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Washington, D. C. 20549
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2008 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Maryland (State of incorporation) | 20-8429087 (I.R.S. Employer Identification No.) | |
50 Rockefeller Plaza New York, New York | 10020 (Zip code) | |
(Address of principal executive office) |
(212) 492-1100
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
* | The summarized financial statements contained herein are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of such financial statements have been included. |
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(in thousands, except share and per share amounts)
September 30, | December 31, | |||||||
2008 | 2007 | |||||||
(NOTE) | ||||||||
ASSETS | ||||||||
Real estate, net | $ | 175,138 | $ | — | ||||
Net investment in direct financing leases | 46,229 | — | ||||||
Equity investment in real estate | 23,851 | 8 | ||||||
Cash and cash equivalents | 125,825 | 183 | ||||||
Commercial mortgage-backed securities | 20,158 | — | ||||||
Intangible assets, net | 11,680 | — | ||||||
Deferred offering costs and other assets | 5,561 | 2,753 | ||||||
Total assets | $ | 408,442 | $ | 2,944 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Non-recourse debt | $ | 135,619 | $ | — | ||||
Accounts payable, accrued expenses and other liabilities | 3,192 | 82 | ||||||
Prepaid and deferred rental income | 2,591 | — | ||||||
Due to affiliates | 5,913 | 2,768 | ||||||
Distributions payable | 3,140 | — | ||||||
Total liabilities | 150,455 | 2,850 | ||||||
Minority interest in consolidated entities | 15,582 | — | ||||||
Commitments and contingencies (Note 11) | ||||||||
Shareholders’ Equity: | ||||||||
Preferred stock, $0.001 par value; 50,000,000 shares authorized; none issued | — | — | ||||||
Common stock, $0.001 par value; 400,000,000 shares authorized; 27,737,294 and 22,222 shares issued and outstanding, respectively | 28 | — | ||||||
Additional paid-in capital | 248,809 | 200 | ||||||
Distributions in excess of accumulated earnings | (4,688 | ) | (106 | ) | ||||
Accumulated other comprehensive loss | (1,744 | ) | — | |||||
Total shareholders’ equity | 242,405 | 94 | ||||||
Total liabilities and shareholders’ equity | $ | 408,442 | $ | 2,944 | ||||
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(in thousands, except share and per share amounts)
Period from Inception | ||||||||||||
(February 20, 2007) | ||||||||||||
Three Months Ended | Nine Months Ended | through | ||||||||||
September 30, 2008 | September 30, 2008 | September 30, 2007 | ||||||||||
Revenues | ||||||||||||
Rental income | $ | 2,307 | $ | 2,319 | $ | — | ||||||
Interest income from direct financing leases | 608 | 608 | — | |||||||||
Interest income from commercial mortgage-backed securities | 675 | 985 | — | |||||||||
3,590 | 3,912 | — | ||||||||||
Expenses | ||||||||||||
Depreciation and amortization | (727 | ) | (733 | ) | — | |||||||
General and administrative | (585 | ) | (1,495 | ) | (40 | ) | ||||||
Property expenses | (280 | ) | (341 | ) | — | |||||||
(1,592 | ) | (2,569 | ) | (40 | ) | |||||||
Other Income and Expenses | ||||||||||||
Other interest income | 426 | 1,044 | — | |||||||||
Income from equity investment in real estate | 142 | 194 | — | |||||||||
Minority interest in income | (111 | ) | (111 | ) | — | |||||||
Loss on foreign currency transactions and derivative instrument | (443 | ) | (443 | ) | — | |||||||
Interest expense | (1,322 | ) | (1,331 | ) | — | |||||||
(1,308 | ) | (647 | ) | — | ||||||||
Income (loss) before income taxes | 690 | 696 | (40 | ) | ||||||||
Provision for income taxes | (83 | ) | (83 | ) | — | |||||||
Net Income (Loss) | $ | 607 | $ | 613 | $ | (40 | ) | |||||
Earnings (Loss) Per Share | $ | 0.03 | $ | 0.05 | $ | (1.81 | ) | |||||
Weighted Average Shares Outstanding | 22,590,990 | 12,545,395 | 22,222 | |||||||||
Distributions Declared Per Share | $ | 0.1390 | $ | 0.4140 | N/A | |||||||
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(in thousands)
Period from Inception | ||||||||||||
(February 20, 2007) | ||||||||||||
Three Months Ended | Nine Months Ended | through | ||||||||||
September 30, 2008 | September 30, 2008 | September 30, 2007 | ||||||||||
Net Income (Loss) | $ | 607 | $ | 613 | $ | (40 | ) | |||||
Other Comprehensive Loss | ||||||||||||
Foreign currency translation adjustment | (1,748 | ) | (1,744 | ) | — | |||||||
Comprehensive Loss | $ | (1,141 | ) | $ | (1,131 | ) | $ | (40 | ) | |||
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CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)
For the nine months ended September 30, 2008
(in thousands, except share amounts)
Distributions | Accumulated | |||||||||||||||||||||||
in Excess of | Other | |||||||||||||||||||||||
Common | Additional | Accumulated | Comprehensive | |||||||||||||||||||||
Shares | Stock | Paid-In Capital | Earnings | Loss | Total | |||||||||||||||||||
Balance at December 31, 2007 | 22,222 | $ | — | $ | 200 | $ | (106 | ) | $ | — | $ | 94 | ||||||||||||
Shares issued, net of offering costs | 27,693,496 | 28 | 248,393 | — | — | 248,421 | ||||||||||||||||||
Shares issued to the advisor | 21,576 | — | 216 | — | — | 216 | ||||||||||||||||||
Distributions declared | — | — | (5,195 | ) | — | (5,195 | ) | |||||||||||||||||
Net income | — | — | 613 | — | 613 | |||||||||||||||||||
Other comprehensive loss | — | — | — | (1,744 | ) | (1,744 | ) | |||||||||||||||||
Balance at September 30, 2008 | 27,737,294 | $ | 28 | $ | 248,809 | $ | (4,688 | ) | $ | (1,744 | ) | $ | 242,405 | |||||||||||
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Period from Inception | ||||||||
(February 20, 2007) | ||||||||
Nine Months Ended | through | |||||||
September 30, 2008 | September 30, 2007 | |||||||
Cash Flows — Operating Activities | ||||||||
Net income (loss) | $ | 613 | $ | (40 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization, including intangible assets | 733 | — | ||||||
Straight-line rent adjustments and amortization of rent-related intangibles | (66 | ) | — | |||||
Income from equity investment in real estate | (194 | ) | — | |||||
Minority interest in income | 111 | — | ||||||
Issuance of shares to affiliate in satisfaction of fees due | 216 | — | ||||||
Amortization of discount on commercial mortgage-backed securities | (201 | ) | — | |||||
Realized loss on foreign currency transactions | 257 | — | ||||||
Unrealized loss on derivative instrument | 186 | — | ||||||
Increase in accounts receivable and prepaid expenses | (279 | ) | — | |||||
Increase in funds in escrow | (286 | ) | — | |||||
Increase in prepaid rental income | 1,990 | — | ||||||
Increase in accounts payable and accrued expenses | 1,549 | 40 | ||||||
Decrease in due to affiliates(a) | (2,679 | ) | — | |||||
Net cash provided by operating activities | 1,950 | — | ||||||
Cash Flows — Investing Activities | ||||||||
Acquisitions of real estate(b) | (235,362 | ) | — | |||||
Contributions to equity investments in real estate(b) | (23,074 | ) | — | |||||
Purchase of marketable securities | (19,965 | ) | — | |||||
Net cash used in investing activities | (278,401 | ) | — | |||||
Cash Flows — Financing Activities | ||||||||
Distributions paid | (2,055 | ) | — | |||||
Contributions from minority interest partners | 16,204 | — | ||||||
Proceeds from mortgages | 139,685 | — | ||||||
Scheduled payments of mortgage principal | (59 | ) | — | |||||
Proceeds from issuance of shares, net of offering costs | 248,676 | 200 | ||||||
Net cash provided by financing activities | 402,451 | 200 | ||||||
Change in Cash and Cash Equivalents During the Period | ||||||||
Effect of exchange rate changes on cash | (358 | ) | — | |||||
Net increase in cash and cash equivalents | 125,642 | 200 | ||||||
Cash and cash equivalents, beginning of period | 183 | — | ||||||
Cash and cash equivalents, end of period | $ | 125,825 | $ | 200 | ||||
(a) | Increase in due to affiliates for the nine months ended September 30, 2008 excludes increase in deferred offering costs of $1,787, consisting of $1,532 payable to an affiliate for offering costs and $255 payable to an affiliate for commissions incurred in connection with fundraising. | |
(b) | The cost basis of real estate investments acquired during the nine months ended September 30, 2008 also includes deferred acquisition fees payable of $4,624. |
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(in thousands, except share and per share amounts)
Note 1. | Organization and Offering |
Note 2. | Basis of Presentation |
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Note 3. | Agreements and Transactions with Related Parties |
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Note 4. | Real Estate |
September 30, 2008 | ||||
Land | $ | 37,133 | ||
Building | 138,585 | |||
Less: Accumulated depreciation | (580 | ) | ||
$ | 175,138 | |||
2008 (remainder) | $ | 4,619 | ||
2009 | 18,494 | |||
2010 | 18,607 | |||
2011 | 1,872 | |||
2012 | 18,841 | |||
Thereafter through 2028 | 279,202 |
Note 5. | Net Investment in Direct Financing Leases |
September 30, 2008 | ||||
Minimum lease payments receivable | $ | 21,466 | ||
Unguaranteed residual value | 46,146 | |||
67,612 | ||||
Less: unearned income | (21,383 | ) | ||
$ | 46,229 | |||
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2008 (remainder) | $ | 360 | ||
2009 | 1,439 | |||
2010 | 1,439 | |||
2011 | 1,439 | |||
2012 | 1,439 | |||
Thereafter through 2023 | 15,350 |
Note 6. | Equity Investment in Real Estate |
September 30, 2008 | December 31, 2007 | |||||||
Assets | $ | 85,851 | $ | 87,833 | ||||
Liabilities | (40,169 | ) | (1,356 | ) | ||||
Partners’ equity | $ | 45,682 | $ | 86,477 | ||||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2008 | September 30, 2008 | |||||||
Revenue | $ | 1,660 | $ | 4,999 | ||||
Expenses | (1,381 | ) | (4,000 | ) | ||||
Net income | $ | 279 | $ | 999 | ||||
Our share of income from our equity investment in real estate | $ | 142 | $ | 194 | ||||
Note 7. | Acquisitions of Real Estate-Related Investments |
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Note 8. | Securities Held to Maturity |
Description | Face Value | Amortized Cost | Unrealized Loss | Estimated Fair Value | ||||||||||||
CMBS | $ | 33,314 | $ | 20,158 | $ | (8,125 | ) | $ | 12,033 |
Rating | Amortized Cost | |||
A+ | $ | 3,868 | ||
A | 1,470 | |||
A– | 10,309 | |||
BBB+ | 1,792 | |||
BBB– | 2,719 | |||
$ | 20,158 | |||
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Note 9. | Intangibles |
September 30, 2008 | ||||
Lease intangibles: | ||||
In-place lease | $ | 7,805 | ||
Tenant relationship | 2,568 | |||
Above-market rent | 1,466 | |||
Less: accumulated amortization | (159 | ) | ||
$ | 11,680 | |||
Below-market rent | $ | (663 | ) | |
Less: accumulated amortization | 5 | |||
$ | (658 | ) | ||
Note 10. | Non-Recourse Debt |
Fixed Rate Debt | ||||
2008 (remainder) | $ | 701 | ||
2009 | 2,425 | |||
2010 | 2,595 | |||
2011 | 2,771 | |||
2012 | 2,954 | |||
Thereafter through 2028 | 124,173 | |||
Total | $ | 135,619 | ||
Note 11. | Commitments and Contingencies |
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Note 12. | Risk Management |
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Note 13. | Pro Forma Financial Information |
Period from Inception | ||||||||||||
(February 20, 2007) | ||||||||||||
Three Months Ended | Nine Months Ended | through | ||||||||||
September 30, 2008 | September 30, 2008 | September 30, 2007 | ||||||||||
Pro forma total revenues | $ | 6,051 | $ | 18,228 | $ | 14,187 | ||||||
Pro forma net income | 1,321 | 4,670 | 4,911 | |||||||||
Pro forma earnings per share: | ||||||||||||
Basic and diluted | $ | 0.05 | $ | 0.17 | $ | 0.18 |
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ITEM 2. —MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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Less Than | More Than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
Non-recourse debt — principal | $ | 135,619 | $ | 2,497 | $ | 5,279 | $ | 6,003 | $ | 121,840 | ||||||||||
Deferred acquisition fees | 4,624 | 1,752 | 2,872 | — | — | |||||||||||||||
Interest on borrowings and deferred acquisition fees | 87,708 | 9,272 | 18,287 | 17,385 | 42,764 | |||||||||||||||
Due to the advisor(a) | 987 | 987 | — | — | — | |||||||||||||||
$ | 228,938 | $ | 14,508 | $ | 26,438 | $ | 23,388 | $ | 164,604 | |||||||||||
(a) | Represents costs payable to the advisor and its subsidiaries in connection with the offering of our securities, consisting of organization and offering costs totaling $732 and commissions payable in connection with our fundraising activity totaling $255. |
Item 3. — | Quantitative and Qualitative Disclosures About Market Risk |
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2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||
Fixed rate debt | $ | 701 | $ | 2,425 | $ | 2,595 | $ | 2,771 | $ | 2,954 | $ | 124,173 | $ | 135,619 | $ | 135,036 |
Item 4T. — | Controls and Procedures |
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(in thousands, except share and per share amounts)
Item 1A. — | Risk Factors |
Item 2. — | Unregistered Sales of Equity Securities and Use of Proceeds |
Shares registered | 200,000,000 | |||
Aggregate price of offering amount registered | $ | 2,000,000 | ||
Shares sold(a) | 27,581,762 | |||
Aggregated offering price of amount sold | $ | 275,590 | ||
Direct or indirect payments to directors, officers, general partners of the issuer or their associates; to persons owning ten percent or more of any class of equity securities of the issuer; and to affiliates of the issuer | (27,432 | ) | ||
Direct or indirect payments to others | (3,559 | ) | ||
Net offering proceeds to the issuer after deducting expenses | 244,599 | |||
Purchases of real estate, equity investments in real estate and real estate related assets, net of mortgage financing | (143,340 | ) | ||
Temporary investments in cash and cash equivalents | $ | 101,259 | ||
(a) | Excludes shares issued to affiliates, including our advisor, and excludes shares issued pursuant to our distribution reinvestment and stock purchase plan. |
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Item 6. — | Exhibits |
Exhibit | ||||||
No. | Description | Method of Filing | ||||
10 | .1 | Lease Agreement by and between WGN (GER) LLC, as Landlord, and Wagon Automotive Nagold GmbH, as Tenant, dated June 2008 | Filed herewith | |||
10 | .2 | Lease Agreement by and between WGN (GER) LLC, as Landlord, and Wagon Automotive GmbH, as Tenant, dated June 2008 | Filed herewith | |||
10 | .3 | Facilities Agreement by and between WGN (GER), LLC, as Borrower, and Société Générale, as Arranger, Facility Agent, Security Agent and Original Lender, dated June 3, 2008 | Filed herewith | |||
10 | .4 | Amendment Agreement dated July 1, 2008 relating to the Facilities Agreement by and between WGN (GER), LLC, as Borrower, and Société Générale, as Arranger, Facility Agent, Security Agent and Original Lender | Filed herewith | |||
31 | .1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | |||
31 | .2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | |||
32 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith |
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Incorporated
Date 11/14/2008 | By: | /s/ Mark J. DeCesaris Mark J. DeCesaris Managing Director and acting Chief Financial Officer (Principal Financial Officer) | ||
Date 11/14/2008 | By: | /s/ Thomas J. Ridings Thomas J. Ridings Executive Director and Chief Accounting Officer (Principal Accounting Officer) |
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