Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 11, 2021 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Sterling Real Estate Trust | |
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2021 | |
Document Transition Report | false | |
Entity File Number | 000-54295 | |
Entity Incorporation, State or Country Code | ND | |
Entity Tax Identification Number | 90-0115411 | |
Entity Address, Address Line One | 1711 Gold Drive South, Suite 100 | |
Entity Address, City or Town | Fargo | |
Entity Address, State or Province | ND | |
Entity Address, Postal Zip Code | 58103 | |
City Area Code | 701 | |
Local Phone Number | 353-2720 | |
Title of 12(b) Security | Common Shares, par value $0.01 per share | |
No Trading Symbol Flag | true | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 10,084,442 | |
Entity Central Index Key | 0001412502 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
ASSETS | ||
Land and land improvements | $ 119,114 | $ 119,088 |
Building and improvements | 719,637 | 712,560 |
Construction in progress | 9,339 | 13,640 |
Real estate investments | 848,090 | 845,288 |
Less accumulated depreciation | (165,200) | (160,575) |
Real estate investments, net | 682,890 | 684,713 |
Cash and cash equivalents | 13,888 | 11,716 |
Restricted deposits and funded reserves | 16,459 | 15,919 |
Investment in unconsolidated affiliates | 11,664 | 9,659 |
Notes receivable | 2,009 | 2,026 |
Assets held for sale | 830 | 831 |
Lease intangible assets, less accumulated amortization of $14,507 in 2021 and $15,019 in 2020 | 7,075 | 7,367 |
Other assets, net | 10,449 | 10,798 |
Total Assets | 745,264 | 743,029 |
LIABILITIES | ||
Mortgage notes payable, net | 425,164 | 421,278 |
Dividends payable | 7,477 | 7,447 |
Tenant security deposits payable | 5,084 | 4,908 |
Lease intangible liabilities, less accumulated amortization of $1,933 in 2021 and $1,963 in 2020 | 947 | 994 |
Liabilities related to assets held for sale | 17 | 5 |
Accrued expenses and other liabilities | 12,716 | 16,869 |
Total Liabilities | 451,405 | 451,501 |
COMMITMENTS and CONTINGENCIES - Note 16 | ||
SHAREHOLDERS' EQUITY | ||
Beneficial interest | 110,992 | 109,366 |
Operating partnership | 179,911 | 181,621 |
Partially owned properties | 2,377 | 2,346 |
Accumulated other comprehensive (loss) income | 579 | (1,805) |
Total Shareholders' Equity | 293,859 | 291,528 |
Total liabilities and shareholders' equity | $ 745,264 | $ 743,029 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
CONSOLIDATED BALANCE SHEETS | ||
Lease intangible assets, accumulated amortization | $ 14,507 | $ 15,019 |
Lease intangible liabilities, accumulated amortization | $ 1,934 | $ 1,963 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income from rental operations | ||
Real estate rental income | $ 31,760 | $ 29,906 |
Expenses from rental operations | ||
Operating expenses, excluding real estate taxes | 12,107 | 12,535 |
Real estate taxes | 3,244 | 3,164 |
Depreciation and amortization | 5,328 | 5,252 |
Interest | 4,287 | 4,350 |
Total expenses from rental operations | 24,966 | 25,301 |
Administration of REIT | ||
Administration of REIT | 1,201 | 1,162 |
Total expenses | 26,167 | 26,463 |
Income from operations | 5,593 | 3,443 |
Other income | ||
Equity in income of unconsolidated affiliates | (27) | 158 |
Other income | 270 | 119 |
Gain on sale of real estate and non-real estate investments | 1,455 | |
Gain on involuntary conversion | 52 | |
Total other income | 243 | 1,784 |
Net (loss) income | 5,836 | 5,227 |
Net income (loss) attributable to noncontrolling interest in operating partnership | 3,753 | 3,419 |
Net income (loss) attributable to noncontrolling interest in partially owned properties | 31 | (5) |
Net income attributable to Sterling Real Estate Trust | $ 2,052 | $ 1,813 |
Net income attributable to Sterling Real Estate Trust per common share, basic and diluted | $ 210 | $ 190 |
Comprehensive income: | ||
Net income | $ 5,836 | $ 5,227 |
Other comprehensive gain (loss) - change in fair value of interest rate swaps | 2,384 | (1,486) |
Comprehensive income | 8,220 | 3,741 |
Comprehensive income attributable to noncontrolling interest | 5,325 | 2,442 |
Comprehensive income attributable to Sterling Real Estate Trust | $ 2,895 | $ 1,299 |
Weighted average Common Shares outstanding, basic and diluted | 9,983,000 | 9,562,000 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common Shares | Paid-in Capital | Accumulated Distributions in Excess of Earnings | Total Beneficial Interest | Noncontrolling Interest in Operating Partnership | Noncontrolling Interest in Partially Owned Properties | Accumulated Other Comprehensive Income (Loss) | Total |
Beginning Balance at Dec. 31, 2019 | $ 131,261 | $ (28,888) | $ 102,373 | $ 174,221 | $ 2,416 | $ 37 | $ 279,047 | |
Beginning Balance (in shares) at Dec. 31, 2019 | 9,436,000 | |||||||
Contribution of assets in exchange for the issuance of noncontrolling interest shares | 9,031 | 9,031 | ||||||
Shares/units redeemed | (696) | (696) | (541) | (1,237) | ||||
Shares/units redeemed (in shares) | (38,000) | |||||||
Dividends declared | (2,527) | (2,527) | (4,831) | (7,358) | ||||
Dividends reinvested - stock dividend | 1,584 | 1,584 | $ 1,584 | |||||
Dividends reinvested - stock dividend (in shares) | 87,000 | 87,000 | ||||||
Issuance of shares under optional purchase plan | 1,203 | 1,203 | $ 1,203 | |||||
Issuance of shares under optional purchase plan (in shares) | 62,000 | |||||||
Change in fair value of interest rate swaps | (1,486) | (1,486) | ||||||
Net income | 1,813 | 1,813 | 3,419 | (5) | 5,227 | |||
Ending balance at Mar. 31, 2020 | 133,352 | (29,602) | 103,750 | 181,299 | 2,411 | (1,449) | 286,011 | |
Ending balance (in shares) at Mar. 31, 2020 | 9,547,000 | |||||||
Beginning Balance at Dec. 31, 2020 | 139,105 | (29,739) | 109,366 | 181,621 | 2,346 | (1,805) | $ 291,528 | |
Beginning Balance (in shares) at Dec. 31, 2020 | 9,855,000 | 9,855,000 | ||||||
Shares/units redeemed | (777) | (777) | (628) | $ (1,405) | ||||
Shares/units redeemed (in shares) | (41,000) | |||||||
Dividends declared | (2,642) | (2,642) | (4,835) | (7,477) | ||||
Dividends reinvested - stock dividend | 1,686 | 1,686 | $ 1,686 | |||||
Dividends reinvested - stock dividend (in shares) | 89,000 | 89,000 | ||||||
Issuance of shares under optional purchase plan | 1,307 | 1,307 | $ 1,307 | |||||
Issuance of shares under optional purchase plan (in shares) | 65,000 | |||||||
Change in fair value of interest rate swaps | 2,384 | 2,384 | ||||||
Net income | 2,052 | 2,052 | 3,753 | 31 | 5,836 | |||
Ending balance at Mar. 31, 2021 | $ 141,321 | $ (30,329) | $ 110,992 | $ 179,911 | $ 2,377 | $ 579 | $ 293,859 | |
Ending balance (in shares) at Mar. 31, 2021 | 9,968,000 | 9,968,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
OPERATING ACTIVITIES | ||
Net income | $ 5,836 | $ 5,227 |
Adjustments to reconcile net income to net cash from operating activities | ||
Gain on sale of real estate investments | (1,455) | |
Gain on involuntary conversion | (52) | |
Equity in loss (income) of unconsolidated affiliates | 27 | (158) |
Distributions of earnings of unconsolidated affiliates | 57 | 158 |
Allowance for uncollectible accounts receivable | (47) | 113 |
Depreciation | 5,006 | 4,868 |
Amortization | 315 | 380 |
Amortization of debt issuance costs | 130 | 140 |
Effects on operating cash flows due to changes in | ||
Other assets | 229 | 1,449 |
Tenant security deposits payable | 176 | 131 |
Accrued expenses and other liabilities | (2,820) | (3,617) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 8,909 | 7,184 |
INVESTING ACTIVITIES | ||
Purchase of real estate investment properties | (375) | |
Capital expenditures and tenant improvements | (3,686) | (5,058) |
Proceeds from sale of real estate investments and non-real estate investments | 3,494 | |
Proceeds from involuntary conversion | 1,642 | 259 |
Investment in unconsolidated affiliates | (2,090) | (38) |
Distributions in excess of earnings received from unconsolidated affiliates | 1 | 105 |
Notes receivable payments received | 17 | |
NET CASH USED IN INVESTING ACTIVITIES | (4,116) | (1,613) |
FINANCING ACTIVITIES | ||
Payments for financing, debt issuance | (154) | (98) |
Payments on investment certificates and subordinated debt | (25) | |
Principal payments on special assessments payable | (253) | |
Proceeds from issuance of mortgage notes payable and subordinated debt | 18,485 | 7,788 |
Principal payments on mortgage notes payable | (14,528) | (9,129) |
Proceeds from issuance of shares under optional purchase plan | 1,307 | 1,203 |
Shares/units redeemed | (1,405) | (1,237) |
Dividends/distributions paid | (5,761) | (5,534) |
NET CASH USED IN FINANCING ACTIVITIES | (2,081) | (7,260) |
NET CHANGE IN CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS | 2,712 | (1,689) |
CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT BEGINNING OF YEAR | 27,635 | 17,382 |
CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF QUARTER | $ 30,347 | $ 15,693 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS - Supplemental Disclosures - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF QUARTER | ||
Cash and cash equivalents | $ 13,888 | $ 4,295 |
Restricted deposits | 16,459 | 11,398 |
TOTAL CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS, END OF QUARTER | 30,347 | 15,693 |
SCHEDULE OF CASH FLOW INFORMATION | ||
Cash paid during the period for interest, net of capitalized interest | 4,144 | 4,203 |
SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES | ||
Dividends reinvested | 1,686 | 1,584 |
Dividends declared and not paid | 2,642 | 2,527 |
UPREIT distributions declared and not paid | 4,835 | 4,831 |
Acquisition of assets in exchange for the issuance of noncontrolling interest units in UPREIT | 9,031 | |
Increase in land improvements due to increase in special assessments payable | 26 | 65 |
Unrealized gain (loss) on interest rate swaps | 2,384 | (1,486) |
Acquisition of assets with new financing | 3,225 | |
Acquisition of assets through assumption of debt and liabilities | 265 | |
Capitalized interest and real estate taxes related to construction in progress | $ 95 | $ 137 |
ORGANIZATION
ORGANIZATION | 3 Months Ended |
Mar. 31, 2021 | |
ORGANIZATION | |
ORGANIZATION | Note 1 - Organization Sterling Real Estate Trust, d/b/a Sterling Multifamily Trust (“Sterling”, “the Trust” or “the Company”) is a registered, but unincorporated business trust organized in North Dakota in December 2002. Sterling has elected to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code. Sterling previously established an operating partnership (“Sterling Properties, LLLP or the Operating Partnership”) and transferred all of its assets and liabilities to the operating partnership in exchange for general partnership units. As the general partner, Sterling has management responsibility for all activities of the operating partnership. As of March 31, 2021 and December 31, 2020, Sterling owned approximately 35.35% and 35.03%, respectively, of the operating partnership. |
PRINCIPAL ACTIVITY AND SIGNIFIC
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES | |
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020, which have previously been filed with the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted from this report on Form 10-Q pursuant to the rules and regulations of the SEC. The results for the interim periods shown in this report are not necessarily indicative of future financial results. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly our consolidated financial statements as of and for the three months ended March 31, 2021. These adjustments are of a normal recurring nature. Principles of Consolidation The consolidated financial statements include the accounts of , Properties, LLLP, and wholly-owned limited liability companies. All significant intercompany transactions and balances have been eliminated in consolidation. As of March 31, 2021 the Trust owned approximately 35.35% of the partnership interests (“OP Units”) of the Operating Partnership. The remaining OP Units, consisting exclusively of limited partner interests, are held by persons who contributed their interests in properties to the Operating Partnership in exchange for OP Units. Under the partnership agreement, these persons have the right to tender their OP Units for redemption to the Operating Partnership at any time following a specified restricted period for cash equal to the fair value of an equivalent number of common shares of the Trust. In lieu of delivering cash, however, the Trust, as the Operating Partnership’s general partner, may, at its option, choose to acquire any OP Units so tendered by issuing common shares in exchange for the tendered OP Units. If the Trust so chooses, its common shares will be exchanged for OP Units on a one-for-one basis. This one-for-one exchange ratio is subject to adjustment to prevent dilution. With each such exchange or redemption, the Trust’s percentage ownership in the Operating Partnership will increase. In addition, whenever the Trust issues common or other classes of its shares, it contributes the net proceeds it receives from the issuance to the Operating Partnership and the Operating Partnership issues to the Trust an equal number of OP Units or other partnership interests having preferences and rights that mirror the preferences and rights of the shares issued. This structure is commonly referred to as an umbrella partnership REIT or “UPREIT.” Additionally, we evaluate the need to consolidate affiliates based on standards set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”). In determining whether we have a requirement to consolidate the accounts of an entity, management considers factors such as our ownership interest, our authority to make decisions and contractual and substantive participating rights of the limited partners and shareholders, as well as whether the entity is a variable interest entity (“VIE”) for which we have both: a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and b) the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE. The Trust will consolidate the operations of a joint venture if the Trust determines that it is either the primary beneficiary of a variable interest entity (VIE) or has substantial influence and control of the entity. In instances where the Trust determines that it is not the primary beneficiary of a VIE or the Trust does not control the joint venture but can exercise influence over the entity with respect to its operations and major decisions, the Trust will use the equity method of accounting. Under the equity method, the operations of a joint venture will not be consolidated with the Trust’s operations but instead its share of operations will be reflected as equity in earnings (loss) of unconsolidated entity on its consolidated statements of operations and comprehensive loss. Additionally, the Trust’s net investment in the joint venture will be reflected as investment in unconsolidated entity on the consolidated balance sheets. The Operating Partnership meets the criteria as a variable interest entity (“VIE”). The Trust’s sole significant asset is its investment in the Operating Partnership. As a result, substantially all of the Trust’s assets and liabilities represent those assets and liabilities of the Operating Partnership. All of the Trust’s debt is an obligation of the Operating Partnership, and the Trust guarantees the unsecured debt obligations of the Operating Partnership. Concentration of Credit Risk Our cash balances are maintained in various bank deposit accounts. The bank deposit amounts in these accounts may exceed federally insured limits at various times throughout the year. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Real Estate Investments Real estate investments are recorded at cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred. The Trust allocates the purchase price of each acquired investment property accounted for as an asset acquisition based upon the relative fair value at acquisition date of the individual assets acquired and liabilities assumed, which generally include (i) land, (ii) building and other improvements, (iii) in-place lease intangibles, (iv) acquired above and below market lease intangibles, and (v) assumed financing that is determined to be above or below market, if any. Transaction costs related to acquisitions are accounted for as asset acquisitions and capitalized as a cost of the property. For tangible assets acquired, including land, building and other improvements, the Trust considers available comparable market and industry information in estimating acquisition date fair value. Key factors considered in the calculation of fair value of both real property and intangible assets include the current market rent values, “dark” periods (building in vacant status), direct costs estimated with obtaining a new tenant, discount rates, escalation factors, standard lease terms, and tenant improvement costs. Furniture and fixtures are stated at cost less accumulated depreciation. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for routine maintenance and repairs, which do not add to the value or extend useful lives, are expensed as incurred. Depreciation is provided for over the estimated useful lives of the individual assets using the straight-line method over the following estimated useful lives: Buildings and improvements 40 years Furniture, fixtures and equipment 5 - 9 years The Trust’s investment properties are reviewed for potential impairment at the end of each reporting period or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. At the end of each reporting period, the Trust separately determines whether impairment indicators exist for each property. Based on evaluation, there were no impairment losses during the three months ended March 31, 2021 and 2020. Properties Held for Sale We account for our properties held for sale in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”), which addresses financial accounting and reporting in a period in which a component or group of components of an entity either has been disposed of or is classified as held for sale. The Trust had one property held for sale as of March 31, 2021 and December 31, 2020. See Note 18. Construction in Progress The Trust capitalizes direct and certain indirect project costs incurred during the development period such as construction, insurance, architectural, legal, interest and other financing costs, and real estate taxes. At such time as the development is considered substantially complete, the capitalization of certain indirect costs such as real estate taxes and interest and financing costs cease and all project-related costs included in construction in process are reclassified to land and building and other improvements. Investment in Unconsolidated Affiliates We account for unconsolidated affiliates using the equity method of accounting per guidance established under ASC 323, Investments – Equity Method and Joint Ventures (“ASC 323”). The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for our share of equity in the affiliates’ earnings and distributions. We evaluate the carrying amount of the investments for impairment in accordance with ASC 323. Unconsolidated affiliates are reviewed for potential impairment if the carrying amount of the investment exceeds its fair value. An impairment charge is recorded when an impairment is deemed to be other-than-temporary. To determine whether impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment until the carrying amount is fully recovered. The evaluation of an investment in an affiliate for potential impairment can require our management to exercise significant judgments. No impairment losses were recorded to unconsolidated affiliates for the three months ended March 31, 2021 and 2020. We use the equity method to account for investments that qualify as variable interest entities where we are not the primary beneficiary and entities that we do not control or where we do not own a majority of the economic interest but have the ability to exercise significant influence over the operations and financial policies of the investee. We will also use the equity method for investments that do not qualify as variable interest entities and do not meet the control requirements for consolidation, as defined in ASC 810. For a joint venture accounted for under the equity method, our share of net earnings and losses is reflected in income when earned and distributions are credited against our investment in the joint venture as received. In determining whether an investment in a limited liability company or tenant in common is a variable interest entity, we consider: the form of our ownership interest and legal structure; the size of our investment; the financing structure of the entity, including the necessity of subordinated debt; estimates of future cash flows; our and our partner’s ability to participate in the decision making related to acquisitions, dispositions, budgeting and financing on the entity; and obligation to absorb losses and preferential returns. See Note 5, Investment in Unconsolidated Affilliates, for further information. Noncontrolling Interest A noncontrolling interest in a subsidiary (minority interest) is in most cases an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements and separate from the parent company’s equity. In addition, consolidated net income is required to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest and the amount of consolidated net income attributable to the parent and the noncontrolling interest are required to be disclosed on the face of the consolidated statements of operations and comprehensive income. Operating Partnership: Interests in the operating partnership held by limited partners are represented by operating partnership units. The operating partnership’s income is allocated to holders of units based upon the ratio of their holdings to the total units outstanding during the period. Capital contributions, distributions, syndication costs, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the operating partnership agreement. Partially Owned Properties: The Trust reflects noncontrolling interests in partially owned properties on the balance sheet for the portion of properties consolidated by the Trust that are not wholly owned by the Trust. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as noncontrolling interests in partially owned properties in the consolidated statement of operations and comprehensive income. Federal Income Taxes We have elected to be taxed as a REIT under the Internal Revenue Code, as amended. A REIT calculates taxable income similar to other domestic corporations, with the major difference being a REIT is entitled to a deduction for dividends paid. A REIT is generally required to distribute each year at least 90% of its taxable income. If it chooses to retain the remaining 10% of taxable income, it may do so, but it will be subject to a corporate tax on such income. REIT shareholders are generally taxed on REIT distributions of ordinary income in the same manner as they are taxed on other corporate distributions. We intend to continue to qualify as a REIT and, provided we maintain such status, will not be taxed on the portion of the income that is distributed to shareholders. In addition, we intend to distribute all of our taxable income; therefore, no provisions or liabilities for income taxes have been recorded in the financial statements. We follow ASC Topic 740, Income Taxes, Revenue Recognition The Trust is the lessor for its residential and commercial leases. Leases are analyzed on an individual basis to determine lease classification. As of March 31, 2021, all leases analyzed under the Trust’s lease classification process were determined to be operating leases. We recognize variable income from pass-through expenses on an accrual basis over the periods in which the expenses were incurred. Pass-through expenses are comprised of real estate taxes, operating expenses and common area maintenance costs which are reimbursed by tenants in accordance with specific allowable costs per tenant lease agreements. When we pay pass-through expenses, subject to reimbursement by the tenant, they are included within operating expenses, excluding real estate taxes, and reimbursements are included within real estate rental income along with the associated base rent in the accompanying consolidated financial statements. We record base rents on a straight-line basis. The monthly base rent income according to the terms of our leases is adjusted so that an average monthly rent is recorded for each tenant over the term of its lease. The straight-line rent adjustment increased revenue by $105 for the three months ended March 31, 2021 and decreased revenue by $65 for the three months ended March 31, 2020. The straight-line receivable balance included in other assets on the consolidated balance sheets as of March 31, 2021 and December 31, 2020 was $3,117 and $3,012, respectively. We receive payments for expense reimbursements from substantially all our multi-tenant commercial tenants throughout the year based on estimates. Differences between estimated recoveries and the final billed amounts, which are immaterial, are recognized in the subsequent year. Earnings per Common Share Basic earnings per common share is computed by dividing net income available to common shareholders (the “numerator”) by the weighted average number of common shares outstanding (the “denominator”) during the period. Sterling had no dilutive potential common shares as of March 31, 2021 and 2020, and therefore, basic earnings per common share was equal to diluted earnings per common share for both periods. For the three months ended March 31, 2021 and 2020, Sterling’s denominators for the basic and diluted earnings per common share were approximately 9,983,000 and 9,562,000, respectively. Reclassifications Certain reclassifications considered necessary for a fair presentation have been made to the prior period financial statements in order to conform to the current year presentation. These reclassifications have not changed the results of operations or equity. Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). by reference rate reform. On July 27, 2017, the Financial Conduct Authority (FCA), tasked with overseeing the London Interbank Offered Rate (LIBOR) announced the benchmark interest rate will be phased out by the end of 2023. As a result, existing and future contracts indexed to LIBOR will need to be renegotiated to reference another rate. We adopted the standard effective as of January 1, 2020, using the optional transition method to apply the standard as of the effective date. The Trust elected to apply the optional expedients for all of the Trust’s hedging relationships. The Trust will disregard the potential change in the designated hedged risk that may occur due to reference rate reform when the Trust assesses whether the hedged forecasted transaction is probable in accordance with the requirements of Topic 815. The Trust will continue current hedge accounting for our existing cash flow hedges when the hedged risk changes by assuming the reference rate will not be replaced for the remainder of the hedging relationships for our assessment of hedge effectiveness and all subsequent hedge effectiveness assessments. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), Management does 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
SEGMENT REPORTING | 3 Months Ended |
Mar. 31, 2021 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | NOTE 3 – segment reporting We report our results in two reportable segments: residential and commercial properties. Our residential properties include multifamily properties. Our commercial properties include retail, office, industrial, restaurant and medical properties. We assess and measure operating results based on net operating income (“NOI”), which we define as total real estate segment revenues less real estate expenses (which consist of real estate taxes, property management fees, utilities, repairs and maintenance, insurance and property administrative and management fees). We believe NOI is an important measure of operating performance even though it should not be considered an alternative to net income or cash flow from operating activities. NOI is unaffected by financing, depreciation, amortization, legal and professional fees and certain general and administrative expenses. The accounting policies of each segment are consistent with those described in Note 2 of this report. Segment Revenues and Net Operating Income The revenues and net operating income for the reportable segments (residential and commercial) are summarized as follows for the three months ended March 31, 2021 and 2020, along with reconciliations to the consolidated financial statements. Segment assets are also reconciled to Total Assets as reported in the consolidated financial statements. Three months ended March 31, 2021 Three months ended March 31, 2020 Residential Commercial Total Residential Commercial Total (in thousands) (in thousands) Income from rental operations $ 25,959 $ 5,801 $ 31,760 $ 23,995 $ 5,911 $ 29,906 Expenses from rental operations 13,847 1,504 15,351 13,912 1,787 15,699 Net operating income $ 12,112 $ 4,297 $ 16,409 $ 10,083 $ 4,124 $ 14,207 Depreciation and amortization 5,328 5,252 Interest 4,287 4,350 Administration of REIT 1,201 1,162 Other income (243) (1,784) Net income $ 5,836 $ 5,227 Segment Assets and Accumulated Depreciation As of March 31, 2021 Residential Commercial Total (in thousands) Real estate investments $ 647,519 $ 200,571 $ 848,090 Accumulated depreciation (122,143) (43,057) (165,200) $ 525,376 $ 157,514 682,890 Cash and cash equivalents 13,888 Restricted deposits and funded reserves 16,459 Investment in unconsolidated affiliates 11,664 Note receivable 2,009 Assets held for sale 830 Intangible assets, less accumulated amortization 7,075 Other assets, net 10,449 Total Assets $ 745,264 As of December 31, 2020 Residential Commercial Total (in thousands) Real estate investments $ 647,083 $ 198,205 $ 845,288 Accumulated depreciation (118,363) (42,212) (160,575) $ 528,720 $ 155,993 684,713 Cash and cash equivalents 11,716 Restricted deposits and funded reserves 15,919 Investment in unconsolidated affiliates 9,659 Note receivable 2,026 Assets held for sale 831 Intangible assets, less accumulated amortization 7,367 Other assets, net 10,798 Total Assets $ 743,029 |
RESTRICTED DEPOSITS AND FUNDED
RESTRICTED DEPOSITS AND FUNDED RESERVES | 3 Months Ended |
Mar. 31, 2021 | |
RESTRICTED DEPOSITS AND FUNDED RESERVES | |
RESTRICTED DEPOSITS AND FUNDED RESERVES | NOTE 4 – restricted deposits and funded reserves As of March 31, As of December 31, 2021 2020 (in thousands) Tenant security deposits $ 4,885 $ 4,730 Real estate tax and insurance escrows 1,158 2,058 Replacement reserves 2,094 2,137 Other funded reserves 8,322 6,994 $ 16,459 $ 15,919 Tenant Security Deposits We have set aside funds to repay tenant security deposits upon tenant move-out. Real Estate Tax and Insurance Escrows Pursuant to the terms of certain mortgages, we have established and maintain real estate tax escrows and insurance escrows to pay real estate taxes and insurance. We are required to contribute to the account monthly an amount equal to 1/12 of the estimated real estate taxes and insurance premiums. Replacement Reserves Pursuant to the terms of certain mortgages, we have established and maintain several replacement reserve accounts. We make monthly deposits into the replacement reserve accounts to be used for repairs and replacements on the property. Certain replacement reserve accounts require authorization from the mortgage company for withdrawals. Other Funded Reserves Other funded reserves consist of proceeds received on the disposal of a commercial building located in Bismarck, North Dakota. The proceeds are required to be held as restricted funds under Section 1031 of the Internal Revenue Code (like-kind exchange). Additionally, insurance proceeds of $1,324 that were received during the three months ended March 31, 2021, are held in an escrow account per the agreement set in place with the lender of the property. Funds will be released as construction costs related to the insurance claim are incurred. |
LEASE INTANGIBLES
LEASE INTANGIBLES | 3 Months Ended |
Mar. 31, 2021 | |
LEASE INTANGIBLES | |
LEASE INTANGIBLES | NOTE 6 - Lease intangibles The following table summarizes the net value of other intangible assets and liabilities and the accumulated amortization for each class of intangible: Lease Accumulated Lease As of March 31, 2021 Intangibles Amortization Intangibles, net Lease Intangible Assets (in thousands) In-place leases $ 18,965 $ (13,177) $ 5,788 Above-market leases 2,617 (1,330) 1,287 $ 21,582 $ (14,507) $ 7,075 Lease Intangible Liabilities Below-market leases $ (2,881) $ 1,934 $ (947) Lease Accumulated Lease As of December 31, 2020 Intangibles Amortization Intangibles, net Lease Intangible Assets (in thousands) In-place leases $ 19,768 $ (13,727) $ 6,041 Above-market leases 2,618 (1,292) 1,326 $ 22,386 $ (15,019) $ 7,367 Lease Intangible Liabilities Below-market leases $ (2,957) $ 1,963 $ (994) The estimated aggregate amortization expense for each of the five succeeding fiscal years and thereafter is as follows: Intangible Intangible Years ending December 31, Assets Liabilities (in thousands) 2021 (April 1, 2021 - December 31, 2021) $ 829 $ 137 2022 987 164 2023 849 151 2024 849 151 2025 849 151 Thereafter 2,712 193 $ 7,075 $ 947 The weighted average amortization period for the intangible assets, in-place leases, above-market leases, and below-market leases acquired as of March 31, 2021 was 7.2 years. When acquiring property, the portion of the purchase price allocated to in-place lease value intangibles is amortized on a straight-line basis over the life of the related lease as amortization expense. The Trust incurred amortization expense pertaining to acquired in-place lease value intangibles of $253 and $341 for the three months ended March 31, 2021 and 2020, respectively. When acquiring property, the portion of the purchase price allocated to above and below market lease intangibles is amortized on a straight-line basis over the life of the related lease as an adjustment to real estate rental income. Amortization pertaining to above market lease intangibles of $39 and $52 for the three months ended March 31, 2021 and 2020, respectively, was recorded as a reduction to real estate rental income. Amortization pertaining to below market lease intangibles of $47 and $56 for the three months ended March 31, 2021 and 2020, respectively, was recorded as an increase to real estate rental income. |
LINES OF CREDIT
LINES OF CREDIT | 3 Months Ended |
Mar. 31, 2021 | |
LINES OF CREDIT | |
LINES OF CREDIT | NOTE 7 – LINES OF CREDIT We have a $18,300 variable rate (1-month LIBOR plus 2.25% ) line of credit agreement with Wells Fargo Bank, which expires in June 2021 ; a $4,915 variable rate (floating LIBOR plus 2.00% ) line of credit agreement with Bremer Bank, which expires in June 2022 ; and a $5,000 variable rate (floating LIBOR plus 2.00% ) line of credit agreement with Bremer Bank, which expires June 2022 . The lines of credit are secured by specific properties. At March 31, 2021, the $4,915 variable rate line of credit with Bremer Bank secured two letters of credit totaling $746 , leaving $27,469 available and unused under the agreements. These operating lines are designed to enhance treasury management activities and more effectively manage cash balances. Certain line of credit agreements include covenants that, in part, impose maintenance of certain debt service coverage and debt to net worth ratios. We are not required to determine compliance with all covenants as of March 31, 2021; however, we have not received any notice of non-compliance with our covenants through the date of this filing. |
MORTGAGE NOTES PAYABLE
MORTGAGE NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2021 | |
MORTGAGE NOTES PAYABLE | |
MORTGAGE NOTES PAYABLE | NOTE 8 - MORTGAGE NOTES PAYABLE The following table summarizes the Trust’s mortgage notes payable. Principal Balance At March 31, December 31, 2021 2020 (in thousands) Fixed rate mortgage notes payable (a) $ 419,700 $ 415,665 Variable rate mortgage notes payable 7,368 7,446 Mortgage notes payable 427,068 423,111 Less unamortized debt issuance costs 1,904 1,833 $ 425,164 $ 421,278 (a) Includes $43,408 and $43,613 of variable rate mortgage debt that was swapped to a fixed rate at March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021, we had 107 fixed rate and two variable rate mortgage loans with effective interest rates ranging from 2.11% to 6.85% per annum and a weighted average effective interest rate of 4.01% per annum on fixed rate loans and 2.25% per annum on variable rate loans. As of December 31, 2020, we had 114 fixed rate and two variable rate mortgage loans with effective interest rates ranging from 2.14% to 6.85% per annum, and a weighted average effective interest rate of 4.03% per annum on fixed rate loans and 2.28% per annum on variable rate loans. The majority of the Trust’s mortgages payable require monthly payments of principal and interest. Certain mortgages require reserves for real estate taxes and certain other costs. Certain mortgage note agreements include covenants that, in part, impose maintenance of certain debt service coverage and debt to net worth ratios. We are not required to determine compliance with all covenants as of March 31, 2021; however, we have not received any notice of non-compliance with our covenants through the date of this filing. We are required to make the following principal payments on our outstanding mortgage notes payable for each of the five succeeding fiscal years and thereafter as follows: Years ending December 31, Amount (in thousands) 2021 (April 1, 2021 - December 31, 2021) $ 15,835 2022 27,109 2023 50,417 2024 19,421 2025 51,057 Thereafter 263,229 Total payments $ 427,068 |
DERIVATIVES AND HEDGING ACTIVIT
DERIVATIVES AND HEDGING ACTIVITIES | 3 Months Ended |
Mar. 31, 2021 | |
DERIVATIVES AND HEDGING ACTIVITIES | |
DERIVATIVES AND HEDGING ACTIVITIES | NOTE 9 – DERIVATIVES AND HEDGING ACTIVITIES As part of our interest rate risk management strategy, we have used derivative instruments to manage our exposure to interest rate movements and add stability to interest expense. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for the Trust making fixed rate payments over the life of the agreement without exchange of the underlying notional amount. As of March 31, 2021, the Trust used nine interest rate swaps to hedge the variable cash flows associated with variable rate debt. Changes in fair value of the derivatives that are designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive loss and are reclassified into interest expense as interest payments are made on the Trust’s variable rate debt. Over the next nine months, the Trust estimates that an additional $269 will be reclassified as a interest expense. The following table summarizes the Trust’s interest rate swaps as of March 31, 2021, which effectively convert on month floating rate LIBOR to a fixed rate: Fixed Effective Date Notional Interest Rate Maturity Date November 1, 2019 $ 6,928 3.15% November 1, 2029 November 1, 2019 $ 4,814 3.28% November 1, 2029 January 10, 2020 $ 3,130 3.39% January 10, 2030 June 11, 2020 $ 1,568 3.07% June 15, 2030 June 11, 2020 $ 3,039 3.07% June 15, 2030 June 15, 2020 $ 1,700 2.94% June 15, 2030 June 15, 2020 $ 4,498 2.94% June 15, 2030 July 1, 2020 $ 4,931 2.79% June 10, 2030 December 2, 2020 $ 12,800 2.91% December 2, 2027 The following table summarizes the Trust’s interest rate swaps that were designated as cash flow hedges of interest rate risk: Number of Instruments Notional Interest Rate Derivatives March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 Interest rate swaps 9 9 $ 43,408 $ 43,613 The table below presents the estimated fair value of the Trust’s derivative financial instruments as well as their classification in the accompanying consolidated balance sheets. The valuation techniques are described in Note 9 to the consolidated financial statements. Derivatives Derivatives designated as March 31, 2021 December 31, 2020 cash flow hedges: Balance Sheet Location Fair Value Balance Sheet Location Fair Value Interest rate swaps Other assets, net $ 921 Other assets, net $ — Interest rate swaps Accrued expenses and other liabilities $ 342 Accrued expenses and other liabilities $ 1,805 The carrying amount of the swaps have been adjusted to their fair value at the end of the quarter, which because of changes in forecasted levels of LIBOR, resulted in reporting an asset and liability for the fair value of the future net payments forecasted under the swap. The interest rate swap is accounted for as an effective hedge in accordance with ASC 815-20 whereby it is recorded at fair value and changes in fair value are recorded to comprehensive income. The following table presents the effect of the Company’s derivative financial instruments on the accompanying consolidated statements of operations and other comprehensive loss (income) for the quarters ended March 31, 2021 and 2020: Location of Gain Amount of (Gain)/Loss Reclassified from Amount of (Gain)/Loss Derivatives in Recognized in Other Accumulated other Reclassified from Cash Flow Hedging Comprehensive Income Comprehensive Income AOCI into Income Relationships on Derivatives (AOCI) into Income Three Months Ended 2021 2021 Interest rate swaps $ (2,384) Interest expense $ 115 2020 2020 Interest rate swaps $ 1,486 Interest expense $ 10 Credit-risk-related Contingent Features The Trust has agreements with each of its derivative counterparties that contain a provision whereby if the Trust defaults on the related indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Trust could also be declared in default on its corresponding derivative obligation. The Trust’s agreements with each of its derivative counterparties also contain a provision whereby if the Trust consolidates with, merges with or into, or transfers all or substantially all of its assets to another entity and the creditworthiness of the resulting, surviving or transferee entity, is materially weaker than the Trust’s, the counterparty has the right to terminate the derivative obligations. As of March 31, 2021, the termination value of derivatives in a liability position was $342. As of March 31, 2021, the Trust has pledged the properties related to the loans which are hedged as collateral. |
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT | 3 Months Ended |
Mar. 31, 2021 | |
FAIR VALUE MEASUREMENT | |
FAIR VALUE MEASUREMENT | NOTE 10 - FAIR VALUE MEASUREMENT The following table presents the carrying value and estimated fair value of the Company’s financial instruments: March 31, 2021 December 31, 2020 Carrying Carrying Value Fair Value Value Fair Value (in thousands) Financial assets: Note receivable $ 2,009 $ 2,091 $ 2,026 $ 2,117 Derivative assets $ 921 $ 921 $ — $ — Financial liabilities: Mortgage notes payable $ 427,069 $ 451,910 $ 423,111 $ 443,100 Derivative liabilities $ 342 $ 342 $ 1,805 $ 1,805 ASC 820-10 established a three-level valuation hierarchy for fair value measurement. Management uses these valuation techniques to establish the fair value of the assets at the measurement date. These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect management’s assumptions. These two types of inputs create the following fair value hierarchy: ● Level 1 – Quoted prices for identical instruments in active markets; ● 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 whose significant inputs are observable; ● Level 3 – Instruments whose significant inputs are unobservable. The guidance requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. Recurring Fair Value Measurements The following table presents the Company’s financial instruments, which are measured at fair value on a recurring basis, by the level in the fair value hierarchy within which those measurements fall. Methods and assumptions used to estimate the fair value of these instruments are described after the table. Level 1 Level 2 Level 3 Total (in thousands) March 31, 2021 Derivative assets $ — $ 921 $ — $ 921 Derivative liabilities $ — $ 342 $ — $ 342 December 31, 2020 Derivative liabilities $ — $ 1,805 $ — $ 1,805 Derivatives: The Company has determined that its derivative valuations in their entirety are classified within Level 2 of the fair value hierarchy. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements. Fair Value Disclosures The following table presents the Company’s financial assets and liabilities, which are measured at fair value for disclosure purposes, by the level in the fair value hierarchy within which they fall. Methods and assumptions used to estimate the fair value of these instruments are described after the table. Level 1 Level 2 Level 3 Total (in thousands) March 31, 2021 Mortgage notes payable, net $ — $ — $ 451,910 $ 451,910 Note receivable $ — $ — $ 2,091 $ 2,091 December 31, 2020 Mortgage notes payable, net $ — $ — $ 443,100 $ 443,100 Note receivable $ — $ — $ 2,117 $ 2,117 Mortgage notes payable: Notes receivable. |
NONCONTROLLING INTEREST OF UNIT
NONCONTROLLING INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP | 3 Months Ended |
Mar. 31, 2021 | |
NONCONTROLLING INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP | |
NONCONTROLLING INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP | NOTE 11 – NONCONTROLLING INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP As of March 31, 2021 and December 31, 2020, outstanding limited partnership units totaled 18,246,000 and 18,279,000, respectively. Total aggregate distributions per unit were $0.2650 and $0.2647 during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and 2020, the Operating Partnership declared first quarter distributions of $4,835 and $4,831, respectively, to limited partners paid on April 15, 2021 and 2020, respectively. During the three months ended March 31, 2021 and 2020, there were no limited partnership units exchanged for common shares pursuant to redemption requests. At the sole and absolute discretion of the Trust as general partner of the limited partnership, and so long our redemption plans exists and applicable holding periods are met, Limited Partners may request the Operating Partnership redeem their limited partnership units. The Trust as general partner on behalf of the limited partnership may choose to offer the Limited Partner: (i) cash for the redemption or, at the request of the Limited Partner, or (ii) offer shares in lieu of cash for the redemption on a basis of one limited partnership unit for one Sterling common share (the “Exchange Request”). The Exchange Request shall be exercised pursuant to a Notice of Exchange. If the issuance of Sterling common shares pursuant to an Exchange Request will cause the shareholder to exceed the ownership limitations, among other reasons, payment will be made to the Limited Partner in cash. No Limited Partner may exercise an Exchange Request more than twice during any calendar year, and Exchange Requests may not be made for less than 1,000 limited partnership units. If a Limited Partner owns fewer than 1,000 limited partnership units, all of the limited partnership units held by the Limited Partner must be exchanged pursuant to the Exchange Request. |
REDEMPTION PLANS
REDEMPTION PLANS | 3 Months Ended |
Mar. 31, 2021 | |
REDEMPTION PLANS | |
REDEMPTION PLANS | NOTE 12 – REDEMPTION PLANS Our Board of Trustees has approved redemption plans that enable our shareholders to sell their common shares and the partners of our Operating Partnership to sell their limited partnership units to us, after they have held the securities for at least one year and subject to other conditions and limitations described in the plans. Our redemption plans currently provide that the maximum amount that can be redeemed under the plan is $40,000 worth of securities. Currently, the fixed redemption price is $19.00 per share or unit under the plans, which price became effective January 1, 2021. Prior to January 1, 2021 the redemption price was $18.25 per share or unit under the plan. We may redeem securities under the plans provided that the aggregate total has not been exceeded and we have sufficient funds to do so. The plans will terminate in the event the shares become listed on any national securities exchange, the subject of bona fide quotes on any inter-dealer quotation system or electronic communications network or are the subject of bona fide quotes in the pink sheets. Additionally, the Board, in its sole discretion, may terminate, amend or suspend the redemption plans, either or both of them, if it determines to do so in its sole discretion. During the three months ended March 31, 2021 and 2020, the Company redeemed 41,000 and 38,000 common shares valued at $777 and $696, respectively. In addition, during the three months ended March 31, 2021 and 2020, the Trust redeemed 33,000 and 30,000 units valued at $628 and $541, respectively. The total amount remaining available under the plan as of March 31, 2021 is $5,920 worth of securities. |
BENEFICIAL INTEREST
BENEFICIAL INTEREST | 3 Months Ended |
Mar. 31, 2021 | |
BENEFICIAL INTEREST | |
BENEFICIAL INTEREST | NOTE 13 – BENEFICIAL INTEREST We are authorized to issue 100,000,000 common shares of beneficial interest with $0.01 par value and 50,000,000 preferred shares with $0.01 par value, which collectively represent the entire beneficial interest of Sterling. As of March 31, 2021 and December 31, 2020, there were 9,968,000 and 9,855,000 common shares outstanding, respectively. We had no preferred shares outstanding as of either date. Dividends paid to holders of common shares were $0.2650 per share and $0.2647 per share for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and 2020, the Operating Partnership declared first quarter dividends of $2,642 and $2,527, respectively, to holders of common shares paid on April 15, 2021 and 2020, respectively. |
DIVIDEND REINVESTMENT PLAN
DIVIDEND REINVESTMENT PLAN | 3 Months Ended |
Mar. 31, 2021 | |
DIVIDEND REINVESTMENT PLAN | |
DIVIDEND REINVESTMENT PLAN | NOTE 14 – DIVIDEND REINVESTMENT PLAN Our Board of Trustees approved a dividend reinvestment plan to provide existing holders of our common shares with a convenient method to purchase additional common shares without payment of brokerage commissions, fees or service charges. The estimated value per common share was $20.00 and $19.25 at March 31, 2021 and December 31, 2020, respectively. See discussion of determination of estimated value in Management Discussion and Analysis. Therefore, the purchase price per common share for dividend reinvestments was $19.00 and $18.29 and for additional optional cash purchases was $20.00 and $19.25 at March 31, 2021 and December 31, 2020, respectively. The Board, in its sole discretion, may amend, suspend or terminate the plan at any time, without the consent of shareholders, upon a ten day notice to participants. In the three months ended March 31, 2021, 89,000 shares were issued pursuant to dividend reinvestments and 65,000 shares were issued pursuant to additional optional cash purchases under the plan, valued at $1,686 and $1,307 respectively. In the three months ended March 31, 2020, 87,000 shares were issued pursuant to dividend reinvestments and 62,000 shares were issued pursuant to additional optional cash purchases under the plan, valued at $1,584 and $1,203, respectively. |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2021 | |
LEASES | |
LEASES | NOTE 15 – LEASES As of March 31, 2021, we derived 82% of our revenues from residential leases that are generally for terms of one year or less. The residential leases may include lease income related items such as parking, storage and non-refundable deposits that we treat as a single lease component because the amenities cannot be leased on their own and the timing and pattern of revenue recognition are the same. The collection of lease payments at lease commencement is probable and therefore we subsequently recognize lease income over the lease term on a straight-line basis. Residential leases are renewable upon consent of both parties on an annual or monthly basis. As of March 31, 2021, we derived 18% of our revenues from commercial leases primarily under long-term lease agreements. Substantially all commercial leases contain fixed escalations or, in some instances, changes based on the Consumer Price Index, which occur at specified times during the term of the lease. In certain commercial leases, variable lease income, such as percentage rent, is recognized when rents are earned. We recognize rental income and rental abatements from our commercial leases on a straight-line basis over the lease term. Recognition of rental income commences when control of the leased space has been transferred to the tenant. The Trust’s leases contain lease and non-lease components for utility reimbursement from our residents. We have elected to combine lease and non-lease components for all asset classes. The combined components are included in real estate rental income in our consolidated financial statements and are accounted for under ASC 842. Lease income related to the Company’s operating leases is comprised of the following: Three months ended March 31, 2021 Residential Commercial Total (in thousands) Lease income related to fixed lease payments $ 24,834 $ 4,382 $ 29,216 Lease income related to variable lease payments — 1,094 1,094 Other (a) (135) 294 159 Lease Income (b) $ 24,699 $ 5,770 $ 30,469 Three months ended March 31, 2020 Residential Commercial Total (in thousands) Lease income related to fixed lease payments $ 23,203 $ 4,714 $ 27,917 Lease income related to variable lease payments — 1,261 1,261 Other (a) (257) (90) (347) Lease Income (b) $ 22,946 $ 5,885 $ 28,831 (a) For the three months ended March 31, 2021 and 2020, “Other” is comprised of revenue adjustments related to changes in collectibility and amortization of above and below market lease intangibles and lease inducements. (b) Excludes other rental income for the three months ended March 31, 2021 and 2020 of $1,291 and $1,075 , respectively, which is accounted for under the revenue recognition standard. As of March 31, 2021, non-cancelable commercial operating leases provide for future minimum rental income as follows. Apartment leases are not included as the terms are generally for one year or less. Years ending December 31, Amount (in thousands) 2021 (April 1, 2021 - December 31, 2021) $ 11,658 2022 14,789 2023 13,454 2024 12,737 2025 12,491 Thereafter 56,308 $ 121,437 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2021 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 16 – RELATED PARTY TRANSACTIONS Effective January 1, 2021, Alloy Enterprises, Inc. was formed to act as the holding company for Sterling Management, LLC and GOLDMARK Property Management. In connection with this restructuring transaction, the owners of Alloy Enterprises, Inc. indirectly own Sterling Management, LLC and GOLDMARK Property Management. Alloy Enterprises, Inc. is owned in part by the Trust’s Chief Executive Officer and Trustee Mr. Kenneth P. Regan, by Trustee Mr. James S. Wieland, by President Joel Thomsen, by Chief Investment Officer, Ryan M. Downs, and by the Chief Financial Officer and Treasurer Erica J. Chaffee. In addition, Mr. Regan serves as the Executive Chairman of the Advisor, and Messrs. Wieland, Thomsen, and Downs and Ms. Chaffee serve on the Board of Governors of both the Advisor and GOLDMARK Property Management. Sterling Management, LLC, a North Dakota limited liability company formed in November 2002. The Advisor is responsible for managing day-to-day affairs, overseeing capital projects and identifying, acquiring and disposing investments on behalf of the trust. GOLDMARK Property Management, a North Dakota limited liability company formed in 1981. GOLDMARK Property Management performs property management services for the Trust. We have a historical and ongoing relationship with Bell Bank. Bell Bank has provided the Trust certain financial services throughout the relationship. A family member of Erica J. Chaffee, our Chief Financial Officer, is an employee of Bell Bank and could have an indirect material interest in any such engagement and related transactions. Property Management Fee During the three months ended March 31, 2021 and 2020, we paid property management and administrative fees to GOLDMARK Property Management, Inc. For the three months ended March 31, 2021 and 2020, we paid management fees, on-site staff costs and other miscellaneous fees required to run the property of $3,064 and $3,311, respectively, to GOLDMARK Property Management, Inc. Management fees paid during the three months ended March 31, 2021 and 2020 approximated 5% of net collected rents. In addition, during the three months ended March 31, 2021 and 2020, we paid repair and maintenance expenses, and payroll related expenses to GOLDMARK Property Management, Inc. totaling $1,696 and $1,627, respectively. Board of Trustee Fees We incurred Trustee fees of $15 and $20 during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, and December 31, 2020 we owed our Trustees $42 and $27 for unpaid board of trustee fees, respectively. There is no cash retainer paid to Trustees. Instead, we pay Trustees a specific number of common shares for meetings attended. The plan provides: Board Chairman – Board Meeting 105 shares/meeting Trustee – Board Meeting 75 shares/meeting Committee Chair – Committee Meeting 30 shares/meeting Trustee – Committee Meeting 30 shares/meeting Common shares earned in accordance with the plan are calculated on an annual basis. Shares earned pursuant to the Trustee Compensation Plan are issued on or about July 15 for Trustees’ prior year of service. Non-independent Trustees are not compensated for their service on the Board or Committees. Advisory Agreement We are an externally managed trust and as such, although we have a Board of Trustees and Executive Officers responsible for our management, we have no paid employees. The following is a brief description of the current fees and compensation that may be and was received by the Advisor under the Advisory Agreement, which must be renewed on an annual basis and approved by a majority of the independent trustees. The Advisory Agreement was approved by the Board of Trustees (including all the independent Trustees) on March 24, 2021, and is effective until March 31, 2022. Management Fee: 0.35% of our total assets (before depreciation and amortization), annually. Total assets are our gross assets (before depreciation and amortization) as reflected on our consolidated financial statements, taken as of the end of the fiscal quarter last preceding the date of computation. The management fee will be payable monthly in cash or our common shares, at the option of the Advisor, not to exceed one-twelfth of 0.35% of the total assets as of the last day of the immediately preceding month. The management fee calculation is subject to quarterly and annual reconciliations. The management fee may be deferred at the option of the Advisor, without interest. Acquisition Fee: Disposition Fee: Financing Fee: Project Management Fee: Development Fee: Total Cost Fee Range of Fee Formula 0 – 10M 5.0 % 0 –.5M 0M – 5.0% x (TC – 0M) 10M - 20M 4.5 % .5 M – .95M .50M – 4.5% x (TC – 10M) 20M – 30M 4.0 % .95 M – 1.35M .95M – 4.0% x (TC – 20M) 30M – 40M 3.5 % 1.35 M – 1.70M 1.35M – 3.5% x (TC – 30M) 40M – 50M 3.0 % 1.70 M – 2.00M 1.70M – 3.0% x (TC – 40M) TC = Total Project Cost If Advisor shares responsibility for providing Development Services with one or more third parties, Advisor’s set Development Fee shall be reduced by the fees charged by any such third parties; provided, such adjustment is subject to a 2.5% minimum Advisor’s Development Fee. Additionally, in cases where the Advisor is sharing responsibility for providing Development Services, the Development Fee shall be capped at 2.5% of $20,000,000 ($500,000). The below table summarizes the fees incurred and payable to our Advisor. March 31, 2021 March 31, 2020 March 31, 2021 December 31, 2020 Incurred Incurred Due and Due and Fee Fee Payable Payable (in thousands) Fee: Advisory $ 807 $ 765 $ 271 $ 278 Acquisition $ - $ 302 $ - $ - Disposition $ - $ 92 $ - $ 175 Financing $ 43 $ 25 $ 38 $ - Development $ - $ - $ 79 $ 79 Project Management $ 71 $ 17 $ - $ 51 Operating Partnership Units Issued in Connection with Acquisitions During the three months ended March 31, 2021, there were no operating partnership units issued. During the three months ended March 31, 2020, 176,000 operating partnership units were issued to an entity affiliated with Messrs. Regan and Wieland, two of our trustees, in connection with the acquisition of various properties. The aggregate value of these units was $3,373. Commissions During the three months ended March 31, 2021 and 2020, we incurred real estate commissions of $250 and $324, to GOLDMARK Commercial Real Estate Services, Inc., which is controlled by Messrs. Regan and Wieland. There were no outstanding commissions owed as of March 31, 2021 or December 31, 2020. Rental Income During the three months ended March 31, 2021 and 2020, we received rental income of $67 and $67, respectively, under an operating lease agreement with GOLDMARK Property Management, Inc. During the three months ended March 31, 2021 and 2020, we received rental income of $14 and $14, respectively, under an operating lease agreement with GOLDMARK Commercial Real Estate, Inc. During the three months ended March 31, 2021 and 2020, we received rental income of $22 and $21, respectively, under operating lease agreements with our Advisor. During the three months ended March 31, 2021 and 2020, we received rental income of $122 and $120, respectively, under an operating lease agreement with Bell Bank. Other operational liabilities and receivables During the three months ended March 31, 2021 and 2020, the Trust incurred $174 and $0, respectively, for general costs related to business operations as well as capital expenditures related to construction in progress that were paid to related parties. As of March 31, 2021 and December 31, 2020, operational outstanding liabilities were $121 and $684, respectively. Debt Financing As of March 31, 2021 and December 31, 2020, the Trust had $67,935 and $51,915, respectively, of outstanding principal on loans entered into with Bell Bank. During the three months ended March 31, 2021 and 2020, the Trust incurred interest expense on debt held with Bell Bank of $587 and $514, respectively. Accrued interest as of March 31, 2021 and December 31, 2020, related to this debt was $123 and $121, respectively. Insurance Services On November 1, 2020, the Trust obtained a traditional insurance policy with Bell Insurance. The policy provides coverage for the Trust’s Commercial segment. As of March 31, 2021, total premiums paid for this policy was $113 . There was no such policy in place with Bell Bank as of March 31, 2020. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2021 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 17 - COMMITMENTS AND CONTINGENCIES Environmental Matters Federal law (and the laws of some states in which we own or may acquire properties) imposes liability on a landowner for the presence on the premises of hazardous substances or wastes (as defined by present and future federal and state laws and regulations). This liability is without regard to fault or knowledge of the presence of such substances and may be imposed jointly and severally upon all succeeding landowners. If such hazardous substance is discovered on a property acquired by us, we could incur liability for the removal of the substances and the cleanup of the property. There can be no assurance that we would have effective remedies against prior owners of the property. In addition, we may be liable to tenants and may find it difficult or impossible to sell the property either prior to or following such a cleanup. Risk of Uninsured Property Losses We maintain property damage, fire loss, and liability insurance. However, there are certain types of losses (generally of a catastrophic nature) which may be either uninsurable or not economically insurable. Such excluded risks may include war, earthquakes, tornadoes, certain environmental hazards, and floods. Should such events occur, (i) we might suffer a loss of capital invested, (ii) tenants may suffer losses and may be unable to pay rent for the spaces, and (iii) we may suffer a loss of profits which might be anticipated from one or more properties. Litigation The Trust is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material effect on the financial statements of the Trust. Significant Risks and Uncertainties The Trust continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business and geographies, including how it will impact its tenants and business partners. Several uncertainties continue to exist at this time, including but not limited to the uncertainty of additional state and/or federal stimulus and the effect of the recent surge in COVID-19 cases in many states. The Trust did not incur significant disruptions for the year ended December 31, 2020 from the COVID-19 pandemic. During the quarter ended March 31, 2021, the Trust continued to monitor state and federal legislative actions and efforts regarding the eviction moratorium which affects almost all single-family and multifamily rental housing units. The Trust has seen several tenants complete the sworn statement certifying the qualifications to obtain eviction protection. The Trust is monitoring the collection rates on these tenants and financial condition, results of operations and cash flows . |
DISPOSITIONS
DISPOSITIONS | 3 Months Ended |
Mar. 31, 2021 | |
DISPOSITIONS | |
DISPOSITIONS | NOTE 18 – DISPOSITIONS During the three months ended March 31, 2021, the operating partnership did not dispose of any properties. During the three months ended March 31, 2020, the Trust disposed of one property located in Apple Valley, Minnesota, for $3,670 and recognized a gain of $1,455 in March 2020. The Trust had one property that qualified for held for sale accounting treatment and as such, the assets and liabilities associated with this property were separately classified as held for sale in the consolidated balance sheet as of March 31, 2021 and December 31, 2020. The following table shows the net book value of assets held for sale. March 31, December 31, 2021 2020 (in thousands) ASSETS Real estate investments Land and land improvements $ 150 $ 150 Building and improvements 1,428 1,428 Real estate investments 1,578 1,578 Less accumulated depreciation (749) (749) Real estate investments, net 829 829 Other assets, net 1 2 Total Assets $ 830 $ 831 LIABILITIES Tenant security deposits payable $ 5 $ 5 Accrued expenses and other liabilities $ 12 $ — Total Liabilities $ 17 $ 5 |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Mar. 31, 2021 | |
ACQUISITIONS | |
BUSINESS COMBINATIONS AND ACQUISITIONS | NOTE 19 – ACQUISITIONS The Trust had no acquisitions during the three months ended March 31, 2021. The Company closed on the following acquisitions during the three months ended March 31, 2020. Date Property Name Location Property Type Units/ Square Footage/ Acres Acquisition Price 1/12/20 Wolf Creek Fargo, ND Apartment complex 54 units $ 4,968 1/31/20 Columbia Park Village Grand Forks, ND Apartment complex 12 units 612 3/1/20 Belmont East & West Bismarck, ND Apartment complex 26 units 1,494 3/1/20 Eastbrook Bismarck, ND Apartment complex 24 units 1,296 3/1/20 Hawn Fargo, ND Apartment complex 48 units 2,400 3/1/20 Rosser Bismarck, ND Apartment complex 24 units 1,296 $ 12,066 (a) (a) Acquisition price does not include capitalized closing costs and adjustments totaling $636 , special assessments assumed and capitalized of $168 or additional costs incurred due to difference in unit price of $26 . Total consideration given for acquisitions through March 31, 2020 was completed through issuing approximately 469,000 limited partnership units of the operating partnership valued at $19.25 per unit for an aggregate consideration of approximately $9,031 , assumed liabilities of $265 , a mortgage $3,225 and cash of $375 . The value of units issued in exchange for property is determined through a value established annually by our Board of Trustees, and reflects the fair value at the time of issuance. The following table summarizes the acquisition date fair values, before pro-rations, the Company recorded in conjunction with the acquisitions discussed above: Three Months Ended March 31, 2021 2020 Land, building, tenant improvements and FF&E $ - $ 12,896 Other liabilities - (265) Net assets acquired - 12,631 Equity/limited partnership unit consideration - (9,031) New loans - (3,225) Net cash consideration $ - $ 375 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2021 | |
SUBSEQUENT EVENTS. | |
SUBSEQUENT EVENTS | NOTE 20 - SUBSEQUENT EVENTS On April 15, 2021, we paid a dividend or distribution of $0.265 per share on our common shares of beneficial interest or limited partnership units, respectively, to common shareholders and limited partnership unit holders of record on March 31, 2021. On April 28, 2021, the Trust disposed of a commercial real estate property located in Waite Park, Minnesota for $900 . We have evaluated subsequent events through the date of this filing. We are not aware of any other subsequent events which would require recognition or disclosure in the consolidated financial statements. |
PRINCIPAL ACTIVITY AND SIGNIF_2
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020, which have previously been filed with the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted from this report on Form 10-Q pursuant to the rules and regulations of the SEC. The results for the interim periods shown in this report are not necessarily indicative of future financial results. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly our consolidated financial statements as of and for the three months ended March 31, 2021. These adjustments are of a normal recurring nature. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of , Properties, LLLP, and wholly-owned limited liability companies. All significant intercompany transactions and balances have been eliminated in consolidation. As of March 31, 2021 the Trust owned approximately 35.35% of the partnership interests (“OP Units”) of the Operating Partnership. The remaining OP Units, consisting exclusively of limited partner interests, are held by persons who contributed their interests in properties to the Operating Partnership in exchange for OP Units. Under the partnership agreement, these persons have the right to tender their OP Units for redemption to the Operating Partnership at any time following a specified restricted period for cash equal to the fair value of an equivalent number of common shares of the Trust. In lieu of delivering cash, however, the Trust, as the Operating Partnership’s general partner, may, at its option, choose to acquire any OP Units so tendered by issuing common shares in exchange for the tendered OP Units. If the Trust so chooses, its common shares will be exchanged for OP Units on a one-for-one basis. This one-for-one exchange ratio is subject to adjustment to prevent dilution. With each such exchange or redemption, the Trust’s percentage ownership in the Operating Partnership will increase. In addition, whenever the Trust issues common or other classes of its shares, it contributes the net proceeds it receives from the issuance to the Operating Partnership and the Operating Partnership issues to the Trust an equal number of OP Units or other partnership interests having preferences and rights that mirror the preferences and rights of the shares issued. This structure is commonly referred to as an umbrella partnership REIT or “UPREIT.” Additionally, we evaluate the need to consolidate affiliates based on standards set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”). In determining whether we have a requirement to consolidate the accounts of an entity, management considers factors such as our ownership interest, our authority to make decisions and contractual and substantive participating rights of the limited partners and shareholders, as well as whether the entity is a variable interest entity (“VIE”) for which we have both: a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and b) the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE. The Trust will consolidate the operations of a joint venture if the Trust determines that it is either the primary beneficiary of a variable interest entity (VIE) or has substantial influence and control of the entity. In instances where the Trust determines that it is not the primary beneficiary of a VIE or the Trust does not control the joint venture but can exercise influence over the entity with respect to its operations and major decisions, the Trust will use the equity method of accounting. Under the equity method, the operations of a joint venture will not be consolidated with the Trust’s operations but instead its share of operations will be reflected as equity in earnings (loss) of unconsolidated entity on its consolidated statements of operations and comprehensive loss. Additionally, the Trust’s net investment in the joint venture will be reflected as investment in unconsolidated entity on the consolidated balance sheets. The Operating Partnership meets the criteria as a variable interest entity (“VIE”). The Trust’s sole significant asset is its investment in the Operating Partnership. As a result, substantially all of the Trust’s assets and liabilities represent those assets and liabilities of the Operating Partnership. All of the Trust’s debt is an obligation of the Operating Partnership, and the Trust guarantees the unsecured debt obligations of the Operating Partnership. |
Concentration of Credit Risk | Concentration of Credit Risk Our cash balances are maintained in various bank deposit accounts. The bank deposit amounts in these accounts may exceed federally insured limits at various times throughout the year. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Real Estate Investments | Real Estate Investments Real estate investments are recorded at cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred. The Trust allocates the purchase price of each acquired investment property accounted for as an asset acquisition based upon the relative fair value at acquisition date of the individual assets acquired and liabilities assumed, which generally include (i) land, (ii) building and other improvements, (iii) in-place lease intangibles, (iv) acquired above and below market lease intangibles, and (v) assumed financing that is determined to be above or below market, if any. Transaction costs related to acquisitions are accounted for as asset acquisitions and capitalized as a cost of the property. For tangible assets acquired, including land, building and other improvements, the Trust considers available comparable market and industry information in estimating acquisition date fair value. Key factors considered in the calculation of fair value of both real property and intangible assets include the current market rent values, “dark” periods (building in vacant status), direct costs estimated with obtaining a new tenant, discount rates, escalation factors, standard lease terms, and tenant improvement costs. Furniture and fixtures are stated at cost less accumulated depreciation. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for routine maintenance and repairs, which do not add to the value or extend useful lives, are expensed as incurred. Depreciation is provided for over the estimated useful lives of the individual assets using the straight-line method over the following estimated useful lives: Buildings and improvements 40 years Furniture, fixtures and equipment 5 - 9 years The Trust’s investment properties are reviewed for potential impairment at the end of each reporting period or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. At the end of each reporting period, the Trust separately determines whether impairment indicators exist for each property. Based on evaluation, there were no impairment losses during the three months ended March 31, 2021 and 2020. |
Properties Held for Sale | Properties Held for Sale We account for our properties held for sale in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”), which addresses financial accounting and reporting in a period in which a component or group of components of an entity either has been disposed of or is classified as held for sale. The Trust had one property held for sale as of March 31, 2021 and December 31, 2020. See Note 18. |
Construction in Progress | Construction in Progress The Trust capitalizes direct and certain indirect project costs incurred during the development period such as construction, insurance, architectural, legal, interest and other financing costs, and real estate taxes. At such time as the development is considered substantially complete, the capitalization of certain indirect costs such as real estate taxes and interest and financing costs cease and all project-related costs included in construction in process are reclassified to land and building and other improvements. |
Investment in Unconsolidated Affiliates | Investment in Unconsolidated Affiliates We account for unconsolidated affiliates using the equity method of accounting per guidance established under ASC 323, Investments – Equity Method and Joint Ventures (“ASC 323”). The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for our share of equity in the affiliates’ earnings and distributions. We evaluate the carrying amount of the investments for impairment in accordance with ASC 323. Unconsolidated affiliates are reviewed for potential impairment if the carrying amount of the investment exceeds its fair value. An impairment charge is recorded when an impairment is deemed to be other-than-temporary. To determine whether impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment until the carrying amount is fully recovered. The evaluation of an investment in an affiliate for potential impairment can require our management to exercise significant judgments. No impairment losses were recorded to unconsolidated affiliates for the three months ended March 31, 2021 and 2020. We use the equity method to account for investments that qualify as variable interest entities where we are not the primary beneficiary and entities that we do not control or where we do not own a majority of the economic interest but have the ability to exercise significant influence over the operations and financial policies of the investee. We will also use the equity method for investments that do not qualify as variable interest entities and do not meet the control requirements for consolidation, as defined in ASC 810. For a joint venture accounted for under the equity method, our share of net earnings and losses is reflected in income when earned and distributions are credited against our investment in the joint venture as received. In determining whether an investment in a limited liability company or tenant in common is a variable interest entity, we consider: the form of our ownership interest and legal structure; the size of our investment; the financing structure of the entity, including the necessity of subordinated debt; estimates of future cash flows; our and our partner’s ability to participate in the decision making related to acquisitions, dispositions, budgeting and financing on the entity; and obligation to absorb losses and preferential returns. See Note 5, Investment in Unconsolidated Affilliates, for further information. |
Noncontrolling Interest | Noncontrolling Interest A noncontrolling interest in a subsidiary (minority interest) is in most cases an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements and separate from the parent company’s equity. In addition, consolidated net income is required to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest and the amount of consolidated net income attributable to the parent and the noncontrolling interest are required to be disclosed on the face of the consolidated statements of operations and comprehensive income. Operating Partnership: Interests in the operating partnership held by limited partners are represented by operating partnership units. The operating partnership’s income is allocated to holders of units based upon the ratio of their holdings to the total units outstanding during the period. Capital contributions, distributions, syndication costs, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the operating partnership agreement. Partially Owned Properties: The Trust reflects noncontrolling interests in partially owned properties on the balance sheet for the portion of properties consolidated by the Trust that are not wholly owned by the Trust. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as noncontrolling interests in partially owned properties in the consolidated statement of operations and comprehensive income. |
Federal Income Taxes | Federal Income Taxes We have elected to be taxed as a REIT under the Internal Revenue Code, as amended. A REIT calculates taxable income similar to other domestic corporations, with the major difference being a REIT is entitled to a deduction for dividends paid. A REIT is generally required to distribute each year at least 90% of its taxable income. If it chooses to retain the remaining 10% of taxable income, it may do so, but it will be subject to a corporate tax on such income. REIT shareholders are generally taxed on REIT distributions of ordinary income in the same manner as they are taxed on other corporate distributions. We intend to continue to qualify as a REIT and, provided we maintain such status, will not be taxed on the portion of the income that is distributed to shareholders. In addition, we intend to distribute all of our taxable income; therefore, no provisions or liabilities for income taxes have been recorded in the financial statements. We follow ASC Topic 740, Income Taxes, |
Revenue Recognition | Revenue Recognition The Trust is the lessor for its residential and commercial leases. Leases are analyzed on an individual basis to determine lease classification. As of March 31, 2021, all leases analyzed under the Trust’s lease classification process were determined to be operating leases. We recognize variable income from pass-through expenses on an accrual basis over the periods in which the expenses were incurred. Pass-through expenses are comprised of real estate taxes, operating expenses and common area maintenance costs which are reimbursed by tenants in accordance with specific allowable costs per tenant lease agreements. When we pay pass-through expenses, subject to reimbursement by the tenant, they are included within operating expenses, excluding real estate taxes, and reimbursements are included within real estate rental income along with the associated base rent in the accompanying consolidated financial statements. We record base rents on a straight-line basis. The monthly base rent income according to the terms of our leases is adjusted so that an average monthly rent is recorded for each tenant over the term of its lease. The straight-line rent adjustment increased revenue by $105 for the three months ended March 31, 2021 and decreased revenue by $65 for the three months ended March 31, 2020. The straight-line receivable balance included in other assets on the consolidated balance sheets as of March 31, 2021 and December 31, 2020 was $3,117 and $3,012, respectively. We receive payments for expense reimbursements from substantially all our multi-tenant commercial tenants throughout the year based on estimates. Differences between estimated recoveries and the final billed amounts, which are immaterial, are recognized in the subsequent year. |
Earnings per Common Share | Earnings per Common Share Basic earnings per common share is computed by dividing net income available to common shareholders (the “numerator”) by the weighted average number of common shares outstanding (the “denominator”) during the period. Sterling had no dilutive potential common shares as of March 31, 2021 and 2020, and therefore, basic earnings per common share was equal to diluted earnings per common share for both periods. For the three months ended March 31, 2021 and 2020, Sterling’s denominators for the basic and diluted earnings per common share were approximately 9,983,000 and 9,562,000, respectively. |
Reclassifications | Reclassifications Certain reclassifications considered necessary for a fair presentation have been made to the prior period financial statements in order to conform to the current year presentation. These reclassifications have not changed the results of operations or equity. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). by reference rate reform. On July 27, 2017, the Financial Conduct Authority (FCA), tasked with overseeing the London Interbank Offered Rate (LIBOR) announced the benchmark interest rate will be phased out by the end of 2023. As a result, existing and future contracts indexed to LIBOR will need to be renegotiated to reference another rate. We adopted the standard effective as of January 1, 2020, using the optional transition method to apply the standard as of the effective date. The Trust elected to apply the optional expedients for all of the Trust’s hedging relationships. The Trust will disregard the potential change in the designated hedged risk that may occur due to reference rate reform when the Trust assesses whether the hedged forecasted transaction is probable in accordance with the requirements of Topic 815. The Trust will continue current hedge accounting for our existing cash flow hedges when the hedged risk changes by assuming the reference rate will not be replaced for the remainder of the hedging relationships for our assessment of hedge effectiveness and all subsequent hedge effectiveness assessments. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), Management does 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. |
PRINCIPAL ACTIVITY AND SIGNIF_3
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES | |
Summary of Estimated Useful Life | Buildings and improvements 40 years Furniture, fixtures and equipment 5 - 9 years |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
SEGMENT REPORTING | |
Summary of Segment Revenues and Net Operating Income | Three months ended March 31, 2021 Three months ended March 31, 2020 Residential Commercial Total Residential Commercial Total (in thousands) (in thousands) Income from rental operations $ 25,959 $ 5,801 $ 31,760 $ 23,995 $ 5,911 $ 29,906 Expenses from rental operations 13,847 1,504 15,351 13,912 1,787 15,699 Net operating income $ 12,112 $ 4,297 $ 16,409 $ 10,083 $ 4,124 $ 14,207 Depreciation and amortization 5,328 5,252 Interest 4,287 4,350 Administration of REIT 1,201 1,162 Other income (243) (1,784) Net income $ 5,836 $ 5,227 |
Summary of Segment Assets and Accumulated Depreciation | As of March 31, 2021 Residential Commercial Total (in thousands) Real estate investments $ 647,519 $ 200,571 $ 848,090 Accumulated depreciation (122,143) (43,057) (165,200) $ 525,376 $ 157,514 682,890 Cash and cash equivalents 13,888 Restricted deposits and funded reserves 16,459 Investment in unconsolidated affiliates 11,664 Note receivable 2,009 Assets held for sale 830 Intangible assets, less accumulated amortization 7,075 Other assets, net 10,449 Total Assets $ 745,264 As of December 31, 2020 Residential Commercial Total (in thousands) Real estate investments $ 647,083 $ 198,205 $ 845,288 Accumulated depreciation (118,363) (42,212) (160,575) $ 528,720 $ 155,993 684,713 Cash and cash equivalents 11,716 Restricted deposits and funded reserves 15,919 Investment in unconsolidated affiliates 9,659 Note receivable 2,026 Assets held for sale 831 Intangible assets, less accumulated amortization 7,367 Other assets, net 10,798 Total Assets $ 743,029 |
RESTRICTED DEPOSITS AND FUNDE_2
RESTRICTED DEPOSITS AND FUNDED RESERVES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
RESTRICTED DEPOSITS AND FUNDED RESERVES | |
Schedule of restricted deposits and funded reserves | As of March 31, As of December 31, 2021 2020 (in thousands) Tenant security deposits $ 4,885 $ 4,730 Real estate tax and insurance escrows 1,158 2,058 Replacement reserves 2,094 2,137 Other funded reserves 8,322 6,994 $ 16,459 $ 15,919 |
INVESTMENT IN UNCONSOLIDATED AF
INVESTMENT IN UNCONSOLIDATED AFFILIATES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
INVESTMENT IN UNCONSOLIDATED AFFILIATES | |
Schedule of investments in unconsolidated real estate ventures | Unconsolidated Affiliates Date Acquired Trust Ownership Interest Total Investment in Unconsolidated Affiliates Banner Building 2007 66.67% $ 59 Grand Forks Market Place Retail Center 2003 50% 2,429 SE Savage, LLC 2019 60% 3,168 SE Maple Grove, LLC 2019 60% 2,942 SE Rogers, LLC 2020 60% 3,066 $ 11,664 |
Schedule of financial information of unconsolidated entities | The following is a summary of the financial position of the unconsolidated affiliates as of March 31, 2021 and December 31, 2020. March 31, 2021 December 31, 2020 (in thousands) ASSETS Real estate investments $ 86,983 $ 74,991 Accumulated depreciation (9,939) (9,692) 77,044 65,299 Cash and cash equivalents 282 249 Restricted deposits and funded reserves 192 384 Other assets, net 296 180 Total Assets $ 77,814 $ 66,112 LIABILITIES Mortgage notes payable, net $ 51,016 $ 41,405 Tenant security deposits payable 17 2 Accrued expenses and other liabilities 6,543 6,533 Total Liabilities $ 57,576 $ 47,940 SHAREHOLDERS' EQUITY Total Shareholders' Equity $ 20,238 $ 18,172 $ 77,814 $ 66,112 The following is a summary of results of operations of the unconsolidated affiliates for the three months ended March 31, 2021 and 2020. Three months ended March 31, 2021 2020 (in thousands) Income from rental operations $ 880 $ 963 Expenses from rental operations 234 259 Net operating income $ 646 $ 704 Depreciation and Amortization 247 171 Interest 417 244 Net (loss) income $ (18) $ 289 |
LEASE INTANGIBLES (Tables)
LEASE INTANGIBLES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
LEASE INTANGIBLES | |
Schedule of Intangible Assets, Liabilities and Accumulated Amortization | Lease Accumulated Lease As of March 31, 2021 Intangibles Amortization Intangibles, net Lease Intangible Assets (in thousands) In-place leases $ 18,965 $ (13,177) $ 5,788 Above-market leases 2,617 (1,330) 1,287 $ 21,582 $ (14,507) $ 7,075 Lease Intangible Liabilities Below-market leases $ (2,881) $ 1,934 $ (947) Lease Accumulated Lease As of December 31, 2020 Intangibles Amortization Intangibles, net Lease Intangible Assets (in thousands) In-place leases $ 19,768 $ (13,727) $ 6,041 Above-market leases 2,618 (1,292) 1,326 $ 22,386 $ (15,019) $ 7,367 Lease Intangible Liabilities Below-market leases $ (2,957) $ 1,963 $ (994) |
Schedule of Estimated Aggregate Amortization Expense | Intangible Intangible Years ending December 31, Assets Liabilities (in thousands) 2021 (April 1, 2021 - December 31, 2021) $ 829 $ 137 2022 987 164 2023 849 151 2024 849 151 2025 849 151 Thereafter 2,712 193 $ 7,075 $ 947 |
MORTGAGE NOTES PAYABLE (Tables)
MORTGAGE NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
MORTGAGE NOTES PAYABLE | |
Schedule of Mortgage Notes Payable | Principal Balance At March 31, December 31, 2021 2020 (in thousands) Fixed rate mortgage notes payable (a) $ 419,700 $ 415,665 Variable rate mortgage notes payable 7,368 7,446 Mortgage notes payable 427,068 423,111 Less unamortized debt issuance costs 1,904 1,833 $ 425,164 $ 421,278 (a) Includes $43,408 and $43,613 of variable rate mortgage debt that was swapped to a fixed rate at March 31, 2021 and December 31, 2020, respectively. |
Scheduled Maturities of Mortgage Notes Payable | Years ending December 31, Amount (in thousands) 2021 (April 1, 2021 - December 31, 2021) $ 15,835 2022 27,109 2023 50,417 2024 19,421 2025 51,057 Thereafter 263,229 Total payments $ 427,068 |
DERIVATIVES AND HEDGING ACTIV_2
DERIVATIVES AND HEDGING ACTIVITIES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
DERIVATIVES AND HEDGING ACTIVITIES | |
Schedule of interest rate swaps | The following table summarizes the Trust’s interest rate swaps as of March 31, 2021, which effectively convert on month floating rate LIBOR to a fixed rate: Fixed Effective Date Notional Interest Rate Maturity Date November 1, 2019 $ 6,928 3.15% November 1, 2029 November 1, 2019 $ 4,814 3.28% November 1, 2029 January 10, 2020 $ 3,130 3.39% January 10, 2030 June 11, 2020 $ 1,568 3.07% June 15, 2030 June 11, 2020 $ 3,039 3.07% June 15, 2030 June 15, 2020 $ 1,700 2.94% June 15, 2030 June 15, 2020 $ 4,498 2.94% June 15, 2030 July 1, 2020 $ 4,931 2.79% June 10, 2030 December 2, 2020 $ 12,800 2.91% December 2, 2027 The following table summarizes the Trust’s interest rate swaps that were designated as cash flow hedges of interest rate risk: Number of Instruments Notional Interest Rate Derivatives March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 Interest rate swaps 9 9 $ 43,408 $ 43,613 |
Schedule of the estimated fair value of derivatives | Derivatives Derivatives designated as March 31, 2021 December 31, 2020 cash flow hedges: Balance Sheet Location Fair Value Balance Sheet Location Fair Value Interest rate swaps Other assets, net $ 921 Other assets, net $ — Interest rate swaps Accrued expenses and other liabilities $ 342 Accrued expenses and other liabilities $ 1,805 |
Schedule of the effect of the derivatives | Location of Gain Amount of (Gain)/Loss Reclassified from Amount of (Gain)/Loss Derivatives in Recognized in Other Accumulated other Reclassified from Cash Flow Hedging Comprehensive Income Comprehensive Income AOCI into Income Relationships on Derivatives (AOCI) into Income Three Months Ended 2021 2021 Interest rate swaps $ (2,384) Interest expense $ 115 2020 2020 Interest rate swaps $ 1,486 Interest expense $ 10 |
FAIR VALUE MEASUREMENT (Tables)
FAIR VALUE MEASUREMENT (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
FAIR VALUE MEASUREMENT | |
Carrying Value and Estimated Fair Value of Company's Financial Instruments | March 31, 2021 December 31, 2020 Carrying Carrying Value Fair Value Value Fair Value (in thousands) Financial assets: Note receivable $ 2,009 $ 2,091 $ 2,026 $ 2,117 Derivative assets $ 921 $ 921 $ — $ — Financial liabilities: Mortgage notes payable $ 427,069 $ 451,910 $ 423,111 $ 443,100 Derivative liabilities $ 342 $ 342 $ 1,805 $ 1,805 |
Schedule of Fair Value of Liabilities on Recurring Basis | Level 1 Level 2 Level 3 Total (in thousands) March 31, 2021 Derivative assets $ — $ 921 $ — $ 921 Derivative liabilities $ — $ 342 $ — $ 342 December 31, 2020 Derivative liabilities $ — $ 1,805 $ — $ 1,805 |
Fair Value of Company's Financial Assets and Liabilities | Level 1 Level 2 Level 3 Total (in thousands) March 31, 2021 Mortgage notes payable, net $ — $ — $ 451,910 $ 451,910 Note receivable $ — $ — $ 2,091 $ 2,091 December 31, 2020 Mortgage notes payable, net $ — $ — $ 443,100 $ 443,100 Note receivable $ — $ — $ 2,117 $ 2,117 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
LEASES | |
Schedule of Lease Income related to the Trust's Operating Leases | Lease income related to the Company’s operating leases is comprised of the following: Three months ended March 31, 2021 Residential Commercial Total (in thousands) Lease income related to fixed lease payments $ 24,834 $ 4,382 $ 29,216 Lease income related to variable lease payments — 1,094 1,094 Other (a) (135) 294 159 Lease Income (b) $ 24,699 $ 5,770 $ 30,469 Three months ended March 31, 2020 Residential Commercial Total (in thousands) Lease income related to fixed lease payments $ 23,203 $ 4,714 $ 27,917 Lease income related to variable lease payments — 1,261 1,261 Other (a) (257) (90) (347) Lease Income (b) $ 22,946 $ 5,885 $ 28,831 (a) For the three months ended March 31, 2021 and 2020, “Other” is comprised of revenue adjustments related to changes in collectibility and amortization of above and below market lease intangibles and lease inducements. (b) Excludes other rental income for the three months ended March 31, 2021 and 2020 of $1,291 and $1,075 , respectively, which is accounted for under the revenue recognition standard. |
Schedule of Future Minimum Rental Income | Years ending December 31, Amount (in thousands) 2021 (April 1, 2021 - December 31, 2021) $ 11,658 2022 14,789 2023 13,454 2024 12,737 2025 12,491 Thereafter 56,308 $ 121,437 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
RELATED PARTY TRANSACTIONS | |
Summary of Compensation Plan | Board Chairman – Board Meeting 105 shares/meeting Trustee – Board Meeting 75 shares/meeting Committee Chair – Committee Meeting 30 shares/meeting Trustee – Committee Meeting 30 shares/meeting |
Summary of Total Project Cost | Total Cost Fee Range of Fee Formula 0 – 10M 5.0 % 0 –.5M 0M – 5.0% x (TC – 0M) 10M - 20M 4.5 % .5 M – .95M .50M – 4.5% x (TC – 10M) 20M – 30M 4.0 % .95 M – 1.35M .95M – 4.0% x (TC – 20M) 30M – 40M 3.5 % 1.35 M – 1.70M 1.35M – 3.5% x (TC – 30M) 40M – 50M 3.0 % 1.70 M – 2.00M 1.70M – 3.0% x (TC – 40M) |
Schedule of fees incurred and payable to Advisor | March 31, 2021 March 31, 2020 March 31, 2021 December 31, 2020 Incurred Incurred Due and Due and Fee Fee Payable Payable (in thousands) Fee: Advisory $ 807 $ 765 $ 271 $ 278 Acquisition $ - $ 302 $ - $ - Disposition $ - $ 92 $ - $ 175 Financing $ 43 $ 25 $ 38 $ - Development $ - $ - $ 79 $ 79 Project Management $ 71 $ 17 $ - $ 51 |
DISPOSITIONS (Tables)
DISPOSITIONS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
DISPOSITIONS | |
Schedule of assets and liabilities held for sale | March 31, December 31, 2021 2020 (in thousands) ASSETS Real estate investments Land and land improvements $ 150 $ 150 Building and improvements 1,428 1,428 Real estate investments 1,578 1,578 Less accumulated depreciation (749) (749) Real estate investments, net 829 829 Other assets, net 1 2 Total Assets $ 830 $ 831 LIABILITIES Tenant security deposits payable $ 5 $ 5 Accrued expenses and other liabilities $ 12 $ — Total Liabilities $ 17 $ 5 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
ACQUISITIONS | |
Schedule of acquisitions | Date Property Name Location Property Type Units/ Square Footage/ Acres Acquisition Price 1/12/20 Wolf Creek Fargo, ND Apartment complex 54 units $ 4,968 1/31/20 Columbia Park Village Grand Forks, ND Apartment complex 12 units 612 3/1/20 Belmont East & West Bismarck, ND Apartment complex 26 units 1,494 3/1/20 Eastbrook Bismarck, ND Apartment complex 24 units 1,296 3/1/20 Hawn Fargo, ND Apartment complex 48 units 2,400 3/1/20 Rosser Bismarck, ND Apartment complex 24 units 1,296 $ 12,066 (a) (a) Acquisition price does not include capitalized closing costs and adjustments totaling $636 , special assessments assumed and capitalized of $168 or additional costs incurred due to difference in unit price of $26 . |
Schedule of acquisition date fair values, before prorations recorded in conjunction with acquisitions | Three Months Ended March 31, 2021 2020 Land, building, tenant improvements and FF&E $ - $ 12,896 Other liabilities - (265) Net assets acquired - 12,631 Equity/limited partnership unit consideration - (9,031) New loans - (3,225) Net cash consideration $ - $ 375 |
Organization - Additional Infor
Organization - Additional Information (Details) | Mar. 31, 2021 | Dec. 31, 2020 |
ORGANIZATION | ||
Ownership in operating partnership (as a percent) | 35.35% | 35.03% |
Principal Activity and Signif_4
Principal Activity and Significant Accounting Policies - Principles of Consolidation (Details) | Mar. 31, 2021 | Dec. 31, 2020 |
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES | ||
Ownership in operating partnership (as a percent) | 35.35% | 35.03% |
Principal Activity and Signif_5
Principal Activity and Significant Accounting Policies - Real Estate Investments (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Real Estate Investments | ||
Loss on impairment of property | $ 0 | $ 0 |
Building and improvements | ||
Real Estate Investments | ||
Estimated useful life | 40 years | |
Furniture and fixtures | Minimum | ||
Real Estate Investments | ||
Estimated useful life | 5 years | |
Furniture and fixtures | Maximum | ||
Real Estate Investments | ||
Estimated useful life | 9 years |
Principal Activity and Signif_6
Principal Activity and Significant Accounting Policies - Held for Sale, CIP and Unconsolidated Affiliates (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021USD ($)property | Mar. 31, 2020USD ($) | Dec. 31, 2020property | |
Significant Accounting Policies | |||
Impairment losses related to the unconsolidated affiliates | $ | $ 0 | $ 0 | |
Assets Held for Sale | |||
Significant Accounting Policies | |||
Number of real estate properties classified as held for sale | property | 1 | 1 |
Principal Activity and Signif_7
Principal Activity and Significant Accounting Policies - Federal Income Taxes (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES | |
Taxable income to be distributed | 90.00% |
Retainable taxable income | 10.00% |
Provisions or liabilities for income taxes | $ 0 |
Principal Activity and Signif_8
Principal Activity and Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenue Recognition | ||
(Decrease)/Increase in revenue due to straight - line adjustment | $ 105 | $ 65 |
Straight - line receivable | $ 3,117 | $ 3,012 |
Principal Activity and Signif_9
Principal Activity and Significant Accounting Policies - Earnings Per Common Share And Incurred But Not Reported Insurance Liability (Details) - shares | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Earnings per Common Share | ||
Dilutive potential common shares | 0 | 0 |
Denominators for the basic and diluted earnings per common share | 9,983,000 | 9,562,000 |
Segment Reporting - Additional
Segment Reporting - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2021segment | |
SEGMENT REPORTING | |
Number of reportable segments | 2 |
Segment Reporting - Summary of
Segment Reporting - Summary of Segment Revenues and Net Operating Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
SEGMENT REPORTING | ||
Income from rental operations | $ 31,760 | $ 29,906 |
Expenses from rental operations | 15,351 | 15,699 |
Net operating income | 16,409 | 14,207 |
Depreciation and amortization | 5,328 | 5,252 |
Interest | 4,287 | 4,350 |
Administration of REIT | 1,201 | 1,162 |
Other income | (243) | (1,784) |
Net (loss) income | 5,836 | 5,227 |
Residential | ||
SEGMENT REPORTING | ||
Income from rental operations | 25,959 | 23,995 |
Expenses from rental operations | 13,847 | 13,912 |
Net operating income | 12,112 | 10,083 |
Commercial | ||
SEGMENT REPORTING | ||
Income from rental operations | 5,801 | 5,911 |
Expenses from rental operations | 1,504 | 1,787 |
Net operating income | $ 4,297 | $ 4,124 |
Segment Reporting - Summary o_2
Segment Reporting - Summary of Segment Assets and Accumulated Depreciation (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 |
SEGMENT REPORTING | |||
Real estate investments | $ 848,090 | $ 845,288 | |
Accumulated depreciation | (165,200) | (160,575) | |
Real estate investments, net | 682,890 | 684,713 | |
Cash and cash equivalents | 13,888 | 11,716 | $ 4,295 |
Restricted deposits and funded reserves | 16,459 | 15,919 | $ 11,398 |
Investment in unconsolidated affiliates | 11,664 | 9,659 | |
Note receivable | 2,009 | 2,026 | |
Assets held for sale | 830 | 831 | |
Intangible assets, less accumulated amortization | 7,075 | 7,367 | |
Other assets, net | 10,449 | 10,798 | |
Total Assets | 745,264 | 743,029 | |
Residential | |||
SEGMENT REPORTING | |||
Real estate investments | 647,519 | 647,083 | |
Accumulated depreciation | (122,143) | (118,363) | |
Real estate investments, net | 525,376 | 528,720 | |
Commercial | |||
SEGMENT REPORTING | |||
Real estate investments | 200,571 | 198,205 | |
Accumulated depreciation | (43,057) | (42,212) | |
Real estate investments, net | $ 157,514 | $ 155,993 |
Restricted Deposits and Funde_3
Restricted Deposits and Funded Reserves - Summary of Restricted Deposits and Funded Reserves (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 |
RESTRICTED DEPOSITS AND FUNDED RESERVES | |||
Tenant security deposits | $ 4,885 | $ 4,730 | |
Real estate tax and insurance escrows | 1,158 | 2,058 | |
Replacement reserves | 2,094 | 2,137 | |
Other restricted escrows | 8,322 | 6,994 | |
Restricted deposits and funded reserves, Total | $ 16,459 | $ 15,919 | $ 11,398 |
Restricted Deposits and Funde_4
Restricted Deposits and Funded Reserves - Additional Information (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
RESTRICTED DEPOSITS AND FUNDED RESERVES | |
Percentage of monthly contributions of estimated real estate taxes and insurance premium | 0.083333 |
Insurance proceeds held in escrow | $ 1,324 |
Investment in Unconsolidated _2
Investment in Unconsolidated Affiliates - Total investments (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Schedule of Equity Method Investments [Line Items] | ||
Investment in unconsolidated affiliates | $ 11,664 | $ 9,659 |
Banner Building | ||
Schedule of Equity Method Investments [Line Items] | ||
Investment in unconsolidated affiliates | 59 | |
Grand Forks Market Place Retail Center | ||
Schedule of Equity Method Investments [Line Items] | ||
Investment in unconsolidated affiliates | 2,429 | |
SE Savage, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Investment in unconsolidated affiliates | 3,168 | |
SE Maple Grove, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Investment in unconsolidated affiliates | 2,942 | |
SE Rogers | ||
Schedule of Equity Method Investments [Line Items] | ||
Investment in unconsolidated affiliates | $ 3,066 | |
Operating Partnership | Banner Building | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 66.67% | |
Operating Partnership | Grand Forks Market Place Retail Center | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 50.00% | |
Operating Partnership | SE Savage, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 60.00% | |
Operating Partnership | SE Maple Grove, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 60.00% | |
Operating Partnership | SE Rogers | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 60.00% |
Investment in Unconsolidated _3
Investment in Unconsolidated Affiliates - Additional Information (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021USD ($)ft²property | Dec. 31, 2020USD ($) | |
Schedule of Equity Method Investments [Line Items] | ||
Assets | $ 745,264 | $ 743,029 |
SE Savage, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Assets | 32,133 | 27,015 |
SE Maple Grove, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Assets | 18,331 | 13,106 |
SE Rogers | ||
Schedule of Equity Method Investments [Line Items] | ||
Assets | $ 5,761 | 4,161 |
Operating Partnership | Grand Forks Market Place Retail Center | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 50.00% | |
Percentage of interest | 100.00% | |
Area of commercial property | ft² | 183,000 | |
Mortgage carrying amount | $ 9,975 | 10,036 |
Operating Partnership | Banner Building | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 66.67% | |
Area of commercial property | ft² | 75,000 | |
Mortgage carrying amount | $ 6,181 | 6,232 |
Operating Partnership | SE Savage, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 60.00% | |
Number of units | property | 190 | |
Cash contribution | $ 2,077 | |
Development project budget | 37,800 | |
Development project cost incurred | 29,117 | |
Mortgage balance | $ 24,786 | 19,436 |
Operating Partnership | SE Maple Grove, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 60.00% | |
Number of units | ft² | 160 | |
Cash contribution | $ 2,975 | |
Development project budget | 33,000 | |
Development project cost incurred | 16,242 | |
Mortgage balance | $ 11,335 | 5,710 |
Operating Partnership | SE Rogers | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest (as a percent) | 60.00% | |
Number of units | ft² | 165 | |
Cash contribution | $ 3,089 | |
Development project budget | 34,300 | |
Development project cost incurred | 5,478 | |
Mortgage balance | $ 0 | $ 0 |
Investment in Unconsolidated _4
Investment in Unconsolidated Affiliates - Summary of financial position (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
ASSETS | ||||
Real estate investments | $ 848,090 | $ 845,288 | ||
Accumulated depreciation | (165,200) | (160,575) | ||
Real estate investments, net | 682,890 | 684,713 | ||
Cash and cash equivalents | 13,888 | 11,716 | $ 4,295 | |
Restricted deposits and funded reserves | 16,459 | 15,919 | 11,398 | |
Other assets, net | 10,449 | 10,798 | ||
Total Assets | 745,264 | 743,029 | ||
LIABILITIES | ||||
Mortgage notes payable, net | 425,164 | 421,278 | ||
Tenant security deposits payable | 5,084 | 4,908 | ||
Accrued expenses and other liabilities | 12,716 | 16,869 | ||
Total Liabilities | 451,405 | 451,501 | ||
SHAREHOLDERS' EQUITY | ||||
Total Shareholders' Equity | 293,859 | 291,528 | $ 286,011 | $ 279,047 |
Total liabilities and shareholders' equity | 745,264 | 743,029 | ||
Unconsolidated Affiliates | ||||
ASSETS | ||||
Real estate investments | 86,983 | 74,991 | ||
Accumulated depreciation | (9,939) | (9,692) | ||
Real estate investments, net | 77,044 | 65,299 | ||
Cash and cash equivalents | 282 | 249 | ||
Restricted deposits and funded reserves | 192 | 384 | ||
Other assets, net | 296 | 180 | ||
Total Assets | 77,814 | 66,112 | ||
LIABILITIES | ||||
Mortgage notes payable, net | 51,016 | 41,405 | ||
Tenant security deposits payable | 17 | 2 | ||
Accrued expenses and other liabilities | 6,543 | 6,533 | ||
Total Liabilities | 57,576 | 47,940 | ||
SHAREHOLDERS' EQUITY | ||||
Total Shareholders' Equity | 20,238 | 18,172 | ||
Total liabilities and shareholders' equity | $ 77,814 | $ 66,112 |
Investment in Unconsolidated _5
Investment in Unconsolidated Affiliates - Summary of results of operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Schedule of Equity Method Investments [Line Items] | ||
Income from rental operations | $ 31,760 | $ 29,906 |
Expenses from rental operations | 24,966 | 25,301 |
Income from operations | 5,593 | 3,443 |
Depreciation and amortization | 5,328 | 5,252 |
Interest | 4,287 | 4,350 |
Net (loss) income | 5,836 | 5,227 |
Unconsolidated Affiliates | ||
Schedule of Equity Method Investments [Line Items] | ||
Income from rental operations | 880 | 963 |
Expenses from rental operations | 234 | 259 |
Income from operations | 646 | 704 |
Depreciation and amortization | 247 | 171 |
Interest | 417 | 244 |
Net (loss) income | $ (18) | $ 289 |
Lease Intangibles - Schedule of
Lease Intangibles - Schedule of Intangible Assets and Liabilities and Accumulated Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Intangible Assets | |||
Lease Intangibles | $ 21,582 | $ 22,386 | |
Accumulated Amortization | (14,507) | (15,019) | |
Total | 7,075 | 7,367 | |
Amortization of Intangible Assets | 315 | $ 380 | |
Intangible Liabilities | |||
Below-market lease | (2,881) | (2,957) | |
Below-market lease, accumulated amortization | 1,934 | 1,963 | |
Below-market lease, net | (947) | (994) | |
Amortization of Below Market Lease | 47 | 56 | |
In-place leases | |||
Intangible Assets | |||
Lease Intangibles | 18,965 | 19,768 | |
Accumulated Amortization | (13,177) | (13,727) | |
Total | 5,788 | 6,041 | |
Amortization of Intangible Assets | 253 | 341 | |
Above-market leases | |||
Intangible Assets | |||
Lease Intangibles | 2,617 | 2,618 | |
Accumulated Amortization | (1,330) | (1,292) | |
Total | 1,287 | $ 1,326 | |
Amortization of Intangible Assets | $ 39 | $ 52 |
Lease Intangibles - Schedule _2
Lease Intangibles - Schedule of Estimated Aggregate Amortization Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Intangible Assets | ||
2021 (April 1, 2021 - December 31, 2021) | $ 829 | |
2022 | 987 | |
2023 | 849 | |
2024 | 849 | |
2025 | 849 | |
Thereafter | 2,712 | |
Total | 7,075 | $ 7,367 |
Intangible Liabilities | ||
2021 (April 1, 2021 - December 31, 2021) | 137 | |
2022 | 164 | |
2023 | 151 | |
2024 | 151 | |
2025 | 151 | |
Thereafter | 193 | |
Total | $ 947 | $ 994 |
Amortization period | 7 years 2 months 12 days |
Lines of Credit - Additional In
Lines of Credit - Additional Information (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($)item | |
Wells Fargo Bank | |
Lines of Credit | |
Agreed line of credit | $ 18,300 |
Expiration date | Jun. 1, 2021 |
Wells Fargo Bank | 1-Month LIBOR | |
Lines of Credit | |
Variable interest rate of line of credit | 2.25% |
Bremer Bank | |
Lines of Credit | |
Unused line of credit | $ 27,469 |
Bremer Bank Agreement One | |
Lines of Credit | |
Agreed line of credit | $ 4,915 |
Expiration date | Jun. 1, 2022 |
Number of letters of credit secured | item | 2 |
Letters of credit total | $ 746 |
Bremer Bank Agreement One | LIBOR | |
Lines of Credit | |
Variable interest rate of line of credit | 2.00% |
Bremer Bank Agreement Two | |
Lines of Credit | |
Agreed line of credit | $ 5,000 |
Expiration date | Jun. 1, 2022 |
Bremer Bank Agreement Two | Floating LIBOR | |
Lines of Credit | |
Variable interest rate of line of credit | 2.00% |
Mortgage Notes Payable - Summar
Mortgage Notes Payable - Summary (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021USD ($)loanitem | Mar. 31, 2020USD ($)loan | Dec. 31, 2020USD ($)item | |
MORTGAGE NOTES PAYABLE | |||
Long-term debt, gross | $ 427,068 | ||
Mortgage Notes Payable | |||
MORTGAGE NOTES PAYABLE | |||
Long-term debt, gross | 427,068 | $ 423,111 | |
Less unamortized debt issuance costs | 1,904 | 1,833 | |
Long-term debt, net | 425,164 | 421,278 | |
Fixed rate mortgage notes payable | |||
MORTGAGE NOTES PAYABLE | |||
Long-term debt, gross | 419,700 | 415,665 | |
Fixed rate mortgage notes payable | Mortgage Notes Payable | |||
MORTGAGE NOTES PAYABLE | |||
Debt swapped from variable to fixed rate | $ 43,408 | $ 43,613 | |
Number of mortgage loans | item | 107 | 114 | |
Fixed rate mortgage notes payable | Mortgage Notes Payable | Minimum | |||
MORTGAGE NOTES PAYABLE | |||
Effective interest rate (as a percent) | 2.11% | 2.14% | |
Fixed rate mortgage notes payable | Mortgage Notes Payable | Maximum | |||
MORTGAGE NOTES PAYABLE | |||
Effective interest rate (as a percent) | 6.85% | 6.85% | |
Fixed rate mortgage notes payable | Mortgage Notes Payable | Weighted Average | |||
MORTGAGE NOTES PAYABLE | |||
Effective interest rate (as a percent) | 4.01% | 4.03% | |
Variable rate mortgage notes payable | |||
MORTGAGE NOTES PAYABLE | |||
Long-term debt, gross | $ 7,368 | $ 7,446 | |
Variable rate mortgage notes payable | Mortgage Notes Payable | |||
MORTGAGE NOTES PAYABLE | |||
Number of mortgage loans | loan | 2 | 2 | |
Variable rate mortgage notes payable | Mortgage Notes Payable | Weighted Average | |||
MORTGAGE NOTES PAYABLE | |||
Effective interest rate (as a percent) | 2.25% | 2.28% |
Mortgage Notes Payable - Schedu
Mortgage Notes Payable - Scheduled Maturities of Mortgage Notes Payable (Details) $ in Thousands | Mar. 31, 2021USD ($) |
MORTGAGE NOTES PAYABLE | |
2021 (April 1, 2021 - December 31, 2021) | $ 15,835 |
2022 | 27,109 |
2023 | 50,417 |
2024 | 19,421 |
2025 | 51,057 |
Thereafter | 263,229 |
Total payments | $ 427,068 |
Derivatives and Hedging Activ_3
Derivatives and Hedging Activities - Other (Details) - Interest rate swaps $ in Thousands | Mar. 31, 2021USD ($)instrument | Dec. 31, 2020instrument |
Derivatives and Hedging Activities | ||
Estimated amount to be reclassified over the next 9 months, as a increase to interest expense | $ | $ 269 | |
Designated as Hedging Instrument | Cash Flow Hedging | ||
Derivatives and Hedging Activities | ||
Number of instruments | instrument | 9 | 9 |
Derivatives and Hedging Activ_4
Derivatives and Hedging Activities - Summary (Details) - Designated as Hedging Instrument - Cash Flow Hedging $ in Thousands | 3 Months Ended | |
Mar. 31, 2021USD ($)instrument | Dec. 31, 2020USD ($)instrument | |
Interest rate swaps | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 43,408 | $ 43,613 |
Number of instruments | instrument | 9 | 9 |
Interest Rate Swap, November 2029 | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 6,928 | |
Fixed interest rate (as a percent) | 3.15% | |
Derivative maturity date | Nov. 1, 2029 | |
Interest Rate Swap, November 2029 | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 4,814 | |
Fixed interest rate (as a percent) | 3.28% | |
Derivative maturity date | Nov. 1, 2029 | |
Interest Rate Swap, January 2030 | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 3,130 | |
Fixed interest rate (as a percent) | 3.39% | |
Derivative maturity date | Jan. 10, 2030 | |
Interest Rate Swap, June 2030 | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 1,568 | |
Fixed interest rate (as a percent) | 3.07% | |
Derivative maturity date | Jun. 15, 2030 | |
Interest Rate Swap, June 2030 | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 3,039 | |
Fixed interest rate (as a percent) | 3.07% | |
Derivative maturity date | Jun. 15, 2030 | |
Interest Rate Swap, June 2030 | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 1,700 | |
Fixed interest rate (as a percent) | 2.94% | |
Derivative maturity date | Jun. 15, 2030 | |
Interest Rate Swap, June 2030 | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 4,498 | |
Fixed interest rate (as a percent) | 2.94% | |
Derivative maturity date | Jun. 15, 2030 | |
Interest Rate Swap, June 2030 | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 4,931 | |
Fixed interest rate (as a percent) | 2.79% | |
Derivative maturity date | Jun. 10, 2030 | |
Interest Rate Swap, December 2027 | ||
Derivatives and Hedging Activities | ||
Notional amount | $ 12,800 | |
Fixed interest rate (as a percent) | 2.91% | |
Derivative maturity date | Dec. 2, 2027 |
Derivatives and Hedging Activ_5
Derivatives and Hedging Activities - Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Other assets, net | ||
Derivatives and Hedging Activities | ||
Fair value, derivative assets | $ 921 | |
Accrued expenses and other liabilities | ||
Derivatives and Hedging Activities | ||
Fair value, derivative liabilities | $ 342 | $ 1,805 |
Derivatives and Hedging Activ_6
Derivatives and Hedging Activities - Gain/Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Derivatives and Hedging Activities | ||
Amount of (Gain)/Loss Recognized in Other Comprehensive Income on Derivatives | $ (2,384) | $ 1,486 |
Interest expense | ||
Derivatives and Hedging Activities | ||
Amount of (Gain)/Loss Reclassified from AOCI into income | 115 | 10 |
Interest rate swaps | ||
Derivatives and Hedging Activities | ||
Amount of (Gain)/Loss Recognized in Other Comprehensive Income on Derivatives | $ (2,384) | $ 1,486 |
Derivatives and Hedging Activ_7
Derivatives and Hedging Activities - Credit-Risk Related Contingent Features (Details) $ in Thousands | Mar. 31, 2021USD ($) |
Credit-risk-related Contingent Features | |
Termination value of interest rate derivatives in liability position | $ 342 |
Fair Value Measurement - Carryi
Fair Value Measurement - Carrying Value and Estimated Fair Value of Company's Financial Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Carrying Value | ||
Financial assets: | ||
Note receivable | $ 2,009 | $ 2,026 |
Derivative assets | 921 | |
Financial liabilities: | ||
Mortgage notes payable | 427,069 | 423,111 |
Derivative liabilities | 342 | 1,805 |
Fair Value | ||
Financial assets: | ||
Note receivable | 2,091 | 2,117 |
Derivative assets | 921 | |
Financial liabilities: | ||
Mortgage notes payable | 451,910 | 443,100 |
Derivative liabilities | $ 342 | $ 1,805 |
Fair Value Measurement - Schedu
Fair Value Measurement - Schedule of Fair Value of Assets on Recurring Basis (Details) - Recurring - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value Measurements | ||
Derivative assets | $ 921 | |
Derivative liabilities | 342 | $ 1,805 |
Level 2 | ||
Fair Value Measurements | ||
Derivative assets | 921 | |
Derivative liabilities | $ 342 | $ 1,805 |
Fair Value Measurement - Fair V
Fair Value Measurement - Fair Value of Company's Financial Assets and Liabilities (Details) - Fair Value - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value Measurements | ||
Mortgage notes payable, net | $ 451,910 | $ 443,100 |
Note receivable | 2,091 | 2,117 |
Level 3 | ||
Fair Value Measurements | ||
Mortgage notes payable, net | 451,910 | 443,100 |
Note receivable | $ 2,091 | $ 2,117 |
Fair Value Measurement - Additi
Fair Value Measurement - Additional Information (Details) | Mar. 31, 2021 | Dec. 31, 2020 |
Minimum | ||
Fair Value Disclosures | ||
Discount rates used to estimate fair value of mortgages and notes payable | 3.05 | 3.25 |
Maximum | ||
Fair Value Disclosures | ||
Discount rates used to estimate fair value of mortgages and notes payable | 3.15 | 3.35 |
Measurement Input, Discount Rate | Minimum | ||
Fair Value Disclosures | ||
Discount rates used to estimate fair value of notes receivable | 3.05 | 3.25 |
Measurement Input, Discount Rate | Maximum | ||
Fair Value Disclosures | ||
Discount rates used to estimate fair value of notes receivable | 3.15 | 3.35 |
Noncontrolling Interest of Un_2
Noncontrolling Interest of Unitholders in Operating Partnership - Additional Information (Details) $ / shares in Units, $ in Thousands | Mar. 31, 2021USD ($)shares | Mar. 31, 2020USD ($) | Mar. 31, 2021item$ / sharesshares | Mar. 31, 2020$ / sharesshares | Dec. 31, 2020shares |
Noncontrolling Interest | |||||
Distributions per unit | $ / shares | $ 0.2650 | $ 0.2647 | |||
Maximum | |||||
Noncontrolling Interest | |||||
Number of permitted exchange requests in a calendar year | item | 2 | ||||
Limited Partnership | |||||
Noncontrolling Interest | |||||
Total units | 18,246,000 | 18,246,000 | 18,279,000 | ||
Units converted by limited partners into common shares | 0 | 0 | |||
Total units | 1 | ||||
Limited Partnership | Minimum | |||||
Noncontrolling Interest | |||||
Number of units which can be redeemed in single redemption | 1,000 | ||||
Operating Partnership | |||||
Noncontrolling Interest | |||||
Declared distributions | $ | $ 4,835 | $ 4,831 |
Redemption Plans - Additional I
Redemption Plans - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands | Jan. 01, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 |
Redemption plans | ||||
Redemption of shares, value | $ 1,405 | $ 1,237 | ||
Redemption Plans | ||||
Redemption plans | ||||
Amount of securities redemption | 40,000 | |||
Remaining securities to be redeemed | $ 5,920 | |||
Redemption price of securities | $ 19 | $ 18.25 | ||
Redemption of shares | 41,000 | 38,000 | ||
Redemption of shares, value | $ 777 | $ 696 | ||
Additional redemption of units | 33,000 | 30,000 | ||
Additional redemption of units, value | $ 628 | $ 541 |
Beneficial Interest - Additiona
Beneficial Interest - Additional Information (Details) - $ / shares | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Beneficial Interest | |||
Common shares, outstanding | 9,968,000 | 9,855,000 | |
Preferred shares, outstanding | 0 | 0 | |
Dividends paid | $ 0.2650 | $ 0.2647 | |
Total Beneficial Interest | |||
Beneficial Interest | |||
Common shares, authorized | 100,000,000 | ||
Common shares, par value | $ 0.01 | ||
Preferred shares, authorized | 50,000,000 | ||
Preferred shares, par value | $ 0.01 |
Dividend Reinvestment Plan - Ad
Dividend Reinvestment Plan - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
DIVIDEND REINVESTMENT PLAN | |||
Estimated value per common share | $ 20 | $ 19.25 | |
Purchase price per common share for dividend reinvestments | 19 | 18.29 | |
Purchase price per common share additional optional cash purchases | $ 20 | $ 19.25 | |
Notice period to participants | 10 days | ||
Shares issued pursuant to dividend reinvestments | 89,000 | 87,000 | |
Shares issued pursuant to additional optional cash purchases under the plan | 65,000 | 62,000 | |
Value of shares issued pursuant to dividend reinvestments | $ 1,686 | $ 1,584 | |
Value of shares issued pursuant to additional optional cash purchases under the plan | $ 1,307 | $ 1,203 |
Leases - Other (Details)
Leases - Other (Details) | Mar. 31, 2021 |
Residential | |
Revenue from leases | |
Percentage of revenue from leases that are generally for terms of one year or less | 82.00% |
Commercial | |
Revenue from leases | |
Percentage of revenue from leases primarily under long-term lease agreements | 18.00% |
Leases - Lease Income (Details)
Leases - Lease Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Lease income: | ||
Lease income related to fixed lease payments | $ 29,216 | $ 27,917 |
Lease income related to variable lease payments | 1,094 | 1,261 |
Other | 159 | (347) |
Lease income | 30,469 | 28,831 |
Rental income accounted for under revenue recognition standard: | ||
Other rental income | 1,291 | 1,075 |
Residential | ||
Lease income: | ||
Lease income related to fixed lease payments | 24,834 | 23,203 |
Other | (135) | (257) |
Lease income | 24,699 | 22,946 |
Commercial | ||
Lease income: | ||
Lease income related to fixed lease payments | 4,382 | 4,714 |
Lease income related to variable lease payments | 1,094 | 1,261 |
Other | 294 | (90) |
Lease income | $ 5,770 | $ 5,885 |
Leases - Future minimum rental
Leases - Future minimum rental income (Details) $ in Thousands | Mar. 31, 2021USD ($) |
Future minimum rental income: | |
2021 (April 1, 2021 - December 31, 2021) | $ 11,658 |
2022 | 14,789 |
2023 | 13,454 |
2024 | 12,737 |
2025 | 12,491 |
Thereafter | 56,308 |
Total | $ 121,437 |
Related Party Transactions - Pr
Related Party Transactions - Property Management and Board of Trustee Fees (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Related Party Transactions | |||
Trustee fees | $ 15 | $ 20 | |
Unpaid board of trustee fees | 42 | $ 27 | |
GOLDMARK Property Management | |||
Related Party Transactions | |||
Management fee, amount paid | $ 3,064 | $ 3,311 | |
Management fees paid expressed as a percentage of net collected rents | 5.00% | 5.00% | |
Repair and maintenance related payroll and payroll related expenses | $ 1,696 | $ 1,627 | |
Board Chairman - Board Meeting | |||
Related Party Transactions | |||
Shares received by board members per meeting | 105 | ||
Trustee - Board Meeting | |||
Related Party Transactions | |||
Shares received by board members per meeting | 75 | ||
Committee Chair - Committee Meeting | |||
Related Party Transactions | |||
Shares received by board members per meeting | 30 | ||
Trustee - Committee Meeting | |||
Related Party Transactions | |||
Shares received by board members per meeting | 30 |
Related Party Transactions - Ad
Related Party Transactions - Advisory Agreement and Other (Details) $ / item in Thousands | Nov. 01, 2020policy | Mar. 31, 2021USD ($)employee$ / itemshares | Mar. 31, 2020USD ($)policyshares | Dec. 31, 2020USD ($) |
Related Party Transactions | ||||
Number of paid employees | employee | 0 | |||
Management fee percentage of total assets | 0.35% | |||
Maximum management fee payable in cash or common shares | not to exceed one-twelfth of 0.35% of the total assets | |||
Percentage of project management fee | 6.00% | |||
Number of operating partnership (OP) units issued in connection with the acquisition of various properties | shares | 0 | |||
Rental income | $ 29,216,000 | $ 27,917,000 | ||
Costs and expenditures incurred due to construction in progress | 174,000 | 0 | ||
Operational liabilities outstanding | $ 121,000 | $ 684,000 | ||
Advisory Agreement | ||||
Related Party Transactions | ||||
Business acquisition purchase price allocation acquisition fees percentage | 2.50% | |||
Advisory disposition fee for sale of investments | 2.50% | |||
Advisory disposition fee sale of cap amount | $ / item | 375 | |||
Financing fee percentage | 0.25% | |||
Finance fee capped per loan | $ 38,000 | |||
Development fee cap (as a percent) | 2.50% | |||
Development fee cap amount | $ 20,000,000 | |||
Development fee cap amount if Advisor shares responsibility | $ 500,000 | |||
Advisory Agreement | Minimum | ||||
Related Party Transactions | ||||
Fee | 3.00% | |||
Advisor's development fee, after adjustment of charges (as a percent) | 2.50% | |||
Advisory Agreement | Maximum | ||||
Related Party Transactions | ||||
Criteria acquisition fees | $ / item | 375 | |||
Acquisition fees and expenses net percentage | 6.00% | |||
Fee | 5.00% | |||
Advisory Agreement | 0 - 10M | ||||
Related Party Transactions | ||||
Fee | 5.00% | |||
Formula | 0M – 5.0% x (TC – 0M) | |||
Advisory Agreement | 0 - 10M | Minimum | ||||
Related Party Transactions | ||||
Total Cost | $ 0 | |||
Range of Fee | 0 | |||
Advisory Agreement | 0 - 10M | Maximum | ||||
Related Party Transactions | ||||
Total Cost | 10,000,000 | |||
Range of Fee | $ 500,000 | |||
Advisory Agreement | 10M - 20M | ||||
Related Party Transactions | ||||
Fee | 4.50% | |||
Formula | .50M – 4.5% x (TC – 10M) | |||
Advisory Agreement | 10M - 20M | Minimum | ||||
Related Party Transactions | ||||
Total Cost | $ 10,000,000 | |||
Range of Fee | 500,000 | |||
Advisory Agreement | 10M - 20M | Maximum | ||||
Related Party Transactions | ||||
Total Cost | 20,000,000 | |||
Range of Fee | $ 950,000 | |||
Advisory Agreement | 20M - 30M | ||||
Related Party Transactions | ||||
Fee | 4.00% | |||
Formula | .95M – 4.0% x (TC – 20M) | |||
Advisory Agreement | 20M - 30M | Minimum | ||||
Related Party Transactions | ||||
Total Cost | $ 20,000,000 | |||
Range of Fee | 950,000 | |||
Advisory Agreement | 20M - 30M | Maximum | ||||
Related Party Transactions | ||||
Total Cost | 30,000,000 | |||
Range of Fee | $ 1,350,000 | |||
Advisory Agreement | 30M - 40M | ||||
Related Party Transactions | ||||
Fee | 3.50% | |||
Formula | 1.35M – 3.5% x (TC – 30M) | |||
Advisory Agreement | 30M - 40M | Minimum | ||||
Related Party Transactions | ||||
Total Cost | $ 30,000,000 | |||
Range of Fee | 1,350,000 | |||
Advisory Agreement | 30M - 40M | Maximum | ||||
Related Party Transactions | ||||
Total Cost | 40,000,000 | |||
Range of Fee | $ 1,700,000 | |||
Advisory Agreement | 40M - 50M | ||||
Related Party Transactions | ||||
Fee | 3.00% | |||
Formula | 1.70M – 3.0% x (TC – 40M) | |||
Advisory Agreement | 40M - 50M | Minimum | ||||
Related Party Transactions | ||||
Total Cost | $ 40,000,000 | |||
Range of Fee | 1,700,000 | |||
Advisory Agreement | 40M - 50M | Maximum | ||||
Related Party Transactions | ||||
Total Cost | 50,000,000 | |||
Range of Fee | 2,000,000 | |||
Sterling Management, LLC | ||||
Related Party Transactions | ||||
Advisory management fees | 807,000 | 765,000 | ||
Advisory management fees outstanding | 271,000 | 278,000 | ||
Acquisition fees | 302,000 | |||
Disposition fees | 92,000 | |||
Disposition fees outstanding | 175,000 | |||
Financing fees | 43,000 | 25,000 | ||
Financing fees outstanding | 38,000 | |||
Development fees outstanding | 79,000 | 79,000 | ||
Project management fee | 71,000 | 17,000 | ||
Project management fee outstanding | 51,000 | |||
Rental income | 22,000 | 21,000 | ||
GOLDMARK Property Management | ||||
Related Party Transactions | ||||
Rental income | 67,000 | 67,000 | ||
GOLDMARK SCHLOSSMAN Commercial Real Estate Services | ||||
Related Party Transactions | ||||
Real estate commissions outstanding | 0 | 0 | ||
Rental income | 14,000 | $ 14,000 | ||
Entity Affiliated With Messrs Regan and Wieland | ||||
Related Party Transactions | ||||
Number of operating partnership (OP) units issued in connection with the acquisition of various properties | shares | 176,000 | |||
Value of operating partnership (OP) units issued in connection with the acquisition of various properties | $ 3,373,000 | |||
Bell Bank | ||||
Related Party Transactions | ||||
Rental income | 122,000 | 120,000 | ||
Outstanding on principal loans | 67,935,000 | $ 51,915,000 | ||
Interest expense incurred | 587,000 | 514,000 | ||
Accrued interest | 123,000 | $ 121,000 | ||
Number of policies obtained | policy | 1 | 0 | ||
Total premiums paid | $ 113,000 |
Dispositions - Additional Infor
Dispositions - Additional Information (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021property | Mar. 31, 2020USD ($)property | Dec. 31, 2020property | |
Dispositions | |||
Number of dispositions | 0 | ||
Gain on sale of real estate | $ | $ 1,455 | ||
Assets Held for Sale | |||
Dispositions | |||
Number of real estate properties classified as held for sale | 1 | 1 | |
Retail Property, Apple Valley, MN | Disposed of by Sale | |||
Dispositions | |||
Number of dispositions | 1 | ||
Disposal of property | $ | $ 3,670 | ||
Gain on sale of real estate | $ | $ 1,455 | ||
Retail Property, Waite Park, Minnesota | Assets Held for Sale | |||
Dispositions | |||
Number of real estate properties classified as held for sale | 1 | 1 |
Dispositions - Assets and Liabi
Dispositions - Assets and Liabilities Classified as Held for Sale (Details) - Assets Held for Sale - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Real estate investments | ||
Land and land improvements | $ 150 | $ 150 |
Building and improvements | 1,428 | 1,428 |
Real estate investments, net | 1,578 | 1,578 |
Less accumulated depreciation | (749) | (749) |
Real estate investments, net | 829 | 829 |
Other assets, net | 1 | 2 |
Total Assets | 830 | 831 |
LIABILITIES | ||
Tenant security deposits payable | 5 | 5 |
Accrued expenses and other liabilities | 12 | |
Total Liabilities | $ 17 | $ 5 |
Acquisitions - Purchases, Prior
Acquisitions - Purchases, Prior Year (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021item | Mar. 31, 2020USD ($)item$ / sharesshares | |
BUSINESS COMBINATIONS AND ACQUISITIONS | ||
Acquisition price | $ 12,066 | |
Capitalized closing costs and adjustments | 636 | |
Special assessments | 168 | |
Additional costs due to difference in unit price | $ 26 | |
Number of acquisitions | item | 0 | |
Aggregate number of limited partnership units issued for acquisition | shares | 469,000 | |
Price per limited partnership unit issued for acquisition, price one | $ / shares | $ 19.25 | |
Aggregate value of limited partnership units issued for acquisition | $ 9,031 | |
Assumed liabilities | 265 | |
Mortgage loan | 3,225 | |
Consideration in cash to pay for acquisitions | $ 375 | |
Wolf Creek, Fargo, ND | ||
BUSINESS COMBINATIONS AND ACQUISITIONS | ||
Units acquired | item | 54 | |
Acquisition price | $ 4,968 | |
Columbia Park Village, Grand Forks, ND | ||
BUSINESS COMBINATIONS AND ACQUISITIONS | ||
Units acquired | item | 12 | |
Acquisition price | $ 612 | |
Belmont East & West, Bismarck, ND | ||
BUSINESS COMBINATIONS AND ACQUISITIONS | ||
Units acquired | item | 26 | |
Acquisition price | $ 1,494 | |
Eastbrook, Bismarck, ND | ||
BUSINESS COMBINATIONS AND ACQUISITIONS | ||
Units acquired | item | 24 | |
Acquisition price | $ 1,296 | |
Hawn, Fargo, ND | ||
BUSINESS COMBINATIONS AND ACQUISITIONS | ||
Units acquired | item | 48 | |
Acquisition price | $ 2,400 | |
Rosser, Bismarck, ND | ||
BUSINESS COMBINATIONS AND ACQUISITIONS | ||
Units acquired | item | 24 | |
Acquisition price | $ 1,296 |
Acquisitions - Summary of Acqui
Acquisitions - Summary of Acquisition Date Fair Values (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Acquisition date fair values | |
Net cash consideration | $ 375 |
Nonrecurring | Real Estate Property Acquisitions 2020 | |
Acquisition date fair values | |
Land, building, tenant improvements and FF&E | 12,896 |
Other liabilities | (265) |
Net assets acquired | 12,631 |
Equity/limited partnership unit consideration | (9,031) |
New loans | (3,225) |
Net cash consideration | $ 375 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 28, 2021 | Apr. 15, 2021 | Mar. 31, 2021 | Mar. 31, 2020 |
Subsequent Events | ||||
Dividend or distribution paid | $ 0.2650 | $ 0.2647 | ||
Subsequent Events | ||||
Subsequent Events | ||||
Dividend or distribution paid | $ 0.265 | |||
Subsequent Events | Retail Property, Waite Park, Minnesota | Disposed of by Sale | ||||
Subsequent Events | ||||
Proceeds from sale of real estate investments | $ 900 |