3. REAL ESTATE INVESTMENTS

Acquisition of Properties

The Company did not have any property acquisitions for the years ended December 31, 2015 and 2014.

Sale of Properties

During the year ended December 31, 2015, the Company sold the following six properties:

Gross

Original

Property

Location

Acquisition Date

Sale Date

Sale Price

Purchase Price

⁽¹⁾

Osceola Village

Kissimmee, FL

10/11/2011

3/11/2015

22,000,000

21,800,000

⁽²⁾

Constitution Trail

Normal, IL

10/21/2011

3/11/2015

23,100,000

18,000,000

Aurora Commons

Aurora, OH

3/20/2012

3/11/2015

8,500,000

7,000,000

Moreno Marketplace

Moreno Valley, CA

11/19/2009

10/29/2015

19,400,000

12,500,000

Northgate Plaza

Tuczon, AZ

7/6/2010

10/29/2015

12,800,000

8,050,000

Summit Point

Fayetteville, GA

12/21/2011

10/30/2015

19,600,000

18,250,000

105,400,000

85,600,000

⁽¹⁾

The original purchase price amounts do not include acquisition fees.

⁽²⁾

The original purchase price for Osceola Village included an additional pad which was sold for $875,000 prior to this transaction.

The sale of these six properties did not represent a strategic shift that will have a major effect on the Company’s operations and financial results and, as a result, was not included in discontinued operations for the year ended December 31, 2015. The Company’s consolidated statements of operations include net operating income of $128,000 for the year ended December 31, 2015 and net operating loss of $2,400,000 for the year ended December 31, 2014, relating to the results of operations for these sold properties.

The Company used the net sales proceeds from the sale of Moreno Marketplace and Northgate Plaza to pay off a portion of $30.7 million in outstanding secured term loans. The Company used the net sales proceeds from the sale of Summit Point, to pay off an $11.9 million mortgage loan.

The sale of Osceola Village, Constitution Trail and Aurora Commons (the “SGO Properties”) was completed in connection with the formation of the SGO Joint Venture, as defined and further described in Note 4. “Investments in Unconsolidated Joint Ventures.” The three properties were sold to the SGO Joint Venture, and the closing of the sale was conditioned on the Company receiving a 19% membership interest in the SGO Joint Venture. In exchange for this 19% membership interest, the Company contributed $4.5 million to the SGO Joint Venture, which amount was credited against the Company’s proceeds from the sale of the three properties to the SGO Joint Venture. Of the net sales proceeds from the sale of the aforementioned properties, $36.4 million was used by the Company to retire the debt associated with the sold properties.

Pro Forma Financial Information

The pro forma financial information below is based on the Company’s historical consolidated statements of operations for the years ended December 31, 2015 and 2014, adjusted to give effect to the sale of the SGO Properties, Moreno Marketplace, Northgate Plaza and Summit Point as if they had been completed at the beginning of 2014. The pro forma financial information is presented for information purposes only, and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of 2015 and 2014, respectively, nor does it purport to represent results of operations for future periods.

					Moreno, Northgate
			SGO Properties		Summit Dispositions		Pro Forma
	Year Ended		Disposition		Pro Forma		Year Ended
	December 31, 2015		Pro Forma Adjustments		Adjustments		December 31, 2015
Rental and reimbursements	$	16,047,000	$	(1,058,000)	$	(3,558,000)	$	11,431,000
Income (loss) from continuing operations	$	13,991,000	$	(4,448,000)	$	(15,649,000)	$	(6,106,000)
Net income (loss)	$	13,991,000	$	(4,448,000)	$	(15,649,000)	$	(6,106,000)
Net income (loss) available to common shareholders	$	13,310,000	$	(4,280,000)	$	(15,649,000)	$	(6,619,000)

Weighted average shares outstanding		10,960,613						10,960,613
Net earnings (loss) per share attributable to
common stockholders - basic and diluted	$	1.21					$	(0.60)

					Moreno, Northgate
			SGO Properties		Summit Dispositions		Pro Forma
	Year Ended		Disposition		Pro Forma		Year Ended
	December 31, 2014		Pro Forma Adjustments		Adjustments		December 31, 2014
Rental and reimbursements	$	21,703,000	$	(5,127,000)	$	(4,314,000)	$	12,262,000
Income (loss) from continuing operations	$	(11,948,000)	$	4,893,000	$	303,000	$	(6,752,000)
Net income (loss)	$	(8,889,000)	$	4,893,000	$	303,000	$	(3,693,000)
Net income (loss) available to common stockholders	$	(8,663,000)	$	4,707,000	$	303,000	$	(3,653,000)

Weighted avergae shares outstanding		10,969,714						10,969,714
Net earnings (loss) per share attributable to
common stockholders - basic and diluted	$	(0.79)					$	(0.33)

On November 25, 2014, the Company completed the sale of San Jacinto Esplanade in San Jacinto, California for a gross sales price of $5,700,000. The Company originally acquired San Jacinto Esplanade in August 2010 for $7,088,000 and subsequently sold three separate parcels of the property in 2011. Net proceeds from the 2014 sale were used to pay down and reduce the line of credit balance with KeyBank. The results of operations related to San Jacinto Esplanade are classified as continuing operations because the property was placed on the market for sale after April 30, 2014, which was the date that the Company implemented ASU No. 2014-08.

Discontinued Operations

The Company reports operating properties sold in periods prior to May 1, 2014, as discontinued operations. The results of these discontinued operations are included as a separate component on the consolidated statements of operations under the caption “Discontinued operations”.

On January 8, 2014, the Company completed the sale of Visalia Marketplace in Visalia, California for a gross sales price of $21,100,000. The Company originally acquired Visalia Marketplace in June 2012 for $19,000,000. In accordance with the terms of the loan documents with KeyBank at the time, 80% of the net proceeds from the sale were released from escrow to pay down and reduce the prior line of credit balance with KeyBank. The Company classified assets and liabilities (including the line of credit) related to Visalia Marketplace as held for sale in the consolidated balance sheet at December 31, 2013. The results of operations related to Visalia Marketplace continue to be classified as discontinued operations for the year ended December 31, 2014, because the property was classified as such in previously issued financial statements.

The components of income and expense relating to discontinued operations for the year ended December 31, 2014 are shown below.

	Year Ended December 31,
	2014
Revenues from rental property	$	62,000
Rental property expenses		75,000
Interest expense		12,000
Operating loss from discontinued operations		(25,000)
Gain on disposal of real estate		3,084,000
Income (loss) from discontinued operations	$	3,059,000

Assets Held for Sale and Liabilities Related to Assets Held for Sale

At December 31, 2015, Bloomingdale Hills, located in Riverside, Florida, was classified as held for sale in the consolidated balance sheet. Since the sale of the property does not represent a strategic shift that will have a major effect on the Company’s operations and financial results, its results of operations was not reported as discontinued operations on the Company’s financial statements. The Company intends to use part of the net proceeds from the sale to retire the outstanding debt associated with this property. The Company anticipates that the sale of Bloomingdale Hills will occur within one year from December 31, 2015. The Company’s consolidated statement of operations includes net operating income of $140,000 and net operating loss of $54,000 for the years ended December 31, 2015 and 2014, respectively, related to the assets held for sale.

On November 21, 2014, the Company entered into a sales contract with a buyer to purchase an undeveloped parcel at Osceola Village in Kissimmee, Florida. The gross sales price was $875,000, and the sale was expected to close in May 2015. Subsequently, on March 11, 2015, the entire Osceola Village Property was sold to the SGO Joint Venture. The land value associated with the parcel was classified as held for sale at December 31, 2014.

The major classes of assets and liabilities related to assets held for sale included in the consolidated balance sheets are as follows:

	December 31,
	2015		2014
ASSETS
Investments in real estate
Land	$	4,718,000	$	342,000
Building and improvements		4,697,000		-
Tenant improvements		499,000		-
		9,914,000		342,000
Accumulated depreciation		(891,000)		-
Investments in real estate, net		9,023,000		342,000
Lease intangibles, net		694,000		-
Deferred financing costs, net		127,000		-
Tenant receivables, net		36,000		-
Prepaid expenses		16,000		-
Assets held for sale	$	9,896,000	$	342,000
LIABILITIES
Notes payable	$	5,395,000	$	-
Below market lease intangibles, net		1,625,000		-
Other liabilities		16,000		-
Liabilities related to assets held for sale	$	7,036,000	$	-

Amounts above are being presented at their carrying value which the Company believes to be lower than their estimated fair value less costs to sell.