þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ohio | 34-6513657 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) | |
7 Bulfinch Place, Suite 500, Boston, Massachusetts | 02114 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
2
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
ASSETS |
||||||||
Investments in real estate, at cost |
||||||||
Land |
$ | 36,495 | $ | 37,142 | ||||
Buildings and improvements |
273,071 | 271,357 | ||||||
309,566 | 308,499 | |||||||
Less: accumulated depreciation |
(38,084 | ) | (36,232 | ) | ||||
Investments in real estate, net |
271,482 | 272,267 | ||||||
Cash and cash equivalents |
21,240 | 45,257 | ||||||
Restricted cash held in escrows |
30,648 | 8,593 | ||||||
Loans receivable, net |
105,390 | 110,395 | ||||||
Accounts receivable, net of allowances of $378 and $262, respectively |
12,534 | 12,402 | ||||||
Securities carried at fair value |
14,695 | 33,032 | ||||||
Loan securities carried at fair value |
14,132 | 11,981 | ||||||
Preferred equity investment |
4,034 | 4,010 | ||||||
Equity investments |
106,606 | 81,937 | ||||||
Other receivables, net |
8,459 | | ||||||
Lease intangibles, net |
25,651 | 26,821 | ||||||
Deferred financing costs, net |
1,479 | 1,158 | ||||||
Assets held for sale |
3,710 | 2,275 | ||||||
TOTAL ASSETS |
$ | 620,060 | $ | 610,128 | ||||
LIABILITIES |
||||||||
Mortgage loans payable |
$ | 212,155 | $ | 230,443 | ||||
Series B-1 Cumulative Convertible Redeemable Preferred Shares, $25
per share liquidation preference; 852,000 shares authorized and
outstanding at March 31, 2011 and December 31, 2010 |
21,300 | 21,300 | ||||||
Secured financing |
15,150 | | ||||||
Revolving line of credit |
33,875 | 25,450 | ||||||
Accounts payable and accrued liabilities |
11,982 | 12,557 | ||||||
Dividends payable |
4,441 | 4,431 | ||||||
Deferred income |
1,206 | 150 | ||||||
Below market lease intangibles, net |
2,503 | 2,696 | ||||||
Liabilites of held for sale assets |
537 | 33 | ||||||
TOTAL LIABILITIES |
303,149 | 297,060 | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
NON-CONTROLLING REDEEMABLE PREFERRED INTEREST |
||||||||
Series C Cumulative Convertible Redeemable Preferred Shares, $25 per
share liquidation preference, 144,000 shares authorized and
outstanding at March 31, 2011 and December 31, 2010 |
3,221 | 3,221 | ||||||
Total non-controlling redeemable preferred interest |
3,221 | 3,221 | ||||||
EQUITY |
||||||||
Winthrop Realty Trust Shareholders Equity: |
||||||||
Common Shares, $1 par, unlimited shares authorized; 27,088,347 and
27,030,186 issued and outstanding at March 31, 2011 and
December 31, 2010, respectively |
27,088 | 27,030 | ||||||
Additional paid-in capital |
570,208 | 569,586 | ||||||
Accumulated distributions in excess of net income |
(298,045 | ) | (300,782 | ) | ||||
Accumulated other comprehensive loss |
| (63 | ) | |||||
Total Winthrop Realty Trust Shareholders Equity |
299,251 | 295,771 | ||||||
Non-controlling interests |
14,439 | 14,076 | ||||||
Total Equity |
313,690 | 309,847 | ||||||
TOTAL LIABILITIES AND EQUITY |
$ | 620,060 | $ | 610,128 | ||||
3
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Revenue |
||||||||
Rents and reimbursements |
$ | 10,986 | $ | 9,320 | ||||
Interest, dividends and discount accretion |
9,672 | 3,209 | ||||||
20,658 | 12,529 | |||||||
Expenses |
||||||||
Property operating |
4,045 | 1,949 | ||||||
Real estate taxes |
1,255 | 720 | ||||||
Depreciation and amortization |
3,481 | 2,300 | ||||||
Interest |
4,613 | 3,651 | ||||||
General and administrative |
2,524 | 1,907 | ||||||
State and local taxes |
29 | 14 | ||||||
15,947 | 10,541 | |||||||
Other income (loss) |
||||||||
Earnings from preferred equity investments |
83 | 83 | ||||||
Equity in loss of equity investments |
(1,355 | ) | (527 | ) | ||||
Realized gain on sale of securities carried at fair value |
124 | 695 | ||||||
Unrealized gain on securities carried at fair value |
886 | 2,540 | ||||||
Unrealized gain (loss) on loan securities carried at fair value |
2,813 | (613 | ) | |||||
Interest income |
93 | 37 | ||||||
2,644 | 2,215 | |||||||
Income from continuing operations |
7,355 | 4,203 | ||||||
Discontinued operations |
||||||||
Income from discontinued operations |
47 | 247 | ||||||
Consolidated net income |
7,402 | 4,450 | ||||||
Income attributable to non-controlling interest |
(204 | ) | (245 | ) | ||||
Net income attributable to Winthrop Realty Trust |
7,198 | 4,205 | ||||||
Income attributable to non-controlling redeemable preferred
interest |
(59 | ) | (113 | ) | ||||
Net income attributable to Common Shares |
$ | 7,139 | $ | 4,092 | ||||
Comprehensive income |
||||||||
Consolidated net income |
$ | 7,402 | $ | 4,450 | ||||
Change in unrealized gain on available for sale securities |
| 7 | ||||||
Change in unrealized gain on interest rate derivative |
63 | 40 | ||||||
Comprehensive income |
$ | 7,465 | $ | 4,497 | ||||
Per Common Share data Basic |
||||||||
Income from continuing operations |
$ | 0.26 | $ | 0.19 | ||||
Income from discontinued operations |
| 0.01 | ||||||
Net income attributable to Winthrop Realty Trust |
$ | 0.26 | $ | 0.20 | ||||
Per Common Share data Diluted |
||||||||
Income from continuing operations |
$ | 0.26 | $ | 0.19 | ||||
Income from discontinued operations |
| 0.01 | ||||||
Net income attributable to Winthrop Realty Trust |
$ | 0.26 | $ | 0.20 | ||||
Basic Weighted-Average Common Shares |
27,079 | 20,598 | ||||||
Diluted Weighted-Average Common Shares |
27,081 | 21,389 | ||||||
4
Accumulated | Accumulated | |||||||||||||||||||||||||||
Common Shares of | Additional | Distributions | Other | Non- | ||||||||||||||||||||||||
Beneficial Interest | Paid-In | in Excess of | Comprehensive | Controlling | ||||||||||||||||||||||||
Shares | Amount | Capital | Net Income | Income | Interests | Total | ||||||||||||||||||||||
Balance, December 31, 2010 |
27,030 | $ | 27,030 | $ | 569,586 | $ | (300,782 | ) | $ | (63 | ) | $ | 14,076 | $ | 309,847 | |||||||||||||
Net income attributable to Winthrop Realty Trust |
| | | 7,198 | | | 7,198 | |||||||||||||||||||||
Net income attributable to non-controlling
interests |
| | | | | 204 | 204 | |||||||||||||||||||||
Distributions to non-controlling interests |
| | | | | (118 | ) | (118 | ) | |||||||||||||||||||
Contributions from non-controlling interests |
| | | | | 277 | 277 | |||||||||||||||||||||
Dividends paid or accrued on Common
Shares of Beneficial Interest ($0.1625 per
share) |
| | | (4,402 | ) | | | (4,402 | ) | |||||||||||||||||||
Dividends paid or accrued on Series C Preferred
Shares ($0.40625 per share) |
| | | (59 | ) | | | (59 | ) | |||||||||||||||||||
Change in unrealized gain on interest rate
derivatives |
| | | | 63 | | 63 | |||||||||||||||||||||
Shares issued pursuant to dividend
reinvestment plan |
58 | 58 | 622 | | | | 680 | |||||||||||||||||||||
Balance, March 31, 2011 |
27,088 | $ | 27,088 | $ | 570,208 | $ | (298,045 | ) | $ | | $ | 14,439 | $ | 313,690 | ||||||||||||||
Balance, December 31, 2009 |
20,375 | $ | 20,375 | $ | 498,118 | $ | (301,317 | ) | $ | (87 | ) | $ | 12,111 | $ | 229,200 | |||||||||||||
Net income attributable to Winthrop Realty Trust |
| | | 4,205 | | | 4,205 | |||||||||||||||||||||
Net income attributable to non-controlling
interests |
| | | | | 245 | 245 | |||||||||||||||||||||
Distributions to non-controlling interests |
| | | | | (120 | ) | (120 | ) | |||||||||||||||||||
Contributions from non-controlling interests |
| | | | | 288 | 288 | |||||||||||||||||||||
Dividends paid or accrued on Common
Shares of Beneficial Interest ($0.1625 per
share) |
| | | (3,435 | ) | | | (3,435 | ) | |||||||||||||||||||
Dividends paid or accrued on Series C Preferred
Shares ($0.40625 per share) |
| | | (113 | ) | | | (113 | ) | |||||||||||||||||||
Change in unrealized gain on available for sale
securities |
| | | | 7 | | 7 | |||||||||||||||||||||
Change in unrealized gain on interest rate
derivatives |
| | | | 40 | | 40 | |||||||||||||||||||||
Conversion of Series C Preferred Shares
to Common Shares |
714 | 714 | 8,234 | | | | 9,662 | |||||||||||||||||||||
Shares issued pursuant to dividend
reinvestment plan |
48 | 48 | 524 | | | | 620 | |||||||||||||||||||||
Balance, March 31, 2010 |
21,137 | $ | 21,137 | $ | 506,876 | $ | (300,660 | ) | $ | (40 | ) | $ | 12,524 | $ | 240,599 | |||||||||||||
5
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Cash flows from operating activities |
||||||||
Net income |
$ | 7,402 | $ | 4,450 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation and amortization (including amortization
of deferred financing costs) |
2,409 | 1,644 | ||||||
Amortization of lease intangibles |
1,237 | 654 | ||||||
Straight-lining of rental income |
(346 | ) | 599 | |||||
Loan discount accretion |
(6,504 | ) | (1,741 | ) | ||||
Earnings of preferred equity investments |
(83 | ) | (83 | ) | ||||
Distributions of income from preferred equity investments |
59 | 103 | ||||||
Losses of equity investments |
1,355 | 527 | ||||||
Distributions of income from equity investments |
1,166 | 590 | ||||||
Restricted cash held in escrows |
1,501 | 1,745 | ||||||
Gain on sale of securities carried at fair value |
(124 | ) | (695 | ) | ||||
Unrealized gain on securities carried at fair value |
(886 | ) | (2,540 | ) | ||||
Unrealized (gain) loss on loan securities carried at fair value |
(2,813 | ) | 613 | |||||
Tenant leasing costs |
(260 | ) | (2,131 | ) | ||||
Bad debt expense (recovery) |
116 | (20 | ) | |||||
Net change in interest receivable |
(226 | ) | 5 | |||||
Net change in accounts receivable |
149 | 735 | ||||||
Net change in accounts payable and accrued liabilities |
63 | (584 | ) | |||||
Net cash provided by operating activities |
4,215 | 3,871 | ||||||
Cash flows from investing activities |
||||||||
Investments in real estate |
(3,293 | ) | (687 | ) | ||||
Investment in equity investments |
(27,190 | ) | (920 | ) | ||||
Purchase of securities carried at fair value |
(568 | ) | (1,306 | ) | ||||
Proceeds from sale of securities carried at fair value |
19,915 | 11,407 | ||||||
Restricted cash held in escrows |
(7,927 | ) | (30 | ) | ||||
Issuance and acquisition of loans receivable |
(2,773 | ) | (679 | ) | ||||
Proceeds from sale of loans receivable |
| 3,000 | ||||||
Collection of loans receivable |
170 | | ||||||
Investment in other receivables |
(7,000 | ) | | |||||
Net cash (used in) provided by investing activities |
(28,666 | ) | 10,785 | |||||
Cash flows from financing activities |
||||||||
Proceeds from mortgage loans payable |
11,000 | | ||||||
Principal payments of mortgage loans payable |
(29,288 | ) | (1,790 | ) | ||||
Proceeds from revolving line of credit |
27,324 | | ||||||
Payment of revolving line of credit |
(18,899 | ) | | |||||
Proceeds from note payable |
15,150 | | ||||||
Restricted cash held in escrows |
(629 | ) | 37 | |||||
Deferred financing costs |
(612 | ) | (13 | ) | ||||
Contribution from non-controlling interest |
277 | 288 | ||||||
Distribution to non-controlling interest |
(118 | ) | (120 | ) | ||||
Issuance of Common Shares under Dividend Reinvestment Plan |
680 | 572 | ||||||
Dividend paid on Common Shares |
(4,392 | ) | (3,311 | ) | ||||
Dividend paid on Series C Preferred Shares |
(59 | ) | (221 | ) | ||||
Net cash provided by (used in) financing activities |
434 | (4,558 | ) | |||||
Net (decrease) increase in cash and cash equivalents |
(24,017 | ) | 10,098 | |||||
Cash and cash equivalents at beginning of period |
45,257 | 66,493 | ||||||
Cash and cash equivalents at end of period |
$ | 21,240 | $ | 76,591 | ||||
6
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Supplemental Disclosure of Cash Flow
Information |
||||||||
Interest paid |
$ | 4,754 | $ | 3,687 | ||||
Taxes paid |
$ | 18 | $ | 11 | ||||
Supplemental Disclosure on Non-Cash Investing
and
Financing Activities |
||||||||
Dividends accrued on Common Shares |
$ | 4,402 | $ | 3,435 | ||||
Dividends accrued on Series C Preferred Shares |
$ | 39 | $ | 39 | ||||
Capital expenditures accrued |
$ | 122 | $ | 141 | ||||
Other receivables |
$ | (1,459 | ) | $ | | |||
Loan securities carried at fair value |
$ | 662 | $ | | ||||
Loans receivable |
$ | (662 | ) | $ | | |||
7
1. | Organization |
Winthrop Realty Trust (Winthrop), a real estate investment trust (REIT) under section 856-860 of the Internal Revenue Code is an unincorporated association in the form of a business trust organized in Ohio under a Declaration of Trust dated August 1, 1961, as amended and restated on May 21, 2009, which has as its stated principal business activity the ownership and management of, and lending to, real estate and related investments. | ||
Since January 11, 2005, Winthrop has conducted its business through WRT Realty L.P., a Delaware limited partnership (the Operating Partnership). Winthrop is the sole general partner of, and owns directly and indirectly, 100% of the limited partnership interest in the Operating Partnership. All references to the Trust refer to Winthrop and its consolidated subsidiaries, including the Operating Partnership. | ||
The Trust is engaged in the business of owning real property and real estate related assets which it categorizes into three specific areas: (i) ownership of investment properties (operating properties); (ii) origination and acquisition of loans and debt securities collaterized directly or indirectly by commercial and multi-family real property, including collateral mortgage-backed securities (collectively loan assets); and (iii) equity and debt interests in other real estate investment trusts (REIT securities). |
2. | Summary of Significant Accounting Policies |
Basis of Presentation | ||
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial statements and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, although management believes that the disclosures presented herein are adequate to make the accompanying unaudited consolidated interim financial statements not misleading. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated annual financial statements and the notes thereto included in the Trusts Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC. In the opinion of management, all adjustments considered necessary for fair statements have been included, and all such adjustments are of a normal recurring nature. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the operating results for the full year. | ||
The accompanying unaudited consolidated financial statements represent the consolidated results of Winthrop, its wholly-owned taxable REIT subsidiary, WRT TRS Management Corp., and the Operating Partnership. All majority-owned subsidiaries and affiliates over which the Trust has financial and operating control and variable interest entities (VIEs) in which the Trust has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Trust accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Trusts share of the earnings of these joint ventures and companies is included in consolidated net income. | ||
Reclassifications | ||
Certain prior year balances have been reclassified in order to conform to the current year presentation. Discontinued operations for the three month period ended March 31, 2011 include the Trusts properties in Lafayette, Louisiana; Knoxville, Tennessee; and St. Louis, Missouri. Discontinued operations for the three month period ended March 31, 2010 also include the Trusts properties in Athens, Georgia and Sherman, Texas which were disposed of in 2010. | ||
Earnings Per Share | ||
The Trust determines basic earnings per share on the weighted average number of Common Shares of Beneficial Interest (Common Shares) outstanding during the period and reflects the impact of participating securities. The holders of the Trusts Series B-1 Cumulative Convertible Redeemable Preferred Shares (Series B-1 Preferred Shares) and the Series C Cumulative Convertible Redeemable Preferred Shares (Series C Preferred Shares) are entitled to receive cumulative |
8
preferential dividends on a quarterly basis equal to the greater of (i) $0.40625 per share quarterly (6.5% of the liquidation preference on an annualized basis) or (ii) cash dividends payable on the number of Common Shares into which the Series B-1 Preferred Shares and Series C Preferred Shares (assuming for this purpose that the conversion price of the Series C Preferred Shares equals the conversion price of the Series B-1 Preferred Shares) are convertible. The Trust computes diluted earnings per share based on the weighted average number of Common Shares outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments. | ||
The Trust has calculated earnings per share in accordance with relevant accounting guidance for participating securities and the two class method. The reconciliation of earnings attributable to Common Shares outstanding for the basic and diluted earnings per share calculation is as follows (in thousands, except per share data): |
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Basic |
||||||||
Income from continuing operations |
$ | 7,355 | $ | 4,203 | ||||
Allocation of undistributed earnings to Series C
Preferred Shares |
(9 | ) | | |||||
Income attributable to non-controlling interest |
(204 | ) | (245 | ) | ||||
Preferred dividend of Series C Preferred Shares |
(59 | ) | (113 | ) | ||||
Income from continuing operations applicable
to Common Shares |
7,083 | 3,845 | ||||||
Income from discontinued operations |
47 | 247 | ||||||
Net income applicable to Common Shares
for earnings per share purposes |
$ | 7,130 | $ | 4,092 | ||||
Basic weighted-average Common Shares |
27,079 | 20,598 | ||||||
Income from continuing operations |
$ | 0.26 | $ | 0.19 | ||||
Income from discontinued operations |
| 0.01 | ||||||
Net income per Common Share |
$ | 0.26 | $ | 0.20 | ||||
Diluted |
||||||||
Income from continuing operations |
$ | 7,355 | $ | 4,203 | ||||
Allocation of undistributed earnings
to Series C Preferred Shares |
(9 | ) | | |||||
Income attributable to non-controlling interest |
(204 | ) | (245 | ) | ||||
Preferred dividend of Series C Preferred Shares |
(59 | ) | | |||||
Income from continuing operations applicable
to Common Shares |
7,083 | 3,958 | ||||||
Income from discontinued operations |
47 | 247 | ||||||
Net income applicable to Common Shares
for earnings per share purposes |
$ | 7,130 | $ | 4,205 | ||||
Basic weighted-average Common Shares |
27,079 | 20,598 | ||||||
Series B-1 Preferred Shares (1) |
| | ||||||
Series C Preferred Shares (2) |
| 789 | ||||||
Stock options (3) |
2 | 2 | ||||||
Diluted weighted-average Common Shares |
27,081 | 21,389 | ||||||
Income from continuing operations |
$ | 0.26 | $ | 0.19 | ||||
Income from discontinued operations |
| 0.01 | ||||||
Net income per Common Share |
$ | 0.26 | $ | 0.20 | ||||
9
(1) | The Series B-1 Preferred Shares were anti-dilutive for the three months ended March 31, 2011 and 2010 and are not included in the weighted-average shares outstanding for the calculation of diluted earnings per Common Share. | |
(2) | The Series C Preferred Shares were anti-dilutive for the three months ended March 31, 2011 and are not included in the weighted-average shares outstanding for the calculation of diluted earnings per Common Share. The Series C Preferred Shares were dilutive for the three months ended March 31, 2010. | |
(3) | The Trusts outstanding stock options were dilutive for the three months ended March 31, 2011 and 2010. |
Recently Issued Accounting Standards | ||
In April 2011 the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update that provides clarification on which loan modifications meet the criteria to be treated as Troubled Debt Restructurings (TDRs).The guidance is intended to improve financial reporting by creating greater consistency in the way accounting principles generally accepted in the United States of America (GAAP) is applied for various TDRs by reaffirming the requirements and clarifying the criteria that creditors should use in evaluating whether a restructuring constitutes a TDR. The guidance is effective for interim and/or annual periods beginning on or after June 15, 2011, and early application is permitted. The Trust has adopted this standard which did not have a material impact on its consolidated financial statements. |
3. | Fair Value Measurements |
Cash and cash equivalents, restricted cash in escrows, derivative financial instruments, and certain securities are reported at fair value. The accounting standards establish a framework for measuring fair value as well as disclosures about fair value measurements. They emphasize that fair value is a market based measurement, not an entity-specific measurement. Therefore a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). | ||
Recurring Measurements | ||
The table below presents the Trusts assets and liabilities measured at fair value on a recurring basis as of March 31, 2011, according to the level in the fair value hierarchy within which those measurements fall (in thousands): |
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical Assets | Observable | Unobservable | ||||||||||||||
and Liabilities | Inputs | Inputs | ||||||||||||||
Recurring Basis | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Assets |
||||||||||||||||
Cash and cash equivalents |
$ | 21,240 | $ | | $ | | $ | 21,240 | ||||||||
Restricted cash held in escrow |
30,648 | | | 30,648 | ||||||||||||
Securities carried at fair value |
14,695 | | | 14,695 | ||||||||||||
Loan securities carried at fair value |
| | 14,132 | 14,132 | ||||||||||||
$ | 66,583 | $ | | $ | 14,132 | $ | 80,715 | |||||||||
10
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical Assets | Observable | Unobservable | ||||||||||||||
and Liabilities | Inputs | Inputs | ||||||||||||||
Recurring Basis | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Assets |
||||||||||||||||
Cash and cash equivalents |
$ | 45,257 | $ | | $ | | $ | 45,257 | ||||||||
Restricted cash held in escrow |
8,593 | | | 8,593 | ||||||||||||
Securities carried at fair value |
33,032 | | | 33,032 | ||||||||||||
Loan securities carried at fair value |
| | 11,981 | 11,981 | ||||||||||||
$ | 86,882 | $ | | $ | 11,981 | $ | 98,863 | |||||||||
Liabilities |
||||||||||||||||
Derivative liabilities |
$ | | $ | 63 | $ | | $ | 63 | ||||||||
The table below includes a roll forward of the balance sheet amounts from January 1, 2011 to March 31, 2011, including the change in fair value, for financial instruments classified by the Trust within Level 3 of the valuation hierarchy. When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. |
Loan Securities | ||||
Carried at Fair | ||||
Three Months Ended March 31, 2011 | Value | |||
(in thousands) | ||||
Fair value, January 1, 2011 |
$ | 11,981 | ||
Sales |
(662 | ) | ||
Unrealized gain, net |
2,813 | |||
Fair value, March 31, 2011 |
$ | 14,132 | ||
Fair Value Option |
The current accounting guidance for fair value measurement provides a fair value option election that allows companies to irrevocably elect fair value as the measurement attribute for certain financial assets and liabilities. Changes in fair value for assets and liabilities for which the election is made are recognized in earnings on a quarterly basis based on the then market price regardless of whether such assets or liabilities have been disposed of at such time. The fair value option guidance permits the fair value option election to be made on an instrument by instrument basis when it is initially recorded or upon an event that gives rise to a new basis of accounting for that asset or liability. The Trust elected the fair value option for all loan securities and REIT securities acquired subsequent to September 30, 2008. |
For the three months ended March 31, 2011 and 2010, the Trust recognized net unrealized gains of $3,699,000 and $1,927,000, respectively, as a result of the change in fair value of the securities for which the fair value option was elected, which is recorded as an unrealized gain or loss in the Trusts statement of operations. Income related to securities carried at fair value is recorded as interest and dividend income. |
11
The following table presents as of March 31, 2011 and December 31, 2010 the Trusts financial assets for which the fair value option was elected (in thousands): |
Financial Instruments at Fair Value | March 31, 2011 | December 31, 2010 | ||||||
Assets |
||||||||
Securities carried at fair value: |
||||||||
REIT Preferred shares |
$ | 10,547 | $ | 28,547 | ||||
REIT Common shares |
4,148 | 4,485 | ||||||
Loan securities carried at fair value |
14,132 | 11,981 | ||||||
$ | 28,827 | $ | 45,013 | |||||
The table below presents as of March 31, 2011 the difference between fair values and the aggregate contractual amounts due for which the fair value option has been elected (in thousands): |
Fair Value at | Amount Due | |||||||||||
March 31, 2011 | Upon Maturity | Difference | ||||||||||
Assets |
||||||||||||
Loan securities carried at fair value |
$ | 14,132 | $ | 16,241 | $ | 2,109 | ||||||
$ | 14,132 | $ | 16,241 | $ | 2,109 | |||||||
4. | Acquisition, Disposition, Leasing and Financing Activities |
Acquisition Activity | ||
Gotham Hotel Joint Venture Loan Acquisition - On February 23, 2011 the Trust acquired for $15,628,000 a performing $16,303,000 first mortgage secured by a lien on a recently constructed, 26-story, 66 room limited service boutique hotel located in New York, New York through a 50/50 joint venture. The loan bears interest at a rate of 9.33%, and matured on May 4, 2011. The borrower is working on a proposed settlement anticipated to be resolved during the second quarter of 2011. The Trust will account for its investment in the joint venture using the equity method. | ||
Vintage Receivables Acquisition On March 2, 2011 the Trust entered into an agreement pursuant to which it agreed, subject to the satisfaction of certain conditions, to purchase for $25,200,000 an effective 75% interest in a joint venture which owns the general partnership interests in and developer fees and advances receivable from partnerships owning 26 multifamily and senior housing properties comprising approximately 4,400 units located primarily in the Pacific Northwest and California. On March 8, 2011, the first stage of the transaction closed pursuant to which the Trust acquired for a purchase price of $7,000,000 certain of the receivables owed by the underlying partnerships. The balance of the transaction is expected to close upon obtaining all requisite lender and limited partner consents which are anticipated to be obtained during the second quarter. If the second step of the transaction fails to close by June 30, 2011, the seller has the right to repurchase the assets acquired at a price equal to the Trusts purchase price plus a 12% return thereon. The Trust will account for this investment as other receivables. | ||
Lakeside Eagle Joint Venture Loan Acquistion On March 22, 2011 the Trust, through a 50/50 joint venture, purchased at par two non-performing first mortgage loans for an aggregate price of $35,558,000. The loans are collateralized by two retail centers located in Riverside County, California. Both notes matured on April 1, 2010 and are in maturity default. The notes bear interest at their default rate of 8.92% (4.92% stated note rate plus 4% default rate). Upon acquisition, the joint venture began foreclosure proceedings. The Trust will account for its investment in the joint venture using the equity method. | ||
CDO Management - On March 23, 2011, a venture in which Winthrop will hold a 50% interest entered into a contract to acquire the collateral management agreements with respect to three real estate CDOs that hold loans and loan securities. The acquisition of the collateral management agreements is subject to the satisfaction of certain conditions precedent, including required third party consents. |
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Disposition Activity | ||
Concord CDO CDO Bonds In February 2011, the Trust sold to Concord Debt Funding Trust (CDFT) a wholly owned subsidiary of CDH CDO LLC, an entity in which the Trust holds a 33.3% interest, and the sole equity owner of Concord Real Estate CDO-1 LTD (CDO-1), tranche E bonds with a face amount of $9,000,000 issued by CDO-1. In exchange for the bonds, the Trust received a note in the amount of the Trusts original purchase price plus accrued interest. At March 31, 2011 the carrying value of the loan plus accrued interest was $759,000. The note plus accrued interest was repaid in full on April 15, 2011. | ||
Financing Activity | ||
San Marbeya Loan Receivable Participation Interest On January 14, 2011, the Trust restructured the San Marbeya first mortgage loan to create a $15,150,000 senior participation which bears interest at 4.85% and a $15,744,000 junior participation which bears interest at 6.4% and concurrently issued the senior loan participation to CDO-1 at par. The Trust will account for the loan participation as a secured borrowing with a pledge of collateral, establishing a liability for the portion participated to CDO-1. | ||
Newbury Apartments Loan Modification On February 24, 2011 the Trust reached an agreement with the first mortgage lender on its Newbury Apartments property to repay all past due interest and fees of approximately $853,000, to fund escrows of approximately $83,000, to prepay Marchs debt service inclusive of escrows of approximately $150,000 and to pay a modification fee of approximately $119,000 (0.5% of the loan balance). In exchange the lender waived all defaulted interest, modified the payments to interest only and extended the maturity date to February 1, 2014. The note bears interest at 5.83% and the waiver of past due interest and fees will be recorded as a yield adjustment over the remaining term of the note. The Trust has recognized no gain or loss in connection with this transaction. Costs incurred by the Trust totaling $176,500, inclusive of the modification fee of $119,000, have been charged to expense. | ||
Revolving Line of Credit On March 3, 2011 the Trust amended its existing revolving line of credit such that (i) the maximum borrowing was increased to $50,000,000 with an accordion feature of up to $150,000,000 (ii) the maturity date was extended to March 2014 with an option to extend the maturity date to March 2015. The amended credit facility bears interest at Libor plus 3%. In March 2011, the Trust drew down $10,985,000 to satisfy certain mortgage loan payable and $16,000,000 to fund new investments. These borrowings, together with the existing balance, resulted in an outstanding balance on the revolving line of credit of $33,875,000 at March 2011. The Trust capitalized $370,000 of expenses incurred in connection with this transaction and is amortizing the balance over the modified life. | ||
Plantation, Florida Property Level Financing On March 4, 2011 the Trust financed its Plantation, Florida property with an $11,000,000 first mortgage loan bearing interest at 6.483% and maturing on April 1, 2018. The net proceeds of approximately $10,676,000 were used to partially satisfy a mortgage loan payable. |
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5. | Loans Receivable |
The following table summarizes the Trusts loans receivable at March 31, 2011 and December 31, 2010 (in thousands): |
Carrying Amount | Contractual | |||||||||||||
Stated | March 31, | December 31, | Maturity | |||||||||||
Description | Location | Interest Rate | 2011 | 2010 | Date | |||||||||
Beverly Hilton (1) |
Beverly Hills, CA | Libor + 1.74% | $ | 8,697 | $ | 7,899 | 08/09/11 | |||||||
Westwood (1) |
Phoeniz, AZ | 11.00% | 3,500 | 3,500 | 10/31/11 | |||||||||
Metropolitan Tower |
New York, NY | Libor + 1.51% | | 10,312 | 11/01/11 | |||||||||
Moffett Towers (1) |
Sunnyvale, CA | Libor + 6.48% | 22,583 | 21,752 | 01/31/12 | |||||||||
Siete Square |
Phoeniz, AZ | 10.37%(2) | 2,488 | 2,488 | 06/09/12 | |||||||||
160 Spear |
San Francisco, CA | 9.75%(3) | 7,578 | 6,674 | 06/09/12 | |||||||||
160 Spear |
San Francisco, CA | 15.00% | 4,240 | 3,029 | 06/09/12 | |||||||||
Legacy Orchard (1) |
Various | 15.00% | 9,750 | 9,750 | 10/31/14 | |||||||||
San Marbeya (1) |
Tempe, AZ | 5.88% | 26,858 | 26,966 | 01/01/15 | |||||||||
CDH CDO LLC (1) |
n/a | 12.00% | 3,605 | 3,498 | 12/30/15 | |||||||||
CDH CDO LLC (1) |
n/a | 12.00% | 759 | | (4) | |||||||||
Rockwell |
Shirley, NY | 12.00% | 258 | 255 | 05/01/16 | |||||||||
500-512 7th Ave |
New York, NY | 7.19% | 9,956 | 9,954 | 07/11/16 | |||||||||
180 N. Michigan (1) |
Chicago, IL | 8.50%(5) | 2,637 | 1,862 | 12/31/16 | |||||||||
Wellington Tower (1) |
New York, NY | 6.79% | 2,481 | 2,456 | 07/11/17 | |||||||||
$ | 105,390 | $ | 110,395 | |||||||||||
(1) | The Trust determined that certain loans receivable are variable interests in VIEs primarily based on the fact that the underlying entities do not have sufficient equity at risk to permit the entity to finance its activities without additional subordinated financial support. The Trust does not have the power to direct the activities of the entity that most significantly impact the entitys economic performance and is not required to consolidate the underlying entity. | |
(2) | The Trust holds a B participation in this loan. Interest on the B participation equals the difference between (i) interest on the entire outstanding loan principal balance ($7,219 at March 31, 2011) at a rate of 9.8375% per annum less (ii) interest payable on the outstanding principal balance of the A participation ($3,000 at March 31, 2011) at a rate of 8.0% per annum. As a result, the effective yield on the Trusts $2,410 cash investment is 21.0%. | |
(3) | The Trust holds a B note in this loan. Interest on the B note equals the difference between (i) interest on the entire outstanding loan principal balance ($73,796 at March 31, 2011) at a rate of 6.48215% per annum less (ii) interest payable on the outstanding principal balance of the A note ($35,000 at March 31, 2011) at a rate of 9.75% per annum. As a result, the effective yield on the Trusts $3,410 cash investment is 40.8%. | |
(4) | This loan was repaid in full in April 2011. | |
(5) | Represents tenant improvement and capital expenditure loans collateralized by a subordinate mortgage or the ownership interests in the owner of the applicable property. |
The carrying amount of loans receivable includes accrued interest of $784,000 and $558,000 at March 31, 2011 and December 31, 2010, respectively, and cumulative accretion of $7,808,000 and $9,803,000 at March 31, 2011 and December 31, 2010, respectively. For the three months ended March 31, 2011 and 2010, the Trust recorded discount accretion into interest income of $6,504,000 and $1,741,000 respectively. The fair value of the Trusts loans receivable, exclusive of interest receivables was approximately $117,904,000 at March 31, 2011. |
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The following table summarizes the Trusts interest, dividend and discount accretion income for the three months ended March 31, 2011 and 2010 (in thousands): |
2011 | 2010 | |||||||
Interest, dividends and discount accretion detail: |
||||||||
Interest on loan assets |
$ | 2,710 | $ | 721 | ||||
Accretion of loan discount |
6,504 | 1,741 | ||||||
Interest and dividends on REIT securities |
458 | 747 | ||||||
Total interest, dividends, and discount accretion |
$ | 9,672 | $ | 3,209 | ||||
Credit Quality of Loans Receivable and Loan Losses | ||
The Trust evaluates impairment on its loan portfolio on an individual basis and has developed a loan grading system for all of its outstanding loans that are collateralized directly or indirectly by real estate. Grading categories include debt yield, debt service coverage ratio, length of loan, property type, loan type, and other more subjective variables that include property or collateral location, market conditions, industry conditions, and sponsors financial stability. Management reviews each category and assigns an overall numeric grade for each loan to determine the loans risk of loss and to provide a threshold for the determination of whether a specific allowance analysis is necessary. A loans grade of credit quality is determined quarterly. | ||
All loans with a positive score do not require a loan loss allowance. Any loan graded with a neutral score or zero is subject to further review of the collectability of the interest and principal based on current conditions and qualitative factors to determine if impairment is warranted. Any loan with a negative score is deemed impaired and management then would measure the specific impairment of each loan separately using the fair value of the collateral less costs to sell. | ||
Management estimates impairment by calculating the estimated fair value less costs to sell of the underlying collateral securing the loan based on the present value of expected future cash flows, and comparing the fair value to the loans net carrying value. If the fair value is less than the net carrying value of the loan, an allowance is created with a corresponding charge to the provision for loan losses. The allowance for each loan is maintained at a level the Trust believes is adequate to absorb losses. | ||
The table below summarizes the Trusts loans receivable by internal credit rating at March 31, 2011 (in thousands, except for number of loans). |
Carrying Value | ||||||||
Number of | of Loans | |||||||
Internal Credit Quality | Loans (1) | Receivable | ||||||
Greater than zero |
10 | $ | 75,962 | |||||
Equal to zero |
2 | 25,064 | ||||||
Less than zero |
| | ||||||
12 | $ | 101,026 | ||||||
(1) | The Trust holds unsecured loans at March 31, 2011 not included above that have a carrying amount of $4,364. In April 2011, the Trust received payments of $2,093 and anticipates that the remaining balance will be repaid during the second quarter of 2011. |
There was no provision for loan loss recorded during the three month periods ended March 31, 2011 and 2010. |
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Non Performing Loans | ||
The Trust considers a loan to be non-performing and places loans on non-accrual status at such time as management determines it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan. While on non-accrual status, based on the Trusts judgment as to collectability of principal, loans are either accounted for on a cash basis, where interest income is recognized only upon actual receipt of cash, or on a cost-recovery basis, where all cash receipts reduce a loans carrying value. If and when a loan is brought back into compliance with its contractual terms, the Trust will resume accrual of interest. As of March 31, 2011 and December 31, 2010, there were no non-performing loans and no past due payments. | ||
Activity related to loans receivable is as follows (in thousands): |
January 1, 2011 to | January 1, 2010 to | |||||||
March 31, 2011 | December 31, 2010 | |||||||
Balance at beginning of period |
$ | 110,395 | $ | 26,101 | ||||
Purchase and advances |
2,773 | 122,301 | ||||||
Proceeds from sale |
| (12,876 | ) | |||||
Interest (received) accrued, net |
226 | 361 | ||||||
Repayments |
(15,170 | ) | (15,064 | ) | ||||
Loan accretion |
6,504 | 8,782 | ||||||
Reclass from loan securities |
662 | | ||||||
Reclass to investment in real estate |
| (19,210 | ) | |||||
Balance at end of period |
$ | 105,390 | $ | 110,395 | ||||
In addition to our initial purchase price of certain loans, we have future funding requirements. At March 31, 2011 and December 31, 2010, we had future funding requirements pursuant to three loans receivable totaling approximately $4,004,000 and $6,031,000, respectively. |
6. | Securities Carried at Fair Value |
Securities carried at fair value are summarized in the table below (in thousands): |
March 31, 2011 | December 31, 2010 | |||||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
REIT Preferred shares |
$ | 5,646 | $ | 10,547 | $ | 15,757 | $ | 28,547 | ||||||||
REIT Common shares |
2,935 | 4,148 | 3,590 | 4,485 | ||||||||||||
8,581 | 14,695 | 19,347 | 33,032 | |||||||||||||
Loan securities |
6,911 | 14,132 | 7,574 | 11,981 | ||||||||||||
$ | 15,492 | $ | 28,827 | $ | 26,921 | $ | 45,013 | |||||||||
During the three months ended March 31, 2011 and 2010, available for sale securities, securities carried at fair value and loan securities carried at fair value were sold or paid off for total proceeds of approximately $19,915,000 and $11,407,000, respectively. The gross realized gains on these sales and payoffs totaled approximately $124,000 and $695,000, in the three months ended March 31, 2011 and 2010, respectively. For purpose of determining gross realized gains, the cost of securities is based on specific identification. | ||
For the three months ended March 31, 2011 and 2010, the Trust recognized net unrealized gains on available for sale securities, securities carried at fair value and loan securities carried at fair value of $3,699,000, and $1,927,000 respectively, as the result of the change in fair value of the financial assets for which the fair value option was elected. |
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7. | Equity Investments |
The Trusts equity investments consist of the following at March 31, 2011 and December 31, 2010 (in thousands): |
Nominal % Ownership | March 31, | December 31, | ||||||||||
Venture Partner | Equity Investment | at March 31, 2011 | 2011 | 2010 | ||||||||
Marc Realty |
8 South Michigan LLC | 50.0% | $ | 7,117 | $ | 7,087 | ||||||
Marc Realty |
11 East Adams Street LLC | 49.0% | 3,259 | 3,223 | ||||||||
Marc Realty |
29 East Madison Street LLC | 50.0% | 7,839 | 7,720 | ||||||||
Marc Realty |
Michigan 30 LLC | 50.0% | 12,159 | 12,080 | ||||||||
Marc Realty |
Brooks Building LLC | 50.0% | 7,727 | 7,452 | ||||||||
Marc Realty |
High Point Plaza LLC | 50.0% | 6,290 | 6,275 | ||||||||
Marc Realty |
Salt Creek LLC | 50.0% | 2,336 | 2,344 | ||||||||
Marc Realty |
1701 Woodfield LLC | 50.0% | 4,158 | 4,221 | ||||||||
Marc Realty |
River Road LLC | 50.0% | 4,101 | 4,123 | ||||||||
Marc Realty |
3701 Algonquin Road LLC | 50.0% | 2,991 | 2,931 | ||||||||
Marc Realty |
Enterprise Center LLC | 50.0% | 2,898 | 3,018 | ||||||||
Marc Realty |
900 Ridgebrook LLC | 50.0% | 1,618 | 1,676 | ||||||||
Sealy |
Northwest Atlanta Partners LP | 60.0% | 1,887 | 2,479 | ||||||||
Sealy |
Newmarket GP LLC | 68.0% | 6,136 | 6,647 | ||||||||
Sealy |
Airpark Nashville GP | 50.0% | 2,421 | 2,778 | ||||||||
Inland/Lexington |
Concord Debt Holdings LLC | 33.3% | | | ||||||||
Inland/Lexington |
CDH CDO LLC | 33.3% | | | ||||||||
ROIC |
WRT-ROIC Riverside LLC | 50.0% | 7,883 | 7,883 | ||||||||
ROIC |
WRT-ROIC Lakeside Eagle LLC | 50.0% | 17,837 | | ||||||||
Atrium Holding |
WRT-46th Street Gotham LLC | 50.0% | 7,949 | | ||||||||
$ | 106,606 | $ | 81,937 | |||||||||
The Trust has determined that all of the equity investments, other than those with Sealy and WRT-ROIC Riverside LLC are VIEs. The Trust has determined that it is not the primary beneficiary of these investments since the Trust does not have the power to direct the activities of the investments that most significantly impact the investments economic performance. | ||
The following table reflects the activity of the Trusts equity investments for the period ended March 31, 2011 (in thousands): |
Marc | Concord | |||||||||||||||||||||||
Realty | Sealy | Investments | ROIC | Gotham | Total | |||||||||||||||||||
Balance at December 31, 2010 |
$ | 62,150 | $ | 11,904 | $ | | $ | 7,883 | $ | | $ | 81,937 | ||||||||||||
Contributions |
1,060 | | | 18,093 | 8,037 | 27,190 | ||||||||||||||||||
Equity in income (loss) |
55 | (1,300 | ) | | (22 | ) | (88 | ) | (1,355 | ) | ||||||||||||||
Distributions |
(772 | ) | (160 | ) | | (234 | ) | | (1,166 | ) | ||||||||||||||
Balance at March 31, 2011 |
$ | 62,493 | $ | 10,444 | $ | | $ | 25,720 | $ | 7,949 | $ | 106,606 | ||||||||||||
The Trust has performed an impairment assessment of its joint ventures with Marc Realty and Sealy. The Trust has determined that the fair value of certain of its investments in these ventures each marginally exceed their carrying values. While the |
17
ventures continue to aggressively market available space for lease and work with existing tenants for lease renewal, declines in occupancy could cause impairment of certain of the Trusts ventures that could be material. |
8. | Debt |
Mortgage Loans Payable | ||
The Trust had outstanding mortgage loans payable of $212,155,000 and $230,443,000 at March 31, 2011 and December 31, 2010, respectively. The mortgage loan payments of principal and interest are generally due monthly, quarterly or semi-annually and are collateralized by applicable real estate of the Trust. | ||
The Trusts mortgage loans payable at March 31, 2011 and December 31, 2010 are summarized as follows (in thousands): |
Location of | Spread Over | Interest Rate at | March 31, | December 31, | ||||||||||||||||
Collateral | Maturity | LIBOR/Prime | March 31, 2011 | 2011 | 2010 | |||||||||||||||
Andover, MA |
Mar 2011 | | N/A | $ | | $ | 6,135 | |||||||||||||
S. Burlington, VT |
Mar 2011 | | N/A | | 2,629 | |||||||||||||||
Various |
Jun 2011 | | N/A | | 19,002 | |||||||||||||||
Chicago, IL |
Apr 2012 | | 6.25 | % | 8,900 | 9,100 | ||||||||||||||
Amherst, NY |
Oct 2013 | | 5.65 | % | 16,007 | 16,116 | ||||||||||||||
Meriden, CT |
Feb 2014 | | 5.83 | % | 23,875 | 23,875 | ||||||||||||||
Indianapolis, IN |
Apr 2015 | | 5.82 | % | 4,226 | 4,245 | ||||||||||||||
Chicago, IL |
Mar 2016 | | 5.75 | % | 20,749 | 20,828 | ||||||||||||||
Houston, TX |
Apr 2016 | | 6.32 | % | 59,418 | 60,351 | ||||||||||||||
Lisle, IL |
Jun 2016 | | 6.26 | % | 23,859 | 23,905 | ||||||||||||||
Lisle, IL |
Mar 2017 | | 5.55 | % | 5,600 | 5,600 | ||||||||||||||
Orlando, FL |
Jul 2017 | | 6.40 | % | 38,521 | 38,657 | ||||||||||||||
Plantation, FL |
Apr 2018 | | 6.48 | % | 11,000 | | ||||||||||||||
$ | 212,155 | $ | 230,443 | |||||||||||||||||
The fair value of the Trusts mortgage loans payable, loans payable and revolving line of credit are less than their current carrying value by $20,873,000 and $22,042,000 at March 31, 2011 and December 31, 2010, respectively. |
9. | Revolving Line of Credit |
On March 3, 2011 the Trust amended its existing revolving line of credit with KeyBank. Under the modified terms the Trust can borrow on a revolving basis up to $50,000,000 with an accordion feature of up to $150,000,000. The revolving line of credit bears interest at Libor plus 3% and has a maturity date of March 3, 2014 with a one year option to extend the maturity date to March 3, 2015. | ||
The Trust must comply with financial covenants on an ongoing basis. The covenants are tested as of the end of each quarter based upon results for the most recently ended quarter. The Trust was in compliance of its financial covenants under its revolving line of credit as of March 31, 2011. | ||
The revolving credit line is recourse and as such is effectively collateralized by all of the Trusts assets. The revolving credit line requires monthly payments of interest only. To the extent that the amounts outstanding under the facility are in excess of the borrowing base (as calculated), the Trust is required to make a principal payment to reduce such excess. The Trust may prepay from time to time without premium or penalty and re-borrow amounts prepaid. |
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The outstanding balance under the facility was $33,875,000 and $25,450,000 at March 31, 2011 and December 31, 2010. The Trust is required to pay a commitment fee on the unused portion of the line, which amounted to approximately $9,000 and $22,000 for the three months ended March 31, 2011 and 2010. |
10. | Common Shares |
The following table sets forth information relating to sales of Common Shares during the three months ended March 31, 2011: |
Number of Shares | ||||||||||||
Date of Issuance | Issued | Price per Share | Type of Offering | |||||||||
January 15, 2011 |
58,161 | $ | 11.70 | DRIP (1) |
(1) | The Trusts Dividend Reinvestment and Stock Purchase Plan. |
11. | Discontinued Operations |
In addition to the Trusts properties in Athens, Georgia, Lafayette, Louisiana, Knoxville, Tennessee and Sherman, Texas that were previously classified as discontinued operations, in January 2011 another retail property in St. Louis, Missouri has also been classified as discontinued operations. In February 2011 the Trust entered into agreements to sell the St. Louis, Missouri, and Knoxville, Tennessee properties, each subject to the respective buyers due diligence. | ||
Results for discontinued operations for the three months ended March 31, 2011 and 2010 are as follows (in thousands): |
2011 | 2010 | |||||||
Revenues |
$ | 139 | $ | 295 | ||||
Operating expenses |
(90 | ) | (17 | ) | ||||
Depreciation and amortization |
(2 | ) | (31 | ) | ||||
Income from discontinued operations |
$ | 47 | $ | 247 | ||||
12. | Commitments and Contingencies |
The Trust is involved from time to time in litigation on various matters, including disputes with tenants and disputes arising out of agreements to purchase or sell properties. Given the nature of the Trusts business activities, these lawsuits are considered routine to the conduct of its business. The result of any particular lawsuit cannot be predicted because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. The Trust does not expect that the liabilities, if any, that may ultimately result from such legal actions will have a material adverse effect on its financial condition or results of operations. | ||
Concord CDO-1 Litigation | ||
In January 2010, CDFT submitted for cancellation certain bonds issued by CDO-1 and held by CDFT. The trustee for CDO-1 refused to cancel such bonds and CDO-1 brought an action in the Delaware Court of Chancery seeking declaratory relief that such bonds should be cancelled and no longer remains outstanding. Pending the courts decision, the trustee escrowed all payments on account of the bonds and distributions payable to CDFT from CDO-1s assets. In addition, the trustee also escrowed any principal payments that could otherwise have been used for reinvestment by CDO-1 for additional or replacement assets. In May 2010 the Delaware Court of Chancery issued a ruling that the bonds submitted for cancellation should be deemed no longer outstanding effective January 2010. The trustee appealed the ruling and on March 4, 2011, the Delaware Supreme Court affirmed the Delaware Court of Chancerys ruling that the bonds submitted for cancellation should be deemed no longer outstanding effective January 2010. As a result, in April 2011 the trustee began releasing the funds held in escrow thereby enabling CDO-1 to make all current and past due payments on its remaining bonds as well as to pay |
19
distributions to CDFT, which distributions will be used by CDFT to repay the loans plus accrued interest totalling $4,364,000 due to the Trust. | ||
Tenant Matters | ||
The lease term with respect to the Trusts property located in Churchill, Pennsylvania expired on December 31, 2010. CBS Corporation (CBS), the lessee of the property, elected not to renew the lease and, in anticipation of this lease termination and surrender of the property, a review of the condition of the property was performed by the Trust. In the Trusts view, the property is in need of substantial repairs and refurbishing in order for the tenant to comply with the surrender conditions. The Trust advised CBS of these issues and no resolution was reached with CBS after numerous discussions. Accordingly, in May 2010 the Trust brought an action in Pennsylvania State Court, Alleghany County against CBS seeking damages for, among other things, CBS failure to restore the property to the condition necessary to comply with its surrender obligations. The case is currently in the discovery phase. |
13. | Related-Party Transactions |
FUR Advisors | ||
The activities of the Trust are administered by FUR Advisors LLC (FUR Advisors) pursuant to the terms of the Advisory Agreement between the Trust and FUR Advisors. FUR Advisors is controlled by and partially owned by the executive officers of the Trust. Pursuant to the terms of the Advisory Agreement, FUR Advisors is responsible for providing asset management services to the Trust and coordinating with the Trusts shareholder transfer agent and property managers. FUR Advisors is entitled to receive a base management fee and an incentive fee in accordance with the terms of the Advisory Agreement. In addition, FUR Advisors or its affiliate is also entitled to receive property and construction management fees subject to the approval of the independent Trustees of the Trust. | ||
The following table sets forth the fees and reimbursements paid by the Trust for the three months ended March 31, 2011 and 2010 to FUR Advisors and Winthrop Management (in thousands): |
For the Three Months Ended | ||||||||
March 31, 2011 | March 31, 2010 | |||||||
Base Asset Management |
$ | 1,720 | $ | 1,024 | ||||
WRP Sub-Management LLC Credit |
| (52 | ) | |||||
Property Management |
132 | 59 | ||||||
$ | 1,852 | $ | 1,031 | |||||
Base Asset Management Fee | ||
Effective January 1, 2010, the Advisory Agreement was amended so that the determination of the issuance price of Common Shares reverted back to the pre 2009 definition such that the fee is to be calculated on the actual issuance price of Common Shares instead of a fixed price for Common Shares issued prior to January 1, 2009. Additionally, FUR Advisors receives a fee equal to 0.25% of any equity contributions by an unaffiliated third party to a venture managed by the Trust. | ||
Winthrop Management | ||
Winthrop Management L.P. (Winthrop Management), an affiliate of FUR Advisors and the Trusts executive officers, assumed property management responsibilities for various properties owned by the Trust. Winthrop Management receives a property management fee pursuant to the terms of individual property management agreements. |
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14. | Reportable Segments |
The Financial Accounting Standards Board (FASB) guidance on segment reporting establishes standards for the way that public business enterprises report information about operating segments in financial statements and requires that those enterprises report selected financial information about operating segments in interim financial reports issued to shareholders. | ||
Based on the Trusts method of internal reporting, management determined that it has three operating segments: (i) the ownership of operating properties; (ii) the origination and acquisition of loans and debt securities secured directly or indirectly by commercial and multi-family real property collectively, loan assets; and (iii) the ownership of equity and debt securities in other REITs REIT securities. | ||
The operating properties segment includes all of the Trusts wholly and partially owned operating properties. The loan assets segment includes all of the Trusts activities related to real estate loans including loans receivable, loan securities and equity investments in loan related entities. The REIT securities segment includes all of the Trusts activities related to the ownership of securities in other publicly traded real estate companies. In addition to its three business segments, the Trust reports non-segment specific income and expense under corporate income (expense). | ||
The following table summarizes the Trusts assets by business segment for the periods ended March 31, 2011 and December 31, 2010 (in thousands): |
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Operating properties |
$ | 378,529 | $ | 373,142 | ||||
Loan assets |
157,225 | 134,269 | ||||||
REIT securities |
14,695 | 33,032 | ||||||
Corporate |
||||||||
Cash and cash equivalents |
21,240 | 45,257 | ||||||
Restricted cash |
30,648 | 8,593 | ||||||
Accounts receivable and prepaids |
12,534 | 12,402 | ||||||
Deferred financing costs |
1,479 | 1,158 | ||||||
Discontinued operations |
3,710 | 2,275 | ||||||
Total Assets |
$ | 620,060 | $ | 610,128 | ||||
The Trust defines net operating income for each segment presented as all items of income and expense directly derived from or incurred by each business segment before depreciation, amortization and interest expense. Interest on cash reserves, general and administrative expenses and other non-segment specific income and expense items are reported under corporate income (expense). | ||
The following table presents a summary of revenues from operating properties, loan assets and REIT securities and expenses incurred by each segment for the three months ended March 31, 2011 and March 31, 2010 (in thousands): |
21
For the Three Months Ended | ||||||||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Operating Properties |
||||||||
Rents and reimbursements |
$ | 10,986 | $ | 9,320 | ||||
Operating expenses |
(4,045 | ) | (1,949 | ) | ||||
Real estate taxes |
(1,255 | ) | (720 | ) | ||||
Equity in loss of Sealy Northwest Atlanta |
(592 | ) | (175 | ) | ||||
Equity in loss of Sealy Airpark Nashville |
(197 | ) | (209 | ) | ||||
Equity in loss of Sealy Newmarket |
(511 | ) | (219 | ) | ||||
Equity in income of Marc Realty investment |
55 | 76 | ||||||
Operating income |
4,441 | 6,124 | ||||||
Depreciation and amortization expense |
(3,481 | ) | (2,300 | ) | ||||
Interest expense |
(3,819 | ) | (3,193 | ) | ||||
Operating properties net income (loss) |
(2,859 | ) | 631 | |||||
Loan Assets |
||||||||
Interest and discount accretion |
9,214 | 2,462 | ||||||
Equity in earnings of preferred equity
investment of Marc Realty |
83 | 83 | ||||||
Unrealized gain (loss) on loan securities carried at fair value |
2,813 | (613 | ) | |||||
Equity in income of ROIC Riverside |
234 | | ||||||
Equity in loss of ROIC Lakeside Eagle |
(256 | ) | | |||||
Equity in loss of 46th Street Gotham |
(88 | ) | | |||||
Operating income |
12,000 | 1,932 | ||||||
General and administrative expense |
(4 | ) | (10 | ) | ||||
Interest expense |
(157 | ) | | |||||
Loan assets net income |
11,839 | 1,922 | ||||||
REIT Securities |
||||||||
Interest and dividends |
458 | 747 | ||||||
Gain on sale of securities carried at fair value |
124 | 695 | ||||||
Unrealized gain on securities carried at fair value |
886 | 2,540 | ||||||
Operating income |
1,468 | 3,982 | ||||||
Net Income |
10,448 | 6,535 | ||||||
Reconciliations to GAAP Net Income: |
||||||||
Corporate Income (Expense) |
||||||||
Interest income |
93 | 37 | ||||||
Interest expense |
(637 | ) | (458 | ) | ||||
General and administrative |
(2,520 | ) | (1,897 | ) | ||||
State and local taxes |
(29 | ) | (14 | ) | ||||
Income from continuing operations before
non-controlling interest |
7,355 | 4,203 | ||||||
Non-controlling interest |
(204 | ) | (245 | ) | ||||
Income from continuing operations
attributable to Winthrop Realty Trust |
7,151 | 3,958 | ||||||
Income from discontinued operations
attributable to Winthrop Realty Trust |
47 | 247 | ||||||
Net Income Attributable to
Winthrop Realty Trust |
$ | 7,198 | $ | 4,205 | ||||
Capital Expenditures |
||||||||
Operating properties |
$ | 2,819 | $ | 627 | ||||
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15. | Variable Interest Entities |
Consolidated Variable Interest Entities | ||
Andover Operating Property The lease agreement executed in January 2010 on the Andover, Massachusetts property gives the tenant an option to purchase the building for a fixed price of $10,500,000. The option is exercisable at the tenants discretion at any point during the lease term prior to January 2013. As a result of the fixed price purchase option contained in this lease agreement, the Trust has determined that its Andover, Massachusetts property is a VIE for which the Trust is the primary beneficiary since it has the power to direct activities that most significantly impact the economics of the property. | ||
The carrying amounts of the Trusts Andover property include land of $1,200,000, building of $6,181,000 and lease intangibles of $1,488,000. Prior to the execution of the lease agreement, the Andover property was not considered a VIE but it has been consolidated since its acquisition. There is no mortgage debt associated with this property. | ||
Deer Valley Medical Center Operating Property The Trust has concluded that its venture, WRT-DV LLC (WRT-DV), the entity that owns the property, is a VIE. This assessment is primarily based on the fact that the equity investment at risk is not sufficient to finance its activities without additional subordinated financial support. | ||
Pursuant to the terms of WRT-DVs operating agreement, the Trust receives a priority return on $7,900,000 of its invested capital, with the balance of the capital being allocated 96.5% to the Trust and 3.5% to its joint venture partner, Fenway. The Trust has effectively all control rights with respect to WRT-DV. Therefore the Trust has determined it is the primary beneficiary and consolidates the venture which owns the operating property. | ||
The carrying amounts of the Deer Valley property include land and building of $10,037,000 and lease intangibles of $2,263,000. There is no mortgage debt associated with this property. | ||
Variable Interest Entities Not Consolidated | ||
Equity Method Investments | ||
Concord and CDH CDO The Trust has one-third equity interests in each of the separate entities that resulted from the Trusts reorganization of its Lex-Win investment, Concord and CDH CDO (collectively, the Concord Investments). The Trust has determined that each of the Concord Investments are variable interests in VIEs because the equity investment at risk in the Concord Investments is not sufficient to finance their activities without additional subordinated financial support. The Trust has determined that it is not the primary beneficiary of the Concord Investments as it shares equally in the power to make decisions that most effect the economics of the entity. | ||
At March 31, 2011, the carrying value of the Trusts Concord Investments is zero. The Trust does not have the current intent to provide financial or other support to the Concord Investments and the obligations of the Concord Investments are non-recourse to the Trust. | ||
Marc Realty Equity Investments and Preferred Equity Investment The Trust has concluded that the 12 Marc Realty equity investments and the one preferred equity investment are variable interests in VIEs. This assessment is primarily based on the fact that the underlying entities do not have sufficient equity at risk to permit them to finance their activities without additional subordinated financial support. | ||
While the Trust maintains certain protective rights under the terms of the agreements governing the Marc Realty investments, the power to direct the activities that most significantly impact the economics of the Marc Realty investments is vested in Marc Realty as the managing member. As such, management has concluded that the Trust is not the primary beneficiary of these Marc Realty investments. At March 31, 2011, the Trusts investment in the Marc Realty equity investments was $62,493,000 and its investment in the preferred equity investment was $4,034,000. | ||
WRT-ROIC Lakeside Eagle LLC and WRT-46th Street Gotham LLC The Trust has entered into two separate 50/50 joint ventures WRT-ROIC Lakeside Eagle LLC and WRT-46th Street Gotham LLC for the purpose of acquiring certain loan receivables collateralized by real estate. In both cases the joint venture entities have been identified as VIEs because the only |
23
assets associated with these separate single purpose entities are the underlying loans which the Trust has determined are variable interests in VIEs because the equity investments at risk at the borrowing entities are not considered sufficient for the entity to finance its activities without additional subordinated financial support. | ||
Based on the 50/50 ownership and shared decision making, the Trust has determined that none of the members are considered to be most closely aligned with the business. As such, the Trust has determined that it is not the primary beneficiary of these loan asset investments as it shares equally in the power to make decisions that most effect the economics of the entity. At March 31, 2011, the Trusts investment in the WRT-ROIC Lakeside Eagle LLC and WRT-46th Street Gotham LLC equity investments was $17,837,000 and $7,949,000 respectively. | ||
Loans Receivable and Loan Securities | ||
The Trust has reviewed its loans receivable and loan securities and certain of these assets have been identified as variable interests in a VIE because the equity investment at risk is not considered sufficient for the entity to finance its activities without additional subordinated financial support. | ||
Certain loans receivable and loan securities which have been determined to be VIEs are performing assets, meeting their debt service requirements, and the borrowers hold title to the collateral. In these cases the borrower has the power to direct the activities that most significantly impact the economic performance of the VIE, including management and leasing activities. In the event of default under these loans the Trust only has protective rights and has the risk to absorb losses only to the extent of its loan investment. The borrower has been determined to be the primary beneficiary for these performing assets. | ||
The Trust has determined that it does not currently have the power to direct the activities of the ventures collateralizing any of its loans receivable and loan securities. For this reason, management believes that it does not control, nor is it the primary beneficiary of these ventures. Accordingly, the Trust accounts for these investments under the guidance for loans receivable and real estate debt investments. |
16. | Subsequent Events |
On April 4, 2011, the Trust made a $2,000,000 secured bridge loan to 446-High Line, LLC (446 High Line), the entity that ultimately holds the leasehold interest in the property located at 450 West 14th Street, New York, New York. | ||
On April 6, 2011, the Trust closed a public offering of 5,750,000 Common Shares at a price of $11.25 per share before underwriters discount and received net proceeds of approximately $61,566,000. A portion of the proceeds were utilized to pay down our revolving line of credit. | ||
On April 6, 2011, the Trust acquired an ownership interest in an entity that holds an approximately $2,500,000 non-performing junior mezzanine loan indirectly secured by a 194 unit apartment complex located in Jacksonville, Florida. The loan matured on March 30, 2011 and the venture commenced foreclosure on its collateral. |
24
25
26
| the use of cash and cash equivalents; | ||
| rents and reimbursements received from our operating properties; | ||
| payments received under our loan assets; | ||
| disposition of REIT securities; | ||
| sale of existing assets; | ||
| cash distributions from joint ventures; | ||
| borrowings under our credit facilities; | ||
| asset specific borrowings; and | ||
| the issuance of equity and debt securities. |
27
For Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Net cash flow provided by operating activities |
$ | 4,215 | $ | 3,871 | ||||
Net cash flow (used in) provided by investing activities |
(28,666 | ) | 10,785 | |||||
Net cash flow provided by (used in) financing activities |
434 | (4,558 | ) | |||||
Decrease in cash and cash equivalents |
$ | (24,017 | ) | $ | 10,098 | |||
| $18,093,000 for investment in our Lakeside Eagle loan joint venture; |
28
| $8,037,000 for investment in our Gotham loan joint venture; | ||
| $7,000,000 for investment in Vintage Housing receivable; | ||
| $3,293,000 for investment in capital and tenant improvements at our operating properties; | ||
| $2,773,000 for additional loan advances under existing facilities; | ||
| $1,060,000 for investment in our Marc Realty equity investments; and | ||
| $568,000 for purchases of REIT securities carried at fair value. |
| $27,324,000 drawn down on our revolving line of credit; | ||
| $15,150,000 in proceeds from the issuance of the senior participation in the San Marbeya loan; and | ||
| $11,000,000 in proceeds from the financing of our Plantation, Florida property. |
| $29,288,000 for mortgage loan repayments which included $8,764,000 for the satisfaction of loans payable on our Andover, Massachusetts and Burlington, Vermont properties which matured in March 2011, and $19,138,000 for the satisfaction of our loan payable which was scheduled to mature in June 2011; | ||
| $18,899,000 for payments on our revolving line of credit; and | ||
| $4,392,000 for dividend payments on our Common Shares. |
29
Ø | Operating Properties our wholly and partially owned operating properties; | ||
Ø | Loan Assets our loans receivable, loan securities carried at fair value, and equity investments in loan assets; | ||
Ø | REIT Securities our ownership of equity and debt securities in other real estate investment trusts; and | ||
Ø | Corporate non-segment specific results which includes interest on cash reserves, general and administrative expenses and other non-segment specific income and expense items. |
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Operating properties |
$ | 378,529 | $ | 373,142 | ||||
Loan assets |
157,225 | 134,269 | ||||||
REIT securities |
14,695 | 33,032 | ||||||
Corporate |
||||||||
Cash and cash equivalents |
21,240 | 45,257 | ||||||
Restricted cash |
30,648 | 8,593 | ||||||
Accounts receivable and prepaids |
12,534 | 12,402 | ||||||
Deferred financing costs |
1,479 | 1,158 | ||||||
Discontinued Operations |
3,710 | 2,275 | ||||||
Total Assets |
$ | 620,060 | $ | 610,128 | ||||
30
2011 | 2010 | |||||||
Operating properties |
$ | (2,859 | ) | $ | 631 | |||
Loan assets |
11,839 | 1,922 | ||||||
REIT securities |
1,468 | 3,982 | ||||||
Corporate expenses |
(3,093 | ) | (2,332 | ) | ||||
Income from continuing operations |
$ | 7,355 | $ | 4,203 | ||||
2011 | 2010 | |||||||
Rents and reimbursements |
$ | 10,986 | $ | 9,320 | ||||
Operating expenses |
(4,045 | ) | (1,949 | ) | ||||
Real estate taxes |
(1,255 | ) | (720 | ) | ||||
Equity in income of Marc Realty investments |
55 | 76 | ||||||
Equity in loss of Sealy Northwest Atlanta |
(592 | ) | (175 | ) | ||||
Equity in loss of Sealy Airpark Nashville |
(197 | ) | (209 | ) | ||||
Equity in loss of Sealy Newmarket |
(511 | ) | (219 | ) | ||||
Operating income |
4,441 | 6,124 | ||||||
Depreciation and amortization expense |
(3,481 | ) | (2,300 | ) | ||||
Interest expense |
(3,819 | ) | (3,193 | ) | ||||
Net income (loss) |
$ | (2,859 | ) | $ | 631 | |||
| a $2,096,000 increase in operating expenses due primarily to a $951,000 increase in costs at our Churchill, Pennsylvania property as a result of the termination of the CBS net lease as of December 31, 2010, a $424,000 increase in legal and professional fees related to tenant disputes primarily in connection with the Churchill tenant litigation and $735,000 of operating expenses at our four 2010 property acquisitions; | ||
| a decrease of $170,000 in rents and reimbursements from our two Lisle, Illinois properties due to an approximate 13% decrease in average occupancy at one of the properties and an approximate 3% decrease at the other property for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010; | ||
| a $697,000 increase in losses from our Sealy equity investments due primarily to a $417,000 increase in loss related to our Northwest Atlanta, Georgia property as a result of default interest incurred on the first mortgage loan, and a $292,000 increase in loss at our Newmarket office complex in Atlanta, Georgia which experienced a 16% loss in occupancy at March 31, 2011 from March 31, 2010; | ||
| a decrease of $83,000 in rents and reimbursements at our One East Erie property due to the turnover of tenants; |
31
| a decrease of $92,000 in rents and reimbursements at our River City property as a result of an approximate 7% decrease in average occupancy; and | ||
| a decrease of $110,000 in rents and reimbursements at our Churchill, Pennsylvania property; | ||
Partially offset by: | |||
| rents and reimbursements of $1,773,000 from our four 2010 property acquisitions; | ||
| an increase of $77,000 in rents and reimbursements at our Jacksonville, Florida property which was leased effective February 1, 2010; and | ||
| an increase of $245,000 in rents and reimbursements at our Andover, Massachusetts property which was leased effective March 18, 2010; |
2011 | 2010 | |||||||
Interest |
$ | 2,710 | $ | 722 | ||||
Discount accretion |
6,504 | 1,740 | ||||||
Equity in earnings of preferred equity investment in Marc Realty |
83 | 83 | ||||||
Equity in earnings of ROIC-Riverside LLC |
234 | | ||||||
Equity in loss of WRT-46th Street Gotham LLC |
(88 | ) | | |||||
Equity in loss of ROIC-Lakeside Eagle LLC |
(256 | ) | | |||||
Unrealized gain (loss) on loan securities carried at fair value |
2,813 | (613 | ) | |||||
Operating income |
12,000 | 1,932 | ||||||
General and administrative expense |
(4 | ) | (10 | ) | ||||
Interest expense |
(157 | ) | | |||||
Net income |
$ | 11,839 | $ | 1,922 | ||||
| a $2,813,000 unrealized gain on loan securities carried at fair value recognized in 2011 compared to a $613,000 unrealized loss recognized in the first three months of 2010; | ||
| a $4,764,000 increase in discount accretion due primarily to the recognition of $3,504,000 as a result of the early pay off at face of our Metropolitan Tower loan; and | ||
| a $1,988,000 increase in interest income due primarily to the acquisition of new loans throughout 2010. |
32
2011 | 2010 | |||||||
Interest and dividends |
$ | 458 | $ | 747 | ||||
Gain on sale of securities carried at fair value |
124 | 695 | ||||||
Unrealized gain on securities carried at fair value |
886 | 2,540 | ||||||
Operating income |
$ | 1,468 | $ | 3,982 | ||||
| a $1,654,000 reduction in unrealized gain on securities carried at fair value primarily as a result of our divestiture of securities; | ||
| a $571,000 reduction in realized gain on the sale of securities carried at fair value; and | ||
| a $289,000 decrease in interest and dividend income primarily due to the sale of certain securities. |
2011 | 2010 | |||||||
Interest income |
$ | 93 | $ | 37 | ||||
General and administrative |
(2,520 | ) | (1,897 | ) | ||||
Interest expense |
(637 | ) | (458 | ) | ||||
State and local taxes |
(29 | ) | (14 | ) | ||||
Operating loss |
$ | (3,093 | ) | $ | (2,332 | ) | ||
33
Change in LIBOR(2) | ||||||||||||||||
-0.24% | 1% | 2% | 3% | |||||||||||||
Change in consolidated interest expense |
$ | (82 | ) | $ | 339 | $ | 677 | $ | 1,016 | |||||||
Pro-rata share of change in interest expense
of debt on non-consolidated entities (1) |
(18 | ) | 76 | 232 | 416 | |||||||||||
(Increase) decrease in net income |
$ | (100 | ) | $ | 415 | $ | 909 | $ | 1,432 | |||||||
(1) | Represents our pro-rata share of a change in interest expense in our Marc Realty equity investment. The amount does not reflect our equity investment in Concord which has been written down to zero. | |
(2) | The one-month LIBOR rate at March 31, 2011 was 0.24%. |
34
35
Winthrop Realty Trust |
||||
Date: May 6, 2011 | By: | /s/ Michael L. Ashner | ||
Michael L. Ashner | ||||
Chief Executive Officer | ||||
Date: May 6, 2011 | By: | /s/ Thomas C. Staples | ||
Thomas C. Staples | ||||
Chief Financial Officer |
36
Page | ||||
Exhibit | Description | Number | ||
3.1 | Second Amended
and Restated Declaration of Trust as of May 21, 2009 Incorporated by reference to
Exhibit 3.1 to the Trusts Quarterly Report
on Form 10-Q for the period ended June 30, 2009. |
| ||
3.2 | By-laws of Winthrop Realty Trust as amended
and restated on November 3, 2009 Incorporated by reference to Exhibit 3.1 to the Trusts Current
Report on Form 8-K filed November 6, 2009. |
| ||
3.3 | Amendment to By-laws Incorporated
by reference to Exhibit 3.1 to the Trusts Current Report on Form 8-K filed March 6, 2010. |
| ||
4.1 | Form of certificate for Common Shares of
Beneficial Interest. Incorporated by reference to Exhibit 4.1 to the Trusts Annual Report on
Form 10-K for the year ended December 31, 2008. |
| ||
4.2 | Warrant to purchase 500,000 shares of
Beneficial Interest of Trust Incorporated by reference to Exhibit 4(l) to the Trusts Annual Report
on Form 10-K for the year ended December 31, 1998. |
| ||
4.3 | Agreement of Limited Partnership of WRT
Realty L.P., dated as of January 1, 2005 Incorporated by reference to Exhibit 4.1 to the Trusts Form
8-K filed January 4, 2005. |
| ||
4.4 | Amended and Restated Certificate of
Designations for Series B-1 Cumulative Convertible Redeemable Preferred Shares of Beneficial
Interest (Series B-1 Certificate of Designations) Incorporated by
reference to Exhibit 4.1 to the Trusts Form 8-K filed June 21, 2005. |
| ||
4.5 | Amendment No. 1 to Series B-1
Certificate of Designations Incorporated by reference to Exhibit 4.1 to the Trusts Form 8-K filed November 13,
2007. |
| ||
4.6 | Certificate of Designations for
Series C Cumulative Convertible Redeemable Preferred Shares of Beneficial Interest Incorporated by
reference to Exhibit 4.1 to the Trusts Form 8-K filed November 2, 2009. |
| ||
10.1 | Stock Purchase Agreement between the Trust
and FUR Investors, LLC, dated as of November 26, 2003, including Annex A thereto, being the list of
Conditions to the Offer Incorporated by reference to Exhibit 10.1 to
the Trusts Form 8-K filed December 1, 2003. |
| ||
10.2 | Second Amended and Restated Advisory
Agreement dated March 5, 2009, between the Trust, WRT Realty L.P. and FUR Advisors LLC. Incorporated by
reference to Exhibit 10.3 to the Trusts Annual Report on Form 10-K for
the year ended December 31, 2008. |
| ||
10.3 | Amendment No. 1 to Second Amended and
Restated Advisory Agreement Incorporated by reference to Exhibit 10.30 to the Trusts Quarterly
Report on Form 10-Q for the period ended March 31, 2009. |
| ||
10.4 | Amendment No. 2 to Second Amended and
Restated Advisory Agreement Incorporated by reference to Exhibit 10.1 to the Trusts Form 8-K filed
January 29, 2010. |
| ||
10.5 | Exclusivity Services Agreement between the
Trust and Michael L. Ashner Incorporated |
|
37
Page | ||||
Exhibit | Description | Number | ||
by reference to Exhibit 10.4 to the Trusts Form 8-K filed
December 1, 2003. |
||||
10.6 | Amendment No. 1 to Exclusivity
Agreement, dated November 7, 2005 Incorporated by reference to Exhibit 10.7 to the Trusts Form 8-K filed
November 10, 2005. |
| ||
10.7 | Covenant Agreement between the Trust and
FUR Investors, LLC Incorporated by reference to Exhibit 10.5 to the Trusts Form 8-K filed
December 1, 2003. |
| ||
10.8 | Amended and Restated Omnibus Agreement,
dated March 16, 2005, among Gerald Nudo, Laurence Weiner and WRT Realty L.P. Incorporated by
reference to Exhibit 10.1 to the Trusts Form 8-K filed March 18, 2005. |
| ||
10.9 | Agreement, dated as of July 1, 2009,
among Gerald Nudo, Laurence Weiner and WRT Realty L.P. Incorporated by reference to Exhibit 10.14 to the
Trusts Form 10-Q for the period ended June 30, 2009 filed August 10,
2009. |
| ||
10.10 | Securities Purchase Agreement, dated
February 25, 2005, between First Union Real Estate Equity and Mortgage Investments, Perrin Holden &
Davenport Capital Corp. and the Investors named therein Incorporated
by reference to Exhibit 10.1 to the Trusts Form 8-K filed March 3,
2005. |
| ||
10.11 | Securities Purchase Agreement, dated
June 15, 2005, between First Union Real Estate Equity and Mortgage Investments, Perrin Holden & Davenport
Capital Corp. and the Investors named therein Incorporated by
reference to Exhibit 10.1 to the Trusts Form 8-K filed June 21, 2005. |
| ||
10.12 | Amended and Restated Registration Rights
Agreement, dated June 20, 2005, between First Union Real Estate Equity and Mortgage Investments and the
Investors named therein Incorporated by reference to Exhibit 10.2 to
the Trusts Form 8-K filed June 21, 2005. |
| ||
10.13 | Amended and Restated Investor Rights
Agreement, dated June 20, 2005, between First Union Real Estate Equity and Mortgage Investments and the
Investors named therein Incorporated by reference to Exhibit 10.3 to
the Trusts Form 8-K filed June 21, 2005. |
| ||
10.14 | Securities Purchase Agreement, dated
November 7, 2005, between the Trust and Vornado Investments L.L.C. (Vornado) Incorporated by reference
to Exhibit 10.1 to the Trusts Form 8-K filed November 10, 2005. |
| ||
10.15 | Agreement between Michael L. Ashner and
Winthrop Realty Trust dated July 23, 2006 Incorporated by reference to Exhibit 10.2 to the Trusts Form
8-K filed July 25, 2006. |
| ||
10.16 | Winthrop Realty Trust 2007 Long Term
Stock Incentive Plan Incorporated by reference to the Trusts Definitive Proxy Statement on Schedule 14A
filed with the Securities and Exchange Commission on March 30, 2007. |
| ||
10.17 | Form of Series B-1 and Series C
Preferred Share Purchase Agreement, dated November 1, 2009 Incorporated by reference to Exhibit 10.1 to
the Trusts Form 8-K filed November 2, 2009. |
| ||
10.18 | Investor Rights Agreement (Series C
Preferred Shares), dated November 1, 2009, between Winthrop Realty Trust and the investors
party thereto Incorporated by reference to Exhibit 10.2 to the Trusts Form 8-K filed
November 2, 2009. |
| ||
10.19 | Amended and Restated Loan Agreement,
dated as of March 3, 2011, between WRT Realty L.P. and KeyBank,
National Association Incorporated by reference to Exhibit
10.19 to the Trusts 10-K filed March 16, 2011. |
|
38
Page | ||||
Exhibit | Description | Number | ||
10.20 | Guaranty
from Winthrop Realty Trust and certain of its Subsidiaries in favor
of KeyBank, National Association Incorporated by reference to
Exhibit 10.20 to the Trusts Form 10-K filed March 16, 2011. |
| ||
31 | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
* | ||
32 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* |
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1. | I have reviewed this Quarterly Report on Form 10-Q of Winthrop Realty Trust; | ||
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)) 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 changes in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter, 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: May 6, 2011
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/s/ Michael L. Ashner
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Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Winthrop Realty Trust; | ||
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)) 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 changes in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter, 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: May 6, 2011
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/s/ Thomas C. Staples
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Chief Financial Officer |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: Name: |
/s/ Michael L. Ashner
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Chief Executive Officer |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: Name: |
/s/ Thomas C. Staples
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Chief Financial Officer |
May 6, 2011 |