RREEF Property Trust Inc.

11/13/2025 | Press release | Distributed by Public on 11/13/2025 14:27

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements, the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q, or this Quarterly Report. The following discussion should also be read in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024 and in our Quarterly Report on Form 10-Q for the three months ended June 30, 2025. We further invite you to visit our website, www.rreefpropertytrust.com, where we routinely post additional information about our Company, such as, without limitation, our daily net asset value, or NAV, per share. The contents of our website may be deemed material and are not incorporated by reference. The terms "we," "us," "our" and the "Company" refer to RREEF Property Trust, Inc. and its subsidiaries.
The NAV per share is published daily via NASDAQ's Mutual Fund Quotation System under the symbols ZRPTAX, ZRPTIX, ZRPTMX, ZRPTNX, ZRPTTX, ZRPTUX and ZRPTDX for our Class A shares, Class I shares, Class M-I shares, Class N shares, Class T shares, Class T2 shares and Class D shares, respectively. The NAV per share for our Class S shares will be available on the Company's website and via NASDAQ's Mutual Fund Quotation System once the first sale of shares for this share class has occurred.
All dollar amounts included in this Quarterly Report on Form 10-Q are presented in thousands, except for per share data.
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q, other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, or Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable by law. Such statements include, in particular, statements about our plans, strategies and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guaranty of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "would," "could," "should," "expect," "intend," "anticipate," "estimate," "believe," "continue," "plan," "potential," "predict" or other similar words.
The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.
Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We caution readers not to place undue reliance on forward-looking statements, which reflect our management's view only as of the date this Quarterly Report on Form 10-Q is filed with the Securities and Exchange Commission, or the SEC. We make no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this Quarterly Report on Form 10-Q. Additionally, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. The forward-looking statements should be read in light of the risk factors identified in "Risk Factors" of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024.
Overview
We are a Maryland corporation formed on February 7, 2012, our inception date, to invest in a diversified portfolio of high-quality, income-producing commercial real estate properties and other real estate-related assets. We are an externally advised, perpetual-life corporation that initially elected to be taxed as a REIT for federal income tax purposes for the calendar year ended December 31, 2013. We invest primarily in the office, industrial, retail and residential sectors of the commercial real estate industry in the United States and may also invest in the self-storage sector. We also invest in real estate-related assets, which include common and preferred stock of publicly-traded REITs and other real estate companies, which we refer to as "real estate equity securities," and debt investments backed by real estate, which we refer to as "real estate loans." We hold our properties, real estate-related assets and other investments through RREEF Property Operating Partnership, LP, or our operating partnership, of which we are the sole general partner.
Our board of directors has ultimate oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to our advisory agreement, our board of directors has delegated to RREEF America L.L.C., or our advisor, authority to manage our day-to-day business in accordance with our investment objectives, strategy, guidelines, policies and limitations. Our advisory agreement is renewable annually upon approval by our board of directors, including a majority of our independent directors. The current term expires on August 2, 2026.
We raise capital through a combination of public and private offerings of our shares of common stock. Our initial public offering commenced on January 3, 2013, through which we raised $102,831 (the "Initial Public Offering"). Our second public offering commenced in July 12, 2016, through which we raised $132,994 (the "Second Public Offering"). Our third public offering commenced on January 8, 2020, through which we raised $149,580 (the "Third Public Offering"). On August 10, 2023, our fourth public offering commenced (the "Fourth Public Offering"). We have registered for sale in our Fourth Public Offering up to $2,000,000 of shares of our common stock to be sold on a "best efforts" basis in any combination of Class A, Class I, Class M-I, Class N, Class S, Class T or Class T2 common stock.
On January 20, 2016, we launched a private offering of up to a maximum of $350,000 of our Class D shares (the "Reg D Private Placement"). The Reg D Private Placement is being conducted pursuant to Rule 506(c) of Regulation D promulgated under the Securities Act.
On November 17, 2020, we commenced a separate private offering of up to a maximum of $300,000 in Class D shares under Regulation S promulgated under the Securities Act (the "Reg S Private Placement" and, together with the Reg D Private Placement, the "Private Placements"). We refer to the Initial Public Offering, Second Public Offering, Third Public Offering, Fourth Public Offering and the Private Placements collectively as our "offerings."
The per share purchase price of our common stock varies from day-to-day, and on any given business day, for a given share class, is equal to our NAV of such share class divided by the number of shares of our common stock outstanding for such share class as of the end of business on such day, plus, for Class A, Class D, Class S and Class T2 shares only, applicable selling commissions and dealer manager fees.
We are structured as a perpetual-life, non-exchange traded REIT. This means that, subject to regulatory approval of our filing for additional offerings, we intend to sell shares of our common stock on a continuous basis and for an indefinite period of time. We will endeavor to take all reasonable actions to avoid interruptions in the continuous public offering of our shares of common stock. There can be no assurance, however, that we will not need to suspend our continuous public offering. The public offering must be registered in every state in which we offer or sell shares. Generally, such registrations are for a period of one year. Thus, we may have to stop selling shares in any state in which our registration is not renewed or otherwise extended annually. We reserve the right to terminate the Fourth Public Offering at any time.
Portfolio Information
Real Estate Property Portfolio
As of September 30, 2025, we owned 9 properties diversified across geography and sector. Excluding our residential properties with leases that roll over approximately every year, as of September 30, 2025, our weighted average remaining lease term for active leases was 6.7 years. The following table sets forth certain additional information about the properties we owned as of September 30, 2025:
Property Location Rentable Square Feet Number of Leases/Units
Leased(1)
Office Properties
Loudoun Gateway Sterling, VA 102,015 1 100.0
Office Total 102,015 1 100.0
Retail Properties
Wallingford Plaza(2)
Seattle, WA 30,761 4 90.9
Terra Nova Plaza Chula Vista, CA 96,114 2 100.0
Elston Plaza(3)
Chicago, IL 92,911 12 97.3
Providence Square(4)
Marietta, GA 222,805 25 98.9
Retail Total 442,591 43 98.0
Industrial Properties
Commerce Corner
Logan Township, NJ 400,901 2 100.0
Seattle East Industrial
Redmond, WA 210,321 1 100.0
Industrial Total 611,222 3 100.0
Residential Properties
The Flats at Carrs Hill Athens, GA 135,896 138 94.6
The Glenn Centennial, CO 274,688 306 94.8
Residential Total 410,584 444 94.7
Grand Total 1,566,412 47/444 97.8 %
(1) Leased percentage is based on executed leases as of September 30, 2025, is calculated based on square footage for a single property and is weighted by relative property value when calculated for more than one property together.
(2) Wallingford Plaza is ground floor retail plus two floors of office space.
(3) The total square footage for Elston Plaza includes a freestanding bank branch of 4,860 square feet that is subject to a ground lease to a single tenant.
(4) The total square footage for Providence Square includes a freestanding restaurant of 5,779 square feet that is subject to a ground lease to a single tenant.
Real Estate Equity Securities Portfolio
As of September 30, 2025, our real estate equity securities portfolio consisted of publicly-traded common stock of 27 REITs with a value of $125 allocated across multiple property type sectors. We believe that investing a portion of our proceeds from our offerings into a diversified portfolio of common and preferred shares of REITs and other real estate operating companies will provide the overall portfolio some flexibility with near-term liquidity as well as potentially enhance our NAV over a longer period. Our real estate equity securities portfolio is regularly reviewed and evaluated to determine whether the securities held continue to serve their original intended purposes.
From our inception until the first quarter of 2023, we have invested in a portfolio of publicly-traded REIT securities to potentially enhance performance of the overall portfolio while also providing a source of liquidity available to fund redemptions or other needs. During the first quarter of 2023, in considering the then-current market volatility as well as higher liquidity demands across the non-listed REIT industry in general, we converted nearly all
of our securities portfolio into cash. Our strategy to invest in a real estate securities portfolio has not changed and we will look to increase our allocation to real estate securities as conditions improve.
Real Estate Loan Portfolio
In October 2022, we purchased all of the Class D certificates and certain interest-only certificates of CMBS securitized through a trust (the "CMBS Trust") sponsored by the Federal Home Loan Mortgage Corporation ("Freddie Mac") for a total investment of $30,855, excluding closing costs and the net accrued interest receivable. The Class D certificates represent the most subordinate tranche of the CMBS Trust issued through Freddie Mac's K-Series program.
The Class D certificates contain certain rights which under GAAP are considered the controlling class because they provide the owner with the power to direct the activities that most significantly impact the performance of the CMBS Trust. As a result, we were required to consolidate the CMBS Trust.
In February and March 2024, we sold our investments in the interest-only certificates issued by the CMBS Trust for approximately $7,588, excluding accrued interest. In July 2024, we sold our entire investment in the Class D certificates issued by the CMBS Trust for approximately $25,588. After this sale, we do not own any securities issued by the CMBS Trust.
Market Outlook
In the third quarter of 2025, core real estate marked its fifth consecutive quarter of positive performance, delivering trailing annual total returns of 4.7% as measured by the National Property Index ("NPI") published by the National Council of Real Estate Investment Fiduciaries ("NCREIF") as of September 2025. Among the major property sectors, the retail sector led the trailing annual NPI at 7.0%, followed by the residential sector at 5.3% and the industrial sector 4.5%. Returns for the office sector were weak at 1.9% but positive for a third consecutive quarter.
In our view, outlook for real estate will be determined by four key performance pillars. From a macroeconomic perspective, the economy is an important driver of leasing activity per CBRE Econometric Advisors ("CBRE-EA") as of September 2025, while interest rates largely dictate capitalization rates. From a microeconomic perspective, we believe that structural factors can lift or suppress demand beyond any impulse from the economy, which in turn is balanced against the forthcoming supply pipeline as discussed below.
The U.S. economy has defied policy uncertainty in our view. While job creation has slowed, according to the Bureau of Labor Statistics ("BLS") in August 2025, U.S. gross domestic product ("GDP") growth averaged an estimated 4% on an annualized basis in the middle two quarters of 2025, as reported by the Bureau of Economic Analysis ("BEA") and the Federal Reserve Bank of Atlanta in August 2025. We believe that growth has been buoyed by artificial intelligence ("AI"). Information technology and data center investment jumped 23% year-over-year in the second quarter as reported by the BEA in June 2025, while an AI-fueled stock market rally has bolstered household wealth, as reported by the Federal Reserve in June 2025. The International Monetary Fund in October 2025 predicts that U.S. GDP growth will average 2% in 2025 and 2026, a pace that would provide moderate support to real estate demand.
Meanwhile, the Federal Reserve has cut its Fed Funds rate by 150 basis points ("bps") since the spring of 2024, and its latest Summary of Economic Projections in October 2025 anticipates a further 75 bps reduction in the coming quarters. Historically, 10-year Treasury yields have moved directionally with the policy rate, according to the Federal Reserve as of September 2025. Nevertheless, consensus expectations as reported by Moody's Analytics in October 2025, perhaps influenced by fiscal concerns, call for 10-year Treasuries to remain near current levels at around 4%. We believe that this scenario would also hold capitalization rates near current levels, neither inflating nor deflating real estate valuations.
Microeconomic factors are more categorically positive, in our view. A jump in home prices and interest rates since the pandemic has pushed the cost of buying an average home with a mortgage to 50% above that of renting,
compared 20% above renting, on average over the past 20 years, as measured by comparison of data from the National Association of Realtors and the Census Bureau in June 2025. The significantly higher home mortgage cost should generate robust demand for rental housing as reported by CBRE-EA in June 2025. Retail properties are catering to Americans' growing appetite for services, including health care and entertainment, as reported by the BEA in June 2025. Industrial demand as reported by CBRE-EA in June 2025 is suffering a momentary slowdown following an unsustainable COVID boom, exacerbated by tariff uncertainty; however, underlying support from e-commerce remains intact, growing at roughly double the pace of retail sales as reported by the Census Bureau in June 2025, and may be augmented by onshore manufacturing according to the BEA in June 2025. Finally, within the office sector, demand for space has outstripped employment for the past two years, suggesting that return-to-office mandates are supporting a nascent recovery, as reported by CBRE-EA in September 2025.
Structural demand across major real estate sectors meets a rapidly vanishing supply pipeline, in our view. In the third quarter of 2025, construction starts, weighted across property sectors, as a share of inventory, on a trailing four-quarter basis, dropped to 2012 levels and continued to trend lower, based on data from CoStar and NCREIF in September 2025. This plunge as evidenced by this data implies modest new supply through at least mid-2027, in our view. We believe the pause may last much longer, with real estate valued at a discount to replacement cost on average, with variations across sectors and markets, based on data from NCREIF and Engineering News Record. This disparity might widen with the advent of tariffs, and thus in our view prices may need to rise substantially before many projects are viable.
In our view, the sum of these macro and micro economic factors is positive for the real estate outlook. We believe that a stable interest-rate environment will clear the path for an extended period of solid, if unspectacular, performance, as moderate economic growth, structural demand, and limited supply propel healthy rent and value gains. However, a macroeconomic surprise, via a recession or an interest rate spike, could dampen the outlook, but at the very least, supportive microeconomic factors through structural demand and limited supply should cushion the blow.
Results of Operations
As of September 30, 2025, we owned 9 properties and invested in real estate equity securities as described above under "Portfolio Information." We expect to continue to raise additional capital, increase our borrowings and make future investments in our targeted segments of real estate properties, real estate equity securities and real estate loans, which we believe will have a significant impact on our future results of operations.
The following table illustrates the changes in our income statement components for the three and nine months ended September 30, 2025 and 2024.
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 Change 2025 2024 Change
Revenues
Property related income $ 10,195 $ 8,815 $ 1,380 $ 30,635 $ 29,085 $ 1,550
Interest income 26 57 (31) 104 117 (13)
Investment income on marketable securities 1 1 - 3 3 -
Total revenues 10,222 8,873 1,349 30,742 29,205 1,537
Expenses
General and administrative expenses 543 593 (50) 1,768 1,956 (188)
Property operating expenses 3,010 3,189 (179) 9,434 9,143 291
Advisory fees 558 646 (88) 1,724 1,946 (222)
Provision for impairment of real estate
- 2,201 (2,201) - 2,201 (2,201)
Depreciation 2,515 2,403 112 7,400 7,112 288
Amortization 480 465 15 1,399 1,773 (374)
Total operating expenses 7,106 9,497 (2,391) 21,725 24,131 (2,406)
Net realized loss upon sale of real estate 22,515 - 22,515 22,424 - 22,424
Net realized gain upon sale of marketable securities 1 - 1 - 4 (4)
Net realized gain upon sale of investment in CMBS Trust - 1,856 (1,856) - 2,321 (2,321)
Net unrealized change in fair value of investment in marketable securities 3 18 (15) (1) 13 (14)
Change in net assets of consolidated CMBS Trust - (1,856) 1,856 - (1,474) 1,474
Operating income
25,635 (606) 26,241 31,440 5,938 25,502
Interest expense (3,507) (2,967) (540) (10,367) (9,457) (910)
Net income (loss) $ 22,128 $ (3,573) $ 25,701 $ 21,073 $ (3,519) $ 24,592
Three and Nine Months Ended September 30, 2025 and 2024
Property Related Income
Our property related income for the three and nine months ended September 30, 2025increased compared to the 2024 periods primarily due to increased base rent at Commerce Corner resulting from the October 2024 completion of the tenant expansion for Performance Food Group, Inc. Also contributing to the increase in the 2025 periods was (a) the new lease with Floor & Decor at Terra Nova Plaza which brought the property to 100% leased, (b) higher rents at Providence Square from new and renewed leases, and (c) higher rents at our student housing property, The Flats at Carrs Hill, resulting from some upgraded units. These increases were partially offset by decreased base rent at Heritage Parkway due to vacancy beginning in second quarter 2024 and subsequent disposition of the property on February 28, 2025 and decreased rents at The Glenn where additional supply recently came into the local market.
Interest Income
Our interest income is generated from automated, overnight sweeps of cash to an interest-bearing account.
Investment Income on Marketable Securities
As of September 30, 2025 and 2024, our real estate equity securities portfolio consisted of publicly-traded common stock with fair value of $125 and $129, respectively. In considering market volatility as well as higher liquidity demands across the non-listed REIT industry in general, during the first quarter of 2023 we converted nearly all of our securities portfolio into cash. Our strategy to invest in a real estate securities portfolio has not changed, and we will look to increase our allocation to real estate securities as market conditions improve.
General and Administrative Expenses
Our general and administrative expenses include a variety of corporate expenses, the largest of which generally are directors and officers insurance, audit fees, board of director compensation and legal costs. Compared to the three months ended September 30, 2024, the 2025 period saw lower legal expenses, fund administration costs, appraisal fees and professional fees. Compared to the nine months ended September 30, 2024, the 2025 period saw lower legal expenses, income tax, fund administration costs and professional fees.
Property Operating Expenses
Property operating expenses for the three months ended September 30, 2025 decreased from the 2024 period due to lower utility costs, legal costs and third party management fees, as well as the dispositions of Hialeah I in December 2024 and Heritage Parkway in February 2025, partially offset by higher repair and maintenance costs, marketing costs and landscaping. Property operating expenses for the nine months ended September 30, 2025 increased from the 2024 period due to higher real estate taxes, snow removal and marketing costs partially offset by lower utility costs as well as the aforementioned dispositions.
Advisory Fees
The fixed component of the advisory fee pursuant to the advisory agreement is equal to 1% per annum of the NAV for each share class and is calculated and accrued daily and reflected in our NAV per share. The fixed component of the advisory fee was lower in the 2025 periods compared to the 2024 periods which is commensurate with the overall decrease in our average NAV due to fulfilling share redemption requests.
In accordance with our advisory agreement, our advisor can earn the performance component of the advisory fee when the total return to stockholders of a particular share class exceeds a required per annum hurdle for such share class (the "Hurdle Amount"). The performance component is calculated separately for each share class and is comprised of the distributions paid to stockholders in each share class combined with the change in the price per share of each share class. For any calendar year in which the total return per share allocable to a class exceeds the Hurdle Amount for such class, RREEF America will receive a percentage of the aggregate total return allocable to such class. The performance component of the advisory fee is payable annually based on the results for the entire calendar year. The actual performance component that our advisor could earn in the current calendar year depends on several factors, including but not limited to the performance of our investments, our expenses and interest rates. For the three and nine months ended September 30, 2025 and 2024, the performance fees did not meet the criteria for accrual in accordance with GAAP, resulting in no performance component of the advisory fee.
Provision for Impairment of Real Estate
During the three months ended September 30, 2024, in accordance with authoritative guidance for impairment of long-lived assets, we determined that Heritage Parkway was impaired as the carrying value of the investment was not deemed recoverable due to a reduction of the expected hold period. Therefore, we recognized an impairment charge totaling $2,201 for the three months ended September 30, 2024. There have been no impairments to our real estate investments for the three and nine months ended September 30, 2025.
Depreciation and Amortization
Depreciation increased for the three and nine months ended September 30, 2025 at Commerce Corner due to the October 2024 completion of the tenant expansion for Performance Food Group, Inc. This increase was partially offset by decreases for properties disposed since mid-2024. Amortization for the three months ended September 30, 2025 increased from the 2024 period due to higher lease commission amortization at Providence Square resulting from new or renewed leases. Amortization for the nine months ended September 30, 2025 decreased from the 2024 period primarily from Heritage Parkway due to its disposal as well as the full amortization of assets in the 2024 period related to the Allstate lease which was terminated in May 2024.
Sale of Real Estate
On February 28, 2025, we sold Heritage Parkway for $5,000, resulting in a net realized loss of $91.
On September 18, 2025, we sold Palmetto Lakes and Hialeah II for $27,800 and $8,850, respectively, resulting in net realized gains of $17,533 and $4,982, respectively.
Marketable Securities
Since our inception, we have invested in a portfolio of publicly-traded REIT securities to potentially enhance performance of the overall portfolio while also providing a source of liquidity available to fund redemptions or other needs. In considering then-current market volatility as well as higher liquidity demands across the non-listed REIT industry in general, during the first quarter of 2023 we converted nearly all of our securities portfolio into cash. Thereafter, due to the reduced size of our portfolio of investments in publicly-traded REIT securities, the securities portfolio is rebalanced on a less frequent basis, resulting in a much lower net realized gain or loss occurring after the date of selling most of the securities portfolio.
Gain Upon Partial Sale of Investment in CMBS Trust
In February and March of 2024, we sold our investments in the interest-only certificates issued by the CMBS Trust, resulting in net realized gains of $465.
In July 2024, we sold our investment in the principal-only certificates issued by the CMBS Trust, resulting in net realized gains of $1,856.
Changes in Net Assets of CMBS Trust
In October 2022, we purchased an investment in CMBS securities issued through the CMBS Trust. Under GAAP, we were required to consolidate the entire CMBS Trust, because we had the power to direct certain activities of the CMBS Trust that could most significantly impact the overall performance of the CMBS Trust. In connection therewith, we elected to fair value the securities issued by the CMBS Trust. Further, we elected to present interest income and interest expense from the consolidated activities of the CMBS Trust, along with any unrealized gain or loss in fair value of our investment in the CMBS Trust, together as a single line item as changes in net assets of the consolidated CMBS Trust. For the three and nine months ended September 30, 2024the decrease in net assets of the CMBS Trust represents a reversal of the unrealized gain which was converted to realized gain upon sale of the principal-only certificates in July 2024.
Interest Expense
The higher interest expense for the three and nine months ended September 30, 2025compared to the 2024 periodswas primarily due to a higher weighted average outstanding balance on the Wells Fargo Line of Credit, partially offset by a slightly lower weighted average interest rates and lower finance cost amortization. Our total outstanding loan balance as of September 30, 2025 consisted of 74% fixed rate loans and 26% floating rate loans.
We expect our interest expense to increase in future periods because we anticipate acquiring additional properties or making real estate debt investments with borrowings, including by utilizing additional property-
specific debt as a form of permanent financing along with continuing to use the Wells Fargo Line of Credit. Interest rates available for both fixed and floating rate financing of property acquisitions have increased significantly since early 2022 in response to higher U.S. Treasury rates, higher inflation, tariffs, bank failures and war, among other economic concerns. Consequently, higher interest rates will cause us to incur higher interest costs on our floating rate line of credit, and may reduce the availability of reasonable financing rates relative to yields on property investments.
Inflation
The increase in inflation since mid-2021, the impact of recent tariffs and economic policies, and the extent to which these trends continue, may have an impact on our property operating expenses. When the economy will see a reduction of inflation to historical averages remains subject to countless economic, regulatory and population driven variables.
With the exception of leases with tenants in residential properties, we seek to include provisions in our tenant leases designed to protect us from the impact of inflation. These provisions include annual contractual base rent increases, reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases, annual reimbursement of operating expenses above a certain allowance. Notwithstanding these provisions, periods of excessive or prolonged inflation, higher tariffs and higher interest rates may negatively impact our tenants' businesses, resulting in increased vacancy, concessions or bad debt expense, which may adversely and materially affect our net operating income and NAV. Due to the generally long-term nature of our commercial leases, and inflation since the second quarter of 2021, contractual annual rent increases may not have been, and may not in the future be, sufficient to cover inflation and may result in rental rates that are below market. Leases in residential properties generally expire on an annual basis and do not typically present the same concerns regarding inflation protection due to their short-term nature and our ability to increase rents in an attempt to keep up with inflation.
In addition, prices for certain construction materials have risen significantly over the past year. While we have incurred typical ongoing capital expenditures for property improvements and maintenance, such costs have been relatively immaterial to date. We currently have no ongoing development projects. Future significant capital projects may be impacted by increased material and/or labor costs.
NAV per Share
Our NAV per share is calculated by The Bank of New York Mellon Corporation ("BNY") in accordance with the valuation guidelines approved by our board of directors for the purposes of establishing a purchase price for our shares sold in our offerings as well as establishing a redemption price for our share repurchase plan. Our advisor is responsible for overseeing, and is ultimately responsible for, the calculation of our NAV and our NAV per share as performed by BNY.
Each class of our common stock has an undivided interest in our assets and liabilities, other than class-specific liabilities. In accordance with the valuation guidelines, BNY calculates our NAV per share for each class after the end of each business day, using a process that reflects several components, including, but not limited to, (1) estimated values of each of our properties based upon individual appraisal reports provided periodically by our independent valuation advisor and other third-party independent valuation firms, (2) the value of our liquid assets for which third party market quotes are available, (3) estimated values of our other real estate equity securities and non-held-to-maturity real estate loan investments, as provided by independent valuation agents, and (4) estimated accruals and amortizations of our operating revenues and expenses, including our organization and offering expenses. No rule or regulation requires that we calculate NAV in a certain way. While we believe our NAV calculation methodologies are consistent with standard industry principles, there is no established practice among public REITs, whether listed or not, for calculating NAV in order to establish a purchase or redemption price. As a result, other public REITs may use different methodologies or assumptions to determine NAV.
At the end of each business day, before taking into consideration additional issuances of shares of capital stock, redemptions or class-specific fee accruals for that day, any change in our aggregate NAV (whether an increase or decrease) is allocated among each class of shares based on each class's relative percentage of the previous aggregate NAV. Changes in our daily NAV will include, without limitation and as applicable, daily accruals and amortizations of our net portfolio income, interest expense, unrealized/realized gains and losses on assets, offering costs and any expense reimbursements. Costs incurred by us under the expense support agreement will be allocated to all classes of shares of our common stock on a pro rata basis as and when such amounts are reimbursed to our advisor. In addition, offering costs associated with all of our offerings (including any private offerings) will be allocated to all classes, on a pro rata basis. The net portfolio income will be calculated and accrued on the basis of data extracted from (1) the monthly budget for each property and at the company level, including organization and offering expenses and certain operating expenses, (2) interest accruals and premium or discount amortization on real estate loans, (3) material, unbudgeted non-recurring income and expense events such as capital expenditures, prepayment penalties, assumption fees, tenant buyouts, lease termination fees and tenant turnover with respect to our properties when our advisor becomes aware of such events and the relevant information is available, (4) material investment acquisitions and dispositions occurring during the month and (5) reports from other vendors impacting our aggregate NAV. Acquisition costs with respect to each acquired property are amortized on a daily basis into our NAV over a five-year period following the acquisition date. Costs of purchasing or originating real estate loan investments will be amortized over the term of the investment. On an ongoing basis, BNY will adjust the accruals to reflect actual operating results and the outstanding receivable, payable and other account balances resulting from the accumulation of daily accruals for which financial information is available.
Prior to the initiation of our current follow-on offering period, and prior to initiation of future follow-on offering periods, we have incurred and will incur certain costs in preparation for such follow-on offering periods, which we refer to as prepaid offering costs. Such costs will benefit the entire follow-on offering period to which they relate and as such will be amortized on a straight-line basis over the anticipated follow-on offering period into the NAV for each class of shares beginning upon commencement of each particular follow-on offering. Organization and offering costs incurred during an active follow-on offering period will be deducted from our NAV on an accrual basis as they are incurred. In the event our advisor agrees to pay some or all of our organization and offering costs prior to the commencement of an offering period and agrees to defer reimbursement of such costs, then such costs will be amortized into the daily NAV calculation as such costs are reimbursed to our advisor. We will allocate all of our offering costs to all outstanding shares of all classes on a pro rata basis, each day that we calculate a NAV for a given class of shares. Similarly, any payments made by our dealer manager of reimbursable offering costs in connection with our offerings on our behalf will also be recognized and reflected in our daily NAV for all share classes on a pro rata basis.
Following the aggregation of the net asset values of our investments, the addition of any other assets (such as cash on hand), the deduction of any other liabilities and the allocation of income and expenses, BNY will incorporate any class-specific adjustments to our NAV, including additional issuances and redemptions of our common stock and accruals of class-specific fees such as distribution fees. Our share classes may have different fee accruals associated with the advisory fee we will pay our advisor because the performance component of our advisory fee is calculated separately with respect to each class. At the close of business on the date that is one business day after each record date for any declared distribution, which we refer to as the "distribution adjustment date," our NAV for each class will be reduced to reflect the accrual of our liability to pay the distribution to our stockholders of record of each class as of the record date. NAV per share for each class is calculated by dividing such class's NAV at the end of each trading day by the number of shares outstanding for that class on such day.
The following table provides a breakdown of the major components of our total NAV and NAV per share as of September 30, 2025:
Components of NAV Total NAV Per Class A Share Per Class I Share Per Class T Share Per Class D Share Per Class N Share Per Class M-I Share Per Class T2 Share Per Class Z Share
Investments in real estate(1)
$ 467,900 $ 28.73 $ 28.95 $ 29.02 $ 29.01 $ 28.77 $ 28.68 $ 28.60 $ 28.94
Investments in real estate equity securities(2)
125 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01
Other assets, net (3)
12,466 0.77 0.77 0.77 0.77 0.77 0.76 0.76 0.77
Line of credit (4)
(65,300) (4.01) (4.04) (4.05) (4.05) (4.02) (4.00) (3.99) (4.04)
Mortgage loans payable (4)
(188,925) (11.60) (11.69) (11.72) (11.72) (11.62) (11.56) (11.55) (11.69)
Other liabilities, net (3)
(9,527) (0.59) (0.59) (0.59) (0.58) (0.58) (0.63) (0.58) (0.58)
Net asset value $ 216,739 $ 13.31 $ 13.41 $ 13.44 $ 13.44 $ 13.33 $ 13.26 $ 13.25 $ 13.41
Note: No Class S shares were outstanding as of September 30, 2025.
(1) Our investments in real estate are included at fair value as determined by our advisor based on appraisals completed by our independent valuation advisor or another independent third-party appraiser. Although our independent valuation advisor performs the majority of the valuations, our valuation guidelines require that on a rotating basis, approximately 1/12th of our properties in any particular month must be appraised by one or more independent third-party appraisers who are not affiliated with us, our advisor or our independent valuation advisor. Newly acquired, consolidated properties are initially valued at cost and thereafter join the daily valuation process during the first full quarter in which we own the property. On an ongoing basis, our advisor monitors our properties for events that our advisor believes may be expected to have a material impact on the most recent estimated values provided by our independent appraisers, and notifies our independent valuation advisor of such events, if any. If, on any given day, in the opinion of our independent valuation advisor, an event identified by our advisor, or an event that becomes known to our independent valuation advisor through other means, is likely to have a material impact on previously provided estimated values of the affected properties, our independent valuation advisor will prepare a revised valuation for such properties. As of September 30, 2025, the value of our investments in real estate was approximately 7.2% more than their historical cost.
(2) As of September 30, 2025, our investments in real estate equity securities consisted entirely of common stock of publicly traded REITs, which are included in our NAV at fair value based on publicly available pricing information provided by third parties. As of September 30, 2025, the value of our investments in real estate equity securities was approximately 28.9% more than their historical cost.
(3) Other assets and other liabilities include normal operating items such as cash, restricted cash, accounts receivable, prepaids, accounts payable and due to affiliates, and other accrued liabilities. Each of these are valued at their current carry value as they are typically short term in nature. Liabilities allocable to a specific class of shares will only be included in the NAV calculation for that class.
(4) Our line of credit is valued at cost. Any other debt obligations originated by us will be valued at amortized cost, while any debt obligations assumed by us in connection with a transaction will be valued at the time of assumption pursuant to the purchase price allocation as required by GAAP. Thereafter, assumed debt will not be revalued but rather the discount or premium that resulted from the purchase price allocation will be amortized over the remaining term of the instrument.
Set forth below are the weighted averages of the key assumptions used in the appraisals of the properties by type as of September 30, 2025. This information will be provided for our office properties once we have at least two office properties in the portfolio.
Discount Rate Exit Capitalization Rate
Retail properties 7.65 % 6.61 %
Industrial properties 7.06 % 5.42 %
Residential properties 7.00 % 5.41 %
These assumptions are determined by our independent valuation advisor or by separate third-party appraisers. A change in these assumptions would impact the calculation of the value of our property investments. The table below shows the approximate decrease in the value of our property investments assuming an increase of 0.25% in the weighted-average discount rate or the weighted-average exit capitalization rate as of September 30, 2025.
Discount Rate Exit Capitalization Rate
Retail properties 1.9 % 2.2 %
Industrial properties 1.9 % 2.7 %
Residential properties 1.9 % 2.7 %
The table below sets forth a reconciliation of our stockholders' equity to our NAV, which we calculate for the purpose of establishing the purchase and redemption price for our shares, as of September 30, 2025.
Total NAV Per Class A Share Per Class I Share Per Class T Share Per Class D Share Per Class N Share Per Class M-I Share Per Class T2 Share Per Class Z Share
Total stockholders' equity $ 83,510 $ 5.13 $ 5.16 $ 5.18 $ 5.18 $ 5.14 $ 5.11 $ 5.11 $ 5.16
Plus:
Unrealized gain on real estate investments (1)
31,619 1.94 1.96 1.96 1.96 1.94 1.94 1.93 1.96
Accumulated depreciation (2)
60,319 3.70 3.73 3.74 3.74 3.71 3.69 3.69 3.73
Accumulated amortization (2)
26,305 1.62 1.63 1.63 1.63 1.62 1.61 1.61 1.63
Deferred offering costs and expenses (3)
21,119 1.30 1.31 1.31 1.31 1.30 1.29 1.29 1.31
Less:
Deferred rent receivable (4)
(6,133) (0.38) (0.38) (0.38) (0.38) (0.38) (0.38) (0.38) (0.38)
Net asset value $ 216,739 $ 13.31 $ 13.41 $ 13.44 $ 13.44 $ 13.33 $ 13.26 $ 13.25 $ 13.41
Note: No Class S shares were outstanding as of September 30, 2025.
(1) Our investments in real estate are presented under historical cost in our GAAP consolidated financial statements. As such, any increases in the fair value of our investments in real estate are not included in our GAAP results. For purposes of determining our NAV, our investments in real estate are recorded at fair value.
(2) Recording of depreciation and amortization are required under GAAP for historical cost financial statements. Because we include our investments in real estate at fair value when determining our NAV, the accumulated depreciation and amortization recorded under GAAP are eliminated for purposes of determining our NAV.
(3) The deferred costs and expenses of $21,119 include amounts that have been accrued as a liability under GAAP but are initially excluded from the NAV calculation. The deferred costs and expenses include $16,448 in
estimated future trailing fees that will be deducted from the NAV on a daily basis as and when they become payable to DWS Distributors, Inc., or the dealer manager. Additionally, the deferred costs and expenses include $5,187 payable to our advisor which is reflected in due to affiliates and note to affiliate on our consolidated balance sheet but is not yet payable and will be deducted from the NAV as and when they are reimbursed to our advisor in accordance with the advisory agreement, the expense support agreement and the ESA letter agreement dated March 24, 2020 amending the advisory agreement and expense support agreement. Lastly, the deferred cost and expenses above is net of the difference in recognition between GAAP and our NAV calculation for (i) certain offering costs, (ii) performance fees and (iii) compensation costs related to the shares granted to our independent directors.
(4) Under GAAP, rental revenue is recorded on a straight-line basis where the total contractual revenue for a given lease is recognized for the same average amount per month over the lease term. The estimate of fair value for real estate generally does not reflect this straight-line concept and as such, the amount of rent accrued but not yet billed to the tenants (deferred rent receivable) is not considered in determining our NAV.
Limitations and Risks
As with any valuation methodology, our methodology is based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different NAV per share. Accordingly, with respect to our NAV per share, we can provide no assurance that:
•a stockholder would be able to realize this NAV per share upon attempting to resell his or her shares;
•we would be able to achieve, for our stockholders, the NAV per share, upon a listing of our shares of common stock on a national securities exchange, selling our real estate portfolio, or merging with another company; or
•the NAV per share, or the methodologies relied upon to estimate the NAV per share, will be found by any regulatory authority to comply with any regulatory requirements.
Furthermore, the NAV per share was calculated as of a particular point in time. The NAV per share will fluctuate over time in response to, among other things, global, national or regional events, such as the war in Ukraine, tariffs, government shutdowns, higher interest rates, inflation, changes in real estate market fundamentals, capital markets activities, and attributes specific to the properties and leases within our portfolio. The extent to which these events impact our investments and operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
Funds from Operations and Adjusted Funds from Operations
We believe that funds from operations, or FFO, and adjusted funds from operations, or AFFO, in combination with net income or loss and cash flows from operating activities, as defined by GAAP, are useful supplemental performance measures that we use to evaluate our operating performance. However, these supplemental, non-GAAP measures should not be considered as an alternative to net income or loss or to cash flows from operating activities, both as determined by GAAP, as an indication of our performance and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders. No single measure can provide users of financial information with sufficient information, and only our disclosures read as a whole can be relied upon to adequately portray our financial position, liquidity and results of operations. In addition, other REITs may define FFO and AFFO measures differently and thus choose to treat certain accounting line items in a manner different from us due to differences in investment and operating strategy or for other reasons.
FFO
As defined by Nareit, the National Association of Real Estate Investment Trusts, FFO is a non-GAAP supplemental financial performance measure that excludes certain items such as real estate-related depreciation and amortization and the impact of certain non-recurring items such as impairment write-downs of real estate
investments and realized gains and losses on sales of certain real estate assets. We believe FFO is a meaningful supplemental financial performance measure of our operating performance that is useful to investors because depreciation and amortization in accordance with GAAP implicitly assume that the value of real estate assets diminishes predictably over time. Additionally, impairment write-downs related to a material decline in the value of a real estate investment and realized gains and losses on sales of certain real estate assets (such as real property or real estate related debt investments) generally occur infrequently. As a result, excluding these items from FFO aids our analysis of our ongoing operations. We use FFO as an indication of our operating performance and as a guide to making decisions about future investments.
AFFO
We believe that AFFO is a non-GAAP supplemental financial performance measure that is helpful as a measure of ongoing operating performance because it excludes costs that management considers more reflective of investing activities and other non-operating items included in FFO. Compared to FFO, AFFO additionally excludes items such as acquisition-related costs (if expensed in accordance with GAAP), straight-line rent, amortization of above- and below-market lease intangibles and lease incentives, amortization of restricted stock awards, amortization of deferred financing costs, amortization of the discount on the note to affiliate, gains or losses on extinguishment of debt, the net unrealized change in the fair value of our investments in marketable securities and the net unrealized change in the fair value of our investment in the CMBS Trust.
We use FFO and AFFO, among other things: (i) to evaluate and compare the potential performance of the portfolio after the acquisition phase is complete, and (ii) as metrics in evaluating our ongoing distribution policy. We believe investors are best served if the information that is made available to them allows them to align their analyses and evaluation with these same performance metrics used by us in planning and executing our business strategy. We believe that these performance metrics will assist investors in evaluating the potential performance of the portfolio after the completion of the acquisition phase. However, these supplemental, non-GAAP measures are not necessarily indicative of future performance and should not be considered as an alternative to net income or loss or to cash flows from operating activities, both as determined by GAAP, and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders. Neither the SEC, Nareit, nor any regulatory body has passed judgment on the acceptability of the adjustments used to calculate AFFO. In the future, the SEC, Nareit, or a regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry at which point we may adjust our calculation and characterization of AFFO.
The following unaudited table presents a reconciliation of net income (loss) to FFO and AFFO.
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net income (loss) $ 22,128 $ (3,573) $ 21,073 $ (3,519)
Real estate related depreciation 2,515 2,403 7,400 7,112
Real estate related amortization 480 465 1,399 1,773
Provision for impairment of real estate - 2,201 - 2,201
Realized gain on sale of real estate (22,515) - (22,424) -
Net realized gain upon sale of investment in CMBS Trust - (1,856) - (2,321)
Nareit defined FFO $ 2,608 $ (360) $ 7,448 $ 5,246
Straight line rents, net (218) 82 (1,021) (1,165)
Amortization of above- and below-market lease intangibles, net (113) (114) (340) (341)
Amortization of lease incentive 26 26 78 78
Net unrealized change in fair value of investment in marketable securities (3) (18) 1 (13)
Net unrealized change in fair value of investment in CMBS Trust - 1,856 - 1,687
Amortization of restricted stock awards 19 19 56 57
Amortization of deferred financing costs 204 246 687 735
Amortization of discount on note to affiliate - 44 79 141
AFFO $ 2,523 $ 1,781 $ 6,988 $ 6,425
Liquidity and Capital Resources
Our primary needs for liquidity and capital resources are to fund our investments in accordance with our investment strategy and policies, make distributions to our stockholders, redeem shares of our common stock pursuant to our share redemption plan, pay our offering and operating fees and expenses and pay interest on any outstanding indebtedness.
Over time, we generally intend to fund our cash needs for items, other than asset acquisitions and material capital improvements, from operations. Our cash needs for acquisitions and material capital improvements will be funded primarily from the sale of shares of our common stock in our offerings or from sales of other investments. The amount we may raise in such offerings is uncertain and dependent on a number of factors, including the impact of higher interest rates and the general view of investors toward commercial real estate. We intend to contribute any additional net proceeds from our offerings that are not used or retained to pay the fees and expenses attributable to our operations to our operating partnership.
We generally intend to maintain sufficient liquidity at all times to satisfy our operational needs and the maximum potential monthly redemptions under our share redemption plan. As of September 30, 2025, among our cash balances, our real estate securities portfolio, and the available borrowing capacity on our Wells Fargo Line of Credit (as defined below), we had liquidity of $21,975.
We may also satisfy our cash needs for acquisitions and material capital improvements through the assumption or incurrence of debt. On January 27, 2023, we, as limited guarantor, and certain of the wholly owned subsidiaries of the Operating Partnership, as co-borrowers, amended and restated our secured revolving credit facility (the "Wells Fargo Line of Credit") with Wells Fargo Bank, National Association, as administrative agent, and other lending institutions that may become parties to the credit agreement. On December 27, 2023, the Wells Fargo Line of Credit was amended to add CIBC Inc. ("CIBC") to the credit facility as an additional lender; increase the maximum
commitment amount from $100,000 to $120,000; allocate the maximum commitment amount between the Revolving Commitment and the Construction Commitment (each, as defined under the Wells Fargo Line of Credit); revise or suspend certain covenants; and extend the maturity date to December 27, 2025. The maximum commitment amount of $120,000 was bifurcated as follows: $75,600 to the Revolving Commitment and $44,400 to the Construction Commitment. The maximum commitment of $120,000 is allocated 70.83% to Wells Fargo and 29.17% to CIBC. The interest rate under the Wells Fargo Line of Credit is based on the 30-day average of the secured overnight financing rate ("SOFR") plus a spread of 225 basis points. We continued to serve as guarantor to the Wells Fargo Line of Credit only with respect to specified bad acts.
On September 7, 2023, RPT 1109 Commerce Corner, LLC ("RPT 1109 Commerce"), entered into a guaranteed maximum price contract to expand our property located at 1109 Commerce Boulevard, Logan Township, New Jersey ("Commerce Corner") by approximately 141,000 square feet (the "Commerce Expansion"). Commerce Corner was a 259,910 rentable square-foot, 100% leased multi-tenant warehouse and distribution center acquired by us in 2014. The Commerce Expansion was completed in October 2024 and was fully funded from the Construction Commitment for a total cost of approximately $26,000. The Commerce Expansion was undertaken to accommodate the growth initiatives of Performance Food Group, Inc. (NYSE: PFGC), who entered into a 15-year lease with RPT 1109 Commerce to take possession of the Commerce Expansion space upon its substantial completion. In connection therewith, Performance Food Group's lease for its existing space at Commerce Corner has been similarly extended to be coterminous, bringing Performance Food Group's footprint to approximately 301,000 square feet with a lease maturity in October 2039. After completion of the Commerce Expansion, the Construction Commitment was closed and the Revolving Commitment became $120,000.
On August 25, 2025, the Wells Fargo Line of Credit was amended (the "Fifth Amendment") to: (a) extend the maturity date from December 27, 2025 to April 1, 2028; (b) amend the calculation of the Borrowing Base Value (described below) once the Borrower Base Value Trigger Date (described below) occurs; (c) require us maintain a minimum liquidity amount of at least $1,000; (d) decrease the maximum revolving commitment amount from $120,000 to $105,000; and (e) revise or eliminate certain covenants. Pursuant to the Fifth Amendment, the Borrowing Base Value Trigger Date occurred on September 18, 2025, the date both of the Palmetto Lakes and Hialeah II properties were released from the Wells Fargo Line of Credit. From and after the Borrowing Base Value Trigger Date, the Borrowing Base Value is based on the sum of (1) the Loudoun Borrowing Base Value (described below) and (2) the lesser of (a) an amount equal to 65% of the aggregate value of all other properties in the collateral pool as determined by lender appraisals; and (b) an amount that results in a minimum debt service coverage ratio of 1.20:1.00 as determined under the Fifth Amendment. The interest rate under the Wells Fargo Line of Credit remains at SOFR plus a spread of 225 basis points.
A wholly owned subsidiary of us that is a borrower under the Wells Fargo Line of Credit has entered into a contract to sell the Loudoun Gateway property to a third party unaffiliated with us or our advisor (the "Loudoun Sale"). The completion of the Loudoun Sale is subject to certain conditions including but not limited to the ability of the buyer to receive a zoning exception from the relevant authorities allowing Loudoun Gateway to be converted to a data center use, which is subject to numerous conditions and may take a year or longer for the buyer to achieve. As such, the completion of the Loudoun Sale remains uncertain and the closing date likely would not occur until late 2026 or early 2027.
The "Loudoun Borrowing Base Value" is equal to (a) after September 18, 2025 but prior to June 1, 2026, $12,513; (b) thereafter until July 31, 2027, an amount equal to $12,513 as reduced on the first day of every calendar month from and after June 1, 2026 by $500, provided however that such monthly reduction of the Loudoun Borrowing Base Value would increase to $1,000 in the event the Loudoun Sale has been terminated prior to its completion; and (c) from and after August 1, 2027, zero.
In exchange for keeping Loudoun Gateway as part of the pool of properties upon which the Borrowing Base Value is determined, on August 25, 2025 we entered into the Amended and Restated Guaranty Agreement, under which we will provide, for a limited time, a full repayment guaranty rather than a limited guaranty (the "Guaranty"). The provisions relating to the full repayment guaranty will automatically terminate once either (a) Loudoun Gateway has been released from the Wells Fargo Line of Credit, or (b) the Loudoun Borrowing Base Value has been reduced
to zero (the "Loudoun Release"). Upon the occurrence of the Loudoun Release, the Guaranty will become a non-recourse limited guaranty. Upon entering into the Guaranty and until the Loudoun Release, we are not allowed to sell or transfer, but may encumber or finance under specified conditions, any of the following properties: Commerce Corner, The Glenn, Seattle East Industrial, Providence Square and The Flats at Carrs Hill (the "Significant Properties"). Upon the occurrence of the Loudoun Release, the restrictions related to the Significant Properties shall no longer be in effect. Notwithstanding, in no event shall the Commerce Corner property be eligible for release from the Wells Fargo Line of Credit until the Wells Fargo Line of Credit is repaid in full and all commitments have been terminated.
For the Revolving Commitment, as of September 30, 2025 and December 31, 2024, the borrowers' maximum borrowing capacity was $80,035 and $92,981, respectively, and the borrowers' outstanding balance was $65,300 and $75,514, respectively. As of September 30, 2025 and December 31, 2024, the weighted average interest rate was 6.61% and 6.93%, respectively.
The Wells Fargo Line of Credit agreement contains customary representations, warranties, borrowing conditions and affirmative, negative and financial covenants. As of September 30, 2025, we were in compliance with all applicable covenants.
Historically, we have entered into property specific mortgage loans to finance the acquisition of certain properties, or refinance certain properties off of the Wells Fargo Line of Credit to increase available borrowing capacity under the Wells Fargo Line of Credit to fund future property acquisitions. The following table presents a summary of the property specific mortgage loans in place as of September 30, 2025. Each of the below mortgage loans has a fixed interest rate for the entire term of the mortgage loan. In addition, each mortgage loan contains provisions allowing for (a) a one-time transfer of the loan to an unaffiliated borrower at the sole discretion of the lender and upon payment of applicable fees, and (b) full prepayment of the mortgage loan within allowable windows subject to payment of applicable penalties, if any.
Lender Encumbered Property Outstanding Balance Interest Rate Maturity Date
State Farm Life Insurance Company Elston Plaza $ 16,199 3.89 July 1, 2026
Massachusetts Mutual Life Insurance Company The Glenn 66,000 3.02 December 1, 2028
Transamerica Life Insurance Company Wallingford Plaza 6,386 4.56 January 1, 2029
Nationwide Life Insurance Company Providence Square 29,700 3.67 October 5, 2029
JPMorgan Chase Bank Seattle East Industrial 45,140 3.87 January 1, 2030
Nationwide Life Insurance Company The Flats at Carrs Hill 25,500 5.51 July 1, 2030
$ 188,925
The amount of the mortgage loan on Elston Plaza is approximately 55% of the appraised value of the property as of September 30, 2025. Accordingly, we believe we will be able to sell Elston Plaza or refinance the Elston Plaza mortgage loan on market terms prior to the loan maturity in July 2026. In the event we are unable to satisfactorily complete such sale or refinance, we expect that we will be able to sell other real estate investments or utilize available borrowing capacity under the Wells Fargo Line of Credit and available cash and cash equivalents in an amount sufficient to fully repay the mortgage loan prior to the scheduled maturity date.
Aggregate future principal payments due on the Wells Fargo Line of Credit and mortgage loans payable as of September 30, 2025 are as follows:
Year Amount
2025 (remainder) $ 125
2026 16,246
2027 145
2028 137,369
2029 74,840
Thereafter 25,500
Total $ 254,225
In the future, as our assets increase, it may not be commercially feasible or we may not be able to secure an adequate line of credit to fund acquisitions, redemptions or other needs. Interest rates available for both fixed and floating rate financing of property acquisitions have increased significantly since early 2022 in response to higher U.S. Treasury rates, higher inflation, tariffs, bank failures, war and concerns over a potential coming recession, as well as other general economic and/or geopolitical conditions. Consequently, higher interest rates will cause us to incur higher interest costs on our floating rate line of credit, and may reduce the availability of reasonable financing rates relative to yields on property investments. Moreover, actual availability of financing capital may be reduced at any given time if the values of our investments decline, such as that which may occur as a result of inflation, higher interest rates or an expected or actual recession.
Expense Payments by Our Advisor
Pursuant to the advisory agreement, RREEF America is entitled to reimbursement of certain costs incurred by RREEF America or its affiliates. Costs eligible for reimbursement include most third-party operating expenses, salaries and related costs of its employees who perform services for us (but not those employees for which RREEF America earns a separate fee or those employees who are our executive officers) and travel related costs for its employees who incur such costs on our behalf. We will reimburse our advisor for all expenses paid or incurred by our advisor in connection with the services provided to us, subject to the limitations described below regarding the 2%/25% guidelines as defined in our advisory agreement. As of September 30, 2025, we owed $66 to our advisor for such costs.
On May 29, 2013, we entered into an expense support agreement with our advisor, which was amended and restated most recently on January 20, 2016, which we refer to as the expense support agreement. Pursuant to the terms of the expense support agreement, our advisor incurred expenses related to our operations which we refer to as expense payments. These expense payments included, without limitation, expenses that are organization and offering costs and operating expenses under the advisory agreement. As of December 31, 2015, our advisor had incurred $9,200 in expense payments, which was the maximum amount of expense payments allowed under the expense support agreement. We have not received any expense support from our advisor under the expense support agreement since January 1, 2016.
On March 24, 2020, we and our advisor entered into a second letter agreement which superseded the previous letter agreement, which we refer to as the ESA letter agreement. The ESA letter agreement provides, in part, that our obligations to reimburse our advisor for expense payments under the expense support agreement are suspended until the first calendar month following the month in which we have reached $500,000 in offering proceeds from our offerings, which we refer to as the ESA commencement date. Since our inception through September 30, 2025, we raised $479,281 from the sale of shares of our common stock, including proceeds from our dividend reinvestment plan. Pursuant to the ESA letter agreement, our advisor agreed to permanently waive reimbursement of $3,567 of expense payments related to organization and offering costs from our Initial Public Offering. As a result, we currently owe $5,383 to our advisor under the expense support agreement. Beginning the month following the ESA commencement date, we will make monthly reimbursement payments to our advisor in the amount of $250 for the first 12 months and $198 for the second 12 months. In addition, pursuant to the ESA letter agreement, if RREEF America is serving as our advisor at the time that we or our operating partnership undertakes a liquidation, our
remaining obligations to reimburse our advisor for the unpaid monthly reimbursements under the expense support agreement shall be waived.
Limits on Expense Reimbursement
In all cases, reimbursement payments to our advisor will be subject to reduction as necessary in order to ensure that such reimbursement payment will not cause the aggregate organization and offering costs paid by us for any particular offering to exceed 15% of the gross proceeds from the sale of shares in such offering as of the date of the reimbursement payment, and such reimbursement payment will not adversely affect our ability to maintain our qualification as a REIT for federal tax purposes.
In addition to the reimbursement limitations for organization and offering costs, we are also limited in the amount of operating expenses that we may reimburse our advisor. Pursuant to our charter, we may reimburse our advisor, at the end of each fiscal quarter, for total operating expenses incurred by our advisor; provided, however, that we may not reimburse our advisor at the end of any fiscal quarter for total operating expenses (as defined in our charter) that, in the four consecutive fiscal quarters then ended, exceed the greater of 2% of our average invested assets or 25% of our net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of our assets for that period (which we refer to as the 2%/25% guidelines) for such four-quarter period. Notwithstanding the foregoing, we may reimburse our advisor for expenses in excess of the 2%/25% guidelines if a majority of our independent directors determine that such excess expenses, which we refer to as an excess amount, are justified based on unusual and non-recurring factors. For the four fiscal quarters ended September 30, 2025, our total operating expenses (as defined in our charter) were $4,611, which did not exceed the 2%/25% guidelines.
Pursuant to the expense support agreement, the amount of the reimbursement payment paid in any calendar quarter will not be aggregated with our cumulative operating expenses for any four consecutive calendar quarters that includes the calendar quarter in which such reimbursement payment is paid, and instead the amount of the unreimbursed expense payments comprising such reimbursement payment will have previously been aggregated with our total operating expenses for the four calendar quarter periods ending with the calendar quarter in which such expense payment was originally incurred, which we refer to as prior 2%/25% periods. If an unreimbursed expense payment incurred during a prior 2%/25% period exceeded the 2%/25% guidelines for such prior 2%/25% period, the amount of such excess will only be reimbursed pursuant to the expense support agreement to the extent that our independent directors previously approved such excess with respect to the applicable prior 2%/25% period.
We anticipate our offering and operating fees and expenses will include, among other things, the advisory fee that we pay to our advisor, the selling commissions, dealer manager and distribution fees we pay to the dealer manager, legal and audit expenses, federal and state filing fees, printing expenses, transfer agent fees, marketing and distribution expenses and fees related to appraising and managing our properties. We will not have any office or personnel expenses as we do not have any employees. Our advisor will incur certain of these expenses and fees, for which we may reimburse our advisor, subject to certain limitations. Additionally, our advisor may allocate to us out-of-pocket expenses in connection with providing services to us, including our allocable share of our advisor's overhead, such as rent, utilities and personnel costs for personnel who are directly involved in the performance of services to us and are not our executive officers. Furthermore, our dealer manager incurs certain bona fide offering expenses in connection with the distribution of our shares for which we may reimburse the dealer manager. Ultimately, total organization and offering costs incurred in a given offering will not exceed 15% of the gross proceeds from such offering. The total organization and offering costs paid by our advisor did not cause us to exceed the 15% limitation as of September 30, 2025 with respect to any of our public offerings. If, in future periods, the total organization and offering costs paid by our advisor and the dealer manager cause us to exceed the 15% limitation with respect to any of our current or prior public offerings, or any subsequent public offering, the excess would not be reflected on our consolidated balance sheet as of the end of such period. In such event, we may become obligated to reimburse all or a portion of this excess as we raise additional proceeds from such public offering. As of September 30, 2025, our total organization and offering costs incurred with respect to our current public offering and any of our prior public offerings did not exceed the 15% limitation for each such offering.
Other potential future sources of capital include secured or unsecured financings from banks or other lenders and proceeds from the sale of assets. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.
Cash Flow Analysis
Cash flow provided by operating activities during the nine months ended September 30, 2025 was $7,543 while cash flow provided by operating activities during the nine months ended September 30, 2024 was $6,281. The 2025 period was higher than the 2024 period primarily due to higher rents at Commerce Corner from the expanded lease with Performance Food Group that began in November 2024, and rents from the new lease with Floor & Decor at Terra Nova Plaza that started in late June 2025. These increases were partially offset by decreases related to higher deferred leasing costs for new leases and the 2024 one-time receipt of a termination fee from the Allstate Insurance Company lease termination at Heritage Parkway.
Cash flow provided by investing activities of $36,188 for the nine months ended September 30, 2025 was driven by the sale of Palmetto Lakes, Hialeah II and Heritage Parkway. These cash inflows were partially offset by improvements to our real estate investments. Cash flow provided by investing activities during the nine months ended September 30, 2024 was $14,715, which was driven by the sale of our investment in the CMBS Trust offset by improvements to our real estate investments, primarily for construction of the Commerce Expansion.
Cash flow used in financing activities was $44,996 for the nine months ended September 30, 2025. We used the proceeds from the sales of Palmetto Lakes, Hialeah II and Heritage Parkway, along with capital raised in our offerings to reduce the outstanding balance on our Wells Fargo Line of Credit. Redemptions were funded primarily with funds borrowed from our Wells Fargo Line of Credit.
Cash flow used in financing activities was $17,588 for the nine months ended September 30, 2024. We used the proceeds from the sale of our investment in the CMBS trust capital raised in our offerings to make payments against our outstanding balance on the Wells Fargo Line of Credit. We borrowed from our Wells Fargo Line of Credit to pay redemptions and fund capital improvements for the Commerce Expansion.
Distributions
Our board of directors has authorized and we declared cash distributions for each month which were payable monthly for each share of our common stock outstanding. The table below shows the aggregate declared distribution amount per share for each period presented. Stockholders for each share class will receive a net amount per share that includes a deduction for applicable distribution fees and dealer manager fees.
Three Months Ended September 30, 2025 Nine Months Ended September 30, 2025
Distributions:
Declared distribution amount per share, before adjustment for class-specific fees $ 0.22485
Distributions paid or payable in cash $ 2,068 $ 6,323
Distributions reinvested 1,357 4,314
Distributions declared $ 3,425 $ 10,637
Net cash provided by Operating Activities: $ 2,959 $ 7,543
Funds From Operations: $ 2,608 $ 7,448
For the nine months ended September 30, 2025, our distributions were covered 70.9% by cash flow from operations and 29.1% by borrowings. We expect that we will continue to pay distributions monthly in arrears. Any distributions not reinvested will be payable in cash, and there can be no assurances regarding the portion of the distributions that will be reinvested. We intend to fund distributions from cash generated by operations. However, we may fund distributions from borrowings under our Wells Fargo Line of Credit, from the proceeds of our offerings or any other source.
The payment of distributions from sources other than cash flow from operations or FFO may be dilutive to our NAV per share because it may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds.
Redemptions
For details on our redemptions, please see Note 10 ("Capitalization") to our consolidated financial statements included in this quarterly report on Form 10-Q. Also see Part II, Item 2 "Unregistered Sales of Equity Securities and Use of Proceeds-Share Redemption Plan."
Critical Accounting Policies
Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management's judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. We consider our critical accounting policies to be the policies that relate to the following concepts:
•Real Estate Investments and Lease Intangibles
•Revenue Recognition
A complete description of such policies and our considerations is contained in Note 2 ("Summary of Significant
Accounting Policies") to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as supplemented by the most recent quarterly report on Form 10-Q.
Certain Accounting Pronouncements Effective in the Future
We refer you to Note 2 ("Summary of Significant Accounting Policies") to our consolidated financial statements included in this quarterly report on Form 10-Q for a discussion of the potential impact on us from certain accounting pronouncements that become effective in the future, if any.
REIT Compliance and Income Taxes
We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code beginning with the year ended December 31, 2013, and we believe that we have operated in such a manner to continue to be taxed as a REIT for federal income tax purposes. In order to maintain our qualification as a REIT, we are required to, among other things, distribute as dividends at least 90% of our REIT taxable income, determined without regard to the dividends-paid deduction and excluding net capital gains, to our stockholders and meet certain tests regarding the nature of our income and assets. In addition, we must distribute 100% of our net realized capital gains to avoid paying income tax on any undistributed net realized capital gains. If we qualify for taxation as a REIT, we generally will not be subject to federal income tax to the extent our income meets certain criteria and we distribute our REIT taxable income to our stockholders. Even if we qualify for taxation as a REIT, we may be subject to (1) certain state and local taxes on our income, property or net worth and (2) federal income and excise taxes on undistributed income, if any income remains undistributed. Many of these requirements are highly technical and complex. We will monitor the business and transactions that may potentially impact our REIT status. If we were to fail to meet these requirements, we could be subject to federal income tax on our taxable income at regular corporate rates. We would not be able to deduct distributions paid to stockholders in any year in which we fail to qualify as a REIT. We will also be disqualified for the four taxable years following the year during which qualification was lost unless we are entitled to relief under specific statutory provisions.
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