Daniel M. LeBey, Esq. Hunton & Williams LLP Riverfront Plaza, East Tower 951 E. Byrd Street Richmond, Virginia 23219-4074 (804) 788-8200 (804) 788-8218 (Facsimile) | Wayne D. Boberg, Esq. Brendan P. Head, Esq. Winston & Strawn LLP 35 West Wacker Drive Chicago, Illinois 60601-9703 (312) 558-5882 (312) 558-5700 (Facsimile) |
Proposed Maximum | Amount of | |||||
Aggregate Offering | Registration | |||||
Title of Securities Being Registered | Price(1)(2) | Fee(3)(4) | ||||
Common Stock, $0.001 par value | $106,375,000 | $12,188 | ||||
(1) | Includes shares that the underwriters have the option to purchase from us to cover over-allotments, if any, and 1,250,000 shares that are being offered by selling stockholders. |
(2) | Estimated solely for the purpose of determining the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended. |
(3) | Calculated in accordance with Rule 457(o) under the Securities Act of 1933, as amended. |
(4) | Of this amount, $8,830 was paid on October 18, 2005 for securities with a proposed maximum aggregate offering price of $75,000,000 and an additional $6,252 was paid on June 30, 2006 for additional securities with a proposed maximum aggregate offering price of $58,428,350. As a result, the Registrant has paid an aggregate of $15,082 for securities with a maximum aggregate offering price of $133,428,350. The registration fee of $2,894 with respect to the remaining $27,053,350 maximum aggregate offering price of securities will be used under a future registration statement. |
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting to buy these securities in any state where the offer or sale is not permitted. |
Per Share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discount | $ | $ | ||||||
Proceeds to us, before expenses | $ | $ | ||||||
Proceeds to selling stockholders | $ | $ |
Friedman Billings Ramsey | Wachovia Securities |
• | Core-Plus Properties: Properties with stable occupancies that have below-market rents and/or inefficient operations. We believe we can achieve higher operating cash flows and enhanced asset values from these types of properties by increasing rents through aggressive leasing, enhancing tenant service and reducing operating expenses. We believe we can reduce operating expenses in part by utilizing our own internal property management and engineering personnel, reducing energy costs at the properties, negotiating new lower cost service and maintenance agreements and by implementing other operating efficiencies. | |
• | Value-Added Properties: Properties with significant current or expected vacancy and/or that need capital improvements, but that we believe have attractive upside potential that may be achieved from hands-on, proactive management and leasing and modest capital improvements. |
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• | Structured Real Estate Investments: Investments in mezzanine loans, preferred equity interests, joint venture interests and/or other structured finance instruments involving what we believe to be high-quality local real estate operators or owner-occupants. We intend to use these investments to provide us with attractive current cash flow yields and to maintain or create relationships with existing or potential future investment partners or sources of additional investment opportunities, while attempting to minimize our risk through the structure of the investments. |
• | assumed property management, maintenance and engineering businesses and purchase contracts from our predecessor business for approximately $3.4 million, all of which was paid in shares of our common stock based on a price per share of $8.50, which was the offering price of our common stock in our 2005 private offering; | |
• | acquired fourteen properties, including five contributed properties in which our predecessor business and founders owned an interest, and three structured real estate investments, including one contributed investment in which our predecessor business and founders owned an interest, for total consideration of approximately $183.0 million, including transaction costs, of which approximately $7.5 million was paid in shares of our common stock based on a price per share of $8.50, approximately $76.4 million was paid in cash, and approximately $99.1 million was either assumed, defeased or repaid mortgage indebtedness; | |
• | originated a mezzanine loan with a principal balance of $14.7 million and an annual interest rate of 16%. We receive a monthly interest-only payment for half of the interest due, with the other half added to the principal amount of the loan. The loan has a maturity date in February 2011. The borrower used the proceeds of the loan to purchase a $66.0 million portfolio of properties located primarily in the Baltimore, Maryland metropolitan area; | |
• | entered into contracts to acquire interests in six additional properties for aggregate consideration of approximately $52.8 million, of which approximately $47.8 million will be paid in cash and approximately $5.0 million will be new mortgage indebtedness. We expect to pay approximately $2.5 million in cash for transaction costs related to these acquisitions; and | |
• | entered into two contracts with two separate buyers to sell approximately 31.0 acres and 9.7 acres, respectively, of the Hollymead Town Center property (representing approximately 52% of the property’s acreage) for sales prices of approximately $27.0 million and $13.1 million, respectively. |
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Our Investment Strategy |
• | are located in our target market and in other strategic geographic locations that we believe offer attractive prospects for increases in value; | |
• | have a current market value between $5 million and $50 million; | |
• | have significant current or expected vacancy and/or that need capital improvements, but that we believe have attractive upside potential that may be achieved from hands-on, proactive management and leasing and modest capital improvements; | |
• | have stable occupancies that have below-market rents and/or inefficient operations with the potential to generate higher operating cash flows and enhanced asset values through aggressive leasing, reductions in operating expenses and improved operations; | |
• | present the opportunity for growth in net income through intensive property management; | |
• | can support new or additional leverage, which we believe can allow us to reduce our equity investment and to increase our returns; or | |
• | have a development component that we believe can provide attractive returns through rental revenue and capital gains from dispositions. |
• | achieving attractive, risk-adjusted returns by utilizing our expertise to identify and structure investment opportunities; and | |
• | forming relationships with owners of, or investors in, commercial real estate properties in which we may be able to invest and for which we may be able to provide services in the future. |
Our Operating Strategy |
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Our Value Realization Strategy |
• | outright sales of our properties to third parties; | |
• | the sale of a portion of the interests in a property we own to a joint venture with one or more institutional investors where we may retain the opportunity to earn property and asset management fees as well as certain incentive fees; | |
• | recapitalizations of our properties with third-party debt; and | |
• | recycling our capital in new investment opportunities that fit our investment criteria. |
Our Financing Strategy |
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• | Our founders have extensive real estate investment experience and contacts in the greater metropolitan Washington, D.C. marketplace and its surrounding area. Our founders have been actively investing in commercial real estate properties and real estate-related debt instruments for an average of approximately 19 years. A significant number of the transactions in which our founders have participated involved properties located in the greater metropolitan Washington, D.C. area. Our founders have previous experience investing in distressed debt, direct equity investments, mezzanine debt and asset redevelopment. Based in part on this experience, we have developed a disciplined underwriting approach that we believe allows us to effectively evaluate properties. Through these activities, our founders have developed a network of industry contacts within the brokerage community and with tenants, property owners, lenders, third-party service providers, developers and institutional investors who invest in our target market. We expect these contacts to provide us with significant investment opportunities going forward. | |
• | Our primary geographic focus is on one of the most attractive and largest real estate markets in the United States. We believe our primary focus on the greater metropolitan Washington, D.C. marketplace, one of the most attractive and largest real estate markets in the United States, and its surrounding areas is a distinct advantage relative to investors with a broader geographic focus that have less local market knowledge and experience. | |
• | Organizing our company as a taxable corporation rather than a REIT gives us greater flexibility than we would have as a REIT. By organizing our company as a taxable corporation rather than as a REIT, we are able to capitalize on short-term increases in the value of our properties by disposing of or recapitalizing our properties because we are not subject to the 100% prohibited transactions tax applicable to sales of dealer property by REITs (although we will be subject to regular corporate tax). We also are able to retain our after-tax capital for acquisitions, and we have broad discretion with respect to the types of investments we can make. At the same time, by structuring our company to operate our business and make our investments through an operating partnership, which we refer to as the Up-C structure, we have the same flexibility that many REITs have to acquire assets by issuing operating partnership units, which may allow property owners from whom we acquire properties to defer recognizing taxable gain until we dispose of those properties. | |
• | We are a fully integrated real estate operating company. We are a fully integrated real estate operating company with acquisition, property management, leasing, engineering and tenant services all residing within one organization and sharing common operating and tenant relationship objectives. Based on our management’s experience, we believe that operating a fully integrated business with common management and objectives will allow us to achieve growth in property level cash flows and maintain strong relationships with our tenants. | |
• | We believe we are one of the few well-capitalized, Washington, D.C.-based sources of structured real estate financing. We believe we are one of the few well-capitalized sources of real estate mezzanine financing and other structured real estate finance products based in the greater metropolitan Washington, D.C. area that has extensive local market knowledge. We believe this combination of local market knowledge and locally based financing capabilities gives us a competitive advantage over out-of-market financing sources. |
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• | most of our properties are or will be located in the greater metropolitan Washington, D.C. area, making us vulnerable to changes in economic conditions in that region, including the adverse impact of decreased government spending; | |
• | we did not obtain current appraisals on the initial properties, the structured real estate investment and other assets that were contributed or assigned to us by our predecessor business in our formation transactions, and the consideration given by us in exchange for these assets was not negotiated at arm’s length and may have exceeded fair market value or the value that would have been determined by third-party appraisals; | |
• | if we are unable to complete acquisitions we have under contract in a timely fashion or at all, our results of operations could be adversely affected; | |
• | we may not complete the acquisition of the properties we have under contract to purchase; therefore, investors may not be able to evaluate the economic merits of the investments we do make. We may be unable to invest our funds on favorable terms, or at all; | |
• | we may not complete the disposition of the properties we have under contract to sell, which would reduce the amount of capital available to us for future investments; | |
• | our founders have no experience operating a public company, which could increase our general and administrative costs and reduce our cash available to originate new investments, service our debt, make additional investments in our properties, pay our operating expenses and pay dividends to our stockholders; | |
• | we have a limited operating history, and we may not be able to successfully operate our business or generate sufficient revenue to pay our operating expenses. Also, the operating results and financial data in this prospectus may not be useful in assessing our likely future performance; | |
• | we expect to experience significant growth in the future and may not be able to adapt our management and operational systems to properly integrate additional properties we may acquire without unanticipated significant disruption or expense; | |
• | our acquisition of or investment in structured real estate investments may subject us to substantial risks, including risks related to changes in interest rates, lender liability and the risk of loss of our investment; | |
• | we intend to leverage our investments, and we have no established limits in our charter on the amount of indebtedness we may incur; | |
• | our structured real estate finance origination business subjects us to the unique risks of a mezzanine lender, including the risk associated with having a subordinated position relative to other creditors with respect to the collateral underlying the loans we make or acquire; | |
• | unlike a REIT, we are subject to corporate income tax, which may reduce the amount of funds we have to invest and pay to you as dividends and which exposes our stockholders to double taxation with respect to any dividends we pay; | |
• | we may be unable to renew expiring leases, lease vacant space or re-lease space on a timely basis or on comparable or better terms, which could significantly decrease our cash flow; | |
• | our business could be harmed if key personnel with long-standing business relationships in the real estate industry terminate their employment with us; |
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• | we may experience conflicts of interest with our founders and certain other officers relating to their duties owed both to us and to the limited partners of our operating partnership, their ownership of LTIP units and their interests in properties that may compete for the same tenants as our properties; and | |
• | we have no assurance that any party making representations and warranties in the contribution agreements and assignment and assumption agreement pursuant to which five properties, a structured real estate investment and other assets that have been contributed or assigned to us, including those contributed by our predecessor business, will be adequately capitalized or otherwise honor its obligations to us to the extent there is a breach of any such representation or warranty by such party. |
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Net Rentable | Annualized | ||||||||||||||||
Square Feet | Annualized | Base Rent per | |||||||||||||||
as of | March 31, 2006 | Base Rent | Leased Square | ||||||||||||||
Property/Location | March 31, 2006 | Occupancy | Payable to Us(1) | Foot | |||||||||||||
(in thousands) | |||||||||||||||||
Columbia Medical Campus, Columbia, MD(2) | 154,558 | 34 | % | $ | 930 | $ | 17.53 | ||||||||||
Timonium Medical Center, Timonium, MD(3) | 23,966 | 88 | 441 | 20.85 | |||||||||||||
Frederick Medical Center, Frederick, MD | 32,949 | 57 | 359 | 19.10 | |||||||||||||
Century South, Germantown, MD | 21,108 | 100 | 335 | 15.88 | |||||||||||||
Executive Tower, Hampton, VA | 134,179 | 94 | 2,136 | 17.00 | |||||||||||||
Hollymead Town Center, Charlottesville, VA(4) | N/A | N/A | N/A | N/A | |||||||||||||
Commerce Center I, Greenbelt, MD | 123,249 | 100 | 2,940 | 23.87 | |||||||||||||
Garden City Drive, Landover, MD | 55,497 | 97 | 1,092 | 20.38 | |||||||||||||
Pinewood Plaza, Hampton, VA | 71,066 | 85 | 1,066 | 17.73 | |||||||||||||
Pidgeon Hill I, Sterling, VA(5) | 89,831 | 74 | 1,366 | 20.68 | |||||||||||||
Pidgeon Hill II, Sterling, VA(6) | 95,137 | 74 | 1,425 | 20.14 | |||||||||||||
4260 Forbes Boulevard, Lanham, MD | 54,692 | 100 | 725 | 13.25 | |||||||||||||
4550 Forbes Boulevard, Lanham, MD(7) | 46,858 | 90 | 516 | 12.27 | |||||||||||||
7700 Montpelier Avenue, Laurel, MD | 43,785 | 100 | 598 | 13.65 | |||||||||||||
Total/Weighted Average | 946,875 | 80 | % | $ | 13,929 | $ | 18.47 | ||||||||||
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Consists of two medical office buildings, which we refer to as the Knoll North I building and Knoll North II building. |
(3) | This property has been listed for sale. |
(4) | The Hollymead Town Center property is a 78.1 acre parcel of land with infrastructure in place that is currently being marketed as a mixed use development. The development of this property currently contemplates retail, residential and office buildings. We have entered into an asset management and disposition services agreement with the party that structured and originated this investment opportunity whereby we will receive asset management and disposition services in return for a fee of $10,000 per month as well as a participation interest in the net profits from the Hollymead property. The participation interest granted to the asset manager entitles it to receive 40% of any net profits we receive (including net profits from the sale of the property) after repayment of all indebtedness on the property and our recoupment of our total cash investment plus a 15% internal rate of return. We also have entered into two sales contracts to sell approximately 31.0 acres and 9.7 acres, respectively, of this property for sales prices of approximately $27.0 million and $13.1 million, respectively. These sales are expected to close periodically over the next four years, subject to the satisfaction of customary conditions precedent to closing. The closing of the sale of land under each contract is not dependent on the closing of the sale of land under the other contract. We cannot guarantee that we will complete the dispositions of these parcels of land. See “— Sales and Dispositions of Our Properties.” We are also in active discussions with potential buyers of additional parcels of land within the Hollymead Town Center property. |
(5) | This property consists of two buildings, which we refer to as the 10 Pidgeon Hill Drive building and the 14 Pidgeon Hill Drive building. |
(6) | This property consists of two buildings, which we refer to as the 2 Pidgeon Hill Drive building and the 6 Pidgeon Hill Drive building. |
(7) | One of our tenants filed for bankruptcy and vacated the premises prior to our acquisition of this property. This tenant accounts for approximately 12% of the net rentable square feet in this property and approximately 13% of the annualized base rent for this property, based on $12.67 per leased square foot. Although the tenant still remains contractually bound to the terms of its lease, we may have little or no recourse against the tenant if the lease is terminated as a result of the bankruptcy proceedings, or if the tenant fails to pay rent due to us under the lease. We are currently collecting from an escrow account 50% of the contractual rents due from this tenant. |
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Net Rentable | |||||||||||||||||||||
Contractual | Square Feet as | March 31, | Annualized Base | ||||||||||||||||||
Purchase | of March 31, | 2006 | Annualized | Rent per Leased | |||||||||||||||||
Property/Location | Price(1) | 2006 | Occupancy | Base Rent(2) | Square Foot | ||||||||||||||||
(in thousands) | |||||||||||||||||||||
Lynnhaven Corporate Center I, Virginia Beach, VA | $ | 3,900,000 | 30,845 | 100 | % | $ | 501 | $ | 16.25 | ||||||||||||
Southport Centre, Virginia Beach, VA | 9,700,000 | 61,594 | 88 | 966 | 17.79 | ||||||||||||||||
Twin Oaks I, Norfolk, VA | 12,800,000 | 81,886 | 89 | 1,280 | 17.62 | ||||||||||||||||
Twin Oaks II, Norfolk, VA | 13,300,000 | 84,749 | 100 | 1,659 | 19.58 | ||||||||||||||||
Godwin Business Park, Manassas, VA | 6,250,000 | (3) | 60,072 | 77 | 682 | 14.72 | |||||||||||||||
4230 Forbes Boulevard, Lanham, MD | 6,800,000 | 55,867 | 66 | 477 | 12.61 | ||||||||||||||||
Total/ Weighted Average | $ | 52,750,000 | 375,013 | 87 | % | $ | 5,565 | $ | 17.07 | ||||||||||||
(1) | Excludes transactional costs. |
(2) | Calculated as actual monthly base rent for March 2006 multiplied by 12, with the exception of one lease at the 4230 Forbes Boulevard property, which commenced in June 2006 and which has an annualized base rent amount calculated as actual monthly base rent for June 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(3) | We intend to acquire this property with approximately $1.25 million in cash and approximately $5.0 million in new mortgage indebtedness. |
Current | ||||||||||||||||
Economic | Preferred | Net Rentable | ||||||||||||||
Ownership | Annual | Square Feet as of | March 31, 2006 | |||||||||||||
Property/Location | Interest | Return | March 31, 2006 | Occupancy | ||||||||||||
Plaza 270, Rockville, MD(1) | — | $ | 112,800 | (1) | 248,875 | 100 | % | |||||||||
Twelve Oaks, Rockville, MD(2) | 8% | (2) | $ | 60,000 | (2) | 127,616 | 100 | % | ||||||||
Research 28, Rockville, MD(3) | 2% | (3) | $ | 15,600 | (3) | 64,432 | 100 | % |
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(1) | We own 100% of the Class B partnership interest in the limited partnership that owns this property. Our Class B partnership interest currently entitles us to receive an annual distribution of $112,800. The distributions we are entitled to receive on our Class B partnership interest are not guaranteed, but rather represent a preferred return that takes preference over distributions to the holder of the Class A partnership interest. We also will receive a pro rata portion of any residual distribution after payments are made pursuant to our Class B partnership interest and to the holder of the Class A partnership interest. Pursuant to a sale/purchase agreement, our partner has the right to acquire and we have the right to sell to our partner our Class B partnership interest for fair market value subject to certain minimum and maximum limits. Annualized base rent generated by the property is approximately $5,118,100, based on actual monthly base rent in March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. See “Our Business and Properties — Description of Properties — Our Structured Real Estate Investments — Plaza 270, Rockville, Maryland” for additional information about this partnership interest. |
(2) | We own 100% of the Class A membership interests and Class B membership interests in the limited liability company that owns this property. Our Class B membership interest currently entitles us to receive a $60,000 annual preferred distribution. The distributions we are entitled to receive on the Class B membership interest are not guaranteed, but rather represent a preferred return that takes preference over all other distributions to the other classes of membership interest except distributions received by us pursuant to our ownership of the Class A membership interest. Our Class A membership interest entitles us to receive an annual distribution equal to 8% of the entity’s distributable cash flow, before the Class B and Class C member receive any distributions. Both our Class A and Class B membership interests are subject to a put/call agreement whereby these interests may be redeemed at the option of either us or the Class C member. The Class A interest is redeemable for its fair market value, plus (i) an amount equal to six times the property’s average monthly asset and property management fees and (ii) an additional 25% premium over the purchase price if redeemed at the option of the Class C member prior to the earlier of any refinancing of the underlying property or December 31, 2006. The Class B interest is redeemable for its fair market value, subject to certain minimum and maximum limits. Annualized base rent generated by the property is approximately $2,830,000, based on actual monthly base rent in March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. See “Our Business and Properties—Description of Properties—Our Structured Real Estate Investments—Twelve Oaks, Rockville, Maryland” for additional information about these membership interests. |
(3) | On June 28, 2006, we acquired a 2% general partnership interest in the limited partnership that owns this property. Our general partnership interest currently entitles us to receive an annual distribution of $15,600. The distributions we are entitled to receive on our general partnership interest are not guaranteed, but rather represent a preferred return that takes preference over distributions to the holder of the limited partnership interest. We also will receive a pro rata portion of any residual distribution after payments are made pursuant to our general partnership interest and to the holder of the limited partnership interest. Pursuant to a sale/purchase option agreement, the limited partner has the right to acquire and we have the right to sell to the limited partner our general partnership interest for fair market value subject to certain minimum and maximum limits. See “Our Business and Properties — Description of Properties — Our Structured Real Estate Investments — Research 28, Rockville, Maryland” for additional information about this partnership interest. |
Original | Annual | |||||||||||
Principal | Interest | |||||||||||
Mezzanine Loan | Amount | Rate | Maturity Date | |||||||||
BTR Mezzanine Loan(1) | $ | 14,700,000 | 16% | (2) | February 2011 |
(1) | The BTR Mezzanine Loan, or BTR Loan, has been used by the borrower, BTR Miller LLC, or BTR, to facilitate a $66.0 million acquisition of a portfolio of 10 mixed-use properties located primarily in the Baltimore, Maryland metropolitan area. The BTR Loan will be secured by a pledge of the membership interests in the limited liability companies that own each property. The underlying properties are currently subject to a $44.8 million senior mortgage loan. |
(2) | Although we are entitled to a 16% interest rate, we receive a monthly interest-only payment for half of the interest due, with the other half added to the principal amount of the loan. See “Our Business and Properties — Description of Properties — Our Structured Real Estate Investments — BTR Mezzanine Loan” for additional information about this loan. |
Investment Pipeline |
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Property Management and Engineering Agreements |
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(1) | Ownership percentage is shown on a fully vested basis. |
(2) | Our structured real estate investments are described in “Our Business and Properties— Description of Properties— Our Structured Real Estate Investments.” |
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Common stock offered by us | 8,000,000 shares(1) | |
Common stock offered by selling stockholders | 1,250,000 shares(1) | |
Common stock to be outstanding after completion of this offering | 19,750,943 shares(2) | |
Use of proceeds | We estimate that the net proceeds from this offering will be approximately $67.5 million after deducting the underwriting discount and estimated offering fees and expenses payable by us. We will contribute the net proceeds from this offering to our operating partnership in exchange for operating partnership units. | |
We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders. | ||
Our operating partnership expects to use the net proceeds as follows: | ||
• approximately $41.9 million to fund the acquisition of the Lynnhaven Corporate Center, Southport Center, Twin Oaks I and Twin Oaks II properties, which we refer to collectively as the Gees Group portfolio, including related transaction costs; | ||
• approximately $1.4 million to fund the acquisition of the Godwin Business Park property, including related transaction costs; | ||
• approximately $6.9 million to fund the acquisition of the 4230 Forbes Boulevard property, including related transaction costs; | ||
• approximately $10.0 million to repay the portion of the outstanding notes due August 16, 2006 on the Hollymead Town Center property that we incurred in connection with the property’s acquisition. These notes mature at varying dates through August 2009 and have a current interest rate of 8%; | ||
• approximately $5.0 million to fund planning, legal, interest and initial development costs associated with the Hollymead Town Center property; and | ||
• any remaining proceeds to fund our working capital needs and investments in additional office properties and related assets, including pending acquisitions that we have under consideration and for other general corporate purposes. | ||
Pending these uses, we intend to invest the net offering proceeds in interest-bearing, short-term, marketable investment grade securities or money market accounts. Such investments may include, for example, government and government agency certificates, certificates of deposit and interest-bearing bank deposits. |
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Proposed Nasdaq Global MarketTM symbol | ACCI |
(1) | Excludes up to 1,387,500 shares of common stock that may be sold by selling stockholders or, if not sold by selling stockholders, by us upon exercise of the underwriters’ over-allotment option. |
(2) | In addition to the shares offered by us in this offering, includes (a) 10,248,893 shares of our common stock issued in our 2005 private offering; (b) 230,479 shares of our common stock held by our founders and our former chief financial officer; (c) 394,385 shares of common stock issued to entities which are wholly owned by our founders in exchange for the assignment of certain management and engineering agreements as part of the formation transactions; (d) 246,755, 60,776, 147,429, 203,242, 129,424 and 89,560 shares of common stock issued upon the contribution of the Century South property, which occurred on August 26, 2005, the Commerce Center I property, which occurred on September 22, 2005, the Garden City Drive property, which occurred on December 5, 2005, the Pidgeon Hill I property, which occurred on December 23, 2005, the Twelve Oaks structured real estate investment, which occurred on December 30, 2005, and the Pidgeon Hill II property, which occurred on March 2, 2006, respectively; (e) 8,000 LTIP units issued to our directors; and (f) 68,492 LTIP units issued or to be issued to certain officers, our former chief financial officer and certain key employees. LTIP units are a special class of partnership interests in our operating partnership that are convertible in certain circumstances into shares of our common stock. See “Management—2005 Equity Incentive Plan” for additional information regarding LTIP units. |
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Historical | ||||||||||||||||||
Pro-forma | ||||||||||||||||||
March 30, | ||||||||||||||||||
Three Months | Three Months | 2005 | ||||||||||||||||
Ended | Year Ended | Ended | (inception) to | |||||||||||||||
March 31, | December 31, | March 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Restated)(2) | |||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||
Revenue | ||||||||||||||||||
Rental income | $ | 4,936 | $ | 18,467 | $ | 2,945 | $ | 2,834 | ||||||||||
Operating expense reimbursements | 353 | 1,193 | 151 | 125 | ||||||||||||||
Other | 239 | 1,236 | 239 | 574 | ||||||||||||||
Total revenue | 5,528 | 20,896 | 3,335 | 3,533 | ||||||||||||||
Expenses | ||||||||||||||||||
Property operating expenses | 1,616 | 6,602 | 1,152 | 1,346 | ||||||||||||||
Real estate taxes and insurance | 554 | 1,990 | 383 | 411 | ||||||||||||||
General and administrative | 1,585 | 3,034 | 1,572 | 2,759 | ||||||||||||||
Depreciation and amortization | 2,523 | 10,510 | 1,395 | 1,699 | ||||||||||||||
Total operating expenses | 6,278 | 22,136 | 4,502 | 6,215 | ||||||||||||||
Operating loss | (750 | ) | (1,240 | ) | (1,167 | ) | (2,682 | ) | ||||||||||
Interest income | 417 | 521 | 417 | 512 | ||||||||||||||
Interest expense | (1,425 | ) | (5,022 | ) | (1,029 | ) | (685 | ) | ||||||||||
Minority interest in loss | 10 | 7 | 10 | 7 | ||||||||||||||
Equity in earnings of unconsolidated entities | 46 | 238 | 46 | 39 | ||||||||||||||
Loss from continuing operations before income taxes | (1,702 | ) | (5,496 | ) | (1,723 | ) | (2,809 | ) | ||||||||||
Provision for income taxes | — | — | — | — | ||||||||||||||
Loss from continuing operations | (1,702 | ) | (5,496 | ) | (1,723 | ) | (2,809 | ) | ||||||||||
Income from discontinued operations | 1 | 22 | 1 | 22 | ||||||||||||||
Net loss | $ | (1,701 | ) | $ | (5,474 | ) | $ | (1,722 | ) | $ | (2,787 | ) | ||||||
Net loss per common share — basic and diluted | ||||||||||||||||||
Continuing operations | $ | (0.09 | ) | $ | (0.39 | ) | $ | (0.15 | ) | (0.39 | ) | |||||||
Discontinued operations | $ | — | $ | — | $ | — | — | |||||||||||
Net loss | $ | (0.09 | ) | $ | (0.39 | ) | $ | (0.15 | ) | (0.39 | ) | |||||||
Weighted average common shares outstanding — basic and diluted | 18,490,833 | 14,164,326 | 11,521,892 | 7,195,385 | ||||||||||||||
Balance Sheet Data (at period end): | ||||||||||||||||||
Real estate investments, net | $ | 166,143 | $ | 114,848 | $ | 82,199 | ||||||||||||
Properties held for sale | 57,993 | 57,993 | 56,961 | |||||||||||||||
Real estate loan | 14,700 | 14,700 | — | |||||||||||||||
Cash and cash equivalents | 10,659 | 1,955 | 23,271 | |||||||||||||||
Other assets, net | 25,382 | 22,847 | 18,734 | |||||||||||||||
Total assets | $ | 274,877 | $ | 212,343 | $ | 181,165 | ||||||||||||
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Historical | ||||||||||||||||||
Pro-forma | ||||||||||||||||||
March 30, | ||||||||||||||||||
Three Months | Three Months | 2005 | ||||||||||||||||
Ended | Year Ended | Ended | (inception) to | |||||||||||||||
March 31, | December 31, | March 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Restated)(2) | |||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||
Mortgage loans and other debt | $ | 85,493 | $ | 80,493 | $ | 50,123 | ||||||||||||
Mortgage loan and other liabilities for properties held for sale | 31,278 | 41,278 | 40,829 | |||||||||||||||
Other liabilities | 4,731 | 4,731 | 3,638 | |||||||||||||||
Total liabilities | 69 | 69 | 29 | |||||||||||||||
Minority interest | 153,306 | 85,772 | 86,546 | |||||||||||||||
Stockholders’ equity | 274,877 | 212,343 | 181,165 | |||||||||||||||
Total liabilities and stockholders’ equity | ||||||||||||||||||
Other Data: | $ | 2,226 | $ | 10,070 | $ | 681 | $ | (397 | ) | |||||||||
EBITDA(1) | ||||||||||||||||||
Cash flows from: | $ | (542 | ) | $ | (741 | ) | ||||||||||||
Operating activities | $ | (25,703 | ) | $ | (66,589 | ) | ||||||||||||
Investing activities | $ | 4,929 | $ | 90,601 | ||||||||||||||
Financing activities | ||||||||||||||||||
Reconciliation of net loss to EBITDA: | $ | (1,701 | ) | $ | (5,474 | ) | $ | (1,722 | ) | $ | (2,787 | ) | ||||||
Net loss | ||||||||||||||||||
Plus: | 1,425 | 5,022 | 1,029 | 685 | ||||||||||||||
Interest expense | 2,502 | 10,522 | 1,374 | 1,705 | ||||||||||||||
Depreciation and amortization | 2,226 | 10,070 | 681 | (397 | ) | |||||||||||||
EBITDA | ||||||||||||||||||
(1) | EBITDA is defined as net income (loss) before interest, taxes, depreciation and amortization. We believe it is a useful financial performance measure for us and for our stockholders and is a complement to net income and other financial performance measures provided in accordance with generally accepted accounting principles in the United States of America, or GAAP. We use EBITDA to measure the financial performance of our operating properties because it excludes expenses such as depreciation and amortization, taxes and interest expense, which are not indicative of operating performance. By excluding interest expense, EBITDA measures our financial performance irrespective of our capital structure or how we finance our properties and operations. By excluding depreciation and amortization expense, which can vary from property to property based on a variety of factors unrelated to the properties’ financial performance, we can more accurately assess the financial performance of our properties. Under GAAP, real estate properties are recorded at historical cost at the time of acquisition and are depreciated on a straight line basis. By excluding depreciation and amortization, we believe EBITDA provides a basis for measuring the financial performance of properties unrelated to historical cost. However, because EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our fixed assets. In addition, because EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt nor does it show trends in interest costs due to changes in our borrowings or changes in interest rates. EBITDA, as calculated by us, may not be comparable to EBITDA reported by other companies that do not define EBITDA exactly as we define the term. Because we use EBITDA to evaluate our financial performance, we reconcile it to net income (loss) which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity. |
(2) | Previously, the acquisition of Asset Capital Corporation, L.L.C.’s interests in the Predecessor LLCs, as defined in “Unaudited Pro Forma Financial Information,” had been accounted for as a transaction without substance in accordance with FASB Technical Bulletin 85-5 and recorded at Asset Capital Corporation, L.L.C.’s historical carrying value. The acquisitions of the Predecessor LLCs and certain other assets contributed by entities affiliated with our founders have now been accounted for as a series of separate business combinations for which Asset Capital Corporation, Inc. is the accounting acquirer, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”. Accordingly, the acquired interests in the Predecessor LLCs and certain other assets contributed by entities affiliated with our founders have been recorded in an amount equal to the purchase consideration, which has been allocated to the identifiable assets acquired and liabilities assumed based on their fair values. |
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• | one or more of our partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions (in which event we and any other remaining partners, members or co-venturers would generally remain liable for the liabilities of the partnership, joint venture or other entity); | |
• | one or more of our partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals; | |
• | one or more of our partners or co-venturers may be in a position to take actions contrary to our instructions, requests, policies or objectives; and |
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• | disputes between us and our partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business. |
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• | The Federal Anti-Kickback Statute, which prohibits, among other things, the knowing and willful offer, payment, solicitation or receipt of renumeration, whether direct or indirect, overt or covert, in cash or in kind, in return for the referral or arrangement of a referral of any individual for any item or service payable by a federal healthcare program, including both Medicare and Medicaid. | |
• | The Federal Physician Self-Referral Prohibition (Stark), which restricts physicians from making certain referrals for specified “designated health services” for which payment may be made under Medicare or Medicaid programs to an entity with which the physician (or an immediate family member) has a financial relationship. |
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• | The False Claims Act, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government, including the Medicare and Medicaid programs. | |
• | The Civil Monetary Penalties Law, which permits the Department of Health and Human Services to impose civil financial penalties for certain proscribed acts. |
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• | a lack of market knowledge, a network of commercial real estate brokers in the new markets and understanding of the local economies; | |
• | an inability to identify promising acquisition, investment or development opportunities; | |
• | an inability to hire qualified development and construction personnel; and | |
• | an unfamiliarity with local government and permitting procedures. |
• | we may be unable to obtain, or may suffer delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased costs, modification or abandonment of these projects; | |
• | we may incur construction costs for property which exceed our original estimates due to increased costs for materials or labor or other costs that we did not anticipate; | |
• | we may not be able to obtain financing on favorable terms or at all, which may render us unable to proceed with our development activities; and | |
• | we may be unable to complete construction and lease-up of a property on schedule, which could result in increased debt service expense or construction costs. |
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• | our ability to complete acquisitions or investments on favorable terms or at all; | |
• | our success in negotiating favorable lease terms; and | |
• | our tenants’ ability to perform under their leases. |
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• | “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose special stockholder voting requirements on these combinations; and | |
• | “control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all shares with respect to which any of our officers, employee directors or any persons |
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making the control share acquisition are entitled to direct or exercise voting power in the election of directors. |
• | actual or anticipated variations in our quarterly results of operations; | |
• | changes in our earnings estimates or publication of research reports about us or the real estate industry; | |
• | increases in market interest rates that may lead purchasers of common stock to demand a higher yield; | |
• | changes in market valuations of similar companies; | |
• | adverse market reaction to any increased indebtedness we incur in the future; | |
• | additions or departures of key personnel; | |
• | actions by institutional stockholders; | |
• | reaction to the sale or purchase of company stock by our executives officers; | |
• | changes in the economic environment in the markets where our properties are located; | |
• | changes in the financial ability of our key tenants to satisfy the terms of the respective lease agreements; | |
• | changes in tax law; | |
• | speculation in the press or investment community; and | |
• | general market, economic and political conditions. |
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• | local oversupply, increased competition or reduction in demand for office space; | |
• | inability to collect contractual payments from third parties involved in our structured real estate investments; | |
• | vacancies; | |
• | our inability to rent space on favorable terms; | |
• | a general decline in the value of commercial real estate in our target market; | |
• | increased operating costs, including insurance premiums, utilities and real estate taxes; | |
• | costs of complying with changes in governmental regulations; and | |
• | earthquakes and other natural disasters, which may result in uninsured or underinsured losses. |
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• | our lack of knowledge of the contamination; | |
• | the timing of the contamination; | |
• | the cause of the contamination; or | |
• | the party responsible for the contamination of the property. |
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• | we may be required to use a substantial portion of our cash flow from operations to pay principal and interest, which reduces the amount available for acquisition of new office properties and to pay dividends to our stockholders; | |
• | we may be at a competitive disadvantage compared to our competitors that have less debt; | |
• | our cash flow may be insufficient to meet our required principal and interest payments; | |
• | we may be unable to borrow additional funds as needed or on favorable terms; | |
• | we may be unable to refinance our indebtedness at maturity or may find that the refinancing terms may be less favorable than the terms of our original indebtedness; | |
• | because a portion of our debt bears interest at variable rates, an increase in interest rates could materially increase our interest expense; | |
• | we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms; | |
• | we may experience increased vulnerability to economic and industry downturns, reducing our ability to respond to changing business and economic conditions; | |
• | we may violate restrictive covenants in our loan documents or otherwise default on our obligations, which would entitle the lenders or mortgagees to accelerate our debt obligations, collect additional fees and interest and foreclose on our properties that secure their loans and receive an assignment of lease payments; and |
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• | our default under any one of our mortgage loans with cross-default or cross-collateralization provisions could result in default on other indebtedness or result in the foreclosures of other properties we own. |
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• | our business and investment strategy; | |
• | our projected results of operations; | |
• | completion of any pending acquisitions, including acquisition of our properties and structured real estate investments under contract and/or under review; | |
• | our ability to manage our anticipated growth; | |
• | our ability to obtain future financing arrangements; | |
• | our estimates relating to, and our ability to pay, future dividends; | |
• | our understanding of our competition and our ability to compete effectively; | |
• | commercial real estate market and industry trends in the United States, and particularly in the greater metropolitan Washington, D.C. marketplace and its surrounding areas, ranging generally from Baltimore, Maryland through Richmond, Virginia and the Hampton Roads, Virginia metropolitan statistical area; | |
• | projected capital and operating expenditures; | |
• | availability and creditworthiness of current and prospective tenants; | |
• | interest rates; and | |
• | lease rates and terms. |
• | the factors referenced in this prospectus, including those set forth under the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Our Business and Properties;” | |
• | changes in our business and investment strategy; | |
• | default by our tenants; | |
• | availability, terms and deployment of capital; | |
• | general volatility of the capital markets; | |
• | availability of qualified personnel; | |
• | perception of the real estate industry; |
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• | changes in supply and demand dynamics within the real estate industry; | |
• | environmental effects; | |
• | changes in interest rates; | |
• | the degree and nature of our competition; | |
• | changes in applicable laws and regulations; and | |
• | state of the general economy and the local economy in which our properties are located. |
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• | our capitalization on a historical basis; and | |
• | our pro forma capitalization as adjusted to reflect the sale of 8,000,000 shares of our common stock in this offering at a public offering price of $9.50 per share, which is the midpoint of the range set forth on the front cover of this prospectus, after deducting an underwriting discount of approximately $5.3 million and approximately $3.1 million of other estimated offering expenses, the acquisition of the properties we have under contract (including the placement of approximately $5.0 million of new mortgage debt on the Godwin Business Park property) as described under “Summary — Current Assets and Pipeline — Our Properties Under Contract” and the application of the net proceeds as described in “Use of Proceeds.” |
March 31, 2006 | |||||||||
Asset Capital | Pro Forma | ||||||||
Corporation, Inc. | As Adjusted | ||||||||
(Unaudited) | |||||||||
(in thousands) | |||||||||
Long-term debt | $ | 120,493 | $ | 115,493 | |||||
Stockholders’ equity: | |||||||||
Preferred stock, $0.001 par value per share, 50,000,000 shares authorized, no shares issued and outstanding | — | — | |||||||
Common stock, $0.001 par value per share, 200,000,000 shares authorized, 11,750,943 shares issued and outstanding, actual; 19,750,943 shares issued and outstanding, pro forma as adjusted(1) | 12 | 20 | |||||||
Additional paid-in capital | 90,269 | 157,795 | |||||||
Deficit | (4,509 | ) | (4,509 | ) | |||||
Total stockholders’ equity | 85,772 | 153,306 | |||||||
Total capitalization | $ | 206,265 | $ | 268,799 | |||||
(1) | Excludes 76,492 shares of our common stock issuable upon conversion of LTIP units outstanding or allocated for issuance as of the date of this prospectus and shares we may sell upon exercise of the underwriters’ over-allotment option, if any. |
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Assumed initial public offering price per share | $ | 9.50 | |||
Net tangible book value per share at March 31, 2006(1) | 6.10 | ||||
Increase in pro forma net tangible book value per share attributable to this offering(2) | 1.01 | ||||
Pro forma net tangible book value per share after this offering(3) | 7.11 | ||||
Dilution in pro forma net tangible book value per share to new investors(4) | $ | 2.39 | |||
(1) | Net tangible book value per share of common stock is determined by dividing our net tangible book value (total tangible assets less total liabilities) at March 31, 2006 by the number of shares of common stock outstanding prior to this offering, assuming the conversion of all currently outstanding LTIP units and LTIP units allocated for issuance into shares of our common stock. |
(2) | After deducting underwriting discounts, commissions and other estimated expenses of this offering. |
(3) | Based on the pro forma net tangible book value attributable to common stockholders of approximately $141.0 million divided by 19,827,435 shares of our common stock to be outstanding following the consummation of this offering, assuming the conversion of all currently outstanding LTIP units and LTIP units allocated for issuance into shares of our common stock. |
(4) | Dilution is determined by subtracting (i) pro forma net tangible book value per share of our common stock after giving effect to this offering and the application of the net proceeds from (ii) the initial public offering price per share paid by a new investor in this offering. |
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Shares Issued(1) | Tangible Book Value/Cash | |||||||||||||||||||
Number | Percentage | Amount | Percentage | Per Share | ||||||||||||||||
Existing stockholders and LTIP unitholders | 11,827,435 | 60 | % | $ | 72,110,000 | (2) | 49 | % | $ | 6.10 | ||||||||||
New investors in this offering | 8,000,000 | 40 | % | 76,000,000 | (3) | 51 | % | $ | 9.50 | |||||||||||
Total | 19,827,435 | 100 | % | $ | 148,110,000 | 100 | % | |||||||||||||
(1) | Includes 76,492 shares of common stock issuable upon conversion of LTIP units outstanding or allocated for issuance as of the date of this prospectus. |
(2) | Based on the net tangible book value of our assets at March 31, 2006. |
(3) | Represents the proceeds from this offering before deducting underwriting discounts and commissions and other expenses of this offering. |
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• | approximately $41.9 million to fund the acquisition of the Gees Group portfolio, including related transaction costs; | |
• | approximately $1.4 million to fund the acquisition of the Godwin Business Park property, including related transaction costs; | |
• | approximately $6.9 million to fund the acquisition of the 4230 Forbes Boulevard property, including related transaction costs; | |
• | approximately $10.0 million to repay the portion of the outstanding notes due August 16, 2006 on the Hollymead Town Center property that we incurred in connection with the property’s acquisition. These notes mature at varying dates through August 2009 and have a current interest rate of 8%; | |
• | approximately $5.0 million to fund planning, legal, interest and initial development costs associated with the Hollymead Town Center property; and | |
• | any remaining proceeds to fund our working capital needs and investments in additional office properties and related assets, including pending acquisitions that we have under consideration and for other general corporate purposes. |
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• | all shares the investor actually owns beneficially or of record; | |
• | all shares over which the investor has or shares voting or dispositive control (such as in the capacity as a general partner of an investment fund); and | |
• | all shares the investor has the right to acquire within 60 days (such as upon exercise of options that are currently vested or which are scheduled to vest within 60 days). |
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Shares of | Shares of | Shares of | |||||||||||||||
Common Stock | Common Stock | Common Stock | Percentage of | ||||||||||||||
Beneficially | Offered by | Beneficially | Class Beneficially | ||||||||||||||
Owned Before | this | Owned After | Owned After | ||||||||||||||
Selling Stockholder | Resale | Prospectus(1) | Resale(1) | Resale(1)(2) | |||||||||||||
A. Bartley Bryt and Maud S. Bryt | 6,000 | 2,948 | 3,052 | * | |||||||||||||
Brian A. Rommel | 3,500 | 1,719 | 1,781 | * | |||||||||||||
Condor Partners LP(3) | 50,000 | 18,177 | 31,823 | * | |||||||||||||
Continental Casualty Company(4) | 300,000 | 147,377 | 152,623 | * | |||||||||||||
Hunter Global Investors Fund I L.P.(5) | 290,000 | 142,464 | 147,536 | * | |||||||||||||
Hunter Global Investors Offshore Fund II Ltd.(5) | 154,000 | 75,653 | 78,347 | * | |||||||||||||
Hunter Global Investors Offshore Fund Ltd.(5) | 556,000 | 273,138 | 282,862 | 1.4% | |||||||||||||
Jeffrey LAKE TRUST(6) | 2,500 | 1,228 | 1,272 | * | |||||||||||||
John A. Johnston and Robin L. Johnston(7) | 10,000 | 4,913 | 5,087 | ||||||||||||||
Kensington Realty Income Fund LP(3) | 70,000 | 34,388 | 35,612 | * | |||||||||||||
Kensington Strategic Realty Fund(3) | 1,523,000 | 394,478 | 1,128,522 | 5.7% | |||||||||||||
Lee A. Alexander | 3,500 | 1,719 | 1,781 | * | |||||||||||||
Mercury Real Estate Advisors LLC(8) | 427,000 | 119,867 | 307,133 | 1.6% | |||||||||||||
Patrick Beach and Christine Beach | 5,000 | 2,456 | 2,544 | * | |||||||||||||
Realty Enterprise Fund II, LLC(9) | 60,000 | 29,475 | 30,525 | * | |||||||||||||
TOTAL | 3,460,500 | 1,250,000 | 2,210,500 | 11.2% | |||||||||||||
* | Represents less than one percent of our issued and outstanding shares after resale and completion of this offering. |
(1) | Does not reflect the sale of shares of common stock that may be sold by the selling stockholders pursuant to the underwriters’ over-allotment option. | |
(2) | Assumes that each named selling stockholder sells all of the shares of our common stock it is offering for sale under this prospectus and neither acquires nor disposes of any other shares, nor has the right to purchase other shares, of our common stock subsequent to the date as of which we obtained information regarding its holdings. Because the selling stockholders are not obligated to sell all or any portion of the shares of our common stock shown as offered by them, we cannot estimate the actual number of shares (or actual percentage of the class) of our common stock that will be held by any selling stockholder upon completion of this offering. | |
(3) | Paul Gray and Joel Beal, executive vice presidents of the selling stockholder, have voting and investment power over the shares that this selling stockholder beneficially owns. | |
(4) | Dennis R. Hemme, vice president��— investments of the selling stockholder, has voting and investment power over the shares that this selling stockholder beneficially owns. This selling stockholder identified itself as an affiliate of a broker-dealer. This selling stockholder has represented to us that (a) the shares of our common stock shown above as being offered by such selling stockholder were purchased by such selling stockholder in the ordinary course of business, and (b) at the time of such purchase, such selling stockholder had no arrangements or understandings, directly or indirectly, with any person to distribute such shares of our common stock. Accordingly, such selling stockholder is not deemed to be an “underwriter” within the meaning of Section 2(11) of the Securities Act. | |
(5) | Duke Buchan III, president of the investment manager of the selling stockholder, has voting and investment power over the shares that this selling stockholder beneficially owns. The foregoing should not be construed in and of itself as an admission by Mr. Buchan of beneficial ownership of the shares. | |
(6) | Jeffrey L. Lake, trustee of the selling stockholder, has voting and investment power over the shares that this selling stockholder beneficially owns. | |
(7) | John A. Johnston is a member of the board of directors of American Home Mortgage Investment Corp., which has utilized FBR for certain investment banking services. | |
(8) | David R. Jarvis and Malcolm F. MacLean IV, managing members of the selling stockholder, have voting and investment power over the shares that this selling stockholder beneficially owns. | |
(9) | John Weil and Christopher Weil, directors of the managing member of the selling stockholder, have voting and investment power over the shares that this selling stockholder beneficially owns. This selling stockholder identified itself as an affiliate of a broker-dealer. This selling stockholder has represented to us that (a) the shares of our common stock shown above as being offered by such selling stockholder were purchased by such selling stockholder in the ordinary course of business, and (b) at the time of such purchase, such selling stockholder had no arrangements or understandings, directly or indirectly, with any person to distribute such shares of our common stock. Accordingly, such selling stockholder is not deemed to be an “underwriter” within the meaning of Section 2(11) of the Securities Act. |
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High Sales | Low Sales | |||||||
Price | Price | |||||||
June 25, 2005 to June 30, 2005 | $ | * | $ | * | ||||
July 1, 2005 to September 30, 2005 | $ | 8.70 | $ | 8.40 | ||||
October 1, 2005 to December 31, 2005 | $ | 8.70 | $ | 8.70 | ||||
January 1, 2006 to March 31, 2006 | $ | 8.70 | $ | 8.70 | ||||
April 1, 2006 to June 30, 2006 | $ | 8.70 | $ | 8.70 | ||||
July 1, 2006 to July 14, 2006 | $ | * | $ | * |
* | We have no knowledge of any trades of our common stock during this period. |
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Historical | |||||||||||
March 30, | |||||||||||
Three Months | 2005 | ||||||||||
Ended | (inception) to | ||||||||||
March 31, | December 31, | ||||||||||
2006 | 2005 | ||||||||||
(Unaudited) | (Restated)(2) | ||||||||||
(in thousands, except per share | |||||||||||
amounts) | |||||||||||
Statements of Operations Data: | |||||||||||
Revenue | |||||||||||
Rental income | $ | 2,945 | $ | 2,834 | |||||||
Operating expense reimbursements | 151 | 125 | |||||||||
Other | 239 | 574 | |||||||||
Total revenue | 3,335 | 3,533 | |||||||||
Expenses | |||||||||||
Property operating expenses | 1,152 | 1,346 | |||||||||
Real estate taxes and insurance | 383 | 411 | |||||||||
General and administrative | 1,572 | 2,759 | |||||||||
Depreciation and amortization | 1,395 | 1,699 | |||||||||
Total operating expenses | 4,502 | 6,215 | |||||||||
Operating loss | (1,167 | ) | (2,682 | ) | |||||||
Interest income | 417 | 512 | |||||||||
Interest expense | (1,029 | ) | (685 | ) | |||||||
Minority interest in loss | 10 | 7 | |||||||||
Equity in earnings of unconsolidated entities | 46 | 39 | |||||||||
Loss from continuing operations before income taxes | (1,723 | ) | (2,809 | ) | |||||||
Provision for income taxes | — | — | |||||||||
Loss from continuing operations | (1,723 | ) | (2,809 | ) | |||||||
Income from discontinued operations | 1 | 22 | |||||||||
Net loss | $ | (1,722 | ) | $ | (2,787 | ) | |||||
Net loss per common share — basic and diluted | |||||||||||
Continuing operations | $ | (0.15 | ) | $ | (0.39 | ) | |||||
Discontinued operations | $ | — | $ | — | |||||||
Net loss | $ | (0.15 | ) | $ | (0.39 | ) | |||||
Weighted average common shares outstanding — basic and diluted | 11,521,892 | 7,195,385 | |||||||||
Balance Sheet Data (at period end): | |||||||||||
Real estate investments, net | $ | 114,848 | $ | 82,199 | |||||||
Properties held for sale | 57,993 | 56,961 | |||||||||
Real estate loan | 14,700 | — | |||||||||
Cash and cash equivalents | 1,955 | 23,271 | |||||||||
Other assets, net | 22,847 | 18,734 | |||||||||
Total assets | $ | 212,343 | $ | 181,165 | |||||||
Mortgage loans and other debt | $ | 80,493 | $ | 50,123 | |||||||
Mortgage loans and other liabilities for properties held for sale | 41,278 | 40,829 | |||||||||
Other liabilities | 4,731 | 3,638 | |||||||||
Total liabilities | 126,502 | 94,590 | |||||||||
Minority interest | 69 | 29 | |||||||||
Stockholders’ equity | 85,772 | 86,546 | |||||||||
Total liabilities and stockholders’ equity | $ | 212,343 | $ | 181,165 | |||||||
Other Data: | |||||||||||
EBITDA(1) | $ | 681 | $ | (397 | ) | ||||||
Cash flows from: | |||||||||||
Operating activities | $ | (542 | ) | $ | (741 | ) | |||||
Investing activities | $ | (25,703 | ) | $ | (66,589 | ) | |||||
Financing activities | $ | 4,929 | $ | 90,601 | |||||||
Reconciliation of Net Loss to EBITDA: | |||||||||||
Net loss | $ | (1,722 | ) | $ | (2,787 | ) | |||||
Plus: | |||||||||||
Interest expense | 1,029 | 685 | |||||||||
Depreciation and amortization | 1,374 | 1,705 | |||||||||
EBITDA | $ | 681 | $ | (397 | ) | ||||||
(1) | EBITDA is defined as net income (loss) before interest, taxes, depreciation and amortization. We believe it is a useful financial performance measure for us and for our stockholders and is a complement to net income and other financial performance measures provided in accordance with GAAP. We use EBITDA to measure the financial performance of our operating properties because it excludes expenses such as depreciation and amortization, taxes and interest expense, which |
54
are not indicative of operating performance. By excluding interest expense, EBITDA measures our financial performance irrespective of our capital structure or how we finance our properties and operations. By excluding depreciation and amortization expense, which can vary from property to property based on a variety of factors unrelated to the properties’ financial performance, we can more accurately assess the financial performance of our properties. Under GAAP, real estate properties are recorded at historical cost at the time of acquisition and are depreciated on a straight line basis. By excluding depreciation and amortization, we believe EBITDA provides a basis for measuring the financial performance of properties unrelated to historical cost. However, because EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our fixed assets. In addition, because EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt nor does it show trends in interest costs due to changes in our borrowings or changes in interest rates. EBITDA, as calculated by us, may not be comparable to EBITDA reported by other companies that do not define EBITDA exactly as we define the term. Because we use EBITDA to evaluate our financial performance, we reconcile it to net income (loss) which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity. | |
(2) | Previously, the acquisition of Asset Capital Corporation, L.L.C’s interests in the Predecessor LLCs, as defined in “Unaudited Pro Forma Financial Information,” had been accounted for as a transaction without substance in accordance with FASB Technical Bulletin 85-5 and recorded at Asset Capital Corporation, L.L.C.’s historical carrying value. The acquisitions of the Predecessor LLCs and certain other assets contributed by entities affiliated with our founders have now been accounted for as a series of separate business combinations for which Asset Capital Corporation, Inc. is the accounting acquirer, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”. Accordingly, the acquired interests in the Predecessor LLCs and certain other assets contributed by entities affiliated with our founders have been recorded in an amount equal to the purchase consideration, which has been allocated to the identifiable assets acquired and liabilities assumed based on their fair values. |
55
• | The acquisition of the Gees Group portfolio for $39.7 million, exclusive of approximately $2.2 million of transaction costs, which is currently under contract; | |
• | The acquisition of the Godwin Business Park property for $6.25 million, exclusive of approximately $150,000 of transaction costs, which is currently under contract; | |
• | The acquisition of the 4230 Forbes Boulevard property for $6.8 million, exclusive of approximately $100,000 of transaction costs, which is currently under contract; | |
• | The initial public offering of 8,000,000 shares of our common stock at $9.50 per share, with net proceeds of $67.5 million after deducting the underwriting discount and estimated offering fees and expenses; and | |
• | The repayment of approximately $10.0 million of debt using net proceeds from the initial public offering of our common stock. |
• | The acquisitions of the following real estate investments that occurred subsequent to January 1, 2005: |
• | RSMK portfolio, which occurred during March 2006, | |
• | Pinewood Plaza property, which occurred during November 2005, and | |
• | CareFirst portfolio (consisting of the Columbia Medical Campus, Timonium Medical Center and Frederick Medical Center properties) and Executive Tower property, both of which occurred during July 2005; |
• | The acquisition of membership interests in limited liability companies controlled by our founders (collectively the “Predecessor LLCs”) in exchange for cash and shares of our common stock in conjunction with the formation transactions described herein, which occurred during the period August 2005 to March 2006; | |
• | The assignment of certain purchase, property management, maintenance and engineering agreements to us by companies wholly-owned by our founders in exchange for shares of our common stock, which occurred during June 2005; | |
• | The acquisition of the Gees Group portfolio, which is currently under contract; | |
• | The acquisition of the Godwin Business Park property, which is currently under contract; | |
• | The acquisition of the 4230 Forbes Boulevard property, which is currently under contract; | |
• | The amortization of deferred compensation costs arising from the issuance of 230,479 shares of restricted common stock to certain of our executives and the issuance of 12,611 LTIP units to certain of our directors and employees; and | |
• | The repayment of approximately $10.0 million of debt using net proceeds from the initial public offering of our common stock. |
56
57
Historical | Pro Forma | ||||||||||||||||||||||||
Asset | Godwin | Asset | |||||||||||||||||||||||
Capital | Gees Group | Business | 4230 | Capital | |||||||||||||||||||||
Corporation, | Offering | Portfolio | Park | Forbes Blvd. | Corporation, | ||||||||||||||||||||
Inc. | (A) | (B) | (C) | (D) | Inc. | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||
Real estate investments, net | $ | 114,848 | $ | — | $ | 38,967 | $ | 5,985 | $ | 6,343 | $ | 166,143 | |||||||||||||
Properties held for sale | 57,993 | — | — | — | — | 57,993 | |||||||||||||||||||
Real estate loans | 14,700 | — | — | — | — | 14,700 | |||||||||||||||||||
Cash and cash equivalents | 1,955 | 58,904 | (41,900 | ) | (1,400 | ) | (6,900 | ) | 10,659 | ||||||||||||||||
Escrows and reserves | 4,120 | — | — | — | — | 4,120 | |||||||||||||||||||
Accounts receivable, net of allowance for doubtful accounts | 629 | — | — | — | — | 629 | |||||||||||||||||||
Accrued straight-line rents, net | 286 | — | — | — | — | 286 | |||||||||||||||||||
Prepaid expenses and other assets | 1,843 | — | — | — | — | 1,843 | |||||||||||||||||||
Deferred costs, net | 1,892 | (1,370 | ) | — | — | — | 522 | ||||||||||||||||||
Intangible assets, net | 11,553 | — | 2,933 | 415 | 557 | 15,458 | |||||||||||||||||||
Investment in real estate entities | 2,524 | — | — | — | — | 2,524 | |||||||||||||||||||
Total assets | $ | 212,343 | $ | 57,534 | $ | — | $ | 5,000 | $ | — | $ | 274,877 | |||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||||||
Mortgage loans and other debt | $ | 80,493 | $ | — | $ | — | $ | 5,000 | $ | — | $ | 85,493 | |||||||||||||
Mortgage loan and other liabilities on property held for sale | 41,278 | (10,000 | ) | — | — | — | 31,278 | ||||||||||||||||||
Accounts payable and accrued expenses | 2,655 | — | — | — | — | 2,655 | |||||||||||||||||||
Borrowers’ escrow | 698 | — | — | — | — | 698 | |||||||||||||||||||
Deferred revenue | 684 | — | — | — | — | 684 | |||||||||||||||||||
Tenant security deposits | 694 | — | — | — | — | 694 | |||||||||||||||||||
Total liabilities | 126,502 | (10,000 | ) | — | 5,000 | — | 121,502 | ||||||||||||||||||
Minority interest | 69 | — | — | — | — | 69 | |||||||||||||||||||
Stockholders’ equity | 85,772 | 67,534 | — | — | — | 153,306 | |||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 212,343 | $ | 57,534 | $ | — | $ | 5,000 | $ | — | $ | 274,877 | |||||||||||||
58
• | The initial public offering of 8,000,000 shares of our common stock at a price of $9.50 per share, which is the midpoint of the range on the cover of this prospectus, with net proceeds of $67.5 million after deducting the underwriting discount and estimated offering fees and expenses; | |
• | The repayment of approximately $10.0 million of debt using net proceeds from the initial public offering of our common stock; | |
• | The acquisition of the Gees Group portfolio for $39.7 million, exclusive of approximately $2.2 million of transaction costs, which is currently under contract; and | |
• | The acquisition of the Godwin Business Park property for $6.25 million, exclusive of approximately $150,000 of transaction costs, which is currently under contract. | |
• | The acquisition of the 4230 Forbes Boulevard property for $6.8 million, exclusive of approximately $100,000 of transaction costs, which is currently under contract. |
(A) | Reflects adjustments related to: | |
• Proceeds from the initial public offering of 8,000,000 shares of our common stock at a price of $9.50 per share, which is the midpoint of the range on the cover of this prospectus, net of estimated transaction costs, including costs that had been incurred and deferred at March 31, 2006; and | ||
• The repayment of $10.0 million of mortgage debt related to property held for sale. | ||
(B) | Reflects the acquisition of the Gees Group portfolio, which is currently under contract, for approximately $41.9 of cash, inclusive of related transaction costs. The purchase price has been preliminarily allocated among the underlying buildings (on an as-if vacant basis), land and lease intangibles in accordance with Statement of Financial Accounting Standards, (SFAS) No. 141 “Business Combinations”. | |
(C) | Reflects the acquisition of the Godwin Business Park property, which is currently under contract, for approximately $6.4 million, inclusive of related transaction costs. The acquisition of the |
59
property will be funded through the payment of approximately $1.4 million of cash and the incurrence of approximately $5.0 million of debt. The purchase price has been preliminarily allocated among the underlying buildings (on an as-if vacant basis), land and lease intangibles in accordance with SFAS No. 141. | ||
(D) | Reflects the acquisition of the 4230 Forbes Boulevard property, which is currently under contract, for approximately $6.9 million of cash, inclusive of related transaction costs. The purchase price has been preliminarily allocated among the underlying buildings (or an as-of-vacant basis), land and lease intangibles in accordance with SFAS No. 141. |
60
Historical | Pro Forma | |||||||||||||||||||||||||||||||||||||
Asset | Gees | Godwin | 4230 | Asset | ||||||||||||||||||||||||||||||||||
Capital | RSMK | Predecessor | Group | Business | Forbes | Capital | ||||||||||||||||||||||||||||||||
Corporation, | Portfolio | LLCs | Portfolio | Park | Blvd. | Other | Corporation | |||||||||||||||||||||||||||||||
Inc. | (A) | (E) | Subtotal | (H) | (I) | (J) | (K) | Inc. | ||||||||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||||
Rental income | $ | 2,945 | $ | 411 | $ | 255 | $ | 3,611 | $ | 1,111 | $ | 121 | $ | 93 | $ | — | $ | 4,936 | ||||||||||||||||||||
Operating expense reimbursements | 151 | 151 | 15 | 317 | 10 | 1 | 25 | — | 353 | |||||||||||||||||||||||||||||
Other income | 239 | — | — | 239 | — | — | — | — | 239 | |||||||||||||||||||||||||||||
Total revenue | 3,335 | 562 | 270 | 4,167 | 1,121 | 122 | 118 | — | 5,528 | |||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||
Property operating expenses | 1,152 | 119 | 70 | 1,341 | 229 | 31 | 15 | — | 1,616 | |||||||||||||||||||||||||||||
Real estate taxes and insurance | 383 | 49 | 3 | 435 | 89 | 14 | 16 | — | 554 | |||||||||||||||||||||||||||||
General and administrative | 1,572 | 9 | 1 | 1,582 | — | 3 | — | — | 1,585 | |||||||||||||||||||||||||||||
Depreciation and amortization | 1,395 | 291 | 93 | 1,779 | 594 | 81 | 69 | — | 2,523 | |||||||||||||||||||||||||||||
Total expenses | 4,502 | 468 | 167 | 5,137 | 912 | 129 | 100 | — | 6,278 | |||||||||||||||||||||||||||||
Operating income (loss) | (1,167 | ) | 94 | 103 | (970 | ) | 209 | (7 | ) | 18 | — | (750 | ) | |||||||||||||||||||||||||
Interest income | 417 | — | — | 417 | — | — | — | — | 417 | |||||||||||||||||||||||||||||
Interest expense | (1,029 | ) | (237 | ) | (80 | ) | (1,346 | ) | — | (79 | ) | — | — | (1,425 | ) | |||||||||||||||||||||||
Minority interest in (income) losses | 10 | — | — | 10 | — | — | — | — | 10 | |||||||||||||||||||||||||||||
Equity in earnings of unconsolidated entities | 46 | — | — | 46 | — | — | — | — | 46 | |||||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | (1,723 | ) | (143 | ) | 23 | (1,843 | ) | 209 | (86 | ) | 18 | — | (1,702 | ) | ||||||||||||||||||||||||
Provision for income taxes | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Net income (loss) from continuing operations | (1,723 | ) | (143 | ) | 23 | (1,843 | ) | 209 | (86 | ) | 18 | — | (1,702 | ) | ||||||||||||||||||||||||
Income from discontinued operations | 1 | — | — | 1 | — | — | — | — | 1 | |||||||||||||||||||||||||||||
Net income (loss) | $ | (1,722 | ) | $ | (143 | ) | $ | 23 | $ | (1,842 | ) | $ | 209 | $ | (86 | ) | $ | 18 | $ | — | $ | (1,701 | ) | |||||||||||||||
Net loss per common share — basic and diluted | ||||||||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.15 | ) | $ | (0.09 | ) | ||||||||||||||||||||||||||||||||
Discontinued operations | $ | — | $ | — | ||||||||||||||||||||||||||||||||||
Total | $ | (0.15 | ) | $ | (0.09 | ) | ||||||||||||||||||||||||||||||||
Weighted average common shares outstanding — basic and diluted | 11,521,892 | 18,490,833 |
61
Historical | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset | Gees | Godwin | 4230 | Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital | RSMK | Executive | CareFirst | Pinewood | Predecessor | Contract | Deferred | Group | Business | Forbes | Asset Capital | |||||||||||||||||||||||||||||||||||||||||||||||
Corporation, | Portfolio | Tower | Portfolio | Plaza | LLCs | Assignments | Compensation | Portfolio | Park | Blvd. | Other | Corporation, | ||||||||||||||||||||||||||||||||||||||||||||||
Inc. | (A) | (B) | (C) | (D) | (E) | (F) | (G) | Subtotal | (H) | (I) | (J) | (K) | Inc. | |||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rental income | $ | 2,834 | $ | 1,935 | $ | 1,050 | $ | 532 | $ | 870 | $ | 6,199 | $ | — | $ | — | $ | 13,420 | $ | 4,193 | $ | 483 | $ | 371 | $ | — | $ | 18,467 | ||||||||||||||||||||||||||||||
Operating expense reimbursements | 125 | 605 | 37 | — | — | 239 | — | — | 1,006 | 79 | 3 | �� | 105 | — | 1,193 | |||||||||||||||||||||||||||||||||||||||||||
Other income | 574 | 1 | 15 | — | 10 | 420 | 216 | — | 1,236 | — | — | — | — | 1,236 | ||||||||||||||||||||||||||||||||||||||||||||
Total revenue | 3,533 | 2,541 | 1,102 | 532 | 880 | 6,858 | 216 | — | 15,662 | 4,272 | 486 | 476 | — | 20,896 | ||||||||||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property operating expenses | 1,346 | 494 | 249 | 732 | 240 | 2,186 | 178 | — | 5,425 | 991 | 123 | 63 | — | 6,602 | ||||||||||||||||||||||||||||||||||||||||||||
Real estate taxes and insurance | 411 | 201 | 73 | 173 | 70 | 577 | — | — | 1,505 | 368 | 55 | 62 | — | 1,990 | ||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 2,759 | 95 | — | — | — | 152 | — | — | 3,006 | 17 | 11 | — | — | 3,034 | ||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 1,699 | 1,373 | 561 | 536 | 487 | 2,361 | 335 | 181 | 7,533 | 2,375 | 326 | 276 | — | 10,510 | ||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 6,215 | 2,163 | 883 | 1,441 | 797 | 5,276 | 513 | 181 | 17,469 | 3,751 | 515 | 401 | — | 22,136 | ||||||||||||||||||||||||||||||||||||||||||||
Operating income (loss) | (2,682 | ) | 378 | 219 | (909 | ) | 83 | 1,582 | (297 | ) | (181 | ) | (1,807 | ) | 521 | (29 | ) | 75 | — | (1,240 | ) | |||||||||||||||||||||||||||||||||||||
Interest income | 512 | — | — | — | — | 9 | — | — | 521 | — | — | — | — | 521 | ||||||||||||||||||||||||||||||||||||||||||||
Interest expense | (685 | ) | (1,140 | ) | (374 | ) | — | (298 | ) | (2,210 | ) | — | — | (4,707 | ) | — | (315 | ) | — | — | (5,022 | ) | ||||||||||||||||||||||||||||||||||||
Minority interest in (income) losses | 7 | — | — | — | — | — | — | — | 7 | — | — | — | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||
Equity in earnings of unconsolidated entities | 39 | — | — | — | — | 199 | — | — | 238 | — | — | — | — | 238 | ||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | (2,809 | ) | (762 | ) | (155 | ) | (909 | ) | (215 | ) | (420 | ) | (297 | ) | (181 | ) | (5,748 | ) | 521 | (344 | ) | 75 | — | (5,496 | ) | |||||||||||||||||||||||||||||||||
Provision for income taxes | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) from continuing operations | (2,809 | ) | (762 | ) | (155 | ) | (909 | ) | (215 | ) | (420 | ) | (297 | ) | (181 | ) | (5,748 | ) | 521 | (344 | ) | 75 | — | (5,496 | ) | |||||||||||||||||||||||||||||||||
Income from discontinued operations | 22 | — | — | — | — | — | — | — | 22 | — | — | — | — | 22 | ||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | $ | (2,787 | ) | $ | (762 | ) | $ | (155 | ) | $ | (909 | ) | $ | (215 | ) | $ | (420 | ) | $ | (297 | ) | $ | (181 | ) | $ | (5,726 | ) | $ | 521 | $ | (344 | ) | $ | 75 | $ | — | $ | (5,474 | ) | |||||||||||||||||||
Net loss per common share — basic and diluted | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.39 | ) | $ | (0.39 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | (0.39 | ) | $ | (0.39 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average common shares outstanding — basic and diluted | 7,195,385 | 14,164,326 |
62
• | The acquisitions of the following real estate investments that have occurred subsequent to January 1, 2005: |
• | RSMK portfolio, which occurred during March 2006, | |
• | Pinewood Plaza property, which occurred during November 2005, and | |
• | CareFirst portfolio (consisting of the Columbia Medical Campus, Timonium Medical Center and Frederick Medical Center properties) and Executive Tower property, both of which occurred during July 2005; |
• | The acquisition of membership interests in the Predecessor LLCs in exchange for cash and shares of our common stock in conjunction with the formation transactions described herein, which occurred during the period August 2005 to March 2006; | |
• | The assignment of certain purchase, property management and engineering agreements to us by companies wholly-owned by our founders in exchange for shares of our common stock in conjunction with the formation transactions described herein, which occurred during June 2005; | |
• | The acquisition of the Gees Group portfolio, which is currently under contract; | |
• | The acquisition of the Godwin Business Park property, which is currently under contract; | |
• | The acquisition of the 4230 Forbes Boulevard property, which is currently under contract; | |
• | The amortization of deferred compensation costs arising from the issuance of 230,479 shares of restricted common stock and 12,611 LTIP units; and | |
• | The repayment of approximately $10.0 million of debt using net proceeds from the initial public offering of our common stock. |
63
(A) | Reflects the historical revenue and certain expenses of the RSMK portfolio through acquisition date, ranging from February 2006 to March 2006. The adjustment to depreciation and amortization relates to the allocation of the purchase price of the properties to land, buildings and intangibles, in accordance with SFAS No. 141. Buildings are depreciated using the straight-line method over an estimated useful life of 40 years. Intangibles are amortized over the terms of the underlying leases, which range from one to nine years. The adjustment to interest expense relates to mortgage loans aggregating $16.2 million assumed and incurred in connection with the acquisition bearing interest at a weighted average rate of 6% per annum. | |
(B) | Reflects the historical revenue and certain expenses of the Executive Tower property through its July 2005 acquisition date. The pro forma depreciation and amortization relates to allocation of the purchase price of the properties to land, buildings and intangibles, in accordance with SFAS No. 141. Buildings are depreciated using the straight-line method over an estimated useful life of 40 years. Intangibles are amortized over the terms of the underlying leases, which range from one to five years. The pro forma interest expense relates to a $12.6 million mortgage loan incurred in connection with the acquisition bearing interest at a rate of 30-day LIBOR plus 1.5% per annum. | |
(C) | Reflects the historical revenue and certain expenses of the CareFirst portfolio through its July 2005 acquisition date. The pro forma depreciation and amortization relates to allocation of the purchase price of the properties to land, buildings and intangibles, in accordance with SFAS No. 141. Buildings are depreciated using the straight-line method over an estimated useful life of 40 years. Intangibles are amortized over the terms of the underlying leases, which range from one to five years. No adjustment to interest expense has been made since we did not assume or incur any debt in connection with the acquisition. | |
(D) | Reflects the historical revenue and certain expenses of the Pinewood Plaza property through its November 2005 acquisition date. The pro forma depreciation and amortization relates to allocation of the purchase price of the properties to land, buildings and intangibles, in accordance with SFAS No. 141. Buildings are depreciated using the straight-line method over an estimated useful life of 40 years. Intangibles are amortized over the terms of the underlying leases, which range from one to six years. The pro forma interest expense relates to a $5.8 million mortgage loan incurred in connection with the acquisition bearing interest at a rate of 6.2% per annum. | |
(E) | Reflects the historical revenue and certain expenses of the Predecessor LLCs through acquisition dates ranging from August 2005 to March 2006. The pro forma depreciation and amortization relates to allocation of the purchase price to the fair value of the net assets acquired, in accordance with SFAS No. 141. Buildings are depreciated using the straight-line method over the estimated useful lives approximating 40 years. Intangibles are amortized over useful lives, which range from one to five years. The pro forma interest expense relates to mortgage loans aggregating $40.2 million assumed and incurred in connection with the acquisitions that bear interest at rates ranging from 5.66% to 7.06% per annum. | |
(F) | Reflects historical revenue and certain expenses related to the assignment of certain purchase, property management and engineering agreements to us by companies wholly-owned by our founders in exchange for shares of our common stock. The pro forma depreciation and amortization relates to amortization of the $3.4 million value assigned to the contracts, which are amortized using the straight-line method over estimated useful lives approximating five years. | |
(G) | Reflects amortization of deferred compensation costs arising from restricted common stock and LTIP units issued at the Company’s formation. | |
(H) | Reflects the historical revenue and certain expenses of the Gees Group portfolio, which is currently under contract. The pro forma depreciation and amortization relates to the preliminary allocation of the purchase price of the properties to land, building and intangibles, in accordance |
64
with SFAS No. 141. Buildings will be depreciated using the straight-line method over an estimated useful life of 40 years. Intangibles will be amortized over the terms of the underlying leases, which are expected to range from one to 10 years. | ||
(I) | Reflects the historical revenue and certain expenses of the Godwin Business Park property, which is currently under contract. The pro forma depreciation and amortization relates to the preliminary allocation of the purchase price of the properties to land, building and intangibles, in accordance with SFAS No. 141. Buildings will be depreciated using the straight-line method over an estimated useful life of 40 years. Intangibles will be amortized over the terms of the underlying leases, which are expected to range from one to five years. The pro forma interest expense relates to a $5.0 million mortgage loan expected to be incurred in connection with the acquisition bearing interest at 6.3% per annum. | |
(J) | Reflects the historical revenue and certain expenses of the 4230 Forbes Boulevard property, which is currently under contract. The pro forma depreciation and amortization relates to the preliminary allocation of the purchase price of the property to land, building and intangibles, in accordance with SFAS No. 141. Buildings will be depreciated using the straight-line method over an estimated useful life of 40 years. Intangibles will be amortized over the terms of the underlying leases, which are expected to range from five to seven years. | |
(K) | Since the interest related to the mortgage debt that will be repaid with proceeds from our initial public offering has been capitalized, an adjustment has not been made to interest expense. |
65
• | employment growth; | |
• | local economic conditions; | |
• | capital investments by corporations; | |
• | federal government spending, outsourcing and procurement; |
66
• | suburban housing growth; and | |
• | population growth and new development suburban areas. |
Revenue Recognition |
Real Estate Investments |
67
Purchase Accounting |
68
Three Months Ended March 31, 2006 |
Three months | |||||
ended | |||||
March 31, | |||||
2006 | |||||
(unaudited) | |||||
(in thousands) | |||||
Rental income | $ | 2,945 | |||
Operating expense reimbursements | 151 | ||||
Other income | 239 | ||||
Total revenue | $ | 3,335 | |||
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March 30, 2005 (Inception) to December 31, 2005 |
March 30, 2005 | |||||
(inception) to | |||||
December 31, | |||||
2005 | |||||
(in thousands) | |||||
Rental income | $ | 2,834 | |||
Operating expense reimbursements | 125 | ||||
Other income | 574 | ||||
Total revenue | $ | 3,533 | |||
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Less Than | 1-3 | More Than | ||||||||||||||||||||
Total | 1 Year | Years | 3-5 Years | 5 Years | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||
Operating Lease Obligations: | ||||||||||||||||||||||
Leased space under noncancelable operating leases | $ | 1,448 | $ | 215 | $ | 544 | $ | 577 | $ | 112 | ||||||||||||
Long-Term Debt Obligations: | ||||||||||||||||||||||
Principal payments on mortgage notes payable | 90,123 | 10,200 | 50,935 | 23,530 | 5,458 | |||||||||||||||||
Interest payments on mortgage notes payable | 16,999 | 4,530 | 5,812 | 5,462 | 1,195 | |||||||||||||||||
Purchase Obligations: | ||||||||||||||||||||||
Property acquisitions and structured real estate investments | 34,900 | (1) | 34,900 | — | — | — | ||||||||||||||||
Total | $ | 143,470 | $ | 49,845 | $ | 57,291 | $ | 29,569 | $ | 6,765 | ||||||||||||
(1) | Includes purchase obligations of $12.2 million and $22.7 million related to the acquisition of the Pidgeon Hill II property and the RSMK portfolio, respectively, excluding transactional costs. Excludes asset management fees and profits interests under the asset management agreements for the Hollymead property and the CareFirst portfolio. See “Our Business and Properties — Property Management and Engineering Agreements” for a description of these agreements. Also excludes the purchase obligations entered into subsequent to December 31, 2005, including those related to the acquisition of the Gees Group portfolio, the Godwin Business Park property and the 4230 Forbes Boulevard property. |
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• | Core-Plus Properties: Properties with stable occupancies that have below-market rents and/or inefficient operations. We believe we can achieve higher operating cash flows and enhanced asset values from these types of properties by increasing rents through aggressive leasing, enhancing tenant service and reducing operating expenses. We believe we can reduce operating expenses in part by utilizing our own internal property management and engineering personnel, reducing energy costs at the properties, negotiating new lower cost service and maintenance agreements and by implementing other operating efficiencies. | |
• | Value Added Properties: Properties with significant current or expected vacancy and/or that need capital improvements, but that we believe have attractive upside potential that may be achieved from hands-on, proactive management and leasing and modest capital improvements. | |
• | Structured Real Estate Investments: Investments in mezzanine loans, preferred equity interests, joint venture interests and/or other structured finance instruments involving what we believe to be high-quality local real estate operators or owner-occupants. We intend to use these investments to provide us with attractive current cash flow yields and to maintain or create relationships with existing or potential future investment partners or sources of additional investment opportunities, while attempting to minimize our risk through the structure of the investments. | |
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• | assumed property management, maintenance and engineering businesses, and purchase contracts from our predecessor business for approximately $3.4 million, all of which was paid in shares of our common stock based on a price per share of $8.50, which was the offering price of our common stock in our 2005 private offering; | |
• | acquired fourteen properties, including five contributed properties in which our predecessor business and founders owned an interest, and three structured real estate investments, including one contributed investment in which our predecessor business and founders owned an interest, for a total purchase price of approximately $183.0 million, including transaction costs, of which approximately $7.5 million was paid in shares of our common stock based on a price per share of $8.50 and approximately $76.4 million was paid in cash, and approximately $99.1 million was either assumed, defeased or repaid mortgage indebtedness; | |
• | originated a mezzanine loan with a principal balance of $14.7 million and an annual interest of 16%. We receive a monthly interest-only payment for half of the interest due, with the other half added to the principal amount of the loan. The loan has a maturity date in February 2011. The borrower used the proceeds of the loan to purchase a $66.0 million portfolio of properties located primarily in the Baltimore, Maryland metropolitan area; | |
• | entered into contracts to acquire interests in six additional properties for aggregate consideration of approximately $52.8 million, of which approximately $47.8 million will be paid in cash and approximately $5.0 million will be new mortgage indebtedness. We expect to pay approximately $2.5 million in cash for transaction costs related to these acquisitions; and | |
• | entered into two contracts with two separate buyers to sell approximately 31.0 acres and 9.7 acres, respectively, of the Hollymead Town Center property (representing approximately 52% of the property’s acreage) for sales prices of approximately $27.0 million and $13.1 million, respectively. |
Economic Overview |
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• | Population Growth. Since the 2000 census, the region’s population grew by almost 400,000 to approximately 5.9 million, ranking it as the fourth largest metropolitan area in the United States in 2004. | |
• | Job Growth. From 1999 through 2004, the greater metropolitan Washington, D.C. area was one of only six metropolitan regions that achieved positive job growth, adding 314,000 new jobs during that time. The city with the next largest job growth was New York, adding 87,500 new jobs. The pace at which new jobs are created in the greater metropolitan Washington, D.C. area is also increasing with 77,100 net jobs created in 2004, as compared to 59,700 new net jobs in 2003 and 9,200 new net jobs in 2002. | |
• | Low Unemployment. The region’s unemployment rate remained unchanged in 2004 at 3.3%, which is substantially lower than the national average of 5.5%. | |
• | Affluence. The area’s 2004 median household annual income increased to $71,059 from $64,613 in 2000, an increase of 10%. The greater metropolitan Washington, D.C. area ranked second, behind only the San Francisco/ San Jose metropolitan area, in terms of 2004 median household annual income among the largest metropolitan areas in the United States. | |
• | Economic Activity. Gross regional product for the greater metropolitan Washington, D.C. area increased to $313 billion in 2004, a 7.2% increase over 2003 and a 30% increase since 2000. |
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Office Market Overview |
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• | Washington, D.C.; | |
• | Northern Virginia, which includes Arlington County, Alexandria, Fairfax County, Loudoun County and Prince William County; and | |
• | Suburban Maryland, which includes Frederick County, Howard County, Montgomery County and Prince George’s County. |
Net Absorption(2) | Supply Factors | |||||||||||||||||||||||||||||||||||
2004 | Year-to- | �� | ||||||||||||||||||||||||||||||||||
Year-End | Year-to-Date | Date % of | Stock | Vacancy % | 2006 Estimated | 2007 Estimated | ||||||||||||||||||||||||||||||
Vacancy % | Completions | 4Q05 | Year-to-Date | Stock(3) | as of 12-31-05 | as of 12-31-05 | Completions | Completions | ||||||||||||||||||||||||||||
Washington, D.C. (CBD) | 6.43 | % | 3,203.5 | 947.0 | 3,171.0 | 3.01 | % | 108,256.7 | 5.50 | % | 4,861.8 | 1,686 | ||||||||||||||||||||||||
Northern Virginia | 10.84 | % | 2,905.7 | 992.5 | 4,741.3 | 3.36 | % | 143,128.9 | 7.89 | % | 3,599.7 | 2,142 | ||||||||||||||||||||||||
Suburban Maryland | 10.31 | % | 240.0 | 375.3 | 998.1 | 1.46 | % | 67,595.9 | 8.20 | % | 1,066.4 | — | ||||||||||||||||||||||||
Market Totals | 9.26 | % | 6,349.2 | 2,314.7 | 8,910.4 | 2.85 | % | 318,981.6 | 7.14 | % | 9,527.9 | 3,827.8 | ||||||||||||||||||||||||
(1) | All data are shown in square feet, except for percentages. Jones Lang LaSalle defines the Northern Virginia submarket to include Arlington, Fairfax, Loudoun and Prince William counties as well as the cities of Alexandria, Fairfax and Falls Church. Jones Lang LaSalle defines the Suburban Maryland submarket to include Montgomery and Prince George’s counties. Seven of our 14 properties reside within the Northern Virginia and suburban Maryland submarkets, as defined by Jones Lang LaSalle. |
(2) | “Net Absorption” is defined by Jones Lang LaSalle as the net change in occupied space in a given market between the current measurement period and the last measurement period. |
(3) | “Year-to-Date % of Stock” is calculated as year-to-date absorption divided by stock as of December 31, 2005. The term stock as used in this table means the existing office supply at a certain measurement period. |
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Greater Metropolitan Washington, D.C. Area | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006E | 2007E | 2008E | |||||||||||||||||||||||
(in thousands, except for percentages and dollars per square foot) | |||||||||||||||||||||||||||||
Net Construction | 10,965 | 4,143 | 7,764 | 4,448 | 8,097 | 8,150 | 7,000 | ||||||||||||||||||||||
Net Absorption | 3,329 | 5,178 | 14,247 | 8,910 | 9,100 | 6,700 | 5,700 | ||||||||||||||||||||||
Ending Stock | 302,626 | 306,770 | 314,534 | 318,982 | 327,079 | 335,229 | 342,229 | ||||||||||||||||||||||
Ending Vacancy Rate | 11.8 | % | 11.8 | % | 9.3 | % | 8.3 | % | 7.2 | % | 7.5 | % | 7.7 | % | |||||||||||||||
Central Business District | 6.3 | % | 6.6 | % | 6.4 | % | 6.3 | % | 5.8 | % | 6.6 | % | 7.0 | % | |||||||||||||||
Northern Virginia | 15.7 | % | 14.3 | % | 10.8 | % | 9.4 | % | 8.7 | % | 8.8 | % | 9.1 | % | |||||||||||||||
Suburban Maryland | 12.0 | % | 12.2 | % | 10.3 | % | 9.5 | % | 9.3 | % | 8.8 | % | 8.5 | % | |||||||||||||||
Gross Rental Rate Per Square Foot | $ | 30.13 | $ | 29.69 | $ | 30.21 | $ | 32.08 | $ | 30.27 | $ | 31.68 | $ | 32.66 | |||||||||||||||
Central Business District | $ | 38.90 | $ | 38.88 | $ | 39.48 | $ | 41.68 | $ | 41.46 | $ | 43.12 | $ | 44.41 | |||||||||||||||
Northern Virginia | $ | 26.31 | $ | 25.39 | $ | 25.99 | $ | 28.20 | $ | 27.01 | $ | 27.82 | $ | 28.38 | |||||||||||||||
Suburban Maryland | $ | 25.08 | $ | 24.83 | $ | 24.66 | $ | 25.38 | $ | 25.39 | $ | 25.89 | $ | 26.41 |
United States | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006E | 2007E | 2008E | |||||||||||||||||||||||
(in thousands, except for percentages and dollars per square foot) | |||||||||||||||||||||||||||||
Net Construction | 69,120 | 37,703 | 35,399 | 37,867 | 34,168 | 42,145 | 41,809 | ||||||||||||||||||||||
Net Absorption | (14,951 | ) | 21,284 | 75,712 | 62,073 | 60,813 | 51,320 | 49,145 | |||||||||||||||||||||
Ending Stock | 3,171,456 | 3,209,159 | 3,244,558 | 3,282,425 | 3,316,593 | 3,358,738 | 3,400,547 | ||||||||||||||||||||||
Ending Vacancy Rate | 16.5 | % | 16.8 | % | 15.4 | % | 14.5 | % | 13.5 | % | 13.1 | % | 12.7 | % | |||||||||||||||
Central Business District | 13.2 | % | 13.7 | % | 13.2 | % | 13.2 | % | 12.5 | % | 12.2 | % | 11.7 | % | |||||||||||||||
Suburban | 18.4 | % | 18.6 | % | 16.6 | % | 15.8 | % | 14.7 | % | 14.2 | % | 13.9 | % | |||||||||||||||
Gross Rental Rate Per Square Foot | $ | 23.10 | $ | 22.20 | $ | 22.00 | $ | 22.40 | $ | 22.90 | $ | 23.50 | $ | 24.30 | |||||||||||||||
Central Business District | $ | 28.30 | $ | 26.80 | $ | 26.50 | $ | 27.00 | $ | 27.70 | $ | 28.50 | $ | 29.60 | |||||||||||||||
Suburban | $ | 20.60 | $ | 19.90 | $ | 19.70 | $ | 20.00 | $ | 20.40 | $ | 20.90 | $ | 21.60 |
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2000 | 2001 | 2002 | 2003 | 2004 | 2005E | 2006E | 2007E | 2008E | |||||||||||||||||||||||||||||
(all figures in thousands) | |||||||||||||||||||||||||||||||||||||
Total Population | 1,583.3 | 1,594.6 | 1,615.3 | 1,634.6 | 1,653.3 | 1,668.4 | 1,682.3 | 1,693.7 | 1,703.1 | ||||||||||||||||||||||||||||
% change | 0.6 | % | 0.7 | % | 1.3 | % | 1.2 | % | 1.1 | % | 0.9 | % | 0.8 | % | 0.7 | % | 0.6 | % | |||||||||||||||||||
Total Employment | 723.7 | 732.5 | 736.7 | 740.1 | 753.3 | 759.8 | 772.3 | 776.3 | 784.7 | ||||||||||||||||||||||||||||
% change | 1.4 | % | 1.2 | % | 0.6 | % | 0.5 | % | 1.8 | % | 0.9 | % | 1.7 | % | 0.5 | % | 1.1 | % | |||||||||||||||||||
Unemployment Rate | 2.3 | % | 4.1 | % | 4.5 | % | 4.2 | % | 4.3 | % | 4.1 | % | 4.0 | % | 4.0 | % | N/A |
Impact of BRAC |
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Our Investment Strategy |
• | are located in our target market and in other strategic geographic locations that we believe offer attractive prospects for increases in value; | |
• | have a current market value between $5 million and $50 million; | |
• | have significant current or expected vacancy and/or that need capital improvements, but that we believe have attractive upside potential that can be achieved from hands-on, proactive management and leasing and modest capital improvements; |
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• | have stable occupancies that have below-market rents and/or inefficient operations with the potential to generate higher operating cash flows and enhanced asset values through aggressive leasing, reductions in operating expenses and improved operations; | |
• | present the opportunity for growth in net operating income through intensive property management; | |
• | can support new or additional leverage, which we believe can allow us to reduce our equity investment and to increase our returns; or | |
• | have a development component that we believe can provide attractive returns through rental revenue and capital gains from dispositions. |
• | significant in-place occupancies; | |
• | limited lease rollover exposure; or | |
• | attractive valuation in comparison with competing assets. |
• | recovering sub-market fundamentals; | |
• | in-place rents below market with ability to re-lease at market rents during the period in which we expect to hold the property; or | |
• | ability to reposition the asset through pro-active leasing, redevelopment, management and/or recapitalization strategies. |
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• | attractive, risk-adjusted rate of return after evaluating credit or real estate risk; | |
• | the condition, type and location of the underlying real estate collateral; or | |
• | the potential to develop or strengthen a relationship with a potential future investment partner or source of additional investment opportunities. |
Underwriting Criteria |
Building Design and Functionality |
• | relative cost to build property of similar quality (replacement cost analysis); | |
• | physical condition and age of property; | |
• | functional and efficient floor plans that maximize the number of exterior offices; | |
• | modern systems (including life/safety) and technological adaptability; | |
• | on-site and nearby parking; | |
• | compliant with all federal and state regulations including the Americans with Disabilities Act; |
Sub-Market and Location |
• | established sub-market with identified demand generators, including employment; | |
• | analysis of space users in the sub-market, terms of their leases and rental rates; | |
• | land available for new development under construction, pipeline for new projects and inventory of land available for future development in the sub-market; | |
• | property’s competitive position within the sub-market, which includes an evaluation of rent trends, market vacancy (including sub-let space) and historical operating performance; | |
• | proximity to major transportation arteries and public transportation; |
Tenant Credit Analysis |
• | financial and business outlook for each tenant in relation to the tenant’s ability to meet future obligations; | |
• | the terms of existing leases at the property, including relationship of existing rents to current market rents and schedule of lease expirations; | |
• | current payment history; | |
• | importance of space to a tenant’s operations; |
Portfolio Analysis |
• | impact of asset size, lease rollover and tenant mix on our existing portfolio; and | |
• | management or leasing synergies. |
Our Operating Strategy |
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Our Value Realization Strategy |
• | outright sales of our properties to third parties; | |
• | the sale of a portion of the interests in a property we own to a joint venture with one or more institutional investors where we may retain the opportunity to earn property and asset management fees as well as certain incentive fees; | |
• | recapitalizations of our properties with third-party debt; and | |
• | recycling our capital in new investment opportunities that fit our investment criteria. |
Our Financing Strategy |
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• | compliance with the following ratios: (i) on the one-year anniversary of closing, satisfying an interest-only debt service coverage ratio of 1.00x; and (ii) on the two-year anniversary of closing, satisfying an interest-only debt service coverage ratio of 1.15x; and | |
• | providing Citizens Bank with copies of annual tax returns and financial statements within 30 days of filing and no later than 180 days after fiscal year end. |
• | merge or consolidate with another entity or sell all or substantially all of its assets; | |
• | incur additional indebtedness; | |
• | assume, guarantee or endorse the liability of another person or entity; | |
• | acquire all or a portion of the stock, securities or assets of another person or entity; or | |
• | create, purport to create, or suffer to exist any lien, encumbrance, mortgage or security interest on any of the CareFirst portfolio properties, except presently existing liens in favor of the lender. |
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• | Our founders have extensive real estate investment experience and contacts in the greater metropolitan Washington, D.C. marketplace and its surrounding area. Our founders have been actively investing in commercial real estate properties and real estate debt instruments for an average of approximately 19 years. A significant number of the transactions in which our founders have participated involved properties located in the greater metropolitan Washington, D.C. area. Our founders have previous investment experience working with distressed debt, direct equity investments, mezzanine debt and asset redevelopment. Based in part on this experience, we have developed a disciplined underwriting approach that we believe allows us to effectively evaluate properties. Through these activities, our founders have developed a network of industry contacts within the brokerage community and with tenants, property owners, lenders, third-party service providers, developers and institutional investors who invest in our target market. We expect these contacts to provide us with significant investment opportunities going forward. | |
• | Our primary geographic focus is on one of the most attractive and largest real estate markets in the United States. We believe our primary focus on the greater metropolitan Washington, D.C. marketplace, one of the most attractive and largest real estate markets in the United States, and its surrounding areas is a distinct advantage relative to investors with a broader geographic focus that have less local market knowledge and experience relative to investors focused on smaller real estate markets. We believe that the greater metropolitan Washington, D.C. marketplace and its surrounding areas should continue to provide numerous high-quality investment opportunities that meet our investment criteria and objectives. Commercial real estate properties in the greater metropolitan Washington, D.C. area consistently generate higher rents and lower vacancies than the national average. We believe our focus on this market is a distinct advantage over other commercial real estate investors. | |
• | Organizing our company as a taxable corporation rather than a REIT gives us greater flexibility than we would have as a REIT. |
- | capitalize on short-term increases in the value of our properties by disposing of or recapitalizing our properties because we are not subject to the 100% prohibited transactions tax applicable to sales of dealer property by REITs (although we will be subject to regular corporate tax); | |
- | retain our after-tax capital for acquisitions; and | |
- | have broad discretion with respect to the types of investments we can make. |
At the same time, by structuring our company to operate our business and make our investments through an operating partnership, we have the same flexibility that many REITs have to acquire assets by issuing operating partnership units, which may allow property owners from whom we acquire properties to defer recognizing taxable gain until we dispose of those properties. We believe this is the optimal structure for the execution of our business plan. |
• | We are a fully integrated real estate operating company. We are a fully integrated real estate operating company with acquisition, property management, leasing, engineering and tenant services all residing within one organization and sharing common operating and tenant |
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relationship objectives. Based on our management’s experience, we believe that operating a fully integrated business with common management and objectives will allow us to achieve growth in property level cash flows and maintain strong relationships with our tenants. These capabilities provide us with daily updates on the properties and allow us to respond quickly to tenant needs and requests. | ||
• | We believe we are one of the few well-capitalized, Washington, D.C.-based sources of structured real estate financing. We believe we are one of the few well-capitalized sources of real estate mezzanine financing and other structured real estate finance products based in the greater metropolitan Washington, D.C. area that has extensive local market knowledge. We believe this combination of local knowledge and locally based financing capabilities gives us a competitive advantage over out-of-market financing sources. We also believe that our ability to invest in structured finance opportunities may provide a source for future equity investments. |
Aggregate | Amount | |||||||||||||||||||||||
Consideration | Paid in | Closing Costs | ||||||||||||||||||||||
Paid for | Shares of | Amount | Debt | and Other | ||||||||||||||||||||
Percentage | Contributed | Common | Paid in | Assumed or | Cash | |||||||||||||||||||
Property Owning Entity | Ownership | Interests | Stock(1) | Cash(2) | Repaid(3) | Payments(4) | ||||||||||||||||||
(in thousands, except for ownership percentages) | ||||||||||||||||||||||||
Century South Investors LLC | 100 | % | $ | 4,500 | $ | 517 | $ | 1,098 | $ | 2,885 | $ | 68 | ||||||||||||
Commerce Center I, L.L.C. | 100 | % | $ | 18,500 | $ | 2,097 | $ | 5,072 | $ | 11,331 | $ | 175 | ||||||||||||
Garden City Drive Investors LLC | 100 | % | $ | 8,500 | $ | 1,253 | $ | 2,347 | $ | 4,900 | $ | 300 | ||||||||||||
Pidgeon Hill Drive LLC | 100 | % | $ | 12,300 | $ | 1,728 | $ | 1,502 | $ | 9,070 | $ | 368 | ||||||||||||
Second Pidgeon LLC | 100 | % | $ | 12,200 | $ | 761 | $ | 2,939 | $ | 8,500 | $ | 135 | ||||||||||||
Twelve Oaks Investment LLC | 8 | % (5) | $ | 1,500 | (5) | $ | 1,100 | $ | 15 | $ | 385 | (6) | $ | 95 |
(1) | Based on a per share price of $8.50, the offering price per share in our 2005 private offering. |
(2) | Includes cash paid for legal fees incurred by the limited liability companies and cash disposition fees, each of which were obligations of the contributed entities that we paid on their behalf in exchange for a reduction of the purchase price. Excludes the amounts in the column in this table entitled “Closing Costs and Other Cash Payments.” |
(3) | Outstanding principal balance as of the completion of the contribution of the membership interests in the respective limited liability companies that owned these properties. |
(4) | These amounts are not included in the column in this table entitled “Aggregate Consideration Paid For Contributed Interests.” Represents our closing costs, the purchase of prepaid assets from certain of the limited liability companies that owned the properties and the replacement of reserves required to lenders for Century South, Commerce Center I, L.L.C., |
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Garden City Drive Investors LLC and Pidgeon Hill Drive LLC, respectively, which we expect to use for future tenant improvements, capital expenditures and leasing commissions, net of tenant deposits and other credits. The limited liability companies that owned the above-listed properties subsequently distributed these amounts to their members, which included our founders. | |
(5) | In addition to the Class A membership interest, we acquired a Class B membership interest in the limited liability company that owns the property. The Class B membership interest is currently limited to a $60,000 annual preferred distribution payable to us as the holder of the Class B interest. See “Our Business and Properties— Description of Properties—Our Structured Real Estate Investments— Twelve Oaks, Rockville, Maryland” for additional information about these membership interests. |
(6) | Approximately $385,000 of the debt assumed relating to this property in connection with the contribution of the ownership interests was repaid using the net proceeds we received from our 2005 private offering. Excludes our pro rata share of debt in connection with our Class A membership interest of approximately $999,500 at March 31, 2006. |
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Approximate number | ||||||
of shares of | ||||||
Asset Capital | ||||||
Corporation, Inc. | ||||||
common stock | ||||||
Contributor | Contributed Interest | received | ||||
Peter C. Minshall and affiliates and family members | 15.30% Class A interest in Pidgeon Hill Drive LLC | |||||
33.30% Class B interest in Pidgeon Hill Drive LLC(1) | 86,856 | |||||
1.45% Class A interest in Second Pidgeon LLC | ||||||
25.00% Class B interest in Second Pidgeon LLC(1) | 8,719 | |||||
5.89% Class A interest in Commerce Center I, L.L.C. | ||||||
84.00% Class B interest in Commerce Center I, L.L.C.(2) | 246,755 | |||||
13.00% Class A interest in Garden City Drive Investors LLC | ||||||
33.30% Class C interest in Garden City Drive Investors LLC (1) | 51,472 | |||||
33.30% Class B interest in Century South Investors LLC(1) | 14,333 | |||||
33.30% Class A interest in Twelve Oaks Investment LLC(1) | ||||||
33.30% Class B interest in Twelve Oaks Investment LLC(1) | 43,142 | |||||
451,277 | ||||||
Blair D. Fernau and affiliates and family members | 33.30% Class B interest in Pidgeon Hill Drive LLC(1) | 58,193 | ||||
1.45% Class A interest in Second Pidgeon LLC | ||||||
25.00% Class B interest in Second Pidgeon LLC(1) | 8,719 | |||||
5.00% Class A interest in Garden City Drive Investors LLC | ||||||
33.30% Class C interest in Garden City Drive Investors LLC (1) | 43,488 | |||||
3.01% Class A interest in Century South Investors LLC | ||||||
33.30% Class B interest in Century South Investors LLC(1) | 18,565 | |||||
33.30% Class A interest in Twelve Oaks Investment LLC(1) | ||||||
33.30% Class B interest in Twelve Oaks Investment LLC(1) | 43,141 | |||||
172,106 | ||||||
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Approximate number | ||||||
of shares of | ||||||
Asset Capital | ||||||
�� | Corporation, Inc. | |||||
common stock | ||||||
Contributor | Contributed Interest | received | ||||
William B. LeBlanc III and affiliates and family members | 33.30% Class B interest in Pidgeon Hill Drive LLC(1) | 58,193 | ||||
0.87% Class A interest in Second Pidgeon LLC | ||||||
25.00% Class B interest in Second Pidgeon LLC(1) | 6,326 | |||||
2.00% Class A interest in Garden City Drive Investors LLC | ||||||
33.30% Class C interest in Garden City Drive Investors LLC (1) | 40,493 | |||||
33.30% Class B interest in Century South Investors LLC(1) | 14,333 | |||||
33.30% Class A interest in Twelve Oaks Investment LLC(1) | ||||||
33.30% Class B interest in Twelve Oaks Investment LLC(1) | 43,141 | |||||
162,486 | ||||||
Total for Messrs. Minshall, Fernau and LeBlanc and their affiliates and family members: | 785,869 | |||||
(1) | These interests were owned by Asset Capital Corporation, L.L.C., which is owned in equal parts by Messrs. Minshall, Fernau and LeBlanc. |
(2) | This interest was owned by Asset Capital Corporation, L.L.C., which is owned in equal parts by Messrs. Minshall, Fernau and LeBlanc; however, pursuant to the operating agreement for Asset Capital Corporation, L.L.C., Mr. Minshall is to receive 100% of the economic benefit derived from Asset Capital Corporation, L.L.C.’s ownership of this interest. |
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Net Rentable | ||||||||||||||||||||||||||
Square | Annualized | Annualized | ||||||||||||||||||||||||
Year | Feet as of | March 31, | Base | Base Rent per | ||||||||||||||||||||||
Location/ | Built/ | March 31, | 2006 | Rent Payable | Leased Square | |||||||||||||||||||||
Property | Sub-Market | Renovated | 2006 | Occupancy | to Us(1) | Foot | Primary Tenants | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Columbia Medical Campus(2) | Columbia, MD | 1982-1984 | 154,558 | 34 | % | $ | 930 | $ | 17.53 | Columbia Medical Plan | ||||||||||||||||
Timonium Medical Center(3) | Timonium, MD | 1986 | 23,966 | 88 | 441 | 20.85 | Potomac Physicians, P.A.; CareFirst of Maryland, Inc. | |||||||||||||||||||
Frederick Medical Center | Frederick, MD | 1996 | 32,949 | 57 | 359 | 19.10 | Imaging Associates of Western Maryland, L.P.; Potomac Physicians, P.A. | |||||||||||||||||||
Century South | Germantown, MD | 2003 | 21,108 | 100 | 335 | 15.88 | Stephen Gould of Maryland, Inc.; Renal Treatment Center |
94
Net Rentable | ||||||||||||||||||||||||||
Square | Annualized | Annualized | ||||||||||||||||||||||||
Year | Feet as of | March 31, | Base | Base Rent per | ||||||||||||||||||||||
Location/ | Built/ | March 31, | 2006 | Rent Payable | Leased Square | |||||||||||||||||||||
Property | Sub-Market | Renovated | 2006 | Occupancy | to Us(1) | Foot | Primary Tenants | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Executive Tower | Hampton, VA | 1974/1991 | 134,179 | 94 | 2,136 | 17.00 | U.S. General Service Administration; The Hampton-Newport News Community Service Board; General Dynamics Government Systems | |||||||||||||||||||
Hollymead Town Center(4) | Charlottesville, VA | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||
Commerce Center I | Greenbelt, MD | 1987 | 123,249 | 100 | 2,940 | 23.87 | SGT, Inc.; ITT Industries, Inc.; Corporate Express | |||||||||||||||||||
Garden City Drive | Landover, MD | 1980 | 55,497 | 97 | 1,092 | 20.38 | United Foods & Commercial Workers, Local 400; Robert A. Ades and Associates; Ashcraft and Gerel, LLP | |||||||||||||||||||
Pinewood Plaza | Hampton, VA | 1987 | 71,066 | 85 | 1,066 | 17.73 | GSH Residential Real Estate; City of Hampton, VA; The Boeing Company | |||||||||||||||||||
Pidgeon Hill I(5) | Sterling, VA | 1986-1989 | 89,831 | 74 | 1,366 | 20.68 | Marymount University; Weight Watchers North America; Electronic Transaction Systems; ELISA/ACT Biotechnologies; Ed Anywhere, LLC | |||||||||||||||||||
Pidgeon Hill II(6) | Sterling, VA | 1986/1987 | 95,137 | 74 | 1,425 | 20.14 | RJE Telecom, Inc.; Reston Pediatrics; The Executive Suites at Countryside; Beacon Accounting Group | |||||||||||||||||||
4260 Forbes Boulevard | Lanham, MD | 2001 | 54,692 | 100 | 725 | 13.25 | Vocus, Inc.; Northrop Grumman Systems; Loiederman Soltesz Associates | |||||||||||||||||||
4550 Forbes Boulevard(7) | Lanham, MD | 1985 | 46,858 | 90 | 516 | 12.27 | Herman Stewart Construction and Development, Inc.; Diversified International Sciences, Corp.; Resource Connections of PG County | |||||||||||||||||||
7700 Montpelier Avenue | Laurel, MD | 2001 | 43,785 | 100 | 598 | 13.65 | Johns Hopkins University | |||||||||||||||||||
Total/Weighted Average | 946,875 | 80 | % | $ | 13,929 | $ | 18.47 | |||||||||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Consists of two medical office buildings, which we refer to as the Knoll North I building and Knoll North II building. The Knoll North I building was built in 1982; and the Knoll North II building was built in 1984. On June 30, 2006, we entered into a new lease with a tenant that currently occupies approximately 63.0% of the property’s total leased square feet. The tenant’s previous lease covered approximately 33,354 square feet, and provided for annualized base rent based on actual monthly base rent for March 2006 of approximately $476,000, or approximately $14.27 per leased square foot. The new lease covers approximately 32,709 square feet, and provides for annualized base rent based on actual monthly base rent for July 2006 of approximately $703,200, or approximately $21.50 per leased square foot. The lease also contains a rent escalation provision that will result in base rent per leased square foot during the final 20 months of the lease of approximately $28.05. The term of the new lease expires in June 2016. |
(3) | This property has been listed for sale. |
(4) | The Hollymead Town Center property is a 78.1 acre parcel of land with infrastructure in place that is currently being marketed as a mixed use development. The development of this property currently contemplates retail, residential and office buildings. We have entered into an asset management and disposition services agreement with the party that structured and originated this investment opportunity whereby we will receive asset management and disposition services in return for a fee of $10,000 per month as well as a participation interest in the net profits from the Hollymead property. The participation interest granted to the asset manager entitles it to receive 40% of any net profits we receive (including net profits from the sale of the property) after repayment of all indebtedness on the property and our recoupment of our total cash investment plus a 15% internal rate of return. We also have entered into two sales contracts to sell approximately 31.0 acres and 9.7 acres, respectively, of this property for sales prices of approximately $27.0 million and $13.1 million, respectively. These sales are expected to close periodically over the next four years, subject to the satisfaction of customary conditions precedent to closing. The closing of the sale of land under each contract is not dependent on the closing of the sale of land under the other contract. We cannot guarantee that we will complete the disposition of these parcels of land. See “— Description of Properties — Owned Properties — Hollymead Town Center, Charlottesville, Virginia.” We are also in active discussions with potential buyers of additional parcels of land within the Hollymead Town Center property. |
(5) | This property consists of two buildings, which we refer to as the 10 Pidgeon Hill Drive building and the 14 Pidgeon Hill Drive building. The 10 Pidgeon Hill Drive building was built in 1986; and the 14 Pidgeon Hill Drive building was built in 1989. |
(6) | This property consists of two buildings, which we refer to as the 2 Pidgeon Hill Drive building and the 6 Pidgeon Hill Drive building. The 2 Pidgeon Hill Drive building was built in 1986; and the 6 Pidgeon Hill Drive building was built in 1987. |
95
(7) | One of our tenants filed for bankruptcy and vacated the premises prior to our acquisition of this property. This tenant accounts for approximately 12% of the net rentable square feet in this property and approximately 13% of the annualized base rent for this property, based on $12.67 per leased square foot. Although the tenant still remains contractually bound to the terms of its lease, we may have little or no recourse against the tenant if the lease is terminated as a result of the bankruptcy proceedings, or if the tenant fails to pay rent due to us under the lease. We are currently collecting from an escrow account 50% of the contractual rents due from this tenant. |
Net Rentable | ||||||||||||||||||||||||||||||
Square | Annualized | |||||||||||||||||||||||||||||
Year | Feet as of | March 31, | Base Rent | |||||||||||||||||||||||||||
Location/ | Built/ | Contractual | March 31, | 2006 | Annualized | per Leased | ||||||||||||||||||||||||
Property | Sub-Market | Renovated | Purchase Price(1) | 2006 | Occupancy | Base Rent(2) | Square Foot | Primary Tenants | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||
Lynnhaven Corporate Center I | Virginia Beach, VA | 1985 | $ | 3,900,000 | 30,845 | 100 | % | $ | 501 | $ | 16.25 | Michael Baker Jr., Inc.; Chartway Federal Credit Union | ||||||||||||||||||
Southport Centre | Virginia Beach, VA | 1997 | 9,700,000 | 61,594 | 88 | 966 | 17.79 | Towne Bank Mortgage; Shuttleworth, Ruloff, Giordano; Atlantic Container Line, A.B. | ||||||||||||||||||||||
Twin Oaks I | Norfolk, VA | 1999 | 12,800,000 | 81,886 | 89 | 1,280 | 17.62 | HDR Engineering, Inc.; Spirit Cruises, Inc.; Bradley-Morris, Inc. | ||||||||||||||||||||||
Twin Oaks II | Norfolk, VA | 2001 | 13,300,000 | 84,749 | 100 | 1,659 | 19.58 | Booz-Allen & Hamilton, Inc.; Mantech Systems Engineering; GSA- Transportation Security | ||||||||||||||||||||||
Godwin Business Park | Manassas, VA | 1990 | 6,250,000 | (3) | 60,072 | 77 | 682 | 14.72 | Bowman Consulting Group; Integrated Digital Systems; Intersections, Inc.; Colgan Air | |||||||||||||||||||||
4230 Forbes Boulevard | Lanham, MD | 2003 | 6,800,000 | 55,867 | 66 | 477 | 12.61 | Northrup Grumman Systems; Benco Dental Supply; Prince George’s PIU Party Place | ||||||||||||||||||||||
Total/Weighted Average | $ | 52,750,000 | 375,013 | 87 | % | $ | 5,565 | $ | 17.07 | |||||||||||||||||||||
(1) | Excludes transactional costs. |
(2) | Calculated as actual monthly base rent for March 2006 multiplied by 12, with the exception of one lease at the 4230 Forbes Boulevard property, which commenced in June 2006 and which has an annualized base rent amount calculated as actual monthly base rent for June 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from annualized amounts. |
(3) | We intend to acquire this property with approximately $1.25 million in cash and approximately $5.0 million in new mortgage indebtedness. |
96
Current | ||||||||||||||||
Economic | Preferred | Net Rentable | ||||||||||||||
Ownership | Annual | Square Feet as of | March 31, 2006 | |||||||||||||
Property/Location | Interest | Return | March 31, 2006 | Occupancy | ||||||||||||
Plaza 270, Rockville, MD(1) | — | $ | 112,800 | (1) | 248,875 | 100 | % | |||||||||
Twelve Oaks, Rockville, MD(2) | 8% | (2) | $ | 60,000 | (2) | 127,616 | 100 | % | ||||||||
Research 28, Rockville, MD(3) | 2% | (3) | $ | 15,600 | 64,432 | 100 | % |
(1) | We own 100% of the Class B partnership in the limited partnership that owns this property. Our Class B partnership interest entitles us to receive an annual distribution of 12% of our Class B contributions account, which currently equals $112,800. The distributions we are entitled to receive on our Class B partnership interest are not guaranteed, but rather represent a preferred return that takes preference over distributions to the holder of the Class A partnership interest. We also will receive a pro rata portion of any residual distribution after payments are made pursuant to our Class B partnership interest and to the holder of the Class A partnership interest. Pursuant to a sale/purchase agreement, our partner has the right to acquire and we have the right to sell to our partner our Class B partnership interest for fair market value subject to a certain minimum and maximum limits. Annualized base rent generated by the property is approximately $5,118,100, based on actual monthly base rent in March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. See “— Description of Properties — Our Structured Real Estate Investments — Plaza 270, Rockville, Maryland” for additional information about this partnership interest. |
(2) | We own 100% of the Class A membership interest and Class B membership interest in the limited liability company that owns this property. Our Class B membership interest entitles us to receive an annual return of 12% of our net capital investment in the Class B interest, which currently amounts to an annual distribution of $60,000. The distributions we are entitled to receive on the Class B membership interest are not guaranteed, but rather represent a preferred return that takes preference over all other distributions to the other classes of membership interest except distributions received by us pursuant to our ownership of the Class A membership interest. Our Class A membership interest entitles us to receive an annual distribution equal to 8% of the entity’s distributable cash flow, before the Class B and Class C members receive any distributions. Both our Class A and Class B membership interests are subject to a put/call agreement whereby these interests may be redeemed at the option of either us or the Class C member. The Class A interest is redeemable for its fair market value, plus (i) an amount equal to six times the property’s average monthly asset and property management fees and (ii) an additional 25% premium over the purchase price if redeemed at the option of the Class C member prior to the earlier of any refinancing of the underlying property or December 31, 2006. The Class B interest is redeemable for its fair market value, subject to certain minimum and maximum limits. Annualized base rent generated by the property is approximately $2,830,000, based on actual monthly base rent in March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. See “— Description of Properties— Our Structured Real Estate Investments —Twelve Oaks, Rockville, Maryland” for additional information about these membership interests. |
(3) | On June 28, 2006, we acquired a 2% general partnership interest in the limited partnership that owns this property. Our general partnership interest currently entitles us to receive an annual distribution of $15,600. The distributions we are entitled to receive on our general partnership interest are not guaranteed, but rather represent a preferred return that takes preference over distributions to the holder of the limited partnership interest. We also will receive a pro rata portion of any residual distribution after payments are made pursuant to our general partnership interest and to the holder of the limited partnership interest. Pursuant to a sale/purchase option agreement, the limited partner has the right to acquire and we have the right to sell to the limited partner our general partnership interest for fair market value subject to certain minimum and maximum limits. Annualized base rent generated by the property is approximately $1,407,000 based on actual monthly base rent in March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from |
97
annualized amounts. See “Our Business and Properties — Description of Properties — Our Structured Real Estate Investments — Research 28, Rockville, Maryland” for additional information about this partnership interest. |
Original | Annual | |||||||||||
Principal | Interest | |||||||||||
Mezzanine Loan | Amount | Rate | Maturity Date | |||||||||
BTR Mezzanine Loan(1) | $ | 14,700,000 | 16%(2) | February 2011 |
(1) | The BTR Loan has been used by BTR to facilitate a $66.0 million acquisition of a portfolio of 10 mixed-use properties located primarily in the Baltimore, Maryland metropolitan area. The BTR Loan is secured by a pledge of the membership interests in the limited liability companies that own each property. The underlying properties are currently subject to a $44.8 million senior mortgage loan. |
(2) | Although we are entitled to a 16% interest rate, we receive a monthly interest-only payment for half of the interest due, with the other half added to the principal amount of the loan. See “—Description of Properties—Our Structured Real Estate Investments—BTR Mezzanine Loan” for additional information about this mezzanine loan. |
Owned Properties |
Columbia Medical Campus, Columbia, Maryland. |
98
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2005 | 34% | $ | 16.27 | |||||
March 31, 2006 | 34% | $ | 17.53 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage | ||||||||||||||||||||||||||
of | ||||||||||||||||||||||||||
Property’s | ||||||||||||||||||||||||||
Total | Percentage | |||||||||||||||||||||||||
Leased | Leased | of | ||||||||||||||||||||||||
Principal Nature | Lease | Square | Square | Annualized | Annualized | Renewal | ||||||||||||||||||||
Name | of Business | Expiration | Feet | Feet | Base Rent(2) | Base Rent(3) | Option | |||||||||||||||||||
Columbia Medical Plan(4) | Medical Office | 11/1/2007 | 33,354 | 62.87% | $ | 475,819 | 51.17 | % | None |
(1) | Prior to our purchase of the property, the prior owner was CareFirst BlueCross BlueShield, or CareFirst. CareFirst operated this property not as an investment property but as an HMO facility, which means that CareFirst attempted to induce as many care providers in a facility as possible. To induce these care providers to lease space in this property, they negotiated leases for certain tenants that provided that the tenants could terminate their leases anytime with 30 to 120 days notice. |
(2) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(3) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
(4) | On June 30, 2006, we entered into a new lease with this tenant. The new lease covers approximately 32,709 square feet, and provides for annualized base rent based on actual monthly base rent for July 2006 of approximately $703,200, or approximately $21.50 per leased square foot. The new lease also contains a rent escalation provision that will result in base rent per leased square foot during the final 20 months of the lease of approximately $28.05. The term of the new lease expires in June 2016. |
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006(3) | 3 | 9,011 | 16.99 | % | $ | 203,267 | 21.86 | % | |||||||||||||
2007 | 6 | 41,740 | 78.68 | 669,720 | 72.02 | ||||||||||||||||
2008 | — | — | — | — | — | ||||||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | 1 | 2,300 | 4.33 | 56,925 | 6.12 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 10 | 53,051 | 100.00 | % | $ | 929,912 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
99
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | This property currently has two tenants that have month-to-month tenancies. These two tenants occupy 6,368 square feet, and the aggregate annualized base rent for these two tenants based on actual monthly rent for March 2006 was $165,563. |
Timonium Medical Center, Timonium, Maryland. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2005 | 88% | $ | 21.68 | |||||
March 31, 2006 | 88% | $ | 20.85 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
100
Percentage | ||||||||||||||||||||||||||||
of | ||||||||||||||||||||||||||||
Property’s | Percentage | |||||||||||||||||||||||||||
Total | of | |||||||||||||||||||||||||||
Leased | Leased | Annualized | ||||||||||||||||||||||||||
Principal Nature | Square | Square | Annualized | Base | Renewal | |||||||||||||||||||||||
Name | of Business | Lease Expiration | Feet | Feet | Base Rent(2) | Rent(3) | Option | |||||||||||||||||||||
Potomac Physicians, P.A. | Medical Office | month-to-month | 5,669 | 26.78% | $ | 115,866 | 26.26% | None | ||||||||||||||||||||
CareFirst of Maryland, Inc. | Medical Office | 7/31/2010 | 15,497 | 73.22% | $ | 325,437 | 73.74% | None |
(1) | Prior to our purchase of the property, the prior owner was CareFirst. CareFirst operated this property not as an investment property but as an HMO facility, which means that CareFirst attempted to induce as many care providers in a facility as possible. To induce these care providers to lease space in this property, they negotiated leases for certain tenants that provided that the tenants could terminate their leases anytime with 30 to 120 days notice. |
(2) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(3) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006(3) | 1 | 5,669 | 26.78 | % | $ | 115,866 | 26.26 | % | |||||||||||||
2007 | — | — | — | — | — | ||||||||||||||||
2008 | — | — | — | — | — | ||||||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | 1 | 15,497 | 73.22 | 325,437 | 73.74 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 2 | 21,166 | 100.00 | % | $ | 441,303 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | This tenant has a month-to-month tenancy. |
101
Frederick Medical Center, Frederick, Maryland. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2005 | 53% | $ | 20.90 | |||||
March 31, 2006 | 57% | $ | 19.74 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage | ||||||||||||||||||||||||||||
of | ||||||||||||||||||||||||||||
Property’s | ||||||||||||||||||||||||||||
Total | Percentage | |||||||||||||||||||||||||||
Principal | Leased | Leased | of | |||||||||||||||||||||||||
Nature of | Square | Square | Annualized | Annualized | Renewal | |||||||||||||||||||||||
Name | Business | Lease Expiration | Feet | Feet | Base Rent(2) | Base Rent(3) | Option | |||||||||||||||||||||
Imaging Associates of Western Maryland, L.P. | Medical Office | 12/31/2007 | 6,275 | 33.40 | % | $ | 146,101 | 40.72 | % | None | ||||||||||||||||||
Potomac Physicians, P.A. | Medical Office | month-to-month | 6,330 | 33.69 | % | $ | 96,533 | 26.91 | % | None |
(1) | Prior to our purchase of the property, the prior owner was CareFirst. CareFirst operated this property not as an investment property but as an HMO facility, which means that CareFirst attempted to induce as many care providers in a facility as possible. To induce these care providers to lease space in this property, they negotiated leases for certain tenants that provided that the tenants could terminate their leases anytime with 30 to 120 days notice. |
(2) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(3) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
102
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006(3) | 4 | 9,640 | 51.31 | % | $ | 172,446 | 48.07 | % | |||||||||||||
2007 | 1 | 6,275 | 33.40 | 146,101 | 40.72 | ||||||||||||||||
2008 | — | — | — | — | — | ||||||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | 1 | 2,873 | 15.29 | 40,222 | 11.21 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 6 | 18,788 | 100.00 | % | $ | 358,769 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | This property currently has two tenants that have month-to-month tenancies. These two tenants occupy 6,815 square feet, and the aggregate annualized base rent for these two tenants based on actual monthly rent for March 2006 was $155,010. |
Century South, Germantown, Maryland. |
�� | Occupancy | Average Annualized Base Rent | ||||||
Rate | per Leased Square Foot(1) | |||||||
2005 | 100% | $ | 15.70 | |||||
March 31, 2006 | 100% | $ | 15.88 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
103
Percentage | ||||||||||||||||||||||||
of | ||||||||||||||||||||||||
Property’s | ||||||||||||||||||||||||
Total | Percentage | |||||||||||||||||||||||
Leased | Leased | of | ||||||||||||||||||||||
Principal Nature | Lease | Square | Square | Annualized | Annualized | Renewal | ||||||||||||||||||
Name | of Business | Expiration | Feet | Feet | Base Rent(1) | Base Rent(2) | Option | |||||||||||||||||
Stephen Gould | Packaging and printing | 11/01/2012 | 9,024 | 42.75% | $ | 155,486 | 46.38% | 1, 5 year term | ||||||||||||||||
AMI Enterprises, Inc. | Electronic Data Storage | 9/30/2010 | 4,796 | 22.72% | $ | 59,950 | 17.88% | None | ||||||||||||||||
Renal Treatment Center | Medical | 8/01/2013 | 7,288 | 34.53% | $ | 119,844 | 35.74% | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | — | — | — | — | — | ||||||||||||||||
2007 | — | — | — | — | — | ||||||||||||||||
2008 | — | — | — | — | — | ||||||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | 1 | 4,796 | 22.72 | % | $ | 59,950 | 17.88 | % | |||||||||||||
2011 | — | — | — | — | — | ||||||||||||||||
2012 | 1 | 9,024 | 42.75 | 155,486 | 46.38 | ||||||||||||||||
2013 | 1 | 7,288 | 34.53 | 119,844 | 35.74 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 3 | 21,108 | 100.00 | % | $ | 335,280 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
104
Executive Tower, Hampton, Virginia. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2005 | 94% | $ | 16.76 | |||||
March 31, 2006 | 94% | $ | 17.00 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage of | ||||||||||||||||||||||||||||
Principal | Leased | Property’s | Percentage of | |||||||||||||||||||||||||
Nature of | Lease | Square | Total Leased | Annualized | Annualized | Renewal | ||||||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Option | |||||||||||||||||||||
The Hampton-Newport News Community Service Board | Government | 3/31/2009 | 9,231 | 7.35 | % | $ | 154,896 | 7.25 | % | None | ||||||||||||||||||
General Dynamics | Defense | 8/31/2008 | 2,445 | 1.95 | % | $ | 40,343 | 1.89 | % | None | ||||||||||||||||||
7/31/2006 | 1,059 | 0.84 | % | $ | 19,221 | 0.90 | % | None | ||||||||||||||||||||
7/31/2008 | 6,987 | 5.56 | % | $ | 126,814 | 5.94 | % | None | ||||||||||||||||||||
7/31/2008 | 1,794 | 1.43 | % | $ | 32,561 | 1.52 | % | None | ||||||||||||||||||||
U.S. General Service Administration | Government | 9/30/2008 | 6,436 | 5.12 | % | $ | 105,209 | 4.93 | % | None | ||||||||||||||||||
10/21/2009 | 5,578 | 4.44 | % | $ | 91,380 | 4.28 | % | None | ||||||||||||||||||||
10/31/2006 | 6,457 | 5.14 | % | $ | 115,793 | 5.42 | % | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
105
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | 15 | 32,856 | 26.15 | % | $ | 569,888 | 26.68 | % | |||||||||||||
2007 | 7 | 12,040 | 9.58 | 204,564 | 9.58 | ||||||||||||||||
2008 | 8 | 27,629 | 21.99 | 474,066 | 22.19 | ||||||||||||||||
2009 | 8 | 32,258 | 25.68 | 538,838 | 25.23 | ||||||||||||||||
2010 | 5 | 11,003 | 8.76 | 186,095 | 8.71 | ||||||||||||||||
2011 | 1 | 9,847 | 7.84 | 162,476 | 7.61 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 44 | 125,633 | 100.00 | % | $ | 2,135,927 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
Hollymead Town Center, Charlottesville, Virginia. |
106
Commerce Center I, Greenbelt, Maryland. |
107
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2001 | 98% | $ | 22.37 | |||||
2002 | 98% | $ | 22.56 | |||||
2003 | 95% | $ | 23.36 | |||||
2004 | 99% | $ | 22.92 | |||||
2005 | 100% | $ | 23.70 | |||||
March 31, 2006 | 100% | $ | 23.87 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet; provided, however, that the 2002 average annualized base rent per leased square foot was calculated using November 2002 actual base rent. |
Percentage of | ||||||||||||||||||||||||||
Property’s | Percentage of | |||||||||||||||||||||||||
Principal Nature | Lease | Leased | Total Leased | Annualized | Annualized | |||||||||||||||||||||
Name | of Business | Expiration | Square Feet | Square Feet | Base Rent(1) | Base Rent(2) | Renewal Option | |||||||||||||||||||
SGT, Inc. | Aerospace Engineering & IT | 2/28/2009 | 22,433 | 18.22% | $ | 461,335 | 15.69% | 1, 5 year term | ||||||||||||||||||
ITT Industries | Engineering & Manufacturing | 5/31/2010 | 11,805 | 9.59% | $ | 242,003 | 8.23% | None | ||||||||||||||||||
Corporate Express | Office Furniture | 7/31/2006 | 8,668 | 7.04% | $ | 218,017 | 7.42% | 1, 3 year term | ||||||||||||||||||
First Home Mortgage | Mortgage Lending | 1/31/2009 | 6,761 | 5.49% | $ | 165,256 | 5.62% | None | ||||||||||||||||||
First Horizon Home Loan Corporation | Mortgage Lending | 3/31/2009 | 6,604 | 5.36% | $ | 159,850 | 5.44% | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
108
Number | Percentage of | Annualized | Percentage of | |||||||||||||||||
of | Square Footage | Property’s | Base Rent of | Property’s | ||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | ||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | |||||||||||||||
2006 | 6 | 21,860 | 17.75 | % | $ | 541,754 | 18.43 | % | ||||||||||||
2007 | 8 | 24,411 | 19.82 | 614,928 | 20.92 | |||||||||||||||
2008 | 8 | 24,269 | 19.71 | 651,980 | 22.17 | |||||||||||||||
2009 | 4 | 40,808 | 33.14 | 889,389 | 30.25 | |||||||||||||||
2010 | 1 | 11,805 | 9.58 | 242,003 | 8.23 | |||||||||||||||
Thereafter | — | — | — | — | — | |||||||||||||||
Total | 27 | 123,153 | 100.00 | % | $ | 2,940,054 | 100.00 | % | ||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
Garden City Drive, Landover, Maryland. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2002 | 91% | $ | 19.44 | |||||
2003 | 91% | $ | 20.04 | |||||
2004 | 94% | $ | 19.66 | |||||
2005 | 97% | $ | 19.74 | |||||
March 31, 2006 | 97% | $ | 20.38 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
109
Percentage of | ||||||||||||||||||||||||
Leased | Property’s | Percentage of | ||||||||||||||||||||||
Principal Nature | Lease | Square | Total Leased | Annualized | Annualized | Renewal | ||||||||||||||||||
Name | of Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Option | |||||||||||||||||
United Foods & Commercial Workers, Local 400 | Labor union | 9/30/2014 | 17,450 | 32.56% | $ | 335,367 | 30.71% | 2, 5 year terms | ||||||||||||||||
Robert A. Ades & Associates, PC | Legal | 12/31/2012 | 6,560 | 12.24% | $ | 138,529 | 12.68% | 2, 5 year terms | ||||||||||||||||
Associated Administrators, Inc. | Employee benefit | 9/30/2012 | 6,452 | 12.04% | $ | 155,106 | 14.20% | 2, 5 year terms | ||||||||||||||||
Ashcraft & Gerel, LLP | Legal | 9/30/2012 | 6,344 | 11.84% | $ | 145,748 | 13.35% | 2, 5 year terms |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006(3) | 1 | 3,255 | 6.07 | % | $ | 35,568 | 3.26 | % | |||||||||||||
2007 | 3 | 3,377 | 6.30 | 64,462 | 5.90 | ||||||||||||||||
2008 | 2 | 3,784 | 7.06 | 72,667 | 6.65 | ||||||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | 1 | 3,102 | 5.79 | 71,182 | 6.52 | ||||||||||||||||
2011 | — | — | — | — | — | ||||||||||||||||
2012 | 5 | 22,629 | 42.22 | 512,846 | 46.96 | ||||||||||||||||
2013 | — | — | — | — | — | ||||||||||||||||
2014 | 1 | 17,450 | 32.56 | 335,367 | 30.71 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 13 | 53,597 | 100.00 | % | $ | 1,092,092 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | This tenant currently has a month-to-month tenancy. |
110
Pinewood Plaza, Hampton, Virginia. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2005 | 92 | % | $ | 17.48 | ||||
March 31, 2006 | 85 | % | $ | 17.73 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage of | ||||||||||||||||||||||||||
Principal | Leased | Property’s | Percentage of | |||||||||||||||||||||||
Nature of | Lease | Square | Total Leased | Annualized | Annualized | Renewal | ||||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Option | |||||||||||||||||||
GSH Residential Real Estate | Real Estate | 9/30/2010 | 1,466 | 2.44 | % | $ | 24,922 | 2.34 | % | None | ||||||||||||||||
2/29/2008 | 8,661 | 14.41 | % | $ | 151,394 | 14.21 | % | None | ||||||||||||||||||
City of Hampton, VA | Government | 6/30/2007 | 7,622 | 12.68 | % | $ | 143,370 | 13.45 | % | None | ||||||||||||||||
The Boeing Company | Aerospace | 5/31/2008 | 7,413 | 12.33 | % | $ | 124,382 | 11.67 | % | None | ||||||||||||||||
Northrop Grumman Systems Corp. | Defense | 9/30/2006 | 5,698 | 9.48 | % | $ | 114,986 | 10.79 | % | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
111
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | 3 | 9,404 | 15.64 | % | $ | 183,549 | 17.22 | % | |||||||||||||
2007 | 5 | 11,721 | 19.50 | 210,112 | 19.72 | ||||||||||||||||
2008 | 5 | 26,032 | 43.30 | 458,868 | 43.06 | ||||||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | 3 | 10,465 | 17.41 | 173,291 | 16.26 | ||||||||||||||||
2011 | 1 | 2,494 | 4.15 | 39,829 | 3.74 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 17 | 60,116 | 100.00 | % | $ | 1,065,649 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
Pidgeon Hill I, Sterling, Virginia. |
112
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2001 | 89% | $ | 21.16 | |||||
2002 | 95% | $ | 21.39 | |||||
2003 | 98% | $ | 21.61 | |||||
2004 | 87% | $ | 21.74 | |||||
2005 | 72% | $ | 20.54 | |||||
March 31, 2006 | 74% | $ | 20.68 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage of | ||||||||||||||||||||||||||
Leased | Property’s | Percentage of | ||||||||||||||||||||||||
Principal Nature | Lease | Square | Total Leased | Annualized | Annualized | Renewal | ||||||||||||||||||||
Name | of Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Option | |||||||||||||||||||
Marymount University | Education | 6/30/2006 | 11,170 | 16.91% | $ | 284,757 | 20.85% | None | ||||||||||||||||||
ELISA/ ACT Biotechnologies, LLC | Bio-technology | Month-to- Month | 8,091 | 12.25% | $ | 141,593 | 10.37% | None | ||||||||||||||||||
Ed Anywhere, LLC | Education | 6/30/2008 | 5,047 | 7.64% | $ | 96,378 | 7.06% | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006(3) | 6 | 28,262 | 42.79 | % | $ | 577,997 | 42.33 | % | |||||||||||||
2007 | 2 | 6,703 | 10.15 | 132,138 | 9.68 | ||||||||||||||||
2008 | 4 | 8,531 | 12.92 | 171,345 | 12.55 | ||||||||||||||||
2009 | 6 | 14,734 | 22.31 | 318,348 | 23.31 | ||||||||||||||||
2010 | 3 | 4,141 | 6.27 | 82,420 | 6.04 | ||||||||||||||||
2011 | 1 | 850 | 1.29 | 19,261 | 1.41 | ||||||||||||||||
2012 | — | — | — | — | — | ||||||||||||||||
2013 | 1 | 2,823 | 4.27 | 64,045 | 4.68 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 23 | 66,044 | 100.00 | % | $ | 1,365,554 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
113
(3) | This property currently has two tenants that have a month-to-month tenancy. These tenants occupy 10,406 square feet and have annualized base rent based on actual monthly rent for March 2006 of approximately $198,915. |
Pidgeon Hill II, Sterling, Virginia. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2004 | 65 | % | $ | 20.31 | ||||
2005 | 77 | % | $ | 20.06 | ||||
March 31, 2006 | 74 | % | $ | 20.14 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage of | ||||||||||||||||||||||||
Principal | Leased | Property’s | Percentage of | |||||||||||||||||||||
Nature of | Lease | Square | Total Leased | Annualized | Annualized | Renewal | ||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Option | |||||||||||||||||
RJE Telecom, Inc. | Telecom | 4/30/2007 | 7,150 | 10.11 | % | $ | 125,125 | 8.78 | % | 2, 1 year terms | ||||||||||||||
Reston Pediatrics | Healthcare | 12/31/2008 | 6,116 | 8.65 | % | $ | 143,452 | 10.07 | % | 1, 5 year term | ||||||||||||||
The Executive Suites at Countryside, Inc. | Short-term office leasing | 1/31/2009 | 5,846 | 8.26 | % | $ | 117,838 | 8.27 | % | None | ||||||||||||||
Beacon Accounting Group LLC | Accounting | 1/31/2010 | 3,255 | 4.60 | % | $ | 60,348 | 4.23 | % | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
114
Percentage of | Annualized | Percentage of | ||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | ||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | ||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | |||||||||||||||
2006(3) | 7 | 9,452 | 13.36 | % | $ | 229,182 | 16.08 | % | ||||||||||||
2007 | 8 | 15,909 | 22.49 | 296,007 | 20.77 | |||||||||||||||
2008 | 4 | 10,009 | 14.15 | 229,688 | 16.12 | |||||||||||||||
2009 | 7 | 17,371 | 24.55 | 315,826 | 22.16 | |||||||||||||||
2010 | 6 | 15,715 | 22.21 | 304,324 | 21.36 | |||||||||||||||
2011 | — | — | — | — | — | |||||||||||||||
2012 | 1 | 2,290 | 3.24 | 50,047 | 3.51 | |||||||||||||||
Thereafter | — | — | — | — | — | |||||||||||||||
Total | 33 | 70,746 | 100.00 | % | $ | 1,425,074 | 100.00 | % | ||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | This property currently has one tenant that has a month-to-month tenancy. This tenant occupies 1,334 square feet and the aggregate annualized base rent for this tenant based on actual monthly rent for March 2006 was $30,428. |
4260 Forbes Boulevard, Lanham, Maryland. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2005 | 100 | % | $ | 13.25 | ||||
March 31, 2006 | 100 | % | $ | 13.25 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
115
Percentage of | ||||||||||||||||||||||||
Principal | Leased | Property’s | Percentage of | |||||||||||||||||||||
Nature of | Lease | Square | Total Leased | Annualized | Annualized | |||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Renewal Option | |||||||||||||||||
Vocus, Inc. | Software | 5/31/2011 | 23,560 | 43.08% | $ | 309,578 | 42.72% | 1, 5 year term | ||||||||||||||||
Northrop Grumman Systems Corporation | Defense | 9/30/2007 | 21,608 | 39.51% | $ | 282,201 | 38.94% | 2, 3 year terms | ||||||||||||||||
Loiederman Soltesz Associates | Engineering | 8/31/2012 | 9,524 | 17.41% | $ | 132,860 | 18.33% | 2, 5 year terms |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | — | — | — | — | — | ||||||||||||||||
2007 | 1 | 21,608 | 39.51 | % | $ | 282,201 | 38.94 | % | |||||||||||||
2008 | — | — | — | — | — | ||||||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | — | — | — | — | — | ||||||||||||||||
2011 | 1 | 23,560 | 43.08 | 309,578 | 42.72 | ||||||||||||||||
2012 | 1 | 9,524 | 17.41 | 132,860 | 18.34 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 3 | 54,692 | 100.00 | % | $ | 724,639 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
4550 Forbes Boulevard, Lanham, Maryland. |
116
Occupancy | Average Annualized Base Rent | |||||||
Rate(1) | per Leased Square Foot(2) | |||||||
2005 | 90 | % | $ | 12.26 | ||||
March 31, 2006 | 90 | % | $ | 12.27 |
(1) | One of our tenants filed for bankruptcy and vacated the premises prior to our acquisition of this property. This tenant accounts for approximately 12% of the net rentable square feet in this property and approximately 13% of the annualized base rent for this property, based on $12.67 per leased square foot. Although the tenant still remains contractually bound to the terms of its lease, we may have little or no recourse against the tenant if the lease is terminated as a result of the bankruptcy proceedings, or if the tenant fails to pay rent due to us under the lease. We are currently collecting from an escrow account 50% of the contractual rents due from this tenant. |
(2) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage of | ||||||||||||||||||||||||||||
Leased | Property’s | Percentage of | ||||||||||||||||||||||||||
Principal Nature of | Lease | Square | Total Leased | Annualized | Annualized | Renewal | ||||||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Option | |||||||||||||||||||||
Herman Stewart Construction and Development, Inc. | Construction | 4/30/2007 | 14,026 | 33.34 | % | $ | 169,294 | 32.80 | % | None | ||||||||||||||||||
Diversified International Sciences, Corp. | Information Technology | 9/30/2008 | 9,142 | 21.73 | % | $ | 109,887 | 21.29 | % | None | ||||||||||||||||||
Resource Connections of Prince George’s County | Living Assistance | 9/30/2015 | 8,075 | 19.19 | % | $ | 100,938 | 19.55 | % | None | ||||||||||||||||||
Aerospace Engineering(3) | Engineering | 7/31/2006 | 5,463 | 12.99 | % | $ | 69,216 | 13.41 | % | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | This tenant filed for bankruptcy and vacated the premises prior to our acquisition of this property. This tenant accounts for approximately 12% of our net rentable square feet in this property and approximately 13% of the annualized base rent for this property, based on $12.67 per leased square foot. Although this tenant still remains contractually bound to the terms of the lease, we may have little or no recourse against the tenant if the lease is terminated as a result of the bankruptcy proceedings, or if the tenant fails to pay rent due to us under the lease. We are currently collecting from an escrow account 50% of the contractual rents due from this tenant. |
117
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | 3 | 9,643 | 22.92 | % | $ | 120,691 | 23.38 | % | |||||||||||||
2007 | 2 | 15,210 | 36.15 | 184,681 | 35.78 | ||||||||||||||||
2008 | 1 | 9,142 | 21.73 | 109,887 | 21.29 | ||||||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | — | — | — | — | — | ||||||||||||||||
2011 | — | — | — | — | — | ||||||||||||||||
2012 | — | — | — | — | — | ||||||||||||||||
2013 | — | — | — | — | — | ||||||||||||||||
2014 | — | — | — | — | — | ||||||||||||||||
2015 | 1 | 8,075 | 19.20 | 100,938 | 19.55 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 7 | 42,070 | 100.00 | % | $ | 516,197 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
7700 Montpelier Avenue, Laurel, Maryland. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2005 | 100 | % | $ | 13.25 | ||||
March 31, 2006 | 100 | % | $ | 13.65 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
118
Percentage of | ||||||||||||||||||||||||||||
Principal | Leased | Property’s | Percentage of | |||||||||||||||||||||||||
Nature of | Lease | Square | Total Leased | Annualized | Annualized | |||||||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Renewal Option | |||||||||||||||||||||
Johns Hopkins University | Education | 12/31/2010 | 43,785 | 100 | % | $ | 597,556 | 100 | % | 1, 5 year term |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Square | Percentage of | Annualized | Percentage of | ||||||||||||||||||
Number of | Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | — | — | — | — | — | ||||||||||||||||
2007 | — | — | — | — | — | ||||||||||||||||
2008 | — | — | — | — | — | ||||||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | 1 | 43,785 | 100 | % | $ | 597,556 | 100 | % | |||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 1 | 43,785 | 100 | % | $ | 597,556 | 100 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
Lynnhaven Corporate Center I, Virginia Beach, Virginia. |
119
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
March 31, 2006 | 100 | % | $ | 16.25 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage of | ||||||||||||||||||||||||||||
Principal | Leased | Property’s | Percentage of | |||||||||||||||||||||||||
Nature of | Lease | Square | Total Leased | Annualized | Annualized | |||||||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Renewal Option | |||||||||||||||||||||
Michael Baker Jr., Inc. | Engineering | 12/31/2007 | 21,355 | 69.23 | % | $ | 349,969 | 69.83 | % | None | ||||||||||||||||||
Chartway Federal Credit Union | Banking | 2/28/2013 | 5,720 | 18.54 | % | $ | 96,515 | 19.26 | % | 2, 5 year terms |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
120
Square | Percentage of | Annualized | Percentage of | ||||||||||||||||||
Number of | Footage of | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | — | — | — | — | — | ||||||||||||||||
2007 | 1 | 21,335 | 69.17 | % | $ | 349,969 | 69.83 | % | |||||||||||||
2008 | 1 | 1,655 | 5.37 | 24,825 | 4.95 | ||||||||||||||||
2009 | 1 | 2,135 | 6.92 | 29,890 | 5.96 | ||||||||||||||||
2010 | — | — | — | — | — | ||||||||||||||||
2011 | — | — | — | — | — | ||||||||||||||||
2012 | — | — | — | — | — | ||||||||||||||||
2013 | 1 | 5,720 | 18.54 | 96,515 | 19.26 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 4 | 30,845 | 100.00 | % | $ | 501,199 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
Southport Centre, Virginia Beach, Virginia. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
March 31, 2006 | 88% | $ | 17.79 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
121
Percentage of | ||||||||||||||||||||||||||||
Principal | Leased | Property’s | Percentage of | |||||||||||||||||||||||||
Nature of | Lease | Square | Total Leased | Annualized | Annualized | |||||||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Renewal Option | |||||||||||||||||||||
Towne Bank Mortgage | Mortgage Banking | 9/30/2009 | 17,199 | 31.67 | % | $ | 277,248 | 28.69 | % | None | ||||||||||||||||||
Shuttleworth, Ruloff, Giordano | Legal | 7/31/2009 | 15,003 | 27.62 | % | $ | 254,151 | 26.30 | % | None | ||||||||||||||||||
Atlantic Container Line, A.B | Shipping | 12/31/2007 | 12,025 | 22.14 | % | $ | 259,740 | 26.88 | % | 1, 5 year term |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Square | Percentage of | Annualized | Percentage of | ||||||||||||||||||
Number of | Footage of | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | — | — | — | — | — | ||||||||||||||||
2007 | 1 | 12,025 | 22.14 | % | $ | 259,740 | 26.88 | % | |||||||||||||
2008 | 2 | 3,930 | 7.24 | 74,162 | 7.68 | ||||||||||||||||
2009 | 4 | 36,974 | 68.07 | 612,237 | 63.36 | ||||||||||||||||
2010 | 1 | 1,384 | 2.55 | 20,068 | 2.08 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 8 | 54,313 | 100.00 | % | $ | 966,207 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
Twin Oaks I, Norfolk, Virginia. |
122
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
March 31, 2006 | 89 | % | $ | 17.62 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage of | ||||||||||||||||||||||||||||
Leased | Property’s | Percentage of | ||||||||||||||||||||||||||
Principal Nature | Lease | Square | Total Leased | Annualized | Annualized | |||||||||||||||||||||||
Name | of Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Renewal Option | |||||||||||||||||||||
HDR Engineering | Engineering | 5/31/2013 | 13,566 | 18.66 | % | $ | 237,541 | 18.55 | % | None | ||||||||||||||||||
Spirit Cruises, Inc | Travel | 2/28/2007 | 6,746 | 9.28 | % | $ | 138,943 | 10.85 | % | 1, 5 year term | ||||||||||||||||||
Bradley-Morris, Inc | Staffing | 5/31/2009 | 6,035 | 8.30 | % | $ | 110,646 | 8.64 | % | None | ||||||||||||||||||
Nextel Communications | Communication | 4/30/2006 | 5,697 | 7.84 | % | $ | 122,998 | 9.61 | % | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Square | Percentage of | Annualized | Percentage of | ||||||||||||||||||
Number of | Footage of | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | 2 | 10,605 | 14.59 | % | $ | 122,998 | 9.61 | % | |||||||||||||
2007 | 5 | 15,165 | 20.86 | 294,044 | 22.96 | ||||||||||||||||
2008 | 3 | 10,110 | 13.91 | 195,403 | 15.26 | ||||||||||||||||
2009 | 4 | 16,931 | 23.29 | 315,366 | 24.63 | ||||||||||||||||
2010 | 2 | 6,307 | 8.68 | 115,138 | 8.99 | ||||||||||||||||
2011 | — | — | — | — | — | ||||||||||||||||
2012 | — | — | — | — | — | ||||||||||||||||
2013 | 1 | 13,566 | 18.67 | 237,541 | 18.55 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 17 | 72,684 | 100.00 | % | $ | 1,280,490 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
123
Twin Oaks II, Norfolk, Virginia. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
March 31, 2006 | 100 | % | $ | 19.58 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage of | ||||||||||||||||||||||||||||
Leased | Property’s | Percentage of | ||||||||||||||||||||||||||
Principal Nature | Lease | Square | Total Leased | Annualized | Annualized | |||||||||||||||||||||||
Name | of Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Renewal Option | |||||||||||||||||||||
Booz-Allen & Hamilton, Inc | Consulting | 4/30/2010 | 38,164 | 45.03 | % | $ | 686,952 | 41.40 | % | 1, 5 year term | ||||||||||||||||||
Mantech Systems Engineering | Defense | 2/28/2009 | 13,206 | 15.58 | % | $ | 260,111 | 15.67 | % | 2, 3 year terms | ||||||||||||||||||
GSA -Transportation Security | Government | 12/31/2012 | 10,967 | 12.94 | % | $ | 288,726 | 17.40 | % | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
124
Square | Percentage of | Annualized | Percentage of | ||||||||||||||||||
Number of | Footage of | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | — | — | — | — | — | ||||||||||||||||
2007 | 2 | 3,179 | 3.75 | % | $ | 54,743 | 3.30 | % | |||||||||||||
2008 | 3 | 7,615 | 8.99 | 145,236 | 8.75 | ||||||||||||||||
2009 | 3 | 56,093 | 66.19 | 1,039,759 | 62.66 | ||||||||||||||||
2010 | — | — | — | — | — | ||||||||||||||||
2011 | 1 | 6,895 | 8.13 | 131,005 | 7.89 | ||||||||||||||||
2012 | 1 | 10,967 | 12.94 | 288,726 | 17.40 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 10 | 84,749 | 100.00 | % | $ | 1,659,469 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
Godwin Business Park, Manassas, Virginia |
Average | ||||||||
Annualized Base | ||||||||
Rent per Leased | ||||||||
Occupancy Rate | Square Foot(1) | |||||||
March 31, 2006 | 77 | % | $ | 14.72 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
125
Percentage of | ||||||||||||||||||||||
Principal | Leased | Property’s | Percentage of | |||||||||||||||||||
Nature of | Lease | Square | Total Leased | Annualized | Annualized | Renewal | ||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Option | |||||||||||||||
Bowman Consulting Group | Civil Engineering | 8/31/2008 | 12,887 | 27.82% | $ | 225,070 | 33.00% | 1, 3 year term | ||||||||||||||
Integrated Digital Systems | Technology | 10/31/2010 | 8,358 | 18.05% | $ | 125,370 | 18.38% | 1, 1 year term | ||||||||||||||
Intersections, Inc. | Credit Reporting | 8/31/2008 | 8,185 | 17.67% | $ | 102,031 | 14.96% | 2, 5 year terms | ||||||||||||||
Colgan Air | Aviation | Month-to-Month | 7,628 | 16.47% | $ | 133,490 | 19.57% | None | ||||||||||||||
TFS | Industrial | Month-to-Month | 6,762 | 14.60% | $ | 67,620 | 9.92% | None |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Square | Percentage | Annualized | Percentage of | |||||||||||||||||
Number of | Footage of | of Property’s | Base Rent of | Property’s | ||||||||||||||||
Leases | Expiring | Total Leased | Expiring | Annualized | ||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | |||||||||||||||
2006(3) | 2 | 14,390 | 31.07 | % | $ | 201,110 | 29.49 | % | ||||||||||||
2007 | 1 | 2,505 | 5.41 | 28,382 | 4.16 | |||||||||||||||
2008 | 2 | 21,062 | 45.48 | 327,101 | 47.97 | |||||||||||||||
2009 | — | — | — | — | — | |||||||||||||||
2010 | 1 | 8,358 | 18.04 | 125,370 | 18.38 | |||||||||||||||
Thereafter | — | — | — | — | — | |||||||||||||||
Total | 6 | 46,315 | 100.00 | % | $ | 681,963 | 100.00 | % | ||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | This property currently has two tenants that have a month-to-month tenancy. These tenants occupy 14,390 square feet and the aggregate annualized base rent for these tenants based on actual monthly rent for March 2006 was approximately $201,110. |
4230 Forbes Boulevard, Lanham, Maryland |
126
Average | ||||||||
Annualized Base | ||||||||
Rent per Leased | ||||||||
Occupancy Rate | Square Foot(1) | |||||||
March 31, 2006 | 66 | % | $ | 12.61 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
Percentage of | ||||||||||||||||||||||||||||
Leased | Property’s | Percentage of | ||||||||||||||||||||||||||
Principal Nature | Lease | Square | Total Leased | Annualized | Annualized | Renewal | ||||||||||||||||||||||
Name | of Business | Expiration | Feet | Square Feet | Base Rent(2) | Base Rent(3) | Option | |||||||||||||||||||||
Northrop Grumman Systems | Defense | 12/31/2008 | 15,273 | 27.34% | $ | 199,465 | 41.78% | 2, 3 year terms | ||||||||||||||||||||
Benco Dental Supply, Co. | Medical Supply | 1/31/2011 | 11,513 | 20.61% | $ | 166,132 | 34.80% | None | ||||||||||||||||||||
Prince George’s PIU Party Place, LLC | Entertainment | 6/14/2011 | 10,451 | 18.71% | $ | 111,826 | 23.42% | 2, 5 year terms |
(1) | With the exception of the Prince George’s PIU Party Place, LLC lease, which commenced in June 2006. The annualized base rent for this tenant is calculated as actual monthly base rent for June 2006 multiplied by 12. |
(2) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(3) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Square | Percentage of | Annualized | Percentage of | ||||||||||||||||||
Number of | Footage of | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | — | — | — | — | — | ||||||||||||||||
2007 | — | — | — | — | — | ||||||||||||||||
2008 | 1 | 15,273 | 41.02 | % | $ | 199,465 | 41.78 | % | |||||||||||||
2009 | — | — | — | — | — | ||||||||||||||||
2010 | — | — | — | — | — | ||||||||||||||||
2011 | 2 | 21,964 | 58.98 | 277,958 | 58.22 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 3 | 37,237 | 100.00 | % | $ | 477,423 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12, with the exception of the Prince George’s PIU Party Place, LLC lease, which commenced in June 2006 and which has an annualized base rent amount calculated as actual monthly base rent for June 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
127
(2) | Calculated as the annualized base rent of expiring leases divided by the product of the property’s actual total March 2006 base rent and 12. |
Plaza 270, Rockville, Maryland. |
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2005 | 100% | $ | 20.47 | |||||
March 31, 2006 | 100% | $ | 20.56 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
128
Percentage of | ||||||||||||||||||||||||||
Principal | Leased | Property’s | Percentage of | |||||||||||||||||||||||
Nature of | Lease | Square | Total Leased | Annualized | Annualized | |||||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Base Rent(1) | Base Rent(2) | Renewal Option | |||||||||||||||||||
Westat, Inc. | Research | 10/31/2007 | 171,655 | 68.97% | $ | 2,966,400 | 57.96% | 3, 59 month terms | ||||||||||||||||||
Westat, Inc. | Research | 6/30/2009 | 77,220 | 31.03% | $ | 2,151,700 | 42.04% | Rolling 1 year term |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
Percentage of | Annualized | Percentage of | |||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | |||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | ||||||||||||||||
2006 | — | — | — | — | — | ||||||||||||||||
2007 | 1 | 171,655 | 68.97 | % | $ | 2,966,400 | 57.96 | % | |||||||||||||
2008 | — | — | — | — | — | ||||||||||||||||
2009 | 1 | 77,220 | 31.03 | 2,151,700 | 42.04 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total | 2 | 248,875 | 100.00 | % | $ | 5,118,100 | 100.00 | % | |||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amount. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
Twelve Oaks, Rockville, Maryland. |
129
Occupancy | Average Annualized Base Rent | |||||||
Rate | per Leased Square Foot(1) | |||||||
2001 | 100 | % | $ | 19.78 | ||||
2002 | 100 | % | $ | 20.64 | ||||
2003 | 100 | % | $ | 21.43 | ||||
2004 | 100 | % | $ | 21.80 | ||||
2005 | 100 | % | $ | 22.22 | ||||
March 31, 2006 | 100 | % | $ | 22.25 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
130
Percentage | ||||||||||||||||||||||||||||||||
of | ||||||||||||||||||||||||||||||||
Property’s | Percentage | |||||||||||||||||||||||||||||||
Total | of | Pro Rata | ||||||||||||||||||||||||||||||
Principal | Leased | Leased | Annualized | Annualized | Annualized | |||||||||||||||||||||||||||
Nature of | Lease | Square | Square | Base | Base | Base | ||||||||||||||||||||||||||
Name | Business | Expiration | Feet | Feet | Rent(1) | Rent(2) | Rent(3) | Renewal Option | ||||||||||||||||||||||||
Westat, Inc. | Research | 6/30/2013 | 44,991 | 35.38 | % | $ | 895,035 | 31.63 | % | $ | 71,603 | 4, 59 month terms | ||||||||||||||||||||
Westat, Inc. | Research | 6/30/2012 | 41,460 | 32.60 | % | $ | 967,218 | 34.18 | % | $ | 77,377 | 4, 59 month terms | ||||||||||||||||||||
Westat, Inc. | Research | 6/30/2007 | 28,253 | 22.22 | % | $ | 725,904 | 25.65 | % | $ | 58,072 | 4, 59 month terms | ||||||||||||||||||||
Westat, Inc. | Research | 12/31/2010 | 12,464 | 9.80 | % | $ | 241,691 | 8.54 | % | $ | 19,050 | 4, 59 month terms |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | Calculated as annualized base rent multiplied by our economic ownership interest in the property. Does not include the current annual $60,000 payment pursuant to the Class B membership interest. |
Percentage of | Annualized | Percentage of | Pro Rata | ||||||||||||||||||||||
Number of | Square Footage | Property’s | Base Rent of | Property’s | Annualized Base | ||||||||||||||||||||
Leases | of Expiring | Total Leased | Expiring | Annualized | Rent of Expiring | ||||||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | Leases(3) | |||||||||||||||||||
2006 | — | — | — | — | — | — | |||||||||||||||||||
2007 | 1 | 28,253 | 22.22 | % | $ | 725,904 | 25.65 | % | $ | 58,072 | |||||||||||||||
2008 | — | — | — | — | — | — | |||||||||||||||||||
2009 | — | — | — | — | — | — | |||||||||||||||||||
2010 | 1 | 12,464 | 9.80 | 241,691 | 8.54 | 19,335 | |||||||||||||||||||
2011 | — | — | — | — | — | — | |||||||||||||||||||
2012 | 1 | 41,460 | 32.60 | 967,218 | 34.18 | 77,377 | |||||||||||||||||||
2013 | 1 | 44,991 | 35.38 | 895,035 | 31.63 | 71,603 | |||||||||||||||||||
Thereafter | — | — | — | — | — | — | |||||||||||||||||||
Total | 4 | 127,168 | 100.00 | % | $ | 2,829,848 | 100.00 | % | $ | 226,387 | |||||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the period presented divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | Calculated as annualized base rent of expiring leases multiplied by our economic ownership in the property. Does not reflect the current annual $60,000 payment pursuant to the Class B membership interest. |
131
Research 28, Rockville, Maryland |
Average | ||||||||
Annualized Base | ||||||||
Rent per Leased | ||||||||
Occupancy Rate | Square Foot(1) | |||||||
March 31, 2006 | 100% | $ | 21.83 |
(1) | Calculated as the product of the actual monthly base rent for the last month in the respective period and 12, divided by total leased square feet. |
132
Percentage of | ||||||||||||||||||||||||||||||||
Principal | Leased | Property’s | Annualized | Percentage of | Pro Rata | |||||||||||||||||||||||||||
Nature of | Lease | Square | Total Leased | Base | Annualized | Annualized | Renewal | |||||||||||||||||||||||||
Name | Business | Expiration | Feet | Square Feet | Rent(1) | Base Rent(2) | Base Rent(3) | Option | ||||||||||||||||||||||||
Westat, Inc. | Research | 5/31/2010 | 64,432 | 100% | $ | 1,406,551 | 100% | $ | 28,131 | Rolling 1 year term |
(1) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the tenant’s annualized base rent divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | Calculated as annualized base rent multiplied by our economic ownership interest in the property. Does not include the current annual $15,600 payment pursuant to our general partnership interest. |
Pro Rata | |||||||||||||||||||||||||
Square | Percentage | Annualized | Percentage of | Annualized Base | |||||||||||||||||||||
Number of | Footage of | of Property’s | Base Rent of | Property’s | Rent of | ||||||||||||||||||||
Leases | Expiring | Total Leased | Expiring | Annualized | Expiring | ||||||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(1) | Base Rent(2) | Leases(3) | |||||||||||||||||||
2006 | — | — | — | — | — | — | |||||||||||||||||||
2007 | — | — | — | — | — | — | |||||||||||||||||||
2008 | — | — | — | — | — | — | |||||||||||||||||||
2009 | — | — | — | — | — | — | |||||||||||||||||||
2010 | 1 | 64,432 | 100.00% | $ | 1,406,551 | 100.00% | $ | 28,131 | |||||||||||||||||
Thereafter | — | — | — | — | — | — | |||||||||||||||||||
Total | 1 | 64,432 | 100.00% | $ | 1,406,551 | 100.00% | $ | 28,131 | |||||||||||||||||
(1) | Calculated as actual monthly base rent for March 2006 of expiring leases at the property multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(2) | Calculated as the annualized base rent of expiring leases during the periods presented divided by the product of the property’s actual total March 2006 base rent and 12. |
(3) | Calculated as annualized base rent of expiring leases multiplied by our economic ownership in the property. Does not reflect the current annual $15,600 payment pursuant to our general partnership interest. |
BTR Mezzanine Loan |
133
Top Ten Tenants in Our Portfolio of Wholly-Owned Properties and Properties Under Contract(1) |
Percentage of | Percentage of | |||||||||||||||||||
Our | Our | |||||||||||||||||||
Portfolio’s | Portfolio’s | |||||||||||||||||||
Number of | Total Leased | Total Leased | Annualized | Annualized | ||||||||||||||||
Tenant | Properties | Square Feet | Square Feet | Base Rent(2) | Base Rent | |||||||||||||||
Booz-Allen & Hamilton, Inc. | 1 | 38,164 | 3.53 | % | $ | 686,952 | 3.52 | % | ||||||||||||
Johns Hopkins University | 2 | 45,628 | 4.22 | 633,771 | 3.25 | |||||||||||||||
U.S. General Service Administration | 2 | 29,438 | 2.73 | 601,107 | 3.08 | |||||||||||||||
Columbia Medical Plan | 2 | 33,354 | 3.09 | 475,819 | 2.44 | |||||||||||||||
SGT, Inc. | 1 | 22,433 | 2.08 | 461,335 | 2.37 | |||||||||||||||
Northrop Grumman | 3 | 42,579 | 3.94 | 596,651 | 3.06 | |||||||||||||||
CareFirst of Maryland, Inc. | 2 | 18,370 | 1.70 | 365,659 | 1.88 | |||||||||||||||
Michael Baker Jr. Inc. | 1 | 21,335 | 1.98 | 349,969 | 1.80 | |||||||||||||||
United Food & Commercial Workers, Local 400 | 1 | 17,450 | 1.62 | 335,367 | 1.72 | |||||||||||||||
Vocus, Inc. | 1 | 23,560 | 2.18 | 309,578 | 1.59 | |||||||||||||||
Total | 292,311 | 27.06 | % | $ | 4,816,209 | 24.71 | % | |||||||||||||
(1) | This table does not reflect the only tenant of Twelve Oaks and Plaza 270, Westat Inc., because we only own an 8% economic ownership interest in Twelve Oaks, with the remainder of our investment in Twelve Oaks and our entire investment in Plaza 270 being in the form of structured real estate investments. |
(2) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
134
Percentage | |||||||||||||||||||||
Number | Square | Percentage | Annualized | of | |||||||||||||||||
of | Footage | of | Base Rent | Portfolio | |||||||||||||||||
Leases | of Expiring | Total Leased | of Expiring | Annualized | |||||||||||||||||
Year of Lease Expiration | Expiring | Leases | Square Feet | Leases(2) | Base Rent | ||||||||||||||||
2006(3) | 52 | 164,047 | 15.19 | % | $ | 3,074,317 | 15.77 | % | |||||||||||||
2007 | 53 | 213,203 | 19.74 | 3,791,791 | 19.45 | ||||||||||||||||
2008 | 44 | 169,041 | 15.65 | 3,134,692 | 16.08 | ||||||||||||||||
2009 | 37 | 217,304 | 20.12 | 4,059,655 | 20.82 | ||||||||||||||||
2010 | 28 | 141,531 | 13.10 | 2,399,980 | 12.31 | ||||||||||||||||
2011 | 7 | 65,610 | 6.07 | 940,107 | 4.82 | ||||||||||||||||
2012 | 9 | 54,434 | 5.04 | 1,139,964 | 5.85 | ||||||||||||||||
2013 | 4 | 29,397 | 2.72 | 517,944 | 2.66 | ||||||||||||||||
2014 | 1 | 17,450 | 1.62 | 335,367 | 1.72 | ||||||||||||||||
2015 | 1 | 8,075 | 0.75 | 100,938 | 0.52 | ||||||||||||||||
Thereafter | — | — | — | — | — | ||||||||||||||||
Total/ Weighted Average | 236 | 1,080,092 | 100.00 | % | $ | 19,494,756 | 100.00 | % | |||||||||||||
(1) | With the exception of one lease, which commenced in June 2006 and which has an annualized base rent amount calculated as actual monthly base rent for June 2006 multiplied by 12. |
(2) | Calculated as actual monthly base rent for March 2006 multiplied by 12. Because annualized base rent is not derived from historical results that were accounted for in accordance with accounting principles generally accepted in the United States, historical results differ from the annualized amounts. |
(3) | We currently have 12 tenants that have month-to-month tenancies. These tenants occupy an aggregate of approximately 55,179 square feet and pay aggregate annualized base rent based on actual monthly rent for March 2006 of approximately $1,018,866. |
135
Property Tax | Real Estate | Depreciation | ||||||||||||||||||
Federal Tax | Rate 2005 | Tax 2005 | Depreciation | Life | ||||||||||||||||
Properties | Basis | Estimated(2) | Estimated | Method | (Years)(3) | |||||||||||||||
4260 Forbes Boulevard | $ | 9,400,000 | $ | 14.51 | $ | 82,700 | Straight-line | 5-39 | ||||||||||||
4550 Forbes Boulevard | $ | 6,500,000 | $ | 14.51 | $ | 67,900 | Straight-line | 5-39 | ||||||||||||
7700 Montpelier Avenue | $ | 6,800,000 | $ | 13.90 | $ | 67,300 | Straight-line | 5-39 | ||||||||||||
Columbia Medical Campus | $ | 15,188,000 | $ | 20.62 | $ | 213,000 | Straight-line | 5-39 | ||||||||||||
Frederick Medical Center | $ | 4,405,000 | $ | 19.57 | $ | 87,900 | Straight-line | 5-39 | ||||||||||||
Timonium Medical Center | $ | 3,407,000 | $ | 12.47 | $ | 33,800 | Straight-line | 5-39 | ||||||||||||
Century South | $ | 1,502,000 | (1) | $ | 11.41 | $ | 29,400 | Straight-line | 5-39 | |||||||||||
Commerce Center I | $ | 12,034,000 | (1) | $ | 18.35 | $ | 251,000 | Straight-line | 5-39 | |||||||||||
Executive Tower | $ | 15,400,000 | $ | 12.50 | $ | 146,400 | Straight-line | 5-39 | ||||||||||||
Garden City Drive | $ | 5,800,000 | (1) | $ | 14.51 | $ | 82,000 | Straight-line | 5-39 | |||||||||||
Hollymead Town Center | $ | 52,000,000 | $ | 7.40 | $ | 40,700 | N/A | N/A | ||||||||||||
Pidgeon Hill I | $ | 7,749,000 | (1) | $ | 13.08 | $ | 142,000 | Straight-line | 5-39 | |||||||||||
Pidgeon Hill II | $ | 10,231,000 | (1) | $ | 13.08 | $ | 147,000 | Straight-line | 5-39 | |||||||||||
Pinewood Plaza | $ | 8,528,000 | $ | 12.50 | $ | 81,000 | Straight-line | 5-39 | ||||||||||||
Lynnhaven Corporate Center I | $ | 3,940,000 | $ | 15.94 | $ | 40,000 | Straight-line | 5-39 | ||||||||||||
Southport Centre | $ | 9,650,000 | $ | 15.94 | $ | 118,000 | Straight-line | 5-39 | ||||||||||||
Twin Oaks I | $ | 12,830,000 | $ | 13.50 | $ | 133,000 | Straight-line | 5-39 | ||||||||||||
Twin Oaks II | $ | 13,290,000 | $ | 13.50 | $ | 139,000 | Straight-line | 5-39 | ||||||||||||
Godwin Business Park | $ | 6,250,000 | $ | 10.00 | $ | 57,000 | Straight-line | 5-39 | ||||||||||||
4230 Forbes Boulevard | $ | 6,800,000 | $ | 14.51 | $ | 62,000 | Straight-line | 5-39 |
(1) | Represents estimated net tax basis as of March 31, 2006. |
(2) | Per $1,000 of assessed value. |
(3) | Represents depreciation life in years currently used. |
136
137
138
139
Name | Age | Position | ||||
Peter C. Minshall | 53 | Chairman and Chief Executive Officer | ||||
Blair D. Fernau | 40 | Vice Chairman and Chief Investment Officer | ||||
William B. LeBlanc III | 39 | Director, President and Chief Operating Officer | ||||
Clay E. Carney | 48 | Chief Financial Officer, Treasurer and Secretary | ||||
William P. Ciorletti | 49 | Director | ||||
Brian K. Fields | 46 | Director | ||||
William T. Gordon III | 52 | Director | ||||
Robert S. Smith | 47 | Director |
140
Directors |
141
142
Audit Committee |
Compensation Committee |
Nominating and Corporate Governance Committee |
Investment Committee |
143
Compensation Committee Interlocks and Insider Participation |
144
Long-Term | |||||||||||||||||||||
Annual Compensation | Compensation | ||||||||||||||||||||
Base | Other Annual | LTIP Unit | |||||||||||||||||||
Name and Principal Position | Year | Salary(1) | Bonus | Compensation(2) | Awards | ||||||||||||||||
Peter C. Minshall | 2005 | $ | 162,504 | $ | 100,000 | (3) | $ | 17,222 | (4) | — | |||||||||||
Chairman of the Board and | |||||||||||||||||||||
Chief Executive Officer | |||||||||||||||||||||
Blair D. Fernau | 2005 | $ | 162,504 | $ | 100,000 | (3) | $ | 17,190 | (4) | — | |||||||||||
Vice Chairman and | |||||||||||||||||||||
Chief Investment Officer | |||||||||||||||||||||
William B. LeBlanc, III | 2005 | $ | 162,504 | $ | 100,000 | (3) | $ | 11,790 | (4) | — | |||||||||||
President and | |||||||||||||||||||||
Chief Operating Officer | |||||||||||||||||||||
Clay E. Carney | 2005 | $ | 14,263 | $ | — | $ | — | 29,707 | (5) | ||||||||||||
Chief Financial Officer, | |||||||||||||||||||||
Treasurer and Secretary |
(1) | Amounts shown for the year ended December 31, 2005 represent amounts paid to Messrs. Minshall, Fernau and LeBlanc since the completion of the 2005 private offering and to Mr. Carney since the commencement of his employment on December 12, 2005. |
(2) | Includes the estimated annual cost of life and long-term disability benefits and health insurance provided in accordance with the executive’s employment agreement. Additionally, Messrs. Minshall, Fernau and LeBlanc receive monthly automobile allowances of $833. |
(3) | All bonuses for 2005 were accrued by us in 2005 and paid in 2006. |
(4) | Amount shown reflects other annual compensation received since the completion of the 2005 private offering. Amount for each individual includes payments of life and long-term disability premiums, health insurance premiums and an automobile allowance of $834 per month. |
(5) | The forfeiture restrictions on Mr. Carney’s LTIP units shall be removed quarterly on a pro-rata basis over the first three anniversaries of his employment with us, subject to certain events such as a change of control (as defined in Mr. Carney’s employment agreement) and termination without cause (as defined in Mr. Carney’s employment agreement) that will cause all forfeiture restrictions to be removed upon the occurrence of such event. Mr. Carney will receive dividends on his units. The LTIP units were granted to Mr. Carney on June 23, 2006 and, therefore, have been excluded from our calculation of fully diluted issued and outstanding shares of common stock as of March 31, 2006. |
145
• | annual base salary, bonus and other benefits accrued throughout the date of termination; | |
• | lump-sum cash payment equal to 2.99 multiplied by the sum of (1) the executive officer’s then-current annual base salary; and (2) the average bonus paid to the executive officer during the two years preceding termination; provided that, if the executive officer has been employed for less than two years, the bonus amount in clause (2) will be the bonus paid for the prior year and, if the executive officer has been employed for less than one year, the bonus amount in clause (2) will be 100% of the executive’s annual base salary; | |
• | for one year after termination of employment, continuing coverage under the group health plans the executive would have received under his employment agreement, as would have applied in the absence of such termination provided that such benefits will cease after such executive becomes entitled to receive the same type of benefits from another employer; and | |
• | full vesting of, or termination of any forfeiture restrictions with respect to, all outstanding equity-based incentive awards or other equity held by the executive officer. |
146
• | annual base salary, bonus and other benefits accrued throughout the date of termination; | |
• | annual base salary as in effect immediately before termination, payable monthly, for a period equal to the shorter of (x) the number of days from the effective date of such termination to the date on which Mr. Carney commences employment with a new employer, or enters into a paid consulting arrangement or other paid service arrangement with another entity or entities, for compensation or fees substantially similar to the compensation provided for under the employment agreement and (y) 365 days; | |
• | for one year after termination of employment, continuing coverage under the group health plans Mr. Carney would have received under his employment agreement, as would have applied in the absence of such termination provided that such benefits will cease after he becomes entitled to receive the same types of benefits from another employer; and | |
• | full vesting of, or termination of any forfeiture restriction with respect to, all outstanding equity-based incentive awards or other equity held by the executive officer. |
147
Administration |
Eligibility and Types of Awards |
148
Available Shares |
Awards Under the 2005 Equity Incentive Plan |
149
Adjustments in General; Certain Change in Control Provisions |
Amendment and Termination |
150
151
Approximate number | ||||||
of shares of | ||||||
Asset Capital | ||||||
Corporation, Inc. | ||||||
common stock | ||||||
Contributor | Contributed Interest | received | ||||
Peter C. Minshall and affiliates and family members | 15.30% Class A interest in Pidgeon Hill Drive LLC | |||||
33.30% Class B interest in Pidgeon Hill Drive LLC(1) | 86,856 | |||||
1.45% Class A interest in Second Pidgeon LLC | ||||||
25.00% Class B interest in Second Pidgeon LLC(1) | 8,719 | |||||
5.89% Class A interest in Commerce Center I, L.L.C. | ||||||
84.00% Class B interest in Commerce Center I, L.L.C.(2) | 246,755 | |||||
13.00% Class A interest in Garden City Drive Investors LLC | ||||||
33.30% Class C interest in Garden City Drive Investors LLC (1) | 51,472 | |||||
33.30% Class B interest in Century South Investors LLC(1) | 14,333 | |||||
33.30% Class A interest in Twelve Oaks Investment LLC(1) | ||||||
33.30% Class B interest in Twelve Oaks Investment LLC(1) | 43,142 | |||||
451,277 | ||||||
Blair D. Fernau and affiliates and family members | 33.30% Class B interest in Pidgeon Hill Drive LLC(1) | 58,193 | ||||
1.45% Class A interest in Second Pidgeon LLC | ||||||
25.00% Class B interest in Second Pidgeon LLC(1) | 8,719 | |||||
5.00% Class A interest in Garden City Drive Investors LLC | ||||||
33.30% Class C interest in Garden City Drive Investors LLC (1) | 43,488 | |||||
3.01% Class A interest in Century South Investors LLC | ||||||
33.30% Class B interest in Century South Investors LLC(1) | 18,565 | |||||
33.30% Class A interest in Twelve Oaks Investment LLC(1) | ||||||
33.30% Class B interest in Twelve Oaks Investment LLC(1) | 43,141 | |||||
172,106 | ||||||
William B. LeBlanc III and affiliates and family members | 33.30% Class B interest in Pidgeon Hill Drive LLC(1) | 58,193 | ||||
0.87% Class A interest in Second Pidgeon LLC | ||||||
25.00% Class B interest in Second Pidgeon LLC(1) | 6,326 | |||||
2.00% Class A interest in Garden City Drive Investors LLC | ||||||
33.30% Class C interest in Garden City Drive Investors LLC (1) | 40,493 | |||||
33.30% Class B interest in Century South Investors LLC(1) | 14,333 | |||||
33.30% Class A interest in Twelve Oaks Investment LLC(1) | ||||||
33.30% Class B interest in Twelve Oaks Investment LLC(1) | 43,141 | |||||
162,486 | ||||||
Total for Messrs. Minshall, Fernau and LeBlanc and their affiliates and family members: | 785,869 | |||||
(1) | These interests were owned by Asset Capital Corporation, L.L.C., which is owned in equal parts by Messrs. Minshall, Fernau and LeBlanc. |
(2) | This interest was owned by Asset Capital Corporation, L.L.C., which is owned in equal parts by Messrs. Minshall, Fernau and LeBlanc; however, pursuant to the operating agreement for Asset Capital Corporation, L.L.C., Mr. Minshall is to receive 100% of the economic benefit derived from Asset Capital Corporation, L.L.C.’s ownership of this interest. |
152
153
154
155
Investments in Securities of or Interests in Persons Primarily Engaged in Real Estate Activities and Other Issuers |
156
• | overall level of consolidated indebtedness; | |
• | timing of debt and lease maturities; | |
• | provisions that require recourse and cross-collateralization; | |
• | corporate financial ratios, including debt service coverage and debt to assets; and | |
• | the overall ratio of fixed and variable-rate debt. |
• | the interest rate on the proposed financing; | |
• | the extent to which the financing affects the flexibility with which we can manage our properties; | |
• | prepayment penalties and restrictions on refinancing; | |
• | our long-term objectives with respect to the property; | |
• | our target investment return; | |
• | the terms of the existing property leases; | |
• | the creditworthiness of tenants leasing the property; | |
• | the estimated market value of the property upon refinancing; and | |
• | the ability of particular properties, and our company as a whole, to generate cash flow to cover expected debt service. |
157
• | acquire from or sell to any of our directors, officers or employees, any entity in which any of our directors, officers or employees has an interest of more than 5%, or to any affiliate of any of the foregoing, including family members of any of our directors, officers or employees, any assets or other property; |
158
• | make any loan to or borrow from any of our directors, officers or employees, any entity in which any of our directors, officers or employees has an interest of more than 5%, or to any affiliate of any of the foregoing, including family members of any of our directors, officers or employees; | |
• | engage in any other transaction with any of our directors, officers or employees, any entity in which any of our directors, officers or employees has an interest of more than 5%, or with any affiliate of any of the foregoing, including family members of any of our directors, officers or employees; or | |
• | permit any of our directors or officers to make recommendations regarding or to approve compensation decisions that will personally benefit such directors or officers or their family members. |
• | the fact of the common directorship or interest is disclosed to the board or a committee of the board, and the board or that committee authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even if the disinterested directors constitute less than a quorum; | |
• | the fact of the common directorship or interest is disclosed to stockholders entitled to vote on the contract or transaction, and the contract or transaction is approved by a majority of the votes cast by the stockholders entitled to vote on the matter, other than votes of shares owned of record or beneficially by the interested director, corporation, firm or other entity; or | |
• | the contract or transaction is fair and reasonable to the corporation at the time it is authorized, ratified or approved. |
159
• | each of our directors; | |
• | each of our executive officers; | |
• | all directors and executive officers as a group; and | |
• | each person known to us as of the date of this prospectus who is or will be the beneficial owner of more than five percent of our outstanding common stock. |
Common Shares | ||||||||
Owned on a | ||||||||
Fully Diluted Basis(1) | ||||||||
Name and Address(2) | Number | Percentage | ||||||
Directors and Executive Officers: | ||||||||
Peter C. Minshall(3) | 716,970 | 6.1 | % | |||||
Blair D. Fernau(4) | 397,055 | 3.4 | ||||||
William B. LeBlanc, III | 360,086 | 3.0 | ||||||
Clay E. Carney | 29,707 | (5) | * | |||||
William P. Ciorletti | 2,000 | * | ||||||
Brian K. Fields | 2,000 | * | ||||||
William T. Gordon III | 2,000 | * | ||||||
Robert S. Smith | 2,000 | * | ||||||
All directors and executive officers as a group | 1,511,818 | 12.8 | % | |||||
Greater than 5% Holders: | ||||||||
Friedman, Billings, Ramsey Group, Inc.(6) | 1,216,397 | 10.3 | % | |||||
Hunter Global Investors L.P.(7) | 1,000,000 | 8.5 | % | |||||
Highbridge Capital Management, LLC(8) | 588,235 | 5.0 | % | |||||
Kensington Investment Group(9) | 1,643,000 | 13.9 | % |
* | Represents less than 1% of the number of shares of common stock outstanding on a fully diluted basis upon completion of this offering. |
(1) | Assumes 11,827,435 of our common shares outstanding on a fully diluted basis, including 76,492 LTIP units which we have issued or allocated for issuance and assume will be fully vested, achieve parity with our operating partnership units and will be converted into shares of our common stock on a one-for-one basis. | |
(2) | The address for each of our directors and named executive officers is c/o Asset Capital Corporation, Inc., 4733 Bethesda Avenue, Suite 800, Bethesda, Maryland 20814. | |
(3) | The number of common shares shown as beneficially owned by Mr. Minshall includes 7,984 common shares beneficially owned by Mr. Minshall’s children and 4,991 beneficially owned by Mr. Minshall’s mother. | |
(4) | The number of common shares beneficially owned by Mr. Fernau includes 15,205 common shares beneficially owned by both Mr. Fernau and Mr. Fernau’s wife. | |
(5) | Pursuant to Mr. Carney’s employment agreement, he will be granted 29,707 LTIP units. | |
(6) | These shares of common stock are beneficially owned by Friedman, Billings, Ramsey Group, Inc., the parent company of Friedman, Billings, Ramsey & Co., Inc., or FBR, and/or one or more of its subsidiaries. FBR has advised us that these shares were purchased by FBR for investment purposes only, and FBR does not have, and disclaims, any intention to control us. Friedman, Billings, Ramsey Group, Inc.’s address is 1001 Nineteenth Street North, 18th Floor, Arlington, Virginia 22209. |
160
(7) | These shares of common stock are beneficially owned by Hunter Global Investors L.P., which holds 90,000 shares in Hunter Global Investors Fund I L.P., 556,000 shares in Hunter Global Investors Offshore Fund Ltd. and 154,000 shares in Hunter Global Investors Offshore Fund II Ltd. Hunter Global Investors L.P.’s address is 485 Madison Avenue, 22nd Floor, New York, NY 10022. | |
(8) | These shares of common stock are beneficially owned by Highbridge Capital Management, LLC, which holds 271,676 shares in Highbridge Event Driven/Relative Value Fund LTD, 40,088 shares in Highbridge Event Driven/Relative Value Fund LP and 276,471 shares in Highbridge International LLC. Highbridge Capital Management, LLC’s address is 9 West 57th Street, 27th Floor, New York, NY 10019. | |
(9) | These shares of common stock are beneficially owned by Kensington Investment Group, which holds 1,523,000 shares in the Kensington Strategic Realty Fund, 70,000 shares in Kensington Realty Income Fund LP and 50,000 shares in Condor Partners LP. Kensington Investment Group’s address is 4 Orinda Way #200c, Orinda, CA, 94563. |
161
162
163
• | the representative of the underwriters of an underwritten offering of primary shares by us has advised us that the sale of shares of our common stock under the registration statement would have a material adverse effect on our primary offering; | |
• | a majority of our board, including at least two of our independent directors, in good faith, determines that (A) the offer or sale of any shares of our common stock would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, merger, tender offer, business combination, corporate reorganization, consolidation or other material transaction involving us, (B) after the advice of counsel, the sale of the shares covered by the registration statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law; or (C) either (x) we have a bona fide business purposes for preserving the confidentiality of the proposed transaction, (y) disclosure would have a material adverse effect on us or our ability to consummate the proposed transaction, or (z) the proposed transaction renders us unable to comply with SEC requirements, in each case under circumstances that would make it impractical or inadvisable to cause the registration statement to become effective or to promptly amend or supplement the registration statement on a post-effective basis; or | |
• | a majority of our board, including at least two of our independent directors, determines in good faith, upon the advice of counsel, that we are required by law, rule or regulation to supplement the registration statement or file a post-effective amendment to the registration statement in order to incorporate information into the registration statement for the purpose of (1) including in the registration statement any prospectus required under Section 10(a)(3) of the Securities Act; (2) reflecting in the prospectus included in the registration statement any facts or events arising after the effective date of the registration statement (or the most-recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth in the prospectus; or (3) including in the prospectus included in the registration statement any material information with respect to the plan of distribution not disclosed in the registration statement or any material change to such information. |
164
165
166
167
• | a classified board; | |
• | a two-thirds vote requirement for removing a director; | |
• | a requirement that the number of directors be fixed only by vote of the directors; | |
• | a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the class of directors in which the vacancy occurred; and | |
• | a majority requirement for the calling of a special meeting of stockholders. |
168
• | the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty; | |
• | the director or officer actually received an improper personal benefit in money, property or services; or | |
• | in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. |
• | a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and | |
• | a written undertaking by the director or officer or on the director’s or officer’s behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director or officer did not meet the standard of conduct. |
169
• | any present or former director or officer who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity; or | |
• | any individual who, while a director or officer of our company and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. |
170
171
172
• | the general partner’s bankruptcy, judicial dissolution, death, removal or withdrawal (unless a majority-in-interest of the remaining limited partners agree to continue the partnership and to the appointment of a successor general partner); | |
• | the passage of 90 days after the sale or other disposition of all or substantially all of the operating partnership’s assets; |
173
• | redemption of all operating partnership units held by the limited partners; or | |
• | an election by the general partner in its capacity as the sole general partner of our operating partnership. |
174
• | an individual who is a citizen or resident of the United States; | |
• | a corporation or other entity taxable as a corporation under federal income tax laws created or organized in or under the laws of the United States, any state of the United States or the District of Columbia; |
175
• | an estate the income of which is subject to federal income tax purposes regardless of its source; or | |
• | a trust that is subject to the primary supervision of a court and the control of one or more U.S. persons, or a trust that has validly elected to be treated as a domestic trust under applicable Treasury regulations. |
176
• | is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact; or | |
• | provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules. |
177
• | the gain is U.S. trade or business income and, where a tax treaty applies, is attributable to a U.S. permanent establishment of the non-U.S. stockholder, in which case (i) the non-U.S. stockholder that is an individual will be subject to tax on any gain from the disposition under regular graduated U.S. federal income tax rates and (ii) a non-U.S. stockholder that is a corporation will be subject to tax on the gain under regular graduated U.S. federal income tax rates and, in addition, may be subject to the 30% branch profits tax; or |
178
• | the non-U.S. stockholder that is an individual who is present in the United States for more than 182 days in the taxable year of the disposition and meets certain other requirements, in which case the non-U.S. stockholder will be subject to a flat 30% tax on any gain derived from the disposition which may be offset by U.S. source capital losses (even though such non-U.S. stockholder is not considered a resident of the United States). |
179
Underwriters | Number of Shares | ||||
Friedman, Billings, Ramsey & Co., Inc. | |||||
Wachovia Capital Markets, LLC | |||||
Robert W. Baird & Co. Incorporated | |||||
Total | |||||
180
No Exercise | Full Exercise | ||||||||
Underwriting discounts and commissions paid by us | |||||||||
Per share: | |||||||||
Total: | |||||||||
Underwriting discounts and commissions paid by selling stockholders | |||||||||
Per share: | |||||||||
Total: |
• | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise dispose of or transfer, directly or indirectly, any of our equity securities or any securities convertible into or exercisable or exchangeable for our equity securities, or | |
• | enter into any swap or other arrangement that transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of any of our equity securities, |
• | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise dispose of or transfer, directly or indirectly, any of our equity securities or any securities convertible into or exercisable or exchangeable for our equity securities, or |
181
• | enter into any swap or other arrangement that transfers, in while or in part, directly or indirectly, any of the economic consequences of ownership of any of our equity securities. |
• | stabilizing transactions; | |
• | short sales; | |
• | syndicate covering transactions; | |
• | imposition of penalty bids; and | |
• | purchases of cover positions created by short sales. |
182
• | the economic conditions in and future prospects for the industry in which we compete; | |
• | our past and present operating performance and financial condition; | |
• | our prospects for future earnings; | |
• | an assessment of our management; | |
• | the present state of our development; | |
• | the prevailing conditions of the equity securities markets at the time of this offering; and | |
• | current market valuations of publicly traded companies considered comparable to our company. |
183
184
185
Page | |||
Historical Consolidated Financial Statements— Asset Capital Corporation, Inc. | |||
Report of Independent Registered Public Accounting Firm | F-2 | ||
Consolidated Balance Sheets as of December 31, 2005 and March 31, 2006 (unaudited) | F-3 | ||
Consolidated Statements of Operations for the period March 30, 2005 (inception) to December 31, 2005 and for the three months ended March 31, 2006 (unaudited) | F-4 | ||
Consolidated Statements of Stockholders’ Equity for the period March 30, 2005 (inception) to December 31, 2005 and for the three months ended March 31, 2006 (unaudited) | F-5 | ||
Consolidated Statements of Cash Flows for the period March 30, 2005 (inception) to December 31, 2005 and for the three months ended March 31, 2006 (unaudited) | F-6 | ||
Notes to Consolidated Financial Statements | F-7 | ||
Historical Consolidated Financial Statements— Asset Capital Corporation, L.L.C. | |||
Report of Independent Registered Public Accounting Firm | F-20 | ||
Consolidated Balance Sheets as of December 31, 2005 and 2004 | F-21 | ||
Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003 | F-22 | ||
Consolidated Statements of Changes in Owners’ Equity (Deficit) for the years ended December 31, 2005, 2004 and 2003 | F-23 | ||
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003 | F-24 | ||
Notes to Consolidated Financial Statements | F-25 | ||
Historical Financial Statements— Executive Tower | |||
Report of Independent Registered Public Accounting Firm | F-30 | ||
Statements of Revenue and Certain Expenses for the year ended December 31, 2004 and the six months ended June 30, 2005 (unaudited) | F-31 | ||
Notes to Statements of Revenues and Certain Expenses | F-32 | ||
Historical Financial Statements— CareFirst Portfolio | |||
Report of Independent Registered Public Accounting Firm | F-34 | ||
Statements of Revenue and Certain Expenses for the year ended December 31, 2004 and the six months ended June 30, 2005 (unaudited) | F-35 | ||
Notes to Statements of Revenues and Certain Expenses | F-36 | ||
Historical Financial Statement— RSMK Portfolio | |||
Report of Independent Registered Public Accounting Firm | F-38 | ||
Statements of Revenues and Certain Expenses for the year ended October 31, 2005 and the three months ended January 31, 2006 (unaudited) | F-39 | ||
Notes to Statements of Revenues and Certain Expenses | F-40 | ||
Historical Financial Statements— Pinewood Plaza | |||
Report of Independent Registered Public Accounting Firm | F-42 | ||
Statements of Revenues and Certain Expenses for the year ended December 31, 2004 and the nine months ended September 30, 2005 (unaudited) | F-43 | ||
Notes to Statements of Revenues and Certain Expenses | F-44 | ||
Historical Financial Statements— Gees Group Portfolio | |||
Report of Independent Registered Public Accounting Firm | F-46 | ||
Statements of Revenues and Certain Expenses for the year ended December 31, 2005 and the three months ended March 31, 2006 (unaudited) | F-47 | ||
Notes to Statements of Revenues and Certain Expenses | F-48 | ||
Schedule III: Real Estate and Accumulated Depreciation | F-50 |
F-1
/s/ BDO Seidman, LLP |
F-2
March 31, | December 31, | |||||||||
2006 | 2005 | |||||||||
(Unaudited) | (Restated) | |||||||||
ASSETS | ||||||||||
Real estate investments | ||||||||||
Land | $ | 24,005 | $ | 17,047 | ||||||
Building and improvements | 91,517 | 65,459 | ||||||||
Tenant improvements | 252 | 162 | ||||||||
115,774 | 82,668 | |||||||||
Less: Accumulated depreciation and amortization | (926 | ) | (469 | ) | ||||||
114,848 | 82,199 | |||||||||
Properties held for sale | 57,993 | 56,961 | ||||||||
Real estate loan | 14,700 | — | ||||||||
Cash and cash equivalents | 1,955 | 23,271 | ||||||||
Escrows and reserves | 4,120 | 2,004 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $68 and $17 | 629 | 322 | ||||||||
Accrued straight-line rents | 286 | 191 | ||||||||
Prepaid expenses and other assets | 1,843 | 2,695 | ||||||||
Deferred costs, net | 1,892 | 1,104 | ||||||||
Intangible assets, net | 11,553 | 9,897 | ||||||||
Investment in real estate entities | 2,524 | 2,521 | ||||||||
Total assets | $ | 212,343 | $ | 181,165 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Mortgage loans | $ | 80,493 | $ | 50,123 | ||||||
Mortgage loan and other liabilities for properties held for sale | 41,278 | 40,829 | ||||||||
Accounts payable and accrued expenses | 2,655 | 2,795 | ||||||||
Borrower’s escrow | 698 | — | ||||||||
Deferred revenue | 684 | 363 | ||||||||
Tenant security deposits | 694 | 480 | ||||||||
Total liabilities | 126,502 | 94,590 | ||||||||
Commitments and contingencies | ||||||||||
Minority interest | 69 | 29 | ||||||||
Preferred stock, $.001 par value; 50,000,000 shares authorized, no shares issued and outstanding | — | — | ||||||||
Common stock, $.001 par value; 200,000,000 shares authorized, 11,750,943 and 11,661,383 shares issued and outstanding at March 31, 2006 (unaudited) and December 31, 2005 | 12 | 11 | ||||||||
Additional paid-in capital | 90,269 | 89,322 | ||||||||
Deficit | (4,509 | ) | (2,787 | ) | ||||||
Total stockholders’ equity | 85,772 | 86,546 | ||||||||
Total liabilities and stockholders’ equity | $ | 212,343 | $ | 181,165 | ||||||
F-3
Three Months | March 30, 2005 | |||||||||
Ended | (inception) to | |||||||||
March 31, | December 31, | |||||||||
2006 | 2005 | |||||||||
(Unaudited) | (Restated) | |||||||||
Revenue | ||||||||||
Rental income | $ | 2,945 | $ | 2,834 | ||||||
Operating expense reimbursements | 151 | 125 | ||||||||
Other | 239 | 574 | ||||||||
Total revenue | 3,335 | 3,533 | ||||||||
Expenses | ||||||||||
Property operating expenses | 1,152 | 1,346 | ||||||||
Real estate taxes and insurance | 383 | 411 | ||||||||
General and administrative | 1,572 | 2,759 | ||||||||
Depreciation and amortization | 1,395 | 1,699 | ||||||||
Total operating expenses | 4,502 | 6,215 | ||||||||
Operating loss | (1,167 | ) | (2,682 | ) | ||||||
Interest income | 417 | 512 | ||||||||
Interest expense, net of $800 (unaudited) and $1,200 of interest capitalized during the three months ended March 31, 2006 and the period March 30, 2005 (inception) to December 31, 2005, respectively | (1,029 | ) | (685 | ) | ||||||
Minority interest in loss | 10 | 7 | ||||||||
Equity in earnings of unconsolidated entities | 46 | 39 | ||||||||
Loss from continuing operations before income taxes | (1,723 | ) | (2,809 | ) | ||||||
Provision for income taxes | — | — | ||||||||
Loss from continuing operations | (1,723 | ) | (2,809 | ) | ||||||
Income from discontinued operations | 1 | 22 | ||||||||
Net loss | $ | (1,722 | ) | $ | (2,787 | ) | ||||
Loss per common share — basic and diluted | ||||||||||
Continuing operations | $ | (0.15 | ) | $ | (0.39 | ) | ||||
Discontinued operations | $ | — | $ | — | ||||||
Total | $ | (0.15 | ) | $ | (0.39 | ) | ||||
Weighted average common shares outstanding — basic and diluted | 11,521,892 | 7,195,385 |
F-4
Common Stock | Additional | ||||||||||||||||||||
Paid-In | |||||||||||||||||||||
Shares | Amount | Capital | Deficit | Total | |||||||||||||||||
Balance, March 30, 2005 (inception) | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Issuance of restricted common shares | 230,479 | — | — | — | — | ||||||||||||||||
Net proceeds from issuance of common shares | 10,248,893 | 10 | 78,919 | — | 78,929 | ||||||||||||||||
Issuance of common shares in exchange for acquired businesses | 1,182,011 | 1 | 10,077 | — | 10,078 | ||||||||||||||||
Vesting of restricted common shares | — | — | 326 | — | 326 | ||||||||||||||||
Net loss | — | — | — | (2,787 | ) | (2,787 | ) | ||||||||||||||
Balance, December 31, 2005, restated | 11,661,383 | 11 | 89,322 | (2,787 | ) | 86,546 | |||||||||||||||
Issuance of common shares in exchange for acquired businesses | 89,560 | 1 | 760 | — | 761 | ||||||||||||||||
Vesting of restricted common shares | — | — | 187 | — | 187 | ||||||||||||||||
Net loss | — | — | — | (1,722 | ) | (1,722 | ) | ||||||||||||||
Balance at March 31, 2006 | 11,750,943 | $ | 12 | $ | 90,269 | $ | (4,509 | ) | $ | 85,772 | |||||||||||
F-5
Period | |||||||||||||
Three Months | March 30, 2005 | ||||||||||||
Ended | (inception) to | ||||||||||||
March 31, | December 31, | ||||||||||||
2006 | 2005 | ||||||||||||
(Unaudited) | (Restated) | ||||||||||||
Cash flows from operating activities: | |||||||||||||
Net loss | $ | (1,722 | ) | $ | (2,787 | ) | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||||
Depreciation | 472 | 494 | |||||||||||
Amortization of intangibles | 896 | 1,209 | |||||||||||
Amortization of deferred costs | 116 | 94 | |||||||||||
Minority interest in loss | (10 | ) | (7 | ) | |||||||||
Equity in earnings of unconsolidated entities | (46 | ) | (39 | ) | |||||||||
Distributions from unconsolidated entities | 43 | 39 | |||||||||||
Deferred compensation | 237 | 362 | |||||||||||
Changes in operating assets and liabilities, net of effects of business combinations: | |||||||||||||
Escrows and reserves | (1,418 | ) | (1,463 | ) | |||||||||
Accounts receivable | (226 | ) | (242 | ) | |||||||||
Accrued straight-line rents | (99 | ) | (205 | ) | |||||||||
Prepaid expenses and other assets | 871 | (2,178 | ) | ||||||||||
Accounts payable and accrued expenses | 223 | 3,501 | |||||||||||
Borrower’s escrow | (302 | ) | — | ||||||||||
Deferred revenue | 300 | 411 | |||||||||||
Tenant security deposits | 123 | 70 | |||||||||||
Net cash used in operating activities | (542 | ) | (741 | ) | |||||||||
Cash flows from investing activities: | |||||||||||||
Business combinations | (3,223 | ) | (10,174 | ) | |||||||||
Acquisitions of real estate investments and related intangibles | (7,422 | ) | (53,865 | ) | |||||||||
Additions to real estate investments | (1,243 | ) | (1,579 | ) | |||||||||
Funding of real estate loan | (13,700 | ) | — | ||||||||||
Deferred leasing costs | (115 | ) | (31 | ) | |||||||||
Investments in unconsolidated entities | — | (940 | ) | ||||||||||
Net cash used in investing activities | (25,703 | ) | (66,589 | ) | |||||||||
Cash flows from financing activities: | |||||||||||||
Issuance of common shares | — | 78,929 | |||||||||||
Proceeds from mortgage loans | 5,676 | 12,640 | |||||||||||
Repayment of mortgage loans | (40 | ) | (14 | ) | |||||||||
Deferred financing costs | (707 | ) | (954 | ) | |||||||||
Net cash provided by financing activities | 4,929 | 90,601 | |||||||||||
Increase (decrease) in cash and cash equivalents | (21,316 | ) | 23,271 | ||||||||||
Cash and cash equivalents, beginning of period | 23,271 | — | |||||||||||
Cash and cash equivalents, end of period | $ | 1,955 | $ | 23,271 | |||||||||
Supplemental disclosure of non cash investing and financing activities | |||||||||||||
Debt assumed and seller-financed in connection with business combinations and acquisitions of real estate investments | $ | 24,734 | $ | 77,497 | |||||||||
Cash interest paid | $ | 1,302 | $ | 941 | |||||||||
Issuance of common shares in exchange for acquired businesses | $ | 761 | $ | 10,078 |
F-6
NOTE 1: | DESCRIPTION OF BUSINESS, FORMATION TRANSACTIONS AND BASIS OF PRESENTATION |
1A: Description of Business and Formation Transactions |
F-7
1B: Basis of Presentation |
As Previously | ||||||||||||||
Presented | Adjustments(1) | Current Presentation | ||||||||||||
Real estate investments, net | $ | 91,978 | $ | (9,779 | ) | $ | 82,199 | |||||||
Total assets | $ | 183,251 | $ | (2,086 | ) | $ | 181,165 | |||||||
Mortgage loans | $ | 58,623 | $ | (8,500 | ) | $ | 50,123 | |||||||
Stockholders’ equity | $ | 77,197 | $ | 9,349 | $ | 86,546 | ||||||||
Total revenue | $ | 10,642 | $ | (7,109 | ) | $ | 3,533 | |||||||
Total operating expenses | $ | 10,642 | $ | (4,427 | ) | $ | 6,215 | |||||||
Net loss | $ | 2,223 | $ | 564 | $ | 2,787 | ||||||||
Loss per common share — basic and diluted | ||||||||||||||
Continuing operations | $ | (0.35 | ) | $ | (0.39 | ) | ||||||||
Discontinued operations | $ | — | — | |||||||||||
Total | $ | (0.35 | ) | $ | (0.39 | ) |
(1) | The balance sheet adjustments reflect the elimination of the Pidgeon Hill II property, which was not acquired until March 2, 2006, the recording of the acquisition of ACC, L.L.C.’s interests in the Predecessor LLC’s at fair value and the recording of the acquisition of the Management Agreements at fair value. The statement of operations adjustments reflect the elimination of the operations of the Predecessor LLC’s prior to their respective acquisition dates and the adjustments to depreciation and amortization related to recording the acquisition of ACC, L.L.C.’s interest in the Predecessor LLC’s and the Management Agreements at their fair values. |
NOTE 2: | SIGNIFICANT ACCOUNTING POLICIES |
Principles of Consolidation |
F-8
Revenue Recognition |
Cash and Cash Equivalents |
Escrows and Reserves |
Deferred Costs |
Real Estate Investments |
F-9
Intangibles |
Income Taxes |
F-10
Earnings per Share |
Use of Estimates |
New Accounting Pronouncements |
F-11
NOTE 3: | REAL ESTATE INVESTMENTS |
Acquisitions |
Square | Date | Purchase | |||||||||||||||
Property | Location | Feet | Acquired | Price | |||||||||||||
(Unaudited) | |||||||||||||||||
Predecessor LLCs: | |||||||||||||||||
Pidgeon Hill II | Sterling, VA | 95,137 | 03/02/06 | $ | 12,484 | ||||||||||||
Unrelated parties: | |||||||||||||||||
4200 Forbes Boulevard | Lanham, MD | 54,692 | 02/24/06 | 23,656 | (1) | ||||||||||||
4550 Forbes Boulevard | Lanham, MD | 46,858 | 03/23/06 | — | (1) | ||||||||||||
7700 Montpelier Avenue | Laurel, MD | 43,785 | 03/23/06 | — | (1) | ||||||||||||
$ | 36,140 | ||||||||||||||||
(1) | The 4200 and 4550 Forbes Boulevard and 7700 Montpelier Avenue properties were acquired as a portfolio (the “RSMK Portfolio”) for total consideration of $23.7 million. |
(Unaudited) | |||||
Land | $ | 6,921 | |||
Buildings | 25,983 | ||||
Intangibles | 2,563 | ||||
Other assets | 871 | ||||
Total assets acquired | 36,338 | ||||
Mortgage notes payable | 24,734 | ||||
Other liabilities | 198 | ||||
Total liabilities assumed | 24,932 | ||||
Net assets acquired | $ | 11,406 | |||
F-12
Square | Date | Purchase | |||||||||||||||
Property | Location | Feet | Acquired | Price | |||||||||||||
Predecessor LLCs: | |||||||||||||||||
Century South | Germantown, MD | 21,108 | 08/26/05 | $ | 4,522 | ||||||||||||
Commerce Center I | Greenbelt, MD | 123,249 | 09/22/05 | 20,930 | |||||||||||||
Garden City Drive | Landover, MD | 89,831 | 12/05/05 | 8,800 | |||||||||||||
Pidgeon Hill I | Sterling, VA | 55,497 | 12/21/05 | 12,798 | |||||||||||||
Unrelated parties | |||||||||||||||||
Executive Tower | Hampton, VA | 134,179 | 07/07/05 | 15,471 | |||||||||||||
Columbia Medical Campus | Columbia, MD | 154,558 | 07/29/05 | 23,384 | (1) | ||||||||||||
Frederick Medical Center | Frederick, MD | 32,949 | 07/29/05 | — | (1) | ||||||||||||
Timonium Medical Center | Timonium, MD | 23,966 | 07/29/05 | — | (1) | ||||||||||||
Pinewood Plaza | Hampton, VA | 71,066 | 11/09/05 | 8,617 | |||||||||||||
Hollymead Town Center | Charlottesville, VA | N/A | 08/18/05 | 52,160 | |||||||||||||
$ | 146,682 | ||||||||||||||||
(1) | The Columbia Medical Campus, Frederick Medical Campus and Timonium Medical Campus were acquired as a portfolio (the “CareFirst Portfolio”) for total consideration of $23.4 million. |
Land | $ | 69,902 | |||
Buildings | 67,802 | ||||
Intangibles | 8,079 | ||||
Other assets | 1,383 | ||||
Total assets acquired | 147,166 | ||||
Mortgage notes payable | 77,497 | ||||
Other liabilities | 484 | ||||
Total liabilities assumed | 77,981 | ||||
Net assets acquired | $ | 69,185 | |||
F-13
Three Months | March 30, 2005 | |||||||
Ended | (inception) to | |||||||
March 31, 2006 | December 31, 2005 | |||||||
(Unaudited) | ||||||||
Pro forma total revenues | $ | 3,959 | $ | 10,562 | ||||
Pro forma net loss | $ | (1,812 | ) | $ | (4,061 | ) | ||
Pro forma basic and diluted loss per share | $ | (0.16 | ) | $ | (0.56 | ) |
Dispositions |
March 31, | December 31, | ||||||||
2006 | 2005 | ||||||||
Real estate investments, net | $ | 3,051 | $ | 3,066 | |||||
Other assets | 328 | 371 | |||||||
Total assets | $ | 3,379 | $ | 3,437 | |||||
Accounts payable and accrued liabilities | $ | 55 | $ | 65 | |||||
March 30, | |||||||||
Three Months | 2005 | ||||||||
Ended | (inception) to | ||||||||
March 31, | December 31, | ||||||||
2006 | 2005 | ||||||||
Total revenue | $ | 111 | $ | 199 | |||||
Total expenses | 110 | 177 | �� | ||||||
Income | $ | 1 | $ | 22 | |||||
F-14
NOTE 4: | INVESTMENTS IN REAL ESTATE ENTITIES |
Condensed Balance Sheets |
December 31, | |||||
2005 | |||||
Real estate investments, net | $ | 15,509 | |||
Accrued rent | 559 | ||||
Cash and cash equivalents, including restricted cash of $440 and $395 at December 31, 2005 and 2004, respectively | 2,100 | ||||
Deferred costs and other assets | 279 | ||||
Total assets | $ | 18,447 | |||
Mortgages and accrued interest payable | $ | 12,410 | |||
Accounts payable and other liabilities | 2,177 | ||||
Total liabilities | 14,587 | ||||
Members’ equity | 3,860 | ||||
Total liabilities and members’ equity | $ | 18,447 | |||
F-15
NOTE 5: | REAL ESTATE LOANS |
NOTE 6: | BORROWINGS |
March 31, | December 31, | ||||||||
2006 | 2005 | ||||||||
Line of credit, at a rate of LIBOR plus 1.85% | $ | 2,276 | $ | — | |||||
Mortgage debt: | |||||||||
Fixed, with interest rates ranging from 5.66% to 8%, maturing at various dates through January 2015 | 76,897 | 59,723 | |||||||
Variable, at a rate of LIBOR plus 1.5% (5.875% at December 31, 2005), maturing October 2007 | 41,320 | 30,400 | |||||||
118,217 | 90,123 | ||||||||
$ | 120,493 | $ | 90,123 | ||||||
Line of Credit |
Mortgage Debt |
F-16
Year ending December 31, 2006 | $ | 10,200 | ||
Year ending December 31, 2007 | 40,661 | |||
Year ending December 31, 2008 | 10,274 | |||
Year ending December 31, 2009 | 23,452 | |||
Year ending December 31, 2010 | 78 | |||
Thereafter | 5,458 | |||
$ | 90,123 | |||
NOTE 7: | STOCKHOLDERS’ EQUITY |
NOTE 8: | 2005 EQUITY INCENTIVE PLAN |
F-17
NOTE 9: | FAIR VALUE OF FINANCIAL INSTRUMENTS |
NOTE 10: | LEASING ARRANGEMENTS |
Year ending December 31, 2006 | $ | 9,205 | ||
Year ending December 31, 2007 | 7,834 | |||
Year ending December 31, 2008 | 5,831 | |||
Year ending December 31, 2009 | 5,098 | |||
Year ending December 31, 2010 | 3,506 | |||
Thereafter | 3,559 | |||
$ | 35,033 | |||
Year ending December 31, 2006 | $ | 215 | ||
Year ending December 31, 2007 | 268 | |||
Year ending December 31, 2008 | 276 | |||
Year ending December 31, 2009 | 284 | |||
Year ending December 31, 2010 | 293 | |||
Thereafter | 112 | |||
$ | 1,448 | |||
NOTE 11: | TRANSACTIONS WITH RELATED PARTIES |
F-18
NOTE 12: | COMMITMENTS AND CONTINGENCIES |
Contingencies |
Commitments |
NOTE 13: | SUBSEQUENT EVENTS |
F-19
/s/ BDO Seidman, LLP |
F-20
December 31, | ||||||||||
2005 | 2004 | |||||||||
(in thousands) | ||||||||||
ASSETS | ||||||||||
Real estate investments | ||||||||||
Land | $ | 1,790 | $ | 6,420 | ||||||
Building and improvements | 7,602 | 33,489 | ||||||||
Tenant improvements | 73 | 780 | ||||||||
9,465 | 40,689 | |||||||||
Less: Accumulated depreciation and amortization | (285 | ) | (3,172 | ) | ||||||
9,180 | 37,517 | |||||||||
Cash and cash equivalents | 635 | 2,607 | ||||||||
Escrows and reserves | 669 | 883 | ||||||||
Accounts receivable | 431 | 208 | ||||||||
Accrued straight-line rents | 61 | 801 | ||||||||
Prepaid expenses and other assets | 568 | 278 | ||||||||
Deferred costs, net | 214 | 778 | ||||||||
Intangible assets, net | 749 | 1,579 | ||||||||
Investment in real estate entities | — | 613 | ||||||||
Total assets | $ | 12,507 | $ | 45,264 | ||||||
LIABILITIES AND OWNERS’ EQUITY (DEFICIT) | ||||||||||
Mortgage loans and other debt | $ | 9,050 | $ | 37,018 | ||||||
Accounts payable and accrued expenses | 184 | 511 | ||||||||
Deferred revenue | 60 | 39 | ||||||||
Tenant security deposits | 118 | 454 | ||||||||
Total liabilities | 9,412 | 38,022 | ||||||||
Commitments and contingencies | ||||||||||
Minority interest | 2,671 | 7,657 | ||||||||
Owners’ equity (deficit) | 424 | (415 | ) | |||||||
Total liabilities and owners’ equity (deficit) | $ | 12,507 | $ | 45,264 | ||||||
F-21
Year Ended December 31, | ||||||||||||||
2005 | 2004 | 2003 | ||||||||||||
(in thousands) | ||||||||||||||
Revenue | ||||||||||||||
Rental income | $ | 6,199 | $ | 5,883 | $ | 5,859 | ||||||||
Operating expense reimbursements | 239 | 249 | 89 | |||||||||||
Other income | 420 | 346 | 237 | |||||||||||
Total revenue | 6,858 | 6,478 | 6,185 | |||||||||||
Expenses | ||||||||||||||
Property operating expenses | 2,186 | 1,151 | 1,526 | |||||||||||
Real estate taxes and insurance | 577 | 430 | 379 | |||||||||||
General and administrative | 152 | 750 | 620 | |||||||||||
Depreciation and amortization | 1,541 | 1,024 | 932 | |||||||||||
Total expenses | 4,456 | 3,355 | 3,457 | |||||||||||
Operating income | 2,402 | 3,123 | 2,728 | |||||||||||
Interest income | 9 | 2 | 8 | |||||||||||
Interest expense | (2,233 | ) | (2,064 | ) | (2,032 | ) | ||||||||
Equity in earnings of unconsolidated entities | 199 | 118 | 128 | |||||||||||
Gain on sale of net assets | 15,563 | — | — | |||||||||||
Income before minority interest | 15,940 | 1,179 | 832 | |||||||||||
Minority interest in income | (8,020 | ) | (837 | ) | (524 | ) | ||||||||
Distributions to minority interests in excess of basis | — | — | (99 | ) | ||||||||||
Net income | $ | 7,920 | $ | 342 | $ | 209 | ||||||||
F-22
(In thousands) | |||||
Balance, January��1, 2003 | $ | (242 | ) | ||
Distributions | (347 | ) | |||
Net income | 209 | ||||
Balance, December 31, 2003 | (380 | ) | |||
Contributions | 34 | ||||
Distributions | (411 | ) | |||
Net income | 342 | ||||
Balance, December 31, 2004 | (415 | ) | |||
Distributions | (7,081 | ) | |||
Net income | 7,920 | ||||
Balance, December 31, 2005 | $ | 424 | |||
F-23
Year Ended December 31, | |||||||||||||||||
2005 | 2004 | 2003 | |||||||||||||||
(in thousands) | |||||||||||||||||
Cash flows from operating activities | |||||||||||||||||
Net income | $ | 7,920 | $ | 342 | $ | 209 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
Depreciation | 961 | 841 | 807 | ||||||||||||||
Amortization of intangibles | 505 | 28 | — | ||||||||||||||
Amortization of deferred costs | 193 | 155 | 125 | ||||||||||||||
Equity in earnings of unconsolidated entities | (199 | ) | (118 | ) | (143 | ) | |||||||||||
Distributions from unconsolidated entities | 15 | 107 | 107 | ||||||||||||||
Gain on sale of net assets | (15,563 | ) | — | — | |||||||||||||
Minority interest | 8,020 | 837 | 623 | ||||||||||||||
Loss on disposal of fixed assets | — | — | 81 | ||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||
Escrows and reserves | (473 | ) | (407 | ) | (159 | ) | |||||||||||
Accounts receivable | (392 | ) | (193 | ) | 5 | ||||||||||||
Accrued straight-line rents | (20 | ) | (133 | ) | (206 | ) | |||||||||||
Prepaid expenses and other assets | (375 | ) | (43 | ) | (21 | ) | |||||||||||
Accounts payable and accrued expenses | 96 | 483 | (13 | ) | |||||||||||||
Tenant security deposits | 419 | 102 | 1 | ||||||||||||||
Deferred revenue | (266 | ) | (8 | ) | 19 | ||||||||||||
Net cash provided by operating activities | 841 | 1,993 | 1,435 | ||||||||||||||
Cash flows from investing activities: | |||||||||||||||||
Proceeds from sale of net assets | 10,358 | — | — | ||||||||||||||
Acquisitions of real estate investments and related intangibles | — | (2,959 | ) | — | |||||||||||||
Additions to real estate investments and other assets | (832 | ) | (162 | ) | (77 | ) | |||||||||||
Deferred leasing costs | (126 | ) | (153 | ) | (121 | ) | |||||||||||
Net cash provided by (used in) investing activities | 9,400 | (3,274 | ) | (198 | ) | ||||||||||||
Cash flows from financing activities | |||||||||||||||||
Contributions | — | 34 | — | ||||||||||||||
Contributions from minority interests | — | 4,138 | — | ||||||||||||||
Distributions | (988 | ) | (411 | ) | (347 | ) | |||||||||||
Distributions to minority interests | (11,817 | ) | (463 | ) | (660 | ) | |||||||||||
Proceeds from line of credit | 1,000 | — | — | ||||||||||||||
Proceeds from mortgage notes payable | 300 | 150 | — | ||||||||||||||
Repayment of mortgage notes payable | (86 | ) | (433 | ) | (252 | ) | |||||||||||
Other debt repayments, net | (622 | ) | (30 | ) | (30 | ) | |||||||||||
Deferred financing costs | — | (219 | ) | (33 | ) | ||||||||||||
Net cash (used in) provided by financing activities | (12,213 | ) | 2,766 | (1,322 | ) | ||||||||||||
Increase (decrease) in cash and cash equivalents | (1,972 | ) | 1,485 | (85 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | 2,607 | 1,122 | 1,207 | ||||||||||||||
Cash and cash equivalents, end of period | $ | 635 | $ | 2,607 | $ | 1,122 | |||||||||||
Supplemental disclosure of non cash investing and financing activities | |||||||||||||||||
Non cash distribution of net assets | $ | 6,093 | $ | — | $ | — | |||||||||||
Non cash distribution of net assets to minority interests | $ | 1,189 | $ | — | $ | — | |||||||||||
Debt assumed in acquisitions of real estate investments | $ | — | $ | 11,080 | $ | — | |||||||||||
Cash interest paid | $ | 2,206 | $ | 2,064 | $ | 2,032 |
F-24
NOTE 1: | DESCRIPTION OF BUSINESS AND FORMATION TRANSACTION |
NOTE 2: | SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation |
Principles of Consolidation |
F-25
Revenue Recognition |
Cash and Cash Equivalents |
Escrows and Reserves |
Deferred Costs |
Real Estate Investments |
F-26
Intangibles |
Income Taxes |
Use of Estimates |
NOTE 3: | ACQUISITIONS OF REAL ESTATE INVESTMENTS |
Land | $ | 2,462 | |||
Buildings | 9,765 | ||||
Intangibles | 1,601 | ||||
Total assets acquired | 13,828 | ||||
Mortgage notes payable | (10,930 | ) | |||
Net assets acquired | $ | 2,898 | |||
F-27
Year Ending | ||||
December 31, 2004 | ||||
(Unaudited) | ||||
Pro forma total revenues | $ | 7,808 | ||
Pro forma net income | $ | 1,551 |
NOTE 4: | INVESTMENTS IN REAL ESTATE ENTITIES |
NOTE 5: | BORROWINGS |
December 31, | |||||||||
2005 | 2004 | ||||||||
Line of credit | $ | 550 | $ | 150 | |||||
Mortgage debt: | |||||||||
Fixed, with an interest rate of 5.66% at December 31, 2005 | 8,500 | 33,728 | |||||||
Variable | — | 2,730 | |||||||
8,500 | 36,458 | ||||||||
Note payable, at a rate of prime plus 1% | — | 410 | |||||||
$ | 9,050 | $ | 37,018 | ||||||
Line of Credit |
Mortgage Debt |
F-28
Year ending December 31, 2006 | $ | — | ||
Year ending December 31, 2007 | 77 | |||
Year ending December 31, 2008 | 86 | |||
Year ending December 31, 2009 | 93 | |||
Year ending December 31, 2010 | 98 | |||
Thereafter | 8,146 | |||
$ | 8,500 | |||
NOTE 6: | FAIR VALUE OF FINANCIAL INSTRUMENTS |
NOTE 7: | LEASING ARRANGEMENTS |
NOTE 8: | TRANSACTIONS WITH RELATED PARTIES |
NOTE 9: | COMMITMENTS AND CONTINGENCIES |
F-29
/s/ BDO Seidman, LLP |
F-30
Six Months Ended | Year Ended | |||||||||
June 30, 2005 | December 31, 2004 | |||||||||
(unaudited) | ||||||||||
REVENUES | ||||||||||
Rental income | $ | 1,049,973 | $ | 2,175,256 | ||||||
Operating expense reimbursements | 37,493 | 31,778 | ||||||||
Other income | 15,080 | 34,631 | ||||||||
Total revenues | 1,102,546 | 2,241,665 | ||||||||
CERTAIN EXPENSES | ||||||||||
Real estate taxes | 73,220 | 145,657 | ||||||||
Utilities | 130,714 | 283,392 | ||||||||
Property operating expenses | 115,568 | 240,503 | ||||||||
General and administrative | 1,718 | 3,447 | ||||||||
Amortization of lease costs | 33,115 | 66,231 | ||||||||
Total expenses | 354,335 | 739,230 | ||||||||
REVENUES IN EXCESS OF CERTAIN EXPENSES | $ | 748,211 | $ | 1,502,435 | ||||||
F-31
(1) | Organization and Formation |
(2) | Summary of Significant Accounting Policies |
Basis of Accounting |
Use of Estimates |
Revenue Recognition |
(3) | Rental Income |
F-32
Year | Amount | |||
2005 | $ | 1,983,462 | ||
2006 | $ | 1,420,900 | ||
2007 | $ | 1,068,449 | ||
2008 | $ | 751,047 | ||
2009 | $ | 253,918 | ||
Thereafter | $ | 44,833 |
F-33
/s/ BDO Seidman, LLP |
F-34
Six Months Ended | Year Ended | |||||||||
June 30, 2005 | December 31, 2004 | |||||||||
(unaudited) | ||||||||||
REVENUE | ||||||||||
Rental income | $ | 455,784 | $ | 518,593 | ||||||
CERTAIN EXPENSES | ||||||||||
Real estate taxes | 147,811 | 294,608 | ||||||||
Utilities | 208,769 | 465,665 | ||||||||
Property operating expenses | 417,780 | 818,451 | ||||||||
Total expenses | 774,360 | 1,578,724 | ||||||||
CERTAIN EXPENSES IN EXCESS OF REVENUE | $ | (318,576 | ) | $ | (1,060,131 | ) | ||||
F-35
(1) | Organization and Formation |
(2) | Summary of Significant Accounting Policies |
Basis of Accounting |
Use of Estimates |
Revenue Recognition |
(3) | Rental Income |
F-36
Year | Amount | |||
2005 | $ | 265,416 | ||
2006 | $ | 594,833 | ||
2007 | $ | 511,156 | ||
2008 | $ | 151,215 | ||
2009 | $ | — | ||
Thereafter | $ | — |
F-37
/s/ BDO Seidman, LLP |
F-38
Three Months | ||||||||||
Ended | Year Ended | |||||||||
January 31, 2006 | October 31, 2005 | |||||||||
(Unaudited) | ||||||||||
REVENUES | ||||||||||
Rental income | $ | 479,699 | $ | 1,935,365 | ||||||
Operating expense reimbursements | 166,424 | 604,936 | ||||||||
Other income | 225 | 735 | ||||||||
Total revenues | 646,348 | 2,541,036 | ||||||||
CERTAIN EXPENSES | ||||||||||
Real estate taxes | 56,254 | 200,494 | ||||||||
Utilities | 37,868 | 173,002 | ||||||||
Property operating expenses | 87,790 | 321,380 | ||||||||
General and administrative | 9,674 | 94,456 | ||||||||
Other expenses | 71 | 749 | ||||||||
Interest expense | 145,446 | 520,066 | ||||||||
Total expenses | 337,103 | 1,310,147 | ||||||||
REVENUES IN EXCESS OF CERTAIN EXPENSES | $ | 309,245 | $ | 1,230,889 | ||||||
F-39
(1) | Organization and Formation |
(2) | Summary of Significant Accounting Policies |
Basis of Accounting |
Use of Estimates |
Revenue Recognition |
F-40
(3) | Rental Income |
Year | Amount | |||
2006 | $ | 1,735,360 | ||
2007 | $ | 1,592,928 | ||
2008 | $ | 1,279,422 | ||
2009 | $ | 1,218,246 | ||
2010 | $ | 1,244,984 | ||
Thereafter | $ | 864,500 |
(4) | Mortgage |
2006 | $ | 114,781 | ||
2007 | 122,437 | |||
2008 | 129,018 | |||
2009 | 139,237 | |||
2010 | 148,556 | |||
Thereafter | 8,096,480 | |||
Total | $ | 8,750,509 | ||
F-41
/s/ BDO Seidman, LLP |
F-42
Nine Months | ||||||||||
Ended | Year Ended | |||||||||
September 30, 2005 | December 31, 2004 | |||||||||
(unaudited) | ||||||||||
REVENUES | ||||||||||
Rental income | $ | 781,979 | $ | 1,033,034 | ||||||
Other income | 8,315 | 3,603 | ||||||||
Total revenues | 790,294 | 1,036,637 | ||||||||
CERTAIN EXPENSES | ||||||||||
Real estate taxes | 65,697 | 87,504 | ||||||||
Utilities | 51,825 | 82,409 | ||||||||
Property operating expenses | 151,000 | 239,811 | ||||||||
General and administrative | 5,214 | 6,548 | ||||||||
Other expenses | 5,023 | — | ||||||||
Interest expense | 268,166 | 357,554 | ||||||||
Total expenses | 546,925 | 773,826 | ||||||||
REVENUES IN EXCESS OF CERTAIN EXPENSES | $ | 243,369 | $ | 262,811 | ||||||
F-43
(1) | Organization and Formation |
(2) | Summary of Significant Accounting Policies |
Basis of Accounting |
Use of Estimates |
Revenue Recognition |
(3) | Rental Income |
F-44
Year | Amount | |||
2005 | $ | 1,066,596 | ||
2006 | $ | 923,465 | ||
2007 | $ | 688,811 | ||
2008 | $ | 282,883 | ||
2009 | $ | 148,675 | ||
Thereafter | $ | 125,387 |
(4) | Mortgage |
2005 | $ | 0 | ||
2006 | 24,906 | |||
2007 | 64,803 | |||
2008 | 67,967 | |||
2009 | 73,394 | |||
Thereafter | 5,535,930 | |||
Total | $ | 5,767,000 | ||
F-45
/s/ BDO Seidman, LLP |
F-46
Three Months | ||||||||||
Ended | Year Ended | |||||||||
March 31, 2006 | December 31, 2005 | |||||||||
(Unaudited) | ||||||||||
REVENUES | ||||||||||
Rental income | $ | 1,110,906 | $ | 4,192,858 | ||||||
Operating expense reimbursements | 10,404 | 78,907 | ||||||||
Other income | — | — | ||||||||
Total revenues | 1,121,310 | 4,271,765 | ||||||||
CERTAIN EXPENSES | ||||||||||
Real estate taxes | 88,854 | 368,306 | ||||||||
Utilities | 114,552 | 490,149 | ||||||||
Property operating expenses | 113,676 | 500,536 | ||||||||
General and administrative | 234 | 17,039 | ||||||||
Total expenses | 317,316 | 1,376,030 | ||||||||
REVENUES IN EXCESS OF CERTAIN EXPENSES | $ | 803,994 | $ | 2,895,735 | ||||||
F-47
(1) | Organization and Formation |
(2) | Summary of Significant Accounting Policies |
Basis of Accounting |
Use of Estimates |
Revenue Recognition |
(3) | Rental Income |
F-48
Year | Amount | |||
2006 | $ | 4,299,072 | ||
2007 | $ | 4,167,241 | ||
2008 | $ | 3,219,927 | ||
2009 | $ | 2,345,191 | ||
2010 | $ | 965,324 | ||
Thereafter | $ | 1,631,028 |
F-49
Gross Amount at Which | |||||||||||||||||||||||||||||||||||||||||
Carried at Close | |||||||||||||||||||||||||||||||||||||||||
Initial Costs | Costs | of Period | |||||||||||||||||||||||||||||||||||||||
Capitalized | Date of | ||||||||||||||||||||||||||||||||||||||||
Buildings and | Subsequent to | Buildings and | Accumulated | Construction/ | Year | ||||||||||||||||||||||||||||||||||||
Properties | Encumbrances | Land | Improvements | Acquisition | Land | Improvements | Total | Depreciation | Renovation | Acquired | |||||||||||||||||||||||||||||||
Office Buildings | |||||||||||||||||||||||||||||||||||||||||
Pidgeon Hill Drive — Sterling, VA | $ | 9,062 | $ | 2,289 | $ | 9,155 | $ | — | $ | 2,289 | $ | 9,155 | $ | 11,444 | $ | — | 1986 | 2005 | |||||||||||||||||||||||
Executive Tower — Hampton, VA | 12,640 | 3,086 | 10,800 | 84 | 3,086 | 10,884 | 13,970 | 140 | 1974/1991 | 2005 | |||||||||||||||||||||||||||||||
Columbia Medical Campus — Columbia, MD | — | 3,258 | 11,858 | — | 3,258 | 11,858 | 15,116 | 123 | 1982/1984 | 2005 | |||||||||||||||||||||||||||||||
Frederick Medical Campus — Frederick, MD | — | 897 | 3,430 | — | 897 | 3,430 | 4,327 | 36 | 1996 | 2005 | |||||||||||||||||||||||||||||||
Timonium — Timonium, MD | — | 710 | 2,381 | — | 710 | 2,381 | 3,091 | 25 | 1986 | 2005 | |||||||||||||||||||||||||||||||
Century South — Germantown, MD | — | 816 | 3,351 | (19 | ) | 816 | 3,332 | 4,148 | 33 | 2003 | 2005 | ||||||||||||||||||||||||||||||
Commerce Center — Greenbelt, MD | 17,760 | 3,786 | 15,228 | — | 3,786 | 15,228 | 19,014 | 96 | 1987 | 2005 | |||||||||||||||||||||||||||||||
Pinewood Plaza — Hampton, VA | 5,767 | 1,528 | 6,114 | 10 | 1,528 | 6,124 | 7,652 | 26 | 1987 | 2005 | |||||||||||||||||||||||||||||||
Garden City Drive — Landover, MD | 4,894 | 1,371 | 5,485 | 63 | 1,387 | 5,532 | 6,919 | 11 | 1980/1985 | 2005 | |||||||||||||||||||||||||||||||
Property Totals | 50,123 | 17,741 | 67,802 | 138 | 17,757 | 67,924 | 85,681 | 490 | |||||||||||||||||||||||||||||||||
Land held for sale — Charlottesville, VA | 40,000 | 52,160 | 1,362 | 53,522 | — | 53,522 | |||||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | 78 | 78 | 3 | |||||||||||||||||||||||||||||||||
Total | $ | 90,123 | $ | 69,901 | $ | 67,802 | $ | 1,500 | $ | 71,279 | $ | 68,002 | $ | 139,281 | $ | 493 | |||||||||||||||||||||||||
Buildings | 40 years | |
Building components | 5 to 15 years | |
Tenant improvements | Lesser of the lease term or useful life of the assets | |
Furniture, fixtures and equipment | 5 to 10 years |
F-50
March 30, 2005 | |||||
(inception) to | |||||
December 31, | |||||
Real Estate Assets | 2005 | ||||
Balance at beginning of period | $ | — | |||
Additions during period | |||||
Acquisitions | 137,703 | ||||
Improvements | 122 | ||||
Development costs on land held for sale | 1,378 | ||||
Other | 78 | ||||
Balance at close of period | $ | 139,281 | |||
March 30, 2005 | |||||
(inception) to | |||||
December 31, | |||||
Accumulated Depreciation on Real Estate Assets | 2005 | ||||
Balance at beginning of period | $ | — | |||
Additions during period | |||||
Depreciation expense | 493 | ||||
Balance at close of period | $ | 493 | |||
F-51
Page | ||||
Summary | 1 | |||
Risk Factors | 21 | |||
Special Note Regarding Forward-Looking Statements | 43 | |||
Market Data | 44 | |||
Capitalization | 45 | |||
Dilution | 46 | |||
Dividend Policy | 48 | |||
Use of Proceeds | 49 | |||
Selling Stockholders | 50 | |||
Institutional Trading of Our Common Stock | 52 | |||
Selected Historical Financial and Other Data | 53 | |||
Unaudited Pro Forma Financial Information | 56 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 66 | |||
Our Business and Properties | 75 | |||
Management | 140 | |||
Certain Relationships and Related Transactions | 151 | |||
Policies with Respect to Certain Activities | 156 | |||
Principal Stockholders | 160 | |||
Description of Our Common Stock | 162 | |||
Certain Provisions of Maryland Law and of Our Charter and Bylaws | 166 | |||
Asset Capital Partners, L.P. | 171 | |||
U.S. Federal Income Tax Considerations | 175 | |||
Underwriting | 180 | |||
Legal Matters | 185 | |||
Experts | 185 | |||
Where You Can Find More Information | 185 | |||
Index to Financial Statements | F-1 |
Securities and Exchange Commission registration fee | $ | 15,082 | |||
NASD filing fee | 13,843 | ||||
Nasdaq Global MarketTM Listing Fees | 100,000 | ||||
Transfer agent and registrar fees | 20,000 | ||||
Legal fees and expenses | 966,307 | ||||
Accounting fees and expenses | 962,889 | ||||
Printing and mailing fees | 817,405 | ||||
Miscellaneous | 250,000 | ||||
Total | $ | 3,145,526 | |||
* | To be filed by amendment. |
II-1
II-2
II-3
• | the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, | |
• | the director or officer actually received an improper personal benefit in money, property or services, or | |
• | in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. |
• | a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation, and | |
• | a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met. |
II-4
Exhibit | Description of Document | |||||
1 | .1** | — | Form of Underwriting Agreement | |||
3 | .1** | — | Articles of Amendment and Restatement of Asset Capital Corporation, Inc. | |||
3 | .2** | — | Second Amended and Restated Bylaws of Asset Capital Corporation, Inc. | |||
4 | .1** | — | Form of Certificate for Common Stock for Asset Capital Corporation, Inc. | |||
4 | .2** | — | Registration Rights Agreement among Friedman, Billings, Ramsey & Co., Inc., Asset Capital Corporation, Inc., Peter C. Minshall, Blair D. Fernau, William B. LeBlanc III, Barry E. Johnson and Kenneth M. Houle for the benefit of certain holders of the common stock of Asset Capital Corporation, Inc., dated as of June 30, 2005 | |||
5 | .1** | — | Opinion of Hunton & Williams LLP | |||
10 | .1** | — | First Amended and Restated Agreement of Limited Partnership of Asset Capital Partners, L.P. | |||
10 | .2**† | — | 2005 Equity Incentive Plan | |||
10 | .3**† | — | Employment Agreement between Asset Capital Corporation, Inc. and Peter C. Minshall, dated June 30, 2005 | |||
10 | .4**† | — | Amended and Restated Employment Agreement between Asset Capital Corporation, Inc. and Blair D. Fernau, dated May 24, 2006 | |||
10 | .5**† | — | Amended and Restated Employment Agreement between Asset Capital Corporation, Inc. and William B. LeBlanc III, dated May 23, 2006 | |||
10 | .6**† | — | Amended and Restated Employment Agreement between Asset Capital Corporation, Inc. and Clay E. Carney, dated March 8, 2006 | |||
10 | .7**† | — | Form of LTIP Award Agreement (Officers and Employees) | |||
10 | .8**† | — | Form of LTIP Award Agreement (Non-Employee Directors) | |||
10 | .9** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Century South Investors LLC, Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .10** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Commerce Center I L.L.C., ACC II LLC, and Asset Capital Corporation, Inc. | |||
10 | .11** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Garden City Drive Investors LLC, Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .12** | — | Contribution Agreement, dated June 21, 2005, by and between Leo Halpert and Asset Capital Corporation, Inc. | |||
10 | .13** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Pidgeon Hill Drive LLC, Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .14** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Second Pidgeon LLC, Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .15** | — | Contribution Agreement, dated June 23, 2005, by and between Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .16** | — | Assignment and Assumption Agreement, dated June 23, 2005, by and among Asset Capital Corporation, Inc. and Asset Capital Corporation, L.L.C. and Asset Capital Management, LLC and ARV/ACC Engineering, LLC | |||
10 | .17** | — | Assignment and Assumption of Partnership Interest Sale/Purchase Option Agreement (Class C Interests), dated May 27, 2005, by and between Westat, Inc. and Asset Capital Corporation, L.L.C. | |||
10 | .18** | — | Assignment and Assumption of Partnership Interest Sale/Purchase Option Agreement (Class B Interests), dated May 27, 2005, by and between Westat, Inc. and Asset Capital Corporation, L.L.C. | |||
10 | .19** | — | Agreement of Purchase and Sale, dated August 12, 2005, by and between Asset Capital Partners, L.P. and Pinewood Plaza Associates, LLC | |||
10 | .20** | — | Amendment to Agreement of Purchase and Sale, dated September 20, 2005, by and between Pinewood Associates, LLC and Asset Capital Partners, L.P. |
II-5
Exhibit | Description of Document | |||||
10 | .21** | — | Agreement of Purchase and Sale, dated July 29, 2005, by and between Carefirst Bluechoice, Inc. and ACC Columbia Medical Campus LLC | |||
10 | .22** | — | First Amendment to Agreement of Purchase and Sale, dated July 29, 2005, by and between Carefirst Bluechoice, Inc. and ACC Columbia Medical Campus LLC | |||
10 | .23** | — | Agreement of Purchase and Sale, dated July 29, 2005, by and between Carefirst Bluechoice, Inc. and ACC Frederick Medical Campus LLC | |||
10 | .24** | — | First Amendment to Agreement of Purchase and Sale, dated July 29, 2005, by and between Carefirst Bluechoice, Inc. and ACC Frederick Medical Center LLC | |||
10 | .25** | — | Agreement of Purchase and Sale, dated July 29, 2005, by and between Timonium Office Building Limited Partnership and ACC Timonium LLC | |||
10 | .26** | — | First Amendment to Agreement of Purchase and Sale, dated July 29, 2005, by and between Timonium Office Building Limited Partnership and ACC Timonium LLC | |||
10 | .27** | — | Agreement of Purchase and Sale, dated August 16, 2005, by and between M. Clifton McClure and Robert M. Callaghan, as trustees of the NYC Land Trust, D. Michael Atkins and Robert M. Callaghan, trustees of the Sixty-Four-616 Land Trust, M. Clifton McClure and Robert M. Callaghan, trustees of the One Ninth Land Trust, and S-V Associates, as the record owners, Wendell W. Wood, as the beneficial owner, HM Acquisition Group, LLC and HM Capital Group, LLC and HM Capital Group, LLC | |||
10 | .28** | — | Agreement of Sale and Purchase of Improved Real Property, dated April 18, 2005, by and between Asset Capital Corporation, L.L.C., and Executive Tower Associates, Limited Partnership | |||
10 | .29** | — | Amendment to Agreement of Sale and Purchase of Improved Real Property, dated May 6, 2005, by and between Executive Tower Associates, Limited Partnership and Asset Capital Corporation, L.L.C. | |||
10 | .30** | — | Amendment No. 2 to Agreement of Sale and Purchase of Improved Real Property, dated June 6, 2005, by and between Executive Tower Associates, Limited Partnership and Asset Capital Corporation, L.L.C. | |||
10 | .31** | — | Agreement of Purchase and Sale, dated November 11, 2005, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .32** | — | First Amendment to Agreement of Purchase and Sale, dated December 12, 2005, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .33** | — | Second Amendment to Agreement of Purchase and Sale, dated December 14, 2005, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .34** | — | Third Amendment to Agreement of Purchase and Sale, dated December 14, 2005, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .35** | — | Fourth Amendment to Agreement of Purchase and Sale, dated January 9, 2006, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .36** | — | Fifth Amendment to Agreement of Purchase and Sale, dated January 19, 2006, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derby Court LLC and Asset Capital Partners, L.P. | |||
10 | .37** | — | Separation Agreement and General Release, dated November 15, by and between Asset Capital Corporation, Inc. and Barry E. Johnson. | |||
10 | .38** | — | Asset Management Agreement, effective as of January 31, 2006, by and between HM Acquisition Group LLC and Octagon Partners, LLC | |||
10 | .39** | — | Asset Management Agreement, effective as of July 29, 2005, by and between Asset Capital Partners, L.P. and Brownstone Capital, LLC. | |||
10 | .40** | — | Credit Facility Agreement, dated March 20, 2006, by and between Asset Capital Partners, L.P. and Citizens Bank. |
II-6
Exhibit | Description of Document | |||||
10 | .41** | — | Mezzanine Loan and Security Agreement, dated February 15, 2006, by and between Asset Capital Partners, L.P. and BTR Miller, LLC. | |||
10 | .42** | — | Agreement of Sale, dated May 15, 2006, by and between Lake Wright Properties I, LLC, Lake Wright Properties II, LLC, Trident Properties, LLC, Southport Center, LLC and Asset Capital Partners, L.P. | |||
10 | .43** | — | Agreement of Purchase and Sale, dated May 4, 2006, by and between Edens & Avent Investments Limited Partnership and HM Acquisition Group LLC. | |||
10 | .44** | — | Building Pad Purchase Agreement, dated April 10, 2006, by and between HM Acquisition Group LLC and NVR, Inc. | |||
10 | .45** | — | Agreement of Purchase and Sale, dated June 21, 2006, by and between C-9813 and B-9813 Godwin Drive LLC and Asset Capital Partners L.P. | |||
10 | .46** | — | Agreement of Purchase and Sale, dated July 7, 2006, by and between Asset Capital Partners, L.P. and Mor Forbes 2 LLC. | |||
21 | .1** | — | List of Subsidiaries of Asset Capital Corporation, Inc. | |||
23 | .1** | — | Consent of Hunton & Williams LLP (included in Exhibits 5.1) | |||
23 | .2 | — | Consent of BDO Seidman, LLP | |||
24 | .1** | — | Power of Attorney (included on Signature Page) |
* | To be filed by amendment. |
** | Previously filed. |
† | Compensatory plan or arrangement. |
(1) For purposes of determining any liability under the Securities Act the information omitted from the form of prospectus filed as part of this registration statement in reliance under Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be a part of this registration statement as of the time it was declared effective. | |
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
II-7
ASSET CAPITAL CORPORATION, INC. |
By: | /s/ Clay E. Carney |
Name: Clay E. Carney | |
Title: | Chief Financial Officer, Treasurer and Secretary |
Signature | Title | Date | ||||
* | Chairman and Chief Executive Officer (Principal Executive Officer) | August 1, 2006 | ||||
* | Vice Chairman and Chief Investment Officer | August 1, 2006 | ||||
* | Director, President and Chief Operating Officer | August 1, 2006 | ||||
/s/ Clay E. Carney | Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) | August 1, 2006 | ||||
* | Director | August 1, 2006 | ||||
* | Director | August 1, 2006 | ||||
* | Director | August 1, 2006 | ||||
* | Director | August 1, 2006 | ||||
*By: | /s/ Clay E. Carney Attorney-in-Fact |
II-8
Exhibit | Description of Document | |||||
1 | .1** | — | Form of Underwriting Agreement | |||
3 | .1** | — | Articles of Amendment and Restatement of Asset Capital Corporation, Inc. | |||
3 | .2** | — | Second Amended and Restated Bylaws of Asset Capital Corporation, Inc. | |||
4 | .1** | — | Form of Certificate for Common Stock for Asset Capital Corporation, Inc. | |||
4 | .2** | — | Registration Rights Agreement among Friedman, Billings, Ramsey & Co., Inc., Asset Capital Corporation, Inc., Peter C. Minshall, Blair D. Fernau, William B. LeBlanc III, Barry E. Johnson and Kenneth M. Houle for the benefit of certain holders of the common stock of Asset Capital Corporation, Inc., dated as of June 30, 2005 | |||
5 | .1** | — | Opinion of Hunton & Williams LLP | |||
10 | .1** | — | First Amended and Restated Agreement of Limited Partnership of Asset Capital Partners, L.P. | |||
10 | .2**† | — | 2005 Equity Incentive Plan | |||
10 | .3**† | — | Employment Agreement between Asset Capital Corporation, Inc. and Peter C. Minshall, dated June 30, 2005 | |||
10 | .4**† | — | Amended and Restated Employment Agreement between Asset Capital Corporation, Inc. and Blair D. Fernau, dated May 24, 2006 | |||
10 | .5**† | — | Amended and Restated Employment Agreement between Asset Capital Corporation, Inc. and William B. LeBlanc III, dated May 23, 2006 | |||
10 | .6**† | — | Amended and Restated Employment Agreement between Asset Capital Corporation, Inc. and Clay E. Carney, dated March 8, 2006 | |||
10 | .7**† | — | Form of LTIP Award Agreement (Officers and Employees) | |||
10 | .8**† | — | Form of LTIP Award Agreement (Non-Employee Directors) | |||
10 | .9** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Century South Investors LLC, Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .10** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Commerce Center I L.L.C., ACC II LLC, and Asset Capital Corporation, Inc. | |||
10 | .11** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Garden City Drive Investors LLC, Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .12** | — | Contribution Agreement, dated June 21, 2005, by and between Leo Halpert and Asset Capital Corporation, Inc. | |||
10 | .13** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Pidgeon Hill Drive LLC, Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .14** | — | Contribution Agreement, dated June 23, 2005, by and among the members of Second Pidgeon LLC, Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .15** | — | Contribution Agreement, dated June 23, 2005, by and between Asset Capital Corporation, L.L.C. and Asset Capital Corporation, Inc. | |||
10 | .16** | — | Assignment and Assumption Agreement, dated June 23, 2005, by and among Asset Capital Corporation, Inc. and Asset Capital Corporation, L.L.C. and Asset Capital Management, LLC and ARV/ACC Engineering, LLC | |||
10 | .17** | — | Assignment and Assumption of Partnership Interest Sale/Purchase Option Agreement (Class C Interests), dated May 27, 2005, by and between Westat, Inc. and Asset Capital Corporation, L.L.C. | |||
10 | .18** | — | Assignment and Assumption of Partnership Interest Sale/Purchase Option Agreement (Class B Interests), dated May 27, 2005, by and between Westat, Inc. and Asset Capital Corporation, L.L.C. | |||
10 | .19** | — | Agreement of Purchase and Sale, dated August 12, 2005, by and between Asset Capital Partners, L.P. and Pinewood Plaza Associates, LLC | |||
10 | .20** | — | Amendment to Agreement of Purchase and Sale, dated September 20, 2005, by and between Pinewood Associates, LLC and Asset Capital Partners, L.P. | |||
10 | .21** | — | Agreement of Purchase and Sale, dated July 29, 2005, by and between Carefirst Bluechoice, Inc. and ACC Columbia Medical Campus LLC |
Exhibit | Description of Document | |||||
10 | .22** | — | First Amendment to Agreement of Purchase and Sale, dated July 29, 2005, by and between Carefirst Bluechoice, Inc. and ACC Columbia Medical Campus LLC | |||
10 | .23** | — | Agreement of Purchase and Sale, dated July 29, 2005, by and between Carefirst Bluechoice, Inc. and ACC Frederick Medical Campus LLC | |||
10 | .24** | — | First Amendment to Agreement of Purchase and Sale, dated July 29, 2005, by and between Carefirst Bluechoice, Inc. and ACC Frederick Medical Center LLC | |||
10 | .25** | — | Agreement of Purchase and Sale, dated July 29, 2005, by and between Timonium Office Building Limited Partnership and ACC Timonium LLC | |||
10 | .26** | — | First Amendment to Agreement of Purchase and Sale, dated July 29, 2005, by and between Timonium Office Building Limited Partnership and ACC Timonium LLC | |||
10 | .27** | — | Agreement of Purchase and Sale, dated August 16, 2005, by and between M. Clifton McClure and Robert M. Callaghan, as trustees of the NYC Land Trust, D. Michael Atkins and Robert M. Callaghan, trustees of the Sixty-Four-616 Land Trust, M. Clifton McClure and Robert M. Callaghan, trustees of the One Ninth Land Trust, and S-V Associates, as the record owners, Wendell W. Wood, as the beneficial owner, HM Acquisition Group, LLC and HM Capital Group, LLC and HM Capital Group, LLC | |||
10 | .28** | — | Agreement of Sale and Purchase of Improved Real Property, dated April 18, 2005, by and between Asset Capital Corporation, L.L.C., and Executive Tower Associates, Limited Partnership | |||
10 | .29** | — | Amendment to Agreement of Sale and Purchase of Improved Real Property, dated May 6, 2005, by and between Executive Tower Associates, Limited Partnership and Asset Capital Corporation, L.L.C. | |||
10 | .30** | — | Amendment No. 2 to Agreement of Sale and Purchase of Improved Real Property, dated June 6, 2005, by and between Executive Tower Associates, Limited Partnership and Asset Capital Corporation, L.L.C. | |||
10 | .31** | — | Agreement of Purchase and Sale, dated November 11, 2005, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .32** | — | First Amendment to Agreement of Purchase and Sale, dated December 12, 2005, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .33** | — | Second Amendment to Agreement of Purchase and Sale, dated December 14, 2005, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .34** | — | Third Amendment to Agreement of Purchase and Sale, dated December 14, 2005, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .35** | — | Fourth Amendment to Agreement of Purchase and Sale, dated January 9, 2006, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derry Court LLC and Asset Capital Partners, L.P. | |||
10 | .36** | — | Fifth Amendment to Agreement of Purchase and Sale, dated January 19, 2006, by and between MOR Montpelier LLC, Forbes Boulevard LLC, Derby Court LLC and Asset Capital Partners, L.P. | |||
10 | .37** | — | Separation Agreement and General Release, dated November 15, by and between Asset Capital Corporation, Inc. and Barry E. Johnson. | |||
10 | .38** | — | Asset Management Agreement, effective as of January 31, 2006, by and between HM Acquisition Group LLC and Octagon Partners LLC | |||
10 | .39** | — | Asset Management Agreement, effective as of July 29, 2005, by and between Asset Capital Partners, L.P. and Brownstone Capital, LLC. | |||
10 | .40** | — | Credit Facility Agreement, dated March 20, 2006, by and between Asset Capital Partners, L.P. and Citizens Bank. | |||
10 | .41** | — | Mezzanine Loan and Security Agreement, dated February 15, 2006, by and between Asset Capital Partners, L.P. and BTR Miller, LLC. |
Exhibit | Description of Document | |||||
10 | .42** | — | Agreement of Sale, dated May 15, 2006, by and between Lake Wright Properties I, LLC, Lake Wright Properties II, LLC, Trident Properties, LLC, Southport Center, LLC and Asset Capital Partners, L.P. | |||
10 | .43** | — | Agreement of Purchase and Sale, dated May 4, 2006, by and between Edens & Avant Investments Limited Partnership and HM Acquisition Group LLC. | |||
10 | .44** | — | Building Pad Purchase Agreement, dated April 10, 2006, by and between HM Acquisition Group LLC and NVR, Inc. | |||
10 | .45** | — | Agreement of Purchase and Sale, dated June 21, 2006, by and between C-9813 and B-9813 Godwin Drive LLC and Asset Capital Partners, L.P. | |||
10 | .46** | — | Agreement of Purchase and Sale, dated July 7, 2006, by and between Asset Capital Partners, L.P. and Mor Forbes 2 LLC. | |||
21 | .1** | — | List of Subsidiaries of Asset Capital Corporation, Inc. | |||
23 | .1** | — | Consent of Hunton & Williams LLP (included in Exhibits 5.1) | |||
23 | .2 | — | Consent of BDO Seidman, LLP | |||
24 | .1** | — | Power of Attorney (included on Signature Page) |
* | To be filed by amendment. |
** | Previously filed. |
† | Compensatory plan or arrangement. |