UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 21, 2011
EXCEL TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
| Maryland | 001-34698 | 27-1493212 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File No.) |
(I.R.S. Employer Identification No.) |
17140 Bernardo Center Drive, Suite 300
San Diego, California 92128
(Address of Principal Executive Offices, Including Zip Code)
(858) 613-1800
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
This Current Report on Form 8-K/A is being filed by Excel Trust, Inc. to provide the financial statements that will be required in connection with the expected acquisition of a 433,000 square foot retail shopping center (the “Shopping Center”) located in Arizona. The Company has not yet completed the acquisition of the Shopping Center and can offer no assurances that such acquisition will close on the terms described, or at all. In evaluating this acquisition and determining the appropriate amount of consideration expected to be paid, we considered a variety of factors including property type, geographic markets and demographics, tenants and lease terms.
| Item 9.01 | Financial Statements and Exhibits. |
| (a) | Financial Statements of Businesses Acquired |
Independent Auditors’ Report
Statement of Revenues and Expenses of the Shopping Center for the year ended December 31, 2010
Notes to Statement of Revenues and Certain Expenses
| (b) | Unaudited Pro Forma Financial Information. |
Unaudited Pro Forma Condensed Consolidated Balance Sheet of Excel Trust, Inc. as of December 31, 2010
Unaudited Pro Forma Condensed Consolidated Statement of Operations of Excel Trust, Inc. for the period from April 28, 2010 to December 31, 2010
Unaudited Pro Forma Condensed Combined Statement of Operations of Excel Trust, Inc. Predecessor for the period from January 1, 2010 to April 27, 2010
Notes to Pro Forma Condensed Consolidated and Combined Statements of Operations of Excel Trust, Inc. and Excel Trust, Inc. Predecessor
| (d) | Exhibits |
The following exhibits are filed herewith:
| Exhibit |
Description of Exhibit | |
| 23.1 |
Consent of Deloitte & Touche, LLP (1) | |
| (1) | Filed herewith. |
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Stockholders of Excel Trust, Inc.
We have audited the accompanying statement of revenues and certain expenses (the “Historical Summary”) of the Shopping Center located in Arizona (the “Property”) for the year ended December 31, 2010. This Historical Summary is the responsibility of the Property’s management. Our responsibility is to express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summaries, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in this Current Report on Form 8-K/A) as described in Note 1 to the Historical Summary and are not intended to be a complete presentation of the Property’s revenue and expenses.
In our opinion, the Historical Summary of the Property presents fairly, in all material respects, the revenues and certain expenses described in Note 1 to the Historical Summary of the Shopping Center located in Arizona for the year ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
| /s/ DELOITTE & TOUCHE LLP |
| Los Angeles, California |
| May 4, 2011 |
THE SHOPPING CENTER, ARIZONA
STATEMENT OF REVENUES AND CERTAIN EXPENSES
For the Year Ended December 31, 2010
| Year ended December 31, 2010 |
||||
| Revenues: |
||||
| Rental revenues |
$ | 8,579,000 | ||
| Tenant reimbursements |
3,089,000 | |||
| Other income |
44,000 | |||
| Total revenues |
11,712,000 | |||
| Certain expenses |
||||
| Property operating and maintenance |
1,876,000 | |||
| Property taxes |
1,637,000 | |||
| Management fees |
244,000 | |||
| Insurance |
71,000 | |||
| Total certain expenses |
3,828,000 | |||
| Revenues in excess of certain expenses |
$ | 7,884,000 | ||
See accompanying notes to statements of revenues and certain expenses.
THE SHOPPING CENTER, ARIZONA
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenues and certain expenses includes the operations of a shopping center located in Arizona (the “Property”). The Property contains approximately 433,000 square feet of retail space. The acquisition of the Property by Excel Trust, Inc. (the “Company”) from a nonaffiliated third party is expected to close in the second quarter of 2011 for a purchase price of approximately $110.0 million, of which approximately $52.8 million would be assumed mortgage debt.
Basis of Presentation
The statement of revenues and certain operating expenses (the “Historical Summary”) has been prepared for the purpose of complying with the provisions of Article 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The Historical Summary includes the historical revenues and certain operating expenses of the Property, exclusive of items which may not be comparable to the proposed future operations of the Property. Material amounts that would not be directly attributable to future operating results of the Property are excluded, and the Historical Summary is not intended to be a complete presentation of the Property’s revenues and expenses. Items excluded consist of depreciation, interest expense and federal and state income taxes.
The accompanying statement is not representative of the actual operations for the period presented, as certain expenses that may not be comparable to the expenses expected to be incurred by the Company in the future operations of the Property have been excluded.
In the preparation of the accompanying Historical Summary, subsequent events were evaluated through May 4, 2011, the date the financial statements were issued.
Revenue Recognition
Rental revenue is recognized on an accrual basis as it is earned over the lives of the respective tenant leases on a straight-line basis. Estimated recoveries from certain tenants for their pro rata share of real estate taxes, insurance and other operating expense are recognized as revenues in the period the applicable expenses are incurred or as specified in the leases. Rental receivables are periodically evaluated for collectability.
Repairs and Maintenance
Expenditures for repairs and maintenance are expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ materially from the estimates in the near term.
Concentration of Credit Risk
The Property had no tenants account for more than 10% of revenues in the year ended December 31, 2010.
2. Leases
The aggregate annual future minimum lease payments to be received under existing operating leases as of December 31, 2010 are as follows:
| 2011 |
$ | 7,872,000 | ||
| 2012 |
7,836,000 | |||
| 2013 |
7,493,000 | |||
| 2014 |
6,813,000 | |||
| 2015 |
5,036,000 | |||
| 2016 and thereafter |
12,741,000 | |||
| $ | 47,791,000 | |||
The Property was completed in 1999 and was approximately 99% occupied at December 31, 2010 . The Property is generally leased to tenants under lease terms that provide for the tenants to pay a pro rata share of their operating expenses. The above future minimum lease payments do not include amounts for tenant reimbursements of operating expenses.
Certain tenants have lease termination options built into their leases, which are subject to termination fees. In the event that a tenant does exercise its option to terminate its lease early and the terminated space is not subsequently leased out, the amount of future minimum rent received will be reduced.
3. Related Party Transactions
In the year ended December 31, 2010, $244,000 in property management fees were paid to a company affiliated with the sellers of the Property, respectively.
4. Commitments and Contingencies
The Company may be subject to legal claims in the ordinary course of business as a property owner. The Company believes that the ultimate settlement of any potential claims will not have a material impact on the Property’s results of operations.
Excel Trust, Inc.
Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
The following unaudited pro forma financial information of Excel Trust, Inc. (the “Company”) is based on the historical financial statements of the Company and Excel Trust, Inc. Predecessor (the “Predecessor”). The unaudited pro forma condensed consolidated balance sheet as of December 31, 2010 and condensed consolidated and combined statements of operations of the Company for the period April 28, 2010 to December 31, 2010 and the Predecessor for the period from January 1, 2010 to April 28, 2010 have been prepared as if the acquisition of the shopping center (the “Property”) had occurred on January 1, 2010.
Such unaudited pro forma financial information should be read in conjunction with the historical combined financial statements of the Company and Predecessor filed with the Securities and Exchange Commission on the Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2010, June 30, 2010 and September 30, 2010, and the Company’s Annual Report on Form 10-K for the years ended December 31, 2010. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations of the Company and Predecessor that would have occurred if the acquisition of the Property had been completed on the date indicated, nor does it purport to represent the Company and Predecessor’s results of operations as of any future date or for any future period. In addition, the pro forma condensed consolidated and combined financial statements are based upon pro forma allocations of the purchase price of the Property based upon preliminary estimates of fair value of the assets and liabilities acquired in connection with the acquisition. These allocations may be adjusted in the future upon finalization of these preliminary estimates. Management believes all material adjustments necessary to reflect the effect of their acquisition have been made to the unaudited pro forma financial information.
EXCEL TRUST, INC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 2010
(in thousands, except per share amounts)
| Company Historical (A) |
Acquisition of the Shopping Center, in Arizona (B) |
Company Pro Forma |
||||||||||
| ASSETS: |
||||||||||||
| Property, net |
$ | 365,112 | $ | 99,478 | $ | 464,590 | ||||||
| Cash and cash equivalents |
6,525 | (264 | ) | 6,261 | ||||||||
| Lease intangibles, net |
53,024 | 14,187 | 67,211 | |||||||||
| Other |
16,427 | 264 | 16,691 | |||||||||
| Total Assets |
$ | 441,088 | $ | 113,665 | $ | 554,753 | ||||||
| LIABILITIES AND EQUITY: |
||||||||||||
| Liabilities: |
||||||||||||
| Mortgage and notes payable |
$ | 222,427 | $ | 110,104 | $ | 332,531 | ||||||
| Accounts payable and other liabilities |
14,901 | — | 14,901 | |||||||||
| Lease intangibles, net |
7,150 | 3,561 | 10,711 | |||||||||
| Total liabilities |
244,478 | 113,665 | 358,143 | |||||||||
| Equity: |
||||||||||||
| Total stockholder’s equity |
187,511 | — | 187,511 | |||||||||
| Non-controlling interests |
9,099 | — | 9,099 | |||||||||
| Total equity |
196,610 | — | 196,610 | |||||||||
| Total liabilities and equity |
$ | 441,088 | $ | 113,665 | $ | 554,753 | ||||||
See accompanying notes
EXCEL TRUST, INC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Period from April 28, 2010 to December 31, 2010
(in thousands, except per share amounts)
| Company Historical (C) |
Acquisition of the Shopping Center, in Arizona (D) |
Company Pro Forma |
||||||||||
| REVENUES: |
||||||||||||
| Rental revenue |
$ | 13,641 | $ | 5,903 | $ | 19,544 | ||||||
| Tenant recoveries |
2,134 | 2,364 | 4,498 | |||||||||
| Other income |
143 | 30 | 173 | |||||||||
| Total revenues |
15,918 | 8,297 | 24,215 | |||||||||
| EXPENSES: |
||||||||||||
| Maintenance and repairs |
707 | 667 | 1,374 | |||||||||
| Real estate taxes |
1,685 | 1,420 | 3,105 | |||||||||
| Management fees |
119 | — | 119 | |||||||||
| Other operating expenses |
853 | 656 | 1,509 | |||||||||
| General and administrative |
7,152 | — | 7,152 | |||||||||
| Depreciation and amortization |
6,727 | 2,334 | 9,061 | |||||||||
| Total expenses |
17,243 | 5,077 | 22,320 | |||||||||
| Net operating (loss) income |
(1,325 | ) | 3,220 | 1,895 | ||||||||
| Interest expense |
(3,692 | ) | (3,396 | ) | (7,088 | ) | ||||||
| Interest income |
166 | — | 166 | |||||||||
| Gain on acquisition of real estate |
978 | — | 978 | |||||||||
| Net (loss) income |
(3,873 | ) | (176 | ) | (4,049 | ) | ||||||
| Non-controlling interest |
(148 | ) | (7 | ) | (155 | ) | ||||||
| Net (loss) income attributable to the common stockholders |
$ | (3,725 | ) | $ | (169 | ) | $ | (3,894 | ) | |||
| Basic and diluted loss per share |
$ | (0.24 | ) | $ | (0.25 | ) | ||||||
| Weighted-average common shares outstanding - basic and diluted |
15,510 | 15,510 | ||||||||||
See accompanying notes
EXCEL TRUST, INC. PREDECESSOR
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Period from January 1, 2010 to April 27, 2010
(in thousands)
| Company Historical (C) |
Acquisition of the Shopping Center, in Arizona (D) |
Company Pro Forma |
||||||||||
| REVENUES: |
||||||||||||
| Rental revenue |
$ | 1,455 | $ | 2,785 | $ | 4,240 | ||||||
| Tenant recoveries |
113 | 1,115 | 1,228 | |||||||||
| Other income |
— | 14 | 14 | |||||||||
| Total revenues |
1,568 | 3,914 | 5,482 | |||||||||
| EXPENSES: |
||||||||||||
| Maintenance and repairs |
98 | 314 | 412 | |||||||||
| Real estate taxes |
140 | 670 | 810 | |||||||||
| Management fees |
43 | — | 43 | |||||||||
| Other operating expenses |
98 | 310 | 408 | |||||||||
| General and administrative |
8 | — | 8 | |||||||||
| Depreciation and amortization |
542 | 1,101 | 1,643 | |||||||||
| Total expenses |
929 | 2,395 | 3,324 | |||||||||
| Net operating income |
639 | 1,519 | 2,085 | |||||||||
| Interest expense |
(483 | ) | (1,602 | ) | (2,085 | ) | ||||||
| Interest income |
— | — | — | |||||||||
| Net income |
156 | (83 | ) | 73 | ||||||||
| Non-controlling interest |
290 | — | 290 | |||||||||
| Net (loss) income attributable to the controlling interest |
$ | (134 | ) | $ | (83 | ) | $ | (217 | ) | |||
See accompanying notes
EXCEL TRUST, INC. AND
EXCEL TRUST, INC. PREDECESSOR
NOTES TO CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
(A) Derived from the Company’s condensed consolidated and combined financial statements as of December 31, 2010.
(B) To reflect the acquisition of the Shopping Center as if it was acquired December 31, 2010 for a purchase price of approximately $110.0 million, not including closing costs. The acquisition will be funded by an assumed mortgage note of approximately $52.8 million and cash from a draw on the Company’s credit facility. The acquisition method of accounting was used to allocate the purchase price to tangible and identifiable intangible assets and liabilities and other working capital liabilities assumed according to their fair values. The purchase price has been allocated for the pro forma adjustments as follows:
| Land |
$ | 19,861 | ||
| Building |
75,833 | |||
| Site improvements |
935 | |||
| Tenant improvements |
2,849 | |||
| Lease intangible assets |
14,187 | |||
| Debt premium |
(104 | ) | ||
| Lease intangible liabilities |
(3,561 | ) | ||
| $ | 110,000 | |||
(C) Derived from the Company’s and the Predecessor’s condensed consolidated and combined financial statements of operations for the period from April 28, 2010 to December 31, 2010 and the period from January 1, 2010 to April 27, 2010.
(D) To reflect the acquisition of the Shopping Center as if it was acquired on January 1, 2010. The pro forma adjustments include the pro forma operations of the property. The acquisition method of accounting was used to allocate the purchase price to tangible and identified intangible assets and liabilities according to their fair values. The amount allocated to building and site improvements and tenant improvements is depreciated over an estimated useful life of 40 years and five years, respectively. The amounts allocated to intangible lease assets and liabilities are amortized over the lives of the leases with an average life of five years and six years, respectively.
Historical revenue of $5,829 and $2,750 is increased by $74 and $35, for the pro forma net amortization of above and below market leases for the period from April 28, 2010 to December 31, 2010 and the period from January 1, 2010 to April 27, 2010, respectively.
Expenses are based on historical operations of the previous owner except for real estate property tax which is calculated based on an estimated reassessed tax basis subsequent to the acquisition. Tenant recoveries have been adjusted to reflect the estimated property tax expense.
Interest expense reflects: 1) Assumption of a $52.8 million mortgage payable. The loan bears interest at a rate of 4.8%. 2) Borrowing of $57.2 million from the Company’s credit facility used to fund the acquisition. Interest is assumed to be 4.25%. The Company’s credit facility bears interest LIBOR plus a margin of 2.75%, with a LIBOR floor of 1.50%. As LIBOR was approximately 0.26% at December 31, 2010, an increase or decrease in LIBOR of up to 0.125% would have no effect on the Company’s interest rate given the LIBOR floor. 3) Amortization of approximately $55 of loan costs. 4) Amortization of approximately $104 of debt premium.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: May 4, 2011 | Excel Trust, Inc. | |||
| By: | /S/ JAMES Y. NAKAGAWA | |||
| James Y. Nakagawa | ||||
| Chief Financial Officer | ||||
EXHIBITS
| Exhibit |
Description of Exhibit | |
| 23.1 |
Consent of Deloitte & Touche, LLP (1) | |
| (1) | Filed herewith. |
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No. 333-166267 on Form S-8 of Excel Trust, Inc. of our report dated May 4, 2011, relating to the statement of revenues and certain expenses for the Shopping Center for the year ended December 31, 2010 (which report on the statement of revenues and certain expenses expresses an unqualified opinion and includes explanatory paragraphs referring of the purpose of the statement) appearing in this Current Report on Form 8-K/A of Excel Trust, Inc.
| /s/ DELOITTE & TOUCHE LLP |
| Los Angeles, CA |
| May 4, 2011 |