XML 81 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Real Estate (Tables)
 9 Months Ended 12 Months Ended
Sep. 30, 2018
Dec. 31, 2017
Real Estate [Line Items]    
Schedule of Aggregate purchase price of the acquisitions  
The purchase price and other acquisition items for the properties acquired during the year ended December 31, 2017 are shown below:
 
 
 
 
 
 
 
 
 
 
 
 
Paid to Advisor
 
 
Property
 
Location
 
Tenant/Major Lessee
 
Acquisition Date
 
Purchase Price
 
Approx. Square Feet
 
Acquisition Fees and Reimbursable Expenses (1)
 
Contingent Advisor Payment (2)
 
Year of Lease Expiration
Allstate
 
Lone Tree, CO
 
Allstate Insurance Company
 
1/31/2017
 
$
14,750

(3) 
70,300

 
$
402

 
$
273

 
2026
MISO
 
Carmel, IN
 
Midcontinent Independent System Operator, Inc.
 
5/15/2017
 
$
28,600

 
133,400

 
$
696

 
$
529

 
2028
(1)
Under the Original Advisory Agreement, the fee consisted of a 2.0% base acquisition fee and acquisition expense reimbursement for actual acquisition expenses incurred, estimated to be approximately 1.0% of acquisition value.
(2)
Under the Original Advisory Agreement, the Advisor was entitled to receive an acquisition fee in an amount up to 3.85% of the contract purchase price for each property the Company acquired. The acquisition fee consisted of a 2.0% base acquisition fee and up to an additional 1.85% contingent advisor payment (the “Contingent Advisor Payment”); provided, however, that $5.0 million of amounts advanced by the Advisor for dealer manager fees and organizational and offering expenses (the “Contingent Advisor Payment Holdback”) would be retained by the Company until the later of (a) the termination of the IPO, including any follow-on offerings where the Advisor provides up-front funding of offering fees, or (b) July 31, 2017, at which time such amount would be paid to the Advisor. On July 31, 2017, the Company paid to the Advisor the Contingent Advisor Payment Holdback of $5.0 million, which consisted of amounts previously advanced by the Advisor for dealer manager fees and organizational and offering expenses.
(3)
The purchase price for the Allstate property was $14.8 million, plus closing costs, less a credit in the amount of $0.4 million applied at closing.
Summary of purchase price allocation  
The following summarizes the purchase price allocations for the properties acquired during the year ended December 31, 2017:
Property(1)
 
Land
 
Building and Improvements
 
Tenant Origination and Absorption Cost
 
In-Place Lease Valuation Above Market
 
In-Place Lease Valuation (Below) Market
 
Total
 
Allstate
 
$
1,808

 
$
9,071

 
$
5,019

 
$
—

 
$
(1,001
)
 
$
14,897

 
MISO
 
$
3,104

 
$
18,077

 
$
7,937

 
$
218

 
$
—

 
$
29,336

 
(1)
The Company evaluated the transactions above under the clarified framework for determining whether an integrated set of assets and activities meets the definition of a business, pursuant to ASU No. 2017-01, Business Combinations, issued in January 2017, which the Company early-adopted effective October 1, 2016. Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. Since the transactions above lacked a substantive process, the transactions did not meet the definition of a business and consequently were accounted for as asset acquisitions. The Company allocated the total consideration (including acquisition costs of approximately $1.2 million) to the individual assets and liabilities acquired on a relative fair value basis.
Schedule of future minimum contractual rent payments
The future minimum contractual rent payments pursuant to the current lease terms are shown in the table below. The Company's current leases have expirations ranging from 2021 to 2044.
 
As of September 30, 2018
Remaining 2018
$
19,311

2019
78,887

2020
80,492

2021
72,677

2022
73,538

Thereafter
528,803

Total
$
853,708
The future minimum contractual rent payments pursuant to the current lease terms are shown in the table below. The Company’s current leases have expirations ranging from 2020 to 2044.
 
As of December 31, 2017
2018
$
71,662

2019
78,887

2020
80,492

2021
72,677

2022
73,538

Thereafter
528,803

Total
$
906,059
Schedule of in-place lease valuation and tenant origination and absorption cost
The Company allocated a portion of the acquired real estate asset value to in-place lease valuation and tenant origination and absorption cost. The in-place lease was measured against comparable leasing information and the present value of the difference between the contractual, in-place rent and the fair market rent was calculated using, as the discount rate, the capitalization rate utilized to compute the value of the real estate at acquisition.
 
September 30, 2018
 
December 31, 2017
In-place lease valuation (above market)
$
4,046

 
$
4,046

In-place lease valuation (above market), accumulated amortization
(1,030
)
 
(752
)
Intangible assets, net
$
3,016

 
$
3,294

In-place lease valuation (below market)
$
(62,070
)
 
$
(62,070
)
In-place lease valuation (below market) - accumulated amortization
14,564

 
10,775

In-place lease valuation (below market), net
$
(47,506
)
 
$
(51,295
)
Tenant origination and absorption cost
$
240,364

 
$
240,364

Tenant origination and absorption cost - accumulated amortization
(65,264
)
 
(47,165
)
Tenant origination and absorption cost, net
$
175,100

 
$
193,199
The Company allocated a portion of the acquired real estate asset value to in-place lease valuation and tenant origination and absorption cost. The in-place lease was measured against comparable leasing information and the present value of the difference between the contractual, in-place rent and the fair market rent was calculated using, as the discount rate, the capitalization rate utilized to compute the value of the real estate at acquisition. The intangible assets are amortized over the remaining lease terms of the respective properties, which on a weighted-average basis, was approximately 10.3 and 11.4 years as of December 31, 2017 and December 31, 2016, respectively.
 
December 31, 2017
 
December 31, 2016
In-place lease valuation (above market)
$
4,046

 
$
3,828

In-place lease valuation (above market), accumulated amortization
(752
)
 
(300
)
Intangible assets, net
$
3,294

 
$
3,528

In-place lease valuation (below market)
$
(62,070
)
 
$
(61,069
)
In-place lease valuation (below market) - accumulated amortization
10,775

 
5,750

In-place lease valuation (below market), net
$
(51,295
)
 
$
(55,319
)
Tenant origination and absorption cost
$
240,364

 
$
227,407

Tenant origination and absorption cost - accumulated amortization
(47,165
)
 
(23,409
)
Tenant origination and absorption cost, net
$
193,199

 
$
203,998
Schedule of estimated annual amortization (income) expense  
The amortization of the intangible assets and other leasing costs for the respective periods is as follows:
 
Amortization (income) expense for the year ended December 31,
 
2017
 
2016
 
2015
In-place lease valuation
$
(4,573
)
 
$
(3,592
)
 
$
(1,858
)
Tenant origination and absorption cost
$
23,756

 
$
16,264

 
$
7,145
Estimated annual amortization (income) expense, in-place lease valuation
The following table sets forth the estimated annual amortization (income) expense for in-place lease valuation, and tenant origination and absorption costs as of September 30, 2018 for the next five years:
Year
 
In-Place Lease Valuation
 
Tenant Origination and Absorption Costs
Remaining 2018
 
$
(1,170
)
 
$
6,033

2019
 
$
(4,695
)
 
$
24,198

2020
 
$
(4,695
)
 
$
24,198

2021
 
$
(3,799
)
 
$
19,715

2022
 
$
(3,799
)
 
$
19,597
The following table sets forth the estimated annual amortization (income) expense for in-place lease valuation, and tenant origination and absorption costs as of December 31, 2017 for the next five years:
Year
 
In-Place Lease Valuation
 
Tenant Origination and Absorption Costs
2018
 
$
(4,695
)
 
$
24,198

2019
 
$
(4,695
)
 
$
24,198

2020
 
$
(4,695
)
 
$
24,198

2021
 
$
(3,799
)
 
$
19,715

2022
 
$
(3,799
)
 
$
19,597
Griffin Capital Essential Asset REIT, Inc. [Member]    
Real Estate [Line Items]    
Schedule of Aggregate purchase price of the acquisitions
The purchase price and other acquisition items for the properties acquired during the nine months ended September 30, 2018 are shown below:
Property
 
Location
 
Tenant/Major Lessee
 
Acquisition Date
 
Purchase Price
 
Approx. Square Feet
 
Acquisition Fees and Expenses (1)
 
Year of Lease Expiration
Quaker
 
Lakeland, Florida
 
Quaker Sales and Distribution, Inc.
 
3/13/2018
 
$
59,600

 
605,400
 
$
1,777

 
2028
McKesson
 
Scottsdale, Arizona
 
McKesson Corporation
 
4/10/2018
 
$
67,000

 
271,100
 
$
2,139

 
2028
Shaw
 
Wentworth, Georgia
 
Shaw Industries, Inc.
 
5/3/2018
 
$
56,526

 
1,001,500
 
$
1,782

 
2033
(1)
The Advisor is entitled to receive acquisition fees equal to 2.5% and acquisition expense reimbursement of up to 0.5% of the contract purchase price for each acquisition. In addition, the Company incurred third-party costs associated with the three acquisitions.
The purchase price and other acquisition items for the property acquired during the year ended December 31, 2017 are shown below:
Property
 
Location
 
Tenant/Major Lessee
 
Acquisition Date
 
Purchase Price
 
Approx. Square Feet
 
Acquisition Fees Paid to the Advisor (1)
 
Year of Lease Expiration
LPL
 
Fort Mill, SC
 
LPL Holdings, Inc.
 
11/30/2017
 
$
130,000

 
451,600
 
$
3,791

 
2036
(1)
The Advisor is entitled to receive acquisition fees equal to 2.5% and acquisition expense reimbursement of up to 0.5% of the contract purchase price for each acquisition.
Summary of purchase price allocation  
The following summarizes the purchase price allocation of the LPL property acquired during the year ended December 31, 2017:
Property
 
Land
 
Building and improvements
 
Tenant origination and absorption costs
 
In-place lease valuation - above market
 
Total
LPL (1)
 
$
5,886

 
$
108,000

 
$
19,859

 
$
383

 
$
134,128


(1)
The Company evaluated the transactions above under the clarified framework for determining whether an integrated set of assets and activities meets the definition of a business, pursuant to ASU No. 2017-01, Business Combinations, issued in January 2017, which the Company early-adopted effective January 1, 2017. Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. Since the transaction above lacked a substantive process, the transaction did not meet the definition of a business and consequently was accounted for as asset acquisition. The Company allocated the total consideration (including acquisition costs of approximately $4.1 million) to the individual assets and liabilities acquired on a relative fair value basis.
Schedule of future minimum contractual rent payments
The following summarizes the purchase price allocations of the properties acquired during the nine months ended September 30, 2018:
Property (1)
 
Land
 
Building and improvements
 
Tenant origination and absorption costs
 
In-place lease valuation - above (below) market
 
Receivable- Ground Lease
 
Payable-
Ground Lease Payments
 
Total
Quaker
 
$
5,433

 
$
50,953

 
$
4,387

 
$
(502
)
 
$
—

 
$
—

 
$
60,271

McKesson
 
$
312

 
$
45,109

 
$
24,652

 
$
(933
)
 
$
—

 
$
—

 
$
69,140

Shaw
 
$
5,465

 
$
48,820

 
$
8,297

 
$
(4,273
)
 
$
2,008

 
$
(2,008
)
 
$
58,309


(1)
The Company evaluated the transactions above under the clarified framework for determining whether an integrated set of assets and activities meets the definition of a business, pursuant to ASU No. 2017-01, Business Combinations, issued in January 2017, which the Company early-adopted effective January 1, 2017. Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. Since the transactions above lacked a substantive process, the transactions did not meet the definition of a business and consequently were accounted for as asset acquisitions. The Company allocated the total consideration (including acquisition costs of approximately $5.7 million) to the individual assets and liabilities acquired on a relative fair value basis.
The future minimum contractual rent payments pursuant to the current lease terms are shown in the table below. The Company's current leases have expirations ranging from 2018 to 2036.
 
As of September 30, 2018
Remaining 2018
$
61,164

2019
226,557

2020
204,640

2021
191,182

2022
182,708

Thereafter
803,849

Total
$
1,670,100
The future minimum contractual rent payments pursuant to the current lease terms are shown in the table below. The Company’s current leases have expirations ranging from 2018 to 2036.
 
As of December 31, 2017
2018
$
231,620

2019
210,449

2020
188,653

2021
174,053

2022
164,494

Thereafter
664,226

Total
$
1,633,495
Schedule of in-place lease valuation and tenant origination and absorption cost
The Company allocated a portion of the acquired and contributed real estate asset value to in-place lease valuation and tenant origination and absorption cost, net of the write-off of intangibles, as of September 30, 2018 and December 31, 2017:
 
September 30, 2018
 
December 31, 2017
In-place lease valuation (above market)
$
42,736

 
$
42,736

In-place lease valuation (above market) - accumulated amortization
(31,065
)
 
(26,613
)
In-place lease valuation (above market), net
11,671

 
16,123

Ground leasehold interest (below market)
2,254

 
2,255

Ground leasehold interest (below market) - accumulated amortization
(129
)
 
(109
)
Ground leasehold interest (below market), net
2,125

 
2,146

Intangible assets, net
$
13,796

 
$
18,269

In-place lease valuation (below market)
$
(55,482
)
 
$
(49,774
)
In-place lease valuation (below market) - accumulated amortization
30,779

 
26,193

In-place lease valuation (below market), net
$
(24,703
)
 
$
(23,581
)
Tenant origination and absorption cost
$
532,207

 
$
494,871

Tenant origination and absorption cost - accumulated amortization
(284,763
)
 
(242,108
)
Tenant origination and absorption cost, net
$
247,444

 
$
252,763
The Company allocated a portion of the acquired and contributed real estate asset value to in-place lease valuation and tenant origination and absorption cost, net of the write-off of intangibles for the years ended December 31, 2017 and 2016. In-place leases were measured against comparable leasing information and the present value of the difference between the contractual, in-place rent, and the fair market rent was calculated using, as the discount rate, the capitalization rate utilized to compute the value of the real estate at acquisition or contribution.
 
December 31,
 
2017
 
2016
In-place lease valuation (above market)
$
43,826

 
$
47,419

In-place lease valuation (above market) - accumulated amortization
(27,703
)
 
(20,543
)
In-place lease valuation (above market), net
16,123

 
26,876

Ground leasehold interest (below market)
2,255

 
2,254

Ground leasehold interest (below market) - accumulated amortization
(109
)
 
(82
)
Ground leasehold interest (below market), net
2,146

 
2,172

Intangible assets, net
$
18,269

 
$
29,048

In-place lease valuation (below market)
$
(49,774
)
 
$
(51,966
)
In-place lease valuation (below market) - accumulated amortization
26,193

 
20,330

In-place lease valuation (below market), net
$
(23,581
)
 
$
(31,636
)
Tenant origination and absorption cost
$
495,364

 
$
541,646

Tenant origination and absorption cost - accumulated amortization
(242,601
)
 
(197,173
)
Tenant origination and absorption cost, net
$
252,763

 
$
344,473
Schedule of estimated annual amortization (income) expense
The following table sets forth the estimated annual amortization (income) expense for in-place lease valuation, net, tenant origination and absorption costs, ground leasehold improvements, and other leasing costs as of September 30, 2018 for the next five years:
Year
 
In-place lease valuation, net
 
Tenant origination and absorption costs
 
Ground leasehold improvements
 
Other leasing costs
Remaining 2018
 
$
(386
)
 
$
11,150

 
$
21

 
$
2,389

2019
 
$
(2,464
)
 
$
38,096

 
$
21

 
$
4,765

2020
 
$
(936
)
 
$
29,867

 
$
21

 
$
4,712

2021
 
$
(717
)
 
$
25,170

 
$
21

 
$
4,830

2022
 
$
(1,058
)
 
$
22,938

 
$
21

 
$
4,818
The amortization of the intangible assets and other leasing costs for the respective periods is as follows:
 
Amortization (income) expense for the year ended December 31,
 
2017
 
2016
 
2015
In-place lease valuation, net
$
1,689

 
$
3,287

 
$
(3,785
)
Tenant origination and absorption cost
$
59,046

 
$
72,912

 
$
69,099

Ground leasehold amortization (below market)
$
27

 
$
28

 
$
28

Other leasing costs amortization
$
1,527

 
$
1,202

 
$
301
Restrictions on cash and cash equivalents
In conjunction with acquisition of certain assets, as required by certain lease provisions or certain lenders in conjunction with an acquisition or debt financing, or credits received by the seller of certain assets, the Company assumed or funded reserves for specific property improvements and deferred maintenance, re-leasing costs, and taxes and insurance, which are included on the consolidated balance sheets as restricted cash. Additionally, an ongoing replacement reserve is funded by certain tenants pursuant to each tenant’s respective lease as follows:
 
Balance as of
 
September 30, 2018
 
December 31, 2017
Cash reserves
$
20,619

 
$
17,034

Midland mortgage loan restricted lockbox
1,746

 
2,158

1031 Exchange Funds (1)
—

 
154,940

Total
$
22,365

 
$
174,132

(1)
Section 1031 of the Internal Revenue Code of 1986, as amended ("1031 Exchanges"). Represents cash proceeds from a disposition that are temporarily held at the qualified intermediary for purposes of facilitating potential Section 1031 Exchanges. The Company's three acquisitions during the six months ended June 30, 2018 completed the 1031 Exchange.
Additionally, an ongoing replacement reserve is funded by certain tenants pursuant to each tenant’s respective lease as follows:
 
Balance as of December 31, 2016
 
Additions
 
Deductions
 
Balance as of December 31, 2017
Tenant improvement reserves (1)
$
9,238

 
$
5,468

 
$
(1,071
)
 
$
13,635

Midland mortgage loan repairs reserves (2)
67

 
323

 
—

 
390

Real estate tax reserve (3)
1,645

 
3,344

 
(2,892
)
 
2,097

Property insurance reserve (Emporia Partners) (3)
257

 
467

 
(499
)
 
225

Rent Abatement Reserve
—

 
731

 
(390
)
 
341

Restricted deposits/Leasing commission reserve
745

 
4

 
(404
)
 
345

Midland mortgage loan restricted lockbox (4)
1,468

 
2,158

 
(1,468
)
 
2,158

Holdback Escrow (5)
—

 
77,275

 
(77,275
)
 
—

1031 Exchange Funds (6)
—

 
286,711

 
(131,771
)
 
154,940

Total
$
13,420

 
$
376,481

 
$
(215,770
)
 
$
174,131

(1)
Represents tenant improvement reserves held by the lenders.
(2)
Represents a deferred maintenance reserve funded by the Company as part of the refinancing that occurred on February 28, 2013, whereby certain properties became collateral for the Midland mortgage loan.
(3)
Represents real estate tax and insurance reserves which are funded monthly and held by the lenders. Funds are requested for disbursement as real estate tax and insurance premium payments are made.
(4)
As part of the terms of the Midland mortgage loan, rent collections from the eight properties which serve as collateral thereunder are received in a designated cash collateral account which is controlled by the lender until the designated payment date, as defined in the loan agreement, and the excess cash is transferred to the operating account.
(5)
Represents initial funds held back related to the Bank of America Loan, which were released on October 25, 2017 and October 26, 2017.
(6)
Represents cash proceeds from a disposition that are temporarily held at the qualified intermediary for purposes of facilitating potential Section 1031 Exchanges.
Major components of assets and liabilities related to the real estate held for sale
The following summary presents the major components of assets and liabilities related to the real estate held for sale as of the nine months ended September 30, 2018 and year ended December 31, 2017:
 
 
Balance as of

 
September 30, 2018
 
December 31, 2017
Land
 
$
589

 
$
589

Building and improvements
 
2,493

 
2,493

Tenant origination and absorption cost
 
493

 
493

Total real estate
 
3,575

 
3,575

Less: accumulated depreciation and amortization
 
(868
)
 
(794
)
Total real estate, net
 
2,707

 
2,781

Other assets
 
4

 
178

Total assets
 
$
2,711

 
$
2,959


 

 

Accrued expenses and other liabilities
 
$
288

 
$
527

Due to affiliates
 
5

 
10

Total liabilities
 
$
293

 
$
537

  
Estimated annual amortization (income) expense, in-place lease valuation  
The following table sets forth the estimated annual amortization (income) expense for in-place lease valuation, net, tenant origination and absorption costs, ground leasehold improvements, and other leasing costs as of December 31, 2017 for the next five years:
Year
 
In-place lease valuation, net
 
Tenant origination and absorption costs
 
Ground leasehold improvements
 
Other leasing costs
2018
 
$
(1,018
)
 
$
51,363

 
$
27

 
$
1,768

2019
 
$
(1,856
)
 
$
42,721

 
$
27

 
$
1,782

2020
 
$
(770
)
 
$
33,302

 
$
27

 
$
1,757

2021
 
$
(630
)
 
$
28,724

 
$
27

 
$
1,704

2022
 
$
(1,007
)
 
$
24,918

 
$
27

 
$
1,674