Maryland | 000-54691 | 27-1106076 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Exhibit Number | Description of Exhibit | |
PHILLIPS EDISON GROCERY CENTER REIT I, INC. | ||
Date: December 15, 2017 | By: | /s/ Jennifer L. Robison |
Jennifer L. Robison | ||
Chief Accounting Officer (Principal Accounting Officer) |
Exhibit Number | Description of Exhibit | |
2016 | 2015 | ||||||
ASSETS | |||||||
Investment in real estate: | |||||||
Land and improvements | $ | 187,064 | $ | 192,334 | |||
Building and improvements | 419,847 | 446,795 | |||||
Acquired intangible lease assets | 2,164 | — | |||||
Total investment in real estate assets | 609,075 | 639,129 | |||||
Accumulated depreciation and amortization | (244,125 | ) | (261,884 | ) | |||
Investment in real estate, net | 364,950 | 377,245 | |||||
Cash and cash equivalents | 13,520 | 10,912 | |||||
Restricted cash | 15,198 | 14,540 | |||||
Accounts receivable, net | 7,884 | 9,712 | |||||
Accounts receivable - affiliates | 11,516 | 8,607 | |||||
Notes receivable - affiliates | 19,574 | 8,064 | |||||
Investment in affiliates | 31,115 | 31,806 | |||||
Other assets, net | 27,377 | 31,114 | |||||
Total assets | $ | 491,134 | $ | 492,000 | |||
LIABILITIES AND DEFICIT | |||||||
Liabilities: | |||||||
Mortgages and loans payable, net | $ | 493,724 | $ | 518,327 | |||
Deferred income | 3,007 | 6,200 | |||||
Acquired intangible lease liabilities, net | 2,291 | — | |||||
Accounts payable - affiliates | 268 | 6 | |||||
Accounts payable and other liabilities | 47,577 | 37,899 | |||||
Total liabilities | 546,867 | 562,432 | |||||
Deficit: | |||||||
Accumulated other comprehensive income | 664 | 664 | |||||
Accumulated deficit | (57,092 | ) | (71,193 | ) | |||
Total partnership deficit | (56,428 | ) | (70,529 | ) | |||
Noncontrolling interests | 695 | 97 | |||||
Total deficit | (55,733 | ) | (70,432 | ) | |||
Total liabilities and deficit | $ | 491,134 | $ | 492,000 |
2016 | 2015 | 2014 | |||||||||
REVENUES: | |||||||||||
Rental income | $ | 68,768 | $ | 68,635 | $ | 66,997 | |||||
Tenant recovery income | 19,850 | 19,877 | 19,341 | ||||||||
Fees and management income | 75,190 | 51,297 | 73,569 | ||||||||
Other property income | 549 | 961 | 621 | ||||||||
Total revenues | 164,357 | 140,770 | 160,528 | ||||||||
EXPENSES: | |||||||||||
Property operating | 36,781 | 33,992 | 28,041 | ||||||||
Real estate taxes | 11,160 | 11,077 | 10,859 | ||||||||
General and administrative | 37,837 | 52,618 | 34,131 | ||||||||
Acquisition expenses | 400 | — | — | ||||||||
Impairment of real estate assets | 4,044 | — | 697 | ||||||||
Depreciation and amortization | 28,389 | 30,219 | 30,012 | ||||||||
Total expenses | 118,611 | 127,906 | 103,740 | ||||||||
OTHER: | |||||||||||
Interest expense | (19,558 | ) | (22,796 | ) | (25,658 | ) | |||||
Gain on disposition of properties | 15,233 | 6,886 | — | ||||||||
Loss on or impairment of investment in affiliates | (1,304 | ) | (810 | ) | (19,724 | ) | |||||
Distribution income | 344 | 1,254 | 15,123 | ||||||||
Other income, net | 1,313 | 191 | 995 | ||||||||
Income (loss) before discontinued operations | 41,774 | (2,411 | ) | 27,524 | |||||||
DISCONTINUED OPERATIONS: | |||||||||||
Gain on disposition of properties | — | — | 5,369 | ||||||||
Loss from operations | — | — | (207 | ) | |||||||
Net income (loss) | 41,774 | (2,411 | ) | 32,686 | |||||||
Net income attributable to noncontrolling interests | (550 | ) | (242 | ) | (315 | ) | |||||
Net income (loss) attributable to partners | $ | 41,224 | $ | (2,653 | ) | $ | 32,371 | ||||
COMPREHENSIVE INCOME (LOSS): | |||||||||||
Net income (loss) | $ | 41,774 | $ | (2,411 | ) | $ | 32,686 | ||||
Other comprehensive income: | |||||||||||
Change in unrealized gain on investment | — | 664 | — | ||||||||
Comprehensive income (loss) | 41,774 | (1,747 | ) | 32,686 | |||||||
Comprehensive income attributable to noncontrolling interests | (550 | ) | (242 | ) | (315 | ) | |||||
Comprehensive income (loss) attributable to partners | $ | 41,224 | $ | (1,989 | ) | $ | 32,371 |
Accumulated Other Comprehensive Income | Accumulated Deficit | Total Partnership Deficit | Noncontrolling Interests | Total Deficit | |||||||||||||||
BALANCE — January 1, 2014 | $ | — | $ | (71,960 | ) | $ | (71,960 | ) | $ | 4,183 | $ | (67,777 | ) | ||||||
Distributions | — | (18,549 | ) | (18,549 | ) | (4 | ) | (18,553 | ) | ||||||||||
Redeemed partners | — | (12,055 | ) | (12,055 | ) | — | (12,055 | ) | |||||||||||
Acquisition of non-controlling interest | — | (437 | ) | (437 | ) | (154 | ) | (591 | ) | ||||||||||
Net income | — | 32,371 | 32,371 | 315 | 32,686 | ||||||||||||||
BALANCE — December 31, 2014 | $ | — | $ | (70,630 | ) | $ | (70,630 | ) | $ | 4,340 | $ | (66,290 | ) | ||||||
Change in unrealized gain on investments | 664 | — | 664 | — | 664 | ||||||||||||||
Equity-based compensation expense | — | 22,385 | 22,385 | — | 22,385 | ||||||||||||||
Distributions | — | (20,518 | ) | (20,518 | ) | (4,262 | ) | (24,780 | ) | ||||||||||
Acquisition of non-controlling interest | — | 223 | 223 | (223 | ) | — | |||||||||||||
Net (loss) income | — | (2,653 | ) | (2,653 | ) | 242 | (2,411 | ) | |||||||||||
BALANCE — December 31, 2015 | $ | 664 | $ | (71,193 | ) | $ | (70,529 | ) | $ | 97 | $ | (70,432 | ) | ||||||
Equity-based compensation expense | — | 266 | 266 | — | 266 | ||||||||||||||
Distributions | — | (27,389 | ) | (27,389 | ) | (2 | ) | (27,391 | ) | ||||||||||
Contribution from noncontrolling interest | — | — | — | 50 | 50 | ||||||||||||||
Net income | — | 41,224 | 41,224 | 550 | 41,774 | ||||||||||||||
BALANCE — December 31, 2016 | $ | 664 | $ | (57,092 | ) | $ | (56,428 | ) | $ | 695 | $ | (55,733 | ) |
2016 | 2015 | 2014 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income (loss) | $ | 41,774 | $ | (2,411 | ) | $ | 32,686 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 28,608 | 29,424 | 29,124 | ||||||||
Amortization of deferred financing expense | 1,534 | 1,854 | 1,894 | ||||||||
Gain on vesting of Class B units | — | — | (23,675 | ) | |||||||
Net gain on sale or disposal of real estate assets | (14,667 | ) | (5,481 | ) | (3,622 | ) | |||||
Loss on write-off of unamortized tenant allowances, deferred financing expense, | |||||||||||
and capitalized leasing commissions | 431 | 569 | 954 | ||||||||
Impairment of real estate assets | 4,044 | — | 697 | ||||||||
Impairment of investment in affiliates | — | 810 | 19,724 | ||||||||
Equity-based compensation | 266 | 22,385 | — | ||||||||
Net loss in investment in affiliates | 1,304 | — | — | ||||||||
Straight-line rent | 654 | (177 | ) | (172 | ) | ||||||
Other | 43 | — | (91 | ) | |||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable, net | 1,828 | (1,131 | ) | (1,098 | ) | ||||||
Accounts receivable - affiliates | (2,909 | ) | (1,760 | ) | (2,294 | ) | |||||
Other assets, net | (3,533 | ) | (1,325 | ) | (6,382 | ) | |||||
Accounts payable and other liabilities | 3,157 | (8,878 | ) | 13,444 | |||||||
Accounts payable - affiliates | 262 | (49 | ) | 55 | |||||||
Deferred income | (3,193 | ) | 1,517 | 2,070 | |||||||
Net cash provided by operating activities | 59,603 | 35,347 | 63,314 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Real estate acquisitions | (10,175 | ) | — | — | |||||||
Capital expenditures | (21,088 | ) | (17,696 | ) | (18,196 | ) | |||||
Net proceeds from sale or disposal of real estate assets | 20,344 | 552 | 10,406 | ||||||||
Change in restricted cash and investments | 2,172 | (2,615 | ) | (1,146 | ) | ||||||
Change in investment in affiliates | (613 | ) | 2,033 | 3,971 | |||||||
Principal disbursements on notes receivable - affiliates | (11,510 | ) | (3,779 | ) | — | ||||||
Principal receipts on notes receivable - affiliates | — | 500 | — | ||||||||
Net cash used in investing activities | (20,870 | ) | (21,005 | ) | (4,965 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Net change in credit facility borrowings | 31,002 | — | 2,278 | ||||||||
Proceeds from mortgages and loans payable | 330,000 | 81,545 | 74,151 | ||||||||
Repayments of mortgages and loans payable | (373,753 | ) | (79,228 | ) | (106,360 | ) | |||||
Distributions paid to partners | (19,553 | ) | (20,518 | ) | (18,549 | ) | |||||
Redeemed partners | — | — | (12,055 | ) | |||||||
Payments of deferred financing costs | (3,784 | ) | (438 | ) | (1,028 | ) | |||||
Other | (37 | ) | (1,219 | ) | (595 | ) | |||||
Net cash used in financing activities | (36,125 | ) | (19,858 | ) | (62,158 | ) | |||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 2,608 | (5,516 | ) | (3,809 | ) | ||||||
CASH AND CASH EQUIVALENTS: | |||||||||||
Beginning of year | 10,912 | 16,428 | 20,237 | ||||||||
End of year | $ | 13,520 | $ | 10,912 | $ | 16,428 |
2016 | 2015 | 2014 | |||||||||
SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||
Cash paid for interest during the year | $ | 18,032 | $ | 19,387 | $ | 23,856 | |||||
Capital expenditures in accounts payable | 1,129 | 2,444 | 2,211 | ||||||||
Change in distributions payable | 7,836 | — | — | ||||||||
Settlement of debt through transfer of real estate assets | — | 11,427 | — | ||||||||
Distributions to noncontrolling interests through settlement of receivable | — | 3,043 | — | ||||||||
Receipt of vested shares of affiliate | — | 3,440 | — | ||||||||
Change in fair value of investment in affiliates | — | 664 | — | ||||||||
Like-kind exchanges of real estate | |||||||||||
Proceeds from sale of real estate assets | 20,204 | — | — | ||||||||
Repayment of fees and related debt | (10,211 | ) | — | — | |||||||
Utilization of funds held for acquisitions | (7,163 | ) | — | — | |||||||
Net restricted cash activity — like-kind exchanges | $ | 2,830 | $ | — | $ | — |
Entity Name | |
12 West Station LLC | Melbourne Station LLC |
Aegis Realty Operating Partnership, LP and Subsidiaries | Miramar Station LLC(1) |
Aegis Waterford, LLC | Monfort Heights Station Ltd. |
Amelia Station LLC(2) | Monfort Heights Station II LLC |
Ashland Junction LLC | Mountain Park Station LLC |
Ashland Junction II LLC | Mountain View Station LLC |
B. & O., Ltd. | New Market Station LP |
Barclay/Aegis Limited Partnership | Nordan Station LP |
Barnwell Station LLC | Northlake Station LLC |
Belvedere Station LLC | Northside Station LLC |
Birdneck Station LLC | Orchard Plaza Station LLC |
Buckingham Station LLC | Page Station LLC |
Cactus Station LLC | Palmetto Station LLC |
Catawba Station LLC(1) | Park Place Station LLC |
Cedar Hills - West LLC | Parkway Station LLC |
Cell 2007-6 of Global Re SCC (Captive) | Parsons Village Station LLC |
Centre Stage Station LLC | PECO II Inc. |
Civic Center Station Ltd. | PECO-Griffin REIT Advisor LLC(4) |
Commerce GP LLC | PECO Lassen, Inc. |
Commerce Station LP | Phillips Edison & Co NTR LLC |
Countryside Station LLC | Phillips Edison & Co NTR II LLC |
Crossroads Asheboro Station LLC | Phillips Edison & Co NTR III LLC |
Doubleday Station Member LLC | Phillips Edison & Company Shopping Center Opportunity Fund Managing Member LLC and Subsidiary |
Dunlop Station LLC | Phillips Edison & Company, Ltd. and Subsidiaries |
Dutch Square LLC(1) | Phillips Edison HoldCo LLC |
Dutch Square II LLC | Phillips Edison Limited Partnership |
East Pointe Station II LLC | Pipestone Station LLC |
East Pointe Station LLC | Plaza of the Oaks Station LLC |
Eastland Station LLC | Portland Station LLC |
Edgecombe Station LLC | Powell Villa Station LLC |
Edgewood Station LLC | Promenade Station LLC |
Emporia Station LLC | Quail Valley Station LLC |
Fairview Station LLC | Quincy Station LLC(1) |
Forest Park Station LLC | Renton WA Walgreens |
Gateway Station LLC | Rio Rancho Station LLC |
Geist Station LLC | Riverplace Station LLC(4) |
GlenEagles Station LLC | River Road - Northwest LLC |
Goshen Station Ltd | Rolling Hills Station LLC |
Governor's Square Station LLC | Rt. 24 & Marketplace LLC |
Greenwood Station LLC | SCB II Management CO. |
Guadalupe Station LLC | Silver Rock Insurance, Inc. |
Heritage Oaks Station L.P. | Smoketown & Veronica LLC |
Hickory Station LLC | South Oaks Station LLC |
High Point Village Station LLC | Southaven Station LLC(1) |
Highland Fair Station LLC | Southgate Partners Limited Partnership |
Hillside - West LLC | Stations West - Downtown, LLC |
Jackson Junction Ltd. | Stations West - Shelley, LLC(1) |
Jasper Station LLC | Stations West Developments LLC |
Kokomo Station LLC(1) | Stations West-Saratoga, LLC |
Lafayette Station LLC | Summerville Station LLC |
Lake Stevens - Northwest LLC | The Phillips Edison Group LLC |
Lakeside Center Station LLC(1) | Timberlake Station LLC |
Lakeside Square Station LLC | Towne Crossing Station Limited Partnership |
Landen Station LLC | Upper Deerfield Station LP |
LaPlata IV LLC | Vaughns Station LLC |
LaPlata North LLC | Village Mooresville Station LLC |
LaPlata Plaza LLC | Western Square Station LLC |
LaPlata South LLC | WG Station Holding Company LLC |
Lassen Station L.P. | WG Station VI LLC |
Lemon Bay Station LLC(2) | WG Station IX LLC |
Lilburn Corners Ltd(3) | White Oaks Station LLC |
Louisa Junction Ltd(1) | Willowbrook Commons LLC(4) |
Marion Station LLC | Windsor Station LLC |
Marketplace Station LLC | Winery Square Station L.P. |
Mayfair Station LLC |
(1) | Entities disposed in 2016 |
(2) | Entities disposed in 2015 |
(3) | Entities disposed in 2014 |
(4) | Entities Acquired or established in 2016 |
• | whether the lease stipulates how and on what a tenant improvement allowance may be spent; |
• | whether the tenant or landlord retains legal title to the improvements; |
• | the uniqueness of the improvements; |
• | the expected economic life of the tenant improvements relative to the length of the lease; and |
• | who constructs or directs the construction of the improvements. |
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, 2018. | January 1, 2019, except for Tenant Recovery Income, which will follow the adoption date of ASU 2016-02 on January 1, 2020 | Our revenue-producing contracts are primarily leases that are not within the scope of this standard. As a result, we do not expect the adoption of this standard to have a material impact on our rental income. We continue to evaluate the effect of this standard on our other sources of revenue. These include fees and management income and reimbursement amounts we receive from tenants for operating expenses such as real estate taxes, insurance, and other common area maintenance. However, we currently do not believe the adoption of this standard will significantly affect the timing of the recognition of our fees and management income and reimbursement revenue. We currently plan to adopt this guidance on a modified retrospective basis. | |||
ASU 2016-01, Financial Instruments | This update amends existing guidance by measuring equity securities, except those accounted for under the equity method or result in consolidation, at fair value with changes in fair value recognized through net income. It is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. | January 1, 2019 | The Company is currently evaluating the impact the adoption of this standard will have on its combined 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, 2019, but early adoption is permitted. | January 1, 2020 | The Company is currently evaluating the impact the adoption of this standard will have on its combined financial statements. The Company has identified areas within its accounting policies it believes could be impacted by the new standard. The Company may have a change in presentation on its combined statement of operations with regards to Tenant Recovery Income, which includes reimbursement amounts it receives from tenants for operating expenses such as real estate taxes, insurance, and other common area maintenance. Additionally, this standard impacts the lessor’s ability to capitalize certain costs related to the leasing of vacant space. | |||
ASU 2016-15, Statement of Cash Flows (Topic 230) | This update addresses the presentation of eight specific cash receipts and cash payments on the statement of cash flows. It is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. | January 1, 2018 | The Company is currently evaluating the impact the adoption of this standard will have on its combined financial statements. Of the eight specific cash receipts and cash payments listed within this guidance, the Company believes only three would be applicable to its business as it stands currently: debt prepayment or debt extinguishment costs, proceeds from settlement of insurance claims, and distributions received from equity method investees. The Company will continue to evaluate the impact that adoption of the standard will have on its presentation of these and any other applicable cash receipts and cash payments. | |||
ASU 2016-18, Statement of Cash Flows (Topic 230) | This update amends existing guidance in order to clarify the classification and presentation of restricted cash on the statement of cash flows. It is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. | January 1, 2018 | Upon adoption, the Company will include amounts generally described as restricted cash within the beginning-of-period, change, and end-of-period total amounts on the statement of cash flows rather than within an activity on the statement of cash flows. The Company anticipates an early adoption as of January 1, 2018. | |||
ASU 2017-01, Business Combinations (Topic 805) | This update amends existing guidance in order to clarify when an integrated set of assets and activities is considered a business. It is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. | January 1, 2017 | On January 1, 2017, the Company adopted this standard. The Company expects that most of its acquisition activity will no longer be considered a business combination under the new guidance and will instead be classified as an asset acquisition. As a result, most acquisition-related expenses that would have been recorded on its combined statements of operations and comprehensive income (loss) as Acquisition Expense will be capitalized and amortized over the life of the related assets. This change is only applicable to acquisitions after January 1, 2017. |
2016 | 2015 | ||||||
Deferred leasing commissions and costs | $ | 45,784 | $ | 42,354 | |||
Tenant allowances | 12,254 | 12,953 | |||||
Deferred financing costs(1) | 1,005 | 4,965 | |||||
Accumulated amortization(1) | (41,775 | ) | (39,933 | ) | |||
Net long-term amortizable assets | 17,268 | 20,339 | |||||
Deferred rent receivable, net | 6,668 | 7,587 | |||||
Prepaid expenses | 2,212 | 2,890 | |||||
Deposits and miscellaneous receivables | 1,229 | 298 | |||||
Total | $ | 27,377 | $ | 31,114 |
(1) | Due to the adoption of ASU 2015-03 and ASU 2015-15, $1,381 of unamortized debt issuance costs, net of $2,588 of accumulated amortization, on the Company’s combined balance sheets as of December 31, 2015, was reclassified from Other Assets, Net to Mortgages and Loans Payable, Net. |
2016 | |||
Land and improvements | $ | 6,194 | |
Building and improvements | 10,702 | ||
Acquired in-place leases | 2,094 | ||
Acquired above-market leases | 70 | ||
Acquired below-market leases | (2,320 | ) | |
Total assets and lease liabilities acquired | $ | 16,740 |
2016 | |
Acquired in-place leases | 17 |
Acquired above-market leases | 8 |
Acquired below-market leases | 24 |
2016 | |||
Revenue | $ | 606 | |
Acquisition expenses | 157 | ||
Net Income | 17 |
2016 | 2015 | 2014 | |||||||||
Operating properties | |||||||||||
Net sales proceeds | $ | 38,870 | $ | — | $ | 10,197 | |||||
Gain on disposition, net(1) | 13,075 | — | 5,369 | ||||||||
Non-operating properties | |||||||||||
Net sales proceeds | 1,678 | 606 | 225 | ||||||||
Gain on disposition(2) | 588 | 197 | 222 |
(1) | The net gain on disposition of operating properties is recorded in Gain on Disposition of Properties and Impairment of Real Estate Assets on the combined statements of operations and comprehensive income (loss). For the year ended December 31, 2014, such gain is recorded in discontinued operations in the combined statements of operations and comprehensive income (loss). |
(2) | The gain on disposition of non-operating properties is recorded in Other Income, Net on the combined statements of operations and comprehensive income (loss). |
2015 | |||
Loan balance at time of settlement | $ | 11,427 | |
Net disposal costs | 54 | ||
Gain on disposal of real estate assets | 6,886 |
2014 | |||
Total revenue | $ | 460 | |
Total expenses | (458 | ) | |
Other expense | (209 | ) | |
Loss from operations | $ | (207 | ) |
2016 | ||||
Acquired in-place leases | $ | 2,094 | ||
Acquired above-market leases | 70 | |||
Acquired intangible lease assets | 2,164 | |||
Accumulated amortization | (43 | ) | ||
Acquired intangible lease assets, net | $ | 2,121 | ||
Acquired below-market lease liabilities | $ | 2,320 | ||
Accumulated amortization | (29 | ) | ||
Acquired intangible lease liabilities, net | $ | 2,291 |
2016 | |||
In-place leases | $ | 39 | |
Above-market leases | 4 | ||
Total intangible lease asset amortization | $ | 43 | |
Below-market lease liability amortization | $ | 29 |
In-Place Leases | Above-Market Leases | Below-Market Leases | |||||||||
2017 | $ | 125 | $ | 9 | $ | 95 | |||||
2018 | 125 | 9 | 95 | ||||||||
2019 | 125 | 9 | 95 | ||||||||
2020 | 125 | 9 | 95 | ||||||||
2021 | 125 | 9 | 95 |
Interest Rate | 2016 | 2015 | |||||||
Term loans due 2019(1) | 2.77%-4.67% | $ | 330,000 | $ | 47,000 | ||||
Revolving credit facility(1)(2) | 2.77% | 44,791 | 24,000 | ||||||
Mortgages payable(3) | 3.00%-7.21% | 122,157 | 446,259 | ||||||
Note payable | — | 2,651 | |||||||
Assumed market debt adjustments, net(4) | (174 | ) | (202 | ) | |||||
Deferred financing costs(5) | (3,050 | ) | (1,381 | ) | |||||
Total | $ | 493,724 | $ | 518,327 |
(1) | As of December 31, 2016, the LIBOR portion of the interest rate on $315 million of the Company’s outstanding variable-rate debt was, effectively, capped at 2.5% by four interest rate cap agreements maturing in July 2018. |
(2) | The gross borrowings under our revolving credit facility were $140 million and $8 million, and gross payments were $119 million and $18 million during the years ended December 31, 2016 and 2014, respectively. There was no net activity on our revolving credit facility during the year ended December 31, 2015. |
(3) | Due to the non-recourse nature of the Company’s fixed-rate mortgages, the assets and liabilities of the related properties are neither available to pay the debts of the combined property-holding limited liability companies nor constitute obligations of such consolidated limited liability companies as of December 31, 2016. |
(4) | Net of accumulated amortization of $255 and $226 as of December 31, 2016 and 2015, respectively. |
(5) | Net of accumulated amortization of $2,210 and $2,588 as of December 31, 2016 and 2015, respectively. Deferred financing costs related to the revolving credit facility are recorded in Other Assets, Net, and were $726 and $514, as of December 31, 2016 and 2015, respectively, which is net of accumulated amortization of $279 and $4,450, respectively. |
2016 | 2015 | ||||||
As to interest rate: | |||||||
Fixed-rate debt | $ | 122,157 | $ | 166,770 | |||
Variable-rate debt | 374,791 | 353,140 | |||||
Total | $ | 496,948 | $ | 519,910 | |||
As to collateralization: | |||||||
Unsecured debt | $ | 30,000 | $ | 49,651 | |||
Secured debt | 466,948 | 470,259 | |||||
Total | $ | 496,948 | $ | 519,910 |
2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total | |||||||||||||||||||||
Term loans(1) | $ | — | $ | — | $ | 330,000 | $ | — | $ | — | $ | — | $ | 330,000 | |||||||||||||
Revolving credit facility(1) | — | — | 44,791 | — | — | — | 44,791 | ||||||||||||||||||||
Mortgages payable | 42,686 | 1,942 | 3,939 | 2,055 | 2,170 | 69,365 | 122,157 | ||||||||||||||||||||
Total maturing debt | $ | 42,686 | $ | 1,942 | $ | 378,730 | $ | 2,055 | $ | 2,170 | $ | 69,365 | $ | 496,948 |
(1) | The unsecured and secured credit facilities have options to extend their maturities to 2020 and 2021, respectively. A maturity date extension for the unsecured credit facility requires the payment of an extension fee of 0.25% of the outstanding principal amount. The secured credit facility may extend for two twelve-month periods, requiring an extension fee of 0.15% of the outstanding principal amount for each extension. |
Totals | |||
2017 | $ | 65,376 | |
2018 | 56,484 | ||
2019 | 47,518 | ||
2020 | 38,959 | ||
2021 | 29,405 | ||
Thereafter | 106,252 | ||
Total | $ | 343,994 |
Totals | |||
2017 | $ | 1,004 | |
2018 | 843 | ||
2019 | 554 | ||
2020 | 115 | ||
2021 | 3 | ||
Thereafter | — | ||
Total | $ | 2,519 |
Count | Notional Amount | LIBOR Cap | Maturity Date | |||
4 | $315,000 | 2.5% | July 1, 2018 |
2016 | 2015 | |||||||
NTR I | $ | 4,213 | $ | 4,847 | ||||
NTR II | 2,442 | 1,579 | ||||||
NTR III | 13,504 | — | ||||||
PREP and affiliates | 9,271 | 8,805 | ||||||
SCB Air I & II | 1,534 | 1,413 | ||||||
Necessity Retail Partners | 126 | — | ||||||
Other related parties | — | 27 | ||||||
Total | $ | 31,090 | $ | 16,671 |
2016 | 2015 | |||||||
NTR I | $ | 26,449 | $ | 26,449 | ||||
NTR II | 200 | 200 | ||||||
NTR III | 700 | — | ||||||
PREP and affiliates | 3,766 | 5,157 | ||||||
Total | $ | 31,115 | $ | 31,806 |
NTR I | NTR II | NTR III | PREP and Affiliates | Necessity Retail Partners | Total | |||||||||||||||||||
Acquisition fees | $ | 1,991 | $ | 4,281 | $ | 292 | $ | — | $ | — | $ | 6,564 | ||||||||||||
Asset management fee (Class B unit distributions) | 2,926 | 570 | — | — | — | 3,496 | ||||||||||||||||||
Asset management fees | 16,353 | 8,536 | 12 | — | 140 | 25,041 | ||||||||||||||||||
Development/construction management fees | 1,127 | 1,059 | — | — | 36 | 2,222 | ||||||||||||||||||
Disposition fees | 633 | — | — | — | — | 633 | ||||||||||||||||||
Due diligence expenses | 464 | 991 | 29 | — | 140 | 1,624 | ||||||||||||||||||
Insurance premiums (Captive) | 663 | 424 | — | — | 5 | 1,092 | ||||||||||||||||||
Leasing commissions | 7,724 | 3,751 | — | — | 239 | 11,714 | ||||||||||||||||||
Property management fees | 9,929 | 4,715 | — | — | 350 | 14,994 | ||||||||||||||||||
Other fees and reimbursements | 5,611 | 3,530 | 78 | 345 | 222 | 9,786 | ||||||||||||||||||
Total | $ | 47,421 | $ | 27,857 | $ | 411 | $ | 345 | $ | 1,132 | $ | 77,166 |
NTR I | NTR II | PREP and Affiliates | Other Related Parties | Total | ||||||||||||||||
Acquisition fees | $ | 1,060 | $ | 5,748 | $ | — | $ | — | $ | 6,808 | ||||||||||
Asset management fee (Class B unit distributions) | 2,078 | — | — | — | 2,078 | |||||||||||||||
Asset management fees | 3,911 | 66 | 381 | 839 | 5,197 | |||||||||||||||
Development/construction management fees | 1,117 | 377 | 314 | 17 | 1,825 | |||||||||||||||
Financing fees | 2,757 | 454 | 100 | — | 3,311 | |||||||||||||||
Due diligence expenses | 195 | 1,242 | — | — | 1,437 | |||||||||||||||
Insurance premiums (Captive) | 737 | 118 | — | 324 | 1,179 | |||||||||||||||
Leasing commissions | 7,316 | 1,788 | 29 | 205 | 9,338 | |||||||||||||||
Property management fees | 9,108 | 2,085 | 74 | 264 | 11,531 | |||||||||||||||
Other fees and reimbursements | 2,531 | 1,412 | 666 | 228 | 4,837 | |||||||||||||||
Total | $ | 30,810 | $ | 13,290 | $ | 1,564 | $ | 1,877 | $ | 47,541 |
NTR I | NTR II | PREP and Affiliates | Other Related Parties | Total | ||||||||||||||||
Acquisition fees | $ | 7,660 | $ | 2,495 | $ | — | $ | — | $ | 10,155 | ||||||||||
Asset management fee (Class B unit distributions) | 820 | — | — | — | 820 | |||||||||||||||
Asset management fees | 23,675 | 4 | 1,143 | 3,577 | 28,399 | |||||||||||||||
Development/construction management fees | 692 | 26 | 932 | 417 | 2,067 | |||||||||||||||
Financing fees | 3,401 | 1,335 | 237 | — | 4,973 | |||||||||||||||
Due diligence expenses | 1,074 | 403 | — | — | 1,477 | |||||||||||||||
Insurance premiums (Captive) | 1,374 | — | 191 | 1,630 | 3,195 | |||||||||||||||
Leasing commissions | 3,570 | 246 | 1,309 | 1,877 | 7,002 | |||||||||||||||
Property management fees | 7,245 | 273 | 636 | 2,027 | 10,181 | |||||||||||||||
Other fees and reimbursements | 2,348 | 8,620 | 748 | 1,888 | 13,604 | |||||||||||||||
Total | $ | 51,859 | $ | 13,402 | $ | 5,196 | $ | 11,416 | $ | 81,873 |
2016 | 2015 | ||||||
Fair value | $ | 499,594 | $ | 526,789 | |||
Recorded value(1) | 496,774 | 519,708 |
(1) | Recorded value does not include deferred financing costs of $3,050 and $1,381 as of December 31, 2016 and 2015, respectively. |
Property Name | Location | Anchor Tenant | Acquisition Date | Purchase Price | Square Footage | Leased % of Rentable Square Feet at Acquisition | ||||||||
Everson Pointe Station | Snellville, GA | Kroger | 1/4/2017 | $ | 12,563 | 81,428 | 96.6% | |||||||
Delafield Station | Delafield, WI | Pick 'n Save | 1/24/2017 | 12,678 | 81,639 | 98.4% |
September 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Investment in real estate: | |||||||
Land and improvements | $ | 191,077 | $ | 187,064 | |||
Building and improvements | 428,833 | 419,847 | |||||
Acquired intangible lease assets | 5,261 | 2,164 | |||||
Total investment in real estate assets | 625,171 | 609,075 | |||||
Accumulated depreciation and amortization | (249,904 | ) | (244,125 | ) | |||
Total investment in real estate assets, net | 375,267 | 364,950 | |||||
Cash and cash equivalents | 32,052 | 13,520 | |||||
Restricted cash | 11,078 | 15,198 | |||||
Accounts receivable, net | 7,357 | 7,884 | |||||
Accounts receivable - affiliates | 13,717 | 11,516 | |||||
Notes receivable - affiliates | 7,838 | 19,574 | |||||
Investment in affiliates | 31,062 | 31,115 | |||||
Other assets, net | 26,011 | 27,377 | |||||
Real estate investment and other assets held for sale | 5,802 | — | |||||
Total assets | $ | 510,184 | $ | 491,134 | |||
LIABILITIES AND DEFICIT | |||||||
Liabilities: | |||||||
Mortgages and loans payable, net | $ | 503,847 | $ | 493,724 | |||
Deferred income | 2,965 | 3,007 | |||||
Acquired intangible lease liabilities, net | 3,625 | 2,291 | |||||
Accounts payable - affiliates | 1,138 | 268 | |||||
Accounts payable and other liabilities | 43,723 | 47,577 | |||||
Liabilities of real estate investment held for sale | 8,194 | — | |||||
Total liabilities | 563,492 | 546,867 | |||||
Deficit: | |||||||
Accumulated other comprehensive income | 666 | 664 | |||||
Accumulated deficit | (54,949 | ) | (57,092 | ) | |||
Total partnership deficit | (54,283 | ) | (56,428 | ) | |||
Noncontrolling interests | 975 | 695 | |||||
Total deficit | (53,308 | ) | (55,733 | ) | |||
Total liabilities and deficit | $ | 510,184 | $ | 491,134 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
REVENUES: | |||||||
Rental income | $ | 50,178 | $ | 52,245 | |||
Tenant recovery income | 13,263 | 15,323 | |||||
Fees and management income | 59,176 | 54,588 | |||||
Other property income | 918 | 288 | |||||
Total revenues | 123,535 | 122,444 | |||||
EXPENSES: | |||||||
Property operating | 27,406 | 27,760 | |||||
Real estate taxes | 8,460 | 8,527 | |||||
General and administrative | 27,992 | 27,705 | |||||
Acquisition expenses | — | 104 | |||||
Impairment of real estate assets | 4,588 | — | |||||
Depreciation and amortization | 22,344 | 20,780 | |||||
Total expenses | 90,790 | 84,876 | |||||
OTHER: | |||||||
Interest expense | (14,850 | ) | (14,982 | ) | |||
Transaction expenses | (3,911 | ) | — | ||||
Other income, net | 4,835 | 10,104 | |||||
Total other expense, net | (13,926 | ) | (4,878 | ) | |||
Net income | 18,819 | 32,690 | |||||
Net income attributable to noncontrolling interests | (283 | ) | (409 | ) | |||
Net income attributable to partners | $ | 18,536 | $ | 32,281 | |||
COMPREHENSIVE INCOME: | |||||||
Net income | $ | 18,819 | $ | 32,690 | |||
Other comprehensive income: | |||||||
Change in unrealized gain on investment | 2 | — | |||||
Comprehensive income | 18,821 | 32,690 | |||||
Comprehensive income attributable to noncontrolling interests | (283 | ) | (409 | ) | |||
Comprehensive income attributable to partners | $ | 18,538 | $ | 32,281 |
Accumulated Other Comprehensive Income | Accumulated Deficit | Total Partnership Deficit | Noncontrolling Interests | Total Deficit | |||||||||||||||
BALANCE — January 1, 2016 | $ | 664 | $ | (71,193 | ) | $ | (70,529 | ) | $ | 97 | $ | (70,432 | ) | ||||||
Equity-based compensation expense | — | 339 | 339 | — | 339 | ||||||||||||||
Distributions | — | (14,658 | ) | (14,658 | ) | (3 | ) | (14,661 | ) | ||||||||||
Contributions from noncontrolling interests | — | — | — | 50 | 50 | ||||||||||||||
Net income | — | 32,281 | 32,281 | 409 | 32,690 | ||||||||||||||
BALANCE — September 30, 2016 | $ | 664 | $ | (53,231 | ) | $ | (52,567 | ) | $ | 553 | $ | (52,014 | ) | ||||||
BALANCE — January 1, 2017 | $ | 664 | $ | (57,092 | ) | $ | (56,428 | ) | $ | 695 | $ | (55,733 | ) | ||||||
Change in unrealized gain on investments | 2 | — | 2 | — | 2 | ||||||||||||||
Equity-based compensation expense | — | 63 | 63 | — | 63 | ||||||||||||||
Distributions | — | (16,242 | ) | (16,242 | ) | (3 | ) | (16,245 | ) | ||||||||||
Redeemed partners | — | (214 | ) | (214 | ) | — | (214 | ) | |||||||||||
Net income | — | 18,536 | 18,536 | 283 | 18,819 | ||||||||||||||
BALANCE — September 30, 2017 | $ | 666 | $ | (54,949 | ) | $ | (54,283 | ) | $ | 975 | $ | (53,308 | ) |
2017 | 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 18,819 | $ | 32,690 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 21,657 | 21,318 | |||||
Net amortization of above- and below-market leases | (102 | ) | (14 | ) | |||
Amortization of deferred financing expense | 1,127 | 1,139 | |||||
Gain on disposal of real estate assets | (2,199 | ) | (9,345 | ) | |||
Loss on write-off of deferred financing expense, capitalized leasing commissions, | |||||||
and tenant allowance | 246 | 382 | |||||
Impairment of real estate assets | 4,588 | — | |||||
Change in fair value of derivative | 17 | 71 | |||||
Equity-based compensation | 63 | 339 | |||||
Straight-line rent | (357 | ) | 198 | ||||
Other | (134 | ) | — | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | 432 | 2,025 | |||||
Accounts receivable - affiliates | (2,201 | ) | (2,434 | ) | |||
Other assets, net | (4,283 | ) | (2,672 | ) | |||
Accounts payable and other liabilities | 5,296 | 2,545 | |||||
Accounts payable - affiliates | 870 | (3 | ) | ||||
Deferred income | (33 | ) | (2,887 | ) | |||
Net cash provided by operating activities | 43,806 | 43,352 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Real estate acquisitions | (23,210 | ) | (7,510 | ) | |||
Capital expenditures | (16,889 | ) | (14,753 | ) | |||
Net proceeds from sale or disposal of real estate assets | 7,758 | 6,912 | |||||
Change in restricted cash | 2,199 | 3,216 | |||||
Distributions from affiliates | 55 | 60 | |||||
Principal disbursements on notes receivable - affiliates | — | (236 | ) | ||||
Principal receipts on notes receivable - affiliates | 11,890 | — | |||||
Net cash used in investing activities | (18,197 | ) | (12,311 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Net change in credit facility borrowings | 1,400 | 25,643 | |||||
Proceeds from mortgages and loans payable | 19,992 | 330,000 | |||||
Repayments of mortgages and loans payable | (4,030 | ) | (369,933 | ) | |||
Distributions paid to partners | (24,078 | ) | (14,658 | ) | |||
Redeemed partners | (214 | ) | — | ||||
Payments of deferred financing expense | (144 | ) | (3,787 | ) | |||
Other | (3 | ) | (38 | ) | |||
Net cash used in financing activities | (7,077 | ) | (32,773 | ) | |||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 18,532 | (1,732 | ) | ||||
CASH AND CASH EQUIVALENTS: | |||||||
Beginning of period | 13,520 | 10,912 | |||||
End of period | $ | 32,052 | $ | 9,180 | |||
2017 | 2016 | ||||||
SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||
Cash paid for interest during the year | $ | 13,417 | $ | 13,750 | |||
Capital expenditures in accounts payable | — | 228 | |||||
Change in distributions payable | (7,836 | ) | — | ||||
Like-kind exchange of real estate | |||||||
Proceeds from sale of real estate assets | $ | — | $ | 10,924 | |||
Repayment of fees and related debt | — | (3,711 | ) | ||||
Utilization of funds held for acquisitions | (1,541 | ) | (1,588 | ) | |||
Net restricted cash activity — non-cash | $ | (1,541 | ) | $ | 5,625 |
Entity Name | |
12 West Station LLC | Mayfair Station LLC |
Aegis Realty Operating Partnership, LP | Melbourne Station LLC |
Aegis Waterford, LLC | Miramar Station LLC(1) |
Ashland Junction LLC | Monfort Heights Station LLC |
Ashland Junction II LLC | Monfort Heights Station II LLC(4) |
B. & O., Ltd. | Mountain Park Station LLC |
Barclay Station LLC(5) | Mountain View Station LLC(4) |
Barnwell Station LLC | New Market Station LLC |
Belvedere Station LLC | Nordan Station LLC |
Birdneck Station LLC | Northlake Station LLC |
Buckingham Station LLC | Northside Station LLC |
Cactus Station LLC | Orchard Plaza Station LLC |
Catawba Station LLC(1) | Page Station LLC |
Cedar Hills - West LLC | Palmetto Station LLC |
Cell 2007-6 of Global Re SCC (Captive)(1) | Park Place Station LLC |
Centre Stage Station LLC | Parkway Station LLC |
Civic Center Station Ltd. | Parsons Village Station LLC |
Commerce GP LLC | PECO II Inc. |
Commerce Station LP | PECO-Griffin REIT Advisor LLC(2) |
Countryside Station LLC | PECO Heritage LLC |
Crossroads Asheboro Station LLC | PECO Lassen LLC(4) |
Delafield Station LLC(3) | PECO Winery LLC(5) |
Doubleday Station Member LLC | Phillips Edison & Co NTR LLC |
Dunlop Station LLC | Phillips Edison & Co NTR II LLC |
Dutch Square II LLC(1) | Phillips Edison & Co NTR III LLC |
Dutch Square LLC(1) | Phillips Edison & Company, Ltd. and Subsidiaries |
East Pointe Station II LLC | Phillips Edison HoldCo LLC |
East Pointe Station LLC | Phillips Edison Limited Partnership |
Eastland Station LLC | Pipestone Station LLC |
Edgecombe Station LLC | Plaza of the Oaks Station LLC |
Edgewood Station LLC | Portland Station LLC |
Emporia Station LLC | Powell Villa Station LLC |
Everson Station LLC(3) | Promenade Station LLC |
Fairview Station LLC | Quail Valley Station LLC |
Forest Park Station LLC | Quincy Station LLC(1) |
Forest Park Station II LLC | Rio Rancho Station LLC |
Gateway Station LLC | Riverplace Station LLC(2) |
Geist Station LLC | Rolling Hills Station LLC |
GlenEagles Station LLC | Rt. 24 & Marketplace LLC |
Goshen Station Ltd | SCB II Management CO. |
Governor's Square Station LLC | Silver Rock Insurance, Inc. |
Greenwood Station LLC | Smoketown & Veronica LLC |
Guadalupe Station LLC | South Oaks Station LLC |
Heritage Oaks Station L.P. | Southaven Station LLC(1) |
Hickory Station LLC | Southgate (Ohio) Station LLC(5) |
High Point Village Station LLC | Stations West - Shelley, LLC(1) |
Highland Fair Station LLC | Stations West Developments LLC(1) |
Hillside - West LLC | Stations West-Saratoga, LLC |
Jackson Junction Ltd. | Summerville Station LLC |
Jasper Station LLC | The Phillips Edison Group LLC |
Kokomo Station LLC(1) | Timberlake Station LLC |
Lafayette Station LLC | Towne Crossing Station Limited Partnership |
Lakeside Center Station LLC(1) | Upper Deerfield Station LP |
Lakeside Square Station LLC(1) | Vaughns Station LLC |
Landen Station LLC | Village Mooresville Station LLC |
LaPlata IV LLC | Western Square Station LLC |
LaPlata North LLC | WG Station Holding Company LLC |
LaPlata Plaza LLC | WG Station IX LLC |
LaPlata South LLC | WG Station VI LLC |
Lassen Station L.P.(4) | White Oaks Station LLC |
Lilburn Corners Ltd | Willowbrook Commons LLC(2) |
Louisa Junction Ltd.(1) | Windsor Station LLC |
Marion Station LLC | Winery Square Station L.P. |
Marketplace Station LLC |
(1) | Entities disposed or terminated in 2016 |
(2) | Entities acquired or established in 2016 |
(3) | Entities acquired in 2017 |
(4) | Entity disposed in 2017 |
(5) | Entity structure changed in 2017 |
• | whether the lease stipulates how and on what a tenant improvement allowance may be spent; |
• | whether the tenant or landlord retains legal title to the improvements; |
• | the uniqueness of the improvements; |
• | the expected economic life of the tenant improvements relative to the length of the lease; and |
• | who constructs or directs the construction of the improvements. |
Standard | Description | Date of Adoption | Effect on the Financial Statements or Other Significant Matters | |||
ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) | This update amends existing guidance in order to provide consistency in accounting for the derecognition of a business or nonprofit activity. It is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. | January 1, 2019 | The Company will adopt this standard concurrently with ASU 2014-09, listed below. The Company expects the adoption will impact its transactions that are subject to the amendments, which, although expected to be infrequent, would include a partial sale of real estate or contribution of a nonfinancial asset to form a joint venture. | |||
ASU 2016-18, Statement of Cash Flows (Topic 230) | This update amends existing guidance in order to clarify the classification and presentation of restricted cash on the statement of cash flows. It is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. | January 1, 2018 | Upon adoption, the Company will include amounts generally described as restricted cash within the beginning-of-period and end-of-period total amounts on the statement of cash flows rather than within an activity on the statement of cash flows. | |||
ASU 2016-15, Statement of Cash Flows (Topic 230) | This update addresses the presentation of eight specific cash receipts and cash payments on the statement of cash flows. It is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. | January 1, 2018 | The Company is currently evaluating the impact the adoption of this standard will have on its combined financial statements. The Company anticipates an early adoption as of January 1, 2018. | |||
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, 2019, but early adoption is permitted. | January 1, 2020 | The Company is currently evaluating the impact the adoption of this standard will have on its combined financial statements. | |||
ASU 2016-01, Financial Instruments | This update amends existing guidance by measuring equity securities, except those accounted for under the equity method or result in consolidation, at fair value with changes in fair value recognized through net income. It is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. | January 1, 2019 | The Company is currently evaluating the impact the adoption of this standard will have on its combined financial statements. | |||
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, 2018. | January 1, 2019, except for Tenant Recovery Income, which will follow the adoption date of ASU 2016-02 on January 1, 2020 | The Company’s revenue-producing contracts are primarily leases that are not within the scope of this standard. As a result, the Company does not expect the adoption of this standard to have a material impact on its rental income. The Company continues to evaluate the effect of this standard on its other sources of revenue. These include fees and management income and reimbursement amounts it receives from tenants for operating expenses such as real estate taxes, insurance, and other common area maintenance. However, the Company currently does not believe the adoption of this standard will significantly affect the timing of the recognition of its fees and management income and reimbursement revenue. The Company currently plans to adopt this guidance on a modified retrospective basis. |
September 30, 2017 | December 31, 2016 | ||||||
Deferred leasing commissions and costs | $ | 48,917 | $ | 45,784 | |||
Tenant allowances | 11,334 | 12,254 | |||||
Deferred financing costs | 1,005 | 1,005 | |||||
Accumulated amortization | (45,343 | ) | (41,775 | ) | |||
Net long-term amortizable assets | 15,913 | 17,268 | |||||
Deferred rent receivable, net | 6,915 | 6,668 | |||||
Prepaid expenses | 2,997 | 2,212 | |||||
Deposits and miscellaneous receivables | 186 | 1,229 | |||||
Total | $ | 26,011 | $ | 27,377 |
2017 | 2016 | ||||||
Land and improvements | $ | 10,073 | $ | 2,569 | |||
Building and improvements | 13,631 | 6,760 | |||||
Acquired in-place leases | 3,063 | 1,174 | |||||
Acquired above-market leases | 33 | 70 | |||||
Acquired below-market leases | (1,450 | ) | (1,423 | ) | |||
Total assets and lease liabilities acquired | $ | 25,350 | $ | 9,150 |
2017 | 2016 | ||
Acquired in-place leases | 18 | 15 | |
Acquired above-market leases | 3 | 8 | |
Acquired below-market leases | 24 | 25 |
2017 | 2016 | ||||||
Operating properties | |||||||
Net sales proceeds | $ | 7,500 | $ | 5,710 | |||
Gain on disposition(1) | 3,132 | 2,842 | |||||
Outparcels | |||||||
Net sales proceeds | $ | 500 | $ | 1,529 | |||
Gain on disposition(1) | 209 | 425 |
(1) | The gain on dispositions of properties is recorded in Other Income, Net on the combined statements of income. |
September 30, 2017 | |||
ASSETS | |||
Total investment in real estate assets, net | $ | 5,282 | |
Restricted cash | 380 | ||
Accounts receivable, net | 95 | ||
Other assets, net | |||
Deferred rent receivable, net | 28 | ||
Deposits and miscellaneous receivables | 10 | ||
Prepaid expenses | 7 | ||
Real estate investment and other assets held for sale | $ | 5,802 | |
LIABILITIES | |||
Liabilities: | |||
Mortgages and loans payable, net | $ | 8,000 | |
Deferred income | 9 | ||
Accounts payable and other liabilities | 185 | ||
Liabilities of real estate investment held for sale | $ | 8,194 |
September 30, 2017 | December 31, 2016 | ||||||
Acquired in-place leases | $ | 5,158 | $ | 2,094 | |||
Acquired above-market leases | 103 | 70 | |||||
Acquired intangible lease assets | 5,261 | 2,164 | |||||
Accumulated amortization | (275 | ) | (43 | ) | |||
Acquired intangible lease assets, net | $ | 4,986 | $ | 2,121 | |||
Acquired below-market lease liabilities | $ | 3,770 | $ | 2,320 | |||
Accumulated amortization | (145 | ) | (29 | ) | |||
Acquired intangible lease liabilities, net | $ | 3,625 | $ | 2,291 |
2017 | 2016 | ||||||
In-place leases | $ | 217 | $ | 22 | |||
Above-market leases | 15 | 2 | |||||
Total intangible lease asset amortization | $ | 232 | $ | 24 | |||
Below-market lease liability amortization | $ | 116 | $ | 16 |
Interest Rate | September 30, 2017 | December 31, 2016 | |||||||
Term loans due 2019(1) | 3.29%-5.19% | $ | 345,000 | $ | 330,000 | ||||
Revolving credit facility(1)(2) | 3.29% | 87,091 | 44,791 | ||||||
Mortgages payable(3) | 4.16%-7.21% | 71,863 | 122,157 | ||||||
Note payable due 2018 | 2.87% | 2,269 | — | ||||||
Assumed market debt adjustments, net(4) | (152 | ) | (174 | ) | |||||
Deferred financing costs(5) | (2,224 | ) | (3,050 | ) | |||||
Total | $ | 503,847 | $ | 493,724 |
(1) | As of September 30, 2017, the LIBOR portion of the interest rate on $315,000 of the Company’s outstanding variable-rate debt was, effectively, capped at 2.5% by four interest rate cap agreements maturing in July 2018. |
(2) | The gross borrowings under the Company’s revolving credit facility were $64,500 and $96,341, and gross payments were $63,100 and $74,409 during the nine months ended September 30, 2017 and 2016, respectively. |
(3) | Due to the non-recourse nature of the Company’s fixed-rate mortgages, the assets and liabilities of the related properties are neither available to pay the debts of the combined property-holding limited liability companies nor constitute obligations of such combined limited liability companies as of September 30, 2017. |
(4) | Net of accumulated amortization of $276 and $255 as of September 30, 2017 and December 31, 2016, respectively. |
(5) | Net of accumulated amortization of $2,498 and $2,210 as of September 30, 2017 and December 31, 2016, respectively. Deferred financing costs related to the revolving credit facility are recorded in Other Assets, Net, and |
September 30, 2017 | December 31, 2016 | ||||||
As to interest rate: | |||||||
Fixed-rate debt | $ | 74,132 | $ | 122,157 | |||
Variable-rate debt | 432,091 | 374,791 | |||||
Total | $ | 506,223 | $ | 496,948 | |||
As to collateralization: | |||||||
Unsecured debt | $ | 32,269 | $ | 30,000 | |||
Secured debt | 473,954 | 466,948 | |||||
Total | $ | 506,223 | $ | 496,948 |
2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total | |||||||||||||||||||||
Term loans(1) | $ | — | $ | — | $ | 345,000 | $ | — | $ | — | $ | — | $ | 345,000 | |||||||||||||
Revolving credit facility(1) | — | — | 87,091 | — | — | — | 87,091 | ||||||||||||||||||||
Mortgages payable | 439 | 1,763 | 3,747 | 1,862 | 1,967 | 62,085 | 71,863 | ||||||||||||||||||||
Note payable | 1,361 | 908 | — | — | — | — | 2,269 | ||||||||||||||||||||
Total maturing debt | $ | 1,800 | $ | 2,671 | $ | 435,838 | $ | 1,862 | $ | 1,967 | $ | 62,085 | $ | 506,223 |
(1) | The unsecured $30 million term loan and secured credit facilities, which includes the $315 million term loan and the revolving credit facility, have options to extend their maturities to 2020 and 2021, respectively. A maturity date extension for the unsecured term loan facility requires the payment of an extension fee of 0.25% of the outstanding principal amount. The secured credit facility may extend for two twelve-month periods, requiring an extension fee of 0.15% of the outstanding principal amount for each extension. |
Year | Amount | ||
Remaining 2017 | $ | 17,973 | |
2018 | 61,799 | ||
2019 | 54,052 | ||
2020 | 45,684 | ||
2021 | 36,577 | ||
Thereafter | 122,419 | ||
Total | $ | 338,504 |
Year | Amount | ||
Remaining 2017 | $ | 230 | |
2018 | 813 | ||
2019 | 524 | ||
2020 | 85 | ||
2021 | — | ||
Thereafter | — | ||
Total | $ | 1,652 |
Count | Notional Amount | LIBOR Cap | Maturity Date | |||
4 | $315,000 | 2.5% | July 1, 2018 |
September 30, 2017 | December 31, 2016 | |||||||
PECO | $ | 4,336 | $ | 4,213 | ||||
NTR II | 2,444 | 2,442 | ||||||
NTR III | 3,932 | 13,504 | ||||||
PREP and affiliates | 9,118 | 9,271 | ||||||
SCB Air I & II | 1,538 | 1,534 | ||||||
Necessity Retail Partners | 187 | 126 | ||||||
Total | $ | 21,555 | $ | 31,090 |
September 30, 2017 | December 31, 2016 | |||||||
PECO | $ | 26,449 | $ | 26,449 | ||||
NTR II | 202 | 200 | ||||||
NTR III | 700 | 700 | ||||||
PREP and affiliates | 3,711 | 3,766 | ||||||
Total | $ | 31,062 | $ | 31,115 |
PECO | NTR II | NTR III | PREP and Affiliates | Necessity Retail Partners | Total | ||||||||||||||||||
Acquisition fees | $ | 1,186 | $ | 1,479 | $ | — | $ | — | $ | — | $ | 2,665 | |||||||||||
Asset management fee (Class B unit distributions) | 2,392 | 458 | — | — | — | 2,850 | |||||||||||||||||
Asset management fees | 13,310 | 7,953 | 110 | — | 286 | 21,659 | |||||||||||||||||
Development/construction management fees | 1,367 | 577 | — | — | 85 | 2,029 | |||||||||||||||||
Due diligence expenses | 568 | 412 | — | — | 120 | 1,100 | |||||||||||||||||
Insurance premiums | 405 | 241 | — | — | — | 646 | |||||||||||||||||
Leasing commissions | 6,231 | 2,546 | 5 | — | 586 | 9,368 | |||||||||||||||||
Property management fees | 7,986 | 4,356 | 37 | — | 656 | 13,035 | |||||||||||||||||
Other fees and reimbursements | 6,047 | 2,631 | 373 | 203 | 289 | 9,543 | |||||||||||||||||
Total | $ | 39,492 | $ | 20,653 | $ | 525 | $ | 203 | $ | 2,022 | $ | 62,895 |
PECO | NTR II | PREP and Affiliates | Necessity Retail Partners | Total | |||||||||||||||
Acquisition fees | $ | 1,111 | $ | 3,435 | $ | — | $ | — | $ | 4,546 | |||||||||
Asset management fee (Class B unit distributions) | 2,160 | 430 | — | — | 2,590 | ||||||||||||||
Asset management fees | 12,054 | 6,173 | — | 87 | 18,314 | ||||||||||||||
Development/construction management fees | 664 | 676 | — | 14 | 1,354 | ||||||||||||||
Due diligence expenses | 268 | 722 | — | 25 | 1,015 | ||||||||||||||
Insurance premiums | 559 | 359 | — | — | 918 | ||||||||||||||
Leasing commissions | 5,586 | 2,778 | — | 213 | 8,577 | ||||||||||||||
Property management fees | 7,456 | 3,484 | — | 197 | 11,137 | ||||||||||||||
Other fees and reimbursements | 4,050 | 3,217 | 303 | 94 | 7,664 | ||||||||||||||
Total | $ | 33,908 | $ | 21,274 | $ | 303 | $ | 630 | $ | 56,115 |
September 30, 2017 | December 31, 2016 | ||||||
Fair value | $ | 507,687 | $ | 499,594 | |||
Recorded value(1) | 506,071 | 496,774 |
(1) | Recorded value does not include deferred financing costs of $2,224 and $3,050 as of September 30, 2017 and December 31, 2016, respectively. |
Amount | |||
Value of Operating Partnership units (“OP units”) received | $ | 402,258 | |
Debt assumed by PECO:(1) | |||
Corporate debt | 432,091 | ||
Mortgages and notes payable | 70,837 | ||
Cash payments | 25,000 | ||
Total estimated consideration | $ | 930,186 |
(1) | The amounts related to debt assumed by PECO are shown at face value, but the final amounts will be recorded by PECO at fair value. |
Property Name | Location | Disposition Date | GLA | Consideration | Gain/(Loss) | |||||||||
Mountain View Station LLC | Snellville, GA | 10/6/2017 | 99,908 | $ | 9,300 | $ | 2,770 | |||||||
Cedar Hills - West LLC | Cedar Hills, UT | 10/27/2017 | N/A | 300 | — | |||||||||
New Market Station LLC | Madison, NC | 11/21/2017 | 172,353 | 1,850 | (165 | ) | ||||||||
$ | 11,450 | $ | 2,605 |
• | The historical consolidated financial information as of and for the nine months ended September 30, 2017, derived from our unaudited consolidated financial statements, and the historical consolidated statement of operations for the year ended December 31, 2016, derived from our audited consolidated financial statements; |
• | Pro forma adjustments to give effect to our acquisitions during 2016 and through September 30, 2017, and other investments, dispositions and significant debt activity on our consolidated statement of operations for the nine months ended September 30, 2017 and the year ended December 31, 2016, as if these transactions occurred on January 1, 2016; |
• | The historical financial information of PELP as of and for the nine months ended September 30, 2017, derived from PELP’s unaudited combined financial statements, and the historical combined statement of income for the year ended December 31, 2016, derived from PELP’s audited combined financial statements; |
• | Pro forma adjustments to give effect to PELP’s acquisitions during 2016 and through September 30, 2017, and other investments, dispositions, and significant debt activity on PELP’s combined statements of income for the nine months ended September 30, 2017 and for the year ended December 31, 2016, as if these transactions occurred on January 1, 2016; |
• | Pro forma adjustments to give effect to our acquisition of PELP on our consolidated balance sheet as of September 30, 2017, as if the acquisition closed on September 30, 2017; and |
• | Pro forma adjustments to give effect to our acquisition of PELP on our consolidated statements of income for the nine months ended September 30, 2017 and for the year ended December 31, 2016, as if the acquisition closed on January 1, 2016. |
• | Our unaudited consolidated financial statements and the related notes thereto as of and for the nine months ended September 30, 2017 included in our Quarterly Report on Form 10-Q for the quarter then ended, filed with the Securities and Exchange Commission (“SEC”) on November 9, 2017; |
• | Our audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2016 included in our Annual Report on Form 10-K for the year then ended, filed with the SEC on March 9, 2017; |
• | PELP’s unaudited combined financial statements and the related notes thereto as of and for the nine months ended September 30, 2017 included herein; and |
• | PELP’s audited combined financial statements and the related notes thereto for the year ended December 31, 2016 included herein. |
PECO Historical | PELP Historical (A) | PELP Adjustments (B) | PELP Pro Forma as Adjusted | PECO and PELP Transaction Adjustments (C) | Total Pro Forma | ||||||||||||||||||
ASSETS | |||||||||||||||||||||||
Total investment in real estate assets, net | $ | 2,328,640 | $ | 375,267 | $ | (20,869 | ) | $ | 354,398 | $ | 551,011 | (D) | $ | 3,234,049 | |||||||||
Cash and cash equivalents | 7,189 | 32,052 | — | 32,052 | — | 39,241 | |||||||||||||||||
Restricted cash | 6,025 | 11,078 | (502 | ) | 10,576 | — | 16,601 | ||||||||||||||||
Other assets, net | 102,541 | 85,985 | (7,576 | ) | 78,409 | 56,905 | (E) | 237,855 | |||||||||||||||
Real estate investments and other assets held for sale | 4,863 | 5,802 | (5,802 | ) | — | — | 4,863 | ||||||||||||||||
Total assets | $ | 2,449,258 | $ | 510,184 | $ | (34,749 | ) | $ | 475,435 | $ | 607,916 | $ | 3,532,609 | ||||||||||
LIABILITIES AND EQUITY | |||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Mortgages and loans payable, net | $ | 1,224,779 | $ | 503,847 | $ | (2,821 | ) | $ | 501,026 | $ | 44,747 | (F) | $ | 1,770,552 | |||||||||
Acquired below-market lease intangibles, net | 42,080 | 3,625 | — | 3,625 | 48,410 | (D) | 94,115 | ||||||||||||||||
Accounts payable – affiliates | 4,567 | 1,138 | (26 | ) | 1,112 | (4,336 | ) | (G) | 1,343 | ||||||||||||||
Accounts payable and other liabilities | 69,007 | 46,688 | (3,926 | ) | 42,762 | 40,628 | (H) | 152,397 | |||||||||||||||
Liabilities of real estate investments held for sale | 233 | 8,194 | (8,194 | ) | — | — | 233 | ||||||||||||||||
Total liabilities | 1,340,666 | 563,492 | (14,967 | ) | 548,525 | 129,449 | 2,018,640 | ||||||||||||||||
Equity: | |||||||||||||||||||||||
Total stockholders’ equity | 1,090,893 | (54,283 | ) | (19,782 | ) | (74,065 | ) | 7,476 | (I) | 1,024,304 | |||||||||||||
Noncontrolling interests | 17,699 | 975 | — | 975 | 470,991 | (J) | 489,665 | ||||||||||||||||
Total equity | 1,108,592 | (53,308 | ) | (19,782 | ) | (73,090 | ) | 478,467 | 1,513,969 | ||||||||||||||
Total liabilities and equity | $ | 2,449,258 | $ | 510,184 | $ | (34,749 | ) | $ | 475,435 | $ | 607,916 | $ | 3,532,609 |
PECO Historical | PECO Adjustments (K) | PECO Pro Forma as Adjusted | PELP Historical (L) | PELP Adjustments (M) | PELP Pro Forma as Adjusted | PECO and PELP Transaction Adjustments (N) | Total Pro Forma | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Rental income | $ | 157,425 | $ | 3,199 | $ | 160,624 | $ | 50,178 | $ | (3,318 | ) | $ | 46,860 | $ | 2,961 | (O) | $ | 210,445 | |||||||||||||
Tenant recovery income | 50,442 | 2,083 | 52,525 | 13,263 | (716 | ) | 12,547 | — | 65,072 | ||||||||||||||||||||||
Fees and management income | — | — | — | 59,176 | (619 | ) | 58,557 | (35,702 | ) | (P) | 22,855 | ||||||||||||||||||||
Other property income | 911 | (60 | ) | 851 | 918 | (8 | ) | 910 | — | 1,761 | |||||||||||||||||||||
Total revenues | 208,778 | 5,222 | 214,000 | 123,535 | (4,661 | ) | 118,874 | (32,741 | ) | 300,133 | |||||||||||||||||||||
Expenses: | |||||||||||||||||||||||||||||||
Property operating | 32,611 | 635 | 33,246 | 27,406 | (458 | ) | 26,948 | (11,317 | ) | (Q) | 48,877 | ||||||||||||||||||||
Real estate taxes | 31,136 | 868 | 32,004 | 8,460 | (543 | ) | 7,917 | — | 39,921 | ||||||||||||||||||||||
General and administrative | 25,438 | (12 | ) | 25,426 | 27,992 | (2,766 | ) | 25,226 | (16,382 | ) | (R) | 34,270 | |||||||||||||||||||
Termination of affiliate arrangements | 5,454 | — | 5,454 | — | — | — | (5,454 | ) | (S) | — | |||||||||||||||||||||
Acquisition expenses | 466 | (16 | ) | 450 | — | — | — | — | 450 | ||||||||||||||||||||||
Impairment of real estate assets | — | — | — | 4,588 | (4,588 | ) | — | — | — | ||||||||||||||||||||||
Depreciation and amortization | 84,481 | 1,983 | 86,464 | 22,344 | (1,807 | ) | 20,537 | 25,845 | (T) | 132,846 | |||||||||||||||||||||
Total expenses | 179,586 | 3,458 | 183,044 | 90,790 | (10,162 | ) | 80,628 | (7,308 | ) | 256,364 | |||||||||||||||||||||
Other: | |||||||||||||||||||||||||||||||
Interest expense, net | (28,537 | ) | 556 | (27,981 | ) | (14,850 | ) | 600 | (14,250 | ) | (30 | ) | (U) | (42,261 | ) | ||||||||||||||||
Transaction expenses | (9,760 | ) | — | (9,760 | ) | (3,911 | ) | 15 | (3,896 | ) | 13,656 | (V) | — | ||||||||||||||||||
Other (expense) income, net | 642 | — | 642 | 4,835 | (4,150 | ) | 685 | (270 | ) | (V) | 1,057 | ||||||||||||||||||||
Net (loss) income | (8,463 | ) | 2,320 | (6,143 | ) | 18,819 | 1,966 | 20,785 | (12,077 | ) | 2,565 | ||||||||||||||||||||
Net loss (income) attributable to noncontrolling interests | 144 | (52 | ) | 92 | (283 | ) | (30 | ) | (313 | ) | (281 | ) | (W) | (502 | ) | ||||||||||||||||
Net (loss) income attributable to stockholders | $ | (8,319 | ) | $ | 2,268 | $ | (6,051 | ) | $ | 18,536 | $ | 1,936 | $ | 20,472 | $ | (12,358 | ) | $ | 2,063 | ||||||||||||
Earnings per common share: | |||||||||||||||||||||||||||||||
Basic | $ | (0.05 | ) | n/a | $ | (0.03 | ) | n/a | n/a | n/a | n/a | $ | 0.01 | ||||||||||||||||||
Diluted | $ | (0.05 | ) | n/a | $ | (0.03 | ) | n/a | n/a | n/a | n/a | $ | 0.01 | ||||||||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||||||||||||
Basic | 183,402 | n/a | 183,402 | n/a | n/a | n/a | n/a | 183,402 | |||||||||||||||||||||||
Diluted | 183,402 | n/a | 183,402 | n/a | n/a | n/a | 44,515 | (X) | 227,917 |
PECO Historical | PECO Adjustments (K) | PECO Pro Forma as Adjusted | PELP Historical (L) | PELP Adjustments (M) | PELP Pro Forma as Adjusted | PECO and PELP Transaction Adjustments (N) | Total Pro Forma | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Rental income | $ | 193,561 | $ | 18,600 | $ | 212,161 | $ | 68,768 | $ | (6,869 | ) | $ | 61,899 | $ | 4,586 | (O) | $ | 278,646 | |||||||||||||
Tenant recovery income | 63,131 | 8,065 | 71,196 | 19,850 | (1,934 | ) | 17,916 | — | 89,112 | ||||||||||||||||||||||
Fees and management income | — | — | — | 75,190 | (1,196 | ) | 73,994 | (42,996 | ) | (P) | 30,998 | ||||||||||||||||||||
Other property income | 1,038 | (121 | ) | 917 | 549 | (133 | ) | 416 | — | 1,333 | |||||||||||||||||||||
Total revenues | 257,730 | 26,544 | 284,274 | 164,357 | (10,132 | ) | 154,225 | (38,410 | ) | 400,089 | |||||||||||||||||||||
Expenses: | |||||||||||||||||||||||||||||||
Property operating | 41,890 | 5,308 | 47,198 | 36,781 | (2,596 | ) | 34,185 | (13,887 | ) | (Q) | 67,496 | ||||||||||||||||||||
Real estate taxes | 36,627 | 4,505 | 41,132 | 11,160 | (983 | ) | 10,177 | — | 51,309 | ||||||||||||||||||||||
General and administrative | 31,804 | 197 | 32,001 | 37,837 | (3,893 | ) | 33,944 | (20,263 | ) | (R) | 45,682 | ||||||||||||||||||||
Acquisition expenses | 5,803 | (1,490 | ) | 4,313 | 400 | (156 | ) | 244 | (4,381 | ) | (V) | 176 | |||||||||||||||||||
Impairment of real estate assets | — | — | — | 4,044 | (4,044 | ) | — | — | — | ||||||||||||||||||||||
Depreciation and amortization | 106,095 | 12,049 | 118,144 | 28,389 | (3,465 | ) | 24,924 | 35,769 | (T) | 178,837 | |||||||||||||||||||||
Total expenses | 222,219 | 20,569 | 242,788 | 118,611 | (15,137 | ) | 103,474 | (2,762 | ) | 343,500 | |||||||||||||||||||||
Other: | |||||||||||||||||||||||||||||||
Interest expense, net | (32,458 | ) | (4,657 | ) | (37,115 | ) | (19,558 | ) | 1,603 | (17,955 | ) | (6,722 | ) | (U) | (61,792 | ) | |||||||||||||||
Gain on disposition of properties | 4,732 | (4,732 | ) | — | 15,233 | (15,233 | ) | — | — | — | |||||||||||||||||||||
Other income (expense), net | 1,258 | — | 1,258 | 353 | (978 | ) | (625 | ) | (344 | ) | (V) | 289 | |||||||||||||||||||
Net income (loss) | 9,043 | (3,414 | ) | 5,629 | 41,774 | (9,603 | ) | 32,171 | (42,714 | ) | (4,914 | ) | |||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | (111 | ) | 27 | (84 | ) | (550 | ) | 67 | (483 | ) | 1,525 | (W) | 958 | ||||||||||||||||||
Net income (loss) attributable to stockholders | $ | 8,932 | $ | (3,387 | ) | $ | 5,545 | $ | 41,224 | $ | (9,536 | ) | $ | 31,688 | $ | (41,189 | ) | $ | (3,956 | ) | |||||||||||
Earnings per common share: | |||||||||||||||||||||||||||||||
Basic | $ | 0.05 | n/a | $ | 0.03 | n/a | n/a | n/a | n/a | $ | (0.02 | ) | |||||||||||||||||||
Diluted | $ | 0.05 | n/a | $ | 0.03 | n/a | n/a | n/a | n/a | $ | (0.02 | ) | |||||||||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||||||||||||
Basic | 183,876 | n/a | 183,876 | n/a | n/a | n/a | n/a | 183,876 | |||||||||||||||||||||||
Diluted | 186,665 | n/a | 186,665 | n/a | n/a | n/a | 41,726 | (X) | 228,391 |
(A) | Represents the historical financial condition as reflected in the combined financial statements of PELP as of September 30, 2017. |
(B) | Adjustments reflect the exclusion of certain PELP properties, investments in certain entities, and working capital, including cash, that were not acquired in the PELP Transaction. |
(C) | Represents adjustments to record the acquisition of PELP by us based upon the purchase price of approximately $930 million, excluding a $43 million earn-out liability (see item H). Additionally, intercompany activity between PELP and us has been eliminated. The calculation of the purchase price to be allocated is as follows (in thousands, except per share amounts): |
Value of OP units issued(1) | $ | 402,258 | |
Debt assumed: | |||
Corporate debt | 432,091 | ||
Mortgages and notes payable | 70,837 | ||
Cash payments | 25,000 | ||
Total consideration | $ | 930,186 |
(1) | Includes the issuance of 39.4 million OP units, excluding 5.1 million OP units and Class B units outstanding prior to the acquisition date, with an established value per unit of $10.20. |
(D) | Reflects adjustments to record the estimated increase over PELP’s historical investment in real estate, as reflected in the PELP pro forma as adjusted column of the unaudited pro forma condensed consolidated balance sheet, based upon the preliminary estimated fair value for the tangible and intangible real estate assets and liabilities acquired. These preliminary estimated fair values are as follows (in thousands): |
Land and improvements | $ | 265,219 | |
Buildings and improvements | 548,364 | ||
Acquired in-place lease assets | 80,594 | ||
Acquired above-market lease assets | 11,232 | ||
Total investment in real estate assets | $ | 905,409 | |
Acquired below-market lease liabilities | (52,035 | ) | |
Estimated fair value of net real estate investments | $ | 853,374 |
(E) | Reflects the (i) recording of acquired intangible assets, including approximately $60 million of management contracts and $65 million of goodwill, (ii) elimination of approximately $46 million of intercompany activity between PELP |
(F) | Represents the following adjustments (in thousands): |
New PECO debt acquired:(1)(2) | |||
4.5-year unsecured term loan | $ | 310,000 | |
7-year unsecured term loan | 175,000 | ||
Draw on PECO unsecured revolving credit facility to pay for PELP Transaction closing costs(3) | 50,001 | ||
PELP debt refinanced as part of the acquisition:(1) | |||
Unsecured term loans | (345,000 | ) | |
Unsecured revolver | (87,091 | ) | |
Paydown on PECO unsecured revolving credit facility(3) | (2,908 | ) | |
Closing costs paid related to the PELP Transaction | (50,001 | ) | |
Other: | |||
Write-off of unamortized deferred financing expense and market debt adjustment related to PELP debt assumed | 2,225 | ||
Deferred financing expense associated with new PECO debt | (9,403 | ) | |
Fair value adjustment of PELP debt assumed by PECO | 1,924 | ||
Pro forma adjustment to debt | $ | 44,747 |
(1) | Upon completion of the PELP Transaction, PELP’s debt, except for the mortgages assumed by us, was refinanced with new, long-term debt instruments under current market conditions. Therefore, similar assumptions were made in regards to these pro forma consolidated financial statements. |
(2) | Aside from refinancing PELP’s corporate-level debt outstanding at September 30, 2017, new debt was used to fund cash requirements associated with the acquisition. |
(3) | Upon completion of the PELP Transaction, we extended the maturity on our revolving credit facility to October 2021, with additional options to extend the maturity to October 2022. |
(G) | Reflects the elimination of intercompany activity between PELP and us. |
(H) | Represents the addition of an estimated $43 million earn-out liability, recorded at fair value, which is payable to PELP shareholders contingent upon achieving certain milestones related to a liquidity event for our shareholders and reaching certain fundraising targets in Phillips Edison Grocery Center REIT III, Inc., of which PELP was a co-sponsor. The maximum payout is approximately 12.49 million OP units, or $137.4 million at an estimated value of $11.00 per share, and the liability will be adjusted quarterly through earnings. Additional adjustments include a $2.9 million increase in the value of Restricted Membership Units (“RMUs”), which are issued as part of a phantom equity compensation plan for employees, partially offset by a $5.1 million adjustment to remove our accrued expenses related to the PELP Transaction and a $0.2 million adjustment to remove PELP’s historical straight-line rent liability. |
(I) | Represents the write-off of PELP’s historical equity, with various adjustments to reflect the purchase price allocation as well as the adjustments to PELP’s debt assumed in the PELP Transaction. |
(J) | Reflects the adjustment to record the 39.4 million OP units issued to PELP, in addition to the vesting of the unvested Class B units currently outstanding, which are considered noncontrolling interests, as consideration for the transaction. |
(K) | Reflects adjustments for properties acquired and sold by us during the nine months ended September 30, 2017, and the year ended December 31, 2016, to reflect their results as if they had been acquired or sold on January 1, 2016. |
(L) | Reflects the historical results of operations of PELP for the nine months ended September 30, 2017, or for the year ended December 31, 2016. |
(M) | Adjustments reflect the exclusion of PELP properties that (i) are not being acquired in the PELP Transaction or (ii) were disposed of prior to September 30, 2017. Additionally, adjustments were made for properties acquired during the nine months ended September 30, 2017, and throughout the year ended December 31, 2016, to reflect their results as if they had been acquired on January 1, 2016. |
(N) | Represents adjustments related to the acquisition of PELP as though the PELP Transaction had occurred as of January 1, 2016. Additionally, intercompany activity between PELP and us has been eliminated. |
(O) | Represents the following adjustments (in thousands): |
For the Nine Months Ended September 30, 2017 | For the Year Ended December 31, 2016 | ||||||
Net increase in above- and below-market lease amortization(1) | $ | 1,129 | $ | 1,568 | |||
Increase in straight-line rent | 1,355 | 2,136 | |||||
Write off of PELP’s tenant allowance adjustments | 477 | 882 | |||||
Pro forma adjustment to rental income | $ | 2,961 | $ | 4,586 | |||
(1) | Based on the preliminary purchase price allocation, $11 million has been allocated to above-market leases and $52 million to below-market leases. The adjustment to rental income is calculated on a straight-line basis based on a five-year useful life for above-market leases and a 14-year useful life for below-market leases. |
(P) | Reflects adjustments to eliminate PELP’s fees and management income earned from us, which are reflected in PELP’s historical combined financial statements. |
(Q) | Represents the following adjustments (in thousands): |
For the Nine Months Ended September 30, 2017 | For the Year Ended December 31, 2016 | ||||||
Eliminate PECO expenses paid to PELP | $ | (9,759 | ) | $ | (12,452 | ) | |
Capitalization of PECO leasing costs | (1,922 | ) | (2,229 | ) | |||
Revalue PELP’s RMUs | 426 | 835 | |||||
Write off PELP’s straight-line rent bad debt | (62 | ) | (41 | ) | |||
Pro forma adjustment to property operating | $ | (11,317 | ) | $ | (13,887 | ) | |
(R) | Primarily reflects adjustments to eliminate intercompany activity between us and PELP and our former advisor, in the amounts of $16.3 million and $19.4 million for the nine months ended September 30, 2017, and the year ended December 31, 2016, respectively. The remaining adjustment reflects straight-line rent adjustments related to PELP’s office leases, as well as RMU and incentive compensation adjustments in the amount of $0.1 million and $0.9 million for the nine months ended September 30, 2017, and the year ended December 31, 2016, respectively. |
(S) | Adjustment reflects the removal of the costs associated with the termination of our relationship with American Realty Capital II Advisors, LLC (“ARC”). This was directly attributable to the PELP Transaction and terminated all remaining contractual and economic relationships between us and ARC. |
(T) | Adjustment reflects the difference between PELP historical depreciation and amortization and the estimated depreciation and amortization for real estate investments, in-place leases, and other assets. Based on the preliminary purchase price allocation, $195 million has been allocated to land and $618 million to buildings and improvements. Depreciation expense is calculated on a straight-line basis based on our purchase price allocation and using a 28-year life for buildings, a four-year life for tenant improvements, and a seven-year life for land improvements. Additionally, our purchase price allocation includes $81 million of acquired in-place lease intangibles and $60 million of acquired management contract intangibles, which will be amortized using a six-year life and seven-year life, respectively. |
For the Nine Months Ended September 30, 2017 | For the Year Ended December 31, 2016 | ||||||
Depreciation of buildings and improvements | $ | 11,999 | $ | 18,446 | |||
Amortization of in-place leases | 10,455 | 14,026 | |||||
Amortization of management contracts | 6,429 | 8,571 | |||||
Amortization of other assets | (3,038 | ) | (5,274 | ) | |||
Pro forma adjustment to depreciation and amortization | $ | 25,845 | $ | 35,769 |
(U) | Represents the following adjustments (in thousands): |
For the Nine Months Ended September 30, 2017 | For the Year Ended December 31, 2016 | ||||||
Interest expense eliminated on PELP debt refinanced as part of the acquisition(1) | $ | 10,642 | $ | 14,777 | |||
Interest expense charged on new debt as part of refinancing(1)(2) | (10,246 | ) | (19,629 | ) | |||
Change in interest on unsecured revolving credit facility borrowings | (619 | ) | (2,306 | ) | |||
Amortization expense eliminated on financing costs associated with PELP debt refinanced as part of the acquisition | 1,120 | 1,675 | |||||
Amortization expense charged on financing costs associated with new debt as part of refinancing | (1,279 | ) | (1,710 | ) | |||
Amortization expense on the fair value adjustment of PELP debt assumed by PECO | 352 | 471 | |||||
Pro forma adjustment to interest | $ | (30 | ) | $ | (6,722 | ) |
(1) | Upon completion of the PELP Transaction, PELP’s debt, except for the mortgages assumed by us, was refinanced with new, long-term debt instruments under current market conditions. Therefore, similar assumptions were made in regards to these pro forma consolidated financial statements. |
(1) | As of September 30, 2017 and December 31, 2016, the weighted-average interest rate on the new debt instruments was 2.8% and 3.0%, respectively. |
(V) | Reflects the (i) removal of historical expenses related to the PELP Transaction, (ii) elimination of intercompany acquisition expenses, and (iii) removal of distribution income to PELP from us and from other PELP investments that are not being acquired. |
(W) | Reflects the adjustment to income attributable to noncontrolling interests related to the 39.4 million OP units issued to PELP as consideration for the transaction in addition to the 5.1 million OP units and Class B units previously issued. |
(X) | Reflects the increase in weighted-average dilutive shares related to the issuance of 39.4 million OP units and vesting of the unvested Class B units, assuming the PELP Transaction closed on January 1, 2016. |
PECO Historical | PECO Adjustments (K) | PECO Pro Forma as Adjusted | PELP Historical (L) | PELP Adjustments (M) | PELP Pro Forma as Adjusted | PECO and PELP Transaction Adjustments (N) | Total Pro Forma | ||||||||||||||||||||||||
Net (loss) income | $ | (8,463 | ) | $ | 2,320 | $ | (6,143 | ) | $ | 18,819 | $ | 1,966 | $ | 20,785 | $ | (12,077 | ) | $ | 2,565 | ||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||
Depreciation and amortization of real estate assets | 84,481 | 1,983 | 86,464 | 22,344 | (1,807 | ) | 20,537 | 19,416 | 126,417 | ||||||||||||||||||||||
Impairment of real estate assets | — | — | — | 4,588 | (4,588 | ) | — | — | — | ||||||||||||||||||||||
Gain on sale of property | — | — | — | (3,170 | ) | 3,170 | — | — | — | ||||||||||||||||||||||
FFO | $ | 76,018 | $ | 4,303 | $ | 80,321 | $ | 42,581 | $ | (1,259 | ) | $ | 41,322 | $ | 7,339 | $ | 128,982 | ||||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||||||||||||
Diluted | 186,150 | n/a | 186,150 | n/a | n/a | n/a | 41,767 | 227,917 | |||||||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||||||||||
Net (loss) income per share - diluted | $ | (0.05 | ) | n/a | $ | (0.03 | ) | n/a | n/a | n/a | n/a | $ | 0.01 | ||||||||||||||||||
FFO per share - diluted | $ | 0.41 | n/a | $ | 0.43 | n/a | n/a | n/a | n/a | $ | 0.57 |
PECO Historical | PECO Adjustments (K) | PECO Pro Forma as Adjusted | PELP Historical (L) | PELP Adjustments (M) | PELP Pro Forma as Adjusted | PECO and PELP Transaction Adjustments (N) | Total Pro Forma | ||||||||||||||||||||||||
Net income (loss) | $ | 9,043 | $ | (3,414 | ) | $ | 5,629 | $ | 41,774 | $ | (9,603 | ) | $ | 32,171 | $ | (42,714 | ) | $ | (4,914 | ) | |||||||||||
Adjustments: | |||||||||||||||||||||||||||||||
Depreciation and amortization of real estate assets | 106,095 | 12,049 | 118,144 | 28,389 | (3,465 | ) | 24,924 | 27,198 | 170,266 | ||||||||||||||||||||||
Impairment of real estate assets | — | — | — | 4,044 | (4,044 | ) | — | — | — | ||||||||||||||||||||||
Gain on sale of property | (4,732 | ) | 4,732 | — | (15,233 | ) | 15,233 | — | — | — | |||||||||||||||||||||
FFO | $ | 110,406 | $ | 13,367 | $ | 123,773 | $ | 58,974 | $ | (1,879 | ) | $ | 57,095 | $ | (15,516 | ) | $ | 165,352 | |||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||||||||||||
Diluted | 186,665 | n/a | 186,665 | n/a | n/a | n/a | 41,726 | 228,391 | |||||||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||||||||||
Net income (loss) per share - diluted | $ | 0.05 | n/a | $ | 0.03 | n/a | n/a | n/a | n/a | $ | (0.02 | ) | |||||||||||||||||||
FFO per share - diluted | $ | 0.59 | n/a | $ | 0.66 | n/a | n/a | n/a | n/a | $ | 0.72 |