under the Advisory Agreement, if the Advisor or its affiliates provide a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of a real property, the Advisor or its affiliates may be paid disposition fees up to 50% of a customary and competitive real estate commission, but not to exceed 3% of the contract sales price of each property sold.

Leasing Fees

Under the property management agreements, Glenborough is entitled to receive a separate fee for the leases of new tenants, and for expansions, extensions and renewals of existing tenants in an amount not to exceed the fee customarily charged by similarly situated parties rendering similar services in the same geographic area for similar properties.

Legal Leasing Fees

Under the property management agreements, Glenborough is entitled to receive a market-based legal leasing fee for the negotiation and production of new leases, renewals, and amendments.

Construction Management Fees

In connection with the construction or repair in or about a property, the property manager is responsible for coordinating and facilitating the planning and the performance of all construction and is entitled to receive a fee equal to 5% of the hard costs for the project in question.

~~Related-Party Fees Paid by the Unconsolidated Joint Ventures~~

The unconsolidated joint ventures are party to certain agreements with Glenborough for services related to the investment of funds and management of the joint ventures’ investments, as well as the day-to-day management, operation and maintenance of the properties owned by the joint ventures. The joint ventures pay fees to Glenborough for these services. For the three months ended September 30, 2017 and 2016, the SGO Joint Venture recognized related party fees and reimbursements of $58 thousand and $0.1 million, respectively. For the nine months ended September 30, 2017 and 2016, the SGO Joint Venture recognized related party fees and reimbursements of $0.2 million and $0.4 million, respectively. For the three months ended September 30, 2017 and 2016, the SGO MN Joint Venture recognized related party fees and reimbursements of $0.2 million and $0.3 million, respectively. For the nine months ended September 30, 2017 and 2016, the SGO MN Joint Venture recognized related party fees and reimbursements of $0.5 million and $0.8 million, respectively. The related-party amounts consist of property management, asset management, leasing commission, legal leasing, construction management fees and salary reimbursements.

~~Table of Contents~~

~~STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~13.~~12. COMMITMENTS AND CONTINGENCIES

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments, management of the daily operations of the Company’s real estate and real estate-related investment portfolio, and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services to the Company, the Company will be required to obtain such services from other sources.

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its condensed consolidated financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

~~14.~~13. SUBSEQUENT EVENTS

~~Distributions~~COVID-19 Pandemic

~~On September 6, 2017,~~The Company is monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic will impact its tenants and business partners. While the Company did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, a majority of the Company’s ~~board of directors declared~~tenants have not paid April rent and have recently requested rent deferral or rent abatement as a ~~third quarter distribution in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of September 30, 2017. The distribution was paid on October 31, 2017.~~

~~Sale of Held for Sale Properties~~

On October 31, 2017, the Borrowers under the Amended and Restated Credit Facility borrowed $26.0 million under that facility, and used the proceeds to repay the existing secured financing that encumbered the following properties: The Shops at Turkey Creek, Morningside Marketplace, Florissant Marketplace, Ensenada Square and Cochran Bypass. The total amountresult of the ~~repayment was $25.4 million,~~pandemic, and therefore, the Company is unable to predict the full impact that the pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties. The Company is evaluating each tenant’s request for rent relief on an individual basis and is considering a number of factors. Not all tenant requests will result in modified agreements nor is the Company forgoing its contractual rights under its lease agreements. See Item 2 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Impact of COVID-19” for additional information regarding the potential impact of COVID-19 on the Company’s operations.

The full extent to which ~~included a payment~~the COVID-19 pandemic impacts the Company’s operations and those of ~~yield maintenance due upon prepayment~~its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of ~~$1.4 million.~~ the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. While the Company is not able at this time to estimate the impact of the COVID-19 pandemic on its financial position and results of operations, it could be material.

Share Redemption Program

In order to preserve cash in light of the uncertainty relating to the duration of shelter-in-place orders and the economic impact of COVID-19 on the Company, by unanimous written consent executed on April 21, 2020, the Board approved the suspension of the SRP, which offered redemption opportunities only in connection with ~~that borrowing,~~a stockholder’s death or qualifying disability.

Under the ~~Borrower added~~SRP, the ~~following property~~Board may amend, suspend, or terminate the SRP with 30 days’ notice to the Company’s stockholders. The Current Report on Form 8-K, filed on April 21, 2020 with the SEC, serves as ~~additional collateral security under~~such required notice and therefore the suspension of the SRP will be effective on May 21, 2020. The SRP will remain suspended and no further redemptions will be made unless and until the Board approves the resumption of the SRP. During the suspension, the Company will continue to accept death and disability redemption filings from stockholders, but will not take any action with regard to those requests until the Board has elected to lift the suspension and provided the terms and conditions for any continuation of the ~~Amended and Restated Credit Facility: The Shops at Turkey Creek, Morningside Marketplace, Florissant Marketplace and Ensenada Square.~~

On October 31, 2017, the Company consummated the disposition of Cochran Bypass for a sales price of approximately $2.5 million in cash. The net proceeds from the sale of Cochran Bypass were used to repay a portion of the outstanding balance under the Company’s line of credit.

On November 1, 2017, the Company, through an indirect subsidiary, sold an approximately 76,900 square foot retail property located in Fontana, California (“Morningside Marketplace”) to an unrelated third party for $12.7 million. The proceeds were used to pay down amounts outstanding under the Company’s line of credit.

program.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q and in our audited consolidated financial statements and the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, as filed with the Securities and Exchange Commission, or SEC, on March ~~24, 2017,~~18, 2020, which we refer to herein as our ~~“2016~~“2019 Annual Report on Form 10-K.”

As used herein, the terms “we,” “our,” “us,” and “Company” refer to Strategic Realty Trust, Inc., ~~formerly TNP Strategic Retail Trust, Inc.,~~ and, as required by context, Strategic Realty ~~Operating Partnership, L.P., formerly TNP Strategic Retail~~ Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “operating partnership” or “OP”, and to their respective subsidiaries. References to “shares” and “our common stock” refer to the shares of our common stock.

Special Note Regarding Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of ~~Section 27A of the Securities Act of 1933, as amended, and~~ Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing 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 predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

The potential adverse effect of the ongoing public health crisis of the novel coronavirus disease (COVID-19) pandemic, or any future pandemic, epidemic or outbreak of infectious disease, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets.

Our executive officers and certain other key real estate professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor. As a result, they face conflicts of interest, including conflicts created by our advisor’s compensation arrangements with us and conflicts in allocating time among us and other programs and business activities.

We are uncertain of our sources for funding our future capital needs. If we cannot obtain debt or equity financing on acceptable terms, our ability to continue to acquire real properties or other real estate-related assets, fund or expand our operations and pay distributions to our stockholders will be adversely affected.

We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants. Revenues from our properties could decrease due to a reduction in tenants (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for us to meet our financial obligations, including debt service and our ability to pay distributions to our stockholders.

A significant portion of our assets are concentrated in one state and in urban retail properties, any adverse economic, real estate or business conditions in this geographic area or in the urban retail market could affect our operating results and our ability to pay distributions to our stockholders.

Our current and future investments in real estate and other real estate-related investments may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders. Revenues from our properties could decrease. Such events would

make it more difficult for us to meet our debt service obligations and limit our ability to pay distributions to our stockholders.

Certain of our debt obligations have variable interest rates with interest and related payments that vary with the movement of LIBOR or other indices. Increases in these indices could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.

All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of our ~~2016~~2019 Annual Report on Form 10-K. Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon on any forward-looking statements included herein. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Moreover, you should interpret many of the risks identified in this Quarterly Report, as well as the risks set forth above, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report on Form 10-Q, and the risks described in Part I, Item 1A of our ~~2016~~2019 Annual Report on Form 10-K, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report on Form 10-Q will be achieved.

Overview

We are a Maryland corporation that was formed on September 18, 2008, to invest in and manage a portfolio of income-producing retail properties, located in the United States, real estate-owning entities and real estate-related assets, including the investment in or origination of mortgage, mezzanine, bridge and other loans related to commercial real estate. During the first quarter of 2016, we also invested, through joint ventures, in two significant retail projects under development. We have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes, commencing with the taxable year ended December 31, 2009, and we have operated and intend to continue to operate in such a manner. We own substantially all of our assets and conduct our operations through our operating partnership, of which we are the sole general partner. We also own a majority of the outstanding limited partner interests in the operating partnership.

Since our inception, our business has been managed by an external advisor. We do not have direct employees and all management and administrative personnel responsible for conducting our business are employed by our advisor. Currently we are externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed every ~~year.~~year through 2019. The current term of the Advisory Agreement terminates on August ~~10, 2018.~~9, 2020. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.

Impact of COVID-19

On March 11, 2020, the World Health Organization declared COVID-19, a respiratory illness caused by the novel coronavirus, a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The COVID-19 pandemic has caused state and local governments to institute quarantines, shelter-in-place rules and restrictions on travel, the types of business that may continue to operate, and the types of construction projects that may continue. California, where the majority of our properties are located, declared a state of emergency on March 4, 2020 and instituted a shelter-in-place order on March 16, 2020 to reduce the spread of COVID-19.

COVID-19 and the efforts to contain its spread have significantly impacted the global economy, the U.S. economy, the economies of the local markets throughout California in which our properties are predominately located, and the broader financial markets. Nearly every industry has been impacted directly or indirectly, and the U.S. retail market has come under severe pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, restrictions on travel and shelter-in-place or stay-at-home orders. There is uncertainty as to the time, date and extent to which these restrictions will be relaxed, lifted or reinstated, businesses of tenants that have closed, either voluntarily or by mandate, will reopen or when customers will re-engage with tenants as they have in the past.

While we did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, we believe that there is a reasonable risk that the COVID-19 outbreak could negatively impact our financial condition and results of operations, including but not limited to, declines in real estate rental revenues, the inability to sell certain properties at a favorable price, and a decrease in construction and leasing activity. A majority of our tenants have not paid April rent and have recently requested rent deferral or rent abatement as a result of the pandemic. Tenants that requested rent relief account for approximately 93% of our annualized rents. We are reviewing these requests on a case by case basis and are continuing to monitor and communicate with our commercial tenants to assess their needs and ability to pay rent. As of May 6, 2020, we have collected approximately 13% of April’s monthly billings to tenants. In most cases, it is in our best interest to help our tenants remain in business and reopen when shelter-in-place orders or other mandated closures are lifted. If these tenants fail, finding replacement tenants may be costly and time-consuming. In addition, while the majority of our properties are fully leased as of March 31, 2020, we expect that the effects of the COVID-19 pandemic may impact our ability to lease up available commercial space at certain properties. For example, while the Wilshire Property is nearing completion and was 60% leased as of March 31, 2020, there were three potential tenants who put their plans on hold in light of the COVID-19 pandemic, however they remain interested in the project. As of March 31, 2020, we had approximately 8,000 square feet of vacant commercial space and approximately 600 square feet of commercial lease expirations scheduled for the remainder of 2020.

To mitigate the impact of COVID-19 on our operations and liquidity, we have taken a number of proactive measures, which include the following:

Our Advisor has been able to transition all employees and operations to a remote work environment, beginning on March 16, 2020, and we have been fortunate that our operations have continued successfully during these difficult times.

~~ITEM 2. PROPERTIES~~We are in constant communication with our tenants and are assisting tenants in identifying local, state and federal resources that may be available to support their businesses and employees during the pandemic, including stimulus funds that may be available under the Coronavirus Aid, Relief, and Economic Security Act of 2020.

We believe we have adequate cash and cash equivalents to service our debts and pay for our ongoing general and administrative expenses for the foreseeable future. As of March 31, 2020, we have approximately $5.4 million in cash and cash equivalents. Furthermore, the Shops at Turkey Creek remain unencumbered by debt and is available for financing to provide us funds if needed.

We fully paid off the revolving line of credit with the SRT Loan (as defined below) from PFP Holding Company, LLC (the “SRT Lender”). The SRT Loan is secured by six of our core urban properties in Los Angeles and San Francisco. The SRT Loan does not have the sort of restrictive covenants and ongoing debt coverage ratios that could trigger a default caused by tenants not paying rent or seeking rent relief (unlike the former line of credit).

We remain in compliance with all the terms of the Wilshire Construction Loan (as defined below), which matures on May 10, 2022 with the options to extend for two additional twelve-month periods, subject to certain conditions. Similarly, we remain in compliance with the Sunset & Gardner Loan (as defined below), which matures on October 31, 2020, and we are in discussions to further extend the maturity date of the Sunset & Gardner Loan.

To further preserve cash and liquidity, we suspended our Amended and Restated Share Redemption Program (the “SRP”), such suspension to be effective on May 21, 2020. The SRP will remain suspended and no further redemptions will be made unless and until our board of directors (the “Board”) approves the resumption of the SRP. During the suspension, we will continue to accept death and disability redemption filings from stockholders, but will not take any action with regard to those requests until the Board has elected to lift the suspension and provided the terms and conditions for any continuation of the program. In addition, on March 27, 2020, the Board decided to suspend the payment of any dividend for the quarter ending March 31, 2020, and will reconsider future dividend payments on a quarter by quarter basis as more information becomes available on the impact of COVID-19 and related impact to us.

Given the uncertainty of the COVID-19 pandemic’s near and potential long-term impact on our business, the full extent of the financial impact cannot be reasonably estimated at this time. However, there are those who believe that, as more tools are developed to fight COVID-19 - increased testing, enhanced monitoring, data analysis and identification of effective therapeutics-the country can, anchored by advice of healthcare specialists, incrementally foster economic activity in the near term and at some point with a vaccine and time, the country should return to a more normal state as with other pandemics in the past.

Property Portfolio

As of ~~September 30, 2017,~~March 31, 2020, our property portfolio included 127 retail properties, ~~including 3 properties held for sale,~~excluding a pad, which we refer to as “our properties” or “our portfolio,” comprising an aggregate of approximately ~~425,000~~43,000 square feet of ~~single- and~~ multi-tenant, commercial retail space located in ~~five~~two states. We purchased our properties for an aggregate purchase price of approximately ~~$94.8~~$39.6 million. As of ~~September 30, 2017 and December~~March 31, ~~2016, there was~~2020 approximately ~~$23.9 million and approximately $33.8 million of indebtedness on our properties, respectively. As of September 30, 2017 and December 31, 2016, approximately 97% and 91%~~81% of our portfolio was leased (based on rentable square footage), ~~respectively,~~ with a weighted-average remaining lease term of approximately ~~five~~6.8 years. As of December 31, 2019, approximately 90% of our portfolio was leased (based on rentable square footage), with a weighted-average remaining lease term of approximately 6.8 years.


(dollars in thousands)	(dollars in thousands)		Rentable Square Feet ⁽¹⁾		Percent Leased ⁽²⁾		Effective Rent ⁽³⁾ (Sq. Foot)			Anchor Tenant		Date Acquired	Original Purchase Price ⁽⁴⁾			Debt ⁽⁵⁾				Rentable Square Feet		Percent Leased ⁽²⁾		Effective Rent ⁽³⁾ (per Sq. Foot)		Date Acquired	Original Purchase Price ⁽⁴⁾		Debt ⁽⁵⁾
Property Name(1)		Location					Effective Rent ⁽³⁾ (Sq. Foot)			Anchor Tenant	Location	Date Acquired								Rentable Square Feet		Percent Leased ⁽²⁾		Effective Rent ⁽³⁾ (per Sq. Foot)		Date Acquired	Original Purchase Price ⁽⁴⁾		Debt ⁽⁵⁾
Topaz Marketplace		Hesperia, CA	Rentable Square Feet ⁽¹⁾	50,699	Percent Leased ⁽²⁾			83	%	$	22.30		Original Purchase Price ⁽⁴⁾		n/a	Debt ⁽⁵⁾		9/23/2011	13,500		—
Ensenada Square		Arlington, TX	62,628		100	%	7.52			Kroger		2/27/2012	5,025			2,901
Shops at Turkey Creek		Knoxville, TN	16,324		100	%	27.71			n/a		3/12/2012	4,300			2,624			Knoxville, TN	16,324		61	%	$	30.59	3/12/2012	$	4,300	$	—
400 Grove Street		San Francisco, CA	2,000		100	%	60.00			n/a		6/14/2016	2,890			—			San Francisco, CA	2,000		100	%	63.04		6/14/2016	2,890		1,450
8 Octavia Street		San Francisco, CA	3,640		47	%	32.00			n/a		6/14/2016	2,740			—			San Francisco, CA	3,640		47	%	53.89		6/14/2016	2,740		1,500
Fulton Shops		San Francisco, CA	3,758		100	%	55.91			n/a		7/27/2016	4,595			—			San Francisco, CA	3,758		100	%	57.68		7/27/2016	4,595		2,200
450 Hayes		San Francisco, CA	3,724		100	%	89.82			n/a		12/22/2016	8,020			—			San Francisco, CA	3,724		100	%	93.08		12/22/2016	7,567		3,650
388 Fulton		San Fancisco, CA	3,110		100	%	63.05			n/a		1/4/2017	4,500			—			San Francisco, CA	3,110		100	%	68.13		1/4/2017	4,195		2,300
Silver Lake		Los Angeles, CA	10,497		100	%	62.96			n/a		1/11/2017	13,300			—			Los Angeles, CA	10,497		100	%	68.80		1/11/2017	13,300		6,900
			156,380										$	58,870		$	5,525			43,053							$	39,587	$	18,000

Properties Held for Sale
Cochran Bypass		Chester, SC	45,817		100	%	5.11			Bi-Lo Store		7/14/2011	$	2,585		$	1,465
Florissant Marketplace		Florissant, MO	146,257		98	%	9.90			Schnuck's		5/16/2012	15,250			8,588
Morningside Marketplace		Fontana, CA	76,923		100	%	16.24			Ralph's		1/9/2012	18,050			8,365
			268,997										35,885			18,418
			425,377										$	94,755		$	23,943


(1)	~~Square feet includes improvements made on ground leases~~List of properties does not include a residual parcel at ~~the property.~~Topaz Marketplace as of March 31, 2020.


(2)	Percentage is based on leased rentable square feet of each property as of ~~September 30, 2017.~~March 31, 2020.


(3)	Effective rent per square foot is calculated by dividing the annualized ~~September 2017~~March 2020 contractual base rent by the total square feet occupied at the property. The contractual base rent does not include other items such as tenant concessions (e.g., free rent), percentage rent, and expense recoveries.


(4)	The purchase price for Shops at Turkey Creek includes the issuance of common units in our operating partnership to the sellers.

(5)

Debt represents the outstanding balance as of ~~September 30, 2017,~~March 31, 2020, and excludes reclassification of approximately ~~$36 thousand~~$0.7 million deferred financing costs, net, as a contra-liability. For more information on our financing, refer to Note 8.7. “Notes Payable, Net” to our ~~interim unaudited~~ condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. As of September 30, 2017, our line of credit principal balance of $21.0 million was secured by Topaz Marketplace, 8 Octavia Street, 400 Grove Street, the Fulton Shops, 450 Hayes, 388 Fulton, and Silver Lake. For information regarding recent draws under the Key Bank credit facility, see “– Recent Financing Transactions - Our Line of Credit.”

Properties Under Development

As of ~~September 30, 2017,~~March 31, 2020, we had two properties under development. The properties are identified in the following table (dollar amounts in thousands):


Properties Under Development	Location	Estimated Completion Date	Estimated Expected Square Feet	Debt		Location	Estimated Completion Date	Estimated Expected Square Feet	Debt
Wilshire Property	Santa Monica, CA	May, 2018	12,500	$	8,500	Santa Monica, CA	August, 2020	12,500	$	10,084
Gelson’s Property	Hollywood, CA	July, 2018	37,000	10,700
Sunset & Gardner Property						Hollywood, CA	January, 2022	37,000	8,700
Total			49,500	$	19,200			49,500	$	18,784

~~Portfolio Investments~~

~~As of September 30, 2017, our portfolio included:~~

~~Investments in two consolidated joint ventures, which own property under development in the Los Angeles, California area that are expected to comprise 49,500 square feet upon completion.~~

~~Investments in two unconsolidated joint ventures, which own, in aggregate, 8 retail centers, comprising an aggregate of approximately 599,000 square feet and located in four states.~~

Twelve retail properties, including 3 properties held for sale, comprising an aggregate of approximately 425,000 square feet of single- and multi-tenant, commercial retail space located in five states.

Results of Operations

Comparison of the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020, versus the three ~~and nine~~ months ended ~~September 30, 2016.~~March 31, 2019.

The following table provides summary information about our results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (amounts in thousands):


	Three Months Ended September 30,											Three Months Ended March 31,
	2017			2016			$ Change			% Change		2020			2019			$ Change			% Change
Rental revenue and reimbursements	$	2,219		$	2,647		$	(428	)	(16.2	)%	$	807		$	944		$	(137	)	(14.5	)%
Operating and maintenance expenses	848			949			(101		)	(10.6	)%	450			270			180			66.7	%
General and administrative expenses	483			623			(140		)	(22.5	)%	405			399			6			1.5	%
Depreciation and amortization expenses	653			907			(254		)	(28.0	)%	301			377			(76		)	(20.2	)%
Transaction expense	—			165			(165		)	(100.0	)%
Interest expense	449			550			(101		)	(18.4	)%	171			189			(18		)	(9.5	)%
Operating loss	(214		)	(547		)	333			(60.9	)%	(520		)	(291		)	(229		)	78.7	%
Other income (loss), net	(19		)	16			(35		)	(218.8	)%	947			(20		)	967			(4,835.0	)%
Income taxes	3			(19		)	22			(115.8	)%	(2		)	—			(2		)	100.0	%
Net income (loss)	$	(230	)	$	(550	)	$	320		(58.2	)%	$	425		$	(311	)	$	736		(236.7	)%

	Nine Months Ended September 30,
	2017			2016			$ Change			% Change
Rental revenue and reimbursements	$	7,084		$	7,837		$	(753	)	(9.6	)%
Operating and maintenance expenses	2,554			2,787			(233		)	(8.4	)%
General and administrative expenses	1,478			1,691			(213		)	(12.6	)%
Depreciation and amortization expenses	2,439			2,628			(189		)	(7.2	)%
Transaction expense	85			445			(360		)	(80.9	)%
Interest expense	1,505			1,660			(155		)	(9.3	)%
Operating loss	(977		)	(1,374		)	397			(28.9	)%
Other income (loss), net	9,027			(34		)	9,061			(26,650.0	)%
Income taxes	(99		)	(153		)	54			(35.3	)%
Net income (loss)	$	7,951		$	(1,561	)	$	9,512		(609.4	)%

Our results of operations for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020, are not necessarily indicative of those expected in future periods.

Revenue

The decrease in revenue during the three months ended ~~September 30, 2017,~~March 31, 2020, compared to the same period in ~~2016,~~2019, was primarily due to the sales of ~~Pinehurst Square East in January~~a significant portion of ~~2017 and Woodland West~~Topaz Marketplace in April 2017. The decreases were partially offset by a full quarter of revenue from the acquisition of Fulton Shops in July 2016 and acquisitions of 450 Hayes in December 2016, and 388 Fulton and Silver Lake during the first quarter of 2017.

The decrease in revenue during the nine months ended September 30, 2017, compared to the same period in 2016, was primarily due to the sales of Bloomingdale Hills in April 2016, Pinehurst Square East in January of 2017 and Woodland West Marketplace in April 2017. The decreases were partially offset by a full quarter of revenue from acquisitions of 8 Octavia, and 400 Grove in June 2016, acquisitions of Fulton Shops in July 2016 and 450 Hayes in December 2016, and 388 Fulton and Silver Lake during the first quarter of 2017.February 2020.

Operating and maintenance expenses

Operating and maintenance expenses ~~decreased~~increased during the three months ended ~~September 30, 2017,~~March 31, 2020, when compared to the same period in ~~2016~~2019, primarily due to ~~sales of Pinehurst Square East~~an increase in ~~January of 2017 and Woodland West Marketplace in April 2017.~~bad debt reserves for amounts deemed to be uncollectible.

~~The decreases were mostly offset by acquisitions of Fulton Shops in July 2016 and 450 Hayes in December 2016, and 388 Fulton and Silver Lake during the first quarter of 2017.~~

Operating and maintenance expenses decreased during the nine months ended September 30, 2017, when compared to the same period in 2016 due to sales of Bloomingdale Hills in April 2016, Pinehurst Square East in January of 2017 and Woodland West Marketplace in April 2017. The decreases were mostly offset by acquisitions of 8 Octavia, 400 Grove in June 2016, acquisitions of Fulton Shops in July 2016 and 450 Hayes in December 2016, and 388 Fulton and Silver Lake during the first quarter of 2017.

General and administrative expenses

General and administrative expenses ~~decreased~~remained relatively flat during the three months ended ~~September 30, 2017,~~March 31, 2020, compared to the same period in ~~2016 primarily due to decreased legal fees.~~

General and administrative expenses decreased during the nine months ended September 30, 2017, compared to the same period in 2016 primarily due to decreased legal fees and decreased investor relations costs.2019.

Depreciation and amortization expenses

Depreciation and amortization expenses decreased during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020, compared to the same period in ~~2016,~~2019, primarily due to ~~the~~ classification of ~~Cochran Bypass, Florissant Marketplace, and Morningside~~Topaz Marketplace as held for sale during the ~~third quarter of 2017.~~three months ended September, 2019, and subsequent sale in February 2020.

~~Transaction~~Interest expense

~~There was no purchase or sale activity~~Interest expense decreased during the three months ended ~~September 30, 2017, which resulted in lower transaction fees when compared to the three months ended September 30, 2016.~~

~~The decrease in transaction fees during the nine months ended September 30, 2017, as~~March 31, 2020, compared to the same period in ~~2016 was primarily~~2019, due to ~~our adoption of Accounting Standards Update (“ASU”) No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ ~~(“ASU 2017-01”)~~decreases in interest rates as ~~of January 1, 2017. As part of adopting ASU 2017-01, acquisitions of 388 Fulton and Silver Lake during the first quarter of 2017 were classified~~well as ~~asset acquisitions and the related acquisition costs were capitalized.~~

~~Interest expense~~

~~Interest expense has decreased in 2017 over 2016 due to changes~~decreases in debt balances as a result of using the proceeds from property ~~acquisitions and dispositions~~disposition activities ~~and the resulting fluctuations~~to repay debt. Additionally, decreased deferred loan fees amortization also contributed to a decrease in ~~debt balances from related proceeds and repayments of debt.~~interest expense.

Other income (loss), net

Other income (loss), net ~~from~~for the three months ended ~~September 30, 2017, primarily~~March 31, 2020, consisted of gain on sale of Topaz Marketplace. Other income (loss), net for the three months ended March 31, 2019, consisted of equity in loss resulting from our previous investment in unconsolidated joint ~~ventures.~~ventures

Other income, net from the nine months ended September 30, 2017, primarily consisted of approximately $9.1 million related to the gain on sales of Pinehurst Square East in January 2017 and Woodland West Marketplace in April 2017, as well as the recognition of deferred gain resulting from the first quarter of 2017 sale by the SGO Retail Acquisitions Venture, LLC (“SGO Joint Venture”) of Aurora Commons.Income Taxes

Income taxes

~~In addition to~~ for the ended March 31, 2020, consisted of various state tax payments, we have incurred federal tax due to our election to treat one of our subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Internal Revenue Code. A TRS is subject to federal and state income taxes. For the nine months ended September 30, 2016, income taxes increased due to the income taxes on our share of the gain from the sale of certain SGO MN Retail Acquisitions Venture, LLC (“SGO MN Joint Venture”) properties, partially offset by the 2016 reversal of an over accrual of estimated alternative minimum state/federal taxes, which was accrued and included in expenses as of December 31, 2015. The over accrual was determined to be immaterial and was the result of finalizing, in 2016, the calculation of taxes owed for 2015.payments.

Liquidity and Capital Resources

Since our inception, our principal demand for funds has been for the acquisition of real estate, the payment of operating expenses and interest on our outstanding indebtedness, the payment of distributions to our stockholders and investments in unconsolidated joint ventures and development properties. On February 7, 2013, we ceased offering shares of our common

stock in our primary offering and under our distribution reinvestment plan. As a result of the termination of our initial public offering, offering proceeds from the sale of our securities are not currently available to fund our cash needs. We have used and expect to continue to use debt financing, net sales proceeds and cash flow from operations to fund our cash needs.

As of ~~September 30, 2017,~~March 31, 2020, our cash and cash equivalents were approximately ~~$3.6~~$5.4 million and ~~our~~we had $0.9 million of restricted cash (funds held by the lenders for property taxes, insurance, tenant improvements, leasing commissions, capital expenditures, rollover reserves and other financing needs) ~~was approximately $4.2 million. For properties with lender reserves, we may draw upon such reserves to fund the specific needs for which the funds were established.~~.

Our aggregate borrowings, secured and unsecured, are reviewed by our board of directors at least quarterly. Under our Articles of Amendment and Restatement, as amended, which we refer to as our “charter,” we are prohibited from borrowing in excess of 300% of the value of our net assets. Net assets for purposes of this calculation is defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation, reserves for bad debts and other non-cash reserves, less total liabilities. ~~The preceding calculation is generally expected to approximate 75% of the aggregate cost of our assets before non-cash reserves and depreciation.~~ However, we may temporarily borrow in excess of these amounts if such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with an explanation for such excess. As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, our borrowings ~~excluding secured term loans balances which have been classified as held for sale,~~ were approximately ~~89.2%~~63.5% and ~~105.2%~~75.1%, respectively, of the carrying value of our net assets.

The following table summarizes, for the periods indicated, selected items in our condensed consolidated statements of cash flows (amounts in thousands):


	Nine Months Ended September 30,									Three Months Ended March 31,
	2017			2016			$ Change			2020			2019			$ Change
Net cash provided by (used in):
Operating activities	$	2,597		$	1,243		$	1,354		$	(410	)	$	76		$	(486	)
Investing activities	12,081			(31,569		)	43,650			7,156			(815		)	7,971
Financing activities	(14,163		)	25,426			(39,589		)	(7,681		)	646			(8,327		)
Net increase (decrease) in cash and cash equivalents	$	515		$	(4,900	)
Net decrease in cash, cash equivalents and restricted cash										$	(935	)	$	(93	)

Cash Flows from Operating Activities

The ~~increase~~decrease in cash flows from operating activities was primarily due to ~~a decrease in deposit balances resulting from the closing of the acquisitions of 388 Fulton and Silver Lake~~lower operating income during the ~~first quarter~~three months ended March 31, 2020 as compared to the same period in 2019, which resulted from sale of ~~2017.~~Topaz Marketplace during the three months ended March 31, 2020 as well as increased reserves for amounts deemed to be uncollectible.

Cash Flows from Investing Activities

~~The change in cash~~Cash flows ~~from~~provided by investing activities ~~was~~during the three months ended March 31, 2020 primarily ~~due to the net~~consisted of approximately $9.9 million of proceeds from ~~the disposition~~sale of ~~Pinehurst Square East and Woodland West Marketplace of approximately $32.4 million,~~Topaz Marketplace. These were partially offset by our aggregate ~~$17.8~~additional $2.5 million ~~acquisition of 388 Fulton~~investment in the Wilshire and ~~Silver Lake in January 2017.~~ Sunset and Gardner Joint Ventures.

Cash flows ~~from~~used in investing activities during the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2019, primarily consisted of our aggregate ~~$28.5~~additional $0.7 million ~~investments~~investment in the Wilshire and ~~Gelson's~~Sunset and Gardner Joint Ventures.

Cash Flows from Financing Activities

~~The change in cash~~Cash flows ~~from~~used by financing activities during the ~~nine~~three months ended ~~September 30, 2017, was~~March 31, 2020, primarily ~~due to an increase in pay down of debt~~consisted of approximately ~~$33.2~~$8.9 million in ~~connection with the pay down of a portion~~repayments of our line of ~~credit as a result~~credit. This was partially offset by approximately $1.6 million from construction loan proceeds.

Cash flows provided by financing activities during the three months ended March 31, 2019, primarily consisted of ~~the dispositions~~approximately $1.5 million from draws on our line of ~~Pinehurst Square East and Woodland West Marketplace.~~credit. This was partially offset by our quarterly dividend payment of approximately $0.7 million.

Short-term Liquidity and Capital Resources

Our principal short-term demand for funds is for the payment of operating expenses, the payment ~~of principal and interest~~ on our outstanding indebtedness and distributions. To date, our cash needs for operations have been covered from cash provided by property operations, the sales of properties and the sale of shares of our common stock. ~~Due to the termination of our initial public offering on February 7, 2013, we~~We may fund our short-term operating cash needs from operations, from the sales of properties and from debt.

Long-term Liquidity and Capital Resources

On a long-term basis, our principal demand for funds will be for real estate and real estate-related investments and the payment of acquisition-related expenses, operating expenses, distributions to stockholders, future redemptions of shares and

interest and principal payments on current and future indebtedness. Generally, we intend to meet cash needs for items other than acquisitions and acquisition-related expenses from our cash flow from operations, debt and sales of properties. ~~Until the termination of our initial public offering on February 7, 2013, our cash needs for acquisitions were satisfied from the net proceeds of the public offering and from debt financings.~~ On a long-term basis, we expect that substantially all cash generated from operations will be used to pay distributions to our stockholders after satisfying our operating expenses including interest and principal payments. We may consider future public offerings or private placements of equity. Refer to Note 8.7. “Notes Payable, Net” to our interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on the maturity dates and terms of our outstanding indebtedness.

Recent Financing Transactions

~~Line of Credit~~

~~During the three and nine months ended September 30, 2017 and 2016, the following transactions occurred under our credit line:~~

~~Nine months ended September 30, 2017:~~Multi-Property Secured Financing

On ~~January 4, 2017,~~December 24th, we ~~drew $4.0 million~~entered into a Loan Agreement (the “SRT Loan Agreement”) with PFP Holding Company, LLC (the “SRT Lender”) for a non-recourse secured loan (the “SRT Loan”).

The SRT Loan is secured by first deeds of trust on our five San Francisco assets (Fulton Shops, 8 Octavia, 400 Grove, 450 Hayes and ~~used the proceeds to acquire~~ 388 ~~Fulton.~~

~~On January 6, 2017, we consummated the disposition of Pinehurst Square East,~~Fulton Street) as well as our Silverlake Collection located in ~~Bismarck, North Dakota, for a sales price of approximately $19.2 million in cash, $18.4 million of which was~~Los Angeles. Proceeds from the SRT Loan were used by us to pay down our ~~line of credit.~~

~~On January 11, 2017, we drew $11.0 million~~credit facility and ~~used~~in connection with such payment, the ~~proceeds to acquire Silver Lake.~~

~~On January 27, 2017, we drew $1.0 million and used the proceeds for working capital.~~

~~On February 28, 2017, we drew $9.8 million and used the proceeds to pay off the mortgage loan~~properties referenced above were released from liens related to ~~Woodland West Marketplace.~~that credit facility. The SRT Loan matures on January 9, 2023. We have an option to extend the term of the loan for two additional twelve-month periods, subject to the satisfaction of certain covenants and conditions contained in the SRT Loan Agreement. We have the right to prepay the SRT Loan in whole at any time or in part from time to time, subject to the payment of yield maintenance payments if such prepayment occurs in the first 18 months of the loan term, calculated through the 18th monthly payment date, as well as certain expenses, costs or liabilities potentially incurred by the SRT Lender as a result of the prepayment and subject to certain other conditions contained in the loan documents. Individual properties may be released from the SRT Loan collateral in connection with bona fide third-party sales, subject to compliance with certain covenants and conditions contained in the SRT Loan Agreement. Any prepayment or repayment on or before the first 12 months of the loan term in connection with a bona fide third-party sale of a property securing the SRT Loan shall only require the payment of yield maintenance payments calculated through the 12th monthly payment date.

~~On February 28, 2017, we drew $0.6 million and used~~

As of March 31, 2020, the ~~proceeds to pay certain costs for the refinancing of our line of credit.~~

~~On March 29, 2017, we drew $1.0 million and used the proceeds for working capital.~~

~~On April 17, 2017, we consummated the disposition of Woodland West Marketplace, located in Arlington, Texas, for~~SRT Loan had a ~~sales price~~principal balance of approximately ~~$14.6 million~~$18.0 million. The SRT Loan is a floating LIBOR rate loan which bears interest at 30-day LIBOR (with a floor of 1.50%) plus 2.80%. The default rate is equal to 5% above the rate that otherwise would be in ~~cash, $13.7 million of which was used~~effect. Monthly payments are interest-only with the entire principal balance and all outstanding interest due at maturity.

Pursuant to ~~pay down our line of credit.~~

~~On June 28, 2017,~~the SRT Loan, we ~~drew $1.3 million and used the proceeds for working capital.~~

~~On August 22, 2017, we drew $1.0 million and used the proceeds for working capital.~~

~~Nine months ended September 30, 2016:~~

~~On March 7, 2016, we drew $6.0 million and used the proceeds to invest~~must comply with certain matters contained in the ~~Wilshire Joint Venture.~~loan documents including but not limited to, (i) requirements to deliver audited and unaudited financial statements, SEC filings, tax returns, pro forma budgets, and quarterly compliance certificates, and (ii) minimum limits on our liquidity and tangible net worth. The SRT Loan contains customary covenants, including, without limitation, covenants with respect to maintenance of properties and insurance, compliance with laws and environmental matters, covenants limiting or prohibiting the creation of liens, and transactions with affiliates.

~~On April 4, 2016,~~In connection with the SRT Loan, we ~~consummated~~executed customary non-recourse carveout and environmental guaranties, together with limited additional assurances with regard to the ~~disposition of Bloomingdale Hills, located in Riverside, Florida, for a sales price of approximately $9.2 million in cash, $3.0 million of which was used to pay down the line of credit.~~

~~On June 9, 2016, we drew $7.5 million and used the majority~~condominium structures of the ~~proceeds to acquire 8 Octavia and 400 Grove.~~San Francisco assets.

~~On July 25, 2016, we drew $4.7 million and used the majority of the proceeds to acquire the Fulton Shops.~~

~~On September 29, 2016, we drew $1.0 million and used the proceeds for working capital.~~

~~Mortgage~~ Loans Secured by Properties Under Development

~~In connection~~On May 7, 2019, we refinanced and repaid our financing with ~~our investment in~~Loan Oak Fund, LLC with a new construction loan from ReadyCap Commercial, LLC (the “Lender”) (the “Wilshire Construction Loan”). As of March 31, 2020, the Wilshire ~~Joint Venture~~Construction Loan had a principal balance of approximately $10.1 million, with future funding availability up to a total of approximately $13.9 million, and ~~the acquisition of the Wilshire Property, we have consolidated borrowings of $8.5 million (the “Wilshire Loan”). The Wilshire Loan~~ bears an interest ~~at a~~ rate of ~~10.0%~~1-month LIBOR plus an interest margin of 4.25% per annum, payable ~~monthly, commencing on April 1, 2016.~~monthly. The ~~loan was~~Wilshire Construction Loan is scheduled to mature on ~~March 7, 2017,~~May 10, 2022, with ~~an option~~options to extend for two additional ~~six-month~~twelve-month periods, subject to certain conditions as stated in the loan agreement. ~~All conditions to extensions were met, and~~The Wilshire Construction Loan is secured by a first Deed of Trust on ~~March 7, 2017, we exercised~~ the ~~option to extend~~property. We executed a guaranty that guaranties that the loan ~~until September 7, 2017. On August 29, 2017, we exercised~~interest reserve amounts are kept in compliance with the ~~remaining option to extend~~terms of the loan agreement. The Lender also required that a principal in the upstream owner of our joint venture partner in the Wilshire Joint Venture (the “Guarantor”), guarantees performance of borrower’s obligations under the loan agreement with respect to the completion of capital improvements to the property. We executed an Indemnity Agreement in favor of the Guarantor against liability under that completion guaranty except to the extent caused by gross negligence or willful misconduct, as well as for liabilities incurred under the Environmental Indemnity Agreement executed by the Guarantor in favor of the Lender. We used working capital funds of approximately $3.1 million to repay the difference between the Wilshire Construction Loan initial advance and the prior loan, to pay transaction costs, as well as to fund certain required interest and construction reserves.

On October 29, 2018, we entered into a loan agreement with Lone Oak Fund, LLC (the “Sunset & Gardner Loan”). The Sunset & Gardner Loan has a principal balance of approximately $8.7 million, and bears an interest rate of 6.9% per annum. The Sunset & Gardner Loan was scheduled to mature on October 31, 2019. We extended the Sunset & Gardner Loan for an additional ~~six months.~~twelve month period under the same terms. The new maturity date is ~~March 7, 2018.~~October 31, 2020. The ~~loan~~Sunset & Gardner Loan is secured by ~~among other things,~~ a ~~lien~~first Deed of Trust on the ~~Wilshire development project and other collateral as defined~~property.

Line of Credit

On February 10, 2020, we used proceeds from the sale of Topaz Marketplace to repay the line of credit in ~~the loan agreement.~~

~~In connection~~its entirety. The line of credit expired of its own accord on February 15, 2020, with ~~our investment in the Gelson’s Joint Venture and the acquisition~~no balance outstanding. As part of the ~~Gelson’s Property,~~payoff, Shops at Turkey Creek was released from the line of credit.

Effective January 8, 2020, we ~~have consolidated borrowings~~elected to permanently reduce the maximum aggregate commitment under its line of ~~$10.7~~credit from $30.0 million ~~(the “Gelson’s Loan”). The Gelson’s Loan bears interest at a rate of 9.5% per annum,~~

~~payable monthly, commencing on April 1, 2016. The loan was scheduled~~ to mature on January 27, 2017, with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. Those conditions were not met, but we negotiated a six month extension$10.5 million. All other terms of the ~~term on January 27, 2017 to mature on July 27, 2017. The new maturity date is April 27, 2018. The loan is secured by, among other things, a lien on~~credit facility remained the ~~Gelson’s development project and other joint venture collateral as defined in the loan agreement.~~

~~Interim Financial Information~~

The financial information as of and for the period ended September 30, 2017, included in this Quarterly Report on Form 10-Q is unaudited, but includes all adjustments (consisting of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of our financial position and operating results for the three and nine months ended September 30, 2017. These interim unaudited condensed consolidated financial statements do not include all disclosures required by GAAP for complete consolidated financial statements. Interim results of operations are not necessarily indicative of the results to be expected for the full year; and such results may be less favorable. Our accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 2016 Annual Report on Form 10-K.same.

Guidelines on Total Operating Expenses

We reimburse our Advisor for some expenses paid or incurred by our Advisor in connection with the services provided to us, except that we will not reimburse our Advisor for any amount by which our total operating expenses at the end of the four preceding fiscal quarters exceed the greater of (1) 2% of our average invested assets, as defined in our charter; and (2) 25% of our net income, as defined in our charter, or the “2%/25% Guidelines” unless a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, our total operating expenses did not exceed the 2%/25% Guidelines.

On August 2, 2018, we entered into the Sixth Amendment to the Advisory Agreement. The Advisory Agreement Amendment provides that the Advisor shall not be required to reimburse to us any operating expenses incurred during a given period that exceed the applicable limit on “Total Operating Expenses” (as defined in the Advisory Agreement) to the extent that such excess operating expenses are incurred as a result of certain unusual and non-recurring factors approved by our board of

directors, including some related to the execution of our investment strategy as directed by our board of directors. These provisions were also included in the Seventh Amendment to the Advisory Agreement entered into August 2, 2019.

Inflation

The majority of our leases at our properties contain inflation protection provisions applicable to reimbursement billings for common area maintenance charges, real estate tax and insurance reimbursements on a per square foot basis, or in some cases, annual reimbursement of operating expenses above a certain per square foot allowance. We expect to include similar provisions in our future tenant leases designed to protect us from the impact of inflation. Due to the generally long-term nature of these leases, annual rent increases, as well as rents received from acquired leases, may not be sufficient to cover inflation and rent may be below market rates.

REIT Compliance

To qualify as a REIT for tax purposes, we are required to annually distribute at least 90% of our REIT taxable income, subject to certain adjustments, to our stockholders. We must also meet certain asset and income tests, as well as other requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which our REIT qualification is lost unless the IRS grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders.

Quarterly Distributions

As set forth above, in order to qualify as a REIT, we are required to distribute at least 90% of our annual REIT taxable income, subject to certain adjustments, to our stockholders.

Under the terms of the ~~Key Bank~~ credit facility, we may pay distributions to our stockholders so long as the total amount paid does not exceed certain thresholds specified in the ~~Key Bank~~ credit facility; provided, however, that we are not restricted from making any distributions necessary in order to maintain our status as a REIT. Our board of directors will continue to evaluate the amount of future quarterly distributions based on our operational cash needs.

Some or all of our distributions have been paid, and in the future may continue to be paid, from sources other than cash flows from operations.

In light of the COVID-19 pandemic, its impact on the economy and the related future uncertainty, on March 27, 2020, the board of directors of the Company decided to suspend the payment of any dividend for the quarter ending March 31, 2020, and to reconsider future dividend payments on a quarter by quarter basis as more information becomes available on the impact of COVID-19 and related impact to the Company.

The following ~~tables~~table set forth the quarterly distributions declared to ~~our~~the Company’s common stockholders and ~~common unit~~Common Unit holders for the ~~nine months ended September 30, 2017, and the~~ year ended ~~December 31, 2016~~2019 (amounts in thousands, except per share amounts):

Distribution Record
Date

Distribution
Payable
Date

Distribution Per Share of Common Stock /
Common Unit

Total Common
Stockholders
Distribution

Total Common
Unit Holders
Distribution

Total
Distribution
First Quarter 2017 3/31/2017 4/28/2017 $ 0.06
$ 655
$ 25
$ 680
Second Quarter 2017 6/30/2017 7/31/2017 0.06
652
25
677
Third Quarter 2017 9/30/2017 10/31/2017 0.06
660
16
676
Total $ 1,967
$ 66
$ 2,033

Distribution Record
Date

Distribution
Payable
Date

Distribution Per Share of Common Stock /
Common Unit

Total Common
Stockholders
Distribution

Total Common
Unit Holders
Distribution

Total
Distribution
First Quarter 2016 3/31/2016 4/29/2016 $ 0.06
$ 660
$ 26
$ 686
Second Quarter 2016 7/7/2016 7/29/2016 0.06
661
25
686
Third Quarter 2016 9/30/2016 10/31/2016 0.06
659
25
684
Fourth Quarter 2016 12/30/2016 1/31/2017 0.06
656
25
681
Total $ 2,636
$ 101
$ 2,737



	Distribution Record Date	Distribution Payable Date	Distribution Per Share of Common Stock / Common Unit		Total Common Stockholders Distribution		Total Common Unit Holders Distribution		Total Distribution
First Quarter 2019	3/31/2019	4/30/2019	$	0.06	$	651	$	14	$	665
Second Quarter 2019	6/30/2019	7/31/2019	0.06		648		14		662
Third Quarter 2019	9/30/2019	10/31/2019	0.06		646		13		659
Fourth Quarter 2019	12/31/2019	1/31/2020	0.02		215		5		220
Total					$	2,160	$	46	$	2,206

Funds From Operations

Funds from operations (“FFO”) is a supplemental non-GAAP financial measure of a real estate company’s operating performance. The National Association of Real Estate Investment Trusts, or “NAREIT”, an industry trade group, has promulgated this supplemental performance measure and defines FFO as net income, computed in accordance with GAAP, plus real estate related depreciation and amortization and excluding extraordinary items and gains and losses on the sale of real estate, and after adjustments for unconsolidated joint ventures (adjustments for unconsolidated partnerships and joint ventures

are calculated to reflect FFO.) It is important to note that not only is FFO not equivalent to our net income or loss as determined under GAAP, it also does not represent cash flows from operating activities in accordance with GAAP. FFO should not be considered an alternative to net income as an indication of our performance, nor is FFO necessarily indicative of cash flow as a measure of liquidity or our ability to fund cash needs, including the payment of distributions.

We consider FFO to be a meaningful, additional measure of operating performance and one that is an appropriate supplemental disclosure for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.

Our calculation of FFO attributable to common shares and Common Units and the reconciliation of net income (loss) to FFO is as follows (amounts in thousands, except shares and per share amounts):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
FFO	2017			2016			2017			2016			2020			2019
Net income (loss) ⁽¹⁾	$	(230	)	$	(550	)	$	7,951		$	(1,561	)	$	425		$	(311	)
Adjustments:
Gain on disposal of assets	—			—			(9,131		)	(614		)	(947		)	—
Adjustment to reflect FFO of unconsolidated joint ventures	97			184			309			360			—			78
Depreciation of real estate	503			680			1,725			1,962			240			299
Amortization of in-place leases and other intangibles	150			227			714			666
Amortization of in-place leases and leasing costs													61			78
FFO attributable to common shares and Common Units(1)	$	520		$	541		$	1,568		$	813		$	(221	)	$	144

FFO per share and Common Unit(1)	$	0.05		$	0.05		$	0.14		$	0.07		$	(0.02	)	$	0.01

Weighted average common shares and units outstanding(1)	11,290,377			11,430,172			11,325,712			11,445,981			10,976,673			11,098,000


(1)	Our common units have the right to convert a unit into common stock for a one-to-one conversion. Therefore, we are including the related non-controlling interest income/loss attributable to common units in the computation of FFO and including the common units together with weighted average shares outstanding for the computation of FFO per share and common unit.

Related Party Transactions and Agreements

We are currently party to the Advisory Agreement, pursuant to which the Advisor manages our business in exchange for specified fees paid for services related to the investment of funds in real estate and real estate-related investments, management of our investments and for other services. Refer to Note ~~12.~~11. “Related Party Transactions” to our interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the Advisory Agreement and other related party transactions, agreements and fees.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist primarily of carve-out guarantees in connection with our previous investments in unconsolidated joint ventures ~~and are~~as described in ~~Note 4. “Investments in Unconsolidated Joint Ventures” in~~ the ~~notes to the interim unaudited condensed~~ consolidated financial statements in ~~this Quarterly~~our 2019 Annual Report on Form 10-Q. Our joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint ventures’ debts are secured by a first mortgage, are without recourse to the joint venture partners, and10-K. These carve-out guarantees do not represent a liability of the partners other than carve-out guarantees for certain matters such as environmental conditions, misuse of funds and material misrepresentations. ~~As of September 30, 2017, we~~We have ~~provided carve-out guarantees in connection with our two unconsolidated joint ventures; in connection with those carve-out guarantees we have~~retained certain rights of recovery ~~from our joint venture partners.~~ in connection with these carve-out guarantees.

Critical Accounting Policies

Our interim unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our 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 our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar

businesses. ~~Other than the critical accounting policy discussed below, a~~A discussion of additional accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our ~~2016~~2019 Annual Report on Form 10-K.

~~Investments in Real Estate~~

~~In January 2017, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ ~~(“ASU 2017-01”) that clarifies the framework for~~

determining whether an integrated set of assets and activities meets the definition of a business. The revised framework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions.

We elected to early adopt ASU 2017-01 for the reporting period beginning January 1, 2017. As a result of adopting ASU 2017-01, our acquisitions of properties beginning January 1, 2017 were evaluated under the new guidance. The acquisitions occurring during 2017 were determined to be asset acquisitions, as they did not meet the definition of a business.

~~Evaluation of business combination or asset acquisition:~~

We evaluate each acquisition of real estate to determine if the integrated set of assets and activities acquired meet the definition of a business and need to be accounted for as a business combination. If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:

~~• Substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets; or~~

~~An acquired process is considered substantive if:~~

~~• The process cannot be replaced without significant cost, effort, or delay; or~~

~~• The process is considered unique or scarce.~~

Generally, we expect that acquisitions of real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets), or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.

In asset acquisitions, the purchase consideration, including acquisition costs, is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. As a result, asset acquisitions do not result in the recognition of goodwill or a bargain purchase gain.

~~Depreciation and amortization is computed using a straight-line method over the estimated useful lives of the assets as follows:~~



	~~Years~~
~~Buildings and improvements~~	~~5 - 30 years~~
~~Tenant improvements~~	~~1 - 36 years~~

Tenant improvement costs recorded as capital assets are depreciated over the tenant’s remaining lease term, which we determined approximates the useful life of the improvement. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Significant renovations and improvements that improve or extend the useful lives of assets are capitalized. Acquisition costs related to asset acquisitions are capitalized in the condensed consolidated balance sheets.

For acquisitions of real estate prior to the adoption of ASU 2017-01, which were generally accounted for as business combinations, we recognized the assets acquired (including the intangible value of acquired above- or below-market leases, acquired in-place leases and other intangible assets or liabilities) at fair value as of the acquisition date. Acquisition costs related to the business combinations were expensed as incurred.

Subsequent Events

~~Distributions~~COVID-19 Pandemic

~~On September 6, 2017, our board of directors declared a third quarter distribution in~~We are monitoring the ~~amount of $0.06 per share/unit to common stockholders and holders of common units of record as of September 30, 2017. The distribution was paid on October 31, 2017.~~

~~Sale of Held for Sale Properties~~

On October 31, 2017, the Borrowers under the Amended and Restated Credit Facility borrowed $26.0 million under that facility, and used the proceeds to repay the existing secured financing that encumbered the following properties: The Shops at Turkey Creek, Morningside Marketplace, Florissant Marketplace, Ensenada Square and Cochran Bypass. The total amountimpact of the ~~repayment was $25.4 million,~~COVID-19 pandemic on all aspects of our business, including how the pandemic will impact our tenants and business partners. While we did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, a majority of our tenants have not paid April rent and have recently requested rent deferral or rent abatement as a result of the pandemic, and therefore, we are unable to predict the full impact that the pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. We are evaluating each tenant’s request for rent relief on an individual basis and are considering a number of factors. Not all tenant requests will result in modified agreements nor are we forgoing our contractual rights under our lease agreements. See Item 2—“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of COVID-19” for additional information regarding the potential impact of COVID-19 on our operations.

The full extent to which ~~included a payment~~the COVID-19 pandemic impacts our operations and those of ~~yield maintenance due upon prepayment~~our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of ~~$1.4 million.~~ the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. While we are not able at this time to estimate the impact of the COVID-19 pandemic on our financial position and results of operations, it could be material.

Share Redemption Program

Under the ~~Borrower added~~SRP, the ~~following property~~Board may amend, suspend, or terminate the SRP with 30 days’ notice to our stockholders. The Current Report on Form 8-K, filed on April 21, 2020 with the SEC, serves as ~~additional collateral security under~~such required notice and therefore the suspension of the SRP will be effective on May 21, 2020. The SRP will remain suspended and no further redemptions will be made unless and until the Board approves the resumption of the SRP. During the suspension, we will continue to accept death and disability redemption filings from stockholders, but will not take any action with regard to those requests until the Board has elected to lift the suspension and provided the terms and conditions for any continuation of the ~~Amended and Restated Credit Facility: The Shops at Turkey Creek, Morningside Marketplace, Florissant Marketplace and Ensenada Square.~~

On October 31, 2017, we, through an indirect subsidiary, consummated the disposition of Cochran Bypass for a sales price of approximately $2.5 million in cash. The net proceeds from the sale of Cochran Bypass were used to repay a portion of the outstanding balance under our line of credit.

On November 1, 2017, we, through an indirect subsidiary, sold an approximately 76,900 square foot retail property located in Fontana, California (“Morningside Marketplace”) to an unrelated third party for $12.7 million. The proceeds were used to pay down amounts outstanding under our line of credit.program.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted as permitted under rules applicable to smaller reporting companies.

ITEM 4.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon, and as of the date of, the evaluation, our chief executive officer and chief financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2017,~~March 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

~~OTHER INFORMATION~~

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Omitted as permitted under rules applicable to smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the period covered by this Quarterly Report on Form 10-Q, we did not issue any equity securities that were not registered under the Securities Act of 1933, as amended.

Share Redemption Program

On April 1, 2015, our board of directors approved the reinstatement of the share redemption program (which had been suspended since January 15, 2013) and adopted an Amended and Restated Share Redemption Program (the “SRP”). Under the SRP, only shares submitted for repurchase in connection with the death or “qualifying disability” (as defined in the SRP) of a stockholder are eligible for repurchase by us. ~~The~~Under the current SRP, as amended to date, the number of shares to be redeemed is limited to the lesser of (i) a total of ~~$2.0~~$3.5 million for redemptions sought upon a stockholder’s death and a total of $1.0 million for redemptions sought upon a stockholder’s qualifying disability, and (ii) 5% of the number of shares of our common stock outstanding during the prior calendar year. Share repurchases pursuant to the SRP are made at our sole discretion. We reserve the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the SRP.

The redemption price for shares that are redeemed is 100% of our most recent estimated net asset value per share as of the applicable redemption date. A redemption request must be made within one year after the stockholder’s death or disability, unless such death or disability occurred between January 15, 2013 and April 1, 2015, when the share redemption program was suspended. Redemption requests due to the death or disability of a Company stockholder that occurred during such time period, were required to be submitted on or before April 1, 2016.disability.

The SRP provides that any request to redeem less than ~~$5 thousand~~$5,000 worth of shares will be treated as a request to redeem all of the stockholder’s shares. If we cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If we do not completely satisfy a redemption request in one quarter, we will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. We may increase or decrease the amount of funding available for redemptions under the SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter.

~~The other material terms of the SRP are consistent with the terms of the share redemption program that was in effect immediately prior to January 15, 2013.~~

On ~~October 5, 2016,~~August 8, 2019, our board of directors approved ~~pursuant to Section 3(a) of SRP,~~ an additional ~~$0.5~~$0.3 million of funds ~~available~~ for the redemption of shares in connection with the death of a ~~stockholder.~~

~~On August 2, 2017, our board of directors approved, pursuant to Section 3(a) of the SRP, an additional $1.0~~stockholder and $0.2 million of funds ~~available~~ for ~~the~~ redemption of shares in connection with the ~~death~~disability of a stockholder.

Under the SRP, the Board may amend, suspend, or terminate the SRP with 30 days’ notice to our stockholders. The Current Report on Form 8-K, filed on April 21, 2020 with the SEC, serves as such required notice and therefore the suspension of the SRP will be effective on May 21, 2020. The SRP will remain suspended and no further redemptions will be made unless and until the Board approves the resumption of the SRP. During the suspension, we will continue to accept death and disability redemption filings from stockholders, but will not take any action with regard to those requests until the Board has elected to lift the suspension and provided the terms and conditions for any continuation of the program.

During the ~~nine months~~quarter ended ~~September 30, 2017,~~March 31, 2020, we redeemed shares as follows:

Period
Total Number of
Shares Redeemed ⁽¹⁾

Average Price
Paid per Share

Total Number of Shares
Purchased as Part of a
Publicly Announced Plan
or Program

Approximate Dollar Value of
Shares That May Yet be
Redeemed Under the Program ⁽²⁾
January 2017 —
$ —
—
$ 915,158
February 2017 —
—
—
915,158
March 2017 31,875
6.36
31,875
712,431
April 2017 —
—
—
712,431
May 2017 —
—
—
712,431
June 2017 37,820
6.36
37,820
471,900
July 2017 —
—
—
471,900
August 2017 —
—
—
1,471,900
September 2017 18,233
6.27
18,233
1,357,581
Total 87,928

87,928



Period	Total Number of Shares Redeemed ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Approximate Dollar Value of Shares That May Yet be Redeemed Under the Program ⁽²⁾
January 2020	—	$	—	—	$	456,218
February 2020	—	—		—	456,218
March 2020	19,907	5.86		19,907	339,565
Total	19,907			19,907


(1)	All of our purchases of equity securities during the ~~nine months~~quarter ended ~~September 30, 2017,~~March 31, 2020, were made pursuant to the SRP.


(2)	We currently limit the dollar value and number of shares that may yet be repurchased under the SRP as described above.

Cumulatively, through ~~September 30, 2017, the Company has~~March 31, 2020, we have redeemed ~~563,122~~878,458 shares for ~~$4.3~~$6.2 million. The company had no unfulfilled redemption requests during the quarter ended March 31, 2020.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None.~~Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

As of the three months ended ~~September 30, 2017,~~March 31, 2020, all items required to be disclosed under Form 8-K were reported under Form 8-K.

ITEM 6. EXHIBITS

The exhibits listed on the Exhibit Index (following the signatures section of this Quarterly Report on Form 10-Q) are included herewith, or incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on ~~November 13, 2017.~~May 8, 2020.



	Strategic Realty Trust, Inc.

	By:	/s/ Andrew Batinovich
		Andrew Batinovich
		Chief Executive Officer, Corporate Secretary and Director (Principal Executive Officer)

	By:	/s/ ~~Terri Garnick~~M. Bradley Kettmann
		~~Terri Garnick~~M. Bradley Kettmann
		Chief Financial Officer (Principal Financial ~~and Accounting~~ Officer)

EXHIBIT INDEX

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 (and are numbered in accordance with Item 601 of Regulation S-K).



			Incorporated by Reference
Exhibit No.	Description	Filed Herewith	Form/File No.	Filing Date

3.1.1	Articles of Amendment and Restatement of TNP Strategic Retail Trust, Inc.		S-11/ No. 333-154975	7/10/2009

3.1.2	Articles of Amendment, dated August 22, 2013		8-K	8/26/2013

3.1.3	Articles Supplementary, dated November 1, 2013		8-K	11/4/2013

3.1.4	Articles Supplementary, dated January 22, 2014		8-K	1/28/2014

~~3.2~~4.1	~~Third Amended and Restated Bylaws~~Description of ~~Strategic Realty Trust, Inc.~~ Registrant’s Securities		~~8-K~~10-K	~~1/28/2014~~3/18/2020

~~10.1~~	~~The Purchase and Sale Agreement by and between TNP SRT Portfolio II, LLC and Baseline Property, LLC, dated September 14, 2017.~~	X

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

99.1	Strategic Realty Trust, Inc. Amended and Restated Share Redemption Program Adopted August 26, 2016		8-K	8/30/2016

101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	X

101.SCH	Inline XBRL Taxonomy Extension Schema Document	X

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	X

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	X

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	X

104.1	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

4436



	Three Months Ended September 30,										Nine Months Ended September 30,
	2017					2016					2017				2016
	Pinehurst Square East		Woodland West Marketplace			Pinehurst Square East		Woodland West Marketplace			Pinehurst Square East		Woodland West Marketplace		Pinehurst Square East		Woodland West Marketplace
Operating income (loss)	$	4	$	(4	)	$	234	$	(73	)	$	20	$	188	$	697	$	(160	)



		Ownership Interest				Investment
Joint Venture	Date of Investment	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
SGO Retail Acquisitions Venture, LLC	3/11/2015	19	%	19	%	$	1,007	$	3,052
SGO MN Retail Acquisitions Venture, LLC	9/30/2015	10	%	10	%	1,732		1,709
Total						$	2,739	$	4,761



Remainder of 2017	$	828
2018	3,134
2019	3,110
2020	2,953
2021	2,603
Thereafter	13,915
Total	$	26,543



	Principal Balance						Interest Rates At
	September 30, 2017			December 31, 2016			September 30, 2017
Line of credit ⁽¹⁾	$	20,968		$	11,150		3.81	%
Secured term loan	5,525			24,277			5.10	%
Mortgage loans secured by properties under development ⁽²⁾	19,200			19,200			9.5% - 10.0%
Deferred financing costs, net ⁽³⁾	(220		)	(323		)	n/a
	$	45,473		$	54,304



Remainder of 2017	$	354
2018	20,661
2019	3,710
2020	20,968
Total ⁽¹⁾	$	45,693



	Carrying Value ⁽¹⁾				Fair Value ^{(1) (2)}
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Notes payable, net	$	45,473	$	54,304	$	45,530	$	54,781