Inland Diversified Real Estate Trust, Inc. - FORM 8-K - February 19, 2013

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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): February 19, 2013
 
INLAND DIVERSIFIED REAL ESTATE TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
 
Maryland
(State or Other
Jurisdiction of
Incorporation)
 
000-53945
(Commission File
Number)
 
26-2875286
(IRS Employer
Identification No.)
 
2901 Butterfield Road
Oak Brook, Illinois 60523
(Address of Principal Executive Offices)
 
(630) 218-8000
(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 obligation of the registrant under any of the following provisions:
 
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 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))




Explanatory Note. 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Inland Diversified Real Estate Trust, Inc. (which may be referred to as the “Registrant,” the “Company,” “we,” “our,” and “us”) hereby amends its Current Report on Form 8-K filed on January 3, 2013 to provide the required financial information relating to our entry, through a wholly-owned subsidiary, into a joint venture with Centennial Centre, L.L.C., Eastern - Beltway, Ltd., Centennial Gateway, LLC, and Retail Development Partners, LLC formed for the purpose of owning, operating and managing an aggregate of 1,746,744 square feet of retail space comprised of six shopping centers located in Las Vegas and Henderson, Nevada known as Centennial Center, Centennial Gateway, Eastgate, Eastern Beltway Center, Cannery Corner, and Lowe's Plaza.

Item 9.01.  Financial Statements and Exhibits

(a)           Financial statements of businesses acquired

(b)           Pro forma financial information

(c)           Exhibits
Exhibit No.
Title of Exhibit
 
23.1
Consent of KPMG, LLP dated February 19, 2013
 

2


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.
 
 
 
 
INLAND DIVERSIFIED REAL ESTATE TRUST, INC.
 
 
 
 
Date:
February 19, 2013
 
By:
/s/ Steven T. Hippel
 
 
 
Name:
Steven T. Hippel
 
 
 
Title
Chief Financial Officer

3



Index to Financial Statements
 
 
 
Page
Territory Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


4


Independent Auditors’ Report
 
The Board of Directors
Inland Diversified Real Estate Trust, Inc.:
 
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (Historical Summary) of Centennial Center, Centennial Gateway, Eastgate, Eastern Beltway Center, Cannery Corner, and Lowe's Plaza (the Territory Portfolio) for the year ended December 31, 2011. This Historical Summary is the responsibility of management of Inland Diversified Real Estate Trust, Inc. 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 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 Territory Portfolio's internal control over financial reporting. 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 and for the inclusion in a Form 8-K/A of Inland Diversified Real Estate Trust, Inc., to be filed with the Securities and Exchange Commission, as described in note 2. It is not intended to be a complete presentation of the Territory Portfolio’s revenues and expenses.
 
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 for the year ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.
 
 
/s/ KPMG LLP
 
 
 
 
 
February 14, 2013
 


F-1

Territory Portfolio
Historical Summary of Gross Income and
Direct Operating Expenses
For the Nine Month Period ended September 30, 2012 (unaudited)
and Year ended December 31, 2011


 
 
 
Nine months
ended
September 30, 2012
(unaudited)
 
Year ended
December 31,
2011
Gross income:
 
 

 
 

Base rental income
 
$
14,710,880

 
$
18,958,446

Operating expense, insurance, and real estate tax recoveries
 
2,532,547

 
3,064,347

Other income
 
146,682

 
186,307

Total gross income
 
17,390,109

 
22,209,100

Direct operating expenses:
 
 

 
 

Operating expenses
 
2,272,640

 
2,835,884

Insurance
 
132,249

 
125,613

Real estate taxes
 
958,572

 
1,393,002

Total direct operating expenses
 
3,363,461

 
4,354,499

Excess of gross income over direct operating expenses
 
$
14,026,648

 
$
17,854,601

 
See accompanying notes to historical summary of gross income and direct operating expenses.


F-2

Territory Portfolio
Notes to Historical Summary of Gross Income and
Direct Operating Expenses
 For the Nine Month Period ended September 30, 2012 (unaudited)
and Year ended December 31, 2011


(1)           Business
Centennial Center, Centennial Gateway, Eastgate, Eastern Beltway Center, Cannery Corner and Lowe's Plaza (collectively, the Territory Portfolio) are located in Las Vegas and Henderson, Nevada. The Territory Portfolio has approximately 1,832,264 square feet (unaudited) of gross leasable area of retail space, and was approximately 82% (unaudited) leased, at December 31, 2011 to a total of 146 tenants. Inland Diversified Real Estate Trust, Inc. (IDRETI), through its wholly owned subsidiary, Inland Territory Member, L.L.C. (ITM), and Centennial Center, L.L.C., Centennial Holdings, L.L.C., Centennial Gateway, LLC, Retail Development Partners, LLC, Eastern - Beltway, Ltd., Craig Losee Corner, L.L.C., and Virgin Territory, L.L.C. (collectively, the Seller), unaffiliated third parties, formed a joint venture, Inland Territory, L.L.C (the Joint Venture), of which ITM owns all Class A shares and the Seller owns all Class B shares. The Seller contributed the Territory Portfolio to the Joint Venture on December 27, 2012.
(2)           Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses (Historical Summary) has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission (SEC) Regulation S-X and for inclusion in the Form 8-K/A of IDRETI to be filed with the SEC and is not intended to be a complete presentation of the Territory Portfolio's revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting and requires management of the Territory Portfolio to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates.
The unaudited Historical Summary for the nine months ended September 30, 2012 has been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Accordingly, it does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management of IDRETI, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The Historical Summary for the nine months ended September 30, 2012 is not necessarily indicative of the expected results for the entire year ended December 31, 2012.
(3)           Gross Income
The Territory Portfolio leases retail space under various lease agreements with their tenants. All leases are accounted for as operating leases. The leases include provisions under which the Territory Portfolio is reimbursed for common area, real estate tax, and insurance expenses. Revenue related to these reimbursed expenses is recognized in the period the applicable expenses are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates.
Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental income accrues for the full period of occupancy on a straight-line basis. If collectability issues exist, rental income may be recognized on a cash basis. Related adjustments decreased base rental income by $276,841 (unaudited) for the nine months ended September 30, 2012 and increased base rental income by $105,683 for the year ended December 31, 2011.

F-3

Territory Portfolio
Historical Summary of Gross Income and
Direct Operating Expenses
For the Nine Month Period ended September 30, 2012 (unaudited)
and Year ended December 31, 2011


Minimum rents to be received from retail tenants under operating leases, with remaining lease terms ranging from 2 to 75 years, as of December 31, 2011, are as follows:
Year:
 
2012
$
18,539,112

2013
17,307,611

2014
15,304,488

2015
14,557,655

2016
13,783,811

Thereafter
92,921,776

 
$
172,414,453

(4)    Direct Operating Expenses
Direct operating expenses include only those expenses expected to be comparable to the proposed future operations of the Territory Portfolio. Repairs and maintenance expenses are charged to operations as incurred. Expenses such as depreciation, amortization and interest expense related to mortgage debt not assumed, and professional fees are excluded from the Historical Summary.
(5)    Related-Party Transactions
Territory Incorporated (Territory), an affiliate of the Sellers, provided property management services to the Territory Portfolio. Territory charged a management fee of approximately 3% to 4% of collected revenue earned by the Territory Portfolio. The Territory Portfolio incurred management fees of $586,608 (unaudited) and $736,597, which are included in operating expenses for the nine month period ended September 30, 2012 and the year ended December 31, 2011, respectively. These management fees may not be comparable to the management fees charged to the Territory Portfolio by IDRETI.
(6)    Subsequent Events
Subsequent to December 31, 2011 and through February 14, 2013, the date through which management evaluated subsequent events and on which date the Historical Summary was issued, management did not identify any subsequent events requiring additional disclosure.


F-4


Inland Diversified Real Estate Trust, Inc.
Pro Forma Consolidated Balance Sheet
September 30, 2012
(Dollars in thousands)
(unaudited)
The following unaudited pro forma Consolidated Balance Sheet is presented as if the acquisitions and financings had occurred on September 30, 2012.
This unaudited pro forma Consolidated Balance Sheet is not necessarily indicative of what the actual financial position would have been at September 30, 2012, nor does it purport to represent our future financial position. Pro forma adjustments have been made for the significant properties that were purchased and financed subsequent to September 30, 2012. The pro forma adjustments were made for the following properties: Centennial Center, Centennial Gateway, Eastgate, Eastern Beltway Center, Cannery Corner, and Lowe's Plaza (together, the "Territory Portfolio") and Crossing at Killingly Commons.
The Company does not consider any potential property acquisitions to be probable under Rule 3-14 of Regulation S-X.


F-5


Inland Diversified Real Estate Trust, Inc.
Pro Forma Consolidated Balance Sheet
September 30, 2012
(Dollars in thousands)
(unaudited)
 
 
Historical
(A)
 
Pro Forma
Adjustments
(B)
 
Pro Forma
Assets
 
 

 
 

 
 

Net investment properties (C) 
 
$
1,547,528

 
$
321,503

 
$
1,869,031

Cash and cash equivalents (E) 
 
113,426

 
(68,610
)
 
44,816

Restricted cash and escrows
 
5,322

 
—

 
5,322

Investment in marketable securities
 
39,803

 
—

 
39,803

Investment in unconsolidated entities
 
486

 
—

 
486

Accounts and rents receivable, net
 
11,536

 
—

 
11,536

Acquired lease intangibles, net (C) (D) 
 
227,661

 
44,121

 
271,782

Deferred costs, net
 
7,757

 
—

 
7,757

Other assets
 
12,473

 
—

 
12,473

Total assets
 
$
1,965,992

 
$
297,014

 
$
2,263,006

 
 
 
 
 
 
 
Liabilities and Equity
 
 

 
 

 
 

Mortgages, credit facility and securities margin payable (C) 
 
$
896,168

 
$
234,440

 
$
1,130,608

Accrued offering expenses
 
385

 
—

 
385

Accounts payable and accrued expenses (F) 
 
5,784

 
446

 
6,230

Distributions payable
 
5,388

 
—

 
5,388

Accrued real estate taxes payable
 
9,777

 
—

 
9,777

Deferred investment property acquisition obligations (C) (G) 
 
46,610

 
12,312

 
58,922

Other liabilities
 
13,487

 
—

 
13,487

Acquired below market lease intangibles, net (C) (D) 
 
31,979

 
10,654

 
42,633

Due to related parties
 
2,563

 
—

 
2,563

Total liabilities
 
1,012,141

 
257,852

 
1,269,993

 
 
 
 
 
 
 
Redeemable noncontrolling interests (H)
 
7,517

 
39,608

 
47,125

 
 
 
 
 
 
 
Equity:
 
 
 
 
 


Preferred stock
 
—

 
—

 
—

Common stock 
 
114

 
—

 
114

Additional paid in capital, net of offering costs
 
1,017,177

 
—

 
1,017,177

Accumulated distributions and net loss
 
(72,364
)
 
(446
)
 
(72,810
)
Accumulated other comprehensive income
 
(264
)
 
—

 
(264
)
Total Company stockholders’ equity
 
944,663

 
(446
)
 
944,217

Noncontrolling interests
 
1,671

 
—

 
1,671

Total equity
 
946,334

 
(446
)
 
945,888

Total liabilities and equity
 
$
1,965,992

 
$
297,014

 
$
2,263,006

 
See accompanying notes to pro forma consolidated balance sheet.


F-6


Inland Diversified Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
September 30, 2012
(Dollars in thousands)
(unaudited)
(A)
The historical column represents the Company’s Consolidated Balance Sheet as of September 30, 2012 as filed with the Securities and Exchange Commission on Form 10-Q.
(B)    The pro forma adjustments column includes adjustments related to our significant acquisitions and mortgage financings which occurred after September 30, 2012 and is detailed below as follows:     
 
Territory Portfolio
 
Crossing at Killingly Commons
 
Total Pro Forma Adjustments
Net investment properties
$
267,010

 
$
54,493

 
$
321,503

 
 

 
 
 
 

Intangible assets, net
$
36,713

 
$
7,408

 
$
44,121

 
 

 
 
 
 

Intangible liabilities, net
$
8,454

 
$
2,200

 
$
10,654

 
 

 
 
 
 

Deferred investment property acquisition obligations
$
7,219

 
$
5,093

 
$
12,312

 
 

 
 
 
 

Mortgages, credit facility and securities margin payable
$
201,440

 
$
33,000

 
$
234,440

 
 
 
 
 
 
Redeemable noncontrolling interests
$
30,000

 
$
9,608

 
$
39,608

 (C)
The pro forma adjustments reflect the acquisitions and mortgage financings of the following properties by the Company.  No pro forma adjustments have been made for prorations as the amounts are not significant. The Company acquired the Territory Portfolio and Crossing at Killingly Commons by paying cash of $68,610, entering into or assuming mortgage loans payable of $181,940, funding from the credit facility of $52,500 and issuing redeemable noncontrolling interests of $39,608.
    
Property
 
Net assets acquired
Territory Portfolio
 
$
288,050

Crossings at Killingly Commons
 
54,608

Total
 
342,658

 
 
 
Allocation of net investments in properties:
 
 

Land
 
$
46,251

Building and improvements
 
275,252

Acquired lease intangible assets, net
 
44,121

Acquired lease intangible liabilities, net
 
(10,654
)
Deferred investment property acquisition obligations
 
(12,312
)
Total
 
$
342,658

Allocations are preliminary and subject to change.
(D)
Acquired intangibles represent above and below market leases and the difference between the property valued with existing in-place leases and the property valued as if vacant. The value of the acquired intangibles will be amortized over the lease terms. Allocations are preliminary and subject to change.
(E)
Pro forma cash use of $68,610 represents the cash paid for the pro forma net acquisition price of investments in real estate.
(F)
Estimated accrued acquisition related costs for the acquisitions included in (B).
(G)
The acquisitions described in (B) include earnout components to the purchase price, meaning the Company did not pay a portion of the purchase price of the property at closing, although the Company owns the entire property. The earnout component is recorded at the estimated fair value at the date of the property acquisition. The Company is not obligated to pay this contingent portion of the purchase price unless the space which was vacant at the time of acquisition is later leased by the seller within the time limits and parameters set forth in the acquisition agreement. The earnout payment is based on a predetermined formula applied to rental income received. The earnout agreement has a limited obligation period up to three years from the date of acquisition. If at the end of the time period certain spaces have not been leased, occupied or rent producing, the Company will have no further obligation to pay additional purchase price consideration and will retain ownership of the entire property.
(H)
Redeemable noncontrolling interests issued by the Company to the seller which are redeemable for cash or the Company's common shares on a one-for-one basis both at the option of the holder and upon the occurrence of an event that is not solely within the Company's control.

F-7


Inland Diversified Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations and Other Comprehensive Income
For the nine months ended September 30, 2012
(Dollars in thousands, except per share amounts)
(unaudited)
The following unaudited pro forma Consolidated Statement of Operations and Other Comprehensive Income is presented to give effect to the acquisitions and financings of the properties indicated in Note (B) of the Notes to the pro forma Consolidated Statement of Operations and Other Comprehensive Income as though they occurred on January 1, 2011. Pro forma adjustments have been made for significant properties that were purchased or financed subsequent to December 31, 2011. The pro forma adjustments were made for the following properties: the Territory Portfolio, City Center and Crossing at Killingly Commons.
The Company does not consider any potential property acquisitions to be probable under Rule 3-14 of Regulation S-X.
This unaudited pro forma Consolidated Statement of Operations and Other Comprehensive Income is not necessarily indicative of what the actual results of operations would have been for the nine months ended September 30, 2012, nor does it purport to represent our future results of operations.


F-8


Inland Diversified Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations and Other Comprehensive Income
For the nine months ended September 30, 2012
(Dollars in thousands, except per share amounts)
(unaudited)
 
 
Historical
(A)
 
Pro Forma
Adjustments
(B)
 
Pro Forma
Rental income (C)
 
$
71,997

 
$
23,753

 
$
95,750

Tenant recovery income
 
15,470

 
5,960

 
21,430

Other property income
 
1,711

 
147

 
1,858

Total income
 
89,178

 
29,860

 
119,038

General and administrative expenses
 
2,984

 
—

 
2,984

Acquisition related costs
 
3,650

 
—

 
3,650

Property operating expenses (D)
 
13,861

 
5,652

 
19,513

Real estate taxes
 
10,328

 
3,025

 
13,353

Depreciation and amortization (C)
 
34,215

 
17,693

 
51,908

Business management fee - related party
 
500

 
—

 
500

Total expenses
 
65,538

 
26,370

 
91,908

Operating income
 
23,640

 
3,490

 
27,130

Interest and dividend income
 
1,685

 
—

 
1,685

Realized loss on sale of marketable securities
 
22

 
—

 
22

Interest expense (E)
 
(22,724
)
 
(7,816
)
 
(30,540
)
Equity in income of unconsolidated entities
 
253

 
—

 
253

Net income (loss)
 
2,876

 
(4,326
)
 
(1,450
)
Add: net loss attributable to noncontrolling interests
 
55

 
—

 
55

Less: net income attributable to redeemable noncontrolling interests (F)
 
(9
)
 
(1,436
)
 
(1,445
)
Net income (loss) attributable to common stockholders
 
$
2,922

 
$
(5,762
)
 
$
(2,840
)
Net income (loss) attributable to common stockholders per common share, basic and diluted (G)
 
$
0.04

 
 

 
$
(0.02
)
Weighted average number of common shares outstanding, basic and diluted (G)
 
83,326,053

 
 

 
113,778,342

Comprehensive income (loss):
 
 

 
 

 
 

Net income (loss)
 
$
2,876

 
$
(4,326
)
 
$
(1,450
)
Other comprehensive income:
 
 

 
 

 
 

Unrealized gain on marketable securities
 
2,927

 
—

 
2,927

Unrealized loss on derivatives
 
(1,406
)
 
—

 
(1,406
)
Gain reclassified into earnings from other comprehensive income on the sale of marketable securities
 
(22
)
 
—

 
(22
)
Comprehensive income (loss)
 
4,375

 
(4,326
)
 
49

Add: comprehensive loss attributable to noncontrolling interests
 
55

 
—

 
55

Less: comprehensive income attributable to redeemable noncontrolling interests
 
(9
)
 
(1,436
)
 
(1,445
)
Comprehensive income (loss) attributable to common stockholders
 
$
4,421

 
$
(5,762
)
 
$
(1,341
)
 
See accompanying notes to pro forma consolidated statement of operations and other comprehensive income.


F-9


Inland Diversified Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations and Other Comprehensive Income
For the nine months ended September 30, 2012
(Dollars in thousands, except per share amounts)
(unaudited)
(A)
The historical column represents the Company’s Consolidated Statement of Operations and Other Comprehensive Income for the nine months ended September 30, 2012 as filed with the Securities and Exchange Commission on Form 10-Q.
(B)
Total pro forma adjustments for significant acquisitions consummated through the date of this filing are as though the properties were acquired January 1, 2011.
Total income, property operating expenses and real estate taxes for the nine months ended September 30, 2012 are based on information provided by the sellers for the Territory Portfolio, City Center and Crossing at Killingly Commons.
The pro forma adjustments for the nine months ended September 30, 2012 are composed of the following adjustments:    
 
Territory Portfolio
 
City Center
 
Crossing at Killingly Commons
 
Total Pro Forma
Adjustments
Rental income
$
14,319

 
$
6,457

 
$
2,977

 
$
23,753

Tenant recovery income
2,532

 
2,472

 
956

 
5,960

Other property income
147

 
—

 
—

 
147

Total income
16,998

 
8,929

 
3,933

 
29,860

Property operating expenses
2,601

 
2,301

 
750

 
5,652

Real estate taxes
958

 
1,506

 
561

 
3,025

Depreciation and amortization
9,769

 
6,145

 
1,779

 
17,693

Total expenses
13,328

 
9,952

 
3,090

 
26,370

Operating income (loss)
3,670

 
(1,023
)
 
843

 
3,490

Interest expense
(5,126
)
 
(1,788
)
 
(902
)
 
(7,816
)
Net loss
(1,456
)
 
(2,811
)
 
(59
)
 
(4,326
)
Less: net income attributable to redeemable noncontrolling interests
(901
)
 
(175
)
 
(360
)
 
(1,436
)
Net loss attributable to common stockholders
$
(2,357
)
 
$
(2,986
)
 
$
(419
)
 
$
(5,762
)
 (C)
Investment properties will be depreciated on a straight-line basis based upon estimated useful lives of 30 years for buildings and improvements and 15 years for site improvements. The portion of the purchase price allocated to above or below market lease intangibles will be amortized on a straight-line basis over the life of the related leases as an adjustment to rental income. In-place lease intangibles will be amortized on a straight-line basis over the life of the related leases as a component of amortization expense. The purchase price allocation for pro forma financial statement purposes are preliminary and may be subject to change.
 (D)
Management fees are calculated as 4.5% of gross revenues pursuant to the new management agreements and are also included in property operating expenses.

F-10


Inland Diversified Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations and Other Comprehensive Income
For the nine months ended September 30, 2012
(Dollars in thousands, except per share amounts)
(unaudited)
 (E)
The pro forma adjustments relating to incremental interest expense were based on the following debt terms:
    
 
 
Principal Balance
 
Interest Rate
 
Maturity Date
Centennial Center
 
$
70,455

 
3.83
%
 
January 6, 2023
Centennial Gateway
 
29,978

 
3.81
%
 
January 1, 2023
Eastern Beltway Center
 
34,100

 
3.83
%
 
January 6, 2023
Eastgate
 
14,407

 
3.81
%
 
January 1, 2023
City Center
 
87,000

 
2.67
%
 
September 28, 2022
Crossing at Killingly Commons (variable rate)
 
8,250

 
2.96
%
 
November 1, 2017
Crossing at Killingly Commons (hedged to fixed rate)
 
24,750

 
3.73
%
 
November 1, 2017
Credit facility
 
52,500

 
1.90
%
 
October 31, 2015
 
 
$
321,440

 
 

 
 
(F)
The proforma preferred return to the holders of outstanding redeemable noncontrolling interest, based on a effective preferred return of 4.00%, 3.83% and 4.92% per annum for the Territory Portfolio, City Center and Crossing at Killingly Commons, respectively.
 (G)
The pro forma weighted average shares of common stock outstanding for the nine months ended September 30, 2012 was calculated assuming all shares sold through September 30, 2012 were issued on January 1, 2011.

F-11


Inland Diversified Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations and Other Comprehensive Income
For the year ended December 31, 2011
(Dollars in thousands, except per share amounts)
(unaudited)
The following unaudited pro forma Consolidated Statement of Operations and Other Comprehensive Income is presented to give effect to the acquisitions or financings of the properties indicated in Note (B) of the Notes to the pro forma Consolidated Statement of Operations and Other Comprehensive Income as though they occurred on January 1, 2011. Pro forma adjustments have been made for the significant properties that were purchased or financed subsequent to December 31, 2011. The pro forma adjustments were made for the following properties: the Territory Portfolio, City Center and Crossing at Killingly Commons.
The Company does not consider any potential property acquisitions to be probable under Rule 3-14 of Regulation S-X.
This unaudited pro forma Consolidated Statement of Operations and Other Comprehensive Income is not necessarily indicative of what the actual results of operations would have been for the year ended December 31, 2011, nor does it purport to represent our future results of operations.

F-12


Inland Diversified Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations and Other Comprehensive Income
For the year ended December 31, 2011
(Dollars in thousands, except per share amounts)
(unaudited) 
 
 
Historical
(A)
 
Pro Forma
Adjustments
(B)
 
Pro Forma
Rental income (C)
 
$
58,073

 
$
31,250

 
$
89,323

Tenant recovery income
 
12,379

 
8,088

 
20,467

Other property income
 
1,663

 
186

 
1,849

Total income
 
72,115

 
39,524

 
111,639

General and administrative expenses
 
2,770

 
—

 
2,770

Acquisition related costs
 
2,963

 
—

 
2,963

Property operating expenses (D)
 
12,296

 
7,677

 
19,973

Real estate taxes
 
7,789

 
4,272

 
12,061

Depreciation and amortization (C)
 
28,980

 
23,164

 
52,144

Business management fee - related party
 
1,000

 
—

 
1,000

Total expenses
 
55,798

 
35,113

 
90,911

Operating income
 
16,317

 
4,411

 
20,728

Interest and dividend income
 
871

 
—

 
871

Realized loss on sale of marketable securities
 
365

 
—

 
365

Interest expense (E)
 
(19,835
)
 
(10,451
)
 
(30,286
)
Equity in income of unconsolidated entities
 
105

 
—

 
105

Net loss
 
(2,177
)
 
(6,040
)
 
(8,217
)
Less: net income attributable to noncontrolling interests
 
(102
)
 
—

 
(102
)
Less: net income attributable to redeemable noncontrolling interests (F)
 
—

 
(1,916
)
 
(1,916
)
Net loss attributable to common stockholders
 
$
(2,279
)
 
$
(7,956
)
 
$
(10,235
)
Net loss attributable to common stockholders per common share, basic and diluted (G)
 
$
(0.05
)
 
 

 
$
(0.09
)
Weighted average number of common shares outstanding, basic and diluted (G)
 
42,105,681

 
 

 
113,778,342

Comprehensive income (loss):
 
 

 
 

 
 

Net loss
 
$
(2,177
)
 
$
(6,040
)
 
$
(8,217
)
Other comprehensive income:
 
 

 
 

 
 

Unrealized loss on marketable securities
 
(269
)
 
—

 
(269
)
Unrealized loss on derivatives
 
(1,293
)
 
 
 
(1,293
)
Gain reclassified into earnings from other comprehensive income on the sale of marketable securities
 
(365
)
 
—

 
(365
)
Comprehensive loss
 
(4,104
)
 
(6,040
)
 
(10,144
)
Less: comprehensive income attributable to noncontrolling interests
 
(102
)
 
—

 
(102
)
Less: comprehensive income attributable to redeemable noncontrolling interests
 
—

 
(1,916
)
 
(1,916
)
Comprehensive loss attributable to common stockholders
 
$
(4,206
)
 
$
(7,956
)
 
$
(12,162
)
 
See accompanying notes to pro forma consolidated statement of operations and other comprehensive income.


F-13


Inland Diversified Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations and Other Comprehensive Income
For the year ended December 31, 2011
(Dollars in thousands, except per share amounts)
(unaudited)
(A)
The historical column represents the Company’s Consolidated Statement of Operations and Other Comprehensive Income for the year ended December 31, 2011 as filed with the Securities and Exchange Commission on Form 10-K.
 (B)
Total pro forma adjustments for significant acquisitions consummated through the date of this filing are as though the properties were acquired January 1, 2011.
Total income, property operating expenses and real estate taxes for the year ended December 31, 2011 are based on information provided by the sellers of the Territory Portfolio, City Center and Crossing at Killingly Commons.
The pro forma adjustments for the year ended December 31, 2011 are composed of the following adjustments:
 
 
Territory Portfolio
 
City Center
 
Crossing at Killingly Commons
 
Total Pro Forma
Adjustments
Rental income
 
$
18,467

 
$
8,746

 
$
4,037

 
$
31,250

Tenant recovery income
 
3,064

 
3,345

 
1,679

 
8,088

Other property income
 
186

 
—

 
—

 
186

Total income
 
21,717

 
12,091

 
5,716

 
39,524

Property operating expenses
 
3,224

 
2,993

 
1,460

 
7,677

Real estate taxes
 
1,393

 
2,131

 
748

 
4,272

Depreciation and amortization
 
12,950

 
7,872

 
2,342

 
23,164

Total expenses
 
17,567

 
12,996

 
4,550

 
35,113

Operating income
 
4,150

 
(905
)
 
1,166

 
4,411

Interest expense
 
(6,842
)
 
(2,407
)
 
(1,202
)
 
(10,451
)
Net loss
 
(2,692
)
 
(3,312
)
 
(36
)
 
(6,040
)
Less: net income attributable to redeemable noncontrolling interests
 
(1,200
)
 
(237
)
 
(479
)
 
(1,916
)
Net loss attributable to common stockholders
 
$
(3,892
)
 
$
(3,549
)
 
$
(515
)
 
$
(7,956
)
(C)
Investment properties will be depreciated on a straight-line basis based upon estimated useful lives of 30 years for buildings and improvements and 15 years for site improvements. The portion of the purchase price allocated to above or below market lease intangibles will be amortized on a straight-line basis over the life of the related leases as an adjustment to rental income. In-place lease intangibles will be amortized on a straight-line basis over the life of the related leases as a component of amortization expense. The purchase price allocation for pro forma financial statement purposes are preliminary and may be subject to change.
(D)
Management fees are calculated as 4.5% of gross revenues pursuant to the new management agreements and are also included in property operating expenses.

F-14


Inland Diversified Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations and Other Comprehensive Income
For the year ended December 31, 2011
(Dollars in thousands, except per share amounts)
(unaudited)
(E)
The pro forma adjustments relating to incremental interest expense were based on the following debt terms:
 
 
Principal Balance
 
Interest Rate
 
Maturity Date
Centennial Center
 
$
70,455

 
3.83
%
 
January 6, 2023
Centennial Gateway
 
29,978

 
3.81
%
 
January 1, 2023
Eastern Beltway Center
 
34,100

 
3.83
%
 
January 6, 2023
Eastgate
 
14,407

 
3.81
%
 
January 1, 2023
City Center
 
87,000

 
2.67
%
 
September 28, 2022
Crossing at Killingly Commons (variable rate)
 
8,250

 
2.96
%
 
November 1, 2017
Crossing at Killingly Commons (hedged to fixed rate)
 
24,750

 
3.73
%
 
November 1, 2017
Credit facility
 
52,500

 
1.90
%
 
October 31, 2015
 
 
$
321,440

 
 

 
 
(F)
The proforma preferred return to the holders of outstanding redeemable noncontrolling interest, based on a effective preferred return of 4.00%, 3.83% and 4.92% per annum for the Territory Portfolio, City Center and Crossing at Killingly Commons, respectively.
(G)
The pro forma weighted average shares of common stock outstanding for the year ended December 31, 2011 was calculated assuming all shares sold through September 30, 2012 were issued on January 1, 2011.

F-15

Inland Diversified Real Estate Trust, Inc. Reports

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