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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q

(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 000-55376
 
Industrial Property Trust Inc.
(Exact name of registrant as specified in its charter)
 
Maryland
 
61-1577639
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
518 Seventeenth Street, 17th Floor Denver, CO
 
80202
(Address of principal executive offices)
 
(Zip code)
(303) 228-2200
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Smaller reporting company
¨
 
 
 
 
 
 
Non-accelerated filer
x
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of November 6, 2019, there were 105,954,159 shares of the registrant’s Class A common stock and 72,043,322 shares of the registrant’s Class T common stock outstanding.

 
 
 

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INDUSTRIAL PROPERTY TRUST INC.
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.



Table of Contents


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDUSTRIAL PROPERTY TRUST INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 
 
As of
(in thousands, except per share data)
 
September 30, 2019
 
December 31, 2018
 
 
(unaudited)
 
 
ASSETS
 
 
 
 
Net investment in real estate properties
 
$
2,602,043

 
$
2,660,798

Investment in unconsolidated joint venture partnerships
 
121,552

 
113,869

Cash and cash equivalents
 
6,024

 
5,698

Restricted cash
 

 
65

Straight-line and tenant receivables, net
 
32,526

 
28,838

Due from affiliates
 
28

 
326

Other assets
 
15,137

 
22,030

Total assets
 
$
2,777,310

 
$
2,831,624

LIABILITIES AND EQUITY
 
 
 
 
Liabilities
 
 
 
 
Accounts payable and accrued liabilities
 
$
32,362

 
$
22,801

Debt, net
 
1,546,229

 
1,538,824

Due to affiliates
 
390

 
217

Distributions payable
 
23,941

 
23,953

Distribution fees payable to affiliates
 
12,259

 
18,492

Other liabilities
 
38,651

 
46,979

Total liabilities
 
1,653,832

 
1,651,266

Commitments and contingencies (Note 9)
 

 

Equity
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock, $0.01 par value - 200,000 shares authorized, none issued and outstanding
 

 

Class A common stock, $0.01 par value per share - 900,000 shares authorized, 105,958 shares and 105,674 shares issued and outstanding, respectively
 
1,060

 
1,057

Class T common stock, $0.01 par value per share - 600,000 shares authorized, 72,043 shares and 71,280 shares issued and outstanding, respectively
 
720

 
713

Additional paid-in capital
 
1,607,537

 
1,582,846

Accumulated deficit
 
(488,920
)
 
(420,697
)
Accumulated other comprehensive income
 
3,080

 
16,438

Total stockholders’ equity
 
1,123,477

 
1,180,357

Noncontrolling interests
 
1

 
1

Total equity
 
1,123,478

 
1,180,358

Total liabilities and equity
 
$
2,777,310

 
$
2,831,624

See accompanying Notes to Condensed Consolidated Financial Statements.

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INDUSTRIAL PROPERTY TRUST INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
(in thousands, except per share data)
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
Rental revenues
 
$
63,320

 
$
60,664

 
$
188,114

 
$
179,514

Total revenues
 
63,320

 
60,664

 
188,114

 
179,514

Operating expenses:
 
 
 
 
 
 
 
 
Rental expenses
 
16,678

 
15,950

 
50,222

 
47,451

Real estate-related depreciation and amortization
 
25,972

 
27,934

 
79,239

 
83,987

General and administrative expenses
 
2,084

 
2,130

 
7,546

 
7,410

Asset management fees, related party
 
5,969

 
6,214

 
18,030

 
18,326

Total operating expenses
 
50,703

 
52,228

 
155,037

 
157,174

Other (income) expenses:
 
 
 
 
 
 
 
 
Equity in income of unconsolidated joint venture partnerships
 
(171
)
 
(2,729
)
 
(1,783
)
 
(4,023
)
Interest expense and other
 
12,933

 
12,875

 
39,469

 
36,939

Net gain on disposition of real estate properties
 

 
(141
)
 
(6,083
)
 
(126
)
Total other expenses
 
12,762

 
10,005

 
31,603

 
32,790

Net (loss) income
 
(145
)
 
(1,569
)
 
1,474

 
(10,450
)
Net loss (income) attributable to noncontrolling interests
 

 

 

 

Net (loss) income attributable to common stockholders
 
$
(145
)
 
$
(1,569
)
 
$
1,474

 
$
(10,450
)
Weighted-average shares outstanding
 
177,979

 
176,456

 
177,552

 
176,071

Net (loss) income per common share - basic and diluted
 
$
0.00

 
$
(0.01
)
 
$
0.01

 
$
(0.06
)
See accompanying Notes to Condensed Consolidated Financial Statements.


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INDUSTRIAL PROPERTY TRUST INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Net (loss) income attributable to common stockholders
 
$
(145
)
 
$
(1,569
)
 
$
1,474

 
$
(10,450
)
Change from cash flow hedging derivatives
 
(2,334
)
 
81

 
(13,358
)
 
6,376

Comprehensive loss attributable to common stockholders
 
$
(2,479
)
 
$
(1,488
)
 
$
(11,884
)
 
$
(4,074
)
See accompanying Notes to Condensed Consolidated Financial Statements.

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INDUSTRIAL PROPERTY TRUST INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
 
 
Stockholders’ Equity
 
 
 
 
 
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other
Comprehensive
Income (Loss)
 
Noncontrolling Interests
 
Total
(in thousands)
 
Shares
 
Amount
 
 
 
 
 
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018
 
 
 
 
 
 
 
 
 
 
Balance as of June 30, 2018
 
176,205

 
$
1,762

 
$
1,572,613

 
$
(376,198
)
 
$
23,167

 
$
1

 
$
1,221,345

Net loss
 

 

 

 
(1,569
)
 

 

 
(1,569
)
Change from cash flow hedging derivatives
 

 

 

 

 
81

 

 
81

Issuance of common stock
 
1,091

 
11

 
11,968

 

 

 

 
11,979

Share-based compensation
 

 

 
317

 

 

 

 
317

Upfront offering costs
 

 

 
(137
)
 

 

 

 
(137
)
Trailing distribution fees
 

 

 
43

 
1,880

 

 

 
1,923

Redemptions of common stock
 
(790
)
 
(8
)
 
(6,080
)
 

 

 

 
(6,088
)
Distributions on common stock
 

 

 

 
(25,127
)
 

 

 
(25,127
)
Balance as of September 30, 2018
 
176,506

 
$
1,765

 
$
1,578,724

 
$
(401,014
)
 
$
23,248

 
$
1

 
$
1,202,724

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019
 
 
 
 
 
 
 
 
 
 
Balance as of June 30, 2019
 
177,647

 
$
1,777

 
$
1,595,719

 
$
(465,509
)
 
$
5,414

 
$
1

 
$
1,137,402

Net loss
 

 

 

 
(145
)
 

 

 
(145
)
Change from cash flow hedging derivatives
 

 

 

 

 
(2,334
)
 

 
(2,334
)
Issuance of common stock
 
937

 
9

 
11,583

 

 

 

 
11,592

Share-based compensation
 

 

 
339

 

 

 

 
339

Upfront offering costs
 

 

 
(143
)
 

 

 

 
(143
)
Trailing distribution fees
 

 

 
14

 
2,070

 

 

 
2,084

Redemptions of common stock
 
(583
)
 
(6
)
 
25

 

 

 

 
19

Distributions on common stock
 

 

 

 
(25,336
)
 

 

 
(25,336
)
Balance as of September 30, 2019
 
178,001

 
$
1,780

 
$
1,607,537

 
$
(488,920
)
 
$
3,080

 
$
1

 
$
1,123,478

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2017
 
174,514

 
$
1,745

 
$
1,561,749

 
$
(320,897
)
 
$
16,872

 
$
1

 
$
1,259,470

Net loss
 

 

 

 
(10,450
)
 

 

 
(10,450
)
Change from cash flow hedging derivatives
 

 

 

 

 
6,376

 

 
6,376

Issuance of common stock
 
3,433

 
34

 
36,252

 

 

 

 
36,286

Share-based compensation
 

 

 
1,201

 

 

 

 
1,201

Upfront offering costs
 

 

 
(397
)
 

 

 

 
(397
)
Trailing distribution fees
 

 

 
51

 
5,589

 

 

 
5,640

Redemptions of common stock
 
(1,441
)
 
(14
)
 
(20,132
)
 

 

 

 
(20,146
)
Distributions on common stock
 

 

 

 
(75,256
)
 

 

 
(75,256
)
Balance as of September 30, 2018
 
176,506

 
$
1,765

 
$
1,578,724

 
$
(401,014
)
 
$
23,248

 
$
1

 
$
1,202,724

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
 
176,954

 
$
1,770

 
$
1,582,846

 
$
(420,697
)
 
$
16,438

 
$
1

 
$
1,180,358

Net income
 

 

 

 
1,474

 

 

 
1,474

Change from cash flow hedging derivatives
 

 

 

 

 
(13,358
)
 

 
(13,358
)
Issuance of common stock
 
3,005

 
30

 
35,126

 

 

 

 
35,156

Share-based compensation
 

 

 
1,463

 

 

 

 
1,463

Upfront offering costs
 

 

 
(557
)
 

 

 

 
(557
)
Trailing distribution fees
 

 

 
79

 
6,155

 

 

 
6,234

Redemptions of common stock
 
(1,958
)
 
(20
)
 
(11,420
)
 

 

 

 
(11,440
)
Distributions on common stock
 

 

 

 
(75,852
)
 

 

 
(75,852
)
Balance as of September 30, 2019
 
178,001

 
$
1,780

 
$
1,607,537

 
$
(488,920
)
 
$
3,080

 
$
1

 
$
1,123,478

See accompanying Notes to Condensed Consolidated Financial Statements.

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INDUSTRIAL PROPERTY TRUST INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
 
For the Nine Months Ended
September 30,
(in thousands)
 
2019
 
2018
Operating activities:
 
 
 
 
Net income (loss)
 
$
1,474

 
$
(10,450
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Real estate-related depreciation and amortization
 
79,239

 
83,987

Equity in income of unconsolidated joint venture partnerships
 
(1,783
)
 
(4,023
)
Straight-line rent and amortization of above- and below-market leases
 
(5,049
)
 
(7,519
)
Net gain on disposition of real estate properties
 
(6,083
)
 
(126
)
Other
 
3,285

 
2,137

Changes in operating assets and liabilities:
 
 
 
 
Tenant receivables and other assets
 
(3,645
)
 
(1,679
)
Accounts payable, accrued expenses and other liabilities
 
8,195

 
5,955

Due from / to affiliates, net
 
541

 
413

Net cash provided by operating activities
 
76,174

 
68,695

Investing activities:
 
 
 
 
Real estate acquisitions
 
(3,624
)
 
(39,918
)
Acquisition deposits
 

 
(130
)
Proceeds from the disposition of real estate properties
 
24,978

 
580

Capital expenditures and development activities
 
(34,288
)
 
(30,806
)
Investment in unconsolidated joint venture partnerships
 
(8,577
)
 
(14,931
)
Distributions from joint venture partnerships
 
2,600

 

Net proceeds from sale of joint venture partnership ownership interest
 

 
4,235

Other
 
(1,898
)
 

Net cash used in investing activities
 
(20,809
)
 
(80,970
)
Financing activities:
 
 
 
 
Proceeds from line of credit
 
69,000

 
117,000

Repayments of line of credit
 
(62,000
)
 
(46,000
)
Repayments of mortgage notes
 
(1,400
)
 
(893
)
Financing costs paid
 

 
(335
)
Offering costs paid related to issuance of common stock
 
(627
)
 
(435
)
Distributions paid to common stockholders
 
(34,564
)
 
(33,277
)
Distribution fees paid
 
(6,137
)
 
(5,588
)
Redemptions of common stock
 
(19,376
)
 
(18,822
)
Net cash (used in) provided by financing activities
 
(55,104
)
 
11,650

Net increase (decrease) in cash, cash equivalents and restricted cash
 
261

 
(625
)
Cash, cash equivalents and restricted cash, at beginning of period
 
5,763

 
5,462

Cash, cash equivalents and restricted cash, at end of period
 
$
6,024

 
$
4,837


See accompanying Notes to Condensed Consolidated Financial Statements.

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INDUSTRIAL PROPERTY TRUST INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
Unless the context otherwise requires, the “Company” refers to Industrial Property Trust Inc. and its consolidated subsidiaries.
The accompanying unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain disclosures normally included in the annual audited financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been omitted. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 6, 2019 (“2018 Form 10-K”).
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with GAAP.
Asset Sale Transaction
On July 15, 2019, the Company announced that it had entered into an agreement and plan of merger (as amended and restated on August 20, 2019, the “Merger Agreement”) pursuant to which it or its wholly-owned real estate assets will be acquired by an affiliate or affiliates of Prologis, L.P. in an all cash transaction valued at approximately $3.99 billion, subject to certain transaction costs. On August 22, 2019, the Company announced that it had elected to structure the transaction as a sale of substantially all of IPT’s assets excluding its interests in its unconsolidated joint venture partnerships (the “Asset Sale”), and following the Asset Sale, the Company will continue to exist with its remaining assets consisting primarily of its minority ownership interests in its unconsolidated joint venture partnerships (as described in “Note 3”). Subject to the satisfaction of applicable closing conditions (including the receipt of the requisite approval of the Company’s stockholders), the Company expects the Asset Sale to close in January 2020. However, the Company can provide no assurances that the Asset Sale will be completed on the expected timeline or at all. For more information about the Asset Sale, see the Company’s definitive proxy statement filed with the SEC on October 21, 2019.
Recently Adopted Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Subtopic 842)” (“ASU 2016-02”), which provides guidance for greater transparency in financial reporting by organizations that lease assets such as real estate, airplanes and manufacturing equipment by requiring such organizations to recognize lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted the standard when it became effective for the Company, as of the reporting period beginning January 1, 2019, and the Company elected the practical expedients available for implementation under the standard. Under the practical expedients election, the Company was not required to reassess: (i) whether an expired or existing contract meets the definition of a lease; (ii) the lease classification at the adoption date for expired or existing leases; and (iii) whether costs previously capitalized as initial direct costs would continue to be amortized. The practical expedient also allowed the Company to not separate tenant reimbursement revenue from rental revenue if certain criteria were met. The Company assessed the criteria and concluded that the timing and pattern of transfer for rental revenue and the related tenant reimbursement revenue are the same and the lease component, if accounted for separately, would be classified as an operating lease. As such, the Company accounts for and presented rental revenue and tenant reimbursement revenue as a single component in the condensed consolidated statements of operations. The standard also requires new disclosures within the notes accompanying the condensed consolidated financial statements. Additionally, in January 2018, the FASB issued ASU No. 2018-01, “Leases (Subtopic 842): Land Easement Practical Expedient for Transition to Topic 842” (“ASU 2018-01”), which updates ASU 2016-02 to include land easements under the updated guidance, including the option to elect the practical expedient discussed above. The Company also adopted ASU 2018-01 when it became effective for the Company, as of the reporting period beginning January 1, 2019, and the Company elected the practical expedients available for implementation under the standard. In addition, in December 2018, the FASB issued ASU No. 2018-20, “Narrow—Scope Improvements for Lessors” (“ASU 2018-20”), which updates ASU 2016-02 by providing the option to elect a practical expedient for lessors to exclude sales and other similar taxes from the transaction price of the contract, requires lessors to exclude from revenue and expense lessor costs paid directly to a third party by lessees, and clarifies lessors’ accounting for variable payments related to both lease and nonlease components. The Company adopted ASU 2018-20 when it became effective for the Company, as of the reporting period beginning January

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1, 2019, and the Company elected the practical expedients available for implementation under the standard. The adoption of these standards did not have a material effect on the Company’s condensed consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the option of early adopting the new standard using a modified retrospective transition method in any interim period after issuance of the update, or alternatively requires adoption for fiscal years beginning after December 15, 2018. The Company adopted ASU 2017-12 as of the reporting period beginning on January 1, 2019. The adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements.
In March 2019, the FASB issued ASU No. 2019-01, “Leases (Topic 842): Codification Improvements” (“ASU 2019-01”), which updates ASU 2016-02 to clarify that entities are not required to provide interim disclosures related to their adoption of ASU 2016-02 as required for other accounting changes and error corrections. The Company adopted this standard in conjunction with the adoption of ASU 2016-02. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.
In July 2019, the FASB issued ASU No. 2019-07, “Codification Updates to SEC Sections” (“ASU 2019-07”), which updates various codification topics by clarifying or improving the disclosure requirements to align with the SEC’s regulations. The Company adopted this standard immediately upon its issuance. The adoption did not have a material effect on the Company’s consolidated financial statements.
2. INVESTMENT IN REAL ESTATE PROPERTIES
As of both September 30, 2019 and December 31, 2018, the Company’s consolidated investment in real estate properties consisted of 236 industrial buildings.
 
 
As of
(in thousands)
 
September 30, 2019
 
December 31, 2018
Land
 
$
784,469

 
$
789,840

Building and improvements
 
1,965,368

 
1,956,788

Intangible lease assets
 
190,774

 
208,234

Construction in progress
 
25,315

 
16,071

Investment in real estate properties
 
2,965,926

 
2,970,933

Less accumulated depreciation and amortization
 
(363,883
)
 
(310,135
)
Net investment in real estate properties
 
$
2,602,043

 
$
2,660,798

Intangible Lease Assets and Liabilities
Intangible lease assets and liabilities, as of September 30, 2019 and December 31, 2018, include the following:
 
 
As of September 30, 2019
 
As of December 31, 2018
(in thousands)
 
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
Intangible lease assets (1)
 
$
182,245

 
$
(104,496
)
 
$
77,749

 
$
197,976

 
$
(104,054
)
 
$
93,922

Above-market lease assets (1)
 
8,529

 
(5,145
)
 
3,384

 
10,258

 
(5,962
)
 
4,296

Below-market lease liabilities (2)
 
(27,818
)
 
16,047

 
(11,771
)
 
(30,150
)
 
15,056

 
(15,094
)
 
(1)
Included in net investment in real estate properties on the condensed consolidated balance sheets.
(2)
Included in other liabilities on the condensed consolidated balance sheets.
Dispositions
During the nine months ended September 30, 2019, the Company sold two industrial buildings and one land parcel to third parties for proceeds of approximately $25.0 million. Total disposition fees paid to the Advisor in relation to the disposition of these properties were $0.7 million. Both buildings were located in the San Diego market and the land parcel was located in the Dallas market. The Company recorded a total net gain of $6.1 million related to the disposal of these properties.

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Future Minimum Rent
Future minimum base rental payments, which equal the cash basis of monthly contractual rent, owed to the Company from its customers under the terms of non-cancelable operating leases in effect as of September 30, 2019 and December 31, 2018, excluding rental revenues from the potential renewal or replacement of existing leases, were as follows for the next five years and thereafter:
 
 
As of
(in thousands)
 
September 30, 2019
 
December 31, 2018
2019
 
$
44,701

 
$
175,852

2020
 
174,957

 
154,892

2021
 
156,543

 
132,190

2022
 
121,445

 
97,369

2023
 
92,473

 
72,016

Thereafter
 
159,941

 
120,814

Total
 
$
750,060

 
$
753,133

Rental Revenue Adjustments and Depreciation and Amortization Expense
The following table summarizes straight-line rent adjustments, amortization recognized as an increase (decrease) to rental revenues from above- and below-market lease assets and liabilities, and real estate-related depreciation and amortization expense:
 
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Increase (Decrease) to Rental Revenue:
 
 
 
 
 
 
 
 
Straight-line rent adjustments
 
$
1,178

 
$
1,614

 
$
2,650

 
$
4,724

Above-market lease amortization
 
(263
)
 
(441
)
 
(908
)
 
(1,390
)
Below-market lease amortization
 
1,037

 
1,296

 
3,307

 
4,185

Real Estate-Related Depreciation and Amortization:
 
 
 
 
 
 
 
 
Depreciation expense
 
$
18,921

 
$
18,552

 
$
56,493

 
$
53,889

Intangible lease asset amortization
 
7,051

 
9,382

 
22,746

 
30,098

3. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE PARTNERSHIPS
The Company has entered into joint venture partnerships with third-party investors for purposes of investing in industrial properties located in certain major U.S. distribution markets. The Company reports its investments in the Build-To-Core Industrial Partnership I LP (the “BTC I Partnership”) and the Build-To-Core Industrial Partnership II LP (the “BTC II Partnership”) under the equity method on its consolidated balance sheets due to the fact that the Company maintains significant influence in each partnership. The following table summarizes the Company’s investment in the unconsolidated joint venture partnerships:
 
 
As of
 
Investment in Unconsolidated
Joint Venture Partnerships as of
 
 
September 30, 2019
 
December 31, 2018
 
($ in thousands)
 
Ownership Percentage
 
Number of Buildings (1)
 
Ownership Percentage
 
Number of Buildings (1)
 
September 30,
2019
 
December 31, 2018
BTC I Partnership
 
20.0%
 
38
 
20.0%
 
36
 
$
97,903

 
$
97,128

BTC II Partnership
 
8.0%
 
17
 
8.0%
 
13
 
23,649

 
16,741

Total joint venture partnerships
 
 
 
55
 
 
 
49
 
$
121,552

 
$
113,869

 
(1)
Represents acquired or completed buildings.

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The following is a summary of certain operating data of the BTC I Partnership:
 
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Operating data:
 
 
 
 
 
 
 
 
Total revenues
 
$
16,506

 
$
12,310

 
$
44,434

 
$
35,172

Total operating expenses
 
11,519

 
9,352

 
31,772

 
26,886

Total other (expenses) income (1)
 
(3,884
)
 
10,998

 
(2,618
)
 
13,030

Net income
 
1,103

 
13,956

 
10,044

 
21,316

 
(1)
Includes a gain of $5.6 million for the nine months ended September 30, 2019 related to the disposal of two industrial buildings. There were no dispositions during the three months ended September 30, 2019. The three and nine months ended September 30, 2018 include a gain of $12.3 million and $17.1 million, respectively, related to the disposal of one industrial building for the three months ended September 30, 2018 and three industrial buildings for the nine months ended September 30, 2018.
4. DEBT
The Company’s consolidated indebtedness is currently comprised of borrowings under its line of credit, term loans and mortgage notes. Borrowings under the non-recourse mortgage notes are secured by mortgages or deeds of trust and related assignments and security interests in collateralized and certain cross-collateralized properties, which are generally owned by single purpose entities. Substantially all of the Company’s debt is expected to be repaid in connection with the closing of the Asset Sale. A summary of the Company’s debt is as follows:
 
 
Weighted-Average
Effective Interest Rate as of
 
 
 
Balance as of
($ in thousands)
 
September 30,
2019
 
December 31, 2018
 
Maturity Date
 
September 30,
2019
 
December 31, 2018
Line of credit (1)
 
2.99%
 
3.38%
 
January 2020
 
$
331,000

 
$
324,000

Term loan (2)
 
2.50%
 
2.65%
 
January 2021
 
350,000

 
350,000

Term loan (3)
 
3.42%
 
4.05%
 
May 2022
 
150,000

 
150,000

Fixed-rate mortgage notes (4)
 
3.36%
 
3.36%
 
July 2020 - December 2025
 
720,126

 
721,526

Total principal amount / weighted-average (5)
 
3.09%
 
3.27%
 
 
 
$
1,551,126

 
$
1,545,526

Less unamortized debt issuance costs
 
 
 
 
 
 
 
$
(4,897
)
 
$
(6,702
)
Total debt, net
 
 
 
 
 
 
 
$
1,546,229

 
$
1,538,824

Gross book value of properties encumbered by debt
 
 
 
 
 
$
1,152,118

 
$
1,147,963

 
(1)
The effective interest rate is calculated based on either: (i) the London Interbank Offered Rate (“LIBOR”) multiplied by a statutory reserve rate plus a margin ranging from 1.40% to 2.30%; or (ii) an alternative base rate plus a margin ranging from 0.40% to 1.30%, each depending on the Company’s consolidated leverage ratio. The weighted-average effective interest rate is the all-in interest rate, including the effects of interest rate swap agreements relating to $150.0 million in borrowings under this line of credit. As of September 30, 2019, the unused and available portions under the line of credit were both $169.0 million. The line of credit is available for general corporate purposes, including but not limited to the acquisition and operation of permitted investments.
(2)
The effective interest rate is calculated based on either: (i) LIBOR multiplied by a statutory reserve rate, plus a margin ranging from 1.35% to 2.20%; or (ii) an alternative base rate plus a margin ranging from 0.35% to 1.20%, each depending on the Company’s consolidated leverage ratio. The weighted-average effective interest rate is the all-in interest rate, including the effects of interest rate swap agreements. This term loan is available for general corporate purposes, including but not limited to the acquisition and operation of permitted investments.
(3)
The effective interest rate is calculated based on either: (i) LIBOR multiplied by a statutory reserve rate, plus a margin ranging from 1.30% to 2.15%; or (ii) an alternative base rate plus a margin ranging from 0.30% to 1.15%, each depending on the Company’s consolidated leverage ratio. The weighted-average effective interest rate is the all-in interest rate. This term loan is available for general corporate purposes, including but not limited to the acquisition and operation of permitted investments.

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(4)
Interest rates range from 2.94% to 3.65%, which includes the effects of an interest rate swap agreement relating to a variable-rate mortgage note with an outstanding amount of $94.2 million and $95.6 million as of September 30, 2019 and December 31, 2018, respectively. The assets and credit of each of the Company’s consolidated properties pledged as collateral for the Company’s mortgage notes are not available to satisfy the Company’s other debt and obligations, unless the Company first satisfies the mortgage notes payable on the respective underlying properties.
(5)
The weighted-average remaining term of the Company’s consolidated debt was approximately 2.8 years as of September 30, 2019, excluding any extension options on the line of credit.
As of September 30, 2019, the principal payments due on the Company’s consolidated debt during each of the next five years and thereafter were as follows:
(in thousands)
 
Line of Credit (1)
 
Term Loans
 
Mortgage Notes
 
Total
Remainder of 2019
 
$

 
$

 
$
791

 
$
791

2020
 
331,000

 

 
15,259

 
346,259

2021
 

 
350,000

 
6,047

 
356,047

2022
 

 
150,000

 
83,579

 
233,579

2023
 

 

 
190,472

 
190,472

Thereafter
 

 

 
423,978

 
423,978

Total principal payments
 
$
331,000

 
$
500,000

 
$
720,126

 
$
1,551,126

 
(1)
The term of the line of credit may be extended pursuant to a one-year extension option, subject to certain conditions.
Debt Covenants
The Company’s line of credit, term loans and mortgage note agreements contain various property-level covenants, including customary affirmative and negative covenants. In addition, the line of credit and term loan agreements contain certain corporate level financial covenants, including leverage ratio, fixed charge coverage ratio, and tangible net worth thresholds. The Company was in compliance with its debt covenants as of September 30, 2019.
Derivative Instruments
To manage interest rate risk for certain of its variable-rate debt, the Company uses interest rate swaps as part of its risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by providing a fixed interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap agreements without exchange of the underlying notional amount. Certain of the Company’s variable-rate borrowings are not hedged, and therefore, to an extent, the Company has on-going exposure to interest rate movements.
For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss is recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) on the condensed consolidated balance sheets and is reclassified into earnings as interest expense for the same period that the hedged transaction affects earnings, which is when the interest expense is recognized on the related debt. The gain or loss on the derivative instrument is presented in the same line item on the condensed consolidated statement of operations as the earnings effect of the hedged item.
Substantially all of the Company’s debt is expected to be repaid in connection with the closing of the Asset Sale. Assuming the debt remains outstanding during the next 12 months, the Company estimates that approximately $3.4 million would be reclassified as a decrease to interest expense related to active effective hedges of existing floating-rate debt.
The following table summarizes the location and fair value of the cash flow hedges on the Company’s condensed consolidated balance sheets:
($ in thousands)
 
Number of
Contracts
 
Notional
Amount
 
Balance Sheet
Location
 
Fair
Value
As of September 30, 2019
 
 
 
 
 
 
 
 
Interest rate swaps
 
11
 
$
594,227

 
Other assets
 
$
3,080

As of December 31, 2018
 
 
 
 
 
 
 
 
Interest rate swaps
 
11
 
$
595,626

 
Other assets
 
$
16,438


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The following table presents the effect of the Company’s cash flow hedges on the Company’s condensed consolidated financial statements:
 
 
For the Three Months
Ended September 30,
 
For the Nine Months
Ended September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Derivative Instruments Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
(Loss) gain recognized in AOCI
 
$
(522
)
 
$
1,664

 
$
(7,282
)
 
$
10,081

Gain reclassified from AOCI into interest expense
 
(1,812
)
 
(1,583
)
 
(6,076
)
 
(3,705
)
Total interest expense presented in the condensed consolidated statements of operations in which the effects of the cash flow hedges are recorded
 
12,933

 
12,875

 
39,469

 
36,939

5. FAIR VALUE
The Company estimates the fair value of its financial instruments using available market information and valuation methodologies it believes to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that the Company would realize upon disposition of its financial instruments.
Fair Value Measurements on a Recurring Basis
The following table presents the Company’s financial instruments measured at fair value on a recurring basis:
(in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Total Fair Value
As of September 30, 2019
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
Derivative instruments
 
$

 
$
3,080

 
$

 
$
3,080

Total assets measured at fair value
 
$

 
$
3,080

 
$

 
$
3,080

As of December 31, 2018
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
Derivative instruments
 
$

 
$
16,438

 
$

 
$
16,438

Total assets measured at fair value
 
$

 
$
16,438

 
$

 
$
16,438

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Derivative Instruments. The derivative instruments are interest rate swaps. The interest rate swaps are standard cash flow hedges whose fair value is estimated using market-standard valuation models. Such models involve using market-based observable inputs, including interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements, which we have concluded are not material to the valuation. Due to the interest rate swaps being unique and not actively traded, the fair value is classified as Level 2. See “Note 4” above for further discussion of the Company’s derivative instruments.
Nonrecurring Fair Value of Financial Measurements
As of September 30, 2019 and December 31, 2018, the fair values of cash and cash equivalents, restricted cash, tenant receivables, due from/to affiliates, accounts payable and accrued liabilities, and distributions payable approximate their carrying values due to the short-term nature of these instruments. The table below includes fair values for certain of the Company’s financial instruments for which it is practicable to estimate fair value. The carrying values and fair values of these financial instruments were as follows:
 
 
As of September 30, 2019
 
As of December 31, 2018
(in thousands)
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Liabilities
 
 
 
 
 
 
 
 
Line of credit
 
$
331,000

 
$
331,000

 
$
324,000

 
$
324,000

Term loans
 
500,000

 
500,000

 
500,000

 
500,000

Mortgage notes
 
720,126

 
726,544

 
721,526

 
698,603


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6. STOCKHOLDERS’ EQUITY
Distribution Reinvestment Plan Offering
On July 15, 2019, the Company announced that beginning with the third quarter of 2019, it has suspended the offering of shares pursuant to its distribution reinvestment plan in connection with the Company’s original announcement of the Merger Agreement described in “Note 1.” The Company had registered $311.9 million in shares of its common stock to be sold pursuant to its distribution reinvestment plan and immediately prior to suspending the distribution reinvestment plan, offered the shares at a price equal to the net asset value (“NAV”) per share most recently disclosed by the Company, which was $12.33 per share as of November 30, 2018. As of September 30, 2019, $216.3 million in shares remained available for sale pursuant to the Company’s distribution reinvestment plan. Following the closing of the Asset Sale, the Company currently expects to terminate the distribution reinvestment plan.
Common Stock
The following table summarizes the changes in the shares outstanding for each class of common stock for the periods presented below:
(in thousands)
 
Class A
Shares
 
Class T
Shares
 
Total
Shares
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018
 
 
 
 
 
 
Balance as of June 30, 2018
 
105,490

 
70,715

 
176,205

Issuance of common stock:
 
 
 
 
 
 
DRIP
 
647

 
431

 
1,078

Stock grants
 
18

 

 
18

Redemptions
 
(636
)
 
(154
)
 
(790
)
Forfeitures
 
(5
)
 

 
(5
)
Balance as of September 30, 2018
 
105,514

 
70,992

 
176,506

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019
 
 
 
 
 
 
Balance as of June 30, 2019
 
105,860

 
71,787

 
177,647

Issuance of common stock:
 
 
 
 
 
 
DRIP
 
567

 
374

 
941

Redemptions
 
(465
)
 
(118
)
 
(583
)
Forfeitures
 
(4
)
 

 
(4
)
Balance as of September 30, 2019
 
105,958

 
72,043

 
178,001

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
 
 
 
 
 
 
Balance as of December 31, 2017
 
104,589

 
69,925

 
174,514

Issuance of common stock:
 
 
 
 
 
 
DRIP
 
1,958

 
1,308

 
3,266

Stock grants
 
180

 

 
180

Redemptions
 
(1,200
)
 
(241
)
 
(1,441
)
Forfeitures
 
(13
)
 

 
(13
)
Balance as of September 30, 2018
 
105,514

 
70,992

 
176,506

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
 
 
 
 
 
 
Balance as of December 31, 2018
 
105,674

 
71,280

 
176,954

Issuance of common stock:
 
 
 
 
 
 
DRIP
 
1,719

 
1,133

 
2,852

Stock grants
 
158

 

 
158

Redemptions
 
(1,588
)
 
(370
)
 
(1,958
)
Forfeitures
 
(5
)
 

 
(5
)
Balance as of September 30, 2019
 
105,958

 
72,043

 
178,001


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Distributions
The following table summarizes the Company’s distribution activity (including distributions reinvested in shares of the Company’s common stock) for the quarters ended below:
 
 
Amount
(in thousands, except per share data)
 
Declared per Common Share (1)
 
Paid in Cash
 
Reinvested in Shares
 
Distribution Fees (2)
 
Gross Distributions (3)
2019
 
 
 
 
 
 
 
 
 
 
September 30
 
$
0.1425

 
$
23,266

 
$

 
$
2,070

 
$
25,336

June 30
 
0.1425

 
11,641

 
11,601

 
2,052

 
25,294

March 31
 
0.1425

 
11,490

 
11,699

 
2,033

 
25,222

Total
 
$
0.4275

 
$
46,397

 
$
23,300

 
$
6,155

 
$
75,852

2018
 
 
 
 
 
 
 
 
 
 
December 31
 
$
0.1425

 
$
11,433

 
$
11,863

 
$
1,900

 
$
25,196

September 30
 
0.1425

 
11,350

 
11,897

 
1,880

 
25,127

June 30
 
0.1425

 
11,262

 
11,980

 
1,864

 
25,106

March 31
 
0.1425

 
11,092

 
12,086

 
1,845

 
25,023

Total
 
$
0.5700

 
$
45,137

 
$
47,826

 
$
7,489

 
$
100,452

 
(1)
Amounts reflect the quarterly distribution rate authorized by the Company’s board of directors per Class A share and per Class T share of common stock. The quarterly distribution on Class T shares of common stock is reduced by the distribution fees that are payable monthly with respect to such Class T shares (as calculated on a daily basis).
(2)
Distribution fees are paid monthly to Black Creek Capital Markets, LLC (the “Dealer Manager”) with respect to Class T shares issued in the primary portion of the public offering only.
(3)
Gross distributions are total distributions before the deduction of distribution fees relating to Class T shares.
Redemptions
The following table summarizes the Company’s redemption activity for the periods presented below:
 
 
For the Nine Months Ended
September 30,
(in thousands, except per share data)
 
2019
 
2018
Number of eligible shares redeemed
 
1,155

 
2,057

Aggregate dollar amount of shares redeemed
 
$
11,440

 
$
20,146

Average redemption price per share
 
$
9.90

 
$
9.79

In connection with the Company’s original announcement of the Merger Agreement described in “Note 1,” the Company has suspended its share redemption program, effective as of the third quarter of 2019. Following the closing of the Asset Sale, the Company currently expects to reinstate the share redemption program solely with respect to redemptions requested in connection with the death of a stockholder, subject to an aggregate cap for all stockholders of $1.0 million.

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7. RELATED PARTY TRANSACTIONS
The table below summarizes the fees and expenses incurred by the Company for services provided by Industrial Property Advisors LLC (the “Advisor”) and its affiliates, and by the Dealer Manager related to the services the Dealer Manager provided in connection with the Company’s initial public offering, and any related amounts payable:
 
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
 
Payable as of
 
 
 
 
September 30,
2019
 
December 31,
2018
(in thousands)
 
2019
 
2018
 
2019
 
2018
 
 
Expensed:
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees (1)
 
$
5,969

 
$
6,010

 
$
17,924

 
$
17,916

 
$
65

 
$
69

Asset management fees related to dispositions (2)
 

 
221

 
764

 
427

 

 

Other expense reimbursements (3)
 
1,091

 
1,145

 
3,878

 
3,881

 
494

 
510

Total
 
$
7,060

 
$
7,376

 
$
22,566

 
$
22,224

 
$
559

 
$
579

Capitalized:
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition fees
 
$

 
$
525

 
$
73

 
$
784

 
$

 
$
62

Development acquisition fees (4)
 
676

 
123

 
2,213

 
1,070

 
177

 
61

Total
 
$
676

 
$
648

 
$
2,286

 
$
1,854

 
$
177

 
$
123

Additional Paid-In Capital:
 
 
 
 
 
 
 
 
 
 
 
 
Offering costs
 
$
143

 
$
137

 
$
557

 
$
397

 
$

 
$
70

Distribution fees—current (5)
 
2,070

 
1,880

 
6,155

 
5,589

 
675

 
657

Distribution fees—trailing (5)
 

 

 

 

 
12,259

 
18,492

Total
 
$
2,213

 
$
2,017

 
$
6,712

 
$
5,986

 
$
12,934

 
$
19,219

 
(1)
Includes asset management fees other than asset management fees related to dispositions.
(2)
Asset management fees that relate to the Company’s proportionate share of the disposition fee associated with the dispositions of joint venture partnership properties are included in asset management fees on the Company’s condensed consolidated statement of operations. Asset management fees that relate to the disposition fee associated with dispositions of wholly-owned properties are netted against the respective gain from dispositions and are included in the related net gain amount on the Company’s condensed consolidated statements of operations.
(3)
Other expense reimbursements include certain expenses incurred in connection with the services provided to the Company under the amended and restated advisory agreement, dated June 12, 2019, by and among the Company, Industrial Property Operating Partnership LP (the “Operating Partnership”), and the Advisor, and are included in general and administrative expenses on the Company’s condensed consolidated statements of operations. These reimbursements include a portion of compensation expenses of individual employees of the Advisor, including certain of the Company’s named executive officers, related to activities for which the Advisor does not otherwise receive a separate fee. A portion of the compensation received by certain employees of the Advisor and its affiliates may be in the form of a restricted stock grant awarded by the Company. The Company shows these as reimbursements to the Advisor to the same extent that the Company recognizes the related share-based compensation on its condensed consolidated statements of operations. The Company reimbursed the Advisor approximately $0.9 million and $0.9 million for the three months ended September 30, 2019 and 2018, respectively, and $3.4 million and $3.1 million for the nine months ended September 30, 2019 and 2018, respectively, related to these compensation expenses. The remaining amount of other expense reimbursements relate to other general overhead and administrative expenses including, but not limited to, allocated rent paid to both third parties and affiliates of the Advisor, equipment, utilities, insurance, travel and entertainment.
(4)
Development acquisition fees are included in the total development project costs of the respective properties and are capitalized in construction in progress, which is included in net investment in real estate properties on the Company’s condensed consolidated balance sheets. Amounts also include the Company’s proportionate share of development acquisition fees relating to the joint venture partnerships, which is included in investment in unconsolidated joint venture partnerships on the Company’s condensed consolidated balance sheets.
(5)
The distribution fees accrue daily and are payable monthly in arrears. The monthly amount of distribution fees payable is included in distributions payable on the condensed consolidated balance sheets. Additionally, the Company accrues for estimated trailing amounts payable based on the shares outstanding as of the balance sheet date, which are included in distribution fees payable to affiliates on the condensed consolidated balance sheets. All or a portion of the distribution fees are reallowed or advanced by the Dealer Manager to unaffiliated participating broker dealers or broker dealers servicing accounts of investors who own Class T shares.

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Joint Venture Partnerships
For the three and nine months ended September 30, 2019, the joint venture partnerships (as described in “Note 3”) incurred in aggregate approximately $3.0 million and $6.7 million, respectively, in acquisition and asset management fees, which were paid to the Advisor and its wholly-owned subsidiary pursuant to the respective service agreements, as compared to $2.1 million and $5.6 million for the three and nine months ended September 30, 2018, respectively. As of September 30, 2019, the Company had amounts due to the joint venture partnerships in aggregate of approximately $5,000, which were recorded in due to affiliates on the condensed consolidated balance sheets, and as of December 31, 2018, the Company had amounts due from the joint venture partnerships in aggregate of approximately $0.2 million, which were recorded in due from affiliates on the condensed consolidated balance sheets.
Reorganization in connection with the Asset Sale
See “Note 10” for information concerning the reorganization of the Sponsor’s and the Advisor’s interests in the Company in connection with and following the Asset Sale.
8. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information and disclosure of non-cash investing and financing activities is as follows:
 
 
For the Nine Months Ended
September 30,
(in thousands)
 
2019
 
2018
Distributions payable
 
$
23,941

 
$
23,860

Distribution fees payable to affiliates
 
12,259

 
20,432

Distributions reinvested in common stock
 
35,163

 
36,288

Restricted Cash
Restricted cash consists of cash held in escrow in connection with certain financing requirements and tenant improvements. The following table presents a reconciliation of the beginning of period and end of period cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the totals shown on the condensed consolidated statements of cash flows:
 
 
For the Nine Months Ended
September 30,
(in thousands)
 
2019
 
2018
Beginning of period:
 
 
 
 
Cash and cash equivalents
 
$
5,698

 
$
5,397

Restricted cash
 
65

 
65

Cash, cash equivalents and restricted cash
 
$
5,763

 
$
5,462

End of period:
 
 
 
 
Cash and cash equivalents
 
$
6,024

 
$
4,772

Restricted cash
 

 
65

Cash, cash equivalents and restricted cash
 
$
6,024

 
$
4,837


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9. COMMITMENTS AND CONTINGENCIES
The Company and the Operating Partnership are not presently involved in any material litigation nor, to the Company’s knowledge, is any material litigation threatened against the Company or its subsidiaries.
Asset Sale Transaction
The Merger Agreement provides that, in connection with the termination of the Merger Agreement under specified circumstances, the Company will be required to pay to Prologis, L.P. a termination fee of $65.0 million, provided that if the requisite approval of the Asset Sale by the Company’s stockholders has not been obtained on or before January 15, 2020, then the termination fee shall be $96.0 million.
Environmental Matters
A majority of the properties the Company acquires are subject to environmental reviews either by the Company or the previous owners. In addition, the Company may incur environmental remediation costs associated with certain land parcels it may acquire in connection with the development of land. The Company has acquired certain properties in urban and industrial areas that may have been leased to or previously owned by commercial and industrial companies that discharged hazardous material. The Company may purchase various environmental insurance policies to mitigate its exposure to environmental liabilities. The Company is not aware of any environmental liabilities that it believes would have a material adverse effect on its business, financial condition, or results of operations as of September 30, 2019.

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10. SUBSEQUENT EVENTS
Reorganization in connection with the Asset Sale
On October 7, 2019, the Company, the Operating Partnership, Industrial Property Advisors Group LLC (the “Sponsor”), the Advisor and Academy Partners Ltd. Liability Company, an affiliate of the Sponsor (“Academy Partners”), entered into a Master Reorganization and Transaction Agreement (the “Master Reorganization Agreement”) to engage in certain transactions to restructure the Sponsor’s and the Advisor’s interests in the Company in connection with and following the Asset Sale.
The Master Reorganization Agreement provides that the Company, the Operating Partnership and the Advisor enter into an amendment to the Amended and Restated Advisory Agreement (2019), dated as of June 12, 2019 (the “Advisory Agreement”), to reduce the advisory fees payable to the Advisor in connection with the Asset Sale by an amount equal to approximately $75.0 million. On October 7, 2019, the Company, the Operating Partnership and the Advisor entered into the Amendment to Amended and Restated Advisory Agreement (2019) (the “Advisory Agreement Amendment”). Pursuant to the Advisory Agreement Amendment, the parties thereto agreed that solely with respect to any disposition involving the properties owned 100% by the Operating Partnership (the “Wholly-Owned Portfolio”) (which disposition includes the Asset Sale), the asset management fee owed to the Advisor under the Advisory Agreement is reduced from 2.5% to 0.6203% of the “Contract Sales Price” (as defined in the Advisory Agreement). The Advisory Agreement Amendment also provides that the Company remains obligated to pay such asset management fee in the event that the Company consummates a disposition involving the Wholly-Owned Portfolio pursuant to one or more definitive agreements entered into during the term of the Advisory Agreement (including the Asset Sale), even if the Advisor is terminated by the Company without cause prior to the closing of such disposition.
The Master Reorganization Agreement also provides that the Company, the Operating Partnership and the Sponsor enter into an amendment to the Second Amended and Restated Limited Partnership Agreement of Industrial Property Operating Partnership LP (the “Operating Partnership LPA”) to increase the profits interest of the Sponsor in the Operating Partnership. On October 7, 2019, the Company, the Operating Partnership and the Sponsor entered into the Amendment to Second Amended and Restated Limited Partnership Agreement of Industrial Property Operating Partnership LP (the “LPA Amendment”). The LPA Amendment provides that, effective as of January 1, 2019, distributions of net sales proceeds will be made (i) with respect to the sale by the Company of its Wholly-Owned Portfolio: (A) first, 100% to the holders of limited partnership interests in the Operating Partnership in proportion to their ownership interest in the Operating Partnership until the Company and its stockholders have received cumulative distributions equal to their capital contributions plus a 6.5% per annum return (the “Distribution Hurdle Requirement”), and (B) second, 85% to the holders of limited partnership interests in the Operating Partnership in proportion to their ownership interest in the Operating Partnership and 15% to the Sponsor, as the special limited partner in the Operating Partnership, and (ii) thereafter, assuming the Distribution Hurdle Requirement has been previously met, 65% to the holders of limited partnership interests in the Operating Partnership in proportion to their ownership interest in the Operating Partnership and 35% to the Sponsor, as the special limited partner in the Operating Partnership.  In addition, the LPA Amendment provides that, effective as of January 1, 2019, distributions of cash other than net sales proceeds will be made (i) prior to the sale by the Company of its Wholly-Owned Portfolio, 100% to the holders of limited partnership interests in the Operating Partnership in proportion to their ownership interest in the Operating Partnership, and (ii) thereafter, 65% to the holders of limited partnership interests in the Operating Partnership in proportion to their ownership interest in the Operating Partnership and 35% to the Sponsor, as the special limited partner in the Operating Partnership.
The Master Reorganization Agreement also provides that, prior to the closing of the Asset Sale, the Sponsor will accept an assignment of all rights to the trademark and all related rights and goodwill, world-wide, to the mark “Industrial Properties Trust” (collectively, the “IPT Intellectual Property”) from Academy Partners and an assignment from the Advisor of all of its rights under the Advisory Agreement, and the Sponsor will assume the obligations of the Advisor under the Advisory Agreement. Following such actions and prior to the closing of the Asset Sale, the Sponsor has agreed to capitalize IPT Advisor LLC, an affiliate of the Sponsor (“New Advisor”), by contributing to it (i) the IPT Intellectual Property, (ii) the Advisory Agreement, and (iii) the Sponsor’s special limited partnership interests in the Operating Partnership. As a result of such contribution transactions, New Advisor will be the Company’s new external advisor and will be substituted for the Sponsor as the special limited partner in the Operating Partnership.
The Master Reorganization Agreement also contemplates that immediately following the closing of the Asset Sale, New Advisor will make an in-kind contribution to the Operating Partnership, in the form of an assignment of the IPT Intellectual Property, which IPT Intellectual Property the Company currently licenses from Academy Partners under a non-exclusive license terminable by either party on short notice. In exchange for such in-kind contribution of the IPT Intellectual Property, the Operating Partnership will issue to New Advisor a preferred equity capital interest in the Operating Partnership having a preference on distributions from the Operating Partnership equal to $10.0 million, which amount was determined by reference to the appraised fair market value of the IPT Intellectual Property (the “Preference”). In connection therewith, pursuant to the Master Reorganization Agreement, the Company and the Operating Partnership have agreed to amend and restate the Operating

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Partnership LPA immediately following the closing of the Asset Sale to provide that distributions by the Operating Partnership will be made, after any distributions necessary to maintain the Company’s status as a real estate investment trust, (i) first, 100% to pay the Preference described above, and (ii) then, 65% to the holders of limited partnership interests in the Operating Partnership in proportion to their ownership interest in the Operating Partnership and 35% to the special limited partner in the Operating Partnership.
The Company relies on the Advisor to manage its day-to-day activities and to implement its investment strategy. The Advisor, New Advisor and Academy Partners are wholly-owned by the Sponsor. The Sponsor is the special limited partner in the Operating Partnership and owned 100 special partnership units in the Operating Partnership as of October 7, 2019. The Sponsor is presently directly or indirectly majority owned, controlled and/or managed by the estate of John A. Blumberg, James R. Mulvihill and Evan H. Zucker, Chairman of the board of directors of the Company, and/or their affiliates. Dwight L. Merriman III, chief executive officer and a director of the Company, Thomas G. McGonagle, chief financial officer of the Company, and Joshua J. Widoff, managing director, chief legal officer and secretary of the Company, each has an indirect ownership interest in the Sponsor. The agreements described above and the transactions contemplated thereby were unanimously approved by the independent directors of the Company’s board of directors.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the terms “we,” “our,” or “us” refer to Industrial Property Trust Inc. and its consolidated subsidiaries. The following discussion and analysis should be read together with our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes certain statements that may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements relate to, without limitation, rent and occupancy growth, general conditions in the geographic area where we operate, our future debt and financial position, our future capital expenditures, future distributions and acquisitions (including the amount and nature thereof), other developments and trends of the real estate industry, business strategies and the expansion and growth of our operations. Forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “project,” or the negative of these words or other comparable terminology. These statements are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict.
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. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:
The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;
Failure to obtain the requisite vote of stockholders required to consummate the proposed Asset Sale or the failure to satisfy the other closing conditions to the Asset Sale or any of the other transactions contemplated by the Merger Agreement;
Risks related to disruption of management’s attention from our ongoing business operations due to the pendency of the Asset Sale;
The effect of the announcement of the Asset Sale on our ability to retain key personnel, maintain relationships with our customers and suppliers, and maintain our operating results and business generally;
The ability of third parties to fulfill their obligations relating to the proposed transaction, including providing financing under current financial market conditions;
The outcome of any legal proceedings that may be instituted against us and others related to the Merger Agreement;
Our ability to effectuate a transaction involving our minority ownership interest in our joint venture partnerships on satisfactory terms or at all;
The risk that the Asset Sale, or the other transactions contemplated by the Merger Agreement, may not be completed in the time frame expected by the parties or at all; 
Our ability to locate and make investments in accordance with our business strategy;
The failure of properties to perform as we expect;
Risks associated with acquisitions, dispositions and development of properties;
Our failure to successfully integrate acquired properties and operations;
Unexpected delays or increased costs associated with any development projects;
The availability of cash flows from operating activities for distributions and capital expenditures;
Defaults on or non-renewal of leases by customers, lease renewals at lower than expected rent, or failure to lease properties at all or on favorable rents and terms;

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Difficulties in economic conditions generally and the real estate, debt, and securities markets specifically;
Legislative or regulatory changes, including changes to the laws governing the taxation of real estate investment trusts (“REITs”);
Our failure to obtain, renew, or extend necessary financing or access the debt or equity markets;
Conflicts of interest arising out of our relationships with Industrial Property Advisors Group LLC (the “Sponsor”), the Advisor, and their affiliates;
Risks associated with using debt to fund our business activities, including re-financing and interest rate risks;
Increases in interest rates, operating costs, or greater than expected capital expenditures;
Changes to GAAP; and
Our ability to continue to qualify as a REIT.
Any of the assumptions underlying forward-looking statements could prove to be inaccurate. Our stockholders are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report on Form 10-Q. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report on Form 10-Q will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, changed circumstances, or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report on Form 10-Q, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report on Form 10-Q will be achieved.

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OVERVIEW
General
Industrial Property Trust Inc. is a Maryland corporation formed on August 28, 2012 to make investments in income