Attached files
| file | filename |
|---|---|
| EX-32 - EXHIBIT 32 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INC | cpa182020q110-qexh32.htm |
| EX-31.2 - EXHIBIT 31.2 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INC | cpa182020q110-qexh312.htm |
| EX-31.1 - EXHIBIT 31.1 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INC | cpa182020q110-qexh311.htm |
| EX-10.1 - EXHIBIT 10.1 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INC | cpa182020q110-qexh101.htm |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2020 | ||
or | ||
o | 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: 000-54970
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland | 90-0885534 | |
(State of incorporation) | (I.R.S. Employer Identification No.) | |
50 Rockefeller Plaza | ||
New York, New York | 10020 | |
(Address of principal executive offices) | (Zip Code) | |
Investor Relations (212) 492-8920
(212) 492-1100
(Registrant’s telephone numbers, including area code)
Securities registered pursuant to Section 12(b) of the Act: 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 þ No o
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 and post such files). Yes þ No o
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 o | Accelerated filer o | Non-accelerated filer þ |
Smaller reporting company o | Emerging growth company o | |
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Registrant has 118,621,016 shares of Class A common stock, $0.001 par value, and 32,549,043 shares of Class C common stock, $0.001 par value, outstanding at May 8, 2020.
INDEX
Page No. | ||
PART I — FINANCIAL INFORMATION | ||
Item 1. Financial Statements (Unaudited) | ||
Item 4. Controls and Procedures | ||
PART II — OTHER INFORMATION | ||
Item 1A. Risk Factors | ||
Item 6. Exhibits | ||
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Report”), including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I of this Report, contains forward-looking statements within the meaning of the federal securities laws.
These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements include, but are not limited to, statements regarding: our corporate strategy and estimated or future economic performance and results, the timing of any future liquidity event, underlying assumptions about our portfolio (e.g. occupancy rate, lease terms, and tenant credit quality, including our expectations about tenant bankruptcies and interest coverage), expectations about tenant rent collections, potential holding periods for our investments (including possible dispositions), our international exposure; our future capital expenditure levels, including any plans to fund our future liquidity needs, and future leverage and debt service obligations; statements that we make regarding our ability to remain qualified for taxation as a real estate investment trust (“REIT”); our expectations regarding the impact on our business, tenants, and prospects in light of the outbreak of the novel coronavirus (“COVID-19”) and the various effects in connection therewith, as well as the measures taken to prevent its spread; and the impact of recently issued accounting pronouncements and other regulatory activity.
CPA:18 – Global 3/31/2020 10-Q – 1
These statements are based on the current expectations of our management. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Other unknown or unpredictable risks or uncertainties, like the risks related to effects of pandemics and global outbreaks of contagious diseases or the fear of such outbreaks, like the current COVID-19 pandemic and those additional factors discussed in reports filed with the SEC by us under the heading “Risk Factors” could also have material adverse effects on our business, financial condition, liquidity, results of operations, Modified funds from operations (“MFFO”), and prospects. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties, and other factors that may materially affect our future results, performance, achievements, or transactions. Information on factors that could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this Report as well as in our other filings with the Securities and Exchange Commission (“SEC”), including but not limited to those described in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 28, 2019 (the “2019 Annual Report”). Moreover, because we operate in a very competitive and rapidly changing environment, new risks are likely to emerge from time to time. Given these risks and uncertainties, shareholders are cautioned not to place undue reliance on these forward-looking statements as a prediction of future results, which speak only as of the date of this Report, unless noted otherwise. Except as required by federal securities laws and the rules and regulations of the SEC, we do not undertake to revise or update any forward-looking statements.
All references to “Notes” throughout the document refer to the footnotes to the condensed consolidated financial statements of the registrant in Part I, Item 1. Financial Statements (Unaudited).
CPA:18 – Global 3/31/2020 10-Q – 2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)
March 31, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Investments in real estate: | |||||||
Real estate — Land, buildings and improvements | $ | 1,158,497 | $ | 1,200,645 | |||
Operating real estate — Land, buildings and improvements | 505,326 | 512,485 | |||||
Real estate under construction | 267,044 | 235,751 | |||||
Net investments in direct financing leases | 30,338 | 42,054 | |||||
In-place lease and other intangible assets | 276,196 | 284,097 | |||||
Investments in real estate | 2,237,401 | 2,275,032 | |||||
Accumulated depreciation and amortization | (335,051 | ) | (328,312 | ) | |||
Net investments in real estate | 1,902,350 | 1,946,720 | |||||
Cash and cash equivalents | 104,939 | 144,148 | |||||
Accounts receivable and other assets, net | 142,255 | 143,935 | |||||
Total assets (a) | $ | 2,149,544 | $ | 2,234,803 | |||
Liabilities and Equity | |||||||
Non-recourse secured debt, net | $ | 1,183,382 | $ | 1,201,913 | |||
Accounts payable, accrued expenses and other liabilities | 141,899 | 147,098 | |||||
Due to affiliates | 9,486 | 11,376 | |||||
Distributions payable | 22,844 | 22,745 | |||||
Total liabilities (a) | 1,357,611 | 1,383,132 | |||||
Commitments and contingencies (Note 10) | |||||||
Preferred stock, $0.001 par value; 50,000,000 shares authorized; none issued | — | — | |||||
Class A common stock, $0.001 par value; 320,000,000 shares authorized; 117,627,430 and 117,179,578 shares, respectively, issued and outstanding | 117 | 117 | |||||
Class C common stock, $0.001 par value; 80,000,000 shares authorized; 32,263,611 and 32,238,513 shares, respectively, issued and outstanding | 32 | 32 | |||||
Additional paid-in capital | 1,323,827 | 1,319,584 | |||||
Distributions and accumulated losses | (508,253 | ) | (470,326 | ) | |||
Accumulated other comprehensive loss | (79,912 | ) | (56,535 | ) | |||
Total stockholders’ equity | 735,811 | 792,872 | |||||
Noncontrolling interests | 56,122 | 58,799 | |||||
Total equity | 791,933 | 851,671 | |||||
Total liabilities and equity | $ | 2,149,544 | $ | 2,234,803 | |||
__________
(a) | See Note 2 for details related to variable interest entities (“VIEs”). |
See Notes to Condensed Consolidated Financial Statements.
CPA:18 – Global 3/31/2020 10-Q – 3
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share amounts)
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Revenues | |||||||
Lease revenues — net-leased | $ | 22,361 | $ | 30,914 | |||
Lease revenues — operating real estate | 17,943 | 17,265 | |||||
Other operating and interest income | 2,576 | 2,115 | |||||
42,880 | 50,294 | ||||||
Operating Expenses | |||||||
Depreciation and amortization | 14,530 | 15,372 | |||||
Operating real estate expenses | 6,724 | 6,466 | |||||
Property expenses, excluding reimbursable tenant costs | 5,084 | 4,651 | |||||
Allowance for credit losses | 4,865 | — | |||||
Reimbursable tenant costs | 3,128 | 4,024 | |||||
General and administrative | 1,897 | 1,759 | |||||
36,228 | 32,272 | ||||||
Other Income and Expenses | |||||||
Interest expense | (10,489 | ) | (12,357 | ) | |||
Other gains and (losses) | (2,072 | ) | 172 | ||||
Equity in losses of equity method investment in real estate | (54 | ) | (648 | ) | |||
Gain on sale of real estate, net | — | 15,408 | |||||
(12,615 | ) | 2,575 | |||||
(Loss) income before income taxes | (5,963 | ) | 20,597 | ||||
Benefit from (provision for) income taxes | 394 | (924 | ) | ||||
Net (Loss) Income | (5,569 | ) | 19,673 | ||||
Net income attributable to noncontrolling interests (inclusive of Available Cash Distributions to a related party of $1,916 and $1,848, respectively) | (2,611 | ) | (4,846 | ) | |||
Net (Loss) Income Attributable to CPA:18 – Global | $ | (8,180 | ) | $ | 14,827 | ||
Class A Common Stock | |||||||
Net (loss) income attributable to CPA:18 – Global | $ | (6,398 | ) | $ | 11,654 | ||
Basic and diluted weighted-average shares outstanding | 117,968,262 | 115,497,094 | |||||
Basic and diluted (loss) earnings per share | $ | (0.05 | ) | $ | 0.10 | ||
Class C Common Stock | |||||||
Net (loss) income attributable to CPA:18 – Global | $ | (1,782 | ) | $ | 3,173 | ||
Basic and diluted weighted-average shares outstanding | 32,445,640 | 31,879,027 | |||||
Basic and diluted (loss) earnings per share | $ | (0.05 | ) | $ | 0.10 | ||
See Notes to Condensed Consolidated Financial Statements.
CPA:18 – Global 3/31/2020 10-Q – 4
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(in thousands)
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Net (Loss) Income | $ | (5,569 | ) | $ | 19,673 | ||
Other Comprehensive Loss | |||||||
Foreign currency translation adjustments | (24,082 | ) | (4,242 | ) | |||
Unrealized loss on derivative instruments | (1,823 | ) | (238 | ) | |||
(25,905 | ) | (4,480 | ) | ||||
Comprehensive (Loss) Income | (31,474 | ) | 15,193 | ||||
Amounts Attributable to Noncontrolling Interests | |||||||
Net income | (2,611 | ) | (4,846 | ) | |||
Foreign currency translation adjustments | 2,525 | 158 | |||||
Unrealized loss on derivative instruments | 3 | — | |||||
Comprehensive income attributable to noncontrolling interests | (83 | ) | (4,688 | ) | |||
Comprehensive (Loss) Income Attributable to CPA:18 – Global | $ | (31,557 | ) | $ | 10,505 | ||
See Notes to Condensed Consolidated Financial Statements.
CPA:18 – Global 3/31/2020 10-Q – 5
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
(in thousands, except share and per share amounts)
CPA:18 – Global Stockholders | |||||||||||||||||||||||||||||||||||||
Additional Paid-In Capital | Distributions and Accumulated Losses | Accumulated Other Comprehensive Loss | Total CPA:18 – Global Stockholders | Noncontrolling Interests | |||||||||||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||||||||
Class A | Class C | ||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Total | |||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | 117,179,578 | $ | 117 | 32,238,513 | $ | 32 | $ | 1,319,584 | $ | (470,326 | ) | $ | (56,535 | ) | $ | 792,872 | $ | 58,799 | $ | 851,671 | |||||||||||||||||
Cumulative-effect adjustment for the adoption of ASU 2016-13, Financial Instruments — Credit Losses (Note 2) | (6,903 | ) | (6,903 | ) | (6,903 | ) | |||||||||||||||||||||||||||||||
Shares issued | 966,298 | 1 | 290,887 | — | 10,938 | 10,939 | 10,939 | ||||||||||||||||||||||||||||||
Shares issued to affiliate | 169,045 | — | 1,481 | 1,481 | 1,481 | ||||||||||||||||||||||||||||||||
Contributions from noncontrolling interests | — | 595 | 595 | ||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | (3,355 | ) | (3,355 | ) | ||||||||||||||||||||||||||||||||
Distributions declared ($0.1563 and $0.1382 per share to Class A and Class C, respectively) | (22,844 | ) | (22,844 | ) | (22,844 | ) | |||||||||||||||||||||||||||||||
Net (loss) income | (8,180 | ) | (8,180 | ) | 2,611 | (5,569 | ) | ||||||||||||||||||||||||||||||
Other comprehensive loss: | |||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | (21,557 | ) | (21,557 | ) | (2,525 | ) | (24,082 | ) | |||||||||||||||||||||||||||||
Unrealized loss on derivative instruments | (1,820 | ) | (1,820 | ) | (3 | ) | (1,823 | ) | |||||||||||||||||||||||||||||
Repurchase of shares | (687,491 | ) | (1 | ) | (265,789 | ) | — | (8,176 | ) | (8,177 | ) | (8,177 | ) | ||||||||||||||||||||||||
Balance at March 31, 2020 | 117,627,430 | $ | 117 | 32,263,611 | $ | 32 | $ | 1,323,827 | $ | (508,253 | ) | $ | (79,912 | ) | $ | 735,811 | $ | 56,122 | $ | 791,933 | |||||||||||||||||
Balance at January 1, 2019 | 114,589,333 | $ | 114 | 31,641,265 | $ | 32 | $ | 1,290,888 | $ | (411,464 | ) | $ | (50,593 | ) | $ | 828,977 | $ | 66,993 | $ | 895,970 | |||||||||||||||||
Cumulative-effect adjustment for the adoption of ASU 2016-02, Leases (Topic 842) | (1,108 | ) | (1,108 | ) | (1,108 | ) | |||||||||||||||||||||||||||||||
Shares issued | 965,197 | 1 | 297,063 | — | 11,018 | 11,019 | 11,019 | ||||||||||||||||||||||||||||||
Shares issued to affiliate | 220,238 | — | 1,922 | 1,922 | 1,922 | ||||||||||||||||||||||||||||||||
Contributions from noncontrolling interests | — | 2,520 | 2,520 | ||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | (8,943 | ) | (8,943 | ) | ||||||||||||||||||||||||||||||||
Distributions declared ($0.1563 and $0.1373 per share to Class A and Class C, respectively) | (22,416 | ) | (22,416 | ) | (22,416 | ) | |||||||||||||||||||||||||||||||
Net income | 14,827 | 14,827 | 4,846 | 19,673 | |||||||||||||||||||||||||||||||||
Other comprehensive loss: | |||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | (4,084 | ) | (4,084 | ) | (158 | ) | (4,242 | ) | |||||||||||||||||||||||||||||
Unrealized loss on derivative instruments | (238 | ) | (238 | ) | (238 | ) | |||||||||||||||||||||||||||||||
Repurchase of shares | (330,661 | ) | — | (98,187 | ) | — | (3,605 | ) | (3,605 | ) | (3,605 | ) | |||||||||||||||||||||||||
Balance at March 31, 2019 | 115,444,107 | $ | 115 | 31,840,141 | $ | 32 | $ | 1,300,223 | $ | (420,161 | ) | $ | (54,915 | ) | $ | 825,294 | $ | 65,258 | $ | 890,552 | |||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
CPA:18 – Global 3/31/2020 10-Q – 6
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Cash Flows — Operating Activities | |||||||
Net Cash Provided by Operating Activities | $ | 22,808 | $ | 21,859 | |||
Cash Flows — Investing Activities | |||||||
Funding for development projects | (38,086 | ) | (32,408 | ) | |||
Value added taxes paid in connection with construction funding | (3,641 | ) | (2,926 | ) | |||
Capital expenditures on real estate | (3,057 | ) | (750 | ) | |||
Payment of deferred acquisition fees to an affiliate | (1,488 | ) | (2,252 | ) | |||
Return of capital from equity investments | 1,134 | — | |||||
Capital contributions to equity investment | (345 | ) | — | ||||
Value added taxes refunded in connection with construction funding | 325 | 1,006 | |||||
Proceeds from sale of real estate | — | 16,404 | |||||
Net Cash Used in Investing Activities | (45,158 | ) | (20,926 | ) | |||
Cash Flows — Financing Activities | |||||||
Proceeds from mortgage financing | 25,126 | 7,582 | |||||
Distributions paid | (22,745 | ) | (22,264 | ) | |||
Proceeds from issuance of shares | 10,426 | 10,487 | |||||
Repurchase of shares | (8,177 | ) | (3,605 | ) | |||
Scheduled payments and prepayments of mortgage principal | (7,529 | ) | (16,423 | ) | |||
Distributions to noncontrolling interests | (3,355 | ) | (7,112 | ) | |||
Contributions from noncontrolling interests | 595 | 2,520 | |||||
Other financing activities, net | (99 | ) | (716 | ) | |||
Net Cash Used in Financing Activities | (5,758 | ) | (29,531 | ) | |||
Change in Cash and Cash Equivalents and Restricted Cash During the Period | |||||||
Effect of exchange rate changes on cash and cash equivalents and restricted cash | (3,388 | ) | (441 | ) | |||
Net decrease in cash and cash equivalents and restricted cash | (31,496 | ) | (29,039 | ) | |||
Cash and cash equivalents and restricted cash, beginning of period | 163,398 | 190,838 | |||||
Cash and cash equivalents and restricted cash, end of period | $ | 131,902 | $ | 161,799 | |||
See Notes to Condensed Consolidated Financial Statements.
CPA:18 – Global 3/31/2020 10-Q – 7
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Organization
Organization
Corporate Property Associates 18 – Global Incorporated (“CPA:18 – Global”), is a publicly owned, non-traded REIT, that invests primarily in a diversified portfolio of income-producing commercial real estate properties leased to companies, both domestically and internationally. In addition, our portfolio includes self-storage and student housing investments. We were formed in 2012 and are managed by W. P. Carey Inc. (“WPC”) through one of its subsidiaries (collectively our “Advisor”). As a REIT, we are not subject to U.S. federal income taxes on income and gains that we distribute to our stockholders as long as we satisfy certain requirements, principally relating to the nature of our income and the level of our distributions, among other factors. We earn revenue primarily by leasing the properties we own to single corporate tenants, predominantly on a triple-net lease basis, which requires the tenant to pay substantially all of the costs associated with operating and maintaining the property. We derive self-storage revenue from rents received from customers who rent storage space primarily under month-to-month leases for personal or business use. We earn student housing revenue primarily from leases of one year or less with individual students. Revenue is subject to fluctuation due to the timing of new lease transactions, lease terminations, lease expirations, contractual rent adjustments, tenant defaults, sales of properties, and changes in foreign currency exchange rates.
Substantially all of our assets and liabilities are held by CPA:18 Limited Partnership (the “Operating Partnership”), and as of March 31, 2020 we owned 99.97% of general and limited partnership interests in the Operating Partnership. The remaining interest in the Operating Partnership is held by a subsidiary of WPC.
As of March 31, 2020, our net lease portfolio was comprised of full or partial ownership interests in 47 properties, substantially all of which were fully-occupied and triple-net leased to 65 tenants totaling 9.6 million square feet. The remainder of our portfolio was comprised of our full or partial ownership interests in 68 self-storage properties, 12 student housing development projects and two student housing operating properties, totaling approximately 5.5 million square feet.
We operate in three reportable business segments: Net Lease, Self Storage, and Other Operating Properties. Our Net Lease segment includes our investments in net-leased properties, whether they are accounted for as operating leases or direct financing leases. Our Self Storage segment is comprised of our investments in self-storage properties. Our Other Operating Properties segment is primarily comprised of our investments in student housing operating properties and multi-family residential properties (our last multi-family residential property was sold in January 2019). In addition, we have an All Other category that includes our notes receivable investments, one of which was repaid during the second quarter of 2019. Our reportable business segments and All Other category are the same as our reporting units (Note 12).
We raised aggregate gross proceeds in our initial public offering of approximately $1.2 billion through April 2, 2015, which is the date we closed our offering. We have fully invested the proceeds from our initial public offering. In addition, from inception through March 31, 2020, $192.3 million and $55.1 million of distributions to our shareholders were reinvested in our Class A and Class C common stock, respectively, through our Distribution Reinvestment Plan (“DRIP”).
CPA:18 – Global 3/31/2020 10-Q – 8
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 2. Basis of Presentation
Basis of Presentation
Our interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair statement of our condensed consolidated financial position, results of operations, and cash flows in accordance with generally accepted accounting principles in the United States (“GAAP”). The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.
In the opinion of management, the unaudited financial information for the interim periods presented in this Report reflects all normal and recurring adjustments necessary for a fair statement of financial position, results of operations, and cash flows. Our interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2019, which are included in the 2019 Annual Report, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this Report. Operating results for interim periods are not necessarily indicative of operating results for an entire year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
Basis of Consolidation
Our condensed consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portions of equity in consolidated subsidiaries that are not attributable, directly or indirectly, to us are presented as noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.
When we obtain an economic interest in an entity, we evaluate the entity to determine if it should be deemed a VIE and, if so, whether we are the primary beneficiary and are therefore required to consolidate the entity. There have been no significant changes in our VIE policies from what was disclosed in the 2019 Annual Report.
As of both March 31, 2020 and December 31, 2019, we considered 19 entities to be VIEs, 18 of which we consolidated as we are considered the primary beneficiary. The following table presents a summary of selected financial data of the consolidated VIEs included in the condensed consolidated balance sheets (in thousands):
March 31, 2020 | December 31, 2019 | ||||||
Real estate — Land, buildings and improvements | $ | 343,342 | $ | 359,886 | |||
Real estate under construction | 267,044 | 233,220 | |||||
In-place lease intangible assets | 98,588 | 101,198 | |||||
Accumulated depreciation and amortization | (79,634 | ) | (78,598 | ) | |||
Total assets | 661,082 | 642,648 | |||||
Non-recourse secured debt, net | $ | 287,069 | $ | 276,124 | |||
Total liabilities | 342,183 | 330,549 | |||||
As of both March 31, 2020 and December 31, 2019, we had one unconsolidated VIE, which we account for under the equity method of accounting. We do not consolidate this entity because we are not the primary beneficiary and the nature of our involvement in the activities of the entity allows us to exercise significant influence on, but does not give us power over, decisions that significantly affect the economic performance of the entity. As of March 31, 2020 and December 31, 2019, the net carrying amount of this equity investment was $13.2 million and $14.9 million, respectively, and our maximum exposure to loss in this entity is limited to our investment.
CPA:18 – Global 3/31/2020 10-Q – 9
Notes to Condensed Consolidated Financial Statements (Unaudited)
Foreign Currencies
We are subject to fluctuations in exchange rates between foreign currencies and the U.S. dollar (primarily the euro and the Norwegian krone and, to a lesser extent, the British pound sterling). The following table reflects the end-of-period rate of the U.S. dollar in relation to foreign currencies:
March 31, 2020 | December 31, 2019 | Percent Change | ||||||||
British Pound Sterling | $ | 1.2360 | $ | 1.3204 | (6.4 | )% | ||||
Euro | 1.0956 | 1.1234 | (2.5 | )% | ||||||
Norwegian Krone | 0.0952 | 0.1139 | (16.4 | )% | ||||||
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation.
We currently present Reimbursable tenant costs on its own line item in the condensed consolidated statements of operations. Previously, this line item was included within Property expenses (which is now presented as Property expenses, excluding reimbursable tenant costs).
Revenue Recognition
Lease revenue (including straight-line lease revenue) is only recognized when deemed probable of collection. Collectibility is assessed for each tenant receivable using various criteria including credit ratings, guarantees, past collection issues, and the current economic and business environment affecting the tenant. If collectibility of the contractual rent stream is not deemed probable, revenue will only be recognized upon receipt of cash from the tenant. During the three months ended March 31, 2020, we wrote off $7.0 million in straight-line rent receivables based on our current assessment of less than 75% likelihood of collecting all remaining contractual rent on certain net lease hotels.
Restricted Cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the condensed consolidated statements of cash flows (in thousands):
March 31, 2020 | December 31, 2019 | ||||||
Cash and cash equivalents | $ | 104,939 | $ | 144,148 | |||
Restricted cash (a) | 26,963 | 19,250 | |||||
Total cash and cash equivalents and restricted cash | $ | 131,902 | $ | 163,398 | |||
__________
(a) | Restricted cash is included within Accounts receivable and other assets, net on our condensed consolidated balance sheets. |
Deferred Income Taxes
Our deferred tax liabilities were $42.9 million and $48.6 million at March 31, 2020 and December 31, 2019, respectively, and are included in Accounts payable, accrued expenses and other liabilities in the condensed consolidated financial statements. Our deferred tax assets, net of valuation allowances, were $1.5 million and $1.4 million at March 31, 2020 and December 31, 2019, respectively, and are included in Accounts receivable and other assets, net in the condensed consolidated financial statements.
Recent Accounting Pronouncements
Pronouncements Adopted through March 31, 2020
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments — Credit Losses. ASU 2016-13 replaces the “incurred loss” model with an “expected loss” model, resulting in the earlier recognition of credit losses even if the risk of loss is remote. This standard applies to financial assets measured at amortized cost and certain other instruments, including loans receivable and net investments in direct financing leases. This standard does not apply to receivables arising from operating leases, which are within the scope of Topic 842.
CPA:18 – Global 3/31/2020 10-Q – 10
Notes to Condensed Consolidated Financial Statements (Unaudited)
We adopted ASU 2016-13 on January 1, 2020 using the modified retrospective method, which requires applying changes in reserves through a cumulative-effect adjustment to retained earnings. Upon adoption, we recorded a net decrease in retained earnings of $6.9 million, which is reflected within our consolidated statement of equity.
The allowance for credit losses, which is recorded as a reduction to Net investments in direct financing leases on our condensed consolidated balance sheets, was measured using a probability of default method based on the lessees’ respective credit ratings and the expected value of the underlying collateral upon its repossession. Included in our model are factors that incorporate forward-looking information.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 contains practical expedients for reference rate reform-related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Interbank Offered Rate indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We will continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
CPA:18 – Global 3/31/2020 10-Q – 11
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 3. Agreements and Transactions with Related Parties
Transactions with Our Advisor
We have an advisory agreement with our Advisor whereby our Advisor performs certain services for us under a fee arrangement, including the identification, evaluation, negotiation, purchase, day-to-day management, and disposition of real estate and related assets and mortgage loans. We also reimburse our Advisor for general and administrative duties performed on our behalf. The advisory agreement has a term of one year and may be renewed for successive one-year periods. We may terminate the advisory agreement upon 60 days written notice without cause or penalty.
Jointly Owned Investments and Other Transactions with our Affiliates
As of March 31, 2020, we owned interests ranging from 50% to 100% in jointly owned investments, with the remaining interests held by affiliates or by third parties. Since no other parties hold any rights that supersede our control, we consolidate all of these joint ventures, with the exception of our sole equity investment (Note 4), which we account for under the equity method of accounting.
The following tables present a summary of fees we paid, expenses we reimbursed, and distributions we made to our Advisor and other affiliates in accordance with the terms of the relevant agreements (in thousands):
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Amounts Included in the Condensed Consolidated Statements of Operations | |||||||
Asset management fees | $ | 3,002 | $ | 2,868 | |||
Available Cash Distributions | 1,916 | 1,848 | |||||
Personnel and overhead reimbursements | 725 | 798 | |||||
Interest expense on deferred acquisition fees and external joint venture loans | 123 | 127 | |||||
Disposition fees | — | 1,117 | |||||
$ | 5,766 | $ | 6,758 | ||||
Acquisition Fees Capitalized | |||||||
Current acquisition fees | $ | 110 | $ | 695 | |||
Deferred acquisition fees | 88 | 555 | |||||
Capitalized personnel and overhead reimbursements | 70 | 89 | |||||
$ | 268 | $ | 1,339 | ||||
The following table presents a summary of amounts included in Due to affiliates in the condensed consolidated financial statements (in thousands):
March 31, 2020 | December 31, 2019 | ||||||
Due to Affiliates | |||||||
External joint venture loans, accounts payable, and other (a) | $ | 5,360 | $ | 5,951 | |||
Deferred acquisition fees, including accrued interest | 3,007 | 4,456 | |||||
Asset management fees payable | 1,001 | 961 | |||||
Current acquisition fees | 118 | 8 | |||||
$ | 9,486 | $ | 11,376 | ||||
___________
(a) | Includes loans from our joint venture partners to the jointly owned investments that we consolidate. As of March 31, 2020 and December 31, 2019, loans due to our joint venture partners, including accrued interest, were $4.5 million and $4.6 million, respectively. |
CPA:18 – Global 3/31/2020 10-Q – 12
Notes to Condensed Consolidated Financial Statements (Unaudited)
Asset Management Fees
Pursuant to the advisory agreement, our Advisor is entitled to an annual asset management fee ranging from 0.5% to 1.5%, depending on the type of investment and based on the average market value or average equity value, as applicable, of our investments. Asset management fees are payable in cash and/or shares of our Class A common stock. For any portion of fees our Advisor receives in shares, the number of shares issued is determined by dividing the dollar amount of fees by our most recently published estimated net asset value per share (“NAV”) per Class A share, which was $8.94 as of December 31, 2019. Effective January 1, 2019, our Advisor elected to receive 50% of the asset management fees in shares of our Class A common stock and 50% in cash. Effective April 1, 2020, our Advisor elected to receive all of the asset management fees in shares of our Class A common stock. As of March 31, 2020, our Advisor owned 5,922,928 shares, or 4.0%, of our outstanding Class A common stock. Asset management fees are included in Property expenses in the condensed consolidated financial statements.
Acquisition and Disposition Fees
Our Advisor receives acquisition fees, a portion of which is payable upon acquisition, while the remaining portion is subordinated to a preferred return of a non-compounded cumulative distribution of 5.0% per annum (based initially on our invested capital). The initial acquisition fee and subordinated acquisition fee are 2.5% and 2.0%, respectively, of the aggregate total cost of our portion of each investment for all investments, other than those in readily marketable real estate securities purchased in the secondary market, for which our Advisor will not receive any acquisition fees. Deferred acquisition fees are scheduled to be paid in three equal annual installments following the quarter in which a property was purchased and are subject to the preferred return described above. The preferred return was achieved as of the periods ended March 31, 2020 and December 31, 2019. The preferred return will continue to be assessed on a cumulative basis for the remainder of the fiscal year. Unpaid installments of deferred acquisition fees are included in Due to affiliates in the condensed consolidated financial statements and bear interest at an annual rate of 2.0%. The cumulative total acquisition costs, including acquisition fees paid to the advisor, may not exceed 6.0% of the aggregate contract purchase price of all investments, which is measured at the end of each year.
In addition, prior to January 1, 2020, our Advisor was entitled to receive a disposition fee equal to the lesser of (i) 50.0% of the competitive real estate commission (as defined in the advisory agreement) or (ii) 3.0% of the contract sales price of the investment being sold. These fees were paid at the discretion of our board of directors. Effective January 1, 2020, the Advisor has waived its right to disposition fees with respect to sales and dispositions of single investments and portfolios of investments. The Advisor may still be entitled to disposition fees in connection with a transaction or series of transactions related to a merger, liquidation, or other event, at the discretion of our board of directors.
Personnel and Overhead Reimbursements
Under the terms of the advisory agreement, our Advisor allocates a portion of its personnel and overhead expenses to us and the other entities that are managed by WPC and its affiliates, which as of March 31, 2020 included Carey Watermark Investors Incorporated, Carey Watermark Investors 2 Incorporated, and Carey European Student Housing Fund I L.P. (collectively with us, the “Managed Programs”).
We reimburse our Advisor for the allocated costs of personnel and overhead in managing our day-to-day operations, including accounting services, stockholder services, corporate management, and property management and operations. In addition, we reimburse our Advisor for various expenses it incurs in the course of providing services to us. We reimburse certain third-party expenses paid by our Advisor on our behalf, including property-specific costs, professional fees, office expenses, and business development expenses. We do not reimburse our Advisor for salaries and benefits paid to our named executive officers or for the cost of personnel that provide services for transactions for where our Advisor receives a fee (such as for acquisitions and dispositions). Under the advisory agreement, the amount of applicable personnel costs allocated to us is capped at 1.0% of our pro rata total revenues for each of 2020 and 2019. Our Advisor allocates overhead expenses to us based upon the percentage that our full-time employee equivalents comprised of the Advisor’s total full-time employee equivalents. Costs related to our Advisor’s legal transactions group are based on a schedule of expenses relating to services performed for different types of transactions, such as financing, lease amendments, and dispositions, among other categories, and includes 0.25% of the total investment cost of an acquisition. In general, personnel and overhead reimbursements are included in General and administrative expenses in the condensed consolidated financial statements. However, we capitalize certain costs related to our Advisor’s legal transactions group if the costs relate to an asset acquisition or other transactions.
CPA:18 – Global 3/31/2020 10-Q – 13
Notes to Condensed Consolidated Financial Statements (Unaudited)
Excess Operating Expenses
Our Advisor is obligated to reimburse us for the amount by which our operating expenses exceeds the “2%/25% guidelines” (the greater of 2% of average invested assets or 25% of net income) as defined in the advisory agreement for any 12-month period, subject to certain conditions. For the most recent trailing four quarters, our operating expenses were below this threshold.
Available Cash Distributions
WPC’s interest in the Operating Partnership entitles it to receive distributions of up to 10.0% of the available cash generated by the Operating Partnership (“the Available Cash Distribution”), which is defined as cash generated from operations, excluding capital proceeds, as reduced by operating expenses and debt service, excluding prepayments and balloon payments. Available Cash Distributions are included in Net income attributable to noncontrolling interests in the condensed consolidated financial statements.
Note 4. Real Estate, Operating Real Estate, Real Estate Under Construction, and Equity Investment in Real Estate
Real Estate — Land, Buildings and Improvements
Real estate, which consists of land and buildings leased to others, which are subject to operating leases, is summarized as follows (in thousands):
March 31, 2020 | December 31, 2019 | ||||||
Land | $ | 185,556 | $ | 196,693 | |||
Buildings and improvements | 972,941 | 1,003,952 | |||||
Less: Accumulated depreciation | (138,269 | ) | (135,922 | ) | |||
$ | 1,020,228 | $ | 1,064,723 | ||||
The carrying value of our Real Estate — Land, buildings and improvements decreased by $41.9 million from December 31, 2019 to March 31, 2020, reflecting the impact of exchange rate fluctuations during the same period (Note 2).
Depreciation expense, including the effect of foreign currency translation, on our real estate was $7.1 million and $7.5 million for the three months ended March 31, 2020 and 2019, respectively.
Leases
Operating Lease Income
Lease income related to operating leases recognized and included within Lease revenues — net-leased and Lease revenues — operating real estate in the condensed consolidated statements of operations are as follows (in thousands):
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Lease revenues — net-leased | |||||||
Lease income — fixed (a) | $ | 17,622 | $ | 25,387 | |||
Lease income — variable (b) | 3,785 | 4,561 | |||||
Total operating lease income (c) | $ | 21,407 | $ | 29,948 | |||
Lease revenues — operating real estate | |||||||
Lease income — fixed | $ | 17,302 | $ | 16,641 | |||
Lease income — variable (d) | 641 | 624 | |||||
Total operating lease income | $ | 17,943 | $ | 17,265 | |||
___________
CPA:18 – Global 3/31/2020 10-Q – 14
Notes to Condensed Consolidated Financial Statements (Unaudited)
(a) | Amount for the three months ended March 31, 2020 includes a $7.0 million write-off of straight-line rent receivables based on our current assessment of less than 75% likelihood of collecting all remaining contractual rent on certain net lease hotels (Note 2). |
(b) | Includes (i) rent increases based on changes in the Consumer Price Index (“CPI”) and other comparable indices and (ii) reimbursements for property taxes, insurance, and common area maintenance services. |
(c) | Excludes $1.0 million of interest income for both the three months ended March 31, 2020 and 2019, from direct financing leases that is included in Lease revenues — net-leased in the condensed consolidated statements of operations. |
(d) | Primarily comprised of late fees and administrative fees revenues. |
Operating Real Estate — Land, Buildings and Improvements
Operating real estate, which consists of our self-storage and student housing properties, is summarized as follows (in thousands):
March 31, 2020 | December 31, 2019 | ||||||
Land | $ | 77,704 | $ | 78,240 | |||
Buildings and improvements | 427,622 | 434,245 | |||||
Less: Accumulated depreciation | (60,743 | ) | (57,237 | ) | |||
$ | 444,583 | $ | 455,248 | ||||
The carrying value of our Operating real estate — land, buildings and improvements decreased by $7.2 million from December 31, 2019 to March 31, 2020, reflecting the impact of exchange rate fluctuations during the same period (Note 2).
Depreciation expense, including the effect of foreign currency translation, on our operating real estate was $3.8 million for both the three months ended March 31, 2020 and 2019.
Real Estate Under Construction
The following table provides the activity of our Real estate under construction (in thousands):
Three Months Ended March 31, 2020 | |||
Beginning balance | $ | 235,751 | |
Capitalized funds | 38,569 | ||
Foreign currency translation adjustments | (5,217 | ) | |
Placed into service | (4,062 | ) | |
Capitalized interest | 2,003 | ||
Ending balance | $ | 267,044 | |
Capitalized Funds
During the three months ended March 31, 2020, total capitalized funds primarily related to construction draws for our student housing development projects, and includes accrued costs of $2.5 million, which is a non-cash investing activity.
Capitalized Interest
Capitalized interest includes interest incurred during construction as well as amortization of the mortgage discount and deferred financing costs, which totaled $2.0 million during the three months ended March 31, 2020, which is a non-cash investing activity.
Ending Balance
As of March 31, 2020, we had 12 open development projects, with aggregate unfunded commitments of approximately $237.0 million, excluding capitalized interest, accrued costs, and capitalized acquisition fees for our Advisor.
CPA:18 – Global 3/31/2020 10-Q – 15
Notes to Condensed Consolidated Financial Statements (Unaudited)
Ghana Settlement Update
During the three months ended March 31, 2020, the collectibility of the value added tax (“VAT”) receivable to be refunded by the Ghanaian government was no longer deemed probable. As such, we recorded a $2.8 million loss to write-off the VAT receivable during the three months ended March 31, 2020, which is included within Other gains and (losses) on our condensed consolidated statements of operations.
Equity Investment in Real Estate
We classify distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.
We have an interest in an unconsolidated investment in our Self Storage segment that relates to a joint venture for the development of three self-storage facilities in Canada. This entity was jointly owned with a third party, which is also the general partner of the joint venture. Our ownership and economic interest in the joint venture is 100%. We continue to not consolidate this entity because we are not the primary beneficiary due to shared decision making with the general partner and the nature of our involvement in the activities, which allows us to exercise significant influence, but does not give us power over decisions that significantly affect the economic performance of the entity.
As of March 31, 2020 and December 31, 2019, our total equity investment balance for these self-storage properties was $13.2 million and $14.9 million, respectively, which is included in Accounts receivable and other assets, net in the condensed consolidated financial statements. As of March 31, 2020 and December 31, 2019, the joint venture had total third-party recourse debt of $29.3 million and $32.2 million, respectively.
Note 5. Finance Receivables
Assets representing rights to receive money on demand or at fixed or determinable dates are referred to as finance receivables. Our finance receivables portfolio consists of our notes receivable (which are included in Accounts receivable and other assets, net in the condensed consolidated financial statements) and our Net investments in direct financing leases (net of allowance for credit losses). Operating leases are not included in finance receivables.
Notes Receivable
As of March 31, 2020, our notes receivable consisted of a $28.0 million mezzanine tranche of 10-year commercial mortgage-backed securities on the Cipriani banquet halls in New York, New York with a maturity date of July 2024. The mezzanine tranche is subordinated to a $60.0 million senior loan on the properties. Interest-only payments at a rate of 10% per annum are due through its maturity date. As of both March 31, 2020 and December 31, 2019, the balance for this note receivable remained $28.0 million.
Interest income from our notes receivable was $0.7 million and $1.8 million for three months ended March 31, 2020 and 2019, respectively, and is included in Other operating and interest income in our condensed consolidated statements of operations.
CPA:18 – Global 3/31/2020 10-Q – 16
Notes to Condensed Consolidated Financial Statements (Unaudited)
Net Investments in Direct Financing Leases
Net investments in our direct financing lease investments is summarized as follows (in thousands):
March 31, 2020 | December 31, 2019 | ||||||
Lease payments receivable | $ | 54,419 | $ | 55,278 | |||
Unguaranteed residual value | 39,401 | 39,401 | |||||
93,820 | 94,679 | ||||||
Less: unearned income | (51,714 | ) | (52,625 | ) | |||
Less: allowance for credit losses (a) | (11,768 | ) | — | ||||
$ | 30,338 | $ | 42,054 | ||||
___________
(a) | Upon our adoption of ASU 2016-13 on January 1, 2020, we applied changes in loss reserves through a cumulative-effect adjustment to retained earnings totaling $6.9 million (Note 2). In addition, during the three months ended March 31, 2020, due to changes in expected economic conditions, we recorded an allowance for credit losses of $4.9 million, which was included in Allowance for credit losses in our condensed consolidated statements of operations. |
Interest income from direct financing leases was $1.0 million for both the three months ended March 31, 2020 and 2019, and is included in Lease revenues — net-leased in our condensed consolidated statements of operations.
Credit Quality of Finance Receivables
We generally invest in facilities that we believe are critical to a tenant’s business and therefore have a lower risk of tenant default. As of both March 31, 2020 and December 31, 2019, we had no significant finance receivable balances that were past due, but as noted above, we established an allowance for credit losses during the first quarter of 2020. Additionally, there were no modifications of finance receivables during the three months ended March 31, 2020.
We evaluate the credit quality of our finance receivables utilizing an internal five-point credit rating scale, with one representing the highest credit quality and five representing the lowest. A credit quality of one through three indicates a range of investment grade to stable. A credit quality of four through five indicates inclusion on the watch list to risk of default. The credit quality evaluation of our finance receivables is updated quarterly.
A summary of our finance receivables by internal credit quality rating is as follows (dollars in thousands):
Number of Tenants/Obligors at | Carrying Value at | |||||||||||
Internal Credit Quality Indicator | March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | ||||||||
1 – 3 | 4 | 4 | $ | 44,964 | $ | 45,457 | ||||||
4 | 1 | 1 | 13,374 | 24,597 | ||||||||
5 | — | — | — | — | ||||||||
0 | $ | 58,338 | $ | 70,054 | ||||||||
Note 6. Intangible Assets and Liabilities
In-place lease and above-market rent intangibles are included in In-place lease and other intangible assets in the condensed consolidated financial statements. Below-market rent intangibles are included in Accounts payable, accrued expenses and other liabilities in the condensed consolidated financial statements.
Goodwill is included in our Net Lease segment and included in Accounts receivable and other assets, net in the condensed consolidated financial statements. As a result of foreign currency translation adjustments, goodwill decreased from $26.0 million as of December 31, 2019 to $23.2 million as of March 31, 2020.
CPA:18 – Global 3/31/2020 10-Q – 17
Notes to Condensed Consolidated Financial Statements (Unaudited)
Intangible assets and liabilities are summarized as follows (in thousands):
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||
Amortization Period (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
Finite-Lived Intangible Assets | |||||||||||||||||||||||||
In-place lease | 6 – 23 | $ | 232,546 | $ | (131,852 | ) | $ | 100,694 | $ | 238,771 | $ | (131,012 | ) | $ | 107,759 | ||||||||||
Above-market rent | 7 – 30 | 9,929 | (4,187 | ) | 5,742 | 10,257 | (4,141 | ) | 6,116 | ||||||||||||||||
242,475 | (136,039 | ) | 106,436 | 249,028 | (135,153 | ) | 113,875 | ||||||||||||||||||
Indefinite-Lived Intangible Assets | |||||||||||||||||||||||||
Goodwill | 23,179 | — | 23,179 | 26,024 | — | 26,024 | |||||||||||||||||||
Total intangible assets | $ | 265,654 | $ | (136,039 | ) | $ | 129,615 | $ | 275,052 | $ | (135,153 | ) | $ | 139,899 | |||||||||||
Finite-Lived Intangible Liabilities | |||||||||||||||||||||||||
Below-market rent | 6 – 30 | $ | (14,930 | ) | $ | 6,875 | $ | (8,055 | ) | $ | (14,974 | ) | $ | 6,627 | $ | (8,347 | ) | ||||||||
Total intangible liabilities | $ | (14,930 | ) | $ | 6,875 | $ | (8,055 | ) | $ | (14,974 | ) | $ | 6,627 | $ | (8,347 | ) | |||||||||
Net amortization of intangibles, including the effect of foreign currency translation, was $3.5 million and $3.9 million for the three months ended March 31, 2020 and 2019, respectively. Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to Rental income; and amortization of in-place lease intangibles is included in Depreciation and amortization expense.
Note 7. Fair Value Measurements
The fair value of an asset is defined as the exit price, which is the amount that would either be received when an asset is sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a three-tier fair value hierarchy based on the inputs used in measuring fair value. These tiers are: Level 1, for which quoted market prices for identical instruments are available in active markets, such as money market funds, equity securities, and U.S. Treasury securities; Level 2, for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument, such as certain derivative instruments including interest rate caps, interest rate swaps, foreign currency forward contracts and foreign currency collars; and Level 3, for securities that do not fall into Level 1 or Level 2 and for which little or no market data exists, therefore requiring us to develop our own assumptions.
Items Measured at Fair Value on a Recurring Basis
The methods and assumptions described below were used to estimate the fair value of each class of financial instrument. For significant Level 3 items, we have also provided the unobservable inputs.
Derivative Assets and Liabilities — Our derivative assets and liabilities, which are included in Accounts receivable and other assets, net and Accounts payable, accrued expenses and other liabilities, respectively, in the condensed consolidated financial statements, are comprised of foreign currency forward contracts, interest rate swaps, interest rate caps, and foreign currency collars (Note 8).
The valuation of our derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves, spot and forward rates, and implied volatilities. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative instruments for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. These derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.
CPA:18 – Global 3/31/2020 10-Q – 18
Notes to Condensed Consolidated Financial Statements (Unaudited)
We did not have any transfers into or out of Level 1, Level 2, and Level 3 measurements during the three months ended March 31, 2020 and 2019. Gains and losses (realized and unrealized) recognized on items measured at fair value on a recurring basis included in earnings are reported within Other gains and (losses) on our condensed consolidated financial statements.
Our other financial instruments had the following carrying values and fair values as of the dates shown (dollars in thousands):
March 31, 2020 | December 31, 2019 | ||||||||||||||||
Level | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
Non-recourse secured debt, net (a) (b) | 3 | $ | 1,183,382 | $ | 1,196,712 | $ | 1,201,913 | $ | 1,239,004 | ||||||||
Notes receivable (c) | 3 | 28,000 | 30,300 | 28,000 | 30,300 | ||||||||||||
___________
(a) | As of March 31, 2020 and December 31, 2019, the carrying value of Non-recourse secured debt, net includes unamortized deferred financing costs of $6.2 million and $5.8 million, respectively, and unamortized premium, net of $1.3 million and $2.1 million, respectively (Note 9). |
(b) | We determined the estimated fair value of our Non-recourse secured debt, net using a discounted cash flow model that estimates the present value of the future loan payments by discounting such payments at current estimated market interest rates. The estimated market interest rates take into account interest rate risk and the value of the underlying collateral, which includes quality of the collateral, the credit quality of the tenant/obligor, and the time until maturity. |
(c) | We determined the estimated fair value of our Notes receivable using a discounted cash flow model with rates that take into account the credit of the tenant/obligor, order of payment tranches, and interest rate risk. We also considered the value of the underlying collateral, taking into account the quality of the collateral, the credit quality of the tenant/obligor, the time until maturity, and the current market interest rate. |
We estimated that our other financial assets and liabilities (excluding net investments in direct financing leases) had fair values that approximated their carrying values as of both March 31, 2020 and December 31, 2019.
Note 8. Risk Management and Use of Derivative Financial Instruments
Risk Management
In the normal course of our ongoing business operations, we encounter economic risk. There are four main components of economic risk that impact us: interest rate risk, credit risk, market risk, and foreign currency risk. We are primarily subject to interest rate risk on our interest-bearing liabilities. Credit risk is the risk of default on our operations and our tenants’ inability or unwillingness to make contractually required payments. Market risk includes changes in the value of our properties and related loans, as well as changes in the value of our other investments due to changes in interest rates or other market factors. We own international investments, primarily in Europe, and are subject to risks associated with fluctuating foreign currency exchange rates.
Derivative Financial Instruments
There have been no significant changes in our derivative financial instrument policies from what was disclosed in the 2019 Annual Report. As of both March 31, 2020 and December 31, 2019, no cash collateral had been posted or received for any of our derivative positions.
CPA:18 – Global 3/31/2020 10-Q – 19
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table sets forth certain information regarding our derivative instruments (in thousands):
Derivatives Designated as Hedging Instruments | Balance Sheet Location | Derivative Assets Fair Value at | Derivative Liabilities Fair Value at | |||||||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | |||||||||||||||
Foreign currency collars | Accounts receivable and other assets, net | $ | 2,518 | $ | 1,444 | $ | — | $ | — | |||||||||
Foreign currency forward contracts | Accounts receivable and other assets, net | 654 | 861 | — | — | |||||||||||||
Interest rate caps | Accounts receivable and other assets, net | 37 | 116 | — | — | |||||||||||||
Interest rate swaps | Accounts receivable and other assets, net | — | 53 | — | — | |||||||||||||
Interest rate swaps | Accounts payable, accrued expenses and other liabilities | — | — | (4,555 | ) | (1,991 | ) | |||||||||||
3,209 | 2,474 | (4,555 | ) | (1,991 | ) | |||||||||||||
Derivatives Not Designated as Hedging Instruments | ||||||||||||||||||
Interest rate swap | Accounts payable, accrued expenses and other liabilities | — | — | (37 | ) | (48 | ) | |||||||||||
— | — | (37 | ) | (48 | ) | |||||||||||||
Total derivatives | $ | 3,209 | $ | 2,474 | $ | (4,592 | ) | $ | (2,039 | ) | ||||||||
The following tables present the impact of our derivative instruments in the condensed consolidated financial statements (in thousands):
Amount of Loss Recognized on Derivatives in Other Comprehensive Loss | ||||||||
Three Months Ended March 31, | ||||||||
Derivatives in Cash Flow Hedging Relationships | 2020 | 2019 | ||||||
Interest rate swaps | $ | (2,617 | ) | $ | (887 | ) | ||
Foreign currency collars | 1,140 | 805 | ||||||
Foreign currency forward contracts | (207 | ) | (157 | ) | ||||
Interest rate caps | (139 | ) | 1 | |||||
Derivatives in Net Investment Hedging Relationship (a) | ||||||||
Foreign currency collars | 149 | 1 | ||||||
Total | $ | (1,674 | ) | $ | (237 | ) | ||
___________
(a) | The changes in fair value and the settlement of these contracts are reported in the foreign currency translation adjustment section of Other comprehensive loss. |
Amount of Gain on Derivatives Reclassified from Other Comprehensive Loss into Income | ||||||||||
Derivatives in Cash Flow Hedging Relationships | Location of Gain (Loss) Recognized in Income | Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||||
Foreign currency forward contracts | Other gains and (losses) | $ | 278 | $ | 346 | |||||
Interest rate swaps | Interest expense | (179 | ) | 27 | ||||||
Foreign currency collars | Other gains and (losses) | 119 | 11 | |||||||
Interest rate caps | Interest expense | (17 | ) | (3 | ) | |||||
Total | $ | 201 | $ | 381 | ||||||
CPA:18 – Global 3/31/2020 10-Q – 20
Notes to Condensed Consolidated Financial Statements (Unaudited)
Amounts reported in Other comprehensive loss related to our interest derivative contracts will be reclassified to Interest expense as interest is incurred on our variable-rate debt. Amounts reported in Other comprehensive loss related to foreign currency derivative contracts will be reclassified to Other gains and (losses) when the hedged foreign currency contracts are settled. As of March 31, 2020, we estimated that an additional $1.9 million and $1.6 million will be reclassified as Interest expense and Other gains and (losses), respectively, during the next 12 months.
The following table presents the impact of our derivative instruments in the condensed consolidated financial statements (in thousands):
Amount of Gain on Derivatives Recognized in Income | ||||||||||
Derivatives Not in Cash Flow Hedging Relationships | Location of Gain (Loss) Recognized in Income | Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||||
Foreign currency collars | Other gains and (losses) | $ | 81 | $ | 118 | |||||
Interest rate swap | Interest expense | 8 | — | |||||||
Foreign currency forward contracts | Other gains and (losses) | 7 | — | |||||||
Derivatives in Cash Flow Hedging Relationships | ||||||||||
Interest rate swaps | Interest expense | 179 | (1 | ) | ||||||
Foreign currency collars | Other gains and (losses) | — | 7 | |||||||
Total | $ | 275 | $ | 124 | ||||||
Interest Rate Swaps and Caps
We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed-rate basis. However, from time to time, we or our joint investment partners have obtained, and may in the future obtain, variable-rate non-recourse secured debt and, as a result, we have entered into, and may continue to enter into interest rate swap agreements or interest rate cap agreements with counterparties. Interest rate swaps, which effectively convert the variable-rate debt service obligations of a loan to a fixed rate, are agreements in which one party exchanges a stream of interest payments for a counterparty’s stream of cash flow over a specific period. The notional, or face, amount on which the swaps are based is not exchanged. Interest rate caps limit the effective borrowing rate of variable-rate debt obligations while allowing participants to share in downward shifts in interest rates. Our objective in using these derivatives is to limit our exposure to interest rate movements.
The interest rate swaps and caps that our consolidated subsidiaries had outstanding as of March 31, 2020 are summarized as follows (currency in thousands):
Interest Rate Derivatives | Number of Instruments | Notional Amount | Fair Value at March 31, 2020 (a) | |||||||
Interest rate swaps | 9 | 92,008 | USD | $ | (4,555 | ) | ||||
Interest rate cap | 1 | 12,975 | EUR | 20 | ||||||
Interest rate caps | 2 | 59,000 | GBP | 17 | ||||||
Interest rate cap | 1 | 5,700 | USD | — | ||||||
Derivatives Not Designated as Hedging Instruments | ||||||||||
Interest rate swap (b) | 1 | 9,183 | EUR | (37 | ) | |||||
$ | (4,555 | ) | ||||||||
___________
(a) | Fair value amount is based on the exchange rate of the respective currencies as of March 31, 2020, as applicable. |
(b) | This interest rate swap does not qualify for hedge accounting; however, it does protect against fluctuations in interest rates related to the underlying variable-rate debt. |
CPA:18 – Global 3/31/2020 10-Q – 21
Notes to Condensed Consolidated Financial Statements (Unaudited)
Foreign Currency Contracts
We are exposed to foreign currency exchange rate movements, primarily in the euro and, to a lesser extent, the Norwegian krone. We manage foreign currency exchange rate movements by generally placing our debt service obligation on an investment in the same currency as the tenant’s rental obligation to us. This reduces our overall exposure to the net cash flow from that investment. However, we are subject to foreign currency exchange rate movements to the extent that there is a difference in the timing and amount of the rental obligation and the debt service. Realized and unrealized gains and losses recognized in earnings related to foreign currency transactions are included in Other gains and (losses) in the condensed consolidated financial statements.
In order to hedge certain of our foreign currency cash flow exposures, we enter into foreign currency forward contracts and collars. A foreign currency forward contract is a commitment to deliver a certain amount of currency at a certain price on a specific date in the future. By entering into forward contracts and holding them to maturity, we are locked into a future currency exchange rate for the term of the contract. A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices. Our foreign currency forward contracts and foreign currency collars have maturities of 72 months or less.
The following table presents the foreign currency derivative contracts we had outstanding and their designations as of March 31, 2020 (currency in thousands):
Foreign Currency Derivatives | Number of Instruments | Notional Amount | Fair Value at March 31, 2020 | |||||||
Designated as Cash Flow Hedging Instruments | ||||||||||
Foreign currency collars | 20 | 17,152 | EUR | $ | 1,665 | |||||
Foreign currency collars | 16 | 30,660 | NOK | 801 | ||||||
Foreign currency forward contracts | 5 | 2,006 | EUR | 654 | ||||||
Designated as Net Investment Hedging Instruments | ||||||||||
Foreign currency collar | 1 | 2,500 | NOK | 52 | ||||||
$ | 3,172 | |||||||||
Credit Risk-Related Contingent Features
We measure our credit exposure on a counterparty basis as the net positive aggregate estimated fair value of our derivatives, net of any collateral received. No collateral was received as of March 31, 2020. At March 31, 2020, our total credit exposure was $2.4 million and the maximum exposure to any single counterparty was $1.2 million.
Some of the agreements we have with our derivative counterparties contain cross-default provisions that could trigger a declaration of default on our derivative obligations if we default, or are capable of being declared in default, on certain of our indebtedness. As of March 31, 2020, we had not been declared in default on any of our derivative obligations. The estimated fair value of our derivatives in a net liability position was $4.7 million and $2.1 million as of March 31, 2020 and December 31, 2019, respectively, which included accrued interest and any nonperformance risk adjustments. If we had breached any of these provisions as of March 31, 2020 or December 31, 2019, we could have been required to settle our obligations under these agreements at their aggregate termination value of $5.0 million and $2.2 million, respectively.
Note 9. Non-Recourse Secured Debt, Net
Non-recourse secured debt, net is collateralized by the assignment of real estate properties. As of March 31, 2020, the weighted-average interest rates for our fixed-rate and variable-rate non-recourse secured debt were 4.0% and 3.7%, respectively, with maturity dates ranging from 2020 to 2039.
CPA:18 – Global 3/31/2020 10-Q – 22
Notes to Condensed Consolidated Financial Statements (Unaudited)
Financing Activity During 2020
On March 13, 2020, we obtained a construction loan of $22.5 million (amount based on the exchange rate of the euro at the date of the loan) for a student housing development project in Barcelona, Spain. The loan is comprised of four tranches with a weighted average variable interest rate of 2.1% as of March 31, 2020. Interest only payments are due on outstanding draws through its scheduled maturity date of December 2023. A total of $16.8 million was drawn on the loan as of March 31, 2020.
Scheduled Debt Principal Payments
Scheduled debt principal payments during the remainder of 2020, each of the next four calendar years following December 31, 2020, and thereafter are as follows (in thousands):
Years Ending December 31, | Total | |||
2020 (remainder) | $ | 59,686 | ||
2021 | 151,979 | |||
2022 | 189,208 | |||
2023 | 203,916 | |||
2024 | 198,335 | |||
Thereafter through 2039 | 385,187 | |||
Total principal payments | 1,188,311 | |||
Unamortized deferred financing costs | (6,244 | ) | ||
Unamortized premium, net | 1,315 | |||
Total | $ | 1,183,382 | ||
Certain amounts in the table above are based on the applicable foreign currency exchange rate at March 31, 2020.
The carrying value of our Non-recourse secured debt, net decreased by $35.7 million in the aggregate from December 31, 2019 to March 31, 2020, reflecting the impact of exchange rate fluctuations during the same period (Note 2).
Covenants
Our non-recourse mortgage loan agreements include customary financial maintenance covenants that require us to maintain certain ratios and benchmarks at the end of each quarter. We were in compliance with all of these covenants at March 31, 2020.
Note 10. Commitments and Contingencies
As of March 31, 2020, we were not involved in any material litigation. Various claims and lawsuits arising in the normal course of business are pending against us. The results of these proceedings are not expected to have a material adverse effect on our condensed consolidated financial statements of operations or results of operations.
See Note 4 for unfunded construction commitments.
CPA:18 – Global 3/31/2020 10-Q – 23
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 11. (Loss) Earnings Per Share and Equity
Basic and Diluted (Loss) Earnings Per Share
The following table presents (loss) earnings per share (in thousands, except share and per share amounts):
Three Months Ended March 31, | |||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||
Basic and Diluted Weighted-Average Shares Outstanding | Allocation of Net Loss | Basic and Diluted Loss Per Share | Basic and Diluted Weighted-Average Shares Outstanding | Allocation of Net Income | Basic and Diluted Earnings Per Share | ||||||||||||||||
Class A common stock | 117,968,262 | $ | (6,398 | ) | $ | (0.05 | ) | 115,497,094 | $ | 11,654 | $ | 0.10 | |||||||||
Class C common stock | 32,445,640 | (1,782 | ) | (0.05 | ) | 31,879,027 | 3,173 | 0.10 | |||||||||||||
Net (loss) income attributable to CPA:18 – Global | $ | (8,180 | ) | $ | 14,827 | ||||||||||||||||
The allocation of Net (loss) income attributable to CPA:18 – Global is calculated based on the basic and diluted weighted-average shares outstanding for Class A and Class C common stock for each respective period. The Class C common stock allocation includes interest expense related to the accretion of interest on the annual distribution and shareholder servicing fee liability of less than $0.1 million for both the three months ended March 31, 2020 and March 31, 2019, respectively (Note 3).
Distributions
For the three months ended March 31, 2020, our board of directors declared quarterly distributions of $0.1563 per share for our Class A common stock and $0.1382 per share for our Class C common stock, which were paid on April 15, 2020 to stockholders of record on March 31, 2020, in the amount of $22.8 million.
Reclassifications Out of Accumulated Other Comprehensive Loss
The following tables present a reconciliation of changes in Accumulated other comprehensive loss by component for the periods presented (in thousands):
Three Months Ended March 31, 2020 | |||||||||||
Gains and (Losses) on Derivative Instruments | Foreign Currency Translation Adjustments | Total | |||||||||
Beginning balance | $ | 138 | $ | (56,673 | ) | $ | (56,535 | ) | |||
Other comprehensive loss before reclassifications | (1,622 | ) | (24,082 | ) | (25,704 | ) | |||||
Amounts reclassified from accumulated other comprehensive loss to: | |||||||||||
Other gains and (losses) | (397 | ) | — | (397 | ) | ||||||
Interest expense | 196 | — | 196 | ||||||||
Net current-period other comprehensive loss | (1,823 | ) | (24,082 | ) | (25,905 | ) | |||||
Net current-period other comprehensive loss attributable to noncontrolling interests | — | 2,528 | 2,528 | ||||||||
Ending balance | $ | (1,685 | ) | $ | (78,227 | ) | $ | (79,912 | ) | ||
CPA:18 – Global 3/31/2020 10-Q – 24
Notes to Condensed Consolidated Financial Statements (Unaudited)
Three Months Ended March 31, 2019 | |||||||||||
Gains and (Losses) on Derivative Instruments | Foreign Currency Translation Adjustments | Total | |||||||||
Beginning balance | $ | 2,215 | $ | (52,808 | ) | $ | (50,593 | ) | |||
Other comprehensive loss before reclassifications | 143 | (4,242 | ) | (4,099 | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss to: | |||||||||||
Other gains and (losses) | (357 | ) | — | (357 | ) | ||||||
Interest expense | (24 | ) | — | (24 | ) | ||||||
Net current-period other comprehensive loss | (238 | ) | (4,242 | ) | (4,480 | ) | |||||
Net current-period other comprehensive loss attributable to noncontrolling interests | — | 158 | 158 | ||||||||
Ending balance | $ | 1,977 | $ | (56,892 | ) | $ | (54,915 | ) | |||
See Note 8 for additional information on our derivative activity recognized within Other comprehensive loss for the periods presented.
CPA:18 – Global 3/31/2020 10-Q – 25
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 12. Segment Reporting
We operate in three reportable business segments: Net Lease, Self Storage, and Other Operating Properties. Our Net Lease segment includes our investments in net-leased properties, whether they are accounted for as operating leases or direct financing leases. Our Self Storage segment is comprised of our investments in self-storage properties. Our Other Operating Properties segment is primarily comprised of our investments in student housing operating properties and multi-family residential properties (our last multi-family residential property was sold in January 2019). In addition, we have an All Other category that includes our notes receivable investments, one of which was repaid during the second quarter of 2019. The following tables present a summary of comparative results and assets for these business segments (in thousands):
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Net Lease | |||||||
Revenues (a) | $ | 24,067 | $ | 30,992 | |||
Operating expenses (b) | (20,602 | ) | (17,311 | ) | |||
Interest expense | (6,858 | ) | (8,736 | ) | |||
Other gains and (losses) | (3,440 | ) | 43 | ||||
Gain on sale of real estate, net | — | 897 | |||||
Benefit from (provision for) income taxes | 639 | (360 | ) | ||||
Net income attributable to noncontrolling interests | (700 | ) | (209 | ) | |||
Net (loss) income attributable to CPA:18 – Global | $ | (6,894 | ) | $ | 5,316 | ||
Self Storage | |||||||
Revenues | $ | 15,356 | $ | 14,839 | |||
Operating expenses | (9,095 | ) | (8,745 | ) | |||
Interest expense | (3,356 | ) | (3,426 | ) | |||
Other gains and (losses) (c) | (54 | ) | (668 | ) | |||
Provision for income taxes | (31 | ) | (33 | ) | |||
Net income attributable to CPA:18 – Global | $ | 2,820 | $ | 1,967 | |||
Other Operating Properties | |||||||
Revenues | $ | 2,747 | $ | 2,622 | |||
Operating expenses | (1,485 | ) | (1,634 | ) | |||
Interest expense | (252 | ) | (120 | ) | |||
Other gains and (losses) | 15 | (39 | ) | ||||
Gain on sale of real estate, net | — | 14,514 | |||||
Benefit from (provision for) income taxes | 14 | (23 | ) | ||||
Net loss (income) attributable to noncontrolling interests | 5 | (2,789 | ) | ||||
Net income attributable to CPA:18 – Global | $ | 1,044 | $ | 12,531 | |||
All Other (d) | |||||||
Revenues | $ | 710 | $ | 1,833 | |||
Operating expenses | — | (1 | ) | ||||
Net income attributable to CPA:18 – Global | $ | 710 | $ | 1,832 | |||
Corporate | |||||||
Unallocated Corporate Overhead (e) | $ | (3,944 | ) | $ | (4,971 | ) | |
Net income attributable to noncontrolling interests — Available Cash Distributions | $ | (1,916 | ) | $ | (1,848 | ) | |
Total Company | |||||||
Revenues | $ | 42,880 | $ | 50,294 | |||
Operating expenses (b) | (36,228 | ) | (32,272 | ) | |||
Interest expense | (10,489 | ) | (12,357 | ) | |||
Other gains and (losses) (c) | (2,126 | ) | (476 | ) | |||
Gain on sale of real estate, net | — | 15,408 | |||||
Benefit from (provision for) income taxes | 394 | (924 | ) | ||||
Net income attributable to noncontrolling interests | (2,611 | ) | (4,846 | ) | |||
Net (loss) income attributable to CPA:18 – Global | $ | (8,180 | ) | $ | 14,827 | ||
CPA:18 – Global 3/31/2020 10-Q – 26
Notes to Condensed Consolidated Financial Statements (Unaudited)
Total Assets | |||||||
March 31, 2020 | December 31, 2019 | ||||||
Net Lease | $ | 1,463,826 | $ | 1,517,659 | |||
Self Storage | 365,907 | 369,883 | |||||
Other Operating Properties | 215,628 | 213,692 | |||||
Corporate | 76,018 | 105,407 | |||||
All Other | 28,165 | 28,162 | |||||
Total Company | $ | 2,149,544 | $ | 2,234,803 | |||
__________
(a) | The three months ended March 31, 2020 and 2019 includes straight-line rent amortization of $0.7 million and $0.9 million, respectively. The three months ended March 31, 2020 includes a $7.0 million write-off of straight-line rent receivables (Note 2). Straight-line lease revenue is only recognized when deemed probable of collection, and is included within Lease revenues — net-leased within our condensed consolidated financial statements. |
(b) |