Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets (Tables)

v2.4.0.8
Real Estate and Intangible Assets (Tables)
9 Months Ended
Sep. 30, 2014
Property, Plant and Equipment [Abstract]  
Company's Investments in Real Estate

The following table sets forth the components of our investments in real estate as of September 30, 2014 and December 31, 2013 (dollars in thousands):

 

     September 30, 2014     December 31, 2013  

Real estate:

    

Land

   $ 86,737      $ 79,153   

Building and improvements

     573,149        527,230   

Tenant improvements

     40,688        35,970   

Accumulated depreciation

     (93,401     (81,241
  

 

 

   

 

 

 

Real estate, net

   $ 607,173      $ 561,112   
  

 

 

   

 

 

 
Summary of Properties Acquired

2014 Real Estate Activity

During the nine months ended September 30, 2014, we acquired eight properties, which are summarized in the table below (dollars in thousands):

 

Location

  Acquisition
Date
    Square
Footage
    Lease
Term
    Renewal
Options
    Total
Purchase
Price
    Acquisition
Expenses
    Annualized
Straight
Line Rent
    Debt Issued &
Assumed
 

Allen, TX

    3/27/2014        21,154        12 Years        4 (5 years each)      $ 5,525      $ 33      $ 570      $ 3,481   

Colleyville, TX

    3/27/2014        20,355        12 Years        4 (5 years each)        4,523        33        467        2,849   

Rancho Cordova, CA (4)

    4/22/2014        61,358        10 Years        1 (5 year)        8,225        73        902        4,935   

Coppell, TX

    5/8/2014        21,171        12 Years        4 (5 years each)        5,838        26        601        3,816   

Columbus, OH

    5/13/2014        114,786        9.5 Years (1)      N/A (1)      11,800        70        1,278 (3)      N/A   

Taylor, PA

    6/9/2014        955,935        10 Years        4 (5 years each)        39,000        730        3,400        22,600   

Aurora, CO

    7/1/2014        124,800        15 Years        2 (5 years each)        8,300        91        768        N/A   

Indianapolis, IN (4)

    9/3/2014        86,495        11.5 Years (2)      2 (5 years each) (2)      10,500        58        1,504 (3)      6,100   
   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 

Total

      1,406,054          $ 93,711      $ 1,114      $ 9,490      $ 43,781   
   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Lease term and renewal options are reflective of the largest tenant. The smaller tenant’s lease terminates in November 2016 and contains no renewal options.
(2) Lease term and renewal options are reflective of the largest tenant. The other tenants in the building have varying lease expirations from December 2015 to October 2018. No other tenants have renewal options.
(3) Rent figure is reflective of aggregate rent among all tenants occupying the building.
(4)

Tenants occupying these properties are subject to a gross lease.

 

2013 Real Estate Activity

During the nine months ended September 30, 2013, we acquired five properties and completed an expansion of one property, which are summarized below (dollars in thousands):

 

Location

  Acquisition/
Expansion Date
    Square
Footage
    Lease
Term
    Renewal
Options
    Total Purchase/
Expansion Price
    Acquistion
Expenses
    Annualized Straight
Line Rent
    Debt Issued  

Egg Harbor Township, NJ

    3/28/2013        29,257        10 years        1 (5 years)      $ 5,650      $ 152      $ 490      $ 3,700   

Clintonville, WI (1)

    4/11/2013        102,400        15 years        N/A        3,250        N/A        961        —     

Vance, AL

    5/8/2013        170,000        10 years        2 (5 year options)        13,388        186        1,173        —     

Blaine, MN

    5/10/2013        92,275        6.9 years        2 (5 year options)        14,450        79        1,475        8,200   

Austin, TX

    7/9/2013        320,000        8 years        3 (3 year options)        57,000        155        4,641        35,300   

Allen, TX (4)

    7/10/2013        115,200        11.5 years (2)      2 (5 year options) (2)      15,150        81        1,918 (3)      8,900   
   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 

Total

      829,132          $ 108,888      $ 653      $ 10,658      $ 56,100   
   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Property was originally acquired in November 2005 for $5.3 million. After the expansion completed in April 2013, the total investment in the property is $8.6 million.
(2) Lease term and renewal options are reflective of the largest tenant. The smaller tenant’s lease terminates in August 2021 and contains 2 (5 year) renewal options.
(3) Rent figure is reflective of aggregate rent among all tenants occupying the building.
(4) The larger tenant occupying this property is subject to a gross lease. The smaller tenant occupying this property is subject to a triple net lease.
Fair Value of Acquired Assets and Liabilities Assumed

In accordance with ASC 805, we determined the fair value of the acquired assets and liabilities assumed related to the eight properties acquired during the nine months ended September 30, 2014 as follows (in thousands):

 

    Land     Building     Tenant
Improvements
    In-place
Leases
    Leasing
Costs
    Customer
Relationships
    Above Market
Leases
    Below Market
Leases
    Premium on
Assumed Debt
    Total Purchase
Price
 

Allen, TX

  $ 874      $ 3,509      $ 125      $ 598      $ 273      $ 218      $ —        $ —        $ (72   $ 5,525   

Colleyville, TX

    1,277        2,307        117        486        220        181        —          (6     (59     4,523   

Rancho Cordova, CA

    752        5,898        278        473        546        278        —          —          —          8,225   

Coppell, TX

    1,448        3,221        128        636        293        230        —          —          (118     5,838   

Columbus, OH

    990        6,080        1,937        823        719        990        261        —          —          11,800   

Taylor, PA

    3,102        24,449        956        6,171        1,452        2,870        —          —          —          39,000   

Aurora, CO

    2,882        3,825        92        413        806        282        —          —          —          8,300   

Indianapolis, IN

    502        5,334        1,088        1,990        741        732        126        (13     —          10,500   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 11,827      $ 54,623      $ 4,721      $ 11,590      $ 5,050      $ 5,781      $ 387      $ (19   $ (249   $ 93,711   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

In accordance with ASC 805, we determined the fair value of acquired assets related to the five properties acquired during the nine months ended September 30, 2013 as follows (in thousands):

 

     Land      Building      Tenant
Improvements
     In-place
Leases
     Leasing
Costs
     Customer
Relationships
     Above Market
Leases
     Below
Market
Leases
    Total
Purchase
Price
 

Egg Harbor Township, NJ

   $ 1,627       $ 2,735       $ 282       $ 558       $ 189       $ 259       $ —         $ —        $ 5,650   

Vance, AL

     457         9,721         808         1,097         678         627         —           —          13,388   

Blaine, MN

     1,060         9,347         1,172         1,361         694         816         —           —          14,450   

Austin, TX

     2,330         37,207         6,814         6,118         1,906         3,793         —           (1,168     57,000   

Allen, TX

     2,699         5,758         2,187         1,525         1,146         1,499         336         —          15,150   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 8,173       $ 64,768       $ 11,263       $ 10,659       $ 4,613       $ 6,994       $ 336       $ (1,168   $ 105,638   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
Schedule of Revenue and Earnings Recognized on Properties Acquired

Below is a summary of the total revenue and earnings recognized on the eight properties acquired during the three and nine months ended September 30, 2014 (dollars in thousands):

 

            For the three months ended September 30,      For the nine months ended September 30,  
     Acquisition      2014      2014  

Location

   Date      Rental Revenue      Earnings(1)      Rental Revenue      Earnings(1)  

Allen, TX

     3/27/2014       $ 143       $ 101       $ 293       $ 167   

Colleyville, TX

     3/27/2014         117         83         240         138   

Rancho Cordova, CA

     4/22/2014         226         104         399         168   

Coppell, TX

     5/8/2014         150         116         239         139   

Columbus, OH (2)

     5/13/2014         311         115         479         184   

Taylor, PA

     6/9/2014         850         395         1,058         493   

Aurora, CO

     7/1/2014         192         124         192         124   

Indianapolis, IN (2)

     9/3/2014         116         9         116         9   
     

 

 

    

 

 

    

 

 

    

 

 

 
      $ 2,105       $ 1,047       $ 3,016       $ 1,422   
     

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Earnings is calculated as net income exclusive of both interest expense and acquisition related costs that are required to be expensed under ASC 805.
(2) Rental revenue and earnings is reflective of aggregate rent and operating expenses among all tenants occupying the building.

Below is a summary of the total revenue and earnings recognized on the five properties acquired during the three and nine months ended September 30, 2013 (dollars in thousands):

          Rental Revenue     Net Income  

Location

  Acquisition Date     For the three months
ended September
30, 2013
    For the nine months
ended September
30, 2013
    For the three months
ended September
30, 2013(1)
    For the nine months
ended September
30, 2013(1)
 

Egg Harbor Township, NJ

    3/28/2013      $ 122      $ 250      $ 61      $ 130   

Vance, AL

    5/8/2013        293        464        147        218   

Blaine, MN

    5/10/2013        369        579        161        256   

Austin, TX

    7/9/2013        1,098        1,098        297        297   

Allen, TX

    7/10/2013        325        325        136        136   
   

 

 

   

 

 

   

 

 

   

 

 

 
    $ 2,207      $ 2,716      $ 802      $ 1,037   
   

 

 

   

 

 

   

 

 

   

 

 

 
(1) Earnings is calculated as net income less interest expense and acquisition related costs that are required to be expensed under ASC 805.
Pro-Forma Condensed Consolidated Statements of Operations

The following table reflects pro-forma consolidated statements of operations as if the eight properties acquired during the three and nine months ended September 30, 2014 were acquired as of the beginning of the previous period. The pro-forma earnings for the three and nine months ended September 30, 2014 and 2013 were adjusted to assume that acquisition-related costs were incurred as of the beginning of the previous period (dollars in thousands, except per share amounts):

 

    For the three months ended September 30,     For the nine months ended September 30,  
    2014     2013     2014     2013  
    (unaudited)     (unaudited)  

Operating Data:

       

Total operating revenue

  $ 19,086      $ 19,060      $ 58,050      $ 56,906   

Total operating expenses

    (11,434     (10,538     (47,780 )(1)      (32,479

Other expenses

    (7,283     (8,215     (21,269     (24,347
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    369        307        (10,999     80   

Dividends attributable to preferred and senior common stock

    (1,160     (1,106     (3,417     (3,274
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

  $ (791   $ (799   $ (14,416   $ (3,194
 

 

 

   

 

 

   

 

 

   

 

 

 

Share and Per Share Data:

       

Basic and diluted loss per share of common stock

  $ (0.04   $ (0.06   $ (0.86   $ (0.25

Weighted average shares outstanding-basic

    17,739,084        14,196,423        16,685,162        12,613,354   

Weighted average shares outstanding-diluted

    17,739,084        14,196,423        16,685,162        12,613,354   

 

(1) $14.2 million relates to the impairment charge recorded in operating expenses during the nine months ended September 30, 2014.
Future Operating Lease Payments from Tenants under Non-Cancelable Leases

Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the remainder of 2014 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

 

Year

   Tenant
Lease Payments
 

Three Months ending December 31, 2014

   $ 16,929   

2015

     68,254   

2016

     65,416   

2017

     64,689   

2018

     64,103   

2019

     64,403   

Thereafter

     290,868   
Carrying Value of Intangible Assets and Accumulated Amortization

The following table summarizes the carrying value of intangible assets and the accumulated amortization for each intangible asset class as of September 30, 2014 and December 31, 2013, respectively (dollars in thousands):

 

     September 30, 2014     December 31, 2013  
     Lease
Intangibles
     Accumulated
Amortization
    Lease
Intangibles
     Accumulated
Amortization
 

In-place leases

   $ 58,925       $ (18,391   $ 47,442       $ (15,158

Leasing costs

     36,969         (11,419     31,339         (9,323

Customer relationships

     40,909         (12,351     35,739         (10,407
  

 

 

    

 

 

   

 

 

    

 

 

 
   $ 136,803       $ (42,161   $ 114,520       $ (34,888
  

 

 

    

 

 

   

 

 

    

 

 

 
Weighted Average Amortization Period for Intangible Assets Acquired and Liabilities Assumed

The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the nine months ended September 30, 2014 and 2013, respectively, were as follows

 

Intangible Assets & Liabilities

   2014      2013  

In-place leases

     10.2         8.8   

Leasing costs

     10.2         8.8   

Customer relationships

     14.6         13.5   

Above market leases

     9.3         8.8   

Below market leases

     9.9         7.2   
  

 

 

    

 

 

 

All intangible assets & liabilities

     11.5         9.9   
  

 

 

    

 

 

 
Estimated Aggregate Amortization Expense

The estimated aggregate amortization expense for the remainder of 2014 and for each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

 

Year

   Estimated
Amortization Expense
 

Three Months ending December 31, 2014

   $ 3,049   

2015

     11,931   

2016

     11,224   

2017

     11,018   

2018

     10,719   

2019

     10,711   

Thereafter

     35,990