UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 23, 2014 (October 17, 2014)
AMERICAN REALTY CAPITAL PROPERTIES, INC.
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
(Exact name of Registrant as specified in its charter)
_________________________
| Maryland | 001-35263 | 45-2482685 |
| Delaware | 333-197780 | 45-1255683 |
|
(State or other jurisdiction of incorporation)
|
(Commission File Number) | (IRS Employer Identification No.) |
405 Park Avenue, 15th Floor
New York, New York 10022
(Address of principal executive offices, including zip code)
(212) 415-6500
(Registrant’s telephone number, including area code)
(Former name or former address, if changed
since last report)
_________________________
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:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01. Completion of Acquisition or Disposition of Assets.
American Realty Capital Properties, Inc. Completes Sale of Multi-Tenant Shopping Center Portfolio for $1.93 Billion to Blackstone-DDR Joint Venture
On October 17, 2014, subsidiaries of ARC Properties Operating Partnership, L.P. (“ARCP OP”), of which American Realty Capital Properties, Inc. (the “Company”) is the general partner and parent, completed the sale of a portfolio of 71 properties (consisting of 64 multi-tenant shopping centers and seven single-tenant retail properties and the adjacent land and related property (the “Portfolio”)) to BRE DDR Retail Holdings III LLC (the “Purchaser”), an entity indirectly jointly owned by affiliates of Blackstone Real Estate Partners VII L.P. and DDR Corp. The Portfolio constitutes substantially the same assets that the Company previously announced it would spin off into a new real estate investment trust, American Realty Capital Centers, Inc. The Portfolio was sold to the Purchaser for a contract purchase price of $1.93 billion, exclusive of closing costs.
The Purchaser has no material relationship with the Company, ARCP OP or the Company’s or ARCP OP’s respective affiliates, directors or officers, aside from its purchase of the Portfolio.
As permitted by that certain Agreement of Purchase and Sale among certain subsidiaries of ARCP OP and the Purchaser, dated as of June 11, 2014, which was filed as Exhibit 10.50 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 with the U.S. Securities and Exchange Commission on July 29, 2014, five properties from the original 76-property portfolio were excluded from the sale of the Portfolio to the Purchaser. As announced by the Company on October 20, 2014, the Company has entered into a letter of intent to sell those excluded five properties to an unrelated third party for $52.8 million, bringing total sales proceeds relating to the originally announced 76-property portfolio to $1.98 billion.
Item 9.01. Financial Statements and Exhibits.
(b) Pro forma financial information.
The unaudited pro forma financial statements and notes related thereto of the Company and ARCP OP required by Item 9.01(b) of Form 8-K and Article 11 of Regulation S-X relating to the disposition of the Portfolio, as of and for the six months ended June 30, 2014, are attached to this Current Report on Form 8-K as Exhibit 99.1 and are incorporated by reference herein.
(d) Exhibits.
|
Exhibit |
Description | |
| 99.1 |
Unaudited Pro Forma Financial Statements and Notes Related Thereto of the Company Relating to the Disposition of the Portfolio, as of and for the Six Months Ended June 30, 2014
| |
|
Unaudited Pro Forma Financial Statements and Notes Related Thereto of ARCP OP Relating to the Disposition of the Portfolio, as of and for the Six Months Ended June 30, 2014
| ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AMERICAN REALTY CAPITAL PROPERTIES, INC. | ||
|
By: |
/s/ David S. Kay | |
| Name: | David S. Kay | |
| Title: | Chief Executive Officer | |
|
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
By: American Realty Capital Properties, Inc., its sole general partner | ||
|
By: |
/s/ David S. Kay | |
| Name: | David S. Kay | |
| Title: | Chief Executive Officer | |
Date: October 23, 2014
Exhibit 99.1
American Realty Capital Properties, Inc.
Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated financial statements were developed by applying pro forma adjustments to the historical consolidated financial data which reflect the transaction described below.
The following unaudited pro forma consolidated balance sheet is presented as if American Realty Capital Properties, Inc. (“ARCP” or the “Company”) had completed the sale of the Multi-Tenant Portfolio (as defined below) as of June 30, 2014.
The following unaudited pro forma consolidated statement of operations for the six months ended June 30, 2014 is presented as if the sale of the Multi-Tenant Portfolio had occurred at the beginning of the period presented.
The Company did not include the pro forma financial statements for the year ended December 31, 2013 as the Company did not own any of the properties within the Multi-Tenant Portfolio during such year then ended. As such, the pro forma impact of the sale of the Multi-Tenant Portfolio would have no effect on the Company’s consolidated statement of operations for the year ended December 31, 2013.
On June 11, 2014, indirect wholly-owned subsidiaries of ARCP entered into an Agreement of Purchase and Sale for the sale of the Multi-Tenant Portfolio to a third party, subject to certain closing conditions. On October 17, 2014, the Company completed the sale of 71 properties, consisting of 64 multi-tenant shopping centers and 7 single-tenant retail properties (the “Multi-Tenant Portfolio”) to the third party, for a purchase price of $1.93 billion. Separately, the Company has entered into a letter of intent to sell five properties to an unrelated third-party for $52.8 million. Those five properties have not been included in these pro forma consolidated financial statements.
The unaudited pro forma consolidated financial statements should be read in conjunction with ARCP’s historical financial statements and notes thereto as of and for the three and six months ended June 30, 2014 included within the Company’s Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission (“SEC”) on July 29, 2014. The unaudited pro forma financial statements are not necessarily indicative of the results of operations or financial position that would have been reported had the above transactions occurred at the beginning of the period presented or as of June 30, 2014.
American Realty Capital Properties, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
June 30, 2014
(In thousands)
| ARCP Historical (1) | Multi-Tenant Portfolio (2) | ARCP Pro Forma | ||||||||||
| Assets | ||||||||||||
| Real estate investments, at cost: | ||||||||||||
| Land | $ | 3,361,195 | $ | (421,165 | )(3) | $ | 2,940,030 | |||||
| Buildings, fixtures and improvements | 12,445,972 | (1,376,445 | )(3) | 11,069,527 | ||||||||
| Land and construction in progress | 62,594 | (3,647 | )(3) | 58,947 | ||||||||
| Acquired intangible lease assets | 2,231,675 | (287,271 | )(3) | 1,944,404 | ||||||||
| Total real estate investments, at cost | 18,101,436 | (2,088,528 | ) | 16,012,908 | ||||||||
| Less: accumulated depreciation and amortization | (661,005 | ) | 48,148 | (3) | (612,857 | ) | ||||||
| Total real estate investments, net | 17,440,431 | (2,040,380 | ) | 15,400,051 | ||||||||
| Investments in unconsolidated entities | 102,047 | - | 102,047 | |||||||||
| Investment in direct financing leases, net | 62,094 | - | 62,094 | |||||||||
| Investment securities, at fair value | 219,204 | - | 219,204 | |||||||||
| Loans held for investment, net | 97,587 | - | 97,587 | |||||||||
| Cash and cash equivalents | 193,690 | - | 193,690 | |||||||||
| Restricted cash | 69,544 | - | 69,544 | |||||||||
| Intangible assets, net | 347,618 | - | 347,618 | |||||||||
| Deferred costs and other assets, net | 405,056 | (2,681 | )(3) | 402,375 | ||||||||
| Goodwill | 2,304,880 | - | 2,304,880 | |||||||||
| Due from affiliates | 73,336 | - | 73,336 | |||||||||
| Total assets | $ | 21,315,487 | $ | (2,043,061 | ) | $ | 19,272,426 | |||||
| Liabilities and Equity | ||||||||||||
| Mortgage notes payable, net | $ | 4,227,494 | $ | (544,493 | )(3) | $ | 3,683,001 | |||||
| Corporate bonds, net | 2,546,089 | - | 2,546,089 | |||||||||
| Convertible debt, net | 975,003 | - | 975,003 | |||||||||
| Credit facilities | 1,896,000 | (1,368,446 | )(4) | 527,554 | ||||||||
| Other debt, net | 146,158 | - | 146,158 | |||||||||
| Below-market lease liabilities, net | 283,518 | (54,869 | )(3) | 228,649 | ||||||||
| Accounts payable and accrued expenses | 154,741 | - | 154,741 | |||||||||
| Deferred rent, derivatives and other liabilities | 218,023 | (6,721 | )(3) | 211,302 | ||||||||
| Distributions payable | 3,837 | - | 3,837 | |||||||||
| Due to affiliates | 835 | - | 835 | |||||||||
| Total liabilities | 10,451,698 | (1,974,529 | ) | 8,477,169 | ||||||||
| Series D preferred stock | 269,299 | - | 269,299 | |||||||||
| Series F preferred stock | 427 | - | 427 | |||||||||
| Common stock | 9,079 | - | 9,079 | |||||||||
| Additional paid-in capital | 11,904,537 | - | 11,904,537 | |||||||||
| Accumulated other comprehensive income | 12,392 | - | 12,392 | |||||||||
| Accumulated deficit | (1,628,354 | ) | (67,715 | )(5) | (1,696,069 | ) | ||||||
| Total stockholders' equity | 10,298,081 | (67,715 | ) | 10,230,366 | ||||||||
| Non-controlling interests | 296,409 | (817 | )(3) | 295,592 | ||||||||
| Total equity | 10,594,490 | (68,532 | ) | 10,525,958 | ||||||||
| Total liabilities and equity | $ | 21,315,487 | $ | (2,043,061 | ) | $ | 19,272,426 | |||||
American Realty Capital Properties, Inc.
Notes to Unaudited Pro Forma Consolidated Balance Sheet
| (1) | Reflects the historical Consolidated Balance Sheet of ARCP as of June 30, 2014 as presented within the Company’s Quarterly Report on Form 10-Q filed with the SEC on July 29, 2014. |
| (2) | Adjustments reflect the pro forma impact of the sale of the Multi-Tenant Portfolio as if the sale had occurred on June 30, 2014. |
| (3) | Adjustment reflects the removal of the real estate investments and other assets, such as straight line rent receivable, and the mortgage debt and other liabilities, such as below market lease and deferred rent, and the non-controlling interests associated with the 71 properties included in the Multi-Tenant Portfolio. |
| (4) | Reflects the anticipated cash proceeds from the sale of the Multi-Tenant Portfolio, offset by closing costs of $15.0 million expected to be incurred in the Multi-Tenant Portfolio disposition transaction comprised of third-party legal expenses, debt assumption costs, transfer taxes, accounting fees and investment banking fees. On a pro forma basis, the net proceeds will be used to paydown ARCP’s existing credit facility. ARCP has commitments on its unsecured credit facility (including revolving and term loans) for total borrowings of $4.6 billion as of June 30, 2014, with an accordion feature of up to $6.0 billion, subject to borrowing base availability, among other conditions. |
| (5) | Reflects the excess of the carrying value, as of June 30, 2014, of the assets associated with the Multi-Tenant Portfolio,
net of liabilities, over the expected proceeds from the sale of the Multi-Tenant Portfolio less the estimated closing costs. The Company is permitted a period of up to one year to assess the estimated fair values of the assets
acquired and liabilities assumed, including intangible assets, from the date that the Company acquired Cole Real Estate Investments,
Inc., or February 7, 2014; therefore, the Company is still in the process of finalizing its assessment of the fair value of these
assets. Thus, the provisional measurements and valuation of intangible assets are subject to change. Such post-closing adjustments
are customary in nature in accordance with ASC 805, Business Combinations. Accordingly, the Company would presume no gain or loss
to be reflected from the disposition of the Multi-Tenant Portfolio. |
American Realty Capital Properties, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
Six Months Ended June 30, 2014
(In thousands, except per share data)
| ARCP Historical (1) | Multi-Tenant Portfolio (2) | ARCP Pro Forma | ||||||||||
| Revenues: | ||||||||||||
| Rental income | $ | 559,288 | $ | (59,146 | )(3) | $ | 500,142 | |||||
| Direct financing lease income | 2,187 | - | 2,187 | |||||||||
| Operating expense reimbursements | 49,641 | (12,677 | )(3) | 36,964 | ||||||||
| Cole Capital revenue | 91,479 | - | 91,479 | |||||||||
| Total revenues | 702,595 | (71,823 | ) | 630,772 | ||||||||
| Operating expenses: | ||||||||||||
| Cole Capital reallowed fees and commissions | 41,504 | - | 41,504 | |||||||||
| Acquisition related | 20,337 | (1,973 | )(3) | 18,364 | ||||||||
| Merger and other transaction related | 235,478 | - | 235,478 | |||||||||
| Property operating | 69,030 | (19,562 | )(3) | 49,468 | ||||||||
| General and administrative | 44,748 | - | 44,748 | |||||||||
| Equity-based compensation | 31,848 | - | 31,848 | |||||||||
| Depreciation and amortization | 424,356 | (44,330 | )(3) | 380,026 | ||||||||
| Total operating expenses | 867,301 | (65,865 | )(3) | 801,436 | ||||||||
| Operating loss | (164,706 | ) | (5,958 | ) | (170,664 | ) | ||||||
| Other income (expenses): | ||||||||||||
| Interest expense, net | (216,347 | ) | 19,943 | (4) | (196,404 | ) | ||||||
| Other income, net | 10,915 | (246 | )(3) | 10,669 | ||||||||
| Gain on derivative instruments, net | 1,729 | (293 | )(3) | 1,436 | ||||||||
| Gain on disposition of properties | 4,489 | - | 4,489 | |||||||||
| Total other expenses, net | (199,214 | ) | 19,404 | (179,810 | ) | |||||||
| Net loss (income) attributable to non-controlling interests | (363,920 | ) | 13,446 | (350,474 | ) | |||||||
| Net loss (income) attributable to non-controlling interests | 14,911 | (551 | )(5) | 14,360 | ||||||||
| Net (loss) income attributable to shareholders | (349,009 | ) | 12,895 | (336,114 | ) | |||||||
| Dividends allocable to preferred shares | 44,443 | - | 44,443 | |||||||||
| Dividends allocable to participating securities | 2,280 | - | 2,280 | |||||||||
| Net (loss) income attributable to common shareholders | $ | (395,732 | ) | $ | 12,895 | $ | (382,837 | ) | ||||
| Earnings per common share: | ||||||||||||
| Basic and Diluted | $ | (0.58 | ) | $ | (0.56 | ) | ||||||
| Weighted average common share: | ||||||||||||
| Basic and Diluted (6) | 682,502 | 682,502 | ||||||||||
American Realty Capital Properties, Inc.
Notes to Unaudited Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 2014
| (1) | Reflects the historical Consolidated Statement of Operations of ARCP for the six months ended June 30, 2014, as presented within the Company’s Form 10-Q filed with the SEC on July 29, 2014. |
| (2) | Adjustments reflect the pro forma impact of the sale of the Multi-Tenant Portfolio to record the sale as if it had occurred on January 1, 2014. |
| (3) | Reflects adjustments to eliminate the revenues and expenses recording during the six months ended June 30, 2014 that were attributable to the Multi-Tenant Portfolio. Operating expenses are not reduced by the savings expected to be realized with a streamlined work force. |
| (4) | Adjustments reflect $10.9 million in interest savings on ARCP’s existing unsecured credit facility for the repayment of $1.4 billion from the proceeds of the Multi-Tenant Portfolio at an assumed annual interest rate of 1.6%. The adjustment to interest expense also reflects a $9.0 million reduction in interest expense for any mortgage notes assumed by a third-party in the sale of the Multi-Tenant Portfolio and the elimination of any premiums and discounts associated with those mortgages. The interest rate on ARCP’s existing unsecured credit facility is partially dependent on its credit rating. For every one-eighth of a percent change in interest rates on ARCP’s existing unsecured credit facility, the pro forma adjustment to its interest expense would increase or decrease by $1.7 million annually. |
| (5) | Adjustment represents the allocation to ARCP’s non-controlling interests for the impact of pro forma adjustments for the sale of the Multi-Tenant Portfolio. |
| (6) | Excludes the effect of restricted shares, convertible preferred stock and partnership equity units convertible to common stock as the effect would be anti-dilutive. |
ARC Properties Operating Partnership, L.P.
Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated financial statements were developed by applying pro forma adjustments to the historical consolidated financial data which reflect the transaction described below.
The following unaudited pro forma consolidated balance sheet is presented as if ARC Properties Operating Partnership, L.P. (“ARCP OP” or the “Company”) had completed the sale of the Multi-Tenant Portfolio (as defined below) as of June 30, 2014.
The following unaudited pro forma consolidated statement of operations for the six months ended June 30, 2014 is presented as if the sale of the Multi-Tenant Portfolio had occurred at the beginning of the period presented.
The Company did not include the pro forma financial statements for the year ended December 31, 2013 as the Company did not own any of the properties within the Multi-Tenant Portfolio during such year then ended. As such, the pro forma impact of the sale of the Multi-Tenant Portfolio would have no effect on the Company’s consolidated statement of operations for the year ended December 31, 2013.
On June 11, 2014, wholly-owned subsidiaries of ARCP OP entered into an Agreement of Purchase and Sale for the sale of the Multi-Tenant Portfolio to a third party, subject to certain closing conditions. On October 17, 2014, the Company completed the sale of 71 properties, consisting of 64 multi-tenant shopping centers and 7 single-tenant retail properties (the “Multi-Tenant Portfolio”) to the third party, for a purchase price of $1.93 billion. Separately, the Company has entered into a letter of intent to sell five properties to an unrelated third-party for $52.8 million. Those five properties have not been included in these pro forma consolidated financial statements.
The unaudited pro forma consolidated financial statements should be read in conjunction with ARCP OP’s historical financial statements and notes thereto as of and for the three and six months ended June 30, 2014 included within the Company’s Final Prospectus filed pursuant to Rule 424(b)(3) filed with the U.S. Securities and Exchange Commission (“SEC”) on September 12, 2014. The unaudited pro forma financial statements are not necessarily indicative of the results of operations or financial position that would have been reported had the above transactions occurred at the beginning of the period presented or as of June 30, 2014.
ARC Properties Operating Partnership, L.P.
Unaudited Pro Forma Consolidated Balance Sheet
June 30, 2014
(In thousands)
| ARCP OP Historical (1) | Multi-Tenant Portfolio (2) | ARCP OP Pro Forma | ||||||||||
| Assets | ||||||||||||
| Real estate investments, at cost: | ||||||||||||
| Land | $ | 3,361,195 | $ | (421,165 | )(3) | $ | 2,940,030 | |||||
| Buildings, fixtures and improvements | 12,445,972 | (1,376,445 | )(3) | 11,069,527 | ||||||||
| Land and construction in progress | 62,594 | (3,647 | )(3) | 58,947 | ||||||||
| Acquired intangible lease assets | 2,231,675 | (287,271 | )(3) | 1,944,404 | ||||||||
| Total real estate investments, at cost | 18,101,436 | (2,088,528 | ) | 16,012,908 | ||||||||
| Less: accumulated depreciation and amortization | (661,005 | ) | 48,148 | (3) | (612,857 | ) | ||||||
| Total real estate investments, net | 17,440,431 | (2,040,380 | ) | 15,400,051 | ||||||||
| Investments in unconsolidated entities | 102,047 | - | 102,047 | |||||||||
| Investment in direct financing leases, net | 62,094 | - | 62,094 | |||||||||
| Investment securities, at fair value | 219,204 | - | 219,204 | |||||||||
| Loans held for investment, net | 97,587 | - | 97,587 | |||||||||
| Cash and cash equivalents | 193,690 | - | 193,690 | |||||||||
| Restricted cash | 69,544 | - | 69,544 | |||||||||
| Intangible assets, net | 347,618 | - | 347,618 | |||||||||
| Deferred costs and other assets, net | 405,056 | (2,681 | )(3) | 402,375 | ||||||||
| Goodwill | 2,304,880 | - | 2,304,880 | |||||||||
| Due from affiliates | 73,336 | - | 73,336 | |||||||||
| Total assets | $ | 21,315,487 | $ | (2,043,061 | ) | $ | 19,272,426 | |||||
| Liabilities and Equity | ||||||||||||
| Mortgage notes payable, net | $ | 4,227,494 | $ | (544,493 | )(3) | $ | 3,683,001 | |||||
| Corporate bonds, net | 2,546,089 | - | 2,546,089 | |||||||||
| Convertible debt, net | 975,003 | - | 975,003 | |||||||||
| Credit facilities | 1,896,000 | (1,368,446 | )(4) | 527,554 | ||||||||
| Other debt, net | 146,158 | - | 146,158 | |||||||||
| Below-market lease liabilities, net | 283,518 | (54,869 | )(3) | 228,649 | ||||||||
| Accounts payable and accrued expenses | 154,741 | - | 154,741 | |||||||||
| Deferred rent, derivatives and other liabilities | 218,023 | (6,721 | )(3) | 211,302 | ||||||||
| Distributions payable | 3,837 | - | 3,837 | |||||||||
| Due to affiliates | 835 | - | 835 | |||||||||
| Total liabilities | 10,451,698 | (1,974,529 | ) | 8,477,169 | ||||||||
| Series D preferred stock | 269,299 | 269,299 | ||||||||||
| General Partner's common equity | 9,918,549 | (67,298 | )(5) | 9,851,251 | ||||||||
| General Partner's preferred equity | 367,514 | - | 367,514 | |||||||||
| Limited Partners' common equity | 269,634 | (417 | )(6) | 269,217 | ||||||||
| Limited Partners' preferred equity | 3,435 | - | 3,435 | |||||||||
| Accumulated other comprehensive income (loss) | 12,392 | - | 12,392 | |||||||||
| Total unitholders' equity | 10,571,524 | (67,715 | ) | 10,503,809 | ||||||||
| Non-controlling interests | 22,966 | (817 | )(3) | 22,149 | ||||||||
| Total equity | 10,594,490 | (68,532 | ) | 10,525,958 | ||||||||
| Total liabilities and equity | $ | 21,315,487 | $ | (2,043,061 | ) | $ | 19,272,426 | |||||
ARC Properties Operating Partnership, L.P.
Notes to Unaudited Pro Forma Consolidated Balance Sheet
| (1) | Reflects the historical Consolidated Balance Sheet of ARCP OP as of June 30, 2014 as presented within the Company’s Final Prospectus filed pursuant to Rule 424(b)(3) filed with the SEC on September 12, 2014. |
| (2) | Adjustments reflect the pro forma impact of the sale of the Multi-Tenant Portfolio as if the sale had occurred on June 30, 2014. |
| (3) | Adjustment reflects the removal of the real estate investments and other assets, such as straight line rent receivable, and the mortgage debt and other liabilities, such as below market lease and deferred rent, and the non-controlling interests associated with the 71 properties included in the Multi-Tenant Portfolio. |
| (4) | Reflects the anticipated cash proceeds from the sale of the Multi-Tenant Portfolio, offset by closing costs of $15.0 million expected to be incurred in the Multi-Tenant Portfolio disposition transaction comprised of third-party legal expenses, debt assumption costs, transfer taxes, accounting fees and investment banking fees. On a pro forma basis, the net proceeds will be used to paydown ARCP OP’s existing credit facility. ARCP OP has commitments on its unsecured credit facility (including revolving and term loans) for total borrowings of $4.6 billion as of June 30, 2014, with an accordion feature of up to $6.0 billion, subject to borrowing base availability, among other conditions. |
| (5) | Reflects the excess of the carrying value, as of June 30, 2014, of the assets associated with the Multi-Tenant Portfolio, net of liabilities, over the expected proceeds from the sale of the Multi-Tenant Portfolio less the estimated closing costs. The Company is permitted a period of up to one year to assess the estimated fair values of the assets acquired and liabilities assumed, including intangible assets, from the date that the Company acquired Cole Real Estate Investments, Inc., or February 7, 2014; therefore, the Company is still in the process of finalizing its assessment of the fair value of these assets. Thus, the provisional measurements and valuation of intangible assets are subject to change. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations. Accordingly, the Company would presume no gain or loss to be reflected from the disposition of the Multi-Tenant Portfolio. |
| (6) | Reflects the allocation of estimated closing costs to the Limited Partners based on the percentage ownership as of June 30, 2014. |
ARC Properties Operating Partnership, L.P.
Unaudited Pro Forma Consolidated Statement of Operations
Six Months Ended June 30, 2014
(In thousands, except per unit data)
| ARCP OP Historical (1) | Multi-Tenant Portfolio (2) | ARCP OP Pro Forma | ||||||||||
| Revenues: | ||||||||||||
| Rental income | $ | 559,288 | $ | (59,146 | )(3) | $ | 500,142 | |||||
| Direct financing lease income | 2,187 | - | 2,187 | |||||||||
| Operating expense reimbursements | 49,641 | (12,677 | )(3) | 36,964 | ||||||||
| Cole Capital revenue | 91,479 | - | 91,479 | |||||||||
| Total revenues | 702,595 | (71,823 | ) | 630,772 | ||||||||
| Operating expenses: | ||||||||||||
| Cole Capital reallowed fees and commissions | 41,504 | - | 41,504 | |||||||||
| Acquisition related | 20,337 | (1,973 | )(3) | 18,364 | ||||||||
| Merger and other transaction related | 235,478 | - | 235,478 | |||||||||
| Property operating | 69,030 | (19,562 | )(3) | 49,468 | ||||||||
| General and administrative | 44,748 | - | 44,748 | |||||||||
| Equity-based compensation | 31,848 | - | 31,848 | |||||||||
| Depreciation and amortization | 424,356 | (44,330 | )(3) | 380,026 | ||||||||
| Total operating expenses | 867,301 | (65,865 | )(3) | 801,436 | ||||||||
| Operating loss | (164,706 | ) | (5,958 | ) | (170,664 | ) | ||||||
| Other income (expenses): | ||||||||||||
| Interest expense, net | (216,347 | ) | 19,943 | (4) | (196,404 | ) | ||||||
| Other income, net | 10,915 | (246 | )(3) | 10,669 | ||||||||
| Gain on derivative instruments, net | 1,729 | (293 | )(3) | 1,436 | ||||||||
| Gain on disposition of properties | 4,489 | - | 4,489 | |||||||||
| Total other expenses, net | (199,214 | ) | 19,404 | (179,810 | ) | |||||||
| Net loss (income) attributable to non-controlling interests | (363,920 | ) | 13,446 | (350,474 | ) | |||||||
| Net (income) loss attributable to non-controlling interests | (80 | ) | - | (80 | ) | |||||||
| Net (loss) income attributable to unitholders | (364,000 | ) | 13,446 | (350,554 | ) | |||||||
| Dividends allocable to preferred units | 44,443 | - | 44,443 | |||||||||
| Dividends allocable to participating securities | 2,280 | - | 2,280 | |||||||||
| Net (loss) income attributable to common unitholders | $ | (410,723 | ) | $ | 13,446 | $ | (397,277 | ) | ||||
| Earnings per common units: | ||||||||||||
| Basic and Diluted | $ | (0.58 | ) | $ | (0.56 | ) | ||||||
| Weighted average common units: | ||||||||||||
| Basic and Diluted (5) | 708,315 | 708,315 | ||||||||||
ARC Properties Operating Partnership, L.P.
Notes to Unaudited Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 2014
| (1) | Reflects the historical Consolidated Statement of Operations of ARCP OP for the six months ended June 30, 2014, as presented within the Company’s Final Prospectus filed pursuant to Rule 424(b)(3) filed on September 12, 2014. |
| (2) | Adjustments reflect the pro forma impact of the sale of the Multi-Tenant Portfolio to record the sale as if it had occurred on January 1, 2014. |
| (3) | Reflects adjustments to eliminate the revenues and expenses recording during the six months ended June 30, 2014 that were attributable to the Multi-Tenant Portfolio. Operating expenses are not reduced by the savings expected to be realized with a streamlined work force. |
| (4) | Adjustments reflect $10.9 million in interest savings on ARCP OP’s existing unsecured credit facility for the repayment of $1.4 billion from the proceeds of the Multi-Tenant Portfolio at an assumed annual interest rate of 1.6%. The adjustment to interest expense also reflects a $9.0 million reduction in interest expense for any mortgage notes assumed by a third-party in the sale of the Multi-Tenant Portfolio and the elimination of any premiums and discounts associated with those mortgages. The interest rate on ARCP OP’s existing unsecured credit facility is partially dependent on its credit rating. For every one-eighth of a percent change in interest rates on ARCP OP’s existing unsecured credit facility, the pro forma adjustment to its interest expense would increase or decrease by $1.7 million annually. |
| (5) | Excludes the effect of restricted units and convertible preferred units convertible to General Partner Units as the effect would be anti-dilutive. |