Acquisitions, Dispositions, Leasing and Financing Activities

3 Months Ended

Mar. 31, 2013

Acquisitions, Dispositions, Leasing and Financing Activities [Abstract]

Acquisitions, Dispositions, Leasing and Financing Activities

4. Acquisitions, Dispositions, Leasing and Financing Activities

Operating Property Activity:

1515 Market Street – loan modification and equity acquisition - On February 1, 2013 the Trust entered into a loan modification agreement which extended the maturity date to February 1, 2016, increased the loan balance to $71,629,000 (from $70,000,000) and changed the interest rate to be the greater of 7.5% or LIBOR plus 6.5%. The loan balance can be increased through future funding advances up to an aggregate of $6,000,000 to cover tenant improvements, capital expenditures and leasing commissions. For each $500,000 of future advances, the interest rate increases by 0.10%. The loan modification also provides the lender with a 40% participation interest in the case of a capital event.

Simultaneously with the modification of the loan, the Trust acquired, for $10,000, an indirect 49% equity interest in the property. As part of the transaction, the Trust acquired the general partner interest in the property. Management has determined that this entity is a variable interest entity (“VIE”) and that the Trust is the primary beneficiary of the VIE (see Note 17). As a result, the Trust has consolidated this property as of February 1, 2013. All intercompany transactions have been eliminated in consolidation. For segment reporting purposes, this investment will be classified within the operating properties segment as of February 1, 2013. Prior to consolidation, this investment was part of the loan assets segment.

The fair value of the assets and liabilities of the consolidated property was calculated by an independent third party valuation firm and reviewed by management. The following table summarizes the provisional allocation of the aggregate purchase price of 1515 Market Street as of February 1, 2013 (in thousands):

	1515 Market Street
Land	$	18,627
Building		23,159
Other improvements		73
Tenant improvements		1,407
Lease intangibles		14,943
Above market lease intangibles		2,867
Net working capital acquired		1,132
Below market lease intangibles		(620	)
Other liabilities		(1,299	)
Long Term liabilities assumed		(60,279	)(1)
Net assets acquired	$	10

(1) Long Term liabilities assumed as part of this transaction remain legally outstanding but are eliminated in consolidation with the Trust’s loan asset purchased on December 12, 2012.

Intangible assets acquired and intangible liabilities assumed for 1515 Market Street consisted of the following (in thousands):

				Weighted
				Average
	Carrying			Amortization
	Value			Period (years)
Intangible assets:
In place lease intangibles	$	6,542			6.2
Above market lease intangibles		2,867			5.8
Tenant relationship value		7,388			13.3
Lease commissions, legal and marketing fees		1,013			5.4
Total	$	17,810			9.0
Intangible liabilities:
Below market lease intangibles	$	(620	)		4.2

1515 Market Street contributed approximately $1,861,000 of revenue and net income of approximately $496,000 to the Trust for the period from February 1, 2013 through March 31, 2013.

The accompanying unaudited pro forma information for the quarters ended March 31, 2013 and 2012 is presented as if the consolidation of 1515 Market Street on February 1, 2013 had occurred on January 1, 2012. This unaudited pro forma information is based upon the historical consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto. This unaudited pro forma information does not purport to represent what the actual results of operations of the Trust would have been had the above occurred, nor do they purport to predict the results of operations of future periods.

Pro forma (unaudited) (In thousands, except for per share data)	For the Three Months Ended March 31,
	2013		2012
Total revenue	$	21,430	$	20,104
Consolidated net income		12,919		7,815
Net income attributable to Winthrop Realty Trust		13,987		8,691
Per common share data - basic		0.34		0.23
Per common share data - diluted		0.34		0.23

WRT-Elad Lender/Equity (Sullivan) – loan modification and equity participation - On February 18, 2013 a forbearance agreement was entered into whereby WRT-Elad Lender agreed to forbear from exercising its rights under the loan documents with respect to the borrower’s failure to pay debt service for the period from December 2012 through October 2013. To the extent such debt service is not paid, debt service will accrue and be added to the outstanding principal balance of the mezzanine loan on each applicable monthly payment date. In exchange for the forbearance, WRT-Elad’s indirect future interest in the property increased by 5%, with a corresponding decrease in the borrower’s general partner’s interest. In consideration for the forbearance, the borrower is required to pay a $1,400,000 fee to WRT-Elad Lender on or prior to November 9, 2013. If the $1,400,000 is not paid, in lieu of the payment, then WRT-Elad’s indirect future interest in the property will increase by an additional 6% with a corresponding decrease to the general partner’s interest.

Andover, Massachusetts – property sale - On March 28, 2013 the Trust sold its Andover, Massachusetts office property to an independent third party for gross sale proceeds of $12,000,000. After costs and pro-rations, the Trust received net proceeds of approximately $11,425,000 and recorded a gain of $2,775,000 on the sale of the property. The results of operations for this property have been classified as discontinued operations for all periods presented in the consolidated financial statements.

Loan Asset Activity:

Playa Vista – loan origination - On January 24, 2013 the Trust originated a $20,500,000 mezzanine loan collateralized by a 260,000 square foot office campus in the Los Angeles, California area. The loan is subordinate to an $80,300,000 mortgage loan, matures January 23, 2015, bears interest at LIBOR plus 14.25% per annum, with a 0.5% LIBOR floor and requires payments of interest only at a rate of 8.25% with the remaining interest being accrued and added to principal. In connection with the origination, the borrower paid to the Trust an origination fee of $205,000. On March 1, 2013 the Trust sold a 50% pari passu participation interest in the loan for $10,250,000 and gave the transferee a credit of $100,000 from the initial loan origination. No gain or loss was recognized on the sale of the interest.

Disney B Note – sale of participation - On January 25, 2013 the Trust sold for $9,000,000 a 100% participation interest in the $10,000,000 B Note collateralized by the office building located in Burbank, California. The selling price was equal to the Trust’s carrying value of the B Note. The Trust retains title to the B Note but the holder of the participation assumes each and every right and obligation of the B Note. The Trust is prohibited from taking any actions with respect to the B Note without written consent from the participation holder. The Trust has recorded this as a sale of the loan and no gain or loss has been recognized on the sale.

RE CDO Management – asset sales - On February 20, 2013 the venture sold its subordinated interests in Sorin CDO III for $2,750,000 and transferred the Sorin CDO III collateral management agreement for $0. On March 8, 2013 the venture sold its C Tranche subordinated interests in Sorin CDO IV for $6,240,000. As a result of the sales, the Trust received distributions of approximately $4,416,000 in the aggregate. The Trust’s share of the gain has been recorded as equity in earnings of this equity investment.

CDH CDO LLC – sale of interest - On February 25, 2013 the Trust sold for $25,000 a 17% interest in the equity of CDH CDO, exclusive of the interest in the entity that holds the collateral management agreement of CDH CDO, to Inland American. As a result of the sale, the Trust now holds a 49.67% interest in CDH CDO. The Trust maintains 100% of CDH CDO’s interest in WRP Management.

127 West 25 ^th Street – loan payoff - On March 1, 2013 the loan collateralized by the property located at 127 West 25th Street, New York, New York was paid off in full at par. There was no gain or loss recognized on the payoff.

180 N Michigan – loan payoff - On March 28, 2013 the loan collateralized by the property located at 180 North Michigan Avenue, Chicago, Illinois was paid off in full at par. There was no gain or loss recognized on the payoff.

Financing Activity:

Recourse Secured Financings – loan payments - During the quarter ended March 31, 2013, several of the condominium units collateralizing the Queensridge loan receivable were sold resulting in principal payments to the Trust of approximately $10,117,000. The Trust made identical principal payments on its recourse debt with KeyBank. As a result of the payments, the outstanding principal balance on the Queensridge loan and the KeyBank recourse secured financing were reduced to $28,976,000 and $13,653,000, respectively, at March 31, 2013.