Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets

v2.4.0.6
Real Estate and Intangible Assets
6 Months Ended
Jun. 30, 2012
Real Estate and Intangible Assets [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 June 30, 2012 and December 31, 2011:

 

                 
    June 30, 2012     December 31, 2011  

Real estate:

               

Land

  $ 65,099     $ 60,602  

Building and improvements

    394,903       367,605  

Tenant improvements

    18,408       14,314  

Accumulated depreciation

    (59,433     (53,784
   

 

 

   

 

 

 

Real estate, net

  $ 418,977     $ 388,737  
   

 

 

   

 

 

 

 

During the six months ended June 30, 2012, we acquired five properties, which are summarized below:

 

                                                         

Location

  Acquisition Date     Square Footage    

Lease

Term

 

Renewal Options

  Total
Purchase
Price
    Acquistion
Expenses
    Annualized Straight
Line Rent
    Debt Issued  

Ashburn, VA

    1/25/2012       52,130     15 years   2 (5 years each)   $ 10,775     $ 102     $ 989       N/A  

Ottumwa, IA

    5/30/2012       352,860     11.5 years   3 (5 years each)     7,100       47       684       5,000  

New Albany, OH

    6/5/2012       89,000     10.5 years   2 (5 years each)     13,333       188       1,361       N/A  

Columbus, GA

    6/21/2012       32,000     11.5 years   2 (5 years each)     7,320       126       656       4,750  

Columbus, OH

    6/28/2012       31,293     10 years   N/A     4,037       59       342       N/A  

In accordance with ASC 805, we determined the fair value of acquired assets and liabilities assumed related to the properties acquired during the six months ended June 30, 2012 as follows:

 

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

Ashburn, VA

  $ 706     $ 6,551     $ 1,307     $ 804     $ 908     $ 499     $ —       $ —       $ 10,775  

Ottumwa, IA

    212       4,743       329       940       484       499       —         (107     7,100  

New Albany, OH

    1,658       7,511       1,235       1,122       857       903       47       —         13,333  

Columbus, GA

    1,378       3,894       626       574       473       375       —         —         7,320  

Columbus, OH

    542       1,856       597       391       213       325       113       —         4,037  

Below is a summary of the total revenue and net income recognized on the properties acquired during the six months ended June 30, 2012:

 

                                         
          Rental Revenue     Net Income  

Location

  Acquisition Date     For the three months
ended June 30, 2012
    For the six months
ended  June 30, 2012
    For the three months
ended June 30, 2012 (1)
    For the six months
ended June 30, 2012 (1)
 

Ashburn, VA

    1/25/2012     $ 247     $ 431     $ 147     $ 262  

Ottumwa, IA

    5/30/2012       61       61       30       30  

New Albany, OH

    6/5/2012       98       98       51       51  

Columbus, GA

    6/21/2012       18       18       11       11  

Columbus, OH

    6/28/2012       3       3       3       3  

 

(1)

Does not include interest expense or acquisition related costs that are required to be expensed under ASC 805.

We acquired five properties during the six months ended June 30, 2012. The following table reflects pro-forma condensed consolidated statements of operations as if the properties were acquired as of the beginning of the earliest periods presented, which was January 1, 2011. The pro-forma earnings for the three and six months ended June 30, 2012, were adjusted to exclude $0.5 million of acquisition-related costs incurred in 2012 related to the five properties acquired. The pro-forma earnings for the three and six months ended June 30, 2011, were adjusted to include these charges:

 

                                 
    For the three months ended June 30,     For the six months ended June 30,  
    2012     2011     2012     2011  

Operating Data:

                               

Total operating revenue

  $ 13,071     $ 11,905     $ 26,073     $ 23,512  

Total operating expenses

    (6,036     (5,924     (12,273     (12,036

Other expense

    (5,658     (4,413     (10,837     (8,735
   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    1,377       1,568       2,963       2,741  

Dividends attributable to preferred and senior common stock

    (1,046     (1,039     (2,088     (2,078
   

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders

  $ 331     $ 529     $ 875     $ 663  
   

 

 

   

 

 

   

 

 

   

 

 

 

Share and Per Share Data:

                               

Basic earnings per share of common stock

  $ 0.03     $ 0.05     $ 0.08     $ 0.07  

Diluted earnings per share of common stock

  $ 0.03     $ 0.05     $ 0.08     $ 0.07  

Weighted average shares outstanding-basic

    10,945       9,782       10,945       9,522  

Weighted average shares outstanding-diluted

    10,945       9,834       11,011       9,574  

 

The weighted average amortization period for the intangible assets acquired and liabilities assumed during the six months ended June 30, 2012, were as follows:

 

         

Intangible assets & liabilities

  Years  

In-place leases

    11.0  

Leasing costs

    11.0  

Customer relationships

    15.2  

Above market leases

    10.4  

Below market leases

    11.6  
   

 

 

 

All intangible assets & liabilities

    12.4  
   

 

 

 

Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the remainder of 2012 and each of the five succeeding fiscal years and thereafter is as follows:

 

         

Year

  Tenant
Lease Payments
 

Six months ending December 31, 2012

  $ 24,342  

2013

    45,352  

2014

    42,167  

2015

    38,279  

2016

    33,733  

2017

    31,701  

Thereafter

    202,159  

In accordance with the lease terms, substantially all tenant expenses are required to be paid by the tenant; however, we would be required to pay property taxes on the respective properties in the event the tenants fail to pay them. The total annualized property taxes for all properties owned by us at June 30, 2012, were $8.0 million.

On February 13, 2012, we extended the lease with the tenant occupying our property located in South Hadley, Massachusetts. The lease covering this property was extended for an additional one-year period, through January 2013. The lease was originally set to expire in February 2012. The lease provides for annual rents of approximately $0.3 million. Furthermore, the lease grants the tenant one option to extend the lease for an additional year.

On February 14, 2012, we extended the lease with the tenant occupying our property located in San Antonio, Texas. The lease covering this property was extended for an additional eight-year period, through November 2021. The lease was originally set to expire in February 2014. The lease provides for prescribed rent escalations over the life of the lease, with annualized straight line rents of approximately $0.8 million. Furthermore, the lease grants the tenant two options to extend the lease for a period of five years each. In connection with the extension of the lease and the modification of certain terms under the lease, we provided a tenant allowance of $0.6 million, payable over two years, and paid $0.3 million in leasing commissions.

On February 27, 2012, we extended the lease with the tenant occupying our property located in Roseville, Minnesota. The new lease covers approximately one-third of this property and was extended for an additional five-year period, through December 2017. The lease was originally set to expire in December 2012. The tenant in this property will pay rent on the entire building through the end of 2012, and we continue to search for new tenants to lease the remainder of the building. The new lease provides for prescribed rent escalations over the life of the lease, with annualized straight line rents of $2.9 million for the remainder of 2012 and annualized straight line rents beginning in 2013 of $1.2 million. Furthermore, the lease grants the tenant one option to extend the lease for a period of five years. In connection with the extension of the lease and the modification of certain terms under the lease, we provided a tenant allowance of $0.4 million, payable over two years, and paid $0.8 million in leasing commissions.

On June 27, 2012, we extended the lease with the tenant occupying our property located in Hialeah, Florida. The lease covering this property was extended for an additional five-year period, through March 2027. The lease was originally set to expire in March 2022. The lease provides for prescribed rent escalations over the life of the lease, with annualized straight line rents of approximately $1.1 million. In connection with the extension of the lease and the modification of certain terms under the lease, we provided a tenant allowance of $0.3 million.

Intangible Assets

The following table summarizes the carrying value of intangible assets and the accumulated amortization for each intangible asset class:

 

                                 
    June 30, 2012     December 31, 2011  
    Lease
Intangibles
    Accumulated
Amortization
    Lease
Intangibles
    Accumulated
Amortization
 

In-place leases

  $ 28,449     $ (11,087   $ 24,620     $ (10,181

Leasing costs

    19,085       (6,303     15,013       (5,663

Customer relationships

    23,327       (7,545     20,725       (6,844
   

 

 

   

 

 

   

 

 

   

 

 

 
    $ 70,861     $ (24,935   $ 60,358     $ (22,688
   

 

 

   

 

 

   

 

 

   

 

 

 

The estimated aggregate amortization expense for the remainder of 2012 and each of the five succeeding fiscal years and thereafter is as follows:

 

         

Year

  Estimated
Amortization Expense
 

Six months ending December 31, 2012

    3,400  

2013

    5,495  

2014

    4,910  

2015

    4,508  

2016

    3,907  

2017

    3,739  

Thereafter

    19,967