Exhibit 99.1
HIGHLANDS REIT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2019
(Amounts in thousands, except share and per share amounts)
The following unaudited pro forma condensed consolidated balance sheet is presented assuming the disposition of the Lincoln Center, which was completed on June 21, 2019. This unaudited pro forma condensed consolidated balance sheet should be read in conjunction with our unaudited pro forma condensed consolidated statements of operations appearing herein and our historical financial statements and notes thereto as filed in our quarterly report on Form 10-Q for the three months ended March 31, 2019. This unaudited pro forma condensed consolidated balance sheet is not necessarily indicative of what the actual financial position would have been had we completed this transaction on March 31, 2019, nor does it purport to represent our future financial position.
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| | Highlands REIT Historical (a) | | Adjustments for the disposition of Lincoln Center (b) | | Pro Forma Total |
| | | | | | |
| Assets | | | | | |
| Investment properties | | | | | |
| Land | $ | 75,999 |
| | $ | (11,000 | ) | | $ | 64,999 |
|
| Building and other improvements | 257,012 |
| | (59,547 | ) | | 197,465 |
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| Construction in progress | 41 |
| | (13 | ) | | 28 |
|
| Total | 333,052 |
| | (70,560 | ) | | 262,492 |
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| Less accumulated depreciation | (75,236 | ) | | 25,513 |
| | (49,723 | ) |
| Net investment properties | 257,816 |
| | (45,047 | ) | | 212,769 |
|
| Cash and cash equivalents | 99,990 |
| | 52,604 |
| (c) | 152,594 |
|
| Restricted cash and escrows | 3,695 |
| | — |
| | 3,695 |
|
| Accounts and rents receivable (net of allowance of $1,156) | 6,494 |
| | (1,959 | ) | | 4,535 |
|
| Intangible assets, net | 467 |
| | (11 | ) | | 456 |
|
| Deferred costs and other assets | 4,212 |
| | (415 | ) | | 3,797 |
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| Total assets | $ | 372,674 |
| | $ | 5,172 |
| | $ | 377,846 |
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| Liabilities | | | | | |
| Debt, net | $ | 74,871 |
| | $ | — |
| | $ | 74,871 |
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| Accounts payable and accrued expenses | 7,883 |
| | (846 | ) | | 7,037 |
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| Intangible liabilities, net | 2,890 |
| | (1,951 | ) | | 939 |
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| Other liabilities | 2,020 |
| | 9,869 |
| (d) | 11,889 |
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| Total liabilities | 87,664 |
| | $ | 7,072 |
| | $ | 94,736 |
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Stockholders’ Equity | | | | | |
| Common stock, $0.01 par value, 1,000,000,000 shares authorized, 875,589,393 shares issued and outstanding as of March 31, 2019 | 8,756 |
| | — |
| | 8,756 |
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| Additional paid in capital | 1,408,828 |
| | — |
| | 1,408,828 |
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| Accumulated distributions in excess of net income | (1,132,574 | ) | | (1,900 | ) | (d) | (1,134,474 | ) |
| Total stockholders’ equity | 285,010 |
| | (1,900 | ) | | 283,110 |
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| Total liabilities and stockholders' equity | $ | 372,674 |
| | $ | 5,172 |
| | $ | 377,846 |
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F-1
HIGHLANDS REIT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2019
(Amounts in thousands, except share and per share amounts)
The following unaudited pro forma condensed consolidated statement of operations for the three months ended March 31, 2019 is presented assuming the disposition of Lincoln Center had occurred as of January 1, 2018. This unaudited pro forma condensed consolidated statement of operations should be read in conjunction with our unaudited pro forma condensed consolidated balance sheet appearing herein and our historical financial statements and notes thereto as filed in our quarterly report on Form 10-Q for the three months ended March 31, 2019. This unaudited pro forma condensed consolidated statement of operations is not necessarily indicative of what the actual results of operations would have been had we completed this transaction on January 1, 2018, nor does it purport to represent our future operations.
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| | Highlands REIT Historical (aa) | | Adjustments for the disposition of Lincoln Center (bb) | | Pro Forma Total |
| | | | | | |
| Revenues | | | | | |
| Rental income | $ | 10,141 |
| | $ | (2,238 | ) | | $ | 7,903 |
|
| Other property income | 116 |
| | 5 |
| | 121 |
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| Total revenues | $ | 10,257 |
| | $ | (2,233 | ) | | $ | 8,024 |
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| Expenses | | | | | — |
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| Property operating expenses | 1,904 |
| | (726 | ) | | 1,178 |
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| Real estate taxes | 1,306 |
| | (295 | ) | | 1,011 |
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| Depreciation and amortization | 2,730 |
| | (586 | ) | | 2,144 |
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| General and administrative expenses | 4,383 |
| | — |
| | 4,383 |
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| Total expenses | $ | 10,323 |
| | $ | (1,607 | ) | | $ | 8,716 |
|
| Loss from operations | (66 | ) | | (626 | ) | | (692 | ) |
| Interest income | 369 |
| | — |
| | 369 |
|
| Interest expense | (758 | ) | | — |
| | (758 | ) |
| Net loss | $ | (455 | ) | | $ | (626 | ) | | $ | (1,081 | ) |
| Net loss per common share, basic and diluted | $ | 0.00 |
| | $ | 0.00 |
| (cc) | $ | 0.00 |
|
| Weighted average number of common shares outstanding, basic and diluted | 873,379,003 |
| | | | 873,379,003 |
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F-2
HIGHLANDS REIT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2018
(Amounts in thousands, except share and per share amounts)
The following unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2018 is presented assuming the disposition of Lincoln Center had occurred as of January 1, 2018. This unaudited pro forma condensed consolidated statement of operations should be read in conjunction with our unaudited pro forma condensed consolidated balance sheet appearing herein and our historical financial statements and notes thereto as filed in our annual report on Form 10-K for the year ended December 31, 2018. This unaudited pro forma condensed consolidated statement of operations is not necessarily indicative of what the actual results of operations would have been had we completed this transaction on January 1, 2018, nor does it purport to represent our future operations.
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| | Highlands REIT Historical (aa) | | Adjustments for the disposition of Lincoln Center (bb) | | Pro Forma Total |
| | | | | | |
| Revenues | | | | | |
| Rental income | $ | 34,966 |
| | $ | (5,407 | ) | | $ | 29,559 |
|
| Tenant recovery income | 7,795 |
| | (3,474 | ) | | 4,321 |
|
| Other property income | 748 |
| | (30 | ) | | 718 |
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| Total revenues | $ | 43,509 |
| | $ | (8,911 | ) | | $ | 34,598 |
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| Expenses | | | | | — |
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| Property operating expenses | 8,892 |
| | (3,097 | ) | | 5,795 |
|
| Real estate taxes | 5,028 |
| | (1,150 | ) | | 3,878 |
|
| Depreciation and amortization | 12,178 |
| | (2,294 | ) | | 9,884 |
|
| General and administrative expenses | 12,603 |
| | — |
| | 12,603 |
|
| Provision for asset impairment | 4,667 |
| | — |
| | 4,667 |
|
| Total expenses | $ | 43,368 |
| | $ | (6,541 | ) | | $ | 36,827 |
|
| Gain on sale of investment properties | 27,863 |
| | — |
| | 27,863 |
|
| Income from operations | $ | 28,004 |
| | $ | (2,370 | ) | | $ | 25,634 |
|
| Interest income | 497 |
| | — |
| | 497 |
|
| Loss on extinguishment of debt | (1,199 | ) | | — |
| | (1,199 | ) |
| Other income | 30 |
| | — |
| | 30 |
|
| Interest expense | (2,559 | ) | | — |
| | (2,559 | ) |
| Income before income taxes | $ | 24,773 |
| | $ | (2,370 | ) | | $ | 22,403 |
|
| Income tax benefit | 155 |
| | — |
| | 155 |
|
| Net income | $ | 24,928 |
| | $ | (2,370 | ) | | $ | 22,558 |
|
| Net income per common share, basic and diluted | $ | 0.03 |
| | $ | 0.00 |
| (cc) | $ | 0.03 |
|
| Weighted average number of common shares outstanding, basic and diluted | 871,177,934 |
| | | | 871,177,934 |
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F-3
HIGHLANDS REIT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Balance sheet adjustments
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| (a) | Represents the historical condensed consolidated balance sheet as of March 31, 2019. |
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| (b) | Reflects the elimination of the assets and liabilities of the Property as of March 31, 2019. |
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| (c) | Reflects receipt of cash consideration at the closing of the disposition. |
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| (d) | Reflects the change in net assets arising from the disposition of the property, net of any estimated gain on disposition. This change has not been reflected in the pro forma condensed consolidated statements of operations because it is considered to be non-recurring in nature. No adjustment has been made to the sale proceeds to give effect to any potential post-closing adjustments under the terms of the agreement. |
2. Income statement adjustments
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| (aa) | Reflects the Company's historical condensed consolidated statement of operations for the three-month period ended March 31, 2019 and for the year ended December 31, 2018. |
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| (bb) | The pro forma adjustments reflect the disposition of the Property for the three-month period ended March 31, 2019 and for the year ended December 31, 2018 as if the Property was disposed of on January 1, 2018. |
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| (cc) | Pro forma income per share attributable to common shareholders basic and diluted is calculated by dividing pro forma condensed consolidated net income allocable to common stockholders by the number of weighted average shares of common stock outstanding for the three-month period ended March 31, 2019 and for the year ended December 31, 2018. |
F-4
