Segments

12 Months Ended

Dec. 31, 2018

13. SEGMENTS

The Company’s reportable segments consist of the three types of commercial real estate properties for which the Company’s decision-makers internally evaluate operating performance and financial results: Office/Industrial Properties, Model Homes and Retail Properties. The Company also has certain corporate level activities including accounting, finance, legal administration and management information systems which are not considered separate operating segments. The accounting policies of the reportable segments are the same as those described in Note 2. There is no significant intersegment activity.

The Company evaluates the performance of its segments based upon net operating income (“NOI”), which is a non-GAAP supplemental financial measure. The Company defines NOI for its segments as operating revenues (rental income, tenant reimbursements and other operating income) less property and related expenses (property operating expenses, real estate taxes, insurance, asset management fees, impairments and provision for bad debt) excluding interest expense. NOI excludes certain items that are not considered to be controllable in connection with the management of an asset such as non-property income and expenses, depreciation and amortization, real estate acquisition fees and expenses and corporate general and administrative expenses. The Company uses NOI to evaluate the operating performance of the Company’s real estate investments and to make decisions about resource allocations.

The following tables reconcile the Company’s segment activity to its results of operations and financial position as of and for the years ended December 31, 2018 and 2017, respectively.

	For the Year Ended December 31,
	2018			2017
Office/Industrial Properties:
Rental income	$	24,037,363		$	25,140,525
Property and related expenses		(9,494,885	)		(9,263,556	)
Net operating income, as defined		14,542,478			15,876,969
Model Home Properties:
Rental income		4,642,159			3,899,570
Property and related expenses		(174,238	)		(154,206	)
Net operating income, as defined		4,467,921			3,745,364
Retail Properties:
Rental income		3,664,491			4,334,047
Property and related expenses		(1,217,596	)		(1,305,702	)
Net operating income, as defined		2,446,895			3,028,345
Reconciliation to net income (loss):
Total net operating income, as defined, for reportable segments		21,457,294			22,650,678
General and administrative expenses		(4,532,703	)		(5,200,592	)
Depreciation and amortization		(9,101,605	)		(9,710,265	)
Interest expense		(13,041,016	)		(12,954,079	)
Interest income		55,909			30,287
Gain on sale of real estate		12,200,138			2,623,469
Deferred offering cost		(1,507,599	)		-
Impairment of real estate		(532,951	)		-
Acquisition costs		(26,177	)		(72,897	)
Income tax expense		(518,567	)		(208,681	)
Net income (loss )	$	4,452,723		$	(2,842,080	)

	December 31,		December 31,
Assets by Reportable Segment:	2018		2017

Office/Industrial Properties:
Land, buildings and improvements, net (1)	$	138,694,773	$	160,422,468
Total assets (2)	$	143,620,315	$	163,041,049
Model Home Properties:
Land, buildings and improvements, net (1)	$	48,762,869	$	43,245,832
Total assets (2)	$	48,864,060	$	44,782,943
Retail Properties:
Land, buildings and improvements, net (1)	$	23,650,423	$	30,865,644
Total assets (2)	$	27,702,384	$	32,534,890
Reconciliation to Total Assets:
Total assets for reportable segments	$	220,186,759	$	240,358,882
Other unallocated assets:
Cash and cash equivalents		9,776,215		8,310,575
Other assets, net		3,087,066		5,827,408
Total Assets	$	233,050,040	$	254,496,865

(1)	Includes lease intangibles and the land purchase option related to property acquisitions.

(2)	Includes land, buildings and improvements, current receivables, deferred rent receivables and deferred leasing costs and other related intangible assets, all shown on a net basis.

Capital Expenditures by Reportable Segment
	For the Year Ended December 31,
	2018		2017
Office/Industrial Properties:
Capital expenditures and tenant improvements	$	3,340,023	$	3,418,722

Model Home Properties:
Acquisition of operating properties		17,326,915		17,560,745

Retail Properties:
Capital expenditures and tenant improvements		19,260		203,002

Totals:
Acquisition of operating properties, net		17,326,915		17,560,745
Capital expenditures and tenant improvements		3,359,283		3,621,724
Total real estate investments	$	20,686,198	$	21,182,469