Company Quick10K Filing
Hines Global REIT
Price-0.00 EPS1
Shares265 P/E-0
MCap-0 P/FCF0
Net Debt716 EBIT391
TEV716 TEV/EBIT2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-03-30
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-14
10-K 2018-12-31 Filed 2019-03-28
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-13
10-Q 2018-03-31 Filed 2018-05-11
10-K 2017-12-31 Filed 2018-03-30
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-28
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-12
10-Q 2016-03-31 Filed 2016-05-12
10-K 2015-12-31 Filed 2016-03-28
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-03-30
10-Q 2014-09-30 Filed 2014-11-13
10-Q 2014-06-30 Filed 2014-08-13
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-03-27
10-Q 2013-09-30 Filed 2013-11-13
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-14
10-K 2012-12-31 Filed 2013-04-01
10-Q 2012-09-30 Filed 2012-11-14
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-27
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-03-30
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-13
10-Q 2010-03-31 Filed 2010-05-17
10-K 2009-12-31 Filed 2010-03-31
8-K 2020-04-17 Regulation FD, Other Events, Exhibits
8-K 2020-04-03 Other Events, Exhibits
8-K 2020-03-20 Other Events
8-K 2020-03-03 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-01-10 M&A, Exhibits
8-K 2019-12-20 M&A, Exhibits
8-K 2019-12-09 Enter Agreement
8-K 2019-09-10 Shareholder Vote, Regulation FD, Exhibits
8-K 2019-07-23 Other Events, Exhibits
8-K 2019-06-07 Other Events
8-K 2019-05-23 Enter Agreement, Officers, Exhibits
8-K 2019-03-21 Enter Agreement, Exhibits
8-K 2019-03-13 Regulation FD, Exhibits
8-K 2019-03-04 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-02-14 Other Events, Exhibits
8-K 2019-02-04 M&A, Other Events, Exhibits
8-K 2018-12-19 Regulation FD, Other Events, Exhibits
8-K 2018-12-05 Officers
8-K 2018-11-21 M&A, Exhibits
8-K 2018-11-15 Enter Agreement
8-K 2018-11-08 Other Events
8-K 2018-11-06 M&A, Exhibits
8-K 2018-10-18 Regulation FD, Exhibits
8-K 2018-10-10 Enter Agreement
8-K 2018-10-02 Enter Agreement
8-K 2018-10-01 Other Events
8-K 2018-09-04 Other Events
8-K 2018-08-24 M&A, Exhibits
8-K 2018-08-01 Other Events
8-K 2018-07-24 Enter Agreement
8-K 2018-07-17 Shareholder Vote, Regulation FD, Other Events, Exhibits
8-K 2018-06-01 Other Events
8-K 2018-05-01 Other Events
8-K 2018-04-20 Regulation FD, Other Events, Exhibits
8-K 2018-04-02 Other Events
8-K 2018-03-02 Other Events
8-K 2018-02-26 Other Events, Exhibits
8-K 2018-02-26 Amendment
8-K 2018-02-01 Other Events
8-K 2018-01-18 Regulation FD, Exhibits
8-K 2018-01-02 Regulation FD, Other Events, Exhibits

HGRI 10Q Quarterly Report

Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 hgr03312020exhibit311.htm
EX-31.2 hgr03312020exhibit312.htm
EX-32.1 hgr03312020exhibit321.htm

Hines Global REIT Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
4.53.62.71.80.90.02012201420172020
Assets, Equity
0.30.20.10.1-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.70.40.1-0.2-0.5-0.82012201420172020
Ops, Inv, Fin

10-Q 1 hgr_0331202010-q.htm HINES GLOBAL REIT 3.31.2020 10-Q Document
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-Q

(Mark One)
 
þ 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
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: 000-53964
 

 Hines Global REIT, Inc.
(Exact name of registrant as specified in its charter)
Maryland
26-3999995
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
2800 Post Oak Boulevard
 
Suite 5000
 
Houston, Texas
77056-6118
(Address of principal executive offices)
(Zip code)

(888) 220-6121
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Exchange 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 þ 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 þ   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 ☐
Non-accelerated filer þ 
 
Smaller reporting company ☐
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 þ 
 
 As of May 5, 2020, approximately 262.6 million shares of the registrant’s common stock were outstanding.

 



TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
 
 
Item 1.
Condensed Consolidated Financial Statements (Unaudited):
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
PART II – OTHER INFORMATION
 
 
Item 1. 
Item 1A. 
Item 2.
Item 3. 
Item 4. 
Item 5. 
Item 6.



PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements

HINES GLOBAL REIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
March 31, 2020
 
December 31, 2019
 
(In thousands, except per share amounts)
ASSETS
 
 
 
Cash and cash equivalents
$
386,788

 
$
373,179

Derivative instruments
16,421

 

Tenant and other receivables
213

 
114

Other assets
389

 
574

Assets held for sale
1,261,289

 
1,551,858

Total assets
$
1,665,100

 
$
1,925,725

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Accounts payable and accrued expenses
$
2,370

 
$
1,419

Due to affiliates
2,711

 
11,159

Derivative instruments

 
3,684

Liabilities associated with assets held for sale
315,928

 
653,900

Total liabilities
321,009

 
670,162

 
 
 
 
Commitments and contingencies (Note 10)

 

 
 
 
 
Equity:
 
 
 
Stockholders’ equity:
 
 
 
Preferred shares, $.001 par value; 500,000 preferred shares authorized, none issued or outstanding as of March 31, 2020 and December 31, 2019

 

Common stock, $.001 par value; 1,500,000 shares authorized, 262,924 and 263,373 issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
263

 
263

Additional paid-in capital
2,382,838

 
2,386,673

Accumulated distributions in excess of earnings
(948,012
)
 
(1,049,332
)
Accumulated other comprehensive income (loss)
(91,499
)
 
(82,571
)
Total stockholders’ equity
1,343,590

 
1,255,033

Noncontrolling interests
501

 
530

Total equity
1,344,091

 
1,255,563

Total liabilities and equity
$
1,665,100

 
$
1,925,725


See notes to the condensed consolidated financial statements.

1


HINES GLOBAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31, 2020 and 2019
(UNAUDITED)
 
Three Months Ended March 31,
 
2020
 
2019
 
(In thousands, except per share amounts)
Revenues:
 
 
 
Rental revenue
$
34,120

 
$
45,856

Other revenue
514

 
2,377

Total revenues
34,634

 
48,233

Expenses:
 

 
 

Property operating expenses
11,669

 
12,738

Real property taxes
4,589

 
6,789

Property management fees
826

 
1,148

Depreciation and amortization

 
13,444

Asset management fees
5,712

 
6,780

General and administrative expenses
2,073

 
2,595

Total expenses
24,869

 
43,494

Other income (expenses):
 

 
 

Gain (loss) on derivative instruments
20,598

 
(126
)
Gain (loss) on sale of real estate investments
80,186

 
192,189

Foreign currency gains (losses)
(6,166
)
 
399

Interest expense
(2,386
)
 
(7,347
)
Other income (expenses)
1,009

 
1,283

Income (loss) before benefit (provision) for income taxes
103,006

 
191,137

Benefit (provision) for income taxes
(1,700
)
 
273

Net income (loss)
101,306

 
191,410

Net (income) loss attributable to noncontrolling interests
14

 
(9
)
Net income (loss) attributable to common stockholders
$
101,320

 
$
191,401

Basic and diluted income (loss) per common share
$
0.38

 
$
0.72

Weighted average number of common shares outstanding
264,131

 
265,029

Net comprehensive income (loss):
 

 
 

Net income (loss)
$
101,306

 
$
191,410

Other comprehensive income (loss):
 

 
 

Foreign currency translation adjustment
(8,943
)
 
5,675

Net comprehensive income (loss)
92,363

 
197,085

Net comprehensive (income) loss attributable to noncontrolling interests
29

 
(13
)
Net comprehensive income (loss) attributable to common stockholders
$
92,392

 
$
197,072


See notes to the condensed consolidated financial statements.

2


HINES GLOBAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2020
(UNAUDITED)
(In thousands)
 
Common Shares
 
Amount
 
Additional Paid-in Capital
 
Accumulated Distributions in Excess of Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’ Equity
 
Noncontrolling Interests
Balance as of
January 1, 2020
263,373

 
$
263

 
$
2,386,673

 
$
(1,049,332
)
 
$
(82,571
)
 
$
1,255,033

 
$
530

Issuance of common shares

 

 
30

 

 

 
30

 

Redemption of common shares
(449
)
 

 
(3,859
)
 

 

 
(3,859
)
 

Issuer costs

 

 
(6
)
 

 

 
(6
)
 

Net income (loss)

 

 

 
101,320

 

 
101,320

 
(14
)
Foreign currency translation adjustment

 

 

 

 
(17,940
)
 
(17,940
)
 
(15
)
Foreign currency translation adjustment reclassified into earnings

 

 

 

 
9,012

 
9,012

 

Balance as of March 31, 2020
262,924

 
$
263

 
$
2,382,838

 
$
(948,012
)
 
$
(91,499
)
 
$
1,343,590

 
$
501


See notes to the condensed consolidated financial statements.


3


HINES GLOBAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2019
(UNAUDITED)
(In thousands)

 
Common Shares
 
Amount
 
Additional Paid-in Capital
 
Accumulated Distributions in Excess of Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’ Equity
 
Noncontrolling Interests
Balance as of
January 1, 2019
267,073

 
$
267

 
$
2,409,529

 
$
(688,475
)
 
$
(128,927
)
 
$
1,592,394

 
$
468

Contribution from noncontrolling interest

 

 

 

 

 

 
97

Distributions declared

 

 

 
(661,238
)
 

 
(661,238
)
 
(53
)
Redemption of common shares
(2,648
)
 
(3
)
 
(16,298
)
 

 

 
(16,301
)
 

Issuer costs

 

 
(8
)
 

 

 
(8
)
 

Net income (loss)

 

 

 
191,401

 

 
191,401

 
9

Foreign currency translation adjustment

 

 

 

 
5,671

 
5,671

 
4

Balance as of March 31, 2019
264,425

 
$
264

 
$
2,393,223

 
$
(1,158,312
)
 
$
(123,256
)
 
$
1,111,919

 
$
525


See notes to the condensed consolidated financial statements.


4


HINES GLOBAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2020 and 2019
(UNAUDITED)
 
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
(In thousands)
Net income (loss)
$
101,306

 
$
191,410

Adjustments to reconcile net income (loss) to net cash from operating activities:
 
 
 
Depreciation and amortization
481

 
16,939

Foreign currency (gains) losses
6,166

 
(399
)
(Gain) on the sale of real estate investments
(80,186
)
 
(192,189
)
(Gain) loss on derivative instruments
(20,598
)
 
126

Changes in assets and liabilities:
 
 
 
Change in other assets
1,664

 
(1,072
)
Change in tenant and other receivables
(4,644
)
 
732

Change in deferred leasing costs
(2,222
)
 
(3,347
)
Change in accounts payable and accrued expenses
(4,506
)
 
(7,407
)
Change in other liabilities
(4,929
)
 
(4,970
)
Change in due to affiliates
(3,215
)
 
(2,217
)
Net cash used in operating activities
(10,683
)
 
(2,394
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Proceeds from the sale of real estate investments
248,009

 
455,220

Capital expenditures at operating properties and developments
(4,437
)
 
(21,979
)
Net cash from investing activities
243,572

 
433,241

CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Contribution from noncontrolling interest

 
97

Redemption of common shares
(2,772
)
 
(23,736
)
Payments of issuer costs
(6
)
 
(11
)
Distributions paid to stockholders and noncontrolling interests

 
(675,758
)
Proceeds from notes payable

 
169,000

Payments on notes payable
(225,535
)
 
(75,553
)
Change in security deposit liability
320

 
179

Deferred financing costs paid
(396
)
 
(1,761
)
Net cash used in financing activities
(228,389
)
 
(607,543
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(499
)
 
313

Net change in cash, cash equivalents, and restricted cash
4,001

 
(176,383
)
Cash, cash equivalents, and restricted cash, beginning of period
385,959

 
261,017

Cash, cash equivalents, and restricted cash, end of period
$
389,960

 
$
84,634


See notes to the condensed consolidated financial statements.

5


HINES GLOBAL REIT, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2020 and 2019

1.  ORGANIZATION

The accompanying interim unaudited condensed consolidated financial information has been prepared according to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted according to such rules and regulations. For further information, refer to the financial statements and footnotes for the year ended December 31, 2019 included in Hines Global REIT, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019. In the opinion of management, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly and in conformity with GAAP the financial position of Hines Global REIT, Inc. as of March 31, 2020, the results of operations for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020 and 2019 have been included.  The results of operations for such interim periods are not necessarily indicative of the results for the full year.

Hines Global REIT, Inc. (the “Company”) was formed as a Maryland corporation on December 10, 2008, under the General Corporation Law of the state of Maryland for the purpose of engaging in the business of investing in and owning commercial real estate properties and other real estate investments. The Company conducts substantially all of its operations through Hines Global REIT Properties, LP (the “Operating Partnership”) and subsidiaries of the Operating Partnership. The Company operates in a manner to qualify as a real estate investment trust (“REIT”) for federal income tax purposes. The day-to-day business of the Company is managed by Hines Global REIT Advisors LP (the “Advisor”), an affiliate of Hines Interests Limited Partnership (“Hines”), pursuant to the Advisory Agreement between the Company, the Advisor and the Operating Partnership (the “Advisory Agreement”).

The Company raised the equity capital for its real estate investments through two public offerings from August 5, 2009 through April 11, 2014, which included primary offering shares as well as shares issued through its distribution reinvestment plan. The Company terminated its offering of primary offering shares in April 2014, but continued to issue shares through its distribution reinvestment plan (the “DRP Offering”) from April 24, 2014 to August 2018. Collectively, through its public offerings, the Company received gross offering proceeds of $3.1 billion from the sale of 313.3 million shares, which was invested in the Company’s real estate portfolio.

In recent years, the Company has concentrated its efforts on actively managing its assets and exploring a variety of strategic opportunities focused on enhancing the composition of its portfolio and its total return potential for its stockholders. On April 23, 2018, in connection with its review of potential strategic alternatives available to the Company, the Company’s board of directors determined that it is in the best interest of the Company and its stockholders to sell all or substantially all of the Company’s properties and assets and for the Company to liquidate and dissolve pursuant to a Plan of Liquidation and Dissolution (the “Plan of Liquidation”). The principal purpose of the Plan of Liquidation is to provide liquidity to the Company’s stockholders by selling the Company’s assets, paying its debts and distributing the net proceeds from liquidation to the Company’s stockholders.

As required by Maryland law and the Company’s charter, the Plan of Liquidation was approved by the affirmative vote of the holders of at least a majority of the shares of the Company’s common stock outstanding and entitled to vote thereon at the Company’s annual meeting of stockholders held on July 17, 2018. In accordance with Maryland law, the Plan of Liquidation provides the Company’s board of directors with the authority to modify or amend the Plan of Liquidation without further action by the Company’s stockholders to the extent permitted by then-current law and to terminate the Plan of Liquidation for any reason, provided that the board of directors may not terminate the Plan of Liquidation after Articles of Dissolution have been filed with and accepted for record by the State Department of Assessments and Taxation of Maryland. The Company’s original goal was to complete the liquidation of its assets and make final distributions to its stockholders by July 17, 2020 (24 months after stockholder approval of the Plan of Liquidation). While the Company has been actively marketing the remaining assets for disposition, the recent spread of the COVID-19 (more commonly referred to as the Coronavirus) pandemic and its impact on the global economic environment has had, and is expected to continue to have, an adverse impact on overall market conditions and the Company’s disposition process. As a result, the Company believes it is unlikely that it will be able to complete the liquidation of its assets and make final cash distributions to its stockholders by July 17, 2020. Accordingly, any remaining assets and liabilities of the Company will be transferred into a liquidating trust as described in the Plan of Liquidation approved by the Company’s stockholders in July 2018. At that time, the Company’s stockholders will receive shares of beneficial interest in the liquidating trust and the Company will be dissolved. The liquidating trust will operate substantially in the same manner as the Company operates today and will continue to pursue the liquidation of the remaining assets with the goal of distributing the net proceeds of the liquidation to the Company’s stockholders. There can be no assurances regarding the timing or amounts of any additional liquidating distributions.


6


Through May 15, 2020, the Company has paid aggregate return of capital distributions of approximately $4.00 per share to its stockholders, which included $2.83 per share of liquidating distributions pursuant to the Plan of Liquidation.

Because the Plan of Liquidation follows the Company’s initial business plan, these financial statements have not been prepared on the liquidation basis of accounting.

The Company sold its interests in six properties for an aggregate sales price of $1.0 billion during 2017, 20 properties in 2018 for an aggregate sales price of $1.7 billion, four properties in 2019 for an aggregate sales price of $1.3 billion, and two properties in the first quarter of 2020 for an aggregate sales price of $379.9 million. As of March 31, 2020, the Company owned interests in eight real estate investments, consisting of the following types of investments:

Domestic office investments (1 investments)
Domestic other investments (4 investments)
International office investments (3 investments)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Described below are certain of the Company’s significant accounting policies. The disclosures regarding several of the policies have been condensed or omitted in accordance with interim reporting regulations specified in the instructions for Form 10-Q. Please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for a complete listing of all of its significant accounting policies.

Coronavirus Outbreak

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates. In particular, the Coronavirus pandemic has adversely impacted and is likely to further adversely impact the Company’s business, the businesses of the Company’s tenants and the real estate market generally. The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including fair value measurements, and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.

The ongoing global outbreak of the Coronavirus pandemic continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. It has disrupted global travel and supply chains, adversely impacted global commercial activity, and its long-term economic impact remains uncertain. Considerable uncertainty still surrounds the Coronavirus and its potential effects on the population, as well as the effectiveness of any responses taken on a national and local level by government authorities and businesses. The travel restrictions, limits on hours of operations and/or closures of non-essential businesses and other efforts to curb the spread of the Coronavirus have significantly disrupted business activity globally, including in the markets where the Company’s remaining assets are located, and the Company expects them to have an adverse impact on the performance of its investments. Many of the Company’s tenants are subject to shelter in place and other quarantine restrictions, and the restrictions could be in place for an extended period of time. These restrictions are particularly adversely impacting many of the Company’s retail tenants (other than grocery tenants), as government instructions regarding social distancing and mandated closures have reduced and, in some cases, eliminated customer foot traffic, causing many of the Company’s retail tenants to temporarily close their brick and mortar stores. As of March 31, 2020, the Company owned four retail properties in the U.S., which comprised nearly 51% of total revenues recognized by the Company during the three months ended March 31, 2020. Further, while the Company collected approximately 94% of March rents at its retail properties, collections in April dropped to around 33%. The Company is in preliminary discussions with these tenants and currently expects to grant relief to some of its tenants to defer rent payments as a result of their estimated lost revenues from the current Coronavirus pandemic; however, there can be no assurance the Company will reach an agreement with any tenant or if an agreement is reached, that any such tenant will be able to repay any such deferred rent in the future. Excluding retail properties, the Company collected approximately 97% of March rents and approximately 87% of April rents.
 
The outbreak will likely have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. In addition, the rapidly evolving nature of the pandemic makes it difficult to ascertain the long-term impact it will have on commercial real estate markets and the Company’s investments. Nevertheless, the Coronavirus presents material uncertainty and risk with respect to the performance of the Company’s real estate investments, its financial results, such as rent concessions or reduced rental rates, and ability to complete the disposition of its remaining properties pursuant to the Plan of

7


Liquidation, such as the potential negative impact to occupancy at the Company’s properties, the potential closure of certain of its assets for an extended period, the potential for adverse impacts with respect to financing arrangements, increased costs of operations, decrease in values of the Company’s real estate investments, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. The Company is unable to estimate the impact the Coronavirus will have on its financial results at this time. See Note 1 — Organization for a description of the delays it has caused with respect to the Company's completion of its Plan of Liquidation, which will cause the Company to transfer its assets and liabilities to a liquidating trust in the third quarter of this year.

Due to the business disruptions and challenges severely affecting the global economy caused by the Coronavirus pandemic, many lessors may be required to provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in Accounting Standards Codification (“ASC”) Topic 842 ("Topic 842") addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from the Coronavirus pandemic. In April 2020, the Financial Accounting Standards Board (“FASB”) staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the Coronavirus pandemic. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company has elected to apply such relief and will avail itself of the election to avoid performing a lease by lease analysis for the lease concessions that 1) were granted as relief due to the Coronavirus pandemic and 2) result in the cash flows remaining substantially the same or less. The Lease Modification Q&A has no material impact on the Company’s consolidated financial statements as of and for the three months ended March 31, 2020, however, its future impact to the Company is dependent upon the extent of lease concessions granted to tenants as a result of the Coronavirus pandemic in future periods and the elections made by the Company at the time of entering into such concessions.

Assets and Liabilities Held for Sale

As described previously, in connection with the execution of the Plan of Liquidation, the Company is actively working to sell its remaining properties by July 2020. Accordingly, in July 2019, the Company determined that all of its real estate properties and their related assets and associated liabilities should be classified as held for sale in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10. ASC 360-10 requires amounts related to assets held for sale to be recorded at the lower of their current carrying value or their estimated net realizable value (i.e. fair value less costs to sell).

As ASC 360-10 requires the separate presentation of assets and liabilities classified as held for sale, the Company has aggregated and presented these assets and liabilities each as one line on the Condensed Consolidated Balance Sheet (“assets held for sale” and “liabilities associated with assets held for sale”, respectively), which are described further in the tables below. Further, as a result of the held for sale designation, no depreciation or amortization related to the properties was recorded after July 2019. These assets did not qualify to be classified as discontinued operations, because the sale of these assets does not represent a strategic shift in the Company’s operations. As of March 31, 2020 and December 31, 2019, assets held for sale consisted of the following (in thousands):

8


 
 
March 31, 2020
 
December 31, 2019
Investment property, net
 
$
893,834

 
$
1,179,770

Restricted cash
 
3,172

 
12,780

Tenant and other receivables, net
 
94,526

(1) 
50,278

Intangible lease assets, net
 
89,152

 
97,030

Right-of-use asset, net
 
91,034

 
97,499

Deferred leasing costs, net
 
79,801

 
102,366

Deferred financing costs, net
 
845

 
845

Other assets
 
8,925

 
11,290

Total assets held for sale
 
$
1,261,289

 
$
1,551,858



(1)
As of March 31, 2020, Tenant and other receivables, net included $47.4 million related to proceeds to be received from the sale of Perspective Defense. See Note 3 — Investment Property for more information on the sale of Perspective Defense.

As of March 31, 2020 and December 31, 2019, liabilities associated with assets held for sale consisted of the following (in thousands):

 
 
March 31, 2020
 
December 31, 2019
Accounts payable and accrued expenses
 
$
37,681

 
$
48,459

Due to affiliates
 
824

 
2,003

Intangible lease liabilities, net
 
43,534

 
45,425

Other liabilities
 
12,447

 
21,328

Notes payable, net (1)
 
221,442

 
536,685

Total liabilities associated with assets held for sale
 
$
315,928

 
$
653,900


(1)
Includes outstanding liabilities related to the Company’s Revolving Credit Facility (as defined below), which is collateralized by several of the remaining properties and must be repaid after the sale of those properties.

Other Assets

As of March 31, 2020, other assets included the following (in thousands):

 
 
March 31, 2020
(1) 
December 31, 2019
(2) 
Prepaid expenses
 
$
1,062

 
$
1,580

 
Deferred tax assets
 
8,027

 
10,056

 
Other
 
225

 
228

 
Other assets
 
$
9,314

 
$
11,864

 

(1)
As of March 31, 2020, with the exception of $0.4 million related to corporate level activities, these amounts were included in other assets within assets held for sale.

(2)
As of December 31, 2019, with the exception of $0.6 million related to corporate level activities, these amounts were included in other assets within assets held for sale.


9


Revenue Recognition
 
As of January 1, 2018, the Company began accounting for the sale of real estate properties under ASU 2017-05, which provides for revenue recognition based on completed performance obligations, which typically occurs upon the transfer of ownership of a real estate asset.

Rental payments are generally paid by the tenants prior to the beginning of each month or quarter to which they relate. As of March 31, 2020 and December 31, 2019, respectively, the Company recorded liabilities of $5.5 million and $12.4 million related to prepaid rental payments, which were included in liabilities associated with assets held for sale as of March 31, 2020 and December 31, 2019, respectively in the accompanying Condensed Consolidated Balance Sheets. The Company recognizes rental revenue on a straight-line basis over the life of the lease, including rent holidays, if any. Straight-line rent receivable was $34.3 million and $40.4 million as of March 31, 2020 and December 31, 2019, respectively. Straight-line rent receivable consists of the difference between the tenants’ rents calculated on a straight-line basis from the date of acquisition or lease commencement over the remaining terms of the related leases and the tenants’ actual rents due under the lease agreements and is included in assets held for sale as of March 31, 2020 and December 31, 2019 in the accompanying Condensed Consolidated Balance Sheets. Revenues associated with operating expense recoveries are recognized in the period in which the expenses are incurred based upon the tenant lease provisions. Revenues relating to lease termination fees are recognized on a straight-line basis amortized from the time that a tenant’s right to occupy the leased space is modified through the end of the revised lease term.

Other revenues consist primarily of parking revenue, tenant reimbursements and interest on loans receivable. Parking revenue represents amounts generated from contractual and transient parking and is recognized in accordance with contractual terms or as services are rendered. Other revenues relating to tenant reimbursements are recognized in the period that the expense is incurred.

Recently Adopted Accounting Pronouncements
 
In August 2018, the FASB issued ASU No. 2018-13, "Changes to the Disclosure Requirements for Fair Value Measurement." This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. The ASU also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU No. 2018-13 are effective for the Company as of January 1, 2020 and have not materially impacted the Company’s financial statements.


10


3. INVESTMENT PROPERTY
 
Investment property consisted of the following amounts as of March 31, 2020 and December 31, 2019 (in thousands):

 
March 31, 2020
 
December 31, 2019
Buildings and improvements
$
712,755

 
$
955,411

Less: accumulated depreciation
(43,280
)
 
(79,394
)
Buildings and improvements, net
669,475

 
876,017

Land
224,359

 
303,753

Investment property, net (1)
$
893,834

 
$
1,179,770


(1)
As of March 31, 2020 and December 31, 2019, these amounts were included in assets held for sale.

Recent Dispositions of Real Estate Investments

In January 2020, the Company completed the sale of its Riverside Center property for a contract sales price of $235.0 million. The Company recognized a gain on sale of this asset of $48.6 million net of disposition fees, which was recorded in gain on sale of real estate investments on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

In February 2020, the Company completed the sale of its Perspective Defense property for a contract sales price of €129.8 million (approximately $144.9 million at a rate of $1.12 per EUR). The Company recognized a gain on sale of this asset of $17.7 million net of disposition fees, which was recorded in gain on sale of real estate investments on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

During the three months ended March 31, 2020, the Company completed the sale of several outparcels at its property, The Rim, for a total aggregate contract sales price of $25.1 million. The Company recognized a gain on sale of these assets of $15.2 million net of disposition fees, which was recorded in gain on sale of real estate investments on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

As of March 31, 2020, the cost basis and accumulated amortization related to lease intangibles were as follows (in thousands):

 
Lease Intangibles (1)
 
 In-Place Leases
 
Out-of-Market
Lease Assets
 
Out-of-Market
Lease Liabilities
 
 
 
Cost
$
159,536

 
$
13,993

 
$
(69,698
)
Less: accumulated amortization
(77,157
)
 
(7,220
)
 
26,164

Net
$
82,379

 
$
6,773

 
$
(43,534
)

(1)
As of March 31, 2020, these amounts were included in assets held for sale and liabilities associated with assets held for sale.

As of December 31, 2019, the cost basis and accumulated amortization related to lease intangibles were as follows (in thousands):

 
Lease Intangibles (1)
 
 
 
Out-of-Market
Lease Assets
 
Out-of-Market
Lease Liabilities
 
In-Place Leases
 
 
Cost
$
221,996

 
$
21,776

 
$
(75,002
)
Less: accumulated amortization
(131,940
)
 
(14,802
)
 
29,577

Net
$
90,056

 
$
6,974

 
$
(45,425
)

(1)
As of December 31, 2019, these amounts were included in assets held for sale and liabilities associated with assets held for sale.


11


Amortization expense of in-place leases was $4.5 million for the three months ended March 31, 2019. There was no amortization of in-place leases for the three months ended March 31, 2020, due to the related properties being classified as held for sale. Amortization of out-of-market leases resulted in an increase to rental revenue of $1.0 million for the three months ended March 31, 2019. There was no amortization of out-of-market leases for the three months ended March 31, 2020, due to the related properties being classified as held for sale.

Leases
 
The Company’s leases are generally for terms of 15 years or less and may include multiple options to extend the lease term upon tenant election. The Company’s leases typically do not include an option to purchase. Generally, the Company does not expect the value of its real estate assets to be impacted materially at the end of any individual lease term, as the Company is typically able to release the space and real estate assets tend to hold their value over a long period of time. Tenant terminations prior to the lease end date occasionally result in a one-time termination fee based on the remaining unpaid lease payments including variable payments and could be material to the tenant. Many of the Company’s leases have increasing minimum rental rates during the terms of the leases through escalation provisions. In addition, the majority of the Company’s leases provide for separate billings for variable rent, such as, reimbursements of real estate taxes, maintenance and insurance and may include an amount based on a percentage of the tenants’ sales.  Total billings related to expense reimbursements from tenants for the three months ended March 31, 2020 and 2019 was $10.3 million and $12.2 million, respectively, which is included in rental revenue on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The Company has entered into non-cancelable lease agreements with tenants for space. As of March 31, 2020, the approximate fixed future minimum rentals for the period from April 1, 2020 through December 31, 2020, for each of the years ending December 31, 2021 through December 31, 2025 and for the period thereafter are as follows (in thousands):

 
Fixed Future Minimum Rentals (1)
April 1, 2020 through December 31, 2020
$
66,273

2021
90,528

2022
89,696

2023
83,233

2024
71,924

2025
65,439

Thereafter
401,674

Total
$
868,767


(1) As of March 31, 2020, these amounts were related to assets classified as held for sale.

During the three months ended March 31, 2020 and 2019, the Company did not earn more than 10% of its total rental revenue from any individual tenant.


12


4. DEBT FINANCING
 
As of March 31, 2020 and December 31, 2019, the Company had $222.2 million and $537.8 million of principal outstanding, respectively, with a weighted average years to maturity of 0.6 years and 0.4 years, respectively, and a weighted average interest rate of 3.1% and 3.0%, respectively. The following table describes the Company’s debt outstanding at March 31, 2020 and December 31, 2019 (in thousands, except percentages):
Description
 
Origination or Assumption Date
 
Maturity Date
 
Interest Rate Description
 
Interest Rate as of
March 31, 2020
 
Principal Outstanding at March 31, 2020 (1)
 
Principal Outstanding at December 31, 2019 (1)
Secured Mortgage Debt
 
 
 
 
 
 
 
 
 
 
 
 
New City
 
3/28/2013
 
3/18/2021
 
Variable, subject to interest rate cap
 
2.30
%
 
$
69,112

 
$
71,144

Perspective Défense
 
6/21/2013
 
7/25/2020
 
Variable
 
 N/A

 

 
78,505

25 Cabot Square
 
3/26/2014
 
9/30/2020
(2) 
Fixed
 
3.50
%
 
153,116

 
163,164

Other Notes Payable
 
 
 
 
 
 
 
 

 
 
 
 
JPMorgan Chase Revolving Credit Facility - Revolving Loan
 
4/13/2012
 
9/4/2020
(3) 
Variable
 
 N/A

 

 

JPMorgan Chase Revolving Credit Facility - Term Loan
 
5/22/2013
 
9/4/2020
 
Variable
 
 N/A

 

(4) 
225,000

Total Principal Outstanding
 
 
 
 
 
 
 
$
222,228

 
$
537,813

Unamortized Deferred Financing Costs(5)
 
 
 
 
 
 
 
 
 
$
(786
)
 
$
(1,128
)
Notes Payable, net
 
 
 
 
 
 
 
$
221,442

 
$
536,685


(1)As of March 31, 2020 and December 31, 2019, these amounts were included in liabilities associated with assets held for sale.

(2)In March 2020, the secured mortgage loan at 25 Cabot Square was amended, resulting in a new maturity date of September 30, 2020.

(3)In March 2020, the Revolving Credit Facility was amended, resulting in a new maturity date of September 4, 2020.

(4)In January 2020, the Company paid off the Revolving Credit Facility - Term Loan in full.

(5)Unamortized deferred financing costs related to the revolving loan commitment of the JPMorgan Chase Revolving Credit Facility were included in assets held for sale as of March 31, 2020.

As of March 31, 2020, the variable-rate debt has variable interest rates ranging from the LIBOR or EURIBOR screen rate plus 1.45% to 2.30% per annum. As of March 31, 2020, $55.4 million of one of the Company’s variable-rate loans was capped at a strike rate of 0.00%. Additionally, as of December 31, 2019, $56.9 million one of the Company’s variable-rate loans was capped at a strike rate of 0.00%.

JP Morgan Chase Revolving Credit Facility

In April 2012, the Operating Partnership entered into a credit agreement with JPMorgan Chase Bank, N.A. (the “Credit Agreement”), as administrative agent for itself and various lenders named in the Credit Agreement. The Company refers to the revolving loan commitment and term loan commitment collectively as the “Revolving Credit Facility.” As amended in March 2020, the borrowings may be denominated in U.S. dollars, British pound sterling, Euros, Australian dollars or Canadian dollars with up to $200.0 million maximum amount available under the Revolving Credit Facility.

Prior to the March 2020 amendment total commitments under the Revolving Credit Facility were $725.0 million. As amended, the Credit Agreement provides for a revolving loan commitment of up to $200.0 million and a term loan commitment of up to $225.0 million. Aggregate foreign currency commitments can constitute up to $100.0 million of the maximum amount available under the revolving loan commitment. The March 2020 amendment extended the maturity date of the Revolving Credit Facility from March 4, 2020 to September 4, 2020. The Company may elect to extend the maturity by two additional six-month extensions at the Company’s option and subject to the satisfaction of certain conditions.

During the three months ended March 31, 2020, the Company made no draws and a payment of $225.0 million on the Revolving Credit Facility to pay it off in full.


13


Financial Covenants

The Company's mortgage agreements and other loan documents for the debt described in the table above contain customary events of default, with corresponding grace periods, including payment defaults, cross-defaults to other agreements and bankruptcy-related defaults, and customary covenants, including limitations on liens and indebtedness and maintenance of certain financial ratios. In addition, the Company has executed customary recourse carve-out guarantees of certain obligations under its mortgage agreements and the other loan documents.  The Company is not aware of any instances of noncompliance with financial covenants as of March 31, 2020. The Company’s continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions associated with the Coronavirus pandemic. Failure to comply with these covenants would result in a default which, if the Company were unable to cure or obtain a waiver from the lenders, could accelerate the repayment obligations and strain the liquidity of the Company.

Principal Payments on Debt
 
The Company is required to make the following principal payments on its outstanding notes payable for period April 1, 2020 through December 31, 2020, and each of the years ending December 31, 2021 through December 31, 2024 and for the period thereafter (amounts are in thousands):

 
Payments due by Year
 
April 1, 2020 through December 31, 2020
 
2021
 
2022
 
2023
 
2024
 
Thereafter
Principal payments
$
154,770


$
67,458

 
$

 
$

 
$

 
$


5. DERIVATIVE INSTRUMENTS

The Company has entered into several interest rate cap contracts in connection with certain of its secured mortgage loans in order to limit its exposure against the variability of future interest rates on its variable interest rate borrowings.  The Company’s interest rate cap agreements have economically limited the interest rate on each of the loans to which they relate.  The Company has not designated any of these derivatives as hedges for accounting purposes. The Company has not entered into a master netting arrangement with its third-party counterparty and does not offset on its consolidated balance sheets the fair value amount recorded for its derivative instruments. See Note 4 — Debt Financing for additional information on the interest rate caps associated with the Company’s variable rate loans and Note 7 — Fair Value Measurements for additional information regarding the fair value of the Company’s interest rate contracts.

The Company has also entered into foreign currency forward contracts as economic hedges against the variability of foreign exchange rates related to certain cash flows of some of its international investments. These forward contracts fixed the currency exchange rates on each of the investments to which they related. The Company did not designate any of these contracts as fair value or cash flow hedges for accounting purposes.

The table below provides additional information regarding the Company’s foreign currency forward contracts that were outstanding, as of March 31, 2020 (in thousands):

Foreign Currency Forward Contracts
 
 
 
 
 
 
Effective Date
 
Expiration Date
 
Notional Amount
 
Buy/Sell
 
Traded Currency Rate
December 4, 2019
 
April 30, 2020
 
£
225,000

 
USD/GBP
 
$
1.31

December 5, 2019
 
April 30, 2020
 
20,000

 
USD/EUR
 
$
1.12

March 27, 2020
 
April 30, 2020
 
45,000

 
USD/EUR
 
$
1.11



14


The table below presents the effects of the changes in fair value of the Company’s derivative instruments in the Company’s condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2020 and 2019 (in thousands):

 
Gain (Loss) Recorded on Derivative Instruments
 
Three Months Ended
 
March 31,
2020
 
March 31,
2019
Derivatives not designated as hedging instruments:
 
 
 
Unrealized foreign currency forward contracts
$
20,105

 
$

Settlement of foreign currency forward contract
493

 
(126
)
Total gain (loss) on derivatives
$
20,598

 
$
(126
)

6.  RELATED PARTY TRANSACTIONS

The table below outlines fees and expense reimbursements incurred that are payable by the Company to the Advisor, Hines and its affiliates for the periods indicated below and amounts unpaid as of March 31, 2020 and December 31, 2019 (in thousands):

 
Incurred
 
 
 
 
 
 
 
Three Months Ended March 31,
 
Unpaid as of
 
Type and Recipient
 
2020
 
2019
 
March 31, 2020
(1) 
December 31, 2019
(1) 
Asset Management Fee- the Advisor and affiliates of Hines
 
$
5,712

 
$
6,780

 
$
1,584

 
$
1,763

 
Disposition Fee- the Advisor
 
$
4,049

 
$
4,777

 
251

 
7,976

 
Other (2) 
 
$
750

 
$
1,488

 
818

 
1,477

 
Property Management Fee- Hines
 
$
472

 
$
1,055

 
153

 
277

 
Development/Construction Management Fee- Hines
 
$
12

 
$
572

 
103

 
119

 
Leasing Fee- Hines
 
$
99

 
$
194

 
369

 
1,061

 
Expense Reimbursement- Hines (with respect to management and operations of the Company’s properties)
 
$
1,356

 
$
1,887

 
257

 
489

 
Due to Affiliates
 
 
 
 
 
$
3,535

 
$
13,162

 

(1)
As of March 31, 2020 and December 31, 2019, with the exception of $2.7 million and $11.2 million, respectively, related to corporate level activities, these amounts were included in due to affiliates within liabilities associated with assets held for sale.

(2)
Includes amounts the Advisor paid on behalf of the Company such as general and administrative expenses and offering costs.  These amounts are generally reimbursed to the Advisor during the month following the period in which they are incurred.

Summit Development Agreement

In March 2019, the Company entered into a Development Management Agreement with Hines, the Company’s sponsor, for the construction and development of an office building at the Summit in Bellevue, Washington. Hines was paid a project administration fee equal to 2.5% of the qualified construction costs. In December 2019, The Summit, including the office building in development, was sold and the Company is no longer a party to this agreement.


15


7.  FAIR VALUE MEASUREMENTS

Financial Instruments Fair Value Disclosures
 
As of March 31, 2020, the Company estimated that the fair value of its notes payable, which had a book value (excluding any unamortized discount or premium and deferred financing costs) of $222.2 million, was $222.4 million. As of December 31, 2019, the Company estimated that the fair value of its notes payable, which had a book value (excluding any unamortized discount or premium) of $537.8 million, was $538.0 million. Management has utilized available market information, such as interest rate and spread assumptions of notes payable with similar terms and remaining maturities, to estimate the amounts required to be disclosed. Although the Company has determined the majority of the inputs used to value its notes payable fall within Level 2 of the fair value hierarchy, the credit quality adjustments associated with its fair value of notes payable utilize Level 3 inputs. However, as of March 31, 2020, the Company has assessed the significance of the impact of the credit quality adjustments on the overall valuations of its fair market value of notes payable and has determined that they are not significant. As a result, the Company has determined these financial instruments utilize Level 2 inputs. Since such amounts are estimates that are based on limited available market information for similar transactions, there can be no assurance that the disclosed values could be realized.

Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, restricted cash, tenant and other receivables, accounts payable and accrued expenses, other liabilities, due to affiliates and distributions payable.  The carrying value of these items reasonably approximates their fair value based on their highly liquid nature and/or short-term maturities. Due to the short-term nature of these instruments, Level 1 inputs are utilized to estimate the fair value of the cash and cash equivalents and restricted cash and Level 2 inputs are utilized to estimate the fair value of the remaining financial instruments.

Financial Instruments Measured on a Nonrecurring Basis

Certain long-lived assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments (i.e., impairments) in certain circumstances. The fair value methodologies used to measure long-lived assets are described in Note 2 — Summary of Significant Accounting Policies - Investment Property and Lease Intangibles.  The inputs associated with the valuation of long-lived assets are generally included in Level 3 of the fair value hierarchy.  

Impairment of Investment Property

Investment properties are reviewed for impairment at each reporting period if events or changes in circumstances indicate that the
carrying amount may not be recoverable. No investment properties were impaired during the three months ended March 31, 2020.

As a result of the Company’s remaining real estate properties meeting the criteria to be classified as held for sale for the year ended December 31, 2019, the Company determined that six of its remaining properties were impaired by $115.4 million based on such assets having carrying values that exceeded their estimated sales price less costs to sell based on the offers received (level 2 inputs) and third party broker consultations (level 3 inputs), which were obtained in conjunction with its marketing process. Of this amount, $46.9 million is attributable to the requirement when real estate properties are classified as held for sale to include cumulative foreign currency translation adjustments (“cumulative CTA”) in the carrying value for two of the Company’s foreign denominated assets within the impairment tests in accordance with ASC 830, Foreign Currency Matters. These impairment losses are limited to the carrying amount of each asset.

Prior to designating its properties as held for sale, investment properties were reviewed for impairment at each reporting period if events or changes in circumstances indicated that the carrying amount may not be recoverable. During the year ended December 31, 2019, the Company determined that one of its properties was impaired by $7.2 million as a result of deteriorating market conditions and valued it using level 3 inputs.

The changes in assumptions resulted in the net book value of the assets exceeding the projected undiscounted cash flows for the property. As a result, the assets were written down to fair value. The following table summarizes activity for the Company’s assets measured at fair value, on a non-recurring basis as of March 31, 2020 and December 31, 2019 (in thousands).


16


 
 
Basis of Fair Value Measurements
As of
 
Description
 
Fair Value of Assets
 
Quoted Prices
In Active
Markets for
Identical Items
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Impairment
Loss
December 31, 2019
 
Investment property
 
$
544,846

 
$

 
$
458,828

 
$
86,018

 
$
122,603


The Company’s estimated fair value of the investment properties measured using level 3 inputs were based on comparisons of recent market activity and discounted cash flow models, which include estimates of property-specific inflows and outflows over a specific holding period. Significant unobservable quantitative inputs used in determining the fair value of the investment property for the period ended December 31, 2019 include: a discount rate of 8.80%; a capitalization rate of 6.50%; stabilized occupancy rate of 91.7%; and current market rental rates ranging from $12.00 to $47.00 per square foot.  These inputs are based on the location, type and nature of each property, current and anticipated market conditions, and management’s knowledge and expertise in real estate.

8. REPORTABLE SEGMENTS

The Company’s real estate investments are geographically diversified and management evaluates the operating performance of each at an individual investment level and considers each investment to be an operating segment. The Company has aggregated all of its operating segments into four reportable segments based on the location of the segment and the underlying asset class. Management has aggregated the Company’s investments that are not office properties in “other” based on the geographic location of the investment, due to the Company’s ownership of interests in various different types of investments that do not stand alone as their own reportable segment. The Company’s reporting segments consist of the following, based on the Company’s investments as of March 31, 2020:

Domestic office investments (1 investments)
Domestic other investments (4 investments)
International office investments (3 investments)
International other investments (0 investments remaining as of March 31, 2020)

The tables below provide additional information related to each of the Company’s segments, geographic location and a reconciliation to the Company’s net income (loss), as applicable. “Corporate-Level Accounts” includes amounts incurred by the corporate-level entities which are not allocated to any of the reportable segments (all amounts are in thousands, except for percentages):

 
Three Months Ended March 31,
 
2020
 
2019
Total Revenue
 
 
 
Domestic office investments
$
3,162

 
$
16,841

Domestic other investments
17,637

 
18,660

International office investments
13,835

 
11,991

International other investments

 
741

Total Revenue
$
34,634

 
$
48,233



17


For the three months ended March 31, 2020 and 2019 the Company’s total revenue was attributable to the following countries:

 
Three Months Ended March 31,
 
2020
 
2019
Total Revenue
 
 
 
United States
59
%
 
73
%
United Kingdom
25
%
 
14
%
Poland
8
%
 
5
%
Russia
5
%
 
5
%
France
3
%
 
3
%

For the three months ended March 31, 2020 and 2019, the Company’s property revenues in excess of expenses by segment was as follows (in thousands):

 
Three Months Ended March 31,
 
2020
 
2019
Property revenues in excess of expenses (1)
 
 
 
Domestic office investments
$
1,157

 
$
10,166

Domestic other investments
9,771

 
11,393

International office investments
6,793

 
5,599

International other investments
(171
)
 
400

Property revenues in excess of expenses
$
17,550

 
$
27,558


(1)
Revenues less property operating expenses, real property taxes and property management fees.

As of March 31, 2020 and December 31, 2019, the Company’s total assets by segment was as follows (in thousands):

 
March 31, 2020
 
December 31, 2019
Total Assets
 
 
 
Domestic office investments
$
75,666

 
$
261,330

Domestic other investments
655,626

 
665,079

International office investments
546,818

 
655,138

International other investments
6,720

 
7,723

Corporate-level accounts
380,270

 
336,455

Total Assets
$
1,665,100

 
$
1,925,725


As of March 31, 2020 and December 31, 2019, the Company’s total assets were attributable to the following countries:

 
March 31, 2020
 
December 31, 2019
Total Assets
 
 
 
United States
67
%
 
66
%
United Kingdom
23
%
 
21
%
Poland
6
%
 
6
%
France
3
%
 
6
%
Russia
1
%
 
1
%


18


For the three months ended March 31, 2020 and 2019, the Company’s reconciliation to the Company’s property revenues in excess of expenses is as follows (in thousands):

 
Three Months Ended March 31,
 
2020
 
2019
Reconciliation to property revenues in excess of expenses
 
 
 
Net income (loss)
$
101,306

 
$
191,410

Depreciation and amortization

 
13,444

Asset management fees
5,712

 
6,780

General and administrative expenses
2,073

 
2,595

(Gain) loss on derivatives
(20,598
)
 
126

(Gain) loss on sale of real estate investments
(80,186
)
 
(192,189
)
Foreign currency (gains) losses
6,166

 
(399
)
Interest expense
2,386

 
7,347

Other (income) expenses
(1,009
)
 
(1,283
)
(Benefit) provision for income taxes
1,700

 
(273
)
Total property revenues in excess of expenses
$
17,550

 
$
27,558


9. SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental cash flow disclosures for the three months ended March 31, 2020 and 2019 (in thousands):

 
Three Months Ended March 31,
 
2020
 
2019
Supplemental Disclosure of Cash Flow Information
 
 
 
Cash paid for interest
$
2,708

 
$
5,717

Cash paid for taxes
$
376

 
$
794

Supplemental Schedule of Non-Cash Activities
 
 
 
Shares tendered for redemption
$
1,785

 
$
705

Receivables related to proceeds from dispositions
$
48,149

 
$

Assumption of mortgage upon disposition of property
$
78,519

 
$

Accrued capital additions
$
1,437

 
$
7,182



19


10. COMMITMENTS AND CONTINGENCIES

The Company may be subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on the Company’s condensed consolidated financial statements.




20


11. SUBSEQUENT EVENTS

Additional Suspension of Share Redemption Program

In February 2019, in line with common practice within the industry when executing a plan of liquidation, the Company suspended its share redemption program (“SRP”), with the exception of redemptions related to the death or disability of a stockholder. As previously announced, because values are difficult to discern at this time due to the market unrest resulting from the Coronavirus pandemic, the Company’s board of directors has determined it would not be prudent to attempt to determine a new net asset value (“NAV”) per share of the Company’s common stock at this time. Since the Coronavirus pandemic is ongoing, and given that the redemption price under the SRP is equal to the most recently determined NAV per share of the Company’s common stock and the NAV per share was last determined as of February 14, 2019, the Board has determined to also suspend redemptions related to the death or disability of a stockholder, effective May 17, 2020.

The Rim Outparcel

In April 2020, the Company sold an outparcel at The Rim for a contract sales prices of $6.9 million. The purchaser is not affiliated with the Company or its affiliates.

The Avenue at Murfreesboro

In April 2020, the Company entered into a contract to sell The Avenue at Murfreesboro for a contract sales prices of $141.3 million. Although the Company expects the closing of this sale to occur in August 2020, there can be no assurances as to if or when this sale is completed.

The Markets at Town Center Outparcel

In May 2020, the Company entered into a contract to sell an outparcel at The Markets at Town Center for a contract sales prices of $10.0 million. Although the Company expects the closing of this sale to occur in 2020, there can be no assurances as to if or when this sale is completed.


*****


21


Item 2.   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 condensed consolidated financial statements and the notes thereto included in Item 1 in this Quarterly Report on Form 10-Q.  The following discussion should also be read in conjunction with our audited consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Cautionary Note 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, economic conditions that may impact our operations, our ability to effectively liquidate our assets and pay liquidating distributions to our stockholders in the expected time frame or not at all, our future leverage and financial position, our future capital expenditures, future distributions, other developments and trend in the commercial real estate industry and our business strategy. Forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” 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 in this Form 10-Q are based on 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, current and future economic, competitive and market conditions, the availability of future financing and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Any of the assumptions underlying forward-looking statements could prove to be inaccurate. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide distributions to our stockholders and maintain the value of the real estate properties in which we hold an interest, may be significantly hindered.


22


The following are some of the risks and uncertainties, which could cause actual results to differ materially from those presented in certain forward-looking statements:
 
 
Whether we will be able to complete the sale of all or substantially all of our assets as expected;
 
 
Risks associated with adverse changes in general economic or local market conditions, including the impact of the ongoing COVID-19 (more commonly referred to as the Coronavirus) pandemic and efforts to prevent the spread, which are adversely affecting the markets in which we and our tenants operate;
 
 
Unanticipated difficulties, expenditures or delays relating to our implementation of our plan of liquidation and dissolution, which may reduce or delay our payment of additional liquidating distributions to our stockholders;
 
 
Risks associated with the potential response of tenants, business partners and competitors to our adoption and implementation of the plan of liquidation and dissolution;
 
 
Risks associated with legal proceedings that may be instituted against us and others related to the Plan of Liquidation;
 
 
Competition for tenants, including competition with affiliates of Hines Interests Limited Partnership (“Hines”);
 
 
Our reliance on Hines Global REIT Advisors LP (the “Advisor”) Hines and affiliates of Hines for our day-to-day operations and the management of our real estate investments, and our advisor’s ability to attract and retain high-quality personnel who can provide service at a level acceptable to us;
 
 
Risks associated with conflicts of interest that result from our relationship with our Advisor and Hines, as well as conflicts of interests certain of our officers and directors face relating to the positions they hold with other entities;
 
 
The potential need to fund tenant improvements, lease-up costs or other capital expenditures, as well as increases in property operating expenses and costs of compliance with environmental matters or discovery of previously undetected environmentally hazardous or other undetected adverse conditions at our properties;
 
 
The amount and timing of additional liquidating distributions we may pay is uncertain and cannot be assured;
 
 
Risks associated with debt and our ability to secure financing;
 
 
Catastrophic events, such as hurricanes, earthquakes, tornadoes and terrorist attacks; and our ability to secure adequate insurance at reasonable and appropriate rates;
 
 
The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to fund our operating expenses and other capital expenditures;
 
 
Changes in governmental, tax, real estate and zoning laws and regulations and the related costs of compliance and increases in our administrative operating expenses, including expenses associated with operating as a public company;
 
 
International investment risks, including the burden of complying with a wide variety of foreign laws and the uncertainty of such laws, the tax treatment of transaction structures, political and economic instability, foreign currency fluctuations, and inflation and governmental measures to curb inflation may adversely affect our operations and our ability to make distributions;
 
 
The lack of liquidity associated with our assets;
 
 
Our ability to continue to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; and
 
 

Risks related to the United Kingdom's exit from the European Union (“Brexit”), including, but not limited to the decline of revenue derived from, and the market value of, our properties located in the United Kingdom and Poland, which may negatively impact on our ability to sell these properties and the pricing we are able to receive.

These risks are more fully discussed in, and all forward-looking statements should be read in light of, all of the factors discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.

Our stockholders are cautioned not to place undue reliance on any forward-looking statement 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 may increase with the passage of time. In light of the significant uncertainties inherent in the forward-looking statements in this Quarterly Report on Form 10-Q, 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. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. Each forward-looking statement speaks only as of the date of the particular statement, and we do not undertake to update any forward-looking statement.


23


Executive Summary

Hines Global REIT, Inc. (“Hines Global” and, together with its consolidated subsidiaries, “we”, “us” or the “Company”) was incorporated under the Maryland General Corporation Laws on December 10, 2008, primarily for the purpose of investing in a diversified portfolio of quality commercial real estate properties and other real estate investments located throughout the United States and internationally. Hines Global raised the equity capital for its real estate investments through two public offerings from August 2009 through April 2014, and through its distribution reinvestment plan (the “DRP Offering”) from April 2014 through August 2018. Collectively, through its public offerings, Hines Global raised gross offering proceeds of approximately $3.1 billion, including the DRP Offering, all of which was invested in the Company’s real estate portfolio.

We invested the proceeds from our public offerings into a diverse portfolio of real estate investments. In recent years, we have concentrated our efforts on actively managing our assets and exploring a variety of strategic opportunities focused on enhancing the composition of our portfolio and its total return potential for its stockholders.  On April 23, 2018, in connection with its review of potential strategic alternatives available to the Company, our board of directors determined that it is in the best interest of the Company and its stockholders to sell all or substantially all of our properties and assets and for the Company to liquidate and dissolve pursuant to the Plan of Liquidation. The principal purpose of the liquidation is to provide liquidity to our stockholders by selling the Company’s assets, paying its debts and distributing the net proceeds from liquidation to our stockholders. As required by Maryland law and our charter, the Plan of Liquidation was approved by the affirmative vote of the holders of at least a majority of the shares of our common stock outstanding and entitled to vote thereon at the Company’s annual meeting of stockholders held on July 17, 2018.

In April 2018, our board of directors estimated that, in addition to regular operating distributions paid to our stockholders, if we are able to successfully implement the Plan of Liquidation, then after the sale of all or substantially all of the Company’s assets and the payment of all of the outstanding liabilities, we will have made total Return of Capital Distributions to our stockholders of approximately $10.00 to $11.00 per share of the Company’s common stock, consisting of three components: (i) the $1.05 per share special distribution paid to stockholders in January 2018 (the “Special Distribution”); (ii) the $0.12 per share of return on invested capital distributions paid to stockholders for the six months ended June 30, 2018 (the “Return of Invested Capital Distributions”); and (iii) the range of liquidating distributions to be made pursuant to the Plan of Liquidation of $8.83 to $9.83 per share, estimated by our board of directors in April 2018, and we have made liquidating distributions of approximately $2.83 per share to date.

From January 2018 through February 2019, we paid Return of Capital Distributions to our stockholders totaling approximately $4.00 per share, consisting of the $1.05 per share Special Distribution paid in January 2018, the $0.12 per share Return of Invested Capital Distributions paid for the six months ended June 30, 2018, the $0.33 per share monthly liquidating distributions paid between August 2018 and January 2019, and the $2.50 per share liquidating distribution paid in February 2019. We have been working diligently to successfully execute the Plan of Liquidation. Our original goal was to complete the liquidation and make final distributions to our stockholders by July 17, 2020 (24 months after stockholder approval of the Plan of Liquidation). While we have been actively marketing the remaining assets for disposition, the recent spread of the COVID-19 (more commonly referred to as the Coronavirus) pandemic and its impact on the global economic environment has had, and is expected to continue to have, an adverse impact on overall market conditions and our disposition process. At this time, we cannot predict the ultimate impact to the process or timing, but we remain very thoughtful in proactively positioning our portfolio to be flexible and adaptable to the evolving circumstances. Accordingly, there can be no assurances regarding the timing or amounts of any further liquidating distributions, that we will ultimately pay aggregate liquidating distributions within the range estimated by our board of directors when it approved the Plan of Liquidation in April 2018, or that we will make the final distribution on or before July 17, 2020. If we are unable to complete the liquidation and make final distributions to our stockholders by July 17, 2020, we expect that any remaining assets and liabilities of the Company would be transferred into a liquidating trust as described in the Plan of Liquidation approved by our stockholders in July 2018. In addition, even if we sell all of our assets by July 17, 2020, we may determine not to distribute all distributable cash by that date and may establish a reserve to provide for any remaining obligations and to cover our expenses as we complete our wind down and dissolution.

At the peak of our acquisition phase, we owned interests in 45 properties. We sold interests in six properties for an aggregate sales price of $1.0 billion during 2017, 20 properties for an aggregate sales price of $1.7 billion during 2018, four properties during 2019 for an aggregate sales price of $1.3 billion and two additional properties in the first quarter of 2020 for an aggregate sales price of $379.9 million. As of March 31, 2020, we owned eight properties in our portfolio that include the following investments:

Domestic office investments (1 investments)
Domestic other investments (4 investments)
International office investments (3 investments)


24


Our portfolio is comprised of approximately 64% domestic and 36% international investments and our current investment types encompass approximately 41% office and 59% retail based on the estimated values of our investments as of March 31, 2020, which were based on the appraised values of our real estate investments as of December 31, 2018.

The following table provides additional information regarding each of the properties in which we owned an interest as of March 31, 2020.

Property
 
Location
 
Investment Type
 
Date Acquired/ Net Purchase Price (in millions) (1)
 
Estimated Going-in Capitalization Rate (2)
 
Leasable Square Feet
 
Percent Leased
Domestic Office Investments
 
 
 
 
 
 
 
 
 
 
Campus at Marlborough
 
Marlborough, Massachusetts
 
Office
 
10/2011; $103.0
 
8.0%
 
531,916

 
76
%
Total for Domestic Office Investments
 
 
 
 
 
 
 
531,916

 
76
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic Other Investments
 
 
 
 
 
 
 
 

 
 

Minneapolis Retail Center
 
Minneapolis, Minnesota
 
Retail
 
8/2012 & 12/2012; $130.6
 
6.5%
 
398,585

 
95
%
The Markets at Town Center

Jacksonville, Florida

Retail

7/2013; $135.0

5.9%

317,557


65
%
The Avenue at Murfreesboro

Nashville, Tennessee

Retail

8/2013; $163.0

6.4%

800,106


85
%
The Rim
 
San Antonio, Texas
 
Retail
 
2/2014, 4/2015, 12/2015 & 12/2016: $285.9
 
5.9%
 
1,051,219

 
96
%
Total for Domestic Other Investments
 
 
 
 
 
 
 
2,567,467

 
89
%
 
 
 
 
 
 
 
 
 
 
 
 
 
International Office Investments
 
 
 
 
 
 
 
 
 
 
Gogolevsky 11
 
Moscow, Russia
 
Office
 
8/2011; $96.1
 
8.9%
 
94,519

 
95
%
New City
 
Warsaw, Poland
 
Office
 
3/2013; $163.5
 
7.1%
 
484,591

 
97
%
25 Cabot Square
 
London, England
 
Office
 
3/2014; $371.7
 
6.7%
 
477,485

 
99
%
Total for International Office Properties
 
 
 
 
 
 
 
1,056,595

 
97
%
Total for All Investments
 
 
 
 
 
 
 
4,155,978

 
89
%

(1)
For acquisitions denominated in a foreign currency, amounts have been translated to U.S. dollars at a rate based on the exchange rate in effect on the acquisition date.

(2)
The estimated going-in capitalization rate is determined as of the date of acquisition by dividing the projected property revenues in excess of expenses for the first fiscal year following the date of acquisition by the net purchase price (excluding closing costs and taxes). Property revenues in excess of expenses includes all projected operating revenues (rental income, tenant reimbursements, parking and any other property-related income) less all projected operating expenses (property operating and maintenance expenses, property taxes, insurance and property management fees).

The projected property revenues in excess of expenses includes assumptions which may not be indicative of the actual future performance of the property, and the actual economic performance of each property for our period of ownership may differ materially from the amounts used in calculating the estimated going-in capitalization rate. These include assumptions, with respect to each property, that in-place tenants will continue to perform under their lease agreements during the 12 months following our acquisition of the property.  In addition, with respect to the Minneapolis Retail Center, The Markets at Town Center, and the Avenue at Murfreesboro, the projected property revenues in excess of expenses include assumptions concerning estimates of timing and rental rates related to re-leasing vacant space.

Critical Accounting Policies

Each of our critical accounting policies involves the use of estimates that require management to make assumptions that are subjective in nature. Management relies on its experience, collects historical and current market data, and analyzes these assumptions in order to arrive at what it believes to be reasonable estimates. In addition, application of these accounting policies involves the exercise of judgments regarding assumptions as to future uncertainties. Actual results could materially differ from these estimates. A disclosure of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2019 in

25


Management’s Discussion and Analysis of Financial Condition and Results of Operations. There have been no changes to our critical accounting policies during 2020.

Financial Condition, Liquidity and Capital Resources
 
As described previously, we commenced the Plan of Liquidation in July 2018 and have been selling our properties and have distributed proceeds from the sale of our properties to our stockholders in the form of liquidating distributions at that time. We received proceeds from the sale of 28 properties from 2017 through February 2019, which were used to make Return of Capital distributions totaling $1.1 billion from January 2018 through February 2019 (approximately $4.00 per share). Additionally, we sold four properties in late 2019 and early 2020 and used the proceeds to significantly reduce our leverage, as indicated below.

Our original goal was to complete the liquidation of our portfolio and make final distributions to our stockholders by July 17, 2020 (24 months after stockholder approval of the Plan of Liquidation). While we have been actively marketing our remaining assets for disposition, the recent spread of the Coronavirus pandemic and its impact on the global economic environment has had, and is expected to continue to have, an adverse impact on overall market conditions and our disposition process. As a result, we believe it is unlikely that we will be able to complete the liquidation of our assets and make final cash distributions to our stockholders by July 17, 2020. Accordingly, any remaining assets and liabilities will be transferred into a liquidating trust as described in the Plan of Liquidation approved by our stockholders in July 2018. At that time, our stockholders will receive shares of beneficial interest in the liquidating trust and Hines Global will be dissolved. The liquidating trust will operate substantially in the same manner as we operate today and will continue to pursue the liquidation of the remaining assets with the goal of distributing the net proceeds of the liquidation to our stockholders. There can be no assurances regarding the timing or amounts of any additional liquidating distributions.

The Coronavirus pandemic did not have a material impact on our liquidity and capital resources for the three months ended March 31, 2020. We are still in the early stages of navigating the actual and potential long-term impacts the pandemic will have on our business. However, we have already begun to experience certain effects on our liquidity and capital resources such as reduced rent collections at certain of our properties and adverse effects on our disposition process. These conditions may continue to worsen as the pandemic continues. Fortunately, we have a strong liquidity position as of March 31, 2020, resulting from $386.8 million of cash on hand and significant undrawn capacity under our revolving credit facility that we may use to fund cash needs, including shortages that may arise as a result of the Coronavirus pandemic. Additionally, we only have two outstanding mortgages totaling $222.2 million on our remaining portfolio of eight properties as of March 31, 2020. We expect to repay these loans using proceeds from the sale of our real estate investments and available cash on hand, but may refinance them to conserve our cash for other purposes.

The discussions below provide additional details regarding our operating, investing, and financing cash flows.

Cash Flows from Operating Activities

Our real estate properties generate cash flow in the form of rental revenues, which are used to pay direct leasing costs, property-level operating expenses and interest payments. Property-level operating expenses consist primarily of salaries and wages of property management personnel, utilities, cleaning, insurance, security and building maintenance costs, property management and leasing fees, and property taxes. Additionally, we pay general and administrative expenses, acquisition fees and expenses and asset management fees, which also reduce our operating cash flows.

Net cash from operating activities decreased by $8.3 million for the three months ended March 31, 2020, as compared to the same period in the prior year, primarily due to our dispositions of four properties in 2019 and two properties in the first quarter of 2020.
 

26


Cash Flows from Investing Activities

Net cash from investing activities primarily relates to proceeds received from the sales of our real estate investments and capital expenditures at our properties. Net cash from investing activities decreased $189.7 million for the three months ended March 31, 2020 compared to the same period in 2019, primarily as a result of property sales in each period.

2020

We received net proceeds of $248.0 million, primarily from the sale of two properties, and several outparcels at another property during the three months ended March 31, 2020. See “Note 3 — Investment Property” for additional information regarding the sale of the properties.
We paid $4.4 million in capital expenditures at our operating properties.

2019

We received proceeds of $455.2 million from the sale of two properties during the three months ended March 31, 2019.
We paid $22.0 million in capital expenditures at our operating properties.

Cash Flows from Financing Activities

Redemptions

As described previously, we ceased offering primary shares pursuant to our second public offering in April 2014. In December 2018, the Board determined to suspend our share redemption program, effective February 2, 2019, except for redemption requests related to the death or disability of the stockholder. Additionally, in April 2020, the Board determined to suspend redemptions related to the death or disability of a stockholder, effective May 17, 2020. See “Note 11 — Subsequent Events” for additional information regarding the sale of the properties. During the three months ended March 31, 2020 and 2019, respectively, we redeemed $2.8 million and $23.7 million in shares of our common stock through our share redemption program.

Distributions

As described previously, we declared distributions of approximately $0.65 per share (approximately $0.0541667 per share, per month) for the year ended December 31, 2018. Approximately $0.45 per share of these distributions were designated as a return of a portion of the stockholders’ invested capital as further described below. Distributions were paid monthly on or around the first business day following the completion of each month to which they relate. All distributions were paid in cash or reinvested in shares of our common stock for those participating in our distribution reinvestment plan. As a result of the suspension of our distribution reinvestment plan, all distributions paid after August 31, 2018 were paid to our stockholders in cash.

From January 2018 through February 2019, we paid aggregate Return of Capital Distributions to stockholders totaling approximately $4.00 per share, which represent a portion of the stockholders’ invested capital. These Return of Capital Distributions reduced the stockholders’ remaining investment in the Company and were made up of the following:

a $1.05 per share Special Distribution declared to all stockholders of record as of December 30, 2017 and paid in January 2018. The Special Distribution was funded with a portion of the net proceeds received from the strategic sale of six assets during 2017.
$0.12 per share resulting from a portion of the monthly distributions declared for the months of January 2018 through June 2018, (approximately $0.02 per share, per month), which were designated by our board of directors as a return of a portion of the stockholders’ invested capital and, as such, reduced the stockholders’ remaining investment in the Company.
Approximately $0.33 per share resulting from the monthly liquidating distributions declared for the months of July 2018 through December 2018 (approximately $0.0541667 per share, per month), which reduced the stockholders’ remaining investment in the Company.
a $2.50 per share liquidating distribution declared to all stockholders of record as of February 13, 2019 and paid in February 2019.

Distributions paid to stockholders during the three months ended March 31, 2019 were $675.7 million. These were all Return of Capital Distributions. We have paid no distributions since February 2019.


27


Debt Financings

We utilize permanent mortgage financing to leverage returns on our real estate investments and use borrowings under our Revolving Credit Facility to provide funding for near-term investment or working capital needs. As mentioned previously, our portfolio was 12% leveraged as of March 31, 2020 (based on the values of our real estate investments) with a weighted average interest rate of 3.1%.

Below is additional information regarding our loan activities for the three months ended March 31, 2020 and 2019. See Note 4 — Debt Financing for additional information regarding our outstanding debt:

2020

We made payments of $225.0 million under our Revolving Credit Facility.
We made payments of $0.4 million related to deferred financing costs due to the refinancing of the Revolving Credit Facility in March 2020.

2019

We borrowed approximately $169.0 million and made payments of $75.0 million under our Revolving Credit Facility.
We made payments of $1.8 million related to deferred financing costs due to the refinancing of the Revolving Credit Facility in March 2019.


28


Results of Operations

The table below presents information regarding changes in our results of operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, including explanations for significant changes and any significant or unusual activity. The Coronavirus pandemic did not have a material effect on our results of operations for the three months ended March 31, 2020. However, we can provide no assurances as to its impact in future periods. All amounts are in thousands, except for percentages:

 
Three Months Ended March 31,
 
Change
 
2020
 
2019
 
$
 
%
Revenues:
 
 
 
 
 
 
 
Rental revenue
$
34,120

 
$
45,856

 
$
(11,736
)
 
(26
)%
Other revenue
514

 
2,377

 
(1,863
)
 
(78
)%
Total revenues
34,634

 
48,233

 
(13,599
)
 
(28
)%
Expenses:
 
 
 
 
 
 
 
Property operating expenses
11,669

 
12,738

 
(1,069
)
 
(8
)%
Real property taxes
4,589

 
6,789

 
(2,200
)
 
(32
)%
Property management fees
826

 
1,148

 
(322
)
 
(28
)%
Depreciation and amortization

 
13,444

 
(13,444
)
 
(100
)%
Asset management fees
5,712

 
6,780

 
(1,068
)
 
(16
)%
General and administrative expenses
2,073

 
2,595

 
(522
)
 
(20
)%
Total expenses
24,869

 
43,494

 
(18,625
)
 
(43
)%
Other income (expenses):
 
 
 
 
 
 
 
Gain (loss) on derivative instruments
20,598

 
(126
)
 
20,724

 
*

Gain (loss) on sale of real estate investments
80,186

 
192,189

 
(112,003
)
 
(58
)%
Foreign currency gains (losses)
(6,166
)
 
399

 
(6,565
)
 
*

Interest expense
(2,386
)
 
(7,347
)
 
4,961

 
(68
)%
Other income (expenses)
1,009

 
1,283

 
(274
)
 
(21
)%
Income (loss) before benefit (provision) for income taxes
103,006

 
191,137

 
(88,131
)
 
(46
)%
Benefit (provision) for income taxes
(1,700
)
 
273

 
(1,973
)
 
*

Net income (loss)
$
101,306

 
$
191,410

 
$
(90,104
)
 
(47
)%

* Not a meaningful percentage

Total revenues, property operating expenses, real property taxes, and property management fees: These amounts relate directly to the operations of our real estate investments. The decrease in these amounts is primarily due to the disposition of real estate investments during 2019 and the first quarter of 2020. We disposed of 2 real estate investments during the quarter ended March 31, 2020 and four real estate investments during 2019. Please refer to our Same-store Analysis below for additional discussion on the results of operations of our portfolio.

Depreciation and amortization: The decrease in depreciation and amortization expense is primarily due to the remaining properties being classified as held for sale in July 2019. As a result of the held for sale classification, no depreciation or amortization related to the properties was recorded after July 2019.

Asset management fees: We pay monthly asset management fees to the Advisor based on an annual fee of 1.5% of the net equity capital invested in real estate, which may be affected by the timing of the property sales, amounts of equity invested in properties that are sold, capital expenditures and changes in the leverage of our properties. Asset management fees decreased during 2020 as a result of the 6 property dispositions in 2019 and to date in 2020.

General and administrative expenses: General and administrative expenses include legal and accounting fees, printing and mailing costs, corporate insurance costs, costs and expenses associated with our board of directors and other administrative expenses. The decrease is due to the sale of 6 properties during 2019 and to date in 2020.


29


Gain (loss) on derivative instruments: The gain on derivatives for the three months ended March 31, 2020 was primarily related to an unrealized gain on our outstanding Great British Pound foreign currency forward contract that we entered into related to the expected sale of one of our properties. The loss on derivatives for the three months ended March 31, 2019 was primarily related to timing differences for foreign currency forward contracts that we entered into related to the sales of our properties.

Gain on sale of real estate: The gain on sale of real estate investments for the three months ended March 31, 2020 and 2019, was due to the sale of 2 properties during each of the quarters ended March 31, 2020 and 2019, respectively.

Foreign currency gains (losses): Our international real estate investments use functional currencies other than the U.S. dollar. The financial statements for these subsidiaries are translated into U.S. dollars for reporting purposes. Assets and liabilities are translated at the exchange rate in effect as of the balance sheet date while income statement amounts are translated using the average exchange rate for the period and significant nonrecurring transactions using the rate on the transaction date. Gains or losses resulting from translation are included in accumulated other comprehensive income (loss) within stockholders’ equity. By contrast, gains and losses related to transactions denominated in currencies other than an entity’s functional currency are recorded in foreign currency gains (losses) on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss). An exception is made where an intercompany loan or advance is deemed to be of a long-term investment nature, in which instance foreign currency transaction gains or losses are included in accumulated other comprehensive income (loss) within stockholders’ equity until the properties are sold and the gains or losses are realized.

During the three months ended March 31, 2020 and 2019, these gains/losses were primarily related to the effect of remeasuring our Euro borrowings that are denominated in the Polish Zloty and the changes to the related exchange rates between the date of the borrowing and the end of each period.

Interest expense: The decrease in the interest expense in the table above is primarily due to our lower total outstanding debt principal during the three months ended March 31, 2020, compared to the three months ended March 31, 2019.

Benefit (provision) for income taxes: The change from a $0.3 million tax benefit during the three months ended March 31, 2019 to a $1.7 million tax provision for the three months ended March 31, 2020 is a result of changes in our deferred tax assets and liabilities related to changes in estimates and book / tax timing differences at our international subsidiaries.

Same-store Analysis

We evaluate our consolidated results of operations on a same-store basis, which allows us to analyze our property operating
results excluding the effects of acquisitions and dispositions during the periods under comparison. Properties in our portfolio
are considered same-store if they wer