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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): April 27, 2012

 

 

PHILLIPS EDISON – ARC

SHOPPING CENTER REIT INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Maryland   006-54691   27-1106076

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

11501 Northlake Drive

Cincinnati, Ohio 45249

(Address of principal executive offices)

(Zip Code)

(513) 554-1110

(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))

 

 

 


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Pursuant to the requirements of the Securities Exchange Act of 1934, Phillips Edison — ARC Shopping Center REIT Inc. (the “Company”) hereby amends the following Current Report on Form 8-K filed on April 27, 2012 to provide the required financial information relating to the Company’s acquisition of The Village at Glynn Place, located in Brunswick, Georgia.

After reasonable inquiry, the Company is not aware of any material factors relating to The Village at Glynn Place that would cause the reported revenues and certain operating expenses relating to it not to be necessarily indicative of future operating results.

 

Item 9.01 Financial Statements and Exhibits.

 

         Page  

(a)

 

Financial Statements of Businesses Acquired.

  
 

Independent Auditors’ Report

     3   
 

Statements of Revenues and Certain Operating Expenses for the three months ended March  31, 2012 (unaudited) and for the year ended December 31, 2011

     4   
 

Notes to the Statements of Revenues and Certain Operating Expenses for the three months ended March  31, 2012 (unaudited) and for the year ended December 31, 2011

     5   

(b)

 

Pro Forma Financial Information.

  
 

Unaudited Pro Forma Condensed Consolidated Financial Information

     7   
 

Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2012

     8   
 

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the three months ended March  31, 2012

     9   
 

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December  31, 2011

     10   
 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

     11   

 

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Independent Auditors’ Report

To the Board of Directors and Stockholders of

Phillips Edison – ARC Shopping Center REIT Inc.

Cincinnati, Ohio

We have audited the accompanying statement of revenues and certain operating expenses (the “Historical Summary”), of The Village at Glynn Place, a shopping center located in Brunswick, Georgia (the “Property”), for the year ended December 31, 2011. This Historical Summary is the responsibility of the Property’s management. 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 of material misstatement. An audit includes consideration of internal control over financial reporting as it relates to the Historical Summary as a basis for designing 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 over financial reporting as it relates to the Historical Summary. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.

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 Phillips Edison — ARC Shopping Center REIT Inc.) as discussed in Note 1 to the Historical Summary and is not intended to be a complete presentation of the Property’s revenues and expenses.

In our opinion, the Historical Summary presents fairly, in all material respects, the revenues and certain operating expenses discussed in Note 1 to the Historical Summary of the Property for the year ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio

July 10, 2012

 

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The Village at Glynn Place

Statements of Revenues and Certain Operating Expenses

For the Three Months Ended March 31, 2012 (unaudited)

and for the Year Ended December 31, 2011

(in thousands)

 

     Three Months
Ended
March 31,
2012
(Unaudited)
    

Year Ended

December 31,
2011

 

Revenues

     

Rentals

   $ 253       $ 1,011   

Recoveries

     48         176   
  

 

 

    

 

 

 

Total revenues

     301         1,187   

Certain Operating Expenses

     

Property operating

     58         213   

Real estate taxes

     19         75   

General and administrative expenses

     —           2   
  

 

 

    

 

 

 

Total certain operating expenses

     77         290   
  

 

 

    

 

 

 

Revenues in excess of certain operating expenses

   $ 224       $ 897   
  

 

 

    

 

 

 

See accompanying Notes to the Statements of Revenues and Certain Operating Expenses.

 

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The Village at Glynn Place

Notes to the Statements of Revenues and Certain Operating Expenses

For the Three Months Ended March 31, 2012 (unaudited) and Year Ended December 31, 2011

 

1. ORGANIZATION AND BASIS OF PRESENTATION

On April 27, 2012, Phillips Edison — ARC Shopping Center REIT Inc. (the “Company”), through a joint venture formed between a group of institutional international investors advised by CBRE Investors Global Multi Manager (the “CBRE Global Investors”) and the Company’s wholly-owned subsidiary, purchased The Village at Glynn Place, a shopping center containing 111,924 rentable square feet (unaudited) located in Brunswick, Georgia, for approximately $11.35 million, exclusive of closing costs. The acquisition and related expenses were funded with proceeds from draws on the Company’s Snow View Credit Facility and St. Charles Credit Facility.

The statements of revenues and certain operating expenses (the “Historical Summaries”) of The Village at Glynn Place have been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included in certain filings with the SEC. The Historical Summaries are not intended to be a complete presentation of the revenues and operating expenses of The Village at Glynn Place. The statements of revenues and certain operating expenses exclude items that may not be comparable to the future operations of The Village at Glynn Place, such as depreciation, amortization, and interest on debt not assumed.

The statement of revenues and certain operating expenses and notes thereto for the three months ended March 31, 2012, included in this report, are unaudited. In the opinion of the Company’s management, all adjustments necessary for a fair presentation of such statement of revenues and certain operating expenses have been included. Such adjustments consist of normal recurring items. Interim results are not necessarily indicative of results for a full year.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Reporting and 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 of the reported amounts of revenues and certain operating expenses during the reporting period. Actual results may differ from those estimates.

Revenue Recognition — The Village at Glynn Place leases space to retail tenants under leases with varying terms, which are accounted for as operating leases. The property recognizes minimum rents on the straight-line method over the terms of the leases regardless of when payments are due. The leases also typically provide for tenant recoveries of common area maintenance (CAM) costs, real estate taxes, and other operating expenses. These recoveries are recognized as revenue in the period the applicable costs are incurred. Most tenants pay estimated monthly CAM amounts and are billed the shortfalls or credited the overpayments annually, with the exclusion of tenants with gross leases.

Straight-line rental revenue was higher than the current amount required to be paid by tenants by $5,000 and $35,000 for the three months ended March 31, 2012 and the year ended December 31, 2011, respectively.

Repairs and Maintenance — Expenditures for normal, recurring, or periodic maintenance are charged to expense when incurred and are included in Property Operating expenses. Renovations which improve or extend the life of the asset are capitalized.

Subsequent Events — The Company has evaluated subsequent events through July 10, 2012, the date the Historical Summaries were available to be issued, to determine if either recognition or disclosure of significant events or transactions is required. The Company has determined that no such recognition or disclosure is required.

 

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3. LEASES

Minimum future rentals of The Village at Glynn Place to be received under noncancelable operating leases in effect as of December 31, 2011, assuming no new or renegotiated leases or option extensions on lease agreements are as follows:

 

Years Ending December 31       

2012

   $ 983,000  

2013

     959,000  

2014

     911,000  

2015

     894,000  

2016

     847,000  

Thereafter

     3,750,000  
  

 

 

 

Total

   $ 8,344,000  
  

 

 

 

The minimum future rental income represents the base rent required to be paid by the tenants under the terms of their leases, exclusive of operating expense recoveries.

 

4. CONCENTRATIONS

The percentages of rental income from tenants who individually represent more than 10% of the rental income of The Village at Glynn Place for the year ended December 31, 2011 are as follows:

 

Tenant    Percent of Rental Revenue  

Publix

     47

Goodwill

     21

* * * * * *

 

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Phillips Edison – ARC Shopping Center REIT Inc.

Unaudited Pro Forma Condensed Consolidated Financial Information

On April 27, 2012, the Company, through a consolidated joint venture formed between a group of institutional international investors advised by CBRE Investors Global Multi Manager (the “CBRE Global Investors”) and the Company's wholly-owned subsidiary (the “Joint Venture”), purchased a shopping center containing 111,924 rentable square feet located on approximately 14.7 acres of land in Brunswick, Georgia (“The Village at Glynn Place”) for approximately $11.35 million, exclusive of closing costs. The Company holds an approximate 54% interest in the Joint Venture and the CBRE Global Investors hold the remaining approximate 46% interest. The acquisition and related expenses were funded with proceeds from existing mortgage loan draws. The Village at Glynn Place was purchased from CRP II — Glynn Place, LLC, a Delaware limited liability company that is not affiliated with the Company, its advisor or its sub-advisor.

In the Company’s opinion, all material adjustments necessary to reflect the effects of the above transactions have been made. Although we do not anticipate any changes in the The Village at Glynn Place fair value measurements, the measurements may be subject to change within 12 months of the business combination date if new facts or circumstances that were previously unknown but existed as of the business combination date are brought to the Company’s attention.

The following unaudited pro forma condensed consolidated balance sheet as of March 31, 2012 is presented as if the Company acquired The Village at Glynn Place on March 31, 2012. The following unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2012 and for the year ended December 31, 2011 are presented as if the Company had acquired The Village at Glynn Place on January 1, 2011. This unaudited pro forma condensed consolidated financial information should be read in conjunction with the historical financial statements and notes thereto as filed in the Company’s quarterly report on Form 10-Q for the three months ended March 31, 2012 and are not necessarily indicative of what the actual financial position or results of operations would have been had the Company completed the transactions as of the beginning of the periods presented, nor is it necessarily indicative of future results.

 

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Phillips Edison – ARC Shopping Center REIT Inc.

Pro Forma Condensed Consolidated Balance Sheet (Unaudited)

(in thousands)

 

    

March 31,
2012

as Reported

(a)

   

Pro Forma

Adjustments

   

Pro Forma

March 31,

2012

 

ASSETS

      

Investments in real estate, net

   $ 79,547      $ 11,297 (b)    $ 90,844   

Cash and cash equivalents

     6,339        —          6,339   

Restricted cash

     11        —          11   

Accounts receivable, net

     719        —          719   

Prepaid expenses and other, net

     8,822        681 (b)      9,503   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 95,438      $ 11,978      $ 107,416   
  

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

      

Liabilities:

      

Mortgage loans payable

   $ 40,463      $ 11,530 (c)    $ 51,993   

Acquired below market lease intangibles, net

     1,240        560 (b)      1,800   

Accounts payable

     251        —          251   

Accrued expenses and other liabilities

     8,894        —          8,894   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     50,848        12,090        62,938   

Commitments and contingencies

     —          —          —     

Equity:

      

Preferred stock

     —          —          —     

Common stock

     38        —          38   

Additional paid-in capital

     28,480        —          28,480   

Accumulated deficit

     (4,891     (89 )(b)      (4,980
  

 

 

   

 

 

   

 

 

 

Total shareholders' equity

     23,627        (89     23,538   

Noncontrolling interests

     20,963        (23 )(b)      20,940   
  

 

 

   

 

 

   

 

 

 

Total equity

     44,590        (112     44,478   
  

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 95,438      $ 11,978      $ 107,416   
  

 

 

   

 

 

   

 

 

 

See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information.

 

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Phillips Edison – ARC Shopping Center REIT Inc.

Pro Forma Condensed Consolidated Statement of Operations (Unaudited)

For the Three Months Ended March 31, 2012

(in thousands, except per share amounts)

 

    

Three Months
Ended
March 31,
2012

as Reported

(a)

   

Statement of

Revenues and

Certain
Operating
Expenses

(b)

    

Other Pro
Forma
Adjustments

(c)

    Pro Forma
Year Ended
March 31,
2012
 

Revenues:

         

Rental income

   $ 1,755      $ 253       $ 197      $ 2,205   

Tenant recovery income

     443        48         31        522   

Other property income

     17        —           —          17   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenues

     2,215        301         228        2,744   
  

 

 

   

 

 

    

 

 

   

 

 

 

Expenses:

         

Property operating

     379        58         36        473   

Real estate taxes

     242        19         15        276   

General and administrative

     324        —           54        378   

Acquisition-related expenses

     278        —           —          278   

Depreciation and amortization

     1,044        —           255        1,299   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total expenses

     2,267        77         360        2,704   
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (loss)

     (52     224         (132     40   

Interest expense

     (391     —           (90     (481
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

     (443     224         (222     (441

Net loss (income) attributable to noncontrolling interests

     185        —           (1     184   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to Company shareholders

   $ (258   $ 224       $ (223   $ (257
  

 

 

   

 

 

    

 

 

   

 

 

 

Per share information – basic and diluted:

         

Basic and diluted loss per share

   $ (0.08        $ (0.08
  

 

 

        

 

 

 

Weighted-average basic and diluted common shares outstanding

     3,124,334             3,165,242 (i) 
  

 

 

        

 

 

 

See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information.

 

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Phillips Edison – ARC Shopping Center REIT Inc.

Pro Forma Condensed Consolidated Statement of Operations (Unaudited)

For the Year Ended December 31, 2011

(in thousands, except per share amounts)

 

    

Year Ended
December 31,
2011

as Reported

(a)

   

Statement of

Revenues and

Certain
Operating

Expenses

(b)

    

Other Pro
Forma
Adjustments

(c)

   

Pro Forma
Year Ended
December 31,

2011

 

Revenues:

         

Rental income

   $ 2,762      $ 1,011       $ 5,339      $ 9,112   

Tenant recovery income

     750        176         1,331        2,257   

Other property income

     17        —           (2     15   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenues

     3,529        1,187         6,668        11,384   
  

 

 

   

 

 

    

 

 

   

 

 

 

Expenses:

         

Property operating

     631        213         1,210        2,054   

Real estate taxes

     507        75         652        1,234   

General and administrative

     845        2         803        1,650   

Acquisition-related expenses

     1,751        —           250        2,001   

Depreciation and amortization

     1,500        —           3,658        5,158   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total expenses

     5,234        290         6,573        12,097   
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (loss)

     (1,705     897         95        (713

Interest expense

     (811     —           (1,918     (2,729
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

     (2,516     897         (1,823     (3,442

Net loss attributable to noncontrolling interests

     152        —           329        481   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to Company shareholders

   $ (2,364   $ 897       $ (1,494   $ (2,961
  

 

 

   

 

 

    

 

 

   

 

 

 

Per share information – basic and diluted:

         

Basic and diluted loss per share

   $ (1.57        $ (1.03
  

 

 

        

 

 

 

Weighted-average basic and diluted common shares outstanding

     1,503,477             2,888,041 (k) 
  

 

 

        

 

 

 

See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information.

 

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Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2012

 

a. Reflects the Company’s historical balance sheet as of March 31, 2012.

 

b. Reflects the acquisition of The Village at Glynn Place for $11,350,000. Acquisition-related costs of $112,000 were expensed as incurred. The Company used proceeds from existing mortgage loan draws to fund the acquisition. The Company has allocated its purchase price to the assets and liabilities below (amounts in thousands):

 

Description   

The
Village at

Glynn Place

 

Land

   $ 3,671   

Buildings

     4,653   

Land improvements

     1,531   

Tenant improvements

     1,442   
  

 

 

 

Total investment in real estate

     11,297   

Above-market lease values

     31   

In-place lease values

     582   

Below-market lease values

     (560
  

 

 

 

Total purchase price

   $ 11,350   
  

 

 

 

The Company capitalized $68 for prepaid insurance for The Village at Glynn Place. These costs, in addition to those allocated from the purchase price, are included in prepaid expenses and other assets on the unaudited pro forma condensed consolidated balance sheet as shown below (amounts in thousands):

 

Description   

The

Village at

Glynn Place

 

Above-market lease values

   $ 31   

In-place lease values

     582   

Prepaid insurance

     68   
  

 

 

 

Total prepaid expenses and other assets

   $ 681   
  

 

 

 

The Company has allocated the purchase price to the above tangible and identified intangible assets acquired and intangible liabilities assumed based on their fair values in accordance with generally accepted accounting principles as follows:

Estimates of future cash flows and other valuation techniques that the Company believes are similar to those used by independent appraisers were used to record the purchase of identifiable assets acquired such as land, buildings and improvements, and identifiable intangible assets and liabilities such as amounts related to in-place leases and acquired above- and below-market leases.

The estimated fair value of acquired in-place leases reflect the costs the Company would have incurred to lease the properties to the occupancy level of the properties at the dates of acquisition. Such estimates include the fair value of the loss of rental income, leasing commissions, legal costs and other direct costs that would be incurred to lease the properties to such occupancy levels.

Acquired above- and below-market lease values were recorded based on the present value of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of the current market lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values will be amortized as adjustments to rental revenue over the remaining terms of the respective leases. Should a tenant terminate its lease prior to its contractual term, the unamortized portion of the in-place lease value will be charged to amortization expense and the unamortized portion of above- and-below market lease value will be charged to rental revenue.

Although we do not anticipate any further changes in the The Village at Glynn Place fair value measurements, the measurements may be subject to change within 12 months of the business combination date if new facts or circumstances are brought to the Company’s attention that were previously unknown but existed as of the business combination date.

 

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The following table summarizes the cash paid to acquire The Village at Glynn Place (amounts in thousands):

 

Description   

The
Village at

Glynn Place

 

Purchase price

   $ 11,350   

Acquisition costs

     112   

Prepaid insurance

     68   
  

 

 

 

Total cash paid to acquire properties

   $ 11,530   
  

 

 

 

 

c. Reflects proceeds of $11,530,000 from existing mortgage loan draws. $11,530,000 was paid in cash at closing for the acquisition of The Village at Glynn Place.

Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Three Months

Ended March 31, 2012

 

a. Reflects the Company’s historical operations for the three months ended March 31, 2012.

 

b. Reflects the historical revenues and certain operating expenses of The Village at Glynn Place for the three months ended March 31, 2012.

 

c. Reflects pro forma adjustments related to the operations of two acquisitions made since January 1, 2012, as if they were acquired on January 1, 2011, in addition to other pro forma adjustments related to the acquisition of The Village at Glynn Place (amounts in thousands).

 

Description    Previous
Acquisitions
Actual
Results of
Operations
(j)
    Previous
Acquisitions
Pro Forma
Results of
Operations
(k)
    Pro Forma
Adjustments
   

The

Village at

Glynn Place

Pro Forma

Adjustments

   

Other Pro

Forma

Adjustments

 

Revenue:

          

Rental income

   $ 1,755      $ 1,922      $ 167      $ 30 (d)    $ 197   

Tenant recovery income

     443        474        31        —          31   

Other property income

     17        17        —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     2,215        2,413        198        30        228   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

          

Property operating

     379        415        36        —          36   

Real estate taxes

     242        257        15        —          15   

General and administrative

     324        350        26        28 (e)      54   

Acquisition-related expenses

     278        278        —          —          —     

Depreciation and amortization

     1,044        1,133        89        166 (f)      255   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,267        2,433        166        194        360   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (52     (20     32        (164     (132

Interest expense

     (391     (391     —          (90 )(g)      (90
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

     (443     (411     32        (254     (222

Net loss (income) attributable to noncontrolling interests

     185        170        (15     14 (h)      (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to Company shareholders

   $ (258   $ (241   $ 17      $ (240   $ (223
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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d. Reflects the sum of the pro forma straight-line amortization of above- and below-market leases over the average remaining terms of the leases and the adjustment to reflect straight-line rental revenues as if the Company had acquired the property as of January 1, 2011.

 

e. Reflects the asset management fees owed to the Company’s related-party advisor associated with The Village at Glynn Place, for an annual asset management fee of 1% of the costs of the real estate investments.

 

f. Reflects the depreciation and amortization of The Village at Glynn Place using the straight-line method over the estimated useful life of 30 years for buildings, 15 years for land improvements, and average remaining terms of the leases for tenant improvements and in-place leases.

 

g. Reflects the approximate amount of interest based on the terms of the Company’s Snow View Credit Facility and St. Charles Credit Facility at LIBOR plus 2.85% (using an average LIBOR rate during the three months ended March 31, 2012 of 0.26%) on the $11.5 million loan draw that would have been incurred for the acquisition of The Village at Glynn Place on January 1, 2011. Each one-eighth of a percent change in LIBOR would increase or decrease, respectively, interest expense by $14,000.

 

h. Reflects the CBRE Global Investors’ 46% share of the net income of The Village at Glynn Place. The allocation to noncontrolling interests is calculated as 46% of the properties’ results of operations as presented within the combined statement of revenues and certain operating expenses and their related pro forma adjustments, excluding any acquisition fees.

 

i. Reflects the weighted average shares that would be outstanding if the property was acquired on January 1, 2011, based on offering proceeds received as of January 30, 2012. While no additional proceeds were required for the acquisition of The Village at Glynn Place, such adjustment accounts for proceeds required to fund previous acquisitions.

 

j. Previously presented on the Company’s Form 10-Q for the quarter ended March 31, 2012.

 

k. Reflects the pro forma results of operations as if all previously owned properties purchased during the three months ended March 31, 2012 were actually purchased on January 1, 2011.

Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year

Ended December 31, 2011

 

a. Reflects the Company’s historical operations for the year ended December 31, 2011.

 

b. Reflects the historical revenues and certain operating expenses of The Village at Glynn Place for the year ended December 31, 2011.

 

c. Reflects pro forma adjustments related to the operations of seven acquisitions made since January 1, 2011, as if they were acquired on January 1, 2011, in addition to other pro forma adjustments related to the acquisition of The Village at Glynn Place (amounts in thousands).

 

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Description   

Previous

Acquisitions

Actual

Results of

Operations

(l)

   

Previous

Acquisitions

Pro Forma

Results of

Operations

(m)

   

Pro Forma

Adjustments

   

The

Village at

Glynn Place

Pro Forma

Adjustments

   

Other Pro

Forma

Adjustments

 

Revenue:

          

Rental income

   $ 2,762      $ 7,981      $ 5,219      $ 120 (d)    $ 5,339   

Tenant recovery income

     750        2,081        1,331        —          1,331   

Other property income

     17        15        (2     —          (2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     3,529        10,077        6,548        120        6,668   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

          

Property operating

     631        1,835        1,204        6 (e)      1,210   

Real estate taxes

     507        1,159        652        —          652   

General and administrative

     845        1,534        689        114 (f)      803   

Acquisition-related expenses

     1,751        1,889        138        112 (g)      250   

Depreciation and amortization

     1,500        4,493        2,993        665 (h)      3,658   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     5,234        10,910        5,676        897        6,573   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (1,705     (833     872        (777     95   

Interest expense

     (811     (2,369     (1,558     (360 )(i)      (1,918
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (2,516     (3,202     (686     (1,137     (1,823

Net loss attributable to noncontrolling interests

     152        399        247        82 (j)      329   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Company shareholders

   $ (2,364   $ (2,803   $ (439   $ (1,056   $ (1,494
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

d. Reflects the sum of the pro forma straight-line amortization of above- and below-market leases over the average remaining terms of the leases and the adjustment to reflect straight-line rental revenues as if the Company had acquired the property as of January 1, 2011.

 

e. Reflects property management fees associated with the current management, a related-party, at a rate of 4.5% of cash receipts from the properties. Property management fees associated with the current management for The Village at Glynn Place were $52,000, and property management fees included in the historical financial information were $46,000.

 

f. Reflects the asset management fees owed to the Company’s related-party advisor associated with The Village at Glynn Place, for an annual asset management fee of 1% of the costs of the real estate investments.

 

g. Reflects the sum of the acquisition expenses incurred to acquire The Village at Glynn Place.

 

h. Reflects the depreciation and amortization of The Village at Glynn Place using the straight-line method over the estimated useful life of 30 years for buildings, 15 years for land improvements, and average remaining terms of the leases for tenant improvements and in-place leases.

 

i. Reflects the approximate amount of interest based on the terms of the Company’s Snow View Credit Facility and St. Charles Credit Facility at LIBOR plus 2.85% (using an average LIBOR rate during the year ended December 31, 2011 of 0.23%) on the $11.5 million loan draw that would have been incurred for the acquisition of The Village at Glynn Place on January 1, 2011. Each one-eighth of a percent change in LIBOR would increase or decrease, respectively, interest expense by $14,000.

 

j. Reflects the CBRE Global Investors’ 46% share of the net income of The Village at Glynn Place. The allocation to noncontrolling interests is calculated as 46% of the properties’ results of operations as presented within the combined statement of revenues and certain operating expenses and their related pro forma adjustments, excluding any acquisition fees.

 

k. Reflects the weighted average shares that would be outstanding if the property was acquired on January 1, 2011, based on offering proceeds received as of January 30, 2012. While no additional proceeds were required for the acquisition of The Village at Glynn Place, such adjustment accounts for proceeds required to fund previous acquisitions.

 

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l. Previously presented on the Company’s annual report on Form 10-K for the year ended December 31, 2011.

 

m. Reflects the pro forma results of operations as if all previously owned properties purchased after January 1, 2011 were actually purchased on January 1, 2011.

 

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SIGNATURE

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.

 

    Phillips Edison – ARC Shopping Center REIT Inc.
Dated: July 10, 2012       By:  

/s/ Richard J. Smith

        Richard J. Smith
        Chief Financial Officer

 

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