UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 12, 2005
(Date of earliest event reported)
Inland Western Retail Real Estate Trust, Inc.
(Exact name of registrant as specified in the charter)
Maryland | 333-103799 | 42-1579325 |
(State or other jurisdiction of incorporation) | (Commission File No.) | (IRS Employer Identification No.) |
2901 Butterfield Road
Oak Brook, Illinois 60523
(Address of Principal Executive Offices)
(630) 218-8000
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing in intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
We filed a Form 8-K dated May 12, 2005, with regard to the acquisition of The Gateway without the requisite financial information. Accordingly we are filing this Form 8-K/A to include that financial information.
Item 9.01. Financial Statements, ProForma Financial Information and Exhibits
- Financial Statements
Index to Financial Statements
Page | |
Inland Western Retail Real Estate Trust, Inc.: | |
Consolidated Balance Sheets at March 31, 2005 (unaudited) and December 31, 2004 | F-1 |
Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2005 and March 31, 2004 | F-3 |
Consolidated Statement of Stockholders' Equity (unaudited) for the three month period ended March 31, 2005 | F-4 |
Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2005 and March 31, 2004 | F-5 |
Notes to Consolidated Financial Statements at March 31, 2005 | F-7 |
Pro Forma Consolidated Balance Sheet at March 31, 2005 (unaudited) | F-23 |
Notes to Pro Forma Consolidated Balance Sheet at March 31, 2005 (unaudited) | F-25 |
Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2005 (unaudited) | F-28 |
Notes to Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2005 (unaudited) | F-30 |
Pro Forma Consolidated Statement of Operations for the year ended December 31, 2004 (unaudited) | F-33 |
Notes to Pro Forma Consolidated Statement of Operations for the year ended December 31, 2004 (unaudited) | F-35 |
Gateway: | |
| F-41 |
| F-42 |
| F-43 |
Four Peaks Plaza: | |
| F-45 |
| F-46 |
| F-47 |
Properties Acquired from Ceruzzi Holdings: | |
| F-49 |
| F-50 |
| F-51 |
The Brickyard: | |
| F-53 |
| F-54 |
| F-55 |
Montecito Crossing: | |
| F-57 |
| F-58 |
| F-59 |
Properties Acquired from Ainbinder Company: | |
| F-61 |
| F-62 |
| F-63 |
Acquisition Properties: | |
| F-65 |
| F-66 |
| F-67 |
Properties Acquired from Starwood Wasserman: | |
| F-69 |
| F-70 |
| F-71 |
Greensburg Commons: | |
| F-74 |
| F-75 |
Bison Hollow: | |
| F-76 |
| F-77 |
Clearlake Shores: | |
| F-78 |
| F-79 |
Cornerstone Plaza: | |
| F-80 |
| F-81 |
Lake Forest Crossing: | |
| F-82 |
| F-83 |
Ashland & Roosevelt: | |
| F-84 |
| F-85 |
The Shops at 5: | |
| F-86 |
| F-87 |
Beachway Plaza: | |
| F-88 |
| F-89 |
Galvez Shopping Center: | |
| F-90 |
| F-91 |
Southwest Crossing: | |
| F-92 |
| F-93 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC. | |
By: | /s/ Lori J. Foust |
Name: | Lori J. Foust |
Title: | Principal Accounting Officer |
Date: | May 12, 2005 |
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Consolidated Balance Sheets
(Dollar amounts in thousands)
Assets
March 31, 2005 | ||||
(unaudited) | December 31, 2004 | |||
Investment properties: | ||||
Land | $ | 674,405 | $ | 575,032 |
Building and other improvements | 3,037,769 | 2,654,585 | ||
3,712,174 | 3,229,617 | |||
Less accumulated depreciation | (62,522) | (36,290) | ||
Net investment properties | 3,649,652 | 3,193,327 | ||
Cash and cash equivalents (including cash held by management company of $12,851 and $8,574 as of March 31, 2005 and December 31, 2004, respectively) | 693,969 | 241,224 | ||
Restricted cash (Note 2) | 61,108 | 65,923 | ||
Restricted escrows (Note 2) | 20,956 | 17,105 | ||
Investment in marketable securities and treasury contracts (Note 2) | 4,077 | 1,287 | ||
Investment in unconsolidated joint ventures (Note 9) | 70,358 | 75,261 | ||
Accounts and rents receivable (net of allowance of $537 and $346 as of March 31, 2005 and December 31, 2004, respectively) | 28,149 | 19,962 | ||
Due from affiliates (Note 3) | 52 | 654 | ||
Notes receivable (Note 6) | 32,578 | 31,772 | ||
Acquired in-place lease intangibles and customer relationship value (net of accumulated amortization of $16,998 and $9,976 as of March 31, 2005 and December 31, 2004, respectively) | 265,255 | 240,116 | ||
Acquired above market lease intangibles (net of accumulated amortization of $4,587 and $3,124 as of March 31, 2005 and December 31, 2004, respectively) | 43,202 | 40,774 | ||
Loan fees, leasing fees and loan fee deposits (net of accumulated amortization of $1,411 and $755 as of March 31, 2005 and December 31, 2004, respectively) | 28,797 | 19,472 | ||
Other assets | 32,254 | 8,939 | ||
Total assets | $ | 4,930,407 | $ | 3,955,816 |
See accompanying notes to consolidated financial statements
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Consolidated Balance Sheets
(continued)
(Dollar amounts in thousands)
Liabilities and Stockholders' Equity
March 31, 2005 | ||||
(unaudited) | December 31, 2004 | |||
Liabilities: | ||||
Mortgages and notes payable (Note 7) | $ | 2,145,403 | $ | 1,783,114 |
Accounts payable | 3,056 | 1,692 | ||
Accrued offering costs due to affiliates | 4,030 | 2,880 | ||
Accrued offering costs due to non-affiliates | 131 | - | ||
Accrued interest payable | 6,388 | 4,306 | ||
Tenant improvements payable | 4,808 | 5,096 | ||
Accrued real estate taxes | 9,756 | 4,254 | ||
Distributions payable | 14,610 | 11,378 | ||
Security deposits | 3,979 | 3,679 | ||
Prepaid rental income and other liabilities | 9,047 | 7,765 | ||
Advances from sponsor (Note 3) | 3,523 | 3,523 | ||
Acquired below market lease intangibles (net of accumulated amortization of $7,439 and $4,718 as of March 31, 2005 and December 31, 2004, respectively) | 96,404 | 85,986 | ||
Restricted cash liability (Note 2) | 61,108 | 65,923 | ||
Due to affiliates | 2,051 | 957 | ||
Total liabilities | 2,364,294 | 1,980,553 | ||
Minority interests | 101,241 | 89,537 | ||
Stockholders' equity: | ||||
Preferred stock, $.001 par value, 10,000,000 shares authorized, none outstanding | - | - | ||
Common stock, $.001 par value, 500,000,000 shares authorized, 285,633,361 and 217,457,528 shares issued and outstanding as of March 31, 2005 and December 31, 2004, respectively | 286 | 217 | ||
Additional paid-in capital (net of offering costs of $306,450 and $234,014 as of March 31, 2005 and December 31, 2004, respectively, of which $228,971 and $175,509 was paid or accrued to affiliates as of March 31, 2005 and December 31, 2004, respectively) | 2,549,106 | 1,940,018 | ||
Accumulated distributions in excess of net income | (84,795) | (54,750) | ||
Accumulated other comprehensive income | 275 | 241 | ||
Total stockholders' equity | 2,464,872 | 1,885,726 | ||
Commitments and contingencies (Note 12) | ||||
Total liabilities and stockholders' equity | $ | 4,930,407 | $ | 3,955,816 |
See accompanying notes to consolidated financial statements
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Consolidated Statements of Operations
(Dollar amounts in thousands, except per share amounts)
(unaudited)
Three months ended | Three months ended | |||
March 31, 2005 | March 31, 2004 | |||
Revenues: | ||||
Rental income | $ | 74,063 | $ | 7,553 |
Tenant recovery income | 15,819 | 1,748 | ||
Other property income | 905 | 5 | ||
Total revenues | 90,787 | 9,306 | ||
Expenses: | ||||
General and administrative expenses to affiliates | 625 | 489 | ||
General and administrative expenses to non-affiliates | 1,259 | 719 | ||
Advisor asset management fee | 925 | - | ||
Property operating expenses to affiliates | 3,683 | 413 | ||
Property operating expenses to non-affiliates | 12,169 | 620 | ||
Real estate taxes | 8,162 | 988 | ||
Depreciation and amortization | 34,759 | 3,693 | ||
Total expenses | 61,582 | 6,922 | ||
Operating income | $ | 29,205 | $ | 2,384 |
Other income | 2,619 | 211 | ||
Interest expense | (23,021) | (2,559) | ||
Minority interests | 470 | - | ||
Equity in earnings (losses) of unconsolidated entities | (259) | - | ||
Net income | $ | 9,014 | $ | 36 |
Other comprehensive income: | ||||
Unrealized gain on investment securities | 34 | - | ||
Comprehensive income | $ | 9,048 | $ | 36 |
Net income per common share, basic and diluted | $ | .04 | $ | - |
Weighted average number of common shares outstanding, basic and diluted | 251,114,531 | 32,314,792 |
See accompanying notes to consolidated financial statements
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Consolidated Statement of Stockholders' Equity
For the three month period ended March 31, 2005
(Dollar amounts in thousands)
(unaudited)
Number of | Common | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | |||||||
Shares | Stock | Capital | Net Income | Income | Total | ||||||
Balance at December 31, 2004 | 217,457,528 | $ | 217 | $ | 1,940,018 | $ | (54,750) | $ | 241 | $ | 1,885,726 |
Net income | - | - | - | 9,014 | - | 9,014 | |||||
Unrealized gain on investment securities | - | - | - | - | 34 | 34 | |||||
Distributions declared | - | - | - | (39,059) | - | (39,059) | |||||
Proceeds from offering | 66,351,621 | 67 | 664,655 | - | - | 664,722 | |||||
Offering costs | - | - | (72,436) | - | - | (72,436) | |||||
Proceeds from dividend reinvestment program | 2,010,963 | 2 | 19,102 | - | - | 19,104 | |||||
Shares repurchased | (190,751) | (1,764) | - | - | (1,764) | ||||||
Shares obligated to be repurchased as of March 31, 2005 | - | - | (512) | - | - | (512) | |||||
Issuance of stock options and discounts on shares issued to affiliates | - | - | 43 | - | - | 43 | |||||
Balance at March 31, 2005 | 285,633,361 | $ | 286 | $ | 2,549,106 | $ | (84,795) | $ | 275 | $ | 2,464,872 |
See accompanying notes to consolidated financial statements
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(unaudited)
Three months ended | Three months ended | |||
March 31, 2005 | March 31, 2004 | |||
Cash flows from operations: | ||||
Net income | $ | 9,014 | $ | 36 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation | 26,232 | 2,599 | ||
Amortization | 8,527 | 1,094 | ||
Amortization of acquired above market leases | 1,470 | 338 | ||
Amortization of acquired below market leases | (2,860) | (357) | ||
Rental income under master leases | 1,787 | - | ||
Straight line rental income | (2,979) | - | ||
Straight line lease expense | 663 | - | ||
Minority interests | (470) | - | ||
Loss from investments in unconsolidated entities | 259 | - | ||
Issuance of stock options and discount on shares issued to affiliates | 43 | 301 | ||
Realized gain on sale of treasury contracts | (8) | - | ||
Write-off of bad debt | 185 | - | ||
Changes in assets and liabilities: | ||||
Accounts and rents receivable net of change in allowance of $191 and $0 for March 31, 2005 and 2004, respectively. | (5,393) | (1,289) | ||
Due from affiliates | (52) | - | ||
Other assets | (347) | (276) | ||
Accounts payable | 1,364 | (87) | ||
Accrued interest payable | 2,082 | 526 | ||
Accrued real estate taxes | 5,364 | 851 | ||
Security deposits | 300 | 596 | ||
Prepaid rental income and other liabilities | 107 | 446 | ||
Net cash flows provided by operating activities | 45,288 | 4,778 | ||
Cash flows from investing activities: | ||||
Purchase of investment securities and treasury contracts | (2,748) | - | ||
Restricted escrows | (3,851) | - | ||
Purchase of investment properties | (468,224) | (343,278) | ||
Acquired in-place lease intangibles and customer relationship value | (33,010) | (31,583) | ||
Acquired above market leases | (3,898) | (7,132) | ||
Acquired below market leases | 13,278 | 5,492 | ||
Contributions from minority interests - joint ventures | 23,027 | - | ||
Distributions to minority interests - joint ventures | (6,209) | - | ||
Payment of leasing fees | (85) | - | ||
Tenant improvements payable | (288) | 1,983 | ||
Other assets | (22,968) | (878) | ||
Funding of notes receivable | (806) | - | ||
Due to affiliates | 1,094 | (2,154) | ||
Net cash flows used in investing activities | (504,688) | (377,550) |
See accompanying notes to consolidated financial statements
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(unaudited)
Three months ended | Three months ended | |||||
March 31, 2005 | March 31, 2004 | |||||
Cash flows from financing activities: | ||||||
Proceeds from offering | 664,722 | 292,488 | ||||
Proceeds from the dividend reinvestment program | 19,104 | 2,075 | ||||
Shares repurchased | (1,764) | - | ||||
Payment of offering costs | (71,155) | (29,931) | ||||
Proceeds from mortgage debt and notes payable | 382,382 | 180,768 | ||||
Principal payments on mortgage debt | (333) | - | ||||
Lump-sum payoffs of mortgage debt | (35,742) | - | ||||
Proceeds from unsecured line of credit | - | 65,000 | ||||
Payment of loan fees and deposits | (9,896) | (2,385) | ||||
Distributions paid | (35,827) | (4,027) | ||||
Due from affiliates | 654 | (1,093) | ||||
Contribution from sponsor advances | - | 1,167 | ||||
Net cash flows provided by financing activities | 912,145 | 504,062 | ||||
Net increase in cash and cash equivalents | 452,745 | 131,290 | ||||
Cash and cash equivalents, at beginning of period | 241,224 | 64,381 | ||||
Cash and cash equivalents, at end of period | $ | 693,969 | $ | 195,671 | ||
Supplemental disclosure of cash flow information: | ||||||
Cash paid for interest | $ | 20,939 | $ | 2,032 | ||
Consolidation of previously unconsolidated entities | $ | 2,244 | $ | - | ||
Consolidation of previously unconsolidated entities - minority interest | (2,244) | - | ||||
Restricted cash | $ | 4,815 | $ | (2,340) | ||
Restricted cash liability | (4,815) | 2,340 | ||||
Due from sponsor | $ | - | $ | (845) | ||
Due to sponsor | - | 845 | ||||
Share repurchase program | $ | (512) | $ | - | ||
Share repurchase program liability | 512 | - | ||||
Supplemental schedule of non-cash investing and financing activities: | ||||||
Purchase of investment properties | $ | (484,344) | $ | (350,830) | ||
Assumption of mortgage debt | 15,982 | - | ||||
Purchase price adjustments | 138 | - | ||||
Conversion of mortgage receivable to investment property | - | 7,552 | ||||
$ | (468,224) | $ | (343,278) | |||
Distributions payable | $ | 14,610 | $ | 2,531 | ||
Accrued offering costs payable | $ | 4,161 | $ | 3,469 | ||
Write-off of in-place lease intangibles | $ | 849 | $ | - | ||
Write-off of above market lease intangibles | $ | 7 | $ | - | ||
Write-off of below market lease intangibles | $ | 139 | $ | - |
See accompanying notes to consolidated financial statements
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
March 31, 2005
(Dollar amounts in thousands, except per share amounts)
The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Readers of this Quarterly Report should refer to the audited financial statements of Inland Western Retail Real Estate Trust, Inc. for the fiscal year ended December 31, 2004, which are included in the Company's 2004 Annual Report, as certain footnote disclosures contained in such audited financial statements have been omitted from this Report.
(1) Organization and Basis of Accounting
Inland Western Retail Real Estate Trust, Inc. (the "Company") was formed on March 5, 2003 to acquire and manage a diversified portfolio of real estate, primarily multi-tenant shopping centers and single-user net lease properties. The Advisory Agreement provides for Inland Western Retail Real Estate Advisory Services, Inc. (the "Business Manager/Advisor"), an Affiliate of the Company, to be the Business Manager/Advisor to the Company. On September 15, 2003, the Company commenced an initial public offering (the "initial public offering") of up to 250,000,000 shares of common stock at $10 each and the issuance of 20,000,000 shares at $9.50 each which may be distributed pursuant to the Company's distribution reinvestment program (the "DRP"). Sales of shares for the initial public offering were completed on March 22, 2005. The Company filed a registration statement for an offering (the "second offering") which became effective on December 28, 2004 with the Securities and Exchange Commission for up to 250,000,00 0 shares of common stock at $10 each and up to 20,000,000 shares at $9.50 each pursuant to the DRP. Sales of shares in the second offering began in early January 2005.
The Company is qualified and has elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended, for federal income tax purposes commencing with the tax year ending December 31, 2003. Since the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal income tax to the extent it distributes at least 90% of its REIT taxable income to its stockholders. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate tax rates. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property and federal income and excise taxes on its undistributed income.
The Company provides the following programs to facilitate investment in the Company's shares and to provide limited liquidity for stockholders.
The Company allows stockholders who purchase shares in the offerings to purchase additional shares from the Company by automatically reinvesting distributions through the DRP, subject to certain share ownership restrictions. Such purchases under the DRP are not subject to selling commissions or the marketing contribution and due diligence expense allowance, and are made at a price of $9.50 per share.
The Company will repurchase shares under the share repurchase program (the "SRP"), if requested, at least once quarterly on a first-come, first-served basis, subject to certain restrictions. Subject to funds being available, the Company will limit the number of shares repurchased during any calendar year to 5% of the weighted average number of shares outstanding during the prior calendar year. Funding for the SRP will come exclusively from proceeds that the Company receives from the sale of shares under the DRP and such other operating funds, if any, as the Company's board of directors, at its sole discretion, may reserve for this purpose. The board, at its sole discretion, may choose to terminate the SRP after the end of the offering period, or reduce the number of shares purchased under the program, if it determines that the funds allocated to the SRP are needed for other purposes, such as the acquisition, maintenance or repair of properties, or for use in making a declared distribution. A determination by the board to eliminate or reduce the SRP will require the unanimous affirmative vote of the independent directors.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
The accompanying Consolidated Financial Statements include the accounts of the Company, as well as all wholly-owned subsidiaries and consolidated joint venture investments. Wholly-owned subsidiaries generally consist of limited liability companies (LLCs) and limited partnerships (LPs). The effects of all significant intercompany transactions have been eliminated.
The Company would consolidate certain property holding entities and other subsidiaries that it owns less than a 100% equity interest if the entity is a variable interest entity ("VIE") and it is the primary beneficiary (as defined in FASB Interpretation 46(R)Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, as revised ("FIN 46(R)")). For joint ventures that are not VIEs of which the Company owns less than 100% of the equity interest, the Company consolidates the property if it has the direct or indirect ability to make major decisions. Major decisions are defined in the respective joint venture agreements and generally include participating and protective rights such as decisions regarding major leases, encumbering the entities with debt and whether to dispose of the entities.
The Company has a 95% ownership interest in the LLCs which own Gateway Village, Boulevard at the Capital Centre, Towson Circle, Reisterstown Road Plaza and Tollgate Marketplace. However, the Company shares equally in major decisions. These entities are considered VIEs as defined in FIN 46(R) and the Company is considered the primary beneficiary.Therefore, these entities are consolidated by the Company and the 5% outside ownership interest is reflected as minority interest in the accompanying Consolidated Financial Statements.
The Company has a 60.9% ownership interest in, and is the controlling member of the LLC which owns Cardiff Hall East Apartments. The other members' interests in the property are reflected as minority interest in the accompanying Consolidated Financial Statements.
The Company has a 75% ownership in the LP which owns North Plaza Shopping Center. The other partners' interests in the property are reflected as minority interest in the accompanying Consolidated Financial Statements.
Minority interest is adjusted for additional contributions and distributions to minority holders as well as the minority holders' share of the net earnings or losses of each respective entity.
(2) Summary of Significant Accounting Policies
Rental income is recognized on a straight-line basis over the term of each lease. The difference between rental income earned on a straight-line basis and the cash rent due under the provisions of the lease agreements is recorded as deferred rent receivable and is included as a component of accounts and rents receivable in the accompanying Consolidated Balance Sheets.
The Company records lease termination income if there is a signed termination agreement, all of the conditions of the agreement have been met, and the tenant is no longer occupying the property. Upon early lease termination, the Company provides for losses related to unrecovered intangibles and other assets.
The Company considers all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased with a maturity of three months or less, at the date of purchase, to be cash equivalents. The Company maintains its cash and cash equivalents at financial institutions. The combined account balances at one or more institutions periodically exceed the Federal Depository Insurance Corporation ("FDIC") insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company believes that the risk is not significant, as the Company does not anticipate the financial institutions' non-performance.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
The Company classifies its investment in securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. All securities not included in trading or held-to-maturity are classified as available for sale. Investment in securities at March 31, 2005 consists of common stock investments and is classified as available-for-sale securities and is recorded at fair value. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis. A decline in the market value of any available-for-sale security below c ost that is deemed to be other than temporary, results in a reduction in the carrying amount to fair value. The impairment is charged to earnings and a new costs basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year end and forecasted performance of the investee. Of the investment securities held on March 31, 2005, the Company has accumulated other comprehensive income of $275.
The Company allocates the purchase price of each acquired investment property between land, building and improvements, acquired above market and below market leases, in-place lease value, and any assumed financing that is determined to be above or below market terms. In addition, we allocate a portion of the purchase price to the value of the customer relationships. The allocation of the purchase price is an area that requires judgment and significant estimates. The Company uses the information contained in the independent appraisal obtained at acquisition as the primary basis for the allocation to land and building and improvements. The Company determines whether any financing assumed is above or below market based upon comparison to similar financing terms for similar investment properties. The Company allocates a portion of the purchase price to the estimated acquired in-place lease costs based on estimated lease execution costs for similar leases as well as lost rent payments during assumed lease-up pe riod when calculating as if vacant fair values. The Company considers various factors including geographic location and size of leased space. The Company also evaluates each acquired lease based upon current market rates at the acquisition date and considers various factors including geographical location, size and location of leased space within the investment property, tenant profile, and the credit risk of the tenant in determining whether the acquired lease is above or below market lease costs. After an acquired lease is determined to be above or below market, the Company allocates a portion of the purchase price to such above or below acquired lease costs based upon the present value of the difference between the contractual lease rate and the estimated market rate. For below market leases with fixed rate renewals, renewal periods are included in the calculation of below market in-place lease values. The determination of the discount rate used in the present value calculation is based upon the "risk free rate." This discount rate is a significant factor in determining the market valuation which requires the Company's judgment of subjective factors such as market knowledge, economics, demographics, location, visibility, age and physical condition of the property.
The application of the Financial Accounting Standards Board's Statement of Financial Accounting Standards ("SFAS") Nos. 141 and 142 resulted in the recognition upon acquisition of additional intangible assets and liabilities relating to real estate acquisitions during the quarter ended March 31, 2005. The portion of the purchase price allocated to acquired above market lease costs and acquired below market lease costs are amortized on a straight line basis over the life of the related lease as an adjustment to rental income and over the respective renewal period for below market lease costs with fixed rate renewals. Amortization pertaining to the above market lease costs of $1,470 was applied as a reduction to rental income for the three months ended March 31, 2005. Amortization pertaining to the below market lease costs of $2,860 was applied as an increase to rental income for the three months ended March 31, 2005.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
The portion of the purchase price allocated to acquired in-place lease intangibles is amortized on a straight line basis over the life of the related lease. The Company incurred amortization expense pertaining to acquired in-place lease intangibles of $7,816 for the three month period ended March 31, 2005.
The portion of the purchase price allocated to customer relationship value is amortized on a straight line basis over the life of the related lease. The Company incurred amortization expense pertaining to customer relationship value of $55 for the three months ended March 31, 2005.
The following table presents the amortization during the next five years related to the acquired in-place lease intangibles, customer relationship value, acquired above market lease costs and the below market lease costs for properties owned at March 31, 2005.
April 1, 2005 through December 31, | |||||||
Amortization of: | 2005 | 2006 | 2007 | 2008 | 2009 | Thereafter | |
Acquired above | |||||||
market lease costs | $ | (4,399) | (5,686) | (4,855) | (4,569) | (4,069) | (19,624) |
Acquired below | |||||||
market lease costs | 8,071 | 10,017 | 9,040 | 8,035 | 7,213 | 54,028 | |
Net rental income | |||||||
increase | $ | 3,672 | 4,331 | 4,185 | 3,466 | 3,144 | 34,404 |
Acquired in-place lease | |||||||
intangibles | $ | 22,121 | 29,494 | 29,494 | 29,440 | 28,169 | 123,996 |
Customer relationship value | $ | 195 | 260 | 260 | 260 | 260 | 1,306 |
Depreciation expense is computed using the straight line method. Building and improvements are depreciated based upon estimated useful lives of 30 years for building and improvements and 15 years for site improvements.
In accordance with SFAS No. 144, the Company performs a quarterly analysis to identify impairment indicators to ensure that the investment property's carrying value does not exceed its fair value. The valuation analysis performed by the Company is based upon many factors which require difficult, complex or subjective judgments to be made. Such assumptions include projecting vacancy rates, rental rates, operating expenses, lease terms, tenant financial strength, economy, demographics, property location, capital expenditures and sales value among other assumptions to be made upon valuing each property. This valuation is sensitive to the actual results of any of these uncertain factors, either individually or taken as a whole. Based upon the Company's judgment, no impairment was warranted as of March 31, 2005 or December 31, 2004.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
In conjunction with certain acquisitions, the Company receives payments under master lease agreements pertaining to certain non-revenue producing spaces either at the time of, or subsequent to the purchase of some of the Company's properties. Upon receipt of the payments, the receipts are recorded as a reduction in the purchase price of the related properties rather than as rental income. These master leases were established at the time of purchase in order to mitigate the potential negative effects of loss of rent and expense reimbursements. Master lease payments are received through a draw of funds escrowed at the time of purchase and may cover a period from three months to three years. These funds may be released to either the Company or the seller when certain leasing conditions are met. Restricted cash includes funds received by third party escrow agents from sellers pertaining to master lease agreements. The Company records the third party escrow funds as both an asset and a c orresponding liability, until certain leasing conditions are met. These amounts are recorded as restricted cash and restricted cash liabilities on the Consolidated Balance Sheets.
Restricted escrows primarily consist of lenders' restricted escrows and funds restricted through joint ventures.
Notes receivable relate to real estate financing arrangements and bear interest at a market rate based on the borrower's credit quality and are recorded at face value. Interest is recognized over the life of the note. The Company requires collateral for the notes.
A note is considered impaired pursuant to SFAS No. 114, ("SFAS 114")Accounting by Creditors for Impairment of a Loan. Pursuant to SFAS 114, a note is impaired if it is probable that the Company will not collect all principal and interest contractually due. The impairment is measured based on the present value of expected future cash flows discounted at the note's effective interest rate. The Company does not accrue interest when a note is considered impaired. When ultimate collectibility of the principal balance of the impaired note is in doubt, all cash receipts on the impaired note are applied to reduce the principal amount of the note until the principal has been recovered and are recognized as interest income, thereafter.
The carrying amount of the Company's debt approximates fair value. The Company estimates the fair value of its mortgages payable by discounting the future cash flows of each instrument at rates currently offered to the Company for similar debt instruments of comparable maturities by the Company's lenders. The carrying amount of the Company's other financial instruments approximate fair value because of the relatively short maturity of these instruments.
Certain reclassifications have been made to the 2004 financial statements to conform to the 2005 presentations.
New Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 153,Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29, ("SFAS 153"). The amendments made by SFAS 153 are based on the principle that exchanges of nonmonetary assets should be measured on the fair value of assets exchanged. It eliminates the exceptions for nonmonetary exchanges of similar productive assets and replaces it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. The statement is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not believe that the adoption of SFAS 153 will have a material impact on its Consolidated Financial Statements.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
(3) Transactions with Affiliates
The Business Manager/Advisor contributed $200 to the capital of the Company for which it received 20,000 shares of common stock.
As of March 31, 2005 and December 31, 2004, the Company had incurred $306,450 and $234,014 of offering costs for both the initial public offering and second offering, of which $228,971 and $175,509, respectively, was paid or accrued to affiliates. Pursuant to the terms of the offerings, the Business Manager/Advisor has guaranteed payment of all public offering expenses (excluding sales commissions and the marketing contribution and the due diligence expense allowance) in excess of 5.5% of the gross proceeds of the offering or all organization and offering expenses (including selling commissions) which together exceed 15% of gross proceeds. As of March 31, 2005 and December 31, 2004, offering costs did not exceed the 5.5% and 15% limitations. The Company anticipates that these costs will not exceed these limitations upon completion of the offerings.
The Business Manager/Advisor and its affiliates are entitled to reimbursement for salaries and expenses of employees of the Business Manager/Advisor and its affiliates relating to the offerings. In addition, an affiliate of the Business Manager/Advisor is entitled to receive selling commissions, and the marketing contribution and due diligence expense allowance from the Company in connection with the offerings. Such offering costs are offset against the stockholders' equity accounts. Such costs totaled $228,971 and $175,509, of which $4,030 and $2,880 was unpaid at March 31, 2005 and December 31, 2004, respectively.
The Business Manager/Advisor and its affiliates are entitled to reimbursement for general and administrative costs relating to the Company's administration. Such costs are included in general and administrative expenses to affiliates. For the three month periods ended March 31, 2005 and 2004, the Company incurred $981 and $266, respectively, of these costs. $1,127 and $957 remained unpaid as of March 31, 2005 and December 31, 2004, respectively, and are included in due to affiliates on the Consolidated Balance Sheets.
An affiliate of the Business Manager/Advisor provides loan servicing to the Company for an annual fee. The agreement allows for annual fees totaling .03% of the first $1 billion in mortgage balance outstanding and .01% of the remaining mortgage balances, payable monthly. Such fees totaled $91 and $4 for the three months ended March 31, 2005 and 2004, respectively. None remained unpaid as of March 31, 2005 and December 31, 2004.
The Company uses the services of an affiliate of the Business Manager/Advisor to facilitate the mortgage financing that the Company obtains on some of the properties purchased. The Company pays the affiliate .02% of the principal amount of each loan obtained on the Company's behalf. Such costs are capitalized as loan fees and amortized over the respective loan term. For the three months ended March 31, 2005 and 2004, the Company paid loan fees totaling $900 and $368, respectively, to this affiliate. No amounts remained unpaid as of March 31, 2005 and December 31, 2004.
The Company may pay an advisor asset management fee of not more than 1% of the average assets. Average asset value is defined as the average of the total book value, including acquired intangibles, of the Company's real estate assets plus the Company's loans receivable secured by real estate, before reserves for depreciation, reserves for bad debt or other similar non-cash reserves. The Company computes the average assets by taking the average of these values at the end of each month for which the fee is being calculated. The fee is payable quarterly in an amount equal to 1/4 of 1% of average assets as of the last day of the immediately preceding quarter. For any year in which the Company qualifies as a REIT, the advisor must reimburse the Company for the following amounts if any: (1) the amounts by which total operating expenses, the sum of the advisor asset management fee plus other operating expenses, paid during the previous fiscal year exceed the greater of: (i) 2% of average assets for that fiscal ye ar, or (ii) 25% of net income for that fiscal year; plus (2) an
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
amount, which will not exceed the advisor asset management fee for that year, equal to any difference between the total amount of distributions to stockholders for that year and the 6% minimum annual return on the net investment of stockholders. The Company neither paid nor accrued such fees for the three months ended March 31, 2004 because the Business Manager/Advisor agreed to forego such fees. The Company accrued fees totaling $925 for the three months ended March 31, 2005, all of which remained unpaid as of that date, and did forego any additional amount.
The property managers, entities owned principally by individuals who are affiliates of the Business Manager/Advisor, are entitled to receive property management fees totaling 4.5% of gross operating income, for management and leasing services. The Company incurred property management fees of $3,683 and $413 for the three months ended March 31, 2005 and 2004, respectively. None remained unpaid as of March 31, 2005 and December 31, 2004.
The Company established a discount stock purchase policy for affiliates of the Company and the Business Manager/Advisor that enables the affiliates to purchase shares of common stock at a discount at either $8.95 or $9.50 per share depending on when the shares are purchased. The Company sold 67,138 and 439,906 shares of common stock to affiliates and recognized an expense related to these discounts of $43 and $300 for the three months ended March 31, 2005 and 2004, respectively.
As of March 31, 2005 and December 31, 2004, the Company was due funds from affiliates for costs paid by the Company on their behalf in the amount of $52 and $654, respectively. During 2004, the sponsor advanced funds to the Company for a portion of distributions paid to the Company's shareholders until funds available for distributions were sufficient to cover the distributions. The sponsor forgave $2,369 of these amounts during the second quarter of 2004 and these funds were no longer due and were recorded as a contribution to capital in the accompanying Consolidated Financial Statements. As of March 31, 2005 and December 31, 2004, the Company owed funds to the sponsor in the amount of $3,523 for repayment of the funds advanced for payment of distributions for 2004. No funds have been advanced during 2005.
(4) Stock Option Plan
The Company has adopted an Independent Director Stock Option Plan (the "Plan") which, subject to certain conditions, provides for the grant to each independent director of an option to acquire 3,000 shares following their becoming a director and for the grant of additional options to acquire 500 shares on the date of each annual stockholders' meeting. The options for the initial 3,000 shares are exercisable as follows: 1,000 shares on the date of grant and 1,000 shares on each of the first and second anniversaries of the date of grant. The subsequent options will be exercisable on the second anniversary of the date of grant. The initial options will be exercisable at $8.95 per share. The subsequent options will be exercisable at the fair market value of a share on the last business day preceding the annual meeting of stockholders as determined under the Plan. During the three months ended March 31, 2005, the Company did not issue any new options. As of March 31, 2005 and December 31, 2004, there were a tota l of 17,500 options issued, of which none had been exercised or expired.
The per share weighted average fair value of options granted was $0.60 on the date of the grant using the Black Scholes option-pricing model with the following assumptions: expected dividend yield of 8%, risk free interest rate of 2.0%, expected life of five years and expected volatility rate of 18.0%. During the three months ended March 31, 2005 and 2004, the Company recorded $1 and $.75, respectively, of expense related to stock options.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
(5) Leases
Master Lease Agreements
In conjunction with certain acquisitions, the Company received payments under master lease agreements pertaining to certain non-revenue producing spaces at the time of purchase for periods ranging from three months to three years after the date of purchase or until the spaces are leased. As these payments are received, they are recorded as a reduction in the purchase price of the respective property rather than as rental income. The cumulative amount of such payments was $4,811 and $3,025 as of March 31, 2005 and December 31, 2004, respectively.
Operating Leases
Minimum lease payments to be received under operating leases, excluding rental income under master lease agreements and assuming no expiring leases are renewed, are as follows:
Minimum Lease | |||
Payments | |||
2005 | $ | 283,877 | * |
2006 | 280,895 | ||
2007 | 271,043 | ||
2008 | 258,887 | ||
2009 | 236,251 | ||
Thereafter | 1,494,534 | ||
Total | $ | 2,825,487 |
* For the twelve month period from January 1, 2005 through December 31, 2005.
The remaining lease terms range from one year to 55 years. Pursuant to the lease agreements, tenants of the property are required to reimburse the Company for a portion or their entire pro rata share of the real estate taxes, operating expenses and management fees of the properties. Such amounts are included in tenant recovery income.
Ground Leases
The Company leases land under noncancelable operating leases at certain of the properties expiring in various years from 2028 to 2096. For the three months ended March 31, 2005, ground lease rent was $1,458. No ground lease payments were required to be made during the three months ended March 31 2004. Minimum future rental payments to be paid under the ground leases are as follows:
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
Minimum Lease | |||
Payments | |||
2005 | $ | 3,185 | * |
2006 | 3,191 | ||
2007 | 3,244 | ||
2008 | 3,247 | ||
2009 | 3,412 | ||
Thereafter | 360,404 | ||
Total | $ | 376,683 |
* For the twelve month period from January 1, 2005 through December 31, 2005.
(6) Notes Receivable
The notes receivable balance of $32,578 as of March 31, 2005 consisted of two installment notes, one from Newman Development Group of Gilroy, LLC (Gilroy) and one from Newman Development Group of Richland, LLC (Richland) that mature on July 15, 2005 and August 15, 2005, respectively. These notes are secured by first mortgages on Pacheco Pass Shopping Center and Quakertown Shopping Center, respectively and are guaranteed personally by the owners of Gilroy and Richland. Interest only is due in advance on the first of each month at a rate of 6.993% per annum for Gilroy and 7.5572% per annum for Richland. Upon closing, an interest reserve escrow totaling three months of interest payments was established for both notes.
(7) Mortgages and Note Payable
Mortgage loans outstanding as of March 31, 2005 were $2,144,760 and had a weighted average interest rate of 4.64%. Of this amount, $2,033,762 had fixed rates ranging from 3.96% to 8.02% and a weighted average fixed rate of 4.68% at March 31, 2005. The rate of 8.02% represented the interest rate on the mortgage for Cardiff Hall East (Cardiff), a consolidated joint venture investment. Excluding the Cardiff mortgage, the highest fixed rate on our mortgage debt was 6.34%. The remaining $110,998 represented variable rate loans with a weighted average interest rate of 3.81% at March 31, 2005. Properties with a net carrying value of $3,449,702 at March 31, 2005 and related tenant leases are pledged as collateral. As of March 31, 2005, scheduled maturities for the Company's outstanding mortgage indebtedness had various due dates through August 2023.
The following table shows the mortgage debt maturing during the next five years:
2005 | 2006 | 2007 | 2008 | 2009 | Thereafter | |
Maturing debt | ||||||
Fixed rate debt | 846 | 1,217 | 58,156 | 47,584 | 965,872 | 960,087 |
Variable rate debt | - | - | - | - | 110,998 | - |
The debt is cross-collateralized among properties in connection with the financings of: Heritage Towne Crossing and Eckerd Drug Stores in Norman and Edmond, OK; the Eckerd Drug Stores in Crossville, TN, Columbia and Greer, SC, and Kill Devil Hills, NC; the Academy Sports stores in Houma, LA, and Port Arthur, Midland and San Antonio, TX; Shaw's Supermarket and Shops at Park Place; and Fairgrounds Plaza and another one of the seller's properties located in Norwalk, CT which the Company currently does not intend to acquire.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
As part of the Plaza Santa Fe II loan assumption, a promissory note approximating $414 was executed between the Company and the seller for the total amount that the seller had paid into escrows under the loan agreement as of the acquisition date. The note bears interest at the rate of prime less 3.00%, payable to the seller upon maturity of the note in 2006. The seller also agreed to fund the Company's monthly required payments into this escrow for a period of two years. Each monthly payment funded by the seller increases the principal balance of the note payable. The outstanding note payable balance at March 31, 2005 is approximately $643.
(8) Line of Credit
The Company has an unsecured line of credit facility with a bank for up to $100,000 with an optional unsecured borrowing capacity of $150,000, for a total unsecured borrowing capacity of $250,000. The facility has an initial term of one year with two one-year extension options, with an annual variable interest rate. The funds from this line of credit may be used to provide liquidity from the time a property is purchased until permanent debt is placed on that property. The line of credit requires interest only payments monthly at the rate equal to the London InterBank Offered Rate or LIBOR plus up to 190 basis points depending on the Company's leverage ratio. LIBOR ranged from 2.40% to 2.87% during the quarter ended March 31, 2005. The Company is also required to pay, on a quarterly basis, an amount ranging from .15% to .25%, per annum, on the average daily undrawn funds under this line. The line of credit requires compliance with certain covenants, such as debt service ratios, minimu m net worth requirements, distribution limitations and investment restrictions. As of March 31, 2005, the Company was in compliance with such covenants. There was no outstanding balance on the line as of March 31, 2005.
(9) Investment in Unconsolidated Joint Ventures
On August 11, 2004, CR Investors, LLC, an entity wholly owned by Reisterstown Plaza Holdings, LLC (a joint venture entity consolidated by the Company), invested $5,782 to purchase a 36.5% tenancy in common interest in an apartment complex known as Courthouse Square located in Towson, MD.
On November 5, 2004, CRP Power Plant Investors, LLC, an entity wholly owned by Reisterstown Plaza Holdings, LLC (a joint venture entity consolidated by the Company), invested $15,000 to purchase a 37.5% interest in a retail/office complex known as The Power Plant located in Baltimore, MD. On the same day, CGW Power Plant Investors, LLC, an entity wholly owned by Gateway Village Holding, LLC (a joint venture entity consolidated by the Company), invested $5,000,000 to purchase a 12.5% interest in The Power Plant.
On November 5, 2004, CTC Pier IV Investors, LLC, an entity wholly owned by Towson Circle Holding, LLC (a joint venture entity consolidated by the Company), invested $5,000 to purchase a 16.67% interest in a retail/office complex known as Pier IV located in Baltimore, MD. On the same day, CTOLL Pier IV Investors, LLC, an entity wholly owned by Tollgate Marketplace Holding Company, LLC (a joint venture entity consolidated by the Company), invested $15,000,000 to purchase a 50.0% interest in Pier IV.
On December 29, 2004, CGW Louisville Investors, LLC, an entity wholly owned by Gateway Village Holding, LLC (a joint venture entity consolidated by the Company), invested $1,900 to purchase a 3.3% interest in a retail/office complex known as Louisville Galleria located in Louisville, KY. On the same day, CTOLL Louisville Investors, LLC, an entity wholly owned by Tollgate Marketplace Holding Company, LLC (a joint venture entity consolidated by the Company), invested $7,200,000 to purchase a 12.0% interest in Louisville Galleria. Also, on the same day, CCC Louisville Investors, LLC an entity wholly owned by Capital Centre Holdings, LLC (a joint venture entity consolidated by the Company), invested $19,100,000 to purchase a 31.8% member interest in Louisville Galleria.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
These investments are accounted for utilizing the equity method of accounting. Under the equity method of accounting, the net equity investment of the Company is reflected on the Consolidated Balance Sheets and the Consolidated Statements of Operations includes the Company's share of net income or loss from the unconsolidated entity. For the three months ended March 31, 2005, all equity in earnings of unconsolidated entities was allocated to the Company's joint venture partners in accordance with the joint venture operating agreements.
(10) Segment Reporting
The Company owns and seeks to acquire multi-tenant shopping centers and single-user net lease properties primarily in the western United States. The Company's shopping centers are typically anchored by discount retailers, home improvement retailers, grocery and drugstores complemented with additional stores providing a wide range of other goods and services to shoppers.
The Company assesses and measures operating results on an individual property basis for each of its properties based on net property operations. Since all of the Company's properties exhibit highly similar economic characteristics, cater to the day-to-day living needs of their respective surrounding communities, and offer similar degrees of risk and opportunities for growth, the properties have been aggregated and reported as one operating segment.
Net property operations are summarized in the following table for the three months ended March 31, 2005 and 2004, along with a reconciliation to net income.
Three months ended | Three months ended | |||
March 31, 2005 | March 31, 2004 | |||
Property rental income and additional property income | $ | 90,787 | $ | 9,306 |
Total property operating expenses | (24,014) | (2,021) | ||
Interest expense | (23,021) | (2,559) | ||
Net property operations | 43,752 | 4,726 | ||
Other income | 2,611 | 211 | ||
Less non-property expenses: | ||||
General and administrative expenses | (1,884) | (1,208) | ||
Advisor asset management fee | (925) | - | ||
Depreciation and amortization | (34,759) | (3,693) | ||
Realized gain on sale of treasury contracts | 8 | - | ||
Minority interests | 470 | - | ||
Equity in earnings (losses) of unconsolidated entities | (259) | - | ||
Net income | $ | 9,014 | $ | 36 |
The following table summarizes property asset information as of March 31, 2005 and December 31, 2004.
March 31, 2005 | December 31, 2004 | |||
Total assets: | ||||
Rental real estate | $ | 4,112,908 | $ | 3,601,513 |
Non-segment assets | 817,499 | 354,303 | ||
$ | 4,930,407 | $ | 3,955,816 |
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
The Company does not derive any of its consolidated revenue from foreign countries and does not have any major customers that individually account for 10% or more of the Company's consolidated revenues.
(11) Earnings per Share
Basic earnings per share ("EPS") are computed by dividing income by the weighted average number of common shares outstanding for the period (the "common shares"). Diluted EPS is computed by dividing net income by the common shares plus shares issuable upon exercising options or other contracts. As of March 31, 2005 and 2004, options to purchase 17,500 and 15,000 shares of common stock, respectively, at an exercise price of $8.95 per share were outstanding. These options were not included in the computation of basic or diluted EPS as the effect would be immaterial.
The basic and diluted weighted average number of common shares outstanding was 251,114,531 and 32,314,792 for the three months ended March 31, 2005 and 2004, respectively.
(12) Commitments and Contingencies
The Company has acquired several properties which have earnout components, meaning the Company did not pay for portions of these properties that were not rent producing. The Company is obligated, under certain agreements, to pay for those portions when the tenant moves into its space and begins to pay rent. The earnout payments are based on a predetermined formula. Each earnout agreement has a time limit regarding the obligation to pay any additional monies. If at the end of the time period allowed certain space has not been leased and occupied, the Company will own that space without any further payment obligation to the seller. Based on pro-forma leasing rates, the Company may pay as much as $188,827 in the future as retail space covered by earnout agreements is occupied and becomes rent producing.
During 2004, the Company entered into two installment note agreements in which the Company is obligated to fund up to a total of $33,398. The notes have stated interest rates of 6.993% and 7.5572% per annum and mature in July 2005 and August 2005. Each note requires monthly interest payments with the entire principal balance due at maturity. The combined receivable balance at March 31, 2005 was $32,578. Therefore, the Company may be required to fund up to an additional $820 on these notes.
The Company has obtained seven irrevocable letters of credit related to loan fundings against earnout spaces at certain properties. Once the Company purchases the remaining portion of these properties and meet certain occupancy requirements, the letters of credit will be released. The balance of outstanding letters of credit at March 31, 2005 is $26,538.
The Company has entered into interest rate lock agreements with various lenders to secure interest rates on mortgage debt on properties the Company currently owns or plans to purchase in the future. The Company has outstanding rate lock deposits in the amount of $13,499 as of March 31, 2005 which are applied as credits to the mortgage fundings as they occur. These agreements lock interest rates from 4.45% to 5.13% for periods from 60 days to 90 days on approximately $980,000 in principal.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
The Company is currently considering acquiring 34 properties for an estimated purchase price of $746,906. The Company's decision to acquire each property will generally depend upon no material adverse change occurring relating to the property, the tenants or in the local economic conditions and the Company's receipt of satisfactory due diligence information including appraisals, environmental reports and lease information prior to purchasing the property.
(13) Subsequent Events
The Company issued 24,008,871 shares of common stock and repurchased 56,154 shares of common stock from April 1, 2005 through May 2, 2005, resulting in gross proceeds of approximately $239,000.
The Company paid distributions of $14,610 to its stockholders in April 2005.
The Company acquired the following properties during the period April 1 to May 2, 2005. The respective acquisitions are detailed in the table below.
Date | Year | Approximate Purchase Price | Gross Leasable Area | ||
Acquired | Property | Built | ($) | (Sq. Ft.) | Major Tenants |
04/01/05 | The Brickyard | 1977/ | 76,900 | 234,081 | Jewel-Osco |
04/11/05 | Walgreens | 2000 | 5,850 | 16,335 | Walgreens |
04/13/05 | Greensburg Commons | 1999 | 24,200 | 272,893 | Wal-Mart Supercenter |
04/14/05 | Walgreens | 1999 | 4,415 | 13,956 | Walgreens |
04/18/05 | Bear Creek | 2002 | 19,406 | 87,912 | HEB Grocery |
04/18/05 | Grapevine Crossing | 2001 | 23,300 | 125,381 | Best Buy |
04/19/05 | Publix Supermarket | 2005 | 7,970 | 44,271 | Publix |
04/20/05 | Bison Hollow | 2004 | 19,525 | 134,798 | Michaels |
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
Date | Year | Approximate Purchase Price | Gross Leasable Area | ||
Acquired | Property | Built | ($) | (Sq. Ft.) | Major Tenants |
04/29/05 | Massillion Commons | 1986/ | 18,411 | 245,993 | Home Depot |
04/29/05 | Brown's Lane | 1985 | 11,425 | 74,715 | Super Stop N Shop |
04/29/05 | Commons at Temecula | 1999 | 51,536 | 292,661 | JoAnn Fabrics |
04/29/05 | Boulevard Plaza | 1994 | 17,068 | 103,471 | Rojacks/Supervalue |
04/29/05 | Clear Shores Shopping Center | 2003-2004 | 9,121 | 60,155 | Office Depot |
04/29/05 | Vail Ranch | 2004-2005 | 24,525 | 101,766 | Henry's Marketplace |
04/29/05 | Cuyahoga Falls Market Center | 1998 | 15,062 | 76,361 | PETsMART |
04/29/05 | Edwards Multiplex | 2000 | 47,242 | 124,614 | Edwards Multiplex |
05/02/05 | Edwards Multiplex | 1999 | 33,437 | 94,600 | Edwards Multiplex |
05/02/05 | Page Field Commons | 1999 | 46,507 | 322,051 | Toys R Us |
05/02/05 | University Square | 2003 | 54,481 | 287,172 | Tops Supermarket |
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
The mortgage debt and financings obtained during the period April 1 to May 2, 2005, are detailed in the table below.
Date | Maturity | Principal Borrowed | ||
Funded | Mortgage Payable | Annual Interest Rate | Date | ($) |
04/05/05 | Phenix Crossing | 5.030% | 05/01/10 | 5,535 |
04/07/05 | 23rd Street | 5.060% | 05/01/10 | 3,990 |
04/08/05 | High Ridge Crossing | 4.815% | 04/11/10 | 7,439 |
04/11/05 | Four Peaks Plaza | 4.815% | 04/11/10 | 17,072 |
04/12/05 | Southgate Plaza | 4.690% | 05/01/10 | 6,740 |
04/13/05 | Greensburg Commons | LIBOR + 1.55 | 05/12/09 | 14,200 |
04/19/05 | CVS Pharmacy | 4.690% | 05/01/10 | 1,685 |
04/19/05 | Stateline Station | 5.007% | 05/01/10 | 17,600 |
04/20/05 | CarMax | 5.690% | 05/01/10 | 8,030 |
04/20/05 | Blockbuster at Five Forks | 4.815% | 02/11/10 | 825 |
04/25/05 | Plaza at Riverlakes | 4.700% | 05/01/10 | 9,350 |
The Company is obligated under earnout agreements to pay for certain tenant space in its existing properties after the tenant moves into its space and begins paying rent. During the period from April 1 to May 2, 2005, the Company funded earnouts totaling $2,636 at 2 of its existing properties.
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Notes to Consolidated Financial Statements
(continued)
(Dollar amounts in thousands, except per share amounts)
On April 28, 2005, the Company funded the remaining principal amount on its notes receivable which originated in 2004. The Company is not obligated to make any further fundings on these notes.
On April 14, 2005, the Company funded approximately $18,900 as an initial funding against an approximate $43,150 construction loan on a property located in McKinney, TX. The construction loan has a stated interest rate of 8.50% and a maturity date of October 2007. The loan is secured by a first mortgage on the property.
On May 2, 2005, the Company funded approximately $9,000 as an initial funding against an approximate $86,000 construction loan on a property located in Southlake, TX. The construction loan has a stated interest rate of 7.48% and a maturity date of May 2007. The loan is secured by a first mortgage on the property and is guaranteed by individuals of the borrower.
During the period from April 1 to May 2, 2005, the Company entered into rate lock agreements which lock interest rates from 4.83% to 4.93% for periods of 90 days each on approximately $400,000 in principal.
Inland Western Retail Real Estate Trust, Inc.
Pro Forma Consolidated Balance Sheet
March 31, 2005
(unaudited)
The following unaudited Pro Forma Consolidated Balance Sheet is presented as if the acquisitions of the properties and the issuance of the notes receivable had occurred on March 31, 2005.
This unaudited Pro Forma Consolidated Balance Sheet is not necessarily indicative of what the actual financial position would have been at March 31, 2005, nor does it purport to represent our future financial position. No pro forma adjustments have been made for any potential property acquisitions identified as of June 8, 2005. The Company does not consider these properties as probable under Rule 3-14 of Regulation S-X as the Company has not completed the due diligence process on these properties. Additionally, the Company has not received sufficient offering proceeds or obtained firm financing commitments to acquire all of these properties as of June 8, 2005. The Company believes it will have sufficient cash from offering proceeds raised and from additional financing proceeds to acquire these properties if and when the Company is prepared to acquire these properties.
Inland Western Retail Real Estate Trust, Inc.
Pro Forma Consolidated Balance Sheet
March 31, 2005
(unaudited)
(Dollar amounts in thousands, except per share amounts)
Historical | Pro Forma | |||
(A) | Adjustments | Pro Forma | ||
Assets | ||||
Net investment properties (B) | $ | 3,649,652 | 1,659,768 | 5,309,420 |
Cash and cash equivalents | 693,969 | (598,610) | 95,359 | |
Restricted cash | 61,108 | - | 61,108 | |
Restricted escrows | 20,956 | - | 20,956 | |
Investment in marketable securities and treasury contracts | 4,077 | - | 4,077 | |
Investment in unconsolidated joint ventures | 70,358 | - | 70,358 | |
Accounts and rents receivable | 28,149 | - | 28,149 | |
Due from affiliates | 52 | - | 52 | |
Notes receivable | 32,578 | 84,902 | 117,480 | |
Acquired in-place lease intangibles and customer relationship value (B) (D) | 265,255 | 129,802 | 395,057 | |
Acquired above market lease intangibles (B) (D) | 43,202 | 3,872 | 47,074 | |
Loan fees, leasing fees and loan fee deposits (G) | 28,797 | (11,176) | 17,621 | |
Other assets (G) | 32,254 | (24,868) | 7,386 | |
Total assets | $ | 4,930,407 | 1,243,690 | 6,174,097 |
Liabilities and Stockholders' Equity | ||||
Mortgage and notes payable (B) (E) | 2,145,403 | 763,107 | 2,908,510 | |
Accounts payable | 3,056 | - | 3,056 | |
Accrued offering costs due to affiliates | 4,030 | - | 4,030 | |
Accrued offering costs due to non-affiliates | 131 | - | 131 | |
Accrued interest payable | 6,388 | - | 6,388 | |
Tenant improvements payable | 4,808 | - | 4,808 | |
Accrued real estate taxes | 9,756 | - | 9,756 | |
Distributions payable | 14,610 | - | 14,610 | |
Security deposits | 3,979 | - | 3,979 | |
Prepaid rental income and other liabilities | 9,047 | - | 9,047 | |
Advances from sponsor | 3,523 | - | 3,523 | |
Acquired below market lease intangibles (B) (D) | 96,404 | 12,864 | 109,268 | |
Restricted cash liability | 61,108 | - | 61,108 | |
Due to affiliates | 2,051 | - | 2,051 | |
Total liabilities | 2,364,294 | 775,971 | 3,140,265 | |
Minority interests | 101,241 | - | 101,241 | |
Common stock (C) | 286 | 53 | 339 | |
Additional paid-in capital (net of offering costs) (C) | 2,549,106 | 467,666 | 3,016,772 | |
Accumulated distributions in excess of net income (F) | (84,795) | - | (84,795) | |
Accumulated other comprehensive income | 275 | - | 275 | |
Total stockholders' equity | 2,464,872 | 467,719 | 2,932,591 | |
Total liabilities and stockholders' equity | $ | 4,930,407 | 1,243,690 | 6,174,097 |
See accompanying notes to pro forma consolidated balance sheet.
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
March 31, 2005
(unaudited)
(Dollar amounts in thousands, except per share amounts)
- The historical column represents our Consolidated Balance Sheet as of March 31, 2005 as filed with the Securities Exchange Commission on Form 10-Q. As of March 31, 2005, the Company had sold 280,734,975 shares to the public and 5,089,966 shares had been issued pursuant to the Company's distribution reinvestment program. In addition, the company had repurchased 211,580 shares pursuant to the Company's share repurchase program. As a result, the Company received $2,853,716 of gross offering proceeds. In addition, the Company received the Advisor's capital contribution of $200 for which the Advisor was issued 20,000 shares.
- The pro forma adjustments reflect the acquisition of the following properties or earnout components. The Company is obligated under earnout agreements to pay for certain tenant space in its existing properties after the tenant moves into its space and begins paying rent. The mortgages payable represent mortgages either obtained from a third party, or mortgages assumed as part of the acquisition. No pro forma adjustment has been made for prorations or other closing costs as the amounts are not significant:
Acquisition | Mortgage | |
Price | Payable | |
Purchases | ||
The Brickyard | $ 76,900 | $ - |
Walgreens - Northwoods | 5,850 | 3,218 |
Greensburg Commons | 24,200 | 14,200 |
Walgreens - West Allis | 4,415 | 2,600 |
Grapevine Crossing | 23,300 | 12,815 |
Bear Creek | 19,406 | 11,450 |
Publix - Mountain Brook | 7,970 | 4,384 |
Bison Hollow | 19,525 | 10,774 |
Massillon Village | 18,411 | 10,126 |
Brown's Lane | 11,425 | 6,284 |
Commons at Temecula | 51,536 | 29,623 |
Boulevard Plaza | 17,068 | 6,300 |
Clearlake Shores | 9,121 | 6,683 |
Vail Ranch | 24,525 | 13,489 |
Cuyahoga Falls Market Center | 15,062 | 8,285 |
Edwards Multiplex - Ontario | 47,242 | 27,875 |
Edwards Multiplex - Fresno | 33,437 | 19,730 |
Page Field Commons | 46,507 | 26,853 |
University Square | 54,481 | 31,340 |
Circuit City Corporate Headquarters | 53,000 | 31,270 |
The Gateway | 143,574 | 98,781 |
Lakepointe Towne Crossing | 27,570 | 21,714 |
CVS Pharmacy - Moore | 3,427 | - |
Eckerd - Colesville | 7,438 | - |
Crossroads Plaza | 5,882 | 4,978 |
Commons at Royal Palm | 24,701 | 14,472 |
Boston Commons | 14,748 | 9,880 |
Hewitt Associates Corporate Headquarters | 220,000 | 129,800 |
Ashland & Roosevelt | 24,139 | 15,017 |
Cornerstone Plaza | 14,250 | 18,922 |
Golfland Plaza | 9,604 | - |
Maple Tree Place | 102,332 | - |
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
March 31, 2005
(unaudited)
(Dollar amounts in thousands, except per share amounts)
Acquisition | Mortgage | |
Price | Payable | |
Chantilly Crossing | $ 25,685 | $ 15,675 |
Gloucester Town Center | 22,500 | 11,975 |
Eckerd - Atlanta | 2,206 | - |
CVS Pharmacy - Lawton | 2,847 | - |
Wickes Furniture - Naperville | 8,488 | 4,964 |
Galvez Shopping Center | 8,125 | 4,470 |
Southwest Crossing | 24,900 | - |
Montecito Crossing | 51,414 | - |
The Shops at 5 | 81,500 | - |
Gardiner Manor Mall | 65,227 | - |
Century III Plaza | 42,903 | - |
Mid-Hudson Center | 42,637 | - |
Wilton Square | 47,161 | - |
Home Depot Plaza | 28,363 | - |
Home Depot Center | 17,705 | - |
Crown Palace Theater | 17,033 | - |
Bed Bath & Beyond Plaza | 16,640 | - |
Greenwich Center | 38,452 | - |
Shops on Lake Avenue | 46,845 | 30,622 |
Beachway Plaza | 17,000 | 10,235 |
Earnouts | ||
Boulevard at the Capital Centre | 1,312 | - |
Pavilion at King's Grant | 1,563 | - |
John's Creek Village | 1,969 | - |
Peoria Crossings II | 4,714 | - |
Forks Town Center | 696 | - |
Denton Crossing | 487 | - |
Reisterstown Road Plaza | 660 | - |
Gateway Station | 500 | - |
Total | $ 1,780,578 | $ 668,804 |
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
March 31, 2005
(unaudited)
(Dollar amounts in thousands, except per share amounts)
Allocation of net investments in properties:
Land | $ | 388,912 | |
Building and improvements | 1,270,856 | ||
Acquired in-place lease intangibles and customer relationship value | 129,802 | ||
Acquired above market lease intangibles | 3,872 | ||
Acquired below market lease intangibles | (12,864) | ||
Total | $ | 1,780,578 |
- Additional offering proceeds of $531,500, net of additional offering costs of $63,781 are reflected as received as of March 31, 2005, prior to the purchase of the properties and are limited to offering proceeds necessary to acquire the properties and offering proceeds actually received as of June 8, 2005. Offering costs consist principally of registration costs, printing and selling costs, including commissions.
- Acquired intangibles represent above and below market leases and the difference between the property valued with the existing in-place leases and the property valued as if vacant as well as the value associated with customer relationships. The value of the acquired leases and customer relationship values will be amortized over the lease term.
- Additional mortgages payable of $763,107, reflected as funded as of March 31, 2005, includes $668,804 of mortgages payable obtained subsequent to the acquisition of the properties described in (B) and $94,303 of new financing placed on previously acquired properties.
- No pro forma assumptions have been made for the additional payment of distributions resulting from the additional proceeds raised.
- Change in loan fees, leasing fees and loan fee deposits of $11,176 represents prepaid loan fees applied to mortgage payables obtained as described in (E). Change in other assets of $24,868 represents advance purchase deposits on properties purchased as described in (B).
Inland Western Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the three months ended March 31, 2005
(unaudited)
The following unaudited Pro Forma Consolidated Statement of Operations is presented to give effect the acquisition of the properties indicated in Note B of the Notes to the Pro Forma Consolidated Statement of Operations as though they occurred on January 1, 2004 or the date significant operations commenced. No pro forma adjustments have been made for any potential property acquisitions identified as of June 8, 2005. The Company does not consider these properties as probable under Rule 3-14 of Regulation S-X as the Company has not completed the due diligence process on these properties. Additionally, the Company has not received sufficient offering proceeds or obtained firm financing commitments to acquire all of these properties as of June 8, 2005. The Company believes it will have sufficient cash from offering proceeds raised and from additional financing proceeds to acquire these properties if and when the Company is prepared to acquire these properties. No pro forma adjustments were ma de for Hobby Lobby - Concord, Stanley Works, Academy Sports - San Antonio, CVS Pharmacy - Jacksonville, Vail Ranch, Eckerd - Colesville, Wickes Furniture - Naperville or any new earnout components as the properties and earnout components were completed in 2005 and there were no significant operations prior to the Company's acquisition. No pro forma adjustments were made related to the Company's notes receivable as there were no significant operations prior to the Company's funding of the notes receivable.
This unaudited Pro Forma Consolidated Statement of Operations is not necessarily indicative of what the actual results of operations would have been for the three months ended March 31, 2005, nor does it purport to represent our future results of operations.
Inland Western Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the three months ended March 31, 2005 (unaudited)
(Dollar amounts in thousands, except per share amounts)
Pro Forma | ||||
Historical | Adjustments | |||
(A) | (B) | Pro Forma | ||
Rental income | $ | 74,063 | 32,001 | 106,064 |
Tenant recovery income | 15,819 | 9,387 | 25,206 | |
Other property income | 905 | - | 905 | |
Total income | 90,787 | 41,388 | 132,175 | |
General and administrative expenses | 1,884 | - | 1,884 | |
Advisor asset management fee (C) | 925 | - | 925 | |
Property operating expenses (F) | 24,014 | 13,024 | 37,038 | |
Depreciation and amortization (D) | 34,759 | 15,248 | 50,007 | |
Total expenses | 61,582 | 28,272 | 89,854 | |
Operating income | 29,205 | 13,116 | 42,321 | |
Other income | 2,619 | - | 2,619 | |
Interest expense (G) | (23,021) | (8,996) | (32,017) | |
Minority interests | 470 | - | 470 | |
Equity in earnings (losses) of unconsolidated entities | (259) | - | (259) | |
Net income (loss) | $ | 9,014 | 4,120 | 13,134 |
Other comprehensive income: | ||||
Unrealized gain/loss on investment securities | 34 | - | 34 | |
Comprehensive income (loss) | $ | 9,048 | 4,120 | 13,168 |
Weighted average number of shares of common stock outstanding, basic and diluted (E) | 251,114,531 | 297,841,029 | ||
Net income (loss) per share, basic and diluted (E) | .04 | .04 | ||
See accompanying notes to pro forma consolidated statement of operations.
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the three months ended March 31, 2005
(unaudited)
(Dollar amounts in thousands, except per share amounts)
- The historical information represents the historical statement of operations of the Company for the period from January 1, 2005 to March 31, 2005 as filed with the Securities Exchange Commission on Form 10-Q.
- Total pro forma adjustments for acquisitions consummated as of June 8, 2005 are as though the properties were acquired January 1, 2004.
Gross Income | ||||
& Direct | Total | |||
Operating | Pro Forma | Pro Forma | ||
Expenses (1) | Adjustments | Adjustments | ||
Rental income | $ | 32,086 | (85) | 32,001 |
Tenant recovery income | 9,387 | - | 9,387 | |
Total income | 41,473 | (85) | 41,388 | |
Advisor asset management fee | - | - | - | |
Property operating expenses | 11,162 | 1,862 | 13,024 | |
Depreciation and amortization | - | 15,248 | 15,248 | |
Interest expense | - | 8,996 | 8,996 | |
Total expenses | 11,162 | 26,106 | 37,268 | |
Net income (loss) | $ | 30,311 | (26,191) | 4,120 |
- Unaudited combined gross income and direct operating expenses from January 1, 2005 through the date of acquisition based on information provided by the Seller for the following properties:
Fairgrounds Plaza, Midtown Center, Magnolia Square, Cottage Plaza, Village of Quail Springs, Holliday Towne Center, Trenton Crossing, Southgate Plaza, Stateline Station, High Ridge Crossing, Four Peaks Plaza, Lake Forest Crossing, The Brickyard, Greensburg Commons, Grapevine Crossing, Bear Creek, Bison Hollow, Massillon Village, Brown's Lane, Commons at Temecula, Boulevard Plaza, Cuyahoga Falls Market Center, Page Field Commons, University Square, Crossroads Plaza, Commons at Royal Palm, Boston Commons, Shops on Lake Avenue, Clearlake Shores, The Gateway, Lakepointe Towne Crossing, Ashland & Roosevelt, Cornerstone Plaza, Maple Tree Place, Golfland Center, Gardiner Manor Mall, Century III Plaza, Mid-Hudson Center, Wilton Square, Home Depot Plaza, Hone Depot Center, Crown Palace Theater, Bed Bath & Beyond Plaza, Greenwich Center, Chantilly Crossing, Gloucester Town Center, Montecito Crossing, The Shops at 5, Beachway Plaza, Galvez Shopping Center and Southwest Crossing.
Gross rental income from January 1, 2005 through the date of acquisition based on information provided by tenant net leases for the following properties:
Maytag Distribution Center, American Express - Markham, CarMax - San Antonio, American Express - Salt Lake City, Blockbuster at Five Forks, CVS Pharmacy - Montevallo, Cinemark Seven Bridges, CVS Pharmacy - Saginaw, Walgreens - Northwoods, Walgreens - West Allis, Publix Supermarket - Mountain Brook, Circuit City Corporate Headquarters, CVS Pharmacy - Moore, Hewitt Associates Corporate Headquarters, Eckerd - Atlanta, CVS Pharmacy - Lawton, Edwards Multiplex - Ontario and Edward Multiplex - Fresno.
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the three months ended March 31, 2005
(unaudited)
(Dollar amounts in thousands, except per share amounts)
- No pro forma adjustment has been made related to the advisor asset management fee as it is assumed that a greater fee would not have been paid as a result of these additional properties.
- Buildings and improvements will be depreciated on a straight line basis based upon estimated useful lives of 30 years for building and improvements and 15 years for site improvements. That portion of the purchase price that is allocated to above or below lease intangibles will be amortized on a straight line basis over the life of the related leases as an adjustment to rental income. Other leasing costs, tenant improvements, in-place lease intangibles and customer relationship values will be amortized on a straight line basis over the life of the related leases as a component of amortization expense.
- The pro forma weighted average shares of common stock outstanding for the three months ended March 31, 2005 was calculated using the additional shares sold to purchase each of the properties on a weighted average basis plus the 20,000 shares purchased by the Advisor in connection with our organization.
- Management fees are calculated as 4.5% of gross revenues pursuant to the management agreement and are included in property operating expenses.
- The pro forma adjustments relating to interest expense were based on the following debt terms:
Principal | Interest | Maturity | |
Balance | Rate | Date | |
American Express - Markham, Ontario | 25,380 | 4.2675% | 02/15 |
American Express - Salt Lake City | 30,149 | 4.2975% | 04/15 |
Ashland & Roosevelt (1) | 1,889 | 7.480% | 02/22 |
Ashland & Roosevelt (2) | 13,128 | 5.130% | 07/10 |
Beachway Plaza | 10,235 | 4.880% | 07/10 |
Bear Creek | 11,450 | 5.000% | 06/10 |
Bison Hollow | 10,774 | 4.560% | 06/10 |
Blockbuster at Five Forks | 825 | 4.815% | 02/10 |
Boston Commons | 9,880 | 5.360% | 06/14 |
Boulevard Plaza | 6,300 | 4.780% | 06/10 |
Brown's Lane | 6,284 | 4.668% | 06/10 |
CarMax - San Antonio | 8,030 | 4.690% | 05/10 |
Chantilly Crossing | 15,675 | 4.700% | 07/10 |
Cinemark Seven Bridges | 7,800 | 4.690% | 06/10 |
Circuit City Corporate Headquarters | 31,270 | 5.105% | 07/10 |
Clearlake Shores | 6,683 | 4.720% | 07/10 |
Commons at Royal Palm | 14,472 | 6.877% | 11/12 |
Commons at Temecula | 29,623 | 4.580% | 06/10 |
Cornerstone Plaza | 8,400 | 4.830% | 06/10 |
Cottage Plaza | 13,025 | 4.600% | 04/10 |
Crossroads Plaza | 4,977 | 5.441% | 01/15 |
Cuyahoga Falls Market Center | 8,285 | 4.668% | 06/10 |
CVS Pharmacy - Montevallo | 1,685 | 4.690% | 05/10 |
Edwards Multiplex - Fresno | 19,730 | 4.818% | 06/10 |
Edwards Multiplex - Ontario | 27,875 | 4.818% | 06/10 |
Fairgrounds Plaza | 15,941 | 5.690% | 01/33 |
Four Peaks Plaza | 17,072 | 4.815% | 04/10 |
Galvez Shopping Center | 4,470 | 4.668% | 07/10 |
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the three months ended March 31, 2005
(unaudited)
(Dollar amounts in thousands, except per share amounts)
Principal | Interest | Maturity | |
Balance | Rate | Date | |
Gloucester Town Center | 11,975 | 5.130% | 07/10 |
Grapevine Crossing | 12,815 | 4.590% | 07/10 |
Greensburg Commons | 14,200 | LIBOR + 155 | 05/09 |
Hewitt Associates Corporate Headquarters | 129,800 | 5.040% | 06/30 |
High Ridge Crossing | 7,439 | 4.815% | 06/10 |
Holliday Town Center | 8,050 | 5.180% | 03/10 |
Lake Forest Crossing | 4,520 | 4.900% | 06/11 |
Lakepointe Towne Crossing | 21,715 | 5.040% | 06/10 |
Magnolia Square | 10,265 | 5.115% | 03/10 |
Massillon Village | 10,126 | 4.668% | 06/10 |
Maytag Distribution Center | 12,740 | 4.840% | 03/10 |
Midtown Center | 28,228 | 4.460% | 03/10 |
Page Field Commons | 26,853 | 4.580% | 05/10 |
Publix Supermarket - Mountain Brook | 4,384 | 4.668% | 07/10 |
Shops on Lake Avenue | 30,458 | 5.020% | 03/34 |
Southgate Plaza | 6,740 | 4.690% | 05/10 |
Stateline Station | 17,600 | 5.007% | 05/10 |
The Gateway | 90,428 | 4.790% | 06/10 |
The Gateway - Central Power Plant | 8,352 | 4.790% | 06/10 |
Trenton Crossing | 19,307 | 4.460% | 03/10 |
University Square | 31,340 | 4.780% | 07/10 |
Village at Quail Springs | 5,740 | 5.060% | 03/01 |
Walgreens - Northwoods | 3,218 | 4.820% | 06/10 |
Walgreens - West Allis | 2,600 | 5.130% | 06/10 |
Inland Western Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004
(unaudited)
The following unaudited Pro Forma Consolidated Statement of Operations is presented to give effect the acquisition of the properties indicated in Note B of the Notes to the Pro Forma Consolidated Statement of Operations as though they occurred on January 1, 2004 or the date significant operations commenced. No pro forma adjustments have been made for any potential property acquisitions identified as of June 8, 2005. The Company does not consider these properties as probable under Rule 3-14 of Regulation S-X as the Company has not completed the due diligence process on these properties. Additionally, the Company has not received sufficient offering proceeds or obtained firm financing commitments to acquire all of these properties as of June 8, 2005. The Company believes it will have sufficient cash from offering proceeds raised and from additional financing proceeds to acquire these properties if and when the Company is prepared to acquire these properties. No pro forma adjustments were ma de for Eckerd - Greer, Eckerd - Kill Devil Hills, Eckerd - Columbia, Eckerd - Crossville, Kohl's - Wilshire Plaza III, Academy Sports - Houma, Academy Sports - Port Arthur, Academy Sports - Midland, Hobby Lobby - Concord, Stanley Works, Academy Sports - San Antonio, CVS Pharmacy - Jacksonville, Blockbuster at Five Forks, Vail Ranch, Eckerd - Colesville, Wickes Furniture - Naperville or any new earnout components as the properties and earnout components were completed in 2004 or 2005 and there were no significant operations prior to the Company's acquisition. No pro forma adjustments were made related to the Company's notes receivable as there were no significant operations prior to the Company's funding of the notes receivable.
This unaudited Pro Forma Consolidated Statement of Operations is not necessarily indicative of what the actual results of operations would have been for the year ended December 31, 2004, nor does it purport to represent our future results of operations.
Inland Western Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004 (unaudited)
(Dollar amounts in thousands, except per share amounts)
Pro Forma | Pro Forma | ||||
Historical | Adjustments | Adjustments | |||
(A) | (B) | (C) | Pro Forma | ||
Rental income | $ | 106,425 | 93,515 | 158,804 | 358,744 |
Tenant recovery income | 23,155 | 28,498 | 24,900 | 76,553 | |
Other property income | 825 | - | - | 825 | |
Total income | 130,405 | 122,013 | 183,704 | 436,122 | |
General and administrative expenses | 4,857 | - | - | 4,857 | |
Advisor asset management fee (D) | - | - | - | - | |
Property operating expenses (G) | 32,522 | 40,798 | 42,223 | 115,543 | |
Depreciation and amortization (E) | 47,973 | 47,467 | 82,698 | 178,138 | |
Total expenses | 85,352 | 88,265 | 124,921 | 298,538 | |
Operating income | 45,053 | 33,748 | 58,783 | 137,584 | |
Other income | 3,681 | - | - | 3,681 | |
Interest expense (H) | (33,175) | (27,164) | (61,688) | (122,027) | |
Realized loss on sale of treasury contacts | (3,667) | - | - | (3,667) | |
Minority interests | 398 | - | - | 398 | |
Equity in earnings (losses) of unconsolidated entities | (589) | - | - | (589) | |
Net income (loss) | $ | 11,701 | 6,584 | (2,905) | 15,380 |
Other comprehensive income: | |||||
Unrealized gain/loss on investment securities | 241 | - | - | 241 | |
Comprehensive income (loss) | $ | 11,942 | 6,584 | (2,905) | 15,621 |
Weighted average number of shares of common stock outstanding, basic and diluted (F) | 98,562,885 | 297,841,029 | |||
Net income (loss) per share, basic and diluted (F) | .12 | .05 | |||
See accompanying notes to pro forma consolidated statement of operations.
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004
(unaudited)
- The historical information represents the historical statement of operations of the Company for the period from January 1, 2004 to December 31, 2004 as filed with the Securities Exchange Commission on Form 10-K.
- Total pro forma adjustments for acquisitions consummated as of June 8, 2005 are as though the properties were acquired January 1, 2004.
Gross Income | ||||
& Direct | Total | |||
Operating | Pro Forma | Pro Forma | ||
Expenses (1) | Adjustments | Adjustments | ||
Rental income | $ | 94,115 | (600) | 93,515 |
Tenant recovery income | 28,498 | - | 28,498 | |
Total income | 122,613 | (600) | 122,013 | |
Advisor asset management fee | - | - | - | |
Property operating expenses | 35,316 | 5,482 | 40,798 | |
Depreciation and amortization | - | 47,467 | 47,467 | |
Interest expense | - | 27,164 | 27,164 | |
Total expenses | 35,316 | 80,113 | 115,429 | |
Net income (loss) | $ | 87,297 | (80,713) | 6,584 |
- Audited combined gross income and direct operating expenses as prepared in accordance with Rule 3-14 of Regulation S-X for the following properties:
Coram Plaza, Mesa Fiesta, Green's Corner, Newton Crossroads, Stilesboro Oaks, Pleasant Run Towne Crossing, Shoppes at Lake Andrew, Fairgrounds Plaza, Midtown Center, Trenton Crossing, Lakepointe Towne Center, Stateline Station, Four Peaks Plaza, The Brickyard, Grapevine Crossing, Bear Creek, Massillon Village, Brown's Lane, Commons at Temecula, Boulevard Plaza, Cuyahoga Falls Market Center, Page Field Commons, University Square, Crossroads Plaza, Commons at Royal Palm, Boston Commons, Shops on Lake Avenue, The Gateway, Maple Tree Place, Golfland Center, Gardiner Manor Mall, Century III Plaza, Mid-Hudson Center, Wilton Square, Home Depot Plaza, Home Depot Center, Crown Palace Theater, Bed Bath & Beyond Plaza, Greenwich Center, Chantilly Crossing, Gloucester Town Center and Montecito Crossing.
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004
(unaudited)
- Total pro forma adjustments for acquisitions consummated as of June 8, 2005 are as though the properties were acquired January 1, 2004. No pro forma adjustments were made for Eckerd - Greer, Eckerd - Kill Devil Hills, Eckerd - Columbia, Eckerd - Crossville, Kohl's - Wilshire Plaza III, Academy Sports - Houma, Academy Sports - Port Arthur, Academy Sports - Midland, Hobby Lobby - Concord, Stanley Works, Academy Sports - San Antonio, CVS Pharmacy - Jacksonville, Blockbuster at Five Forks, Vail Ranch, Peoria Eckerd - Colesville, Wickes Furniture - Naperville or any new earnout components as the properties and earnout components were completed in 2004 or 2005 and there were no significant operations prior to the Company's acquisition. No pro forma adjustments were made related to the Company's notes receivable as there were no significant operations prior to the Company's funding of the notes receivable.
Gross Income | ||||
& Direct | Total | |||
Operating | Pro Forma | Pro Forma | ||
Expenses (1) | Adjustments | Adjustments | ||
Rental income | $ | 161,754 | (2,950) | 158,804 |
Tenant recovery income | 24,900 | - | 24,900 | |
Total revenues | 186,654 | (2,950) | 183,704 | |
Advisor asset management fee | - | - | - | |
Property operating expenses | 34,103 | 8,120 | 42,223 | |
Depreciation and amortization | - | 82,698 | 82,698 | |
Interest expense | - | 61,688 | 61,688 | |
Total expenses | 34,103 | 152,506 | 186,609 | |
Net income (loss) | $ | 152,551 | (155,456) | (2,905) |
- Unaudited combined gross income and direct operating expenses from January 1, 2004 through the date of acquisition based on information provided by the Seller for the following properties:
CorWest Plaza, Hickory Ridge, Shoppes at Quarterfield, Larkspur Landing, North Ranch Pavilion, La Plaza Del Norte, MacArthur Crossing, Promenade at Red Cliff, Peoria Crossings, Dorman Center, Heritage Towne Crossing, Paradise Valley Marketplace, Best on the Boulevard, Bluebonnet Parc, North Rivers Town Center, Alison's Corner, Arvada Connection and Arvada Marketplace, Eastwood Town Center, Watauga Pavilion, Northpointe Plaza, Plaza Santa Fe II, Pine Ridge Plaza, Huebner Oaks Center, John's Creek Village, Lakewood Towne Center, Shoppes of Prominence Point, Northgate North, Davis Towne Crossing, Fullerton Metrocenter, Low Country Village, The Shops at Boardwalk, Shoppes of New Hope, Cranberry Square, Tollgate Marketplace, Gateway Village, Towson Circle, Gateway Plaza, Plaza at Marysville, Forks Town Center, Reisterstown Road Plaza, Village Shoppes at Simonton, Manchester Meadows, Governor's Marketplace, Mitchell Ranch Plaza, The Columns, Saucon Valley Square, Lincoln Park, Harvest Towne Center, Boulevard at the Capital Centre, Bed, Bath & Beyond Plaza, Denton Crossing, Azalea Square, Lake Mary Pointe, Plaza at Riverlakes, Gurnee Town Centre, Mansfield Towne Crossing, Winchester Commons, Shoppes at Park West, Fox Creek Village, Oswego Commons, University Town Center, Edgemont Town Center, Five Forks, Placentia Town Center, Gateway Station, Northwoods Center, Shops at Forest Commons, Gateway Pavilions, Henry Town Center, McAllen Shopping Center, 23rd Street Plaza, Southlake Town Square, Irmo Station, Evans Towne Centre, Cottage Plaza, Village at Quail Springs, Phenix Crossing, Magnolia Square, Holliday Towne Center, Southgate Plaza, High Ridge Crossing, Lake Forest Crossing, Greensburg Commons, Bison Hollow, Clearlake Shores, Ashland & Roosevelt, Cornerstone Plaza, The Shops at 5, Beachway Plaza, Galvez Shopping Center and Southwest Crossing.
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004
(unaudited)
Gross rental income from January 1, 2004 through the date of acquisition based on information provided by tenant net leases for the following properties:
Wal-Mart Supercenter - Blytheville, Wrangler Company Western Headquarters, Wal-Mart Supercenter - Jonesboro, Harris Teeter - Wilmington, GMAC Insurance, CVS Pharmacy - Sylacauga, Zurich Towers, the American Express portfolio, Maytag Distribution Center, CarMax - San Antonio, CVS Pharmacy - Montevallo, Cinemark Seven Bridges, CVS Pharmacy - Saginaw, Walgreen's - Northwoods, Walgreens - West Allis, Publix Supermarket - Mountain Brook, Circuit City Corporate Headquarters, CVS Pharmacy - Moore, Eckerd - Atlanta, Hewitt Associates Corporate Headquarters, CVS Pharmacy - Lawton, Edwards Multiplex - Ontario and Edwards Multiplex - Fresno.
- No pro forma adjustment has been made related to the advisor asset management fee as it is assumed that a greater fee would not have been paid as a result of these additional properties.
- Buildings and improvements will be depreciated on a straight line basis based upon estimated useful lives of 30 years for building and improvements and 15 years for site improvements. That portion of the purchase price that is allocated to above or below lease intangibles will be amortized on a straight line basis over the life of the related leases as an adjustment to rental income. Other leasing costs, tenant improvements, in-place lease intangibles and customer relationship values will be amortized on a straight line basis over the life of the related leases as a component of amortization expense.
- The pro forma weighted average shares of common stock outstanding for the year ended December 31, 2004 was calculated using the additional shares sold to purchase each of the properties on a weighted average basis plus the 20,000 shares purchased by the Advisor in connection with our organization.
- Management fees are calculated as 4.5% of gross revenues pursuant to the management agreement and are included in property operating expenses.
- The pro forma adjustments relating to interest expense were based on the following debt terms:
Principal | Interest | Maturity | |
Balance | Rate | Date | |
23rd Street Plaza | 3,990 | 5.060% | 05/10 |
Alison's Corner | 3,850 | 4.272% | 06/10 |
American Express - Markham, Ontario | 25,380 | 4.2675% | 02/15 |
American Express - Depere | 11,623 | 4.2975% | 01/15 |
American Express - 31st Avenue - Phoenix | 31,860 | 4.2675% | 01/15 |
American Express - 19th Avenue - Phoenix | 8,260 | 4.2675% | 01/15 |
American Express - Minneapolis | 56,050 | 4.2675% | 01/15 |
American Express - Greensboro | 33,040 | 4.2675% | 01/15 |
American Express - Fort Lauderdale | 37,170 | 4.2675% | 01/15 |
American Express - Salt Lake City | 30,149 | 4.2975% | 04/15 |
Arvada Marketplace and Arvada Connection | 28,510 | 4.130% | 07/09 |
Ashland & Roosevelt (1) | 1,889 | 7.480% | 02/22 |
Ashland & Roosevelt (2) | 13,128 | 5.130% | 07/10 |
Azalea Square | 16,535 | 5.010% | 12/09 |
Beachway Plaza | 10,235 | 4.880% | 07/10 |
Bear Creek | 11,450 | 5.000% | 06/10 |
Bed Bath & Beyond Plaza | 11,193 | 5.170% | 12/09 |
Best on the Boulevard | 19,525 | 3.990% | 05/09 |
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004
(unaudited)
Principal | Interest | Maturity | |
Balance | Rate | Date | |
Bison Hollow | 10,774 | 4.560% | 06/10 |
Blockbuster at Five Forks | 825 | 4.815% | 02/10 |
Bluebonnet Parc | 12,100 | 4.372% | 05/09 |
Boston Commons | 9,880 | 5.360% | 06/14 |
Boulevard at the Capital Centre | 71,500 | 5.120% | 10/09 |
Boulevard Plaza | 6,300 | 4.780% | 06/10 |
Brown's Lane | 6,284 | 4.668% | 06/10 |
CarMax - San Antonio | 8,030 | 4.690% | 05/10 |
Chantilly Crossing | 15,675 | 4.700% | 07/10 |
Cinemark Seven Bridges | 7,800 | 4.690% | 06/10 |
Circuit City Corporate Headquarters | 31,270 | 5.105% | 07/10 |
Clearlake Shores | 6,683 | 4.720% | 07/10 |
Commons at Royal Palm | 14,472 | 6.877% | 11/12 |
Commons at Temecula | 29,623 | 4.580% | 06/10 |
Coram Plaza | 20,755 | 4.550% | 02/10 |
Cornerstone Plaza | 8,400 | 4.830% | 06/10 |
CorWest Plaza | 18,150 | 4.560% | 02/09 |
Cottage Plaza | 13,025 | 4.600% | 04/10 |
Cranberry Square | 10,900 | 4.975% | 08/09 |
Crossroads Plaza | 4,977 | 5.441% | 01/15 |
Cuyahoga Falls Market Center | 8,285 | 4.668% | 06/10 |
CVS Pharmacy - Montevallo | 1,685 | 4.690% | 05/10 |
CVS Pharmacy - Sylacauga | 1,685 | 5.060% | 01/10 |
Davis Towne Crossing | 5,365 | 5.185% | 09/09 |
Denton Crossing | 35,200 | 4.300% | 01/10 |
Dorman Center | 27,610 | 4.180% | 05/09 |
Eastwood Towne Center | 46,750 | 4.640% | 07/09 |
Edgemont Town Center | 8,600 | 4.430% | 03/10 |
Edwards Multiplex - Fresno | 19,730 | 4.818% | 06/10 |
Edwards Multiplex - Ontario | 27,875 | 4.818% | 06/10 |
Evans Towne Centre | 5,005 | 4.670% | 02/10 |
Fairgrounds Plaza | 15,941 | 5.690% | 01/33 |
Five Forks | 4,483 | 4.815% | 02/10 |
Forks Town Center | 10,395 | 4.970% | 09/09 |
Four Peaks Plaza | 17,072 | 4.815% | 04/10 |
Fox Creek Village | 11,485 | 5.210% | 12/09 |
Fullerton Metrocenter | 28,050 | 5.090% | 08/09 |
Galvez Shopping Center | 4,470 | 4.668% | 07/10 |
Gateway Pavilions | 35,842 | 4.670% | 01/10 |
Gateway Plaza | 18,163 | 5.100% | 09/09 |
Gateway Station | 3,717 | 4.650% | 07/10 |
Gateway Village | 27,233 | LIBOR + 113 | 07/09 |
Gloucester Town Center | 11,975 | 5.130% | 07/10 |
GMAC Insurance | 33,000 | 4.610% | 10/09 |
Governor's Marketplace | 20,625 | 5.185% | 09/09 |
Grapevine Crossing | 12,815 | 4.590% | 07/10 |
Green's Corner | 7,022 | 4.500% | 02/10 |
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004
(unaudited)
Principal | Interest | Maturity | |
Balance | Rate | Date | |
Greensburg Commons | 14,200 | LIBOR + 155 | 05/09 |
Gurnee Town Center | 24,360 | 4.597% | 01/10 |
Harris Teeter - Wilmington | 3,960 | 4.915% | 11/09 |
Harvest Towne Center | 5,005 | 4.935% | 01/10 |
Henry Town Center | 35,692 | 5.420% | 01/13 |
Heritage Towne Crossing | 8,950 | 4.374% | 06/09 |
Hewitt Associates Corporate Headquarters | 129,800 | 5.040% | 06/30 |
Hickory Ridge | 23,650 | 4.531% | 02/09 |
High Ridge Crossing | 7,439 | 4.815% | 06/10 |
Holiday Town Center | 8,050 | 5.180% | 03/10 |
Huebner Oaks Center (Note A) | 31,723 | 4.200% | 07/10 |
Huebner Oaks Center (Note B) | 16,277 | 3.960% | 07/10 |
Irmo Station | 7,085 | 5.124% | 02/10 |
John's Creek Village | 23,300 | 5.100% | 08/09 |
La Plaza Del Norte | 32,528 | 4.610% | 03/10 |
Lake Forest Crossing | 4,520 | 4.900% | 06/11 |
Lake Mary Pointe | 3,658 | 5.170% | 12/09 |
Lakepointe Towne Crossing | 21,715 | 5.040% | 06/10 |
Lakewood Towne Center | 44,000 | 2.680% | 06/09 |
Larkspur Landing | 33,630 | 4.450% | 02/09 |
Lincoln Park | 26,153 | 4.610% | 11/09 |
Low Country Village - Phase I | 5,370 | 4.960% | 10/09 |
Low Country Village - Phase II | 5,440 | 5.130% | 05/09 |
MacArthur Crossing | 12,700 | 4.290% | 05/09 |
Magnolia Square | 10,265 | 5.115% | 03/10 |
Manchester Meadows | 31,065 | 4.480% | 09/07 |
Mansfield Towne Crossing | 10,982 | 5.215% | 12/09 |
Massillon Village | 10,126 | 4.668% | 06/10 |
Maytag Distribution Center | 12,740 | 4.840% | 03/10 |
McAllen Shopping Center | 2,455 | 5.060% | 03/10 |
Mesa Fiesta | 23,500 | 5.300% | 02/10 |
Midtown Center | 28,228 | 4.460% | 03/10 |
Mitchell Ranch Plaza | 18,700 | 4.480% | 10/09 |
Newnan Crossing II | 2,223 | 4.380% | 05/09 |
Newton Crossroads | 5,548 | 4.500% | 02/10 |
North Ranch Pavilion | 10,157 | 4.120% | 04/09 |
North Rivers Town Center | 11,050 | 4.760% | 05/09 |
Northgate North | 26,650 | 4.600% | 07/08 |
Northpointe Plaza | 30,850 | 4.272% | 05/09 |
Northwoods Center | 11,193 | 4.815% | 01/10 |
Oswego Commons | 19,262 | 4.750% | 12/09 |
Page Field Commons | 26,853 | 4.580% | 05/10 |
Paradise Valley Marketplace | 15,681 | 4.550% | 05/09 |
Peoria Crossings | 20,497 | 4.090% | 04/09 |
Phenix Crossing | 5,535 | 5.030% | 05/10 |
Pine Ridge Plaza | 14,700 | 5.085% | 08/09 |
Placentia Town Center | 13,695 | 4.597% | 01/10 |
Inland Western Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004
(unaudited)
Principal | Interest | Maturity | |
Balance | Rate | Date | |
Plaza at Marysville | 11,800 | 5.085% | 08/09 |
Plaza at Riverlakes | 9,350 | 4.700% | 05/10 |
Plaza Santa Fe II | 17,308 | 6.200% | 12/12 |
Pleasant Run Towne Crossing | 22,800 | 5.215% | 01/10 |
Promenade at Red Cliff | 10,590 | 4.290% | 05/09 |
Publix Center | 6,655 | 4.597% | 01/10 |
Publix Supermarket - Mountain Brook | 4,384 | 4.668% | 07/10 |
Reisterstown Road Plaza | 49,650 | 5.300% | 09/09 |
Saucon Valley Square | 8,851 | 5.115% | 10/09 |
Shoppes at Lake Andrew | 15,657 | 5.000% | 03/14 |
Shoppes at Quarterfield | 6,067 | 4.280% | 04/09 |
Shoppes of New Hope | 7,179 | 4.960% | 04/09 |
Shoppes of Prominence Point | 9,954 | 5.235% | 09/09 |
Shops at Forest Commons | 5,214 | 6.340% | 09/13 |
Shops on Lake Avenue | 30,458 | 5.020% | 03/34 |
Southgate Plaza | 6,740 | 4.690% | 05/10 |
Southlake Town Square | 70,571 | 4.550% | 03/10 |
Southlake Town Square II | 10,429 | 4.550% | 03/10 |
Stateline Station | 17,600 | 5.007% | 05/10 |
Stilesboro Oaks | 6,592 | 4.500% | 02/10 |
The Columns - Phase I | 11,423 | 4.910% | 11/09 |
The Gateway | 90,428 | 4.790% | 06/10 |
The Gateway - Central Power Plant | 8,352 | 4.790% | 06/10 |
The Shops at Boardwalk | 20,150 | 4.130% | 08/09 |
Tollgate Marketplace | 39,765 | LIBOR + 120 | 07/09 |
Towson Circle | 15,648 | 5.100% | 07/09 |
Trenton Crossing | 19,307 | 4.460% | 03/10 |
University Square | 31,340 | 4.780% | 07/10 |
University Town Center | 5,810 | 4.430% | 03/10 |
Village at Quail Springs | 5,740 | 5.060% | 03/01 |
Village Shoppes at Simonton | 7,562 | 4.960% | 10/09 |
Walgreens - Northwoods | 3,218 | 4.820% | 06/10 |
Walgreens - West Allis | 2,600 | 5.130% | 06/10 |
Wal-Mart Supercenter - Blytheville | 7,100 | 4.390% | 09/09 |
Wal-Mart Supercenter - Jonesboro | 6,089 | 5.085% | 09/09 |
Watauga Pavilion (1) | 17,100 | 4.140% | 06/10 |
Watauga Pavilion (2) | 2,517 | 4.166% | 07/10 |
Winchester Commons | 7,235 | 5.120% | 12/09 |
Wrangler Company Western Headquarters | 11,300 | 5.090% | 08/27 |
Zurich Towers | 81,420 | 4.247% | 12/34 |
Independent Auditors' Report
The Board of Directors
Inland Western Retail Real Estate Trust, Inc.
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses ("Historical Summary") of Gateway ("the Property") for the year ended December 31, 2004. This Historical Summary is the responsibility of the management of Inland Western Retail Real Estate Trust, Inc. Our responsibility is to express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in Form 8-K/A of Inland Western Retail Real Estate Trust, Inc., as described in note 2. It is not intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 of Gateway for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Chicago, IL
June 2, 2005
GATEWAY
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the three months ended | For the year ended | |||
March 31, 2005 | December 31, 2004 | |||
(unaudited) | ||||
Gross income: | ||||
Base rental income | $ | 2,200,002 | $ | 9,485,609 |
Percentage rent | 752,269 | 1,745,331 | ||
Parking operating income | 287,965 | 1,029,382 | ||
Central plant recovery income | 397,217 | 1,877,434 | ||
Operating expense and real estate tax recoveries | 1,032,526 | 3,804,779 | ||
Total gross income | 4,699,979 | 17,942,535 | ||
Direct operating expenses: | ||||
Operating expenses | 1,139,224 | 4,297,178 | ||
Central plant operating expenses | 192,524 | 894,843 | ||
Insurance | 62,426 | 194,312 | ||
Real estate taxes | 444,666 | 1,575,057 | ||
Total direct operating expenses | 1,838,840 | 6,961,390 | ||
Excess of gross income over direct operating expenses | $ | 2,831,139 | $ | 10,981,145 |
See accompanying notes to historical summary of gross income and direct operating expenses. |
GATEWAY
Notes to the Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
- Business
- Basis of Presentation
- Gross Income
- Direct Operating Expenses
Gateway ("the Property") is located in Salt Lake City, Utah. On May 12, 2005, Inland Western Retail Real Estate Trust, Inc. ("IWRRETI") acquired the Property from Gateway Associates, an unaffiliated third party. The Property includes retail shops, an indoor parking garage, and a central plant. The central plant is a profit center providing electricity and gas to the tenants of Gateway Associates and to other properties. The Property's retail shops consist of approximately 601,685 square feet of gross leasable area and were approximately 89% occupied at December 31, 2004.The Property's retail shops are leased to a total of 77 tenants, of which one tenant accounts for approximately 13% of base rental revenue for the year ended December 31, 2004
The Historical Summary of Gross Income and Direct Operating Expenses ("Historical Summary") has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K/A of IWRRETI and is not intended to be a complete presentation of the Property's revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting and requires management of the Property to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the three months ended March 31, 2005.
The Property leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. The leases include provisions under which the Property is reimbursed for common area, real estate tax, and insurance costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates. Certain of the leases contain provisions for contingent rentals. Recognition of contingent rental income is deferred until the target that triggers the contingent rental income is achieved. Contingent rent of $290,546 was earned during the year ended December 31, 2004.
Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental income accrues for the full period of occupancy on a straight-line basis. Related adjustments increased base rental income by $606,658 for the year ended December 31, 2004. Certain tenants pay monthly percentage rent based on sales in lieu of minimum base rents. Such rents aggregate $1,745,331 for the year ended December 31, 2004.
GATEWAY
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
Minimum rents to be received from tenants under operating leases, which terms range from one to 14 years, as of December 31 2004, are as follows:
Year | ||
2005 | $ | 8,715,436 |
2006 | 8,982,804 | |
2007 | 8,604,307 | |
2008 | 8,212,604 | |
2009 | 8,417,278 | |
Thereafter | 31,453,101 | |
$ | 74,385,530 |
Direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Property. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, management fees, interest expense related to mortgage debt not assumed, and professional fees are excluded from the Historical Summary.
Independent Auditors' Report
The Board of Directors
Inland Western Retail Real Estate Trust, Inc.
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses ("Historical Summary") of Four Peaks Plaza ("the Property") for the year ended December 31, 2004. This Historical Summary is the responsibility of the management of Inland Western Retail Real Estate Trust, Inc. Our responsibility is to express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in Form 8-K/A of Inland Western Retail Real Estate Trust, Inc., as described in note 2. It is not intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 of Four Peaks Plaza for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Chicago, Illinois
June 8, 2005
FOUR PEAKS PLAZA
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the three months ended | For the year ended | |||
March 31, 2005 | December 31, 2004 | |||
(unaudited) | ||||
Gross income: | ||||
Base rental income | $ | 468,566 | $ | 1,347,601 |
Operating expense and real estate tax recoveries | 95,822 | 218,758 | ||
Total gross income | 564,388 | 1,566,359 | ||
Direct operating expenses: | ||||
Operating expenses | 45,981 | 159,931 | ||
Real estate taxes | 68,428 | 108,249 | ||
Total direct operating expenses | 114,409 | 268,180 | ||
Excess of gross income over direct operating expenses | $ | 449,979 | $ | 1,298,179 |
See accompanying notes to historical summary of gross income and direct operating expenses. |
FOUR PEAKS PLAZA
Notes to the Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
- Business
- Basis of Presentation
- Gross Income
- Direct Operating Expenses
Four Peaks Plaza ("the Property") is located in Fountain Hills, Arizona. The Property consists of approximately 140,571 square feet of gross leasable area and was approximately 73% occupied at December 31, 2004.The Property is leased to a total of 21 tenants, of which four tenants account for approximately 44% of base rental revenue for the year ended December 31, 2004. On March 30, 2005, Inland Western Retail Real Estate Trust, Inc. ("IWRRETI") acquired the Property from an unaffiliated third party.
Portions of Four Peaks Plaza were under construction during 2004.
The Historical Summary of Gross Income and Direct Operating Expenses ("Historical Summary") has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K/A of IWRRETI and is not intended to be a complete presentation of the Property's revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting and requires management of the Property to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to accompanying unaudited amounts for the three months ended March 31, 2005.
The Property leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. The leases include provisions under which the Property is reimbursed for common area, real estate, and insurance costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates. Certain of the leases contain provision for contingent rentals. Recognition of contingent rental income is deferred until the target that triggers the contingent rental income is achieved. There was no contingent rent earned during the year ended December 31, 2004.
Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental income accrues for the full period of occupancy on a straight-line basis. Related adjustments increased base rental income by $88,920 for the year ended December 31, 2004.
FOUR PEAKS PLAZA
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
Minimum rents to be received from tenants under operating leases, which terms range from two to 14 years, as of December 31 2004, are as follows:
Year | ||
2005 | $ | 1,819,539 |
2006 | 1,964,138 | |
2007 | 1,928,394 | |
2008 | 1,493,116 | |
2009 | 1,328,821 | |
Thereafter | 5,567,628 | |
$ | 14,101,636 |
Direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Property. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, management fees, interest expense related to mortgage debt not assumed, professional fees and insurance expense are excluded from the Historical Summary.
Independent Auditors' Report
The Board of Directors
Inland Western Retail Real Estate Trust, Inc.
We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses ("Combined Historical Summary") of the Properties Acquired from Ceruzzi Holdings ("the Properties") for the year ended December 31, 2004. This Combined Historical Summary is the responsibility of the management of Inland Western Retail Real Estate Trust, Inc. Our responsibility is to express an opinion on the Combined Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Combined Historical Summary is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Properties' internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Combined Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Combined Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Combined Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in Form 8-K/A of Inland Western Retail Real Estate Trust, Inc., as described in note 2. It is not intended to be a complete presentation of the Properties' revenues and expenses.
In our opinion, the Combined Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 of the Properties acquired from Ceruzzi Holdings for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Chicago, Illinois
May 20, 2005
PROPERTIES ACQUIRED FROM CERUZZI HOLDINGS
Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the three months endedMarch 31, 2005 | For the year endedDecember 31, 2004 | |||
(unaudited) | ||||
Gross income: | ||||
Base rental income | $ | 856,346 | $ | 1,820,386 |
Operating expense and real estate tax recoveries | 457,621 | 231,002 | ||
Total gross income | 1,313,967 | 2,051,388 | ||
Direct operating expenses: | ||||
Operating expenses | 309,400 | 288,798 | ||
Insurance | 6,455 | 22,011 | ||
Real estate taxes | 192,781 | 58,748 | ||
Total direct operating expenses | 508,636 | 369,557 | ||
Excess of gross income over direct operating expenses | $ | 805,331 | $ | 1,681,831 |
See accompanying notes to combined historical summary of gross income and direct operating expenses. |
PROPERTIES ACQUIRED FROM CERUZZI HOLDINGS
Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
- Business
- Basis of Presentation
- Gross Income
- Direct Operating Expenses
The Properties acquired from Ceruzzi Holdings ("the Properties") consist of:
Name | Gross | Location | Occupancy at |
Chantilly Crossing | 77,044 | Chantilly, VA | 96% |
Gloucester | 108,519 | Gloucester, NJ | 97% |
The Properties are leased to a total of 41 tenants. Of these, four tenants account for 44% of base rental revenue for the year ended December 31, 2004. On May 20, 2005, Inland Western Retail Real Estate Trust, Inc. ("IWRRETI") acquired Chantilly Crossing and Gloucester from Ceruzzi Holdings, an unaffiliated third party.
The Combined Historical Summary of Gross Income and Direct Operating Expenses ("Combined Historical Summary") has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K/A of IWRRETI and is not intended to be a complete presentation of the Properties' revenues and expenses. The Combined Historical Summary has been prepared on the accrual basis of accounting and requires management of the Properties to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. The Combined Historical Summary is presented on a combined basis since the Properties were acquired from the same seller.
All adjustments necessary for a fair presentation have been made to accompanying unaudited amounts for the three months ended March 31, 2005.
The Properties lease retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. The leases include provisions under which the Properties are reimbursed for common area, real estate tax, and insurance costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates. Certain of the leases contain provision for contingent rentals. Recognition of contingent rental income is deferred until the target that triggers the contingent rental income is achieved. There was no contingent rent earned for the year ended December 31, 2004.
Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental income accrues for the full period of occupancy on a straight-line basis. Related adjustments increased base rental income by $194,925 for the year ended December 31, 2004.
PROPERTIES ACQUIRED FROM CERUZZI HOLDINGS
Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
Minimum rents to be received from tenants under operating leases, which terms range from five to 20 years, as of December 31, 2004, are as follows:
Year | ||
2005 | $ | 3,240,902 |
2006 | 3,279,988 | |
2007 | 3,295,042 | |
2008 | 3,301,628 | |
2009 | 3,066,650 | |
Thereafter | 23,052,248 | |
$ | 39,236,458 |
Direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Properties. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, management fees, interest expense related to mortgage debt not assumed, and professional fees are excluded from the Combined Historical Summary.
Independent Auditors' Report
The Board of Directors
Inland Western Retail Real Estate Trust, Inc.
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses ("Historical Summary") of the Brickyard ("the Property") for the year ended December 31, 2004. This Historical Summary is the responsibility of the management of Inland Western Retail Real Estate Trust, Inc. Our responsibility is to express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in Form 8-K/A of Inland Western Retail Real Estate Trust, Inc., as described in note 2. It is not intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 of the Brickyard for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Chicago, IL
June 4, 2005
THE BRICKYARD
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the three months ended | For the year ended | |||
March 31, 2005 | December 31, 2004 | |||
Gross income: | (unaudited) | |||
Base rental income | $ | 1,152,828 | $ | 2,715,462 |
Operating expense and real estate tax recoveries | 559,525 | 613,463 | ||
Total gross income | 1,712,353 | 3,328,925 | ||
Direct operating expenses: | ||||
Operating expenses | 358,945 | 705,599 | ||
Insurance | 25,961 | 85,147 | ||
Real estate taxes | 319,518 | 711,172 | ||
Total direct operating expenses | 704,424 | 1,501,918 | ||
Excess of gross income over direct operating expenses | $ | 1,007,929 | $ | 1,827,007 |
See accompanying notes to historical summary of gross income and direct operating expenses. |
THE BRICKYARD
Notes to the Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
- Business
- Basis of Presentation
- Gross Income
- Direct Operating Expenses
The Brickyard ("the Property") is located in Chicago, Illinois. The Property consists of approximately 268,035 square feet of gross leasable area and was approximately 61% occupied at December 31, 2004.The Property is leased to a total of 34 tenants, of which two tenants account for approximately 38% of base rental revenue for the year ended December 31, 2004. On April 1, 2005, Inland Western Retail Real Estate Trust, Inc. ("IWRRETI") acquired the Property from an unaffiliated third party.
The Brickyard was under construction and completed during 2004. Real estate taxes related to the portion of the Property under construction are excluded from the Historical Summary.
The Historical Summary of Gross Income and Direct Operating Expenses ("Historical Summary") has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K/A of IWRRETI and is not intended to be a complete presentation of the Property's revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting and requires management of the Property to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to accompanying unaudited amounts for the three months ended March 31, 2005.
The Property leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. The leases include provisions under which the Property is reimbursed for common area, real estate tax, and insurance costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates. Certain of the leases contain provision for contingent rentals. Recognition of contingent rental income is deferred until the target that triggers the contingent rental income is achieved. There was no contingent rent earned during the year ended December 31, 2004.
Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental income accrues for the full period of occupancy on a straight-line basis. Related adjustments increased base rental income by $1,169,058 for the year ended December 31, 2004.
THE BRICKYARD
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
Minimum rents to be received from tenants under operating leases, which terms range from five to 20 years, as of December 31 2004, are as follows:
Year | ||
2005 | $ | 4,547,798 |
2006 | 4,767,576 | |
2007 | 4,771,458 | |
2008 | 4,775,883 | |
2009 | 4,659,557 | |
Thereafter | 32,182,291 | |
$ | 55,704,563 |
Direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Property. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, management fees, interest expense related to mortgage debt not assumed, and professional fees are excluded from the Historical Summary.
Independent Auditors' Report
The Board of Directors
Inland Western Retail Real Estate Trust, Inc.
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses ("Historical Summary") of Montecito Crossing ("the Property") for the period from July 18, 2004 (commencement of operations) to December 31, 2004. This Historical Summary is the responsibility of the management of Inland Western Retail Real Estate Trust, Inc. Our responsibility is to express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in Form 8-K/A of Inland Western Retail Real Estate Trust, Inc., as described in note 2. It is not intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 of Montecito Crossing for the period from July 18, 2004 (commencement of operations) to December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Chicago, Illinois
June 3, 2005
MONTECITO CROSSING
Historical Summary of Gross Income and Direct Operating Expenses
For the period from July 18, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
Forthe three months ended | Forthe period from July 18, 2004 (commencement of operations) to | |||
March 31, 2005 | December 31, 2004 | |||
(unaudited) | ||||
Gross income: | ||||
Base rental income | $ | 428,943 | $ | 252,849 |
Operating expense and real estate tax recoveries | 119,545 | 77,300 | ||
Total gross income | 548,488 | 330,149 | ||
Direct operating expenses: | ||||
Operating expenses | 53,281 | 100,567 | ||
Insurance | 8,150 | 13,426 | ||
Real estate taxes | 135,623 | 16,145 | ||
Total direct operating expenses | 197,054 | 130,138 | ||
Excess of gross income over direct operating expenses | $ | 351,434 | $ | 200,011 |
See accompanying notes to historical summary of gross income and direct operating expenses. |
MONTECITO CROSSING
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from July 18, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
- Business
- Basis of Presentation
- Gross Income
- Direct Operating Expenses
Montecito Crossing ("the Property") is located in Las Vegas, Nevada. The Property consists of approximately 72,840 square feet of gross leasable area and was approximately 59% occupied at December 31, 2004.The Property is leased to a total of seven tenants, of which four tenants account for approximately 90% of base rental revenue for the period from July 18, 2004 (commencement of operations) to December 31, 2004. Inland Western Retail Real Estate Trust, Inc. ("IWRRETI") expects to close on the acquisition of the Property by the end of the second quarter of 2005.
The Historical Summary of Gross Income and Direct Operating Expenses ("Historical Summary") has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K/A of IWRRETI and is not intended to be a complete presentation of the Property's revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting and requires management of the Property to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to accompanying unaudited amounts for the three months ended March 31, 2005.
The Property leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. The leases include provisions under which the Property is reimbursed for common area, real estate tax, and insurance costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates. Certain of the leases contain provision for contingent rentals. Recognition of contingent rental income is deferred until the target that triggers the contingent rental income is achieved. There was no contingent rent earned during the period from July 18, 2004 (commencement of operations) to December 31, 2004.
Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental income accrues for the full period of occupancy on a straight-line basis. Related adjustments increased base rental income by $62,766 for the year ended December 31, 2004.
MONTECITO CROSSING
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from July 18, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
Minimum rents to be received from tenants under operating leases, which terms range from four to 20 years, as of December 31 2004, are as follows:
Year | ||
2005 | $ | 2,290,279 |
2006 | 2,706,041 | |
2007 | 2,782,193 | |
2008 | 2,796,735 | |
2009 | 2,748,704 | |
Thereafter | 14,887,013 | |
$ | 28,210,965 |
Direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Property. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, management fees, interest expense related to mortgage debt not assumed, and professional fees are excluded from the Historical Summary.
Independent Auditors' Report
The Board of Directors
Inland Western Retail Real Estate Trust, Inc.
We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses ("Combined Historical Summary") of the Properties Acquired from Ainbinder Company ("the Properties") for the year ended December 31, 2004. This Combined Historical Summary is the responsibility of the management of Inland Western Retail Real Estate Trust, Inc. Our responsibility is to express an opinion on the Combined Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Combined Historical Summary is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Properties' internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Combined Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Combined Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Combined Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in Form 8-K/A of Inland Western Retail Real Estate Trust, Inc., as described in note 2. It is not intended to be a complete presentation of the Properties' revenues and expenses.
In our opinion, the Combined Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 of the Properties acquired from Ainbinder Company for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Chicago, Illinois
May 25, 2005
PROPERTIES ACQUIRED FROM AINBINDER COMPANY
Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the three months ended | For the year ended | |||
March 31, 2005 | December 31, 2004 | |||
(unaudited) | ||||
Gross income: | ||||
Base rental income | $ | 755,794 | $ | 2,992,842 |
Operating expense and real estate tax recoveries | 280,546 | 751,692 | ||
Total gross income | 1,036,340 | 3,744,534 | ||
Direct operating expenses: | ||||
�� Operating expenses | 89,126 | 154,746 | ||
Insurance | 23,610 | 79,250 | ||
Real estate taxes | 167,095 | 515,781 | ||
Total direct operating expenses | 279,831 | 749,777 | ||
Excess of gross income over direct operating expenses | $ | 756,509 | $ | 2,994,757 |
See accompanying notes to combined historical summary of gross income and direct operating expenses. |
PROPERTIES ACQUIRED FROM AINBINDER COMPANY
Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
- Business
- Basis of Presentation
- Gross Income
- Direct Operating Expenses
The Properties acquired from Ainbinder Company ("the Properties") consist of:
Name | Gross | Location | Occupancy at |
Bear Creek | 87,912 | Houston, TX | 100% |
Grapevine Crossing | 125,381 | Grapevine, TX | 100% |
The Properties are leased to a total of 25 tenants. Of these, three tenants account for 68% of base rental revenue for the year ended December 31, 2004. On April 18, 2005, Inland Western Retail Real Estate Trust, Inc. ("IWRRETI") acquired Bear Creek and Grapevine Crossing from Ainbinder Company, an unaffiliated third party.
The Combined Historical Summary of Gross Income and Direct Operating Expenses ("Combined Historical Summary") has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K/A of IWRRETI and is not intended to be a complete presentation of the Properties' revenues and expenses. The Combined Historical Summary has been prepared on the accrual basis of accounting and requires management of the Properties to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. The Combined Historical Summary is presented on a combined basis since the Properties were acquired from the same seller.
All adjustments necessary for a fair presentation have been made to accompanying unaudited amounts for the three months ended March 31, 2005.
The Properties lease retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. The leases include provisions under which the Properties are reimbursed for common area, real estate tax, and insurance costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates. Certain of the leases contain provision for contingent rentals. Recognition of contingent rental income is deferred until the target that triggers the contingent rental income is achieved. There was no contingent rent earned for the year ended December 31, 2004.
Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental income accrues for the full period of occupancy on a straight-line basis. Related adjustments increased base rental income by $107,008 for the year ended December 31, 2004.
PROPERTIES ACQUIRED FROM AINBINDER COMPANY
Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
Minimum rents to be received from tenants under operating leases, which terms range from three to 17 years, as of December 31, 2004, are as follows:
Year | ||
2005 | $ | 2,941,886 |
2006 | 2,956,216 | |
2007 | 2,814,195 | |
2008 | 2,695,924 | |
2009 | 2,607,457 | |
Thereafter | 21,919,607 | |
$ | 35,935,285 |
Direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Properties. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, management fees, interest expense related to mortgage debt not assumed, and professional fees are excluded from the Combined Historical Summary.
Report of Independent Auditors
To the Members of
Starwood Ceruzzi LLC
We have audited the accompanying combined statement of revenues and certain operating expenses of the Acquisition Properties, as described in Note 1, for the year ended December 31, 2004. This statement is the responsibility of the Acquisition Properties' management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement. We believe that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain operating expenses of the Acquisition Properties was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of revenues and expenses of the Acquisition Properties.
In our opinion, the statement referred to above presents fairly, in all material respects, the revenues and certain operating expenses of the Acquisition Properties, as described in Note 1, for the year ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers, LLP
March 5, 2005
Acquisition Properties
Combined Statement of Revenues and Certain Operating Expenses of the Operating Properties
For the three months ended | For the year ended | ||
March 31, 2005 | December 31 2004 | ||
Revenues: | (unaudited) | ||
Base rent | $ | 7,398,182 | 28,271,046 |
Other income | 2,331,933 | 7,165,854 | |
Total revenues | 9,730,115 | 35,436,900 | |
Costs and Expenses: | |||
Property operating and maintenance | 1,499,073 | 3,516,974 | |
Utilities | 120,625 | 297,051 | |
Real estate taxes | 1,714,785 | 6,062,144 | |
Insurance | 87,467 | 339,928 | |
General and administrative | 178,955 | 556,839 | |
Bad Debt | 115,715 | 801,354 | |
Total expenses | 3,716,620 | 11,574,290 | |
Net income | $ | 6,013,495 | 23,862,610 |
The accompanying notes are an integral part of this statement.
Acquisition Properties
Notes to Combined Statement of Revenues and Certain Operating Expenses
- Business and Summary of Significant Accounting Policies
- Tenant Leases
- Related Party Transactions
The Combined Statement of Revenues and Certain Operating Expenses of the Acquisition Properties (the "Statement") includes the operations of 11 community, neighborhood and regional retail shopping centers (collectively, the "Acquisition Properties"), located in the suburban Connecticut, Pennsylvania, Vermont and New York markets. The Acquisition Properties were owned and managed by Starwood Retail Trust, Inc and Ceruzzi Holdings LLC (collectively, the "Companies") and their subsidiaries.
Basis of Presentation
The Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission Rule 3-14 of Regulation S-X, and is not a complete presentation of the actual operations of the Acquisition Properties for the period presented. Certain revenues and expenses considered by management not comparable to the proposed future operations of the Acquisition Properties have been excluded, consisting primarily of depreciation, amortization, interest income and expense, and nonrecurring corporate expenses.
Estimates
The Statement is prepared in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of revenues and certain operating expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Minimum rental revenues attributable to operating leases are recognized when earned and due from tenants. The effects of scheduled rent increases and rental concessions, if any, are recorded on a straight-line basis over the term of the tenant's lease. Certain of the leases provide for additional rental revenue to be paid, based on a percentage of the level of sales achieved by the lessee. Such additional rental revenue is recognized when the lessee achieves the specified sales that triggered such additional rent. Revenue from tenant reimbursement of common area maintenance and other operating expenses is recognized pursuant to the tenant's lease.
Ground lease expense recognition
Expenses incurred under non-cancelable ground leases with terms greater than one year are recognized on a straight-line basis over the related lease terms after giving effect to rent abatements and escalations. Accordingly, contractual lease payment increases are recorded on a straight-line basis over the term of lease.
Property Operating and Maintenance
Included in property operating and maintenance are expenses for cleaning, maintenance, security, and other non-reimbursable operating expenses.
Acquisition Properties
Notes to Combined Statement of Revenues and Certain Operating Expenses
The Acquisition Properties are leased to tenants under operating leases. Future minimum rentals payable at December 31, 2004 from tenants under non-cancelable operating leases, excluding tenant reimbursements of operating expenses and contingent rentals based on tenant sales volume, are approximately as follows:
2005 | $ | 12,521,973 |
2006 | 12,379,833 | |
2007 | 12,561,061 | |
2008 | 12,527,984 | |
2009 | 12,360,567 | |
Thereafter | 121,989,005 | |
Total | $ | 184,340,423 |
The general economic climate, as well as local factors in the areas where the Acquisition Properties are located, affects operations of the Acquisition Properties. The tenant base includes national, regional and local retailers. No tenant occupies more than 10% of leasable space or represents more than 10% of revenue.
The Acquisition Properties pay management fees to an entity affiliated through common ownership based on terms defined in various management agreements. During 2004, management fees incurred amounted to $982,972 which is included in property operating & maintenance in the Statement.
Independent Auditors' Report
The Board of Directors
Inland Western Retail Real Estate Trust, Inc.
We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses ("Combined Historical Summary") of the Properties Acquired from Starwood Wasserman ("the Properties") for the year ended December 31, 2004. This Combined Historical Summary is the responsibility of the management of Inland Western Retail Real Estate Trust, Inc. Our responsibility is to express an opinion on the Combined Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Combined Historical Summary is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Properties' internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Combined Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Combined Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Combined Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in Form 8-K/A of Inland Western Retail Real Estate Trust, Inc., as described in note 2. It is not intended to be a complete presentation of the Properties' revenues and expenses.
In our opinion, the Combined Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 of the Properties acquired from Starwood Wasserman for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Chicago, Illinois
June 8, 2005
PROPERTIES ACQUIRED FROM STARWOOD WASSERMAN
Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the three | For the | |||
months ended | year ended | |||
March 31, 2005 | December 31, 2004 | |||
(unaudited) | ||||
Gross income: | ||||
Base rental income | $ | 6,813,821 | $ | 26,999,158 |
Operating expense and real estate tax recoveries | 2,156,895 | 6,951,418 | ||
Total gross income | 8,970,716 | 33,950,576 | ||
Direct operating expenses: | ||||
Operating expenses | 990,745 | 3,769,247 | ||
Insurance | 107,120 | 408,290 | ||
Real estate taxes | 1,167,826 | 4,041,137 | ||
Ground rent expense | 464,101 | 1,856,344 | ||
Interest expense | 562,231 | 1,771,526 | ||
Total direct operating expenses | 3,292,023 | 11,846,554 | ||
Excess of gross income over direct operating expenses | $ | 5,678,693 | $ | 22,104,032 |
See accompanying notes to combined historical summary of gross income and direct operating expenses. |
PROPERTIES ACQUIRED FROM STARWOOD WASSERMAN
Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
- Business
- Basis of Presentation
- Gross Income
- Direct Operating Expenses
- Interest Expense
The Properties acquired from Starwood Wasserman ("the Properties") consist of:
Name | Gross | Location | Occupancy at |
Edwards Multiplex | 124,163 | Ontario, CA | Single tenant |
Edwards Multiplex | 94,600 | Fresno, CA | Single tenant |
Crossroads Plaza | 16,000 | North Attleboro, MA | Single tenant |
Commons at Temecula | 292,661 | Temecula, CA | 98% |
Shops on Lake Avenue | 132,205 | Pasadena, CA | 99% |
Commons at Royal Palm | 158,159 | Royal Palm Beach, FL | 98% |
Page Field Commons | 322,051 | Fort Meyers, FL | 93% |
Cuyahoga Falls Market Center | 76,361 | Cuyahoga Falls, OH | 96% |
Massillon Commons | 245,993 | Massillon, OH | 90% |
University Square | 287,172 | University Heights, OH | 64% |
Boston Commons | 103,070 | Springfield, MA | 100% |
Boulevard Plaza | 108,897 | Pawtucket, RI | 97% |
Brown's Lane | 74,715 | Middletown, RI | 100% |
The Properties are leased to a total of 137 tenants. Of these, one tenant accounted for 12% of base rental revenue for the year ended December 31, 2004. On April 29, 2005, Inland Western Retail Real Estate Trust, Inc. ("IWRRETI") acquired Edwards Multiplex - Ontario, Commons at Temecula, Cuyahoga Falls Market Center, Massillon Commons, Boulevard Plaza, and Brown's Lane from Starwood Wasserman, an unaffiliated third party. On May 2, 2005, IWRRETI acquired Edwards Multiplex - Fresno, Page Field Commons, and University Square from Starwood Wasserman. On May 18, 2005, IWRRETI acquired Crossroads Plaza, Commons at Royal Palm, and Boston Commons from Starwood Wasserman. IWRRETI expects to close on the acquisition of Shops on Lake Avenue by the end of the second quarter of 2005.
The Combined Historical Summary of Gross Income and Direct Operating Expenses ("Combined Historical Summary") has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in Form 8-K/A of IWRRETI and is not intended to be a complete presentation of the Properties' revenues and expenses. The Combined Historical Summary has been prepared on the accrual basis of accounting and requires management of the Properties to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. The Combined Historical Summary is presented on a combined basis since the Properties were acquired from the same seller.
All adjustments necessary for a fair presentation have been made to accompanying unaudited amounts for the three months ended March 31, 2005.
PROPERTIES ACQUIRED FROM STARWOOD WASSERMAN
Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
The Properties lease retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. The leases include provisions under which the Properties are reimbursed for common area, real estate tax, and insurance costs. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements.Certain leases contain renewal options at various periods at various rental rates. Certain of the leases contain provision for contingent rentals. Recognition of contingent rental income is deferred until the target that triggers the contingent rental income is achieved. There was no contingent rent earned during the year ended December 31, 2004.
Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental income accrues for the full period of occupancy on a straight-line basis. Related adjustments increased base rental income by $728,323 for the year ended December 31, 2004.
Minimum rents to be received from tenants under operating leases, which terms range from two to 20 years, as of December 31, 2004, are as follows:
Year | ||
2005 | $ | 26,784,839 |
2006 | 26,768,113 | |
2007 | 26,418,679 | |
2008 | 25,751,743 | |
2009 | 25,101,418 | |
Thereafter | 164,387,962 | |
$ | 295,212,753 |
Direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Properties. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, management fees, interest expense related to mortgage debt not assumed, and professional fees are excluded from the Combined Historical Summary.
Three properties are subject to ground leases. Such leases related to Edwards Multiplex - Fresno, Page Field Commons and Shops on Lake Avenue have terms ending in 2053, 2032, and 2057, respectively, and provide for increase in minimum rent payments over the term of the leases. For financial reporting purposes, ground rent expense is recognized on a straight-line basis over the term of the leases and, as a result the related adjustment increased ground rent expense by $539,933 for the year ended December 31, 2004.
PROPERTIES ACQUIRED FROM STARWOOD WASSERMAN
Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
Minimum rents to be paid to the unaffiliated third party under the ground lease in effect at December 31, 2004 are as follows:
Year | ||
2005 | $ | 1,316,470 |
2006 | 1,316,470 | |
2007 | 1,362,304 | |
2008 | 1,401,456 | |
2009 | 1,413,117 | |
Thereafter | 79,036,814 | |
$ | 85,846,631 |
IWRRETI assumed or expects to assume mortgage loans in the amounts of $4,977,713, $9,879,711, and $30,457,845, secured by Crossroads Plaza, Boston Commons, and Shops on Lake Avenue, respectively,in connection with the acquisitions. The mortgage loans bear fixed interest rates of 5.44%, 5.36%, and 5.02% for Crossroads Plaza, Boston Commons, and Shops on Lake Avenue, respectively, and are payable in monthly installments of principal and interest, and mature on January 1, 2015, June 1, 2014, and March 1, 2034, respectively. Each of these mortgage loans was funded during 2004. As a result, interest expense, included in the accompanying Combined Historical Summary for Crossroads Plaza is for one month ($22,671), for Boston Commons for eight months ($359,302), and for Shops on Lake Avenue for eleven months ($1,389,553).
Minimum annual principal payments under the terms of the mortgage debt are as follows:
Year | ||
2005 | $ | 340,416 |
2006 | 683,082 | |
2007 | 719,487 | |
2008 | 751,381 | |
2009 | 797,883 | |
Thereafter | 42,023,020 | |
$ | 45,315,269 |
GREENSBURG COMMONS
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the year ended | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 455,484 | 1,882,359 |
Operating expense and real estate tax recoveries | 65,773 | 228,074 | |
Total gross income | 521,257 | 2,110,433 | |
Direct operating expenses: | |||
Operating expenses | 38,851 | 108,711 | |
Real estate taxes | 27,804 | 111,216 | |
Insurance | 10,725 | 39,290 | |
Total direct operating expenses | 77,380 | 259,217 | |
Excess of gross income over direct operating expenses | $ | 443,877 | 1,851,216 |
See accompanying notes to historical summary of gross income and direct operating expense.
GREENSBURG COMMONS
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of Greensburg Commons to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively.
BISON HOLLOW
Historical Summary of Gross Income and Direct Operating Expenses
For the period from March 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the period from | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 358,499 | 918,283 |
Operating expense and real estate tax recoveries | 77,948 | 194,869 | |
Total gross income | 436,447 | 1,113,152 | |
Direct operating expenses: | |||
Operating expenses | 30,925 | 68,947 | |
Real estate taxes | 77,313 | 201,600 | |
Insurance | 2,209 | 5,570 | |
Total direct operating expenses | 110,447 | 276,117 | |
Excess of gross income over direct operating expenses | $ | 326,000 | 837,035 |
See accompanying notes to historical summary of gross income and direct operating expense.
BISON HOLLOW
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from March 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the period from March 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of Bison Hollow to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the period from March 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005, respectively.
CLEARLAKE SHORES
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 190,791 | 487,153 |
Operating expense and real estate tax recoveries | 29,705 | 92,598 | |
Total gross income | 220,496 | 579,751 | |
Direct operating expenses: | |||
Operating expenses | 33,442 | 42,719 | |
Real estate taxes | 20,160 | 70,683 | |
Insurance | 9,321 | 31,692 | |
Total direct operating expenses | 62,923 | 145,094 | |
Excess of gross income over direct operating expenses | $ | 157,573 | 434,657 |
See accompanying notes to historical summary of gross income and direct operating expense.
CLEARLAKE SHORES
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004
and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of Clearlake Shores to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively.
CORNERSTONE PLAZA
Historical Summary of Gross Income and Direct Operating Expenses
For the period from November 11, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the period from | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 207,112 | 118,048 |
Operating expense and real estate tax recoveries | 28,397 | 14,788 | |
Total gross income | 235,509 | 132,836 | |
Direct operating expenses: | |||
Operating expenses | 18,687 | 12,458 | |
Real estate taxes | 21,429 | 14,286 | |
Insurance | 13,596 | 9,064 | |
Total direct operating expenses | 53,712 | 35,808 | |
Excess of gross income over direct operating expenses | $ | 181,797 | 97,028 |
See accompanying notes to historical summary of gross income and direct operating expense.
CORNERSTONE PLAZA
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from November 11, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the period from November 11, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of Cornerstone Plaza to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the period from November 11, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005, respectively.
LAKE FOREST CROSSING
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 128,228 | 516,187 |
Operating expense and real estate tax recoveries | 33,356 | 113,440 | |
Total gross income | 161,584 | 629,627 | |
Direct operating expenses: | |||
Operating expenses | 6,054 | 27,559 | |
Real estate taxes | 42,164 | 118,988 | |
Insurance | 547 | 2,188 | |
Total direct operating expenses | 48,765 | 148,735 | |
Excess of gross income over direct operating expenses | $ | 112,819 | 480,892 |
See accompanying notes to historical summary of gross income and direct operating expense.
LAKE FOREST CROSSING
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004
and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of Lake Forest Crossing to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively.
ASHLAND & ROOSEVELT
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 574,816 | 2,367,728 |
Operating expense and real estate tax recoveries | 149,973 | 559,513 | |
Total gross income | 724,789 | 2,927,241 | |
Direct operating expenses: | |||
Operating expenses | 101,580 | 438,648 | |
Real estate taxes | 53,201 | 186,035 | |
Insurance | 1,633 | 6,221 | |
Total direct operating expenses | 156,414 | 630,904 | |
Excess of gross income over direct operating expenses | $ | 568,375 | 2,296,337 |
See accompanying notes to historical summary of gross income and direct operating expense.
ASHLAND & ROOSEVELT
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004
and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of Ashland & Roosevelt to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively.
THE SHOPS AT 5
Historical Summary of Gross Income and Direct Operating Expenses
For the period from November 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the period from | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 1,186,419 | 907,398 |
Operating expense and real estate tax recoveries | 203,896 | 99,830 | |
Total gross income | 1,390,316 | 1,007,228 | |
Direct operating expenses: | |||
Operating expenses | 162,538 | 91,769 | |
Real estate taxes | 75,594 | 23,517 | |
Insurance | 3,750 | 2,333 | |
Total direct operating expenses | 241,882 | 117,619 | |
Excess of gross income over direct operating expenses | $ | 1,148,434 | 889,610 |
See accompanying notes to historical summary of gross income and direct operating expense.
THE SHOPS AT 5
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from November 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the period from November 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of The Shops at 5 to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the period from November 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005, respectively
BEACHWAY PLAZA
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 67,923 | 153,445 |
Operating expense and real estate tax recoveries | 6,708 | 20,237 | |
Total gross income | 74,631 | 173,681 | |
Direct operating expenses: | |||
Operating expenses | 8,150 | 52,010 | |
Real estate taxes | 7,964 | 18,859 | |
Insurance | 3,107 | 25,150 | |
Total direct operating expenses | 19,221 | 95,750 | |
Excess of gross income over direct operating expenses | $ | 55,410 | 77,932 |
See accompanying notes to historical summary of gross income and direct operating expense.
BEACHWAY PLAZA
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004
and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of Beachway Plaza to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively.
GALVEZ SHOPPING CENTER
Historical Summary of Gross Income and Direct Operating Expenses
For the period from April 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the period from | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 117,950 | 266,232 |
Operating expense and real estate tax recoveries | 27,800 | 56,266 | |
Total gross income | 145,750 | 322,498 | |
Direct operating expenses: | |||
Operating expenses | 9,252 | 29,029 | |
Real estate taxes | 15,008 | 61,470 | |
Insurance | 6,034 | 25,022 | |
Total direct operating expenses | 30,294 | 115,521 | |
Excess of gross income over direct operating expenses | $ | 115,456 | 206,977 |
See accompanying notes to historical summary of gross income and direct operating expense.
GALVEZ SHOPPING CENTER
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from April 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the period from April 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of Galvez Shopping Center to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the period from April 1, 2004 (commencement of operations) to December 31, 2004 and the three months ended March 31, 2005, respectively.
SOUTHWEST CROSSING
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004 and the three months ended March 31, 2005 (unaudited)
For the | For the | ||
March 31, 2005 | December 31 2004 | ||
Gross income: | (unaudited) | (unaudited) | |
Base rental income | $ | 432,626 | 1,796,117 |
Operating expense and real estate tax recoveries | 87,301 | 407,504 | |
Total gross income | 519,927 | 2,203,621 | |
Direct operating expenses: | |||
Operating expenses | 25,442 | 80,386 | |
Real estate taxes | 74,409 | 283,464 | |
Insurance | 32,069 | 31,007 | |
Total direct operating expenses | 131,920 | 394,857 | |
Excess of gross income over direct operating expenses | $ | 388,007 | 1,808,764 |
See accompanying notes to historical summary of gross income and direct operating expense.
SOUTHWEST CROSSING
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 2004
and the three months ended March 31, 2005 (unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively, has been prepared from the operating statements provided by the owners of the property during those periods and requires management of Southwest Crossing to make estimates and assumptions that affect the amounts of the revenues and expense during those periods. Actual results may differ from those estimates.
All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the year ended December 31, 2004 and the three months ended March 31, 2005, respectively.