UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 2)
(Mark One)
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-35263
AMERICAN REALTY CAPITAL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland | 45-2482685 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
2325 E. Camelback Road, Suite 1100 Phoenix, AZ | 85016 | |
(Address of principal executive offices) | (Zip Code) |
(800) 606-3610
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class: |
Name of each exchange on which registered: | |
Common Stock, $0.01 par value per share | NASDAQ Stock Market | |
Series F Preferred Stock, $0.01 par value per share | NASDAQ Stock Market |
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the registrants common stock held by non-affiliates of the registrant as of June 30, 2013 was $2.78 billion.
The number of outstanding shares of the registrants common stock on February 27, 2015 was 905,338,684 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants proxy statement previously delivered to stockholders in connection with the registrants 2014 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K/A.
Explanatory Note
American Realty Capital Properties, Inc. (the Company, its, we, our or us) is filing this Amendment No. 2 on Form 10-K/A (this Form 10-K/A) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2013, originally filed with the U.S. Securities and Exchange Commission (the SEC) on February 27, 2014 (the Original Filing) and amended by Amendment No. 1 thereto on Form 10-K/A filed with the SEC on September 4, 2014, to restate and amend its previously-issued audited consolidated financial statements and related financial information for the fiscal years ended December 31, 2013 and 2012.
This Form 10-K/A also reflects the recasting of the Companys historical financial statements to present the Companys January 3, 2014 acquisition of American Realty Capital Trust IV, Inc. (ARCT IV), an entity previously deemed to be under common control with the Company, from the earliest period of common control. Recasted audited consolidated financial statements reflecting the Companys acquisition of ARCT IV were originally filed with the SEC by the Company as an exhibit to its Current Report on Form 8-K dated May 20, 2014.
Concurrently with the filing of this Form 10-K/A, the Company is filing amendments to its Quarterly Reports on Form 10-Q for the fiscal periods ended March 31, 2014 and June 30, 2014 to restate and amend its previously-issued unaudited consolidated financial statements and related financial information for these periods and the comparable fiscal periods of 2013 (collectively, with this Form 10-K/A, the Amended Filings). The Companys Quarterly Report on Form 10-Q for the fiscal period ended September 30, 2014, which is also being concurrently filed, includes restated and amended unaudited consolidated financial statements and related financial information for the fiscal period ended September 30, 2013.
The following sections of this Form 10-K/A contain information that has been amended where necessary to reflect the restatement and certain other events that have occurred subsequent to February 27, 2014, the date of the Original Filing:
| Forward-Looking Statements |
| Part I, Item 1A. Risk Factors |
| Part I, Item 3. Legal Proceedings |
| Part II, Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
| Part II, Item 6. Selected Financial Data |
| Part II, Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations (Certain Sections As Restated) |
| Part II, Item 9A. Controls and Procedures |
| Part III |
| Part IV, Item 15. Exhibits, Financial Statement Schedules |
Except as described in this Explanatory Note, the information contained in the Original Filing has not been updated to reflect any subsequent events.
Background
On October 29, 2014, the Company filed a Current Report on Form 8-K (the October 29 8-K) reporting that the Audit Committee of the Companys Board of Directors (the Audit Committee) had concluded that the previously-issued audited consolidated financial statements and other financial information contained in the Original Filing, the previously issued unaudited financial statements and other financial information contained in the Companys Quarterly Reports on Form 10-Q for the fiscal periods ended March 31, 2014 and June 30, 2014, and the Companys earnings releases and other financial communications for these periods should no longer be relied upon.
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The Audit Committee based its conclusion on the preliminary findings of its investigation into concerns regarding accounting practices and other matters that had first been reported to it on September 7, 2014. Promptly after learning of these concerns, the Audit Committee initiated an investigation, which was conducted with the assistance of independent counsel and forensic accountants. The investigation continued after the filing of the October 29 8-K and expanded in scope beyond the concerns initially brought to the Audit Committees attention. Certain key findings of the investigation are presented below.
The investigation found that Adjusted Funds From Operations (AFFO), a non-GAAP measure presented in the Companys SEC filings and other financial communications, was overstated for fiscal year 2011, fiscal year 2012, fiscal year 2013 (including each fiscal quarter of 2013) and, as previously disclosed in the October 29 8-K, the first two fiscal quarters of 2014. Senior management considered AFFO to be an important metric used by analysts and investors in evaluating the Companys performance and, for the first two quarters of 2014, sought to maintain reported AFFO within the 2014 guidance range of $1.13 to $1.19 per share announced at the end of 2013. The overstatements of AFFO were due in part to errors in reflecting amounts attributable to the limited partnership interests in the Companys operating partnership, ARC Properties Operating Partnership, L.P., held by holders other than the Company (known as non-controlling interests or NCI). Prior to the filing of the Quarterly Report on Form 10-Q for the first quarter of 2014, some members of senior management were aware of NCI errors but allowed the report to be filed without completing an analysis of the errors. In the Companys Quarterly Report on Form 10-Q for the second quarter of 2014, as previously reported in the October 29 8-K, the NCI errors in the first quarter were intentionally not corrected, and other AFFO and financial statement errors were intentionally made, resulting in an overstatement of AFFO and an understatement of the Companys net loss for the three and six months ended June 30, 2014. See Managements Discussion and Analysis of Financial Condition and Results of Operations Sources of Funds Funds from Operations and Adjusted Funds from Operations (As Restated) in Item 7 of this Form 10-K/A.
The investigation identified certain payments made by the Company to ARC Properties Advisors, LLC (the Former Manager) and certain affiliates of the Former Manager that were not sufficiently documented or otherwise warrant scrutiny. The Company has recovered consideration valued at approximately $8.5 million in respect of certain such payments. The Company is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statements related to any potential recovery. See Note 19-Related Party Transactions and Arrangements (As Restated) to the consolidated financial statements in this Form 10-K/A.
The investigation found that the agreements relating to equity awards made to Nicholas S. Schorsch and Brian S. Block in connection with the transition from external to internal management of the Company contained provisions that, as drafted, were more favorable to them than the Compensation Committee of the Companys Board of Directors (the Compensation Committee) had authorized. At the time the awards took effect, Mr. Schorsch was the Companys Executive Chairman and Chief Executive Officer and Mr. Block was the Companys Chief Financial Officer. Immediately prior to his resignation from the Company, Mr. Schorsch and the Company agreed that the terms of his equity awards should have been consistent with the Compensation Committees authorization. In connection with their resignations from the Company, Mr. Block relinquished all of his equity awards and Mr. Schorsch relinquished all of his equity awards other than 1,000,000 shares of restricted stock, the vesting of which was accelerated. These shares are subject to clawback by the Company if, in any proceeding, after all appeals, Mr. Schorsch is found to have breached his fiduciary duty of loyalty or is found to have committed or admits to fraud or misconduct in connection with his responsibilities as a director or officer of the Company. See Management Changes below.
The investigation also found material weaknesses in the Companys internal control over financial reporting and its disclosure controls and procedures. See Internal Control Considerations below.
The Audit Committee believes that the scope and process of its investigation were sufficient to identify matters that could materially affect the Companys consolidated financial statements and the calculation of AFFO.
Effects of the Restatements and Other Corrections
The restatements contained in this Form 10-K/A and the other Amended Filings correct errors in the consolidated financial statements contained in the original filings that were identified as a result of the Audit Committee investigation as well as additional errors identified as a result of a review performed by the Companys new management. The restatements also reflect
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certain adjustments that the Company determined to be immaterial, both individually and in the aggregate, when the consolidated financial statements contained in the original filings were issued. In connection with the restatements, the Company has determined that it would be appropriate to reflect such adjustments. See Note 2 Restatement of Previously Issued Financial Statements to the consolidated financial statements in this Form 10-K/A.
The Amended Filings also correct errors in the calculation of AFFO contained in the original filings that were identified as a result of the Audit Committees investigation or that otherwise reflect restatement adjustments. See Managements Discussion and Analysis of Financial Condition and Results of Operations Sources of Funds Funds from Operations and Adjusted Funds from Operations (As Restated) in Item 7 of this Form 10-K/A.
The following tables summarize the effect of the restatements on certain key items of the Companys previously issued consolidated financial statements and on its previously issued calculations of AFFO and AFFO per share for the year ended December 31, 2013, the three months ended March 31, 2014 and the three and six months ended June 30, 2014 (amounts in thousands, except for per share data).
Year Ended December 31, 2013 | ||||||||||||||||
As Previously Reported (1) |
As Restated | $ Change Fav/(Unfav) |
% Change | |||||||||||||
Selected balance sheet amounts |
||||||||||||||||
Total assets |
$ | 7,807,979 | $ | 7,809,083 | $ | 1,104 | 0.01 | % | ||||||||
Total liabilities |
5,285,446 | 5,310,556 | (25,110 | ) | (0.48 | )% | ||||||||||
Total equity |
2,253,234 | 2,229,228 | (24,006 | ) | (1.07 | )% | ||||||||||
Selected statement of operations amounts |
||||||||||||||||
Total revenues |
$ | 329,878 | $ | 329,323 | $ | (555 | ) | (0.17 | )% | |||||||
Total operating expenses |
640,704 | 665,228 | (24,524 | ) | (3.83 | )% | ||||||||||
Net loss attributable to stockholders |
(474,740 | ) | (491,499 | ) | (16,759 | ) | (3.53 | )% | ||||||||
Selected cash flow amounts |
||||||||||||||||
Net cash provided by operating activities |
$ | 12,769 | $ | 11,918 | $ | (851 | ) | (6.66 | )% | |||||||
Net cash used in investing activities |
(4,542,759 | ) | (4,541,718 | ) | 1,041 | 0.02 | % | |||||||||
Net cash provided by financing activities |
4,290,140 | 4,289,950 | (190 | ) | | % | ||||||||||
Net change in cash and cash equivalents |
(239,850 | ) | (239,850 | ) | | | % | |||||||||
Funds from operations and adjusted funds from operations amounts - net method (2) |
||||||||||||||||
Funds from operations |
$ | (263,382 | ) | $ | (285,076 | ) | $ | (21,694 | ) | (8.24 | )% | |||||
Adjusted funds from operations |
236,374 | 192,416 | (43,958 | ) | (18.60 | )% | ||||||||||
AFFO per share |
1.07 | (3) | 0.87 | (0.20 | ) | (18.69 | )% |
(1) | The amounts reflect the recasting of the Companys historical financial statements to present the effects of the Companys acquisition of ARCT IV, an entity previously deemed to be under common control with the Company, as if it had been completed at inception, as previously disclosed in the Companys Current Report on From 8-K, dated May 20, 2014. |
(2) | The net method is defined in Managements Discussion and Analysis of Financial Condition and Results of Operations Sources of Funds Funds from Operations and Adjusted Funds from Operations (As Restated) in Item 7 of this Form 10-K/A. |
(3) | AFFO per share was not previously reported in the Original Filing, although it was reported in the earnings release related to the year ended December 31, 2013. It has been calculated utilizing the previously reported AFFO and weighted average shares of 221,378,676. |
For discussion of the restatement adjustments, see Note 2 Restatement of Previously Issued Financial Statements to the consolidated financial statements in this Form 10-K/A.
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Three Months Ended March 31, 2014 (Unaudited) | ||||||||||||||||
As Previously Reported |
As Restated | $ Change Fav/(Unfav) |
% Change | |||||||||||||
Selected balance sheet amounts |
||||||||||||||||
Total assets |
$ | 20,480,300 | $ | 20,488,095 | $ | 7,795 | 0.04 | % | ||||||||
Total liabilities |
10,950,414 | 10,974,377 | (23,963 | ) | (0.22 | )% | ||||||||||
Total equity |
9,260,587 | 9,244,419 | (16,168 | ) | (0.17 | )% | ||||||||||
Selected statement of operations amounts |
||||||||||||||||
Total revenues |
$ | 320,614 | $ | 321,154 | $ | 540 | 0.17 | % | ||||||||
Total operating expenses |
512,851 | 482,128 | 30,723 | 5.99 | % | |||||||||||
Net loss attributable to stockholders |
(308,681 | ) | (291,444 | ) | 17,237 | 5.58 | % | |||||||||
Selected cash flow amounts |
||||||||||||||||
Net cash provided by operating activities |
$ | (106,126 | ) | $ | (122,828 | ) | $ | (16,702 | ) | (15.74 | )% | |||||
Net cash used in investing activities |
(1,212,122 | ) | (1,174,407 | ) | 37,715 | 3.11 | % | |||||||||
Net cash provided by financing activities |
1,348,590 | 1,327,726 | (20,864 | ) | (1.55 | )% | ||||||||||
Net change in cash and cash equivalents |
30,342 | 30,491 | 149 | 0.49 | % | |||||||||||
Funds from operations and adjusted funds from operations amounts - net method (1) |
||||||||||||||||
Funds from operations |
$ | (183,791 | ) | $ | (137,960 | ) | $ | 45,831 | 24.94 | % | ||||||
Adjusted funds from operations |
147,389 | 108,892 | (38,497 | ) | (26.12 | )% | ||||||||||
AFFO per share (2) |
$ | 0.26 | $ | 0.19 | (0.07 | ) | (26.92 | )% |
(1) | The net method is defined in Managements Discussion and Analysis of Financial Condition and Results of Operations Sources of Funds Funds from Operations and Adjusted Funds from Operations (As Restated) in Item 7 of this Form 10-K/A. |
(2) | As previously disclosed in the Companys quarterly supplemental information furnished on Form 8-K on May 8, 2014. |
For discussion of the restatement adjustments, see Note 2 Restatement of Previously Issued Financial Statements in the Companys Quarterly Report on Form 10-Q/A for the fiscal period ended March 31, 2014.
Three Months Ended June 30, 2014 (Unaudited) | Six Months Ended June 30, 2014 (Unaudited) | |||||||||||||||||||||||||||||||
As Previously Reported |
As Restated | $ Change Fav/(Unfav) |
% Change | As Previously Reported |
As Restated | $ Change Fav/(Unfav) |
% Change | |||||||||||||||||||||||||
Selected balance sheet amounts |
||||||||||||||||||||||||||||||||
Total assets |
$ | 21,315,487 | $ | 21,310,496 | $ | (4,991 | ) | (0.02 | )% | $ | 21,315,487 | $ | 21,310,496 | $ | (4,991 | ) | (0.02 | )% | ||||||||||||||
Total liabilities |
10,451,698 | 10,485,022 | (33,324 | ) | (0.32 | )% | 10,451,698 | 10,485,022 | (33,324 | ) | (0.32 | )% | ||||||||||||||||||||
Total equity |
10,594,490 | 10,556,175 | (38,315 | ) | (0.36 | )% | 10,594,490 | 10,556,175 | (38,315 | ) | (0.36 | )% | ||||||||||||||||||||
Selected statement of operations amounts |
||||||||||||||||||||||||||||||||
Total revenues |
$ | 381,981 | $ | 382,178 | $ | 197 | 0.05 | % | $ | 702,595 | $ | 703,332 | $ | 737 | 0.10 | % | ||||||||||||||||
Total operating expenses |
355,573 | 353,284 | 2,289 | 0.64 | % | 867,301 | 835,412 | 31,889 | 3.68 | % | ||||||||||||||||||||||
Net loss attributable to the Company |
(40,328 | ) | (54,720 | ) | (14,392 | ) | (35.69 | )% | (349,009 | ) | (346,164 | ) | 2,845 | 0.82 | % | |||||||||||||||||
Selected cash flow amounts |
||||||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | 139,911 | $ | 154,021 | $ | 14,110 | 10.08 | % | $ | 33,785 | $ | 31,193 | $ | (2,592 | ) | (7.67 | )% | |||||||||||||||
Net cash used in investing activities |
(734,300 | ) | (777,649 | ) | (43,349 | ) | (5.90 | )% | (1,946,422 | ) | (1,952,056 | ) | (5,634 | ) | (0.29 | )% | ||||||||||||||||
Net cash provided by financing activities |
705,012 | 735,941 | 30,929 | 4.39 | % | 2,053,602 | 2,063,667 | 10,065 | 0.49 | % | ||||||||||||||||||||||
Net change in cash and cash equivalents |
110,623 | 112,313 | 1,690 | 1.53 | % | 140,965 | 142,804 | 1,839 | 1.30 | % | ||||||||||||||||||||||
Funds from operations and adjusted funds from operations amounts - gross method (1) |
||||||||||||||||||||||||||||||||
Funds from operations |
$ | 174,661 | $ | 156,967 | $ | (17,694 | ) | (10.13 | )% | $ | (15,115 | ) | $ | 12,163 | $ | 27,278 | 180.47 | % | ||||||||||||||
Adjusted funds from operations |
205,278 | 185,934 | (19,344 | ) | (9.42 | )% | 353,058 | 300,706 | (52,352 | ) | (14.83 | )% | ||||||||||||||||||||
AFFO per share (2) |
$ | 0.24 | $ | 0.21 | (0.03 | ) | (12.50 | )% | $ | 0.49 | $ | 0.41 | (0.08 | ) | (16.33 | )% |
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(1) | The gross method is defined in Managements Discussion and Analysis of Financial Condition and Results of Operations Sources of Funds Funds from Operations and Adjusted Funds from Operations (As Restated) in Item 7 of this Form 10-K/A. |
(2) | As previously disclosed in the Companys quarterly supplemental information furnished on Form 8-K on July 29, 2014. |
For discussion of the restatement adjustments, see Note 2 Restatement of Previously Issued Financial Statements in the Companys Quarterly Report on Form 10-Q/A for the fiscal periods ended June 30, 2014.
Internal Control Considerations
In light of the findings of the Audit Committees investigation and a review by the Company in connection with the preparation of the restatements, the Companys new management re-evaluated the Companys internal control over financial reporting and its disclosure controls and procedures and concluded that they were not effective at December 31, 2013. These material weaknesses had not been remediated, and additional material weaknesses in our internal control over financial reporting existed, at March 31, 2014, June 30, 2014 and September 30, 2014. In addition, at those dates, our disclosure controls and procedures were not effective. The material weaknesses existing at December 31, 2013 and the Companys plans for remediation are described in Part II, Item 9A Controls and Procedures in this Form 10-K/A. The Company is committed to remediating its material weaknesses as promptly as possible. Implementation of the Companys remediation plans has commenced and is being overseen by the Audit Committee.
Management Changes
During the fourth quarter of 2014, the following executive officers resigned from all positions with the Company and its subsidiaries: Mr. Schorsch, Executive Chairman of the Board of Directors; Mr. Block, Chief Financial Officer; David S. Kay, Chief Executive Officer and a director; Lisa E. Beeson, President and Chief Operating Officer; and Lisa P. McAlister, Chief Accounting Officer. In connection with their resignations, these individuals relinquished an aggregate of approximately 2.7 million shares of stock as well as all outstanding interests in the Companys 2014 Outperformance Plan.
Following the resignations of Mr. Block and Ms. McAlister, the Companys Board of Directors appointed Michael Sodo as Chief Financial Officer and Gavin B. Brandon as Chief Accounting Officer. Following the resignations of Messrs. Schorsch and Kay and Ms. Beeson, the Board of Directors appointed William G. Stanley, who had been serving as Lead Independent Director, as Interim Chairman of the Board and Interim Chief Executive Officer. The Compensation Committee has commenced a search, with the assistance of an independent search firm, for a new independent Chairman of the Board and a new Chief Executive Officer.
Regulatory Investigations and Litigation Related to this Matter
Prior to the filing of the October 29 8-K, the Audit Committee previewed for the SEC the information contained in the filing. Subsequent to the filing, the SEC provided notice that it had commenced a formal investigation and issued subpoenas calling for the production of documents. In addition, the United States Attorneys Office for the Southern District of New York contacted counsel for the Audit Committee and counsel for the Company with respect to this matter, and the Secretary of the Commonwealth of Massachusetts issued a subpoena calling for the production of various documents. The Audit Committee and the Company are cooperating with these regulators in their investigations.
The Company and certain of its current and former directors and officers have been named as defendants in a number of lawsuits filed in response to the October 29 8-K, including class actions, derivative actions and individual actions under the federal securities laws and state common and corporate laws in both federal and state courts in New York and Maryland. For information concerning these lawsuits, see Risk Factors New Risk Factors in Item 1A of this Form 10-K/A and Note 24 Subsequent Events (As Restated) to the consolidated financial statements contained in this Form 10-K/A.
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AMERICAN REALTY CAPITAL PROPERTIES, INC.
For the fiscal year ended December 31, 2013
Page | ||||||
Forward-Looking Statements | 8 | |||||
PART I | ||||||
Item 1. | 11 | |||||
Item 1A. | 19 | |||||
Item 1B. | 58 | |||||
Item 2. | 58 | |||||
Item 3. | 63 | |||||
Item 4. | 63 | |||||
PART II | ||||||
Item 5. | 64 | |||||
Item 6. | 71 | |||||
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
73 | ||||
Item 7A. | 100 | |||||
Item 8. | 100 | |||||
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
101 | ||||
Item 9A. | 101 | |||||
Item 9B. | 108 | |||||
PART III | ||||||
Item 10. | 110 | |||||
Item 11. | 110 | |||||
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
110 | ||||
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
110 | ||||
Item 14. | 110 | |||||
PART IV | ||||||
Item 15. | 111 | |||||
Signatures | 117 | |||||
Index to Consolidated Financial Statements | F-1 |
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Forward-Looking Statements (As Restated)
Certain statements included herein are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of American Realty Capital Properties, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as may, will, seeks, anticipates, believes, estimates, expects, plans, intends, should or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. As used herein, the terms ARCP, we, our and us refer to American Realty Capital Properties, Inc., a Maryland corporation, together with our consolidated subsidiaries, including ARC Properties Operating Partnership, L.P., a Delaware limited partnership of which we are the sole general partner, which we refer to in herein as our OP; our Former Manager refers to ARC Properties Advisors, LLC, a Delaware limited liability company, our former external manager; ARC refers to AR Capital, LLC (formerly known as American Realty Capital II, LLC) and its affiliated companies, which formerly was our sponsor; and the Contributor refers to ARC Real Estate Partners, LLC, an affiliate of ARC, which contributed its 100% indirect ownership interests in the properties contributed to our OP in the formation transactions related to our initial public offering, or our IPO, described elsewhere herein, or the formation transactions. During the year ended December 31, 2013, we retained our Former Manager to manage our affairs on a day to day basis and, as a result, were generally externally managed, with the exception of certain acquisition, accounting and portfolio management services performed by our employees. Our board of directors determined that it is in the best interests of us and our stockholders to become self-managed, and we completed our transition to self-management on January 8, 2014. In connection with becoming self-managed and since the beginning of the third quarter of 2013, we terminated the existing management agreement with our Former Manager, entered into employment and incentive compensation arrangements with our executives.
The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
| We have a limited operating history and limited experience operating a public company. This inexperience makes our future performance difficult to predict. |
| The competition for the type of properties we desire to acquire may cause our dividends and the long-term returns of our investors to be lower than they otherwise would be. |
| We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all, which could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for dividends to our stockholders, per share trading price of our common stock and our ability to satisfy our debt service obligations. |
| We depend on tenants for our revenue, and, accordingly, our revenue is dependent upon the success and economic viability of our tenants. |
| Failure by any major tenant with leases in multiple locations to make rental payments to us, because of a deterioration of its financial condition or otherwise, or the termination or non-renewal of a lease by a major tenant, would have a material adverse effect on us. |
| We are subject to tenant industry concentrations that make us more susceptible to adverse events with respect to certain industries. |
| Increases in interest rates could increase the amount of our debt payments and limit our ability to pay dividends to our stockholders. |
| We may be unable to make scheduled payments on our debt obligations. |
| We may not generate cash flows sufficient to pay our dividends to stockholders, and as such we may be forced to borrow at higher rates to fund our operations. |
| We may be unable to pay or maintain cash dividends or increase dividends over time. |
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| We may be affected by the incurrence of additional secured or unsecured debt. |
| We may be adversely affected by increases in interest rates or a failure to maintain our OPs credit rating. |
| We may not be able to integrate the assets and businesses acquired in Recent Acquisitions (defined below) into our existing portfolio or with our business successfully, or may not realize the anticipated benefits within the expected timeframe or at all. |
| We may not be able to effectively manage or dispose of assets acquired in connection with our Recent Acquisitions that do not fit within our target assets. |
| We may not be able to effectively manage our expanded portfolio and operations following our Recent Acquisitions. |
| We may be affected by risks associated with current and future litigation, including pending and filed securities litigation and governmental inquiries. |
| We may not be able to successfully acquire future properties on advantageous terms. |
| We may not be able to achieve and maintain profitability. |
| We are subject to risks associated with lease terminations, tenant defaults, bankruptcies and insolvencies and tenant credit, geographic and industry concentrations. |
| We could be subject to unexpected costs or unexpected liabilities that may arise from our Recent Acquisitions. |
| We may fail to qualify to be treated as a real estate investment trust for U.S. federal income tax purposes (REIT). |
| We may be deemed to be an investment company under the Investment Company Act of 1940, as amended, (the Investment Company Act) and thus subject to regulation under the Investment Company Act. |
| Once we resume paying a dividend in respect of our common stock, there is no guarantee that such dividend will be paid at a rate equal to or at the same frequency as our previously declared monthly dividend. |
| Our financial condition may be affected by our recent credit rating downgrade which could impact our access to capital and the terms of potential financing. |
| We have material weaknesses in our disclosure controls and procedures and our internal control over financial reporting and we may not be able to remediate such material weaknesses in a timely enough manner to eliminate the risks posed by such material weaknesses in future periods. |
| Failure to timely deliver on or before March 31, 2015 our and the OPs annual report on Form 10-K for the year ended December 31, 2014 in light of our obligations pursuant to an agreement with the lenders under the Credit Facility and pursuant to the terms of our indentures governing our senior unsecured and convertible notes could result in an event of default. |
| We may not satisfy NASDAQs requirements for regaining compliance with its listing rules and, if so, NASDAQ could delist our common stock and Series F Preferred Stock. |
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of this Form 10-K/A.
9
We use certain defined terms throughout this document that have the following meanings:
We use the term net lease throughout this document. Under a net lease, the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. There are various forms of net leases, most typically classified as triple net or double net. Triple net leases typically require the tenant to pay all costs associated with a property, including real estate taxes, insurance, utilities and routine maintenance in addition to the base rent. Double net leases typically require the tenant to pay all the costs as triple net leases, but hold the landlord responsible for capital expenditures, including the repair or replacement of specific structural and/or bearing components of a property, such as the roof or structure of the building. Accordingly, the owner receives the rent net of these expenses, rendering the cash flow associated with the lease predictable for the term of the lease. Under a net lease, the tenant generally agrees to lease the property for a significant term and agrees that it will either have no ability or only limited ability to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation or failure by the landlord to fulfill its obligations under the lease.
We use the term modified gross lease throughout this document. Under a modified gross lease, the commercial enterprises occupying the leased property pay base rent plus a proportional share of some of the other costs associated with the property, such as property taxes, utilities, insurance and maintenance.
We use the term credit tenant throughout this document. When we refer to a credit tenant, we mean a tenant that has entered into a lease that we determine is creditworthy and may include tenants with an investment grade or below investment grade credit rating, as determined by major credit rating agencies, or unrated tenants. To the extent we determine that a tenant is a credit tenant even though it does not have an investment grade credit rating, we do so based on our managements determination that a tenant should have the financial wherewithal to honor its obligations under its lease with us. This determination is based on our managements substantial experience closing net lease transactions and is made after evaluating all tenants due diligence materials that are made available to us, including financial statements and operating data.
We use the term annualized rental income throughout this document. When we refer to annualized rental income, we mean the rental income under our leases reflecting straight-line rent adjustments associated with contractual rent increases in the leases as required by generally accepted accounting principles in the United States (U.S. GAAP), which includes the effect of tenant concessions such as free rent, as applicable. We also use the term annualized rental income/net operating income (NOI) throughout this document. When we refer to annualized rental income/NOI for net leases, we mean rental income on a straight-line basis, which includes the effect of tenant concessions such as free rent as applicable. For modified gross leased properties, NOI is rental income on a straight-line basis, which includes the effect of tenant concessions such as free rent, as applicable, plus operating expense reimbursement revenue less property expenses.
When we refer to properties that are net leased on a medium-term basis, we mean properties originally leased long term (10 years or longer) that are currently subject to net leases with remaining primary lease terms of generally three to eight years, on average. When we refer to properties that are net leased on a long-term basis, we mean properties with remaining primary lease terms of generally 10 years or longer on average.
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Overview
We were incorporated on December 2, 2010 as a Maryland corporation that qualified as a REIT for U.S. federal income tax purposes beginning in the year ended December 31, 2011. On September 6, 2011, we completed our initial public offering (our IPO) and our shares of common stock began trading on the NASDAQ Global Select Market (NASDAQ) under the symbol ARCP on September 7, 2011.
We are a self-managed and self-administered real estate company that acquires, owns and operates single-tenant, free-standing commercial real estate properties primarily subject to net leases with high credit quality tenants. We focus on investing in properties that are net leased to (i) credit tenants, which are generally large public companies with investment-grade ratings and other creditworthy tenants and (ii) governmental, quasi-governmental and not-for-profit entities. Our long-term business strategy is to acquire a diverse portfolio consisting of approximately 70% long-term leases and 30% medium-term leases, with an average remaining lease term of 10 to 12 years. We expect this investment strategy to provide for stable income from credit tenants and to provide for growth opportunities from re-leasing of current below market leases.
Substantially all of our business is conducted through the OP. We are the sole general partner and holder of 96.1% of the equity interests in the OP as of December 31, 2013. As of December 31, 2013, certain of our affiliates and certain unaffiliated investors are limited partners and owners of 3.3% and 0.6%, respectively, of the equity interests in the OP. Under the limited partnership agreement of the OP, after holding units of limited partner interests in the OP (OP Units) for a period of one year, unless otherwise consented to by us, holders of OP Units have the right to redeem the OP Units for the cash value of a corresponding number of shares of our common stock or, at our option, as general partner of the OP, a corresponding number of shares of our common stock. The remaining rights of the holders of OP Units are limited, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OPs assets.
We have advanced our investment objectives by growing our net lease portfolio through self-origination of property acquisitions and strategic mergers and acquisitions. See Note 3 Mergers and Acquisitions to the consolidated financial statements.
As of December 31, 2013, excluding one vacant property classified as held for sale, we owned 2,559 properties consisting of 43.8 million square feet, which were 99% leased with a weighted-average remaining lease term of 9.4 years. In constructing our portfolio, we are committed to diversification (by industry, tenant and geography). As of December 31, 2013, rental revenues derived from investment grade tenants and tenants affiliated with investment grade entities as determined by a major rating agency approximated 60% (we have attributed the rating of each parent company to its wholly owned subsidiary for purposes of this disclosure). Our strategy encompasses receiving the majority of our revenue from investment grade tenants as we further acquire properties and enter into (or assume) lease arrangements.
Completed Mergers and Major Acquisitions
The following summarizes mergers and portfolio acquisitions that have been consummated since January 1, 2013 (the Recent Acquisitions):
American Realty Capital Trust III, Inc. Merger
On December 14, 2012, we entered into an Agreement and Plan of Merger (the ARCT III Merger Agreement) with American Realty Capital Trust III, Inc. (ARCT III) and certain subsidiaries of each company. The ARCT III Merger Agreement provided for the merger of ARCT III (the ARCT III Merger) with and into a subsidiary of ours. The ARCT III Merger was consummated on February 28, 2013. See Note 3 Mergers and Acquisitions for further discussion of the ARCT III Merger.
Also in connection with the ARCT III Merger, we entered into an agreement with ARC and its affiliates to internalize certain functions performed by them prior to the ARCT III Merger, reduce certain fees paid to affiliates, purchase certain corporate assets and pay certain merger related fees. See Note 19 Related Party Transactions and Arrangements (As Restated) for further discussion.
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GE Capital Portfolio Acquisition
On June 27, 2013, we acquired, through subsidiaries of the OP, from certain affiliates of GE Capital Corp., the equity interests in the entities that own a real estate portfolio comprised of 447 properties, (the GE Capital Portfolio) for a purchase price of $773.9 million, exclusive of closing costs, with no liabilities assumed. The 447 properties are subject to 409 property operating leases, as well as 38 direct financing leases.
During the year ended December 31, 2013, ARCT IV (defined below) acquired, from certain affiliates of GE Capital Corp., the equity interests in the entities that own a real estate portfolio comprised of 924 properties (the ARCT IV GE Capital Portfolio) for a purchase price of $1.4 billion, exclusive of closing costs, with no liabilities assumed. The 924 properties are subject to 912 property operating leases, as well as 12 direct financing leases.
CapLease, Inc. Merger
On May 28, 2013, we entered into an Agreement and Plan of Merger (the CapLease Merger Agreement) with CapLease, Inc., a Maryland corporation (CapLease), and certain subsidiaries of each company. The CapLease Merger Agreement provided for the merger of CapLease with and into a subsidiary of ours (the CapLease Merger). On November 5, 2013, we completed the merger with CapLease based on the terms of the CapLease Merger Agreement. See Note 3 Mergers and Acquisitions for further discussion of the CapLease Merger.
American Realty Capital Trust IV, Inc. Merger
On July 1, 2013, we entered into an Agreement and Plan of Merger, as amended on October 6, 2013 and October 11, 2013, (the ARCT IV Merger Agreement) with American Realty Capital Trust IV, Inc., a Maryland corporation (ARCT IV), and certain subsidiaries of each company. The ARCT IV Merger Agreement provided for the merger of ARCT IV with and into a subsidiary of the OP (the ARCT IV Merger). We consummated the ARCT IV Merger on January 3, 2014. See Note 3 Mergers and Acquisitions for further discussion of the ARCT IV Merger.
ARCP and ARCT IV, from inception to the ARCT IV Merger date, were considered to be entities under common control. Both entities advisors were wholly owned subsidiaries of ARC. ARC and its related parties had ownership interests in us and in ARCT IV through the ownership of shares of common stock and other equity interests. In addition, the advisors of both entities were contractually eligible to receive potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and had continued to receive fees from us prior to our transition to self-management on January 8, 2014. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting, whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT IV Merger date. In addition, U.S. GAAP requires us to present historical financial information as if the entities were combined from the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT IV Merger, including the impact of the equity transactions entered to consummate the merger, had occurred at inception.
Fortress Portfolio Acquisition
On July 24, 2013, ARC and another related entity, on our behalf and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with affiliates of funds managed by Fortress Investment Group LLC (Fortress) for the purchase and sale of 196 properties owned by Fortress for an aggregate contract purchase price of $972.5 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which was allocated to us based on the pro rata fair value of the properties acquired by us relative to the fair value of all 196 properties to be acquired from Fortress. Of the 196 properties, 120 properties were allocated to us (the Fortress Portfolio). On October 1, 2013, we closed on 41 of the 120 properties with a total purchase price of $200.3 million, exclusive of closing costs. We closed the acquisition of the remaining 79 properties in the Fortress Portfolio on January 8, 2014, for an aggregate contract purchase price of $400.9 million, exclusive of closing costs. The total purchase price of the Fortress Portfolio was $601.2 million, exclusive of closing costs. See Note 3 Mergers and Acquisitions for further discussion of the Fortress Portfolio acquisition.
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Cole Real Estate Investments, Inc. Merger
On October 22, 2013, we entered into an Agreement and Plan of Merger (the Cole Merger Agreement) with Cole Real Estate Investments, Inc. (Cole), a Maryland corporation, and a wholly owned subsidiary of ours. The Cole Merger Agreement provided for the merger of Cole with and into a wholly owned subsidiary of ours (the Cole Merger). We consummated the Cole Merger on February 7, 2014 (the Cole Acquisition Date). See Note 3 Mergers and Acquisitions for further discussion of the Cole Merger.
Inland Portfolio Acquisition
On August 8, 2013, ARC entered into a purchase and sale agreement with Inland American Real Estate Trust, Inc. (Inland) for the purchase and sale of the equity interests of 67 companies owned by Inland for an aggregate contract purchase price of $2.3 billion, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs. Of the 67 companies, the equity interests of 10 companies (the Inland Portfolio) were acquired, in total, by us from Inland for a purchase price of $501.0 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which was allocated to us based on the pro rata fair value of the Inland Portfolio relative to the fair value of all 67 companies to be acquired from Inland by us and the other entities sponsored directly or indirectly by ARC. The Inland Portfolio is comprised of 33 properties. As of December 31, 2013, we had closed on five of the 33 properties for a total purchase price of $56.4 million, exclusive of closing costs. We closed the acquisition of 27 additional properties in the Inland Portfolio subsequent to December 31, 2013. We do not consider it probable that we will close on the remaining property.
Transition to Self-Management
During the year ended December 31, 2013, we retained our Former Manager, a wholly owned subsidiary of ARC, to manage our affairs on a day-to-day basis and, as a result, we were generally externally managed, with the exception of certain acquisition, accounting and portfolio management services performed by our employees. In August 2013, our board of directors determined that it was in the best interests of us and our stockholders to become self-managed, and we completed our transition to self-management on January 8, 2014. In connection with becoming self-managed, we terminated the existing management agreement with our Former Manager, entered into employment and incentive compensation arrangements with our executives and the Former Manager agreed to sell us certain assets.
Under the termination agreement, the Former Manager agreed to provide services previously provided under the management agreement with the Former Manager, to the extent required by ARCP, for a tail period of 60 days following January 8, 2014 and received a payment in the amount of $10.0 million for providing such services. In addition, pursuant to a separate transition services agreement, affiliates of the Former Manager agreed to provide certain transition services, including accounting support, acquisition support, investor relations support, public relations support, human resources and administration, general human resources duties, payroll services, benefits services, treasury, insurance and risk management, information technology, telecommunications and Internet and services relating to office supplies for a 60-day term, which may be extended by ARCP. For additional services that were required by ARCP, ARCP paid an hourly rate or flat rate to be agreed on, that did not exceed market rate. See Note 19 Related Party Transactions and Arrangements (As Restated) and Note 24 Subsequent Events (As Restated) for further discussion.
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Investment Policies
Our primary business objective is to generate dependable monthly cash dividends from a consistent and predictable level of funds from operations (FFO) and adjusted funds from operations (AFFO) per share and capital appreciation associated with extending expiring leases or repositioning our properties for lease to new credit tenants upon the expiration of a net lease. After consummation of the mergers and acquisitions discussed above, we will own a portfolio that uniquely combines all entities portfolio of properties with stable income from high credit quality tenants, with our portfolio, which has substantial growth opportunities. Our long-term business strategy is to acquire a diverse portfolio consisting of approximately 70% long-term leases and 30% medium-term leases, with an average remaining lease term of 10 to 12 years. We expect this investment strategy to provide for stable income from credit tenants and to provide for growth opportunities from the re-leasing of properties that are currently subject to below market leases. We intend to pursue an investment strategy that maximizes current cash flow and achieves sustainable long-term growth. We expect to achieve these objectives by acquiring net leased properties that either (a) have in-place rental rates below current average asking rents in the applicable sub-market and are located in sub-markets with stable or improving market fundamentals or (b) provide a vital location or infrastructure that is essential to the business operations of the tenant, which we believe will give incentive to the existing tenant or a new credit tenant to re-lease the property at a higher rental rate upon the expiration of the existing lease.
Primary Investment Focus
We focus on investing in properties that are net leased to (i) credit tenants, which are generally large public companies with investment grade or below investment grade ratings and (ii) governmental, quasi-governmental and not-for-profit entities. We intend to invest in properties with tenants that reflect a diversity of industries, geographies and sizes. A significant majority of our net lease investments have been and will continue to be in properties net leased to investment grade tenants, although at any particular time our portfolio may not reflect this. Our properties are primarily located in Main & Main locations in markets that we believe exhibit demographic trends that will support growth. We believe the diversification of our portfolio reduces the risks associated with potential adverse events that may impact any one tenant, industry, asset type or location. We believe our scale will enable us to continue to make significant acquisitions without exposing ourselves to excessive concentration risk. Our strategy encompasses receiving the majority of our revenue from investment grade tenants as we further acquire properties and enter into (or assume) lease arrangements.
Under net lease arrangements, tenants enter into long-term leases and pay most of the costs associated with the property and limited day-to-day property management by us is required. As a result, net lease companies are generally able to increase their size and scale with minimal incremental expense. This enables us to take advantage of economies of scale resulting in significant operational efficiencies as we grow. We believe that our focus on net leases has also enabled us to achieve greater tenant and geographic diversification, more stable cash flows, increased liquidity and lower cost of capital.
Investing in Real Property
We invest, and expect to continue to invest, in primarily freestanding, single-tenant retail properties net-leased to investment grade and other creditworthy tenants. When evaluating prospective investments in real property, our management will consider relevant real estate and financial factors, including the location of the property, the leases and other agreements affecting the property, the creditworthiness of major tenants, its income-producing capacity, its physical condition, its prospects for appreciation, its prospects for liquidity, tax considerations and other factors. In this regard, our management will have substantial discretion with respect to the selection of specific investments, subject to approval of our board of directors.
As of December 31, 2013, after giving effect to the properties owned by ARCT IV which we acquired on January 3, 2014, we owned nearly 2,559 double and triple-net lease assets across property types. As a percentage of rental income, as of December 31, 2013, retail properties represented 54%, office properties represented 27% and distribution properties represented 19% of our total portfolio. Our portfolio is located across 49 states, the District of Columbia and Puerto Rico. Our tenant base is comprised of approximately 486 tenants, which include well-known national as well as regional companies across 55 industries.
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The following table lists the tenants whose annualized rental income, on a straight-line basis, represented greater than 10% of consolidated annualized rental income on a straight-line basis as of December 31, 2013 and 2012:
Tenant |
2013 | 2012 | ||||||
Citizens Bank |
* | 13.8 | % | |||||
Dollar General |
* | 12.3 | % | |||||
FedEx |
* | 10.2 | % |
* | The tenants annualized rental income was not greater than 10% of total annualized rental income for all portfolio properties as of the period specified. |
The following table lists the states where we have concentrations of properties where annual rental income, on a straight-line basis, represented greater than 10% of consolidated annualized rental income, on a straight-line basis, as of December 31, 2013 and 2012:
State |
2013 | 2012 | ||||||
Texas |
10.7 | % | * | |||||
Illinois |
* | 11.2 | % |
* | The states annualized rental income was not greater than 10% of total annualized rental income for all portfolio properties as of the period specified. |
We do not have any specific policy as to the amount or percentage of our assets which will be invested in any specific property, other than the requirements under REIT qualification rules. We currently anticipate that our real estate investments will continue to be diversified in multiple net leased single tenant properties and in multiple geographic markets.
Purchase and Sale of Investments
We may deliberately and strategically dispose of properties in the future and redeploy funds into new acquisitions that align with our strategic objectives. Further, on a limited and opportunistic basis, we intend to acquire and promptly resell medium-term net lease assets for immediate gain. To the extent we engage in these activities, to avoid adverse U.S. federal income tax consequences, we generally must do so through a taxable REIT subsidiary (TRS). In general, a TRS is treated as a regular C corporation and therefore must pay corporate-level taxes on its taxable income. Thus, our yield on such activities will be reduced by such taxes borne by the TRS. Our two vacant properties will be held in a TRS because we are contemplating various strategies including selling them as a means of maximizing our value from those properties.
Investments in Real Estate Mortgages
While our current portfolio consists of, and our business objectives emphasize, equity investments in real estate, we may, at the discretion of our board of directors and without a vote of our stockholders, invest in mortgages and other types of real estate interests consistent with our qualification as a REIT. We acquired $97.6 million of mortgage loans and $211.9 million of collateralized mortgage backed securities (CMBS), pursuant to the Cole merger and the CapLease merger. Investments in real estate mortgages run the risk that one or more borrowers may default under the mortgages and that the collateral securing those mortgages may not be sufficient to enable us to recoup our full investment. Investments in mortgages are also subject to our policy not to be treated as an investment company under the Investment Company Act.
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Securities of or Interests in Persons Primarily Engaged in Real Estate Activities and Other Issuers
Subject to the asset tests and income tests necessary for REIT qualification, we may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers (including partnership interests, limited liability company interests, common stock and preferred stock), where such investment would be consistent with our investment objectives, including for the purpose of exercising control over such entities. There are no limitations on the amount or percentage of our total assets that may be invested in any one issuer, other than those imposed by the gross asset tests we must meet in order to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the Code). We do not intend that our investments in securities will require us to register as an investment company under the Investment Company Act, and we would generally divest appropriate securities before any such registration would be required.
Build-to-Suit and Properties under Development
We are also expanding our investment activities beyond the traditional investment in completed properties with tenants in occupancy and paying rents by continuing the build-to-suit program and acquisition of properties under the development of Cole and CapLease. These programs involve acquisition of properties that are not yet developed or are under development. Through the build-to-suit program and acquisition of properties under development or that require substantial refurbishment or renovation, we seek to source investments at higher rates of return relative to completed projects. We believe that by entering into projects with established developer partners, we can provide the capital needed to get projects built, while at the same time, securing long-term investment assets for our company at yields significantly higher than those available for completed properties.
Cole Capital®
We acquired Cole Capital as part of our acquisition of Cole. Cole Capital sponsors and manages direct investment programs, which primarily includes five publicly registered, non-traded REITs. Cole Capital is responsible for managing the day-to-day affairs of the non-traded REITs, identifying and making acquisitions and investments on behalf of the non-traded REITs, and recommending to each of the respective board of directors of the non-traded REITs an approach for providing investors with liquidity. Cole Capital also develops new non-traded REIT offerings, distributes the shares of common stock for the non-traded REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings.
Joint Ventures
We may acquire or enter into joint ventures from time to time, if we determine that doing so would be the most cost-effective and efficient means of raising capital. Equity investments may be subject to existing mortgage financing and other indebtedness or such financing or indebtedness may be incurred in connection with acquiring investments. Any such financing or indebtedness will have priority over our equity interest in such property.
Financing Policies
We rely on leverage to allow us to invest in a greater number of assets and enhance our asset returns. We expect our leverage levels to decrease over time, as a result of one or more of the following factors: scheduled principal amortization on our debt and lower leverage on new asset acquisitions. We expect to continue to strengthen our balance sheet through debt repayment or repurchase and also opportunistically grow our portfolio through new property acquisitions.
We intend to finance future acquisitions with the most advantageous source of capital available to us at the time of the transaction, which may include a combination of public and private offerings of our equity and debt securities, secured and unsecured corporate-level debt, property-level debt and mortgage financing and other public, private or bank debt. In addition, we may acquire properties in exchange for the issuance of common stock or OP Units and in many cases we may acquire properties subject to existing mortgage indebtedness.
In February 2014, we, through our OP, raised $2.55 billion in unsecured senior notes, and simultaneously with that financing, our credit agreement, which previously had been secured by pledges of interests in property-owning entities, was modified to eliminate these pledges. We intend to continue to emphasize unsecured corporate- or OP-level debt in our financing and seek to reduce the percentage of our assets which are secured by mortgage loans.
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When we use mortgage financing, we generally seek to finance our properties with, or acquire properties subject to, long-term, fixed-rate, non-recourse debt, effectively locking in the spread we expect to generate on our properties and isolating the default risk to solely the properties financed. Through non-recourse debt, we seek to limit the overall company exposure in the event we default on the debt to the amount we have invested in the asset or assets financed. We seek to finance our assets with match-funded or substantially match-funded debt, meaning that we seek to obtain debt whose maturity matches as closely as possible the lease maturity of the asset financed. We expect that over time the leverage on net leased properties with medium-term remaining lease durations will be approximately 45% to 55% of the property value. At December 31, 2013, our corporate leverage ratio (total debt outstanding less on-hand cash and cash equivalents divided by base purchase price of acquired properties) was 58.1%.
We also may obtain secured or unsecured debt to acquire properties, and we expect that our financing sources will include banks, institutional investment firms, including asset managers, and life insurance companies. Although we intend to maintain a conservative capital structure, with limited reliance on debt financing, our charter does not contain a specific limitation on the amount of debt we may incur and our board of directors may implement or change target debt levels at any time without the approval of our stockholders.
Lending Policies
We do not have a policy limiting our ability to make loans to other persons, although we may be so limited by applicable law, such as the Sarbanes-Oxley Act. Subject to REIT qualification rules, we may make loans to unaffiliated third parties. For example, we may consider offering purchase money financing in connection with the disposition of properties in instances where the provision of that financing would increase the value to be received by us for the property sold. We do not expect to engage in any significant lending in the future. We may choose to guarantee debt of certain joint ventures with third parties. Consideration for those guarantees may include, but is not limited to, fees, long-term management contracts, options to acquire additional ownership interests and promoted equity positions. Our board of directors may, in the future, adopt a formal lending policy without notice to or consent of our stockholders.
Dividend Policy
We intend to pay regular monthly dividends to holders of our common stock, Series D cumulative convertible preferred stock, Series F cumulative redeemable preferred stock and the units of ownership in the OP. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its REIT taxable income.
In September 2011, our board of directors authorized, and we began paying dividends in October 2011, on the 15th day of each month to common stockholders of record at the close of business on the eighth day of such month. Since October 2011, the board of directors has authorized the following increases in our common stock dividends:
Declaration date |
Annualized dividend per share |
Distribution date | Record date | |||||||||
September 7, 2011 |
$ | 0.875 | 10/15/2011 | 10/8/2011 | ||||||||
February 27, 2012 |
$ | 0.880 | 3/15/2012 | 3/8/2012 | ||||||||
March 16, 2012 |
$ | 0.885 | 6/15/2012 | 6/8/2012 | ||||||||
June 27, 2012 |
$ | 0.890 | 9/15/2012 | 9/8/2012 | ||||||||
September 30, 2012 |
$ | 0.895 | 11/15/2012 | 11/8/2012 | ||||||||
November 29, 2012 |
$ | 0.900 | 2/15/2013 | 2/8/2013 | ||||||||
March 17, 2013 |
$ | 0.910 | 6/15/2013 | 6/8/2013 | ||||||||
May 28, 2013 |
$ | 0.940 | 12/13/2013 | 12/6/2013 | ||||||||
October 23, 2013* |
$ | 1.000 | 2/15/2014 | 2/7/2014 |
* | The dividend increase was contingent upon, and became effective with, the close of the Cole merger, which was consummated on February 7, 2014. |
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Commencing on May 31, 2012, we began paying cumulative dividends on the Series A convertible preferred stock monthly in arrears at the annualized rate of $0.77 per share. Commencing on August 15, 2012, we began paying cumulative dividends on the Series B convertible preferred stock monthly in arrears at an annualized rate of $0.74 per share. These dividends were discontinued when the Series A and B convertible preferred stock were converted to common stock in August 2013. Commencing in June 2013, we began paying cumulative dividends on the Series C cumulative convertible preferred stock monthly in arrears at the annualized rate of $0.9104 per share. These dividends were discontinued when the Series C cumulative convertible preferred stock was converted to common stock and cash in November 2013. Commencing in November 2013, we began paying cumulative dividends on the Series D cumulative preferred stock monthly in arrears at the annualized rate of $0.7896 per share.
We have the ability to fund dividends from any source, including borrowing funds and using the proceeds of equity and debt offerings. Dividends made by us will be authorized by our board of directors in its sole discretion out of funds legally available therefore and will be dependent upon a number of factors, including restrictions under applicable law and our capital requirements.
We and our board of directors share a similar philosophy with respect to paying our dividend. The dividend should principally be derived from cash flows generated from real estate operations. The management agreement with our Former Manager, prior to the amendment thereof in connection with the ARCT III Merger, provided for payment of the asset management fee only if the full amount of the dividends declared by us in respect of our OP Units for the six immediately preceding months is equal to or greater than the amount of our AFFO. This condition has been satisfied. Prior to when it was satisfied, our Former Manager waived such portion of its management fee that, when added to our AFFO, without regard to the waiver of the management fee, increased our AFFO so that it equaled the dividends declared by us in respect of our OP Units for the prior six months. For the year ended December 31, 2013, $9.4 million in base management fees were incurred while certain of these fees were waived by our Former Manager that were in excess of certain net income thresholds related to the Companys operations. Subsequent to December 31, 2013, the management agreement was terminated as a result of our transition to self-management. See Note 24 Subsequent Events for further discussion.
As our real estate portfolio matures and one-time acquisition and transaction expenses are significantly reduced, we expect cash flows from operations to cover a more significant portion of our dividends and over time to cover dividends.
Tax Status
We elected to be taxed as a REIT under Sections 856 through 860 of the Code, effective for our taxable year ended December 31, 2011. We believe that we are organized and operate in such a manner as to qualify for taxation as a REIT under the Code. We intend to continue to operate in such a manner to qualify for taxation as a REIT, but no assurance can be given that we will operate in a manner so as to qualify or remain qualified as a REIT. Pursuant to our charter, our board of directors has the authority to make any tax elections on our behalf that, in their sole judgment, are in our best interest. This authority includes the ability to elect not to qualify as a REIT for U.S. federal income tax purposes or, after qualifying as a REIT, to revoke or otherwise terminate our status as a REIT. Our board of directors has the authority under our charter to make these elections without the necessity of obtaining the approval of our stockholders. In addition, our board of directors has the authority to waive any restrictions and limitations contained in our charter that are intended to preserve our status as a REIT during any period in which our board of directors has determined not to pursue or preserve our status as a REIT.
Competition
We are subject to competition in the acquisition of properties and intense competition in the leasing of our properties. We compete with a number of developers, owners and operators of retail, restaurant, industrial and office real estate, many of which own properties similar to ours in the same markets in which our properties are located, in the leasing of our properties. We also may face new competitors and, due to our focus on single-tenant properties located throughout the United States, and because many of our competitors are locally or regionally focused, we will not encounter the same competitors in each region of the United States.
Many of our competitors have greater financial and other resources and may have other advantages over our company. Our competitors may be willing to accept lower returns on their investments and may succeed in buying the properties that we have targeted for acquisition. We may also incur costs on unsuccessful acquisitions that we will not be able to recover.
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Regulations
Our investments are subject to various federal, state, local and foreign laws, ordinances and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity. We believe that we have all permits and approvals necessary under current law to operate our investments.
Environmental Matters
Under various federal, state and local environmental laws, a current owner of real estate may be required to investigate and clean up contaminated property. Under these laws, courts and government agencies have the authority to impose cleanup responsibility and liability even if the owner did not know of and was not responsible for the contamination. For example, liability can be imposed upon us based on the activities of our tenants or a prior owner. In addition to the cost of the cleanup, environmental contamination on a property may adversely affect the value of the property and our ability to sell, rent or finance the property, and may adversely impact our investment in that property.
Prior to acquisition of a property, we will obtain Phase I environmental reports, or will rely on recent Phase I environmental reports. These reports will be prepared in accordance with an appropriate level of due diligence based on our standards and generally include a physical site inspection, a review of relevant federal, state and local environmental and health agency database records, one or more interviews with appropriate site-related personnel, review of the propertys chain of title and review of historic aerial photographs and other information on past uses of the property and nearby or adjoining properties. We may also obtain a Phase II investigation which may include limited subsurface investigations and tests for substances of concern where the results of the Phase I environmental reports or other information indicates possible contamination or where our consultants recommend such procedures.
Employees
As of December 31, 2013, we had 12 employees. On January 8, 2014, we successfully completed our transition to self-management. In connection with becoming self-managed, ARCP terminated its management agreement with its external manager and certain former executives and employees of our Former Manager became our employees. Subsequent to our transition to self-management on January 8, 2014 and including employees from the consummation of the Cole Merger, we had approximately 400 employees.
Financial Information About Industry Segments
Our current business consists of owning, managing, operating, leasing, acquiring, investing in and disposing of real estate assets. All of our consolidated revenues are from our consolidated real estate properties. We internally evaluate operating performance on an individual property level and view all of our real estate assets as one industry segment, and accordingly, all of our properties are aggregated into one reportable segment. Please see Part IV, Item 15 Exhibits and Financial Statement Schedules included elsewhere in this annual report for more detailed financial information.
Available Information
We electronically file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and proxy statements, with the SEC. You may read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, or you may obtain information by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet address at http://www.sec.gov that contains reports, proxy statements and information statements, and other information, which you may obtain free of charge. In addition, copies of our filings with the SEC may be obtained from the website maintained for us at www.arcpreit.com.
Item 1A. Risk Factors (Certain Sections Restated)
This Risk Factors section contains references to our capital stock and to our stockholders. Unless expressly stated otherwise, the references to our capital stock represent our common stock and any class or series of our preferred stock, while the references to our stockholders represent holders of our common stock and any class or series of our preferred stock.
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New Risk Factors in this Form 10-K/A
The following risk factors, which relate to the matters discussed in the Explanatory Note, have been added to this Form 10-K/A. Other than this section, New Risk Factors in this Form 10-K/A, the remainder of Item 1A. Risk Factors has not been updated to reflect developments since February 27, 2014, the date of the Original Filing, unless specified as restated. However, all Risk Factors not updated should be read in light of the information presented below.
We have not been in compliance with the requirements of the NASDAQ Stock Market for continued listing and if NASDAQ does not concur that we have adequately remedied our non-compliance, our common stock may be delisted from trading on NASDAQ, which could have a material adverse effect on us and our shareholders.
We have been delinquent in the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014 (the Third Quarter 10-Q), as a result of which we have not been in compliance with the listing rules of the NASDAQ and are subject to having our stock delisted from trading on NASDAQ. We submitted a compliance plan to NASDAQ on January 12, 2015 and the staff at NASDAQ granted us an exception to file our Third Quarter 10-Q and any other delinquent SEC filings on or before April 15, 2015 in order to enable us to regain compliance with the listing rules. We are filing our Third Quarter 10-Q concurrently with this filing. As a result, we currently believe that we have adequately remedied our current non-compliance with NASDAQs listing rules within NASDAQs terms of exception. However, there can be no assurance that the NASDAQ will concur that we have remedied our current non-compliance or that we will timely file our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, in either of which case our common stock could remain subject to delisting by NASDAQ. If our common stock were delisted, there can be no assurance whether or when it would again be listed for trading on NASDAQ or any other securities exchange. In addition, the market price of our shares might decline and become more volatile, and our shareholders might find that their ability to trade in our stock would be adversely affected. Furthermore, institutions whose charters do not allow them to hold securities in unlisted companies might sell our shares, which could have a further adverse effect on the price of our stock.
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Our inability to file and deliver our financial statements and certain other financial deliverables required under the terms of our Credit Agreement and the indentures governing our senior unsecured notes and convertible notes has adversely affected our overall borrowing flexibility, exposed us to actual and potential consequences of default and required us to pay certain additional expenses.
As a result of our failure to deliver our financial statements for the fiscal quarter ended September 30, 2014 and certain other financial deliverables (the Q3 2014 Financial Information) required under the terms of the Amended and Restated Credit Agreement (the Credit Agreement), dated as of June 30, 2014, by and among the Company, the OP, as the borrower thereunder, the lenders party thereto (the Lenders) and Wells Fargo Bank, National Association, as administrative agent, the Company and the OP entered into two consent and waiver agreements with respect to the Credit Agreement. On November 12, 2014, the Company and the OP entered into the Consent and Waiver Agreement and First Amendment to Credit Agreement (the First Consent and Waiver), which, among other things, provided for an extension for delivery of the Q3 2014 Financial Information until the earlier of five days following the date the company files with the SEC its Third Quarter 10-Q and January 5, 2015, modified certain financial covenants in the Credit Agreement relating to the OPs indebtedness ratios and added certain other financial maintenance covenants. Based upon our determination that we would not deliver the Q3 2014 Financial Information by January 5, 2015 in accordance with the First Consent and Waiver, the Company and the OP entered into a subsequent Consent and Waiver Agreement (the Second Consent and Waiver) on December 23, 2014, which provided for a further extension for delivery of the Q3 2014 Financial Information until the earlier of March 2, 2015 and 45 days following the receipt of a notice of breach or default from the applicable trustee or the requisite percentage of holders under the Companys and the OPs respective indentures.
The First Consent and Waiver and the Second Consent and Waiver also, among other things, (i) provided an extension for delivery of the Companys full year 2014 audited financial statements until the earlier of the fifth day after the date that the Company files its Annual Report on Form 10-K with the SEC for the fiscal year ended December 31, 2014 and March 31, 2015, (ii) permanently reduced the maximum amount of indebtedness under the Credit Agreement to $3.6 billion, including the reduction of commitments under the Companys revolving facilities and the elimination of a $25 million swingline facility, (iii) provided that until the date that all of the required financial information and other deliverables were delivered, no further loans or letters of credit would be requested by the Company under the Credit Agreement, other than in accordance with the cash flow forecast provided by the Company to the lenders thereunder, (iv) provided that neither the Company nor the OP would pay any dividends on, or make any other Restricted Payment (as defined in the Credit Agreement) on, its respective common equity and provided that the Company and the OP would provide additional financial and other information to the Lenders from time to time. In connection with the First Consent and Waiver and Second Consent and Waiver, the Company and OP paid certain customary fees to the consenting Lenders and agreed to reimburse certain customary expenses of the arrangers. On February 20, 2015, we entered into a third consent (the Third Consent) to confirm that certain revisions to the required financial deliverables were agreed with the Lenders.
In addition, in connection with our failure to timely file our Third Quarter 10-Q containing the information required to be included in respect of the OP, which is required to be delivered pursuant to the terms of the senior notes Indenture, dated February 6, 2014, by and among the OP, U.S. Bank National Association, as trustee (the Trustee), and the guarantors named therein (the Indenture), the Company engaged in discussions with counsel to an ad hoc group of note holders (the Senior Noteholder Group), which we have been advised then represented a majority of the aggregate principal amounts outstanding of each of the 2.000% senior notes due 2017, the 3.000% senior notes due 2019 and the 4.600% senior notes due 2024, which, in each case, were issued by the OP and guaranteed by the Company under the Indenture. On January 22, 2015, we announced that we had entered into an agreement in principle, pursuant to which the Senior Noteholder Group agreed not to issue a notice of default, prior to March 3, 2015, for the Companys failure to timely deliver such Third Quarter 10-Q. In exchange, we agreed to sign a confidentiality agreement with the Senior Noteholder Groups counsel, pay reasonable and documented fees and out-of-pocket expenses of such counsel up to $300,000, and amend the Indenture to provide that if we have not furnished the required third quarter 2014 information to the Trustee prior to March 3, 2015, then any notice of default in relation to our failure to timely file such information will be deemed to have been given as of January 19, 2015 for purposes of determining the period during which we can cure that failure prior to it becoming an Event of Default (as defined in the Indenture). Such agreement was subsequently definitively documented, and a supplement to the Indenture was entered into on February 9, 2015. The Third Quarter 2014 10-Q will be filed with the SEC concurrently with this filing.
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In addition, we announced on January 22, 2015 that we received at our Phoenix, Arizona corporate office notice (the Notice) from the trustee under the indentures (the Convertible Indentures) governing each of the 3.00% convertible senior notes due 2018 issued by us on July 29, 2013 and the 3.75% convertible senior notes due 2020 issued by us on December 10, 2013 (collectively, the Convertible Notes) of our failure to timely deliver our Third Quarter 10-Q, which was required to be delivered pursuant to the terms of the Convertible Indentures. Subsequent to our announcement, we learned that we also received the Notice on January 16, 2015, at an address in New York City that was formerly our principal place of business. Pursuant to the terms of the Convertible Indentures, we have 60 days following receipt of a notice of default to deliver the required financial statements, after which such failure would become an event of default under each of the Convertible Indentures. Our Third Quarter 10-Q will be filed with the SEC concurrently with this filing and such default will be cured upon such filing.
We currently expect to file our Annual Report on Form 10-K for the year ended December 31, 2014, on or prior to March 31, 2015, in compliance with the terms of our Credit Agreement, consents, waivers and amendment described above, and the indentures for our senior and convertible notes; however we cannot assure you that we will so timely file and our failure to do so could expose us to further risks associated with noncompliance with the terms of those agreements.
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If we fail to comply with the terms of our financing agreements, including waivers, consents and amendments thereto, were to occur, our business, financial condition, results of operations, cash flows and ability to satisfy our debt service obligations could be materially and adversely affected. In addition, any foreclosure on our properties could create taxable income without accompanying cash proceeds, which could adversely affect our ability to meet the REIT dividend requirements imposed by the Code.
The recent downgrades in our credit ratings by Standard & Poors and Moodys could impact our access to capital and materially adversely affect our business and financial condition.
Our credit rating has been downgraded to a non-investment grade credit rating and there can be no assurance that it will not be downgraded further. The current downgrade, and any further downgrade, could adversely affect the amount of capital we can access, as well as the terms of any financing we obtain. Since we depend in part on debt financing to fund our growth, such an adverse change in our credit rating could have a negative effect on our financial condition and future growth and on transactions in which we must obtain debt capital at an advantageous cost.
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As a result of the delayed filing of our periodic reports with the SEC, we are not currently eligible to use a registration statement on Form S-3 to register the offer and sale of securities, which may adversely affect our ability to raise future capital or complete acquisitions.
We are not currently eligible to register the offer and sale of our securities using a registration statement on Form S-3 and we will not become eligible until we have timely filed certain periodic reports required under the Securities Exchange Act of 1934 for one year. There can be no assurance when we will meet this requirement, which depends upon our ability to file our periodic reports on a timely basis in the future. Should we wish to register the offer and sale of our securities to the public before we are eligible to do so on Form S-3, our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially having an adverse effect on our financial condition.
The Amended Credit Agreement currently prohibits us and the OP from making distributions in respect of our respective common equity and there can be no assurance as to if, when or at what rate we and the OP will resume common equity distributions.
In connection with our entry into the Second Consent and Waiver, we agreed that, until such time as we have delivered the required financial statements and provided certain other financial deliverables to the lenders under the Amended Credit Agreement, we and the OP would not make distribution payments in respect of our respective common equity. There can be no assurance as to when we will satisfy these requirements. Once we have satisfied these requirements, our Board of Directors intends to reevaluate the reinstatement of a common equity distribution for both us and the OP. There can be no assurance that the reinstated dividends will be paid at rates equal to or at the same frequency as we and the OP previously declared common equity distributions, and any future common equity distributions to be paid by us and the OP to our respective common equity holders may be affected by our reduced borrowing capacity under the Amended Credit Agreement, potentially adversely affecting our ability to make required REIT dividend payments under the Code, which could jeopardize our status as a REIT.
Government investigations may require significant management time and attention, result in significant legal expenses or damages and cause our business, financial condition, results of operations and cash flows to suffer.
On November 13, 2014, we received a formal order of investigation from the staff of the SEC, and the SEC has issued subpoenas calling for the production documents. On December 19, 2014, we received a subpoena from the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts. The U.S. Attorneys Office for the Southern District of New York has contacted counsel for the Company and counsel for the Audit Committee. We and the Audit Committee are cooperating with these regulators in their investigations. The amount of time needed to resolve these investigations is uncertain, and we cannot predict the outcome of these investigations or whether we will face additional government investigations, inquiries or other actions related to the matters described in this Form 10-K/A. Subject to certain limitations, we are obligated to indemnify our current and former directors, officers and employees in connection with the ongoing governmental investigations and any future government inquiries, investigations or actions. These matters could require us to expend significant management time and incur significant legal and other expenses and could result in civil and criminal actions seeking, among other things, injunctions against us and the payment of significant fines and penalties by us, which could have a material adverse effect on our financial condition, business, results of operations and cash flow. If any of these governmental authorities were to commence legal action, we could be required to pay significant penalties and could become subject to injunctions, a cease and desist order and other equitable remedies. We can provide no assurance as to the outcome of any governmental investigation.
ARCP and certain of our current and former officers and directors have been named as defendants in various lawsuits and other proceedings related to the matters described in this Form 10-K/A, and those lawsuits and other proceedings may require significant management time and attention, result in significant legal expenses or damages and have an adverse effect on our business, financial condition, results of operations and cash flows.
Between October 30, 2014 and January 20, 2015, the Company and its current and former officers and directors (along with others) were named as defendants in ten putative securities class action complaints in the United States District Court for the Southern District of New York. At a February 10, 2015 status conference, the court consolidated these actions, appointed a lead plaintiff, designated the complaint filed in Teachers Insurance and Annuity Association of America v. American Realty Capital Properties, Inc., et al., No. 15-cv-0421 (AKH), as the consolidated class action complaint, and set a
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deadline of April 10, 2015 for the defendants to respond to the consolidated class action complaint. The consolidated class action complaint asserts claims for violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, arising out of allegedly false and misleading statements in connection with the purchase or sale of the Companys securities. The proposed class period runs from May 6, 2013 to October 29, 2014.
In addition, on November 25, 2014, an additional putative securities class action complaint was filed in the Circuit Court for Baltimore County, Maryland, which the Company removed to the United States District Court for the District of Maryland (Northern Division) on December 23, 2014 and seeks to have transferred to the Southern District of New York. This action asserts claims for violations of Sections 11 and 15 of the Securities Act of 1933, arising out of allegedly false and misleading statements made in connection with the Companys securities issued in connection with the Cole Real Estate Investments, Inc. merger. The Company is not yet required to respond to this complaint.
Between November 17, 2014 and January 29, 2015, nine shareholder derivative actions, purportedly in the name and for the benefit of the Company, were filed against certain of the Companys current and former officers and directors in the United States District Court for the Southern District of New York, the Circuit Court for Baltimore City, Maryland and the Supreme Court of the State of New York. On February 9, 2015 and February 20, 2015, three of the plaintiffs who filed actions in the New York federal court voluntarily dismissed those actions without prejudice. The remaining six actions seek money damages and other relief on behalf of the Company for, among other things, alleged breaches of fiduciary duty, abuse of control, gross mismanagement and unjust enrichment in connection with the alleged conduct underlying the claims asserted in the securities class actions negligence and breach of contract. On February 10, 2015, the New York federal court consolidated the New York federal court actions, appointed a lead plaintiff and ordered the lead plaintiff to file a consolidated amended complaint by March 10, 2015. The court also set a deadline of April 3, 2015 for the Company and defendants to respond to the consolidated amended complaint in the consolidated New York federal court action. On February 18, 2015 the parties to the New York state action entered into a stipulation setting a deadline of April 20, 2015 for the Company and defendants. The Company is not yet required to respond to the complaints in the Maryland state court actions.
On December 18, 2014, a former employee, Lisa McAlister, filed a defamation action against the Company and certain of its former officers and directors in the New York Supreme Court, captioned McAlister v. American Realty Capital Properties, Inc., et al., Index No. 162499/2014. On January 26, 2015, ARCP and defendants filed a motion to dismiss plaintiffs complaint. Subsequently, plaintiff voluntarily dismissed her complaint.
On January 7, 2015, Ms. McAlister also filed a complaint, No. 2-4173-15-016, with the Occupational Safety and Health Administration of the United States Department of Labor. Subsequently, Ms. McAlister voluntarily withdrew her complaint.
On January 15, 2015 and February 20, 2015, the Company and certain of its former directors and officers were named as defendants in two individual securities fraud actions filed in the United States District Court for the Southern District of New York, captioned Jet Capital Master Fund, L.P. v. American Realty Capital Properties, Inc., et al., No. 15-cv-307 (AKH) (the Jet Capital Action) and Twin Securities, Inc. v. American Realty Capital Properties, Inc., No. 15-cv-1291 (AKH) (the Twin Securities Action, and together with the Jet Capital Action, the Individual Securities Actions). The Individual Securities Actions seek money damages and assert claims for alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b), 14(a), 18 and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, as well as common law fraud under New York law in connection with the purchase of the Companys securities. At a February 10, 2015 status conference, the court set a deadline of April 10, 2015 for the defendants to respond to the complaint in the Jet Capital Action. The defendants are not yet required to respond to the complaint in the Twin Securities Action.
We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting. If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.
Maintaining effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce reliable financial statements. As discussed in Item 9A Controls and Procedures of this Form 10-K/A, we have re-evaluated our internal control over financial reporting and our disclosure controls and procedures and concluded that they were not effective as of December 31, 2013. As disclosed in Item 4 of our Quarterly reports on Form 10-Q/A for the first and second quarters of 2014 and our Third Quarter 10-Q, the material weaknesses in our internal control over financial reporting at December 31, 2013 had not been remediated, and additional material weaknesses in our internal control over financial reporting existed, at March 31, 2014, June 30, 2014 and September 30, 2014. In addition, at those dates, our disclosure controls and procedures were not effective. Finally, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, we expect to report our conclusions that our disclosure controls and procedures and internal control over financial reporting were not effective as of that date.
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A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The Company is committed to remediating its material weaknesses as promptly as possible. Implementation of the Companys remediation plans has commenced and is being overseen by the Audit Committee. However, there can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will not arise in the future. Any failure to remediate the material weaknesses, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading price of our common stock.
Risks Related to Our Properties and Operations
Our growth will partially depend upon our ability to successfully acquire future properties, and we may be unable to enter into and consummate property acquisitions on advantageous terms or our property acquisitions may not perform as we expect due to competitive conditions and other factors.
We acquire and intend to continue to acquire primarily freestanding, single tenant retail properties net leased primarily to investment grade and other credit tenants. The acquisition of properties entails various risks, including the risks that our investments may not perform as we expect, that we may be unable to quickly and efficiently integrate our new acquisitions into our existing operations and that our cost estimates for bringing an acquired property up to market standards may prove inaccurate. Further, we face significant competition for attractive investment opportunities from other well capitalized real estate investors, including both publicly-traded REITs and private institutional investment funds including REITs and funds sponsored by the PCM business and these competitors may have greater financial resources than us and a greater ability to borrow funds and acquire properties. This competition increases as investments in real estate become increasingly attractive relative to other forms of investment. As a result of competition, we may be unable to acquire additional properties as we desire or the purchase price may be significantly elevated. In addition, we expect to finance future acquisitions through a combination of borrowings under our revolving credit facility, proceeds from equity or debt offerings by us or our operating partnership or its subsidiaries and proceeds from property contributions and divestitures, which may not be available and which could adversely affect our cash flows. Any of the above risks could adversely affect our financial condition, results of operations, cash flows and ability to pay distributions on, and the market price of, our common stock.
In addition, our growth strategy includes the disciplined acquisition of properties as opportunities arise. Our ability to acquire properties on satisfactory terms and successfully integrate and operate them is subject to the following significant risks:
| we may be unable to acquire desired properties because of competition from other real estate investors with more capital, including other real estate operating companies, REITs and investment funds; |
| we may acquire properties that are not accretive to our results upon acquisition, and we may not successfully manage and lease those properties to meet our expectations; |
| competition from other potential acquirers may significantly increase the purchase price of a desired property; |
| we may be unable to generate sufficient cash from operations, or obtain the necessary debt or equity financing to consummate an acquisition or, if obtainable, financing may not be on satisfactory terms; |
| we may need to spend more than budgeted amounts to make necessary improvements or renovations to acquired properties; |
| agreements for the acquisition of properties are typically subject to customary conditions to closing, including satisfactory completion of due diligence investigations, and we may spend significant time and money on potential acquisitions that we do not consummate; |
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| the process of acquiring or pursuing the acquisition of a new property may divert the attention of our management from our existing business operations; |
| we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations; |
| market conditions may result in future vacancies and lower-than-expected rental rates; and |
| we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as cleanup of environmental contamination, claims by tenants, vendors or other persons against the former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties. |
If we cannot complete property acquisitions on favorable terms, or operate acquired properties to meet our goals or expectations, our business, financial condition, results of operations and cash flow; the per share trading price of our common stock; and our ability to satisfy our debt service obligations and to make dividends to our stockholders could be materially and adversely affected.
We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all, which could have a material adverse effect on our financial condition, results of operations, cash flow, cash available for dividends to our stockholders, the per share trading price of our common stock and our ability to satisfy our debt service obligations.
Because we compete with a number of real estate operators in connection with the leasing of our properties, the possibility exists that one or more of our tenants will extend or renew its lease with us when the lease term expires on terms that are less favorable to us than the terms of the then-expiring lease, or that such tenant or tenants will not renew at all. Because we depend, in large part, on rental payments from our tenants, if one or more tenants renews its lease on terms less favorable to us, does not renew its lease or we do not re-lease a significant portion of the space made available due to vacancy, our financial condition, results of operations, cash flow, cash available for dividends to our stockholders, the per share trading price of our common stock and our ability to satisfy our debt service obligations could be materially adversely affected.
We are dependent on single-tenant leases for our revenue and, accordingly, lease terminations or tenant defaults could have a material adverse effect on our results of operations.
We focus our investment activities on ownership of freestanding, single-tenant commercial properties that are net leased to a single tenant. Therefore, the financial failure of, or other default in payment by, a single tenant under its lease is likely to cause a significant reduction in our operating cash flows from that property and a significant reduction in the value of the property, and could cause a significant reduction in our revenues. If a lease is terminated or defaulted on, we may experience difficulty or significant delay in re-leasing such property, or we may be unable to find a new tenant to re-lease the vacated space, which could result in us incurring a loss. The current economic conditions may put financial pressure on and increase the likelihood of the financial failure of, or other default in payment by, one or more of the tenants to whom we have exposure.
The failure by any major tenant with leases in multiple locations to make rental payments to us, because of a deterioration of its financial condition or otherwise, or the termination or non-renewal of a lease by a major tenant, would have a material adverse effect on us.
Our ability to generate cash from operations is dependent on the rents that we are able to charge and collect from our tenants. While we evaluate the creditworthiness of our tenants by reviewing available financial and other pertinent information, there can be no assurance that any tenant will be able to make timely rental payments or avoid defaulting under its lease. At any time, our tenants may experience an adverse change in their business. For example, the downturn in the global economy that commenced in 2008 may have adversely affected, or may in the future adversely affect, one or more of our tenants. If any of our tenants business experience significant adverse changes, they may decline to extend or renew leases upon expiration, fail to make rental payments when due, close a number of stores, exercise early termination rights (to the extent such rights are available to the tenant) or declare bankruptcy. If a tenant defaults, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment.
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If any of the foregoing were to occur, it could result in the termination of the tenants leases and the loss of rental income attributable to the terminated leases. If a lease is terminated or defaulted on, we may be unable to find a new tenant to re-lease the vacated space at attractive rents or at all, which would have a material adverse effect on our results of operations and our financial condition. Furthermore, the consequences to us would be exacerbated if one of our major tenants were to experience an adverse development in their business that resulted in them being unable to make timely rental payments or to default under their lease. The occurrence of any of the situations described above would have a material adverse effect on our results of operations and our financial condition.
If a sale-leaseback transaction is re-characterized in a tenants bankruptcy proceeding, our financial condition could be adversely affected.
We have entered and may continue to enter into sale-leaseback transactions, whereby we would purchase a property and then lease the same property back to the person from whom we purchased it. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be re-characterized as either a financing or a joint venture, either of which outcomes could adversely affect our financial condition, cash flow and the amount available for distributions to our stockholders.
If the sale-leaseback were re-characterized as a financing, we might not be considered the owner of the property, and as a result would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of its outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, our lessee and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property.
We are subject to tenant geographic concentrations that make us more susceptible to adverse events with respect to certain geographic areas.
We are subject to geographic concentrations, the most significant of which, as of December 31, 2013, on a pro forma basis (including the properties acquired in the Cole Merger and the acquisitions of the Fortress Portfolio and Inland Portfolio after December 31, 2013), are the following:
| $59.5 million, or 10.7%, of our annualized rental income came from properties located in Texas (1); |
| $35.1 million, or 6.3%, of our annualized rental income came from properties located in Illinois (1); |
| $34.8 million, or 6.3%, of our annualized rental income came from properties located in Pennsylvania (1); |
| $32.1 million, or 5.8%, of our annualized rental income came from properties located in Florida (1); and |
| $28.8 million, or 5.2%, of our annualized rental income came from properties located in California (1). |
(1) | Figures were adjusted in order to apply the carryover basis of accounting to include the effects of the merger with ARCT IV, an entity previously deemed to be under common control with the Company, as if it had been completed at the beginning of the period presented. |
Any downturn of the economies in one or more of these states, or in any other state in which we, may have a significant credit concentration in the future, could result in a material reduction of our cash flows or material losses to us.
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Our net leases may require us to pay property-related expenses that are not the obligations of our tenants.
Under the terms of the majority of our net leases, in addition to satisfying their rent obligations, our tenants are responsible for the payment of real estate taxes, insurance and ordinary maintenance and repairs. However, under the provisions of certain leases and leases that we may enter into in the future with our tenants, including leases of multi-tenant properties acquired in the Cole Merger, we may be required to pay some expenses, such as the costs of environmental liabilities, roof and structural repairs, insurance, certain non-structural repairs and maintenance. If our properties incur significant expenses that must be paid by us under the terms of our leases, our business, financial condition and results of operations will be adversely affected and the amount of cash available to meet expenses and to make dividends to holders of our capital stock may be reduced.
Net leases may not result in fair market lease rates over time, which could negatively impact our income and reduce the amount of funds available to make distributions to stockholders.
The vast majority of our rental income comes from net leases, which generally provide the tenant greater discretion in using the leased property than ordinary property leases, such as the right to freely sublease the property, to make alterations in the leased premises and to terminate the lease prior to its expiration under specified circumstances. Furthermore, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases in future years will fail to result in fair market rental rates during those years. As a result, our income and distributions to our stockholders could be lower than they would otherwise be if we did not engage in net leases.
Long-term leases with tenants may not result in fair value over time.
Long-term leases do not allow for significant changes in rental payments and do not expire in the near term. If we do not accurately judge the potential for increases in market rental rates when negotiating these long-term leases, significant increases in future property operating costs, to the extent not covered under the net leases could result in us receiving less than fair value from these leases. These circumstances would adversely affect our revenues and funds available for distribution to our stockholders.
Any of our properties that incurs a vacancy could be difficult to sell or re-lease.
One or more of our properties may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. Certain of our properties may be specifically suited to the particular needs of a tenant (e.g., a retail bank branch or distribution warehouse) and major renovations and expenditures may be required in order for us to re-lease vacant space for other uses. We may have difficulty obtaining a new tenant for any vacant space we have in our properties, including our presently vacant property. If the vacancies continue for a long period of time, we may suffer reduced revenues, resulting in less cash available to be distributed to stockholders. In addition, the resale value of a property could be diminished because the market value of a particular property will depend principally upon the value of the leases of such property.
Our properties may be subject to impairment charges.
We periodically evaluate our real estate investments for impairment indicators. The judgment regarding the existence of impairment indicators is based on factors such as market conditions, tenant performance and legal structure. For example, the early termination of, or default under, a lease by a tenant may lead to an impairment charge. Since our investment focus is on properties net leased to a single tenant, the financial failure of, or other default in payment by, a single tenant under its lease may result in a significant impairment loss. If we determine that an impairment has occurred, we would be required to make an adjustment to the net carrying value of the property, which could have a material adverse effect on our results of operations in the period in which the impairment charge is recorded.
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Our real estate investments are relatively illiquid and therefore we may not be able to dispose of properties when appropriate or on favorable terms.
The real estate investments made, and to be made, by us are relatively difficult to sell quickly. Return of capital and realization of gains, if any, from an investment generally will occur upon disposition or refinancing of a property. In addition, the Code imposes restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate companies. We may be unable to realize our investment objectives by disposition or refinancing of a property at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy. In particular, these risks could arise from weakness in or even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located.
Our investments in properties backed by below investment grade credits will have a greater risk of default.
As of December 31, 2013, on a pro forma basis (including the properties acquired in the Cole Merger and the acquisitions of the Fortress Portfolio and the Inland Portfolio after December 31, 2013), 40% of our annualized rental income is derived from tenants who do not have investment grade credit ratings from a major ratings agency or are not affiliates of companies having an investment grade credit rating. We also may invest in other properties in the future where the tenant is not rated or the tenants credit rating is below investment grade. These investments will have a greater risk of default and bankruptcy than investments in properties leased exclusively to investment grade tenants.
Our investments in properties where the underlying tenant does not have a publicly available credit rating will expose us to certain risks.
When we invest in properties where the underlying tenant does not have a publicly available credit rating, we will rely on our own estimates of the tenants credit rating. If our lender or a credit rating agency disagrees with our ratings estimates, or our ratings estimates are inaccurate, we may not be able to obtain our desired level of leverage or our financing costs may exceed those that we projected. This outcome could have an adverse impact on our returns on that asset and hence our operating results.
Dividends paid from sources other than our cash flow from operations, particularly from proceeds of financings, will result in us having fewer funds available for the acquisition of properties and other real estate-related investments and may dilute stockholders interests in us, which may adversely affect our ability to fund future dividends with cash flow from operations and may adversely affect stockholders overall return.
Our cash flows provided by operations were $11.9 million (as restated) for the year ended December 31, 2013. For the year ended December 31, 2013, our dividends paid of $234.9 million (as restated) were partially funded from cash flows from operations and through $4.3 billion (as restated) from proceeds of financing activities. Additionally, we may in the future pay dividends from sources other than from our cash flow from operations.
Even after our acquisition of properties during 2013 and the ARCT IV Merger, the Cole Merger and the acquisitions of the Fortress Portfolio and the Inland Portfolio, we may not generate sufficient cash flow from operations to pay dividends. Our inability to acquire additional properties or other real estate-related investments may result in a lower return on your investment than you expect. If we have not generated sufficient cash flow from our operations and other sources, such as from borrowings, and/or the sale of additional securities to fund distributions, we may use the proceeds from offerings of securities. Moreover, our board of directors may change our dividend distribution policy, in its sole discretion, at any time. Dividends made from offering proceeds are a return of capital to stockholders, from which we will have already paid offering expenses in connection with the applicable offering. We have not established any limit on the amount of proceeds from an offering that may be used to fund dividends, except that, in accordance with our organizational documents and Maryland law, we may not make dividend distributions that would: (1) cause us to be unable to pay our debts as they become due in the usual course of business; (2) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences; or (3) jeopardize our ability to qualify as a REIT.
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If we fund dividends from the proceeds of offerings of securities, we will have less funds available for acquiring properties or other real estate-related investments. As a result, the return you realize on your investment may be reduced. Funding dividends from borrowings could restrict the amount we can borrow for investments, which may affect our profitability. Funding dividends with the sale of assets or the proceeds of offerings of securities may affect our ability to generate cash flows. Funding dividends from the sale of additional securities could dilute your interest in us if we sell shares of our common stock or securities convertible or exercisable into shares of our common stock to third party investors. Payment of dividends from the mentioned sources could restrict our ability to generate sufficient cash flow from operations, affect our profitability and/or affect the dividends payable to you upon a liquidity event, any or all of which may have an adverse effect on your investment.
We disclose FFO and adjusted funds from operations (AFFO), a non-GAAP financial measure, including in documents filed with the SEC; however, AFFO is not equivalent to our net income or loss as determined under GAAP, and you should consider GAAP measures to be more relevant to our operating performance.
We use and disclose to investors FFO and AFFO, which is a non-GAAP financial measure. See Managements Discussion and Analysis of Financial Condition and Results of Operations - Funds from Operations and Adjusted Funds from Operations. FFO and AFFO are not equivalent to our net income or loss as determined in accordance with GAAP, and investors should consider GAAP measures to be more relevant to evaluating our operating performance. FFO and AFFO and GAAP net income differ because one or both FFO and AFFO exclude gains and losses from the sale of property, plus depreciation and amortization, merger related and other non-routine transaction costs, acquisition-related fees and expenses and other non cash charges.
Because of the differences between FFO and AFFO and GAAP net income or loss, FFO and AFFO may not be accurate indicators of our operating performance, especially during periods in which we are acquiring properties. In addition, AFFO is not necessarily indicative of cash flow available to fund cash needs and investors should not consider FFO and AFFO as alternatives to cash flows from operations, as an indication of our liquidity, or as indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders.
Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO and AFFO. Also, because not all companies calculate FFO and AFFO the same way, comparisons with other companies may not be meaningful.
Operating expenses of our properties will reduce our cash flow and funds available for future distributions.
For certain of our properties, including multi-tenant properties acquired in the Cole Merger, we are responsible for some or all of the operating costs of the property. In some of these instances, our leases require the tenant to reimburse us for all or a portion of these costs, either in the form of an expense reimbursement or increased rent. Our reimbursement may be limited to a fixed amount or a specified percentage annually. To the extent operating costs exceed our reimbursement, our returns and net cash flows from the property and hence our overall operating results and cash flows could be materially adversely affected.
We would face potential adverse effects from tenant defaults, bankruptcies or insolvencies.
The bankruptcy of our tenants may adversely affect the income generated by our properties. If our tenant files for bankruptcy, we generally cannot evict the tenant solely because of such bankruptcy. In addition, a bankruptcy court could authorize a bankrupt tenant to reject and terminate its lease with us. In such a case, our claim against the tenant for unpaid and future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and it is unlikely that a bankrupt tenant would pay in full amounts it owes us under the lease. Any shortfall resulting from the bankruptcy of one or more of our tenants could adversely affect our cash flow and results of operations.
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We have assumed, and expect in the future to continue to assume, liabilities in connection with our property acquisitions, including unknown liabilities.
We have assumed existing liabilities some of which may have been unknown or unquantifiable at the time of the transaction related to our formation transactions, our Recent Acquisitions and certain other property acquisitions, and expect in the future to continue to assume existing liabilities related to our property acquisitions. Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants or other persons dealing with the sellers prior to our acquisition of the properties, tax liabilities, employment-related issues, and accrued but unpaid liabilities whether incurred in the ordinary course of business or otherwise. If the magnitude of such unknown liabilities is high, either singly or in the aggregate, they could adversely affect our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders.
We face intense competition, which may decrease or prevent increases in the occupancy and rental rates of our properties.
We compete with numerous developers, owners and operators of retail, industrial and office real estate, many of which own properties similar to ours in the same markets in which our properties are located. If one of our properties becomes vacant and our competitors (which would include funds sponsored by us) offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates below those we currently charge or to offer substantial rent abatements. As a result, our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make dividends to our stockholders may be adversely affected.
Our operating performance and value are subject to risks associated with our real estate assets and with the real estate industry.
Our real estate investments are subject to various risks and fluctuations and cycles in value and demand, many of which are beyond our control. Certain events may decrease cash available for dividends, as well as the value of our properties. These events include, but are not limited to:
| adverse changes in international, national or local economic and demographic conditions such as the recent global economic downturn; |
| vacancies or our inability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenant improvements, early termination rights or tenant-favorable renewal options |
| adverse changes in financial conditions of buyers, sellers and tenants of properties; |
| inability to collect rent from tenants; |
| competition from other real estate investors with significant capital, including other real estate operating companies, REITs and institutional investment funds; |
| reductions in the level of demand for commercial space generally, and freestanding net leased properties specifically, and changes in the relative popularity of our properties; |
| increases in the supply of freestanding single-tenant properties; |
| fluctuations in interest rates, which could adversely affect our ability, or the ability of buyers and tenants of our properties, to obtain financing on favorable terms or at all; |
| increases in expenses, including, but not limited to, insurance costs, labor costs, energy prices, real estate assessments and other taxes and costs of compliance with laws, regulations and governmental policies, all of which have an adverse impact on the rent a tenant may be willing to pay us in order to lease one or more of our properties; and |
| changes in, and changes in enforcement of, laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning and tax laws, governmental fiscal policies and the Americans with Disabilities Act of 1990. |
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In addition, periods of economic slowdown or recession, such as the recent global economic downturn, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases. If we cannot operate our properties to meet our financial expectations, our business, financial condition, results of operations, cash flow, market price of our common stock and ability to satisfy our debt service obligations and to pay dividends to our stockholders could be materially and adversely affected. We cannot assure you that we will achieve our return objectives.
A potential change in U.S. accounting standards regarding operating leases may make the leasing of our properties less attractive to our potential tenants, which could reduce overall demand for our leasing services.
Under current authoritative accounting guidance for leases, a lease is classified by a tenant as a capital lease if the significant risks and rewards of ownership are considered to reside with the tenant. Under capital lease accounting for a tenant, both the leased asset and liability are reflected on their balance sheet. If the lease does not meet any of the criteria for a capital lease, the lease is considered an operating lease by the tenant, and the obligation does not appear on the tenants balance sheet; rather, the contractual future minimum payment obligations are only disclosed in the footnotes thereto. Thus, entering into an operating lease can appear to enhance a tenants balance sheet in comparison to direct ownership. The Financial Accounting Standards Board (the FASB) and the International Accounting Standards Board (the IASB) conducted a joint project to re-evaluate lease accounting. In August 2010, the FASB and the IASB jointly released exposure drafts of a proposed accounting model that would significantly change lease accounting. Based on comments received, a revised exposure was released in May 2013. Changes to the accounting guidance could affect both our accounting for leases as well as that of our current and potential tenants. These changes may affect how our real estate leasing business is conducted. For example, if the accounting standards regarding the financial statement classification of operating leases are revised, then companies may be less willing to enter into leases with us in general or desire to enter into leases with us with shorter terms because the apparent benefits to their balance sheets could be reduced or eliminated. This in turn could make it more difficult for us to enter into leases on terms we find favorable.
We will rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.
In order to qualify as a REIT under the Code, we will be required, among other things, to distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with U.S. GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. Because of this dividend requirement, we may not be able to fund, from cash retained from operations, all of our future capital needs, including capital needed to make investments and to satisfy or refinance maturing obligations.
We expect to rely on external sources of capital, including debt and equity financing, to fund future capital needs. However, the U.S. and global economic slowdown that commenced in 2008 has resulted in a capital environment characterized by limited availability, increasing costs and significant volatility. If we are unable to obtain needed capital on satisfactory terms or at all, we may not be able to make the investments needed to expand our business, or to meet our obligations and commitments as they mature.
Any additional debt we incur will increase our leverage. Our access to capital will depend upon a number of factors over which we have little or no control, including:
| general market conditions; |
| the markets perception of our growth potential; |
| our current debt levels; |
| our current and expected future earnings; |
| our cash flow and cash dividends; and |
| the market price per share of our common stock. |
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We may not be in a position to take advantage of attractive investment opportunities for growth if we are unable to access the capital markets on a timely basis on favorable terms.
Our ability to sell equity to expand our business will depend, in part, on the market price of our common stock, and our failure to meet market expectations with respect to our business could negatively affect the market price of our common stock and limit our ability to sell equity.
The availability of equity capital to us will depend, in part, on the market price of our common stock, which, in turn, will depend upon various market conditions and other factors that may change from time to time, including:
| the extent of investor interest; |
| our ability to satisfy the dividend requirements applicable to REITs; |
| the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; |
| our financial performance and that of our tenants; |
| analyst reports about us and the REIT industry; |
| general stock and bond market conditions, including changes in interest rates on fixed-income securities, which may lead prospective purchasers of our common stock to demand a higher annual yield from future dividends; |
| a failure to maintain or increase our dividend, which is dependent, to a large part, on FFO, which, in turn, depends upon increased revenue from additional acquisitions and rental increases; and |
| other factors such as governmental regulatory action and changes in REIT tax laws. |
Our failure to meet market expectations with regard to future earnings and cash dividends would likely adversely affect the market price of our common stock and, as a result, the availability of equity capital to us.
We have substantial amounts of indebtedness outstanding, which may affect our ability to make dividends, may expose us to interest rate fluctuation risk and may expose us to the risk of default under our debt obligations.
As of December 31, 2013, our aggregate indebtedness was approximately $4.3 billion (as restated). Subsequent to December 31, 2013, we incurred $2.6 billion of indebtedness pursuant to an offering of senior notes in February 2014. After giving effect to the financing and the use of proceeds therefrom, on a pro forma basis (including the properties acquired in the ARCT IV Merger, the Cole Merger and the acquisitions of the Fortress Portfolio and Inland Portfolio after December 31, 2013), our aggregate indebtedness was $10.3 billion. We may incur significant additional debt for various purposes including, without limitation, the funding of future acquisitions, capital improvements and leasing commissions in connection with the repositioning of a property.
We intend to incur additional indebtedness in the future, including borrowings under our existing $2.72 billion credit facility (as of December 31, 2013, under which we have undrawn commitments of $1.9 million (as restated) at February 26, 2014 and which contains an accordion feature to allow us, under certain circumstances, to increase the commitments thereunder by $280.0 million). At February 26, 2014, we had $0.8 billion (as restated) of outstanding borrowings under this credit facility.
Payments of principal and interest on borrowings may leave us with insufficient cash resources to make the dividends currently contemplated or necessary to maintain our REIT qualification. Our substantial outstanding indebtedness, and the limitations imposed on us by our debt agreements, could have other significant adverse consequences, including as follows:
| our cash flow may be insufficient to meet our required principal and interest payments; |
| we may be unable to borrow additional funds as needed or on satisfactory terms, which could, among other things, adversely affect our ability to capitalize upon emerging acquisition opportunities or meet needs to fund capital improvements and leasing commissions; |
| we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; |
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| we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms; |
| we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations; |
| certain of the property subsidiaries loan documents may include restrictions on such subsidiarys ability to make dividends to us; |
| we may be unable to hedge floating-rate debt, counterparties may fail to honor their obligations under our hedge agreements, these agreements may not effectively hedge interest rate fluctuation risk, and, upon the expiration of any hedge agreements, we would be exposed to then-existing market rates of interest and future interest rate volatility; |
| we may default on our obligations and the lenders or mortgagees may foreclose on our properties that secure their loans and receive an assignment of rents and leases; |
| increasing our vulnerability to general adverse economic and industry conditions; |
| limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements; |
| requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements; |
| limiting our flexibility in planning for, or reacting to, changes in our business and industry; and |
| putting us at a disadvantage compared to our competitors with less indebtedness. |
If we default under a loan or indenture (including any default in respect of the financial maintenance and negative covenants contained in our credit facility), we may automatically be in default under any other loan or indenture that has cross-default provisions (including our credit facility), and further borrowings under our credit facility will be prohibited, outstanding indebtedness under our credit facility, our indenture or such other loans may be accelerated, and to the extent our credit facility, our indenture or such other loans are secured, directly or indirectly by any properties or assets, lenders or trustees under our credit facility, our indenture or such other loans may foreclose on the collateral securing such indebtedness as a result. In addition, increases in interest rates may impede our operating performance and put us at a competitive disadvantage. Further, payments of required debt service or amounts due at maturity, or creation of additional reserves under loan agreements or indentures, could adversely affect our financial condition and operating results.
If any one of these events were to occur, our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make dividends to our stockholders could be materially and adversely affected. In addition, any foreclosure on our properties could create taxable income without accompanying cash proceeds, which could adversely affect our ability to meet the REIT dividend requirements imposed by the Code. See also Our inability to file and deliver our financial statements and certain other financial deliverables required under the terms of our Credit Agreement and the indentures governing our senior unsecured notes and convertible notes has adversely affected our overall borrowing flexibility, exposed us to actual and potential consequences of default and required us to pay certain additional expenses.
Our existing loan agreements contain, and future financing arrangements will likely contain, restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders. (As Restated)
We are subject to certain restrictions pursuant to the restrictive covenants of our outstanding indebtedness, which may affect our dividend and operating policies and our ability to incur additional debt. Indentures and loan documents evidencing our existing indebtedness contain, and loan documents entered into in the future will likely contain, certain operating covenants that limit our ability to further incur indebtedness or discontinue insurance coverage. In addition, future agreements may contain, and any future company credit facilities and indentures likely will contain, financial covenants, including certain coverage ratios, and negative covenants, including limitations on our ability to incur secured and unsecured debt, make dividends, sell all or substantially all of our assets, and engage in mergers and consolidations and certain acquisitions. Specifically, our ability to make distributions may be limited by our credit facility, pursuant to which our distributions may not exceed the greater of (i) 105% of our FFO, as adjusted for certain items, the most significant of which are acquisition and merger related expenses, in 2013, and 95% thereafter or (ii) the amount required for us to qualify and maintain our status as a REIT. Covenants under any future indebtedness may restrict our ability to pursue certain business initiatives or certain acquisition transactions. In addition, failure to meet any of these covenants, including the financial coverage ratios, could cause
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an event of default under or accelerate some or all of our indebtedness, which would have a material adverse effect on us. See The Amended Credit Agreement currently prohibits us and the OP from making distributions in respect of our respective common equity and there can be no assurance as to if, when or at what rate we and the OP will resume common equity distributions and Note 24 Subsequent Events (As Restated) for further discussion.
The indenture governing our senior notes and the credit agreement governing our credit facility contain restrictive covenants that limit our operating flexibility.
The indenture governing our senior notes and the agreement governing our credit facility require us to meet specified financial and operating covenants, including financial maintenance covenants with respect to maximum consolidated leverage ratio, maximum secured recourse indebtedness, minimum fixed charge coverage, minimum borrowing base interest coverage, maximum secured leverage, minimum tangible net worth and maximum variable rate indebtedness and borrowing base asset value ratio. In addition, our credit facility contains certain customary negative covenants that restrict the ability of our OP to incur secured and unsecured indebtedness. These covenants may restrict our ability to expand or fully pursue our business strategies. Our ability to comply with these and other provisions of the indenture governing our senior notes and the credit agreement governing our credit facility may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events adversely impacting us. Any failure to comply with these financial maintenance covenants and negative covenants would constitute a default under our credit facility and/or senior note indenture, as applicable and would prevent further borrowings under our credit facility, and could cause those and other obligations to become due and payable. If any of our indebtedness is accelerated, we may not be able to repay it. See also Our inability to file and deliver our financial statements and certain other financial deliverables required under the terms of our Credit Agreement and the indentures governing our senior unsecured notes and convertible notes has adversely affected our overall borrowing flexibility, exposed us to actual and potential consequences of default and required us to pay certain additional expenses.
Our organizational documents have no limitation on the amount of indebtedness that we may incur. As a result, we may become highly leveraged in the future, which could adversely affect our financial condition.
Our business strategy contemplates the use of both secured and unsecured debt to finance long-term growth. While we intend to limit our indebtedness to maintain an overall net debt to gross asset value of approximately 45% to 55%, provided that we may exceed this amount for individual properties in select cases where attractive financing is available, our governing documents contain no limitations on the amount of debt that we may incur, and our board of directors may change our financing policy at any time without stockholder approval. As a result, we may be able to incur substantial additional debt, including secured debt, in the future, which could result in an increase in our debt service and harm our financial condition.
Increases in interest rates would increase our debt service costs, may adversely affect any future refinancing of our debt and our ability to incur additional debt, and could adversely affect our financial condition, cash flow and results of operations.
Certain of our borrowings bear interest at variable rates, and we may incur additional variable-rate debt in the future. Increases in interest rates would result in higher interest expenses on our existing unhedged variable rate debt, and increase the costs of refinancing existing debt or incurring new debt. Additionally, increases in interest rates may result in a decrease in the value of our real estate and decrease the market price of ARCPs common stock and could accordingly adversely affect our financial condition, cash flow and results of operations.
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A downgrade in our credit ratings could materially adversely affect our business and financial condition.
We received credit ratings for our senior notes from Moodys Investor Service, Inc. and Standard & Poors Rating Services. We plan to manage our operations to maintain these credit ratings with a capital structure consistent with or better than our current profile, but there can be no assurance that we will be able to maintain the current credit ratings. Any downgrades in terms of ratings or outlook by any of the noted rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our financial condition, results of operations and liquidity and the trading price of the notes. Credit ratings are not recommendations to purchase, hold or sell the notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the notes.
We may not be able to generate sufficient cash flow to meet our debt service obligations.
Our ability to make payments on and to refinance our indebtedness, and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash in the future. To a certain extent, our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control.
We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness or to fund our other liquidity needs.
Additionally, if we incur additional indebtedness in connection with future acquisitions or development projects or for any other purpose, our debt service obligations could increase. We may need to refinance all or a portion of our indebtedness or before maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things:
| our financial condition and market conditions at the time; and |
| restrictions in the agreements governing our indebtedness. |
As a result, we may not be able to refinance any of our indebtedness on commercially reasonable terms, or at all. If we do not generate sufficient cash flow from operations, and additional borrowings or refinancings or proceeds of asset sales or other sources of cash are not available to us, we may not have sufficient cash to enable us to meet all of our obligations. Accordingly, if we cannot service our indebtedness, we may have to take actions such as seeking additional equity, or delaying strategic acquisitions and alliances or capital expenditures, any of which could have a material adverse effect on our operations. We cannot assure you that we will be able to effect any of these actions on commercially reasonable terms, or at all.
The continued recovery of real estate markets from the recent recession is dependent upon forecasted moderate economic growth which, if significantly slower than expected, could have a negative impact on the performance of our investment portfolio.
The U.S. economy is in its fourth year of recovery from a severe global recession and the commercial real estate markets stabilized and began to recover in 2011. Based on moderate economic growth in the future, and historically low levels of new supply in the commercial real estate pipeline, a stronger recovery is forecasted for all property sectors over the next two years. Nevertheless, this ongoing economic recovery remains fragile, and could be slowed or halted by significant external events. As a result, real estate markets could perform lower than expected as a result of reduced tenant demand. A severe weakening of the economy or a renewed recession could also lead to higher tenancy default and vacancy rates, which could create an oversupply of rentable space, increased property concessions and tenant improvement expenditures and reduced rental rates to maintain occupancies. There can be no assurance that our real estate investments will not be adversely impacted by a severe slowing of the economy or renewed recession. Tenant defaults, fluctuations in interest rates, limited availability of capital and other economic conditions beyond our control could negatively impact our portfolio and decrease the value of your investment.
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Uninsured losses or losses in excess of our insurance coverage could adversely affect our financial condition and cash flows, and there can be no assurance as to future costs and the scope of coverage that may be available under insurance policies.
We carry comprehensive liability, fire, extended coverage, business interruption and rental loss insurance covering all of the properties in our portfolio under a blanket insurance policy with policy specifications, limits and deductibles customarily carried for similar properties. In addition, we carry professional liability and directors and officers insurance. We have selected policy specifications and insured limits that we believe are appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. We do not carry insurance for certain losses, including, but not limited to, losses caused by riots or war. Certain types of losses may be either uninsurable or not economically insurable, such as losses due to earthquakes, riots or acts of war. Should an uninsured loss occur, we could lose both our investment in and anticipated profits and cash flow from a property. If any such loss is insured, we may be required to pay a significant deductible on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss, or the amount of the loss may exceed our coverage for the loss. In addition, future lenders may require such insurance, and our failure to obtain such insurance could constitute a default under our loan agreements. In addition, we may reduce or discontinue terrorism, earthquake, flood or other insurance on some or all of our properties in the future if the cost of premiums for any of these policies exceeds, in our judgment, the value of the coverage discounted for the risk of loss. Our title insurance policies may not insure for the current aggregate market value of our portfolio, and we do not intend to increase our title insurance coverage as the market value of our portfolio increases. As a result, our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make dividends to our stockholders may be materially and adversely affected.
If we or one or more of our tenants experiences a loss that is uninsured or which exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.
If any of our insurance carriers becomes insolvent, we could be adversely affected.
We carry several different lines of insurance, placed with several large insurance carriers. If any one of these large insurance carriers were to become insolvent, we would be forced to replace the existing insurance coverage with another suitable carrier, and any outstanding claims would be at risk for collection. In such an event, we cannot be certain that we would be able to replace the coverage at similar or otherwise favorable terms. Replacing insurance coverage at unfavorable rates and the potential of uncollectible claims due to carrier insolvency could adversely affect our results of operations and cash flows.
Terrorism and other factors affecting demand for our properties could harm our operating results.
The strength and profitability of our business depends on demand for and the value of our properties. Future terrorist attacks in the United States, such as the attacks that occurred in New York and Washington, D.C. on September 11, 2001, and other acts of terrorism or war could have a negative impact on our operations. Such terrorist attacks could have an adverse impact on our business even if they are not directed at our properties. In addition, the terrorist attacks of September 11, 2001 have substantially affected the availability and price of insurance coverage for certain types of damages or occurrences, and our insurance policies for terrorism include large deductibles and co-payments. The lack of sufficient insurance for these types of acts could expose us to significant losses and could have a negative impact on our operations.
Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or
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unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant and investor relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations, business relationships or confidential information will not be negatively impacted by such an incident.
We may be required to make significant capital expenditures to improve our properties in order to retain and attract tenants, causing a decline in operating revenue and reducing cash available for debt service and distributions to stockholders.
Upon expiration of leases at our properties, we may be required to make rent or other concessions to tenants, or accommodate requests for renovations, build-to-suit remodeling and other improvements. As a result, we may have to make significant capital or other expenditures in order to retain tenants whose leases expire and to attract new tenants. Additionally, we may need to raise capital to make such expenditures. If we are unable to do so or capital is otherwise unavailable, we may be unable to make the required expenditures. This could result in non-renewals by tenants upon expiration of their leases, which would result in declines in revenue from operations and reduce cash available for debt service and dividends to stockholders.
Difficult conditions in the commercial real estate markets may cause us to experience market losses related to our holdings, and these conditions may not improve in the near future.
Our results of operations are materially affected by conditions in the real estate markets, the financial markets and the economy generally and may cause commercial real estate values, including the values of our properties, and market rental rates, including rental rates that we are able to charge, to decline significantly. Recent economic and credit market conditions have contributed to increased volatility and diminished expectations for real estate markets, as well as adversely impacted inflation, energy costs, geopolitical issues and the availability and cost of credit, and may continue to do so going forward. The further deterioration of the real estate market may cause us to record losses on our assets, reduce the proceeds we receive upon sale or refinance of our assets or adversely impact our ability to lease our properties. Declines in the market values of our properties may adversely affect our results of operations and credit availability, which may reduce earnings and, in turn, cash available for dividends to our stockholders. Economic and credit market conditions may also cause one or more of the tenants to whom we have exposure to fail or default in their payment obligations, which could cause us to record material losses or a material reduction in our cash flows.
Because we own real property, we are subject to extensive environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities.
Environmental laws regulate, and impose liability for, releases of hazardous or toxic substances into the environment. Under various provisions of these laws, an owner or operator of real estate, such as us, is or may be liable for costs related to soil or groundwater contamination on, in, or migrating to or from its property. In addition, persons who arrange for the disposal or treatment of hazardous or toxic substances may be liable for the costs of cleaning up contamination at the disposal site. Such laws often impose liability regardless of whether the person knew of, or was responsible for, the presence of the hazardous or toxic substances that caused the contamination. The presence of, or contamination resulting from, any of these substances, or the failure to properly remediate them, may adversely affect our ability to sell or lease our property or to borrow using such property as collateral. In addition, persons exposed to hazardous or toxic substances may sue us for personal injury damages. For example, certain laws impose liability for release of or exposure to asbestos-containing materials and contamination from past operations or from off-site sources. As a result, in connection with our current or former ownership, operation, management and development of real properties, we may be potentially liable for investigation and cleanup costs, penalties, and damages under environmental laws.
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Although all of our properties were, at the time they were acquired by our predecessor, subjected to preliminary environmental assessments, known as Phase I assessments, by independent environmental consultants that identify certain liabilities, Phase I assessments are limited in scope, and may not include or identify all potential environmental liabilities or risks associated with the property. Further, any environmental liabilities that arose since the date the studies were done would not be identified in the assessments. Unless required by applicable laws or regulations, we may not further investigate, remedy or ameliorate the liabilities disclosed in the Phase I assessments.
We cannot assure you that these or other environmental studies identified all potential environmental liabilities, or that we will not incur material environmental liabilities in the future. If we do incur material environmental liabilities in the future, we may face significant remediation costs, and we may find it difficult to sell any affected properties.
Our PCM business, which was acquired from Cole, is subject to risks that are particular to their role as sponsor and dealer manager for direct investment program offerings.
Our PCM business, including Cole Capital Corporation, which was Coles broker-dealer subsidiary and is a wholesale broker-dealer registered with the SEC and a member firm of FINRA, is subject to various risk and uncertainties that are common in the securities industry. Such risks and uncertainties include:
| the volatility of financial markets; |
| extensive governmental regulation; |
| litigation; and |
| intense competition. |
Our PCM business, which involves sponsoring and distributing interests in direct investment programs, will depend on a number of factors including our ability to enter into agreements with broker-dealers and independent investment advisors who will sell interests to their clients, our success in investing the proceeds of our offering, managing the properties acquired and generating cash flow to make distributions to investors in our direct investment programs and our success in entering into liquidity event for the direct investment programs. We are subject to competition from other sponsors and dealer-managers of direct investment programs and other investments, and there can be no assurance that this business will be successful.
Sponsorship of non-traded REITs also involves risks relating to the possibility that such programs will not receive capital at the levels and timing that are anticipated and that sufficient capital will not be raised to repay investments of cash in, and loans to, such non-traded REITs needed to meet up-front costs, the initial breaking of escrow and the acquisition of properties will not be made, as well as risks relating to competition from other sponsors of other similar programs.
In addition, our PCM business is subject to risks that are particular to its function as a wholesale broker-dealer and sponsoring non-traded REITs. For example, the broker-dealer provides substantial promotional support to broker-dealers selling a particular offering, including by providing sales literature, forums, webinars, press releases and other mass forms of communication. Due to our PCM business acting as a sponsor of non-traded REITs and the volume of materials that Cole Capital Corporation may provide throughout the course of an offering, much of which may be scrutinized by regulators. We and Cole Capital Corporation may be exposed to significant liability under federal and state securities laws. Additionally, Cole Capital Corporation may be subject to fines and suspension from the SEC and FINRA.
Failure to comply with the net capital requirements could subject us to sanctions imposed by the SEC or FINRA.
Our broker-dealer subsidiary is required to maintain certain levels of minimum net capital subject to the SECs net capital rule. The net capital rule is designed to measure the general financial integrity and liquidity of a broker-dealer. Compliance with the net capital rule limits those operations of broker-dealers that require the intensive use of their capital, such as underwriting commitments and principal trading activities. The rule also limits the ability of securities firms to pay dividends or make payments on certain indebtedness, such as subordinated debt, as it matures. FINRA may enter the offices of a broker-dealer at any time, without notice, and calculate the firms net capital. If the calculation reveals a deficiency in net capital, FINRA may immediately restrict or suspend certain or all the activities of a broker-dealer. Our broker-dealer subsidiary may not be able to maintain adequate net capital, or its net capital may fall below requirements established by the SEC, and it may be subject to disciplinary action in the form of fines, censure, suspension, expulsion or the termination of business altogether. In addition, if
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these net capital rules are changed or expanded, or if there is an unusually large charge against net capital, operations that require the intensive use of capital would be limited. A large operating loss or charge against net capital could adversely affect our broker-dealers ability to expand or even maintain its present levels of business, which could have a material adverse effect on its business of sponsoring and distributing interests in direct investment programs. In addition, our broker-dealer subsidiary may become subject to net capital requirements in other foreign jurisdictions in which it operates. We cannot predict its future capital needs or its ability to obtain additional financing.
Broker-dealers and other financial services firms are subject to extensive regulations and increased scrutiny.
The financial services industry is subject to extensive regulation by U.S. federal, state and international government agencies, as well as various self-regulatory agencies. Recent turmoil in the financial markets has contributed to significant rule changes, heightened scrutiny of the conduct of financial services firms and increasing penalties for rule violations. Our broker-dealer subsidiary may be adversely affected by new laws or rules or changes in the interpretation of existing rules or more rigorous enforcement. Significant new rules are developing under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Some of these rules could impact our broker-dealer subsidiarys business, including through the potential implementation of a more stringent fiduciary standard for brokers and enhanced regulatory oversight over incentive compensation.
Our broker-dealer subsidiary also may be adversely affected by other evolving regulatory standards, such as those relating to suitability and supervision. Legal claims or regulatory actions against our broker-dealer subsidiary also could have adverse financial effects on us or harm our reputation, which could harm our business prospects.
Our broker-dealer subsidiary, which is registered as a broker-dealer under the Exchange Act and is a member of FINRA, is subject to regulation, examination and supervision by the SEC, FINRA, other self-regulatory organizations and state securities regulators. Broker-dealers are subject to regulations that cover all aspects of the securities business, including sales practices, use and safekeeping of clients funds and securities capital adequacy, record-keeping and the conduct and qualification of officers, employees and independent contractors. Failure by our broker-dealers to comply with applicable laws or regulations could result in censures, penalties or fines, the issuance of cease and desist orders, the suspension or expulsion from the securities industry of any such broker-dealer, or its officers, employees or independent contractors or other similar adverse consequences. Additionally, the adverse publicity arising from the imposition of sanctions could harm our reputation and cause us to lose existing clients or fail to gain new clients.
Financial services firms are also subject to rules and regulations relating to the prevention and detection of money laundering. The USA PATRIOT Act of 2001 mandates that financial institutions, including broker-dealers and investment advisors, establish and implement anti-money laundering (AML) programs reasonably designed to achieve compliance with the Bank Secrecy Act of 1970 and the rules thereunder. Financial services firms must maintain AML policies, procedures and controls, designate an AML compliance officer to oversee the firms AML program, implement appropriate employee training and provide for annual independent testing of the program. Our broker-dealer subsidiary has established AML programs but there can be no assurance of the effectiveness of these programs. Failure to comply with AML requirements could subject our broker-dealer subsidiary to disciplinary sanctions and other penalties. Financial services firms must also comply with applicable privacy and data protection laws and regulations, including SEC Regulation S-P and applicable provisions of the 1999 Gramm-Leach-Bliley Act, the Fair Credit Reporting Act of 1970 and the 2003 Fair and Accurate Credit Transactions Act. Any violations of laws and regulations relating to the safeguarding of private information could subject our broker-dealer subsidiary to fines and penalties, as well as to civil action by affected parties.
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We are subject to risks relating to mortgage loans, bridge loans, mezzanine loans, CMBS and real estate-related securities.
In connection with the Cole and Caplease Mergers, we acquired interests in mortgage loans, bridge loans, mezzanine loans, CMBS and other types of real estate-related securities. In addition, we may continue to make similar investments, which will subject us to risks relating to these types of loans and securities.
We are subject to risks relating to mortgage, bridge or mezzanine loans.
Investing in mortgage, bridge or mezzanine loans involves risk of defaults on those loans caused by many conditions beyond our control, including local and other economic conditions affecting real estate values, interest rate changes, rezoning, and failure by the borrower to maintain the property. If there are defaults under these loans, we may not be able to repossess and sell quickly any properties securing such loans. An action to foreclose on a property securing a loan is regulated by state statutes and regulations and is subject to many of the delays and expenses of any lawsuit brought in connection with the foreclosure if the defendant raises defenses or counterclaims. In the event of default by a mortgagor, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the loan, which could reduce the value of our investment in the defaulted loan. In addition, investments in mezzanine loans involve a higher degree of risk than long-term senior mortgage loans secured by income-producing real property because the investment may become unsecured as a result of foreclosure on the underlying real property by the senior lender.
We are subject to risks relating to real estate-related securities in general.
Investments in real estate-related securities involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer. Issuers of real estate-related equity securities generally invest in real estate or real estate-related assets and are subject to the inherent risks associated with real estate-related investments discussed herein, including risks relating to rising interest rates.
Real estate-related securities are often unsecured and also may be subordinated to other obligations of the issuer. As a result, investments in real estate-related securities are subject to risks of (1) limited liquidity in the secondary trading market in the case of unlisted or thinly traded securities, (2) substantial market price volatility resulting from changes in prevailing interest rates in the case of traded equity securities, (3) subordination to the prior claims of banks and other senior lenders to the issuer, (4) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (5) the possibility that earnings of the issuer may be insufficient to meet its debt service and distribution obligations and (6) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic slowdown or downturn. These risks may adversely affect the value of outstanding real estate-related securities and the ability of the issuers thereof to repay principal and interest or make distribution payments.
We may not have the expertise necessary to maximize the return on our investment in real estate-related securities. If we determine that it is advantageous to us to make the types of investments in which we do not have experience, we intend to employ persons, engage consultants or partner with third parties that have, in our opinion, the relevant expertise necessary to assist us in evaluating, making and administering such investments.
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We are subject to risks relating to CMBS.
CMBS are securities that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. Accordingly, these securities are subject to all of the risks of the underlying mortgage loans. In a rising interest rate environment, the value of CMBS may be adversely affected when payments on underlying mortgages do not occur as anticipated, resulting in the extension of the securitys effective maturity and the related increase in interest rate sensitivity of a longer-term instrument. The value of CMBS may also change due to shifts in the markets perception of issuers and regulatory or tax changes adversely affecting the mortgage securities market as a whole. In addition, CMBS are subject to the credit risk associated with the performance of the underlying mortgage properties. CMBS are issued by investment banks, not financial institutions, and are not insured or guaranteed by the U.S. government.
CMBS are also subject to several risks created through the securitization process. Subordinate CMBS are paid interest only to the extent that there are funds available to make payments. To the extent the collateral pool includes delinquent loans, there is a risk that interest payments on subordinate CMBS will not be fully paid. Subordinate CMBS are also subject to greater credit risk than those CMBS that are more highly rated. In certain instances, third-party guarantees or other forms of credit support can reduce the credit risk.
The value of CMBS can be negatively impacted by any dislocation in the mortgage-backed securities market in general. Currently, the mortgage-backed securities market is suffering from a severe dislocation created by mortgage pools that include sub-prime mortgages secured by residential real estate. Sub-prime loans often have high interest rates and are often made to borrowers with credit scores that would not qualify them for prime conventional loans. In recent years, banks made a great number of the sub-prime residential mortgage loans with high interest rates, floating interest rates, interest rates that reset from time to time and/or interest-only payment features that expire over time. These terms, coupled with rising interest rates, have caused an increasing number of homeowners to default on their mortgages. Purchasers of mortgage-backed securities collateralized by mortgage pools that include risky sub-prime residential mortgages have experienced severe losses as a result of the defaults and such losses have had a negative impact on the CMBS market.
Our build-to-suit program is subject to additional risks related to properties under development.
The businesses we acquired in each of the Cole and CapLease Mergers engage in build-to-suit programs and acquisition of properties under development. In connection with these businesses, we enter into purchase and sale arrangements with sellers or developers of suitable properties under development or construction. In such cases, we are obligated to purchase the property at the completion of construction, provided that the construction conforms to definitive plans, specifications, and costs approved by us in advance. We may continue this business.
As a result, we are subject to potential development risks and construction delays and the resultant increased costs and risks. If we engage in development or construction projects, we will be subject to uncertainties associated with re-zoning for development, environmental concerns of governmental entities and/or community groups, and the builders ability to build in conformity with plans, specifications, budgeted costs and timetables. If a builder fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance. A builders performance may also be affected or delayed by conditions beyond the builders control. Delays in completion of construction could also give tenants the right to terminate preconstruction leases. We may incur additional risks if we make periodic progress payments or other advances to builders before they complete construction. These and other such factors can result in increased project costs or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also will rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a price at the time we acquire the property. If these projections are inaccurate, we may pay too much for a property and our return on our investment could suffer. If we contract with a development company for newly developed properties, we anticipate that it will be obligated to pay a substantial earnest money deposit at the time of contracting to acquire such properties. In the case of properties to be developed by a development company, we anticipate that it will be required to close the purchase of the property upon completion of the development of the property. At the time of contracting and the payment of the earnest money deposit, the development company typically will not have acquired title to any real property and there is a risk that its earnest money deposit made to the development company may not be fully refunded.
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Risks Related to Our Organization and Structure
The supermajority voting requirements applicable to our board of directors in connection with our consolidation, merger, sale of all or substantially all of our assets or our engaging in a share exchange will limit our independent directors ability to influence such corporate matters.
Our charter provides that we may not consolidate, merge, sell all or substantially all of our assets or engage in a share exchange, unless such actions are approved by the affirmative vote of at least two-thirds of our board of directors. This concentrated control limits the ability of our independent directors to influence such corporate matters and could delay, deter or prevent a change of control transaction that might otherwise involve a premium for our shares of common stock or otherwise be in the best interests of our stockholders. Additionally, the market price of our common stock could be adversely affected because of the imbalance of control.
Our charter, the partnership agreement of our operating partnership and Maryland law contain provisions that may delay or prevent a change of control transaction.
Our charter, subject to certain exceptions, limits any person to actual or constructive ownership of no more than 9.8% in value of the aggregate of our outstanding shares of stock and not more than 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of our shares of stock. Our board of directors, in its sole discretion and upon receipt of certain representations and undertakings, may exempt a person (prospectively or retroactively) from the ownership limits. However, our board of directors may not, among other limitations, grant an exemption from the ownership limits to any person whose ownership, direct or indirect, in excess of the 9.8% ownership limit would cause us to fail to qualify as a REIT. The ownership limits and the other restrictions on ownership and transfer of our stock contained in our charter may delay or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.
Tax protection provisions on certain properties could limit our operating flexibility.
We have agreed with the Contributor, an affiliate of ARC, to indemnify it against adverse tax consequences if we were to sell, convey, transfer or otherwise dispose of all or any portion of the interests in the continuing properties acquired by us in the formation transactions, in a taxable transaction. However, we can sell these properties in a taxable transaction if we pay the Contributor cash in the amount of its tax liabilities arising from the transaction and tax payments. These tax protection provisions apply until September 6, 2021, which is the 10th anniversary of the closing of our IPO. Although it may be in our stockholders best interest that we sell a property, it may be economically disadvantageous for us to do so because of these obligations. We have also agreed to make debt available for the Contributor to guarantee. We agreed to these provisions in order to assist the Contributor in preserving its tax position after its contribution of its interests in our initial properties. As a result, we may be required to incur and maintain more debt than we would otherwise.
Tax consequences to holders of OP units upon a sale or refinancing of our properties may cause the interests of our principals to differ from the interests of our other stockholders.
As a result of the unrealized built-in gain that may be attributable to one or more of the contributed properties at the time of contribution in connection with the formation transactions, some holders of OP units, including the Contributor, an affiliate of ARC, may experience different tax consequences than holders of our capital stock upon the sale or refinancing of the properties owned by our operating partnership, including disproportionately greater allocations of items of taxable income and gain upon a realization event. As those holders will not receive a correspondingly greater distribution of cash proceeds, they may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain properties, or whether to sell or refinance such properties at all, than those that would be in the best interests of our stockholders taken as a whole.
We continue to rely on services provided by our Former Manager for certain administrative services.
While we have terminated our management agreement with our Former Manager, our Former Manager continues to provide us with certain administrative services, including transaction management services, under agreements which continue in effect following our transition to self-management. Affiliates of our Former Manager have not agreed to dedicate specific personnel to providing these services. Accordingly, we continue to rely on affiliates of the Former Manager for services required to execute our business plan.
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We are a holding company with no direct operations. As a result, we rely on funds received from our operating partnership to pay liabilities and dividends, our stockholders claims will be structurally subordinated to all liabilities of our operating partnership and our stockholders do not have any voting rights with respect to our operating partnerships activities, including the issuance of additional OP units.
We are a holding company and conduct all of our operations through our operating partnership. We do not have, apart from our ownership of our operating partnership, any independent operations. As a result, we rely on distributions from our operating partnership to pay any dividends we might declare on shares of our common stock. We also rely on distributions from our operating partnership to meet any of our obligations, including tax liability on taxable income allocated to us from our operating partnership (which might make distributions to the company not equal to the tax on such allocated taxable income).
In addition, because we are a holding company, stockholders claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of our operating partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, claims of our stockholders will be satisfied only after all of our and our operating partnerships and its subsidiaries liabilities and obligations have been paid in full.
As of December 31, 2013, we owned approximately 96.1% of the OP units in our operating partnership. However, our operating partnership may issue additional OP units in the future. Such issuances could reduce our ownership percentage in our operating partnership. Because our stockholders will not directly own any OP units, they will not have any voting rights with respect to any such issuances or other partnership-level activities of our operating partnership.
Our board of directors may create and issue a class or series of common or preferred stock without stockholder approval.
Our board of directors is empowered under our charter to amend our charter from time to time to increase or decrease the aggregate number of shares of our stock or the number of shares of stock of any class or series that we have authority to issue, to designate and issue from time to time one or more classes or series of stock and to classify or reclassify any unissued shares of our common stock or preferred stock without stockholder approval. Our board of directors may determine the relative preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of any class or series of stock issued. As a result, we may issue series or classes of stock with voting rights, rights to dividends or other rights, senior to the rights of holders of our capital stock. The issuance of any such stock could also have the effect of delaying or preventing a change of control transaction that might otherwise be in the best interests of our stockholders.
Certain provisions in the partnership agreement of our operating partnership may delay or prevent unsolicited acquisitions of us.
Provisions in the partnership agreement of our operating partnership may delay or make more difficult unsolicited acquisitions of us or changes in our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some stockholders might consider such proposals, if made, desirable. These provisions include, among others:
| redemption rights of qualifying parties; |
| transfer restrictions on the OP units; |
| the ability of the general partner in some cases to amend the partnership agreement without the consent of the limited partners; |
| the right of the limited partners to consent to transfers of the general partnership interest of the general partner and mergers or consolidations of our company under specified limited circumstances; and |
| restrictions relating to our qualification as a REIT under the Code. |
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Our charter and bylaws and the partnership agreement of our operating partnership also contain other provisions that may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.
Certain rights which are reserved to our stockholders may allow third parties to enter into business combinations with us that are not in the best interest of the stockholders without negotiating with our board of directors.
Certain provisions of the Maryland General Corporation Law (the MGCL) may have the effect of requiring a third party seeking to acquire us to negotiate with our board of directors, including:
| business combination provisions that, subject to limitations, prohibit certain business combinations between us and an interested stockholder (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of our company who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding stock) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and stockholder supermajority voting requirements on these combinations; and |
| control share provisions that provide that control shares of our company (defined as shares which, when aggregated with other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a control share acquisition (defined as the direct or indirect acquisition of ownership or control of issued and outstanding control shares) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. |
As permitted by the MGCL, our board of directors has by resolution exempted business combinations (1) between us and any person, provided that such business combination is first approved by our board of directors (including a majority of directors who are not affiliates or associates of such person) and (2) between us and ARC, our Former Manager, our operating partnership or any of their respective affiliates. Consequently, the five-year prohibition and the supermajority vote requirements will not apply to such business combinations. As a result, any person described above may be able to enter into business combinations with us that may not be in the best interest of our stockholders without compliance by us with the supermajority vote requirements and other provisions of the statute. This resolution, however, may be altered or repealed in whole or in part at any time by our board of directors. If this resolution is repealed, or our board of directors does not otherwise approve a business combination with a person other than ARC, our Former Manager, our operating partnership or any of their respective affiliates, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.
Pursuant to a provision in our bylaws, we have opted out of the control share provisions of the MGCL. However, we may, by amendment to our bylaws, opt in to the control shares provisions of the MGCL in the future.
Additionally, Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, such as a classified board, some of which we do not yet have. These provisions may have the effect of inhibiting a third-party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then current market price.
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Our fiduciary duties as sole general partner of our operating partnership could create conflicts of interest.
We are the sole general partner of our operating partnership, and, as such, will have fiduciary duties to our operating partnership and the limited partners in the operating partnership, the discharge of which may conflict with the interests of our stockholders. The limited partnership agreement of our operating partnership provides that, in the event of a conflict between the duties owed by our directors to our company and the duties that we owe, in our capacity as the sole general partner of our operating partnership, to such limited partners, our directors are under no obligation to give priority to the interests of such limited partners. In addition, those persons holding OP units will have the right to vote on certain amendments to the limited partnership agreement (which require approval by a majority in interest of the limited partners, including us) and individually to approve certain amendments that would adversely affect their rights, as well as the right to vote on mergers and consolidations of us in our capacity as sole general partner of the operating partnership in certain limited circumstances. These voting rights may be exercised in a manner that conflicts with the interests of our stockholders. For example, we cannot adversely affect the limited partners rights to receive distributions, as set forth in the limited partnership agreement, without their consent, even though modifying such rights might be in the best interest of our stockholders generally.
We had never operated as a REIT prior to making our initial REIT election for the year ended December 31, 2011 and have only recently begun operating as a public company and, therefore, we cannot assure you that we will successfully and profitably operate our business in compliance with the regulatory requirements applicable to REITs and to public companies.
We had never operated as a REIT prior to making our initial REIT election for the year ended December 31, 2011. Also, we have only operated as a public company beginning the date of the closing of our IPO on September 6, 2011. In addition, certain members of our board of directors and certain of our executive officers have no experience in operating a publicly traded REIT that is traded on a securities exchange other than in connection with our operations. We cannot assure you that we will be able to successfully operate our company as a REIT or a publicly traded company, including satisfying the requirements to timely meet disclosure requirements and complying with the Sarbanes-Oxley Act, including implementing effective internal controls. Failure to maintain our qualification as a REIT or comply with other regulatory requirements would have an adverse effect on our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders.
Our board of directors may change significant corporate policies without stockholder approval.
Our investment, financing, borrowing and dividend policies and our policies with respect to other activities, including growth, debt, capitalization and operations, will be determined by our board of directors. These policies may be amended or revised at any time and from time to time at the discretion of the board of directors without a vote of our stockholders. In addition, the board of directors may change our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal requirements. A change in these policies could have an adverse effect on our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders.
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ARCP may incur adverse tax consequences if ARCT III , CapLease, ARCT IV or Cole has failed qualify as a REIT for U.S. federal income tax purposes.
If ARCT III, CapLease, ARCT IV or Cole has failed to qualify as a REIT for U.S. federal income tax purposes at any time prior to the ARCT III Merger, the CapLease Merger, the ARCT IV Merger and the Cole Merger, respectively, ARCP may inherit significant tax liabilities and could lose ARCPs REIT status should disqualifying activities continue after the mergers.
We could incur liability as a result of a lawsuit to which Cole is subject in connection with the merger between Cole and Cole Holdings Corporation (Cole Holdings), pursuant to which Cole became a self-managed REIT.
Three outstanding putative class action and/or derivative lawsuits, which were filed earlier this year, assert claims for breach of fiduciary duty, abuse of control, corporate waste, unjust enrichment, aiding and abetting breach of fiduciary duty and other claims relating to the merger between a wholly owned subsidiary of Cole and Cole Holdings, pursuant to which Cole became a self-managed REIT. The Court in one of the lawsuits has granted defendants motion to dismiss with prejudice, but the plaintiffs have filed a notice of appeal of this dismissal. The other two lawsuits, which also purport to assert claims under the Securities Act, are pending in the United States District Court for the District of Arizona. Defendants filed a motion to dismiss both complaints on January 10, 2014.
Whether or not any plaintiffs claims are successful, this type of litigation is often expensive and diverts managements attention and resources, which could adversely affect our operations.
We could incur liability as a result of an adverse judgment in litigation challenging one or more of our Recent Acquisitions, including the Cole Merger and the Caplease Merger and the ARCT III Merger.
Stockholders of Cole have filed lawsuits and may file additional lawsuits challenging the Cole Merger, which name and may name ARCP as a defendant. To date, eleven such lawsuits have been filed. Two putative class actions have been filed in in the U.S. District Court of Arizona, captioned as: (i) Wunsch v. Cole Real Estate Investment, Inc., et al.; and (ii) Sobon v. Cole Real Estate Investments, Inc., et al. Eight other putative stockholder class action lawsuits have been filed in the Circuit Court for Baltimore City, Maryland, captioned as: (i) Operman v. Cole Real Estate Investments, Inc., et al.; (ii) Branham v. Cole Real Estate Investments, Inc., et al.; (iii) Wilfong v. Cole Real Estate Investments, Inc., et al.; (iv) Polage v. Cole Real Estate Investments, Inc., et al.; (v) Flynn v. Cole Real Estate Investments, Inc., et al.; (vi) Corwin v. Cole Real Estate Investments, Inc., et al.; (vii) Green v. Cole Real Estate Investments, Inc., et al.; and (viii) Morgan v. Cole Real Estate Investments, Inc., et al. (collectively, the Baltimore Actions). All of these lawsuits name ARCP, Cole and the Cole board of directors as defendants. All of the named plaintiffs claim to be Cole stockholders and purport to represent all holders of Coles stock. Each complaint generally alleges that the individual defendants breached fiduciary duties owed to plaintiff, the other public stockholders of Cole and to Cole, and that certain entity defendants aided and abetted those breaches. In addition, certain lawsuits claim that the individual defendants breached their duty of candor to our stockholders and the Branham, Polage and Flynn lawsuits assert claims derivatively against the individual defendants for their alleged breach of fiduciary duties owed to Cole. The Polage lawsuit also asserts derivative claims for waste of corporate assets and unjust enrichment. The eight Baltimore Actions were consolidated on December 12, 2013. The Wunsch and Sobon lawsuits, which were consolidated by court order on January 17, 2014, also allege that the joint proxy statement filed in relation to the Cole Merger contains materially incomplete and misleading disclosures in violation of Sections 14(a) and 20(a) of the Exchange Act. Among other remedies, the complaints seek money damages, costs and attorneys fees.
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On January 10, 2014, solely to avoid the costs, risks, and uncertainties inherent in litigation and without admitting any liability or wrongdoing, ARCP, Cole and the other named defendants in the Baltimore Actions entered into a memorandum of understanding with the plaintiffs in the Baltimore Actions to settle the cases. The memorandum of understanding contemplates that the parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary conditions, including court approval following notice to ARCPs and Coles stockholders. In the event that the parties enter into a stipulation of settlement, a hearing will be scheduled by the court to consider the fairness, reasonableness, and adequacy of the settlement. In the event the settlement is finally approved by the court, it will resolve and release all claims in all actions that were or could have been brought challenging any aspect of the Cole Merger, the Cole Merger Agreement and any disclosure made in connection therewith, among other claims, pursuant to terms that will be disclosed to stockholders prior to final approval of the settlement. In addition, in connection with the settlement, the parties contemplate that plaintiffs counsel in the Baltimore Actions will file a petition in the court for an award of attorneys fees and expenses to be paid by ARCP, which the defendants may oppose. ARCP will pay or cause to be paid any attorneys fees and expenses awarded by the court. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve the settlement even if the parties were to enter into such stipulation. In such event, the proposed settlement as contemplated by the memorandum of understanding may be terminated.
One additional putative class action has been filed in the Supreme Court of New York, captioned as: Realistic Partners v. Schorsch et al. (the Realistic Partners Action). This lawsuit names ARCP, the ARCP board of directors and Cole as defendants. The named plaintiff claims to be an ARCP stockholder and purports to represent all holders of ARCPs stock. The complaint generally alleges that ARCP and the individual defendants breached a fiduciary duty of candor allegedly owed to plaintiff and to the other public stockholders of ARCP, and that Cole aided and abetted those breaches. On January 17, 2014, solely to avoid the costs, risks, and uncertainties inherent in litigation and without admitting any liability or wrongdoing, ARCP, Cole and the other named defendants in the Realistic Partners Action entered into a memorandum of understanding with the plaintiff in the Realistic Partners Action to settle the case. The memorandum of understanding contemplates that the parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary conditions, including court approval following notice to ARCPs and Coles stockholders. In the event that the parties enter into a stipulation of settlement, a hearing will be scheduled by the court to consider the fairness, reasonableness, and adequacy of the settlement. In the event the settlement is finally approved by the court, it will resolve and release all claims in all actions that were or could have been brought challenging any aspect of the Cole Merger, the Cole Merger Agreement, and any disclosure made in connection therewith, among other claims, pursuant to terms that will be disclosed to stockholders prior to final approval of the settlement. In addition, in connection with the settlement, the parties contemplate that plaintiffs counsel in the Realistic Partners Action will file a petition in the court for an award of attorneys fees and expenses to be paid by ARCP, which the defendants may oppose. ARCP will pay or cause to be paid any attorneys fees and expenses awarded by the court. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve the settlement even if the parties were to enter into such stipulation. In such event, the proposed settlement as contemplated by the memorandum of understanding may be terminated.
A number of lawsuits by CapLeases stockholders have been challenging the CapLease Merger, some of which name ARCP and the OP as defendants. Additionally, a lawsuit was commenced on behalf of holders of a series of CapLeases preferred stock in connection with the CapLease Merger alleging that the conversion of such preferred stock pursuant to the terms of the CapLease Merger Agreement was prohibited by the Articles Supplementary classifying and designating such preferred stock.
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After the announcement of the ARCT III Merger Agreement, Randell Quaal filed a putative class action lawsuit on January 30, 2013 against the Company, the OP, ARCT III, ARCT III OP, the members of the board of directors of ARCT III and certain subsidiaries of the Company in the Supreme Court of the State of New York. In February 2013, the parties agreed to a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of ARCT III stockholders. In connection with the settlement contemplated by the memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
We cannot assure you as to the outcome of these lawsuits, including the costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation or settlement of these claims. Whether or not any plaintiffs claims are successful, this type of litigation is often expensive and diverts managements attention and resources, which could adversely affect the operation of our business.
Our future results will suffer if we do not effectively manage our expanded portfolio and operations following the Recent Acquisitions.
Following the Recent Acquisitions, we have an expanded portfolio and operations and likely will continue to expand its operations through additional acquisitions and other strategic transactions, some of which may involve complex challenges. Our future success will depend, in part, upon our ability to manage our expansion opportunities, integrate new operations into our existing business in an efficient and timely manner, successfully monitor our operations, costs, regulatory compliance and service quality, and maintain other necessary internal controls. We cannot assure you that our expansion or acquisition opportunities will be successful, or that we will realize the expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.
ARCP has a history of operating losses and cannot assure you that it will achieve profitability.
Since ARCPs inception in 2010, ARCP has experienced net losses (calculated in accordance with GAAP) each fiscal year and, as of December 31, 2013, had an accumulated deficit of $878.0 million (as restated). The extent of ARCPs future operating losses and the timing of when ARCP will achieve profitability are uncertain, and depends on the demand for, and value of, ARCPs portfolio of properties and ARCP may never achieve or sustain profitability.
ARCP may be unable to integrate the recently acquired GE Capital, Fortress and Inland Portfolios into ARCPs existing portfolio or CapLeases, ARCT IVs and Coles businesses with ARCPs business successfully and realize the anticipated synergies and related benefits of the Mergers, and acquisition of the GE Capital Portfolio and other pending acquisitions or do so within the anticipated timeframe.
ARCPs consummation of the CapLease Merger, the ARCT IV Merger and the Cole Merger, involves the combination of companies that, prior to the consummation thereof, operated as independent companies. Additionally, ARCP recently acquired the GE Capital, Fortress and Inland Portfolios. ARCP may be required to devote significant management attention and resources to integrating ARCPs business practices and operations with those of CapLease, ARCT IV and Cole and the acquired GE Capital, Inland and Fortress Portfolios as well as the Inland Portfolio. Potential difficulties ARCP may encounter in the integration process include the following:
| the inability to successfully combine ARCPs business with CapLeases, ARCT IVs or Coles business or the GE Capital, Inland and Fortress Portfolios into ARCPs portfolio, in each case in a manner that permits the combined company to achieve the anticipated cost savings, which would result in the anticipated benefits of the mergers and the acquisition of the Inland and Fortress Portfolios not being realized in the timeframe anticipated or at all; |
| the complexities associated with managing the combined business out of several different locations and integrating personnel from the two companies; |
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| the additional complexities of combining companies with different histories, cultures, potential regulatory restrictions, markets and tenant bases; |
| the failure to retain ARCPs key employees or those of any of ARCT IV, CapLease or Cole; |
| the inability to divest certain CapLease or Cole assets not fundamental to ARCPs business; |
| potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the combinations; and |
| performance shortfalls as a result of the diversion of managements attention caused by completing the Mergers and acquisition of the Inland and Fortress Portfolios and integrating operations. |
For all these reasons, our stockholders should be aware that it is possible that the integration process following the Recent Acquisitions could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our services, standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with tenants, vendors and employees or to achieve the anticipated benefits of such transactions, or could otherwise adversely affect the business and our financial results.
ARCP cannot assure our stockholders that it will be able to continue paying distributions at the same rate as in the past. (As Restated)
ARCP will reevaluate a reinstatement of the dividend on its common stock at a rate that is in line with its industry peers. ARCPs stockholders may not receive the same distributions for various reasons, including the following:
| ARCP may determine to change its current dividend rate; |
| as a result of the mergers and the issuance of shares of ARCPs common and preferred stock in connection with the mergers, the total amount of cash required for ARCP to pay distributions at its current rate will increase; |
| ARCP may not have enough cash to pay such distributions due to changes in ARCPs cash requirements, capital spending plans, cash flow or financial position; |
| decisions on whether, when and in which amounts to make any future distributions will remain at all times entirely at the discretion of the ARCP Board, which reserves the right to change ARCPs dividend practices at any time and for any reason; |
| ARCP may desire to retain cash to maintain or improve its credit ratings; |
| the amount of distributions that ARCPs subsidiaries may distribute to ARCP may be subject to restrictions imposed by state law, restrictions that may be imposed by state regulators and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur; |
| ARCP is subject to certain restrictions on borrowing and on paying dividends on its common stock pursuant to the Amended Credit Agreement. |
ARCPs stockholders have no contractual or other legal right to distributions or dividends that have not been declared.
Our net income per share and FFO per share in the near term may decrease as a result of us becoming self-managed.
We completed our transition to self-management in January 2014. While we will no longer bear the external costs of the various fees and expenses paid to our Former Manager, subsequent to becoming self-managed, net income per share and FFO per share in the near term may decrease as a result of us becoming self-managed, due to increased expenses related to being self-managed, including expenses for compensation and benefits of our officers and other employees, which previously were paid by our Former Manager. Therefore, the exact amount of savings to us, if any, from becoming self-managed cannot reasonably be estimated. If the expenses we assume as a result of us becoming self-managed are higher than we anticipate, our net income per share and FFO per share may be lower as a result of us becoming self-managed than we otherwise would have been, potentially causing our net income per share and FFO per share to decrease.
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In connection with us becoming self-managed, we may become exposed to risks to which we have not historically been exposed.
In connection with us becoming self-managed, we may be exposed to risks to which we have not historically been exposed. Excluding the effect of the eliminated asset management and other fees previously paid to our Former Manager and its affiliates, our direct overhead, on a consolidated basis, will increase as a result of us becoming self-managed. Prior to us becoming self-managed, the responsibility for such overhead was borne by our Former Manager.
Prior to us becoming self-managed, we did not have separate facilities, communications and information systems nor did we directly employ very many employees; our Former Manager formerly provided such amenities. As a result of us becoming self-managed, we now will lease office space, have our own communications and information systems and directly employ a staff. Any failure of our employees or infrastructure to provide these services after self-management could adversely affect our operations. Our business is highly dependent on communications and information systems. Any failure or interruption of our systems could have a material adverse effect on our financial condition and operating results. Additionally, as a direct employer, we will be subject to those potential liabilities that are commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances, and we will bear the costs of the establishment and maintenance of such plans.
Furthermore, pursuant to our Recent Acquisitions, we will also be combining the facilities and personnel of the companies acquired pursuant to our Recent Acquisitions. In particular, as a result of the Cole Merger, we will significantly increase the number of our employees, including the addition of employees who will become our senior officers, and significantly increase the facilities at which our business operates. We will face potential difficulties in effecting our self-management and integrating these businesses, including those described under ARCP may be unable to integrate the recently acquired GE Capital, Fortress and Inland Portfolios into ARCPs existing portfolio or CapLeases, ARCT IVs and Coles businesses with ARCPs business successfully and realize the anticipated synergies and related benefits of the Mergers, and acquisition of the GE Capital Portfolio and other pending acquisitions or do so within the anticipated timeframe.
U.S. Federal Income Tax Risks
Our failure to remain qualified as a REIT would subject us to U.S. federal income tax and potentially state and local tax, and would adversely affect our operations and the market price of our common stock.
We have qualified to be taxed as a REIT commencing with the taxable year ended December 31, 2011 and intend to operate in a manner that would allow us to continue to qualify as a REIT. However, we may terminate our REIT qualification if our board of directors determines that not qualifying as a REIT is in our best interests, or inadvertently. Our qualification as a REIT depends upon our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. We structured our activities in a manner designed to satisfy all requirements for qualification as a REIT. However, the REIT qualification requirements are extremely complex and interpretation of the U.S. federal income tax laws governing qualification as a REIT is limited. Furthermore, any opinion of our counsel, including tax counsel, as to our eligibility to remain qualified as a REIT is not binding on the IRS and is not a guarantee that we will continue to qualify as a REIT. Accordingly, we cannot be certain that we will be successful in operating so we can remain qualified as a REIT. Our ability to satisfy the asset tests depends on our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income or quarterly asset requirements also depends on our ability to successfully manage the composition of our income and assets on an ongoing basis. Accordingly, if certain of our operations were to be recharacterized by the IRS, such recharacterization would jeopardize our ability to satisfy all requirements for qualification as a REIT. Furthermore, future legislative, judicial or administrative changes to the U.S. federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT.
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If we fail to continue to qualify as a REIT for any taxable year and we do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT qualification. Losing our REIT qualification would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.
Even with our REIT qualification, in certain circumstances, we may incur tax liabilities that would reduce our cash available for distribution to our stockholders.
Even with our REIT qualification, we may be subject to U.S. federal, state and local income taxes. For example, net income from the sale of properties that are dealer properties sold by a REIT (a prohibited transaction under the Code) will be subject to a 100% tax. We may not make sufficient dividends to avoid excise taxes applicable to REITs. Similarly, if we were to fail an income test (and did not lose our REIT status because such failure was due to reasonable cause and not willful neglect) we would be subject to tax on the income that does not meet the income test requirements. We also may decide to retain net capital gain we earn from the sale or other disposition of our property and pay U.S. federal income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns and thereon seek a refund of such tax. We also will be subject to corporate tax on any undistributed REIT taxable income. We also may be subject to state and local taxes on our income or property, including franchise, payroll and transfer taxes, either directly or at the level of our operating partnership or at the level of the other companies through which we indirectly own our assets, such as TRSs, which are subject to full U.S. federal, state, local and foreign corporate-level income taxes. Any taxes we pay directly or indirectly will reduce our cash available for distribution to our stockholders.
To qualify as a REIT we must meet annual dividend requirements, which may force us to forgo otherwise attractive opportunities or borrow funds during unfavorable market conditions. This could delay or hinder our ability to meet our investment objectives and reduce our stockholders overall return.
In order to qualify as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. We will be subject to U.S. federal income tax on our undistributed taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which dividends we pay with respect to any calendar year are less than the sum of (a) 85% of our ordinary income, (b) 95% of our capital gain net income and (c) 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on investments in real estate assets and it is possible that we might be required to borrow funds, possibly at unfavorable rates, or sell assets to fund these dividends. Although we intend to make dividends sufficient to meet the annual dividend requirements and to avoid U.S. federal income and excise taxes on our earnings while we qualify as a REIT, it is possible that we might not always be able to do so.
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Certain of our business activities are potentially subject to the prohibited transaction tax, which could reduce the return on our stockholders investments.
For so long as we qualify as a REIT, our ability to dispose of property during the first few years following acquisition may be restricted to a substantial extent as a result of our REIT qualification. Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT, we will be subject to a 100% penalty tax on any gain recognized on the sale or other disposition of any property (other than foreclosure property) that we own, directly or through any subsidiary entity, including our operating partnership, but generally excluding our TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. While we qualify as a REIT, we intend to avoid the 100% prohibited transaction tax by (a) conducting activities that may otherwise be considered prohibited transactions through a TRS (but such TRS will incur corporate rate income taxes with respect to any income or gain recognized by it), (b) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary, will be treated as a prohibited transaction or (c) structuring certain dispositions of our properties to comply with the requirements of the prohibited transaction safe harbor available under the Code for properties that, among other requirements have been held for at least two years. However, despite our present intention, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including our operating partnership, but generally excluding our TRSs, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
Our TRSs are subject to corporate-level taxes and our dealings with our TRSs may be subject to 100% excise tax.
A REIT may own up to 100% of the stock of one or more TRSs. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of a REITs assets may consist of stock or securities of one or more TRSs.
A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT, including gross income from operations pursuant to management contracts. We may use TRSs generally to hold properties for sale in the ordinary course of business or to hold assets or conduct activities that we cannot conduct directly as a REIT. Our TRSs will be subject to applicable U.S. federal, state, local and foreign income tax on its taxable income. In addition, the TRS rules limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules which are applicable to us as a REIT also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arms-length basis.
If our operating partnership failed to qualify as a partnership or was not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REIT.
We intend to maintain the status of our operating partnership as a partnership for U.S. federal income tax purposes. However, if the IRS were to successfully challenge the status of our operating partnership as a partnership for such purposes, it would be taxable as a corporation. In such event, this would reduce the amount of dividends that our operating partnership could make to us. This would also result in our failing to qualify as a REIT, and becoming subject to a corporate level tax on our income. This substantially would reduce our cash available to pay dividends and the yield on our stockholders investments. In addition, if any of the partnerships or limited liability companies through which our operating partnership owns its properties, in whole or in part, loses its characterization as a partnership and is otherwise not disregarded for U.S. federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing dividends to the operating partnership. Such a recharacterization of an underlying property owner could also threaten our ability to maintain our REIT qualification.
We may choose to make distributions in our own stock, in which case stockholders may be required to pay U.S. federal income taxes in excess of the cash dividends stockholders receive.
In connection with our qualification as a REIT, we are required to distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with U.S. GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain. In order to satisfy this requirement, we may make
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distributions that are payable in cash and/or shares of our common stock (which could account for up to 80% of the aggregate amount of such distributions) at the election of each stockholder. Taxable stockholders receiving such distributions will be required to include the full amount of such distributions as ordinary dividend income to the extent of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. As a result, U.S. stockholders may be required to pay U.S. federal income taxes with respect to such distributions in excess of the cash portion of the distribution received. Accordingly, U.S. stockholders receiving a distribution of our shares may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution. If a U.S. stockholder sells the stock that it receives as part of the distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such distribution, including in respect of all or a portion of such distribution that is payable in stock, by withholding or disposing of part of the shares included in such distribution and using the proceeds of such disposition to satisfy the withholding tax imposed. In addition, if a significant number of our stockholders determine to sell shares of our common stock in order to pay taxes owed on dividend income, such sale may put downward pressure on the market price of our common stock.
Various tax aspects of such a taxable cash/stock distribution are uncertain and have not yet been addressed by the IRS. No assurance can be given that the IRS will not impose requirements in the future with respect to taxable cash/stock distributions, including on a retroactive basis, or assert that the requirements for such taxable cash/stock distributions have not been met.
The taxation of distributions to our stockholders can be complex; however, dividends that we make to our stockholders generally will be taxable as ordinary income.
Dividends that we make to our taxable stockholders out of current and accumulated earnings and profits (and not designated as capital gain dividends or qualified dividend income) generally will be taxable as ordinary income. However, a portion of our dividends may (1) be designated by us as capital gain dividends generally taxable as long-term capital gain to the extent that they are attributable to net capital gain recognized by us, (2) be designated by us as qualified dividend income generally to the extent they are attributable to dividends we receive from our TRSs, or (3) constitute a return of capital generally to the extent that they exceed our accumulated earnings and profits as determined for U.S. federal income tax purposes. A return of capital is not taxable, but has the effect of reducing the basis of a stockholders investment in our common stock.
Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends.
Currently, the maximum tax rate applicable to qualified dividend income payable to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, generally are not eligible for this reduced rate. Although this does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock. Tax rates could be changed in future legislation.
If we were considered to actually or constructively pay a preferential dividend to certain of our stockholders, our status as a REIT could be adversely affected.
In order to qualify as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with U.S. GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain. In order for distributions to be counted as satisfying the annual distribution requirements for REITs, and to provide us with a REIT-level tax deduction, the distributions must not be preferential dividends. A dividend is not a preferential dividend if the distribution is pro rata among all outstanding shares of stock within a particular class, and in accordance with the preferences among different classes of stock as set forth in our organizational documents. Currently, there is uncertainty as to the IRSs position regarding whether certain arrangements that REITs have with their stockholders could give rise to the inadvertent payment of a preferential dividend (e.g., the pricing methodology for stock purchased under a distribution reinvestment plan inadvertently causing a greater than 5% discount on the price of such stock
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purchased). While we believe that our operations have been structured in such a manner that we will not be treated as inadvertently paying preferential dividends, there is no de minimis exception with respect to preferential dividends. Therefore, if the IRS were to take the position that we inadvertently paid a preferential dividend, we may be deemed either to (a) have distributed less than 100% of our REIT taxable income and be subject to tax on the undistributed portion, or (b) have distributed less than 90% of our REIT taxable income and our status as a REIT could be terminated for the year in which such determination is made if we were unable to cure such failure.
Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code may limit our ability to hedge our liabilities. Any income from a hedging transaction we enter into to manage risk of interest rate changes, price changes or currency fluctuations with respect to borrowings made or to be made to acquire or carry real estate assets, if properly identified under applicable Treasury Regulations, does not constitute gross income for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions will likely be treated as non-qualifying income for purposes of both of the gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRSs would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of such TRS.
Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities.
To qualify as a REIT, we must ensure that we meet the REIT gross income tests annually and that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and certain kinds of mortgage-related securities. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate assets from our portfolio or not make otherwise attractive investments in order to maintain our qualification as a REIT. These actions could have the effect of reducing our income and amounts available for dividend to our stockholders.
The ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to U.S. federal income tax and reduce dividends to our stockholders.
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. While we elected to be qualified to be taxed as a REIT, we may terminate our REIT election if we determine that qualifying as a REIT is no longer in the best interests of our stockholders. If we cease to be a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders and on the market price of our common stock.
56
We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the market price of our common stock.
In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S. federal income tax laws applicable to investments similar to an investment in shares of our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure our stockholders that any such changes will not adversely affect the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. Our stockholders are urged to consult with their tax advisor with respect to the impact of recent legislation on their investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares. Our stockholders should also note that our counsels tax opinion is based upon existing law, applicable as of the date of its opinion, all of which will be subject to change, either prospectively or retroactively.
Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interest of our stockholders.
The share ownership restrictions of the Code for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in our shares of stock and restrict our business combination opportunities.
In order to qualify as a REIT, five or fewer individuals, as defined in the Code, may not own, actually or constructively, more than 50% in value of our issued and outstanding shares of stock at any time during the last half of each taxable year, other than the first year for which a REIT election is made. Attribution rules in the Code determine if any individual or entity actually or constructively owns our shares of stock under this requirement. Additionally, at least 100 persons must beneficially own our shares of stock during at least 335 days of a taxable year for each taxable year, other than the first year for which a REIT election is made. To help insure that we meet these tests, among other purposes, our charter restricts the acquisition and ownership of our shares of stock.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT while we so qualify. Unless exempted by our board of directors, for so long as we qualify as a REIT, our charter prohibits, among other limitations on ownership and transfer of shares of our stock, any person from beneficially or constructively owning (applying certain attribution rules under the Code) more than 9.8% in value of the aggregate of our outstanding shares of stock and more than 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of our shares of stock. Our board of directors may not grant an exemption from these restrictions to any proposed transferee whose ownership in excess of the 9.8% ownership limit would result in the termination of our qualification as a REIT. These restrictions on transferability and ownership will not apply, however, if our board of directors determines that it is no longer in our best interest to continue to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to continue to so qualify as a REIT.
These ownership limits could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of the stockholders.
Non-U.S. stockholders will be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax on dividends received from us and upon the disposition of our shares.
Subject to certain exceptions, dividends received from us will be treated as dividends of ordinary income to the extent of our current or accumulated earnings and profits. Such dividends ordinarily will be subject to U.S. withholding tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty, unless the dividends are treated as effectively connected with the conduct by the non-U.S. stockholder of a U.S. trade or business. Pursuant to the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, capital gain dividends attributable to sales or exchanges of U.S. real property
57
interests, or USRPIs, generally will be taxed to a non-U.S. stockholder as if such gain were effectively connected with a U.S. trade or business. However, a capital gain dividend will not be treated as effectively connected income if (a) the dividend is received with respect to a class of stock that is regularly traded on an established securities market located in the United States; and (b) the non-U.S. stockholder does not own more than 5% of the class of our stock at any time during the one year period ending on the date the dividend is received. We anticipate that our shares will be regularly traded on an established securities market for the foreseeable future, although, no assurance can be given that this will be the case.
Gain recognized by a non-U.S. stockholder upon the sale or exchange of our common stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI under FIRPTA. Our common stock will not constitute a USRPI so long as we are a domestically-controlled qualified investment entity. A domestically-controlled qualified investment entity includes a REIT if at all times during a specified testing period, less than 50% in value of such REITs stock is held directly or indirectly by non-U.S. stockholders. We believe, but cannot assure our stockholders, that we will be a domestically-controlled qualified investment entity, and because our common stock will be publicly traded, no assurance can be given that we will be a domestically-controlled qualified investment entity.
Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S. stockholder sells or exchanges our common stock, gain arising from such a sale or exchange would not be subject to U.S. taxation under FIRPTA as a sale of a USRPI if: (a) our common stock is regularly traded, as defined by applicable Treasury regulations, on an established securities market, and (b) such non-U.S. stockholder owned, actually and constructively, 5% or less of our common stock at any time during the five-year period ending on the date of the sale. We encourage our stockholders to consult their tax advisor to determine the tax consequences applicable to them if they are non-U.S. stockholders.
Potential characterization of dividends or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.
If (a) we are a pension-held REIT, (b) a tax-exempt stockholder has incurred (or is deemed to have incurred) debt to purchase or hold our common stock, or (c) a holder of common stock is a certain type of tax-exempt stockholder, dividends on, and gains recognized on the sale of, common stock by such tax-exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Code.
Item 1B. Unresolved Staff Comments
None.
General
As of December 31, 2013, after giving effect to the properties owned by ARCT IV which we acquired on January 3, 2014, we owned 2,559 properties, comprised of 43.8 million square feet and located in 49 states, the District of Columbia and Puerto Rico, excluding one vacant property classified as held for sale. Our properties were 99% occupied with a weighted-average remaining lease term of 9.4 years as of December 31, 2013.
58
Industry Distribution (As Restated)
The following table details the industry distribution of our portfolio as of December 31, 2013 (dollars in thousands):
Industry |
Number of Leases |
Square Feet | Square Feet as a % of Total Portfolio |
Annualized Rental Income |
Annualized Rental Income as a % of Total Portfolio |
|||||||||||||||
Administrative & Support Services - Employment & Office Maintenance |
2 | 129,999 | 0.3 | % | $ | 504 | 0.1 | % | ||||||||||||
Agricultural - Crop Farming |
1 | 107,520 | 0.3 | % | 770 | 0.1 | % | |||||||||||||
Billboard |
5 | | | % | 46 | | % | |||||||||||||
Education - Other |
1 | 194,665 | 0.4 | % | 1,734 | 0.3 | % | |||||||||||||
Entertainment & Recreation - Fitness |
1 | 45,906 | 0.1 | % | 1,319 | 0.2 | % | |||||||||||||
Finance - Banking |
263 | 1,643,951 | 3.8 | % | 38,717 | 7.0 | % | |||||||||||||
Finance - Credit Card & Consumer Lending |
6 | 350,948 | 0.8 | % | 5,424 | 1.0 | % | |||||||||||||
Finance - Investment, Securities & Commodity |
6 | 555,860 | 1.3 | % | 9,927 | 1.8 | % | |||||||||||||
Government & Public Services - Other |
21 | 663,031 | 1.5 | % | 18,544 | 3.3 | % | |||||||||||||
Healthcare - Dental |
2 | 5,834 | | % | 100 | | % | |||||||||||||
Healthcare - Emergency & Medical Centers |
38 | 496,645 | 1.1 | % | 9,091 | 1.6 | % | |||||||||||||
Healthcare - Labratories & Diagnostics |
2 | 243,117 | 0.6 | % | 3,077 | 0.6 | % | |||||||||||||
Healthcare - Medical |
1 | 22,708 | 0.1 | % | 506 | 0.1 | % | |||||||||||||
Healthcare - Other |
1 | 227,467 | 0.5 | % | 3,347 | 0.6 | % | |||||||||||||
Information & Communications - Telecommunications |
5 | 399,653 | 0.9 | % | 6,915 | 1.3 | % | |||||||||||||
Insurance - Life |
3 | 131,113 | 0.3 | % | 2,215 | 0.4 | % | |||||||||||||
Insurance - Medical |
1 | 100,352 | 0.2 | % | 4,233 | 0.8 | % | |||||||||||||
Insurance - Property |
10 | 977,675 | 2.2 | % | 13,787 | 2.5 | % | |||||||||||||
Logistics - Packaging |
1 | 221,035 | 0.5 | % | 1,480 | 0.3 | % | |||||||||||||
Logistics - Postal & Delivery Services |
43 | 2,605,673 | 5.9 | % | 26,498 | 4.8 | % | |||||||||||||
Manufacturing - Aircraft & Aerospace |
5 | 875,083 | 2.0 | % | 14,694 | 2.7 | % | |||||||||||||
Manufacturing - Consumer Products |
10 | 4,440,909 | 10.1 | % | 13,755 | 2.5 | % | |||||||||||||
Manufacturing - Food |
6 | 3,892,811 | 8.9 | % | 18,986 | 3.4 | % | |||||||||||||
Manufacturing - Machinery & Heavy Equipment |
1 | 552,960 | 1.3 | % | 2,353 | 0.4 | % | |||||||||||||
Manufacturing - Medical |
4 | 409,051 | 0.9 | % | 7,453 | 1.3 | % | |||||||||||||
Manufacturing - Motor Vehicle |
2 | 957,042 | 2.2 | % | 3,828 | 0.7 | % | |||||||||||||
Manufacturing - Other |
1 | 307,275 | 0.7 | % | 2,340 | 0.4 | % | |||||||||||||
Mining & Natural Resources - Petroleum, Gas & Coal |
1 | 308,586 | 0.7 | % | 5,338 | 1.0 | % | |||||||||||||
Other Services - Automotive |
2 | 11,518 | | % | 234 | | % | |||||||||||||
Other Services - Beauty Salons & Spas |
1 | 1,288 | | % | 21 | | % | |||||||||||||
Other Services - Non-Profit Organizations |
1 | 9,513 | | % | 228 | | % | |||||||||||||
Other Services - Other |
1 | 150,000 | 0.3 | % | 1,056 | 0.2 | % | |||||||||||||
Parking |
1 | 8,400 | | % | 1 | | % | |||||||||||||
Professional Services - Administrative & Management Consulting |
6 | 1,458,581 | 3.3 | % | 20,638 | 3.7 | % | |||||||||||||
Professional Services - Advertising |
16 | 558,036 | 1.3 | % | 6,236 | 1.1 | % | |||||||||||||
Professional Services - Media |
2 | 216,285 | 0.5 | % | 2,817 | 0.5 | % | |||||||||||||
Professional Services - Other |
1 | 16,352 | | % | 313 | 0.1 | % | |||||||||||||
Professional Services - Research & Development |
1 | 223,912 | 0.5 | % | 695 | 0.1 | % | |||||||||||||
Restaurants - Casual Dining |
214 | 1,395,247 | 3.2 | % | 39,584 | 7.1 | % |
59
Industry |
Number of Leases |
Square Feet | Square Feet as a % of Total Portfolio |
Annualized Rental Income |
Annualized Rental Income as a % of Total Portfolio |
|||||||||||||||
Restaurants - Family Dining |
104 | 543,271 | 1.2 | % | 13,022 | 2.4 | % | |||||||||||||
Restaurants - Premium Dining |
1 | 9,354 | | % | 98 | | % | |||||||||||||
Restaurants - Quick Service Restaurant |
1,095 | 3,427,178 | 7.8 | % | 98,262 | 17.7 | % | |||||||||||||
Retail - Apparel & Jewelry |
3 | 1,324,855 | 3.0 | % | 12,843 | 2.3 | % | |||||||||||||
Retail - Automotive |
68 | 516,771 | 1.2 | % | 7,809 | 1.4 | % | |||||||||||||
Retail - Department Stores |
1 | 88,408 | 0.2 | % | 858 | 0.2 | % | |||||||||||||
Retail - Discount |
425 | 4,850,625 | 11.2 | % | 41,806 | 7.5 | % | |||||||||||||
Retail - Gas & Convenience |
37 | 160,850 | 0.4 | % | 8,553 | 1.5 | % | |||||||||||||
Retail - Grocery & Supermarket |
17 | 2,112,054 | 4.8 | % | 15,831 | 2.9 | % | |||||||||||||
Retail - Home & Garden |
18 | 3,247,129 | 7.4 | % | 20,707 | 3.7 | % | |||||||||||||
Retail - Home Furnishings |
22 | 136,396 | 0.3 | % | 3,896 | 0.7 | % | |||||||||||||
Retail - Pharmacy |
109 | 1,457,596 | 3.3 | % | 36,000 | 6.5 | % | |||||||||||||
Retail - Specialty (Other) |
2 | 315,230 | 0.7 | % | 1,920 | 0.4 | % | |||||||||||||
Retail - Sporting Goods |
5 | 292,645 | 0.7 | % | 3,459 | 0.6 | % | |||||||||||||
Retail - Warehouse Clubs |
1 | 108,532 | 0.3 | % | 883 | 0.2 | % | |||||||||||||
Utilities - Power Generation |
1 | 9,353 | | % | 239 | | % | |||||||||||||
Vacant |
| 318,245 | 0.8 | % | | | % | |||||||||||||
|
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|
|
|||||||||||
2,598 | 43,834,493 | 100.0 | % | $ | 554,990 | 100.0 | % | |||||||||||||
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Geographical Distribution
The following table details the geographic distribution of our portfolio as of December 31, 2013 (dollars in thousands):
State/Possession |
Number of Properties |
Square Feet | Square Feet as a % of Total Portfolio |
Annualized Rental Income |
Annualized Rental Income as a % of Total Portfolio |
|||||||||||||||
Alabama |
100 | 985,161 | 2.2 | % | $ | 20,873 | 3.8 | % | ||||||||||||
Alaska |
1 | 2,805 | | % | 121 | | % | |||||||||||||
Arizona |
30 | 196,128 | 0.4 | % | 4,481 | 0.8 | % | |||||||||||||
Arkansas |
71 | 506,813 | 1.2 | % | 5,142 | 0.9 | % | |||||||||||||
California |
37 | 2,931,471 | 6.7 | % | 28,769 | 5.2 | % | |||||||||||||
Colorado |
29 | 738,801 | 1.7 | % | 13,923 | 2.5 | % | |||||||||||||
Connecticut |
15 | 60,437 | 0.1 | % | 1,922 | 0.3 | % | |||||||||||||
Delaware |
4 | 12,369 | | % | 286 | 0.1 | % | |||||||||||||
District of Columbia |
1 | 3,210 | | % | 44 | | % | |||||||||||||
Florida |
149 | 2,209,983 | 5.0 | % | 32,125 | 5.8 | % | |||||||||||||
Georgia |
133 | 980,469 | 2.2 | % | 17,263 | 3.1 | % | |||||||||||||
Idaho |
14 | 101,853 | 0.2 | % | 3,429 | 0.6 | % | |||||||||||||
Illinois |
100 | 2,285,588 | 5.2 | % | 35,092 | 6.3 | % | |||||||||||||
Indiana |
69 | 3,994,003 | 9.1 | % | 24,799 | 4.5 | % | |||||||||||||
Iowa |
32 | 824,716 | 1.9 | % | 6,278 | 1.1 | % | |||||||||||||
Kansas |
34 | 1,654,772 | 3.8 | % | 11,094 | 2.0 | % | |||||||||||||
Kentucky |
56 | 1,260,977 | 2.9 | % | 11,625 | 2.1 | % | |||||||||||||
Louisiana |
60 | 492,457 | 1.1 | % | 9,507 | 1.7 | % | |||||||||||||
Maine |
5 | 298,114 | 0.7 | % | 3,909 | 0.7 | % | |||||||||||||
Maryland |
15 | 502,064 | 1.1 | % | 3,775 | 0.7 | % | |||||||||||||
Massachusetts |
29 | 1,148,866 | 2.6 | % | 11,722 | 2.1 | % |
60
State/Possession |
Number of Properties |
Square Feet | Square Feet as a % of Total Portfolio |
Annualized Rental Income |
Annualized Rental Income as a % of Total Portfolio |
|||||||||||||||
Michigan |
121 | 1,100,961 | 2.5 | % | $ | 19,636 | 3.5 | % | ||||||||||||
Minnesota |
24 | 300,507 | 0.7 | % | 2,643 | 0.5 | % | |||||||||||||
Mississippi |
51 | 1,423,664 | 3.2 | % | 9,965 | 1.8 | % | |||||||||||||
Missouri |
115 | 1,128,639 | 2.6 | % | 13,616 | 2.5 | % | |||||||||||||
Montana |
5 | 55,377 | 0.1 | % | 795 | 0.1 | % | |||||||||||||
Nebraska |
12 | 650,154 | 1.5 | % | 6,494 | 1.2 | % | |||||||||||||
Nevada |
14 | 116,743 | 0.3 | % | 2,628 | 0.5 | % | |||||||||||||
New Hampshire |
13 | 94,237 | 0.2 | % | 1,885 | 0.3 | % | |||||||||||||
New Jersey |
14 | 615,352 | 1.4 | % | 12,653 | 2.3 | % | |||||||||||||
New Mexico |
26 | 161,456 | 0.4 | % | 4,295 | 0.8 | % | |||||||||||||
New York |
56 | 555,634 | 1.3 | % | 12,619 | 2.3 | % | |||||||||||||
North Carolina |
110 | 1,616,820 | 3.7 | % | 20,004 | 3.6 | % | |||||||||||||
North Dakota |
5 | 39,248 | 0.1 | % | 1,052 | 0.2 | % | |||||||||||||
Ohio |
145 | 2,933,976 | 6.7 | % | 22,740 | 4.1 | % | |||||||||||||
Oklahoma |
37 | 769,462 | 1.8 | % | 9,829 | 1.8 | % | |||||||||||||
Oregon |
12 | 54,677 | 0.1 | % | 679 | 0.1 | % | |||||||||||||
Pennsylvania |
111 | 3,098,552 | 7.1 | % | 34,789 | 6.3 | % | |||||||||||||
Puerto Rico |
3 | 87,550 | 0.2 | % | 2,429 | 0.4 | % | |||||||||||||
Rhode Island |
13 | 161,642 | 0.4 | % | 3,260 | 0.6 | % | |||||||||||||
South Carolina |
78 | 812,541 | 1.9 | % | 10,749 | 1.9 | % | |||||||||||||
South Dakota |
5 | 84,414 | 0.2 | % | 781 | 0.1 | % | |||||||||||||
Tennessee |
95 | 787,940 | 1.8 | % | 13,933 | 2.5 | % | |||||||||||||
Texas |
312 | 3,795,939 | 8.7 | % | 59,481 | 10.7 | % | |||||||||||||
Utah |
6 | 23,527 | 0.1 | % | 692 | 0.1 | % | |||||||||||||
Vermont |
4 | 15,432 | | % | 336 | 0.1 | % | |||||||||||||
Virginia |
73 | 1,011,320 | 2.3 | % | 18,842 | 3.4 | % | |||||||||||||
Washington |
13 | 405,633 | 0.9 | % | 8,660 | 1.6 | % | |||||||||||||
West Virginia |
33 | 167,244 | 0.4 | % | 3,440 | 0.6 | % | |||||||||||||
Wisconsin |
60 | 516,631 | 1.2 | % | 8,735 | 1.6 | % | |||||||||||||
Wyoming |
9 | 58,164 | 0.1 | % | 1,151 | 0.2 | % | |||||||||||||
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2,559 | 43,834,493 | 100.0 | % | $ | 554,990 | 100.0 | % | |||||||||||||
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Property Type
The following table details the property type of our portfolio as of December 31, 2013 (dollars in thousands):
Property Type |
Number of Properties |
Square Feet | Square Feet as a % of Total Portfolio |
Annualized Rental Income |
Annualized Rental Income as a % of Total Portfolio |
|||||||||||||||
Retail |
2,381 | 15,026,368 | 34.3 | % | $ | 301,524 | 54.3 | % | ||||||||||||
Office |
102 | 9,006,915 | 20.6 | % | 145,060 | 26.1 | % | |||||||||||||
Distribution |
66 | 19,561,645 | 44.6 | % | 106,830 | 19.3 | % | |||||||||||||
Parking Lot |
1 | 8,400 | | % | 1 | | % | |||||||||||||
Billboard |
5 | | | % | 48 | | % | |||||||||||||
Industrial |
4 | 231,165 | 0.5 | % | 1,527 | 0.3 | % | |||||||||||||
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2,559 | 43,834,493 | 100.0 | % | $ | 554,990 | 100.0 | % | |||||||||||||
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61
Property Financing
Our mortgage notes payable consist of the following as of December 31, 2013 and 2012 (dollar amounts in thousands):
Encumbered Properties | Outstanding Loan Amount | Weighted-Average Effective Interest Rate (1) |
Weighted-Average Maturity (2) |
|||||||||||||
December 31, 2013 |
177 | $ | 1,258,661 | 3.42 | % | 3.41 | ||||||||||
December 31, 2012 |
164 | $ | 265,118 | 4.28 | % | 5.51 |
(1) | Mortgage notes payable have fixed rates or are fixed by way of interest rate swap arrangements. Effective interest rates range from 1.83% to 6.28% at December 31, 2013 and 3.32% to 6.13% at December 31, 2012. |
(2) | Weighted-average remaining years until maturity as of December 31, 2013 and 2012, respectively. |
As part of the CapLease Merger, we assumed a secured credit facility with Wells Fargo, National Association (the Secured Credit Facility), which had commitments of up to $150.0 million at December 31, 2013. The Secured Credit Facility was fully drawn with $150.0 million outstanding at December 31, 2013.
The borrowings under the Secured Credit Facility bear interest at an annual rate of one-month LIBOR or LIBOR based on an interest period of one, three or six months, at our election, plus an applicable margin of 2.75%, payable quarterly in arrears. The Secured Credit Facility matures on December 31, 2014 and may be prepaid, in whole or in part, without premium or penalty, at our option, at any time.
In addition, we have financing, which is not secured by interests in real property, which is described under Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Future Minimum Lease Payments
The following table presents future minimum base rental cash payments due to us over the next 10 years. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items (amounts in thousands):
Future Minimum Base Rent Payments |
||||
2014 |
$ | 527,965 | ||
2015 |
517,861 | |||
2016 |
501,637 | |||
2017 |
464,615 | |||
2018 |
428,389 | |||
2019 |
399,486 | |||
2020 |
378,893 | |||
2021 |
347,657 | |||
2022 |
318,967 | |||
2023 |
263,388 | |||
Thereafter |
1,036,460 | |||
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|
|||
$ | 5,185,318 | |||
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|
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Future Lease Expirations
The following is a summary of lease expirations for the next 10 years at the properties we own as of December 31, 2013 (dollar amounts in thousands):
Year of Expiration |
Number of Leases Expiring |
Square Feet | Square Feet as a % of Total Portfolio |
Annualized Rental Income Expiring |
Annualized Rental Income Expiring as a % of Total Portfolio |
|||||||||||||||
2014 |
95 | 1,312,901 | 3.00 | % | $ | 13,519 | 2.44 | % | ||||||||||||
2015 |
134 | 1,949,644 | 4.45 | % | 22,094 | 3.98 | % | |||||||||||||
2016 |
122 | 1,798,220 | 4.10 | % | 27,373 | 4.93 | % | |||||||||||||
2017 |
225 | 4,363,294 | 9.95 | % | 51,443 | 9.27 | % | |||||||||||||
2018 |
189 | 1,842,608 | 4.20 | % | 28,955 | 5.22 | % | |||||||||||||
2019 |
115 | 970,126 | 2.21 | % | 23,806 | 4.29 | % | |||||||||||||
2020 |
128 | 1,511,798 | 3.45 | % | 26,845 | 4.84 | % | |||||||||||||
2021 |
103 | 3,204,582 | 7.31 | % | 30,108 | 5.42 | % | |||||||||||||
2022 |
180 | 6,786,771 | 15.48 | % | 52,309 | 9.43 | % | |||||||||||||
2023 |
132 | 3,726,446 | 8.50 | % | 40,485 | 7.29 | % | |||||||||||||
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|||||||||||
1,423 | 27,466,390 | 62.65 | % | $ | 316,937 | 57.11 | % | |||||||||||||
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Item 3. Legal Proceedings (As Restated)
The information contained in Note 16 Commitments and Contingencies Litigation of our notes to consolidated financial statements included in this Form 10-K/A is incorporated by reference into this Item 3. Also, refer to Note 24 Subsequent Events (As Restated) included in this Form 10-K/A for further discussion on legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. (As Restated)
Market Information
Our common stock is currently traded on the NASDAQ under the symbol ARCP. Set forth below is a line graph comparing the cumulative total stockholder return on our common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the FTSE National Association of Real Estate Investment Trusts Equity Index (NAREIT) and the S&P 500 Index (S&P 500) for the period commencing September 6, 2011, the date of our IPO, and ending December 31, 2013. The graph assumes an investment of $100 on September 6, 2011.
Comparison to Cumulative Total Return
For each calendar quarter indicated, the following table reflects respective high, low and closing sales prices for the common stock as quoted by NASDAQ and the dividends paid per share in each such period:
First Quarter 2012 |
Second Quarter 2012 |
Third Quarter 2012 |
Fourth Quarter 2012 |
First Quarter 2013 |
Second Quarter 2013 |
Third Quarter 2013 |
Fourth Quarter 2013 |
|||||||||||||||||||||||||
High |
$ | 11.65 | $ | 11.34 | $ | 12.50 | $ | 13.48 | $ | 14.92 | $ | 18.05 | $ | 15.36 | $ | 13.94 | ||||||||||||||||
Low |
$ | 10.39 | $ | 10.00 | $ | 10.43 | $ | 11.94 | $ | 12.45 | $ | 13.99 | $ | 12.13 | $ | 12.16 | ||||||||||||||||
Close |
$ | 11.34 | $ | 10.40 | $ | 12.50 | $ | 13.24 | $ | 14.67 | $ | 15.26 | $ | 12.20 | $ | 12.85 | ||||||||||||||||
Dividends paid per share |
$ | 0.219 | $ | 0.220 | $ | 0.222 | $ | 0.223 | $ | 0.225 | $ | 0.226 | $ | 0.228 | $ | 0.230 |
Holders
As of February 25, 2014, we had 766,128,817 shares of common stock outstanding held by 9,449 stockholders of record.
Dividends
We have elected to qualify as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2011. As a REIT, we are required to distribute at least 90% of our REIT taxable income to our stockholders annually, computed without regard to the dividends paid deduction and excluding net capital gain. Our distributions are paid on a
64
monthly basis as directed by our board of directors. Monthly cash distributions are paid based on daily record and distribution declaration dates so our investors will be entitled to be paid distributions beginning no more than a month from the day that they are admitted as stockholders. All distributions are recorded as a reduction of stockholders equity. From a tax perspective, 22.3% and 54.5% of the amounts distributed by us during the years ended December 31, 2013, and 2012, respectively, represented a return of capital, and 77.7% and 45.5% of our dividends represented ordinary income for the years ended December 31, 2013 and 2012, respectively. On a per share basis, dividends of $0.7045 and $0.2022 were a return of capital and ordinary income, respectively, for the year ended December 31, 2013. Dividends of $0.4820 and $0.4020 were a return of capital and ordinary income, respectively, for the year ended December 31, 2012. Distributions that are a return of capital are deferred for the purpose of being subject to income tax. During the years ended December 31, 2013 and 2012, monthly distributions totaled $231.4 and $73.0, respectively. As of December 31, 2013, cash used to pay our distributions is generated from cash received from operating activities and financing activities (as reported on a U.S. GAAP basis). The amount of dividends payable to our common stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for dividends, financial condition, capital expenditure requirements, as applicable, and annual dividend requirements needed to qualify and maintain our status as a REIT under the Code. Operating cash flows are expected to increase as additional properties are acquired in our investment portfolio.
The following is a chart of quarterly distributions declared and paid in respect of our common stock during the years ended December 31, 2013 and 2012 and through the date of the Original Filing (in thousands):
Total Distributions Paid | ||||
2014: |
||||
January and February (1) |
$ | 101,450 | ||
2013: |
||||
1st Quarter |
40,485 | |||
2nd Quarter |
49,882 | |||
3rd Quarter |
66,674 | |||
4th Quarter |
74,311 | |||
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|
|||
Total 2013 |
$ | 231,352 | ||
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|||
2012: |
||||
1st Quarter |
4,427 | |||
2nd Quarter |
12,110 | |||
3rd Quarter |
24,807 | |||
4th Quarter |
31,681 | |||
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|
|||
Total 2012 |
$ | 73,025 | ||
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(1) | Pursuant to the Cole Merger Agreement, we paid a stub period dividend to our stockholders who were record holders on February 6, 2014 for the period since their most recent record date through the last business day prior to the closing of the Cole Merger. The amount paid for such stub period was $0.08113 per share and totaled $19.7 million, and is included above. |
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Our board of directors philosophy is that dividends should principally be derived from cash flows generated from real estate operations. In order to improve our operating cash flows and our ability to pay dividends from operating cash flows, we agreed to waive certain fees including asset management and incentive fees prior to our transition to self-management. Base management fees incurred during the year ended December 31, 2013 were $9.4 million while $6.0 million of such fees were waived by our Former Manager that were in excess of certain net income thresholds related to the Companys operations. No incentive fees have been incurred or paid to the Former Manager since inception. The fees that were waived relating to the activity during 2013 are not deferrals and accordingly, will not be paid. Because the Former Manager waived certain fees that we owed, cash flow from operations that would have been used to pay such fees to the Former Manager was available to pay dividends to our stockholders. See Note 19 Related Party Transactions and Arrangements (As Restated) for further information on fees paid to and forgiven by our Former Manager. Subsequent to December 31, 2013, we completed our transition to self-management and will no longer pay such fees to the Former Manager. See Note 24 Subsequent Events (As Restated) for further discussion. The management agreement with the Former Manager was terminated effective January 8, 2014.
As our real estate portfolio matures, we expect cash flows from operations to cover our dividends.
Our board of directors authorized and we declared the following annualized dividends per share payable monthly, in cash, on the 15th day of each month to stockholders of record at the close of business on the eighth day of such month.
Declaration date |
Annualized dividend per share |
Distribution date | Record date | |||||||||
September 7, 2011 |
$ | 0.875 | 10/15/2011 | 10/8/2011 | ||||||||
February 27, 2012 |
$ | 0.880 | 3/15/2012 | 3/8/2012 | ||||||||
March 16, 2012 |
$ | 0.885 | 6/15/2012 | 6/8/2012 | ||||||||
June 27, 2012 |
$ | 0.890 | 9/15/2012 | 9/8/2012 | ||||||||
September 30, 2012 |
$ | 0.895 | 11/15/2012 | 11/8/2012 | ||||||||
November 29, 2012 |
$ | 0.900 | 2/15/2013 | 2/8/2013 | ||||||||
March 17, 2013 |
$ | 0.910 | 6/15/2013 | 6/8/2013 | ||||||||
May 28, 2013 |
$ | 0.940 | 12/13/2013 | 12/6/2013 | ||||||||
October 23, 2013 (1) |
$ | 1.000 | 2/15/2014 | 2/7/2014 |
(1) | The dividend increase was contingent upon, and became effective with, the close of the Cole merger, which was consummated on February 7, 2014. |
Our existing loan agreements contain, and future financing arrangements will likely contain, restrictive covenants that could limit our ability to make distributions to our stockholders. Specifically, our ability to make distributions may be limited by our Credit Facility, pursuant to which our distributions may not exceed the greater of (i) 105% of our FFO, as adjusted for certain items, the most significant of which are acquisition and merger related expenses, in 2013, and 95% thereafter (ii) the amount required for us to qualify and maintain our status as a REIT.
Distribution payments are dependent on the availability of funds. Our board of directors may reduce the amount of dividends paid or suspend dividend payments at any time and therefore dividend payments are not assured. The dividends paid in respect of our common stock for the year ended December 31, 2013 were $231.4 million.
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Share Based Compensation Plans
Equity Plan
We have adopted the American Realty Capital Properties, Inc. Equity Plan (the Equity Plan), which provides for the grant of stock options, restricted shares of common stock, restricted stock units, dividend equivalent rights and other equity-based awards to our and our affiliates non-executive directors, officers and other employees and advisors and consultants who are providing services to us or our affiliates.
We authorized and reserved a total number of shares equal to 10% of the total number of issued and outstanding shares of common stock (on a fully diluted basis assuming the redemption of all OP Units for shares of common stock) to be issued at any time under the Equity Plan for equity incentive awards.
Director Stock Plan
We have adopted the American Realty Capital Properties, Inc. Non-Executive Director Stock Plan (the Director Stock Plan), which provides for the grant of restricted shares of common stock to each of our independent directors, each of whom is a non-executive director. Awards of restricted stock will vest ratably over a five-year period following the date of grant in increments of 20% per annum, subject to the directors continued service on the board of directors, and shall provide for distribution equivalents with respect to this restricted stock, whether or not vested, at the same time and in the same amounts as distributions are paid to the stockholders. At December 31, 2013, a total of 99,000 shares of common stock are reserved for issuance under the Director Stock Plan.
The fair value of restricted common stock awards under the Equity Plan and Director Stock Plan is determined on the grant date using the closing stock price on NASDAQ that day. The fair value of restricted common stock awarded to non-employees under the Equity Plan is measured based upon the fair value of goods or services received or the equity instruments granted, whichever is more reliably determinable.
ARCT III Restricted Share Plan
ARCT III had an employee and director incentive restricted share plan (the RSP), which provided for the automatic grant of 3,000 restricted shares of common stock to each of its independent directors, without any further action by ARCT IIIs board of directors or its stockholders, on the date of initial election to the board of directors and on the date of each annual stockholders meeting thereafter. Restricted stock issued to independent directors vested over a five-year period following the date of grant in increments of 20% per annum. The RSP provided ARCT III with the ability to grant awards of restricted shares to its directors, officers and employees (if ARCT III ever had employees), employees of ARCT IIIs Advisor and its affiliates, employees of entities that provided services to ARCT III, directors of the ARCT III Advisor or of entities that provided services to ARCT III, certain consultants to ARCT III and the ARCT III Advisor and its affiliates or to entities that provided services to ARCT III.
Immediately prior to the effective time of the ARCT III Merger, each then-outstanding share of ARCT III restricted stock fully vested. All shares of ARCT III common stock then-outstanding as a result of the full vesting of shares of ARCT III restricted stock, and the satisfaction of any applicable withholding taxes, had the right to receive a number of shares of our common stock based on the ARCT III Exchange Ratio.
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The following tables detail the restricted shares activity within the Equity Plan, Director Stock Plan and RSP during the years ended December 31, 2013, 2012 and 2011:
Restricted Share Awards
Equity Plan | RSP & Director Stock Plan | |||||||||||||||
Number of Restricted Common Shares |
Weighted-Average Issue Price |
Number of Restricted Common Shares |
Weighted-Average Issue Price |
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Awarded, January 1, 2011 |
| $ | | | $ | | ||||||||||
Granted |
167,400 | 12.50 | 14,700 | 11.50 | ||||||||||||
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Awarded December 31, 2011 |
167,400 | 12.50 | 14,700 | 11.50 | ||||||||||||
Granted |
93,683 | 10.65 | 30,634 | 10.45 | ||||||||||||
Forfeited |
(1,174 | ) | 10.65 | (13,650 | ) | 11.54 | ||||||||||
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Awarded December 31, 2012 |
259,909 | 11.84 | 31,684 | 10.47 | ||||||||||||
Granted |
932,527 | 13.82 | 20,768 | 14.58 | ||||||||||||
Forfeited |
(1,085 | ) | 12.85 | (3,000 | ) | 12.99 | ||||||||||
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Awarded December 31, 2013 |
1,191,351 | $ | 13.39 | 49,452 | $ | 12.04 | ||||||||||
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Unvested Restricted Shares
Equity Plan | RSP & Director Stock Plan | |||||||||||||||
Number of Restricted Common Shares |
Weighted-Average Issue Price |
Number of Restricted Common Shares |
Weighted-Average Issue Price |
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Unvested, January 1, 2011 |
| $ | | | $ | | ||||||||||
Granted |
167,400 | 12.50 | 14,700 | 11.50 | ||||||||||||
Vested |
(27,900 | ) | 12.50 | | | |||||||||||
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Unvested, December 31, 2011 |
139,500 | 12.50 | 14,700 | 11.50 | ||||||||||||
Granted |
93,683 | 10.65 | 30,634 | 10.45 | ||||||||||||
Vested |
(59,556 | ) | 12.38 | (2,370 | ) | 11.88 | ||||||||||
Forfeited |
(1,174 | ) | 10.65 | (13,650 | ) | 11.54 | ||||||||||
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Unvested, December 31, 2012 |
172,453 | 11.55 | 29,314 | 10.35 | ||||||||||||
Granted |
932,527 | 13.82 | 20,768 | 14.58 | ||||||||||||
Vested |
(172,453 | ) | 11.55 | (28,207 | ) | 11.03 | ||||||||||
Forfeited |
(1,085 | ) | 12.85 | (3,000 | ) | 12.99 | ||||||||||
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Unvested, December 31, 2013 |
931,442 | $ | 13.82 | 18,875 | $ | 13.52 | ||||||||||
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68
For the years ended December 31, 2013, 2012 and 2011, compensation expense for restricted shares under the above plans was $8.0 million, $1.2 million and $0.2 million, respectively. In addition, the Company recognized $2.7 million as a distribution to its Former Manager, which is included in consideration to Former Manager for internalization in the accompanying consolidated statements of changes in equity.
Multi-Year Outperformance Plan
Upon consummation of the ARCT III Merger, the Company entered into the 2013 Advisor Multi-Year Outperformance Agreement (the OPP) with its Former Manager, whereby its Former Manager was able to potentially earn compensation upon the attainment of stockholder value creation targets.
Under the OPP, the Companys Former Manager was granted 8,241,101 long term incentive plan units (LTIP Units) of the OP, which are earned or forfeited based on the Companys total return to stockholders (including both share price appreciation and common stock distributions) (Total Return), for the three-year period consisting of:
| Absolute Component: 4% of any excess Total Return attained above an absolute hurdle of 7% for each annual measurement period, non-compounded, 14% for the interim measurement period and 21% for the full performance period; and |
| Relative Component: 4% of any excess Total Return attained above the Total Return for the performance period of a peer group comprised of the following companies: CapLease, Inc.; EPR Properties; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc.; and Realty Income Corporation. |
The award will be funded (OPP Pool) up to a maximum award opportunity equal to 5% of our equity market capitalization at the ARCT III Merger date of $2.1 billion (the OPP Cap). Awards under the OPP are dependent on achieving an annual hurdle that commenced December 11, 2012, an interim (two-year) hurdle and then the aforementioned three-year hurdle ending on December 31, 2015.
In order to further ensure that the interests of our Former Manager are aligned with our investors, the Relative Component is subject to a ratable sliding scale factor as follows:
| 100% will be earned if we attain a median Total Return of at least 6% for each annual measurement period, non-compounded, at least 12% for the interim measurement period, and at least 18% for the full performance period; |
| 50% will be earned if we attain a median Total Return of at least 0% for each measurement period; |
| 0% will be earned if we attain a median Total Return of less than 0% for each measurement period; and |
| a percentage from 50% to 100% calculated by linear interpolation will be earned if our median Total Return is between 0% and the percentage set for each measurement period. |
For each year during the performance period a portion of the OPP Cap equal to a maximum of up to 1.25% of the Companys equity market capitalization of $2.1 billion will be locked-in based upon the attainment of the performance hurdles set forth above for each annual measurement period. In addition, a portion of the OPP Cap equal to a maximum of up to 3% of the Companys equity market capitalization will be locked-in based upon the attainment of the performance hurdles set forth above for the interim measurement period, which if achieved, will supersede and negate any prior locked-in portion based upon annual performance through the first and second valuation dates on December 31, 2013 and 2014, respectively (i.e., a maximum award opportunity equal to a maximum of up to 3% of the Companys equity market capitalization may be locked-in through December 31, 2014). Since certain awards under the OPP plan are dependent on the comparison of the Companys current market capitalization to the Companys market capitalization at the inception of plan, the issuance of additional common shares by the Company may result in higher awards.
Following the performance period, the Absolute Component and the Relative Component will be calculated separately and then added together to determine the aggregate award earned under the OPP, which in no event may exceed the OPP Cap. The OPP Pool will be used to determine the number of LTIP Units that vest. Any unvested LTIP Units will be immediately forfeited on December 31, 2015. At December 31, 2013, 100% of the OPP Pool has been allocated.
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Pursuant to previous authorization of the Companys board of directors, as a result of the termination of the management agreement with the Former Manager, all 8,241,101 LTIP Units vested upon the consummation of the Companys transition to self-management on January 8, 2014.
Our Former Manager is entitled to receive a tax gross-up in the event that any amounts paid to it under the OPP constitute parachute payments as defined in Section 280G of the Code.
During the year ended December 31, 2013,we recorded expenses of $92.3 million for the OPP, which is included in the general and administrative in the consolidated statements of operations. As of December 31, 2013, 2.3 million LTIP Units were earned and $32.7 million of the expense was locked-in and has been included in non-controlling interests on the consolidated balance sheets. The remaining $59.6 million expense has been accrued and is included in due to affiliates in the consolidated balance sheet as of December 31, 2013.
New Multi-Year Outperformance Plan
On October 21, 2013, the Company approved a multi-year outperformance plan (the New OPP), to be effective as of the Companys transition to self-management, which occurred on January 8, 2014. Under the New OPP, individual agreements will be entered into between the Company and the participants selected by the Companys board of directors (the Participants) that set forth the Participants participation percentage in the New OPP and the number of LTIP Units subject to the award (OPP Agreements). Under the OPP Agreements, the Participants will be eligible to earn performance-based bonus awards equal to the Participants participation percentage of a pool that will be funded up to a maximum award opportunity (the New OPP Cap) equal to approximately 5% of the Companys equity market capitalization (the Initial Market Cap) on October 1, 2013. Subject to the New OPP Cap, the pool will equal an amount to be determined based on the Companys achievement of total return to stockholders, including both share price appreciation and common stock distributions (Total Return), for a three-year performance period (the Performance Period); each 12-month period during the Performance Period (each an Annual Period) and the initial 24-month period of the Performance Period (the Interim Period), as follows:
Performance Period |
Annual Period | Interim Period | ||||||
Absolute Component: 4% of any excess Total Return attained above an absolute hurdle measured from the beginning of such period: |
21% | 7% | 14% | |||||
Relative Component: 4% of any excess Total Return attained above the median Total Return for the performance period of the Peer Group(1), subject to a ratable sliding scale factor as follows based on achievement of cumulative Total Return measured from the beginning of such period: |
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|
100% will be earned if cumulative Total Return achieved is at least: | 18% | 6% | 12% | ||||
|
50% will be earned if a cumulative Total Return achieved is: | 0% | 0% | 0% | ||||
|
0% will be earned if cumulative Total Return achieved is less than: | 0% | 0% | 0% | ||||
|
a percentage from 50% to 100% calculated by linear interpolation will be earned if cumulative Total Return achieved is if between: | 0% - 18% | 0% - 6% | 0% - 12% |
(1) | The Peer Group is comprised of the following companies: EPR Properties; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc.; Realty Income Corporation; and Spirit Realty Capital, Inc. |
The Participants will be entitled to receive a tax gross-up in the event that any amounts paid to the Participant under the New OPP constitute parachute payments as defined in Section 280G of the Code. The LTIP Units granted under the New OPP represent units of equity ownership in the OP that are structured as a profits interest therein. Subject to the Participants continued service through each vesting date, 1/3 of any earned LTIP Units will vest on each of the third, fourth and fifth anniversaries of October 1, 2013. The Participant will be entitled to receive distributions on their LTIP Units to the extent provided for in the limited partnership agreement of the OP, as amended from time to time.
Use of Proceeds from Sales of Registered Securities; Unregistered Sales of Equity Securities
On April 19, 2013, we issued approximately 38,300 shares of our common stock upon the conversion of limited partner interests in the OP (the OP Unit Conversion) at a purchase price of $16.23, for an aggregate purchase price of approximately $0.6 million.
70
On June 7, 2013, we closed on a private placement transaction for the sale and issuance of approximately 29.4 million shares of our common stock, par value $0.01 per share, at a purchase price of $15.47 per share, for an aggregate purchase price of $455.0 million (the Common Stock Transaction).
Concurrently with the closing of the Common Stock Transaction, we closed on a private placement transaction for the sale of approximately 28.4 million shares of a 5.81% convertible preferred stock designated as Series C Convertible Preferred Stock, at a purchase price of $15.67 per share, for an aggregate purchase price of $445.0 million (the Preferred Stock Transaction). After deducting for fees and expenses, the aggregate net proceeds from (i) the Common Stock Transaction were approximately $453.0 million and (ii) the Preferred Stock Transaction were approximately $443.0 million, for aggregate net proceeds from both transactions of approximately $896.0 million.
The shares of common stock and Series C Convertible Preferred Stock offered and sold pursuant to the OP Unit Conversion, the Common Stock Transaction and the Preferred Stock Transaction were sold pursuant to an exemption from registration under Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
On June 11, 2013, we issued approximately 560,900 shares of our common stock upon the conversion of limited partner interests in the OP at a purchase price of $14.56, for an aggregate purchase price of approximately $5.4 million.
On August 5, 2013, we issued 546,611 shares of our common stock upon the conversion of 545,454 shares of Series A Preferred Stock. An additional 1,157 shares of common stock were issued in lieu of unpaid dividends.
On August 13, 2013, we issued 283,018 shares of our common stock upon the conversion of 283,018 shares of Series B Preferred Stock.
On September 15, 2013, we entered into definitive purchase agreements pursuant to which we agreed to issue Series D Preferred Stock, par value $0.01 per share, and common stock, par value $0.01 per share, to certain institutional holders promptly following the close of our merger with CapLease, via a private placement. Pursuant to the definitive purchase agreements, we issued approximately 21.7 million shares of Series D Preferred Stock and 15.1 million shares of common stock, for gross proceeds of $288.0 million and $186.0 million, respectively, on November 12, 2013. The Series D Preferred Stock has a 5.81% coupon on its liquidation preference of $13.59 per share (equivalent to $0.79 per share on an annualized basis).
All the net proceeds from our equity offerings were contributed to our OP in exchange for OP units. Our operating partnership has primarily used the net proceeds from our issuance of common and preferred stock to acquire single-tenant, freestanding commercial real estate primarily subject to net leases with high credit quality tenants. As of December 31, 2013, we have used the net proceeds from the issuance of common and preferred stock, revolving credit facility, and debt financings to purchase 1,329 properties with an aggregate purchase price of $5.2 billion. We did not use any proceeds from any registered offering during the fourth quarter of 2013.
Item 6. Selected Financial Data. (As Restated)
The following selected financial data should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations below. The Company has restated its consolidated balance sheets as of December 31, 2013 and 2012 and its consolidated statements of operations, consolidated statements of comprehensive loss and consolidated statements of changes in equity for the years ended December 31, 2013 and 2012, along with certain related notes. In addition, the Company has restated its consolidated statement of cash flows for the year ended December 31, 2013. For discussion of the restatement adjustments, see Note 2 Restatement of Previously Issued Financial Statements to the consolidated financial statements. In addition, on January 3, 2014, we acquired ARCT IV, and together, we were considered to be entities under common control because the entities advisors were wholly-owned subsidiaries of ARC. Accordingly, the financial statements have been recast in applying the carryover basis of accounting to include ARCT IV from the earliest period of common control. See Note 1 Organization for further explanation.
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Balance sheet data (amounts in thousands):
December 31, | ||||||||||||||||
2013 (As Restated) |
2012 (As Restated) |
2011 | 2010 | |||||||||||||
Total real estate investments, at cost |
$ | 7,459,142 | $ | 1,875,615 | $ | 209,326 | $ | | ||||||||
Total assets |
$ | 7,809,083 | $ | 2,182,195 | $ | 221,578 | $ | 279 | ||||||||
Mortgage notes payable, net |
$ | 1,301,114 | $ | 265,118 | $ | 35,320 | $ | | ||||||||
Senior secured revolving credit facility |
$ | | $ | 124,604 | $ | 42,407 | $ | | ||||||||
Senior corporate credit facilities |
$ | 1,819,800 | $ | | $ | | ||||||||||
Convertible debt, net |
$ | 972,490 | $ | | $ | | $ | | ||||||||
Other debt |
$ | 104,804 | $ | | $ | | ||||||||||
Due to affiliates |
$ | 103,434 | $ | 1,522 | $ | | $ | | ||||||||
Total liabilities |
$ | 5,310,556 | $ | 513,435 | $ | 80,790 | $ | 279 | ||||||||
Total equity |
$ | 2,229,228 | $ | 1,668,760 | $ | 140,788 | $ | |
Operating data, cash flow data and per share data (amounts in thousands except share and per share data):
Year ended December 31, | Period from December 2, 2010 (Date of Inception) to December 31, 2010 |
|||||||||||||||
2013 (As Restated) |
2012 (As Restated) |
2011 | ||||||||||||||
Operating data: |
||||||||||||||||
Total revenues |
$ | 329,323 | $ | 67,207 | $ | 3,970 | $ | | ||||||||
Acquisition related |
$ | 76,113 | $ | 45,070 | $ | 3,898 | $ | | ||||||||
Merger and other non-routine transactions |
$ | 210,543 | $ | 2,603 | $ | | $ | | ||||||||
Property operating |
$ | 23,616 | $ | 3,522 | $ | 220 | $ | | ||||||||
Management fees to affiliates |
$ | 17,462 | $ | 212 | $ | | $ | | ||||||||
General and administrative |
$ | 123,172 | $ | 5,458 | $ | 749 | $ | | ||||||||
Depreciation and amortization |
$ | 210,976 | $ | 40,957 | $ | 2,097 | $ | | ||||||||
Operating loss |
$ | (335,905 | ) | $ | (30,615 | ) | $ | (2,994 | ) | $ | | |||||
Interest expense |
$ | (105,548 | ) | $ | (11,856 | ) | $ | (960 | ) | $ | | |||||
Loss on derivative instruments, net |
$ | (67,946 | ) | $ | | $ | (2 | ) | ||||||||
Loss from continuing operations |
$ | (507,781 | ) | $ | (41,492 | ) | $ | (3,952 | ) | $ | | |||||
Net loss attributable to non-controlling interests |
$ | 16,316 | $ | 585 | $ | 105 | $ | | ||||||||
Net loss attributable to stockholders |
$ | (491,499 | ) | $ | (41,652 | ) | $ | (4,699 | ) | $ | | |||||
Cash flow data: (2) |
||||||||||||||||
Net cash flows provided (used in) by operating activities |
$ | 11,918 | $ | 9,440 | $ | (257 | ) | $ | | |||||||
Net cash flows used in investing activities |
$ | (4,541,718 | ) | $ | (1,701,422 | ) | $ | (89,981 | ) | $ | | |||||
Net cash flows provided by financing activities |
$ | 4,289,950 | $ | 1,965,226 | $ | 109,569 | $ | | ||||||||
Per share data: |
||||||||||||||||
Basic net income (loss) per share from continuing operations attributable to stockholders |
$ | (2.41 | ) | $ | (0.40 | ) | $ | (1.04 | ) | $ | | |||||
Diluted net income (loss) per share attributable to stockholders |
$ | (2.41 | ) | $ | (0.41 | ) | $ | (1.26 | ) | $ | | |||||
Annualized distributions declared per common share |
$ | 0.91 | $ | 0.89 | $ | 0.88 | $ | | ||||||||
Weighted-average number of common shares outstanding (1) |
205,341,431 | 103,306,366 | 3,720,351 | |
(1) | For the years ended December 31, 2013, 2012, 2011 and the period ended December 31, 2010, the effect of certain OP Units outstanding, LTIP Units, unvested restricted shares and convertible preferred shares were excluded from the weighted-average share calculation as the effect would be anti-dilutive. |
(2) | Cash Flow data has been restated for only the year ended December 31, 2013 |
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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. (Certain Sections Restated or Corrected)
The following discussion and analysis should be read in conjunction with the accompanying financial statements of American Realty Capital Properties, Inc. (the Company or ARCP) and the notes thereto. As used herein, the terms we, our and us refer to American Realty Capital Properties, Inc., a Maryland corporation, and, as required by context, to ARC Properties Operating Partnership, L.P. (the OP), a Delaware limited partnership and its subsidiaries. As of December 31, 2013, ARCP was still externally managed by ARC Properties Advisors, LLC (our Former Manager), a Delaware limited liability company and a wholly owned subsidiary of AR Capital, LLC (ARC).
Restatement and Recast
As discussed in the Explanatory Note to this Form 10-K/A and Note 2 Restatement of Previously Issued Financial Statements to the consolidated financial statements, we are restating our consolidated financial statements and related financial information for the years ended December 31, 2013 and 2012. In addition, on January 3, 2014, we acquired ARCT IV, and together we were considered to be entities under common control because the entities advisors were wholly-owned subsidiaries of ARC. Accordingly, the financial statements have been recast in applying the carryover basis of accounting to include ARCT IV. See Note 1 Organization to the consolidated financial statements for further explanation. The following discussion and analysis of our financial condition and results of operations is based on the restated and recasted amounts. Further, certain events occurred subsequent to December 31, 2013 through the filing date of this Form 10-K/A. Refer to Note 24 Subsequent Events (As Restated) to the consolidated financial statements for further explanation.
Overview
We were incorporated on December 2, 2010, as a Maryland corporation that qualified as a real estate investment trust (REIT) for U.S. federal income tax purposes beginning in the year ended December 31, 2011. On September 6, 2011, we completed our IPO and our shares of common stock began trading on the NASDAQ Global Select Market (NASDAQ) under the symbol ARCP.
We acquire, own and operate single-tenant, freestanding commercial real estate properties, primarily subject to net leases with high credit quality tenants. We focus on investing in properties that are net leased to (i) credit tenants, which are generally large public companies with investment-grade ratings and other creditworthy tenants and (ii) governmental, quasi-governmental and not-for-profit entities. Our long-term business strategy is to acquire a diverse portfolio consisting of approximately 70% long-term leases and 30% medium-term leases, with an average remaining lease term of 10 to 12 years. We expect this investment strategy to provide for stable income from credit tenants and to provide for growth opportunities from re-leasing of current below market leases.
We have advanced our investment objectives by growing our net lease portfolio through strategic mergers and acquisitions. See Note 3 Mergers and Acquisitions to the consolidated financial statements for further discussion.
Substantially all of our business is conducted through our OP. We are the sole general partner and holder of 96.1% of the equity interest in the OP as of December 31, 2013. Certain affiliates of ours and certain unaffiliated investors are limited partners and owners of 3.3% and 0.6%, respectively, of the equity interest in our OP. After holding units of limited partner interests in our OP (OP Units) for a period of one year, holders of OP Units have the right to convert limited partner interests in the OP for the cash value of a corresponding number of shares of our common stock or, at the option of our OP, a corresponding number of shares of our common stock, as allowed by the limited partnership agreement of our OP. The remaining rights of the holders of OP Units are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of our OPs assets.
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During the year ended December 31, 2013, we retained our Former Manager to manage our affairs on a day-to-day basis and, as a result, were generally externally managed, with the exception of certain acquisition, accounting and portfolio management services performed by our employees. In August 2013, our board of directors determined that it was in the best interests of us and our stockholders to become self-managed, and we completed our transition to self-management on January 8, 2014. In connection with becoming self-managed, we terminated the existing management agreement with our Former Manager and entered into employment and incentive compensation arrangements with our executives. The Former Manager agreed to sell us certain assets. See Note 19 Related Party Transactions and Arrangements (As Restated) and Note 24 Subsequent Events (As Restated) to the consolidated financial statements for further discussion.
As of December 31, 2013, excluding one vacant property classified as held for sale, we owned 2,559 properties consisting of 43.8 million square feet that were 99% leased with a weighted-average remaining lease term of 9.4 years. In constructing our portfolio, we are committed to diversification (industry, tenant and geography). As of December 31, 2013, rental revenues derived from investment grade tenants and tenants affiliated with investment grade entities, as determined by major credit rating agencies, approximated 60% (we have attributed the rating of each parent company to its wholly owned subsidiary for purposes of this disclosure). Our strategy encompasses receiving the majority of our revenue from investment grade tenants as we further acquire properties and enter into (or assume) lease arrangements.
Completed Mergers and Major Acquisitions
American Realty Capital Trust III, Inc. Merger
On December 14, 2012, we entered into the ARCT III Merger Agreement with ARCT III and certain subsidiaries of each company. The ARCT III Merger Agreement provided for the merger of ARCT III with and into a subsidiary of ours. The ARCT III Merger was consummated on February 28, 2013.
Pursuant to the terms and subject to the conditions set forth in the ARCT III Merger Agreement, each outstanding share of common stock of ARCT III, including restricted shares which became vested, was converted into the right to receive (i) 0.95 of a share of our common stock, or (ii) $12.00 in cash. In addition, each outstanding unit of equity ownership of the ARCT III OP was converted into the right to receive 0.95 of the same class of unit of equity ownership in our OP.
Upon the closing of the ARCT III Merger, on February 28, 2013, 29.2 million shares, or 16.5% of the then outstanding shares of ARCT IIIs common stock were received in cash consideration at $12.00 per share, which is equivalent to 27.7 million shares of our common stock based on the ARCT III Exchange Ratio. In addition, 148.1 million shares of ARCT IIIs common stock were converted to shares of our common stock at the Exchange Ratio, resulting in an additional 140.7 million shares of our common stock outstanding after the exchange.
Upon the consummation of the ARCT III Merger, American Realty Capital Trust III Special Limited Partner, LLC, the holder of the special limited partner interest in the ARCT III OP, was entitled to subordinated distributions of net sales proceeds from ARCT III OP which resulted in the issuance of units of limited partner interests in the ARCT III OP, when after applying the Exchange Ratio, resulted in the issuance of an additional 7.3 million OP Units to affiliates of our Former Manager. The parties had agreed that such OP Units would be subject to a minimum one-year holding period before being exchangeable into our common stock.
Also in connection with the ARCT III Merger, we entered into an agreement with ARC and its affiliates to internalize certain functions performed by them prior to the ARCT III Merger, reduce certain fees paid to affiliates, purchase certain corporate assets and pay certain merger related fees. See Note 19 Related Party Transactions and Arrangements (As Restated).
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Accounting Treatment of the ARCT III Merger
We and ARCT III, from inception to the ARCT III Merger date, were considered to be entities under common control. Both entities advisors were wholly owned subsidiaries of ARC. ARC and its related parties had significant ownership interests in us and had significant ownership of ARCT III through the ownership of shares of common stock and other equity interests. In addition, the advisors of both entities were contractually eligible to charge potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and continue to charge fees to us. Due to the significance of these fees, the advisors and ultimately ARC was determined to have a significant economic interest in both companies in addition to having the power to direct the significant activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT III Merger date. In addition, U.S. GAAP requires us to present historical financial information as if the merger had occurred as of the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT III Merger had occurred at inception.
GE Capital Portfolio Acquisition
On June 27, 2013, we, through subsidiaries of the OP, acquired, from certain affiliates of GE Capital Corp., the equity interests in the entities that own a real estate portfolio comprised of 447 properties, (the GE Capital Portfolio) for a purchase price of $773.9 million exclusive of closing costs. The 447 properties are subject to 409 property operating leases, as well as 38 direct financing leases.
During the year ended December 31, 2013, ARCT IV acquired, from certain affiliates of GE Capital Corp., the equity interests in the entities that own a real estate portfolio comprised of 924 properties (the ARCT IV GE Capital Portfolio) for a purchase price of $1.4 billion, exclusive of closing costs, with no liabilities assumed. The 924 properties are subject to 912 property operating leases, as well as 12 direct financing leases.
CapLease, Inc. Merger
On May 28, 2013, we entered into an Agreement and Plan of Merger (the CapLease Merger Agreement) with CapLease and certain subsidiaries of each company. The CapLease Merger Agreement provided for the merger of CapLease with and into a subsidiary of ours.
On November 5, 2013, we completed the merger with CapLease based on the terms of the CapLease Merger Agreement. Pursuant to the terms set forth in the CapLease Merger Agreement, at the effective time of the CapLease Merger, each outstanding share of common stock of CapLease, other than shares owned by us, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive $8.50. Each outstanding share of preferred stock of CapLease, other than shares owned by us, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive an amount in cash, equal to the sum of $25.00 plus all accrued and unpaid dividends on such shares of preferred stock. In addition, in connection with the merger of CapLease, LP with and into the OP (the CapLease Partnership Merger), each outstanding unit of equity ownership of CapLeases operating partnership other than units owned by CapLease or any wholly owned subsidiary of CapLease was converted into the right to receive $8.50. Shares of CapLeases outstanding restricted stock were accelerated and became fully vested, and restricted stock and any outstanding performance shares were fully earned and received $8.50 per share. In total, cash consideration of $920.7 million was paid to the common and preferred stockholders of CapLease.
Accounting Treatment for the CapLease Merger
The CapLease Merger has been accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from CapLease have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values has been recorded as goodwill. Results of operations for CapLease will be included in our consolidated financial statements from the date of acquisition. See Note 6 CapLease Acquisition (As Restated).
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American Realty Capital Trust IV, Inc. Merger
On July 1, 2013, we entered into ARCT IV Merger Agreement with ARCT IV and certain subsidiaries of each company. The ARCT IV Merger Agreement provided for the merger of ARCT IV with and into a subsidiary of the OP. We consummated the ARCT IV Merger on January 3, 2014.
Pursuant to the terms of the ARCT IV Merger Agreement, as amended, each outstanding share of common stock of ARCT IV, including unvested restricted shares that vested in conjunction with the ARCT IV Merger, was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a share of the Companys common stock (the ARCT IV Exchange Ratio) and (iii) 0.5937 of a share of a new series of preferred stock of the Company designated as the 6.70% Series F Cumulative Redeemable Preferred Stock (Series F Preferred Stock) and each outstanding unit of ARCT IVs operating partnership (ARCT IV OP Unit), other than ARCT IV OP Units held by the American Realty Capital Trust IV Special Limited Partner, LLC, (the ARCT IV Special Limited Partner) and American Realty Capital Advisors IV, LLC (the ARCT IV Advisor) was exchanged for (i) $9.00 in cash, (ii) 0.5190 of an OP Unit and (iii) 0.5937 of a OP Unit designated as Series F Preferred Units (Series F OP Units). In total, the Company paid $651.4 million in cash, issued 36.9 million shares of common stock and 42.2 million shares of Series F Preferred Stock, and issued 0.7 million units of Series F OP units and 0.6 million OP Units to the former ARCT IV shareholders and ARCT IV OP Unit holders in connection with the consummation of the ARCT IV Merger. In addition, each outstanding ARCT IV Class B Unit (as defined below) and each outstanding ARCT IV OP Unit held by the ARCT IV Special Limited Partner and the ARCT IV Advisor was converted into 2.3961 OP Units, resulting in the Company issuing 1.2 million OP Units.
In connection with the ARCT IV Merger and pursuant to the terms of the agreement of limited partnership of ARCT IVs operating partnership, ARCT IVs external advisor received subordinated distributions of net sales proceeds in an approximate amount of $63.2 million. Such subordinated distributions of net sales proceeds were paid in the form of equity units of ARCT IVs operating partnership that were automatically converted into 6.7 million OP Units. Upon the consummation of the ARCT IV Merger, the OP Units had a fair value of $78.2 million and are subject to a minimum two-year holding period from the date of issuance before being exchangeable into our common stock.
Accounting Treatment of the ARCT IV Merger
We and ARCT IV were considered to be entities under common control. Both entities advisors are wholly owned subsidiaries of ARC. ARC and its related parties had ownership interests in us and ARCT IV through the ownership of shares of common stock and other equity interests. In addition, the advisors of both entities were contractually eligible to charge potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and will continue to charge fees to us following the ARCT IV Merger. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT IV Merger date. In addition, U.S. GAAP requires us to present historical financial information as if the entities were combined as of the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT IV Merger had occurred at inception.
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Fortress Portfolio Acquisition
On July 24, 2013, ARC and another related entity, on our behalf and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with affiliates of funds managed by Fortress Investment Group LLC (Fortress) for the purchase and sale of 196 properties owned by Fortress for an aggregate contract purchase price of $972.5 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which were allocated to us based on the pro rata fair value of the properties acquired by us relative to the fair value of all 196 properties to be acquired from Fortress. Of the 196 properties, 120 properties were allocated to us (the Fortress Portfolio). On October 1, 2013, we closed on 41 of the 120 properties with a total purchase price of $200.3 million, exclusive of closing costs. We closed the acquisition of the remaining 79 properties in the Fortress Portfolio on January 8, 2014, for an aggregate contract purchase price of $400.9 million, exclusive of closing costs. The total purchase price of the Fortress Portfolio was $601.2 million, exclusive of closing costs. During the year ended December 31, 2013, we deposited $72.2 million into escrow in relation to the Fortress Portfolio, which has been included in prepaid expenses and other assets in the consolidated balance sheet as of December 31, 2013.
Cole Real Estate Investments, Inc. Merger
On October 22, 2013, we entered into an agreement and plan of merger (the Cole Merger Agreement) with Cole Real Estate Investments, Inc. (Cole), a Maryland corporation, and a wholly owned subsidiary of ours. The Cole Merger Agreement provided for the merger of Cole with and into the wholly owned subsidiary (the Cole Merger). We consummated the Cole Merger on February 7, 2014 (the Cole Acquisition Date).
Pursuant to the terms of the Cole Merger Agreement, each share of common stock of Cole issued and outstanding immediately prior to the effectiveness of the Cole Merger, including unvested restricted stock units (RSUs) and performance stock units that vested in conjunction with the Cole Merger was converted into the right to receive either (i) 1.0929 shares of our common stock, par value $0.01 per share, (the Stock Consideration) or (ii) $13.82 in cash (the Cash Consideration and together with the Stock Consideration, the Merger Consideration). Approximately 98% of all outstanding Cole holders received Stock Consideration and approximately 2% of outstanding Cole shares elected to receive Cash Consideration, pursuant to the terms of the Cole Merger Agreement, resulting in the issuance of approximately 520.8 million shares of our common stock and paying $181.8 million to holders of Cole shares based on their elections.
In addition, the Company issued approximately 2.8 million shares of our common stock, in the aggregate, to certain executives of Cole pursuant to letter agreements entered into between us and such individuals concurrently with the execution of the Cole Merger Agreement, as previously disclosed. Additionally, effective as of the Cole Acquisition Date, we issued, but have not yet allocated, 0.4 million shares with dividend equivalent rights commensurate with the our common stock.
We are in the process of gathering certain additional information in order to finalize our assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the Cole Acquisition Date totaled approximately $7.5 billion and consisted of the following (in thousands):
As of Cole Acquisition Date (Preliminary) |
||||
Estimated Fair Value of Consideration Transferred: |
||||
Cash |
$ | 181,775 | ||
Common stock |
7,285,868 | |||
|
|
|||
Total consideration transferred |
$ | 7,467,643 | ||
|
|
The fair value of the 520.8 million shares of common stock issued, excluding those common shares transferred to former Cole executives, was determined based on the closing market price of our common stock on the Cole Acquisition Date.
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Accounting Treatment for the Cole Merger
The Cole Merger will be accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from Cole will be recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values will be recorded as goodwill. Results of operations for Cole will be included in our consolidated financial statements from the date of acquisition.
Inland Portfolio Acquisition
On August 8, 2013, ARC entered into a purchase and sale agreement with Inland American Real Estate Trust, Inc. (Inland) for the purchase and sale of the equity interests of 67 companies owned by Inland for an aggregate contract purchase price of $2.3 billion, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs. Of the 67 companies, the equity interests of 10 companies (the Inland Portfolio) will be acquired, in total, by us from Inland for a purchase price of $501.0 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which was allocated to us based on the pro rata fair value of the Inland Portfolio relative to the fair value of all 67 companies to be acquired from Inland by us and the other entities sponsored directly or indirectly by ARC. The Inland Portfolio is comprised of 33 properties. As of December 31, 2013, we had closed on five of the 33 properties for a total purchase price of $56.4 million, exclusive of closing costs. We closed the acquisition of 27 additional properties in the Inland Portfolio subsequent to December 31, 2013. We do not consider it probable that we will close on the remaining property.
The operating results for the year ended December 31, 2013 do not include the impact of the Cole Merger and the acquisitions of the Fortress and Inland Portfolios, which closed after December 31, 2013, and do not include the other recent organic acquisitions that were acquired subsequent to December 31, 2013. Accordingly, the operating results in 2013 are not indicative of our future operating results.
Significant Accounting Estimates and Critical Accounting Policies
Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. These significant accounting estimates include:
Revenue Recognition
Upon the acquisition of real estate, certain properties will have leases where minimum rent payments increase during the term of the lease. We will record rental revenue for the full term of each lease on a straight-line basis. When we acquire a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Cost recoveries from tenants are included in tenant reimbursement income in the period the related costs are incurred, as applicable.
Our revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record a receivable, and include in revenues, unbilled rent receivables that we will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. We defer the revenue related to lease payments received from tenants in advance of their due dates.
We continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenants payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, we will record an increase in the allowance for uncollectible accounts or record a direct write-off of the receivable in the consolidated statements of operations and comprehensive loss. As of December 31, 2013, we recorded an allowance for uncollectible accounts of $187,000. As of December 31, 2012, we determined that no allowance for uncollectible accounts was necessary.
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Real Estate Investments
We record acquired real estate at cost and make assessments as to the useful lives of depreciable assets. We consider the period of future benefit of the asset to determine the appropriate useful lives. Depreciation is computed using a straight-line method over the estimated useful life of 40 years for buildings, five to 15 years for building fixtures and improvements and the remaining lease term for acquired intangible lease assets.
Allocation of Purchase Price of Business Combinations and Acquired Assets
In accordance with the guidance for business combinations, we determine whether a transaction or other event is a business combination. If the transaction is determined to be a business combination, we determine if the transaction is considered to be between entities under common control. The acquisition of an entity under common control is accounted for on the carryover basis of accounting whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the merger date. All other business combinations are accounted for by applying the acquisition method of accounting. Under the acquisition method, we recognize the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired entity. In addition, we evaluate the existence of goodwill or a gain from a bargain purchase. We will immediately expense acquisition-related costs and fees associated with business combinations and asset acquisitions.
We allocate the purchase price of acquired properties and business combinations accounted for under the acquisition method of accounting to tangible and identifiable intangible assets acquired based on their respective fair values to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, buildings, equipment and tenant improvements on an as-if vacant basis. We utilize various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Identifiable intangible assets include amounts allocated to acquired leases for above-market and below-market lease rates and the value of in-place leases.
Amounts allocated to land, buildings, equipment and fixtures are based on cost segregation studies performed by independent third-parties or on our analysis of comparable properties in our portfolio.
The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by us in our analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period, which typically ranges from six to 18 months. We also estimate costs to execute similar leases including leasing commissions, legal and other related expenses.
Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and managements estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, including any bargain option renewal periods. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease. The capitalized below-market lease values are amortized as an increase to rental income over the remaining term, including any bargain option renewal periods. In determining the amortization period for below-market lease intangibles, we initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenants payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
The fair value of investments and debt are valued using techniques consistent with those disclosed in Note 10 Fair Value of Financial Instruments (As Restated), depending on the nature of the investment or debt. The fair value of all other assumed assets and liabilities based on the best information available.
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The value of in-place leases is amortized to expense over the initial term of the respective leases, which range primarily from two to 20 years. If a tenant terminates its lease and the unamortized portion of the in-place lease value is charged to expense.
In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. We also consider information obtained about each property as a result of its pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Derivative Instruments
We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings. Certain of the techniques used to hedge exposure to interest rate fluctuations may also be used to protect against declines in the market value of assets that result from general trends in debt markets. The principal objective of such agreements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions.
We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain of our risk, even though hedge accounting does not apply or we elect not to apply hedge accounting.
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment. If we elect not to apply hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the consolidated statements of operations and comprehensive loss. If the derivative is designated and qualifies for hedge accounting treatment the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivatives change in fair value will be immediately recognized in earnings.
Recently Issued Accounting Pronouncements
Recently issued accounting pronouncements are described in Note 4 Summary of Significant Accounting Policies (As Restated).
Results of Operations (As Restated)
As of December 31, 2013, we owned 2,559 properties with an aggregate original base purchase price of $7.4 billion, excluding one vacant property classified as held for sale. As of December 31, 2013, the 2,559 properties comprised 43.8 million square feet that were 99% leased. As of December 31, 2012, we owned 702 properties with an aggregate original base purchase price of $1.9 billion, excluding one vacant property classified as held for sale. As of December 31, 2012, the 702 properties comprised 15.8 million square feet that were 100% leased. Accordingly, our results of operations for the year ended December 31, 2013 as compared to the year ended December 31, 2012 reflect significant increases in most categories.
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Comparison of the Year Ended December 31, 2013 to the Year Ended December 31, 2012
Rental Income
Rental income increased $245.2 million to $310.5 million for the year ended December 31, 2013 compared to $65.3 million for the year ended December 31, 2012. Rental income was driven by our acquisition of 1,807 properties, which excludes 50 properties that are accounted for as direct financing leases, acquired during the year ended December 31, 2013 for an aggregate purchase price of $5.5 billion. The annualized rental income per square foot of the properties at December 31, 2013 was $12.66 with a weighted-average remaining lease term of 9.4 years, compared to $9.59 per square foot at December 31, 2012.
Our properties are generally leased from two to twenty years and 60% are leased to investment grade tenants and affiliates of investment grade tenants, as determined by major credit rating agencies. Cash same store rents on the 129 properties held for the full period in each of the years ended December 31, 2013 and 2012 increased $0.2 million, or 1.3%, to $16.2 million compared to $16.0 million for the years ended December 31, 2013 and 2012, respectively. Same store annualized average rental income per square foot was $11.37 at December 31, 2013 compared to $11.23 at December 31, 2012.
Direct Financing Lease Income
Direct financing lease income of $2.2 million was recognized for the year ended December 31, 2013. Direct financing lease income was primarily driven by our 2013 acquisition of 50 properties comprised of $66.1 million of net investments subject to direct financing leases during the year ended December 31, 2013.
Operating Expense Reimbursements
Operating expense reimbursements increased by $14.7 million to $16.6 million for the year ended December 31, 2013 compared to $1.9 million for the year ended December 31, 2012. Operating expense reimbursements represent reimbursements for taxes, property maintenance and other charges contractually due from tenants per their respective leases. Operating expense reimbursements were driven by our acquisition of 1,807 properties since December 31, 2012.
Acquisition Related Expenses
Acquisition related costs increased by $31.0 million to $76.1 million for the year ended December 31, 2013 compared to $45.1 million for the year ended December 31, 2012. Acquisition expenses mainly consisted of acquisition fees, legal costs, deed transfer costs and other costs related to real estate purchase transactions. The increase is driven by our acquisition of 1,807 properties during the year ended December 31, 2013 compared to 573 during the year ended December 31, 2012. This increase was offset by the agreement with our Former Manager in conjunction with the ARCT III Merger, where it was agreed that our Former Manager would no longer charge acquisition fees. Subsequent to December 31, 2013, the management agreement was terminated as a result of our transition to self-management. See Note 24 Subsequent Events (As Restated) for further discussion.
Merger and Other Non-routine Transactions
Expenses related to various mergers, as well as other non-routine transaction expenses, increased by $207.9 million to $210.5 million for the year ended December 31, 2013 compared to $2.6 million for the year ended December 31, 2012. Upon the consummation of the ARCT III Merger, an affiliate of ARCT III received a subordinated incentive distribution upon the attainment of certain performance hurdles. For the year ended December 31, 2013, $98.4 million was recorded for this fee, which was settled in 7.3 million OP Units issued to the affiliate. During the year ended December 31, 2013, the Company incurred $62.3 million of strategic advisory services, $16.0 million of legal fees and $8.9 million of transfer taxes relating to the various mergers and acquisitions. In addition, merger and other non-routine transaction related expenses for the year ended December 31, 2013 included $24.9 million in post-transaction support fees, printing fees, proxy services and other costs associated with entering into and completing the various mergers and acquisitions. During the year ended December 31, 2012, the $2.6 million of merger and other non-routine transaction related expenses consisted of legal fees related to the merger with ARCT III announced in December 2012. See Note 4 Summary of Significant Accounting Policies (As Restated) for a breakdown of costs.
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The Audit Committees investigation identified certain payments made by us to the Former Manager and its affiliates that were not sufficiently documented or that otherwise warrant scrutiny. The Company is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statements related to any potential recovery. See Note 19 Related Party Transactions and Arrangements (As Restated) for further discussion.
Property Operating Expenses
Property expenses increased by $20.1 million to $23.6 million for the year ended December 31, 2013 compared to $3.5 million for the year ended December 31, 2012. These costs relate to expenses associated with maintaining certain properties, including real estate taxes, ground lease rent, insurance and repairs and maintenance expenses. The increase in property expenses are primarily due to our acquisition of properties with modified gross leases subsequent to December 31, 2012, and an increased number of properties for which we pay expenses, which are reimbursed by the tenant.
Management Fees to Affiliates
Prior to the consummation of the ARCT III Merger, we paid our Former Manager an annual base management fee equal to 0.50% per annum of the average unadjusted book value of our real estate assets, calculated and payable monthly in advance, provided that the full amount of the distributions we have declared for the six immediately preceding months is equal to or greater than certain net income thresholds related to our operations. Subsequent to the consummation of the ARCT III Merger, we paid our Former Manager an annual base management fee equal to 0.50% per annum for up to $3.0 billion of unadjusted book value of assets and 0.40% of unadjusted book value of assets greater than $3.0 billion. For the years ended December 31, 2013 and 2012, our Former Manager waived base management fees earned of $6.1 million and $1.8 million, respectively.
We may have been required to pay our Former Manager a quarterly incentive fee, equal to the difference between (1) the product of (a) 20% and (b) the excess of our annualized core earnings (as defined in the management agreement with our Former Manager) over the product of (i) the weighted-average number of shares multiplied by the weighted-average issuance price per share of common stock (ii) 8% and (2) the sum of any incentive compensation paid to the our Former Manager with respect to the first three calendar quarters of the previous 12-month period. One half of each quarterly installment of the incentive fee may have been payable in shares of common stock. The remainder of the incentive fee may have been payable in cash. No incentive fees were earned for the years ended December 31, 2013 and 2012, respectively. Subsequent to December 31, 2013, the management agreement was terminated as a result of our transition to self-management. See Note 24 Subsequent Events (As Restated) for further discussion.
Management fees to affiliates increased by $17.3 million to $17.5 million for the year ended December 31, 2013 compared to $0.2 million for the year ended December 31, 2012. Of the $17.3 million, $5.0 million related to base management fees, $11.7 million related to ARCT III asset management fees settled in OP Units upon the closing of the ARCT III Merger and for services performed during a 60-day period following the ARCT III Merger and $0.8 million related to property management services. For the year ended December 31, 2012, the Former Manager waived all but $0.2 million of base management fees.
General and Administrative Expenses
General and administrative expenses increased by $117.7 million to $123.2 million for the year ended December 31, 2013 compared to $5.5 million for the year ended December 31, 2012. General and administrative expenses increased as a result of higher professional fees, such as legal fees, accountant fees and financial printer services fees, insurance expense, salary-related expenses and board member compensation to support our increased real estate portfolio.
Also, included in general and administrative expenses is equity-based compensation expense, which increased by $99.1 million to $100.3 million for the year ended December 31, 2013 compared to $1.2 million for the year ended December 31, 2012. Equity-based compensation expenses for the current year primarily included expenses for the OPP, which was entered into upon consummation of the ARCT III Merger, as well as the amortization of restricted stock. During the year ended December 31, 2013, we recorded equity-based compensation of $92.3 million for the OPP, of which $59.6 million related to accelerating the vesting of OP units in relation to our transition to self-management and $32.7 million of the expense was locked in based on OPP provisions. During the year ended December 31, 2012, equity-based compensation expense related only to the amortization of restricted stock.
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Depreciation and Amortization Expense
Depreciation and amortization expense increased by $170.0 million to $211.0 million for the year ended December 31, 2013 compared to $41.0 million for the year ended December 31, 2012. The increase in depreciation and amortization expense was driven by our acquisition of 1,807 properties since December 31, 2012 for an aggregate purchase price of $3.5 billion.
Impairment of Real Estate
For the year ended December 31, 2013, we recorded an impairment loss of $3.3 million. No impairments were recorded for the year ended December 31, 2012. After reviewing our portfolio for impairment indicators, we performed a recoverability test as of the dates on which the indicators existed. Certain properties failed the recoverability test, as such a fair value analysis was performed to determine the amount of impairment. An impairment loss was calculated based on the difference between the carrying amount of each property and the estimated fair value of each property as of the respective measurement dates.
Interest Expense
Interest expense increased by $93.6 million to $105.5 million for the year ended December 31, 2013 compared to $11.9 million for the year ended December 31, 2012. The increase in interest expense was due to increases in debt balances used to fund portfolio acquisitions, partially offset by a decrease in the weighted-average annualized interest rate on borrowings. The weighted-average debt balances for the years ended December 31, 2013 and 2012 were $1.8 billion and $205.1 million, respectively. The weighted-average annualized interest rate on all debt, including the effect of derivative instruments used to hedge the effects of interest rate volatility but excluding amortization of deferred financing costs and non-usage fees, for the years ended December 31, 2013 and 2012 was 3.40% and 4.16%, respectively.
Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the level of proceeds raised in offerings, our credit rating, the cost of borrowings, and the opportunity to acquire real estate assets which meet our investment objectives.
Other Income, Net
Other income increased by $2.8 million to $3.8 million for the year ended December 31, 2013 compared to other income of $1.0 million for the year ended December 31, 2012. The increase is primarily related to income earned on investments in redeemable preferred stock, senior notes and common stock, all of which were sold as of December 31, 2013, and investment income on certain assets acquired from CapLease during the fourth quarter of the year ended December 31, 2013.
Loss on Derivative Instruments, Net
Loss on the fair value of derivative instruments for the year ended December 31, 2013 was $67.9 million, which primarily consisted of a loss on contingent value rights. The loss pertains to the fair value of our obligation to pay certain preferred and common stockholders for the difference between the value of our shares on certain measurement dates and the value of the shares at the time of issuance as set forth by the contingent value rights agreement. The obligations were settled in full during the year ended December 31, 2013. The loss was partially offset by a gain on derivative instruments resulting from marking our derivative instruments to fair value. No gain or loss on derivative instruments was recorded during the year ended December 31, 2012.
Loss on Sale of Investment in Affiliates
Loss on sale of investment in affiliates for the year ended December 31, 2013 was $0.4 million resulting from the sale of our investment in a real estate fund sponsored by ARC purchased during the year ended December 31, 2013. No loss on the sale of investment in such funds was recorded during the year ended December 31, 2012.
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Loss on Sale of Investments
Loss on sale of investment securities, net for the year ended December 31, 2013 of $1.8 million primarily related to a $2.3 million loss on the sale of investments in redeemable preferred stock, senior notes and common stock, all of which were purchased in 2013 and sold as of December 31, 2013, partially offset by a $0.5 million gain on sale of investments in redeemable preferred stock, all of which were purchased in 2012 and sold as of December 31, 2013. The Company did not sell any investment securities during the year ended December 31, 2012.
Net Loss from Discontinued Operations
Net loss from discontinued operations decreased by $0.7 million to a net loss of approximately $34,000 for the year ended December 31, 2013 compared to a net loss of $0.7 million for the year ended December 31, 2012. As of December 31, 2013 and 2012, we classified one property as held for sale on the consolidated balance sheets and reported in discontinued operations on the consolidated statements of operations and comprehensive loss. The net losses from discontinued operations during each year were primarily due to impairment on the held for sale property representing the difference between the carrying value and estimated proceeds from the sale of the property less estimated selling costs.
Comparison of the Year Ended December 31, 2012 to Year Ended December 31, 2011
Rental Income
Rental income increased by $61.5 million to $65.3 million for the year ended December 31, 2012 compared to $3.8 million for the year ended December 31, 2011. Rental income was driven by our acquisition of 573 properties during the year ended December 31, 2012 for an aggregate purchase price of $1.7 billion, as well as revenue for a full year from the 129 properties held as of December 31, 2011. The annualized rental income per square foot of the properties at December 31, 2012 was $9.59 with a weighted-average remaining lease term of 10.4 years, compared to $11.59 per square foot at December 31, 2011. There were no properties held for sale for the full period in each of the years ended December 31, 2012 and 2011.
Operating Expense Reimbursements
Operating expense reimbursements increased by $1.7 million to $1.9 million for the year ended December 31, 2012 compared to $0.2 million for the year ended December 31, 2011. Operating expense reimbursements represent reimbursements for taxes, property maintenance and other charges contractually due from tenants per their respective leases. Operating expense reimbursements were driven by our acquisition of 573 properties during the year ended December 31, 2012 as well as reimbursements for a full year from the 129 properties held as of December 31, 2011.
Acquisition Related Expenses
Acquisition related expenses increased by $41.2 million to $45.1 million for the year ended December 31, 2012 compared to $3.9 million for the year ended December 31, 2011. The increase is driven by our acquisition of 573 properties during the year ended December 31, 2012 compared to 69 during the year ended December 31, 2011. Acquisition and related costs represent the costs related to the acquisition of properties. Acquisition costs mainly consisted of legal costs, deed transfer costs and other costs related to real estate purchase transactions.
Merger and Other Non-routine Transaction Expenses
During the year ended December 31, 2012, expenses related to the merger with ARCT III announced in December 2012 and other transaction costs were $2.6 million. These costs primarily consisted of legal fees, accountant fees and other costs associated with entering into the ARCT III merger agreement. There were no such merger expenses incurred during the year ended December 31, 2011.
Property Expenses
Property expenses increased by $3.3 million to $3.5 million for the year ended December 31, 2012 compared to $0.2 million for the year ended December 31, 2011. These expenses relate to costs associated with maintaining certain properties, including real estate taxes, ground lease rent, insurance and repairs and maintenance expenses. The increase in property expenses is mainly due to our acquisition of properties with modified gross leases during the year ended December 31, 2012 and an increased number of properties for which we pay expenses, which are reimbursed by the tenant.
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Management Fees to Affiliates
We paid our Former Manager an annual base management fee equal to 0.50% per annum of the average unadjusted book value of our real estate assets, calculated and payable monthly in advance, provided that the full amount of the distributions we have declared for the six immediately preceding months is equal to or greater than certain net income thresholds related to our operations. Our Former Manager waived such portion of its management fee in excess of such thresholds. For the years ended December 31, 2012 and 2011, our Former Manager waived base management fees earned of $1.8 million and $0.3 million, respectively.
We were required to pay our Former Manager a quarterly incentive fee, calculated based on 20% of the excess our annualized core earnings (as defined in the management agreement with our Former Manager) over the weighted-average number of shares multiplied by the weighted-average price per share of common stock. One half of each quarterly installment of the incentive fee would be payable in shares of common stock. The remainder of the incentive fee would be payable in cash. No incentive fees were earned for the years ended December 31, 2012 and 2011, respectively.
Management fees to affiliates were $0.2 million for the year ended December 31, 2012, compared to no such fees for the year ended December 31, 2011, which was the result of decisions by the Former Manager to not waive base management fees of $0.2 million in 2012 whereas the Former Manager waived all fees in 2011.
General and Administrative Expenses
General and administrative expenses increased by $4.8 million to $5.5 million for the year ended December 31, 2012 compared to $0.7 million for the year ended December 31, 2011. General and administrative expenses increased primarily as a result of higher professional fees, such as legal fees, accountant fees and financial printer services fees, insurance expense and board member compensation to support our increased real estate portfolio.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by $38.9 million to $41.0 million for the year ended December 31, 2012 compared to $2.1 million for the year ended December 31, 2011. The increase in depreciation and amortization expense was driven by our acquisition of 573 properties during the year ended December 31, 2012 for an aggregate purchase price of $1.7 billion as well as depreciation and amortization expense for a full year from the 129 properties held as of December 31, 2011.
Interest Expense
Interest expense increased by $10.9 million to $11.9 million for the year ended December 31, 2012 compared to $1.0 million for the year ended December 31, 2011. The increase primarily related to the increase in debt balances used to fund portfolio acquisitions as the outstanding balance on our senior secured revolving credit facility increased by $82.2 million during the year ended December 31, 2012. Interest expense also related to outstanding mortgage notes payable, which increased $229.8 million during the year ended December 31, 2012, partially offset by a slightly lower weighted-average effective interest rate during 2012 as compared to 2011.
Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the level of proceeds raised in offerings, our credit ratings, the cost of borrowings, and the opportunity to acquire real estate assets which meet our investment objectives.
Other Income, Net
Other income increased by $1.0 million to $1.0 million for the year ended December 31, 2012 compared to approximately $4,000 for the year ended December 31, 2011. The increase was primarily due to income on investment securities purchased during the year ended December 31, 2012.
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Net Loss from Discontinued Operations
Net loss from discontinued operations decreased by $0.2 million to $0.7 million for the year ended December 31, 2012 compared to $0.9 million for the year ended December 31, 2011. As of the year ended December 31, 2012 and 2011, we had one and two vacant properties, respectively, classified as held for sale on the consolidated balance sheets and reported in discontinued operations on the consolidated statements of operations and comprehensive loss. The net losses from discontinued operations during each year were primarily due to impairments on the held for sale properties representing the difference between the carrying value and estimated proceeds from the sale of the properties less estimated selling costs. On July 3, 2012, one of the properties was sold for $0.6 million of net proceeds.
Cash Flows for the Year Ended December 31, 2013 (As Restated)
During the year ended December 31, 2013, net cash provided by operating activities was $11.9 million. The level of cash flows used in or provided by operating activities is affected by acquisition and transaction costs, the timing of interest payments, as well as the receipt of scheduled rent payments. Cash flows provided by operating activities during the year ended December 31, 2013 included adjusted net loss of 43.9 million (net loss of $507.8 million adjusted for non-cash items, the most significant of which were depreciation and amortization expense, the issuance of operating partnership units, equity-based compensation, and the loss on extinguishment of Series C Stock, which totaled to $446.3 million, in the aggregate). In addition, we incurred a one-time expense related to the loss in the extinguishment of Series C Convertible Preferred Stock (Series C Stock) of $13.7 million. Cash inflows included an increase in accounts payable and accrued expenses of $20.8 million and an increase in deferred rent and other liabilities of $8.6 million, partially offset by an increase in prepaid and other assets of $19.9 million.
Net cash used in investing activities for the year ended December 31, 2013 of $4.5 billion primarily related to the investment in real estate assets and the CapLease Merger of $4.4 billion, deposits for real estate investments of $101.9 million, the purchase of investment securities of $81.6 million and investments in direct financing leases of $68.6 million, partially offset by the proceeds from the sales of investment securities of $119.5 million.
Net cash provided by financing activities was $4.3 billion during the year ended December 31, 2013. This was primarily driven by the issuance of stock and debt during the year, most notably $2.0 billion of proceeds net of offering-related costs from the issuance of common stock, $1.7 billion of proceeds, net of repayments, from our credit facilities, $967.8 million of proceeds from the issuance of convertible debt and $288.0 million of proceeds from the issuance of Series D Preferred Stock and $30.9 million of contributions from non-controlling interest holders. These inflows were partially offset by cash outflows, the most significant of which were common stock repurchases of $359.2 million, total distributions paid of $243.1 million, payments of deferred financing costs of $101.2 million and payments on mortgage notes and other debt of $15.1 million.
Cash Flows for the Year Ended December 31, 2012
During the year ended December 31, 2012, net cash provided by operating activities was $9.4 million. The level of cash flows used in or provided by operating activities is affected by acquisition and transaction costs, the timing of interest payments, as well as the receipt of scheduled rent payments. Cash flows provided by operating activities during the year ended December 31, 2012 was primarily due to an increase in adjusted net income of $2.7 million (net loss of $42.2 million adjusted for non-cash items, the most significant of which were depreciation and amortization expense and equity-based compensation, which totaled $44.4 million, in the aggregate). Cash inflows included an increase in accounts payable and accrued expenses of $8.3 million and in increase in deferred rent and other liabilities of $3.5 million, partially offset by an increase in prepaid and other assets of $5.1 million.
Net cash used in investing activities for the year ended December 31, 2012 was $1.7 billion, primarily related to an increase in investment in real estate assets paid for with cash of $1.7 billion and the purchase of investment securities of $41.7 million.
Net cash provided by financing activities of $2.0 billion during the year ended December 31, 2012 primarily related to cash inflows from the issuances of stock and debt, most notably $1.7 billion of proceeds net of offering-related costs from the issuance of common and preferred stock, $229.8 million of proceeds from mortgage notes payable and $82.2 million of proceeds from our senior secured revolving credit facility. These inflows were partially offset by cash outflows, most notably by total distributions paid of $38.3 million and payments related to deferred financing costs of $14.0 million.
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Liquidity and Capital Resources
In the normal course of business, our principal demands for funds will continue to be for property acquisitions, either directly or through investment interests, for the payment of operating expenses, distributions to our investors and for the payment of principal and interest on our outstanding indebtedness. We expect to meet our future short-term operating liquidity requirements through net cash provided by our current property operations. Management expects that our properties will generate sufficient cash flow to cover all operating expenses and the payment of a monthly distribution. The majority of our net leases contain contractual rent escalations during the primary term of the lease. Other potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from offerings, including our ATM program, proceeds from the sale of properties and undistributed funds from operations. With the stabilization of the investment portfolio, we expect to significantly increase the amount of cash flow generated from operating activities in future periods. Such increased cash flow will positively impact the amount of funds available for dividends.
As of December 31, 2013, we had $52.7 million of cash and cash equivalents.
Sources of Funds
Funds from Operations and Adjusted Funds from Operations (As Corrected)
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. (NAREIT), an industry trade group, has promulgated a measure known as funds from operations (FFO), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.
We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the White Paper). The White Paper defines FFO as net income or loss computed in accordance with U.S. GAAP, excluding gains or losses from sales of property, depreciation and amortization of real estate assets and impairment write-downs. These adjustments also include the Companys pro rata share of unconsolidated partnerships and joint ventures. Our FFO calculation complies with NAREITs policy described above.
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of U.S. GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in U.S. GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO and adjusted funds from operations (AFFO), as described below, should not be construed to be more relevant or accurate than the current U.S. GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under U.S. GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and AFFO measures and the adjustments to U.S. GAAP in calculating FFO and AFFO.
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We consider FFO and AFFO useful indicators of the performance of a REIT. Because FFO calculations exclude such factors as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs in our peer group. Accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.
Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREITs definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. While certain companies may experience significant acquisition activity, other companies may not have significant acquisition activity and management believes that excluding costs such as merger and transaction costs and acquisition related costs from property operating results provides useful information to investors and provides information that improves the comparability of operating results with other companies who do not have significant merger or acquisition activities. AFFO is not equivalent to our net income or loss as determined under GAAP, and AFFO may not be a useful measure of the impact of long-term operating performance if we continue to have such activities in the future.
We exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non-cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan. These items include unrealized gains and losses, which may not ultimately be realized, such as gains or losses on derivative instruments, gains and losses on investments and early extinguishment of debt. In addition, by excluding non-cash income and expense items such as amortization of above and below market leases, amortization of deferred financing costs, straight-line rent, net direct financing lease adjustments and equity-based compensation from AFFO we believe we provide useful information regarding income and expense items which have no cash impact and do not provide us liquidity or require our capital resources. By providing AFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our ongoing operating performance without the impacts of transactions that are not related to the ongoing profitability of our portfolio of properties. We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies that are not as involved in activities which are excluded from our calculation. Investors are cautioned that AFFO should only be used to assess the sustainability of our operating performance excluding these activities, as it excludes certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.
In addition, we exclude certain interest expenses related to securities that are convertible to common stock as the shares are assumed to have converted to common stock in our calculation of weighted-average common shares-fully diluted.
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In calculating AFFO, we exclude expenses, which under GAAP are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued merger and acquisition fees and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property and certain other expenses. Therefore, AFFO may not be an accurate indicator of our operating performance, especially during periods in which mergers are being consummated or properties are being acquired or certain other expenses are being incurred. AFFO that excludes such costs and expenses would only be comparable to companies that did not have such activities. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments as items which are unrealized and may not ultimately be realized. We view both gains and losses from fair value adjustments as items which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with managements analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information.
As a result, we believe that the use of FFO and AFFO, together with the required U.S. GAAP presentations, provide a more complete understanding of our performance relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.
FFO and AFFO are non-GAAP financial measures and do not represent net income as defined by U.S. GAAP. FFO and AFFO do not represent cash flows from operations as defined by U.S. GAAP, are not indicative of cash available to fund all cash flow needs and liquidity, including our ability to pay distributions and should not be considered as alternatives to net income, as determined in accordance with U.S. GAAP, for purposes of evaluating our operating performance. Other REITs may not define FFO in accordance with the current NAREIT definition (as we do) or may interpret the current NAREIT definition differently than we do and/or calculate AFFO differently than we do. Consequently, our presentation of FFO and AFFO may not be comparable to other similarly titled measures presented by other REITs.
As discussed in the Explanatory Note to this Form 10-K/A, the investigation conducted by the Audit Committee concluded that the Company erroneously calculated AFFO and/or AFFO per share for the years ended December 31, 2013, 2012 and 2011 due in part to errors in reflecting non-controlling interests. We are now presenting the restated FFO and AFFO using two methods: 1) we calculate FFO and AFFO on a gross basis, whereby we start with net income attributable to both the stockholders and the non-controlling interest holders, and then adjust net income by the gross reported amounts of the items being adjusted (Gross Method); and 2) we calculate FFO and AFFO on a net basis, whereby we start with net income attributable only to the stockholders, and adjust net income by only the stockholders portion of the applicable items (Net Method). For presentation of the Net Method, the company has included the gross amounts of each adjustment on their respective line items and adjusted for the proportionate share which is attributable to non-controlling interest on a separate line item within FFO and AFFO.
The calculation of AFFO per share follows the same logic. Under the Gross Method, AFFO is divided by a share number that takes into account the dilutive effect of units held by the non-controlling interest holders; under the Net Method, AFFO is divided by a share number that reflects only the dilutive effects of common shares. While the two methods generally result in the same per share value, the treatment of certain dilutive securities may result in different per share values under the respective methods.
89
The tables below reflect the two methods of calculating FFO and AFFO for the years ended December 31, 2013, 2012 and 2011 (in thousands, except share and per share data).
Net Method
Year Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(As Corrected) | (As Corrected) | (As Corrected) | ||||||||||
Net loss attributable to stockholders |
$ | (491,499 | ) | $ | (41,652 | ) | $ | (4,699 | ) | |||
Loss on disposition of properties a |
| 600 | 815 | |||||||||
Depreciation and amortization of real estate assets a |
210,976 | 40,957 | 2,097 | |||||||||
Impairment of real estate a |
3,346 | | | |||||||||
Proportionate share of adjustments for non-controlling interests (1) |
(7,899 | ) | (719 | ) | (64 | ) | ||||||
|
|
|
|
|
|
|||||||
FFO attributable to stockholders |
(285,076 | ) | (814 | ) | (1,851 | ) | ||||||
Acquisition related b |
76,113 | 45,070 | 3,898 | |||||||||
Merger and other non-routine transactions b |
210,543 | 2,603 | | |||||||||
Loss on sale of investment securities b |
2,206 | | | |||||||||
Loss on derivative instruments, net b |
67,946 | | 2 | |||||||||
Interest on convertible obligation to preferred investors b |
10,802 | | | |||||||||
Interest premiums and discounts on debt, net and settlement of convertible obligation to preferred investors b |
12,072 | | | |||||||||
Amortization of above- and below-market lease assets and liabilities b |
(178 | ) | 118 | | ||||||||
Net direct financing lease adjustments b |
496 | | | |||||||||
Amortization and write off of deferred financing costs b |
29,161 | 1,985 | 186 | |||||||||
Other amortization and non-cash charges b |
172 | 46 | 14 | |||||||||
Straight-line rent b |
(15,272 | ) | (2,212 | ) | (240 | ) | ||||||
Non-cash equity compensation expense b |
100,261 | 1,197 | 191 | |||||||||
Proportionate share of adjustments for non-controlling interests (2) |
(16,830 | ) | (622 | ) | (89 | ) | ||||||
|
|
|
|
|
|
|||||||
AFFO attributable to stockholders |
$ | 192,416 | $ | 47,371 | $ | 2,111 | ||||||
|
|
|
|
|
|
|||||||
Weighted-average shares outstanding - basic (3) |
205,341,431 | 103,306,366 | 3,720,351 | |||||||||
Effect of dilutive securities |
16,037,245 | 528,919 | 61,318 | |||||||||
|
|
|
|
|
|
|||||||
Weighted-average shares outstanding - diluted (4) |
221,378,676 | 103,835,285 | 3,781,669 | |||||||||
AFFO attributable to stockholders per diluted share |
$ | 0.87 | $ | 0.46 | $ | 0.56 |
(1) | Includes proportionate share attributable to non-controlling interests of the adjustments denoted with a. |
(2) | Includes proportionate share attributable to non-controlling interests of the adjustments denoted with b. |
(3) | Weighted-average shares for the year ended December 31, 2013 are adjusted as if the acquisition of all outstanding shares of ARCT IV common stock for cash in conjunction with the ARCT IV Merger had been completed at inception. |
(4) | Weighted-average shares for the year ended December 31, 2013 excludes the effect of the convertible debt as the effect would be antidilutive. |
90
Gross Method
Year Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(As Corrected) | (As Corrected) | (As Corrected) | ||||||||||
Net loss (in accordance with U.S. GAAP) |
$ | (507,815 | ) | $ | (42,237 | ) | $ | (4,804 | ) | |||
Loss on disposition of properties |
| 600 | 815 | |||||||||
Depreciation and amortization of real estate assets |
210,976 | 40,957 | 2,097 | |||||||||
Impairment of real estate |
3,346 | | | |||||||||
|
|
|
|
|
|
|||||||
FFO |
(293,493 | ) | (680 | ) | (1,892 | ) | ||||||
Acquisition related |
76,113 | 45,070 | 3,898 | |||||||||
Merger and other non-routine transactions |
210,543 | 2,603 | | |||||||||
Loss on sale of investment securities |
2,206 | | | |||||||||
Loss on derivative instruments, net |
67,946 | | 2 | |||||||||
Interest on convertible obligation to preferred investors |
10,802 | | | |||||||||
Interest premiums and discounts on debt, net and settlement of convertible obligation to preferred investors |
12,072 | | | |||||||||
Amortization of above- and below-market lease assets and liabilities |
(178 | ) | 118 | | ||||||||
Net direct financing lease adjustments |
496 | | | |||||||||
Amortization and write off of deferred financing costs |
29,161 | 1,985 | 186 | |||||||||
Other amortization and non-cash charges |
172 | 46 | 14 | |||||||||
Straight-line rent |
(15,272 | ) | (2,212 | ) | (240 | ) | ||||||
Non-cash equity compensation expense |
100,261 | 1,197 | 191 | |||||||||
|
|
|
|
|
|
|||||||
AFFO |
$ | 200,829 | $ | 48,127 | $ | 2,159 | ||||||
|
|
|
|
|
|
|||||||
Weighted-average shares outstanding - basic (1) |
205,341,431 | 103,306,366 | 3,720,351 | |||||||||
Dilutive effect of restricted share awards |
25,223,423 | 1,316,197 | 160,688 | |||||||||
|
|
|
|
|
|
|||||||
Weighted-average shares outstanding - diluted (2) |
230,564,854 | 104,622,563 | 3,881,039 | |||||||||
AFFO per share |
$ | 0.87 | $ | 0.46 | $ | 0.56 |
(1) | Weighted-average shares for the year ended December 31, 2013 are adjusted as if the acquisition of all outstanding shares of ARCT IV common stock for cash in conjunction with the ARCT IV Merger had been completed at inception. |
(2) | Weighted-average shares for the year ended December 31, 2013 excludes the effect of the convertible debt as the effect would be antidilutive. |
91
The following tables present the combined impact of all changes to the applicable line items in the Companys previously issued FFO and AFFO presentations using the Net Method for the years ended December 31, 2013, 2012 and 2011 (amounts in thousands):
Net Method
Year Ended December 31, 2013 | ||||||||||||||||
As Previously Reported (1) |
Methodology Adjustments (2) |
Error Corrections (3) |
As Corrected | |||||||||||||
Net loss attributable to stockholders |
$ | (474,740 | ) | $ | | $ | (16,759 | ) | $ | (491,499 | ) | |||||
(Gain) loss on held for sale properties a |
(14 | ) | | 14 | | |||||||||||
Depreciation and amortization a |
211,372 | (46 | ) (6) | (350 | ) | 210,976 | ||||||||||
Impairment of real estate a |
| | 3,346 | 3,346 | ||||||||||||
Proportionate share of adjustments for non-controlling interests (4) |
| (7,789 | ) | (110 | ) | (7,899 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
FFO attributable to stockholders |
(263,382 | ) | (7,835 | ) | (13,859 | ) | (285,076 | ) | ||||||||
Acquisition related b |
76,136 | | (23 | ) | 76,113 | |||||||||||
Merger and other non-routine transactions b |
278,319 | | (67,776 | ) | 210,543 | |||||||||||
Loss on sale of investment securities b |
2,206 | | | 2,206 | ||||||||||||
Loss on derivative instruments, net b |
67,946 | | | 67,946 | ||||||||||||
Interest on convertible obligation to preferred investors b |
10,802 | | | 10,802 | ||||||||||||
Interest premiums and discounts on debt, net and settlement of convertible obligations to preferred investors b |
12,072 | | | 12,072 | ||||||||||||
Amortization of above- and below- market lease assets and liabilities b |
(178 | ) | | | (178 | ) | ||||||||||
Net direct financing lease adjustments b |
| 496 | (7) | | 496 | |||||||||||
Amortization and write off of deferred financing costs b |
26,895 | | 2,266 | 29,161 | ||||||||||||
Other amortization and non-cash charges b |
| 172 | (6)(7) | | 172 | |||||||||||
Straight-line rent b |
(15,058 | ) | (214 | ) (8) | | (15,272 | ) | |||||||||
Non-cash equity compensation expense b |
34,962 | | 65,299 | 100,261 | ||||||||||||
Operating fees to affiliate b |
5,654 | (5,654 | ) (9) | | | |||||||||||
Proportionate share of adjustments for non-controlling interests (5) |
| (16,944 | ) | 114 | (16,830 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
AFFO attributable to stockholders |
$ | 236,374 | $ | (29,979 | ) | $ | (13,979 | ) | $ | 192,416 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted-average shares outstanding diluted |
221,378,676 | | | 221,378,676 | ||||||||||||
AFFO attributable to the stockholders per share |
$ | 1.07 | (8) | $ | (0.14 | ) | $ | (0.06 | ) | $ | 0.87 |
(1) | The numbers in this column reflect the recasting of the Companys historical financial statements to present the effects of the Companys acquisition of ARCT IV, an entity previously deemed to be under common control with the Company, as if it had been completed at inception, as previously disclosed in the Companys Current Report on Form 8-K, dated May 20, 2014. |
(2) | The adjustments in this column reflect the Net Method for adjusting for non-controlling interests and certain other methodology adjustments. |
(3) | The adjustments in this column reflect the restatement. See Note 2 Restatement of Previously Issued Financial Statements to the consolidated financial statements for further explanation on adjustments. |
(4) | Includes proportionate share attributable to non-controlling interests of the adjustments denoted with a. |
(5) | Includes proportionate share attributable to non-controlling interests of the adjustments denoted with b. |
(6) | Reclassification between line items to properly show non-real estate related amortization below in AFFO. |
(7) | In reviewing its AFFO methodology, the Company has determined that it is appropriate to include certain adjustments that were not included in the previously reported AFFO calculation. These adjustments include $496,000 for net direct financing lease adjustments and $126,000 for straight line rent expense. |
(8) | AFFO per share was not previously reported in the Original Filing although it was has been calculated utilizing the previously reported adjusted funds from operations and weighted average shares of 221,378,676. |
92
(8) | The original Filing presented this line item net of the proportionate share for non-controlling interest. A gross up adjustment has been made to include the amount attributable to non-controlling interest in order to show all proportionate adjustments for non-controlling interests on one line item called Proportionate share of adjustments for non-controlling interest. |
(9) | In reviewing its AFFO methodology, the Company has determined that it was not appropriate to adjust for operating fees incurred to affiliates as these expenses represent operating expenses that are typical for the industry. |
Year Ended December 31, 2012 | ||||||||||||||||
As Previously Reported (1) |
Methodology Adjustments (2) |
Error Corrections (3) |
As Corrected | |||||||||||||
Net loss attributable to stockholders |
$ | (41,936 | ) | $ | | $ | 284 | $ | (41,652 | ) | ||||||
Loss on held for sale properties a |
600 | | | 600 | ||||||||||||
Depreciation and amortization a |
41,003 | (46 | ) (6) | | 40,957 | |||||||||||
Proportionate share of adjustments for non-controlling interests (4) |
| (719 | ) | | (719 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
FFO attributable to stockholders |
(333 | ) | (765 | ) | 284 | (814 | ) | |||||||||
Acquisition related b |
45,070 | | | 45,070 | ||||||||||||
Merger and other non-routine transactions b |
2,603 | | | 2,603 | ||||||||||||
Amortization of above- and below- market lease assets and liabilities b |
110 | 8 | (7) | | 118 | |||||||||||
Amortization of deferred financing costs b |
1,985 | | | 1,985 | ||||||||||||
Other amortization and non-cash charges b |
| 46 | (6) | | 46 | |||||||||||
Straight-line rent b |
(2,165 | ) | (47 | ) (7) | | (2,212 | ) | |||||||||
Non-cash equity compensation expense b |
1,197 | | | 1,197 | ||||||||||||
Operating fees to affiliate b |
212 | (212 | ) (8) | | | |||||||||||
Proportionate share of adjustments for non-controlling interests (5) |
| (622 | ) | | (622 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
AFFO attributable to stockholders |
$ | 48,679 | $ | (1,592 | ) | $ | 284 | $ | 47,371 | |||||||
|
|
|
|
|
|
|
|
(1) | The numbers in this column reflect the recasting of the Companys historical financial statements to present the effects of the Companys acquisition of ARCT IV, an entity previously deemed to be under common control with the Company, as if it had been completed at inception, as previously disclosed in the Companys Current Report on Form 8-K, dated May 20, 2014. |
(2) | The adjustments in this column reflect the Net Method for adjusting for non-controlling interests and certain other methodology adjustments. |
(3) | The adjustments in this column reflect the restatement. See Note 2 Restatement of Previously Issued Financial Statements to the consolidated financial statements for further explanation on adjustments. |
(4) | Includes proportionate share attributable to non-controlling interests of the adjustments denoted with a. |
(5) | Includes proportionate share attributable to non-controlling interests of the adjustments denoted with b. |
(6) | Reclassification between line items to properly show non-real estate related amortization below in AFFO. |
(7) | The previously reported AFFO calculation presented this line item net of the proportionate share for non-controlling interest. A gross up adjustment has been made to include the amount attributable to non-controlling interest in order to show all proportionate adjustments for non-controlling interests on one line item called Proportionate share of adjustments for non-controlling interest. |
(8) | In reviewing its AFFO methodology, the Company has determined that it was not appropriate to adjust for operating fees incurred to affiliates as these expenses represent operating expenses that are typical for the industry. |
93
Year Ended December 31, 2011 | ||||||||||||
As Previously Reported (1) |
Methodology Adjustments (2) |
As Corrected | ||||||||||
Net loss attributable to stockholders |
$ | (4,699 | ) | $ | | $ | (4,699 | ) | ||||
Loss on held for sale properties a |
815 | | 815 | |||||||||
Depreciation and amortization a |
2,111 | (14 | ) (5) | 2,097 | ||||||||
Proportionate share of adjustments for non-controlling interests (3) |
| (64 | ) (2)(3) | (64 | ) | |||||||
|
|
|
|
|
|
|||||||
FFO attributable to stockholders |
(1,773 | ) | (78 | ) | (1,851 | ) | ||||||
Acquisition related b |
3,898 | | 3,898 | |||||||||
Loss on derivative instruments b |
2 | | 2 | |||||||||
Amortization of deferred financing costs b |
186 | | 186 | |||||||||
Other amortization and non-cash charges b |
| 14 | (5) | 14 | ||||||||
Straight-line rent b |
(229 | ) | (11 | ) (6) | (240 | ) | ||||||
Non-cash equity compensation expense b |
191 | | 191 | |||||||||
Proportionate share of adjustments for non-controlling interests (4) |
| (89 | ) (2)(4) | (89 | ) | |||||||
|
|
|
|
|
|
|||||||
AFFO attributable to stockholders |
$ | 2,275 | $ | (164 | ) | $ | 2,111 | |||||
|
|
|
|
|
|
(1) | The numbers in this column reflect the recasting of the Companys historical financial statements to present the effects of the Companys acquisition of ARCT IV, an entity previously deemed to be under common control with the Company, as if it had been completed at inception, as previously disclosed in the Companys Current Report on Form 8-K, dated May 20, 2014. |
(2) | The adjustments in this column reflect the Net Method for adjusting for non-controlling interests and certain other methodology adjustments. |
(3) | Includes proportionate share attributable to non-controlling interests of the adjustments denoted with a. |
(4) | Includes proportionate share attributable to non-controlling interests of the adjustments denoted with b. |
(5) | Reclassification between line items to properly show non-real estate related depreciation and amortization below FFO. |
(6) | The previously reported AFFO calculation presented this line item net of the proportionate share for non-controlling interest. A gross up adjustment has been made to include the amount attributable to non-controlling interest in order to show all proportionate adjustments for non-controlling interests on one line item called Proportionate share of adjustments for non-controlling interest. |
94
Capital Markets
The following are our equity offerings of common stock during the year ended December 31, 2013 (dollar amounts in millions):
Type of offering |
Closing Date | Number of Shares (1) | Gross Proceeds | |||||||
Registered follow-on offering |
January 29, 2013 | 2,070,000 | $ | 26.8 | ||||||
ATM |
January 1 - April 17, 2013 | 553,300 | 8.9 | |||||||
Private placement offering |
June 7, 2013 | 29,411,764 | 455.0 | |||||||
Private placement offering |
November 12, 2013 | 15,126,498 | 186.0 | |||||||
|
|
|
|
|||||||
Total - Year end December 31, 2013 |
47,161,562 | $ | 676.7 | |||||||
|
|
|
|
(1) | Excludes 140.7 million shares of common stock that were issued to the stockholders of ARCT IIIs common stock in conjunction with the ARCT III Merger. |
On August 1, 2012, we filed a $500.0 million universal shelf registration statement and a resale registration statement with the SEC. Each registration statement became effective on August 17, 2012. As of December 31, 2013, we had issued 2.1 million shares of common stock through a registered follow on offering and an ATM offering under the $500.0 million universal shelf registration statement. No preferred stock, debt or equity-linked security had been issued under the universal shelf registration statement. The resale registration statement, as amended, registers the resale of up to 1,882,248 shares of common stock issued in connection with any future conversion of certain currently outstanding restricted shares, convertible preferred stock or limited partnership interests in the OP. As of December 31, 2013, no common stock had been issued under the resale registration statement.
On March 14, 2013, we filed a universal automatic shelf registration statement and achieved well-known seasoned issuer (WKSI) status. As a result of the delayed filing of certain of our periodic reports with the SEC, we are not currently eligible to use a shelf registration statement for the offer and sale of our securities.
In January 2013, we commenced an at the market equity offering program (ATM) in which we may from time to time offer and sell shares of our common stock having an aggregate offering proceeds of up to $60.0 million. The shares will be issued pursuant to our $500.0 million universal shelf registration statement.
In addition to our common stock offerings, on June 7, 2013, we issued 28.4 million shares convertible preferred stock (the Series C Shares) for gross proceeds of $445.0 million. On November 12, 2013, we converted all outstanding Series C Shares into our common stock. Pursuant to the Series C Articles Supplementary, the number of shares of common stock that could be issued upon conversion of Series C Shares was limited to an exchange cap. Therefore, we converted 1.1 million Series C Shares into 1.4 million shares of our common stock. With respect to the 27.3 million Series C Shares for which we could not issue shares of our common stock upon conversion due to the exchange cap, we paid holders of Series C Shares an aggregate cash amount equal to approximately $441.4 million in exchange for such Series C Shares. Based on our share price on the conversion date, the total settlement value was $458.8 million. See Note 12 Other Debt in the consolidated financial statements for a description of the conversion features of the Series C Convertible Preferred Stock.
On September 15, 2013, we entered into definitive purchase agreements pursuant to which we agreed to issue Series D Preferred Stock, par value $0.01 per share, and common stock, par value $0.01 per share, to certain institutional holders promptly following the close of our merger with CapLease. Pursuant to the definitive purchase agreements, we issued approximately 21.7 million shares of Series D Preferred Stock and 15.1 million shares of common stock, for gross proceeds of $288.0 million and $186.0 million, respectively, on November 12, 2013.
Upon consummation of the ARCT IV merger on January 3, 2014, 42.2 million shares of Series F Preferred Stock were issued to ARCT IV stockholders. There were no shares issued and outstanding of Series F Preferred Stock as of December 31, 2013. See Note 17 Preferred and Common Stock (As Restated) in the consolidated financial statements for a description of the Series D Preferred Stock and Series F Preferred Stock.
See Note 24 Subsequent Events (As Restated) for significant subsequent events.
95
Availability of Funds from Credit Facilities (As Restated)
We and our OP are parties to a credit facility with Wells Fargo, National Association , as administrative agent and other lenders party thereto (the Credit Facility).
At December 31, 2013, the Credit Facility has commitments of $2.4 billion. The Credit Facility has an accordion feature, which, if exercised in full, would allow us to increase borrowings under the Credit Facility to $3.0 billion, subject to additional lender commitments and borrowing base availability.
At December 31, 2013, the Credit Facility contains a $940.0 million term loan facility and a $1.5 billion revolving credit facility, of which $940.0 million and $119.8 million was outstanding, respectively. Loans under the Credit Facility are priced at the applicable rate (at our election, either a floating interest rate based on one month LIBOR, determined on a daily basis, or LIBOR for a period of one, three or six months), plus 2.25% to 3.00%, decreasing to 1.60% to 2.20% upon the satisfaction of certain conditions set forth in the credit agreement relating to the credit facility), based upon our current leverage. To the extent that we receive an investment grade credit rating as determined by a major credit rating agency, and upon the satisfaction of certain other conditions set forth in the credit agreement relating to the Credit Facility, at our election, advances under the revolving credit facility will be priced at the applicable rate plus 0.90% to 1.75% and term loans will be priced at the applicable rate plus 1.15% to 2.00%, in each case, based upon our then current investment grade credit rating.
The Credit Facility provides for monthly interest payments. Upon the occurrence of an event of default, the agent acting at the request or with the consent of lenders holding a majority of the loans and commitments under the Credit Facility, may declare the Credit Facility commitments to be terminated, and may accelerate the payment on any unpaid principal amount of all outstanding loans. We have guaranteed the obligations under the Credit Facility. The revolving credit facility will terminate on February 14, 2017 and the term loan facility will terminate on February 14, 2018, in each case, unless extended in accordance with the terms of the credit facility. At any time, upon timely notice by us, we may prepay borrowings under the credit facility. We incur an unused fee of 0.15% to 0.25% per annum on the unused amount of the revolving credit commitments, based on our usage of the revolving credit facility, which unused fee will decrease 0.12% to 0.35% per annum, based upon our then current investment grade credit rating, to the extent we have elected for the interest rate margin applicable to the outstanding advances under the credit facility to be governed by our credit rating as set forth above. To the extent that any delayed draw commitments remain undrawn, we will incur an unused fee of 0.25% per annum on the unused amount of such commitments. The Credit Facility also required us to maintain certain property available for collateral as a condition to funding, but this requirement was eliminated pursuant to an amendment effective February 7, 2014. See also Our inability to file and deliver our financial statements and certain other financial deliverables required under the terms of our Credit Agreement and the indentures governing our senior unsecured notes has adversely affected our overall borrowing flexibility, exposed us to the possibility of default and required us to pay certain additional expenses, for a description of certain provisions of our Amended Credit Agreement which have subsequently become effective. Refer to Note 24 Subsequent Events (As Restated) included in this Amendment No. 2 to Annual Report on Form 10-K/A for further discussion on significant recent events.
Principal Use of Funds
Acquisitions
Generally, cash needs for property acquisitions will be met through proceeds from the public or private offerings of debt and equity and other financings. We may also from time to time enter into other agreements with third parties whereby third parties will make equity investments in specific properties or groups of properties that we acquire.
We evaluate potential acquisitions of real estate and real estate-related assets and engage in negotiations with sellers and borrowers. Investors and stockholders should be aware that after a purchase contract is executed that contains specific terms the property will not be purchased until the successful completion of due diligence and negotiation of final binding agreements. During this period, we may decide to temporarily invest any unused proceeds from equity offerings in certain investments that could yield lower returns than the properties. These lower returns may affect our ability to make distributions.
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We financed the aggregate purchase prices of the recent mergers and acquisitions discussed in Note 3 Mergers and Acquisitions in part through the assumption of outstanding indebtedness, and expect to finance the balance of the aggregate purchase prices through a combination of available cash on hand from: (a) a portion of the $676.7 million in gross proceeds for the year ended December 31, 2013 from the sale of shares of ARCP common stock and convertible preferred stock in separate previously disclosed private placement transactions; (b) a portion of the $967.8 million in net proceeds from the sale of the Notes; (c) funds available from the issuance of common stock through our current ATM or any successor program thereto; (d) financing available under our credit facility; and (e) additional alternative financing arrangements, as needed, from the issuance of additional common stock, preferred securities or other debt, equity or equity-linked financings.
Dividends
The amount of dividends payable to our stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for dividends, financial condition, capital expenditure requirements, as applicable, and annual dividend requirements needed to qualify and maintain our status as a REIT under the Internal Revenue Code of 1986, as amended (the Code). Operating cash flows are expected to increase as additional properties are acquired in our investment portfolio.
We and our board of directors share a similar philosophy with respect to paying our dividends. The dividends should principally be derived from cash flows generated from real estate operations. In order to improve our operating cash flows and our ability to pay dividends from operating cash flows, our Former Manager has in the past agreed to waive certain fees including management and incentive fees. The fees that were waived relating to the activity are not deferrals and accordingly, will not be paid. Because our Former Manager waived certain fees that we owed, cash flow from operations that would have been used to pay such fees to our Former Manager was available to pay dividends to our stockholders. See Note 19 Related Party Transactions and Arrangements (As Restated) in the consolidated financial statements within this report for further information on fees paid to and forgiven by our Former Manager. Subsequent to December 31, 2013, we completed our transition to self-management and will no longer pay such fees to our Former Manager. See Note 24 Subsequent Events (As Restated) for further discussion.
As our real estate portfolio matures, we expect cash flows from operations to cover our dividends.
The following table shows the sources for the payment of dividends to common stockholders for the year ended December 31, 2013 (dollars in thousands):
Three Months Ended | ||||||||||||||||||||||||||||||||
March 31, 2013 | June 30, 2013 | September 30, 2013 | December 31, 2013 | |||||||||||||||||||||||||||||
Dividends | % of Dividends |
Dividends | % of Dividends |
Dividends | % of Dividends |
Dividends | % of Dividends |
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Dividends: |
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Distributions paid in cash |
$ | 40,485 | $ | 49,882 | $ | 66,674 | $ | 74,311 | ||||||||||||||||||||||||
Distributions reinvested |
7,498 | 13,121 | 4,949 | | ||||||||||||||||||||||||||||
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$ | 47,983 | $ | 63,003 | $ | 71,623 | $ | 74,311 | |||||||||||||||||||||||||
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Sources of dividends: |
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Cash flows provided by operations (1) |
$ | | | % | $ | 5,674 | 9.0 | % | $ | 16,976 | 23.7 | % | $ | 29,254 | 39.4 | % | ||||||||||||||||
Proceeds from issuances of common stock |
3,185 | 6.6 | % | 12,794 | 20.3 | % | 23,938 | 33.4 | % | | | % | ||||||||||||||||||||
Proceeds from financing activities |
37,300 | 77.8 | % | 31,414 | 49.9 | % | 25,760 | 36.0 | % | 45,057 | 60.6 | % | ||||||||||||||||||||
Common stock issued under the DRIP |
7,498 | 15.6 | % | 13,121 | 20.8 | % | 4,949 | 6.9 | % | | | % | ||||||||||||||||||||
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Total sources of dividends |
$ | 47,983 | 100.0 | % | $ | 63,003 | 100.0 | % | $ | 71,623 | 100.0 | % | $ | 74,311 | 100.0 | % | ||||||||||||||||
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Net loss attributable to stockholders (in accordance with U.S. GAAP) |
$ | (143,880 | ) | $ | (69,603 | ) | $ | (80,201 | ) | $ | (197,815 | ) | ||||||||||||||||||||
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(1) | Dividends paid from cash provided by operations are derived from cash flows from operations (U.S. GAAP basis) for the year ended December 31, 2013. Cash flows provided by operations include $76.1 million (as restated) of acquisition related expenses and $210.5 million (as restated) of merger and other non-routine transaction related expenses incurred during the year ended December 31, 2013. If we had not incurred such acquisition and merger related costs, our cash flows from operations would have sourced all dividend payments during the year ended December 31, 2013. |
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Loan Obligations
At December 31, 2013, our leverage ratio (net debt, excluding debt convertible to common stock, divided by enterprise value) was 58.3%.
The payment terms of our loan obligations vary. In general, only interest amounts are payable monthly with all unpaid principal and interest due at maturity. Some of our loan agreements stipulate that we comply with specific reporting and financial covenants mainly related to debt coverage ratios and loan to value ratios. Each loan that has these requirements has specific ratio thresholds that must be met. As of December 31, 2013, we were in compliance with the debt covenants under our loan agreements.
As of December 31, 2013, we had non-recourse mortgage indebtedness of $1.3 billion which was collateralized by 177 properties. Our mortgage indebtedness bore interest at weighted-average rate of 3.42% per annum and had a weighted-average maturity of 3.41 years. We may in the future incur additional mortgage debt on the properties we currently own or use long-term non-recourse financing to acquire additional properties in the future.
As of December 31, 2013, there was $1.1 billion outstanding on the Credit Facility, of which $554.8 million bore a floating interest rate of 3.17%, and for $515.0 million of the Credit Facilitys floating base interest rate is fixed through the use of derivative instruments used to hedge interest rate volatility. Including the spread, which can vary based on our leverage, interest on this portion was 3.85% at December 31, 2013. At December 31, 2013, there was up to $1.9 billion available to us for future borrowings, subject to additional lender commitments and borrowing availability. In addition, we had $760.0 million outstanding under the Senior Secured Credit Facility.
Our loan obligations require the maintenance of financial covenants, as well as restrictions on corporate guarantees, the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. At December 31, 2013 and 2012, we were in compliance with the debt covenants under all of our loan obligations.
Convertible Senior Note Offering
On July 29, 2013, the Company issued $300.0 million of Convertible Senior Notes (the 2018 Notes) and, pursuant to an over-allotment exercise by the underwriters of such 2018 Notes offering, issued an additional $10.0 million of its 2018 Notes on August 1, 2013. On December 10, 2013, the Company issued an additional $287.5 million of the 2018 Notes through a reopening of the 2018 Notes indenture agreement. Also on December 10, 2013, the Company issued $402.5 million of Convertible Senior Notes (the 2020 Notes, collectively with the 2018 Notes, the Convertible Notes). The 2018 Notes mature August 1, 2018 and the 2020 Notes mature on December 15, 2020. The Convertible Notes are convertible to cash or shares of the Companys common stock at the Companys option. In accordance with U.S GAAP, the notes are accounted for as a liability with a separate equity component recorded for the conversion option. A liability was recorded for the Convertible Notes on the issuance date at fair value based on a discounted cash flow analysis using current market rates for debt instruments with similar terms. The difference between the initial proceeds from the Convertible Notes and the estimated fair value of the debt instruments resulted in a debt discount, with an offset recorded to additional paid-in capital representing the equity component. The debt discount is being amortized to interest expense over the expected lives of the Convertible Notes.
Refer to Note 24 Subsequent Events (As Restated) included in this Amendment No. 2 to Annual Report on Form 10-K/A for further discussion on significant recent events.
Bond Offering
On February 6, 2014, the OP issued, in a private offering, $2.55 billion aggregate principal amount of senior unsecured notes consisting of $1.3 billion aggregate principal amount of 2.00% senior notes due 2017 (the 2017 Notes), $750.0 million aggregate principal amount of 3.00% senior notes due 2019 (the 2019 Notes) and $500.0 million aggregate principal amount of 4.60% senior notes due 2024 (the 2024 Notes, and, together with the 2017 Notes and 2019 Notes, the Notes). The Notes are guaranteed by the Company. The Company used a portion of the net proceeds to partially fund the cash consideration, fees and expenses relating to Cole Merger and repayment of Coles credit facility. The Company used the remaining portion of the net proceeds from the offering to repay $900.0 million outstanding under the OPs senior credit facility and for other general corporate purposes.
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Refer to Note 24 Subsequent Events (As Restated) included in this Amendment No. 2 to Annual Report on Form 10-K/A for further discussion on significant recent events.
Contractual Obligations
The following is a summary of our contractual obligations, including contractual lease obligations, as of December 31, 2013 (in thousands):
Total | 2014 | 2015 2016 | 2017 2018 | Thereafter | ||||||||||||||||
Principal payments due on mortgage notes payable |
$ | 1,258,661 | $ | 86,933 | $ | 677,200 | $ | 293,869 | $ | 200,659 | ||||||||||
Interest payments due on mortgage notes payable |
204,982 | 63,581 | 82,666 | 25,064 | 33,671 | |||||||||||||||
Principal payments due on senior corporate credit facilities |
1,819,800 | | | 1,819,800 | | |||||||||||||||
Interest payments due on senior corporate credit facilities |
186,585 | 47,048 | 94,095 | 45,442 | | |||||||||||||||
Principal payments due on secured credit facility |
150,000 | 150,000 | | | | |||||||||||||||
Interest payments due on secured credit facility |
4,410 | 4,410 | | | | |||||||||||||||
Principal payments due on convertible debt |
1,000,000 | | | 597,500 | 402,500 | |||||||||||||||
Interest payments due on convertible debt |
187,235 | 33,019 | 66,038 | 58,619 | 29,559 | |||||||||||||||
Principal payments due on other debt |
108,316 | 12,851 | 24,378 | 40,157 | 30,930 | |||||||||||||||
Interest payments due on other debt |
65,659 | 6,808 | 11,469 | 6,802 | 40,580 | |||||||||||||||
Payments due on lease obligations |
84,441 | 4,541 | 8,657 | 7,456 | 63,787 | |||||||||||||||
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Total |
$ | 5,070,089 | $ | 409,191 | $ | 964,503 | $ | 2,894,709 | $ | 801,686 | ||||||||||
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Contractual Lease Obligations
The following table reflects the minimum base rental cash payments due from the Company over the next five years and thereafter for certain ground and office lease obligations (amounts in thousands):
Future Minimum Lease Payments |
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2014 |
$ | 4,541 | ||
2015 |
4,443 | |||
2016 |
4,214 | |||
2017 |
4,244 | |||
2018 |
3,212 | |||
Thereafter |
63,787 | |||
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$ | 84,441 | |||
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Election as a REIT
We elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with the taxable year ended December 31, 2011. If we continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income tax to the extent we distribute our REIT taxable income to our stockholders, and so long as we distribute at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain. REITs are subject to a number of other organizational and operational requirements. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income. We believe we are organized and operating in such a manner as to qualify to be taxed as a REIT for the taxable year ending December 31, 2013.
Inflation
We may be adversely impacted by inflation on any leases that do not contain indexed escalation provisions. In addition, our net leases may require the tenant to pay its allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance. This may reduce our exposure to increases in costs and operating expenses resulting from inflation.
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Related-Party Transactions and Agreements
We have entered into agreements with affiliates, whereby we pay or have paid in the past certain fees or reimbursements to ARC, our Former Manager or their affiliates for acquisition fees and expenses, organization and offering costs, asset management fees and reimbursement of operating costs and have in the past paid sales commissions and dealer manager fees. See Note 19 Related Party Transactions and Arrangements (As Restated) in our financial statements included in this report for a discussion of the various related-party transactions, agreements and fees. In August 2013, our board of directors determined that it is in the best interests of us and our stockholders to become self-managed, and we completed our transition to self-management on January 8, 2014. See Note 24 Subsequent Events (As Restated) to the consolidated financial statements for further discussion.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to variable-rate borrowings. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We would not hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.
As of December 31, 2013, our debt included fixed-rate debt, including debt that has interest rates that are fixed with the use of derivative instruments, with a carrying and fair value of $2.9 billion. Changes in market interest rates on our fixed rate debt impact fair value of the debt, but they have no impact on interest incurred or cash flow. For instance, if interest rates rise 100 basis points and our fixed rate debt balance remains constant, we expect the fair value of our debt to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our fixed-rate debt assumes an immediate 100 basis point move in interest rates from their December 31, 2013 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed rate debt by approximately $102.8 million. A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt by $65.8 million.
As of December 31, 2013, our debt included variable-rate debt with a carrying and fair value of $1.5 billion. The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from their December 31, 2013 levels, with all other variables held constant. A 100 basis point increase or decrease in variable interest rates on our variable-rate notes payable would increase or decrease our interest expense by approximately $14.6 million annually.
As the information presented above includes only those exposures that existed as of December 31, 2013, it does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.
These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs, and, assume no other changes in our capital structure.
Item 8. Financial Statements and Supplementary Data
The information required by Item 8 is hereby incorporated by reference to our Consolidated Financial Statements beginning on page F-1 of this document.
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures (As Restated)
Evaluation of Disclosure Controls and Procedures
The Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC on February 27, 2014 disclosed that the Companys former management, with the participation of its former Chief Executive Officer and former Chief Financial Officer, had evaluated the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) and, based on that evaluation, had concluded that the Companys disclosure controls and procedures were effective as of December 31, 2013. In light of the findings of the Audit Committee investigation and a review made by the Company in connection with the preparation of the restatement presented in this Form 10-K/A, current management, under the supervision of our current Interim Chief Executive Officer and our current Chief Financial Officer, re-evaluated the Companys disclosure controls and procedures and, based on that evaluation, concluded that the Companys disclosure controls and procedures were not effective at December 31, 2013 as a result of the matters discussed under Material Weaknesses below.
Managements Report on Internal Control over Financial Reporting
The Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC on February 27, 2014 disclosed that the Companys former management had assessed the Companys internal control over financial reporting (excluding that relating to CapLease, Inc., which the Company acquired on November 5, 2013) under the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 1992 Internal Control-Integrated Framework (the COSO Framework), and believed that the Companys internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act) was effective as of December 31, 2013. In light of the findings of the Audit Committee investigation and a review made by the Company in connection with preparation of the restatement presented in this Form 10-K/A, current management performed a re-assessment of the Companys internal control over financial reporting under the COSO Framework (excluding both CapLease, Inc. and ARCT IV, the latter of which the Company acquired on January 3, 2014 in a transaction accounted for on a carryover basis of accounting and recast in the Companys historical financial statements) and concluded that the Companys internal control over financial reporting was not effective as of December 31, 2013 as a result of the matters discussed under Material Weaknesses in Internal Control over Financial Reporting below.
Material Weaknesses
Material Weaknesses in Disclosure Controls and Procedures The Companys disclosure controls and procedures were not properly designed or implemented to ensure that the information contained in the Companys periodic reports and other SEC filings correctly reflected the information contained in the Companys accounting records and other supporting information and that AFFO per share (a non-GAAP measure that is an important industry metric) was correctly calculated. In addition, the Company did not have appropriate controls to ensure that its SEC filings were reviewed on a timely basis by senior management or that significant changes to amounts or other disclosures contained in a document that had previously been reviewed and approved by the Audit Committee were brought to the attention of the Audit Committee or its Chair for review and approval before the document was filed with the SEC. Finally, the Company did not have appropriate controls over the formulation of AFFO per share guidance or the periodic re-assessment of the Companys ability to meet its guidance.
Material Weaknesses in Internal Control Over Financial Reporting A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
During 2013, due in part to a number of large portfolio acquisitions, the Company experienced significant growth and increases in the complexity of its financial reporting and number of non-routine transactions. In late 2013, as a result of three impending transactions the transition to self-management announced in August 2013 and effective on January 8, 2014, the acquisition of ARCT IV announced in July 2013 and completed on January 3, 2014 and the acquisition of Cole Real Estate Investments, Inc. announced in October 2013 and completed on February 7, 2014 the complexity of the Companys transactions and the need for accounting judgments and estimates became more prevalent and had a severe impact on the Companys control environment. These changes in business conditions, combined with the pressure of market expectations inherent in announcing AFFO per share guidance for 2014, demanded an enhanced control environment.
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The control environment, as part of the internal control framework, sets the tone of an organization, influencing the control consciousness of its people and providing discipline and structure. Current management identified the following material weaknesses through its re-assessment of the Companys internal control over financial reporting:
Related Party Transactions and Conflicts of Interest The Company did not maintain the appropriate controls to assess, authorize and monitor related party transactions, validate the appropriateness of such transactions or manage the risks arising from contractual relationships with affiliates. Without the appropriate controls, the Company made certain payments to the Former Manager and its affiliates that were not sufficiently documented or that otherwise warrant scrutiny.
Equity-Based Compensation The Company did not maintain appropriate controls over various grants of equity-based compensation. In the fourth quarter of 2013, in anticipation of the Companys transition to self-management, the Company entered into employment agreements with the Companys former Executive Chairman and Chief Executive Officer and its former Chief Financial Officer, and also approved the 2014 Outperformance Plan pursuant to which awards were made to them on January 8, 2014. Without the appropriate controls, these documents contained terms that were inconsistent with the terms authorized by the Compensation Committee. Additionally, the Company did not obtain copies of or administer the equity awards made by means of block grants allocated by the Former Manager and its affiliates, nor did the Company review the awards for consistency with the Compensation Committees authorization.
Aggregation of Significant Deficiencies Within Business Process-Level Control Activities and Financial Reporting Controls The following significant deficiencies together constitute a material weakness:
| Accounting Close Process The Company did not have consistent policies and procedures throughout its offices relating to purchase accounting, accounting for gain or loss on disposition and testing for impairment. In addition, senior management did not establish clear reporting lines and job responsibilities or promote accountability over business process control activities. |
| Critical Accounting Estimates and Non-Routine Transactions The Company did not maintain effective controls or develop standardized policies and procedures for critical accounting estimates and non-routine transactions, including management review and approval of the accounting treatment of all critical and significant estimates on a periodic basis. |
Attestation Report of Our Independent Registered Public Accounting Firm
Grant Thornton LLP, our independent registered public accounting firm that audited the Companys financial statements included in this Annual Report on Form 10-K/A, has issued an attestation report on the Companys internal control over financial reporting, which appears on page 106 of this Annual Report on Form 10-K/A.
Remediation
As discussed below, the Company is actively engaged in improving its disclosure controls and procedures and internal control over financial reporting. The Companys new senior management will report on a quarterly basis to the Audit Committee and, where applicable, to the other Committees of the Board of Directors as to the progress made in remediating the material weaknesses identified above.
Control Environment During the fourth quarter of 2014, the Company underwent a change in senior leadership as a result of the resignations of the Companys Executive Chairman of the Board, Chief Executive Officer and director, President and Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer. The Audit Committee, the Board of Directors and new senior leadership are committed to establishing a culture of compliance, integrity and transparency and have begun communicating their commitment and expectations to all employees of the Company. This commitment will also be an important consideration in the Board of Directors selection of a new independent Chairman of the Board of Directors and a permanent Chief Executive Officer pursuant to its previously-announced search process.
The Board of Directors, with the assistance of outside counsel, has commenced a comprehensive review of its key practices and procedures. This review will include, among other things, the nature, transparency and timeliness of information provided to the Board of Directors by management, the agenda-setting process, the process by which the Board of Directors oversees the Companys risk management functions and the roles and responsibilities, charters, key practices and procedures of the committees of the Board of Directors. As an outgrowth of this review, the Board of Directors has adopted a new related person transactions policy and assigned the administration of this policy to the Nominating and Corporate Governance Committee.
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Under the Audit Committees oversight, management has commenced a comprehensive review of corporate compliance policies and programs and is initiating periodic Company-wide training on ethics, reporting procedures and other key topics as well as a review of the Companys whistleblower hotline policies and procedures.
The Company is also in the process of strengthening its controls in a number of areas highlighted by the Audit Committee investigation, as follows:
| Adding additional layers of review of the Companys significant accounting policies and estimates, including the bonus accrual process; |
| Improving the controls around decisions whether or not to reflect certain accounting adjustments in the Companys books and records and/or to report such adjustments within the financial statements, by revising its policies, implementing additional review and training all accounting personnel on the revised policies; |
| Adopting new accounting policies that incorporate technical accounting guidance as to when expenses may be appropriately classified as merger-related expenses, and conducting training on the implementation of this policy with relevant members of its accounting staff; and |
| Adopting new practices surrounding the calculation and presentation of AFFO and the formulation and review of AFFO guidance. |
Financial Reporting Disclosure Controls Under the oversight of the Audit Committee, the Company is in the process of creating a chartered Disclosure Committee to be comprised of senior attorneys, accounting personnel and executives and heads of other pertinent firm-wide disciplines. The Chair of the Disclosure Committee will have ongoing dialogue with the Audit Committee and the Board of Directors on how the Disclosure Committee is fulfilling its mandate to ensure the timeliness, accuracy, completeness and quality of the Companys SEC filings and other public disclosures. The Disclosure Committee will be responsible for establishing and administering a process by which certain personnel in relevant functions and areas will be required to provide sub-certifications in support of the certifications that the Companys principal executive and principal financial officers are required to provide in connection with each periodic SEC report. Processes will be implemented to help plan appropriately for quarterly financial reporting as well as securities offerings.
Additionally, at the direction of the Audit Committee, the Company is enhancing and formalizing the procedures for the review and approval of annual and quarterly SEC reports (some of which were previously less formal) as follows:
| Drafts of reports will be circulated sufficiently in advance of Audit Committee meetings to permit adequate review; |
| Audit Committee meetings will be attended in person to the extent practicable and, in addition to Audit Committee members, required attendees will include the Chief Financial Officer, Chief Accounting Officer, General Counsel, Chair of the Disclosure Committee, head of Internal Audit, independent auditors and outside legal counsel as necessary; |
| At Audit Committee meetings, in addition to required communications from the independent auditors, reports will be made by the Chief Accounting Officer and the Chair of the Disclosure Committee on significant changes from prior filings, significant judgments reflected in the report and receipt of sub-certifications; |
| At Audit Committee meetings, separate executive sessions will be held with the independent auditor, head of Internal Audit, General Counsel and others as necessary; and |
| Any changes to a draft of a periodic report that has been approved by the Audit Committee must be submitted to and reviewed and approved by the Chair of the Audit Committee prior to filing. |
Related Party Transactions and Conflicts of Interest The resignation of certain members of senior management affiliated with the Former Manager has eliminated certain conflicts of interest that existed prior to such resignations.
The Audit Committees investigation identified certain payments made by the Company to the Former Manager or its affiliates that were not sufficiently documented or otherwise warrant scrutiny. In November 2014, as a result of the Audit Committee investigation, the Company terminated a lease with an affiliate of the Former Manager for space in a building located in Newport, Rhode Island. The Company, which never occupied the building, was reimbursed for certain leasehold improvements and other costs by delivery of 916,423 OP Units valued at approximately $8.5 million, which were retired. The Company is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statements related to any potential recovery.
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The Company is working closely with outside counsel to terminate its remaining relationships with affiliates of its Former Manager, including ARC Capital, LLC (ARC) and RCS Capital Corporation, and to disentangle its internal control framework from the affiliated entities. The Company is seeking to obtain copies of all of its books and records held by ARC and to eliminate all human resource, information technology and other overlapping departmental services.
The Company has also enhanced the procedures for review and approval of potential related party transactions with directors, director nominees, executive officers, 5% shareholders and their immediate family members through the adoption of a new related party transactions policy administered by the Nominating and Corporate Governance Committee.
Equity-Based Compensation The Company has recently obtained copies from ARC of all equity awards made by means of block grants allocated by the Former Manager or its affiliates and will seek to assume administration of those awards that remain outstanding. In addition, the Company will review all awards for consistency with the Compensation Committees authorization.
Under the Compensation Committees oversight, the Company is implementing new governance processes for the authorization, documentation, issuance, administration and accounting for equity-based compensation. The Compensation Committee will approve each award, rather than delegating authority to management to allocate large tranches of awards. In-house counsel, accounting, tax, and human resources personnel will work together to oversee the issuance of equity compensation to directors, officers and employees. Equity compensation tracking and recordkeeping will be improved through the use of equity tracking software. All compensation matters within the Compensation Committees purview will be reviewed by the Compensation Committee Chair and in-house counsel against the Compensation Committees authorization to ensure consistency and appropriate documentation. In respect of all other employment matters, the human resources department will consult in-house counsel before making any offer of employment or any compensation adjustment that includes any equity award or otherwise raises equity compensation issues.
Aggregation of Significant Deficiencies Within Business Process-Level Control Activities and Financial Reporting Controls The Company is taking following steps to remedy the underlying significant deficiencies comprising this material weakness:
| Accounting Close Process The Company has begun to standardize its internal accounting close process and intends to complete the integration of its accounting and financial reporting processes among its various offices. Toward this end, the Company has documented, and intends to continue to document, its key and significant operational activities and accounting policies and procedures. In addition, the Company has designed and implemented internal controls within its accounting close process to ensure that closing activities, such as reconciliations, timely reviews, journal entry reviews and comprehensive financial analysis, are performed and reviewed. The Company intends to create a financial reporting sub- certification process and is defining key roles and responsibilities within the organizational structure. Lastly, the Company has conducted trainings, and will conduct additional trainings, for its accounting and other professionals to ensure the accounting close processes and entity level and company level controls and procedures are well defined, documented and implemented to support operational effectiveness. |
| Critical Accounting Estimates and Non-Routine Transactions The Company has documented various critical accounting policies, and intends to continue to document new accounting policies and to update its existing documentation for any noted changes on a timely basis. New policies have been communicated to the relevant Company employees. The Company has also established a process under which senior management approves all critical accounting estimates and non-routine transactions on a periodic basis as part of the financial close and reporting processes. |
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Changes in Internal Control over Financial Reporting
During the fourth quarter of the fiscal year ended December 31, 2013, there were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting, other than the hiring of senior executive officers and financial reporting personnel in connection with the Companys transition to self-management and entry into the Cole Real Estate Investments, Inc. merger agreement.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
American Realty Capital Properties, Inc.
We have audited the internal control over financial reporting of American Realty Capital Properties, Inc. (a Maryland corporation) and subsidiaries (the Company) as of December 31, 2013, based on criteria established in the 1992 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Report on Internal Control Over Financial Reporting (Managements Report) presented in Item 9A, Controls and Procedures. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. Our audit of, and opinion on, American Realty Capital Properties, Inc .s internal control over financial reporting does not include internal control over financial reporting of CapLease, Inc. (CapLease), a wholly owned subsidiary, which was acquired by the Company on November 5, 2013 and whose financial statements reflect total assets and revenues constituting 26% and 9%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2013. In addition, our audit of, and opinion on, American Realty Capital Properties, Inc .s internal control over financial reporting does not include internal control over financial reporting of American Realty Capital Trust IV, Inc. (ARCT IV), an affiliated entity under common control with which the Company merged on January 4, 2014 in a merger accounted for as a reorganization of entities under common control and whose financial statements reflect total assets and revenues constituting 28% and 27%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2013. As indicated in Managements Report, managements assertion of the effectiveness of American Realty Capital Properties, Inc.s internal control over financial reporting excluded internal control over financial reporting of CapLease and ARCT IV.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in managements assessment. Management identified a material weakness related to the Companys failure to maintain controls associated with related party transactions and risks arising from contractual arrangements with affiliates. A material weakness was identified by management related to the Companys failure to maintain controls related to stock based compensation, including the administration of certain restricted stock awards. Additionally, a material weakness was identified by management as a result of the Company not maintaining and applying adequate policies and procedures, including those related to the accounting close process, critical accounting estimates and non-routine transactions,.
In our report dated February 27, 2014, we expressed an unqualified opinion on the Companys internal control over financial reporting. The material weaknesses discussed above were subsequently identified in connection with the restatement of the Companys previously issued financial statements. Accordingly, management has revised its assessment about the effectiveness of the Companys internal control over financial reporting, and our present opinion on the effectiveness of the Companys internal control over financial reporting as of December 31, 2013, as presented herein, is different from that expressed in our previous report. The
106
material weaknesses were considered in connection with the aforementioned restatement, and this report does not affect our opinion on the Companys 2013 financial statements.
In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2013, based on criteria established in the 1992 Internal Control-Integrated Framework issued by COSO.
We do not express an opinion or any other form of assurance on managements statements referring to Material Weaknesses in Disclosure Controls and Procedures and Remediation included in Managements Report.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of and for the year ended December 31, 2013. The material weaknesses identified above were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2013 consolidated financial statements, and this report does not affect our report dated March 2, 2015, which expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Phoenix, Arizona
March 2, 2015
107
None.
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EXPLANATORY NOTE
As permitted by Instruction G.3 to Form 10-K, the Company incorporated by reference into Part III of the Original Filing, the information required by Items 10-14 of Form 10-K contained in its definitive proxy statement filed with the SEC on April 29, 2014 (the Proxy Statement). Based upon the Audit Committees investigation and additional work by the Company, the information incorporated by reference from the Proxy Statement into Part III of the Original Filing should be read in light of the following:
Item 11:
| In connection with Mr. Schorschs resignation from the Company effective December 12, 2014, Mr. Schorsch entered into a Reformation of Employment Agreement, a restricted share award agreement, and a Clarification of Award Agreement under the 2014 Multi-Year Outperformance Plan (the 2014 Outperformance Plan). These documents were intended to reform his Employment Agreement and equity awards, as of January 8, 2014, to be consistent with vesting provisions authorized by the Compensation Committee of the Companys Board (the Compensation Committee) and to make certain other corrections. Among other things, the reformed agreements provided that, upon a termination for Cause (as defined in his Employment Agreement) by the Company or a voluntary resignation by Mr. Schorsch without Good Reason (as defined in his Employment Agreement), Mr. Schorschs restricted share award and award under the 2014 Outperformance Plan would not accelerate and such awards would be forfeited immediately. |
| The maximum award opportunity under the 2014 Outperformance Plan was $120.0 million, not $222.1 million as stated in the Proxy Statement. The Compensation Committee approved an aggregate award pool to be measured by the Companys market capitalization as of the date of such approval on October 3, 2013; however, as executed, the 2014 Outperformance Plan measured market capitalization on a pro forma basis as of the Companys transition to self-management on January 8, 2014 (including the pro forma impact of various transactions expected to be consummated prior to the Companys transition to self-management on January 8, 2014). See Note 18 Equity-Based Compensation (As Restated) to the consolidated financial statements contained in this Form 10-K/A for further detail. |
| The vesting period for the restricted stock awards of 40,000 shares made to each non-executive director in connection with the Companys transition to self-management on January 8, 2014 is five years, not three years as stated in the Proxy Statement. |
| Item 13: |
| The Company entered into transactions with related parties pertaining to the Audrain Building located in Newport, Rhode Island during 2013 and 2014, as described in Note 19 Related Party Transactions and Arrangements (As Restated) to the consolidated financial statements contained in this Form 10-K/A. |
| The Company did not incur any fees pursuant to the Transition Services Agreement, dated October 21, 2013 (described in the Proxy Statement). |
| An $8.4 million disposition fee was paid to American Realty Capital Advisors IV, LLC in connection with the Companys acquisition of American Realty Capital Trust IV, Inc. on January 3, 2014, as described in Note 19 Related Party Transactions and Arrangements (As Restated) to our restated audited consolidated financial statements contained in this Form 10-K/A. |
| The Companys payment of $2.9 million to RCS Advisory Services, LLC in respect of the Transaction Management Services Agreement, dated December 9, 2013, was made upon the Companys transition to self-management on January 8, 2014, rather than on February 7, 2014, in connection with the closing of the Cole Merger. |
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Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item is incorporated by reference to our Proxy Statement, subject to the following: the address to write to for a copy of our Code of Ethics, free of charge, is our new executive office 2325 E. Camelback Road, Suite 1100, Phoenix, AZ 85016, Attention: Chief Financial Officer.
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference to the Proxy Statement, subject to the information set forth under Explanatory Note above.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item is incorporated by reference to the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated by reference to the Proxy Statement, subject to the information set forth under Explanatory Note above.
Item 14. Principal Accounting Fees and Services.
The information required by this Item is incorporated by reference to the Proxy Statement.
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The following documents are filed as part of this Amendment No. 2 to its Annual Report on Form 10-K/A:
Exhibit No. |
Description | |
1.1 (1) |
Equity Distribution Agreement between Registrant, ARC Properties Operating Partnership, L.P. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated January 22, 2013. | |
1.2 (1) |
Equity Distribution Agreement between Registrant, ARC Properties Operating Partnership, L.P. and JMP Securities LLC, dated January 22, 2013. | |
1.3 (1) |
Equity Distribution Agreement between Registrant, ARC Properties Operating Partnership, L.P. and Ladenburg Thalmann & Co. Inc., dated January 22, 2013. | |
1.4 (1) |
Equity Distribution Agreement between Registrant, ARC Properties Operating Partnership, L.P. and RBS Securities Inc., dated January 22, 2013. | |
1.5 (1) |
Equity Distribution Agreement between Registrant, ARC Properties Operating Partnership, L.P. and Robert W. Baird & Co. Incorporated, dated January 22, 2013. | |
1.6 (14) |
Underwriting Agreement, dated July 23, 2013, by and among the Registrant, ARC Properties Operating Partnership, L.P. and J.P. Morgan Securities LLC and Citigroup Global Markets Inc., as representatives of the several Underwriters listed therein. | |
1.7 (25) |
Equity Distribution Agreement, dated November 25, 2013, between the Registrant, ARC Properties Operating Partnership, L.P., Barclays Capital Inc., Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Capital One Securities, Inc., Ladenburg Thalmann & Co. Inc. and JMP Securities, LLC. | |
1.8 (27) |
Underwriting Agreement, dated December 5, 2013, by and among the Registrant, ARC Properties Operating Partnership, L.P. and Barclays Capital Inc. and Citigroup Global Markets Inc., as representatives of the several Underwriters listed therein, with respect to the Registrants 3.00% Convertible Senior Notes due 2018. | |
1.9 (27) |
Underwriting Agreement, dated December 5, 2013, by and among the Registrant, ARC Properties Operating Partnership, L.P. and Barclays Capital Inc. and Citigroup Global Markets Inc., as representatives of the several Underwriters listed therein, with respect to the Registrants 3.75% Convertible Senior Notes due 2020. | |
2.1 (2) |
Agreement and Plan of Merger by and among Registrant, ARC Properties Operating Partnership, L.P., Tiger Acquisition LLC, American Realty Capital Trust III, Inc. and American Realty Capital Operating Partnership III, L.P.** | |
2.2 (10) |
Agreement and Plan of Merger, by and among, the Registrant, ARC Properties Operating Partnership, L.P., Safari Acquisition, LLC, CapLease, Inc., Caplease, LP and CLF OP General Partner LLC, dated as of May 28, 2013.** | |
2.3 (11) |
Purchase and Sale Agreement, by and among, CNL APF Partners, LP and Certain Affiliates as Seller Parties, and ARC Properties Operating Partnership, L.P., as Purchaser, dated May 31, 2013.** | |
2.4 (13) |
Agreement and Plan of Merger, dated as of July 1, 2013, among the Registrant, American Realty Capital Trust IV, Inc., Thunder Acquisition, LLC, ARC Properties Operating Partnership, L.P. and American Realty Capital Operating Partnership IV, L.P.** | |
2.4.1 (18) |
Amendment dated as of October 6, 2013 to the Agreement and Plan of Merger, dated as of July 1, 2013, by and among the Registrant, ARC Properties Operating Partnership, L.P., Thunder Acquisition, LLC, American Realty Capital Trust IV, Inc. and American Realty Capital Operating Partnership IV, L.P. | |
2.4.2 (26) |
Second Amendment dated as of October 11, 2013 to the Agreement and Plan of Merger, dated as of July 1, 2013, by and among the Registrant, ARC Properties Operating Partnership, L.P., Thunder Acquisition, LLC, American Realty Capital Trust IV, Inc. and American Realty Capital Operating Partnership IV, L.P. | |
2.5 (17) |
Equity Interest Purchase Agreement by and between Inland American Real Estate Trust, Inc. and AR Capital, LLC, dated as of August 8, 2013. ** | |
2.6 (19) |
Purchase and Sale Agreement by and among ARC PADRBPA001, LLC and AR Capital, LLC and the sellers described on schedules thereto, dated as of July 24, 2013. ** | |
2.7 (20) |
Agreement and Plan of Merger, dated as of October 22, 2013, by and among the Registrant, Cole Real Estate Investments, Inc. and Clark Acquisition, LLC.** | |
3.1 (3) |
Articles of Amendment and Restatement of the Registrant. | |
3.2 (4) |
Bylaws of the Registrant. | |
3.3 (5) |
Articles Supplementary Relating to the Series A Convertible Preferred Stock of the Registrant, dated May 10, 2012. | |
3.4 (6) |
Articles Supplementary Relating to the Series B Convertible Preferred Stock of the Registrant, dated July 24, 2012. | |
3.5 (12) |
Articles Supplementary for the Series C Convertible Preferred Stock of the Registrant, dated June 6, 2013. | |
3.6 (14) |
Articles of Amendment to Articles of Amendment and Restatement of the Registrant, effective July 2, 2013. | |
3.7 (24) |
Articles Supplementary for the Series D Cumulative Convertible Preferred Stock of the Registrant, filed November 8, 2013. | |
3.8 (28) |
Articles of Amendment to Articles of Amendment and Restatement of the Registrant, filed with the SDAT on December 9, 2013. |
111
Exhibit No. |
Description | |
3.9 (29) |
Articles Supplementary to the Articles of Incorporation of the Registrant classifying and designating the 6.70% Series F Cumulative Redeemable Preferred Stock, dated January 2, 2014. | |
3.10 (31) |
Amendment to the Registrants bylaws, effective as of February 7, 2014. | |
4.1 * |
Third Amended and Restated Agreement of Limited Partnership of ARC Properties Operating Partnership, L.P., effective January 3, 2014. | |
4.2 (14) |
Indenture, dated as of July 29, 2013, between the Registrant and U.S. Bank National Association, as trustee. | |
4.3 (14) |
First Supplemental Indenture, dated as of July 29, 2013, between the Registrant and U.S. Bank National Association, as trustee. | |
4.4 (23) |
Form of 3.00% Convertible Senior Notes due 2018 (included in Exhibit 4.3). | |
4.5 (22) |
Indenture, dated as of October 9, 2007, by and among CapLease, Inc., Caplease, LP, Caplease Debt Funding, LP, Caplease Services Corp., Caplease Credit LLC and Deutsche Bank Trust Company Americas, as trustee. | |
4.6 (22) |
Supplemental Indenture, dated as of November 5, 2013, by and among the Registrant, ARC Properties Operating Partnership, L.P., CapLease, Inc., Caplease, LP and Deutsche Bank Trust Company Americas, as trustee. | |
4.7 (22) |
Junior Subordinated Indenture, dated as of December 13, 2005, by and between Caplease, LP and The Bank of New York Mellon, as trustee, as successor-in-trust to JPMorgan Chase Bank, National Association. | |
4.8 (22) |
Supplemental Indenture, dated November 5, 2013, by and among ARC Properties Operating Partnership, L.P., Caplease, LP and The Bank of New York Mellon, as trustee, as successor-in-trust to JPMorgan Chase Bank, National Association. | |
4.9 (27) |
Second Supplemental Indenture, dated as of December 10, 2013, between the Registrant and U.S. Bank National Association, as trustee. | |
4.10 (27) |
Form of 3.75% Convertible Senior Notes due 2020. | |
4.11 (31) |
Indenture, dated as of February 6, 2014, among ARC Properties Operating Partnership, L.P., Clark Acquisition, LLC, the guarantors named therein and U.S. Bank National Association, as trustee. | |
4.12 (31) |
Officers Certificate, dated as of February 6, 2014. | |
4.13 (31) |
Registration Rights Agreement, dated as of February 6, 2014, among ARC Properties Operating Partnership, L.P., Clark Acquisition, LLC, the guarantors named therein, Barclays Capital Inc. and Citigroup Global Markets Inc. | |
10.1 (34) |
Amendment and Acknowledgment of Termination of Amended and Restated Management Agreement, entered into as of January 8, 2014, by and among the Registrant and ARC Properties Advisors, LLC. | |
10.2 (4) |
Registrants Equity Plan. | |
10.3 (4) |
Registrants Director Stock Plan. | |
10.4 (4) |
Form of Restricted Stock Award Agreement for Non-Executive Directors. | |
10.5 (4) |
Form of Restricted Stock Award Agreement for ARC Properties Advisors, LLC. | |
10.6 (2) |
Letter by and between American Realty Capital Trust III, Inc., American Realty Capital Operating Partnership III, L.P., American Realty Capital Advisors III, LLC, American Realty Capital Trust III Special Limited Partner, LLC, American Realty Capital Properties III, LLC and Registrant, dated December 14, 2012. | |
10.7 (2) |
Asset Purchase and Sale Agreement, by and between ARC Properties Operating Partnership, L.P. and American Realty Capital Advisors III, LLC, dated December 14, 2012. | |
10.8 (32) |
Indemnity Agreement, by ARC Real Estate Partners, LLC, in favor of Registrant, dated December 28, 2012. | |
10.9 (32) |
Indemnity Agreement, by Indemnitors, in favor of ARC Real Estate Partners, LLC, dated December 28, 2012. | |
10.10 (32) |
Credit Agreement, dated as of February 14, 2013, among American Realty Capital Operating Partnership III, L.P., American Realty Capital Trust III, Inc., Wells Fargo Bank, National Association, RBS Citizens, N.A., and Regions Bank, Capital One, N.A. and JPMorgan Chase Bank, N.A. and the other lenders party hereto. | |
10.11 (8) |
Contribution and Exchange Agreement, dated February 28, 2013, among American Realty Capital Operating Partnership III, L.P., American Realty Capital Trust III Special Limited Partner, LLC and ARC Properties Operating Partnership, L.P. | |
10.12 (8) |
2013 Advisor Multi-Year Outperformance Agreement, made as of February 28, 2013, the Registrant, ARC Properties Operating Partnership, L.P. and ARC Properties Advisors, LLC. | |
10.13 (9) |
First Amendment to Credit Agreement, dated as of March 18, 2013, by and among ARC Properties Operating Partnership, L.P., Tiger Acquisition, LLC, the Registrant, the Lenders party thereto and Wells Fargo Bank, National Association. | |
10.14 (10) |
Voting Agreement, dated as of May 28, 2013, by and among the Registrant, Paul H. McDowell, William R. Pollert, Shawn P. Seale, Robert C. Blanz and Paul C. Hughes. | |
10.15 (10) |
Management Letter Agreement, dated as of May 28, 2013, among the Registrant, Paul H. McDowell, William R. Pollert, Shawn P. Seale, Robert C. Blanz, Michael J. Heneghan and Paul C. Hughes. |
112
Exhibit No. |
Description | |
10.16 (13) |
Letter Agreement, dated as of July 1, 2013, among the Registrant, American Realty Capital Trust IV, Inc., American Realty Capital Operating Partnership IV, L.P., American Realty Capital Trust IV Special Limited Partner, LLC, American Realty Capital Advisors IV, LLC and American Realty Capital Properties IV, LLC. | |
10.17 (13) |
Asset Purchase and Sale Agreement, dated as of July 1, 2013, between ARC Properties Operating Partnership, L.P. and American Realty Capital Advisors IV, LLC. | |
10.18 (15) |
Augmenting Lender and Increasing Lender Supplement and Incremental Amendment, dated as of March 28, 2013, to the Credit Agreement, among ARC Properties Operating Partnership, L.P., Tiger Acquisition, LLC, the Registrant, the lenders party thereto and Wells Fargo Bank, National Association. | |
10.19 (15) |
Third Amendment to Credit Agreement, by and among ARC Properties Operating Partnership, L.P., Tiger Acquisition, LLC, the Registrant, the Lenders party thereto, and Wells Fargo Bank, National Association, dated as of May 28, 2013. | |
10.20 (15) |
Fourth Amendment to Credit Agreement, by and among ARC Properties Operating Partnership, L.P., Tiger Acquisition, LLC, the Registrant, the Lenders party thereto, and Wells Fargo Bank, National Association, dated as of July 22, 2013. | |
10.21 (15) |
Indemnity Agreement, by Indemnitors, in favor of ARC Real Estate Partners, LLC, dated December 28, 2012. | |
10.22 (16) |
Credit Agreement, dated as of February 14, 2013, among American Realty Capital Operating Partnership III, L.P., American Realty Capital Trust III, Inc., Wells Fargo Bank, National Association, RBS Citizens, N.A., Regions Bank, Capital One, N.A. and JPMorgan Chase Bank, N.A. and the other lenders party hereto. | |
10.23 (16) |
Common Stock Purchase Agreement, dated as of September 15, 2013, entered into by and between the Registrant and certain investors party thereto. | |
10.24 (22) |
Credit Agreement, dated June 29, 2012, by and among CapLease, Inc., Caplease, LP, certain subsidiaries of Caplease, LP party thereto and Wells Fargo Bank, National Association, as administrative agent and sole lender. | |
10.25 (22) |
First Amendment to Credit Agreement, dated April 16, 2013, by and among CapLease, Inc., Caplease, LP, certain subsidiaries of Caplease, LP party thereto and Wells Fargo Bank, National Association, as administrative agent and sole lender. | |
10.26 (22) |
Second Amendment to Credit Agreement, dated June 21, 2013, by and among CapLease, Inc., Caplease, LP, certain subsidiaries of Caplease, LP party thereto and Wells Fargo Bank, National Association, as administrative agent and sole lender. | |
10.27 (22) |
Third Amendment to Credit Agreement, dated November 5, 2013, by and among the Registrant, ARC Properties Operating Partnership, L.P., Safari Acquisition, LLC, certain subsidiaries of Safari Acquisition, LLC party thereto and Wells Fargo Bank, National Association, as administrative agent and sole lender. | |
10.28 (20) |
Voting Agreement, dated as of October 22, 2013, by and among the Registrant, Cole Real Estate Investments, Inc., Christopher H. Cole and Marc T. Nemer. | |
10.29 (20) |
Letter Agreement, dated as of October 22, 2013, by and among the Registrant, Cole Real Estate Investments, Inc. and Christopher H. Cole. | |
10.30 (20) |
Letter Agreement, dated as of October 22, 2013, by and among the Registrant, Cole Real Estate Investments, Inc. and Marc T. Nemer. | |
10.31 (21) |
Letter Agreement, dated as of October 22, 2013, between the Registrant and Kirk McAllaster. | |
10.32 (21) |
Letter Agreement, dated as of October 22, 2013, by and among the Registrant and Stephan Keller. | |
10.33 (21) |
Letter Agreement, dated as of October 22, 2013, by and among the Registrant and Jeffery Holland. | |
10.34 (23) |
First Amendment dated as of September 30, 2013 to the Purchase and Sale Agreement dated July 24, 2013, by and among ARC DB5PROP001, LLC, ARC DBPGDYR001, LLC, ARC DBPPROP001, LLC, ARC DB5SAAB001, LLC, ARC DBGWSDG001, LLC and ARC DBGESRG001, LLC and the sellers described on the schedules thereto. | |
10.35 (23) |
Second Amendment dated as October 1, 2013 to the Purchase and Sale Agreement dated July 24, 2013, by and among ARC DB5PROP001, LLC, ARC DBPGDYR001, LLC, ARC DBPPROP001, LLC, ARC DB5SAAB001, LLC, ARC DBGWSDG001, LLC and ARC DBGESRG001, LLC and the sellers described on the schedules thereto. | |
10.36 (23) |
Third Amendment dated as of October 30, 2013 to the Purchase and Sale Agreement dated July 24, 2013, by and among ARC DB5PROP001, LLC, ARC DBPGDYR001, LLC, ARC DBPPROP001, LLC, ARC DB5SAAB001, LLC, ARC DBGWSDG001, LLC and ARC DBGESRG001, LLC and the sellers described on the schedules thereto. | |
10.37 (23) |
Sixth Amendment to the Credit Agreement, by and among ARC Properties Operating Partnership, L.P., Tiger Acquisition, LLC, the Registrant, the Lenders party thereto, and Wells Fargo Bank, National Association, dated as of November 4, 2013. | |
10.38 (23) |
Employment Agreement, dated as of October 21, 2013, by and between the Registrant and Nicholas S. Schorsch. | |
10.39 (23) |
Employment Agreement, dated as of October 21, 2013, by and between the Registrant and Brian S. Block. | |
10.40 (23) |
Employment Agreement, dated as of October 21, 2013, by and between American Realty Capital Properties Operating Partnership, L.P. and Lisa Beeson. | |
10.41 (30) |
Contribution and Exchange Agreement, dated as of January 3, 2014, among ARC Properties Operating Partnership, L.P., American Realty Capital Trust IV Special Limited Partner, LLC, AREP and ARCT IV Operating Partnership. |
113
Exhibit No. |
Description | |
10.42 (34) |
Asset Purchase and Sale Agreement, entered into as of January 8, 2014, by and among ARC Properties Operating Partnership, L.P. and ARC Properties Advisors, LLC. | |
10.43 (34) |
Employment Agreement, dated as of November 22, 2013, by and between American Realty Capital Properties Operating Partnership, L.P. and David S. Kay. | |
10.44 (34) |
Registrants 2014 Multi-Year Outperformance Plan. | |
10.45 (34) |
Form of Award Agreement Under the Registrants 2014 Multi-Year Outperformance Plan. | |
10.46 (34) |
Seventh Amendment to Credit Agreement, dated December 4, 2013, by and among, ARC Properties Operating Partnership, L.P., Tiger Acquisition, LLC, the Registrant, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, issuing bank and swingline lender. | |
10.47 (34) |
Augmenting Lender and Increasing Lender Supplement, dated as of December 20, 2013, among ARC Properties Operating Partnership, L.P., Tiger Acquisition, LLC, the Registrant, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, issuing bank and swingline lender. | |
10.48 (34) |
Augmenting Lender Supplement, dated as of January 17, 2014, among ARC Properties Operating Partnership, L.P., Tiger Acquisition, LLC, the Registrant, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, issuing bank and swingline lender. | |
10.49 (34) |
Tenth Amendment to Credit Agreement, dated February 4, 2014, by and among, ARC Properties Operating Partnership, L.P., Tiger Acquisition, LLC, the Registrant, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, issuing bank and swingline lender. | |
10.50 (34) |
Assignment and Assumption Agreement, dated January 8, 2014, by and between AR Capital, LLC and American Realty Capital Properties, Inc. | |
12.1 (33) |
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. | |
14 (7) |
Code of Ethics. | |
21 (34) |
List of Subsidiaries. | |
23.1 * |
Consent of Grant Thornton LLP. | |
31.1 * |
Certification of the Chief Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 * |
Certification of the Chief Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 * |
Written statements of the Chief Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 * |
Written statements of the Chief Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 |
XBRL (eXtensible Business Reporting Language). The following materials from Registrants Amended Annual Report on Form 10-K/A for the year ended December 31, 2013, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Loss, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purpose of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
* | Filed herewith |
** | Schedules and applicable exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish a supplemental copy of any omitted schedule to the SEC upon request. |
| To be filed by amendment. |
(1) | Previously filed with Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on January 22, 2013. |
(2) | Previously filed with Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on December 17, 2012. |
(3) | Previously filed with the Pre-Effective Amendment No. 5 to Form S-11 Registration Statement (Registration No. 333-172205) filed by the Registrant with the Securities and Exchange Commission on July 5, 2011. |
(4) | Previously filed with the Pre-Effective Amendment No. 4 to Form S-11 Registration Statement (Registration No. 333-172205) filed by the Registrant with the Securities and Exchange Commission on June 13, 2011. |
(5) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2012. |
(6) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2012. |
(7) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on August 1, 2012. |
114
(8) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on March 6, 2013. |
(9) | Previously filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed with the Securities and Exchange Commission on May 6, 2013. |
(10) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on May 28, 2013. |
(11) | Previously filed with the Registrants Amended Current Report on Form 8-K/A filed with the Securities and Exchange Commission on June 7, 2013. |
(12) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2013. |
(13) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on July 2, 2013. |
(14) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on July 29, 2013. |
(15) | Previously filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed with the Securities and Exchange Commission on August 6, 2013. |
(16) | Previously filed with the Registrants Amended Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 19, 2013. |
(17) | Previously filed with the Registrants Amended Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 25, 2013. |
(18) | Previously filed with the Registrants First Current Report on Form 8-K filed with the Securities and Exchange Commission on October 7, 2013. |
(19) | Previously filed with the Registrants Second Current Report on Form 8-K filed with the Securities and Exchange Commission on October 7, 2013. |
(20) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on October 23, 2013. |
(21) | Previously filed with the Registrants Amended Current Report on Form 8-K/A filed with the Securities and Exchange Commission on October 25, 2013. |
(22) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2013. |
(23) | Previously filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 filed with the Securities and Exchange Commission on November 7, 2013. |
(24) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on November 15, 2013. |
(25) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on November 26, 2013. |
(26) | Previously filed as Annex E with the Registrants Final Prospectus Filed Pursuant to Rule 424(b)(3) with the Securities and Exchange Commission on December 4, 2013. |
(27) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on December 10, 2013. |
(28) | Previously filed with the Registrants Amended Current Report on Form 8-K/A filed with the Securities and Exchange Commission on December 19, 2013. |
(29) | Previously filed with the Registrants Registration Statement on Form 8-A filed with the Securities and Exchange Commission on January 3, 2014. |
(30) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on January 3, 2014. |
(31) | Previously filed with the Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on February 7, 2014. |
(32) | Previously filed with the Registrants Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on February 28, 2013. |
115
(33) | Previously filed with Pre-Effective Amendment No. 7 to the Registrants Registration Statement on Form S-4/A filed with the Securities and Exchange Commission on December 3, 2013. |
(34) | Previously filed with the Registrants Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission on February 27, 2014. |
116
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Amendment No. 2 to its Annual Report on Form 10-K/A to be signed on its behalf by the undersigned thereunto duly authorized on this 2nd day of March, 2015.
AMERICAN REALTY CAPITAL PROPERTIES, INC. | ||||
By: | /s/ Michael Sodo | |||
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
117
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||
Financial Statements (As Restated) (1) |
||||
F-2 | ||||
Consolidated Balance Sheets as of December 31, 2013 and 2012 |
F-3 | |||
F-4 | ||||
Consolidated Statement of Changes in Equity for the Years Ended December 31, 2013, 2012 and 2011 |
F-6 | |||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011 |
F-8 | |||
F-10 | ||||
F-90 | ||||
F-162 |
(1) | These financial statements are restated, as described in Note 2 Restatement of Previously Issued Financial Statements and are those that reflect the recast in applying the carryover basis of accounting to include American Realty Capital Trust IV, Inc. (ARCT IV), as a result of American Realty Capital Properties, Inc.s merger with ARCT IV, as discussed in Note 1 Organization. |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
American Realty Capital Properties, Inc.
We have audited the accompanying consolidated balance sheets of American Realty Capital Properties, Inc. (a Maryland corporation) and subsidiaries (the Company) as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, changes in equity, and cash flows for each of the three years in the period ended December 31, 2013. Our audits of the basic consolidated financial statements included the financial statement schedules listed in the index. These financial statements and financial statement schedules are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Realty Capital Properties, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As described in Note 2 Restatement of Previously Issued Financial Statements, the Company has restated its consolidated financial statements for 2013 and 2012.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of December 31, 2013, based on criteria established in the 1992 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 2, 2015 expressed an adverse opinion.
/s/ GRANT THORNTON LLP
Phoenix, Arizona
March 2, 2015
F-2
AMERICAN REALTY CAPITAL PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data)
December 31, | ||||||||
2013 (As Restated) (1) |
2012 (As Restated) (1) |
|||||||
ASSETS | ||||||||
Real estate investments, at cost: |
||||||||
Land |
$ | 1,380,308 | $ | 262,906 | ||||
Buildings, fixtures and improvements |
5,297,400 | 1,391,209 | ||||||
Land and construction in progress |
21,839 | | ||||||
Acquired intangible lease assets |
759,595 | 221,500 | ||||||
|
|
|
|
|||||
Total real estate investments, at cost |
7,459,142 | 1,875,615 | ||||||
Less: accumulated depreciation and amortization |
(267,278 | ) | (56,524 | ) | ||||
|
|
|
|
|||||
Total real estate investments, net |
7,191,864 | 1,819,091 | ||||||
Cash and cash equivalents |
52,725 | 292,575 | ||||||
Investment in direct financing leases, net |
66,112 | | ||||||
Investment securities, at fair value |
62,067 | 41,654 | ||||||
Loans held for investment, net |
26,279 | | ||||||
Derivative assets, at fair value |
9,189 | | ||||||
Restricted cash |
35,921 | 1,108 | ||||||
Prepaid expenses and other assets, net |
186,726 | 11,984 | ||||||
Goodwill |
92,789 | | ||||||
Deferred costs, net |
84,746 | 15,118 | ||||||
Assets held for sale |
665 | 665 | ||||||
|
|
|
|
|||||
Total assets |
$ | 7,809,083 | $ | 2,182,195 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY | ||||||||
Mortgage notes payable, net |
$ | 1,301,114 | $ | 265,118 | ||||
Convertible debt, net |
972,490 | | ||||||
Senior secured revolving credit facility |
| 124,604 | ||||||
Senior corporate credit facilities |
1,819,800 | | ||||||
Secured credit facility |
150,000 | | ||||||
Other debt |
104,804 | | ||||||
Below-market lease liabilities, net |
77,169 | | ||||||
Derivative liabilities, at fair value |
18,455 | 3,830 | ||||||
Accounts payable and accrued expenses |
730,571 | 102,740 | ||||||
Deferred rent and other liabilities |
21,816 | 4,516 | ||||||
Distributions payable |
10,903 | 11,105 | ||||||
Due to affiliates |
103,434 | 1,522 | ||||||
|
|
|
|
|||||
Total liabilities |
5,310,556 | 513,435 | ||||||
|
|
|
|
|||||
Series D Preferred Stock, $0.01 par value, 21,735,008 shares (part of 100,000,000 aggregate preferred shares authorized) and zero shares authorized and 21,735,008 and zero shares issued and outstanding at December 31, 2013 and 2012, respectively |
269,299 | | ||||||
Preferred stock (excluding Series D Preferred Stock), $0.01 par value, 100,000,000 and 100,000,000 shares authorized and 42,199,547 and 6,990,328 shares issued and outstanding at December 31, 2013 and 2012, respectively |
422 | 70 | ||||||
Common stock, $0.01 par value, 1,500,000,000 and 240,000,000 shares authorized and 239,234,725 and 184,553,676 issued and outstanding at December 31, 2013 and 2012, respectively |
2,392 | 1,846 | ||||||
Additional paid-in capital |
2,940,907 | 1,778,883 | ||||||
Accumulated other comprehensive income (loss) |
7,666 | (3,934 | ) | |||||
Accumulated deficit |
(877,957 | ) | (124,286 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
2,073,430 | 1,652,579 | ||||||
Non-controlling interests |
155,798 | 16,181 | ||||||
|
|
|
|
|||||
Total equity |
2,229,228 | 1,668,760 | ||||||
|
|
|
|
|||||
Total liabilities and equity |
$ | 7,809,083 | $ | 2,182,195 | ||||
|
|
|
|
(1) | For discussion on the restatement adjustments, see Note 2 Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-3
AMERICAN REALTY CAPITAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
Year Ended December 31, | ||||||||||||
2013 (As Restated) (1) |
2012 (As Restated) (1) |
2011 | ||||||||||
Revenues: |
||||||||||||
Rental income |
$ | 310,508 | $ | 65,262 | $ | 3,762 | ||||||
Direct financing lease income |
2,244 | | | |||||||||
Operating expense reimbursements |
16,571 | 1,945 | 208 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
329,323 | 67,207 | 3,970 | |||||||||
|
|
|
|
|
|
|||||||
Operating expenses: |
||||||||||||
Acquisition related (including $37,564, $28,656 and $1,692 to affiliates, respectively) |
76,113 | 45,070 | 3,898 | |||||||||
Merger and other non-routine transactions (including $156,146, $0 and $0 to affiliates, respectively) |
210,543 | 2,603 | | |||||||||
Property operating |
23,616 | 3,522 | 220 | |||||||||
Management fees to affiliates |
17,462 | 212 | | |||||||||
General and administrative (including $103,206, $826 and $168 to affiliates, respectively) |
123,172 | 5,458 | 749 | |||||||||
Depreciation and amortization |
210,976 | 40,957 | 2,097 | |||||||||
Impairment of real estate |
3,346 | | | |||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
665,228 | 97,822 | 6,964 | |||||||||
|
|
|
|
|
|
|||||||
Operating loss |
(335,905 | ) | (30,615 | ) | (2,994 | ) | ||||||
|
|
|
|
|
|
|||||||
Other (expense) income: |
||||||||||||
Interest expense |
(105,548 | ) | (11,856 | ) | (960 | ) | ||||||
Other income, net |
3,824 | 979 | 4 | |||||||||
Loss on derivative instruments, net |
(67,946 | ) | | (2 | ) | |||||||
Loss on sale of investments in affiliates |
(411 | ) | | | ||||||||
Loss on sale of investments |
(1,795 | ) | | | ||||||||
|
|
|
|
|
|
|||||||
Total other expenses, net |
(171,876 | ) | (10,877 | ) | (958 | ) | ||||||
|
|
|
|
|
|
|||||||
Loss from continuing operations |
(507,781 | ) | (41,492 | ) | (3,952 | ) | ||||||
Net loss from continuing operations attributable to non-controlling interests |
16,315 | 531 | 69 | |||||||||
|
|
|
|
|
|
|||||||
Net loss from continuing operations attributable to stockholders |
(491,466 | ) | (40,961 | ) | (3,883 | ) | ||||||
|
|
|
|
|
|
|||||||
Discontinued operations: |
||||||||||||
Loss from operations of held for sale properties |
(34 | ) | (145 | ) | (37 | ) | ||||||
Loss on held for sale properties |
| (600 | ) | (815 | ) | |||||||
|
|
|
|
|
|
|||||||
Net loss from discontinued operations |
(34 | ) | (745 | ) | (852 | ) | ||||||
Net loss from discontinued operations attributable to non-controlling interest |
1 | 54 | 36 | |||||||||
|
|
|
|
|
|
|||||||
Net loss from discontinued operations attributable to stockholders |
(33 | ) | (691 | ) | (816 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss |
(507,815 | ) | (42,237 | ) | (4,804 | ) | ||||||
Net loss attributable to non-controlling interests |
16,316 | 585 | 105 | |||||||||
|
|
|
|
|
|
|||||||
Net loss attributable to stockholders |
$ | (491,499 | ) | $ | (41,652 | ) | $ | (4,699 | ) | |||
|
|
|
|
|
|
|||||||
Basic and diluted net loss per share from continuing operations attributable to common stockholders |
$ | (2.41 | ) | $ | (0.40 | ) | $ | (1.04 | ) | |||
|
|
|
|
|
|
|||||||
Basic and diluted net loss per share attributable to common stockholders |
$ | (2.41 | ) | $ | (0.41 | ) | $ | (1.26 | ) | |||
|
|
|
|
|
|
(1) | For discussion on the restatement adjustments, see Note 2 Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-4
AMERICAN REALTY CAPITAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Year Ended December 31, | ||||||||||||
2013 (As Restated) (1) |
2012 (As Restated) (1) |
2011 | ||||||||||
Net loss |
$ | (507,815 | ) | $ | (42,237 | ) | $ | (4,804 | ) | |||
Other comprehensive income (loss): |
||||||||||||
Designated derivatives, fair value adjustments |
11,481 | (3,743 | ) | (98 | ) | |||||||
Unrealized gain (loss) on investment securities |
119 | (93 | ) | | ||||||||
|
|
|
|
|
|
|||||||
Total other comprehensive income (loss) |
11,600 | (3,836 | ) | (98 | ) | |||||||
|
|
|
|
|
|
|||||||
Total comprehensive loss |
(496,215 | ) | (46,073 | ) | (4,902 | ) | ||||||
Comprehensive loss attributable to noncontrolling interests |
16,316 | 585 | 105 | |||||||||
|
|
|
|
|
|
|||||||
Total comprehensive loss attributable to stockholders |
$ | (479,899 | ) | $ | (45,488 | ) | $ | (4,797 | ) | |||
|
|
|
|
|
|
(1) | For discussion on the restatement adjustments, see Note 2 Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-5
AMERICAN REALTY CAPITAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except for share data)
(As restated for the years ended December 31, 2013 and 2012) (1)
Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||
Number of Shares |
Par Value |
Number of Shares |
Par Value |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income (Loss) |
Accumulated Deficit |
Total Stockholders Equity |
Non-Controlling Interests |
Total Equity |
|||||||||||||||||||||||||||||||
Balance, December 31, 2010 |
| $ | | 20,000 | $ | | $ | 200 | $ | | $ | | $ | 200 | $ | | $ | 200 | ||||||||||||||||||||||
Issuance of common stock |
| | 16,929,184 | 170 | 185,957 | | | 186,127 | | 186,127 | ||||||||||||||||||||||||||||||
Offering costs, commissions and dealer manager fees (2) |
| | | | (21,752 | ) | | | (21,752 | ) | | (21,752 | ) | |||||||||||||||||||||||||||
Common stock issued through distribution reinvestment plan |
| | 27,169 | | 271 | | | 271 | | 271 | ||||||||||||||||||||||||||||||
Equity-based compensation |
| | 185,663 | 2 | 223 | | | 225 | | 225 | ||||||||||||||||||||||||||||||
Distributions declared |
| | | | | | (2,519 | ) | (2,519 | ) | | (2,519 | ) | |||||||||||||||||||||||||||
Common stock repurchases |
| | | | (25 | ) | | | (25 | ) | | (25 | ) | |||||||||||||||||||||||||||
Contribution transactions |
| | | | (16,769 | ) | | | (16,769 | ) | | (16,769 | ) | |||||||||||||||||||||||||||
Contributions from non-controlling interest holders |
| | | | (3,875 | ) | | | (3,875 | ) | 3,875 | | ||||||||||||||||||||||||||||
Distributions to non-controlling interest holders |
| | | | | | | | (68 | ) | (68 | ) | ||||||||||||||||||||||||||||
Net loss |
| | | | | | (4,699 | ) | (4,699 | ) | (105 | ) | (4,804 | ) | ||||||||||||||||||||||||||
Other comprehensive loss |
| | | | | (98 | ) | | (98 | ) | | (98 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance, December 31, 2011 |
| | 17,162,016 | 172 | 144,230 | (98 | ) | (7,218 | ) | 137,086 | 3,702 | 140,788 | ||||||||||||||||||||||||||||
Issuance of preferred stock |
6,990,328 | 70 | | | 8,992 | | | 9,062 | | 9,062 | ||||||||||||||||||||||||||||||
Issuance of common stock |
| | 164,775,688 | 1,648 | 1,911,126 | | | 1,912,774 | | 1,912,774 | ||||||||||||||||||||||||||||||
Excess of ARCT IV Merger considerations over historical cost |
| | | | (93,421 | ) | | | (93,421 | ) | | (93,421 | ) | |||||||||||||||||||||||||||
Offering costs, commissions and dealer manager fees (2) |
| | | | (218,431 | ) | | | (218,431 | ) | | (218,431 | ) | |||||||||||||||||||||||||||
Common stock issued through distribution reinvestment plan |
| | 2,686,141 | 27 | 27,109 | | | 27,136 | | 27,136 | ||||||||||||||||||||||||||||||
Equity based compensation |
| | 112,950 | 1 | 1,229 | | | 1,230 | | 1,230 | ||||||||||||||||||||||||||||||
Distributions declared |
| | | | | | (75,416 | ) | (75,416 | ) | | (75,416 | ) | |||||||||||||||||||||||||||
Common stock repurchases |
| | (183,119 | ) | (2 | ) | (1,951 | ) | | | (1,953 | ) | | (1,953 | ) | |||||||||||||||||||||||||
OP Units issued to acquire real estate investment |
| | | | | | | | 6,352 | 6,352 | ||||||||||||||||||||||||||||||
Contributions from non-controlling interest holders |
| | | | | | | | 7,375 | 7,375 | ||||||||||||||||||||||||||||||
Distributions to non-controlling interest holders |
| | | | | | | | (663 | ) | (663 | ) | ||||||||||||||||||||||||||||
Net loss |
| | | | | | (41,652 | ) | (41,652 | ) | (585 | ) | (42,237 | ) | ||||||||||||||||||||||||||
Other comprehensive loss |
| | | | | (3,836 | ) | | (3,836 | ) | | (3,836 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance, December 31, 2012 |
6,990,328 | $ | 70 | 184,553,676 | $ | 1,846 | 1,778,883 | $ | (3,934 | ) | $ | (124,286 | ) | $ | 1,652,579 | $ | 16,181 | $ | 1,668,760 |
The consolidated statements of changes in equity continues onto the next page.
F-6
AMERICAN REALTY CAPITAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)
(In thousands, except for share data)
(As restated for the years ended December 31, 2013 and 2012) (1)
Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||
Number of Shares |
Par Value |
Number of Shares |
Par Value |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income (Loss) |
Accumulated Deficit |
Total Stockholders Equity |
Non-Controlling Interests |
Total Equity |
|||||||||||||||||||||||||||||||
Issuances of preferred stock |
36,037,691 | $ | 360 | | $ | | $ | | $ | | $ | | $ | 360 | $ | | $ | 360 | ||||||||||||||||||||||
Issuances of common stock |
| | 78,215,719 | 781 | 2,153,144 | | | 2,153,925 | | 2,153,925 | ||||||||||||||||||||||||||||||
Excess of ARCT IV Merger considerations over historical cost |
| | | | (558,089 | ) | | | (558,089 | ) | | (558,089 | ) | |||||||||||||||||||||||||||
Offering costs, commissions and dealer manager fees (2) |
| | | | (165,531 | ) | | | (165,531 | ) | | (165,531 | ) | |||||||||||||||||||||||||||
Common stock issued through dividend reinvestment plan |
| | 940,737 | 10 | 25,554 | | | 25,564 | | 25,564 | ||||||||||||||||||||||||||||||
Common stock repurchases |
| | (28,319,972 | ) | (283 | ) | (357,758 | ) | | | (358,041 | ) | | (358,041 | ) | |||||||||||||||||||||||||
Conversion of Convertible Preferred Stock Series A and B to common stock |
(828,472 | ) | (8 | ) | 829,629 | 8 | | | | | | | ||||||||||||||||||||||||||||
Issuance of common stock in conversion of Convertible Preferred Stock Series C |
| | 1,411,030 | 14 | 17,382 | | | 17,396 | | 17,396 | ||||||||||||||||||||||||||||||
Conversion of OP Units to common stock |
| | 599,233 | 6 | 5,794 | | | 5,800 | (5,800 | ) | | |||||||||||||||||||||||||||||
Equity based compensation, including amortization of restricted shares |
| | 1,004,673 | 10 | 7,952 | | | 7,962 | 32,700 | 40,662 | ||||||||||||||||||||||||||||||
Equity component of convertible debt |
| | | | 28,559 | | | 28,559 | | 28,559 | ||||||||||||||||||||||||||||||
Contribution from Former Manager |
| | | | 2,313 | | | 2,313 | | 2,313 | ||||||||||||||||||||||||||||||
Consideration to Former Manager for internalization |
| | | | 2,704 | | (2,704 | ) | | | | |||||||||||||||||||||||||||||
Distributions declared |
| | | | | | (259,468 | ) | (259,468 | ) | | (259,468 | ) | |||||||||||||||||||||||||||
Issuance of OP Units to affiliate |
| | | | | | | | 107,771 | 107,771 | ||||||||||||||||||||||||||||||
Contributions from non-controlling interest holders |
| | | | | | | | 30,861 | 30,861 | ||||||||||||||||||||||||||||||
Distributions to non-controlling interest holders |
| | | | | | | | (9,014 | ) | (9,014 | ) | ||||||||||||||||||||||||||||
Non-controlling interests retained in CapLease Merger |
| | | | | | | | 567 | 567 | ||||||||||||||||||||||||||||||
Redemption of OP Units |
| | | | | | | | (1,152 | ) | (1,152 | ) | ||||||||||||||||||||||||||||
Net loss |
| | | | | (491,499 | ) | (491,499 | ) | (16,316 | ) | (507,815 | ) | |||||||||||||||||||||||||||
Other comprehensive income |
| | | | | 11,600 | | 11,600 | | 11,600 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance, December 31, 2013 |
42,199,547 | $ | 422 | 239,234,725 | $ | 2,392 | $ | 2,940,907 | $ | 7,666 | $ | (877,957 | ) | $ | 2,073,430 | $ | 155,798 | $ | 2,229,228 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | For discussion on the restatement adjustments, see Note 2 Restatement of Previously Issued Financial Statements. |
(2) | Includes $161.8 million, $211.4 million and $18.2 million to affiliates of the Former Manager (as defined in Note 1) for the years ended December 31, 2013, 2012 and 2011, respectively. |
The accompanying notes are an integral part of these statements.
F-7
AMERICAN REALTY CAPITAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year ended December 31, | ||||||||||||
2013 (As Restated) (1) |
2012 | 2011 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss |
$ | (507,815 | ) | $ | (42,237 | ) | $ | (4,804 | ) | |||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
||||||||||||
Issuance of OP Units for the ARCT III Merger |
107,771 | | | |||||||||
Depreciation and amortization |
238,307 | 43,152 | 2,323 | |||||||||
Loss on held for sale properties |
| 600 | 815 | |||||||||
Impairment of real estate |
3,346 | | | |||||||||
Equity based compensation |
100,261 | 1,230 | 225 | |||||||||
Unrealized gain on derivative instruments |
(1,739 | ) | | | ||||||||
Loss on sale of investments, net |
2,206 | | | |||||||||
Loss in extinguishment of Series C Stock |
13,749 | | | |||||||||
Changes in assets and liabilities: |
||||||||||||
Investment in direct financing leases |
2,505 | | | |||||||||
Prepaid expenses and other assets |
(19,851 | ) | (5,089 | ) | (546 | ) | ||||||
Accounts payable and accrued expenses |
20,789 | 8,277 | 843 | |||||||||
Deferred rent and other liabilities |
8,555 | 3,507 | 887 | |||||||||
Due to affiliates |
43,834 | | | |||||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) operating activities |
11,918 | 9,440 | (257 | ) | ||||||||
|
|
|
|
|
|
|||||||
Cash flows from investing activities: |
||||||||||||
Investments in real estate and other assets |
(3,520,412 | ) | (1,659,536 | ) | (89,981 | ) | ||||||
Acquisition of a real estate business, net of cash acquired of $41,779 |
(878,898 | ) | | | ||||||||
Investment in direct financing leases |
(68,617 | ) | | | ||||||||
Capital expenditures |
(9,755 | ) | (54 | ) | | |||||||
Principal repayments received from borrowers |
442 | | | |||||||||
Investment in other assets |
(543 | ) | | | ||||||||
Proceeds from sale of property held for sale |
| 553 | | |||||||||
Deposits for real estate investments |
(101,887 | ) | (638 | ) | | |||||||
Purchases of investment securities |
(81,590 | ) | (41,747 | ) | | |||||||
Proceeds from sale of investment securities |
119,542 | | | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
(4,541,718 | ) | (1,701,422 | ) | (89,981 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from mortgage notes payable |
6,924 | 229,798 | 21,470 | |||||||||
Payments on mortgage notes payable |
(5,711 | ) | | | ||||||||
Payments on other debt |
(9,368 | ) | | | ||||||||
Proceeds from senior secured revolving credit facility |
| 82,319 | 2,066 | |||||||||
Payments on senior secured revolving credit facility |
(124,604 | ) | (122 | ) | (11,159 | ) | ||||||
Proceeds from senior corporate credit facility |
1,889,800 | | | |||||||||
Payments on senior corporate credit facility |
(830,000 | ) | | | ||||||||
Proceeds from secured credit facility |
789,000 | | | |||||||||
Payments of deferred financing costs |
(101,196 | ) | (13,974 | ) | (3,108 | ) | ||||||
Proceeds from issuance of convertible debt |
967,786 | | | |||||||||
Common stock repurchases |
(359,193 | ) | (1,534 | ) | | |||||||
Proceeds from issuances of preferred shares |
| 9,000 | | |||||||||
Proceeds from issuance of Series C Stock |
445,000 | | | |||||||||
Cash payment on settlement of Series C Stock |
(441,353 | ) | | | ||||||||
Proceeds from issuance of Series D Preferred Stock |
287,991 | | | |||||||||
Proceeds from issuance of common stock |
2,158,486 | 1,909,520 | 122,993 | |||||||||
Payments of offering costs and fees related to stock issuances |
(165,327 | ) | (218,108 | ) | (20,884 | ) | ||||||
Contributions from affiliate |
| | 2 | |||||||||
Contributions from non-controlling interest holders |
30,861 | 7,375 | | |||||||||
Distributions to non-controlling interest holders |
(8,219 | ) | (663 | ) | (68 | ) | ||||||
Distributions paid |
(234,897 | ) | (37,673 | ) | (1,743 | ) |
The consolidated statements of cash flows continue onto the next page.
F-8
AMERICAN REALTY CAPITAL PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Continued)
Year ended December 31, | ||||||||||||
2013 (As Restated) (1) |
2012 | 2011 | ||||||||||
Advances from affiliates, net |
$ | (376 | ) | $ | 396 | $ | | |||||
Change in restricted cash |
(5,654 | ) | (1,108 | ) | | |||||||
|
|
|
|
|
|
|||||||
Net cash provided by financing activities |
4,289,950 | 1,965,226 | 109,569 | |||||||||
|
|
|
|
|
|
|||||||
Net change in cash and cash equivalents |
(239,850 | ) | 273,244 | 19,331 | ||||||||
Cash and cash equivalents, beginning of period |
292,575 | 19,331 | | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ | 52,725 | $ | 292,575 | $ | 19,331 | ||||||
|
|
|
|
|
|
|||||||
Supplemental Disclosures: |
||||||||||||
Cash paid for interest |
$ | 49,549 | $ | 8,983 | $ | 622 | ||||||
Cash paid for income taxes |
$ | 1,711 | $ | 173 | $ | | ||||||
Non-cash investing and financing activities: |
||||||||||||
OP units issued to acquire real estate investments |
$ | | $ | 6,352 | $ | | ||||||
Common stock issued through distribution reinvestment plan |
$ | 25,568 | $ | 27,136 | $ | 271 | ||||||
Initial proceeds from credit facility used to pay down mortgages assumed at formation |
$ | | $ | | $ | 51,500 | ||||||
Mortgage note payable contributed in formation |
$ | | $ | | $ | 13,850 |
(1) | For discussion on the restatement adjustments, see Note 2 Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-9
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013
Note 1 Organization
American Realty Capital Properties, Inc. (the Company or ARCP) is a Maryland corporation incorporated on December 2, 2010 that qualified as a real estate investment trust (REIT) for U.S. federal income tax purposes beginning in the taxable year ended December 31, 2011. On September 6, 2011, the Company completed its initial public offering (the IPO). The Companys common stock trades on the NASDAQ Global Select Market (NASDAQ) under the symbol ARCP.
The Company is primarily in the business of acquiring, owning and operating single-tenant, freestanding commercial real estate properties. The Company focuses on investing in properties that are net leased to (i) credit tenants, which are generally large public companies with investment-grade ratings and other creditworthy tenants and (ii) governmental, quasi-governmental and not-for-profit entities. The Companys long-term business strategy is to acquire a diverse portfolio consisting of approximately 70% long-term leases and 30% medium-term leases, with an average portfolio remaining lease term of approximately 10 to 12 years. The Company considers properties that are leased on a medium-term basis to mean properties originally leased long-term (10 years or longer) that currently have a primary remaining lease duration of generally three to eight years, on average. The Company expects this investment strategy to provide for stable income from credit tenants and to provide for growth opportunities from re-leasing of current below market leases.
The Company has advanced its investment objectives by not only growing its net lease portfolio through organic acquisitions but also through strategic mergers and acquisitions. See Note 3 Mergers and Acquisitions (As Restated).
Substantially all of the Companys business is conducted through ARC Properties Operating Partnership, L.P., a Delaware limited partnership (the OP). The Company is the sole general partner and holder of 96.1% of the equity interests in the OP as of December 31, 2013. As of December 31, 2013, certain affiliates of the Company and certain unaffiliated investors are limited partners and owners of 3.3% and 0.6%, respectively, of the equity interests in the OP. Under the limited partnership agreement of the OP, after holding units of limited partner interests in the OP (OP Units) for a period of one year, unless otherwise consented to by the Company, holders of OP Units have the right to redeem the OP Units for the cash value of a corresponding number of shares of the Companys common stock or, at the option of the Company, as general partner of the OP, a corresponding number of shares of the Companys common stock. The remaining rights of the holders of OP Units are limited and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OPs assets.
During the year ended December 31, 2013, ARC Properties Advisors, LLC (the Former Manager), a wholly owned subsidiary of AR Capital, LLC (ARC), managed the Companys affairs on a day to day basis and, as a result, the Company was generally externally managed, with the exception of certain acquisition, accounting and portfolio management services performed by employees of the Company. In August 2013, the Companys board of directors determined that it was in the best interests of the Company and its stockholders to become self-managed, and the Company completed its transition to self-management on January 8, 2014. In connection with becoming self-managed, the Company terminated the management agreement with its Former Manager.
As discussed in Note 3 Mergers and Acquisitions (As Restated), on January 3, 2014, the Company acquired American Realty Capital Trust IV, Inc. (ARCT IV). The Company and ARCT IV, from the date of the Companys inception to January 3, 2014, were considered to be entities under common control because the entities advisors were wholly-owned subsidiaries of ARC. ARC and its related parties had ownership interests in the Company and ARCT IV through the ownership of shares of common stock and other equity interests. In addition, the advisors of the entities were contractually eligible to receive potential fees for their services from the companies, including asset management fees, incentive fees and other fees and had continued to receive fees from the Company prior to the Companys transition to self-management, which was completed on January 8, 2014. Due to the significance of these fees, the entities advisors and ultimately ARC were determined to have a significant economic interest in both companies, in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Accordingly, these financial statements have been recast in applying the carryover basis of accounting to include ARCT IV.
F-10
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
See Note 24 Subsequent Events (As Restated) for significant events that occurred subsequent to December 31, 2013.
Note 2 Restatement of Previously Issued Financial Statements
The Company has restated its consolidated balance sheets as of December 31, 2013 and 2012 and its consolidated statements of operations, consolidated statements of comprehensive loss and consolidated statements of changes in equity for the years ended December 31, 2013 and 2012, along with certain related notes to such restated consolidated financial statements. In addition, the Company has restated its consolidated statement of cash flows for the year ended December 31, 2013. The financial statements, as disclosed in Note 1 Organization, have also been recast in applying the carryover basis of accounting to include the effects of the Companys merger with ARCT IV.
The Company determined that the restatement was necessary after an investigation was conducted by the Audit Committee of the Companys Board of Directors (the Audit Committee) with the assistance of independent counsel and forensic accountants. The Audit Committee initiated the investigation in response to concerns regarding accounting practices and other matters that were first reported to it on September 7, 2014. The restatement corrects errors that were identified as a result of the investigation, as well as certain other errors that were identified by the Company. In addition, the restatement reflects corrections of certain immaterial errors and certain previously identified errors that were identified by the Company in the normal course of business and were determined to be immaterial, both individually and in the aggregate, when the consolidated financial statements for the year ended December 31, 2013 were originally issued. In connection with the restatement, the Company has determined that it would be appropriate to correct such errors.
Error Corrections
Merger and Other Non-routine Transaction Related
In light of the findings of the investigation conducted by the Audit Committee, the Company performed an internal review of all acquisition, merger and other non-routine transaction related expenses. The work resulted in the identification of the following errors:
| The Company improperly classified $75.7 million of expenses as merger-related for the year ended December 31, 2013. As restated, the amount has been reclassified from merger and other non-routine transaction related expenses to general and administrative expenses. The largest component of the misclassified amount was $59.6 million of equity-based compensation expense relating to the OPP (as defined in Note 18 Equity-based Compensation (As Restated)). |
| The Company identified a net amount of $14.5 million of merger and other non-routine transaction related expenses that were incorrectly excluded in the year ended December 31, 2013. As such, the Company recorded additional merger and other non-routine transaction related expense for this amount. |
| The Company identified $13.0 million of management fees that were improperly classified as merger and other non-routine transaction related expenses. Such amounts have been properly classified as management fees to affiliates for the year ended December 31, 2013. |
| The Company identified $5.9 million of expenses that were improperly recorded as merger and other transaction related expenses that should have been capitalized as deferred financing costs and amortized accordingly. As such, an adjustment to properly record and amortize the deferred financing costs has been made for the year ended December 31, 2013. As a result of capitalizing these deferred financing costs, additional interest expense of $2.3 million was recorded for the year ended December 31, 2013. This resulted in a net adjustment of $3.6 million to deferred financing costs reported on the balance sheet. |
| Upon consummation of the ARCT III Merger (as defined in Note 3 Mergers and Acquisitions (As Restated)), the OP entered into an agreement with an affiliate to acquire certain furniture, fixtures, equipment (FF&E) and other assets. The Company originally capitalized $4.1 million of FF&E costs and expensed $1.7 million of costs. The Company has concluded that there was no evidence of the receipt and it could not support the value of the FF&E. As such, the Company has |
F-11
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
expensed the amount originally capitalized and recognized the expense in merger and other non-routine transaction related expense for the year ended December 31, 2013. See Note 19 Related Party Transactions and Arrangements (As Restated) for further discussion. |
| The Company has determined that it should have recorded a controlling interest transfer tax liability totaling $8.9 million upon consummation of the ARCT III Merger and CapLease Merger (each, as defined in Note 3 Merger and Acquisitions (As Restated)). The accrual and corresponding merger and other non-routine transaction related expense are recorded for the year ended December 31, 2013. |
The Company has updated the caption from merger and other transaction related to merger and other non-routine transactions to appropriately include non-recurring costs that may not have been incurred solely for a merger transaction. See Note 4 Summary of Significant Accounting Policies (As Restated) for a further breakout of the merger costs and other non-routine transactions.
Operating Fees to Affiliate
The Company identified $1.2 million of expenses that were incorrectly recorded as operating fees to affiliate. Therefore, the Company decreased operating fees to affiliate by this amount for the year ended December 31, 2013 and recorded the adjustment to the proper balance sheet account.
General and Administrative
The Company originally reported $35.0 million in equity-based compensation in its own line item, however it now reports such compensation as general and administrative expenses.
The Company identified $1.8 million in bonuses paid in 2014 that should have been, but were not, recorded as an accrued expense for the year ended December 31, 2013. As such, the Company has increased the 2013 bonus accrual and the corresponding general and administrative expense by this amount.
Impairment of Real Estate
The Company originally believed that the risk of impairment of its real estate and related assets was mitigated by the fact that substantially all of the Companys real estate portfolio had been acquired in 2012 and 2013. As a result, the Company had failed to monitor events and changes in circumstances that could indicate that the carrying amount of its real estate and related assets may not be recoverable. The Company performed a detailed analysis of the portfolio in connection with the restatement and noted four properties with impairment indicators. The Company assessed the recoverability of the carrying amounts of such properties as of the date in which such indicators existed. Based on this assessment, the Company noted two properties with carrying amounts in excess of their expected undiscounted cash flows. As a result, the Company reduced the carrying amount of the real estate and related net assets to their estimated fair values by recognizing an impairment loss of $3.3 million for the year ended December 31, 2013.
Net Loss Attributable to Non-controlling Interests
The original calculation of the net loss attributable to non-controlling interest holders for the year ended December 31, 2013 and 2012 excluded expenses that were improperly recorded at the Company level. These expenses were incurred by the OP, and therefore should have been included in the Companys determination of the net loss attributable to its non-controlling interest holders. In addition, the net loss attributable to the non-controlling interest holders has been adjusted to reflect the impact of the cumulative restatement adjustments discussed and presented herein. As a result, the 2013 and 2012 restated consolidated financial statements reflect an increase of $10.6 million and $0.3 million, respectively, for net loss attributable to non-controlling interest holders and corresponding decreases in net loss attributable to stockholders.
F-12
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Goodwill
Subsequent to the CapLease Merger, the Company disposed of certain properties acquired in that transaction. The disposition of such properties resulted in a net loss on disposition; however, the Company accounted for such losses by adjusting its purchase price allocation to increase the amount of goodwill and decrease the associated real estate investments recorded in connection with the CapLease Merger by $12.0 million when it reissued its recasted financial statements to reflect the common control merger with ARCT IV. The Company has determined that there was not sufficient evidence to support adjusting its goodwill as a measurement period adjustment. As a result, the Company has reversed the measurement period adjustments that were made to goodwill and related assets and liabilities acquired in the CapLease Merger and recognized a net loss on the dispositions in 2014 when the dispositions occurred. In addition, the Company has recorded a decrease to goodwill of $0.6 million for the year ended December 31, 2013 to reflect valid measurement period adjustments that were identified subsequent to the initial purchase price allocation. Additionally, the Company has identified certain liabilities assumed and subsequent payments of such liabilities by the former manager from the CapLease Merger that were not recorded properly. To correct the accounting, the Company has increased goodwill by $3.0 million, decreased merger and non-routine transaction related expenses by $0.7 million and increased the equity contributions by $2.3 million.
Due to Affiliates
Amounts due to affiliates of the Company of $103.4 million, previously reported in accounts payable and accrued expenses, are now reported on a separate line item on the consolidated restated balance sheet.
Other Changes
Along with restating the consolidated financial statements to correct the errors discussed above, the Company recorded adjustments for certain previously identified immaterial accounting errors related to the year ended December 31, 2013 that arose in the normal course of business. In connection with the original financial statement issuance, the Company assessed the impact of these immaterial errors and concluded that they were not material, individually or in the aggregate, to the consolidated financial statements for the year ended December 31, 2013 and each reported fiscal quarter within the year. However, in conjunction with the restatement, the Company determined that it would be appropriate to correct such errors.
The Company also recorded certain reclassifications to conform the presentation of its consolidated statement of operations for the year ended December 31, 2013 to the current period classification and maintain comparability.
In addition to the restatement of the consolidated financial statements, the Company has also restated the following notes for the years ended December 31, 2012 and December 31, 2013 to reflect the error corrections noted above.
| Note 3 Mergers and Acquisitions |
| Note 4 Summary of Significant Accounting Policies |
| Note 5 Real Estate Investments |
| Note 6 CapLease Acquisition |
| Note 8 Prepaid Expenses and Other Assets |
| Note 10 Fair Value of Financial Instruments |
| Note 14 Accounts Payable and Accrued Expenses |
| Note 17 Preferred and Common Stock |
| Note 18 Equity-based Compensation |
| Note 19 Related Party Transactions and Arrangements |
| Note 21 Net Loss Per Share |
| Note 23 Quarterly Results (Unaudited) |
| Note 24 Subsequent Events |
F-13
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The following tables present the combined impact of all changes, as described above, to the applicable line items in the consolidated financial statements to the Companys previously reported consolidated financial statements for the years ended December 31, 2012 and 2013 (in thousands, except share amounts):
2012 Restated Consolidated Balance Sheet (Adjusted Line Items)
December 31, 2012 | ||||||||||||
As Previously Reported (1) |
Restatement Adjustments |
As Restated | ||||||||||
Accumulated deficit |
$ | (124,570 | ) | $ | 284 | $ | (124,286 | ) | ||||
Total stockholders equity |
$ | 1,652,295 | $ | 284 | $ | 1,652,579 | ||||||
Non-controlling interests |
16,465 | (284 | ) | 16,181 | ||||||||
|
|
|
|
|
|
|||||||
Total equity |
$ | 1,668,760 | $ | | $ | 1,668,760 | ||||||
|
|
|
|
|
|
(1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
2012 Restated Consolidated Statement of Operations (Adjusted Line Items)
Year Ended December 31, 2012 | ||||||||||||
As Previously Reported (1) |
Restatement Adjustments |
As Restated | ||||||||||
Loss from continuing operations |
$ | (41,492 | ) | $ | | $ | (41,492 | ) | ||||
Net loss from continuing operations attributable to non-controlling interests |
255 | 276 | 531 | |||||||||
|
|
|
|
|
|
|||||||
Net loss from continuing operations attributable to stockholders |
$ | (41,237 | ) | $ | 276 | $ | (40,961 | ) | ||||
|
|
|
|
|
|
|||||||
Net loss from discontinued operations |
$ | (745 | ) | $ | | $ | (745 | ) | ||||
Net loss from discontinued operations attributable to non-controlling interest |
46 | 8 | 54 | |||||||||
|
|
|
|
|
|
|||||||
Net loss from discontinued operations attributable to stockholders |
$ | (699 | ) | $ | 8 | $ | (691 | ) | ||||
|
|
|
|
|
|
|||||||
Net loss |
$ | (42,237 | ) | $ | | $ | (42,237 | ) | ||||
Net loss attributable to non-controlling interests |
301 | 284 | 585 | |||||||||
|
|
|
|
|
|
|||||||
Net loss attributable to stockholders |
$ | (41,936 | ) | $ | 284 | $ | (41,652 | ) | ||||
|
|
|
|
|
|
(1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
F-14
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
2013 Restated Consolidated Balance Sheet
December 31, 2013 | ||||||||||||||||
As Previously Reported (1) |
Reclassifications | Restatement Adjustments |
As Restated | |||||||||||||
ASSETS | ||||||||||||||||
Real estate investments, at cost: |
||||||||||||||||
Land |
$ | 1,379,453 | $ | | $ | 855 | $ | 1,380,308 | ||||||||
Buildings, fixtures and improvements |
5,291,031 | | 6,369 | 5,297,400 | ||||||||||||
Land and construction in progress |
21,839 | | | 21,839 | ||||||||||||
Acquired intangible lease assets |
758,376 | 382 | 837 | 759,595 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total real estate investments, at cost |
7,450,699 | 382 | 8,061 | 7,459,142 | ||||||||||||
Less: accumulated depreciation and amortization |
(267,352 | ) | (155 | ) | 229 | (267,278 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total real estate investments, net |
7,183,347 | 227 | 8,290 | 7,191,864 | ||||||||||||
Cash and cash equivalents |
52,725 | | | 52,725 | ||||||||||||
Investment in direct financing leases, net |
66,112 | | | 66,112 | ||||||||||||
Investment securities, at fair value |
62,067 | | | 62,067 | ||||||||||||
Loans held for investment, net |
26,279 | | | 26,279 | ||||||||||||
Derivative assets, at fair value |
9,189 | | | 9,189 | ||||||||||||
Restricted cash |
35,921 | | | 35,921 | ||||||||||||
Prepaid expenses and other assets (2) |
187,930 | | (1,204 | ) | 186,726 | |||||||||||
Goodwill |
102,419 | | (9,630 | ) | 92,789 | |||||||||||
Deferred costs, net |
81,311 | (227 | ) | 3,662 | 84,746 | |||||||||||
Assets held for sale |
679 | | (14 | ) | 665 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 7,807,979 | $ | | $ | 1,104 | $ | 7,809,083 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
LIABILITIES AND EQUITY | ||||||||||||||||
Mortgage notes payable, net |
$ | 1,301,114 | $ | | $ | | $ | 1,301,114 | ||||||||
Convertible debt, net |
972,490 | | | 972,490 | ||||||||||||
Senior corporate credit facilities |
1,819,800 | | | 1,819,800 | ||||||||||||
Secured credit facility |
150,000 | | | 150,000 | ||||||||||||
Other debt |
104,804 | | | 104,804 | ||||||||||||
Below-market lease liabilities, net |
77,789 | | (620 | ) | 77,169 | |||||||||||
Derivative liabilities, at fair value |
18,455 | | | 18,455 | ||||||||||||
Accounts payable and accrued expenses |
808,900 | | (78,329 | ) | 730,571 | |||||||||||
Deferred rent and other liabilities |
21,816 | | | 21,816 | ||||||||||||
Distributions payable |
10,278 | | 625 | 10,903 | ||||||||||||
Due to affiliates (3) |
| | 103,434 | 103,434 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
5,285,446 | | 25,110 | 5,310,556 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Series D Preferred Stock, $0.01 par value, 21,735,008 shares authorized (part of 100,000,000 aggregate preferred shares authorized) and 21,735,008 shares issued and outstanding at December 31, 2013 |
269,299 | | | 269,299 | ||||||||||||
Preferred stock (excluding Series D Preferred Stock), $0.01 par value, 100,000,000 shares authorized and 42,199,547 shares issued and outstanding at December 31, 2013 |
422 | | | 422 | ||||||||||||
Common stock, $0.01 par value, 1,500,000,000 shares authorized and 239,234,725 issued and outstanding at December 31, 2013 |
2,392 | | | 2,392 | ||||||||||||
Additional paid-in capital |
2,939,287 | | 1,620 | 2,940,907 | ||||||||||||
Accumulated other comprehensive income (loss) |
7,666 | | | 7,666 | ||||||||||||
Accumulated deficit |
(864,516 | ) | | (13,441 | ) | (877,957 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total stockholders equity |
2,085,251 | | (11,821 | ) | 2,073,430 | |||||||||||
Non-controlling interests |
167,983 | | (12,185 | ) | 155,798 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total equity |
2,253,234 | | (24,006 | ) | 2,229,228 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities and equity |
$ | 7,807,979 | $ | | $ | 1,104 | $ | 7,809,083 | ||||||||
|
|
|
|
|
|
|
|
(1) | These financial statements have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
F-15
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
(2) | Certain line item captions have been updated since the recasted filing, which applied the carryover basis of accounting to include the effects of the merger with ARCT IV. This line item caption has been updated to prepaid expenses and other assets, net in the accompanying consolidated balance sheets. |
(3) | This line item caption has been added and is included in the accompanying consolidated balance sheets. |
F-16
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
2013 Restated Statement of Operations
Year Ended December 31, 2013 | ||||||||||||||||
As Previously Reported (1) |
Reclassifications | Restatement Adjustments |
As Restated | |||||||||||||
Revenues: |
||||||||||||||||
Rental income |
$ | 309,839 | $ | 669 | $ | | $ | 310,508 | ||||||||
Direct financing lease income |
2,244 | | | 2,244 | ||||||||||||
Operating expense reimbursements |
17,795 | (669 | ) | (555 | ) | 16,571 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
329,878 | | (555 | ) | 329,323 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating expenses: |
||||||||||||||||
Acquisition related |
76,136 | | (23 | ) | 76,113 | |||||||||||
Merger and other transaction related (2) |
278,319 | | (67,776 | ) | 210,543 | |||||||||||
Property operating |
23,616 | | | 23,616 | ||||||||||||
Operating fees to affiliate (3) |
5,654 | | 11,808 | 17,462 | ||||||||||||
General and administrative |
10,645 | 46 | 112,481 | 123,172 | ||||||||||||
Equity-based compensation (4) |
34,962 | | (34,962 | ) | | |||||||||||
Depreciation and amortization |
211,372 | (46 | ) | (350 | ) | 210,976 | ||||||||||
Impairment of real estate (5) |
| | 3,346 | 3,346 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
640,704 | | 24,524 | 665,228 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating loss |
(310,826 | ) | | (25,079 | ) | (335,905 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Other (expense) income: |
||||||||||||||||
Interest expense |
(102,305 | ) | (977 | ) | (2,266 | ) | (105,548 | ) | ||||||||
Other income, net |
2,847 | 977 | | 3,824 | ||||||||||||
Loss on derivative instruments, net |
(67,946 | ) | | | (67,946 | ) | ||||||||||
Loss on sale of investments in affiliates |
(411 | ) | | | (411 | ) | ||||||||||
Loss on sale of investments |
(1,795 | ) | | | (1,795 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other expenses, net |
(169,610 | ) | | (2,266 | ) | (171,876 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from continuing operations |
(480,436 | ) | | (27,345 | ) | (507,781 | ) | |||||||||
Net loss from continuing operations attributable to non-controlling interests |
5,715 | | 10,600 | 16,315 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss from continuing operations attributable to stockholders |
(474,721 | ) | | (16,745 | ) | (491,466 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Discontinued operations: |
||||||||||||||||
Loss from operations of held for sale properties |
(34 | ) | | | (34 | ) | ||||||||||
Gain (loss) on held for sale properties (6) |
14 | | (14 | ) | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss from discontinued operations |
(20 | ) | | (14 | ) | (34 | ) | |||||||||
Net loss from discontinued operations attributable to non-controlling interest |
1 | | | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss from discontinued operations attributable to stockholders |
(19 | ) | | (14 | ) | (33 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
(480,456 | ) | | (27,359 | ) | (507,815 | ) | |||||||||
Net loss attributable to non-controlling interests |
5,716 | | 10,600 | 16,316 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to stockholders |
$ | (474,740 | ) | $ | | $ | (16,759 | ) | $ | (491,499 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted net loss per share from continuing operations attributable to common stockholders |
$ | (2.33 | ) | $ | | $ | (0.08 | ) | $ | (2.41 | ) | |||||
Basic and diluted net loss per share from discontinued operations attributable to common shareholders |
$ | | $ | | $ | | $ | | ||||||||
Basic and diluted net loss per share attributable to common stockholders |
$ | (2.33 | ) | $ | | $ | (0.08 | ) | $ | (2.41 | ) |
(1) | These financial statements have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
(2) | This line item caption has been updated to merger and other non-routine transactions in the accompanying consolidated statements of operations. |
(3) | This line item caption has been updated to management fees to affiliates in the accompanying consolidated statements of operations. |
(4) | As disclosed above, this line item has been reclassified into general and administrative in the accompanying consolidated statements of operations. |
F-17
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
(5) | As disclosed above, this line item has been added and is included in the accompanying consolidated statements of operations. |
(6) | This line item caption has been updated to loss on held for sale properties in the accompanying consolidated statements of operations. |
2013 Restated Statement of Comprehensive Loss (1)
Year Ended December 31, 2013 | ||||||||||||
As Previously Reported (2) |
Restatement Adjustments |
As Restated | ||||||||||
Net loss (3) |
$ | (480,456 | ) | $ | (27,359 | ) | $ | (507,815 | ) | |||
Other comprehensive income (loss): |
||||||||||||
Designated derivatives, fair value adjustments |
11,480 | 1 | 11,481 | |||||||||
Change in unrealized gain/loss on investment securities (4) |
119 | | 119 | |||||||||
|
|
|
|
|
|
|||||||
Total other comprehensive income (loss) (5) |
11,599 | 1 | 11,600 | |||||||||
|
|
|
|
|
|
|||||||
Total comprehensive loss (6) |
(468,857 | ) | (27,358 | ) | (496,215 | ) | ||||||
Comprehensive loss attributable to non-controlling interests |
5,716 | 10,600 | 16,316 | |||||||||
|
|
|
|
|
|
|||||||
Total comprehensive loss attributable to stockholders |
$ | (463,141 | ) | $ | (16,758 | ) | $ | (479,899 | ) | |||
|
|
|
|
|
|
(1) | The statement of comprehensive loss was originally included within the consolidated statement of operations in the recasted filing, which applied the carryover basis of accounting to include the effects of the merger with ARCT IV; it is now presented as a standalone financial statement. |
(2) | These financial statements have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
(3) | The statement of comprehensive loss previously began with net loss attributable to common stockholders . The statement has been updated to begin with net loss to properly show the total comprehensive loss. |
(4) | This line item has been updated to unrealized gain (loss) on investment securities in the accompanying statements of comprehensive loss. |
(5) | The total other comprehensive income (loss) line item has been added and included in the accompanying statements of comprehensive loss. |
(6) | This line item caption has been updated to total comprehensive loss in the accompanying statements of comprehensive loss. |
F-18
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
2013 Restated Statement of Cash Flows
December 31, 2013 | ||||||||||||||||
As Previously Reported (1) |
Reclassifications | Restatement Adjustments |
As Restated | |||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net loss |
$ | (480,456 | ) | $ | | $ | (27,359 | ) | $ | (507,815 | ) | |||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
||||||||||||||||
Issuance of OP Units for ARCT III Merger |
108,247 | | (476 | ) | 107,771 | |||||||||||
Depreciation (2) |
162,027 | 74,364 | 1,916 | 238,307 | ||||||||||||
Amortization of intangible lease assets (2) |
49,345 | (49,345 | ) | | | |||||||||||
Amortization of deferred costs (2) |
26,895 | (26,895 | ) | | | |||||||||||
Amortization of above- and below-market lease asset (2) |
(176 | ) | 176 | | | |||||||||||
Amortization of discounts and premiums (2) |
(1,700 | ) | 1,700 | | | |||||||||||
Loss on held for sale properties (3) |
(14 | ) | | 14 | | |||||||||||
Impairment of real estate (4) |
| | 3,346 | 3,346 | ||||||||||||
Equity-based compensation |
43,565 | | 56,696 | 100,261 | ||||||||||||
Unrealized gain on derivative instruments |
(1,739 | ) | | | (1,739 | ) | ||||||||||
Loss on sale of investments, net |
2,206 | | | 2,206 | ||||||||||||
Loss in extinguishment of Series C Stock |
13,749 | | | 13,749 | ||||||||||||
Changes in assets and liabilities: |
||||||||||||||||
Investment in direct financing leases |
2,505 | | | 2,505 | ||||||||||||
Prepaid expenses and other assets |
(20,406 | ) | | 555 | (19,851 | ) | ||||||||||
Accounts payable and accrued expenses |
100,166 | | (79,377 | ) | 20,789 | |||||||||||
Deferred rent and other liabilities |
8,555 | | | 8,555 | ||||||||||||
Due to affiliates (5) |
| | 43,834 | 43,834 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash provided by operating activities |
12,769 | | (851 | ) | 11,918 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash flows from investing activities: |
||||||||||||||||
Investments in real estate and other assets |
(3,520,412 | ) | | | (3,520,412 | ) | ||||||||||
Acquisition of a real estate business, net of cash acquired of $41,779 |
(878,898 | ) | | | (878,898 | ) | ||||||||||
Investment in direct financing leases |
(68,617 | ) | | | (68,617 | ) | ||||||||||
Capital expenditures |
(9,755 | ) | | | (9,755 | ) | ||||||||||
Principal repayments received from borrowers |
442 | | | 442 | ||||||||||||
Purchase of assets from Manager (6) |
(1,584 | ) | | 1,041 | (543 | ) | ||||||||||
Deposits for real estate investments |
(101,887 | ) | | | (101,887 | ) | ||||||||||
Purchases of investment securities |
(81,590 | ) | | | (81,590 | ) | ||||||||||
Proceeds from sale of investment securities |
119,542 | | | 119,542 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash used in investing activities |
(4,542,759 | ) | | 1,041 | (4,541,718 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash flows from financing activities: |
||||||||||||||||
Proceeds from mortgage notes payable |
6,924 | | | 6,924 | ||||||||||||
Payments on mortgage notes payable |
(5,711 | ) | | | (5,711 | ) | ||||||||||
Payments on other debt |
(9,368 | ) | | | (9,368 | ) | ||||||||||
Payments on senior secured revolving credit facility |
(124,604 | ) | | | (124,604 | ) | ||||||||||
Proceeds from senior corporate credit facility |
1,889,800 | | | 1,889,800 | ||||||||||||
Payments on senior corporate credit facility |
(830,000 | ) | | | (830,000 | ) | ||||||||||
Proceeds from secured credit facility |
789,000 | | | 789,000 |
The 2013 restated consolidated statement of cash flows continues onto the next page.
F-19
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
December 31, 2013 | ||||||||||||||||
As Previously Reported (1) |
Reclassifications | Restatement Adjustments |
As Restated | |||||||||||||
Payments of deferred financing costs |
$ | (95,268 | ) | $ | | $ | (5,928 | ) | $ | (101,196 | ) | |||||
Proceeds from issuance of convertible debt |
967,786 | | | 967,786 | ||||||||||||
Common stock repurchases |
(359,193 | ) | | | (359,193 | ) | ||||||||||
Proceeds from issuance of Series C Stock |
445,000 | | | 445,000 | ||||||||||||
Cash payment on settlement of Series C Stock |
(441,353 | ) | | | (441,353 | ) | ||||||||||
Proceeds from issuance of Series D Preferred Stock |
287,991 | | | 287,991 | ||||||||||||
Proceeds from issuance of common stock |
2,158,486 | | | 2,158,486 | ||||||||||||
Payments of offering costs and fees related to stock issuances |
(165,327 | ) | | | (165,327 | ) | ||||||||||
Consideration to Former Manager for internalization |
(5,738 | ) | | 5,738 | | |||||||||||
Contributions from non-controlling interest holders |
30,861 | | | 30,861 | ||||||||||||
Distributions to non-controlling interest holders |
(8,219 | ) | | | (8,219 | ) | ||||||||||
Distributions paid |
(234,897 | ) | | | (234,897 | ) | ||||||||||
Advances from affiliates, net |
(376 | ) | | | (376 | ) | ||||||||||
Change in restricted cash |
(5,654 | ) | | | (5,654 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash provided by financing activities |
4,290,140 | | (190 | ) | 4,289,950 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net change in cash and cash equivalents |
(239,850 | ) | | | (239,850 | ) | ||||||||||
Cash and cash equivalents, beginning of period |
292,575 | | | 292,575 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash and cash equivalents, end of period |
$ | 52,725 | $ | | $ | | $ | 52,725 | ||||||||
|
|
|
|
|
|
|
|
(1) | These financial statements have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
(2) | These five depreciation and amortization line items have been consolidated into one line item named depreciation and amortization in the accompanying consolidated statements of cash flows. |
(3) | This line item caption has been updated to loss on held for sale properties in the accompanying consolidated statements of cash flows. |
(4) | As disclosed above, this line item has been added and is included in the accompanying consolidated statements of cash flows. |
(5) | This line item caption has been added and is included in the accompanying consolidated statements of cash flows. |
(6) | This line item caption has been updated to investments in other assets in the accompanying consolidated statements of cash flows. |
Note 3 Mergers and Acquisitions (As Restated)
Completed Mergers and Significant Acquisitions
American Realty Capital Trust III, Inc. Merger
On December 14, 2012, the Company entered into an Agreement and Plan of Merger (the ARCT III Merger Agreement) with American Realty Capital Trust III, Inc. (ARCT III) and certain subsidiaries of each company. The ARCT III Merger Agreement provided for the merger of ARCT III with and into a subsidiary of the Company (the ARCT III Merger). The ARCT III Merger was consummated on February 28, 2013.
Pursuant to the terms and subject to the conditions set forth in the ARCT III Merger Agreement, each outstanding share of common stock of ARCT III, including restricted shares which became vested, was converted into the right to receive (i) 0.95 of a share of the Companys common stock, (the ARCT III Exchange Ratio) or (ii) $12.00 in cash. In addition, each outstanding unit of equity ownership of the ARCT III Operating Partnership (ARCT III OP) was converted into the right to receive 0.95 of the same class of unit of equity ownership in the OP.
Upon the closing of the ARCT III Merger on February 28, 2013, the Company paid an aggregate of $350.4 million in cash for the 29.2 million shares, or 16.5% of the then outstanding shares of ARCT IIIs common stock (which is equivalent to 27.7 million shares of the Companys common stock based on the ARCT III Exchange Ratio). In addition, 140.7 million shares of the Companys common stock were issued in exchange for 148.1 million shares of ARCT IIIs common stock adjusted for the ARCT III Exchange Ratio.
F-20
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Upon the consummation of the ARCT III Merger, American Realty Capital Trust III Special Limited Partner, LLC (the ARCT III Special Limited Partner), the holder of the special limited partner interest in the ARCT III OP, was entitled to subordinated distributions of net sales proceeds from ARCT III OP which resulted in the issuance of units of limited partner interests in the ARCT III OP, when after applying the ARCT III Exchange Ratio, resulting in the issuance of an additional 7.3 million OP Units to affiliates of the Companys Former Manager. The parties had agreed that such OP Units would be subject to a minimum one-year holding period from the date of issuance before being exchangeable into the Companys common stock.
Also in connection with the ARCT III Merger, the Company entered into an agreement with ARC and its affiliates to internalize certain functions performed by them prior to the ARCT III Merger, reduce certain fees paid to affiliates and pay certain merger related fees. See Note 19 Related Party Transactions and Arrangements (As Restated).
Accounting Treatment for the ARCT III Merger
The Company and ARCT III, from inception to the ARCT III Merger date, were considered to be entities under common control. Both entities advisors were wholly owned subsidiaries of ARC. ARC and its related parties had significant ownership interests in the Company and ARCT III through the ownership of shares of common stock and other equity interests. In addition, the advisors of both entities were contractually eligible to receive potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and continued to receive fees from the Company prior to the Companys transition to self-management. Due to the significance of these fees, the advisors, and ultimately ARC, were determined to have a significant economic interest in both companies in addition to having the power to direct the significant activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting, whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT III Merger date. In addition, U.S. GAAP requires the Company to present historical financial information as if the merger had occurred as of the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT III Merger had occurred at inception.
GE Capital Portfolio Acquisitions
On June 27, 2013, the Company acquired, through subsidiaries of the OP, from certain affiliates of GE Capital Corp., the equity interests in the entities that own a real estate portfolio comprised of 447 properties (the GE Capital Portfolio) for a purchase price of $773.9 million, exclusive of closing costs, with no liabilities assumed. The 447 properties are subject to 409 property operating leases, as well as 38 direct financing leases.
During the year ended December 31, 2013, ARCT IV acquired, from certain affiliates of GE Capital Corp., the equity interests in the entities that own a real estate portfolio comprised of 924 properties (the ARCT IV GE Capital Portfolio) for a purchase price of $1.4 billion, exclusive of closing costs, with no liabilities assumed. The 924 properties are subject to 912 property operating leases, as well as 12 direct financing leases.
CapLease, Inc. Merger
On May 28, 2013, the Company entered into an Agreement and Plan of Merger (the CapLease Merger Agreement) with CapLease Inc. (CapLease), and certain subsidiaries of each company. The CapLease Merger Agreement provided for the merger of CapLease with and into a subsidiary of the Company (the CapLease Merger).
F-21
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
On November 5, 2013, the Company completed the merger with CapLease pursuant to the CapLease Merger Agreement. Pursuant to the terms of the CapLease Merger Agreement, each outstanding share of common stock of CapLease, other than shares owned by the Company, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive $8.50. Each outstanding share of preferred stock of CapLease, other than shares owned by the Company, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive an amount in cash equal to the sum of $25.00 plus all accrued and unpaid dividends on such shares of preferred stock. In addition, in connection with the merger of CapLease, LP with and into the OP (the CapLease Partnership Merger), each outstanding unit of equity ownership of CapLeases operating partnership, other than units owned by CapLease or any wholly owned subsidiary of CapLease, was converted into the right to receive $8.50. Shares of CapLeases outstanding restricted stock were accelerated and became fully vested, and restricted stock and any outstanding performance shares were fully earned and received $8.50 per share. In total, cash consideration of $920.7 million was paid to the common and preferred shareholders.
Accounting Treatment for the CapLease Merger
The CapLease Merger has been accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from CapLease have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values was recorded as goodwill. Results of operations for CapLease are included in the Companys consolidated financial statements from the date of acquisition. See Note 6 CapLease Acquisition (As Restated).
American Realty Capital Trust IV, Inc. Merger
On July 1, 2013, the Company entered into an Agreement and Plan of Merger, as amended on October 6, 2013 and October 11, 2013 (the ARCT IV Merger Agreement), with ARCT IV and certain subsidiaries of each company. The ARCT IV Merger Agreement provided for the merger of ARCT IV with and into a subsidiary of the OP (the ARCT IV Merger). The Company consummated the ARCT IV Merger on January 3, 2014.
Pursuant to the terms of the ARCT IV Merger Agreement, as amended, each outstanding share of common stock of ARCT IV, including unvested restricted shares that vested in conjunction with the ARCT IV Merger, was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a share of the Companys common stock (the ARCT IV Exchange Ratio) and (iii) 0.5937 of a share of a new series of preferred stock of the Company designated as the 6.70% Series F Cumulative Redeemable Preferred Stock (Series F Preferred Stock) and each outstanding unit of ARCT IVs operating partnership (ARCT IV OP Unit), other than ARCT IV OP Units held by the American Realty Capital Trust IV Special Limited Partner, LLC, (the ARCT IV Special Limited Partner) and American Realty Capital Advisors IV, LLC (the ARCT IV Advisor) was exchanged for (i) $9.00 in cash, (ii) 0.5190 of an OP Unit and (iii) 0.5937 of an OP Unit designated as Series F Preferred Units (Series F OP Units). In total, the Company paid $651.4 million in cash, issued 36.9 million shares of common stock and 42.2 million shares of Series F Preferred Stock, and issued 0.7 million Series F OP Units and 0.6 million OP Units to the former ARCT IV shareholders and ARCT IV OP Unit holders in connection with the consummation of the ARCT IV Merger. In addition, each outstanding ARCT IV Class B Unit (as defined below) and each outstanding ARCT IV OP Unit held by the ARCT IV Special Limited Partner and the ARCT IV Advisor was converted into 2.3961 OP Units, resulting in the Company issuing 1.2 million OP Units.
On January 3, 2014, the OP entered into a Contribution and Exchange Agreement (the ARCT IV Contribution and Exchange Agreement) with the ARCT IV OP, ARCT IV Special Limited Partner and ARC Real Estate Partners, LLC (ARC Real Estate), an entity affiliated with the Former Manager. The ARCT IV Special Limited Partner was entitled to receive certain distributions from the ARCT IV OP, including the subordinated distribution of net sales proceeds resulting from an investment liquidity event (as defined in the agreement of limited partnership of the ARCT IV OP). The ARCT IV Merger constituted an investment liquidity event, as a result of which the ARCT IV Special Limited Partner, in connection with managements successful attainment of the 6.0% performance hurdle and the return to ARCT IVs stockholders of approximately $358.3 million in addition to their initial investment, was entitled to receive a subordinated distribution of net sales proceeds from the ARCT IV OP equal to approximately $63.2 million. Pursuant to the ARCT IV Contribution and Exchange Agreement, the ARCT IV Special Limited Partner contributed its interest in the ARCT IV OP, inclusive of the subordinated distribution proceeds received, to the ARCT IV OP in exchange for 2.8 million equity units of the ARCT IV OP,
F-22
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
based on a price per share of $22.50. The fair value of these units at date of issuance was $78.2 million and has been included in merger and other non-routine transactions in the accompanying consolidated statement of operations. Upon consummation of the ARCT IV Merger, these equity units were immediately converted to 6.7 million OP Units after application of the exchange ratio of 2.3961 per share. In conjunction with the ARCT IV Merger Agreement, the ARCT IV Special Limited Partner agreed to a minimum two-year holding period for these OP Units before converting them to shares of Company common stock.
In addition, as part of the ARCT IV Contribution and Exchange Agreement, ARC Real Estate Partners, LLC, contributed $750,000 in cash to the ARCT IV OP, effective prior to the consummation of the ARCT IV Merger, in exchange for ARCT IV OP Units. Upon the consummation of the ARCT IV Merger, these equity units converted at an exchange ratio of 2.3961 OP Units per ARCT IV OP Unit, resulting in the Company issuing 0.1 million OP Units.
Accounting Treatment for the ARCT IV Merger
The Company and ARCT IV, from inception to the ARCT IV Merger date, were considered to be entities under common control. Both entities advisors were wholly owned subsidiaries of ARC. ARC and its related parties had ownership interests in the Company and ARCT IV through the ownership of shares of common stock and other equity interests. In addition, the advisors of both entities were contractually eligible to receive potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and had continued to receive fees from the Company prior to the Companys transition to self-management. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting, whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT IV Merger date. In addition, U.S. GAAP requires the Company to present historical financial information as if the entities were combined as of the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT IV Merger, including the impact of the equity transactions entered to consummate the merger, had occurred at inception.
Fortress Portfolio Acquisition
On July 24, 2013, ARC and another related entity, on behalf of the Company and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with affiliates of funds managed by Fortress Investment Group LLC (Fortress) for the purchase of 196 properties owned by Fortress, for an aggregate contract purchase price of $972.5 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which were allocated to the Company based on the pro rata fair value of the properties acquired by the Company relative to the fair value of all 196 properties to be acquired from Fortress. Of the 196 properties, 120 properties were allocated to the Company (the Fortress Portfolio). On October 1, 2013, the Company closed on 41 of the 120 properties with a total purchase price of $200.3 million, exclusive of closing costs. The Company closed the acquisition of the remaining 79 properties in the Fortress Portfolio on January 8, 2014, for an aggregate contract purchase price of $400.9 million, exclusive of closing costs. The total purchase price of the Fortress Portfolio was $601.2 million, exclusive of closing costs. During the year ended December 31, 2013, the Company deposited $72.2 million into escrow in relation to the Fortress Portfolio, which has been included in prepaid expenses and other assets in the consolidated balance sheet as of December 31, 2013.
Cole Real Estate Investments, Inc. Merger
On October 22, 2013, the Company entered into an agreement and plan of merger (the Cole Merger Agreement) with Cole Real Estate Investments, Inc. (Cole), a Maryland corporation, and a wholly owned subsidiary of the Company. The Cole Merger Agreement provided for the merger of Cole with and into a wholly owned subsidiary of the Company (the Cole Merger). The Company consummated the Cole Merger on February 7, 2014 (the Cole Acquisition Date).
F-23
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Pursuant to the terms of the Cole Merger Agreement, each share of common stock of Cole issued and outstanding immediately prior to the effectiveness of the Cole Merger, including unvested restricted stock units (RSUs) and performance stock units that vested in conjunction with the Cole Merger, other than shares owned by the Company, any subsidiary of the Company or any wholly owned subsidiary of Cole, was converted into the right to receive either (i) 1.0929 shares of common stock, par value $0.01 per share, of the Company (the Stock Consideration) or (ii) $13.82 in cash (the Cash Consideration and together with the Stock Consideration, the Merger Consideration). Approximately 98% of all outstanding Cole holders received Stock Consideration and approximately 2% of outstanding Cole shares elected to receive Cash Consideration, pursuant to the terms of the Cole Merger Agreement, resulting in the Company issuing approximately 520.8 million shares of Company common stock and paying $181.8 million to holders of Cole shares based on their elections.
In addition, the Company issued approximately 2.8 million shares of Company common stock, in the aggregate, to certain executives of Cole pursuant to letter agreements entered into between the Company and such individuals concurrently with the execution of the Cole Merger Agreement, as previously disclosed by the Company. Additionally, effective as of the Cole Acquisition Date, the Company issued, but has not yet allocated, 0.4 million shares with dividend equivalent rights commensurate with the Companys common stock.
The Company is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the Cole Acquisition Date totaled approximately $7.5 billion and consisted of the following (in thousands):
As of Cole Acquisition Date (Preliminary) (As Restated) |
||||
Estimated fair value of consideration transferred: |
||||
Cash |
$ | 181,775 | ||
Common stock |
7,285,868 | |||
|
|
|||
Total consideration transferred |
$ | 7,467,643 | ||
|
|
The fair value of the 520.8 million shares of common stock issued, excluding those common shares transferred to former Cole executives, was determined based on the closing market price of the Companys common stock on the Cole Acquisition Date.
Accounting Treatment for the Cole Merger
The Cole Merger will be accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from Cole will be recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values will be recorded as goodwill. Results of operations for Cole will be included in the Companys consolidated financial statements subsequent to the Cole Acquisition Date. The initial accounting for the business combination has not been completed due to the significant judgments and time necessary to complete third-party valuation of real estate and other assets.
F-24
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Pending Significant Acquisition
Inland Portfolio Acquisition
On August 8, 2013, ARC and another related entity, on behalf of the Company and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with Inland American Real Estate Trust, Inc. (Inland) for the purchase of the equity interests of 67 companies owned by Inland for an aggregate contract purchase price of approximately $2.3 billion, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs. Of the 67 companies, the equity interests of 10 companies (the Inland Portfolio) will be acquired, in total, by the Company from Inland for a purchase price of approximately $501.0 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which was allocated to the Company based on the pro rata fair value of the Inland Portfolio relative to the fair value of all 67 companies to be acquired from Inland by the Company and the other entities sponsored directly or indirectly by ARC. The Inland Portfolio is comprised of 33 properties. As of December 31, 2013, the Company has closed on five of the 33 properties for a total purchase price of $56.4 million, exclusive of closing costs. The Company closed the acquisition of 27 additional properties in the Inland Portfolio subsequent to December 31, 2013. The Company does not consider it probable that it will close on the remaining property. During the year ended December 31, 2013, the Company deposited $28.6 million into escrow in relation to the Inland Portfolio, which has been included in prepaid expenses and other assets in the consolidated balance sheets.
Note 4 Summary of Significant Accounting Policies (As Restated)
Basis of Accounting
The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with U.S. GAAP.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company, its subsidiaries and consolidated joint venture arrangement . The portions of the consolidated joint venture arrangement not owned by the Company are presented as non-controlling interests. In addition, as described in Note 1 Organization, certain affiliates and non-affiliated third parties have been issued OP Units. Holders of OP Units are considered to be non-controlling interest holders in the OP and their ownership interest is reflected as equity in the consolidated balance sheets. In addition, a portion of the earnings and losses of the OP are allocated to non-controlling interest holders based on their respective ownership percentages. Furthermore, upon conversion of OP Units to common stock, any difference between the fair value of common shares issued and the carrying value of the OP Units converted is recorded as a component of equity. As of December 31, 2013 and 2012, there were 9,591,173 and 1,621,349 OP Units outstanding, respectively. In addition, as discussed in Note 3 Mergers and Acquisitions (As Restated), the historical information of ARCT III and ARCT IV has been presented from earliest date of common control for each merger.
All intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity of which the Company is the primary beneficiary.
Reclassification
Certain reclassifications have been made to the previously issued historical financial statements of the Company to conform to this presentation.
F-25
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, investments in real estate, business combinations, and derivative financial instruments and hedging activities, as applicable.
Real Estate Investments
The Company records acquired real estate at cost and makes assessments as to the useful lives of depreciable assets. The Company considers the period of future benefit of the asset to determine the appropriate useful lives. Depreciation is computed using a straight-line method over the estimated useful life of 40 years for buildings, five to 15 years for building fixtures and improvements and the remaining lease term for acquired intangible lease assets.
Assets Held for Sale
The Company classifies real estate investments as held for sale when the Company has entered into a contract to sell the property, all material due diligence requirements have been satisfied, and the Company believes it is probable that the disposition will occur, or the Company is actively marketing the property and management has the intent to sell the property, among other conditions. Assets held for sale are recorded at the lower of carrying value or estimated fair value, less estimated cost to dispose of the asset. The results of operations and the related gain or loss on sale of properties that have been sold or that are classified as held for sale are included in discontinued operations in the consolidated statements of operations and comprehensive loss for all periods presented. At both December 31, 2013 and 2012, the Company had one property that was classified as held for sale. See Note 22 Discontinued Operations and Properties Held for Sale.
If circumstances arise that the Company previously considered unlikely and, as a result, the Company decides not to sell a property previously classified as held for sale, the Company will reclassify the property as held and used. The Company measures and records a property that is reclassified as held and used at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used or (ii) the estimated fair value at the date of the subsequent decision not to sell.
Development Activities
Project costs and expenses, which include interest expense, associated with the development, construction and lease-up of a real estate project are capitalized as construction in progress. Once the development and construction of the building is substantially completed, the amounts capitalized to construction in progress are transferred to (i) land and (ii) buildings and improvements. As required by U.S. GAAP, the Company computes interest expense on the full amount it has invested in the project, whether or not such investment is externally financed.
Impairment of Long Lived Assets
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to, bankruptcy or other credit concerns of a propertys major tenant, such as a history of late payments, rental concessions, and other factors, a significant decrease in a propertys revenues due to lease terminations, vacancies, co-tenancy clauses, reduced lease rates or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate and related assets to their respective fair values and recognize an impairment loss. Generally, the fair value estimates of real estate assets are primarily based upon an income approach utilizing a present value technique to discount the expected cash flows using market participant assumptions for market rent and terminal values or based upon recent comparable sales transactions.
F-26
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The Company recorded $3.3 million in impairment charges on real estate investments from continuing operations during the year ended December 31, 2013. The Company did not record any impairment on real estate investments from continuing operations during the years ended December 31, 2012 or 2011. The Company did not record any impairment charges on real estate investments from discontinued operations during the year ended December 31, 2013. For the years ended December 31, 2012 and 2011, the Company recorded $0.6 million and $0.8 million as impairment charges from discontinued operations.
Allocation of Purchase Price of Business Combinations including Acquired Properties
In accordance with the guidance for business combinations, the Company determines whether a transaction or other event is a business combination. If the transaction is determined to be a business combination, the Company determines if the transaction is considered to be between entities under common control. The acquisition of an entity under common control is accounted for on the carryover basis of accounting whereby the assets and liabilities of the acquired companies are recorded upon the merger on the same basis as they were carried by the acquired companies on the merger date. All other business combinations are accounted for by applying the acquisition method of accounting. Under the acquisition method, the Company recognizes the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired entity at fair value. In addition, the Company evaluates the existence of goodwill or a gain from a bargain purchase. The Company will immediately expense acquisition-related costs and fees associated with business combinations and asset acquisitions.
The Company allocates the purchase price of acquired properties and businesses accounted for under the acquisition method of accounting to tangible and identifiable intangible assets and liabilities acquired based on their respective fair values. Tangible assets include land, buildings, equipment and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Identifiable intangible assets and liabilities include amounts allocated to acquired leases for above-market and below-market lease rates and the value of in-place leases.
Amounts allocated to land, buildings, equipment and fixtures are based on cost segregation studies performed by independent third parties or on the Companys analysis of comparable properties in its portfolio.
The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by the Company in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period, which typically ranges from six to 18 months. The Company also estimates costs to execute similar leases including leasing commissions, legal and other related expenses.
Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and managements estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, including any bargain renewal periods. Above-market leases are amortized as a reduction to rental income over the remaining terms of the respective leases. Below-market leases are amortized as an increase to rental income over the remaining terms of the respective leases, including any bargain renewal periods.
The fair value of investments and debt are valued using techniques consistent with those disclosed in Note 10 Fair Value of Financial Instruments (As Restated), depending on the nature of the investment or debt. The fair value of all other assumed assets and liabilities based on the best information available.
The value of in-place leases is amortized to expense over the initial term of the respective leases, which range primarily from two to 20 years. If a tenant terminates its lease and the unamortized portion of the in-place lease value is charged to expense.
F-27
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Intangible lease assets and liabilities of the Company consist of the following as of December 31, 2013 and 2012 (amounts in thousands):
December 31, | ||||||||
2013 | 2012 | |||||||
Intangible lease assets: |
||||||||
In-place leases, gross |
$ | 749,862 | $ | 219,649 | ||||
Accumulated amortization on in-place leases |
(60,753 | ) | (11,247 | ) | ||||
|
|
|
|
|||||
In-place leases, net of accumulated amortization |
689,109 | 208,402 | ||||||
|
|
|
|
|||||
Above-market leases, gross |
9,351 | 1,504 | ||||||
Accumulated amortization on above market leases |
(658 | ) | (118 | ) | ||||
|
|
|
|
|||||
Above-market leases, net of accumulated amortization |
8,693 | 1,386 | ||||||
Leasing commissions |
382 | 347 | ||||||
Accumulated amortization on leasing commissions |
(155 | ) | (109 | ) | ||||
|
|
|
|
|||||
Leasing commissions, net of accumulated amortization |
227 | 238 | ||||||
|
|
|
|
|||||
Total intangible lease assets, net |
$ | 698,029 | $ | 210,026 | ||||
|
|
|
|
|||||
Intangible lease liabilities: |
||||||||
Below-market leases, gross |
$ | 77,884 | $ | | ||||
Accumulated amortization on below market leases |
(715 | ) | | |||||
|
|
|
|
|||||
Below-market leases, net of accumulated amortization |
77,169 | | ||||||
|
|
|
|
|||||
Total intangible lease liabilities, net |
$ | 77,169 | $ | | ||||
|
|
|
|
The following table provides the remaining weighted-average amortization period as of December 31, 2013 for intangible assets and liabilities, excluding the amortization of leasing commissions, and the projected amortization expense and adjustments to rental income for the next five years (amounts in thousands):
Remaining Weighted-Average Amortization Period in Years |
2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||||||||
In-place leases: |
||||||||||||||||||||||||
Total to be included in amortization expense |
10.2 | $ | 81,139 | $ | 75,235 | $ | 69,915 | $ | 64,735 | $ | 62,560 | |||||||||||||
Above-market lease assets: |
||||||||||||||||||||||||
Total to be deducted from rental income |
11.9 | $ | 1,525 | $ | 1,525 | $ | 1,516 | $ | 1,388 | $ | 1,359 | |||||||||||||
Below-market lease liabilities: |
||||||||||||||||||||||||
Total to be included in rental income |
22.7 | $ | (4,173 | ) | $ | (4,169 | ) | $ | (4,151 | ) | $ | (4,151 | ) | $ | (4,144 | ) |
Goodwill
In the case of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration paid over the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill. Goodwill that arose as a result of the Companys mergers and acquisitions was recorded in the Companys consolidated financial statements.
In the event the Company disposes of a property that constitutes a business under U.S. GAAP from a reporting unit with goodwill, the Company will allocate a portion of the reporting units goodwill to that business in determining the gain or loss on the disposal of the business. The amount of goodwill allocated to the business will be based on the relative fair value of the business to the fair value of the reporting unit. Goodwill acquired in the CapLease Merger comprises one reporting unit.
F-28
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The Company will evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value, by reporting unit, may not be recoverable. The Companys annual testing date is during the fourth quarter. The Company will test goodwill for impairment by first comparing the book value of net assets to the fair value of each reporting unit. If the fair value is determined to be less than the book value or if qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Company will estimate the fair value of the reporting units using discounted cash flows and relevant competitor multiples. The evaluation of goodwill for potential impairment requires the Companys management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions.
Cash and Cash Equivalents
Cash and cash equivalents include cash in bank accounts, as well as investments in highly-liquid money market funds with original maturities of three months or less.
The Company deposits cash with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company (FDIC) up to an insurance limit. At December 31, 2013 and 2012, the Company had deposits of $52.7 million and $292.6 million, respectively, of which $44.3 million and $288.9 million were in excess of the amount insured by the FDIC. Although the Company bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result due to the high quality of the institutions.
Restricted Cash
Restricted cash primarily consists of reserves related to lease expirations, as well as maintenance, structural and debt service reserves.
Investment in Direct Financing Leases
The Company has acquired certain properties that are subject to leases that qualify as direct financing leases in accordance with U.S. GAAP due to the significance of the lease payments from the inception of the leases compared to the fair value of the property. Investments in direct financing leases represent the fair value of the remaining lease payments on the leases and the estimated fair value of any expected residual property value at the end of the lease term. The fair value of the remaining lease payments is estimated using a discounted cash flow based on interest rates that would represent the Companys incremental borrowing rate for similar types of debt. The expected residual property value at the end of the lease term is estimated using market data and assessments of the remaining useful lives of the properties at the end of the lease terms, among other factors. Income from direct financing leases is calculated using the effective interest method over the remaining term of the lease.
As part of the update to the provisional allocation of the purchase price for the GE Capital Portfolio during the measurement period, the Company reclassified approximately $9.9 million from investment in direct financing leases receivables to investments in real estate, at cost.
Loans Held for Investments
The Company classifies its loans as long-term investments, as the Company intends to hold the loans for the foreseeable future or until maturity. Loan investments are carried on the Companys consolidated balance sheets at amortized cost (unpaid principal balance adjusted for unearned discount or premium and loan origination fees), net of any allowance for loan losses. Unearned discounts or premiums and loan origination fees are amortized as a component of interest income using the effective interest method over the life of the loan.
From time to time, the Company may determine to sell a loan in which case it must reclassify the asset as held for sale. Loans held for sale are carried at lower of cost or estimated fair value. From the period the Company acquired the loan investments through December 31, 2013, the Company has not sold or reclassified any loans as held for sale.
The Company evaluates its loan investments for possible impairment on a quarterly basis. Refer to Note 7 Investment Securities, at Fair Value.
F-29
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Commercial Mortgage-Backed Securities
The Company classifies all of its commercial mortgage-backed securities (CMBS) as available for sale for financial accounting purposes. Under U.S. GAAP, securities classified as available for sale are carried on the consolidated balance sheet at fair value with the net unrealized gains or losses included in accumulated other comprehensive income (loss), a component of Stockholders Equity. Any premiums or discounts on securities are amortized as a component of interest income using the effective interest method.
The Company estimates fair value on all securities investments quarterly based on a variety of inputs. Under applicable accounting guidance, securities where the fair value is less than the Companys cost are deemed impaired, and, therefore, must be measured for other-than-temporary impairment. If an impaired security (i.e., fair value below cost) is intended to be sold or required to be sold prior to expected recovery of the impairment loss, the full amount of the loss must be charged to earnings as other-than-temporary impairment. Otherwise, temporary impairment losses are charged to other comprehensive income (loss).
In estimating credit or other-than-temporary impairment losses, management considers a variety of factors including (1) the financial condition and near-term prospects of the credit, including credit rating of the security and the underlying tenant and an estimate of the likelihood, amount and expected timing of any default, (2) whether the Company expects to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value, (3) the length of time and the extent to which the fair value has been below cost, (4) current market conditions, (5) expected cash flows from the underlying collateral and an estimate of underlying collateral values, and (6) subordination levels within the securitization pool. These estimates are highly subjective and could differ materially from actual results. From the period the Company acquired the CMBS through December 31, 2013, the Company had no other-than-temporary impairment losses.
Deferred Costs, Net
Deferred costs, net consists of deferred financing costs net of accumulated amortization, deferred leasing costs net of accumulated amortization and deferred offering costs.
Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined the financing will not close. At December 31, 2013 and 2012, the Company had $84.7 million and $15.1 million, respectively, of deferred financing costs net of accumulated amortization.
Deferred leasing costs, consisting primarily of lease commissions and payments made to assume existing leases, are deferred and amortized over the term of the lease. At December 31, 2013 and 2012, the Company had no deferred leasing costs.
Deferred offering costs represent professional fees, fees paid to various regulatory agencies, and other costs incurred in connection with registering to sell shares of the Companys common stock. As of December 31, 2013 and 2012, the Company had no deferred offering costs.
Convertible Obligation to Series C Convertible Preferred Stockholders
On June 7, 2013, the Company issued, through a private placement, 28.4 million shares of Series C Convertible Preferred Stock (the Series C Stock) for gross proceeds of $445.0 million. Due to an unconditional obligation to either redeem or convert the Series C Stock into a variable number of shares of common stock that is predominantly based on a fixed monetary amount, the preferred securities were classified as an obligation under U.S. GAAP and were presented in the consolidated balance sheets as a liability prior to their settlement in November 2013. Promptly following the closing of the CapLease Merger, which, as discussed in Note 3 Mergers and Acquisitions (As Restated), was consummated on November 5, 2013, the Company converted the Series C Stock, in accordance with the terms of the original agreement, into 1.4 million shares of common stock with the remaining balance of Series C Stock settled in cash consideration of $441.4 million.
F-30
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Contingent Valuation Rights
On June 7, 2013, the Company issued to certain common stock investors 29.4 million contingent value rights (Common Stock CVRs) and to the Series C Stock investors 28.4 million contingent value rights (Preferred Stock CVRs). In September 2013, certain investors holding the Common Stock CVRs received $20.4 million representing the maximum payment of $1.50 per share as defined in the agreement. The remaining Common Stock CVR holders received settlement of the amount owed to them of $23.8 million promptly following the CapLease Merger, which consummated on November 5, 2013, representing the maximum payment of $1.50 per share.
The Company elected to settle the Preferred Stock CVRs promptly following the closing of the CapLease Merger on November 5, 2013. The Company settled the Preferred Stock CVRs for $0.90 per Preferred Stock CVR for total cash consideration of $25.6 million.
Changes in the fair value of the contingent valuation rights obligation subsequent to issuance date were recorded in the consolidated statements of operations and comprehensive loss within gain/loss on derivatives, net in the period incurred. For the year ended December 31, 2013, the Company recorded a loss on the CVRs of $69.7 million, representing the settled value.
Convertible Debt
On July 29, 2013, the Company issued $300.0 million of Convertible Senior Notes due 2018 (the 2018 Notes) and, pursuant to an over-allotment exercise by the underwriters of such 2018 Notes offering, issued an additional $10.0 million of its 2018 Notes on August 1, 2013. On December 10, 2013, the Company issued an additional $287.5 million of the 2018 Notes through a reopening of the 2018 Notes indenture agreement. Also on December 10, 2013, the Company issued $402.5 million of Convertible Senior Notes due 2020 (the 2020 Notes) (the 2020 Notes, collectively with the 2018 Notes, the Convertible Notes). The 2018 Notes mature August 1, 2018 and the 2020 Notes mature on December 15, 2020. The Convertible Notes are convertible to cash or shares of the Companys common stock at the Companys option. In accordance with U.S GAAP, the notes are accounted for as a liability with a separate equity component recorded for the conversion option. A liability was recorded for the Convertible Notes on the issuance date at fair value based on a discounted cash flow analysis using current market rates for debt instruments with similar terms. The difference between the initial proceeds from the Convertible Notes and the estimated fair value of the debt instruments resulted in a debt discount, with an offset recorded to additional paid-in capital representing the equity component. The debt discount is being amortized to interest expense over the expected lives of the Convertible Notes.
Derivative Instruments
The Company may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with its borrowings. Certain of the techniques used to hedge exposure to interest rate fluctuations may also be used to protect against declines in the market value of assets that result from general trends in debt markets. The principal objective of such agreements is to minimize the risks and/or costs associated with the Companys operating and financial structure as well as to hedge specific anticipated transactions.
The Company records all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
F-31
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment. If the Company elects not to apply hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the consolidated statements of operations and comprehensive loss. If the derivative is designated and qualifies for hedge accounting treatment the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivatives change in fair value will be immediately recognized in earnings.
Share Repurchase Programs
ARCT IIIs and ARCT IVs boards of directors had adopted Share Repurchase Programs (the ARCT III SRP and the ARCT IV SRP, respectively, and collectively, the SRPs) that enabled stockholders to offer their shares to ARCT III and ARCT IV, respectively, for repurchase in limited circumstances. The SRPs permitted investors to sell their shares back to ARCT III or ARCT IV, as applicable, after they had held them for at least one year, subject to the significant conditions and limitations described below.
The purchase price per share of the ARCT III SRP depended on the length of time investors had held such shares as follows: after one year from the purchase date the lower of $9.25 and 92.5% of the amount they actually paid for each share; after two years from the purchase date the lower of $9.50 and 95.0% of the amount they actually paid for each share; after three years from the purchase date the lower of $9.75 and 97.5% of the amount they actually paid for each share; and after four years from the purchase date the lower of $10.00 and 100% of the amount they actually paid for each share.
The purchase price per share of the ARCT IV SRP depended on the length of time investors had held such shares as follows: after one year from the purchase date the lower of $23.13 and 92.5% of the amount they actually paid for each share; after two years from the purchase date the lower of $23.75 and 95.0% of the amount they actually paid for each share; after three years from the purchase date the lower of $24.38 and 97.5% of the amount they actually paid for each share; and after four years from the purchase date the lower of $25.00 and 100.0% of the amount they actually paid for each share.
Both ARCT III and ARCT IV were only authorized to repurchase shares pursuant to the SRPs up to the value of shares issued under their respective DRIP (as defined below) and limited the amount spent to repurchase shares in a given quarter to the value of the shares issued under the DRIP in that same quarter.
When a stockholder requested repurchases and the repurchases were approved by ARCT IIIs or ARCT IVs board of directors, as applicable, it reclassified such obligation from equity to a liability based on the settlement value of the obligation. The following table reflects the number of shares repurchased for the years ended December 31, 2013, 2012 and 2011.
Number of Requests |
Number of Shares |
Average Price per Share |
||||||||||
2011 |
1 | 2,375 | $ | 10.00 | ||||||||
2012 |
75 | 180,744 | 10.07 | |||||||||
2013 |
11 | 4,956 | 24.98 | |||||||||
|
|
|
|
|
|
|||||||
Cumulative repurchase requests as of December 31, 2013 |
87 | 188,075 | $ | 10.46 | ||||||||
|
|
|
|
|
|
Upon the ARCT III Merger, the ARCT III SRP was terminated. Upon the ARCT IV Merger, the ARCT IV SRP was terminated.
Upon the closing of the ARCT III Merger on February 28, 2013, pursuant to the terms of the ARCT III Merger Agreement, 29.2 million shares, or 16.5% of the then outstanding shares of ARCT IIIs common stock, were paid in cash at $12.00 per share, which is equivalent to 27.7 million shares of the Companys common stock based on the ARCT III Exchange Ratio. See Note 3 Mergers and Acquisitions.
On August 20, 2013, the Companys board of directors reauthorized its $250 million share repurchase program which was originally authorized in February 2013. During the year ended December 31, 2013, the Company repurchased approximately 0.6 million shares at an average price of $13.07 per share or $7.5 million in total.
F-32
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Distribution Reinvestment Plans
Pursuant to the ARCT III distribution reinvestment plan (ARCT III DRIP), stockholders could have elected to reinvest distributions by purchasing shares of ARCT III common stock in lieu of receiving cash. No dealer manager fees or selling commissions were paid with respect to shares purchased pursuant to the ARCT III DRIP. Participants purchasing shares pursuant to the ARCT III DRIP had the same rights and were treated in the same manner as if such shares were issued pursuant to ARCT IIIs initial public offering (the ARCT III IPO). Shares issued pursuant to the ARCT III DRIP were recorded within stockholders equity in the accompanying consolidated balance sheets in the period distributions were declared. During the years ended December 31, 2013, 2012 and 2011, ARCT III issued 0.5 million, 2.7 million and 27,169 shares of common stock, respectively, with a value of $4.9 million, $27.1 million and $0.3 million, respectively, in each case with a par value per share of $0.01, pursuant to the DRIP. Upon the closing of the ARCT III Merger, the DRIP was terminated.
Pursuant to the ARCT IV distribution reinvestment plan (ARCT IV DRIP), stockholders could have elected to reinvest distributions by purchasing shares of ARCT IV common stock in lieu of receiving cash. No dealer manager fees or selling commissions are paid with respect to shares purchased pursuant to the ARCT IV DRIP. Participants purchasing shares pursuant to the ARCT IV DRIP had the same rights and were treated in the same manner as if such shares were issued pursuant to ARCT IVs initial public offering (the ARCT IV IPO). Shares issued pursuant to the ARCT III DRIP were recorded within stockholders equity in the accompanying consolidated balance sheet in the period distributions are declared. During the years ended December 31, 2013 and 2012, ARCT IV issued 0.5 million and 7,690 shares of common stock with a value of $20.7 million and $0.4 million, respectively, and a par value per share of $0.01 pursuant to the ARCT IV DRIP.
F-33
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Revenue Recognition
Upon the acquisition of real estate, certain properties will have leases where minimum rent payments change during the term of the lease. The Company will record rental revenue for the full term of each lease on a straight-line basis. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Cost recoveries from tenants are included in tenant reimbursement income in the period the related costs are incurred, as applicable.
The Companys revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable, and include in revenues, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. Straight-line rent receivables are included in prepaid expenses and other assets on the consolidated balance sheets. See Note 8 Prepaid Expenses and Other Assets (As Restated). The Company defers the revenue related to lease payments received from tenants in advance of their due dates. As of December 31, 2013 and 2012, the Company had $20.4 million and $4.4 million, respectively, of deferred rental income, which is included in deferred rent and other liabilities on the consolidated balance sheets.
The Company continually reviews receivables related to rent and unbilled rent receivables and determines collectability by taking into consideration the tenants payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, the Company will record an increase in the allowance for uncollectible accounts or record a direct write-off of the receivable in the consolidated statements of operations and comprehensive loss. As of December 31, 2013, the Company recorded an allowance for uncollectible accounts of $187,000. As of December 31, 2012, the Company determined that no allowance for uncollectible accounts was necessary.
Contingent Rental Income
The Company owns certain properties that have associated leases that require the tenant to pay contingent rental income based on a percentage of the tenants sales after the achievement of certain sales thresholds, which may be monthly, quarterly or annual targets. As a lessor, the Company defers the recognition of contingent rental income until the specified target that triggered the contingent rental income is achieved, or until such sales upon which percentage rent is based are known.
Offering and Related Costs
Offering and related costs include costs incurred in connection with the Companys issuance of common stock. These costs include, but are not limited to, (i) legal, accounting, printing, mailing and filing fees; (ii) escrow related fees and (iii) reimbursement to the dealer manager for amounts they paid to reimburse the bonified due diligence expenses of broker-dealers.
Acquisition Related Expenses and Merger and Other Non-routine Transaction Related Expenses
All direct costs incurred as a result of a business combination are classified as acquisition costs or merger and other non-routine transaction costs and expensed as incurred. In addition, indirect costs, such as internal salaries, that are tracked and documented in a manner that clearly indicate that the activities driving the cost directly relate to activities necessary to complete, or effect, a business combination are classified as acquisition related expenses. Similar costs incurred in relation to mergers with entities under common control (which are not accounted for as acquisitions) are included in the caption merger and other non-routine transactions. Acquisition related expenses include legal and other transaction related costs incurred in connection with self-originated acquisitions including purchases of portfolios. Other non-routine transaction costs are also presented within the line item merger and other non-routine transactions in the consolidated statements of operations and comprehensive loss.
F-34
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Merger and other non-routine transaction related expenses include the following costs (amounts in thousands):
Year Ended December 31, | ||||||||||||
2013 (As Restated) |
2012 | 2011 | ||||||||||
Merger related costs: |
||||||||||||
Strategic advisory services |
$ | 62,332 | $ | | $ | | ||||||
Transfer taxes |
8,931 | | | |||||||||
Legal fees and expenses |
15,081 | 2,603 | | |||||||||
Personnel costs and other reimbursements |
3,612 | | | |||||||||
Other fees and expenses |
8,450 | | | |||||||||
Other non-routine costs: |
||||||||||||
Post-transaction support services |
4,000 | | | |||||||||
Subordinated distribution fee |
98,360 | | | |||||||||
Furniture, fixtures and equipment |
5,800 | | | |||||||||
Legal fees and expenses |
950 | | | |||||||||
Personnel costs and other reimbursements |
2,546 | | | |||||||||
Other fees and expenses |
481 | | | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 210,543 | $ | 2,603 | $ | | ||||||
|
|
|
|
|
|
Equity-based Compensation
The Company has an equity-based incentive award plan for its affiliated Manager, non-executive directors, officers, other employees and independent contractors who are providing services to the Company, as applicable, and a non-executive director restricted share plan, which are accounted for under the guidance for share-based payments. The expense for such awards is recognized over the vesting period or when the requirements for exercise of the award have been met. See Note 18 Equity-based Compensation (As Restated) for additional information on these plans.
Per Share Data
Income (loss) per basic share of common stock is calculated by dividing net income (loss) less dividends on unvested restricted stock and dividends on preferred shares by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted income (loss) per share of common stock considers the effect of potentially dilutive shares of common stock outstanding during the period. As the Company has the ability and intent to settle all outstanding convertible debt in cash, the Company has excluded the if-converted shares from its calculation of diluted shares.
Income Taxes
Each of the Company, ARCT IV and ARCT III qualified as REITs under Sections 856 through 860 of the Internal Revenue Code (the Code) commencing with the taxable year ended December 31, 2011. Being qualified for taxation as a REIT, each of the Company, ARCT III and ARCT IV generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, and so long as it distributes at least 90% of its REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain. REITs are subject to a number of other organizational and operational requirements. Each of the Company, ARCT IV and ARCT III may still be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.
As of December 31, 2013, the Company had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended December 31, 2010 remain open to examination by the major taxing jurisdictions to which the Company is subject.
F-35
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Reportable Segments
The Company has determined that it has one reportable segment with activities related to investing in real estate and real estate-related assets. The Companys investments in real estate generate rental revenue and other income through the leasing of properties, which comprised 100% of its total consolidated revenues. Although the Companys investments in real estate will be geographically diversified throughout the United States, management evaluates operating performance on an individual property level. The Companys properties have been aggregated into one reportable segment.
Recent Accounting Pronouncements
In December 2011, the U.S. Financial Accounting Standards Boards (the FASB) issued guidance regarding disclosures about offsetting assets and liabilities, which requires entities to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance was effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented. The adoption of this guidance, which is related to disclosure only, did not have a material impact on the Companys consolidated financial position, results of operations or cash flows. Refer to Note 15 Derivatives and Hedging Activities for the Companys disclosure of information about offsetting and related arrangements.
In July 2012, the FASB issued revised guidance intended to simplify how an entity tests indefinite-lived intangible assets for impairment. The amendments allow an entity to initially assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. An entity is no longer required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative test unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments were effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this guidance did not have a material impact on the Companys consolidated financial position, results of operations or cash flows.
In February 2013, the FASB issued guidance which requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The guidance was effective for annual and interim periods beginning after December 15, 2012. The adoption of this guidance, which is related to disclosure only, did not have a material impact on the Companys consolidated financial position, results of operations or cash flows. Refer to Note 15 Derivatives and Hedging Activities for the Companys disclosure of the information about the amounts reclassified out of accumulated other comprehensive income by component.
In February 2013, the FASB issued new accounting guidance clarifying the accounting and disclosure requirements for obligations resulting from joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on the Companys consolidated financial position, results of operations or cash flows.
In April 2014, the FASB issued Accounting Standards Update, 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08), which amends the reporting requirements for discontinued operations by updating the definition of a discontinued operation to be a component of an entity that represents a strategic shift that has (or will have) a major effect on an entitys operations and financial results, resulting in fewer disposals that qualify for discontinued operations reporting yet the pronouncement also requires expanded disclosures for discontinued operations. The Company adopted ASU 2014-08 effective January 1, 2014. Starting with the first quarter of 2014, the results of operations for disposals and properties that were previously reported in discontinued operations but do not qualify under the new guidance will be presented within income from continuing operations on the accompanying consolidated statements of operations and comprehensive loss.
F-36
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Note 5 Real Estate Investments (As Restated)
Excluding the CapLease Merger, the following table presents the allocation of the assets acquired and liabilities assumed during the periods presented (dollar amounts in thousands):
Year Ended December 31, | ||||||||
2013 (1) | 2012 | |||||||
Real estate investments, at cost: |
||||||||
Land |
$ | 883,491 | $ | 237,282 | ||||
Buildings, fixtures and improvements |
2,311,211 | 1,229,230 | ||||||
|
|
|
|
|||||
Total tangible assets |
3,194,702 | 1,466,512 | ||||||
|
|
|
|
|||||
Acquired intangible assets: |
||||||||
In-place leases |
334,839 | 197,873 | ||||||
Above market leases |
12,317 | 1,503 | ||||||
|
|
|
|
|||||
Total assets acquired, net |
3,541,858 | 1,665,888 | ||||||
|
|
|
|
|||||
Assumed intangible liabilities: |
||||||||
|
|
|
|
|||||
Below market leases |
(21,446 | ) | | |||||
|
|
|
|
|||||
Total liabilities acquired, net |
(21,446 | ) | | |||||
OP Units issued to acquire real estate investments |
| (6,352 | ) | |||||
|
|
|
|
|||||
Cash paid for acquired real estate investments |
$ | 3,520,412 | $ | 1,659,536 | ||||
|
|
|
|
|||||
Number of properties acquired |
1,739 | 573 | ||||||
|
|
|
|
(1) | Excludes 50 properties comprised of $66.1 million of net investments subject to direct financing leases. |
The following table presents unaudited pro forma information as if the acquisitions, including the CapLease Merger discussed in Note 6 CapLease Acquisition (As Restated), during the year ended December 31, 2013 had been consummated on January 1, 2012. These amounts have been calculated after applying the Companys accounting policies and adjusting the results of acquisitions to reflect the additional depreciation and amortization and interest expense that would have been charged had the acquisitions occurred on January 1, 2012. Additionally, the unaudited pro forma net loss attributable to stockholders was adjusted to exclude acquisition related expenses of $76.1 million (as restated) and $45.1 million for the years ended December 31, 2013 and 2012, respectively, and merger and other non-routine transaction related expenses of $210.5 million (as restated) and $2.6 million for the years ended December 31, 2013 and 2012, respectively (amounts in thousands).
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
As Restated | As Restated | |||||||
Pro forma revenues |
$ | 573,503 | $ | 467,434 | ||||
Pro forma net loss attributable to stockholders |
$ | (91,891 | ) | $ | (15,424 | ) |
F-37
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Future Lease Payments
The following table presents future minimum base rental cash payments due to the Company over the next five years and thereafter. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items (amounts in thousands):
Future Minimum Operating Lease Base Rent Payments |
Future Minimum Direct Financing Lease Payments (1) |
|||||||
2014 |
$ | 522,563 | $ | 5,402 | ||||
2015 |
512,833 | 5,028 | ||||||
2016 |
496,691 | 4,946 | ||||||
2017 |
460,070 | 4,545 | ||||||
2018 |
424,934 | 3,455 | ||||||
Thereafter |
2,734,499 | 10,352 | ||||||
|
|
|
|
|||||
Total |
$ | 5,151,590 | $ | 33,728 | ||||
|
|
|
|
(1) | 50 properties are subject to direct financing leases and, therefore, revenue is recognized as direct financing lease income on the discounted cash flows of the lease payments. Amounts reflected are the cash rent on these respective properties. |
Net Investment in Direct Financing Leases
The components of the Companys net investment in direct financing leases as of December 31, 2013 are as follows (amounts in thousands):
December 31, 2013 | ||||
Future minimum lease payments receivable |
$ | 33,729 | ||
Unguaranteed residual value of property |
46,172 | |||
Unearned income |
(13,789 | ) | ||
|
|
|||
Net investment in direct financing leases |
$ | 66,112 | ||
|
|
The Company had no investments in direct financing leases as of December 31, 2012.
Development Activities
Prior to the CapLease Acquisition Date (as defined below), Caplease entered into an agreement to construct a distribution warehouse in Columbia, South Carolina on a build-to-suit basis for a large private company tenant. The new build-to-suit project has an estimated total investment of $22.1 million. Construction activity and funding of the project commenced during June 2013.
Also prior to the CapLease Acquisition Date, CapLease entered into an agreement with a major Texas-based developer to develop a 150,000 square foot speculative office building in The Woodlands, Texas, adjacent to and part of the same development as an existing office building owned by CapLease and purchased in 2012. Costs of the project, which are budgeted to be $34.0 million, are scheduled to be funded by equity contributions from the Company and its developer partner, and $17.0 million of advances during the construction period under a development loan entered into with Amegy Bank. All equity contributions are scheduled to be borne as follows: the Company, 90%; and the developer, 10%; except for cost overruns, which will be borne 50% by each. Because the Company has a controlling financial interest in the investment, it consolidates the investment for financial accounting purposes. The Company has an option to purchase, and the developer the option to sell to the Company, in each case at fair market value, the developers interest in the project upon (i) substantial completion of the project and (ii) leases being entered into for 95% of the square footage of the project. Construction activity and funding of the project commenced during the quarter ended September 30, 2013.
F-38
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The table below details the Companys investment in its pending development projects as of December 31, 2013. The information included in the table below represents managements estimates and expectations at December 31, 2013 which are subject to change. The Companys disclosures regarding certain projections or estimates of completion dates may not reflect actual results (dollar amounts in thousands).
Location |
Tenant |
Property |
Approximate Square Feet |
Lease Term (years) |
Percent Owned |
Investment through 12/31/13 |
Estimated Remaining Investment |
Estimated Total Investment |
Estimated Completion Date | |||||||||||||||||||||
Columbia, South Carolina |
Large private company |
Warehouse | 450,000 | 10.5 | (1) | 100 | % | $ | 14,745 | $ | 7,325 | $ | 22,070 | Q1 2014 | ||||||||||||||||
The Woodlands, Texas |
N/A - speculative development |
Office building | 150,000 | N/A | 90 | % | $ | 7,257 | $ | 26,775 | $ | 34,032 | Q3 2014 |
(1) | The lease is in force and the 10.5 year lease term will commence upon substantial completion of the building. |
The amount of the Investment as of December 31, 2013 includes capitalized interest of approximately $37,000 for the Columbia, South Carolina project and approximately $45,000 for The Woodlands, Texas project. The amount of capitalized interest subsequent to the CapLease Acquisition Date through December 31, 2013 was not significant.
Tenant Concentration
The following table lists the tenants of the Company whose annualized rental income on a straight-line basis represented greater than 10% of consolidated annualized rental income on a straight-line basis as of December 31, 2013. Annualized rental income for net leases is rental income on a straight-line basis as of the period reported, which includes the effect of tenant concessions such as free rent, as applicable. There were no tenants exceeding 10% of consolidated annualized rental income on a straight-line basis at December 31, 2013.
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
Citizens Bank |
* | 13.8 | % | |||||
Dollar General |
* | 12.3 | % | |||||
FedEx |
* | 10.2 | % |
* | The tenants annualized rental income was not greater than 10% of total consolidated annualized rental income for all portfolio properties as of the period specified. |
No other tenant represents more than 10% of total consolidated annualized rental income on a straight-line basis for the periods presented.
Geographic Concentration
The following table lists the states where the Company has concentrations of properties where annual rental income on a straight-line basis represented greater than 10% of consolidated annualized rental income on a straight-line basis as of December 31, 2013 and 2012:
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
Texas |
10.7 | % | * | |||||
Illinois |
* | 11.2 | % |
* | The geographical concentrations annualized rental income was not greater than 10% of total consolidated annualized rental income for all portfolio properties as of the period specified. |
F-39
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Note 6 CapLease Acquisition (As Restated)
On November 5, 2013 (the CapLease Acquisition Date), the Company completed its acquisition of CapLease, a real estate investment trust that primarily owned and managed a diversified portfolio of single tenant commercial real estate properties subject to long-term leases, the majority of which were net leases, to high credit quality tenants, by acquiring 100% of the outstanding common shares and voting interests of CapLease. The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The Companys consolidated financial statements include the results of operations of CapLease subsequent to the CapLease Acquisition Date.
The purchase price includes a cash payment of $920.7 million, which was funded by the Company through additional borrowings under its revolving credit facility and the credit facility assumed from CapLease, see Note 12 Other Debt and Note 13 Credit Facilities.
The purchase price allocation for the CapLease Merger is considered preliminary, and additional adjustments may be recorded during the measurement period in accordance with U.S. GAAP. The purchase price allocation will be finalized as the Company receives additional information relevant to the acquisition, including a final valuation of the assets purchased and liabilities assumed.
F-40
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The preliminary purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair value and reflects the goodwill adjustment discussed in Note 2 Restatement of Previously Issued Financial Statements. The following table presents the allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the CapLease Acquisition Date (in thousands):
As of CapLease Acquisition Date (As Restated) |
||||
Fair value of consideration given |
$ | 920,697 | ||
|
|
|||
Assets purchased, at fair value: |
||||
Land |
$ | 235,843 | ||
Buildings, fixtures and improvements |
1,596,481 | |||
Land and construction in process |
12,352 | |||
Acquired intangible lease assets |
191,964 | |||
|
|
|||
Total real estate investments |
2,036,640 | |||
|
|
|||
Cash and cash equivalents |
41,799 | |||
Investment securities |
60,730 | |||
Loans held for investment |
26,457 | |||
Restricted cash |
29,119 | |||
Prepaid expenses and other assets |
21,249 | |||
Deferred costs |
325 | |||
|
|
|||
Total identifiable assets purchased |
2,216,319 | |||
|
|
|||
Liabilities assumed, at fair value: |
||||
Mortgage notes payable |
1,037,510 | |||
Secured credit facility |
121,000 | |||
Other debt |
114,208 | |||
Below-market leases |
57,058 | |||
Derivative liabilities |
158 | |||
Accounts payable and accrued expenses |
49,291 | |||
Deferred rent and other liabilities |
8,619 | |||
|
|
|||
Total liabilities assumed |
1,387,844 | |||
|
|
|||
|
|
|||
Non-controlling interest retained by third party |
567 | |||
|
|
|||
|
|
|||
Net identifiable assets acquired by Company |
827,908 | |||
|
|
|||
Goodwill |
$ | 92,789 | ||
|
|
Management is in the process of further evaluating the purchase price accounting. The fair value of real estate investments and below-market leases have been estimated by the Company with the assistance of third-party valuation firms. Based on analyses received to date, the estimated fair value of these assets and liabilities total $2.0 billion and $57.1 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analyses, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result.
The fair value of the non-controlling interest has been estimated based on the fair value of the percentage ownership of The Woodlands, Texas development activity not held by the Company. Refer to Note 5 Real Estate Investments (As Restated).
The fair value of the remaining CapLease assets and liabilities have been calculated in accordance with the Companys policy on purchase price allocation, as disclosed in Note 4 Summary of Significant Accounting Policies (As Restated).
F-41
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The $92.8 million of goodwill is expected to be assigned to the real estate segment upon completion of the external valuation. The goodwill recognized is attributed to the enhancement of the Companys year-round rental revenue stream, expected synergies, and the assembled work force at CapLease.
The amounts of revenue and net loss of CapLease included in the Companys consolidated statements of operations and comprehensive loss from the CapLease Acquisition Date to the period ended December 31, 2013 was $29.5 million and $6.3 million, respectively.
The pro forma consolidated statement of operation as if CapLease had been included in the consolidated results of the Company for the entire years ended December 31, 2013 and 2012 have been reflected in Note 5 Real Estate Investments (As Restated).
Note 7 Investment Securities, at Fair Value
Investment securities are considered available-for-sale and, therefore, increases or decreases in the fair value of these investments are recorded in accumulated other comprehensive income (loss) as a component of equity on the consolidated balance sheets unless the securities are considered to be other than temporarily impaired at which time the losses are reclassified to expense.
The following table details the unrealized gains and losses on investment securities as of December 31, 2013 and 2012 (amounts in thousands):
As of December 31, 2013 | Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | ||||||||||||
Investments in real estate fund |
$ | 1,589 | $ | | $ | (105 | ) | $ | 1,484 | |||||||
CMBS |
60,452 | 498 | (367 | ) | 60,583 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 62,041 | $ | 498 | $ | (472 | ) | $ | 62,067 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
As of December 31, 2012 | ||||||||||||||||
Preferred securities |
$ | 41,747 | $ | 223 | $ | (316 | ) | $ | 41,654 | |||||||
|
|
|
|
|
|
|
|
Investment in Real Estate Fund
On June 4, 2013, the Company invested $10.0 million in a real estate fund that is sponsored by an affiliate of the Former Manager and which invests primarily in equity securities of other publicly traded REITs. During the year-ended December 31, 2013, the Company reinvested distributions totaling $0.1 million into the real estate fund. During the fourth quarter of 2013, the Company sold investments with an original cost of $8.5 million for total proceeds of $8.1 million. The realized loss of $0.4 million has been recorded to losses on investments in affiliates within the consolidated statements of operations and comprehensive loss. Refer to Note 19 Related Party Transactions and Arrangements (As Restated).
Commercial Mortgage-Backed Securities (CMBS)
In connection with the CapLease Merger, the Company acquired 10 commercial mortgage-backed securities, with a fair value of $60.7 million. At December 31, 2013, the commercial mortgage-backed securities had a carrying value of $60.6 million and carried interest rates ranging from 5.88% to 8.95%. The Company had no commercial mortgage-backed securities as of December 31, 2012.
As of December 31, 2013, the fair value of four commercial mortgage-backed securities was below its carrying value. The Company evaluated each of its securities for other-than-temporary impairment at December 31, 2013, and determined that no other-than-temporary impairment charges on its securities were appropriate. The Company believes that none of the unrealized losses on investment securities are other-than-temporary because management expects the Company will receive all contractual principal and interest related to these investments. In addition, the Company did not have the intent to sell the securities or believe it would be required to sell them as of December 31, 2013.
F-42
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Redeemable Preferred Stock, Senior Notes and Common Stock
At December 31, 2012, the Company had investments in redeemable preferred stock, accounted for as debt securities, with a fair value of $41.7 million. These investment securities were sold during the year ended December 31, 2013, resulting in a gain on sale of investments of $0.5 million.
During 2013, the Company acquired additional investments in redeemable preferred stock, as well as investments in senior notes and common stock, with an aggregate cost basis of $69.5 million. The Company sold all of these investment securities during 2013 for $67.2 million, resulting in a loss on sale of $2.3 million. As of December 31, 2013, the Company had no remaining investments in redeemable preferred stock, senior notes or common stock.
Note 8 Prepaid Expenses and Other Assets (As Restated)
Prepaid expenses and other assets consisted of the following as of December 31, 2013 and 2012 (amounts in thousands):
Year Ended December 31, | ||||||||
2013 (As Restated) |
2012 | |||||||
Restricted escrow deposits |
$ | 101,813 | $ | 138 | ||||
Accounts receivable (1) |
16,254 | 7,174 | ||||||
Straight line rent receivable |
19,010 | 3,738 | ||||||
Prepaid expenses |
43,801 | 905 | ||||||
Other assets |
5,848 | 29 | ||||||
|
|
|
|
|||||
$ | 186,726 | $ | 11,984 | |||||
|
|
|
|
(1) | Allowance for doubtful accounts was $187,000 as of December 31, 2013. There was no allowance for doubtful accounts as of December 31, 2012. |
Note 9 Loans Held for Investment
In connection with the CapLease Merger, the Company acquired 12 loans held for investment, which consist predominantly of mortgage loans on properties subject to leases to investment grade tenants, with a fair value of $26.5 million at the CapLease Merger Date. At December 31, 2013, the loans held for investment had a carrying value of $26.3 million and carried interest rates ranging from 5.28% to 7.24%. The fair value adjustment is being amortized to interest expense in the consolidated statements of operations and comprehensive loss over the life of the Secured Term. The Company had no loans held for investment as of December 31, 2012.
The Companys loan portfolio is comprised primarily of fully amortizing or nearly fully amortizing first mortgage loans on commercial real estate leased to a single tenant. Payments of debt service on the Companys loans is, in substantially all cases, funded directly by rent payments paid into a lockbox account by the underlying tenant. Therefore, the Companys monitoring of the credit quality of its loans held for investment is focused primarily on an analysis of the tenant, including review of tenant credit ratings (including changes in ratings) and other measures of tenant credit quality, trends in the tenants industry and general economic conditions, and an analysis of measures of collateral coverage, such as an estimate of the loans loan-to-value (LTV) ratio (principal amount outstanding divided by estimated value of the property) and its remaining term until maturity. As of December 31, 2013, the Company did not record a reserve for loan loss.
Note 10 Fair Value of Financial Instruments (As Restated)
The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The guidance defines three levels of inputs that may be used to measure fair value:
Level 1 Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
F-43
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 Unobservable inputs that reflect the entitys own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of December 31, 2013, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Companys derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. As of December 31, 2013, the Companys interest rate cap derivative measured at fair value on a recurring basis was zero and was classified in Level 2 of the fair value hierarchy.
In addition, during the year ended December 31, 2013, real estate assets with a carrying amounts of $4.5 million related to two properties were deemed to be impaired and their carrying amount was reduced to their estimated fair value, resulting in an impairment charge of $3.3 million, which is included in impairment of real estate on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2013. The Companys estimated fair values of its real estate assets were primarily based upon an income approach utilizing a present value technique to discount the expected cash flows using market participant assumptions for market rent and terminal values, which are considered to be Level 3 inputs, or based upon recent comparable sales transaction, which are considered to be Level 2 inputs. The aggregate fair value as of December 31, 2013 was $1.2 million. No impairments were noted during the year ended December 31, 2012.
The following table presents information about the Companys assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of December 31, 2013 and 2012, aggregated by the level in the fair value hierarchy within which those instruments fall (amounts in thousands):
Quoted Prices in Active Markets Level 1 |
Significant Other Observable Inputs Level 2 |
Significant Unobservable Inputs Level 3 |
Total | |||||||||||||
December 31, 2013 |
||||||||||||||||
Investments in real estate fund |
$ | | $ | 1,484 | $ | | $ | 1,484 | ||||||||
CMBS |
| | 60,583 | 60,583 | ||||||||||||
Interest rate swap assets |
| 9,189 | | 9,189 | ||||||||||||
Interest rate swap liabilities |
| (1,719 | ) | | (1,719 | ) | ||||||||||
Series D Preferred Stock embedded derivative |
| | (16,736 | ) | (16,736 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | | $ | 8,954 | $ | 43,847 | $ | 52,801 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2012 |
||||||||||||||||
Investment securities |
$ | 41,654 | $ | | $ | | $ | 41,654 | ||||||||
Interest rate swaps |
| (3,830 | ) | | (3,830 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 41,654 | $ | (3,830 | ) | $ | | $ | 37,824 | |||||||
|
|
|
|
|
|
|
|
Investment in real estate fund The fair value of the Companys investment in real estate fund is based on published pricing.
F-44
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Commercial mortgage-backed securities The fair values of the Companys CMBS are valued using broker quotations, collateral values, subordination levels, and liquidity of the individual securities.
Derivatives The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Companys potential nonperformance risk and the performance risk of the counterparties.
Series D Preferred Stock embedded derivative The valuation of this derivative instrument is determined using a binomial option pricing model. Key inputs in the model include the expected term, risk-free interest rate, volatility, and dividend yield.
The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, due to affiliates and accounts payable approximate their carrying value on the accompanying consolidated balance sheets due to their short-term nature and are classified as Level 1 under the fair value hierarchy.
A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 or Level 3 of the fair value hierarchy during the year ended December 31, 2013.
The following is a reconciliation of the beginning and ending balance for the changes in instruments with Level 3 inputs in the fair value hierarchy for the year ended December 31, 2013 (amounts in thousands):
CMBS | Series D Preferred Stock Embedded Derivative |
Total | ||||||||||
Beginning balance |
$ | | $ | | $ | | ||||||
Fair value at purchase/issuance |
60,730 | (18,692 | ) | 42,038 | ||||||||
Sales of CMBS |
(278 | ) | | (278 | ) | |||||||
Fair value adjustment (1) |
131 | 1,956 | 2,087 | |||||||||
|
|
|
|
|
|
|||||||
Ending balance |
$ | 60,583 | $ | (16,736 | ) | $ | 43,847 | |||||
|
|
|
|
|
|
(1) | The change in fair value in the CMBS and Series D Preferred Stock embedded derivative is recorded in unrealized gain (loss) on investment securities, net and loss on derivative instruments, net, respectively, on the consolidated statement of operations and comprehensive loss. |
F-45
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The fair values of the Companys financial instruments that are not reported at fair value on the consolidated balance sheets are reported below (amounts in thousands):
Level | Carrying Amount at December 31, 2013 |
Fair Value at December 31, 2013 |
Carrying Amount at December 31, 2012 |
Fair Value at December 31, 2012 |
||||||||||||||||
Assets: |
||||||||||||||||||||
Loans held for investment |
3 | $ | 26,279 | $ | 26,435 | $ | | $ | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities: |
||||||||||||||||||||
Convertible debt |
3 | $ | 972,490 | $ | 976,629 | $ | | $ | | |||||||||||
Mortgage notes payable |
3 | 1,301,114 | 1,305,823 | 265,118 | 271,056 | |||||||||||||||
Senior secured revolving credit facility |
3 | | | 124,604 | 124,604 | |||||||||||||||
Senior corporate credit facilities |
3 | 1,819,800 | 1,819,800 | | | |||||||||||||||
Secured credit facility |
3 | 150,000 | 150,000 | | | |||||||||||||||
Trust preferred notes |
3 | 26,548 | 23,345 | | | |||||||||||||||
Secured term loan |
3 | 58,979 | 59,049 | | | |||||||||||||||
Other debt |
3 | 19,277 | 19,350 | | | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
$ | 4,348,208 | $ | 4,353,996 | $ | 389,722 | $ | 395,660 | ||||||||||||
|
|
|
|
|
|
|
|
Loans held for investment The fair value of the Companys fixed-rate loan portfolio is estimated with a discounted cash flow analysis, utilizing scheduled cash flows and discount rates estimated by management to approximate those that a willing buyer and seller might use.
Credit facilities Management believes that the stated interest rates (which float based on short-term interest rates) approximates market rates. As such, the fair values of these obligations is estimated to be equal to the outstanding principal amounts.
Convertible debt, mortgage notes payable and secured term loan The fair value of mortgages payable on real estate investments and the secured term loan is estimated using a discounted cash flow analysis, based on managements estimates of market interest rates. For mortgages where the Company has an early prepayment right, management also considers the prepayment amount to evaluate the fair value.
Trust preferred notes The fair value of the Companys other long-term debt is estimated using a discounted cash flow analysis, based on managements estimates of market interest rates.
Note 11 Mortgage Notes Payable
The Companys mortgage notes payable consist of the following as of December 31, 2013 and 2012 (dollar amounts in thousands):
Encumbered Properties | Outstanding Loan Amount |
Weighted-Average Effective Interest Rate (1) |
Weighted-Average Maturity (2) |
|||||||||||||
December 31, 2013 |
177 | $ | 1,258,661 | 3.42 | % | 3.41 | ||||||||||
December 31, 2012 |
164 | $ | 265,118 | 4.28 | % | 5.51 |
(1) | Mortgage notes payable have fixed rates or are fixed by way of interest rate swap arrangements. Effective interest rates range from 1.83% to 6.28% at December 31, 2013 and 3.32% to 6.13% at December 31, 2012. |
(2) | Weighted-average remaining years until maturity as of December 31, 2013 and 2012, respectively. |
F-46
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
In conjunction with the CapLease Merger, aggregate net premiums totaling $45.2 million were recorded upon assumption of the mortgages for above-market interest rates. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective mortgages using a method that approximates the effective-interest method. As of December 31, 2013, there was $42.5 million in unamortized net premiums included in mortgage notes payable, net on the consolidated balance sheets.
The following table summarizes the scheduled aggregate principal repayments subsequent to December 31, 2013 (amounts in thousands):
Principal Repayment | ||||
2014 |
$ | 86,933 | ||
2015 |
381,574 | |||
2016 |
295,627 | |||
2017 |
257,658 | |||
2018 |
36,210 | |||
Thereafter |
200,659 | |||
|
|
|||
$ | 1,258,661 | |||
|
|
The Companys mortgage loan agreements generally require restrictions on corporate guarantees and the maintenance of financial covenants including maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios). As of December 31, 2013, the Company was in compliance with the debt covenants under the mortgage loan agreements.
Note 12 Other Debt
Convertible Obligation to Series C Convertible Preferred Stockholders
On June 7, 2013, the Company issued 28.4 million shares of Series C Stock through a private placement for gross proceeds of $445.0 million. Due to an unconditional obligation to either redeem or convert the Series C Stock into a variable number of shares of common stock that is predominantly based on a fixed monetary amount, the preferred securities were classified as an obligation under U.S. GAAP and were presented in the consolidated balance sheets as a liability prior to their conversion on November 12, 2013. On November 12, 2013, the Company converted all outstanding Series C Stock into common shares of the Company. Pursuant to the Series C Articles Supplementary, the number of common shares that could be issued upon conversion of Series C Stock was limited by the exchange cap. Therefore, the Company converted 1.1 million shares of Series C Stock into 1.4 million common shares of the Company. With respect to the 27.3 million shares of Series C Stock for which Common Shares could not be issued upon conversion due to the exchange cap, the Company paid holders of Series C Stock an aggregate cash amount equal to approximately $441.4 million in exchange for such Series C Stock. Based on the Companys share price on the conversion date, the total settlement value was $458.8 million. Settlement of the Series C Stock resulted in a loss of $13.8 million, which is recorded as interest expense in the consolidated statements of operations and comprehensive loss.
F-47
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Convertible Senior Note Offering
On July 29, 2013, the Company issued $300.0 million of the 2018 Notes and, pursuant to an over-allotment exercise by the underwriters of such 2018 Notes offering, issued an additional $10.0 million of its 2018 Notes on August 1, 2013 (collectively, the Original 2018 Notes). On December 10, 2013, the Company issued an additional $287.5 million through a reopening of the 2018 Notes indenture agreement (the Reopened 2018 Notes, together with the Original 2018 Notes, the 2018 Notes). The 2018 Notes mature on August 1, 2018. The fair value of the Original 2018 Notes and Reopened 2018 Notes was determined at issuance to be $299.6 million and $282.1 million, respectively, resulting in a debt discount of $10.4 million and $5.4 million, respectively, with an offset recorded to additional paid-in capital representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected lives of the 2018 Notes. As of December 31, 2013, the carrying value of the Original 2018 Notes and Reopened 2018 Notes was $300.5 million and $282.1 million, respectively. The holders may elect to convert the 2018 Notes into cash, common stock of the Company or a combination thereof, at the Companys option, in limited circumstances prior to February 1, 2018 and may convert the 2018 Notes at any time into such consideration on or after February 1, 2018. The initial conversion rate is 59.805 shares of the Companys common stock per $1,000 principal amount of 2018 Notes.
On December 10, 2013, the Company issued $402.5 million of the 2020 Notes. The 2020 Notes mature on December 15, 2020. The fair value of the 2020 Notes was determined at issuance to be $389.7 million, resulting in a debt discount of $12.8 million with an offset recorded to additional paid-in capital representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected life of the 2020 Notes. As of December 31, 2013, the carrying value of the 2020 Notes was $389.7 million. The holders may elect to convert the 2020 Notes into cash, common stock of the Company or a combination thereof, at the Companys option, in limited circumstances prior to June 15, 2020 and may convert the 2020 Notes at any time into such consideration on or after June 15, 2020. The initial conversion rate is 66.0262 shares of ARCPs common stock per $1,000 principal amount of 2020 Notes.
In connection with the 2018 Notes and 2020 Notes, the remaining unamortized discount totaled $27.5 million.
See Note 24 Subsequent Events (As Restated) for further discussion.
Trust Preferred Notes
As part of the CapLease Merger, the Company assumed $30.9 million in aggregate principal amount of fixed/floating rate preferred notes with a fair value of $26.5 million at the CapLease Merger Date. The trust preferred securities represent an unsecured subordinated recourse debt obligation of the Company and require quarterly interest payments calculated at a fixed interest rate equal to 7.68% per annum through January 30, 2016, and subsequently at a variable interest rate equal to LIBOR plus 2.60% per annum. The notes must be redeemed on January 30, 2036, and may be redeemed, in whole or in part, at par, at the Companys option, at any time. The discount recorded on the notes is being amortized to interest expense on the consolidated statements of operations and comprehensive loss over the life of the preferred notes. As of December 31, 2013, the carrying value of the preferred securities was $26.5 million.
Secured Term Loan
As part of the CapLease Merger, the Company assumed a secured term loan with KBC Bank, N.V. with a principal balance of $59.8 million and a fair value of $60.7 million at the CapLease Merger Date. The interest coupon on the loan is fixed at 5.81% annually until the loan matures in January 2018. The loan is non-recourse to the Company, subject to limited non-recourse exceptions. During the period between the CapLease Acquisition Date and December 31, 2013, the Company made principal payments of $1.7 million. The premium is being amortized to interest expense on the consolidated statements of operations and comprehensive loss over the life of the secured term loan. As of December 31, 2013, the carrying value of the secured term loan was $59.0 million.
F-48
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Amounts related to the secured term loan as of December 31, 2013 were as follows (amounts in thousands):
Borrowings | Collateral Carrying Value |
|||||||
Loans held for investment |
$ | 14,065 | $ | 22,496 | ||||
Intercompany mortgage loans on CapLease properties |
9,195 | 21,114 | ||||||
Commercial mortgage-backed securities |
34,915 | 46,054 | ||||||
|
|
|
|
|||||
$ | 58,175 | $ | 89,664 | |||||
|
|
|
|
Other Debt
As part of the CapLease Merger, the Company assumed $19.2 million of senior notes (the Senior Notes) that bear interest at an annual interest rate of 7.50%, payable semi-annually on April 1 and October 1, with a fair value of $19.3 million at the CapLease Merger Date. The Senior Notes mature on October 1, 2027. The Company has the right to redeem the Senior Notes in whole or in part for cash at any time or from time to time at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed, plus any accrued and unpaid interest. Holders of the Senior Notes may require the Company to repurchase their Senior Notes, in whole or in part, on October 1, 2017 and October 1, 2022, for a cash price equal to 100% of the principal amount of the Senior Notes to be repurchased, plus any accrued and unpaid interest. The discount is being amortized to interest expense on the consolidated statements of operations and comprehensive loss over the life of the Senior Notes. As of December 31, 2013, the carrying value of the Senior Notes was $19.3 million.
In conjunction with the CapLease Merger, aggregate net discounts totaling $3.5 million were recorded upon assumption of the trust preferred notes, secured term loan and senior notes. As of December 31, 2013, unamortized net discounts were $3.5 million in unamortized net discounts included in other debt on the consolidated balance sheets.
Future Minimum Repayments
The following table summarizes the scheduled aggregate principal repayments of our convertible debt, trust preferred notes, secured term loan and other debt subsequent to December 31, 2013 (amounts in thousands):
Principal Repayment | ||||
2014 |
$ | 12,851 | ||
2015 |
11,862 | |||
2016 |
12,516 | |||
2017 |
26,890 | |||
2018 |
610,767 | |||
Thereafter |
433,430 | |||
|
|
|||
$ | 1,108,316 | |||
|
|
F-49
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Barclays Facility
As of December 31, 2013, the Company had available commitments from Barclays Bank PLC, and other committed parties, for up to $2.1 billion in senior secured term loans (the Barclays Facility) in order to fund cash amounts payable in connection with the Cole Merger, which were subject to certain conditions, including the absence of a material adverse effect in respect of Cole, the negotiation of definitive documentation and pro forma compliance with financial covenants. Any other long-term debt obtained by the Company would have reduced the commitments under the Barclays Facility. The Barclays Facility contained an accordion feature to allow the Company, under certain circumstances, to increase commitments thereunder by up to $350.0 million.
The Company could have elected to use the Barclays Facility to fund a portion of the consideration to be paid pursuant to the Cole Merger, to refinance existing indebtedness of Cole and to pay related fees and expenses. The commitments received in the Barclays Facility were schedule to terminate upon the occurrence of certain customary events, and in any event on April 22, 2014, which date may be extended by an additional three months under certain circumstances. The Barclays Facility was terminated upon the issuance of the senior unsecured notes in February 2014, as discussed below.
Bond Offering
On February 6, 2014, the OP issued, in a private offering, $2.55 billion aggregate principal amount of senior unsecured notes consisting of $1.3 billion aggregate principal amount of 2.00% senior notes due 2017 (the 2017 Notes, $750.0 million aggregate principal amount of 3.00% senior notes due 2019 (the 2019 Notes) and $500.0 million aggregate principal amount of 4.60% senior notes due 2024 (the 2024 Notes, and, together with the 2017 Notes and 2019 Notes, the Notes). The Notes are guaranteed by the Company. The OP may redeem all or a part of any series of the Notes at any time at its option at the redemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest on the principal amount of the Notes of such series being redeemed to, but excluding, the applicable redemption date. With respect to the 2019 Notes and the 2024 Notes, if such Notes are redeemed on or after January 6, 2019, with respect to the 2019 Notes, or November 6, 2023, with respect to the 2024 Notes, the redemption price will equal 100% of the principal amount of the Notes of the applicable series to be redeemed, plus accrued and unpaid interest on the amount being redeemed to, but excluding, the applicable redemption date.
See Note 24 Subsequent Events (As Restated) for further discussion.
Note 13 Credit Facilities
Senior Corporate Credit Facility
The Company and the OP are parties to a credit facility with Wells Fargo, National Association (the Credit Facility), as administrative agent and other lenders party thereto.
At December 31, 2013, the Credit Facility had commitments of $2.4 billion. The Credit Facility has an accordion feature, which, if exercised in full, would allow the Company to increase borrowings under the Credit Facility to $3.0 billion, subject to additional lender commitments, borrowing base availability and other conditions.
At December 31, 2013, the Credit Facility contained a $940.0 million term loan facility and a $1.5 billion revolving credit facility, of which $940.0 million and $119.8 million was outstanding, respectively. In November 2013, the Credit Facility was amended and certain modifications were made to the terms of the agreement. Loans under the Credit Facility are priced at the applicable rate (at the Companys election, either a floating interest rate based on one month LIBOR, determined on a daily basis) plus 2.25% to 3.00%, or a prime-based interest rate, based upon the Companys current leverage. From the amendment date until the first completed fiscal quarter, the applicable LIBOR rate is increased by 3.00%. To the extent that the Company receives an investment grade credit rating as determined by a major credit rating agency, at the Companys election, advances under the revolving credit facility will be priced at their applicable rate plus 0.90% to 1.75% and term loans will be priced at a floating interest rate of LIBOR plus 1.15% to 2.00%, based upon the Companys then current investment grade credit rating. The Company may also make fixed rate borrowings under the Credit Facility. At December 31, 2013, the Company had undrawn commitments of $1.4 billion under the Credit Facility.
F-50
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The Credit Facility provides for monthly interest payments. In event of a default, each lender has the right to terminate its obligations under the Credit Facility, and to accelerate the payment on any unpaid principal amount of all outstanding loans. The Company has guaranteed the obligations under the Credit Facility. The revolving credit facility will terminate on February 14, 2017, unless extended for an additional year pursuant to the terms of the agreement. The Company may prepay borrowings under the Credit Facility and the Company may incur an unused fee of 0.15% to 0.25% per annum on the unused amount depending on the unused balance as a percentage of the total facility and the type of funding. As of December 31, 2013, the Credit Facility also required the Company to maintain certain property available for collateral as a condition to funding.
As of December 31, 2013, the outstanding balance on the Credit Facility was $1.1 billion, of which $544.8 million bore interest at a floating rate of 3.17%. $515.0 million outstanding on the Credit Facility is fixed through the use of derivative instruments used to hedge interest rate volatility. Including the spread, which can vary based on the Companys leverage, interest on this portion was 3.85% at December 31, 2013. At December 31, 2013, there was up to $1.9 billion available to the Company for future borrowings, subject to additional lender commitments and borrowing availability. The credit facility matures on June 30, 2018.
The Credit Facility requires restrictions on corporate guarantees as well as the maintenance of financial covenants including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) and the maintenance of a minimum net worth. At December 31, 2013, the Company was in compliance with the debt covenants under the Credit Facility.
See Note 24 Subsequent Events (As Restated) for further discussion.
ARCT IV Senior Secured Credit Facility
On June 18, 2013, the Company obtained a credit agreement (the Credit Agreement) with Regions Bank, JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, National Association and RBS Citizens, N.A (collectively, the Lenders) relating to a $750.0 million senior secured credit facility (the Senior Secured Credit Facility).
Initially, the Senior Secured Credit Facility contained a $300.0 million term loan facility and a $450.0 million revolving credit facility. The Senior Secured Credit Facility contained an accordion feature to allow the Company, under certain circumstances, to increase the aggregate commitments under the Senior Secured Credit Facility to up to $1.5 billion. On October 16, 2013, the Company entered into agreements that amended the Credit Agreement, increasing the maximum principal amount under the revolving credit facility to $500.0 million and the aggregate commitment under the Senior Secured Credit Facility to $800.0 million.
As of December 31, 2013, the Company had $760.0 million outstanding under the Credit Agreement. The effective annualized interest rate on the Credit Agreement was 1.71% as of December 31, 2013. The Company had $40.0 million of unused borrowing capacity under the Credit Agreement as of December 31, 2013.
The Senior Secured Credit Facility required the Company to meet certain financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. As of December 31, 2013, the Company was in compliance with the financial covenants under the Credit Agreement.
In connection with the ARCT IV Merger, the Company notified the Administrative Agent in December 2013 and on January 3, 2014, prepaid all of its loans pursuant to, and terminated all commitments available under, the Credit Agreement.
Secured Credit Facility
As part of the CapLease Merger, the Company assumed a secured credit facility with Wells Fargo, National Association (the Secured Credit Facility), which had commitments of up to $150.0 million at December 31, 2013. The Secured Credit Facility was fully drawn with $150.0 million outstanding at December 31, 2013.
F-51
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The borrowings under the Secured Credit Facility bear interest at an annual rate of one-month LIBOR or LIBOR based on an interest period of one, three or six months, at the Companys election, plus an applicable margin of 2.75%, payable quarterly in arrears. The Secured Credit Facility matures on December 31, 2014 and may be prepaid, in whole or in part, without premium or penalty, at the Companys option, at any time.
The obligations under the Secured Credit Facility are secured by mortgages on certain real property assets acquired from CapLease comprising the borrowing base. The Secured Credit Facility includes affirmative and negative covenants and financial performance covenants. At December 31, 2013, the Company was in compliance with the debt covenants under the Secured Credit Facility.
Repayment of Previous Credit Facilities
On February 28, 2013, the Company repaid all of the outstanding borrowings under its previous senior secured revolving credit facility in the amount of $124.6 million, and the credit agreement for such facility was terminated. The average interest rate on the borrowings during the period the balance was outstanding was 3.11%. On February 14, 2013, simultaneous with entering into the Credit Facility, the Company terminated its secured credit facility agreement, which had been unused.
Note 14 Accounts Payable and Accrued Expenses (As Restated)
Accounts payable and accrued expenses consisted of the following as of December 31, 2013 and 2012 (amounts in thousands):
Year Ended December 31, | ||||||||
2013 (As Restated) |
2012 | |||||||
Accounts payable |
$ | 5,887 | $ | 2,690 | ||||
Accrued interest |
14,189 | (114 | ) | |||||
Accrued real estate taxes |
24,658 | 919 | ||||||
Accrued merger costs |
651,430 | | ||||||
Accrued other |
34,407 | 99,245 | ||||||
|
|
|
|
|||||
$ | 730,571 | $ | 102,740 | |||||
|
|
|
|
Note 15 Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Companys operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.
F-52
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Cash Flow Hedges of Interest Rate Risk
The Companys objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract and payments of variable-rate amounts if interest rates fall below the floor strike rate on the contract.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2013, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
Amounts reported in accumulated other comprehensive income related to derivatives that will be reclassified to interest expense as interest payments are made on the Companys variable-rate debt. During the next 12 months, the Company estimates that an additional $5.8 million will be reclassified from other comprehensive income as an increase to interest expense. During the year ended December 31, 2013, the Company accelerated the reclassification of amounts in other comprehensive income to earnings as a result of the hedged forecasted transactions becoming probable not to occur. The accelerated amounts were a loss of less than $27,000.
As of December 31, 2013, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):
Interest Rate Derivative |
Number of Instruments |
Notional Amount | ||||||
Interest rate swaps |
16 | $ | 700,390 |
The table below presents the fair value of the companys derivative financial instruments as well as their classification on the consolidated balance sheets as of the years ended December 31, 2013 and 2012 (dollar amounts in thousands):
Year Ended December 31, | ||||||||||
Derivatives Designated as Hedging Instruments |
Balance Sheet Location |
2013 | 2012 | |||||||
Interest rate products |
Derivative assets, at fair value | $ | 9,189 | $ | | |||||
Interest rate products |
Derivative liabilities, at fair value | $ | (1,719 | ) | $ | (3,830 | ) |
The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the years ended December 31, 2013 and 2012, respectively (amounts in thousands):
Year Ended December 31, | ||||||||
Derivatives in Cash Flow Hedging Relationships |
2013 | 2012 | ||||||
Amount of gain (loss) recognized in accumulated other comprehensive income on interest rate derivatives (effective portion) |
$ | 6,946 | $ | (4,684 | ) | |||
|
|
|
|
|||||
Amount of loss reclassified from accumulated other comprehensive income into income as interest expense (effective portion) |
$ | (4,535 | ) | $ | (941 | ) | ||
|
|
|
|
|||||
Amount of loss recognized in income on derivative (ineffective portion, reclassifications of missed forecasted transactions and amounts excluded from effectiveness testing) |
$ | (79 | ) | $ | (1 | ) | ||
|
|
|
|
F-53
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Derivatives Not Designated as Hedging Instruments
Derivatives not designated as hedges are not speculative and are used to manage the Companys exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements to be classified as hedging instruments. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and were approximately $19,000 for the year ended December 31, 2013. The company did not have any derivatives that were not designated as of December 31, 2012.
As of December 31, 2013, the Company had the following outstanding interest rate derivatives that were not designated as hedges of in qualifying hedging relationships (dollar amounts in thousands):
Interest Rate Derivative |
Number of Instruments | Notional Amount | ||||||
Interest Rate Cap |
1 | $ | 500,000 |
The table below presents the fair value of the Companys derivate financial instruments not designated as hedges as well as their classification as liabilities on the consolidated balance sheets as of December 31, 2013 and 2012. There were no derivatives classified as not hedging instruments as assets as of December 31, 2013 and 2012 (amounts in thousands):
Year Ended December 31, | ||||||||||
Derivatives Not Designated as Hedging Instruments |
Balance Sheet Location |
2013 | 2012 | |||||||
Series D Preferred Stock embedded derivative |
Derivative liabilities, at fair value | $ | (16,736 | ) | $ | |
Refer to Note 17 Preferred and Common Stock (As Restated) for additional information for the Series D Preferred Stock embedded derivative.
Tabular Disclosure Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Companys derivatives as of December 31, 2013 and 2012. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets (amounts in thousands).
Offsetting of Derivative Assets and Liabilities |
||||||||||||||||||||||||||||||||
Gross Amounts of Recognized Assets |
Gross Amounts of Recognized Liabilities |
Gross Amounts Offset in the Consolidated Balance Sheets |
Net Amounts of Assets Presented in the Consolidated Balance Sheets |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets |
Financial Instruments |
Cash Collateral Received |
Net Amount |
|||||||||||||||||||||||||
December 31, 2013 |
$ | 9,189 | $ | (18,455 | ) | $ | | $ | 9,189 | $ | (18,455 | ) | $ | | $ | | $ | (9,266 | ) | |||||||||||||
December 31, 2012 |
$ | | $ | (3,830 | ) | $ | | $ | | $ | (3,830 | ) | $ | | $ | | $ | (3,830 | ) |
Credit-risk-related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
As of December 31, 2013, the fair value of the interest rate derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $1.7 million. As of December 31, 2013, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $1.7 million at December 31, 2013.
F-54
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Note 16 Commitments and Contingencies
Contractual Lease Obligations
The following table reflects the minimum base rental cash payments due from the Company over the next five years and thereafter for certain ground and office lease obligations (amounts in thousands):
Future Minimum Lease Payments |
||||
2014 |
$ | 4,541 | ||
2015 |
4,443 | |||
2016 |
4,214 | |||
2017 |
4,244 | |||
2018 |
3,212 | |||
Thereafter |
63,787 | |||
|
|
|||
$ | 84,441 | |||
|
|
Litigation
In the ordinary course of business, the Company may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Company, except as follows:
ARCT III Litigation Matters
After the announcement of the ARCT III Merger Agreement on December 17, 2012, Randell Quaal filed a putative class action lawsuit filed on January 30, 2013 against the Company, the OP, ARCT III, ARCT III OP, the members of the board of directors of ARCT III and certain subsidiaries of the Company in the Supreme Court of the State of New York. The plaintiff alleges, among other things, that the board of ARCT III breached its fiduciary duties in connection with the transactions contemplated under the ARCT III Merger Agreement. In February 2013, the parties agreed to a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of ARCT III stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required ARCT III to make certain additional disclosures related to the ARCT III Merger, which were included in a Current Report on Form 8-K filed by ARCT III with the SEC on February 21, 2013. The memorandum of understanding also added that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to ARCT IIIs stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
CapLease Litigation Matters
Since the announcement of the CapLease Merger Agreement on May 28, 2013, the following lawsuits have been filed:
On May 28, 2013, Jacquelyn Mizani filed a putative class action lawsuit in the Supreme Court for the State of New York against the Company, the OP, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the Mizani Action). The complaint alleges, among other things, that the merger agreement at issue was the product of breaches of fiduciary duty by the CapLease directors because the proposed merger transaction (the CapLease Transaction) purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that CapLease, the Company, the OP and Safari Acquisition LLC aided and abetted the CapLease directors alleged breaches of fiduciary duty.
F-55
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
On July 3, 2013, Fred Carach filed a putative class action and derivative lawsuit in the Supreme Court for the State of New York against the Company, the OP, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the Carach Action). The complaint alleges, among other things, that the merger agreement was the product of breaches of fiduciary duty by the CapLease directors because the merger purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that with respect to the Registration Statement and draft joint proxy statement issued in connection with the proposed CapLease Transaction on July 2, 2013, that disclosures made therein were insufficient or otherwise improper. The complaint also alleges that CapLease, the Company, the OP and Safari Acquisition LLC aided and abetted the CapLease directors alleged breaches of fiduciary duty.
On June 25, 2013, Dewey Tarver filed a putative class action and derivative lawsuit in the Circuit Court for Baltimore City against the Company, the OP, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the Tarver Action). The complaint alleges, among other things, that the merger agreement was the product of breaches of fiduciary duty by the CapLease directors because the CapLease Transaction purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that CapLease, CapLease LP, CLF OP General Partner, LLC, the Company, the OP and Safari Acquisition, LLC aided and abetted the CapLease directors alleged breaches of fiduciary duty.
Counsel who filed each of these three cases reached an agreement with each other as to who will serve as lead plaintiff and lead plaintiffs counsel in the cases and where they will be prosecuted. Thus, on August 9, 2013, counsel in the Tarver Action filed a motion for stay in the Baltimore Court, informing the court that they had agreed to join and participate in the prosecution of the Mizani and Carach Actions in the New York Court. The Defendants consented to the stay of the Tarver Action in the Baltimore Court, and on September 5, 2013, Judge Pamela J. White issued an order granting that stay. Consequently, there has been no subsequent activity in the Baltimore Court in the Tarver Action. Also on August 9, 2013, all counsel involved in the Mizani and Carach Actions filed a joint stipulation in the New York Court, reflecting agreement among all parties that the Mizani and Carach Actions should be consolidated (jointly, the Consolidated Actions) and setting out a schedule for early motion practice in response to the complaints filed (the Consolidation Stipulation). Pursuant to the Consolidation Stipulation, an amended complaint was also filed in the New York court on August 9, 2013 and was designated as the operative complaint in the Consolidated Actions (Operative Complaint). Pursuant to the Consolidation Stipulation, all Defendants filed a motion to dismiss all claims asserted in the Operative Complaint on September 23, 2013. Plaintiffs response was due on or before November 7, 2013. On November 7, 2013, Plaintiffs filed a motion seeking leave to file a second amended complaint, which the Defendants have opposed. On March 24, 2014, Plaintiffs counsel in the Consolidated Actions dismissed those claims without prejudice. Consequently, only the Tarver Action currently remains pending among these cases, although it remains stayed.
On October 8, 2013, John Poling filed a putative class action lawsuit in the Circuit Court for Baltimore City against the Company, the OP, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the Poling Action). The complaint alleges that the merger agreement breaches the terms of the CapLease 8.375% Series B Cumulative Redeemable Preferred Stock (Series B) and the terms of the 7.25% Series C Cumulative Redeemable Preferred Stock (Series C) and is in violation of the Series B Articles Supplementary and the Series C Articles Supplementary. The Complaint alleges claims for breach of contract and breach of fiduciary duty against the CapLease entities and the CapLease board of directors. The complaint also alleges that the Company, the OP and Safari Acquisition, LLC aided and abetted CapLease and the CapLease directors alleged breach of contract and breach of fiduciary duty.
F-56
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
On November 13, 2013, all counsel involved in the Poling Action filed a joint stipulation, reflecting agreement among all parties concerning a schedule for early motion practice in response to the complaint filed (the Scheduling Stipulation). Pursuant to the Scheduling Stipulation, all Defendants filed a motion to dismiss all claims asserted in the Operative Complaint on December 20, 2013. Plaintiffs counsel has opposed that the motion to dismiss, and a hearing on the motion is currently scheduled for May 15, 2014.
Cole Litigation Matters
Three putative class action and/or derivative lawsuits, which were filed earlier this year, assert claims for breach of fiduciary duty, abuse of control, corporate waste, unjust enrichment, aiding and abetting breach of fiduciary duty and other claims relating to the merger between a wholly owned subsidiary of Cole and Cole Holdings Corporation, pursuant to which Cole became a self-managed REIT. On October 22, 2013, the Circuit Court for Baltimore City granted all defendants motion to dismiss with prejudice the action pending before the court, but the plaintiffs have appealed that dismissal. The other two lawsuits, which also purport to assert shareholder class action claims under the Securities Act of 1933, as amended (the Securities Act), are pending in the United States District Court for the District of Arizona. Defendants filed a motion to dismiss both complaints on January 10, 2014. Subsequently, both of those lawsuits have been stayed by the Court pursuant to a joint request made by all parties pending final approval of the consolidated Baltimore Cole Merger Actions described below.
To date, eleven lawsuits have been filed in connection with the Cole Merger. Two of these suits Wunsch v. Cole, et al (Wunsch), No. 13-CV-2186, and Sobon v. Cole, et al (Sobon) were filed as putative class actions on October 25, 2013 and November 18, 2013, respectively, in the U.S. District Court for the District of Arizona. Between October 30, 2013 and November 14, 2013, eight other putative stockholder class action or derivative lawsuits were filed in the Circuit Court for Baltimore City, Maryland, captioned as: (i) Operman v. Cole, et al (Operman); (ii) Branham v. Cole, et al (Branham); (iii) Wilfong v. Cole, et al. (Wilfong); (iv) Polage v. Cole, et al. (Polage); (v) Corwin v. Cole, et al (Corwin); (vi) Green v. Cole, et al (Green); (vii) Flynn v. Cole, et al (Flynn) and (viii) Morgan v. Cole, et al. (Morgan). All of these lawsuits name the Company, Cole and Coles board of directors as defendants; Wunsch, Sobon, Branham, Wilfong, Flynn, Green, Morgan and Polage also name CREInvestments, LLC, a Maryland limited liability company and a wholly-owned subsidiary of the Cole, as a defendant. All of the named plaintiffs claim to be Cole stockholders and purport to represent all holders of Coles stock. Each complaint generally alleges that the individual defendants breached fiduciary duties owed to plaintiff and the other public stockholders of Cole in connection with the Cole Merger, and that certain entity defendants aided and abetted those breaches. The breach of fiduciary duty claims asserted include claims that the Cole Merger does not provide for full and fair value for the Cole shareholders, that the Cole Merger was the product of an inadequate sale process, that the Cole Merger Agreement contains coercive deal protection measures and the Cole Merger Agreement and that the Cole Merger were approved as a result of or in a manner which facilitates improper self-dealing by certain defendants. In addition, the Flynn, Corwin, Green, Wilfong, Polage and Branham lawsuits claim that the individual defendants breached their duty of candor to shareholders and the Branham and Polage lawsuits assert claims derivatively against the individual defendants for their alleged breach of fiduciary duties owed to Cole. The Polage lawsuit also asserts derivative claims for waste of corporate assets and unjust enrichment. The Wunsch and Sobon lawsuits also assert claims against Cole and the individual defendants under Section 14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), based on allegations that the proxy materials omitted to disclose allegedly material information, and a claim against the individual defendants under Section 20(a) of the Exchange Act based on the same allegations. Among other remedies, the complaints seek unspecified money damages, costs and attorneys fees.
F-57
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
In January 2014, the parties to the eight lawsuits filed in the Circuit Court for Baltimore City, Maryland (the consolidated Baltimore Cole Merger Actions) entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of Cole stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required Cole to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by Cole with the SEC on January 14, 2014. The memorandum of understanding also contemplated that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to Coles stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
The Sobon lawsuit was voluntarily dismissed on February 3, 2014. The Company believes that the Wunsch lawsuit in connection with the Cole Merger is without merit and that it has substantial meritorious defenses to the claims set forth in the complaint.
On December 27, 2013, Realistic Partners filed a putative class action lawsuit against the Company and the members of its board of directors in the Supreme Court for the State of New York. Cole was later added as a defendant also. The plaintiff alleges, among other things, that the board of the Company breached its fiduciary duties in connection with the transactions contemplated under the Cole Merger Agreement and that Cole aided and abetted those breaches. In January 2014, the parties entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of the Companys stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required the Company to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by the Company with the SEC on January 17, 2014. The memorandum of understanding also contemplated that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to the Companys stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
See Note 24 Subsequent Events (As Restated) for significant litigation matters that occurred subsequent to December 31, 2013.
Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition, in each case, that it believes will have a material adverse effect on the results of operations.
Note 17 Preferred and Common Stock (As Restated)
Series A and Series B Convertible Preferred Stock
During the year ended December 31, 2013, the Company converted all 545,454 outstanding shares of its Series A Convertible Preferred Stock and all 283,018 outstanding shares of Series B Convertible Preferred Stock into 829,629 shares of the Companys common stock, which included dividends on the Series A Convertible Preferred Stock.
F-58
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Series D and Series E Preferred Stock
On September 12, 2013, the Companys board of directors unanimously approved the issuance of Series D Cumulative Convertible Preferred Stock (Series D Preferred Stock) and the issuance of Series E Cumulative Preferred Stock (Series E Preferred Stock).
On September 15, 2013, the Company entered into definitive purchase agreements pursuant to which it agreed to issue Series D Preferred Stock, par value $0.01 per share, and common stock, par value $0.01 per share, to certain institutional holders promptly following the close of the Companys merger with CapLease, via a private placement. Pursuant to the definitive purchase agreements, the Company issued approximately 21.7 million shares of Series D Preferred and 15.1 million shares of common stock, for gross proceeds of $288.0 million and $186.0 million, respectively, on November 12, 2013. The Series D Preferred Stock will pay dividends at the rate of 5.81% per annum on its face amount of $13.59 per share (equivalent to $0.79 per share on an annualized basis). The Series D Preferred Stock is redeemable by the Company on August 31, 2014 (the Redemption Date). Subsequent to that date, or in certain other circumstances, the Series D Preferred Stock is convertible into common stock or Series E Preferred Stock or redeemable into cash, at the discretion of the Company upon such request for conversion by the holders of Series D Preferred Stock.
In the event of a liquidation, the holders of Series D Preferred Stock are entitled to receive the greater of (a) $13.59 per share plus accrued and unpaid dividends (the Liquidation Preference) plus a 20% premium and (b) an amount the Preferred Shares holders would have received had they converted into shares of common stock immediately prior to the liquidation event.
If the Company elects to redeem the Series D Preferred Stock on the Redemption Date, the Company shall pay the greater of (a) the product of the number of Series D Preferred Stock and the 102% of the Liquidation Preference and (b) product of the number of common shares that would be issued if the Series D Preferred Stock converted immediately prior to the Redemption Date and 102% of the one-day VWAP.
At any time after the Redemption Date, the holders of Series D Preferred Stock may convert some or all of their outstanding Series D Preferred Stock into shares of common stock. Upon such an election to convert, the Company may elect the following settlement options (1) convert the shares of Series D Preferred Stock into the number of fully paid and non-assessable Common Shares obtained by dividing the aggregate Liquidation Preference of such Series D Preferred Stock by the Conversion Price, as defined below, (2) convert the shares of Series D Preferred Stock into an equal number shares of Series E Preferred Stock, additional shares of Series E Preferred Stock may be issued under certain circumstances, or (3) an amount equal to the product of the number of shares of Series D Preferred Stock and the Cash Conversion Price, as defined below.
The Conversion Price shall be the lowest of (i) a 2% discount to the VWAP of the common stock for the 10 Trading Days prior to the Conversion Election Date, (ii) a 2% discount to the closing price on the Conversion Election Date, and (iii) $13.59. The Cash Conversion Price shall be the greater of (i) 102% of the Liquidation Preference and (ii) the one day VWAP of the Common Shares on the date of the election.
The Company has concluded that the conversion option qualifies as a derivative and should be bifurcated from the host instrument. At issuance, the conversion option had a fair value of $18.7 million. As of December 31, 2013, the fair value of the conversion option had a fair value of $16.7 million. The Company recorded the change in fair value of $2.0 million in gain (loss) on derivative instruments in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2013.
As the holders of Series D Preferred Stock are entitled to receive liquidation preferences that other equity holders are not entitled to, the Company determined the Series D Preferred Stock meets the definition of a deemed liquidation event and therefore should be classified as temporary equity under U.S. GAAP. At the date of issuance, the fair value of the Series D Preferred Stock was $269.3 million. As of December 31, 2013, the Company has determined that a liquidation event is not probable; therefore, the Company has concluded that the Series D Preferred Stock is not currently redeemable or likely to become redeemable. As such, the Company has not accreted the initial value of the Series D Preferred Stock.
As of December 31, 2013, there were 21,735,008 authorized and issued shares of Series D Preferred Stock and no authorized and issued shares of Series E Preferred Stock, respectively.
F-59
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Series F Preferred Stock
On October 6, 2013, in connection with the modification to the ARCT IV Merger, the Companys board of directors unanimously approved the issuance of Series F Preferred Stock. Upon consummation of the ARCT IV Merger on January 3, 2014, 42.2 million shares of Series F Preferred Stock were issued to ARCT IV shareholders and 0.7 million units of Series F OP Units were issued to the ARCT IV OP Unit holders. To comply with the carryover basis of accounting required in relation to an acquisition of an entity under common control, the financial statements reflect the ARCT IV Merger as if it occurred at the beginning of the periods presented. As such, the accompanying consolidated balance sheet depicts that 42.2 million shares of Series F Preferred Stock were outstanding as of December 31, 2013.
The Series F Preferred Stock will pay cumulative cash dividends at the rate of 6.70% per annum on its liquidation preference of $25.00 per share (equivalent to $1.675 per share on an annual basis). The Series F Preferred Stock will not be redeemable by the Company before the fifth anniversary of the date on which such Series F Preferred Stock is issued (the Initial Redemption Date), except under circumstances intended to preserve the Companys status as a real estate investment trust for federal and/or state income tax purposes and except upon the occurrence of a change of control. On and after the Initial Redemption Date, the Company may, at its option, redeem shares of the Series F Preferred Stock, in whole or from time to time in part, at a redemption price of $25.00 per share plus, subject to exceptions, any accrued and unpaid dividends thereon to the date fixed for redemption. The shares of Series F Preferred Stock have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company redeems or otherwise repurchases them or they become convertible and are converted into common stock (or, if applicable, alternative consideration). The Series F Preferred Stock trades on the NASDAQ under the symbol ARCPP.
Increases in Authorized Common Stock
On July 2, 2013, the Company filed articles of amendment to its charter to increase the number of authorized shares of common stock to 750,000,000 shares. On December 9, 2013, the Company filed articles of amendment to its charter to increase the number of authorized shares of common stock to 1.5 billion shares.
Offerings
On August 1, 2012, the Company filed a $500.0 million universal shelf registration statement and a resale registration statement with the SEC. Each registration statement became effective on August 17, 2012. As of December 31, 2013, the Company had issued 2.1 million shares of common stock under the $500.0 million universal shelf registration statement. No preferred stock, debt or equity-linked security had been issued under this $500.0 million universal shelf registration statement. The resale registration statement, as amended, registers the resale of up to 1,882,248 shares of common stock issued in connection with any future conversion of certain currently outstanding restricted shares, convertible preferred stock or limited partnership interests in the OP.
In January 2013, the Company commenced its at the market equity offering program (ATM) in which it may from time to time offer and sell shares of its common stock having an aggregate offering proceeds of up to $60.0 million. The shares will be issued pursuant to the Companys $500.0 million universal shelf registration statement.
On March 14, 2013, the Company filed a universal automatic shelf registration statement that was automatically declared effective and achieved well-known seasoned issuer (WKSI) status. As a result of the delayed filing of certain of our periodic reports with the SEC, we are not currently eligible to use a shelf registration statement for the offer and sale of our securities.
F-60
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The following are the Companys equity offerings of common stock and the gross proceeds of the equity offering for the years ended December 31, 2013, 2012 and 2011 (dollar amounts in millions):
Type of offering |
Closing Date |
Number of Shares (1) | Gross Proceeds | |||||||
IPO |
September 7, 2011 | 5,574,131 | $ | 67.4 | ||||||
Follow-on offering |
November 2, 2011 | 1,497,924 | 15.8 | |||||||
Underwriters over-allotment |
November 7, 2011 | 74,979 | 0.8 | |||||||
|
|
|
|
|||||||
Total - Year end December 31, 2011 (2) |
7,147,034 | 84.0 | ||||||||
|
|
|
|
|||||||
Follow-on offering |
June 18, 2012 | 3,250,000 | 30.3 | |||||||
Underwriters over-allotment |
July 9, 2012 | 487,500 | 4.6 | |||||||
|
|
|
|
|||||||
Total - Year end December 31, 2012 (3) |
3,737,500 | 34.9 | ||||||||
|
|
|
|
|||||||
Registered follow-on offering |
January 29, 2013 | 2,070,000 | 26.8 | |||||||
ATM |
January 1 -April 17, 2013 | 553,300 | 8.9 | |||||||
Private placement offering |
June 7, 2013 | 29,411,764 | 455.0 | |||||||
Private placement offering |
November 12, 2013 | 15,126,498 | 186.0 | |||||||
|
|
|
|
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Total - Year end December 31, 2013 (4) |
47,161,562 | $ | 676.7 | |||||||
|
|
|
|
(1) | Excludes 140.7 million shares of common stock that were issued to the stockholders of ARCT IIIs common stock in conjunction with the ARCT III Merger. |
(2) | Excludes 9.8 million shares of common stock that were issued by ARCT III for gross proceeds of $102.2 million. |
(3) | Excludes 155.7 million and 5.4 million shares of common stock that were issued by ARCT III and ARCT IV, respectively, for gross proceeds of $1.6 billion and $255.0 million, respectively. |
(4) | Excludes 31.0 million shares of common stock that were issued by ARCT IV for gross proceeds of $1.5 billion. |
See Note 24 Subsequent Events (As Restated) for significant subsequent events.
Dividends
In October 2011, the Company began paying dividends on the 15th day of each month to stockholders of record on the eighth day of such month. Since inception, the board of directors of the Company has authorized the following increases in the Companys dividend.
Dividend increase declaration date |
Annualized dividend per share |
Effective date | ||||
September 7, 2011 |
$ | 0.875 | October 9, 2011 | |||
February 27, 2012 |
$ | 0.880 | March 9, 2012 | |||
March 16, 2012 |
$ | 0.885 | June 9, 2012 | |||
June 27, 2012 |
$ | 0.890 | September 9, 2012 | |||
September 30, 2012 |
$ | 0.895 | November 9, 2012 | |||
November 29, 2012 |
$ | 0.900 | February 9, 2013 | |||
March 17, 2013 |
$ | 0.910 | June 8, 2013 | |||
May 28, 2013 |
$ | 0.940 | December 8, 2013 (1) | |||
October 23, 2013 |
$ | 1.000 | February 7, 2014 (2) |
(1) | The dividend increase became effective at the close of the CapLease Merger, which was consummated on November 5, 2013. |
(2) | The dividend increase was contingent upon, and became effective with, the close of the Cole Merger, which was consummated on February 7, 2014. |
F-61
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The annualized dividend rate at December 31, 2013 was $0.940 per share.
Common Stock Repurchases
On August 20, 2013, the Companys board of directors reauthorized its $250 million share repurchase program which was originally authorized in February 2013. During the year ended December 31, 2013, the Company repurchased approximately 0.6 million shares at an average price of $13.07 per share or $7.5 million in total.
Upon the closing of the ARCT III Merger, on February 28, 2013, $29.2 million shares, or 16.5% of the then outstanding shares of ARCT IIIs common stock, were paid in cash at $12.00 per share, which is equivalent to 27.7 million shares of the Companys common stock based on the Exchange Ratio. In addition, 148.1 million shares of ARCT IIIs common stock were converted to shares of the Companys common stock at the Exchange Ratio, resulting in an additional 140.7 million shares of the Companys common stock outstanding after the exchange.
Note 18 Equity-based Compensation (As Restated)
Equity Plan
The Company has adopted the American Realty Capital Properties, Inc. Equity Plan (the Equity Plan), which provides for the grant of stock options, restricted shares of common stock, restricted stock units, dividend equivalent rights and other equity-based awards to the Companys and its affiliates non-executive directors, officers and other employees and advisors and consultants who are providing services to the Company or its affiliates.
The Company authorized and reserved a total number of shares equal to 10.0% of the total number of issued and outstanding shares of common stock (on a fully diluted basis assuming the redemption of all OP Units for shares of common stock) to be issued at any time under the Equity Plan for equity incentive awards excluding an initial grant of 167,400 shares to the Former Manager in connection with the IPO, all of which were vested as of December 31, 2013.
Director Stock Plan
The Company has adopted the American Realty Capital Properties, Inc. Non-Executive Director Stock Plan (the Director Stock Plan), which provides for the grant of restricted shares of common stock to each of the Companys non-executive directors. Awards of restricted stock will vest in accordance with the award agreements, which generally provide for vesting ratably over a five-year period following the date of grant in increments of 20.0% per annum, subject to the directors continued service on the board of directors, and shall provide for distribution equivalents with respect to this restricted stock, whether or not vested, at the same time and in the same amounts as distributions are paid to the stockholders. At December 31, 2013, a total of 99,000 shares of common stock are reserved for issuance under the Director Stock Plan.
The fair value of restricted common stock awards under the Equity Plan and Director Stock Plan is determined on the grant date using the closing stock price on NASDAQ that day and is expensed over the requisite service period. The fair value of restricted common stock awarded to non-employees under the Equity Plan is measured based upon the fair value of goods or services received or the equity instruments granted, whichever is more reliably determinable.
F-62
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
ARCT III Restricted Share Plan
ARCT III had an employee and director incentive restricted share plan (the ARCT III RSP), which provided for the automatic grant of 3,000 restricted shares of common stock to each of its independent directors, without any further action by ARCT IIIs board of directors or its stockholders, on the date of initial election to the board of directors and on the date of each annual stockholders meeting thereafter. Restricted stock issued to independent directors vested over a five-year period following the date of grant in increments of 20.0% per annum. The ARCT III RSP provided ARCT III with the ability to grant awards of restricted shares to its directors, officers and employees (if ARCT III ever had employees), employees of ARCT IIIs advisor and its affiliates, employees of entities that provided services to ARCT III, directors of the ARCT III Advisor or of entities that provided services to ARCT III, certain consultants to ARCT III and the ARCT III Advisor and its affiliates or to entities that provided services to ARCT III.
Immediately prior to the effective time of the ARCT III Merger, each then-outstanding share of ARCT III restricted stock fully vested. All shares of ARCT III common stock then-outstanding as a result of the full vesting of shares of ARCT III restricted stock, and the satisfaction of any applicable withholding taxes, had the right to receive a number of shares of the Companys common stock based on the ARCT III Exchange Ratio.
ARCT IV Restricted Share Plan
ARCT IV had an employee and director incentive restricted share plan (the ARCT IV RSP and together with the ARCT III RSP, the RSP Plans), which provided for the automatic grant of 1,333 restricted shares of common stock to each of its independent directors without any further action by ARCT IVs board of directors or its stockholders on the date of initial election to the board of directors and on the date of each annual stockholders meeting thereafter. Restricted stock issued to independent directors vested over a five-year period following the date of grant in increments of 20% per annum. ARCT IV issued 5,333 and 2,667 restricted shares under the ARCT IV RSP during the years ended December 31, 2013 and 2012, respectively. All restricted shares issued under the ARCT IV RSP had an issue price of $22.50. The ARCT IV RSP provided ARCT IV with the ability to grant awards of restricted shares to its directors, officers and employees, employees of the ARCT IV Advisor and its affiliates, employees of entities that provided services to ARCT IV, directors of the ARCT IV Advisor or of entities that provided services to ARCT IV, certain consultants to ARCT IV and the ARCT IV Advisor and its affiliates or to entities that provided services to ARCT IV.
Immediately prior to the effective time of the ARCT IV Merger, each then-outstanding share of ARCT IV restricted stock fully vested. All shares of ARCT IV common stock then-outstanding as a result of the full vesting of shares of ARCT IV restricted stock, and the satisfaction of any applicable withholding taxes, received shares of the Companys common stock based on the ARCT IV Exchange Ratio.
F-63
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The following tables detail the restricted shares activity within the Equity Plan, Director Stock Plan and RSP Plans during the years ended December 31, 2013, 2012 and 2011:
Restricted Share Awards:
Equity Plan | RSP Plans & Director Stock Plan | |||||||||||||||
Number of Restricted Common Shares |
Weighted-Average Issue Price |
Number of Restricted Common Shares |
Weighted-Average Issue Price |
|||||||||||||
Awarded, January 1, 2011 |
| $ | | | $ | | ||||||||||
Granted |
167,400 | 12.50 | 14,700 | 11.50 | ||||||||||||
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|
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Awarded December 31, 2011 |
167,400 | 12.50 | 14,700 | 11.50 | ||||||||||||
Granted |
93,683 | 10.65 | 30,634 | 10.45 | ||||||||||||
Forfeited |
(1,174 | ) | 10.65 | (13,650 | ) | 11.54 | ||||||||||
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Awarded December 31, 2012 |
259,909 | 11.84 | 31,684 | 10.47 | ||||||||||||
Granted |
932,527 | 13.82 | 20,768 | 14.58 | ||||||||||||
Forfeited |
(1,085 | ) | 12.85 | (3,000 | ) | 12.99 | ||||||||||
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Awarded December 31, 2013 |
1,191,351 | $ | 13.39 | 49,452 | $ | 12.04 | ||||||||||
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Unvested Restricted Share Awards:
Equity Plan | RSP Plans & Director Stock Plan | |||||||||||||||
Number of Restricted Common Shares |
Weighted-Average Issue Price |
Number of Restricted Common Shares |
Weighted-Average Issue Price |
|||||||||||||
Unvested, January 1, 2011 |
| $ | | | $ | | ||||||||||
Granted |
167,400 | 12.50 | 14,700 | 11.50 | ||||||||||||
Vested |
(27,900 | ) | 12.50 | | | |||||||||||
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Unvested, December 31, 2011 |
139,500 | 12.50 | 14,700 | 11.50 | ||||||||||||
Granted |
93,683 | 10.65 | 30,634 | 10.45 | ||||||||||||
Vested |
(59,556 | ) | 12.38 | (2,370 | ) | 11.88 | ||||||||||
Forfeited |
(1,174 | ) | 10.65 | (13,650 | ) | 11.54 | ||||||||||
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Unvested, December 31, 2012 |
172,453 | 11.55 | 29,314 | 10.35 | ||||||||||||
Granted |
932,527 | 13.82 | 20,768 | 14.58 | ||||||||||||
Vested |
(172,453 | ) | 11.55 | (28,207 | ) | 11.03 | ||||||||||
Forfeited |
(1,085 | ) | 12.85 | (3,000 | ) | 12.99 | ||||||||||
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Unvested, December 31, 2013 |
931,442 | $ | 13.82 | 18,875 | $ | 13.52 | ||||||||||
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|
For the years ended December 31, 2013, 2012 and 2011, compensation expense for restricted shares under the above plans was $8.0 million, $1.2 million and $0.2 million, respectively. In addition, the Company recognized $2.7 million as a distribution to the Former Manager, which is included in consideration to the Former Manager for internalization in the accompanying consolidated statements of changes in equity.
Multi-Year Outperformance Plan
Upon consummation of the ARCT III Merger, the Company entered into the 2013 Advisor Multi-Year Outperformance Agreement (the OPP) with the Former Manager, whereby the Former Manager was able to potentially earn compensation upon the attainment of stockholder value creation targets.
F-64
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Under the OPP, the Former Manager was granted 8,241,101 long term incentive plan units (LTIP Units) of the OP, which are earned or forfeited based on the Companys total return to stockholders (including both share price appreciation and common stock distributions) (Total Return), for the three-year period consisting of:
| Absolute Component: 4% of any excess Total Return attained above an absolute hurdle of 7% for each annual measurement period, non-compounded, 14% for the interim measurement period and 21% for the full performance period; and |
| Relative Component: 4% of any excess Total Return attained above the Total Return for the performance period of a peer group comprised of the following companies: CapLease, Inc.; EPR Properties; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc.; and Realty Income Corporation. |
The award will be funded (OPP Pool) up to a maximum award opportunity equal to 5% of our equity market capitalization at the ARCT III Merger date of $2.1 billion (the OPP Cap). Awards under the OPP are dependent on achieving an annual hurdle that commenced December 11, 2012, an interim (two-year) hurdle and then the aforementioned three-year hurdle ending on December 31, 2015.
In order to further ensure that the interests of the Former Manager are aligned with our investors, the Relative Component is subject to a ratable sliding scale factor as follows:
| 100% will be earned if we attain a median Total Return of at least 6% for each annual measurement period, non-compounded, at least 12% for the interim measurement period, and at least 18% for the full performance period; |
| 50% will be earned if we attain a median Total Return of at least 0% for each measurement period; |
| 0% will be earned if we attain a median Total Return of less than 0% for each measurement period; and |
| a percentage from 50% to 100% calculated by linear interpolation will be earned if the median Total Return is between 0% and the percentage set for each measurement period. |
For each year during the performance period a portion of the OPP Cap equal to a maximum of up to 1.25% of the Companys equity market capitalization of $2.1 billion will be locked-in based upon the attainment of the performance hurdles set forth above for each annual measurement period. In addition, a portion of the OPP Cap equal to a maximum of up to 3% of the Companys equity market capitalization will be locked-in based upon the attainment of the performance hurdles set forth above for the interim measurement period, which if achieved, will supersede and negate any prior locked-in portion based upon annual performance through the first and second valuation dates on December 31, 2013 and 2014, respectively (i.e., a maximum award opportunity equal to a maximum of up to 3% of the Companys equity market capitalization may be locked-in through December 31, 2014). Since certain awards under the OPP are dependent on the comparison of the Companys current market capitalization to the Companys market capitalization at the inception of plan, the issuance of additional common shares by the Company may result in higher awards.
Following the performance period, the Absolute Component and the Relative Component will be calculated separately and then added together to determine the aggregate award earned under the OPP, which in no event may exceed the OPP Cap. The OPP Pool will be used to determine the number of LTIP Units that vest. Any unvested LTIP Units will be immediately forfeited on December 31, 2015. At December 31, 2013, 100% of the OPP Pool has been allocated.
Pursuant to previous authorization of the Companys board of directors, as a result of the termination of the management agreement with the Former Manager, all 8,241,101 LTIP Units vested and were deemed earned upon the consummation of the Companys transition to self-management on January 8, 2014 and were converted into OP Units on such date.
The Former Manager is entitled to receive a tax gross-up in the event that any amounts paid to it under the OPP constitute parachute payments as defined in Section 280G of the Code.
F-65
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
During the year ended December 31, 2013, the Company recorded expenses of $92.3 million for the OPP, which is included in the general and administrative in the consolidated statements of operations and comprehensive loss. As of December 31, 2013, 2.3 million LTIP Units were earned and $32.7 million of the expense was locked-in and has been included in non-controlling interest on the consolidated balance sheets. The remaining $59.6 million expense has been accrued and is included in due to affiliates in the consolidated balance sheet as of December 31, 2013.
New Multi-Year Outperformance Plan
On October 3, 2013, the Company approved a multi-year outperformance plan (the New OPP), to be effective as of the Companys transition to self-management, which occurred on January 8, 2014. Under the New OPP, individual agreements will be entered into between the Company and the participants selected by the Companys board of directors (the Participants) that set forth the Participants participation percentage in the New OPP and the number of LTIP Units subject to the award (OPP Agreements). Under the OPP Agreements, the Participants will be eligible to earn performance-based bonus awards equal to the Participants participation percentage of a pool that will be funded up to a maximum award opportunity (the New OPP Cap) equal to approximately 5% of the Companys equity market capitalization (the Initial Market Cap) on October 1, 2013. Subject to the New OPP Cap, the pool will equal an amount to be determined based on the Companys achievement of total return to stockholders, including both share price appreciation and common stock distributions (Total Return), for a three-year performance period (the Performance Period); each 12-month period during the Performance Period (each an Annual Period) and the initial 24-month period of the Performance Period (the Interim Period), as follows:
Performance Period |
Annual Period | Interim Period | ||||||||||
Absolute Component: 4% of any excess Total Return attained above an absolute hurdle measured from the beginning of such period: |
21% | 7% | 14% | |||||||||
Relative Component: 4% of any excess Total Return attained above the median Total Return for the performance period of the Peer Group (1), subject to a ratable sliding scale factor as follows based on achievement of cumulative Total Return measured from the beginning of such period: |
||||||||||||
|
100% will be earned if cumulative Total Return achieved is at least: | 18% | 6% | 12% | ||||||||
|
50% will be earned if a cumulative Total Return achieved is: | % | % | % | ||||||||
|
0% will be earned if cumulative Total Return achieved is less than: | % | % | % | ||||||||
|
a percentage from 50% to 100% calculated by linear interpolation will be earned if cumulative Total Return achieved is if between: | 0% - 18% | 0% - 6% | 0% - 12% |
(1) | The Peer Group is comprised of the following companies: EPR Properties; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc.; Realty Income Corporation; and Spirit Realty Capital, Inc. |
The Participants will be entitled to receive a tax gross-up in the event that any amounts paid to the Participant under the OPP constitute parachute payments as defined in Section 280G of the Code. The LTIP Units granted under the New OPP represent units of equity ownership in the OP that are structured as a profits interest therein. Subject to the Participants continued service through each vesting date, 1/3 of any earned LTIP Units will vest on each of the third, fourth and fifth anniversaries of October 1, 2013. The Participant will be entitled to receive distributions on their LTIP Units to the extent provided for in the limited partnership agreement of the OP, as amended from time to time.
For the status of the New OPP, see Note 24 Subsequent Events (As Restated).
Note 19 Related Party Transactions and Arrangements (As Restated)
The Company, ARCT III and ARCT IV have incurred commissions, fees and expenses payable to the Former Manager and its affiliates including Realty Capital Securities, LLC (RCS), RCS Advisory Services, LLC (RCS Advisory), ARC, ARC Advisory Services, LLC (ARC Advisory), the ARCT III Advisor, the ARCT IV Advisor, American National Stock Transfer, LLC (ANST) and ARC Real Estate. References throughout this Note 19 Related Party Transactions and Arrangements (As Restated) to expenses incurred by ARCT III or ARCT IV are to expenses incurred before their acquisitions by the Company on February 28, 2013 and January 3, 2014, respectively.
F-66
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The Audit Committees investigation identified certain payments made by the Company to the Former Manager and certain affiliates of the Former Manager that were not sufficiently documented or otherwise warrant scrutiny. As described below, the Company has recovered consideration valued at approximately $8.5 million in respect of certain such payments. The Company is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statements related to any potential recovery.
The following table summarizes the related party fees and expenses incurred by the Company, ARCT III and ARCT IV by category and the aggregate amounts contained in such categories for the periods presented (in thousands):
Year Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Related party transactions: |
||||||||||||
Financing fees and reimbursements |
$ | 14,277 | $ | 3,350 | $ | 182 | ||||||
Offering related costs |
161,796 | 211,391 | 18,218 | |||||||||
Acquisition related expenses |
37,564 | 28,656 | 1,692 | |||||||||
Merger and other non-routine transactions |
156,146 | | | |||||||||
Management fees to affiliates |
17,462 | 212 | | |||||||||
General and administrative expenses |
103,206 | 826 | 168 | |||||||||
Indirect affiliate expenses |
68 | | | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 490,519 | $ | 244,435 | $ | 20,260 | ||||||
|
|
|
|
|
|
The following sections below further expand on the summarized related party transactions listed above.
Financing Fees and Reimbursements
The Company, ARCT III and ARCT IV paid the Former Manager, the ARCT III Advisor and the ARCT IV Advisor, respectively, a financing fee equal to 0.75% of the amount available under any secured mortgage financing or refinancing that the Company, ARCT III or ARCT IV obtained and used for the acquisition of properties that was arranged by the Former Manager, ARCT III Advisor or ARCT IV Advisor, respectively. The financing fee was payable in cash at the closing of each financing. In conjunction with the closing of the ARCT III Merger, it was agreed that these fees would no longer be paid by the Company to the Former Manager. These fees were paid by ARCT IV throughout 2013. Financing fees and reimbursements of $14.3 million, $3.4 million and $0.2 million as of December 31, 2013, 2012 and 2011, respectively, are included in deferred costs, net in the accompanying consolidated balance sheets.
Offering Related Costs
The Company, ARCT III and ARCT IV recorded commissions, fees and offering cost reimbursements as shown in the table below for services provided to the Company, ARCT III and ARCT IV, as applicable, by affiliates of the Former Manager during the periods indicated (in thousands):
Year Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Offering related costs: |
| |||||||||||
Commissions and fees |
$ | 148,232 | $ | 184,384 | $ | 13,835 | ||||||
Offering costs and other reimbursements |
13,564 | 27,007 | 4,383 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 161,796 | $ | 211,391 | $ | 18,218 | ||||||
|
|
|
|
|
|
RCS served as the dealer manager of the ARCT III IPO and the ARCT IV IPO. RCS received fees and compensation in connection with the sale of ARCT IIIs and ARCT IVs common stock in the respective IPOs. RCS received a selling commission of 7% of gross offering proceeds before reallowance of commissions earned by participating broker-dealers in each of the IPOs. RCS received 3% of the gross proceeds from the sale of common stock, before reallowance to participating broker-dealers, as a dealer manager fee in each of the IPOs. In addition, ARCT III and ARCT IV reimbursed the ARCT III Advisor, the ARCT IV Advisor and RCS, as applicable, for services relating to the ARCT III IPO and the ARCT IV IPO. Offering related costs are included in offering costs, commissions and dealer manager fees in the accompanying consolidated statements of changes in equity.
F-67
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Acquisition Related Expenses
Separate from acquisition fees related to the acquisition of certain properties in the GE Capital Portfolio discussed below, the Company, ARCT III and ARCT IV paid acquisition fees to the Former Manager and its affiliates equal to 1.0% of the contract purchase price, inclusive of indebtedness, of each property acquired by the Company, ARCT III or ARCT IV, as applicable. The Company, ARCT III and ARCT IV additionally reimbursed certain expenses as permitted under the advisory agreements. These fees and reimbursements (as applicable), totaled $12.3 million, $28.7 million and $1.7 million during the years ended December 31, 2013, 2012 and 2011, respectively. The Company and ARCT III were no longer required to pay these fees as of the ARCT III Merger, except for those properties in the Companys acquisition pipeline as of that date. ARCT IV incurred these fees throughout 2013 and 2012.
During the year ended December 31, 2013, the Company paid a fee of $1.9 million (equal to 0.25% of the contract purchase price) to RCS and reimbursed expenses of $6.1 million to the Former Manager and its affiliates related to its acquisition of certain properties in the GE Capital Portfolio.
During the year ended December 31, 2013, ARCT IV paid a fee of $3.5 million (equal to 0.25% of the contract purchase price) to RCS and also paid an acquisition fee of $13.8 million to the affiliates of the Former Manager related to its acquisition of certain properties in the GE Capital Portfolio.
Merger and Other Non-routine Transactions
The Company, ARCT III and ARCT IV incurred fees and expenses payable to the Former Manager and its affiliates for services related to mergers and other non-routine transactions, as discussed below. These fees are included in merger and other non-routine transactions in the accompanying consolidated statements of operations. The table below shows fees and expenses attributable to each merger and other non-routine transaction during the period indicated (in thousands):
Year Ended December 31, 2013 | ||||||||||||||||||||||||
ARCT III Merger |
ARCT IV Merger |
Cole Merger | CapLease Merger |
Other | Total | |||||||||||||||||||
Merger related costs: |
||||||||||||||||||||||||
Strategic advisory services |
$ | | $ | 16,075 | $ | 14,215 | $ | 5,563 | $ | 243 | $ | 36,096 | ||||||||||||
Legal fees and expenses |
126 | 500 | | 3,000 | 40 | 3,666 | ||||||||||||||||||
Personnel costs and other reimbursements |
522 | 2,137 | 169 | 567 | 178 | 3,573 | ||||||||||||||||||
Other fees and expenses |
| 640 | | 250 | | 890 | ||||||||||||||||||
Other non-routine transactions: |
||||||||||||||||||||||||
Subordinated distribution fee |
98,360 | | | | | 98,360 | ||||||||||||||||||
Furniture, fixtures and equipment |
5,800 | | | | | 5,800 | ||||||||||||||||||
Legal fees and expenses |
950 | | | | | 950 | ||||||||||||||||||
Personnel costs and other reimbursements |
| 1,107 | 1,463 | | 109 | 2,679 | ||||||||||||||||||
Post-transaction support services |
2,000 | 2,000 | | | | 4,000 | ||||||||||||||||||
Other fees and expenses |
| | | 132 | | 132 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 107,758 | $ | 22,459 | $ | 15,847 | $ | 9,512 | $ | 570 | $ | 156,146 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
No expenses payable to affiliates of the Former Manager relating to mergers or other non-routine transactions were incurred during the years ended December 31, 2012 and 2011.
F-68
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Merger Costs
Unless otherwise indicated, all of the fees and reimbursements discussed below were incurred and recognized during the year ended December 31, 2013.
ARCT III Merger
The Company and ARCT III incurred and paid $0.3 million to ARC Advisory and $0.4 million to RCS Advisory for expense reimbursements in connection with the ARCT III Merger.
ARCT IV Merger
The Company entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the Company in connection with the ARCT IV Merger. The Company paid $7.7 million (equal to 0.25% of the transaction value) upon the consummation of the ARCT IV Merger and reimbursed out of pocket expenses of $0.6 million pursuant to this agreement.
The Company entered into an agreement with RCS, RCS Advisory and ANST under which they agreed to provide financial advisory and information agent services in connection with the ARCT IV Merger and the related proxy solicitation seeking approval from the Companys stockholders in connection with such merger. The agreement provided that these services included facilitation of the preparation, distribution and accumulation of proxy materials, stockholder, analyst and financial advisor communications and consultation on materials and communications made to the public and regulatory agencies regarding the ARCT IV Merger. However, effective October 6, 2013 pursuant to the first amendment to the ARCT IV Merger Agreement, a vote by they Companys stockholders was no longer required. The Company paid $0.6 million in fees pursuant to this agreement.
ARCT IV entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to assist ARCT IV with its alternatives for a potential liquidity event. ARCT IV paid $7.7 million (equal to 0.25% of the transaction value) upon the consummation of the ARCT IV Merger and reimbursed out of pocket expenses of $0.8 million.
ARCT IV entered into an agreement with ARC Advisory and RCS Advisory under which they agreed to provide legal support services up to the date that ARCT IV entered into the ARCT IV Merger Agreement. ARCT IV paid $0.5 million in fees pursuant to this agreement.
ARCT IV entered into an agreement with RCS, RCS Advisory, and ANST under which they agreed to provide advisory and information agent services in connection with the ARCT IV Merger and the related proxy solicitation seeking approval of such merger by ARCT IVs stockholders. The agreement provided that these services included facilitation of the preparation, distribution and accumulation of proxy materials, stockholder, analyst and financial advisor communications and consultation on materials and communications made to the public and regulatory agencies regarding the ARCT IV Merger. ARCT IV paid $0.8 million in fees and reimbursed $0.2 million of expenses pursuant to this agreement.
The Company and ARCT IV incurred and paid $0.5 million to RCS Advisory for expense reimbursements in connection with the ARCT IV Merger.
Pursuant to ARCT IVs advisory agreement with the ARCT IV Advisor, ARCT IV agreed to pay the ARCT IV Advisor a brokerage commission on the sale of property in connection with the ARCT IV Merger. No fees were incurred under this agreement during the year ended December 31, 2013. The Company incurred and paid $8.4 million as a brokerage commission, pursuant to the advisory agreement, in 2014.
F-69
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Cole Merger
The Company entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the Company in connection with the Cole Merger. The Company paid a fee equal to 0.25% of the transaction value and reimbursed out of pocket expenses. The Company incurred and recognized $14.2 million in expense from this agreement in 2013. The amount recognized in 2013 constitutes one-half of the total fee of $28.4 million which was paid in 2014. The Company incurred and paid an additional $0.2 million to ARC Advisory for expense reimbursements in connection with the Cole Merger.
CapLease Merger
The Company entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the Company in connection with the CapLease Merger. The Company paid a fee equal to 0.25% of the transaction value and reimbursed out of pocket expenses. The Company incurred and paid $5.6 million in fees pursuant to this agreement. The Company incurred and paid an additional $0.2 million to ARC Advisory and $3.6 million to RCS Advisory for expense reimbursements in connection with the CapLease Merger.
F-70
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Other Non-routine Transactions
ARCT III Merger Subordinated Distribution Fee
On February 28, 2013, the OP entered into a Contribution and Exchange Agreement (the Contribution and Exchange Agreement) with the ARCT III OP and the ARCT III Special Limited Partner, the holder of the special limited partner interest in the ARCT III OP. The ARCT III Special Limited Partner was entitled to receive certain distributions from the ARCT III OP, including a subordinated distribution of net sales proceeds resulting from an investment liquidity event (as defined in the agreement of limited partnership of the ARCT III OP). The ARCT III Merger constituted an investment liquidity event, due to the attainment of the 6.0% performance hurdle and the return to ARCT IIIs stockholders in addition to their initial investment. Pursuant to the Contribution and Exchange Agreement, the ARCT III Special Limited Partner contributed its interest in the ARCT III OP, inclusive of the $98.4 million subordinated distribution proceeds received, to the ARCT III OP in exchange for 7.6 million ARCT III OP Units. Upon consummation of the ARCT III Merger, these ARCT III OP Units were immediately converted into 7.3 million OP Units after application of the ARCT III Exchange Ratio. The Company recorded an expense of $98.4 million in connection with this transaction. In conjunction with the ARCT III Merger Agreement, the ARCT III Special Limited Partner agreed to hold its OP Units for a minimum of one year before converting them into shares of Company common stock.
Furniture, Fixtures and Equipment and Other Assets
The Company entered into three agreements with affiliates of the Former Manager and the Former Manager (the Sellers), as applicable, pursuant to which, concurrently with the closing of the ARCT III Merger and ARCT IV Merger and the Companys transition to self-management, the Sellers agreed to sell to the OP certain FF&E and other assets used by the Sellers in connection with managing the property level business and operations and accounting functions of the Company and the OP. During the year ended December 31, 2013, the Company expensed $5.8 million of costs associated with the acquisition of FF&E and other assets. In the first quarter of 2014, the Company expensed an additional $15.8 million of costs associated with the acquisition of FF&E and other assets.
Legal Fees and Expenses
On December 12, 2012, ARCT III and the OP entered into a legal services reimbursement agreement with ARC Advisory to provide legal support services through the date of the ARCT III Merger. ARCT III incurred expenses of $0.5 million in connection with this agreement in 2013. Additional expenses of $0.5 million were paid to ARC Advisory during 2013 as reimbursement for litigation services.
Post-Transaction Support Services
ARCT III entered into an agreement with ARC Advisory under which ARC Advisory agreed to provide support services including legal, accounting, marketing, human resources and information technology, among other services, until the earlier of the ARCT III Merger closing date or one year (and an agreed upon period of up to 60 days following the ARCT III Merger). ARCT III incurred $2.0 million in fees pursuant to this agreement.
ARCT IV entered into an agreement with ARC Advisory and RCS Advisory under which they agreed to provide support services including legal, accounting, marketing, human resources and information technology, among other services, until the earlier of the ARCT IV Merger closing date or one year (and an agreed upon period of up to 60 days following the ARCT IV Merger). ARCT IV incurred $2.0 million in expenses pursuant to this agreement.
Personnel Costs and Other Reimbursements
The Company, ARCT III and ARCT IV incurred expenses of and paid, $2.5 million to RCS Advisory and $0.2 million to ANST for personnel costs and reimbursements in connection with non-recurring transactions.
Management Fees to Affiliates
The Company, ARCT III and ARCT IV recorded fees and reimbursements as shown in the table below for services provided by the Former Manager and its affiliates related to the operations of the Company, ARCT III and ARCT IV during the periods indicated (in thousands):
Year Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Management fees to affiliates: |
||||||||||||
Base management fees |
$ | 4,969 | $ | 212 | $ | | ||||||
Asset management fees |
11,693 | | | |||||||||
Property management fees |
800 | | | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 17,462 | $ | 212 | $ | | ||||||
|
|
|
|
|
|
F-71
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Base Management Fees
Prior to the termination of the amended and restated management agreement, the Company paid the Former Manager an annual base management fee equal to 0.50% per annum of the average unadjusted book value of the Companys real estate assets, calculated and payable monthly in advance, for the value of assets up to $3.0 billion and 0.40% per annum for the unadjusted book value of assets over $3.0 billion. The management fee was generally payable in cash however in lieu of cash, on January 21, 2014, the Former Manager agreed to settle all outstanding balances in stock, resulting in the Company issuing 388,461 shares of common stock to the Former Manager. Prior to the ARCT III Merger, the Former Manager was entitled to an annual base management fee equal to 0.50% per annum for the unadjusted book value of assets with no asset threshold limitations. The Company incurred expenses of $5.0 million and $0.2 million that were not waived during the years ended December 31, 2013 and 2012, respectively. The Former Manager waived the portion of its management fee in excess of certain net income thresholds related to the Companys operations during certain periods in 2013, 2012 and 2011. These waived fees totaled $6.1 million, $1.8 million and $0.3 million during the years ended December 31, 2013, 2012 and 2011, respectively.
Asset Management Fees
ARCT III
Until July 1, 2012, the ARCT III Advisor was entitled to an asset management fee of 0.75% per annum from ARCT III equal to the cost of its assets (cost includes the purchase price, acquisition expenses, capital expenditures and other customarily capitalized costs, but excludes acquisition fees) plus costs and expenses incurred by the ARCT III Advisor in providing asset management services. However, the asset management fee was to be reduced by any amounts payable to ARCT IIIs property manager as an oversight fee, such that the aggregate of the asset management fee and the oversight fee did not exceed 0.75% per annum of the cost of ARCT IIIs assets plus costs and expenses incurred by the ARCT III Advisor in providing asset management services. Prior to July 1, 2012, this fee was payable in monthly installments at the discretion of ARCT IIIs board of directors in cash, common stock or restricted stock grants, or any combination thereof. Asset management fees for the year ended December 31, 2013 are included in management fees to affiliates in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2013. These asset management fees for the years ended December 31, 2012 and 2011 were waived.
Effective July 1, 2012, the payment of asset management fees in monthly installments in cash, shares or restricted stock grants, or any combination thereof to the ARCT III Advisor was eliminated. Instead, ARCT III issued (subject to periodic approval by its board of directors) to the ARCT III Advisor performance-based restricted partnership units of the ARCT III OP designated as ARCT III Class B units, which were intended to be profits interests and to vest, and no longer be subject to forfeiture, at such time as: (x) the value of the ARCT III OPs assets plus all distributions equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the economic hurdle); and (y) a liquidity event had occurred.
The ARCT III Advisor received distributions on unvested ARCT III Class B units equal to the distribution rate received on ARCT III common stock. These distributions were included in management fees to affiliates in the accompanying consolidated statements of operations and comprehensive loss until the performance condition was considered probable to occur. In 2012, the ARCT III board of directors approved the issuance of 145,022 ARCT III Class B units to the ARCT III Advisor for asset management services it provided. In 2013, the ARCT III board of directors approved issuance of an additional 603,599 ARCT III Class B units to the ARCT III Advisor for asset management services it provided. As of December 31, 2012, ARCT III did
F-72
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
not consider achievement of the performance condition to be probable as the shareholder vote for the ARCT III Merger, which would allow vesting of these ARCT III Class B Units, was not completed. The performance condition related to these ARCT III Class B units was satisfied upon the completion of the ARCT III Merger and as a result a $9.4 million expense was recorded at that time. The 748,621 total ARCT III Class B units then converted into ARCT III OP Units which converted on a one-to-one basis into 711,190 OP Units after the application of the ARCT III Exchange Ratio.
In connection with a 60-day extension of the advisory agreement which was executed in order to facilitate the smooth transition of advisory services following the consummation of the ARCT III Merger, the Company incurred and paid additional asset management fees of $2.3 million during 2013.
ARCT IV
In connection with the asset management services provided by the ARCT IV Advisor, ARCT IV issued (subject to periodic approval by the ARCT IV board of directors) to the ARCT IV Advisor performance-based restricted partnership units of the ARCT IV OP designated as ARCT IV Class B Units, which were intended to be profits interests and to vest, and no longer be subject to forfeiture, at such time as: (x) the value of the ARCT IV OPs assets plus all distributions that equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the economic hurdle); (y) any one of the following occurs: (1) the termination of the advisory agreement by an affirmative vote of a majority of ARCT IVs independent directors without cause; (2) a listing; or (3) another liquidity event; and (z) the ARCT IV Advisor was still providing advisory services to ARCT IV.
The calculation of the ARCT IV asset management fees was equal to: (i) 0.1875% of the cost of ARCT IVs assets; divided by (ii) the value of one share of ARCT IV common stock as of the last day of such calendar quarter. When approved by the ARCT IV board of directors, the ARCT IV Class B Units were issued to the ARCT IV Advisor quarterly in arrears pursuant to the terms of the ARCT IV OP agreement. During the year ended December 31, 2013, the ARCT IV board of directors approved the issuance of 492,483 ARCT IV Class B Units to the ARCT IV Advisor in connection with this arrangement. As of December 31, 2013, ARCT IV did not consider achievement of the performance condition to be probable and no expense was recorded at that time. The ARCT IV Advisor received distributions on unvested ARCT IV Class B Units equal to the distribution rate received on the ARCT IV common stock. The performance condition related to the 498,857 ARCT IV Class B Units, which includes units issued for the period of January 1, 2014 through the ARCT IV Merger Date, was satisfied upon the completion of the ARCT IV Merger. These ARCT IV Class B Units immediately converted into OP Units at the 2.3961 exchange ratio and the Company recorded an expense of $13.9 million based on the fair value of the ARCT IV Class B Units during 2014.
Property Management Fees
ARCT III also had agreed to pay an affiliate of ARC, unless it contracted with a third party, a property management fee of up to 2% of gross revenues from ARCT IIIs stand-alone single-tenant net leased properties and 4% of gross revenues from its multi-tenant properties, plus, in each case, market-based leasing commissions applicable to the geographic location of the property. ARCT III also reimbursed the affiliate for property level expenses. If ARCT III contracted directly with third parties for such services, it paid them customary market fees and paid the affiliated property manager an oversight fee of up to 1% of the gross revenues of the property managed. The fees totaled $0.8 million during 2013.
Quarterly Incentive Fee
Prior to the termination of the amended and restated management agreement upon the transition to self-management, the Company was required to pay the Former Manager a quarterly incentive fee, calculated based on 20% of the excess of Company annualized core earnings (as defined in the management agreement with the Former Manager) over the weighted-average number of shares multiplied by the weighted-average price per share of common stock. One half of each quarterly installment of the incentive fee was payable in shares of common stock. The remainder of the incentive fee was payable in cash. No such incentive fees were incurred or paid to the Former Manager from inception through termination of the management agreement.
F-73
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
General and Administrative Expenses
The Company, ARCT III and ARCT IV recorded general and administrative expenses as shown in the table below for services provided by the Former Manager and its affiliates related tot the operations of the Company during the periods indicated (in thousands):
Year Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
General and administrative expenses: |
||||||||||||
Advisory fees and reimbursements |
$ | 5,602 | $ | 826 | $ | 168 | ||||||
Equity awards |
97,604 | | | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 103,206 | $ | 826 | $ | 168 | ||||||
|
|
|
|
|
|
Advisory Fees and Reimbursements
The Company, ARCT III and ARCT IV agreed to reimburse the Former Manager and its affiliates, as applicable, for their out-of-pocket costs incurred by those entities, including without limitation, legal fees and expenses, transfer agent fees, due diligence fees and expenses, other third party fees and expenses, costs of appraisals, travel expenses, nonrefundable option payments and deposits on properties not acquired, accounting fees and expenses, title insurance premiums and other closing costs, personnel costs and miscellaneous expenses relating to the selection, acquisition and due diligence of properties or general operation of the company.
Equity Awards
Upon consummation of the ARCT III Merger, the Company entered into the OPP with the Former Manager. The OPP gave the Former Manager the opportunity to earn compensation upon the attainment of certain stockholder value-creation targets. Pursuant to previous authorization of the Companys board of directors, as a result of the termination of the management agreement with the Former Manager, all LTIP Units awarded under the OPP were deemed earned and vested upon the consummation of the Companys transition to self-management on January 8, 2014 and were converted into OP Units on such date. The Company recorded an expense of $32.7 million for the valuation of the award through December 31, 2013 and an additional expense of $59.6 million due to the accelerated vesting of the OPP. This accelerated vesting was recorded in 2013 as the Company determined that the required service had been effectively complete as of December 31, 2013. See Note 18 Equity-based Compensation (As Restated) for a more detailed description of this plan. This total expense of $92.3 million is included in general and administrative expenses in the accompanying consolidated statements of operations.
The Company granted 620,000 and 93,683 restricted share awards to employees of affiliates of the Former Manager during the years ended December 31, 2013 and 2012, respectively. These were three separate grants and the grant date fair values for these issuances were $1.0 million in June 2012, $4.5 million in February 2013 and $4.4 million in July 2013.
Separately, as a result of the ARCT III Merger and the termination of the Management Agreement with the Former Manager, certain restricted shares held by employees of affiliates of the Former Manager were fully vested. This aggregate expense of $5.3 million is included in general and administrative expense in the accompanying consolidated statements of operations.
Indirect Affiliate Expenses
During the year ended December 31, 2013, a wholly owned subsidiary of ARC Real Estate purchased a historic building in Newport, Rhode Island (Audrain) with plans to renovate the second floor to serve as offices for certain executives of the Company and affiliates of the Former Manager. ARC Real Estate requested that invoices relating to the second floor renovation and tenant improvements and all building operating expenses either be reimbursed by the Company to the affiliate of the Former Manager or be paid directly to the contractors and vendors. During the year ended December 31, 2013, the Company paid $27,000 for architectural costs relating to the renovation directly to a third party. Tenant improvement, furniture and operating expenses incurred during 2014 in respect of Audrain totaled $8.8 million.
F-74
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
In addition in 2013, the Company entered into a lease agreement with the subsidiary of ARC Real Estate for a term of 15 years with base rent of $0.4 million due annually beginning October 2013. As there were tenants occupying the building when it was purchased, these tenants subleased their premises from the Company until their leases terminated. During the year ended December 31, 2013, the Company incurred and paid $96,000 for base rent, which was partially offset by $55,000 of rental revenue received from the subtenants. Net rent expense incurred during 2014 totaled $0.2 million.
In November 2014, as a result of findings of the investigation conducted by the Audit Committee, the Company terminated the lease agreement and was reimbursed for the tenant improvement and furniture costs incurred by the Company totaling approximately $8.5 million, including the architectural costs of $27,000 incurred by the Company in 2013. Reimbursement was made by delivery and retirement of 916,423 OP Units held by an affiliate of the Former Manager. The Company never moved into or occupied the building.
Additional Related Party Transactions
The following related party transactions were not included in the tables above.
Tax Protection Agreement
The Company is party to a tax protection agreement with ARC Real Estate, which contributed its 100% indirect ownership interests in 63 of the Companys properties to the Operating Partnership in the formation transactions related to the Companys IPO. Pursuant to the tax protection agreement, the Company has agreed to indemnify ARC Real Estate for its tax liabilities (plus an additional amount equal to the taxes incurred as a result of such indemnity payment) attributable to its built-in gain, as of the closing of the formation transactions, with respect to its interests in the contributed properties (other than two vacant properties contributed), if the Company sells, conveys, transfers or otherwise disposes of all or any portion of these interests in a taxable transaction on or prior to September 6, 2021. The tax protection agreement provides that the sole and exclusive rights and remedies of ARC Real Estate under the tax protection agreement will be a claim against the Operating Partnership for ARC Real Estates tax liabilities as calculated in the tax protection agreement, and ARC Real Estate shall not be entitled to pursue a claim for specific performance or bring a claim against any person that acquires a protected party from the Operating Partnership in violation of the tax protection agreement.
Investment from the ARCT III Special Limited Partner
In connection with the ARCT III Merger, the ARCT III Special Limited Partner invested $0.8 million in the ARCT III OP and was subsequently issued 56,797 OP Units in respect thereof upon the closing of the ARCT III Merger after giving effect to the ARCT III Exchange Ratio. This investment is included in non-controlling interests in the accompanying consolidated balance sheets.
Investment in an Affiliate of the Former Manager
During the year ended December 31, 2013, the Company invested $10.0 million in a real estate fund advised by an affiliate of the Former Manager, American Real Estate Income Fund, which invests primarily in equity securities of other publicly traded REITs, and subsequently reinvested dividends totaling $0.1 million in the fund. During the fourth quarter of 2013, the Company sold a portion of such investments with an original cost of $8.5 million at a loss of $0.4 million. The fair value of the investment at December 31, 2013 was $1.5 million.
Ownership by Affiliates of the Former Manager
Certain affiliates of the Former Manager own shares of the Companys common stock, shares of unvested restricted common stock, OP Units and LTIP Units. As of December 31, 2013 and 2012, 4.37% and 1.35%, respectively, of the total equity units issued by the Company and the OP were owned by affiliates.
F-75
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Due to Affiliates
Due to affiliates, as reported in the accompanying consolidated balance sheets, is comprised of the following amounts discussed above (in thousands):
December 31, | ||||||||
2013 | 2012 | |||||||
Due to affiliates: |
||||||||
Offering related costs |
$ | 220 | $ | 100 | ||||
Merger and other non-routine transactions |
38,645 | 1,046 | ||||||
Management fees to affiliates |
4,969 | | ||||||
General and administrative |
59,600 | 376 | ||||||
|
|
|
|
|||||
Total |
$ | 103,434 | $ | 1,522 | ||||
|
|
|
|
See Note 24 Subsequent Events (As Restated) for significant subsequent events.
Note 20 Economic Dependency
Prior to transitioning to self-management on January 8, 2014, the Company engaged, under various agreements, its Former Manager and its affiliates to provide certain services that are essential to the Company, including asset management services and supervision of the management and leasing of properties owned by the Company, the sale of shares of the Companys common stock, as well as other administrative responsibilities for the Company including information technology, legal services and investor relations. See Note 24 Subsequent Events (As Restated) for additional information on the Companys transition to self-management.
As a result of these relationships, the Company was dependent upon its Former Manager, the Sponsor and their affiliates. In the event that these companies were unable to provide the Company with the respective services, the Company would have been required to find alternative providers of these services. As a result of the ARCT III Merger, the Company internalized certain accounting and property acquisition services previously performed by its Former Manager and its affiliates. The Company may from time to time engage its Former Manager for legal, information technology or other support services for which it will pay a fee.
Note 21 Net Loss Per Share (As Restated)
The following is a summary of the basic and diluted net loss per share computation for the years ended December 31, 2013, 2012 and 2011 (amounts in thousands, expect for shares and per share data):
Year Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
(As Restated) | (As Restated) |
|
||||||||||
Net loss from continuing operations attributable to stockholders |
$ | (491,466 | ) | $ | (40,961 | ) | $ | (3,883 | ) | |||
Net income (loss) from discontinued operations attributable to common stockholders |
(33 | ) | (691 | ) | (816 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss attributable to common stockholders |
(491,499 | ) | (41,652 | ) | (4,699 | ) | ||||||
Less: dividends declared on preferred shares and RSUs |
(3,631 | ) | (368 | ) | | |||||||
|
|
|
|
|
|
|||||||
Net loss attributable to common stockholders, net of dividends on preferred securities and RSUS |
$ | (495,130 | ) | $ | (42,020 | ) | $ | (4,699 | ) | |||
|
|
|
|
|
|
|||||||
Weighted average common shares outstanding (1) |
205,341,431 | 103,306,366 | 3,720,351 | |||||||||
|
|
|
|
|
|
|||||||
Basic and diluted net loss per share from attributable to common stockholders |
$ | (2.41 | ) | $ | (0.40 | ) | $ | (1.04 | ) | |||
|
|
|
|
|
|
|||||||
Basic and diluted net loss per share from discontinued operations attributable to common stockholders |
(0.00 | ) | $ | (0.01 | ) | $ | (0.22 | ) | ||||
|
|
|
|
|
|
|||||||
Basic and diluted net loss per share attributable to common stockholders |
$ | (2.41 | ) | $ | (0.41 | ) | $ | (1.26 | ) | |||
|
|
|
|
|
|
(1) | Weighted-average shares for the year ended December 31, 2013 are adjusted as if the acquisition of all outstanding shares of ARCT III common stock for cash in conjunction with the ARCT III Merger had been completed at inception. |
For the year ended December 31, 2013, the Company excluded 9,591,173 OP Units outstanding, which are convertible to an equal number of shares of the Companys common stock, all LTIP Units,
F-76
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
950,317 shares of unvested restricted stock outstanding and 21,735,008 shares of the Companys Series D Convertible Preferred Stock outstanding as of December 31, 2013 from the calculation of diluted net loss per share as the effect would have been antidilutive.
Note 22 Discontinued Operations and Properties Held for Sale
The Company separately classifies properties held for sale in the accompanying consolidated balance sheets and operating results for those properties as discontinued operations in the accompanying consolidated statements of operations and comprehensive loss. In the normal course of business, changes in the market or changes in credit risk of certain tenants, among other factors, may compel the Company to decide to classify a property as held for sale or reclassify a property that is designated as held for sale back to held for investment. In these situations, the property is transferred to held for sale or back to held for investment at the lesser of fair value or depreciated cost. As of both December 31, 2013 and 2012, the Company held one property as held for sale on the accompanying respective consolidated balance sheets.
On March 5, 2013, the Company executed a purchase and sale agreement to sell a Citizens Bank branch in Worth, IL classified as held for sale as of December 31, 2013. The sale price of the asset is $0.7 million in cash, which approximates the carrying value of the property.
Note 23 Quarterly Results (Unaudited) (As Restated)
Presented below is a summary of the unaudited quarterly financial information for the year ended December 31, 2013 (in thousands, except share and per share amounts). See Note 2 Restatement of Previously Issued Financial Statements in the Companys Quarterly Reports on Forms 10-Q/A for the fiscal periods ended March 31, 2014 and June 30, 2014, respectively, and Form 10Q for the fiscal period ended September 30, 2014, for further discussion on the Quarterly Results as restated.
Quarters Ended(1) | ||||||||||||||||
March 31, 2013 |
June 30, 2013 |
September 30, 2013 |
December 31, 2013 |
|||||||||||||
(As Restated) | (As Restated) | (As Restated) | (As Restated) | |||||||||||||
Revenues |
$ | 42,897 | $ | 54,945 | $ | 95,255 | $ | 136,226 | ||||||||
Net loss from continuing operations attributable to stockholders |
(143,864 | ) | (69,603 | ) | (80,170 | ) | (197,829 | ) | ||||||||
Net loss from discontinued operations attributable to stockholders |
(16 | ) | | (31 | ) | 14 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to Stockholders |
(143,880 | ) | (69,603 | ) | (80,201 | ) | (197,815 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Less: dividends declared on preferred shares and RSUs |
(193 | ) | (233 | ) | (199 | ) | (3,006 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to the common stockholders |
$ | (144,073 | ) | $ | (69,836 | ) | $ | (80,400 | ) | $ | (200,821 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Weighted-average shares outstanding |
167,847,516 | 198,956,355 | 221,707,920 | 231,969,433 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted loss per share from continuing operations attributable to common stockholders (2) |
$ | (0.86 | ) | $ | (0.35 | ) | $ | (0.36 | ) | $ | (0.87 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted loss per share from discontinued operations attributable to common stockholders |
$ | | $ | | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted net loss per share attributable to common stockholders |
$ | (0.86 | ) | $ | (0.35 | ) | $ | (0.36 | ) | $ | (0.87 | ) | ||||
|
|
|
|
|
|
|
|
(1) | The historical financial statements have been adjusted for discontinued operations and figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
(2) | For the year ended December 31, 2013, the total quarterly basic and diluted earnings per share were $0.03 lower than the annual basic and diluted earnings per share due to the effects of rounding. |
F-77
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
The following tables present the combined impact of all changes to the applicable line items in the consolidated financial statements to the Companys previously reported consolidated financial statements for each of the fiscal quarters in the year ended December 31, 2013, as disclosed in Note 2 Restatement of Previously Issued Financial Statements (in thousands, except share amounts):
Three Months Ended March 31, 2013 | Three Months Ended June 30, 2013 | |||||||||||||||||||||||
As Previously Reported (1) |
Restatement Adjustments (2) |
As Restated | As Previously Reported (1) |
Restatement Adjustments (2) |
As Restated | |||||||||||||||||||
Revenues |
$ | 42,897 | $ | | $ | 42,897 | $ | 54,945 | $ | 0 | $ | 54,945 | ||||||||||||
Net loss from continuing operations attributable to stockholders |
(141,161 | ) | (2,703 | ) | (143,864 | ) | (71,992 | ) | 2,389 | (69,603 | ) | |||||||||||||
Net loss from discontinued operations attributable to stockholders |
(2 | ) | (14 | ) | (16 | ) | 34 | (34 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss attributable to Stockholders |
(141,163 | ) | (2,717 | ) | (143,880 | ) | (71,958 | ) | 2,355 | (69,604 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Less: dividends declared on preferred shares and RSUs |
(193 | ) | | (193 | ) | (233 | ) | | (233 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss attributable to the common stockholders |
$ | (141,356 | ) | $ | (2,717 | ) | $ | (144,073 | ) | $ | (72,191 | ) | $ | 2,355 | $ | (69,836 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Weighted-average shares outstanding |
167,847,516 | | 167,847,516 | 198,956,355 | | 198,956,355 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic and diluted loss per share from continuing operations attributable to common stockholders |
$ | (0.84 | ) | $ | (0.02 | ) | $ | (0.86 | ) | $ | (0.36 | ) | $ | 0.01 | $ | (0.35 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic and diluted loss per share from discontinued operations attributable to common stockholders |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic and diluted net loss per share attributable to common stockholders |
$ | (0.84 | ) | $ | (0.02 | ) | $ | (0.86 | ) | $ | (0.36 | ) | $ | 0.01 | $ | (0.35 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
(2) | See Note 2 Restatement of Previously Issued Financial Statements in the Companys Quarterly Reports on Forms 10-Q/A for the fiscal periods ended March 31, 2014 and June 30, 2014, respectively, for further discussion on the restatement adjustments. |
Three Months Ended September 30, 2013 | Three Months Ended December 31, 2013 | |||||||||||||||||||||||
As Previously Reported (1) |
Restatement Adjustments (2) |
As Restated | As Previously Reported (1) |
Restatement Adjustments |
As Restated | |||||||||||||||||||
Revenues |
$ | 95,255 | $ | | $ | 95,255 | $ | 136,781 | $ | (555 | ) | $ | 136,226 | |||||||||||
Net loss from continuing operations attributable to stockholders |
(82,768 | ) | 2,598 | (80,170 | ) | (178,800 | ) | (19,029 | ) | (197,829 | ) | |||||||||||||
Net loss from discontinued operations attributable to stockholders |
91 | (122 | ) | (31 | ) | (142 | ) | 156 | 14 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss attributable to Stockholders |
(82,677 | ) | 2,476 | (80,201 | ) | (178,942 | ) | (18,873 | ) | (197,815 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Less: dividends declared on preferred shares and RSUs |
(199 | ) | | (199 | ) | (3,006 | ) | | (3,006 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss attributable to the common stockholders |
$ | (82,876 | ) | $ | 2,476 | $ | (80,400 | ) | $ | (181,948 | ) | $ | (18,873 | ) | $ | (200,821 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Weighted-average shares outstanding |
221,707,934 | (14 | ) | 221,707,920 | 231,969,433 | | 231,969,433 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic and diluted loss per share from continuing operations attributable to common stockholders |
$ | (0.37 | ) | $ | 0.01 | $ | (0.36 | ) | $ | (0.77 | ) | $ | (0.10 | ) | $ | (0.87 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic and diluted loss per share from discontinued operations attributable to common stockholders |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic and diluted net loss per share attributable to common stockholders |
$ | (0.37 | ) | $ | 0.01 | $ | (0.36 | ) | $ | (0.78 | ) | $ | (0.09 | ) | $ | (0.87 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
(2) | See Note 2 Restatement of Previously Issued Financial Statements in the Companys Quarterly Report on Form 10-Q for the fiscal period ended September 30, 2014 for further discussion on the restatement adjustments. |
F-78
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Presented below is a summary of the unaudited quarterly financial information for each of the fiscal quarters in the year ended December 31, 2012 (in thousands, except share and per share amounts):
Quarters Ended(1) | ||||||||||||||||
March 31, 2012 |
June 30, 2012 |
September 30, 2012 |
December 31, 2012 (As Restated) |
|||||||||||||
Revenues |
$ | 6,240 | $ | 11,534 | $ | 18,945 | $ | 30,488 | ||||||||
Net loss from continuing operations attributable to stockholders |
(4,722 | ) | (7,012 | ) | (12,768 | ) | (16,459 | ) | ||||||||
Net loss from discontinued operations attributable to stockholders |
(322 | ) | (77 | ) | (41 | ) | (251 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to Stockholders |
(5,044 | ) | (7,089 | ) | (12,809 | ) | (16,710 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Less: dividends declared on preferred shares and RSUs |
| (70 | ) | (140 | ) | (158 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to the common stockholders |
$ | (5,044 | ) | $ | (7,159 | ) | $ | (12,949 | ) | $ | (16,868 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Weighted-average shares outstanding |
23,614,122 | 68,317,195 | 138,348,622 | 180,931,150 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted loss per share from continuing operations attributable to common stockholders |
$ | (0.20 | ) | $ | (0.10 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted loss per share from discontinued operations attributable to common stockholders |
$ | (0.01 | ) | $ | | $ | | $ | | |||||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted net loss per share from continuing operations attributable to common stockholders |
$ | (0.21 | ) | $ | (0.10 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
|
|
|
|
|
|
|
|
(1) | Certain historical balances have been restated for discontinued operations. |
(2) | For the year ended December 31, 2012, the total quarterly basic and diluted earnings per share were $0.07 higher than the annual basic and diluted earnings per share due to the effects of rounding. |
The following table presents the combined impact of all changes to the applicable line items in the consolidated financial statements to the Companys previously issued consolidated financial statements for the quarter ended December 31, 2012, as disclosed in Note 2 Restatement of Previously Issued Financial Statements (in thousands, except share and per share amounts):
F-79
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Three Months Ended December 31, 2012 | ||||||||||||
As Previously Reported (1) |
Restatement Adjustments (2) |
As Restated | ||||||||||
Revenues |
$ | 30,488 | $ | | $ | 30,488 | ||||||
Net loss from continuing operations attributable to stockholders |
(16,735 | ) | 276 | (16,459 | ) | |||||||
Net loss from discontinued operations attributable to stockholders |
(259 | ) | 8 | (251 | ) | |||||||
|
|
|
|
|
|
|||||||
Net loss attributable to stockholders |
(16,994 | ) | 284 | (16,710 | ) | |||||||
|
|
|
|
|
|
|||||||
Less: dividends declared on preferred shares and RSUs |
(158 | ) | | (158 | ) | |||||||
|
|
|
|
|
|
|||||||
Net loss attributable to the common stockholders |
$ | (17,152 | ) | $ | 284 | $ | (16,868 | ) | ||||
|
|
|
|
|
|
|||||||
Weighted-average shares outstanding |
180,931,150 | | 180,931,150 | |||||||||
|
|
|
|
|
|
|||||||
Basic and diluted loss per share from continuing operations attributable to common stockholders |
$ | (0.09 | ) | $ | | $ | (0.09 | ) | ||||
|
|
|
|
|
|
|||||||
Basic and diluted loss per share from discontinued operations attributable to common stockholders |
$ | | $ | | $ | | ||||||
|
|
|
|
|
|
|||||||
Basic and diluted net loss per share from continuing operations attributable to common stockholders |
$ | (0.09 | ) | $ | | $ | (0.09 | ) | ||||
|
|
|
|
|
|
(1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
(2) | See Note 2 Restatement of Previously Issued Financial Statements. |
Note 24 Subsequent Events (As Restated)
The following significant events occurred subsequent to December 31, 2013:
Completion of Acquisition of Assets
The following table presents certain information about the properties that the Company acquired from January 1, 2014 to February 26, 2015 (dollar amounts in thousands):
No. of Buildings | Square Feet | Base Purchase Price (1) | ||||||||||
Total Portfolio December 31, 2013 (2) |
2,559 | 43,834,493 | $ | 7,392,610 | ||||||||
Acquisitions, net of disposals (3) (4) |
2,101 | 59,373,760 | 10,468,192 | |||||||||
|
|
|
|
|
|
|||||||
Total Portfolio February 26, 2015 (2) |
4,660 | 103,208,253 | $ | 17,860,802 | ||||||||
|
|
|
|
|
|
(1) | Contract purchase price, excluding acquisition and transaction related costs. |
(2) | Total portfolio excludes one vacant property contributed in September 2011, which was classified as held for sale as of December 31, 2013. |
(3) | As part of the Cole Merger, the Company acquired 1,053 properties in February 2014 for a base purchase price of $8.7 billion. |
(4) | The Red Lobster portfolio, which consists of 542 properties, was purchased in July 2014 for a base purchase price of $1.7 billion. |
Transition to Self-Management
On January 8, 2014, the Company completed its transition to self-management. In connection with becoming self-managed, the Company terminated its management agreement with the Former Manager and certain former executives and employees of the Former Manager and its affiliates became employees of the Company.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Termination of Management Agreement
In connection with the transition by the Company to self-management on January 8, 2014, the Company and the Former Manager entered into an Amendment and Acknowledgment of Termination of Amended and Restated Management Agreement (the Termination Agreement), dated January 8, 2014. The Termination Agreement provided for termination of the Amended and Restated Management Agreement, dated February 28, 2013, between the Company and the Former Manager, effective January 8, 2014. Pursuant to the Termination Agreement, the Former Manager agreed to continue to provide services previously provided under the Management Agreement, to the extent required by the Company, for a period of 60 days following January 8, 2014 and received a payment in the amount of $10.0 million for providing such services.
Pursuant to an Assignment and Assumption Agreement (the Assignment) dated January 8, 2014 between an affiliate of the Former Manager and RCS Advisory, ARC assigned to the Company, and the Company assumed, certain of the rights and obligations under that certain Services Agreement dated as of June 10, 2013 between ARC and RCS Advisory (the Services Agreement). Under the Services Agreement, RCS Advisory and its affiliates had been providing to the Company certain transaction management services and other services, employees and other resources. The Assignment enabled the Company to continue to receive the services and resources contemplated under the Services Agreement, at the Companys discretion.
In addition, pursuant to a separate Transition Services Agreement (the Transition Services Agreement), dated October 21, 2013, affiliates of the Former Manager agreed to provide certain transition services, including accounting support, acquisition support, investor relations support, public relations support, human resources and administration, general human resources duties, payroll services, benefits services, insurance and risk management, information technology, telecommunications and internet and services relating to office supplies. The Transition Services Agreement was in effect for a 60-day term beginning on the date the Company became self-managed, and could have been extended by the Company at its discretion. To the extent the Company requested any services, the Company was required to pay a fee at an hourly rate or flat rate to be agreed on, not to exceed a market rate for the services to be provided pursuant to the Transition Services Agreement.
Furniture, Fixtures and Equipment
The Company entered into agreements with the Sellers, pursuant to which, as applicable, concurrently with the closing of the ARCT IV Merger and the Companys transition to self-management, the Sellers agreed to sell to the OP certain FF&E and other assets used by the Sellers in connection with managing the property level business and operations and accounting functions of the Company and the OP. The Company incurred and recorded $15.8 million of expenses related to the FF&E in 2014. See Note 19 Related Party Transactions and Arrangements (As Restated).
The Operating Partnership
Substantially all of the Companys business is conducted through the OP. The actions of the OP and its relationship with the Company are governed by the Third Amended and Restated Agreement of Limited Partnership, as amended (the LPA), effective as of January 3, 2014. The Company does not have any significant assets other than its investment in the OP. Therefore, the assets and liabilities of the Company and the OP are substantially the same. Additionally, pursuant to the LPA, all administrative expenses and expenses associated with the formation and continuity of existence and operation of the Company incurred by the Company on the OPs behalf shall be treated as expenses of the OP. Further, when the Company issues any equity instrument that has been approved by the Companys board of directors to date, the LPA requires the OP to issue the Company equity instruments with substantially similar terms.
Executive Leadership Changes and Audit Committee Investigation
On September 30, 2014, the Company announced that, effective October 1, 2014, David S. Kay would become Chief Executive Officer of the Company and Lisa E. Beeson would become the Companys President. Nicholas S. Schorsch, who had served as the Companys Chief Executive Officer, would remain the Companys Executive Chairman.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
On October 29, 2014, the Company filed a Current Report on Form 8-K with the SEC disclosing the Audit Committees conclusion that the previously issued audited consolidated financial statements contained in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and Quarterly Reports on Form 10-Q for the fiscal periods ended March 31, 2014 and June 30, 2014, should no longer be relied upon. Results of the investigation are further discussed within Note 2 Restatement of Previously Issued Financial Statements.
On October 28, 2014, Brian S. Block and Lisa Pavelka McAlister, the Companys Executive Vice President, Chief Financial Officer, Treasurer and Secretary and Senior Vice President and Chief Accounting Officer, respectively, each resigned from the Company. The Companys board of directors appointed Michael Sodo to serve as the Companys Chief Financial Officer and Gavin Brandon to serve as the Companys Chief Accounting Officer.
On December 12, 2014, Nicholas S. Schorsch resigned as Executive Chairman and a director of the Company. He also resigned from all other employment and board positions that he held at the Company and its subsidiaries and certain Company-related entities (including the non-traded real estate investment trusts sponsored or managed by the Company or its affiliates).
On December 15, 2014, David S. Kay resigned as Chief Executive Officer (CEO) and a director of the Company and as CEO of the OP. Lisa E. Beeson also resigned as President and Chief Operating Officer of the Company and OP. In addition, each of them resigned from any other employment or board positions held with the Company, its subsidiaries and certain Company-related entities (including the non-traded real estate investment trusts sponsored or managed by the Company or its affiliates).
In connection with their resignations, Messrs. Schorsch, Block and Kay and Ms. Beeson relinquished an aggregate of approximately 2.7 million shares of stock as well as all outstanding interests in the Companys 2014 Out-performance Plan.
Effective December 15, 2014, William G. Stanley, who had been serving as the Companys Lead Independent Director, became the Companys Interim Chief Executive Officer and Interim Chairman of the Companys board of directors, thus resigning from his role as Lead Independent Director, which was assumed by another independent director. Mr. Stanley will lead the Company until permanent replacements are named. The Compensation Committee of the Companys board of directors has commenced a search for a new Chief Executive Officer and a new independent Chairman of the Companys board of directors.
Unconsummated Sale of Cole Capital to RCAP
On October 1, 2014, the Company announced that it had entered into an equity purchase agreement (the Agreement), dated as of September 30, 2014, with RCS Capital Corporation (RCAP), pursuant to which RCAP would acquire Cole Capital, the Companys private capital management business, for at least $700.0 million. As part of the transaction, the Company would be entitled to an earn-out of up to an additional $130.0 million based upon Cole Capitals 2015 EBITDA.
On November 3, 2014, the Company received notice from RCAP purporting to terminate the Agreement.
On December 4, 2014, the Company issued a press release announcing that it had entered into a settlement agreement with RCAP that resolved their dispute relating to the Agreement. The settlement, in which the Company received $60.0 million, resolved litigation brought by the Company in the Delaware Court of Chancery to enforce its rights under the Agreement.
The settlement included: $42.7 million in cash paid by RCAP to the Company; a $15.3 million unsecured note issued by RCAP to the Company; and a release of the Company from its obligation to pay $2.0 million to RCAP or its affiliates relating to another matter described in the press release. The $42.7 million in cash included a $10.0 million payment already delivered to the Company by RCAP in connection with the Agreement. The two-year unsecured note bears interest at an 8.0% interest rate per annum. In addition, the Company and RCAP have agreed to terminate, unwind or otherwise discontinue all agreements, arrangements and understandings between the two parties and any of their respective subsidiaries.
Abandoned Spin-off of Multi-Tenant Shopping Center Portfolio
On March 13, 2014, the Company announced its intention to spin off its multi-tenant shopping center business into a publicly traded REIT, American Realty Capital Centers, Inc., which was expected to operate under the name ARCenters and to trade on the NASDAQ Global Market under the symbol ARCM. The OP was expected to retain 25% ownership of ARCM. The spin-off was expected to be effectuated through a pro rata taxable special distribution of one share of ARCM common stock for every 10 shares of the Companys common stock and every 10 OP Units held by third parties in the OP. On April 4, 2014, ARCM filed a Registration Statement on Form 10 to register ARCMs common stock, par value $0.01 per share, pursuant to Section 12(b) of the Exchange Act
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
so that, upon consummation of the spin-off, shares of ARCM received by holders of the Companys common stock, or OP Units, as applicable, could freely trade their newly received ARCM common stock. ARCM was expected to be externally managed by the Company. On May 21, 2014, the Company announced that it had reassessed its plans for the multi-tenant shopping center portfolio and entered into a letter of intent to sell such portfolio to Blackstone, expecting to finalize pertinent documentation related thereto within 30 days of such date. The properties included in such sale were the same properties that would have been spun off into ARCM and, consequently, the Company abandoned its proposed spin-off at such time. On June 11, 2014, indirect subsidiaries of the Company entered into an Agreement of Purchase and Sale with BRE DDR Retail Holdings III LLC, an entity indirectly jointly owned by affiliates of Blackstone Real Estate Partners VII L.P. and DDR Corp., pursuant to which the parties definitively documented the sale of the Companys multi-tenant shopping center portfolio. Such sale was consummated on October 17, 2014, as described below. The Company expects to withdraw its filed Registration Statement on Form 10 intended to register shares of common stock of ARCM.
Multi-tenant Shopping Center Portfolio Sale
On October 17, 2014, the Company completed the sale of its multi-tenant shopping center portfolio for $1.9 billion to a joint venture (the Joint Venture) between affiliates of Blackstone Real Estate Partners VII (Blackstone) and DDR Corp (DDR). Additionally, the Company entered into a letter of intent with an unrelated third party to sell five multi-tenant properties for $52.3 million bringing total sale proceeds to $2.0 billion. The transaction aimed to simplify the Companys business model, allowing it to focus solely on its single-tenant, net lease investments. The disposition to Blackstone and DDR provided $1.3 billion of net proceeds, of which $1.2 billion were used to reduce the Companys leverage by paying down the Companys line of credit, and a loss on sale of $261.1 million, which includes the write-off of $195.5 million of goodwill allocated to the cost basis of the Multi-Tenant Portfolio.
National Institute of Health
The Company acquired the National Institute of Health (NIH) office building in Bethesda, Maryland with a historical cost approximating $40.0 million on November 5, 2013 as part of the acquisition of CapLease, Inc. As of March 31, 2014, 9,133 of the 207,055 square feet (4.4%) were leased by certain divisions of the NIH, with the remainder of the building substantially vacated since November 1, 2013.
On June 12, 2014, the lender of the $65.2 million mortgage loan, with a current balance outstanding of $53.8 million, collateralized by the property located in Bethesda, Maryland placed our loan with them in default due to non-payment. The Company decided not to make the debt service payment since cash flows generated from the property were insufficient to fund debt service payments and capital improvements necessary to lease and operate the property. The Company was not prepared to fund any further cash shortfalls. We are currently accruing interest at the default interest rate of 5.32% per annum.
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AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Line of Credit, Agreements, and Waivers
The Company has substantial amounts of indebtedness outstanding upon which it relies for funding of future capital needs. As discussed within Note 13 Credit Facilities, at December 31, 2013, the Credit Facility had commitments of $2.4 billion. The Credit Facility had an accordion feature, which, if exercised in full, would allow the Company to increase borrowings under the Credit Facility to $3.0 billion, subject to additional lender commitments, borrowing base availability and other conditions.
On June 30, 2014, the Company, as guarantor, and the OP, as borrower, entered into the Credit Agreement, which increased the available borrowings, extended the term and decreased the interest rates associated with the Credit Facility prior to the execution of the Credit Agreement. The Credit Agreement provided an accordion feature, which, if exercised in full, would allow the Company to increase the aggregate commitments under the Credit Facility to $6.0 billion, subject to the receipt of such additional commitments and the satisfaction of certain customary conditions. Subsequent to the execution of the Credit Agreement, the Company accepted an additional $50.0 million commitment on the revolving credit facility from one of the original 20 financial institutions, bringing the total Credit Facility commitments to $4.7 billion.
On November 12, 2014, the Company entered into a consent, waiver and amendment (the Amendment) with its lenders under its unsecured credit facility for an extension regarding the delivery of its third quarter 2014 financial statements and certain other financial deliverables until the earlier of five days following the date the Company files with the SEC its third quarter 2014 10-Q and January 5, 2015. The Amendment allowed the Company to remain compliant with its borrowing obligations under its Credit Facility as its external auditors completed their review of the Companys previously filed 2013 and 2014 financial statements. As part of the Amendment, in order to better align the size of the facility with anticipated future usage, the Company elected to reduce the maximum amount of indebtedness from $4.65 billion to $4.0 billion. Additionally, until the 2013 and 2014 financial statements are filed with the SEC, the maximum principal amount of indebtedness outstanding under the Credit Facility was temporarily reduced thereunder to $3.6 billion.
On December 23, 2014, the Company and the OP, as the borrower, entered into a Consent and Waiver Agreement (the Consent and Waiver) with respect to the Credit Agreement, as amended. The Consent and Waiver, among other things, (i) provided for a further extension regarding the delivery of the Companys third quarter 2014 financial statements and certain other financial deliverables that the Company agreed to provide under the Amendment, until the earlier of March 2, 2015 and 45 days following the receipt of a notice of breach or default from the applicable trustee or the requisite percentage of holders under the Companys and the OPs respective indentures, (ii) provided an extension from the lenders for the delivery of the Companys full-year 2014 audited financial statements until the earlier of the fifth day after the date that the Company files its Annual Report on Form 10-K with the SEC for the fiscal year ended December 31, 2014 and March 31, 2015, (iii) permanently reduced the maximum amount of indebtedness under the Credit Agreement to $3.6 billion, including the reduction of commitments under the Companys revolving facilities and the elimination of the $25 million swingline facility, (iv) provided that until the date that all required financial deliverables have been delivered, no further loans or letters of credit would be requested under the Credit Agreement, as amended, by the Company, other than in accordance with the cash flow forecast provided by the Company to the Lenders thereunder, and that neither the Company nor the OP would pay any dividends on, or make any other Restricted Payment (as defined in the Credit Agreement) on, its respective common equity and (v) provided that the Company would provide additional financial and other information to the Lenders from time to time. In connection with the Amendment and Consent and Waiver, the Company agreed to pay certain customary fees to the consenting Lenders and agreed to reimburse certain customary expenses of the arrangers. On February 20, 2015, we entered into a third consent (the Third Consent) to confirm that certain revisions to the required financial deliverables were agreed with the Lenders.
Agreement in Principle with Senior Noteholder Group; Convertible Notes
On January 22, 2015, the Company announced that it had entered into an agreement in principle with an ad hoc group of holders (the Senior Noteholder Group), which the Company had been advised then represented a majority of the aggregate principal amounts outstanding of each of the 2.000% senior notes due 2017, the 3.000% senior notes due 2019 and the 4.600% senior notes due 2024, which, in each case, were issued by the OP, of which the Company is the sole general partner, and guaranteed by us under an Indenture, dated February 6, 2014 (the Indenture), by and among the OP, U.S. Bank National
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Association, as trustee, and the guarantors named therein. Pursuant to such agreement, the Senior Noteholder Group agreed not to issue a notice of default, prior to March 3, 2015, for the Companys failure to timely deliver its Third Quarter 10-Q containing financial information required to be included therein in respect of the OP, which is required to be delivered pursuant to the terms of the Indenture. In exchange, the Company agreed to sign a confidentiality agreement with the Senior Noteholder Groups counsel and pay reasonable and documented fees and out-of-pocket expenses of such counsel up to $300,000. Furthermore, the parties agreed that in the event a notice of default related to our failure to timely deliver such Third Quarter 10-Q is issued by the senior noteholders on or after March 3, 2015, the 60-day cure period set forth in the Indenture will be reduced by one day for each day after January 19, 2015 that such notice of default is given. Such agreement was subsequently definitively documented and a supplement to the Indenture was entered into on February 9, 2015. The agreement was reached after the ad hoc group organized recently and directed counsel to the Senior Noteholder Group to engage in discussions with the Company regarding the terms of a possible resolution in response to our failure to timely deliver such third quarter 2014 financial information regarding the OP.
In addition, the Company announced on January 22, 2015 that it received at its Phoenix, Arizona corporate office notice (the Notice) from the trustee under the indentures (the Convertible Indentures) governing each of the 3.00% convertible senior notes due 2018 issued by us on July 29, 2013 and the 3.75% convertible senior notes due 2020 issued by the Company on December 10, 2013 (collectively, the Convertible Notes) of the Companys failure to timely deliver our Third Quarter 10-Q, which was required to be delivered pursuant to the terms of the Convertible Indentures. Subsequent to the Companys announcement, the Company learned that it also received the Notice on January 16, 2015, at an address in New York City that was formerly the Companys principal place of business. Pursuant to the terms of the Convertible Indentures, the Company has 60 days following its receipt of a notice of default to deliver the required financial statements, after which such failure would become an event of default under each of the Convertible Indentures. Our Third Quarter 10-Q will be filed with the SEC concurrently with Amendment No. 2 to the Companys Annual Report in Form 10-K/A for the year ended December 31, 2014.
Non-Compliance Associated with the Companys Filings
The federal securities laws require companies subject to the Exchange Act to disclose information on an ongoing basis. These laws include deadlines for public companies based on the category of the filer as well as type of form filed.
The Company is classified as a Large Accelerated Filer. The deadlines associated with our filing category are as follows:
| The Companys Annual Report on Form 10-K must be submitted within 60 days of the Companys fiscal year end; and |
| The Companys Quarterly Report on Form 10-Q must be submitted within 40 days of the Companys fiscal quarter end. |
In light of the non-reliance on the Companys financial statements and the Audit Committee investigation, such deadlines with the SEC were not met with respect to the Companys Quarterly Report on Form 10-Q for the three months ended September 30, 2014.
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AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
On November 12, 2014, the Company received a notification letter (the Letter) from the NASDAQ Listing Qualifications Department (NASDAQ) stating that because the Company had not yet filed its Quarterly Report on Form 10-Q for the period ended September 30, 2014 (the Third Quarter 10-Q) with the SEC, it was not in compliance with the continued listing requirements under NASDAQ Listing Rule 5250(c)(1). The Company also received, and has cooperated with, a letter (the NASDAQ Information Request) from NASDAQ requesting certain information relating to the matters described in the Current Report on Form 8-K filed October 29, 2014.
Pursuant to the Letter, we were required to submit a plan to NASDAQ to regain compliance with the applicable NASDAQ Listing Rule within 60 days of November 12, 2014. The Company complied with such obligation. After review of our plan for regaining compliance, NASDAQ granted us an extension until April 15, 2015 to file our Third Quarter 10-Q and any other delinquent filings to regain compliance with the listing rule.
Dividend Policy
As of December 24, 2014, the Company determined that, until it has delivered its 2013 financial statements, 2014 financial statements and related compliance certificates, neither it nor its subsidiary, the OP, will pay any dividends on, or make any other Restricted Payment (as defined in the Amended Credit Agreement) on, its respective common equity. Following the delivery of its financial statements, the Company will reevaluate a reinstatement of its dividend at a rate that is in line with its industry peers.
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AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
Redemption of Series D Preferred Stock
As described in Note 19 Related Party Transactions and Arrangements (As Restated), the Company issued 21.7 million shares of Series D Preferred Stock on November 12, 2013 to various holders pursuant to a private placement. The Articles Supplementary designating the terms of the Series D Preferred Stock provided that such shares were redeemable on the Redemption Date. If the Company did not choose to redeem the shares on the Redemption Date, the holders of Series D Preferred Stock were entitled to convert some or all of their outstanding shares of Series D Preferred Stock and the Company would then elect whether to (1) convert the shares of Series D Preferred Stock into the number of fully paid and non-assessable shares of common stock obtained by dividing the aggregate Liquidation Preference of such Series D Preferred Stock by the Conversion Price, (2) convert the shares of Series D Preferred Stock into an equal number of shares of Series E Preferred Stock (additional shares of Series E Preferred Stock could have been issued under certain circumstances) or (3) pay the holders a cash amount equal to the product of the number of shares of Series D Preferred Stock and the Cash Conversion Price. In advance of the Redemption Date, the Company sent the required notice to the holders of the Series D Preferred Stock indicating its intention to redeem all of the shares of Series D Preferred Stock on September 2, 2014. Upon settlement on the Redemption Date, the Company paid the holders of the Series D Preferred Stock the net amount due to them of $315.8 million and cancelled all outstanding shares of Series D Preferred Stock. As of the date of this filing, there are zero outstanding shares of Series D Preferred Stock.
CapLease and Cole Litigation Matters
On March 24, 2014, plaintiffs counsel in the Consolidated Actions brought by former CapLease stockholders concerning the CapLease Transaction dismissed those claims without prejudice. Consequently, the only litigation brought by former CapLease stockholders with respect to the CapLease Transaction that is still pending is the Tarver Action, which remains stayed.
On July 31, 2014, plaintiffs in the putative class action filed in the Circuit Court for Baltimore City challenging the merger between Cole and Cole Holdings, pursuant to which Cole became a self-managed REIT, dismissed their pending appeal based on an agreement by defendants to reimburse plaintiffs in the amount of $100,000. The other two lawsuits filed in connection with the Cole Holdings transaction have been stayed by the court pursuant to a joint request made by all parties pending final approval of the consolidated Baltimore Actions relating to the Cole Merger, described below.
On August 14, 2014, the parties in the consolidated Baltimore Actions, which were brought by Cole stockholders challenging the Cole Merger, executed a Stipulation and Release and Agreement of Compromise and Settlement (the Settlement Stipulation), and the parties in the consolidated Baltimore Actions submitted the Settlement Stipulation, along with related filings, for approval by the Maryland court on August 18, 2014. On August 25, 2014, the Baltimore Circuit Court entered an Order on Preliminary Approval of Derivative and Class Action Settlement and Class Action Certification (the Preliminary Approval Order). Pursuant to the Preliminary Approval Order, the defendants mailed the Notice of Pendency of Derivative and Class Action (the Class Notice) to the Cole shareholders on October 7, 2014. On December 3, 2014, the parties in the consolidated Baltimore Merger Actions executed an Amended Stipulation and Release and Agreement of Compromise and Settlement (the Amended Stipulation) modifying the Stipulation. A final settlement hearing in the consolidated Baltimore Actions was held on December 12, 2014, and on January 13, 2015, the Baltimore Circuit Court issued an order approving the settlement pursuant to the terms of the Amended Stipulation. Two objecting class members have since filed a notice of appeal of the settlement order. Following court approval of the settlement of the consolidated Baltimore Actions, the Wunsch case was dismissed voluntarily on January 21, 2015.
Regulatory Investigations and Litigation Relating to the Audit Committee Investigation
On October 29, 2014, the Company filed a Current Report on Form 8-K (the October 29 8-K) reporting that the Audit Committee had concluded that the previously-issued audited consolidated financial statements and other financial information contained in the original filing of the Companys Annual Report on Form 10-K for the year ended December 31, 2013, the previously issued unaudited financial statements and other financial information contained in the Companys Quarterly Reports on Form 10-Q for the fiscal periods ended March 31, 2014 and June 30, 2014, and the Companys earnings releases and other financial communications for these periods should no longer be relied upon. Prior to that filing, the Audit Committee previewed for the SEC the information contained in that filing. Subsequent to the filing, the SEC provided notice that it had commenced a formal investigation and issued subpoenas calling for the production of documents. In addition, the United States Attorneys Office for the Southern District of New York contacted counsel for the Audit Committee and counsel for the Company with respect to this matter, and the Secretary of the Commonwealth of Massachusetts issued a subpoena calling for the production of various documents. The Audit Committee and the Company are cooperating with these regulators in their investigations.
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AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
As discussed below, the Company and certain of its current and former directors and officers have been named as defendants in a number of lawsuits filed in response to the October 29 8-K, including class actions, derivative actions, and individual actions under the federal securities laws and state common and corporate laws in both federal and state courts in New York and Maryland.
Between October 30, 2014 and January 20, 2015, the Company and its current and former officers and directors (in addition to underwriters for certain of the Companys securities offerings) were named as defendants in ten putative securities class action complaints in the United States District Court for the Southern District of New York (the SDNY Actions): Ciraulu v. American Realty Capital, Inc., et al., No. 14-cv-8659 (AKH); Priever v. American Realty Capital Properties, Inc., et al., No. 14-cv-8668 (AKH); Rubinstein v. American Realty Capital Properties, Inc., et al., No. 14-cv-8669 (AKH); Patton v. American Realty Capital Properties, Inc., et al., No. 14-cv-8671 (AKH); Edwards v. American Realty Capital Properties, Inc., et al., No. 14-cv-8721 (AKH); Harris v. American Realty Capital Properties, Inc., et al., No. 14-cv-8740 (AKH); Abadi v. American Realty Capital Properties, Inc., et al., No. 14-cv-9006 (AKH); City of Tampa General Employees Retirement Fund v. American Realty Capital Properties, Inc., et al., No. 14-cv-10134 (AKH); Teachers Insurance and Annuity Association of America v. American Realty Capital Properties, Inc., et al., No. 15-cv-0421 (AKH); and New York City Employees Retirement System v. American Realty Capital Properties, Inc., et al., No. 15-cv-0422 (AKH). At a February 10, 2015 status conference, the court consolidated the SDNY Actions, appointed a lead plaintiff, and set a deadline of April 10, 2015 for the defendants to respond to the consolidated class action complaint, namely, the complaint filed in Teachers Insurance and Annuity Association of America v. American Realty Capital Properties, Inc., et al., No. 15-cv-0421 (AKH). The consolidated class action complaint asserts claims for violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, arising out of allegedly false and misleading statements in connection with the purchase or sale of the Companys securities. The proposed class period runs from May 6, 2013 to October 29, 2014.
In addition, on November 25, 2014, the Company and certain of its current and former officers and directors were named as defendants in a putative securities class action filed in the Circuit Court for Baltimore County, Maryland, captioned Wunsch v. American Realty Capital Properties, Inc., et al., No. 03-C-14-012816 (the Maryland Securities Action and together with the SDNY Actions, the Securities Actions). On December 23, 2014, the Company removed the Maryland Securities Action to the United States District Court for the District of Maryland (Northern Division), under the caption Wunsch v. American Realty Capital Properties, Inc., et al., No. 14-cv-4007 (ELH), and to transfer the action to the United States District Court for the Southern District of New York. The Maryland Securities Action asserts claims for violations of Sections 11 and 15 of the Securities Act of 1933, arising out of allegedly false and misleading statements made in connection with the Companys securities issued in connection with the Cole Merger. The Company is not yet required to respond to this complaint.
Between November 17, 2014 and February 2, 2015, six shareholder derivative actions, purportedly in the name and for the benefit of the Company, were filed against certain of the Companys current and former officers and directors, amongst others, in the United States District Court for the Southern District of New York (the SDNY Derivative Actions): Michelle Graham Turner 1995 Revocable Trust v. Schorsch, et al., No. 14-cv-9140 (AKH); Froehner v. Schorsch, et al., No. 14-cv-9444 (AKH); Serafin v. Schorsch, et al., No. 14-cv-9672 (AKH); Hopkins v. Schorsch, et al., No. 15-cv-262 (AKH); Appolito v. Schorsch, et al., No. 15-cv-644 (AKH); and The Joel and Robin Staadecker Living Trust v. Schorsch, et al., No. 15-cv-768 (AKH). In addition, between December 30, 2014 and January 16, 2015, the Company and certain of its current and former officers and directors were named as defendants in two shareholder derivative actions filed in the Circuit Court for Baltimore City, Maryland (the Maryland Derivative Actions): Meloche v. Schorsch, et al., No. 24-C-14-008210 and Botifoll v. Schorsch, et al., No. 24-C-15-000245. In addition, on January 29, 2015, the Company and certain of its current directors, amongst others,
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013
were named as defendants in a shareholder derivative action filed in the Supreme Court of the State of New York, captioned Fran Kosky Roth IRA v. Rendell, et al., No. 15-650269 (the New York Derivative Action, and together with the SDNY Derivative Actions and the Maryland Derivative Actions, the Derivative Actions). On February 9, 2015 and February 20, 2015, three plaintiffs who filed SDNY Derivative ActionsAppolito, Hopkins and The Joel and Robin Staadecker Living Trustvoluntarily dismissed their actions without prejudice. The Derivative Actions seek money damages and other relief on behalf of the Company for, among other things, alleged breaches of fiduciary duty, abuse of control, gross mismanagement and unjust enrichment in connection with the alleged conduct underlying the claims asserted in the Securities Actions negligence and breach of contract. At a February 10, 2015 status conference, the court consolidated the SDNY Derivative Actions and directed the plaintiffs to file a consolidated amended complaint by March 10, 2015. The court set a deadline of April 3, 2015 for the defendants to respond to the consolidated complaint. On February 18, 2015, the parties to the New York Derivative Action entered into a stipulation setting a deadline of April 20, 2015 for the Company and defendants to respond to the complaint in that action. The Company and defendants are not yet required to respond to the complaints in the Maryland Derivative Actions.
On December 18, 2014, a former employee, Lisa McAlister, filed a defamation action against the Company and certain of its former officers and directors in the Supreme Court for the State of New York, captioned McAlister v. American Realty Capital Properties, Inc., et al., No. 14-162499. The complaint sought, among other things, compensatory and punitive damages and alleged that the October 29 8-K falsely blamed plaintiff for improper accounting and financial reporting practices. On January 26, 2015, the Company and the other defendants filed motions to dismiss plaintiffs complaint. Subsequently, Ms. McAlister dismissed this action without prejudice.
On January 7, 2015, Ms. McAlister also filed a complaint, No. 2-4173-15-016, with the Occupational Safety and Health Administration of the United States Department of Labor. The complaint seeks, among other things, compensatory and punitive damages and asserts claims for wrongful termination of employment for allegedly reporting concerns relating to alleged improper accounting practices by the Company. Ms. McAlister has withdrawn the complaint without prejudice.
On January 15, 2015, the Company and certain of its former directors and officers were named as defendants in an individual securities fraud action filed in the United States District Court for the Southern District of New York, captioned Jet Capital Master Fund, L.P. v. American Realty Capital Properties, Inc., et al., No. 15-cv-307 (AKH) (the Jet Capital Action). The Jet Capital Action seeks money damages and asserts claims for alleged violations of Sections 10(b), 18 and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, as well as common law fraud under New York law in connection with the purchase of the Companys securities. The court set a deadline of April 10 for the defendants to respond to the complaint.
On February 20, 2015, the Company, certain of its current and former directors and officers, and ARC Properties Operating Partnership L.P. (in addition to several other individuals and entities) were named as defendants in an individual securities fraud action filed in the United States District Court for the Southern District of New York, captioned Twin Securities, Inc. v. American Realty Capital Properties, Inc., et al., No. 15-cv-1291 (the Twin Securities Action). The Twin Securities Action seeks money damages and asserts claims for alleged violations of Sections 10(b), 14(a), 18, and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as well as common law fraud under New York law in connection with the purchase of the Companys securities. The Company and defendants are not yet required to respond to the complaint in the Twin Securities Action.
F-89
Real Estate and Accumulated Depreciation
Schedule III
December 31, 2013
(in thousands)
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
24 Hour Fitness |
Woodlands | TX | $ | | (1) | $ | 2,690 | $ | 8,312 | $ | | $ | 11,002 | $ | 135 | 9/24/2013 | 2001 | |||||||||||||||||
7-Eleven |
Sarasota | FL | | (1) | 1,312 | 1,312 | | 2,624 | 80 | 11/19/2012 | 2000 | |||||||||||||||||||||||
7-Eleven |
Gloucester | VA | | (1) | 144 | 578 | | 722 | 32 | 12/24/2012 | 1985 | |||||||||||||||||||||||
7-Eleven |
Hampton | VA | | (1) | 69 | 624 | | 693 | 35 | 12/24/2012 | 1986 | |||||||||||||||||||||||
7-Eleven |
Hampton | VA | | (1) | 161 | 644 | | 805 | 36 | 12/24/2012 | 1959 | |||||||||||||||||||||||
Abbott Laboratories |
Waukegan | IL | 13,649 | 4,734 | 21,319 | | 26,053 | 193 | 11/5/2013 | 2000 | ||||||||||||||||||||||||
Abbott Laboratories |
Columbus | OH | | (2) | 800 | 11,385 | | 12,185 | 122 | 11/5/2013 | 2004 | |||||||||||||||||||||||
Academy Sports |
Fayetteville | AR | | 1,900 | 7,601 | | 9,501 | 534 | 12/28/2012 | 2012 | ||||||||||||||||||||||||
Academy Sports |
Dalton | GA | | 998 | 5,656 | | 6,654 | 331 | 2/20/2013 | 2012 | ||||||||||||||||||||||||
Advance Auto |
Birmingham | AL | | (1) | 330 | 494 | | 824 | 23 | 2/28/2013 | 1999 | |||||||||||||||||||||||
Advance Auto |
Birmingham | AL | | (1) | 455 | 373 | | 828 | 17 | 2/28/2013 | 1997 | |||||||||||||||||||||||
Advance Auto |
Calera | AL | | (1) | 723 | 723 | | 1,446 | 41 | 12/27/2012 | 2008 | |||||||||||||||||||||||
Advance Auto |
Dothan | AL | | (1) | 326 | 326 | | 652 | 18 | 12/31/2012 | 1997 | |||||||||||||||||||||||
Advance Auto |
Enterprise | AL | | (1) | 280 | 420 | | 700 | 24 | 12/31/2012 | 1995 | |||||||||||||||||||||||
Advance Auto |
Albany | GA | | (1) | 210 | 629 | | 839 | 35 | 12/31/2012 | 1995 | |||||||||||||||||||||||
Advance Auto |
Cairo | GA | | (1) | 140 | 326 | | 466 | 18 | 12/31/2012 | 1993 | |||||||||||||||||||||||
Advance Auto |
Hazlehurst | GA | | (1) | 113 | 451 | | 564 | 25 | 12/31/2012 | 1998 | |||||||||||||||||||||||
Advance Auto |
Hinesville | GA | | (1) | 352 | 430 | | 782 | 24 | 12/31/2012 | 1994 | |||||||||||||||||||||||
Advance Auto |
Perry | GA | | (1) | 209 | 487 | | 696 | 27 | 12/31/2012 | 1994 | |||||||||||||||||||||||
Advance Auto |
Thomasville | GA | | (1) | 251 | 377 | | 628 | 21 | 12/31/2012 | 1997 | |||||||||||||||||||||||
Advance Auto |
Auburn | IN | | 337 | 1,347 | | 1,684 | 132 | 3/29/2012 | 2007 | ||||||||||||||||||||||||
Advance Auto |
Clinton | IN | | (1) | 182 | 729 | | 911 | 24 | 6/5/2013 | 2004 | |||||||||||||||||||||||
Advance Auto |
Fort Wayne | IN | | (1) | 193 | 450 | | 643 | 21 | 2/28/2013 | 1998 | |||||||||||||||||||||||
Advance Auto |
Fort Wayne | IN | | (1) | 200 | 371 | | 571 | 17 | 2/28/2013 | 1998 | |||||||||||||||||||||||
Advance Auto |
Salina | KS | | (1) | 195 | 782 | | 977 | 29 | 4/30/2013 | 2006 | |||||||||||||||||||||||
Advance Auto |
Barbournville | KY | | (1) | 194 | 1,098 | | 1,292 | 46 | 4/15/2013 | 2006 | |||||||||||||||||||||||
Advance Auto |
Bardstown | KY | | (1) | 272 | 1,090 | | 1,362 | 66 | 12/10/2012 | 2005 | |||||||||||||||||||||||
Advance Auto |
Brandenburg | KY | | (1) | 186 | 742 | | 928 | 45 | 12/10/2012 | 2005 |
F-90
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Advance Auto |
Hardinsburg | KY | | (1) | 94 | 845 | | 939 | 51 | 12/10/2012 | 2007 | |||||||||||||||||||||||
Advance Auto |
Inez | KY | | (1) | 130 | 1,174 | | 1,304 | 88 | 8/22/2012 | 2010 | |||||||||||||||||||||||
Advance Auto |
Leitchfield | KY | | (1) | 104 | 939 | | 1,043 | 57 | 12/10/2012 | 2005 | |||||||||||||||||||||||
Advance Auto |
West Liberty | KY | | (1) | 249 | 996 | | 1,245 | 42 | 4/15/2013 | 2006 | |||||||||||||||||||||||
Advance Auto |
Rayne | LA | | (1) | 122 | 490 | | 612 | 16 | 5/21/2013 | 2000 | |||||||||||||||||||||||
Advance Auto |
Caro | MI | | (8) | 117 | 665 | | 782 | 78 | 11/23/2011 | 2002 | |||||||||||||||||||||||
Advance Auto |
Charlotte | MI | | (8) | 123 | 697 | | 820 | 82 | 11/23/2011 | 2002 | |||||||||||||||||||||||
Advance Auto |
Flint | MI | | (1) | 133 | 534 | | 667 | 62 | 11/23/2011 | 2002 | |||||||||||||||||||||||
Advance Auto |
Livonia | MI | | (8) | 210 | 629 | 14 | 853 | 74 | 12/12/2011 | 2003 | |||||||||||||||||||||||
Advance Auto |
Manistee | MI | | (1) | 348 | 1,043 | | 1,391 | 44 | 4/15/2013 | 2007 | |||||||||||||||||||||||
Advance Auto |
Sault Ste. Marie | MI | | (8) | 75 | 671 | | 746 | 78 | 11/23/2011 | 2003 | |||||||||||||||||||||||
Advance Auto |
Ypsilanti | MI | | (1) | 85 | 483 | | 568 | 57 | 11/23/2011 | 2002 | |||||||||||||||||||||||
Advance Auto |
Eden | NC | | (1) | 320 | 746 | | 1,066 | 17 | 7/16/2013 | 2004 | |||||||||||||||||||||||
Advance Auto |
Granite Falls | NC | | (1) | 251 | 1,005 | | 1,256 | 80 | 8/9/2012 | 2010 | |||||||||||||||||||||||
Advance Auto |
Lakewood | NJ | | (1) | 750 | 1,750 | | 2,500 | 131 | 8/22/2012 | 2010 | |||||||||||||||||||||||
Advance Auto |
Woodbury | NJ | | (1) | 446 | 1,784 | | 2,230 | 150 | 6/20/2012 | 2007 | |||||||||||||||||||||||
Advance Auto |
Eaton | OH | | (1) | 157 | 471 | | 628 | 15 | 6/13/2013 | 1987 | |||||||||||||||||||||||
Advance Auto |
Franklin | OH | | (1) | 218 | 873 | | 1,091 | 69 | 8/9/2012 | 1984 | |||||||||||||||||||||||
Advance Auto |
Springfield | OH | | (1) | 461 | 1,075 | | 1,536 | 60 | 12/31/2012 | 2005 | |||||||||||||||||||||||
Advance Auto |
Van Wert | OH | | (1) | 33 | 630 | | 663 | 21 | 6/13/2013 | 1998 | |||||||||||||||||||||||
Advance Auto |
Warren | OH | | 83 | 745 | | 828 | 73 | 4/12/2012 | 2003 | ||||||||||||||||||||||||
Advance Auto |
Oklahoma City | OK | | (1) | 208 | 1,178 | | 1,386 | 94 | 8/9/2012 | 2007 | |||||||||||||||||||||||
Advance Auto |
Chambersburg | PA | | (1) | 553 | 830 | | 1,383 | 39 | 2/28/2013 | 1997 | |||||||||||||||||||||||
Advance Auto |
Selinsgrove | PA | | (1) | 99 | 891 | | 990 | 29 | 6/3/2013 | 2003 | |||||||||||||||||||||||
Advance Auto |
Titusville | PA | | (1) | 207 | 1,172 | | 1,379 | 71 | 12/12/2012 | 2010 | |||||||||||||||||||||||
Advance Auto |
Chapin | SC | | (1) | 395 | 922 | | 1,317 | 78 | 6/20/2012 | 2007 | |||||||||||||||||||||||
Advance Auto |
Chesterfield | SC | | (1) | 131 | 745 | | 876 | 63 | 6/27/2012 | 2008 | |||||||||||||||||||||||
Advance Auto |
Greenwood | SC | | 210 | 630 | | 840 | 65 | 3/9/2012 | 1995 | ||||||||||||||||||||||||
Advance Auto |
Sweetwater | TN | | (1) | 360 | 839 | | 1,199 | 51 | 11/29/2012 | 2006 | |||||||||||||||||||||||
Advance Auto |
Alton | TX | | (1) | 169 | 958 | | 1,127 | 63 | 10/18/2012 | 2006 | |||||||||||||||||||||||
Advance Auto |
Houston | TX | | (3) | 248 | 991 | | 1,239 | 125 | 9/30/2011 | 2006 | |||||||||||||||||||||||
Advance Auto |
Houston | TX | | (3) | 343 | 1,029 | | 1,372 | 130 | 9/30/2011 | 2006 | |||||||||||||||||||||||
Advance Auto |
Houston | TX | | (1) | 837 | 685 | | 1,522 | 51 | 8/21/2012 | 2007 | |||||||||||||||||||||||
Advance Auto |
Pasadena | TX | | (1) | 382 | 1,146 | | 1,528 | 97 | 7/6/2012 | 2008 |
F-91
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Advance Auto |
Fort Atkinson | WI | | (1) | 353 | 824 | | 1,177 | 15 | 8/26/2013 | 2004 | |||||||||||||||||||||||
Advance Auto |
Kenosha | WI | | (1) | 569 | 465 | | 1,034 | 22 | 3/13/2013 | 2004 | |||||||||||||||||||||||
Advance Auto |
St. Marys | WY | | (1) | 309 | 928 | | 1,237 | 52 | 12/28/2012 | 2007 | |||||||||||||||||||||||
Aetna Life Insurance Company |
Fresno | CA | 16,043 | 3,405 | 22,343 | | 25,748 | 207 | 11/5/2013 | 2008 | ||||||||||||||||||||||||
Ale House |
Orlando | FL | | (1) | 290 | 3,647 | | 3,937 | 105 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Ale House |
Orlando | FL | | (1) | 270 | 3,668 | | 3,938 | 105 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Ale House |
Saint Petersburg | FL | | 930 | 3,116 | | 4,046 | 89 | 6/27/2013 | 1998 | ||||||||||||||||||||||||
Allstate Insurance Company |
Charlotte | NC | 18,846 | 8,320 | 23,409 | | 31,729 | 265 | 11/5/2013 | 1990 | ||||||||||||||||||||||||
Allstate Insurance Company |
Roanoke | VA | 20,064 | 6,176 | 27,085 | | 33,261 | 281 | 11/5/2013 | 1981 | ||||||||||||||||||||||||
AMCOR |
Alhambra | MI | | (1) | 7,143 | 8,730 | | 15,873 | 488 | 1/24/2013 | 1966 | |||||||||||||||||||||||
AMEC plc |
Houston | TX | 15,765 | 2,524 | 30,398 | | 32,922 | 255 | 11/5/2013 | 2003 | ||||||||||||||||||||||||
Ameriprise |
Ashwaubenon | WI | | 751 | 14,260 | | 15,011 | 631 | 1/25/2013 | 2000 | ||||||||||||||||||||||||
AON Corporation |
Lincolnshire | IL | | 5,337 | 124,776 | | 130,113 | 7,297 | 11/16/2012 | 1998 | ||||||||||||||||||||||||
Applebees |
Clinton | IA | | (1) | 490 | 1,184 | | 1,674 | 34 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Applebees |
Fort Dodge | IA | | (1) | | 1,363 | | 1,363 | 39 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Applebees |
Marshalltown | IA | | (1) | 660 | 1,175 | | 1,835 | 34 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Applebees |
Mason City | IA | | (1) | 340 | 1,495 | | 1,835 | 43 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Applebees |
Muscatine | IA | | (1) | 330 | 1,266 | | 1,596 | 36 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Applebees |
Sterling | IL | | (1) | 390 | 1,291 | | 1,681 | 37 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Applebees |
Hopkinsville | KY | | (1) | 460 | 1,265 | | 1,725 | 36 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Applebees |
Greenville | SC | | (1) | 600 | 2,166 | | 2,766 | 62 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Applebees |
Antioch | TN | | (1) | 470 | 878 | | 1,348 | 25 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Applebees |
Clarksville | TN | | (1) | 570 | 1,729 | | 2,299 | 50 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Applebees |
Columbia | TN | | (1) | 590 | 1,823 | | 2,413 | 52 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Applebees |
Cookeville | TN | | (1) | 410 | 1,128 | | 1,538 | 32 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Applebees |
Hermitage | TN | | (1) | 530 | 1,491 | | 2,021 | 43 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Applebees |
Lebanon | TN | | (1) | 460 | 1,120 | | 1,580 | 32 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Applebees |
Madison | TN | | (1) | 460 | 772 | | 1,232 | 22 | 6/27/2013 | 1995 |
F-92
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Arbys |
Arab | AL | | (1) | 40 | 887 | | 927 | 25 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Arbys |
Hampton Cove | AL | | (1) | 310 | 986 | | 1,296 | 27 | 6/27/2013 | 2007 | |||||||||||||||||||||||
Arbys |
Sacramento | CA | | (1) | 520 | 195 | | 715 | 5 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Arbys |
Arvada | CO | | (1) | 190 | 1,465 | | 1,655 | 41 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Arbys |
Orange Park | FL | | (1) | 420 | 1,256 | | 1,676 | 35 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Arbys |
Canton | GA | | (1) | 370 | 1,200 | | 1,570 | 33 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Arbys |
Douglasville | GA | | (1) | 370 | 1,692 | | 2,062 | 47 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Arbys |
Suwanee | GA | | (1) | 370 | 1,561 | | 1,931 | 43 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Arbys |
Avon | IN | | (1) | 500 | 812 | | 1,312 | 22 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Arbys |
Indianapolis | IN | | (1) | 530 | 1,236 | | 1,766 | 34 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Arbys |
Indianapolis | IN | | (1) | 370 | 1,130 | | 1,500 | 31 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Arbys |
Kansas City | KS | | (1) | 280 | 364 | | 644 | 10 | 6/27/2013 | 1970 | |||||||||||||||||||||||
Arbys |
Salina | KS | | (1) | 540 | 300 | | 840 | 8 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Arbys |
Topeka | KS | | (1) | 240 | 291 | | 531 | 8 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Arbys |
Topeka | KS | | (1) | 270 | 433 | | 703 | 12 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Arbys |
Alma | MI | | (1) | 380 | 408 | | 788 | 11 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Arbys |
Chesterfield | MI | | (1) | 210 | 841 | | 1,051 | 23 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Arbys |
Davison | MI | | (1) | 420 | 631 | | 1,051 | 17 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Arbys |
Flint | MI | | (1) | 110 | 1,422 | | 1,532 | 39 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Arbys |
Flint | MI | | (1) | 230 | 1,428 | | 1,658 | 40 | 6/27/2013 | 1962 | |||||||||||||||||||||||
Arbys |
Midland | MI | | (1) | 340 | 753 | | 1,093 | 21 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Arbys |
Pontiac | MI | | (1) | 180 | 962 | | 1,142 | 27 | 6/27/2013 | 1968 | |||||||||||||||||||||||
Arbys |
Port Huron | MI | | (1) | 210 | 868 | | 1,078 | 24 | 6/27/2013 | 1975 | |||||||||||||||||||||||
Arbys |
Saginaw | MI | | (1) | 310 | 1,110 | | 1,420 | 31 | 6/27/2013 | 1970 | |||||||||||||||||||||||
Arbys |
South Haven | MI | | (1) | 260 | 573 | | 833 | 16 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Arbys |
Walker | MI | | (1) | 360 | 1,002 | | 1,362 | 28 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Arbys |
Fayetteville | NC | | (1) | 420 | 2,001 | | 2,421 | 55 | 6/27/2013 | 2006 | |||||||||||||||||||||||
Arbys |
Greensboro | NC | | (1) | 300 | 906 | | 1,206 | 25 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Arbys |
Greenville | NC | | (1) | 310 | 681 | | 991 | 19 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Arbys |
Jonesville | NC | | (1) | 350 | 908 | | 1,258 | 25 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Arbys |
Kernersville | NC | | (1) | 280 | 774 | | 1,054 | 21 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Arbys |
Kinston | NC | | (1) | 350 | 832 | | 1,182 | 23 | 6/27/2013 | 1995 |
F-93
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Arbys |
Lexington | NC | | (1) | 360 | 873 | | 1,233 | 24 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Arbys |
Columbus | OH | | (1) | 400 | 1,155 | | 1,555 | 32 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Arbys |
Reynoldsburg | OH | | (1) | 370 | 945 | | 1,315 | 26 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Arbys |
Willard | OH | | (1) | 230 | 599 | | 829 | 17 | 6/27/2013 | 2005 | |||||||||||||||||||||||
Arbys |
Allentown | PA | | (1) | 600 | 1,652 | | 2,252 | 46 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Arbys |
Carlisle | PA | | (1) | 200 | 472 | | 672 | 13 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Arbys |
Hanover | PA | | (1) | 400 | 921 | | 1,321 | 26 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Arbys |
Myrtle Beach | SC | | (1) | 370 | 1,132 | | 1,502 | 31 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Arbys |
Amarillo | TX | | (1) | 260 | 627 | | 887 | 17 | 6/27/2013 | 1992 | |||||||||||||||||||||||
AT&T |
Richardson | TX | 20,224 | 1,891 | 31,118 | | 33,009 | 262 | 11/5/2013 | 1987 | ||||||||||||||||||||||||
Auto Zone |
Chicago | IL | | (1) | 698 | 1,047 | | 1,745 | 39 | 4/30/2013 | 2007 | |||||||||||||||||||||||
Bandanas Bar-B-Q Restaurant |
Collinsville | IL | | (1) | 340 | 627 | | 967 | 18 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Bandanas Bar-B-Q Restaurant |
Arnold | MO | | (1) | 460 | 433 | | 893 | 12 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Baxter International, Inc. |
Bloomington | IN | | (2) | 1,310 | 8,216 | | 9,526 | 84 | 11/5/2013 | 2004 | |||||||||||||||||||||||
Bed Bath & Beyond |
Stockton | CA | | 2,761 | 52,454 | | 55,215 | 4,266 | 8/17/2012 | 2003 | ||||||||||||||||||||||||
Big O Tires |
Los Lunas | NM | | (1) | 316 | 1,265 | | 1,581 | 116 | 6/1/2012 | 2006 | |||||||||||||||||||||||
BJs Wholesale Club |
Canton | OH | | 456 | 8,668 | | 9,124 | 507 | 2/20/2013 | 1998 | ||||||||||||||||||||||||
Black Angus |
Dublin | CA | | (1) | 620 | 2,467 | | 3,087 | 71 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Bojangles |
Winder | GA | | (1) | 645 | 1,198 | | 1,843 | 120 | 7/30/2012 | 2011 | |||||||||||||||||||||||
Bojangles |
Biscoe | NC | | (1) | 247 | 986 | | 1,233 | 75 | 11/29/2012 | 2010 | |||||||||||||||||||||||
Bojangles |
Boone | NC | | (1) | 278 | 833 | | 1,111 | 83 | 7/27/2012 | 1980 | |||||||||||||||||||||||
Bojangles |
Dobson | NC | | (1) | 251 | 1,004 | | 1,255 | 100 | 7/30/2012 | 2010 | |||||||||||||||||||||||
Bojangles |
Indian Trail | NC | | (1) | 655 | 1,217 | | 1,872 | 121 | 7/27/2012 | 2011 | |||||||||||||||||||||||
Bojangles |
Morganton | NC | | 566 | 1,321 | | 1,887 | 132 | 7/27/2012 | 2010 | ||||||||||||||||||||||||
Bojangles |
Roanoke Rapids | NC | | (1) | 442 | 1,032 | | 1,474 | 103 | 7/27/2012 | 2011 | |||||||||||||||||||||||
Bojangles |
Southport | NC | | (1) | 505 | 1,179 | | 1,684 | 118 | 7/30/2012 | 2011 | |||||||||||||||||||||||
Bojangles |
Chapin | SC | | (1) | 577 | 1,071 | | 1,648 | 107 | 8/9/2012 | 2009 | |||||||||||||||||||||||
Bojangles |
Clinton | SC | | (1) | 397 | 926 | | 1,323 | 92 | 7/27/2012 | 2009 | |||||||||||||||||||||||
Bojangles |
Greenwood | SC | | (1) | 440 | 1,320 | | 1,760 | 77 | 2/28/2013 | 2011 | |||||||||||||||||||||||
Bojangles |
Moncks Corner | SC | | (1) | 505 | 1,179 | | 1,684 | 90 | 11/29/2012 | 2010 | |||||||||||||||||||||||
Bojangles |
Walterboro | SC | | (1) | 454 | 1,363 | | 1,817 | 104 | 11/29/2012 | 2010 |
F-94
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Boston Market |
Indianapolis | IN | | (1) | 930 | | | 930 | | 6/27/2013 | 1997 | |||||||||||||||||||||||
Boston Market |
Indianapolis | IN | | (1) | 410 | 1,070 | | 1,480 | 30 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Boston Market |
Fayetteville | NC | | (1) | 460 | 1,520 | | 1,980 | 42 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Boston Market |
Raleigh | NC | | (1) | 280 | 1,015 | | 1,295 | 28 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Brangus Steakhouse |
Jasper | AL | | (1) | 140 | 219 | | 359 | 6 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Brueggers Bagels |
Iowa City | IA | | (1) | 40 | 379 | | 419 | 10 | 6/27/2013 | 2013 | |||||||||||||||||||||||
Brueggers Bagels |
Raleigh | NC | | (1) | 230 | 654 | | 884 | 18 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Buca di Beppo Italian |
Wheeling | IL | | (1) | 450 | 1,272 | | 1,722 | 36 | 6/27/2013 | 1975 | |||||||||||||||||||||||
Buca di Beppo Italian |
Westlake | OH | | (1) | 370 | 887 | | 1,257 | 25 | 6/27/2013 | 1900 | |||||||||||||||||||||||
Bunge North America, Inc. |
Fort Worth | TX | 6,262 | 1,100 | 8,433 | | 9,533 | 76 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
Burger King |
Tucson | AZ | | (1) | 300 | 1,307 | | 1,607 | 36 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Burger King |
Atlanta | GA | | (1) | 380 | 499 | | 879 | 14 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Burger King |
Fort Oglethorpe | GA | | (1) | 170 | 2,175 | | 2,345 | 60 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Burger King |
Marietta | GA | | (1) | 350 | 916 | | 1,266 | 25 | 6/27/2013 | 1983 | |||||||||||||||||||||||
Burger King |
Chicago | IL | | (1) | 580 | 1,413 | | 1,993 | 39 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Burger King |
Highland | IN | | (1) | 410 | 992 | | 1,402 | 27 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Burger King |
Madisonville | KY | | (1) | 550 | 1,067 | | 1,617 | 30 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Burger King |
Caribou | ME | | (1) | 770 | 440 | | 1,210 | 12 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Burger King |
Grand Rapids | MI | | (1) | 490 | 545 | | 1,035 | 15 | 6/27/2013 | 1968 | |||||||||||||||||||||||
Burger King |
Grand Rapids | MI | | (1) | 260 | 780 | | 1,040 | 22 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Burger King |
Holland | MI | | (1) | 420 | 707 | | 1,127 | 20 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Burger King |
Sparta | MI | | (1) | 640 | 570 | | 1,210 | 16 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Burger King |
Walled Lake | MI | | (1) | 470 | 433 | | 903 | 12 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Burger King |
Durham | NC | | (1) | 170 | 352 | | 522 | 10 | 6/27/2013 | 1990 |
F-95
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Burger King |
Rockingham | NC | | 430 | 1,171 | | 1,601 | 32 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
Burger King |
Edison | NJ | | (1) | 480 | 1,075 | | 1,555 | 30 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Burger King |
Manahawkin | NJ | | (1) | 310 | 748 | | 1,058 | 21 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Burger King |
Elko | NV | | (1) | 260 | 1,001 | | 1,261 | 28 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Burger King |
Albany | NY | | (1) | 330 | 850 | | 1,180 | 24 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Burger King |
Central Square | NY | | (1) | 500 | 1,189 | | 1,689 | 33 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Burger King |
Cohoes | NY | | (1) | 270 | 563 | | 833 | 16 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Burger King |
Montgomery | NY | | (1) | 480 | 1,042 | | 1,522 | 29 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Burger King |
Schenectady | NY | | (1) | 380 | 936 | | 1,316 | 26 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Burger King |
Willoughby | OH | | (1) | 410 | 1,005 | | 1,415 | 28 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Burger King |
Ardmore | OK | | (1) | 270 | 1,023 | | 1,293 | 28 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Burger King |
Corvallis | OR | | (1) | 170 | 195 | | 365 | 5 | 6/27/2013 | 1977 | |||||||||||||||||||||||
Burger King |
Roseburg | OR | | (1) | 350 | 886 | | 1,236 | 25 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Burger King |
Old Forge | PA | | (1) | 390 | 905 | | 1,295 | 25 | 6/27/2013 | 1977 | |||||||||||||||||||||||
Burger King |
Gaffney | SC | | (1) | 370 | 880 | | 1,250 | 24 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Burger King |
Greenville | SC | | (1) | 420 | 571 | | 991 | 16 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Burger King |
Chattanooga | TN | | (1) | 740 | 1,591 | | 2,331 | 44 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Burger King |
Cleburne | TX | | (1) | 300 | 603 | | 903 | 17 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Burger King |
Bluefield | WV | | (1) | 210 | 1,163 | | 1,373 | 32 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Cadbury Holdings Limited |
Whippany | NJ | 31,793 | 2,767 | 38,018 | | 40,785 | 304 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
Capital One Financial Corporation |
Plano | TX | | (2) | 8,440 | 23,212 | 191 | 31,843 | 298 | 11/5/2013 | 2005 | |||||||||||||||||||||||
Captain Ds |
Statesboro | GA | | (1) | 350 | 401 | | 751 | 11 | 6/27/2013 | 1974 | |||||||||||||||||||||||
Captain Ds |
Southaven | MS | | (1) | 270 | 564 | | 834 | 16 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Captain Ds |
Memphis | TN | | (1) | 230 | 338 | | 568 | 9 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Captain Ds |
Dallas | TX | | (1) | 160 | 535 | | 695 | 15 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Captain Ds |
Grand Prairie | TX | | (1) | 260 | 338 | | 598 | 9 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Caribou Coffee |
Grosse Pointe Woods | MI | | (1) | 140 | 1,046 | | 1,186 | 29 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Carlos OKellys |
Mason City | IA | | (1) | 290 | 1,255 | | 1,545 | 36 | 6/27/2013 | 1955 | |||||||||||||||||||||||
Carlos OKellys |
Bloomington | IL | | (1) | 270 | 1,375 | | 1,645 | 39 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Carlos OKellys |
Springfield | MO | | (1) | 840 | 730 | | 1,570 | 21 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Charlestons |
Carmel | IN | | (1) | 140 | 3,016 | | 3,156 | 86 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Check City |
Taylorsville | UT | | (1) | 180 | 953 | | 1,133 | 27 | 6/27/2013 | 1997 |
F-96
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Checkers |
Huntsville | AL | | (1) | 689 | | | 689 | | 6/27/2013 | 1993 | |||||||||||||||||||||||
Checkers |
Hollywood | FL | | (1) | 160 | 2,220 | | 2,380 | 64 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Checkers |
Lauderhill | FL | | (1) | 280 | 1,951 | | 2,231 | 56 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Checkers |
Plantation | FL | | (1) | 220 | 1,461 | | 1,681 | 42 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Checkers |
Fayetteville | GA | | (1) | 681 | | | 681 | | 6/27/2013 | 1992 | |||||||||||||||||||||||
Chevys |
Greenbelt | MD | | (1) | 530 | 2,399 | | 2,929 | 69 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Chevys |
Lake Oswego | OR | | (1) | 590 | 1,693 | | 2,283 | 49 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Chilis |
Fayetteville | AR | | (1) | 1,370 | 1,714 | | 3,084 | 49 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Chilis |
Boise | ID | | (1) | 400 | 751 | | 1,151 | 22 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Chilis |
Riverdale | UT | | (1) | 800 | 899 | | 1,699 | 26 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Chilis |
Cheyenne | WY | | (1) | 270 | 815 | | 1,085 | 23 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Chippers Grill |
Streator | IL | | (1) | 190 | 255 | | 445 | 7 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Cimarex Energy Company |
Tulsa | OK | 30,676 | 2,802 | 68,732 | | 71,534 | 550 | 11/5/2013 | In process | ||||||||||||||||||||||||
Circle K |
Phoenix | AZ | | (1) | 344 | 1,377 | | 1,721 | 129 | 5/4/2012 | 1986 | |||||||||||||||||||||||
Circle K |
Martinez | GA | | (1) | 348 | 813 | | 1,161 | 61 | 8/28/2012 | 2003 | |||||||||||||||||||||||
Circle K |
Akron | OH | | (1) | 675 | 1,254 | | 1,929 | 88 | 9/27/2012 | 1996 | |||||||||||||||||||||||
Citizens Bank |
Colchester | CT | | (1) | 185 | 1,049 | | 1,234 | 70 | 9/26/2012 | 1981 | |||||||||||||||||||||||
Citizens Bank |
Deep River | CT | | (1) | 453 | 1,812 | | 2,265 | 121 | 9/26/2012 | 1851 | |||||||||||||||||||||||
Citizens Bank |
East Hampton | CT | | (7) | 312 | 935 | | 1,247 | 84 | 4/26/2012 | 1984 | |||||||||||||||||||||||
Citizens Bank |
East Lyme | CT | | (1) | 258 | 1,032 | | 1,290 | 69 | 9/26/2012 | 1972 | |||||||||||||||||||||||
Citizens Bank |
Hamden | CT | | (1) | 581 | 475 | | 1,056 | 32 | 9/26/2012 | 1893 | |||||||||||||||||||||||
Citizens Bank |
Higganum | CT | | (9) | 171 | 971 | | 1,142 | 219 | 10/1/2008 | 1983 | |||||||||||||||||||||||
Citizens Bank |
Montville | CT | | (1) | 413 | 2,342 | | 2,755 | 157 | 9/26/2012 | 1984 | |||||||||||||||||||||||
Citizens Bank |
New London | CT | | (1) | 94 | 534 | | 628 | 121 | 10/1/2008 | 1900 | |||||||||||||||||||||||
Citizens Bank |
Stonington | CT | | (1) | 104 | 937 | | 1,041 | 54 | 12/14/2012 | 1982 | |||||||||||||||||||||||
Citizens Bank |
Stonington | CT | | (1) | 190 | 1,079 | | 1,269 | 72 | 9/26/2012 | 1960 | |||||||||||||||||||||||
Citizens Bank |
Lewes | DE | | (1) | 102 | 916 | | 1,018 | 41 | 2/22/2013 | 1968 | |||||||||||||||||||||||
Citizens Bank |
Smyrna | DE | | (9) | 183 | 1,036 | | 1,219 | 215 | 3/1/2009 | 1940 | |||||||||||||||||||||||
Citizens Bank |
Wilmington | DE | | (7) | 250 | 464 | | 714 | 41 | 4/26/2012 | 1950 | |||||||||||||||||||||||
Citizens Bank |
Wilmington | DE | | (7) | 299 | 299 | | 598 | 27 | 4/26/2012 | 1981 | |||||||||||||||||||||||
Citizens Bank |
Alsip | IL | | (1) | 226 | 1,280 | | 1,506 | 289 | 10/1/2008 | 1981 | |||||||||||||||||||||||
Citizens Bank |
Calumet City | IL | | (7) | 168 | 393 | | 561 | 35 | 4/26/2012 | 1975 |
F-97
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Citizens Bank |
Chicago | IL | | (7) | 189 | 81 | | 270 | 7 | 4/26/2012 | 1990 | |||||||||||||||||||||||
Citizens Bank |
Chicago | IL | | (1) | 267 | 1,511 | | 1,778 | 341 | 10/1/2008 | 1923 | |||||||||||||||||||||||
Citizens Bank |
Chicago | IL | | (1) | 191 | 1,082 | | 1,273 | 244 | 10/1/2008 | 1979 | |||||||||||||||||||||||
Citizens Bank |
Elmwood Park | IL | | (1) | 431 | 2,441 | | 2,872 | 481 | 6/1/2009 | 1977 | |||||||||||||||||||||||
Citizens Bank |
Evergreen Park | IL | | (1) | 167 | 944 | | 1,111 | 213 | 10/1/2008 | 1982 | |||||||||||||||||||||||
Citizens Bank |
Lyons | IL | | (1) | 214 | 1,212 | | 1,426 | 274 | 10/1/2008 | 1957 | |||||||||||||||||||||||
Citizens Bank |
Olympia Fields | IL | | (7) | 426 | 1,704 | | 2,130 | 152 | 4/26/2012 | 1974 | |||||||||||||||||||||||
Citizens Bank |
Wilmington | IL | | (1) | 330 | 1,872 | | 2,202 | 349 | 9/1/2009 | 1964 | |||||||||||||||||||||||
Citizens Bank |
Dorchester | MA | | 386 | 386 | | 772 | 34 | 4/26/2012 | 1960 | ||||||||||||||||||||||||
Citizens Bank |
Ludlow | MA | | (1) | 810 | 540 | | 1,350 | 36 | 9/26/2012 | 1948 | |||||||||||||||||||||||
Citizens Bank |
Malden | MA | | (1) | 488 | 596 | | 1,084 | 40 | 9/26/2012 | 1920 | |||||||||||||||||||||||
Citizens Bank |
Malden | MA | | 484 | 1,935 | | 2,419 | 130 | 9/26/2012 | 1988 | ||||||||||||||||||||||||
Citizens Bank |
Medford | MA | | 589 | 1,094 | | 1,683 | 73 | 9/26/2012 | 1938 | ||||||||||||||||||||||||
Citizens Bank |
New Bedford | MA | | (1) | 297 | 694 | | 991 | 46 | 9/26/2012 | 1983 | |||||||||||||||||||||||
Citizens Bank |
Randolph | MA | | 480 | 1,439 | | 1,919 | 96 | 9/26/2012 | 1979 | ||||||||||||||||||||||||
Citizens Bank |
Somerville | MA | | (1) | 561 | 561 | | 1,122 | 38 | 9/26/2012 | 1940 | |||||||||||||||||||||||
Citizens Bank |
South Dennis | MA | | (1) | | 1,294 | | 1,294 | 75 | 12/14/2012 | 1986 | |||||||||||||||||||||||
Citizens Bank |
Springfield | MA | | (1) | 187 | 747 | | 934 | 27 | 5/10/2013 | 1975 | |||||||||||||||||||||||
Citizens Bank |
Tewksbury | MA | | (7) | 266 | 1,063 | | 1,329 | 95 | 4/26/2012 | 1998 | |||||||||||||||||||||||
Citizens Bank |
Watertown | MA | | (1) | 443 | 542 | | 985 | 36 | 9/26/2012 | 1950 | |||||||||||||||||||||||
Citizens Bank |
Wilbraham | MA | | (7) | 148 | 591 | | 739 | 53 | 4/26/2012 | 1967 | |||||||||||||||||||||||
Citizens Bank |
Winthrop | MA | | (1) | 390 | 724 | | 1,114 | 48 | 9/26/2012 | 1974 | |||||||||||||||||||||||
Citizens Bank |
Woburn | MA | | (1) | 350 | 816 | | 1,166 | 47 | 12/14/2012 | 1991 |
F-98
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Citizens Bank |
Clinton Township | MI | | (1) | 574 | 3,250 | | 3,824 | 746 | 9/1/2008 | 1970 | |||||||||||||||||||||||
Citizens Bank |
Dearborn | MI | | (1) | 434 | 2,461 | | 2,895 | 459 | 9/1/2009 | 1977 | |||||||||||||||||||||||
Citizens Bank |
Dearborn | MI | | (1) | 385 | 2,184 | | 2,569 | 407 | 9/1/2009 | 1974 | |||||||||||||||||||||||
Citizens Bank |
Detroit | MI | | (1) | 112 | 636 | | 748 | 148 | 8/1/2008 | 1958 | |||||||||||||||||||||||
Citizens Bank |
Detroit | MI | | (1) | 204 | 1,159 | | 1,363 | 270 | 8/1/2008 | 1956 | |||||||||||||||||||||||
Citizens Bank |
Grosse Pointe | MI | | (1) | 410 | 2,322 | | 2,732 | 508 | 12/1/2008 | 1975 | |||||||||||||||||||||||
Citizens Bank |
Harper Woods | MI | | (1) | 207 | 1,171 | | 1,378 | 273 | 8/1/2008 | 1983 | |||||||||||||||||||||||
Citizens Bank |
Highland Park | MI | | (1) | 150 | 848 | | 998 | 198 | 8/1/2008 | 1967 | |||||||||||||||||||||||
Citizens Bank |
Lathrup Village | MI | | (1) | 283 | 1,602 | | 1,885 | 362 | 10/1/2008 | 1980 | |||||||||||||||||||||||
Citizens Bank |
Livonia | MI | | (1) | 261 | 1,476 | | 1,737 | 344 | 8/1/2008 | 1959 | |||||||||||||||||||||||
Citizens Bank |
Richmond | MI | | (1) | 168 | 951 | | 1,119 | 222 | 8/1/2008 | 1980 | |||||||||||||||||||||||
Citizens Bank |
Southfield | MI | | (1) | 283 | 1,605 | | 1,888 | 368 | 9/1/2008 | 1975 | |||||||||||||||||||||||
Citizens Bank |
St. Clair Shores | MI | | (1) | 309 | 1,748 | | 2,057 | 407 | 8/1/2008 | 1961 | |||||||||||||||||||||||
Citizens Bank |
Utica | MI | | (1) | 376 | 2,133 | | 2,509 | 466 | 12/1/2008 | 1982 | |||||||||||||||||||||||
Citizens Bank |
Warren | MI | | (1) | 178 | 1,009 | | 1,187 | 228 | 10/1/2008 | 1963 | |||||||||||||||||||||||
Citizens Bank |
Keene | NH | | 132 | 2,511 | | 2,643 | 146 | 12/14/2012 | 1900 | ||||||||||||||||||||||||
Citizens Bank |
Manchester | NH | | (1) | | 1,568 | | 1,568 | 91 | 12/14/2012 | 1985 | |||||||||||||||||||||||
Citizens Bank |
Manchester | NH | | (1) | 640 | 782 | | 1,422 | 52 | 9/26/2012 | 1941 | |||||||||||||||||||||||
Citizens Bank |
Ossipee | NH | | (7) | 176 | 264 | | 440 | 24 | 4/26/2012 | 1980 | |||||||||||||||||||||||
Citizens Bank |
Pelham | NH | | (7) | 113 | 340 | | 453 | 30 | 4/26/2012 | 1983 | |||||||||||||||||||||||
Citizens Bank |
Pittsfield | NH | | (1) | 160 | 908 | | 1,068 | 205 | 10/1/2008 | 1976 | |||||||||||||||||||||||
Citizens Bank |
Rollinsford | NH | | (1) | 78 | 444 | | 522 | 100 | 10/1/2008 | 1977 | |||||||||||||||||||||||
Citizens Bank |
Salem | NH | | (1) | 328 | 1,312 | | 1,640 | 76 | 12/14/2012 | 1980 | |||||||||||||||||||||||
Citizens Bank |
Haddon Heights | NJ | | (1) | 316 | 948 | | 1,264 | 21 | 7/23/2013 | 1960 | |||||||||||||||||||||||
Citizens Bank |
Marlton | NJ | | (7) | 444 | 825 | | 1,269 | 74 | 4/26/2012 | 1988 | |||||||||||||||||||||||
Citizens Bank |
Albany | NY | | (9) | 232 | 1,315 | | 1,547 | 245 | 9/1/2009 | 1994 | |||||||||||||||||||||||
Citizens Bank |
Amherst (Buffalo) | NY | | (9) | 238 | 1,348 | | 1,586 | 266 | 6/1/2009 | 1995 | |||||||||||||||||||||||
Citizens Bank |
East Aurora | NY | | (9) | 162 | 919 | | 1,081 | 181 | 6/1/2009 | 1996 | |||||||||||||||||||||||
Citizens Bank |
Greene | NY | | (9) | 216 | 1,227 | | 1,443 | 229 | 9/1/2009 | 1994 | |||||||||||||||||||||||
Citizens Bank |
Johnstown | NY | | (9) | 163 | 923 | | 1,086 | 172 | 9/1/2009 | 1994 | |||||||||||||||||||||||
Citizens Bank |
Port Jervis | NY | | (9) | 143 | 811 | | 954 | 169 | 3/1/2009 | 1964 | |||||||||||||||||||||||
Citizens Bank |
Rochester | NY | | (9) | 166 | 943 | | 1,109 | 186 | 6/1/2009 | 1962 |
F-99
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Citizens Bank |
Schenectady | NY | | (9) | 292 | 1,655 | | 1,947 | 309 | 9/1/2009 | 1994 | |||||||||||||||||||||||
Citizens Bank |
Vails Gate | NY | | (9) | 284 | 1,610 | | 1,894 | 300 | 9/1/2009 | 1968 | |||||||||||||||||||||||
Citizens Bank |
Whitesboro | NY | | (9) | 130 | 739 | | 869 | 138 | 9/1/2009 | 1994 | |||||||||||||||||||||||
Citizens Bank |
Alliance | OH | | (1) | 204 | 1,156 | | 1,360 | 274 | 7/1/2008 | 1972 | |||||||||||||||||||||||
Citizens Bank |
Bedford | OH | | (7) | 175 | 699 | | 874 | 62 | 4/26/2012 | 2005 | |||||||||||||||||||||||
Citizens Bank |
Boardman | OH | | (1) | 280 | 1,589 | | 1,869 | 376 | 7/1/2008 | 1984 | |||||||||||||||||||||||
Citizens Bank |
Broadview Heights | OH | | (1) | 201 | 1,140 | | 1,341 | 237 | 3/1/2009 | 2000 | |||||||||||||||||||||||
Citizens Bank |
Brunswick | OH | | (1) | 186 | 1,057 | | 1,243 | 250 | 7/1/2008 | 2004 | |||||||||||||||||||||||
Citizens Bank |
Cleveland | OH | | (1) | 239 | 1,357 | | 1,596 | 321 | 7/1/2008 | 2003 | |||||||||||||||||||||||
Citizens Bank |
Cleveland | OH | | (1) | 210 | 1,190 | | 1,400 | 282 | 7/1/2008 | 1950 | |||||||||||||||||||||||
Citizens Bank |
Cleveland | OH | | (1) | 182 | 1,031 | | 1,213 | 244 | 7/1/2008 | 1960 | |||||||||||||||||||||||
Citizens Bank |
Fairlawn | OH | | 511 | 2,045 | | 2,556 | 119 | 12/14/2012 | 1979 | ||||||||||||||||||||||||
Citizens Bank |
Lakewood | OH | | (1) | 196 | 1,111 | | 1,307 | 207 | 9/1/2009 | 1965 | |||||||||||||||||||||||
Citizens Bank |
Louisville | OH | | (1) | 191 | 1,080 | | 1,271 | 255 | 7/1/2008 | 1960 | |||||||||||||||||||||||
Citizens Bank |
Massillon | OH | | (1) | 287 | 1,624 | | 1,911 | 384 | 7/1/2008 | 1976 | |||||||||||||||||||||||
Citizens Bank |
Massillon | OH | | (1) | 212 | 1,202 | | 1,414 | 284 | 7/1/2008 | 1958 | |||||||||||||||||||||||
Citizens Bank |
Mentor | OH | | (1) | 178 | 1,011 | | 1,189 | 228 | 10/1/2008 | 1976 | |||||||||||||||||||||||
Citizens Bank |
Northfield | OH | | (1) | 317 | 1,797 | | 2,114 | 406 | 10/1/2008 | 1960 | |||||||||||||||||||||||
Citizens Bank |
Parma | OH | | (7) | 248 | 744 | | 992 | 66 | 4/26/2012 | 1972 | |||||||||||||||||||||||
Citizens Bank |
Parma | OH | | (1) | 475 | 581 | | 1,056 | 34 | 12/14/2012 | 1971 | |||||||||||||||||||||||
Citizens Bank |
Rocky River | OH | | (1) | 283 | 1,602 | | 1,885 | 299 | 9/1/2009 | 1965 | |||||||||||||||||||||||
Citizens Bank |
South Russell | OH | | (1) | 106 | 957 | | 1,063 | 56 | 12/14/2012 | 1981 | |||||||||||||||||||||||
Citizens Bank |
Wadsworth | OH | | (1) | 158 | 893 | | 1,051 | 211 | 7/1/2008 | 1994 | |||||||||||||||||||||||
Citizens Bank |
Willoughby | OH | | (1) | 395 | 2,239 | | 2,634 | 506 | 10/1/2008 | 1920 | |||||||||||||||||||||||
Citizens Bank |
Allison Park | PA | | (1) | 314 | 733 | | 1,047 | 49 | 9/26/2012 | 1972 | |||||||||||||||||||||||
Citizens Bank |
Altoona | PA | | (1) | 153 | 459 | | 612 | 27 | 12/14/2012 | 1971 | |||||||||||||||||||||||
Citizens Bank |
Ambridge | PA | | (9) | 215 | 1,217 | | 1,432 | 227 | 9/1/2009 | 1925 | |||||||||||||||||||||||
Citizens Bank |
Ashley | PA | | (1) | 225 | 675 | | 900 | 39 | 12/14/2012 | 1928 | |||||||||||||||||||||||
Citizens Bank |
Beaver Falls | PA | | (1) | 138 | 553 | | 691 | 37 | 9/26/2012 | 1968 | |||||||||||||||||||||||
Citizens Bank |
Carlisle | PA | | (7) | 234 | 546 | | 780 | 49 | 4/26/2012 | 1960+ | |||||||||||||||||||||||
Citizens Bank |
Dallas | PA | | (1) | 213 | 1,205 | | 1,418 | 81 | 9/26/2012 | 1949 | |||||||||||||||||||||||
Citizens Bank |
Dillsburg | PA | | (1) | 232 | 926 | | 1,158 | 54 | 12/14/2012 | 1935 |
F-100
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Citizens Bank |
Drexel Hill | PA | | (1) | 266 | 1,064 | | 1,330 | 62 | 12/14/2012 | 1950 | |||||||||||||||||||||||
Citizens Bank |
Erie | PA | | (1) | 168 | 671 | | 839 | 39 | 12/14/2012 | 1954 | |||||||||||||||||||||||
Citizens Bank |
Glenside | PA | | 343 | 1,370 | | 1,713 | 43 | 5/22/2013 | 1958 | ||||||||||||||||||||||||
Citizens Bank |
Grove City | PA | | (7) | 292 | 239 | | 531 | 21 | 4/26/2012 | 1977 | |||||||||||||||||||||||
Citizens Bank |
Grove City | PA | | (7) | 41 | 782 | | 823 | 70 | 4/26/2012 | 1920 | |||||||||||||||||||||||
Citizens Bank |
Harrisburg | PA | | (7) | 512 | 419 | | 931 | 37 | 4/26/2012 | 1967 | |||||||||||||||||||||||
Citizens Bank |
Havertown | PA | | (1) | 219 | 875 | | 1,094 | 59 | 9/26/2012 | 2003 | |||||||||||||||||||||||
Citizens Bank |
Homestead | PA | | (1) | 202 | 807 | | 1,009 | 54 | 9/26/2012 | 1960 | |||||||||||||||||||||||
Citizens Bank |
Kingston | PA | | (1) | 404 | 943 | | 1,347 | 55 | 12/14/2012 | 1977 | |||||||||||||||||||||||
Citizens Bank |
Kutztown | PA | | (7) | 81 | 725 | | 806 | 65 | 5/11/2012 | 1974 | |||||||||||||||||||||||
Citizens Bank |
Lancaster | PA | | (7) | 368 | 552 | | 920 | 49 | 4/26/2012 | 1965 | |||||||||||||||||||||||
Citizens Bank |
Lancaster | PA | | (1) | 383 | 468 | | 851 | 31 | 9/26/2012 | 1967 | |||||||||||||||||||||||
Citizens Bank |
Latrobe | PA | | (1) | 148 | 591 | | 739 | 34 | 12/14/2012 | 1969 | |||||||||||||||||||||||
Citizens Bank |
Lititz | PA | | (7) | 37 | 708 | | 745 | 63 | 4/26/2012 | 1964 | |||||||||||||||||||||||
Citizens Bank |
Lower Burrell | PA | | (1) | 180 | 722 | | 902 | 42 | 12/14/2012 | 1980 | |||||||||||||||||||||||
Citizens Bank |
Mechanicsburg | PA | | 288 | 2,590 | | 2,878 | 174 | 9/26/2012 | 1900 | ||||||||||||||||||||||||
Citizens Bank |
Mercer | PA | | (1) | 105 | 314 | | 419 | 18 | 12/14/2012 | 1964 | |||||||||||||||||||||||
Citizens Bank |
Metamoras | PA | | (1) | 509 | 946 | | 1,455 | 55 | 12/14/2012 | 1920 | |||||||||||||||||||||||
Citizens Bank |
Milford | PA | | (1) | 513 | 769 | | 1,282 | 45 | 12/14/2012 | 1981 | |||||||||||||||||||||||
Citizens Bank |
Monesson | PA | | (9) | 198 | 1,123 | | 1,321 | 209 | 9/1/2009 | 1930 | |||||||||||||||||||||||
Citizens Bank |
Mount Lebanon | PA | | 215 | 1,939 | | 2,154 | 130 | 9/26/2012 | 1960 | ||||||||||||||||||||||||
Citizens Bank |
Mountain Top | PA | | (1) | 111 | 631 | | 742 | 37 | 12/14/2012 | 1980 | |||||||||||||||||||||||
Citizens Bank |
Munhall | PA | | (7) | 191 | 191 | | 382 | 17 | 4/26/2012 | 1973 | |||||||||||||||||||||||
Citizens Bank |
Narberth | PA | | (9) | 420 | 2,381 | | 2,801 | 548 | 9/1/2009 | 1935 | |||||||||||||||||||||||
Citizens Bank |
New Stanton | PA | | (7) | 330 | 612 | | 942 | 55 | 4/26/2012 | 1975 | |||||||||||||||||||||||
Citizens Bank |
Oakmont | PA | | (1) | 199 | 1,127 | | 1,326 | 65 | 12/14/2012 | 1967 | |||||||||||||||||||||||
Citizens Bank |
Philadelphia | PA | | (7) | 184 | 735 | | 919 | 66 | 4/26/2012 | 1904 |
F-101
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Citizens Bank |
Philadelphia | PA | | (1) | 127 | 722 | | 849 | 42 | 12/14/2012 | 1920 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (1) | 185 | 1,051 | | 1,236 | 61 | 12/14/2012 | 1960 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (1) | 389 | 1,168 | | 1,557 | 68 | 12/14/2012 | 1940 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (1) | 146 | 2,770 | | 2,916 | 161 | 12/14/2012 | 1900 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | 470 | 2,661 | | 3,131 | 154 | 12/14/2012 | 1980 | ||||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (1) | 215 | 1,219 | | 1,434 | 82 | 9/26/2012 | 1970 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (1) | 256 | 767 | | 1,023 | 51 | 9/26/2012 | 1970 | |||||||||||||||||||||||
Citizens Bank |
Shippensburg | PA | | (7) | 143 | 429 | | 572 | 38 | 4/26/2012 | 1985 | |||||||||||||||||||||||
Citizens Bank |
Slovan | PA | | (7) | 217 | 117 | | 334 | 10 | 4/26/2012 | 1975 | |||||||||||||||||||||||
Citizens Bank |
State College | PA | | (7) | 256 | 475 | | 731 | 42 | 4/26/2012 | 1966 | |||||||||||||||||||||||
Citizens Bank |
Temple | PA | | (1) | 268 | 626 | | 894 | 42 | 9/26/2012 | 1936 | |||||||||||||||||||||||
Citizens Bank |
Turtle Creek | PA | | (1) | 308 | 923 | | 1,231 | 62 | 9/26/2012 | 1970 | |||||||||||||||||||||||
Citizens Bank |
Tyrone | PA | | (1) | 146 | 583 | | 729 | 34 | 12/14/2012 | 1967 | |||||||||||||||||||||||
Citizens Bank |
Upper Darby | PA | | (1) | 411 | 617 | | 1,028 | 36 | 12/14/2012 | 1966 | |||||||||||||||||||||||
Citizens Bank |
Verona | PA | | (7) | 264 | 616 | | 880 | 55 | 4/26/2012 | 1972 | |||||||||||||||||||||||
Citizens Bank |
West Grove | PA | | (7) | 181 | 725 | | 906 | 65 | 4/26/2012 | 1980 | |||||||||||||||||||||||
Citizens Bank |
West Hazelton | PA | | (1) | 279 | 2,509 | | 2,788 | 168 | 9/26/2012 | 1900 | |||||||||||||||||||||||
Citizens Bank |
York | PA | | (7) | 337 | 626 | | 963 | 56 | 4/26/2012 | 1955 | |||||||||||||||||||||||
Citizens Bank |
Coventry | RI | | (1) | 559 | 559 | | 1,118 | 37 | 9/26/2012 | 1968 | |||||||||||||||||||||||
Citizens Bank |
Johnston | RI | | (1) | 343 | 1,030 | | 1,373 | 69 | 9/26/2012 | 1972 | |||||||||||||||||||||||
Citizens Bank |
North Providence | RI | | 200 | 1,800 | | 2,000 | 96 | 12/31/2012 | 1971 | ||||||||||||||||||||||||
Citizens Bank |
Wakefield | RI | | (1) | 517 | 959 | | 1,476 | 64 | 9/26/2012 | 1976 | |||||||||||||||||||||||
Citizens Bank |
Warren | RI | | (1) | 328 | 609 | | 937 | 41 | 9/26/2012 | 1980 | |||||||||||||||||||||||
Citizens Bank |
Warwick | RI | | (1) | 1,570 | 5,544 | | 7,114 | 58 | 9/24/2013 | 1996 | |||||||||||||||||||||||
Citizens Bank |
Warwick | RI | | (1) | 1,870 | 9,662 | | 11,532 | 102 | 9/24/2013 | 1995 | |||||||||||||||||||||||
Citizens Bank |
Middlebury | VT | | (1) | 363 | 544 | | 907 | 32 | 12/14/2012 | 1969 | |||||||||||||||||||||||
Citizens Bank |
Poultney | VT | | (1) | 149 | 847 | | 996 | 176 | 3/1/2009 | 1860 | |||||||||||||||||||||||
Citizens Bank |
St. Albans | VT | | (1) | 141 | 798 | | 939 | 166 | 3/1/2009 | 1989 | |||||||||||||||||||||||
Citizens Bank |
White River Junction | VT | | (1) | 183 | 1,039 | | 1,222 | 216 | 3/1/2009 | 1975 | |||||||||||||||||||||||
Comcast Corporation |
Englewood | CO | | 1,490 | 5,060 | | 6,550 | 45 | 11/5/2013 | 2011 | ||||||||||||||||||||||||
Community Bank |
Whitehall | NY | | (9) | 106 | 600 | | 706 | 112 | 9/1/2009 | 1950 | |||||||||||||||||||||||
Community National Bank |
Lake Mary | FL | | 1,230 | 1,504 | | 2,734 | 18 | 10/1/2013 | 1990 |
F-102
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Cooper Tire & Rubber Company |
Franklin | IN | 16,998 | 4,438 | 33,994 | | 38,432 | 346 | 11/5/2013 | 2009 | ||||||||||||||||||||||||
County of Yolo, California |
Woodland | CA | 10,332 | 2,640 | 13,681 | | 16,321 | 108 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
Cracker Barrel |
Braselton | GA | | 1,294 | 2,403 | | 3,697 | 197 | 11/13/2012 | 2005 | ||||||||||||||||||||||||
Cracker Barrel |
Bremen | GA | | 1,012 | 2,361 | | 3,373 | 194 | 11/13/2012 | 2006 | ||||||||||||||||||||||||
Cracker Barrel |
Mebane | NC | | 1,106 | 2,054 | | 3,160 | 169 | 11/13/2012 | 2004 | ||||||||||||||||||||||||
Cracker Barrel |
Emporia | VA | | 972 | 2,267 | | 3,239 | 186 | 11/13/2012 | 2004 | ||||||||||||||||||||||||
Cracker Barrel |
Woodstock | VA | | 928 | 2,164 | | 3,092 | 178 | 11/13/2012 | 2005 | ||||||||||||||||||||||||
Crozer-Keystone Health System |
Ridley Park | PA | 2,332 | | 6,114 | | 6,114 | 51 | 11/5/2013 | 2004 | ||||||||||||||||||||||||
CVS |
Phoenix | AZ | | 1,511 | 4,533 | | 6,044 | 62 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Phoenix | AZ | | 901 | 2,704 | | 3,605 | 37 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Fresno | CA | | 1,890 | 4,409 | | 6,299 | 60 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Palmdale | CA | | 2,493 | 4,630 | | 7,123 | 63 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Sacramento | CA | | 2,163 | 4,016 | | 6,179 | 55 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Norwich | CT | | 1,998 | 5,995 | | 7,993 | 82 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
Lakeland | FL | | 587 | 2,347 | | 2,934 | 32 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
St. Cloud | FL | | 1,534 | 1,875 | | 3,409 | 84 | 4/12/2013 | 2002 | ||||||||||||||||||||||||
CVS |
Alpharetta | GA | | (1) | 572 | 858 | | 1,430 | 64 | 9/28/2012 | 1994 | |||||||||||||||||||||||
CVS |
Stockbridge | GA | | (1) | 855 | 1,283 | | 2,138 | 64 | 2/28/2013 | 1998 | |||||||||||||||||||||||
CVS |
Vidalia | GA | | (1) | 368 | 1,105 | | 1,473 | 83 | 9/28/2012 | 2000 | |||||||||||||||||||||||
CVS |
Franklin | IN | | (1) | 310 | 2,787 | | 3,097 | 293 | 3/29/2012 | 1999 | |||||||||||||||||||||||
CVS |
Mandeville | LA | | 2,385 | 2,915 | | 5,300 | 40 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Metairie | LA | | 1,895 | 3,519 | | 5,414 | 48 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
New Orleans | LA | | 2,439 | 2,439 | | 4,878 | 34 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Slidell | LA | | 1,142 | 4,568 | | 5,710 | 63 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Hingham | MA | | 1,873 | 5,619 | | 7,492 | 76 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Malden | MA | | 1,757 | 5,271 | | 7,028 | 72 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Detroit | MI | | (1) | 270 | 2,427 | | 2,697 | 121 | 2/28/2013 | 1999 | |||||||||||||||||||||||
CVS |
Harper Woods | MI | | (1) | 499 | 2,829 | | 3,328 | 141 | 2/28/2013 | 1999 | |||||||||||||||||||||||
CVS |
St. Joseph | MO | | 1,022 | 3,067 | | 4,089 | 42 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Beaufort | NC | | 378 | 3,404 | | 3,782 | 46 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
Albuquerque | NM | | 975 | 3,899 | | 4,874 | 53 | 10/1/2013 | 2011 |
F-103
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
CVS |
Albuquerque | NM | | 1,029 | 4,118 | | 5,147 | 57 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
Las Cruces | NM | | 1,295 | 5,178 | | 6,473 | 71 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Las Vegas | NV | | 1,374 | 3,207 | | 4,581 | 257 | 8/22/2012 | 2004 | ||||||||||||||||||||||||
CVS |
Rochester | NY | | (1) | 965 | 1,180 | | 2,145 | 83 | 11/8/2012 | 1997 | |||||||||||||||||||||||
CVS |
Tulsa | OK | | 950 | 2,216 | | 3,166 | 30 | 10/1/2013 | 2010 | ||||||||||||||||||||||||
CVS |
Freeland | PA | | 122 | 1,096 | | 1,218 | 93 | 8/8/2012 | 2004 | ||||||||||||||||||||||||
CVS |
Mechanicsburg | PA | | 1,155 | 3,465 | | 4,620 | 225 | 11/29/2012 | 2008 | ||||||||||||||||||||||||
CVS |
Shippensburg | PA | | 351 | 1,988 | | 2,339 | 109 | 2/8/2013 | 2002 | ||||||||||||||||||||||||
CVS |
Greenville | SC | | (1) | 169 | 1,520 | | 1,689 | 76 | 2/28/2013 | 1997 | |||||||||||||||||||||||
CVS |
Jackson | TN | | 1,209 | 2,822 | | 4,031 | 38 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Knoxville | TN | | 1,190 | 2,210 | | 3,400 | 30 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
Nashville | TN | | (1) | 203 | 1,148 | | 1,351 | 86 | 9/28/2012 | 1996 | |||||||||||||||||||||||
CVS |
Converse | TX | | 1,390 | 3,243 | | 4,633 | 45 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
Dumas | TX | | 846 | 2,537 | | 3,383 | 35 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
Elsa | TX | | 915 | 2,744 | | 3,659 | 37 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
Fort Worth | TX | | 2,453 | 3,679 | | 6,132 | 50 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
San Antonio | TX | | 1,996 | 2,993 | | 4,989 | 41 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
San Antonio | TX | | 2,034 | 3,778 | | 5,812 | 52 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
San Antonio | TX | | 868 | 2,605 | | 3,473 | 36 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
San Juan | TX | | 610 | 2,441 | | 3,051 | 34 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Norfolk | VA | | 697 | 2,789 | | 3,486 | 38 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
Portsmouth | VA | | 1,230 | 3,690 | | 4,920 | 50 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Roanoke | VA | | 825 | 2,474 | | 3,299 | 34 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
CVS |
Virginia Beach | VA | | 683 | 3,868 | | 4,551 | 53 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
CVS |
Williamsburg | VA | | 907 | 5,137 | | 6,044 | 70 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
Dairy Queen |
Mauldin | SC | | (1) | 133 | | | 133 | | 6/27/2013 | 1979 | |||||||||||||||||||||||
Dairy Queen |
Alto | TX | | (1) | 50 | 110 | | 160 | 3 | 6/27/2013 | 1972 |
F-104
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dairy Queen |
Pineland | TX | | (1) | 40 | 120 | | 160 | 3 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Dairy Queen |
Silsbee | TX | | (1) | 60 | 100 | | 160 | 3 | 6/27/2013 | 1988 | |||||||||||||||||||||||
DaVita Dialysis |
Osceola | AR | | (1) | 137 | 1,232 | | 1,369 | 43 | 3/28/2013 | 2009 | |||||||||||||||||||||||
DaVita Dialysis |
Allen Park | MI | | (1) | 209 | 1,885 | | 2,094 | 102 | 12/31/2012 | 1955 | |||||||||||||||||||||||
DaVita Dialysis |
St. Pauls | NC | | (1) | 138 | 1,246 | | 1,384 | 24 | 8/2/2013 | 2006 | |||||||||||||||||||||||
DaVita Dialysis |
Beeville | TX | | (1) | 99 | 1,879 | | 1,978 | 102 | 12/31/2012 | 2002 | |||||||||||||||||||||||
DaVita Dialysis |
Federal Way | WA | | 1,929 | 22,357 | | 24,286 | 1,509 | 11/21/2012 | 2000 | ||||||||||||||||||||||||
DC Sports Bar & Steakhouse |
Eunice | LA | | (1) | 500 | 262 | | 762 | 8 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Del Monte Corporation |
Lathrop | CA | 32,694 | | 41,318 | | 41,318 | 420 | 11/5/2013 | 1994 | ||||||||||||||||||||||||
Dennys |
Winter Springs | FL | | (1) | 550 | 1,668 | | 2,218 | 48 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Dennys |
Merriam | KS | | (1) | 390 | 1,150 | | 1,540 | 33 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Dennys |
Topeka | KS | | (1) | 630 | 446 | | 1,076 | 13 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Dennys |
Branson | MO | | (1) | 620 | 2,209 | | 2,829 | 63 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Dennys |
Kansas City | MO | | (1) | 750 | 686 | | 1,436 | 20 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Dennys |
North Kansas City | MO | | (1) | 630 | 937 | | 1,567 | 27 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Dennys |
Sedalia | MO | | (1) | 500 | 783 | | 1,283 | 22 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Dennys |
Black Mountain | NC | | (1) | 210 | 505 | | 715 | 14 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Dennys |
Mooresville | NC | | (1) | 250 | 841 | | 1,091 | 24 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Dennys |
Watertown | NY | | (1) | 330 | 1,107 | | 1,437 | 32 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Dennys |
Fremont | OH | | (1) | 320 | 975 | | 1,295 | 28 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Dennys |
Ontario | OR | | (1) | 240 | 1,067 | | 1,307 | 31 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Dennys |
Columbia | SC | | (1) | 490 | 1,115 | | 1,605 | 32 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Dennys |
Greenville | SC | | (1) | 570 | 554 | | 1,124 | 16 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Dennys |
Pasadena | TX | | (1) | 500 | 1,316 | | 1,816 | 38 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Dollar General |
Birmingham | AL | | (1) | 156 | 882 | | 1,038 | 78 | 6/6/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Chunchula | AL | | (1) | 174 | 697 | | 871 | 65 | 4/25/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Moulton | AL | | (1) | 517 | 1,207 | | 1,724 | 113 | 4/26/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Gardendale | AL | | (1) | 142 | 805 | | 947 | 64 | 8/9/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Red Level | AL | | 120 | 680 | | 800 | 83 | 10/31/2011 | 2010 | ||||||||||||||||||||||||
Dollar General |
Tarrant | AL | | (5) | 217 | 869 | | 1,086 | 102 | 12/12/2011 | 2011 | |||||||||||||||||||||||
Dollar General |
Tuscaloosa | AL | | 133 | 756 | | 889 | 85 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
Dollar General |
Ash Flat | AR | | (1) | 44 | 132 | | 176 | 11 | 6/19/2012 | 1997 |
F-105
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
Batesville | AR | | (1) | 32 | 285 | | 317 | 7 | 7/25/2013 | 1998 | |||||||||||||||||||||||
Dollar General |
Batesville | AR | | (1) | 42 | 374 | | 416 | 9 | 7/25/2013 | 1999 | |||||||||||||||||||||||
Dollar General |
Beebe | AR | | (1) | 51 | 458 | | 509 | 11 | 7/25/2013 | 1999 | |||||||||||||||||||||||
Dollar General |
Bella Vista | AR | | (1) | 129 | 302 | | 431 | 37 | 11/10/2011 | 2005 | |||||||||||||||||||||||
Dollar General |
Bergman | AR | | (1) | 113 | 639 | | 752 | 54 | 7/2/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Blytheville | AR | | (1) | 30 | 274 | | 304 | 6 | 7/25/2013 | 2000 | |||||||||||||||||||||||
Dollar General |
Carlisle | AR | | (1) | 13 | 245 | | 258 | 30 | 11/10/2011 | 2005 | |||||||||||||||||||||||
Dollar General |
Des Arc | AR | | (1) | 56 | 508 | | 564 | 12 | 7/25/2013 | 1999 | |||||||||||||||||||||||
Dollar General |
Dumas | AR | | (1) | 46 | 412 | | 458 | 10 | 7/25/2013 | 1998 | |||||||||||||||||||||||
Dollar General |
Flippin | AR | | (1) | 53 | 64 | | 117 | 5 | 6/19/2012 | 1994 | |||||||||||||||||||||||
Dollar General |
Gassville | AR | | (1) | 54 | 305 | | 359 | 7 | 7/25/2013 | 1999 | |||||||||||||||||||||||
Dollar General |
Green Forest | AR | | (1) | 52 | 293 | | 345 | 36 | 11/10/2011 | 2005 | |||||||||||||||||||||||
Dollar General |
Higdon | AR | | (1) | 52 | 469 | | 521 | 11 | 7/25/2013 | 1999 | |||||||||||||||||||||||
Dollar General |
Lake Village | AR | | (1) | 64 | 362 | | 426 | 8 | 7/25/2013 | 1998 | |||||||||||||||||||||||
Dollar General |
Lepanto | AR | | (1) | 43 | 389 | | 432 | 9 | 7/25/2013 | 1998 | |||||||||||||||||||||||
Dollar General |
Little Rock | AR | | (1) | 73 | 412 | | 485 | 10 | 7/25/2013 | 1999 | |||||||||||||||||||||||
Dollar General |
Marvell | AR | | (1) | 40 | 358 | | 398 | 8 | 7/25/2013 | 1999 | |||||||||||||||||||||||
Dollar General |
Maynard | AR | | (1) | 73 | 654 | | 727 | 40 | 12/4/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
McGehee | AR | | (1) | 25 | 228 | | 253 | 5 | 7/25/2013 | 1998 | |||||||||||||||||||||||
Dollar General |
Quitman | AR | | (1) | 45 | 405 | | 450 | 9 | 7/25/2013 | 2001 | |||||||||||||||||||||||
Dollar General |
Searcy | AR | | (1) | 29 | 263 | | 292 | 6 | 7/25/2013 | 1998 | |||||||||||||||||||||||
Dollar General |
Tuckerman | AR | | (1) | 49 | 280 | | 329 | 7 | 7/25/2013 | 1999 | |||||||||||||||||||||||
Dollar General |
Whitehall | AR | | (1) | 43 | 388 | | 431 | 9 | 7/25/2013 | 1999 | |||||||||||||||||||||||
Dollar General |
Wooster | AR | | (1) | 74 | 664 | | 738 | 40 | 12/4/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Grand Ridge | FL | | 76 | 684 | | 760 | 77 | 12/30/2011 | 2010 | ||||||||||||||||||||||||
Dollar General |
Molina | FL | | 178 | 1,007 | | 1,185 | 123 | 10/31/2011 | 2010 | ||||||||||||||||||||||||
Dollar General |
Panama City | FL | | (1) | 139 | 312 | | 451 | 23 | 6/19/2012 | 1987 | |||||||||||||||||||||||
Dollar General |
Chariton | IA | | (1) | 165 | 934 | | 1,099 | 70 | 8/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Estherville | IA | | (1) | 226 | 903 | | 1,129 | 59 | 10/25/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Hampton | IA | | (5) | 188 | 751 | | 939 | 81 | 2/1/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Lake Milles | IA | | (5) | 81 | 728 | | 809 | 78 | 2/1/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Nashua | IA | | (1) | 136 | 768 | | 904 | 58 | 9/6/2012 | 2012 |
F-106
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
Ottumwa | IA | | (1) | 143 | 812 | | 955 | 42 | 1/31/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Altamont | IL | | (6) | 211 | 844 | | 1,055 | 87 | 3/9/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Carthage | IL | | (1) | 48 | 908 | | 956 | 68 | 8/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Jacksonville | IL | | (1) | 145 | 823 | | 968 | 62 | 8/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Jonesboro | IL | | (1) | 77 | 309 | | 386 | 38 | 11/10/2011 | 2007 | |||||||||||||||||||||||
Dollar General |
Lexington | IL | | (1) | 100 | 899 | | 999 | 63 | 9/21/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Marion | IL | | (1) | 153 | 867 | | 1,020 | 61 | 9/24/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Mt Morris | IL | | (1) | 97 | 877 | | 974 | 49 | 12/17/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Monroeville | IN | | (5) | 112 | 636 | | 748 | 71 | 12/22/2011 | 2011 | |||||||||||||||||||||||
Dollar General |
Auburn | KS | | (1) | 42 | 801 | | 843 | 60 | 8/31/2012 | 2009 | |||||||||||||||||||||||
Dollar General |
Caney | KS | | (1) | 31 | 178 | | 209 | 15 | 6/19/2012 | 2002 | |||||||||||||||||||||||
Dollar General |
Cottonwood Falls | KS | | (1) | 89 | 802 | | 891 | 60 | 8/31/2012 | 2009 | |||||||||||||||||||||||
Dollar General |
Erie | KS | | (1) | 42 | 790 | | 832 | 59 | 8/31/2012 | 2009 | |||||||||||||||||||||||
Dollar General |
Garden City | KS | | (1) | 136 | 771 | | 907 | 58 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Harper | KS | | (1) | 91 | 818 | | 909 | 61 | 8/31/2012 | 2009 | |||||||||||||||||||||||
Dollar General |
Humboldt | KS | | (1) | 44 | 828 | | 872 | 62 | 8/31/2012 | 2009 | |||||||||||||||||||||||
Dollar General |
Kingman | KS | | (1) | 142 | 804 | | 946 | 60 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Medicine Lodge | KS | | (1) | 40 | 765 | | 805 | 57 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Minneapolis | KS | | (1) | 43 | 816 | | 859 | 61 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Pomona | KS | | (1) | 42 | 796 | | 838 | 60 | 8/31/2012 | 2009 | |||||||||||||||||||||||
Dollar General |
Sedan | KS | | (1) | 42 | 792 | | 834 | 59 | 8/31/2012 | 2009 | |||||||||||||||||||||||
Dollar General |
Syracuse | KS | | (1) | 43 | 817 | | 860 | 61 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Nancy | KY | | (1) | 81 | 733 | | 814 | 69 | 4/26/2012 | 2011 |
F-107
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
Choudrant | LA | | 83 | 745 | | 828 | 80 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Converse | LA | | (1) | 84 | 756 | | 840 | 53 | 9/26/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Doyline | LA | | (1) | 88 | 793 | | 881 | 48 | 11/27/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Gardner | LA | | (6) | 138 | 784 | | 922 | 81 | 3/8/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Jonesville | LA | | (1) | 103 | 929 | | 1,032 | 65 | 9/27/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Keithville | LA | | (1) | 83 | 750 | | 833 | 60 | 7/26/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Lake Charles | LA | | 102 | 919 | | 1,021 | 95 | 2/29/2012 | 2012 | ||||||||||||||||||||||||
Dollar General |
Mangham | LA | | 40 | 759 | | 799 | 82 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Mt. Hermon | LA | | (1) | 94 | 842 | | 936 | 91 | 2/6/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
New Iberia | LA | | (1) | 315 | 736 | | 1,051 | 69 | 4/26/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Patterson | LA | | 259 | 1,035 | | 1,294 | 97 | 4/26/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Richwood | LA | | (1) | 97 | 869 | | 966 | 94 | 2/6/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Sarepta | LA | | (1) | 131 | 743 | | 874 | 59 | 8/9/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
West Monroe | LA | | (1) | 153 | 869 | | 1,022 | 89 | 3/9/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Zachary | LA | | (1) | 248 | 743 | | 991 | 70 | 4/26/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Bangor | MI | | (1) | 173 | 691 | | 864 | 58 | 7/10/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Cadillac | MI | | (6) | 187 | 747 | | 934 | 73 | 3/16/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Carleton | MI | | (6) | 222 | 666 | | 888 | 65 | 3/16/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Covert | MI | | (1) | 37 | 704 | | 741 | 53 | 8/30/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Durand | MI | | (1) | 181 | 726 | | 907 | 65 | 5/18/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
East Jordan | MI | | (1) | 125 | 709 | | 834 | 60 | 7/10/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Flint | MI | | (6) | 83 | 743 | | 826 | 66 | 5/18/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Flint | MI | | (1) | 91 | 820 | | 911 | 54 | 10/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Gaylord | MI | | (1) | 172 | 687 | | 859 | 58 | 7/10/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Iron River | MI | | (1) | 86 | 777 | | 863 | 58 | 8/30/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Melvindale | MI | | (1) | 242 | 967 | | 1,209 | 81 | 6/26/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Negaunee | MI | | (1) | 87 | 779 | | 866 | 58 | 8/30/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Roscommon | MI | | (1) | 87 | 781 | | 868 | 58 | 8/30/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Melrose | MN | | (1) | 96 | 863 | | 959 | 48 | 12/17/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Montgomery | MN | | (1) | 87 | 783 | | 870 | 44 | 12/17/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Olivia | MN | | (1) | 98 | 884 | | 982 | 46 | 1/31/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Rush City | MN | | (1) | 126 | 716 | | 842 | 57 | 7/25/2012 | 2012 |
F-108
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
Springfield | MN | | (1) | 88 | 795 | | 883 | 45 | 12/26/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Virginia | MN | | (1) | 147 | 831 | | 978 | 47 | 1/14/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Appleton City | MO | | (1) | 22 | 124 | | 146 | 15 | 11/10/2011 | 2004 | |||||||||||||||||||||||
Dollar General |
Ash Grove | MO | | (1) | 35 | 315 | | 350 | 38 | 11/10/2011 | 2006 | |||||||||||||||||||||||
Dollar General |
Ashland | MO | | (1) | 70 | 398 | | 468 | 48 | 11/10/2011 | 2006 | |||||||||||||||||||||||
Dollar General |
Auxvasse | MO | | (2) | 72 | 650 | | 722 | 76 | 11/22/2011 | 2011 | |||||||||||||||||||||||
Dollar General |
Belton | MO | | (1) | 105 | 948 | | 1,053 | 75 | 8/3/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Berkeley | MO | | (1) | 132 | 748 | | 880 | 53 | 10/9/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Bernie | MO | | (1) | 35 | 314 | | 349 | 38 | 11/10/2011 | 2007 | |||||||||||||||||||||||
Dollar General |
Bloomfield | MO | | (1) | 23 | 209 | | 232 | 25 | 11/10/2011 | 2005 | |||||||||||||||||||||||
Dollar General |
Cardwell | MO | | (1) | 89 | 805 | | 894 | 60 | 8/24/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Carterville | MO | | (8) | 10 | 192 | | 202 | 23 | 11/10/2011 | 2004 | |||||||||||||||||||||||
Dollar General |
Caruthersville | MO | | (1) | 98 | 878 | | 976 | 62 | 9/27/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Clarkton | MO | | (1) | 19 | 354 | | 373 | 43 | 11/10/2011 | 2007 | |||||||||||||||||||||||
Dollar General |
Clever | MO | | (1) | 136 | 542 | | 678 | 46 | 6/19/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Concordia | MO | | (1) | 40 | 161 | | 201 | 14 | 6/19/2012 | 1998 | |||||||||||||||||||||||
Dollar General |
Conway | MO | | (2) | 37 | 694 | | 731 | 81 | 11/22/2011 | 2011 | |||||||||||||||||||||||
Dollar General |
Diamond | MO | | (1) | 44 | 175 | | 219 | 21 | 11/10/2011 | 2005 | |||||||||||||||||||||||
Dollar General |
Edina | MO | | (1) | 127 | 722 | | 849 | 54 | 9/13/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Ellsinore | MO | | (8) | 30 | 579 | | 609 | 70 | 11/10/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
Gower | MO | | (1) | 118 | 668 | | 786 | 50 | 8/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Greenfield | MO | | (1) | 42 | 378 | | 420 | 32 | 6/19/2012 | 2000 | |||||||||||||||||||||||
Dollar General |
Hallsville | MO | | (8) | 29 | 263 | | 292 | 32 | 11/10/2011 | 2004 | |||||||||||||||||||||||
Dollar General |
Hawk Point | MO | | (1) | 177 | 709 | | 886 | 53 | 8/24/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Humansville | MO | | (1) | 69 | 277 | | 346 | 23 | 6/19/2012 | 2007 | |||||||||||||||||||||||
Dollar General |
Jennings | MO | | (1) | 445 | 826 | | 1,271 | 70 | 7/13/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Kansas City | MO | | (1) | 313 | 731 | | 1,044 | 51 | 9/21/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
King City | MO | | (2) | 33 | 625 | | 658 | 73 | 11/22/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
Lawson | MO | | (1) | 29 | 162 | | 191 | 20 | 11/10/2011 | 2003 | |||||||||||||||||||||||
Dollar General |
Lebanon | MO | | (1) | 278 | 835 | | 1,113 | 59 | 9/26/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Lebanon | MO | | (1) | 177 | 708 | | 885 | 50 | 9/24/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Licking | MO | | (2) | 76 | 688 | | 764 | 80 | 11/22/2011 | 2010 |
F-109
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
Lilbourne | MO | | (8) | 62 | 554 | | 616 | 67 | 11/10/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
Marble Hill | MO | | (1) | 104 | 935 | | 1,039 | 70 | 9/11/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Marionville | MO | | (1) | 89 | 797 | | 886 | 52 | 10/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Marthasville | MO | | 41 | 782 | | 823 | 84 | 2/1/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Maysville | MO | | (2) | 107 | 607 | | 714 | 74 | 10/31/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
Morehouse | MO | | (1) | 87 | 783 | | 870 | 59 | 9/7/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
New Haven | MO | | (1) | 176 | 702 | | 878 | 66 | 4/27/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Oak Grove | MO | | (1) | 27 | 106 | | 133 | 9 | 6/19/2012 | 1999 | |||||||||||||||||||||||
Dollar General |
Oran | MO | | (6) | 83 | 747 | | 830 | 73 | 3/30/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Osceola | MO | | (1) | 93 | 835 | | 928 | 39 | 2/19/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Ozark | MO | | (6) | 190 | 758 | | 948 | 71 | 4/27/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Ozark | MO | | (1) | 149 | 842 | | 991 | 59 | 9/24/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Pacific | MO | | (1) | 151 | 853 | | 1,004 | 76 | 6/6/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Palmyra | MO | | (1) | 40 | 225 | | 265 | 19 | 6/19/2012 | 2003 | |||||||||||||||||||||||
Dollar General |
Plattsburg | MO | | (1) | 44 | 843 | | 887 | 67 | 8/9/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Qulin | MO | | (8) | 30 | 573 | | 603 | 70 | 11/10/2011 | 2009 | |||||||||||||||||||||||
Dollar General |
Robertsville | MO | | (1) | 131 | 744 | | 875 | 56 | 8/24/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Rocky Mount | MO | | (1) | 88 | 789 | | 877 | 59 | 8/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Sedalia | MO | | (1) | 273 | 637 | | 910 | 48 | 9/7/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Senath | MO | | (1) | 61 | 552 | | 613 | 47 | 6/19/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Seneca | MO | | (1) | 47 | 189 | | 236 | 16 | 6/19/2012 | 1962 | |||||||||||||||||||||||
Dollar General |
Sikeston | MO | | (6) | 56 | 1,056 | | 1,112 | 109 | 2/24/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Sikeston | MO | | (1) | 144 | 819 | | 963 | 61 | 8/24/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Springfield | MO | | (1) | 378 | 702 | | 1,080 | 62 | 6/14/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
St James | MO | | (1) | 81 | 244 | | 325 | 21 | 6/19/2012 | 1999 | |||||||||||||||||||||||
Dollar General |
St. Clair | MO | | 220 | 879 | | 1,099 | 99 | 12/30/2011 | 2011 |
F-110
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
St. Louis | MO | | (1) | 372 | 692 | | 1,064 | 52 | 8/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
St. Louis | MO | | (1) | 260 | 606 | | 866 | 43 | 9/26/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Stanberry | MO | | (3) | 111 | 629 | | 740 | 74 | 11/22/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
Steele | MO | | (8) | 31 | 598 | | 629 | 73 | 11/10/2011 | 2009 | |||||||||||||||||||||||
Dollar General |
Strafford | MO | | (8) | 51 | 461 | 10 | 522 | 56 | 11/10/2011 | 2009 | |||||||||||||||||||||||
Dollar General |
Vienna | MO | | (6) | 78 | 704 | | 782 | 72 | 2/24/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Willow Springs | MO | | (1) | 24 | 213 | | 237 | 18 | 6/19/2012 | 2002 | |||||||||||||||||||||||
Dollar General |
Winona | MO | | (1) | 52 | 155 | | 207 | 13 | 6/19/2012 | 2001 | |||||||||||||||||||||||
Dollar General |
Edwards | MS | | 75 | 671 | | 746 | 75 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
Dollar General |
Greensville | MS | | 82 | 739 | | 821 | 83 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
Dollar General |
Hickory | MS | | (1) | 77 | 692 | | 769 | 58 | 7/2/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Jackson | MS | | (1) | 198 | 793 | | 991 | 56 | 9/27/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Meridian | MS | | (1) | 178 | 713 | | 891 | 53 | 9/13/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Meridian | MS | | (1) | 40 | 754 | | 794 | 56 | 9/13/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Moorhead | MS | | (6) | 107 | 606 | | 713 | 57 | 5/1/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Natchez | MS | | (1) | 166 | 664 | | 830 | 59 | 6/11/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Soso | MS | | (6) | 116 | 658 | | 774 | 65 | 4/12/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Stonewall | MS | | (1) | 116 | 655 | | 771 | 55 | 7/2/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Stringer | MS | | (1) | 116 | 655 | | 771 | 55 | 7/2/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Walmut Grove | MS | | 71 | 641 | | 712 | 72 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
Dollar General |
Fayetteville | NC | | 216 | 647 | | 863 | 70 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Hickory | NC | | (1) | 89 | 804 | | 893 | 64 | 8/13/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Ocean Isle Beach | NC | | 341 | 633 | | 974 | 68 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Tryon | NC | | (1) | 139 | 789 | | 928 | 63 | 8/13/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Vass | NC | | 226 | 528 | | 754 | 57 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Farmington | NM | | (1) | 269 | 807 | | 1,076 | 60 | 9/6/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Forest | OH | | 76 | 681 | | 757 | 83 | 10/31/2011 | 2010 | ||||||||||||||||||||||||
Dollar General |
Greenfield | OH | | 110 | 986 | | 1,096 | 102 | 2/23/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Loudonville | OH | | (1) | 236 | 945 | | 1,181 | 84 | 6/6/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Lucasville | OH | | (1) | 223 | 893 | | 1,116 | 79 | 5/16/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
New Carlisle | OH | | (1) | 215 | 860 | | 1,075 | 72 | 7/10/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
New Matamoras | OH | | 123 | 696 | | 819 | 85 | 10/31/2011 | 2010 |
F-111
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
Payne | OH | | (3) | 81 | 729 | | 810 | 89 | 10/31/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
Pleasant City | OH | | (3) | 131 | 740 | | 871 | 90 | 10/31/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
Calera | OK | | (1) | 136 | 770 | | 906 | 58 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Commerce | OK | | (1) | 38 | 341 | | 379 | 41 | 11/10/2011 | 2006 | |||||||||||||||||||||||
Dollar General |
Hartshorne | OK | | (1) | 100 | 898 | | 998 | 67 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Lexington | OK | | (1) | 85 | 761 | | 846 | 57 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Maud | OK | | (1) | 76 | 688 | | 764 | 51 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Maysville | OK | | (1) | 41 | 785 | | 826 | 59 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Nowata | OK | | (1) | 43 | 128 | | 171 | 11 | 6/19/2012 | 1998 | |||||||||||||||||||||||
Dollar General |
Rush Spring | OK | | (1) | 87 | 779 | | 866 | 58 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Doyle | TN | | (1) | 75 | 679 | | 754 | 51 | 8/22/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Manchester | TN | | (1) | 114 | 646 | | 760 | 51 | 7/26/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
McMinnville | TN | | (1) | 120 | 679 | | 799 | 57 | 7/12/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Pleasant Hill | TN | | 39 | 747 | | 786 | 84 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
Dollar General |
Academy | TX | | (1) | 122 | 693 | | 815 | 65 | 4/27/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Alto Bonito | TX | | (5) | 163 | 652 | | 815 | 70 | 2/1/2012 | 2011 | |||||||||||||||||||||||
Dollar General |
Blessing | TX | | (1) | 83 | 745 | | 828 | 42 | 12/18/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Bryan | TX | | (1) | 148 | 840 | | 988 | 63 | 9/14/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Bryan | TX | | (1) | 193 | 772 | | 965 | 58 | 9/14/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Bryan | TX | | (1) | 185 | 740 | | 925 | 55 | 8/31/2012 | 2009 | |||||||||||||||||||||||
Dollar General |
Canyon Lake | TX | | (1) | 149 | 843 | | 992 | 59 | 10/12/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Como | TX | | (6) | 76 | 683 | | 759 | 64 | 4/20/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Corpus Christi | TX | | (1) | 270 | 809 | | 1,079 | 45 | 12/26/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Dickinson | TX | | (1) | 87 | 786 | | 873 | 55 | 9/25/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Donna | TX | | (1) | 136 | 768 | | 904 | 58 | 9/11/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Donna | TX | | (1) | 200 | 799 | | 999 | 56 | 10/12/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Donna | TX | | (1) | 145 | 820 | | 965 | 42 | 1/31/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Edinburg | TX | | (1) | 136 | 769 | | 905 | 58 | 9/7/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Elemdorf | TX | | (1) | 94 | 847 | | 941 | 56 | 10/23/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Gladewater | TX | | (1) | 184 | 736 | | 920 | 55 | 8/31/2012 | 2009 | |||||||||||||||||||||||
Dollar General |
Gordonville | TX | | (6) | 38 | 717 | | 755 | 67 | 4/20/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Kyle | TX | | (1) | 132 | 747 | | 879 | 52 | 9/26/2012 | 2012 |
F-112
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
LaMarque | TX | | (1) | 102 | 917 | | 1,019 | 69 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Laredo | TX | | (1) | 253 | 758 | | 1,011 | 60 | 7/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Lubbock | TX | | (1) | 267 | 801 | | 1,068 | 60 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Lyford | TX | | 80 | 724 | | 804 | 81 | 12/30/2011 | 2010 | ||||||||||||||||||||||||
Dollar General |
Morgans Point | TX | | (1) | 145 | 821 | | 966 | 61 | 9/13/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Mount Pleasant | TX | | (1) | 214 | 858 | | 1,072 | 64 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
New Braunfels | TX | | (1) | 205 | 818 | | 1,023 | 61 | 8/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Poteet | TX | | (3) | 96 | 864 | | 960 | 105 | 10/31/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
Progreso | TX | | (3) | 169 | 957 | | 1,126 | 116 | 10/31/2011 | 2009 | |||||||||||||||||||||||
Dollar General |
Rio Grande City | TX | | (3) | 137 | 779 | | 916 | 95 | 10/31/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
Roma | TX | | (3) | 253 | 1,010 | | 1,263 | 123 | 10/31/2011 | 2010 | |||||||||||||||||||||||
Dollar General |
San Antonio | TX | | (1) | 252 | 756 | | 1,008 | 50 | 10/22/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
San Antonio | TX | | (1) | 222 | 888 | | 1,110 | 58 | 10/22/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Silsbee | TX | | (1) | 43 | 810 | | 853 | 68 | 7/6/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Troy | TX | | (1) | 93 | 841 | | 934 | 63 | 9/12/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Tyler | TX | | (1) | 219 | 875 | | 1,094 | 66 | 8/31/2012 | 2010 | |||||||||||||||||||||||
Dollar General |
Victoria | TX | | (1) | 91 | 817 | | 908 | 42 | 1/31/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Waco | TX | | (1) | 192 | 767 | | 959 | 57 | 8/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Weslaco | TX | | (1) | 215 | 862 | | 1,077 | 61 | 9/24/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Burkeville | VA | | (1) | 160 | 906 | | 1,066 | 85 | 5/8/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Chesterfield | VA | | 242 | 726 | | 968 | 78 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Danville | VA | | 155 | 621 | | 776 | 67 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Hopewell | VA | | 584 | 713 | | 1,297 | 77 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Hot Springs | VA | | 283 | 661 | | 944 | 71 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
Dollar General |
Mellen | WI | | 79 | 711 | | 790 | 80 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
Dollar General |
Minong | WI | | 38 | 727 | | 765 | 82 | 12/30/2011 | 2011 |
F-113
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
Solon Springs | WI | | 76 | 685 | | 761 | 77 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
Dunkin Donuts/Baskin-Robbins |
Dearborn Heights | MI | | (1) | 230 | 846 | | 1,076 | 23 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Einstein Bros. Bagels |
Dearborn | MI | | (1) | 190 | 724 | | 914 | 20 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Exelis |
Herndon | VA | 39,519 | 1,384 | 53,584 | | 54,968 | 434 | 11/5/2013 | 2006 | ||||||||||||||||||||||||
Express Scripts |
St. Louis | MO | | (4) | 5,706 | 32,333 | | 38,039 | 3,661 | 1/25/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Rangeley | CO | | (6) | 66 | 593 | | 659 | 56 | 5/4/2012 | 2010 | |||||||||||||||||||||||
Family Dollar |
Middleburg | FL | | (1) | 274 | 822 | | 1,096 | 27 | 6/4/2013 | 2008 | |||||||||||||||||||||||
Family Dollar |
Ormond Beach | FL | | 573 | 860 | | 1,433 | 28 | 6/4/2013 | 2008 | ||||||||||||||||||||||||
Family Dollar |
Lenox | GA | | (1) | 90 | 809 | | 899 | 53 | 11/9/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Arco | ID | | (1) | 76 | 684 | | 760 | 48 | 9/18/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Kimberly | ID | | (1) | 219 | 657 | | 876 | 28 | 4/10/2013 | 2013 | |||||||||||||||||||||||
Family Dollar |
Brookston | IN | | (1) | 126 | 715 | | 841 | 50 | 10/1/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Greensburg | KS | | (1) | 80 | 718 | | 798 | 13 | 9/9/2013 | 2012 | |||||||||||||||||||||||
Family Dollar |
Chalmette | LA | | (1) | 751 | 615 | | 1,366 | 58 | 5/3/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Tickfaw | LA | | (1) | 181 | 543 | | 724 | 53 | 3/30/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Detroit | MI | | (1) | 130 | 1,169 | | 1,299 | 71 | 11/27/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Detroit | MI | | (1) | 106 | 956 | | 1,062 | 36 | 5/2/2013 | 1964 | |||||||||||||||||||||||
Family Dollar |
Jackson | MI | | (1) | 93 | 525 | | 618 | 10 | 9/12/2013 | 2007 | |||||||||||||||||||||||
Family Dollar |
St Louis | MO | | (1) | 445 | 1,038 | | 1,483 | 68 | 12/14/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
St. Louis | MO | | (1) | 168 | 671 | | 839 | 66 | 4/2/2012 | 2006 | |||||||||||||||||||||||
Family Dollar |
St. Louis | MO | | (1) | 445 | 1,039 | | 1,484 | 63 | 10/23/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
St. Louis | MO | | (1) | 215 | 1,219 | | 1,434 | 46 | 4/30/2013 | 2013 | |||||||||||||||||||||||
Family Dollar |
Biloxi | MS | | (6) | 310 | 575 | | 885 | 57 | 3/30/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Carriere | MS | | (6) | 200 | 599 | | 799 | 59 | 3/30/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
DIberville | MS | | (1) | 241 | 561 | | 802 | 50 | 5/21/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Gulfport | MS | | (6) | 209 | 626 | | 835 | 56 | 5/21/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Gulfport | MS | | (1) | 270 | 629 | | 899 | 44 | 9/20/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Gulfport | MS | | (1) | 218 | 654 | | 872 | 43 | 11/15/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Hattiesburg | MS | | (1) | 225 | 674 | | 899 | 35 | 1/30/2013 | 2012 | |||||||||||||||||||||||
Family Dollar |
Horn Lake | MS | | (1) | 225 | 676 | | 901 | 51 | 8/22/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Kiln | MS | | (1) | 106 | 650 | | 756 | 43 | 11/14/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Okolona | MS | | (1) | 64 | 578 | | 642 | 46 | 7/31/2012 | 2012 |
F-114
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Family Dollar |
Winona | MS | | (1) | 146 | 585 | | 731 | 47 | 7/31/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Lumberton | NC | | 151 | 603 | | 754 | 11 | 9/11/2013 | 2006 | ||||||||||||||||||||||||
Family Dollar |
Fort Yates | ND | | (5) | 126 | 715 | | 841 | 77 | 1/31/2012 | 2010 | |||||||||||||||||||||||
Family Dollar |
New Town | ND | | (5) | 105 | 942 | | 1,047 | 101 | 1/31/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Rolla | ND | | (5) | 83 | 749 | | 832 | 81 | 1/31/2012 | 2010 | |||||||||||||||||||||||
Family Dollar |
Madison | NE | | (5) | 37 | 703 | | 740 | 79 | 12/30/2011 | 2011 | |||||||||||||||||||||||
Family Dollar |
Chimayo | NM | | (1) | 158 | 632 | | 790 | 33 | 1/30/2013 | 2009 | |||||||||||||||||||||||
Family Dollar |
Mountainair | NM | | (1) | 84 | 752 | | 836 | 63 | 7/6/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Hawthorne | NV | | (6) | 191 | 764 | | 955 | 68 | 6/1/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Lovelock | NV | | (6) | 185 | 742 | | 927 | 69 | 5/4/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Silver Spring | NV | | (1) | 202 | 808 | | 1,010 | 57 | 9/21/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Wells | NV | | (6) | 84 | 755 | | 839 | 71 | 5/11/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Toledo | OH | | (1) | 306 | 917 | | 1,223 | 43 | 2/25/2013 | 2012 | |||||||||||||||||||||||
Family Dollar |
Warren | OH | | (1) | 170 | 681 | | 851 | 51 | 9/11/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Stillwell | OK | | (5) | 40 | 768 | | 808 | 86 | 1/6/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Tulsa | OK | | (6) | 220 | 878 | | 1,098 | 70 | 7/30/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Martin | SD | | (5) | 85 | 764 | | 849 | 82 | 1/31/2012 | 2009 | |||||||||||||||||||||||
Family Dollar |
Harrison | TN | | (1) | 74 | 420 | | 494 | 10 | 7/23/2013 | 2006 | |||||||||||||||||||||||
Family Dollar |
Avinger | TX | | (1) | 40 | 761 | | 801 | 50 | 10/22/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Caldwell | TX | | (1) | 138 | 552 | | 690 | 49 | 5/29/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Chireno | TX | | (1) | 50 | 943 | | 993 | 57 | 12/10/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Eagle Lake | TX | | (1) | 100 | 566 | | 666 | 48 | 7/6/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Floydada | TX | | (5) | 36 | 681 | | 717 | 77 | 12/30/2011 | 2010 | |||||||||||||||||||||||
Family Dollar |
Kerens | TX | | (6) | 73 | 658 | | 731 | 68 | 2/29/2012 | 2011 | |||||||||||||||||||||||
Family Dollar |
Oakhurst | TX | | (1) | 36 | 683 | | 719 | 42 | 12/12/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Plano | TX | | (1) | 468 | 869 | | 1,337 | 20 | 8/1/2013 | 2013 | |||||||||||||||||||||||
Family Dollar |
Kemmerer | WY | | (1) | 45 | 853 | | 898 | 40 | 2/22/2013 | 2013 | |||||||||||||||||||||||
Famous Daves |
Independence | MO | | (1) | 620 | 422 | | 1,042 | 12 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Farmers Group, Inc. |
Simi Valley | CA | 25,620 | 11,851 | 31,096 | | 42,947 | 314 | 11/5/2013 | 1982 | ||||||||||||||||||||||||
Farmers New World Life Insurance Company |
Mercer Island | WA | 29,161 | 24,287 | 28,210 | | 52,497 | 231 | 11/5/2013 | 1982 | ||||||||||||||||||||||||
FedEx |
Lowell | AR | | (1) | 396 | 7,521 | | 7,917 | 382 | 3/15/2013 | 2012 | |||||||||||||||||||||||
FedEx |
Yuma | AZ | | | 2,076 | | 2,076 | 148 | 10/17/2012 | 2011 |
F-115
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
FedEx |
Chico | CA | | (1) | 308 | 2,776 | | 3,084 | 198 | 11/9/2012 | 2006 | |||||||||||||||||||||||
FedEx |
Commerce City | CO | | (4) | 6,556 | 26,224 | | 32,780 | 2,799 | 3/20/2012 | 2007 | |||||||||||||||||||||||
FedEx |
Melbourne | FL | | (1) | 159 | 1,433 | | 1,592 | 36 | 7/26/2013 | 1989 | |||||||||||||||||||||||
FedEx |
Kankakee | IL | | (1) | 195 | 1,103 | | 1,298 | 107 | 5/31/2012 | 2003 | |||||||||||||||||||||||
FedEx |
Mt. Vernon | IL | | (1) | 222 | 1,259 | | 1,481 | 122 | 5/31/2012 | 2009 | |||||||||||||||||||||||
FedEx |
Quincy | IL | | 371 | 2,101 | | 2,472 | 160 | 9/28/2012 | 2012 | ||||||||||||||||||||||||
FedEx |
Evansville | IN | | (1) | 665 | 2,661 | | 3,326 | 257 | 5/31/2012 | 2003 | |||||||||||||||||||||||
FedEx |
Kokomo | IN | | 186 | 3,541 | | 3,727 | 378 | 3/16/2012 | 2012 | ||||||||||||||||||||||||
FedEx |
Hazard | KY | | 215 | 4,085 | | 4,300 | 312 | 9/28/2012 | 2012 | ||||||||||||||||||||||||
FedEx |
London | KY | | (1) | 191 | 1,081 | | 1,272 | 104 | 5/31/2012 | 2000 | |||||||||||||||||||||||
FedEx |
Grand Rapids | MI | 4,800 | 1,797 | 7,189 | | 8,986 | 694 | 6/14/2012 | 2012 | ||||||||||||||||||||||||
FedEx |
Port Huron | MI | | (1) | 125 | 1,121 | | 1,246 | 40 | 5/31/2013 | 2003 | |||||||||||||||||||||||
FedEx |
Roseville | MN | | 1,462 | 8,282 | | 9,744 | 547 | 11/30/2012 | 2012 | ||||||||||||||||||||||||
FedEx |
Butte | MT | 5,060 | 403 | 7,653 | | 8,056 | 1,050 | 9/27/2011 | 2011 | ||||||||||||||||||||||||
FedEx |
Belmont | NH | | (4) | 265 | 2,386 | | 2,651 | 291 | 12/29/2011 | 2011 | |||||||||||||||||||||||
FedEx |
Wendover | NV | | (1) | 262 | 1,483 | | 1,745 | 75 | 2/25/2013 | 2012 | |||||||||||||||||||||||
FedEx |
Winnemucca | NV | | (1) | 280 | 1,585 | | 1,865 | 81 | 2/25/2013 | 2012 | |||||||||||||||||||||||
FedEx |
Blauvelt | NY | | 14,420 | 26,779 | | 41,199 | 2,859 | 4/5/2012 | 2012 | ||||||||||||||||||||||||
FedEx |
Chillicothe | OH | | (1) | 143 | 1,284 | | 1,427 | 124 | 5/31/2012 | 2000 | |||||||||||||||||||||||
FedEx |
Mt. Pleasant | PA | | (1) | 454 | 1,814 | 98 | 2,366 | 179 | 5/31/2012 | 2001 | |||||||||||||||||||||||
FedEx |
Blountville | TN | | (4) | 562 | 5,056 | | 5,618 | 591 | 2/3/2012 | 2009 | |||||||||||||||||||||||
FedEx |
Humboldt | TN | | 239 | 4,543 | | 4,782 | 416 | 7/11/2012 | 2008 | ||||||||||||||||||||||||
FedEx |
Bryan | TX | | (1) | 1,422 | 3,318 | | 4,740 | 320 | 6/15/2012 | 2011 | |||||||||||||||||||||||
FedEx |
Omak | WA | | 252 | 1,425 | | 1,677 | 109 | 9/27/2012 | 2012 | ||||||||||||||||||||||||
FedEx |
Wenatchee | WA | | 266 | 2,393 | | 2,659 | 183 | 9/28/2012 | 2012 | ||||||||||||||||||||||||
FedEx |
Parkersburg | WV | | 193 | 3,671 | | 3,864 | 280 | 9/20/2012 | 2012 | ||||||||||||||||||||||||
FedEx Ground |
Greenville | NC | | (5) | 363 | 6,903 | | 7,266 | 772 | 2/22/2012 | 2011 |
F-116
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
FedEx Ground |
Tulsa | OK | | (5) | 458 | 8,695 | | 9,153 | 972 | 2/22/2012 | 2011 | |||||||||||||||||||||||
First Bank |
Pinellas Park | FL | | 630 | 1,470 | | 2,100 | 18 | 10/1/2013 | 1981 | ||||||||||||||||||||||||
Fresenius |
Aurora | IL | | 287 | 2,584 | | 2,871 | 182 | 7/13/2012 | 2009 | ||||||||||||||||||||||||
Fresenius |
Chicago | IL | | 588 | 1,764 | | 2,352 | 117 | 7/31/2012 | 2009 | ||||||||||||||||||||||||
Fresenius |
Waukegan | IL | | 94 | 1,792 | | 1,886 | 119 | 7/31/2012 | 2011 | ||||||||||||||||||||||||
Fresenius |
Peru | IN | | 69 | 1,305 | | 1,374 | 92 | 6/27/2012 | 1982 | ||||||||||||||||||||||||
Fresenius |
Bossier City | LA | | (1) | 120 | 682 | | 802 | 29 | 1/30/2013 | 2008 | |||||||||||||||||||||||
Fresenius |
Caro | MI | | (1) | 92 | 1,744 | | 1,836 | 130 | 6/5/2012 | 2009 | |||||||||||||||||||||||
Fresenius |
Jackson | MI | | 137 | 2,603 | | 2,740 | 194 | 6/5/2012 | 2008 | ||||||||||||||||||||||||
Fresenius |
Albermarle | NC | | (1) | 139 | 1,253 | | 1,392 | 39 | 4/30/2013 | 2008 | |||||||||||||||||||||||
Fresenius |
Angier | NC | | (1) | 203 | 1,152 | | 1,355 | 36 | 4/30/2013 | 2012 | |||||||||||||||||||||||
Fresenius |
Asheboro | NC | | 323 | 2,903 | | 3,226 | 91 | 4/30/2013 | 2012 | ||||||||||||||||||||||||
Fresenius |
Taylorsville | NC | | (1) | 275 | 1,099 | | 1,374 | 34 | 4/30/2013 | 2011 | |||||||||||||||||||||||
Fresenius |
Warsaw | NC | | (1) | 75 | 1,428 | | 1,503 | 78 | 11/13/2012 | 2003 | |||||||||||||||||||||||
Fresenius |
Kings Mills | OH | | (1) | 399 | 598 | | 997 | 45 | 6/5/2012 | 2007 | |||||||||||||||||||||||
Fresenius |
Dallas | TX | | (1) | 377 | 1,132 | | 1,509 | 44 | 2/28/2013 | 1958 | |||||||||||||||||||||||
GE Aviation |
Auburn | AL | | 1,627 | 30,920 | | 32,547 | 1,767 | 11/21/2012 | 2012 | ||||||||||||||||||||||||
General Mills |
Geneva | IL | 16,555 | 7,457 | 22,371 | | 29,828 | 2,161 | 5/23/2012 | 1998 | ||||||||||||||||||||||||
General Mills |
Fort Wayne | IN | | (1) | 2,533 | 48,130 | | 50,663 | 3,425 | 10/18/2012 | 2012 | |||||||||||||||||||||||
General Motors Financial Company |
Arlington | TX | 25,552 | 7,901 | 35,553 | | 43,454 | 328 | 11/5/2013 | 1999 | ||||||||||||||||||||||||
Golden Corral |
Albany | GA | | (1) | 460 | 1,863 | | 2,323 | 53 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Golden Corral |
Brunswick | GA | | (1) | 390 | 2,093 | | 2,483 | 60 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Golden Corral |
McDonough | GA | | (1) | 930 | 3,936 | | 4,866 | 113 | 6/27/2013 | 2004 | |||||||||||||||||||||||
Golden Corral |
Council Bluffs | IA | | (1) | 1,140 | 1,460 | | 2,600 | 42 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Golden Corral |
Evansville | IN | | (1) | 670 | 2,707 | | 3,377 | 78 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Golden Corral |
Evansville | IN | | (1) | 640 | 944 | | 1,584 | 27 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Golden Corral |
Fort Wayne | IN | | (1) | 820 | 1,935 | | 2,755 | 55 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Golden Corral |
Kokomo | IN | | (1) | 780 | 2,107 | | 2,887 | 60 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Golden Corral |
Elizabethtown | KY | | (1) | 760 | 2,753 | | 3,513 | 79 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Golden Corral |
Henderson | KY | | (1) | 600 | 1,586 | | 2,186 | 45 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Golden Corral |
Blue Springs | MO | | (1) | 810 | 1,346 | | 2,156 | 39 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Golden Corral |
Flowood | MS | | (1) | 680 | 2,730 | | 3,410 | 78 | 6/27/2013 | 1999 |
F-117
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Golden Corral |
Aberdeen | NC | | (1) | 690 | 1,566 | | 2,256 | 45 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Golden Corral |
Burlington | NC | | (1) | 840 | 2,319 | | 3,159 | 66 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Golden Corral |
Hickory | NC | | (1) | 260 | 2,658 | | 2,918 | 76 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Golden Corral |
Bellevue | NE | | (1) | 520 | 1,433 | | 1,953 | 41 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Golden Corral |
Lincoln | NE | | (1) | 300 | 2,930 | | 3,230 | 84 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Golden Corral |
Farmington | NM | | (1) | 270 | 3,174 | | 3,444 | 91 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Golden Corral |
Columbus | OH | | (1) | 770 | 2,476 | | 3,246 | 71 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Golden Corral |
Tulsa | OK | | (1) | 280 | 3,890 | | 4,170 | 112 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Golden Corral |
Rock Hill | SC | | (1) | 320 | 2,130 | | 2,450 | 61 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Golden Corral |
Cookeville | TN | | (1) | 800 | 1,937 | | 2,737 | 56 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Golden Corral |
Bristol | VA | | (1) | 750 | 2,276 | | 3,026 | 65 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Goodfire BBQ |
San Antonio | TX | | (1) | 350 | 341 | | 691 | 10 | 6/27/2013 | 1983 | |||||||||||||||||||||||
Grandys |
Hobbs | NM | | (1) | 815 | | | 815 | | 6/27/2013 | 1984 | |||||||||||||||||||||||
Grandys |
Ardmore | OK | | (1) | 454 | | | 454 | | 6/27/2013 | 1983 | |||||||||||||||||||||||
Grandys |
Moore | OK | | (1) | 320 | 428 | | 748 | 12 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Grandys |
Oklahoma City | OK | | (1) | 260 | 380 | | 640 | 11 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Grandys |
Oklahoma City | OK | | (1) | 320 | 289 | | 609 | 8 | 6/27/2013 | 1984 | |||||||||||||||||||||||
GSA |
Birmingham | AL | 10,568 | 1,400 | 8,830 | | 10,230 | 84 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
GSA |
Mobile | AL | | (1) | 268 | 5,095 | | 5,363 | 420 | 6/19/2012 | 1995 | |||||||||||||||||||||||
GSA |
Birmingham | AL | 17,640 | 2,982 | 19,982 | | 22,964 | 193 | 11/5/2013 | 2007 | ||||||||||||||||||||||||
GSA |
Springerville | AZ | | (1) | 148 | 2,810 | | 2,958 | 232 | 7/2/2012 | 2006 | |||||||||||||||||||||||
GSA |
Craig | CO | | (5) | 129 | 1,159 | | 1,288 | 128 | 12/30/2011 | 2011 | |||||||||||||||||||||||
GSA |
Cocoa | FL | | 253 | 1,435 | | 1,688 | 164 | 12/13/2011 | 2009 | ||||||||||||||||||||||||
GSA |
Stuart | FL | | (1) | 900 | 3,600 | | 4,500 | 363 | 3/5/2012 | 2011 | |||||||||||||||||||||||
GSA |
Grangeville | ID | | 317 | 6,023 | | 6,340 | 607 | 3/5/2012 | 2007 | ||||||||||||||||||||||||
GSA |
Kansas City | KS | 16,872 | 4,264 | 29,678 | | 33,942 | 276 | 11/5/2013 | 2003 | ||||||||||||||||||||||||
GSA |
Springfield | MO | | (1) | 131 | 2,489 | | 2,620 | 228 | 5/15/2012 | 2011 | |||||||||||||||||||||||
GSA |
Albany | NY | 10,137 | 2,470 | 11,836 | | 14,306 | 124 | 11/5/2013 | 2008 | ||||||||||||||||||||||||
GSA |
Freeport | NY | | (1) | 843 | 3,372 | | 4,215 | 371 | 1/10/2012 | 1960 | |||||||||||||||||||||||
GSA |
Plattsburg | NY | | (1) | 508 | 4,572 | | 5,080 | 377 | 6/19/2012 | 2008 | |||||||||||||||||||||||
GSA |
Warren | PA | | (1) | 341 | 3,114 | | 3,455 | 268 | 6/19/2012 | 2008 | |||||||||||||||||||||||
GSA |
Ponce | PR | | 1,780 | 9,297 | | 11,077 | 128 | 11/5/2013 | 2000 |
F-118
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
GSA |
Austin | TX | 5,046 | 1,570 | 3,057 | | 4,627 | 37 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
GSA |
Fort Worth | TX | | (1) | 477 | 4,290 | | 4,767 | 393 | 5/9/2012 | 2010 | |||||||||||||||||||||||
GSA |
Gloucester | VA | | (1) | 287 | 1,628 | | 1,915 | 134 | 6/19/2012 | 1997 | |||||||||||||||||||||||
Habaneros Mexican Grill |
Hueytown | AL | | (1) | 60 | 639 | | 699 | 18 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Hanesbrands |
Rural Hall | NC | | 1,082 | 22,565 | | 23,647 | 1,426 | 12/21/2012 | 1989 | ||||||||||||||||||||||||
Hardees |
Alma | GA | | (1) | 80 | 502 | | 582 | 14 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Hardees |
Brunswick | GA | | (1) | 200 | 494 | | 694 | 14 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Hardees |
Claxton | GA | | (1) | 170 | 469 | | 639 | 13 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Hardees |
Glennville | GA | | (1) | 170 | 450 | | 620 | 12 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Hardees |
Hazlehurst | GA | | (1) | 300 | 263 | | 563 | 7 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Hardees |
Metter | GA | | (1) | 230 | 369 | | 599 | 10 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Hardees |
Richmond Hill | GA | | (1) | 390 | 149 | | 539 | 4 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Hardees |
Savannah | GA | | (1) | 130 | 456 | | 586 | 13 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Hardees |
Swainsboro | GA | | (1) | 470 | 107 | | 577 | 3 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Hardees |
Vidalia | GA | | (1) | 220 | 377 | | 597 | 10 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Hardees |
Old Fort | NC | | (1) | 300 | 904 | | 1,204 | 25 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Hardees |
Aiken | SC | | (1) | 220 | 450 | | 670 | 12 | 6/27/2013 | 1977 | |||||||||||||||||||||||
Hardees |
Chapin | SC | | (1) | 380 | 741 | | 1,121 | 21 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Hardees |
Bloomingdale | TN | | (1) | 270 | 844 | | 1,114 | 23 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Hardees |
Clinton | TN | | (1) | 390 | 893 | | 1,283 | 25 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Hardees |
Crossville | TN | | (1) | 300 | 689 | | 989 | 19 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Hardees Red Burrito |
Attalla | AL | | (1) | 220 | 896 | | 1,116 | 25 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Hash House A-Go-Go Restaurant |
Las Vegas | NV | | (1) | 580 | 1,347 | | 1,927 | 39 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Home Depot |
Columbia | SC | 13,776 | 2,911 | 15,463 | | 18,374 | 2,748 | 11/1/2009 | 2009 | ||||||||||||||||||||||||
Houlihans |
Plymouth Meeting | PA | | (1) | 870 | 2,015 | | 2,885 | 58 | 6/27/2013 | 1974 | |||||||||||||||||||||||
Huntington National Bank |
Conneaut | OH | | 205 | 477 | | 682 | 5 | 10/1/2013 | 1971 | ||||||||||||||||||||||||
Huntington National Bank |
Jefferson | OH | | 255 | 765 | | 1,020 | 9 | 10/1/2013 | 1963 |
F-119
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Hy-Vee |
Vermillion | SD | | 409 | 3,684 | | 4,093 | 194 | 4/8/2013 | 2003 | ||||||||||||||||||||||||
IHOP |
Homewood | AL | | (1) | 610 | 1,762 | | 2,372 | 50 | 6/27/2013 | 1996 | |||||||||||||||||||||||
IHOP |
Castle Rock | CO | | (1) | 320 | 2,334 | | 2,654 | 67 | 6/27/2013 | 1999 | |||||||||||||||||||||||
IHOP |
Greeley | CO | | (1) | 120 | 1,538 | | 1,658 | 44 | 6/27/2013 | 1998 | |||||||||||||||||||||||
IHOP |
Pueblo | CO | | (1) | 330 | 1,589 | | 1,919 | 46 | 6/27/2013 | 1997 | |||||||||||||||||||||||
IHOP |
Stockbridge | GA | | (1) | 580 | 2,091 | | 2,671 | 60 | 6/27/2013 | 1997 | |||||||||||||||||||||||
IHOP |
Natchitoches | LA | | 750 | 89 | | 839 | 3 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
IHOP |
Roseville | MI | | (1) | 340 | 1,071 | | 1,411 | 31 | 6/27/2013 | 1997 | |||||||||||||||||||||||
IHOP |
Kansas City | MO | | (1) | 630 | 1,002 | | 1,632 | 29 | 6/27/2013 | 1998 | |||||||||||||||||||||||
IHOP |
Southaven | MS | | (1) | 350 | 2,108 | | 2,458 | 60 | 6/27/2013 | 1997 | |||||||||||||||||||||||
IHOP |
Poughkeepsie | NY | | (1) | 430 | 1,129 | | 1,559 | 32 | 6/27/2013 | 1996 | |||||||||||||||||||||||
IHOP |
Greenville | SC | | (1) | 610 | 1,551 | | 2,161 | 44 | 6/27/2013 | 1998 | |||||||||||||||||||||||
IHOP |
Clarksville | TN | | (1) | 530 | 1,346 | | 1,876 | 39 | 6/27/2013 | 1997 | |||||||||||||||||||||||
IHOP |
Memphis | TN | | (1) | 750 | 2,009 | | 2,759 | 58 | 6/27/2013 | 1997 | |||||||||||||||||||||||
IHOP |
Murfreesboro | TN | | (1) | 600 | 1,687 | | 2,287 | 48 | 6/27/2013 | 1998 | |||||||||||||||||||||||
IHOP |
Fort Worth | TX | | (1) | 560 | 1,879 | | 2,439 | 54 | 6/27/2013 | 1994 | |||||||||||||||||||||||
IHOP |
Houston | TX | | (1) | 760 | 2,462 | | 3,222 | 71 | 6/27/2013 | 1996 | |||||||||||||||||||||||
IHOP |
Killeen | TX | | (1) | 380 | 1,028 | | 1,408 | 29 | 6/27/2013 | 1997 | |||||||||||||||||||||||
IHOP |
Lake Jackson | TX | | (1) | 370 | 2,018 | | 2,388 | 58 | 6/27/2013 | 1997 | |||||||||||||||||||||||
IHOP |
Leon Valley | TX | | (1) | 650 | 2,055 | | 2,705 | 59 | 6/27/2013 | 1997 | |||||||||||||||||||||||
IHOP |
Auburn | WA | | (1) | 780 | 1,878 | | 2,658 | 54 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Invesco Holding Co. Ltd. |
Denver | CO | 43,700 | 12,650 | 66,398 | | 79,048 | 607 | 11/5/2013 | 2008 | ||||||||||||||||||||||||
Iron Mountain |
Columbus | OH | | (1) | 405 | 3,642 | | 4,047 | 278 | 9/28/2012 | 1954 | |||||||||||||||||||||||
Jack in the Box |
Avondale | AZ | | (1) | 110 | 2,237 | | 2,347 | 62 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Jack in the Box |
Chandler | AZ | | (1) | 450 | 1,447 | | 1,897 | 40 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Jack in the Box |
Folsom | CA | | (1) | 280 | 2,423 | | 2,703 | 67 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Jack in the Box |
Fresno | CA | | (1) | 190 | 1,810 | | 2,000 | 50 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Jack in the Box |
West Sacramento | CA | | (1) | 590 | 1,710 | | 2,300 | 47 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Jack in the Box |
Burley | ID | | (1) | 240 | 1,430 | | 1,670 | 40 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Jack in the Box |
Moscow | ID | | (1) | 350 | 1,110 | | 1,460 | 31 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Jack in the Box |
Belleville | IL | | (1) | 200 | 966 | | 1,166 | 27 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Jack in the Box |
Florissant | MO | | (1) | 502 | 1,515 | | 2,017 | 42 | 6/27/2013 | 1997 |
F-120
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Jack in the Box |
St. Louis | MO | | (1) | 420 | 1,494 | | 1,914 | 41 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Jack in the Box |
Las Vegas | NV | | (1) | 680 | 1,533 | | 2,213 | 42 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Jack in the Box |
Salem | OR | | (1) | 580 | 1,301 | | 1,881 | 36 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
Tigard | OR | | (1) | 620 | 1,361 | | 1,981 | 38 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
Arlington | TX | | (1) | 420 | 1,325 | | 1,745 | 37 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Jack in the Box |
Arlington | TX | | (1) | 420 | 1,365 | | 1,785 | 38 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Jack in the Box |
Corinth | TX | | (1) | 400 | 1,416 | | 1,816 | 39 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Jack in the Box |
Farmers Branch | TX | | (1) | 460 | 1,640 | | 2,100 | 45 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Jack in the Box |
Fort Worth | TX | | (1) | 490 | 1,702 | | 2,192 | 47 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Jack in the Box |
Georgetown | TX | | (1) | 600 | 1,508 | | 2,108 | 42 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
Granbury | TX | | (1) | 380 | 1,449 | | 1,829 | 40 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
Grand Prairie | TX | | (1) | 600 | 1,856 | | 2,456 | 51 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Jack in the Box |
Grapevine | TX | | (1) | 470 | 1,344 | | 1,814 | 37 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Jack in the Box |
Gun Barrel City | TX | | (1) | 300 | 961 | | 1,261 | 27 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Jack in the Box |
Houston | TX | | (1) | 460 | 1,437 | | 1,897 | 40 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Jack in the Box |
Houston | TX | | (1) | 390 | 1,172 | | 1,562 | 32 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Jack in the Box |
Houston | TX | | (1) | 330 | 1,845 | | 2,175 | 51 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Jack in the Box |
Houston | TX | | (1) | 410 | 1,621 | | 2,031 | 45 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Jack in the Box |
Houston | TX | | (1) | 450 | 1,396 | | 1,846 | 39 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Jack in the Box |
Hutchins | TX | | (1) | 330 | 1,363 | | 1,693 | 38 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Jack in the Box |
Kingswood | TX | | (1) | 430 | 955 | | 1,385 | 26 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Jack in the Box |
Lufkin | TX | | (1) | 440 | 1,544 | | 1,984 | 43 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
Lufkin | TX | | (1) | 450 | 1,563 | | 2,013 | 43 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Jack in the Box |
Mesquite | TX | | (1) | 560 | 1,652 | | 2,212 | 46 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Jack in the Box |
Nacogdoches | TX | | (1) | 340 | 1,320 | | 1,660 | 37 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Jack in the Box |
Orange | TX | | (1) | 270 | 1,661 | | 1,931 | 46 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
Port Arthur | TX | | (1) | 460 | 1,405 | | 1,865 | 39 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Jack in the Box |
Rockwall | TX | | (1) | 450 | 1,275 | | 1,725 | 35 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Jack in the Box |
San Antonio | TX | | (1) | 400 | 1,244 | | 1,644 | 34 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
San Antonio | TX | | (1) | 470 | 1,256 | | 1,726 | 35 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
San Antonio | TX | | (1) | 350 | 1,249 | | 1,599 | 35 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Jack in the Box |
Spring | TX | | (1) | 450 | 1,487 | | 1,937 | 41 | 6/27/2013 | 1993 |
F-121
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Jack in the Box |
Spring | TX | | (1) | 570 | 1,340 | | 1,910 | 37 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
Tyler | TX | | (1) | 450 | 1,025 | | 1,475 | 28 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
Weatherford | TX | | (1) | 480 | 1,329 | | 1,809 | 37 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Jack in the Box |
Enumclaw | WA | | (1) | 380 | 1,238 | | 1,618 | 34 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Joes Crab Shack |
Lilburn | GA | | (1) | 800 | 1,917 | | 2,717 | 55 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Joes Crab Shack |
Houston | TX | | (1) | 900 | 1,749 | | 2,649 | 50 | 6/27/2013 | 1994 | |||||||||||||||||||||||
John Deere |
Davenport | IA | | (1) | 1,161 | 22,052 | | 23,213 | 2,130 | 5/31/2012 | 2003 | |||||||||||||||||||||||
Johnson Controls, Inc. |
Pinellas Park | FL | 16,200 | 4,538 | 23,842 | | 28,380 | 242 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
Kaiser Foundation |
Cupertino | CA | | (1) | 14,236 | 42,708 | | 56,944 | 1,848 | 2/20/2013 | 2005 | |||||||||||||||||||||||
Kers WingHouse Bar and Grill |
Brandon | FL | | (1) | 340 | 654 | | 994 | 19 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Kers WingHouse Bar and Grill |
Clearwater | FL | | (1) | 550 | 627 | | 1,177 | 18 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Key Bank |
Spencerport | NY | | (1) | 59 | 1,112 | | 1,171 | 35 | 6/5/2013 | 1960 | |||||||||||||||||||||||
Key Bank |
Berea | OH | | 234 | 1,326 | | 1,560 | 16 | 10/1/2013 | 1958 | ||||||||||||||||||||||||
KFC |
Deming | NM | | (1) | 220 | 691 | | 911 | 19 | 6/27/2013 | 1992 | |||||||||||||||||||||||
KFC |
Las Cruces | NM | | (1) | 270 | 498 | | 768 | 14 | 6/27/2013 | 1990 | |||||||||||||||||||||||
KFC |
Appleton | WI | | (1) | 350 | 874 | | 1,224 | 24 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Kohls |
Howell | MI | | 547 | 10,399 | | 10,946 | 548 | 3/28/2013 | 2003 | ||||||||||||||||||||||||
Koninklijke Ahold, N.V. |
Levittown | PA | 13,340 | 4,716 | 9,955 | | 14,671 | 83 | 11/5/2013 | 2006 | ||||||||||||||||||||||||
Krystal |
Greenville | AL | | (1) | 195 | 1,147 | | 1,342 | 32 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Krystal |
Montgomery | AL | | (1) | 259 | 1,036 | | 1,295 | 91 | 9/21/2012 | 1964 | |||||||||||||||||||||||
Krystal |
Montgomery | AL | | (1) | 560 | 829 | | 1,389 | 23 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Krystal |
Phoenix City | AL | | (1) | 366 | 1,465 | | 1,831 | 129 | 9/21/2012 | 1980 | |||||||||||||||||||||||
Krystal |
Scottsboro | AL | | (1) | 20 | 1,157 | | 1,177 | 32 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Krystal |
Tuscaloosa | AL | | (1) | 206 | 1,165 | | 1,371 | 103 | 9/21/2012 | 1976 | |||||||||||||||||||||||
Krystal |
Jacksonville | FL | | (1) | 574 | 574 | | 1,148 | 51 | 9/21/2012 | 1990 | |||||||||||||||||||||||
Krystal |
Orlando | FL | | (1) | 372 | 372 | | 744 | 33 | 9/21/2012 | 1994 |
F-122
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Krystal |
Orlando | FL | | (1) | 669 | 446 | | 1,115 | 39 | 9/21/2012 | 1995 | |||||||||||||||||||||||
Krystal |
Plant City | FL | | (1) | 355 | 533 | | 888 | 47 | 9/21/2012 | 2012 | |||||||||||||||||||||||
Krystal |
St. Augustine | FL | | (1) | 411 | 411 | | 822 | 36 | 9/21/2012 | 2012 | |||||||||||||||||||||||
Krystal |
Albany | GA | | (1) | 309 | 721 | | 1,030 | 63 | 9/21/2012 | 1962 | |||||||||||||||||||||||
Krystal |
Atlanta | GA | | (1) | 166 | 664 | | 830 | 58 | 9/21/2012 | 1973 | |||||||||||||||||||||||
Krystal |
Augusta | GA | | (1) | 365 | 851 | | 1,216 | 75 | 9/21/2012 | 1979 | |||||||||||||||||||||||
Krystal |
Columbus | GA | | (1) | 622 | 934 | | 1,556 | 82 | 9/21/2012 | 1977 | |||||||||||||||||||||||
Krystal |
Decatur | GA | | (1) | 94 | 533 | | 627 | 47 | 9/21/2012 | 1965 | |||||||||||||||||||||||
Krystal |
East Point | GA | | (1) | 221 | 664 | | 885 | 55 | 10/26/2012 | 1984 | |||||||||||||||||||||||
Krystal |
Macon | GA | | (1) | 325 | 759 | | 1,084 | 67 | 9/21/2012 | 1962 | |||||||||||||||||||||||
Krystal |
Milledgeville | GA | | (1) | 261 | 609 | | 870 | 54 | 9/21/2012 | 2011 | |||||||||||||||||||||||
Krystal |
Snellville | GA | | (1) | 466 | 466 | | 932 | 41 | 9/21/2012 | 1981 | |||||||||||||||||||||||
Krystal |
Gulfport | MS | | (1) | 215 | 861 | | 1,076 | 76 | 9/21/2012 | 2011 | |||||||||||||||||||||||
Krystal |
Jackson | MS | | (1) | 285 | 1,140 | | 1,425 | 100 | 9/21/2012 | 1978 | |||||||||||||||||||||||
Krystal |
Jackson | MS | | (1) | 198 | 1,120 | | 1,318 | 99 | 9/21/2012 | 1983 | |||||||||||||||||||||||
Krystal |
Pearl | MS | | (1) | 426 | 638 | | 1,064 | 56 | 9/21/2012 | 1976 | |||||||||||||||||||||||
Krystal |
Chattanooga | TN | | (1) | 336 | 784 | | 1,120 | 69 | 9/21/2012 | 2010 | |||||||||||||||||||||||
Krystal |
Chattanooga | TN | | (1) | 500 | 947 | | 1,447 | 26 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Krystal |
Knoxville | TN | | (1) | 369 | 246 | | 615 | 22 | 9/21/2012 | 1970 | |||||||||||||||||||||||
Kum & Go |
Bentonville | AR | | (1) | 587 | 1,370 | | 1,957 | 83 | 11/20/2012 | 2009 | |||||||||||||||||||||||
Kum & Go |
Lowell | AR | | (1) | 774 | 1,437 | | 2,211 | 87 | 11/20/2012 | 2009 | |||||||||||||||||||||||
Kum & Go |
Paragould | AR | | (1) | 708 | 2,123 | | 2,831 | 149 | 9/28/2012 | 2012 | |||||||||||||||||||||||
Kum & Go |
Rogers | AR | | (1) | 668 | 1,559 | | 2,227 | 95 | 11/20/2012 | 2008 | |||||||||||||||||||||||
Kum & Go |
Sherwood | AR | | (1) | 866 | 1,609 | | 2,475 | 113 | 9/28/2012 | 2012 | |||||||||||||||||||||||
Kum & Go |
Fountain | CO | | (1) | 1,131 | 1,696 | | 2,827 | 95 | 12/24/2012 | 2012 | |||||||||||||||||||||||
Kum & Go |
Monument | CO | | (1) | 1,192 | 1,457 | | 2,649 | 82 | 12/24/2012 | 2012 | |||||||||||||||||||||||
Kum & Go |
Muscatine | IA | | (1) | 794 | 1,853 | | 2,647 | 104 | 12/31/2012 | 2012 | |||||||||||||||||||||||
Kum & Go |
Ottumwa | IA | | (1) | 586 | 1,368 | | 1,954 | 83 | 11/20/2012 | 1998 | |||||||||||||||||||||||
Kum & Go |
Waukee | IA | | (1) | 1,280 | 1,280 | | 2,560 | 54 | 3/28/2013 | 2012 | |||||||||||||||||||||||
Kum & Go |
Tioga | ND | | (1) | 318 | 2,863 | | 3,181 | 188 | 11/8/2012 | 2012 | |||||||||||||||||||||||
Kum & Go |
Muskogee | OK | | (1) | 423 | 1,691 | | 2,114 | 40 | 7/22/2013 | 2013 | |||||||||||||||||||||||
Kum & Go |
Cheyenne | WY | | (1) | 411 | 2,327 | | 2,738 | 131 | 12/27/2012 | 2012 |
F-123
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Leeann Chin |
Blaine | MN | | (1) | 480 | 528 | | 1,008 | 15 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Leeann Chin |
Chanhassen | MN | | (1) | 450 | 763 | | 1,213 | 21 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Leeann Chin |
Golden Valley | MN | | (1) | 270 | 776 | | 1,046 | 21 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Logans Roadhouse |
Huntsville | AL | | (1) | 520 | 4,797 | | 5,317 | 138 | 6/27/2013 | 2003 | |||||||||||||||||||||||
Logans Roadhouse |
Fayetteville | AR | | (1) | 1,570 | 2,182 | | 3,752 | 63 | 6/27/2013 | 2004 | |||||||||||||||||||||||
Logans Roadhouse |
Hattiesburg | MS | | (1) | 890 | 4,012 | | 4,902 | 115 | 6/27/2013 | 2006 | |||||||||||||||||||||||
Logans Roadhouse |
Clarksville | TN | | (1) | 1,010 | 4,424 | | 5,434 | 127 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Logans Roadhouse |
Cleveland | TN | | (1) | 890 | 3,902 | | 4,792 | 112 | 6/27/2013 | 2003 | |||||||||||||||||||||||
Logans Roadhouse |
El Paso | TX | | (1) | 320 | 4,731 | | 5,051 | 136 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Long John Silvers |
Alamogordo | NM | | (1) | 160 | 574 | | 734 | 16 | 6/27/2013 | 1977 | |||||||||||||||||||||||
LongHorn Steakhouse |
Tampa | FL | | (1) | 370 | 1,852 | | 2,222 | 53 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Lowes |
New Orleans | LA | 15,643 | 10,317 | 20,728 | | 31,045 | 172 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
Mattress Firm |
Boise | ID | | (1) | 335 | 1,339 | | 1,674 | 63 | 2/22/2013 | 2013 | |||||||||||||||||||||||
Mattress Firm |
Columbus | IN | | (1) | 157 | 891 | | 1,048 | 58 | 11/6/2012 | 2012 | |||||||||||||||||||||||
Mattress Firm |
Raleigh | NC | | (1) | 1,091 | 1,091 | | 2,182 | 77 | 9/28/2012 | 2012 | |||||||||||||||||||||||
Mattress Firm |
Wilson | NC | | (1) | 373 | 692 | | 1,065 | 49 | 9/28/2012 | 2012 | |||||||||||||||||||||||
Mattress Firm |
Florence | SC | | (1) | 398 | 929 | | 1,327 | 57 | 12/7/2012 | 2012 | |||||||||||||||||||||||
Mattress Firm |
Rock Hill | SC | | (1) | 385 | 898 | | 1,283 | 17 | 8/21/2013 | 2008 | |||||||||||||||||||||||
Mattress Firm |
Nederland | TX | | (1) | 311 | 1,245 | | 1,556 | 87 | 9/26/2012 | 2012 | |||||||||||||||||||||||
McAlisters |
Murfreesboro | TN | | (1) | 310 | 720 | | 1,030 | 21 | 6/27/2013 | 1985 | |||||||||||||||||||||||
MetroPCS Wireless |
Richardson | TX | | 1,292 | 19,606 | | 20,898 | 168 | 11/5/2013 | 1987 | ||||||||||||||||||||||||
Michelin North America |
Louisville | KY | | (2) | 1,120 | 7,763 | | 8,883 | 79 | 11/5/2013 | 2011 | |||||||||||||||||||||||
Monro Muffler |
Waukesha | WI | | (1) | 228 | 684 | | 912 | 17 | 7/23/2013 | 2002 | |||||||||||||||||||||||
Morgans Foods |
Pittsburgh | PA | | 180 | 269 | | 449 | 4 | 10/1/2013 | 1985 | ||||||||||||||||||||||||
Morgans Foods |
Benwood | WV | | 123 | 287 | | 410 | 4 | 10/1/2013 | 2006 | ||||||||||||||||||||||||
Mos Irish Pub Restaurant |
Wauwatosa | WI | | (1) | 550 | 818 | | 1,368 | 23 | 6/27/2013 | 1977 | |||||||||||||||||||||||
Mrs Bairds |
Dallas | TX | | (1) | 453 | 4,077 | | 4,530 | 373 | 7/11/2012 | 2002 | |||||||||||||||||||||||
Multi tenant (1000 Milwaukee Avenue) |
Glenview | IL | 55,523 | 14,016 | 73,313 | | 87,329 | 665 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
Multi tenant (15721 Park Row Boulevard) |
Houston | TX | 19,525 | 2,356 | 36,347 | | 38,703 | 295 | 11/5/2013 | 2009 | ||||||||||||||||||||||||
Multi tenant (1585 Sawdust Road) |
The Woodlands | TX | 22,440 | 4,724 | 40,332 | | 45,056 | 321 | 11/5/2013 | 2009 |
F-124
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Multi tenant (2211 Old Earhart Road) |
AnnArbor | MI | 29,356 | 3,520 | 39,594 | | 43,114 | 314 | 11/5/2013 | 2013 | ||||||||||||||||||||||||
Multi tenant (26501 Aliso Creek Road) |
Aliso Viejo | CA | 40,024 | 18,726 | 31,970 | | 50,696 | 266 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
Multi tenant (5859 Farinon Drive) |
San Antonio | TX | 10,000 | 1,666 | 19,092 | | 20,758 | 155 | 11/5/2013 | 2008 | ||||||||||||||||||||||||
Multi tenant (Columbia Pike) |
Silver Spring | MD | | 2,190 | 26,635 | 1,023 | 29,848 | 203 | 11/5/2013 | 1986 | ||||||||||||||||||||||||
Multi tenant (Dodge Building) |
Omaha | NE | | (2) | | 7,358 | | 7,358 | 112 | 11/5/2013 | 2011 | |||||||||||||||||||||||
Multi tenant (Landmark Building) |
Omaha | NE | | (2) | | 10,156 | 4 | 10,160 | 253 | 11/5/2013 | 1991 | |||||||||||||||||||||||
My Dentist |
Chickasha | OK | | (1) | 100 | 186 | | 286 | 6 | 6/27/2013 | 2001 | |||||||||||||||||||||||
National Tire & Battery |
Morrow | GA | | (1) | 397 | 1,586 | | 1,983 | 146 | 6/5/2012 | 1992 | |||||||||||||||||||||||
National Tire & Battery |
St. Louis | MO | | (1) | 756 | 924 | | 1,680 | 63 | 10/31/2012 | 1998 | |||||||||||||||||||||||
Nestle Holdings |
Breinigsville | PA | 46,494 | | 66,948 | | 66,948 | 681 | 11/5/2013 | 1994 | ||||||||||||||||||||||||
OReilly Auto Parts |
Oneonta | AL | | (1) | 81 | 460 | | 541 | 37 | 8/2/2012 | 2000 | |||||||||||||||||||||||
OReilly Auto Parts |
Laramie | WY | | (1) | 144 | 1,297 | | 1,441 | 91 | 10/12/2012 | 1999 | |||||||||||||||||||||||
Pearson |
Lawrence | KS | 15,177 | 2,548 | 18,057 | | 20,605 | 156 | 11/5/2013 | 1997 | ||||||||||||||||||||||||
Pilot Flying J |
Carnesville | GA | | (1) | 1,867 | 7,466 | | 9,333 | 494 | 1/31/2013 | 2000 | |||||||||||||||||||||||
Pizza Hut |
Cooper City | FL | | (1) | 320 | 466 | | 786 | 13 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Pizza Hut |
Marathon | FL | | (1) | 530 | 187 | | 717 | 5 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Pizza Hut |
Bozeman | MT | | (1) | 150 | 343 | | 493 | 10 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Pizza Hut |
Glasgow | MT | | (1) | 120 | 217 | | 337 | 6 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Pizza Hut |
Laurel | MT | | (1) | 170 | 621 | | 791 | 18 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Pizza Hut |
Livingston | MT | | (1) | 130 | 245 | | 375 | 7 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Pizza Hut |
Knoxville | TN | | (1) | 300 | 546 | | 846 | 16 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Pollo Tropical |
Davie | FL | | (1) | 280 | 1,490 | | 1,770 | 41 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Pollo Tropical |
Fort Lauderdale | FL | | (1) | 190 | 1,242 | | 1,432 | 34 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Pollo Tropical |
Lake Worth | FL | | (1) | 280 | 1,182 | | 1,462 | 33 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Popeyes |
Starke | FL | | (1) | 380 | | | 380 | | 6/27/2013 | 1997 | |||||||||||||||||||||||
Popeyes |
Thomasville | GA | | (1) | 110 | 705 | | 815 | 20 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Popeyes |
Valdosta | GA | | (1) | 240 | 599 | | 839 | 17 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Popeyes |
New Orleans | LA | | (1) | 60 | 390 | | 450 | 11 | 6/27/2013 | 1975 |
F-125
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Popeyes |
Channelview | TX | | (1) | 220 | 401 | | 621 | 11 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Popeyes |
Houston | TX | | (1) | 300 | 244 | | 544 | 7 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Popeyes |
Houston | TX | | (1) | 190 | 452 | | 642 | 13 | 6/27/2013 | 1978 | |||||||||||||||||||||||
PriceRite |
Rochester | NY | | 569 | 3,222 | | 3,791 | 285 | 9/27/2012 | 2007 | ||||||||||||||||||||||||
Pulte Mortgage LLC |
Englewood | CO | | 2,563 | 22,026 | | 24,589 | 185 | 11/5/2013 | 2009 | ||||||||||||||||||||||||
Qdoba |
Flint | MI | | (1) | 110 | 990 | | 1,100 | 52 | 3/29/2013 | 2006 | |||||||||||||||||||||||
Qdoba |
Grand Blanc | MI | | (1) | 165 | 935 | | 1,100 | 49 | 3/29/2013 | 2006 | |||||||||||||||||||||||
Rallys |
Indianapolis | IN | | (1) | 210 | 1,514 | | 1,724 | 42 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Rallys |
Kokomo | IN | | (1) | 290 | 548 | | 838 | 15 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Rallys |
Muncie | IN | | (1) | 310 | 1,196 | | 1,506 | 33 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Rallys |
Harvey | LA | | (1) | 420 | 870 | | 1,290 | 24 | 6/27/2013 | 2004 | |||||||||||||||||||||||
Rallys |
New Orleans | LA | | (1) | 450 | 1,691 | | 2,141 | 47 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Rallys |
New Orleans | LA | | (1) | 220 | 1,018 | | 1,238 | 28 | 6/27/2013 | 2004 | |||||||||||||||||||||||
Rallys |
Hamtramck | MI | | (1) | 230 | 1,020 | | 1,250 | 28 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Razzoos |
Lewisville | TX | | (1) | 780 | 1,503 | | 2,283 | 43 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Reckitt Benckiser |
Chester | NJ | 5,500 | 886 | 7,972 | | 8,858 | 513 | 8/16/2012 | 2006 | ||||||||||||||||||||||||
Rite Aid |
Jeffersonville | IN | | (1) | 824 | 2,472 | | 3,296 | 161 | 11/30/2012 | 2008 | |||||||||||||||||||||||
Rite Aid |
Lawrenceburg | KY | | (1) | 567 | 2,267 | | 2,834 | 147 | 11/30/2012 | 2008 | |||||||||||||||||||||||
Rite Aid |
Lexington | KY | | (1) | | 1,943 | | 1,943 | 126 | 11/30/2012 | 2007 | |||||||||||||||||||||||
Rite Aid |
Paris | KY | | (1) | 743 | 2,228 | | 2,971 | 145 | 11/30/2012 | 2008 | |||||||||||||||||||||||
Rite Aid |
Scottsville | KY | | (1) | 153 | 2,904 | | 3,057 | 189 | 11/30/2012 | 2007 | |||||||||||||||||||||||
Rite Aid |
Stanford | KY | | (1) | 152 | 2,886 | | 3,038 | 188 | 11/30/2012 | 2009 | |||||||||||||||||||||||
Rite Aid |
Lima | OH | | (1) | 576 | 2,304 | | 2,880 | 161 | 11/13/2012 | 2006 | |||||||||||||||||||||||
Rite Aid |
Louisville | OH | | (1) | 576 | 3,266 | | 3,842 | 229 | 10/31/2012 | 2008 | |||||||||||||||||||||||
Rite Aid |
Marion | OH | | (1) | 508 | 2,877 | | 3,385 | 201 | 11/13/2012 | 2006 | |||||||||||||||||||||||
Rite Aid |
Huntington | WV | | (1) | 964 | 2,250 | | 3,214 | 146 | 11/30/2012 | 2008 | |||||||||||||||||||||||
Rubbermaid |
Winfield | KS | 12,725 | 1,056 | 20,060 | | 21,116 | 2,039 | 4/25/2012 | 2008 | ||||||||||||||||||||||||
Rubbermaid |
Winfield | KS | | (1) | 819 | 15,555 | | 16,374 | 1,028 | 11/28/2012 | 2012 | |||||||||||||||||||||||
Ruby Tuesday |
Colorado Springs | CO | | (1) | 480 | 809 | | 1,289 | 23 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Ruby Tuesday |
Dillon | CO | | (1) | 400 | 1,628 | | 2,028 | 47 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Ruby Tuesday |
Bartow | FL | | (1) | 270 | 1,916 | | 2,186 | 55 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Ruby Tuesday |
London | KY | | (1) | 370 | 1,493 | | 1,863 | 43 | 6/27/2013 | 1997 |
F-126
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Ruby Tuesday |
Somerset | KY | | (1) | 480 | 1,120 | | 1,600 | 32 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Sakura Tepanyaki Steakhouse |
Orem | UT | | (1) | 340 | 658 | | 998 | 19 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Sams Southern Eatery |
Kennesaw | GA | | (1) | 210 | 46 | | 256 | 1 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Scotts Company |
Orrville | OH | | (1) | 611 | 1,134 | | 1,745 | 98 | 7/30/2012 | 2008 | |||||||||||||||||||||||
Scotts Company |
Orrville | OH | | (1) | 609 | 11,576 | | 12,185 | 1,000 | 7/30/2012 | 2008 | |||||||||||||||||||||||
Scotts Company |
Orrville | OH | | (1) | 278 | 2,502 | | 2,780 | 191 | 9/28/2012 | 2008 | |||||||||||||||||||||||
Shaws Supermarkets |
Plymouth | MA | | (1) | 1,440 | 3,361 | | 4,801 | 394 | 4/18/2012 | 2000 | |||||||||||||||||||||||
Shoneys |
Athens | AL | | 560 | 110 | | 670 | 3 | 6/27/2013 | 1982 | ||||||||||||||||||||||||
Shoneys |
Florence | AL | | 100 | 484 | | 584 | 14 | 6/27/2013 | 1966 | ||||||||||||||||||||||||
Shoneys |
Gadsden | AL | | (1) | 220 | 707 | | 927 | 20 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Shoneys |
Oxford | AL | | (1) | 670 | 25 | | 695 | 1 | 6/27/2013 | 1977 | |||||||||||||||||||||||
Shoneys |
Valdosta | GA | | 420 | 440 | | 860 | 13 | 6/27/2013 | 2000 | ||||||||||||||||||||||||
Shoneys |
Elizabethtown | KY | | (1) | 450 | 465 | | 915 | 13 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Shoneys |
Grayson | KY | | (1) | 420 | 406 | | 826 | 12 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Shoneys |
Owensboro | KY | | 390 | 129 | | 519 | 4 | 6/27/2013 | 1988 | ||||||||||||||||||||||||
Shoneys |
Lafayette | LA | | 530 | 138 | | 668 | 4 | 6/27/2013 | 1989 | ||||||||||||||||||||||||
Shoneys |
Osage Beach | MO | | 453 | 113 | | 566 | 3 | 6/27/2013 | 1992 | ||||||||||||||||||||||||
Shoneys |
Hattiesburg | MS | | (1) | 730 | 618 | | 1,348 | 18 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Shoneys |
Jackson | MS | | (1) | 360 | 572 | | 932 | 16 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Shoneys |
Summerville | SC | | (1) | 350 | 800 | | 1,150 | 23 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Shoneys |
Cookeville | TN | | (1) | 510 | 760 | | 1,270 | 22 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Shoneys |
Lawrenceburg | TN | | (1) | 330 | 873 | | 1,203 | 25 | 6/27/2013 | 1983 | |||||||||||||||||||||||
Shoneys |
Charleston | WV | | (1) | 190 | 543 | | 733 | 16 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Shoneys |
Lewisburg | WV | | (1) | 110 | 642 | | 752 | 18 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Shoneys |
Princeton | WV | | (1) | 90 | 593 | | 683 | 17 | 6/27/2013 | 1975 | |||||||||||||||||||||||
Shoneys |
Ripley | WV | | (1) | 200 | 599 | | 799 | 17 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Smokey Bones BBQ |
Morrow | GA | | 390 | 2,184 | | 2,574 | 63 | 6/27/2013 | 1999 | ||||||||||||||||||||||||
Sonnys Real Pit Bar-B-Q |
Athens | GA | | (1) | 460 | 1,280 | | 1,740 | 37 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Sonnys Real Pit Bar-B-Q |
Conyers | GA | | (1) | 450 | 663 | | 1,113 | 19 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Sonnys Real Pit Bar-B-Q |
Marietta | GA | | (1) | 290 | 1,772 | | 2,062 | 51 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Spaghetti Warehouse |
Marietta | GA | | (1) | 800 | 276 | | 1,076 | 8 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Spaghetti Warehouse |
Aurora | IL | | (1) | 480 | 805 | | 1,285 | 23 | 6/27/2013 | 1993 |
F-127
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Spaghetti Warehouse |
Elk Grove Village | IL | | (1) | 550 | 299 | | 849 | 9 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Spaghetti Warehouse |
Oklahoma City | OK | | (1) | 570 | 1,193 | | 1,763 | 34 | 6/27/2013 | 1905 | |||||||||||||||||||||||
Spaghetti Warehouse |
Tulsa | OK | | (1) | 530 | 1,174 | | 1,704 | 34 | 6/27/2013 | 1917 | |||||||||||||||||||||||
Spaghetti Warehouse |
Memphis | TN | | (1) | 100 | 283 | | 383 | 8 | 6/27/2013 | 1905 | |||||||||||||||||||||||
Spaghetti Warehouse |
Arlington | TX | | (1) | 630 | 1,400 | | 2,030 | 40 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Spaghetti Warehouse |
Dallas | TX | | (1) | 810 | 1,656 | | 2,466 | 47 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Spaghetti Warehouse |
Houston | TX | | (1) | 980 | 2,284 | | 3,264 | 65 | 6/27/2013 | 1906 | |||||||||||||||||||||||
Spaghetti Warehouse |
Plano | TX | | (1) | 540 | 1,060 | | 1,600 | 30 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Spaghetti Warehouse |
San Antonio | TX | | (1) | 1,140 | 1,434 | | 2,574 | 41 | 6/27/2013 | 1907 | |||||||||||||||||||||||
Subway |
Knoxville | TN | | (1) | 160 | 349 | | 509 | 10 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Sweet Tomatoes |
Coral Springs | FL | | (1) | 790 | 1,625 | | 2,415 | 47 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Synovus Bank |
Tampa | FL | | (1) | 985 | 2,298 | | 3,283 | 123 | 12/31/2012 | 1959 | |||||||||||||||||||||||
T.G.I. Fridays |
Homestead | PA | | (1) | 970 | 3,455 | | 4,425 | 99 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Taco Bell |
Daphne | AL | | (1) | 180 | 1,278 | | 1,458 | 35 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Taco Bell |
Foley | AL | | (1) | 360 | 1,460 | | 1,820 | 40 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Taco Bell |
Mobile | AL | | (1) | 160 | 1,973 | | 2,133 | 55 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Taco Bell |
SaraLand | AL | | (1) | 150 | 1,063 | | 1,213 | 29 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Taco Bell |
Jacksonville | FL | | (1) | 440 | 1,167 | | 1,607 | 32 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Taco Bell |
Jacksonville | FL | | (1) | 340 | 1,383 | | 1,723 | 38 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Taco Bell |
Pensacola | FL | | (1) | 140 | 1,897 | | 2,037 | 53 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Taco Bell |
Augusta | GA | | (1) | 220 | 1,292 | | 1,512 | 36 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Taco Bell |
Hephzibah | GA | | (1) | 330 | 930 | | 1,260 | 26 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Taco Bell |
Jesup | GA | | (1) | 230 | 715 | | 945 | 20 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Taco Bell |
Waycross | GA | | (1) | 170 | 1,115 | | 1,285 | 31 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Taco Bell |
St. Louis | MO | | (1) | 190 | 1,951 | | 2,141 | 44 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Taco Bell |
Wentzville | MO | | (1) | 410 | 1,168 | | 1,578 | 32 | 6/27/2013 | 2000 |
F-128
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Taco Bell |
Brunswick | OH | | (1) | 400 | 1,267 | | 1,667 | 35 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Taco Bell |
North Olmstead | OH | | (1) | 390 | 904 | | 1,294 | 25 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Taco Bell |
Kingston | TN | | (1) | 280 | 714 | | 994 | 20 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Taco Bell |
Dallas | TX | | (1) | 400 | 1,225 | | 1,625 | 34 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Taco Bell |
Colonial Heights | VA | | (1) | 450 | 1,144 | | 1,594 | 32 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Taco Bell |
Hayes | VA | | (1) | 350 | | | 350 | | 6/27/2013 | 1994 | |||||||||||||||||||||||
Taco Bell |
Portsmouth | VA | | 350 | | | 350 | | 6/27/2013 | 1997 | ||||||||||||||||||||||||
Taco Bell |
Richmond | VA | | (1) | 500 | 1,061 | | 1,561 | 29 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Taco Bell |
Richmond | VA | | (1) | 510 | 1,321 | | 1,831 | 37 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Taco Bell/Long John Silvers |
Ashtabula | OH | | (1) | 440 | 1,640 | | 2,080 | 45 | 6/27/2013 | 2004 | |||||||||||||||||||||||
Taco Bell/Pizza Hut |
Dallas | TX | | (1) | 420 | 1,582 | | 2,002 | 44 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Taco Cabana |
Austin | TX | | (1) | 700 | 2,105 | | 2,805 | 58 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Taco Cabana |
Pasadena | TX | | (1) | 420 | 1,420 | | 1,840 | 39 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Taco Cabana |
San Antonio | TX | | (1) | 600 | 1,955 | | 2,555 | 54 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Taco Cabana |
San Antonio | TX | | (1) | 500 | 1,740 | | 2,240 | 48 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Taco Cabana |
San Antonio | TX | | (1) | 280 | 1,695 | | 1,975 | 47 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Taco Cabana |
San Antonio | TX | | (1) | 500 | 1,766 | | 2,266 | 49 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Taco Cabana |
Schertz | TX | | (1) | 520 | 1,408 | | 1,928 | 39 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Talbots HQ |
Hingham | MA | | 3,009 | 27,080 | | 30,089 | 762 | 5/24/2013 | 1980 | ||||||||||||||||||||||||
TCF National Bank |
Crystal | MN | | (1) | 640 | 642 | | 1,282 | 17 | 6/27/2013 | 1981 | |||||||||||||||||||||||
TD Bank |
Falmouth | ME | | 4,057 | 23,489 | | 27,546 | 864 | 3/18/2013 | 2002 | ||||||||||||||||||||||||
Teva Pharmaceuticals Industries Limited |
Malvern | PA | | (2) | 2,666 | 40,981 | | 43,647 | 326 | 11/5/2013 | 2013 | |||||||||||||||||||||||
Texas Roadhouse |
Cedar Rapids | IA | | (1) | 430 | 2,194 | | 2,624 | 63 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Texas Roadhouse |
Ammon | ID | | (1) | 490 | 1,206 | | 1,696 | 35 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Texas Roadhouse |
Shively | KY | | (1) | 540 | 2,055 | | 2,595 | 59 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Texas Roadhouse |
Concord | NC | | (1) | 650 | 2,130 | | 2,780 | 61 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Texas Roadhouse |
Gastonia | NC | | (1) | 570 | 1,544 | | 2,114 | 44 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Texas Roadhouse |
Hickory | NC | | (1) | 580 | 1,831 | | 2,411 | 53 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Texas Roadhouse |
Dickson City | PA | | (1) | 640 | 1,897 | | 2,537 | 54 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Texas Roadhouse |
College Station | TX | | (1) | 670 | 2,299 | | 2,969 | 66 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Texas Roadhouse |
Grand Prairie | TX | | (1) | 780 | 1,867 | | 2,647 | 54 | 6/27/2013 | 1997 |
F-129
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
The Kroger Co. |
Calhoun | GA | | (2) | | 6,279 | | 6,279 | 52 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Lithonia | GA | | (2) | | 6,250 | | 6,250 | 52 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Suwanee | GA | | (2) | | 7,574 | | 7,574 | 63 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Suwanee | GA | | (2) | | 7,691 | | 7,691 | 64 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Frankfort | KY | | (2) | | 5,794 | | 5,794 | 48 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Georgetown | KY | | (2) | | 6,742 | | 6,742 | 56 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Madisonville | KY | | (2) | | 5,715 | | 5,715 | 48 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Murray | KY | | (2) | | 6,165 | | 6,165 | 51 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Owensboro | KY | | (2) | | 6,073 | | 6,073 | 51 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Franklin | TN | | (2) | | 7,782 | | 7,782 | 65 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Kroger Co. |
Knoxville | TN | | (2) | | 7,642 | | 7,642 | 64 | 11/5/2013 | 1996 | |||||||||||||||||||||||
The Pantry, Inc. |
Montgomery | AL | | (1) | 526 | 1,228 | | 1,754 | 69 | 12/31/2012 | 1998 | |||||||||||||||||||||||
The Pantry, Inc. |
Charlotte | NC | | (1) | 1,332 | 1,332 | | 2,664 | 75 | 12/31/2012 | 2004 | |||||||||||||||||||||||
The Pantry, Inc. |
Charlotte | NC | | (1) | 1,667 | 417 | | 2,084 | 23 | 12/31/2012 | 1982 | |||||||||||||||||||||||
The Pantry, Inc. |
Charlotte | NC | | (1) | 1,191 | 1,787 | | 2,978 | 100 | 12/31/2012 | 1987 | |||||||||||||||||||||||
The Pantry, Inc. |
Charlotte | NC | | (1) | 1,070 | 1,308 | | 2,378 | 73 | 12/31/2012 | 1997 | |||||||||||||||||||||||
The Pantry, Inc. |
Conover | NC | | (1) | 1,144 | 936 | | 2,080 | 53 | 12/31/2012 | 1998 | |||||||||||||||||||||||
The Pantry, Inc. |
Cornelius | NC | | (1) | 1,847 | 2,258 | | 4,105 | 127 | 12/31/2012 | 1999 | |||||||||||||||||||||||
The Pantry, Inc. |
Lincolnton | NC | | (1) | 1,766 | 2,159 | | 3,925 | 121 | 12/31/2012 | 2000 | |||||||||||||||||||||||
The Pantry, Inc. |
Matthews | NC | | (1) | 980 | 1,819 | | 2,799 | 102 | 12/31/2012 | 1987 | |||||||||||||||||||||||
The Pantry, Inc. |
Thomasville | NC | | (1) | 1,175 | 1,436 | | 2,611 | 81 | 12/31/2012 | 2000 | |||||||||||||||||||||||
The Pantry, Inc. |
Fort Mill | SC | | (1) | 1,311 | 1,967 | | 3,278 | 110 | 12/31/2012 | 1988 | |||||||||||||||||||||||
The Procter & Gamble Co. |
FortWayne | IN | 25,904 | | 26,400 | | 26,400 | 268 | 11/5/2013 | 1994 | ||||||||||||||||||||||||
Thermo Process Systems |
Sugarland | TX | | (1) | 1,680 | 7,778 | | 9,458 | 82 | 9/24/2013 | 2005 | |||||||||||||||||||||||
Tiffany & Co. |
Parsippany | NJ | 55,773 | 2,248 | 81,083 | | 83,331 | 824 | 11/5/2013 | 2002 | ||||||||||||||||||||||||
Tilted Kilt |
Hendersonville | TN | | (1) | 310 | 763 | | 1,073 | 22 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Time Warner Cable |
Milwaukee | WI | 20,570 | 3,081 | 22,512 | | 25,593 | 217 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
Tire Kingdom |
Dublin | OH | | (6) | 373 | 1,119 | | 1,492 | 108 | 4/27/2012 | 2003 | |||||||||||||||||||||||
TJX Companies, Inc. |
Philadelphia | PA | 67,335 | 9,890 | 84,955 | | 94,845 | 864 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
T-Mobile USA, Inc. |
Nashville | TN | 10,295 | 1,190 | 15,847 | | 17,037 | 140 | 11/5/2013 | 2002 | ||||||||||||||||||||||||
Tractor Supply |
Oneonta | AL | | (1) | 359 | 1,438 | | 1,797 | 46 | 4/18/2013 | 2012 | |||||||||||||||||||||||
Tractor Supply |
Gray | LA | | 550 | 2,202 | | 2,752 | 149 | 8/7/2012 | 2011 |
F-130
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Tractor Supply |
Negaunee | MI | | (1) | 488 | 1,953 | | 2,441 | 147 | 6/12/2012 | 2010 | |||||||||||||||||||||||
Tractor Supply |
Plymouth | NH | | 424 | 2,402 | | 2,826 | 124 | 11/29/2012 | 2011 | ||||||||||||||||||||||||
Tractor Supply |
Allentown | NJ | | (5) | 697 | 3,949 | | 4,646 | 361 | 1/27/2012 | 2011 | |||||||||||||||||||||||
Tractor Supply |
Rio Grande City | TX | | (1) | 469 | 1,095 | | 1,564 | 78 | 6/19/2012 | 2008 | |||||||||||||||||||||||
UPS e-Logistics |
Elizabethtown | KY | | (1) | 1,460 | 10,923 | | 12,383 | 155 | 9/24/2013 | 2001 | |||||||||||||||||||||||
Bobs Stores |
Randolph | MA | 6,929 | 2,840 | 6,826 | | 9,666 | 68 | 11/5/2013 | 1993 | ||||||||||||||||||||||||
Vacant |
Bethesda | MD | 54,554 | 8,538 | 31,879 | | 40,417 | 292 | 11/5/2013 | 2012 | ||||||||||||||||||||||||
Vacant |
Irving | TX | | 2,610 | 4,470 | | 7,080 | 34 | 11/5/2013 | 1997 | ||||||||||||||||||||||||
Vacant (Development property) |
Columbia | SC | | | 6,941 | 7,006 | 13,947 | | 11/5/2013 | in progress | ||||||||||||||||||||||||
Vacant (Development property) |
The Woodlands | TX | | | 5,411 | 1,266 | 6,677 | | 11/5/2013 | in progress | ||||||||||||||||||||||||
Vitamin Shoppe |
Evergreen Park | IL | | (1) | 476 | 1,427 | | 1,903 | 53 | 4/19/2013 | 2012 | |||||||||||||||||||||||
Vitamin Shoppe |
Ashland | VA | | 2,400 | 19,663 | | 22,063 | 200 | 11/5/2013 | 2013 | ||||||||||||||||||||||||
Walgreens |
Wetumpka | AL | | (5) | 547 | 3,102 | | 3,649 | 341 | 2/22/2012 | 2007 | |||||||||||||||||||||||
Walgreens |
Peoria | AZ | | (1) | 837 | 1,953 | | 2,790 | 98 | 2/28/2013 | 1996 | |||||||||||||||||||||||
Walgreens |
Phoenix | AZ | | (1) | 1,037 | 1,927 | | 2,964 | 87 | 3/26/2013 | 1999 | |||||||||||||||||||||||
Walgreens |
Coalings | CA | | (3) | 396 | 3,568 | | 3,964 | 482 | 10/11/2011 | 2008 | |||||||||||||||||||||||
Walgreens |
Acworth | GA | | (1) | 1,583 | 2,940 | | 4,523 | 162 | 1/25/2013 | 2012 | |||||||||||||||||||||||
Walgreens |
Chicago | IL | | (1) | 1,212 | 2,829 | | 4,041 | 156 | 1/30/2013 | 1999 | |||||||||||||||||||||||
Walgreens |
Chicago | IL | | (1) | 1,617 | 3,003 | | 4,620 | 165 | 1/30/2013 | 2007 | |||||||||||||||||||||||
Walgreens |
Anderson | IN | | 807 | 3,227 | | 4,034 | 274 | 7/31/2012 | 2001 | ||||||||||||||||||||||||
Walgreens |
Orlando | FL | | (1) | 1,007 | 1,869 | | 2,876 | 28 | 9/30/2013 | 1996 | |||||||||||||||||||||||
Walgreens |
Olathe | KS | | (1) | 1,258 | 3,774 | | 5,032 | 94 | 7/25/2013 | 2002 | |||||||||||||||||||||||
Walgreens |
Frankfort | KY | | (5) | 911 | 3,643 | | 4,554 | 419 | 2/8/2012 | 2006 | |||||||||||||||||||||||
Walgreens |
Shreveport | LA | | (5) | 619 | 3,509 | | 4,128 | 386 | 2/22/2012 | 2003 | |||||||||||||||||||||||
Walgreens |
Baltimore | MD | | (1) | 1,185 | 2,764 | | 3,949 | 69 | 8/6/2013 | 2000 | |||||||||||||||||||||||
Walgreens |
Clinton | MI | | (1) | 1,463 | 3,413 | | 4,876 | 239 | 11/13/2012 | 2002 | |||||||||||||||||||||||
Walgreens |
Dearborn | MI | | (1) | 190 | 3,605 | | 3,795 | 162 | 4/1/2013 | 1998 |
F-131
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Walgreens |
Eastpointe | MI | | (1) | 668 | 2,672 | | 3,340 | 307 | 1/19/2012 | 1998 | |||||||||||||||||||||||
Walgreens |
Lincoln Park | MI | | 1,041 | 5,896 | | 6,937 | 501 | 7/31/2012 | 2007 | ||||||||||||||||||||||||
Walgreens |
Livonia | MI | | (1) | 261 | 2,350 | | 2,611 | 106 | 4/1/2013 | 1998 | |||||||||||||||||||||||
Walgreens |
Stevensville | MI | | (3) | 855 | 3,420 | | 4,275 | 428 | 11/28/2011 | 2007 | |||||||||||||||||||||||
Walgreens |
Troy | MI | | (1) | | 1,896 | | 1,896 | 123 | 12/12/2012 | 2000 | |||||||||||||||||||||||
Walgreens |
Warren | MI | | (1) | 748 | 2,991 | | 3,739 | 194 | 11/21/2012 | 1999 | |||||||||||||||||||||||
Walgreens |
Columbia | MS | | 452 | 4,072 | | 4,524 | 244 | 12/21/2012 | 2011 | ||||||||||||||||||||||||
Walgreens |
Greenwood | MS | | (5) | 561 | 3,181 | | 3,742 | 350 | 2/22/2012 | 2007 | |||||||||||||||||||||||
Walgreens |
Maplewood | NJ | | (3) | 1,071 | 6,071 | | 7,142 | 759 | 11/18/2011 | 2011 | |||||||||||||||||||||||
Walgreens |
Las Vegas | NV | | 1,528 | 6,114 | | 7,642 | 581 | 5/30/2012 | 2009 | ||||||||||||||||||||||||
Walgreens |
Las Vegas | NV | | (1) | 700 | 2,801 | | 3,501 | 112 | 4/30/2013 | 2001 | |||||||||||||||||||||||
Walgreens |
Staten Island | NY | | | 3,984 | | 3,984 | 538 | 10/5/2011 | 2007 | ||||||||||||||||||||||||
Walgreens |
Akron | OH | | 664 | 1,548 | | 2,212 | 54 | 5/31/2013 | 1994 | ||||||||||||||||||||||||
Walgreens |
Bryan | OH | | (5) | 219 | 4,154 | | 4,373 | 457 | 2/22/2012 | 2007 | |||||||||||||||||||||||
Walgreens |
Eaton | OH | | 398 | 3,586 | | 3,984 | 323 | 6/27/2012 | 2008 | ||||||||||||||||||||||||
Walgreens |
Tahlequah | OK | | 647 | 3,664 | | 4,311 | 220 | 1/2/2013 | 2008 | ||||||||||||||||||||||||
Walgreens |
Aibonito Pueblo | PR | | 1,855 | 5,566 | | 7,421 | 278 | 3/5/2013 | 2012 | ||||||||||||||||||||||||
Walgreens |
Las Piedras | PR | | 1,726 | 5,179 | | 6,905 | 233 | 4/3/2013 | 2012 | ||||||||||||||||||||||||
Walgreens |
Anderson | SC | | (5) | 835 | 3,342 | | 4,177 | 384 | 2/8/2012 | 2006 | |||||||||||||||||||||||
Walgreens |
Easley | SC | | 1,206 | 3,617 | | 4,823 | 326 | 6/27/2012 | 2007 | ||||||||||||||||||||||||
Walgreens |
Greenville | SC | | 1,313 | 3,940 | | 5,253 | 355 | 6/27/2012 | 2006 | ||||||||||||||||||||||||
Walgreens |
Myrtle Beach | SC | | (1) | | 2,077 | | 2,077 | 249 | 12/29/2011 | 2001 | |||||||||||||||||||||||
Walgreens |
North Charleston | SC | | 1,320 | 3,081 | | 4,401 | 277 | 6/27/2012 | 2008 | ||||||||||||||||||||||||
Walgreens |
Cordova | TN | | 1,005 | 2,345 | | 3,350 | 164 | 11/9/2012 | 2002 | ||||||||||||||||||||||||
Walgreens |
Memphis | TN | | 896 | 2,687 | | 3,583 | 201 | 10/2/2012 | 2003 | ||||||||||||||||||||||||
Walgreens |
Portsmouth | VA | 2,118 | 730 | 3,311 | | 4,041 | 33 | 11/5/2013 | 1998 | ||||||||||||||||||||||||
Wendys |
Atascadero | CA | | (1) | 230 | 1,009 | | 1,239 | 28 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Wendys |
Camarillo | CA | | (1) | 320 | 2,253 | | 2,573 | 62 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Wendys |
Paso Robles | CA | | (1) | 150 | 1,603 | | 1,753 | 44 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Wendys |
Worcester | MA | | (1) | 370 | 1,288 | | 1,658 | 36 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Wendys |
Salisbury | MD | | (1) | 370 | 1,299 | | 1,669 | 36 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Wendys |
Swanton | OH | | (1) | 430 | 1,233 | | 1,663 | 34 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Wendys |
Sylvania | OH | | (1) | 300 | 799 | | 1,099 | 22 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Wendys |
Knoxville | TN | | (1) | 330 | 1,161 | | 1,491 | 32 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Wendys |
Knoxville | TN | | (1) | 330 | 1,132 | | 1,462 | 31 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Wendys |
Millington | TN | | (1) | 380 | 1,208 | | 1,588 | 33 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Wendys |
Bluefield | VA | | (1) | 450 | 1,927 | | 2,377 | 53 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Wendys |
Midlothian | VA | | (1) | 230 | 1,300 | | 1,530 | 36 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Wendys |
Beaver | WV | | (1) | 290 | 1,156 | | 1,446 | 32 | 6/27/2013 | 1982 | |||||||||||||||||||||||
West Marine |
Deltaville | VA | | (1) | 425 | 2,409 | | 2,834 | 192 | 7/31/2012 | 2012 | |||||||||||||||||||||||
Williams Sonoma |
Olive Branch | MS | 28,350 | 2,330 | 44,266 | | 46,596 | 3,825 | 8/10/2012 | 2001 | ||||||||||||||||||||||||
Abuelos |
Rogers | AR | | (14) | 825 | 2,296 | | 3,121 | 66 | 6/27/2013 | 2003 | |||||||||||||||||||||||
Academy Sports |
Smyrna | TN | | 2,109 | 8,434 | | 10,543 | 68 | 11/1/2013 | 2012 |
F-132
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Academy Sports |
Mobile | AL | | 1,311 | 7,431 | | 8,742 | 60 | 11/1/2013 | 2012 | ||||||||||||||||||||||||
Advance Auto |
Opelika | AL | | (14) | 289 | 1,156 | | 1,445 | 43 | 4/24/2013 | 2013 | |||||||||||||||||||||||
Alibertos Mexican Food |
Holbrook | AZ | | (14) | 32 | 96 | | 128 | 3 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Applebees |
Davenport | FL | | (14) | 1,506 | 4,517 | | 6,023 | 112 | 7/31/2013 | 2007 | |||||||||||||||||||||||
Applebees |
Bradenton | FL | | (14) | 2,475 | 3,713 | | 6,188 | 92 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Applebees |
Rio Rancho | NM | | (14) | 645 | 3,654 | | 4,299 | 91 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Applebees |
Brandon | FL | | (14) | 2,453 | 3,647 | | 6,100 | 105 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Applebees |
Lakeland | FL | | (14) | 1,959 | 3,638 | | 5,597 | 90 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Applebees |
Temple Terrace | FL | | (14) | 2,396 | 3,594 | | 5,990 | 89 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Applebees |
Largo | FL | | (14) | 2,334 | 3,501 | | 5,835 | 87 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Applebees |
St. Petersburg | FL | | (14) | 2,329 | 3,493 | | 5,822 | 87 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Applebees |
Riverview | FL | | (14) | 1,849 | 3,434 | | 5,283 | 85 | 7/31/2013 | 2006 | |||||||||||||||||||||||
Applebees |
Hobbs | NM | | (14) | 600 | 3,401 | | 4,001 | 84 | 7/31/2013 | 2002 | |||||||||||||||||||||||
Applebees |
Valrico | FL | | (14) | 1,202 | 3,274 | | 4,476 | 94 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Applebees |
Wesley Chapel | FL | | (14) | 3,272 | 3,272 | | 6,544 | 81 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Applebees |
New Port Richey | FL | | (14) | 1,695 | 3,147 | | 4,842 | 78 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Applebees |
Inverness | FL | | (14) | 1,977 | 2,965 | | 4,942 | 74 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Applebees |
Corpus Christi | TX | | (14) | 563 | 2,926 | | 3,489 | 84 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Applebees |
Nampa | ID | | (14) | 729 | 2,915 | | 3,644 | 72 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Applebees |
Pueblo | CO | | (14) | 960 | 2,879 | | 3,839 | 71 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Applebees |
Plant City | FL | | (14) | 2,079 | 2,869 | | 4,948 | 82 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Applebees |
Evans | GA | | (14) | 1,426 | 2,649 | | 4,075 | 66 | 7/31/2013 | 2004 | |||||||||||||||||||||||
Applebees |
Winter Haven | FL | | (14) | 2,130 | 2,603 | | 4,733 | 65 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Applebees |
Gresham | OR | | 853 | 2,560 | | 3,413 | 49 | 8/30/2013 | 2004 | ||||||||||||||||||||||||
Applebees |
Garden City | ID | | 628 | 2,512 | | 3,140 | 48 | 8/30/2013 | 2003 | ||||||||||||||||||||||||
Applebees |
Savannah | GA | | (14) | 1,329 | 2,468 | | 3,797 | 61 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Applebees |
Crystal River | FL | | (14) | 1,328 | 2,467 | | 3,795 | 61 | 7/31/2013 | 2001 | |||||||||||||||||||||||
Applebees |
Alamogordo | NM | | 271 | 2,438 | | 2,709 | 47 | 8/30/2013 | 2000 | ||||||||||||||||||||||||
Applebees |
Lakeland | FL | | (14) | 1,283 | 2,383 | | 3,666 | 59 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Applebees |
Augusta | GA | | (14) | 1,254 | 2,329 | | 3,583 | 58 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Applebees |
Roswell | NM | | (14) | 405 | 2,295 | | 2,700 | 57 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Applebees |
Pueblo | CO | | 752 | 2,257 | | 3,009 | 43 | 8/30/2013 | 1998 | ||||||||||||||||||||||||
Applebees |
Greeley | CO | | (14) | 559 | 2,235 | | 2,794 | 55 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Applebees |
Phenix City | AL | | (14) | 1,488 | 2,232 | | 3,720 | 55 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Applebees |
Oxford | AL | | 1,162 | 2,157 | | 3,319 | 41 | 8/30/2013 | 1995 | ||||||||||||||||||||||||
Applebees |
Clackamas | OR | | (14) | 901 | 2,103 | | 3,004 | 52 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Applebees |
Tualatin | OR | | (14) | 1,116 | 2,072 | | 3,188 | 51 | 7/31/2013 | 2002 | |||||||||||||||||||||||
Applebees |
Richland | WA | | (14) | 1,112 | 2,064 | | 3,176 | 51 | 7/31/2013 | 2003 | |||||||||||||||||||||||
Applebees |
Edinburg | TX | | (14) | 898 | 2,058 | | 2,956 | 59 | 6/27/2013 | 2006 | |||||||||||||||||||||||
Applebees |
Thornton | CO | | 681 | 2,043 | | 2,724 | 39 | 8/30/2013 | 1994 | ||||||||||||||||||||||||
Applebees |
Colorado Springs | CO | | (14) | 499 | 1,996 | | 2,495 | 49 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Applebees |
McAllen | TX | | (14) | 1,114 | 1,988 | | 3,102 | 57 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Applebees |
Brighton | CO | | (14) | 657 | 1,972 | | 2,629 | 49 | 7/31/2013 | 1998 |
F-133
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Applebees |
Colorado Springs | CO | | (14) | 629 | 1,888 | | 2,517 | 47 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Applebees |
Vancouver | WA | | 791 | 1,846 | | 2,637 | 35 | 8/30/2013 | 2001 | ||||||||||||||||||||||||
Applebees |
Pocatello | ID | | (14) | 612 | 1,837 | | 2,449 | 46 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Applebees |
San Antonio | TX | | (14) | 732 | 1,796 | | 2,528 | 51 | 6/27/2013 | 2003 | |||||||||||||||||||||||
Applebees |
Milledgeville | GA | | (14) | 1,174 | 1,761 | | 2,935 | 44 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Applebees |
Boise | ID | | (14) | 948 | 1,761 | | 2,709 | 44 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Applebees |
Arvada | CO | | (14) | 754 | 1,760 | | 2,514 | 44 | 7/31/2013 | 1996 | |||||||||||||||||||||||
Applebees |
Crestview | FL | | (14) | 943 | 1,752 | | 2,695 | 43 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Applebees |
Northglenn | CO | | (14) | 578 | 1,734 | | 2,312 | 43 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Applebees |
Auburn | AL | | (14) | 1,155 | 1,732 | | 2,887 | 43 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Applebees |
Ocean Springs | MS | | (14) | 673 | 1,708 | | 2,381 | 49 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Applebees |
Vancouver | WA | | (14) | 718 | 1,675 | | 2,393 | 42 | 7/31/2013 | 2001 | |||||||||||||||||||||||
Applebees |
Roseburg | OR | | 717 | 1,673 | | 2,390 | 32 | 8/30/2013 | 2000 | ||||||||||||||||||||||||
Applebees |
Lake Oswego | OR | | (14) | 1,352 | 1,652 | | 3,004 | 41 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Applebees |
Newton | KS | | (14) | 504 | 1,569 | | 2,073 | 45 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Applebees |
Fall River | MA | | 275 | 1,558 | | 1,833 | 39 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Applebees |
New Braunfels | TX | | (14) | 566 | 1,486 | | 2,052 | 43 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Applebees |
Dublin | GA | | (14) | 1,171 | 1,431 | | 2,602 | 35 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Applebees |
North Canton | OH | | 152 | 838 | | 990 | 24 | 6/27/2013 | 1992 | ||||||||||||||||||||||||
Arbys |
Atlanta | GA | | (14) | 1,207 | 987 | | 2,194 | 22 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Arbys |
Kennesaw | GA | | (14) | 583 | 840 | | 1,423 | 23 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Arbys |
Memphis | TN | | (14) | 449 | 835 | | 1,284 | 18 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Arbys |
Mount Vernon | IL | | (14) | 911 | 764 | | 1,675 | 21 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Arbys |
Richmond Hill | GA | | (14) | 430 | 755 | | 1,185 | 21 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Arbys |
Grandville | MI | | (14) | 1,133 | 755 | | 1,888 | 17 | 7/31/2013 | 1982 | |||||||||||||||||||||||
Arbys |
Prescott | AZ | | 404 | 750 | | 1,154 | 16 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Arbys |
Schertz | TX | | 499 | 748 | | 1,247 | 16 | 7/31/2013 | 1996 | ||||||||||||||||||||||||
Arbys |
Apopka | FL | | (14) | 464 | 697 | | 1,161 | 15 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Arbys |
Mobile | AL | | 460 | 685 | | 1,145 | 19 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
Arbys |
Wyoming | MI | | (14) | 1,513 | 648 | | 2,161 | 14 | 7/31/2013 | 1970 | |||||||||||||||||||||||
Arbys |
Fort Wayne | IN | | 529 | 647 | | 1,176 | 14 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
Arbys |
Louisville | KY | | 336 | 625 | | 961 | 26 | 5/30/2013 | 1979 | ||||||||||||||||||||||||
Arbys |
Phoenix | AZ | | 559 | 618 | | 1,177 | 17 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
Arbys |
Fountain Hills | AZ | | 241 | 597 | | 838 | 17 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
Arbys |
Orlando | FL | | 251 | 585 | | 836 | 13 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Arbys |
Rockledge | FL | | 381 | 571 | | 952 | 13 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
Arbys |
Erie | PA | | 188 | 552 | | 740 | 15 | 6/27/2013 | 1966 | ||||||||||||||||||||||||
Arbys |
Merritt Island | FL | | 297 | 552 | | 849 | 12 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
Arbys |
Hopkinsville | KY | | (14) | 432 | 528 | | 960 | 12 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Arbys |
Clovis | NM | | 91 | 518 | | 609 | 14 | 6/27/2013 | 1982 | ||||||||||||||||||||||||
Arbys |
Winchester | IN | | 341 | 511 | | 852 | 11 | 7/31/2013 | 1988 | ||||||||||||||||||||||||
Arbys |
Lexington | NC | | 484 | 504 | | 988 | 14 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Arbys |
Guntersville | AL | | 142 | 503 | | 645 | 14 | 6/27/2013 | 1986 |
F-134
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Arbys |
New Albany | IN | | (14) | 456 | 470 | | 926 | 13 | 6/27/2013 | 2005 | |||||||||||||||||||||||
Arbys |
Chattanooga | TN | | (14) | 201 | 469 | | 670 | 10 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Arbys |
New Albany | IN | | (14) | 325 | 465 | | 790 | 13 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Arbys |
Scottsburg | IN | | (14) | 526 | 445 | | 971 | 12 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Arbys |
Corinth | MS | | (14) | 753 | 429 | | 1,182 | 12 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Arbys |
Alexander City | AL | | (14) | 527 | 401 | | 928 | 11 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Arbys |
Middlefield | OH | | 379 | 388 | | 767 | 11 | 6/27/2013 | 1988 | ||||||||||||||||||||||||
Arbys |
Rochester | NY | | 128 | 384 | | 512 | 8 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Arbys |
Savannah | GA | | 293 | 293 | | 586 | 6 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Arbys |
Albuquerque | NM | | 217 | 246 | | 463 | 7 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Arbys |
Alexandria | LA | | 82 | 245 | | 327 | 5 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Arbys |
Las Vegas | NM | | 236 | 236 | | 472 | 5 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Arbys |
Toccoa | GA | | 185 | 227 | | 412 | 5 | 7/31/2013 | 1998 | ||||||||||||||||||||||||
Arbys |
Bullhead City | AZ | | 550 | | | 550 | | 6/27/2013 | 1999 | ||||||||||||||||||||||||
Arbys |
Omaha | NE | | 359 | | | 359 | | 7/31/2013 | 1984 | ||||||||||||||||||||||||
Auto Pawn |
Columbus | GA | | 170 | | | 170 | | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Bandanas Bar-B-Q Restaurant |
Fenton | MO | | 470 | 314 | | 784 | 6 | 8/30/2013 | 1986 | ||||||||||||||||||||||||
Billboard |
Memphis | TN | | 33 | | | 33 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Billboard |
Memphis | TN | | 63 | | | 63 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Billboard |
Memphis | TN | | 73 | | | 73 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Billboard |
Memphis | TN | | 90 | | | 90 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Billboard |
Memphis | TN | | 69 | | | 69 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Black Meg 43 |
Copperas Cove | TX | | (14) | 151 | 151 | | 302 | 4 | 6/27/2013 | 1969 | |||||||||||||||||||||||
Bojangles |
Statesville | NC | | (14) | 646 | 1,937 | | 2,583 | 43 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Bojangles |
Denver | NC | | (14) | 1,013 | 1,881 | | 2,894 | 41 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Bojangles |
Hickory | NC | | (14) | 749 | 1,789 | | 2,538 | 50 | 6/27/2013 | 1973 | |||||||||||||||||||||||
Bojangles |
Fountain Inn | SC | | 287 | 1,150 | | 1,437 | 20 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
Bojangles |
Taylorsville | NC | | (14) | 436 | 1,108 | | 1,544 | 31 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Bojangles |
Troutman | NC | | 718 | 1,077 | | 1,795 | 19 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
Bridgestone Firestone |
Kansas City | MO | | (14) | 651 | 1,954 | | 2,605 | 66 | 5/31/2013 | 2008 | |||||||||||||||||||||||
Brueggers Bagels |
Durham | NC | | (14) | 312 | 728 | | 1,040 | 16 | 7/31/2013 | 1926 | |||||||||||||||||||||||
Buchos Mexican Food |
Bolingbrook | IL | | (14) | 470 | 137 | | 607 | 4 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Buffalo Wild Wings |
Langhorne | PA | | (14) | 815 | 815 | | 1,630 | 20 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Burger King |
Augusta | GA | | (14) | 693 | 2,080 | | 2,773 | 46 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Burger King |
Spanaway | WA | | 509 | 1,628 | | 2,137 | 45 | 6/27/2013 | 1997 | ||||||||||||||||||||||||
Burger King |
Cleveland | MS | | (14) | 688 | 1,606 | | 2,294 | 35 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Burger King |
Brandon | MS | | (14) | 649 | 1,513 | | 2,162 | 42 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Burger King |
North Augusta | SC | | (14) | 256 | 1,451 | | 1,707 | 32 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Burger King |
Troy | AL | | (14) | 461 | 1,383 | | 1,844 | 30 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Burger King |
Charlotte | NC | | 1,105 | 1,372 | | 2,477 | 38 | 6/27/2013 | 1997 | ||||||||||||||||||||||||
Burger King |
Martinez | GA | | (14) | 909 | 1,350 | | 2,259 | 37 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Burger King |
Greenville | MS | | (14) | 573 | 1,337 | | 1,910 | 29 | 7/31/2013 | 2004 | |||||||||||||||||||||||
Burger King |
Germantown | WI | | (14) | 644 | 1,300 | | 1,944 | 36 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Burger King |
Denver | CO | | (14) | 872 | 1,242 | | 2,114 | 34 | 6/27/2013 | 1994 |
F-135
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Burger King |
Alpharetta | GA | | (14) | 501 | 1,219 | | 1,720 | 34 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Burger King |
Amesbury | MA | | (14) | 835 | 1,217 | | 2,052 | 34 | 6/27/2013 | 1977 | |||||||||||||||||||||||
Burger King |
Dothan | AL | | (14) | 628 | 1,167 | | 1,795 | 26 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Burger King |
Roswell | GA | | (14) | 495 | 1,156 | | 1,651 | 25 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Burger King |
Wahoo | NE | | (14) | 196 | 1,109 | | 1,305 | 24 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Burger King |
Dothan | AL | | (14) | 594 | 1,104 | | 1,698 | 24 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Burger King |
Cut Off | LA | | 726 | 1,088 | | 1,814 | 24 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
Burger King |
Defuniak Springs | FL | | (14) | 362 | 1,087 | | 1,449 | 24 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Burger King |
Blair | NE | | (14) | 272 | 1,087 | | 1,359 | 24 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Burger King |
Maywood | IL | | (14) | 860 | 1,051 | | 1,911 | 23 | 7/31/2013 | 2003 | |||||||||||||||||||||||
Burger King |
North Augusta | SC | | (14) | 450 | 1,050 | | 1,500 | 23 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Burger King |
Bainbridge | GA | | (14) | 347 | 1,042 | | 1,389 | 23 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Burger King |
Sierra Vista | AZ | | 260 | 1,041 | | 1,301 | 23 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Burger King |
Greenwood | MS | | (14) | 692 | 1,038 | | 1,730 | 23 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Burger King |
Kansas CIty | MO | | 444 | 1,036 | | 1,480 | 23 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
Burger King |
Laredo | TX | | (14) | 684 | 1,026 | | 1,710 | 23 | 7/31/2013 | 2002 | |||||||||||||||||||||||
Burger King |
Andalusia | AL | | (14) | 181 | 1,025 | | 1,206 | 23 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Burger King |
Kingsford | MI | | (14) | 53 | 1,015 | | 1,068 | 22 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Burger King |
Red Oak | IA | | (14) | 334 | 1,002 | | 1,336 | 22 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Burger King |
Austin | TX | | (14) | 666 | 999 | | 1,665 | 28 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Burger King |
Cairo | GA | | (14) | 245 | 981 | | 1,226 | 22 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Burger King |
Alpharetta | GA | | (14) | 1,128 | 977 | | 2,105 | 27 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Burger King |
Springfield | FL | | (14) | 324 | 971 | | 1,295 | 21 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Burger King |
Opelousas | LA | | 964 | 964 | | 1,928 | 21 | 7/31/2013 | 1998 | ||||||||||||||||||||||||
Burger King |
Panama City | FL | | (14) | 319 | 956 | | 1,275 | 21 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Burger King |
Chattanooga | TN | | (14) | 637 | 955 | | 1,592 | 21 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Burger King |
Dover | NH | | (14) | 1,159 | 952 | | 2,111 | 26 | 6/27/2013 | 1970 | |||||||||||||||||||||||
Burger King |
Des Moines | IA | | (14) | 1,160 | 949 | | 2,109 | 21 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Burger King |
Alpharetta | GA | | (14) | 795 | 943 | | 1,738 | 26 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Burger King |
Philadelphia | MS | | (14) | 402 | 939 | | 1,341 | 21 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Burger King |
Brewton | AL | | (14) | 307 | 920 | | 1,227 | 20 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Burger King |
Stuart | IA | | (14) | 607 | 911 | | 1,518 | 20 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Burger King |
Yazoo City | MS | | (14) | 489 | 909 | | 1,398 | 20 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Burger King |
Marshfield | WI | | (14) | 232 | 885 | | 1,117 | 25 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Burger King |
Thomson | GA | | (14) | 748 | 876 | | 1,624 | 24 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Burger King |
Wilmington | NC | | (14) | 573 | 870 | | 1,443 | 24 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Burger King |
Alpharetta | GA | | (14) | 635 | 865 | | 1,500 | 24 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Burger King |
Clarksdale | MS | | (14) | 865 | 865 | | 1,730 | 19 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Burger King |
Opp | AL | | (14) | 214 | 857 | | 1,071 | 19 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Burger King |
Cincinnati | OH | | 353 | 824 | | 1,177 | 18 | 7/31/2013 | 1974 | ||||||||||||||||||||||||
Burger King |
Greenville | MS | | (14) | 351 | 820 | | 1,171 | 18 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Burger King |
Grand Rapids | MI | | (14) | 346 | 807 | | 1,153 | 18 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Burger King |
Grenada | MS | | (14) | 536 | 805 | | 1,341 | 18 | 7/31/2013 | 1989 |
F-136
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Burger King |
Clinton | NC | | (14) | 494 | 801 | | 1,295 | 22 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Burger King |
Chadbourn | NC | | (14) | 353 | 797 | | 1,150 | 22 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Burger King |
Texas City | TX | | (14) | 421 | 782 | | 1,203 | 17 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Burger King |
New Philadelphia | OH | | 419 | 779 | | 1,198 | 17 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Burger King |
Mansfield | OH | | 191 | 766 | | 957 | 17 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Burger King |
Lake Charles | LA | | 610 | 746 | | 1,356 | 16 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
Burger King |
Warren | MI | | 248 | 745 | | 993 | 16 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
Burger King |
Atmore | AL | | (14) | 181 | 723 | | 904 | 16 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Burger King |
Tallahassee | FL | | (14) | 720 | 720 | | 1,440 | 16 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Burger King |
Weston | WI | | (14) | 329 | 718 | | 1,047 | 20 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Burger King |
Walker | MI | | (14) | 305 | 711 | | 1,016 | 16 | 7/31/2013 | 1975 | |||||||||||||||||||||||
Burger King |
Evergreen | AL | | (14) | 172 | 689 | | 861 | 15 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Burger King |
Chicago Ridge | IL | | (14) | 431 | 684 | | 1,115 | 19 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Burger King |
Perry | IA | | (14) | 557 | 680 | | 1,237 | 15 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Burger King |
Springfield | IL | | (14) | 354 | 677 | | 1,031 | 19 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Burger King |
Hudsonville | MI | | (14) | 451 | 676 | | 1,127 | 15 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Burger King |
Natchez | MS | | 225 | 674 | | 899 | 15 | 7/31/2013 | 1973 | ||||||||||||||||||||||||
Burger King |
Irondequoit | NY | | 988 | 659 | | 1,647 | 14 | 7/31/2013 | 1980 | ||||||||||||||||||||||||
Burger King |
Enterprise | AL | | (14) | 437 | 655 | | 1,092 | 14 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Burger King |
Nashua | NH | | (14) | 655 | 655 | | 1,310 | 14 | 7/31/2013 | 2008 | |||||||||||||||||||||||
Burger King |
Claremont | NC | | (14) | 646 | 646 | | 1,292 | 18 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Burger King |
Pontiac | IL | | 151 | 616 | | 767 | 17 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
Burger King |
LAnse | MI | | (14) | 32 | 616 | | 648 | 14 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Burger King |
Hastings | MN | | (14) | 328 | 608 | | 936 | 13 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Burger King |
Gary | IN | | (14) | 544 | 606 | | 1,150 | 17 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Burger King |
Syracuse | NY | | 606 | 606 | | 1,212 | 13 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Burger King |
Rhinelander | WI | | (14) | 260 | 606 | | 866 | 13 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Burger King |
Monroeville | AL | | (14) | 325 | 604 | | 929 | 13 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Burger King |
Menominee | MI | | (14) | 494 | 604 | | 1,098 | 13 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Burger King |
Asheville | NC | | 728 | 595 | | 1,323 | 13 | 7/31/2013 | 1982 | ||||||||||||||||||||||||
Burger King |
Clearwater | FL | | (14) | 981 | 591 | | 1,572 | 16 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Burger King |
Shenandoah | IA | | (14) | 313 | 582 | | 895 | 13 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Burger King |
Raceland | LA | | 356 | 533 | | 889 | 12 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
Burger King |
Springfield | MA | | 983 | 516 | | 1,499 | 14 | 6/27/2013 | 1974 | ||||||||||||||||||||||||
Burger King |
Spring Lake | MI | | 341 | 512 | | 853 | 11 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
Burger King |
Harvey | IL | | 403 | 507 | | 910 | 14 | 6/27/2013 | 1997 | ||||||||||||||||||||||||
Burger King |
Anchorage | AK | | 427 | 489 | | 916 | 14 | 6/27/2013 | 1982 | ||||||||||||||||||||||||
Burger King |
Dayton | OH | | (14) | 569 | 466 | | 1,035 | 10 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Burger King |
Gonzales | LA | | 380 | 465 | | 845 | 10 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
Burger King |
Gallatin | TN | | (14) | 199 | 463 | | 662 | 10 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Burger King |
Lake Charles | LA | | 456 | 456 | | 912 | 10 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Burger King |
Tallahassee | FL | | (14) | 843 | 454 | | 1,297 | 10 | 7/31/2013 | 1980 |
F-137
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Burger King |
Palatine | IL | | 352 | 426 | | 778 | 12 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
Burger King |
Largo | FL | | 683 | 412 | | 1,095 | 11 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
Burger King |
Harrisburg | PA | | (14) | 619 | 412 | | 1,031 | 9 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Burger King |
Belding | MI | | 221 | 411 | | 632 | 9 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Burger King |
Niceville | FL | | (14) | 598 | 399 | | 997 | 9 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Burger King |
Metairie | LA | | 728 | 392 | | 1,120 | 9 | 7/31/2013 | 1992 | ||||||||||||||||||||||||
Burger King |
Hamburg | NY | | (14) | 403 | 383 | | 786 | 11 | 6/27/2013 | 1974 | |||||||||||||||||||||||
Burger King |
Valdosta | GA | | (14) | 564 | 376 | | 940 | 8 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Burger King |
Cedar Lake | IN | | 327 | 374 | | 701 | 10 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
Burger King |
Jenison | MI | | 233 | 349 | | 582 | 8 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Burger King |
Detroit | MI | | (14) | 614 | 331 | | 945 | 7 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Burger King |
Apex | NC | | 366 | 324 | | 690 | 9 | 6/27/2013 | 1992 | ||||||||||||||||||||||||
Burger King |
East Greenbush | NY | | 404 | 269 | | 673 | 7 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
Burger King |
Dunn | NC | | 328 | 268 | | 596 | 6 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
Burnie Bistros |
Clearwater | FL | | (14) | 25 | 14 | | 39 | | 7/31/2013 | 1987 | |||||||||||||||||||||||
Captain Ds |
Florence | KY | | (14) | 248 | 325 | | 573 | 9 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Captain Ds |
Duncanville | TX | | 295 | 246 | | 541 | 7 | 6/27/2013 | 1982 | ||||||||||||||||||||||||
Carls Jr. |
Purcell | OK | | (14) | 77 | 513 | | 590 | 14 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Casa Del Rio |
Wadsworth | OH | | 130 | 389 | | 519 | 10 | 7/31/2013 | 1971 | ||||||||||||||||||||||||
Cashland |
Celina | OH | | 108 | 132 | | 240 | 3 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
Castle Dental |
Murfreesboro | TN | | (14) | 256 | 256 | | 512 | 6 | 7/31/2013 | 1996 | |||||||||||||||||||||||
Chappala Mexican Restaurant |
Nampa | ID | | 473 | 692 | | 1,165 | 20 | 6/27/2013 | 1998 | ||||||||||||||||||||||||
Checkers |
Jacksonville | FL | | (14) | 731 | 1,096 | | 1,827 | 24 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Checkers |
Tampa | FL | | 736 | | | 736 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Checkers |
Miami | FL | | 621 | | | 621 | | 7/31/2013 | 1993 | ||||||||||||||||||||||||
Checkers |
Orlando | FL | | 1,033 | | | 1,033 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Checkers |
Winter Springs | FL | | 734 | | | 734 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Cheddars Casual Cafe |
Brandon | FL | | (14) | 860 | 3,071 | | 3,931 | 88 | 6/27/2013 | 2003 | |||||||||||||||||||||||
Cheddars Casual Cafe |
Lubbock | TX | | (14) | 1,053 | 2,345 | | 3,398 | 67 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Cheddars Casual Cafe |
Bolingbrook | IL | | (14) | 1,344 | 1,760 | | 3,104 | 50 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Chevys Fresh Mex |
Miami | FL | | (14) | 1,455 | 783 | | 2,238 | 19 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Chicago Steak & Lemonade |
Louisville | KY | | 195 | 18 | | 213 | 1 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
Chicago Style Gyros |
Nashville | TN | | 201 | 134 | | 335 | 3 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Chilis |
East Peoria | IL | | (14) | 1,023 | 2,347 | | 3,370 | 67 | 6/27/2013 | 2003 | |||||||||||||||||||||||
Chilis |
Amarillo | TX | | 811 | 1,893 | | 2,704 | 47 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
China Buffet |
Alvin | TX | | (14) | 110 | 299 | | 409 | 9 | 6/27/2013 | 1982 | |||||||||||||||||||||||
China Buffet |
Angleton | TX | | (14) | 127 | 272 | | 399 | 8 | 6/27/2013 | 1982 | |||||||||||||||||||||||
China King |
Belen | NM | | (14) | 94 | 94 | | 188 | 3 | 6/27/2013 | 1980 | |||||||||||||||||||||||
China One |
Bay City | TX | | (14) | 229 | 124 | | 353 | 3 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Churchs Chicken |
Bay Minette | AL | | (14) | 134 | 757 | | 891 | 17 | 7/31/2013 | 2003 | |||||||||||||||||||||||
Churchs Chicken |
Jackson | AL | | (14) | 127 | 719 | | 846 | 16 | 7/31/2013 | 1982 | |||||||||||||||||||||||
Churchs Chicken |
Augusta | GA | | (14) | 256 | 597 | | 853 | 13 | 7/31/2013 | 1976 |
F-138
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Churchs Chicken |
Atmore | AL | | (14) | 144 | 574 | | 718 | 13 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Churchs Chicken |
Augusta | GA | | (14) | 178 | 533 | | 711 | 12 | 7/31/2013 | 1981 | |||||||||||||||||||||||
Churchs Chicken |
Spartanburg | SC | | (14) | 350 | 525 | | 875 | 12 | 7/31/2013 | 1972 | |||||||||||||||||||||||
Churchs Chicken |
Flomaton | AL | | (14) | 173 | 518 | | 691 | 11 | 7/31/2013 | 1981 | |||||||||||||||||||||||
Churchs Chicken |
Greenville | SC | | (14) | 325 | 487 | | 812 | 11 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Churchs Chicken |
Greenville | SC | | (14) | 254 | 472 | | 726 | 10 | 7/31/2013 | 2009 | |||||||||||||||||||||||
Churchs Chicken |
Augusta | GA | | (14) | 196 | 458 | | 654 | 10 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Churchs Chicken |
Columbia | SC | | (14) | 437 | 437 | | 874 | 10 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Churchs Chicken |
Columbia | SC | | (14) | 231 | 428 | | 659 | 9 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Churchs Chicken |
Augusta | GA | | (14) | 178 | 414 | | 592 | 9 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Churchs Chicken |
North Charleston | SC | | (14) | 407 | 407 | | 814 | 9 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Churchs Chicken |
Orlando | FL | | (14) | 254 | 380 | | 634 | 8 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Churchs Chicken |
Greenwood | SC | | (14) | 188 | 349 | | 537 | 8 | 7/31/2013 | 2002 | |||||||||||||||||||||||
Churchs Chicken |
Charleston | SC | | (14) | 421 | 344 | | 765 | 8 | 7/31/2013 | 1973 | |||||||||||||||||||||||
Churchs Chicken |
Greenville | SC | | (14) | 280 | 342 | | 622 | 8 | 7/31/2013 | 1970 | |||||||||||||||||||||||
Churchs Chicken |
North Charleston | SC | | (14) | 302 | 302 | | 604 | 7 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Churchs Chicken |
Anderson | SC | | (14) | 647 | 277 | | 924 | 6 | 7/31/2013 | 1981 | |||||||||||||||||||||||
Churchs Chicken |
Spartanburg | SC | | (14) | 411 | 274 | | 685 | 6 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Churchs Chicken |
Orangeburg | SC | | (14) | 407 | 271 | | 678 | 6 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Churchs Chicken |
Nashville | TN | | (14) | 186 | 186 | | 372 | 4 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Churchs Chicken |
Charleston | SC | | (14) | 500 | 167 | | 667 | 4 | 7/31/2013 | 1979 | |||||||||||||||||||||||
Churchs Chicken |
Bowling Green | KY | | (14) | 100 | 156 | | 256 | 4 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Citizens Bank |
Milton | MA | | (14) | 619 | 2,476 | | 3,095 | 144 | 12/14/2012 | 1968 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (14) | 268 | 2,413 | | 2,681 | 140 | 12/14/2012 | 1970 | |||||||||||||||||||||||
Citizens Bank |
Orland Hills | IL | | (14) | 1,253 | 2,327 | | 3,580 | 135 | 12/14/2012 | 1988 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (14) | 206 | 1,852 | | 2,058 | 107 | 12/14/2012 | 1923 | |||||||||||||||||||||||
Citizens Bank |
Chicago Heights | IL | | (14) | 182 | 1,637 | | 1,819 | 80 | 1/24/2013 | 1996 | |||||||||||||||||||||||
Citizens Bank |
Reading | PA | | (14) | 269 | 1,524 | | 1,793 | 61 | 4/12/2013 | 1919 | |||||||||||||||||||||||
Citizens Bank |
Carnegie | PA | | (14) | 73 | 1,396 | | 1,469 | 81 | 12/14/2012 | 1920 | |||||||||||||||||||||||
Citizens Bank |
Cranston | RI | | (14) | 411 | 1,234 | | 1,645 | 72 | 12/14/2012 | 1967 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (14) | 516 | 1,204 | | 1,720 | 70 | 12/14/2012 | 1970 | |||||||||||||||||||||||
Citizens Bank |
Butler | PA | | (14) | 286 | 1,144 | | 1,430 | 66 | 12/14/2012 | 1966 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (14) | 196 | 1,110 | | 1,306 | 64 | 12/14/2012 | 1980 | |||||||||||||||||||||||
Citizens Bank |
Philadelphia | PA | | (14) | 266 | 1,065 | | 1,331 | 62 | 12/14/2012 | 1971 | |||||||||||||||||||||||
Citizens Bank |
Kittanning | PA | | (14) | 56 | 1,060 | | 1,116 | 62 | 12/14/2012 | 1889 | |||||||||||||||||||||||
Citizens Bank |
Pittsburgh | PA | | (14) | 255 | 1,019 | | 1,274 | 59 | 12/14/2012 | 1970 | |||||||||||||||||||||||
Citizens Bank |
Troy | MI | | (14) | 312 | 935 | | 1,247 | 54 | 12/14/2012 | 1980 | |||||||||||||||||||||||
Citizens Bank |
Warrendale | PA | | (14) | 611 | 916 | | 1,527 | 53 | 12/14/2012 | 1981 | |||||||||||||||||||||||
Citizens Bank |
Providence | RI | | (14) | 300 | 899 | | 1,199 | 52 | 12/14/2012 | 1960 | |||||||||||||||||||||||
Citizens Bank |
N. Providence | RI | | (14) | 223 | 892 | | 1,115 | 52 | 12/14/2012 | 1971 | |||||||||||||||||||||||
Citizens Bank |
Pitcairn | PA | | (14) | 46 | 867 | | 913 | 50 | 12/14/2012 | 1985 | |||||||||||||||||||||||
Citizens Bank |
Greensburg | PA | | (14) | 45 | 861 | | 906 | 50 | 12/14/2012 | 1957 | |||||||||||||||||||||||
Citizens Bank |
Westchester | IL | | (14) | 366 | 853 | | 1,219 | 38 | 2/22/2013 | 1986 |
139
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Citizens Bank |
Ford City | PA | | (14) | 89 | 802 | | 891 | 47 | 12/14/2012 | 1975 | |||||||||||||||||||||||
Citizens Bank |
Reading | PA | | (14) | 267 | 802 | | 1,069 | 47 | 12/14/2012 | 1970 | |||||||||||||||||||||||
Citizens Bank |
Aliquippa | PA | | (14) | 138 | 782 | | 920 | 45 | 12/14/2012 | 1953 | |||||||||||||||||||||||
Citizens Bank |
Wexford | PA | | (14) | 180 | 719 | | 899 | 42 | 12/14/2012 | 1975 | |||||||||||||||||||||||
Citizens Bank |
Farmington | MI | | (14) | 303 | 707 | | 1,010 | 41 | 12/14/2012 | 1962 | |||||||||||||||||||||||
Citizens Bank |
East Greenwich | RI | | (14) | 227 | 680 | | 907 | 39 | 12/14/2012 | 1959 | |||||||||||||||||||||||
Citizens Bank |
Rumford | RI | | (14) | 352 | 654 | | 1,006 | 38 | 12/14/2012 | 1977 | |||||||||||||||||||||||
Citizens Bank |
Highspire | PA | | (14) | 216 | 649 | | 865 | 38 | 12/14/2012 | 1974 | |||||||||||||||||||||||
Citizens Bank |
Camp Hill | PA | | (14) | 430 | 645 | | 1,075 | 37 | 12/14/2012 | 1971 | |||||||||||||||||||||||
Citizens Bank |
Parma Heights | OH | | (14) | 426 | 638 | | 1,064 | 37 | 12/14/2012 | 1957 | |||||||||||||||||||||||
Citizens Bank |
Oil City | PA | | (14) | 110 | 623 | | 733 | 36 | 12/14/2012 | 1965 | |||||||||||||||||||||||
City Buffet |
Alexander City | AL | | (14) | 292 | 301 | | 593 | 9 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Cowboys Express |
Monticello | AR | | (14) | 43 | 36 | | 79 | 1 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Cuco Mexican |
Circleville | OH | | 149 | 164 | | 313 | 5 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
CVS |
Hoover | AL | | (14) | 1,239 | 2,890 | | 4,129 | 101 | 5/31/2013 | 2003 | |||||||||||||||||||||||
CVS |
Columbia | SC | | | 2,811 | | 2,811 | 84 | 7/2/2013 | 2006 | ||||||||||||||||||||||||
CVS |
New Castle | PA | 1,562 | 412 | 2,337 | | 2,749 | 164 | 10/31/2012 | 1999 | ||||||||||||||||||||||||
CVS |
Hardy | VA | | (14) | 686 | 2,059 | | 2,745 | 72 | 5/16/2013 | 2005 | |||||||||||||||||||||||
CVS |
Towanda | PA | | (14) | | 877 | | 877 | 35 | 4/24/2013 | 2003 | |||||||||||||||||||||||
Dairy Queen |
Woodville | TX | | (14) | 98 | 65 | | 163 | 1 | 7/31/2013 | 1980 | |||||||||||||||||||||||
DaVita Dialysis |
Hiawatha | KS | | (14) | 69 | 1,302 | | 1,371 | 36 | 5/30/2013 | 2012 | |||||||||||||||||||||||
DaVita Dialysis |
Palatka | FL | | 207 | 1,173 | | 1,380 | 32 | 6/5/2013 | 2013 | ||||||||||||||||||||||||
DaVita Dialysis |
Hartsville | SC | | (14) | 126 | 1,136 | | 1,262 | 31 | 5/30/2013 | 2013 | |||||||||||||||||||||||
DaVita Dialysis |
Cincinnati | OH | | (14) | 219 | 878 | | 1,097 | 31 | 3/28/2013 | 2008 | |||||||||||||||||||||||
DaVita Dialysis |
Georgetown | OH | | (14) | 125 | 706 | | 831 | 25 | 3/28/2013 | 2009 | |||||||||||||||||||||||
Dennys |
Tempe | AZ | | 1,960 | 1,273 | (2,610 | ) | 623 | 36 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Dennys |
Phoenix | AZ | | 825 | 1,237 | | 2,062 | 31 | 7/31/2013 | 2005 | ||||||||||||||||||||||||
Dennys |
Idaho Falls | ID | | 538 | 1,183 | (1,093 | ) | 628 | 34 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Dennys |
Mesa | AZ | | 1,089 | 891 | | 1,980 | 22 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Dennys |
Tempe | AZ | | 1,567 | 844 | | 2,411 | 21 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Dennys |
Scottsdale | AZ | | (14) | 736 | 491 | | 1,227 | 12 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Dennys |
Peoria | AZ | | 310 | 457 | | 767 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Dennys |
Marion | OH | | (14) | 115 | 390 | | 505 | 11 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Dennys |
Spartanburg | SC | | 656 | 353 | | 1,009 | 9 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
Dennys |
Henrietta | NY | | 361 | 241 | | 602 | 6 | 7/31/2013 | 1970 | ||||||||||||||||||||||||
Dennys |
Bloomington | MN | | 1,184 | | | 1,184 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Dollar General |
Holly Hill | SC | | (14) | 259 | 2,333 | | 2,592 | 109 | 3/6/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Presidio | TX | | (14) | 72 | 1,370 | | 1,442 | 58 | 3/28/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Savanna | IL | | (14) | 273 | 1,093 | | 1,366 | 61 | 12/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Chelyan | WV | | 273 | 1,092 | | 1,365 | 15 | 9/27/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Adams | MA | | 254 | 1,016 | | 1,270 | 14 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
Dollar General |
Modena | NY | | 249 | 996 | | 1,245 | 14 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
Dollar General |
Mount Morris | MI | | (14) | 110 | 988 | | 1,098 | 46 | 2/27/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Eldon | MO | | (14) | 52 | 986 | | 1,038 | 51 | 2/14/2013 | 2013 |
F-140
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
Malden | MO | | 108 | 974 | | 1,082 | 23 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Lytle | TX | | 243 | 971 | | 1,214 | 9 | 10/30/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
San Antonio | TX | | (14) | 239 | 956 | | 1,195 | 45 | 3/11/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
San Juan | TX | | 169 | 956 | | 1,125 | 9 | 11/15/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Henry | IL | | (14) | 104 | 934 | | 1,038 | 31 | 5/23/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
South Pekin | IL | | 104 | 933 | | 1,037 | 22 | 8/14/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
San Antonio | TX | | (14) | 163 | 926 | | 1,089 | 48 | 2/14/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Laurie | MO | | 102 | 918 | | 1,020 | 9 | 11/15/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Milaca | MN | | 102 | 916 | | 1,018 | 13 | 9/24/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Edinburg | TX | | 102 | 914 | | 1,016 | 21 | 7/16/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
De Soto | MO | | (14) | 101 | 912 | | 1,013 | 47 | 2/14/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Shelbina | MO | | (14) | 101 | 911 | | 1,012 | 30 | 5/22/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Kyle | TX | | 101 | 910 | | 1,011 | 4 | 12/6/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Eagle Grove | IA | | 100 | 902 | | 1,002 | 25 | 7/9/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Farmington | NM | | 224 | 898 | | 1,122 | 25 | 7/11/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Mission | TX | | (14) | 158 | 894 | | 1,052 | 38 | 3/27/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Adkins | TX | | (14) | 157 | 889 | | 1,046 | 50 | 12/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
New Braunfels | TX | | 156 | 883 | | 1,039 | 8 | 10/30/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Aurora | MO | | (14) | 98 | 881 | | 979 | 41 | 2/28/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Millwood | WV | | 98 | 881 | | 979 | 25 | 7/2/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
San Antonio | TX | | 220 | 880 | | 1,100 | 25 | 7/9/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Pequot Lakes | MN | | 155 | 880 | | 1,035 | 16 | 8/22/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Amarillo | TX | | 97 | 877 | | 974 | 21 | 8/13/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Mahomet | IL | | 292 | 877 | | 1,169 | 16 | 8/22/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Manistique | MI | | (14) | 155 | 876 | | 1,031 | 41 | 2/27/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
West Union | SC | | 46 | 868 | | 914 | 24 | 7/3/2013 | 2011 | ||||||||||||||||||||||||
Dollar General |
Fairbury | IL | | 96 | 867 | | 963 | 28 | 6/7/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Amarillo | TX | | 153 | 866 | | 1,019 | 20 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Cedar Falls | IA | | 96 | 862 | | 958 | 16 | 8/28/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Mercedes | TX | | 215 | 859 | | 1,074 | 20 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Ganado | TX | | 95 | 857 | | 952 | 20 | 8/13/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
New Braunfels | TX | | (14) | 95 | 855 | | 950 | 44 | 2/14/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Manchester | MI | | (14) | 213 | 853 | | 1,066 | 40 | 2/27/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Guyton | GA | | (14) | 213 | 852 | | 1,065 | 28 | 6/3/2013 | 2011 | |||||||||||||||||||||||
Dollar General |
Annandale | MN | | 212 | 848 | | 1,060 | 20 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Staples | MN | | 150 | 848 | | 998 | 16 | 9/4/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Lexington | MO | | 149 | 846 | | 995 | 16 | 9/13/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Whitesburg | KY | | (14) | 211 | 845 | | 1,056 | 28 | 5/30/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Lubbock | TX | | (14) | 148 | 841 | | 989 | 28 | 5/16/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Brookeland | TX | | 93 | 840 | | 933 | 20 | 8/15/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Bastrop | LA | | 148 | 838 | | 986 | 24 | 7/1/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Rolla | MO | | 209 | 835 | | 1,044 | 16 | 8/21/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Lonedell | MO | | (14) | 208 | 833 | | 1,041 | 31 | 4/26/2013 | 2013 |
F-141
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Dollar General |
Boling | TX | | 92 | 831 | | 923 | 19 | 8/13/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Avinger | TX | | 44 | 830 | | 874 | 19 | 8/8/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Roodhouse | IL | | (14) | 207 | 829 | | 1,036 | 47 | 12/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Lacy Lakeview | TX | | (14) | 146 | 826 | | 972 | 50 | 11/16/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Elkview | WV | | 274 | 823 | | 1,097 | 19 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Weslaco | TX | | 205 | 822 | | 1,027 | 8 | 10/16/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Buchanan Dam | TX | 562 | 145 | 820 | | 965 | 58 | 9/28/2012 | 2012 | ||||||||||||||||||||||||
Dollar General |
McMechen | WV | | (14) | 91 | 819 | | 910 | 46 | 1/9/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Sand Springs | OK | | 43 | 819 | | 862 | 15 | 9/3/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Joplin | MO | | 144 | 816 | | 960 | 8 | 11/12/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
San Antonio | TX | | (14) | 271 | 812 | | 1,083 | 27 | 5/23/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Skidmore | TX | | (14) | 90 | 811 | | 901 | 42 | 2/14/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Savannah | MO | | 270 | 811 | | 1,081 | 15 | 8/23/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Sand Springs | OK | | 143 | 811 | | 954 | 15 | 9/3/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Beeville | TX | | (14) | 90 | 810 | | 900 | 49 | 11/19/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Roseau | MN | | 143 | 808 | | 951 | 8 | 10/30/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
San Benito | TX | | 202 | 807 | | 1,009 | 15 | 8/23/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Belton | TX | | (14) | 89 | 804 | | 893 | 38 | 2/28/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Hawley | MN | | 89 | 803 | | 892 | 8 | 10/16/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
East Bernstadt | KY | | (14) | 141 | 799 | | 940 | 26 | 5/30/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Lubbock | TX | | 199 | 796 | | 995 | 15 | 8/28/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Wakefield | MI | | (14) | 88 | 794 | | 882 | 45 | 12/19/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Romulus | MI | | (14) | 199 | 794 | | 993 | 37 | 2/27/2013 | 2011 | |||||||||||||||||||||||
Dollar General |
Amarillo | TX | | 198 | 794 | | 992 | 22 | 7/11/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Sand Springs | OK | | 198 | 791 | | 989 | 15 | 9/3/2013 | 2012 | ||||||||||||||||||||||||
Dollar General |
Billings | MO | | 139 | 790 | | 929 | 7 | 10/17/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Caulfield | MO | | (14) | 139 | 789 | | 928 | 44 | 12/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
DeSoto | IL | | (14) | 138 | 784 | | 922 | 33 | 3/26/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Powhatan Point | WV | | 138 | 784 | | 922 | 22 | 7/2/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Cowen | WV | | (14) | 196 | 783 | | 979 | 40 | 1/16/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Camden | MI | | (14) | 138 | 781 | | 919 | 37 | 2/27/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Berea | KY | | (14) | 138 | 781 | | 919 | 26 | 5/30/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Moody | TX | | 41 | 781 | | 822 | 26 | 6/11/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Doolittle | MO | | 137 | 778 | | 915 | 18 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
San Antonio | TX | | 333 | 776 | | 1,109 | 18 | 8/13/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Eubank | KY | | (14) | 137 | 775 | | 912 | 25 | 5/30/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Center Point | IA | | (14) | 136 | 772 | | 908 | 43 | 12/31/2012 | 2012 | |||||||||||||||||||||||
Dollar General |
Texarkana | TX | | 136 | 772 | | 908 | 7 | 10/25/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Coldiron | KY | | (14) | 187 | 747 | | 934 | 24 | 5/30/2013 | 2013 | |||||||||||||||||||||||
Dollar General |
Diana | TX | | 186 | 743 | | 929 | 14 | 8/27/2013 | 2013 | ||||||||||||||||||||||||
Dollar General |
Rapid City | MI | | (14) | 179 | 716 | | 895 | 34 | 2/27/2013 | 2012 | |||||||||||||||||||||||
Dollar General |
Cedar Creek | TX | | (14) | 291 | 680 | | 971 | 41 | 11/16/2012 | 2012 | |||||||||||||||||||||||
Dragon China Buffet |
Carlsbad | NM | | (14) | 208 | 104 | | 312 | 3 | 6/27/2013 | 1995 |
F-142
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
East Supreme Buffet |
Whitehall | PA | | (14) | 492 | 505 | | 997 | 14 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Eegees |
Tucson | AZ | | 357 | 436 | | 793 | 10 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
El Chico |
Killeen | TX | | 534 | 992 | | 1,526 | 25 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
El Tapatio Mexican Restaurant |
Page | AZ | | (14) | 170 | 133 | | 303 | 4 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Family Dollar |
Mount Vernon | IL | | 117 | 1,050 | | 1,167 | 30 | 7/11/2013 | 2012 | ||||||||||||||||||||||||
Family Dollar |
Crosby | MN | | 49 | 928 | | 977 | 26 | 7/11/2013 | 1985 | ||||||||||||||||||||||||
Family Dollar |
Toledo | OH | | 226 | 905 | | 1,131 | 25 | 7/11/2013 | 1942 | ||||||||||||||||||||||||
Family Dollar |
Carlin | NV | | 99 | 895 | | 994 | 17 | 9/13/2013 | 2012 | ||||||||||||||||||||||||
Family Dollar |
Cold Springs | NV | | 217 | 869 | | 1,086 | 16 | 9/13/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Des Moines | IA | | 152 | 863 | | 1,015 | 16 | 8/30/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Cincinnatus | NY | | 287 | 862 | | 1,149 | | 12/30/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Etoile | TX | | 45 | 850 | | 895 | 20 | 8/6/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Mountain View | WY | | 44 | 838 | | 882 | 16 | 9/13/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Markesan | WI | | 92 | 831 | | 923 | 4 | 12/12/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Thorp | WI | | 90 | 810 | | 900 | 15 | 8/30/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Webster | WI | | 43 | 808 | | 851 | 23 | 7/11/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Oakwood | TX | | 133 | 752 | | 885 | 4 | 11/20/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Clarendon | TX | | 83 | 749 | | 832 | 11 | 9/17/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Gretna | VA | | 131 | 744 | | 875 | 21 | 7/2/2013 | 2012 | ||||||||||||||||||||||||
Family Dollar |
Somerville | TX | | (14) | 131 | 743 | | 874 | 42 | 12/31/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Lovelady | TX | | (14) | 82 | 740 | | 822 | 31 | 3/27/2013 | 2012 | |||||||||||||||||||||||
Family Dollar |
Birch Run | MI | | 81 | 729 | | 810 | 20 | 7/11/2013 | 1950 | ||||||||||||||||||||||||
Family Dollar |
Hoosick Falls | NY | | (14) | 181 | 724 | | 905 | 27 | 4/26/2013 | 2013 | |||||||||||||||||||||||
Family Dollar |
Marble Hill | MO | | 38 | 719 | | 757 | 13 | 8/29/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Houston | TX | | (14) | 174 | 696 | | 870 | 26 | 4/26/2013 | 1985 | |||||||||||||||||||||||
Family Dollar |
University Park | IL | | 295 | 688 | | 983 | 6 | 10/29/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Centerville | TX | | 226 | 679 | | 905 | 13 | 9/10/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Alderson | WV | | 166 | 663 | | 829 | 19 | 7/11/2013 | 2012 | ||||||||||||||||||||||||
Family Dollar |
Torrington | WY | | (14) | 72 | 645 | | 717 | 24 | 5/9/2013 | 2007 | |||||||||||||||||||||||
Family Dollar |
Tustin | MI | | (14) | 33 | 633 | | 666 | 36 | 12/18/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Custer | SD | | 32 | 617 | | 649 | 20 | 6/14/2013 | 2006 | ||||||||||||||||||||||||
Family Dollar |
International Falls | MN | | 32 | 608 | | 640 | 9 | 9/30/2013 | 1966 | ||||||||||||||||||||||||
Family Dollar |
Barryton | MI | | (14) | 32 | 599 | | 631 | 34 | 12/18/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Pulaski | IL | | (14) | 31 | 588 | | 619 | 33 | 12/31/2012 | 2012 | |||||||||||||||||||||||
Family Dollar |
Lombard | IL | | 1,008 | 543 | | 1,551 | 3 | 12/12/2013 | 2013 | ||||||||||||||||||||||||
Family Dollar |
Rushville | NE | | (14) | 125 | 499 | | 624 | 19 | 4/26/2013 | 2007 | |||||||||||||||||||||||
Famous Daves |
Eden Prairie | MN | | (14) | 824 | 549 | | 1,373 | 14 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Fazolis |
Carmel | IN | | (14) | 427 | 522 | | 949 | 11 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Fazolis |
Appleton | WI | | 705 | | | 705 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
FedEx |
Tinicum | PA | | | 32,170 | | 32,170 | 818 | 8/15/2013 | 2013 | ||||||||||||||||||||||||
FedEx |
Lebanon | OH | | 1,492 | 8,452 | | 9,944 | 172 | 8/26/2013 | 2013 | ||||||||||||||||||||||||
FedEx |
Albany | GA | | 195 | 3,711 | | 3,906 | 57 | 10/11/2013 | 2013 | ||||||||||||||||||||||||
FedEx |
London | KY | | 350 | 3,151 | | 3,501 | 48 | 10/11/2013 | 2013 |
F-143
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
FedEx |
Waterloo | IA | | (14) | 152 | 2,882 | | 3,034 | 132 | 3/22/2013 | 2012 | |||||||||||||||||||||||
FedEx |
Rapid City | SD | | (14) | 305 | 2,741 | | 3,046 | 167 | 12/21/2012 | 2012 | |||||||||||||||||||||||
FedEx |
Ottumwa | IA | | (14) | 134 | 2,552 | | 2,686 | 182 | 10/30/2012 | 2012 | |||||||||||||||||||||||
FedEx |
Independence | KS | | (14) | 114 | 2,166 | | 2,280 | 154 | 10/30/2012 | 2012 | |||||||||||||||||||||||
FedEx |
Des Moines | IA | | (14) | 733 | 1,361 | | 2,094 | 55 | 4/18/2013 | 1986 | |||||||||||||||||||||||
FedEx |
Riverton | WY | | 431 | 1,006 | | 1,437 | 10 | 10/23/2013 | 2013 | ||||||||||||||||||||||||
FedEx |
Homewood | AL | | 522 | 779 | | 1,301 | 22 | 6/27/2013 | 2000 | ||||||||||||||||||||||||
Flip It Bakery & Deli |
Washington | DC | | (14) | 338 | 84 | | 422 | 2 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Fresenius |
Fayetteville | NC | | 178 | 3,379 | | 3,557 | 79 | 6/28/2013 | 1999 | ||||||||||||||||||||||||
Fresenius |
Clinton | NC | | 139 | 2,647 | | 2,786 | 62 | 6/28/2013 | 2003 | ||||||||||||||||||||||||
Fresenius |
Foley | AL | | 287 | 2,580 | | 2,867 | 61 | 7/8/2013 | 2009 | ||||||||||||||||||||||||
Fresenius |
Fayetteville | NC | | 134 | 2,551 | | 2,685 | 60 | 6/28/2013 | 2004 | ||||||||||||||||||||||||
Fresenius |
Mobile | AL | | 278 | 2,505 | | 2,783 | 59 | 7/8/2013 | 1987 | ||||||||||||||||||||||||
Fresenius |
Fayetteville | NC | | 420 | 2,379 | | 2,799 | 56 | 6/28/2013 | 1998 | ||||||||||||||||||||||||
Fresenius |
Lumberton | NC | | 117 | 2,216 | | 2,333 | 52 | 6/28/2013 | 1986 | ||||||||||||||||||||||||
Fresenius |
DeFuniak Springs | FL | | 115 | 2,180 | | 2,295 | 51 | 7/8/2013 | 2008 | ||||||||||||||||||||||||
Fresenius |
Fairhope | AL | | | 2,035 | | 2,035 | 48 | 7/8/2013 | 2006 | ||||||||||||||||||||||||
Fresenius |
Red Springs | NC | | 101 | 1,913 | | 2,014 | 45 | 6/28/2013 | 2000 | ||||||||||||||||||||||||
Fresenius |
Fairmont | NC | | 201 | 1,812 | | 2,013 | 43 | 6/28/2013 | 2002 | ||||||||||||||||||||||||
Fresenius |
Pembroke | NC | | 81 | 1,547 | | 1,628 | 36 | 6/28/2013 | 2009 | ||||||||||||||||||||||||
Fresenius |
Roseboro | NC | | 74 | 1,404 | | 1,478 | 33 | 6/28/2013 | 2011 | ||||||||||||||||||||||||
Fresenius |
St. Pauls | NC | | 73 | 1,389 | | 1,462 | 33 | 6/28/2013 | 2008 | ||||||||||||||||||||||||
Furrs |
Garland | TX | | (14) | 1,529 | 3,715 | | 5,244 | 107 | 6/27/2013 | 2008 | |||||||||||||||||||||||
Golden Corral |
Surprise | AZ | | (14) | 1,258 | 4,068 | | 5,326 | 117 | 6/27/2013 | 2007 | |||||||||||||||||||||||
Golden Corral |
Harlingen | TX | | 832 | 3,037 | | 3,869 | 87 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
Golden Corral |
Texarkana | TX | | 758 | 3,031 | | 3,789 | 67 | 7/31/2013 | 2001 | ||||||||||||||||||||||||
Golden Corral |
Gilbert | AZ | | (14) | 871 | 2,910 | | 3,781 | 83 | 6/27/2013 | 2006 | |||||||||||||||||||||||
Golden Corral |
Jacksonville | FL | | 1,721 | 2,629 | | 4,350 | 75 | 6/27/2013 | 1999 | ||||||||||||||||||||||||
Golden Corral |
Houston | TX | | 1,147 | 2,447 | | 3,594 | 70 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
Golden Corral |
Stockbridge | GA | | 422 | 2,391 | | 2,813 | 53 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
Golden Corral |
Brownsville | TX | | 604 | 2,302 | | 2,906 | 66 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
Golden Corral |
Norman | OK | | 345 | 2,107 | | 2,452 | 60 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
Golden Corral |
Zanesville | OH | | (14) | 487 | 2,030 | | 2,517 | 58 | 6/27/2013 | 2002 | |||||||||||||||||||||||
Golden Corral |
Goodyear | AZ | | (14) | 686 | 1,939 | | 2,625 | 56 | 6/27/2013 | 2006 | |||||||||||||||||||||||
Golden Corral |
Baytown | TX | | (14) | 596 | 1,788 | | 2,384 | 39 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Golden Corral |
College Station | TX | | 1,265 | 1,718 | | 2,983 | 49 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
Golden Corral |
Midwest City | OK | | 1,175 | 1,708 | | 2,883 | 49 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
Golden Corral |
Wichita | KS | | (14) | 560 | 1,306 | | 1,866 | 29 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Golden Corral |
Jacksonville | FL | | 1,033 | 1,084 | | 2,117 | 31 | 6/27/2013 | 1997 | ||||||||||||||||||||||||
Golden Corral |
Palatka | FL | | (14) | 853 | 1,048 | | 1,901 | 30 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Golden Corral |
Emporia | KS | | (14) | 403 | 941 | | 1,344 | 21 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Golden Corral |
Roswell | NM | | 203 | 600 | | 803 | 17 | 6/27/2013 | 2000 | ||||||||||||||||||||||||
Golden Corral |
Rock Springs | WY | | (14) | 354 | 90 | | 444 | 3 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Grandys |
Abilene | TX | | 803 | | | 803 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Arlington | TX | | 734 | | | 734 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Carrollton | TX | | 773 | | | 773 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Carrollton | TX | | 847 | | | 847 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Fort Worth | TX | | 777 | | | 777 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Fort Worth | TX | | 811 | | | 811 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Garland | TX | | 623 | | | 623 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Garland | TX | | 859 | | | 859 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Grapevine | TX | | 618 | | | 618 | | 6/27/2013 | 1988 | ||||||||||||||||||||||||
Grandys |
Irving | TX | | 871 | | | 871 | | 6/27/2013 | N/A |
F-144
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Grandys |
Lancaster | TX | | 780 | | | 780 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Lubbock | TX | | 694 | | | 694 | | 6/27/2013 | 1979 | ||||||||||||||||||||||||
Grandys |
Mesquite | TX | | 871 | | | 871 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Plano | TX | | 871 | | | 871 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Dallas | TX | | 725 | | | 725 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Dallas | TX | | 357 | | | 357 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Grandys |
Greenville | TX | | 847 | | | 847 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Great Clips |
Lombard | IL | | 84 | 100 | | 184 | 3 | 6/27/2013 | 1973 | ||||||||||||||||||||||||
Hardees |
Jacksonville | FL | | 875 | 583 | | 1,458 | 13 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
Hardees |
Williston | FL | | (14) | 395 | 553 | | 948 | 15 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Hardees |
Canton | GA | | 488 | 539 | | 1,027 | 15 | 6/27/2013 | 1983 | ||||||||||||||||||||||||
Hardees |
Bremen | GA | | (14) | 129 | 518 | | 647 | 11 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Hardees |
Springfield | TN | | (14) | 343 | 515 | | 858 | 11 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Hardees |
Akron | OH | | (14) | 207 | 483 | | 690 | 11 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Hardees |
Mount Vernon | IA | | 320 | 480 | | 800 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Hardees |
Belleville | IL | | 269 | 467 | | 736 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Hardees |
Seville | OH | | (14) | 151 | 454 | | 605 | 10 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Hardees |
Pace | FL | | (14) | 419 | 435 | | 854 | 12 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Hardees |
Morristown | TN | | (14) | 353 | 431 | | 784 | 9 | 7/31/2013 | 1991 | |||||||||||||||||||||||
Hardees |
Erwin | TN | | (14) | 346 | 406 | | 752 | 11 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Hardees |
Jefferson | OH | | (14) | 242 | 363 | | 605 | 8 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Hardees |
Sparta | NC | | (14) | 372 | 346 | | 718 | 10 | 6/27/2013 | 1983 | |||||||||||||||||||||||
Hardees |
Minerva | OH | | (14) | 214 | 321 | | 535 | 7 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Hardees |
Beaver | WV | | 217 | 318 | | 535 | 9 | 6/27/2013 | 1983 | ||||||||||||||||||||||||
Harley Davidson |
Round Rock | TX | | (14) | 1,688 | 9,563 | | 11,251 | 237 | 7/31/2013 | 2008 | |||||||||||||||||||||||
Harveys Grill & Bar |
Saginaw | MI | | (14) | 230 | 647 | | 877 | 19 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Haydens Grill & Bar |
Canton | MI | | (14) | 160 | 693 | | 853 | 20 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Hooley House Sports Pub & Grille |
Brooklyn | OH | | (14) | 291 | 321 | | 612 | 9 | 6/27/2013 | 2000 | |||||||||||||||||||||||
IHOP |
Bossier City | LA | | (14) | 541 | 1,342 | | 1,883 | 38 | 6/27/2013 | 1998 | |||||||||||||||||||||||
IHOP |
Baytown | TX | | (14) | 698 | 1,297 | | 1,995 | 29 | 7/31/2013 | 1998 | |||||||||||||||||||||||
IHOP |
Auburn | AL | | (14) | 1,111 | 933 | | 2,044 | 27 | 6/27/2013 | 1998 | |||||||||||||||||||||||
IHOP |
Warren | MI | | (14) | 605 | 830 | | 1,435 | 24 | 6/27/2013 | 1996 | |||||||||||||||||||||||
IHOP |
Corpus Christi | TX | | 1,176 | | | 1,176 | | 7/31/2013 | N/A | ||||||||||||||||||||||||
Indis Fast Food |
Louisville | KY | | 292 | 157 | | 449 | 3 | 7/31/2013 | 1972 | ||||||||||||||||||||||||
Iron Chef Super Buffet |
Kissimmee | FL | | (14) | 297 | 127 | | 424 | 3 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Italian Villa, The |
Grand Island | NY | | (14) | 38 | 101 | | 139 | 3 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Jack in the Box |
Cleburne | TX | | (14) | 291 | 1,647 | | 1,938 | 36 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Jack in the Box |
Walker | LA | | (14) | 543 | 1,196 | | 1,739 | 33 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Jack in the Box |
Sacramento | CA | | 476 | 1,110 | | 1,586 | 24 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
Jack in the Box |
Texas City | TX | | 454 | 844 | | 1,298 | 23 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
Jack in the Box |
Missouri City | TX | | (14) | 451 | 837 | | 1,288 | 18 | 7/31/2013 | 1991 | |||||||||||||||||||||||
Johnny Carinos |
Houston | TX | | (14) | 1,328 | 2,656 | | 3,984 | 76 | 6/27/2013 | 2002 | |||||||||||||||||||||||
Johnny Carinos |
Rogers | AR | | (14) | 997 | 2,540 | | 3,537 | 73 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Johnny Carinos |
Midland | TX | | (14) | 998 | 2,329 | | 3,327 | 58 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Johnny Carinos |
Grand Prairie | TX | | (14) | 997 | 2,327 | | 3,324 | 58 | 7/31/2013 | 2001 |
F-145
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Johnny Carinos |
Amarillo | TX | | (14) | 993 | 2,317 | | 3,310 | 57 | 7/31/2013 | 2001 | |||||||||||||||||||||||
Johnny Carinos |
San Angelo | TX | | (14) | 769 | 2,306 | | 3,075 | 57 | 7/31/2013 | 2005 | |||||||||||||||||||||||
Johnny Carinos |
Muncie | IN | | 540 | 2,160 | | 2,700 | 41 | 8/30/2013 | 2003 | ||||||||||||||||||||||||
Johnny Carinos |
Columbus | IN | | 809 | 1,888 | | 2,697 | 36 | 8/30/2013 | 2004 | ||||||||||||||||||||||||
Kentucky Fried Chicken |
Matteson | IL | | (14) | 399 | 2,259 | | 2,658 | 50 | 7/31/2013 | 1973 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Decatur | IL | | (14) | 276 | 1,619 | | 1,895 | 45 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Homewood | IL | | (14) | 660 | 1,541 | | 2,201 | 34 | 7/31/2013 | 1992 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Bloomington | IL | | (14) | 576 | 1,466 | | 2,042 | 41 | 6/27/2013 | 2004 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Greenwood | IN | | (14) | 339 | 1,405 | | 1,744 | 39 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Hazel Crest | IL | | (14) | 153 | 1,376 | | 1,529 | 30 | 7/31/2013 | 1982 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Franklin | IN | | (14) | 205 | 1,375 | | 1,580 | 38 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Lebanon | IN | | (14) | 337 | 1,348 | | 1,685 | 30 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Springfield | IL | | (14) | 212 | 1,203 | | 1,415 | 26 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Rockford | IL | | (14) | 201 | 1,142 | | 1,343 | 25 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Kentucky Fried Chicken |
New Boston | TX | | (14) | 125 | 1,127 | | 1,252 | 25 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Granite City | IL | | (14) | 102 | 1,083 | | 1,185 | 30 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Crawfordsville | IN | | (14) | 159 | 1,068 | | 1,227 | 30 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Springfield | IL | | (14) | 267 | 1,068 | | 1,335 | 23 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Oak Forest | IL | | (14) | 185 | 1,047 | | 1,232 | 23 | 7/31/2013 | 1955 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Green Bay | WI | | (14) | 208 | 1,022 | | 1,230 | 28 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Mattoon | IL | | (14) | 113 | 1,019 | | 1,132 | 22 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Milwaukee | WI | | (14) | 197 | 975 | | 1,172 | 27 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Elmhurst | IL | | (14) | 242 | 969 | | 1,211 | 21 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Westchester | IL | | (14) | 238 | 952 | | 1,190 | 21 | 7/31/2013 | 1973 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Mount Pleasant | TX | | (14) | 106 | 952 | | 1,058 | 21 | 7/31/2013 | 1992 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Dolton | IL | | (14) | 167 | 946 | | 1,113 | 21 | 7/31/2013 | 1975 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Tipton | IN | | (14) | 104 | 936 | | 1,040 | 21 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Crawfordsville | IN | | (14) | 234 | 934 | | 1,168 | 21 | 7/31/2013 | 1991 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Milwaukee | WI | | (14) | 138 | 924 | | 1,062 | 26 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Germantown | WI | | (14) | 368 | 913 | | 1,281 | 25 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Lafayette | IN | | (14) | 304 | 912 | | 1,216 | 20 | 7/31/2013 | 1990 |
F-146
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Kentucky Fried Chicken |
Frankfort | IN | | (14) | 99 | 893 | | 992 | 20 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Hartford City | IN | | (14) | 99 | 889 | | 988 | 20 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Kokomo | IN | | (14) | 199 | 798 | | 997 | 18 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Milwaukee | WI | | (14) | 281 | 795 | | 1,076 | 22 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Milwaukee | WI | | (14) | 396 | 773 | | 1,169 | 21 | 6/27/2013 | 1991 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Shreveport | LA | | (14) | 616 | 753 | | 1,369 | 17 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Milwaukee | WI | | (14) | 89 | 750 | | 839 | 21 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Kentucky Fried Chicken |
West Bend | WI | | (14) | 185 | 705 | | 890 | 20 | 6/27/2013 | 1972 | |||||||||||||||||||||||
Kentucky Fried Chicken |
South Milwaukee | WI | | (14) | 197 | 695 | | 892 | 19 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Allison Park | PA | | (14) | 246 | 683 | | 929 | 19 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Warren | OH | | (14) | 426 | 640 | | 1,066 | 14 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Minden | LA | | (14) | 274 | 639 | | 913 | 14 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Texarkana | AR | | (14) | 111 | 630 | | 741 | 14 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Wauwatosa | WI | | (14) | 135 | 615 | | 750 | 17 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Greenville | TX | | 119 | 585 | | 704 | 16 | 6/27/2013 | 1988 | ||||||||||||||||||||||||
Kentucky Fried Chicken |
Green Bay | WI | | (14) | 470 | 574 | | 1,044 | 13 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Noblesville | IN | | (14) | 363 | 545 | | 908 | 12 | 7/31/2013 | 2005 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Shreveport | LA | | (14) | 352 | 528 | | 880 | 12 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Shreveport | LA | | (14) | 427 | 522 | | 949 | 11 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Shreveport | LA | | (14) | 343 | 514 | | 857 | 11 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Kentucky Fried Chicken |
New Kensington | PA | | (14) | 324 | 487 | | 811 | 11 | 7/31/2013 | 1967 | |||||||||||||||||||||||
Kentucky Fried Chicken |
Burnsville | MN | | 267 | 267 | | 534 | 6 | 7/31/2013 | 1988 | ||||||||||||||||||||||||
Kentucky Fried Chicken / A&W |
Charleston | IL | | (14) | 282 | 1,514 | | 1,796 | 42 | 6/27/2013 | 2003 | |||||||||||||||||||||||
Kentucky Fried Chicken / Taco Bell |
Canonsburg | PA | | (14) | 176 | 1,586 | | 1,762 | 35 | 7/31/2013 | 1996 | |||||||||||||||||||||||
Kentucky Fried Chicken / Taco Bell |
Dunkirk | NY | | (14) | 800 | 978 | | 1,778 | 21 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Kentucky Fried Chicken / Taco Bell |
Geneva | NY | | (14) | 569 | 695 | | 1,264 | 15 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Kettle Restaurant |
College Station | TX | | 225 | 249 | | 474 | 7 | 6/27/2013 | 1981 | ||||||||||||||||||||||||
Kettle Restaurant |
San Antonio | TX | | 168 | 206 | | 374 | 5 | 7/31/2013 | 1965 | ||||||||||||||||||||||||
Krystal |
Memphis | TN | | (14) | 257 | 1,029 | | 1,286 | 48 | 4/23/2013 | 1975 | |||||||||||||||||||||||
Krystal |
Huntsville | AL | | (14) | 348 | 811 | | 1,159 | 38 | 4/23/2013 | 1960 | |||||||||||||||||||||||
Krystal |
Memphis | TN | | (14) | 181 | 723 | | 904 | 34 | 4/23/2013 | 1972 | |||||||||||||||||||||||
Krystal |
Huntsville | AL | | 305 | 712 | | 1,017 | 29 | 6/10/2013 | 1985 | ||||||||||||||||||||||||
Krystal |
Lawrenceburg | TN | | (14) | 304 | 709 | | 1,013 | 33 | 4/23/2013 | 1980 | |||||||||||||||||||||||
Krystal |
Murfreesboro | TN | | (14) | 465 | 698 | | 1,163 | 33 | 4/23/2013 | 2008 | |||||||||||||||||||||||
Krystal |
Valley | AL | | (14) | 297 | 694 | | 991 | 33 | 4/23/2013 | 1979 | |||||||||||||||||||||||
Krystal |
Chattanooga | TN | | (14) | 440 | 659 | | 1,099 | 31 | 4/23/2013 | 1983 | |||||||||||||||||||||||
Krystal |
Huntsville | AL | | (14) | 352 | 654 | | 1,006 | 31 | 4/23/2013 | 1971 | |||||||||||||||||||||||
Krystal |
Corinth | MS | | (14) | 279 | 652 | | 931 | 31 | 4/23/2013 | 2007 | |||||||||||||||||||||||
Krystal |
Montgomery | AL | | (14) | 502 | 613 | | 1,115 | 29 | 4/23/2013 | 1962 | |||||||||||||||||||||||
Krystal |
Montgomery | AL | | (14) | 303 | 562 | | 865 | 26 | 4/23/2013 | 1962 | |||||||||||||||||||||||
Krystal |
Vestavia Hills | AL | | (14) | 342 | 513 | | 855 | 24 | 4/23/2013 | 1979 | |||||||||||||||||||||||
Kum & Go |
Gillette | WY | | 878 | 2,048 | | 2,926 | 58 | 6/28/2013 | 2013 |
F-147
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Lees Famous Recipe Chicken |
Saint Louis | MO | | 107 | 874 | | 981 | 24 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
Lees Famous Recipe Chicken |
Saint Ann | MO | | 187 | 571 | | 758 | 16 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
Lees Famous Recipe Chicken |
Florissant | MO | | 306 | 560 | | 866 | 16 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
Logans Roadhouse |
Mt. Juliet | TN | | (14) | 1,366 | 2,538 | | 3,904 | 63 | 7/31/2013 | 2006 | |||||||||||||||||||||||
Logans Roadhouse |
Owasso | OK | | (14) | 1,449 | 2,173 | | 3,622 | 54 | 7/31/2013 | 2006 | |||||||||||||||||||||||
Long John Silvers |
Marion | IL | | (14) | 305 | 1,059 | | 1,364 | 29 | 6/27/2013 | 1983 | |||||||||||||||||||||||
Long John Silvers |
Litchfield | IL | | (14) | 194 | 996 | | 1,190 | 28 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Long John Silvers |
West Frankfort | IL | | (14) | 244 | 996 | | 1,240 | 28 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Long John Silvers |
Collinsville | IL | | (14) | 220 | 940 | | 1,160 | 26 | 6/27/2013 | 2006 | |||||||||||||||||||||||
Long John Silvers |
Merced | CA | | (14) | 174 | 695 | | 869 | 15 | 7/31/2013 | 1982 | |||||||||||||||||||||||
Long John Silvers |
Asheville | NC | | (14) | 586 | 693 | | 1,279 | 19 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Long John Silvers |
Albuquerque | NM | | 227 | 680 | | 907 | 15 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
Long John Silvers |
Penn Hills | PA | | 438 | 656 | | 1,094 | 14 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
Long John Silvers |
Hays | KS | | (14) | 160 | 624 | | 784 | 17 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Long John Silvers |
Las Cruces | NM | | (14) | 242 | 565 | | 807 | 12 | 7/31/2013 | 1975 | |||||||||||||||||||||||
Long John Silvers |
Arlington | TX | | 365 | 537 | | 902 | 15 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
Long John Silvers |
Garden City | KS | | (14) | 120 | 530 | | 650 | 15 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Long John Silvers |
Fairview Heights | IL | | (14) | 258 | 525 | | 783 | 15 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Long John Silvers |
Mount Carmel | IL | | (14) | 105 | 484 | | 589 | 13 | 6/27/2013 | 1977 | |||||||||||||||||||||||
Long John Silvers |
Vandalia | IL | | (14) | 101 | 484 | | 585 | 13 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Long John Silvers |
Jacksonville | IL | | (14) | 171 | 431 | | 602 | 12 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Long John Silvers |
Cleburne | TX | | 205 | 380 | | 585 | 8 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Long John Silvers |
Clarksville | TN | | 339 | 339 | | 678 | 7 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
Long John Silvers |
Jackson | TN | | (14) | 264 | 323 | | 587 | 7 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Long John Silvers |
Wood River | IL | | (14) | 251 | 314 | | 565 | 9 | 6/27/2013 | 1975 | |||||||||||||||||||||||
Long John Silvers |
Fairborn | OH | | (14) | 103 | 300 | | 403 | 8 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Long John Silvers |
Englewood | OH | | (14) | 547 | | | 547 | | 6/27/2013 | 1974 | |||||||||||||||||||||||
Long John Silvers / A&W |
Kansas City | MO | | 389 | 722 | | 1,111 | 16 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
Long John Silvers / A&W |
Houston | TX | | 480 | 495 | | 975 | 14 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
Long John Silvers / A&W |
Austin | TX | | (14) | 459 | 477 | | 936 | 13 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Long John Silvers / A&W |
Murfreesboro | TN | | 219 | 219 | | 438 | 5 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Long John Silvers / KFC |
Green Bay | WI | | (14) | 748 | 563 | | 1,311 | 16 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Los Tios Mexican Restaurant |
Dalton | OH | | (14) | 18 | 30 | | 48 | 1 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Lowes |
Windham | ME | | (14) | 12,640 | | | 12,640 | | 6/3/2013 | 2006 | |||||||||||||||||||||||
Mattress Firm |
Evansville | IN | | (14) | 117 | 2,227 | | 2,344 | 115 | 2/11/2013 | 2012 | |||||||||||||||||||||||
Mattress Firm |
Spokane | WA | | (14) | 409 | 1,685 | | 2,094 | 72 | 4/4/2013 | 2013 | |||||||||||||||||||||||
Mattress Firm |
Spokane | WA | | (14) | 511 | 1,582 | | 2,093 | 68 | 3/28/2013 | 2013 | |||||||||||||||||||||||
Mattress Firm |
Mishawaka | IN | | 375 | 1,500 | | 1,875 | 35 | 7/30/2013 | 2013 | ||||||||||||||||||||||||
Mattress Firm |
Tallahassee | FL | | (14) | 924 | 1,386 | | 2,310 | 52 | 5/14/2013 | 2013 |
F-148
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Mattress Firm |
Bountiful | UT | | (14) | 736 | 1,367 | | 2,103 | 77 | 12/31/2012 | 2012 | |||||||||||||||||||||||
Mattress Firm |
Destin | FL | | 693 | 1,287 | | 1,980 | 42 | 6/5/2013 | 2013 | ||||||||||||||||||||||||
Mattress Firm |
Rogers | AR | | (14) | 321 | 1,284 | | 1,605 | 66 | 2/6/2013 | 2012 | |||||||||||||||||||||||
Mattress Firm |
Wilmington | NC | | 412 | 1,257 | | 1,669 | 53 | 3/29/2013 | 2013 | ||||||||||||||||||||||||
Mattress Firm |
Lafayette | LA | | (14) | | 1,251 | | 1,251 | 47 | 5/2/2013 | 2013 | |||||||||||||||||||||||
Mattress Firm |
Daphne | AL | | 528 | 1,233 | | 1,761 | 17 | 10/1/2013 | 2013 | ||||||||||||||||||||||||
Mattress Firm |
Dothan | AL | | (14) | 406 | 1,217 | | 1,623 | 46 | 5/14/2013 | 2013 | |||||||||||||||||||||||
Mattress Firm |
Knoxville | TN | | (14) | 586 | 1,088 | | 1,674 | 46 | 3/19/2013 | 2012 | |||||||||||||||||||||||
Mattress Firm |
Greenville | NC | | (14) | 1,085 | 1,085 | | 2,170 | 66 | 12/12/2012 | 2012 | |||||||||||||||||||||||
Mattress Firm |
Bowling Green | KY | | (14) | 648 | 973 | | 1,621 | 36 | 4/25/2013 | 2012 | |||||||||||||||||||||||
McDonalds |
Scotland Neck | NC | | (14) | 320 | | | 320 | | 6/27/2013 | N/A | |||||||||||||||||||||||
Mezcal Mexican Restaurant |
Grafton | OH | | 64 | 191 | | 255 | 5 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
Monro Muffler |
Lewiston | ME | | (14) | 279 | 1,115 | | 1,394 | 43 | 5/10/2013 | 1976 | |||||||||||||||||||||||
Montereys Tex Mex |
Tulsa | OK | | 135 | 406 | | 541 | 10 | 7/31/2013 | 2001 | ||||||||||||||||||||||||
Native New Yorker |
Glendale | AZ | | (14) | 254 | 420 | | 674 | 12 | 6/27/2013 | 1998 | |||||||||||||||||||||||
OCharleys |
Dalton | GA | | (14) | 406 | 1,817 | | 2,223 | 52 | 6/27/2013 | 1993 | |||||||||||||||||||||||
OCharleys |
Tucker | GA | | (14) | 1,037 | 866 | | 1,903 | 25 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Parking Lot |
Kingston | PA | | (14) | 29 | | | 29 | | 6/27/2013 | N/A | |||||||||||||||||||||||
Pizza Hut |
Chester | VA | | (14) | 473 | 1,104 | | 1,577 | 24 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Pizza Hut |
Ashland | VA | | (14) | 589 | 1,093 | | 1,682 | 24 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Pizza Hut |
Amarillo | TX | | (14) | 339 | 1,016 | | 1,355 | 22 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Pizza Hut |
Amarillo | TX | | (14) | 254 | 1,015 | | 1,269 | 22 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Pizza Hut |
Fort Stockton | TX | | (14) | 252 | 1,007 | | 1,259 | 22 | 7/31/2013 | 2008 | |||||||||||||||||||||||
Pizza Hut |
Christiansburg | VA | | (14) | 494 | 918 | | 1,412 | 20 | 7/31/2013 | 1982 | |||||||||||||||||||||||
Pizza Hut |
Odessa | TX | | (14) | 588 | 882 | | 1,470 | 19 | 7/31/2013 | 1972 | |||||||||||||||||||||||
Pizza Hut |
Hopewell | VA | | (14) | 707 | 864 | | 1,571 | 19 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Pizza Hut |
Clifton Forge | VA | | (14) | 287 | 861 | | 1,148 | 19 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Pizza Hut |
Odessa | TX | | (14) | 456 | 847 | | 1,303 | 19 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Pizza Hut |
Richmond | VA | | (14) | 666 | 814 | | 1,480 | 18 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Pizza Hut |
Odessa | TX | | (14) | 627 | 766 | | 1,393 | 17 | 7/31/2013 | 1979 | |||||||||||||||||||||||
Pizza Hut |
JACKSON | GA | | (14) | 673 | 735 | | 1,408 | 20 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Pizza Hut |
Salisbury | MD | | (14) | 245 | 734 | | 979 | 16 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Pizza Hut |
Delaware | OH | | (14) | 270 | 721 | | 991 | 20 | 6/27/2013 | 1975 | |||||||||||||||||||||||
Pizza Hut |
Pecos | TX | | (14) | 387 | 719 | | 1,106 | 16 | 7/31/2013 | 1974 | |||||||||||||||||||||||
Pizza Hut |
Petersburg | VA | | (14) | 378 | 701 | | 1,079 | 15 | 7/31/2013 | 1979 | |||||||||||||||||||||||
Pizza Hut |
Odessa | TX | | (14) | 457 | 685 | | 1,142 | 15 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Pizza Hut |
Monahans | TX | | (14) | 361 | 671 | | 1,032 | 15 | 7/31/2013 | 1979 | |||||||||||||||||||||||
Pizza Hut |
Bedford | VA | | (14) | 548 | 670 | | 1,218 | 15 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Pizza Hut |
San Angelo | TX | | (14) | 214 | 641 | | 855 | 14 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Pizza Hut |
San Angelo | TX | | (14) | 268 | 624 | | 892 | 14 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Pizza Hut |
Midland | TX | | (14) | 506 | 619 | | 1,125 | 14 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Pizza Hut |
Downers Grove | IL | | 504 | 616 | | 1,120 | 14 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Pizza Hut |
Detroit | MI | | 501 | 612 | | 1,113 | 13 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
Pizza Hut |
Newport News | VA | | (14) | 394 | 591 | | 985 | 13 | 7/31/2013 | 1969 | |||||||||||||||||||||||
Pizza Hut |
Newport News | VA | | (14) | 394 | 591 | | 985 | 13 | 7/31/2013 | 1970 | |||||||||||||||||||||||
Pizza Hut |
Columbia | SC | | (14) | 881 | 588 | | 1,469 | 13 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Pizza Hut |
Odessa | TX | | (14) | 572 | 572 | | 1,144 | 13 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Pizza Hut |
Tyler | TX | | 238 | 555 | | 793 | 15 | 6/27/2013 | 1981 |
F-149
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Pizza Hut |
San Angelo | TX | | (14) | 237 | 552 | | 789 | 12 | 7/31/2013 | 1975 | |||||||||||||||||||||||
Pizza Hut |
Dearborn | MI | | 284 | 528 | | 812 | 12 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
Pizza Hut |
Aurora | IL | | (14) | 281 | 522 | | 803 | 11 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Pizza Hut |
Cheraw | SC | | (14) | 415 | 507 | | 922 | 11 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Pizza Hut |
Midland | TX | | (14) | 414 | 506 | | 920 | 11 | 7/31/2013 | 1975 | |||||||||||||||||||||||
Pizza Hut |
Louisville | KY | | (14) | 539 | 499 | | 1,038 | 14 | 6/27/2013 | 1975 | |||||||||||||||||||||||
Pizza Hut |
Batesburg | SC | | (14) | 261 | 484 | | 745 | 11 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Pizza Hut |
Greensboro | GA | | (14) | 569 | 465 | | 1,034 | 10 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Pizza Hut |
Crystal City | TX | | (14) | 148 | 453 | | 601 | 13 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Pizza Hut |
Abilene | TX | | (14) | 549 | 449 | | 998 | 10 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Pizza Hut |
Sweetwater | TX | | 77 | 435 | | 512 | 10 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
Pizza Hut |
Detroit | MI | | 105 | 421 | | 526 | 9 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Pizza Hut |
Pageland | SC | | (14) | 344 | 420 | | 764 | 9 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Pizza Hut |
West Columbia | SC | | (14) | 507 | 415 | | 922 | 9 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Pizza Hut |
Edgefield | SC | | (14) | 221 | 410 | | 631 | 9 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Pizza Hut |
Coleman | TX | | 69 | 391 | | 460 | 9 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
Pizza Hut |
Stevens Point | WI | | 130 | 390 | | 520 | 9 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
Pizza Hut |
Laurens | SC | | (14) | 454 | 371 | | 825 | 8 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Pizza Hut |
Elmira | NY | | 199 | 370 | | 569 | 8 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
Pizza Hut |
Wellsville | NY | | 123 | 368 | | 491 | 8 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
Pizza Hut |
Ann Arbor | MI | | 119 | 367 | | 486 | 10 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
Pizza Hut |
Bishopville | SC | | (14) | 365 | 365 | | 730 | 8 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Pizza Hut |
Cedar City | UT | | 52 | 361 | | 413 | 10 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
Pizza Hut |
Eatonton | GA | | (14) | 353 | 353 | | 706 | 8 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Pizza Hut |
Saluda | SC | | (14) | 346 | 346 | | 692 | 8 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Pizza Hut |
Hampton | VA | | (14) | 641 | 345 | | 986 | 8 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Pizza Hut |
Merrill | WI | | 83 | 331 | | 414 | 7 | 7/31/2013 | 1980 | ||||||||||||||||||||||||
Pizza Hut |
Red Bank | TN | | (14) | 215 | 323 | | 538 | 7 | 7/31/2013 | 1975 | |||||||||||||||||||||||
Pizza Hut |
Colonial Heights | VA | | (14) | 311 | 311 | | 622 | 7 | 7/31/2013 | 1991 | |||||||||||||||||||||||
Pizza Hut |
Richmond | VA | | (14) | 311 | 311 | | 622 | 7 | 7/31/2013 | 1991 | |||||||||||||||||||||||
Pizza Hut |
Seminole | TX | | 53 | 301 | | 354 | 7 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
Pizza Hut |
Tucker | GA | | 192 | 288 | | 480 | 6 | 7/31/2013 | 1974 | ||||||||||||||||||||||||
Pizza Hut |
Front Royal | VA | | (14) | 191 | 287 | | 478 | 6 | 7/31/2013 | 1973 | |||||||||||||||||||||||
Pizza Hut |
Mobile | AL | | 127 | 276 | | 403 | 8 | 6/27/2013 | 1974 | ||||||||||||||||||||||||
Pizza Hut |
Dawson | GA | | 131 | 274 | | 405 | 8 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Pizza Hut |
Lafayette | LA | | 68 | 271 | | 339 | 8 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
Pizza Hut |
Oklahoma City | OK | | (14) | 268 | 268 | | 536 | 6 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Pizza Hut |
Page | AZ | | 66 | 263 | | 329 | 6 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
Pizza Hut |
Bowling Green | OH | | 141 | 262 | | 403 | 6 | 7/31/2013 | 1979 | ||||||||||||||||||||||||
Pizza Hut |
Antigo | WI | | 45 | 252 | | 297 | 6 | 7/31/2013 | 1997 | ||||||||||||||||||||||||
Pizza Hut |
Santee | SC | | (14) | 371 | 248 | | 619 | 5 | 7/31/2013 | 1972 | |||||||||||||||||||||||
Pizza Hut |
Saint George | SC | | (14) | 367 | 245 | | 612 | 5 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Pizza Hut |
Ashburn | GA | | 102 | 233 | | 335 | 6 | 6/27/2013 | 1988 |
F-150
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Pizza Hut |
Box Elder | SD | | (14) | 68 | 217 | | 285 | 6 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Pizza Hut |
Shamokin | PA | | 54 | 217 | | 271 | 5 | 7/31/2013 | 1976 | ||||||||||||||||||||||||
Pizza Hut |
Kanab | UT | | 52 | 210 | | 262 | 5 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
Pizza Hut |
Hayward | WI | | 51 | 205 | | 256 | 5 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
Pizza Hut |
Plover | WI | | 85 | 199 | | 284 | 4 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Pizza Hut |
Defiance | OH | | 114 | 197 | | 311 | 5 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
Pizza Hut |
Schofield | WI | | 106 | 196 | | 302 | 4 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
Pizza Hut |
Monticello | FL | | 115 | 195 | | 310 | 5 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Pizza Hut |
Abbotsford | WI | | 159 | 195 | | 354 | 4 | 7/31/2013 | 1980 | ||||||||||||||||||||||||
Pizza Hut |
Marietta | OH | | 104 | 193 | | 297 | 4 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Pizza Hut |
Hurricane | WV | | 126 | 188 | | 314 | 4 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
Pizza Hut |
East Syracuse | NY | | 137 | 185 | | 322 | 5 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
Pizza Hut |
Cleveland | OH | | 87 | 175 | | 262 | 5 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
Pizza Hut |
Toledo | OH | | 58 | 173 | | 231 | 5 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
Pizza Hut |
Sandusky | OH | | 140 | 171 | | 311 | 4 | 7/31/2013 | 1982 | ||||||||||||||||||||||||
Pizza Hut |
Abilene | TX | | (14) | 397 | 170 | | 567 | 4 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Pizza Hut |
Ronceverte | WV | | 66 | 162 | | 228 | 4 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
Pizza Hut |
Eagle River | WI | | 28 | 159 | | 187 | 3 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
Pizza Hut |
Middleburg Heights | OH | | 128 | 156 | | 284 | 3 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
Pizza Hut |
North Olmsted | OH | | 122 | 153 | | 275 | 4 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
Pizza Hut |
Cross Lanes | WV | | 122 | 149 | | 271 | 3 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
Pizza Hut |
Beckley | WV | | 160 | 131 | | 291 | 3 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
Pizza Hut |
Stamford | TX | | 38 | 115 | | 153 | 3 | 7/31/2013 | 1970 | ||||||||||||||||||||||||
Pizza Hut |
Norwalk | OH | | (14) | 77 | 115 | | 192 | 3 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Pizza Hut |
Ballinger | TX | | 34 | 109 | | 143 | 3 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
Pizza Hut |
Strongsville | OH | | 74 | 108 | | 182 | 3 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
Pizza Hut |
Neillsville | WI | | 35 | 106 | | 141 | 2 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
Pizza Hut |
Milton | WV | | 24 | 96 | | 120 | 2 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
Pizza Hut |
Waupaca | WI | | 61 | 91 | | 152 | 2 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
Pizza Hut |
Tomahawk | WI | | 35 | 81 | | 116 | 2 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Pizza Hut |
Nedrow | NY | | 55 | 80 | | 135 | 2 | 6/27/2013 | 1979 | ||||||||||||||||||||||||
Pizza Hut |
Clintonville | WI | | 208 | 69 | | 277 | 2 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
Pizza Hut |
Rochester | NY | | 62 | 62 | | 124 | 1 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
Pizza Hut |
Lambertville | MI | | 110 | 6 | | 116 | | 7/31/2013 | 1995 | ||||||||||||||||||||||||
Pizza Hut |
Huntington | WV | | 190 | 4 | | 194 | | 7/31/2013 | 1979 | ||||||||||||||||||||||||
Pizza Hut |
Adrian | MI | | 265 | | | 265 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Pizza Hut |
Monroe | MI | | 220 | | | 220 | | 6/27/2013 | 1977 | ||||||||||||||||||||||||
Pizza Hut |
Bedford | OH | | 183 | | | 183 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Ponderosa |
Indiana | PA | | 676 | 1,255 | | 1,931 | 31 | 7/31/2013 | 2000 | ||||||||||||||||||||||||
Ponderosa |
Massena | NY | | 190 | 570 | | 760 | 14 | 7/31/2013 | 1988 | ||||||||||||||||||||||||
Ponderosa |
Scottsburg | IN | | (14) | 430 | 141 | | 571 | 4 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Popeyes |
Marksville | LA | | (14) | 487 | 1,129 | | 1,616 | 31 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Popeyes |
Tampa | FL | | (14) | 673 | 1,065 | | 1,738 | 30 | 6/27/2013 | 2000 |
F-151
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Popeyes |
Winter Haven | FL | | (14) | 484 | 1,001 | | 1,485 | 28 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Popeyes |
Greenville | MS | | (14) | 513 | 977 | | 1,490 | 27 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Popeyes |
Brandon | FL | | (14) | 776 | 961 | | 1,737 | 27 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Popeyes |
Jacksonville | FL | | (14) | 781 | 955 | | 1,736 | 21 | 7/31/2013 | 1955 | |||||||||||||||||||||||
Popeyes |
Orlando | FL | | (14) | 782 | 955 | | 1,737 | 21 | 7/31/2013 | 2004 | |||||||||||||||||||||||
Popeyes |
Lafayette | LA | | (14) | 473 | 901 | | 1,374 | 25 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Popeyes |
Lafayette | LA | | (14) | 434 | 899 | | 1,333 | 25 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Popeyes |
Eunice | LA | | (14) | 382 | 891 | | 1,273 | 20 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Popeyes |
Orange | TX | | (14) | 456 | 847 | | 1,303 | 19 | 7/31/2013 | 2004 | |||||||||||||||||||||||
Popeyes |
Lakeland | FL | | (14) | 830 | 830 | | 1,660 | 18 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Popeyes |
Bayou Vista | LA | | (14) | 375 | 709 | | 1,084 | 20 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Popeyes |
Nederland | TX | | (14) | 445 | 668 | | 1,113 | 15 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Popeyes |
Omaha | NE | | (14) | 264 | 615 | | 879 | 14 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Popeyes |
Port Arthur | TX | | (14) | 408 | 589 | | 997 | 16 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Popeyes |
Franklin | LA | | (14) | 283 | 538 | | 821 | 15 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Popeyes |
Austin | TX | | 1,216 | 533 | | 1,749 | 15 | 6/27/2013 | 1996 | ||||||||||||||||||||||||
Popeyes |
Omaha | NE | | (14) | 343 | 515 | | 858 | 11 | 7/31/2013 | 1996 | |||||||||||||||||||||||
Popeyes |
Saint Louis | MO | | (14) | 248 | 460 | | 708 | 13 | 6/27/2013 | 1959 | |||||||||||||||||||||||
Popeyes |
Saint Louis | MO | | (14) | 288 | 431 | | 719 | 9 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Popeyes |
Baton Rouge | LA | | (14) | 323 | 394 | | 717 | 9 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Popeyes |
Ferguson | MO | | (14) | 128 | 383 | | 511 | 8 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Popeyes |
Miami | FL | | 220 | 330 | | 550 | 7 | 7/31/2013 | 1962 | ||||||||||||||||||||||||
Popeyes |
Houston | TX | | 295 | 241 | | 536 | 5 | 7/31/2013 | 1976 | ||||||||||||||||||||||||
Popeyes |
Portsmouth | VA | | (14) | 369 | 230 | | 599 | 6 | 6/27/2013 | 2002 | |||||||||||||||||||||||
Popeyes |
Houston | TX | | 278 | 227 | | 505 | 5 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
Popeyes |
Newport News | VA | | (14) | 381 | 217 | | 598 | 6 | 6/27/2013 | 2002 | |||||||||||||||||||||||
Popeyes |
Houston | TX | | 111 | 166 | | 277 | 4 | 7/31/2013 | 1976 | ||||||||||||||||||||||||
Quincys Family Steakhouse |
Monroe | NC | | 560 | 458 | | 1,018 | 11 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
Rallys |
Indianapolis | IN | | (14) | 1,168 | | | 1,168 | | 7/31/2013 | N/A | |||||||||||||||||||||||
Rallys |
Indianapolis | IN | | (14) | 1,168 | | | 1,168 | | 7/31/2013 | N/A | |||||||||||||||||||||||
Rancho Grande Grill |
Andalusia | AL | | 94 | 251 | | 345 | 7 | 6/27/2013 | 2004 | ||||||||||||||||||||||||
Rite Aid |
Burton | MI | | 128 | 2,541 | | 2,669 | 63 | 7/26/2013 | 1999 | ||||||||||||||||||||||||
Rite Aid |
Wilson | NC | | 573 | 1,337 | | 1,910 | 33 | 7/30/2013 | 2002 | ||||||||||||||||||||||||
Rite Aid |
Adams | MA | | 300 | 1,200 | | 1,500 | 30 | 7/30/2013 | 2000 | ||||||||||||||||||||||||
Rolls-Royce Corporation |
Indianapolis | IN | | (14) | 5,770 | 64,063 | | 69,833 | 2,100 | 5/9/2013 | 2000 | |||||||||||||||||||||||
Rubbermaid |
Brimfield | OH | | (14) | 1,552 | 29,485 | | 31,037 | 1,650 | 1/31/2013 | 2012 | |||||||||||||||||||||||
Rubbermaid |
Bowling Green | OH | | 714 | 13,560 | | 14,274 | 345 | 7/29/2013 | 2013 | ||||||||||||||||||||||||
Saltwater Willys |
Grapevine | TX | | (14) | 572 | 868 | | 1,440 | 25 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Schlotzskys Deli |
Colorado Springs | CO | | (14) | 530 | 530 | | 1,060 | 15 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Schlotzskys Deli |
Louisville | KY | | (14) | 321 | 342 | | 663 | 9 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Senor Panchos |
Orrville | OH | | (14) | 99 | 176 | | 275 | 5 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Shoneys |
Grenada | MS | | 270 | 809 | | 1,079 | 18 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
Shoneys |
Columbia | SC | | (14) | 446 | 545 | | 991 | 12 | 7/31/2013 | 1985 |
F-152
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Shoneys |
West Columbia | SC | | (14) | 392 | 262 | | 654 | 6 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Snowflake Donut Shop |
Gun Barrel City | TX | | 241 | 383 | | 624 | 11 | 6/27/2013 | 2008 | ||||||||||||||||||||||||
Sonic Drive-In |
Crystal River | FL | | (14) | 107 | 322 | | 429 | 7 | 7/31/2013 | 2008 | |||||||||||||||||||||||
Sonic Drive-In |
Mulberry | FL | | (14) | 165 | 298 | | 463 | 8 | 6/27/2013 | 2004 | |||||||||||||||||||||||
Sonic Drive-In |
Wadesboro | NC | | (14) | 137 | 266 | | 403 | 7 | 6/27/2013 | 2007 | |||||||||||||||||||||||
Sonic Drive-In |
Spring Hill | FL | | (14) | 79 | 252 | | 331 | 7 | 6/27/2013 | 2003 | |||||||||||||||||||||||
Sonnys BBQ |
Venice | FL | | (14) | 338 | 507 | | 845 | 13 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Sports Wings |
Sumter | SC | | (14) | 73 | 109 | | 182 | 2 | 7/31/2013 | 1988 | |||||||||||||||||||||||
Stripes Gas & Convenience |
Rio Hondo | TX | | (14) | 293 | 2,640 | | 2,933 | 136 | 2/15/2013 | 2008 | |||||||||||||||||||||||
Stripes Gas & Convenience |
Pharr | TX | | (14) | 281 | 2,531 | | 2,812 | 130 | 2/15/2013 | 1995 | |||||||||||||||||||||||
Stripes Gas & Convenience |
Andrews | TX | | (14) | 406 | 2,302 | | 2,708 | 119 | 2/15/2013 | 2008 | |||||||||||||||||||||||
Stripes Gas & Convenience |
La Feria | TX | | (14) | 219 | 1,970 | | 2,189 | 101 | 2/15/2013 | 2008 | |||||||||||||||||||||||
Sun Trust Bank |
Waldorf | MD | | (14) | 523 | 2,962 | | 3,485 | 119 | 3/22/2013 | 1964 | |||||||||||||||||||||||
Sun Trust Bank |
Mocksville | NC | | (14) | 978 | 2,933 | | 3,911 | 118 | 3/22/2013 | 2000 | |||||||||||||||||||||||
Sun Trust Bank |
Annapolis | MD | | 2,653 | 2,170 | | 4,823 | 48 | 7/23/2013 | 1976 | ||||||||||||||||||||||||
Sun Trust Bank |
Richmond | VA | | (14) | 224 | 2,012 | | 2,236 | 81 | 4/12/2013 | 1909 | |||||||||||||||||||||||
Sun Trust Bank |
Tallahassee | FL | | (14) | 828 | 1,933 | | 2,761 | 78 | 4/12/2013 | 1991 | |||||||||||||||||||||||
Sun Trust Bank |
Dunedin | FL | | (14) | 479 | 1,917 | | 2,396 | 77 | 3/22/2013 | 1995 | |||||||||||||||||||||||
Sun Trust Bank |
Monroe | NC | | (14) | 204 | 1,837 | | 2,041 | 74 | 4/12/2013 | 1920 | |||||||||||||||||||||||
Sun Trust Bank |
Plant City | FL | | (14) | 751 | 1,753 | | 2,504 | 70 | 3/22/2013 | 2000 | |||||||||||||||||||||||
Sun Trust Bank |
Destin | FL | | (14) | 572 | 1,717 | | 2,289 | 69 | 4/12/2013 | 1998 | |||||||||||||||||||||||
Sun Trust Bank |
Jesup | GA | | (14) | 184 | 1,657 | | 1,841 | 67 | 3/22/2013 | 1964 | |||||||||||||||||||||||
Sun Trust Bank |
Atlanta | GA | | (14) | 1,018 | 1,527 | | 2,545 | 61 | 4/12/2013 | 1965 | |||||||||||||||||||||||
Sun Trust Bank |
Coral Springs | FL | | (14) | 654 | 1,525 | | 2,179 | 61 | 4/12/2013 | 1996 | |||||||||||||||||||||||
Sun Trust Bank |
Rocky Mount | VA | | (14) | 265 | 1,504 | | 1,769 | 47 | 5/22/2013 | 1961 | |||||||||||||||||||||||
Sun Trust Bank |
Dunwoody | GA | | (14) | 1,784 | 1,460 | | 3,244 | 59 | 3/22/2013 | 1972 | |||||||||||||||||||||||
Sun Trust Bank |
Melbourne | FL | | (14) | 464 | 1,392 | | 1,856 | 56 | 4/12/2013 | 1987 | |||||||||||||||||||||||
Sun Trust Bank |
Durham | NC | | (14) | 747 | 1,388 | | 2,135 | 56 | 4/12/2013 | 1973 | |||||||||||||||||||||||
Sun Trust Bank |
North Port | FL | | (14) | 460 | 1,381 | | 1,841 | 55 | 3/22/2013 | 1982 | |||||||||||||||||||||||
Sun Trust Bank |
Hudson | FL | | (14) | 448 | 1,345 | | 1,793 | 54 | 3/22/2013 | 1979 | |||||||||||||||||||||||
Sun Trust Bank |
Port Orange | FL | | (14) | 563 | 1,314 | | 1,877 | 53 | 3/22/2013 | 1982 | |||||||||||||||||||||||
Sun Trust Bank |
Nashville | TN | | (14) | 1,598 | 1,308 | | 2,906 | 53 | 4/12/2013 | 1992 | |||||||||||||||||||||||
Sun Trust Bank |
Chattanooga | TN | | (14) | 223 | 1,263 | | 1,486 | 51 | 3/22/2013 | 1953 | |||||||||||||||||||||||
Sun Trust Bank |
Palm Harbor | FL | | (14) | 535 | 1,249 | | 1,784 | 50 | 4/12/2013 | 1994 | |||||||||||||||||||||||
Sun Trust Bank |
Bowdon | GA | | (14) | 416 | 1,247 | | 1,663 | 50 | 3/22/2013 | 1900 | |||||||||||||||||||||||
Sun Trust Bank |
Orlando | FL | | (14) | 805 | 1,208 | | 2,013 | 49 | 4/12/2013 | 1988 | |||||||||||||||||||||||
Sun Trust Bank |
Madison | TN | | (14) | 286 | 1,143 | | 1,429 | 46 | 3/22/2013 | 1953 | |||||||||||||||||||||||
Sun Trust Bank |
Miami | FL | | (14) | 1,393 | 1,140 | | 2,533 | 46 | 4/12/2013 | 1982 | |||||||||||||||||||||||
Sun Trust Bank |
Lakeland | FL | | (14) | 598 | 1,110 | | 1,708 | 45 | 4/12/2013 | 1988 | |||||||||||||||||||||||
Sun Trust Bank |
South Daytona Beach | FL | | (14) | 592 | 1,099 | | 1,691 | 44 | 4/12/2013 | 1985 | |||||||||||||||||||||||
Sun Trust Bank |
Port Orange | FL | | (14) | 590 | 1,095 | | 1,685 | 44 | 3/22/2013 | 1989 | |||||||||||||||||||||||
Sun Trust Bank |
Anderson | SC | | (14) | 574 | 1,065 | | 1,639 | 43 | 3/22/2013 | 1998 | |||||||||||||||||||||||
Sun Trust Bank |
West Palm Beach | FL | | (14) | 1,026 | 1,026 | | 2,052 | 41 | 3/22/2013 | 1981 |
F-153
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Sun Trust Bank |
Frederick | MD | | (14) | 991 | 991 | | 1,982 | 35 | 4/26/2013 | 1880 | |||||||||||||||||||||||
Sun Trust Bank |
Roswell | GA | | (14) | 1,425 | 950 | | 2,375 | 38 | 4/12/2013 | 1988 | |||||||||||||||||||||||
Sun Trust Bank |
Ellicott City | MD | | (14) | 1,728 | 931 | | 2,659 | 37 | 3/22/2013 | 1975 | |||||||||||||||||||||||
Sun Trust Bank |
Belmont | NC | | (14) | 616 | 924 | | 1,540 | 37 | 3/22/2013 | 1970 | |||||||||||||||||||||||
Sun Trust Bank |
Lexington | NC | | (14) | 447 | 831 | | 1,278 | 33 | 4/12/2013 | 2001 | |||||||||||||||||||||||
Sun Trust Bank |
Kissimmee | FL | | (14) | 1,167 | 778 | | 1,945 | 31 | 4/12/2013 | 1981 | |||||||||||||||||||||||
Sun Trust Bank |
Greensboro | NC | | (14) | 403 | 748 | | 1,151 | 30 | 4/12/2013 | 1962 | |||||||||||||||||||||||
Sun Trust Bank |
Travelers Rest | SC | | (14) | 746 | 746 | | 1,492 | 30 | 4/12/2013 | 1995 | |||||||||||||||||||||||
Sun Trust Bank |
St. Simons Island | GA | | (14) | 1,363 | 734 | | 2,097 | 29 | 3/22/2013 | 1975 | |||||||||||||||||||||||
Sun Trust Bank |
Pensacola | FL | | (14) | 886 | 725 | | 1,611 | 29 | 4/12/2013 | 1979 | |||||||||||||||||||||||
Sun Trust Bank |
Concord | NC | | (14) | 707 | 707 | | 1,414 | 28 | 4/12/2013 | 1988 | |||||||||||||||||||||||
Sun Trust Bank |
Lake Wales | FL | | (14) | 671 | 671 | | 1,342 | 27 | 3/22/2013 | 1988 | |||||||||||||||||||||||
Sun Trust Bank |
Raleigh | NC | | (14) | 658 | 658 | | 1,316 | 26 | 3/22/2013 | 1997 | |||||||||||||||||||||||
Sun Trust Bank |
Zebulon | NC | | (14) | 515 | 630 | | 1,145 | 25 | 3/22/2013 | 1972 | |||||||||||||||||||||||
Sun Trust Bank |
Nashville | TN | | (14) | 613 | 613 | | 1,226 | 25 | 4/12/2013 | 1970 | |||||||||||||||||||||||
Sun Trust Bank |
Belton | SC | | (14) | 473 | 578 | | 1,051 | 23 | 4/12/2013 | 1967 | |||||||||||||||||||||||
Sun Trust Bank |
Burlington | NC | | (14) | 446 | 545 | | 991 | 22 | 4/12/2013 | 1995 | |||||||||||||||||||||||
Sun Trust Bank |
Oakboro | NC | | 360 | 540 | | 900 | 12 | 7/23/2013 | 1970 | ||||||||||||||||||||||||
Sun Trust Bank |
Carrboro | NC | | (14) | 512 | 512 | | 1,024 | 21 | 4/12/2013 | 1980 | |||||||||||||||||||||||
Sun Trust Bank |
Cheriton | VA | | (14) | 90 | 510 | | 600 | 21 | 3/22/2013 | 1975 | |||||||||||||||||||||||
Sun Trust Bank |
Atlanta | GA | | (14) | 1,435 | 478 | | 1,913 | 19 | 4/12/2013 | 1970 | |||||||||||||||||||||||
Sun Trust Bank |
Lynchburg | VA | | (14) | 251 | 466 | | 717 | 19 | 3/22/2013 | 1973 | |||||||||||||||||||||||
Sun Trust Bank |
Dunnellon | FL | | (14) | 82 | 463 | | 545 | 19 | 3/22/2013 | 1980 | |||||||||||||||||||||||
Sun Trust Bank |
Norfolk | VA | | (14) | 656 | 437 | | 1,093 | 18 | 4/12/2013 | 1990 | |||||||||||||||||||||||
Sun Trust Bank |
Richmond | VA | | (14) | 277 | 416 | | 693 | 17 | 3/22/2013 | 1959 | |||||||||||||||||||||||
Sun Trust Bank |
Matthews | NC | | (14) | 382 | 382 | | 764 | 15 | 3/22/2013 | 1971 | |||||||||||||||||||||||
Sun Trust Bank |
Yadkinville | NC | | (14) | 200 | 371 | | 571 | 15 | 4/12/2013 | 1975 | |||||||||||||||||||||||
Sun Trust Bank |
Petersburg | VA | | (14) | 102 | 306 | | 408 | 12 | 4/12/2013 | 1975 | |||||||||||||||||||||||
Sun Trust Bank |
Nashville | TN | | 567 | 305 | | 872 | 7 | 7/23/2013 | 1954 | ||||||||||||||||||||||||
Sun Trust Bank |
La Vergne | TN | | (14) | 171 | 209 | | 380 | 8 | 3/22/2013 | 1985 | |||||||||||||||||||||||
T.G.I. Fridays |
Warwick | RI | | 1,228 | 2,775 | | 4,003 | 80 | 6/27/2013 | 1983 | ||||||||||||||||||||||||
T.G.I. Fridays |
Kentwood | MI | | (14) | 281 | 2,533 | | 2,814 | 63 | 7/31/2013 | 1983 | |||||||||||||||||||||||
T.G.I. Fridays |
Bismarck | ND | | (14) | 1,038 | 1,928 | | 2,966 | 48 | 7/31/2013 | 2000 | |||||||||||||||||||||||
T.G.I. Fridays |
Blasdell | NY | | (14) | 1,215 | 1,913 | | 3,128 | 55 | 6/27/2013 | 2000 | |||||||||||||||||||||||
T.G.I. Fridays |
Ann Arbor | MI | | (14) | 547 | 1,640 | | 2,187 | 41 | 7/31/2013 | 1998 | |||||||||||||||||||||||
T.G.I. Fridays |
Royal Palm Beach | FL | | (14) | 1,530 | 1,530 | | 3,060 | 38 | 7/31/2013 | 2001 | |||||||||||||||||||||||
T.G.I. Fridays |
Rochester | MN | | (14) | 1,347 | 1,102 | | 2,449 | 27 | 7/31/2013 | 1993 | |||||||||||||||||||||||
T.G.I. Fridays |
Novi | MI | | (14) | 1,042 | 1,042 | | 2,084 | 26 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Taco Bell |
Vacaville | CA | | (14) | 522 | 1,513 | | 2,035 | 42 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Taco Bell |
Suisun City | CA | | (14) | 355 | 1,419 | | 1,774 | 31 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Taco Bell |
Vacaville | CA | | (14) | 1,184 | 1,375 | | 2,559 | 38 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Taco Bell |
Fairfield | CA | | (14) | 500 | 1,327 | | 1,827 | 37 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Taco Bell |
Rancho Cucamonga | CA | | (14) | 415 | 1,210 | | 1,625 | 34 | 6/27/2013 | 1992 |
F-154
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Taco Bell |
Corona | CA | | (14) | 306 | 1,138 | | 1,444 | 32 | 6/27/2013 | 1990 | |||||||||||||||||||||||
Taco Bell |
North Corbin | KY | | (14) | 139 | 1,082 | | 1,221 | 30 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Taco Bell |
Cullman | AL | | (14) | 375 | 1,053 | | 1,428 | 29 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Taco Bell |
Fontana | CA | | (14) | 524 | 1,016 | | 1,540 | 28 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Taco Bell |
Moreno Valley | CA | | (14) | 367 | 998 | | 1,365 | 28 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Taco Bell |
Marion | IN | | (14) | 496 | 921 | | 1,417 | 20 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Taco Bell |
Winfield | AL | | (14) | 278 | 834 | | 1,112 | 18 | 7/31/2013 | 2008 | |||||||||||||||||||||||
Taco Bell |
Westerville | OH | | (14) | 354 | 827 | | 1,181 | 18 | 7/31/2013 | 1992 | |||||||||||||||||||||||
Taco Bell |
Jasper | AL | | (14) | 445 | 814 | | 1,259 | 23 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Taco Bell |
Dora | AL | | (14) | 348 | 813 | | 1,161 | 18 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Taco Bell |
Hilliard | OH | | (14) | 424 | 787 | | 1,211 | 17 | 7/31/2013 | 1991 | |||||||||||||||||||||||
Taco Bell |
Hartselle | AL | | (14) | 378 | 781 | | 1,159 | 22 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Taco Bell |
Albertville | AL | | (14) | 419 | 778 | | 1,197 | 17 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Taco Bell |
Dayton | OH | | (14) | 129 | 732 | | 861 | 16 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Taco Bell |
Pickerington | OH | | (14) | 470 | 705 | | 1,175 | 15 | 7/31/2013 | 1991 | |||||||||||||||||||||||
Taco Bell |
Detroit | MI | | 124 | 704 | | 828 | 15 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
Taco Bell |
Warrior | AL | | (14) | 364 | 675 | | 1,039 | 15 | 7/31/2013 | 1996 | |||||||||||||||||||||||
Taco Bell |
Marysville | OH | | (14) | 412 | 618 | | 1,030 | 14 | 7/31/2013 | 1992 | |||||||||||||||||||||||
Taco Bell |
Anniston | AL | | 80 | 609 | | 689 | 17 | 6/27/2013 | 2000 | ||||||||||||||||||||||||
Taco Bell |
Kennesaw | GA | | (14) | 162 | 601 | | 763 | 17 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Taco Bell |
Moraine | OH | | 280 | 505 | | 785 | 14 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
Taco Bell / KFC |
Milwaukee | WI | | (14) | 533 | 1,055 | | 1,588 | 29 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Taco Bell / Pizza Hut |
Rubidoux | CA | | (14) | 415 | 1,223 | | 1,638 | 34 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Taco Bell / Pizza Hut |
Montclair | CA | | (14) | 322 | 900 | | 1,222 | 25 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Taco Bueno |
Arlington | TX | | (14) | 597 | 895 | | 1,492 | 20 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Taco Bueno |
Waco | TX | | (14) | 595 | 893 | | 1,488 | 20 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Taco Bueno |
Waco | TX | | (14) | 595 | 892 | | 1,487 | 20 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Taco Bueno |
Hutchinson | KS | | (14) | 561 | 841 | | 1,402 | 18 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Taco Bueno |
Springfield | MO | | (14) | 753 | 753 | | 1,506 | 17 | 7/31/2013 | 2006 | |||||||||||||||||||||||
Taco Bueno |
Belton | MO | | (14) | 476 | 701 | | 1,177 | 19 | 6/27/2013 | 2006 | |||||||||||||||||||||||
Taco Bueno |
Frisco | TX | | (14) | 601 | 577 | | 1,178 | 16 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Taco Bueno |
North Richland Hills | TX | | (14) | 423 | 567 | | 990 | 16 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Taco Bueno |
Lubbock | TX | | (14) | 228 | 561 | | 789 | 16 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Talbots |
Lakeville | MA | | (14) | 6,302 | 25,199 | | 31,501 | 897 | 5/17/2013 | 1987 | |||||||||||||||||||||||
Texas Roadhouse |
Kenosha | WI | | (14) | 1,061 | 1,835 | | 2,896 | 53 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Tire Warehouse |
Bangor | ME | | (14) | 289 | 1,400 | | 1,689 | 39 | 6/27/2013 | 1977 | |||||||||||||||||||||||
Tire Warehouse |
Fitchburg | MA | | (14) | 203 | 704 | | 907 | 20 | 6/27/2013 | 1982 | |||||||||||||||||||||||
TitleMax |
Gainesville | GA | | (14) | 221 | 270 | | 491 | 7 | 7/31/2013 | 2007 | |||||||||||||||||||||||
Tommy Addisons |
Edgewood | FL | | (14) | 366 | 447 | | 813 | 11 | 7/31/2013 | 2003 | |||||||||||||||||||||||
Tractor Supply |
Los Banos | CA | | (14) | 1,213 | 3,638 | | 4,851 | 145 | 2/28/2013 | 2009 | |||||||||||||||||||||||
Tractor Supply |
Mims | FL | | 310 | 2,787 | | 3,097 | 33 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
Tractor Supply |
Plaistow | NH | | 638 | 2,552 | | 3,190 | 30 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
Tracys Seafood |
Port Arthur | TX | | 43 | 72 | | 115 | 2 | 6/27/2013 | 1998 |
F-155
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Tumbleweed |
Zanesville | OH | | (14) | 639 | 1,491 | | 2,130 | 37 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Tumbleweed |
Owensboro | KY | | (14) | 355 | 1,420 | | 1,775 | 35 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Tumbleweed |
Louisville | KY | | (14) | 468 | 1,404 | | 1,872 | 35 | 7/31/2013 | 2001 | |||||||||||||||||||||||
Tumbleweed |
Terre Haute | IN | | (14) | 434 | 1,303 | | 1,737 | 32 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Tumbleweed |
Springfield | OH | | (14) | 549 | 1,280 | | 1,829 | 32 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Tumbleweed |
Bellefontaine | OH | | (14) | 234 | 938 | | 1,172 | 23 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Tumbleweed |
Mayesville | KY | | (14) | 353 | 823 | | 1,176 | 20 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Tumbleweed |
Wooster | OH | | (14) | 342 | 799 | | 1,141 | 20 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Vacant |
Albemarle | NC | | 483 | 457 | | 940 | 13 | 6/27/2013 | 1992 | ||||||||||||||||||||||||
Velox Insurance |
Woodstock | GA | | 155 | 127 | | 282 | 3 | 7/31/2013 | 1988 | ||||||||||||||||||||||||
Verizon Wireless |
Statesville | NC | | 207 | 459 | | 666 | 13 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
Waffle House |
Roanoke | VA | | 176 | 327 | | 503 | 7 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
Waffle House |
Cocoa | FL | | 150 | 279 | | 429 | 6 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Walgreens |
Denver | CO | | | 4,050 | | 4,050 | 122 | 7/2/2013 | 2008 | ||||||||||||||||||||||||
Walgreens |
Castle Rock | CO | | 1,581 | 3,689 | | 5,270 | 111 | 7/11/2013 | 2002 | ||||||||||||||||||||||||
Wendys |
Columbus | GA | | (14) | 478 | 2,209 | | 2,687 | 61 | 6/27/2013 | 2003 | |||||||||||||||||||||||
Wendys |
Owego | NY | | (14) | 101 | 1,915 | | 2,016 | 42 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Wendys |
Pasadena | MD | | (14) | 1,049 | 1,902 | | 2,951 | 53 | 6/27/2013 | 1997 | |||||||||||||||||||||||
Wendys |
El Paso | TX | | (14) | 630 | 1,889 | | 2,519 | 42 | 7/31/2013 | 1996 | |||||||||||||||||||||||
Wendys |
Hamilton | OH | | (14) | 655 | 1,848 | | 2,503 | 51 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Wendys |
Columbus | GA | | (14) | 701 | 1,787 | | 2,488 | 50 | 6/27/2013 | 1999 | |||||||||||||||||||||||
Wendys |
Kingwood | TX | | (14) | 304 | 1,724 | | 2,028 | 38 | 7/31/2013 | 2001 | |||||||||||||||||||||||
Wendys |
Corning | NY | | (14) | 191 | 1,717 | | 1,908 | 38 | 7/31/2013 | 1996 | |||||||||||||||||||||||
Wendys |
Richmond | IN | | (14) | 735 | 1,716 | | 2,451 | 38 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Wendys |
Albany | GA | | (14) | 414 | 1,656 | | 2,070 | 36 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Wendys |
Orange | CT | | (14) | 1,343 | 1,641 | | 2,984 | 36 | 7/31/2013 | 2003 | |||||||||||||||||||||||
Wendys |
Woodbridge | VA | | (14) | 1,193 | 1,598 | | 2,791 | 44 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Wendys |
Arlington | TX | | (14) | 1,322 | 1,546 | | 2,868 | 43 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Wendys |
Middletown | OH | | (14) | 494 | 1,481 | | 1,975 | 33 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Wendys |
Fairborn | OH | | (14) | 629 | 1,468 | | 2,097 | 32 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Wendys |
Lake Wales | FL | | (14) | 975 | 1,462 | | 2,437 | 32 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Wendys |
Wintersville | OH | | (14) | 621 | 1,450 | | 2,071 | 32 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Wendys |
Kenosha | WI | | (14) | 965 | 1,447 | | 2,412 | 32 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Wendys |
Mcminnville | TN | | (14) | 255 | 1,443 | | 1,698 | 32 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Wendys |
Centerville | OH | | (14) | 615 | 1,434 | | 2,049 | 32 | 7/31/2013 | 1997 | |||||||||||||||||||||||
Wendys |
Emporia | VA | | (14) | 631 | 1,424 | | 2,055 | 39 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Wendys |
Louisville | KY | | (14) | 857 | 1,421 | | 2,278 | 39 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Wendys |
Kankakee | IL | | (14) | 250 | 1,419 | | 1,669 | 31 | 7/31/2013 | 2005 | |||||||||||||||||||||||
Wendys |
Hillsboro | OH | | (14) | 291 | 1,408 | | 1,699 | 39 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Wendys |
Cincinnati | OH | | (14) | 939 | 1,408 | | 2,347 | 31 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Wendys |
Fairborn | OH | | (14) | 604 | 1,408 | | 2,012 | 31 | 7/31/2013 | 1992 | |||||||||||||||||||||||
Wendys |
Pounding Mill | VA | | (14) | 296 | 1,404 | | 1,700 | 39 | 6/27/2013 | 2004 | |||||||||||||||||||||||
Wendys |
Dublin | VA | | (14) | 384 | 1,402 | | 1,786 | 39 | 6/27/2013 | 1993 |
F-156
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Wendys |
Manchester | TN | | (14) | 245 | 1,390 | | 1,635 | 31 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Wendys |
Louisville | KY | | (14) | 834 | 1,379 | | 2,213 | 38 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Wendys |
Horseheads | NY | | (14) | 72 | 1,369 | | 1,441 | 30 | 7/31/2013 | 1982 | |||||||||||||||||||||||
Wendys |
Hamilton | OH | | (14) | 908 | 1,362 | | 2,270 | 30 | 7/31/2013 | 2002 | |||||||||||||||||||||||
Wendys |
Madison | WI | | (14) | 454 | 1,362 | | 1,816 | 30 | 7/31/2013 | 1998 | |||||||||||||||||||||||
Wendys |
Hogansville | GA | | (14) | 240 | 1,359 | | 1,599 | 30 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Wendys |
Brentwood | TN | | (14) | 339 | 1,356 | | 1,695 | 30 | 7/31/2013 | 1982 | |||||||||||||||||||||||
Wendys |
Milwaukee | WI | | (14) | 338 | 1,351 | | 1,689 | 30 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Wendys |
Oak Creek | WI | | (14) | 577 | 1,347 | | 1,924 | 30 | 7/31/2013 | 1999 | |||||||||||||||||||||||
Wendys |
Dayton | OH | | (14) | 723 | 1,343 | | 2,066 | 30 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Wendys |
Springboro | OH | | (14) | 891 | 1,336 | | 2,227 | 29 | 7/31/2013 | 1979 | |||||||||||||||||||||||
Wendys |
Auburn | AL | | (14) | 718 | 1,334 | | 2,052 | 29 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Wendys |
Saint Marys | WV | | (14) | 70 | 1,322 | | 1,392 | 29 | 7/31/2013 | 2001 | |||||||||||||||||||||||
Wendys |
Fairburn | GA | | (14) | 1,076 | 1,316 | | 2,392 | 29 | 7/31/2013 | 2002 | |||||||||||||||||||||||
Wendys |
Nashville | TN | | (14) | 328 | 1,313 | | 1,641 | 29 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Wendys |
Sharpsburg | GA | | (14) | 649 | 1,299 | | 1,948 | 36 | 6/27/2013 | 2002 | |||||||||||||||||||||||
Wendys |
Connersville | IN | | (14) | 324 | 1,298 | | 1,622 | 29 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Wendys |
Hamilton | OH | | (14) | 697 | 1,295 | | 1,992 | 28 | 7/31/2013 | 1974 | |||||||||||||||||||||||
Wendys |
Kenosha | WI | | (14) | 322 | 1,290 | | 1,612 | 28 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Wendys |
Germantown | WI | | (14) | 419 | 1,257 | | 1,676 | 28 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Wendys |
Endicott | NY | | (14) | 313 | 1,253 | | 1,566 | 28 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Wendys |
Parkersburg | WV | | (14) | 311 | 1,243 | | 1,554 | 27 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Wendys |
Fitchburg | WI | | (14) | 662 | 1,230 | | 1,892 | 27 | 7/31/2013 | 2003 | |||||||||||||||||||||||
Wendys |
Louisville | KY | | (14) | 532 | 1,221 | | 1,753 | 34 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Wendys |
Corpus Christi | TX | | (14) | 646 | 1,199 | | 1,845 | 26 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Wendys |
Fort Smith | AR | | 195 | 1,186 | | 1,381 | 33 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
Wendys |
Columbus | GA | | (14) | 743 | 1,185 | | 1,928 | 33 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Wendys |
Phenix City | AL | | (14) | 529 | 1,178 | | 1,707 | 33 | 6/27/2013 | 2005 | |||||||||||||||||||||||
Wendys |
Millville | NJ | | 373 | 1,169 | | 1,542 | 32 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
Wendys |
El Dorado | AR | | 413 | 1,151 | | 1,564 | 32 | 6/27/2013 | 1975 | ||||||||||||||||||||||||
Wendys |
Greenfield | WI | | (14) | 487 | 1,137 | | 1,624 | 25 | 7/31/2013 | 2001 | |||||||||||||||||||||||
Wendys |
Middletown | OH | | (14) | 755 | 1,133 | | 1,888 | 25 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Wendys |
Fairmont | WV | | (14) | 224 | 1,119 | | 1,343 | 31 | 6/27/2013 | 1983 | |||||||||||||||||||||||
Wendys |
Sayre | PA | | (14) | 372 | 1,115 | | 1,487 | 25 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Wendys |
Nashville | TN | | (14) | 592 | 1,100 | | 1,692 | 24 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Wendys |
Murfreesboro | TN | | (14) | 586 | 1,088 | | 1,674 | 24 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Wendys |
Miamisburg | OH | | (14) | 888 | 1,086 | | 1,974 | 24 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Wendys |
Auburn | NY | | (14) | 465 | 1,085 | | 1,550 | 24 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Wendys |
West Allis | WI | | (14) | 583 | 1,083 | | 1,666 | 24 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Wendys |
Bourbonnais | IL | | (14) | 346 | 1,039 | | 1,385 | 23 | 7/31/2013 | 1993 | |||||||||||||||||||||||
Wendys |
Stuttgart | AR | | (14) | 67 | 1,038 | | 1,105 | 29 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Wendys |
Baltimore | MD | | (14) | 904 | 1,036 | | 1,940 | 29 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Wendys |
Lancaster | OH | | (14) | 552 | 1,025 | | 1,577 | 23 | 7/31/2013 | 1984 |
F-157
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Wendys |
Pine Bluff | AR | | (14) | 221 | 1,022 | | 1,243 | 28 | 6/27/2013 | 1989 | |||||||||||||||||||||||
Wendys |
Benton | AR | | 478 | 1,018 | | 1,496 | 28 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
Wendys |
Fort Smith | AR | | 63 | 1,016 | | 1,079 | 28 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
Wendys |
Milwaukee | WI | | (14) | 436 | 1,016 | | 1,452 | 22 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Wendys |
Sheboygan | WI | | (14) | 676 | 1,014 | | 1,690 | 22 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Wendys |
Saint Bernard | OH | | (14) | 432 | 1,009 | | 1,441 | 22 | 7/31/2013 | 1985 | |||||||||||||||||||||||
Wendys |
Lebanon | VA | | (14) | 431 | 1,006 | | 1,437 | 22 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Wendys |
Mokena | IL | | (14) | 665 | 997 | | 1,662 | 22 | 7/31/2013 | 1992 | |||||||||||||||||||||||
Wendys |
Richmond | IN | | (14) | 661 | 992 | | 1,653 | 22 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Wendys |
Birmingham | AL | | (14) | 562 | 990 | | 1,552 | 27 | 6/27/2013 | 2005 | |||||||||||||||||||||||
Wendys |
Ponca City | OK | | (14) | 529 | 983 | | 1,512 | 22 | 7/31/2013 | 1979 | |||||||||||||||||||||||
Wendys |
South Hill | VA | | 313 | 976 | | 1,289 | 27 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
Wendys |
Hillsville | VA | | (14) | 324 | 973 | | 1,297 | 21 | 7/31/2013 | 2001 | |||||||||||||||||||||||
Wendys |
Fairfield | OH | | (14) | 794 | 971 | | 1,765 | 21 | 7/31/2013 | 1981 | |||||||||||||||||||||||
Wendys |
Janesville | WI | | (14) | 647 | 971 | | 1,618 | 21 | 7/31/2013 | 1991 | |||||||||||||||||||||||
Wendys |
Parkersburg | WV | | (14) | 241 | 964 | | 1,205 | 21 | 7/31/2013 | 1996 | |||||||||||||||||||||||
Wendys |
Joliet | IL | | (14) | 642 | 963 | | 1,605 | 21 | 7/31/2013 | 1977 | |||||||||||||||||||||||
Wendys |
Cortland | NY | | (14) | 635 | 952 | | 1,587 | 21 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Wendys |
Norwich | CT | | 703 | 937 | | 1,640 | 26 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
Wendys |
Minden | LA | | (14) | 182 | 936 | | 1,118 | 26 | 6/27/2013 | 2001 | |||||||||||||||||||||||
Wendys |
Bowling Green | OH | | 502 | 932 | | 1,434 | 20 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Wendys |
Beloit | WI | | (14) | 1,138 | 931 | | 2,069 | 20 | 7/31/2013 | 2002 | |||||||||||||||||||||||
Wendys |
West Chester | OH | | (14) | 616 | 924 | | 1,540 | 20 | 7/31/2013 | 2005 | |||||||||||||||||||||||
Wendys |
Morrow | GA | | (14) | 755 | 922 | | 1,677 | 20 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Wendys |
Middletown | OH | | (14) | 752 | 920 | | 1,672 | 20 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Wendys |
Rogers | AR | | 579 | 912 | | 1,491 | 25 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
Wendys |
Searcy | AR | | 247 | 905 | | 1,152 | 25 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
Wendys |
Groton | CT | | 1,099 | 900 | | 1,999 | 20 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
Wendys |
Anderson | SC | | 734 | 897 | | 1,631 | 20 | 7/31/2013 | 1979 | ||||||||||||||||||||||||
Wendys |
Wytheville | VA | | (14) | 598 | 897 | | 1,495 | 20 | 7/31/2013 | 2003 | |||||||||||||||||||||||
Wendys |
Springdale | AR | | 323 | 896 | | 1,219 | 25 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
Wendys |
Pendleton | IN | | (14) | 448 | 895 | | 1,343 | 25 | 6/27/2013 | 2005 | |||||||||||||||||||||||
Wendys |
Enid | OK | | (14) | 158 | 893 | | 1,051 | 20 | 7/31/2013 | 2003 | |||||||||||||||||||||||
Wendys |
Buckhannon | WV | | (14) | 157 | 890 | | 1,047 | 20 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Wendys |
Parkersburg | WV | | (14) | 295 | 885 | | 1,180 | 19 | 7/31/2013 | 1979 | |||||||||||||||||||||||
Wendys |
Binghamton | NY | | (14) | 293 | 879 | | 1,172 | 19 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Wendys |
Little Rock | AR | | 278 | 878 | | 1,156 | 24 | 6/27/2013 | 1976 | ||||||||||||||||||||||||
Wendys |
Batesville | AR | | 155 | 878 | | 1,033 | 19 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
Wendys |
Buckeye Lake | OH | | (14) | 864 | 877 | | 1,741 | 24 | 6/27/2013 | 2000 | |||||||||||||||||||||||
Wendys |
Ripley | WV | | (14) | 273 | 871 | | 1,144 | 24 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Wendys |
West Carrollton | OH | | (14) | 708 | 865 | | 1,573 | 19 | 7/31/2013 | 1979 | |||||||||||||||||||||||
Wendys |
Whitehall | OH | | (14) | 716 | 863 | | 1,579 | 24 | 6/27/2013 | 1983 | |||||||||||||||||||||||
Wendys |
North Myrtle Beach | SC | | 464 | 861 | | 1,325 | 19 | 7/31/2013 | 1983 |
F-158
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Wendys |
Hayes | VA | | (14) | 304 | 859 | | 1,163 | 24 | 6/27/2013 | 1992 | |||||||||||||||||||||||
Wendys |
Lynn Haven | FL | | (14) | 446 | 852 | | 1,298 | 24 | 6/27/2013 | 2005 | |||||||||||||||||||||||
Wendys |
Panama City | FL | | (14) | 445 | 837 | | 1,282 | 23 | 6/27/2013 | 1987 | |||||||||||||||||||||||
Wendys |
Conway | AR | | 482 | 833 | | 1,315 | 23 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
Wendys |
Fayetteville | AR | | 408 | 830 | | 1,238 | 23 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
Wendys |
Payson | AZ | | 679 | 829 | | 1,508 | 18 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Wendys |
Springdale | AR | | 410 | 821 | | 1,231 | 23 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
Wendys |
Bridgeport | WV | | (14) | 273 | 818 | | 1,091 | 18 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Wendys |
Milwaukee | WI | | (14) | 810 | 810 | | 1,620 | 18 | 7/31/2013 | 1979 | |||||||||||||||||||||||
Wendys |
Burlington | WA | | 425 | 806 | | 1,231 | 22 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
Wendys |
Baltimore | MD | | (14) | 760 | 802 | | 1,562 | 22 | 6/27/2013 | 1995 | |||||||||||||||||||||||
Wendys |
The Dalles | OR | | 201 | 802 | | 1,003 | 18 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Wendys |
Eatontown | NJ | | (14) | 651 | 796 | | 1,447 | 17 | 7/31/2013 | 1987 | |||||||||||||||||||||||
Wendys |
Baton Rouge | LA | | 316 | 782 | | 1,098 | 22 | 6/27/2013 | 1998 | ||||||||||||||||||||||||
Wendys |
Douglasville | GA | | 605 | 776 | | 1,381 | 21 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
Wendys |
Lithia Springs | GA | | (14) | 668 | 774 | | 1,442 | 21 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Wendys |
Little Rock | AR | | 773 | 773 | | 1,546 | 17 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
Wendys |
West Chester | OH | | (14) | 944 | 772 | | 1,716 | 17 | 7/31/2013 | 1982 | |||||||||||||||||||||||
Wendys |
Titusville | FL | | 414 | 770 | | 1,184 | 17 | 7/31/2013 | 1996 | ||||||||||||||||||||||||
Wendys |
Titusville | FL | | (14) | 415 | 761 | | 1,176 | 21 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Wendys |
Crossville | TN | | (14) | 190 | 760 | | 950 | 17 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Wendys |
Anderson | IN | | (14) | 505 | 757 | | 1,262 | 17 | 7/31/2013 | 1995 | |||||||||||||||||||||||
Wendys |
Van Buren | AR | | 197 | 748 | | 945 | 21 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
Wendys |
New Berlin | WI | | (14) | 903 | 739 | | 1,642 | 16 | 7/31/2013 | 1983 | |||||||||||||||||||||||
Wendys |
Anderson | IN | | (14) | 872 | 736 | | 1,608 | 20 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Wendys |
Madison Heights | MI | | (14) | 198 | 725 | | 923 | 20 | 6/27/2013 | 1998 | |||||||||||||||||||||||
Wendys |
Savannah | GA | | (14) | 720 | 720 | | 1,440 | 16 | 7/31/2013 | 2001 | |||||||||||||||||||||||
Wendys |
Anderson | IN | | (14) | 584 | 713 | | 1,297 | 16 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Wendys |
Bentonville | AR | | 648 | 708 | | 1,356 | 20 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
Wendys |
Anderson | IN | | (14) | 859 | 708 | | 1,567 | 20 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Wendys |
Cabot | AR | | 524 | 707 | | 1,231 | 20 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
Wendys |
Mechanicsville | VA | | (14) | 521 | 704 | | 1,225 | 20 | 6/27/2013 | 1988 | |||||||||||||||||||||||
Wendys |
Vienna | WV | | (14) | 301 | 702 | | 1,003 | 15 | 7/31/2013 | 1976 | |||||||||||||||||||||||
Wendys |
Melbourne | FL | | (14) | 550 | 681 | | 1,231 | 19 | 6/27/2013 | 1993 | |||||||||||||||||||||||
Wendys |
Tinton Falls | NJ | | 874 | 671 | | 1,545 | 19 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
Wendys |
Creedmoor | NC | | 533 | 663 | | 1,196 | 18 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
Wendys |
Little Rock | AR | | (14) | 532 | 650 | | 1,182 | 14 | 7/31/2013 | 1978 | |||||||||||||||||||||||
Wendys |
Russellville | AR | | 356 | 638 | | 994 | 18 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
Wendys |
Arkadelphia | AR | | 225 | 633 | | 858 | 18 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
Wendys |
Greenville | SC | | 516 | 631 | | 1,147 | 14 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
Wendys |
San Antonio | TX | | 268 | 630 | | 898 | 17 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
Wendys |
Christiansburg | VA | | (14) | 416 | 624 | | 1,040 | 14 | 7/31/2013 | 1980 | |||||||||||||||||||||||
Wendys |
Little Rock | AR | | 990 | 623 | | 1,613 | 17 | 6/27/2013 | 1982 |
F-159
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Wendys |
Woodbridge | VA | | (14) | 521 | 615 | | 1,136 | 17 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Wendys |
Indialantic | FL | | (14) | 592 | 614 | | 1,206 | 17 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Wendys |
North Haven | CT | | 729 | 610 | | 1,339 | 17 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
Wendys |
Conway | AR | | 478 | 594 | | 1,072 | 16 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
Wendys |
Anniston | AL | | (14) | 454 | 591 | | 1,045 | 16 | 6/27/2013 | 1976 | |||||||||||||||||||||||
Wendys |
Merritt Island | FL | | 720 | 589 | | 1,309 | 13 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
Wendys |
Bryant | AR | | 529 | 575 | | 1,104 | 16 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
Wendys |
Spartanburg | SC | | 699 | 572 | | 1,271 | 13 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
Wendys |
Port Orange | FL | | (14) | 695 | 569 | | 1,264 | 13 | 7/31/2013 | 1996 | |||||||||||||||||||||||
Wendys |
Cocoa | FL | | (14) | 249 | 567 | | 816 | 16 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Wendys |
Ormond Beach | FL | | (14) | 626 | 561 | | 1,187 | 16 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Wendys |
North Tazewell | VA | | 124 | 560 | | 684 | 16 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
Wendys |
Stockbridge | GA | | 480 | 558 | | 1,038 | 15 | 6/27/2013 | 1897 | ||||||||||||||||||||||||
Wendys |
North Little Rock | AR | | 420 | 551 | | 971 | 15 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
Wendys |
Memphis | TN | | 227 | 530 | | 757 | 12 | 7/31/2013 | 1980 | ||||||||||||||||||||||||
Wendys |
Panama City | FL | | (14) | 461 | 529 | | 990 | 15 | 6/27/2013 | 1984 | |||||||||||||||||||||||
Wendys |
Tallahassee | FL | | (14) | 952 | 514 | | 1,466 | 14 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Wendys |
Austell | GA | | (14) | 383 | 506 | | 889 | 14 | 6/27/2013 | 1994 | |||||||||||||||||||||||
Wendys |
Indianapolis | IN | | 214 | 505 | | 719 | 14 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
Wendys |
Tallahassee | FL | | (14) | 855 | 505 | | 1,360 | 14 | 6/27/2013 | 1986 | |||||||||||||||||||||||
Wendys |
Ormond Beach | FL | | (14) | 503 | 503 | | 1,006 | 11 | 7/31/2013 | 1984 | |||||||||||||||||||||||
Wendys |
Little Rock | AR | | 501 | 501 | | 1,002 | 11 | 7/31/2013 | 1983 | ||||||||||||||||||||||||
Wendys |
Bellevue | NE | | (14) | 338 | 484 | | 822 | 13 | 6/27/2013 | 1981 | |||||||||||||||||||||||
Wendys |
Eastman | GA | | (14) | 258 | 473 | | 731 | 13 | 6/27/2013 | 1996 | |||||||||||||||||||||||
Wendys |
Little Rock | AR | | 605 | 463 | | 1,068 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Wendys |
Fayetteville | AR | | (14) | 463 | 463 | | 926 | 10 | 7/31/2013 | 1989 | |||||||||||||||||||||||
Wendys |
San Antonio | TX | | 410 | 451 | | 861 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
Wendys |
Columbia | SC | | 425 | 438 | | 863 | 12 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
Wendys |
Brunswick | GA | | (14) | 306 | 435 | | 741 | 12 | 6/27/2013 | 1985 | |||||||||||||||||||||||
Wendys |
Pine Bluff | AR | | 105 | 433 | | 538 | 12 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
Wendys |
South Daytona | FL | | (14) | 531 | 432 | | 963 | 12 | 6/27/2013 | 1980 | |||||||||||||||||||||||
Wendys |
Starke | FL | | 383 | 419 | | 802 | 12 | 6/27/2013 | 1979 | ||||||||||||||||||||||||
Wendys |
Smyrna | GA | | 693 | 416 | | 1,109 | 12 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
Wendys |
Hot Springs | AR | | 593 | 395 | | 988 | 9 | 7/31/2013 | 1974 | ||||||||||||||||||||||||
Wendys |
New Smyrna Beach | FL | | (14) | 476 | 394 | | 870 | 11 | 6/27/2013 | 1982 | |||||||||||||||||||||||
Wendys |
San Antonio | TX | | 320 | 320 | | 640 | 9 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
Wendys |
Suitland | MD | | (14) | 332 | 275 | | 607 | 8 | 6/27/2013 | 1979 | |||||||||||||||||||||||
Wendys |
Landover | MD | | (14) | 340 | 267 | | 607 | 7 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Wendys |
Springs | TX | | 217 | 266 | | 483 | 6 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
Wendys |
Little Rock | AR | | 762 | 258 | | 1,020 | 7 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
Wendys |
Titusville | FL | | (14) | 528 | 239 | | 767 | 7 | 6/27/2013 | 1978 | |||||||||||||||||||||||
Wendys |
Homewood | AL | | 995 | | | 995 | | 6/27/2013 | N/A | ||||||||||||||||||||||||
Wendys |
Columbia | SC | | 1,368 | | | 1,368 | | 6/27/2013 | N/A |
F-160
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
Wendys |
Edmond | OK | | 791 | | | 791 | | 7/31/2013 | 1979 | ||||||||||||||||||||||||
West Fork Roadhouse |
Youngstown | OH | | 139 | 232 | | 371 | 7 | 6/27/2013 | 1976 | ||||||||||||||||||||||||
Whataburger |
El Campo | TX | | 693 | 1,013 | | 1,706 | 28 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
Whataburger |
Edna | TX | | (14) | 290 | 869 | | 1,159 | 19 | 7/31/2013 | 1986 | |||||||||||||||||||||||
Whataburger |
Lubbock | TX | | (14) | 432 | 647 | | 1,079 | 14 | 7/31/2013 | 1992 | |||||||||||||||||||||||
Whataburger |
Ingleside | TX | | 1,106 | 474 | | 1,580 | 10 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
Williams Fried Chicken |
Garland | TX | | 265 | 137 | | 402 | 4 | 6/27/2013 | 1983 | ||||||||||||||||||||||||
Winn Dixie |
Jacksonville | FL | | (14) | 4,360 | 82,825 | | 87,185 | 2,736 | 4/24/2013 | 2000 | |||||||||||||||||||||||
Zebbs |
Amherst | NY | | (14) | 150 | 1,347 | | 1,497 | 33 | 7/31/2013 | 1994 | |||||||||||||||||||||||
Zebbs |
Orchard Park | NY | | (14) | 69 | 1,320 | | 1,389 | 33 | 7/31/2013 | 2000 | |||||||||||||||||||||||
Zebbs |
Rochester | NY | | (14) | 126 | 1,137 | | 1,263 | 28 | 7/31/2013 | 1990 | |||||||||||||||||||||||
Zebbs |
New Hartford | NY | | (14) | 122 | 1,095 | | 1,217 | 27 | 7/31/2013 | 1970 | |||||||||||||||||||||||
ZTejas Grill |
Austin | TX | | (14) | 837 | 1,797 | | 2,634 | 52 | 6/27/2013 | 2007 | |||||||||||||||||||||||
Capitalized land value on DFLs |
| 6,932 | | | 6,932 | | ||||||||||||||||||||||||||||
Encumbrances allocated based on notes below |
2,152,878 | |||||||||||||||||||||||||||||||||
|
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|
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|
|
|
|
|||||||||||||||||||||||
Total |
$ | 3,228,461 | $ | 1,382,232 | $ | 5,311,406 | $ | 5,909 | $ | 6,699,547 | $ | 205,712 | ||||||||||||||||||||||
|
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|
(1) | These properties collateralize a senior corporate credit facility of up to $2.42 billion, which had $1.06 billion outstanding as of December 31, 2013. |
(2) | These properties collateralize a $150.0 million secured credit facility, which had $150.0 million outstanding as of December 31, 2013. |
(3) | These properties collateralize a $54.3 million mortgage note payable of which $54.3 million was outstanding as of December 31, 2013. |
(4) | These properties collateralize a $48.5 million mortgage note payable of which $48.5 million was outstanding as of December 31, 2013. |
(5) | These properties collateralize a $36.6 million mortgage note payable of which $36.6 million was outstanding as of December 31, 2013. |
(6) | These properties collateralize a $12.3 million mortgage note payable of which $12.3 million was outstanding as of December 31, 2013. |
(7) | These properties collateralize a $15.0 million mortgage note payable of which $15.0 million was outstanding as of December 31, 2013. |
(8) | These properties collateralize a $4.5 million mortgage note payable of which $4.5 million was outstanding as of December 31, 2013. |
(9) | These properties collateralize a $11.9 million mortgage note payable of which $11.9 million was outstanding as of December 31, 2013. |
(10) | Acquired intangible lease assets allocated to individual properties in the amount of $759.6 million are not reflected in the table above. |
(11) | The tax basis of aggregate land, buildings and improvements as of December 31, 2013 was $5.1 million. |
(12) | The accumulated depreciation column excludes $48.1 million of amortization associated with acquired intangible lease assets. |
(13) | Depreciation is computed using the straight-line method over the estimated useful lives of up to forty years for buildings, five to fifteen years for building fixtures and improvements. |
(14) | These properties collateralize a senior corporate facility of up to $800.0 million, which had $760.0 million outstanding as of December 31, 2013. |
A summary of activity for real estate and accumulated depreciation for the year ended December 31, 2013 (amounts in thousands):
Year ended December 31, 2013 | ||||
Real estate investments, at cost: |
||||
Balance at beginning of year |
$ | 1,684,115 | ||
Additions - acquisitions and improvements |
5,019,135 | |||
Deductions - impairments |
(3,703 | ) | ||
|
|
|||
Balance at end of the year |
$ | 6,699,547 | ||
|
|
|||
Accumulated depreciation: |
||||
Balance at beginning of year |
$ | 45,050 | ||
Depreciation expense |
160,662 | |||
|
|
|||
Balance at end of the year |
$ | 205,712 | ||
|
|
F-161
AMERICAN REALTY CAPITAL PROPERTIES, INC.
SCHEDULE IV
December 31, 2013
(In thousands)
Description |
Location |
Interest Rate |
Final Maturity Date |
Periodic Payment Terms |
Prior Liens |
Face Amount of Mortgages |
Carrying Amount of Mortgages |
Principal Amount of Loans Subject to Delinquent Principal or Interest |
||||||||||||||||
Long-Term Mortgage Loans |
||||||||||||||||||||||||
Bank Of America, N.A. |
Mt. Airy, MD | 6.42 | % | Dec 2026 | Principal and interest are payable monthly at a varying amount over the life to maturity |
$ | 2,973 | $ | 3,329 | $ | | |||||||||||||
CVS Caremark Corporation |
Evansville, IN | 6.22 | % | Jan 2033 | Principal and interest are payable monthly at a level amount over the life to maturity |
2,932 | 3,268 | | ||||||||||||||||
CVS Caremark Corporation |
Greensboro, GA | 6.52 | % | Jan 2030 | Principal and interest are payable monthly at a level amount over the life to maturity |
1,133 | 1,289 | | ||||||||||||||||
CVS Caremark Corporation |
Shelby Twp., MI | 5.98 | % | Jan 2031 | Principal and interest are payable monthly at a varying amount over the life to maturity |
2,237 | 2,443 | | ||||||||||||||||
Koninklijke Ahold, N.V. |
Bensalem, PA | 7.24 | % | May 2020 | Principal and interest are payable monthly at a varying amount over the life to maturity |
2,083 | 2,384 | | ||||||||||||||||
Lowes Companies, Inc. |
Framingham, MA | N/A | Sep 2031 | Principal and interest are payable monthly at a varying amount over the life to maturity |
5,692 | 1,399 | | |||||||||||||||||
Walgreen Co. |
Dallas, TX | 6.46 | % | Dec 2029 | Principal and interest are payable monthly at a level amount over the life to maturity |
2,851 | 3,231 | | ||||||||||||||||
Walgreen Co. |
Nacogdoches, TX | 6.8 | % | Sep 2030 | Principal and interest are payable monthly at a level amount over the life to maturity |
3,084 | 3,561 | | ||||||||||||||||
Walgreen Co. |
Rosemead, CA | 6.26 | % | Dec 2029 | Principal and interest are payable monthly at a level amount over the life to maturity |
4,369 | 4,888 | | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
$ | 27,354 | $ | 25,792 | $ | | |||||||||||||||||||
Corporate Credit Notes |
||||||||||||||||||||||||
Federal Express Corporation |
Bellingham, WA | 5.78 | % | Mar 2015 | Principal and interest are payable monthly at a level amount over the life to maturity |
$ | 81 | $ | 83 | $ | | |||||||||||||
Lowes Companies, Inc. |
N. Windham, ME | 5.28 | % | Sep 2015 | Principal and interest are payable monthly at a level amount over the life to maturity |
256 | 261 | | ||||||||||||||||
Walgreen Co. |
Jefferson City, TN | 5.49 | % | May 2015 | Principal and interest are payable monthly at a level amount over the life to maturity |
140 | 143 | | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
$ | 477 | $ | 487 | $ | | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 27,831 | $ | 26,279 | $ | | ||||||||||||||||||
|
|
|
|
|
|
Carrying Amount of Mortgages |
||||
Balance - November 5, 2013 |
$ | 26,457 | ||
Additions during the year: |
||||
New Loan Investments |
| |||
Deductions during the year: |
||||
Principal received |
(164 | ) | ||
Allowance for loan losses |
| |||
Amortization of unearned discounts and premiums |
(14 | ) | ||
|
|
|||
Balance - December 31, 2013 |
$ | 26,279 | ||
|
|
F-162
Exhibit 4.1
EXECUTION COPY
THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
(a Delaware limited partnership)
TABLE OF CONTENTS
Page | ||||||
ARTICLE I DEFINED TERMS |
2 | |||||
ARTICLE II FORMATION OF PARTNERSHIP |
23 | |||||
2.01 |
Formation of the Partnership |
23 | ||||
2.02 |
Name |
23 | ||||
2.03 |
Registered Office and Agent; Principal Office |
23 | ||||
2.04 |
Term and Dissolution |
23 | ||||
2.05 |
Filing of Certificate and Perfection of Limited Partnership |
24 | ||||
2.06 |
Certificates Describing Partnership Units |
25 | ||||
ARTICLE III BUSINESS OF THE PARTNERSHIP |
25 | |||||
ARTICLE IV CAPITAL CONTRIBUTIONS AND ACCOUNTS |
26 | |||||
4.01 |
Capital Contributions |
26 | ||||
4.02 |
Additional Capital Contributions and Issuances of Additional Partnership Units |
26 | ||||
4.03 |
Additional Funding |
30 | ||||
4.04 |
Capital Accounts |
30 | ||||
4.05 |
Percentage Interests |
30 | ||||
4.06 |
No Interest on Contributions |
30 | ||||
4.07 |
Return of Capital Contributions |
30 | ||||
4.08 |
No Third-Party Beneficiary |
30 | ||||
ARTICLE V NET INCOME AND NET LOSS; DISTRIBUTIONS |
31 | |||||
5.01 |
Allocations |
31 | ||||
5.02 |
Distribution of Cash |
38 | ||||
5.03 |
REIT Distribution Requirements |
41 | ||||
5.04 |
No Right to Distributions in Kind |
41 | ||||
5.05 |
Limitations on Distributions |
41 | ||||
5.06 |
Distributions Upon Liquidation |
41 | ||||
5.07 |
Substantial Economic Effect / Savings Clause |
42 | ||||
ARTICLE VI RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER |
43 | |||||
6.01 |
Management of the Partnership |
43 | ||||
6.02 |
Delegation of Authority |
46 | ||||
6.03 |
Indemnification and Exculpation of Indemnitees |
46 | ||||
6.04 |
Liability of the General Partner |
47 | ||||
6.05 |
Partnership Obligations |
48 | ||||
6.06 |
Outside Activities |
49 | ||||
6.07 |
Employment or Retention of Affiliates |
49 | ||||
6.08 |
General Partner Activities |
50 | ||||
6.09 |
Title to Partnership Assets |
50 | ||||
6.10 |
Redemption of General Partners Partnership Units |
50 |
i
ARTICLE VII CHANGES IN GENERAL PARTNER |
50 | |||||
7.01 |
Transfer of the General Partners Partnership Interest |
50 | ||||
7.02 |
Merger of General Partner |
51 | ||||
7.03 |
Admission of a Substitute or Additional General Partner |
52 | ||||
7.04 |
Effect of Bankruptcy, Withdrawal, Death or Dissolution of General Partner |
53 | ||||
7.05 |
Removal of General Partner |
53 | ||||
ARTICLE VIII RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS |
55 | |||||
8.01 |
Management of the Partnership |
55 | ||||
8.02 |
Power of Attorney |
55 | ||||
8.03 |
Limitation on Liability of Limited Partners |
55 | ||||
8.04 |
OP Unit Redemption Right |
55 | ||||
8.05 |
Registration |
58 | ||||
ARTICLE IX TRANSFERS OF PARTNERSHIP INTERESTS |
62 | |||||
9.01 |
Purchase for Investment |
62 | ||||
9.02 |
Restrictions on Transfer of Partnership Units |
63 | ||||
9.03 |
Admission of Substitute Limited Partner |
64 | ||||
9.04 |
Rights of Assignees of Partnership Units |
65 | ||||
9.05 |
Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner |
65 | ||||
9.06 |
Joint Ownership of Partnership Units |
66 | ||||
ARTICLE X BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS |
66 | |||||
10.01 |
Books and Records |
66 | ||||
10.02 |
Custody of Partnership Funds; Bank Accounts |
66 | ||||
10.03 |
Fiscal and Taxable Year |
67 | ||||
10.04 |
Annual Tax Information and Report |
67 | ||||
10.05 |
Tax Matters Partner; Tax Elections; Special Basis Adjustments |
67 | ||||
10.06 |
Reports to Limited Partners |
68 | ||||
ARTICLE XI AMENDMENT OF AGREEMENT; MERGER |
68 | |||||
11.01 |
Amendment of Agreement |
68 | ||||
11.02 |
Merger of Partnership |
69 | ||||
ARTICLE XII CLASS B UNITS |
69 | |||||
12.01 |
Designation and Number |
69 | ||||
12.02 |
Special Provisions |
70 | ||||
12.03 |
Voting |
70 | ||||
12.04 |
Conversion of Class B Units |
71 | ||||
12.05 |
Profits Interests |
73 | ||||
ARTICLE XIII LTIP UNITS |
74 | |||||
13.01 |
LTIP Units |
74 | ||||
13.02 |
Conversion of LTIP Units |
79 |
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ARTICLE XIV SERIES C PREFERRED UNITS |
81 | |||||
14.01 |
Number of Preferred Units and Designation |
81 | ||||
14.02 |
Ranking |
82 | ||||
14.03 |
Distributions |
82 | ||||
14.04 |
Conversion |
82 | ||||
14.05 |
Redemption |
82 | ||||
14.06 |
Voting |
82 | ||||
14.07 |
Transfers |
83 | ||||
14.08 |
Miscellaneous |
83 | ||||
ARTICLE XV SERIES D PREFERRED UNITS |
83 | |||||
15.01 |
Number of Preferred Units and Designation |
83 | ||||
15.02 |
Ranking |
83 | ||||
15.03 |
Distributions |
83 | ||||
15.04 |
Conversion |
84 | ||||
15.05 |
Redemption |
84 | ||||
15.06 |
Voting |
84 | ||||
15.07 |
Transfers |
85 | ||||
15.08 |
Miscellaneous |
85 | ||||
ARTICLE XVI SERIES E PREFERRED UNITS |
85 | |||||
ARTICLE XVII SERIES F PREFERRED UNITS |
85 | |||||
17.01 |
Number of Preferred Units and Designation |
85 | ||||
17.02 |
Ranking |
85 | ||||
17.03 |
Distributions |
86 | ||||
17.04 |
Conversion |
86 | ||||
17.05 |
Redemption |
86 | ||||
17.06 |
Voting |
87 | ||||
17.07 |
Transfers |
87 | ||||
17.08 |
Miscellaneous |
87 | ||||
ARTICLE XVIII GENERAL PROVISIONS |
88 | |||||
18.01 |
Notices |
88 | ||||
18.02 |
Survival of Rights |
88 | ||||
18.03 |
Additional Documents |
88 | ||||
18.04 |
Severability |
88 | ||||
18.05 |
Entire Agreement |
88 | ||||
18.06 |
Pronouns and Plurals |
88 | ||||
18.07 |
Headings |
89 | ||||
18.08 |
Counterparts |
89 | ||||
18.09 |
Governing Law |
89 | ||||
EXHIBITS |
||||||
EXHIBIT A Partners, Capital Contributions and Percentage Interests |
||||||
EXHIBIT B Notice of Exercise of OP Unit Redemption Right |
iii
EXHIBIT C-1 Certification of Non-Foreign Status (For Redeeming Limited Partners That Are Entities) |
||||
EXHIBIT C-2 Certification of Non-Foreign Status (For Redeeming Limited Partners That Are Individuals) |
||||
EXHIBIT D Notice of Election by Partner to Convert LTIP Units into OP Units |
||||
EXHIBIT E Notice of Election by Partnership to Force Conversion of LTIP Units into OP Units |
iv
THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
RECITALS
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this Agreement) of ARC PROPERTIES OPERATING PARTNERSHIP, L.P. (the Partnership), effective as of January 3, 2014, is entered into among American Realty Capital Properties, Inc., a Maryland corporation (in its capacity as general partner of the Partnership, together with its successors and permitted assigns that are admitted to the Partnership as a general partner of the Partnership in accordance with the terms hereof, the General Partner), the Limited Partners listed on Exhibit A and any other limited partner or general partner that is admitted from time to time to the Partnership and listed on Exhibit A attached hereto, on February 26, 2014.
WHEREAS, the General Partner formed the Partnership as a limited partnership on January 13, 2011 pursuant to the Revised Uniform Limited Partnership Act of the State of Delaware and filed a Certificate of Limited Partnership of the Partnership with the Secretary of State of the State of Delaware.
WHEREAS, the General Partner and AR Capital, LLC (formerly known as American Realty Capital II, LLC), a Delaware limited liability company (the Initial Limited Partner) entered into the Agreement of Limited Partnership on January 13, 2011 (the Original Agreement).
WHEREAS, the General Partner, the Initial Limited Partner and ARC Real Estate Partners, LLC, a Delaware limited liability company, entered into the Amended and Restated Agreement of Limited Partnership, dated as of September 6, 2011, as amended by that certain First Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of May 11, 2012, as further amended by that certain Second Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of May 31, 2012, as further amended by that certain Third Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of July 24, 2012, and as further amended by that certain Fourth Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of December 28, 2012 (as amended, the Amended Agreement).
WHEREAS, the Second Amended and Restated Agreement of Limited Partnership was entered into, dated as of February 28, 2013, as amended by that certain First Amendment to the Second Amended and Restated Agreement of Limited Partnership, dated as of October 14, 2013, and that certain Second Amendment to the Second Amended and Restated Agreement of Limited Partnership, made as of December 31, 2013 (as amended, the Second Amended Agreement).
WHEREAS, the General Partner desires to amend and restate the Second Amended Agreement in its entirety with this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Amended Agreement is hereby amended, restated, superseded and replaced in its entirety and the parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
The following defined terms used in this Agreement shall have the meanings specified below:
Act means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time.
Additional Funds has the meaning set forth in Section 4.03.
Additional Securities has the meaning set forth in Section 4.02(a)(ii).
Adjusted Capital Account Deficit means, with respect to any Partner, the negative balance, if any, in such Partners Capital Account as of the end of any relevant fiscal year, determined after giving effect to the following adjustments:
(a) credit to such Capital Account any portion of such negative balance which such Partner (i) is treated as obligated to restore to the Partnership pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of the Regulations, or (ii) is deemed to be obligated to restore to the Partnership pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
Adjustment Events means the following events: (a) the Partnership makes a distribution on all outstanding OP Units in Partnership Units, (b) the Partnership subdivides the outstanding OP Units into a greater number of units or combines the outstanding OP Units into a smaller number of units, or (c) the Partnership issues any Partnership Units in exchange for its outstanding OP Units by way of a reclassification or recapitalization of its OP Units. For the avoidance of doubt, the following events shall not be Adjustment Events: (x) the issuance of Partnership Units in a financing, reorganization, acquisition or other similar business transaction, (y) the issuance of Partnership Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan, or (z) the issuance of any Partnership Units to the General Partner in respect of a capital contribution to the Partnership of proceeds from the sale of securities by the General Partner.
Administrative Expenses means (a) all administrative and operating costs and expenses incurred by the Partnership, (b) administrative costs and expenses of the General Partner, including any salaries or other payments to directors, officers or employees of the
2
General Partner, and any accounting and legal expenses of the General Partner, which expenses, the Partners have agreed, shall be treated as expenses of the Partnership and not the General Partner, and (c) to the extent not included in clauses (a) or (b) above, REIT Expenses; provided, however, that Administrative Expenses shall not include any administrative costs and expenses incurred by the General Partner that are attributable to Properties or interests in a Subsidiary that are owned by the General Partner other than through its ownership interest in the Partnership.
Affected Gain has the meaning set forth in Section 5.01(f)(ii).
Affiliate means, (a) any Person that, directly or indirectly, controls or is controlled by or is under common control with such Person, (b) any other Person that owns, beneficially, directly or indirectly, 10% or more of the outstanding capital stock, shares or equity interests of such Person, or (c) any officer, director, employee, partner, member, manager or trustee of such Person or any Person controlling, controlled by or under common control with such Person (excluding trustees and Persons serving in similar capacities who are not otherwise an Affiliate of such Person). For the purposes of this definition, control (including the correlative meanings of the terms controlled by and under common control with), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, through the ownership of voting securities or partnership interests or otherwise.
Aggregate Share Ownership Limit has the meaning set forth in the Charter.
Agreed Value means the fair market value of a Partners non-cash Capital Contribution as of the date of contribution as agreed to by such Partner and the General Partner. The names and addresses of the Partners, number of Partnership Units issued to each Partner, and the Agreed Value of non-cash Capital Contributions as of the date of contribution are set forth on Exhibit A, as it may be amended or restated from time to time.
Agreement means this Second Amended and Restated Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time.
ARCA III Limited Partner means American Realty Capital Advisors III, LLC, its successors and assigns.
ARCA IV Limited Partner means American Realty Capital Advisors IV, LLC, its successors and assigns.
AREP Limited Partner means ARC Real Estate Partners, LLC, its successors and assigns.
Available Cash means, with respect to the applicable period of measurement (i.e., any period (other than the first period in which this calculation of Available Cash is being made) beginning on the first day of the fiscal year, quarter or other period commencing immediately after the last day of the fiscal year, quarter or other applicable period for purposes of the prior calculation of Available Cash for or with respect to which a distribution has been made, and ending on the last day of the fiscal year, quarter or other applicable period immediately preceding the date of the calculation), the excess, if any, as of such date, of
3
(a) the gross cash receipts of the Partnership for such period from all sources whatsoever, including the following:
(i) all rents, revenues, income and proceeds derived by the Partnership from its operations, including distributions received by the Partnership from any Entity in which the Partnership has an interest;
(ii) all proceeds and revenues received by the Partnership on account of any sales of any Property or as a refinancing of or payment of principal, interest, costs, fees, penalties or otherwise on account of any borrowings or loans made by the Partnership or financings or refinancings of any property of the Partnership;
(iii) the amount of any insurance proceeds and condemnation awards received by the Partnership;
(iv) all Capital Contributions and loans received by the Partnership from its Partners;
(v) all cash amounts previously reserved by the Partnership, to the extent such amounts are no longer needed for the specific purposes for which such amounts were reserved; and
(vi) the proceeds of liquidation of the Property in accordance with this Agreement;
over
(b) the sum of the following:
(i) all operating costs and expenses, including taxes and other expenses of the Properties and capital expenditures made during such period (without deduction, however, for any capital expenditures, charges for Depreciation or other expenses not paid in cash or expenditures from reserves described in clause (viii) below);
(ii) all costs and expenses expended or paid during such period in connection with the sale or other disposition, or financing or refinancing, of Property or the recovery of insurance or condemnation proceeds;
(iii) all fees provided for under this Agreement;
(iv) all debt service, including principal and interest, paid during such period on all indebtedness (including under any line of credit) of the Partnership;
(v) all capital contributions, advances, reimbursements, loans or similar payments made to any Person in which the Partnership has an interest;
4
(vi) all loans made by the Partnership in accordance with the terms of this Agreement;
(vii) all reimbursements to the General Partner or its Affiliates during such period; and
(viii) the amount of any new reserve or reserves or increase in reserves established during such period which the General Partner determines is necessary or appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash received or reductions in reserves, or take into account any disbursements made or reserves established, after commencement of the dissolution and liquidation of the Partnership.
Average Class B Economic Capital Account Balance means, with respect to a Limited Partner owning Class B Units, an amount equal to the quotient of (a) the Class B Economic Capital Account Balance of such Limited Partner divided by (b) the number of Class B Units owned by such Limited Partner.
Average LTIP Economic Capital Account Balance means, with respect to a Limited Partner owning LTIP Units, an amount equal to the quotient of (a) the LTIP Economic Capital Account Balance of such Limited Partner divided by (b) the number of LTIP Units owned by such Limited Partner.
Board of Directors means the Board of Directors of the General Partner.
Business Day means any day other than Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open.
Capital Account means with respect to any Partner, the Capital Account maintained for such Partner in accordance with the following provisions:
(a) to each Partners Capital Account there shall be credited:
(i) such Partners Capital Contributions;
(ii) such Partners distributive share of Net Income, Net Property Gain and any items in the nature of income or gain which are specially allocated to such Partner pursuant to Sections 5.01(c) and 5.01(d); and
(iii) the amount of any Partnership liabilities assumed by such Partner or which are secured by any asset distributed to such Partner;
(b) to each Partners Capital Account there shall be debited:
(i) the amount of cash and the Gross Asset Value of any property distributed to such Partner pursuant to any provision of this Agreement;
5
(ii) such Partners distributive share of Net Loss, Net Property Loss and any items in the nature of expenses or losses which are specially allocated to such Partner pursuant to Sections 5.01(c), 5.01(d) and 15.05(d); and
(iii) the amount of any liabilities of such Partner assumed by the Partnership or which are secured by any asset contributed by such Partner to the Partnership; and
(c) if all or a portion of a Partnership Interest is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Sections 1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and applied in a manner consistent with such Regulations. If the General Partner shall reasonably determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including debits or credits relating to liabilities which are secured by contributed or distributed assets or which are assumed by the Partnership, the General Partner or any Limited Partner) are computed in order to comply with such Regulations, the General Partner may make such modification; provided, however, that all allocations of Partnership income, gain, loss and deduction continue to have substantial economic effect within the meaning of Section 704(b) of the Code and that no Limited Partner is materially adversely affected by any such modification.
Capital Account Limitation has the meaning set forth in Section 13.02(b) hereof.
Capital Contribution means the total amount of cash, cash equivalents, and the Agreed Value of any Property (less any liabilities assumed with respect to such Property) or other asset contributed or agreed to be contributed, as the context requires, to the Partnership by each Partner pursuant to the terms of the Agreement. Any reference to the Capital Contribution of a Partner shall include the Capital Contribution made by a predecessor holder of the Partnership Interest of such Partner.
Cash Amount means an amount of cash per OP Unit equal to the Value of the REIT Shares Amount on the date of receipt by the Partnership and the General Partner of a Notice of Redemption.
Cash Available for Distribution means the Available Cash other than Net Sales Proceeds.
Certificate means any instrument or document that is required under the laws of the State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be signed and sworn to by the Partners (either by themselves or pursuant to the power-of-attorney granted to the General Partner in Section 8.02 hereof) and filed for recording in the appropriate public offices within the State of Delaware or such other jurisdiction to perfect or maintain the Partnership as a limited partnership, to effect the admission, withdrawal or substitution of any Partner of the Partnership, or to protect the limited liability of the Limited Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.
6
Change of Control means, as to the General Partner, the occurrence of any of the following:
(a) any person as such term is used in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof except that such term shall not include (A) the General Partner or any Subsidiaries of the General Partner, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the General Partner or any Affiliate of the General Partner, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, (D) any corporation owned, directly or indirectly, by the stockholders of the General Partner in substantially the same proportions as their ownership of common shares of the General Partner, or (E) any person or group as used in Rule 13d-1(b) under the Exchange Act, is or becomes the Beneficial Owner, as such term is defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the General Partner representing at least 35% of the combined voting power or common shares of the General Partner;
(b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors or whose election by the Board of Directors or nomination for election by the General Partners stockholders was approved by a vote of at least two thirds (2/3) of the Board of Directors then still in office cease for any reason to constitute at least a majority thereof;
(c) there is consummated a merger or consolidation of the General Partner or any Subsidiary of the General Partner with any other corporation, other than a merger or consolidation which would result in the voting securities of the General Partner outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the General Partner or any Subsidiary of the General Partner, more than 50% of the combined voting power and common shares of the General Partner or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or
(d) there is consummated an agreement for the sale or disposition by the General Partner of all or substantially all of the General Partners assets (or any transaction having a similar effect, including a liquidation) other than a sale or disposition by the General Partner of all or substantially all of the General Partners assets to an entity, more than fifty percent (50%) of the combined voting power and common shares of which is owned by stockholders of the General Partner in substantially the same proportions as their ownership of the common shares of the General Partner immediately prior to such sale.
Charter means the charter of the General Partner, as in effect from time to time.
Class B Conversion Date has the meaning set forth in Section 15.04(a).
Class B Economic Capital Account Balances mean the Capital Account balances of the Class B Units holders to the extent attributable to their ownership of Class B Units reduced by any forfeiture allocations in accordance with Section 15.05(d) due to the forfeiture of any Class B Units.
7
Class B Unit means a Partnership Unit which is designated as a Class B Unit of the Partnership.
Code means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time. Reference to any particular provision of the Code shall mean that provision in the Code at the date hereof and any successor provision of the Code.
Commission means the U.S. Securities and Exchange Commission.
Common Units means any class or series of Partnership Interest that does not have a priority or preference in the payment of distributions in the distribution of assets upon any Liquidation, including OP Units, Class B Units and LTIP Units.
Concurrent LTIP Distribution has the meaning provided in Section 5.02(a)(ii).
Concurrent Manager Distribution has the meaning provided in Section 5.02(a)(ii).
Constituent Person has the meaning set forth in Section 15.04(d).
Contributed Property means each property, partnership interest, contract right or other asset, in such form as may be permitted by the Act, contributed or deemed contributed to the Partnership by any Partner, including any interest in any successor partnership occurring as a result of a termination of the Partnership pursuant to Section 708 of Code.
Contribution Agreement means that certain contribution agreement, dated February 4, 2011, between the Partnership and ARC Real Estate Partners, LLC.
Conversion Factor means 1.0, provided, that in the event that the General Partner (a) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (b) subdivides its outstanding REIT Shares or (c) combines its outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on such date and, provided further, that in the event that an entity other than an Affiliate of the General Partner shall become General Partner pursuant to any merger, consolidation or combination of the General Partner with or into another entity (the Successor Entity), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one REIT Share is converted pursuant to such merger, consolidation or combination, determined as of the date of such merger, consolidation or combination. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; provided, however, that if the General Partner receives a Notice of Redemption after the record date, but prior to the effective date of such dividend, distribution, subdivision or combination, the Conversion Factor shall be determined as if the General Partner had received the Notice of Redemption immediately prior to the record date for such dividend, distribution, subdivision or combination.
8
Defaulting Limited Partner means a Limited Partner that has failed to pay any amount owed to the Partnership under a Partnership Loan within 15 days after demand for payment thereof is made by the Partnership.
Depreciation means, for each fiscal year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable for federal income tax purposes with respect to an asset for such fiscal year or other period, except that (a) with respect to any asset the Gross Asset Value of which differs from its adjusted tax basis for federal income tax purposes at the beginning of such fiscal year or other period and which difference is being eliminated by use of the remedial method as defined by Section 1.704-3(d) of the Regulations, Depreciation for such fiscal year or other period shall be the amount of book basis recovered for such fiscal year or other period under the rules prescribed by Section 1.704-3(d)(2) of the Regulations, and (b) with respect to any other asset the Gross Asset Value of which differs from its adjusted tax basis for federal income tax purposes at the beginning of such fiscal year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such fiscal year or other period bears to such beginning adjusted tax basis; provided, however, that in the case of clause (b) above, if the adjusted tax basis for federal income tax purposes of an asset at the beginning of such fiscal year or other period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the General Partner.
Distributable Amount has the meaning set forth in Section 5.02(d).
Distribution Triggering Event means the time at which the Partnership covers the payment of distributions on OP Units, that correspond with the General Partners cash dividends declared in respect of the REIT Shares, for the six immediately preceding months from the funds from operations (as defined by the National Association of Real Estate Investment Trusts from time to time), as determined in good faith for the General Partner, adjusted to exclude acquisition-related fees and expenses.
Entity means any general partnership, limited partnership, corporation, joint venture, trust, business trust, real estate investment trust, limited liability company, limited liability partnership, cooperative or association.
Event of Bankruptcy as to any Person means (a) the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978, as amended, or similar provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); (b) the insolvency or bankruptcy of such Person as finally determined by a court proceeding; (c) the filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; or (d) the commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by
9
such Person or by another, provided, that if such proceeding is commenced by another, such Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days.
Excepted Holder Limit has the meaning set forth in the Charter.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Forced Conversion has the meaning set forth in Section 13.02(c) hereof.
Forced Conversion Notice has the meaning set forth in Section 13.02(c) hereof.
General Partner has the meaning set forth in the first paragraph of this Agreement.
General Partner Loan means a loan extended by the General Partner to a Defaulting Limited Partner in the form of a payment on a Partnership Loan by the General Partner to the Partnership on behalf of the Defaulting Limited Partner.
General Partner Interest means the Partnership Interests held by the General Partner in its capacity as the general partner of the Partnership, which Partnership Interest is an interest as a general partner under the Act. The General Partner Interest may be expressed as a number of Partnership Units. A number of OP Units held by the General Partner equal to one-tenth of one percent (0.1%) of all outstanding Partnership Units shall be deemed to be the General Partner Interest. All other Partnership Units owned by the General Partner and any Partnership Units owned by any Affiliate or Subsidiary of the General Partner shall be considered to constitute a Limited Partnership Interest.
Gross Asset Value means, with respect to any asset of the Partnership, such assets adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, without reduction for liabilities, as determined by the contributing Partner and the Partnership on the date of contribution thereof;
(b) if the General Partner determines that an adjustment is necessary or appropriate to reflect the relative economic interests of the Partners, the Gross Asset Values of all Partnership assets shall be adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g) of the Regulations to equal their respective gross fair market values, without reduction for liabilities, as reasonably determined by the General Partner, as of the following times:
(i) Capital Contribution (other than a de minimis Capital Contribution) to the Partnership by a new or existing Partner as consideration for a Partnership Interest;
(ii) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership assets as consideration for the repurchase or redemption of a Partnership Interest;
10
(iii) the liquidation of the Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations; and
(iv) the grant of an interest in the Partnership (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Partnership by an existing Partner acting in a partner capacity, or by a new Partner acting in a partner capacity or in anticipation of becoming a Partner by such Partner;
(c) the Gross Asset Values of Partnership assets distributed to any Partner shall be the gross fair market values of such assets (taking Section 7701(g) of the Code into account) without reduction for liabilities, as determined by the General Partner as of the date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations (as set forth in Section 5.01(d)(vi)); provided, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph (d) to the extent that the General Partner determines that an adjustment pursuant to paragraph (b) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken into account with respect to the Partnerships assets for purposes of computing Net Income and Net Loss.
Indemnified Party has the meaning set forth in Section 8.05(f).
Indemnifying Party has the meaning set forth in Section 8.05(f).
Indemnitee means (i) any Person made a party to a proceeding by reason of its status as (A) the General Partner or (B) a director, manager or member of the General Partner or an officer or employee of the Partnership or the General Partner, and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.
Independent Director means a director of the General Partner who meets the NASDAQ requirements for an independent director as set forth from time to time.
Initial Limited Partner has the meaning set forth in the preamble.
Liability Shortfall has the meaning set forth in Section 5.01(f)(iv).
Limited Partner means any Person named as a Limited Partner on Exhibit A attached hereto, as it may be amended or restated from time to time, and any Person who becomes a Substitute Limited Partner or any additional Limited Partner, in such Persons capacity as a limited partner in the Partnership.
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Limited Partnership Interest means a Partnership Interest held by a Limited Partner at any particular time representing a fractional part of the Partnership Interest of all Limited Partners, and includes any and all benefits to which the holder of such a Limited Partnership Interest may be entitled as provided in this Agreement and in the Act, together with the obligations of such Limited Partner to comply with all the provisions of this Agreement and of the Act. Limited Partnership Interests may be expressed as a number of OP Units or other Partnership Units.
Liquidation means (a) a dissolution or winding up of the General Partner or the Partnership, whether voluntary or involuntary, (b) a consolidation or merger of the General Partner or the Partnership with and into one or more entities which are not affiliates of the General Partner or the Partnership which results in a Change in Control, or (c) a sale, transfer or other disposition (other than a deemed disposition pursuant to Section 708(b)(1)(B) of the Code and the Regulations thereunder) of all or substantially all of the General Partners or the Partnerships assets or a related series of transactions that, taken together, result in the sale, transfer or other disposition of all or substantially all of the General Partners or the Partnerships assets other than to an affiliate of the General Partner or the Partnership.
LTIP Award means each or any, as the context requires, LTIP Award issued under the OPP Agreement or otherwise having the economic rights and entitlements and such other rights and entitlements, and subject to the vesting, forfeiture and additional restrictions on transfer, as set forth in the applicable LTIP Award, including any amendments thereto.
LTIP Conversion Date has the meaning set forth in Section 13.02(b).
LTIP Conversion Notice has the meaning set forth in Section 13.02(b) hereof.
LTIP Conversion Right has the meaning set forth in Section 13.02(a) hereof.
LTIP Economic Capital Account Balances mean the Capital Account balances of the LTIP Units holders to the extent attributable to their ownership of LTIP Units reduced by any forfeiture allocations in accordance with Sections 13.01(c)(ii) and 13.01(e)(iv) due to the forfeiture of any LTIP Units.
LTIP Unit means a Partnership Unit which is designated as an LTIP Unit and which has the rights, preferences and other privileges designated in Section 5.01(c)(iv) and Article XVI hereof and elsewhere in this Agreement in respect of holders of LTIP Units. The allocation of LTIP Units among the Partners shall be set forth on Exhibit A, as the same may be amended from time to time.
LTIP Unit Distribution Participation Date means the date as of which an LTIP Unit is earned pursuant to the terms of an OPP Agreement.
LTIP Unitholder means a Partner that holds LTIP Units.
Majority in Interest means the Limited Partners holding more than fifty percent (50%) of the Percentage Interests of the Limited Partners.
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NASDAQ means The NASDAQ Stock Market.
Net Income or Net Loss means, for each fiscal year or other applicable period, an amount equal to the Partnerships taxable income or loss for such year or period as determined for federal income tax purposes by the General Partner, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a) of the Code shall be included in taxable income or loss), adjusted as follows:
(a) by including as an item of gross income any tax-exempt income received by the Partnership and not otherwise taken into account in computing Net Income or Net Loss;
(b) by treating as a deductible expense any expenditure of the Partnership described in Section 705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B) expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not otherwise taken into account in computing Net Income or Net Loss, including amounts paid or incurred to organize the Partnership (unless an election is made pursuant to Section 709(b) of the Code) or to promote the sale of interests in the Partnership and by treating deductions for any losses incurred in connection with the sale or exchange of Partnership property disallowed pursuant to Section 267(a)(1) or 707(b) of the Code as expenditures described in Section 705(a)(2)(B) of the Code;
(c) by taking into account Depreciation in lieu of depreciation, depletion, amortization and other cost recovery deductions taken into account in computing taxable income or loss;
(d) by computing gain or loss resulting from any disposition of Partnership property with respect to which gain or loss is recognized for federal income tax purposes by reference to the Gross Asset Value of such property rather than its adjusted tax basis;
(e) if an adjustment of the Gross Asset Value of any Partnership asset which requires that the Capital Accounts of the Partnership be adjusted pursuant to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into account the amount of such adjustment as if such adjustment represented additional Net Income or Net Loss pursuant to Section 5.01;
(f) by excluding Net Property Gain and Net Property Loss; and
(g) by not taking into account in computing Net Income or Net Loss items specially allocated to the Partners pursuant to Sections 5.01(c), 5.01(d), 15.05(d) and 13.01(e)(iv).
Net Investment means the excess, if any, of the total amount of Capital Contributions over any proceeds or property used to redeem Partnership Interests.
Net Property Gain or Net Property Loss means, for each fiscal year or other applicable period, an amount equal to the Partnerships net taxable gain or loss for such year or period from the disposition of Property, including the net capital gain realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership, including
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but not limited to net capital gain realized in connection with an adjustment of the Gross Asset Value of any Property which requires that the Capital Accounts of the Partners be adjusted pursuant to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations. For these purposes, the Gross Asset Value of the Property shall reflect the market capitalization of the General Partner (increased by the amount of any Partnership liabilities).
Net Sales Proceeds means the net proceeds from the sale or other disposition of Property, as determined by the General Partner.
Nonrecourse Deductions has the meaning set forth in Sections 1.704-2(b)(1) and 1.704-2(c) of the Regulations.
Nonrecourse Liabilities has the meaning set forth in Section 1.704-2(b)(3) of the Regulations.
Notice of Redemption means the Notice of Exercise of OP Unit Redemption Right substantially in the form attached as Exhibit B hereto.
Offer has the meaning set forth in Section 7.02(a) hereof.
OP Unit means a Partnership Unit which is designated by the General Partner as an OP Unit of the Partnership.
OP Unit Economic Balance means the quotient of (a) the aggregate Capital Account balance attributable to the OP Units outstanding, plus the amount of any Partner Minimum Gain or Partnership Minimum Gain, in either case to the extent attributable to the ownership of OP Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under Section 5.01(c), divided by (b) the number of OP Units outstanding.
OP Unit Redemption Amount means either the Cash Amount or the REIT Shares Amount, as selected by the Partnership pursuant to Section 8.04(a) or the General Partner pursuant to Section 8.04(b) hereof.
OP Unit Redemption Right has the meaning provided in Section 8.04(a) hereof.
OP Unit Transaction shall mean a transaction to which the Partnership or the General Partner shall be a party, including, without limitation a merger, consolidation, unit exchange, self tender offer for all or substantially all OP Units or other business combination or reorganization, or sale of all or substantially all of the Partnerships assets (but excluding any transaction which constitutes an Adjustment Event) in each case as a result of which OP Units shall be exchanged for or converted into the right, or the holders of such Units shall otherwise be entitled, to receive cash, securities or other property or any combination thereof.
OPP Agreement means any outperformance award agreement adopted by and among the General Partner, the Partnership and any grantee thereunder, including the American Realty Capital Properties, Inc. 2013 Advisor Multi-Year Outperformance Agreement.
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Partner means the General Partner or any Limited Partner, and Partners means the General Partner and the Limited Partners.
Partner Nonrecourse Debt has the meaning set forth in Section 1.704-2(b)(4) of the Regulations.
Partner Nonrecourse Debt Minimum Gain has the meaning set forth in Regulations Section 1.704-2(i). A Partners share of Partner Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5).
Partner Nonrecourse Deductions has the meaning set forth in Sections 1.704-2(i)(1) and (2) of the Regulations, and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be determined in accordance with the rules of Section 1.704-2(i)(2) of the Regulations.
Partnership means ARC Properties Operating Partnership, L.P., a limited partnership formed under the Act and pursuant to this Agreement, and any successor thereto.
Partnership Interest means an ownership interest in the Partnership held by either a Limited Partner or the General Partner, and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement and in the Act, together with all obligations of such Person to comply with the terms and provisions of this Agreement and of the Act. A Partnership Interest may be expressed as a number of Preferred Units, OP Units, Class B Units, LTIP Units or other Partnership Units.
Partnership Loan means a loan from the Partnership to the Partner on the day the Partnership pays over the excess of the Withheld Amount over the Distributable Amount to a taxing authority.
Partnership Minimum Gain has the meaning set forth in Regulations Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the amount of Partnership Minimum Gain is determined by first computing, for each Partnership nonrecourse liability, any gain the Partnership would realize if it disposed of the property subject to that liability for no consideration other than full satisfaction of the liability, and then aggregating the separately computed gains. A Partners share of Partnership Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(g)(1).
Partnership Record Date means the record date established by the General Partner for the distribution of cash pursuant to Section 5.02 hereof, which record date shall be the same as the record date established by the General Partner for a distribution to its stockholders of some or all of its portion of such distribution.
Partnership Unit means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder, and includes Series C Preferred Units, Series D Preferred Units, Series F Preferred Units OP Units, Class B Units, LTIP Units and any other class or series of Partnership Units that may be established after the date hereof. The number of Partnership Units outstanding and the Percentage Interests represented by such Partnership Units, if any, are set forth on Exhibit A hereto, as it may be amended or restated from time to time. The ownership of Partnership Units may be evidenced by a certificate in a form approved by the General Partner.
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Percentage Interest means the percentage determined by dividing the number of Partnership Units of a Partner by the sum of the number of Partnership Units of all Partners (other than the Preferred Units).
Person means any individual or Entity.
Precontribution Gain has the meaning set forth in Section 5.01(f)(iii).
Preferred Units means the Series C Preferred Units, Series D Preferred Units, Series E Preferred Units, Series F Preferred Units and any other series of Preferred Units that may be established after the date hereof.
Property means any property or other investment in which the Partnership, directly or indirectly, holds an ownership interest.
Redemption Shares has the meaning set forth in Section 8.05(a) hereof.
Redeeming Limited Partner has the meaning provided in Section 8.04(a).
Registration Statement has the meaning set forth in Section 8.05(a).
Regulations means the Federal Income Tax Regulations issued under the Code, as amended and as hereafter amended from time to time. Reference to any particular provision of the Regulations shall mean that provision of the Regulations on the date hereof and any successor provision of the Regulations.
REIT means a real estate investment trust under Sections 856 through 860 of the Code.
REIT Expenses means (a) costs and expenses relating to the formation and continuity of existence and operation of the General Partner and any Subsidiaries thereof (which Subsidiaries shall, for purposes hereof, be included within the definition of the General Partner), including taxes, fees and assessments associated therewith, any and all costs, expenses or fees payable to any director, officer or employee of the General Partner, and reasonable expenses incurred to maintain the General Partners qualification as a REIT, (b) costs and expenses relating to any public offering and registration, or private offering, of securities by the General Partner, and all statements, reports, fees and expenses incidental thereto, including, without limitation, underwriting discounts and selling commissions applicable to any such offering of securities, and any costs and expenses associated with any claims made by any holders of such securities or any underwriters or placement agents thereof, (c) costs and expenses associated with any repurchase of any securities by the General Partner, (d) costs and expenses associated with the preparation and filing of any periodic or other reports and communications by the General Partner under federal, state or local laws or regulations, including filings with the Commission, (e) costs and expenses associated with compliance by the General Partner with laws, rules and regulations promulgated by any regulatory body, including the Commission and any securities exchange, (f) costs and expenses associated with compensation of the employees of the General
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Partner (including, without limitation, health, vision, dental, disability and life insurance benefits), (g) costs and expenses associated with any 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the employees of the General Partner, (h) costs and expenses incurred by the General Partner relating to any issuing or redemption of Partnership Interests and (i) all other operating or administrative costs of the General Partner incurred in the ordinary course of its business on behalf of or in connection with the Partnership.
REIT Requirements has the meaning set forth in Section 6.01(a)(xxiv).
REIT Share means one share of common stock, par value $0.01 per share, of the General Partner (or Successor Entity, as the case may be).
REIT Shares Amount means the number of REIT Shares equal to the product of (X) the number of OP Units offered for redemption by a Redeeming Limited Partner, multiplied by (Y) the Conversion Factor as adjusted to and including the Specified Redemption Date; provided, that in the event the General Partner issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the holders of REIT Shares to subscribe for or purchase additional REIT Shares, or any other securities or property (collectively, the Rights), and such Rights have not expired at the Specified Redemption Date, then the REIT Shares Amount shall also include such Rights issuable to a holder of the REIT Shares Amount on the record date fixed for purposes of determining the holders of REIT Shares entitled to Rights.
Restriction Notice has the meaning set forth in Section 8.04(f).
Rights has the meaning set forth in the definition of REIT Shares Amount contained herein.
S-3 Eligible Date has the meaning set forth in Section 8.05(a).
Safe Harbor has the meaning set forth in Section 10.05(e).
Safe Harbor Election has the meaning set forth in Section 10.05(e).
Safe Harbor Interest has the meaning set forth in Section 10.05(e).
Securities Act means the Securities Act of 1933, as amended.
Separate Registration Rights Agreement has the meaning set forth in Section 8.05.
Series C Articles Supplementary means the Articles Supplementary classifying and designating the Series C Preferred Stock and fixing distribution and other preferences and rights of the Series C Preferred Stock as filed with the State Department of Assessments and Taxation of Maryland on June 6, 2013.
Series C Distribution Payment Date means the fifteenth day of each month; provided, however, that if any Series C Distribution Payment Date falls on any day other than a Business Day, the distribution payment due on such Series C Distribution Payment Date shall be paid on the first Business Day immediately following such Series C Distribution Payment Date.
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Series C Distribution Period means monthly distribution periods commencing on the first day of each month and ending on and including the day preceding the first day of the next succeeding Series C Distribution Period.
Series C Junior Units means Common Units and any class or series of Partnership Units hereafter issued and outstanding that are not Series C Senior Units, Series C Preferred Units or Series C Parity Units.
Series C Liquidation Amount means the greater of (a) the aggregate Series C Liquidation Preference plus the aggregate Series C Redemption Premium or (b) an amount per Series C Preferred Unit equal to the amount which would have been payable to a Series C Preferred Unit holder had each Series C Preferred Unit been converted into OP Units immediately prior to such Liquidation.
Series C Liquidation Preference means fifteen dollars and sixty-seven cents ($15.67) per Series C Preferred Unit.
Series C Parity Units means the Series D Preferred Units, Series F Preferred Units and any class or series of Partnership Units hereafter issued and outstanding, whether or not the distribution rates thereof shall be different from those of the Series C Preferred Units, if the holders of such class or series and the Series C Preferred Units shall be entitled to (i) the receipt of distributions in proportion to their respective amounts of accrued and unpaid distributions per unit and (ii) amounts distributable upon Liquidation in proportion to their respective liquidation preferences, in each case without preference or priority one over the other.
Series C Preferred Return means, for each Series C Preferred Unit, a cumulative, non-compounded rate per annum equal to 5.81% of the Series C Liquidation Preference; provided, that the amount payable for any Series C Distribution Period shall be computed by dividing the Series C Preferred Return by twelve, and the amount of distributions payable for any period shorter or longer than a full Series C Distribution Period shall be computed on the basis of twelve 30-day months and a 360-day year.
Series C Preferred Stock means the Series C Convertible Preferred Stock, par value $.01 per share, of the General Partner.
Series C Preferred Unit means a Partnership Unit which is designated by the General Partner as a Series C Preferred Unit of the Partnership.
Series C Redemption Date has the meaning set forth in Section 14.05.
Series C Redemption Premium equals twenty percent (20%) of the Series C Liquidation Preference.
Series C Senior Units means any class or series of Partnership Units hereafter issued and outstanding, if the holders of such class or series shall be entitled to the receipt of distributions prior to a Liquidation or of amounts distributable upon any event of Liquidation, in preference or priority to the holders of Series C Preferred Units.
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Series D Articles Supplementary means the Articles Supplementary classifying and designating the Series D Preferred Stock and fixing distribution and other preferences and rights of the Series D Preferred Stock as filed with the State Department of Assessments and Taxation of Maryland on November 8, 2013.
Series D Distribution Payment Date shall mean the fifteenth day of each month; provided, however, that if any Series D Distribution Payment Date falls on any day other than a Business Day, the distribution payment due on such Series D Distribution Payment Date shall be paid on the first Business Day immediately following such Series D Distribution Payment Date.
Series D Distribution Period means monthly distribution periods commencing on the first day of each month and ending on and including the day preceding the first day of the next succeeding Series D Distribution Period.
Series D Junior Units means Common Units and any class or series of Partnership Units hereafter issued and outstanding that are not Series D Senior Units, Series D Preferred Units or Series D Parity Units.
Series D Liquidation Amount means the greater of (a) the aggregate Series D Liquidation Preference plus the aggregate Series D Redemption Premium or (b) an amount per Series D Preferred Unit equal to the amount which would have been payable to a Series D Preferred Unit holder had each Series D Preferred Unit been converted into OP Units immediately prior to such Liquidation.
Series D Liquidation Preference means thirteen dollars and fifty-nine cents ($13.59) per Series D Preferred Unit.
Series D Parity Units means the Series C Preferred Units, Series F Preferred Units and any class or series of Partnership Units hereafter issued and outstanding, whether or not the distribution rates thereof shall be different from those of the Series D Preferred Units, if the holders of such class or series and the Series D Preferred Units shall be entitled to (i) the receipt of distributions in proportion to their respective amounts of accrued and unpaid distributions per unit and (ii) amounts distributable upon Liquidation in proportion to their respective liquidation preferences, in each case without preference or priority one over the other.
Series D Preferred Return means, for each Series D Preferred Unit, a cumulative, non-compounded rate per annum equal to 5.81% of the Series D Liquidation Preference; provided, that the amount payable for any Series D Distribution Period shall be computed by dividing the Series D Preferred Return by twelve, and the amount of distributions payable for any period shorter or longer than a full Series D Distribution Period shall be computed on the basis of twelve 30-day months and a 360-day year.
Series D Preferred Stock means the Series D Cumulative Convertible Preferred Stock, par value $.01 per share, of the General Partner.
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Series D Preferred Unit means a Partnership Unit which is designated by the General Partner as a Series D Preferred Unit of the Partnership.
Series D Redemption Date has the meaning set forth in Section 15.05.
Series D Redemption Premium equals twenty percent (20%) of the Series D Liquidation Preference.
Series D Senior Units means any class or series of Partnership Units hereafter issued and outstanding, if the holders of such class or series shall be entitled to the receipt of distributions prior to a Liquidation or of amounts distributable upon any event of Liquidation, in preference or priority to the holders of Series D Preferred Units.
Series E Preferred Stock means the Series E Convertible Preferred Stock, par value $.01 per share, of the General Partner.
Series E Preferred Unit means a Partnership Unit which is designated by the General Partner as a Series E Preferred Unit of the Partnership.
Series F Articles Supplementary means the Articles Supplementary classifying and designating the Series F Preferred Stock and fixing distribution and other preferences and rights of the Series F Preferred Stock as filed with the State Department of Assessments and Taxation of Maryland on January 2, 2014.
Series F Distribution Payment Date shall mean the fifteenth day of each month; provided, however, that if any Series F Distribution Payment Date falls on any day other than a Business Day, the distribution payment due on such Series F Distribution Payment Date shall be paid on the first Business Day immediately following such Series F Distribution Payment Date.
Series F Distribution Period means monthly distribution periods commencing on the first day of each month and ending on and including the day preceding the first day of the next succeeding Series F Distribution Period.
Series F Junior Units means Common Units and any class or series of Partnership Units hereafter issued and outstanding that are not Series F Senior Units, Series F Preferred Units or Series F Parity Units.
Series F Liquidation Amount means the aggregate Series F Liquidation Preference.
Series F Liquidation Preference means twenty-five dollars ($25.00) per Series F Preferred Unit.
Series F Parity Units means the Series C Preferred Units, Series D Preferred Units and any class or series of Partnership Units hereafter issued and outstanding, whether or not the distribution rates thereof shall be different from those of the Series F Preferred Units, if the holders of such class or series and the Series F Preferred Units shall be entitled to (i) the receipt of distributions in proportion to their respective amounts of accrued and unpaid distributions per unit and (ii) amounts distributable upon Liquidation in proportion to their respective liquidation preferences, in each case without preference or priority one over the other.
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Series F Preferred Return means, for each Series F Preferred Unit, a cumulative, non-compounded rate per annum equal to 6.70% of the Series F Liquidation Preference; provided, that the amount payable for any Series F Distribution Period shall be computed by dividing the Series F Preferred Return by twelve, and the amount of distributions payable for any period shorter or longer than a full Series F Distribution Period shall be computed on the basis of twelve 30-day months and a 360-day year.
Series F Preferred Stock means the 6.70% Series F Cumulative Redeemable Preferred Stock, par value $.01 per share, of the General Partner.
Series F Preferred Unit means a Partnership Unit which is designated by the General Partner as a Series F Preferred Unit of the Partnership.
Series F Redemption Date has the meaning set forth in Section 17.05.
Series F Senior Units means any class or series of Partnership Units hereafter issued and outstanding, if the holders of such class or series shall be entitled to the receipt of distributions prior to a Liquidation or of amounts distributable upon any event of Liquidation, in preference or priority to the holders of Series F Preferred Units.
Service means the Internal Revenue Service.
Specified Redemption Date means the first business day of the month that is at least 60 calendar days after the receipt by the General Partner of a Notice of Redemption.
Subsidiary means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.
Subsidiary Partnership means any partnership or limited liability company in which the General Partner, the Partnership or a wholly owned subsidiary of the General Partner or the Partnership owns a partnership or limited liability company interest.
Substitute Limited Partner means any Person admitted to the Partnership as a Limited Partner pursuant to Section 9.03 hereof.
Successor Entity has the meaning set forth in the definition of Conversion Factor contained herein.
Survivor has the meaning set forth in Section 7.02(b).
Tax Items has the meaning set forth in Section 5.01(f)(i).
Tax Matters Partner has the meaning set forth within Section 6231(a)(7) of the Code.
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Tax Protection Agreement means that tax protection agreement, dated September 6, 2011, by and among the Partnership, the General Partner and ARC Real Estate Partners, LLC.
Trading Day means a day on which the principal national securities exchange on which a security is listed or admitted to trading is open for the transaction of business or, if a security is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
Transaction has the meaning set forth in Section 7.02(a).
Transfer has the meaning set forth in Section 9.02(a).
TRS means a taxable REIT subsidiary (as defined in Section 856(l) of the Code) of the General Partner.
Unvested LTIP Units has the meaning set forth in Section 13.01(c)(i) hereof.
Value means, with respect to any security, the average of the daily market price of such security for the ten consecutive Trading Days immediately preceding the date of such valuation. The market price for each such Trading Day shall be: (i) if the security is listed or admitted to trading on the NASDAQ or any national securities exchange, the last reported sale price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices, regular way, on such day, (ii) if the security is not listed or admitted to trading on the NASDAQ or any national securities exchange, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or (iii) if the security is not listed or admitted to trading on the NASDAQ or any national securities exchange and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten days prior to the date in question) for which prices have been so reported; provided, that if there are no bid and asked prices reported during the ten days prior to the date in question, the value of the security shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event the security includes any additional rights, then the value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.
Vested LTIP Units has the meaning set forth in Section 13.01(c)(i) hereof.
Withheld Amount means any amount required to be withheld by the Partnership with respect to a Partner and paid over to any taxing authority as a result of any allocation or distribution of income to a Partner or any other transaction.
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ARTICLE II
FORMATION OF PARTNERSHIP
2.01 Formation of the Partnership. The Partnership was formed as a limited partnership pursuant to the provisions of the Act and the Original Agreement and continued upon the terms and subject to the conditions set forth in this Agreement. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes.
2.02 Name. The Name of the Partnership shall be ARC Properties Operating Partnership, L.P. and the Partnerships business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words Limited Partnership, LP, L.P. or Ltd. or similar words or letters shall be included in the Partnerships name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Partners of such change in the next regular communication by the Partnership to the Partners. Notwithstanding any provision in this Agreement and without the consent of any Limited Partner or other Person, the General Partner may amend this Agreement and the Certificate of Limited Partnership of the Partnership to reflect any change in the name of the Partnership.
2.03 Registered Office and Agent; Principal Office. The address of the registered office of the Partnership in the State of Delaware is located at Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808, and the registered agent for service of process on the Partnership in the State of Delaware at such address is the Corporation Service Company, a Delaware corporation. The General Partner may, from time to time, designate a new registered agent and/or registered office for the Partnership and, notwithstanding any provision in this Agreement, may amend this Agreement and the Certificate of Limited Partnership of the Partnership to reflect such designation without the consent of the Limited Partners or any other Person. The principal office of the Partnership is located at: c/o American Realty Capital Properties, Inc., 405 Park Avenue, New York, New York, 10022 or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places as the General Partner deems necessary or desirable.
2.04 Term and Dissolution.
(a) The term of the Partnership shall continue in full force and effect until the Partnership is dissolved and its affairs are wound up upon the first to occur of any of the following events:
(i) the occurrence of an Event of Bankruptcy as to a General Partner or the dissolution, death, removal or withdrawal of a General Partner or any other event that results in the General Partner ceasing to be a general partner of the Partnership under the Act unless (A) the business of the Partnership is continued
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pursuant to Section 7.04(b) hereof, or (B) at the time of the occurrence of such event there is at least one remaining general partner of the Partnership who is hereby authorized to and does carry on the business of the Partnership;
(ii) the passage of 90 days after the sale or other disposition of all or substantially all of the assets of the Partnership (provided, that if the Partnership receives an installment obligation as consideration for such sale or other disposition, the Partnership shall continue, unless sooner dissolved under the provisions of this Agreement, until such time as such installment obligations are paid in full);
(iii) the redemption of all Limited Partnership Interests, unless the General Partner determines to continue the Partnership by the admission of one or more additional Limited Partners effective as of such redemption;
(iv) the election in writing by the General Partner that the Partnership should be dissolved;
(v) at any time there are no limited partners of the Partnership, unless the business of the Partnership is continued in accordance with the Act; or
(vi) the entry of a decree of judicial dissolution of the Partnership under Section 17-802 of the Act.
(b) Upon dissolution of the Partnership (unless the business of the Partnership is continued pursuant to Section 7.04(b) hereof), the General Partner (or, if dissolution of the Partnership should occur by reason of Section 2.04(a)(i) or the General Partner is unable to act as liquidator, a liquidating trustee of the Partnership or other representative designated by a Majority in Interest) shall proceed to wind up the affairs of the Partnership, liquidate the Partnerships assets and apply and distribute the proceeds thereof in accordance with Section 5.06 hereof. Notwithstanding the foregoing, the General Partner or the liquidating trustee, as the case may be, may, subject to the Act, either (i) defer liquidation of, or withhold from distribution for a reasonable time, any assets of the Partnership (including those necessary to satisfy the Partnerships debts and obligations), or (ii) distribute the assets to the Partners in kind.
(c) The Partnership shall terminate when (i) all of the assets of the Partnership, after payment of or due provision for all debts, liabilities and obligations of the Partnership shall have been distributed to the Partners in the manner provided for in this Agreement and (ii) the Certificate of Limited Partnership of the Partnership shall have been canceled in the manner required by the Act.
2.05 Filing of Certificate and Perfection of Limited Partnership. The General Partner shall execute, acknowledge, record and file at the expense of the Partnership any Certificate (including the Certificate of Limited Partnership of the Partnership) and any and all amendments thereto and all requisite fictitious name statements and notices in such places and jurisdictions as may be necessary to cause the Partnership to be treated as a limited partnership under, and otherwise to comply with, the laws of each state or other jurisdiction in which the Partnership conducts business.
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2.06 Certificates Describing Partnership Units. The Partnership Interests shall not be evidenced by certificates unless requested by a Partner. At the request of a Partner, the General Partner, at its option, may issue a certificate evidencing such Partners Partnership Interests, including the class or series and number of Partnership Units owned and the Percentage Interest represented by such Partnership Units as of the date of such certificate. Any such certificate (i) shall be in form and substance as determined by the General Partner, (ii) shall not be negotiable and (iii) shall bear a legend to the following effect:
THIS CERTIFICATE IS NOT NEGOTIABLE. THE PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND TRANSFERABLE ONLY IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP OF ARC PROPERTIES OPERATING PARTNERSHIP, L.P., AS AMENDED, SUPPLEMENTED OR RESTATED FROM TIME TO TIME.
Each certificate evidencing Partnership Interests shall be executed by manual or facsimile signature of the General Partner on behalf of the Partnership. The Partnership shall maintain books for the purpose of registering the transfer of Partnership Interests. In connection with a Partners transfer in accordance with this Agreement of any Partnership Interests, the certificate(s) evidencing the Partnership Interests, if any, shall be delivered to the Partnership for cancellation, and the Partnership shall thereupon issue a new certificate to the transferee evidencing the Partnership Interests that were transferred and, if applicable, the Partnership shall issue a new certificate to the transferor evidencing any Partnership Interests registered in the name of the transferor that were not transferred.
Each Partnership Interest shall constitute a security within the meaning of, and governed by, (i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time in the State of Delaware, and (ii) the corresponding provisions of the Uniform Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on February 14, 1995.
ARTICLE III
BUSINESS OF THE PARTNERSHIP
The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, (ii) to enter into any partnership, joint venture or other similar arrangement for the purpose of engaging in any of the foregoing or the ownership and disposition of interests in any entity engaged in any of the foregoing and (iii) to do anything necessary or incidental to the foregoing; provided, however, that any business to be conducted by the Partnership shall be limited to and conducted in such a manner as to permit the General Partner at all times to qualify as a REIT, unless the General Partner otherwise ceases to, or the Board of Directors determines that the General Partner shall no longer, qualify as a REIT. In connection with the foregoing,
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and without limiting the General Partners right in its sole and absolute discretion to cease qualifying as a REIT, the Partners acknowledge that the General Partner has elected REIT status and the General Partners continued qualification as a REIT and the avoidance of income and excise taxes on the General Partner inure to the benefit of all the Partners and not solely to the General Partner. Notwithstanding the foregoing, the Partners agree that the General Partner may terminate or revoke its status as a REIT under the Code at any time. The General Partner shall also be empowered to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a publicly traded partnership taxable as a corporation for purposes of Section 7704 of the Code.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.01 Capital Contributions. The General Partner and each Limited Partner has made (or shall be deemed to have made) a Capital Contribution to the Partnership in exchange for the Partnership Units set forth opposite such Partners name on Exhibit A hereto, as it may be amended or restated from time to time by the General Partner to the extent necessary to reflect accurately sales, exchanges or other Transfers, redemptions, Capital Contributions, the issuance of additional Partnership Units or similar events having an effect on a Partners ownership of Partnership Units.
4.02 Additional Capital Contributions and Issuances of Additional Partnership Units. Except as provided in this Section 4.02 or in Section 4.03 hereof, the Partners shall have no right or obligation to make any additional Capital Contributions or loans to the Partnership. The General Partner may contribute additional capital to the Partnership, from time to time, and receive additional Partnership Interests, in the form of Partnership Units, in respect thereof, in the manner contemplated in this Section 4.02.
(a) Issuances of Additional Partnership Units.
(i) General. As of the effective date of this Agreement, the Partnership shall have six classes of Partnership Units, entitled Series C Preferred Units, Series D Preferred Units, Series F Preferred Units, OP Units, Class B Units and LTIP Units respectively. The Series C Preferred Units, Series D Preferred Units, Series F Preferred Units, Class B Units and LTIP Units shall have the same rights, privileges and preferences as the OP Units, except as set forth in Articles XII, XIII, XIV, XV, XVI and XVII hereof. Notwithstanding any provision of this Agreement, the General Partner is hereby authorized to cause the Partnership to issue such additional Partnership Interests, in the form of Partnership Units, for any Partnership purpose at any time or from time to time to the Partners (including the General Partner and/or the Limited Partner) or to other Persons, and admit such Persons as additional general partners of the Partnership pursuant to Section 7.03 or additional Limited Partners pursuant to this Section 4.02, for such consideration, or in connection with the performance of past, present or future services to the Partnership, and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partners or any other
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Person. Notwithstanding any provision of this Agreement, a Person shall be deemed admitted to the Partnership as an additional Limited Partner upon the written consent of the General Partner and the execution of a counterpart to this Agreement by such Person. The General Partners determination that consideration is adequate shall be conclusive insofar as the adequacy of consideration relates to whether the Partnership Units are validly issued and fully paid. Notwithstanding any provision of this Agreement, any additional Partnership Units issued thereby may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers, preferences and duties, including rights, powers, preferences and duties senior and superior to the then-outstanding Partnership Units held by the Limited Partners, all as shall be determined by the General Partner in its sole and absolute discretion and without the approval of any Limited Partner or other Person, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Units; (ii) the right of each such class or series of Partnership Units to share in Partnership distributions; (iii) the rights of each such class or series of Partnership Units upon dissolution and liquidation of the Partnership; and (iv) the right, if any, of the holder of each such class or series of Partnership Units to vote on Partnership matters; provided, however, that no additional Partnership Units shall be issued to the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) unless:
(1) (A) the additional Partnership Units are issued in connection with an issuance of REIT Shares of or other interests in the General Partner, which shares or interests have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Partnership Units issued to the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) by the Partnership in accordance with this Section 4.02 and (B) the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) shall make a Capital Contribution to the Partnership in an amount equal to the consideration received by the General Partner from the issuance of such REIT Shares or other interests in the General Partner;
(2) (A) the additional Partnership Units are issued in connection with an issuance of REIT Shares of or other interests in the General Partner pursuant to a taxable share dividend declared by the General Partner, which shares or interests have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Partnership Units issued to the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) by the Partnership in accordance with this Section 4.02, (B) if the General Partner allows the holders of its REIT Shares to elect whether to receive such dividend in REIT Shares, other interests of the General Partner or cash, the
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Partnership will give the Limited Partners (excluding the General Partner or any direct or indirect Subsidiary of the General Partner) the same election to elect to receive (I) Partnership Units or cash or, (II) at the election of the General Partner, REIT Shares or cash, and (C) if the Partnership issues additional Partnership Units pursuant to this Section 4.02(a)(i)(2), then an amount of income equal to the value of the Partnership Units received will be allocated to those holders of OP Units that elect to receive additional Partnership Units;
(3) the additional Partnership Units are issued in exchange for property owned by the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) with a fair market value, as determined by the General Partner, in good faith, equal to the value of the Partnership Units; or
(4) the additional Partnership Units are issued to all Partners in proportion to their respective Percentage Interests.
Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue Partnership Units for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the best interests of the General Partner and the Partnership.
Notwithstanding any provision in this Agreement, the General Partner may amend this Agreement in any manner in connection with the creation, authorization and/or issuance of any additional Partnership Interests, all without the approval of the Limited Partners or any other Person.
(ii) Upon Issuance of Additional Securities. The General Partner shall not issue any additional REIT Shares (other than REIT Shares issued in connection with an exchange pursuant to Section 8.04 hereof or a taxable share dividend as described in Section 4.02(a)(i)(2) hereof) or Rights (collectively, Additional Securities) other than to all holders of REIT Shares, unless (A) the General Partner shall cause the Partnership to issue to the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) Partnership Units or Rights having designations, preferences and other rights, all such that the economic interests are substantially similar to those of the Additional Securities, and (B) the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) contributes the proceeds from the issuance of such Additional Securities and from any exercise of Rights contained in such Additional Securities to the Partnership; provided, however, that the General Partner is allowed to issue Additional Securities in connection with an acquisition of Property to be held directly by the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner), but if and only if, such direct acquisition and issuance of Additional Securities have been approved by a majority of the Independent Directors. Without limiting the foregoing, the General Partner is expressly authorized to issue Additional Securities for less than
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fair market value, and the General Partner is authorized to cause the Partnership to issue to the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) corresponding Partnership Units, so long as (x) the General Partner concludes in good faith that such issuance is in the best interests of the Partnership and (y) the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) contributes all proceeds from such issuance to the Partnership, including without limitation, the issuance of REIT Shares and corresponding Partnership Units pursuant to a share purchase plan providing for purchases of REIT Shares at a discount from fair market value or pursuant to share awards, including share options that have an exercise price that is less than the fair market value of the REIT Shares, either at the time of issuance or at the time of exercise, and restricted or other share awards approved by the Board of Directors. For example, in the event the General Partner issues REIT Shares for a cash purchase price and the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) contributes all of the proceeds of such issuance to the Partnership as required hereunder, the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) shall be issued a number of additional Partnership Units equal to the product of (A) the number of such REIT Shares issued by the General Partner, the proceeds of which were so contributed, multiplied by (B) a fraction, the numerator of which is 100%, and the denominator of which is the Conversion Factor in effect on the date of such contribution.
(b) Certain Contributions of Proceeds of Issuance of REIT Shares. In connection with any and all issuances of REIT Shares, the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) shall make Capital Contributions to the Partnership of the proceeds therefrom, provided, that if the proceeds actually received and contributed by the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) are less than the gross proceeds of such issuance as a result of any underwriters discount, commissions, placement fees or other expenses paid or incurred in connection with such issuance, then the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) shall make a Capital Contribution to the Partnership constituting the sum of (i) such net proceeds and (ii) an intangible asset in an amount equal to the capitalized costs of the General Partner relating to such issuance of REIT Shares or other interests in the General Partner. Upon any such Capital Contribution by the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner), the Capital Account of the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) shall be increased by the amount of its Capital Contribution as described in the previous sentence.
(c) Repurchases of Shares. If the General Partner shall repurchase shares of any class of its shares of common stock, the purchase price thereof and all costs incurred in connection with such repurchase shall be reimbursed to the General Partner by the Partnership pursuant to Section 6.05 hereof and the General Partner shall cause the Partnership to redeem an equivalent number of Partnership Units of the appropriate class or series held by the General Partner (which, in the case of REIT Shares, shall be a number equal to the quotient of the number of such REIT Shares divided by the Conversion Factor) in the manner provided in Section 6.10 hereof.
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4.03 Additional Funding. If the General Partner determines that it is in the best interests of the Partnership to provide for additional Partnership funds (Additional Funds) for any Partnership purpose, the General Partner may (a) cause the Partnership to obtain such funds from outside borrowings, or (b) elect to have the General Partner or any of its Affiliates provide such Additional Funds to the Partnership through loans or otherwise.
4.04 Capital Accounts. A separate Capital Account shall be established and maintained for each Partner.
4.05 Percentage Interests. If the number of outstanding OP Units, Class B Units, LTIP Units or other class or series of Partnership Units increases or decreases during a taxable year, each Partners Percentage Interest shall be adjusted by the General Partner effective as of the effective date of each such increase or decrease to a percentage equal to the number of OP Units, Class B Units, LTIP Units or other class or series of Partnership Units held by such Partner divided by the aggregate number of OP Units, Class B Units, LTIP Units or other class or series of Partnership Units, as applicable, outstanding after giving effect to such increase or decrease. If the Partners Percentage Interests are adjusted pursuant to this Section 4.05, the Net Income and Net Loss for the taxable year in which the adjustment occurs shall be allocated between the part of the year ending on the effective date of such adjustment and the part of the year beginning on the following day either (i) as if the taxable year had ended on the date of the adjustment or (ii) based on the number of days in each part. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate Net Income and Net Loss for the taxable year in which the adjustment occurs. The allocation of Net Income and Net Loss for the earlier part of the year shall be based on the Percentage Interests before adjustment, and the allocation of Net Income and Net Loss for the later part shall be based on the adjusted Percentage Interests.
4.06 No Interest on Contributions. No Partner shall be entitled to interest on its Capital Contribution.
4.07 Return of Capital Contributions. No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any distribution from the Partnership, except as specifically provided in this Agreement. Except as otherwise provided herein, there shall be no obligation to return to any Partner or withdrawn Partner any part of such Partners Capital Contribution for so long as the Partnership continues in existence.
4.08 No Third-Party Beneficiary. No creditor or other third party (other than an Indemnitee) having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto, Indemnitees and their respective successors and assigns. To the fullest extent permitted by law, none of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any of the Partners. In addition, it is the
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intent of the parties hereto that no distribution to any Limited Partner shall be deemed a return of money or other property in violation of the Act. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such money or property, such obligation shall, to the fullest extent permitted by law, be the obligation of such Limited Partner and not of the General Partner. Without limiting the generality of the foregoing, a deficit Capital Account of a Partner shall not be deemed to be a liability of such Partner nor an asset or property of the Partnership.
ARTICLE V
NET INCOME AND NET LOSS; DISTRIBUTIONS
5.01 Allocations.
(a) Allocations of Net Income and Net Loss. Except as otherwise provided in this Agreement and subject to Sections 12.02(b) and 13.01(c)(iii), after giving effect to the special allocations in Sections 5.01(c) and 5.01(d), Net Income, Net Loss and, to the extent necessary, individual items of income, gain, loss or deduction, of the Partnership, without duplication, shall be allocated among the Partners as follows:
(i) first, if the Partnership has Net Income for any taxable year or portion thereof, such Net Income shall be allocated to the Partners holding Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units pro rata and pari passu in proportion to their relative accrued and unpaid Series C Preferred Return, Series D Preferred Return and/or Series F Preferred Return to the extent of and until such Partners have received allocations of Net Income equal to the aggregate amount of distributions made to such Partners pursuant to Section 5.02(a)(i);
(ii) second, to the Partners holding OP Units, Class B Units and/or LTIP Units pro rata and pari passu to the extent of and in proportion to the distribution of Cash Available for Distribution to such Partners with respect to their OP Units, Class B Units and/or LTIP Units in accordance with Sections 5.02(a)(ii) and 13.01(a)(ii); and
(iii) thereafter, to the Partners holding OP Units, Class B Units and/or LTIP Units pro rata and pari passu in accordance with each such Partners respective Percentage Interest with respect to such OP Units, Class B Units and/or LTIP Units; provided, that for the avoidance of doubt, Net Loss, and to the extent necessary, individual items of loss or deductions shall be allocated (A) first to the Partners holding OP Units, Class B Units and/or LTIP Units pro rata and pari passu in accordance with each such Partners respective Percentage Interest with respect to such OP Units, Class B Units and/or LTIP Units until such Partners have received cumulative allocations of Net Loss equal to the cumulative amount of Net Income allocated to them pursuant to this Section 5.01(a)(iii), (B) then to the Partners holding OP Units, Class B Units and/or LTIP Units to the extent of and in a manner that has the effect of reversing the allocations of Net Income to such Partners pursuant to Section 5.10(a)(ii), (C) then to the Partners holding OP
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Units, Class B Units and/or LTIP Units pro rata and pari passu in accordance with each such Partners respective Percentage Interest with respect to such OP Units, Class B Units and/or LTIP Units until each such Partners Capital Account with respect to their OP Units, Class B Units and/or LTIP Units has been reduced to zero, but not below zero (provided, further, that if the Capital Account of one or more such Partners, but not all such Partners, has been reduced to zero, any remaining Net Loss, and to the extent necessary, individual item of loss or deduction shall be allocated to the remaining Partners holding OP Units, Class B Units and/or LTIP Units in the same manner as in this Section 5.01(a)(ii)(A) until the Capital Account of all such Partners with respect to such OP Units, Class B Units and/or LTIP Units has been reduced to zero), (D) then to the Partners holding Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units pro rata and pari passu in proportion to their relative aggregate unpaid Series C Liquidation Preference, Series D Liquidation Preference and/or Series F Liquidation Preference until the Capital Accounts of such Partners with respect to their Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units has been reduced to zero, and (E) thereafter to the General Partner.
(b) Allocations of Net Property Gain and Net Property Loss. Except as otherwise provided in this Agreement, after giving effect to the special allocations in Sections 5.01(c) and 5.01(d), Net Property Gain, Net Property Loss and, to the extent necessary, individual items of gain or loss comprising Net Property Gain and Net Property Loss of the Partnership, without duplication, shall be allocated among the Partners as follows:
(i) first, if the Partnership has Net Property Gain for any taxable year or portion thereof, such Net Property Gain shall be allocated to the Partners holding Series C Preferred Units and/or Series D Preferred Units pro rata and pari passu in proportion to their relative aggregate Series C Liquidation Preference and/or Series D Liquidation Preference until each such Partners Capital Accounts is equal to such Partners aggregate Series C Liquidation Amount and/or Series D Liquidation Amount;
(ii) second, the Partners holding Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units pro rata and pari passu in proportion to their relative accrued and unpaid Series C Preferred Return, Series D Preferred Return and/or Series F Preferred Return to the extent of and until such Partners have received allocations of Net Property Gain equal to the aggregate amount of distributions made to such Partners pursuant to Section 5.02(b)(i); and
(iii) thereafter, in a manner such that the Capital Account of each Partner immediately after making such allocation, is, as nearly as possible, equal proportionately to (i) the distributions that would be made to such Partner pursuant to Section 5.02(b) if the Partnership were dissolved, its affairs wound up and its assets sold for cash equal to their Gross Asset Value, as determined in the reasonable discretion of the General Partner, all Partnership liabilities were
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satisfied (limited with respect to each nonrecourse liability to the Gross Asset Value of the assets securing such liability), and the net assets of the Partnership were distributed in accordance with Section 5.02(b) to the Partners immediately after making such allocation, minus (ii) such Partners share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain and the amount, if any and without duplication, that the Partner would be obligated to contribute to the capital of the Partnership, all computed immediately prior to the hypothetical sale of assets.
(c) Special Allocations
(i) Special Allocations of Depreciation. Notwithstanding any other provisions of this Sections 5.01, after giving effect to the regulatory allocations in Section 5.01(d), but prior to any allocations under Sections 5.01(a)(ii) and 5.01(b)(iii), Depreciation shall be allocated to the AREP Limited Partner, until the cumulative amount of Depreciation allocated to the AREP Limited Partner pursuant to this Section 5.01(c)(i) for all years equals $10,000,000, to the ARCA III Limited Partner, until the cumulative amount of Depreciation allocated to the ARCA III Limited Partner pursuant to this subparagraph 5.01(c)(i) for all years equals $50,000,000, and to the ARCA IV Limited Partner, until the cumulative amount of Depreciation allocated to the ARCA IV Limited Partner pursuant to this subparagraph 5.01(c)(i) for all years equals $10,000,000, pro rata and pari passu in proportion to the amount of Depreciation that each such Partner is entitled to be allocated that has not yet been allocated to such Partner.
(ii) Special Allocations of Net Property Gain. Notwithstanding any other provisions of this Sections 5.01, after giving effect to the regulatory allocations in Section 5.01(d) and to the extent not previously allocated pursuant to Section 5.01(d)(ii), but prior to any allocations under Section 5.01(b)(iii), Net Property Gain and, to the extent necessary, individual items of income and gain comprising Net Property Gain of the Partnership, shall be allocated to the AREP Limited Partner, the ARCA III Limited Partner and the ARCA IV Limited Partner, pro rata and pari passu in proportion to, and to the extent of, the cumulative amount of Depreciation allocated to each such Partner pursuant to Section 5.01(c)(i).
(iii) Special Allocations Regarding Class B Units. Notwithstanding any other provisions of this Sections 5.01, after giving effect to the regulatory allocations in Section 5.01(d) and the special allocations in Section 5.01(c)(ii), but prior to any allocations under Section 5.01(b)(iii), Net Property Gain and, to the extent necessary, individual items of income and gain comprising Net Property Gain of the Partnership, shall be allocated to the Partners holding Class B Units until their Class B Economic Capital Account Balances are equal to (A) the OP Unit Economic Balance, multiplied by (B) the number of their Class B Units; provided, that no such Net Property Gain and, to the extent necessary, individual items of income and gain comprising Net Property Gain of the Partnership, will be allocated with respect to any particular Class B Unit unless and to the extent
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that the OP Unit Economic Balance exceeds the OP Unit Economic Balance in existence at the time such Class B Unit was issued. Any allocations made pursuant to the first sentence of this Section 5.01(c)(iii) shall be made among the holders of Class B Units in proportion to the amounts required to be allocated to each under this Section 5.01(c)(iii). The parties agree that the intent of this Section 5.01(c)(iii) is to make the Capital Account balance associated with each Class B Unit to be economically equivalent to the Capital Account balance associated with the OP Units outstanding (on a per-unit basis), but only if and to the extent that the Capital Account balance associated with the OP Units outstanding, without regard to the allocations under this Section 5.01(c)(iii), has increased on a per-unit basis since the issuance of the relevant Class B Unit. To the extent Net Property Loss is allocated to Partners holding Class B Units pursuant to Section 5.01(b)(iii), such Net Property Loss shall be allocated among the Partners holding Class B Units in a manner that reverses the allocation of Net Property Gain to such Partner pursuant to this Section 5.01(c)(iii).
(iv) Special Allocations Regarding LTIP Units. Notwithstanding any other provisions of this Sections 5.01, after giving effect to the regulatory allocations in Section 5.01(d) and the special allocations in Sections 5.01(c)(ii) and 5.01(c)(iii), but prior to any allocations under Section 5.01(b)(iii), Net Property Gain and, to the extent necessary, individual items of income and gain comprising Net Property Gain of the Partnership, shall be allocated to the LTIP Unitholders until their LTIP Economic Capital Account Balances are equal to (i) the OP Unit Economic Balance, multiplied by (ii) the number of their LTIP Units; provided that no such Net Property Gain and, to the extent necessary, individual items of income and gain comprising Net Property Gain of the Partnership, will be allocated with respect to any particular LTIP Unit unless and to the extent that the OP Unit Economic Balance exceeds the OP Unit Economic Balance in existence at the time such LTIP Unit was issued. Any allocations made pursuant to the first sentence of this Section 5.01(c)(iv) shall be made among the LTIP Unitholders in proportion to the amounts required to be allocated to each under this Section 5.01(c)(iv). The parties agree that the intent of this Section 5.01(c)(iv) is to make the Capital Account balance associated with each LTIP Unit to be economically equivalent to the Capital Account balance associated with the OP Units outstanding (on a per-unit basis), but only if and to the extent that the Capital Account balance associated with the OP Units outstanding, without regard to the allocations under this Section 5.01(c)(iv), has increased on a per-unit basis since the issuance of the relevant LTIP Unit. To the extent Net Property Loss is allocated to LTIP Unitholders pursuant to Section 5.01(b)(iii), such Net Property Loss shall be allocated among the LTIP Unitholders in a manner that reverses the allocation of Net Property Gain to the LTIP Unitholders pursuant to this Section 5.01(c)(iv).
(d) Regulatory Allocations.
(i) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as otherwise provided in Section 1.704-2(f) of the Regulations, if there is a net
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decrease in Partnership Minimum Gain for any Partnership fiscal year, each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partners share of the net decrease in Partnership Minimum Gain to the extent required by Section 1.704-2(f) of the Regulations. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f) and (i) of the Regulations. This Section 5.01(d)(i) is intended to comply with the minimum gain chargeback requirement in said section of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this Section 5.01(d)(i) shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant hereto.
(ii) Partner Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(i)(4) of the Regulations, if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any fiscal year, each Partner who has a share of the Partner Nonrecourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to that Partners share of the net decrease in the Partner Nonrecourse Debt Minimum Gain to the extent and in the manner required by Section 1.704-2(i) of the Regulations. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and (j)(2) of the Regulations. This Section 5.01(d)(ii) is intended to comply with the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt contained in said section of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this Section 5.01(d)(ii) shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant hereto.
(iii) Qualified Income Offset. If a Partner unexpectedly receives any adjustments, allocations or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has an Adjusted Capital Account Deficit, items of Partnership income (including gross income) and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly as possible as required by the Regulations. This Section 5.01(d)(iii) is intended to constitute a qualified income offset under Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.
(iv) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or other applicable period shall be allocated to the Partners in accordance with their respective Percentage Interests.
(v) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any fiscal year or other applicable period with respect to a Partner Nonrecourse Debt shall be specially allocated to the Partner that bears the economic risk of loss for such Partner Nonrecourse Debt (as determined under Sections 1.704-2(b)(4) and 1.704-2(i)(1) of the Regulations)
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(vi) Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any asset of the Partnership pursuant to Section 734(b) of the Code or Section 743(b) of the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations, to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated among the Partners in a manner consistent with the manner in which each of their respective Capital Accounts are required to be adjusted pursuant to such section of the Regulations.
(vii) Capital Account Deficits. If any Partner has an Adjusted Capital Account Deficit at the end of any fiscal year or other applicable period which is in excess of the amount such Partner is obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), such Partner shall be specially allocated items of Partnership income and gain in the amount of such excess as quickly as possible, provided, that an allocation pursuant to this Section 5.01(d)(vii) shall be made only if and to the extent that such Partner would have an Adjusted Capital Account Deficit in excess of such amount after all other allocations provided for under this Agreement have been made as if Section 5.01(d)(iii) and this Section 5.01(d)(vii) were not in this Agreement.
(e) Allocations Between Transferor and Transferee. If a Partner transfers any part or all of its Partnership Interest, the distributive shares of the various items of Net Income and Net Loss allocable among the Partners during such fiscal year of the Partnership shall be allocated between the transferor and the transferee Partner either (i) as if the Partnerships fiscal year had ended on the date of the transfer or (ii) based on the number of days of such fiscal year that each was a Partner without regard to the results of Partnership activities in the respective portions of such fiscal year in which the transferor and the transferee were Partners. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate the distributive shares of the various items of Net Income and Net Loss between the transferor and the transferee Partner.
(f) Tax Allocations.
(i) Items of Income or Loss. Except as is otherwise provided in this Section 5.01, an allocation of Net Income, Net Loss, Net Property Gain or Net Property Loss to a Partner shall be treated as an allocation to such Partner of the same share of each item of income, gain, loss, deduction and item of tax-exempt income or Section 705(a)(2)(B) expenditure (or item treated as such expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) (Tax Items) that is taken into account in computing Net Income, Net Loss, Net Property Gain or Net Property Loss.
(ii) Section 1245/1250 Recapture. Subject to Section 5.01(f)(iii) below, if any portion of gain from the sale of Partnership assets is treated as gain
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which is ordinary income by virtue of the application of Sections 1245 or 1250 of the Code (Affected Gain), then such Affected Gain shall be allocated among the Partners in the same proportion that the depreciation and amortization deductions giving rise to the Affected Gain were allocated. This Section 5.01(f)(ii) shall not alter the amount of Net Income or Net Property Gain (or items thereof) allocated among the Partners, but merely the character of such Net Income or Net Property Gain (or items thereof). For purposes hereof, in order to determine the proportionate allocations of depreciation and amortization deductions for each fiscal year or other applicable period, such deductions shall be deemed allocated on the same basis as Net Income, Net Loss, Net Property Gain and Net Property Loss for such respective period.
(iii) Precontribution Gain, Revaluations. With respect to any Contributed Property, the Partnership shall use any permissible method contained in the Regulations promulgated under Section 704(c) of the Code selected by the General Partner, in its sole discretion, to take into account any variation between the adjusted basis of such asset and the fair market value of such asset as of the time of the contribution (Precontribution Gain). Each Partner hereby agrees to report income, gain, loss and deduction on such Partners federal income tax return in a manner consistent with the method used by the Partnership. If any asset has a Gross Asset Value which is different from the Partnerships adjusted basis for such asset for federal income tax purposes because the Partnership has revalued such asset pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations, the allocations of Tax Items shall be made in accordance with the principles of Section 704(c) of the Code and the Regulations and the methods of allocation promulgated thereunder. The intent of this Section 5.01(f)(iii) is that each Partner who contributed to the capital of the Partnership a Contributed Property will bear, through reduced allocations of depreciation, increased allocations of gain or other items, the tax detriments associated with any Precontribution Gain. This Section 5.01(f)(iii) is to be interpreted consistently with such intent.
(iv) Excess Nonrecourse Liability Safe Harbor. Pursuant to Section 1.752-3(a)(3) of the Regulations, solely for purposes of determining each Partners proportionate share of the excess nonrecourse liabilities of the Partnership (as defined in Section 1.752-3(a)(3) of the Regulations), the Partners respective interests in Partnership profits shall be determined under any permissible method reasonably determined by the General Partner; provided, however, that each Partner who has contributed an asset to the Partnership shall be allocated, to the extent possible, a share of excess nonrecourse liabilities of the Partnership which results in such Partner being allocated nonrecourse liabilities in an amount which is at least equal to the amount of income required to be allocated to such Partner pursuant to Section 704(c) of the Code and the Regulations promulgated thereunder (the Liability Shortfall). If there is an insufficient amount of nonrecourse liabilities to be able to allocate to each Partner nonrecourse liabilities equal to the Liability Shortfall, nonrecourse liabilities shall be allocated to each Partner in pro rata in accordance with each such Partners Liability Shortfall.
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5.02 Distribution of Cash.
(a) Cash Available for Distribution. Subject to the other provisions of this Article V and to the provisions of Sections 14.03, 15.03 and 17.03, the General Partner shall cause the Partnership to distribute Cash Available for Distribution, at such times and in such amounts as are, subject to the terms and conditions of this Agreement, determined by the General Partner in its sole and absolute discretion, to the Partners who are Partners on the Partnership Record Date with respect to such quarter (or other distribution period), as follows:
(i) first, 100% to the Partners holding Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units pro rata and pari passu in proportion to their relative accrued and unpaid Series C Preferred Return, Series D Preferred Return and/or Series F Preferred Return until such Partners have received in the aggregate, pursuant to this Section 5.02(a)(i) and Section 5.02(b)(i), an amount such that the accrued but unpaid Series C Preferred Return has been paid with respect to each such Series C Preferred Unit, the accrued but unpaid Series D Preferred Return has been paid with respect to each such Series D Preferred Unit and the accrued but unpaid Series F Preferred Return has been paid with respect to each such Series F Preferred Unit; and
(ii) second, if such Partnership Record Date is prior to the LTIP Unit Distribution Participation Date, 100% to the Partners holding OP Units, Class B Units and/or LTIP Units, pro rata and pari passu in proportion to each such Partners respective Percentage Interest with respect to such OP Units, Class B Units and/or LTIP Units; provided, however, that distributions to the LTIP Unitholders with respect to an LTIP Unit shall be in an amount equal to the product of (A) the distributions per OP Unit to be paid to the holders of OP Units pursuant to this Section 5.02(a)(ii) multiplied by (B) ten (10%) percent (the Concurrent LTIP Distribution) with the balance of the distribution that would have otherwise been payable to the LTIP Unitholders but for the effect of this proviso being distributed to the Partners holding OP Units and/or Class B Units in proportion to each such Partners respective Percentage Interest;
(iii) third, following the LTIP Unit Distribution Participation Date, 100% to the LTIP Unitholders pro rata until such time as the LTIP Unitholders have received distributions per LTIP Unit pursuant to this Section 5.02(a)(iii) equal to the difference of (A) the cumulative distributions paid on each OP Unit prior to the LTIP Unit Distribution Participation Date and during the period the LTIP Unitholder held such LTIP Unit, minus (B) the Concurrent LTIP Distribution paid on such LTIP Units; and
(iv) thereafter, 100% to the Partners holding OP Units, Class B Units and/or LTIP Units pro rata and pari passu in proportion to each such Partners respective Percentage Interest with respect to such OP Units, Class B Units and/or LTIP Units.
(b) Net Sales Proceeds. Subject to the other provisions of this Article V and to the provisions of Sections 14.03, 15.03 and 17.03, the General Partner shall cause the Partnership to distribute Net Sales Proceeds, at such times and in such amounts as are, subject to the terms and conditions of this Agreement, determined by the General Partner in its sole and
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absolute discretion, to the Partners who are Partners on the Partnership Record Date with respect to such quarter (or other distribution period), as follows:
(i) first, 100% to the Partners holding Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units pro rata and pari passu in proportion to their relative accrued and unpaid Series C Preferred Return, Series D Preferred Return and/or Series F Preferred Return until such Partners have received in the aggregate, pursuant to this Section 5.02(b)(i) and Section 5.02(a)(i), an amount such that the accrued but unpaid Series C Preferred Return has been paid with respect to each such Series C Preferred Unit, the accrued but unpaid Series D Preferred Return has been paid with respect to each such Series D Preferred Unit and the accrued but unpaid Series F Preferred Return has been paid with respect to each such Series F Preferred Unit; provided, that if there is both Cash Available for Distribution and Net Sales Proceeds to be distributed, the Partners holding Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units first shall receive distributions of Cash Available for Distribution pursuant to Section 5.02(a)(i) in order to satisfy the Series C Preferred Return, Series D Preferred Return and/or Series F Preferred Return, and then distributions of Net Sales Proceeds pursuant to this Section 5.01(b)(i); and
(ii) thereafter, 100% to the Partners holding OP Units, Class B Units and/or LTIP Units pro rata and pari passu in proportion to each such Partners respective Percentage Interest with respect to such OP Units, Class B Units and/or LTIP Units; provided, that:
(1) to the extent the Average Class B Economic Capital Account Balance of a holder of Class B Units is less than the OP Unit Economic Balance, the Percentage Interest of such Partner holding Class B Units with respect to such Class B Units shall be reduced for purposes of determining its proportionate share of distributions pursuant to this Section 5.02(b)(iii) to equal such Partners Percentage Interest with respect to its Class B Units multiplied by a fraction, the numerator of which is such Partners Average Class B Economic Capital Account Balance, and the denominator of which is the OP Unit Economic Balance; and
(2) to the extent the Average LTIP Economic Capital Account Balance of a holder of LTIP Units is less than the OP Unit Economic Balance, the Percentage Interest of such Partner holding LTIP Units with respect to such LTIP Units shall be reduced for purposes of determining its proportionate share of distributions pursuant to this Section 5.02(b)(iii) to equal such Partners Percentage Interest with respect to its LTIP Units multiplied by a fraction, the numerator of which is such Partners Average LTIP Economic Capital Account Balance, and the denominator of which is the OP Unit Economic Balance.
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For the avoidance of doubt, any decrease in the Percentage Interest of a Partner with respect to its Class B Units or LTIP Units shall result in a corresponding increase in the Percentage Interests of Partners with respect to their OP Units (and LTIP Units to the extent such LTIP Units are eligible for conversion pursuant to Section 13.02(b) but have not been converted).
(c) If a new or existing Partner acquires additional Partnership Units in exchange for a Capital Contribution on any date other than a Partnership Record Date, the cash distribution attributable to such additional Partnership Units relating to the Partnership Record Date next following the issuance of such additional Partnership Units shall be reduced in the proportion to (i) the number of days that such additional Partnership Units are held by such Partner bears to (ii) the number of days between such Partnership Record Date and the immediately preceding Partnership Record Date.
(d) Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount with respect to a Partner, either (i) if the actual amount to be distributed to the Partner (the Distributable Amount) equals or exceeds the Withheld Amount, the entire Distributable Amount shall be treated as a distribution of cash to such Partner, or (ii) if the Distributable Amount is less than the Withheld Amount, the Distributable Amount shall be treated as a distribution of cash to such Partner and the excess of the Withheld Amount over the Distributable Amount shall be treated as a Partnership Loan from the Partnership to the Partner on the day the Partnership pays over such amount to a taxing authority. A Partner shall repay a Partnership Loan upon the demand of the Partnership or, alternatively, through withholding by the Partnership with respect to subsequent distributions to the applicable Partner or assignee. In the event that a Limited Partner fails to pay any amount owed to the Partnership with respect to the Partnership Loan within 15 days after demand for payment thereof is made by the Partnership on the Limited Partner, the General Partner, in its sole and absolute discretion, may elect to make the payment to the Partnership on behalf of such Defaulting Limited Partner. In such event, on the date of payment, the General Partner shall be deemed to have extended a General Partner Loan to the Defaulting Limited Partner in the amount of the payment made by the General Partner and the General Partner shall succeed to all rights and remedies of the Partnership against the Defaulting Limited Partner as to that amount. Without limitation, the General Partner shall have the right to receive any distributions that otherwise would be made by the Partnership to the Defaulting Limited Partner until such time as the General Partner Loan has been paid in full, and any such distributions so received by the General Partner shall be treated as having been received by the Defaulting Limited Partner and immediately paid to the General Partner.
Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to this Section 5.02(d) shall bear interest at the lesser of (i) 300 basis points above the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, or (ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date the Partnership or the General Partner, as applicable, is deemed to extend the loan until such loan is repaid in full.
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(e) In no event may a Partner receive a distribution of cash with respect to a Partnership Unit if such Partner is entitled to receive a cash dividend as the holder of record of a REIT Share for which all or part of such Partnership Unit has been or is being redeemed.
5.03 REIT Distribution Requirements. The General Partner shall use commercially reasonable efforts to cause the Partnership to distribute amounts sufficient to enable the General Partner to pay distributions to its stockholders that will allow the General Partner to (i) meet its distribution requirement for qualification as a REIT as set forth in Section 857 of the Code and (ii) avoid any federal income or excise tax liability imposed by the Code, other than to the extent the General Partner elects to retain and pay income tax on its net capital gain.
5.04 No Right to Distributions in Kind. No Partner shall be entitled to demand property other than cash in connection with any distributions by the Partnership.
5.05 Limitations on Distributions. Notwithstanding any of the provisions of this Agreement, no Partner shall have the right to receive, and the Partnership and the General Partner shall not have the right to make, a distribution that violates the Act or other applicable law.
5.06 Distributions Upon Liquidation.
(a) Upon liquidation of the Partnership, after the satisfaction of all the debts and obligations of the Partnership, to the extent permitted by law, whether by payment or the making of reasonable provision for payment thereof, any remaining assets of the Partnership shall be distributed, subject to Section 5.07(b), first to the Partners holding Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units pro rata in proportion to their respective positive Capital Accounts and then to all Partners with positive Capital Accounts in accordance with their respective positive Capital Accounts.
(b) For purposes of Section 5.06(a), the Capital Account of each Partner shall be determined after making all adjustments in accordance with Sections 5.01, 5.02 and 5.07(b) resulting from Partnership operations and from all sales and dispositions of all or any part of the Partnerships assets.
(c) Any distributions pursuant to this Section 5.06 shall be made within a reasonable time as determined by the General Partner in its sole discretion. To the extent deemed advisable by the General Partner, appropriate arrangements (including the use of a liquidating trust) may be made to assure that adequate funds are available to satisfy any contingent debts or obligations of the Partnership.
(d) If any Partner (other than the AREP Limited Partner, the ARCA III Limited Partner and the ARCA IV Limited Partner) has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such
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deficit shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever. If the AREP Limited Partner, the ARCA III Limited Partner or the ARCA IV Limited Partner has a deficit balance in its Capital Account attributable to and to the extent of the special allocation of Depreciation to such Partner provided for in Section 5.01(c)(i) (after giving effect to all contributions, distributions and allocations for all taxable years, including the year liquidation occurs), such Limited Partner shall restore and contribute to the capital of the Partnership the amount necessary to restore such deficit balance to zero, but not to exceed the excess of the cumulative amount of Depreciation that has been specially allocated to the such Limited Partner pursuant to Section 5.01(c)(i) over the cumulative amount of Net Property Gain that has been allocated to such Limited Partner in accordance with Section 5.01(c)(ii). These deficit restoration obligations are intended to comply with Section 1.704-1(b)(2)(ii)(b)(3) of the Regulations and shall be satisfied before the later to occur of (x) the end of the taxable year in which the Partnership (or the interest of AREP Limited Partner, the ARCA III Limited Partner or the ARCA IV Limited Partner, as the case may be) is liquidated, or (y) ninety (90) days after the date of the liquidation of the Partnership (or the interest of the AREP Limited Partner, the ARCA III Limited Partner or the ARCA IV Limited Partner), which amount shall be paid to creditors of the Partnership or, if the amount contributed exceeds the amount due creditors, shall be distributed to the Partners with positive Capital Account balances.
5.07 Substantial Economic Effect / Savings Clause.
(a) It is the intent of the Partners that the allocations of Net Income, Net Loss, Net Property Gain and Net Property Loss under the Agreement have substantial economic effect (or be consistent with the Partners interests in the Partnership in the case of the allocation of losses attributable to nonrecourse debt) within the meaning of Section 704(b) of the Code as interpreted by the Regulations promulgated pursuant thereto. Article V and other relevant provisions of this Agreement shall be interpreted in a manner consistent with such intent.
(b) Notwithstanding anything to the contrary in this Agreement, it is the intent of the Partners that the allocation provisions of Section 5.01 produce (a) final Capital Account balances of the Partners holding Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units with respect to such Series C Preferred Units, Series D Preferred Units and/or Series F Preferred Units equal to the aggregate Series C Liquidation Amount, Series D Liquidation Amount and/or Series F Liquidation Amount, plus any accrued but unpaid Series C Preferred Return, Series D Preferred Return and/or Series F Preferred Return, for each such Series C Preferred Unit, Series D Preferred Unit and/or Series F Preferred Unit and (b) final Capital Account balances of the Partners holding OP Units, Class B Units and/or LTIP Units with respect to such OP Units, Class B Units and/or LTIP Units equal to the amount such Partners would receive with respect to their OP Units, Class B Units and/or LTIP Units pursuant to Section 5.02(b). To the extent the allocation provisions of Section 5.01 would fail to produce such final Capital Account balances, (y) such provisions shall be amended by the General Partner if and to the extent necessary to produce such result and (z) Net Income, Net Loss, Net Property Gain, Net Property Loss and, to the extent necessary, individual items of income, gain, loss and deduction, of the Partnership for prior open years shall be reallocated by the General Partner, in its sole and absolute discretion, among the Partners to the extent it is not possible to achieve such result with allocations of Net Income, Net Loss, Net Property Gain, Net Property
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Loss and, to the extent necessary, individual items of income, gain, loss and deduction, of the Partnership for the current year and future years. This Section 5.07(b) shall control notwithstanding any reallocation or adjustment of taxable Net Income, Net Loss, Net Property Gain, Net Property Loss and, to the extent necessary, individual items of income, gain, loss and deduction, of the Partnership by the Internal Revenue Service or any other taxing authority. The General Partner shall have the authority to amend this Agreement without the consent of the Limited Partners, as it reasonably considers advisable, to make the allocations and adjustments described in this Section 5.07(b).
ARTICLE VI
RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER
6.01 Management of the Partnership.
(a) Except as otherwise expressly provided in this Agreement, the General Partner shall have full, complete and exclusive discretion to manage and control the business of the Partnership for the purposes herein stated, and shall make all decisions affecting the business and assets of the Partnership. Subject to the restrictions specifically contained in this Agreement, the powers of the General Partner shall include, without limitation, the authority to take the following actions on behalf of the Partnership:
(i) to acquire, purchase, own, operate, lease and dispose of any real property and any other property or assets including, but not limited to, notes and mortgages that the General Partner determines are necessary or appropriate in the business of the Partnership;
(ii) to construct buildings and make other improvements on the properties owned or leased by the Partnership;
(iii) to authorize, issue, sell, redeem or otherwise purchase any Partnership Units or any securities (including secured and unsecured debt obligations of the Partnership, debt obligations of the Partnership convertible into any class or series of Partnership Units, or Rights relating to any class or series of Partnership Units) of the Partnership;
(iv) to borrow or lend money for the Partnership, issue or receive evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any such indebtedness, and secure indebtedness by mortgage, deed of trust, pledge or other lien on the Partnerships assets;
(v) to pay, either directly or by reimbursement, for all operating costs and general administrative expenses of the Partnership to third parties or to the General Partner or its Affiliates as set forth in this Agreement;
(vi) to guarantee or become a co-maker of indebtedness of any Subsidiary of the General Partner or the Partnership, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the
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payment of, any such guarantee or indebtedness, and secure such guarantee or indebtedness by mortgage, deed of trust, pledge or other lien on the Partnerships assets;
(vii) to use assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with this Agreement, including, without limitation, payment, either directly or by reimbursement, of all operating costs and general and administrative expenses of the General Partner, the Partnership or any Subsidiary of either, to third parties or to the General Partner as set forth in this Agreement;
(viii) to lease all or any portion of any of the Partnerships assets, whether or not the terms of such leases extend beyond the termination date of the Partnership and whether or not any portion of the Partnerships assets so leased are to be occupied by the lessee, or, in turn, subleased in whole or in part to others, for such consideration and on such terms as the General Partner may determine;
(ix) to prosecute, defend, arbitrate or compromise any and all claims or liabilities in favor of or against the Partnership, on such terms and in such manner as the General Partner may reasonably determine, and similarly to prosecute, settle or defend litigation with respect to the Partners, the Partnership or the Partnerships assets;
(x) to file applications, communicate and otherwise deal with any and all governmental agencies having jurisdiction over, or in any way affecting, the Partnerships assets or any other aspect of the Partnerships business;
(xi) to make or revoke any election permitted or required of the Partnership by any taxing authority;
(xii) to maintain such insurance coverage for public liability, fire and casualty, and any and all other insurance for the protection of the Partnership, for the conservation of Partnership assets, or for any other purpose convenient or beneficial to the Partnership, in such amounts and such types, as it shall determine from time to time;
(xiii) to determine whether or not to apply any insurance proceeds for any property to the restoration of such property or to distribute the same;
(xiv) to establish one or more divisions of the Partnership, to hire and dismiss employees of the Partnership or any division of the Partnership, and to retain legal counsel, accountants, consultants, real estate brokers and such other persons as the General Partner may deem necessary or appropriate in connection with the Partnership business and to pay therefor such reasonable remuneration as the General Partner may deem reasonable and proper;
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(xv) to retain other services of any kind or nature in connection with the Partnership business, and to pay therefor such remuneration as the General Partner may deem reasonable and proper;
(xvi) to negotiate and conclude agreements on behalf of the Partnership with respect to any of the rights, powers and authority conferred upon the General Partner;
(xvii) to maintain accurate accounting records and to file promptly all federal, state and local income tax returns on behalf of the Partnership;
(xviii) to distribute Partnership cash or other Partnership assets in accordance with this Agreement;
(xix) to form or acquire an interest in, and contribute property to, any further limited or general partnerships, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to, its Subsidiaries and any other Person in which it has an equity interest from time to time);
(xx) to establish Partnership reserves for working capital, capital expenditures, contingent liabilities or any other valid Partnership purpose;
(xxi) subject to Section 11.02, to merge, consolidate or combine the Partnership with or into another Person;
(xxii) to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a publicly traded partnership taxable as a corporation under Section 7704 of the Code;
(xxiii) to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts that the General Partner deems necessary or appropriate for the formation, continuation and conduct of the business and affairs of the Partnership and to possess and enjoy all of the rights and powers of a general partner as provided by the Act; and
(xxiv) to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts that the General Partner deems necessary or appropriate such that the General Partner shall continue to satisfy the requirements for qualification as a REIT under the Code and Regulations (REIT Requirements) and avoid any federal income or excise tax liability; provided, however, the General Partner shall not be bound to comply with this covenant to the extent any distributions required to be made in order to satisfy the REIT Requirements would violate the Act or other applicable law or contravene the terms of any notes, mortgages or other types of debt obligations to which the Partnership may be subject in conjunction with borrowed funds.
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(b) Except as otherwise provided herein or in the Act, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that Partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership.
6.02 Delegation of Authority. The General Partner may delegate any or all of its powers, rights and obligations hereunder, and may appoint, employ, contract or otherwise deal with any Person for the transaction of the business of the Partnership, which Person may, under supervision of the General Partner, perform any acts or services for the Partnership as the General Partner may approve.
6.03 Indemnification and Exculpation of Indemnitees.
(a) To the fullest extent permitted by law, the Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. The parties hereto agree, that the termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 6.03(a). The parties hereto agree, that the termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 6.03(a). Any indemnification pursuant to this Section 6.03 shall be made only out of the assets of the Partnership.
(b) The Partnership shall reimburse an Indemnitee for reasonable expenses incurred by an Indemnitee who is a party to a proceeding in advance of the final disposition of the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitees good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 6.03 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.
(c) The indemnification provided by this Section 6.03 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity.
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(d) The Partnership may purchase and maintain insurance, as an expense of the Partnership, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnerships activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 6.03, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 6.03; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is not opposed to the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.03 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.03 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.
(i) Any amendment, modification or repeal of this Section 6.03 or any provision hereof shall be prospective only and shall not in any way affect the indemnification of an Indemnitee by the Partnership under this Section 6.03 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.
6.04 Liability of the General Partner.
(a) Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership or any Partners for losses sustained or liabilities incurred as a result of errors in judgment or mistakes of fact or law or of any act or omission if any such party acted in good faith. Notwithstanding any provision of this Agreement or otherwise applicable provision of law or equity, the General Partner shall not be in breach of any duty (fiduciary or otherwise) that the General Partner may owe to the Limited Partners or the Partnership or any other Persons bound by this Agreement provided the General Partner, acting in good faith, abides by the terms of this Agreement.
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(b) Notwithstanding any provision of this Agreement or otherwise applicable provision of law or equity, the Limited Partners expressly acknowledge that the General Partner is acting for the benefit of the Partnership, the Limited Partners and the General Partners stockholders collectively, and that, to the fullest extent permitted by law, the General Partner has no duty (fiduciary or otherwise) and is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause the Partnership to take (or decline to take) any actions. In the event of a conflict between the interests of the stockholders of the General Partner on the one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either the stockholders of the General Partner or the Limited Partners; provided, however, that for so long as the General Partner owns a controlling interest in the Partnership, any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either the stockholders of the General Partner or the Limited Partners shall be resolved in favor of the stockholders of the General Partner. The General Partner shall not be liable to the Partners or the Partnership for monetary damages for losses sustained, liabilities incurred or benefits not derived by the Limited Partners or the Partnership in connection with such decisions.
(c) Subject to its obligations and duties as General Partner set forth in Section 6.01 hereof, the General Partner may exercise any of the powers granted to it under this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible or liable to the Limited Partners or the Partnership for any misconduct or negligence on the part of any such agent appointed by it in good faith.
(d) Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the General Partner to continue to qualify as a REIT or (ii) to prevent the General Partner from incurring any taxes under Section 857, Section 4981 or any other provision of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.
(e) Any amendment, modification or repeal of this Section 6.04 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partners or any of its officers, directors, agents or employees liability to the Partnership and the Limited Partners under this Section 6.04 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.
6.05 Partnership Obligations.
(a) Except as provided in this Section 6.05 and elsewhere in this Agreement (including the provisions of Articles V and VI hereof regarding distributions, payments and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.
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(b) All Administrative Expenses shall be obligations of the Partnership, and the General Partner shall be entitled to reimbursement by the Partnership for any expenditure (including Administrative Expenses) incurred on behalf of the Partnership that shall be made other than out of the funds of the Partnership.
6.06 Outside Activities. Subject to Section 6.08 hereof, the Charter and any agreements entered into by the General Partner or its Affiliates with the Partnership or a Subsidiary, any officer, director, employee, agent, trustee, Affiliate or stockholders of the General Partner and the General Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities substantially similar or identical to those of the Partnership, and the doctrine of corporate opportunity or any analogous doctrine shall not apply to such business interest or activities. Neither the Partnership nor any of the Limited Partners shall have any rights by virtue of this Agreement in any such business ventures, interest or activities. None of the Limited Partners nor any other Person bound by this Agreement shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any such business ventures, interests or activities, and the General Partner, (i) shall have no duty or obligation (fiduciary or otherwise) pursuant to this Agreement to offer any interest in any such business ventures, interests and activities to the Partnership or any Limited Partner, even if such opportunity is of a character that, if presented to the Partnership or any Limited Partner, could be taken by such Person, and (ii) shall not be liable to the Partnership or to the Limited Partners for breach of any fiduciary or other duty existing at law, in equity or otherwise by reason of the fact that the General Partner pursues or acquires for, or directs such business ventures, interests or activities to another Person or does not communicate such opportunity or information to the Partnership.
6.07 Employment or Retention of Affiliates.
(a) Any Affiliate of the General Partner may be employed or retained by the Partnership and may otherwise deal with the Partnership (whether as a buyer, lessor, lessee, manager, furnisher of goods or services, broker, agent, lender or otherwise) and may receive from the Partnership any compensation, price or other payment therefor that the General Partner determines to be fair and reasonable.
(b) The Partnership may lend or contribute to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.
(c) The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as the General Partner deems are consistent with this Agreement and applicable law.
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6.08 General Partner Activities. The General Partner agrees that, generally, all business activities of the General Partner, including activities pertaining to the acquisition, development, ownership of or investment in single tenant freestanding commercial real estate and related assets, shall be conducted through the Partnership or one or more Subsidiary Partnerships; provided, however, that, subject to Section 4.02(a)(ii), the General Partner may make direct acquisitions or undertake business activities if such acquisitions or activities are made in connection with the issuance of Additional Securities by the General Partner or the business activity has been approved by a majority of the Independent Directors.
6.09 Title to Partnership Assets. Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.
6.10 Redemption of General Partners Partnership Units. In the event the General Partner redeems or repurchases any REIT Shares, then the General Partner shall cause the Partnership to purchase from the General Partner a number of Partnership Units as determined based on the application of the Conversion Factor on the same terms that the General Partner redeemed such REIT Shares. Moreover, if the General Partner makes a cash tender offer or other offer to acquire REIT Shares, then the General Partner shall cause the Partnership to make a corresponding offer to the General Partner to acquire an equal number of Partnership Units held by the General Partner. In the event any REIT Shares are redeemed or repurchased by the General Partner pursuant to such offer, the Partnership shall redeem or repurchase an equivalent number of the General Partners Partnership Units for an equivalent purchase price based on the application of the Conversion Factor.
ARTICLE VII
CHANGES IN GENERAL PARTNER
7.01 Transfer of the General Partners Partnership Interest.
(a) The General Partner shall not transfer all or any portion of its General Partner Interests, and the General Partner shall not withdraw as General Partner, except as provided in or in connection with a transaction contemplated by Section 7.01(c) hereof.
(b) The General Partner agrees that its General Partner Interest will at all times be in the aggregate at least 0.1% of the Partnership Interests.
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(c) Notwithstanding anything in this Section 7.01, the General Partner may transfer all or any portion of its General Partner Interest to any wholly owned Subsidiary of the General Partner that is (i) a state law corporation or is eligible to make, and has validly made, an election pursuant to Treas. Regs. Sec. 301.7701-3 to be treated as an association taxable as a corporation for U.S. federal income tax purposes (ii) a TRS, or (iii) an entity that is wholly owned by the General Partner and treated as disregarded for federal income tax purposes, and following a transfer of all of its General Partner Interest, may withdraw as General Partner. In the event that the General Partner transfers its entire General Partner Interest and the transferee is admitted to the Partnership as a substitute General Partner in accordance with this Agreement, such transferee shall be deemed admitted to the Partnership as a General Partner immediately prior to the transfer and such transferee shall continue the business of the Partnership without dissolution.
7.02 Merger of General Partner.
(a) Except as otherwise provided in Section 7.02(b) or (c) hereof, the General Partner shall not engage in any merger, consolidation or other combination with or into another Person or sale of all or substantially all of its assets (other than in connection with a change in the General Partners state of incorporation or organizational form), in each case which results in a Change of Control of the General Partner (a Transaction), unless at least one of the following conditions is met:
(i) the consent of a Majority in Interest (other than the Percentage Interest held by the General Partner or any Subsidiary of the General Partner) is obtained;
(ii) as a result of such Transaction, all Limited Partners will receive, or have the right to receive, for each Partnership Unit held by such Limited Partners an amount of cash, securities or other property equal in value to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid in the Transaction to a holder of one REIT Share in consideration of one REIT Share, provided, that if, in connection with such Transaction, a purchase, tender or exchange offer (Offer) shall have been made to and accepted by the holders of more than 50% of the outstanding REIT Shares, each holder of Partnership Units (other than the General Partner and any Subsidiary of the General Partner) shall be given the option to exchange its Partnership Units for the greatest amount of cash, securities or other property that such Limited Partner would have received had it (A) exercised its OP Unit Redemption Right pursuant to Section 8.04 hereof and (B) sold, tendered or exchanged pursuant to the Offer the REIT Shares received upon exercise of the OP Unit Redemption Right immediately prior to the expiration of the Offer; or
(iii) the General Partner is the surviving entity in the Transaction and either (A) the holders of REIT Shares do not receive cash, securities or other property in the Transaction or (B) all Limited Partners receive for each Partnership Unit held by such Limited Partners an amount of cash, securities or other property (expressed as an amount per REIT Share) that is no less in value
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than the product of the Conversion Factor and the greatest amount of cash, securities or other property (expressed as an amount per REIT Share) received in the Transaction by any holder of REIT Shares.
(b) Notwithstanding Section 7.02(a) hereof, the General Partner may merge with or into or consolidate with another entity if immediately after such merger or consolidation (i) substantially all of the assets of the successor or surviving entity (the Survivor), other than Partnership Units held by the General Partner, are contributed, directly or indirectly, to the Partnership as a Capital Contribution in exchange for Partnership Units with a fair market value equal to the value of the assets so contributed as determined by the Survivor in good faith and (ii) the Survivor expressly agrees to assume all obligations of the General Partner hereunder. Notwithstanding any provision of this Agreement and without the consent of any other person, upon such contribution and assumption, (i) for all purposes of this Agreement, if the General Partner is not the Survivor, the Survivor, shall be deemed to be the General Partner hereunder and shall be deemed to be admitted as the general partner of the Partnership, upon its execution of a counterpart to this Agreement, effective simultaneously with the merger or consolidation, (ii) the Survivor shall continue the business of the Partnership without dissolution, and (iii) the Survivor shall have the right and duty to amend this Agreement as set forth in this Section 7.02(b) or in any other manner, if applicable, to reflect the change in the general partner of the Partnership. The Survivor shall in good faith arrive at a new method for the calculation of the Cash Amount, the REIT Shares Amount and Conversion Factor for a Partnership Unit after any such merger or consolidation so as to approximate the existing method for such calculation as closely as reasonably possible. Such calculation shall take into account, among other things, the kind and amount of securities, cash and other property that was receivable upon such merger or consolidation by a holder of REIT Shares or options, warrants or other rights relating thereto, and which a holder of Partnership Units could have acquired had such Partnership Units been exchanged immediately prior to such merger or consolidation. Such amendment to this Agreement shall provide for adjustment to such method of calculation, which shall be as nearly equivalent as may be practicable to the adjustments provided for with respect to the Conversion Factor. The Survivor also shall in good faith modify the definition of REIT Shares and make such amendments to Section 8.04 hereof so as to approximate the existing rights and obligations set forth in Section 8.04 hereof as closely as reasonably possible. The above provisions of this Section 7.02(b) shall similarly apply to successive mergers or consolidations permitted hereunder.
Notwithstanding anything in this Section 7.02, the General Partner may engage in a transaction required by law or by the rules of any national securities exchange or over-the-counter interdealer quotation system on which the REIT Shares are listed or traded.
7.03 Admission of a Substitute or Additional General Partner. A Person shall be admitted as a substitute or additional General Partner of the Partnership only if the following terms and conditions are satisfied:
(a) the Person to be admitted as a substitute or additional General Partner shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a counterpart hereof, and an amendment to the Certificate of Limited Partnership of the Partnership evidencing the admission of such Person as a General Partner shall have been filed with the office of the Secretary of State of the State of Delaware;
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(b) if the Person to be admitted as a substitute or additional General Partner is a corporation or a partnership, it shall have provided the Partnership with evidence satisfactory to counsel for the Partnership of such Persons authority to become a General Partner and to be bound by the terms and provisions of this Agreement; and
(c) counsel for the Partnership shall have rendered an opinion (relying on such opinions from other counsel as may be necessary) that the admission of the Person to be admitted as a substitute or additional General Partner is in conformity with the Act, that none of the actions taken in connection with the admission of such Person as a substitute or additional General Partner will cause (i) the Partnership to be classified other than as a partnership for federal income tax purposes, or (ii) the loss of any Limited Partners limited liability.
7.04 Effect of Bankruptcy, Withdrawal, Death or Dissolution of General Partner.
(a) Upon the occurrence of an Event of Bankruptcy as to the General Partner (and its removal pursuant to Section 7.05(a) hereof) or the withdrawal, removal or dissolution of the General Partner or any other event that results in the General Partner ceasing to be a general partner of the Partnership under the Act, the Partnership shall be dissolved and its affairs wound up unless the business of the Partnership is continued pursuant to Section 7.04(b) hereof. Notwithstanding anything in this Agreement to the contrary, any successor to the General Partner by merger or consolidation in compliance with Section 7.02(b) shall, without further act of any Person, be the General Partner hereunder, and such merger or consolidation shall not constitute a transfer for purposes of this Agreement and the Partnership shall continue without dissolution.
(b) Following the occurrence of an Event of Bankruptcy as to the General Partner (and its removal pursuant to Section 7.05(a) hereof) or the withdrawal, removal or dissolution of the General Partner or any other event that resulting the General Partner ceasing to be a general partner of the Partnership under the Act, the Partnership shall not be dissolved or wound up if the Limited Partners, within 90 days after such occurrence, elect to continue the business of the Partnership for the balance of the term specified in Section 2.04 hereof by selecting effective as of such occurrence, subject to Section 7.03 hereof in writing or vote, a substitute General Partner by consent of a Majority in Interest. Any substitute General Partner selected by the Limited Partners in accordance with this Section 7.05(b) and admitted to the Partnership in accordance with Section 7.03, shall be deemed admitted to the Partnership effective simultaneously with the occurrence of the event that caused the General Partner to cease to be a general partner of the Partnership. If the Limited Partners elect to continue the business of the Partnership and admit a substitute General Partner, the relationship with the Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be governed by this Agreement.
7.05 Removal of General Partner.
(a) Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, the General Partner, the General Partner shall be deemed to be removed automatically. To the fullest extent permitted by law, the Limited Partners may not remove the General Partner, with or without cause.
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(b) If the General Partner has been removed pursuant to this Section 7.05 and the Partnership is continued pursuant to Section 7.04 hereof, the General Partner shall promptly transfer and assign its General Partner Interest in the Partnership to the substitute General Partner approved by a Majority in Interest in accordance with Section 7.04(b) hereof and otherwise be admitted to the Partnership in accordance with Section 7.03 hereof. At the time of assignment, the removed General Partner shall be entitled to receive from the substitute General Partner the fair market value of the General Partner Interest of such removed General Partner as reduced by any damages caused to the Partnership by such General Partner. Such fair market value shall be determined by an appraiser mutually agreed upon by the General Partner and a Majority in Interest within ten days following the removal of the General Partner. In the event that the parties are unable to agree upon an appraiser, the removed General Partner and a Majority in Interest each shall select an appraiser. Each such appraiser shall complete an appraisal of the fair market value of the removed General Partners General Partner Interest within 30 days of the General Partners removal, and the fair market value of the removed General Partners General Partner Interest shall be the average of the two appraisals; provided, however, that if the higher appraisal exceeds the lower appraisal by more than 20% of the amount of the lower appraisal, the two appraisers, no later than 40 days after the removal of the General Partner, shall select a third appraiser who shall complete an appraisal of the fair market value of the removed General Partners General Partner Interest no later than 60 days after the removal of the General Partner. In such case, the fair market value of the removed General Partners General Partner Interest shall be the average of the two appraisals closest in value.
(c) The General Partner Interest of a removed General Partner, during the time after default until transfer under Section 7.05(b) hereof, shall be converted to that of a special Limited Partner; provided, however, such removed General Partner shall not have any rights to participate in the management and affairs of the Partnership, and shall not be entitled to any portion of the income, expense, profit, gain or loss allocations or cash distributions allocable or payable, as the case may be, to the Limited Partners. Instead, such removed General Partner shall receive and be entitled only to retain distributions or allocations of such items that it would have been entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to Section 7.05(b) hereof.
(d) Notwithstanding any other provision of this Agreement, for so long as the General Partner is treated as a REIT for U.S. federal income tax purposes, to the fullest extent permitted by law, the General Partner shall not be removed unless (a) the General Partners economic interest in the Partnership shall be simultaneously transferred to another entity that is either (i) not an Affiliate of the General Partner or (ii) a TRS or (b) such removal would not otherwise result in the Partnership having only one partner for U.S. federal income tax purposes.
(e) All Partners shall have given and hereby do give such consents, shall take such actions and shall execute such documents as shall be legally necessary and sufficient to effect all the foregoing provisions of this Section 7.05.
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ARTICLE VIII
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
8.01 Management of the Partnership. The Limited Partners shall not participate in the management or control of Partnership business nor shall they transact any business for the Partnership, nor shall they have the power to sign for or bind the Partnership, such powers being vested solely and exclusively in the General Partner. Notwithstanding anything to the contrary contained in this Agreement, none of the actions taken by any of the Limited Partners hereunder shall constitute participation in the control of the business of the Partnership within the meaning of the Act.
8.02 Power of Attorney. Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful attorney-in-fact, who may act for each Limited Partner and in its name, place and stead, and for its use and benefit, to sign, acknowledge, swear to, deliver, file or record, at the appropriate public offices, any and all documents, certificates and instruments as may be deemed necessary or desirable by the General Partner to carry out fully the provisions of this Agreement and the Act in accordance with their terms, including duly adapted amendments hereto, which power of attorney is coupled with an interest and shall survive and not be affected by the subsequent death, dissolution or legal incapacity of the Limited Partner, or the transfer by the Limited Partner of any part or all of its Partnership Interest. This power of attorney may be exercised by such attorney-in-fact for all Limited Partners (or any of them) by a single signature of the General Partner acting as attorney-in-fact with or without listing all of the Limited Partners executing an instrument.
8.03 Limitation on Liability of Limited Partners. No Limited Partner, in its capacity as such, shall be liable for any debts, liabilities, contracts or obligations of the Partnership. Except as otherwise provided in this Agreement or under the Act, a Limited Partner shall be liable to the Partnership only to make payments of its Capital Contribution, if any, as and when due hereunder. After its Capital Contribution is fully paid, no Limited Partner shall, except as otherwise required by the Act or as otherwise provided for herein, be required to make any further Capital Contributions or other payments or lend any funds to the Partnership.
8.04 OP Unit Redemption Right.
(a) Subject to Sections 8.04(b), (c), (d), (e), (f) and (g) hereof, the penultimate sentence of this Section 8.04(a), and the provisions of any agreements between the Partnership and one or more Limited Partners with respect to OP Units held by them, each Limited Partner shall have the right (the OP Unit Redemption Right) to require the Partnership to redeem on a Specified Redemption Date all or a portion of the OP Units held by such Limited Partner at a redemption price equal to and in the form of the OP Unit Redemption Amount to be paid by the Partnership, provided, that such OP Units (including, for the avoidance of doubt, any OP Units issued to such Limited Partners as a result of any merger, consolidation or other business combination or reorganization to which the Partnership and/or the General Partner is a party) shall have been outstanding for at least one year (or such lesser time as determined by the General Partner in its sole and absolute discretion), which period shall include the period that Partnership Units that were converted into such OP Units were held, and subject to any restriction agreed to in writing between the Redeeming Limited Partner and the General Partner.
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The OP Unit Redemption Right shall be exercised pursuant to a Notice of Exercise of Redemption Right in substantially the form attached hereto as Exhibit B delivered to the Partnership (with a copy to the General Partner) by the Limited Partner who is exercising the OP Unit Redemption Right (the Redeeming Limited Partner); provided, however, that the Partnership shall, in its sole and absolute discretion, have the option to deliver either the Cash Amount or the REIT Shares Amount; provided, further, that the Partnership shall not be obligated to satisfy such OP Unit Redemption Right if the General Partner elects to purchase the OP Units subject to the Notice of Redemption; and provided, further, that no Limited Partner may deliver more than two Notices of Redemption during each calendar year. A Limited Partner may not exercise the OP Unit Redemption Right for less than one thousand (1,000) OP Units or, if such Limited Partner holds less than one thousand (1,000) OP Units, all of the OP Units held by such Limited Partner. Each of the AREP Limited Partner, the ARCA III Limited Partner and the ARCA IV Limited Partner shall not be permitted to exercise the OP Unit Redemption Right unless and until such Partner does not have a deficit balance in its Capital Account. The Redeeming Limited Partner shall have no right, with respect to any OP Units so redeemed, to receive any distribution paid with respect to OP Units if the record date for such distribution is on or after the Specified Redemption Date.
(b) Notwithstanding the provisions of Section 8.04(a) hereof, a Limited Partner that exercises the OP Unit Redemption Right shall be deemed to have offered to sell the OP Units described in the Notice of Redemption to the General Partner, and the General Partner may, in its sole and absolute discretion, elect to purchase directly and acquire such OP Units by paying to the Redeeming Limited Partner either the Cash Amount or the REIT Shares Amount, as elected by the General Partner (in its sole and absolute discretion), on the Specified Redemption Date, whereupon the General Partner shall acquire the OP Units offered for redemption by the Redeeming Limited Partner and shall be treated for all purposes of this Agreement as the owner of such OP Units. If the General Partner shall elect to exercise its right to purchase OP Units under this Section 8.04(b) with respect to a Notice of Redemption, it shall so notify the Redeeming Limited Partner within five business days after the receipt by the General Partner of such Notice of Redemption.
In the event the General Partner shall exercise its right to purchase OP Units with respect to the exercise of a OP Unit Redemption Right, the Partnership shall have no obligation to pay any amount to the Redeeming Limited Partner with respect to such Redeeming Limited Partners exercise of such OP Unit Redemption Right, and each of the Redeeming Limited Partner, the Partnership and the General Partner shall treat the transaction between the General Partner and the Redeeming Limited Partner for federal income tax purposes as a sale of the Redeeming Limited Partners OP Units to the General Partner. Each Redeeming Limited Partner agrees to execute such documents as the General Partner may reasonably require in connection with the issuance of REIT Shares upon exercise of the OP Unit Redemption Right.
(c) Notwithstanding the provisions of Section 8.04(a) and 8.04(b) hereof, a Limited Partner shall not be entitled to exercise the OP Unit Redemption Right if the delivery of REIT Shares to such Limited Partner on the Specified Redemption Date by the General Partner pursuant to Section 8.04(b) hereof (regardless of whether or not the General Partner would in fact exercise its rights under Section 8.04(b) hereof) would (i) result in such Limited Partner or any other Person owning, directly or indirectly, REIT Shares in excess of the Aggregate Share
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Ownership Limit or any Excepted Holder Limit (each as defined in Charter) and calculated in accordance therewith, except as provided in the Charter, (ii) result in REIT Shares being owned by fewer than 100 persons (determined without reference to any rules of attribution), (iii) result in the General Partner being closely held within the meaning of Section 856(h) of the Code, (iv) cause the General Partner to own, actually or constructively, 10% or more of the ownership interests in a tenant (other than a TRS) of the General Partners, the Partnerships or a Subsidiary Partnerships real property, within the meaning of Section 856(d)(2)(B) of the Code, (v) otherwise cause the General Partner to fail to qualify as a REIT under the Code, or (vi) cause the acquisition of REIT Shares by such Limited Partner to be integrated with any other distribution of REIT Shares or OP Units for purposes of complying with the registration provisions of the Securities Act. The General Partner, in its sole and absolute discretion and without the consent of any other Partner or Person, may waive the restriction on redemption set forth in this Section 8.04(c).
(d) Any Cash Amount to be paid to a Redeeming Limited Partner pursuant to this Section 8.04 shall be paid on the Specified Redemption Date; provided, however, that the General Partner may elect to cause the Specified Redemption Date to be delayed for up to an additional 90 days to the extent required for the General Partner to cause additional REIT Shares to be issued to provide financing to be used to make such payment of the Cash Amount. Any REIT Share Amount to be paid to a Redeeming Limited Partner pursuant to this Section 8.04 shall be paid on the Specified Redemption Date; provided, however, that the General Partner may elect to cause the Specified Redemption Date to be delayed for up to an additional 60 days to the extent required for the General Partner to cause additional REIT Shares to be issued. Notwithstanding the foregoing, the General Partner agrees to use its reasonable best efforts to cause the closing of the acquisition of redeemed OP Units hereunder to occur as quickly as reasonably possible.
(e) Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law that apply upon a Redeeming Limited Partners exercise of the OP Unit Redemption Right. If a Redeeming Limited Partner believes that it is exempt from such withholding upon the exercise of the OP Unit Redemption Right, such Partner must furnish the General Partner with a FIRPTA Certificate in substantially the form attached hereto as Exhibit C-1 or Exhibit C-2 and any other documentation reasonably requested by the General Partner. If the Partnership or the General Partner is required to withhold and pay over to any taxing authority any amount upon a Redeeming Limited Partners exercise of the OP Unit Redemption Right and if the OP Unit Redemption Amount equals or exceeds the Withheld Amount, the Withheld Amount shall be treated as an amount received by such Partner in redemption of its OP Units. If, however, the OP Unit Redemption Amount is less than the Withheld Amount, the Redeeming Limited Partner shall not receive any portion of the OP Unit Redemption Amount, the OP Unit Redemption Amount shall be treated as an amount received by such Partner in redemption of its OP Units, and the Partner shall contribute the excess of the Withheld Amount over the OP Unit Redemption Amount to the Partnership before the Partnership is required to pay over such excess to a taxing authority.
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(f) Notwithstanding any other provision of this Agreement, the General Partner shall place appropriate restrictions on the ability of the Limited Partners to exercise their OP Unit Redemption Rights as and if deemed necessary to ensure that the Partnership does not constitute a publicly traded partnership under Section 7704 of the Code. If and when the General Partner determines that imposing such restrictions is necessary, the General Partner shall give prompt written notice thereof (a Restriction Notice) to each of the Limited Partners, which notice shall be accompanied by a copy of an opinion of counsel to the Partnership that states that, in the opinion of such counsel, restrictions are desirable in order to avoid the Partnership being treated as a publicly traded partnership under Section 7704 of the Code.
8.05 Registration. Subject to the terms of any agreement between the General Partner and a Limited Partner with respect to OP Units held by such Limited Partner that includes provisions relating to registration rights (each a Separate Registration Rights Agreement):
(a) Shelf Registration of the REIT Shares. Following the date on which the General Partner becomes eligible to use a registration statement on Form S-3 for the registration of securities under the Securities Act (the S-3 Eligible Date) and within the time period that may be agreed by the General Partner and a Limited Partner, the General Partner shall file with the Commission a shelf registration statement under Rule 415 of the Securities Act (a Registration Statement), or any similar rule that may be adopted by the Commission, covering (i) the issuance of REIT Shares issuable upon redemption of the OP Units held by such Limited Partner (Redemption Shares) and/or (ii) the resale by the holder of the Redemption Shares, with respect to OP Units issued prior to the S-3 Eligible Date; provided, however, that the General Partner shall be required to file only two such registrations in any 12-month period. In connection therewith, the General Partner will:
(1) use its reasonable best efforts to have such Registration Statement declared effective;
(2) furnish to each holder of Redemption Shares such number of copies of prospectuses, and supplements or amendments thereto, and such other documents as such holder reasonably requests;
(3) register or qualify the Redemption Shares covered by the Registration Statement under the securities or blue sky laws of such jurisdictions within the United States as any holder of Redemption Shares shall reasonably request, and do such other reasonable acts and things as may be required of it to enable such holders to consummate the sale or other disposition in such jurisdictions of the Redemption Shares; provided, however, that the General Partner shall not be required to (i) qualify as a foreign corporation or consent to a general or unlimited service or process in any jurisdictions in which it would not otherwise be required to be qualified or so consent or (ii) qualify as a dealer in securities; and
(4) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission.
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The General Partner further agrees to supplement or make amendments to each Registration Statement, if required by the rules, regulations or instructions applicable to the registration form utilized by the General Partner or by the Securities Act or rules and regulations thereunder for such Registration Statement. Each Limited Partner agrees to furnish to the General Partner, upon request, such information with respect to the Limited Partner as may be required to complete and file the Registration Statement.
In connection with and as a condition to the General Partners obligations with respect to the filing of a Registration Statement pursuant to this Section 8.05, each Limited Partner agrees with the General Partner that:
(x) it will not offer or sell its Redemption Shares until (A) such Redemption Shares have been included in a Registration Statement and (B) it has received copies of a prospectus, and any supplement or amendment thereto, as contemplated by Section 8.05(a) hereof, and receives notice that the Registration Statement covering such Redemption Shares, or any post-effective amendment thereto, has been declared effective by the Commission;
(y) if the General Partner determines in its good faith judgment, after consultation with counsel, that the use of the Registration Statement, including any post effective amendment thereto, or the use of any prospectus contained in such Registration Statement would require the disclosure of important information that the General Partner has a bona fide business purpose for preserving as confidential or the disclosure of which would impede the General Partners ability to consummate a significant transaction, upon written notice of such determination by the General Partner, the rights of each Limited Partner to offer, sell or distribute its Redemption Shares pursuant to such Registration Statement or prospectus or to require the General Partner to take action with respect to the registration or sale of any Redemption Shares pursuant to a Registration Statement (including any action contemplated by this Section 8.05) will be suspended until the date upon which the General Partner notifies such Limited Partner in writing (which notice shall be deemed sufficient if given through the issuance of a press release) that suspension of such rights for the grounds set forth in this paragraph is no longer necessary; provided, however, that the General Partner may not suspend such rights for an aggregate period of more than 90 days in any 12-month period; and
(z) in the case of the registration of any underwritten equity offering proposed by the General Partner (other than any registration by the General Partner on Form S-8, or a successor or substantially similar form, of (A) an employee share option, share purchase or compensation plan or of securities issued or issuable pursuant to any such plan or (B) a dividend reinvestment plan), each Limited Partner will agree, if requested in writing by the managing underwriter or underwriters administering such offering, not to effect any offer, sale or distribution of any REIT Shares or Redemption Shares (or any option or right to acquire REIT Shares or Redemption Shares) during the period commencing on the tenth day prior to the expected effective date (which date shall be stated in such notice) of the registration statement covering such underwritten primary equity offering or, if such offering shall be a take-down from an effective shelf registration statement, the tenth day prior to the expected commencement date (which date shall be stated in such notice) of such offering, and ending on the date specified by such managing underwriter in such written request to the Limited Partners; provided, however, that no Limited Partner shall be required to agree not to effect any offer, sale or distribution of its
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Redemption Shares for a period of time that is longer than the greater of 90 days or the period of time for which any senior executive of the General Partner is required so to agree in connection with such offering. Nothing in this paragraph shall be read to limit the ability of any Limited Partner to redeem its OP Units in accordance with the terms of this Agreement.
(b) Listing on Securities Exchange. If the General Partner lists or maintains the listing of REIT Shares on any securities exchange or national market system, it shall, at its expense and as necessary to permit the registration and sale of the Redemption Shares hereunder, list thereon, maintain and, when necessary, increase such listing to include such Redemption Shares.
(c) Registration Not Required. Notwithstanding the foregoing, the General Partner shall not be required to file or maintain the effectiveness of a registration statement relating to Redemption Shares after the first date upon which, in the opinion of counsel to the General Partner, all of the Redemption Shares covered thereby could be sold by the holders thereof pursuant to Rule 144 under the Securities Act, or any successor rule thereto.
(d) Allocation of Expenses. The Partnership shall pay all expenses in connection with the Registration Statement, including without limitation (i) all expenses incident to filing with the Financial Industry Regulatory Authority, Inc., (ii) registration fees, (iii) printing expenses, (iv) accounting and legal fees and expenses, except to the extent holders of Redemption Shares elect to engage accountants or attorneys in addition to the accountants and attorneys engaged by the General Partner or the Partnership, which fees and expenses for such accountants or attorneys shall be for the account of the holders of the Redemption Shares, (v) accounting expenses incident to or required by any such registration or qualification and (vi) expenses of complying with the securities or blue sky laws of any jurisdictions in connection with such registration or qualification; provided, however, neither the Partnership nor the General Partner shall be liable for (A) any discounts or commissions to any underwriter or broker attributable to the sale of Redemption Shares, or (B) any fees or expenses incurred by holders of Redemption Shares in connection with such registration that, according to the written instructions of any regulatory authority, the Partnership or the General Partner is not permitted to pay.
(e) Indemnification.
(i) In connection with the Registration Statement, to the fullest extent permitted by law, the General Partner and the Partnership agree to indemnify holders of Redemption Shares within the meaning of Section 15 of the Securities Act, against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) caused by any untrue, or alleged untrue, statement of a material fact contained in the Registration Statement, preliminary prospectus or prospectus (as amended or supplemented if the General Partner shall have furnished any amendments or supplements thereto) or caused by any omission or alleged omission, to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any untrue statement, alleged untrue statement, omission, or alleged omission based upon
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information furnished to the General Partner by the Limited Partner or the holder of Redemption Shares for use therein. The General Partner and each officer, director and controlling Person of the General Partner and the Partnership shall be indemnified by each Limited Partner or holder of Redemption Shares covered by the Registration Statement for all such losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) caused by any untrue, or alleged untrue, statement or any omission, or alleged omission, based upon information furnished to the General Partner or the Partnership by the Limited Partner or the holder for use therein.
(ii) Promptly upon receipt by a party indemnified under this Section 8.05(e) of notice of the commencement of any action against such indemnified party in respect of which indemnity or reimbursement may be sought against any indemnifying party under this Section 8.05(e), such indemnified party shall notify the indemnifying party in writing of the commencement of such action, but the failure to so notify the indemnifying party shall not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 8.05(e) unless such failure shall materially adversely affect the defense of such action. In case notice of commencement of any such action shall be given to the indemnifying party as above provided, the indemnifying party shall be entitled to participate in and, to the extent it may wish, jointly with any other indemnifying party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such indemnified party. The indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the reasonable fees and expenses of such counsel (other than reasonable costs of investigation) shall be paid by the indemnified party unless (i) the indemnifying party agrees to pay the same, (ii) the indemnifying party fails to assume the defense of such action with counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) have been advised by such counsel that representation of such indemnified party and the indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct (in which case the indemnified party shall have the right to separate counsel and the indemnifying party shall pay the reasonable fees and expenses of such separate counsel, provided, that the indemnifying party shall not be liable for more than one separate counsel). No indemnifying party shall be liable to any indemnified party for any settlement entered into without its consent.
(f) Contribution.
(i) If for any reason the indemnification provisions contemplated by Section 8.05(e) hereof are either unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities referred to therein, then the party that would otherwise be required to provide indemnification or the indemnifying party (in either case, for purposes of this Section 8.05(f), the Indemnifying Party) in respect of such losses, claims,
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damages or liabilities, shall contribute to the amount paid or payable by the party that would otherwise be entitled to indemnification or the indemnified party (in either case, for purposes of this Section 8.05(f), the Indemnified Party) as a result of such losses, claims, damages, liabilities or expense, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the Indemnified Party, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact related to information supplied by the Indemnifying Party or Indemnified Party, and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party.
(ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8.05(f) were determined by pro rata allocation (even if the holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person determined to have committed a fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
(iii) The contribution provided for in this Section 8.05(f) shall survive the termination of this Agreement and shall remain in full force and effect regardless of any investigation made by or on behalf of any Indemnified Party.
(g) Conflict. With respect to any Limited Partner, in the event of a conflict between the provisions of this Section 8.05 and any Separate Registration Rights Agreement, the provisions of the Separate Registration Rights Agreement shall control.
ARTICLE IX
TRANSFERS OF PARTNERSHIP INTERESTS
9.01 Purchase for Investment.
(a) Each Limited Partner, by its signature below or by its subsequent admission to the Partnership, hereby represents and warrants to the General Partner and to the Partnership that the acquisition of such Limited Partners Partnership Units is made for investment purposes only and not with a view to the resale or distribution of such Partnership Units.
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(b) Subject to the provisions of Section 9.02 hereof, each Limited Partner agrees that such Limited Partner will not Transfer such Limited Partners Partnership Units or any fraction thereof, whether voluntarily or by operation of law or at judicial sale or otherwise, to any Person who does not make the representations and warranties to the General Partner set forth in Section 9.01(a) hereof.
9.02 Restrictions on Transfer of Partnership Units.
(a) Subject to the provisions of Sections 9.02(b), (c) and (d) hereof, to the fullest extent permitted by law, no Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all or any portion of such Limited Partners Partnership Units, or any of such Limited Partners economic rights as a Limited Partner, whether voluntarily or by operation of law or at judicial sale or otherwise (collectively, a Transfer) without the consent of the General Partner, which consent may be granted or withheld in its sole and absolute discretion. The General Partner may require, as a condition of any Transfer to which it consents, that the transferor assume all costs incurred by the Partnership in connection therewith.
(b) No Limited Partner may withdraw from the Partnership other than as a result of a permitted Transfer (i.e., a Transfer consented to as contemplated by clause (a) above or clause (c) below or a Transfer pursuant to Section 9.05 hereof) of all of such Limited Partners Partnership Units pursuant to this Article IX or pursuant to a redemption of all of such Limited Partners OP Units pursuant to Section 8.04 hereof. Upon the permitted Transfer or redemption of all of a Limited Partners OP Units, such Limited Partner shall cease to be a Limited Partner.
(c) Subject to Sections 9.02(d), (e) and (f) hereof, a Limited Partner may Transfer, with the consent of the General Partner, all or a portion of such Limited Partners Partnership Units to (i) such Limited Partners parent or parents spouse, (ii) such Limited Partners spouse, (iii) such Limited Partners natural or adopted descendant or descendants, (iv) such Limited Partners spouse of such Limited Partners descendant, (v) such Limited Partners brother or sister, (vi) a trust created by such Limited Partner for the primary benefit of such Limited Partner and/or any such Person(s) described in (i) through (v) above, of which trust such Limited Partner or any such Person(s) or bank or other commercial entity in the business of acting as a fiduciary in its ordinary course of business and having an equity capitalization of at least $100,000,000 is a trustee, (vii) a corporation, partnership or limited liability company controlled by a Person or Persons named in (i) through (v) above, or (viii) if the Limited Partner is an entity, its beneficial owners.
(d) No Limited Partner may effect a Transfer of its Partnership Units, in whole or in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer would require the registration of the Partnership Units under the Securities Act or would otherwise violate any applicable federal or state securities or blue sky law (including investment suitability standards).
(e) No Transfer by a Limited Partner of its Partnership Units, in whole or in part, may be made to any Person if the General Partner determines, in its commercially reasonable discretion, that (i) such Transfer would result in the Partnership being treated as an association taxable as a corporation (other than a qualified REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) it would adversely affect the ability of the General Partner to continue to qualify as a REIT or subject the General Partner to any additional taxes under Section 857, Section 4981 or any other provision of the Code or (iii) such Transfer is effectuated
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through an established securities market or a secondary market (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code; provided, that if the General Partner secures an opinion of qualified United States tax counsel that the Partnership would, if such Transfer were completed, satisfy one or more provisions under Section 7704 of the Code and the Regulations promulgated thereunder such that the Partnership would not be treated as a publicly traded partnership for U.S. federal income tax purposes, then such Transfer shall not be prohibited by this Section 9.02(e).
(f) To the fullest extent permitted by law, any purported Transfer in contravention of any of the provisions of this Article IX shall be void ab initio and ineffectual and shall not be binding upon, or recognized by, the General Partner or the Partnership.
(g) Prior to the consummation of any Transfer under this Article IX, the transferor and/or the transferee shall deliver to the General Partner such opinions, certificates and other documents as the General Partner shall request in connection with such Transfer.
(h) Notwithstanding anything to the contrary contained in this Section 9.02, ARC Real Estate Partners, LLC may Transfer any of its OP Units to its Members (as defined in the limited liability company agreement of ARC Real Estate Partners, LLC, dated July 26, 2010, by and among the signatories thereto, as amended from time to time), without the consent of the General Partner.
(i) The Partners hereby acknowledge and agree that a Partner who holds Class B Units or LTIP Units shall not Transfer such Class B Units or LTIP Units other than, and subject to any restriction on the transfer of Class B Units contained in Article XV or any restriction on the transfer of LTIP Units contained in Article XVI or the terms of an applicable OPP Agreement, (i) pursuant to Section 9.02(c) hereof, (ii) by operation of law to the estate of a Partner who held such LTIP Units immediately prior to his or her death or (iii) to the Partnership or the General Partner.
9.03 Admission of Substitute Limited Partner.
(a) Subject to the other provisions of this Article IX, an assignee of the Partnership Units of a Limited Partner (which shall be understood to include any purchaser, transferee, donee or other recipient of any disposition of such Partnership Units) shall be deemed admitted as a Limited Partner of the Partnership only with the consent of the General Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion, and upon the satisfactory completion of the following:
(i) The assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart or an amendment thereof, including a revised Exhibit A, and such other documents or instruments as the General Partner may require in order to effect the admission of such Person as a Limited Partner.
(ii) The assignee shall have delivered a letter containing the representation set forth in Section 9.01(a) hereof and the representations and warranties set forth in Section 9.01(b) hereof.
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(iii) If the assignee is a corporation, partnership or trust, the assignee shall have provided the General Partner with evidence satisfactory to counsel for the Partnership of the assignees authority to become a Limited Partner under the terms and provisions of this Agreement.
(iv) The assignee shall have executed a power of attorney containing the terms and provisions set forth in Section 8.02 hereof.
(v) The assignee shall have paid or reimbursed, and shall hold harmless the General Partner and the Partnership for, all legal fees and other expenses of the Partnership and the General Partner and filing and publication costs in connection with its substitution as a Limited Partner, including any applicable transfer taxes or withholding taxes.
(vi) The assignee shall have obtained the prior written consent of the General Partner to its admission as a Substitute Limited Partner, which consent may be given or denied in the exercise of the General Partners sole and absolute discretion.
(b) For the purpose of allocating Net Income and Net Loss and distributing cash received by the Partnership, a Substitute Limited Partner shall be treated as having become, and appearing in the records of the Partnership as, a Limited Partner on the later of the date specified in the transfer documents or the date on which the General Partner has received all necessary instruments of transfer and substitution.
(c) The General Partner and the Substitute Limited Partner shall cooperate with each other by preparing the documentation required by this Section 9.03 and making all official filings and publications. The Partnership shall take all such action as promptly as practicable after the satisfaction of the conditions in this Article IX to the admission of such Person as a Limited Partner of the Partnership.
9.04 Rights of Assignees of Partnership Units.
(a) Subject to the provisions of Sections 9.01 and 9.02 hereof, except as required by operation of law, the Partnership shall not be obligated for any purposes whatsoever to recognize the assignment by any Limited Partner of its Partnership Units until the Partnership has received notice thereof.
(b) Any Person who is the assignee of all or any portion of a Limited Partners Partnership Units, but does not become a Substitute Limited Partner and desires to make a further assignment of such Partnership Units, shall be subject to all the provisions of this Article IX to the same extent and in the same manner as any Limited Partner desiring to make an assignment of its Partnership Units.
9.05 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner. To the fullest extent permitted by law, the occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited Partner or a final adjudication that a Limited Partner is incompetent (which term shall include, but not be limited to, insanity) shall not, in and of itself,
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cause the termination or dissolution of the Partnership, and the business of the Partnership shall continue, and such Limited Partners personal representative (as defined in the Act) shall have the rights of such Limited Partner for the purpose of settling or managing such Limited Partners estate property and such power as the bankrupt, deceased or incompetent Limited Partner possessed to assign all or any part of such Limited Partners Partnership Units and to join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Limited Partner.
9.06 Joint Ownership of Partnership Units. A Partnership Unit may be acquired by two individuals as joint tenants with right of survivorship, provided, that such individuals either are married or are related and share the same home as tenants in common. The written consent or vote of both owners of any such jointly held Partnership Unit shall be required to constitute the action of the owners of such Partnership Unit; provided, however, that the written consent of only one joint owner will be required if the Partnership has been provided with evidence satisfactory to the counsel for the Partnership that the actions of a single joint owner can bind both owners under the applicable laws of the state of residence of such joint owners. Upon the death of one owner of a Partnership Unit held in a joint tenancy with a right of survivorship, the Partnership Unit shall become owned solely by the survivor as a Limited Partner and not as an assignee. The Partnership need not recognize the death of one of the owners of a jointly-held Partnership Unit until it shall have received notice of such death. Upon notice to the General Partner from either owner, the General Partner shall cause the Partnership Unit to be divided into two equal Partnership Units, which shall thereafter be owned separately by each of the former owners.
ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
10.01 Books and Records. At all times during the continuance of the Partnership, the General Partner shall keep or cause to be kept at the Partnerships specified office true and complete books of account in accordance with generally accepted accounting principles, including: (a) a current list of the full name and last known business address of each Partner, (b) a copy of the Certificate of Limited Partnership of the Partnership and all certificates of amendment thereto, (c) copies of the Partnerships federal, state and local income tax returns and reports, (d) copies of this Agreement and any financial statements of the Partnership for the three most recent years and (e) all documents and information required under the Act. Any Limited Partner or its duly authorized representative, for any purpose reasonably related to such Limited Partners interest as a limited partner in the Partnership, upon paying the costs of collection, duplication and mailing, shall be entitled to inspect or copy such records during ordinary business hours.
10.02 Custody of Partnership Funds; Bank Accounts.
(a) All funds of the Partnership not otherwise invested shall be deposited in one or more accounts maintained in such banking or brokerage institutions as the General Partner shall determine, and withdrawals shall be made only on such signature or signatures as the General Partner may, from time to time, determine.
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(b) All deposits and other funds not needed in the operation of the business of the Partnership may be invested by the General Partner. The funds of the Partnership shall not be commingled with the funds of any other Person except for such commingling as may necessarily result from an investment in those investment companies permitted by this Section 10.02(b).
10.03 Fiscal and Taxable Year. The fiscal and taxable year of the Partnership shall be the calendar year unless otherwise required by the Code.
10.04 Annual Tax Information and Report. Within 75 days after the end of each fiscal year of the Partnership, the General Partner shall furnish to each Person who was a Limited Partner at any time during such year the tax information necessary to file such Limited Partners individual tax returns as shall be reasonably required by law.
10.05 Tax Matters Partner; Tax Elections; Special Basis Adjustments.
(a) The General Partner shall be the Tax Matters Partner of the Partnership. As Tax Matters Partner, the General Partner shall have the right and obligation to take all actions authorized and required, respectively, by the Code for the Tax Matters Partner. The General Partner shall have the right to retain professional assistance in respect of any audit of the Partnership by the Service and all out-of-pocket expenses and fees incurred by the General Partner on behalf of the Partnership as Tax Matters Partner shall constitute Partnership expenses. In the event the General Partner receives notice of a final Partnership adjustment under Section 6223(a)(2) of the Code, the General Partner shall either (i) file a court petition for judicial review of such final adjustment within the period provided under Section 6226(a) of the Code, a copy of which petition shall be mailed to all Limited Partners on the date such petition is filed, or (ii) mail a written notice to all Limited Partners, within such period, that describes the General Partners reasons for determining not to file such a petition.
(b) All elections and determinations required or permitted to be made by the Partnership under the Code or any applicable state or local tax law shall be made by the General Partner in its sole and absolute discretion.
(c) In the event of a transfer of all or any part of the Partnership Interest of any Partner, the Partnership, at the option of the General Partner, may elect pursuant to Section 754 of the Code to adjust the basis of the Properties. Notwithstanding anything contained in Article V of this Agreement, any adjustments made pursuant to Section 754 shall affect only the successor in interest to the transferring Partner and in no event shall be taken into account in establishing, maintaining or computing Capital Accounts for the other Partners for any purpose under this Agreement unless an adjustment to Capital Accounts is permitted under the Regulations promulgated under Section 704 of the Code. Each Partner will furnish the Partnership with all information necessary to give effect to such election.
(d) In the event that the General Partner shall be removed or replaced pursuant to any provision of this Agreement, the successor to the General Partner shall assume the obligations of this Section 10.05.
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(e) The Partners, intending to be legally bound, hereby authorize the Partnership to make an election (the Safe Harbor Election) to have the liquidation value safe harbor provided in Proposed Treasury Regulation § 1.83-3(1) and the Proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43, as such safe harbor may be modified when such proposed guidance is issued in final form or as amended by subsequently issued guidance (the Safe Harbor), apply to any interest in the Partnership transferred to a service provider while the Safe Harbor Election remains effective, to the extent such interest meets the Safe Harbor requirements (collectively, such interests are referred to as Safe Harbor Interests). The Tax Matters Partner is authorized and directed to execute and file the Safe Harbor Election on behalf of the Partnership and the Partners. The Partnership and the Partners (including any Person to whom an interest in the Partnership is transferred in connection with the performance of services) hereby agree to comply with all requirements of the Safe Harbor (including forfeiture allocations) with respect to all Safe Harbor Interests and to prepare and file all U.S. federal income tax returns reporting the tax consequences of the issuance and vesting of Safe Harbor Interests consistent with such final Safe Harbor guidance. The Partnership is also authorized to take such actions as are necessary to achieve, under the Safe Harbor, the effect that the election and compliance with all requirements of the Safe Harbor referred to above would be intended to achieve under Proposed Treasury Regulation § 1.83-3, including amending this Agreement.
10.06 Reports to Limited Partners.
(a) If the General Partner is required to furnish an annual report to its stockholders containing financial statements of the General Partner, the General Partner will, at the same time and in the same manner, furnish such annual report to each Limited Partner.
(b) Any Partner shall further have the right to a private audit of the books and records of the Partnership, provided, that such audit is made for Partnership purposes, at the sole expense of the Partner desiring it and is made during normal business hours.
ARTICLE XI
AMENDMENT OF AGREEMENT; MERGER
11.01 Amendment of Agreement.
Except as otherwise provided herein, the General Partners written consent shall be required for any amendment to this Agreement. Except as otherwise provided herein, the General Partner, without the consent of the Limited Partners or any other Person, may amend this Agreement in any respect; provided, however, that the following amendments shall require the written consent of a Majority in Interest:
(a) any amendment affecting the operation of the Conversion Factor or the OP Unit Redemption Right (except as otherwise provided herein) in a manner that adversely affects the Limited Partners in any material respect;
(b) any amendment that would adversely affect the rights of the Limited Partners in any material respect to receive the distributions payable to them hereunder, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.02 hereof;
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(c) any amendment that would alter the Partnerships allocations of Net Income and Net Loss to the Limited Partners, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.02 hereof;
(d) any amendment that would impose on the Limited Partners any obligation to make additional Capital Contributions to the Partnership; or
(e) any amendment to this Article XI.
11.02 Merger of Partnership.
Notwithstanding any provision of this Agreement, the General Partner, without the consent of the Limited Partners or any other Person, may (i) merge or consolidate the Partnership with or into any other domestic or foreign partnership, limited partnership, limited liability company, corporation or other Person or (ii) sell all or substantially all of the assets of the Partnership in a transaction pursuant to Section 7.02(a) or (b) hereof and may amend this Agreement in any manner or adopt a new limited partnership agreement for the Partnership in connection with any such transaction consistent with the provisions of this Article XI.
ARTICLE XII
CLASS B UNITS
12.01 Designation and Number.
(a) A series of Partnership Units in the Partnership, designated as the Class B Units, is hereby established. Except as set forth in this Article XII, Class B Units shall have the same rights, privileges and preferences as the OP Units. Subject to the provisions of this Article XII and the special provisions of Section 5.01(c)(iii), Class B Units shall be treated as Partnership Units, with all of the rights, privileges and obligations attendant thereto.
(b) It is intended that the Partnership shall maintain at all times a one-to-one correspondence between Class B Units and OP Units for conversion and other purposes. If an Adjustment Event occurs, then the General Partner shall make a corresponding adjustment to the Class B Units to maintain a one-for-one conversion and economic equivalence ratio between OP Units and Class B Units. If more than one Adjustment Event occurs, the adjustment to the Class B Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. If the Partnership takes an action affecting the OP Units other than actions specifically described in the definition of Adjustment Events and, in the opinion of the General Partner such action would require an adjustment to the Class B Units to maintain the one-to-one correspondence described above, the General Partner shall have the right to make such adjustment to the Class B Units, to the extent permitted by law, in such manner and at such time as the General Partner, in its sole discretion, may determine to be appropriate under the circumstances. If an adjustment is made to the Class B Units as herein provided, the Partnership shall promptly file in the books and records of the Partnership an officers certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after the filing of such certificate, the Partnership shall mail a notice to each holder of Class B Units setting forth the adjustment to his, her or its Class B Units and the effective date of such adjustment.
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12.02 Special Provisions. Class B Units shall be subject to the following special provisions:
(a) Distributions. The holders of Class B Units shall be entitled to (i) current distributions of Cash Available for Distribution pursuant to Section 5.02(a)(ii), (ii) distributions, if any, of Net Sales Proceeds pursuant to Section 5.02(b)(iii), and (iii) distributions in liquidation of the Partnership pursuant to Section 5.06.
(b) Allocations. Holders of Class B Units shall be entitled to certain special allocations of Net Property Gain under Section 5.01(c)(iii). Except in connection with Net Property Gain, holders of Class B Units shall be allocated Net Income no greater than the amount of distributions made pursuant to Section 5.02(a)(ii).
(c) Redemption. The OP Unit Redemption Right provided to Limited Partners under Section 8.04 hereof shall not apply with respect to Class B Units unless and until the Class B Units are converted to OP Units as provided in Section 12.04.
12.03 Voting.
(a) Holders of Class B Units shall (x) have the same voting rights as the Limited Partners, with the Class B Units voting as a single class with the OP Units and having one vote per Class B Unit; and (y) have the additional voting rights that are expressly set forth below. So long as any Class B Units remain outstanding, the Partnership shall not, without the affirmative vote of the holders of at least a majority of the Class B Units outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of this Agreement applicable to Class B Units so as to materially and adversely affect any right, privilege or voting power of the Class B Units or the holders of Class B Units as such, unless such amendment, alteration, or repeal affects equally, ratably and proportionately the rights, privileges and voting powers of the Limited Partners; but subject, in any event, to the following provisions:
(i) With respect to any OP Unit Transaction, so long as the Class B Units are treated in accordance with Section 12.04(d) hereof, the consummation of such OP Unit Transaction shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the Class B Units or the holders of Class B Units as such; and
(ii) Any creation or issuance of any Partnership Units or of any class or series of Partnership Interest including additional OP Units or Class B Units whether ranking senior to, junior to, or on a parity with the Class B Units with respect to distributions and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the Class B Units or the holders of Class B Units as such.
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(b) The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required, all outstanding Class B Units shall have been converted into OP Units.
12.04 Conversion of Class B Units.
(a) Conversion. At such time as the Class B Economic Capital Account Balance attributable to a Class B Unit is equal to the OP Unit Economic Balance, each such balance determined on a per unit basis as of the effective date of conversion (the Class B Conversion Date), such Class B Unit shall automatically convert into one fully paid and non-assessable OP Unit, giving effect to all adjustments (if any) made pursuant to Section 12.01 hereof; provided, that a Class B Unit shall not be convertible into OP Units if the Class B Economic Capital Account Balance attributable to such Class B Unit is negative. Each holder of Class B Units covenants and agrees with the Partnership that all Class B Units to be converted pursuant to this Section 12.04 shall be free and clear of all liens. The conversion of Class B Units shall occur automatically after the close of business on the applicable Conversion Date without any action on the part of such holder of Class B Units, as of which time such holder of Class B Units shall be credited on the books and records of the Partnership with the issuance as of the opening of business on the next day of the number of OP Units issuable upon such conversion. For purposes of determining the Class B Economic Capital Account Balance attributable to a Class B Unit, allocations pursuant to Section 5.01(c)(iii) shall be made in such a manner so as to allow the greatest number of Class B Units to convert pursuant to this Section 12.04 at any time.
(b) Adjustment to Gross Asset Value.
(i) The General Partner shall provide the holders of Class B Units the opportunity but not the obligation to make Capital Contributions to the Partnership in exchange for OP Units in order to cause an adjustment to the Gross Asset Value of the Partnerships assets within the meaning of paragraph (b)(i) of the definition of Gross Asset Value up to two (2) times each fiscal year including if the Partnership or the General Partner shall be a party to any OP Unit Transaction; provided, that the General Partner shall give each holder of Class B Units written notice of such OP Unit Transaction at least thirty (30) days prior to entering into any definitive agreement pursuant to which the OP Unit Transaction would be consummated;
(ii) For purposes of clause (i) of this Section 12.04(b), the value of each OP Unit issued in order to cause an adjustment to the Gross Asset Value of the Partnerships assets shall be an amount equal to the product of (y) the Value of one REIT Share as of the date the holder of Class B Units makes a Capital Contribution to the Partnership multiplied by (z) the Conversion Factor.
(iii) For the avoidance of doubt, the issuance of Class B Units shall be treated as an event allowing for an adjustment to the Gross Asset Value of the Partnerships assets within the meaning of paragraph (b)(iv) of the definition of Gross Asset Value.
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(c) Impact of Conversion for Purposes of Section 5.01(c)(iii). For purposes of making future allocations under Section 5.01(c)(iii), the portion of the Class B Economic Capital Account Balance of the applicable holder of Class B Units that is treated as attributable to his, her or its Class B Units shall be reduced, as of the date of conversion, by the product of the number of Class B Units converted and the OP Unit Economic Balance.
(d) OP Unit Transactions. Immediately prior to or concurrent with an OP Unit Transaction the maximum number of Class B Units then eligible for conversion (in accordance with the provisions of Section 12.04(a)) shall automatically be converted into an equal number of OP Units, giving effect to all adjustments (if any) made pursuant to Section 12.01 hereof, taking into account any allocations that occur in connection with the OP Unit Transaction or that would occur in connection with the OP Unit Transaction if the assets of the Partnership were sold at the OP Unit Transaction price or, if applicable, at a value determined by the General Partner in good faith using the value attributed to the Partnership Units in the context of the OP Unit Transaction (in which case the Conversion Date shall be the effective date of the OP Unit Transaction). In anticipation of such OP Unit Transaction, the Partnership shall use commercially reasonable efforts to cause each holder of Class B Units to be afforded the right to receive in connection with such OP Unit Transaction in consideration for the OP Units into which his, her or its Class B Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such OP Unit Transaction by a holder of the same number of OP Units, assuming such holder of OP Units is not a Person with which the Partnership consolidated or into which the Partnership merged or which merged into the Partnership or to which such sale or transfer was made, as the case may be (a Constituent Person), or an affiliate of a Constituent Person. In the event that holders of OP Units have the opportunity to elect the form or type of consideration to be received upon consummation of the OP Unit Transaction, prior to such OP Unit Transaction the General Partner shall give prompt written notice to each holder of Class B Units of such election, and shall use commercially reasonable efforts to afford the holders of Class B Units the right to elect, by written notice to the General Partner, the form or type of consideration to be received upon conversion of each Class B Unit held by such holder into OP Units in connection with such OP Unit Transaction. If a holder of Class B Units fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each Class B Unit held by him, her or it (or by any of his, her or its transferees) the same kind and amount of consideration that a holder of an OP Unit would receive if such OP Unit holder failed to make such an election. The Partnership shall use commercially reasonable effort to cause the terms of any OP Unit Transaction to be consistent with the provisions of this Section 12.04(d) and to enter into an agreement with the successor or purchasing entity, as the case may be, for the benefit of any holders of Class B Units whose Class B Units will not be converted into OP Units in connection with the OP Unit Transaction that will (i) contain provisions enabling the holders of Class B Units that remain outstanding after such OP Unit Transaction to convert their Class B Units into securities as comparable as reasonably possible under the circumstances to the OP Units and (ii) preserve as far as reasonably possible under the circumstances the distribution, special allocation, conversion, and other rights set forth in this Agreement for the benefit of the holders of Class B Units.
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12.05 Profits Interests.
(a) Class B Units are intended to qualify as a profits interest in the Partnership issued to a new or existing Partner in a partner capacity for services performed or to be performed to or for the benefit of the Partnership within the meaning of Rev. Proc. 93-27, 1993-2 C.B. 343, and Rev. Proc. 2001-43, 2001-2 C.B. 191, the Code, the Regulations, and other future guidance provided by the IRS with respect thereto, and the allocations under Section 5.01(c)(iii) shall be interpreted in a manner that is consistent therewith.
(b) The Partners agree that the General Partner may make a Safe Harbor Election, on behalf of itself and of all Partners, to have the Safe Harbor apply irrevocably with respect to Class B Units transferred in connection with the performance of services by a Partner in a partner capacity. The Safe Harbor Election shall be effective as of the date of issuance of such Class B Units. If such election is made, (i) the Partnership and each Partner agree to comply with all requirements of the Safe Harbor with respect to all interests in the Partnership transferred in connection with the performance of services by a Partner in a partner capacity, whether such Partner was admitted as a Partner or as the transferee of a previous Partner, and (ii) the General Partner shall cause the Partnership to comply with all record-keeping requirements and other administrative requirements with respect to the Safe Harbor as shall be required by proposed or final regulations relating thereto.
(c) The Partners agree that if a Safe Harbor Election is made by the General Partner, (A) each Class B Unit issued hereunder is a Safe Harbor Interest, (B) each Class B Unit represents a profits interest received for services rendered or to be rendered to or for the benefit of the Partnership by such holder of Class B Units in his, her or its capacity as a Partner or in anticipation of becoming a Partner, and (C) the fair market value of each Class B Unit issued by the Partnership upon receipt by such holder of Class B Units as of the date of issuance is zero (plus the amount, if any, of any Capital Contributions made to the Partnership by such holder of Class B Units in connection with the issuance of such Class B Unit), representing the liquidation value of such interest upon receipt (with such valuation being consented to and hereby approved by all Partners).
(d) Each Partner, by signing this Agreement or by accepting such transfer, hereby agrees (A) to comply with all requirements of any Safe Harbor Election made by the General Partner with respect to each holder of Class B Units Safe Harbor Interest, (B) that each holder of Class B Units shall take into account of all items of income, gain, loss, deduction and credit associated with its Class B Units as if they were fully vested in computing its federal income tax liability for the entire period during which it holds the Class B Units, (C) that neither the Partnership nor any Partner shall claim a deduction (as wages, compensation or otherwise) for the fair market value of such Class B Units issued to a holder of such Class B Units, either at the time of grant of the Class B Units or at the time the Class B Units becomes substantially vested, and (D) that to the extent that such profits interest is forfeited after the date hereof, the Partnership shall make special forfeiture allocations of gross items of income, deduction or loss (including, as may be permitted by or under Regulations (or other rules promulgated) to be adopted, notional items of income, deduction or loss) in accordance with the Regulations to be adopted under Sections 704(b) and 83 of the Code.
(e) The General Partner shall file or cause the Partnership to file all returns, reports and other documentation as may be required, as reasonably determined by the General Partner, to perfect and maintain any Safe Harbor Election made by the General Partner with respect to granting of each holder of Class B Units Safe Harbor Interest.
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(f) The General Partner is hereby authorized and empowered, without further vote or action of the Partners, to amend this Agreement to the extent necessary or helpful in accordance with the advice of Partnership tax counsel or accountants to sustain the Partnerships position that (A) it has complied with the Safe Harbor requirements in order to provide for a Safe Harbor Election and it has ability to maintain the same, or (B) the issuance of the Class B Units is not a taxable event with respect to the holders of Class B Units, and the General Partner shall have the authority to execute any such amendment by and on behalf of each Partner pursuant to the power of attorney granted by this Agreement. Any undertaking by any Partner necessary or desirable to (A) enable or preserve a Safe Harbor Election or (B) otherwise to prevent the issuance of Class B Units from being a taxable event with respect to the holders of Class B Units may be reflected in such amendments and, to the extent so reflected, shall be binding on each Partner.
(g) Each Partner agrees to cooperate with the General Partner to perfect and maintain any Safe Harbor Election, and to timely execute and deliver any documentation with respect thereto reasonably requested by the General Partner, at the expense of the Partnership.
(h) No Transfer of any interest in the Partnership by a Partner shall be effective unless prior to such Transfer, the assignee or intended recipient of such interest shall have agreed in writing to be bound by the provisions of Section 10.05(e) and this Section 12.05, in a form reasonably satisfactory to the General Partner.
(i) The provisions of this Section 12.05 shall apply regardless of whether or not a holder of Class B Units files an election pursuant to Section 83(b) of the Code.
(j) The General Partner may amend this Section 12.05 as it deems necessary or appropriate to maximize the tax benefit of the issuance of Class B Units to any holder of Class B Units if there are changes in the law or Regulations concerning the issuance of partnership interests for services.
ARTICLE XIII
LTIP UNITS
13.01 LTIP Units.
(a) Issuance of LTIP Units. Pursuant to an OPP Agreement or otherwise, the General Partner may, from time to time, issue LTIP Units to Persons who have provided, or will provide, services to the Partnership or the General Partner for such consideration (if any) as the General Partner may determine to be appropriate, and admit such Persons as Limited Partners. Subject to the following provisions of this Section 13.01 and the special provisions of Sections 13.02 and 5.01(c)(iv) hereof, LTIP Units shall be treated as Partnership Units, with all of the rights, privileges and obligations attendant thereto. For purposes of computing the Partners Percentage Interests, LTIP Unitholders shall be treated as holders of OP Units and LTIP Units shall be treated as OP Units. It is intended that the Partnership shall maintain at all times a one-
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to-one correspondence between LTIP Units and OP Units for conversion, distribution and other purposes, including without limitation complying with the following procedures:
(i) If an Adjustment Event occurs, then the General Partner shall make a corresponding adjustment to the LTIP Units to maintain a one-for-one conversion and economic equivalence ratio between OP Units and LTIP Units. If more than one Adjustment Event occurs, the adjustment to the LTIP Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously.
(ii) If the Partnership takes an action affecting the OP Units other than actions specifically described in the definition of Adjustment Events and, in the opinion of the General Partner such action would require an adjustment to the LTIP Units to maintain the one-to-one correspondence described above, the General Partner shall have the right to make such adjustment to the LTIP Units, to the extent permitted by law and by any OPP Agreement, in such manner and at such time as the General Partner, in its sole discretion, may determine to be appropriate under the circumstances.
(iii) If an adjustment is made to the LTIP Units as herein provided, the Partnership shall promptly file in the books and records of the Partnership an officers certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after the filing of such certificate, the Partnership shall mail a notice to each LTIP Unitholder setting forth the adjustment to his or her LTIP Units and the effective date of such adjustment.
(b) Priority. Subject to the provisions of this Section 13.01 and the special provisions of Sections 13.02 and 5.01(c)(iv), the LTIP Units shall rank pari passu with the OP Units as to the payment of regular and special periodic or other distributions and, subject to Section 5.06 hereof, distribution of assets upon liquidation, dissolution or winding up. As to the payment of distributions upon liquidation, dissolution or winding up, any class or series of OP Units or Partnership Interests which by its terms specifies that it shall rank junior to, on a parity with, or senior to the OP Units shall also rank junior to, or pari passu with, or senior to, respectively, the LTIP Units.
(c) Special Provisions. LTIP Units shall be subject to the following special provisions:
(i) LTIP Awards. LTIP Units may, in the sole discretion of the General Partner, be issued subject to vesting, forfeiture and additional restrictions on transfers pursuant to the terms of an OPP Agreement. The terms of any OPP Agreement may be modified by the General Partner from time to time in its sole discretion, subject to any restrictions on amendment imposed by the relevant OPP Agreement pursuant to which such LTIP Award was issued. LTIP Units that have vested under the terms of an OPP Agreement are referred to as Vested LTIP Units; all other LTIP Units shall be treated as Unvested LTIP Units.
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(ii) Forfeiture. Unless otherwise specified in the OPP Agreement, upon the occurrence of any event specified in a OPP Agreement as resulting in either the right of the Partnership or the General Partner to repurchase LTIP Units at a specified purchase price or some other forfeiture of any LTIP Units, if the Partnership or the General Partner exercises such right of repurchase or forfeiture in accordance with the applicable OPP Agreement, the relevant LTIP Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose. Unless otherwise specified in the OPP Agreement, no consideration or other payment shall be due with respect to any LTIP Units that have been forfeited, other than any distributions declared with respect to a Partnership Record Date prior to the effective date of the forfeiture. In connection with any repurchase or forfeiture of LTIP Units, the LTIP Economic Capital Account Balance of the LTIP Unitholder with respect to remaining LTIP Units, if any, shall be reduced by the amount, if any, by which it exceeds the target balance contemplated by Section 5.01(c)(iv), with respect to such remaining LTIP Units.
(iii) Allocations. LTIP Unitholders shall be entitled to certain special allocations of Net Property Gain under Sections 5.01(c)(iv). Except in connection with Net Property Gain, LTIP Unitholders shall be allocated Net Income no greater than the amount of distributions made pursuant to Section 13.01(a)(ii).
(iv) Redemption. The OP Unit Redemption Right provided to Limited Partners under Section 8.04 hereof shall not apply with respect to LTIP Units unless and until the LTIP Units are converted to OP Units as provided in clause (v) below and Section 13.02.
(v) Conversion to OP Units. Vested LTIP Units are eligible to be converted into OP Units in accordance with Section 13.02.
(vi) Legend. Any certificate evidencing an LTIP Unit shall bear an appropriate legend indicating that additional terms, conditions and restrictions on transfer, including without limitation any LTIP Award, apply to the LTIP Unit.
(d) Voting. LTIP Unitholders shall (a) have the same voting rights as the Limited Partners, with the LTIP Units voting as a single class with the OP Units and having one vote per LTIP Unit; and (b) have the additional voting rights that are expressly set forth below. So long as any LTIP Units remain outstanding, the Partnership shall not, without the affirmative vote of the holders of at least a majority of the LTIP Units outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of this Agreement applicable to LTIP Units so as to materially and adversely affect any right, privilege or voting power of the LTIP Units or the LTIP Unitholders as such, unless such amendment, alteration, or repeal affects equally, ratably and proportionately the rights, privileges and voting powers of the Limited Partners; but subject, in any event, to the following provisions:
(i) With respect to any OP Unit Transaction, so long as the LTIP Units are treated in accordance with Section 13.02(f), the consummation of such OP Unit Transaction shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such; and
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(ii) Any creation or issuance of any Partnership Units or of any class or series of Partnership Interest including without limitation additional OP Units or LTIP Units whether ranking senior to, junior to, or on a parity with the LTIP Units with respect to distributions and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such.
The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required, all outstanding LTIP Units shall have been converted into OP Units.
(e) Liquidation Value of LTIP Units upon Issuance, and Safe Harbor Election.
(i) LTIP Units are intended to qualify as a profits interest in the Partnership issued to a new or existing Partner in a partner capacity for services performed or to be performed to or for the benefit of the Partnership within the meaning of Rev. Proc. 93-27, 1993-2 C.B. 343, and Rev. Proc. 2001-43, 2001-2 C.B. 191, the Code, the Regulations, and other future guidance provided by the IRS with respect thereto, and the allocations under Section 5.01(c)(iv) shall be interpreted in a manner that is consistent therewith.
(ii) The Partners agree that the General Partner may make a Safe Harbor Election, on behalf of itself and of all Partners, to have the Safe Harbor apply irrevocably with respect to LTIP Units transferred in connection with the performance of services by a Partner in a partner capacity. The Safe Harbor Election shall be effective as of the date of issuance of such LTIP Units. If such election is made, (A) the Partnership and each Partner agree to comply with all requirements of the Safe Harbor with respect to all interests in the Partnership transferred in connection with the performance of services by a Partner in a partner capacity, whether such Partner was admitted as a Partner or as the transferee of a previous Partner, and (B) the General Partner shall cause the Partnership to comply with all record-keeping requirements and other administrative requirements with respect to the Safe Harbor as shall be required by proposed or final regulations relating thereto.
(iii) The Partners agree that if a Safe Harbor Election is made by the General Partner, (A) each LTIP Unit issued hereunder is a Safe Harbor Interest, (B) each LTIP Unit represents a profits interest received for services rendered or to be rendered to or for the benefit of the Partnership by the LTIP Unitholder in his or her capacity as a Partner or in anticipation of becoming a Partner, and (C)
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the fair market value of each LTIP Unit issued by the Partnership upon receipt by the LTIP Unitholder as of the date of issuance is zero (plus the amount, if any, of any Capital Contributions made to the Partnership by such LTIP Unitholder in connection with the issuance of such LTIP Unit), representing the liquidation value of such interest upon receipt (with such valuation being consented to and hereby approved by all Partners).
(iv) Each Partner, by signing this Agreement or by accepting such transfer, hereby agrees (A) to comply with all requirements of any Safe Harbor Election made by the General Partner with respect to each LTIP Unitholders Safe Harbor Interest, (B) that each LTIP Unitholder shall take into account of all items of income, gain, loss, deduction and credit associated with its LTIP Units as if they were fully vested in computing its federal income tax liability for the entire period during which it holds the LTIP Units, (C) that neither the Partnership nor any Partner shall claim a deduction (as wages, compensation or otherwise) for the fair market value of such LTIP Units issued to a holder of such LTIP Units, either at the time of grant of the LTIP Units or at the time the LTIP Units become substantially vested, and (D) that to the extent that such profits interest is forfeited after the date hereof, the Partnership shall make special forfeiture allocations of gross items of income, deduction or loss (including, as may be permitted by or under Regulations (or other rules promulgated) to be adopted, notional items of income, deduction or loss) in accordance with the Regulations to be adopted under Sections 704(b) and 83 of the Code.
(v) The General Partner shall file or cause the Partnership to file all returns, reports and other documentation as may be required, as reasonably determined by the General Partner, to perfect and maintain any Safe Harbor Election made by the General Partner with respect to granting of each LTIP Unitholders Safe Harbor Interest.
(vi) The General Partner is hereby authorized and empowered, without further vote or action of the Partners, to amend this Agreement to the extent necessary or helpful in accordance with the advice of Partnership tax counsel or accountants to sustain the Partnerships position that (A) it has complied with the Safe Harbor requirements in order to provide for a Safe Harbor Election and it has ability to maintain the same, or (B) the issuance of the LTIP Units is not a taxable event with respect to the LTIP Unitholders, and the General Partner shall have the authority to execute any such amendment by and on behalf of each Partner pursuant to the power of attorney granted by this Agreement. Any undertaking by any Partner necessary or desirable to (A) enable or preserve a Safe Harbor Election or (B) otherwise to prevent the issuance of LTIP Units to LTIP Unitholders from being a taxable event may be reflected in such amendments and, to the extent so reflected, shall be binding on each Partner.
(vii) Each Partner agrees to cooperate with the General Partner to perfect and maintain any Safe Harbor Election, and to timely execute and deliver any documentation with respect thereto reasonably requested by the General Partner, at the expense of the Partnership.
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(viii) No Transfer of any interest in the Partnership by a Partner shall be effective unless prior to such Transfer, the assignee or intended recipient of such interest shall have agreed in writing to be bound by the provisions of this Section 13.01(e), in a form reasonably satisfactory to the General Partner.
(ix) The provisions of this Section 13.01(e) shall apply regardless of whether or not an LTIP Unitholder files an election pursuant to Section 83(b) of the Code.
(x) The General Partner may amend this Section 13.01(e) as it deems necessary or appropriate to maximize the tax benefit of the issuance of LTIP Units to any LTIP Unitholder if there are changes in the law or Regulations concerning the issuance of partnership interests for services.
13.02 Conversion of LTIP Units.
(a) Conversion Right. Subject to Section 13.02(b), an LTIP Unitholder shall have the right (the LTIP Conversion Right), at his or her option, at any time to convert all or a portion of his or her Vested LTIP Units into OP Units; provided, however, that a holder may not exercise the LTIP Conversion Right for less than one thousand (1,000) Vested LTIP Units or, if such holder holds less than one thousand Vested LTIP Units, all of the Vested LTIP Units held by such holder. LTIP Unitholders shall not have the right to convert Unvested LTIP Units into OP Units until they become Vested LTIP Units; provided, however, that when an LTIP Unitholder is notified of the expected occurrence of an event that will cause his or her Unvested LTIP Units to become Vested LTIP Units, such LTIP Unitholder may give the Partnership an LTIP Conversion Notice conditioned upon and effective as of the time of vesting and such LTIP Conversion Notice, unless subsequently revoked by the LTIP Unitholder, shall be accepted by the Partnership subject to such condition. The General Partner shall have the right at any time to cause a conversion of Vested LTIP Units into OP Units. In all cases, the conversion of any LTIP Units into OP Units shall be subject to the conditions and procedures set forth in this Section 13.02.
(b) Exercise by an LTIP Unitholder. A holder of Vested LTIP Units may convert such LTIP Units into an equal number of fully paid and non-assessable OP Units, giving effect to all adjustments (if any) made pursuant to Section 13.01 hereof. Notwithstanding the foregoing, in no event may a holder of Vested LTIP Units convert a number of Vested LTIP Units that exceeds (x) the LTIP Economic Capital Account Balance of such Limited Partner, divided by (y) the OP Unit Economic Balance, in each case as determined as of the effective date of conversion (the Capital Account Limitation). In order to exercise his or her LTIP Conversion Right, an LTIP Unitholder shall deliver a notice (an LTIP Conversion Notice) in the form attached as Exhibit D to the Agreement (with a copy to the General Partner) not less than ten nor more than 60 days prior to a date (the LTIP Conversion Date) specified in such LTIP Conversion Notice; provided, however, that if the General Partner has not given to the LTIP Unitholders notice of a proposed or upcoming OP Unit Transaction at least 30 days prior to
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the effective date of such OP Unit Transaction, then LTIP Unitholders shall have the right to deliver an LTIP Conversion Notice until the earlier of (x) the tenth day after such notice from the General Partner of a OP Unit Transaction or (y) the third business day immediately preceding the effective date of such OP Unit Transaction. An LTIP Conversion Notice shall be provided in the manner provided in Section 18.01 hereof. Each LTIP Unitholder covenants and agrees with the Partnership that all Vested LTIP Units to be converted pursuant to this Section 13.02(b) shall be free and clear of all liens. Notwithstanding anything herein to the contrary, a holder of LTIP Units may deliver a Notice of Redemption pursuant to Section 8.04(a) hereof relating to those OP Units that will be issued to such holder upon conversion of such LTIP Units into OP Units in advance of the LTIP Conversion Date; provided, however, that the redemption of such OP Units by the Partnership shall in no event take place until after the LTIP Conversion Date. For clarity, it is noted that the objective of this paragraph is to put an LTIP Unitholder in a position where, if he or she so wishes, the OP Units into which his or her Vested LTIP Units will be converted can be redeemed by the Partnership simultaneously with such conversion, with the further consequence that, if the General Partner elects to assume the Partnerships redemption obligation with respect to such OP Units under Section 8.04(b) hereof by delivering to such holder REIT Shares rather than cash, then such holder can have such REIT Shares issued to him or her simultaneously with the conversion of his or her Vested LTIP Units into OP Units. The General Partner and LTIP Unitholder shall reasonably cooperate with each other to coordinate the timing of the events described in the foregoing sentence.
(c) Forced Conversion. The Partnership, at any time at the election of the General Partner, may cause any number of Vested LTIP Units held by an LTIP Unitholder to be converted (a Forced Conversion) into an equal number of OP Units, giving effect to all adjustments (if any) made pursuant to Section 13.01 hereof; provided, however, that the Partnership may not cause Forced Conversion of any LTIP Units that would not at the time be eligible for conversion at the option of such LTIP Unitholder pursuant to Section 13.02(b) hereof. In order to exercise its right of Forced Conversion, the Partnership shall deliver a notice (a Forced Conversion Notice) in the form attached as Exhibit E to the applicable LTIP Unitholder not less than ten nor more than 60 days prior to the LTIP Conversion Date specified in such Forced Conversion Notice. A Forced Conversion Notice shall be provided in the manner provided in Section 18.01 hereof.
(d) Completion of Conversion. A conversion of Vested LTIP Units for which the holder thereof has given an LTIP Conversion Notice or the Partnership has given a Forced Conversion Notice shall occur automatically after the close of business on the applicable LTIP Conversion Date without any action on the part of such LTIP Unitholder, as of which time such LTIP Unitholder shall be credited on the books and records of the Partnership with the issuance as of the opening of business on the next day of the number of OP Units issuable upon such conversion.
(e) Impact of Conversion for Purposes of Section 5.01(c)(iv). For purposes of making future allocations under Section 5.01(c)(iv) hereof and applying the Capital Account Limitation, the portion of the LTIP Economic Capital Account Balance of the applicable LTIP Unitholder shall be reduced, as of the date of conversion, by the product of the number of LTIP Units converted and the OP Unit Economic Balance.
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(f) OP Unit Transactions. If the Partnership or the General Partner shall be a party to any OP Unit Transaction, then the General Partner shall, immediately prior to the OP Unit Transaction, exercise its right to cause a Forced Conversion with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the OP Unit Transaction or that would occur in connection with the OP Unit Transaction if the assets of the Partnership were sold at the OP Unit Transaction price or, if applicable, at a value determined by the General Partner in good faith using the value attributed to the Partnership Units in the context of the OP Unit Transaction (in which case the LTIP Conversion Date shall be the effective date of the OP Unit Transaction). In anticipation of such Forced Conversion and the consummation of the OP Unit Transaction, the Partnership shall use commercially reasonable efforts to cause each LTIP Unitholder to be afforded the right to receive in connection with such OP Unit Transaction in consideration for the OP Units into which his or her LTIP Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such OP Unit Transaction by a holder of the same number of OP Units, assuming such holder of OP Units is not a Constituent Person, or an affiliate of a Constituent Person. In the event that holders of OP Units have the opportunity to elect the form or type of consideration to be received upon consummation of the OP Unit Transaction, prior to such OP Unit Transaction the General Partner shall give prompt written notice to each LTIP Unitholder of such election, and shall use commercially reasonable efforts to afford the LTIP Unitholders the right to elect, by written notice to the General Partner, the form or type of consideration to be received upon conversion of each LTIP Unit held by such holder into OP Units in connection with such OP Unit Transaction. If an LTIP Unitholder fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each LTIP Unit held him or her (or by any of his or her transferees) the same kind and amount of consideration that a holder of a OP Unit would receive if such OP Unit holder failed to make such an election. Subject to the rights of the Partnership and the General Partner under any OPP Agreement, the Partnership shall use commercially reasonable effort to cause the terms of any OP Unit Transaction to be consistent with the provisions of this Section 13.02(f) and to enter into an agreement with the successor or purchasing entity, as the case may be, for the benefit of any LTIP Unitholders whose LTIP Units will not be converted into OP Units in connection with the OP Unit Transaction that will (i) contain provisions enabling the holders of LTIP Units that remain outstanding after such OP Unit Transaction to convert their LTIP Units into securities as comparable as reasonably possible under the circumstances to the OP Units and (ii) preserve as far as reasonably possible under the circumstances the distribution, special allocation, conversion, and other rights set forth in this Agreement for the benefit of the LTIP Unitholders.
ARTICLE XIV
SERIES C PREFERRED UNITS
14.01 Number of Preferred Units and Designation. A series of preferred Partnership Units in the Partnership, designated as the Series C Preferred Units, is hereby established. Except as set forth in Article V and this Article XIV, and except where the context elsewhere in this Agreement otherwise requires, Series C Preferred Units shall have the same rights, privileges and preferences as the OP Units.
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14.02 Ranking. The Series C Preferred Units shall, with respect to the payment of distributions and the right to receive the Series C Liquidation Preference upon a Liquidation, rank junior to all Series C Senior Units; rank senior to all Series C Junior Units, and rank in parity with all Series C Parity Units.
14.03 Distributions. Distributions with respect to Series C Preferred Units shall be cumulative from the day of issuance of any such Series C Preferred Units and shall be payable monthly, when, as and if declared by the General Partner, in arrears, on each Series C Distribution Payment Date. Each such distribution shall be payable to the holders of record of Series C Preferred Units as they appear in the records of the Partnership at the close of business on such record date, which shall not be more than 30 days preceding such Series C Distribution Payment Dates thereof, as shall be fixed by the General Partner.
14.04 Conversion.
(a) Unless such Series C Preferred Units have previously been redeemed pursuant to Section 14.05, at such time as there occurs a conversion of shares of Series C Preferred Stock for REIT Shares, a corresponding number of Series C Preferred Units shall automatically convert into a corresponding number of OP Units (subject to appropriate adjustment in the event of any dividend, split, combination or other similar recapitalization with respect to the OP Units) on terms substantially similar to the terms for conversion of shares of Series C Preferred Stock for REIT Shares contained in the Series C Articles Supplementary.
(b) Each automatic conversion of Series C Preferred Units for OP Units shall be deemed to have been effected at such time as the concurrent conversion of the corresponding shares of Series C Preferred Stock for REIT Shares shall have been deemed effected in accordance with the Charter, and Exhibit A shall be amended by the General Partner to reflect such conversion.
14.05 Redemption. If the General Partner redeems or otherwise purchases any shares of Series C Preferred Stock, the Partnership shall redeem a corresponding number of Series C Preferred Units, on the date of redemption or other purchase of shares of Series C Preferred Stock by the General Partner (Series C Redemption Date), at a redemption price per Series C Preferred Unit equal to the sum of (a) the Series C Liquidation Preference plus (b) the accrued but unpaid Series C Preferred Return plus (c) the Series C Redemption Premium, and the redemption price shall be payable in cash. Any redemption of Series C Preferred Units shall be deemed to occur on the Series C Redemption Date immediately prior to the related redemption or other purchase of Shares of Series C Preferred Stock.
14.06 Voting.
(a) Other than as expressly provided in below in this Section 14.06, the Series C Preferred Units shall not have any voting rights or powers, and the consent of the holders thereof, shall not be required for the taking of any Partnership action.
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(b) As long as any of the Series C Preferred Units shall remain outstanding, the Partnership shall not, and the General Partner shall not have the authority to cause the Partnership to, take any of the following actions without the prior written consent of holders owning at least sixty-six and two-thirds percent (66 and 2/3%) of the Series C Preferred Units then issued and outstanding, voting as a single class, in person or by proxy:
(i) Effectuate amendments to this Agreement that would materially adversely affect the terms and conditions of, or the voting powers, rights, privileges or preferences of the holders of the Series C Preferred Units; provided, however, that amendments to the Agreement to authorize or create or to increase the number of authorized units of any Series C Senior Units, Series C Parity Units or Series C Junior Units shall not be deemed to materially adversely affect the voting powers, rights or preferences of the Series C Preferred Units.
14.07 Transfers. Subject to the provisions of Section 9.02(b), (c) and (d), no Limited Partner may Transfer such Limited Partners Series C Preferred Unit without the prior written consent of the General Partner, which may be withheld or denied by the General Partner it is sole and absolute discretion. Notwithstanding anything in this Agreement to the contrary, any Transfer in contravention of this Section 14.07 shall be void and ineffectual and shall not be binding upon, or recognized by the Partnership.
14.08 Miscellaneous.
(a) Series C Preferred Units will not have any designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms and conditions of redemption, other than those specifically set forth herein and as may be provided under applicable law.
(b) The preferences, conversion and other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of the Series C Preferred Units may be waived, and any of such provisions of the Series C Preferred Units may be amended, with the approval of holders of at least sixty-six and two-thirds percent (66 and 2/3%) of the issued outstanding Series C Preferred Units, voting as a single class in person or by proxy.
ARTICLE XV
SERIES D PREFERRED UNITS
15.01 Number of Preferred Units and Designation. A series of preferred Partnership Units in the Partnership, designated as the Series D Preferred Units, is hereby established. Except as set forth in Article V and this Article XV, and except where the context elsewhere in this Agreement otherwise requires, Series D Preferred Units shall have the same rights, privileges and preferences as the OP Units.
15.02 Ranking. The Series D Preferred Units shall, with respect to the payment of distributions and the right to receive the Series D Liquidation Preference upon a Liquidation, rank junior to all Series D Senior Units; rank senior to all Series D Junior Units, and rank in parity with all Series D Parity Units.
15.03 Distributions. Distributions with respect to Series D Preferred Units shall be cumulative from the day of issuance of any such Series D Preferred Units and shall be payable
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monthly, when, as and if declared by the General Partner, in arrears, on each Series D Distribution Payment Date. Each such distribution shall be payable to the holders of record of Series D Preferred Units as they appear in the records of the Partnership at the close of business on such record date, which shall not be more than 30 days preceding such Series D Distribution Payment Dates thereof, as shall be fixed by the General Partner.
15.04 Conversion.
(a) Unless such Series D Preferred Units have previously been redeemed pursuant to Section 15.05, at such time as there occurs a conversion of shares of Series D Preferred Stock for REIT Shares, Series E Preferred Stock or cash, a corresponding number of Series D Preferred Units shall automatically convert into a corresponding number of OP Units (subject to appropriate adjustment in the event of any dividend, split, combination or other similar recapitalization with respect to the OP Units), a corresponding number of Series E Preferred Units or cash, respectively, on terms substantially similar to the terms for conversion of shares of Series D Preferred Stock for REIT Shares, shares Series E Preferred Stock or cash contained in the Series D Articles Supplementary.
(b) Each automatic conversion of Series D Preferred Units shall be deemed to have been effected at such time as the concurrent conversion of the corresponding shares of Series D Preferred Stock shall have been deemed effected in accordance with the Charter, and Exhibit A shall be amended by the General Partner to reflect such conversion.
15.05 Redemption. If the General Partner redeems or otherwise purchases any shares of Series D Preferred Stock, the Partnership shall redeem a corresponding number of Series D Preferred Units, on the date of redemption or other purchase of shares of Series D Preferred Stock by the General Partner (Series D Redemption Date), at a redemption price per Series D Preferred Unit equal to the greater of: (a) the product of: (i) the number of Series D Preferred Units multiplied by (ii) 102% of the Series D Liquidation Preference and (b) the product of: (i) the number of OP Units to which the Series D Preferred Units would be convertible at the Conversion Price (as defined in the Series D Articles Supplementary) as of the date of the Redemption Notice (as defined in the Series D Articles Supplementary) multiplied by (ii) 102% of the one-day VWAP (as defined in the Series D Articles Supplementary) of the REIT Shares on the date of the Redemption Notice (as defined in the Series D Articles Supplementary), and the redemption price shall be payable in cash. Any redemption of Series D Preferred Units shall be deemed to occur on the Redemption Date immediately prior to the related redemption or other purchase of Shares of Series D Preferred Stock.
15.06 Voting.
(a) Other than as expressly provided in below in this Section 15.06, the Series D Preferred Units shall not have any voting rights or powers, and the consent of the holders thereof, shall not be required for the taking of any Partnership action.
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(b) As long as any of the Series D Preferred Units shall remain outstanding, the Partnership shall not, and the General Partner shall not have the authority to cause the Partnership to, take any of the following actions without the prior written consent of holders owning at least sixty-six and two-thirds percent (66 and 2/3%) of the Series D Preferred Units then issued and outstanding, voting as a single class, in person or by proxy:
(i) Effectuate amendments to this Agreement that would materially adversely affect the terms and conditions of, or the voting powers, rights, privileges or preferences of the holders of the Series D Preferred Units; provided, however, that amendments to the Agreement to authorize or create or to increase the number of authorized units of any Series D Senior Units, Series D Parity Units or Series D Junior Units shall not be deemed to materially adversely affect the voting powers, rights or preferences of the Series D Preferred Units.
15.07 Transfers. Subject to the provisions of Section 9.02(b), (c) and (d), no Limited Partner may Transfer such Limited Partners Series D Preferred Unit without the prior written consent of the General Partner, which may be withheld or denied by the General Partner it is sole and absolute discretion. Notwithstanding anything in this Agreement to the contrary, any Transfer in contravention of this Section 15.07 shall be void and ineffectual and shall not be binding upon, or recognized by the Partnership.
15.08 Miscellaneous.
(a) Series D Preferred Units will not have any designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms and conditions of redemption, other than those specifically set forth herein and as may be provided under applicable law.
(b) The preferences, conversion and other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of the Series D Preferred Units may be waived, and any of such provisions of the Series D Preferred Units may be amended, with the approval of holders of at least sixty-six and two-thirds percent (66 and 2/3%) of the issued outstanding Series D Preferred Units, voting as a single class in person or by proxy.
ARTICLE XVI
SERIES E PREFERRED UNITS
[Reserved]
ARTICLE XVII
SERIES F PREFERRED UNITS
17.01 Number of Preferred Units and Designation. A series of preferred Partnership Units in the Partnership, designated as the Series F Preferred Units, is hereby established. Except as set forth in Article V and this Article XVII, and except where the context elsewhere in this Agreement otherwise requires, Series F Preferred Units shall have the same rights, privileges and preferences as the OP Units.
17.02 Ranking. The Series F Preferred Units shall, with respect to, allocations, the payment of distributions and the right to receive the Series F Liquidation Amount upon a Liquidation, rank junior to all Series F Senior Units; rank senior to all Series F Junior Units, and rank in parity with all Series F Parity Units.
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17.03 Distributions. Distributions with respect to Series F Preferred Units shall be cumulative from the day of issuance of any such Series F Preferred Units and shall be payable monthly, when, as and if declared by the General Partner, in arrears, on each Series F Distribution Payment Date. Each such distribution shall be payable to the holders of record of Series F Preferred Units as they appear in the records of the Partnership at the close of business on such record date, which shall not be more than 30 days preceding such Series F Distribution Payment Dates thereof, as shall be fixed by the General Partner.
17.04 Conversion.
(a) In connection with Series F Preferred Units held by the General Partner, unless such Series F Preferred Units have previously been redeemed pursuant to Section 17.05(a) hereof, at such time as there occurs a conversion of shares of Series F Preferred Stock for REIT Shares, a corresponding number of Series F Preferred Units shall automatically convert into a corresponding number of OP Units (subject to appropriate adjustment in the event of any dividend, split, combination or other similar recapitalization with respect to the OP Units) on terms substantially similar to the terms for conversion of shares of Series F Preferred Stock for REIT Shares contained in the Articles Supplementary. Each automatic conversion of Series F Preferred Units for OP Units shall be deemed to have been effected at such time as the concurrent conversion of the corresponding shares of Series F Preferred Stock for REIT Shares shall have been deemed effected in accordance with the Charter, and Exhibit A shall be amended by the General Partner to reflect such conversion.
(b) In connection with Series F Preferred Units held by Limited Partners other than the General Partner, unless such Series F Preferred Units have previously been redeemed pursuant to Section 17.05(b) hereof, such Limited Partner shall have the right to convert all or a portion of its Series F Preferred Units into OP Units upon the occurrence of a Change of Control (as defined in the Series F Articles Supplementary) on terms substantially similar to the terms for conversion of Shares of Series F Preferred Stock contained in the Series F Articles Supplementary.
17.05 Redemption.
(a) In connection with Series F Preferred Units held by the General Partner, if the General Partner redeems or otherwise purchases any shares of Series F Preferred Stock, the Partnership shall automatically redeem a corresponding number of Series F Preferred Units, on the date of redemption or other purchase of shares of Series F Preferred Stock by the General Partner (Series F Redemption Date) on terms substantially similar to the terms for redemption of Shares of Series F Preferred Stock contained in the Articles Supplementary. Any automatic redemption of Series F Preferred Units shall be deemed to occur on the Redemption Date immediately prior to the related redemption or other purchase of shares of Series F Preferred Stock, and Exhibit A shall be amended by the General Partner to reflect such redemption.
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(b) In connection with Series F Preferred Units held by Limited Partners other than the General Partner, the Partnership shall not redeem such Series F Preferred Units prior to the fifth anniversary of the Original Issue Date (as defined in the Series F Articles Supplementary) except upon the occurrence of a Change of Control (as defined in the Series F Articles Supplementary). The redemption of Series F Preferred Units by the Partnership shall be on terms substantially similar to the terms for redemption of shares of Series F Preferred Stock contained in the Articles Supplementary.
(c) Limited Partners holding Series F Preferred Units shall have the right to have the Partnership redeem all or a portion of such Series F Preferred Units on such terms and conditions as provided for the redemption of OP Units in Section 8.04, which section will apply to such redemption as if all references to OP Units in such section were to Series F Preferred Units, including the requirement that such Series F Preferred Units be outstanding for at least one year prior to being redeemable by a Limited Partner.
17.06 Voting.
(a) Except as otherwise set forth herein, the Series F Preferred Units shall not have any relative, participating, optional or other special voting rights and powers, and the consent of the holders thereof shall not be required for the taking of any Partnership action.
(b) As long as any of the Series F Preferred Units shall remain outstanding, the Partnership shall not, and the General Partner shall not have the authority to cause the Partnership to, take any of the following actions without the prior written consent of holders owning at least sixty-six and two-thirds percent (66 and 2/3%) of the Series F Preferred Units then issued and outstanding, voting as a single class, in person or by proxy:
(i) Effectuate amendments to this Agreement that would materially adversely affect the terms and conditions of, or the voting powers, rights, privileges or preferences of the holders of the Series F Preferred Units; provided, however, that amendments to the Agreement to authorize or create or to increase the number of authorized units of any Series F Senior Units, Series F Parity Units or Series F Junior Units shall not be deemed to materially adversely affect the voting powers, rights or preferences of the Series F Preferred Units.
17.07 Transfers. Subject to the provisions of Section 9.02(b), (c) and (d), no Series F Preferred Unit shall be transferred, sold, assigned, conveyed, gifted, pledged, encumbered, hypothecated, mortgaged, exchanged or otherwise disposed of by law or otherwise without the prior written consent of the General Partner, which may be withheld or denied by the General Partner it is sole and absolute discretion. Notwithstanding anything in this Agreement to the contrary, any Transfer in contravention of this Section 17.07 shall be void and ineffectual and shall not be binding upon, or recognized by the Partnership.
17.08 Miscellaneous.
(a) Series F Preferred Units will not have any designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms and conditions of redemption, other than those specifically set forth herein and as may be provided under applicable law.
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(b) The preferences, conversion and other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of the Series F Preferred Units may be waived, and any of such provisions of the Series F Preferred Units may be amended, with the approval of holders of at least sixty-six and two-thirds percent (66 and 2/3%) of the issued outstanding Series F Preferred Units, voting as a single class in person or by proxy.
ARTICLE XVIII
GENERAL PROVISIONS
18.01 Notices. All communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or upon deposit in the United States mail, registered, postage prepaid return receipt requested, to the Partners at the addresses set forth in Exhibit A attached hereto, as it may be amended or restated from time to time; provided, however, that any Partner may specify a different address by notifying the General Partner in writing of such different address. Notices to the General Partner and the Partnership shall be delivered at or mailed to the Partnerships office address set forth in Section 2.03 hereof. The General Partner and the Partnership may specify a different address by notifying the Limited Partners in writing of such different address.
18.02 Survival of Rights. Subject to the provisions hereof limiting transfers, this Agreement shall be binding upon and inure to the benefit of the Partners and the Partnership and their respective legal representatives, successors, transferees and assigns.
18.03 Additional Documents. Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver all further documents that may be reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act.
18.04 Severability. If any provision of this Agreement shall be declared illegal, invalid or unenforceable in any jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not affect the remainder hereof.
18.05 Entire Agreement. Except for the Contribution Agreement and the Tax Protection Agreement, this Agreement and exhibits attached hereto constitute the entire Agreement of the Partners and supersede all prior written agreements and prior and contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. In furtherance of the foregoing, the Partners acknowledge that the Amended Agreement is hereby superseded in its entirety and this Agreement amends and restates any prior agreement of limited partnership of the Partnership.
18.06 Pronouns and Plurals. When the context in which words are used in the Agreement indicates that such is the intent, words in the singular number shall include the plural and the masculine gender shall include the neuter or female gender as the context may require.
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18.07 Headings. The Article headings or sections in this Agreement are for convenience only and shall not be used in construing the scope of this Agreement or any particular Article.
18.08 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart.
18.09 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this Amended and Restated Agreement of Limited Partnership, all as of the 26th day of February, 2014.
GENERAL PARTNER: | ||
American Realty Capital Properties, Inc. | ||
By: | /s/ Brian S. Block | |
Name: Brian S. Block | ||
Title: Chief Financial Officer, Treasurer, Secretary and Executive Vice President |
[Signature Page to Third Amended and Restated Agreement of Limited Partnership]
EXHIBIT B
NOTICE OF EXERCISE OF OP UNIT REDEMPTION RIGHT
In accordance with Section 8.04 of the Amended and Restated Agreement of Limited Partnership (as amended, the Agreement) of ARC Properties Operating Partnership, L.P., the undersigned hereby irrevocably (i) presents for redemption OP Units in ARC Properties Operating Partnership, L.P. in accordance with the terms of the Agreement and the OP Unit Redemption Right referred to in Section 8.04 thereof, (ii) surrenders such OP Units and all right, title and interest therein and (iii) directs that the Cash Amount or REIT Shares Amount (as defined in the Agreement) as determined by the Partnership deliverable upon exercise of the OP Unit Redemption Right be delivered to the address specified below, and if REIT Shares (as defined in the Agreement) are to be delivered, such REIT Shares be registered or placed in the name(s) and at the address(es) specified below.
Dated: ,
Name of Limited Partner:
(Signature of Limited Partner)
(Mailing Address)
(City) (State) (Zip Code)
Signature Guaranteed by:
If REIT Shares are to be issued, issue to:
Please insert social security or identifying number:
Name:
Exhibit B-1
EXHIBIT C-1
CERTIFICATION OF NON-FOREIGN STATUS
(FOR REDEEMING LIMITED PARTNERS THAT ARE ENTITIES)
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the Code), in the event of a disposition by a non-U.S. person of a partnership interest in a partnership in which (i) 50% or more of the value of the gross assets consists of United States real property interests (USRPIs), as defined in Section 897(c) of the Code, and (ii) 90% or more of the value of the gross assets consists of USRPIs, cash, and cash equivalents, the transferee will be required to withhold 10% of the amount realized by the non-U.S. person upon the disposition. To inform American Realty Capital Properties, Inc. (the General Partner) and ARC Properties Operating Partnership, L.P. (the Partnership) that no withholding is required with respect to the redemption by (Partner) of its OP Units in the Partnership, the undersigned hereby certifies the following on behalf of Partner:
1. | Partner is not a foreign corporation, foreign partnership, foreign trust, or foreign estate, as those terms are defined in the Code and the Treasury regulations thereunder. |
2. | Partner is not a disregarded entity as defined in Treasury Regulation Section 1.1445-2(b)(2)(iii). |
3. | The U.S. employer identification number of Partner is . |
4. | The principal business address of Partner is: , and Partners place of incorporation is . |
5. | Partner agrees to inform the General Partner if it becomes a foreign person at any time during the three-year period immediately following the date of this notice. |
6. | Partner understands that this certification may be disclosed to the Internal Revenue Service by the General Partner and that any false statement contained herein could be punished by fine, imprisonment, or both. |
PARTNER: | ||
| ||
By: |
| |
Name: |
| |
Title: |
|
Exhibit C-1-1
Under penalties of perjury, I declare that I have examined this certification and, to the best of my knowledge and belief, it is true, correct, and complete, and I further declare that I have authority to sign this document on behalf of Partner.
Date:
Name:
Title:
Exhibit C-1-2
EXHIBIT C-2
CERTIFICATION OF NON-FOREIGN STATUS
(FOR REDEEMING LIMITED PARTNERS THAT ARE INDIVIDUALS)
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the Code), in the event of a disposition by a non-U.S. person of a partnership interest in a partnership in which (i) 50% or more of the value of the gross assets consists of United States real property interests (USRPIs), as defined in Section 897(c) of the Code, and (ii) 90% or more of the value of the gross assets consists of USRPIs, cash, and cash equivalents, the transferee will be required to withhold 10% of the amount realized by the non-U.S. person upon the disposition. To inform American Realty Capital Properties, Inc. (the General Partner) and ARC Properties Operating Partnership, L.P. (the Partnership) that no withholding is required with respect to my redemption of my OP Units in the Partnership, I, , hereby certify the following:
1. | I am not a nonresident alien for purposes of U.S. income taxation. |
2. | My U.S. taxpayer identification number (social security number) is . |
3. | My home address is: . |
4. | I agree to inform the General Partner promptly if I become a nonresident alien at any time during the three-year period immediately following the date of this notice. |
5. | I understand that this certification may be disclosed to the Internal Revenue Service by the General Partner and that any false statement contained herein could be punished by fine, imprisonment, or both. |
Name:
Under penalties of perjury, I declare that I have examined this certification and, to the best of my knowledge and belief, it is true, correct, and complete.
Date:
Name:
Title:
Exhibit C-2-1
EXHIBIT D
NOTICE OF ELECTION BY PARTNER TO CONVERT
LTIP UNITS INTO OP UNITS
The undersigned holder of LTIP Units hereby irrevocably (i) elects to convert the number of LTIP Units in ARC Properties Operating Partnership, L.P. (the Partnership) set forth below into OP Units in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership, as amended; and (ii) directs that any cash in lieu of OP Units that may be deliverable upon such conversion be delivered to the address specified below. The undersigned hereby represents, warrants, and certifies that the undersigned (a) has title to such LTIP Units, free and clear of the rights or interests of any other person or entity other than the Partnership; (b) has the full right, power, and authority to cause the conversion of such LTIP Units as provided herein; and (c) has obtained the consent to or approval of all persons or entities, if any, having the right to consent or approve such conversion.
Name of Holder: |
|
|||
(Please Print: Exact Name as Registered with Partnership) |
Number of LTIP Units to be Converted:
Date of this Notice:
| ||
(Signature of Holder: Sign Exact Name as Registered with Partnership) | ||
| ||
(Street Address) | ||
| ||
(City) (State) (Zip Code) | ||
Signature Guaranteed by: |
Exhibit D-1
EXHIBIT E
NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION OF
LTIP UNITS INTO OP UNITS
ARC Properties Operating Partnership, L.P. (the Partnership) hereby irrevocably elects to cause the number of LTIP Units held by the holder of LTIP Units set forth below to be converted into OP Units in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership, as amended.
Name of Holder: |
|
|||
(Please Print: Exact Name as Registered with Partnership) |
Number of LTIP Units to be Converted:
Date of this Notice:
Exhibit E-1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated March 2, 2015, with respect to the consolidated financial statements, schedules and internal control over financial reporting included in the Annual Report of American Realty Capital Properties, Inc. on Form 10-K/A for the year ended December 31, 2013. We hereby consent to the incorporation by reference of said reports in the Registration Statements of American Realty Capital Properties, Inc. on Forms S-8 (File No. 333-176714 and File No. 333-192587).
/s/ GRANT THORNTON LLP
Phoenix, Arizona
March 2, 2015
Exhibit 31.1
AMERICAN REALTY CAPITAL PROPERTIES, INC.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William G. Stanley, certify that:
1. | I have reviewed this Amendment No. 2 to Annual Report on Form 10-K/A of American Realty Capital Properties, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 2, 2015 | By: | /s/ William G. Stanley | ||||
William G. Stanley Interim Chief Executive Officer and Interim Chairman of the Board of Directors |
Exhibit 31.2
AMERICAN REALTY CAPITAL PROPERTIES, INC.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Sodo, certify that:
1. | I have reviewed this Amendment No. 2 to Annual Report on Form 10-K/A of American Realty Capital Properties, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 2, 2015 | By: | /s/ Michael Sodo | ||||
Michael Sodo Executive Vice President, Treasurer and Chief Financial Officer |
Exhibit 32.1
AMERICAN REALTY CAPITAL PROPERITES, INC.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K/A of American Realty Capital Properties, Inc. (the Company) for the fiscal year ended December 31, 2013 (the Report), I, William G. Stanley, Interim Chief Executive Officer and Interim Chairman of the Board of Directors of the Company, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 2, 2015 | By: | /s/ William G. Stanley | ||||
William G. Stanley | ||||||
Interim Chief Executive Officer and Interim Chairman of the Board of Directors |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
AMERICAN REALTY CAPITAL PROPERITES, INC.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K/A of American Realty Capital Properties, Inc. (the Company) for the fiscal year ended December 31, 2013 (the Report), I, Michael Sodo, Executive Vice President, Treasurer and Chief Financial Officer of the Company, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 2, 2015 | By: | /s/ Michael Sodo | ||||
Michael Sodo | ||||||
Executive Vice President, Treasurer and Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
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