HINES GLOBAL INCOME TRUST, INC. filed on Tuesday, May 14 10-Q Form

HINES GLOBAL INCOME TRUST, INC. filed 10-Q with SEC. Read ‘s full filing at 000158510119000029.

Hines Global Income Trust, Inc. (the ‘Company’), formerly known as Hines Global REIT II, Inc., was incorporated in Maryland on July 31, 2013, to invest in a diversified portfolio of quality commercial real estate properties and other real estate investments throughout the United States and internationally, and to a lesser extent, invest in real-estate related securities. The Company is sponsored by Hines Interests Limited Partnership (‘Hines’), a fully integrated global real estate investment and management firm that has acquired, developed, owned, operated and sold real estate for over 60 years. The Company is managed by Hines Global REIT II Advisors LP (the ‘Advisor’), an affiliate of Hines. The Company conducts substantially all of its operations through Hines Global REIT II Properties, LP (the ‘Operating Partnership’). An affiliate of the Advisor, Hines Global REIT II Associates LP, owns less than a 1% limited partner interest in the Operating Partnership as of March 31, 2019 and the Advisor also owns the special limited partnership interest in the Operating Partnership. The Company has elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2015.

As of March 31, 2019, the Company owned direct real estate investments in ten properties totaling 6.1 million square feet that were 95% leased. The Company raises capital for its investments through public offerings of its common stock. The Company commenced its initial public offering of up to $2.5 billion in shares of its common stock (the ‘Initial Offering’) in August 2014, and commenced its second public offering of up to $2.5 billion in shares of common stock including $500.0 million of shares offered under its distribution reinvestment plan (the ‘Follow-On Offering’) in December 2017. As of May 14, 2019, the Company had received gross offering proceeds of $606.8 million from the sale of 61.0 million shares through its public offerings, including shares issued pursuant to its distribution reinvestment plan.

During the three months ended March 31, 2019 and 2018, the Company did not earn more than 10% of its revenue from any individual tenant.

(1)On the loan origination date, the Company entered into a 2.00% Euribor interest rate cap agreement for the full amount borrowed as an economic hedge against the variability of future interest rates on this borrowing.

On the loan origination date, the Company entered into a 2.00% Euribor interest rate cap agreement for the full amount borrowed as an economic hedge against the variability of future interest rates on this borrowing.

(2)On the loan origination date, the Company entered into a 1.25% Euribor interest rate cap agreement for €17.0 million (approximately $19.0 million assuming a rate of $1.12 per EUR as of March 31, 2019) of the full amount borrowed as an economic hedge against the variability of future interest rates on this borrowing.

On the loan origination date, the Company entered into a 1.25% Euribor interest rate cap agreement for €17.0 million (approximately $19.0 million assuming a rate of $1.12 per EUR as of March 31, 2019) of the full amount borrowed as an economic hedge against the variability of future interest rates on this borrowing.

(3)On the loan origination date, the Company entered into a 2.00% LIBOR interest rate cap agreement for £22.1 million (approximately $28.8 million assuming a rate of $1.30 per GBP as of March 31, 2019) of the full amount borrowed as an economic hedge against the variability of future interest rates on this borrowing.

On the loan origination date, the Company entered into a 2.00% LIBOR interest rate cap agreement for £22.1 million (approximately $28.8 million assuming a rate of $1.30 per GBP as of March 31, 2019) of the full amount borrowed as an economic hedge against the variability of future interest rates on this borrowing.

(4)On the loan origination date, the Company entered into a 3.50% LIBOR interest rate cap agreement for the full amount borrowed as an economic hedge against the variability of future interest rates on this borrowing.

On the loan origination date, the Company entered into a 3.50% LIBOR interest rate cap agreement for the full amount borrowed as an economic hedge against the variability of future interest rates on this borrowing.

(5)On the loan origination date, the Company entered into a 2.00% Euribor interest rate cap agreement for €52.5 million (approximately $58.9 million assuming a rate of $1.12 per EUR as of March 31, 2019) as an economic hedge against the variability of future interest rates on this borrowing.

On the loan origination date, the Company entered into a 2.00% Euribor interest rate cap agreement for €52.5 million (approximately $58.9 million assuming a rate of $1.12 per EUR as of March 31, 2019) as an economic hedge against the variability of future interest rates on this borrowing.

(6)In February 2019, the Company entered into a secured mortgage loan to fund the acquisition of Maintal Logistics, which was acquired on December 31, 2018. Funding for the acquisition was not required until the loan closed in February 2019. On the loan origination date, the Company entered into a 2.00% Euribor interest rate cap agreement for €16.5 million (approximately $18.5 million assuming a rate of $1.12 per EUR as of March 31, 2019) as an economic hedge against the variability of future interest rates on this borrowing.

In February 2019, the Company entered into a secured mortgage loan to fund the acquisition of Maintal Logistics, which was acquired on December 31, 2018. Funding for the acquisition was not required until the loan closed in February 2019. On the loan origination date, the Company entered into a 2.00% Euribor interest rate cap agreement for €16.5 million (approximately $18.5 million assuming a rate of $1.12 per EUR as of March 31, 2019) as an economic hedge against the variability of future interest rates on this borrowing.

(3)Through its ownership of the special limited partner interest in the Operating Partnership, the Advisor is entitled to an annual performance participation allocation of 12.5% of the Operating Partnership’s total return. Total return is defined as distributions paid or accrued plus the change in net asset value of the Company’s shares of common stock for the applicable period. This performance participation allocation is subject to the Company earning a 5% total return annually (as defined above), after considering the effect of any losses carried forward from the prior period (as defined in the Operating Partnership agreement). The performance participation allocation accrues monthly and is payable after the completion of each calendar year.

Through its ownership of the special limited partner interest in the Operating Partnership, the Advisor is entitled to an annual performance participation allocation of 12.5% of the Operating Partnership’s total return. Total return is defined as distributions paid or accrued plus the change in net asset value of the Company’s shares of common stock for the applicable period. This performance participation allocation is subject to the Company earning a 5% total return annually (as defined above), after considering the effect of any losses carried forward from the prior period (as defined in the Operating Partnership agreement). The performance participation allocation accrues monthly and is payable after the completion of each calendar year.

In May 2019, the Company acquired ABC Westland, an industrial property located in the Hague, the Netherlands. ABC Westland consists of 1,267,278 square feet of net rentable area and is, in the aggregate, 97.5% leased to 46 tenants. The purchase price for ABC Westland was €116.5 million (approximately $130.5 million assuming a rate of $1.12 per EUR on the date of the transaction), exclusive of transaction costs and working capital reserves. In connection with the acquisition of the property, the Company entered into a third-party mortgage loan for the principal sum of approximately €75.0 million (approximately $84.0 million assuming a rate of $1.12 per EUR on the date of the transaction). The mortgage loan has a floating interest rate of Euribor + 1.50% per annum. Repayment of principal is due in quarterly installments on each interest payment date, with the final payment being due on the last interest payment date of February 15, 2024.

We intend to meet our primary investment objectives by investing in a portfolio of quality commercial real estate properties and other real estate investments that relate to properties that are generally diversified by geographic area, lease expirations and tenant industries. As of March 31, 2019, we owned ten real estate investments consisting of 6.1 million square feet that were 95% leased. The following chart depicts the percentage of our portfolio’s investment types based on the estimated value of each real estate investment as of March 31, 2019 (‘Estimated Values’), which are consistent with the values used to determine our net asset value (‘NAV’) per share on that date.

The following charts depict the location of our real estate investments as of March 31, 2019. Approximately 52% of our portfolio is located throughout the United States and approximately 48% is located internationally, based on the Estimated Values.

The table below discloses the total returns for the classes of shares that are available for investment in our current public offering. Class I Shares and Class D Shares are sold without an upfront sales load. The total returns shown reflect the percent change in the NAV per share from the beginning of the applicable period, plus the amount of any distribution per share declared during the period. The total returns shown are calculated assuming reinvestment of distributions pursuant to our DRP, are derived from unaudited financial information, and are net of all Hines Global expenses, including general and administrative expenses, transaction related expenses, management fees, the performance participation allocation, and share class specific fees, but exclude the impact of early redemption deductions on the redemption of shares that have been outstanding for less than one year. The inception date for Class I, Class D, Class S and Class T Shares is December 6, 2017. Class T Shares and Class S Shares listed as (With Sales Load) reflect the returns after the maximum up-front selling commission and dealer manager fees, which total 3.5% for both share classes. Class T Shares and Class S Shares listed as (No Sales Load) exclude up-front selling commissions and dealer manager fees. The returns have been prepared using unaudited data and valuations of the underlying investments in our portfolio, which are estimates of fair value and form the basis for our NAV per share. Valuations based upon unaudited reports from the underlying investments may be subject to later adjustments, may not correspond to realized value and may not accurately reflect the price at which assets could be liquidated.

We expect that once we have fully invested the proceeds of our public offerings and other potential subsequent offerings, our debt financing, including our pro rata share of the debt financing of entities in which we invest, will be in the range of approximately 40% to 60% of the aggregate value of our real estate investments and other assets. Financing for acquisitions and investments may be obtained at the time an asset is acquired or an investment is made or at such later time as determined to be appropriate. In addition, debt financing may be used from time to time for property improvements, lease inducements, tenant improvements, purchase of real estate-related securities and other working capital needs, including the payment of distributions and redemptions. Our real estate-related securities portfolio may have embedded leverage, including through the use of reverse repurchase agreements and derivatives, including, but not limited to, total return swaps, securities lending arrangements and credit default swaps. Additionally, the amount of debt placed on an individual property or related to a particular investment, including our pro rata share of the amount of debt incurred by an individual entity in which we invest, may be less than 40% or more than 60% of the value of such property/investment or the value of the assets owned by such entity, depending on market conditions and other factors. Our aggregate borrowings, secured and unsecured, must be reasonable in relation to our net assets and must be reviewed by our board of directors at least quarterly. Further, our charter limits our borrowing to 300% of our net assets (which approximates 75% of the cost of our assets) unless any excess borrowing is approved by a majority of our independent directors and is disclosed to our stockholders in our next quarterly report along with justification for the excess. As of March 31, 2019 our portfolio was approximately 52% leveraged, based on the Estimated Values of our real estate investments owned as of that date, with a weighted average interest rate of 2.77%.

Until December 31, 2018, the Advisor advanced all of our organization and offering costs, consisting of issuer costs and certain underwriting costs (but excluding selling commissions, dealer manager fees and distribution and stockholder servicing fees) related to our public offerings, which totaled $9.0 million. In January 2019, we began reimbursing the Advisor in ratable amounts over 60 months for all such advanced expenses, as well as any organization and offering costs incurred subsequent to December 31, 2018, to the extent cumulative organization and offering costs paid by the Company do not exceed an amount equal to 2.5% of gross offering proceeds from our public offerings. The total reimbursement related to organization and offering costs, selling commissions, dealer manager fees and distribution and stockholder servicing fees may not exceed 15.0% of gross proceeds from our public offerings. For the three months ended March 31, 2019, we reimbursed the Advisor $1.3 million for organization and offering costs.

Distributions paid to stockholders during the three months ended March 31, 2019 and 2018 were $6.4 million and $5.5 million, respectively, including those reinvested in shares pursuant to our distribution reinvestment plan. We have not generated and we may continue to be unable to generate sufficient cash flows from operations to fully fund distributions paid. Therefore, some or all of our distributions have been and may continue to be paid and during the offering phase, are likely to be paid at least partially from other sources, such as proceeds from the sales of assets, proceeds from our debt financings, proceeds from our public offerings, cash advances by our Advisor and/or cash resulting from a waiver or deferral of fees. We have not placed a cap on the amount of distributions that may be paid from any of these sources. For example, for the three months ended March 31, 2019 and March 31, 2018, we funded 100% and 15% of total distributions with cash flows from other sources such as cash flows from investing activities, which may include proceeds from the sale of real estate and/or cash flows from financing activities, which may include offering proceeds.

As mentioned above under ‘-Financial Condition, Liquidity and Capital Resources,’ our portfolio was approximately 52% leveraged as of March 31, 2019 (based on the Estimated Values). Our total loan principal outstanding had a weighted average interest rate of 2.77% as of March 31, 2019. Below is additional information regarding our loan activity for the three months ended March 31, 2019 and 2018. See ‘Note 4 – Debt Financing’ for additional information regarding our outstanding debt.

The following table presents the property-level revenues in excess of expenses for the three months ended March 31, 2019, as compared to the same period in 2018, by reportable segment. Same-store properties for the three months ended March 31, 2019 includes seven properties that were 97% leased as of March 31, 2019 and March 31, 2018. In total, property revenues in excess of expenses of the same-store properties decreased 12% for the three months ended March 31, 2019 as compared to the same period in 2018.

(4)The decrease is primarily due to a decline in revenue at Bishop’s Square as a result of vacant space during the three months ended March 31, 2019, resulting from the redevelopment. Construction was substantially completed in April 2019 and the building was 100% leased as of March 31, 2019.

The decrease is primarily due to a decline in revenue at Bishop’s Square as a result of vacant space during the three months ended March 31, 2019, resulting from the redevelopment. Construction was substantially completed in April 2019 and the building was 100% leased as of March 31, 2019.

•As of December 6, 2017, through its ownership of the special limited partner interest in the Operating Partnership, our Advisor is entitled to an annual performance participation allocation of 12.5% of the Operating Partnership’s total return subject to the Company earning a 5% total return annually, after considering the effect of any losses carried forward from the prior year. The performance participation allocation accrues monthly and is payable after the completion of each calendar year. We do not consider the performance participation allocation in evaluating our operating performance. For the three months ended March 31, 2019 and 2018, we incurred $1.1 million and $1.6 million in performance participation allocation fees. Total performance participation allocation fees incurred were $7.3 million from inception through March 31, 2019. Refer to ‘Note 7-Related Party Transactions’ for more information on the performance participation allocation.

As of December 6, 2017, through its ownership of the special limited partner interest in the Operating Partnership, our Advisor is entitled to an annual performance participation allocation of 12.5% of the Operating Partnership’s total return subject to the Company earning a 5% total return annually, after considering the effect of any losses carried forward from the prior year. The performance participation allocation accrues monthly and is payable after the completion of each calendar year. We do not consider the performance participation allocation in evaluating our operating performance. For the three months ended March 31, 2019 and 2018, we incurred $1.1 million and $1.6 million in performance participation allocation fees. Total performance participation allocation fees incurred were $7.3 million from inception through March 31, 2019. Refer to ‘Note 7-Related Party Transactions’ for more information on the performance participation allocation.

In May 2019, we acquired ABC Westland, an industrial property located in the Hague, the Netherlands. ABC Westland consists of 1,267,278 square feet of net rentable area and is, in the aggregate, 97.5% leased to 46 tenants. The purchase price for ABC Westland was €116.5 million (approximately $130.5 million assuming a rate of $1.12 per EUR on the date of the transaction), exclusive of transaction costs and working capital reserves. In connection with the acquisition of the property, we entered into a third-party mortgage loan for the principal sum of approximately €75.0 million (approximately $84.0 million assuming a rate of $1.12 per EUR on the date of the transaction). The mortgage loan has a floating interest rate of Euribor + .015 per annum. Repayment of principal is due in quarterly installments on each interest payment date, with the final payment being due on the last interest payment date of February 15, 2024.

We are exposed to the effects of interest rate changes primarily as a result of debt used to maintain liquidity and fund expansion of our real estate investment portfolio and operations. As of March 31, 2019, we had $376.0 million of variable-rate debt outstanding. If interest rates were to increase by 1% and everything else remained the same, we would incur an additional $3.8 million in interest expense annually. Additionally, we have entered into interest rate cap agreements to limit our exposure to rising interest rates related to our mortgage loans secured by our investment properties. See Note 4 – Debt Financing in the Notes to the Condensed Consolidated Financial Statements for more information concerning our outstanding debt.

Our share redemption program may allow stockholders who have purchased shares from us or received their shares through a non-cash transaction, not in the secondary market, to have their shares redeemed subject to certain limitations and restrictions. Redemptions under our share redemption program will be made on a monthly basis. Subject to the limitations of and restrictions on our share redemption program, and subject to funds being available as described below, shares redeemed under our share redemption program will be redeemed at the transaction price in effect on the date of redemption, which generally will be a price equal to the NAV per share applicable to the class of shares being redeemed and most recently disclosed by us in a public filing with the SEC (subject to the 5% holding discount described below).

Under our share redemption program, we may redeem during any calendar month shares whose aggregate value (based on the redemption price per share in effect when the redemption is effected) is 2% of our aggregate NAV as of the last calendar day of the previous month (the ‘2% Monthly Limitation’) and during any calendar quarter whose aggregate value (based on the redemption price per share in effect when the redemption is effected) is up to 5% of our aggregate NAV as of the last calendar day of the prior calendar quarter (the ‘5% Quarterly Limitation’). During a given quarter, if in each of the first two months of such quarter the 2% Monthly Limitation is reached and stockholders’ redemptions are reduced pro rata for such months, then in the third and final month of that quarter, the applicable limit for such month will likely be less than 2% of our aggregate NAV as of the last calendar day of the previous month because the redemptions for that month, combined with the redemptions in the previous two months, cannot exceed the 5% Quarterly Limitation.

There is no minimum holding period for shares under our share redemption program and stockholders may request that we redeem their shares at any time. However, shares that have not been outstanding for at least one year will be redeemed at 95% of the transaction price (the ‘5% holding discount’) that would otherwise apply; provided, that, the period that a share was held prior to being converted into a share of another class pursuant to our charter will count toward the total hold period for such share, as converted. Upon request, we may waive the 5% holding discount in the case of death or disability of a stockholder. The 5% holding discount also will be waived with respect to shares issued pursuant to our distribution reinvestment plan and any shares that we issue as stock dividends.

(1)Amount provided represents the 2% Monthly Limitation which can be further limited by the 5% Quarterly Limitation. See the description of the share redemption program above for a description of the limitations on the number of shares that may be redeemed pursuant to the share redemption program.

Amount provided represents the 2% Monthly Limitation which can be further limited by the 5% Quarterly Limitation. See the description of the share redemption program above for a description of the limitations on the number of shares that may be redeemed pursuant to the share redemption program.

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