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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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: 000-55776
RW HOLDINGS NNN REIT, INC.
(Exact name of registrant as specified in its charter)
Maryland
47-4156046
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
120 Newport Center Drive, Newport Beach, CA
92660
(Address of principal executive offices)
(Zip Code)
(855) 742-4862
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act.
Title of each class
 
Trading symbols(s)
 
Name of each exchange on which registered
None
 
None
 
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 ý 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 ý 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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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Large accelerated filer ¨
Accelerated filer ¨
 
 
Non-accelerated filer x
Smaller reporting company x
 
 
 
Emerging growth company x
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.ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
As of July 31, 2020, there were 24,150,873 shares of Class C common stock outstanding and 187,900 shares of Class S common stock outstanding.
 


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RW HOLDINGS NNN REIT, INC.
FORM 10-Q
INDEX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2

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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains 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”), and we intend that such forward-looking statements be subject to the safe harbor provisions created thereby. For this purpose, any statements made in this Quarterly Report on Form 10-Q that are not historical or current facts may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “anticipates,” “believes,” “seeks,” “estimates,” “expects,” “intends,” “continue,” “can,” “may,” “plans,” “potential,” “projects,” “should,” “could,” “will,” “would” or similar expressions and the negatives of those expressions are intended to identify forward-looking statements. Such statements include, but are not limited to, any statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods.
The forward-looking statements included herein represent our management’s current expectations and assumptions based on information available as of the date of this report. These statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time-to-time with the Securities and Exchange Commission (the “SEC”). In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information, which speak only as of the date of this report.
Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time-to-time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual future results to be materially different from those expressed or implied by any forward-looking statements. The following are some, but not all, of the assumptions, risks, uncertainties and other factors that could cause our actual results to differ materially from our forward-looking statements:
We are subject to risks associated with deteriorating economic conditions resulting from the novel coronavirus (“COVID-19”) pandemic and related disruptions in the financial markets.
The magnitude and duration of the COVID-19 pandemic and its impact on our tenants, operations and liquidity is uncertain as of the filing date of this Quarterly Report on Form 10-Q and may continue to have an adverse impact on our business and results of operations.
We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.
We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.
Our properties, intangible assets and other assets may be subject to further impairment charges.
We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties, and we may be unable to acquire or dispose of properties on advantageous terms.
We could be subject to risks associated with bankruptcies or insolvencies of tenants or from tenant defaults generally.
We have substantial indebtedness, and may incur additional secured or unsecured debt, which may affect our ability to pay distributions, expose us to interest rate fluctuation risk, impose limitations on how we operate and expose us to the risk of default under our debt obligations.
We may not be able to attain or maintain profitability.
The only sources of cash for distributions to investors will be cash flow from our operations (including sales of properties) or any net proceeds that result from financing or refinancing our properties.
We may not generate cash flows sufficient to pay our distributions to stockholders or meet our debt service obligations.
We may be affected by risks resulting from losses in excess of insured limits.
We may fail to qualify as a REIT for U.S. federal income tax purposes.
Risks of security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology networks and related systems, could adversely affect our business and results of operations.
Our forward-looking statements contained in this Quarterly Report on Form 10-Q should be read in light of the risk factors identified above and the additional risks and uncertainties described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019.
Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. We qualify all of our forward-looking statements by these cautionary statements.

3

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PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements
RW HOLDINGS NNN REIT, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
 
June 30,
2020
 
December 31, 2019
Assets
 
 
 
Real estate investments:
 
 
 
Land
$
76,912,859

 
$
86,775,988

Buildings and improvements
294,123,745

 
309,904,890

Tenant origination and absorption costs
24,450,830

 
27,266,610

Total investments in real estate property
395,487,434

 
423,947,488

Accumulated depreciation and amortization
(27,050,943
)
 
(20,411,794
)
Total investments in real estate property, net (Note 4)
368,436,491

 
403,535,694

Investment in unconsolidated entity (Note 5)
10,200,810

 
10,388,588

Total real estate investments, net
378,637,301

 
413,924,282

Real estate investments held for sale, net (Note 4)
17,926,407

 

Total real estate investments
396,563,708

 
413,924,282

Cash and cash equivalents
3,820,375

 
6,823,568

Restricted cash
258,493

 
113,362

Tenant receivables, net
6,845,034

 
6,224,764

Above-market lease intangibles, net
945,947

 
1,251,734

Due from affiliates (Note 9)
3,214

 
2,332

Prepaid expenses and other assets
2,433,871

 
1,867,777

Interest rate swap derivatives

 
34,567

Assets related to real estate investments held for sale
725,990

 

Operating lease right-of-use asset
2,139,520

 
2,386,877

Goodwill, net
17,320,857

 
50,588,000

Intangible assets, net
6,001,792

 
7,700,000

Total assets
$
437,058,801

 
$
490,917,263

Liabilities and Equity
 
 
 
Mortgage notes payable, net
$
186,677,129

 
$
194,039,207

Mortgage notes payable related to real estate investments held for sale, net
9,549,467

 

Total mortgage notes payable, net
196,226,596

 
194,039,207

Unsecured credit facility, net
11,960,200

 
7,649,861

Short-term notes payable

 
4,800,000

Economic relief notes payable
527,000

 

Accounts payable, accrued and other liabilities
10,718,686

 
11,555,161

Share repurchases payable
750,684

 

Below-market lease intangibles, net
13,658,195

 
14,591,359

Due to affiliates (Note 9)

 
630,820

Interest rate swap derivatives
2,279,909

 
1,021,724

Liabilities related to real estate investments held for sale
196,938

 

Operating lease liability
2,152,919

 
2,386,877

Total liabilities
238,471,127

 
236,675,009

 
 
 
 
Commitments and contingencies (Note 10)


 


 
 
 
 
Redeemable common stock
8,925,145

 
14,069,692

 
 
 
 
Preferred stock, $0.001 par value, 50,000,000 shares authorized, no shares issued and outstanding

 

Class C common stock $0.001 par value, 300,000,000 shares authorized, 24,137,134 and 23,647,466 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
24,137

 
23,647

Class S common stock $0.001 par value, 100,000,000 shares authorized, 187,648 and 186,606 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
188

 
187

Additional paid-in-capital
228,696,741

 
220,714,676

Cumulative distributions and net losses
(89,661,537
)
 
(31,168,948
)
Total RW Holdings NNN REIT, Inc. equity
139,059,529

 
189,569,562

Noncontrolling interests in the Operating Partnership
50,603,000

 
50,603,000

Total equity
189,662,529

 
240,172,562

Total liabilities and equity
$
437,058,801

 
$
490,917,263

See accompanying notes to condensed consolidated financial statements.

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RW HOLDINGS NNN REIT, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2020
 
2019
 
2020
 
2019
Rental income
 
$
9,277,020

 
$
5,896,266

 
$
20,331,429

 
$
11,781,711

 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Fees to affiliates (Note 9)
 

 
812,019

 

 
1,624,037

General and administrative
 
2,369,358

 
853,940

 
4,924,363

 
1,393,445

Depreciation and amortization
 
4,480,262

 
2,391,495

 
9,115,786

 
4,782,991

Interest expense
 
2,558,877

 
2,076,725

 
6,463,533

 
4,237,075

Property expenses
 
1,854,637

 
1,111,936

 
3,803,356

 
2,174,588

Impairment of real estate investment properties (Note 4)
 
349,457

 

 
9,506,525

 

Impairment of goodwill and intangible assets (Note 3)
 

 

 
34,572,403

 

Reserve for loan guarantee (Note 6)
 
(4,253
)
 

 
3,125,037

 

Total expenses
 
11,608,338

 
7,246,115

 
71,511,003

 
14,212,136

Less: Expenses reimbursed by Former Sponsor (Note 9)
 

 
(148,233
)
 

 
(236,232
)
Expenses, net
 
11,608,338

 
7,097,882

 
71,511,003

 
13,975,904

 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
Interest income
 
605

 
5,645

 
4,822

 
11,031

Income from investments in unconsolidated entities, net
 
125,658

 
55,955

 
146,411

 
129,988

Other
 
(4,855
)
 

 
(4,855
)
 

Total other income, net
 
121,408

 
61,600

 
146,378

 
141,019

Net loss
 
$
(2,209,910
)
 
$
(1,140,016
)
 
$
(51,033,196
)
 
$
(2,053,174
)
 
 
 
 
 
 
 
 
 
Net loss per share, basic and diluted (Note 2)
 
$
(0.09
)
 
$
(0.08
)
 
$
(2.13
)
 
$
(0.14
)
 
 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding, basic and diluted
 
24,097,402

 
14,846,259

 
23,976,325

 
14,218,770

 
 
 
 
 
 
 
 
 
Distributions declared per common share
 
$
0.136

 
$
0.175

 
$
0.311

 
$
0.035

See accompanying notes to condensed consolidated financial statements.

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RW HOLDINGS NNN REIT, INC.
Condensed Consolidated Statements of Equity
Three Months Ended June 30, 2020 and 2019
(Unaudited)
 
Common Stock
 
Additional
Paid-in
Capital
 
Cumulative
Distributions
and Net
Losses
 
Total
Stockholders'
Equity
 
Noncontrolling Interests in the Operating Partnership
 
Total
Equity
 
Class C
 
Class S
 
Shares
 
Amounts
 
Shares
 
Amounts
Balance, March 31, 2020
23,660,697

 
$
23,661

 
187,640

 
$
188

 
$
224,849,288

 
$
(84,181,336
)
 
$
140,691,801

 
$
50,603,000

 
$
191,294,801

Issuance of common stock
555,545

 
555

 
1,945

 
2

 
4,850,486

 

 
4,851,043

 

 
4,851,043

Stock compensation expense
6,816

 
7

 

 

 
69,993

 

 
70,000

 

 
70,000

Class P OP Units compensation expense

 

 

 

 
88,784

 

 
88,784

 

 
88,784

Offering costs

 

 

 

 
(265,270
)
 

 
(265,270
)
 

 
(265,270
)
Reclassification to redeemable common stock

 

 

 

 

 

 

 

 

Repurchase of common stock
(85,924
)
 
(86
)
 
(1,936
)
 
(2
)
 
(896,540
)
 

 
(896,628
)
 

 
(896,628
)
Distributions declared

 

 

 

 

 
(3,270,291
)
 
(3,270,291
)
 

 
(3,270,291
)
Net loss

 

 

 

 

 
(2,209,910
)
 
(2,209,910
)
 

 
(2,209,910
)
Balance, June 30, 2020
24,137,134

 
$
24,137

 
187,649

 
$
188

 
$
228,696,741

 
$
(89,661,537
)
 
$
139,059,529

 
$
50,603,000

 
$
189,662,529

 
Common Stock
 
Additional
Paid-in
Capital
 
Cumulative
Distributions
and Net
Losses
 
Total
Stockholders'
Equity
 
Noncontrolling Interests in the Operating Partnership
 
Total
Equity
 
Class C
 
Class S
 
Shares
 
Amounts
 
Shares
 
Amounts
Balance, March 31, 2019
14,201,229

 
$
14,201

 
132,517

 
$
133

 
$
132,742,525

 
$
(19,469,289
)
 
$
113,287,570

 
$

 
$
113,287,570

Issuance of common stock
1,329,089

 
1,329

 
33,931

 
33

 
13,846,925

 

 
13,848,287

 

 
13,848,287

Stock compensation expense
5,414

 
5

 

 

 
54,995

 

 
55,000

 

 
55,000

Offering costs

 

 

 

 
(415,299
)
 

 
(415,299
)
 

 
(415,299
)
Repurchase of common stock
(222,561
)
 
(222
)
 

 

 
(2,217,444
)
 

 
(2,217,666
)
 

 
(2,217,666
)
Distributions declared

 

 

 

 

 
(2,605,268
)
 
(2,605,268
)
 

 
(2,605,268
)
Net loss

 

 

 

 

 
(1,140,016
)
 
(1,140,016
)
 

 
(1,140,016
)
Balance, June 30, 2019
15,313,171

 
$
15,313

 
166,448

 
$
166

 
$
144,011,702

 
$
(23,214,573
)
 
$
120,812,608

 
$

 
$
120,812,608

See accompanying notes to condensed consolidated financial statements.

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RW HOLDINGS NNN REIT, INC.
Condensed Consolidated Statements of Equity
Six Months Ended June 30, 2020 and 2019
(Unaudited)
 
Common Stock
 
Additional
Paid-in
Capital
 
Cumulative
Distributions
and Net
Losses
 
Total
Stockholders'
Equity
 
Noncontrolling Interests in the Operating Partnership
 
Total
Equity
 
Class C
 
Class S
 
Shares
 
Amounts
 
Shares
 
Amounts
Balance, December 31, 2019
23,647,466

 
$
23,647

 
186,606

 
$
187

 
$
220,714,676

 
$
(31,168,948
)
 
$
189,569,562

 
$
50,603,000

 
$
240,172,562

Issuance of common stock
1,458,128

 
1,458

 
2,979

 
3

 
14,090,778

 

 
14,092,239

 

 
14,092,239

Stock compensation expense
12,680

 
13

 

 

 
129,570

 

 
129,583

 

 
129,583

Class P OP Units compensation expense

 

 

 

 
177,567

 

 
177,567

 

 
177,567

Offering costs

 

 

 

 
(822,921
)
 

 
(822,921
)
 

 
(822,921
)
Reclassification to redeemable common stock

 

 

 

 
4,393,863

 

 
4,393,863

 

 
4,393,863

Repurchase of common stock
(981,140
)
 
(981
)
 
(1,936
)
 
(2
)
 
(9,986,792
)
 

 
(9,987,775
)
 

 
(9,987,775
)
Distributions declared

 

 

 

 

 
(7,459,393
)
 
(7,459,393
)
 

 
(7,459,393
)
Net loss

 

 

 

 

 
(51,033,196
)
 
(51,033,196
)
 

 
(51,033,196
)
Balance, June 30, 2020
24,137,134

 
$
24,137

 
187,649

 
$
188

 
$
228,696,741

 
$
(89,661,537
)
 
$
139,059,529

 
$
50,603,000

 
$
189,662,529

 
Common Stock
 
Additional
Paid-in
Capital
 
Cumulative
Distributions
and Net
Losses
 
Total
Stockholders'
Equity
 
Noncontrolling Interests in the Operating Partnership
 
Total
Equity
 
Class C
 
Class S
 
Shares
 
Amounts
 
Shares
 
Amounts
Balance, December 31, 2018
12,943,294

 
$
12,943

 
17,594

 
$
18

 
$
119,247,245

 
$
(16,167,437
)
 
$
103,092,769

 
$

 
$
103,092,769

Issuance of common stock
2,806,991

 
2,807

 
148,854

 
148

 
30,002,536

 

 
30,005,491

 

 
30,005,491

Stock compensation expense
10,335

 
10

 

 

 
104,990

 

 
105,000

 

 
105,000

Offering costs

 

 

 

 
(899,863
)
 

 
(899,863
)
 

 
(899,863
)
Repurchase of common stock
(447,449
)
 
(447
)
 

 

 
(4,443,206
)
 

 
(4,443,653
)
 

 
(4,443,653
)
Distributions declared

 

 

 

 

 
(4,993,962
)
 
(4,993,962
)
 

 
(4,993,962
)
Net loss

 

 

 

 

 
(2,053,174
)
 
(2,053,174
)
 

 
(2,053,174
)
Balance, June 30, 2019
15,313,171

 
$
15,313

 
166,448

 
$
166

 
$
144,011,702

 
$
(23,214,573
)
 
$
120,812,608

 
$

 
$
120,812,608

See accompanying notes to condensed consolidated financial statements.


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Table of Contents

RW HOLDINGS NNN REIT, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended
 
June 30, 2020
 
June 30, 2019
Cash Flows from Operating Activities:
 
 
 
Net loss
$
(51,033,196
)
 
$
(2,053,174
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
9,115,786

 
4,782,991

Stock compensation expense
350,900

 
176,667

Deferred rents
(631,054
)
 
(683,886
)
Amortization of deferred lease incentives
30,602

 
30,602

Amortization of deferred financing costs and premium
298,283

 
390,096

Amortization of above-market lease intangibles
98,966

 
48,523

Amortization of below-market lease intangibles
(774,589
)
 
(237,196
)
Impairment of real estate investment properties
9,506,525

 

Impairment of goodwill and intangible assets
34,572,403

 

Reserve for loan guarantee
3,125,037

 

Unrealized loss on interest rate swap valuation
1,292,752

 
874,016

Income from investments in unconsolidated entities
(146,411
)
 
(129,988
)
Distributions from investments in unconsolidated entities
334,189

 
418,730

Change in operating assets and liabilities:
 
 
 
(Increase) decrease in tenant receivables
(16,688
)
 
196,660

Increase in prepaid and other assets
(606,696
)
 
(311,094
)
(Decrease) increase in accounts payable, accrued and other liabilities
(1,515,624
)
 
319,774

Decrease in due to affiliate
(631,702
)
 
(936,590
)
Decrease in operating lease right-of-use asset, net of decrease in operating lease liability
13,399

 

Net cash provided by operating activities
3,382,882

 
2,886,131

 
 
 
 
Cash Flows from Investing Activities:
 
 
 
Additions to existing real estate investments
(2,170,913
)
 

Additions to intangible assets
(533,041
)
 

Payment of tenant improvements

 
(3,387,699
)
Additions to lease incentives
(990,000
)
 

Refundable purchase deposit

 
(100,000
)
Net cash used in investing activities
(3,693,954
)
 
(3,487,699
)
 
 
 
 
Cash Flows from Financing Activities:
 
 
 
Borrowings from unsecured credit facility
4,260,000

 
4,869,000

Repayments of unsecured credit facility

 
(13,869,000
)
Proceeds from mortgage notes payable
4,000,000

 
6,350,000

Principal payments on mortgage notes payable
(2,003,558
)
 
(14,240,853
)
Proceeds from economic relief notes payable
527,000

 

Principal payments on short-term notes payable
(4,800,000
)
 

Payments of deferred financing costs to third parties
(56,997
)
 
(172,797
)
Payments of financing fees to affiliates

 
(63,500
)
Proceeds from issuance of common stock and investor deposits
9,427,526

 
26,340,968

Payments of offering costs
(822,921
)
 
(899,863
)
Payments of selling commissions on Class S common stock

 
(51,044
)
Repurchases of common stock
(9,987,775
)
 
(4,443,653
)
Distributions paid to common stockholders
(3,090,265
)
 
(1,182,318
)
Net cash (used in) provided by financing activities
(2,546,990
)
 
2,636,940

 
 
 
 
Net (decrease) increase in cash, cash equivalents and restricted cash
(2,858,062
)
 
2,035,372

 
 
 
 
Cash, cash equivalents and restricted cash, beginning of period
6,936,930

 
8,755,928

 
 
 
 
Cash, cash equivalents and restricted cash, end of period
$
4,078,868

 
$
10,791,300

 
 
 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
Cash paid for interest
$
3,367,143

 
$
2,979,031

 
 
 
 
Supplemental Schedule of Noncash Investing and Financing Activities:
 
 
 
Reclassification from (to) redeemable common stock
$
4,393,863

 
$
(238,153
)
Reinvested distributions from common stockholders
$
4,664,713

 
$
3,664,523

Real estate investments held for sale, net
$
17,926,407

 
$

Assets related to real estate investments held for sale
$
725,990

 
$

Mortgage notes payable related to real estate investments held for sale, net
$
9,549,467

 
$

Liabilities related to real estate investments held for sale
$
196,938

 
$

Increase in share repurchases payable
$
750,684

 
$
238,153

Accrued distributions
$
295,585

 
$
896,291

See accompanying notes to condensed consolidated financial statements.

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1. BUSINESS AND ORGANIZATION
RW Holdings NNN REIT, Inc. (the “Company”) was incorporated on May 14, 2015 as a Maryland corporation. The Company has the authority to issue 450,000,000 shares of stock, consisting of 50,000,000 shares of preferred stock, $0.001 par value per share, 300,000,000 shares of Class C common stock, $0.001 par value per share, and 100,000,000 shares of Class S common stock, $0.001 par value per share. The Company was formed to primarily invest, directly or indirectly, in real estate owning entities which own single-tenant income-producing properties located in the United States, which are leased to creditworthy tenants under long-term net leases. The Company’s goal is to generate current income for investors and long-term capital appreciation in the value of its properties.
The Company holds its investments in real property through special purpose limited liability companies which are wholly-owned subsidiaries of RW Holdings NNN REIT Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”), or Katana Merger Sub, LP (“Merger Sub”), which is described below. The Operating Partnership was formed on January 28, 2016. The Company is the sole general partner of and owned a 99% partnership interest in the Operating Partnership prior to the completion of the Self-Management Transaction (defined below) on December 31, 2019. The Company's wholly-owned subsidiary, Rich Uncles NNN LP, LLC, a Delaware limited liability company formed on May 13, 2016 (“NNN LP”), owned the remaining 1% partnership interest in the Operating Partnership and was the sole limited partner of the Operating Partnership prior to the completion of the Self-Management Transaction on December 31, 2019.
Following completion of the Self-Management Transaction, the Company, including NNN LP, owns an approximately 87% partnership interest in the Operating Partnership. Daisho OP Holdings, LLC, a formerly wholly-owned subsidiary of BrixInvest (defined below) (“Daisho”) which was spun off from BrixInvest on December 31, 2019, was issued and held 657,949.5 units of Class M limited partnership interest (the “Class M OP Units”), or an approximate 12% limited partnership interest, in the Operating Partnership as of December 31, 2019. Daisho is managed by Messrs. Aaron S. Halfacre, Raymond J. Pacini and Raymond Wirta, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman, respectively. The Class M OP Units were distributed to the members of Daisho during 2020. In connection with the Self-Management Transaction, the Company's Chief Executive Officer and Chief Financial Officer were issued an aggregate of 56,029 units of Class P limited partnership interest (the “Class P OP Units”) in the Operating Partnership and thereby own the remaining approximate 1% limited partnership interest in the Operating Partnership.
The Company was externally managed by its former advisor, Rich Uncles NNN REIT Operator, LLC (the “Former Advisor”), a Delaware limited liability company, pursuant to the Second Amended and Restated Advisory Agreement dated August 11, 2017, as amended (the “Advisory Agreement”), through December 31, 2019. The Former Advisor was wholly-owned by the Company’s former sponsor, BrixInvest, LLC (f/k/a Rich Uncles, LLC) (“BrixInvest” or the “Former Sponsor”), a Delaware limited liability company, whose members include Messrs. Halfacre and Wirta. On each of June 24, 2015 and December 31, 2015, the Company issued 10,000 shares of its Class C common stock to the Former Sponsor, for a total of 20,000 shares of Class C common stock, at a purchase price of $10.00 per share. Upon completing the Self-Management Transaction, the Former Sponsor's previously held 10,740 shares of the Company’s Class C common stock were canceled.
On December 31, 2019, pursuant to an Agreement and Plan of Merger dated September 19, 2019 (the “Merger Agreement”), Rich Uncles Real Estate Investment Trust I (“REIT I”) merged with and into Merger Sub, a Delaware limited partnership and wholly-owned subsidiary of the Company, with Merger Sub surviving as a direct, wholly-owned subsidiary of the Company (the “Merger”). At such time, the separate existence of REIT I ceased. As a result, the Company issued 8,042,221.6 shares of its Class C common stock to former shareholders of REIT I. In addition, on December 31, 2019, a self-management transaction was completed, whereby the Company, the Operating Partnership, BrixInvest and Daisho effectuated a Contribution Agreement (the “Contribution Agreement”) pursuant to which the Company acquired substantially all of the assets and assumed certain liabilities of BrixInvest in exchange for 657,949.5 Class M OP Units in the Operating Partnership (the “Self-Management Transaction”). As a result of the completion of the Merger and the Self-Management Transaction, the Company became self-managed (see Note 3).
On July 15, 2015, the Company filed a registration statement on Form S-11 (File No. 333-205684) with the Securities and Exchange Commission (the “SEC”) to register an initial public offering of a maximum of 90,000,000 of its shares of common stock for sale to the public (the “Primary Offering”). The Company also registered a maximum of 10,000,000 of its shares of common stock pursuant to the Company’s distribution reinvestment plan (the “Registered DRP Offering” and together with the Primary Offering, the “Registered Offering”). The SEC declared the Company’s registration statement effective on June 1, 2016, and on July 20, 2016, the Company began offering shares of common stock to the public. Pursuant to the Registered Offering, the Company sold shares of Class C common stock directly to investors, with a minimum investment in shares of $500. Commencing

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

in August 2017, the Company began selling shares of its Class C common stock only to U.S. persons as defined under Rule 903 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and began selling shares of its Class S common stock as a result of the commencement of the Class S Offering (as defined below) to non-U.S. Persons.
On August 11, 2017, the Company began offering up to 100,000,000 shares of Class S common stock exclusively to non-U.S. Persons as defined under Rule 903 promulgated under the Securities Act, pursuant to an exemption from the registration requirements of the Securities Act and in accordance with Regulation S of the Securities Act (the “Class S Offering” and, together with the Registered Offering and the Follow-on Offering (as defined below), the “Offerings”). The Class S common stock has similar features and rights as the Class C common stock, including with respect to voting and liquidation, except that the Class S common stock offered in the Class S Offering may be sold only to non-U.S. Persons and may be sold through brokers or other persons who may be paid upfront and deferred selling commissions and fees.
On December 23, 2019, the Company commenced a follow-on offering pursuant to a new registration statement on Form S-11 (File No. 333-231724) (the “Follow-on Offering” and, together with the Registered Offering, the “Registered Offerings”), which registered the offer and sale of up to $800,000,000 in share value of Class C common stock, including $725,000,000 in share value of Class C common stock pursuant to the primary portion of the Follow-on Offering and $75,000,000 in share value of Class C common stock pursuant to the Company's distribution reinvestment plan. The Company ceased offering shares pursuant to the Registered Offering concurrently with the commencement of the Follow-on Offering.
On January 31, 2020, the Company’s board of directors approved and established an estimated net asset value (“NAV”) per share of the Company’s common stock of $10.27 (unaudited). Effective February 1, 2020, the purchase price per share of the Company’s common stock in the primary portion of the Follow-on Offering and the distribution reinvestment plans was increased from $10.16 (unaudited) to $10.27 (unaudited). Also, commencing February 1, 2020, the purchase price per share in the primary portion of the Class S Offering was increased to $10.27 (unaudited) plus the amount of any applicable upfront commissions and fees, and the NAV per share used for purposes of the share repurchase programs was increased to $10.27 (unaudited).
In response to the significant economic impacts of the COVID-19 pandemic, effective as of the close of business on May 7, 2020, the Company’s board of directors temporarily suspended the primary portion of the Company’s Follow-on Offering and Class S Offering until such time as the board of directors approved and established an updated estimated NAV per share of the Company’s common stock and determined to resume such primary offerings. On May 20, 2020, the Company’s board of directors approved and established an updated estimated NAV per share of the Company’s common stock of $7.00 (unaudited) to reflect the Company's most recent valuation of the Company’s real estate assets, debt and other assets and liabilities. Additional information on the determination of the Company's estimated NAV per share, including the process used to determine its estimated NAV per share, can be found in the Company's Current Report on Form 8-K filed with the SEC on May 22, 2020. With respect to distributions paid to stockholders on May 26, 2020, the purchase price per share of the Company’s common stock in the distribution reinvestment plans was decreased from $10.27 to $7.00. Commencing on June 1, 2020, the Company’s board of directors resumed the primary portions of the Follow-on Offering and the Class S Offering. The purchase price per share in the primary portion of the Follow-on Offering was decreased from $10.27 to $7.00, and the purchase price per share in the primary portion of the Class S Offering was decreased to $7.00 plus the amount of any applicable upfront commissions and fees. The NAV per share used for purposes of future repurchases pursuant to the share repurchase programs was also decreased from $10.27 (unaudited) to $7.00 (unaudited).
Through June 30, 2020, the Company had sold 19,346,077 shares of Class C common stock in the Registered Offerings, including 2,045,330 shares of Class C common stock sold under its registered distribution reinvestment plan, for aggregate gross offering proceeds of $193,763,736, and 189,585 shares of Class S common stock in the Class S Offering, including 4,621 shares of Class S common stock sold under its distribution reinvestment plan, for aggregate gross offering proceeds of $1,921,229.
As of June 30, 2020, the Company had invested in (i) 45 operating properties, comprised of: 20 retail properties, 16 office properties and nine industrial properties (including 20 operating properties which were acquired through the Merger on December 31, 2019 and are comprised of: (a) 11 retail properties, (b) six office properties and (c) three industrial properties); (ii) one parcel of land, which currently serves as an easement to one of the Company’s office properties; and (iii) an approximate 72.7% tenant-in-common interest in a Santa Clara office property (the “TIC Interest”). During the second quarter of 2020, the Company determined to sell four of its operating properties, including three retail properties and one industrial property, and classified them as real estate investments held for sale as of June 30, 2020. See Note 4 for additional discussion.
The Company continues to offer shares of common stock under its Offerings. In some states, the Company is required to renew the registration statement for the Follow-on Offering annually or file a new registration statement to continue the Follow-on Offering. The Company may terminate the Offerings at any time.

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and the rules and regulations of the SEC. Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, which is responsible for their integrity and objectivity. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 6, 2020.
The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which are normal and recurring, necessary to fairly state the Company's financial position, results of operations and cash flows. All significant intercompany balances and transactions are eliminated in consolidation. The condensed consolidated balance sheet as of December 31, 2019 included herein was derived from the audited financial statements. The condensed consolidated financial statements do not include all disclosures or notes required by GAAP for complete financial statements.
Use of Estimates
The preparation of the condensed consolidated financial statements and the accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates are based on historical experience and, in some cases, assumptions based on current and future market experience, including considerations related to the COVID-19 pandemic (see Notes 3 and 4 for impairment charges related primarily to COVID-19). Actual results may differ from those estimates.
Noncontrolling Interests in Consolidated Entities
The Company accounts for the noncontrolling interests in its Operating Partnership in accordance with the related accounting guidance. Due to the Company's control of the Operating Partnership through its general partnership interest therein and the limited rights of the limited partners, the Operating Partnership, including its wholly-owned subsidiaries, are consolidated with the Company, and the limited partner interests are reflected as noncontrolling interests in the accompanying condensed consolidated balance sheets. The noncontrolling interests were issued on December 31, 2019 and represent non-voting, non-dividend accruing interests with no allocation of profits or losses. As described in Note 3, the interests are not able to be converted or exchanged prior to (i) December 31, 2020, the one-year anniversary of the closing of the Self-Management Transaction (in the case of the Class M OP Units), or (ii) the expiration of the Lockup Period (as defined below) (in the case of the Class P OP Units).
Business Combinations
The Company accounts for business combinations in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) and applicable Accounting Standard Updates, whereby the total consideration transferred is allocated to the assets acquired and liabilities assumed, including amounts attributable to any non-controlling interests, when applicable, based on their respective estimated fair values as of the date of acquisition. Goodwill represents the excess of consideration transferred over the estimated fair value of the net assets acquired in a business combination.
ASC 805 defines a business as an integrated set of activities and assets (collectively, a “set”) that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members, or participants. To be considered a business, the set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. ASC 805 provides a practical screen to determine when a set would not be considered a business. If the screen is not met and further assessment determines that the set is not a business, then the set is an asset acquisition. The primary difference between a business combination and an asset acquisition is that an asset acquisition requires cost accumulation and allocation at relative fair value. Acquisition costs are capitalized for an asset acquisition and expensed for a business combination (see Note 3 for a description of the Merger and Self-Management Transaction).

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Revenue Recognition
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”), effective January 1, 2018. The Company’s revenue impacted by ASU No. 2014-09 included revenue generated by sales of real estate, other operating income and tenant reimbursements for substantial services earned at the Company’s properties. Such revenues are recognized when the services are provided and the performance obligations are satisfied. Tenant reimbursements, consisting of amounts due from tenants for common area maintenance, property taxes and other recoverable costs, are recognized in rental income subsequent to the adoption of Topic 842, as discussed below, in the period the recoverable costs are incurred. Tenant reimbursements, for which the Company pays the associated costs directly to third-party vendors and is reimbursed by the tenants, are recognized and recorded on a gross basis.
The Company adopted FASB ASU No. 2016-02, Leases (Topic 842), and the related FASB ASU Nos. 2018-10, 2018-11, 2018-20 and 2019-01 effective January 1, 2019, which provide practical expedients, technical corrections and improvements for certain aspects of ASU 2016-02, on a modified retrospective basis (collectively, “Topic 842”). Topic 842 establishes a single comprehensive model for entities to use in accounting for leases and supersedes the existing leasing guidance. Topic 842 applies to all entities that enter into leases. Lessees are required to report assets and liabilities that arise from leases. Lessor accounting has largely remained unchanged; however, certain refinements were made to conform with revenue recognition guidance, specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. Topic 842 impacts the Company's accounting for leases primarily as a lessor. However, Topic 842 also impacts the Company's accounting as a lessee for an operating lease assumed as a result of the Self-Management Transaction, which was completed on December 31, 2019.
As a lessor, the Company's leases with tenants generally provide for the lease of real estate properties, as well as common area maintenance, property taxes and other recoverable costs. Under Topic 842, the lease of space is considered a lease component while the common area maintenance, property taxes and other recoverable costs billings are considered nonlease components, which fall under revenue recognition guidance in ASU No. 2014-09. However, upon adopting the guidance in Topic 842, the Company determined that its tenant leases met the criteria to apply the practical expedient provided by ASU No. 2018-11 to recognize the lease and non-lease components together as one single component. This conclusion was based on the consideration that (1) the timing and pattern of transfer of the nonlease components and associated lease components are the same, and (2) the lease component, if accounted for separately, would be classified as an operating lease. As the lease of properties is the predominant component of the Company's leasing arrangements, the Company accounted for all lease and nonlease components as one, single component under Topic 842. As a result, the adoption of Topic 842 did not have any impact on the Company's timing or pattern of recognition of rental revenues as compared to previous guidance. To reflect recognition as one lease component, rental income and tenant reimbursements and other lease related property income that meet the requirements of the practical expedient provided by ASU No. 2018-11 have been combined under rental income subsequent to the adoption of Topic 842 in the Company's consolidated statements of operations. For the three months ended June 30, 2020 and 2019, tenant reimbursements included in rental income amounted to $1,538,586 and $1,098,603, respectively, and for the six months ended June 30, 2020 and 2019, tenant reimbursements included in rental income amounted to $3,899,505 and $2,186,463, respectively.
The Company recognizes rental income from tenants under operating leases on a straight-line basis over the noncancelable term of the lease when collectability of such amounts is reasonably assured. Recognition of rental income on a straight-line basis includes the effects of rental abatements, lease incentives and fixed and determinable increases in lease payments over the lease term. If the lease provides for tenant improvements, management of the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or by the Company.
When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that the tenant can take in the form of cash or a credit against its rent) that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:
whether the lease stipulates how a tenant improvement allowance may be spent;
whether the amount of a tenant improvement allowance is in excess of market rates;
whether the tenant or landlord retains legal title to the improvements at the end of the lease term;

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

whether the tenant improvements are unique to the tenant or general-purpose in nature; and
whether the tenant improvements are expected to have any residual value at the end of the lease.
Tenant reimbursements of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the expenses are incurred and presented gross if the Company is the primary obligor and, with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk. In instances where the operating lease agreement has an early termination option, the termination penalty is based on a predetermined termination fee or based on the unamortized tenant improvements and leasing commissions.
The Company evaluates the collectability of rents and other receivables on a regular basis based on factors including, among others, payment history, credit rating, the asset type, and current economic conditions. If the Company’s evaluation of these factors indicates it may not recover the full value of the receivable, it provides an allowance against the portion of the receivable that it estimates may not be recovered. This analysis requires the Company to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that may not be collected.
Bad Debts and Allowances for Tenant and Deferred Rent Receivables
Since the adoption of Topic 842 on January 1, 2019, the Company's determination of the adequacy of its allowances for tenant receivables includes a binary assessment of whether or not the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination. In addition, for tenant and deferred rent receivables deemed probable of collection, the Company also may record an allowance under other authoritative GAAP depending upon the Company's evaluation of the individual receivables, specific credit enhancements, current economic conditions, and other relevant factors. Such allowances are recorded as increases or decreases through rental income in the Company's consolidated statements of operations.
With respect to tenants in bankruptcy, management makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. When a tenant is in bankruptcy, the Company will record a bad debt allowance for the tenant’s receivable balance and generally will not recognize subsequent rental revenue until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments.
Leasing Costs
Upon adoption of Topic 842, the Company elected to apply the package of practical expedients provided and did not reassess the following as of January 1, 2019: (1) whether any expired or existing contracts are leases or contain leases; (2) the lease classification for any expired or existing leases; and (3) initial direct costs for any existing leases. Under Topic 842, initial direct costs for both lessees and lessors would include only those costs that are incremental to the arrangement and would not have been incurred if the lease had not been obtained. As a result, since January 1, 2019, the Company no longer capitalizes internal leasing costs and third-party legal leasing costs and instead charges these costs to expense as incurred. These expenses are included in legal leasing costs under property expenses in the Company's condensed consolidated statements of operations. The election of the package of practical expedients described above permits the Company to continue to account for its leases that commenced before January 1, 2019 under the previously existing lease accounting guidance for the remainder of their lease terms, and to apply the new lease accounting guidance to leases entered into or acquired commencing or modified after January 1, 2019.
Impairment of Investment in Real Estate Properties
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of real estate assets may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of real estate assets may not be recoverable, management assesses whether the carrying value of the assets will be recovered through the future undiscounted operating cash flows expected from the use of and eventual disposition of the property. If, based on the analysis, the Company does not believe that it will be able to recover the carrying value of the asset, the Company records an impairment charge to the extent the carrying value exceeds the estimated fair value of the asset. As more fully discussed in Note 4, the Company recorded impairment charges of $349,457 and $9,506,525 related to one and four of its properties, respectively, during the three and six months ended June 30, 2020, respectively.

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Other Comprehensive Loss
For all periods presented, other comprehensive loss is the same as net loss.
Per Share Data
The Company reports a dual presentation of basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”). Basic EPS excludes dilution and is computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted EPS uses the treasury stock method or the if-converted method, where applicable, to compute for the potential dilution that would occur if dilutive securities or commitments to issue common stock were exercised. Diluted EPS is the same as Basic EPS for the three and six months ended June 30, 2020 and 2019 as the Company had a net loss for all reported periods. As of June 30, 2020, there were 657,949.5 Class M OP Units and 56,029 Class P OP Units that are convertible to Class C OP Units (defined below) at a conversion ratio of five Class C OP Units for each one Class M OP Unit or Class P OP Unit, as applicable, after a specified period of time (see Note 3). The holders of Class C OP Units may exchange such Class C OP Units for shares of the Company's Class C common stock on a 1-for-1 basis or, at the Company’s sole and absolute discretion, for cash. The Class M OP Units and Class P OP Units, and the shares of Class C common stock into which they may ultimately be converted, were excluded from the computation of Diluted EPS because their effect would not be dilutive. There were no other outstanding securities or commitments to issue common stock that would have a dilutive effect for the periods then ended.
The Company has presented the basic and diluted net loss per share amounts on the accompanying condensed consolidated statements of operations for Class C and S share classes as a combined common share class. Application of the two-class method for allocating net loss in accordance with the provisions of ASC 260, Earnings per Share, would have resulted in a net loss of $(0.09) and $(0.06) per share for Class C shares for the three months ended June 30, 2020 and 2019, respectively, and a net loss of $(0.09) and $(0.10) per share for Class S shares for the three months ended June 30, 2020 and 2019, respectively. The two-class method would have resulted in a net loss per share of $(2.13) and $(0.13) for Class C shares for the six months ended June 30, 2020 and 2019, respectively, and $(2.13) and $(0.18) for Class S shares for the six months ended June 30, 2020 and 2019, respectively. The differences in net loss per share if allocated under this method primarily reflects the lower effective distributions per share for Class S shareholders as a result of the payment of the deferred commission to the Class S distributor of these shares, and also reflects the impact of the timing of the declaration of the distributions relative to the time the shares were outstanding.
Fair Value Disclosures
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an existing price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy, which is based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value, is as follows:
Level 1: quoted prices in active markets for identical assets or liabilities;
Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value for certain financial instruments is derived using valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instrument for which it is practicable to estimate the fair value:
Cash and cash equivalents, restricted cash, tenant receivables, due from affiliates, prepaid expenses and other assets, accounts payable, accrued and other liabilities and due to affiliates: These balances approximate their fair values due to the short maturities of these items.

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Derivative Instruments: The Company’s derivative instruments are presented at fair value in the accompanying condensed consolidated balance sheets. The valuation of these instruments is determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit risks to the contracts, are incorporated in the fair values to account for potential nonperformance risk.
Goodwill and Intangible Assets: The fair value measurements of goodwill and intangible assets are considered Level 3 nonrecurring fair value measurements. For goodwill, fair value measurement involves the determination of fair value of a reporting unit. The Company uses a Monte Carlo simulation model to estimate future performance, generating the fair value of the reporting unit's business. For intangible assets, fair value measurements include assumptions with inherent uncertainty, including projected Offerings volumes and related projected revenues and long-term growth rates, among others. The carrying value of intangible assets is at risk of impairment if future projected Offerings proceeds, revenues or long-term growth rates are lower than those currently projected.
Unsecured credit facility and short-term notes payable: The fair values of the Company’s unsecured credit facility and short-term notes payable approximate the carrying values of the unsecured credit facility and short-term notes payable as their interest rates and other terms are comparable to those available in the market place for a similar credit facility and short-term note, respectively.
Mortgage notes payable: The fair value of the Company’s mortgage notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.
Restricted Cash
Restricted cash is comprised of funds which are restricted for use as required by certain lenders in conjunction with an acquisition or debt financing or modification and for on-site and tenant improvements or property taxes. Restricted cash as of June 30, 2020 and December 31, 2019 amounted to $258,493 and $113,362, respectively.
Pursuant to lease agreements, the Company has obligations to pay for $60,598 and $98,329 in site and tenant improvements to be incurred by tenants as of June 30, 2020 and December 31, 2019, respectively, including a 72.7% share of tenant improvements for the Santa Clara property at both balance sheet dates. At both June 30, 2020 and December 31, 2019, the Company's restricted cash held to fund the improvements totaled $92,684. As of June 30, 2020 and December 31, 2019, the Company also held restricted cash of $165,809 and $20,678, respectively, for lender reserves.
Real Estate Investments Held for Sale
The Company generally considers a real estate investment to be “held for sale” when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value, (iv) the sale of the property within one year is considered probable and (v) significant changes to the plan to sell are not expected. Real estate that is held for sale and its related assets are classified as “real estate investment held for sale, net” and “assets related to real estate investment held for sale,” respectively, in the accompanying condensed consolidated balance sheets. Mortgage note payable and other liabilities related to a real estate investment held for sale are classified as “mortgage notes payable related to real estate investments held for sale, net” and “liabilities related to real estate investment held for sale,” respectively, in the accompanying condensed consolidated balance sheets. Real estate investment classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell. Operating results of properties that were classified as held for sale in the ordinary course of business are included in continuing operations in the Company’s accompanying condensed consolidated statements of operations.

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Goodwill and Other Intangible Assets
The Company records goodwill when the purchase price of a business combination exceeds the estimated fair value of net identified tangible and intangible assets acquired. The Company evaluates goodwill for possible impairment in accordance with ASC 350, Intangibles–Goodwill and Other on an annual basis, or more frequently when events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit has declined below its carrying value. If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized. Due to the impacts of the COVID-19 pandemic, the Company performed an impairment test of goodwill for the quarter ended March 31, 2020. Since the Company is a single reporting unit, the Company performed a quantitative analysis to compare the estimated fair value of the Company’s net tangible and intangible assets to the preliminary carrying value of its net tangible and intangible assets as of March 31, 2020. The recorded goodwill impairment charge of $33,267,143 represents the excess of the Company’s net book value over its estimated fair value as of March 31, 2020. No goodwill impairment charges were recorded during the three months ended June 30, 2020.
Intangible assets consist of purchased customer-related intangible assets, marketing-related intangible assets, developed technology and other intangible assets. Intangible assets are amortized over their estimated useful lives using the straight-line method ranging from three years to five years. No significant residual value is estimated for intangible assets. An asset is considered impaired if its carrying amount exceeds the future net cash flow the asset is expected to generate. The Company evaluates long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Due to the impacts of the COVID-19 pandemic, the Company evaluated its intangible assets for impairment and recorded an impairment charge of $1,305,260 for the three months ended March 31, 2020. No impairment charges on intangible assets were recorded during the three months ended June 30, 2020.
See Note 3 for additional information related to goodwill and other intangible assets acquired in connection with the Self-Management Transaction and impairments recorded.
Reclassifications
Certain prior period cash flows from operations account grouping in the condensed consolidated statement of cash flows has been reclassified to conform with the current year presentation. The reclassifications had no impact on net loss.
Restricted Stock Units and Restricted Stock Unit Awards
The fair values of the Operating Partnership's units or restricted stock unit awards issued or granted by the Company are based on the most recent NAV per share of the Company’s common stock on the date of issuance or grant. Operating Partnership units issued as purchase consideration in connection with the Self-Management Transaction discussed in Note 3 are recorded in equity under noncontrolling interests in the Operating Partnership in the Company's condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019 and condensed consolidated statement of equity for the three and six months ended June 30, 2020. For units granted to employees of the Company that are not included in the purchase consideration, the fair value of the award is amortized using the straight-line method over the requisite service period of the award, which is generally the vesting period (see Note 3).
The Company determines the accounting classification of equity instruments (e.g. restricted stock units) that are issued as purchase consideration or part of the purchase consideration in a business combination, as either liability or equity, by first assessing whether the equity instruments meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480-10”), and then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock (“ASC 815-40”). Under ASC 480-10, equity instruments are classified as liabilities if the equity instruments are mandatorily redeemable, obligate the issuer to settle the equity instruments or the underlying shares by paying cash or other assets, or must or may require an unconditional obligation that must be settled by issuing a variable number of shares.
If equity instruments do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the equity instruments do not require liability classification under ASC 815-40, in order to conclude equity classification, the Company assesses whether the equity instruments are indexed to its common stock and whether the equity instruments are classified as equity under ASC 815-40 or other applicable GAAP guidance. After all relevant assessments are made, the Company concludes whether the equity instruments are classified as liability or equity. Liability classified equity instruments are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with all changes in fair

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

value after the issuance date recorded in the statements of operations as a gain or loss. Equity classified equity instruments are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date.
Recent Accounting Pronouncements
New Accounting Standards Recently Issued and Adopted
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement (“ASU No. 2018-13”). ASU No. 2018-13 removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation processes for Level 3 fair value measurements. It also adds a requirement to disclose changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and to disclose the range and weighted average of significant unobservable inputs used to develop recurring and nonrecurring Level 3 fair value measurements. For certain unobservable inputs, entities may disclose other quantitative information in lieu of the weighted average if the other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop the Level 3 fair value measurement. In addition, public entities are required to provide information about the measurement uncertainty of recurring Level 3 fair value measurements from the use of significant unobservable inputs if those inputs reasonably could have been different at the reporting date. ASU No. 2018-13 is effective for the Company beginning January 1, 2020. Entities were permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The adoption of ASU No. 2018-13 on January 1, 2020 did not have a material impact on the Company's consolidated financial statements.
In April 2020, the FASB issued a FASB Staff Q&A related to Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic (the “Topic 842 Q&A”). The Company adopted the lease accounting standards of Topic 842 beginning January 1, 2019. Under Topic 842, subsequent changes to lease payments that are not stipulated in the original lease contract are generally accounted for as lease modifications. Some contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. If a lease contract provides enforceable rights and obligations for concessions in the contract and no changes are made to that contract, the concessions are not accounted for under the lease modification guidance in Topic 842. If concessions granted by lessors are beyond the enforceable rights and obligations in the contract, entities would generally account for those concessions in accordance with the lease modification guidance in Topic 842.
Because of the unprecedented and global nature of the COVID-19 pandemic, the FASB staff is aware that it may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and whether those concessions are consistent with the terms of the contract or are modifications to the contract. As such, the FASB staff believes that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842, as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The FASB staff expects that reasonable judgment will be exercised in making those determinations. Some concessions will provide a deferral of payments with no substantive changes to the consideration in the original contract. A deferral affects the timing, but the amount of the consideration is substantially the same as that required by the original contract.

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

The FASB staff expects that there will be multiple ways to account for those deferrals, none of which the FASB staff believes are more preferable than the others. Two of those methods are: (1) account for the concessions as if no changes to the lease contract were made; under that accounting, a lessor would increase its lease receivable, and a lessee would increase its accounts payable as receivables/payments accrue; in its income statement, a lessor would continue to recognize income, and a lessee would continue to recognize expense during the deferral period; and (2) account for the deferred payments as variable lease payments.
The Company has elected to utilize the method wherein the concessions result in additional lease receivable during the deferral period as available under Topic 842 Q&A for lease concessions related to the effects of the COVID-19 pandemic. The Company's lease concessions related to the effects of the COVID-19 pandemic resulted in a receivable of $89,460 on the Company’s condensed consolidated balance sheet as of June 30, 2020. Due to the continuing nature of the COVID-19 pandemic, there may be subsequent impacts from future tenant requests for lease concessions or deferrals for future periods. The Company maintains an inventory of tenants which have or are expected to request lease concessions. Future lease concessions may have an impact on the Company’s business, financial condition and results of operations, but the ultimate impact will largely depend on future developments with respect to the continued spread and treatment of COVID-19, which the Company cannot accurately predict at this time.
New Accounting Standards Recently Issued and Not Yet Adopted
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 eases the potential burden in accounting for recognizing the effects of reference rate reform on financial reporting. Such challenges include the accounting and operational implications for contract modifications and hedge accounting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to loan and lease agreements, contracts, hedging relationships, and other transactions affected by reference rate reform. These provisions apply to contract modifications that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discounted because of reference rate reform.
Qualifying modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate, and the modification would be considered “minor” so that any existing unamortized deferred loan origination fees and costs would carry forward and continue to be amortized. Qualifying modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for hedge accounting. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022, with adoption permitted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected, the amendments must be applied prospectively for all eligible contract modifications. The Company is currently evaluating the effect that ASU 2020-04 will have on the Company’s consolidated financial statements.
NOTE 3. MERGER AND SELF-MANAGEMENT TRANSACTION
REIT I Merger Transaction
On December 31, 2019, pursuant to the Merger Agreement, the Company completed the acquisition of REIT I. The Company's stockholders approved the Merger contemplated by the Merger Agreement at the Annual Meeting of Stockholders held on December 17, 2019 (the “Annual Meeting”). The shareholders of REIT I approved the Merger contemplated by the Merger Agreement at REIT I’s Special Meeting of Shareholders, also held on December 17, 2019. On December 31, 2019, REIT I merged with and into Merger Sub, which survived the Merger as the Company's direct, wholly-owned subsidiary. At such time, the separate existence of REIT I ceased. The acquisition primarily included 20 single-tenant commercial properties and related tenant receivables, mortgage notes payable and accounts payable, in exchange for Merger consideration for each of REIT I's common shares (the “REIT I Common Shares”) issued and outstanding immediately prior to the Merger, other than the REIT I Common Shares owned by the Company, which were automatically canceled and retired, and converted into the right to receive one share of the Company's Class C common stock, with any fractional REIT I Common Shares converted into a corresponding number of fractional shares of the Company’s Class C common stock. As a result, the Company issued 8,042,221.6 shares of its Class C common stock to former shareholders of REIT I. As further discussed in Note 5, prior to the merger of REIT I with and into Merger Sub on December 31, 2019, the Company had an approximate 4.8% ownership interest in REIT I.

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Accounting Treatment
While the Merger transaction was treated legally as a merger of the two entities, for accounting purposes, the transaction was treated as an asset acquisition under GAAP because REIT I did not possess the capability to operate its properties to generate revenue since it had no workforce. It was dependent on its advisor and did not possess the processes to perform asset management, property purchase and sale transactions or the resulting revenue generation on a stand-alone basis. The real estate assets acquired are similar in nature to each other and represent substantially all of the fair value of the assets acquired. While there are some dissimilarities including the nature of the use (retail, industrial and office), each of the properties is subject to a multi-year lease with a single creditworthy tenant and the properties have similar risk profiles, generally including a mortgage secured only by the property. In addition, 17 of the 20 properties (approximately 93% by value as of the transaction date) are located in California and therefore subject to California law and all properties are managed without on-site offices. Merger Sub, not REIT I, was the surviving entity, there was no entity level debt and there was no contingent consideration paid, as would be typical in the purchase of an operating business.
The assets and liabilities acquired in the Merger were recorded at fair value as determined as of December 31, 2019, including normal adjustments for the values of lease-in-place and above/below market leases and premium/discount on outstanding mortgage notes payable. The Company incurred approximately $3,044,000 of acquisition-related transaction costs during 2019. These acquisition-related transaction costs were capitalized to the acquired real estate assets. As the transaction closed on the final day of the year, the Merger did not have an impact on the Company's consolidated statement of operations for the year ended December 31, 2019 (see Unaudited Pro Forma Financial Information Reflecting both the Merger and Self-Management Transaction below).
Purchase Price Allocation
The Company accounted for the Merger in accordance with the accounting standards codification guidance for business combinations, whereby the total purchase price was allocated to the acquired net tangible and intangible assets based on their estimated fair values as of the closing date. As of December 31, 2019, the Company had substantially completed its process for measuring the fair values of the assets acquired and liabilities assumed based on information available as of the closing date.
The following table summarizes the allocation of the purchase price to the fair values assigned to the REIT I assets acquired and liabilities assumed as of December 31, 2019, the Merger closing date. These fair values were based on internal Company and independent external third-party valuations:
Fair Values Assigned
 
December 31,
2019
Assets:
 
 
Real estate property, including above/below lease intangibles
 
$
151,099,097

Cash and cash equivalents
 
1,612,331

Tenant receivable
 
310,169

Prepaid expenses and other assets
 
51,924

Liabilities:
 
 
Mortgage notes payable, net
 
(62,985,425
)
Accounts payable and other liabilities
 
(2,243,156
)
Net
 
87,844,940

Less: Cancellation of investment in REIT I (Note 5)
 
(3,091,489
)
         Capitalized transaction-related costs
 
(3,044,480
)
Net Assets Acquired
 
$
81,708,971

Self-Management Transaction
On September 19, 2019, the Company, the Operating Partnership, BrixInvest and Daisho entered into the Contribution Agreement pursuant to which the Company agreed to acquire substantially all of the net assets of BrixInvest in exchange for 657,949.5 Class M OP Units in the Operating Partnership and assumed certain liabilities. On December 31, 2019, the Self-Management Transaction was completed.

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Prior to the closing of the Self-Management Transaction: (i) substantially all of BrixInvest’s assets and liabilities were contributed to Daisho’s wholly-owned subsidiary, modiv, LLC, a Delaware limited liability company ("modiv, LLC"); and (ii) BrixInvest spun off Daisho to the BrixInvest members (the “Spin Off”). Pursuant to the Self-Management Transaction, Daisho contributed to the Operating Partnership all of the membership interests in modiv, LLC in exchange for the Class M OP Units.
As a result of the Self-Management Transaction, BrixInvest, through its subsidiary, Daisho, transferred all of its operating assets, including but not limited to: (i) all personal property used in or necessary for the conduct of BrixInvest’s business; (ii) intellectual property, goodwill, licenses and sublicenses granted and obtained with respect thereto and certain domain names; (iii) all continuing employees and (iv) certain other assets and liabilities, to modiv, LLC and distributed 100% of the ownership interests in Daisho to the members of BrixInvest in the Spin Off.
BrixInvest had been engaged in the business of serving as the sponsor platform supporting the operations of the Company, REIT I and, prior to October 28, 2019, BRIX REIT, Inc. (“BRIX REIT”), including serving, directly or indirectly, as advisor and asset manager to the Company, REIT I and, until October 28, 2019, BRIX REIT.
As a result of the Merger and the Self-Management Transaction, effective December 31, 2019, the Company, its Former Advisor and BrixInvest, which wholly owned the Company's Former Advisor, mutually agreed to terminate the Advisory Agreement, and the Company became self-managed. Accordingly, disclosures with regard to the Advisory Agreement elsewhere in this Quarterly Report on Form 10-Q pertain only to transactions with the Company's Former Advisor through December 31, 2019.
Amendments to Operating Partnership Agreement
On December 31, 2019, the Company, the Operating Partnership and NNN LP entered into the Second Amended and Restated Agreement of Limited Partnership (the “Amended OP Agreement”), which amended the Amended and Restated Agreement of Limited Partnership of the Operating Partnership dated August 11, 2017. The amendments included amending the name of the Operating Partnership from “Rich Uncles NNN Operating Partnership, LP” to “RW Holdings NNN REIT Operating Partnership, LP” and providing the terms of the Class M OP Units and Class P OP Units issued in connection with the Self-Management Transaction and further described below.
The Class M OP Units were issued to Daisho on December 31, 2019 in connection with the Self-Management Transaction and are non-voting, non-dividend accruing, and are not able to be converted or exchanged prior to the one-year anniversary of the completion of the Self-Management Transaction. Investors holding units in BrixInvest received Daisho units in a ratio of 1:1 for an aggregate of 657,949.5 Daisho units. During 2020, Daisho distributed the Class M OP Units to its members and the Class M OP Units will become convertible into units of Class C limited partnership interest in the Operating Partnership (“Class C OP Units”) at a conversion ratio of five Class C OP Units for each one Class M OP Unit, subject to a reduction in the conversion ratio (which reduction will vary depending upon the amount of time held) if the exchange occurs prior to the four-year anniversary of the completion of the Self-Management Transaction. In the event that the Class M OP Units are converted into Class C OP Units prior to December 31, 2023, such Class M OP Units shall be exchanged at the rate indicated below:
Date of Exchange
 
Early Conversion Rate
From December 31, 2020 to December 30, 2021
 
50% of the Class M conversion ratio
From December 31, 2021 to December 30, 2022
 
60% of the Class M conversion ratio
From December 31, 2022 to December 30, 2023
 
70% of the Class M conversion ratio
The Class M OP Units are eligible for an increase in the conversion ratio (conversion ratio enhancement) if the Company achieves both of the targets for assets under management (“AUM”) and adjusted funds from operations (“AFFO”) in a given year as set forth below:
 
Hurdles
 
 
 
AUM
 
AFFO Per Share
 
Class M
 
($ in billions)
 
($)
 
Conversion Ratio
Initial Conversion Ratio
 
 
 
 
1:5.00
Fiscal Year 2021
$
0.860

 
$
0.59

 
1:5.75
Fiscal Year 2022
$
1.175

 
$
0.65

 
1:7.50
Fiscal Year 2023
$
1.551

 
$
0.70

 
1:9.00

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Based on the current conversion ratio of five Class C OP Units for each one Class M OP Unit, if a Class M OP Unit is converted on or after December 31, 2023, and based on the current NAV per share of $7.00, a Class M OP Unit would be valued at $35.00. The current NAV does not impact the early conversion rate or the future conversion enhancement ratio of the Class M and Class P OP Units.
The Company also issued a portion of the Class P OP Units described below in connection with the Self-Management Transaction. The Class P OP Units are intended to be treated as “profits interests” in the Operating Partnership, which are non-voting, non-dividend accruing, and are not able to be transferred or exchanged prior to the earlier of (1) March 31, 2024, (2) a change of control (as defined in the Amended OP Agreement), or (3) the date of the recipient's involuntary termination (as defined in the relevant award agreement for the Class P OP Units) (collectively, the “Lockup Period”). Following the expiration of the Lockup Period, the Class P OP Units are convertible into Class C OP Units at a conversion ratio of five Class C OP Units for each one Class P OP Unit; provided, however, that the foregoing conversion ratio shall be subject to increase on generally the same terms and conditions as the Class M OP Units, as set forth above.
The Company issued a total of 56,029 Class P OP Units to Messrs. Halfacre and Pacini, including 26,318 Class P OP Units issued in exchange for Messrs. Halfacre's and Pacini's agreements to forfeit a similar number of restricted units in BrixInvest in connection with the Self-Management Transaction. The remaining 29,711 Class P OP Units were issued to these executives as a portion of their incentive compensation for 2020 in connection with their entry into restrictive covenant agreements. The 29,711 Class P OP Units were valued based on the estimated NAV per share of $10.16 when issued on December 31, 2019 and the expected minimum conversion ratio of five Class C OP Units for each one Class P OP Unit, which resulted in a valuation of $1,509,319. This amount is amortized on a straight-line basis over 51 months through March 31, 2024, the expected vesting date of the units, as a periodic charge to stock compensation expense. During the three and six months ended June 30, 2020, the Company amortized and charged $88,784 and $177,567, respectively, to stock compensation expense. The unamortized value of these units was $1,331,752 as of June 30, 2020.
Under the Amended OP Agreement, once the Class M OP Units or Class P OP Units are converted into Class C OP Units, they will be exchangeable for the Company’s shares of Class C common stock on a 1-for-1 basis, or for cash at the sole and absolute discretion of the Company. The Company recorded the ownership interest of the Class M OP Units and Class P OP Units as noncontrolling interests in the Operating Partnership representing a combined total of approximately 13% of equity in the Operating Partnership.
Registration Rights Agreement
On December 31, 2019, the Company, the Operating Partnership and Daisho entered into a Registration Rights Agreement pursuant to which Daisho (or any successor holder) has the right, after one year from the date of the Self-Management Transaction, to request that the Company register for resale, under the Securities Act, shares of the Company's Class C common stock issued or issuable to such holder in exchange for the Class C OP Units as described above.
Accounting Treatment
In accordance with GAAP, the Company accounted for the Self-Management Transaction as an acquisition of a business in accordance with the accounting standards codification guidance for business combinations because the parties to the transaction were not under common control and the acquisition was for an integrated set of activities and assets, consisting of inputs (executives and staff with knowledge and experience) and processes (operating a real estate investment trust and online investor website platform) that contribute to the creation of outputs (real estate transactions, asset management and generation of investors). Therefore, the total consideration transferred was allocated to the acquired net tangible and intangible assets based on their estimated fair values at December 31, 2019.
The fair value measurement of the consideration transferred was based on significant inputs not observable in the market and thus represent a Level 3 measurement as discussed in Note 2. The key assumptions used in estimating the fair value of the Class M OP Units and the Class P OP Units included projections for (i) property acquisitions and changes in property values, (ii) new investors, and (iii) follow on investments by existing stockholders. The consideration transferred in the Self-Management Transaction was determined to have a fair value of $50,603,000 based on a probability weighted analysis of achieving the requisite AUM and AFFO hurdles. The Class M OP Units and the 26,318 Class P OP Units issued in connection with the Self-Management Transaction were treated as permanent equity of the Company for accounting purposes because the Class M OP Units and the Class P OP Units are not mandatorily redeemable by the Company. In addition, there is no unconditional obligation to issue a variable number of shares; the Class M OP Units and the Class P OP Units are issued in the form of shares and as such would not represent a financial instrument other than an outstanding share that embodies a conditional obligation, and they do not

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

possess the characteristics of freestanding derivatives. Moreover, they are not redeemable for cash or other assets at the option of the holder or upon the occurrence of an event that is not solely within the control of the Company. The Class M OP Units and the Class P OP Units are a single financial instrument, including the conversion ratio enhancement, which cannot be detached and is not separately exercisable.
As of December 31, 2019, the Company had substantially completed its process for measuring the fair values of the assets acquired and liabilities assumed based on information available as of the closing date. The Company incurred $1,468,913 in costs in connection with the Self-Management Transaction, which were included in the consolidated statement of operations for the year ended December 31, 2019 and an additional $8,460 and $201,920 in post-closing costs during the three and six months ended June 30, 2020, respectively.
Purchase Price Allocation
The following table summarizes the allocation of the purchase price to the fair values assigned to the BrixInvest assets acquired and liabilities assumed as of December 31, 2019, the closing date of the Self-Management Transaction. These fair values were based on internal Company and independent external third-party valuations:
Fair Values Assigned
 
December 31, 2019
Assets:
 
 
Cash and cash equivalents
 
$
(204,176
)
Prepaid expenses and other assets
 
(305,212
)
Operating lease right-of-use asset
 
(2,386,877
)
Intangible assets
 
(7,700,000
)
Liabilities:
 
 
Short-term notes payable
 
4,800,000

Due to affiliates
 
630,820

Bank line of credit
 
800,000

Accounts payable and other liabilities
 
2,070,968

Operating lease liability
 
2,386,877

Net liabilities assumed
 
92,400

Less: Cancellation of investment in the Company
 
(107,400
)
Add: Contribution of Class M OP Units and Class P OP Units
 
50,603,000

Goodwill
 
$
50,588,000

Prior to the closing of the Self-Management Transaction, BrixInvest held 10,740 shares of Class C common stock in the Company, purchased at $10.00 per share. These shares were canceled in connection with the Self-Management Transaction.
Goodwill
The goodwill recognized was primarily attributable to the Company's ability to be self-managed, the value of the workforce which includes growth opportunities, from both existing and new investment, income streams and the ability to offer new products, the investor platform acquired from BrixInvest and its expected synergies resulting from the Self-Management Transaction and the Merger. Key areas of expected cost synergies include increased purchasing power for acquiring properties, lower financing costs and administrative efficiencies. Goodwill is expected to be mostly non-deductible for tax purposes. As permitted under ASC 805 for business combinations, the Company recorded goodwill because the purchase price of the Self-Management Transaction exceeded the estimated fair value of net identified tangible and intangible assets acquired.
The current COVID-19 pandemic in the United States and globally, and the magnitude and uncertain duration of the economic impacts have resulted in challenges in attracting investor equity during this period of economic weakness and volatility. The disruption in the Company's Offerings is expected to have a protracted impact on capital raising, and the recessionary pressures on the economy have resulted in real estate market uncertainty and an approximate 14% decrease in the estimated fair value of the Company’s real estate properties as of April 30, 2020 as compared with the estimated fair value of the Company’s real estate properties as of December 31, 2019 (see discussion of the Company's updated estimated NAV per share approved on May 20, 2020 above in Note 1). Given these circumstances, the Company has revised its capital raise projections, its projections of new investment and other factors contributing to the Company's analysis of estimated fair value of its consolidated business operations. Since the Company is a single reporting unit, the Company performed a quantitative analysis to compare the estimated

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RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

fair value of the Company’s net tangible and intangible assets, including the estimated fair value of the business acquired from its Former Sponsor, to the carrying value of its net tangible and intangible assets as of March 31, 2020. Since the estimated fair value of the Company’s net tangible and intangible assets was less than the carrying amount of its net tangible and intangible assets, the Company recorded a goodwill impairment charge of $33,267,143 for the quarter ended March 31, 2020 which is reflected in the Company’s net loss for the six months ended June 30, 2020.
The net carrying amount of goodwill as of June 30, 2020 and December 31, 2019 is as follows:
 
 
June 30,
2020
 
December 31,
2019
Goodwill
 
$
17,320,857

 
$
50,588,000

Intangible Assets Acquired
The allocation of the purchase price to the net assets acquired resulted in the recognition of $7,700,000 of intangible assets as of the closing date. The fair values of the acquired investor lists and developed technology assets, primarily the investor online platform, were determined using the adjusted cost approach, which approximates fair value. The useful lives of the intangible assets were determined based on the period of expected cash flows used to measure the fair value of the intangible assets adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic, and/or other factors that may limit the useful life of the respective intangible asset.
Intangible assets, net as of June 30, 2020 and December 31, 2019 and related useful lives are as follows:
Intangible Assets
 
Weighted-Average Useful Life
 
June 30,
2020
 
December 31,
2019
Investor list, net
 
5.0 years
 
$
3,494,740

 
$
4,800,000

Web services technology, domains and licenses
 
3.0 years
 
3,433,041

 
2,900,000

 
 
 
 
6,927,781

 
7,700,000

Accumulated amortization
 
 
 
(925,989
)
 

Net
 
 
 
$
6,001,792

 
$
7,700,000

During the three and six months ended June 30, 2020, the Company acquired additional web services technology intangible assets of $209,351 and $533,041, respectively. Amortization expense for the three and six months ended June 30, 2020 amounted to $438,770 and $925,989, respectively.
As discussed previously, the COVID-19 pandemic has caused significant disruptions in the economy and uncertainties in the investment markets. Based on the impacts on the Company's investors and the economy, the Company evaluated the fair value of intangibles to determine if they exceeded the respective carrying values and determined that a portion of the investor list would no longer be viable and, therefore, an impairment charge of $1,305,260 was recorded for the quarter ended March 31, 2020 which is reflected in the Company’s net loss for the six months ended June 30, 2020.
The estimated amortization expense for the succeeding fiscal years is as follows: July to December 2020, $921,648; 2021, $1,843,295; 2022, $1,843,295; 2023, $756,434; and 2024, $637,120.
NOTE 4. REAL ESTATE INVESTMENTS, NET
As of June 30, 2020, the Company’s real estate investment portfolio consisted of (i) 41 operating properties (including 17 operating properties acquired in connection with the Merger on December 31, 2019) located in 14 states including: 17 retail properties, 16 office properties and eight industrial properties, (ii) one parcel of land, which currently serves as an easement to one of the Company’s office properties and (iii) a 72.7% undivided TIC Interest in an office property in Santa Clara, CA, as discussed in Note 5.

23

Table of Contents
RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

The following table provides summary information regarding the Company’s real estate portfolio as of June 30, 2020:
Property
 
Location
 
Acquisition Date
 
Property Type
 
Land, Buildings and Improvements
 
Tenant Origination and Absorption Costs
 
Accumulated Depreciation and Amortization
 
Total Investment in Real Estate Property, Net
Accredo Health
 
Orlando, FL
 
6/15/2016
 
Office
 
$
9,855,847

 
$
1,269,349

 
$
(1,988,113
)
 
$
9,137,083

Dollar General
 
Litchfield, ME
 
11/4/2016
 
Retail
 
1,281,812

 
116,302

 
(145,884
)
 
1,252,230

Dollar General
 
Wilton, ME
 
11/4/2016
 
Retail
 
1,543,776

 
140,653

 
(186,700
)
 
1,497,729

Dollar General
 
Thompsontown, PA
 
11/4/2016
 
Retail
 
1,199,860

 
106,730

 
(140,168
)
 
1,166,422

Dollar General
 
Mt. Gilead, OH
 
11/4/2016
 
Retail
 
1,174,188

 
111,847

 
(134,389
)
 
1,151,646

Dollar General
 
Lakeside, OH
 
11/4/2016
 
Retail
 
1,112,872

 
100,857

 
(137,925
)
 
1,075,804

Dollar General
 
Castalia, OH
 
11/4/2016
 
Retail
 
1,102,086

 
86,408

 
(134,008
)
 
1,054,486

Dana (1)
 
Cedar Park, TX
 
12/27/2016
 
Industrial
 
6,802,876

 
531,439

 
(1,688,477
)
 
5,645,838

Northrop Grumman
 
Melbourne, FL
 
3/7/2017
 
Office
 
12,382,991

 
1,341,199

 
(2,577,470
)
 
11,146,720

exp US Services
 
Maitland, FL
 
3/27/2017
 
Office
 
6,056,668

 
388,248

 
(721,294
)
 
5,723,622

Harley
 
Bedford, TX
 
4/13/2017
 
Retail
 
13,178,288

 

 
(1,080,657
)
 
12,097,631

Wyndham
 
Summerlin, NV
 
6/22/2017
 
Office
 
10,406,483

 
669,232

 
(992,977
)
 
10,082,738

Williams Sonoma
 
Summerlin, NV
 
6/22/2017
 
Office
 
8,079,612

 
550,486

 
(902,677
)
 
7,727,421

Omnicare
 
Richmond, VA
 
7/20/2017
 
Industrial
 
7,262,747

 
281,442

 
(710,174
)
 
6,834,015

EMCOR
 
Cincinnati, OH
 
8/29/2017
 
Office
 
5,960,610

 
463,488

 
(514,464
)
 
5,909,634

Husqvarna
 
Charlotte, NC
 
11/30/2017
 
Industrial
 
11,840,200

 
1,013,948

 
(935,104
)
 
11,919,044

AvAir
 
Chandler, AZ
 
12/28/2017
 
Industrial
 
27,357,900

 

 
(1,764,098
)
 
25,593,802

3M
 
DeKalb, IL
 
3/29/2018
 
Industrial
 
14,762,819

 
2,356,361

 
(2,853,917
)
 
14,265,263

Cummins
 
Nashville, TN
 
4/4/2018
 
Office
 
14,465,491

 
1,536,998

 
(1,754,657
)
 
14,247,832

Northrop Grumman Parcel
 
Melbourne, FL
 
6/21/2018
 
Land
 
329,410

 

 

 
329,410

24 Hour Fitness (1)
 
Las Vegas, NV
 
7/27/2018
 
Retail
 
6,848,966

 
176,275

 
(825,644
)
 
6,199,597

Texas Health
 
Dallas, TX
 
9/13/2018
 
Office
 
6,976,703

 
713,221

 
(532,685
)
 
7,157,239

Bon Secours
 
Richmond, VA
 
10/31/2018
 
Office
 
10,388,751

 
800,356

 
(751,926
)
 
10,437,181

Costco
 
Issaquah, WA
 
12/20/2018
 
Office
 
27,330,797

 
2,765,136

 
(2,002,991
)
 
28,092,942

Taylor Fresh Foods
 
Yuma, AZ
 
10/24/2019
 
Industrial
 
34,194,370

 
2,894,017

 
(936,185
)
 
36,152,202

Chevron Gas Station
 
San Jose, CA
 
12/31/2019
 
Retail
 
4,054,759

 
145,577

 
(30,317
)
 
4,170,019

Levins
 
Sacramento, CA
 
12/31/2019
 
Industrial
 
4,429,390

 
221,927

 
(110,304
)
 
4,541,013

Chevron Gas Station
 
Roseville, CA
 
12/31/2019
 
Retail
 
3,648,571

 
136,415

 
(59,513
)
 
3,725,473

Dollar General
 
Bakersfield, CA
 
12/31/2019
 
Retail
 
4,899,714

 
261,630

 
(73,566
)
 
5,087,778

PMI Preclinical
 
San Carlos, CA
 
12/31/2019
 
Office
 
9,672,174

 
408,225

 
(102,161
)
 
9,978,238

EcoThrift
 
Sacramento, CA
 
12/31/2019
 
Retail
 
5,550,226

 
273,846

 
(148,740
)
 
5,675,332

GSA (MSHA)
 
Vacaville, CA
 
12/31/2019
 
Office
 
3,112,076

 
243,307

 
(69,257
)
 
3,286,126

PreK Education
 
San Antonio, TX
 
12/31/2019
 
Retail
 
12,447,287

 
447,927

 
(299,714
)
 
12,595,500

Dollar Tree
 
Morrow, GA
 
12/31/2019
 
Retail
 
1,320,367

 
73,298

 
(35,455
)
 
1,358,210

Solar Turbines
 
San Diego, CA
 
12/31/2019
 
Office
 
7,133,241

 
284,026

 
(602,129
)
 
6,815,138

Wood Group
 
San Diego, CA
 
12/31/2019
 
Office
 
9,731,220

 
392,955

 

 
10,124,175

ITW Rippey
 
El Dorado, CA
 
12/31/2019
 
Industrial
 
7,071,143

 
304,387

 

 
7,375,530

Dollar General
 
Big Spring, TX
 
12/31/2019
 
Retail
 
1,281,683

 
76,351

 
(25,484
)
 
1,332,550

Gap
 
Rocklin, CA
 
12/31/2019
 
Office
 
8,378,276

 
360,377

 
(239,653
)
 
8,499,000

L-3 Communications
 
San Diego, CA
 
12/31/2019
 
Office
 
11,631,857

 
454,035

 
(235,412
)
 
11,850,480

Sutter Health
 
Rancho Cordova, CA
 
12/31/2019
 
Office
 
29,555,055

 
1,616,610

 
(540,174
)
 
30,631,491

Walgreens
 
Santa Maria, CA
 
12/31/2019
 
Retail
 
5,223,442

 
335,945

 
(66,480
)
 
5,492,907

 
 
 
 
 
 
 
 
$
371,036,604

 
$
24,450,830

 
$
(27,050,943
)
 
$
368,436,491

(1) See impairment charges discussion below.

24

Table of Contents
RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Impairment Charges
During late March 2020, the Company learned that there would be a substantial impact on the commercial real estate market and specifically on fitness centers due to the COVID-19 pandemic and the requirement of an indefinite and potentially extended period of store closures. We expected that 24 Hour Fitness USA, Inc. (“24 Hour Fitness”) would have significant difficulty in making rent payments. On March 31, 2020, the Company received written notice that due to circumstances beyond their control, including the response to the COVID-19 pandemic and directives and mandates of various governmental authorities, the Las Vegas, NV 24 Hour Fitness store leased from the Company had been closed on or about March 17, 2020 and remained closed as of the date of the tenant's notice. The tenant's notice stated that it would not make the April 2020 rent payment. The Company's special purpose subsidiary, which owns the property, immediately initiated negotiations with the tenant; however, no further rent payments were received and on June 15, 2020, the Company received written notice that the lease was formally rejected in connection with 24 Hour Fitness' Chapter 11 bankruptcy proceeding and the premises were surrendered to the Company's subsidiary.
On April 1, 2020, the Company’s special purpose subsidiary initiated negotiations with the lender on the property regarding the special purpose subsidiary's request for a deferral of mortgage payments until the tenant resumed paying rent. The lender on this property did not agree to provide any substantial mortgage relief to the Company's special purpose subsidiary, but rather agreed to only temporarily reduce its $32,000 monthly mortgage payment by $8,000 for the next four monthly payments. If the Company's special purpose subsidiary cannot find a replacement tenant, then the Company's special purpose subsidiary may allow the lender to foreclose on the property and take possession. As such, the Company concluded that it was necessary to record an impairment charge to reduce the net book value of the property to its estimated fair value.
In addition, the Company determined that the effects of the COVID-19 pandemic on the overall economy and commercial real estate market would have negative impacts on the Company's ability to re-lease two vacant properties, the property formerly leased to Dinan Cars located in Morgan Hill, CA through January 31, 2020 and the property leased to Dana, but currently unoccupied, located in Cedar Park, TX. Based on an evaluation of the value of these two properties, the Company determined that impairment charges were required to reflect the reduction in value due to the uncertainty regarding leasing or sale prospects.
During the three months ended March 31, 2020, the Company recorded impairment charges aggregating $9,157,068 based on the estimated fair value of the real estate properties, as discussed above, and during the three months ended June 30, 2020, the Company recorded an additional impairment charge of $349,457 related to its property located in Lake Elsinore, CA and leased to Rite Aid through February 29, 2028. The Company determined that an impairment charge of $349,457 was required, which represents the excess of the property's carrying value over the property's sale price less estimated selling costs (see Note 11. Subsequent Events for the sale of the property).
The aggregate impairment charges of $9,157,068 represented approximately 2.2% of the Company’s total investments in real estate property before impairments as of March 31, 2020 and the impairment charge of $349,457 represented approximately 0.1% of the Company’s total investments in real estate property before impairments as of June 30, 2020.
The details of the Company's real estate impairment charges for the three and six months ended June 30, 2020 are as follows:
Property
 
Location
 
Three Months Ended June 30, 2020
 
Six Months Ended June 30, 2020
Rite Aid
 
Lake Elsinore, CA
 
$
349,457

 
$
349,457

Dana
 
Cedar Park, TX
 

 
2,184,395

24 Hour Fitness
 
Las Vegas, NV
 

 
5,664,517

Dinan Cars
 
Morgan Hill, CA
 

 
1,308,156

 
 
 
 
$
349,457

 
$
9,506,525

Acquisitions or Dispositions
The Company did not acquire or dispose of any real estate property during the six months ended June 30, 2020 and 2019. See Note 11. Subsequent Events for a description of recently completed and pending asset dispositions.

25

Table of Contents
RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Asset Concentration
The Company does not have any real estate property with a net book value that is greater than 10% of its total assets as of June 30, 2020 and December 31, 2019.
Revenue Concentration
No tenants represented the source of 10% of total revenues during the three or six months ended June 30, 2020. The Company’s revenue concentration based on tenants representing greater than 10% of total revenues for the three and six months ended June 30, 2019 was as follows.
 
 
Three Months Ended
June 30, 2019
Property and Location
 
Revenue
 
Percentage of Total Revenue
Costco, Issaquah, WA
 
$
697,522

 
11.8
%
AvAir, Chandler, AZ
 
$
666,774

 
11.3
%
 
 
Six Months Ended
June 30, 2019
Property and Location
 
Revenue
 
Percentage of Total Revenue
Costco, Issaquah, WA
 
$
1,376,025

 
11.7
%
AvAir, Chandler, AZ
 
$
1,333,549

 
11.3
%
Operating Leases
The Company’s real estate properties are primarily leased to tenants under net leases for which terms and expirations vary. The Company monitors the credit of all tenants to stay abreast of any material changes in credit quality. The Company monitors tenant credit by (1) reviewing the credit ratings of tenants (or their parent companies or lease guarantors) that are rated by national recognized rating agencies; (2) reviewing financial statements and related metrics and information that are publicly available or that are required to be provided pursuant to the lease; (3) monitoring news reports and press releases regarding the tenants (or their parent companies or lease guarantors), and their underlying business and industry; and (4) monitoring the timeliness of rent collections.
During the first four months of 2020, the Company paid an aggregate of $990,000 in lease incentives to cancel certain termination options related to two leases with Walgreens for its Santa Maria, California and Stockbridge, Georgia properties, resulting in extension of the leases for approximately seven and six years, respectively. The Stockbridge property is held for sale as of June 30, 2020 as further discussed below.
As of June 30, 2020, the future minimum contractual rent payments due to the Company under the Company’s non-cancellable operating leases, excluding any rents from 24 Hour Fitness due to its rejection of the lease in connection with its bankruptcy proceeding and excluding rents due related to real estate investments held for sale, are as follows:
July through December 2020
 
$
13,567,979

2021
 
25,932,970

2022
 
23,666,227

2023
 
20,401,395

2024
 
19,832,230

2025
 
16,029,926

Thereafter
 
49,126,171

 
 
$
168,556,898


26

Table of Contents
RW HOLDINGS NNN REIT, INC.
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)

Intangibles
As of June 30, 2020, the Company’s lease intangibles were as follows:
 
Tenant Origination and Absorption Costs
 
Above-Market Lease Intangibles
 
Below-Market Lease Intangibles
Cost
$
24,450,830

 
$
1,194,720

 
$
(15,552,554
)
Accumulated amortization
(7,764,826
)
 
(248,773
)
 
1,894,359

Net amount
$
16,686,004