Annual report pursuant to section 13 and 15(d)

Investment Properties (Tables)

v2.4.0.8
Investment Properties (Tables)
12 Months Ended
Dec. 31, 2013
Pro Forma Condensed Consolidated and Combined Financial Information

Unaudited pro forma consolidated and combined financial information is presented below for all 2012 and 2013 acquisitions, including the PSF Entities and excluding Bixby Commons, Starbucks/Verizon and Jenks Reasors. The unaudited pro forma information presented below illustrates the Company’s pro forma financial results assuming the acquisitions had been consummated as of the beginning of the earliest period presented. The pro forma results include adjustments for depreciation and amortization associated with acquired tangible and intangible assets, straight-line rent adjustments and interest expense related to debt incurred. Unaudited pro forma financial information has not been presented for Bixby Commons, Starbucks/Verizon and Jenks Reasors as the Company’s management has determined that their inclusion would not be meaningful due to limited or no unrelated third party operating history.

 

     Years Ended December 31,  
     2013     2012  

Rental revenue

   $ 11,090,428      $ 10,432,841   

Net loss

   $ (7,045,145   $ (3,190,041

Basic and diluted loss per share

   $ (1.52   $ (0.97
Investment Properties

Investment properties consist of the following:

 

     December 31,  
     2013     2012  

Land

   $ 26,828,228      $ 9,681,750   

Buildings and improvements

     80,003,805        36,955,471   
  

 

 

   

 

 

 

Investment properties at cost

     106,832,033        46,637,221   

Less accumulated depreciation and amortization

     (5,059,698     (3,291,556
  

 

 

   

 

 

 

Investment properties, net

   $ 101,772,335      $ 43,345,665   
  

 

 

   

 

 

 
Real Estate [Member]
 
Summary of Consideration Paid and Preliminary Estimated Fair Values of Assets Acquired and Liabilities Assumed

The following summarizes the consideration paid and the preliminary estimated fair values of assets acquired and liabilities assumed in conjunction with the acquisitions described above, along with a description of the methods used to determine fair value. In determining fair values, the Company considered many factors including, but not limited to, cash flows, market cap rates, location, occupancy rates, appraisals, other acquisitions and management’s knowledge of the current acquisition market for similar properties.

 

     2013              
     Acquisitions     Food Lions     Total  

Preliminary estimated fair value of assets acquired and liabilities assumed:

      

Investment property (a)

   $ 48,576,763      $ 10,910,964      $ 59,487,727   

Lease intangibles and other assets (b)

     6,720,126        4,392,812        11,112,938   

Above market leases (c)

     674,184        704,710        1,378,894   

Below market leases (c)

     (876,736     (161,950     (1,038,686
  

 

 

   

 

 

   

 

 

 

Preliminary fair value of net assets acquired

   $ 55,094,337      $ 15,846,536      $ 70,940,873   
  

 

 

   

 

 

   

 

 

 

Purchase consideration:

      

Consideration paid with cash and debt

   $ 54,149,066      $ 15,846,536      $ 69,995,602   

Consideration paid with common units

     945,271        —          945,271   
  

 

 

   

 

 

   

 

 

 

Total consideration (d)

   $ 55,094,337      $ 15,846,536      $ 70,940,873   
  

 

 

   

 

 

   

 

 

 

 

  a. Represents the preliminary estimated fair value of the net investment properties acquired which includes land, buildings, site improvements and tenant improvements. The fair value was estimated using following approaches:

 

  i. the market approach valuation methodology for land by considering similar transactions in the markets;
  ii. a combination of the cost approach and income approach valuation methodologies for buildings, including replacement cost evaluations, “go dark” analyses and residual calculations incorporating the land values; and

 

  iii. the cost approach valuation methodology for site and tenant improvements, including replacement costs and prevailing quoted market rates.

 

  b. Represents the preliminary estimated fair value of lease intangibles and other assets. Lease intangibles include leasing commissions, in place leases, legal and marketing fees and tenant relationships associated with replacing existing leases. The income approach was used to determine the fair value of these intangible assets which included estimated market rates and expenses. It was determined that carrying value approximated fair value for other asset amounts.

 

  c. Represents the preliminary estimated fair value of above/below market leases. The income approach was used to determine the fair value of above/below market leases using market rental rates for similar properties.

 

  d. Represents the components of purchase consideration paid.
Business Acquisition [Member]
 
Summary of Consideration Paid and Preliminary Estimated Fair Values of Assets Acquired and Liabilities Assumed

The following summarizes the consideration paid and the fair values of assets acquired and liabilities assumed in conjunction with the acquisitions described above, along with a description of the methods used to determine fair value. In determining fair values, we considered many factors including, but not limited to, cash flows, market cap rates, location, occupancy rates, appraisals, other acquisitions and our knowledge of the current acquisition market for similar properties.

 

     2012
Acquisitions
 

Fair value of assets acquired and liabilities assumed:

  

Investment property (a)

   $ 10,063,832   

Lease intangibles and other assets (b)

     1,780,277   

Accounts payable, accrued expenses and other liabilities (c)

     (60,352

Below market leases (d)

     (494,109
  

 

 

 

Fair value of net assets acquired

   $ 11,289,648   
  

 

 

 

Purchase consideration:

  

Consideration paid with cash and debt

   $ 10,795,530   

Consideration paid with common units

     494,118   
  

 

 

 

Total consideration (e)

   $ 11,289,648   
  

 

 

 

 

  a. Represents the fair value of the net investment properties acquired which includes land, buildings, site improvements and tenant improvements. The fair value was determined using following approaches:

 

  i. the market approach valuation methodology for land by considering similar transactions in the markets;

 

  ii. a combination of the cost approach and income approach valuation methodologies for buildings, including replacement cost evaluations, “go dark” analyses and residual calculations incorporating the land values; and

 

  iii. the cost approach valuation methodology for site and tenant improvements, including replacement costs and prevailing quoted market rates.

 

  b. Represents the fair value of lease intangibles and other assets. Lease intangibles include leasing commissions, in place leases and legal and marketing fees associated with replacing existing leases. The income approach was used to determine the fair value of these intangible assets which included estimated market rates and expenses. It was determined that carrying value approximated fair value for other asset amounts.

 

  c. Represents the fair value of accounts payable, accrued expenses and other liabilities. It was determined that carrying value approximated fair value for all amounts in these categories.

 

  d. Represents the fair value of below market leases. The income approach was used to determine the fair value of above/below market leases using market rental rates for similar properties.

 

  e. Represents the components of purchase consideration paid.
Pro Forma Condensed Consolidated and Combined Financial Information

The following unaudited pro forma condensed consolidated and combined financial information is presented to illustrate the estimated impact on the results of operations of the Company assuming the formation transactions discussed above occurred on January 1, 2012.

 

     Year Ended December 31, 2012  
     WHLR and
Subsidiaries (1)
    PSF
Entities (2)
    Consolidated  

Total Revenues

   $ 2,433,979      $ 2,883,035      $ 5,317,014   

Total Operating Expenses

     2,673,523        2,154,303        4,827,826   
  

 

 

   

 

 

   

 

 

 

Net Operating Income (Loss)

     (239,544     728,732        489,188   

Interest Expense

     (966,113     (784,930     (1,751,043
  

 

 

   

 

 

   

 

 

 

Net Loss

   $ (1,205,657   $ (56,198   $ (1,261,855
  

 

 

   

 

 

   

 

 

 

 

(1) Includes the operations of the PSF Entities for the period from November 16, 2012 (date of formation transactions) through December 31, 2012.
(2) Represents the estimated operations of the PSF Entities for the period from January 1, 2012 until November 16, 2012.
PSF Entities [Member]
 
Summary of Consideration Paid and Preliminary Estimated Fair Values of Assets Acquired and Liabilities Assumed

The following summarizes the consideration paid and the preliminary fair values of assets acquired and liabilities assumed in conjunction with the Trust acquiring the PSF Entities, along with a description of the methods used to determine fair value. In determining fair values, management considered many factors including, but not limited to, cash flows, market cap rates, location, occupancy rates, appraisals, other acquisitions and our knowledge of the current acquisition market for similar properties.

Estimated fair value of assets acquired and liabilities assumed:

  

Investment property (a)

   $ 20,769,328   

Tenant and other receivables and other assets (b)

     1,209,811   

Other lease intangibles (c)

     3,250,840   

Mortgage debt (d)

     (14,004,098

Accounts payable, accrued expenses and other liabilities (e)

     (211,997

Above/(below) market leases (f)

     (3,220,166
  

 

 

 

Fair value of net assets acquired

   $ 7,793,718   
  

 

 

 

Less estimated purchase consideration:

  

Estimated consideration paid with common units

   $ 4,813,848   

Estimated consideration paid with cash

     2,979,870   
  

 

 

 

Total estimated consideration (g)

   $ 7,793,718   
  

 

 

 

 

  a. Represents the fair value of the net investment properties acquired which includes land, buildings, site improvements, tenant improvements and in place leases. The fair value was determined using following approaches:

 

  i. the market approach valuation methodology for land by considering similar transactions in the markets;

 

  ii. a combination of the cost approach and income approach valuation methodologies for buildings, including replacement cost evaluations, “go dark” analyses and residual calculations incorporating the land values;

 

  iii. the cost approach valuation methodology for site and tenant improvements, including replacement costs and prevailing quoted market rates; and

 

  iv. the income approach valuation methodology for in place leases which considered estimated market rental rates, expenses reimbursements and time required to replace leases.

 

  b. Represents the fair value of tenant and other receivables and other current assets. It was determined that carrying value approximated fair value for all amounts in these categories.

 

  c. Represents the fair value of other lease intangibles which includes leasing commissions and legal and marketing fees associated with replacing existing leases. The income approach was used to determine the fair value of these intangible assets which included estimated market rates and expenses.

 

  d. Represents the fair value of mortgages payable which was calculated by performing a discounted cash flow analysis on debt service using current prevailing market interest on comparable debt.

 

  e. Represents the fair value of accounts payable, accrued expenses and other liabilities. It was determined that carrying value approximated fair value for all amounts in these categories.

 

  f. Represents the fair value of above/(below) market leases. The income approach was used to determine the fair value of above/(below) market leases using market rental rates for similar properties.

 

  g. Represents the components of purchase consideration to be paid.