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8-K - HINES REIT 09 30 09 PRO FORMAS - HINES REAL ESTATE INVESTMENT TRUST INC | hr093009_proformas.htm |
HINES
REAL ESTATE INVESTMENT TRUST, INC.
UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Hines
Real Estate Investment Trust, Inc. (“Hines REIT” and, together with Hines REIT
Properties, L.P. (the “Operating Partnership”), the “Company”) made the
following acquisitions since January 1, 2008:
Property Name
|
Date of Acquisition
|
Purchase Price
|
2555
Grand
|
February
29, 2008
|
$155.8
million
|
Raytheon/DirecTV
Building
|
March
13, 2008
|
$120.0
million
|
Williams
Tower
|
May
1, 2008
|
$271.5
million
|
4050/4055
Corporate Drive
|
May
22, 2008
|
$42.8
million
|
Grocery-Anchored
Portfolio
|
Nov.
2008 – Mar. 2009
|
$271.4
million
|
Distribution
Parks – Araucaria, Elouveira & Vinhedo
|
December
15, 2008
|
$114.9
million
|
345
Inverness Drive
|
December
30, 2008
|
$25.7
million
|
Arapahoe
Business Park
|
December
30, 2008
|
$40.8
million
|
The
Company owned a 28.7% non-managing general partner interest in the Hines
US Core Office Fund LP (the “Core Fund”) as of September 30, 2009, which it
accounts for using the equity method of accounting. During 2008, the Core Fund
acquired an interest in One North Wacker, a 51-story office building in Chicago,
Illinois.
On
November 13, 2008, the Company acquired a 70% interest in a portfolio of 12
supermarket-anchored shopping centers, the “Grocery-Anchored Portfolio”, through
a joint venture with Weingarten Realty Investors. The joint venture completed
its acquisition of eight of the properties on November 13, 2008 and completed
its acquisition of the remaining four properties during the first quarter
of 2009. The Company accounts for its investment in the Grocery-Anchored
Portfolio using the equity method of accounting.
The
unaudited pro forma consolidated balance sheet is not presented as all
acquisitions occurred prior to September 30, 2009 and no adjustments were made
to the balance sheet. The unaudited pro forma consolidated statements of
operations assume all of the Company’s investments and acquisitions listed above
occurred on January 1, 2008.
In
management’s opinion, all adjustments necessary to reflect the effects of these
transactions have been made. The unaudited pro forma consolidated statements of
operations are not necessarily indicative of what actual results of operations
would have been had the Company made these acquisitions on January 1, 2008, nor
does it purport to represent the results of operations for future
periods.
F-1
HINES
REAL ESTATE INVESTMENT TRUST, INC.
UNAUDITED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For
the Nine Months Ended September 30, 2009
|
Nine
Months Ended
September 30, 2009
|
Adjustment
for Acquisitions
|
Pro Forma
|
|||||||||
Revenues:
|
||||||||||||
Rental
revenue
|
$ | 254,948 | $ | — | $ | 254,948 | ||||||
Other
revenue
|
20,811 | — | 20,811 | |||||||||
Total
revenues
|
275,759 | — | 275,759 | |||||||||
Expenses:
|
||||||||||||
Property
operating expenses
|
69,183 | — | 69,183 | |||||||||
Real
property taxes
|
35,864 | — | 35,864 | |||||||||
Property
management fees
|
6,280 | — | 6,280 | |||||||||
Depreciation
and amortization
|
94,647 | — | 94,647 | |||||||||
Asset
management and acquisition fees
|
20,466 | — | 20,466 | |||||||||
Organizational
and offering expenses
|
— | — | — | |||||||||
Other
losses
|
3,425 | — | 3,425 | |||||||||
General
and administrative expenses
|
4,330 | — | 4,330 | |||||||||
Total
expenses
|
234,195 | — | 234,195 | |||||||||
Income
before other income (expenses), provision for income taxes and equity in
losses of unconsolidated entities, net
|
41,564 | — | 41,564 | |||||||||
Other income
(expenses):
|
||||||||||||
Gain
on derivative instruments
|
35,090 | — | 35,090 | |||||||||
Interest
expense
|
(68,475 | ) | — | (68,475 | ) | |||||||
Interest
income
|
429 | — | 429 | |||||||||
Income
before provision for income taxes and equity in losses of unconsolidated
entities, net
|
8,608 | — | 8,608 | |||||||||
Provision
for income taxes
|
(569 | ) | — | (569 | ) | |||||||
Equity
in losses of unconsolidated entities, net
|
(6,474 | ) | 41 | (a) | (6,433 | ) | ||||||
Net
income
|
$ | 1,565 | $ | 41 | $ | 1,606 | ||||||
Less: Net
income attributable to noncontrolling interests
|
(2,975 | ) | — | (2,975 | ) | |||||||
Net
income attributable to common shareholders
|
$ | (1,410 | ) | $ | 41 | $ | (1,369 | ) | ||||
Basic
and diluted loss per common share:
|
||||||||||||
Income
per common share
|
$ | (0.01 | ) | $ | — | $ | (0.01 | ) | ||||
Weighted
average number common shares outstanding
|
205,325 | — | 205,325 |
See notes
to unaudited pro forma consolidated statement of operations and
notes to
unaudited pro forma consolidated financial statements.
F-2
Note
to Unaudited Pro Forma Consolidated Statement of Operations for the
Nine
Months Ended September 30, 2009
(a)
|
To
record the pro forma effect on the Company’s equity in earnings of the
Grocery-Anchored Portfolio assuming the Company’s investments in the joint
venture and all of the acquisitions consummated by the joint venture were
completed by January 1, 2008.
|
F-3
HINES
REAL ESTATE INVESTMENT TRUST, INC.
UNAUDITED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For
the Year Ended December 31, 2008
|
Year
Ended
December 31, 2008
|
Adjustment
for Acquisitions
|
Pro Forma
|
|||||||||
Revenues:
|
||||||||||||
Rental
revenue
|
$ | 306,948 | $ | 50,959 | (a) | $ | 357,907 | |||||
Other
revenue
|
26,750 | 801 | (a) | 27,551 | ||||||||
Total
revenues
|
333,698 | 51,760 | 385,458 | |||||||||
Expenses:
|
||||||||||||
Property
operating expenses
|
88,418 | 8,354 | (a) | 96,772 | ||||||||
Real
property taxes
|
44,378 | 3,622 | (a) | 48,000 | ||||||||
Property
management fees
|
7,072 | 1,181 | (a) | 8,253 | ||||||||
Depreciation
and amortization
|
122,798 | 19,944 | (a) | 142,742 | ||||||||
Asset
management and acquisition fees
|
42,012 | 1,392 | (b) | 43,404 | ||||||||
Organizational
and offering expenses
|
3,741 | — | 3,741 | |||||||||
General
and administrative expenses
|
5,991 | — | 5,991 | |||||||||
Total
expenses
|
314,410 | 34,493 | 348,903 | |||||||||
Income
before other income (expenses), provision for income taxes and equity in
losses of unconsolidated entities, net
|
19,288 | 17,267 | 36,555 | |||||||||
Other income
(expenses):
|
||||||||||||
Loss
on derivative instruments
|
(85,880 | ) | — | (85,880 | ) | |||||||
Other
losses
|
(256 | ) | — | (256 | ) | |||||||
Interest
expense
|
(83,111 | ) | (6,009 | )(c) | (89,120 | ) | ||||||
Interest
income
|
3,544 | 43 | 3,587 | |||||||||
Income
(loss) before provision for income taxes and equity in losses of
unconsolidated entities, net
|
(146,415 | ) | 11,301 | (135,114 | ) | |||||||
Provision
for income taxes
|
(2,512 | ) | (109 | )(d) | (2,621 | ) | ||||||
Equity
in losses of unconsolidated entities, net
|
(13,416 | ) | (154 | )(e) | (13,570 | ) | ||||||
Net
loss
|
$ | (162,343 | ) | $ | 11,038 | $ | (151,305 | ) | ||||
Less: Net
income attributable to common shareholders
|
(3,065 | ) | — | (3,065 | ) | |||||||
Net
loss attributable to common shareholders
|
$ | (165,408 | ) | $ | 11,038 | $ | (154,370 | ) | ||||
Basic
and diluted loss per common share:
|
||||||||||||
Loss
per common share
|
$ | (0.90 | ) | $ | 1.02 | $ | (0.79 | ) | ||||
Weighted
average number common shares outstanding
|
183,776 | 10,795 | (f) | 194,571 |
See notes
to unaudited pro forma consolidated statement of operations and
notes to
unaudited pro forma consolidated financial statements.
F-4
Notes
to Unaudited Pro Forma Consolidated Statement of Operations for the
Year
Ended December 31, 2008
(a)
|
To
record the pro forma effect of the Company’s acquisitions of 2555 Grand,
the Raytheon/DirecTV Buildings, Williams Tower, 4050/4055 Corporate Drive,
Distribution Parks Araucaria, Elouveira, Vinhedo, 345 Inverness Drive and
Arapahoe Business Parks assuming that the acquisitions had occurred on
January 1, 2008.
|
(b)
|
To
record the pro forma effect of the 3% acquisition fees (of which 2.5% is
payable in cash and the remaining 0.5% of which is reflected in the
participation interest) related to its acquisition of an interest in the
remaining four properties of the Grocery-Anchored
Portfolio
|
(c)
|
To
record the pro forma effect of the Company’s interest expense assuming
that the Company had permanent financing in place as of January 1,
2008 related to its acquisitions of 2555 Grand, the Raytheon/DirecTV
Buildings, Williams Tower, 345 Inverness Drive and Arapahoe Business Park.
The financing for each acquisition is described as
follows:
|
|
•
|
$86.0 million
mortgage with the NYSTRS at a rate of 5.375%, for the acquisition of 2555
Grand;
|
|
•
|
$54.2 million
mortgage with IXIS Real Estate Capital Inc. at a rate of 5.675%, in
connection with the acquisition of the Raytheon/DirecTV
Buildings;
|
|
•
|
$165.0 million
mortgage with NYSTRS at a rate of 5.5%, in connection with the acquisition
of the Williams Tower and
|
|
•
|
Entered
into three mortgage loans totaling $35.8 million with Artesia
Mortgage Capital Corporation at rates of 5.33%, 5.53%, and 5.85% secured
by interests in 345 Inverness Drive and Arapahoe Business
Parks.
|
|
Debt
was not assumed for the following properties: 4050/4055 Corporate Drive,
Distribution Parks Araucaria, Elouveira, Vinhedo and the Grocery-Anchored
Portfolio.
|
(d)
|
To
record the pro forma effect of Texas Margin taxes incurred by Williams
Tower and 4050/4055 Corporate Drive. This adjustment assumes these
acquisitions had occurred on January 1, 2008.
|
(e)
|
To
record the pro forma effect on the Company’s equity in losses of: (i) the
Grocery-Anchored Portfolio assuming the Company’s investments in the joint
venture and all of the acquisitions consummated by the joint venture were
completed by January 1, 2008 and (ii) the Core Fund, assuming One
North Wacker was acquired on January 1, 2008.
|
(f)
|
To
record the pro forma effect of the proceeds required from the issuance of
shares of the Company’s common stock to complete the acquisitions
described in (a) and (b) above, less amounts received from the
financing activities described in
(c) above.
|
F-5
HINES
REAL ESTATE INVESTMENT TRUST, INC.
NOTE TO
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended September 30, 2009
and
the Year Ended December 31, 2008
(1) Investment
Properties Acquired After January 1, 2008
On
February 29, 2008, the Company acquired 2555 Grand, a 24-story office building
that contains 595,607 square feet of rentable area, located in Kansas City,
Missouri. The building was constructed in 2003.
On March
13, 2008, the Company acquired the Raytheon/DirecTV Buildings, a complex
consisting of two buildings located in El Segundo, California that contains
550,579 square feet of rentable area. The building was constructed in
1976.
On March
31, 2008, the Core Fund purchased One North Wacker, a 51-story office building
located in Chicago, Illinois. The building was constructed in 2001. The contract
purchase price of One North Wacker was $540.0 million, excluding transaction
costs, financing fees and working capital reserves. The Core Fund currently
holds approximately an 80.69% interest in One North Wacker. Affiliates of Hines
and third-party investors hold, indirectly, the remaining 0.37% and 18.94%,
respectively.
On May 1,
2008, the Company acquired Williams Tower, a 64-story office building located in
the Galleria/West Loop submarket of Houston, Texas that contains approximately
1.5 million square feet of rentable area. The building was constructed in
1982.
On May
22, 2008, the Company acquired 4050/4055 Corporate Drive, a two building
industrial complex that contains 643,429 square feet of rentable area, located
in the DFW Trade Center submarket of Dallas, Texas.
On
November 13, 2008, the Company acquired a 70% interest in a portfolio of 12
supermarket-anchored shopping centers located throughout the U.S., the
“Grocery-Anchored Portfolio”, through a joint venture with Weingarten Realty
Investors. The portfolio consists of 12 buildings that were constructed in
various years from 1956 to 2004 that contain 1.5 million square feet of
rentable area. The Company completed its acquisition of eight of the properties
on November 13, 2008. The Company completed the acquisition of the remaining
four properties during the first quarter of 2009. The Company accounts
for its investment in the Grocery-Anchored Portfolio using the equity method of
accounting.
On
December 15, 2008, the Company acquired Distribution Parks Araucaria, Elouveira
and Vinhedo, three industrial properties located in Brazil. The properties are
located in Sao Paolo, Brazil and Curitiba, Brazil and contain 1,144,268 square
feet of rentable area. The buildings were constructed in various years from 2000
to 2008.
On
December 30, 2008, the Company acquired 345 Inverness Drive and Arapahoe
Business Parks, two office/flex buildings that contain 484,737 square feet of
rentable area, located in Denver, Colorado. The buildings were constructed
between 1998 and 2001.
The
unaudited pro forma consolidated statements of operations assume that all
acquisitions described above occurred on January 1, 2008.
F-6