Noncontrolling Interests

12 Months Ended

Dec. 31, 2023

Noncontrolling interests are limited partnership interests in the Operating Partnership owned by third parties.

As of December 31, 2023, noncontrolling interests constituted approximately 8.2% of total shares and 8.8% of weighted average shares outstanding (both measures assuming OP Units were converted to common shares).

Any noncontrolling interest that fails to qualify as permanent equity has been reclassified as temporary equity and adjusted to the greater of (a) the carrying amount or (b) its redemption value as of the end of the period in which the determination is made.

As of December 31, 2023, the limited partners of the Operating Partnership owned approximately 3.2 million of OP Units, which were issued to then affiliated parties and unaffiliated third parties in exchange for the contribution of certain properties to the Company and in connection with the Self-Administration Transaction, and approximately 0.02 million OP Units were issued unrelated to property contributions.

As of December 31, 2023, all limited partners of the Operating Partnership (see Noncontrolling Interest Subject to Redemption below) have an Exchange Right (as defined below), pursuant to which, if exercised, the Operating Partnership would be required to redeem their OP Units for cash equal to the value of an equivalent number of common shares as calculated pursuant to the limited partnership agreement and applicable contribution agreement (the “Exchange Right”). If a limited partner of the Operating Partnership exercises an Exchange Right, the Company, as a general partner of the Operating Partnership, has the right, in its sole absolute discretion, elect to either (i) purchase the OP units for cash equal to the value of an equivalent number of common shares, as calculated pursuant to the limited partnership agreement and applicable contribution agreement or (ii) purchase such limited partner’s OP Units by issuing common shares of the Company for the original OP Units redeemed pursuant to the limited partnership agreement and applicable contribution agreement, subject to certain transfer and ownership limitations included in the Company’s charter and the limited partnership agreement.

The following summarizes the activity for noncontrolling interests recorded as equity for the years ended December 31, 2023 and 2022:


	December 31,
	2023		2022
Beginning balance	$	174,655	$	218,653

Reclass of noncontrolling interest subject to redemption	10		957
Exchange of noncontrolling interest	(27,169)		—
Reclass of redeemable noncontrolling interest	3,801		—
Distributions to noncontrolling interests	(2,989)		(10,942)
Allocated distributions to noncontrolling interests subject to redemption	(728)		(17)
Net loss	(54,555)		(39,714)
Other comprehensive loss	(1,396)		5,718
Ending balance	$	91,629	$	174,655

Noncontrolling interests subject to redemption

Prior to the Listing, OP Units issued pursuant to the Will Partners Contribution were not included in permanent equity on the consolidated balance sheets, because the limited partners holding these OP Units could cause the general partner to redeem the OP Units for the cash value, and the Company could not elect to purchase such limited partner’s OP Units by issuing common shares of the Company for the OP Units redeemed. Accordingly, prior to Listing, the general partner of the Operating Partnership did not control these redemptions, these OP Units were presented on the consolidated balance sheets as noncontrolling interest subject to redemption at their redeemable value, and the net income (loss) and distributions attributed to these limited partners are allocated proportionately between common shareholders and other noncontrolling interests that are not considered redeemable.

Effective as of the Listing, and subsequently as of December 31, 2023, all OP Units are subject to the same redemption process as all other OP Units (i.e., can be redeemed for cash or, the Company can elect to purchase these OP Units by issuing common shares) as described above. The Company intends to redeem all OP Units for common shares.

Redemption of OP units from Self-Administration Transaction

In connection with the Self-Administration Transaction, Griffin Capital, LLC (“GC LLC”), an entity controlled by our former Executive Chairman, Kevin A. Shields, and an affiliate of our Predecessor’s sponsor, Griffin Capital Company, LLC “GCC LLC”), received OP units (approximately 2.7 million taking into effect the 9 to 1 reverse split) as consideration in exchange for the sale to our Predecessor of the advisory, asset management and property management business of Griffin Capital Real Estate Company, LLC (n/k/a PKST Management Company, LLC) (“Management Company”). GC LLC assigned approximately 50% of the OP units received in connection with the Self-Administration Transaction to then participants in GC LLC’s long-term incentive plan. Mr. Shields is the plan administrator of such long-term incentive plan.

As previously disclosed, certain of our current and former employees and executive officers, including Michael Escalante, our Chief Executive Officer, and Javier Bitar, our Chief Financial Officer and Treasurer, were employed by affiliates of GC LLC prior to the Self-Administration Transaction and are therefore participants in a long-term incentive plan of GC LLC that made grants to such participants in connection with services rendered prior to the Self-Administration Transaction. Participants in GC LLC’s long-term incentive plan, including Messrs. Escalante and Bitar, are entitled to receive distributions from the long-term incentive plan in the form of either cash, common shares, or other property, or a combination thereof, as elected by the plan administrator.

The Listing required that certain awards under GC LLC’s long-term incentive plan be settled during the fourth quarter 2023 and in four annual installments thereafter, unless waived or modified. As described above, in connection with the settlement of GC LLC’s long-term incentive plan, the plan administrator may choose to distribute cash, common shares, or other property, or a combination thereof, as elected by the plan administrator.

On December 15, 2023, GC LLC elected to redeem 209,954 OP units pursuant to the terms of our Operating Partnership’s operating agreement, and we satisfied such redemption request with our common shares. Following this redemption, GC LLC distributed such common shares to participants in GC LLC’s long-term incentive plan, including 56,266 common shares to Mr. Escalante and his designee and 2,000 common shares to Mr. Bitar.

In connection with the aforesaid future installments, if GC LLC elects to redeem additional OP units, we intend to satisfy such redemption request with our common shares. Any future redemption of OP units and distribution of common shares would have no economically dilutive effect on our common shareholders.

If the plan administrator elects to redeem the OP units GC LLC received in connection with the Self-Administration Transaction pursuant to the terms of our Operating Partnership’s operating agreement, we intend to satisfy such redemption request with our common shares.