UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
| |
| Date of Report (Date of Earliest Event Reported): | July 5, 2016 |
Hines Global REIT II, Inc.
__________________________________
Exact name of registrant as specified in its charter)
Commission file number: 000-55599
|
| | |
| Maryland | | 80-0947092 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | |
| 2800 Post Oak Boulevard | | |
| Suite 5000 | | |
| Houston, Texas | | 77056-6118 |
| (Address of principal executive offices) | | (Zip code) |
|
| | |
| | (888) 220-6121 | |
| (Registrant’s telephone number, including area code) |
| | | |
| | Not Applicable | |
| Former name or former address, if changed since last report |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Explanatory Note.
On July 5, 2016, Hines Global REIT II, Inc. (“Hines Global II”), through a wholly-owned subsidiary of its operating partnership, acquired Cottonwood Corporate Center (the “Property”), a four-building, Class-A office project located in Cottonwood Heights, Utah, a submarket of Salt Lake City, Utah. NOP Cottonwood Holdings, LLC, the seller of Cottonwood Corporate Center, is not affiliated with Hines Global II or its affiliates.
On July 11, 2016, Hines Global II filed a Current Report on Form 8-K (the “Initial Report”) with regard to the acquisition of Cottonwood Corporate Center. This amendment is being filed for the sole purpose of filing the financial statements and pro forma financial information required by Item 9.01 of Form 8-K, and should be read in conjunction with the Initial Report. After reasonable inquiry, Hines Global II is not aware of any material factors relating to the Property that would cause the reported financial information not to be necessarily indicative of future operating results.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Real Estate Property Acquired. The following financial statements are submitted at the end of this Current Report on Form 8-K/A and are filed herewith and incorporated herein by reference.
Cottonwood Corporate Center — For the Six Months Ended June 30, 2016 (Unaudited) and the Year Ended December 31, 2015
Report of Independent Auditor
Statement of Revenues and Certain Operating Expenses
Notes to Statement of Revenues and Certain Operating Expenses
(b) Unaudited Pro Forma Financial Information. The following financial information is submitted at the end of this Current Report on Form 8-K/A and is filed herewith and incorporated herein by reference.
Hines Global REIT II, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2016
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2016
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2016
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2016
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2015
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2015
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2016 and the Year Ended December 31, 2015
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
| | | | | |
| | | | | |
| | | Hines Global REIT II, Inc. |
| | | | | |
| September 20, 2016 | | By: | /s/ J. Shea Morgenroth | |
| | | | Name: J. Shea Morgenroth | |
| | | | Title: Chief Accounting Officer and Treasurer | |
Report of Independent Auditor
To the Partners of
Hines Global REIT II Properties, LP
Houston, Texas
Report on the Historical Summary
We have audited the accompanying statement of revenues and certain operating expenses (the “Historical Summary”) of Cottonwood Corporate Center (the “Property”), a four-building, Class-A office project located in Cottonwood Heights, Utah, a submarket of Salt Lake City, Utah, for the year ended December 31, 2015.
Management’s Responsibility for the Historical Summary
Management is responsible for the preparation and fair presentation of this Historical Summary, in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal controls relevant to the preparation and fair presentation of the statement that is free from material misstatement, whether from fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Historical Summary based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Historical Summary. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the Historical Summary, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Property’s preparation and fair presentation of the Historical Summary in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Historical Summary.
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, such Historical Summary presents fairly, in all material respects, the revenues and certain operating expenses discussed in Note 2 to the Historical Summary of the Property for the year ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.
Matter of Emphasis
The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in this Form 8-K/A of Hines Global REIT II, Inc.) as discussed in Note 2 to the Historical Summary and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to this matter.
/s/ Saville Dodgen & Company, PLLC
Dallas, Texas
September 20, 2016
COTTONWOOD CORPORATE CENTER
STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
For the Six Months Ended June 30, 2016 (Unaudited) and Year Ended December 31, 2015
|
| | | | | | | |
| Revenues: | Six Months Ended June 30, 2016 (unaudited) | | Year Ended December 31, 2015 |
| Rental revenue | $ | 6,393,614 |
| | $ | 12,747,974 |
|
| Other revenue | 239,271 |
| | 488,488 |
|
| Total revenues | 6,632,885 |
| | 13,236,462 |
|
| Certain operating expenses: | | | |
| Utilities | 422,453 |
| | 930,578 |
|
| Real estate taxes | 803,821 |
| | 1,558,607 |
|
| Repairs and maintenance | 137,183 |
| | 312,937 |
|
| Cleaning services | 253,515 |
| | 504,238 |
|
| Salaries and wages | 192,561 |
| | 368,326 |
|
| Building management services | 235,139 |
| | 450,653 |
|
| Insurance | 35,844 |
| | 70,172 |
|
| Total certain operating expenses | 2,080,516 |
| | 4,195,511 |
|
| Revenues in excess of certain operating expenses | $ | 4,552,369 |
| | $ | 9,040,951 |
|
See accompanying notes to statement of revenues and certain operating expenses.
COTTONWOOD CORPORATE CENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
For the Six Months Ended June 30, 2016 (Unaudited) and for the Year Ended December 31, 2015
(1) Organization
Cottonwood Corporate Center (the “Property”) is a four-building, Class-A office project located in Cottonwood Heights, Utah, a submarket of Salt Lake City, Utah, that contains 490,030 square feet of net rentable area. The Property was acquired by Hines Global REIT II, Inc. (“Hines Global II”), through a wholly-owned subsidiary of its operating partnership. The acquisition was completed on July 5, 2016.
(2) Basis of Presentation
The statement of revenues and certain operating expenses (the “Historical Summary”) has been prepared for the purpose of complying with the provisions of Article 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The Historical Summary includes the historical revenues and operating expenses of the Property, exclusive of depreciation and amortization, management fees, interest expense, and other nonrecurring owner specific expenses, which may not be comparable to the corresponding amounts reflected in the future operations of the Property.
The statement of revenues and certain operating expenses and notes thereto for the six months ended June 30, 2016 included in this report are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Historical Summary have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year.
In preparing the accompanying financial statements, Hines Global II evaluated events and transactions that occurred subsequent to December 31, 2015, through the date that the accompanying financial statements were available to be issued on September 20, 2016.
(3) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(4) Significant Accounting Policies
(a) Revenue Recognition
The Property’s operations consist of rental revenue earned from tenants under leasing arrangements, which provide for minimum rent, escalations, and charges to the tenants for operating expenses. The leases with the tenants are base year leases and have been accounted for as operating leases. Rental revenue is recognized by amortizing the aggregate lease payments on a straight-line basis over the entire term of the leases, which resulted in rental revenue in excess of contractual rent of $1,289,349 (unaudited) for the six months ended June 30, 2016 and also resulted in rental revenue in excess of contractual rent of $337,406 for the year ended December 31, 2015.
(b) Repairs and Maintenance
Expenditures for repairs and maintenance are expensed as incurred.
COTTONWOOD CORPORATE CENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
For the Six Months Ended June 30, 2016 (Unaudited) and for the Year Ended December 31, 2015
(5) Rental Revenue
The aggregate annual minimum cash payments to be received on the noncancelable operating leases in effect as of December 31, 2015 are as follows:
|
| | | | |
| Year ending December 31: | | Amount |
| 2016 | | $ | 10,615,464 |
|
| 2017 | | | 13,272,639 |
|
| 2018 | | | 12,528,636 |
|
| 2019 | | | 10,836,922 |
|
| 2020 | | | 10,356,871 |
|
| Thereafter | | | 26,214,016 |
|
| Total | | $ | 83,824,548 |
|
Total minimum future rental revenue represents the base rent that the tenants are required to pay under the terms of its lease in effect at December 31, 2015, exclusive of charges for contingent rents and operating expenses. There were no significant contingent rents for the six months ended June 30, 2016 (unaudited) and for the year ended December 31, 2015.
Of the total rental revenue for the six months ended June 30, 2016 and the year ended December 31, 2015, 35% was earned from a tenant in the data storage industry whose lease expires in 2021 and 10% was earned by a tenant in the energy industry whose lease expires in 2018.
* * * * *
HINES GLOBAL REIT II, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Hines Global REIT II, Inc. (the “Company”), made the following acquisitions since January 1, 2015:
|
| | |
| Property Name | Date of Acquisition | Net Purchase Price |
| Bishop’s Square | March 3, 2015 | $103.2 million |
| Domain Apartments | January 29, 2016 | $58.1 million |
| Cottonwood Corporate Center | July 5, 2016 | $139.2 million |
| Goodyear Crossing II | August 18, 2016 | $56.2 million |
The unaudited pro forma condensed consolidated balance sheet assumes that the 2016 acquisitions occurred on June 30, 2016 and the unaudited pro forma condensed consolidated statements of operations assume that all acquisitions described above occurred on January 1, 2015. However, there are no pro forma adjustments for the acquisition of Goodyear Crossing II included in the unaudited pro forma condensed consolidated financial statements since the financial statements relating to this recent acquisition are not currently required to be filed with the Securities and Exchange Commission (the “SEC”).
The unaudited pro forma adjustments are based on available information and certain estimates and assumptions that the Company believes are reasonable and factually supportable. The unaudited pro forma condensed consolidated statements of operations are not necessarily indicative of what actual results of operations would have been had the Company made these acquisitions on the first day of the period presented, nor does it purport to represent the results of operations for future periods. The pro forma information should be read in conjunction with the historical consolidated financial statements and notes thereto as filed in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, and the Company's quarterly reports on Form 10-Q.
HINES GLOBAL REIT II, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 2016
|
| | | | | | | | | | | |
| | June 30, 2016 | | Adjustments for the Cottonwood Corporate Center acquisition | | Pro Forma |
| ASSETS | | | | | |
| Investment property, net | $ | 128,516,836 |
| | $ | 112,228,425 |
| (a) | $ | 240,745,261 |
|
| Cash and cash equivalents | 51,484,196 |
| | (50,752,561 | ) | (b) | 731,635 |
|
| Restricted cash | 1,620,123 |
| | — |
| | 1,620,123 |
|
| Derivative instruments | 2,200 |
| | — |
| | 2,200 |
|
| Tenant and other receivables, net | 1,964,471 |
| | — |
| | 1,964,471 |
|
| Intangible lease assets, net | 51,967,404 |
| | 27,480,000 |
| (a) | 79,447,404 |
|
| Deferred leasing costs, net | 58,684 |
| | — |
| | 58,684 |
|
| Deferred financing costs, net | 8,324 |
| | — |
| | 8,324 |
|
| Other assets | 5,907,817 |
| | (4,780,000 | ) | (b) | 1,127,817 |
|
| Total assets | $ | 241,530,055 |
| | $ | 84,175,864 |
| | $ | 325,705,919 |
|
| LIABILITIES AND EQUITY | |
| | |
| | |
|
| Liabilities: | |
| | |
| | |
|
| Accounts payable and accrued expenses | $ | 1,254,497 |
| | $ | 496,160 |
| (c) | $ | 1,750,657 |
|
| Due to affiliates | 7,433,192 |
| | 3,131,965 |
| (d) | 10,565,157 |
|
| Intangible lease liabilities, net | 2,303,242 |
| | 510,000 |
| (a) | 2,813,242 |
|
| Other liabilities | 2,260,208 |
| | — |
| | 2,260,208 |
|
| Distributions payable | 796,680 |
| | — |
| | 796,680 |
|
| Note payable to affiliates | — |
| | 8,000,000 |
| (b) | 8,000,000 |
|
| Notes payable, net | 94,890,587 |
| | 77,901,560 |
| (b) | 172,792,147 |
|
| Total liabilities | $ | 108,938,406 |
| | $ | 90,039,685 |
| | $ | 198,978,091 |
|
| | | | | | |
| Commitments and Contingencies | — |
| | — |
| | — |
|
| | | | | | |
| Equity: | |
| | |
| | |
|
| Stockholders’ equity: | |
| | |
| | |
|
| Preferred shares, $0.001 par value; 500,000,000 preferred shares authorized, none issued or outstanding as of June 30, 2016 | — |
| | — |
| | — |
|
| Class A common stock, $0.001 par value; 600,000,000 authorized; 13,962,691 issued and outstanding as of June 30, 2016 | 13,963 |
| | — |
| (b) | 13,963 |
|
| Class T common stock, $0.001 par value; 900,000,000 authorized; 3,831,828 issued and outstanding as of June 30, 2016 | 3,832 |
| | — |
| (b) | 3,832 |
|
| Additional paid-in capital | 149,198,840 |
| | (2,235,696 | ) | (b) | 146,963,144 |
|
| Accumulated distributions in excess of earnings | (15,948,125 | ) | | (3,628,125 | ) | (c) (d) | (19,576,250 | ) |
| Accumulated other comprehensive income (loss) | (676,861 | ) | | — |
| | (676,861 | ) |
| Total stockholders’ equity | 132,591,649 |
| | (5,863,821 | ) | | 126,727,828 |
|
| Noncontrolling interests | — |
| |
|
| | — |
|
| Total equity | 132,591,649 |
| | (5,863,821 | ) | | 126,727,828 |
|
| Total liabilities and equity | $ | 241,530,055 |
| | $ | 84,175,864 |
| | $ | 325,705,919 |
|
See notes to unaudited pro forma condensed consolidated balance sheet and notes to unaudited pro forma condensed consolidated financial statements.
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2016
Adjustments
| |
| (a) | To record the pro forma effect of the Company’s acquisition of Cottonwood Corporate Center, assuming it had occurred on June 30, 2016. Investment property and intangible lease assets were recorded at fair value. See Note 2 — Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 regarding how the fair values of the Company’s investment property and intangible lease assets and liabilities were determined. Pro forma adjustments related to these amounts are preliminary and subject to change. |
| |
| (b) | The acquisition of Cottonwood Corporate Center was funded using proceeds from the Company’s current public offering (of which $4.8 million was funded as of June 30, 2016 and recorded in other assets on the condensed consolidated balance sheet), an $8.0 million advance under the Company’s credit facility with Hines Interests Limited Partnership (“Hines”) and a $78.0 million loan with Principal Life Insurance Company, which the Company entered into simultaneously with the acquisition of Cottonwood Corporate Center. In connection with the permanent debt financing, the Company incurred $98,440 in deferred financing fees which is shown as a reduction in the notes payable balance. See Note 11 — Subsequent Events in the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2016 for additional information regarding the Cottonwood Corporate Center loan agreement. |
| |
| (c) | To record the pro forma effect of the Company’s acquisition expenses related to the acquisition of Cottonwood Corporate Center. |
| |
| (d) | To record the pro forma effect of the 2.25% acquisition fee incurred by the Company related to the acquisition of Cottonwood Corporate Center. In connection with this acquisition, the Company was obligated to pay approximately $3.1 million of acquisition fees to affiliates of Hines. |
HINES GLOBAL REIT II, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2016
|
| | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2016 (unaudited) | | Adjustments for the Cottonwood Corporate Center acquisition | | Other Adjustment | | Pro Forma |
| Revenues: | | | | | | | |
| Rental revenue | $ | 7,039,432 |
| | $ | 6,043,614 |
| (a) | $ | 321,959 |
| (d) | $ | 13,405,005 |
|
| Other revenue | 244,341 |
| | 239,271 |
| (a) | 29,756 |
| (d) | 513,368 |
|
| Total revenue | 7,283,773 |
| | 6,282,885 |
| | 351,715 |
| | 13,918,373 |
|
| Expenses: | | | | | | | |
| Property operating expenses | 1,320,503 |
| | 1,276,695 |
| (a) | 97,320 |
| (d) | 2,694,518 |
|
| Real property taxes | 274,265 |
| | 803,821 |
| (a) | 22,850 |
| (d) | 1,100,936 |
|
| Property management fees | 120,949 |
| | 188,487 |
| (b) | 8,560 |
| (e) | 317,996 |
|
| Depreciation and amortization | 4,310,794 |
| | 4,214,450 |
| (a) | 351,818 |
| (d) | 8,877,062 |
|
| Acquisition related expenses | 439,944 |
| | — |
| | (439,505 | ) | (f) | 439 |
|
| Asset management and acquisition fees | 1,336,257 |
| | — |
| | (525,340 | ) | (g) | 810,917 |
|
| General and administrative expenses | 973,224 |
| | — |
| | — |
| | 973,224 |
|
| Total expenses | 8,775,936 |
| | 6,483,453 |
| | (484,297 | ) | | 14,775,092 |
|
| Income (loss) before other income (expenses) | (1,492,163 | ) | | (200,568 | ) | | 836,012 |
| | (856,719 | ) |
| Other income (expenses): | | | | | | | |
| Gain (loss) on derivative instruments | (4,261 | ) | | — |
| | — |
| | (4,261 | ) |
| Foreign currency gains (losses) | 49,026 |
| | — |
| | — |
| | 49,026 |
|
| Interest expense | (785,675 | ) | | (1,247,573 | ) | (c) | (59,131 | ) | (h) | (2,092,379 | ) |
| Interest income | 40,819 |
| | — |
| | — |
| | 40,819 |
|
| Net income (loss) | (2,192,254 | ) | | (1,448,141 | ) | | 776,881 |
| | (2,863,514 | ) |
| Net (income) loss attributable to noncontrolling interests | (6,078 | ) | | — |
| | — |
| | (6,078 | ) |
| Net income (loss) attributable to common stockholders | $ | (2,198,332 | ) | | $ | (1,448,141 | ) | | $ | 776,881 |
| | $ | (2,869,592 | ) |
| Basic and diluted income (loss) per common share | $ | (0.15 | ) | | — |
| | — |
| | $ | (0.20 | ) |
| Weighted average number of common shares outstanding | 14,276,944 |
| | — |
| | — |
| | 14,276,944 |
|
See notes to unaudited pro forma condensed consolidated statement of operations and notes to unaudited pro forma condensed consolidated financial statements.
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
For the Six Months Ended June 30, 2016
| |
| (a) | To record the pro forma effect of the Company’s acquisition of Cottonwood Corporate Center based on its historical results of operations assuming that the acquisition had occurred on January 1, 2015. Depreciation and amortization were calculated based on the fair values of the investment property using a useful life of 40 years and intangible lease assets and liabilities using a useful life of the remaining lease terms, which are preliminary and subject to change. |
| |
| (b) | To record the pro forma effect of the property management fee incurred by the Company (3.0% of gross revenues) assuming that the acquisition of Cottonwood Corporate Center had occurred on January 1, 2015. |
| |
| (c) | To record the pro forma effect of interest expense assuming that the Company had approximately $78.0 million in permanent financing in place as of January 1, 2015 and borrowings of $8.0 million under the credit facility with Hines related to the acquisition of Cottonwood Corporate Center. The weighted average for all of the borrowings to acquire Cottonwood Corporate Center was 2.91% at the date of acquisition. |
| |
| (d) | To record the pro forma effect of the Company’s acquisition of the Domain Apartments based on its historical results of operations assuming that the acquisition had occurred on January 1, 2015. Depreciation and amortization were calculated based on the fair values of the investment property using a useful life of 40 years and in place lease assets using a useful life of the remaining lease terms, which are preliminary and subject to change. |
| |
| (e) | To record the pro forma effect of the property management fee incurred by the Company (2.5% of gross revenues) assuming that the acquisition of the Domain Apartments had occurred on January 1, 2015. |
| |
| (f) | To eliminate the effect of non-recurring acquisition expenses recorded in relation to the Company’s acquisitions. |
| |
| (g) | To eliminate the effect of the non-recurring acquisition fees recorded in relation to the Company’s acquisitions. |
| |
| (h) | To record the pro forma effect of interest expense assuming that the Company had approximately $34.3 million in permanent financing in place as of January 1, 2015 with an interest rate of 2.03% at the date of the Domain apartments acquisition. |
HINES GLOBAL REIT II, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2015
|
| | | | | | | | | | | | | | | |
| | Year Ended December 31, 2015 | | Adjustments for Cottonwood Corporate Center acquisition | | Other Adjustments | | Pro Forma |
| Revenues: | | | | | | | |
| Rental revenue | $ | 9,278,221 |
| | $ | 12,397,974 |
| (a) | $ | 5,522,868 |
| (d) | $ | 27,199,063 |
|
| Other revenue | 132,454 |
| | 488,488 |
| (a) | 418,007 |
| (d) | 1,038,949 |
|
| Total revenue | 9,410,675 |
|
| 12,886,462 |
|
| 5,940,875 |
|
| 28,238,012 |
|
| Expenses: | | | | | | | |
| Property operating expenses | 1,870,552 |
| | 2,636,904 |
| (a) | 1,330,237 |
| (d) | 5,837,693 |
|
| Real property taxes | 297,598 |
| | 1,558,607 |
| (a) | 296,717 |
| (d) | 2,152,922 |
|
| Property management fees | 128,871 |
| | 386,594 |
| (b) | 212,668 |
| (e) | 728,133 |
|
| Depreciation and amortization | 4,206,600 |
| | 8,452,056 |
| (a) | 3,601,506 |
| (d) | 16,260,162 |
|
| Acquisition related expenses | 2,962,784 |
| | — |
| | (2,918,349 | ) | (f) | 44,435 |
|
| Advisory and other related party expenses | 2,639,645 |
| | — |
| | (2,327,715 | ) | (g) | 311,930 |
|
| General and administrative expenses | 1,548,979 |
| | — |
| | — |
| | 1,548,979 |
|
| Total expenses | 13,655,029 |
|
| 13,034,161 |
|
| 195,064 |
|
| 26,884,254 |
|
| Income (loss) before other income (expenses) | (4,244,354 | ) |
| (147,699 | ) |
| 5,745,811 |
|
| 1,353,758 |
|
| Other income (expenses): | | | | | | | |
| Gain (loss) on derivative instruments | (40,535 | ) | | — |
| | — |
| | (40,535 | ) |
| Foreign currency gains (losses) | (12,107 | ) | | — |
| | — |
| | (12,107 | ) |
| Interest expense | (1,344,779 | ) | | (2,502,000 | ) | (c) | (1,714,089 | ) | (h) | (5,560,868 | ) |
| Interest income | 4,209 |
| | — |
| | — |
| | 4,209 |
|
| Net income (loss) | (5,637,566 | ) |
| (2,649,699 | ) |
| 4,031,722 |
|
| (4,255,543 | ) |
| Net (income) loss attributable to noncontrolling interests | (12,139 | ) | | — |
| | — |
| | (12,139 | ) |
| Net income (loss) attributable to common stockholders | $ | (5,649,705 | ) |
| $ | (2,649,699 | ) |
| $ | 4,031,722 |
|
| $ | (4,267,682 | ) |
| Basic and diluted income (loss) per common share | $ | (1.06 | ) | | — |
| | — |
| | $ | (0.48 | ) |
| Weighted average number of common shares outstanding | 5,307,700 |
| | — |
| | 3,545,383 |
| (i) | 8,853,083 |
|
See notes to unaudited pro forma condensed consolidated statement of operations and notes to unaudited pro forma condensed consolidated financial statements.
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2015
| |
| (a) | To record the pro forma effect of the Company’s acquisition of Cottonwood Corporate Center based on its historical results of operations assuming that the acquisition had occurred on January 1, 2015. Depreciation and amortization were calculated based on the fair values of the investment property using a useful life of 40 years and intangible lease assets and liabilities using a useful life of the remaining lease terms, which are preliminary and subject to change. |
| |
| (b) | To record the pro forma effect of the property management fee incurred by the Company (3.0% of gross revenues) assuming that the acquisition of Cottonwood Corporate Center had occurred on January 1, 2015. |
| |
| (c) | To record the pro forma effect of interest expense assuming that the Company had approximately $78.0 million in permanent financing in place as of January 1, 2015 and borrowings of $8.0 million under the credit facility with Hines related to the acquisition of Cottonwood Corporate Center. The weighted average for all of the borrowings used to acquire Cottonwood Corporate Center was 2.91% at the date of acquisition. |
| |
| (d) | To record the pro forma effect of the Company’s acquisitions of Bishop’s Square and the Domain Apartments based on its historical results of operations assuming that the acquisitions had occurred on January 1, 2015. There were no adjustments made for real property taxes related to Bishop’s Square due to the fact that the tenants are directly responsible for property taxes in Ireland. Depreciation and amortization were calculated based on the fair values of the investment property using a useful life of 40 years and intangible lease assets and liabilities using a useful life of the remaining lease terms, which are preliminary and subject to change. |
| |
| (e) | To record the pro forma effect of the property management fee incurred by the Company (approximately €90,000 per year, or $109,274 per year using the exchange rate in effect on January 1, 2015, for Bishop’s Square and 2.5% of gross revenues for the Domain Apartments) assuming that the acquisitions of Bishop’s Square and the Domain Apartments had occurred on January 1, 2015. |
| |
| (f) | To eliminate the effect of non-recurring acquisition expenses recorded in relation to the Company's acquisitions. |
| |
| (g) | To eliminate the effect of the non-recurring acquisition fees recorded in relation to the Company's acquisitions. |
| |
| (h) | To record the pro forma effect of interest expense assuming that the Company had approximately €55.2 million ($67.0 million using the exchange rate in effect on January 1, 2015) in permanent financing in place as of January 1, 2015 and borrowings of $45.2 million under the credit facility with Hines related to the acquisition of Bishop’s Square and to record the pro forma effect of interest expense assuming that the Company had approximately $34.3 million in permanent financing in place as of January 1, 2015 related to the acquisition of the Domain Apartments. The weighted average interest rate for all of the borrowings used to acquire Bishop’s Square was 1.8% at the date of acquisition and the interest rate for the borrowing to acquire the Domain Apartments was 2.03% at the date of acquisition. |
| |
| (i) | To record the pro forma effect of the proceeds from the issuance of shares of the Company's common stock that were used to complete the acquisitions described in (a) and (d) above, less amounts received from financing described in (c) and (h) above. This adjustment assumes that the Company sold shares at a price of $10.00 per share less an aggregate of $1.08 per share of selling commissions, dealer manager fees and issuer costs. |
|
| | | |
| | Pro Forma for the Year Ended December 31, 2015 |
| Cash needed to acquire 2819 Loker Avenue East | $ | 1,150,000 |
|
| Cash needed to acquire Bishop’s Square | — |
|
| Cash needed to acquire the Domain Apartments | 23,819,500 |
|
| Cash needed to acquire Cottonwood Corporate Center | 54,000,000 |
|
| | 78,969,500 |
|
| | |
| Net cash received from each share of common stock issued | $ | 8.92 |
|
| | |
| Common stock needed to purchase properties listed above | 8,853,083 |
|
| Less: Historical weighted average common shares outstanding | 5,307,700 |
|
| Weighted average number of common shares outstanding | 3,545,383 |
|
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 2016 and
the Year Ended December 31, 2015
(1) Investment Properties Acquired After January 1, 2015
Bishop’s Square
On March 3, 2015, the Company, through a subsidiary of its operating partnership, acquired Bishop’s Square, a Class A office building located in Dublin, Ireland. Bishop’s Square consists of 153,569 square feet of rentable area and is 100% leased. The net purchase price for Bishop’s Square was $103.2 million, exclusive of transaction costs and working capital reserves.
Domain Apartments
On January 29, 2016, the Company, through a wholly-owned subsidiary of its operating partnership, acquired the Domain Apartments, a multi-family community located in Henderson, Nevada near Las Vegas. The Domain Apartments consist of 308 units with an average unit size of 1,075 square feet located on a 15.5 acre site and is 95% leased. The net purchase price for the Domain Apartments was $58.1 million, exclusive of transaction costs and working capital reserves.
Cottonwood Corporate Center
On July 5, 2016, the Company, through a wholly-owned subsidiary of its operating partnership, acquired Cottonwood Corporate Center, a four-building, Class-A office project located in Cottonwood Heights, Utah, a submarket of Salt Lake City, Utah. Cottonwood Corporate Center consists of 490,030 square feet of net rentable area that is 93% leased. The net purchase price for Cottonwood Corporate Center was $139.2 million, exclusive of transaction costs and working capital reserves.
Goodyear Crossing II
On August 18, 2016, the Company, through a wholly-owned subsidiary of its operating partnership, acquired Goodyear Crossing II, a Class-A industrial warehouse located in Goodyear, Arizona, a submarket of Phoenix, Arizona. Goodyear Crossing II consists of 820,384 square feet of net rentable area that is 100% leased to Amazon.com. The net purchase price for Goodyear Crossing II was $56.2 million, exclusive of transaction costs and working capital reserves.
The unaudited pro forma condensed consolidated balance sheet assumes that the acquisition of Cottonwood Corporate Center occurred on June 30, 2016 and the unaudited pro forma condensed consolidated statement of operations assumes that all of the acquisitions described above occurred on January 1, 2015. However, as described previously, there are no pro forma adjustments for the acquisition of Goodyear Crossing II included in the unaudited pro forma condensed consolidated financial statements since the financial statements relating to this recent acquisition are not currently required to be filed with the SEC.
