EX-99.4 7 ef20038082_ex99-4.htm EXHIBIT 99.4

Exhibit  99.4
PEAKSTONE REALTY TRUST AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Financial Statements

As used in these unaudited pro forma consolidated financial statements, unless the context otherwise requires, “we,” “us,” “PKST” and the “Company” mean Peakstone Realty Trust and its consolidated subsidiaries.

On November 4, 2024, certain indirect wholly-owned subsidiaries of the Company entered into that certain Purchase and Sale Agreement (the “Purchase and Sale Agreement”), pursuant to which the we agreed to acquire from certain affiliates of Alterra Property Group, LLC a portfolio of 51 industrial outdoor storage properties (the “IOS Portfolio”) located throughout the United States. The aggregate consideration paid by us to acquire the IOS Portfolio was approximately $490.0 million, subject to proration and certain adjustments described in the Purchase and Sale Agreement.

The unaudited pro forma consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X, as amended. The unaudited pro forma consolidated balance sheet as of September 30, 2024 is based on our historical consolidated balance sheet as of that date and has been prepared to reflect (i) the IOS Portfolio acquisition, (ii) various separate financing transactions that the Company entered into in connection with the IOS Portfolio acquisition (the “Financing Transactions”) and (iii) certain other adjustments, as if such transactions and adjustments had occurred on September 30, 2024.  The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2024 and the year ended December 31, 2023 are based on the Company’s historical consolidated statements of operation for those periods and have been prepared to reflect (i) the IOS Portfolio acquisition, (ii) the Financing Transactions and (iii) certain other adjustments, as if such transactions and adjustments had occurred on January 1, 2023.

The unaudited pro forma consolidated financial statements (i) are based on available information and assumptions that we deem reasonable; (ii) are presented for informational purposes only; (iii) do not purport to represent our financial position or results of operations or cash flows that would actually have occurred assuming the IOS Portfolio acquisition, the Financing Transactions and certain other adjustments had occurred on September 30, 2024 for the unaudited pro forma consolidated balance sheet or the IOS Portfolio acquisition, the Financing Transactions and certain other adjustments had occurred on January 1, 2023 for the unaudited pro forma consolidated statements of operations; and (iv) do not purport to be indicative of the Company’s future financial condition or results of operations.  In management’s opinion, all adjustments necessary to reflect the effects of the transactions have been made.  The unaudited pro forma consolidated financial statements and accompanying notes should be read in conjunction with the Company’s consolidated financial statements included on Form 10-K for the year ended December 31, 2023 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2024.


PEAKSTONE REALTY TRUST
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEETS
As of September 30, 2024
(in thousands, except share and per share amounts)
   
Historical
Peakstone Realty
Trust
   
IOS Portfolio
   
Financing
Transactions and
Other Transaction
Accounting
Adjustments
   
Pro forma
Peakstone Realty
Trust
 
   
(A)
   
(B)
   
(C)
       
ASSETS
                       
Cash and cash equivalents
 
$
241,550
   
$
(213,292
)
 
$
107,418
   
$
135,676
 
Restricted cash
   
25,181
     
     
     
25,181
 
Real estate:
                               
Land
   
212,312
     
257,910
     
     
470,222
 
Building and improvements
   
1,836,900
     
244,898
     
     
2,081,798
 
Tenant origination and absorption cost
   
370,946
     
36,509
     
     
407,455
 
Construction in progress
   
1,017
     
     
     
1,017
 
Total real estate
   
2,421,175
     
539,317
     
     
2,960,492
 
Less: accumulated depreciation and amortization
   
(554,820
)
   
     
     
(554,820
)
Total real estate, net
   
1,866,355
     
539,317
     
     
2,405,672
 
Intangible assets, net
   
27,603
     
1,500
     
     
29,103
 
Deferred rent receivable
   
65,511
     
     
     
65,511
 
Deferred leasing costs, net
   
16,842
     
     
     
16,842
 
Goodwill
   
74,052
     
     
     
74,052
 
Right of use assets
   
33,369
     
     
     
33,369
 
Interest rate swap asset
   
12,042
     
     
     
12,042
 
Other assets
   
45,373
     
     
     
45,373
 
Real estate assets and other assets held for sale, net
   
36,456
     
     
     
36,456
 
Total assets
 
$
2,444,334
   
$
327,525
   
$
107,418
   
$
2,879,277
 
LIABILITIES AND EQUITY
                               
Debt, net
 
$
1,168,010
   
$
280,000
   
$
107,418
   
$
1,555,428
 
Interest rate swap liability
   
10,255
     
     
     
10,255
 
Distributions payable
   
8,436
     
     
     
8,436
 
Due to related parties
   
589
     
     
     
589
 
Intangible liabilities, net
   
13,884
     
40,817
     
     
54,701
 
Lease liability
   
46,860
     
     
     
46,860
 
Accrued expenses and other liabilities
   
62,862
     
6,708
     
     
69,570
 
Liabilities held for sale
   
1,267
     
     
     
1,267
 
Total liabilities
   
1,312,163
     
327,525
     
107,418
     
1,747,106
 
 
                               
Shareholders’ equity:
                               
Common shares, $0.001 par value; 800,000,000  shares authorized; 36,377,254 and 36,377,254 shares issued and outstanding, historical and pro forma, respectively
   
37
     
     
     
37
 
Additional paid-in capital
   
2,996,900
     
     
     
2,996,900
 
Cumulative distributions
   
(1,100,893
)
   
     
     
(1,100,893
)
Accumulated deficit
   
(850,992
)
   
     
     
(850,992
)
Accumulated other comprehensive income
   
2,791
     
     
     
2,791
 
Total shareholders’ equity
   
1,047,843
     
     
     
1,047,843
 
Noncontrolling interests
   
84,328
     
     
     
84,328
 
Total equity
   
1,132,171
     
     
     
1,132,171
 
Total liabilities and equity
 
$
2,444,334
   
$
327,525
   
$
107,418
   
$
2,879,277
 


PEAKSTONE REALTY TRUST
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2024
(in thousands, except share and per share amounts)

   
Historical
Peakstone Realty
Trust
   
IOS Portfolio
   
Financing
Transactions and
Other Transaction
Accounting
Adjustments
   
Pro forma
Peakstone Realty
Trust
 
   
(AA)
   
(BB)
   
(CC)
       
Revenue:
                       
Rental income
 
$
170,140
   
$
26,386
   
$
   
$
196,526
 
Expenses:
                               
Property operating expense
   
18,737
     
1,479
     
     
20,216
 
Property tax expense
   
13,309
     
1,980
     
     
15,289
 
Property management fees
   
1,184
     
     
     
1,184
 
General and administrative expenses
   
27,918
     
     
     
27,918
 
Corporate operating expenses to related parties
   
476
     
     
     
476
 
Depreciation and amortization
   
69,155
     
11,603
     
     
80,758
 
Real estate impairment provision
   
50,774
     
     
     
50,774
 
Total expenses
   
181,553
     
15,062
     
     
196,615
 
(Loss) income before other income (expenses)
   
(11,413
)
   
11,324
     
     
(89
)
Other income (expenses):
                               
Interest expense
   
(46,134
)
   
(4,988
)
   
(14,087
)
   
(65,209
)
Other income, net
   
12,802
     
     
     
12,802
 
Gain from disposition of assets
   
25,245
     
     
     
25,245
 
Extinguishment of debt
   
(508
)
   
     
     
(508
)
Goodwill impairment provision
   
(4,594
)
   
     
     
(4,594
)
Transaction expenses
   
(578
)
   
     
     
(578
)
Net (loss) income
   
(25,180
)
   
6,336
     
(14,087
)
   
(32,931
)
Net loss attributable to noncontrolling interests
   
2,042
     
     
     
2,042
 
Net (loss) income attributable to controlling interests
   
(23,138
)
   
6,336
     
(14,087
)
   
(30,889
)
Net (loss) income attributable to common shareholders
 
$
(23,138
)
 
$
6,336
   
$
(14,087
)
 
$
(30,889
)
Net loss attributable to common shareholders per share, basic and diluted
 
$
(0.64
)
                 
$
(0.86
)
Weighted-average number of common shares outstanding, basic and diluted
   
36,344,568
                     
36,344,568
 
 

PEAKSTONE REALTY TRUST
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2023
(in thousands, except share and per share amounts)

   
Historical Peakstone Realty Trust
 
IOS Portfolio
 
Financing Transactions and Other Transaction Accounting Adjustments
 
Pro forma Peakstone Realty Trust
   
(DD)
 
(EE)
 
(FF)
   
Revenue:
               
Rental income
 
$          254,284
 
$          35,331
 
$          
 
$          289,615
Expenses:
               
Property operating expense
 
29,090
 
1,458
 
 
30,548
Property tax expense
 
21,523
 
2,997
 
 
24,520
Property management fees
 
1,813
 
 
 
1,813
General and administrative expenses
 
42,962
 
 
 
42,962
Corporate operating expenses to related parties
 
1,154
 
 
 
1,154
Real estate impairment provision
 
409,512
 
 
 
409,512
Depreciation and amortization
 
112,204
 
15,765
 
 
127,969
Total expenses
 
618,258
 
20,220
 
 
638,478
(Loss) income before other income (expenses)
 
(363,974)
 
15,111
 
 
(348,863)
Other income (expenses):
               
Interest expense
 
(65,623)
 
(6,429)
 
(18,766)
 
(90,818)
Other income, net
 
13,111
 
 
 
13,111
Net loss from investment in unconsolidated entity
 
(176,767)
 
 
 
(176,767)
Gain from disposition of assets
 
29,164
 
 
 
29,164
Goodwill impairment provision
 
(16,031)
 
 
 
(16,031)
Transaction expenses
 
(24,982)
 
 
 
(24,982)
Net (loss) income
 
(605,102)
 
8,682
 
(18,766)
 
(615,186)
Distributions to redeemable preferred shareholders
 
(2,375)
 
 
 
(2,375)
Preferred units redemption
 
(4,970)
 
 
 
(4,970)
Net loss attributable to noncontrolling interests
 
54,555
 
 
 
54,555
Net (loss) income attributable to controlling interests
 
(557,892)
 
8,682
 
(18,766)
 
(567,976)
Distributions to redeemable noncontrolling interests attributable to common shareholders
 
(36)
 
 
 
(36)
Net (loss) income attributable to common shareholders
 
$          (557,928)
 
$          8,682
 
$          (18,766)
 
$          (568,012)
Net (loss) income attributable to common shareholders per share, basic and diluted
 
$          (15.50)
         
$          (15.78)
Weighted-average number of common shares outstanding, basic and diluted
 
35,988,231
         
35,988,231
 

1.
Unaudited Pro Forma Consolidated Balance Sheet Adjustments

(A) Represents the unaudited consolidated balance sheet of Peakstone Realty Trust as of September 30, 2024.  See the historical consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.

(B) Reflects the IOS Portfolio acquisition as if it had occurred on September 30, 2024 for aggregate consideration of approximately $490.0 million, plus an additional $10.0 million of capitalizable transaction costs. At the effective time of the transaction, the Company funded the acquisition with a $280.0 million draw on its revolving credit facility and $213.3 million of cash on hand.

The Company has performed a preliminary purchase price valuation analysis of the fair market value of the IOS Portfolio’s assets acquired and liabilities assumed, and expects to account for this transaction as an asset acquisition. Using the total consideration for the acquisition, the Company has estimated the allocations to such assets and liabilities.

The following table summarizes the allocation of the preliminary purchase price as of November 4, 2024 (in thousands):

Assets acquired:
     
Land
 
$
257,910
 
Building and improvements
   
244,898
 
Tenant origination and absorption cost
   
36,509
 
Total real estate
   
539,317
 
Intangible assets
   
1,500
 
Total assets acquired
   
540,817
 
Liabilities acquired:
       
Intangible liabilities
   
40,817
 
Total assets and liabilities acquired
 
$
500,000
 

The difference between the draw on the revolving credit facility ($280.0 million) and cash paid ($213.3 million) compared to the purchase price ($500.0 million) is comprised of the following (in thousands):

Credit for advance rent
 
$
1,597
 
Credit for security deposits
   
745
 
Credit for tax prorations
    1,702
 
Credit for advance recoveries
    17
 
Credit for capital items
   
2,647
 
 
 
$
6,708
 

This preliminary purchase price allocation has been used to prepare the transaction accounting adjustments in the pro forma consolidated balance sheet and statements of operations. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations as described in more detail in the explanatory notes below. The final allocation is expected to be completed when the Company files its annual report on Form 10-K for the year ending December 31, 2024 and could differ materially from the preliminary allocation used in the transaction accounting adjustments. The final allocation may include (1) changes in fair values of real estate; (2) changes in allocations to intangible assets and liabilities, and (3) other changes to liabilities.

(C)  On October 31, 2024, under the Ninth Amendment to the Second Credit Agreement dated, the Company obtained an additional $175.0 million term loan (“New Term Loan”). The proceeds from the New Term Loan, less $1.1 million of commitment fees, were utilized to paydown the current balance on our revolving credit facility.  In addition, the Company obtained three separate fixed-rate mortgage loans, two obtained on November 1, 2024 and one obtained on November 4, 2024, all of which are secured by assets within its existing portfolio for an aggregate principal amount of $110.3 million. We incurred financing fees for the New Term Loan of $2.1 million, inclusive of the commitment fees listed above and $1.9 million for the mortgage loans. Proceeds from these mortgage loans were used to fund a portion of the IOS Portfolio acquisition.


The following table summarizes the adjustments to reflect the additional debt obtained by the Company (in thousands):

   
September 30, 2024
 
New Term Loan
 
$
175,000
 
Commitment fees on New Term Loan
   
(1,050
)
New mortgage loans
   
110,326
 
Financing fees
   
(2,908
)
Paydown on revolving credit facility
   
(173,950
)
Total change in Debt, net
 
$
107,418
 

2.
Unaudited Pro Forma Consolidated Statements of Operations Adjustments

(AA) Represents the unaudited historical consolidated statement of operations of the Company for the nine months ended September 30, 2024.  See the historical consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.

(BB) Reflects the IOS Portfolio for the nine months ended September 30, 2024 as of the IOS Portfolio acquisition had occurred on January 1, 2023.

The following table presents the revenues and certain expenses of the IOS Portfolio for the nine months ended September 30, 2024, as adjusted to reflect the pro forma impact of the IOS Portfolio acquisition (in thousands):
   
Nine Months Ended
September 30, 2024 (1)
   
Adjustments
       
Total
 
Revenues
                     
Rental revenue
 
$
20,171
   
$
1,053
 
(2
)
 
$
21,224
 
             
5,131
 
(3
)
   
5,131
 
Miscellaneous income
   
31
     
         
31
 
Total revenues
   
20,202
     
6,184
         
26,386
 
                             
Certain expenses
                           
Operating expenses
   
1,149
     
330
 
(4
)
   
1,479
 
Taxes and insurance
   
2,310
     
(330
)
(4
)
   
1,980
 
Total certain expenses
   
3,459
     
         
3,459
 
Revenues in excess of expenses
 
$
16,743
   
$
6,184
       
$
22,927
 
 
(1)
This information is derived from statements of revenues and certain expenses of the IOS Portfolio prepared for the purposes of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
 
(2)
Reflects the net impact of straight-line rent.
 
(3)
Reflects the amortization of the net amount of above- and below-market lease intangibles based on the preliminary purchase price allocation described in Note (B).
 
(4)
Reflect the reclassification of insurance costs to operating expenses.
 
Depreciation expense is calculated, for purposes of the unaudited pro forma consolidated statement of operations based on an estimated useful life range of 1-40 years for buildings, an estimated useful life range of 1-15 years for building improvements, and the remaining contractual, in-place lease term for intangible lease assets. In utilizing these useful lives for determining the pro-forma adjustments, management considered the length of time the property had been in existence, the maintenance history and anticipated future maintenance, and any contractual stipulations that might limit the useful life.

At the effective time of the transaction, the Company drew $280.0 million on its revolving credit facility. With the additional debt, the Company’s leverage ratio was greater than or equal to 45% but less than 50%, which indicates a spread of 1.80% over SOF Rate and a 0.1% index, for a total rate of 6.60% for the revolving credit facility.

(CC) The terms of the New Term Loan require periodic interest payments priced at SOF Rate plus a spread based on our current leverage ratio. With the additional debt required for the IOS Portfolio acquisition, our leverage ratio was greater than or equal to 45% but less than 50%, which indicates a spread of 1.75% over the SOF Rate for a total rate of 6.55% for the New Term Loan. In connection with The New Term Loan, the Company incurred approximately $2.1 million of financing fees that will be amortized over the four-year term, which includes the one-year extension option of the New Term Loan.  In addition, we secured three fixed-rate mortgage loans described above in Note (C). The first fixed-rate mortgage loan for $49.6 million has a contractual rate of 5.48% and a term of seven and a half years with financing fees of $0.8 million.  The second fixed-rate mortgage loan for $37.7 million has a contractual rate of 5.31% and a term of five years with financing fees of $0.5 million.  The third fixed-rate mortgage loan for $23.0 million has a contractual rate of 6.51% and a term of five years with financing fees of $0.6 million. The related financing fees will be amortized over the applicable term of the loan.


The following table summarizes the adjustment to reflect the interest the Company would have incurred as a result of this additional debt for the nine months ended September 30, 2024 (in thousands):
   
Nine Months Ended
September 30, 2024
 
Interest expense
 
$
13,457
 
Deferred financing fee amortization
   
630
 
Total
 
$
14,087
 

(DD) Represents the audited historical consolidated statement of operations of the Company for the year ended December 31, 2023.  See the historical consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

(EE) The following table summarizes the adjustment to reflect the interest the Company would have incurred as a result of the additional debt described in Note (CC) above for the year ended December 31, 2023  (in thousands):

   
Year Ended
December 31, 2023
 
Interest expense
 
$
17,926
 
Deferred financing fee amortization
   
840
 
Total
 
$
18,766
 

(FF) Reflects the IOS Portfolio for the year ended December 31, 2023 as of the IOS Portfolio acquisition had occurred on January 1, 2023.

The following table presents the revenues and certain expenses of the IOS Portfolio for the year ended December 31, 2023, as adjusted to reflect the pro forma impact of the IOS Portfolio acquisition (in thousands):
   
Year Ended
December 31, 2023 (1)
 
Adjustments
 
Total
Revenues
           
Rental revenue
 
$          24,618
 
$          3,823
(3)
$          28,441
       
6,842
(4)
6,842
Miscellaneous income
 
48
 
 
48
Total revenues
 
24,666
 
10,665
 
35,331
             
Certain expenses
           
Operating expenses
 
1,116
 
342
(5)
1,458
Taxes and insurance
 
3,338
 
(342)
(5)
2,996
Total certain expenses
 
4,455
(2)
 
4,454
Revenues in excess of expenses
 
$          20,211
 
$          10,665
 
$          30,877
 
(1)
This information is derived from statements of revenues and certain expenses of the IOS Portfolio prepared for the purposes of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act.
 
(2)
Amounts may not sum due to rounding.
 
(3)
Reflects the net impact of straight-line rent.
 
(4)
Reflects the amortization of the net amount of above- and below-market lease intangibles based on the preliminary purchase price allocation described in Note (B).
 
(5)
Reflect the reclassification of insurance costs to operating expenses.