UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 20182019

[  ]☐ 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:001-33177

MONMOUTH REAL ESTATE INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)

Juniper Business Plaza,3499 Route 9 North, Suite 3-D, Freehold, NJ07728

(Address of Principal Executive Offices)                                         (Zip Code)

Registrant’s telephone number, including area code(732)577-9996

(Former name, former address and former fiscal year, if changed since last report.)

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

Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):Act:

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. Yes [  ] No [  ]☐

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

Number of shares outstanding of the issuer’s common stock, $0.01 par value per share, as of August 1, 2018: 80,455,217July 31, 2019: 95,464,867

MONMOUTH REAL ESTATE INVESTMENT CORPORATION

AND SUBSIDIARIES

FOR THE QUARTER ENDED JUNE 30, 20182019

CONTENTSC O N T E N T S

PART I:

FINANCIAL INFORMATION

ITEM 1. Financial Statements (Unaudited)

MONMOUTH REAL ESTATE INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 20182019 AND SEPTEMBER 30, 20172018

(in thousands except per share amounts)

See Accompanying Notes to the Consolidated Financial Statements

MONMOUTH REAL ESTATE INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS – CONTINUED

AS OF JUNE 30, 20182019 AND SEPTEMBER 30, 20172018

(in thousands except per share amounts)

See Accompanying Notes to the Consolidated Financial Statements

MONMOUTH REAL ESTATE INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 20182019 AND 20172018

(in thousands)

See Accompanying Notes to Consolidated Financial Statements

MONMOUTH REAL ESTATE INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) - CONTINUED

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2019 AND 2018 AND 2017– CONTINUED

See Accompanying Notes to Consolidated Financial Statements

MONMOUTH REAL ESTATE INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 20182019 AND 20172018

(in thousands)

See Accompanying Notes to Consolidated Financial Statements

MONMOUTH REAL ESTATE INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWSSHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE NINETHREE MONTHS ENDED JUNE 30, 20182019 AND 20172018

(in thousands, except per share data)

Undistributed Income (Loss) [Member]

Accumulated Other Comprehensive Income (Loss) [Member]

See Accompanying Notes to the Consolidated Financial Statements

MONMOUTH REAL ESTATE INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE NINE MONTHS ENDED JUNE 30, 2019 AND 2018

(in thousands, except per share data)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 20182019

NOTE 1 – ORGANIZATION AND ACCOUNTING POLICIES

Monmouth Real Estate Investment Corporation, a Maryland corporation, together with its consolidated subsidiaries (we, our, us, the Company or MREIC), operates as a real estate investment trust (REIT) deriving its income primarily from real estate rental operations. We were founded in 1968 and are one of the oldest public equity REITs in the world. As of June 30, 2018,2019, we owned 109 113 properties with total square footage of approximately 20,535,000,21.8million, which was 99.6% 98.9%occupied, as compared to 108 111properties with total square footage of approximately 18,790,000,21.2million, which was 99.3% 99.6%occupied as of September 30, 2017.2018. Subsequent to quarter end our occupancy increased to 99.4%. These properties are located in 30 states: Alabama, Arizona, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and Wisconsin. As of the quarter ended June 30, 2018,2019, our weighted average lease maturity was approximately 7.8 years and our annualized average base rent per occupied square foot was $5.89.$6.23. As of June 30, 2018,2019, the weighted average building age, based on the square footage of our buildings, was 8.8 9.1 years. We also own a portfolio of REIT investment securities, which we generally limit to no more than approximately 10% of our undepreciated assets (which is our total assets, excluding accumulated depreciation). We intend to reduce our portfolio of REIT investment securities to be no more than approximately 5% of our undepreciated assets by our 2020 fiscal yearend.Total assets excluding accumulated depreciation were $1,821,914,393$2.1 billion as of June 30, 2018.2019. We held $167,594,279$171.0 million in marketable REIT securities as of June 30, 2018,2019, representing 9.2%8.2% of our undepreciated assets.

We have elected to be taxed as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the Code), and we intend to maintain our qualification as a REIT in the future. As a qualified REIT, with limited exceptions, we will not be taxed under Federal and certain state income tax laws at the corporate level on taxable income that we distribute to our shareholders. For special tax provisions applicable to REITs, refer to Sections 856-860 of the Code. We are subject to franchise taxes in several of the states in which we own properties.

In December 2017, as part of the Tax Cuts and Jobs Act of 2017 (the Act)TCJA), Code Section 199A was added to the Code and became effective for tax years beginning after December 31, 2017 and before January 1, 2026. Under the Act,TCJA, subject to certain income limitations, an individual taxpayerstaxpayer and estates and trusts may deduct 20% of the aggregate amount of qualified REIT dividends they receive from their taxable income. Qualified REIT dividends do not include any portion of a dividend received from a REIT that is classified as a capital gain dividend.dividend or non-qualified dividend income.

The interim Consolidated Financial Statements furnished herein have been prepared in accordance with Accounting Principles Generally Accepted in the United States of America (U.S. GAAP) applicable to interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation, have been included. Operating results for the three and nine months ended June 30, 20182019 are not necessarily indicative of the results that may be expected for the year ending September 30, 2018.2019. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in our annual report on Form 10-K for the fiscal year ended September 30, 2017.2018.

Use of Estimates

In preparing the financial statements in accordance with U.S. GAAP, we are required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods and related disclosure of contingent assets and liabilities. Actual results could differ from these estimates and assumptions.

Reclassification

Certain prior period amounts in the accompanying Consolidated Financial Statements have been reclassified to conform to the current period’s presentation.

Lease Termination Income

Lease Termination Income is recognized in operating revenues when there is a signed termination agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and the termination consideration is probable of collection. Lease termination amounts are paid by tenants who want to terminate their lease obligations before the end of the contractual term of the lease agreement with us.

Two leases that were set to expire during fiscal 2018 were leased to Kellogg Sales Company (Kellogg) at our 65,067 square foot facility located in Kansas City, MO through July 31, 2018 and at our 50,400 square foot facility located in Orangeburg, NY through February 28, 2018. Kellogg informed us that they would not be renewing these leases. On December 18, 2017, we sold our property, located in Kansas City, MO for $4,900,000, with net sale proceeds of approximately $4,602,000 and on December 22, 2017, we sold our property, located in Orangeburg, NY for $6,170,000, with net sale proceeds of approximately $5,898,000. The sale of these two properties resulted in a realized gain of approximately $5,388,000, representing a 105% gain over the depreciated U.S. GAAP basis and a realized net gain of approximately $1,804,000, representing a 21% net gain over our historic undepreciated cost basis. In conjunction with the sale of these two properties, we simultaneously entered into a lease termination agreement for each property whereby we received a termination fee from Kellogg totaling approximately $210,000 which represents a weighted average of 80% of the then remaining rent due under each respective lease.

Only four of our 109 properties have leases that contain an early termination provision. These four properties contain approximately 184,000 total rentable square feet, representing less than 1% of our total rentable square feet. Our leases with early termination provisions are our 26,340 square foot location in Ridgeland (Jackson), MS, our 36,270 square foot location in Urbandale (Des Moines), IA, our 38,833 square foot location in Rockford, IL, and our 83,000 square foot location in Roanoke, VA. Each lease termination provision contains certain requirements that must be met in order to exercise each termination provision. These requirements include: the date termination can be exercised, the time frame that notice must be given by the tenant to us and the termination fee that would be required to be paid by the tenant to us. The total potential termination fee to be paid to us from the four tenants with leases that have a termination provision amounts to approximately $1,681,000.

Stock Compensation Plan

We account for awards of stock, stock options and restricted stock in accordance with ASC 718-10, “Compensation-Stock Compensation”.Compensation.” ASC 718-10 requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period). The compensation cost for stock option grants is determined using option pricing models, intended to estimate the fair value of the awards at the grant date less estimated forfeitures. The compensation expense for restricted stock is recognized based on the fair value of the restricted stock awards less estimated forfeitures. The fair value of stock awards and restricted stock awards is equal to the fair value of our stock on the grant date. The amortization of compensation costs for the awards of stock, stock option grants and restricted stock are included in General and Administrative Expenses in the accompanying Consolidated Statements of Income (Loss) and amounted to $96,969$231,000 and $174,709$98,000 for the three months ended June 30, 20182019 and 2017,2018, respectively, and amounted to $339,139$574,000 and $441,054$339,000 for the nine months ended June 30, 2019 and 2018, and 2017, respectively.

During the nine months ended June 30, 20182019 and 2017,2018, the following stock options, which vest one year after grant date, were granted under our Stock Option Plan:

SUMMARY OF STOCK OPTIONS OUTSTANDING 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the fiscal year indicated:

SCHEDULE OF STOCK OPTIONS, VALUATION ASSUMPTIONS 

The weighted-average fair value of options granted during the nine months ended June 30, 2019 and 2018 was $1.17and 2017 was $1.84 and $1.49$1.84 per option, respectively.share subject to the option.

During the nine months ended June 30, 2019 and 2018, 25,000and 2017, 12,500 and -0- shares of restricted stock were granted.granted, respectively. During the nine months ended June 30, 2019, one participant exercised options to purchase 65,000 shares of common stock at a price of $8.72 per share for total proceeds of $567,000. During the nine months ended June 30, 2018, three participants exercised options awarded under the Plan to purchase an aggregate of 40,000 shares of common stock at a weighted average exercise price of $14.24$14.24 per share for total proceeds of $569,600. During the nine months ended June 30, 2017, no options were exercised.$570,000. As of June 30, 2018,2019, a total of 1,672,7821.2 million shares were available for grant as stock options, as restricted stock, or other equity basedequity-based awards, plus any shares subject to outstanding options that expire or are forfeited without being exercised. As of June 30, 2018,2019, there were outstanding options to purchase 695,0001.1 million shares with an aggregate intrinsic value of $3,110,600.$1.2 million.

Recent Accounting Pronouncements

In FebruaryJanuary 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases”. ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. ASU 2016-02 will be effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. We are continuing to evaluate the potential impact this standard may have on our consolidated financial statements and the timing of adoption. The most significant changes related to lessor accounting under ASU 2016-02 include bifurcating revenue into lease and non-lease components and the new standard’s narrow definition of initial direct costs for leases. Since our revenue is primarily derived from leasing activities from long-term net leases and since we currently do not capitalize indirect costs for leases, we believe that we will continue to account for our leases and related leasing costs in substantially the same manner as we currently do once the adoption of the ASU 2016-02 becomes effective.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”.Liabilities.” ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. These changes becomebecame effective for our fiscal year beginning October 1, 2018. We anticipate that theThe most significant change for us, once ASU 2016-01 iswas adopted, will bewas the accounting treatment for our investments in marketable securities that are classified as available for sale. The accounting treatment used for our Consolidated Financial Statements through Fiscal 2018 was that our investments in marketable securities, classified as available for sale, which are currentlywere carried at fair value, with net unrealized holding gains and losses being excluded from earnings and reported as a separate component of Shareholders’ Equity until realized and the change in net unrealized holding gains and losses being reflected as comprehensive income (loss). Under ASU 2016-01, effective October 1, 2018, these marketable securities will continue to be measured at fair value, however, the changes in net unrealized holding gains and losses will beare now recognized through net income.income on our Consolidated Statements of Income (Loss). On October 1, 2018, unrealized net holding losses of $24.7 million were reclassed to beginning Undistributed Income (Loss) to recognize the unrealized losses previously recorded in “accumulated other comprehensive income” on our consolidated balance sheets.

In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessee and lessor accounting. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The most significant changes related to lessor accounting under ASU 2016-02 include bifurcating revenue into lease and non-lease components and the new standard’s narrow definition of initial direct costs for leases. Since our revenue is primarily derived from leasing activities from long-term net-leases and since we currently do not capitalize indirect costs for leases, we believe that we will continue to account for our leases and related leasing costs in substantially the same manner as we currently do once the adoption of the ASU 2016-02 becomes effective. In addition, the guidance requires lessees to recognize assets and liabilities for operating leases with lease terms greater than twelve months on the balance sheet. Therefore, the most significant impact for us may be the recognition of our corporate office lease, while accounting where we are the lessor will remain substantially the same. Upon adoption, we may recognize an asset and lease liability equal to the present value of the minimum lease payments due under our corporate office lease. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases.” The amendment in ASU 2018-10 affects narrow aspects of the guidance issued earlier in ASU 2016-02 by removing certain inconsistencies and providing additional clarification related to the guidance issued earlier. We are currently evaluating the potential impact this standard may have on our consolidated financial statements and expect that the adoption of this standard will not have a significant impact on our consolidated financial statements and related disclosures. In December 2018, the FASB issued ASU 2018-20 “Narrow-Scope Improvements for Lessors.” Similar to ASU 2018-10, 2018-20 affects narrow aspects of the guidance issued earlier in ASU 2016-02 as well by providing additional clarification related to the guidance issued earlier. The most significant changes related to lessor accounting under ASU 2018-20 is the clarification of how to treat payments made by a lessee directly to a third party, such as real estate taxes paid by the lessee directly to the taxing authority, whereby items paid directly by the lessee to a third party should not be reflected in the lessors income statement and, thus, should not be bifurcated and included in revenue and operating expenses. A majority of our reimbursable expenses are paid by us and are billed back to our lessees. Therefore, these reimbursable expenses will continue to be presented separately by bifurcating these revenue and expense items in our Consolidated Statements of Income. We are currently evaluating the potential impact this standard may have on our consolidated financial statements and expect that the adoption of this standard will not have a significant impact on our consolidated financial statements and related disclosures, other than any of these types of payments made by a lessee directly to a third party will no longer be presented on a gross basis in our Consolidated Statements of Income, which will have a net zero effect on our Net Income Attributable to Common Shareholders. ASU 2016-02, 2018-10 and 2018-20 are effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2018. Therefore, we expect to adopt these standards effective October 1, 2019.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers”.customers.” The FASB issued further guidance in ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”,Expedients,” that provides clarifying guidance in certain narrow areas and adds some practical expedients. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The effective date of ASU 2014-09 was extended by one year by ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”.Date.” The new standard is effective for the first interim period within annual reporting periods beginning after December 15, 2017. Therefore, we expect to adoptadopted the standard effective October 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method, and we are evaluating which transition method we will elect. We are also in the process of evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. Our revenue is primarily derived from leasing activities and historically our property dispositions have been cash sales with no contingencies and no future involvement in the property. Since this standard applies to all contracts with customers except those that are within the scope of other guidance, such as leases, we do not expect the adoption of this standard todid not have a significant impact on our consolidated financial statements and related disclosures.

We do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying Consolidated Financial Statements.

Segment Reporting & Financial Information

Our primary business is the ownership and management of real estate properties. We invest in well-located, modern, single tenant,single-tenant, industrial buildings, leased primarily to investment-grade tenants or their subsidiaries on long-term net leases.net-leases. We review operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. We evaluate financial performance using Net Operating Income (NOI) from property operations. NOI is a non-GAAP financial measure, which we define as recurring Rental and Reimbursement Revenue, less Real Estate Taxes and Operating Expenses, such as insurance, utilities and repairs and maintenance. We have aggregated the properties into one reportable segment as the properties share similar long-term economic characteristics and have other similarities, including the fact that they are operated as industrial properties subject to long-term net leasesnet-leases primarily to investment-grade tenants or their subsidiaries.

NOTE 2 – NET INCOME PER SHARE

Basic Net Income per Common Share is calculated by dividing Net Income Attributable to Common Shareholders by the weighted-average number of common shares outstanding during the period. Diluted Net Income per Common Share is calculated by dividing Net Income Attributable to Common Shareholders by the weighted-average number of common shares outstanding plusfor the weighted-average number ofperiod and, when dilutive, the potential net shares that would be issued upon exercise of stock options pursuant to the treasury stock method. In periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation because they are anti-dilutive.

In addition, common stock equivalents of 158,21194,000 and 171,719158,000 shares are included in the diluted weighted average shares outstanding for the three months ended June 30, 2019 and 2018, and 2017, respectively, and common stock equivalents of 177,783100,000 and 157,858178,000 shares are included in the diluted weighted average shares outstanding for the nine months ended June 30, 20182019 and 2017, respectively.2018. For the diluted weighted average shares outstanding for the three months ended June 30, 2019 and 2018, 305,000and 2017, 65,000 options to purchase shares of common stock were antidilutive. For the diluted weighted average shares outstanding for the nine months ended June 30, 2019 and 2018, 305,000and 2017, 65,000 options to purchase shares of common stock, respectively, were antidilutive.

NOTE 3 – REAL ESTATE INVESTMENTS

On November 2, 2017,October 19, 2018, we purchased a newly constructed 121,683347,000 square foot industrial building, situated on 16.2 62.0 acres, located in Charleston, SC.Trenton, NJ. The building is 100% net-leased to FedEx Corporation (FDX),Ground Package System, Inc. for 15 years through August 2032.June 2032. The purchase price was $21,872,170.$85.2 million. We obtained a 15 year, fully-amortizing mortgage loan of $14,200,000$55.0 million at a fixed interest rate of 4.23%4.13%. Annual rental revenue over the remaining term of the lease averages approximately $1,315,000.$5.3 million.

On November 30, 2017,2018, we purchased a newly constructed 300,000127,000 square foot industrial building, situated on 12329.4 acres, located in Oklahoma City, OK.Savannah, GA. The building is 100% net-leased to Amazon.com Services,FedEx Ground Package System, Inc. for 10 years through October 2027. The lease is guaranteed by Amazon.com, Inc.2028. The purchase price was $30,250,000.$27.8 million. We obtained a 1015 year, fully-amortizing mortgage loan amortizing over 18 years, of $19,600,000$17.5 million at a fixed interest rate of 3.64%4.40%. Annual rental revenue over the remaining term of the lease averages approximately $1,884,000.$1.8 million.

On January 22, 2018, we purchased a newly constructed 831,764 square foot industrial building, situated on 62.4 acres, located in Savannah, GA. The building is 100% net-leased to Shaw Industries, Inc. for 10 years through September 2027. The purchase price was $57,483,636. We obtained a 14 year fully-amortizing mortgage loan of $33,300,000 at a fixed interest rate of 3.53%. Annual rental revenue over the remaining term of the lease averages approximately $3,551,000.

On April 6, 2018, we purchased a newly constructed 399,440 square foot industrial building, situated on 27.5 acres, located in Daytona Beach, FL. The building is 100% net-leased to B. Braun Medical Inc. for 10 years through April 2028. The purchase price was $30,750,540. We obtained a 15 year fully-amortizing mortgage loan of $19,500,000 at a fixed interest rate of 4.25%. Annual rental revenue over the remaining term of the lease averages approximately $2,130,000.

On June 28, 2018, we purchased a newly constructed 362,942 square foot industrial building, situated on 31.3 acres, located in Mobile, AL. The building is 100% net-leased to Amazon.com Services, Inc. for 11 years through November 2028. The lease is guaranteed by Amazon.com, Inc. The purchase price was $33,688,276. We obtained a 14 year fully-amortizing mortgage loan of $19,000,000 at a fixed interest rate of 4.14%. Annual rental revenue over the remaining term of the lease averages approximately $2,020,000.

FDX, Amazon.com, Inc. and Shaw Industries,FedEx Ground Package System, Inc.’s ultimate parent, Berkshire Hathaway, Inc. areFedEx Corporation is a publicly-owned companiescompany and financial information related to these entitiesthis entity is available at the SEC’s website,www.sec.gov. The references in this report to the SEC’s website are not intended to and do not include, or incorporate by reference into this report, the information on thewww.sec.gov website.

We evaluated the property acquisitions which took place during the nine months ended June 30, 2018,2019, to determine whether an integrated set of assets and activities meets the definition of a business, pursuant to ASU 2017-01. Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. Accordingly, we accounted for the fivetwo properties purchased during fiscal 2018 in Charleston, SC; Oklahoma City, OK; Savannah, GA; Daytona Beach, FL and Mobile, AL2019 as asset acquisitions and allocated the total cash consideration, including transaction costs of approximately $875,000,$324,000, to the individual assets acquired on a relative fair value basis. There were no liabilities assumed in these acquisitions.

The financial information set forth below summarizes our purchase price allocation for these fivetwo properties acquired during the nine months ended June 30, 20182019 that are accounted for as asset acquisitions:acquisitions (in thousands):

SCHEDULE OF PROPERTIES ACQUIRED DURING PERIOD ACCOUNTED FOR ASSET ACQUISITIONS 

The following table summarizes the operating results included in our consolidated statements of income (loss) for the three and nine months ended June 30, 20182019 for the fivetwo properties acquired during the nine months ended June 30, 2018:2019 (in thousands):

SUMMARY OF CONSOLIDATED STATEMENTS OF INCOME FOR PROPERTIES ACQUIRED

Subsequent to the quarter end, on July 26, 2019, we purchased a newly constructed 350,000 square foot industrial building, situated on 45.6 acres, located in Lafayette, IN. The building is 100% net-leased to Toyota Tsusho America, Inc. (Toyota) for 10 years through June 2029. The purchase price was $25.5 million. We obtained a 15 year, fully-amortizing mortgage loan of $17.0 million at a fixed interest rate of 4.25%. Annual rental revenue over the remaining term of the lease averages $1.7 million. Toyota is considered Investment Grade by S&P Global Ratings (www.standardandpoors.com) and by Moody’s (www.moodys.com). The references in this report to the S&P Global Ratings’ website and the Moody’s website are not intended to and do not include, or incorporate by reference into this report, the information of S&P Global Ratings or Moody’s on such websites.

Expansions

On November 1, 2017,During the nine months ended June 30, 2019, we completed a parking lot155,000 square foot building expansion for aat our property leased to FedEx Ground Package System, Inc., a subsidiary of FDX, located in Indianapolis, IN was completedMonroe (Cincinnati), OH for a total project cost of approximately $1,683,000, resulting$8.6 million. The expansion resulted in a new 10 15 year lease which extended the prior lease expiration date from April 2024February 2030 to October 2027. In addition, theFebruary 2034. The expansion also resulted in an increase in initial annual rent effective March 1, 2019 of $821,000 from the date of completion of approximately $184,000 from approximately $1,533,000,$980,000, or $4.67 $4.22 per square foot, to approximately $1,717,000,$1.8 million, or $5.24 $4.65 per square foot. In addition, the annual rent will increase by 2% per annum, resulting in an average annualized rent of $2.1 million over the 15 years. We obtained a commitment to enter into a 10.7 year, fully-amortizing second mortgage loan of $7.0 million at a fixed interest rate of 3.85%. The maturity of the second mortgage loan will coincide with the maturity of the property’s first fully-amortizing mortgage loan which is at a fixed interest rate of 3.77% and has a principal balance of $6.8 million as of the quarter end.

Dispositions

TwoWe have not had any dispositions thus far in fiscal 2019. During fiscal 2018, there were two leases that were set to expire during fiscal 2018 were leased towith Kellogg Sales Company (Kellogg) at our 65,06765,000 square foot facility located in Kansas City, MO through July 31, 2018 and at our 50,40050,000 square foot facility located in Orangeburg, NY through February 28, 2018. Kellogg informed us that they would not be renewing these leases. On December 18, 2017, we sold our property, located in Kansas City, MO for $4,900,000,$4.9 million, with net sale proceeds of approximately $4,602,000$4.6 million and, on December 22, 2017, we sold our property, located in Orangeburg, NY for $6,170,000,$6.2 million, with net sale proceeds of approximately $5,898,000.$5.9 million. In conjunction with the sale of these two properties, we simultaneously entered into a lease termination agreement for each property whereby we received a termination fee from Kellogg totaling approximately $210,000$210,000 which represents a weighted average of 80% of the then remaining rent due under each respective lease.

On June 1, 2018, we sold a 68,370 square foot building located in Colorado Springs, CO for $5,800,000,$5.8 million, with net sale proceeds of approximately $5,465,000.$5.5 million. Prior to the sale of this property, it was leased to FedEx Ground Package System, Inc. through September 2018. The tenant informed us that they would not be renewing this lease because they have moved their operations from our former 68,370 square foot facility to our newly constructed 225,362225,000 square foot facility, which is also located in Colorado Springs, CO. On June 9, 2016, we purchased this newly constructed 225,362 square foot industrial building, which is leased to FedEx Ground Package System, Inc. for 10 years through January 2026.

On June 5, 2018, we sold an 87,500 square foot vacant building located in Ft. Myers, FL for $6,400,000,$6.4 million, with net sale proceeds of approximately $6,119,000.$6.1 million. Prior to this property becoming vacant, it was leased to FedEx Ground Package System, Inc. through June 2017. FedEx Ground Package System, Inc. vacated this property because they moved their operations from our former 87,500 square foot facility to our newly constructed 213,672214,000 square foot facility, which is also located in Ft. Myers, FL. We purchased this newly constructed facility on December 30, 2016 and it is leased to FedEx Ground Package System, Inc. for 10 years through August 2027.

These four properties sold during fiscal 2018, resulted in a U.S. GAAP net realized gain of approximately $7,485,000,$7.5 million, representing a 51% gain over the depreciated U.S. GAAP basis and a net realized gain over our historic undepreciated cost basis of approximately $1,160,000,$1.2 million, representing a 6% net gain over our historic undepreciated cost basis.