SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) August 2, 2012
WINTHROP REALTY TRUST
(Exact Name of Registrant as Specified in Its Charter)
| Ohio | ||
| (State or Other Jurisdiction of Incorporation) |
|
001-06249
|
34-6513657
|
|
|
(Commission File Number)
|
(I.R.S. Employer Identification No.)
|
|
|
7 Bulfinch Place, Suite 500, P.O. Box 9507, Boston, Massachusetts
|
02114
|
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
|
| (617) 570-4614 | ||
| (Registrant's Telephone Number, Including Area Code) | ||
| n/a |
| (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 obligations of the registrant under any of the following provisions
|
o
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFT|R 230.425)
|
|
o
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
|
o
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
|
o
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Item 8.01 Other Events
The following information sets forth certain recent developments and the financial and operating results for Winthrop Realty Trust (the “Company”) for the second quarter ended June 30, 2012. All per share amounts are on a diluted basis.
Financial Results
Three Months Ended June 30, 2012
Net income applicable to common shares for the quarter ended June 30, 2012 was $571,000, or $0.02 per common share as compared with net income per common share of $3.7 million or $0.11 per common share for the quarter ended June 30, 2011. The decrease in per common share amounts is directly attributable to the effect of the full second quarter dividend payable on the Series D preferred shares issued in March 2012. The $77.7 million in proceeds from the offering along with capital recycled from certain liquidated investments have been invested or committed to investments but the expected positive impact to earnings from such investments will not begin to be recognized until the third quarter. In addition, as a value investor some of the Company's more recent investments, such as the Southern California portfolio loan, have returns that are less weighted to a current coupon, but have a return that will be recognized through a liquidation event at the end of the investment life.
For the quarter ended June 30, 2012, the Company reported Funds from Operations ("FFO") applicable to common shares of $8.1 million, or $0.24 per common share as compared with FFO of $12.3 million, or $0.38 per common share for the second quarter of 2011.
Six Months Ended June 30, 2012
Net income applicable to common shares for the six months ended June 30, 2012 was $7.9 million or $0.24 per common share as compared with net income of $10.8 million or $0.36 per common share for the same period ended June 30, 2011. The reasons for the decrease in per common share amounts are the same as reported above for the decline in the three month operating results.
FFO for the six months ended June 30, 2012 was $22.1 million or $0.67 per common share as compared with FFO of $24.3 million, or $0.81 per common share for the six months ended June 30, 2011.
2012 Second Quarter Activity
Acquisitions and Loan Originations
|
|
·
|
Acquired a $44.5 million first mortgage loan secured by a 326,000 square foot commercial building located in Ft. Lauderdale, Florida, known as the Broward Financial Center, for $42.8 million. The Company subsequently received a payment of approximately $12.8 million, reducing the outstanding principal balance to $30.0 million. The Company modified the loan to waive the late charge, extend the term of the loan to October 15, 2012, increase the interest rate to 9.836% and provide for an exit fee. The property contains 47,000 square feet of retail and 279,000 square feet of office space and is 74.4% leased.
|
|
|
·
|
Acquired from its joint venture partner, Marc Realty, its 20% non-controlling interest in the entity which owns the property located at One East Erie in Chicago, Illinois for $5.85 million. The property contains 126,000 square feet of retail and office space consisting of the first six floors in a mixed use building together with 208 parking spaces. The Company now owns 100% of the property.
|
|
|
·
|
Originated a $9.0 million mezzanine loan collateralized by 100% of the member interests in the owner of the 104,000 square foot, 12-story building located at 127 West 25th Street in Manhattan, New York. The loan bears interest at a rate equal to the greater of 14% per annum or LIBOR plus 10%, requires payment of principal and interest and matures April 30, 2015. In connection with the loan origination, the Company received a 1% origination fee of $90,000 and commitment fees totaling $591,500.
|
|
|
·
|
Originated a $2.25 million first mortgage loan which bears interest at 12% per annum and matures on April 5, 2014, with one, one-year extension right. Payments are interest only payable monthly with a balloon payment due at maturity. The loan is collateralized by a 45,655 square foot, two-story multi-tenant office building located at 4545 East Shea Boulevard in Phoenix, Arizona.
|
|
|
·
|
Entered into an agreement to acquire a 284 unit multi-family property for $17.5 million. The property, Lake Brandt Apartments, is located in Greensboro, North Carolina and is presently 94% occupied. In connection with this acquisition, it is expected that the Company will assume the existing $13.6 million non-recourse mortgage loan which bears interest at 6.22% per annum, matures on August 1, 2016 and requires payments of interest only. The closing is expected to occur in September or October 2012. There can be no assurance that the Company will complete the transaction as described.
|
|
|
·
|
Contributed an additional $5.5 million to the Company’s Vintage Housing Holdings LLC (“VHH”) equity investment platform. In connection with the transaction, VHH acquired a general partner interest and development fees relating to a residential development project referred to as Vintage at Urban Center, a tax credit apartment community in Lynwood, Washington with a proposed village development of 395 multi-family rental units and 4,000 square feet of retail space.
|
Dispositions and Loan Asset Repayments
|
|
·
|
Sold the Company’s non-Westinghouse portion of the Churchill, Pennsylvania operating property for $914,000. The Company provided a financing commitment to the buyer of $675,000. At closing, the Company provided $324,000 of financing to cover buyers expenses and taxes due. An additional $175,000 will be advanced on each of August 20, 2012 and November 20, 2012 directly to the taxing authority to cover taxes due on the sold parcel. The loan is interest only, at LIBOR +3.75% and matures June 1, 2015.
|
|
|
·
|
Sold to Marc Realty, the Company’s equity interest in 30 North Michigan for $10.3 million, of which $6.55 million was financed by the Company with a secured promissory note which bears interest at 10% per annum and requires payments of interest only and matures May 31, 2015. The note was fully satisfied on August 3, 2012.
|
|
|
·
|
Sold to Marc Realty, all of the Company’s equity interest in 2720 River Road, 2000-2060 Algonquin Road and Ridgebrook equity investments for an aggregate of $2.1 million.
|
|
|
·
|
Received payment of approximately $19.6 million resulting in an annualized return of 47.8% that satisfied the Company’s 160 Spear mortgage and mezzanine loans.
|
|
|
·
|
Received repayment of approximately $20.0 million resulting in an annualized return of 15.8% that satisfied the Company’s Magazine multi-family mezzanine loan.
|
Subsequent to Quarter End
|
|
·
|
Obtained a $13.5 million first mortgage loan secured by the recently acquired 320 Unit Class A multi-family property in Memphis, Tennessee, known as Waterford Place. The loan bears interest at 3% annually, and requires monthly payments of principal and interest and matures on August 1, 2014, subject to two, one-year extensions.
|
|
|
·
|
The Company and Marc Realty each contributed approximately $3.5 million to pay off the existing first mortgage loan collateralized by their joint venture investment in the property located at 223 West Jackson in Chicago, Illinois.
|
|
|
·
|
On August 6, 2012, an entity (“10 Metrotech”) in which the Company holds a one-third interest, acquired for $32,500,000 the senior participation in the loan secured by the property located at 625 Fulton Avenue, Brooklyn, New York. 10 Metrotech previously acquired the $21,000,000 junior participation for a nominal amount. As a result, 10 Metrotech now holds the entire mortgage loan. Following consummation of the acquisition, 10 Metrotech entered into a forbearance agreement with the borrower pursuant to which, among other things, (i) the interest rate on the loan was increased to 9%, (ii) the principal amount of the loan was reset to $40,000,000 and (iii) 10 Metrotech agreed to forbear from foreclosing on the property pursuant to current maturity default for two years, subject to any further defaults by the borrower.
|
Financial Results
Financial results for the three and six months ended June 30, 2012 and 2011 are as follows (in thousands except per share amounts):
|
For the Three Months
Ended June 30,
|
For the Six Months
Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
|
Revenue
|
||||||||||||||||
|
Rents and reimbursements
|
$ | 13,257 | $ | 11,234 | $ | 25,797 | $ | 22,220 | ||||||||
|
Interest, dividends and discount accretion
|
5,778 | 5,094 | 11,296 | 14,766 | ||||||||||||
| 19,035 | 16,328 | 37,093 | 36,986 | |||||||||||||
|
Expenses
|
||||||||||||||||
|
Property operating
|
3,779 | 3,987 | 8,331 | 8,032 | ||||||||||||
|
Real estate taxes
|
1,017 | 1,087 | 2,271 | 2,342 | ||||||||||||
|
Depreciation and amortization
|
4,479 | 3,312 | 8,198 | 6,793 | ||||||||||||
|
Interest
|
3,512 | 3,963 | 7,301 | 8,576 | ||||||||||||
|
General and administrative
|
3,264 | 2,758 | 6,295 | 5,282 | ||||||||||||
|
State and local taxes
|
143 | 48 | 149 | 77 | ||||||||||||
| 16,194 | 15,155 | 32,545 | 31,102 | |||||||||||||
|
Other income (loss)
|
||||||||||||||||
|
Earnings from preferred equity investments
|
- | 158 | - | 241 | ||||||||||||
|
Equity in income of equity investments
|
586 | 2,875 | 1,010 | 1,520 | ||||||||||||
|
Realized gain on sale of securities carried at fair value
|
15 | 7 | 41 | 131 | ||||||||||||
|
Unrealized (loss) gain on securities carried at fair value
|
(791 | ) | (723 | ) | 4,141 | 163 | ||||||||||
|
Unrealized (loss) gain on loan securities carried
at fair value
|
(88 | ) | 34 | 76 | 2,847 | |||||||||||
|
Gain on sale of equity investment
|
232 | - | 232 | - | ||||||||||||
|
Interest income
|
90 | 443 | 192 | 536 | ||||||||||||
| 44 | 2,794 | 5,692 | 5,438 | |||||||||||||
|
Income from continuing operations
|
2,885 | 3,967 | 10,240 | 11,322 | ||||||||||||
|
Discontinued operations
|
||||||||||||||||
|
Income (loss) from discontinued operations
|
- | 90 | (3 | ) | 137 | |||||||||||
|
Consolidated net income
|
2,885 | 4,057 | 10,237 | 11,459 | ||||||||||||
|
(Income) loss attributable to non-controlling interests
|
473 | (329 | ) | 1,374 | (533 | ) | ||||||||||
|
Net income attributable to Winthrop Realty Trust
|
3,358 | 3,728 | 11,611 | 10,926 | ||||||||||||
|
Income attributable to non-controlling redeemable
preferred interest
|
- | (58 | ) | - | (117 | ) | ||||||||||
|
Income attributable to Series D Preferred Shares
|
(2,787 | ) | - | (3,712 | ) | - | ||||||||||
|
Net income attributable to Common Shares
|
$ | 571 | $ | 3,670 | $ | 7,899 | $ | 10,809 | ||||||||
|
Per Common Share Data – Basic
|
||||||||||||||||
|
Income from continuing operations
|
$ | 0.02 | $ | 0.11 | $ | 0.24 | $ | 0.36 | ||||||||
|
Income from discontinued operations
|
- | - | - | - | ||||||||||||
|
Net income attributable to Winthrop Realty Trust
|
$ | 0.02 | $ | 0.11 | $ | 0.24 | $ | 0.36 | ||||||||
|
Per Common Share Data – Diluted
|
||||||||||||||||
|
Income from continuing operations
|
$ | 0.02 | $ | 0.11 | $ | 0.24 | $ | 0.36 | ||||||||
|
Income from discontinued operations
|
- | - | - | - | ||||||||||||
|
Net income attributable to Winthrop Realty Trust
|
$ | 0.02 | $ | 0.11 | $ | 0.24 | $ | 0.36 | ||||||||
|
Basic Weighted-Average Common Shares
|
33,064 | 32,573 | 33,058 | 29,841 | ||||||||||||
|
Diluted Weighted-Average Common Shares
|
33,064 | 32,574 | 33,058 | 29,842 | ||||||||||||
|
Comprehensive income
|
||||||||||||||||
|
Consolidated net income
|
$ | 2,885 | $ | 4,057 | $ | 10,237 | $ | 11,459 | ||||||||
|
Change in unrealized gain (loss) on interest rate
derivative
|
(25 | ) | - | (57 | ) | 63 | ||||||||||
|
Comprehensive income
|
$ | 2,860 | $ | 4,057 | $ | 10,180 | $ | 11,522 | ||||||||
Funds From Operations:
The following presents a reconciliation of net income to funds from operations for the three and six months ended June 30, 2012 and 2011 (in thousands, except per share amounts):
|
For the Three Months Ended
June 30,
|
For the Six Months Ended
June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
|
Net income attributable to Winthrop
Realty Trust
|
$ | 3,358 | $ | 3,728 | $ | 11,611 | $ | 10,926 | ||||||||
|
Real estate depreciation
|
2,747 | 2,086 | 5,261 | 4,204 | ||||||||||||
|
Amortization of capitalized leasing costs
|
1,732 | 1,226 | 2,937 | 2,591 | ||||||||||||
|
Real estate depreciation and amortization
of unconsolidated interests
|
3,992 | 2,376 | 7,654 | 4,639 | ||||||||||||
|
Gain on sale of equity investments
|
(232 | ) | - | (232 | ) | - | ||||||||||
|
Impairment loss on equity investments
|
- | 3,800 | - | 3,800 | ||||||||||||
|
Less: Non-controlling interest share of real
estate depreciation and amortization
|
(713 | ) | (789 | ) | (1,445 | ) | (1,581 | ) | ||||||||
|
Funds from operations
|
10,884 | 12,427 | 25,786 | 24,579 | ||||||||||||
|
Series C Preferred Share dividends
|
- | (58 | ) | - | (117 | ) | ||||||||||
|
Series D Preferred Share dividends
|
(2,787 | ) | - | (3,712 | ) | - | ||||||||||
|
Allocations of earnings to Series B-1
Preferred Shares
|
- | (11 | ) | - | (78 | ) | ||||||||||
|
Allocations of earnings to Series C
Preferred Shares
|
- | (39 | ) | - | (92 | ) | ||||||||||
|
FFO applicable to Common Shares-Basic
|
$ | 8,097 | $ | 12,319 | $ | 22,074 | $ | 24,292 | ||||||||
| 33,064 | 32,573 | 33,058 | 29,841 | |||||||||||||
|
FFO Per Common Share-Basic
|
$ | 0.24 | $ | 0.38 | $ | 0.67 | $ | 0.81 | ||||||||
|
Diluted
|
||||||||||||||||
|
Funds from operations (per above)
|
$ | 10,884 | $ | 12,427 | $ | 25,786 | $ | 24,579 | ||||||||
|
Series C Preferred Share dividends
|
- | (58 | ) | - | (117 | ) | ||||||||||
|
Series D Preferred Share dividends
|
(2,787 | ) | - | (3,712 | ) | - | ||||||||||
|
Allocation of earnings to Series B-1
Preferred Shares
|
- | (11 | ) | - | (78 | ) | ||||||||||
|
Allocation of earning to Series C
Preferred Shares
|
- | (39 | ) | - | (92 | ) | ||||||||||
|
FFO applicable to Common Shares
|
$ | 8,097 | $ | 12,319 | $ | 22,074 | $ | 24,292 | ||||||||
|
Weighted-average Common Shares
|
33,064 | 32,573 | 33,058 | 29,841 | ||||||||||||
|
Stock options
|
- | 1 | - | 1 | ||||||||||||
|
Series B-1 Preferred Shares
|
- | - | - | - | ||||||||||||
|
Series C Preferred Shares
|
- | - | - | - | ||||||||||||
|
Diluted weighted-average Common Shares
|
33,064 | 32,574 | 33,058 | 29,842 | ||||||||||||
|
FFO Per Common Share - Diluted
|
$ | 0.24 | $ | 0.38 | $ | 0.67 | $ | 0.81 | ||||||||
The Company has adopted the revised definition of Funds from Operations (“FFO”), adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). The Company’s management considers FFO to be an appropriate measure of performance of a REIT. The Company calculates FFO by adjusting net income (loss) (computed in accordance with GAAP, including non-recurring items), for gains (or losses) from sales of properties, real estate related depreciation and amortization, and adjustment for unconsolidated partnerships and ventures and impairments. The Company’s management believes that in order to facilitate a clear understanding of the Company’s historical operating results, FFO should be considered in conjunction with net income as presented in the consolidated financial statements included elsewhere herein. The Company’s management considers FFO to be a useful measure for reviewing its comparative operating and financial performance because, by excluding gains and losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies.
The Company’s calculation of FFO may not be directly comparable to FFO reported by other REITs or similar real estate companies that have not adopted the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO is not a GAAP financial measure and should not be considered as an alternative to net income (loss), the most directly comparable financial measure of the Company’s performance calculated and presented in accordance with GAAP, as an indication of the Company’s performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of the Company’s ability to pay dividends. The Company believes that to further understand the Company’s performance, FFO should be compared with the Company reported net income and considered in addition to cash flows in accordance with GAAP, as presented in the Company’s consolidated financial statements.
Based on the October 31, 2011 and January 6, 2012 updated guidance on reporting FFO, the Company has excluded impairment losses on depreciable real estate as well as other-than-temporary impairment on equity method joint ventures in the calculations of FFO and have restated prior period calculations to be consistent with this presentation. The other-than-temporary impairments have been excluded as they relate to decreases in the fair value of depreciable real estate held by the investee.
Consolidated Balance Sheets:
(in thousands, except share data)
|
June 30,
|
December 31,
|
|||||||
|
2012
|
2011
|
|||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||
|
ASSETS
|
||||||||
|
Investments in real estate, at cost
|
||||||||
|
Land
|
$ | 39,575 | $ | 36,495 | ||||
|
Buildings and improvements
|
350,243 | 327,337 | ||||||
| 389,818 | 363,832 | |||||||
|
Less: accumulated depreciation
|
(49,818 | ) | (44,556 | ) | ||||
|
Investments in real estate, net
|
340,000 | 319,276 | ||||||
|
Cash and cash equivalents
|
43,959 | 40,952 | ||||||
|
Restricted cash held in escrows
|
10,678 | 3,914 | ||||||
|
Loans receivable, net
|
123,872 | 114,333 | ||||||
|
Accounts receivable, net of allowances of $397 and
$639, respectively
|
19,261 | 16,140 | ||||||
|
Securities carried at fair value
|
34,079 | 28,856 | ||||||
|
Loan securities carried at fair value
|
5,385 | 5,309 | ||||||
|
Preferred equity investments
|
5,500 | 5,520 | ||||||
|
Equity investments
|
146,221 | 162,142 | ||||||
|
Lease intangibles, net
|
34,678 | 36,305 | ||||||
|
Deferred financing costs, net
|
1,081 | 1,180 | ||||||
|
Assets held for sale
|
6 | 6 | ||||||
|
TOTAL ASSETS
|
$ | 764,720 | $ | 733,933 | ||||
|
LIABILITIES
|
||||||||
|
Mortgage loans payable
|
$ | 229,891 | $ | 230,940 | ||||
|
Non-recourse secured financings
|
29,150 | 29,150 | ||||||
|
Revolving line of credit
|
- | 40,000 | ||||||
|
Accounts payable and accrued liabilities
|
16,696 | 16,174 | ||||||
|
Dividends payable
|
5,373 | 5,369 | ||||||
|
Deferred income
|
1,010 | 502 | ||||||
|
Below market lease intangibles, net
|
2,602 | 2,962 | ||||||
|
TOTAL LIABILITIES
|
284,722 | 325,097 | ||||||
|
COMMITMENTS AND CONTINGENCIES
|
||||||||
|
EQUITY
|
||||||||
|
Winthrop Realty Trust Shareholders’ Equity:
|
||||||||
|
Series D Cumulative Redeemable Preferred Shares, $25 per share liquidation preference; 5,060,000 shares authorized and 4,820,000 shares outstanding at June 30, 2012 and 1,840,000 shares authorized and 1,600,000 shares outstanding at December 31, 2011
|
120,500 | 40,000 | ||||||
|
Common Shares, $1 par, unlimited shares authorized;
33,066,280 and 33,041,034 issued and outstanding at June 30, 2012 and December 31, 2011, respectively
|
33,066 | 33,041 | ||||||
|
Additional paid-in capital
|
617,862 | 626,099 | ||||||
|
Accumulated distributions in excess of net income
|
(314,091 | ) | (311,246 | ) | ||||
|
Accumulated other comprehensive loss
|
(149 | ) | (92 | ) | ||||
|
Total Winthrop Realty Trust Shareholders’ Equity
|
457,188 | 387,802 | ||||||
|
Non-controlling interests
|
22,810 | 21,034 | ||||||
|
Total Equity
|
479,998 | 408,836 | ||||||
|
TOTAL LIABILITIES AND EQUITY
|
$ | 764,720 | $ | 733,933 | ||||
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 on this 7th day of August, 2012.
| WINTHROP REALTY TRUST | |||
|
|
By:
|
/s/ Michael L. Ashner | |
| Michael L. Ashner | |||
| Chairman and Chief Executive Officer | |||