Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets

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Real Estate and Intangible Assets
3 Months Ended
Mar. 31, 2016
Text Block [Abstract]  
Real Estate and Intangible Assets

4. Real Estate and Intangible Assets

Real Estate

The following table sets forth the components of our investments in real estate as of March 31, 2016 and December 31, 2015 (dollars in thousands):

 

     March 31, 2016 (1)      December 31, 2015 (2)  

Real estate:

     

Land

   $ 96,884       $ 97,117   

Building

     632,609         635,728   

Tenant improvements

     47,508         47,532   

Accumulated depreciation

     (117,162      (112,243
  

 

 

    

 

 

 

Real estate, net

   $ 659,839       $ 668,134   
  

 

 

    

 

 

 

 

(1) Does not include real estate held for sale as of March 31, 2016.
(2) Does not include real estate held for sale as of December 31, 2015.

Real estate depreciation expense on building and tenant improvements were $5.9 million and $5.2 million for the three months ended March 31 2016 and 2015, respectively.

Pro Forma

The following table reflects pro-forma consolidated statements of operations as if the properties acquired during the three months ended March 31, 2016 and the twelve months ended December 31, 2015, respectively, were acquired as of January 1, 2015. We did not complete any acquisitions during the three months ended March 31, 2016, and pro-forma net loss is identical to the income statement for the same period. The pro-forma earnings for the three months ended March 31, 2014 were adjusted to assume that the acquisition-related costs were incurred as of the previous period (dollars in thousands, except per share amounts):

 

     For the three months ended March 31,
(unaudited)
 
     2016     2015  

Operating Data:

    

Total operating revenue

   $ 21,527      $ 21,389   

Total operating expenses

     (13,257     (12,664

Other expenses

     (7,417     (7,856
  

 

 

   

 

 

 

Net income

     853 (1)      869   

Dividends attributable to preferred and senior common stock

     (1,279     (1,247
  

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (426   $ (378
  

 

 

   

 

 

 

Share and Per Share Data:

    

Basic and diluted loss per share of common stock - pro forma

   $ (0.02   $ (0.02

Basic and diluted loss per share of common stock - actual

   $ (0.02   $ (0.03

Weighted average shares outstanding-basic and diluted

     22,545,285        20,210,975   

 

(1) Includes a $0.04 million impairment charge recognized on our Dayton, Ohio property during the three months ended March 31, 2016.

Significant Real Estate Activity on Existing Assets

During the three months ended March 31, 2016, we executed a lease on one property, which is summarized below (dollars in thousands):

 

Location

   Lease
Commencement
Date
   Square Footage
(unaudited)
   

Lease Term

  

Renewal
Options

   Annualized
GAAP Rent
     Tenant
Improvement
     Leasing
Commissions
 

Bolingbrook, IL

   7/1/2016      13,816 (1)    7.2 Years    1 (5 year)    $ 70       $ 69       $ 28   

 

(1) Tenant’s lease is for 24.9% of the building. The building is now 62.7% leased.

2015 Real Estate Activity

Q1 2015 Investment Activity

During the three months ended March 31, 2015, we acquired two properties, which are summarized below (dollars in thousands):

 

Location

 

Acquisition Date

  Square Footage
(unaudited)
   

Lease

Term

 

Renewal Options

  Total Purchase
Price
    Acquisition
Expenses
    Annualized GAAP
Rent
    Debt Issued  

Richardson, TX(1)

  3/6/2015     155,984      9.5 Years   2 (5 years each)   $ 24,700      $ 112      $ 2,708      $ 14,573   

Birmingham, AL

  3/20/2015     30,850      8.5 Years   1 (5 years)     3,648        76        333        N/A   
   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 

Total

      186,834          $ 28,348      $ 188      $ 3,041      $ 14,573   
   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  The tenant occupying this property is subject to a gross lease.

In accordance with ASC 805, we determined the fair value of the acquired assets and assumed liabilities related to the two properties acquired during the three months ended March 31, 2015, as follows (dollars in thousands):

 

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

Richardson, TX

   $ 2,728       $ 12,591       $ 2,781       $ 2,060       $ 1,804       $ 1,929       $ 807       $ 24,700   

Birmingham, AL

     650         1,683         351         458         146         360         —           3,648   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 3,378       $ 14,274       $ 3,132       $ 2,518       $ 1,950       $ 2,289       $ 807       $ 28,348   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Below is a summary of the total revenue and earnings recognized on the two properties acquired during the three months ended March 31, 2015 (dollars in thousands):

 

          For the three months ended March 31,  
          2015  

Location

   Acquisition
Date
   Rental Revenue      Earnings (1)  

Richardson, TX

   3/6/2015    $ 182       $ 51   

Birmingham, AL

   3/20/2015      11         4   
     

 

 

    

 

 

 
      $ 193       $ 55   
     

 

 

    

 

 

 

 

(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.

Q1 2015 Leasing Activity

During the three months ended March 31, 2015, we amended four of our leases, which are summarized below (dollars in thousands):

 

Location

  New Lease
Effective Date
  Square Footage
(unaudited)
    New Lease
Term
 

Renewal

Options

  Annualized
GAAP Rent
    Tenant
Improvement
    Leasing
Commissions
 

Indianapolis, IN

  1/1/2015     3,546      8.3 Years   N/A   $ 64      $ 64      $ 28   

Indianapolis, IN

  2/1/2015     8,275      3.0 Years   N/A     124        —          —     

Raleigh, NC

  2/1/2015     58,926      5.5 Years   2 (5 year)     711        —          144   

Raleigh, NC

  2/1/2015     21,300 (1)    5.5 Years   2 (5 year)     239        100        32   
   

 

 

       

 

 

   

 

 

   

 

 

 
      92,047          $ 1,138      $ 164      $ 204   

 

(1) Tenant’s lease is for 18.3% of the building. The building is now 93.2% leased.

Intangible Assets

The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of March 31, 2016 and December 31, 2015 respectively (in thousands):

 

    March 31, 2016 (1)     December 31, 2015 (2)  
    Lease Intangibles     Accumulated
Amortization
    Lease Intangibles     Accumulated
Amortization
 

In-place leases

  $ 65,882      $ (23,941   $ 66,244      $ (22,679

Leasing costs

    44,415        (15,760     44,360        (14,774

Customer relationships

    46,468        (15,493     46,485        (14,722
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 156,765      $ (55,194   $ 157,089      $ (52,175
 

 

 

   

 

 

   

 

 

   

 

 

 
    Deferred Rent
Receivable/(Liability)
    Accumulated
(Amortization)/Accretion
    Deferred Rent
Receivable/(Liability)
    Accumulated
(Amortization)/Accretion
 

Above market leases

  $ 10,176      $ (6,936   $ 10,176      $ (6,818

Below market leases and deferred revenue

    (17,273     8,110        (17,951     8,294   
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ (7,097   $ 1,174      $ (7,775   $ 1,476   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Does not include real estate held for sale as of March 31, 2016.
(2)  Does not include real estate held for sale as of December 31, 2015.

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $3.3 million and $3.0 million for the three months ended March 31, 2016 and 2015, respectively, and is included in depreciation and amortization expense in the condensed consolidated statement of operations.

Total amortization related to above-market lease values was $0.1 million for both the three months ended March 31, 2016 and 2015, respectively, and is included in rental income in the condensed consolidated statement of operations. Total amortization related to below-market lease values was $0.2 million for both the three months ended March 31, 2016 and 2015, respectively, and is included in rental income in the condensed consolidated statement of operations.