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Section 1: 10-Q (10-Q)

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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 September 30, 2019
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 000-54376
_________________________________
STRATEGIC REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
_________________________________
Maryland
 
 
90-0413866
(State or Other Jurisdiction of
Incorporation or Organization)
 
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
P.O. Box 5049
 
 
 
San Mateo,
California
 
 
94402
(Address of Principal Executive Offices)
 
 
(Zip Code)
(650) 343-9300
(Registrant’s Telephone Number, Including Area Code)
_________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
None
 
None
 
None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       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   ý
As of November 4, 2019, there were 10,774,036 shares of the registrant’s common stock issued and outstanding.




STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
 
Page
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 



Table of Contents

PART I
FINANCIAL INFORMATION
The accompanying interim unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2019, have been prepared by Strategic Realty Trust, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2018, as filed with the SEC on March 19, 2019 (the “2018 Annual Report on Form 10-K”). The interim unaudited condensed consolidated financial statements herein should also be read in conjunction with the Notes to Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q. The results of operations for the three and nine months ended September 30, 2019, are not necessarily indicative of the operating results expected for the full year. The information furnished in the Company’s accompanying unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of operations, equity, and cash flows reflects all adjustments that, in management’s opinion, are necessary for a fair presentation of the aforementioned financial statements. Such adjustments are of a normal recurring nature.

3

Table of Contents

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share amounts)
(unaudited)
 
September 30,
 
December 31,
 
2019
 
2018
ASSETS
 
 
 
Investments in real estate
 
 
 
Land
$
13,536

 
$
15,217

Building and improvements
23,732

 
31,697

Tenant improvements
1,264

 
1,479

 
38,532

 
48,393

Accumulated depreciation
(3,066
)
 
(3,917
)
Investments in real estate, net
35,466

 
44,476

Properties under development and development costs
 
 
 
Land
25,851

 
25,851

Buildings
558

 
570

Development costs
17,453

 
13,813

Properties under development and development costs
43,862

 
40,234

Cash, cash equivalents and restricted cash
3,720

 
3,347

Prepaid expenses and other assets, net
151

 
137

Tenant receivables, net of $40 and $40 bad debt reserve
666

 
1,084

Investments in unconsolidated joint ventures
2,657

 
2,701

Lease intangibles, net
1,392

 
1,890

Assets held for sale
9,089

 

Deferred financing costs, net
263

 
736

TOTAL ASSETS (1)
$
97,266

 
$
94,605

LIABILITIES AND EQUITY
 
 
 
LIABILITIES
 
 
 
Notes payable, net
$
34,356

 
$
34,536

Accounts payable and accrued expenses
1,447

 
1,224

Amounts due to affiliates
9

 
30

Other liabilities
230

 
375

Liabilities related to assets held for sale
6,703

 

Below-market lease liabilities, net
312

 
370

TOTAL LIABILITIES (1)
43,057

 
36,535

Commitments and contingencies (Note 13)


 


EQUITY
 
 
 
Stockholders’ equity
 
 
 
Preferred stock, $0.01 par value; 50,000,000 shares authorized, none issued and outstanding

 

Common stock, $0.01 par value; 400,000,000 shares authorized; 10,774,036 and 10,863,299 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
110

 
110

Additional paid-in capital
94,803

 
95,336

Accumulated deficit
(41,702
)
 
(38,546
)
Total stockholders’ equity
53,211

 
56,900

Non-controlling interests
998

 
1,170

TOTAL EQUITY
54,209

 
58,070

TOTAL LIABILITIES AND EQUITY
$
97,266

 
$
94,605

(1)
As of September 30, 2019 and December 31, 2018, includes approximately $45.0 million and $40.5 million, respectively, of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and approximately $15.6 million and $17.3 million, respectively, of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. Refer to Note 5. “Variable Interest Entities”.
See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares and per share amounts)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
Rental and reimbursements
$
949

 
$
1,516

 
$
2,832

 
$
5,103

 
 
 
 
 
 
 
 
Expense:
 
 
 
 
 
 
 
Operating and maintenance
327

 
660

 
1,183


1,925

General and administrative
444

 
421

 
1,239


1,317

Depreciation and amortization
331

 
483

 
1,086


1,182

Transaction expense

 
7

 


39

Interest expense
162

 
147

 
481


667

 
1,264

 
1,718

 
3,989

 
5,130

Operating loss
(315
)
 
(202
)
 
(1,157
)
 
(27
)
 
 
 
 
 
 
 
 
Other income (loss):
 
 
 
 
 
 
 
Equity in income (loss) of unconsolidated joint ventures
(14
)
 
290

 
(49
)
 
245

Net gain on disposal of real estate

 
1,293

 
13

 
3,741

Income (loss) before income taxes
(329
)
 
1,381

 
(1,193
)
 
3,959

Income taxes

 
5

 
(44
)

(19
)
Net income (loss)
(329
)

1,386

 
(1,237
)
 
3,940

Net income (loss) attributable to non-controlling interests
(7
)
 
29

 
(26
)
 
83

Net income (loss) attributable to common stockholders
$
(322
)
 
$
1,357

 
$
(1,211
)
 
$
3,857

 
 
 
 
 
 
 
 
Earnings (loss) per common share - basic and diluted
$
(0.03
)
 
$
0.12

 
$
(0.11
)
 
$
0.35

 
 
 
 
 
 
 
 
Weighted average shares outstanding used to calculate earnings (loss) per common share - basic and diluted
10,800,467

 
10,962,529

 
10,833,866

 
10,976,030

See accompanying notes to condensed consolidated financial statements.

5

Table of Contents

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except shares)
(unaudited)
Nine Months Ended September 30, 2019 and 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of
Shares
 
Par Value
 
Additional
Paid-in Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
Non-controlling
Interests
 
Total
Equity
BALANCE — December 31, 2018
10,863,299

 
$
110

 
$
95,336

 
$
(38,546
)
 
$
56,900

 
$
1,170

 
$
58,070

Conversion of OP units to common shares
17,719

 

 
105

 

 
105

 
(105
)
 

Redemption of common shares
(106,982
)
 

 
(638
)
 

 
(638
)
 

 
(638
)
Quarterly distributions

 

 

 
(1,945
)
 
(1,945
)
 
(41
)
 
(1,986
)
Net loss

 

 

 
(1,211
)
 
(1,211
)
 
(26
)
 
(1,237
)
BALANCE — September 30, 2019
10,774,036

 
$
110

 
$
94,803

 
$
(41,702
)
 
$
53,211

 
$
998

 
$
54,209

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE — December 31, 2017
10,988,438

 
$
111

 
$
96,097

 
$
(44,741
)
 
$
51,467

 
$
1,051

 
$
52,518

Redemption of common shares
(61,925
)
 

 
(380
)
 

 
(380
)
 

 
(380
)
Quarterly distributions

 

 

 
(1,973
)
 
(1,973
)
 
(42
)
 
(2,015
)
Cumulative effect from change in accounting principle

 

 

 
668

 
668

 

 
668

Net income

 

 

 
3,857

 
3,857

 
83

 
3,940

BALANCE — September 30, 2018
10,926,513

 
$
111

 
$
95,717

 
$
(42,189
)
 
$
53,639

 
$
1,092

 
$
54,731

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2019 and 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of
Shares
 
Par Value
 
Additional
Paid-in Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
Non-controlling
Interests
 
Total
Equity
BALANCE — June 30, 2019
10,801,141

 
$
110

 
$
94,961

 
$
(40,734
)
 
$
54,337

 
$
1,123

 
$
55,460

Conversion of OP units to common shares
17,719

 

 
105

 

 
105

 
(105
)
 

Redemption of common shares
(44,824
)
 

 
(263
)
 

 
(263
)
 

 
(263
)
Quarterly distributions

 

 

 
(646
)
 
(646
)
 
(13
)
 
(659
)
Net loss

 

 

 
(322
)
 
(322
)
 
(7
)
 
(329
)
BALANCE — September 30, 2019
10,774,036

 
$
110

 
$
94,803

 
$
(41,702
)
 
$
53,211

 
$
998

 
$
54,209

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE — June 30, 2018
10,963,416

 
$
111

 
$
95,940

 
$
(42,890
)
 
$
53,161

 
$
1,077

 
$
54,238

Redemption of common shares
(36,903
)
 

 
(223
)
 

 
(223
)
 

 
(223
)
Quarterly distributions

 

 

 
(656
)
 
(656
)
 
(14
)
 
(670
)
Net income

 

 

 
1,357

 
1,357

 
29

 
1,386

BALANCE — September 30, 2018
10,926,513

 
$
111

 
$
95,717

 
$
(42,189
)
 
$
53,639

 
$
1,092

 
$
54,731

See accompanying notes to condensed consolidated financial statements.

6

Table of Contents

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(1,237
)
 
$
3,940

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Net gain on disposal of real estate
(13
)
 
(3,741
)
Equity in (income) loss of unconsolidated joint ventures
49

 
(245
)
Straight-line rent
(70
)
 
(109
)
Amortization of deferred costs
473

 
443

Depreciation and amortization
1,086

 
1,182

Amortization of above and below-market leases
(16
)
 
(15
)
Bad debt expense
293

 
75

Changes in operating assets and liabilities:
 
 
 
Prepaid expenses and other assets
(14
)
 
(72
)
Tenant receivables
90

 
231

Accounts payable and accrued expenses
155

 
52

Amounts due to affiliates
(21
)
 
3

Other liabilities
(145
)
 
(87
)
Net cash provided by operating activities
630

 
1,657

 
 
 
 
Cash flows from investing activities:
 
 
 
Net proceeds from the sale of real estate
13

 
9,314

Investment in properties under development and development costs
(3,225
)
 
(3,147
)
Improvements, capital expenditures, and leasing costs
(592
)
 
(643
)
Investments in unconsolidated joint ventures
(38
)
 
(191
)
Distributions from unconsolidated joint ventures
33

 
111

Net cash provided by (used in) investing activities
(3,809
)
 
5,444

 
 
 
 
Cash flows from financing activities:
 
 
 
Redemption of common shares
(638
)
 
(380
)
Quarterly distributions
(1,993
)
 
(2,018
)
Proceeds from notes payable
18,635

 
15,950

Repayment of notes payable
(11,835
)
 
(20,769
)
Payment of loan fees from investments in consolidated variable interest entities
(617
)
 
(559
)
Payment of loan fees and financing costs

 
(79
)
Net cash provided by (used in) financing activities
3,552

 
(7,855
)
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
373

 
(754
)
Cash, cash equivalents and restricted cash – beginning of period
3,347

 
3,902

Cash, cash equivalents and restricted cash – end of period
$
3,720

 
$
3,148

 
 
 
 
Supplemental disclosure of non-cash investing and financing activities and other cash flow information:
 
 
 
Distributions declared but not paid
$
659

 
$
670

Change in accrued liabilities capitalized to investment in development
85

 
(194
)
Change to accrued mortgage note payable interest capitalized to investment in development
(10
)
 
(85
)
Amortization of deferred loan fees capitalized to investment in development
328

 
441

Conversion of OP units to common shares
105

 

Changes in capital improvements, accrued but not paid

 
502

Cumulative effect from change in accounting principle

 
668

Cash paid for interest, net of amounts capitalized
33

 
326

See accompanying notes to condensed consolidated financial statements.

7

Table of Contents

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ORGANIZATION AND BUSINESS
Strategic Realty Trust, Inc. (the “Company”) was formed on September 18, 2008, as a Maryland corporation. Effective August 22, 2013, the Company changed its name from TNP Strategic Retail Trust, Inc. to Strategic Realty Trust, Inc. The Company believes it qualifies as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and has elected REIT status beginning with the taxable year ended December 31, 2009, the year in which the Company began material operations.
Since the Company’s inception, its business has been managed by an external advisor. The Company has no direct employees and all management and administrative personnel responsible for conducting the Company’s business are employed by its advisor. Currently, the Company is externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed every year through 2019. The current term of the Advisory Agreement terminates on August 9, 2020. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.
Substantially all of the Company’s business is conducted through Strategic Realty Operating Partnership, L.P. (the “OP”). During the Company’s initial public offering (“Offering”), as the Company accepted subscriptions for shares of its common stock, it transferred substantially all of the net proceeds of the Offering to the OP as a capital contribution. The Company is the sole general partner of the OP. As of September 30, 2019 and December 31, 2018, the Company owned 98.0% and 97.9%, respectively, of the limited partnership interests in the OP.
The Company’s principal demand for funds has been for the acquisition of real estate assets, the payment of operating expenses, interest on outstanding indebtedness, the payment of distributions to stockholders, and investments in unconsolidated joint ventures as well as development of properties. Substantially all of the proceeds of the completed Offering have been used to fund investments in real properties and other real estate-related assets, for payment of operating expenses, for payment of interest, for payment of various fees and expenses, such as acquisition fees and management fees, and for payment of distributions to stockholders. The Company’s available capital resources, cash and cash equivalents on hand and sources of liquidity are currently limited. The Company expects its future cash needs will be funded using cash from operations, future asset sales, debt financing and the proceeds to the Company from any sale of equity that it may conduct in the future.
The Company invests in and manages a portfolio of income-producing retail properties, located in the United States, real estate-owning entities and real estate-related assets. The Company has invested directly, and indirectly through joint ventures, in a portfolio of income-producing retail properties located throughout the United States, with a focus on grocery anchored multi-tenant retail centers, including neighborhood, community and lifestyle shopping centers, multi-tenant shopping centers and free standing single-tenant retail properties. During the first quarter of 2016, the Company invested, through joint ventures, in two significant retail projects under development.
As of September 30, 2019, in addition to the development projects, the Company’s portfolio of properties was comprised of 8 properties, including one property held for sale, with approximately 86,000 rentable square feet of retail space located in two states. As of September 30, 2019, the rentable space at the Company’s retail properties was 90% leased.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X.
The interim unaudited condensed consolidated financial statements include the accounts of the Company, the OP, their direct and indirect owned subsidiaries, and the accounts of joint ventures that are determined to be variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions are eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s condensed consolidated financial position, results of operations and cash flows have been included.

8

Table of Contents
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The Company evaluates the need to consolidate joint ventures and variable interest entities based on standards set forth in ASC Topic 810, Consolidation (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of September 30, 2019 and December 31, 2018, the Company held ownership interests in two unconsolidated joint ventures. Refer to Note 4. “Investments in Unconsolidated Joint Ventures” for additional information. As of September 30, 2019 and December 31, 2018, the Company held variable interests in two variable interest entities and consolidated those entities. Refer to Note 5. “Variable Interest Entities” for additional information.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents represent current bank accounts and other bank deposits free of encumbrances and having maturity dates of three months or less from the respective dates of deposit. The Company limits cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk in cash.
Restricted cash includes escrow accounts for real property taxes, insurance, capital expenditures and tenant improvements, debt service and leasing costs held by lenders.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the consolidated balance sheets that sum to the total of the same such amounts shown on the consolidated statement of cash flows (amounts in thousands):
 
September 30, 2019
 
December 31, 2018
Cash and cash equivalents
$
3,026

 
$
3,347

Restricted cash
694

 

Total cash, cash equivalents, and restricted cash
$
3,720

 
$
3,347


Recent Accounting Pronouncements
The FASB issued the following Accounting Standards Updates (“ASUs”) which could have potential impact to the Company’s condensed consolidated financial statements:
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures upon issuance of ASU 2018-13 and delayed adoption of the additional disclosures until the effective date. The adoption of ASU 2018-13 will not have an impact on the Company’s condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 requires a financial asset, measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Adjustments resulting from adopting ASU 2016-13 shall be applied through a cumulative-effect adjustment to retained earnings. The adoption of ASU 2016-13 will not have an impact on the Company’s condensed consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires entities to recognize lease assets and lease liabilities on the consolidated balance sheet and disclose key information about leasing arrangements. The guidance retains a distinction between finance leases and operating leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. The accounting applied by a lessor is largely unchanged from that applied under Accounting Standards Codification (“ASC”) 840. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using the modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply under ASC 842. The amendments in this guidance are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-02 (as amended by subsequent ASUs) effective January 1, 2019, utilizing the practical expedients described in ASU 2018-11. The Company has elected the lessor practical expedient to not separate common area maintenance and reimbursement of real estate taxes from the associated lease for all existing and

9

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

new leases as the timing and pattern of payments and associated lease payments are the same. The timing of revenue recognition remains the same for the Company’s existing leases and new leases. Revenues related to the Company’s leases continue to be reported on one line in the presentation within the statement of operations as a result of electing this lessor practical expedient. The Company continues to capitalize its direct leasing costs. These costs are incurred as a result of obtaining new leases, and renewing leases, and are paid to the Company’s Advisor. Additionally, the Company is not a lessee of real estate or equipment, as it is externally managed by its Advisor.
3. REAL ESTATE INVESTMENTS
Assets Held for Sale and Liabilities Related to Assets Held for Sale
At September 30, 2019, Topaz Marketplace, located in Hesperia, CA, was classified as held for sale in the condensed consolidated balance sheets.
Since the sale of this property does not represent a strategic shift that will have a major effect on the Company’s operations and financial results, the results of operations of this property were not reported as discontinued operations in the Company’s condensed consolidated financial statements. Initially, the Company intends to use the net proceeds from the sale of this property to repay a portion of the outstanding balance on its line of credit.
The Company’s condensed consolidated statements of operations include net operating income of approximately $0.2 million and $0.1 million for the three months ended September 30, 2019 and 2018, respectively, and approximately $0.4 million and $0.3 million for the nine months ended September 30, 2019 and 2018, related to the assets held for sale.
There were no assets classified as held for sale at December 31, 2018.
The major classes of assets and liabilities related to assets held for sale included in the condensed consolidated balance sheets are as follows (amounts in thousands):
 
September 30,
 
2019
ASSETS
 
Investments in real estate
 
Land
$
1,680

Building and improvements
7,966

Tenant improvements
799

 
10,445

Accumulated depreciation
(1,709
)
Investments in real estate, net
8,736

Tenant receivables, net
105

Lease intangibles, net
248

Assets held for sale
$
9,089

LIABILITIES
 
Notes payable
$
6,691

Below-market lease intangibles, net
12

Liabilities related to assets held for sale
$
6,703


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

10

Table of Contents
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The following table summarizes the Company’s investments in unconsolidated joint ventures as of September 30, 2019 and December 31, 2018 (amounts in thousands):
 
 
 
 
Ownership Interest
 
Investment
Joint Venture
 
Date of Investment
 
September 30,
2019
 
December 31,
2018
 
September 30,
2019
 
December 31,
2018
SGO Retail Acquisitions Venture, LLC
 
3/11/2015
 
19
%
 
19
%
 
$
1,120

 
$
1,128

SGO MN Retail Acquisitions Venture, LLC
 
9/30/2015
 
10
%
 
10
%
 
1,537

 
1,573

Total
 
 
 
 
 
 
 
$
2,657

 
$
2,701


The Company’s off-balance sheet arrangements consist primarily of investments in the joint ventures as set forth in the table above. The joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint ventures’ debts are secured by a first mortgage, are without recourse to the joint venture members, and do not represent a liability of the members other than carve-out guarantees for certain matters such as environmental conditions, misuse of funds and material misrepresentations. As of September 30, 2019 and December 31, 2018, the Company has provided carve-out guarantees in connection with the two aforementioned unconsolidated joint ventures; in connection with those carve-out guarantees, the Company has certain rights of recovery from the joint venture members.
5. VARIABLE INTEREST ENTITIES
The Company has variable interests in, and is the primary beneficiary of, variable interest entities (“VIEs”) through its investments in (i) the Sunset & Gardner Joint Venture (formerly known as Gelson’s Joint Venture) and (ii) the 3032 Wilshire Joint Venture. The Company has consolidated the accounts of these variable interest entities.
Through September 30, 2019, post the initial capital contributions, the Company made additional capital contributions totaling approximately $6.1 million and $7.1 million to the Sunset & Gardner Joint Venture and Wilshire Joint Venture, respectively.
The following reflects the aggregate assets and liabilities of the Sunset & Gardner Joint Venture and the Wilshire Joint Venture, which were consolidated by the Company, as of September 30, 2019 and December 31, 2018 (amounts in thousands):
 
September 30,
 
December 31,
 
2019
 
2018
ASSETS
 
 
 
Properties under development and development costs:
 
 
 
Land
$
25,851

 
$
25,851

Buildings
558

 
570

Development costs
17,453

 
13,813

Properties under development and development costs
43,862

 
40,234

Cash, cash equivalents and restricted cash
1,132

 
276

Prepaid expenses and other assets, net
9

 
9

Lease intangibles, net
4

 
4

TOTAL ASSETS (1)
$
45,007

 
$
40,523

 
 
 
 
LIABILITIES
 
 
 
Notes payable, net (2)
$
15,411

 
$
17,166

Accounts payable and accrued expenses
207

 
132

Amounts due to affiliates

 
8

Other liabilities
5

 
9

TOTAL LIABILITIES
$
15,623

 
$
17,315

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

11

Table of Contents
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

(2)
As of September 30, 2019 and December 31, 2018, includes reclassification of approximately $0.6 million and $0.3 million, respectively, of deferred financing costs, net, as a contra-liability. The creditors of the consolidated joint ventures do not have recourse to the general credit of the Company. The notes payable of the Wilshire Joint Venture is partially guaranteed by the Company, refer to Note 8, “Notes Payable, Net”. The notes payable of the Sunset & Gardner Joint Venture is not guaranteed by the Company.
6. LEASES
Operating Leases
The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2019, the leases at the Company’s properties, excluding properties classified as held for sale, have remaining terms (excluding options to extend) of up to 12.2 years with a weighted-average remaining term (excluding options to extend) of approximately 6.7 years. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying condensed consolidated balance sheets and totaled approximately $0.2 million as of both September 30, 2019 and December 31, 2018.
The following table presents the components of income from real estate operations for the three and nine months ended September 30, 2019 (amounts in thousands):
 
Three Months Ended
September 30, 2019
 
Nine Months Ended
September 30, 2019
Lease income - operating leases
$
722

 
$
2,143

Variable lease income (1)
227

 
689

Rental and reimbursements income
$
949

 
$
2,832

(1)
Primarily includes tenant reimbursements for real estate taxes, insurance and common area maintenance.
As of September 30, 2019, the future minimum rental income from the Company’s properties under non-cancelable operating leases, excluding properties classified as held for sale, was as follows (amounts in thousands):
Remainder of 2019
$
497

2020
1,915

2021
1,837

2022
1,850

2023
1,870

Thereafter
7,335

Total
$
15,304


7. LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES, NET
As of September 30, 2019 and December 31, 2018, the Company’s acquired lease intangibles and below-market lease liabilities, excluding intangibles and below-market lease liabilities classified as held for sale, were as follows (amounts in thousands):
 
Lease Intangibles
 
Below-Market Lease Liabilities
 
September 30,
2019
 
December 31,
2018
 
September 30,
2019
 
December 31,
2018
Cost
$
2,477

 
$
3,030

 
$
(493
)
 
$
(526
)
Accumulated amortization
(1,085
)
 
(1,140
)
 
181

 
156

Total
$
1,392

 
$
1,890

 
$
(312
)
 
$
(370
)


12

Table of Contents
STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The Company’s amortization of lease intangibles and below-market lease liabilities for the three and nine months ended September 30, 2019 and 2018, were as follows (amounts in thousands): 
 
Lease Intangibles
 
Below-Market Lease Liabilities
 
Three Months Ended
September 30,
 
Three Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Amortization
$
(80
)
 
$
(156
)
 
$
15

 
$
18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease Intangibles
 
Below-Market Lease Liabilities
 
Nine Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Amortization
$
(258
)
 
$
(314
)
 
$
47

 
$
51

 
8. NOTES PAYABLE, NET
Line of Credit
The Company’s line of credit is a revolving credit facility with an initial maximum aggregate commitment of $30.0 million. Effective February 15, 2017, the Company’s line of credit was refinanced to increase the maximum aggregate commitment under the credit facility from $30.0 million to $60.0 million. The credit facility matures on February 15, 2020. Each loan made pursuant to the credit facility will be either a LIBOR loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay the lender an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum, if the usage under the Company’s line of credit is less than or equal to 50% of the line of credit amount, and 0.20% per annum if the usage under the Company’s line of credit is greater than 50% of the line of credit amount. The Company is providing a guaranty of all of its obligations under the Company’s line of credit and all other loan documents.
As of September 30, 2019, the Company’s line of credit had an outstanding principal balance of approximately $18.9 million. This balance excludes approximately $6.7 million, which has been classified as held for sale as of September 30, 2019. As of December 31, 2018, the Company’s line of credit had an outstanding principal balance of $17.4 million. As of September 30, 2019 and December 31, 2018, the Company’s line of credit was secured by Topaz Marketplace, 8 Octavia Street, 400 Grove Street, the Fulton Shops, 450 Hayes, 388 Fulton, Silver Lake, and The Shops at Turkey Creek.
Loans Secured by Properties Under Development
On May 7, 2019, the Company refinanced and repaid its current financing (outstanding balance of $8.8 million at the time of refinancing) with a new construction loan from ReadyCap Commercial, LLC (the “Lender”) (the “Wilshire Construction Loan”). As of September 30, 2019, the Wilshire Construction Loan has a principal balance of approximately $7.3 million, with future funding availability up to a total of approximately $13.9 million, and bears an interest rate of 1-month LIBOR plus an interest margin of 4.25% per annum, payable monthly. The Wilshire Loan is scheduled to mature on May 10, 2022, with options to extend for two additional twelve-month periods, subject to certain conditions as stated in the loan agreement. The Wilshire Construction Loan is secured by a first Deed of Trust on the property. The Company executed a guaranty that guaranties that the loan interest reserve amounts are kept in compliance with the terms of the loan agreement. The Lender also required that a principal in the upstream owner of the Company’s joint venture partner in the Wilshire Joint Venture (the “Guarantor”), guarantees performance of borrower’s obligations under the loan agreement with respect to the completion of capital improvements to the property. The Company executed an Indemnity Agreement in favor of the Guarantor against liability under that completion guaranty except to the extent caused by gross negligence or willful misconduct, as well as for liabilities incurred under the Environmental Indemnity Agreement executed by the Guarantor in favor of the Lender. The Company used working capital funds of approximately $3.1 million to repay the difference between the new construction loan initial advance and the prior loan, to pay transaction costs, as well as to fund certain required interest and construction reserves. 
On October 29, 2018, the Company refinanced and repaid its initial financing with a new loan from Lone Oak Fund LLC (the “Sunset & Gardner Loan”). The Sunset & Gardner Loan has a principal balance of approximately $8.7 million, and bears an interest rate of 6.9% per annum. The Sunset & Gardner Loan was scheduled to mature on October 31, 2019. The Company extended the Sunset & Gardner Loan for an additional twelve month period under the same terms. The new maturity date is October 31, 2020. The Sunset & Gardner Loan is secured by a first Deed of Trust on the property.

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of September 30, 2019 (amounts in thousands): 
Remainder of 2019
$

2020
34,335

2021

2022
7,284

   Total (1)
$
41,619

(1)
Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of $0.6 million deferred financing costs, net.
During the three months ended September 30, 2019 and 2018, the Company incurred and expensed approximately $0.2 million and $0.1 million of interest costs, respectively, which primarily consisted of amortization of deferred financing costs. Also during the three months ended September 30, 2019 and 2018, the Company incurred and capitalized approximately $0.7 million and $1.1 million, respectively, of interest expense related to the variable interest entities, which included amortization of deferred financing costs of approximately $0.1 million and $0.2 million, respectively, for each period.
During the nine months ended September 30, 2019, the Company incurred and expensed approximately $0.5 million of interest costs, which primarily consisted of amortization of deferred financing costs. During the nine months ended September 30, 2018, the Company incurred and expensed approximately $0.7 million of interest costs, which included the amortization of deferred financing costs of approximately $0.4 million. Also during the nine months ended September 30, 2019 and 2018, the Company incurred and capitalized approximately $2.1 million and $2.9 million, respectively, of interest expense related to the variable interest entities, which included amortization of deferred financing costs of approximately $0.3 million and $0.4 million, respectively, for each period.
As of both September 30, 2019 and December 31, 2018, interest expense payable was approximately $0.2 million, including an amount related to the variable interest entities of approximately $0.1 million, for each period.
9. FAIR VALUE DISCLOSURES
Certain financial assets and liabilities are measured at fair value on a recurring basis. The Company determines fair value using the following hierarchy:
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3: prices or valuation techniques where little or no market data is available for inputs that are significant to the fair value measurement.
The Company believes the total carrying values reflected on its condensed consolidated balance sheets for cash, cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses, amounts due to affiliates, mortgage loan and construction loan secured by properties under development, and the Company’s line of credit reasonably approximated their fair values at September 30, 2019.
As part of the Company’s ongoing evaluation of the Company’s real estate portfolio, the Company estimates the fair value of its investments in real estate by obtaining outside independent appraisals on all of the operating properties. The appraised values are compared with the carrying values of its real estate portfolio to determine if there are indications of impairment.
For both the three and nine months ended September 30, 2019 and 2018, the Company did not record any impairment losses.
10. EQUITY
Common Units of the OP
On May 26, 2011, in connection with the acquisition of Pinehurst Square East, a retail property located in Bismarck, North Dakota, the OP issued 287,472 Common Units to certain of the sellers of Pinehurst Square East who elected to receive Common Units for an aggregate value of approximately $2.6 million, or $9.00 per Common Unit. On March 12, 2012, in

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

connection with the acquisition of Turkey Creek, a retail property located in Knoxville, Tennessee, the OP issued 144,324 Common Units to certain of the sellers of Turkey Creek who elected to receive Common Units for an aggregate value of approximately $1.4 million, or $9.50 per Common Unit.
During the three month ended September 30, 2019, 17,719 of Common Units were converted into the Company’s common shares for an aggregate basis of approximately $0.1 million.
Pursuant to the Advisory Agreement, in April 2014 the Company caused the OP to issue to the Advisor a separate series of limited partnership interests of the OP in exchange for a capital contribution to the OP of $1 thousand (the “Special Units”). The terms of the Special Units entitle the Advisor to (i) 15% of the Company’s net sale proceeds upon disposition of its assets after the Company’s stockholders receive a return of their investment plus a 7% cumulative, non-compounded rate of return or (ii) an equivalent amount in the event that the Company lists its shares of common stock on a national securities exchange or upon certain terminations of the Advisory Agreement after the Company’s stockholders are deemed to have received a return of their investment plus a 7% cumulative, non-compounded rate of return.The holders of Common Units, other than the Company and the holder of the Special Units, generally have the right to cause the OP to redeem all or a portion of their Common Units for, at the Company’s sole discretion, shares of the Company’s common stock, cash or a combination of both. If the Company elects to redeem Common Units for shares of common stock, the Company will generally deliver one share of common stock for each Common Unit redeemed. Holders of Common Units, other than the Company and the holders of the Special Units, may exercise their redemption rights at any time after one year following the date of issuance of their Common Units; provided, however, that a holder of Common Units may not deliver more than two redemption notices in a single calendar year and may not exercise a redemption right for less than 1,000 Common Units, unless such holder holds less than 1,000 Common Units, in which case, it must exercise its redemption right for all of its Common Units.
Share Redemption Program
On April 1, 2015, the Company’s board of directors approved the reinstatement of the share redemption program (which had been suspended since January 15, 2013) and adopted the SRP. Under the SRP, only shares submitted for repurchase in connection with the death or “qualifying disability” (as defined in the SRP) of a stockholder are eligible for repurchase by the Company. Under the current SRP, as amended to date, the number of shares to be redeemed is limited to the lesser of (i) a total of $3.5 million for redemptions sought upon a stockholder’s death and a total of $1.0 million for redemptions sought upon a stockholder’s qualifying disability, and (ii) 5% of the weighted-average number of shares of the Company’s common stock outstanding during the prior calendar year. Share repurchases pursuant to the SRP are made at the sole discretion of the Company. The Company reserves the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the SRP.
The redemption price for shares that are redeemed is 100% of the Company’s most recent estimated net asset value per share as of the applicable redemption date. A redemption request must be made within one year after the stockholder’s death or disability.
The SRP provides that any request to redeem less than $5,000 worth of shares will be treated as a request to redeem all of the stockholder’s shares. If the Company cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If the Company does not completely satisfy a redemption request in one quarter, it will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. The Company may increase or decrease the amount of funding available for redemptions under the SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter.
On August 8, 2019, the Company’s board of directors approved, pursuant to  pursuant to Section 3(a) of the Company’s Amended and Restated Share Redemption Program (the “Amended and Restated SRP”), an additional $0.3 million of funds available for the redemption of shares in connection with the death of a stockholder and $0.2 million of funds available for redemption of shares in connection with the disability of a stockholder.

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following table summarizes share redemption activity during the three and nine months ended September 30, 2019 and 2018 (amounts in thousands, except shares):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Shares of common stock redeemed
44,824

 
36,903

 
106,982

 
61,925

Purchase price
$
263

 
$
223

 
$
638

 
$
380


As stated above, cumulatively, through September 30, 2019, pursuant to the Original Share Redemption Program and the Amended and Restated SRP, the Company has redeemed 844,236 shares sold in the Offering and/or its dividend reinvestment plan for $6.0 million.
Quarterly Distributions
In order to qualify as a REIT, the Company is required to distribute at least 90% of its annual REIT taxable income, subject to certain adjustments, to its stockholders. Some or all of the Company’s distributions have been paid, and in the future may continue to be paid from sources other than cash flows from operations.
Under the terms of the amended credit facility, the Company may pay distributions to its investors so long as the total amount paid does not exceed 100% of the cumulative Adjusted Funds From Operations plus up to an additional $2.0 million of the Company’s net proceeds from property dispositions, as defined in the amended Company’s line of credit; provided, however, that the Company is not restricted from making any distributions necessary in order to maintain its status as a REIT. The Company’s board of directors evaluates the Company’s ability to make quarterly distributions based on the Company’s operational cash needs.
The following tables set forth the quarterly distributions declared to the Company’s common stockholders and Common Unit holders for the nine months ended September 30, 2019, and the year ended 2018 (amounts in thousands, except per share amounts):
 
Distribution Record
Date
 
Distribution
Payable
Date
 
Distribution Per Share of Common Stock /
Common Unit
 
Total Common
Stockholders
Distribution
 
Total Common
Unit Holders
Distribution
 
Total
Distribution
First Quarter 2019
3/31/2019
 
4/30/2019
 
$
0.06

 
$
651

 
$
14

 
$
665

Second Quarter 2019
6/30/2019
 
7/31/2019
 
0.06

 
648

 
14

 
662

Third Quarter 2019
9/30/2019
 
10/31/2019
 
0.06

 
646

 
13

 
659

Total
 
 
 
 
 
 
$
1,945

 
$
41

 
$
1,986

 
Distribution Record
Date
 
Distribution
Payable
Date
 
Distribution Per Share of Common Stock /
Common Unit
 
Total Common
Stockholders
Distribution
 
Total Common
Unit Holders
Distribution
 
Total
Distribution
First Quarter 2018
3/31/2018
 
4/30/2018
 
$
0.06

 
$
659

 
$
14

 
$
673

Second Quarter 2018
6/30/2018
 
7/31/2018
 
0.06

 
658

 
14

 
672

Third Quarter 2018
9/30/2018
 
10/31/2018
 
0.06

 
656

 
14

 
670

Fourth Quarter 2018
12/31/2018
 
1/31/2019
 
0.06

 
652

 
14

 
666

Total
 
 
 
 
 
 
$
2,625

 
$
56

 
$
2,681

 
11. EARNINGS PER SHARE
EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested shares, if dilutive, is computed using the treasury stock method. The Company applies the two-class method for determining EPS as its outstanding shares of

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

non-vested restricted stock are considered participating securities as dividend payments are not forfeited even if the underlying award does not vest. There was no unvested stock as of September 30, 2019. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS.
The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2019 and 2018 (amounts in thousands, except shares and per share amounts):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Numerator - basic and diluted
 
 
 
 
 
 
 
Net income (loss)
$
(329
)
 
$
1,386

 
$
(1,237
)
 
$
3,940

Net income (loss) attributable to non-controlling interests
(7
)
 
29

 
(26
)
 
83

Net income (loss) attributable to common shares
$
(322
)
 
$
1,357

 
$
(1,211
)
 
$
3,857

Denominator - basic and diluted
 
 
 
 
 
 
 
Basic weighted average common shares
10,800,467

 
10,962,529

 
10,833,866

 
10,976,030

Common Units (1)

 

 

 

Diluted weighted average common shares
10,800,467

 
10,962,529

 
10,833,866

 
10,976,030

Earnings (loss) per common share - basic and diluted
 
 
 
 
 
 
 
Net earnings (loss) attributable to common shares
$
(0.03
)
 
$
0.12

 
$
(0.11
)
 
$
0.35

(1)
The effect of 217,475 convertible Common Units pursuant to the redemption rights outlined in the Company’s registration statement on Form S-11 have not been included as they would not be dilutive.
12. RELATED PARTY TRANSACTIONS
On August 7, 2013, the Company entered into the Advisory Agreement with the Advisor, which has been renewed for successive terms with a current expiration date of August 9, 2020. The Advisor manages the Company’s business as the Company’s external advisor pursuant to the Advisory Agreement. Pursuant to the Advisory Agreement, the Company will pay the Advisor specified fees for services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services.
On March 11, 2015, the Company, through a wholly-owned subsidiary, entered into the Limited Liability Company Agreement of SGO Retail Acquisitions Venture, LLC to form the SGO Joint Venture. On September 30, 2015, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of SGO MN Retail Acquisitions Venture, LLC to form the SGO MN Joint Venture. For additional information regarding the SGO Joint Venture and the SGO MN Joint Venture, refer to Note 4. “Investments in Unconsolidated Joint Ventures.”

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

Summary of Related Party Fees
The following table sets forth the Advisor related party costs incurred and payable by the Company for the periods presented (amounts in thousands):
 
 
Incurred
 
Payable as of
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
September 30,
 
December 31,
Expensed
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Financing coordination fees
 
$

 
$

 
$

 
$
30

 
$

 
$

Asset management fees
 
164