UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2012
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the Transition Period from to .
Commission file number333-154975
TNP STRATEGIC RETAIL TRUST, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 90-0413866 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
4695 MacArthur Court, Suite Newport Beach, California | 92660 | |
| (Address of principal executive offices) | (Zip Code) |
(949) 833-8252
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
None
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:
Common Stock, $0.01 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o¨ No þx
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o¨ No þx
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þx No o¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K. ¨o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” inRule 12b-2 of the Exchange Act (check one):
Large accelerated filer | Accelerated filer ¨ | |||||
| Non-accelerated filer | Smaller reporting company x | |||||
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o¨ No þx
There is no established trading market for the registrant’s common stock and therefore the aggregate market value of the registrant’s common stock held by non-affiliates cannot be determined.
As of March 26, 2010,22, 2013, there were 908,31810,969,714 outstanding shares of common stock of TNP Strategic Retail Trust, Inc.
TABLE OF CONTENTS
Explanatory Note | 1 | |||||||
| PART III | ||||||||
| Directors, Executive Officers and Corporate Governance | 2 | |||||||
| Item | Executive Compensation | 5 | ||||||
| Item | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 7 | ||||||
| Item | Certain Relationships and Related Transactions and Director Independence | 8 | ||||||
| Item | Principal Accountant Fees and Services | 16 | ||||||
i
| December 31, | December 31, | |||||||
Selected Financial Data | 2009 | 2008 | ||||||
| BALANCE SHEET DATA: | ||||||||
| Total assets | $ | 15,605,000 | $ | 202,000 | ||||
| Total liabilities | $ | 12,317,000 | $ | — | ||||
| Total equity | $ | 3,288,000 | $ | 202,000 | ||||
| (Date of Inception) | ||||||||
| Year Ended | through | |||||||
| December 31, | December 31, | |||||||
| 2009 | 2008 | |||||||
| STATEMENT OF OPERATIONS DATA: | ||||||||
| Total revenues | $ | 145,000 | — | |||||
| Total expenses | $ | (1,228,000 | ) | — | ||||
| Other income and expense | $ | (117,000 | ) | |||||
| Net loss | $ | (1,200,000 | ) | — | ||||
| STATEMENT OF CASH FLOWS DATA: | ||||||||
| Net cash used in operating activities | $ | (1,047,000 | ) | $ | (1,000 | ) | ||
| Net cash used in investing activities | $ | (12,500,000 | ) | $ | — | |||
| Net cash provided by financing activities | $ | 14,452,000 | $ | 202,000 | ||||
1
2
3
| PART IV | ||
4
5
6
7
| Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | 2010 | 2011-2012 | 2013-2014 | Thereafter | |||||||||||||||
| Long-term debt obligations(1) | $ | 10,490,000 | 120,000 | 9,120,000 | — | 1,250,000 | ||||||||||||||
| Interest payments on outstanding debt obligations(2) | 1,508,000 | 605,000 | 616,000 | 200,000 | 87,000 | |||||||||||||||
| Total | $ | 11,998,000 | 725,000 | 9,376,000 | 200,000 | 1,337,000 | ||||||||||||||
8
9
10
| Net Loss | $ | (1,200,000 | ) | |
| Add: | ||||
| Depreciation and amortization of real estate assets | 46,000 | |||
| FFO | (1,154,000 | ) | ||
| Add: | ||||
| Acquisition expenses | 408,000 | |||
| Adjusted FFO | $ | (746,000 | ) | |
11
12
| Item 15. | Exhibits and Financial Statement Schedules |
| 3 | .1 | Articles of Amendment and Restatement of TNP Strategic Retail Trust, Inc. (filed as Exhibit 3.1 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 3 | .2 | Bylaws of TNP Strategic Retail Trust, Inc. (filed as Exhibit 3.2 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 4 | .1 | Form of Subscription Agreement (included as Appendix C to prospectus, incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 6 to the Company’s Registration Statement onForm S-11(No. 333-154975)). | ||
| 4 | .2 | TNP Strategic Retail Trust, Inc. Distribution Reinvestment Plan (included as Appendix D to prospectus, incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 6 to the Company’s Registration Statement onForm S-11(No. 333-154975)). | ||
| 10 | .1 | Escrow Agreement among TNP Strategic Retail Trust, Inc., TNP Securities, LLC and CommerceWest Bank, N.A. (filed as Exhibit 10.1 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .2 | Advisory Agreement among TNP Strategic Retail Trust, Inc., TNP Strategic Retail Operating Partnership, LP and TNP Strategic Retail Advisor, LLC (filed as Exhibit 10.2 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .3 | Limited Partnership Agreement of TNP Strategic Retail Operating Partnership, LP (filed as Exhibit 10.3 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .4 | TNP Strategic Retail Trust, Inc. 2009 Long-Term Incentive Plan (filed as Exhibit 10.4 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). |
13
| 10 | .5 | TNP Strategic Retail Trust, Inc. Amended and Restated Independent Directors Compensation Plan (filed as Exhibit 10.5 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .6 | Dealer Manager Agreement (filed as Exhibit 1.1 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .7 | Purchase and Sale Agreement (relating to the acquisition of the Moreno Marketplace), dated September 22, 2009, by and between Moreno Marketplace, LLC and Bill and John Skeffington (filed as Exhibit 10.1 to the Current Report onForm 8-K filed with the SEC on November 24, 2009). | ||
| 10 | .8 | Assignment of Purchase and Sale Agreement (relating to the acquisition of the Moreno Marketplace), dated October 21, 2009 (filed as Exhibit 10.2 to the Current Report onForm 8-K filed with the SEC on November 24, 2009). | ||
| 10 | .9 | Assignment of Purchase and Sale Agreement (relating to the acquisition of the Moreno Marketplace), dated November 9, 2009 (filed as Exhibit 10.3 to the Current Report onForm 8-K filed with the SEC on November 24, 2009). | ||
| 10 | .10 | Promissory Note between TNP SRT Moreno Marketplace, LLC and KeyBank National Association, dated November 12, 2009 (filed as Exhibit 10.9 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .11 | Subordinated Convertible Promissory Note between TNP SRT Moreno Marketplace, LLC and Moreno Retail Partners, LLC, dated November 18, 2009 (filed as Exhibit 10.10 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .12 | Guaranty, dated November 12, 2009, by and between TNP Strategic Retail Trust, Inc. and Anthony W. Thompson, for the benefit of KeyBank National Association (filed as Exhibit 10.11 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .13 | Environmental Indemnity Agreement, dated November 12, 2009, by and among TNP SRT Moreno Marketplace, LLC, TNP Strategic Retail Trust, Inc., Moreno Retail Partners, LLC, John Skeffington, William Skeffington and KeyBank National Association (filed as Exhibit 10.12 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .14 | Reimbursement and Fee Agreement, dated November 20, 2009, by and among TNP SRT Moreno Marketplace, LLC, TNP Strategic Retail Trust, Inc. and Anthony W. Thompson (filed as Exhibit 10.13 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .15 | Revolving Credit Agreement, dated November 12, 2009, by and among TNP Strategic Retail Operating Partnership, LP, TNP Strategic Retail Trust, Inc. and KeyBank National Association (filed as Exhibit 10.14 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .16 | Revolving Credit Note of TNP Strategic Retail Operating Partnership, LP, dated November 12, 2009, in favor of KeyBank National Association (filed as Exhibit 10.15 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .17 | Guaranty Agreement, dated November 12, 2009, by and among TNP Strategic Retail Trust, Inc., Thompson National Properties, LLC and Anthony W. Thompson, for the benefit of KeyBank National Association (filed as Exhibit 10.16 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). |
14
| 10 | .18 | Pledge and Security Agreement, dated November 12, 2009, by and between TNP Strategic Retail Trust, Inc. and KeyBank National Association (filed as Exhibit 10.17 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .19 | Pledge and Security Agreement, dated November 12, 2009, by and between TNP Strategic Retail Operating Partnership, LP and KeyBank National Association (filed as Exhibit 10.18 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .20 | Reimbursement Agreement, dated November 12, 2009, by and between TNP Strategic Retail Operating Partnership, LP and Anthony W. Thompson (filed as Exhibit 10.19 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .21 | Reimbursement and Fee Agreement, dated November 12, 2009, by and between TNP Strategic Retail Operating Partnership, LP and Thompson National Properties, LLC (filed as Exhibit 10.20 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 1 to the Company’s Registration Statement onForm S-11(No. 333-154975) and incorporated herein by reference). | ||
| 10 | .22* | Agreement for Purchase and Sale and Joint Escrow Instructions, dated July 13, 2009, by and between West Oahu Mall Associates, LLC and TNP Acquisitions, LLC. | ||
| 10 | .23* | Assignment and Assumption Agreement, dated December 14, 2009, by and between TNP Acquisitions, LLC and TNP SRT Waianae Mall, LLC. | ||
| 10 | .24* | First Amendment of Agreement of Purchase and Sale and Joint Escrow Instructions, dated July 22, 2009, by and among West Oahu Mall Associates, LLC, TNP Acquisitions, LLC and Title Guaranty Escrow Services, Inc. | ||
| 10 | .25* | Second Amendment of Agreement of Purchase and Sale and Joint Escrow Instructions, dated August 13, 2009, by and among West Oahu Mall Associates, LLC, TNP Acquisitions, LLC and Title Guaranty Escrow Services, Inc. | ||
| 10 | .26* | Third Amendment of Agreement of Purchase and Sale and Joint Escrow Instructions, dated August 31, 2009, by and among West Oahu Mall Associates, LLC, TNP Acquisitions, LLC and Title Guaranty Escrow Services, Inc. | ||
| 10 | .27* | Tenth Amendment of Agreement of Purchase and Sale and Joint Escrow Instructions, dated March 10, 2010, by and among West Oahu Mall Associates, LLC, TNP SRT Waianae Mall, LLC and Title Guaranty Escrow Services, Inc. | ||
| 21 | * | Subsidiaries of the Company | ||
| 31 | .1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
| 31 | .2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
| 32 | .1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
| 32 | .2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
15
F-1
On April 1, and Note 7,
F-2
| December 31, | December 31, | |||||||
| 2009 | 2008 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 1,106,000 | $ | 201,000 | ||||
| Prepaid expenses and other assets | 360,000 | — | ||||||
| Accounts receivable | 11,000 | 1,000 | ||||||
| Investments in real estate | ||||||||
| Land | 3,080,000 | — | ||||||
| Building and improvements | 6,124,000 | — | ||||||
| Tenant improvements | 656,000 | — | ||||||
| 9,860,000 | — | |||||||
| Accumulated depreciation | (28,000 | ) | — | |||||
| Total investments in real estate, net | 9,832,000 | — | ||||||
| Acquired lease intangibles, net | 2,617,000 | — | ||||||
| Deferred costs | ||||||||
| Organization and offering | 1,425,000 | — | ||||||
| Financing fees, net | 254,000 | — | ||||||
| Total deferred costs, net | 1,679,000 | — | ||||||
| Total | $ | 15,605,000 | $ | 202,000 | ||||
| LIABILITIES AND EQUITY | ||||||||
| LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 326,000 | $ | — | ||||
| Amounts due to affiliates | 1,489,000 | — | ||||||
| Other liabilities | 12,000 | — | ||||||
| Notes payable | 10,490,000 | — | ||||||
| Total liabilities | 12,317,000 | — | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
EQUITY | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $0.01 par value per share; 50,000,000 shares authorized; none issued and outstanding | — | — | ||||||
| Common stock, $0.01 par value per share; 400,000,000 shares authorized; 524,752 issued and outstanding at December 31, 2009, 22,222 issued and outstanding at December 31, 2008 | 5,000 | — | ||||||
| Additional paid-in capital | 4,512,000 | 200,000 | ||||||
| Accumulated deficit | (1,231,000 | ) | — | |||||
| Total stockholders’ equity | 3,286,000 | 200,000 | ||||||
| Noncontrolling interest | 2,000 | 2,000 | ||||||
| Total equity | 3,288,000 | 202,000 | ||||||
| TOTAL | $ | 15,605,000 | $ | 202,000 | ||||
F-3
| Period from | ||||||||
| September 18, | ||||||||
| 2008 | ||||||||
| (date of inception) | ||||||||
| Year Ended | through | |||||||
| December 31, | December 31, | |||||||
| 2009 | 2008 | |||||||
Revenue: | ||||||||
| Rental | $ | 140,000 | $ | — | ||||
| Other | 5,000 | — | ||||||
| 145,000 | — | |||||||
Expense: | ||||||||
| General and administrative | 660,000 | — | ||||||
| Acquisition expenses | 408,000 | — | ||||||
| Operating and maintenance | 114,000 | — | ||||||
| Depreciation and amortization | 46,000 | — | ||||||
| 1,228,000 | — | |||||||
Loss before other income (expenses) | (1,083,000 | ) | — | |||||
Other income and expense: | ||||||||
| Interest income | 2,000 | — | ||||||
| Interest expense | (119,000 | ) | — | |||||
Net loss | $ | (1,200,000 | ) | $ | — | |||
| Net loss per share — basic and diluted | $ | (17.14 | ) | $ | — | |||
| Weighted average number of common shares outstanding — basic and diluted | 71,478 | 22,222 | ||||||
| Distributions declared ($0.11 per share) | $ | 31,000 | $ | — | ||||
F-4
| Number | Par | Additional Paid-In | Accumulated | Stockholders’ | Non-controlling | |||||||||||||||||||||||
| of Shares | Value | Capital | Deficit | Equity | Interest | Total Equity | ||||||||||||||||||||||
BALANCE — September 18, 2008 (date of inception) | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Issuance of common stock | 22,222 | — | 200,000 | — | 200,000 | — | 200,000 | |||||||||||||||||||||
| Contributions from non-controlling interest | — | — | — | — | — | 2,000 | 2,000 | |||||||||||||||||||||
BALANCE — December 31, 2008 | 22,222 | — | 200,000 | — | 200,000 | 2,000 | 202,000 | |||||||||||||||||||||
| Issuance of common stock | 486,815 | 5,000 | 4,797,000 | — | 4,802,000 | — | 4,802,000 | |||||||||||||||||||||
| Offering costs | — | — | (542,000 | ) | — | (542,000 | ) | — | (542,000 | ) | ||||||||||||||||||
| Issuance of vested and non-vested restricted common stock | 15,000 | — | 135,000 | — | 135,000 | — | 135,000 | |||||||||||||||||||||
| Deferred stock compensation | — | — | (85,000 | ) | — | (85,000 | ) | — | (85,000 | ) | ||||||||||||||||||
| Issuance of common stock under DRIP | 715 | — | 7,000 | — | 7,000 | — | 7,000 | |||||||||||||||||||||
| Distributions | — | — | — | (31,000 | ) | (31,000 | ) | — | (31,000 | ) | ||||||||||||||||||
| Net loss | — | — | — | (1,200,000 | ) | (1,200,000 | ) | — | (1,200,000 | ) | ||||||||||||||||||
BALANCE — December 31, 2009 | 524,752 | $ | 5,000 | $ | 4,512,000 | $ | (1,231,000 | ) | $ | 3,286,000 | $ | 2,000 | $ | 3,288,000 | ||||||||||||||
F-5
| Period from | ||||||||
| September 18, | ||||||||
| 2008 | ||||||||
| (date of inception) | ||||||||
| Year Ended | through | |||||||
| December 31, | December 31, | |||||||
| 2009 | 2008 | |||||||
Cash flows from operating activities: | ||||||||
| Net loss | $ | (1,200,000 | ) | $ | — | |||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of deferred financing costs | 39,000 | — | ||||||
| Depreciation and amortization | 46,000 | — | ||||||
| Stock based compensation, | 50,000 | — | ||||||
| Amortization of above market leases | 4,000 | — | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (10,000 | ) | (1,000 | ) | ||||
| Amounts due to affiliates | 64,000 | — | ||||||
| Prepaid expenses and other assets | (360,000 | ) | — | |||||
| Accounts payable and accrued expenses | 308,000 | — | ||||||
| Other liabilities | 12,000 | — | ||||||
| Net cash used in operating activities | (1,047,000 | ) | (1,000 | ) | ||||
Cash flows from investing activities: | ||||||||
| Investments in real estate | (9,861,000 | ) | — | |||||
| Acquired lease intangibles | (2,639,000 | ) | — | |||||
| Net cash used in investing activities | (12,500,000 | ) | — | |||||
Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock | 4,802,000 | 200,000 | ||||||
| Distributions | (6,000 | ) | — | |||||
| Contributions from noncontrolling interests | — | 2,000 | ||||||
| Payment of offering costs | (542,000 | ) | — | |||||
| Proceeds from notes and loan payables | 11,126,000 | — | ||||||
| Repayment of notes and loan payable | (636,000 | ) | — | |||||
| Payment of deferred financing costs | (292,000 | ) | — | |||||
| Net cash provided by financing activities | 14,452,000 | 202,000 | ||||||
| Net increase in cash | 905,000 | 201,000 | ||||||
| Cash and cash equivalents — Beginning of the period | 201,000 | — | ||||||
| Cash and cash equivalents — End of the period | $ | 1,106,000 | $ | 201,000 | ||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Deferred organization and offering costs due to affiliates | $ | 1,425,000 | $ | — | ||||
| Issuance of common stock under the DRIP | $ | 7,000 | $ | — | ||||
| Distributions declared but not paid | $ | 18,000 | $ | — | ||||
| Cash paid for interest | $ | 22,000 | $ | — | ||||
F-6
F-7
| As | ||||||||
| previously | As | |||||||
| Consolidated Balance Sheet | reported | corrected | ||||||
| Total liabilities | $ | 12,447,000 | $ | 12,317,000 | ||||
| Total equity | $ | 3,158,000 | $ | 3,288,000 | ||||
Consolidated Statement of Operations | ||||||||
| Other expense | $ | (130,000 | ) | $ | — | |||
| Net loss | $ | (1,330,000 | ) | $ | (1,200,000 | ) | ||
| Loss per share — basic and diluted | $ | (19.17 | ) | $ | (17.14 | ) | ||
Consolidated Statement of Equity | ||||||||
| Net loss | $ | (1,330,000 | ) | $ | (1,200,000 | ) | ||
| Accumulated Deficit | $ | (1,361,000 | ) | $ | (1,231,000 | ) | ||
Consolidated Statement of Cash Flows | ||||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (1,330,000 | ) | $ | (1,200,000 | ) | ||
| Change in other liabilities | $ | 142,000 | $ | 12,000 | ||||
F-8
The information included in this Amendment No. 1 has not been updated to reflect other events occurring after the filing of the Original Form 10-K or to modify or update those disclosures in the Original Form 10-K affected by subsequent events. Accordingly, this Form 10-K/A should be read in conjunction with the Original Form 10-K. In addition, pursuant to the rules of the SEC, this Amendment No. 1 contains currently-dated certifications from the Company’s Co-Chief Executive Officers and Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
PART III
ITEM 10.Directors, Executive Officers and Corporate Governance
Directors
Our current directors and executive officers and their respective ages and positions are listed below:
| Name | Age | Position |
| Anthony W. Thompson | 66 | Chairman of the Board, President and Co-Chief Executive Officer |
| K. Timothy O’Brien | 66 | Co-Chief Executive Officer |
| Dee R. Balch | 49 | Chief Financial Officer, Treasurer , Secretary and Director |
| John B. Maier II | 51 | Independent Director |
| Phillip I. Levin | 73 | Independent Director |
| Jeffrey S. Rogers | 44 | Independent Director |
Anthony W. Thompsonhas served as the chairman of our board of directors since September 2008, as our Co-Chief Executive Officer since November 2012 and as our President since February 2012. Mr. Thompson served as our Chief Executive Officer from September 2008 to November 2012. Mr. Thompson also serves as Chief Executive Officer of Thompson National Properties, LLC (our “sponsor” or “TNP LLC”), TNP Strategic Retail Trust, Inc. and Subsidiaries
Our board of directors, excluding Mr. Thompson, has determined that Mr. Thompson is qualified to serve as an increaseone of our directors due to rental revenue overhis extensive experience overseeing similar non-listed REITs, including the remaining initial lease termselection, negotiation, and any fixed rate renewal periods, if applicable.
K. Timothy O’Brien has served as our Co-Chief Executive Officer since November 2012. Mr. O’Brien has served as the amountExecutive Vice President, Real Estate of costs assigned to individualTNP LLC, our sponsor, since June 2011. His roles at TNP LLC have included positioning and managing the sale of investment parcels in the Company’s portfolio, acquiring and selling single tenant properties under its Delaware Statutory Trust program and related corporate real estate functions. Mr. O’Brien was a founding shareholder of TNP LLC and has served on its Advisory Committee since 2008. Mr. O’Brien was a founding shareholder of Triple Net Properties, Inc. (“NNN”) in multiple property acquisitions. These allocations also impact depreciation expense1998 and gains or losses recordedserved on future salesits Advisory Committee. Mr. O’Brien served on the board of properties.
F-9
F-10
Dee R. Balch has served as our Chief Financial Officer, Treasurer and Secretary since August 2012 and as a REIT, it may be subjectmember of our board of directors since July 2012. Ms. Balch is a Certified Public Accountant with more than 20 years of accounting, reporting and real estate experience. Prior to certain statejoiningTNP LLC in April 2012, Ms. Balch served from January 2010 to February 2012 as Senior Vice President, Finance and local taxes on its incomeAccounting for Buchanan Street Partners, a real estate investment management company. Ms. Balch’s career also includes 14 years with Ernst and property,Young LLP, a major international public accounting firm, from 1996 to 2010 with her last position there as Executive Director overseeing the assurance practice. Ms. Balch’s past experience also includes serving as the internal auditor for Florida Power & Light Company, a large publicly-traded Florida utility company, as a senior auditor for KPMG Peat Marwick, and federal incomeas a financial analyst for Citicorp Savings based in Miami, Florida. Ms. Balch earned a Bachelor of Science in Systems Analysis and excise taxes on its undistributed income.
F-11
Our board of directors, excluding Ms. Balch, has determined that we estimateMs. Balch is qualified to serve as one of our directors due to her experience serving as a Chief Financial Officer and her over20 years of real estate, accounting and SEC reporting experience.
John B. Maier II, has served as one of our independent directors since October 2012. Mr. Maier is Head of Investment Banking at Headwaters|MB LLC. He joined Headwaters when Headwaters acquired Legacy Ptrs. & Co, LLC, an investment bank focused on the middle market. Prior to re-forming Legacy in this analysis include projected rental rates, capital expenditures2010, Mr. Maier was Co-Head of Mergers and property sales capitalization rates. Additionally,Acquisitions and Financial Sponsors at FBR Capital Markets, where he was part of the successful 144A offering of Triple Net. He joined FBR in 2007 when FBR acquired Legacy Partners Group, LLC founded by Mr. Maier in 2003. Prior to launching Legacy, Mr. Maier was Global Co-Head of Middle Market M&A at Credit Suisse First Boston. He joined Credit Suisse when it acquired Donaldson, Lufkin & Jenrette (“DLJ”) where Mr. Maier was a property classifiedpartner. At DLJ he helped build and then led the firm’s Exclusive Sales Group, which became one of the most successful middle market sell-side advisory practices on Wall Street. Prior to joining DLJ, Mr. Maier was with Wasserstein Perella & Co. in their Los Angeles office, where he launched that firm’s Global Logistics and Outsourcing Practice. He subsequently helped start Wasserstein’s San Francisco banking effort and its West Coast Technology Practice. Mr. Maier graduated from Wake Forest University. He received his MBA with the distinction University Fellow from Georgetown University.
Our board of directors, excluding Mr. Maier, has determined that Mr. Maier is qualified to serve as held for sale is carried at the lowerone of carrying cost or estimated fair value, less estimated costour directors due to sell.
Phillip I. Levinhas served as one of our independent directors since April 2011. Mr. Levin has served since 1991 as President of Levin Development Company, a real estate development and consulting firm. Prior to founding Levin Development Company in 2009 or 2008.
Our board of directors, excluding Mr. Levin, has determined that Mr. Levin is qualified to serve as one of our directors due to his experience as an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. We do not expect such standard will have a significant impact on our financial statements as it relates to existing entities we have an ownership interest in.
Jeffrey S. Rogershas served as one of our independent directors since March 2009. Mr. Rogers is currently the head of Zazma, Inc., an online payment services company. Prior to joining Zazma, Mr. Rogers served as President, and Chief Operating Officer from February 2005 until September 2012 and as Chief Operating Officer between February 2004 and February 2005 of Integra Realty Resources, Inc., a commercial real estate valuation and counseling firm, where he oversaw corporate operations, technology and software initiatives, and all aspects of financial reporting and audit procedures. Prior to joining Integra Realty Resources, Inc. in February 2004, Mr. Rogers worked from November 2002 to February 2004 as a consultant for Regeneration, LLC, a management consulting firm. Between September 1999 and November 2002, Mr. Rogers held various positions at ReturnBuy, Inc., a technology and software solutions company, including President of ReturnBuy Ventures, a division of ReturnBuy, Inc., between August 2001 and November 2002, Chief Financial Officer between September 1999 and August 2001 and member of the Board of Directors between September 1999 and August 2001. In January 2003, ReturnBuy, Inc. filed for Chapter 11 bankruptcy as part of a restructuring transaction in which it was acquired by Jabil Circuit, Inc. Mr. Rogers currently serves on the board of directors of Presidential Realty Corp., a quoted market pricepublic REIT. Mr. Rogers has also served on the Finance Committee of the Young Presidents Organization since March 2009 and as Audit Committee Chairman from July 2010 to July 2012. Mr. Rogers earned a Master of Business Administration degree from The Darden School, University of Virginia in Charlottesville, Virginia, a Juris Doctorate degree from Washington and Lee University School of Law in Lexington, Virginia and a Bachelor of Arts degree in Economics from the Washington and Lee University.
Our board of directors, excluding Mr. Rogers, has determined that Mr. Rogers is qualified to serve as one of our directors due to his previous leadership position with a commercial real estate valuation and counseling firm and his professional experience as an active market for the identical liabilityattorney. In addition, our board of directors believes that Mr. Rogers is not available, a reporting entity is requiredqualified to measure fair value by using either (1) a valuation technique that uses quoted prices for identical or similar liabilities or (2) another valuation technique, suchserve as a present value technique ormember of the Audit Committee due to his extensive experience with financial reporting as a technique that is based onformer Chief Financial Officer.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the amount paid or received by the reporting entity to transfer an identical liability. ASUNo. 2009-05 only applies toSecurities Exchange Act of 1934 (the “Exchange Act”) requires our disclosures in note 5 related to the estimated fair valuedirectors and executive officers, and any persons beneficially owning more than 10% of our notes payable and did not have a significant impact on our footnote disclosures.
F-12
| Land | $ | 3,080,000 | ||
| Building & improvements | 6,124,000 | |||
| Tenant improvements | 656,000 | |||
| $ | 9,860,000 | |||
| Acquired lease intangibles | $ | 2,640,000 | ||
| $ | 12,500,000 | |||
| 2010 | $ | 1,062,000 | ||
| 2011 | 1,064,000 | |||
| 2012 | 1,067,000 | |||
| 2013 | 1,073,000 | |||
| 2014 | 1,055,000 | |||
| Thereafter | 14,077,000 | |||
| $ | 19,398,000 | |||
F-13
| Lease commissions | $ | 1,169,000 | ||
| Above market leases | 247,000 | |||
| Leases in place | 1,167,000 | |||
| Marketing costs | 57,000 | |||
| $ | 2,640,000 | |||
| Accumulated amortization | (23,000 | ) | ||
| Acquired lease intangibles, net | $ | 2,617,000 | ||
| 2010 | $ | 181,000 | ||
| 2011 | 181,000 | |||
| 2012 | 181,000 | |||
| 2013 | 181,000 | |||
| 2014 | 164,000 | |||
| Thereafter | 1,729,000 | |||
| $ | 2,617,000 | |||
| Financing fees | $ | 293,000 | ||
| Accumulated amortization | (39,000 | ) | ||
| 254,000 | ||||
| Organization and offering | 1,425,000 | |||
| Deferred costs, net | $ | 1,679,000 | ||
| 2010 | $ | 214,000 | ||
| 2011 | 40,000 | |||
| 2012 | — | |||
| 2013 | — | |||
| 2014 | — | |||
| Thereafter | — | |||
| $ | 254,000 | |||
F-14
In 2012, no person held more than 10% of our outstanding shares of common stock.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics, or the numberCode of sharesEthics, which contains general guidelines for conducting our business and is designed to help directors, employees and independent consultants resolve ethical issues in an increasingly complex business environment. The Code of any class or series that the Company has authorityEthics applies to issue.
Audit Committee
Our board of directors reserveshas a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the rightExchange Act. The Audit Committee meets on a regular basis, at least quarterly and more frequently as necessary. The Audit Committee’s primary function is to reject any redemption request for any reason or no reasonassist our board of directors in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the stockholders and others, the system of internal controls which management has established and the audit and financial reporting process. The current members of the Audit Committee are Phillip I. Levin, Jeffrey S. Rogers and John B. Maier II, each of whom is an independent director. Mr. Levin is the designated Audit Committee financial expert and the chairman of the Audit Committee. The Audit Committee operates under a written charter, which was adopted by our board of directors on April 14, 2009.
Special Committee
Our board of directors has established a Special Committee comprised of our three independent directors. The Special Committee has the maximum power delegable to a committee of our board of directors under Maryland law and has the authority to (1) engage its own financial and legal advisors, (2) execute, deliver and file or to amendcause to be executed, delivered and filed all agreements, documents and instruments in our name and on our behalf as the special committee may deem necessary, convenient or terminateappropriate, (3) expend money on our behalf, and (4) to the share redemption programmaximum extent permitted by applicable law, keep private from our board of directors and our officers the minutes of its meetings and other matters.
| 4 |
ITEM 11.Executive Compensation
Executive Officer Compensation
Historically, none of our executive officers have been employed by us or received any compensation from us in exchange for their service as our executive officers. However, effective August 29, 2012, Peter K. Kompaniez resigned from his position as a member of our board of directors and was appointed as our Co-Chief Executive Officer in a consulting capacity. Mr. Kompaniez received compensation from us for performing his duties as an executive officer until he resigned his position effective October 9, 2012.
In addition, effective November 3, 2012, we entered into an employment arrangement with Dee R. Balch as our Chief Financial Officer, Treasurer and Secretary. Prior to this time, beginning on August 15, 2012, Ms. Balch was employed by our advisor and was not compensated by us for serving as our Chief Financial Officer. Ms. Balch receives an annual base salary of $190,000. As discussed below, Ms. Balch is also eligible to receive a retention bonus and an individual performance bonus based upon her service through April 30, 2013. Ms. Balch’s employment is at will and she is not entitled to any time.
We did not employ or pay compensation to any other of our executive officers in 2012.
Summary Compensation Table
The following table sets forth certain information regarding the compensation paid to our Chief Financial Officer and Co-Chief Executive Officer for the year ended December 31, 20092012. We had no employees and for the period from September 18, 2008 (datepaid no compensation to any of inception) to December 31, 2008, the Company’s did not repurchaseour executive officers during any shares of its common stock pursuant to the share redemption program.
| Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | Non-equity incentive plan compensation | All other compensation | Total | ||||||||||||||||||||||||
| Dee R. Balch – Chief Financial Officer, Treasurer and Secretary (1) | 2012 | $ | 21,924 | $ | — | (2) | $ | — | $ | — | $ | — | $ | — | $ | 21,924 | ||||||||||||||||
| Peter K. Kompaniez – Former Co-Chief Executive Officer (3) | 2012 | — | — | — | — | — | 11,794 | 11,794 | ||||||||||||||||||||||||
| (1) | The table above reflects the compensation that Ms. Balch received from us in exchange for her service as our Chief Financial Officer subsequent to November 2, 2012. As indicated above, prior to that date, Ms. Balch was employed by our advisor and was not compensated by us. |
| (2) | Pursuant to her employment arrangement, Ms. Balch is eligible to receive (1) a retention bonus equal to 20% of her base annual salary (i.e., $38,000) provided that she remains employed by us as of April 30, 2013, and (2) a performance bonus equal to up to 30% of her base annual salary (i.e., $57,000) based upon her individual performance through April 30, 2013, as assessed by our audit committee. As of the date hereof, the retention bonus has not yet been paid and the amount of the performance bonus has not been determined. Ms. Balch did not receive a bonus during 2012. |
| (3) | Peter K. Kompaniez was appointed our Co-Chief Executive Officer, in a consulting capacity, effective August 29, 2012, and resigned from his position effective October 9, 2012. The table above reflects the consulting fees paid to Mr. Kompaniez for the period he served as our Co-Chief Executive Officer. As indicated below, Mr. Kompaniez also received compensation as a member of our board of directors prior to his appointment as our Co-Chief Executive Officer. |
| 5 |
Director Compensation
If a director is also one of our executive officers or an affiliate of our advisor, we do not pay any compensation to that person for services rendered to us as a director. The Company adopted a distribution reinvestment plan (the “DRIP”), which that allows stockholdersamount and form of compensation payable to purchase additional shares of common stock through the reinvestment of distributions, subjectour independent directors for their service to certain conditions. The Company registered and reserved 10,526,316 shares of its common stock for sale pursuant to the DRIP in its public offering. As of December 31, 2009 $7,000 in distributions were reinvested and 715 shares of common stock were issued under the DRIP.
The commencement offollowing table sets forth the distribution was subjectcompensation paid to our having achieved minimum offering proceeds of $2,000,000, the sale of a sufficient number of sharesdirectors in our public offering to finance an asset acquisition and our identification and completion of an asset acquisition. On November 12, 2009, we achieved the minimum offering amount $2,000,000, and on November 19, 2009 we completed our first asset acquisition, thus satisfying all of the conditions for the commencement of the monthly distribution. On November 30, 2009, we declared a monthly distribution in the aggregate amount of $7,000 of which $6,000 was paid in cash on December 15, 2009 and $1,000 was paid through our distribution reinvestment plan in the form of additional shares issued on November 30, 2009.
F-15
| Name | Fees Earned or Paid in Cash(1) | Stock Grants(2) | All Other Compensation | Total | ||||||||||||
| Anthony W. Thompson | $ | — | $ | — | $ | — | $ | — | ||||||||
| Jack R. Maurer (3) | — | — | — | — | ||||||||||||
| James R. Wolford (4) | — | — | — | — | ||||||||||||
| Dee R. Balch (5) | — | — | — | — | ||||||||||||
| John B. Maier II (6) | 27,500 | 45,000 | — | 72,500 | ||||||||||||
| Phillip I. Levin | 118,000 | 22,500 | — | 140,500 | ||||||||||||
| Jeffrey S. Rogers | 119,000 | 22,500 | — | 141,500 | ||||||||||||
| Peter K. Kompaniez (7) | 70,000 | 22,500 | — | 92,500 |
| (2) | Reflects grants of shares of restricted common stock pursuant to our incentive award plan. The amounts shown in this column reflect the aggregate fair value computed as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. On July 18, 2012, 2,500 shares of restricted stock with a per share fair value of $9.00 and an aggregate grant date fair value of $22,500 were granted to each of Mr. Levin, Mr. Rogers and Mr. Kompaniez. On October 2, 2012, 5,000 shares of restricted stock with a per share fair value of $9.00 and an aggregate grant date fair value of $45,000 were granted to Mr. Maier. |
| (3) | Jack R. Maurer resigned from our board of directors effective as of February 3, 2012. |
| (4) | James R. Wolford resigned from our board of directors effective July 27, 2012. |
| (5) | Dee R. Balch was appointed to our board of directors effective July 27, 2012. Ms. Balch is also our Chief Financial Officer, Treasurer and Secretary, and is not entitled to receive compensation as a director. The compensation received by Ms. Balch as our Chief Financial Officer is set forth above under “Executive Officer Compensation.” |
| (6) | John B. Maier II was appointed to our board of directors effective as of October 2, 2012. |
| (7) | Peter K. Kompaniez resigned from our board of directors and was appointed as our Co-Chief Executive Officer effective August 29, 2012. The table above reflects only the compensation that Mr. Kompaniez received in exchange for his service as a member of our board of directors. The consulting fees paid to Mr. Kompaniez for the period he served as our Co-Chief Executive Officer are set forth above under “Executive Officer Compensation.” |
Cash Compensation
We pay our independent directors an annual fee of $30,000, plus $2,500 per in-person board meeting attended, $2,000 per in-person committee meeting attended (excluding in-person meetings of the year ended December 31, 2009,Special Committee, as discussed below), and $1,000 for each telephonic board meeting attended. The Audit Committee and the Company incurred $119,000Special Committee Chairperson receive an additional $10,000 annual retainer. Each member of interest expense,the Special Committee also receives (1) $1,000 per telephonic meeting of less than one hour in which $57,000 was payable at December 31, 2009.
We reimburse our independent directors for each of the next five years ending December 31 and thereafter:
| 2010 | $ | 120,000 | ||
| 2011 | 9,120,000 | |||
| 2012 | — | |||
| 2013 | — | |||
| 2014 | — | |||
| Thereafter | 1,250,000 | |||
| $ | 10,490,000 | |||
F-16
F-17
Equity Plan Compensation
We have no effect on our interest expense. The carrying value of our debt approximates fair value as of December 31, 2009, as all of our debt has a fixed interest rate and the rate approximates market interest rates.
F-18
F-19
On August 29, 2012, upon the appointment of Mr. Kompaniez as our Co-Chief Executive Officer and $0, respectively. A summaryMr. Kompaniez’s resignation from our board of directors, our board of directors amended the terms of the statusrestricted stock previously granted to Mr. Kompaniez pursuant to the independent directors’ compensation plan such that the unvested shares of restricted stock held by Mr. Kompaniez were not forfeited upon his resignation as a director and continued to vest pursuant to the terms of the nonvestedplan. Effective October 9, 2012, Mr. Kompaniez resigned from his position as our Co-Chief Executive Officer, and the remainder of his unvested shares of restricted stock fully vested as of that date.
ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information
The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under our incentive award plan, as of December 31, 2012.
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||||
| Equity compensation plans approved by security holders: | — | — | 1,950,000 | |||||||||
| Equity compensation plans not approved by security holders: | N/A | N/A | N/A | |||||||||
| Total | — | $ | — | 1,950,000 | ||||||||
Security Ownership of Beneficial Owners
The following table sets forth the beneficial ownership of our common stock as of December 31, 2009April 25, 2013 for each person or group that holds more than 5% of our common stock, for each of our current directors and 2008,executive officers and the changes for the year ended December 31, 2009our current directors and forexecutive officers as a group. To our knowledge, each person that beneficially owns our shares has sole voting and disposition power with regard to such shares.
Unless otherwise indicated below, each person or entity has an address in care of our principal executive offices at 4695 MacArthur Court, Suite 1100, Newport Beach, California 92660.
| Name of Beneficial Owner(1) | Number of Shares Beneficially Owned | Percent of All Shares | ||||||
| TNP LLC (2) | 22,222 | * | ||||||
| Anthony W. Thompson(3) | 133,333 | 1.2 | % | |||||
| Dee R. Balch | — | — | ||||||
| John B. Maier II | 5,000 | * | ||||||
| Phillip I. Levin | 10,000 | * | ||||||
| Jeffrey S. Rogers | 12,500 | * | ||||||
| All directors and executive officers as a group | 160,833 | 1.5 | % | |||||
| * | Less than 1% of the outstanding common stock. |
| (1) | Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to dispose of or to direct the disposition of such security. A person also is deemed to be a beneficial owner of any securities which that person has a right to acquire within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he or she has no economic or pecuniary interest. |
| (2) | On October 16, 2008, we issued 22,222 shares of our common stock to our sponsor, TNP LLC. TNP LLC’s address is 3151 Airway Ave, Suite G-3 Costa Mesa, California, 92626. |
| (3) | On May 28, 2010, Mr. Thompson acquired 111,111 shares of our common stock in our public offering. Includes the shares of our common stock held by TNP LLC. Mr. Thompson is the managing member of TNP LLC and may be deemed to have beneficial ownership of the shares beneficially owned by TNP LLC. Mr. Thompson’s address is 3151 Airway Ave, Suite G-3 Costa Mesa, California, 92626. |
ITEM 13.Certain Relationships and Related Transactions and Director Independence
The following describes all transactions during the period from September 18, 2008 (date of inception) throughJanuary 1, 2011 to December 31, 2012 involving us, our directors, our advisor, our sponsor and any affiliate thereof in which more than $120,000 was or will be involved and in which such related person had or will have a direct or indirect material interest and all such proposed transactions. Our independent directors are specifically charged with and have examined the fairness of such transactions to our stockholders, and have determined that all such transactions are fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties.
Ownership Interests
On October 16, 2008, is presented below:
| Weighted | ||||||||
| Restricted | Average | |||||||
| Common | Grant Date | |||||||
| Stock | Fair Value | |||||||
| Balance — September 18, 2008 (date of inception) | — | $ | — | |||||
| Granted | — | — | ||||||
| Vested | — | — | ||||||
| Balance — December 31, 2008 | — | — | ||||||
| Granted | 15,000 | 9.00 | ||||||
| Vested | (5,000 | ) | 9.00 | |||||
| Balance — December 31, 2009 | 10,000 | $ | 9.00 | |||||
As of December 31, 2012, we owned 96.2% of the outstanding limited partnership interests in our operating partnership, TNP Strategic Retail Operating Partnership, L.P., (our “OP”), and our advisor owned 0.02% of the outstanding limited partnership interest in our OP. As of December 31, 2012, TNP Strategic Retail OP Holdings, LLC (“TNP OP Holdings”) owned 100% of the special units issued by our OP. We are the sole general partner of our OP.
TNP OP Holdings’ ownership interest of the special units entitles it to a subordinated participation and it will be entitled to receive (1) 15% of specified distributions frommade upon the OP in an amount equal to 15.0%disposition of net sales proceeds received by the OP on dispositions of itsour OP’s assets, and dispositions of real properties by joint ventures or partnerships in which the OP owns(2) a partnership interest, after the other holders of common units, including the Company, have received,one-time payment, in the aggregate, cumulative distributions from operating income, sales proceedsform of shares of our common stock or other sources, equal to their capital contributions plus a 10.0% cumulative non-compounded annual pre-tax return thereon. The Special Units will be redeemed forpromissory note, in conjunction with the above amountredemption of the special units upon the earliest of: (1)occurrence of certain liquidity events or upon the occurrence of certain events that result in thea termination or non-renewal of our advisory agreement with our advisor, (the “Advisory Agreement”), but in each case only after the other holders of our OP’s units, including us, have received (or have been deemed to have received), in the aggregate, cumulative distributions equal to their capital contributions plus a 10% cumulative non-compounded annual pre-tax return on their net contributions. As the holder of special units, TNP OP Holdings will not be entitled to receive any other distributions.
We have not paid any distributions to TNP OP Holdings pursuant to its subordinated participation interest.
Our Relationships with our Advisor and our Sponsor
TNP Strategic Retail Advisor, LLC was formed in September 2008 and has served as our advisor since our inception. Our advisor is indirectly owned by our sponsor, and Mr. Thompson, our current Chairman, Co-Chief Executive Officer and President, serves as the Chief Executive Officer of our sponsor and our advisor. Dee R. Balch, our Chief Financial Officer, Treasurer and Secretary and a member of our board of directors, was previously employed by our sponsor and advisor. In November 2012, Ms. Balch’s employment with our sponsor and advisor was terminated and she became our employee. Subject to the oversight by our board of directors, our advisor currently provides certain limited services to us pursuant to the Advisory Agreement, including services related to the management of the daily operations of our investment portfolio and certain general and administrative responsibilities. The current Advisory Agreement, as amended, has a one-year term expiring August 7, 2013, subject to an unlimited number of successive one-year renewals upon mutual consent of the parties. We may terminate the Advisory Agreement without cause or penalty upon 60 days written notice to our advisor and immediately upon the fraud, criminal conduct, willful misconduct or gross negligence of our advisor, the material breach of the advisory agreement by our advisor or (2)our advisor’s bankruptcy. If we terminate the Advisory Agreement, we will pay our advisor all unpaid advances for operating expenses and all earned but unpaid fees.
We are currently engaged in negotiations to replace our current advisor with Glenborough, LLC and its affiliates, which we refer to as herein as “Glenborough.” Our board of directors is engaged in ongoing negotiations regarding the transition to Glenborough as our external advisor and the termination of our current advisory agreement and the property management agreements with respect to our properties. However, any change to our advisor or our property manager will require the consent of a listing liquidity event.
Fees and Expense Reimbursements Paid to our Advisor
Pursuant to the terms of our Advisory Agreement, we pay our advisor the fees described below.
| · | We pay our advisor an origination fee of 2.5% of the amount funded by us to acquire or originate real estate-related loans, including third party expenses related to such investments and any debt we use to fund the acquisition or origination of the real estate-related loans. We will not pay an acquisition fee with respect to such real estate-related loans. We paid $0 and $49,000 in loan origination fees to our advisor during the years ended December 31, 2012 and 2011, respectively. |
| · | We pay our advisor an annual asset management fee that is payable monthly in an amount equal to one-twelfth of 0.6% of the aggregate cost of all assets we own and of our investments in joint ventures, including acquisition fees, origination fees, acquisition and origination expenses and any debt attributable to such investments; provided, however, that our advisor will not be paid the asset management fee until our funds from operations exceed the lesser of (1) the cumulative amount of any distributions declared and payable to our stockholders or (2) an amount that is equal to a 10.0% cumulative, non-compounded, annual return on invested capital for our stockholders. For the year ended December 31, 2011, we did not pay our advisor any asset management fees.On November 11, 2011, our board of directors approved Amendment No. 2 to ourAdvisory Agreement to clarify that upon termination of theAdvisory Agreement, any asset management fees that may have accumulated in arrears, but which had not been earned pursuant to the terms of theAdvisory Agreement, will not be paid to our advisor. Because the payment of asset management fees was determined to be remote, we reversed asset management fees that had been accrued, but which had not been earned, through December 31, 2011. There were no asset management fees incurred for the year ended December 31, 2012. |
| · | We pay our advisor a disposition fee of up to 50% of a customary and competitive real estate sales commission not to exceed 3.0% of the contract sales price of each property sold if our advisor or its affiliates provides a substantial amount of services, as determined by our independent directors, in connection with the sale of real property. With respect to a property held in a joint venture, the foregoing commission will be reduced to a percentage of such amounts reflecting our economic interest in the joint venture. For the years ended December 31, 2012 and 2011, we paid $130,000 and $88,000, respectively, of disposition fees to our advisor. |
| · | On January 12, 2012, we entered into amendment No. 3 to our Advisory Agreement to provide for the payment of a financing coordination fee to our advisor. We pay our advisor a financing coordination fee equal to 1.0% of the amount made available and/or outstanding in connection with (1) any financing obtained, directly or indirectly, by us or our OP and used to acquire or originate investments, (2) any financing assumed, directly or indirectly, by us or our OP in connection with the acquisition of investments, or (3) the refinancing of any financing obtained or assumed, directly or indirectly, by us or our operating partnership. The advisor may re-allow some or all of the financing coordination fee to reimburse third parties with whom the advisor may subcontract to procure such financing. For the year ended December 31, 2012, we paid $811,000 of financing coordination fees to our advisor and its affiliates. |
| · | On June 9, 2011, pursuant to Section 11 of ourAdvisory Agreement, our board of directors approved the payment of fees to our advisor for services it provides in connection with leasing our properties. The amount of such leasing fees will be usual and customary for comparable services rendered for similar real properties in the geographic market of the properties leased. The leasing fees will be in addition to the market-based fees for property management services payable by us to TNP Property Management, LLC, our property manager and an affiliate of our advisor. For the years ended December 31, 2012 and 2011, we paid approximately $244,000 and $88,000, respectively, of leasing commission fees payable to our advisor or its affiliates. As of December 31, 2011, leasing fees of $5,000 were included in amounts due to affiliates. |
In addition to the fees we pay to our advisor pursuant to our Advisory Agreement, we also reimburse our advisor for the costs and expenses described below:
| · | Organization and offering costs (other than selling commissions and the dealer manager fee described below) are initially paid by our advisor and its affiliates on our behalf. Such costs include legal, accounting, printing and other offering expenses, including marketing, salaries and direct expenses of certain of our advisor’s employees and employees of our advisor’s affiliates and others. Pursuant to the Advisory Agreement, we are obligated to reimburse our advisor or its affiliates, as applicable, for organization and offering costs, provided that we are not obligated to reimburse our advisor to the extent organization and offering costs, other than selling commissions and dealer manager fees, incurred by us exceed 3.0% of the gross offering proceeds from our offering. Any such reimbursement will not exceed actual expenses incurred by our advisor. As of December 31, 2012 and 2011, organization and offering costs incurred by our advisor on our behalf or paid by us directly were $3,258,000 and $3,016,000, respectively. Pursuant to our Advisory Agreement, organization and offering costs are payable by us to the extent organization and offering costs, other than selling commissions and dealer manager fees, do not exceed 3.0% of the gross proceeds of our offering. As of December 31, 2012, cumulative organization and offering costs reimbursed to our advisor or paid directly by us were approximately $4,308,000, exceeding the 3.0% limit by $1,050,000. Accordingly, the excess amount was billed to our advisor and included in amounts due from affiliates on the balance sheet at December 31, 2012, and subsequently paid as of January 31, 2013. At December 31, 2011, the unreimbursed amount of organization and offering costs incurred by our advisor was $1,269,000 and such amount was deferred and recorded as deferred offering costs and accrued by us in amounts due to affiliates as of December 31, 2011. |
| · | Subject to the 2%/25% Guidelines discussed below, we reimburse our advisor for all expenses paid or incurred by our advisor in connection with the services provided to us, including personnel costs and our allocable share of other overhead of the advisor such as rent and utilities; provided, however, that no reimbursement shall be made for costs of such personnel to the extent that personnel are used in transactions for which our advisor is entitled to an acquisition, origination or disposition fee. For the year ended December 31, 2011, we reimbursed $459,000 to our advisor for operating expenses. For the twelve months ended December 31, 2012, our total operating expenses (as defined in our charter) did not exceed the 2%/25% Guidelines. |
2%/25% Guidelines
As described above, our advisor and its affiliates are entitled to reimbursement of actual expenses incurred for administrative and other services provided to us for which they do not otherwise receive a fee. However, we will not reimburse our advisor or its affiliates at the end of any fiscal quarter for “total operating expenses” that for the four consecutive fiscal quarters then ended, or the “expense year,” exceeded the greater of (1) 2% of our taxableaverage invested assets or (2) 25% of our net income, including distributions reinvested, have resultedwhich we refer to as the “2%/25% Guidelines,” and our advisor must reimburse us quarterly for any amounts by which our total operating expenses exceed the 2%/25% Guidelines in the previous expense year, unless the independent directors determine that the excess expenses were justified based on unusual and nonrecurring factors which they deem sufficient. If the independent directors determine that the excess expenses were justified, we will send our stockholders written disclosure, together with an explanation of the factors the independent directors considered in making such a returndetermination.
For purposes of capitalthe 2%/25% Guidelines, “total operating expenses” means all costs and expenses paid or incurred by us, as determined under U.S. generally accepted accounting principles, that are in any way related to our stockholdersoperation or to corporate business, including advisory fees, but excluding (1) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and listing of the shares, (2) interest payments, (3) taxes, (4) non-cash expenditures such as depreciation, amortization and bad debt reserves, (5) incentive fees; (6) acquisition fees and acquisition expenses, (7) real estate commissions on the sale of property, and (8) other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair, and improvement of property).
Our “average invested assets” for federal income tax purposes. The tax treatmentany period are equal to the average book value of our assets invested in equity interests in, and loans secured by, real estate before reserves for depreciation or bad debts or other similar non-cash reserves computed by taking the average of such values at the end of each month during the period. Our “net income” for any period is equal to our total revenue less total expenses other than additions to reserves for depreciation, bad debts or other similar non-cash reserves for such period. Operating expenses include all costs and expenses incurred by us under generally accepted accounting principles (including the asset management fee), but excluding organization and offering expenses, selling commissions and dealer manager fees, interest payments, taxes, non-cash expenditures such as depreciation, amortization and bad debt reserves, the subordinated disposition fee, acquisition and advisory fees and expenses and distributions reportable forpursuant to our advisor’s subordinated participation interest in our OP.
For the year ended December 31, 20092011, our total operating expenses exceeded the 2%/25% Guidelines by $268,000. On February 24, 2012, the independent directors unanimously determined the excess amount of total operating expenses for the fiscal year ended December 31, 2011 was 100% returnjustified because (1) the amounts reflected legitimate operating expenses necessary for the operation of capital.
Guaranty Fees
In connection with certain acquisition financings, Anthony W. Thompson, our current Chairman of normal recurring adjustments, have beenthe Board and Co-Chief Executive Officer and/or our sponsor has executed guaranty agreements to certain parties. As part of the acquisition of the Waianae Mall, Mr. Thompson guaranteed the mortgage loan assumed by us in connection with the acquisition of the Waianae Mall. In connection with the acquisition of the mortgage loans secured by Constitution Trail, we and Mr. Thompson agreed to jointly and severally guaranty to the lender the full and prompt payment and performance of certain obligations under the acquisition loan.
Additionally, in connection with the acquisition financing on Osceola Village, we entered into a Master Lease Agreement with TNP SRT Osceola Village Master Lessee, LLC, a wholly-owned subsidiary of our OP. Pursuant to the Master Lease Agreement, our sponsor has made certain guarantees with respect to the Master Lease Agreement.
As consideration for the guaranties outlined above, we entered into reimbursement and fee agreements to provide for up-front payments and annual guaranty fee payments for the duration of the guarantee periods. For the years ended December 31, 2012 and 2011, we incurred approximately $51,000 and $104,000, respectively, of guaranty fees. As of December 31, 2012 and 2011, guaranty fees of approximately $10,000 and $50,000, respectively, were included in amounts due to affiliates. At December 31, 2012, our sponsor’s outstanding guaranty agreements relate to guarantees on the amounts stated belowfinancing of Waianae Mall and Constitution Trail and master lease guarantees for Osceola Village, and Mr. Thompson and/or the sponsor received a fee in consideration of such guarantees. On January 22, 2013, Waianae Mall was sold and the guaranty agreement related to present fairly,the Waianae Mall mortgage loan was terminated.
Selling Commissions and in accordance with GAAP, the unaudited selected quarterly financial data when read in conjunction withFees Paid to our consolidated financial statements.
| Quarters Ended: | ||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | |||||||||||||
| 2009 | 2009 | 2009 | 2009 | |||||||||||||
| Revenues | $ | 145,000 | $ | — | $ | — | $ | — | ||||||||
| Expenses | 1,139,000 | 89,000 | — | — | ||||||||||||
| Loss before other expense | 994,000 | 89,000 | — | — | ||||||||||||
| Other expense, net | 117,000 | — | — | — | ||||||||||||
| Net loss | $ | 1,111,000 | $ | 89,000 | $ | — | $ | — | ||||||||
| Loss per share | $ | 5.24 | $ | 4.01 | $ | — | $ | — | ||||||||
| Weighted average number of shares | ||||||||||||||||
| outstanding | 217,640 | 22,222 | 22,222 | 22,222 | ||||||||||||
F-20
| · | We paid TNP Securities selling commissions of up to 7.0% of the gross offering proceeds from the sale of our shares in our primary offering, all of which could be re-allowed to participating broker-dealers. For the years ended December 31, 2012 and 2011, we paid selling commissions of $3,062,000 and $2,395,000 to TNP Securities, respectively. |
| · | We paid TNP Securities a dealer manager fee of 3.0% of the gross offering proceeds from the sale of our shares in the primary offering, a portion of which could be re-allowed to participating broker-dealers. For the years ended December 31, 2012 and 2011, we paid dealer manager fees of $1,411,000 and $1,034,000 to TNP Securities, respectively. |
Our dealer manager agreement with TNP Securities also provided for the reimbursement to TNP Securities and participating broker-dealers forbona fidedue diligence expenses that were included in a detailed and itemized invoice. We also reimburse our dealer manager for legal fees and expenses, travel, food and lodging for employees of the dealer manager, sponsor training and education meetings, attendance fees and expense reimbursements for broker-dealer sponsored conferences, attendance fees and expenses for industry sponsored conferences, and informational seminars, subject to the limitations included in our dealer manager agreement. For the years ended December 31, 2012 and 2011, we did not reimburse TNP Securities directly for any such expenses.
| 12 |
Fees Paid to Our Property Manager
In connection with the acquisitions of our properties, we, through our subsidiaries enter into Property Management Agreements with TNP Property Management, LLC (“TNP Property Manager”), an affiliate of our sponsor, pursuant to which TNP Property Manager serves as the property manager for each of our properties. TNP Property Manager supervises, manages, operates, and maintains each property on the terms and conditions set forth in the Property Management Agreement. We pay TNP Property Manager a market-based annual property management fee of up to $1,100,000,0005.0% of the gross revenues generated by each property under management. In certain instances, TNP Property Manager enters into sub-management agreements with local third-party sub-managers, in shareswhich case TNP Property Manager is responsible for supervising and compensating those property managers. For the years ended December 31, 2012 and 2011, we incurred $1,174,000 and $492,000, respectively, in property management fees payable to TNP Property Manager. As of December 31, 2012 and 2011, property management fees of $48,000 and $16,000, respectively, were included in amounts due to affiliates.
Acquisition of Cochran Bypass
On June 29, 2011, we acquired a single-tenant necessity retail center located in Chester, South Carolina, commonly known as Cochran Bypass, from an affiliate of our sponsor for $2,585,000. The acquisition was approved by our board of directors, including all the independent directors.
Related Party Loans and Fees
In connection with the acquisition of three mortgage notes secured by the Constitution Trail Centre, or the mortgage notes, during the second quarter of 2011, TNP SRT Constitution, LLC, a subsidiary of our OP, obtained a loan from 2008 TNP Participating Notes Program, LLC (the “Notes Program”), an affiliated program sponsored by our sponsor. The loan was evidenced by a promissory note in the aggregate principal amount of $995,000 and bore interest at an annual rate of 14.0%.For the year ended December 31, 2011,we paid loan fees of $49,000 in connection with this loan. This loan was repaid in July 2011.
In connection with the acquisition of Cochran Bypass, TNP SRT Cochran Bypass, LLC, a subsidiary of our OP, obtained a loan from the Notes Program evidenced by a promissory note in the aggregate principal amount of $775,000 and bearing an annual interest rate of 14.0%.For the year ended December 31, 2011,we paid interest expense of $5,000 to the affiliate of our advisor in connection with this loan. This loan was repaid in September 2011.
In connection with our acquisition of Craig Promenade on March 30, 2011, we assumed a $500,000 note payable due to an affiliate of our advisor which was repaid at the closing of the acquisition of Craig Promenade.For the year ended December 31, 2011,we paid interest expense of $19,000 to the affiliate of advisor in connection with this note payable.
We acquired Morningside Marketplace in January 2012. We financed the payment of a portion of the purchase price for the Morningside Marketplace with the proceeds of (1) a loan in the aggregate principal amount of $235,000 from our sponsor to our OP, (2) a loan in the aggregate principal amount of $200,000 from Mr. James Wolford, our then-Chief Financial Officer, Treasurer and Secretary, to our OP and (3) a loan in the aggregate principal amount of $920,000 from Mrs. Sharon Thompson, the spouse of Mr. Anthony W. Thompson, our current Chairman, Co-Chief Executive Officer and President, to our OP, which we refer to collectively as the “affiliate loans.” The affiliate loans each accrued interest at a rate of 12% per annum. Our OP repaid the affiliated loan from our sponsor on January 19, 2012. The entire outstanding principal balance of the affiliate loans from Mr. Wolford and Ms. Thompson and all accrued and unpaid interest thereon was due and payable in full on April 8, 2012. Our OP repaid the affiliate loans from Mr. Wolford and Ms. Thompson on March 29, 2012. Our OP paid interest expense of $20,000 with respect the affiliate loans.
Conflict Resolution Procedures
We are subject to potential conflicts of interest arising out of our relationship with our advisor and its affiliates. These conflicts may relate to compensation arrangements, the allocation of investment opportunities, the terms and conditions on which various transactions might be entered into by us and our advisor or its affiliates and other situations in which our interests may differ from those of our advisor or its affiliates. We have adopted the procedures set forth below to address these potential conflicts of interest.
Priority Allocation of Investment Opportunities
Pursuant to our Advisory Agreement, our advisor has agreed that we will have the first opportunity to acquire any investment in an income-producing retail property identified by our sponsor or advisor that meet our investment criteria, for which we have sufficient uninvested funds. With respect to potential non-retail property investments, in the event that an investment opportunity becomes available that is suitable, under all of the factors considered by our advisor, for both us and our sponsor or its affiliates, and for which more than one of these entities has sufficient uninvested funds, then the entity that has had the longest period of time elapse since it was offered an investment opportunity will first be offered such investment opportunity. Our advisor will make this determination in good faith. Our board of directors, including the independent directors, has a duty to ensure that the method used by our advisor for the allocation of the acquisition of real estate assets by two or more affiliated programs seeking to acquire similar types of real estate assets is reasonable and is applied fairly to us.
Independent Directors
Our independent directors, acting as a group, will resolve potential conflicts of interest whenever they determine that the exercise of independent judgment by our board of directors or our advisor or its affiliates could reasonably be compromised. However, the independent directors may not take any action which, under Maryland law, must be taken by our entire board of directors or which is otherwise not within their authority. The independent directors, as a group, are authorized to retain their own legal and financial advisors. Among the matters we expect the independent directors to review and act upon are:
| · | the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the Advisory Agreement and the property management agreements with our affiliated property manager; |
| · | transactions with affiliates, including our directors and officers; |
| · | awards under our long-term incentive plan; and |
| · | pursuit of a potential liquidity event. |
Those conflict of interest matters that cannot be delegated to the independent directors, as a group, under Maryland law must be acted upon by both our board of directors and the independent directors.
Compensation Involving Our Advisor and its Affiliates
The independent directors will evaluate at least annually whether the compensation that we contract to pay to our advisor and its affiliates is reasonable in relation to the nature and quality of services performed and that such compensation is within the limits prescribed by our charter. The independent directors will supervise the performance of our advisor and its affiliates and the compensation we pay to them to determine that the provisions of our compensation arrangements are being performed appropriately. This evaluation will be based on the factors set forth below as well as any other factors deemed relevant by the independent directors:
| · | the quality and extent of the services and advice furnished by our advisor; |
| · | the amount of fees paid to our advisor in relation to the size, composition and performance of our investments; |
| · | the success of our advisor in generating investment opportunities that meet our investment objectives; |
| · | rates charged to other externally advised REITs and similar investors by advisors performing similar services; |
| · | additional revenues realized by our advisor and its affiliates through their relationship with us, whether we pay them or they are paid by others with whom we do business; |
| · | the performance of our investments, including income, conservation and appreciation of capital, frequency of problem investments and competence in dealing with distress situations; and |
| · | the quality of our investments relative to the investments generated by our advisor for its own account. |
The independent directors shall record these factors in the minutes of the meetings at which they make such evaluations.
Acquisitions, Leases and Sales Involving Affiliates
We will not acquire or lease properties in which our advisor or its affiliates or any of our directors has an interest without a determination by a majority of the directors (including a majority of the independent directors) not otherwise interested in the transaction that such transaction is fair and reasonable to us and at a price to us no greater than the cost of the asset to our advisor or its affiliates or such director unless there is substantial justification for any amount that exceeds such cost and such excess amount is determined to be reasonable. In no event will we acquire any property at an amount in excess of its appraised value. We will not sell or lease properties to our advisor or its affiliates or to our directors unless a majority of the directors (including a majority of the independent directors) not otherwise interested in the transaction determine the transaction is fair and reasonable to us.
Mortgage Loans Involving Affiliates
Our charter prohibits us from investing in or making mortgage loans, including when the transaction is with our advisor or our directors or any of their affiliates, unless an independent expert appraises the underlying property. We must keep the appraisal for at least five years and make it available for inspection and duplication by any of our stockholders. In addition, we must obtain a mortgagee’s or owner’s title insurance policy or commitment as to the priority of the mortgage or the condition of the title. Our charter prohibits us from making or investing in any mortgage loans that are subordinate to any lien or other indebtedness of our advisor, our directors or any of their affiliates.
Issuance of Options and Warrants to Certain Affiliates
Our charter prohibits the issuance of options or warrants to purchase our common stock to our advisor, our directors or any of their affiliates (1) on terms more favorable than we would offer such options or warrants to unaffiliated third parties or (2) in excess of an amount equal to 10.0% of our outstanding common stock on August 7, 2009. Asthe date of March 26, 2010,grant.
Repurchase of Shares of Common Stock
Our charter prohibits us from paying a fee to our advisor or our directors or any of their affiliates in connection with our repurchase or redemption of our common stock.
Loans and Expense Reimbursements Involving Affiliates
We will not make any loans to our advisor or our directors or any of their affiliates except mortgage loans for which an appraisal is obtained from an independent appraiser. In addition, we will not borrow from these persons unless a majority of directors (including a majority of independent directors) not otherwise interested in the Company had accepted investors’ subscriptionstransaction approve the transaction as being fair, competitive and commercially reasonable, and no less favorable to us than comparable loans between unaffiliated parties. These restrictions on loans will only apply to advances of cash that are commonly viewed as loans, as determined by our board of directors. By way of example only, the prohibition on loans would not restrict advances of cash for legal expenses or other costs incurred as a result of any legal action for which indemnification is being sought, nor would the prohibition limit our ability to advance reimbursable expenses incurred by directors or officers or our advisor or its affiliates.
In addition, our directors and issued, 893,318 sharesofficers and our advisor and its affiliates will be entitled to reimbursement, at cost, for actual expenses incurred by them on behalf of us or joint ventures in which we are a joint venture partner, subject to the limitation on reimbursement of operating expenses to the extent that they exceed the 2%/25% Guidelines.
Director Independence
We have a five-member board of directors. We do not consider two of our directors, Anthony W. Thompson and Dee R. Balch, to be independent directors. Mr. Thompson is affiliated with our sponsor and advisor and Ms. Balch was previously affiliated with our sponsor and advisor and is currently employed as our Chief Financial Officer and Treasurer. The three remaining directors comprising our current board of directors qualify as “independent directors” as defined in our charter in compliance with the requirements of the Company’s common stock, includingNorth American Securities Administrators Association’s Statement of Policy Regarding Real Estate Investment Trusts. Although our shares issued pursuantare not listed on any national securities exchange, we consider our three current independent directors to be “independent” as defined by the New York Stock Exchange.
Our charter provides that a majority of the directors must be “independent directors.” As defined in our distribution reinvestment plan, resultingcharter, an “independent director” is a person who is not, on the date of determination, and within the last two years from the date of determination has not been, directly or indirectly, associated with our sponsor or our advisor by virtue of (1) ownership of an interest in our sponsor, our advisor, or any of their affiliates, other than us; (2) employment by our sponsor, our advisor, or any of their affiliates; (3) service as an officer or director of our sponsor, our advisor, or any of their affiliates, other than as one of our directors; (4) performance of services, other than as a director, for us; (5) service as a director or trustee of more than three real estate investment trusts organized by our sponsor or advised by our advisor; or (6) maintenance of a material business or professional relationship with our sponsor, our advisor, or any of their affiliates. A business or professional relationship is considered “material” if the aggregate gross offering proceedsrevenue derived by the director from the sponsor, the advisor, and their affiliates (excluding fees for serving as one of $8,806,000.
ITEM 14.Distributions DeclaredPrincipal Accountant Fees and Services
Independent Auditors
Deloitte & Touche, LLP, or Deloitte, served as our independent registered public accounting firm from our inception in September 2008 to October 2009. On October 27, 2009, we replaced Deloitte with KPMG LLP (“KPMG”) as our independent registered public accounting firm. KPMG served as independent registered public accounting firm from October 2009 to July 2011. On July 5, 2011, we replaced KPMG with McGladrey LLP (“McGladrey”) as our independent registered public accounting firm. All of the foregoing decisions to change our independent registered public accounting firm were approved by our audit committee and our board of directors. McGladrey served as our independent registered public accounting firm during the period from July 5, 2011 to December 31, 2009,2012.
On April 15, 2013, we declareddismissed McGladrey as our independent registered public accounting firm. The decision to change independent registered public accounting firms was approved by the audit committee of our board of directors. On April 15, 2013, we appointed Moss Adams LLP (“Moss Adams”) as our independent registered public accounting firm for the fiscal year ending December 31, 2013. The engagement of Moss Adams has been approved by the audit committee.
Pre-Approval Polices
The charter of our audit committee imposes a monthly distributionduty on the audit committee to pre-approve all auditing services performed for us by our independent auditors as well as all permitted non-audit services in order to ensure that the provision of such services does not impair the auditors’ independence. In determining whether or not to pre-approve services, our audit committee will consider whether the service is a permissible service under the rules and regulations promulgated by the SEC. All services rendered by our independent registered public accountants for the years ended December 31, 2012 and 2011 were pre-approved in accordance with the policies and procedures described above.
Independent Registered Public Accounting Firm Fees
KPMG
The aggregate fees billed to us by KPMG for professional accounting services for the years ended December 31, 2012 and 2011, all of which were preapproved by our audit committee, are set forth in the table below.
| 2012 | 2011 | |||||||
| Audit Fees | $ | 70,000 | $ | 202,246 | ||||
| Audit-related fees | — | — | ||||||
| Tax fees | — | 54,553 | ||||||
| All other fees | — | — | ||||||
| Total | $ | 70,000 | $ | 256,799 | ||||
MCGLADREY
The aggregate of $24,000,fees billed to us by McGladrey for professional accounting services for the years ended December 31, 2012 and 2011, all of which $18,000 was paid in cash on January 15, 2010 and $6,000 was paid throughwere preapproved by our distribution reinvestment planaudit committee, are set forth in the table below.
| 2012 | 2011 | |||||||
| Audit Fees | $ | 1,017,515 | $ | 487,269 | ||||
| Audit-related fees | — | — | ||||||
| Tax fees | 6,908 | — | ||||||
| All other fees | — | — | ||||||
| Total | $ | 1,024,423 | $ | 487,269 | ||||
| For purposes of the preceding tables, KPMG’s and McGladrey’s professional fees are classified as follows: |
| · | Audit fees — These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by KPMG and McGladrey in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements. |
| · | Audit-related fees — These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews, and consultation concerning financial accounting and reporting standards. |
| · | Tax fees — These are fees for all professional services performed by professional staff in KPMG’s and McGladrey’s tax divisions, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning, and tax advice, including federal, state, and local issues. Services may also include assistance with tax audits and appeals before the Internal Revenue Service and similar state and local agencies, as well as federal, state, and local tax issues related to due diligence. |
| · | All other fees — These are fees for any services not included in the above-described categories, including assistance with internal audit plans and risk assessments. |
PART IV
ITEM 15.Exhibits and Financial Statement Schedules
The following documents are filed as part of additional shares issued on December 31, 2009. On January 31, 2010, we declared a monthly distribution in the aggregate of $32,000, of which $25,000 was paid in cash on February 12, 2010 and $7,000 was paid through our distribution reinvestment plan in the form of additional shares issued on January 31, 2010. On February 28, 2010, we declared a monthly distribution in the aggregate of $40,000, of which $29,000 was paid in cash on March 15, 2010 and $11,000 was paid through our distribution reinvestment plan in the form of additional shares issued on February 28, 2010.
F-21
| (b) | Exhibits |
| 31.1 | Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.3 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 17 |
| Initial Cost to Company | ||||||||||||||||||||||||||||||||||||||||||||
| Building, | Cost | Gross Amount at Which Carried at Close of Period | ||||||||||||||||||||||||||||||||||||||||||
| Improvements | Capitalized | Building, | ||||||||||||||||||||||||||||||||||||||||||
| and | Subsequent to | Improvements | Accumulated | Date of | Date | |||||||||||||||||||||||||||||||||||||||
| Encumbrances | Land | Fixtures | Acquisition | Land | and Fixtures | Total | Depreciation | Construction | Acquired | |||||||||||||||||||||||||||||||||||
| Moreno Marketplace | Moreno Valley, CA | $ | 10,490,000 | $ | 3,080,000 | $ | 6,780,000 | $ | — | $ | 3,080,000 | $ | 6,780,000 | $ | 9,860,000 | $ | 28,000 | 2008 | 11/19/2009 | |||||||||||||||||||||||||
| Total | $ | 10,490,000 | $ | 3,080,000 | $ | 6,780,000 | $ | — | $ | 3,080,000 | $ | 6,780,000 | $ | 9,860,000 | $ | 28,000 | ||||||||||||||||||||||||||||
F-22
TNP STRATEGIC RETAIL TRUST, INC. | ||
| By: | /s/ | |
| Anthony W. Thompson Chairman of the Board, Co-Chief Executive Officer and President | ||
| By: | /s/ K. Timothy O’Brien | |
| K. Timothy O’Brien | ||
Co-Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title(s) | Date | ||
/s/ Anthony W. Thompson Anthony W. Thompson | Chairman of the Board, Co-Chief Executive Officer and President (Co-Principal Executive Officer) | April 26, 2013 | ||
/s/ K. Timothy O’Brien K. Timothy O’Brien | Co-Chief Executive Officer | April 26, 2013 | ||
/s/ Dee R. Balch Dee R. Balch | Chief Financial Officer, Treasurer, Secretary and Director (Principal Financial and Accounting Officer) | April 26, 2013 | ||
/s/ John B. Maier John B. Maier | Director | April 26, 2013 | ||
/s/ Phillip I. Levin Phillip I. Levin | Director | April 26, 2013 | ||
/s/ Jeffrey S. Rogers Jeffrey S. Rogers | Director | April 26, 2013 | ||
| 18 |
EXHIBIT INDEX
| 31.1 | Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.3 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |