Maryland | 27-1106076 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
11501 Northlake Drive Cincinnati, Ohio | 45249 |
(Address of Principal Executive Offices) | (Zip Code) |
Large Accelerated Filer | ¨ | Accelerated Filer | ¨ |
Non-Accelerated Filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
June 30, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Investment in real estate: | |||||||
Land and improvements | $ | 761,125 | $ | 719,430 | |||
Building and improvements | 1,453,060 | 1,397,050 | |||||
Acquired in-place lease assets | 203,092 | 194,242 | |||||
Acquired above-market lease assets | 41,036 | 39,311 | |||||
Total investment in real estate assets | 2,458,313 | 2,350,033 | |||||
Accumulated depreciation and amortization | (284,998 | ) | (232,102 | ) | |||
Total investment in real estate assets, net | 2,173,315 | 2,117,931 | |||||
Cash and cash equivalents | 6,456 | 40,680 | |||||
Restricted cash | 7,132 | 6,833 | |||||
Other assets, net | 60,387 | 60,804 | |||||
Total assets | $ | 2,247,290 | $ | 2,226,248 | |||
LIABILITIES AND EQUITY | |||||||
Liabilities: | |||||||
Mortgages and loans payable, net | $ | 894,889 | $ | 845,515 | |||
Acquired below-market lease intangibles, net of accumulated amortization of $17,495 and $14,259, respectively | 42,274 | 39,782 | |||||
Accounts payable – affiliates | 3,843 | 5,278 | |||||
Accounts payable and other liabilities | 56,909 | 43,881 | |||||
Total liabilities | 997,915 | 934,456 | |||||
Commitments and contingencies (Note 6) | — | — | |||||
Equity: | |||||||
Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at June 30, 2016 | |||||||
and December 31, 2015, respectively | — | — | |||||
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 183,873 and 181,308 shares issued and | |||||||
outstanding at June 30, 2016 and December 31, 2015, respectively | 1,839 | 1,813 | |||||
Additional paid-in capital | 1,614,816 | 1,588,541 | |||||
Accumulated other comprehensive (loss) income | (9,651 | ) | 22 | ||||
Accumulated deficit | (381,928 | ) | (323,761 | ) | |||
Total stockholders’ equity | 1,225,076 | 1,266,615 | |||||
Noncontrolling interests | 24,299 | 25,177 | |||||
Total equity | 1,249,375 | 1,291,792 | |||||
Total liabilities and equity | $ | 2,247,290 | $ | 2,226,248 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues: | |||||||||||||||
Rental income | $ | 47,256 | $ | 45,539 | $ | 94,195 | $ | 90,039 | |||||||
Tenant recovery income | 15,509 | 13,289 | 31,453 | 27,393 | |||||||||||
Other property income | 288 | 366 | 487 | 709 | |||||||||||
Total revenues | 63,053 | 59,194 | 126,135 | 118,141 | |||||||||||
Expenses: | |||||||||||||||
Property operating | 9,657 | 8,372 | 19,948 | 18,358 | |||||||||||
Real estate taxes | 9,230 | 8,548 | 18,641 | 16,727 | |||||||||||
General and administrative | 8,461 | 2,509 | 16,014 | 4,871 | |||||||||||
Acquisition expenses | 1,502 | 1,487 | 1,522 | 3,222 | |||||||||||
Depreciation and amortization | 25,977 | 25,271 | 51,683 | 50,001 | |||||||||||
Total expenses | 54,827 | 46,187 | 107,808 | 93,179 | |||||||||||
Other expenses: | |||||||||||||||
Interest expense, net | (7,601 | ) | (7,543 | ) | (15,333 | ) | (14,337 | ) | |||||||
Other expense, net | (42 | ) | (3 | ) | (158 | ) | (125 | ) | |||||||
Net income | 583 | 5,461 | 2,836 | 10,500 | |||||||||||
Net income attributable to noncontrolling interests | (23 | ) | (91 | ) | (57 | ) | (159 | ) | |||||||
Net income attributable to stockholders | $ | 560 | $ | 5,370 | $ | 2,779 | $ | 10,341 | |||||||
Earnings per common share: | |||||||||||||||
Net income per share - basic | $ | 0.00 | $ | 0.03 | $ | 0.02 | $ | 0.06 | |||||||
Net income per share - diluted | $ | 0.00 | $ | 0.03 | $ | 0.01 | $ | 0.06 | |||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 183,514 | 184,342 | 182,880 | 183,669 | |||||||||||
Diluted | 186,299 | 187,127 | 185,665 | 186,316 | |||||||||||
Comprehensive (loss) income: | |||||||||||||||
Net income | $ | 583 | $ | 5,461 | $ | 2,836 | $ | 10,500 | |||||||
Other comprehensive (loss) income: | |||||||||||||||
Unrealized (loss) gain on derivatives | (3,240 | ) | 1,391 | (11,547 | ) | 1,391 | |||||||||
Reclassification of derivative loss to interest expense | 928 | 793 | 1,874 | 793 | |||||||||||
Comprehensive (loss) income | (1,729 | ) | 7,645 | (6,837 | ) | 12,684 | |||||||||
Comprehensive income attributable to noncontrolling interests | (23 | ) | (91 | ) | (57 | ) | (159 | ) | |||||||
Comprehensive (loss) income attributable to stockholders | $ | (1,752 | ) | $ | 7,554 | $ | (6,894 | ) | $ | 12,525 |
Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||
Balance at January 1, 2015 | 182,131 | $ | 1,820 | $ | 1,567,653 | $ | — | $ | (213,975 | ) | $ | 1,355,498 | $ | 22,764 | $ | 1,378,262 | ||||||||||||||
Share repurchases | (645 | ) | (9 | ) | (8,344 | ) | — | — | (8,353 | ) | — | (8,353 | ) | |||||||||||||||||
Change in redeemable common stock | — | — | (22,115 | ) | — | — | (22,115 | ) | — | (22,115 | ) | |||||||||||||||||||
Dividend reinvestment plan (“DRIP”) | 3,363 | 34 | 31,924 | — | — | 31,958 | — | 31,958 | ||||||||||||||||||||||
Change in unrealized gain on interest rate swaps | — | — | — | 2,184 | — | 2,184 | — | 2,184 | ||||||||||||||||||||||
Common distributions declared, $0.34 per share | — | — | — | — | (61,035 | ) | (61,035 | ) | — | (61,035 | ) | |||||||||||||||||||
Issuance of partnership units | — | — | — | — | — | — | 4,047 | 4,047 | ||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (898 | ) | (898 | ) | ||||||||||||||||||||
Net income | — | — | — | — | 10,341 | 10,341 | 159 | 10,500 | ||||||||||||||||||||||
Balance at June 30, 2015 | 184,849 | $ | 1,845 | $ | 1,569,118 | $ | 2,184 | $ | (264,669 | ) | $ | 1,308,478 | $ | 26,072 | $ | 1,334,550 | ||||||||||||||
Balance at January 1, 2016 | 181,308 | $ | 1,813 | $ | 1,588,541 | $ | 22 | $ | (323,761 | ) | $ | 1,266,615 | $ | 25,177 | $ | 1,291,792 | ||||||||||||||
Share repurchases | (396 | ) | (4 | ) | (3,885 | ) | — | — | (3,889 | ) | — | (3,889 | ) | |||||||||||||||||
DRIP | 2,961 | 30 | 30,160 | — | — | 30,190 | — | 30,190 | ||||||||||||||||||||||
Change in unrealized loss on interest rate swaps | — | — | — | (9,673 | ) | — | (9,673 | ) | — | (9,673 | ) | |||||||||||||||||||
Common distributions declared, $0.34 per share | — | — | — | — | (60,946 | ) | (60,946 | ) | — | (60,946 | ) | |||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (935 | ) | (935 | ) | ||||||||||||||||||||
Net income | — | — | — | — | 2,779 | 2,779 | 57 | 2,836 | ||||||||||||||||||||||
Balance at June 30, 2016 | 183,873 | $ | 1,839 | $ | 1,614,816 | $ | (9,651 | ) | $ | (381,928 | ) | $ | 1,225,076 | $ | 24,299 | $ | 1,249,375 |
2016 | 2015 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 2,836 | $ | 10,500 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 50,315 | 48,515 | |||||
Net amortization of above- and below-market leases | (582 | ) | (354 | ) | |||
Amortization of deferred financing expense | 2,093 | 2,491 | |||||
Loss on disposal of real estate assets | 122 | 106 | |||||
Straight-line rental income | (1,725 | ) | (2,605 | ) | |||
Other | 43 | 156 | |||||
Changes in operating assets and liabilities: | |||||||
Other assets | 1,592 | 1,829 | |||||
Accounts payable and other liabilities | 3,849 | 1,670 | |||||
Accounts payable – affiliates | (1,588 | ) | 1,093 | ||||
Net cash provided by operating activities | 56,955 | 63,401 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Real estate acquisitions | (94,385 | ) | (88,474 | ) | |||
Capital expenditures | (10,325 | ) | (9,297 | ) | |||
Change in restricted cash | (299 | ) | (1,025 | ) | |||
Net cash used in investing activities | (105,009 | ) | (98,796 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Net change in credit facility | 106,500 | 134,800 | |||||
Payments on mortgages and loans payable | (57,159 | ) | (45,480 | ) | |||
Payments of deferred financing expenses | — | (557 | ) | ||||
Distributions paid, net of DRIP | (30,973 | ) | (29,262 | ) | |||
Distributions to noncontrolling interests | (790 | ) | (753 | ) | |||
Repurchases of common stock | (3,748 | ) | (6,183 | ) | |||
Net cash provided by financing activities | 13,830 | 52,565 | |||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (34,224 | ) | 17,170 | ||||
CASH AND CASH EQUIVALENTS: | |||||||
Beginning of period | 40,680 | 15,649 | |||||
End of period | $ | 6,456 | $ | 32,819 | |||
SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||
Cash paid for interest | $ | 14,843 | $ | 12,818 | |||
Fair value of assumed debt | — | 24,982 | |||||
Accrued capital expenditures | 1,920 | 2,012 | |||||
Change in distributions payable | (217 | ) | (185 | ) | |||
Change in distributions payable - noncontrolling interests | 145 | 145 | |||||
Change in accrued share repurchase obligation | 141 | 2,170 | |||||
Distributions reinvested | 30,190 | 31,958 |
• | Acquired Intangible Lease Assets was separated into Acquired Above-Market Lease Assets and Acquired In-Place Lease Assets. |
• | Change in Fair Value of Derivative was reclassified to Other. |
Standard | Description | Date of Adoption | Effect on the Financial Statements or Other Significant Matters | |||
ASU 2014-09, Revenue from Contracts with Customers | This update outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU 2014-09 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” While ASU 2014-09 specifically references contracts with customers, it may apply to certain other transactions such as the sale of real estate or equipment. In 2015, the FASB provided for a one-year deferral of the effective date for ASU 2014-09, making it effective for annual reporting periods beginning after December 15, 2017. | January 1, 2018 | We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. | |||
ASU 2016-02, Leases (Topic 842) | This update amends existing guidance by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. It is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. | January 1, 2019 | We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. |
June 30, 2016 | December 31, 2015 | |||||||
Discount rates: | ||||||||
Unsecured variable-rate debt | 1.95 | % | 1.66 | % | ||||
Secured fixed-rate debt | 2.87 | % | 2.75 | % | ||||
Secured variable-rate debt | 2.70 | % | 2.36 | % | ||||
Borrowings: | ||||||||
Fair value | $ | 919,303 | $ | 880,854 | ||||
Recorded value(1) | 902,074 | 854,079 |
(1) | Recorded value does not include deferred financing cost of $7.2 million and $8.6 million as of June 30, 2016 and December 31, 2015, respectively. |
June 30, 2016 | December 31, 2015 | ||||||
Derivative liability (asset) designated as hedging instruments: | |||||||
Interest rate swaps - unsecured term loan facility | $ | 9,651 | $ | (22 | ) | ||
Derivative liability not designated as hedging instrument: | |||||||
Interest rate swap - mortgage note | 473 | 442 |
2016 | 2015 | ||||||
Land and improvements | $ | 40,088 | $ | 33,911 | |||
Building and improvements | 48,999 | 67,647 | |||||
Acquired in-place leases | 8,849 | 10,165 | |||||
Acquired above-market leases | 1,725 | 1,241 | |||||
Acquired below-market leases | (5,728 | ) | (3,782 | ) | |||
Total assets and lease liabilities acquired | 93,933 | 109,182 | |||||
Less: Fair value of assumed debt at acquisition (1) | — | 24,982 | |||||
Net assets acquired | $ | 93,933 | $ | 84,200 |
(1) | Debt assumed for the six months ended June 30, 2015 relates to five properties as well as a strip center adjacent to a previously acquired grocery-anchored shopping center. |
2016 | 2015 | ||
Acquired in-place leases | 14 | 14 | |
Acquired above-market leases | 6 | 9 | |
Acquired below-market leases | 23 | 19 |
2016 | 2015 | ||||||
Revenues | $ | 433 | $ | 3,043 | |||
Acquisition expenses | 1,361 | 1,849 | |||||
Net loss | 1,420 | 1,493 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Pro forma revenues | $ | 64,841 | $ | 59,756 | $ | 130,143 | $ | 125,168 | |||||||
Pro forma net income attributable to stockholders | 2,519 | 6,697 | 5,276 | 14,580 |
June 30, 2016 | December 31, 2015 | ||||||
Unsecured Term Loans - fixed-rate(1) | $ | 387,000 | $ | 387,000 | |||
Unsecured Term Loans - variable-rate | 13,000 | 13,000 | |||||
Unsecured revolving credit facility - variable-rate(2) | 247,500 | 141,000 | |||||
Fixed-rate mortgages payable(3)(4) | 249,277 | 306,435 | |||||
Assumed below-market debt adjustment, net(5) | 5,298 | 6,644 | |||||
Deferred financing costs, net(6) | (7,186 | ) | (8,564 | ) | |||
Total | $ | 894,889 | $ | 845,515 |
(1) | As of June 30, 2016 and December 31, 2015, the interest rate on $387 million outstanding under our Term Loans was, effectively, fixed at various interest rates by three interest rate swap agreements with maturities ranging from February 2019 to February 2021 (see Notes 3 and 7). |
(2) | The gross borrowings under our revolving credit facility were $370 million during the six months ended June 30, 2016. The gross payments on our credit facility were $263.5 million during the six months ended June 30, 2016. |
(3) | Due to the non-recourse nature of our fixed-rate mortgages, the assets and liabilities of the related properties are neither available to pay the debts of the consolidated property-holding limited liability companies nor constitute obligations of such consolidated limited liability companies as of June 30, 2016 and December 31, 2015. |
(4) | As of June 30, 2016 and December 31, 2015, the interest rate on one of our variable-rate mortgage notes payable was, in effect, fixed at 5.22% by an interest rate swap agreement (see Notes 3 and 7). |
(5) | Net of accumulated amortization of $6.2 million and $6.5 million as of June 30, 2016 and December 31, 2015, respectively. |
(6) | Net of accumulated amortization of $3.7 million and $2.8 million as of June 30, 2016 and December 31, 2015, respectively. Accumulated amortization of deferred financing costs included in Other Assets, Net was $5.1 million and $4.8 million as of June 30, 2016 and December 31, 2015, respectively. |
Balance in AOCI as of January 1, 2015 | $ | — | |||||
Amount of gain recognized in other comprehensive income on derivative | $ | 1,391 | |||||
Amount of loss reclassified from AOCI into interest expense | 793 | ||||||
Current-period other comprehensive income | 2,184 | ||||||
Balance in AOCI as of June 30, 2015 | $ | 2,184 | |||||
Balance in AOCI as of January 1, 2016 | $ | 22 | |||||
Amount of loss recognized in other comprehensive income on derivative | $ | (11,547 | ) | ||||
Amount of loss reclassified from AOCI into interest expense | 1,874 | ||||||
Current-period other comprehensive loss | (9,673 | ) | |||||
Balance in AOCI as of June 30, 2016 | $ | (9,651 | ) |
June 30, 2016 | December 31, 2015 | |||||
OP units | 2,785 | 2,785 | ||||
Class B units | 2,340 | 2,083 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Numerator for basic and diluted earnings per share: | |||||||||||||||
Net income attributable to stockholders | $ | 560 | $ | 5,370 | $ | 2,779 | $ | 10,341 | |||||||
Denominator: | |||||||||||||||
Denominator for basic earnings per share - weighted-average shares | 183,514 | 184,342 | 182,880 | 183,669 | |||||||||||
Effect of dilutive OP units/Class B units | 2,785 | 2,785 | 2,785 | 2,647 | |||||||||||
Denominator for diluted earnings per share - adjusted weighted-average shares | 186,299 | 187,127 | 185,665 | 186,316 | |||||||||||
Basic earnings per share: | |||||||||||||||
Net income attributable to stockholders | $ | 0.00 | $ | 0.03 | $ | 0.02 | $ | 0.06 | |||||||
Diluted earnings per share: | |||||||||||||||
Net income attributable to stockholders | $ | 0.00 | $ | 0.03 | $ | 0.01 | $ | 0.06 |
Three Months Ended | Six Months Ended | Unpaid Amount as of | |||||||||||||||||||||
June 30, | June 30, | June 30, | December 31, | ||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Acquisition fees(1) | $ | 940 | $ | 228 | $ | 940 | $ | 1,083 | $ | — | $ | — | |||||||||||
Acquisition expenses(1) | 155 | 23 | 155 | 162 | — | — | |||||||||||||||||
Asset management fees(2) | 4,711 | — | 9,330 | — | 1,608 | 1,538 | |||||||||||||||||
OP units distribution (3) | 464 | 470 | 928 | 898 | 153 | 159 | |||||||||||||||||
Class B units distribution(4) | 382 | 99 | 736 | 111 | 128 | 119 | |||||||||||||||||
Financing fees(5) | — | — | — | 180 | — | — | |||||||||||||||||
Total | $ | 6,652 | $ | 820 | $ | 12,089 | $ | 2,434 | $ | 1,889 | $ | 1,816 |
(1) | The acquisition fees and expenses are presented as Acquisition Expenses on the consolidated statements of operations. |
(2) | Asset management fees are presented in General and Administrative on the consolidated statements of operations. |
(3) | The distributions paid to holders of OP units are presented as Distributions to Noncontrolling Interests on the consolidated statements of equity. |
(4) | The distributions paid to holders of unvested Class B units are presented in General and Administrative on the consolidated statements of operations. |
(5) | Financing fees are presented in Other Assets, Net or Mortgages and Loans Payable, Net, on the consolidated balance sheets and amortized over the term of the related loan. As of October 1, 2015, we are no longer required to pay financing fees. |
Three Months Ended | Six Months Ended | Unpaid Amount as of | |||||||||||||||||||||
June 30, | June 30, | June 30, | December 31, | ||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Property management fees(1) | $ | 2,572 | $ | 2,407 | $ | 4,999 | $ | 4,592 | $ | 771 | $ | 755 | |||||||||||
Leasing commissions(2) | 1,547 | 1,992 | 3,742 | 4,020 | 384 | 729 | |||||||||||||||||
Construction management fees(2) | 254 | 246 | 413 | 411 | 63 | 155 | |||||||||||||||||
Other fees and reimbursements(3) | 1,406 | 1,018 | 2,576 | 2,021 | 651 | 1,699 | |||||||||||||||||
Total | $ | 5,779 | $ | 5,663 | $ | 11,730 | $ | 11,044 | $ | 1,869 | $ | 3,338 |
(1) | The property management fees are included in Property Operating on the consolidated statements of operations. |
(2) | Leasing commissions paid for leases with terms less than one year are expensed immediately and included in Depreciation and Amortization on the consolidated statements of operations. Leasing commissions paid for leases with terms greater than one year, and construction management fees are capitalized and amortized over the life of the related leases or assets. |
(3) | Other fees and reimbursements are included in Property Operating and General and Administrative on the consolidated statements of operations based on the nature of the expense. |
Year | Amount | ||
July 1 to December 31, 2016 | $ | 94,260 | |
2017 | 177,885 | ||
2018 | 160,311 | ||
2019 | 136,784 | ||
2020 | 114,238 | ||
2021 and thereafter | 412,966 | ||
Total | $ | 1,096,444 |
Distribution Period | Date Distribution Paid | Gross Amount of Distribution Paid | Distribution Reinvested through the DRIP | Net Cash Distribution | ||||||||||
June 1, 2016 through June 30, 2016 | 7/1/2016 | $ | 10,102 | $ | 4,773 | $ | 5,329 | |||||||
July 1, 2016 through July 31, 2016 | 8/1/2016 | 10,460 | 4,898 | 5,562 |
Cumulative | Property Acquisitions During the | |||||
Portfolio as of | Six Months Ended | |||||
June 30, 2016 | June 30, 2016 | |||||
Number of properties | 149 | 2 | ||||
Number of states | 28 | 2 | ||||
Total square feet (in thousands) | 15,959 | 389 | ||||
Leased % of rentable square feet | 96.1 | % | 97.4 | % | ||
Average remaining lease term in years(1) | 5.6 | 6.1 |
(1) | As of June 30, 2016. The average remaining lease term in years excludes future options to extend the term of the lease. |
Year | Number of Expiring Leases | Leased Square Feet Expiring | % of Leased Square Feet Expiring | ABR(1) | % of ABR | |||||||||||
July 1 to December 31, 2016(2) | 192 | 416 | 2.7 | % | $ | 6,673 | 3.5 | % | ||||||||
2017 | 329 | 1,318 | 8.6 | % | 16,761 | 8.8 | % | |||||||||
2018 | 344 | 1,647 | 10.7 | % | 21,552 | 11.3 | % | |||||||||
2019 | 356 | 1,941 | 12.7 | % | 26,262 | 13.8 | % | |||||||||
2020 | 291 | 1,765 | 11.5 | % | 22,183 | 11.6 | % | |||||||||
2021 | 235 | 1,722 | 11.2 | % | 18,472 | 9.7 | % | |||||||||
2022 | 77 | 964 | 6.3 | % | 9,932 | 5.2 | % | |||||||||
2023 | 87 | 1,449 | 9.5 | % | 17,783 | 9.3 | % | |||||||||
2024 | 119 | 1,161 | 7.6 | % | 11,482 | 6.0 | % | |||||||||
2025 | 101 | 696 | 4.5 | % | 10,815 | 5.7 | % | |||||||||
Thereafter | 199 | 2,253 | 14.7 | % | 28,574 | 15.1 | % | |||||||||
2,330 | 15,332 | 100.0 | % | $ | 190,489 | 100.0 | % |
(1) | We calculate ABR as monthly contractual rent as of June 30, 2016, multiplied by 12 months, except for the period from July 1 to December 31, 2016, which was multiplied by six months. |
(2) | Subsequent to June 30, 2016, we renewed 24 of the 192 leases expiring in 2016, which accounts for 252 thousand total square feet and total ABR of $1.6 million. |
Tenant Type | Leased Square Feet | % of Leased Square Feet | ABR | % of ABR | |||||||||
Grocery anchor | 8,288 | 54.1 | % | $ | 79,082 | 41.5 | % | ||||||
National and regional(1) | 4,886 | 31.8 | % | 71,886 | 37.8 | % | |||||||
Local | 2,158 | 14.1 | % | 39,521 | 20.7 | % | |||||||
15,332 | 100.0 | % | $ | 190,489 | 100.0 | % |
(1) | We define national tenants as those that operate in at least three states. Regional tenants are defined as those that have at least three locations. |
Tenant Industry | Leased Square Feet | % of Leased Square Feet | ABR | % of ABR | |||||||||
Grocery | 8,288 | 54.1 | % | $ | 79,082 | 41.5 | % | ||||||
Retail | 3,474 | 22.6 | % | 41,735 | 21.9 | % | |||||||
Services | 2,294 | 15.0 | % | 43,011 | 22.6 | % | |||||||
Restaurant | 1,276 | 8.3 | % | 26,661 | 14.0 | % | |||||||
15,332 | 100.0 | % | $ | 190,489 | 100.0 | % |
Tenant | Number of Locations(1) | Leased Square Feet | % of Leased Square Feet | ABR | % of ABR | |||||||||||
Kroger | 37 | 2,076 | 13.5 | % | $ | 16,277 | 8.5 | % | ||||||||
Publix | 31 | 1,458 | 9.5 | % | 14,807 | 7.8 | % | |||||||||
Walmart | 9 | 1,121 | 7.3 | % | 5,198 | 2.7 | % | |||||||||
Albertsons-Safeway | 13 | 788 | 5.1 | % | 8,370 | 4.4 | % | |||||||||
Giant Eagle | 7 | 560 | 3.7 | % | 5,396 | 2.8 | % | |||||||||
Ahold USA | 6 | 411 | 2.7 | % | 6,449 | 3.4 | % | |||||||||
SUPERVALU | 4 | 273 | 1.8 | % | 2,382 | 1.3 | % | |||||||||
Raley’s | 3 | 188 | 1.2 | % | 3,229 | 1.7 | % | |||||||||
Winn-Dixie | 3 | 147 | 1.0 | % | 1,545 | 0.8 | % | |||||||||
Delhaize America | 4 | 142 | 0.9 | % | 1,855 | 1.0 | % | |||||||||
Hy-Vee | 2 | 127 | 0.8 | % | 527 | 0.3 | % | |||||||||
Schnuck’s | 2 | 121 | 0.8 | % | 1,459 | 0.8 | % | |||||||||
Sprouts Farmers Market | 4 | 120 | 0.8 | % | 1,482 | 0.8 | % | |||||||||
BJ’s Wholesale Club | 1 | 115 | 0.8 | % | 1,223 | 0.6 | % | |||||||||
Coborn’s | 2 | 108 | 0.7 | % | 1,388 | 0.7 | % | |||||||||
H-E-B | 1 | 81 | 0.5 | % | 1,210 | 0.6 | % | |||||||||
Price Chopper | 1 | 68 | 0.4 | % | 844 | 0.4 | % | |||||||||
Big Y | 1 | 65 | 0.4 | % | 1,091 | 0.6 | % | |||||||||
PAQ, Inc. | 1 | 59 | 0.4 | % | 1,046 | 0.5 | % | |||||||||
Trader Joe’s | 4 | 55 | 0.4 | % | 921 | 0.5 | % | |||||||||
Rosauers Supermarkets, Inc. | 1 | 51 | 0.4 | % | 537 | 0.3 | % | |||||||||
Save Mart | 1 | 50 | 0.3 | % | 399 | 0.2 | % | |||||||||
The Fresh Market | 2 | 38 | 0.2 | % | 597 | 0.3 | % | |||||||||
Marc’s | 1 | 36 | 0.2 | % | 400 | 0.2 | % | |||||||||
Fresh Thyme | 1 | 30 | 0.2 | % | 450 | 0.2 | % | |||||||||
142 | 8,288 | 54.0 | % | $ | 79,082 | 41.4 | % |
(1) | Number of locations excludes (a) auxiliary leases with grocery anchors such as fuel stations, pharmacies, and liquor stores, (b) six locations where we do not own the portion of the shopping center that contains the grocery-anchor, and (c) two locations that have non-grocery anchors, but includes one location where two grocers operate. |
Favorable (Unfavorable) Change | |||||||||||||||
(In thousands, except per share amounts) | 2016 | 2015 | $ | % | |||||||||||
Operating Data: | |||||||||||||||
Total revenues | $ | 63,053 | $ | 59,194 | $ | 3,859 | 6.5 | % | |||||||
Property operating expenses | (9,657 | ) | (8,372 | ) | (1,285 | ) | (15.3 | )% | |||||||
Real estate tax expenses | (9,230 | ) | (8,548 | ) | (682 | ) | (8.0 | )% | |||||||
General and administrative expenses | (8,461 | ) | (2,509 | ) | (5,952 | ) | (237.2 | )% | |||||||
Acquisition expenses | (1,502 | ) | (1,487 | ) | (15 | ) | (1.0 | )% | |||||||
Depreciation and amortization | (25,977 | ) | (25,271 | ) | (706 | ) | (2.8 | )% | |||||||
Interest expense, net | (7,601 | ) | (7,543 | ) | (58 | ) | (0.8 | )% | |||||||
Other expense, net | (42 | ) | (3 | ) | (39 | ) | n/m | ||||||||
Net income | 583 | 5,461 | (4,878 | ) | (89.3 | )% | |||||||||
Net income attributable to noncontrolling interests | (23 | ) | (91 | ) | 68 | 74.7 | % | ||||||||
Net income attributable to stockholders | $ | 560 | $ | 5,370 | $ | (4,810 | ) | (89.6 | )% | ||||||
Net income per share—basic | $ | 0.00 | $ | 0.03 | $ | (0.03 | ) | (100.0 | )% | ||||||
Net income per share—diluted | 0.00 | 0.03 | (0.03 | ) | (100.0 | )% |
Favorable (Unfavorable) Change | |||||||||||||||
(In thousands, except per share amounts) | 2016 | 2015 | $ | % | |||||||||||
Operating Data: | |||||||||||||||
Total revenues | $ | 126,135 | $ | 118,141 | $ | 7,994 | 6.8 | % | |||||||
Property operating expenses | (19,948 | ) | (18,358 | ) | (1,590 | ) | (8.7 | )% | |||||||
Real estate tax expenses | (18,641 | ) | (16,727 | ) | (1,914 | ) | (11.4 | )% | |||||||
General and administrative expenses | (16,014 | ) | (4,871 | ) | (11,143 | ) | (228.8 | )% | |||||||
Acquisition expenses | (1,522 | ) | (3,222 | ) | 1,700 | 52.8 | % | ||||||||
Depreciation and amortization | (51,683 | ) | (50,001 | ) | (1,682 | ) | (3.4 | )% | |||||||
Interest expense, net | (15,333 | ) | (14,337 | ) | (996 | ) | (6.9 | )% | |||||||
Other expense, net | (158 | ) | (125 | ) | (33 | ) | (26.4 | )% | |||||||
Net income | 2,836 | 10,500 | (7,664 | ) | (73.0 | )% | |||||||||
Net income attributable to noncontrolling interests | (57 | ) | (159 | ) | 102 | 64.2 | % | ||||||||
Net income attributable to stockholders | $ | 2,779 | $ | 10,341 | $ | (7,562 | ) | (73.1 | )% | ||||||
Net income per share—basic | $ | 0.02 | $ | 0.06 | $ | (0.04 | ) | (66.7 | )% | ||||||
Net income per share—diluted | 0.01 | 0.06 | (0.05 | ) | (83.3 | )% |
Total Deals | Inline Deals(1) | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
New leases: | ||||||||||||||||
Number of leases | 40 | 56 | 40 | 54 | ||||||||||||
Square footage (in thousands) | 87 | 125 | 87 | 93 | ||||||||||||
First-year base rental revenue (in thousands) | $ | 1,490 | $ | 1,946 | $ | 1,490 | $ | 1,700 | ||||||||
Average rent per square foot (“PSF”) | $ | 17.05 | $ | 15.53 | $ | 17.05 | $ | 18.35 | ||||||||
Average cost PSF of executing new leases(2) | $ | 34.49 | $ | 30.66 | $ | 34.49 | $ | 34.94 | ||||||||
Weighted average lease term (in years) | 7.2 | 7.2 | 7.2 | 7.0 | ||||||||||||
Renewals and Options: | ||||||||||||||||
Number of leases | 82 | 75 | 78 | 70 | ||||||||||||
Square footage (in thousands) | 247 | 393 | 150 | 153 | ||||||||||||
First-year base rental revenue (in thousands) | $ | 4,157 | $ | 5,181 | $ | 3,384 | $ | 3,224 | ||||||||
Average rent PSF | $ | 16.80 | $ | 13.17 | $ | 22.60 | $ | 21.13 | ||||||||
Average rent PSF prior to renewals | $ | 14.95 | $ | 11.89 | $ | 19.75 | $ | 18.17 | ||||||||
Percentage increase in average rent PSF | 12.4 | % | 10.8 | % | 14.4 | % | 16.3 | % | ||||||||
Average cost PSF of executing renewals and options(2) | $ | 3.64 | $ | 2.92 | $ | 5.16 | $ | 4.77 | ||||||||
Weighted average lease term (in years) | 5.5 | 6.3 | 5.6 | 5.4 | ||||||||||||
Portfolio retention rate(3) | 92.3 | % | 77.3 | % | 85.6 | % | 90.3 | % |
(1) | We consider an inline deal to be a lease for less than 10,000 square feet of gross leasable area (“GLA”). |
(2) | The cost of executing new leases, renewals, and options includes leasing commissions, tenant improvement costs, and tenant concessions. |
(3) | The portfolio retention rate is calculated by dividing a) total square feet of retained tenants with current period lease expirations by b) the square feet of leases expiring during the period. |
Total Deals | Inline Deals(1) | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
New leases: | ||||||||||||||||
Number of leases | 89 | 107 | 86 | 103 | ||||||||||||
Square footage (in thousands) | 300 | 267 | 202 | 192 | ||||||||||||
First-year base rental revenue (in thousands) | $ | 4,221 | $ | 3,913 | $ | 3,379 | $ | 3,352 | ||||||||
Average rent PSF | $ | 14.08 | $ | 14.67 | $ | 16.74 | $ | 17.49 | ||||||||
Average cost PSF of executing new leases(2) | $ | 32.46 | $ | 31.29 | $ | 36.51 | $ | 34.77 | ||||||||
Weighted average lease term (in years) | 7.7 | 7.2 | 7.3 | 7.1 | ||||||||||||
Renewals and Options: | ||||||||||||||||
Number of leases | 145 | 145 | 136 | 136 | ||||||||||||
Square footage (in thousands) | 757 | 822 | 267 | 298 | ||||||||||||
First-year base rental revenue (in thousands) | $ | 8,418 | $ | 9,963 | $ | 5,690 | $ | 6,179 | ||||||||
Average rent PSF | $ | 11.11 | $ | 12.12 | $ | 21.29 | $ | 20.77 | ||||||||
Average rent PSF prior to renewals | $ | 10.00 | $ | 11.04 | $ | 18.56 | $ | 18.17 | ||||||||
Percentage increase in average rent PSF | 11.1 | % | 9.8 | % | 14.7 | % | 14.3 | % | ||||||||
Average cost PSF of executing renewals and options(2) | $ | 2.81 | $ | 4.64 | $ | 4.87 | $ | 4.51 | ||||||||
Weighted average lease term (in years) | 5.6 | 6.1 | 5.5 | 5.2 | ||||||||||||
Portfolio retention rate(3) | 90.1 | % | 89.9 | % | 82.3 | % | 83.5 | % |
(1) | We consider an inline deal to be a lease for less than 10,000 square feet of GLA. |
(2) | The cost of executing new leases, renewals, and options includes leasing commissions, tenant improvement costs, and tenant concessions. |
(3) | The portfolio retention rate is calculated by dividing a) total square feet of retained tenants with current period lease expirations by b) the square feet of leases expiring during the period. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2016 | 2015 | $ Change | % Change | 2016 | 2015 | $ Change | % Change | |||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||
Rental income(1) | $ | 41,794 | $ | 40,516 | $ | 1,278 | $ | 83,865 | $ | 81,138 | $ | 2,727 | ||||||||||||||||||
Tenant recovery income | 14,194 | 12,184 | 2,010 | 28,750 | 25,357 | 3,393 | ||||||||||||||||||||||||
Other property income | 229 | 317 | (88 | ) | 375 | 615 | (240 | ) | ||||||||||||||||||||||
Total revenues | 56,217 | 53,017 | 3,200 | 6.0 | % | 112,990 | 107,110 | 5,880 | 5.5 | % | ||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Property operating expenses | 8,750 | 7,801 | 949 | 18,027 | 17,255 | 772 | ||||||||||||||||||||||||
Real estate taxes | 8,288 | 7,775 | 513 | 16,726 | 15,315 | 1,411 | ||||||||||||||||||||||||
Total operating expenses | 17,038 | 15,576 | 1,462 | 9.4 | % | 34,753 | 32,570 | 2,183 | 6.7 | % | ||||||||||||||||||||
Total Same-Center NOI | $ | 39,179 | $ | 37,441 | $ | 1,738 | 4.6 | % | $ | 78,237 | $ | 74,540 | $ | 3,697 | 5.0 | % |
(1) | Excludes straight-line rental income and the net amortization of above- and below-market leases. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 583 | $ | 5,461 | $ | 2,836 | $ | 10,500 | |||||||
Adjusted to exclude: | |||||||||||||||
Interest expense, net | 7,574 | 7,543 | 15,333 | 14,337 | |||||||||||
Other expense, net | 42 | 5 | 158 | 125 | |||||||||||
General and administrative expenses | 8,461 | 2,509 | 16,014 | 4,871 | |||||||||||
Acquisition expenses | 1,502 | 1,487 | 1,522 | 3,222 | |||||||||||
Depreciation and amortization | 25,977 | 25,271 | 51,683 | 50,001 | |||||||||||
Net amortization of above- and below-market leases | (310 | ) | (176 | ) | (582 | ) | (354 | ) | |||||||
Straight-line rental income | (814 | ) | (1,361 | ) | (1,725 | ) | (2,605 | ) | |||||||
NOI | 43,015 | 40,739 | 85,239 | 80,097 | |||||||||||
Less: NOI from centers excluded from Same-Center | (3,836 | ) | (3,298 | ) | (7,002 | ) | (5,557 | ) | |||||||
Total Same-Center NOI | $ | 39,179 | $ | 37,441 | $ | 78,237 | $ | 74,540 |
• | acquisition fees and expenses; |
• | straight-line rent amounts, both income and expense; |
• | amortization of above- or below-market intangible lease assets and liabilities; |
• | amortization of discounts and premiums on debt investments; |
• | gains or losses from the early extinguishment of debt; |
• | gains or losses on the extinguishment of derivatives, except where the trading of such instruments is a fundamental attribute of our operations; |
• | gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting; and |
• | adjustments related to the above items for joint ventures and noncontrolling interests and unconsolidated entities in the application of equity accounting. |
• | Adjustments for straight-line rents and amortization of discounts and premiums on debt investments—GAAP requires rental receipts and discounts and premiums on debt investments to be recognized using various systematic |
• | Adjustments for amortization of above- or below-market intangible lease assets—Similar to depreciation and amortization of other real estate-related assets that are excluded from FFO, GAAP implicitly assumes that the value of intangibles diminishes ratably over the lease term and should be recognized in revenue. Since real estate values and market lease rates in the aggregate have historically risen or fallen with market conditions, and the intangible value is not adjusted to reflect these changes, management believes that by excluding these charges, MFFO provides useful supplemental information on the performance of the real estate. |
• | Gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting—This item relates to a fair value adjustment, which is based on the impact of current market fluctuations and underlying assessments of general market conditions and specific performance of the holding, which may not be directly attributable to current operating performance. As these gains or losses relate to underlying long-term assets and liabilities, management believes MFFO provides useful supplemental information by focusing on the changes in core operating fundamentals rather than changes that may reflect anticipated, but unknown, gains or losses. |
• | Adjustment for gains or losses related to early extinguishment of derivatives and debt instruments—These adjustments are not related to continuing operations. By excluding gains or losses related to early extinguishment of derivatives and debt instruments and write-offs of unamortized deferred financing fees, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods and to other real estate operators. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Calculation of FFO | |||||||||||||||
Net income attributable to stockholders | $ | 560 | $ | 5,370 | $ | 2,779 | $ | 10,341 | |||||||
Adjustments: | |||||||||||||||
Depreciation and amortization of real estate assets | 25,977 | 25,271 | 51,683 | 50,001 | |||||||||||
Noncontrolling interest | (387 | ) | (376 | ) | (774 | ) | (710 | ) | |||||||
FFO attributable to common stockholders | $ | 26,150 | $ | 30,265 | $ | 53,688 | $ | 59,632 | |||||||
Calculation of MFFO | |||||||||||||||
FFO | $ | 26,150 | $ | 30,265 | $ | 53,688 | $ | 59,632 | |||||||
Adjustments: | |||||||||||||||
Acquisition expenses | 1,502 | 1,487 | 1,522 | 3,222 | |||||||||||
Net amortization of above- and below-market leases | (310 | ) | (176 | ) | (582 | ) | (354 | ) | |||||||
Write-off of unamortized deferred financing expense | 56 | 93 | 105 | 140 | |||||||||||
Straight-line rental income | (826 | ) | (1,361 | ) | (1,725 | ) | (2,605 | ) | |||||||
Amortization of market debt adjustment | (673 | ) | (715 | ) | (1,346 | ) | (1,322 | ) | |||||||
Change in fair value of derivative | (21 | ) | (70 | ) | 32 | (23 | ) | ||||||||
Noncontrolling interest | 17 | 58 | 43 | 61 | |||||||||||
MFFO attributable to common stockholders | $ | 25,895 | $ | 29,581 | $ | 51,737 | $ | 58,751 | |||||||
Earnings per common share: | |||||||||||||||
Weighted-average common shares outstanding - basic | 183,514 | 184,342 | 182,880 | 183,669 | |||||||||||
Weighted-average common shares outstanding - diluted | 186,299 | 187,127 | 185,665 | 186,316 | |||||||||||
Net income per share - basic | $ | 0.00 | $ | 0.03 | $ | 0.02 | $ | 0.06 | |||||||
Net income per share - diluted | $ | 0.00 | $ | 0.03 | $ | 0.01 | $ | 0.06 | |||||||
FFO per share - basic and diluted | $ | 0.14 | $ | 0.16 | $ | 0.29 | $ | 0.32 | |||||||
MFFO per share - basic and diluted | $ | 0.14 | $ | 0.16 | $ | 0.28 | $ | 0.32 |
Six Months Ended June 30, | |||||||
2016 | 2015 | ||||||
Gross distributions paid | $ | 61,163 | $ | 61,220 | |||
Distributions reinvested through DRIP | 30,190 | 31,958 | |||||
Net cash distributions | 30,973 | 29,262 | |||||
Net income attributable to stockholders | 2,779 | 10,341 | |||||
Net cash provided by operating activities | 56,955 | 63,401 | |||||
FFO(1) | 53,688 | 59,632 |
Payments due by period | |||||||||||||||||||||||||||
Total | 2016 | 2017 | 2018 | 2019 | 2020 | Thereafter | |||||||||||||||||||||
Long-term debt obligations - principal payments | $ | 896,777 | $ | 47,563 | $ | 294,740 | $ | 44,790 | $ | 104,145 | $ | 179,113 | $ | 226,426 | |||||||||||||
Long-term debt obligations - interest payments(1) | 87,464 | 13,873 | 23,028 | 16,615 | 13,804 | 9,149 | 10,995 | ||||||||||||||||||||
Operating lease obligations | 595 | 32 | 49 | 30 | 30 | 30 | 424 | ||||||||||||||||||||
Total | $ | 984,836 | $ | 61,468 | $ | 317,817 | $ | 61,435 | $ | 117,979 | $ | 188,292 | $ | 237,845 |
(1) | Future variable-rate interest payments are based on interest rates as of June 30, 2016. |
• | limits the ratio of debt to total asset value, as defined, to 60% or less with a surge to 65% following a material acquisition; |
• | limits the ratio of unsecured debt to unencumbered asset value, as defined, to 60% or less with a surge to 65% following a material acquisition; |
• | limits the ratio of secured debt to total asset value, as defined, to 40% or less with a surge to 45% following a material acquisition; |
• | requires the fixed-charge ratio, as defined, to be at least 1.5 to 1.0 or 1.4 to 1.0 following a material acquisition; |
• | requires maintenance of certain minimum tangible net worth balances; |
• | requires the unencumbered NOI to interest expense on unsecured indebtedness ratio, as defined, to be 1.75 to 1.0 or greater or 1.7 to 1.0 following a material acquisition; and |
• | limits the ratio of cash dividend payments to FFO, as defined, to be less than 95%. |
a) | We did not sell any equity securities that were not registered under the Securities Act during the six months ended June 30, 2016. |
b) | Not applicable. |
c) | During the quarter ended June 30, 2016, we repurchased shares as follows (shares in thousands): |
Period | Total Number of Shares Repurchased(1) | Average Price Paid per Share(1)(3) | Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program(1)(2) | Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program | ||||||||
April 2016 | 40 | $ | 10.20 | 40 | (2) | |||||||
May 2016 | — | — | — | (2) | ||||||||
June 2016 | 144 | 8.18 | 144 | (2) |
(1) | Share repurchases made during the three months ended June 30, 2016, were made in connection with a stockholder’s death, “qualifying disability,” or “determination of incompetence," or pursuant to our self-tender offer, which are not subject to the funding limitations of the share repurchase program. On April 25, 2016, in order to deter an unsolicited tender offer by a third party and to deter other potential future bidders that may try to exploit the illiquidity of shares of our common stock and acquire them from stockholders at prices substantially below their value, we launched a self-tender offer to purchase up to 9.3 million shares of our common stock. The tender offer expired on June 7, 2016, and in connection therewith, we repurchased 69,271 shares of common stock at a price of $6.00 per share, for an aggregate purchase price of approximately $0.4 million. |
(2) | We currently limit the dollar value and number of shares that may yet be repurchased under the share repurchase program as described below. During the three months ended June 30, 2016, we repurchased $1.2 million of common stock. See below regarding funding limitations during the third quarter of 2016 and beyond. |
(3) | The repurchase price per share for all stockholders under our share repurchase plan is equal to the estimated value per share of $10.20. The purchase price per share for all stockholders under the tender offer was $6.00. |
• | Unless the shares are being repurchased in connection with a stockholder’s death, “qualifying disability,” or “determination of incompetence,” we may not repurchase shares unless the stockholder has held the shares for one year. |
• | During any calendar year, we may repurchase no more than 5.0% of the weighted-average number of shares outstanding during the prior calendar year. |
• | We have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. |
• | The cash available for repurchases on any particular date will generally be limited to the proceeds from the DRIP during the preceding four fiscal quarters, less any cash already used for repurchases since the beginning of the same period; however, subject to the limitations described above, we may use other sources of cash at the discretion of the board of directors. The limitations described above do not apply to shares repurchased due to a stockholder’s death, “qualifying disability,” or “determination of incompetence.” |
• | Only those stockholders who purchased their shares from us or received their shares from us (directly or indirectly) through one or more non-cash transactions may be able to participate in the share repurchase program. In other words, once our shares are transferred for value by a stockholder, the transferee and all subsequent holders of the shares are not eligible to participate in the share repurchase program. |
• | The board of directors reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase. |
Ex. | Description |
31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002* |
32.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002* |
99.1 | Second Amended and Restated Share Repurchase Program (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed April 15, 2016) |
101.1 | The following information from the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations and Comprehensive (Loss) Income; (iii) Consolidated Statements of Equity; and (iv) Consolidated Statements of Cash Flows* |
PHILLIPS EDISON GROCERY CENTER REIT I, INC. | ||
Date: August 4, 2016 | By: | /s/ Jeffrey S. Edison |
Jeffrey S. Edison | ||
Chairman of the Board and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: August 4, 2016 | By: | /s/ Devin I. Murphy |
Devin I. Murphy | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Phillips Edison Grocery Center REIT I, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Jeffrey S. Edison | |
Jeffrey S. Edison Chairman of the Board and Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Phillips Edison Grocery Center REIT I, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Devin I. Murphy | |
Devin I. Murphy Chief Financial Officer (Principal Financial Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
/s/ Jeffrey S. Edison | |
Jeffrey S. Edison Chairman of the Board and Chief Executive Officer (Principal Executive Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
/s/ Devin I. Murphy | |
Devin I. Murphy Chief Financial Officer (Principal Financial Officer) |
Document and Entity Information - shares shares in Millions |
6 Months Ended | |
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Jun. 30, 2016 |
Jul. 31, 2016 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2016 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2016 | |
Entity Registrant Name | Phillips Edison Grocery Center REIT I, Inc. | |
Entity Central Index Key | 0001476204 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 184.1 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
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Statement of Financial Position [Abstract] | ||
Acquired below-market lease intangibles, accumulated amortization | $ 17,495 | $ 14,259 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued and outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued and outstanding | 183,873,000 | 181,308,000 |
Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Revenues: | ||||
Rental income | $ 47,256 | $ 45,539 | $ 94,195 | $ 90,039 |
Tenant recovery income | 15,509 | 13,289 | 31,453 | 27,393 |
Other property income | 288 | 366 | 487 | 709 |
Total revenues | 63,053 | 59,194 | 126,135 | 118,141 |
Expenses: | ||||
Property operating | 9,657 | 8,372 | 19,948 | 18,358 |
Real estate taxes | 9,230 | 8,548 | 18,641 | 16,727 |
General and administrative | 8,461 | 2,509 | 16,014 | 4,871 |
Acquisition expenses | 1,502 | 1,487 | 1,522 | 3,222 |
Depreciation and amortization | 25,977 | 25,271 | 51,683 | 50,001 |
Total expenses | 54,827 | 46,187 | 107,808 | 93,179 |
Other expenses: | ||||
Interest expense, net | (7,601) | (7,543) | (15,333) | (14,337) |
Other expense, net | (42) | (3) | (158) | (125) |
Net income | 583 | 5,461 | 2,836 | 10,500 |
Net income attributable to noncontrolling interests | (23) | (91) | (57) | (159) |
Net income attributable to stockholders | $ 560 | $ 5,370 | $ 2,779 | $ 10,341 |
Earnings per common share: | ||||
Net income per share - basic | $ 0.00 | $ 0.03 | $ 0.02 | $ 0.06 |
Net income per share - diluted | $ 0.00 | $ 0.03 | $ 0.01 | $ 0.06 |
Weighted-average common shares outstanding: | ||||
Basic | 183,514 | 184,342 | 182,880 | 183,669 |
Diluted | 186,299 | 187,127 | 185,665 | 186,316 |
Comprehensive (loss) income: | ||||
Net income | $ 583 | $ 5,461 | $ 2,836 | $ 10,500 |
Other comprehensive (loss) income: | ||||
Unrealized (loss) gain on derivatives | (3,240) | 1,391 | (11,547) | 1,391 |
Reclassification of derivative loss to interest expense | 928 | 793 | 1,874 | 793 |
Comprehensive (loss) income | (1,729) | 7,645 | (6,837) | 12,684 |
Comprehensive income attributable to noncontrolling interests | (23) | (91) | (57) | (159) |
Comprehensive (loss) income attributable to stockholders | $ (1,752) | $ 7,554 | $ (6,894) | $ 12,525 |
Consolidated Statements of Equity (Parenthetical) - $ / shares |
6 Months Ended | |
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Jun. 30, 2016 |
Jun. 30, 2015 |
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Statement of Stockholders' Equity [Abstract] | ||
Common distributions declared, per share | $ 0.34 | $ 0.34 |
Organization |
6 Months Ended |
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Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | ORGANIZATION Phillips Edison Grocery Center REIT I, Inc., (“we,” the “Company,” “our,” or “us”) was formed as a Maryland corporation in October 2009. Substantially all of our business is conducted through Phillips Edison Grocery Center Operating Partnership I, L.P., (the “Operating Partnership”), a Delaware limited partnership formed in December 2009. We are a limited partner of the Operating Partnership, and our wholly owned subsidiary, Phillips Edison Grocery Center OP GP I LLC, is the sole general partner of the Operating Partnership. Our advisor is Phillips Edison NTR LLC (“PE-NTR”), which is directly or indirectly owned by Phillips Edison Limited Partnership (the “Phillips Edison sponsor”). Under the terms of the advisory agreement between PE-NTR and us (the “PE-NTR Agreement”), PE-NTR is responsible for the management of our day-to-day activities and the implementation of our investment strategy. We invest primarily in well-occupied, grocery-anchored neighborhood and community shopping centers having a mix of creditworthy national and regional retailers selling necessity-based goods and services in strong demographic markets throughout the United States. As of June 30, 2016, we owned fee simple interests in 149 real estate properties acquired from third parties unrelated to us or PE-NTR. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Set forth below is a summary of the significant accounting estimates and policies that management believes are important to the preparation of our consolidated interim financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by management. As a result, these estimates are subject to a degree of uncertainty. There have been no changes to our significant accounting policies during the six months ended June 30, 2016. For a full summary of our accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 3, 2016. Basis of Presentation and Principles of Consolidation—The accompanying consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report on Form 10-Q should refer to the audited consolidated financial statements of Phillips Edison Grocery Center REIT I, Inc. for the year ended December 31, 2015, which are included in our 2015 Annual Report on Form 10-K. In the opinion of management, all normal and recurring adjustments necessary for the fair presentation of the unaudited consolidated financial statements for the periods presented have been included in this Quarterly Report. Our results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of the operating results expected for the full year. The accompanying consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All intercompany balances and transactions are eliminated upon consolidation. Reclassifications—The following line item on our consolidated balance sheets as of December 31, 2015, was reclassified to conform to the current year presentation:
The following line item on our consolidated statement of cash flows for the six months ended June 30, 2015 was reclassified to conform to the current year presentation:
Newly Adopted and Recently Issued Accounting Pronouncements—In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Interest - Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). This update amends existing guidance to require the presentation of certain debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. In August 2015, the FASB issued ASU 2015-15: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU 2015-15”). This update provides guidance regarding the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. We adopted ASU 2015-03 and ASU 2015-15 on January 1, 2016, and retrospectively applied the guidance for all periods presented. Unamortized debt issuance costs of $7.2 million and $8.6 million are included in Mortgages and Loans Payable, Net as of June 30, 2016 and December 31, 2015, respectively, which were previously included in Deferred Financing Expense, Net on our consolidated balance sheets. The remaining amounts included in Other Assets, Net on our consolidated balance sheets were related to our revolving credit facility. The adoption did not have an impact on our results of operations (see Note 5). In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis to ASC Topic 810 Consolidation. ASU 2015-02 includes all reporting entities within the scope of Subtopic 810-10 Consolidation - Overall, including limited partnerships and similar legal entities, unless a scope exception applies. Overall the amendments in this update are to simplify the codification and reduce the number of consolidation models and place more emphasis on risk of loss when determining controlling financial interests. This ASU was effective beginning in the first quarter of our year ending December 31, 2016. We have evaluated the impact of the adoption of ASU 2015-02 on our consolidated financial statements and have determined under ASU 2015-02 the Operating Partnership is considered a variable interest entity (“VIE”). We are the primary beneficiary of the VIE and our partnership interest is considered a majority voting interest. As such, this standard did not have a material impact on our consolidated financial statements. The following table provides a brief description of recent accounting pronouncements that could have a material effect on our financial statements:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS ASC 820, Fair Value Measurement (“ASC 820”) defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement. Fair value is defined by ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows: Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs). Level 3—Unobservable inputs, only used to the extent that observable inputs are not available, reflect our assumptions about the pricing of an asset or liability. Considerable judgment is necessary to develop estimated fair values of financial and non-financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we did or could actually realize upon disposition of the financial assets and liabilities previously sold or currently held. The following describes the methods we use to estimate the fair value of our financial and non-financial assets and liabilities: Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, and Accounts Payable and Other Liabilities—We consider the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization. Real Estate Investments—The purchase prices of the investment properties, including related lease intangible assets and liabilities, were allocated at estimated fair value based on Level 3 inputs, such as discount rates, capitalization rates, comparable sales, replacement costs, income and expense growth rates, and current market rents and allowances as determined by management. Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the individual property may not be recoverable, or at least annually. In such an event, a comparison will be made of the projected operating cash flows of each property on an undiscounted basis to the carrying amount of such property. Such carrying amount would be adjusted, if necessary, to estimated fair values to reflect impairment in the value of the asset. Mortgages and Loans Payable—We estimate the fair value of our debt by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by our lenders using Level 3 inputs. The discount rate used approximates current lending rates for loans or groups of loans with similar maturities and credit quality, assuming the debt is outstanding through maturity and considering the debt’s collateral (if applicable). We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed. The following is a summary of discount rates and borrowings as of June 30, 2016 and December 31, 2015 (dollars in thousands):
Derivative Instruments—In April 2015, we entered into three interest rate swap agreements with a notional amount of $387 million that are measured at fair value on a recurring basis. These interest rate swap agreements effectively fix the LIBOR portion of the interest rate on $387 million of outstanding debt under our existing unsecured term loan facility. These swaps qualify and have been designated as cash flow hedges. As of June 30, 2016 and December 31, 2015, we were party to an interest rate swap agreement with a notional amount of $11.2 million and $11.3 million, respectively. The interest rate swap was assumed as part of an acquisition and is measured at fair value on a recurring basis. The interest rate swap agreement, in effect, fixes the variable interest rate of one of our secured variable-rate mortgage notes at an annual interest rate of 5.22% through June 2018. The fair values of the interest rate swap agreements as of June 30, 2016 and December 31, 2015, were based on the estimated amount we would receive or pay to terminate the contract at the reporting date and were determined using interest rate pricing models and interest rate-related observable inputs. Although we determined that the significant inputs used to value our derivatives fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of June 30, 2016 and December 31, 2015, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We record derivative liabilities in Accounts Payable and Other Liabilities and derivative assets in Other Assets, Net on our consolidated balance sheets. The fair value measurements of our financial liability and asset as of June 30, 2016 and December 31, 2015, are as follows (in thousands):
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Real Estate Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Acquisitions | REAL ESTATE ACQUISITIONS During the six months ended June 30, 2016, we acquired two grocery-anchored shopping centers and one strip center adjacent to a previously acquired grocery-anchored shopping center for an aggregate purchase price of approximately $93.9 million, with no assumed debt. During the six months ended June 30, 2015, we acquired nine grocery-anchored shopping centers for an aggregate purchase price of approximately $109.2 million, including $24.0 million of assumed debt with a fair value of $25.0 million. The following tables present certain additional information regarding our acquisitions of properties during the six months ended June 30, 2016 and 2015. For the six months ended June 30, 2016 and 2015, we allocated the purchase price of acquisitions to the fair value of the assets acquired and liabilities assumed as follows (in thousands):
The weighted-average amortization periods for acquired in-place lease, above-market lease, and below-market lease intangibles acquired during the six months ended June 30, 2016 and 2015, are as follows (in years):
The amounts recognized for revenues, acquisition expenses, and net loss from each respective acquisition date to June 30, 2016 and 2015, related to the operating activities of our acquisitions are as follows (in thousands):
The following unaudited pro forma information summarizes selected financial information from our combined results of operations as if all of our acquisitions for 2016 and 2015 had been acquired on January 1, 2015. Acquisition expenses related to each respective acquisition are not expected to have a continuing impact and, therefore, have been excluded from these pro forma results. This pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of the period, nor does it purport to represent the results of future operations.
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Mortgages and Loans Payable |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgages and Loans Payable | MORTGAGES AND LOANS PAYABLE Our credit agreement provides access to an unsecured revolving credit facility and an unsecured term loan facility (the “Term Loans”). The revolving credit facility has a capacity of $500 million with a current interest rate of LIBOR plus 1.3%. The revolving credit facility matures in December 2017 with additional options to extend the maturity to December 2018. The Term Loans include three tranches with an interest rate of LIBOR plus 1.25%. The first tranche has a principal amount of $100 million and matures in February 2019, with two 12-month options to extend the maturity to February 2021. The second tranche has a principal amount of $175 million and matures in February 2020, with one option to extend the maturity to February 2021. The third tranche has a principal amount of $125 million and matures in February 2021. A maturity date extension for the first or second tranche requires the payment of an extension fee of 0.15% of the outstanding principal amount of the corresponding tranche. As of June 30, 2016 and December 31, 2015, the weighted-average interest rate for all of our mortgages and loans payable was 3.2% and 3.5%, respectively. The following is a summary of our debt obligations as of June 30, 2016 and December 31, 2015 (in thousands):
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Litigation In the ordinary course of business, we may become subject to litigation or claims. There are no material legal proceedings pending, or known to be contemplated, against us. Environmental Matters In connection with the ownership and operation of real estate, we may be potentially liable for costs and damages related to environmental matters. We record liabilities as they arise related to environmental obligations. We have not been notified by any governmental authority of any material non-compliance, liability or other claim, nor are we aware of any other environmental condition that we believe will have a material impact on our consolidated financial statements. |
Derivatives and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives and Hedging Activities | DERIVATIVES AND HEDGING ACTIVITIES Risk Management Objective of Using Derivatives We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposure to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings. Cash Flow Hedges of Interest Rate Risk Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive (Loss) Income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the six months ended June 30, 2016, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. As of June 30, 2016, we had three interest rate swaps with a notional amount of $387.0 million that were designated as cash flow hedges of interest rate risk. Amounts reported in Accumulated Other Comprehensive (Loss) Income (“AOCI”) related to these derivatives will be reclassified to Interest Expense, Net as interest payments are made on the variable-rate debt. During the next 12 months, we estimate that an additional $3.3 million will be reclassified from Other Comprehensive Loss as an increase to Interest Expense, Net. Derivatives Not Designated as Hedging Instruments Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements to be classified as hedging instruments. Changes in the fair value of these derivative instruments, as well as any payments, are recorded directly in Other Expense, Net and resulted in a gain of $43,000 and a loss of $6,000 for the three months ended June 30, 2016 and 2015, respectively. Changes in the fair value of these derivative instruments resulted in a gain of $162,000 and a loss of $127,000 for the six months ended June 30, 2016 and 2015, respectively. Tabular Disclosure of the Effect of Derivative Instruments on AOCI and the Consolidated Statements of Operations and Comprehensive (Loss) Income The table below presents the changes in AOCI and the effect of our derivative financial instruments on the consolidated statements of operations and comprehensive (loss) income for the six months ended June 30, 2016 and 2015 (in thousands):
Credit-risk-related Contingent Features We have an agreement with our derivative counterparties that contains a provision where, if we either default or are capable of being declared in default on any of our indebtedness, we could also be declared to be in default on our derivative obligations. As of June 30, 2016 and December 31, 2015, the fair value of our derivatives excluded any adjustment for nonperformance risk related to this agreement. As of June 30, 2016 and December 31, 2015, we had not posted any collateral related to this agreement. |
Equity |
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||
Equity | EQUITY On April 14, 2016, our board of directors reaffirmed its estimated value per share of our common stock of $10.20 based substantially on the estimated market value of our portfolio of real estate properties as of March 31, 2016. We engaged a third party valuation firm, Duff & Phelps, LLC, to provide a calculation of the range in estimated value per share of our common stock as of March 31, 2016, which reflected certain balance sheet assets and liabilities as of that date. Tender Offer—On April 25, 2016, in order to deter an unsolicited tender offer by a third party and to deter other potential future bidders that may try to exploit the illiquidity of shares of our common stock and acquire them from stockholders at prices substantially below their value, we launched a self-tender offer to purchase up to 9.3 million shares of our common stock. The tender offer expired on June 7, 2016, and in connection therewith, we repurchased 69,271 shares of common stock at a price of $6.00 per share, for an aggregate purchase price of approximately $416,000. Dividend Reinvestment Plan—We have adopted a dividend reinvestment plan (the “DRIP”) that allows stockholders to invest distributions in additional shares of our common stock. For the three and six months ended June 30, 2016, shares were issued under the DRIP at a price of $10.20 per share. Share Repurchase Program—Our share repurchase program provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations. Our share repurchase program was temporarily suspended during the tender offer as required by SEC rules. No repurchases were made under the share repurchase program during the tender offer and for ten business days thereafter. Redemption requests that were submitted through the share repurchase program during the tender offer were not accepted for consideration. The share repurchase program was reinstated on June 22, 2016. During the first and second quarters of 2016, repurchase requests continued to surpass the funding limits under the share repurchase program. Due to the program’s funding limits, no funds will be available for repurchases during the third quarter of 2016, and we believe the funds available for repurchases during the fourth quarter of 2016 will be insufficient to meet all requests. If we are unable to fulfill all repurchase requests in any month, we will attempt to honor requests on a pro rata basis. We continue to fulfill repurchases sought upon a stockholder’s death, determination of incompetence or qualifying disability in accordance with the terms of the share repurchase program. On April 14, 2016, our board of directors amended and restated the share repurchase program. The amendment provides that the board of directors reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase, and clarifies that the cash available for repurchases on any particular date will generally be limited to the proceeds from the DRIP during the preceding four fiscal quarters, less amounts already used for repurchases since the beginning of that period. The amendment was effective as of May 15, 2016. As a result of this amendment, we no longer record amounts that are redeemable under the share repurchase program as redeemable common stock on our consolidated balance sheets. Since the program’s funding limits were surpassed as of the effective date of the amendment, there was no impact to redeemable stock on the consolidated balance sheets at the date of the amendment. Class B and Operating Partnership Units—The Operating Partnership issues limited partnership units that are designated as Class B units and Operating Partnership units (“OP units”) for asset management services provided by PE-NTR. The vesting of the Class B units is contingent upon a market condition and service condition. OP units may be exchanged at the election of the holder for cash or, at the option of the Operating Partnership, for shares of our common stock, under the terms of exchange rights agreements to be prepared at a future date, provided, however, that the OP units have been outstanding for at least one year. PE-NTR has agreed under the PE-NTR Agreement not to exchange any OP units it may hold until the listing of our common stock or the liquidation of our portfolio occurs. As the form of the redemptions for the OP units is within our control, the OP units issued as of June 30, 2016 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets. Additionally, the cumulative distributions that have been paid on these OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity. Below is a summary of our outstanding OP units and unvested Class B units as of June 30, 2016 and December 31, 2015 (in thousands):
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | EARNINGS PER SHARE We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid). Under the two-class method, basic EPS is computed by dividing the sum of distributed earnings to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from share equivalent activity. Class B units and OP units held by limited partners other than us are considered to be participating securities because they contain non-forfeitable rights to dividends or dividend equivalents and they have the potential to be exchanged for shares of our common stock in accordance with the terms of the Operating Partnership’s Second Amended and Restated Agreement of Limited Partnership, as amended (the “Partnership Agreement”). The impact of these Class B units and OP units on basic and diluted EPS has been calculated using the two-class method whereby earnings are allocated to the Class B units and OP units based on dividends declared and the units’ participation rights in undistributed earnings. The effects of the two-class method on basic and diluted EPS were immaterial to the consolidated financial statements as of June 30, 2016 and 2015. Since the OP units are fully vested, they were included in the diluted net income per share computations for the three and six months ended June 30, 2016 and 2015. However, as vesting of the Class B units is contingent upon a market condition and service condition, unvested Class B units were not included in the diluted net income per share computations since the satisfaction of the market or service condition was not probable as of June 30, 2016 and 2015. There were 2.3 million and 0.8 million unvested Class B units outstanding as of June 30, 2016 and 2015, respectively, which had no effect on EPS. The following table provides a reconciliation of the numerator and denominator of the earnings per unit calculations for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share amounts):
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Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | RELATED PARTY TRANSACTIONS Economic Dependency—We are dependent on PE-NTR, Phillips Edison & Company Ltd. (the “Property Manager”), and their respective affiliates for certain services that are essential to us, including asset acquisition and disposition decisions, asset management, operating and leasing of our properties, and other general and administrative responsibilities. In the event that PE-NTR, and/or the Property Manager, and their respective affiliates are unable to provide such services, we would be required to find alternative service providers, which could result in higher costs and expenses. As of June 30, 2016 and December 31, 2015, PE-NTR owned 176,509 shares of our common stock, or approximately 0.1% of our outstanding common stock issued during our initial public offering period, which closed in February 2014. PE-NTR may not sell any of these shares while serving as our advisor. Advisory Agreement—Pursuant to the PE-NTR Agreement effective as of December 3, 2014, PE-NTR is entitled to specified fees for certain services, including managing our day-to-day activities and implementing our investment strategy. PE-NTR manages our day-to-day affairs and our portfolio of real estate investments subject to the board’s supervision. Expenses are to be reimbursed to PE-NTR based on amounts incurred on our behalf. In October 2015, we entered into amended agreements to revise certain fees that are paid to PE-NTR in consideration for the advisory services that PE-NTR provides to us. Beginning October 1, 2015, we no longer pay a 0.75% financing fee to PE-NTR. The asset management fee remains at 1% of the cost of our assets but is paid 80% in cash and 20% in Class B units of the Operating Partnership. The cash portion is paid on a monthly basis in arrears, in the amount of 0.06667% multiplied by the cost of our assets as of the last day of the preceding monthly period. Acquisition Fee—We pay PE-NTR an acquisition fee related to services provided in connection with the selection and purchase or origination of real estate and real estate-related investments. The acquisition fee is equal to 1% of the cost of investments we acquire or originate, including any debt attributable to such investments. Acquisition Expenses—We reimburse PE-NTR for direct expenses incurred related to selecting, evaluating, and acquiring assets on our behalf, including certain personnel costs. Asset Management Subordinated Participation—Within 60 days after the end of each calendar quarter (subject to the approval of our board of directors), we will pay an asset management subordinated participation partially by issuing a number of restricted operating partnership units designated as Class B Units to PE-NTR and American Realty Capital II Advisors, LLC (“ARC”), equal to: (i) the product of (x) the cost of our assets multiplied by (y) 0.05% (0.25% prior to October 1, 2015); divided by (ii) the most recent primary offering price for a share of our common stock as of the last day of such calendar quarter less any selling commissions and dealer manager fees that would have been payable in connection with that offering. PE-NTR and ARC are entitled to receive distributions on the Class B units (and OP units converted from previously issued and vested Class B units) they receive in connection with their asset management subordinated participation at the same rate as distributions are paid to common stockholders. Such distributions are in addition to the incentive fees that PE-NTR, ARC, and their affiliates may receive from us. We continue to issue Class B units to PE-NTR and ARC in connection with the asset management services provided by PE-NTR under our current advisory agreement. Such Class B units will not vest until the economic hurdle is met in conjunction with (i) a termination of the PE-NTR Agreement by our independent directors without cause, (ii) a listing event, or (iii) a liquidity event; provided that PE-NTR serves as our advisor at the time of any of the foregoing events. During the six months ended June 30, 2016 and 2015, the Operating Partnership issued 0.3 million and 0.8 million Class B units, respectively, to PE-NTR and ARC under the PE-NTR Agreement for asset management services performed by PE-NTR. Disposition Fee—We pay PE-NTR for substantial assistance by PE-NTR or any of its affiliates in connection with the sale of properties or other investments 2% of the contract sales price of each property or other investment sold. The conflicts committee of our board of directors determines whether PE-NTR or its affiliates have provided substantial assistance to us in connection with the sale of an asset. Substantial assistance in connection with the sale of a property includes PE-NTR or its affiliates’ preparation of an investment package for the property (including an investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a structural report and exhibits) or such other substantial services performed by PE-NTR or its affiliates in connection with a sale. However, if we sold an asset to an affiliate, our organizational documents would prohibit us from paying a disposition fee to PE-NTR or its affiliates. General and Administrative Expenses—As of June 30, 2016 and December 31, 2015, we owed PE-NTR $85,000 and $124,000, respectively, for general and administrative expenses paid on our behalf. Summarized below are the fees earned by and the expenses reimbursable to PE-NTR and ARC, except for unpaid general and administrative expenses, which we disclose above, for the three and six months ended June 30, 2016 and 2015, and any related amounts unpaid as of June 30, 2016 and December 31, 2015 (in thousands):
Property Manager—All of our real properties are managed and leased by the Property Manager. The Property Manager is wholly owned by our Phillips Edison sponsor. The Property Manager also manages real properties acquired by Phillips Edison affiliates and other third parties. Property Management Fee—We pay to the Property Manager a monthly property management fee of 4% of the monthly gross cash receipts from the properties it manages. Leasing Commissions—In addition to the property management fee, if the Property Manager provides leasing services with respect to a property, we pay the Property Manager leasing fees in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable services based on national market rates. The Property Manager shall be paid a leasing fee in connection with a tenant’s exercise of an option to extend an existing lease, and the leasing fees payable to the Property Manager may be increased by up to 50% in the event that the Property Manager engages a co-broker to lease a particular vacancy. Construction Management Fee—If we engage the Property Manager to provide construction management services with respect to a particular property, we pay a construction management fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the property. Expenses and Reimbursements—The Property Manager hires, directs, and establishes policies for employees who have direct responsibility for the operations of each real property it manages, which may include, but is not limited to, on-site managers and building and maintenance personnel. Certain employees of the Property Manager may be employed on a part-time basis and may also be employed by PE-NTR or certain of its affiliates. The Property Manager also directs the purchase of equipment and supplies and supervises all maintenance activity. We reimburse the costs and expenses incurred by the Property Manager on our behalf, including employee compensation, legal, travel, and other out-of-pocket expenses that are directly related to the management of specific properties and corporate matters, as well as fees and expenses of third-party accountants. Summarized below are the fees earned by and the expenses reimbursable to the Property Manager for the three and six months ended June 30, 2016 and 2015, and any related amounts unpaid as of June 30, 2016 and December 31, 2015 (in thousands):
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Operating Leases |
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Leases, Operating [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Operating Leases | OPERATING LEASES The terms and expirations of our operating leases with our tenants vary. The lease agreements frequently contain options to extend the terms of leases and other terms and conditions as negotiated. We retain substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Approximate future rentals to be received under non-cancelable operating leases in effect at June 30, 2016, assuming no new or renegotiated leases or option extensions on lease agreements, are as follows (in thousands):
No single tenant comprised 10% or more of our aggregate annualized base rent as of June 30, 2016. |
Subsequent Events |
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Subsequent Events [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subsequent Events | SUBSEQUENT EVENTS Distributions to Stockholders Distributions equal to a daily amount of $0.00183060 per share of common stock outstanding were paid subsequent to June 30, 2016, to the stockholders of record from June 1, 2016 through July 31, 2016 as follows (in thousands):
On August 2, 2016 our board of directors authorized distributions to the stockholders of record at the close of business each day in the period commencing September 1, 2016 through and including November 30, 2016. The authorized distributions equal a daily amount of $0.00183060 per share of common stock. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation—The accompanying consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report on Form 10-Q should refer to the audited consolidated financial statements of Phillips Edison Grocery Center REIT I, Inc. for the year ended December 31, 2015, which are included in our 2015 Annual Report on Form 10-K. In the opinion of management, all normal and recurring adjustments necessary for the fair presentation of the unaudited consolidated financial statements for the periods presented have been included in this Quarterly Report. Our results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of the operating results expected for the full year. The accompanying consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All intercompany balances and transactions are eliminated upon consolidation. |
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Reclassifications | Reclassifications—The following line item on our consolidated balance sheets as of December 31, 2015, was reclassified to conform to the current year presentation:
The following line item on our consolidated statement of cash flows for the six months ended June 30, 2015 was reclassified to conform to the current year presentation:
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Impact of Recently Issued Accounting Pronouncements | Newly Adopted and Recently Issued Accounting Pronouncements—In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Interest - Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). This update amends existing guidance to require the presentation of certain debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. In August 2015, the FASB issued ASU 2015-15: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU 2015-15”). This update provides guidance regarding the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. We adopted ASU 2015-03 and ASU 2015-15 on January 1, 2016, and retrospectively applied the guidance for all periods presented. Unamortized debt issuance costs of $7.2 million and $8.6 million are included in Mortgages and Loans Payable, Net as of June 30, 2016 and December 31, 2015, respectively, which were previously included in Deferred Financing Expense, Net on our consolidated balance sheets. The remaining amounts included in Other Assets, Net on our consolidated balance sheets were related to our revolving credit facility. The adoption did not have an impact on our results of operations (see Note 5). In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis to ASC Topic 810 Consolidation. ASU 2015-02 includes all reporting entities within the scope of Subtopic 810-10 Consolidation - Overall, including limited partnerships and similar legal entities, unless a scope exception applies. Overall the amendments in this update are to simplify the codification and reduce the number of consolidation models and place more emphasis on risk of loss when determining controlling financial interests. This ASU was effective beginning in the first quarter of our year ending December 31, 2016. We have evaluated the impact of the adoption of ASU 2015-02 on our consolidated financial statements and have determined under ASU 2015-02 the Operating Partnership is considered a variable interest entity (“VIE”). We are the primary beneficiary of the VIE and our partnership interest is considered a majority voting interest. As such, this standard did not have a material impact on our consolidated financial statements. The following table provides a brief description of recent accounting pronouncements that could have a material effect on our financial statements:
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Fair Value Measurements Fair Value Measurements (Policies) |
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Jun. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement, Policy | ASC 820, Fair Value Measurement (“ASC 820”) defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement. Fair value is defined by ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows: Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs). Level 3—Unobservable inputs, only used to the extent that observable inputs are not available, reflect our assumptions about the pricing of an asset or liability. |
Earnings Per Share Earnings per Share (Policies) |
6 Months Ended |
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Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Earnings Per Share, Policy | We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid). Under the two-class method, basic EPS is computed by dividing the sum of distributed earnings to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from share equivalent activity. Class B units and OP units held by limited partners other than us are considered to be participating securities because they contain non-forfeitable rights to dividends or dividend equivalents and they have the potential to be exchanged for shares of our common stock in accordance with the terms of the Operating Partnership’s Second Amended and Restated Agreement of Limited Partnership, as amended (the “Partnership Agreement”). The impact of these Class B units and OP units on basic and diluted EPS has been calculated using the two-class method whereby earnings are allocated to the Class B units and OP units based on dividends declared and the units’ participation rights in undistributed earnings. |
Summary of Significant Accounting Policies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following table provides a brief description of recent accounting pronouncements that could have a material effect on our financial statements:
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Inputs, Liabilities, Quantitative Information | The following is a summary of discount rates and borrowings as of June 30, 2016 and December 31, 2015 (dollars in thousands):
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Fair Value, Liabilities Measured on a Recurring Basis | We record derivative liabilities in Accounts Payable and Other Liabilities and derivative assets in Other Assets, Net on our consolidated balance sheets. The fair value measurements of our financial liability and asset as of June 30, 2016 and December 31, 2015, are as follows (in thousands):
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Real Estate Acquisitions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | For the six months ended June 30, 2016 and 2015, we allocated the purchase price of acquisitions to the fair value of the assets acquired and liabilities assumed as follows (in thousands):
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Schedule of Finite-lived Intangible Assets Acquired as Part of Business Combination | The weighted-average amortization periods for acquired in-place lease, above-market lease, and below-market lease intangibles acquired during the six months ended June 30, 2016 and 2015, are as follows (in years):
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Real Estate Acquisitions, Operating Activities Since Acquisition Date | The amounts recognized for revenues, acquisition expenses, and net loss from each respective acquisition date to June 30, 2016 and 2015, related to the operating activities of our acquisitions are as follows (in thousands):
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Business Acquisition, Pro Forma Information | The following unaudited pro forma information summarizes selected financial information from our combined results of operations as if all of our acquisitions for 2016 and 2015 had been acquired on January 1, 2015. Acquisition expenses related to each respective acquisition are not expected to have a continuing impact and, therefore, have been excluded from these pro forma results. This pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of the period, nor does it purport to represent the results of future operations.
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Mortgages and Loans Payable (Tables) |
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt Obligations | The following is a summary of our debt obligations as of June 30, 2016 and December 31, 2015 (in thousands):
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Derivatives and Hedging Activities (Tables) |
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | The table below presents the changes in AOCI and the effect of our derivative financial instruments on the consolidated statements of operations and comprehensive (loss) income for the six months ended June 30, 2016 and 2015 (in thousands):
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Equity (Tables) |
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||
Class B Units Outstanding | Below is a summary of our outstanding OP units and unvested Class B units as of June 30, 2016 and December 31, 2015 (in thousands):
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Earnings Per Share (Tables) |
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Jun. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table provides a reconciliation of the numerator and denominator of the earnings per unit calculations for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share amounts):
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Related Party Transactions (Tables) |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advisor Transactions | Summarized below are the fees earned by and the expenses reimbursable to PE-NTR and ARC, except for unpaid general and administrative expenses, which we disclose above, for the three and six months ended June 30, 2016 and 2015, and any related amounts unpaid as of June 30, 2016 and December 31, 2015 (in thousands):
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Property Manager Transactions | Summarized below are the fees earned by and the expenses reimbursable to the Property Manager for the three and six months ended June 30, 2016 and 2015, and any related amounts unpaid as of June 30, 2016 and December 31, 2015 (in thousands):
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Operating Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||
Leases, Operating [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | Approximate future rentals to be received under non-cancelable operating leases in effect at June 30, 2016, assuming no new or renegotiated leases or option extensions on lease agreements, are as follows (in thousands):
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Subsequent Events (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subsequent Events [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends Paid | Distributions equal to a daily amount of $0.00183060 per share of common stock outstanding were paid subsequent to June 30, 2016, to the stockholders of record from June 1, 2016 through July 31, 2016 as follows (in thousands):
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Organization (Details) |
Jun. 30, 2016
property
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of real estate properties owned | 149 |
Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accounting Policies [Abstract] | ||
Unamortized debt issuance costs reclassified | $ 7.2 | $ 8.6 |
Fair Value Measurements (Details) Mortgages and Loans Payable - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
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Jun. 30, 2016 |
Dec. 31, 2015 |
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Fair Value Inputs, Liabilities, Quantitative Information | ||
Recorded value | $ 902,074 | $ 854,079 |
Unamortized Debt Issuance Expense | 7,200 | 8,564 |
Fair Value, Level 3 Inputs | ||
Fair Value Inputs, Liabilities, Quantitative Information | ||
Fair value | $ 919,303 | $ 880,854 |
Unsecured variable-rate debt | Fair Value, Level 3 Inputs | ||
Fair Value Inputs, Liabilities, Quantitative Information | ||
Fair value inputs, discount rate | 1.95% | 1.66% |
Secured fixed-rate debt | Fair Value, Level 3 Inputs | ||
Fair Value Inputs, Liabilities, Quantitative Information | ||
Fair value inputs, discount rate | 2.87% | 2.75% |
Secured variable-rate debt | Fair Value, Level 3 Inputs | ||
Fair Value Inputs, Liabilities, Quantitative Information | ||
Fair value inputs, discount rate | 2.70% | 2.36% |
Fair Value Measurements (Details) - Derivative Instruments - Interest Rate Swap - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
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Designated as Hedging Instrument | ||
Fair Value, (Assets) Liabilities Measured on Recurring Basis | ||
Number of interest rate swap agreements | 3 | |
Derivative, notional amount | $ 387,000 | |
Portion of hedged debt | 387,000 | $ 387,000 |
Designated as Hedging Instrument | Fair value, Level 2 inputs | ||
Fair Value, (Assets) Liabilities Measured on Recurring Basis | ||
Derivative (Assets) Liabilities, at Fair Value, Net | 9,651 | (22) |
Not Designated as Hedging Instrument | ||
Fair Value, (Assets) Liabilities Measured on Recurring Basis | ||
Derivative, notional amount | $ 11,200 | 11,300 |
Swap agreement interest rate | 5.22% | |
Not Designated as Hedging Instrument | Fair value, Level 2 inputs | ||
Fair Value, (Assets) Liabilities Measured on Recurring Basis | ||
Derivative (Assets) Liabilities, at Fair Value, Net | $ 473 | $ 442 |
Real Estate Acquisitions (Details) - Series of individually immaterial business acquisitions $ in Thousands |
6 Months Ended | |
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Jun. 30, 2016
USD ($)
acquisition
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Jun. 30, 2015
USD ($)
acquisition
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Business Acquisition [Line Items] | ||
Number of Businesses Acquired | acquisition | 2 | 9 |
Number of Business Acquired - Non-grocery Anchored | acquisition | 1 | |
Business Combination Recognized Identifiable Assets Acquired And Liabilities Assumed | $ 93,933 | $ 109,182 |
Business acquisition, cost of acquired entity, debt assumed | 0 | 24,000 |
Fair value of assumed debt at acquisition | $ 0 | $ 24,982 |
Real Estate Acquisitions (Details) - Allocation $ in Thousands |
6 Months Ended | |
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Jun. 30, 2015
USD ($)
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Jun. 30, 2016
USD ($)
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Business Acquisition [Line Items] | ||
Number of business acquired with debt assumed | 5 | |
Series of individually immaterial business acquisitions | ||
Business Acquisition [Line Items] | ||
Land and improvements | $ 33,911 | $ 40,088 |
Building and improvements | 67,647 | 48,999 |
Acquired below-market leases | (3,782) | (5,728) |
Total assets and liabilities acquired | 109,182 | 93,933 |
Less: Fair value of assumed debt at acquisition | 24,982 | 0 |
Net assets acquired | 84,200 | 93,933 |
Acquired in-place leases | Series of individually immaterial business acquisitions | ||
Business Acquisition [Line Items] | ||
Acquired finite-lived intangibles | 10,165 | 8,849 |
Acquired above-market leases | Series of individually immaterial business acquisitions | ||
Business Acquisition [Line Items] | ||
Acquired finite-lived intangibles | $ 1,241 | $ 1,725 |
Real Estate Acquisitions (Details) - Weighted-average amortization - Series of individually immaterial business acquisitions |
6 Months Ended | |
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Jun. 30, 2016 |
Jun. 30, 2015 |
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Acquired in-place leases | ||
Business Acquisition [Line Items] | ||
Acquired finite-lived intangible assets, weighted average useful life | 14 years | 14 years |
Acquired above-market leases | ||
Business Acquisition [Line Items] | ||
Acquired finite-lived intangible assets, weighted average useful life | 6 years | 9 years |
Acquired below-market leases | ||
Business Acquisition [Line Items] | ||
Acquired finite-lived intangible assets, weighted average useful life | 23 years | 19 years |
Real Estate Acquisitions (Details) - Operations - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Business Acquisition [Line Items] | ||||
Acquisition expenses | $ 1,502 | $ 1,487 | $ 1,522 | $ 3,222 |
Series of individually immaterial business acquisitions | ||||
Business Acquisition [Line Items] | ||||
Revenues | 433 | 3,043 | ||
Acquisition expenses | 1,361 | 1,849 | ||
Net (loss) | $ (1,420) | $ (1,493) |
Real Estate Acquisitions (Details) - Pro Forma - Series of individually immaterial business acquisitions - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Business Acquisition [Line Items] | ||||
Pro forma revenues | $ 64,841 | $ 59,756 | $ 130,143 | $ 125,168 |
Pro forma net income attributable to stockholders | $ 2,519 | $ 6,697 | $ 5,276 | $ 14,580 |
Commitments and Contingencies Narrative (Details) |
Jun. 30, 2016
claim
|
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Commitments and Contingencies Disclosure [Abstract] | |
Loss Contingency, Pending Claims, Number | 0 |
Derivatives and Hedging Activities (Details) - Interest Rate Swap |
3 Months Ended | 6 Months Ended | |||
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Jun. 30, 2016
USD ($)
agreement
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Jun. 30, 2015
USD ($)
|
Jun. 30, 2016
USD ($)
agreement
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Jun. 30, 2015
USD ($)
|
Dec. 31, 2015
USD ($)
|
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Designated as Hedging Instrument | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Derivative, number of instruments held | agreement | 3 | 3 | |||
Derivative, notional amount | $ 387,000,000 | $ 387,000,000 | |||
Amount estimated to be reclassified from AOCI into interest expense over the next 12 months | 3,300,000 | ||||
Not Designated as Hedging Instrument | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Derivative, notional amount | 11,200,000 | 11,200,000 | $ 11,300,000 | ||
Loss (gain) on derivative not designated as hedges | $ (43,000) | $ 6,000 | $ (162,000) | $ 127,000 |
Derivatives and Hedging Activities (Details) - Tabular Disclosure - USD ($) $ in Thousands |
6 Months Ended | |
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Jun. 30, 2016 |
Jun. 30, 2015 |
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AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Balance in AOCI as of January 1 | $ 22 | |
Balance in AOCI as of June 30 | (9,651) | |
Interest Rate Swap | Designated as Hedging Instrument | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Balance in AOCI as of January 1 | $ 0 | |
Amount of loss (gain) recognized in other comprehensive income on derivative | 11,547 | (1,391) |
Amount of loss reclassified from AOCI into interest expense | 1,874 | 793 |
Current-period other comprehensive (loss) income | (9,673) | 2,184 |
Balance in AOCI as of June 30 | $ (9,651) | $ 2,184 |
Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 6 Months Ended | ||||
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Jun. 07, 2016 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Apr. 25, 2016 |
Apr. 14, 2016 |
Dec. 31, 2015 |
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Class of Stock [Line Items] | ||||||
Share Price | $ 10.20 | |||||
Stock Repurchase Program, Number of Shares Authorized to be Repurchased | 9,300,000 | |||||
Stock Redeemed or Called During Period, Shares | 69,271 | |||||
Tender offer shares repurchased, price per share | $ 6.00 | |||||
Stock Redeemed or Called During Period, Value | $ 416 | $ 3,889 | $ 8,353 | |||
OP Units | 2,785,000 | 2,785,000 | ||||
Class B units | 2,340,000 | 800,000 | 2,083,000 | |||
Dividend Reinvestment Plan | ||||||
Class of Stock [Line Items] | ||||||
Share Price | $ 10.20 |
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
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Earnings Per Share [Abstract] | |||||
Class B units unvested | 2,340 | 800 | 2,340 | 800 | 2,083 |
Net income attributable to stockholders | $ 560 | $ 5,370 | $ 2,779 | $ 10,341 | |
Denominator for basic earnings per share - weighted-average shares | 183,514 | 184,342 | 182,880 | 183,669 | |
Effect of dilutive OP units/Class B units | 2,785 | 2,785 | 2,785 | 2,647 | |
Denominator for diluted earnings per share - adjusted weighted-average shares | 186,299 | 187,127 | 185,665 | 186,316 | |
Basic earnings per share: net income attributable to stockholders | $ 0.00 | $ 0.03 | $ 0.02 | $ 0.06 | |
Diluted earnings per share: net income attributable to stockholders | $ 0.00 | $ 0.03 | $ 0.01 | $ 0.06 |
Related Party Transactions Related Party (Details) - Economic Dependency - shares shares in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Related Party Transactions [Abstract] | ||
Shares owned by sub-advisor | 177 | 177 |
Percentage of shares owned by sub-advisor | 0.10% | 0.10% |
Operating Leases Future Minimum Rents(Details) $ in Thousands |
Jun. 30, 2016
USD ($)
|
---|---|
Future rentals to be received under non-cancelable operating leases: | |
July 1 to December 31, 2016 | $ 94,260 |
2017 | 177,885 |
2018 | 160,311 |
2019 | 136,784 |
2020 | 114,238 |
2021 and thereafter | 412,966 |
Total | $ 1,096,444 |
Subsequent Events (Details) - Distributions to Stockholders - USD ($) $ / shares in Units, $ in Thousands |
2 Months Ended | 3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|---|
Aug. 01, 2016 |
Jul. 01, 2016 |
Jul. 31, 2016 |
Nov. 30, 2016 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Subsequent Event [Line Items] | ||||||
Common Stock, Dividends, Per Share, Declared | $ 0.34 | $ 0.34 | ||||
Distributions reinvested | $ 30,190 | $ 31,958 | ||||
Net cash distribution | $ 30,973 | $ 29,262 | ||||
Dividend Paid | Subsequent Event | ||||||
Subsequent Event [Line Items] | ||||||
Common Stock, Dividends, Per Share, Declared | $ 0.00183060 | $ 0.00183060 | ||||
Gross amount of distribution paid | $ 10,460 | $ 10,102 | ||||
Distributions reinvested | 4,898 | 4,773 | ||||
Net cash distribution | $ 5,562 | $ 5,329 |
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