COVER 100 filename100.htm SEC Response Letter

 

Julian T.H. Kleindorfer

Direct Dial: +1.213.891.8371

Julian.Kleindorfer@LW.com

    355 South Grand Avenue

Los Angeles, California 90071-1560

Tel: +1.213.485.1234 Fax: +1.213.891.8763

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December 17, 2010      
     
     
     
     
     
VIA EDGAR AND COURIER      
     
Securities and Exchange Commission      
Division of Corporation Finance      
Mail Stop 4631      
100 F Street, N.E.   
Washington, D.C. 20549    File No. 043222-0002

 

Attention: Jennifer Gowetski, Senior Counsel
     Angela McHale, Attorney-Advisor
     Cicely LaMothe, Accounting Branch Chief
     Jorge Bonilla, Staff Accountant

 

          Re: American Assets Trust, Inc.
     Amendment No. 3 to Registration Statement on Form S-11
     Filed December 6, 2010
     File No. 333-169326

Ladies and Gentlemen:

On behalf of American Assets Trust, Inc. (the “Company”), we have electronically transmitted for filing under separate cover, pursuant to Regulation S-T, Amendment No. 4 (the “Amendment”) to the Company’s above-referenced Registration Statement on Form S-11, which was initially filed with the Securities and Exchange Commission (the “Commission”) on September 13, 2010 and subsequently amended on October 20, 2010 (“Amendment No. 1”), November 12, 2010 (“Amendment No. 2”) and December 6, 2010 (“Amendment No. 3”), as amended, the “Registration Statement.” For your convenience, we have enclosed a courtesy package that includes five copies of the Amendment, three of which have been marked to show changes from Amendment No. 3.

This letter responds to the comments of the staff (the “Staff”) of the Division of Corporation Finance of the Commission, received by facsimile on December 16, 2010 (the “Comment Letter”), with respect to the Registration Statement, and the Amendment has been revised to reflect the Company’s responses to the Comment Letter. For ease of review, we have set forth below each of the numbered comments of your letter and the Company’s responses thereto. All page numbers and captions in the responses below refer to the Amendment, except as otherwise noted below.

December 17, 2010

Page 2

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Risk Factors, page 20

Upon completion of this offering and our formation transactions . . . , page 33

 

1. We note your response to comment 2 in our letter dated November 29, 2010 and the revised disclosure on page 33 that you may be subject to on-going litigation, including existing claims relating to entities that own the properties and operate the business and that you may become subject to litigation in connection with the formation transactions. Please revise your disclosure on page 33 to specifically describe the on-going litigation and the existing claims relating to entities that own the properties and operate the business or advise.

Response: In response to the Staff’s comment, the Company has revised the disclosure on page 33 of the Amendment to specifically describe the on-going litigation and the existing claims relating to entities that own the properties and operate the business.

Financial Statements of American Assets Trust, Inc. Predecessor

Note 1 – Summary of Significant Accounting Policies

Real Estate, page F-34

 

2. We note your response to comment seven relating to your accounting for below market rental lease renewal options. Please quantify the impact on the amortization expense in each of the periods presented had you recorded the liability for all below market leases that you determined renewal was not probable. Clarify to us the amortization period you used which we presume is the renewal period. Also provide us your SAB 108 materiality analysis. This analysis should address the impact to your pro forma financial information as well as the audited financial information of your predecessor.

Response: In response to the Staff’s comment, the Company advises the Staff that, based on its calculations related to intangible lease liabilities with fixed rate renewal options, it determined that there were 11 leases where it was not probable that the tenants would exercise their right to renew the leases and that the potential liability related to these leases was $2.5 million. The Company did not record the $2.5 million liability related to these 11 leases since it had been determined that it was not probable that these 11 tenants would renew their leases based on qualitative and quantitative factors. While the Company believes its accounting treatment of the potential intangible lease liability is in accordance with GAAP, it acknowledges that other companies may have different approaches to analyzing intangible lease liabilities relating to below market leases with fixed rate renewals that, were the Company to adopt them, might require the Company to record some portion of the $2.5 million potential liability as an intangible lease liability on its balance sheet (with the debit side of the entry being to real estate property). However, even if the Company were to follow any such alternate approach, the Company respectfully advises the staff that it believes the effect on the Company’s financial statements would be immaterial.

In response to the Staff’s comment, the Company is providing a SAB 108 analysis of the impact of not recording 100% of this potential liability on the audited financial statements of its predecessor as well as on its pro forma information. Included in this analysis is the impact on the amortization into revenue had the Company recorded the liability for all below-market leases for which it had determined renewal was not probable. The amortization period for these leases is based on the renewal periods, therefore the below-market lease liability would not be amortized as an increase of revenue until the renewal period begins. It should be noted that the Company has previously recorded 100% of the potential below-market lease liability related to the nine tenants with respect to which the Company has concluded it is probable that such tenants will exercise their option to renew. These nine tenants constitute 70% of the potential liability for all leases (including the 11 leases discussed above) with below market rent with fixed rate options to renew.

With respect to the materiality of the adjustments relating to the additional intangible lease liabilities and related amortization and related property carrying amounts and related depreciation noted above, the Company believes such adjustments are not material to any of its prior or current year financial statements or pro forma financial information. Based on the quantitative analysis set forth below the Company believes that it is not likely that the judgment of a reasonable person relying upon its financial statements would have been changed or influenced by the inclusion of such adjustments.

December 17, 2010

Page 3

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Quantitative Determination of Materiality (2005 through 9/30/2010 and pro forma information)

The Company’s analysis of the materiality of such adjustments is as follows:

 

Category

   

Range of Impact on
Historical Information

   

Range of Impact on
Pro Forma Information

Adjustment as a percentage of Total Assets:

    0.19% - 0.23%    0.14%

Adjustment as a percentage of Total Liabilities:

    0.25% - 0.33%    0.26%

Adjustment as a percentage of Equity:

    0.03% - 0.16%    0.04%

Adjustment as a percentage of Revenue:

    0.00% - 0.04%    0.02% – 0.03%

Adjustment as a percentage of Depreciation:

    0.18% - 0.21%    0.12% - 0.13%

Adjustment as a percentage of Net Income from continuing operations:

    0.09% - 3.22% (rollover method) and 4.67% for the nine months ended September 30, 2010 (iron curtain method);    0.08%-0.09% (rollover method) and 2.62% (iron curtain method)

Support for the foregoing metrics is attached as Annex A to this letter.

Qualitative Determination of Materiality

 

  •  

The initial assigned intangible lease liabilities are based on valuations which are not capable of precise measurement and are thus subject to a considerable degree of estimation. Factors affecting such valuations include, among other factors, market rent assumptions, competitive considerations for the property and the tenants, sales projections, financial strength and staying power of tenants, renewal rate assumptions, and discount rates.

 

  •  

The adjustments would not mask a change in earnings or other trends. They would have no material impact (less than 0.1%) on “Funds from Operations” or FFO, a primary non-GAAP measure of performance for real estate operating companies and real estate investment trusts, widely used by the investment and banking community, which excludes real estate related depreciation altogether. The adjustments would have primarily impacted real estate related depreciation.

 

  •  

The adjustment would not change a loss into income or vice versa for any of the relevant years. For certain years the Company operated with minimal income or loss due to depreciation expense and/or impairment charges, therefore adjustments as a percentage of net income are not a meaningful measurement.

 

  •  

The Company has considered the impact on its segment data and determined it to not be material (i.e. from 0.0% to 0.2% of respective segment profit for all periods presented).

 

  •  

The adjustments will or would have no impact on the Company’s compliance with any debt covenants or other contractual or regulatory requirements.

 

  •  

The adjustments will or would have no effect on management’s compensation or the determination thereof.

December 17, 2010

Page 4

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Sensitivity Analysis: The Company respectfully suggests that the above analysis is conservative in that it assumes the accrual of 100% of the potential liability related to below market leases with fixed rate renewals. As it is likely that some of the tenants would not exercise their option to renew their lease for reasons independent of the rental rate, the Company believes it would be reasonable to assume that less than 100% of these potential liabilities will ultimately accrue. To illustrate the impact of the accrual of less than 100% of these potential liabilities, the Company has provided the following sensitivity analysis illustrating the impact on its key financial statement metrics if 50% and 75% of these potential liabilities were to be accrued.

Accrual of 50% of Potential Liability

 

Category

   

Range of Impact on

Historical Information

   

Range of Impact on

Pro Forma Information

Adjustment as a percentage of Total Assets:

    0.10% - 0.12%    0.07%

Adjustment as a percentage of Total Liabilities:

    0.13% - 0.17%    0.13%

Adjustment as a percentage of Equity:

    0.02% - 0.08%    0.02%

Adjustment as a percentage of Revenue:

    0.00% - 0.02%    0.01% – 0.02%

Adjustment as a percentage of Depreciation:

    0.09% - 0.11%    0.06% - 0.07%

Adjustment as a percentage of Net Income from continuing operations:

    0.05% - 1.61% (rollover method) and 2.35% for the nine months ended September 30, 2010 (iron curtain method);    0.04%-0.05% (rollover) and 1.31% (iron curtain)

Accrual of 75% of Potential Liability

 

Category

   

Range of Impact on

Historical Information

   

Range of Impact on

Pro Forma Information

Adjustment as a percentage of Total Assets:

    0.15% - 0.18%    0.11%

Adjustment as a percentage of Total Liabilities:

    0.19% - 0.25%    0.20%

Adjustment as a percentage of Equity:

    0.03% - 0.12%    0.03%

Adjustment as a percentage of Revenue:

    0.00% - 0.03%    0.01% – 0.03%

Adjustment as a percentage of Depreciation:

    0.13% - 0.16%    0.09% - 0.10%

Adjustment as a percentage of Net Income from continuing operations:

    0.07% - 2.42% (rollover method) and 3.55% for the nine months ended September 30, 2010 (iron curtain method);    0.06%-0.07% (rollover method) and 2.01% (iron curtain method)

Please do not hesitate to contact me by telephone at (213) 891-8371 or by fax at (213) 891-8763 with any questions or comments regarding this correspondence.

 

Very truly yours,
/s/ Julian T. H. Kleindorfer
Julian T.H. Kleindorfer
of LATHAM & WATKINS LLP

 

cc: John Chamberlain, American Assets Trust, Inc.
     Adam Wyll, American Assets Trust, Inc.
     Scott N. Wolfe, Esq., Latham & Watkins LLP
     Michael E. Sullivan, Esq., Latham & Watkins LLP
     David W. Bonser, Esq., Hogan Lovells US LLP
     Samantha S. Gallagher, Esq., Hogan Lovells US LLP

Annex A

SAB 108 Analysis

Below Market Leases with Fixed Rate Renewal Options

(In thousands)

 

     2005     2006     2007     2008     2009     9/30/2010     Pro Forma
2009		     Pro Forma
9/30/2010		  

ASSETS

                 

Total Real Estate

      817,309        803,589        802,605        793,237        774,208        927,430        N/A        1,288,236   

Total Assets

      1,057,606        1,029,157        1,039,909        971,118        938,991        1,101,906        N/A        1,511,941   

Adjustment

      2,417        2,353        2,289        2,225        2,161        2,122        N/A        2,122   

Percentage of Real Estate Assets

      0.30 %      0.29 %      0.29 %      0.28 %      0.28 %      0.23 %      N/A        0.16 % 

Percentage of Total Assets

      0.23 %      0.23 %      0.22 %      0.23 %      0.23 %      0.19 %      N/A        0.14 % 

LIABILITIES

                 

Other liabilities and deferred credits

      20,099        18,517        16,286        13,049        11,573        29,934        N/A        36,583   

Total Liabilities

      753,449        746,799        763,717        781,944        768,028        947,784        N/A        914,661   

Adjustment

      2,499        2,499        2,493        2,452        2,406        2,366        N/A        2,366   

Percentage of Other liabilities and deferred credits

      12.43 %      13.50 %      15.31 %      18.79 %      20.79 %      7.90 %      N/A        6.47 % 

Percentage of Liabilities

      0.33 %      0.33 %      0.33 %      0.31 %      0.31 %      0.25 %      N/A        0.26 % 

EQUITY

                 

Equity

      304,157        282,358        276,192        189,174        170,963        154,122        N/A        597,280   

Adjustment

      (82 )      (146 )      (204 )      (227 )      (245 )      (244 )      N/A        (244 ) 

Percentage of Equity

      -0.03 %      -0.05 %      -0.07 %      -0.12 %      -0.14 %      -0.16 %      N/A        -0.04 % 

REVENUES

                 

Revenues

      105,038        113,003        117,508        120,943        117,043        94,207        195,562        147,543   

Adjustment

      —          —          6        41        46        40        46        40   

Percentage of Revenue

      0.00 %      0.00 %      0.01 %      0.03 %      0.04 %      0.04 %      0.02 %      0.03 % 

DEPRECIATION

                 

Depreciation

      29,587        31,197        31,376        31,089        29,858        27,347        48,520        40,183   

Adjustment

      64        64        64        64        64        48        64        48   

Percentage of Depreciation

      0.22 %      0.21 %      0.20 %      0.21 %      0.21 %      0.18 %      0.13 %      0.12 % 

OPERATING INCOME

                 

Operating Income

      41,161        39,751        43,109        48,245        51,485        36,341        73,197        49,955   

Adjustment

      (64 )      (64 )      (58 )      (23 )      (18 )      (8 )      (18 )      (8 ) 

Percentage of Operating Income

      -0.16 %      -0.16 %      -0.13 %      -0.05 %      -0.03 %      -0.02 %      -0.02 %      -0.02 % 

FUNDS FROM OPERATIONS

                 

FFO

      N/A        N/A        N/A        N/A        N/A        N/A        68,029        49,846   

Adjustment

      N/A        N/A        N/A        N/A        N/A        N/A        46        40   

Percentage of FFO

      N/A        N/A        N/A        N/A        N/A        N/A        0.07 %      0.08 % 

NET INCOME FROM CONTINUING OPERATIONS

                 

Net Income from Continuing Operations

      (3,280 )      (2,018 )      (1,801 )      (12,059 )      5,239        5,413        19,509        9,663   

Adjustment on an annual basis

      (64 )      (64 )      (58 )      (23 )      (18 )      (8 )      (18 )      (8 ) 

Percentage of Net Income from continuing operations

      1.95 %      3.17 %      3.22 %      0.19 %      -0.34 %      -0.15 %      -0.09 %      -0.08 % 

Adjustment on a cumulative basis

      (82 )      (146 )      (204 )      (227 )      (245 )      (253 )      (245 )      (253 ) 

Percentage of Net Income from continuing operations

      2.50 %      7.23 %      11.33 %      1.88 %      -4.68 %      -4.67 %      -1.26 %      -2.62 % 

Balance Sheet

 

     December 31, 2008     December 31, 2009  
     12/31/2008     Adjustment     As Adjusted     Variance %     12/31/2009     Adjustment     As Adjusted     Variance %  

ASSETS

                 

Real estate, at cost

                 

Operating Real Estate

      953,116        2,499        955,615        0.26 %      959,724        2,499        962,223        0.26 % 

Construction in progress

      1,347          1,347        0.00 %      762          762        0.00 % 

Held for development

      7,639          7,639        0.00 %      7,846          7,846        0.00 % 
                                                                

Subtotal

      962,102        2,499        964,601        0.26 %      968,332        2,499        970,831     

Accumulated depreciation

      (168,865 )      (274 )      (169,139 )      0.16 %      (194,124 )      (338 )      (194,462 )      0.17 % 
                                                                

Net real estate

      793,237        2,225        795,462        0.28 %      774,208        2,161        776,369     

Cash and cash equivalents

      18,978          18,978        0.00 %      24,189          24,189        0.00 % 

Restricted cash

      4,527          4,527        0.00 %      4,644          4,644        0.00 % 

Accounts receivable, net

      19,843          19,843        0.00 %      20,767          20,767        0.00 % 

Notes receivable from affiliates

      22,099          22,099        0.00 %      20,969          20,969        0.00 % 

Investment in real estate partnerships

      69,967          69,967        0.00 %      57,810          57,810        0.00 % 

Prepaid expenses and other assets

      39,993          39,993        0.00 %      34,003          34,003        0.00 % 

Debt issuance costs, net of accumulated amortization

      2,474          2,474        0.00 %      2,401          2,401        0.00 % 
                                                                

TOTAL ASSETS

      971,118        2,225        973,343        0.23 %      938,991        2,161        941,152     
                                                                

LIABILITIES AND EQUITY

                 

Liabilities

                 

Secured notes payable

      724,206          724,206        0.00 %      723,920          723,920        0.00 % 

Unsecured notes payable

      21,143          21,143        0.00 %      12,864          12,864        0.00 % 

Notes payable to affiliates

      9,840          9,840        0.00 %      7,667          7,667        0.00 % 

Accounts payable and accrued expenses

      8,998          8,998        0.00 %      7,193          7,193        0.00 % 

Security deposits payable

      2,402          2,402        0.00 %      2,362          2,362        0.00 % 

Other liabilities and deferred credits

      13,049        2,452        15,501        18.79 %      11,573        2,406        13,979        20.79 % 

Distributions in excess of earnings on JVs

      2,306          2,306        0.00 %      2,449          2,449        0.00 % 
                                                                

Total liabilities

      781,944        2,452        784,396        0.31 %      768,028        2,406        770,434     

Equity

                  —       

Controlling interests

      148,864        (227 )      148,637        -0.15 %      133,173        (245 )      132,928        -0.18 % 

Noncontrolling interests

      40,310          40,310        0.00 %      37,790          37,790        0.00 % 
                                                    

Total equity

      189,174        (227 )      188,947        -0.12 %      170,963        (245 )      170,718        -0.14 % 
                                                                

TOTAL LIABILITIES AND EQUITY

      971,118        2,225        973,343        0.23 %      938,991        2,161        941,152        0.23 % 
                                                                

Balance Sheet

                 
     September 30, 2010     Pro Forma September 30, 2010  
     9/30/2010     Adjustment     As Adjusted     Variance %     9/30/2010     Adjustment     As Adjusted     Variance %  

ASSETS

                 

Real estate, at cost

                 

Operating Real Estate

      1,132,980        2,499        1,135,479        0.22 %         

Construction in progress

      621          621        0.00 %         

Held for development

      7,971          7,971        0.00 %         
                                        

Subtotal

      1,141,572        2,499        1,144,071             

Accumulated depreciation

      (214,142 )      (377 )      (214,519 )      0.18 %         
                                                                

Net real estate

      927,430        2,122        929,552          1,288,236        2,122        1,290,358        0.16 % 

Cash and cash equivalents

      37,363          37,363        0.00 %      120,135          120,135        0.00 % 

Restricted cash

      5,493          5,493        0.00 %      9,038          9,038        0.00 % 

Accounts receivable, net

      21,875          21,875        0.00 %      23,357          23,357        0.00 % 

Notes receivable from affiliates

      21,769          21,769        0.00 %      —            —       

Investment in real estate partnerships

      43,583          43,583        0.00 %      —            —       

Prepaid expenses and other assets

      42,079          42,079        0.00 %      68,015          68,015        0.00 % 

Debt issuance costs, net of accumulated amortization

      2,314          2,314        0.00 %      3,160          3,160        0.00 % 
                                                                

TOTAL ASSETS

      1,101,906        2,122        1,104,028          1,511,941        2,122        1,514,063     
                                                                

LIABILITIES AND EQUITY

                 

Liabilities

                 

Secured notes payable

      853,774          853,774        0.00 %      859,832          859,832        0.00 % 

Unsecured notes payable

      31,376          31,376        0.00 %      —            —       

Notes payable to affiliates

      5,889          5,889        0.00 %      —            —       

Accounts payable and accrued expenses

      10,244          10,244        0.00 %      14,115          14,115        0.00 % 

Security deposits payable

      2,639          2,639        0.00 %      4,131          4,131        0.00 % 

Other liabilities and deferred credits

      29,934        2,366        32,300        7.90 %      36,583        2,366        38,949        6.47 % 

Distributions in excess of earnings on JVs

      13,928          13,928        0.00 %      —            —       
                                                                

Total liabilities

      947,784        2,366        950,150          914,661        2,366        917,027     

Equity

          —                —       

Controlling interests

      120,499        (244 )      120,255        -0.20 %      526,096        (244 )      525,852        -0.05 % 

Noncontrolling interests

      33,623          33,623          71,184          71,184     
                                                                

Total equity

      154,122        (244 )      153,878        -0.16 %      597,280        (244 )      597,036        -0.04 % 
                                                                

TOTAL LIABILITIES AND EQUITY

      1,101,906        2,122        1,104,028        0.19 %      1,511,941        2,122        1,514,063        0.14 % 
                                                                

 

Income Statement

Effect of Annual Adjustment

  

  

            
     December 31, 2007     December 31, 2008  
     12/31/2007     Adjustment     As Adjusted     Variance %     12/31/2008     Adjustment     As Adjusted     Variance %  

REVENUE

                 

Rental income

      113,324        6        113,330        0.01 %      117,104        41        117,145        0.04 % 

Other property income

      4,184          4,184        0.00 %      3,839          3,839        0.00 % 
                                                                

Total revenue

      117,508        6        117,514        0.01 %      120,943        41        120,984        0.03 % 
                                                                

EXPENSES

                  0     

Rental expenses

      21,674          21,674        0.00 %      22,029          22,029        0.00 % 

Real estate taxes

      10,878          10,878        0.00 %      10,890          10,890        0.00 % 

General and administrative

      10,471          10,471        0.00 %      8,690          8,690        0.00 % 

Depreciation and amortization

      31,376        64        31,440        0.20 %      31,089        64        31,153        0.21 % 
                                                                

Total operating expenses

      74,399        64        74,463        0.09 %      72,698        64        72,762        0.09 % 
                                                                

OPERATING INCOME

      43,109        (58 )      43,051        -0.13 %      48,245        (23 )      48,222        -0.05 % 

Interest income

      2,462          2,462        0.00 %      1,167          1,167        0.00 % 

Interest expenses

      (42,902 )        (42,902 )      0.00 %      (43,737 )        (43,737 )      0.00 % 

Fee Income

      2,721          2,721        0.00 %      1,538          1,538        0.00 % 

Income from real estate partnership

      (7,191 )        (7,191 )      0.00 %      (19,272 )        (19,272 )      0.00 % 
                                                                

INCOME FROM CONTINUING OPERATIONS

      (1,801 )      (58 )      (1,859 )      3.22 %      (12,059 )      (23 )      (12,082 )      0.19 % 

DISCONTINUED OPERATIONS

                 

Income from discontinued operations

      (2,874 )        (2,874 )      0.00 %      (2,071 )        (2,071 )      0.00 % 

Gain on sale of real estate from discontinued operations

              2,625          2,625        0.00 % 

Results from discontinued operations

      (2,874 )      —          (2,874 )      0.00 %      554        —          554        0.00 % 
                                                                

NET INCOME

      (4,675 )      (58 )      (4,733 )      1.24 %      (11,505 )      (23 )      (11,528 )      0.20 % 

Net income attributable to noncontrolling interests

      (2,140 )        (2,140 )      0.00 %      (4,488 )        (4,488 )      0.00 % 
                                                                

NET INCOME ATTRIBUTABLE TO PREDECESSOR

      (2,535 )      (58 )      (2,593 )      2.29 %      (7,017 )      (23 )      (7,040 )      0.33 % 
                                                                

Income Statement

Effect of Cumulative Adjustment

  

  

            
     December 31, 2007     December 31, 2008  
     12/31/2007     Adjustment     As Adjusted     Variance %     12/31/2008     Adjustment     As Adjusted     Variance %  

REVENUE

                 

Rental income

      113,324        6        113,330        0.01 %      117,104        47        117,151        0.04 % 

Other property income

      4,184          4,184        0.00 %      3,839          3,839        0.00 % 
                                                                

Total revenue

      117,508        6        117,514        0.01 %      120,943        47        120,990        0.04 % 
                                                                

EXPENSES

                  0     

Rental expenses

      21,674          21,674        0.00 %      22,029          22,029        0.00 % 

Real estate taxes

      10,878          10,878        0.00 %      10,890          10,890        0.00 % 

General and administrative

      10,471          10,471        0.00 %      8,690          8,690        0.00 % 

Depreciation and amortization

      31,376        210        31,586        0.67 %      31,089        274        31,363        0.88 % 
                                                                

Total operating expenses

      74,399        210        74,609        0.28 %      72,698        274        72,972        0.38 % 
                                                                

OPERATING INCOME

      43,109        (204 )      42,905        -0.47 %      48,245        (227 )      48,018        -0.47 % 

Interest income

      2,462          2,462        0.00 %      1,167          1,167        0.00 % 

Interest expenses

      (42,902 )        (42,902 )      0.00 %      (43,737 )        (43,737 )      0.00 % 

Fee Income

      2,721          2,721        0.00 %      1,538          1,538        0.00 % 

Income from real estate partnership

      (7,191 )        (7,191 )      0.00 %      (19,272 )        (19,272 )      0.00 % 
                                                                

INCOME FROM CONTINUING OPERATIONS

      (1,801 )      (204 )      (2,005 )      11.33 %      (12,059 )      (227 )      (12,286 )      1.88 % 

DISCONTINUED OPERATIONS

                 

Income from discontinued operations

      (2,874 )        (2,874 )      0.00 %      (2,071 )        (2,071 )      0.00 % 

Gain on sale of real estate from discontinued operations

              2,625          2,625        0.00 % 

Results from discontinued operations

      (2,874 )      —          (2,874 )      0.00 %      554        —          554        0.00 % 
                                                                

NET INCOME

      (4,675 )      (204 )      (4,879 )      4.36 %      (11,505 )      (227 )      (11,732 )      1.97 % 

Net income attributable to noncontrolling interests

      (2,140 )        (2,140 )      0.00 %      (4,488 )        (4,488 )      0.00 % 
                                                                

NET INCOME ATTRIBUTABLE TO PREDECESSOR

      (2,535 )      (204 )      (2,739 )      8.05 %      (7,017 )      (227 )      (7,244 )      3.24 % 
                                                                

 

Income Statement

Effect of Annual Adjustment

  

  

            
     December 31, 2009     Pro Forma
December 31, 2009		  
     12/31/2009     Adjustment     As Adjusted     Variance %     12/31/2009     Adjustment     As Adjusted     Variance %  

REVENUE

                 

Rental income

      113,080        46        113,126        0.04 %      188,794        46        188,840        0.02 % 

Other property income

      3,963          3,963        0.00 %      6,768          6,768        0.00 % 
                                                                

Total revenue

      117,043        46        117,089        0.04 %      195,562        46        195,608        0.02 % 
                                                                

EXPENSES

          0              0     

Rental expenses

      20,336          20,336        0.00 %      49,433          49,433        0.00 % 

Real estate taxes

      8,306          8,306        0.00 %      13,298          13,298        0.00 % 

General and administrative

      7,058          7,058        0.00 %      11,114          11,114        0.00 % 

Depreciation and amortization

      29,858        64        29,922        0.21 %      48,520        64        48,584        0.13 % 
                                                                

Total operating expenses

      65,558        64        65,622        0.10 %      122,365        64        122,429        0.05 % 
                                                                

OPERATING INCOME

      51,485        (18 )      51,467        -0.03 %      73,197        (18 )      73,179        -0.02 % 

Interest income

      173          173        0.00 %      (113 )        (113 )      0.00 % 

Interest expenses

      (43,290 )        (43,290 )      0.00 %      (53,575 )        (53,575 )      0.00 % 

Fee Income

      1,736          1,736        0.00 %      —            —       

Income from real estate partnership

      (4,865 )        (4,865 )      0.00 %      —            —       
                                                                

INCOME FROM CONTINUING OPERATIONS

      5,239        (18 )      5,221        -0.34 %      19,509        (18 )      19,491        -0.09 % 

DISCONTINUED OPERATIONS

                 

Income from discontinued operations

      —            —            —            —       

Gain on sale of real estate from discontinued operations

      —            —            —            —       

Results from discontinued operations

      —          —          —            —          —          —       
                                                                

NET INCOME

      5,239        (18 )      5,221        -0.34 %      19,509        (18 )      19,491        -0.09 % 

Net income attributable to noncontrolling interests

      (1,205 )        (1,205 )      0.00 %          —       
                                                                

NET INCOME ATTRIBUTABLE TO PREDECESSOR

      6,444        (18 )      6,426        -0.28 %      19,509        (18 )      19,491        -0.09 % 
                                                                

Income Statement

Effect of Cumulative Adjustment

  

  

            
     December 31, 2009     Pro Forma
December 31, 2009		  
     12/31/2009     Adjustment     As Adjusted     Variance %     12/31/2009     Adjustment     As Adjusted     Variance %  

REVENUE

                 

Rental income

      113,080        93        113,173        0.08 %      188,794        93        188,887        0.05 % 

Other property income

      3,963          3,963        0.00 %      6,768          6,768        0.00 % 
                                                                

Total revenue

      117,043        93        117,136        0.08 %      195,562        93        195,655        0.05 % 
                                                                

EXPENSES

          0              0     

Rental expenses

      20,336          20,336        0.00 %      49,433          49,433        0.00 % 

Real estate taxes

      8,306          8,306        0.00 %      13,298          13,298        0.00 % 

General and administrative

      7,058          7,058        0.00 %      11,114          11,114        0.00 % 

Depreciation and amortization

      29,858        338        30,196        1.13 %      48,520        338        48,858        0.70 % 
                                                                

Total operating expenses

      65,558        338        65,896        0.52 %      122,365        338        122,703        0.28 % 
                                                                

OPERATING INCOME

      51,485        (245 )      51,240        -0.48 %      73,197        (245 )      72,952        -0.33 % 

Interest income

      173          173        0.00 %      (113 )        (113 )      0.00 % 

Interest expenses

      (43,290 )        (43,290 )      0.00 %      (53,575 )        (53,575 )      0.00 % 

Fee Income

      1,736          1,736        0.00 %      —            —       

Income from real estate partnership

      (4,865 )        (4,865 )      0.00 %      —            —       
                                                                

INCOME FROM CONTINUING OPERATIONS

      5,239        (245 )      4,994        -4.68 %      19,509        (245 )      19,264        -1.26 % 

DISCONTINUED OPERATIONS

                 

Income from discontinued operations

      —            —            —            —       

Gain on sale of real estate from discontinued operations

      —            —            —            —       

Results from discontinued operations

      —          —          —            —          —          —       
                                                                

NET INCOME

      5,239        (245 )      4,994        -4.68 %      19,509        (245 )      19,264        -1.26 % 

Net income attributable to noncontrolling interests

      (1,205 )        (1,205 )      0.00 %          —       
                                                                

NET INCOME ATTRIBUTABLE TO PREDECESSOR

      6,444        (245 )      6,199        -3.80 %      19,509        (245 )      19,264        -1.26 % 
                                                                

Income Statement

Effect of Annual Adjustment

 

      Year-to-date
September 30, 2010		     Pro Forma
September 30, 2010		  
     9/30/2010     Adjustment     As Adjusted     Variance %     9/30/2010     Adjustment     As Adjusted     Variance %  

REVENUE

                 

Rental income

      91,437        40        91,477        0.04 %      142,634        40        142,674        0.03 % 

Other property income

      2,770          2,770        0.00 %      4,909          4,909        0.00 % 
                                                                

Total revenue

      94,207        40        94,247        0.04 %      147,543        40        147,583        0.03 % 
                                                                

EXPENSES

          0              0     

Rental expenses

      16,114          16,114        0.00 %      36,729          36,729        0.00 % 

Real estate taxes

      9,481          9,481        0.00 %      12,636          12,636        0.00 % 

General and administrative

      4,924          4,924        0.00 %      8,040          8,040        0.00 % 

Depreciation and amortization

      27,347        48        27,395        0.18 %      40,183        48        40,231        0.12 % 
                                                                

Total operating expenses

      57,866        48        57,914        0.08 %      97,588        48        97,636        0.05 % 
                                                                

OPERATING INCOME

      36,341        (8 )      36,333        -0.02 %      49,955        (8 )      49,947        -0.02 % 

Interest income

      62          62        0.00 %      (170 )        (170 )      0.00 % 

Interest expenses

      (34,057 )        (34,057 )      0.00 %      (40,122 )        (40,122 )      0.00 % 

Fee Income

      2,201          2,201        0.00 %      —            —       

Income from real estate partnership

      866          866        0.00 %      —            —       
                                                                

INCOME FROM CONTINUING OPERATIONS

      5,413        (8 )      5,405        -0.15 %      9,663        (8 )      9,655        -0.08 % 

DISCONTINUED OPERATIONS

                 

Income from discontinued operations

      —            —            —            —       

Gain on sale of real estate from discontinued operations

      —            —            —            —       

Results from discontinued operations

      —          —          —            —          —          —       
                                                                

NET INCOME

      5,413        (8 )      5,405        -0.15 %      9,663        (8 )      9,655        -0.08 % 

Net income attributable to noncontrolling interests

      (1,905 )        (1,905 )      0.00 %          —       
                                                                

NET INCOME ATTRIBUTABLE TO PREDECESSOR

      7,318        (8 )      7,310        -0.11 %      9,663        (8 )      9,655        -0.08 % 
                                                                

Income Statement

Effect of Cumulative Adjustment

  

  

      Year-to-date
September 30, 2010		     Pro Forma
September 30, 2010		  
     9/30/2010     Adjustment     As Adjusted     Variance %     9/30/2010     Adjustment     As Adjusted     Variance %  

REVENUE

                 

Rental income

      91,437        133        91,570        0.15 %      142,634        133        142,767        0.09 % 

Other property income

      2,770          2,770        0.00 %      4,909          4,909        0.00 % 
                                                                

Total revenue

      94,207        133        94,340        0.14 %      147,543        133        147,676        0.09 % 
                                                                

EXPENSES

          0              0     

Rental expenses

      16,114          16,114        0.00 %      36,729          36,729        0.00 % 

Real estate taxes

      9,481          9,481        0.00 %      12,636          12,636        0.00 % 

General and administrative

      4,924          4,924        0.00 %      8,040          8,040        0.00 % 

Depreciation and amortization

      27,347        386        27,733        1.41 %      40,183        386        40,569        0.96 % 
                                                                

Total operating expenses

      57,866        386        58,252        0.67 %      97,588        386        97,974        0.40 % 
                                                                

OPERATING INCOME

      36,341        (253 )      36,088        -0.70 %      49,955        (253 )      49,702        -0.51 % 

Interest income

      62          62        0.00 %      (170 )        (170 )      0.00 % 

Interest expenses

      (34,057 )        (34,057 )      0.00 %      (40,122 )        (40,122 )      0.00 % 

Fee Income

      2,201          2,201        0.00 %      —            —       

Income from real estate partnership

      866          866        0.00 %      —            —       
                                                                

INCOME FROM CONTINUING OPERATIONS

      5,413        (253 )      5,160        -4.67 %      9,663        (253 )      9,410        -2.62 % 

DISCONTINUED OPERATIONS

                 

Income from discontinued operations

      —            —            —            —       

Gain on sale of real estate from discontinued operations

      —            —            —            —       

Results from discontinued operations

      —          —          —            —          —          —       
                                                                

NET INCOME

      5,413        (253 )      5,160        -4.67 %      9,663        (253 )      9,410        -2.62 % 

Net income attributable to noncontrolling interests

      (1,905 )        (1,905 )      0.00 %          —       
                                                                

NET INCOME ATTRIBUTABLE TO PREDECESSOR

      7,318        (253 )      7,065        -3.46 %      9,663        (253 )      9,410        -2.62 %