UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
Current Report
Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 12, 2012
Global Income Trust, Inc.
(Exact name of registrant as specified in its charter)
| | | | |
| Maryland | | 000-54684 | | 26-4386951 |
| | |
(State or other jurisdiction of incorporation or organization) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices)
Registrant’s telephone number, including area code: (407) 650-1000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| | ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| | ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| | ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| | ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 9.01 Financial Statements and Exhibits.
On October 18, 2012, Global Income Trust, Inc. (the “Company”) filed a Form 8-K disclosing our acquisition of a Class A bulk industrial building leased to Samsonite, LLC pursuant to a triple-net lease, located on approximately 53 acres of land in close proximity to the port in Jacksonville, Florida (the land and building are collectively referred to as the “Samsonite Property”) on October 12, 2012 from an unaffiliated third party.
The Form 8-K is hereby amended to include the required financial information.
| (a) | Financial Statements of Real Estate Operations Acquired. |
Samsonite Property:
Statements of Revenues and Certain Expenses:
Report of Independent Certified Public Accountants
Statements of Revenues and Certain Expenses for the Year Ended December 31, 2011 and the Nine Months Ended September 30, 2012 (Unaudited)
Notes to Statements of Revenues and Certain Expenses
| (b) | Pro Forma Financial Information. |
Global Income Trust, Inc. and Subsidiaries:
Unaudited Pro Forma Consolidated Financial Statements:
Unaudited Pro Forma Consolidated Balance Sheet at September 30, 2012
Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2011
Unaudited Pro Forma Consolidated Statement of Operations for the Nine Months Ended September 30, 2012
Notes to Unaudited Pro Forma Consolidated Financial Statements
The information above contains “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company’s business and its performance, the economy, and other future conditions and forecasts of future events, and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should” and “could,” and words and terms of similar substance. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factors. Some factors that might cause such a difference include, but are not limited to, the following: risks associated with our investment strategy; a worsening economic environment in the U.S. or globally, including financial market fluctuations; risks associated with real estate markets, including declining real estate values; risks associated with the limited amount of proceeds raised in our offering and as a result, the limited number of investments made; our failure to obtain, renew or extend necessary financing or to access the debt or equity markets; the use of debt to finance our business activities, including refinancing and interest rate risk and our failure to comply with debt covenants; our ability to identify and close on suitable investments; failure to successfully manage growth or integrate acquired properties and operations; our ability to make necessary improvements to properties on a timely or cost-efficient basis; competition for properties and/or tenants; defaults or non-renewal of leases by tenants; failure to lease properties on favorable terms or at all; the impact of current and future environmental, zoning and other governmental regulations affecting our properties; the impact of changes in accounting rules; the impact of regulations requiring periodic valuation of the Company on a per share basis; material adverse actions or omissions by any joint venture partners; consequences of our net operating losses; increases in operating costs and other expenses; uninsured losses or losses in excess of our insurance coverage; the impact of outstanding and/or potential litigation; unknown
liabilities of acquired properties or liabilities caused by property managers or operators; inaccuracies of our accounting estimates; risks associated with our tax structuring; failure to maintain our REIT qualification; and our ability to protect our intellectual property and the value of our brand. Given these uncertainties, we caution you not to place undue reliance on such statements. For further information regarding risks and uncertainties associated with our business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of our documents filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, our annual report on Form 10-K and quarterly reports on Form 10-Q, and our registration statement on Form S-11 and the sticker supplements and amendments thereto, copies of which may be obtained from our Web site athttp://www.incometrust.com.
We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | | | | |
| December 7, 2012 | | | | GLOBAL INCOME TRUST, INC |
| | | |
| | | | By: | | /s/ Steven D. Shackelford |
| | | | Name: | | Steven D. Shackelford |
| | | | Title: | | Chief Financial Officer |
INDEX TO FINANCIAL STATEMENTS
F - 1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of Global Income Trust, Inc.:
We have audited the accompanying statement of revenues and certain expenses (the “Statement”) of the Samsonite Property for the year ended December 31, 2011. This Statement is the responsibility of management. Our responsibility is to express an opinion on this Statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for incorporation by reference in the registration statement on Form S-11 of Global Income Trust, Inc.), as described in Note 1 and is not intended to be a complete presentation of the Samsonite Property’s revenues and expenses.
In our opinion, the Statement referred to above presents fairly, in all material respects, the revenues and certain expenses, as described in Note 1, of the Samsonite Property for the year ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
December 7, 2012
F - 2
SAMSONITE PROPERTY
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
| | | | | | | | |
| | | Year Ended
December 31, 2011 | | | Nine Months Ended
September 30, 2012
(Unaudited) | |
Revenues: | | | | | | | | |
Rental income | | $ | 3,447,358 | | | $ | 2,585,518 | |
Tenant reimbursements | | | 134,157 | | | | 101,780 | |
| | | | | | | | |
Total revenues | | | 3,581,515 | | | | 2,687,298 | |
| | | | | | | | |
Certain expenses: | | | | | | | | |
Property operating expenses | | | 64,849 | | | | 49,300 | |
Property management fees | | | 69,308 | | | | 52,480 | |
| | | | | | | | |
Total certain expenses | | | 134,157 | | | | 101,780 | |
| | | | | | | | |
| | |
Revenues in excess of certain expenses | | $ | 3,447,358 | | | $ | 2,585,518 | |
| | | | | | | | |
The accompanying notes are an integral part of the statements of revenues and certain expenses.
F – 3
SAMSONITE PROPERTY
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2011 AND NINE MONTHS ENDED SEPTEMBER 30, 2012 (UNAUDITED)
| 1. | Organization and Basis of Presentation |
The accompanying statements of revenues and certain expenses (the “Statements”) relate to a fee simple interest in a Class A bulk industrial building leased to Samsonite, LLC pursuant to a triple-net lease, located on approximately 53 acres of land in Jacksonville, Florida (the “Samsonite Property”). The building has a high volume flow-through design and consists of approximately 818,000 square feet (unaudited). The Samsonite Property is located within 1.2 miles of I-95 with direct access to the Port of Jacksonville and Jacksonville International Airport.
On October 12, 2012, Global Income Trust, Inc. (the “Company”), through a subsidiary formed for such purpose, closed on the acquisition of the Samsonite Property for $42.5 million. In connection with the acquisition of the Samsonite Property, the Company assumed the existing mortgage debt outstanding on the property of $26.7 million.
The operating results of the Samsonite Property subsequent to October 12, 2012 will be included in the consolidated financial statements of the Company and its subsidiaries. Prior to October 12, 2012, the Samsonite Property was owned by Imeson West I, LLC, a Florida limited liability company (the “Prior Owner”), a third party not affiliated with the Company or its subsidiaries.
The Statements have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, all adjustments, consisting of normal and recurring adjustments considered necessary for a fair statements, have been included, and therefore the Statements are not representative of the actual results of operations of the Samsonite Property due to the exclusion of certain revenues and expenses which may not be comparable to the proposed future operations of the Samsonite Property including depreciation and amortization expense, interest income and expense, amortization of above and below market leases, and other miscellaneous revenues and expenses not directly related to the proposed future operations of the Samsonite Property.
The interim statement of revenues and certain expenses for the nine months ended September 30, 2012 is unaudited. In the opinion of management, the unaudited interim information for the nine months ended September 30, 2012 includes all adjustments necessary to present fairly the revenues and certain expenses for such period.
| 2. | Significant Accounting Policies |
Revenue Recognition -The lease is accounted for using the operating method whereby rental revenue is recognized on a straight-line basis over the term of the lease when collectability is reasonably assured. Differences between rental revenue earned and amounts due under the lease are charged or credited, as applicable, to accrued rental revenue. The impact of the straight-line rent adjustment increased revenue by approximately $15,200 for the year ended December 31, 2011 and decreased revenues by approximately $38,500 for the nine months ended September 30, 2012. Tenant reimbursements represent reimbursement of common area maintenance expenses and property management fees, and are recognized in the period in which the related expenses are incurred.
Use of Estimates -Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the Statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.
F - 4
SAMSONITE PROPERTY
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2011 AND NINE MONTHS ENDED SEPTEMBER 30, 2012 (UNAUDITED)
| 3. | Description of Leasing Arrangement |
The Samsonite Property is leased to Samsonite, LLC, a Delaware limited liability company, under a non-cancelable, triple-net lease. The lease commenced February 1, 2008 and has an initial term of 121 months, expiring on February 28, 2018. The tenant has the option to renew the lease for two additional terms of five years each. Pursuant to the terms on the lease, the tenant is responsible for the payment of base rent, payable monthly, of approximately $258,000 as of December 31, 2010, increasing to approximately $292,000 on March 1, 2011, approximately $328,000 on March 1, 2014 and approximately $350,000 on March 1, 2017. The tenant is also responsible for reimbursing the landlord for common area maintenance expenses, which includes costs incurred for repairs and maintenance to the landscaping, including lawn services, routine periodic maintenance activities, repair, replacement and refurbishment of irrigation equipment and plumbing, and property management fees not to exceed 2% of the base rent.
In addition, in accordance with the lease, substantially all property expenses are required to be paid directly by the tenant, including real estate taxes which the tenant pays directly to the taxing authorities and property insurance. In the event the tenant failed to pay such taxes, the Company would be obligated to pay such amounts. Property taxes assessed on the Samsonite Property for 2011 were approximately $422,000.
The following is a schedule of future minimum lease payments to be received for each of the next five years and thereafter, in the aggregate, under the non-cancelable operating lease as of December 31, 2011:
| | | | |
2012 | | $ | 3,498,696 | |
2013 | | | 3,498,696 | |
2014 | | | 3,866,596 | |
2015 | | | 3,940,176 | |
2016 | | | 3,940,176 | |
Thereafter | | | 4,860,992 | |
| | | | |
| | $ | 23,605,332 | |
| | | | |
The above future minimum lease payments to be received exclude tenant reimbursements, straight-line rent adjustments, amortization of above- or below-market lease intangibles and base rent attributable to any renewal options that may be exercised by the tenants in the future.
| 4. | Related Party Transaction |
Property management services for the Samsonite Property prior to October 12, 2012 were performed by an affiliate of the Prior Owner. In connection therewith, the Samsonite Property incurred property management fees of approximately $69,000 and $52,000 for the year ended December 31, 2011 and the nine months ended September 30, 2012 (unaudited), respectively, representing approximately 2% of base rent from the tenant.
Management has evaluated the events and transactions that have occurred through December 7, 2012, the date which the Statements were available to be issued, and noted no items requiring adjustment of the Statements or additional disclosure.
F – 5
GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying Unaudited Pro Forma Condensed Consolidated Balance Sheet of Global Income Trust, Inc. and its subsidiaries (collectively, the “Company”) is presented as if the acquisition of the Samsonite Property described in Note 2 had occurred on September 30, 2012.
The accompanying Unaudited Pro Forma Condensed Consolidated Statements of Operations of the Company are presented for the nine months ended September 30, 2012 and for the year ended December 31, 2011 (the “Pro Forma Periods”), and include certain pro forma adjustments to illustrate the estimated effect of the Company’s acquisition of the Samsonite Property as if it had occurred on January 1, 2011.
This pro forma condensed consolidated financial information is presented for informational purposes only and does not purport to be indicative of the Company’s financial position, cash flows or results of operations if the transaction reflected herein had occurred on the date or been in effect during the periods indicated. This pro forma condensed consolidated financial information should not be viewed as indicative of the Company’s financial results in the future and should be read in conjunction with the Company’s financial statements as filed on Form 10-K for the year ended December 31, 2011 and the Company’s financial statements as filed on Form 10-Q for the quarter and nine months ended September 30, 2012.
F – 6
GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2012
| | | | | | | | | | | | | | | | |
| | | Global Income
Trust, Inc.
Historical | | | Pro Forma
Adjustments | | | Global Income
Trust, Inc.
Pro Forma | |
| | | | |
ASSETS | | | | | | | | | | | | | | | | |
| | | | |
Real estate investments properties, net | | $ | 51,229,627 | | | $ | 31,254,500 | | | | (1 | ) | | $ | 82,484,127 | |
Cash and cash equivalents | | | 17,044,487 | | | | (13,270,636 | ) | | | (1 | ) | | | 2,492,680 | |
| | | | | | | (413,494 | ) | | | (2 | ) | | | | |
| | | | | | | (867,677 | ) | | | (3 | ) | | | | |
Intangibles, net | | | 13,722,553 | | | | 11,137,000 | | | | (1 | ) | | | 24,859,553 | |
Restricted cash | | | 2,052,705 | | | | — | | | | | | | | 2,052,705 | |
Other assets | | | 1,281,148 | | | | (500,000 | ) | | | (1 | ) | | | 889,648 | |
| | | | | | | 108,500 | | | | (1 | ) | | | | |
Loan costs, net | | | 772,494 | | | | 413,494 | | | | (2 | ) | | | 1,185,988 | |
| | | | | | | | | | | | | | | | |
Total assets | | $ | 86,103,014 | | | $ | 27,861,687 | | | | | | | $ | 113,964,701 | |
| | | | | | | | | | | | | | | | |
| | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | |
| | | | |
Mortgage notes payable | | $ | 45,021,432 | | | $ | 26,729,364 | | | | (1 | ) | | $ | 71,750,796 | |
Other liabilities | | | 1,694,024 | | | | — | | | | | | | | 1,694,024 | |
Accounts payable and accrued expenses | | | 1,088,148 | | | | — | | | | | | | | 1,088,148 | |
Credit facility | | | 820,000 | | | | 2,000,000 | | | | (1 | ) | | | 2,820,000 | |
Due to related parties | | | 700,199 | | | | — | | | | | | | | 700,199 | |
| | | | | | | | | | | | | | | | |
| | | | |
Total liabilities | | | 49,323,803 | | | | 28,729,364 | | | | | | | | 78,053,167 | |
| | | | | | | | | | | | | | | | |
Commitments and contingencies | | | | | | | | | | | | | | | | |
| | | | |
Stockholders’ equity: | | | | | | | | | | | | | | | | |
Preferred stock, $0.01 par value per share, authorized and unissued 200,000,000 shares | | | — | | | | — | | | | | | | | — | |
Common stock, $0.01 par value per share,
1,120,000,000 shares authorized; 5,784,883 and
4,649,878 shares issued and 5,730,590 and
4,649,878 shares outstanding | | | 57,306 | | | | — | | | | | | | | 57,306 | |
Capital in excess of par value | | | 48,689,272 | | | | — | | | | | | | | 48,689,272 | |
Accumulated distributions | | | (3,418,950 | ) | | | — | | | | | | | | (3,418,950 | ) |
Accumulated deficit | | | (8,459,313 | ) | | | (867,677 | ) | | | (3 | ) | | | (9,326,990 | ) |
Accumulated other comprehensive losses | | | (89,104 | ) | | | — | | | | | | | | (89,104 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Total stockholders’ equity | | | 36,779,211 | | | | (867,677 | ) | | | | | | | 35,911,534 | |
| | | | | | | | | | | | | | | | |
| | | | |
Total liabilities and stockholders’ equity | | $ | 86,103,014 | | | $ | 27,861,687 | | | | | | | $ | 113,964,701 | |
| | | | | | | | | | | | | | | | |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
F – 7
GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
| | | | | | | | | | | | | | | | | | | | |
| | | Global Income
Trust, Inc.
Historical | | | Samsonite
Property
Historical (1) | | | Pro Forma
Adjustments | | | Global Income
Trust, Inc.
Pro Forma | |
|
| |
| | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | |
Rental income from operating leases | | $ | 5,009,802 | | | $ | 2,585,518 | | | $ | 243,984 | | | | (a | ) | | $ | 7,717,249 | |
| | | | | | | | | | | (122,055 | ) | | | (d | ) | | | | |
Tenant reimbursements | | | 838,648 | | | | 101,780 | | | | — | | | | | | | | 940,428 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Total revenues | | | 5,848,450 | | | | 2,687,298 | | | | 121,929 | | | | | | | | 8,657,677 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses: | | | | | | | | | | | | | | | | | | | | |
Property operating expenses | | | 1,893,246 | | | | 49,300 | | | | — | | | | | | | | 1,942,546 | |
Acquisition fees and expenses | | | 1,658,196 | | | | — | | | | (61,753 | ) | | | (b | ) | | | 1,596,443 | |
General and administrative | | | 1,355,976 | | | | — | | | | — | | | | | | | | 1,355,976 | |
Asset management fees | | | 433,165 | | | | — | | | | 318,776 | | | | (e | ) | | | 751,941 | |
Property management fees | | | 170,176 | | | | 52,480 | | | | 5,248 | | | | (c | ) | | | 227,904 | |
Depreciation and amortization | | | 2,773,700 | | | | — | | | | 1,615,575 | | | | (d | ) | | | 4,389,275 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Total expenses | | | 8,284,459 | | | | 101,780 | | | | 1,877,846 | | | | | | | | 10,264,085 | |
| | | | | |
Expense support | | | (632,877 | ) | | | — | | | | (163,775 | ) | | | (g | ) | | | (796,652 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net expenses | | | 7,651,582 | | | | 101,780 | | | | 1,714,071 | | | | | | | | 9,467,433 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Operating income (loss) | | | (1,803,132 | ) | | | 2,585,518 | | | | (1,592,142 | ) | | | | | | | (809,756 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | |
Interest and other income | | | 1,158 | | | | — | | | | — | | | | | | | | 1,158 | |
Interest expense and loan cost amortization | | | (2,254,817 | ) | | | — | | | | (1,312,940 | ) | | | (f | ) | | | (3,567,757 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Total other income (expense) | | | (2,253,659 | ) | | | — | | | | (1,312,940 | ) | | | | | | | (3,566,599 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Income (loss) before income taxes | | | (4,056,791 | ) | | | 2,585,518 | | | | (2,905,082 | ) | | | | | | | (4,376,355 | ) |
| | | | | |
Income tax benefit | | | 161,906 | | | | — | | | | — | | | | | | | | 161,906 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net income (loss) | | $ | (3,894,885 | ) | | $ | 2,585,518 | | | $ | (2,905,082 | ) | | | | | | $ | (4,214,449 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net loss per share of common stock (basic and diluted) | | $ | (0.86 | ) | | | | | | | | | | | | | | $ | (0.85 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Weighted average number of shares of common stock outstanding (basic and diluted)
(Note 5(h)) | | | 4,511,324 | | | | | | | | 456,167 | | | | | | | | 4,967,491 | |
| | | | | | | | | | | | | | | | | | | | |
| | (1) | Samsonite Property Historical amounts represent amounts as presented in the review of the nine months ended September 30, 2012. |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
F – 8
GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
| | | | | | | | | | | | | | | | | | | | |
| | | Global Income
Trust, Inc.
Historical | | | Samsonite
Property
Historical (1) | | | Pro Forma
Adjustments | | | Global Income
Trust, Inc.
Pro Forma | |
|
| |
| | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | |
Rental income from operating leases | | $ | 2,013,633 | | | $ | 3,447,358 | | | $ | 325,312 | | | | (a | ) | | $ | 5,623,563 | |
| | | | | | | | | | | (162,740 | ) | | | (d | ) | | | | |
| | | | | |
Tenant reimbursements | | | 454,468 | | | | 134,157 | | | | — | | | | | | | | 588,625 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Total revenues | | | 2,468,101 | | | | 3,581,515 | | | | 162,572 | | | | | | | | 6,212,188 | |
| | | | | | | | | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | | | | | | | | |
Acquisition fees and expenses | | | 1,598,828 | | | | — | | | | — | | | | | | | | 1,598,828 | |
General and administrative | | | 1,271,805 | | | | — | | | | — | | | | | | | | 1,271,805 | |
Property operating expenses | | | 913,849 | | | | 64,849 | | | | — | | | | | | | | 978,698 | |
Asset management fees | | | 168,180 | | | | — | | | | 425,034 | | | | (e | ) | | | 593,214 | |
Property management fees | | | 67,494 | | | | 69,308 | | | | 6,864 | | | | (c | ) | | | 143,666 | |
Depreciation and amortization | | | 1,089,135 | | | | — | | | | 2,154,100 | | | | (d | ) | | | 3,243,235 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Total expenses | | | 5,109,291 | | | | 134,157 | | | | 2,585,998 | | | | | | | | 7,829,446 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Operating income (loss) | | | (2,641,190 | ) | | | 3,447,358 | | | | (2,423,426 | ) | | | | | | | (1,617,258 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | |
Interest and other income | | | 1,407 | | | | — | | | | — | | | | | | | | 1,407 | |
Interest expense and loan cost amortization | | | (995,694 | ) | | | — | | | | (1,784,654 | ) | | | (f | ) | | | (2,780,348 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Total other income (expense) | | | (994,287 | ) | | | — | | | | (1,784,654 | ) | | | | | | | (2,778,941 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net income (loss) | | $ | (3,635,477 | ) | | $ | 3,447,358 | | | $ | (4,208,080 | ) | | | | | | $ | (4,396,199 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net loss per share of common stock (basic and diluted) | | $ | (2.08 | ) | | | | | | | | | | | | | | $ | (1.25 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Weighted average number of shares of common stock outstanding (basic and diluted)
(Note 5(h)) | | | 1,744,849 | | | | | | | | 1,770,801 | | | | | | | | 3,515,650 | |
| | | | | | | | | | | | | | | | | | | | |
| | (1) | Samsonite Property Historical amounts represent amounts as presented in the audit for the year ended December 31, 2011. |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
F – 9
GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying Unaudited Pro Forma Condensed Consolidated Balance Sheet of Global Income Trust, Inc. and its subsidiaries (collectively, the “Company”) is presented as if the acquisition of the Samsonite Property described in Note 2 had occurred as of September 30, 2012. In addition, the Unaudited Pro Forma Condensed Consolidated Statements of Operations of the Company are presented for the nine months ended September 30, 2012 and the year ended December 31, 2011 (the “Pro Forma Periods”), and include certain pro forma adjustments to illustrate the estimated effect of the Company’s acquisition of the Samsonite Property, described in Note 2, as if it had occurred on January 1, 2011. The amounts included in the historical columns represent the Company’s historical financial condition and operating results for the balance sheet date and the respective Pro Forma Period presented, respectively.
The accompanying unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and do not include all of the information and note disclosures required by generally accepted accounting principles of the United States (“GAAP”). Pro forma financial information is intended to provide information about the continuing impact of a transaction by showing how a specific transaction or group of transactions might have affected historical financial statements. Pro forma financial information illustrates only the isolated and objectively measurable (based on historically determined amounts) effects of a particular transaction, and excludes effects based on judgmental estimates of how historical management practices and operating decisions may or may not have changed as a result of the transaction. Therefore, pro forma financial information does not include information about the possible or expected impact of current actions taken by management in response to the pro forma transaction, as if management’s actions were carried out in previous reporting periods.
This pro forma condensed consolidated financial information is presented for informational purposes only and does not purport to be indicative of the Company’s financial results if the Samsonite Property transaction reflected herein had occurred on January 1, 2011 or been in effect during the Pro Forma Periods. This pro forma consolidated financial information should not be viewed as indicative of the Company’s financial results or conditions in the future. In addition, this pro forma consolidated financial information does not include pro forma adjustments for other properties acquired during or subsequent to the Pro Forma Period.
On October 12, 2012, the Company acquired a fee simple interest in a Class A industrial distribution facility with approximately 818,000 square feet located on approximately 53 acres of land in close proximity to the port in Jacksonville, Florida (“Samsonite Property”) for $42.5 million. The Company funded $13.8 million of the purchase price from proceeds of its public offering of shares of common stock (the “Offering”) of which $0.5 million was recorded as a deposit and included in Other assets as of September 30, 2012, $26.7 million through the assumption of the mortgage loan relating to the property as described below, and $2.0 million through a draw on the Company’s revolving credit facility. In connection with the acquisition, the Company incurred acquisition fees and expenses of approximately $0.9 million.
F-10
GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
CONTINUED
| 2. | Pro Forma Transaction (continued) |
The following summarizes the allocation of the purchase price for the Samsonite Property and the estimated fair values of the assets acquired and liabilities assumed:
| | | | |
Assets | | | | |
Land and land improvements | | $ | 6,283,600 | |
Building | | | 24,545,300 | |
Above market lease | | | 1,166,300 | |
In-place lease | | | 9,970,700 | |
Tenant improvements | | | 425,600 | |
Other | | | 108,500 | |
Liabilities | | | | |
| |
Mortgage debt assumed | | | (26,729,364 | ) |
| | | | |
| |
Net assets acquired | | $ | 15,770,636 | |
| | | | |
In connection with the acquisition of the Samsonite Property, the Company assumed the outstanding mortgage debt of the Prior Owner relating to the property of $26.7 million (the “Mortgage Loan”). The Mortgage Loan bears interest at the rate of 6.08% per annum and will mature on September 1, 2023. Principal and interest on the Mortgage Loan is payable monthly in equal monthly installments of $187,319, based on a 25-year amortization schedule until maturity at which time the remaining outstanding principal balance will be due and payable in full.
In connection with the Mortgage Loan, the Company incurred approximately $0.4 million in loan costs. These costs have been capitalized and are being amortized as interest expense over the term of the loan.
The Samsonite Property is 100% leased to Samsonite, LLC, a Delaware limited liability company, pursuant to a triple-net lease (the “Samsonite Lease”). The Samsonite Lease expires on February 28, 2018, and may be renewed at the option of the tenant for two additional terms of five years each. Pursuant to the terms on the lease, the tenant is responsible for the payment of base rent, payable monthly, of approximately $258,000 per month as of January 1, 2011, increasing to approximately $292,000 as of March 31, 2011, approximately $328,000 on March 1, 2014 and approximately $350,000 on March 1, 2017. The tenant is also responsible for reimbursing the landlord for common area maintenance expenses and property management fees.
In addition, in accordance with the lease, substantially all property expenses are required to be paid directly by the tenant, including real estate taxes which the tenant pays directly to the taxing authorities and property insurance. In the event the tenant failed to pay such taxes, the Company would be obligated to pay such amounts.
F-11
GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
CONTINUED
| 2. | Pro Forma Transaction (continued) |
The Samsonite Lease is accounted for as an operating lease; therefore, revenue is recognized as rentals are earned and expenses (including depreciation) are charged to operations as incurred. Scheduled rental payments are recognized on a straight-line basis over the lease term so as to produce constant periodic rent in accordance with GAAP. Tenant reimbursements represent reimbursement from the tenant for common area maintenance expenses and are recognized in the period in which the related expenses are incurred.
| 3. | Related Party Transactions |
Pursuant to the advisory agreement, the Advisor receives investment services fees equal to 1.85% of the purchase price of properties for services rendered in connection with the selection, evaluation, structure and purchase of assets. In connection with the acquisition of the Samsonite Property, the Company incurred approximately $0.8 million in investment services fees payable to the Advisor. In addition, the Advisor is entitled to receive a monthly asset management fee of 0.08334% of the real estate asset value (as defined in the agreement) of the Company’s properties as of the end of the preceding month.
Pursuant to a master property management agreement, CNL Global Income Managers, LLC (the “Property Manager”) receives property management fees and oversight fees for the management of the Company’s properties. In connection therewith, the Company has agreed to pay the Property Manager fees equal to 2.2% of gross receipts of the Samsonite Property.
In March 2012, the Company’s board of directors approved an Expense Support and Conditional Reimbursement Agreement with its Advisor (the “Expense Support Agreement”) whereby, effective April 1, 2012, reimbursement of operating-related personnel expenses and asset management fees to the Advisor and its affiliates are deferred and subordinated until such time, if any, that (i) cumulative modified funds from operations (as defined in the Expense Support Agreement) for the period April 1, 2012 through the applicable determination date exceeds (ii) distributions declared to stockholders for the same period. Such reimbursements and payments are further subordinated to the Company’s total operating expenses being within the 2%/25% guideline limitations as such terms are defined in the advisory agreement. For purposes of the above subordinations, all or a portion of the deferred amounts may be paid only to the extent it does not cause the applicable performance measurement to not be met inclusive of the conditional reimbursement amount. The Expense Support Agreement is terminable by the Advisor, but not before March 31, 2013, and any deferrals are eligible for conditional reimbursement for a period of up to three years from the applicable determination date. Any amounts deferred that have not met the conditions of reimbursement within the time period established in the Expense Support Agreement will be permanently waived by the Advisor and the Company will have no obligation to pay such amounts.
| 4. | Adjustments to Pro Forma Consolidated Balance Sheet |
The adjustments to the pro forma consolidated balance sheet represent adjustments needed to the Company’s historical results to present the Company’s financial condition as if the Samsonite Property was acquired on September 30, 2012.
F-12
| 4. | Adjustments to Pro Forma Consolidated Balance Sheet (continued) |
| | (1) | Represents the acquisition of the Samsonite Property, including debt assumed and deposits applied, as described in Note 2. |
| | (2) | Represents additional loan costs incurred in connection with the Mortgage Loan described in Note 2. |
| | (3) | Represents acquisition fees and acquisition expenses, as well as other expenses paid at closing, incurred subsequent to September 30, 2012, including the investment services fee payable to the Company’s Advisor in connection with the closing of the Samsonite Property as described in Note 2. |
| 5. | Adjustments to Pro Forma Consolidated Statements of Operations |
The adjustments to the pro forma consolidated statements of operations represent adjustments needed to the Company’s historical results to present operating results as if the Samsonite Property was owned for the full Pro Forma Periods.
| | (a) | Represents rental income on a straight-line basis for the applicable Pro Forma Periods. |
| | (b) | Represents the reversal of acquisition fees and expenses recognized during the nine months ended September 30, 2012 related to the October acquisition of the Samsonite Property that are nonrecurring charges directly related to the pro forma transaction. The pro forma adjustment does not include the reversal of acquisition fees and expenses related to any other acquisitions. |
| | (c) | Represents property management fees due to the Property Manager in connection with the management of the Samsonite Property as described in Note 3 for the applicable Pro Forma Periods. |
| | (d) | Represents depreciation and amortization expense computed using the straight-line method over the estimated useful lives of the related assets for applicable Pro Forma Periods as follows: |
| | | | | | | | | | |
| | | | | Pro Forma Adjustments | |
| | | Estimated
Useful Life | | Year Ended
December 31,
2011 | | | Nine Months Ended
September 30,
2012 | |
| | | |
Land | | Not applicable | | $ | — | | | $ | — | |
Land improvements | | 15 years | | | 74,087 | | | | 55,565 | |
Building | | 39 years | | | 629,367 | | | | 472,025 | |
In-place lease | | 7.16 years | | | 1,391,260 | | | | 1,043,445 | |
Tenant improvements | | 7.16 years | | | 59,386 | | | | 44,540 | |
| | | | | | |
| | | | $ | 2,154,100 | | | $ | 1,615,575 | |
| | | | | | |
| | | |
Above market lease | | 7.16 years | | $ | 162,740 | | | $ | 122,055 | |
| | | | | | |
Amortization expense related to above market leases is treated as a reduction to rental income for GAAP purposes. Other depreciation and amortization expense is treated as an expense in the pro forma statements of operations.
| | (e) | Represents asset management fees for the applicable Pro Forma Periods due to the Advisor in connection with the ownership of the Samsonite Property as described in Note 3. |
F-13
GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
CONTINUED
| 5. | Adjustments to Pro Forma Consolidated Statements of Operations (continued) |
| | (f) | Represents interest expense and amortization of loan costs relating to the assumption of the Mortgage Loan and the draw on the Credit Facility as if such indebtedness had been in place for the applicable Pro Forma Periods. |
| | (g) | Represents additional asset management fees deferred under the Expense Support Agreement as described in Note 3. |
| | (h) | As a result of the Samsonite Property being treated in the Pro Forma Consolidated Statements of Operations as operational since January 1, 2011, the Company assumed approximately 1,771,000 shares of common stock which were sold during 2012 in connection with its Offering, were available for the purchase of the Samsonite Property and have been presented as outstanding as of January 1, 2011. Consequently, the weighted average number of shares outstanding for the Pro Forma Periods was adjusted to reflect this amount of shares being issued on January 1, 2011 instead of the actual dates issued during 2012, and were treated as outstanding for the full Pro Forma Period. Pro forma earnings per share were calculated based on the weighted average number of shares of common stock outstanding, as adjusted. |
F-14
