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	)

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.

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.