Annual report pursuant to Section 13 and 15(d)

Real Estate (Tables)

v3.10.0.1
Real Estate (Tables)
12 Months Ended
Dec. 31, 2018
Real Estate [Abstract]  
Investment Properties
Investment properties consist of the following (in thousands):
 
December 31,
 
2018
 
2017
Land and land improvements
$
98,846

 
$
91,108

Land held for development

 
2,305

Buildings and improvements
374,485

 
312,831

Investment properties at cost
473,331

 
406,244

Less accumulated depreciation
(40,189
)
 
(31,045
)
Investment properties, net
$
433,142

 
$
375,199

Summary of Consideration Paid and Preliminary Estimated Fair Values of Assets Acquired and Liabilities Assumed
The following summarizes the consideration paid and the purchase allocation of assets acquired and liabilities assumed in conjunction with the acquisition described above in accordance with ASU 2017-01, along with a description of the methods used to determine the purchase price allocation (in thousands, unaudited). In determining the purchase price allocation, 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.
Purchase price allocation of assets acquired:
 
 
Investment property (a)
$
75,123

 
Lease intangibles and other assets (b)
10,718

 
Above market leases (d)
2,019

 
Restricted cash (c)
2,500

 
Below market leases (d)
(4,710
)
 
Net purchase price allocation of assets acquired:
$
85,650

 
 
 
 
 
Purchase consideration:
 
 
 
Consideration paid with cash
$
23,153

 
Consideration paid with restricted cash (c)
2,500

 
Consideration paid with assumption of debt (e)
58,867

 
Consideration paid with common stock
1,130

 
 
 
 
 
 
Total consideration (f)
$
85,650

a.
Represents the purchase price allocation of the net investment properties acquired which includes land, buildings, site improvements and tenant improvements. The purchase price allocation 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 purchase price allocation of lease intangibles and other assets. Lease intangibles includes in place leases and ground lease sandwich interests associated with replacing existing leases. The income approach was used to determine the allocation of these intangible assets which included estimated market rates and expenses.
c.
Represents the purchase price allocation of deleveraging reserve (the “Deleveraging Reserve”) released upon the maturity or earlier payment in full of the loan or until the reduction of the principal balance of the loan to $50,000,000.
d.
Represents the purchase price allocation of above/below market leases. The income approach was used to determine the allocation of above/below market leases using market rental rates for similar properties.
e.
Assumption of $53.71 million of debt at a rate of 4.49%, maturing July 2023 with monthly principal and interest payments of $333,159 and assumption of $5.16 million of debt at a rate of 4.95%, maturing January 2026 with monthly principal and interest payments of $29,964.
f.
Represents the components of purchase consideration paid.
Assets Held For Sale, Including Discontinued Operations
As of December 31, 2018 and 2017, assets held for sale and associated liabilities, excluding discontinued operations, consisted of the following (in thousands):
 
 
December 31, 2018
 
December 31, 2017
 
 
 
 
 
Investment properties, net
 
$
4,912

 
$

Rents and other tenant receivables, net
 
72

 

Above market lease, net
 
420

 

Deferred costs and other assets, net
 
228

 

Total assets held for sale, excluding discontinued operations
$
5,632

 
$

 
 
December 31, 2018
 
December 31, 2017
 
 
 
 
 
Loans payable
 
$
3,818

 
$

Accounts payable
 
240

 

Total liabilities associated with assets held for sale, excluding discontinued operations
$
4,058

 
$

As of December 31, 2018 and 2017, assets held for sale and associated liabilities for discontinued operations, consisted of the following (in thousands):
 
 
December 31, 2018
 
December 31, 2017
 
 
 
 
 
Investment properties, net
 
$
3,350

 
$
9,135

Total assets held for sale, discontinued operations
 
$
3,350

 
$
9,135

    
 
 
December 31, 2018
 
December 31, 2017
 
 
 
 
 
Loans payable
 
$
533

 
$
747

Accounts payable
 
41

 
45

Total liabilities associated with assets held for sale, discontinued operations
$
574

 
$
792


Dispositions
 
 
Property
 
Contract Price
 
Gain/(Loss)
 
Net Proceeds
 
 
 
 
(in thousands)
October 22, 2018
 
Monarch Bank Building
 
$
1,750

 
$
151

 
$
299

September 27, 2018
 
Shoppes at Eagle Harbor
 
5,705

 
1,270

 
2,071

June 19, 2018
 
Laskin Road Land Parcel (1.5 acres)
 
2,858

 
903

 
2,747

January 12, 2018
 
Chipotle Ground Lease at Conyers Crossing
 
1,270

 
1,042

 
1,160

June 27, 2017
 
Carolina Place Land Parcel (2.14 acres)
 
250

 
(12
)
 
238

June 26, 2017
 
Steak n' Shake outparcel at Rivergate (1.06 acres)
 
2,250

 
1,033

 
2,178

February 28, 2017
 
Ruby Tuesday's and Outback at Pierpont
 
2,285

 
1,502

 
1,871

June 29, 2016
 
Starbucks/Verizon
 
2,128

 
688

 
1,385

The following is a summary of the income from discontinued operations for the years ended December 31, 2018, 2017 and 2016 (in thousands):

 
 
 
 
 
 
Years Ended December 31,
 
 
 
 
 
 
2018
 
2017
 
2016
Revenues
 
 
 
 
 
$

 
$
26

 
$
284

Expenses
 
 
 
 
 

 
1

 
79

Impairment of land
 
3,938

 

 

Operating (loss) income
 
 
 
 
 
(3,938
)
 
25

 
205

Interest expense
 
 
 
 
 

 
9

 
69

(Loss) income from discontinued operations before gain on disposals
 
(3,938
)
 
16

 
136

Gain on disposal of properties
 
 
 
 
 
903

 
1,502

 
688

(Loss) income from discontinued operations
 
$
(3,035
)
 
$
1,518

 
$
824


The $3.94 million impairment of land is based on the carrying value of the properties exceeding the fair value, less estimated selling costs based on recent real estate sales transactions for undeveloped land within the surrounding markets. These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 3 inputs.