Inland Diversified Real Estate Trust, Inc. - FORM 8-K - February 6, 2014



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  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): February 6, 2014 (January 31, 2014)

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:
£
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))






Item    2.01    Completion of Acquisition or Disposition of Assets.

As previously reported, on December 16, 2013, Inland Diversified Real Estate Trust, Inc., a Maryland corporation (the “Company”), Inland Diversified Cumming Market Place, L.L.C., a Delaware limited liability company and subsidiary of the Company (“Market Place”), and Bulwark Corporation, a Delaware corporation and subsidiary of the Company, entered into two Purchase and Sale Agreements with Realty Income Corporation, a Maryland corporation and unaffiliated third party purchaser (the “Purchaser”), collectively providing for the sale of a total of 84 single tenant, net-leased properties to the Purchaser.
The Purchase and Sale Agreement by and among the Company, Market Place, and the Purchaser (the “Net-Lease Purchase Agreement”) provides for (1) the sale by the Company to the Purchaser of 100% of the issued and outstanding limited liability company membership interests (collectively, the “Purchased Interests”) in certain Delaware limited liability companies (collectively, the “Purchased Entities”) which own, directly or indirectly, a portfolio of 74 net-leased commercial real estate properties (collectively, the “Net-Lease Properties”), and (2) the sale by Market Place to the Purchaser of fee simple title to a single net-leased commercial real estate property located in Cumming, Georgia (the “Market Place Property,” and together with the Purchased Interests, the “Purchased Assets”). Upon the closing of the sale of the Purchased Interests, each of the Purchased Entities will become a wholly-owned subsidiary of the Purchaser and the Purchaser will acquire indirect ownership of the Net-Lease Properties. The Net-Lease Purchase Agreement provides that the Purchased Assets will be sold in two separate tranches (referred to herein as “Tranche I” and “Tranche II”).
The closing of Tranche I (“Tranche I Closing”) occurred on January 31, 2014, resulting in the sale by the Company to the Purchaser of Purchased Interests in Purchased Entities which own a total of 46 of the Net-Lease Properties (collectively, the “Tranche I Properties”) for an aggregate cash purchase price of approximately $202.0 million. The purchase price paid by the Purchaser at the Tranche I Closing reflects customary adjustments for a transaction of this type, including for mortgage indebtedness secured by certain of the Tranche I Properties assumed by the Purchaser, and proration for rent, expenses, deposits, taxes and other customary items. Pursuant to the Net-Lease Purchase Agreement, the Company paid certain costs and expenses incurred in connection with the Tranche I Closing, including all costs and expenses, including lenders’ attorney fees, in connection with the Purchaser’s assumption of mortgage loans secured by certain of the Tranche I Properties and all transfer, excise, documentary, stamp or similar taxes triggered by the sale. The Company used a portion of the proceeds from the sale to pay down approximately $52.5 million in indebtedness currently outstanding under the Company's line of credit.
The foregoing description of the Net-Lease Purchase Agreement and the transactions contemplated thereby is subject to, and qualified in its entirety by, the full text of the Net-Lease Purchase Agreement, a copy of which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed by the Company on December 17, 2013.
Forward-Looking Statements
This Current Report on Form 8-K contains “forward-looking statements,” which are not historical facts, within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements about the 84 properties that will be sold in this transaction. The Company’s actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by the Company and its management, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, among other things, the ability of the closing conditions to be satisified and the risks discussed in the Company’s filings with the SEC, including the Company’s Annual Report on Form 10-K, which filings

2


are available from the SEC. The Company cautions you not to place undue reliance on any forward-looking statements, which are made as of the date of this Current Report on Form 8-K. The Company undertakes no obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements.
Item     9.01    Financial Statements and Exhibits.
(b)           Pro forma financial information
Inland Diversified Real Estate Trust, Inc.

3


Inland Diversified Real Estate Trust, Inc.
Unaudited Pro Forma Consolidated Financial Statements

The accompanying unaudited consolidated pro forma financial statements of Inland Diversified Real Estate Trust, Inc. (the "Company") have been prepared to provide financial information with respect to:
•
the sale of 46 properties for a purchase price of approximately $202.0 million ("Tranche I Properties")
•
the expected sale of 29 properties for an estimated purchase price of approximately $228.7 million ("Tranche II Properties")
•
the expected sale of 9 properties for an estimated purchase price of approximately $72.3 million ("Tranche III Properties" and together with the Tranche I Properties and Tranche II Properties, the "Properties")
The unaudited pro forma Consolidated Balance Sheet as of September 30, 2013 is presented as if the transactions described above occurred on September 30, 2013.
The unaudited pro forma Consolidated Statements of Operations for the nine months ended September 30, 2013 and the years ended December 31, 2012, 2011 and 2010 are presented as if the transactions described above occurred on January 1, 2010.
The pro forma statements presented assume the sale of Tranche II Properties and Tranche III Properties close; significant variances may occur in the pro forma information if one or both of Tranche II Properties and Tranche III Properties do not close or the Company's estimated proceeds differ from actual results.
In the opinion of the Company’s management, all adjustments necessary to reflect the effects of the sale of the Properties have been made. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the Company’s actual results of operations or financial condition would have been had the sale of the Properties occurred on the dates indicated, nor does it purport to represent the future results of operations or financial condition of the Company. The unaudited pro forma consolidated financial statements and accompanying notes should be read in conjunction with the financial statements as filed in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 and the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

F-1


Inland Diversified Real Estate Trust, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
September 30, 2013
(Dollars in thousands, except per share amounts)
 
 
Historical
(A)
 
Disposition of
Properties (B)
 
Pro Forma
Assets:
 
 

 
 

 
 

Investment properties:
 
 
 
 
 
 
Land
 
$
392,756

 
$
(89,365
)
 
$
303,391

Building and improvements
 
1,662,261

 
(315,958
)
 
1,346,303

Construction in progress
 
7,275

 
—

 
7,275

Total
 
2,062,292

 
(405,323
)
 
1,656,969

Less accumulated depreciation
 
(99,919
)
 
17,592

 
(82,327
)
Net investment properties
 
1,962,373

 
(387,731
)
 
1,574,642

Cash and cash equivalents (C)
 
43,870

 
221,588

 
265,458

Restricted cash and escrows (D)
 
7,687

 
20,973

 
28,660

Investment in marketable securities
 
35,100

 
—

 
35,100

Investment in unconsolidated entities
 
447

 
—

 
447

Accounts and rents receivable, net
 
23,798

 
(4,052
)
 
19,746

Acquired lease intangibles, net
 
261,487

 
(61,675
)
 
199,812

Deferred costs, net
 
9,393

 
(2,651
)
 
6,742

Other assets (E)
 
8,780

 
(984
)
 
7,796

Total assets
 
$
2,352,935

 
$
(214,532
)
 
$
2,138,403

 
 
 
 
 
 
 
Liabilities and Equity
 
 

 
 

 
 

Liabilities:
 
 
 
 
 
 
Mortgages, credit facility and securities margin payable
 
$
1,249,328

 
$
(244,256
)
 
$
1,005,072

Accounts payable and accrued expenses
 
8,357

 
(1,001
)
 
7,356

Distributions payable
 
5,789

 
—

 
5,789

Accrued real estate taxes payable
 
11,693

 
(1,167
)
 
10,526

Deferred investment property acquisition obligations
 
35,066

 
—

 
35,066

Other liabilities (E)
 
16,676

 
(5,056
)
 
11,620

Acquired below market lease intangibles, net
 
47,799

 
(1,376
)
 
46,423

Due to related parties
 
1,917

 
—

 
1,917

Total liabilities
 
1,376,625

 
(252,856
)
 
1,123,769

 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
67,919

 
(1,416
)
 
66,503

 
 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
 
Preferred stock, $.001 par value, 40,000,000 shares authorized, none outstanding
 
—

 
—

 
—

Common stock, $.001 par value, 2,460,000,000 shares authorized, 117,380,185 shares issued and outstanding as of September 30, 2013
 
117

 
—

 
117

Additional paid in capital, net of offering costs of $118,182 as of September 30, 2013
 
1,049,412

 
—

 
1,049,412

Accumulated distributions and net loss
 
(143,360
)
 
40,640

 
(102,720
)
Accumulated other comprehensive income (E)
 
2,222

 
(900
)
 
1,322

Total stockholders’ equity
 
908,391

 
39,740

 
948,131

 
 
 
 
 
 
 
Total liabilities and equity
 
$
2,352,935

 
$
(214,532
)
 
$
2,138,403

 
See accompanying notes to the pro forma consolidated financial statements


F-2


Inland Diversified Real Estate Trust, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the nine months ended September 30, 2013
(Dollars in thousands, except per share amounts)
 
 
Historical
(F)
 
Disposition of
Properties (G)
 
Pro Forma
Income:
 
 
 
 
 
 
Rental income
 
$
131,667

 
$
(26,744
)
 
$
104,923

Tenant recovery income
 
28,295

 
(1,741
)
 
26,554

Other property income
 
5,441

 
(87
)
 
5,354

Total income
 
165,403

 
(28,572
)
 
136,831

 
 
 
 
 
 
 
Expense:
 
 
 
 
 
 
General and administrative expenses
 
5,650

 
—

 
5,650

Acquisition related costs
 
180

 
—

 
180

Property operating expenses
 
26,912

 
(1,486
)
 
25,426

Real estate taxes
 
16,784

 
(1,405
)
 
15,379

Depreciation and amortization
 
67,574

 
(11,749
)
 
55,825

Business management fee - related party (H)
 
10,909

 
(231
)
 
10,678

Total expenses
 
128,009

 
(14,871
)
 
113,138

 
 
 
 
 
 
 
Operating income
 
37,394

 
(13,701
)
 
23,693

 
 
 
 
 
 
 
Interest, dividend and other income
 
2,426

 
—

 
2,426

Realized loss on sale of marketable securities
 
640

 
—

 
640

Interest expense
 
(39,964
)
 
8,659

 
(31,305
)
Equity in income of unconsolidated entities
 
197

 
—

 
197

 
 
 
 
 
 
 
Net income (loss) from continuing operations
 
693

 
(5,042
)
 
(4,349
)
 
 
 
 
 
 
 
Less: net income attributable to redeemable noncontrolling interests
 
(1,744
)
 
53

 
(1,691
)
 
 
 
 
 
 
 
Net loss attributable to common stockholders before discontinued operations
 
$
(1,051
)
 
$
(4,989
)
 
$
(6,040
)
 
 
 
 
 
 
 
Net loss attributable to common stockholders before discontinued operations per common share, basic and diluted
 
$
(0.01
)
 
 

 
$
(0.05
)
 
 
 
 
 
 
 
Weighted average number of common shares outstanding, basic and diluted
 
116,253,872

 
 

 
116,253,872

 
See accompanying notes to the pro forma consolidated financial statements

F-3


Inland Diversified Real Estate Trust, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2012
(Dollars in thousands, except per share amounts)
 
 
Historical
(I)
 
Disposition of
Properties (G)
 
Pro Forma
Income:
 
 
 
 
 
 
Rental income
 
$
109,835

 
$
(19,129
)
 
$
90,706

Tenant recovery income
 
22,052

 
(876
)
 
21,176

Other property income
 
2,448

 
(116
)
 
2,332

Total income
 
134,335

 
(20,121
)
 
114,214

 
 
 
 
 
 
 
Expense:
 
 
 
 
 
 
General and administrative expenses
 
4,269

 
—

 
4,269

Acquisition related costs
 
5,868

 
—

 
5,868

Property operating expenses
 
21,221

 
(1,002
)
 
20,219

Real estate taxes
 
13,970

 
(669
)
 
13,301

Depreciation and amortization
 
53,239

 
(8,406
)
 
44,833

Business management fee - related party (H)
 
1,500

 
(175
)
 
1,325

Total expenses
 
100,067

 
(10,252
)
 
89,815

 
 
 
 
 
 
 
Operating income
 
34,268

 
(9,869
)
 
24,399

 
 
 
 
 
 
 
Interest, dividend and other income
 
2,556

 
—

 
2,556

Realized loss on sale of marketable securities
 
26

 
—

 
26

Interest expense
 
(34,001
)
 
6,354

 
(27,647
)
Equity in income of unconsolidated entities
 
17

 
—

 
17

 
 
 
 
 
 
 
Net income (loss) from continuing operations
 
2,866

 
(3,515
)
 
(649
)
 
 
 
 
 
 
 
Less: net income attributable to noncontrolling interests
 
(41
)
 
—

 
(41
)
Less: net income attributable to redeemable noncontrolling interests
 
(209
)
 
27

 
(182
)
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders before discontinued operations
 
$
2,616

 
$
(3,488
)
 
$
(872
)
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders before discontinued operations per common share, basic and diluted
 
$
0.03

 
 

 
$
(0.01
)
 
 
 
 
 
 
 
Weighted average number of common shares outstanding, basic and diluted
 
91,146,154

 
 

 
91,146,154

 
See accompanying notes to the pro forma consolidated financial statements


F-4


Inland Diversified Real Estate Trust, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2011
(Dollars in thousands, except per share amounts)
 
 
Historical
(I)
 
Disposition of
Properties (G)
 
Pro Forma
Income:
 
 
 
 
 
 
Rental income
 
$
58,073

 
$
(7,253
)
 
$
50,820

Tenant recovery income
 
12,379

 
(38
)
 
12,341

Other property income
 
1,663

 
(78
)
 
1,585

Total income
 
72,115

 
(7,369
)
 
64,746

 
 
 
 
 
 
 
Expense:
 
 
 
 
 
 
General and administrative expenses
 
2,770

 
—

 
2,770

Acquisition related costs
 
2,963

 
—

 
2,963

Property operating expenses
 
12,296

 
(287
)
 
12,009

Real estate taxes
 
7,789

 
(38
)
 
7,751

Depreciation and amortization
 
28,980

 
(3,266
)
 
25,714

Business management fee - related party (H)
 
1,000

 
(62
)
 
938

Total expenses
 
55,798

 
(3,653
)
 
52,145

 
 
 
 
 
 
 
Operating income
 
16,317

 
(3,716
)
 
12,601

 
 
 
 
 
 
 
Interest, dividend and other income
 
871

 
—

 
871

Realized loss on sale of marketable securities
 
365

 
—

 
365

Interest expense
 
(19,835
)
 
2,403

 
(17,432
)
Equity in income of unconsolidated entities
 
105

 
—

 
105

 
 
 
 
 
 
 
Net loss from continuing operations
 
(2,177
)
 
(1,313
)
 
(3,490
)
 
 
 
 
 
 
 
Less: net income attributable to noncontrolling interests
 
(102
)
 
—

 
(102
)
 
 
 
 
 
 
 
Net loss attributable to common stockholders before discontinued operations
 
$
(2,279
)
 
$
(1,313
)
 
$
(3,592
)
 
 
 
 
 
 
 
Net loss attributable to common stockholders before discontinued operations per common share, basic and diluted
 
$
(0.05
)
 
 

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

 
 

 
42,105,681

 
See accompanying notes to the pro forma consolidated financial statements

F-5


Inland Diversified Real Estate Trust, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2010
(Dollars in thousands, except per share amounts)
 
 
Historical
(I)
 
Disposition of
Properties (G)
 
Pro Forma
Income:
 
 
 
 
 
 
Rental income
 
$
14,324

 
$
(1,681
)
 
$
12,643

Tenant recovery income
 
3,282

 
—

 
3,282

Other property income
 
592

 
(13
)
 
579

Total income
 
18,198

 
(1,694
)
 
16,504

 
 
 
 
 
 
 
Expense:
 
 
 
 
 
 
General and administrative expenses
 
1,872

 
—

 
1,872

Acquisition related costs
 
1,953

 
—

 
1,953

Property operating expenses
 
3,321

 
(61
)
 
3,260

Real estate taxes
 
2,262

 
—

 
2,262

Depreciation and amortization
 
5,669

 
(707
)
 
4,962

Business management fee - related party (H)
 
603

 
(17
)
 
586

Total expenses
 
15,680

 
(785
)
 
14,895

 
 
 
 
 
 
 
Operating income
 
2,518

 
(909
)
 
1,609

 
 
 
 
 
 
 
Interest, dividend and other income
 
358

 
—

 
358

Realized loss on sale of marketable securities
 
(2
)
 
—

 
(2
)
Interest expense
 
(4,522
)
 
433

 
(4,089
)
Equity in income of unconsolidated entities
 
1

 
—

 
1

 
 
 
 
 
 
 
Net loss from continuing operations
 
(1,647
)
 
(476
)
 
(2,123
)
 
 
 
 
 
 
 
Less: net income attributable to noncontrolling interests
 
(96
)
 
—

 
(96
)
 
 
 
 
 
 
 
Net loss attributable to common stockholders before discontinued operations
 
$
(1,743
)
 
$
(476
)
 
$
(2,219
)
 
 
 
 
 
 
 
Net loss attributable to common stockholders before discontinued operations per common share, basic and diluted
 
$
(0.13
)
 
 

 
$
(0.16
)
 
 
 
 
 
 
 
Weighted average number of common shares outstanding, basic and diluted
 
13,671,936

 
 

 
13,671,936


See accompanying notes to the pro forma consolidated financial statements

F-6


Inland Diversified Real Estate Trust, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements

(A)
The historical column represents the Company's Consolidated Balance Sheet as of September 30, 2013 as filed with the Securities and Exchange Commission on Form 10-Q.
(B)
Represents adjustments to reflect the sale of the Properties as if the sales occurred on September 30, 2013.
(C)
Represents the expected net cash proceeds to be received by the Company after repayment of mortgages secured by the Properties sold and $1,575 principal reduction on a mortgage securing property retained by the Company.
(D)
Represents restricted cash proceeds received from the sale of Tranche III Properties which will be used to potentially fund a future tax-free exchange under Section 1031 of the Internal Revenue Code.
(E)
Principally, represents the settlement of swaps, $724 thousand in other assets and $3,922 thousand in other liabilities, related to the Properties sold.
(F)
The historical column represents the Company's Consolidated Statement of Operations for the nine months ended September 30, 2013 as filed with the Securities and Exchange Commission on Form 10-Q.
(G)
Represents adjustments to reflect the sale of the Properties as if the sales occurred on January 1, 2010 for the nine months ended September 30, 2013 and each of the years ended December 31, 2012, 2011 and 2010.
(H)
Represents adjustments to reduce the business management fee - related party due to the sale of the Properties.
(I)
The historical column represents the Company's Statements of Operations for the years ended December 31, 2012, 2011 and 2010 as filed with the Securities and Exchange Commission on Form 10-K.

F-7


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 6, 2014
By:
/s/ Steven T. Hippel
 
 
Name:
Steven T. Hippel
 
 
Title:
Chief Financial Officer





Inland Diversified Real Estate Trust, Inc. Reports