Filed Pursuant to Rule 424(B)(3)
Registration No. 333-164313
PHILLIPS EDISON – ARC SHOPPING CENTER REIT INC.
SUPPLEMENT NO. 7 DATED APRIL 17, 2012
TO THE PROSPECTUS DATED NOVEMBER 22, 2011
This document supplements, and should be read in conjunction with, our prospectus dated November 22, 2011 relating to our offering of 180 million shares of common stock, as supplemented by Supplement No. 4 dated February 13, 2012, Supplement No. 5 dated February 27, 2012, and Supplement No. 6 dated March 28, 2012. Unless otherwise defined in this Supplement No. 7, capitalized terms used have the same meanings as set forth in the prospectus. The purpose of this supplement is to disclose, among other things, the following:
| • | the status of the offering; and |
| • | updated information regarding the prior performance of programs operated by our sponsors, including prior performance tables, as of December 31, 2011. |
Status of the Offering
We commenced this initial public offering on August 12, 2010, pursuant to which we are offering up to 150 million shares of our common stock in a primary offering at $10.00 per share, with discounts available for certain categories of purchasers, and up to 30 million shares of our common stock pursuant to our dividend reinvestment plan at $9.50 per share. As of April 4, 2012, we had raised aggregate gross offering proceeds of approximately $38.5 million from the sale of approximately 4.0 million shares in our initial public offering, including shares sold under our dividend reinvestment plan.
Prior Performance Summary
The following information supersedes the disclosure in the prospectus under the heading “Prior Performance Summary.”
The information presented in this section represents the historical experience of all real estate programs managed over the last ten years by Messrs. Phillips and Edison, our individual Phillips Edison sponsors, and Messrs. Schorsch and Kahane, our individual AR Capital sponsors. In assessing the relative importance of this information with respect to a decision to invest in this offering, you should keep in mind that we will rely primarily on affiliates of our Phillips Edison sponsor to identify acquisitions and manage our portfolio and we will rely primarily on affiliates of our AR Capital sponsor with respect to our capital-raising efforts, although both AR Capital Advisor and Phillips Edison Sub-Advisor will jointly participate in major decisions as described in this prospectus at “Management – Our Advisor and Sub-Advisor.” You should also note that only programs sponsored by Phillips Edison have invested in our targeted portfolio of grocery-anchored neighborhood shopping centers.
Unless otherwise indicated, the information presented below with respect to the historical experience of Phillips Edison and the private real estate funds sponsored by Phillips Edison and of AR Capital and the prior programs sponsored by AR Capital is as of the 10-years ended December 31, 2011. By purchasing shares in this offering, you will not acquire any ownership interest in any funds to which the information in this section relates and you should not assume that you will experience returns, if any, comparable to those experienced by the investors in the real estate funds discussed. Further, the private funds discussed in this section were conducted through privately held entities that were subject neither to the up-front commissions, fees and expenses associated with this offering nor all of the laws and regulations that will apply to us as a publicly offered REIT.
We intend to conduct this offering in conjunction with future offerings by one or more public and private real estate entities sponsored by Phillips Edison and AR Capital and their respective affiliates. To the extent that such entities have the same or similar objectives as ours or involve similar or nearby properties, such entities may be in competition with the properties acquired by us. See the section entitled “Conflicts of Interest” in this prospectus for additional information.
Appendix A includes five tables with information about the public programs and private funds discussed in this section. They present information with respect to (1) the experience of our sponsors in raising and investing in funds, (2) the compensation paid by prior funds to the sponsor and its affiliates, (3) the operating results of prior funds, (4) sales or disposals of properties by prior funds, and (5) results of completed funds. In all cases, the tables presenting information about the historical experience of programs sponsored by Phillips Edison appear first, followed by tables summarizing similar information for AR Capital.
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Private Programs Sponsored by Phillips Edison
Since 1991, Michael C. Phillips and Jeffrey S. Edison, have partnered to acquire, manage and reposition necessity-driven retail properties, primarily grocery-anchored neighborhood and community shopping centers across the United States. Phillips Edison has operated with financial partners through both property-specific and multi-asset discretionary funds, and to date, Phillips Edison has sponsored six private real estate funds and raised approximately $600 million of equity from high-net-worth individuals and institutional investors.
During the 10-year period ended December 31, 2011, Phillips Edison managed six private real estate funds, all of which were multi-investor, commingled funds. All of these private funds were limited partnerships for which affiliates of Messrs. Phillips and Edison act or acted as general partner. In all cases, affiliates of Messrs. Phillips and Edison had responsibility for acquiring, investing, managing, leasing, developing and selling the real estate and real estate-related assets of each of the funds.
Two of the six private real estate funds managed by Phillips Edison raised approximately $395 million of equity capital from 12 institutional investors during the 10-year period ended December 31, 2011. The institutional investors investing in the private funds include public pension funds, sovereign wealth funds, insurance companies, financial institutions, endowments and foundations. For more information regarding the experience of our sponsors in raising funds from investors, see Table I and Table II of the Prior Performance Tables contained in Appendix A of this supplement.
During the 10-year period ended December 31, 2011, Phillips Edison acquired 241 real estate investments and invested over $1.8 billion in these assets (purchase price) on behalf of the six private funds raising capital for new investments during this period. Debt financing was used in acquiring the properties in all of these six private funds.
Four of the six private funds managed by Phillips Edison during the 10-year period ended December 31, 2011 have or had investment objectives that are similar to ours. Like ours, their primary investment objectives are to provide investors with stable returns, to preserve and return their capital contributions and to realize growth in the value of their investments. In addition, investments in real estate and real estate-related assets involve similar assessments of the risks and rewards of the operation of the underlying real estate and financing thereof as well as an understanding of the real estate and real estate-finance markets. For each of the private funds, Phillips Edison has focused on acquiring a diverse portfolio of real estate investments. Phillips Edison has typically diversified the portfolios of the private funds by geographic region, investment size, and tenant mix. In constructing the portfolios of the six private funds, Phillips Edison specialized in acquiring a mix of value-added and enhanced-return properties. Value-added and enhanced-return assets are assets that are undervalued or that could be repositioned to enhance their value.
Phillips Edison has sought to diversify investments in its private funds by geographic region as illustrated by the chart below. The chart below outlines investments of the private funds by amounts invested (purchase price) during the 10-year period ended December 31, 2011. All were within the United States. The geographic dispersion of properties acquired during the 10-year period ended December 31, 2011 is as follows: 38% of the amount was invested in 96 properties located in the eastern United States, 31% of the amount was invested in 64 properties located in the southern United States, 16% of the amount was invested in 45 properties located in the western United States and 15% of the amount was invested in 36 properties located in the midwestern United States.
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PHILLIPS EDISON - PRIVATE PROGRAMS
INVESTMENT BY REGION
In addition to diversifying the private fund portfolios by geographic region, Phillips Edison has primarily focused on necessity-driven retail investments that include the following categories: grocery, general merchandise, discount, health and beauty, and office supply retailers. Unlike industries that are routinely affected by cyclical fluctuations in the economy, shopping centers anchored by these retailers have historically been more resistant to economic downturns. In general, the consistent consumer demand for items such as food, pharmaceutical goods, postal services, general retail and hardware is present in all cycles of the economy.
In seeking to diversify the portfolios of the private funds by investment risk, Phillips Edison has purchased a mix of low-risk, high-quality properties and high-quality but under-performing properties in need of repositioning. The majority of the properties purchased by the private funds had prior owners and operators.
During the 10-year period ended December 31, 2011, Phillips Edison sold 50 properties on behalf of these six private funds. Phillips Edison continues to actively manage the remaining unsold properties of these private funds.
Though the private funds were not subject to the up-front commissions, fees and expenses associated with this offering, the private funds have fee arrangements with Phillips Edison affiliates structured similar to ours. The percentage of the fees varied based on the market factors at the time the particular fund was formed. For more information regarding the fees paid to Phillips Edison affiliates by these private funds and the operating results of these private funds, please see Tables II and III of the Prior Performance Tables in Appendix A of this supplement.
Two of the six private real estate funds managed by Phillips Edison (referred to as Fund I and Fund II) both experienced a liquidity event in 2004, at which time, investors in these funds were given the option to liquidate their investments or to convert their investments into shares of Phillips Edison Limited Partnership. Approximately 80% of the investors in Fund I and Fund II remained in the funds. The remaining four private real estate funds managed by Phillips Edison are fully invested, but have not yet had a liquidity event under the terms of their respective fund agreements. Note that an investment in this offering is substantially different than an investment in any of the Phillips Edison sponsored private offerings. Prior offerings have focused on purchasing value-add grocery-anchored shopping centers. This offering will invest primarily in core and core plus grocery-anchored shopping centers that are well-occupied, have a higher ratio of national and regional retailers and are located in more heavily populated locations.
Adverse Business Developments and Conditions
Market timing is a strategy of buying or selling assets based on predictions of future market price movements. Phillips Edison has not tried to time the sponsorship of real estate programs based on its predictions of the real estate market as a whole. For most of the last 10 years, sponsored programs have been raising capital in order to acquire a desirable portfolio of real estate. As the money has been raised, sponsored programs have sought
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to acquire real estate at favorable prices based on then-current market conditions. In other words, such programs have generally sought to put capital to use promptly if suitable investments are available rather than hold substantial amounts of cash for long periods. Although our Phillips Edison sponsor believes that this strategy has generally served the investors in Phillips Edison-sponsored programs well, some of the assets acquired by Phillips Edison-sponsored programs were acquired at times when real estate was generally more expensive than during the later stages of the life of the program. As a result, at any given time some acquired assets of a Phillips Edison-sponsored program might sell for prices that are lower than the prices paid for them if those assets had to be liquidated at that time. This can be true even if the property remains leased to creditworthy tenants with long-term leases such that the program continues to project strong income yields. This possibility is the primary reason why Phillips Edison-sponsored programs are sold as long-term investments. With a long-term investment horizon, Phillips Edison-sponsored programs have more flexibility to liquidate or list at a more favorable time during a real estate cycle. Nevertheless, we cannot make any assurances regarding our ability to liquidate or list at a time when real estate prices are attractive relative to the prices we will pay for our portfolio.
Fund III, and other private real estate funds owned and/or managed by Phillips Edison, acquired properties between 2005 through 2007, a time of historically low capitalization rates. Subsequent to these acquisitions, real property values declined and some of the properties experienced a loss of occupancy. Some of these properties had impairments that were recognized in 2010 and 2011.
Prior Investment Programs Sponsored by AR Capital
The information presented in this section represents the historical experience of the real estate programs managed or sponsored over the last ten years by Messrs. Schorsch and Kahane. In connection with ARCT’s internalization and listing on The NASDAQ Global Select Market in March 2012, Mr. Kahane has resigned from the various officer positions he held with the sponsor and its affiliates. Investors should not assume that they will experience returns, if any, comparable to those experienced by investors in such prior real estate programs. The prior performance of real estate investment programs sponsored by affiliates of Messrs. Schorsch and Kahane and AR Capital advisor may not be indicative of our future results. The information summarized below is current as of December 31, 2011 and is set forth in greater detail in the Prior Performance Tables included in this prospectus. In addition, we will provide upon request to us and without charge, a copy of the most recent Annual Report on Form 10-K filed with the SEC by any public program within the last 24 months, and for a reasonable fee, a copy of the exhibits filed with such annual report.
We intend to conduct this offering in conjunction with future offerings by one or more public and private real estate entities sponsored by AR Capital and its affiliates. To the extent that such entities have the same or similar objectives as ours or involve similar or nearby properties, such entities may be in competition with the properties acquired by us. See the section entitled “Conflicts of Interest” in this prospectus for additional information.
Summary Information
During the period from August 2007 (inception of the first program) to December 31, 2011, affiliates of AR Capital Advisor have sponsored nine public programs, of which there were five public programs that had raised funds as of December 31, 2011 and five non-public programs which had similar investment objectives to our program. From August 2007 (inception of the first public program) to December 31, 2011, AR Capital’s public programs, which include ARCT, NYRR, ARC RCA, ARC DNAV, ARCT III, ARCP, and ARC Global Daily NAV and the programs consolidated into ARCT which were ARC Income Properties II and all of the Section 1031 Exchange Programs described below, had raised $2.0 billion from 47,342 investors in public offerings and an additional $37.5 million from 205 investors in a private offering by ARC Income Properties II and 45 investors in private offerings by the Section 1031 Exchange Programs. The public programs purchased 639 properties with an aggregate purchase price of $2.7 billion, including acquisition fees, in 47 states and U.S. territories.
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The following table details the percentage of properties by state based on purchase price:
State/Possession | Purchase Price | |||
Alabama | 1.2 | % | ||
Arizona | 2.8 | % | ||
Arkansas | 1.4 | % | ||
California | 3.9 | % | ||
Colorado | 0.5 | % | ||
Connecticut | 0.1 | % | ||
Delaware | 0.0 | % | ||
Florida | 2.6 | % | ||
Georgia | 3.8 | % | ||
Idaho | 0.2 | % | ||
Illinois | 6.9 | % | ||
Indiana | 0.7 | % | ||
Iowa | 1.2 | % | ||
Kansas | 1.7 | % | ||
Kentucky | 2.6 | % | ||
Louisiana | 1.3 | % | ||
Maine | 0.3 | % | ||
Maryland | 2.5 | % | ||
Massachusetts | 1.3 | % | ||
Michigan | 3.6 | % | ||
Minnesota | 0.7 | % | ||
Mississippi | 0.6 | % | ||
Missouri | 4.6 | % | ||
Montana | 0.3 | % | ||
Nebraska | 1.2 | % | ||
Nevada | 2.2 | % | ||
New Hampshire | 0.5 | % | ||
New Jersey | 1.8 | % | ||
New Mexico | 0.1 | % | ||
New York | 15.6 | % | ||
North Carolina | 1.9 | % | ||
North Dakota | 0.1 | % | ||
Ohio | 7.1 | % | ||
Oklahoma | 0.6 | % | ||
Oregon | 0.2 | % | ||
Pennsylvania | 4.6 | % | ||
Puerto Rico | 0.4 | % | ||
South Carolina | 3.0 | % | ||
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South Dakota | 0.1 | % | ||
Tennessee | 1.1 | % | ||
Texas | 9.9 | % | ||
Utah | 1.2 | % | ||
Vermont | 0.1 | % | ||
Virginia | 1.2 | % | ||
Washington | 0.3 | % | ||
West Virginia | 0.8 | % | ||
Wisconsin | 1.1 | % | ||
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| 100 | % | |||
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The properties are all commercial properties in the following industries based on purchase price.
Industry | Purchase Price | |||
Aerospace | 0.5 | % | ||
Auto Retail | 1.5 | % | ||
Auto Services | 3.0 | % | ||
Consumer Goods | 0.9 | % | ||
Consumer Products | 2.7 | % | ||
Discount Retail | 6.2 | % | ||
Financial Services | 1.0 | % | ||
Freight | 13.9 | % | ||
Gas/Convenience | 1.9 | % | ||
Government Services | 3.8 | % | ||
Healthcare | 11.6 | % | ||
Home Maintenance | 3.0 | % | ||
Manufacturing | 4.4 | % | ||
Parking | 0.2 | % | ||
Pharmacy | 16.3 | % | ||
Restaurant | 3.1 | % | ||
Retail | 6.8 | % | ||
Retail Banking | 9.1 | % | ||
Specialty Retail | 6.5 | % | ||
Supermarket | 1.9 | % | ||
Technology | 1.2 | % | ||
Telecommunications | 0.5 | % | ||
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| 100.0 | % | |||
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The purchased properties were 37.2% new and 62.8% used, based on purchase price. None of the purchased properties were construction properties. As of December 31, 2011, two properties had been sold. The acquired properties were purchased with a combination of proceeds from the issuance of common stock, the issuance of convertible preferred stock, mortgage notes payable, short-term notes payable, revolving lines of credit, long-term notes payable issued in private placements and joint venture arrangements.
During the period from June 2008 (inception of the first non-public program) to December 31, 2011, the non-public programs, which were ARC Income Properties, ARC Income Properties II, ARC Income Properties III, ARC Income Properties IV and ARC Growth Fund, LLC, had raised $54.4 million from 694 investors. The non-public programs purchased 171 properties with an aggregate purchase price of $247.9 million including acquisition fees, in 18 states.
The following table details the percentage of properties by state based on purchase price:
State location | Purchase Price % | |||
Alabama | 0.1 | % | ||
Connecticut | 0.6 | % | ||
Delaware | 4.8 | % | ||
Florida | 11.0 | % | ||
Georgia | 3.5 | % | ||
Illinois | 6.6 | % | ||
Louisiana | 2.3 | % | ||
Michigan | 11.5 | % | ||
North Carolina | 0.1 | % | ||
New Hampshire | 0.5 | % | ||
New Jersey | 13.0 | % | ||
New York | 9.7 | % | ||
Ohio | 10.3 | % | ||
Pennsylvania | 9.5 | % | ||
South Carolina | 8.4 | % | ||
Texas | 5.0 | % | ||
Virginia | 1.2 | % | ||
Vermont | 2.2 | % | ||
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| 100 | % | |||
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The properties are all commercial single tenant facilities with 81.0% retail banking and 10.5% retail distribution facilities and 8.6% specialty retail. The purchased properties were 11.0% new and 89.0% used, based on purchase price. None of the purchased properties were construction properties. As of December 31, 2011, 53 properties had been sold. The acquired properties were purchased with a combination of equity investments, mortgage notes payable and long-term notes payable issued in private placements.
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Programs of Our AR Capital Sponsor
American Realty Capital Trust, Inc.
American Realty Capital Trust, Inc., or ARCT, a Maryland corporation, is the first publicly offered REIT sponsored by American Realty Capital. ARCT was incorporated on August 17, 2007, and qualified as a REIT beginning with the taxable year ended December 31, 2008. ARCT commenced its initial public offering of 150.0 million shares of common stock on January 25, 2008. As of December 31, 2011, ARCT had received aggregate gross offering proceeds of approximately $1.7 billion from the sale of approximately 171.9 million shares in its initial public offering. On August 5, 2010, ARCT filed a registration statement on Form S-11 to register 32.5 million shares of common stock in connection with a follow-on offering. ARCT’s initial public offering was originally set to expire on January 25, 2011, three years after its effective date. However, as permitted by Rule 415 of the Securities Act, ARCT was permitted to continue its initial public offering until July 25, 2011. On July 7, 2011 ARCT had sold all of the 150.0 million shares that were registered in connection with the initial public offering and as permitted, began to sell the remaining 25.0 million shares that were initially registered for ARCT’s distribution reinvestment plan. On July 11, 2011, ARCT filed a request to withdraw the registration of the additional 32.5 million shares, and on July 15, 2011, ARCT filed a registration statement on Form S-3 to register an additional 24.0 million shares to be used in connection with its distribution reinvestment plan. On March 1, 2012, ARCT internalized the management services previously provided by its advisor and ARCT’s common stock was listed on The NASDAQ Global Select Market under the symbol “ARCT”. As of March 31, 2012, ARCT had acquired 485 properties, primarily comprised of free standing, single-tenant retail and commercial properties that are net leased to investment grade and other creditworthy tenants. As of March 31, 2012, ARCT had total real estate investments, at cost, of approximately $2.1 billion. As of December 31, 2011, ARCT had incurred, cumulatively to that date, $198.0 million in offering costs, commissions and dealer manager fees for the sale of its common stock and $43.0 million for acquisition costs related to its portfolio of properties.
American Realty Capital New York Recovery REIT, Inc.
American Realty Capital New York Recovery REIT, Inc., or NYRR, a Maryland corporation, is the second publicly offered REIT sponsored by American Realty Capital. NYRR was incorporated on October 6, 2009 and qualified as a REIT beginning with the taxable year ended December 31, 2010. NYRR filed its initial registration statement with the SEC on November 12, 2009 and became effective on September 2, 2010. To date, NYRR had received aggregate gross offering proceeds of approximately $17.0 million from the sale of 2.0 million shares from a private offering to “accredited investors” (as defined in Regulation D as promulgated under the Securities Act). On December 15, 2011, NYRR exercised its option to convert all its outstanding preferred shares into approximately 2.0 million shares of common stock on a one-to-one basis. As of March 31, 2012, NYRR had received aggregate gross proceeds of approximately $66.9 million from the sale of 6.7 million shares in its public offering. As of March 31, 2012, there were approximately 8.8 million shares of NYRR common stock outstanding, including restricted stock, converted preferred shares, and shares issued under its distribution reinvestment plan. As of March 31, 2012, NYRR had total real estate investments, at cost, of approximately $144.9 million. As of December 31, 2011, NYRR had incurred, cumulatively to that date, approximately $12.4 million in selling commissions, dealer manager fees and other organizational and offering costs for the sale of its common stock.
American Realty Capital Healthcare Trust, Inc.
American Realty Capital Healthcare Trust, Inc. or ARC HT, a Maryland corporation, is the fourth publicly offered REIT sponsored by American Realty Capital. ARC HT was organized on August 23, 2010 and qualified as a REIT beginning with the taxable year ended December 31, 2011. ARC HT filed its registration statement with the SEC on August 27, 2010 and became effective on February 18, 2011. As of March 31, 2012, ARC HT had received aggregate gross offering proceeds of approximately $132.3 million from the sale of approximately 13.3 million shares in its public offering. As of March 31, 2012, ARC HT had acquired 17 commercial properties, for a purchase price of approximately $195.3 million. As of December 31, 2011, ARC HT had incurred, cumulatively to that date, approximately $12.3 million in offering costs for the sale of its common stock and $3.4 million for acquisition costs related to its portfolio of properties.
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American Realty Capital – Retail Centers of America, Inc.
American Realty Capital – Retail Centers of America, Inc., or ARC RCA, a Maryland corporation, is the fifth publicly offered REIT sponsored by American Realty Capital. ARC RCA was organized on July 29, 2010 and intends to qualify as a REIT beginning with the taxable year ending December 31, 2012. ARC RCA filed its registration statement with the SEC on September 14, 2010 and became effective on March 17, 2011. As of March 31, 2012, ARC RCA had received aggregate gross proceeds of approximately $2.4 million from the sale of 0.3 million shares in its public offering, but had not acquired any properties.
American Realty Capital Daily Net Asset Value Trust, Inc.
American Realty Capital Daily Net Asset Value Trust, Inc. (formerly known as American Realty Capital Trust II, Inc.), or ARC DNAV, a Maryland corporation, is the sixth publicly offered REIT sponsored by American Realty Capital. ARC Daily NAV was incorporated on September 10, 2010 and intends to qualify as a REIT beginning with the taxable year ending December 31, 2012. ARC DNAV filed its registration statement with the SEC on October 8, 2010 and became effective on August 15, 2011. As of March 31, 2012, ARC DNAV had received aggregate gross proceeds of approximately $2.4 million from the sale of 0.3 million shares in its public offering. As of March 31, 2012 ARC DNAV had acquired five properties with total real estate investments, at cost, of approximately $23.2 million.
American Realty Capital Trust III, Inc.
American Realty Capital Trust III, Inc., or ARCT III, a Maryland corporation, is the seventh publicly offered REIT sponsored by American Realty Capital. ARCT III was incorporated on October 15, 2010 and qualified as a REIT beginning with the taxable year ended December 31, 2011. ARCT III filed its registration statement with the SEC on November 2, 2010 and became effective on March 31, 2011. As of March 31, 2012, ARCT III had received aggregate gross proceeds of approximately $318.2 million from the sale of 32.0 million shares in its public offering. As of March 31, 2012, ARCT III owned 93 single tenant, free standing properties and had total real estate investments, at cost, of $268.2 million. As of December 31, 2011, ARCT III had incurred, cumulatively to that date, approximately $15.9 million in offering costs for the sale of its common stock and approximately $2.0 million for acquisition costs related to its portfolio of properties.
American Realty Capital Properties, Inc.
American Realty Capital Properties, Inc., or ARCP, a Maryland corporation, is the eighth publicly offered REIT sponsored by American Realty Capital. ARCP was incorporated on December 2, 2010 and qualified as a REIT beginning with the taxable year ended December 31, 2011. ARCP filed its registration statement with the SEC on February 11, 2011 and became effective by the SEC on July 7, 2011. On September 6, 2011, ARCP completed its initial public offering of approximately 5.6 million shares of common stock. ARCP’s common stock is traded on The NASDAQ Capital Market under the symbol “ARCP.” On September 22, 2011, ARCP filed its registration statement with the SEC in connection with an underwritten follow-on offering of 1.5 million shares of its common stock. On November 2, 2011, ARCP completed its secondary offering of 1.5 million shares of common stock. In addition, on November 7, 2011, ARCP closed on the underwriters’ overallotment option of an additional 0.1 million shares of common stock. In aggregate, ARCP has received $83.9 million of proceeds from the sale of common stock. As of March 31, 2012, ARCP owned 92 single tenant, free standing properties and real estate investments, at a purchase price of approximately $157.3 million.
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American Realty Capital Global Daily Net Asset Value Trust, Inc.
American Realty Capital Global Daily Net Asset Value Trust, Inc., or ARC Global Daily NAV, a Maryland corporation, is the ninth publicly offered REIT sponsored by American Realty Capital. ARC Global Daily NAV was incorporated on July 13, 2011 and intends to qualify as a REIT beginning with the taxable year ending December 31, 2012. ARC Global Daily NAV filed its registration statement with the SEC on October 27, 2011, which has not yet been declared effective. As of March 31, 2012, ARC Global Daily NAV had not raised any money in connection with the sale of its common stock nor had it acquired any properties.
American Realty Capital Trust IV, Inc.
American Realty Capital Trust IV, Inc., or ARCT IV, a Maryland corporation, is the tenth publicly offered REIT sponsored by American Realty Capital. ARCT IV was incorporated on February 14, 2012 and intends to qualify as a REIT beginning with the taxable year ending December 31, 2012. ARCT IV filed its registration statement with the SEC on March 21, 2012, which has not yet been declared effective. As of March 31, 2012, ARCT IV had not raised any money in connection with the sale of its common stock nor had it acquired any properties.
Business Development Corporation of America
The American Realty Capital group of companies also has sponsored Business Development Corporation of America, or Business Development Corporation, a Maryland corporation. Business Development Corporation was organized on May 5, 2010 and is a publicly offered specialty finance company which has elected to be treated as a business development company under the Investment Company Act of 1940. As of March 31, 2012, Business Development Corporation had raised gross proceeds of $26.9 million from the sale of 2.7 million shares in its public offering. As of March 31, 2012, Business Development Corporation’s investments, at cost, were $32.8 million.
Liquidity of Public Programs
FINRA Rule 2310(b)(3)(D) requires that we disclose the liquidity of prior public programs sponsored by American Realty Capital. American Realty Capital has sponsored the following other public programs: ARCT, NYRR, ARC HT, ARC RCA, ARC DNAV, ARCT III, ARCP, ARC Global Daily NAV, ARCT IV and Business Development Corporation. Although the prospectus for each of these public programs states a date or time period by which it may be liquidated, NYRR, ARC HT, ARC RCA, ARC DNAV, ARCT III and Business Development Corporation are in their offering and acquisition stages. ARCT closed its initial offering and is in its acquisition stage; ARCP closed its initial offering and secondary offering and is in its acquisition stage. Neither ARC Global Daily NAV nor ARCT IV has yet been declared effective. None of these public programs have reached the stated date or time period by which they may be liquidated.
Private Note Programs
ARC Income Properties, LLC implemented a note program that raised aggregate gross proceeds of $19.5 million. The net proceeds were used to acquire, and pay related expenses in connection with, a portfolio of 65 bank branch properties triple-net leased to RBS Citizens, N.A. and Citizens Bank of Pennsylvania. The purchase price for those bank branch properties also was funded with proceeds received from mortgage loans, as well as equity capital invested by AR Capital, LLC. Such properties contain approximately 323,000 square feet with a purchase price of approximately $98.8 million. The properties are triple-net leased for a primary term of five years and include extension provisions. The notes issued under this note program by ARC Income Properties, LLC were sold by our dealer manager through participating broker-dealers. On September 7, 2011, the note holders were repaid, the properties were contributed to ARCP as part of its formation transaction, and the mortgage loans were repaid.
ARC Income Properties II, LLC implemented a note program that raised aggregate gross proceeds of $13.0 million. The net proceeds were used to acquire, and pay related expenses in connection with, a portfolio of 50 bank branch properties triple-net leased to PNC Bank. The purchase price for those bank branch properties also was funded with proceeds received from a mortgage loan, as well as equity capital raised by ARCT in connection with
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its public offering of equity securities. The properties are triple-net leased with a primary term of ten years with a 10% rent increase after five years. The notes issued under this note program by ARC Income Properties II, LLC were sold by our dealer manager through participating broker-dealers. In May 2011, the notes were repaid in full including accrued interest and the program was closed.
ARC Income Properties III, LLC implemented a note program that raised aggregate gross proceeds of $11.2 million. The net proceeds were used to acquire, and pay related expenses in connection with the acquisition of a distribution facility triple-net leased to Home Depot. The purchase price for the property was also funded with proceeds received from a mortgage loan. The property has a primary lease term of twenty years which commenced on January 30, 2010 with a 2% escalation each year. The notes issued under this note program by ARC Income Properties III, LLC were sold by our dealer manager through participating broker-dealers. On September 7, 2011, the note holders were repaid and the property was contributed to ARCP as part of its formation transaction.
ARC Income Properties IV, LLC implemented a note program that raised proceeds of $5.4 million. The proceeds were used to acquire and pay related expenses in connection with the acquisition of six Tractor Supply stores. An existing mortgage loan of $16.5 million was assumed in connection with the acquisition. The properties had a remaining average lease term of 11.8 years with a 6.25% rental escalation every 5 years. The notes issued under this program by ARC Income Properties IV, LLC were sold by our dealer manager through participating broker-dealers.
ARC Growth Fund, LLC
ARC Growth Fund, LLC is a non-public real estate program formed to acquire vacant bank branch properties and opportunistically sell such properties, either vacant or subsequent to leasing the bank branch to a financial institution or other third-party tenant. Total gross proceeds of approximately $7.9 million were used to acquire, and pay related expenses in connection with, a portfolio of vacant bank branches. The purchase price of the properties also was funded with proceeds received from a one-year revolving warehouse facility. The purchase price for each bank branch is derived from a formulated price contract entered into with a financial institution. During the period from July 2008 to January 2009, ARC Growth Fund, LLC acquired 54 vacant bank branches from Wachovia Bank, N.A., under nine separate transactions. Such properties contain approximately 230,000 square feet with a gross purchase price of approximately $63.6 million. As of December 31, 2011, all properties were sold, 28 of which were acquired and simultaneously sold, resulting in an aggregate gain of approximately $4.8 million.
Section 1031 Exchange Programs
American Realty Capital Exchange, LLC, or ARCX, an affiliate of American Realty Capital, developed a program pursuant to which persons selling real estate held for investment can reinvest the proceeds of that sale in another real estate investment in an effort to obtain favorable tax treatment under Section 1031 of the Code, or a Section 1031 Exchange Program. ARCX acquires real estate to be owned in co-tenancy arrangements with persons desiring to engage in such like-kind exchanges. ARCX acquires the subject property or portfolio of properties and, either concurrently with or following such acquisition, prepares and markets a private placement memorandum for the sale of co-tenancy interests in that property. ARCX has engaged in four Section 1031 Exchange Programs raising aggregate gross proceeds of $10.1 million.
American Realty Capital Operating Partnership, L.P. purchased a Walgreens property in Sealy, TX under a tenant in common structure with an unaffiliated third party, a Section 1031 Exchange Program. The third party’s investment of $1.1 million represented a 44.0% ownership interest in the property. The remaining interest of 56% will be retained by American Realty Capital Operating Partnership, L.P. To date, $1.1 million has been accepted by American Realty Capital Operating Partnership, L.P. pursuant to this program.
American Realty Capital Operating Partnership, L.P., an affiliate of American Realty Capital, previously had transferred 49% of its ownership interest in a Federal Express distribution facility, located in Snowshoe, Pennsylvania, and a PNC Bank branch, located in Palm Coast, Florida, to American Realty Capital DST I, or ARC DST I, a Section 1031 Exchange Program. Realty Capital Securities, LLC, our dealer manager, has offered membership interests of up to 49%, or $2.6 million, in ARC DST I to investors in a private offering. The remaining interests of no less than 51% will be retained by American Realty Capital Operating Partnership, L.P. To date, cash payments of $2.6 million have been accepted by American Realty Capital Operating Partnership, L.P. pursuant to this program.
11
American Realty Capital Operating Partnership, L.P. also has transferred 35.2% of its ownership interest in a PNC Bank branch location, located in Pompano Beach, Florida, to American Realty Capital DST II, or ARC DST II, a Section 1031 Exchange Program. Realty Capital Securities, our dealer manager, has offered membership interests of 35.2%, or $0.5 million, in ARC DST II to investors in a private offering. The remaining interests of no less than 64.8% will be retained by American Realty Capital Operating Partnership, L.P. To date, cash payments of $0.5 million have been accepted by American Realty Capital Operating Partnership, L.P pursuant to this program.
American Realty Capital Operating Partnership, L.P. also has transferred 49% of its ownership interest in three CVS properties, located in Smyrna, Georgia, Chicago, Illinois and Visalia, California, to American Realty Capital DST III, or ARC DST III, a Section 1031 Exchange Program. Realty Capital Securities, our dealer manager, has offered membership interests of up to 49%, or $3.1 million, in ARC DST III to investors in a private offering. The remaining interests of no less than 51% will be retained by American Realty Capital Operating Partnership, L.P. To date, cash payments of $3.1 million have been accepted by American Realty Capital Operating Partnership, L.P. pursuant to this program.
American Realty Capital Operating Partnership, L.P. has transferred 49% of its ownership interest in six Bridgestone Firestone properties, located in Texas and New Mexico, to American Realty Capital DST IV, or ARC DST IV, a Section 1031 Exchange Program. Realty Capital Securities, our dealer manager, has offered membership interests of up to 49%, or $7.3 million, in ARC DST IV to investors in a private offering. The remaining interests of no less than 51% will be retained by American Realty Capital Operating Partnership, L.P. To date, cash payments of $7.3 million had been accepted by American Realty Capital Operating Partnership, L.P. pursuant to this program. American Realty Capital Operating Partnership, L.P. also has sold 24.9% of its ownership interest in a Jared Jewelry property located in Lake Grove, NY, under a tenant-in-common structure with an affiliated third party. The remaining interest of 75.1% will be retained by American Realty Capital Operating Partnership, L.P. To date cash payments of $0.6 million has been accepted by American Realty Capital Operating Partnership, L.P. pursuant to this program.
Other Investment Programs of Mr. Schorsch and Mr. Kahane
American Realty Capital, LLC
American Realty Capital, LLC began acquiring properties in December 2006. During the period from January 1, 2007 to December 31, 2007, American Realty Capital, LLC acquired 73 property portfolios, totaling just over 1,767,000 gross leasable square feet for an aggregate purchase price of approximately $407.5 million. These properties included a mixture of tenants, including HyVee supermarkets, CVS, Rite Aid, Walgreens, Harleysville bank branches, Logan’s Roadhouse Restaurants, Tractor Supply Company, Shop N Save, FedEx, Dollar General and Bridgestone Firestone. The underlying leases within these acquisitions ranged from 10 to 25 years before any tenant termination rights, with a dollar-weighted-average lease term of approximately 21 years based on rental revenue. During the period of April 1, 2007 through October 20, 2009, American Realty Capital, LLC sold nine properties: four Walgreens drug stores, four Logan’s Roadhouse Restaurants and one CVS pharmacy for total sales proceeds of $50.2 million.
American Realty Capital, LLC has operated in three capacities: as a joint-venture partner, as a sole investor and as an advisor. No money was raised from investors in connection with the properties acquired by American Realty Capital, LLC. All American Realty Capital, LLC transactions were done with the equity of the principals or joint-venture partners of American Realty Capital, LLC.
In instances where American Realty Capital, LLC was not an investor in the transaction, but rather solely an advisor, American Realty Capital, LLC typically performed the following advisory services: but rather an advisor, American Realty Capital, LLC typically performed the following advisory services:
| • | identified potential properties for acquisition; |
| • | negotiated letters of intent and purchase and sale contracts; |
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| • | obtained financing; |
| • | performed due diligence; |
| • | closed properties; |
| • | managed properties; and |
| • | sold properties. |
Prior Investment Programs Sponsored by Nicholas S. Schorsch
During the period from 1998 to 2002, one of the principals of our sponsor, Nicholas S. Schorsch, sponsored seven private programs, consisting of First States Properties, L.P., First States Partners, L.P., First States Partners II, First States Partners III, First States Holdings, Chester Court Realty and Dresher Court Realty, which raised approximately $38.3 million from 93 investors and acquired properties with an aggregate purchase price of approximately $272.3 million. These private programs, or Predecessor Entities, financed their investments with investor equity and institutional first mortgages. These properties are located throughout the United States as indicated in the table below. Ninety-four percent of the properties acquired were bank branches and 6% of the properties acquired were office buildings. None of the properties included in the aforesaid figures were newly constructed. Each of these Predecessor Entities is similar to our program because they invested in long-term net lease commercial properties. The Predecessor Entities properties are located as follows:
State | No. of Properties | Square Feet | ||||||
Pennsylvania | 34 | 1,193,741 | ||||||
New Jersey | 38 | 149,351 | ||||||
South Carolina | 3 | 65,992 | ||||||
Kansas | 1 | 17,434 | ||||||
Florida | 4 | 16,202 | ||||||
Oklahoma | 2 | 13,837 | ||||||
Missouri | 1 | 9,660 | ||||||
Arkansas | 4 | 8,139 | ||||||
North Carolina | 2 | 7,612 | ||||||
Texas | 1 | 6,700 | ||||||
Attached hereto as Appendix A-1 is further prior performance information on Nicholas S. Schorsch.
American Financial Realty Trust
In 2002, American Financial Realty Trust, or AFRT, was founded by Nicholas S. Schorsch. In September and October 2002, AFRT sold approximately 40.8 million shares of common stock in a Rule 144A private placement. These sales resulted in aggregate net proceeds of approximately $378.6 million. Simultaneous with the sale of such shares, AFRT acquired certain real estate assets from a predecessor entity for an aggregate purchase price of $230.5 million, including the assumption of indebtedness, consisting of a portfolio of 87 bank branches and six office buildings containing approximately 1.5 million rentable square feet. Mr. Schorsch was the president, chief executive officer and vice-chairman of AFRT from its inception as a REIT in September 2002 until August 2006. Mr. Kahane was the chairman of the Finance Committee of AFRT’s Board of Trustees from its inception as a REIT in September 2002 until August 2006. AFRT went public on the New York Stock Exchange in June 2003 in what was at the time the second largest REIT initial public offering in U.S. history, raising over $800 million. Three years following its initial public offering, AFRT was an industry leader, acquiring over $4.3 billion in assets, over 1,110 properties (net of dispositions) in more than 37 states and over 35.0 million square feet with 175 employees and a
13
well diversified portfolio of bank tenants. On April 1, 2008 AFRT was acquired by Gramercy Capital Corp. Neither Mr. Schorsch nor Mr. Kahane owned any equity interest in AFRT at the time of the acquisition, and neither Mr. Schorsch nor Mr. Kahane currently owns an equity interest in AFRT.
Adverse Business Developments and Conditions
The net losses incurred by ARCT, NYRR, ARC Income Properties, LLC, ARC Income Properties II, LLC, ARC Income Properties III, LLC and ARC Income Properties IV, LLC are primarily attributable to non-cash items and acquisition expenses incurred for the purchases of properties which are not ongoing expenses for the operation of the properties and not the impairment of the programs’ real estate assets. With respect to ARCT, our largest program to date, for the years ended December 31, 2011, 2010 and 2009, the entire net loss was attributable to depreciation and amortization expenses incurred on the properties during the ownership period; and for the year ended December 31, 2008, 71% of the net losses were attributable to depreciation and amortization, and the remaining 29% of the net losses was attributable to the fair market valuation of certain derivative investments held.
Additionally, each of ARC Income Properties, LLC, ARC Income Properties II, LLC, ARC Income Properties III, LLC and ARC Income Properties IV, LLC is an offering of debt securities. Despite incurring net losses during certain periods, all anticipated distributions to investors have been paid on these programs through interest payments on the debt securities. The equity interests in each of these entities are owned by Nicholas Schorsch and William Kahane and their respective families. Any losses pursuant to a reduction in value of the equity in any of these entities (which has not occurred and which is not anticipated), will be borne by Messrs. Schorsch and Kahane and their respective families. On September 7, 2011, the note holders in ARC Income Properties, LLC and ARC Income Properties III, LLC were repaid and the properties were contributed to ARCP as part of its formation transaction. Additionally, the mortgage loans in ARC Income Properties, LLC were repaid.
Since its inception, ARCT has paid distributions through a combination of cash flows from operations, proceeds from the sale of common stock and the issuance of shares in accordance with the distribution reinvestment plan. Distributions paid from cash flows from operations, excluding distributions paid in shares, for the years ended December 31, 2008, 2009, 2010 and 2011 were 100.0%, 79.1%, 84.8% and 94.1%, respectively. Cumulative to date as of December 31, 2011, 89.5% of distributions paid in cash were paid from cash flows from operations with the remaining 10.5% paid from the issuance of new shares.
ARC Growth Fund, LLC was different from the other programs in that all of the properties were vacant when the portfolio was purchased and the properties were purchased with the intention of reselling them. Losses from operations represent carrying costs on the properties as well as acquisition and disposition costs in addition to non-cash depreciation and amortization costs. Upon final distribution in 2010, all investors received their entire investment plus an incremental return based on a percentage of their initial investment and the sponsor retained the remaining available funds and four properties which were unsold at the end of the program.
None of the referenced programs have been subject to any tenant turnover and have experienced a non-renewal of only two leases. Further, none of the referenced programs have been subject to mortgage foreclosure or significant losses on the sales of properties.
Attached hereto as Appendices A-1 and A-2 are further prior performance information on AFRT and Nicholas S. Schorsch, respectively.
Other than as disclosed above, there have been no major adverse business developments or conditions experienced by any program or non-program property that would be material to investors, including as a result of recent general economic conditions.
14
APPENDIX A
PRIOR PERFORMANCE TABLES
The following prior performance tables (“Tables”) provide information relating to the real estate investment programs sponsored by Phillips Edison and programs sponsored by AR Capital. Each of Phillips Edison’s previous programs and investments and some of AR Capital’s prior programs and investments were conducted through privately held entities not subject to the up-front commissions, fees and expenses associated with this offering or all of the laws and regulations to which we will be subject. In addition, we are Phillips Edison’s first publicly offered investment program and Phillips Edison has never operated a public REIT before. Because of these facts, our investors should not assume that the prior performance of programs sponsored by Phillips Edison or AR Capital will be indicative of our future performance. In assessing the relative importance of this information with respect to a decision to invest in this offering, you should keep in mind that we will rely primarily on affiliates of our Phillips Edison sponsor to identify acquisitions and manage our portfolio and we will rely primarily on affiliates of our AR Capital sponsor with respect to our capital-raising efforts, although both AR Capital Advisor and Phillips Edison Sub-Advisor will jointly participate in major decisions as described in the prospectus at “Management – Our Advisor and Sub-Advisor.” You should also note that only programs sponsored by Phillips Edison have invested in our targeted portfolio of grocery-anchored neighborhood shopping centers.
Generally, Phillips Edison’s prior programs described in the following tables have investment objectives similar to ours except that Phillips Edison Strategic Investment Fund LLC focuses on acquiring power and lifestyle centers. None of the AR Capital programs had or have investment objectives similar to ours. We consider programs invested primarily in neighborhood and community shopping centers to have investment objectives similar to ours. ARC Growth Fund, LLC was formed to acquire vacant bank branch properties and opportunistically sell such properties.
The Tables below provide information on the performance of a number of private programs of Phillips Edison and public and private programs of AR Capital. This information should be read together with the summary information included in the “Prior Performance Summary” section of this prospectus.
The inclusion of the Tables does not imply that we will make investments comparable to those reflected in the Tables or that investors in our shares will experience returns comparable to the returns experienced in the programs referred to in the Tables. In addition, you may not experience any return on your investment. If you purchase our shares, you will not acquire any ownership in any of the programs to which the Tables relate.
The following tables are included herein for each of Phillips Edison and AR Capital:
TABLE I Experience in Raising and Investing Funds
TABLE II Compensation to Sponsor
TABLE III Operating Results of Prior Programs
TABLE IV Results of Completed Programs
TABLE V Sales or Disposals of Properties
A-1
Table I
EXPERIENCE IN RAISING AND INVESTING FUNDS
(UNAUDITED)
Prior Performance is not Indicative of Future Results
Table I provides a summary of the experience of Phillips Edison in raising and investing in funds for programs that have had an offering close during the three years ended December 31, 2011. Information is provided as to the manner in which the proceeds of the offering have been applied.
| Similar Programs | Other Program | |||||||||||||||||||||||
| (in thousands) | Phillips Edison Shopping Center Fund III, LP | Percentage of Total Dollar Amount Raised | Phillips Edison Shopping Center Fund IV, LP | Percentage of Total Dollar Amount Raised | Phillips Edison Strategic Investment Fund LLC | Percentage of Total Dollar Amount Raised | ||||||||||||||||||
Dollar amount offered | $ | 200,000 | $ | 500,000 | $ | 50,000 | ||||||||||||||||||
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Dollar amount raised | $ | 275,000 | 100 | % | $ | 119,910 | 100 | % | $ | 65,615 | 100 | % | ||||||||||||
Less offering expenses: | ||||||||||||||||||||||||
Selling commissions and discounts | — | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Organizational and offering expenses | 816 | 0.3 | % | 909 | 0.8 | % | 77 | 0.1 | % | |||||||||||||||
Reserve for operations | — | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Other | — | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
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Available for investment | $ | 274,184 | 99.7 | % | $ | 119,001 | 99.2 | % | $ | 65,538 | 99.9 | % | ||||||||||||
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Acquisition costs: | ||||||||||||||||||||||||
Cash down Payment | $ | 322,300 | 117.2 | % | $ | 46,569 | 38.8 | % | $ | 47,669 | 72.6 | % | ||||||||||||
Acquisition fees | — | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Other(1) | 12,331 | 4.5 | % | 715 | 0.6 | % | 807 | 1.2 | % | |||||||||||||||
Mortgage loan | 659,945 | 240.0 | % | 80,161 | 66.9 | % | 40,095 | 61.1 | % | |||||||||||||||
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Total acquisition costs | $ | 994,576 | 361.7 | % | $ | 127,445 | 106.3 | % | $ | 88,571 | 135.0 | % | ||||||||||||
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Percent leveraged | 66 | % | 63 | % | 45 | % | ||||||||||||||||||
Date offering began | January 2005 | September 2007 | January 2007 | |||||||||||||||||||||
Length of offering (in months) | 12 | 21 | 4 | |||||||||||||||||||||
Months to invest 90% available for investment (measured from date of offering)(2) | 18 | — | 45 | |||||||||||||||||||||
| (1) | Includes legal fees, environmental studies, title and other closing costs. |
| (2) | As of this offering, Fund IV is currently in its investment period and has not invested 90% of its committed capital. As assets are identified for investment equity, capital will be called to fund acquisitions throughout the remainder of the investment period. |
A-2
Table II
COMPENSATION TO SPONSOR
(UNAUDITED)
Prior Performance is not Indicative of Future Results
Table II provides the amount and type of compensation paid to Phillips Edison affiliates during the three years ended December 31, 2011 in connection with 1) each program sponsored by a Phillips Edison investment advisor that had offerings close during this period and 2) all other programs that have made payments to Phillips Edison affiliates during this period. All figures are as of December 31, 2011.
| Similar Programs | Other Programs | |||||||||||||||
| (in thousands) | Phillips Edison Shopping Center Fund III, LP | Phillips Edison Shopping Center Fund IV, LP | Phillips Edison Strategic Investment Fund LLC | Phillips Edison Strategic Investment Fund II LLC | ||||||||||||
Date offering commenced | January 2005 | September 2007 | January 2007 | September 2010 | ||||||||||||
Dollar amount raised | $ | 275,000 | $ | 119,910 | $ | 65,615 | $ | 56,655 | ||||||||
Amount paid to sponsor from proceeds of offering: | ||||||||||||||||
Underwriting fees | — | — | — | — | ||||||||||||
Acquisition fees: | ||||||||||||||||
Real estate commissions | — | — | — | — | ||||||||||||
Advisory fees | — | — | — | — | ||||||||||||
Other | — | — | — | — | ||||||||||||
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Total amount paid to sponsor | — | — | — | — | ||||||||||||
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Dollar amount of cash generated from operations before deducting payments to sponsor | $ | 79,755 | $ | 14,828 | $ | 19,346 | $ | 919 | ||||||||
Amount paid to sponsor from operations: | ||||||||||||||||
Property management fees | 13,247 | 1,323 | 894 | 23 | ||||||||||||
Partnership management fees | 12,063 | 4,502 | 3,799 | 286 | ||||||||||||
Reimbursements | 4,947 | 503 | 182 | 18 | ||||||||||||
Leasing commissions | 10,171 | 927 | 1,120 | — | ||||||||||||
Acquisition fees | — | — | 450 | 50 | ||||||||||||
Development fees | 1,707 | 314 | 347- | — | ||||||||||||
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Totals | $ | 42,135 | $ | 7,569 | $ | 6,792 | $ | 377 | ||||||||
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Dollar amount of sales and refinancing before deducting payments to sponsor: | ||||||||||||||||
Cash | $ | 5,925 | — | — | — | |||||||||||
Notes | — | — | — | — | ||||||||||||
Amount paid to sponsor from sales and refinancing: | ||||||||||||||||
Selling commissions | $ | 422 | $ | 124 | — | — | ||||||||||
Incentive fees | — | — | — | — | ||||||||||||
Other | — | — | — | — | ||||||||||||
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Totals | $ | 422 | $ | 124 | — | — | ||||||||||
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A-3
Table III
OPERATING RESULTS OF PRIOR PROGRAMS
(UNAUDITED)
Prior Performance is not Indicative of Future Results
Table III summarizes the operating results of programs sponsored by Phillips Edison that have had offerings close during the five years ended December 31, 2011. For these programs, this table shows: the income or loss of such programs (based upon U.S. generally accepted accounting principles (“GAAP”)); the cash generated from operations, sales and refinancings; and information regarding cash distributions. All figures are as of or for the year ended December 31 of the year indicated.
A-4
Table III
OPERATING RESULTS OF PRIOR PROGRAMS (Continued)
(UNAUDITED)
Prior Performance is not Indicative of Future Results
| Phillips Edison Limited Partnership(4) | ||||||||||||||||||||||||||||
| (in thousands) | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |||||||||||||||||||||
Gross revenues | $ | 85,295 | $ | 113,282 | $ | 175,683 | $ | 210,681 | $ | 199,433 | $ | 190,016 | $ | 197,771 | ||||||||||||||
Profit on sale of properties | 6,104 | 7,889 | 3,620 | 264 | (524 | ) | 54,254 | 13,913 | ||||||||||||||||||||
Other income (loss) | (4,165 | ) | (40 | ) | (122 | ) | (2,123 | ) | 9,551 | (51,202 | ) | (20,339 | ) | |||||||||||||||
Less: Operating expenses(1) | 34,359 | 44,092 | 71,678 | 96,315 | 86,134 | 84,307 | 79,883 | |||||||||||||||||||||
Interest expense | 32,341 | 47,218 | 84,444 | 110,143 | 75,465 | 70,261 | 65,245 | |||||||||||||||||||||
Depreciation and amortization | 29,325 | 38,298 | 71,955 | 92,578 | 80,221 | 63,939 | 59,498 | |||||||||||||||||||||
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Net income (loss) before non-controlling interests | (8,791 | ) | (8,477 | ) | (48,896 | ) | (90,214 | ) | (33,360 | ) | (25,799 | ) | (13,281 | ) | ||||||||||||||
Net loss (income) allocated to non-controlling interests | — | 9,817 | 31,802 | 55,112 | 19,511 | 58,275 | 12,316 | |||||||||||||||||||||
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Net income (loss)-GAAP basis | $ | (8,791 | ) | $ | 1,340 | $ | (17,094 | ) | $ | (35,102 | ) | $ | (13,849 | ) | $ | 32,476 | $ | (965 | ) | |||||||||
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Taxable (Loss) Income:(2) | ||||||||||||||||||||||||||||
–from operations | $ | (1,377 | ) | $ | 4,182 | $ | 3,180 | $ | (8,273 | ) | $ | (3,293 | ) | $ | (3,696 | ) | $ | 5,249 | ||||||||||
–from gain on sale | — | 476 | 2,043 | 379 | 2,361 | 35,889 | 2,520 | |||||||||||||||||||||
Cash generated from operations | 11,661 | 20,146 | 32,135 | 35,272 | 44,296 | 46,743 | 35,364 | |||||||||||||||||||||
Cash generated from sales | 22,011 | 35,614 | 27,603 | 20,497 | 30,770 | 126,187 | 117,076 | |||||||||||||||||||||
Cash generated from refinancing(3) | 104,799 | 309,302 | 688,314 | 82,652 | 58,544 | (19,935 | ) | (81,998 | ) | |||||||||||||||||||
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Total cash generated from operations, sales and refinancing | 138,471 | 365,062 | 748,052 | 138,421 | 133,610 | 152,995 | 70,442 | |||||||||||||||||||||
Less: Cash distributions to investors: | ||||||||||||||||||||||||||||
–from operating cash flow | 11,661 | 16,735 | 17,675 | 18,617 | 10,857 | 8,853 | 15,643 | |||||||||||||||||||||
–from sales and refinancing | 3,890 | — | — | — | — | — | — | |||||||||||||||||||||
–from other | — | — | — | — | — | — | — | |||||||||||||||||||||
Cash generated after cash distributions (3) | 122,920 | 348,327 | 730,377 | 119,804 | 122,753 | 144,142 | 54,799 | |||||||||||||||||||||
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Less: Special items (not including sales and refinancing) | — | — | — | — | — | — | — | |||||||||||||||||||||
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Cash generated after cash distributions and special items | $ | 122,920 | $ | 348,327 | $ | 730,377 | $ | 119,804 | $ | 122,753 | $ | 144,142 | $ | 54,799 | ||||||||||||||
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Tax and distribution data per $1,000 invested | ||||||||||||||||||||||||||||
U.S. federal income tax results: | ||||||||||||||||||||||||||||
Ordinary income (loss) | ||||||||||||||||||||||||||||
–from operations | $ | (6.18 | ) | $ | 18.79 | $ | 14.29 | $ | (31.01 | ) | $ | (12.34 | ) | $ | (13.86 | ) | $ | 19.68 | ||||||||||
–from recapture | — | — | — | — | — | — | — | |||||||||||||||||||||
Capital gain (loss) | — | 2.14 | 9.18 | 1.42 | 8.85 | 134.54 | 9.45 | |||||||||||||||||||||
Cash distributions to investors | ||||||||||||||||||||||||||||
Source (on a GAAP basis) | ||||||||||||||||||||||||||||
–from investment income | — | 5.61 | — | — | — | 37.00 | — | |||||||||||||||||||||
–from return of capital | 65.00 | 64.39 | 74.00 | 74.00 | 37.00 | — | 48.50 | |||||||||||||||||||||
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Total distribution on GAAP basis | $ | 65.00 | $ | 70.00 | $ | 74.00 | $ | 74.00 | $ | 37.00 | $ | 37.00 | $ | 48.50 | ||||||||||||||
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Source (on cash basis) | ||||||||||||||||||||||||||||
–from sales | 16.26 | — | — | — | — | — | — | |||||||||||||||||||||
–from refinancings | — | — | — | — | — | — | — | |||||||||||||||||||||
–from operations | 48.74 | 70.00 | 74.00 | 74.00 | 37.00 | 37.00 | 48.50 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total distributions on cash basis | $ | 65.00 | $ | 70.00 | $ | 74.00 | $ | 74.00 | $ | 37.00 | $ | 37.00 | $ | 48.50 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Amounts (in percentage terms) remaining in program properties as of December 31, 2011 | 61 | % | ||||||||||||||||||||||||||
| (1) | Operating expenses include all general and administrative expenses. |
| (2) | Program is compromised of partnerships, limited liability companies, real estate investment trusts and subchapter S corporations, which file tax returns for which the partners, members and stockholders are taxed on their respective shares of entity income, and accordingly, no provision for income taxes is included in the consolidated financial statements. |
| (3) | Cash generated from financing / refinancing includes original mortgage proceeds when assets were acquired. |
| (4) | Consolidated financial statements of Phillips Edison Limited Partnership and its subsidiaries. As well as being the general partner in all Phillips Edison-sponsored programs, Phillips Edison Limited Partnership has limited partner interests in the programs reported. |
A-5
Table III
OPERATING RESULTS OF PRIOR PROGRAMS (Continued)
(UNAUDITED)
Prior Performance is not Indicative of Future Results
| Phillips Edison Shopping Center Fund III, L.P. | ||||||||||||||||||||||||
| (in thousands) | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | ||||||||||||||||||
Gross revenues | $ | 20,293 | $ | 76,076 | $ | 106,147 | $ | 97,705 | $ | 82,810 | $ | 82,669 | ||||||||||||
Profit (loss) on sale of properties | — | — | 264 | (551 | ) | 3,077 | 6,535 | |||||||||||||||||
Other loss | — | (30 | ) | (2,186 | ) | (1,694 | ) | (49,249 | ) | (9,993 | ) | |||||||||||||
Less: Operating expenses(1) | 11,415 | 29,115 | 40,062 | 36,476 | 33,237 | 31,976 | ||||||||||||||||||
Interest expense | 9,653 | 42,131 | 62,297 | 38,563 | 35,366 | 31,948 | ||||||||||||||||||
Depreciation and amortization | 9,161 | 38,015 | 56,106 | 49,444 | 32,638 | 27,510 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net loss – GAAP basis | $ | (9,936 | ) | $ | (33,215 | ) | $ | (54,240 | ) | $ | (29,023 | ) | $ | (64,603 | ) | $ | (12,223 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Taxable (Loss) Income:(2) | ||||||||||||||||||||||||
–from operations | $ | (422 | ) | $ | 8,549 | $ | 4,940 | $ | (3,889 | ) | $ | 988 | $ | (1,850 | ) | |||||||||
–from gain on sale | — | — | — | — | — | — | ||||||||||||||||||
Cash generated (deficiency) from operations | (104 | ) | 14,939 | 21,792 | 14,250 | 18,324 | 5,046 | |||||||||||||||||
Cash generated (deficiency) from sales | — | — | 1,778 | 4,956 | 14,395 | 96,145 | ||||||||||||||||||
Cash generated from refinancing(3) | 275,355 | 605,075 | (13,637 | ) | (3,280 | ) | (11,608 | ) | (91,672 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total cash generated from operations, sales and refinancing | 275,251 | 620,014 | 9,933 | 15,926 | 21,111 | 9,519 | ||||||||||||||||||
Less: Cash distributions to investors: | ||||||||||||||||||||||||
–from operating cash flow | — | 14,939 | — | — | — | — | ||||||||||||||||||
–from sales and refinancing | — | 7,561 | — | — | — | — | ||||||||||||||||||
–from other | — | — | — | — | — | — | ||||||||||||||||||
Cash generated after cash distributions | 275,251 | 597,514 | 9,933 | 15,926 | 21,111 | 9,519 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less: Special items (not including sales and refinancing) | — | — | — | — | — | — | ||||||||||||||||||
Cash generated after cash distributions and special items | $ | 275,251 | $ | 597,514 | $ | 9,933 | $ | 15,926 | $ | 21,111 | $ | 9,519 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Tax and distribution Data per $1,000 Invested | ||||||||||||||||||||||||
Federal income tax results: | ||||||||||||||||||||||||
Ordinary income (loss) | ||||||||||||||||||||||||
–from operations | $ | (3.47 | ) | $ | 31.09 | $ | 18.43 | $ | (14.51 | ) | $ | 3.69 | $ | (6.90 | ) | |||||||||
–from recapture | — | — | — | — | — | — | ||||||||||||||||||
Capital gain (loss) | — | — | — | — | — | — | ||||||||||||||||||
Cash distributions to investors | ||||||||||||||||||||||||
Source (on a GAAP basis) | ||||||||||||||||||||||||
–from investment income | — | 56.55 | — | — | — | — | ||||||||||||||||||
–from return of capital | — | 25.27 | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distribution on GAAP basis | $ | — | $ | 81.82 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Source (on cash basis) | ||||||||||||||||||||||||
–from sales | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
–from refinancings | — | 27.49 | — | — | — | — | ||||||||||||||||||
–from operations | — | 54.32 | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions on cash basis | $ | — | $ | 81.82 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Amounts (in percentage terms) remaining in program properties as of December 31, 2011 | 81.4 | % | ||||||||||||||||||||||
| (1) | Operating expenses include all general and administrative expenses. |
| (2) | Program qualifies as a REIT under the Internal Revenue Code for federal income tax purposes. As such, the program is generally not subject to U.S. federal income tax to the extent it distributes its REIT taxable income to its stockholders. |
| (3) | Cash generated from financing / refinancing includes original mortgage proceeds and capital contributions when assets were acquired. |
A-6
Table III
OPERATING RESULTS OF PRIOR PROGRAMS (Continued)
(UNAUDITED)
Prior Performance is not Indicative of Future Results
| Phillips Edison Shopping Center Fund IV, L.P. | ||||||||||||||||||||
| (in thousands) | 2007 | 2008 | 2009 | 2010 | 2011 | |||||||||||||||
Gross revenues | $ | — | $ | 2,950 | $ | 6,622 | $ | 9,490 | $ | 13,837 | ||||||||||
Profit on sale of properties | — | — | — | 8,431 | — | |||||||||||||||
Other income (loss) | — | — | (1,390 | ) | (9,566 | ) | — | |||||||||||||
Less: Operating expenses(1) | 509 | 4,066 | 5,049 | 6,033 | 5,778 | |||||||||||||||
Interest expense | — | 1,533 | 2,278 | 2,692 | 1,769 | |||||||||||||||
Depreciation and amortization | — | 1,351 | 2,679 | 3,809 | 5,265 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net (loss) income – GAAP basis | $ | (509 | ) | $ | (4,000 | ) | $ | (4,774 | ) | $ | (4,179 | ) | $ | 1,025 | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Taxable (Loss) Income:(2) | ||||||||||||||||||||
–from operations | $ | — | $ | (1,373 | ) | $ | (87 | ) | $ | (155 | ) | $ | 5,084 | |||||||
–from gain on sale | — | — | — | — | — | |||||||||||||||
Cash generated (deficiency) from operations | 336 | (1,473 | ) | (730 | ) | 1,940 | 6,049 | |||||||||||||
Cash generated (deficiency) from sales | — | — | — | 1,884 | — | |||||||||||||||
Cash generated from refinancing(3) | (217 | ) | 49,524 | 14,093 | 51,813 | 14,719 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total cash generated from operations, sales and refinancing | 119 | 48,051 | 13,363 | 55,637 | 20,768 | |||||||||||||||
Less: Cash distributions to investors: | ||||||||||||||||||||
–from operating cash flow | — | — | — | — | 6,049 | |||||||||||||||
–from sales and refinancing | — | 913 | — | — | 10,951 | |||||||||||||||
–from other | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cash generated after cash distributions(3) | 119 | 47,138 | 13,363 | 55,637 | 3,768 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: Special items (not including sales and refinancing) | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cash generated after cash distributions and special items | $ | 119 | $ | 47,138 | $ | 13,363 | $ | 55,637 | $ | 3,768 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Tax and distribution data per $1,000 invested | ||||||||||||||||||||
U.S. federal income tax results: | ||||||||||||||||||||
Ordinary (loss) income | ||||||||||||||||||||
–from operations | $ | — | $ | (62.33 | ) | $ | (3.41 | ) | $ | 21.94 | $ | 92.91 | ||||||||
–from recapture | — | — | — | — | — | |||||||||||||||
Capital gain (loss) | — | — | — | — | — | |||||||||||||||
Cash distributions to investors(4) | ||||||||||||||||||||
Source (on a GAAP basis) | ||||||||||||||||||||
–from investment income | — | — | — | — | 171.24 | |||||||||||||||
–from return of capital | — | 41.45 | — | — | 139 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distribution on GAAP basis | $ | — | $ | 41.45 | $ | — | $ | — | $ | 310.67 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Source (on cash basis) | ||||||||||||||||||||
–from sales | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
–from refinancings | — | 41.45 | — | — | 220.18 | |||||||||||||||
–from operations | — | — | — | — | 90.49 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions on cash basis | $ | — | $ | 41.45 | $ | — | $ | — | $ | 310.67 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Amounts (in percentage terms) remaining in program properties as of December 31, 2011 | 86 | % | ||||||||||||||||||
| (1) | Operating expenses include all general and administrative expenses. |
| (2) | Program qualifies as a REIT under the Internal Revenue Code for U.S. federal income tax purposes. To qualify as a REIT, the program must meet a number of organizational and operational requirements, including requirements to distribute at least 90% of the ordinary taxable income and to distribute to stockholders or pay tax on 100% of capital gains and to meet certain asset and income tests. |
| (3) | Cash generated from financing / refinancing includes original mortgage financing and subsequent financings. |
| (4) | As of this offering, this commingled fund is currently in its investment period and has not invested its entire committed capital. As such, as assets are identified for investment equity, capital will be called to fund the acquisition throughout the remainder of the investment period. |
A-7
Table III
OPERATING RESULTS OF PRIOR PROGRAMS (Continued)
(UNAUDITED)
Prior Performance is not Indicative of Future Results
| Phillips Edison Strategic Investment Fund | ||||||||||||||||||||
| (in thousands) | 2007 | 2008 | 2009 | 2010 | 2011 | |||||||||||||||
Gross revenues | $ | — | $ | — | $ | 1,743 | $ | 8,160 | $ | 11,441 | ||||||||||
Profit on sale of properties | — | — | — | — | — | |||||||||||||||
Other income (loss) | 6 | 10 | 14,114 | 4,322 | (2,089 | ) | ||||||||||||||
Less: Operating expenses(1) | 99 | 1,840 | 2,718 | 4,943 | 5,551 | |||||||||||||||
Interest expense | — | 9 | 468 | 1,498 | 1,718 | |||||||||||||||
Depreciation and amortization | — | — | 742 | 2,947 | 4,312 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) – GAAP Basis | $ | (93 | ) | $ | (1,839 | ) | $ | 11,929 | $ | 3,094 | $ | (2,229 | ) | |||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Taxable income:(2) | ||||||||||||||||||||
–from operations | $ | — | $ | — | $ | (1,468 | ) | $ | (258 | ) | $ | 682 | ||||||||
–from gain on sale | — | — | — | — | — | |||||||||||||||
Cash generated (deficiency) from operations | (132 | ) | (1,826 | ) | 1,318 | 5,639 | 5,597 | |||||||||||||
Cash generated (deficiency) from sales | — | — | — | — | — | |||||||||||||||
Cash generated from financing / refinancing(3) | 7,204 | 2,783 | 60,261 | 41,238 | 16,171 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total cash generated from operations, sales and refinancing | 7,072 | 957 | 61,579 | 46,877 | 21,768 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: Cash distributions to investors: | ||||||||||||||||||||
–from operating cash flow | — | — | — | 1,000 | 5,597 | |||||||||||||||
–from sales and refinancing | — | — | — | — | 13,402 | |||||||||||||||
–from other | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cash generated after cash distributions(3) | 7,072 | 957 | 61,579 | 45,877 | 2,769 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: Special items (not including sales and refinancing) | — | — | — | — | — | |||||||||||||||
Cash generated after cash distributions and special items | $ | 7,072 | $ | 957 | $ | 61,579 | $ | 45,877 | $ | 2,769 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Tax and distribution data per $1,000 invested | ||||||||||||||||||||
U.S. federal income tax results: | ||||||||||||||||||||
Ordinary income (loss) | ||||||||||||||||||||
–from operations | $ | — | $ | — | $ | (48.98 | ) | $ | (3.99 | ) | $ | 12.57 | ||||||||
–from recapture | — | — | — | — | — | |||||||||||||||
Capital gain (loss) | — | — | — | — | — | |||||||||||||||
Cash distributions to investors (4) | ||||||||||||||||||||
Source (on a GAAP basis) | ||||||||||||||||||||
–from investment income | — | — | — | 15.46 | 154.81 | |||||||||||||||
–from return of capital | — | — | — | — | 195.29 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distribution on GAAP basis | $ | — | $ | — | $ | — | $ | 15.46 | $ | 350.10 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Source (on cash basis) | ||||||||||||||||||||
–from sales | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
–from refinancings | — | — | — | — | 260.08 | |||||||||||||||
–from operations | — | — | — | 15.46 | 90.02 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions on cash basis | $ | — | $ | — | $ | — | $ | 15.46 | $ | 350.10 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Amounts (in percentage terms) remaining in program properties as of December 31, 2011 | 96 | % | ||||||||||||||||||
| (1) | Operating expenses include all general and administrative expenses. |
| (2) | Program qualifies as a REIT under the Internal Revenue Code for U.S. federal income tax purposes. As such, the program is generally not subject to federal income tax to the extent it distributes its REIT taxable income to its stockholders. |
| (3) | Cash generated from financing / refinancing includes original mortgage proceeds when assets were acquired. |
| (4) | As of this offering, this commingled fund is currently in its investment period and has not invested its entire committed capital. As such, as assets are identified for investment equity, capital will be called to fund the acquisition throughout the remainder of the investment period. |
A-8
Table III
OPERATING RESULTS OF PRIOR PROGRAMS (Continued)
(UNAUDITED)
Prior Performance is not Indicative of Future Results
| Phillips Edison Strategic Investment Fund II | ||||
| (in thousands) | 2011 | |||
Gross revenues | $ | 600 | ||
Profit on sale of properties | — | |||
Other income (loss) | — | |||
Less: Operating expenses(1) | 884 | |||
Interest expense | 91 | |||
Depreciation and amortization | 255 | |||
|
| |||
Net income (loss) – GAAP Basis | $ | (630 | ) | |
|
| |||
Taxable income:(2) | ||||
–from operations | $ | 200 | ||
–from gain on sale | — | |||
Cash generated (deficiency) from operations | 542 | |||
Cash generated (deficiency) from sales | — | |||
Cash generated from financing / refinancing(3) | 20,054 | |||
|
| |||
Total cash generated from operations, sales and refinancing | 20,596 | |||
|
| |||
Less: Cash distributions to investors: | ||||
–from operating cash flow | — | |||
–from sales and refinancing | — | |||
–from other | — | |||
|
| |||
Cash generated after cash distributions(3) | 20,596 | |||
|
| |||
Less: Special items (not including sales and refinancing) | — | |||
|
| |||
Cash generated after cash distributions and special items | $ | 20,596 | ||
|
| |||
Tax and distribution data per $1,000 invested | ||||
U.S. federal income tax results: | ||||
Ordinary income | ||||
–from operations | $ | 17.64 | ||
–from recapture | — | |||
Capital gain (loss) | — | |||
Cash distributions to investors (4) | ||||
Source (on a GAAP basis) | ||||
–from investment income | $ | — | ||
–from return of capital | — | |||
|
| |||
Total distribution on GAAP basis | $ | — | ||
|
| |||
Source (on cash basis) | ||||
–from sales | $ | — | ||
–from refinancings | — | |||
–from operations | — | |||
|
| |||
Total distributions on cash basis | $ | — | ||
|
| |||
Amounts (in percentage terms) remaining in program properties as of December 31, 2011 | 100 | % | ||
| (1) | Operating expenses include all general and administrative expenses. |
| (2) | Program qualifies as a REIT under the Internal Revenue Code for U.S. federal income tax purposes. As such, the program is generally not subject to federal income tax to the extent it distributes its REIT taxable income to its stockholders. |
| (3) | Cash generated from financing / refinancing includes original mortgage proceeds when assets were acquired. |
| (4) | As of this offering, this commingled fund is currently in its investment period and has not invested its entire committed capital. As such, as assets are identified for investment equity, capital will be called to fund the acquisition throughout the remainder of the investment period. |
A-9
Table V
SALES AND DISPOSALS OF PROPERTIES
(UNAUDITED)
Prior Performance is not Indicative of Future Results
Table V presents summary information with respect to the results of sales or disposals of properties sponsored by Phillips Edison during the three years ended December 31, 2011. The table includes information about the sales proceeds received, the cash invested in the properties, the taxable gain or loss from the sales and the cash flow from the operation of the properties. Each of the programs represented in the table have or had investment objectives similar to ours.
| Selling Price, Net of Closing costs and GAAP Adjustments | Costs of Properties Including Closing and Soft Costs | |||||||||||||||||||||||||||||||||||||||||||||
Property | Date Acquired | Date of Sale | Cash received net of closing costs | Mortgage balance at time of sale | Purchase money mortgage taken back by program | Adjust- ments resulting from applica- tion of GAAP | Total(1) | Original mortgage financing | Total acquisition cost, capital improvement closing and soft costs | Total | Excess (deficiency) of property operating cash receipts over cash expenditures total | |||||||||||||||||||||||||||||||||||
| Phillips Edison Shopping Center Fund III, LP | ||||||||||||||||||||||||||||||||||||||||||||||
Ashland Station | 12/20/2006 | 11/13/2009 | 72,493 | 1,207,733 | — | — | 1,280,226 | 2,236,771 | 1,111,077 | 3,347,848 | 184,478 | |||||||||||||||||||||||||||||||||||
Tops Plaza-Canandaaigua | 8/20/2007 | 3/17/2010 | 4,094,538 | 4,171,783 | — | — | 8,266,321 | 5,102,233 | 161,392 | 5,263,626 | 1,073,218 | |||||||||||||||||||||||||||||||||||
Family Station | 6/27/2007 | 2/23/2010 | 115,099 | 4,496,054 | — | — | 4,611,152 | 3,705,000 | 2,028,206 | 5,733,206 | 399,858 | |||||||||||||||||||||||||||||||||||
Forestdale Plaza | 6/27/2007 | 4/28/2011 | 422,847 | 4,960,000 | — | — | 5,382,847 | 5,167,500 | 2,929,129 | 8,096,629 | (1,252,083 | ) | ||||||||||||||||||||||||||||||||||
Genito | 6/27/2007 | 4/28/2011 | 504,182 | 4,640,000 | — | — | 5,144,182 | 5,167,500 | 3,128,701 | 8,296,201 | (256,125 | ) | ||||||||||||||||||||||||||||||||||
Stella Station | 12/20/2006 | 4/30/2011 | 1,390,488 | 5,181,930 | — | — | 6,572,418 | 4,725,396 | 3,796,652 | 8,522,048 | 1,025,778 | |||||||||||||||||||||||||||||||||||
Liberty Station | 5/15/2006 | 4/30/2011 | 722,614 | 2,531,180 | — | — | 3,253,794 | 2,076,027 | 1,458,557 | 3,534,584 | 688,650 | |||||||||||||||||||||||||||||||||||
Western Lights Station | 9/19/2005 | 5/1/2011 | 8,819,672 | 12,629,067 | — | — | 21,448,739 | 9,182,570 | 15,787,913 | 24,970,483 | 6,178,195 | |||||||||||||||||||||||||||||||||||
Northgate | 11/1/2007 | 5/3/2011 | — | 13,170,505 | — | — | 13,170,505 | 13,822,517 | 2,820,071 | 16,642,588 | (4,354,330 | ) | ||||||||||||||||||||||||||||||||||
Monroe Shopping Ctr | 6/27/2007 | 5/27/2011 | 117,609 | 711,644 | — | — | 829,253 | 2,015,000 | 1,119,030 | 3,134,030 | 1,594,860 | |||||||||||||||||||||||||||||||||||
Horizon Park | 6/27/2007 | 7/15/2011 | 3,188,431 | 15,200,000 | — | — | 18,388,431 | 18,915,000 | 11,465,207 | 30,380,207 | (5,323,112 | ) | ||||||||||||||||||||||||||||||||||
Bear Road Plaza | 6/27/2007 | 8/23/2011 | 1,208,393 | 2,160,000 | — | — | 3,368,393 | 3,380,000 | 1,958,321 | 5,338,321 | 487,209 | |||||||||||||||||||||||||||||||||||
Riverchase Station | 6/6/2006 | 9/15/2011 | 2,696,392 | 10,400,000 | — | — | 13,096,392 | 10,520,534 | 6,695,991 | 17,216,525 | 3,573,418 | |||||||||||||||||||||||||||||||||||
Del-Ton Plaza | 6/27/2007 | 10/11/2011 | 526,817 | 3,680,000 | — | — | 4,206,817 | 3,770,000 | 2,136,602 | 5,906,602 | 591,302 | |||||||||||||||||||||||||||||||||||
Hannaford | 6/27/2007 | 12/20/2011 | 2,572,419 | 10,960,000 | — | — | 13,532,419 | 12,350,000 | 6,830,482 | 19,180,482 | 2,359,450 | |||||||||||||||||||||||||||||||||||
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| $ | 26,451,993 | $ | 96,099,896 | $ | — | $ | — | $ | 122,551,889 | $ | 102,136,047 | $ | 63,427,333 | $ | 165,563,380 | $ | 6,970,766 | |||||||||||||||||||||||||||||
Phillips Edison Shopping Center Fund IV, LP | ||||||||||||||||||||||||||||||||||||||||||||||
Village Shoppes at East Cherokee | 8/22/2008 | 9/7/2010 | — | 15,784,000 | — | — | 15,784,000 | 15,784,000 | 2,971,188 | 18,755,188 | (30,314 | ) | ||||||||||||||||||||||||||||||||||
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| $ | — | $ | 15,784,000 | $ | — | $ | — | $ | 15,784,000 | $ | 15,784,000 | $ | 2,971,188 | $ | 18,755,188 | $ | (30,314 | ) | ||||||||||||||||||||||||||||
| Phillips Edison Limited Partnership | ||||||||||||||||||||||||||||||||||||||||||||||
Vernal | 3/28/2006 | 6/3/2009 | 1,061,767 | 2,989,002 | — | — | 4,050,769 | 343,486 | 3,366,678 | 3,710,163 | 97,448 | |||||||||||||||||||||||||||||||||||
Brierhill & Churchville | 12/2/2008 | 11/3/2009 | 1,177,336 | 4,340,101 | — | — | 5,517,437 | 1,879,941 | 3,146,861 | 5,026,802 | 96,994 | |||||||||||||||||||||||||||||||||||
River Road Walgreen’s | 1/5/2009 | 11/4/2009 | 742,839 | 4,862,030 | — | — | 5,604,869 | 3,190,074 | 1,722,670 | 4,912,745 | 6,924 | |||||||||||||||||||||||||||||||||||
Idaho Falls | 6/1/2007 | 12/16/2009 | 299,343 | 4,732,100 | — | — | 5,031,444 | 2,563,907 | 2,845,360 | 5,409,267 | 417,417 | |||||||||||||||||||||||||||||||||||
Unser & McMahon Walgreen’s | 6/27/2008 | 1/6/2010 | 297,246 | 4,896,106 | — | — | 5,193,353 | 5,057,379 | 364,621 | 5,422,000 | 69,148 | |||||||||||||||||||||||||||||||||||
Renton | 3/3/2008 | 3/12/2010 | 160,579 | 6,684,119 | — | — | 6,844,699 | 6,678,540 | 501,472 | 7,180,012 | 404,995 | |||||||||||||||||||||||||||||||||||
Cape Henry Station | 3/1/2003 | 6/15/2010 | 2,811,053 | 3,410,873 | — | — | 6,221,926 | 3,800,000 | 722,313 | 4,522,313 | 2,078,442 | |||||||||||||||||||||||||||||||||||
Knollview | 6/5/2005 | 7/16/2010 | (410,815 | ) | 2,104,083 | — | — | 1,693,268 | 2,100,000 | 162,645 | 2,262,645 | (133,782 | ) | |||||||||||||||||||||||||||||||||
Pablo Plaza Station | 3/1/2003 | 8/31/2010 | 11,379,033 | 7,515,335 | — | — | 18,894,368 | 8,400,000 | 6,453,217 | 14,853,217 | 5,227,204 | |||||||||||||||||||||||||||||||||||
Westbird Station | 3/1/2003 | 8/31/2010 | 8,539,772 | 8,454,779 | — | — | 16,994,551 | 9,450,000 | 2,066,318 | 11,516,318 | 4,286,095 | |||||||||||||||||||||||||||||||||||
Gunston Station | 8/1/2001 | 11/22/2010 | 11,574,886 | 16,113,422 | — | — | 27,688,308 | 9,801,617 | 7,149,196 | 16,950,813 | 11,567,339 | |||||||||||||||||||||||||||||||||||
Applewood Station | 3/1/2003 | 11/2/2010 | 3,486,025 | 5,261,235 | — | — | 8,747,260 | 5,900,000 | 1,379,569 | 7,279,569 | 3,296,550 | |||||||||||||||||||||||||||||||||||
Milford Station | 9/1/1997 | 12/8/2010 | 531,990 | — | — | — | 531,990 | 2,142,566 | 267,849 | 2,410,415 | (247,472 | ) | ||||||||||||||||||||||||||||||||||
Lake Stevens Northwest Walgreens | 6/13/2008 | 10/19/2010 | 670,804 | 6,221,367 | — | — | 6,892,171 | 2,590,708 | 7,896,115 | 10,486,823 | 382,209 | |||||||||||||||||||||||||||||||||||
River Road Northwest Retail | 1/5/2009 | 10/15/2010 | 1,342,443 | 937,970 | — | — | 2,280,413 | — | 1,942,068 | 1,942,068 | 782,803 | |||||||||||||||||||||||||||||||||||
Old Bridge & Smoketown Walgreens | 12/27/2006 | 12/17/2010 | 1,771,878 | 3,132,513 | — | — | 4,904,391 | — | 4,395,801 | 4,395,801 | 22,182 | |||||||||||||||||||||||||||||||||||
Springdale | 9/22/1997 | 2/22/2011 | 1,244,667 | — | — | — | 1,244,667 | 1,012,500 | 2,252,884 | 3,265,384 | 564,861 | |||||||||||||||||||||||||||||||||||
Fond du Lac | 4/29/2005 | 4/13/2011 | — | 5,054,917 | — | — | 5,054,917 | 3,630,750 | 1,196,298 | 4,827,048 | (1,222,974 | ) | ||||||||||||||||||||||||||||||||||
Queensbury | 11/17/1998 | 8/12/2011 | — | 1,284,206 | — | — | 1,284,206 | 1,566,000 | (86,274 | ) | 1,479,726 | (1,224,081 | ) | |||||||||||||||||||||||||||||||||
Southern Hills | 8/6/2007 | 12/1/2011 | 3,957,823 | 7,380,000 | — | — | 11,337,823 | 7,828,469 | 5,284,902 | 13,113,371 | 2,790,846 | |||||||||||||||||||||||||||||||||||
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| $ | 50,638,671 | $ | 95,374,159 | $ | — | $ | — | $ | 146,012,830 | $ | 77,935,937 | $ | 53,030,564 | $ | 130,966,500 | $ | 29,263,148 | |||||||||||||||||||||||||||||
| (1) | Phillips Edison Limited Partnership recognized capital gain on the properties that it sold; Phillips Edison Shopping Center Fund III, L.P. recognized ordinary gain on the properties that it sold. |
A-10
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS FOR PUBLIC PROGRAM PROPERTIES
(UNAUDITED)
Table I provides a summary of the experience of our AR Capital sponsor and its affiliates in raising and investing funds for American Realty Capital Trust, Inc. from its inception on August 17, 2007 to December 31, 2011, American Realty Capital New York Recovery REIT, Inc. from its inception on October 6, 2010 to December 31, 2011, American Realty Capital Healthcare Trust, Inc. from its inception on August 23, 2010 to December 31, 2011 and American Realty Capital Trust III, Inc. from its inception on October 15, 2010 to December 31, 2011. Information is provided as to the manner in which the proceeds of the offering have been applied, the timing and length of this offering and the time period over which the proceeds have been reinvested.
| American Realty Capital Trust, Inc. | American Realty Capital New York Recovery REIT, Inc. | American Realty Capital Healthcare Trust, Inc. | American Realty Capital Trust III, Inc. | |||||||||||||||||||||||||||||
| Percentage of total Dollar Amount Raised | Percentage of total Dollar Amount Raised | Percentage of total Dollar Amount Raised | Percentage of total Dollar Amount Raised | |||||||||||||||||||||||||||||
(dollars in thousands) | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||||||
Dollar amount offered | $ | 1,500,000 | $ | 1,500,000 | $ | 1,500,000 | $ | 1,500,000 | ||||||||||||||||||||||||
Dollar amount raised | 1,695,813 | 45,629 | 68,881 | 102,196 | ||||||||||||||||||||||||||||
Dollar amount raised from non-public program and private investments | 37,460 | (1) | 27,797 | (2) | 2,144 | (3) | — | |||||||||||||||||||||||||
Dollar amount raised from sponsor and affiliates from sale of special partnership units, and 20,000 of common stock | 200 | (4) | 200 | (4) | 200 | (4) | 200 | (4) | ||||||||||||||||||||||||
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Total dollar amount raised | $ | 1,733,473 | 100.00 | % | $ | 73,626 | (5) | 100.00 | % | $ | 71,225 | (5) | 100.00 | % | $ | 102,396 | (5) | 100.00 | % | |||||||||||||
Less offering expenses: | ||||||||||||||||||||||||||||||||
Selling commissions and discounts retained by affiliates | $ | 168,269 | 9.71 | % | $ | 6,232 | 8.46 | % | 6,733 | 9.45 | % | 9,833 | 9.60 | % | ||||||||||||||||||
Organizational expenses | 29,692 | (6) | 1.71 | % | 6,393 | 8.68 | % | 5,575 | 7.83 | % | 6,107 | 5.96 | % | |||||||||||||||||||
Other | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | ||||||||||||||||||||
Reserves | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | ||||||||||||||||||||
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Available for investment | $ | 1,535,512 | 88.58 | % | $ | 61,001 | 82.85 | % | $ | 58,917 | 82.72 | % | $ | 86,456 | 84.43 | % | ||||||||||||||||
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A-11
| American Realty Capital Trust, Inc. | American Realty Capital New York Recovery REIT, Inc. | American Realty Capital Healthcare Trust, Inc. | American Realty Capital Trust III, Inc. | |||||||||||||||||||||||||||||
| Percentage of total Dollar Amount Raised | Percentage of total Dollar Amount Raised | Percentage of total Dollar Amount Raised | Percentage of total Dollar Amount Raised | |||||||||||||||||||||||||||||
(dollars in thousands) | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||||||
Acquisition costs: | ||||||||||||||||||||||||||||||||
Prepaid items related to purchase of property | $ | — | 0.00 | % | $ | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | ||||||||||||||||||
Cash down payment | 1,420,117 | (7) | 81.92 | % | 47,105 | 63.98 | % | 51,243 | 71.95 | % | 67,393 | 65.82 | % | |||||||||||||||||||
Acquisition fees | 44,809 | 2.58 | % | 2,727 | 3.70 | % | 5,568 | 7.82 | % | 7,082 | 6.92 | % | ||||||||||||||||||||
Other | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | ||||||||||||||||||||
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Total acquisition costs | $ | 1,464,926 | 84.51 | % | $ | 49,832 | 67.68 | % | $ | 56,811 | 79.76 | % | $ | 74,475 | 72.73 | % | ||||||||||||||||
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Percentage leverage (mortgage financing divided by total acquisition costs) | 49.3 | %(8) | 136.8 | %(9) | 216.1 | %(10) | 7.5 | %(11) | ||||||||||||||||||||||||
Date offering began | 3/18/2008 | 10/2/2009 | 2/18/2011 | 3/31/2011 | ||||||||||||||||||||||||||||
Number of offerings in the year | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||||||
Length of offerings (in months) | 39 | 33 | 33 | 33 | ||||||||||||||||||||||||||||
Months to invest 90% of amount available for investment (from beginning of the offering) | 39 | NA | (12) | NA | (12) | NA | (12) | |||||||||||||||||||||||||
| (1) | American Realty Capital Trust, Inc. sold non-controlling interests in certain properties in nine separate arrangements. The total amount contributed in these arrangements was $24.5 million. In addition, $13.0 million was raised in a private offering of debt securities through ARC Income Properties II, Inc. The structure of these arrangements and program is such that they are required to be consolidated with the results of American Realty Capital Trust, Inc. and therefore are included with this program. ARC Income Properties II, Inc is also included as a stand-alone program and is included separately in information about private programs. |
| (2) | American Realty Capital New York Recovery REIT, Inc. sold a non-controlling interest in a property. The total amount contributed in this arrangement was $13.0 million, In addition, $15.0 million was raised in a private offering of convertible preferred securities. |
| (3) | American Realty Capital Healthcare Trust, Inc. sold non-controlling interests in three properties. The total amount contributed in these arrangements was $2.1 million. |
| (4) | Represents initial capitalization of the company by the sponsor and was prior to the effectiveness of the common stock offering. |
| (5) | Offerings are not yet completed, funds are still being raised. |
| (6) | Excludes offering costs from proceeds assumed from the distribution reinvestment plan. |
| (7) | Includes $12.0 million investment made in joint venture with American Realty Capital New York Recovery REIT, Inc. for the purchase of real estate and $17.3 million of other investments in common stock. |
| (8) | Total acquisition costs of the properties exclude $721.6 million purchased with mortgage financing. Including mortgage financing, the total acquisition purchase price was $2,112.1 million. The leverage ratio was 34.2% at December 31, 2011. |
A-12
| (9) | Total acquisition costs of the properties exclude $68.2 million purchased with mortgage financing. Including mortgage financing, the total acquisition purchase price was $124.2 million. The leverage ratio was 54.9% at December 31, 2011. |
| (10) | Total acquisition costs of the properties exclude $110.7 million purchased with mortgage financing. Including mortgage financing, the total acquisition purchase price was $164.5 million. The leverage ratio was 67.3% at December 31, 2011. |
| (11) | Total acquisition costs of the properties exclude $5.1 million purchased with mortgage financing. Including mortgage financing, the total acquisition purchase price was $72.5 million. The leverage ratio was 7.0% at December 31, 2011. |
| (12) | As of December 31, 2011 these offerings are still in the investment period and have not invested 90% of the amount offered. Assets are acquired as equity becomes available. |
A-13
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS FOR NON-PUBLIC PROGRAM PROPERTIES
(UNAUDITED)
Table I provides a summary of the experience of our AR Capital sponsor and its affiliates in raising and investing funds in ARC Income Properties, LLC from its inception on June 5, 2008 to its termination on September 6, 2011, ARC Income Properties II, LLC from its inception on August 12, 2008 to its termination on May 16, 2011, ARC Income Properties III, LLC from its inception on September 29, 2009 to its termination on September 6, 2011, ARC Income Properties IV, LLC from its inception on June 23, 2010 to December 31, 2011 and ARC Growth Fund, LLC from its inception on July 24, 2008 to its termination on December 31, 2010. Information is provided as to the manner in which the proceeds of the offerings have been applied, the timing and length of this offering and the time period over which the proceeds have been invested.
| ARC Income Properties, LLC | ARC Income Properties II, LLC | ARC Income Properties, III, LLC | ARC Income Properties, IV, LLC | ARC Growth Fund, LLC | ||||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
| Percentage of Total Dollar Amount Raised |
| Percentage of Total Dollar Amount Raised |
| Percentage of Total Dollar Amount Raised |
| Percentage of Total Dollar Amount Raised |
| Percentage of Total Dollar Amount Raised | ||||||||||||||||||||||||||||||
Dollar amount offered | $ | 19,537 | $ | 13,000 | $ | 11,243 | $ | 5,350 | $ | 7,850 | ||||||||||||||||||||||||||||||
Dollar amount raised | 19,537 | 13,000 | 11,243 | 5,215 | 5,275 | |||||||||||||||||||||||||||||||||||
Dollar amount contributed from sponsor and | 1,975 | — | — | — | 2,575 | |||||||||||||||||||||||||||||||||||
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Total dollar amount raised | $ | 21,512 | 100.00 | % | $ | 13,000 | 100.00 | % | $ | 11,243 | 100.00 | % | $ | 5,215 | 100.00 | % | $ | 7,850 | 100.00 | % | ||||||||||||||||||||
Less offering expenses: | ||||||||||||||||||||||||||||||||||||||||
Selling commissions and discounts retained by affiliates | $ | 1,196 | 5.56 | % | $ | 323 | 2.48 | % | $ | 666 | 5.92 | % | $ | 397 | 7.61 | % | $ | — | 0.00 | % | ||||||||||||||||||||
Organizational expenses | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | |||||||||||||||||||||||||
Other | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | |||||||||||||||||||||||||
Reserves | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | |||||||||||||||||||||||||
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Available for investment | $ | 20,316 | 94.44 | % | $ | 12,677 | 97.52 | % | $ | 10,577 | 94.08 | % | $ | 4,818 | 92.39 | % | $ | 7,850 | 100.00 | % | ||||||||||||||||||||
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Acquisition costs: | ||||||||||||||||||||||||||||||||||||||||
Prepaid items and fees related to purchased property | $ | — | 0.00 | % | $ | — | 0.00 | % | $ | — | 0.00 | % | $ | — | 0.00 | % | $ | — | 0.00 | % | ||||||||||||||||||||
Cash down payment | 11,302 | 52.54 | % | 9,086 | 69.89 | % | 9,895 | 88.01 | % | 4,780 | 91.66 | % | 5,440 | 69.30 | % | |||||||||||||||||||||||||
Acquisition fees | 7,693 | 35.76 | % | 2,328 | 17.91 | % | 682 | 6.07 | % | — | 0.00 | % | 2,410 | 30.70 | % | |||||||||||||||||||||||||
Other | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | — | 0.00 | % | |||||||||||||||||||||||||
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Total acquisition costs | $ | 18,995 | (2) | 88.30 | % | $ | 11,414 | (3) | 87.80 | % | $ | 10,577 | (4) | 94.08 | % | $ | 4,780 | (5) | 91.66 | % | $ | 7,850 | (6) | 100.00 | % | |||||||||||||||
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Percentage leverage (mortgage financing divided by total acquisition costs) | 434.97 | % | 292.61 | % | 141.19 | % | 344.35 | % | 253.20 | % | ||||||||||||||||||||||||||||||
Date offering began | 6/09/2008 | 9/17/2008 | 9/29/2009 | 6/23/2011 | 7/24/2008 | |||||||||||||||||||||||||||||||||||
Number of offerings in the year | 1 | 1 | 1 | 1 | 1 | |||||||||||||||||||||||||||||||||||
Length of offerings (in months) | 7 | 4 | 3 | 4 | 1 | |||||||||||||||||||||||||||||||||||
Months to invest 90% of amount available for investment (from the beginning of the offering) | 7 | 4 | 3 | 4 | 1 | |||||||||||||||||||||||||||||||||||
| (1) | Includes separate investment contributed by sponsor and affiliates for purchase of portfolio properties and related expenses. |
A-14
| (2) | Total acquisition costs of properties exclude $82.6 million purchased with mortgage financing. Including borrowings, the total acquisition purchase price was $101.6 million. The leverage ratio was 83.6% at December 31, 2010. This program ended when it contributed its real estate assets and certain liabilities to American Realty Capital Properties, Inc. on September 6, 2011. |
| (3) | Total acquisition costs of properties exclude $33.4 million purchased with mortgage financing. Including borrowings, the total acquisition purchase price was $101.6 million. The leverage ratio was 60.1% at December 31, 2010. This program ended when the notes were repaid on May 16, 2011. The related properties are still owned by American Realty Capital Trust, Inc. |
| (4) | Total acquisition costs of properties exclude $14.9 million purchased with mortgage financing and $3.5 million related to a final purchase price adjustment which was initially held in escrow until conditions for its release were satisfied in 2010. Including borrowings, the total acquisition purchase price was $25.9 million. The leverage ratio was 59.2% at December 31, 2010. This program ended when it contributed its real estate assets and certain liabilities to American Realty Capital Properties, Inc. on September 6, 2011. |
| (5) | Total acquisition costs of properties exclude a $16.5 million purchased with assumed mortgage financing. Including borrowings, the total acquisition purchase price was $21.2 million. The leverage ratio was 77.5% at December 31, 2011. |
| (6) | Total acquisition costs of properties exclude a $20.0 million purchased with assumed mortgage financing. Including borrowings and $36.3 million purchased with proceeds from the sale of properties, the total acquisition purchase price was $63.6 million. The program was concluded at December 31, 2010. |
A-15
TABLE II
COMPENSATION TO SPONSOR FROM PUBLIC PROGRAM PROPERTIES
(UNAUDITED)
Table II summarizes the amount and type of compensation paid to our AR Capital sponsor and its affiliates for American Realty Capital Trust, Inc. from its inception on August 17, 2007 to December 31, 2011, American Realty Capital New York Recovery REIT, Inc. from its inception on October 6, 2009 to December 31, 2011, American Realty Capital Healthcare Trust, Inc. from its inception on August 23, 2010 to December 31, 2011 and American Realty Capital Trust III, Inc. from its inception on October 15, 2010 to December 31, 2011.
(dollars in | American Realty Capital Trust, Inc. | American Realty Capital New York Recovery REIT, Inc. | American Realty Capital Healthcare Trust, Inc. | American Realty Capital Trust III, Inc. | ||||||||||||
Date offering commenced | 3/18/2008 | 10/2/2009 | 2/18/2011 | 3/31/2011 | ||||||||||||
Dollar amount raised | $ | 1,733,473 | $ | 73,626 | $ | 71,225 | $ | 102,396 | ||||||||
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Amount paid to sponsor from proceeds of offering Underwriting fees | $ | 168,269 | $ | 6,232 | $ | 6,733 | $ | 9,833 | ||||||||
Acquisition fees: | ||||||||||||||||
Real estate commissions | $ | — | $ | — | $ | — | $ | — | ||||||||
Advisory fees – acquisition fees | $ | 21,121 | $ | 1,242 | $ | 1,645 | $ | 725 | ||||||||
Other – organizational and offering costs | $ | 15,944 | $ | 3,997 | $ | 3,179 | $ | 4,383 | ||||||||
Other – financing coordination fees | $ | 9,257 | $ | 671 | $ | 1,279 | $ | 51 | ||||||||
Other – acquisition expense reimbursements | $ | 12,081 | $ | 890 | $ | 1,054 | $ | 567 | ||||||||
Dollar amount of cash generated from operations before deducting payments to sponsor | $ | 60,876 | $ | (972 | ) | $ | (2,161 | ) | $ | (1,177 | ) | |||||
Actual amount paid to sponsor from operations: | ||||||||||||||||
Property management fees | $ | — | $ | — | $ | — | $ | — | ||||||||
Partnership management fees | — | — | — | — | ||||||||||||
Reimbursements | — | — | — | — | ||||||||||||
Leasing commissions | — | — | — | — | ||||||||||||
Other (asset management fees) | $ | 7,071 | $ | — | $ | — | $ | — | ||||||||
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Total amount paid to sponsor from operations | $ | 7,071 | $ | — | $ | — | $ | — | ||||||||
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Dollar amount of property sales and refinancing before deducting payment to sponsor | ||||||||||||||||
Cash | $ | 1,485 | $ | — | $ | — | $ | — | ||||||||
Notes | $ | — | $ | — | $ | — | $ | — | ||||||||
Amount paid to sponsor from property sale and refinancing: | ||||||||||||||||
Real estate commissions | $ | 45 | $ | — | $ | — | $ | — | ||||||||
Incentive fees | $ | — | $ | — | $ | — | $ | — | ||||||||
Other – Financing coordination fees | $ | — | $ | — | $ | — | $ | — | ||||||||
A-16
TABLE II
COMPENSATION TO SPONSOR FROM NON-PUBLIC PROGRAM PROPERTIES
(UNAUDITED)
Table II summarizes the amount and type of compensation paid to our AR Capital sponsor and its affiliates for ARC Income Properties, LLC from its inception on June 5, 2008 to its termination on September 6, 2011, ARC Income Properties II, LLC from its inception on August 12, 2008 to its termination on May 16, 2011, ARC Income Properties III, LLC from its inception on September 29, 2009 to its termination on September 6, 2011. ARC Income Properties IV, LLC from its inception on June 23, 2010 to December 31, 2010 and ARC Growth Fund, L.P. from its inception on July 24, 2008 to its termination on December 31, 2010.
| (dollars in thousands) | ARC Income Properties, LLC | ARC Income Properties II, LLC | ARC Income Properties III, LLC | ARC Income Properties IV, LLC | ARC Growth Fund, LLC | |||||||||||||||
Date offering commenced | 6/05/2008 | 8/12/2008 | 9/29/2009 | 6/23/2011 | 7/24/2008 | |||||||||||||||
Dollar amount raised | $ | 21,512 | (1) | $ | 13,000 | (2) | $ | 11,243 | (2) | $ | 5,215 | (2) | $ | 7,850 | (3) | |||||
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Amount paid to sponsor from proceeds of offering | ||||||||||||||||||||
Underwriting fees | $ | 785 | $ | 323 | $ | 666 | $ | 397 | $ | — | ||||||||||
Acquisition fees | ||||||||||||||||||||
Real estate commissions | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Advisory fees – acquisition fees | $ | 2,959 | $ | 423 | $ | 662 | $ | — | $ | 1,316 | ||||||||||
Other – organizational and offering costs | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Other – financing coordination fees | $ | 939 | $ | 333 | $ | 149 | $ | — | $ | 45 | ||||||||||
Dollar amount of cash generated from operations before deducting payments to sponsor | $ | (3,091 | ) | $ | 2,291 | $ | (724 | ) | $ | (691 | ) | $ | (5,325 | ) | ||||||
Actual amount paid to sponsor from operations: | ||||||||||||||||||||
Property management fees | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Partnership management fees | — | — | — | — | — | |||||||||||||||
Reimbursements | — | — | — | — | — | |||||||||||||||
Leasing commissions | — | — | — | — | — | |||||||||||||||
Other (explain) | — | — | — | — | — | |||||||||||||||
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Total amount paid to sponsor from operations | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
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Dollar amount of property sales and refinancing before deducting payment to sponsor | ||||||||||||||||||||
Cash | $ | — | $ | — | $ | — | $ | — | $ | 13,560 | ||||||||||
Notes | — | — | — | — | $ | 18,281 | ||||||||||||||
Amount paid to sponsor from property sale and refinancing: | ||||||||||||||||||||
Real estate commissions | — | — | — | — | — | |||||||||||||||
Incentive fees | — | — | — | — | — | |||||||||||||||
Other (disposition fees) | — | — | — | — | $ | 1,169 | ||||||||||||||
Other (refinancing fees) | — | — | — | — | $ | 39 | ||||||||||||||
| (1) | Includes $19.5 million raised from investors and $2.0 million raised from sponsor and affiliates. |
A-17
| (2) | Amounts raised from investors. |
| (3) | Includes $5.2 million raised from investors and $2.6 million raised from the sponsor and affiliates. |
A-18
TABLE III
OPERATING RESULTS OF PUBLIC PROGRAM PROPERTIES
(UNAUDITED)
Table III summarizes the operating results of American Realty Capital Trust, Inc., American Realty Capital New York Recovery REIT, Inc., Phillips Edison — ARC Shopping Center REIT, Inc., American Realty Capital Healthcare Trust, Inc. from its inception on August 23, 2010 to December 31, 2011 and American Realty Capital Trust III, Inc. from its inception on October 15, 2010 to December 31, 2011 as of the dates indicated.
| American Realty Capital Trust, Inc. | American Realty Capital New York Recovery REIT, Inc. | American Realty Capital Healthcare Trust, Inc. | American Realty Capital Trust III, Inc. | |||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Year Ended December 31, 2011 | Year Ended December 31, 2010 | Year Ended December 31, 2009 | Year Ended December 31, 2008 | Year Ended December 31, 2011 | Year Ended December 31, 2010 | Period From October 6, 2009 (Date of Inception) to December 31, 2009 | Year Ended December 31, 2011 | Period From August 23, 2010 (Date of Inception) to December 31, 2010 | Year Ended December 31, 2011 | Period From October 15, 2010 (Date of Inception) to December 31, 2010 | |||||||||||||||||||||||||||||||||
Gross revenues | $ | 129,982 | $ | 45,233 | $ | 15,511 | $ | 5,549 | $ | 7,535 | $ | 2,378 | $ | — | $ | 3,314 | $ | — | $ | 795 | $ | — | ||||||||||||||||||||||
Profit (loss) on sales of properties | (44 | ) | 143 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | 45,041 | 15,265 | 1,158 | 2,002 | 5,848 | 2,139 | 1 | 4,707 | 1 | 2,385 | — | |||||||||||||||||||||||||||||||||
Interest expense | 39,912 | 18,109 | 10,352 | 4,774 | 3,912 | 1,070 | — | 1,189 | — | 35 | — | |||||||||||||||||||||||||||||||||
Depreciation | 54,764 | 17,280 | 6,581 | 2,534 | 500 | 500 | — | 1,174 | — | 414 | — | |||||||||||||||||||||||||||||||||
Amortization | 14,176 | 4,374 | 1,735 | 522 | 540 | 540 | — | 361 | — | 85 | — | |||||||||||||||||||||||||||||||||
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Net income (loss) before noncontrolling interests –GAAP Basis | (23,955 | ) | (9,652 | ) | (4,315 | ) | (4,283 | ) | (3,265 | ) | (1,871 | ) | (1 | ) | (4,117 | ) | (1 | ) | (2,124 | ) | — | |||||||||||||||||||||||
Loss from discontinued operations | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests–GAAP Basis | (1,121 | ) | (181 | ) | 49 | — | (154 | ) | 109 | — | 32 | — | — | — | ||||||||||||||||||||||||||||||
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Net income (loss) GAAP basis | $ | (25,076 | ) | $ | (9,833 | ) | $ | (4,266 | ) | $ | (4,283 | ) | $ | (3,419 | ) | $ | (1,762 | ) | $ | (1 | ) | $ | (4,085 | ) | $ | (1 | ) | $ | (2,124 | ) | $ | — | ||||||||||||
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Taxable income (loss) | ||||||||||||||||||||||||||||||||||||||||||||
From operations | $ | (25,032 | ) | $ | (9,976 | ) | $ | (4,266 | ) | $ | (4,283 | ) | $ | (3,419 | ) | $ | (1,762 | ) | $ | (1 | ) | $ | (4,085 | ) | $ | (1 | ) | $ | (2,124 | ) | $ | — | ||||||||||||
From gain (loss) on sale | (44 | ) | 143 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Cash generated from (used by) operations(1) | 49,525 | 9,864 | (2,526 | ) | 4,013 | 263 | (1,234 | ) | (1 | ) | (2,161 | ) | (1 | ) | (1,177 | ) | — | |||||||||||||||||||||||||||
Cash generated from sales | 581 | 900 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
A-19
| American Realty Capital Trust, Inc. | American Realty Capital New York Recovery REIT, Inc. | American Realty Capital Healthcare Trust, Inc. | American Realty Capital Trust III, Inc. | |||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Year Ended December 31, 2011 | Year Ended December 31, 2010 | Year Ended December 31, 2009 | Year Ended December 31, 2008 | Year Ended December 31, 2011 | Year Ended December 31, 2010 | Period From October 6, 2009 (Date of Inception) to December 31, 2009 | Year Ended December 31, 2011 | Period From August 23, 2010 (Date of Inception) to December 31, 2010 | Year Ended December 31, 2011 | Period From October 15, 2010 (Date of Inception) to December 31, 2010 | |||||||||||||||||||||||||||||||||
Cash generated from refinancing | — | — | — | — | 21,300 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
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Cash generated from operations, sales and refinancing | $ | 50,106 | $ | 10,764 | $ | (2,526 | ) | $ | 4,013 | $ | 21,563 | $ | (1,234 | ) | $ | (1 | ) | $ | (2,161 | ) | $ | (1 | ) | $ | (1,177 | ) | $ | — | ||||||||||||||||
Less: Cash distribution to investors(3) | ||||||||||||||||||||||||||||||||||||||||||||
From operating cash flow | 47,524 | 9,864 | $ | 1,818 | $ | 296 | 263 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
From sales and refinancing | — | 900 | — | — | 1,331 | — | — | — | — | 294 | — | |||||||||||||||||||||||||||||||||
From other(2) | — | 647 | 70 | — | 431 | — | — | 376 | — | — | — | |||||||||||||||||||||||||||||||||
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Cash generated after cash distributions | $ | 2,582 | $ | (647 | ) | $ | (4,414 | ) | $ | 3,717 | $ | 19,538 | $ | (1,234 | ) | $ | (1 | ) | $ | (2,537 | ) | $ | (1 | ) | $ | (1,471 | ) | $ | — | |||||||||||||||
Less: Special items | ||||||||||||||||||||||||||||||||||||||||||||
Cash generated after cash distributions and special items | $ | 2,582 | $ | (647 | ) | $ | (4,414 | ) | $ | 3,717 | $ | 19,538 | $ | (1,234 | ) | $ | (1 | ) | $ | (2,537 | ) | $ | (1 | ) | $ | (1,471 | ) | $ | — | |||||||||||||||
Tax and distribution data per $1,000 invested | ||||||||||||||||||||||||||||||||||||||||||||
Federal income tax results:(4)(5)(6) | ||||||||||||||||||||||||||||||||||||||||||||
Ordinary income (loss) | ||||||||||||||||||||||||||||||||||||||||||||
from operations | $ | — | $ | (23.55 | ) | $ | (22.75 | ) | $ | (0.33 | ) | $ | — | $ | (15.42 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
from recapture | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Capital gain (loss) | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Cash distributions to investors | ||||||||||||||||||||||||||||||||||||||||||||
Source (on GAAP Basis) | ||||||||||||||||||||||||||||||||||||||||||||
Investment income | $ | — | $ | 1.44 | $ | — | $ | — | $ | 31.13 | $ | — | $ | — | $ | — | $ | — | $ | 2.87 | $ | — | ||||||||||||||||||||||
Return of capital | 43.50 | 16.78 | (13.06 | ) | 1.22 | 16.23 | — | — | 5.28 | — | — | — | ||||||||||||||||||||||||||||||||
Source (on GAAP basis) | ||||||||||||||||||||||||||||||||||||||||||||
Sales | $ | — | $ | 1.44 | $ | — | $ | — | $ | 31.13 | $ | — | $ | — | $ | — | $ | — | $ | 2.87 | $ | — | ||||||||||||||||||||||
Refinancing | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Operations | 43.50 | 15.75 | 12.57 | 1.22 | 6.15 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Other | — | — | — | — | 10.08 | — | — | 5.28 | — | — | — | |||||||||||||||||||||||||||||||||
| (1) | Includes cash paid for interest and acquisition costs |
| (2) | Distributions paid from proceeds from the sale of common stock. |
| (3) | There were no distributions made for public programs as of December 31, 2010 for all public programs except American Realty Capital Trust, Inc. |
A-20
| (4) | Based on amounts raised as of the end of each period. |
| (5) | Federal tax results for the year ended December 31, 2011 is not available as of the date of this filing |
| (6) | There were no pubilc investors for this program as of December 31, 2009 for all public programs except American Realty Capital Trust, Inc. |
A-21
TABLE III
OPERATING RESULTS OF NON-PUBLIC PROGRAM PROPERTIES
(UNAUDITED)
Table III summarizes the consolidated operating results of ARC Income Properties, LLC and ARC Income Properties II, LLC, ARC Income Properties III, LLC, ARC Income Properties IV, LLC, and ARC Growth Fund, LLC as of the dates indicated.
| ARC Income Properties, LLC | ARC Income Properties II, LLC | ARC Income Properties III, LLC | ||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Period from January 1, 2011 to September 6, 2011(1) | Year Ended December 31, 2010 | Year Ended December 31, 2009 | Period from June 5, 2008 (Date of Inception) to December 31, 2008 | Five Months ended May 16, 2011(2) | Year Ended December 31, 2010 | Year Ended December 31, 2009 | Period from August 12, 2008 to December 31, 2008 | Period from January 1, 2011 to September 6, 2011(1) | Year Ended December 31, 2010 | Period from September 29, 2009 to December 31, 2009 | |||||||||||||||||||||||||||||||||
Gross revenues | $ | 4,652 | $ | 7,008 | $ | 5,347 | $ | 1,341 | $ | 1,383 | $ | 3,507 | $ | 3,423 | $ | 337 | $ | 1,548 | $ | 2,237 | $ | 341 | ||||||||||||||||||||||
Profit (loss) on sales of properties | — | (44 | ) | 143 | — | |||||||||||||||||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | 122 | 320 | 2,847 | 5 | 45 | 113 | 7 | — | 51 | 36 | 918 | |||||||||||||||||||||||||||||||||
Interest expense | 4,504 | 6,525 | 4,993 | 688 | 1,690 | 2,151 | 2,161 | 162 | 1,434 | 1,359 | 186 | |||||||||||||||||||||||||||||||||
Interest expense –investors notes | 1,323 | 1,935 | 1,583 | 381 | 430 | 1,167 | 1,024 | 11 | 671 | 986 | 201 | |||||||||||||||||||||||||||||||||
Depreciation | 2,346 | 3,519 | 2,676 | 909 | 710 | 1,748 | 1,758 | 200 | 495 | 642 | 127 | |||||||||||||||||||||||||||||||||
Amortization | 527 | 976 | 886 | — | 268 | 663 | 670 | — | 187 | 249 | 42 | |||||||||||||||||||||||||||||||||
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Net income (loss) –GAAP Basis | $ | (4,170 | ) | $ | (6,267 | ) | $ | (7,638 | ) | $ | (642 | ) | $ | (1,804 | ) | $ | (2,192 | ) | $ | (2,197 | ) | $ | (36 | ) | $ | (1,290 | ) | $ | (1,035 | ) | $ | (1,133 | ) | |||||||||||
Taxable income (loss) | ||||||||||||||||||||||||||||||||||||||||||||
From operations | $ | (4,170 | ) | $ | (6,267 | ) | $ | (7,638 | ) | $ | (642 | ) | $ | (1,760 | ) | $ | (2,335 | ) | $ | (2,197 | ) | $ | (36 | ) | $ | (1,290 | ) | $ | (1,035 | ) | $ | (1,133 | ) | |||||||||||
From gain (loss) on sale | $ | — | $ | — | $ | — | $ | — | $ | (44 | ) | $ | 143 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||
Cash generated from (used by) operations(3) | $ | (1,297 | ) | $ | (1,896 | ) | $ | (2,349 | ) | $ | 1,154 | $ | (782 | ) | $ | 560 | $ | (2,282 | ) | $ | 4,013 | $ | (608 | ) | $ | (33 | ) | $ | (691 | ) | ||||||||||||||
Cash generated from sales | — | — | — | — | — | 246 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Cash generated from refinancing | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
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Cash generated from operations, sales and refinancing | $ | (1,297 | ) | $ | (1,896 | ) | $ | (2,349 | ) | $ | 1,154 | $ | (782 | ) | $ | 806 | $ | (2,282 | ) | $ | 4,013 | $ | (608 | ) | $ | (33 | ) | $ | (691 | ) | ||||||||||||||
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Less: Cash interest payments made to investors | ||||||||||||||||||||||||||||||||||||||||||||
From operating cash flow | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
From sales and refinancing | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
From other | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
Cash generated after cash distributions | $ | (1,297 | ) | $ | (1,896 | ) | $ | (2,349 | ) | $ | 1,154 | $ | (782 | ) | $ | 806 | $ | (2,282 | ) | $ | 4,013 | $ | (608 | ) | $ | (33 | ) | $ | (691 | ) | ||||||||||||||
Less: Special items | ||||||||||||||||||||||||||||||||||||||||||||
Cash generated after cash distributions and special items | $ | (1,297 | ) | $ | (1,896 | ) | $ | (2,349 | ) | $ | 1,154 | $ | (782 | ) | $ | 806 | $ | (2,282 | ) | $ | 4,013 | $ | (608 | ) | $ | (33 | ) | $ | (691 | ) | ||||||||||||||
A-22
| ARC Income Properties IV, LLC | ARC Growth Fund, LLC | |||||||||||||||||||||||
| (dollars in thousands) | Year Ended December 31, 2011 | June 24, 2010 (Date of Inception) to December 31, 2010 Period from June 24, 2010 | Year Ended December 31, 2011 | Year Ended December 31, 2010 | Year Ended December 31, 2009 | Period from July 25, 2008 to December 31, 2008 | ||||||||||||||||||
Gross revenues | $ | 1,549 | $ | 94 | $ | — | $ | 95 | $ | 185 | $ | 8 | ||||||||||||
Profit (loss) on sales of properties | — | — | (251 | ) | (4,682 | ) | 9,746 | |||||||||||||||||
Less: | ||||||||||||||||||||||||
Operating expenses | 86 | 489 | — | 234 | 528 | 2,004 | ||||||||||||||||||
Interest expense | 1,134 | 100 | — | — | 1,494 | 597 | ||||||||||||||||||
Interest expense –investors notes | 446 | 90 | — | — | — | — | ||||||||||||||||||
Depreciation | 642 | 54 | — | 195 | 592 | 344 | ||||||||||||||||||
Amortization | 218 | 18 | — | — | — | — | ||||||||||||||||||
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Net income (loss) –GAAP Basis | $ | (977 | ) | $ | (657 | ) | $ | — | $ | (585 | ) | $ | (7,111 | ) | $ | 6,809 | ||||||||
Taxable income (loss) | ||||||||||||||||||||||||
From operations | $ | (977 | ) | $ | (443 | ) | $ | — | $ | (334 | ) | $ | (2,429 | ) | $ | (2,937 | ) | |||||||
From gain (loss) on sale | $ | — | $ | — | $ | — | $ | (251 | ) | $ | (4,682 | ) | $ | 9,746 | ||||||||||
Cash generated from (used by) operations(3) | $ | (117 | ) | $ | (691 | ) | $ | — | $ | (330 | ) | $ | (1,769 | ) | $ | (3,226 | ) | |||||||
Cash generated from sales | — | — | — | — | (447 | ) | 11,158 | |||||||||||||||||
Cash generated from refinancing | — | — | — | — | — | — | ||||||||||||||||||
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Cash generated from operations, sales and refinancing | $ | (117 | ) | $ | (691 | ) | $ | — | $ | (330 | ) | $ | (2,216 | ) | $ | 7,932 | ||||||||
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Less: Cash interest payments made to investors | ||||||||||||||||||||||||
From operating cash flow | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
From sales and refinancing | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
From other | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Cash generated after cash distributions | $ | (117 | ) | $ | — | $ | (691 | ) | $ | (330 | ) | $ | (2,216 | ) | $ | 7,932 | ||||||||
Less: Special items | ||||||||||||||||||||||||
Cash generated after cash distributions and special items | $ | (117 | ) | $ | — | $ | (691 | ) | $ | (330 | ) | $ | (2,216 | ) | $ | 7,932 | ||||||||
| (1) | On September 6, 2011, the real estate assets and certain liabilities of ARC Income Properties, LLC and ARC Income Properties III, LLC were contributed in the formation transaction of ARC Properties, Inc. |
| (2) | The program ended on May 16, 2011, when the notes were repaid. These properties are still owned by American Realty Capital Trust, Inc |
| (3) | Includes cash paid for interest including interest payments to investors |
Non-public programs are combined with other entities for U.S. federal income tax reporting purposes, therefore, U.S. Federal income tax results for these programs are not presented.
A-23
TABLE IV
RESULTS OF COMPLETED PUBLIC PROGRAMS OF THE SPONSOR AND ITS AFFILIATES
NOT APPLICABLE
A-24
TABLE IV
RESULTS OF COMPLETED NON-PUBLIC PROGRAMS OF THE SPONSOR AND ITS AFFILIATES
(UNAUDITED)
Table IV summarizes the results of ARC Income Properties, LLC, ARC Income Properties II, LLC, ARC Income Properties III, LLC and ARC Growth Fund, LLC, the completed programs of our AR Capital sponsor as of December 31, 2011.
| (Dollars in thousands) Program name | ARC Income Properties, LLC | ARC Income Properties II, LLC | ARC Income Properties III, LLC | ARC Growth Fund, LLC | ||||||||||||
Dollar amount raised | $ | 21,512 | $ | 13,000 | $ | 11,243 | $ | 7,850 | ||||||||
Number of properties purchased | 62 | 50 | 1 | 52 | ||||||||||||
Date of closing of offering | June 2008 | September 2008 | September 2009 | July 2008 | ||||||||||||
Date of first sale of property | September 2011 | (2) | May 2011 | (3) | September 2011 | (2) | July 2008 | |||||||||
Date of final sale of property | September 2011 | (2) | May 2011 | (3) | September 2011 | (2) | December 2010 | |||||||||
Tax and distribution data per $1,000 investment through 12/31/2010(1) | ||||||||||||||||
Federal income tax results: | ||||||||||||||||
Ordinary income (loss) | ||||||||||||||||
- From operations | $ | — | $ | — | $ | — | $ | — | ||||||||
- From recapture | $ | — | $ | — | $ | — | $ | — | ||||||||
Capital gain (loss) | $ | — | $ | — | $ | — | $ | — | ||||||||
Deferred gain | $ | — | $ | — | $ | — | $ | — | ||||||||
Capital | $ | — | $ | — | $ | — | $ | — | ||||||||
Ordinary | $ | — | $ | — | $ | — | $ | — | ||||||||
Cash distributions to investors | ||||||||||||||||
Source (on GAAP basis) | ||||||||||||||||
- Investment income | — | — | — | — | ||||||||||||
- Return of capital | $ | 19,537 | $ | 13,000 | $ | 11,243 | $ | 7,226 | ||||||||
Source (on cash basis) | ||||||||||||||||
- Sales | $ | 19,537 | $ | 13,000 | $ | 11,243 | $ | 7,226 | ||||||||
- Refinancing | $ | — | $ | — | $ | — | $ | — | ||||||||
- Operations | $ | — | $ | — | $ | — | $ | — | ||||||||
- Other | ||||||||||||||||
Receivable on net purchase money financing | $ | — | $ | — | $ | — | $ | — | ||||||||
| (1) | Programs is combined with other entities for U.S. federal income tax reporting purposes, therefore, U.S. Federal income tax results for this program is not presented. |
| (2) | The real estate assets and certain liabilities of these programs were contributed to ARC Properties, Inc. as part of its formation transaction. |
| (3) | The notes used to purchase these properties were paid off in May 2011, these properties are still owned by American Realty Capital Trust, Inc. |
A-25
TABLE V
SALES OR DISPOSALS OF PUBLIC PROGRAM PROPERTIES
(UNAUDITED)
Table V summarizes the sales or disposals of properties by American Realty Capital Trust, Inc. as of December 31, 2011 (in thousands).
| Selling Price, Net of Closing costs and GAAP Adjustments | Cost of Properties Including Closing and Soft Costs | |||||||||||||||||||||||||||||||||||||||||||
Property | Date Acquired | Date of Sale | Cash received net of closing costs | Mortgage balance at time of sale | Purchase money mortgage taken back by program (1) | Adjustments resulting from application of GAAP (2) | Total (3) | Original Mortgage Financing | Total acquisition cost, capital improvement, closing and soft costs (4) | Total | Excess (deficiency) of Property Operating Cash Receipts Over Cash Expenditures (5) | |||||||||||||||||||||||||||||||||
American Realty Capital Trust, Inc.: |
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PNC Bank Branch - New Jersey | November-08 | September 2010 | $ | 388 | $ | 512 | $ | — | $ | — | $ | 900 | $ | 512 | $ | 187 | $ | 699 | $ | 1,035 | ||||||||||||||||||||||||
PNC Bank Branch - New Jersey | November-08 | January 2011 | $ | 79 | $ | 502 | $ | — | $ | — | $ | 581 | $ | 502 | $ | 178 | $ | 680 | $ | 1,305 | ||||||||||||||||||||||||
| 1) | No purchase money mortgages were taken back by the program. |
| 2) | Financial information was prepared in accordance with GAAP, therefore GAAP adjustments are not applicable. |
| 3) | All taxable gains were categorized as capital gains. None of these sales were reported on the installment basis. |
| 4) | Amounts shown do not include a pro rata share of the offering costs. There were no carried interests received in Lieu of commissions on connection with the acquisition of property. |
| 5) | Amounts exclude the amounts included under “Selling Price Net of Closing Costs and GAAP Adjustments” or “Costs of Properties Including Closing Costs and Soft Costs” and exclude costs incurred in administration of the program not related to the operations of the property. |
A-26
TABLE V
SALES OR DISPOSALS OF NON-PUBLIC PROGRAM PROPERTIES
(UNAUDITED)
Table V provides summary information on the results of sales or disposals of properties by non-public prior programs having similar investment objectives to ours. All figures below are through December 31, 2011.
| (Dollars in thousands) | Selling Price Net of Closing Costs and GAAP Adjustments | Costs of properties Including Closing Costs and Soft Costs | ||||||||||||||||||||||||||||||||||||||||||
Property | Date Acquired | Date of Sale | Cash Received (cash deficit) Net of Closing Costs | Mortgage Balance at Time of Sale | Purchase Money Mortgage Taken Back by Program (2) | Adjustments Resulting From Application of GAAP (3) | Total (4) | Original Mortgage Financing | Total Acquisition Costs, Capital Improvement Costs, Closing and Soft Costs (5) | Total | Excess (Deficit) of Property Operating Cash Receipts Over Cash Expenditures (6) | |||||||||||||||||||||||||||||||||
ARC Income Properties II, LLC: |
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PNC Bank Branch –New Jersey | November-08 | September-10 | $ | 388 | $ | 512 | $ | — | $ | — | $ | 900 | $ | 512 | $ | 187 | $ | 699 | $ | 1,035 | ||||||||||||||||||||||||
PNC Bank Branch –New Jersey | November-08 | January 2011 | 79 | 502 | — | — | 581 | 502 | 178 | 680 | 1,305 | |||||||||||||||||||||||||||||||||
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| $ | 467 | $ | 1,014 | $ | — | $ | — | $ | 1,481 | $ | 1,014 | $ | 365 | $ | 1,379 | $ | 2,340 | |||||||||||||||||||||||||||
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ARC Growth Fund, LLC: |
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Bayonet Point, FL | July-08 | July-08 | $ | 628 | $ | — | $ | — | $ | — | $ | 628 | $ | — | $ | 642 | $ | 642 | $ | — | ||||||||||||||||||||||||
Boca Raton, FL | July-08 | July-08 | 2,434 | — | — | — | 2,434 | — | 2,000 | 2,000 | — | |||||||||||||||||||||||||||||||||
Bonita Springs, FL | July-08 | May-09 | (459 | ) | 1,207 | — | — | 748 | 1,207 | 543 | 1,750 | (29 | ) | |||||||||||||||||||||||||||||||
Clearwater, FL | July-08 | September-08 | 253 | 539 | — | — | 792 | 539 | 371 | 910 | (3 | ) | ||||||||||||||||||||||||||||||||
Clearwater, FL | July-08 | October-08 | (223 | ) | 582 | — | — | 359 | 582 | 400 | 982 | (3 | ) | |||||||||||||||||||||||||||||||
Destin, FL | July-08 | July-08 | 1,358 | — | — | — | 1,358 | — | 1,183 | 1,183 | — | |||||||||||||||||||||||||||||||||
Englewood, FL | July-08 | November-08 | 138 | 929 | — | — | 1,067 | 929 | 632 | 1,561 | (13 | ) | ||||||||||||||||||||||||||||||||
Fort Myers, FL | July-08 | July-08 | 2,434 | — | — | — | 2,434 | — | 1,566 | 1,566 | — | |||||||||||||||||||||||||||||||||
Naples, FL | July-08 | July-08 | 2,727 | — | — | — | 2,727 | — | 1,566 | 1,566 | — | |||||||||||||||||||||||||||||||||
Palm Coast, FL | July-08 | September-08 | 891 | 1,770 | — | — | 2,661 | 1,770 | -530 | 1,240 | (8 | ) | ||||||||||||||||||||||||||||||||
Pompano Beach, FL | July-08 | October-08 | 1,206 | 2,162 | — | — | 3,368 | 2,162 | -411 | 1,751 | (8 | ) | ||||||||||||||||||||||||||||||||
Port St. Lucie, FL | July-08 | August-09 | (60 | ) | 654 | — | — | 594 | 654 | 648 | 1,302 | (40 | ) | |||||||||||||||||||||||||||||||
Punta Gorda, FL | July-08 | July-08 | 2,337 | — | — | — | 2,337 | — | 2,143 | 2,143 | — | |||||||||||||||||||||||||||||||||
Vero Beach, FL | July-08 | February-09 | 87 | 830 | — | — | 917 | 830 | 565 | 1,395 | (13 | ) | ||||||||||||||||||||||||||||||||
Cherry Hill, NJ | July-08 | July-08 | 1,946 | — | — | — | 1,946 | — | 2,225 | 2,225 | — | |||||||||||||||||||||||||||||||||
Cranford, NJ | July-08 | July-08 | 1,453 | — | — | — | 1,453 | — | 725 | 725 | — | |||||||||||||||||||||||||||||||||
Warren, NJ | July-08 | July-08 | 1,375 | — | — | — | 1,375 | — | 1,556 | 1,556 | — | |||||||||||||||||||||||||||||||||
Westfield, NJ | July-08 | July-08 | 2,539 | — | — | — | 2,539 | — | 2,230 | 2,230 | — | |||||||||||||||||||||||||||||||||
Lehigh Acres, FL | July-08 | August-09 | (207 | ) | 758 | — | — | 551 | 758 | 752 | 1,510 | (28 | ) | |||||||||||||||||||||||||||||||
Alpharetta, GA | July-08 | December-08 | 98 | 914 | — | — | 1,012 | 914 | 617 | 1,531 | (9 | ) | ||||||||||||||||||||||||||||||||
Atlanta, GA | July-08 | September-08 | 825 | 1,282 | — | — | 2,107 | 1,282 | 862 | 2,144 | (27 | ) | ||||||||||||||||||||||||||||||||
Columbus, GA | July-08 | December-08 | (43 | ) | 111 | — | — | 68 | 111 | 85 | 196 | (3 | ) | |||||||||||||||||||||||||||||||
Duluth, GA | July-08 | July-08 | 1,851 | — | — | — | 1,851 | — | 1,457 | 1,457 | — | |||||||||||||||||||||||||||||||||
Oakwood, GA | July-08 | September-08 | 49 | 898 | — | — | 947 | 898 | 607 | 1,505 | (1 | ) | ||||||||||||||||||||||||||||||||
Riverdale, GA | July-08 | August-09 | (104 | ) | 471 | — | — | 367 | 471 | 286 | 757 | (12 | ) | |||||||||||||||||||||||||||||||
Laurinburg, NC | July-08 | July-08 | 188 | — | — | — | 188 | — | 197 | 197 | — | |||||||||||||||||||||||||||||||||
A-27
(Dollars in thousands) | Selling Price Net of Closing Costs and GAAP Adjustments | Costs of properties Including Closing Costs and Soft Costs | ||||||||||||||||||||||||||||||||||||||||||
Property | Date Acquired | Date of Sale | Cash Received (cash deficit) Net of Closing Costs | Mortgage Balance at Time of Sale | Purchase Money Mortgage Taken Back by Program (2) | Adjustments Resulting From Application of GAAP (3) | Total (4) | Original Mortgage Financing | Total Acquisition Costs, Capital Improvement Costs, Closing and Soft Costs (5) | Total | Excess (Deficit) of Property Operating Cash Receipts Over Cash Expenditures (6) | |||||||||||||||||||||||||||||||||
Haworth, NJ | July-08 | July-08 | 1,781 | — | — | — | 1,781 | — | 1,834 | 1,834 | — | |||||||||||||||||||||||||||||||||
Fredericksburg, VA | August-08 | August-08 | 2,432 | — | — | — | 2,432 | — | 2,568 | 2,568 | — | |||||||||||||||||||||||||||||||||
Dallas, PA | August-08 | August-08 | 1,539 | — | — | — | 1,539 | — | 366 | 366 | — | |||||||||||||||||||||||||||||||||
Virginia Beach, VA | August-08 | August-08 | 1,210 | — | — | — | 1,210 | — | 930 | 930 | — | |||||||||||||||||||||||||||||||||
Baytown, TX | August-08 | August-08 | 3,205 | — | — | — | 3,205 | — | 1,355 | 1,355 | — | |||||||||||||||||||||||||||||||||
Bradenton, FL | November-08 | November-08 | 778 | — | — | — | 778 | — | 748 | 748 | — | |||||||||||||||||||||||||||||||||
Sarasota, FL | November-08 | November-08 | 1,688 | — | — | — | 1,688 | — | 867 | 867 | — | |||||||||||||||||||||||||||||||||
Tuscaloosa, AL | November-08 | November-08 | 580 | — | — | — | 580 | — | 242 | 242 | — | |||||||||||||||||||||||||||||||||
Palm Harbor, FL | November-08 | November-08 | 1,064 | — | — | — | 1,064 | — | 790 | 790 | — | |||||||||||||||||||||||||||||||||
Reading, PA | November-08 | November-08 | 137 | — | — | — | 137 | — | 248 | 248 | — | |||||||||||||||||||||||||||||||||
St. Augustine, FL | November-08 | November-08 | 1,936 | — | — | — | 1,936 | — | 1,428 | 1,428 | — | |||||||||||||||||||||||||||||||||
Cumming, GA | December-08 | December-08 | 1,227 | — | — | — | 1,227 | — | 810 | 810 | — | |||||||||||||||||||||||||||||||||
Suffolk, VA | December-08 | February-09 | 115 | 172 | — | — | 287 | 172 | 129 | 301 | (1 | ) | ||||||||||||||||||||||||||||||||
Titusville, FL | December-08 | December-08 | 321 | — | — | — | 321 | — | 260 | 260 | — | |||||||||||||||||||||||||||||||||
West Caldwell, NJ(1) | December-08 | September-09 | 333 | 898 | — | — | 1,231 | 357 | 358 | 715 | 15 | |||||||||||||||||||||||||||||||||
Palm Coast, FL | December-08 | December-08 | 507 | — | — | — | 507 | — | 599 | 599 | — | |||||||||||||||||||||||||||||||||
Mableton, GA | December-08 | December-08 | 676 | — | — | — | 676 | — | 696 | 696 | — | |||||||||||||||||||||||||||||||||
Warner Robins, GA | January-09 | January-09 | 149 | — | — | — | 149 | — | 257 | 257 | — | |||||||||||||||||||||||||||||||||
Philadelphia(1) | January-09 | October-09 | 291 | 1,474 | — | — | 1,765 | 552 | 1,105 | 1,657 | 3 | |||||||||||||||||||||||||||||||||
A-28
(Dollars in thousands) | Selling Price Net of Closing Costs and GAAP Adjustments | Costs of properties Including Closing Costs and Soft Costs | ||||||||||||||||||||||||||||||||||||||||||
Property | Date Acquired | Date of Sale | Cash Received (cash deficit) Net of Closing Costs | Mortgage Balance at Time of Sale | Purchase Money Mortgage Taken Back by Program (2) | Adjustments Resulting From Application of GAAP (3) | Total (4) | Original Mortgage Financing | Total Acquisition Costs, Capital Improvement Costs, Closing and Soft Costs (5) | Total | Excess (Deficit) of Property Operating Cash Receipts Over Cash Expenditures (6) | |||||||||||||||||||||||||||||||||
Stockholm, NJ | December-08 | November-09 | (29 | ) | 240 | — | — | 211 | 240 | 438 | 678 | (46 | ) | |||||||||||||||||||||||||||||||
Sebastian, FL | July-08 | December-09 | (104 | ) | 654 | — | — | 550 | 654 | 1,302 | 1,956 | (102 | ) | |||||||||||||||||||||||||||||||
Fort Myers, FL | July-08 | December-09 | (314 | ) | 795 | — | — | 481 | 795 | 1,582 | 2,377 | (113 | ) | |||||||||||||||||||||||||||||||
Seminole, FL | July-08 | March-10 | — | 1,098 | — | — | 1,098 | 1,098 | 1,061 | 2,159 | (48 | ) | ||||||||||||||||||||||||||||||||
Port Richey, FL(1) | July-08 | December-10 | — | 544 | — | — | 544 | 544 | 1,086 | 1,630 | (71 | ) | ||||||||||||||||||||||||||||||||
Punta Gorda, FL(1) | July-08 | December-10 | — | 690 | — | — | 690 | 690 | 1,550 | 2,240 | (72 | ) | ||||||||||||||||||||||||||||||||
Lawrenceville, GA(1) | July-08 | December-10 | — | 695 | — | — | 695 | 695 | 1,381 | 2,076 | (73 | ) | ||||||||||||||||||||||||||||||||
Norristown, PA(1) | July-08 | December-10 | — | 471 | — | — | 471 | 471 | 943 | 1,414 | (83 | ) | ||||||||||||||||||||||||||||||||
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| $ | 43,243 | $ | 20,838 | $ | — | $ | — | $ | 64,081 | $ | 19,375 | $ | 47,850 | $ | 67,225 | $ | (788 | ) | ||||||||||||||||||||||||||
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| (1) | Sale of property was to related party. |
| (2) | No purchase money mortgages were taken back by program. |
| (3) | Financial information for programs was prepared in accordance with GAAP, therefore GAAP adjustments are not applicable. |
| (4) | All taxable gains were categorized as capital gains. None of these sales were reported on the installment basis. |
| (5) | Amounts shown do not include a pro rata share of the offering costs. There were no carried interests received in lieu of commissions on connection with the acquisition of property. |
| (6) | Amounts exclude the amounts included under “Selling Price Net of Closing Costs and GAAP Adjustments” or “Costs of Properties Including Closing Costs and Soft Costs” and exclude costs incurred in administration of the program not related to the operations of the property. |
A-29
APPENDIX A-1: PRIOR PERFORMANCE OF AMERICAN FINANCIAL REALTY TRUST
AMERICAN FINANCIAL REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2006, 2005 and 2004
(In thousands, except per share data)
| Year Ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Revenues: | ||||||||||||
Rental income | $ | 253,485 | $ | 219,689 | $ | 148,695 | ||||||
Operating expense reimbursements | 166,712 | 155,181 | 81,101 | |||||||||
Interest and other income | 6,425 | 5,202 | 3,143 | |||||||||
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Total revenues | 426,622 | 380,072 | 232,939 | |||||||||
Expenses: | ||||||||||||
Property operating expenses: | ||||||||||||
Ground rents and leasehold obligations | 14,336 | 13,427 | 8,726 | |||||||||
Real estate taxes | 42,868 | 35,232 | 21,659 | |||||||||
Property and leasehold impairments | 5,500 | 144 | 446 | |||||||||
Other property operating expenses | 166,310 | 142,148 | 73,730 | |||||||||
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Total property operating expenses | 229,014 | 190,951 | 104,561 | |||||||||
Marketing, general and administrative | 24,934 | 24,144 | 23,888 | |||||||||
Broken deal costs | 176 | 1,220 | 227 | |||||||||
Repositioning | 9,065 | — | — | |||||||||
Amortization of deferred equity compensation | 8,687 | 10,411 | 9,078 | |||||||||
Outperformance plan – contingent restricted share component | — | — | (5,238 | ) | ||||||||
Severance and related accelerated amortization of deferred compensation | 21,917 | 4,503 | 1,857 | |||||||||
Interest expense on mortgages and other debt | 142,432 | 120,514 | 72,121 | |||||||||
Depreciation and amortization | 126,307 | 115,439 | 74,427 | |||||||||
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Total expenses | 562,532 | 467,182 | 280,921 | |||||||||
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Loss before net gain on sale of land, equity in loss from joint venture, net loss on investments, minority interest and discontinued operations | (135,910 | ) | (87,110 | ) | (47,982 | ) | ||||||
Gain on sale of land | 2,043 | 1,596 | 80 | |||||||||
Equity in loss from joint venture | (1,397 | ) | — | — | ||||||||
Net loss on investments | — | (530 | ) | (409 | ) | |||||||
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Loss from continuing operations before minority interest | (135,264 | ) | (86,044 | ) | (48,311 | ) | ||||||
Minority interest | 2,686 | 1,984 | 1,835 | |||||||||
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Loss from continuing operations | (132,578 | ) | (84,060 | ) | (46,476 | ) | ||||||
Discontinued operations: | ||||||||||||
Loss from operations before yield maintenance fees, net of minority interest of $1,850, $3,062 and $114 for the years ended December 31, 2006, 2005 and 2004, respectively | (79,174 | ) | (29,182 | ) | (1,252 | ) | ||||||
Yield maintenance fees, net of minority interest of $15,564, $16 and $103 for the years ended December 31, 2006, 2005 and 2004, respectively | (46,402 | ) | (567 | ) | (3,060 | ) | ||||||
Net gains on disposals, net of minority interest of $74,046, $562 and $934 for the years ended December 31, 2006, 2005 and 2004 respectively | 237,556 | 20,194 | 28,543 | |||||||||
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Income (loss) from discontinued operations | 111,980 | (9,555 | ) | 24,231 | ||||||||
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Net loss | $ | (20,598 | ) | $ | (93,615 | ) | $ | (22,245 | ) | |||
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Basic and diluted income (loss) per share: | ||||||||||||
From continuing operations | $ | (1.04 | ) | $ | (0.71 | ) | $ | (0.45 | ) | |||
From discontinued operations | $ | 0.87 | $ | (0.07 | ) | $ | 0.23 | |||||
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Total basic and diluted loss per share | $ | (0.17 | ) | $ | (0.78 | ) | $ | (0.22 | ) | |||
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A-30
AMERICAN FINANCIAL REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2006, 2005 and 2004
(In thousands)
| Year Ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (20,598 | ) | $ | (93,615 | ) | $ | (22,245 | ) | |||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||||
Depreciation | 137,420 | 138,990 | 93,241 | |||||||||
Minority interest | 53,946 | (4,500 | ) | (1,118 | ) | |||||||
Amortization of leasehold interests and intangible assets | 36,351 | 38,887 | 18,145 | |||||||||
Amortization of above- and below-market leases | 1,160 | (120 | ) | 1,539 | ||||||||
Amortization of deferred financing costs | 13,708 | 12,656 | 5,006 | |||||||||
Amortization of deferred compensation | 13,031 | 13,440 | 10,273 | |||||||||
Amortization of discount on pledged treasury securities | (359 | ) | — | — | ||||||||
Non-cash component of Outperformance Plan | — | — | (5,238 | ) | ||||||||
Non-cash compensation charge | 273 | 262 | 244 | |||||||||
Impairment charges | 65,116 | 3,581 | 4,060 | |||||||||
Net equity in loss from joint venture | 1,397 | — | — | |||||||||
Net gain on sales of properties and lease terminations | (315,077 | ) | (23,006 | ) | (30,076 | ) | ||||||
Net loss on sales of investments | — | 530 | 409 | |||||||||
Increase in restricted cash | (3,792 | ) | (17,646 | ) | (21,246 | ) | ||||||
Leasing costs | (18,154 | ) | (8,404 | ) | (17,349 | ) | ||||||
Payments received from tenants for lease terminations | 1,947 | 440 | 2,061 | |||||||||
Decrease (increase) in operating assets: | ||||||||||||
Tenant and other receivables, net | (23,405 | ) | (19,601 | ) | (22,055 | ) | ||||||
Prepaid expenses and other assets | (2,777 | ) | (81 | ) | (16,466 | ) | ||||||
Increase (decrease) in operating liabilities: | ||||||||||||
Accounts payable | 4,447 | (709 | ) | 3,138 | ||||||||
Accrued expenses and other liabilities | (3,034 | ) | (10,469 | ) | 44,972 | |||||||
Deferred revenue and tenant security deposits | 31,711 | 50,002 | 71,325 | |||||||||
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Net cash (used in) provided by operating activities | (26,689 | ) | 80,637 | 118,620 | ||||||||
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Cash flows from investing activities: | ||||||||||||
Payments for acquisitions of real estate investments, net of cash acquired | (192,669 | ) | (806,951 | ) | (2,006,703 | ) | ||||||
Capital expenditures | (50,043 | ) | (41,559 | ) | (15,786 | ) | ||||||
Proceeds from sales of real estate and non-real estate assets | 1,421,613 | 125,583 | 245,990 | |||||||||
(Increase) decrease in restricted cash | 590 | 1,601 | (10,461 | ) | ||||||||
Investment in joint venture | (23,300 | ) | — | — | ||||||||
Sales of investments | 1,116 | 21,240 | 52,880 | |||||||||
Purchases of investments | (33,082 | ) | (659 | ) | (10,032 | ) | ||||||
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Net cash provided by (used in) investing activities | 1,124,225 | (700,745 | ) | (1,744,112 | ) | |||||||
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Cash flows from financing activities: | ||||||||||||
Repayments of mortgages, bridge notes payable and credit facilities | (1,207,580 | ) | (594,063 | ) | (274,398 | ) | ||||||
Proceeds from mortgages, bridge notes payable and credit facilities | 327,878 | 1,108,652 | 1,531,425 | |||||||||
Proceeds from issuance of convertible senior notes, net | — | — | 434,030 | |||||||||
Payments for deferred financing costs, net | (2,118 | ) | (838 | ) | (25,758 | ) | ||||||
Proceeds from common share issuances, net | 1,185 | 244,442 | 7,552 | |||||||||
Redemption of Operating Partnership units | — | (4,405 | ) | (31,112 | ) | |||||||
Contributions by limited partners | — | 353 | — | |||||||||
Dividends and distributions | (221,140 | ) | (134,395 | ) | (116,799 | ) | ||||||
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Net cash (used in) provided by financing activities | (1,101,775 | ) | 619,746 | 1,524,940 | ||||||||
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Decrease in cash and cash equivalents | (4,239 | ) | (362 | ) | (100,552 | ) | ||||||
Cash and cash equivalents, beginning of year | 110,245 | 110,607 | 211,159 | |||||||||
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Cash and cash equivalents, end of year | $ | 106,006 | $ | 110,245 | $ | 110,607 | ||||||
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Supplemental cash flow and non-cash information: | ||||||||||||
Cash paid for interest | $ | 248,170 | $ | 166,533 | $ | 76,582 | ||||||
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Cash paid for income taxes | $ | 687 | $ | 24 | $ | 1,693 | ||||||
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Debt assumed in real estate acquisitions | $ | — | $ | 78,645 | $ | 48,072 | ||||||
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Operating Partnership units issued to acquire real estate | $ | — | $ | — | $ | 35,867 | ||||||
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Non-cash acquisition costs | $ | — | $ | 2,367 | $ | — | ||||||
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A-31
APPENDIX A-2: RESULTS OF NICHOLAS S. SCHORSCH’S COMPLETED PROGRAMS
(unaudited)
Year | Number of Properties Acquired | Aggregate Purchase Price of Properties Acquired | Number of Properties Sold | Aggregate Gross Proceeds from Sale of Properties | Aggregate Net Gain on Sales | Number of Properties Sold to AFRT | Aggregate Gross Proceeds from Sale of Properties to AFRT | Aggregate Net Gain on Sales to AFRT | ||||||||||||||||||||||||
1998 | 105 | $ | 22,373,000 | 15 | $ | 8,054,000 | $ | 4,227,000 | — | $ | — | $ | — | |||||||||||||||||||
1999 | 33 | 18,825,000 | 16 | 8,418,000 | 4,468,000 | — | — | — | ||||||||||||||||||||||||
2000 | 8 | 142,931,000 | 33 | 21,871,000 | 8,934,000 | — | — | — | ||||||||||||||||||||||||
2001 | 71 | 24,126,000 | 45 | 22,921,000 | 4,107,000 | — | — | — | ||||||||||||||||||||||||
2002 | 59 | 64,030,000 | 63 | 32,130,000 | 11,377,000 | 93 | 230,500,000 | N/A | (1) | |||||||||||||||||||||||
2003 | — | — | 11 | 54,347,000 | 2,567,000 | — | — | — | ||||||||||||||||||||||||
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Total | 276 | $ | 272,285,000 | 183 | $ | 147,741,000 | $ | 35,680,000 | 93 | $ | 230,500,000 | $ | — | |||||||||||||||||||
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| (1) | The consideration received was principally limited partnership units in AFRT’s operating partnership and some cash. The net aggregate gain on the sale to AFRT can not be determined since the registrant has no information as to what each investor did with his or her limited partnership units after the initial transfer to AFRT in 2002. |
A-32