Acquisition, Disposition, Leasing and Financing Activities

3 Months Ended

Mar. 31, 2012

Acquisition, Disposition, Leasing and Financing Activities [Abstract]

Acquisition, Disposition, Leasing and Financing Activities

4. Acquisition, Disposition, Leasing and Financing Activities

Acquisition Activity

Sullivan Center – Equity Investment Operating Property – On February 3, 2012 the Trust entered into a joint venture arrangement with Elad Canada Inc. (“Elad”) pursuant to which two joint venture entities, WRT-Elad Lender LP and WRT-Elad Equity LP (collectively “WRT-Elad”), were formed to acquire for approximately $128,000,000 an existing $140,300,000 first mortgage loan and accrued interest of $6,886,000 (the “Prior Mortgage Loan”). The Prior Mortgage Loan was secured by the 942,000 square foot, office and retail property located at One South State Street in downtown Chicago, Illinois (“Sullivan Center”). Concurrently, the loan was restructured into a $100,000,000 non-recourse mortgage loan (the “New Mortgage Loan”) provided by a third party lender, a $47,458,000 mezzanine loan (the “Mezzanine Loan”) made to One South State Street Investors, L.L.C. (“OSSS”) and held by WRT-Elad and a future profits participation in favor of WRT-Elad in OSSS. WRT-Elad, of which the Trust holds a 50% interest, consolidates the operations of OSSS.

The Mezzanine Loan consists of the difference between the Prior Mortgage Loan and the New Mortgage Loan plus additional advances made to OSSS, including $4,400,000 in reserves for future advances associated with the completion of the build out for tenants at Sullivan Center. The Mezzanine Loan has a six-year term, bears interest at 15% per annum (subject to an increase to 15.5% as described below) and requires minimum payments of interest only at a rate of 10% per annum with the remaining interest accruing. If the Mezzanine Loan is not satisfied at maturity or an event of default occurs, the borrower is required to pay an additional $18,061,000 together with a 15% compounded return on such amount, which represents the discount on the purchase price paid by WRT-Elad for the Prior Mortgage Loan together with accrued default interest and expenses.

WRT-Elad acquired a 65% future profits participation in excess of all amounts due under the Mezzanine Loan. If a $3,000,000 principal payment is made by the borrower on the Mezzanine Loan on or prior to December 31, 2012, the interest rate and compounded return are increased to 15.5% and the profits participation is decreased to 60%.

Stamford Portfolio – Equity Investment Loan Asset – On February 17, 2012, the Trust invested $8,036,000 and acquired a 20% interest in a venture with Mack-Cali Realty Corporation that acquired for $40,000,000 a senior mezzanine loan with a face value of $50,000,000. The venture’s investment is subordinate to $400,000,000 in senior debt. The loan provides for a credit to the borrower of up to $3,000,000 of any principal proceeds above $47,000,000. The loan bears interest at LIBOR plus 3.25% per annum and matures on August 6, 2012, subject to two one-year extensions. The loan is collateralized by the equity interests in a seven building portfolio containing 1,670,000 square feet of Class A office space and 106 residential rental units totaling 70,500 square feet, all located in the Stamford, Connecticut Central Business District.

Mentor Building—Loan Asset—On March 6, 2012, the Trust acquired at par a first mortgage loan secured by the approximately 6,750 square foot retail condominium space at the property located at 39 South State Street, Chicago, Illinois commonly referred to as the Mentor Building. The loan has an outstanding principal balance of approximately $2,521,000, bears interest at 7.5% per annum and matures on September 10, 2012. The property is leased to American Apparel Retail, Inc. through October 2020.

Deer Valley Operating Property – Non-Controlling Interest—On March 29, 2012 the Trust purchased the 3.5% non-controlling ownership interest of its consolidated joint venture, WRT-DV LLC, for $400,000. The Trust now owns 100% of WRT-DV LLC. The Trust accounted for the purchase as an equity transaction recording the differences in the carrying value of the acquired non-controlling interest and the purchase price as a reduction in paid in capital.

RE CDO Management—Additional Equity Investment – During March 2012, the Trust and its joint venture partner in RE CDO Management LLC (“RE CDO”) each contributed $550,000 to the joint venture. RE CDO acquired a 5.52% interest in (i) a first priority mortgage loan collateralized by land located in Las Vegas, Nevada (the “Land”), which loan bears interest at LIBOR plus 40% with a current pay rate of 7.5% and the balance accruing and compounding and which had an outstanding balance of $18,218,000 at March 30, 2012, (ii) a second priority mortgage loan collateralized by the Land which bears interest at 10% per annum, all of which accrues, and which had an outstanding balance of $32,177,000 at March 30, 2012 and (iii) a 5.52% membership interest in the entity that was formed to acquire the Land.

Cedar Realty Trust- REIT Securities—During March 2012 the Trust acquired an additional 873,293 shares of common stock in Cedar Realty Trust, Inc. (“Cedar”) for an aggregate purchase price of approximately $4,188,000. Accordingly, as of March 31, 2012 the Trust holds 6,069,323 shares of common stock in Cedar representing 8.76% of Cedar’s total outstanding common stock.

Disposition Activity

Marc Realty – Sale of Equity Investment Operating Property—On March 1, 2012, the Trust sold its 50% interest in 3701 Algonquin Road, a 193,000 square foot suburban office property in Chicago, Illinois, to its joint venture partner, Marc Realty. This is the first equity investment to close pursuant to the Trust’s agreement to sell to Marc Realty five of its Marc Realty joint venture interests. The Trust received $250,000 which approximated its carrying value.

Financing Activity

Southern California Office Portfolio – Equity Investment Loan Asset– On January 6, 2012, the Trust’s venture that holds the $117,900,000 C Note in a $798,000,000 first mortgage encumbering a 4,500,000 square foot 31 property office portfolio in southern California (the “SoCal Loan”), obtained a $40,000,000 recourse repurchase facility (the “Facility”) with an affiliate of Blackstone Real Estate Debt Strategies. The Facility accrues interest at a LIBOR plus 11% annual rate with a 1% LIBOR floor. LIBOR plus 9% is paid in cash on a monthly basis and the additional 2% is added to the unpaid Facility at the end of each month and accrues interest thereon.

SoCal Loan venture received net proceeds of approximately $38,100,000 after origination fees, interest reserves and closing expenses, which was distributed entirely to the Trust in partial redemption of its interest in SoCal Loan venture resulting in a decrease in the Trust’s ownership interest from approximately 73% to approximately 56%. SoCal Loan venture accounts for this transaction as a secured borrowing with a pledge of its interest in the C Note.

Preferred Shares

Series D Preferred Shares—On March 23, 2012 the Trust closed its public offering of 3,220,000 9.25% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series D Preferred Shares”) at a price of $25.0385 per share, par value of $1 per share. The Trust received net proceeds of approximately $77,772,000 from the offering, after underwriting discounts, commissions and offering expenses. The Trust intends to use the proceeds to fund future acquisitions, pay down borrowings under its credit facility, and/or for general working capital purposes. As a result of this offering there are currently 4,820,000 Series D Preferred Shares issued and outstanding.