Property Acquisitions

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Property Acquisitions

7. PROPERTY ACQUISITIONS

During six months ended June 30, 2015, we acquired fee title to 78 gasoline stations and convenience store properties for an aggregate purchase price of $216,900,000.

On June 3, 2015, we acquired fee simple interests in 77 convenience store and retail motor fuel stations from affiliates of Pacific Convenience and Fuels LLC and simultaneously leased the properties to Apro, LLC (d/b/a “United Oil”), a leading regional convenience store and gas station operator, under three separate cross-defaulted long-term triple-net unitary leases (the “United Oil Transaction”). The properties are located in Northern California, Southern California, Colorado, Washington, Nevada and Oregon. The acquired properties operate under several well recognized brands including 76, Conoco, Circle K, 7-11 and My Goods Market. The total purchase price for the acquisition was approximately $214,500,000, which was funded with proceeds from the Credit Agreement and Restated Prudential Note Purchase Agreement.

The leases governing the properties are unitary triple-net lease agreements with initial terms of 20 years and options for up to three successive five year renewal options. The unitary leases require United Oil to pay a fixed annual rent plus all amounts pertaining to the properties including environmental expenses, real estate taxes, assessments, license and permit fees, charges for public utilities and all other governmental charges. Rent is contractually scheduled to increase at various intervals over the course of the initial and renewal terms of the leases.

We accounted for these transactions as business combinations. We estimated the fair value of acquired tangible assets (consisting of land, buildings and equipment) “as if vacant.” Based on these estimates, we allocated $142,357,000 of the purchase price to land, $75,664,000 to buildings and equipment, $112,000 to above market leases, $19,552,000 to below market leases, which is accounted for as a deferred liability, and $16,136,000 to in-place leases and other intangible assets. We incurred transaction costs of $413,000 directly related to the acquisition which are included in general and administrative expenses in our consolidated statements of operations. As of June 30, 2015, our allocations of the purchase price among the assets acquired are preliminary and subject to change.

Unaudited Pro Forma Condensed Consolidated Financial Information

The following unaudited pro forma condensed consolidated financial information has been prepared utilizing our historical financial statements and the combined effect of additional revenue and expenses from the properties acquired assuming that the acquisitions had occurred as of the beginning of the earliest period presented, after giving effect to certain adjustments resulting from the straight-lining of scheduled rent increases. The following information also gives effect to the additional interest expense resulting from the assumed increase in borrowings outstanding under the Credit Agreement and the Restated Prudential Note Purchase Agreement to fund the acquisition and the elimination of acquisition costs. The unaudited pro forma condensed financial information is not indicative of the results of operations that would have been achieved had the acquisition reflected herein been consummated on the dates indicated or that will be achieved in the future.

(in thousands, except per share data)	Three months ended June 30,				Six months ended June 30,
	2015		2014		2015		2014
Revenues from continuing operations	$	29,263	$	29,491	$	58,349	$	58,348
Net earnings from continuing operations	$	12,684	$	7,583	$	13,356	$	15,598
Basic and diluted earnings from continuing operations per common share	$	0.38	$	0.23	$	0.39	$	0.46