| Real Estate and Intangible Assets |
Real Estate and Intangible Assets
Real Estate
The following table sets forth the components of our investments in real estate as of June 30, 2016 and December 31, 2015 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
(1) |
December 31, 2015 |
(2) |
Real estate: |
|
|
|
|
|
Land |
|
$ |
99,780 |
|
|
$ |
97,117 |
|
|
Building |
|
641,266 |
|
|
635,728 |
|
|
Tenant improvements |
|
49,186 |
|
|
47,532 |
|
|
Accumulated depreciation |
|
(122,827 |
) |
|
(112,243 |
) |
|
Real estate, net |
|
$ |
667,405 |
|
|
$ |
668,134 |
|
|
|
|
(1) |
Does not include real estate held for sale as of June 30, 2016.
|
|
|
(2) |
Does not include real estate held for sale as of December 31, 2015.
|
Real estate depreciation expense on building and tenant improvements was $5.9 million and $11.8 million for the three and six months ended June 30, 2016, respectively, and $5.5 million and $10.7 million for the three and six months ended June 30, 2015, respectively.
2016 Real Estate Activity
During the six months ended June 30, 2016, we acquired one property, which is summarized below (dollars in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location |
|
Acquisition Date |
|
Square Footage (unaudited) |
|
Lease Term |
|
Renewal Options |
|
Total Purchase Price |
|
Acquisition Expenses |
|
Annualized GAAP Rent |
|
Debt Issued |
Salt Lake City, UT |
|
5/26/2016 |
|
107,062 |
|
|
6 Years |
|
2 (3 Years and 2 Years) |
|
$ |
17,000 |
|
|
$ |
109 |
|
|
$ |
1,393 |
|
|
$ |
9,900 |
|
In accordance with Accounting Standards Codification, or ASC, 805, "Business Combinations," we determined the fair value of the acquired assets related to the one property acquired during the six months ended June 30, 2016 as follows (dollars in thousands):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location |
|
Land |
|
Building |
|
Tenant Improvements |
|
In-place Leases |
|
Leasing Costs |
|
Customer Relationships |
|
Below Market Leases |
|
Total Purchase Price |
Salt Lake City, UT |
|
$ |
3,008 |
|
|
$ |
8,973 |
|
|
$ |
1,685 |
|
|
$ |
1,352 |
|
|
$ |
337 |
|
|
$ |
1,675 |
|
|
$ |
(30 |
) |
|
$ |
17,000 |
|
Below is a summary of the total revenue and earnings recognized on the one property acquired during the six months ended June 30, 2016 (dollars in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
|
|
|
2016 |
|
2016 |
Location |
|
Acquisition Date |
|
Rental Revenue |
|
Earnings (1) |
|
Rental Revenue |
|
Earnings (1) |
Salt Lake City, UT |
|
5/26/2016 |
|
$ |
139 |
|
|
$ |
35 |
|
|
$ |
139 |
|
|
$ |
35 |
|
|
|
(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. |
Pro Forma
The following table reflects pro-forma consolidated statements of operations as if the properties acquired during the six months ended June 30, 2016 and the twelve months ended December 31, 2015, respectively, were acquired as of January 1, 2015. The pro-forma earnings for the six months ended June 30, 2016 and 2015 were adjusted to assume that the acquisition-related costs were incurred as of the previous period (dollars in thousands, except per share amounts):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
|
(unaudited) |
|
(unaudited) |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Operating Data: |
|
|
|
|
|
|
|
|
Total operating revenue |
|
$ |
21,465 |
|
|
$ |
21,955 |
|
|
$ |
43,349 |
|
|
$ |
43,420 |
|
Total operating expenses |
|
(13,485 |
) |
|
(13,382 |
) |
|
(27,005 |
) |
|
(26,037 |
) |
Other expenses |
|
(7,004 |
) |
|
(8,024 |
) |
|
(14,540 |
) |
|
(15,993 |
) |
Net income |
|
976 |
|
|
549 |
|
|
1,804 |
|
|
1,390 |
|
Dividends attributable to preferred and senior common stock |
|
(1,514 |
) |
|
(1,284 |
) |
|
(2,794 |
) |
|
(2,532 |
) |
Net loss attributable to common stockholders |
|
$ |
(538 |
) |
|
$ |
(735 |
) |
|
$ |
(990 |
) |
|
$ |
(1,142 |
) |
Share and Per Share Data: |
|
|
|
|
|
|
|
|
Basic and diluted loss per share of common stock - pro forma |
|
$ |
(0.02 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.06 |
) |
Basic and diluted loss per share of common stock - actual |
|
$ |
(0.03 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.07 |
) |
Weighted average shares outstanding-basic and diluted |
|
22,684,391 |
|
|
20,833,787 |
|
|
22,614,838 |
|
|
20,524,101 |
|
Significant Real Estate Activity on Existing Assets
During the six months ended June 30, 2016, we executed leases on three properties, which are summarized below (dollars in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location |
|
Lease Commencement Date |
|
Square Footage
(unaudited) |
|
Lease Term |
|
Renewal Options |
|
Annualized GAAP Rent |
|
Tenant Improvement |
|
Leasing Commissions |
Maple Heights, OH |
|
6/1/2016 |
|
40,606 |
|
(1) |
5.2 Years |
|
2 (3 year) |
|
$ |
109 |
|
|
$ |
— |
|
|
$ |
34 |
|
Bolingbrook, IL |
|
7/1/2016 |
|
13,816 |
|
(2) |
7.2 Years |
|
1 (5 year) |
|
70 |
|
|
69 |
|
|
28 |
|
Burnsville, MN |
|
12/1/2016 |
|
12,663 |
|
(3) |
5.3 Years |
|
1 (5 year) |
|
143 |
|
|
— |
|
|
104 |
|
|
|
(1) |
Tenant's lease is for 11.7% of the building. The building is now 92.8% leased.
|
|
|
(2) |
Tenant’s lease is for 24.9% of the building. The building is now 62.7% leased.
|
|
|
(3) |
Tenant's lease is for 11.0% of the building. The building is now 80.4% leased.
|
On May 31, 2016, we reached a legal settlement with the previous tenant at our currently vacant Newburyport, Massachusetts property to compensate us for deferred capital obligations and repairs they were required to perform during their tenancy. We recognized $0.3 million, recorded in other income on the condensed consolidated statement of operations, related to reimbursed deferred capital obligations, and received $0.9 million as a reimbursement of repairs incurred during the three and six months ended June 30, 2016 in connection with the legal settlement received.
2015 Real Estate Activity
Investment Activity
During the six months ended June 30, 2015, we acquired four properties, which are summarized below (dollars in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Columbus, OH |
|
5/28/2015 |
|
78,033 |
|
|
15.0 Years |
|
2 (5 years each) |
|
7,700 |
|
|
72 |
|
|
637 |
|
|
4,466 |
|
Salt Lake City, UT |
(1) |
5/29/2015 |
|
86,409 |
|
|
6.5 Years |
|
1 (5 years) |
|
22,200 |
|
|
144 |
|
|
2,411 |
|
|
13,000 |
|
Total |
|
|
|
351,276 |
|
|
|
|
|
|
$ |
58,248 |
|
|
$ |
404 |
|
|
$ |
6,089 |
|
|
$ |
32,039 |
|
|
|
(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 four properties acquired during the six months ended June 30, 2015, as follows (dollars in thousands):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location |
|
Land |
|
Building |
|
Tenant Improvements |
|
In-place Leases |
|
Leasing Costs |
|
Customer Relationships |
|
Above Market Leases |
|
Below 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 |
|
Columbus, OH |
|
1,338 |
|
|
3,511 |
|
|
1,547 |
|
|
1,144 |
|
|
672 |
|
|
567 |
|
|
— |
|
|
(1,079 |
) |
|
7,700 |
|
Salt Lake City, UT |
|
3,248 |
|
|
11,861 |
|
|
1,268 |
|
|
2,396 |
|
|
981 |
|
|
1,678 |
|
|
821 |
|
|
(53 |
) |
|
22,200 |
|
|
|
$ |
7,964 |
|
|
$ |
29,646 |
|
|
$ |
5,947 |
|
|
$ |
6,058 |
|
|
$ |
3,603 |
|
|
$ |
4,534 |
|
|
$ |
1,628 |
|
|
$ |
(1,132 |
) |
|
$ |
58,248 |
|
Below is a summary of the total revenue and earnings recognized on the four properties acquired during the three and six months ended June 30, 2015 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
|
|
|
2015 |
|
2015 |
Location |
|
Acquisition
Date
|
|
Rental Revenue |
|
Earnings (1) |
|
Rental Revenue |
|
Earnings (1) |
Richardson, TX |
|
3/6/2015 |
|
$ |
657 |
|
|
$ |
90 |
|
|
$ |
839 |
|
|
$ |
328 |
|
Birmingham, AL |
|
3/20/2015 |
|
83 |
|
|
(22 |
) |
|
94 |
|
|
106 |
|
Columbus, OH |
|
5/28/2015 |
|
67 |
|
|
149 |
|
|
67 |
|
|
149 |
|
Salt Lake City, UT |
|
5/29/2015 |
|
207 |
|
|
278 |
|
|
207 |
|
|
278 |
|
|
|
|
|
$ |
1,014 |
|
|
$ |
495 |
|
|
$ |
1,207 |
|
|
$ |
861 |
|
|
|
(1) |
Earnings is calculated as net income (loss) exclusive of both interest expense and acquisition related costs that are required to be expensed under ASC 805. |
Leasing Activity
During the six months ended June 30, 2015, we amended six of our leases, which are summarized below (dollars in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Columbus, OH |
|
12/1/2016 |
|
9,484 |
|
(2) |
7.1 Years |
|
N/A |
|
1,246 |
|
|
142 |
|
|
29 |
|
Raleigh, NC |
|
8/1/2015 |
|
86,886 |
|
(3) |
12.4 Years |
|
2 (5 year) |
|
534 |
|
|
800 |
|
|
398 |
|
|
|
|
|
188,417 |
|
|
|
|
|
|
$ |
2,918 |
|
|
$ |
1,106 |
|
|
$ |
631 |
|
|
|
(1) |
Tenant’s lease is for 18.3% of the building. The building is now 93.2% leased.
|
|
|
(2) |
The anchor tenant currently occupying 92.0% of the building will expand into the remaining space, currently occupied by another tenant through November 30, 2016.
|
|
|
(3) |
Tenant's lease is for 74.8% 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 June 30, 2016 and December 31, 2015 respectively (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
(1) |
|
December 31, 2015 |
(2) |
|
|
Lease Intangibles |
|
Accumulated Amortization |
|
|
Lease Intangibles |
|
Accumulated Amortization |
|
In-place leases |
|
$ |
67,217 |
|
|
$ |
(25,428 |
) |
|
|
$ |
66,244 |
|
|
$ |
(22,679 |
) |
|
Leasing costs |
|
44,791 |
|
|
(16,748 |
) |
|
|
44,360 |
|
|
(14,774 |
) |
|
Customer relationships |
|
48,099 |
|
|
(16,248 |
) |
|
|
46,485 |
|
|
(14,722 |
) |
|
|
|
$ |
160,107 |
|
|
$ |
(58,424 |
) |
|
|
$ |
157,089 |
|
|
$ |
(52,175 |
) |
|
|
|
Deferred Rent Receivable/(Liability) |
|
Accumulated (Amortization)/Accretion |
|
|
Deferred Rent Receivable/(Liability) |
|
Accumulated (Amortization)/Accretion |
|
Above market leases |
|
$ |
10,232 |
|
|
$ |
(7,053 |
) |
|
|
$ |
10,176 |
|
|
$ |
(6,818 |
) |
|
Below market leases and deferred revenue |
|
(17,302 |
) |
|
8,338 |
|
|
|
(17,951 |
) |
|
8,294 |
|
|
|
|
$ |
(7,070 |
) |
|
$ |
1,285 |
|
|
|
$ |
(7,775 |
) |
|
$ |
1,476 |
|
|
|
|
(1) |
Does not include real estate held for sale as of June 30, 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 $6.6 million for the three and six months ended June 30, 2016, respectively, and $3.5 million and $6.4 million for the three and six months ended June 30, 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 and $0.2 million for the three and six months ended June 30, 2016, respectively, and $0.1 million and $0.2 million for the three and six months ended June 30, 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 and $0.5 million for the three and six months ended June 30, 2016, respectively, and $0.2 million and $0.5 million for the three and six months ended June 30, 2015, respectively, and is included in rental income in the condensed consolidated statement of operations.
The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the six months ended June 30, 2016 and 2015, respectively, were as follows:
|
|
|
|
|
|
Intangible Assets & Liabilities |
|
2016 |
|
2015 |
In-place leases |
|
6.1 |
|
10.9 |
Leasing costs |
|
6.1 |
|
10.9 |
Customer relationships |
|
9.1 |
|
15.6 |
Above market leases |
|
0 |
|
18.9 |
Below market leases |
|
6.1 |
|
12.4 |
All intangible assets & liabilities |
|
6.9 |
|
12.5 |
|