Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 05, 2020 | |
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Entity Registrant Name | Cole Office & Industrial REIT (CCIT III), Inc. | |
Entity Current Report Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Amendment Flag | false | |
Entity Central Index Key | 0001614976 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Class A Common Stock | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 2,500,000 | |
Class T Common Stock | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 709,000 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Real estate assets: | ||
Land | $ 3,245,003 | $ 3,245,003 |
Buildings and improvements | 41,258,770 | 41,258,770 |
Intangible lease assets | 5,101,432 | 5,101,432 |
Total real estate assets, at cost | 49,605,205 | 49,605,205 |
Less: accumulated depreciation and amortization | (7,169,731) | (5,735,541) |
Total real estate assets, net | 42,435,474 | 43,869,664 |
Cash and cash equivalents | 2,793,214 | 1,206,262 |
Rents and tenant receivables | 979,645 | 1,112,208 |
Prepaid expenses and other assets | 99,845 | 54,716 |
Deferred costs, net | 0 | 56,689 |
Total assets | 46,308,178 | 46,299,539 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
Credit facility, net | 25,597,242 | 24,175,000 |
Accrued expenses and accounts payable | 540,140 | 628,747 |
Due to affiliates | 64,015 | 110,872 |
Distributions payable | 99,566 | 132,145 |
Deferred rental income | 221,491 | 217,149 |
Total liabilities | 26,522,454 | 25,263,913 |
Commitments and contingencies | ||
STOCKHOLDERS’ EQUITY | ||
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding | 0 | 0 |
Capital in excess of par value | 28,703,712 | 28,707,032 |
Accumulated distributions in excess of earnings | (8,950,176) | (7,703,609) |
Total stockholders’ equity | 19,785,724 | 21,035,626 |
Total liabilities and stockholders’ equity | 46,308,178 | 46,299,539 |
Class A Common Stock | ||
STOCKHOLDERS’ EQUITY | ||
Common stock | 25,093 | 24,974 |
Class T Common Stock | ||
STOCKHOLDERS’ EQUITY | ||
Common stock | $ 7,095 | $ 7,229 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 245,000,000 | 245,000,000 |
Common stock, shares issued (in shares) | 2,509,336 | 2,504,629 |
Common stock, shares outstanding (in shares) | 2,509,336 | 2,504,629 |
Class T Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 245,000,000 | 245,000,000 |
Common stock, shares issued (in shares) | 709,477 | 722,873 |
Common stock, shares outstanding (in shares) | 709,477 | 722,873 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues: | ||||
Rental and other property income | $ 1,109,708 | $ 1,113,311 | $ 3,322,591 | $ 3,353,381 |
Operating expenses: | ||||
General and administrative | 213,017 | 246,998 | 625,865 | 727,017 |
Property operating | 7,073 | 8,273 | 21,552 | 27,243 |
Real estate tax | 131,121 | 133,036 | 385,705 | 411,931 |
Merger-related | 416,912 | 0 | 416,912 | 0 |
Depreciation and amortization | 478,063 | 478,063 | 1,434,190 | 1,434,190 |
Total operating expenses | 1,246,186 | 866,370 | 2,884,224 | 2,600,381 |
Operating (expense) income | (136,478) | 246,941 | 438,367 | 753,000 |
Other expense: | ||||
Interest expense and other, net | (179,872) | (404,797) | (618,529) | (1,261,064) |
Net loss | (316,350) | (157,856) | (180,162) | (508,064) |
Class A Common Stock | ||||
Other expense: | ||||
Net loss | $ (236,780) | $ (110,244) | $ (109,876) | $ (357,272) |
Basic and diluted weighted average number of common shares outstanding (in shares) | 2,512,479 | 2,484,283 | 2,511,417 | 2,472,534 |
Basic and diluted net loss per common share (in dollars per share) | $ (0.09) | $ (0.04) | $ (0.04) | $ (0.14) |
Class T Common Stock | ||||
Other expense: | ||||
Net loss | $ (79,570) | $ (47,612) | $ (70,286) | $ (150,792) |
Basic and diluted weighted average number of common shares outstanding (in shares) | 711,030 | 735,735 | 714,280 | 745,269 |
Basic and diluted net loss per common share (in dollars per share) | $ (0.11) | $ (0.06) | $ (0.10) | $ (0.20) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) | Total | Class A Common Stock | Class T Common Stock | Common StockClass A Common Stock | Common StockClass T Common Stock | Capital in Excess of Par Value | Accumulated Distributions in Excess of Earnings |
Balance (in shares) at Dec. 31, 2018 | 2,424,682 | 747,316 | |||||
Balance at Dec. 31, 2018 | $ 22,463,281 | $ 24,179 | $ 7,473 | $ 28,016,307 | $ (5,584,678) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock (in shares) | 47,124 | 9,112 | |||||
Issuance of common stock | 538,763 | $ 471 | $ 91 | 538,201 | |||
Equity-based compensation | 20,626 | $ 23 | 20,603 | ||||
Distributions declared on common stock | (458,852) | (458,852) | |||||
Commissions on stock sales and related dealer manager fees | (30,501) | (30,501) | |||||
Other offering costs | (5,909) | (5,909) | |||||
Distribution and stockholder servicing fees | (1,000) | (1,000) | |||||
Redemptions of common stock (in shares) | (5,403) | ||||||
Redemptions of common stock | (48,623) | $ (54) | (48,569) | ||||
Changes in redeemable common stock | 42,019 | 42,019 | |||||
Net income (loss) | (209,262) | (209,262) | |||||
Balance (in shares) at Mar. 31, 2019 | 2,466,403 | 756,428 | |||||
Balance at Mar. 31, 2019 | 22,310,542 | $ 24,619 | $ 7,564 | 28,531,151 | (6,252,792) | ||
Balance (in shares) at Dec. 31, 2018 | 2,424,682 | 747,316 | |||||
Balance at Dec. 31, 2018 | 22,463,281 | $ 24,179 | $ 7,473 | 28,016,307 | (5,584,678) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income (loss) | (508,064) | $ (357,272) | $ (150,792) | ||||
Balance (in shares) at Sep. 30, 2019 | 2,486,298 | 732,866 | |||||
Balance at Sep. 30, 2019 | 21,380,659 | $ 24,863 | $ 7,329 | 28,680,323 | (7,331,856) | ||
Balance (in shares) at Mar. 31, 2019 | 2,466,403 | 756,428 | |||||
Balance at Mar. 31, 2019 | 22,310,542 | $ 24,619 | $ 7,564 | 28,531,151 | (6,252,792) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock (in shares) | 13,965 | 6,346 | |||||
Issuance of common stock | 174,673 | $ 140 | $ 64 | 174,469 | |||
Equity-based compensation | 20,624 | $ 22 | 20,602 | ||||
Distributions declared on common stock | (389,444) | (389,444) | |||||
Other offering costs | (662) | (662) | |||||
Redemptions of common stock (in shares) | (21,426) | ||||||
Redemptions of common stock | (184,261) | $ (214) | (184,047) | ||||
Changes in redeemable common stock | 140,139 | 140,139 | |||||
Net income (loss) | (140,946) | (140,946) | |||||
Balance (in shares) at Jun. 30, 2019 | 2,480,368 | 741,348 | |||||
Balance at Jun. 30, 2019 | 21,930,665 | $ 24,781 | $ 7,414 | 28,681,652 | (6,783,182) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock (in shares) | 12,602 | 5,156 | |||||
Issuance of common stock | 152,711 | $ 126 | $ 52 | 152,533 | |||
Equity-based compensation | 20,625 | $ 23 | 20,602 | ||||
Distributions declared on common stock | (390,818) | (390,818) | |||||
Redemptions of common stock (in shares) | (6,672) | (13,638) | |||||
Redemptions of common stock | (174,668) | $ (67) | $ (137) | (174,464) | |||
Net income (loss) | (157,856) | $ (110,244) | $ (47,612) | (157,856) | |||
Balance (in shares) at Sep. 30, 2019 | 2,486,298 | 732,866 | |||||
Balance at Sep. 30, 2019 | 21,380,659 | $ 24,863 | $ 7,329 | 28,680,323 | (7,331,856) | ||
Balance (in shares) at Dec. 31, 2019 | 2,504,629 | 722,873 | 2,504,629 | 722,873 | |||
Balance at Dec. 31, 2019 | 21,035,626 | $ 24,974 | $ 7,229 | 28,707,032 | (7,703,609) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock (in shares) | 12,256 | 3,893 | |||||
Issuance of common stock | 138,880 | $ 123 | $ 39 | 138,718 | |||
Equity-based compensation | 20,625 | $ 24 | 20,601 | ||||
Distributions declared on common stock | (387,050) | (387,050) | |||||
Distribution and stockholder servicing fees | 3,770 | 3,770 | |||||
Redemptions of common stock (in shares) | (5,543) | (10,959) | |||||
Redemptions of common stock | (148,414) | $ (56) | $ (110) | (148,248) | |||
Net income (loss) | 61,347 | 61,347 | |||||
Balance (in shares) at Mar. 31, 2020 | 2,511,342 | 715,807 | |||||
Balance at Mar. 31, 2020 | 20,724,784 | $ 25,065 | $ 7,158 | 28,721,873 | (8,029,312) | ||
Balance (in shares) at Dec. 31, 2019 | 2,504,629 | 722,873 | 2,504,629 | 722,873 | |||
Balance at Dec. 31, 2019 | 21,035,626 | $ 24,974 | $ 7,229 | 28,707,032 | (7,703,609) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income (loss) | (180,162) | $ (109,876) | $ (70,286) | ||||
Balance (in shares) at Sep. 30, 2020 | 2,509,336 | 709,477 | 2,509,336 | 709,477 | |||
Balance at Sep. 30, 2020 | 19,785,724 | $ 25,093 | $ 7,095 | 28,703,712 | (8,950,176) | ||
Balance (in shares) at Mar. 31, 2020 | 2,511,342 | 715,807 | |||||
Balance at Mar. 31, 2020 | 20,724,784 | $ 25,065 | $ 7,158 | 28,721,873 | (8,029,312) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock (in shares) | 13,004 | 4,291 | |||||
Issuance of common stock | 131,620 | $ 130 | $ 43 | 131,447 | |||
Equity-based compensation | 20,626 | $ 24 | 20,602 | ||||
Distributions declared on common stock | (380,141) | (380,141) | |||||
Distribution and stockholder servicing fees | 2,337 | 2,337 | |||||
Redemptions of common stock (in shares) | (10,585) | (7,688) | |||||
Redemptions of common stock | (138,879) | $ (105) | $ (77) | (138,697) | |||
Net income (loss) | 74,841 | 74,841 | |||||
Balance (in shares) at Jun. 30, 2020 | 2,513,761 | 712,410 | |||||
Balance at Jun. 30, 2020 | 20,435,188 | $ 25,114 | $ 7,124 | 28,737,562 | (8,334,612) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock (in shares) | 7,515 | 2,376 | |||||
Issuance of common stock | 75,460 | $ 75 | $ 24 | 75,361 | |||
Equity-based compensation | 20,625 | $ 24 | 20,601 | ||||
Distributions declared on common stock | (299,214) | (299,214) | |||||
Distribution and stockholder servicing fees | 1,620 | 1,620 | |||||
Redemptions of common stock (in shares) | (11,940) | (5,309) | |||||
Redemptions of common stock | (131,605) | $ (120) | $ (53) | (131,432) | |||
Net income (loss) | (316,350) | $ (236,780) | $ (79,570) | (316,350) | |||
Balance (in shares) at Sep. 30, 2020 | 2,509,336 | 709,477 | 2,509,336 | 709,477 | |||
Balance at Sep. 30, 2020 | $ 19,785,724 | $ 25,093 | $ 7,095 | $ 28,703,712 | $ (8,950,176) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | |
Statement of Stockholders' Equity [Abstract] | ||||||
Distributions declared (in dollars per share) | $ 0.10 | $ 0.12 | $ 0.12 | $ 0.13 | $ 0.12 | $ 0.15 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (180,162) | $ (508,064) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization, net | 1,434,190 | 1,434,190 |
Amortization of deferred financing costs | 60,070 | 227,264 |
Straight-line rental income | (11,504) | (63,734) |
Equity-based compensation | 61,876 | 61,875 |
Write-off of deferred financing costs | 0 | 183,850 |
Changes in assets and liabilities: | ||
Rents and tenant receivables | 144,067 | 81,948 |
Prepaid expenses and other assets | (45,129) | (15,302) |
Accrued expenses and accounts payable | (88,607) | (181,581) |
Deferred rental income | 4,342 | 217,149 |
Due to affiliates | 0 | (757) |
Net cash provided by operating activities | 1,379,143 | 1,436,838 |
Cash flows from investing activities: | ||
Net cash used in investing activities | 0 | 0 |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock | 0 | 350,001 |
Redemptions of common stock | (418,898) | (407,552) |
Offering costs on issuance of common stock | 0 | (37,072) |
Distribution and stockholder servicing fees paid | (39,130) | (46,290) |
Distributions to stockholders | (753,024) | (750,647) |
Proceeds from credit facility | 1,500,000 | 0 |
Deferred financing costs paid | (81,139) | (73,994) |
Net cash provided by (used in) financing activities | 207,809 | (965,554) |
Net increase in cash and cash equivalents | 1,586,952 | 471,284 |
Cash and cash equivalents, beginning of period | 1,206,262 | 635,959 |
Cash and cash equivalents, end of period | 2,793,214 | 1,107,243 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Distributions declared and unpaid | 99,566 | 127,432 |
Change in accrued distribution and stockholder servicing fees due to affiliate | (7,727) | 1,000 |
Common stock issued through distribution reinvestment plan | 345,960 | 516,146 |
Supplemental Cash Flow Disclosures: | ||
Interest paid | 508,659 | 852,584 |
Cash paid for taxes | $ 14,272 | $ 5,354 |
ORGANIZATION AND BUSINESS
ORGANIZATION AND BUSINESS | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BUSINESS | ORGANIZATION AND BUSINESS Cole Office & Industrial REIT (CCIT III), Inc. (the “Company”) is a non-exchange traded real estate investment trust (“REIT”) formed as a Maryland corporation on May 22, 2014, that elected to be taxed, and currently qualifies, as a REIT for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2017. The Company generally acquires and operates commercial real estate assets, primarily consisting of single-tenant, income-producing necessity office and industrial properties, which are leased to creditworthy tenants under long-term leases. As of September 30, 2020 , the Company owned two office and industrial properties, comprising 391,000 rentable square feet of commercial space located in two states. As of September 30, 2020 , the rentable square feet at these properties was 100% leased. Substantially all of the Company’s business is conducted through Cole Corporate Income Operating Partnership III, LP (“CCI III OP”), a Delaware limited partnership, of which the Company is the sole general partner and owns, directly or indirectly, 100% of the partnership interests. The Company is externally managed by Cole Corporate Income Management III, LLC, a Delaware limited liability company (“CCI III Management”), which is an affiliate of CIM Group, LLC (“CIM”). CIM is a community-focused real estate and infrastructure owner, operator, developer and lender with multi-disciplinary expertise, including in acquisitions, management, development, leasing, research and capital markets. CIM is headquartered in Los Angeles, California and has offices in Oakland, California; Bethesda, Maryland; Dallas, Texas; New York, New York; Chicago, Illinois; Phoenix, Arizona; Orlando, Florida; Tokyo, Japan; and Atlanta, Georgia. CCO Group, LLC owns and controls CCI III Management, the Company’s advisor, and is the indirect owner of CCO Capital, LLC (“CCO Capital”), the Company’s dealer manager, and CREI Advisors, LLC (“CREI Advisors”), the Company’s property manager. CCO Group, LLC and its subsidiaries (collectively, “CCO Group”) serve as the Company’s sponsor and as a sponsor to CIM Real Estate Finance Trust, Inc. (“CMFT”), Cole Credit Property Trust V, Inc. (“CCPT V”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”) and CIM Income NAV, Inc. (“CIM Income NAV”). On September 22, 2016, the Company commenced its initial public offering on a “best efforts” basis, offering up to a maximum of $3.5 billion in shares of common stock (the “Offering”). Pursuant to the Offering, the Company offered up to $2.5 billion in shares of its common stock pursuant to the primary offering, consisting of two classes of shares: Class A common stock (“Class A Shares”) at a price of $10.00 per share (up to $1.25 billion in shares) and Class T common stock (“Class T Shares”) at a price of $9.57 per share (up to $1.25 billion in shares). Pursuant to the Offering, the Company also offered up to $1.0 billion in shares of its common stock pursuant to a distribution reinvestment plan (the “DRIP”) at a purchase price during the Offering equal to the per share primary offering prices net of selling commissions and dealer manager fees, or $9.10 per share for both Class A Shares and Class T Shares. Effective December 31, 2018, the primary portion of the Offering was terminated, but the Company continued to issue Class A Shares and Class T Shares pursuant to the DRIP portion of the Offering. On March 28, 2019, the Company registered an aggregate of $4,300,000 of Class A Shares and Class T Shares pursuant to a Registration Statement on Form S-3 (Registration No. 333-230565) filed with the U.S. Securities and Exchange Commission (the “SEC”), which was declared effective on April 5, 2019 (the “DRIP Offering” and collectively with the Offering, the “Offerings”). As of April 30, 2019, the Company ceased issuing shares in the Offering and had sold a total of $31.2 million of Class A Shares and Class T Shares pursuant to the Offering, including $30.2 million ( $23.3 million in Class A Shares and $6.9 million in Class T Shares) sold to the public pursuant to the primary portion of the Offering and $1.0 million ( $655,000 in Class A Shares and $350,000 in Class T Shares) sold pursuant to the DRIP portion of the Offering. The unsold Class A Shares and Class T Shares in the Offering of $3.5 billion in the aggregate were subsequently deregistered. The Company began to issue Class A Shares and Class T Shares under the DRIP Offering on May 1, 2019 and continued to issue shares under the DRIP Offering until, on August 30, 2020, the Company’s board of directors (the “Board”) suspended the DRIP Offering in connection with the entry of the Company into the Merger Agreement (as defined below). The Board establishes an updated estimated per share net asset value (“NAV”) of the Company’s common stock on at least an annual basis for purposes of assisting broker-dealers that participated in the Offering in meeting their customer account reporting obligations under Financial Industry Regulatory Authority Rule 2231. Distributions are reinvested in shares of the Company’s common stock under the DRIP at the estimated per share NAV as determined by the Board. Additionally, the es timated per share NAV as determined by the Board serves as the per share NAV for purposes of the share redemption program. As of September 30, 2020 , the estimated per share NAV was $7.76 per share for both Class A Shares and Class T Shares, which was established on August 12, 2020 using a valuation date of June 30, 2020 . Commencing on August 14, 2020 , $7.76 served as the per share NAV for both Class A Shares and Class T Shares under the DRIP Offering. The Board previously established a per share NAV as of February 13, 2019 , December 31, 2019 and March 31, 2020 . The Company’s estimated per share NAV is not audited or reviewed by its independent registered public accounting firm. Given the relative stability of the Company’s rent collections and the per share NAV for the quarters ended March 31, 2020 and June 30, 2020, the Board determined that it is in the best interests of the Company and its stockholders to cease incurring the additional costs associated with quarterly valuations and return to updating the Company’s per share NAV on an annual basis in accordance with its valuation policies. Pending Merger with CMFT On August 30, 2020, the Company, CMFT and Thor III Merger Sub, LLC, a wholly owned subsidiary of CMFT (“Merger Sub”), entered into an Agreement and Plan of Merger, as subsequently amended by Amendment No. 1 thereto dated November 3, 2020, (the “Merger Agreement”). Subject to the terms and conditions of the Merger Agreement, the Company will merge with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger, such that following the Merger, the surviving entity will continue as a wholly owned subsidiary of CMFT. In accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”), the separate existence of the Company shall cease at the effective time of the Merger. At the effective time of the Merger and subject to the terms and conditions of the Merger Agreement, each issued and outstanding Class A Share and Class T Share will be converted into the right to receive 1.098 shares of CMFT’s common stock, $0.01 par value per share (the “CMFT Common Stock”), subject to the treatment of fractional shares in accordance with the Merger Agreement (the “Merger Consideration”). At the effective time of the Merger and subject to the terms and conditions of the Merger Agreement, each issued and outstanding Class A Share granted under the Company’s 2018 Equity Incentive Plan, whether vested or unvested, will be cancelled in exchange for an amount equal to the Merger Consideration. The Merger Agreement contains customary representations, warranties and covenants, including covenants relating to the conduct of the Company’s and CMFT’s respective businesses during the period between the execution of the Merger Agreement and the completion of the Merger, subject to certain exceptions. Pursuant to the terms of the Merger Agreement, the Company had a “go shop” period that ended on 11:59 p.m. New York City time on October 7, 2020 (the “Go Shop Period End Time”) during which the Company and its subsidiaries and representatives could initiate, solicit, provide information and enter into discussions concerning proposals relating to alternative business combination transactions. Following the Go Shop Period End Time, the Company and its subsidiaries and representatives may not solicit, provide information or enter into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions set forth in the Merger Agreement. The Merger Agreement also provides that prior to the Stockholder Approval (as defined below), the Board may, under specified circumstances, make an Adverse Recommendation Change (as defined in the Merger Agreement), including withdrawing its recommendation of the Merger, subject to complying with certain conditions set forth in the Merger Agreement. The Merger Agreement may be terminated under certain circumstances, including by either the Company or CMFT if the Merger has not been consummated on or before 11:59 p.m. New York time on May 30, 2021 (the “Outside Date”), if a final and non-appealable order is entered permanently restraining or otherwise prohibiting the transactions contemplated by the Merger Agreement, if the Stockholder Approval has not been obtained at the Stockholders Meeting (as defined in the Merger Agreement) or upon a material uncured breach of the respective obligations, covenants or agreements by the other party that would cause the closing conditions in the Merger Agreement not to be satisfied. In addition, the Company may terminate the Merger Agreement in order to enter into an “Alternative Acquisition Agreement” with respect to a “Superior Proposal” (each as defined in the Merger Agreement) at any time prior to receipt by the Company of the Stockholder Approval pursuant to and subject to the terms and conditions of the Merger Agreement. CMFT may terminate the Merger Agreement at any time prior to the receipt of the Stockholder Approval, in certain limited circumstances, including upon (i) an Adverse Recommendation Change, (ii) a tender offer or exchange offer that is commenced which the Board fails to recommend against or (iii) a breach by the Company, in any material respect, of its obligations under the go shop or no solicitation provisions set forth in the Merger Agreement. If the Merger Agreement is terminated because the Merger was not consummated before the Outside Date or because the Stockholder Approval was not obtained, and (i) an Acquisition Proposal (as defined in the Merger Agreement) has been publicly announced or otherwise communicated to the Company’s stockholders prior to the Stockholders Meeting and (ii) within 12 months after the date of such termination (A) the Company consummates or enters into an agreement (that is thereafter consummated) in respect of an Acquisition Proposal for 50% or more of the Company’s equity or assets or (B) the Board recommends or fails to recommend against an Acquisition Proposal structured as a tender or exchange offer for 50% or more of the Company’s equity and such Acquisition Proposal is actually consummated, then the Company must pay CMFT a termination fee of $710,000 and up to $130,000 as reimbursement for CMFT’s Expenses (as defined in the Merger Agreement). If the Merger Agreement is terminated in connection with the Company’s acceptance of a Superior Proposal or making an Adverse Recommendation Change, then the Company must pay to CMFT a termination fee of $710,000 and up to $130,000 as reimbursement for CMFT’s Expenses, subject to certain exceptions set forth in the Merger Agreement. The obligation of each party to consummate the Merger is subject to a number of customary conditions, including receipt of the approval of the Merger (and of an amendment to the Company’s charter that is required to consummate the Merger) by holders of a majority of the outstanding shares of the Company’s common stock entitled to vote thereon (the “Stockholder Approval”), delivery of certain documents and legal opinions, the truth and correctness of the representations and warranties of the parties (subject to the materiality standards contained in the Merger Agreement) and the absence of a CCIT III Material Adverse Effect or CMFT Material Adverse Effect (as each term is defined in the Merger Agreement). On August 30, 2020, CMFT, CCPT V and Thor V Merger Sub, LLC, a wholly owned subsidiary of CMFT (“CCPT V Merger Sub”), entered into an Agreement and Plan of Merger, as subsequently amended on October 22, 2020, October 24, 2020 and October 29, 2020, (the “CCPT V Merger Agreement”), pursuant to which CCPT V will be merged with and into CCPT V Merger Sub (the “CCPT V Merger”). Neither the Merger nor the CCPT V Merger is contingent upon the completion of the other. On August 30, 2020, CMFT, CCIT II and Thor II Merger Sub, LLC, a wholly owned subsidiary of CMFT (“CCIT II Merger Sub”), entered into an Agreement and Plan of Merger (the “CCIT II Merger Agreement”), pursuant to which CCIT II would have merged with and into CCIT II Merger Sub, with CCIT II Merger Sub surviving the merger as the surviving entity such that following the merger, the surviving entity would have continued as a wholly owned subsidiary of CMFT. The CCIT II Merger Agreement was subsequently terminated on October 29, 2020 and, as a result, all provisions of the Merger Agreement relating to CCIT II or the CCIT II Merger Agreement are no longer applicable. Concurrently with the entry into the Merger Agreement, the Company and CCI III Management entered into a letter agreement (the “Termination Agreement”). Pursuant to the Termination Agreement, the advisory agreement between the Company and CCI III Management (the “Advisory Agreement”) will be terminated at the effective time of the Merger. Also pursuant to the Termination Agreement, CCI III Management agreed to waive any subordinated performance fee or disposition fee (as described in Note 8 — Related-Party Transactions and Arrangements) it otherwise would be entitled to pursuant to the Advisory Agreement related to the Merger. In the event the Merger Agreement is terminated in accordance with its terms, the Termination Agreement will be automatically terminated. In connection with the contemplated Merger, on August 30, 2020, the Board approved the suspension of the DRIP, and, therefore, distributions paid after that date will be paid in cash to all stockholders unless and until the DRIP is reinstated. Additionally, on August 30, 2020, the Board approved the suspension of the Company’s share redemption program, and therefore, no shares will be redeemed from the Company’s stockholders after that date unless and until the share redemption program is reinstated. On August 30, 2020, the Board also approved and adopted the Amended and Restated Bylaws of the Company (the “Amended and Restated Bylaws”) to provide that (i) the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (A) any derivative action or proceeding brought on behalf of the Company, (B) any action asserting a claim of breach of any duty owed by a director or officer or other employee of the Company to the Company or its stockholders or asserting a claim of breach of any standard of conduct set forth in the MGCL, (C) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the MGCL, the charter of the Company or the bylaws of the Company, or (D) any action asserting a claim against the Company or any director or officer or other employee of the Company that is governed by the internal affairs doctrine and (ii) the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying condensed consolidated financial statements. Principles of Consolidation and Basis of Presentation The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the SEC regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019 , and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 . The condensed consolidated financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Real Estate Assets Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows: Buildings 40 years Site improvements 15 years Tenant improvements Lesser of useful life or lease term Intangible lease assets Lease term Recoverability of Real Estate Assets The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to: bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, lease concessions and other factors; a significant decrease in a property’s revenues due to lease terminations; vacancies; co-tenancy clauses; reduced lease rates; changes in anticipated holding periods; or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the nine months ended September 30, 2020 or 2019 . The Company’s impairment assessment as of September 30, 2020 was based on the most current information available to the Company, including expected holding periods. If the Company’s expected holding periods for assets change, subsequent tests for impairment could result in impairment charges in the future. The Company cannot provide any assurance that material impairment charges with respect to the Company’s real estate assets will not occur during 2020 or in future periods, particularly in light of the negative economic impacts caused by the current novel coronavirus (“COVID-19”) pandemic. If the effects of the COVID-19 pandemic cause economic and market conditions to continue to deteriorate or if the Company’s expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. As of September 30, 2020 , the Company has not identified any impairments resulting from COVID-19 related impacts, including as a result of tenant requests for rent relief. The Company generally inte nds to hold its assets for the long-term; therefore, a temporary change in cash flows due to COVID-19 related impacts alone would not be an impairment indicator. However, the Company has yet to see the long-term effects of the COVID-19 pandemic on the economy and the extent to which it may impact the Company’s tenants in the future. Indications of a tenant’s inability to continue as a going concern, changes in the Company’s view or strategy relative to a tenant’s business or industry as a result of the economic impacts of the COVID-19 pandemic, or changes in the Company’s long-term hold strategies, could be indicative of an impairment indicator. Accordingly, the Company will continue to monitor circumstances and events in future periods to determine whether the carrying value of the Company’s real estate assets are recoverable. Assets Held for Sale When a real estate asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the assets related to the property and estimate its fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs. There were no assets identified as held for sale as of September 30, 2020 or December 31, 2019 . Leases The Company has lease agreements with lease and non-lease components. The Company has elected to not separate non-lease components from lease components for all classes of underlying assets (primarily real estate assets) and will account for the combined components as rental and other property income. Non-lease components included in rental and other property income include certain tenant reimbursements for maintenance services (including common-area maintenance services or “CAM”), real estate taxes, insurance and utilities paid for by the lessor but consumed by the lessee. As a lessor, the Company has further determined that this policy will be effective only on a lease that has been classified as an operating lease and the revenue recognition pattern and timing is the same for both types of components. The Company is not a party to any material leases where it is the lessee. Significant judgments and assumptions are inherent in not only determining if a contract contains a lease, but also the lease classification, terms, payments, and, if needed, discount rates. Judgments include the nature of any options, including if they will be exercised, evaluation of implicit discount rates and the assessment and consideration of “fixed” payments for straight-line rent revenue calculations. Lease costs represent the initial direct costs incurred in the origination, negotiation and processing of a lease agreement. Such costs include outside broker commissions and other independent third-party costs and are amortized over the life of the lease on a straight-line basis. Costs related to salaries and benefits, supervision, administration, unsuccessful origination efforts and other activities not directly related to completed lease agreements are expensed as incurred. Upon successful lease execution, leasing commissions are capitalized. Revenue Recognition Rental and other property income is primarily derived from fixed contractual payments from operating leases and, therefore, is generally recognized on a straight-line basis over the term of the lease, which typically begins the date the tenant takes control of the space. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. Variable rental and other property income consists primarily of tenant reimbursements for recoverable real estate taxes and operating expenses which are included in rental and other property income in the period when such costs are incurred, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations. The Company defers the recognition of variable rental and other property income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. The Company continually reviews whether collection of lease-related receivables, including any straight-line rent, and current and future operating expense reimbursements from tenants are probable. The determination of whether collectability is probable takes into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Upon the determination that the collectability of a receivable is not probable, the Company will record a reduction to rental and other property income for amounts previously recorded and a decrease in the outstanding receivable. Revenue from leases where collection is deemed to be not probable is recorded on a cash basis until collectability becomes probable. Management’s estimate of the collectability of lease-related receivables is based on the best information available at the time of estimate . The Company does not use a general reserve approach and lease-related receivables are adjusted and taken against rental and other property income only when collectability becomes not probable. There were no lease-related receivable write-offs during the nine months ended September 30, 2020 and 2019. Earnings (Loss) and Distributions Per Share The Company has two classes of common stock. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which can result in different earnings per share for each of the classes. Under the two-class method, earnings per share of each class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. The distributed earnings to Class T Share common stockholders represents distributions declared less the distribution and stockholder servicing fees paid with respect to Class T Shares sold in the primary portion of the Offering. Diluted income per share, when applicable, considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three and nine months ended September 30, 2020 or 2019 . Distributions per share are calculated based on the authorized monthly distribution rate. Prior to April 1, 2020, distributions were calculated based on the authorized daily distribution rate. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s condensed consolidated financial statements. In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), which was subsequently amended by ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (“ASU 2018-19”) in November 2018. Subsequently, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-02 to provide additional guidance on the credit losses standard. ASU 2016-13 and the related updates are intended to improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held-for-investment, held-to-maturity debt securities, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2018-19 clarified that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASU No. 2016-02, Leases ( Topic 842 ) (“ASC 842”) . ASU 2016-13 and ASU 2018-19 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company adopted ASU 2016-13 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of ASU 2018-13 are to be applied retrospectively, and early adoption is permitted. The Company adopted ASU 2018-13 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”). The guidance changes the guidance for determining whether a decision-making fee is a variable interest. Under the new ASU, indirect interests held through related parties under common control will now be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests. Such indirect interests were previously treated the same as direct interests. ASU 2018-17 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company adopted ASU 2018-17 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In April 2020, the FASB issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, many lessors may be required to provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in ASC 842 addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from COVID-19 related impacts. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The future impact of the Lease Modification Q&A is dependent upon the extent of lease concessions granted to tenants as a result of the COVID-19 pandemic in future periods and the elections made by the Company at the time of entering into such concessions. As of September 30, 2020 , the Company has collected 100% of rental payments originally contracted for from the Company’s two tenants during the three and nine months ended September 30, 2020 . |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS GAAP defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. GAAP emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows: Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs). Level 3 — Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability. The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities: Credit facility — The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. These financial instruments are valued using Level 2 inputs. As of September 30, 2020 , the estimated fair value of the Company’s debt was $25.7 million , which approximated its carrying value. As of December 31, 2019 , the estimated fair value of the Company’s debt was $24.2 million , which approximated its carrying value. The carrying and fair values exclude net deferred financing costs. Other financial instruments — The Company considers the carrying values of its cash and cash equivalents, tenant receivables, accrued expenses and accounts payable, other liabilities, due to affiliates and distributions payable to approximate their fair values because of the short period of time between their origination and their expected realization as well as their highly-liquid nature. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments. Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, upon disposition of the financial assets and liabilities. As of September 30, 2020 and December 31, 2019 , there have been no transfers of financial assets or liabilities between fair value hierarchy levels. |
REAL ESTATE ASSETS
REAL ESTATE ASSETS | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
REAL ESTATE ASSETS | REAL ESTATE ASSETS During the nine months ended September 30, 2020 and 2019 , the Company did no t acquire or dispose of any properties. |
INTANGIBLE LEASE ASSETS
INTANGIBLE LEASE ASSETS | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE LEASE ASSETS | INTANGIBLE LEASE ASSETS The Company’s intangible lease assets consisted of the following as of September 30, 2020 and December 31, 2019 : September 30, 2020 December 31, 2019 In-place leases and other intangibles, net of accumulated amortization of $1,753,892 and $1,406,599, respectively (with a weighted average life remaining of 8.0 years and 8.8 years, respectively) $ 3,347,540 $ 3,694,833 Amortization expense for the in-place leases is included in depreciation and amortization in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization expense related to the in-place lease assets for the three and nine months ended September 30, 2020 and 2019 : Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 In-place lease amortization $ 115,764 $ 115,764 $ 347,293 $ 347,293 As of September 30, 2020 , the estimated amortization relating to the intangible lease assets is as follows: Amortization In-Place Lease Remainder of 2020 $ 115,765 2021 463,058 2022 463,058 2023 463,058 2024 463,058 Thereafter 1,379,543 Total $ 3,347,540 |
CREDIT FACILITY
CREDIT FACILITY | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
CREDIT FACILITY | CREDIT FACILITY As of September 30, 2020 , the Company had $25.6 million of debt outstanding, including net deferred financing costs, with a weighted average interest rate of 3.0% and a weighted average term to maturity of one year . The following table summarizes the debt balances as of September 30, 2020 and December 31, 2019 and the debt activity for the nine months ended September 30, 2020 : During the Nine Months Ended September 30, 2020 Balance as of Debt Issuance (1) Repayments Accretion Balance as of Credit facility $ 24,175,000 $ 1,500,000 $ — $ — $ 25,675,000 Total debt 24,175,000 1,500,000 — — 25,675,000 Deferred costs — (81,139 ) — 3,381 (77,758 ) Total debt, net $ 24,175,000 $ 1,418,861 $ — $ 3,381 $ 25,597,242 ______________________ (1) Includes deferred financing costs incurred during the period. Credit Facility The Company has a secured credit facility (the “Credit Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent, and the lenders under the credit agreement, as modified on September 17, 2020 (the “Modified Credit Agreement”). The Modified Credit Agreement reduced the borrowing commitment to $25.7 million , extended the maturity date to September 23, 2021 with no option to further extend, and amended the definition of asset value, in part, by removing certain tenant concentration limits, among other things. The Modified Credit Agreement also converted the Credit Facility balance from revolving loans into non-revolving term loans (the “Term Loans”) and instituted monthly principal payments through the maturity date. As of September 30, 2020 , the Company had $25.7 million of debt outstanding under its Credit Facility. Depending upon the type of loan specified and overall leverage ratio, the Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month London Interbank Offered Rate (“LIBOR”) multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread of 2.75% ; or (ii) a base rate of 1.75% . As of September 30, 2020 , the Term Loans outstanding totaled $25.7 million at a weighted average interest rate of 3.0% . The Company had no available borrowings as of September 30, 2020 . The Modified Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the Modified Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to 75% of the equity issued from the date of the Modified Credit Agreement, a leverage ratio no greater than 60% , and a fixed charge coverage ratio equal to or greater than 1.50 . The Company believes it was in compliance with the financial covenants of the Modified Credit Agreement as of September 30, 2020 . Maturities Liquidity and Financial Condition — As of September 30, 2020 , the Company had $25.7 million of debt outstanding under the Credit Facility maturing on September 23, 2021. The Company expects to enter into new financing arrangements to meet its obligations as they become due in the event that the Merger is not completed. The Company believes cash on hand, net cash provided by operations, and the entry into new financing arrangements will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to September 30, 2020 : Principal Repayments Remainder of 2020 $ — 2021 25,675,000 2022 — 2023 — 2024 — Thereafter — Total $ 25,675,000 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Litigation In the ordinary course of business, the Company may become subject to litigation and claims. The Company is not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or of which the Company’s properties are the subject. Environmental Matters In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. In addition, the Company may own or acquire certain properties that are subject to environmental remediation. Generally, the seller of the property, the tenant of the property and/or another third party is responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify the Company against future remediation costs. The Company also carries environmental liability insurance on its properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which the Company may be liable. The Company is not aware of any environmental matters which it believes are reasonably likely to have a material effect on its results of operations, financial condition or liquidity. Merger Agreement On August 30, 2020, the Company announced it had entered into the Merger Agreement with CMFT and Merger Sub. In the event the Merger Agreement is terminated in connection with the Company’s acceptance of a Superior Proposal or making an Adverse Recommendation Change, as defined in the Merger Agreement, the Company must pay to CMFT a termination fee of $710,000 and up to $130,000 as reimbursement for CMFT’s Expenses, subject to certain exceptions set forth in the Merger Agreement. No such fees were paid as of September 30, 2020 . If the Merger Agreement is terminated because the Merger was not consummated before the Outside Date or because the Stockholder Approval was not obtained, and (i) an Acquisition Proposal has been publicly announced or otherwise communicated to the Company’s stockholders prior to the Stockholders Meeting and (ii) within 12 months after the date of such termination (A) the Company consummates or enters into an agreement (that is thereafter consummated) in respect of an Acquisition Proposal for 50% or more of the Company’s equity or assets or (B) the Board recommends or fails to recommend against an Acquisition Proposal structured as a tender or exchange offer for 50% or more of the Company’s equity and such Acquisition Proposal is actually consummated, then the Company must pay CMFT a termination fee of $710,000 and up to $130,000 as reimbursement for CMFT’s Expenses. |
RELATED-PARTY TRANSACTIONS AND
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS | RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS The Company has incurred, and will continue to incur, commissions, fees and expenses payable to CCI III Management and certain of its affiliates in connection with the Offerings and the acquisition, management and disposition of its assets. Selling commissions and dealer manager fees In connection with the primary portion of the Offering, which was terminated on December 31, 2018, CCO Capital, the Company’s dealer manager, which is affiliated with CCI III Management, received selling commissions of up to 7.0% and 3.0% of gross offering proceeds from the primary portion of the Offering for Class A Shares and Class T Shares, respectively. CCO Capital reallowed 100% of selling commissions earned to participating broker-dealers. In addition, 2.0% of gross offering proceeds from the primary portion of the Offering for both Class A Shares and Class T Shares was paid to CCO Capital as a dealer manager fee. CCO Capital, in its sole discretion, reallowed all or a portion of its dealer manager fee to participating broker-dealers. No selling commissions or dealer manager fees are paid to CCO Capital or other participating broker-dealers with respect to shares sold pursuant to the DRIP. Organization and offering expenses All other organization and offering expenses associated with the sale of the Company’s common stock (excluding selling commissions, dealer manager fees and distribution and stockholder servicing fees) were paid by CCI III Management or its affiliates and were reimbursed by the Company up to 1.0% of aggregate gross offering proceeds, including proceeds from sales of shares under the DRIP. As of September 30, 2020 , CCI III Management had paid organization and offering expenses in excess of the 1.0% of aggregate gross offering proceeds in connection with the Offering. These excess amounts were not included in the condensed consolidated financial statements of the Company because such amounts were not a liability of the Company as they exceeded 1.0% of gross proceeds from the Offering. Since the Offering has been terminated, these excess amounts will not be paid. Distribution and stockholder servicing fees The Company pays CCO Capital a distribution and stockholder servicing fee for Class T Shares that, prior to the Board’s determination of an estimated per share NAV, was calculated on a daily basis in an amount equal to 1/365th of 1.0% of the purchase price per share of the Class T Shares sold in the primary portion of the Offering. Commencing on February 19, 2019, the distribution and stockholder servicing fee for Class T Shares is calculated on a daily basis in an amount equal to 1/365th of 1.0% of the most recent estimated per share NAV. The distribution and stockholder servicing fee is paid monthly in arrears from cash flows from operations or, if the Company’s cash flows from operations are not sufficient to pay the distribution and stockholder servicing fee, from borrowings in anticipation of future cash flows. An estimated liability for future distribution and stockholder servicing fees payable to CCO Capital was recognized at the time each Class T Share was sold and included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. The Company will cease paying the distribution and stockholder servicing fee with respect to Class T Shares at the earliest of (i) the end of the month in which the total distribution and stockholder servicing fees paid by a stockholder within his or her individual account would be equal to 4.0% of the stockholder’s total gross investment amount at the time of the purchase of the primary Class T Shares held in such account, or a lower limit agreed upon between the Company’s dealer manager and the participating broker-dealer at the time such Class T Shares were sold; (ii) the date on which the aggregate underwriting compensation from all sources equals 10.0% of the gross proceeds from the aggregate sale of the Class A Shares and Class T Shares in the Offering, excluding proceeds from sales pursuant to the DRIP; (iii) the fourth anniversary of the last day of the month in which the Offering (excluding the offering of shares pursuant to the DRIP) terminates; (iv) the date such Class T Share is no longer outstanding; and (v) the date the Company effects a liquidity event. CCO Capital may, in its discretion, reallow to participating broker-dealers all or a portion of the distribution and stockholder servicing fee for services that such participating broker-dealers perform in connection with the distribution of Class T Shares. At the time the Company ceases paying the distribution and stockholder servicing fee with respect to an outstanding Class T Share pursuant to the provisions above, such Class T Share will convert into a number of Class A Shares (including any fractional shares) with an equivalent net asset value as such Class T Share. The Company cannot predict when this will occur. No distribution and stockholder servicing fees are paid to CCO Capital or other participating broker-dealers with respect to shares sold pursuant to the DRIP. Advisory fees and expenses Pursuant to the Advisory Agreement, the Company pays CCI III Management a monthly advisory fee based upon the Company’s monthly average asset value, which is equal to the following amounts: (i) an annualized rate of 0.75% paid on the Company’s average asset value that is between $0 and $2.0 billion ; (ii) an annualized rate of 0.70% paid on the Company’s average asset value that is between $2.0 billion and $4.0 billion ; and (iii) an annualized rate of 0.65% paid on the Company’s average asset value that is over $4.0 billion . During the three and nine months ended September 30, 2019 , the Company’s operating expenses (including advisory fees) exceeded the expense limit of the greater of 2.0% of the average invested assets or 25.0% of net income (see operating expenses below) and were not recognized in the condensed consolidated financial statements of the Company because such amounts were not contractually payable by the Company. As of September 30, 2019 , $864,000 in advisory fees exceeded such expense limit. Additionally, CCI III Management waived its right to receive a monthly advisory fee for the full year ending December 31, 2019 , the three and nine months ended September 30, 2020 , and for the full year ending December 31, 2020 . As such, during the three and nine months ended September 30, 2020 , the advisor waived advisory fe es of $91,000 and $269,000 , respectively, which were not recognized in the condensed consolidated financial statements of the Company because such amounts were n ot contractually payable by the Company. As of September 30, 2020 , $1.3 million of advisory fees have been waived since inception. Operating expenses The Company reimburses CCI III Management or its affiliates for the operating expenses they paid or incurred in connection with advisory and administrative services provided to the Company, subject to the limitation that the Company will not reimburse CCI III Management or its affiliates for any amount by which the operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceed the greater of (i) 2.0% of average invested assets, or (ii) 25.0% of net income, excluding any additions to reserves for depreciation or other similar non-cash reserves and excluding any gain from the sale of assets for that period. The Company will not reimburse CCI III Management or its affiliates for compensation paid to the Company’s executive officers or employees of CCI III Management in connection with the services for which CCI III Management or its affiliates receive an acquisition fee, financing coordination fee or disposition fee. During the three and nine months ended September 30, 2020, $61,000 and $289,000 , respectively, of operating expense reimbursements were deferred by the advisor, which were not recognized in the condensed consolidated financial statements of the Company because such amounts were not contractually payable by the Company. During the three and nine months ended September 30, 2019, $109,000 and $457,000 , respectively, of operating expense reimbursements were deferred by the advisor, which were not recognized in the condensed consolidated financial statements of the Company because such amounts were not contractually payable by the Company. However, these amounts may become payable if the advisor recoups expense reimbursements a s capacity becomes available under the greater of 2.0% of average invested assets or 25.0% of net income limitations through reimbursements in a subsequent period. Financing coordination fees If CCI III Management provides services in connection with the origination, assumption or refinancing of any debt to acquire properties or to make other permitted investments, the Company will pay CCI III Management a financing coordination fee equal to 1.0% of the amount available and/or outstanding under such financing. However, CCI III Management will not be entitled to a financing coordination fee on any debt where CCI III Management previously received a fee unless (i) the maturity date of the refinanced debt was scheduled to occur less than one year after the date of the refinancing and the new loan has a term of at least five years or (ii) the new loan is approved by a majority of the independent directors; and provided, further, that no financing coordination fee will be paid in connection with loans advanced by an affiliate of CCI III Management. During the three and nine months ended September 30, 2020 and 2019 , no financing coordination fees were incurred for any such services provided by CCI III Management or its affiliates. Disposition fees If CCI III Management or its affiliates provide a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more properties (or the Company’s entire portfolio), the Company will pay CCI III Management or its affiliates a disposition fee in an amount equal to up to one-half of the real estate or brokerage commission paid by the Company to third parties on the sale of such properties, not to exceed 1.0% of the contract price of the properties sold; provided, however, in no event may the total disposition fees paid to CCI III Management, its affiliates, and unaffiliated third parties, exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price. In addition, if CCI III Management or its affiliates provides a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more assets other than properties, the Company may separately compensate CCI III Management or its affiliates at such rates and in such amounts as the Board, including a majority of the independent directors, and CCI III Management agree upon, not to exceed an amount equal to 1.0% of the contract price of the assets sold. During the three and nine months ended September 30, 2020 and 2019 , no disposition fees were incurred for any such services provided by CCI III Management or its affiliates. Subordinated performance fees The Company will pay a subordinated performance fee in connection with one of the following alternative events: (1) if the Company’s shares are listed on a national securities exchange, CCI III Management, or its affiliates, will be entitled to a subordinated performance fee equal to 15.0% of the amount, if any, by which (i) the market value of the Company’s outstanding stock plus distributions paid by the Company prior to listing, exceeds (ii) the sum of the total amount of capital raised from stockholders and the amount of distributions necessary to generate a 6.0% annual cumulative, non-compounded return to stockholders; (2) if the Company is sold or its assets are liquidated, CCI III Management will be entitled to a subordinated performance fee equal to 15.0% of the net sale proceeds remaining after stockholders have received, from regular distributions plus special distributions paid from proceeds of such sale, a return of their net capital invested and a 6.0% annual cumulative, non-compounded return; or (3) upon termination of the Advisory Agreement, CCI III Management may be entitled to a subordinated performance fee similar to the fee to which it would have been entitled had the portfolio been liquidated (based on an independent appraised value of the portfolio) on the date of termination. During the three and nine months ended September 30, 2020 and 2019 , no subordinated performance fees were incurred related to any such events. The Company incurred commissions, fees and expense reimbursements as shown in the table below for services provided by CCI III Management and its affiliates related to the services described above during the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Selling commissions $ — $ — $ — $ 23,501 Dealer manager fees $ — $ — $ — $ 7,000 Distribution and stockholder servicing fees (1) $ 12,557 $ 14,960 $ 39,130 $ 46,290 Organization and offering costs $ — $ — $ — $ 6,571 ______________________ (1) Amounts are calculated for the respective periods in accordance with the dealer manager agreement and exclude the estimated liability for future distribution and stockholder servicing fees payable to CCO Capital of $64,000 and $142,000 as of September 30, 2020 and 2019 , respectively, which is included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. Due to Affiliates As of September 30, 2020 and December 31, 2019 , $64,000 and $111,000 , respectively, was recorded for services and expenses incurred, but not yet reimbursed to CCI III Management or its affiliates. The amounts are for future distribution and stockholder servicing fees payable to CCO Capital and operating fees and expenses. These amounts were included in due to affiliates in the condensed consolidated balance sheets for such periods. Termination Agreement Concurrently with the entry into the Merger Agreement, the Company and CCI III Management entered into the Termination Agreement, effective as of August 30, 2020. Pursuant to the Termination Agreement, the current Advisory Agreement will be terminated at the effective time of the Merger. Also pursuant to the Termination Agreement, CCI III Management waived any subordinated performance fee or disposition fee it otherwise would be entitled to pursuant to the Advisory Agreement related to the Merger. In the event the Merger Agreement is terminated in accordance with its terms, the Termination Agreement will be automatically terminated. |
ECONOMIC DEPENDENCY
ECONOMIC DEPENDENCY | 9 Months Ended |
Sep. 30, 2020 | |
Economic Dependency [Abstract] | |
ECONOMIC DEPENDENCY | ECONOMIC DEPENDENCY Under various agreements, the Company has engaged and may in the future engage CCI III Management or its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services and stockholder relations. As a result of these relationships, the Company is dependent upon CCI III Management or its affiliates. In the event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services. |
STOCKHOLDERS_ EQUITY
STOCKHOLDERS’ EQUITY | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | STOCKHOLDERS’ EQUITY Equity-Based Compensation On August 9, 2018, the Board approved the adoption of the Company’s 2018 Equity Incentive Plan (the “Plan”), under which 400,000 of the Company’s shares of common stock were reserved for issuance and awards of 381,000 shares of common stock are available for future grant as of September 30, 2020 . As of September 30, 2020 , the Company has granted awards of approximately 6,000 restricted Class A Shares to each of the independent members of the Board (approximately 19,000 restricted shares in aggregate) under the Plan. As of September 30, 2020 , 9,000 of the restricted Class A Shares had vested based on one year of continuous service. The remaining 10,000 shares issued fully vested on October 1, 2020. The fair value of the Company’s share awards is determined using the Company’s per share NAV on the date of grant. Compensation expense related t o these restricted Class A Shares is recognized over the vesting period. The Company recorded compensation expense of $21,000 and $62,000 for the three and nine months ended September 30, 2020 and 2019, respectively, related to these restricted Class A Shares, which is included in general and administrative expenses in the accompanying condensed consolidated statements of operations. All of the total compensation expense related to these restricted Class A Shares was recognized ratably over the period of service prior to October 1, 2020. |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
LEASES | LEASES The Company’s real estate assets are leased to tenants under operating leases for which the terms, expirations and extension options vary. The Company’s operating leases do not convey to the lessee the right to purchase the underlying asset upon expiration of the lease period. To determine whether a contract contains a lease, the Company reviews contracts to determine if the agreement conveys the right to control the use of an asset. The Company accounts for lease and non-lease components as a single, combined operating lease component. Non-lease components primarily consist of maintenance services, including CAM, real estate taxes, insurance and utilities paid for by the lessor but consumed by the lessee. Non-lease components are considered to be variable rental and other property income and are recognized in the period incurred. As of September 30, 2020 , the leases had a weighted-average remaining term of 7.9 years . Certain leases include provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other negotiated terms and conditions. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of September 30, 2020 , the future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows: Future Minimum Rental Income Remainder of 2020 $ 925,809 2021 3,756,969 2022 3,829,450 2023 3,903,333 2024 3,978,647 Thereafter 14,902,466 Total $ 31,296,674 Rental and other property income during the three and nine months ended September 30, 2020 and 2019 consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Fixed rental and other property income (1) $ 972,002 $ 972,002 $ 2,916,007 $ 2,916,007 Variable rental and other property income (2) 137,706 141,309 406,584 437,374 Total rental and other property income $ 1,109,708 $ 1,113,311 $ 3,322,591 $ 3,353,381 ______________________ (1) Consists primarily of fixed contractual payments from operating leases with tenants recognized on a straight-line basis over the lease term, including amortization of acquired above-market leases. (2) Consists primarily of tenant reimbursements for recoverable real estate taxes and property operating expenses. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS The following events occurred subsequent to September 30, 2020 : Amendment to Merger Agreement On November 3, 2020, the parties to the Merger Agreement entered into Amendment No. 1 to Agreement and Plan of Merger (the “Amendment”), pursuant to which (i) the Merger Agreement was amended to increase the Exchange Ratio from 1.093 to 1.098 shares of CMFT Common Stock for each share of CCIT III Common Stock (as each term is defined in the Merger Agreement) (with such ratio subject to adjustments in accordance with the terms and conditions of the Merger Agreement) and (ii) CCIT III irrevocably waived its right to terminate the Merger Agreement set forth in Section 9.1(c)(iii) in relation to the amendment of the CCPT V Merger Agreement to increase the exchange ratio set forth therein. Registration Statement on Form S-4 In connection with the Merger, CMFT filed a registration statement on Form S-4 (File No. 333-249292), declared effective by the SEC on November 10, 2020, that includes a proxy statement of the Company and that also constitutes a prospectus of CMFT. The Merger is currently anticipated to close by year end 2020. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the SEC regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019 , and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 . The condensed consolidated financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q. |
Principles of Consolidation | The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Real Estate Assets and Recoverability Of Real Estate Assets | Real Estate Assets Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows: Buildings 40 years Site improvements 15 years Tenant improvements Lesser of useful life or lease term Intangible lease assets Lease term Recoverability of Real Estate Assets The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to: bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, lease concessions and other factors; a significant decrease in a property’s revenues due to lease terminations; vacancies; co-tenancy clauses; reduced lease rates; changes in anticipated holding periods; or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the nine months ended September 30, 2020 or 2019 . The Company’s impairment assessment as of September 30, 2020 was based on the most current information available to the Company, including expected holding periods. If the Company’s expected holding periods for assets change, subsequent tests for impairment could result in impairment charges in the future. The Company cannot provide any assurance that material impairment charges with respect to the Company’s real estate assets will not occur during 2020 or in future periods, particularly in light of the negative economic impacts caused by the current novel coronavirus (“COVID-19”) pandemic. If the effects of the COVID-19 pandemic cause economic and market conditions to continue to deteriorate or if the Company’s expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. As of September 30, 2020 , the Company has not identified any impairments resulting from COVID-19 related impacts, including as a result of tenant requests for rent relief. The Company generally inte nds to hold its assets for the long-term; therefore, a temporary change in cash flows due to COVID-19 related impacts alone would not be an impairment indicator. However, the Company has yet to see the long-term effects of the COVID-19 pandemic on the economy and the extent to which it may impact the Company’s tenants in the future. Indications of a tenant’s inability to continue as a going concern, changes in the Company’s view or strategy relative to a tenant’s business or industry as a result of the economic impacts of the COVID-19 pandemic, or changes in the Company’s long-term hold strategies, could be indicative of an impairment indicator. Accordingly, the Company will continue to monitor circumstances and events in future periods to determine whether the carrying value of the Company’s real estate assets are recoverable. |
Assets Held for Sale | Assets Held for Sale When a real estate asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the assets related to the property and estimate its fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs. |
Leases | Leases The Company has lease agreements with lease and non-lease components. The Company has elected to not separate non-lease components from lease components for all classes of underlying assets (primarily real estate assets) and will account for the combined components as rental and other property income. Non-lease components included in rental and other property income include certain tenant reimbursements for maintenance services (including common-area maintenance services or “CAM”), real estate taxes, insurance and utilities paid for by the lessor but consumed by the lessee. As a lessor, the Company has further determined that this policy will be effective only on a lease that has been classified as an operating lease and the revenue recognition pattern and timing is the same for both types of components. The Company is not a party to any material leases where it is the lessee. Significant judgments and assumptions are inherent in not only determining if a contract contains a lease, but also the lease classification, terms, payments, and, if needed, discount rates. Judgments include the nature of any options, including if they will be exercised, evaluation of implicit discount rates and the assessment and consideration of “fixed” payments for straight-line rent revenue calculations. Lease costs represent the initial direct costs incurred in the origination, negotiation and processing of a lease agreement. Such costs include outside broker commissions and other independent third-party costs and are amortized over the life of the lease on a straight-line basis. Costs related to salaries and benefits, supervision, administration, unsuccessful origination efforts and other activities not directly related to completed lease agreements are expensed as incurred. Upon successful lease execution, leasing commissions are capitalized. |
Revenue Recognition | Revenue Recognition Rental and other property income is primarily derived from fixed contractual payments from operating leases and, therefore, is generally recognized on a straight-line basis over the term of the lease, which typically begins the date the tenant takes control of the space. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. Variable rental and other property income consists primarily of tenant reimbursements for recoverable real estate taxes and operating expenses which are included in rental and other property income in the period when such costs are incurred, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations. The Company defers the recognition of variable rental and other property income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. The Company continually reviews whether collection of lease-related receivables, including any straight-line rent, and current and future operating expense reimbursements from tenants are probable. The determination of whether collectability is probable takes into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Upon the determination that the collectability of a receivable is not probable, the Company will record a reduction to rental and other property income for amounts previously recorded and a decrease in the outstanding receivable. Revenue from leases where collection is deemed to be not probable is recorded on a cash basis until collectability becomes probable. Management’s estimate of the collectability of lease-related receivables is based on the best information available at the time of estimate . The Company does not use a general reserve approach and lease-related receivables are adjusted and taken against rental and other property income only when collectability becomes not probable. |
Earnings (Loss) and Distributions Per Share | Earnings (Loss) and Distributions Per Share The Company has two classes of common stock. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which can result in different earnings per share for each of the classes. Under the two-class method, earnings per share of each class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. The distributed earnings to Class T Share common stockholders represents distributions declared less the distribution and stockholder servicing fees paid with respect to Class T Shares sold in the primary portion of the Offering. Diluted income per share, when applicable, considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three and nine months ended September 30, 2020 or 2019 . |
Recent Accounting Pronouncements | Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s condensed consolidated financial statements. In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), which was subsequently amended by ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (“ASU 2018-19”) in November 2018. Subsequently, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-02 to provide additional guidance on the credit losses standard. ASU 2016-13 and the related updates are intended to improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held-for-investment, held-to-maturity debt securities, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2018-19 clarified that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASU No. 2016-02, Leases ( Topic 842 ) (“ASC 842”) . ASU 2016-13 and ASU 2018-19 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company adopted ASU 2016-13 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of ASU 2018-13 are to be applied retrospectively, and early adoption is permitted. The Company adopted ASU 2018-13 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”). The guidance changes the guidance for determining whether a decision-making fee is a variable interest. Under the new ASU, indirect interests held through related parties under common control will now be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests. Such indirect interests were previously treated the same as direct interests. ASU 2018-17 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company adopted ASU 2018-17 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements. In April 2020, the FASB issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, many lessors may be required to provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in ASC 842 addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from COVID-19 related impacts. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The future impact of the Lease Modification Q&A is dependent upon the extent of lease concessions granted to tenants as a result of the COVID-19 pandemic in future periods and the elections made by the Company at the time of entering into such concessions. As of September 30, 2020 , the Company has collected 100% of rental payments originally contracted for from the Company’s two tenants during the three and nine months ended September 30, 2020 . |
Fair Value Measurements | Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows: Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs). Level 3 — Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedule of investment in and valuation of real estate and related assets | The estimated useful lives of the Company’s real estate assets by class are generally as follows: Buildings 40 years Site improvements 15 years Tenant improvements Lesser of useful life or lease term Intangible lease assets Lease term |
INTANGIBLE LEASE ASSETS (Table
INTANGIBLE LEASE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of finite-lived intangible assets | The Company’s intangible lease assets consisted of the following as of September 30, 2020 and December 31, 2019 : September 30, 2020 December 31, 2019 In-place leases and other intangibles, net of accumulated amortization of $1,753,892 and $1,406,599, respectively (with a weighted average life remaining of 8.0 years and 8.8 years, respectively) $ 3,347,540 $ 3,694,833 |
Schedule of finite-lived intangible assets amortization expense | The following table summarizes the amortization expense related to the in-place lease assets for the three and nine months ended September 30, 2020 and 2019 : Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 In-place lease amortization $ 115,764 $ 115,764 $ 347,293 $ 347,293 |
Schedule of finite-lived intangible assets, future amortization expense | As of September 30, 2020 , the estimated amortization relating to the intangible lease assets is as follows: Amortization In-Place Lease Remainder of 2020 $ 115,765 2021 463,058 2022 463,058 2023 463,058 2024 463,058 Thereafter 1,379,543 Total $ 3,347,540 |
CREDIT FACILITY (Tables)
CREDIT FACILITY (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of debt | The following table summarizes the debt balances as of September 30, 2020 and December 31, 2019 and the debt activity for the nine months ended September 30, 2020 : During the Nine Months Ended September 30, 2020 Balance as of Debt Issuance (1) Repayments Accretion Balance as of Credit facility $ 24,175,000 $ 1,500,000 $ — $ — $ 25,675,000 Total debt 24,175,000 1,500,000 — — 25,675,000 Deferred costs — (81,139 ) — 3,381 (77,758 ) Total debt, net $ 24,175,000 $ 1,418,861 $ — $ 3,381 $ 25,597,242 ______________________ (1) Includes deferred financing costs incurred during the period. |
Schedule of maturities of long-term debt | The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to September 30, 2020 : Principal Repayments Remainder of 2020 $ — 2021 25,675,000 2022 — 2023 — 2024 — Thereafter — Total $ 25,675,000 |
RELATED-PARTY TRANSACTIONS AN_2
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Schedule of related party transactions | The Company incurred commissions, fees and expense reimbursements as shown in the table below for services provided by CCI III Management and its affiliates related to the services described above during the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Selling commissions $ — $ — $ — $ 23,501 Dealer manager fees $ — $ — $ — $ 7,000 Distribution and stockholder servicing fees (1) $ 12,557 $ 14,960 $ 39,130 $ 46,290 Organization and offering costs $ — $ — $ — $ 6,571 ______________________ (1) Amounts are calculated for the respective periods in accordance with the dealer manager agreement and exclude the estimated liability for future distribution and stockholder servicing fees payable to CCO Capital of $64,000 and $142,000 as of September 30, 2020 and 2019 , respectively, which is included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Future minimum rental income from real estate assets under non-cancelable operating leases | As of September 30, 2020 , the future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows: Future Minimum Rental Income Remainder of 2020 $ 925,809 2021 3,756,969 2022 3,829,450 2023 3,903,333 2024 3,978,647 Thereafter 14,902,466 Total $ 31,296,674 |
Schedule of components of lease income | Rental and other property income during the three and nine months ended September 30, 2020 and 2019 consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Fixed rental and other property income (1) $ 972,002 $ 972,002 $ 2,916,007 $ 2,916,007 Variable rental and other property income (2) 137,706 141,309 406,584 437,374 Total rental and other property income $ 1,109,708 $ 1,113,311 $ 3,322,591 $ 3,353,381 ______________________ (1) Consists primarily of fixed contractual payments from operating leases with tenants recognized on a straight-line basis over the lease term, including amortization of acquired above-market leases. (2) Consists primarily of tenant reimbursements for recoverable real estate taxes and property operating expenses. |
ORGANIZATION AND BUSINESS (Deta
ORGANIZATION AND BUSINESS (Details) $ / shares in Units, ft² in Thousands | Aug. 30, 2020USD ($)$ / sharesshares | Sep. 30, 2020USD ($)ft²statepropertyclass_of_stock$ / shares | Aug. 14, 2020$ / shares | Jun. 30, 2020$ / shares | Dec. 31, 2019USD ($)$ / shares | Apr. 30, 2019USD ($) | Mar. 28, 2019USD ($) | Sep. 22, 2016USD ($)class_of_stock$ / shares |
Class of Stock [Line Items] | ||||||||
Number of real estate properties | property | 2 | |||||||
Net rentable area (in square feet) | ft² | 391 | |||||||
Number of states in which real estate properties are owned | state | 2 | |||||||
Percentage of rentable space leased | 100.00% | |||||||
Classes of common stock | class_of_stock | 2 | |||||||
Common stock, shares issued | $ 31,200,000 | |||||||
Unsold shares deregistered | 3,500,000,000 | |||||||
Class A Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares issued | $ 25,093 | $ 24,974 | ||||||
Net asset value (in dollars per share) | $ / shares | $ 7.76 | |||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||||
Class T Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares issued | $ 7,095 | $ 7,229 | ||||||
Net asset value (in dollars per share) | $ / shares | $ 7.76 | |||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||||
IPO | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares authorized, value (up to) | $ 3,500,000,000 | |||||||
Multi-Class Offering, Primary Offering | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares authorized, value (up to) | $ 2,500,000,000 | |||||||
Classes of common stock | class_of_stock | 2 | |||||||
Common stock, shares issued | 30,200,000 | |||||||
Multi-Class Offering, Primary Offering | Class A Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares authorized, value (up to) | $ 1,250,000,000 | |||||||
Share price (in dollars per share) | $ / shares | $ 10 | |||||||
Common stock, shares issued | 23,300,000 | |||||||
Multi-Class Offering, Primary Offering | Class T Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares authorized, value (up to) | $ 1,250,000,000 | |||||||
Share price (in dollars per share) | $ / shares | $ 9.57 | |||||||
Common stock, shares issued | 6,900,000 | |||||||
Distribution Reinvestment Plan | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares authorized, value (up to) | $ 4,300,000 | $ 1,000,000,000 | ||||||
Share price (in dollars per share) | $ / shares | $ 9.10 | |||||||
Common stock, shares issued | 1,000,000 | |||||||
Distribution Reinvestment Plan | Class A Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares issued | 655,000 | |||||||
Distribution Reinvestment Plan | Class T Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares issued | $ 350,000 | |||||||
CCC III OP | ||||||||
Class of Stock [Line Items] | ||||||||
General partner partnership interest percentage | 100.00% | |||||||
Common Stock | Distribution Reinvestment Plan | Class A Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Share price (in dollars per share) | $ / shares | $ 7.76 | |||||||
Common Stock | Distribution Reinvestment Plan | Class T Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Share price (in dollars per share) | $ / shares | $ 7.76 | |||||||
CMFT | ||||||||
Class of Stock [Line Items] | ||||||||
Termination period | 12 months | |||||||
Percent of equity or assets acquired | 50.00% | |||||||
Percent of company equity | 50.00% | |||||||
Termination fee | $ 710,000 | |||||||
Expense reimbursement (up to) | $ 130,000 | |||||||
Common Stock | CMFT | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | |||||||
Common stock, shares issued (in shares) | shares | 1.098 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($)tenantclass_of_stockshares | Sep. 30, 2019shares | Sep. 30, 2020USD ($)tenantclass_of_stockshares | Sep. 30, 2019USD ($)shares | Dec. 31, 2019USD ($) | |
Class of Stock [Line Items] | |||||
Impairment losses | $ 0 | $ 0 | |||
Asset held for sale | $ 0 | 0 | $ 0 | ||
Lease-related receivable write-off | $ 0 | $ 0 | |||
Classes of common stock | class_of_stock | 2 | 2 | |||
Weighted average number diluted shares outstanding adjustment (in shares) | shares | 0 | 0 | 0 | 0 | |
Percent of rent collected | 100.00% | 100.00% | |||
Number of tenants | tenant | 2 | 2 | |||
Buildings | |||||
Class of Stock [Line Items] | |||||
Acquired real estate asset, useful life (in years) | 40 years | ||||
Site improvements | |||||
Class of Stock [Line Items] | |||||
Acquired real estate asset, useful life (in years) | 15 years |
FAIR VALUE MEASUREMENTS (Detai
FAIR VALUE MEASUREMENTS (Details) - Significant Other Observable Inputs (Level 2) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Estimate of fair value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Debt, fair value | $ 25.7 | $ 24.2 |
Carrying (reported) amount, fair value disclosure | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Debt, fair value | $ 25.7 | $ 24.2 |
REAL ESTATE ASSETS (Details)
REAL ESTATE ASSETS (Details) - property | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Business Combinations [Abstract] | ||
Number of properties acquired | 0 | 0 |
Number of properties disposed | 0 | 0 |
INTANGIBLE LEASE ASSETS (Sched
INTANGIBLE LEASE ASSETS (Schedule of Intangible Lease Assets) (Details) - Acquired in-place lease - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Finite-Lived Intangible Assets [Line Items] | ||
In-place leases and other intangibles, net of accumulated amortization of $1,753,892 and $1,406,599, respectively (with a weighted average life remaining of 8.0 years and 8.8 years, respectively) | $ 3,347,540 | $ 3,694,833 |
Accumulated amortization | $ 1,753,892 | $ 1,406,599 |
Useful life | 8 years | 8 years 9 months 18 days |
INTANGIBLE LEASE ASSETS (Sch_2
INTANGIBLE LEASE ASSETS (Schedule of Finite-lived Intangible Assets Amortization expense) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Acquired in-place lease | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
In-place lease amortization | $ 115,764 | $ 115,764 | $ 347,293 | $ 347,293 |
INTANGIBLE LEASE ASSETS (Estim
INTANGIBLE LEASE ASSETS (Estimated Amortization of Intangible Lease Assets) (Details) - Acquired in-place lease - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Amortization In-Place Lease | ||
Remainder of 2020 | $ 115,765 | |
2021 | 463,058 | |
2022 | 463,058 | |
2023 | 463,058 | |
2024 | 463,058 | |
Thereafter | 1,379,543 | |
Total | $ 3,347,540 | $ 3,694,833 |
CREDIT FACILITY (Credit Facilit
CREDIT FACILITY (Credit Facility) (Details) | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 20, 2019USD ($) | |
Debt Instrument [Line Items] | |||
Debt outstanding | $ 25,597,242 | $ 24,175,000 | |
Debt, weighted average interest rate | 3.00% | ||
Debt instrument, weighted average years to maturity | 1 year | ||
Line of credit outstanding | $ 25,597,242 | $ 24,175,000 | |
J. P. Morgan Chase Bank, N.A. | Line of credit | |||
Debt Instrument [Line Items] | |||
Line of credit outstanding | $ 25,700,000 | ||
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | |||
Debt Instrument [Line Items] | |||
Debt, weighted average interest rate | 3.00% | ||
Line of credit facility, borrowing capacity (up to) | $ 25,675,000 | ||
Interest rate | 1.75% | ||
Line of credit facility, remaining borrowing capacity | $ 0 | ||
Line of credit facility, covenant, minimum consolidated net worth (greater than or equal) | 75.00% | ||
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | Maximum | |||
Debt Instrument [Line Items] | |||
Line of credit facility, covenant, leverage ratio (no greater than) | 60.00% | ||
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | Minimum | |||
Debt Instrument [Line Items] | |||
Debt instrument, covenant, fixed charge coverage ratio (equal to or greater than) | 1.50 | ||
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | Statutory Reserve Rate | |||
Debt Instrument [Line Items] | |||
Debt instrument, basis spread on variable rate | 2.75% |
CREDIT FACILITY (Schedule of De
CREDIT FACILITY (Schedule of Debt) (Details) | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Debt [Roll Forward] | |
Debt, Gross, Beginning Balance | $ 24,175,000 |
Deferred costs, Beginning Balance | 0 |
Balance as of December 31, 2019 | 24,175,000 |
Debt Issuance, Gross | 1,500,000 |
Debt Issuance, Deferred costs | (81,139) |
Debt Issuance, Net | 1,418,861 |
Repayments | 0 |
Accretion | 3,381 |
Debt, Gross, Ending Balance | 25,675,000 |
Deferred costs, Ending Balance | (77,758) |
Balance as of September 30, 2020 | 25,597,242 |
Credit facility | |
Debt [Roll Forward] | |
Debt, Gross, Beginning Balance | 24,175,000 |
Debt Issuance, Gross | 1,500,000 |
Repayments | 0 |
Debt, Gross, Ending Balance | $ 25,675,000 |
CREDIT FACILITY (Schedule Of Ag
CREDIT FACILITY (Schedule Of Aggregate Principal Repayments) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Principal Repayments | ||
Remainder of 2020 | $ 0 | |
2021 | 25,675,000 | |
2022 | 0 | |
2023 | 0 | |
2024 | 0 | |
Thereafter | 0 | |
Total | $ 25,675,000 | $ 24,175,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - CMFT - USD ($) | Aug. 30, 2020 | Sep. 30, 2020 |
Other Commitments [Line Items] | ||
Termination fee | $ 710,000 | |
Expense reimbursement (up to) | $ 130,000 | |
Termination fees paid | $ 0 | |
Termination period | 12 months | |
Percent of equity or assets acquired | 50.00% | |
Percent of company equity | 50.00% |
RELATED-PARTY TRANSACTIONS AN_3
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Selling Commissions and Dealer Manager Fees) (Details) - Dealer manager | Sep. 30, 2020 |
Selling commissions | |
Related Party Transaction [Line Items] | |
Expense reallowed (percent) | 100.00% |
Class A Common Stock | Dealer manager fees | |
Related Party Transaction [Line Items] | |
Commissions percentage on stock sales and related dealer manager fees | 2.00% |
Class A Common Stock | Maximum | Selling commissions | |
Related Party Transaction [Line Items] | |
Commissions percentage on stock sales and related dealer manager fees | 7.00% |
Class T Common Stock | Dealer manager fees | |
Related Party Transaction [Line Items] | |
Commissions percentage on stock sales and related dealer manager fees | 2.00% |
Class T Common Stock | Maximum | Selling commissions | |
Related Party Transaction [Line Items] | |
Commissions percentage on stock sales and related dealer manager fees | 3.00% |
RELATED-PARTY TRANSACTIONS AN_4
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Organization and Offering Expenses) (Details) | Sep. 30, 2020 |
Advisors | Organization and offering costs | |
Related Party Transaction [Line Items] | |
Related party transaction, expense from transactions with related party, percentage of gross offering proceeds | 1.00% |
RELATED-PARTY TRANSACTIONS AN_5
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Distribution and Stockholder Servicing Fees) (Details) - Advisors | 9 Months Ended |
Sep. 30, 2020 | |
Distribution and stockholder servicing fees | |
Related Party Transaction [Line Items] | |
Distribution and servicing fee, termination of payments threshold, percentage of total gross investment | 4.00% |
Distribution and servicing fee, termination of payments threshold, percentage gross proceeds from shares in offering | 10.00% |
Class T Common Stock | |
Related Party Transaction [Line Items] | |
Distribution and servicing fee, percentage of NAV per share | 0.00274% |
RELATED-PARTY TRANSACTIONS AN_6
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Advisory Fees and Expenses) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Advisors | Advisory fees | ||||
Related Party Transaction [Line Items] | ||||
Reimbursement of expense threshold, percent of average assets | 2.00% | 2.00% | ||
Reimbursement of expense threshold, percent of net income | 25.00% | 25.00% | ||
Expenses exceeding the average asset value percent threshold | $ 864,000 | $ 864,000 | ||
Expenses waived | $ 91,000 | $ 269,000 | ||
Expenses exceeding the average asset value percent threshold | $ 1,300,000 | $ 1,300,000 | ||
Average invested assets between $0 to $2 billion | Advisors | Advisory fees | ||||
Related Party Transaction [Line Items] | ||||
Annualized rate percentage paid on average invested asset | 0.75% | 0.75% | ||
Average invested assets between $2 billion to $4 billion | Advisors | Advisory fees | ||||
Related Party Transaction [Line Items] | ||||
Annualized rate percentage paid on average invested asset | 0.70% | 0.70% | ||
Average invested assets over $4 bilion | Advisors | Advisory fees | ||||
Related Party Transaction [Line Items] | ||||
Annualized rate percentage paid on average invested asset | 0.65% | 0.65% | ||
Minimum | Average invested assets between $0 to $2 billion | ||||
Related Party Transaction [Line Items] | ||||
Average invested assets | $ 0 | $ 0 | ||
Minimum | Average invested assets between $2 billion to $4 billion | ||||
Related Party Transaction [Line Items] | ||||
Average invested assets | 2,000,000,000 | 2,000,000,000 | ||
Minimum | Average invested assets over $4 bilion | ||||
Related Party Transaction [Line Items] | ||||
Average invested assets | 4,000,000,000 | 4,000,000,000 | ||
Maximum | Average invested assets between $0 to $2 billion | ||||
Related Party Transaction [Line Items] | ||||
Average invested assets | 2,000,000,000 | 2,000,000,000 | ||
Maximum | Average invested assets between $2 billion to $4 billion | ||||
Related Party Transaction [Line Items] | ||||
Average invested assets | $ 4,000,000,000 | $ 4,000,000,000 |
RELATED-PARTY TRANSACTIONS AN_7
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Operating Expenses) (Details) - Advisors $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)quarter | Sep. 30, 2019USD ($) | |
Minimum | ||||
Related Party Transaction [Line Items] | ||||
Reimbursement assumptions used, number of quarters | quarter | 4 | |||
Operating expense reimbursement percentage of average invested assets | 2.00% | 2.00% | ||
Operating expense reimbursement percentage of net income | 25.00% | 25.00% | ||
Operating expenses | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction reimbursement of expenses deferred | $ | $ 61 | $ 109 | $ 289 | $ 457 |
Operating expenses | Minimum | ||||
Related Party Transaction [Line Items] | ||||
Reimbursement of expense threshold, percent of average invested assets | 2.00% | 2.00% | ||
Reimbursement of expense threshold, percent of net income | 25.00% | 25.00% |
RELATED-PARTY TRANSACTIONS AN_8
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Financing Coordination Fees) (Details) - Advisors - Financing coordination fee - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Related Party Transaction [Line Items] | ||||
Financing coordination fee (percent) | 1.00% | 1.00% | ||
Refinance term before maturity | 1 year | |||
Debt, term | 5 years | 5 years | ||
Related party transaction, expenses from transactions with related party | $ 0 | $ 0 | $ 0 | $ 0 |
RELATED-PARTY TRANSACTIONS AN_9
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Dispositions Fees) (Details) - Advisors - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Brokerage Commission Fee | ||||
Related Party Transaction [Line Items] | ||||
Commissions performance and other fees percent | 50.00% | 50.00% | ||
Property sales commission | ||||
Related Party Transaction [Line Items] | ||||
Commissions performance and other fees percent | 1.00% | 1.00% | ||
Related party transaction, expenses from transactions with related party | $ 0 | $ 0 | $ 0 | $ 0 |
Property portfolio | ||||
Related Party Transaction [Line Items] | ||||
Commissions performance and other fees percent | 6.00% | 6.00% |
RELATED-PARTY TRANSACTIONS A_10
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Subordinated Performance Fees) (Details) - Advisors - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Related Party Transaction [Line Items] | ||||
Cumulative noncompounded annual return | 6.00% | 6.00% | ||
Subordinate performance fee on event of sale of company | ||||
Related Party Transaction [Line Items] | ||||
Commissions performance and other fees percent | 15.00% | 15.00% | ||
Subordinate performance fees for listing | ||||
Related Party Transaction [Line Items] | ||||
Commissions performance and other fees percent | 15.00% | 15.00% | ||
Performance fee | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction, expenses from transactions with related party | $ 0 | $ 0 | $ 0 | $ 0 |
RELATED-PARTY TRANSACTIONS A_11
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Schedule of Related Party Transaction) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Related Party Transaction [Line Items] | ||||
Distribution and stockholder fees payable | $ 64,000 | $ 142,000 | $ 64,000 | $ 142,000 |
Advisors | Selling commissions | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction, expenses from transactions with related party | 0 | 0 | 0 | 23,501 |
Advisors | Dealer manager fees | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction, expenses from transactions with related party | 0 | 0 | 0 | 7,000 |
Advisors | Distribution and stockholder servicing fees | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction, expenses from transactions with related party | 12,557 | 14,960 | 39,130 | 46,290 |
Advisors | Organization and offering costs | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction, expenses from transactions with related party | $ 0 | $ 0 | $ 0 | $ 6,571 |
RELATED-PARTY TRANSACTIONS A_12
RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS (Due to/from Affiliates) (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Affiliated entity | ||
Related Party Transaction [Line Items] | ||
Due to related parties | $ 64 | $ 111 |
STOCKHOLDERS_ EQUITY (Equity-Ba
STOCKHOLDERS’ EQUITY (Equity-Based Compensation) (Details) - CCIT III 2018 Equity Incentive Plan - USD ($) $ in Thousands | Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Aug. 09, 2018 |
Common Stock | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Shares authorized (in shares) | 400,000 | |||||
Number of shares available for grant (in shares) | 381,000 | 381,000 | 381,000 | |||
Class A Common Stock | Restricted Stock | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Grants in period per independent member of the board (in shares) | 6,000 | |||||
Total grants in period (in shares) | 19,000 | |||||
Shares vested (in shares) | 9,000 | |||||
Vesting period | 1 year | |||||
Remaining not vested shares (in shares) | 10,000 | 10,000 | 10,000 | |||
General and Administrative Expense | Class A Common Stock | Restricted Stock | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Allocated share based compensation expense | $ 21 | $ 21 | $ 62 | $ 62 |
LEASES (Future Operating Lease
LEASES (Future Operating Lease Income) (Details) | Sep. 30, 2020USD ($) |
Leases [Abstract] | |
Operating lease, weighted average remaining lease term | 7 years 11 months |
Future Minimum Rental Income | |
Remainder of 2020 | $ 925,809 |
2021 | 3,756,969 |
2022 | 3,829,450 |
2023 | 3,903,333 |
2024 | 3,978,647 |
Thereafter | 14,902,466 |
Total | $ 31,296,674 |
LEASES (Rental and Other Proper
LEASES (Rental and Other Property Income) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Leases [Abstract] | ||||
Fixed rental and other property income | $ 972,002 | $ 972,002 | $ 2,916,007 | $ 2,916,007 |
Variable rental and other property income | 137,706 | 141,309 | 406,584 | 437,374 |
Total rental and other property income | $ 1,109,708 | $ 1,113,311 | $ 3,322,591 | $ 3,353,381 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - CMFT - Common Stock - shares | Nov. 03, 2020 | Nov. 02, 2020 | Aug. 30, 2020 |
Subsequent Event [Line Items] | |||
Common stock, shares issued (in shares) | 1.098 | ||
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Common stock, shares issued (in shares) | 1.098 | 1.093 |