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Form 424B5 Nuveen Global Cities

August 16, 2022 12:46 PM EDT

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Table of Contents

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-252077

NUVEEN GLOBAL CITIES REIT, INC.

SUPPLEMENT NO. 4 DATED AUGUST 16, 2022

TO THE PROSPECTUS DATED MAY 27, 2022

This prospectus supplement (the “Supplement”) is part of and should be read in conjunction with the prospectus of Nuveen Global Cities REIT, Inc., dated May 27, 2022 (the “Prospectus”). Unless otherwise defined herein, capitalized terms used in this Supplement shall have the same meanings as in the Prospectus.

The purposes of this Supplement are as follows:

 

   

to disclose the acquisition of an industrial building;

 

   

to disclose the origination of two loans;

 

   

to disclose the acquisition of a medical office portfolio;

 

   

to disclose the transaction price for each class of our common stock as of September 1, 2022;

 

   

to disclose the calculation of our July 31, 2022 net asset value (“NAV”) per share for each class of our common stock;

 

   

to provide an update on the status of our offering;

 

   

to update certain disclosures in the Prospectus; and

 

   

to include our Quarterly Report on Form 10-Q for the period ended June 30, 2022.

Acquisition of Industrial Building

In July 2022, we acquired a 100% leased, bulk distribution building within the Wilsonville submarket of Portland, Oregon for $60.6 million.

Loan Originations

In July 2022, we originated a floating-rate senior and mezzanine loan amounting to $68.6 million to finance the acquisition of a Class A, garden-style multifamily property located in Kissimmee, Florida.

In July 2022, we originated a floating-rate senior and mezzanine loan amounting to $68.2 million to finance the acquisition and light repositioning of mid-rise community located in Scottsdale, Arizona.

Acquisition of Medical Office Portfolio

In July and August 2022, we acquired a medical office portfolio for $280 million, consisting of ten properties located in various high growth markets across the United States.

September 1, 2022 Transaction Price

The transaction price for each share class of our common stock for subscriptions accepted as of September 1, 2022 (and repurchases as of August 31, 2022) is as follows:

 

     Transaction
Price
(per share)
 

Class T

   $ 13.21  

Class S

   $ 13.07  

Class D

   $ 13.24  

Class I

   $ 13.19  

 

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The transaction price for each of our Class T, Class S, Class D and Class I shares is equal to such class’s NAV per share as of July 31, 2022. A detailed presentation of the NAV per share is set forth below.

The purchase price of our common stock for each share class equals the transaction price of such class, plus applicable upfront selling commissions and dealer manager fees. 

July 31, 2022 NAV Per Share

We calculate NAV per share in accordance with the valuation guidelines that have been approved by our board of directors. Our NAV per share, which is updated as of the last calendar day of each month, is posted on our website at www.nuveenglobalreit.com. Please refer to “Net Asset Value Calculation and Valuation Guidelines” in the Prospectus for information on how our NAV is determined. The Advisor is ultimately responsible for determining our NAV. As of July 31, 2022, our properties have been appraised in accordance with our valuation guidelines and such appraisals were prepared by our independent valuation advisor.

The following table provides a breakdown of the major components of our NAV as of July 31, 2022 ($ and shares in thousands):

 

Components of NAV    July 31,
2022
 

Investments in real property

   $ 1,789,689  

Investments in commercial mortgage loans

     263,236  

Investments in international affiliated funds

     125,177  

Investments in real estate-related securities

     113,873  

Investments in real estate debt

     83,485  

Cash and cash equivalents

     177,572  

Restricted cash

     64,277  

Other assets

     13,471  

Debt obligations

     (412,613

Subscriptions received in advance

     (63,393

Other liabilities

     (36,830

Stockholder servicing fees payable the following month(1)

     (549

Non-controlling interests in joint venture

     (1,210
  

 

 

 

Net Asset Value

   $ 2,116,185  

Net asset value attributable to preferred stock

     126  
  

 

 

 

NAV attributable to common stockholders

   $ 2,116,059  
  

 

 

 

Number of outstanding shares of common stock

     159,681  
  

 

 

 

 

(1)

Stockholder servicing fees only apply to Class T, Class S and Class D shares. For purposes of NAV, we recognize the stockholder servicing fee as a reduction of NAV on a monthly basis as such fee is paid. Under GAAP, we accrue the full cost of the stockholder servicing fee as an offering cost at the time we sell Class T, Class S and Class D shares. As of July 31, 2022, we have accrued under GAAP approximately $42.4 million of stockholder servicing fees payable to the Dealer Manager related to the Class T, Class S and Class D shares sold.

 

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The following table provides a breakdown of our total NAV and NAV per share of common stock by share class as of July 31, 2022 ($ and shares in thousands, except per share data):

 

NAV Per Share    Class T
Shares
     Class S
Shares
     Class D
Shares
     Class I
Shares
     Class N
Shares
     Total  

Net asset value attributable to common stockholders

   $ 204,660      $ 527,422      $ 101,821      $ 875,620      $ 406,536      $ 2,116,059  

Number of outstanding shares

     15,499        40,364        7,691        66,396        29,731        159,681  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

NAV per share as of July 31, 2022

   $ 13.21      $ 13.07      $ 13.24      $ 13.19      $ 13.67     

Set forth below are the weighted averages of the key assumptions in the discounted cash flow methodology used in the July 31, 2022 valuations, based on property types. Once we own more than one retail property, we will include the key assumptions for such property type.

 

Property Type    Discount
Rate
    Exit Capitalization
Rate
 

Industrial

     5.80     4.52

Multifamily

     6.30     4.34  

Office

     6.86     6.27  

Healthcare

     7.21     6.07  

Single-Family Housing

     6.93     4.91  

These assumptions are determined by our independent valuation advisor. A change in these assumptions would impact the calculation of the value of our property investments. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our investment values:

 

Input    Hypothetical
Change
     Industrial
Investment
Values
    Multifamily
Investment
Values
    Office
Investment
Values
    Healthcare
Investment
Values
    Single-
Family
Housing
Investment
Values
 

Discount Rate

     0.25% decrease        2.03     2.02     1.95     2.10     1.28

(weighted average)

     0.25% increase        (2.09 )%      (2.00 )%      (1.87 )%      (2.06 )%      (1.84 )% 

Exit Capitalization Rate

     0.25% decrease        4.29     4.19     2.76     2.82     3.60

(weighted average)

     0.25% increase        (3.90 )%      (3.80 )%      (2.52 )%      (2.66 )%      (3.13 )% 

Status of our Current Public Offering

In our initial public offering, which terminated on July 2, 2021, we sold 36,357,402 shares of our common stock resulting in gross offering proceeds of $394,406,639. Our follow-on offering was declared effective by the SEC and commenced on July 2, 2021. In our follow-on offering, we are currently offering on a continuous basis up to $5.0 billion in shares of common stock, consisting of up to $4.0 billion in shares in our primary offering and up to $1.0 billion on shares pursuant to our distribution reinvestment plan. As of the date hereof, we have issued and sold 101,064,210 shares of our common stock (consisting of 10,093,706 Class T shares, 32,205,466 Class S shares, 5,551,775 Class D shares, and 53,213,263 Class I shares) in this offering, resulting in gross offering proceeds of $1,253,664,467. We intend to continue selling shares in this offering on a monthly basis.

Prospectus Updates

The following disclosure is added to the “Plan of Distribution” section of our Prospectus following the section titled “Indemnification.”

 

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Offering Restrictions

NOTICE TO NON-U.S. INVESTORS

The shares described in this prospectus have not been registered and are not expected to be registered under the laws of any country or jurisdiction outside of the United States except as otherwise described in this prospectus. To the extent you are a citizen of, or domiciled in, a country or jurisdiction outside of the United States, please consult with your advisors before purchasing or disposing of shares.

NOTICE TO RESIDENTS OF THE EEA

It is not intended for the Company to be marketed to prospective investors in any European Economic Area (“EEA”) member state, save as indicated below. To the extent that the Company is marketed to prospective investors in a member state of the EEA, it will be marketed only to professional investors. As of the date of this prospectus, no notification or application has been made to the competent authority of any member state of the EEA under the Alternative Investment Fund Managers, or AIFM, directive (or any applicable regulations made thereunder) or otherwise to market the Company to investors established in the EEA and it is not intended that any such notification or application shall be made, save as indicated below. However, this does not preclude a professional investor in the EEA investing in the Company on its own initiative (i.e. the prospective investor has received this prospectus on the basis of an inquiry made at its own initiative).

In this notice, “professional investor” means an investor which is considered to be a professional client or may, on request, be treated as a professional client within the meaning of Annex II to European Directive 2014/65/EU.

This prospectus is not a prospectus within the meaning of the European Prospectus Directive (Directive 2003/71/EC of the European Parliament and of the Council, as amended) (the “Prospectus Directive”). Shares in the Company will only be offered or sold in EEA member states to qualified investors (as defined in the Prospectus Directive) and may not be offered or sold in any EEA member state except in circumstances that do not require the approval of a prospectus by any regulatory authority competent under the Prospectus Directive. Any direct or indirect offering of shares by any prospective investor to other persons is prohibited except with the prior written express consent of the Advisor.

NOTICE TO RESIDENTS OF IRELAND

This prospectus is for the use only of the persons to whom it is addressed who may not otherwise distribute it in Ireland. No person other than the addressee receiving a copy of this prospectus may treat it as constituting a solicitation or an invitation to them to subscribe for shares in the Company. This prospectus does not constitute an offer or solicitation to anyone other than the addressee and accordingly does not constitute an offer to the public in Ireland.

The following disclosure is added to the “Experts” section of our Prospectus.

The amount of the estimated market values of our real properties as of July 31, 2022 presented on page 2 of this Supplement under the section “July 31, 2022 NAV Per Share” has been prepared by SitusAMC Real Estate Valuation Services, LLC (formerly known as RERC, LLC), an independent valuation firm, and is included in this Supplement given the authority of such firm as experts in property valuations and appraisals. SitusAMC Real Estate Valuation Services, LLC will not calculate or be responsible for our NAV per share for any class of our shares.

Quarterly Report for the Three Months Ended June 30, 2022

On August 15, 2022, we filed with the SEC our Quarterly Report on Form 10-Q for the three months ended June 30, 2022, a copy of which is attached to this Supplement as Appendix A (without exhibits).

 

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Appendix A

Quarterly Report on Form 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the quarterly period ended June 30, 2022

OR

 

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

For the transition period from                  to                 

Commission File Number 000-56273

 

 

nuveen

Nuveen Global Cities REIT, Inc.

(Exact name of Registrant as specified in its Charter)

 

 

 

Maryland   82-1419222

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

730 Third Avenue, 3rd Floor

New York, NY

  10017
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (212) 490-9000

 

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

None   N/A   N/A

 

 

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

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

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

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☒

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

As of August 15, 2022, there were 16,066,787 outstanding shares of Class T common stock, 41,762,306 outstanding shares of Class S common stock, 7,808,029 outstanding shares of Class D common stock, 69,522,125 outstanding shares of Class I common stock, and 29,730,608 outstanding shares of Class N common stock.

 

 

 


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Table of Contents

 

          Page  

PART I.

  

FINANCIAL INFORMATION

  

Item 1.

  

Financial Statements (unaudited)

     3  
  

Consolidated Balance Sheets as of June 30, 2022 and December  31, 2021 (unaudited)

     3  
  

Consolidated Statements of Operations for the three and six months ended June 30, 2022 and June 30, 2021 (unaudited)

     4  
  

Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and June 30, 2021 (unaudited)

     5  
  

Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2022 and June 30, 2021 (unaudited)

     6  
  

Consolidated Statements of Cash Flows for the six months ended June  30, 2022 and June 30, 2021 (unaudited)

     10  
  

Notes to Consolidated Financial Statements (unaudited)

     12  

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     44  

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

     69  

Item 4.

  

Controls and Procedures

     70  

PART II.

     

Item 1.

  

Legal Proceedings

     72  

Item 1A.

  

Risk Factors

     72  

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     73  

Item 3.

  

Defaults Upon Senior Securities

     73  

Item 4.

  

Mine Safety Disclosures

     74  

Item 5.

  

Other Information

     74  

Item 6.

  

Exhibits

     74  
  

Signatures

     75  


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ITEM 1. FINANCIAL STATEMENTS

Nuveen Global Cities REIT, Inc.

Consolidated Balance Sheets (unaudited)

(in thousands, except share and per share data)

 

     June 30,
2022
    December 31,
2021
 

Assets

    

Investments in real estate, net

   $ 1,124,824   $ 909,832

Investment in commercial mortgage loans, at fair value

     236,088     140,512

Investments in international affiliated funds

     128,124     131,046

Investments in real estate-related securities, at fair value

     105,173     93,970

Investments in real estate debt, at fair value

     83,167     14,183

Cash and cash equivalents

     358,954     36,163

Restricted cash

     87,700     94,413

Intangible assets, net

     62,912     57,473

Other assets

     15,710     20,545
  

 

 

   

 

 

 

Total assets

   $ 2,202,652   $ 1,498,137
  

 

 

   

 

 

 

Liabilities and Equity

    

Credit facility

   $ 155,000   $ 238,000

Loan participations, at fair value

     109,599     —    

Mortgages payable, net

     105,671     105,614

Note payable, at fair value

     69,263     —    

Subscriptions received in advance

     86,897     100,778

Due to affiliates

     45,489     30,006

Accounts payable, accrued expenses, and other liabilities

     27,858     14,810

Intangible liabilities, net

     23,262     22,522

Distributions payable

     8,832     5,323
  

 

 

   

 

 

 

Total liabilities

     631,871     517,053
  

 

 

   

 

 

 

Redeemable non-controlling interest

     584     258

Equity

    

Series A Preferred Stock

     126     126

Common stock - Class T shares, $0.01 par value per share, 500,000,000 shares authorized, 14,693,461 and 9,201,452 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

     147     92

Common stock - Class S shares, $0.01 par value per share, 500,000,000 shares authorized, 38,708,716 and 23,809,171 issued and outstanding at June 30, 2022 and December 31, 2021, respectively

     388     238

Common stock - Class D shares, $0.01 par value per share, 500,000,000 shares authorized, 7,442,455 and 4,648,665 issued and outstanding at June 30, 2022 and December 31, 2021, respectively

     73     46

Common stock - Class I shares, $0.01 par value per share, 500,000,000 shares authorized, 62,601,456 and 31,460,729 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

     627     316

Common stock - Class N shares, $0.01 par value per share, 100,000,000 shares authorized, 29,730,608 shares issued and outstanding at June 30, 2022 and December 31, 2021

     297     297

Additional paid-in capital

     1,714,792     1,043,073

Accumulated deficit and cumulative distributions

     (140,393     (63,958

Accumulated other comprehensive loss

     (6,673     (239
  

 

 

   

 

 

 

Total stockholder’s equity

     1,569,384     979,991

Non-controlling interest attributable to third party joint venture

     813     835
  

 

 

   

 

 

 

Total equity

     1,570,197     980,826
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,202,652   $ 1,498,137
  

 

 

   

 

 

 

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

 

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Nuveen Global Cities REIT, Inc.

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2022     2021     2022     2021  

Revenues

       

Rental revenue

  $ 24,482   $ 12,131   $ 46,150   $ 23,393

Income from commercial mortgage loans

    1,897     —         3,892     —    
 

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    26,379     12,131     50,042     23,393

Expenses

       

Rental property operating

    7,785     3,544     15,346     7,058

General and administrative

    2,525     874     4,621     1,931

Advisory fee due to affiliate

    6,431     1,631     11,137     2,695

Depreciation and amortization

    14,040     6,754     26,407     12,238
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    30,781     12,803     57,511     23,922

Other income (expense)

       

Realized and unrealized (loss) income from real estate-related securities

    (18,534     5,904     (21,938     8,785

Realized and unrealized loss from real estate debt

    (1,812     —         (2,518     —    

Income (loss) from equity investments in unconsolidated international affiliated funds

    4,126     (374     4,985     315

Unrealized loss on commercial mortgage loan

    (2,248     —         (2,248     —    

Interest income

    1,177     50     1,507     110

Interest expense

    (3,147     (1,002     (4,943     (1,945
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

    (20,438     4,578     (25,155     7,265
 

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

  $ (24,840   $ 3,906   $ (32,624   $ 6,736
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to non-controlling interest in third party joint venture

    (41     —         (22     —    

Net income attributable to preferred stock

    4     3     8     11
 

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to common stockholders

  $ (24,803   $ 3,903   $ (32,610   $ 6,725
 

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ (0.18   $ 0.07   $ (0.25   $ 0.14
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares of common stock outstanding, basic and diluted

    145,099,003     55,021,598     129,962,367     49,432,630
 

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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Nuveen Global Cities REIT, Inc.

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(in thousands)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2022     2021      2022     2021  

Net (loss) income

   $ (24,840   $ 3,906    $ (32,624   $ 6,736

Other comprehensive (loss) income:

         

Foreign currency translation adjustment

     (4,468     326      (6,434     (935
  

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive (loss) income

     (29,308     4,232      (39,058     5,801
  

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive loss attributable to non-controlling interest in third party joint venture

     (41     —          (22     —    

Comprehensive income attributable to preferred stock

     4     3      8     11
  

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive (loss) income attributable to common stockholders

   $ (29,271   $ 4,229    $ (39,044   $ 5,790
  

 

 

   

 

 

    

 

 

   

 

 

 

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

 

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Nuveen Global Cities REIT, Inc.

Consolidated Statements of Changes in Equity (unaudited)

(in thousands, except share data)

 

Three Months Ended June 30, 2022

 
    Preferred
Stock
    Par Value     Additional
Paid-in
Capital
    Accumulated
Deficit and
Cumulative
Distributions
    Accumulated
Other
Comprehensive
Income (Loss)
    Total
Stockholders’
Equity
    Non-Controlling
Interest Attributable
to Third Party Joint
Venture
    Total
Equity
 
  Common
Stock
Class T
    Common
Stock
Class S
    Common
Stock
Class D
    Common
Stock
Class I
    Common
Stock
Class N
 

Balance at March 31, 2022

  $ 126   $ 119     $ 310   $ 62   $ 439   $ 297   $ 1,329,491   $ (90,787   $ (2,205   $ 1,237,852   $ 854   $ 1,238,706

Issuance of 30,638,194 shares of common stock (net of $330 of offering costs)

    —         28       79     11     187     —         385,178     —         —         385,483     —         385,483

Distribution reinvestment

    —         —   (a)      2     1     4     —         8,637     —         —         8,644     —         8,644

Common stock repurchased

    —         —   (a)      (3     (1     (3     —         (8,152     —         —         (8,159     —         (8,159

Amortization of restricted stock grants

    —         —         —         —         —         —         (54     —         —         (54     —         (54

Net income (loss)

    4     —         —         —         —         —         —         (24,803     —         (24,799     (41     (24,840

Distributions on common stock

    —         —         —         —         —         —         —         (24,803     —         (24,803     —         (24,803

Distribution on preferred stock

    (4     —         —         —         —         —         —         —         —         (4     —         (4

Foreign currency translation adjustment

    —         —         —         —         —         —         —         —         (4,468     (4,468     —         (4,468

Allocation to redeemable non-controlling interest

    —         —         —         —         —         —         (308     —         —         (308     —         (308
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2022

  $ 126   $ 147     $ 388   $ 73   $ 627   $ 297   $ 1,714,792   $ (140,393   $ (6,673   $ 1,569,384   $ 813   $ 1,570,197
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Amount is not presented due to rounding; see Note 17.

 

6


Table of Contents

Three Months Ended June 30, 2021

 
   
Preferred
Stock
    Par Value     Additional
Paid-in
Capital
    Accumulated
Deficit and
Cumulative
Distributions
    Accumulated
Other
Comprehensive
Income
    Total
Stockholders’
Equity
    Non-Controlling
Interest Attributable
to Third Party Joint
Venture
    Total
Equity
 
  Common
Stock
Class T
    Common
Stock
Class S
    Common
Stock
Class D
    Common
Stock
Class I
    Common
Stock
Class N
 

Balance at March 31, 2021

  $ 129   $ 39     $ 47     $ 16     $ 61   $ 297   $ 459,893   $ (46,130   $ 907   $ 415,259   $ —       $ 415,259

Issuance of 13,448,464 shares of common stock (net of $234 of offering costs)

    —         16       48       8       61     —         140,818     —         —         140,951     —         140,951

Distribution reinvestment

    —         —   (a)      1       —   (a)      1     —         1,190     —         —         1,192     —         1,192

Common stock repurchased

    —         —   (a)      —   (a)      —   (a)      (1     —         (868     —         —         (869     —         (869

Amortization of restricted stock grants

    —         —         —         —         —         —         17     —         —         17     —         17

Net income

    3     —         —         —         —         —         —         3,903     —         3,906     —         3,906

Distributions on common stock

    —         —         —         —         —         —         —         (8,313     —         (8,313     —         (8,313

Distribution on preferred stock

    (3     —         —         —         —         —         —         —         —         (3     —         (3

Foreign currency translation adjustment

    —         —         —         —         —         —         —         —         326     326     —         326
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2021

  $ 129   $ 55     $ 96     $ 24     $ 122   $ 297   $ 601,050   $ (50,540   $ 1,233   $ 552,466   $ —     $ 552,466
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Amount is not presented due to rounding; see Note 17.

 

7


Table of Contents

Six Months Ended June 30, 2022

 
    Preferred
Stock
    Par Value     Additional
Paid-in
Capital
    Accumulated
Deficit and
Cumulative
Distributions
    Accumulated
Other
Comprehensive
Loss
    Total
Stockholders’
Equity
    Non-Controlling
Interest Attributable
to Third Party Joint
Venture
    Total
Equity
 
    Common
Stock
Class T
    Common
Stock
Class S
    Common
Stock
Class D
    Common
Stock
Class I
    Common
Stock
Class N
 

Balance at December 31, 2021

  $ 126   $ 92     $ 238   $ 46   $ 316   $ 297   $ 1,043,073   $ (63,958   $ (239   $ 979,991   $ 835   $ 980,826

Issuance of 54,326,072 shares of common stock (net of $524 of offering costs)

    —         54       149     27     309     —         667,709     —         —         668,248     —         668,248

Distribution reinvestment

    —         1       4     1     6     —         14,506     —         —         14,518     —         14,518

Common stock repurchased

    —         —   (a)      (3     (1     (4     —         (10,209     —         —         (10,217     —         (10,217

Amortization of restricted stock grants

    —         —         —         —         —         —         39     —         —         39     —         39

Net income (loss)

    8     —         —         —         —         —         —         (32,610     —         (32,602     (22     (32,624

Distributions on common stock

    —         —         —         —         —         —         —         (43,825     —         (43,825     —         (43,825

Distribution on preferred stock

    (8     —         —         —         —         —         —         —         —         (8     —         (8

Foreign currency translation adjustment

    —         —         —         —         —         —         —         —         (6,434     (6,434     —         (6,434

Allocation to redeemable non-controlling interest

    —         —         —         —         —         —         (326     —         —         (326     —         (326
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2022

  $ 126   $ 147     $ 388   $ 73   $ 627   $ 297   $ 1,714,792   $ (140,393   $ (6,673   $ 1,569,384   $ 813   $ 1,570,197
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Amount is not presented due to rounding; see Note 17.

 

8


Table of Contents

Six Months Ended June 30, 2021

 
   
Preferred
Stock
    Par Value     Additional
Paid-in
Capital
    Accumulated
Deficit and
Cumulative
Distributions
    Accumulated
Other
Comprehensive
Income
    Total
Stockholders’
Equity
    Non-Controlling
Interest Attributable
to Third Party Joint
Venture
    Total
Equity
 
    Common
Stock
Class T
    Common
Stock
Class S
    Common
Stock
Class D
    Common
Stock
Class I
    Common
Stock
Class N
 

Balance at December 31, 2020

  $ 250   $ 33     $ 28     $ 13     $ 46   $ 297   $ 416,348   $ (42,406   $ 2,168   $ 376,777   $ —     $ 376,777

Issuance of 17,678,466 shares of common stock (net of $400 of offering costs)

    —         22       67       11       76     —         183,840     —         —       $ 184,016   $ —     $ 184,016

Distribution reinvestment

    —         —   (a)      1       —   (a)      1     —         1,986     —         —       $ 1,988   $ —     $ 1,988

Preferred stock redemption

    (125     —         —         —         —         —         —         —         —       $ (125   $ —     $ (125

Amortization of restricted stock grants

    —         —         —         —         —         —         34     —         —       $ 34   $ —     $ 34

Common stock repurchased

    —         —   (a)      —   (a)      —   (a)      (1     —         (1,158     —         —       $ (1,159   $ —     $ (1,159

Net income

    11     —         —         —         —         —         —         6,725     —       $ 6,736   $ —     $ 6,736

Distributions on common stock

    —         —         —         —         —         —         —         (14,859     —       $ (14,859   $ —     $ (14,859

Distribution on preferred stock

    (7     —         —         —         —         —         —         —         —       $ (7   $ —     $ (7

Foreign currency translation adjustment

    —         —         —         —         —         —         —         —         (935   $ (935   $ —     $ (935
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2021

  $ 129   $ 55     $ 96     $ 24     $ 122   $ 297   $ 601,050   $ (50,540   $ 1,233   $ 552,466   $ —     $ 552,466
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Amount is not presented due to rounding; see Note 17.

 

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Table of Contents

Nuveen Global Cities REIT, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

     Six Months Ended
June 30,
 
     2022     2021  

Cash flows from operating activities:

    

Net (loss) income

   $ (32,624   $ 6,736

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

    

Depreciation and amortization

     26,407     12,238

Unrealized loss (gain) on changes in fair value of real estate-related securities

     28,356     (6,479

Realized gain on sale of real estate-related securities

     (4,872     (1,565

Unrealized loss on changes in fair value of real estate debt

     2,514     —    

Unrealized loss on changes in commercial mortgage loans

     2,248     —    

Realized loss on sale of real estate debt

     4     —    

Income from equity investment in unconsolidated international affiliated funds

     (4,985     (315

Income distribution from equity investment in unconsolidated international affiliated funds

     1,472     524

Straight line rent adjustment

     (1,056     (795

Amortization of above and below-market lease intangibles

     (1,713     (505

Amortization of deferred financing costs

     380     274

Amortization of restricted stock grants

     39     34

Change in assets and liabilities:

    

Decrease in other assets

     5,569     1

Increase in accounts payable, accrued expenses, and other liabilities

     11,980     189
  

 

 

   

 

 

 

Net cash provided by operating activities

     33,719     10,337
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisitions of real estate

     (235,689     (142,397

Origination and fundings of commercial mortgage loans

     (96,048     —    

Capital improvements to real estate

     (7,628     (1,017

Purchase of real estate-related securities

     (39,608     (24,361

Proceeds from sale of real estate-related securities

     4,921     14,025

Purchases of real estate debt

     (71,502     —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (445,554     (153,750

Cash flows from financing activities:

    

Proceeds from issuance of common stock

     581,229     184,860

Repurchase of common stock

     (7,342     (1,159

Offering costs paid

     (524     (421

Borrowings from credit facility

     107,000     126,000

Repayments on credit facility

     (190,000     (114,000

Borrowings from mortgages payable

     —         28,750

Proceeds from note payable

     69,263     —    

Payment of deferred financing costs

     —         (289

Proceeds from sale of loan participations

     107,823     —    

Payment of offering and organization costs due to affiliate

     (627     —    

Repurchase of preferred stock

     —         (125

Distributions to preferred stockholders

     (8     (7

 

10


Table of Contents

Nuveen Global Cities REIT, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

     Six Months Ended
June 30,
 
     2022     2021  

Subscriptions received in advance

     86,897     70,623

Distributions

     (25,798     (11,936
  

 

 

   

 

 

 

Net cash provided by financing activities

     727,913     282,296
  

 

 

   

 

 

 

Net increase in cash and cash equivalents and restricted cash during the period

     316,078     138,883

Cash and cash equivalents and restricted cash, beginning of period

     130,576     15,671
  

 

 

   

 

 

 

Cash and cash equivalents and restricted cash, end of period

   $ 446,654   $ 154,554
  

 

 

   

 

 

 

Reconciliation of cash and cash equivalents and restricted cash to the Consolidated Balance Sheets, end of period:

    

Cash and cash equivalents

   $ 358,954   $ 83,931

Restricted cash

     87,700     70,623
  

 

 

   

 

 

 

Total cash and cash equivalents and restricted cash

   $ 446,654   $ 154,554
  

 

 

   

 

 

 

Supplemental disclosures:

    

Interest paid

   $ 3,996   $ 1,861
  

 

 

   

 

 

 

Non-cash investing activities:

    

Assumption of other liabilities in conjunction with acquisitions of investments in real estate

   $ 1,835   $ 233
  

 

 

   

 

 

 

Accrued capital expenditures

   $ 1,067   $ 96
  

 

 

   

 

 

 

Non-cash financing activities:

    

Accrued distributions

   $ (3,509   $ 935
  

 

 

   

 

 

 

Accrued stockholder servicing fees

   $ 16,110   $ 6,458
  

 

 

   

 

 

 

Distribution reinvestments

   $ 14,518   $ 1,988
  

 

 

   

 

 

 

Accrued offering costs

   $ —     $ (21
  

 

 

   

 

 

 

Allocation to redeemable non-controlling interest

   $ 326   $ —  
  

 

 

   

 

 

 

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

 

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Table of Contents

Nuveen Global Cities REIT, Inc.

Notes to consolidated financial statements (Unaudited)

Note 1. Organization and Business Purpose

Nuveen Global Cities REIT, Inc. (the “Company”) was formed on May 1, 2017 as a Maryland corporation and elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its taxable year ending December 31, 2018 and intends to operate in a manner that will allow it to continue to qualify as a REIT. The Company’s sponsor is Nuveen, LLC (the “Sponsor”), a wholly owned subsidiary of Teachers Insurance and Annuity Association of America (“TIAA”). The Company is the sole general partner of Nuveen Global Cities REIT OP, LP, a Delaware limited partnership (“Nuveen OP”). Nuveen OP has issued a limited partner interest to Nuveen Global Cities REIT LP, LLC (the “Limited Partner”), a wholly owned subsidiary of the Company. The Company was organized to invest primarily in stabilized income-oriented commercial real estate in the United States and a substantial but lesser portion of the Company’s portfolio will include real properties located in Canada, Europe and the Asia-Pacific region. Substantially all of the Company’s business is conducted through Nuveen OP. The Company and Nuveen OP are externally managed by Nuveen Real Estate Global Cities Advisors, LLC (the “Advisor”), an indirect, wholly owned subsidiary of the Sponsor and an investment advisory affiliate of Nuveen Real Estate.

Pursuant to a Registration Statement on Form S-11 (File No. 333-222231), the (“IPO Registration Statement”), the Company registered with the Securities and Exchange Commission (the “SEC”) its initial public offering of up to $5.0 billion in shares of common stock, consisting of up to $4.0 billion in shares in its primary offering and up to $1.0 billion in shares pursuant to its distribution reinvestment plan (the “Initial Public Offering”). The IPO Registration Statement was initially declared effective on January 31, 2018 and terminated on July 2, 2021.

On January 13, 2021, the Company filed a Registration Statement on Form S-11 (File No. 333-252077), (the “Follow-on Registration Statement”) to register up to $5.0 billion shares of common stock, consisting of up to $4.0 billion in shares in its primary offering and up to $1.0 billion in shares pursuant to its distribution reinvestment plan (the “Follow-on Public Offering”). The Follow-on Registration Statement was declared effective by the SEC on July 2, 2021. In the Follow-on Public Offering, the Company is offering to the public any combination of four classes of shares of its common stock, Class T shares, Class S shares, Class D shares and Class I shares, with a dollar value up to the maximum offering amount. The publicly offered share classes have different upfront selling commissions and ongoing stockholder servicing fees. The purchase price per share for each class of common stock varies and generally equals the Company’s prior month’s net asset value (“NAV”) per share, as calculated monthly, plus applicable upfront selling commissions and dealer manager fees.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, and in the opinion of management, include all necessary adjustments, consisting of only normal and recurring items, necessary for a fair statement of the Company’s consolidated financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021. Results of operations for the interim periods are not necessarily indicative of results for the entire year. These financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the applicable rules and regulations of the SEC. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. Certain footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed from this report pursuant to the rules of the SEC. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements prepared in accordance with GAAP, and the related notes thereto, that are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the SEC. The year-end balance sheet was derived from those audited financial statements.

 

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Table of Contents

The accompanying condensed consolidated financial statements include the accounts of the Company, the Company’s subsidiaries and joint ventures in which the Company has a controlling interest.

Principles of Consolidation

The Company consolidates all entities in which it has a controlling financial interest through majority ownership or voting rights and variable interest entities whereby the Company is the primary beneficiary. In determining whether the Company has a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, the Company considers whether the entity is a variable interest entity (“VIE”) and whether it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has (i) the power to direct the most significant activities impacting the economic performance of the VIE and (ii) the obligation to absorb losses or receive benefits significant to the VIE. Entities that do not qualify as VIEs are generally considered voting interest entities (“VOEs”) and are evaluated for consolidation under the voting interest model. VOEs are consolidated when the Company controls the entity through a majority voting interest or other means. When the requirements for consolidation are not met and the Company has significant influence over the operations of the entity, the investment is accounted for under the equity method of accounting. Equity method investments for which the Company has not elected a fair value option (“FVO”) are initially recorded at cost and subsequently adjusted for the Company’s pro-rata share of net income, contributions and distributions. When the Company elects the FVO, the Company records its share of net asset value of the entity and any related unrealized gains and losses.

The Company holds interest in a joint venture that is considered to be a VIE. The Company consolidated this entity because it has the ability to direct the most significant activities of the joint venture, including unilateral decision making on the disposition of the investment.

For select joint ventures, the non-controlling partner’s share of the assets, liabilities, and operations of each joint venture is included in noncontrolling interests as equity of the Company. The non-controlling partner’s interest is generally computed as the joint venture partner’s ownership percentage. Certain of the joint ventures formed by the Company provide the other partner a profits interest based on certain internal rate of return hurdles being achieved. Any profits interest due to the other partner is reported within redeemable non-controlling interests.

As of June 30, 2022, and December 31, 2021, the total assets and liabilities of the Company’s consolidated VIE were $52.2 million and $30.0 million, and $53.5 million and $29.7 million, respectively. Such amounts are included on the Company’ Consolidated Balance Sheets.

The Company has limited contractual rights to obtain the financial records of its consolidated single-family housing and self-storage portfolios from the operating partner. The operating partner does not prepare separate GAAP financial statements; therefore, the Company compiles GAAP financial information for them based on reports prepared by and received from the operating partner. Such reports are not available to the Company until approximately 25 days after the end of any given period. As a result, single-family rental and self-storage activities are generally included in the Company’s consolidated financial statements on a one month lag; however, any significant activity that occurs in the final month of the quarter is recorded in that period.

Investments in Real Estate

In accordance with the guidance for business combinations, the Company determines whether the acquisition of a property qualifies as a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the property acquired is not a business, the Company accounts for the transaction as an asset acquisition. All property acquisitions to date have been accounted for as asset acquisitions.

Whether the acquisition of a property acquired is considered a business combination or asset acquisition, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in

 

13


Table of Contents

the acquired entity. In addition, for transactions that will be considered business combinations, the Company will evaluate the existence of goodwill or a gain from a bargain purchase. The Company expenses acquisition-related costs associated with business combinations as they are incurred. The Company capitalizes acquisition-related costs associated with asset acquisitions.

Upon acquisition of a property, the Company assesses the fair value of acquired tangible and intangible assets (including land, buildings, tenant improvements, above-market and below-market leases, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocates the purchase price to the acquired assets and assumed liabilities. The Company assesses and considers fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that it deems appropriate, as well as other available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known and anticipated trends and market and economic conditions.

The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. The Company also considers an allocation of purchase price of other acquired intangibles, including acquired in-place leases that may have a customer relationship intangible value, including but not limited to the nature and extent of the existing relationship with the tenants, the tenants’ credit quality and expectations of lease renewals. Based on its acquisitions to date, the Company’s allocation to customer relationship intangible assets has not been material.

The Company records acquired above-market and below-market leases at their fair values (using a discount rate which reflects the risks associated with the leases acquired) equal to the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. Other intangible assets acquired include amounts for in-place lease values that are based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related expenses.

Intangible assets and intangible liabilities are recorded as separate components on the Company’s Consolidated Balance Sheets. The amortization of acquired above-market and below-market leases is recorded as an adjustment to Rental Revenue on the Company’s Consolidated Statements of Operations. The amortization of in-place leases is recorded as an adjustment to Depreciation and Amortization on the Company’s Consolidated Statements of Operations.

The cost of buildings and improvements includes the purchase price of the Company’s properties and any acquisition-related adjustments, along with any subsequent improvements to such properties. The Company’s Investments in Real Estate are stated at cost and are generally depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

 

Description

   Depreciable Life

Building

   40 years

Building, land and site improvements

   15-40 years

Furniture, fixtures and equipment

   3-7 years

Lease intangibles

   Over lease term

Significant improvements to properties are capitalized. When assets are sold or retired, their costs and related accumulated depreciation or amortization are removed from the accounts with the resulting gains or losses reflected in net income or loss for the period.

 

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Repairs and maintenance are expensed to operations as incurred and are included in Rental Property Operating on the Company’s Consolidated Statements of Operations.

The Company’s management reviews its real estate properties for impairment each quarter or when there is an event or change in circumstances that indicates an impaired value. If the carrying amount of the real estate investment is no longer recoverable and exceeds the fair value of such investment, an impairment loss is recognized. The impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value, or fair value, less cost to sell if classified as held for sale. If the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material to the Company’s results. If the Company determines that an impairment has occurred, the affected assets are reduced to their fair value or fair value, less cost to sell if classified as held for sale. During the periods presented, no such impairment occurred.

Investments in Real Estate-Related Securities

The Company reports its investment in real estate-related securities at fair value and any changes in fair value are recorded in the current period earnings. Dividend income is recorded when declared and the resulting dividend income, along with gains and losses are recorded as a component of Realized and Unrealized Income (Loss) from Real Estate-Related Securities on the Company’s Consolidated Statements of Operations.

Investments in Real Estate Debt

The Company’s investments in real estate debt consists of commercial mortgage-backed securities (“CMBS”). The Company classifies the securities as trading securities and records such investments at fair value. As such, the resulting unrealized gains and losses of such securities are recorded as a component of Realized and Unrealized Loss from Real Estate Debt on the Company’s Consolidated Statements of Operations.

Interest income from the Company’s investments in CMBS is recognized over the life of each investment and is recorded on the accrual basis on the Company’s Consolidated Statements of Operations.

Investments in International Affiliated Funds

The Company reports its investment in European Cities Partnership SCSp (“ECF”) and Asia Pacific Cities Fund (“APCF”), investment funds managed by an affiliate of TIAA (collectively, the “International Affiliated Funds”), under the equity method of accounting as it has significant influence over these investments. The equity method income (loss) from the investments in the International Affiliated Funds represents the Company’s allocable share of each fund’s net income or loss, which includes income and expense, realized gains and losses, and unrealized appreciation or depreciation as determined from the financial statements of ECF and APCF (which carry investments at fair value in accordance with the applicable GAAP) and is reported as Income (Loss) from Equity Investment in Unconsolidated International Affiliated Funds on the Company’s Consolidated Statements of Operations.

All contributions to or distributions from the investment in the International Affiliated Funds are accrued when notice is received and recorded as a receivable from or payable to the International Affiliated Funds on the Company’s Consolidated Balance Sheets.

Investment in Commercial Mortgage Loans

The Company has originated multiple commercial mortgage loans and elected the fair value option for each. In accordance with the adoption of the fair value option allowed under ASC 825, Financial Instruments, and at the election of the Company, the commercial mortgage loans were stated at fair value and were initially valued at the face amount of the loan funding. Subsequently, the commercial mortgage loans were valued at least quarterly by

 

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an independent third-party valuation firm with additional oversight being performed by the Advisor’s internal valuation department. The value was based on market factors, such as market interest rates and spreads for comparable loans, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral), and the credit quality of the borrower.

The income from the commercial mortgage loans represents interest income and origination fee income, which is reported as Income from Commercial Mortgage Loans on the Company’s Consolidated Statements of Operations. Unrealized gains and losses are recorded as a component of Unrealized Loss on Commercial Mortgage Loan on the Company’s Consolidated Statements of Operations.

In the event of a partial or whole sale of the commercial mortgage loan that qualifies for sale accounting under GAAP, the Company derecognizes the corresponding asset and fees paid as part of the partial or whole sale are recognized on the Company’s Consolidated Statements of Operations.

Senior Loan Participations

In certain instances, the Company finances loans through the non-recourse syndication of a senior loan interest to a third party. Depending on the particular structure of the syndication, the senior loan interest may remain on the Company’s Consolidated Balance Sheets or, in other cases, the sale will be recognized and the senior loan interest will no longer be included in consolidated financial statements. When these sales do not qualify for sale accounting under GAAP, the Company reflects the transaction by recording a loan participations liability at fair value on the Consolidated Balance Sheets, however this gross presentation does not impact Stockholders’ Equity or Net Income. When the sales are recognized, the Consolidated Balance Sheets only includes the remaining subordinate loan and not the non-consolidated senior interest sold.

Note Payable

The Company finances the acquisition of certain mortgage loans through the use of “note-on-note” transactions in which the Company pledges mortgage loans as collateral to secure a loan which is equal in value to a specified percentage of the estimated fair value of the pledged collateral. These “note-on-note” transactions are recorded in Note Payable on the Consolidated Balance Sheets and are carried at fair value through the adoption of the fair value option allowed under ASC 825.

Financing costs related to the Company’s note payable are expensed as incurred and recorded in Interest Expense on the Consolidated Statements of Operations.

Deferred Charges

The Company’s deferred charges include financing and leasing costs. Financing costs include legal, structuring, and other loan costs incurred by the Company for its financing arrangements. Deferred financing costs related to the Credit Facility (as defined herein) are recorded as a component of Other Assets on the Company’s Consolidated Balance Sheets and are being amortized on a straight-line basis over the term of the Credit Facility, which approximates the effective interest method. Unamortized costs are charged to interest expense upon early repayment or significant modification of the Credit Facility and fully amortized deferred financing costs are removed from the books upon the maturity of the Credit Facility. Deferred financing costs related to the Company’s mortgages payable are recorded as an offset to the related liability and amortized on a straight-line basis over the term of the financing instrument, which approximates the effective interest method. Deferred leasing costs incurred in connection with new leases, which consist primarily of brokerage and legal fees, are recorded as a component of Investments in Real Estate, Net on the Company’s Consolidated Balance Sheets and amortized over the life of the related lease.

 

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Fair Value 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 on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

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

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

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

Investments in real estate-related securities are recorded at fair value based on the closing price of the common stock as reported by the applicable national securities exchange and were classified as Level 1.

The Company’s investments in real estate debt are reported at fair value. As of June 30, 2022, the Company’s investments in real estate debt consisted of CMBS, which are securities backed by one or more mortgage loans secured by real estate assets. The Company generally determines the fair value of its investments in real estate debt by utilizing third-party pricing service providers whenever available and has classified as Level 2.

The Company’s investment in commercial mortgage loans consists of floating rate senior and mezzanine loans the Company originated and has classified as Level 3. The commercial mortgage loans are carried at fair value based on significant unobservable inputs.

The Company’s loan participations and note payable are carried at fair value based on significant observable inputs and have been classified as Level 3.

The carrying amounts of financial instruments such as other assets, accounts payable, accrued expenses and other liabilities approximate their fair values due to the short-term maturities and market rates of interest of these instruments.

 

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The following table details the Company’s assets and liabilities measured at fair value on a recurring basis ($ in thousands):

 

    June 30, 2022     December 31, 2021  
    Level I     Level 2     Level 3     Total     Level I     Level 2     Level 3     Total  

Assets:

               

Investments in real estate-related securities

  $ 105,173   $ —       $ —     $ 105,173   $ 93,970   $ —     $ —     $ 93,970

Investments in real estate debt

  $ —     $ 83,167   $ —     $ 83,167   $ —     $ 14,183   $ —     $ 14,183

Investments in commercial mortgage loans

  $ —     $ —     $ 236,088   $ 236,088   $ —     $ —     $ 140,512   $ 140,512
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 105,173   $ 83,167   $ 236,088   $ 424,428   $ 93,970   $ 14,183   $ 140,512   $ 248,665
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

               

Loan participations

  $ —     $ —     $ 109,599   $ 109,599   $ —     $ —     $ —     $ —  

Note payable

  $ —     $ —     $ 69,263   $ 69,263   $ —     $ —     $ —     $ —  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ —     $ —     $ 178,862   $ 178,862   $ —     $ —     $ —     $ —  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table details the Company’s assets and liabilities measured at fair value on a recurring basis using Level 3 inputs ($ in thousands):

 

     Investments in
Commercial Mortgage
Loans
    Loan Participations      Note Payable  

Balance as of December 31, 2021

   $ 140,512     $ —      $ —  

Loan Originations

     92,350       —          —    

Loan Participations Sold

     —         105,966      —    

Additional Fundings

     3,698       1,857      —    

Net Unrealized (Loss) Gain

     (472 )(a)      1,776      —    

Financing Proceeds

     —         —          69,263
  

 

 

   

 

 

    

 

 

 

Balance as of June 30, 2022

   $ 236,088     $ 109,599    $ 69,263
  

 

 

   

 

 

    

 

 

 

 

(a)

Includes Unrealized Loss on Commercial Mortgage Loans of $(2.2) million, net of unrealized gains of $1.7 million associated with loan participations.

The following table shows the quantitative information about unobservable inputs related to the Level 3 fair value measurements comprising the investments in commercial mortgage loans, loan participations and note payable as of June 30, 2022.

 

Type

  

Asset Class

  

Valuation Technique

  

Unobservable
Inputs

  

Weighted Average

Commercial Mortgage Loans    Various    Cash Equivalency Method    Discount Rate   

LIBOR(1) + 1.75% -

LIBOR (1) + 5.75% - 5.97%

Loan Participations    Various    Cash Equivalency Method    Discount Rate   

SOFR (2) + 1.65%

LIBOR(1) + 1.75%

Note Payable    Various    Cash Equivalency Method    Discount Rate   

SOFR (2) + 1.65%

SOFR (2) + 1.65%

 

(1)

LIBOR as of June 30, 2022 was 1.2%.

(2)

SOFR as of June 30, 2022 was 1.3%.

 

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As of June 30, 2022, the carrying value of the Company’s Credit Facility approximated fair value. The fair value of the Company’s mortgages payable was $98.7 million and $106.3 million as of June 30, 2022 and December 31, 2021, respectively. Fair value of the Company’s indebtedness is estimated by modeling the cash flows required by the Company’s debt agreements and discounting them back to present value using the appropriate discount rate. Additionally, the Company considers current market rates and conditions by evaluating similar borrowing agreements with comparable loan-to-value ratios and credit profiles. The inputs used in determining the fair value of the Company’s indebtedness are considered Level 3.

Revenue Recognition

The Company’s sources of revenue and the related revenue recognition policies are as follows:

Rental revenue—consists primarily of base rent arising from tenant operating leases at the Company’s office, industrial, self-storage, multifamily, retail, healthcare and single-family housing properties. Rental revenue is recognized on a straight-line basis over the life of the lease, including any rent steps or abatement provisions. The Company begins to recognize revenue when a tenant takes possession of the leased space. The Company includes its tenant reimbursement income in rental revenue that consists of amounts due from tenants for costs related to common area maintenance, real estate taxes and other recoverable costs as defined in lease agreements.

Income from Commercial Mortgage Loan—consists of income from interest earned and recognized as operating income based upon the principal amount outstanding and the contracted interest rate along with origination fees. The accrual of interest income on mortgage loans is discontinued when in management’s opinion, the borrower may be unable to meet payments as they become due (“nonaccrual mortgage loans”), unless the loan is well-secured and is in the process of collection. Interest income on nonaccrual mortgage loans is subsequently recognized only to the extent cash payments are received until the loans are returned to accrual status. As of June 30, 2022, the Company did not have any mortgage loans on nonaccrual status.

Leases

The Company derives revenue pursuant to lease agreements. At the inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the lease inception, the Company determines whether each lease is a sales-type, direct financing or operating lease. Such classification is based on whether:

 

   

The lessee gains control of the underlying asset and the lessor therefore relinquishes control to the lessee under certain criteria (sales-type or direct-financing); or

 

   

All other leases that do not meet the criteria as sales-type or direct financing leases (operating).

The Company’s leases are classified as operating leases in accordance with relevant accounting guidelines, and the related revenue is recognized on a straight-line basis. Upon the termination or vacation of a tenant lease, the associated straight-line rent receivable is written off.

Cash and Cash Equivalents

Cash and cash equivalents represent cash held in banks, cash on hand and liquid investments with original maturities of three months or less at the time of purchase. The Company may have bank balances in excess of federally insured amounts; however, the Company deposits its cash with high credit-quality institutions to minimize credit risk.

 

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Restricted Cash

As of June 30, 2022, the Company had $87.7 million of restricted cash. The restricted cash consisted of $0.8 million of tenant security deposits and $86.9 million of cash received for subscriptions prior to the date in which the subscriptions are effective, which is held in a bank account controlled by the Company’s transfer agent, but in the name of the Company.

Income Taxes

The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code (“Code”) commencing with its taxable year ending December 31, 2018 and intends to operate in a manner that will allow it to continue to qualify as a REIT. In qualifying for taxation as a REIT, the Company generally is not subject to federal corporate income tax to the extent it distributes annually at least 90% of its taxable income (determined without regard to the dividends-paid deduction and excluding any net capital gains) to its shareholders. A REIT is subject to U.S. federal income tax on undistributed REIT taxable income and net capital gains, and may be subject to 21% corporate income tax and a 4% excise tax. REITs are subject to a number of other organizational and operational requirements. Even in qualifying for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. The Company may elect to treat certain of its corporate subsidiaries as taxable REIT subsidiaries (“TRSs”). In general, a TRS may perform additional services for the Company’s tenants and generally may engage in any real estate or non-real estate-related business other than management or operation of a lodging facility or a health care facility. A domestic TRS is subject to US corporate federal income tax. The Cayman Islands TRSs are not subject to US corporate federal income tax or Cayman Islands taxes. As of June 30, 2022, the Company had four active TRSs: the Company uses two Cayman Islands TRSs to hold its investments in the International Affiliated Funds, uses one domestic TRS to hold the senior portions of the commercial mortgage loans, and one domestic TRS for self-storage, nonrental-related business.

The Company accrues liabilities when it believes that it is more likely than not that it will not realize the benefits of tax positions that it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740-10, Uncertain Tax Positions.

Tax legislation commonly referred to as the Tax Cuts & Jobs Act (the “TCJA”) was enacted on December 22, 2017. Among other things, the TCJA reduced the U.S. federal corporate income tax rate from 35% to 21% and created new taxes on certain foreign-sourced earnings. Federal legislation intended to ameliorate the economic impact of the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), was enacted on March 27, 2020, which, among other things, made technical corrections to, or modifies on a temporary basis, certain of the provisions of the TCJA.

Management has evaluated the effects of TCJA, as modified by the CARES Act, and concluded that the TCJA will not materially impact its consolidated financial statements. The Company also estimates that the taxes on foreign-sourced earnings imposed under the TCJA are not likely to apply to its foreign investments.

Organization and Offering Expenses

The Advisor advanced organization and offering expenses on behalf of the Company (including legal, accounting, and other expenses attributable to the organization, but excluding upfront selling commissions, dealer manager fees and stockholder servicing fees) through the fourth full fiscal quarter after the Company’s acquisition of its first property. The Company agreed to reimburse the Advisor for all such advanced expenses it incurred in 60 equal monthly installments commencing on the earlier of the date the Company’s NAV reaches $1.0 billion or January 31, 2023. The Company’s NAV reached $1.0 billion in October 2021 and as of June 30, 2022, had reimbursed the Advisor $0.6 million for such costs.

 

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The Advisor and its affiliates have incurred organization and offering expenses on the Company’s behalf for the Initial Public Offering of $4.6 million, consisting of offering costs of $3.5 million and organization costs of $1.1 million, of which $4.0 million and $4.6 million remain outstanding as of June 30, 2022 and December 31, 2021, respectively. These organization and offering costs are recorded as Due to Affiliates on the Company’s Consolidated Balance Sheets.

Offering costs are currently charged to equity as such amounts are incurred. For the three and six months ended June 30, 2022, the Company charged $0.3 million and $0.5 million, respectively, in offering costs to equity.

Foreign Currency

The financial position and results of operations of ECF is measured using the local currency (Euro) as the functional currency and are translated into U.S. dollars for purposes of recording the related activity under the equity method of accounting. Net income (loss), which includes the Company’s allocable share of ECF’s income and expense, realized gains and losses and unrealized appreciation or depreciation, has been translated at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of accumulated other comprehensive income (loss), unless there is a sale or complete liquidation of the underlying foreign investments. Foreign currency translation adjustments resulted in other comprehensive losses of approximately $(4.5) million and $(6.4) million for the three and six months ended June 30, 2022, respectively. Foreign currency translation adjustments resulted in other comprehensive gains (losses) of approximately $0.3 million and $(0.9) million for the three and six months ended June 30, 2021, respectively.

The financial position and results of operations of APCF is measured in U.S. dollars for purposes of recording the related activity under the equity method of accounting. There is no direct foreign currency exposure to the Company for its investment in APCF.

Earnings per Share

Basic net income/(loss) per share of common stock is determined by dividing net income/(loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. All classes of common stock are allocated net income/(loss) at the same rate per share. The Company does not have any dilutive securities outstanding that would cause basic earnings per share and diluted earnings per share to differ.

Recent Accounting Pronouncements

In July 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-05—Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments (“ASU 2021-05”). The amendments in ASU 2021-05 amend the lease classification requirements for lessors to align them with practice under Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if certain criteria are met. When a lease is classified as operating, the lessor does not recognize a net investment in the lease, does not derecognize the underlying asset, and, therefore, does not recognize a selling profit or loss. The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities. Management has adopted the guidance and it did not have a material impact to the financial statements.

In April 2020, the FASB staff released guidance focused on treatment of concessions related to the effects of COVID-19 on the application of lease modification guidance in Accounting Standards Codification (ASC) 842, “Leases.” The guidance provides a practical expedient to forgo the associated reassessments required by ASC 842 when changes to a lease result in similar or lower future consideration. There were no material exposures to rent concessions or lease defaults for tenants impacted by the COVID-19 pandemic as of June 30, 2022.

 

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In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. The expedients and exceptions are effective for the period from March 12, 2020 to December 31, 2022. Management is assessing the impact and currently does not expect the guidance to materially impact the Company.

Note 3. Investments in Real Estate

Investments in Real Estate, Net consisted of the following ($ in thousands):

 

     June 30, 2022      December 31, 2021  

Building and building improvements

   $ 971,661    $ 778,324

Land and land improvements

     204,715      166,944

Furniture, fixtures and equipment

     10,546      9,976
  

 

 

    

 

 

 

Total

     1,186,922      955,244

Accumulated depreciation

     (62,098      (45,412
  

 

 

    

 

 

 

Investments in real estate, net

   $ 1,124,824    $ 909,832
  

 

 

    

 

 

 

For the three and six months ended June 30, 2022, depreciation expense was $9.1 million and $16.7 million, respectively. For the three and six months ended June 30, 2021, depreciation expense was $4.2 million and $8.0 million, respectively.

During the six months ended June 30, 2022, the Company acquired an interest in three industrial, two self-storage, and 65 single-family rental real estate investments.

The following table provides details of the properties acquired during the six months ended June 30, 2022 ($ in thousands):

 

Property Name   Ownership
Interest
    Number of
Properties
    Location     Sector     Acquisition
Date
    Acquisition
Price(1)
 

Tampa Lakeland Industrial

    100%       3       Tampa, FL       Industrial       January, 2022       54,900

610 Loop - Houston Industrial

    100%       5       Houston, TX       Industrial       March, 2022       76,100

Palm Bay Storage

    100%       1       Palm Bay, FL       Self-Storage       June, 2022       5,020

Imperial Sugarland Storage

    100%       1       Sugarland, TX       Self-Storage       June, 2022       20,250

UP Minneapolis Industrial

    100%       3       Minnesota       Industrial       June, 2022       54,350

Single-Family Rentals

    100%       65       Various      
Single-Family
Housing
 
 
    Various       25,069
   

 

 

         

 

 

 
      78           $ 235,689
   

 

 

         

 

 

 

 

(1)

Acquisition price is inclusive of acquisition costs and other acquisition related adjustments. Acquisition price does not include any net liabilities assumed.

 

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The following table summarizes the purchase price allocation for the properties acquired during the six months ended June 30, 2022 ($ in thousands):

 

     Tampa
Lakeland
Industrial
    610 Loop -
Houston
Industrial
    Palm
Bay
Storage
     Imperial
Sugarland
Storage
     UP
Minneapolis
Industrial
     Single-
Family
Rentals
 

Building and building improvements

   $ 43,523   $ 64,716   $ 4,153    $ 18,858    $ 36,244    $ 18,361

Land and land improvements

     8,011     8,660     580      770      12,972      6,698

In-place lease intangibles

     2,956     2,531     275      613      2,237      10

Furniture, fixtures and equipment

     —         —         12      9      1,159      —    

Leasing Commissions

     831     1,019     —          —          1,251      —    

Other intangibles

     (421     (826     —          —          487      —    
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total purchase price

   $ 54,900   $ 76,100   $ 5,020    $ 20,250    $ 54,350    $ 25,069
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Note 4. Investments in Real Estate-Related Securities

As of June 30, 2022 and December 31, 2021, the Company’s investments in real estate-related securities consisted of shares of common stock of publicly-listed REITs. As described in Note 2, the Company records its investments in real estate-related securities at fair value on its Consolidated Balance Sheets.

The following table summarizes the Investments in Real Estate-Related Securities as of June 30, 2022 ($ in thousands):

 

     Investments in Real
Estate-Related Securities
 

Balance as of December 31, 2021

   $ 93,970

Additions

     39,608

Disposals

     (4,921

Unrealized losses

     (28,356

Realized gains

     4,872
  

 

 

 

Balance as of June 30, 2022

   $ 105,173
  

 

 

 

The following table summarizes the components of Realized and Unrealized Income (Loss) from Real Estate-Related Securities during the three and six months ended June 30, 2022 and 2021 ($ in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2022      2021      2022      2021  

Unrealized (losses) gains

   $ (21,338    $ 4,706    $ (28,356    $ 6,479

Realized gains

     1,943      789      4,872      1,565

Dividend income

     861      409      1,546      741
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ (18,534    $ 5,904    $ (21,938    $ 8,785
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Note 5. Investments in Real Estate Debt

The following tables detail the Company’s Investments in Real Estate Debt ($ in thousands):

 

     June 30, 2022  

Type of Security/Loan

   Weighted
Average
Coupon
    Weighted
Average
Maturity
Date(1,2)
     Face
Amount
     Cost
Basis
     Fair
Value
 

CMBS - Fixed

     3.90     12/1/2043      $ 15,409    $ 14,786    $ 14,346

CMBS - Floating

     3.45     6/10/2036        72,146        70,843        68,821  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total

     3.53     10/3/2037      $ 87,555    $ 85,629    $ 83,167
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2021  

Type of Security/Loan

   Weighted
Average
Coupon
    Weighted
Average
Maturity
Date(1,2)
     Face
Amount
     Cost
Basis
     Fair
Value
 

CMBS - Fixed

     4.02     5/13/2042      $ 3,219    $ 3,300    $ 3,300

CMBS - Floating

     2.10     1/16/2037        10,976        10,880        10,883  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2.54     4/02/2038      $ 14,195    $ 14,180    $ 14,183
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Weighted by face amount

(2)

Stated legal maturity; expected maturity is earlier and not the same

The following table details the collateral type of the properties securing the Company’s investments in real estate debt ($ in thousands):

 

     June 30, 2022     December 31, 2021  

Collateral

   Cost
Basis
     Fair
Value
     Percentage
based on
Fair Value
    Cost
Basis
     Fair
Value
     Percentage
based on
Fair Value
 

Office

   $ 11,317    $ 10,955      13.2   $ 2,497    $ 2,496      17.6

Industrial

     25,670      24,818      29.8     5,163      5,163      36.4

Retail

     5,250      5,156      6.2     1,791      1,792      12.6

NNN

     3,918      3,725      4.5     1,513      1,511      10.7

Life Science

     1,405      1,367      1.6     1,428      1,426      10.1

Multifamily

     10,532      10,276      12.4     —          —          —  

Hotel

     4,347      4,175      5.0     —          —          —  

Self-Storage

     2,494      2,341      2.8     —          —          —  

Cold-Storage

     8,853      8,724      10.5     —          —          —  

Manu Housing

     3,149      3,153      3.8     —          —          —  

Diversified

     8,694      8,477      10.2     1,788      1,795      12.6
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   $ 85,629    $ 83,167      100.0   $ 14,180    $ 14,183      100.0
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

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Table of Contents

The following table details the credit rating of the Company’s investments in real estate debt ($ in thousands):

 

     June 30, 2022     December 31, 2021  

Credit Rating(1)

   Cost
Basis
     Fair
Value
     Percentage
based on
Fair Value
    Cost
Basis
     Fair
Value
     Percentage
based on
Fair Value
 

AAA

   $ 2,787    $ 2,670      3.2   $ 1,788    $ 1,795      12.6

AA

     8,342      8,296      10.0     —          —          —  

A

     21,817      21,350      25.7     996      996      7.0

BBB

     49,984      48,283      58.0     11,396      11,392      80.4

BB

     2,164      2,100      2.5     —          —          —  

B

     535      468      0.6     —          —          —  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   $ 85,629    $ 83,167      100.0   $ 14,180    $ 14,183      100.0
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

(1)

Composite rating at the time of purchase.

 

     Investments
in Real
Estate Debt
 

Balance as of December 31, 2021

   $ 14,183

Additions

     71,502

Unrealized losses

     (2,514

Realized losses

     (4
  

 

 

 

Balance as of June 30, 2022

   $ 83,167
  

 

 

 

Note 6. Investment in International Affiliated Funds

Investment in ECF:

ECF was formed in March 2016 as an open-end, Euro-denominated fund that seeks to build a diversified portfolio of high quality and stabilized commercial real estate with good fundamentals (i.e., core real estate) located in or around certain investment cities in Europe selected for their resilience, potential for long-term structural performance and ability to deliver an attractive and stable distribution yield.

The Company originally committed to invest approximately $28.4 million (€25.0 million) into ECF and subsequently increased its commitment by $51.0 million (€45.0 million). As of June 30, 2022, the Company had fully satisfied both commitments.

As described in Note 2, the Company records its investment in ECF using the equity method on its Consolidated Balance Sheets. While the Company has strategies to manage the foreign exchange risk associated with its investment made in Euros, there can be no assurance that these strategies will be successful or that foreign exchange fluctuations will not negatively impact the Company’s financial performance and results of operations in a material manner.

 

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Table of Contents

The following table summarizes the equity investment in Unconsolidated International Affiliated Funds from ECF as of June 30, 2022 ($ in thousands):

 

     Investment
in ECF
 

Balance as of December 31, 2021

   $ 79,097

Income distribution

     (1,076

Income from equity investment in unconsolidated international affiliated fund

     3,757

Foreign currency translation adjustment

     (6,434
  

 

 

 

Balance as of June 30, 2022

   $ 75,344
  

 

 

 

Income from equity investments in Unconsolidated International Affiliated Funds from ECF was $2.9 million and $3.8 million, for the three and six months ended June 30, 2022, respectively. Income from equity investments in Unconsolidated International Affiliated Funds from ECF was $0.4 million and $0.3 million for the three and six months ended June 30, 2021, respectively.

Investment in APCF:

APCF was launched in November 2018 as an open-end, U.S. dollar denominated fund that seeks durable income and capital appreciation from a balanced and diversified portfolio of real estate investments in a defined list of investment cities in the Asia-Pacific region.

The Company committed to invest $10.0 million into APCF and subsequently, twice increased its commitment by $20.0 million, bringing its total commitment to $50.0 million. As of June 30, 2022, the Company has fully funded its total commitment. As described in Note 2, the Company records its investment in APCF using the equity method on its Consolidated Balance Sheets.

The following table summarizes the equity investment in Unconsolidated International Affiliated Funds from APCF as of June 30, 2022 ($ in thousands):

 

     Investment
in APCF
 

Balance as of December 31, 2021

   $ 51,948

Income distribution

     (396

Income from equity investment in unconsolidated international affiliated fund

     1,228
  

 

 

 

Balance as of June 30, 2022

   $ 52,780
  

 

 

 

Income from equity investments in Unconsolidated International Affiliated Funds from APCF for the three and six months ended June 30, 2022 was $1.3 million and $1.2 million. (Loss) income from equity investments in Unconsolidated International Affiliated Funds from APCF for the three and six months ended June 30, 2021 was $(0.8) million and $42,000, respectively.

Note 7. Investment in Commercial Mortgage Loans

On November 9, 2021 the Company originated a floating rate senior mortgage and mezzanine loan to finance the acquisition of an office property in Farmington, Massachusetts, amounting to $63.0 million and has committed to fund an additional $30.4 million for future renovations of the property. On November 16, 2021 the Company originated a second floating rate senior mortgage and mezzanine loan in the amount of $76.9 million to finance the acquisition of a multifamily property in Seattle, Washington, with additional commitments to fund $11.1 million for future renovations.

 

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Table of Contents

On March 24, 2022 and June 27, 2022, the Company sold two senior loans to unaffiliated parties and retained the subordinate mortgages, receiving proceeds of $47.4 million and $57.9 million, respectively, which are net of disposition fees. The sales did not qualify for sale accounting under GAAP and as such, the loans were not de-recognized.

On March 28, 2022 we originated a floating rate senior mortgage and mezzanine loan to finance the acquisition and reposition of five multi-family properties located in Tucson, AZ, amounting to $92.4 million and have committed to fund an additional $9.3 million for future renovations of the property. The advance rate was 70.9% LTV with an in-place debt yield of 5.25%. The secondary market execution is anticipated to be note-on-note.

For the three months and six months ended June 30, 2022, the Company recognized interest income and loan origination fee income from its investment in its commercial mortgage loans of $1.9 million and $3.9 million, respectively. For the three and six months ended June 30, 2021, the Company did not have a commercial mortgage loan investment.

For the three and six months ended June 30, 2022, the Company had unrealized losses on commercial mortgage loans of $(2.2) million for each period. For the three and six months ended June 30, 2021, we did not have a commercial mortgage loan investment.

The following is a reconciliation of the beginning and ending balances for the Company’s investment in commercial mortgage loans for the six months ended June 30, 2022 ($ in thousands):

 

     Investment in
Commercial
Mortgage Loans
 

Balance as of December 31, 2021

   $ 140,512

Loan originations

     92,350

Additional fundings

     3,698

Net unrealized loss(a)

     (472
  

 

 

 

Balance as of June 30, 2022

   $ 236,088
  

 

 

 

 

(a)

Includes Unrealized Loss on Commercial Mortgage Loans of $(2.2) million, net of unrealized gain of $1.7 million associated with loan participations.

 

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Table of Contents

Note 8. Intangibles

The gross carrying amount and accumulated amortization of the Company’s intangible assets and liabilities consisted of the following ($ in thousands):

 

     June 30,
2022
     December 31,
2021
 

Intangible assets:

     

In-place lease intangibles

   $ 61,653    $ 53,031

Above-market lease intangibles

     493      493

Leasing commissions

     24,502      20,559

Other intangibles

     8,283      5,666
  

 

 

    

 

 

 

Total intangible assets

     94,931      79,749

Accumulated amortization:

     

In-place lease intangibles

     (22,836      (16,282

Above-market lease intangibles

     (106      (77

Leasing commissions

     (6,555      (5,055

Other intangibles

     (2,522      (862
  

 

 

    

 

 

 

Total accumulated amortization

     (32,019      (22,276
  

 

 

    

 

 

 

Intangible assets, net

   $ 62,912    $ 57,473
  

 

 

    

 

 

 

Intangible liabilities:

     

Below-market lease intangibles

   $ (28,323    $ (25,841

Accumulated amortization

     5,061      3,319
  

 

 

    

 

 

 

Intangible liabilities, net

   $ (23,262    $ (22,522
  

 

 

    

 

 

 

Amortization expense relating to intangible assets was $5.0 million and $9.7 million for the three and six months ended June 30, 2022, respecitvely. Amortization expense relating to intangible assets was $2.6 million and $4.2 million, respectively, for the three and six months ended June 30, 2021. Income from the amortization of intangible liabilities was $0.9 million and $1.7 million for the three and six months ended June 30, 2022, respectively. Income from the amortization of intangible liabilities was $0.3 million and $0.5 million, respectively, for the three and six months ended June 30, 2021.

The estimated future amortization on the Company’s intangibles for each of the next five years and thereafter is as follows ($ in thousands):

 

     In-Place Lease
Intangibles
     Above-Market Lease
Intangibles
     Leasing
Commissions
     Other
Intangibles
     Below-Market
Lease Intangibles
 

2022 (remaining)

   $ 4,536    $ 47    $ 1,932    $ 1,383    $ (1,577

2023

     7,426      67      3,012      1,279      (3,400

2024

     6,520      67      2,905      1,224      (3,320

2025

     5,015      67      2,475      984      (2,699

2026

     3,349      67      1,977      696      (2,423

Thereafter

     11,971      72      5,646      195      (9,843
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 38,817    $ 387    $ 17,947    $ 5,761    $ (23,262
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2022, the weighted-average amortization periods for the acquired in-place lease intangibles, above-market lease intangibles, leasing commissions, other intangibles and below-market lease intangibles of the properties acquired were 6, 6, 7, 9, and 12 years, respectively.

 

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Table of Contents

Note 9. Credit Facility

On October 24, 2018, the Company entered into a credit agreement (“Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent and lead arranger. The Credit Agreement provides for aggregate commitments of up to $60.0 million for unsecured revolving loans, with an accordion feature that may increase the aggregate commitments to up to $500.0 million (the “Credit Facility”). Loans outstanding under the Credit Facility bear interest, at Nuveen OP’s option, at either an adjusted base rate or an adjusted 30-day LIBOR rate, in each case, plus an applicable margin. The applicable margin ranges from 1.30% to 1.90% for borrowings at the adjusted LIBOR rate, in each case, based on the total leverage ratio of Nuveen OP and its subsidiaries. Interest under the Credit Facility is determined based on a one-month U.S. dollar-denominated LIBOR, which was 0.1% and 1.8% as of December 31, 2020 and 2019, respectively. Loans under the Credit Facility will mature three years from October 24, 2018, with an option to extend twice for an additional year pursuant to the terms of the Credit Agreement. On December 17, 2018 and June 11, 2019, the Company amended the Credit Agreement to increase the Credit Facility to $150.0 million and $210.0 million in aggregate commitments, respectively, with all other terms remaining the same.

On September 30, 2021, Wells Fargo Bank, N.A., the Company and Nuveen OP amended the Credit Agreement to increase the Credit Facility to $335.0 million in aggregate commitments, comprised of a $235.0 million revolving facility, and a senior delayed draw term loan facility in the aggregate amount of up to $100.0 million (the “DDTL Facility”). Loans under the DDTL Facility may be borrowed in up to three advances, each in a minimum amount of $30.0 million. The Credit Facility will terminate, and all amounts outstanding thereunder will be due and payable in full, on September 30, 2024 (the “Revolving Termination Date”), with two additional one-year extension options held by Nuveen OP, including the payment of an extension fee of 0.125% of the aggregate commitment. The DDTL Facility will mature, and all amounts outstanding thereunder will be due and payable in full, on September 30, 2026. Loans outstanding under the Credit Facility bear interest, at Nuveen OP’s option, at either an adjusted base rate or an adjusted LIBOR rate, in each case, plus an applicable margin. The applicable margin ranges from 0.30% to 0.90% for Credit Facility borrowings for base rate loans, in each case, based on the total leverage ratio of the Nuveen OP and its subsidiaries. The applicable margin ranges from 1.30% to 1.90% for Credit Facility borrowings at the adjusted LIBOR rate, in each case, based on the total leverage ratio of the Nuveen OP and its subsidiaries. Loans outstanding under the DDTL Facility bear interest, at the Nuveen OP’s option, at either an adjusted base rate or an adjusted LIBOR rate, in each case, plus an applicable margin. The applicable margin ranges from 0.25% to 0.85% for DDTL Facility borrowings for base rate loans, in each case, based on the total leverage ratio of the Nuveen OP and its subsidiaries. The applicable margin ranges from 1.25% to 1.85% for DDTL Facility borrowings at the adjusted LIBOR rate, in each case, based on the total leverage ratio of the Nuveen OP and its subsidiaries. There is an unused fee of 0.15% if the usage is greater than or equal to 50% of the aggregate commitments and 0.25% of the usage is less than 50% of the aggregate commitments. There is a ticking fee on the DDTL Facility equal to 0.15% of the undisbursed portion of the DDTL Facility. An upfront fee of 40 basis points was payable at closing.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. The consequence of these developments cannot be entirely predicted but could include an increase in the cost of our variable rate indebtedness.

 

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Table of Contents

The following is a summary of the Credit Facility ($ in thousands):

 

                          Principal Balance
Outstanding
 

Indebtedness

   Interest Rate      Maturity Date      Maximum
Facility
Size
     June 30,
2022
     December 31,
2021
 

Revolving facility

     L+applicable margin (1)       September 30, 2024      $ 235,000    $ 80,000    $ 163,000

DDTL Facility

     L+applicable margin (1)       September 30, 2026        100,000      75,000      75,000
        

 

 

    

 

 

    

 

 

 

Credit facility

         $ 335,000    $ 155,000    $ 238,000
        

 

 

    

 

 

    

 

 

 

 

(1)

The weighted-average interest rate for the three and six months ended June 30, 2022 was 2.14% and 1.81%, respectively.

As of June 30, 2022, the Company had $155.0 million in borrowings and had outstanding accrued interest of $1.1 million under the Credit Facility. For the three and six months ended June 30, 2022, the Company incurred $1.4 million and $2.2 million in interest expense under the Credit Facility, respectively. For the three and six months ended June 30, 2021, the Company incurred $0.4 million and $0.8 million in interest expense under the Credit Facility, respectively.

As of June 30, 2022, the Company was in compliance with all loan covenants with respect to the Credit Agreement.

 

Year

   Credit Facility  

2022 (remaining)

   $ —  

2023

     —    

2024

     80,000

2025

     —    

2026

     75,000

Thereafter

     —    
  

 

 

 

Total

   $ 155,000
  

 

 

 

Note 10. Mortgages Payable

The following table is a summary of the Company’s Mortgages Payable secured by the Company’s properties ($ in thousands):

 

                            Principal Balance
Outstanding
 

Indebtedness

  Lender     Interest
Rate
    Maturity
Date
    Maximum
Principal
Amount
    June 30,
2022
    December 31,
2021
 

Fixed rate mortgages payable:

           

Main Street at Kingwood

   
Nationwide Life Insurance
Company
 
 
    3.15     12/01/26       48,000   $ 48,000   $ 48,000

Tacara Steiner Ranch

    Brighthouse Life Insurance       2.62     06/01/28       28,750     28,750     28,750

Signature at Hartwell

   
Allstate/American
Heritage
 
 
    3.01     12/01/28       29,500     29,500     29,500
         

 

 

   

 

 

 

Total mortgages payable

            106,250     106,250
         

 

 

   

 

 

 

Deferred financing costs, net

            (579     (636
         

 

 

   

 

 

 

Mortgages payable, net

          $ 105,671   $ 105,614
         

 

 

   

 

 

 

 

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Table of Contents

As of June 30, 2022, the Company had $106.3 million in borrowings and $0.3 million in accrued interest outstanding under its mortgages payable. As of December 31, 2021, the Company had $106.3 million in borrowings and $0.2 million in accrued interest outstanding under its mortgages payable. For the three and six months ended June 30, 2022, the Company incurred $0.8 million and $1.6 million in interest expense on mortgages payable, respectively. For the three and six months ended June 30, 2021, the Company incurred $0.5 million and $0.9 million in interest expense on mortgages payable, respectively.

The following table presents the future principal payments due under the mortgages payable as of June 30, 2022 ($ in thousands):

 

Year

   Mortgages Payable  

2022 (remaining)

   $ —  

2023

     —    

2024

     —    

2025

     —    

2026

     48,000

Thereafter

     58,250
  

 

 

 

Total

   $ 106,250
  

 

 

 

Note 11. Note Payable

The Company finances the acquisition of certain mortgage loans through the use of “note-on-note” transactions. The notes bear interest based on competitive market rates determined at the time of issuance. The notes involve leverage risk and also the risk that the market value of the collateral will decline below the amount of the funding advanced. As of June 30, 2022, the Company has one note outstanding with Capital One which matures on April 9, 2025. As of June 30, 2022, the total principal amount of the note outstanding was $69.3 million and interest incurred for the three and six months ended June 30, 2022 was $0.1 million, respectively, based on a rate of SOFR plus 1.65%.

The following table presents the future principal payments due under the Note Payable as of June 30, 2022 ($ in thousands):

 

Year

   Note Payable  

2022 (remaining)

   $ —  

2023

     —    

2024

     —    

2025

     69,263

2026

     —    

Thereafter

     —    
  

 

 

 

Total

   $ 69,263
  

 

 

 

 

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Table of Contents

Note 12. Other Assets and Other Liabilities

The following table summarizes the components of Other Assets ($ in thousands):

 

     June 30,
2022
     December 31,
2021
 

Straight-line rent receivable

   $ 7,508    $ 6,451

Receivables

     4,795      3,245

Deferred financing costs on credit facility, net

     1,464      1,710

Prepaid expenses

     1,636      1,154

Other

     307      7,985
  

 

 

    

 

 

 

Total

   $ 15,710    $ 20,545
  

 

 

    

 

 

 

The following table summarizes the components of Accounts Payable, Accrued Expenses, and Other Liabilities ($ in thousands):

 

     June 30,
2022
     December 31,
2021
 

Real estate taxes payable

   $ 5,149    $ 3,072

Accounts payable and accrued expenses

     10,722      5,733

Prepaid rental income

     1,736      2,213

Tenant security deposits

     3,277      2,010

Accrued interest expense

     1,409      462

Other

     5,565      1,320
  

 

 

    

 

 

 

Total

   $ 27,858    $ 14,810
  

 

 

    

 

 

 

Note 13. Related Party Transactions

Fees Due to Related Party

Pursuant to the advisory agreement between the Company, Nuveen OP, and the Advisor, the Advisor is responsible for sourcing, evaluating and monitoring the Company’s investment opportunities and making decisions related to the acquisition, management, financing and disposition of the Company’s assets, in accordance with the Company’s investment objectives, guidelines, policies and limitations, subject to oversight by the Company’s board of directors.

The Advisor will receive fees and compensation, payable monthly in arrears, in connection with the offering and ongoing management of the assets of the Company, as follows:

 

     Class T
Shares
    Class S
Shares
    Class D
Shares
    Class I
Shares
    Class N
Shares
 

Advisory Fee (% of NAV)

     1.25     1.25     1.25     1.25     0.65

For the three and six months ended June 30, 2022, the Company incurred advisory fee expenses of $6.4 million and $11.1 million, respectively. For the three and six months ended June 30, 2021, the Company incurred advisory fee expenses of $1.3 million and $2.2 million, respectively. As of June 30, 2022 and December 31, 2021, the Company had accrued advisory fees of approximately $1.7 million and $1.2 million, respectively, which has been included in Accounts Payable, Accrued Expenses, and Other Liabilities on the Company’s Consolidated Balance Sheets.

The Company may retain certain of the Advisor’s affiliates for necessary services relating to the Company’s investments or its operations, including construction, special servicing, leasing, development, property oversight

 

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and other property management services, as well as services related to mortgage servicing, group purchasing, healthcare, consulting/brokerage, capital markets/credit origination, loan servicing, property, title and other types of insurance, management consulting and other similar operational matters.

During the year ended December 31, 2020, the Company engaged NexCore Companies LLC (“NexCore”), an affiliate of TIAA, to provide property management, accounting and leasing services for certain of its investments in healthcare properties. NexCore is a real estate development company focused exclusively on development, acquisition, and management of healthcare real estate. The Company paid approximately $0.1 million and $0.2 million in management fees to NexCore during the three and six months ended June 30, 2022, respectively. The Company paid approximately $0.1 million in management fees to NexCore during each of the three and six months ended June 30, 2021, respectively.

Additionally, as part of this engagement, the Company may pay acquisition fees to NexCore for sourcing deals. The Company did not incur any acquisition fees to NexCore during the three and six months ended June 30, 2022. For the three and six months ended June 30, 2021, the Company paid approximately $48,000 and $0.1 million in acquisition fees to NexCore, respectively. The Company may also enter into joint ventures with NexCore, and pursuant to the terms of the joint venture agreements, NexCore may receive a promote from the joint venture. The Company has entered in seven joint venture arrangements with NexCore as of June 30, 2022, which have not incurred any promote payments.

On July 27, 2021, the Company entered in an agreement with Imajn Homes Holdings (“Sparrow”), an affiliate of TIAA, to assist the Company in acquiring and managing single-family housing in the United States. Sparrow is a vertically integrated company with acquisition, asset, property and construction management capabilities. As part of the joint venture arrangement with Sparrow, if certain internal rate of return hurdles are met, Sparrow will participate in the profits based on a set criteria at the crystallization event. Additionally, Sparrow has the ability to exercise the crystallization event between the fifth and sixth anniversaries from the effective date of the agreement. Subsequent to entering in the agreement, the Company committed $150.0 million to acquire single family rentals identified by Sparrow. The Company incurred approximately $0.1 million and $0.2 million in asset management fees related to Sparrow during the three and six months ended June 30, 2022, respectively. In addition, the Company incurred approximately $0.1 million and $0.2 million of property management fees during the three and six months ended June 30, 2022. No fees were incurred by the Company for the three and six months ended June 30, 2021.

On August 23, 2021, the Company entered into a master services agreement with Nuveen Real Estate Project Management Services, LLC (“Nuveen RE PMS”), an affiliate of the Advisor, for the purpose of Nuveen RE PMS providing professional services described below in connection with certain of our real estate investments.

For project management services provided by Nuveen RE PMS, the Company will pay Nuveen RE PMS fees determined by the estimated total cost of the any project; provided that such fees shall not exceed 6% of project costs. For development and management services provided by Nuveen RE PMS, the Company will pay Nuveen RE PMS fees to be determined by the complexity and size of the project; provided that such fees shall not exceed 4% of project costs. No fees have been incurred by the Company to Nuveen RE PMS as of June 30, 2022.

Nuveen Securities, LLC (the “Dealer Manager”) serves as the dealer manager for the Initial Public Offering and Follow-on Public Offering (together, the “Offerings”). The Dealer Manager is a registered broker-dealer affiliated with the Advisor. The Company’s obligations under the Dealer Manager Agreement to pay stockholder servicing fees with respect to the Class T, Class S and Class D shares distributed in the Offerings shall survive until such shares are no longer outstanding or converted into Class I shares. As of June 30, 2022, the Company accrued approximately $41.5 million of stockholder servicing fees with respect to the outstanding Class T, Class S and Class D common shares.

 

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The following table presents the upfront selling commissions and dealer manager fees for each class of shares sold in the Offerings, and the stockholder servicing fee per annum based on the aggregate outstanding NAV:

 

     Class T Shares   Class S Shares   Class D Shares   Class I Shares

Maximum Upfront Selling Commissions (% of Transaction Price)

   up to 3.0%   up to 3.5%   up to 1.5%   —  

Maximum Upfront Dealer Manager Fees (% of Transaction Price)

   up to 0.5%   —     —     —  

Stockholder Servicing Fee (% of NAV)

   0.85%(1)   0.85%   0.25%   —  

 

(1)

Consists of an advisor stockholder servicing fee of 0.65% per annum and a dealer stockholder servicing fee of 0.20% per annum (or other amounts, provided that the sum equals 0.85%), of the aggregate NAV of outstanding Class T shares.

The Company will cease paying the stockholder servicing fee with respect to any Class T share, Class S share or Class D share held in a stockholder’s account at the end of the month in which the Dealer Manager, in conjunction with the transfer agent, determines that total upfront selling commissions, dealer manager fees and stockholder servicing fees paid with respect to the shares held within such account would exceed, in the aggregate, 8.75% of the sum of the gross proceeds from the sale of such shares and the aggregate gross proceeds of any shares issued under the distribution reinvestment plan with respect thereto (or, solely with respect to the Class T shares, a lower limit set forth in an agreement between the Dealer Manager and the applicable participating broker-dealer in effect on the date that such shares were sold). At the end of such month, each Class T share, Class S share and Class D share held in a stockholder’s account will convert into a number of Class I shares (including any fractional shares) with an equivalent aggregate NAV as such share. The Company accrues the cost of the stockholder servicing fee as an offering cost at the time each Class T, Class S and Class D share is sold. There is not a stockholder servicing fee with respect to Class I shares.

If not already converted into Class I shares upon a determination that total upfront selling commissions, dealer manager fees and stockholder servicing fees paid with respect to such shares would exceed the applicable limit as described above, each Class T share, Class S share, Class D share and Class N share held in a stockholder’s account will automatically and without any action on the part of the holder thereof convert into a number of Class I shares (including any fractional shares) with an equivalent NAV as such share on the earliest of (i) a listing of Class I shares, (ii) the Company’s merger or consolidation with or into another entity or the sale or other disposition of all or substantially all of the Company’s assets, in each case in a transaction in which stockholders receive cash and/or listed securities or (iii) after termination of the primary portion of the offering in which such Class T shares, Class S shares and Class D shares were sold, the end of the month in which the Company, with the assistance of the dealer manager, determines that all underwriting compensation from all sources in connection with the public offering in which the shares were sold, including upfront selling commissions, the stockholder servicing fee and other underwriting compensation, is equal to 10% of the gross proceeds of the primary portion of such Offering. In addition, immediately before any liquidation, dissolution or winding up, each Class T share, Class S share, Class D share and Class N shares will automatically convert into a number of Class I shares (including any fractional shares) with an equivalent NAV as such share.

 

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Other Related Party Transactions

The following table summarizes the components of Due to Affiliates ($ in thousands):

 

     June 30,
2022
     December 31,
2021
 

Accrued stockholder servicing fees(1)

   $ 41,468    $ 25,358

Advanced organization and offering expenses

     4,021      4,648
  

 

 

    

 

 

 

Total

   $ 45,489    $ 30,006
  

 

 

    

 

 

 

 

(1)

The Company accrues the full amount of future stockholder servicing fees payable to the Dealer Manager for Class T, Class S and Class D shares up to the 8.75% of gross proceeds limit at the time such shares are sold. The Dealer Manager has entered into agreements with the selected dealers distributing the Company’s shares in the Offerings, which provide, among other things, for the re-allowance of the full amount of the selling commissions and the dealer manager fee and all or a portion of stockholder servicing fees received by the Dealer Manager to such selected dealers. The Company will no longer incur the stockholder servicing fee after September 2056 in connection with those Class T, Class S and Class D shares currently outstanding; the fees may end sooner if the total underwriting compensation paid in respect of the Offering reaches 10.0% of the gross offering proceeds or if the Company completes a liquidity event. The Company will incur stockholder servicing fees in connection with future issuances of Class D shares for a 29.5-year period from the date of issuance and seven years for Class T shares and Class S shares from date of issuance, assuming the maximum up-front selling commissions and dealer manager fees are paid.

See “Note 17. Equity and Redeemable Non-controlling Interest” for additional information related to TIAA’s purchase of $300.0 million Class N shares of the Company’s common stock through its wholly-owned subsidiary.

See “Note 6. Investment in International Affiliated Funds” for additional information related to the Company’s investment in International Affiliated Funds.

Note 14. Economic Dependency

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

Note 15. Risks and Contingencies

The outbreak of COVID-19 and subsequent global pandemic began significantly impacting the U.S. and global financial markets and economies during the first half of 2020. The worldwide spread of the COVID-19 pandemic has created significant uncertainty in the global economy. At this time, tenants have requested certain rent relief and lease modifications from this unprecedented event; however, such requests have not been significant as of June 30, 2022 for the Company’s direct real estate investments. Requests have generally been comprised of deferrals, with payments postponed for a brief period (i.e., less than twelve months) and then repaid over the remaining duration of the contract. During the prior year, the Company pursued litigation with a tenant in lease default at one of its office properties in an effort to recover the outstanding balance due to the Company. A settlement agreement was reached between the Company and the tenant in default, and accordingly, the Company received $0.4 million in upfront settlement proceeds paid by the tenant, and is entitled to an additional $0.5 million to be received in 36 equal installments beginning September 1, 2021.

Except as described above, the Company does not have any other material exposure to rent concessions, tenant defaults or loan defaults. The duration and extent of the COVID-19 pandemic over the long-term cannot be

 

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reasonably estimated at this time. The extent to which the COVID-19 pandemic impacts the Company’s business, results of operations, investments, and cash flows will depend on future developments, which are highly uncertain and difficult to predict.

Concentrations of risk may arise when a number of properties are located in a similar geographic region such that the economic conditions of that region could impact tenants’ obligations to meet their contractual obligations or cause the values of individual properties to decline. Additionally, concentrations of risk may arise if any one tenant comprises a significant amount of the Company’s rent, or if tenants are concentrated in a particular industry.

As of June 30, 2022, the Company had no significant concentrations of tenants, as no single tenant had annual contract rent that made up more than 4% of the rental income of the Company. There are no significant lease expirations scheduled to occur over the next twelve months. Based on its assessment, the Company has concluded that there is no impairment of its investments as of June 30, 2022.

The Company’s investment in the International Affiliated Funds have been negatively impacted by COVID-19 in the foreign countries where their investments are located. The duration and extent of the COVID-19 pandemic over the long-term cannot be reasonably estimated at this time.

The Company’s investments in real estate-related securities may also be negatively impacted by uncertainty surrounding the COVID-19 pandemic. Market volatility and economic uncertainty surrounding the COVID-19 pandemic may lead to fluctuations in market pricing, which has the ability to adversely impact the fair value of the Company’s investments in real estate-related securities.

In the normal course of business the Advisor, on behalf of the Company, enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Advisor expects the risk of loss to be remote.

Note 16. Tenant Leases

The Company’s real estate properties are leased to tenants under operating lease agreements which expire on various dates. Certain leases have the option to extend or terminate at the tenant’s discretion, with termination options resulting in additional fees due to the Company.

Rental income is recognized on a straight line basis. The leases do not have material variable payments, material residual value guarantees or material restrictive covenants. Rental income for the three and six months ended June 30, 2022 was $24.5 million and $46.2 million, respectively. Rental income for the three and six months ended June 30, 2021 was $12.1 million and $23.4 million, respectively.

Aggregate minimum annual rentals for wholly-owned real estate investments owned by the Company through the non-cancelable lease term, excluding short-term multifamily, self-storage and single family rentals are as follows ($ in thousands):

 

Year

   June 30, 2022  

2022 (remaining)

   $ 23,821

2023

     47,872

2024

     47,368

2025

     41,405

2026

     32,483

Thereafter

     88,336
  

 

 

 

Total

   $ 281,285
  

 

 

 

 

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Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts, sales volume or contractual increases as defined in the lease agreement. These contractual contingent rentals are not included in the table above.

During each of the three and six months ended June 30, 2022 and 2021, the Company did not have material exposure to rent concessions or lease defaults for tenants impacted by the COVID-19 pandemic.

Note 17. Equity and Redeemable Non-controlling Interest

Authorized Capital

As of June 30, 2022, the Company had authority to issue a total of 2,200,000,000 shares of capital stock consisting of the following:

 

Classification

   Number of Shares
(in thousands)
     Par
Value
 

Class T Shares

     500,000    $ 0.01

Class S Shares

     500,000    $ 0.01

Class D Shares

     500,000    $ 0.01

Class I Shares

     500,000    $ 0.01

Class N Shares

     100,000    $ 0.01

Preferred Stock

     100,000    $ 0.01
  

 

 

    

Total

     2,200,000   

In addition, the Company’s board of directors may amend the Charter from time to time, without stockholder approval, to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Company has authority to issue, or to issue additional classes of stock which may be subject to various class-specific fees.

Preferred Stock

On January 2, 2019, the Company filed Articles Supplementary to the Charter, which set forth the rights, preferences and privileges of the Company’s 12.0% Series A cumulative non-voting preferred stock (“Series A Preferred Stock”). On January 4, 2019, the Company sold 125 shares of its Series A Preferred Stock at a purchase price of $1,000 per share in a private placement exempt from registration under the Securities Act of 1933, as amended. The offering of the Series A Preferred Stock was effected for the purpose of the Company having at least 100 stockholders to satisfy one of the qualifications required in order to qualify as a REIT under the Code. On March 31, 2021, the Company redeemed all of the 125 outstanding shares of the Series A Preferred Stock in accordance with its Charter.

On October 8, 2020, a subsidiary of Nuveen OP sold 125 shares of preferred stock in a private placement to effectuate the formation of a REIT established to hold the Company’s industrial property located in Massachusetts for tax management purposes.

Common Stock

As of June 30, 2022, the Company had issued and outstanding 14,693,461 shares of Class T common stock, 38,708,716 shares of Class S common stock, 7,442,455 shares of Class D common stock, 62,601,456 shares of Class I common stock, and 29,730,608 shares of Class N common stock.

 

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The following tables detail the movement in the Company’s outstanding shares of common stock (in thousands):

 

     Three Months Ended June 30, 2022  
     Class T
Shares
    Class S
Shares
    Class D
Shares
    Class I
Shares
    Class N
Shares
     Total  

March 31, 2022

     11,850     30,913     6,301     43,743     29,731      122,538

Common stock issued

     2,789     7,892     1,110     18,793     —          30,584

Distribution reinvestment

     71     212     40     347     —          670

Vested stock grant

     —         —         —         6     —          6

Common stock repurchased

     (17     (308     (9     (288     —          (622
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

June 30, 2022

     14,693     38,709     7,442     62,601     29,731      153,176
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

     Six Months Ended June 30, 2022  
     Class T
Shares
    Class S
Shares
    Class D
Shares
    Class I
Shares
    Class N
Shares
     Total  

December 31, 2021

     9,201     23,809     4,649     31,460     29,731      98,850

Common stock issued

     5,387     14,862     2,743     30,967     —          53,959

Distribution reinvestment plan

     122     370     69     581     —          1,142

Vested stock grant

     —         —         —         6     —          6

Common stock repurchased

     (17     (332     (19     (413     —          (781
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

June 30, 2022

     14,693     38,709     7,442     62,601     29,731      153,176
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

TIAA has purchased $300.0 million of the Company’s Class N shares of common stock through its wholly owned subsidiary. Per the terms of the agreement between the Company and TIAA, beginning on January 31, 2023, TIAA may submit a portion of its Class N shares for repurchase, provided that after taking into account the repurchase, the total value of TIAA’s aggregate ownership of our class N shares shall not be less than $300.0 million. Beginning on January 31, 2025, TIAA may submit all of its remaining shares for repurchase, provided that provided that TIAA must continue to maintain ownership of the $200,000 initial investment in the Company’s shares for so long as the Advisor or its affiliate serves as the Company’s advisor. Notwithstanding the foregoing, the total amount of repurchases of Class N shares eligible for repurchase will be limited to no more than 0.67% of the Company’s aggregate NAV per month and no more than 1.67% of the Company’s aggregate NAV per calendar quarter; provided that, if in any month or quarter the total amount of aggregate repurchases of all classes of the Company’s common stock do not reach the overall share repurchase plan limits of 2% of the aggregate NAV per month and 5% of the aggregate NAV per calendar quarter, the above repurchase limits on the Class N shares shall not apply to that month or quarter and TIAA shall be entitled to submit shares for repurchase up to the overall share repurchase plan limits.

Restricted Stock Grants

Through June 30, 2022, the Company’s independent directors received a $75,000 annual retainer and the chairperson of the audit committee will receive an additional $15,000 annual retainer. The Company pays 75% of this compensation in cash in quarterly installments and the remaining 25% in the form of an annual grant of restricted stock based on the most recent transaction price that generally vests one year from the date of grant.

Effective July 1, 2022, each independent director will receive a $100,000 annual retainer, the chairperson of the audit committee will receive an additional $20,000 annual retainer and the lead independent director will receive an additional $5,000 annual retainer. The Company will pay 50% of this compensation in cash in quarterly installments and the remaining 50% in the form of an annual grant of restricted stock based on the most recent transaction price. The restricted stock generally vests one year from the date of grant.

 

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Distribution Reinvestment Plan

The Company has adopted a distribution reinvestment plan whereby holders of Class T, Class S, Class D and Class I shares (other than investors in certain states or who are clients of a participating broker-dealer that does not permit automatic enrollment in the distribution reinvestment plan) have their cash distributions automatically reinvested in additional shares of common stock unless they elect to receive their distributions in cash. Holders of Class N shares are not eligible to participate in the distribution reinvestment plan and receive their distributions in cash. Investors who are clients of a participating broker-dealer that does not permit automatic enrollment in the distribution reinvestment plan or are residents of those states that do not allow automatic enrollment receive their distributions in cash unless they elect to have their cash distributions reinvested in additional shares of the Company’s common stock. The per share purchase price for shares purchased pursuant to the distribution reinvestment plan will be equal to the transaction price at the time the distribution is payable, which will generally be equal to the Company’s prior month’s NAV per share for that share class. Stockholders do not pay upfront selling commissions or dealer manager fees when purchasing shares pursuant to the distribution reinvestment plan. The stockholder servicing fees with respect to shares of the Company’s Class T shares, Class S shares and Class D shares are calculated based on the NAV for those shares and may reduce the NAV or, alternatively, the distributions payable with respect to shares of each such class, including shares issued in respect of distributions on such shares under the distribution reinvestment plan.

Distributions

The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with GAAP, to its stockholders each year to comply with the REIT provisions of the Code. Beginning September 30, 2018, the Company established a monthly record date for a quarterly distribution to stockholders on record as of the last day of each applicable month typically payable within 30 days following quarter end. On January 17, 2020, the Company’s board of directors amended the Company’s distribution policy to reflect that the Company intends to pay distributions monthly rather than quarterly going forward, subject to the discretion of the board of directors.

Based on the monthly record dates established by the board of directors, the Company accrues for distributions on a monthly basis. As of June 30, 2022 and December 31, 2021, the Company had accrued $8.8 million and $5.3 million in Distributions Payable on the Consolidated Balance Sheets for the June 2022 and December 2021 distributions. For the three and six months ended June 30, 2022, the Company declared and paid distributions of $22.8 million and $40.3 million, respectively. For the three and six months ended June 30, 2021, the Company declared and paid distributions in the amount of $7.6 million and $13.9 million, respectively.

Each class of common stock receives the same gross distribution per share, which was $0.2166 and $0.4243, respectively, per share for the three and six months ended June 30, 2022. The net distribution varies for each class based on the applicable advisory fee and stockholder servicing fee, which is deducted from the monthly distribution per share.

 

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The following tables detail the aggregate distribution declared for each of the Company’s share classes for the three and six months ended June 30, 2022:

 

     Three Months Ended June 30, 2022  
     Class T
Common
Stock
    Class S
Common
Stock
    Class D
Common
Stock
    Class I
Common
Stock
    Class N
Common
Stock
 

Gross distribution per share of common stock

   $ 0.2166   $ 0.2166   $ 0.2166   $ 0.2166   $ 0.2166

Advisory fee per share of common stock

     (0.0616     (0.0611     (0.0619     (0.0617     (0.0333

Stockholder servicing fee per share of common stock

     (0.0455     (0.0451     (0.0133     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net distribution per share of common stock

   $ 0.1095   $ 0.1104   $ 0.1414   $ 0.1549   $ 0.1833
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Six Months Ended June 30, 2022  
     Class T
Common
Stock
    Class S
Common
Stock
    Class D
Common
Stock
    Class I
Common
Stock
    Class N
Common
Stock
 

Gross distribution per share of common stock

   $ 0.4243   $ 0.4243   $ 0.4243   $ 0.4243   $ 0.4243

Advisory fee per share of common stock

     (0.0743     (0.0736     (0.0746     (0.0744     (0.0401

Stockholder servicing fee per share of common stock

     (0.0549     (0.0544     (0.0161     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net distribution per share of common stock

   $ 0.2951   $ 0.2963   $ 0.3336   $ 0.3499   $ 0.3842
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share Repurchases

The Company has adopted a share repurchase plan, whereby on a monthly basis, stockholders may request that the Company repurchase all or any portion of their shares. The Company may choose to repurchase all, some or none of the shares that have been requested to be repurchased at the end of any particular month, in its discretion, subject to any limitations in the share repurchase plan. The total amount of aggregate repurchases of Class T, Class S, Class D, and Class I shares will be limited to 2% of the aggregate NAV per month and 5% of the aggregate NAV per calendar quarter. In addition, if during any consecutive 24-month period, the Company does not have at least one month in which the Company fully satisfies 100% of properly submitted repurchase requests or accepts all properly submitted tenders in a self-tender offer for the Company’s shares, the Company will not make any new investments (excluding short-term cash management investments under 30 days in duration) and will use all available investable assets to satisfy repurchase requests (subject to the limitations under this program) until all outstanding repurchase requests have been satisfied. Shares would be repurchased at a price equal to the transaction price on the applicable repurchase date, subject to any early repurchase deduction. Shares that have not been outstanding for at least one year would be repurchased at 95% of the transaction price. Due to the illiquid nature of investments in real estate, the Company may not have sufficient liquid resources to fund repurchase requests and has established limitations on the amount of funds the Company may use for repurchases during any calendar month and quarter. Further, the Company’s board of directors may modify, suspend or terminate the share repurchase plan.

For the three and six months ended June 30, 2022, the Company repurchased shares of its common stock for $8.2 million and $10.2 million. For the three and six months ended June 30, 2021, the Company repurchased shares of its common stock for $0.9 million and $1.2 million. The Company had no unfulfilled repurchase requests during the six months ended June 30, 2022.

Redeemable Non-Controlling Interest

The Company’s affiliated partner has a redeemable non-controlling interest in a joint venture due to crystallization rights, which allows the partner to trigger the payment on the promote. The Redeemable Non-Controlling Interests are recorded at the greater of (i) their carrying amount, adjusted for their share of the

 

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allocation of GAAP net income or loss and distributions, or (ii) their redemption value, which is equivalent to the fair value of such interests at the end of each measurement period. As the redemption value was greater than the adjusted carrying value as of June 30, 2022 and December 31, 2021, the Company recorded an allocation adjustment between Additional Paid-In-Capital and Redeemable Non-Controlling Interest. The balance was $0.6 million and $0.3 million as of June 30, 2022 and December 31, 2021.

Note 18. Segment Reporting

The Company operates in ten reportable segments: healthcare properties, industrial and self-storage properties, multifamily properties, office properties, retail properties, commercial mortgage loans, single-family housing, real estate-related securities, International Affiliated Funds, and other (corporate). These are operating segments that are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-makers in deciding how to allocate resources and in assessing performance. The Company’s chief executive officer, chief financial officer and head of portfolio management have been identified as the chief operating decision-makers. The Company’s chief operating decision-makers direct the allocation of resources to operating segments based on the profitability and cash flows of each respective segment. The Company believes that segment net operating income is the performance metric that captures the unique operating characteristics of each segment.

The following table sets forth the total assets by segment as of June 30, 2022 and December 31, 2021 ($ in thousands):

 

     June 30,
2022
     December 31,
2021
 

Industrial and Self-Storage

   $ 395,805    $ 186,502

Multifamily

     295,769      303,852

Commercial Mortgage Loans

     236,088      140,512

Real Estate-Related Securities

     188,340      108,153

Healthcare

     182,808      185,953

Single-Family Housing

     130,303      100,039

International Affiliated Funds

     128,124      131,046

Office

     123,492      125,563

Retail

     81,151      82,791

Other (Corporate)

     440,772      133,726
  

 

 

    

 

 

 

Total assets

   $ 2,202,652    $ 1,498,137
  

 

 

    

 

 

 

 

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The following table sets forth the financial results by segment for the three and six months ended June 30, 2022 and 2021 ($ in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2022      2021      2022      2021  

Rental revenues

           

Healthcare

   $ 4,908    $ 2,395    $ 9,345    $ 4,160

Industrial and Self-Storage

     6,902      3,586      12,266      7,146

Multifamily

     6,540      2,615      12,988      4,995

Office

     3,001      1,791      5,990      3,665

Retail

     1,622      1,744      3,321      3,427

Single-family housing

     1,509      —          2,240      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total rental revenues

     24,482      12,131      46,150      23,393

Rental property operating expenses

           

Healthcare

     1,141      445      2,443      766

Industrial and Self-Storage

     1,732      1,096      3,126      2,205

Multifamily

     3,006      1,192      5,691      2,373

Office

     779      482      1,776      1,037

Retail

     342      329      752      677

Single-family housing

     785      —          1,558      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total rental property operating expenses

     7,785      3,544      15,346      7,058

Depreciation and amortization

     (14,040      (6,754      (26,407      (12,238

Income from commercial mortgage loans

     1,897      —          3,892      —    

Realized and unrealized (loss) income from real estate-related securities

     (18,534      5,904      (21,938      8,785

Realized and unrealized loss from real estate debt

     (1,812      —          (2,518      —    

Realized and unrealized loss on commercial mortgage loan

     (2,248      —          (2,248      —    

Income (loss) from equity investment in unconsolidated international affiliated funds

     4,126      (374      4,985      315

General and administrative expenses

     (2,525      (874      (4,621      (1,931

Advisory fee due to affiliate

     (6,431      (1,631      (11,137      (2,695

Interest income

     1,177      50      1,507      110

Interest expense

     (3,147      (1,002      (4,943      (1,945
  

 

 

    

 

 

    

 

 

    

 

 

 

Net (loss) income

     (24,840      3,906      (32,624      6,736
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to non-controlling interest in third party joint venture

     (41      —          (22      —    

Net income attributable to preferred stock

     4      3      8      11
  

 

 

    

 

 

    

 

 

    

 

 

 

Net (loss) income attributable to common stockholders

   $ (24,803    $ 3,903    $ (32,610    $ 6,725
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 19. Subsequent Events

Distributions

Status of the Offering

On July 1, 2022, the Company sold approximately 6,355,074 shares of common stock (800,815 Class T shares, 1,596,933 Class S shares, 236,894 Class D shares and 3,720,431 Class I shares) at a purchase price of $13.14 for Class T, $13.00 for Class S, $13.17 for Class D, and $13.13 for Class I.

 

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On August 1, 2022, the Company sold approximately 4,545,373 shares of common stock (538,158 Class T shares, 1,308,968 Class S shares, 83,065 Class D shares and 2,615,182 Class I shares) at a purchase price of $13.11 for Class T, $12.98 for Class S, $13.15 for Class D, and $13.10 for Class I.

Proceeds from the Issuance of Common Stock

Subsequent to June 30, 2022, the Company received net proceeds of $142.6 million from the issuance of its common stock.

Investments

In July 2022, the Company originated a floating-rate senior mortgage and mezzanine loan amounting to $68.6 million, the proceeds of which were used by the borrower to finance the acquisition of a Class A, garden-style multifamily property located in Kissimmee, Florida.

In July 2022, the Company originated a floating-rate senior mortgage and mezzanine loan amounting to $68.2 million, the proceeds of which were used by the borrower to finance the acquisition and light repositioning of a mid-rise community located in Scottsdale, Arizona.

In July 2022, the Company acquired a 100% leased, bulk distribution building within the Wilsonville submarket of Portland for $60.6 million.

In July/August 2022, the Company acquired a healthcare portfolio for $280 million, consisting of ten properties located in various high growth markets across the United States.

 

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

References herein to “Company,” “we,” “us,” or “our” refer to Nuveen Global Cities REIT, Inc. and its subsidiaries unless the context specifically requires otherwise.

The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and elsewhere in this Quarterly Report on Form 10-Q.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements about our business, operations and financial performance, including, in particular, statements about our plans, strategies and objectives. You can generally identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. These statements include our plans and objectives for future operations, including plans and objectives relating to future growth and availability of funds, and are based on current expectations that involve numerous risks, uncertainties and assumptions. Assumptions relating to these statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond our control. Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate and our actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements as a result of various factors, including but not limited to those discussed under Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and elsewhere in this Quarterly Report on Form 10-Q. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Quarterly Report on Form 10-Q is filed with the Securities and Exchange Commission (the “SEC”). Except as required by law, we do not undertake to update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q.

Overview

Nuveen Global Cities REIT, Inc. is a Maryland corporation formed on May 1, 2017 and qualifies as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2018. We were formed to invest in properties in or around certain global cities selected for their resilience, long-term structural performance and ability to deliver an attractive and stable distribution yield. We expect that over time a majority of our real estate investments will be located in the United States and that a substantial but lesser portion of our portfolio will include real properties located in Canada, Europe and the Asia-Pacific region. We seek to complement our real property investments by investing a smaller portion of our portfolio in real estate-related assets. We are externally managed by our advisor, Nuveen Real Estate Global Cities Advisors, LLC (the “Advisor”), an investment advisory affiliate of Nuveen Real Estate. Nuveen Real Estate is the real estate investment management division of our sponsor, Nuveen, LLC (“Nuveen”). Nuveen is the asset management arm and wholly owned subsidiary of TIAA.

 

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Public Offerings

On January 31, 2018, our Registration Statement on Form S-11 (File No. 333-252077) relating to our initial public offering was first declared effective by the SEC. Pursuant thereto, we registered with the SEC an offering of up to $5.0 billion in shares of common stock (the “Initial Public Offering”), consisting of up to $4.0 billion in shares in our primary offering and up to $1.0 billion in shares pursuant to our distribution reinvestment plan. The Initial Public Offering terminated on July 2, 2021.

On January 13, 2021, we filed a Registration Statement on Form S-11 (File No. 333-252077), the (“Follow-on Registration Statement”) to register up to $5.0 billion of shares of common stock, consisting of up to $4.0 billion in shares in our primary offering and up to $1.0 billion in shares pursuant to our distribution reinvestment plan (the “Follow-on Public Offering”). The Follow-on Registration Statement was declared effective by the SEC on July 2, 2021. The Company is offering to the public any combination of four classes of shares of our common stock, Class T shares, Class S shares, Class D shares and Class I shares, with a dollar value up to the maximum offering amount. The publicly offered share classes have different upfront selling commissions and ongoing stockholder servicing fees. The purchase price per share for each class of common stock varies and generally equals our prior month’s net asset value (“NAV”) per share, as calculated monthly, plus applicable upfront selling commissions and dealer manager fees.

TIAA Investment

TIAA invested $200,000 through the purchase of 20,000 shares of common stock at $10.00 per share as our initial capitalization. Subsequent to our initial capitalization, TIAA purchased $300.0 million in shares (less the $200,000 initial capitalization amount).

Q2 2022 Highlights

Operating results:

 

   

Raised $393.7 million of net proceeds during the three months ended June 30, 2022. The details of the average annualized distributions rates and total returns are shown in the following table:

 

     Class I     Class D     Class T     Class S  

Average Annualized Distribution Rate

     5.44     5.17     4.59     4.66

Year-to-Date Total Return, without upfront selling commissions

     7.75     7.59     7.30     7.38

Year-to-Date Total Return, assuming maximum upfront selling commissions

     N/A       N/A       3.59     3.67

Inception-to-Date Total Return, without upfront selling commissions

     12.40     12.29     12.99     14.37

Inception-to-Date Total Return, assuming maximum upfront selling commissions

     N/A       N/A       11.86     12.82

Investments:

 

   

In June 2022, we acquired two purpose-built, self-storage properties in high-growth, high-barrier to entry submarkets totaling $25.3 million.

 

   

In June 2022, we acquired a core-plus industrial portfolio, consisting of three Class A light industrial assets for $54.4 million.

 

   

We acquired 57 single-family homes in conjunction with our relationship with Sparrow for a total purchase price of $22.3 million.

 

   

In June 2022, we sold the senior portion of our commercial mortgage loan used to finance the acquisition of a multifamily property in Seattle, Washington for $57.9 million.

 

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In June 2022, we entered into a note-on-note agreement for $69.3 million, secured by the commercial mortgage loan used to finance the acquisition of five garden-style apartments.

Portfolio

The following chart outlines the allocation of our investments based on fair value as of June 30, 2022:

 

LOGO

The following charts further describe the diversification of our direct investments in real properties based on fair value as of June 30, 2022:

 

LOGO    LOGO

 

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The following map shows the location and property type of directly held real estate investments owned by ECF, in which we are currently invested, as of June 30, 2022:

 

LOGO

The following map shows the location and property type of directly held real estate investments owned by APCF, in which we are currently invested, as of June 30, 2022:

 

LOGO

 

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Investments in Real Estate

The following charts provide information on the nature and geographical locations of our real properties as of June 30, 2022:

 

Sector and Property/Portfolio Name

  Number of
Properties
  Location   Acquisition Date   Ownership
Interest
  Sq Feet (in
thousands)
/ # of units
  Occupancy

Multifamily:

             

Kirkland Crossing

  1   Aurora, IL   Dec, 2017   100%   266   units   98%

Tacara Steiner Ranch

  1   Austin, TX   June, 2018   100%   246   units   99%

Brookson Flats

  1   Huntersville, NC   June, 2021   100%   296   units   97%

Signature at Hartwell

  1   Seneca, SC   Nov, 2021   96.5%   185   units   97%

The Reserve at Stonebridge Ranch

  1   McKinney, TX   Dec, 2021   100%   301   units   97%
 

 

       

 

 

 

Total Multifamily

  5         1,294   units   98%

Industrial and Self-Storage:

             

West Phoenix Industrial

  1   Phoenix, AZ   Dec, 2017   100%   265   sq ft.   100%

Denver Industrial

  3   Golden & Denver, CO   Dec, 2017   100%   486   sq ft.   97%

Henderson Interchange

  1   Henderson, NV   Dec, 2018   100%   197   sq ft.   100%

Globe Street Industrial

  1   Moreno Valley, CA   Oct, 2019   100%   252   sq ft.   100%

1 National Street

  1   Boston, MA   Nov, 2020   100%   300   sq ft.   100%

Rittiman West 6 & 7

  2   San Antonio, TX   Dec, 2020   100%   147   sq ft.   100%

10850 Train Ct.

  1   Houston, TX   Dec, 2021   100%   113   sq ft.   100%

5501 Mid Cities Pkwy

  1   San Antonio, TX   Dec, 2021   100%   88   sq ft.   100%

Tampa Lakeland Industrial

  3   Tampa, FL   Jan, 2022   100%   366   sq ft.   100%

610 Loop—Houston Industrial

  5   Houston, TX   Mar, 2022   100%   709   sq ft.   99%

Palm Bay Storage

  1   Palm Bay, FL   June, 2022   100%   27   sq ft.   95%

Imperial Sugarland Storage

  1   Sugarland, TX   June, 2022   100%   94   sq ft.   83%

UP Minneapolis Portfolio

  3   Minneapolis, MN   June, 2022   100%   406   sq ft.   84%
 

 

       

 

 

 

Total Industrial and Self-Storage

  24         3,450   sq ft.   97%

Retail:

             

Main Street at Kingwood

  1   Houston, TX   Oct, 2018   100%   199   sq ft.   100%
 

 

       

 

 

 

Total Retail

  1         199   sq ft.   100%

Office:

             

Defoor Hills

  1   Atlanta, GA   June, 2018   100%   91   sq ft.   100%

East Sego Lily

  1   Salt Lake City, UT   May, 2019   100%   149   sq ft.   100%

Perimeter’s Edge

  1   Raleigh, NC   Sept, 2021   100%   85   sq ft.   97%
 

 

       

 

 

 

Total Office

  3         325   sq ft.   99%

Healthcare:

             

9725 Datapoint

  1   San Antonio, TX   Dec, 2019   100%   205   sq ft.   100%

Locust Grove

  1   Atlanta, GA   Nov, 2020   100%   40   sq ft.   100%

Linden Oaks

  1   Chicago, IL   Nov, 2020   100%   43   sq ft.   100%

2945 Wilderness Place

  1   Boulder, CO   Jan, 2021   100%   31   sq ft.   100%

Pacific Center

  1   San Diego, CA   May, 2021   100%   92   sq ft.   100%

Hillcroft Medical Clinic

  1   Sugarland, TX   June, 2021   100%   41   sq ft.   100%

Buck’s Town Medical Campus I

  5   Philadelphia, PA   Sept, 2021   100%   142   sq ft.   89%

620 Roseville Parkway

  1   Roseville, CA   Oct, 2021   100%   194   sq ft.   51%

Buck’s Town Medical Campus II

  1   Langhorne, PA   Oct, 2021   100%   69   sq ft.   83%
 

 

       

 

 

 

Total Healthcare

  13         857   sq ft.   86%

 

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Sector and Property/Portfolio Name

  Number of
Properties
  Location   Acquisition Date   Ownership
Interest
  Sq Feet (in
thousands)
/# of units
  Occupancy

Single-Family Housing:

             

Single-Family Rentals

  322   Various   Various   100%   653   sq ft.   85%
 

 

       

 

 

 

Total Single-Family Housing

  322         653   sq ft.   85%

Total Investment Properties

  368            
 

 

           

The following schedule details the expiring leases at our industrial, retail, office and healthcare properties by annualized base rent and square footage as of June 30, 2022 ($ and square feet data in thousands). The table below excludes our multifamily properties, single-family rentals, and self-storage properties as substantially all leases at such properties expire within 12 months.

 

Year

   Number of
Expiring Leases
     Annualized
Base Rent(1)
     % of Total
Annualized Base Rent
Expiring
    Square Feet      % of Total
Square Feet
Expiring
 

2022 (remaining)

     11      540      1     71      2

2023

     15        1,152      3     143      3

2024

     25        2,952      7     328      8

2025

     31        11,976      27     1,199      29

2026

     22        4,332      10     594      14

2027

     35      8,160      18     724      17

2028

     9      5,304      12     478      11

2029

     6      636      1     104      2

2030

     7      3,336      7     161      4

Thereafter

     13      6,180      14     372      10
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

     174      44,568      100     4,174      100
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

The annualized June 30, 2022 base rent per leased square foot of the applicable year excluding tenant recoveries, straight-line rent and above-market and below-market lease amortization.

Investments in Real Estate-Related Securities

We invest in real estate-related securities including shares of common stock of publicly-listed REITs. As of June 30, 2022, we had 78 holdings and have invested $112.3 million in securities that are valued at $105.2 million.

Investments in Real Estate Debt

We invest in commercial mortgage-backed securities (“CMBS”) to the extent permitted by the REIT rules. CMBS are securities that evidence interests in, or are secured by, a single commercial mortgage loan or pool of commercial mortgage loans. CMBS are generally pass-through and represent beneficial ownership interests in trusts whose assets consist of defined portfolios of one or more commercial mortgage loans. Losses are usually borne by the most subordinate class, which receive payments only after the senior classes have received payments they are entitled to. CMBS are subject to the risks of the underlying mortgage loans. The majority of these securities are single asset, single borrower (or “SASB”) deals (~89%), and all securities are rated Investment Grade (BBB- or higher) with ~3% being non-Investment Grade (BB+ or lower). The greatest concentration by property sector is in industrial properties. Additionally, to minimize interest rate risk, the portfolio is concentrated in floating-rate securities (~83%) that had a purchase yield of 3.51% which is expected to increase as the base index rates (LIBOR and SOFR) increase. As of June 30, 2022, we have invested $85.6 million in CMBS that are valued at $83.2 million on the balance sheet.

 

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Investments in International Affiliated Funds

European Cities Partnership SCSp

ECF was formed in March 2016 as an open-end, Euro-denominated fund that seeks to build a diversified portfolio of high quality and stabilized commercial real estate with good fundamentals (i.e., core real estate) located in or around certain investment cities in Europe selected for their resilience, potential for long-term structural performance and ability to deliver an attractive and stable distribution yield. As of the latest available information, ECF has total equity commitments of $1.2 billion (€1.2 billion) and has called $1.2 billion (€1.2 billion) of these commitments. ECF has 12 assets with a gross asset value of $2.0 billion (€1.9 billion) and has a loan to value ratio of 34.9%. The ECF portfolio is well diversified and as of March 31, 2022 had a balanced country exposure with 21.6% in UK, 17.7% in Netherlands, 12.6% in Finland, 12.0% in Spain, 12.8% in Germany, 10.9% in Italy, 5.2% in Denmark, 3.6% in France, and 3.6% in Austria resulting in an annualized since inception gross income return of 4.1% and a gross total return of 6.3%.

The following table summarizes the equity investment in Unconsolidated International Affiliated Funds from ECF as of June 30, 2022 ($ in thousands):

 

     Investment in ECF  

Balance as of December 31, 2021

   $ 79,097

Income distribution

     (1,076

Income from equity investment in unconsolidated international affiliated fund

     3,757  

Foreign currency translation adjustment

     (6,434
  

 

 

 

Balance as of June 30, 2022

   $ 75,344
  

 

 

 

Income from equity investments in Unconsolidated International Affiliated Funds from ECF was $2.9 million and $3.8 million for the three and six months ended June 30, 2022, respectively. Income from equity investments in Unconsolidated International Affiliated Funds from ECF was $0.4 million and $0.3 million for the three and six months ended June 30, 2021, respectively.

Asia Pacific Cities Fund

APCF was launched in November 2018 as an open-end, U.S. dollar-denominated fund that seeks durable income and capital appreciation from a balanced and diversified portfolio of real estate investments in a defined list of investment cities in the Asia-Pacific region. As of the latest available information, APCF has total equity commitments of $990.0 million and has called $876.5 million of these commitments. APCF has 18 assets with a gross asset value of $1.6 billion and has a loan to value ratio of 39.1%. As of March 31, 2022, APCF had 32.5% exposure in Singapore, 9.9% in Australia, 26.3% in Japan, 18.3% in South Korea and 13.1% in Hong Kong resulting in an annualized since inception total return of 7.0%.

The following table summarizes the equity investment in Unconsolidated International Affiliated Funds from APCF as of June 30, 2022 ($ in thousands):

 

     Investment in APCF  

Balance as of December 31, 2021

   $ 51,948

Income distribution

     (396

Income from equity investment in unconsolidated international affiliated fund

     1,228
  

 

 

 

Balance as of June 30, 2022

   $ 52,780
  

 

 

 

Income from equity investments in Unconsolidated International Affiliated Funds from APCF for each of the three and six months ended June 30, 2022 was $1.3 million and $1.2 million, respectively. (Loss) income from

 

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equity investments in Unconsolidated International Affiliated Funds from APCF for each of the three and six months ended June 30, 2021 was $(0.8) million and $42,000, respectively.

Investments in Commercial Mortgage Loans

On November 9, 2021 we originated a floating rate senior mortgage and mezzanine loan to finance the acquisition of a four building life science/office campus in Farmington, Massachusetts, amounting to $62.3 million and have committed to fund an additional $30.4 million for future renovations of the property. The advance rate was 65% LTV with an in-place debt yield of 8.47%. On November 16, 2021 we originated a second floating rate senior mortgage and mezzanine loan in the amount of $76.9 million to finance the acquisition of a multifamily property in Seattle, Washington, with additional commitments to fund $11.1 million for future renovations. The advance rate was 74% LTV with an in-place debt yield of 5.14%. The secondary market execution for both of these loan facilities will be to sell the senior mortgage position and increase the mezzanine yield.

On March 28, 2022 we originated a floating rate senior mortgage and mezzanine loan to finance the acquisition and reposition of five multi-family properties located in Tucson, AZ, amounting to $92.4 million and have committed to fund an additional $9.3 million for future renovations of the property. The advance rate was 70.9% LTV with an in-place debt yield of 5.25%. The secondary market execution is anticipated to be note-on-note.

On March 24, 2022 and June 27, 2022, the Company sold two senior loans to unaffiliated parties and retained the subordinate mortgages, receiving proceeds of $47.4 million and $57.9 million, respectively, which are net of disposition fees. The sales did not qualify for sale accounting under GAAP and as such, the loans were not de-recognized.

In accordance with the adoption of the fair value option allowed under ASC 825, Financial Instruments, and at the election of the Company, the existing commercial mortgage loans are stated at fair value and were initially valued at the face amount of the loan funding. Subsequently, the commercial mortgage loans will be valued at least quarterly by an independent third-party valuation firm with additional oversight being performed by the Advisor’s internal valuation department. The value will be based on market factors, such as market interest rates and spreads for comparable loans, the performance of the underlying collateral (such as the loan-to-value ratio and the cash flow of the underlying collateral), and the credit quality of the borrower.

For the three and six months ended June 30, 2022, we had unrealized losses on our commercial mortgage loans of $(2.2) million for each period. For the three and six months ended June 30, 2021, we did not have a commercial mortgage loan investment.

For the three and six months ended June 30, 2022, we recognized interest income and loan origination fee income from our investment in commercial mortgage loans of $1.9 million and $3.9 million, respectively. For the three and six months ended June 30, 2021, we did not have a commercial mortgage loan investment.

Factors Impacting Our Operating Results

Results of operations are affected by a number of factors and depend on the rental revenue we receive from the properties that we acquire, the timing of lease expirations, general market conditions, operating expenses, the competitive environment for real estate assets and income from our investments in real estate-related securities, real estate debt, commercial mortgages and the International Affiliated Funds. The strong U.S. economic recovery is benefiting real estate prices overall. COVID-19 pandemic-related restrictions have largely been removed. The U.S. real estate recovery is generally tracking with the broader economic recovery; however, we expect certain regions, cities, and property types to continue to outperform and others to underperform. U.S. commercial real estate should benefit even during a rising interest rate environment, as real-estate assets will continue to be a higher-yielding alternative to fixed-income assets in the short term.

 

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Rental Revenues

We receive income primarily from rental revenue generated by the properties that we acquire. The amount of rental revenue depends upon a number of factors, including: our ability to enter into leases with increasing or market value rents for the properties that we acquire; and rent collection, which primarily relates to each future tenant’s financial condition and ability to make rent payments to us on time.

Competitive Environment

We face competition from a diverse mix of market participants, including but not limited to, other companies with similar business models, independent investors, hedge funds and other real estate investors. Competition from others may diminish our opportunities to acquire a desired property on favorable terms or at all. In addition, this competition may put pressure on us to reduce the rental rates below those that we expect to charge for the properties that we acquire, which would adversely affect our financial results.

Operating Expenses

Our operating expenses include general and administrative expenses, including legal, accounting, and other expenses related to corporate governance, public reporting and compliance with the various provisions of U.S. securities laws. As we have with the leases associated with our industrial and self-storage, retail, office and healthcare properties, we generally expect to structure our leases so that the tenant is responsible for taxes, maintenance, insurance, and structural repairs with respect to the premises throughout the lease term. Increases or decreases in such operating expenses will impact our overall financial performance.

Our Qualification as a REIT

We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with the taxable year ended December 31, 2018. Shares of our common stock are subject to restrictions on ownership and transfer that are intended, among other purposes, to assist us in qualifying and maintaining our qualification as a REIT. In order for us to qualify as a REIT under the Internal Revenue Code (the “Code”), we are required to, among other things, distribute as dividends at least 90% of our REIT taxable income, determined without regard to the dividends-paid deduction and excluding net capital gains, to our stockholders and meet certain tests regarding the nature of our income and assets. In order to satisfy a requirement that five or fewer individuals do not own (or be treated as owning) more than 50% of our stock, subject to certain exceptions, no person or entity may own, or be deemed to own, by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or number of shares, whichever is more restrictive) of the aggregate of our outstanding shares of stock or more than 9.8% (in value or number of shares, whichever is more restrictive) of our outstanding common stock.

Tax legislation commonly referred to as the Tax Cuts & Jobs Act (the “TCJA”) was enacted on December 22, 2017. Among other things, the TCJA reduced the U.S. federal corporate income tax rate from 35% to 21% and created new taxes on certain foreign-sourced earnings. Federal legislation intended to ameliorate the economic impact of the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), was enacted on March 27, 2020, which, among other things, makes technical corrections to, or modifies on a temporary basis, certain of the provisions of the TCJA. Management has evaluated the effects of TCJA, as modified by the CARES Act and concluded that the TCJA will not materially impact its consolidated financial statements. We also estimate that the taxes on foreign-sourced earnings imposed under the TCJA are not likely to apply to our foreign investments.

 

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Results of Operations

The following table sets forth the results of our operations for the three and six months ended June 30, 2022 and 2021 ($ in thousands):

 

    Three Months Ended
June 30,
    2022 vs 2021     Six Months Ended
June 30,
    2022 vs 2021  
    2022     2021     2022     2021  

Revenues

           

Rental revenue

  $ 24,482   $ 12,131   $ 12,351   $ 46,150   $ 23,393   $ 22,757

Income from commercial mortgage loan

    1,897     —         1,897     3,892     —         3,892
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    26,379     12,131     14,248     50,042     23,393     26,649

Expenses

           

Rental property operating

    7,785     3,544     4,241     15,346     7,058     8,288

General and administrative

    2,525     874     1,651     4,621     1,931     2,690

Advisory fee due to affiliate

    6,431     1,631     4,800     11,137     2,695     8,442

Depreciation and amortization

    14,040     6,754     7,286     26,407     12,238     14,169
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    30,781     12,803     17,978     57,511     23,922     33,589

Other income (expense)

           

Realized and unrealized (loss) income from real estate-related securities

    (18,534     5,904     (24,438     (21,938     8,785     (30,723

Realized and unrealized loss from real estate debt

    (1,812     —         (1,812     (2,518     —         (2,518

Unrealized loss on commercial mortgage loans

    (2,248     —         (2,248     (2,248     —         (2,248

Income (loss) from equity investment in unconsolidated international affiliated funds

    4,126     (374     4,500     4,985     315     4,670

Interest income

    1,177     50     1,127     1,507     110     1,397

Interest expense

    (3,147     (1,002     (2,145     (4,943     (1,945     (2,998
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

    (24,840     3,906     (28,746     (32,624     6,736     (39,360
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to non-controlling interest in third party joint venture

    (41     —         (41     (22     —         (22

Net income attributable to preferred stock

    4     3     1     8     11     (3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to common stockholders

  $ (24,803   $ 3,903   $ (28,706   $ (32,610   $ 6,725   $ (39,335
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Rental Revenue and Rental Property Operating Expenses

Due to acquisitions of real estate we have made since June 30, 2021, our revenues and operating expenses for the three and six months ended June 30, 2022 and 2021 are not comparable. However, certain properties in our portfolio were owned for both the three and six months ended June 30, 2022 and 2021 and are further discussed below in “Same Property Results of Operations.”

Income from Commercial Mortgage Loans

During the three and six months ended June 30, 2022, income from commercial mortgage loans increased $1.9 million and $3.9 million, respectively, due to the origination of three commercial mortgages beginning in November 2021.

Depreciation and Amortization

During the three and six months ended June 30, 2022, depreciation and amortization increased by $7.3 million and $14.2 million in comparison to the corresponding periods in 2021 due to acquisitions of real estate.

 

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General and Administrative Expenses

During the three and six months ended June 30, 2022, general and administrative expenses increased by $1.7 million and $2.7 million in comparison to the corresponding periods in 2021 primarily due to an increase in legal and appraisal fees, fund administration, financing costs associated with our note payable, and disposition fees associated with two sales of the senior portion of our commercial mortgage loans.

Advisory Fee Due to Affiliate

During the three and six months ended June 30, 2022, the advisory fee due to affiliate increased by $4.8 million and $8.4 million as compared to the corresponding periods in 2021 due to the growth of our NAV.

Realized and Unrealized (Loss) Income from Real Estate-Related Securities

Realized and unrealized (loss) income from real estate-related securities decreased $24.4 million and $30.7 million for the three and six months ended June 30, 2022, respectively, compared to the corresponding periods in 2021. The decrease was due to an overall market decline driven by the uncertainty surrounding inflation, interest rates and geopolitics in Eastern Europe.

Realized and Unrealized Loss from Real Estate Debt

Realized and unrealized loss from real estate debt was $1.8 million and $2.5 million for the three and six months ended June 30, 2022, respectively, due to our recent allocations to CMBS.

Income from Equity Investment in Unconsolidated International Affiliated Funds

During the three and six months ended June 30, 2022, income from the International Affiliated Funds increased $4.5 million and $4.7 million as compared to the corresponding periods in 2021. The increase was primarily due to valuation gains on properties within ECF and APCF driven by improved market conditions.

Interest Expense

During the three and six months ended June 30, 2022, interest expense increased $2.1 million and $3.0 million, respectively, compared to the corresponding periods in 2021 due to additional borrowings on our credit facility, mortgage payables and note payable during the current year.

Interest Income

During the three and six months ended June 30, 2022, interest income increased $1.1 million and $1.4 million, respectively, compared to the corresponding periods in 2021 due to increased interest generated by our cash sweep account and bond income from our CMBS holdings.

Same Property Results of Operations

We evaluate our consolidated results of operations on a same property basis, which allows us to analyze our property operating results excluding acquisitions during the periods under comparison. Properties in our portfolio are considered same property if they were owned for the full periods presented, otherwise they are considered non-same property. Newly acquired or recently developed properties that have not achieved stabilized occupancy are excluded from same property results and are considered non-same property. We do not consider our real estate-related securities and International Affiliated Funds segments to be same property.

For the three months ended June 30, 2022, our same property portfolio consisted of six industrial, two multifamily, two office, one retail and four healthcare properties. For the six months ended June 30, 2022, our

 

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same property portfolio consisted of six industrial, two multifamily, two office, one retail, and three healthcare properties.

Same property operating results are measured by calculating same property net operating income (“NOI”). Same property NOI is a supplemental non-GAAP disclosure of our operating results that we believe is meaningful as it enables management to evaluate the impact of occupancy, rents, leasing activity, and other controllable property operating results at our real estate properties. We define same property NOI as operating revenues less operating expenses, which exclude (i) depreciation and amortization, (ii) interest expense and other non-property related revenue and expense items such as (a) general and administrative expenses, (b) management fee, (c) interest income (d) income from real estate-related securities (e) income from equity investment in unconsolidated international affiliated funds, and (f) income from commercial mortgage loan.

Our same property NOI may not be comparable to that of other REITs and should not be considered to be more relevant or accurate in evaluating our operating performance than the current GAAP methodology used in calculating net income (loss).

The following table reconciles GAAP net income attributable to our stockholders to same property NOI for the three and six months ended June 30, 2022 and 2021 ($ in thousands):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2022     2021     2022     2021  

Net (loss) income attributable to common stockholders

   $ (24,803   $ 3,903   $ (32,610   $ 6,725

Adjustments to reconcile to same property NOI

        

General and administrative

     2,525     874     4,621     1,931

Advisory fee due to affiliate

     6,431     1,631     11,137     2,695

Depreciation and amortization

     14,040     6,754     26,407     12,238

Loss (income) from real estate-related securities

     18,534     (5,904     21,938     (8,785

Income from commercial mortgage loans

     (1,897     —         (3,892     —    

Loss from real estate debt

     1,812     —         2,518     —    

(Income) loss from equity investment in unconsolidated international affiliated funds

     (4,126     374     (4,985     (315

Realized and unrealized loss on commercial mortgage loans

     2,248     —         2,248     —    

Interest income

     (1,177     (50     (1,507     (110

Interest expense

     3,147     1,002     4,943     1,945

Income attributable to non-controlling interest in third party joint venture

     (41     —         (22     —    

Preferred Stock

     4     3     8     11