Exhibit 99.3
DIVIDEND CAPITAL TOTAL REALTY TRUST INC.
Pro Forma Financial Information
(Unaudited)
The following pro forma financial statements have been prepared to provide pro forma information with regards to real estate acquisitions, real estate securities investments and debt related investments made in 2007 and 2008 and the related financing of such transactions as applicable.
The accompanying unaudited pro forma condensed consolidated balance sheet presents our historical financial information as of September 30, 2008, as adjusted for the following transactions that occurred subsequent to September 30, 2008; (i) the acquisition of real properties, (ii) additional secured borrowings and (iii) the issuance and redemption of our common stock and OP Units pursuant to our public and private offerings.
The accompanying unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2008 combines our historical operations with the following transactions that occurred subsequent to December 31, 2007; (i) the acquisition of real properties, (ii) the acquisition of debt related investments, net of principal repayments, (iii) the issuance and redemptions of our common stock pursuant to our public offering, (iv) additional secured borrowings, net of principal repayments and (v) the issuance of OP Units pursuant to our Operating Partnership’s private placement offerings, as if all of these transactions had occurred on January 1, 2007.
The accompanying unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2007 combines our historical operations with the following transactions that occurred subsequent to December 31, 2006; (i) the acquisition of real properties, (ii) the acquisition of securities and debt related investments, net of principal repayments, (iii) the issuance and redemption of our common stock pursuant to our public offering, (iv) additional secured borrowings, net of principal repayments and (v) the issuance of OP Units pursuant to our Operating Partnership’s private placement offerings, as if all of these transactions had occurred on January 1, 2007.
The unaudited pro forma condensed consolidated financial statements have been prepared by our management based upon our historical financial statements and the historical financial statements of the acquired properties. These pro forma statements may not be indicative of the results that actually would have occurred if these transactions had been in effect on the dates indicated. The accompanying unaudited pro forma condensed consolidated statements of operations do not contemplate certain amounts that are not readily determinable, such as additional general and administrative expenses that are probable or interest income that would be earned on cash balances. The unaudited pro forma financial statements should be read in conjunction with our historical financial statements incorporated by reference in this prospectus.
DIVIDEND CAPITAL TOTAL REALTY TRUST INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2008
(Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | |
| | | Company
Historical (1) | | | Property Acquisitions
and Property-Related
Financing Activity | | | Pro Forma
Adjustments | | | Pro Forma
Consolidated | |
Assets | | | | | | | | | | | | | | | | |
Net investments in real property | | $ | 1,243,856 | | | $ | 128,152 | (2) | | $ | — | | | $ | 1,372,008 | |
Securities and debt related investments | | | 222,334 | | | | — | | | | — | | | | 222,334 | |
Cash and cash equivalents | | | 541,247 | | | | (24,933 | )(2)(3) | | | 71,603 | (4)(5)(6) | | | 587,917 | |
Other assets, net | | | 73,261 | | | | — | | | | — | | | | 73,261 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 2,080,698 | | | $ | 103,219 | | | $ | 71,603 | | | $ | 2,255,520 | |
| | | | | | | | | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | | | |
| | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Mortgage notes | | $ | 627,012 | | | $ | 93,250 | (2)(3) | | $ | — | | | $ | 720,262 | |
Other secured borrowings | | | 35,252 | | | | — | | | | (18,392 | )(6) | | | 16,860 | |
Financing obligations | | | 91,235 | | | | — | | | | 13,612 | (4) | | | 104,847 | |
Accounts payable and other obligations | | | 69,523 | | | | — | | | | — | | | | 69,523 | |
Intangible lease liabilities, net | | | 50,900 | | | | 5,472 | (2) | | | — | | | | 56,372 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | | 873,922 | | | | 98,722 | | | | (4,780 | ) | | | 967,864 | |
| | | | | | | | | | | | | | | | |
Minority Interests | | | 75,539 | | | | 4,497 | (2) | | | — | | | | 80,036 | |
| | | | |
Stockholders’ Equity: | | | | | | | | | | | | | | | | |
Common stock and additional paid-in-capital, net of selling costs | | | 1,379,720 | | | | — | | | | 76,383 | (5) | | | 1,456,103 | |
Distributions in excess of earnings | | | (172,698 | ) | | | — | | | | — | | | | (172,698 | ) |
Accumulated other comprehensive loss | | | (75,785 | ) | | | — | | | | — | | | | (75,785 | ) |
| | | | | | | | | | | | | | | | |
Total Stockholders’ Equity | | | 1,131,237 | | | | — | | | | 76,383 | | | | 1,207,620 | |
| | | | | | | | | | | | | | | | |
Total Liabilities and Stockholders’ Equity | | $ | 2,080,698 | | | $ | 103,219 | | | $ | 71,603 | | | $ | 2,255,520 | |
| | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of this pro forma condensed consolidated financial statement.
DIVIDEND CAPITAL TOTAL REALTY TRUST INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
| (1) | Reflects our historical condensed consolidated balance sheet as of September 30, 2008. Please refer to our historical condensed consolidated financial statements and notes thereto as incorporated by reference herein. |
| (2) | Reflects the acquisition of properties acquired subsequent to September 30, 2008, which include (i) the Millennium Financial Center, (ii) the Eden Prairie Office Center and (iii) the Austin-Mueller Health Center. The total expected net investment in real property, including acquisition costs and acquisition fees payable to our Advisor, is expected to be approximately $122.7 million and was paid through a combination of (i) net proceeds from the our public and private offerings, (ii) debt financing, (iii) the assumption of debt and (iv) equity contributions from a third-party joint venture partner. The purchase price allocations for these properties have not been finalized and as such, are subject to final purchase price allocations. |
| (3) | Between October 1, 2008 and December 29, 2008, the latest practicable date, we obtained approximately $93.3 million in new mortgage debt financing secured by six of our operating properties, which was comprised of five individual mortgage loans. The weighted average stated interest rate of these loans was approximately 6.66%. All of these loans are amortizing and mature in 2016. |
| (4) | Between October 1, 2008 and December 29, 2008, the latest practicable date, our Operating Partnership received approximately $13.6 million in net proceeds from its private placement offerings during the period from October 1, 2008 and December 29, 2008. |
| (5) | Capital was raised through our public offering subsequent to September 30, 2008, which was used to fund, in part, the real estate property acquisitions described in the above notes. As such, the estimated net proceeds from the shares that were sold from October 1, 2008 through December 29, 2008, the latest practicable date, are included in the accompanying pro forma condensed consolidated balance sheet. The following table approximates the net proceeds received from our public offering based on a selling price of $10.00 per share and selling costs of 10% of gross proceeds (in thousands): |
| | | | |
Shares sold subsequent to September 30, 2008 | | | 8,487 | |
Gross proceeds from shares sold | | $ | 84,870 | |
Less: Selling costs of shares sold | | | (8,487 | ) |
| | | | |
Approximate net proceeds from October 1, 2008 through December 29, 2008 | | $ | 76,383 | |
| | | | |
| (6) | Between October 1, 2008 and December 29, 2008, the latest practicable date, we repaid certain other borrowings secured by our investment in real estate securities and debt related investments. |
DIVIDEND CAPITAL TOTAL REALTY TRUST INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008
(Unaudited)
(In thousands, except per share information)
| | | | | | | | | | | | | | | | |
| | | Company
Historical (1) | | | Property
Acquisitions | | | Pro Forma
Adjustments | | | Total
Pro Forma | |
REVENUE: | | | | | | | | | | | | | | | | |
Rental revenue | | $ | 82,643 | | | $ | 7,574 | (2) | | $ | (420 | )(4) | | $ | 89,797 | |
Debt related and securities income | | | 20,230 | | | | — | | | | 1,184 | (5) | | | 21,414 | |
| | | | | | | | | | | | | | | | |
Total Revenue | | | 102,873 | | | | 7,574 | | | | 764 | | | | 111,211 | |
| | | | |
EXPENSES: | | | | | | | | | | | | | | | | |
Rental expense | | | 21,481 | | | | 1,871 | (2) | | | — | | | | 23,352 | |
Depreciation and amortization expense | | | 37,872 | | | | — | | | | 2,041 | (4) | | | 39,913 | |
General and administrative expenses | | | 3,261 | | | | — | | | | — | | | | 3,261 | |
Asset management fees, related party | | | 8,580 | | | | — | | | | 537 | (6) | | | 9,117 | |
| | | | | | | | | | | | | | | | |
Total Expenses | | | 71,194 | | | | 1,871 | | | | 2,578 | | | | 75,643 | |
Operating Income (Loss) | | | 31,679 | | | | 5,703 | | | | (1,814 | ) | | | 35,568 | |
| | | | |
Other Income (Expenses): | | | | | | | | | | | | | | | | |
Interest income | | | 9,212 | | | | — | | | | — | | | | 9,212 | |
Interest expense | | | (33,197 | ) | | | — | | | | (4,652 | )(7) | | | (37,849 | ) |
Gain (loss) on derivatives | | | (8,427 | ) | | | — | | | | — | | | | (8,427 | ) |
Gain on extinguishment of debt | | | 9,309 | | | | — | | | | — | | | | 9,309 | |
Other-than-temporary impairment on securities | | | (79,441 | ) | | | — | | | | — | | | | (79,441 | ) |
| | | | | | | | | | | | | | | | |
Net Income (Loss) Before Minority Interests | | | (70,865 | ) | | | 5,703 | | | | (6,466 | ) | | | (71,628 | ) |
Minority Interests | | | 2,725 | | | | 693 | (3) | | | 30 | (8) | | | 3,448 | |
| | | | | | | | | | | | | | | | |
NET INCOME (LOSS) FROM CONTINUING OPERATIONS | | $ | (68,140 | ) | | $ | 6,396 | | | $ | (6,436 | ) | | $ | (68,180 | ) |
| | | | | | | | | | | | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | | | | | | | | | | | | | | | | |
Basic | | | 134,075 | | | | — | | | | 27,437 | (9) | | | 161,512 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 137,805 | | | | — | | | | 30,208 | (9) | | | 168,013 | |
| | | | | | | | | | | | | | | | |
NET LOSS FROM CONTINUING OPERATIONS PER COMMON SHARE | | | | | | | | | | | | | | | | |
Basic | | $ | (0.51 | ) | | | | | | | | | | $ | (0.42 | ) |
| | | | | | | | | | | | | | | | |
Diluted | | $ | (0.51 | ) | | | | | | | | | | $ | (0.42 | ) |
| | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of this pro forma condensed consolidated financial statement.
DIVIDEND CAPITAL TOTAL REALTY TRUST INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(Unaudited)
(In thousands, except per share information)
| | | | | | | | | | | | | | | | |
| | | Company
Historical (1) | | | Property
Acquisitions | | | Pro Forma
Adjustments | | | Total
Pro Forma | |
REVENUE: | | | | | | | | | | | | | | | | |
Rental revenue | | $ | 70,424 | | | $ | 43,351 | (2) | | $ | 429 | (4) | | $ | 114,204 | |
Debt related and securities income | | | 24,642 | | | | — | | | | 3,910 | (5) | | | 28,552 | |
| | | | | | | | | | | | | | | | |
Total Revenue | | | 95,066 | | | | 43,351 | | | | 4,339 | | | | 142,756 | |
| | | | |
EXPENSES: | | | | | | | | | | | | | | | | |
Rental expense | | | 18,790 | | | | 8,613 | (2) | | | — | | | | 27,403 | |
Depreciation and amortization expense | | | 31,358 | | | | — | | | | 22,385 | (4) | | | 53,743 | |
General and administrative expenses | | | 3,784 | | | | — | | | | — | | | | 3,784 | |
Asset management fees, related party | | | 8,707 | | | | — | | | | 4,393 | (6) | | | 13,100 | |
| | | | | | | | | | | | | | | | |
Total Expenses | | | 62,639 | | | | 8,613 | | | | 26,778 | | | | 98,030 | |
Operating Income (Loss) | | | 32,427 | | | | 34,738 | | | | (22,439 | ) | | | 44,726 | |
Other Income (Expenses): | | | | | | | | | | | | | | | | |
Interest income | | | 11,927 | | | | — | | | | — | | | | 11,927 | |
Interest expense | | | (34,157 | ) | | | — | | | | (17,608 | )(7) | | | (51,765 | ) |
| | | | | | | | | | | | | | | | |
Net Income (Loss) Before Minority Interests | | | 10,197 | | | | 34,738 | | | | (40,047 | ) | | | 4,888 | |
Minority Interests | | | 868 | | | | (196 | )(3) | | | 205 | (8) | | | 877 | |
| | | | | | | | | | | | | | | | |
NET INCOME (LOSS) FROM CONTINUING OPERATIONS | | $ | 11,065 | | | $ | 34,542 | | | $ | (39,842 | ) | | $ | 5,765 | |
| | | | | | | | | | | | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | | | | | | | | | | | | | | | | |
Basic | | | 85,473 | | | | — | | | | 76,039 | (9) | | | 161,512 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 85,493 | | | | — | | | | 82,520 | (9) | | | 168,013 | |
| | | | | | | | | | | | | | | | |
NET INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | | | | | | | | | | | | | | | | |
Basic | | $ | 0.13 | | | | | | | | | | | $ | 0.04 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.13 | | | | | | | | | | | $ | 0.04 | |
| | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of this pro forma condensed consolidated financial statement.
DIVIDEND CAPITAL TOTAL REALTY TRUST INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| (1) | Reflects our historical condensed consolidated statements of operations for the nine months ended September 30, 2008 and for the year ended December 31, 2007. Please refer to our historical consolidated financial statements and notes thereto as incorporated by reference in this prospectus. |
| (2) | The following table sets forth theincremental impact of properties acquired by us during 2007 and 2008. The amounts presented are based on the historical operations of the properties and management’s estimates. Included in rental revenue are base rent, presented on a straight-line basis, and rental expense recoveries. The amounts presented for rental expense include: (i) real estate taxes, (ii) operating expenses, (iii) insurance expense, and (iv) property management fees (amounts in thousands). |
| | | | | | | | | | | | | | |
Property | | Acquisition
Date | | For the Nine Months Ended
September 30, 2008 | | For the Year Ended
December 31, 2007 |
| | | Rental
Revenue | | Rental
Expense | | Rental
Revenue | | Rental
Expense |
40 Boulevard | | 01/25/07 | | $ | — | | $ | — | | $ | 93 | | $ | 79 |
Bandera Road | | 02/01/07 | | | — | | | — | | | 243 | | | 72 |
Washington Commons | | 02/01/07 | | | — | | | — | | | 313 | | | 138 |
Southfield | | 03/20/07 | | | — | | | — | | | 111 | | | 31 |
Shackleford | | 03/20/07 | | | — | | | — | | | 423 | | | 126 |
Commerce Center | | 03/26/07 | | | — | | | — | | | 600 | | | 17 |
Veterans | | 03/26/07 | | | — | | | — | | | 83 | | | 54 |
Plainfield III | | 03/28/07 | | | — | | | — | | | 389 | | | 90 |
Patriot Drive I & II | | 03/28/07 | | | — | | | — | | | 645 | | | 143 |
Midpoint Drive | | 06/15/07 | | | — | | | — | | | 331 | | | — |
Logistics Boulevard (a) | | 06/15/07 | | | — | | | — | | | 181 | | | — |
DDR JVI Portfolio | | 05/11/07 | | | — | | | — | | | 4,829 | | | 1,354 |
Fortune Concourse | | 05/17/07 | | | — | | | — | | | 1,727 | | | 477 |
CB Square | | 06/27/07 | | | — | | | — | | | 739 | | | 164 |
California Circle | | 07/10/07 | | | — | | | — | | | 911 | | | 145 |
Creekside V (a) | | 06/15/07 | | | — | | | — | | | — | | | 74 |
New England Retail Portfolio (b) | | 8/1/07-10/18/07 | | | — | | | — | | | 17,049 | | | 2,759 |
Joyce Blvd | | 09/28/07 | | | — | | | — | | | 577 | | | — |
Greenwood | | 10/29/07 | | | — | | | — | | | 1,582 | | | 330 |
Westport | | 01/09/08 | | | 52 | | | 8 | | | 2,114 | | | 343 |
DeGuigne | | 11/21/07 | | | — | | | — | | | 1,977 | | | 304 |
National Restaurant Portfolio I | | 09/17/08 | | | 594 | | | — | | | 831 | | | — |
Riverport Industrial Portfolio | | 09/17/08 | | | 2,187 | | | 479 | | | 3,063 | | | 670 |
Millennium Financial Center | | 10/01/08 | | | 3,405 | | | 932 | | | 4,540 | | | 1,243 |
Eden Prairie Office Center (a) | | 10/03/08 | | | 1,336 | | | 452 | | | — | | | — |
Austin-Mueller Health Center (a) | | 12/23/08 | | | — | | | — | | | — | | | — |
| | | | | | | | | | | | | | |
Total | | | | $ | 7,574 | | $ | 1,871 | | $ | 43,351 | | $ | 8,613 |
| | | | | | | | | | | | | | |
| | (a) | Includes limited operating results since Logistics Boulevard, Eden Prairie Office Center and the Austin-Mueller Health Center were newly developed properties. Creekside V was vacant until the second quarter of 2007. |
| | (b) | The New England Retail Portfolio consists of 25 retail properties located in the Northeast region. On August 1, 2007, we acquired 22 of the 25 properties included in the New England Retail Portfolio for a total investment of approximately $336.8 million. We acquired the remaining three properties on October 18, 2007 for a total investment of approximately $47.7 million. All 25 properties are included in the pro forma condensed consolidated statements of operations. |
| (3) | Certain property acquisitions are made through joint ventures entered into by and between wholly-owned subsidiaries of ours and affiliates of various joint venture partners. We consolidate these joint ventures for reporting purposes. Our joint venture partners have ownership interests ranging from 2.5% to 25.0%, and, as a result, our joint venture partners participate in the earnings and losses of their respective joint ventures. |
| (4) | The following table sets forth the purchase price allocation and the resulting incremental depreciation and amortization of real properties acquired by us in 2007 and 2008. Certain properties are presented with the respective estimated purchase price allocation. However, we do not expect final purchase price allocations to deviate materially from the amounts presented. Pursuant to the purchase price allocation, building and other costs include amounts allocated to intangible in-place lease assets, above-market lease intangible assets and below-market lease intangible liabilities. The net adjustment of amortization of above and below market lease intangible assets and liabilities to rental revenue for the nine months ended September 30, 2008 was a net decrease to rental revenue of approximately $420,000 and a net increase to rental revenue of approximately $429,000 for the year ended December 31, 2007. Amounts in the following table are presented in thousands. |
| | | | | | | | | | | | | | | | | |
Property | | Acquisition Date | | Land | | Building and
Other Costs | | Total Costs | | Incremental Depreciation and
Amortization |
| | | | | | For the Nine
Months Ended
September 30,
2008 | | For theYear
Ended
December 31,
2007 |
40 Boulevard | | 01/25/07 | | $ | 2,611 | | $ | 11,944 | | $ | 14,555 | | $ | — | | $ | 174 |
Bandera Road | | 02/01/07 | | | 8,221 | | | 22,166 | | | 30,387 | | | — | | | 87 |
Washington Commons | | 02/01/07 | | | 9,019 | | | 17,436 | | | 26,455 | | | — | | | 266 |
Southfield | | 03/20/07 | | | 1,280 | | | 5,354 | | | 6,634 | | | — | | | 81 |
Shackleford | | 03/20/07 | | | 2,900 | | | 18,792 | | | 21,692 | | | — | | | 168 |
Commerce Center | | 03/26/07 | | | 5,939 | | | 28,970 | | | 34,909 | | | — | | | 328 |
Veterans | | 03/26/07 | | | 2,121 | | | 10,987 | | | 13,108 | | | — | | | 153 |
Plainfield III | | 03/28/07 | | | 2,101 | | | 19,114 | | | 21,215 | | | — | | | 382 |
Patriot Drive I & II | | 03/28/07 | | | 4,200 | | | 28,425 | | | 32,625 | | | — | | | 573 |
DDR JVI Portfolio | | 05/11/07 | | | 48,876 | | | 115,265 | | | 164,141 | | | — | | | 1,159 |
Fortune Concourse | | 05/17/07 | | | 16,380 | | | 40,463 | | | 56,843 | | | — | | | 1,734 |
Midpoint Drive | | 06/15/07 | | | 1,176 | | | 7,899 | | | 9,075 | | | — | | | 219 |
Logistics Boulevard (a) | | 06/15/07 | | | 2,725 | | | 28,660 | | | 31,385 | | | — | | | 667 |
Creekside V | | 06/15/07 | | | 764 | | | 5,628 | | | 6,392 | | | — | | | 162 |
CB Square | | 06/27/07 | | | 3,768 | | | 14,939 | | | 18,707 | | | — | | | 254 |
California Circle | | 07/10/07 | | | 3,659 | | | 10,777 | | | 14,436 | | | — | | | 907 |
New England Retail Portfolio (b) | | 8/1/07-10/18/07 | | | 134,258 | | | 248,638 | | | 382,896 | | | — | | | 8,183 |
Joyce Blvd | | 09/28/07 | | | 2,699 | | | 8,996 | | | 11,695 | | | — | | | 263 |
Greenwood | | 10/29/07 | | | 2,040 | | | 20,869 | | | 22,909 | | | — | | | 822 |
DeGuigne | | 11/21/07 | | | 5,841 | | | 13,903 | | | 19,744 | | | — | | | 1,323 |
Westport | | 01/09/08 | | | 2,376 | | | 23,001 | | | 25,377 | | | — | | | 1,126 |
National Restaurant Portfolio I | | 09/17/08 | | | 3,610 | | | 6,063 | | | 9,673 | | | 115 | | | 151 |
Riverport Industrial Portfolio | | 09/17/08 | | | 4,435 | | | 26,451 | | | 30,886 | | | 1,208 | | | 1,610 |
Millennium Financial Center | | 10/01/08 | | | 12,570 | | | 35,706 | | | 48,276 | | | 873 | | | 1,164 |
Eden Prairie Office Center (a) | | 10/03/08 | | | 7,663 | | | 21,767 | | | 29,430 | | | 265 | | | — |
Austin-Mueller Health Center (a) | | 12/23/08 | | | 11,710 | | | 33,264 | | | 44,974 | | | — | | | — |
| | | | | | | | | | | | | | | | | |
Total | | | | $ | 302,942 | | $ | 825,477 | | $ | 1,128,419 | | $ | 2,461 | | $ | 21,956 |
| | | | | | | | | | | | | | | | | |
| | (a) | Logistics Boulevard, Eden Prairie Office Center and the Austin-Mueller Health Center were newly developed properties and therefore have limited operating histories. As a result, only partial depreciation and amortization, where applicable, has been included in the periods presented to correspond with the limited operating histories of these properties. |
| | (b) | The New England Retail Portfolio consists of 25 retail properties located in the Northeast region. On August 1, 2007, we acquired 22 of the 25 properties included in the New England Retail Portfolio, and we acquired the remaining three properties on October 18, 2007. All 25 properties are included in the pro forma condensed consolidated statements of operations. |
| (5) | We have invested in securities and debt related investments, and we have had certain debt related investments repaid to us. These investments include mortgage notes, commercial mortgage backed securities, collateralized debt obligations and preferred equity securities. For pro forma purposes, these investments are assumed to have been made or repaid as of January 1, 2007 resulting in pro forma adjustments to earnings of approximately $1.2 million and $3.9 million for the nine months ended September 30, 2008 and the year ended December 31, 2007, respectively. |
| (6) | Asset management fees were calculated as if the properties have been managed by our Advisor since January 1, 2007. For real estate assets subject to a product specialist agreement, the asset management fees are equivalent to 0.5% per annum of the aggregate cost (before cash reserves and depreciation) of such assets plus 6.0% of the net operating income derived from such assets. For real estate assets not subject to a product specialist agreement, the management fee equals 0.75% per annum of the aggregate cost (before cash reserves and depreciation) of such assets. For assets included in the New England Retail Portfolio, the management fee equals 0.56% per annum of the aggregate cost (before cash reserves and depreciation) of such assets. Finally, up to 1.0% per annum is charged for asset management fees for the aggregate cost of all securities and debt related investments. |
| (7) | Interest expense presented was calculated based on the terms of mortgage loans, other secured borrowings and financing obligations as of December 29, 2008. The following table sets forth the calculation for the pro forma adjustments as if these financings were outstanding as of January 1, 2007 (amounts in thousands): |
| | | | | | | | | | | | | | | | | | |
Property | | Fixed /
Floating | | Issuance Date | | Rate (1) | | | Amount | | Incremental Interest Expense | |
| | | | | | For the Nine
Months Ended
September 30,
2008 | | | Year Ended
December 31,
2007 | |
40 Boulevard | | Floating | | 01/24/07 | | 1.45 | % | | $ | 9,700 | | $ | — | | | $ | 140 | |
Washington Commons | | Fixed | | 02/01/07 | | 5.94 | % | | | 21,300 | | | — | | | | 49 | |
Bandera Road | | Fixed | | 02/01/07 | | 5.46 | % | | | 21,500 | | | — | | | | 67 | |
Shackleford | | Fixed | | 04/02/07 | | 5.80 | % | | | 13,650 | | | — | | | | 182 | |
DCT JV I Portfolio I | | Fixed | | 05/02/07 | | 5.66 | % | | | 85,000 | | | — | | | | 1,526 | |
DDR JVI Portfolio | | Fixed | | 05/11/07 | | 5.51 | % | | | 110,000 | | | — | | | | 2,086 | |
Logistics Boulevard (2) | | Fixed | | 06/30/07 | | 6.00 | % | | | 16,042 | | | — | | | | 479 | |
Fortune Concourse | | Floating | | 05/17/07 | | 1.65 | % | | | 41,786 | | | — | | | | 981 | |
Midpoint Drive | | Fixed | | 06/15/07 | | 5.25 | % | | | 5,368 | | | — | | | | 121 | |
California Circle | | Fixed | | 07/10/07 | | 7.69 | % | | | 7,377 | | | — | | | | 292 | |
DCT JV II Portfolio | | Fixed | | 08/07/07 | | 6.18 | % | | | 39,725 | | | — | | | | 1,437 | |
New England Retail Portfolio (3) | | Fixed | | 10/18/07 | | 6.08 | % | | | 131,823 | | | 1,393 | | | | 3,849 | |
DeGuigne | | Fixed | | 11/21/07 | | 7.78 | % | | | 9,649 | | | — | | | | 676 | |
DCT JV I Portfolio II | | Fixed | | 6/30/08-9/10/08 | | 5.94 | % | | | 33,444 | | | 1,028 | | | | 1,986 | |
National Restaurant Portfolio I | | Floating | | 09/17/08 | | 3.55 | % | | | 6,398 | | | 154 | | | | 227 | |
Westport | | Fixed | | 12/23/08 | | 6.59 | % | | | 10,750 | | | 531 | | | | 708 | |
Millennium Financial Center | | Fixed | | 10/01/08 | | 5.96 | % | | | 34,500 | | | 1,542 | | | | 2,056 | |
Eden Prairie Office Center (2) | | Fixed | | 12/23/08 | | 7.00 | % | | | 15,100 | | | 440 | | | | — | |
Austin-Mueller Health Center (2) | | Fixed | | 12/23/08 | | 7.50 | % | | | 22,700 | | | — | | | | — | |
Other Secured Borrowings | | Floating | | Various | | 1.15 | % | | | 16,860 | | | 139 | | | | (181 | ) |
Financing Obligations | | Floating | | Various | | 5.83 | % | | | 104,847 | | | (575 | ) | | | 927 | |
| | | | | | | | | | | | | | | | | | |
Total/Weighted Average | | | | | | | | | $ | 757,519 | | $ | 4,652 | | | $ | 17,608 | |
| | | | | | | | | | | | | | | | | | |
| | (1) | Interest rates represent weighted average borrowing rates, using the one-month US LIBOR rate, as of the latest practicable date of December 29, 2008. |
| | (2) | Logistics Boulevard, Eden Prairie Office Center and the Austin-Mueller Health Center were newly developed properties and therefore have limited operating histories. As a result, only partial interest expense, where applicable, has been included in the periods presented to correspond with the limited operating histories of these properties. |
| | (3) | The debt financing associated with the New England Retail Portfolio consists of fixed rate debt at rates that vary from 5.24% to 6.76%. On May 19, 2008, we prepaid (i) an interest-only, secured floating-rate senior loan and (ii) an interest-only floating-rate mezzanine loan, each associated with the New England Retail Portfolio. We repaid the total outstanding aggregate principal balance of these loans of approximately $121.9 million at a discount of approximately $10.4 million. This prepayment resulted in adjustments to reduce interest expense for the nine months ended September 30, 2008 and the year ended December 31, 2007. This prepayment has been partially offset by subsequent refinancing associated with properties included in the New England Retail Portfolio. |
| (8) | Due to our control of the Operating Partnership through our sole general partnership interest and the limited rights of the Operating Partnership’s limited partners, we consolidate the Operating Partnership and limited partner interests are reflected as minority interests. As of the most practicable date, December 29, 2008, we owned approximately 96.1% of our Operating Partnership. As a result, the Operating Partnership’s limited partners participated in the net income and losses of our Operating Partnership. |
| (9) | For purposes of determining the pro forma weighted average number of common shares outstanding, management determined the number of shares sold as of the most practicable date, December 29, 2008, and since the pro forma consolidated financial information presented assumes all transactions occurred on January 1, 2007, the number of shares outstanding as of December 29, 2008 are assumed to have been outstanding as of January 1, 2007. |
