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Stockholders' Equity
12 Months Ended
Dec. 31, 2012
Stockholders' Equity
11. Stockholders’ Equity

Upon formation, the Advisor acquired 22,222 shares of the Company’s common stock for $200,000.

Public Offering — On July 15, 2010, the Company filed a Registration Statement on Form S-11 (“Registration Statement”) with the Securities and Exchange Commission (the “SEC”) to offer for sale up to $3.0 billion of shares of common stock (300,000,000 shares of common stock at $10.00 per share), of which initially 15,000,000 shares are being offered pursuant to its distribution reinvestment plan at a price of $9.50 per share. The Registration Statement was declared effective on June 27, 2011, and the Offering commenced on that date. On June 8, 2011, the Company amended its articles of incorporation to authorize the issuance of 1,620,000,000 shares of capital stock, $0.01 par value per share, consisting of 1,120,000,000 common shares, $0.01 par value per share, 200,000,000 preferred shares and 300,000,000 excess shares. The Company also established a distribution reinvestment plan under which stockholders may elect to have the full amount of their cash distribution from the Company reinvested in additional shares of common stock.

 

As of October 5, 2011, the Company received and accepted aggregate subscriptions in excess of the minimum offering amount of $2.0 million in shares of common stock and commenced operations.

For the year ended December 31, 2012 and 2011, the Company received offering proceeds of approximately $168.1 million (16.9 million shares) and 13.3 million (1.3 million shares), respectively, including approximately $1.7 million (0.2 million shares) and $0.03 million (0.003 million shares), respectively, received through its Reinvestment Plan.

Distributions — On July 29, 2011, the Company’s board of directors authorized a distribution policy providing for monthly cash distributions of $0.03333 (which is equal to an annualized distribution rate of 4%) together with stock distributions of 0.002500 shares of common stock (which is equal to an annualized distribution rate of 3%) for a total annualized distribution of 7% on each outstanding share of common stock (based on $10.00 offering price) payable to all common stockholders of record as of the close of business on the first business day of each month.

The Company commenced operations on October 5, 2011 and declarations of distributions pursuant to this policy began on the first day of November 2011, and will continue on the first day of each month thereafter until such policy is modified by the board of directors. Distributions shall be paid quarterly and will be calculated for each stockholder as of the first day of each month the stockholder has been a stockholder of record in such quarter.

The following table represents total cash distributions declared, distributions reinvested and distributions per share for the years ended December 31, 2012 and 2011, respectively:

 

                   Distributions Paid (3)                       

Periods

   Cash
Distributions
per Share
     Total Cash
Distributions
Declared (2)
     Reinvested
via DRP
     Cash
Distributions
net of
Reinvestment
Proceeds
     Stock
Distributions
Declared
(Shares) (4)
     Stock
Distributions
Declared (at
current
offering
price)
     Total Cash
and Stock
Distributions
Declared(5)
 

2012 Quarter (1)

                    

First

   $ 0.09999       $ 202,598       $ 112,295       $ 90,303         15,196       $ 151,960       $ 354,558   

Second

     0.09999         557,865         308,872         248,993         41,735         417,350         975,215   

Third

     0.09999         984,050         532,724         451,326         73,911         739,110         1,723,160   

Fourth

     0.09999         1,452,887         785,006         667,881         108,943         1,089,430         2,542,317   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Year

   $ 0.39996       $ 3,197,400       $ 1,738,897       $ 1,458,503         239,785       $ 2,397,850       $ 5,595,250   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

                   Distributions Paid (3)                       

Periods

   Cash
 Distributions 
per Share
     Total Cash
Distributions
Declared (2)
     Reinvested
via DRP
     Cash
Distributions
net of
Reinvestment
Proceeds
     Stock
Distributions
Declared
(Shares) (4)
     Stock
Distributions
Declared (at
current
offering
price)
     Total Cash
and Stock
Distributions
Declared(5)
 

2011 Quarter (1)

                    

First

   $ —        $ —        $ —        $ —          —        $ —        $ —    

Second

     —          —          —          —          —          —          —    

Third

     —          —          —          —          —          —          —    

Fourth

     0.06666         55,892         27,667         28,225         4,180        41,800        97,692   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Year

   $ 0.06666       $      55,892       $      27,667       $      28,225             4,180      $      41,800      $      97,692   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

FOOTNOTES:

 

(1) The Company commenced operations on October 5, 2011, as such there were no distributions declared during the first three quarters of 2011.
(2) For the year ended December 31, 2012 cash distributions paid to stockholders were 100% funded with proceeds from the Company’s Offering. For the year ended December 31, 2012, 100% of the cash distributions paid to stockholders are expected to be considered a return of capital to stockholders for federal income tax purposes. Whereas, for the year ended December 31, 2011, approximately 1.9% of the cash distributions paid to stockholders were considered taxable income and 98.1% were considered a return of capital to stockholders for federal income tax purposes.
(3) Represents the amount of cash used to fund distributions and the amount of distributions paid which were reinvested in additional shares through the Company’s distribution reinvestment plan.
(4) The distribution of new common shares to the recipients is non-taxable. Stock distributions may cause the interest of later investors in our stock to be diluted as a result of the stock issued to earlier investors.
(5) Based on the current offering price of $10.00, stock distributions declared represented approximately 43% of the total value of distributions declared and cash distributions declared represented approximately 57% of the total value of distributions declared.

Redemption Plan—The Company has adopted a share redemption plan that allows its stockholders who hold shares for at least one year to request that the Company redeem between 25% and 100% of their shares. If the Company has sufficient funds available to do so and if it chooses, in its sole discretion, to redeem shares, the number of shares the Company may redeem in any calendar year and the price at which they are redeemed are subject to conditions and limitations, including:

 

  (1) If the Company elects to redeem shares, some or all of the proceeds from the sale of shares under its distribution reinvestment plan attributable to any quarter may be used to redeem shares presented for redemption during such quarter. In addition, the Company may use up to $100,000 per quarter of the proceeds from any public offering for redemptions (with the unused amount of any offering proceeds available for use in future quarters to the extent not used to invest in assets or for other purposes);

 

  (2) No more than 5% of the weighted number of shares of the Company’s common stock outstanding during a 12-month period may be redeemed during such 12-month period; and

 

  (3) Redemption pricing will range from 92.5% of the purchase price per share for stockholders who have owned their shares for at least one year to 100% of the purchase price per share for stockholders who have owned their shares for at least four years.

The Company’s board of directors has the ability, in its sole discretion, to amend or suspend the redemption plan or to waive any specific conditions if such action is deemed to be in the Company’s best interest. During the year ended December 31, 2012, we received and redeemed one redemption request for 1,049 shares of common stock at a redemption price of $9.99 per share. No such redemption occurred during the year ended December 31, 2011.

Stock Issuance and Offering Costs – The Company has and will continue to incur costs in connection with the Offering and issuance of shares, including selling commissions, marketing support fees, filing fees, legal, accounting, printing and due diligence expense reimbursements, which are recorded as stock issuance and offering costs and deducted from stockholders’ equity.

 

In accordance with the Company’s articles of incorporation, the total amount of selling commissions, marketing support fees, and other organizational and offering costs to be paid by the Company may not exceed 15% of the aggregate gross offering proceeds. Offering costs are generally funded by our Advisor and subsequently reimbursed by the Company subject to this limitation.

For the years ended December 31, 2012 and 2011, the Company incurred approximately $23.4 million and $2.0 million, respectively, in stock issuance and other offering costs, as described in the discussion of selling commissions and marketing support fees and offering expenses in Note 10. “Related Party Arrangements.”