| Investment Properties |
Investment properties consist of the following (in thousands):
|
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|
|
|
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|
|
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|
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.
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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: |
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|
i. |
the market approach valuation methodology for land by considering similar transactions in the markets; |
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|
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 |
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iii. |
the cost approach valuation methodology for site and tenant improvements, including replacement costs and prevailing quoted market rates. |
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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. |
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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.
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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. |
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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.
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|
f. |
Represents the components of purchase consideration paid. |
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| 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):
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|
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):
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|
|
|
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|
December 31, 2018 |
|
December 31, 2017 |
|
|
|
|
|
Investment properties, net |
|
$ |
3,350 |
|
|
$ |
9,135 |
|
Total assets held for sale, discontinued operations |
|
$ |
3,350 |
|
|
$ |
9,135 |
|
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|
|
|
|
|
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|
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|
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|
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
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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):
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Years Ended December 31, |
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|
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.
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