Real Estate Investments

6 Months Ended

Mar. 31, 2015

Real Estate Investments [Abstract]

REAL ESTATE INVESTMENTS

NOTE 3 – REAL ESTATE INVESTMENTS

Acquisitions

On October 3, 2014, the Company purchased a newly constructed 163,378 square foot industrial building located in Lindale, TX, which is in the Tyler Metropolitan Statistical Area (MSA). The building is 100% net-leased to FedEx Ground Package System, Inc. through June 2024. The purchase price was $10,271,355. The Company obtained a 15 year self-amortizing mortgage of $7,000,000 at a fixed interest rate of 4.57%. Annual rental revenue over the remaining term of the lease is approximately $725,000. In connection with the acquisition, the Company completed its evaluation of the acquired lease. As a result of its evaluation, the Company allocated $341,355 to an Intangible Asset associated with the lease in-place.

On October 10, 2014, the Company purchased a newly constructed 198,773 square foot industrial building located in Sauget, IL, which is in the St. Louis, MO MSA. The building is 100% net-leased to FedEx Ground Package System, Inc. through May 2029. The purchase price was $15,231,000. The Company obtained a 15 year self-amortizing mortgage of $10,660,000 at a fixed interest rate of 4.40%. Annual rental revenue over the remaining term of the lease is approximately $1,036,000. In connection with the acquisition, the Company completed its evaluation of the acquired lease. As a result of its evaluation, the Company allocated $31,000 to an Intangible Asset associated with the lease in-place.

On October 14, 2014, the Company purchased a 38,833 square foot industrial building which was constructed in 2012 and is located in Rockford, IL. The building is 100% net-leased to B/E Aerospace, Inc. through June 2027. The property was acquired, all-cash, for a purchase price of $5,200,000. Annual rental revenue over the remaining term of the lease is approximately $359,000. In connection with the acquisition, the Company completed its evaluation of the acquired lease. As a result of its evaluation, the Company allocated $100,000 to an Intangible Asset associated with the lease in-place.

On November 25, 2014, the Company purchased a newly constructed 158,417 square foot industrial building located in Kansas City, MO. The building is 100% net-leased to Bunzl Distribution Midcentral, Inc. through September 2021. The purchase price was $9,635,770. The Company obtained a 7 year mortgage, of $7,226,828, amortizing over 25 years at a fixed interest rate of 5.18%. Annual rental revenue over the remaining term of the lease is approximately $736,000. In connection with the acquisition, the Company completed its evaluation of the acquired lease. As a result of its evaluation, the Company allocated $35,770 to an Intangible Asset associated with the lease in-place.

On December 12, 2014, the Company purchased a newly constructed 599,840 square foot industrial building located in Frankfort, KY. The building is 100% net-leased to Jim Beam Brands Company through January 2025. The purchase price was $28,000,000. The Company obtained a 10 year mortgage, of $19,600,000 at a fixed interest rate of 4.84% with an amortization schedule as follows: amortizing over 18 years during the first 30 months, amortizing over 14 years during the next 30 months, amortizing over 11 years during the next 30 months and amortizing over 8 years during the final 30 months. Annual rental revenue over the remaining term of the lease is approximately $1,989,000. In connection with the acquisition, the Company completed its evaluation of the acquired lease. As a result of its evaluation, the Company has not allocated any amount to an Intangible Asset.

On February 26, 2015, the Company purchased a newly constructed 297,579 square foot industrial building located in Jacksonville, FL. The building is 100% net-leased to FedEx Ground Package System, Inc. through December 2029. The purchase price was $30,645,954. The Company obtained a 15 year self-amortizing mortgage of $20,000,000 at a fixed interest rate of 3.93%. Annual rental revenue over the remaining term of the lease is approximately $1,992,000. In connection with the acquisition, the Company completed its evaluation of the acquired lease. As a result of its evaluation, the Company has not allocated any amount to an Intangible Asset.

On March 13, 2015, the Company purchased a newly constructed 232,200 square foot industrial building located in Monroe, OH, which is in the Cincinnati, MSA. The building is 100% net-leased to UGN, Inc. through January 2030. The purchase price was $13,416,000. The Company obtained a 15 year self-amortizing mortgage of $8,700,000 at a fixed interest rate of 3.77%. Annual rental revenue over the remaining term of the lease is approximately $1,045,000. In connection with the acquisition, the Company completed its evaluation of the acquired lease. As a result of its evaluation, the Company allocated $479,000 to an Intangible Asset associated with the lease in-place.

FedEx Ground Package System, Inc.’s ultimate parent, FedEx Corporation (FDX), B/E Aerospace, Inc., Bunzl Distribution Midcentral, Inc.’s ultimate parent, Bunzl USA Holdings LLC and Jim Beam Brands Company’s ultimate parent Beam Suntory, Inc. are publicly-owned companies and financial information related to these entities is readily available to the Company’s shareholders.

Expansions

During December 2014, a 62,260 square foot expansion of a building leased to NF&M International, Inc. located in Monaca, PA was completed for a cost of approximately $4,503,000, resulting in a new 10 year lease which extended the current lease expiration date from September 30, 2018 to December 31, 2024. In addition, the expansion resulted in an initial increase in annual rent effective January 1, 2015 from $381,805, or $3.39 per square foot, to $820,000, or $4.69 per square foot. Furthermore, annual rent will increase in year five of the lease to $841,600, or $4.81 per square foot, resulting in an annualized rent over the new ten year period of $830,800, or $4.75 per square foot.

Pro forma information

The following unaudited pro forma condensed financial information has been prepared utilizing the historical financial statements of the Company and the effect of additional revenue and expenses from the properties acquired during fiscal 2015 and 2014, assuming that the acquisitions had occurred as of October 1, 2013, after giving effect to certain adjustments including (a) Rental Revenue adjustments resulting from the straight-lining of scheduled rent increases, (b) Interest Expense resulting from the assumed increase in Mortgage Notes Payable and Loans Payable related to the new acquisitions, and (c) Depreciation Expense related to the new acquisitions. In addition, a portion of the proceeds received from the May 28, 2014 public offering of 8,050,000 shares of the Company’s common stock were used to fund property acquisitions and therefore, the weighted average shares outstanding used in calculating the Basic and Diluted Net Income per Share Attributable to Common Shareholders has been adjusted to account for the portion of the offering proceeds used to fund acquisitions as if the offering had occurred as of October 1, 2013. The unaudited pro forma condensed financial information is not indicative of the results of operations that would have been achieved had the acquisitions reflected herein been consummated on the dates indicated or that will be achieved in the future.

	Three Months Ended		Six Months Ended
	3/31/2015	3/31/2014	3/31/2015	3/31/2014
Rental Revenues	$16,798,500	$16,438,200	$32,822,600	$32,823,400
Net Income Attributable to Common
Shareholders	$2,831,300	$3,156,800	$5,923,300	$5,817,800
Basic and Diluted Net Income per Share Attributable to Common Shareholders	$0.05	$0.06	$0.11	$0.11

Tenant Concentration

The Company has a concentration of FDX and FDX subsidiary-leased properties consisting of forty-six separate stand-alone leases covering approximately 5,611,000 square feet as of March 31, 2015 and forty-two separate stand-alone leases covering approximately 4,450,000 square feet as of March 31, 2014. The percentage of FDX leased square footage to the total of the Company’s rental space was 43% (7% to FDX and 36% to FDX subsidiaries) as of March 31, 2015 and 42% (9% to FDX and 33% to FDX subsidiaries) as of March 31, 2014. No other tenant accounted for 5% or more of the Company’s total rental space as of March 31, 2015. The only tenants that leased 5% or more of the Company’s total square footage as of March 31, 2014 were FDX and its subsidiaries; Milwaukee Electric Tool Corporation, which leases approximately 615,300 square feet and was 6% of the Company’s rental space; and Ralcorp Holdings, Inc., which leases approximately 558,600 square feet and was 5% of the Company’s rental space.

Annualized Rental and Reimbursement Revenue from FDX and its subsidiaries is estimated to be approximately 55% (9% to FDX and 46% to FDX subsidiaries) of total Rental and Reimbursement Revenue for fiscal 2015 and was 53% (10% to FDX and 43% to FDX subsidiaries) for fiscal 2014. No other tenant accounted for 5% or more of the Company’s total Rental and Reimbursement revenue for the three and six months ended March 31, 2015 and 2014.