Attached files

file filename
EX-32.1 - EXHIBIT 32.1 - Phillips Edison & Company, Inc.pearc_20140930-ex321.htm
EX-32.2 - EXHIBIT 32.2 - Phillips Edison & Company, Inc.pearc_20140930-ex322.htm
EX-31.1 - EXHIBIT 31.1 - Phillips Edison & Company, Inc.pearc_20140930-ex311.htm
EX-31.2 - EXHIBIT 31.2 - Phillips Edison & Company, Inc.pearc_20140930-ex312.htm
EXCEL - IDEA: XBRL DOCUMENT - Phillips Edison & Company, Inc.Financial_Report.xls


 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
OR
¨     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to              
Commission file number 000-54691
 
PHILLIPS EDISON – ARC SHOPPING CENTER REIT INC.  
 
(Exact Name of Registrant as Specified in Its Charter)
 
Maryland
27-1106076
(State or Other Jurisdiction of
Incorporation or Organization)
(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)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ¨   
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
¨
Accelerated Filer
¨
 
 
 
 
Non-Accelerated Filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  
As of November 1, 2014, there were 181.7 million outstanding shares of common stock of Phillips Edison – ARC Shopping Center REIT Inc.




PHILLIPS EDISON – ARC SHOPPING CENTER REIT INC.
FORM 10-Q
September 30, 2014
INDEX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1



PART I.        FINANCIAL INFORMATION
 
Item 1.          Financial Statements

PHILLIPS EDISON – ARC SHOPPING CENTER REIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2014 AND DECEMBER 31, 2013
(Unaudited)
(In thousands, except share and per share amounts)
  
September 30, 2014
 
December 31, 2013
ASSETS
  
 
  
Investment in real estate:
  
 
  
Land
$
480,842

 
$
302,182

Building and improvements
1,371,152

 
833,892

Total investment in real estate assets
1,851,994

 
1,136,074

Accumulated depreciation and amortization
(67,613
)
 
(29,538
)
Total investment in real estate assets, net
1,784,381

 
1,106,536

Acquired intangible lease assets, net of accumulated amortization of $35,310 and $14,330, respectively
171,153

 
107,730

Cash and cash equivalents
19,828

 
460,250

Restricted cash and investments
8,980

 
9,859

Accounts receivable, net of bad debt reserve of $785 and $151, respectively
20,835

 
12,982

Deferred financing expense, less accumulated amortization of $4,080 and $1,715, respectively
10,534

 
10,091

Derivative asset

 
818

Prepaid expenses and other
9,100

 
13,261

Total assets
$
2,024,811

 
$
1,721,527

LIABILITIES AND EQUITY
  

 
  

Liabilities:
  

 
  

Mortgages and loans payable
$
518,675

 
$
200,872

Derivative liability
545

 

Acquired below market lease intangibles, less accumulated amortization of $6,101 and $2,708, respectively
36,520

 
20,387

Accounts payable
906

 
1,657

Accounts payable – affiliates
1,524

 
1,132

Accrued and other liabilities
41,489

 
27,947

Total liabilities
599,659

 
251,995

Commitments and contingencies (Note 9)

 

Redeemable common stock
32,881

 

Equity:
  

 
  

Preferred stock, $0.01 par value per share, 10,000,000 shares authorized, zero shares issued and outstanding at September 30, 2014
  
 
  
and December 31, 2013

 

Common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 180,573,225 and 175,594,613 shares issued and
  
 
  
outstanding at September 30, 2014 and December 31, 2013, respectively
1,806

 
1,756

Additional paid-in capital
1,551,199

 
1,538,185

Accumulated other comprehensive income

 
690

Accumulated deficit
(160,815
)
 
(71,192
)
Total stockholders’ equity
1,392,190

 
1,469,439

Noncontrolling interests
81

 
93

Total equity
1,392,271

 
1,469,532

Total liabilities and equity
$
2,024,811

 
$
1,721,527


See notes to condensed consolidated financial statements.

2



PHILLIPS EDISON – ARC SHOPPING CENTER REIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE PERIODS ENDED SEPTEMBER 30, 2014 AND 2013
(Unaudited)
(In thousands, except share and per share amounts)
  
Three Months Ended September 30,
 
Nine Months Ended September 30,
  
2014
 
2013
 
2014
 
2013
Revenues:
  
 
  
 
  
 
  
Rental income
$
38,614

 
$
15,827

 
$
99,515

 
$
35,768

Tenant recovery income
11,078

 
4,260

 
29,422

 
10,637

Other property income
339

 
57

 
685

 
140

Total revenues
50,031

 
20,144

 
129,622

 
46,545

Expenses:
  

 
  

 
  

 
  

Property operating
8,150

 
3,079

 
21,274

 
7,223

Real estate taxes
7,121

 
3,022

 
17,853

 
6,641

General and administrative
2,109

 
842

 
6,377

 
2,424

Acquisition expenses
3,785

 
3,967

 
15,096

 
9,633

Depreciation and amortization
21,430

 
8,324

 
56,031

 
19,879

Total expenses
42,595

 
19,234

 
116,631

 
45,800

Operating income
7,436

 
910

 
12,991

 
745

Other income (expense):
  

 
  

 
  

 
  

Interest expense, net
(5,422
)
 
(2,207
)
 
(13,992
)
 
(6,594
)
Other income (expense)
129

 
(32
)
 
842

 
(45
)
Net income (loss)
2,143

 
(1,329
)
 
(159
)
 
(5,894
)
Net income attributable to noncontrolling interests

 
(79
)
 

 
(355
)
Net income (loss) attributable to Company stockholders
$
2,143

 
$
(1,408
)
 
$
(159
)
 
$
(6,249
)
Per share information - basic and diluted:
  

 
  

 
  

 
  

Net income (loss) per share - basic and diluted
$
0.01

 
$
(0.02
)
 
$
0.00

 
$
(0.14
)
Weighted-average common shares outstanding - basic and diluted
180,072,232

 
79,796,551

 
178,490,256

 
45,207,554

Comprehensive income (loss):
  

 
  

 
  

 
  

Net income (loss)
$
2,143

 
$
(1,329
)
 
$
(159
)
 
$
(5,894
)
Other comprehensive income:
  

 
  

 
  

 
  

Change in unrealized (loss) gain on interest rate swaps, net

 
(357
)
 
(690
)
 
614

Comprehensive income (loss)
2,143

 
(1,686
)
 
(849
)
 
(5,280
)
Comprehensive income attributable to noncontrolling interests

 
(79
)
 

 
(355
)
Comprehensive income (loss) attributable to Company stockholders
$
2,143

 
$
(1,765
)
 
$
(849
)
 
$
(5,635
)

See notes to condensed consolidated financial statements.

3




PHILLIPS EDISON – ARC SHOPPING CENTER REIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(Unaudited)
(In thousands, except share and per share amounts)
  
  
 
  
 
  
 
Accumulated
 
  
 
  
 
  
 
  
  
  
 
  
 
Additional
 
Other
 
  
 
Total
 
  
 
  
  
Common Stock
 
Paid-In
 
Comprehensive
 
Accumulated
 
Stockholders'
 
Noncontrolling
 
  
  
Shares
 
Amount
 
Capital
 
Income
 
Deficit
 
Equity
 
Interests
 
Total
Balance at January 1, 2013
13,801,251

 
$
138

 
$
118,238

 
$

 
$
(11,720
)
 
$
106,656

 
$
45,615

 
$
152,271

Issuance of common stock
93,135,034

 
930

 
922,663

 

 

 
923,593

 

 
923,593

Share repurchases
(58,764
)
 
(1
)
 
(581
)
 

 

 
(582
)
 

 
(582
)
Dividend reinvestment plan (DRP)
893,171

 
9

 
8,476

 

 

 
8,485

 

 
8,485

Change in unrealized gain on interest rate swaps

 

 

 
614

 

 
614

 

 
614

Common distributions declared, $0.50 per share

 

 

 

 
(22,638
)
 
(22,638
)
 

 
(22,638
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(4,238
)
 
(4,238
)
Offering costs

 

 
(100,276
)
 

 

 
(100,276
)
 

 
(100,276
)
Net (loss) income

 

 

 

 
(6,249
)
 
(6,249
)
 
355

 
(5,894
)
Balance at September 30, 2013
107,770,692

 
$
1,076

 
$
948,520

 
$
614

 
$
(40,607
)
 
$
909,603

 
$
41,732

 
$
951,335

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2014
175,594,613

 
$
1,756

 
$
1,538,185

 
$
690

 
$
(71,192
)
 
$
1,469,439

 
$
93

 
$
1,469,532

Issuance of common stock
256,031

 
2

 
2,532

 

 

 
2,534

 

 
2,534

Share repurchases
(223,270
)
 
(2
)
 
(2,102
)
 

 

 
(2,104
)
 

 
(2,104
)
Change in redeemable common stock

 

 
(32,881
)
 

 

 
(32,881
)
 

 
(32,881
)
Dividend reinvestment plan (DRP)
4,945,851

 
50

 
46,936

 

 

 
46,986

 

 
46,986

Change in unrealized loss on interest rate swaps

 

 

 
(690
)
 

 
(690
)
 

 
(690
)
Common distributions declared, $0.50 per share

 

 

 

 
(89,464
)
 
(89,464
)
 

 
(89,464
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(12
)
 
(12
)
Offering costs

 

 
(1,471
)
 

 

 
(1,471
)
 

 
(1,471
)
Net loss

 

 

 

 
(159
)
 
(159
)
 

 
(159
)
Balance at September 30, 2014
180,573,225

 
$
1,806

 
$
1,551,199

 
$

 
$
(160,815
)
 
$
1,392,190

 
$
81

 
$
1,392,271


See notes to condensed consolidated financial statements.

4



PHILLIPS EDISON – ARC SHOPPING CENTER REIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(Unaudited)
(In thousands)
  
Nine Months Ended September 30,
  
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES:
  
 
  
Net loss
$
(159
)
 
$
(5,894
)
Adjustments to reconcile net loss to net cash provided by operating activities:
  

 
  

Depreciation and amortization
54,156

 
19,032

Net amortization of above- and below-market leases
189

 
465

Amortization of deferred financing costs
2,711

 
1,337

Loss on disposal of real estate assets
21

 

Loss on write-off of capitalized leasing commissions and deferred financing expense
68

 

Change in fair value of derivative
(561
)
 
(55
)
Straight-line rental income
(3,053
)
 
(1,135
)
Changes in operating assets and liabilities:
  

 
  

Accounts receivable
(4,800
)
 
(5,661
)
Prepaid expenses and other
(2,087
)
 
(1,594
)
Accounts payable
(972
)
 
(6
)
Accounts payable – affiliates
696

 
426

Accrued and other liabilities
12,613

 
9,054

Net cash provided by operating activities
58,822

 
15,969

CASH FLOWS FROM INVESTING ACTIVITIES:
  

 
  

Real estate acquisitions
(575,748
)
 
(456,956
)
Capital expenditures
(8,994
)
 
(3,568
)
Change in restricted cash and investments
879

 
(2,786
)
Proceeds from sale of derivative
520

 

Net cash used in investing activities
(583,343
)
 
(463,310
)
CASH FLOWS FROM FINANCING ACTIVITIES:
  

 
  

Proceeds from issuance of common stock
2,534

 
923,593

Redemptions of common stock
(1,718
)
 
(582
)
Payment of offering costs
(1,775
)
 
(102,681
)
Payments on mortgages and loans payable
(32,422
)
 
(303,100
)
Proceeds from mortgages and loans payable
163,000

 
267,330

Distributions paid, net of DRP
(42,310
)
 
(9,438
)
Distributions to noncontrolling interests
(16
)
 
(4,242
)
Payments of loan financing costs
(3,194
)
 
(4,961
)
Net cash provided by financing activities
84,099

 
765,919

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(440,422
)
 
318,578

CASH AND CASH EQUIVALENTS:
  

 
  

Beginning of period
460,250

 
7,654

End of period
$
19,828

 
$
326,232

SUPPLEMENTAL CASHFLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:
  
 
  
Cash paid for interest
$
11,630

 
$
5,548

Change in offering costs payable to advisor and sub-advisor
(304
)
 
(2,405
)
Change in distributions payable
168

 
4,715

Change in distributions payable – noncontrolling interests
(4
)
 
(4
)
Change in accrued share repurchase obligation
386

 

Assumed debt
189,006

 
93,808

Assumed interest rate swap
714

 

Accrued capital expenditures
2,809

 
982

Distributions reinvested
46,986

 
8,485


See notes to condensed consolidated financial statements.

5



 Phillips Edison—ARC Shopping Center REIT Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
1. ORGANIZATION
 
Phillips Edison—ARC Shopping Center REIT Inc. (“we”, the “Company”, “our”, or “us”) was formed as a Maryland corporation on October 13, 2009.  Substantially all of our business is conducted through Phillips Edison—ARC Shopping Center Operating Partnership, L.P. (the “Operating Partnership”), a Delaware limited partnership formed on December 3, 2009. We are a limited partner of the Operating Partnership, and our wholly owned subsidiary, Phillips Edison Shopping Center OP GP LLC, is the sole general partner of the Operating Partnership.
 
On January 13, 2010, we filed a registration statement on Form S-11 (Registration No. 333-164313) with the Securities and Exchange Commission (the “SEC”) to offer a maximum of 180 million shares of common stock for sale to the public, of which 150 million shares were registered in our primary offering and 30 million shares were registered under our dividend reinvestment plan (the “DRP”). The SEC declared our registration statement effective on August 12, 2010. On November 19, 2013, we reallocated 26.5 million shares from the DRP to the primary offering. We ceased offering shares of common stock in our primary offering on February 7, 2014. Subsequent to the end of our primary offering, we reallocated approximately 2.7 million unsold shares from the primary offering to the DRP. On June 18, 2014, we filed a registration statement on Form S-3 (Registration No. 333-196870) with the SEC to register an additional 12 million shares to be offered pursuant to the DRP. We continue to offer up to a total of approximately 18.2 million shares of common stock under the DRP. Stockholders who elect to participate in the DRP may choose to invest all or a portion of their cash distributions in shares of our common stock at a purchase price of $9.50 per share.
 
Our advisor is American Realty Capital II Advisors, LLC (the “Advisor”), a limited liability company that was organized in the State of Delaware on December 28, 2009 and that is under common control with AR Capital, LLC (the “AR Capital sponsor”). Under the terms of the advisory agreement between the Advisor and us, the Advisor is responsible for the management of our day-to-day activities and the implementation of our investment strategy. The Advisor has delegated most of its duties under the advisory agreement, including the management of our day-to-day operations and our portfolio of real estate assets, to Phillips Edison NTR LLC (the “Sub-advisor”), which is directly or indirectly owned by Phillips Edison Limited Partnership (the “Phillips Edison sponsor”), and Michael Phillips and Jeffrey Edison, principals of our Phillips Edison sponsor, pursuant to a sub-advisory agreement between the Advisor and the Sub-advisor. Notwithstanding such delegation to the Sub-advisor, the Advisor retains ultimate responsibility for the performance of all the matters entrusted to it under the advisory agreement.
 
We invest primarily in well-occupied grocery-anchored neighborhood and community shopping centers having a mix of creditworthy national and regional retailers selling necessity-based goods and services in strong demographic markets throughout the United States. In addition, we may invest in other retail properties including power and lifestyle shopping centers, multi-tenant shopping centers, free-standing single-tenant retail properties, and other real estate and real estate-related loans and securities depending on real estate market conditions and investment opportunities that we determine are in the best interests of our stockholders. We expect that retail properties primarily would underlie or secure the real estate-related loans and securities in which we may invest.  As of September 30, 2014, we owned fee simple interests in 131 real estate properties, acquired from third parties unaffiliated with us, the Advisor, or the Sub-advisor.
 
On September 20, 2011, we entered into a joint venture with a group of institutional international investors advised by CBRE Investors Global Multi Manager (each a “CBRE Investor”). The joint venture was in the form of PECO-ARC Institutional Joint
Venture I., L.P., a Delaware limited partnership (the “Joint Venture”).  We serve as the general partner and manage the operations of the Joint Venture. Prior to December 31, 2013, we indirectly held a 54% interest in the Joint Venture, and the CBRE Investors held the remaining 46% interest.  We contributed approximately $58.7 million, in the form of equity interests in six wholly owned real estate properties and cash, to the Joint Venture, and the CBRE Investors contributed $50.0 million in cash. On December 31, 2013, we acquired the 46% interest in the Joint Venture previously owned by the CBRE Investors for a purchase price of $57.0 million. As a result, we owned 100% of the Joint Venture as of December 31, 2013. Prior to December 31, 2013, we owned a 54% interest in 20 of our real estate properties through the Joint Venture.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Set forth below is a summary of the significant accounting estimates and policies that management believes are important to the preparation of our condensed consolidated interim financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by management. As a result, these estimates are subject to a degree of uncertainty. There have been no changes to our

6



significant accounting policies during the nine months ended September 30, 2014. For a full summary of our accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on March 13, 2014.
 
Basis of Presentation and Principles of Consolidation—The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report on Form 10-Q should refer to the audited financial statements of Phillips Edison—ARC Shopping Center REIT Inc. for the year ended December 31, 2013, which are included in our 2013 Annual Report on Form 10-K, as certain footnote disclosures contained in such audited financial statements have been omitted from this Quarterly Report on Form 10-Q. In the opinion of management, all normal and recurring adjustments necessary for the fair presentation have been included in this Quarterly Report. Our results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the operating results expected for the full year.
 
The accompanying condensed consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All intercompany balances and transactions are eliminated upon consolidation.
 
Derivative Instruments and Hedging Activities—We may use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps to manage such risk. We may enter into derivative instruments that qualify as cash flow hedges. We do not enter into derivative instruments for speculative purposes. Interest rate swaps are recorded at fair value on a recurring basis. We assess effectiveness of our cash flow hedges both at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate swaps designated as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into interest expense as interest is incurred on the related variable rate debt. Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not perfectly match, such as notional amounts, settlement dates, reset dates, the calculation period and the LIBOR rate. When ineffectiveness exists, the ineffective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recognized in earnings in the period affected.

Changes in fair value as well as net payments or receipts under interest rate swap agreements that do not qualify for hedge accounting treatment are recorded as other income or other expense in the condensed consolidated statements of operations and comprehensive income (loss).

In addition, we evaluate the default risk of the counterparty by monitoring the credit worthiness of the counterparty.  Derivative instruments and hedging activities require management to make judgments on the nature of its derivatives and their effectiveness as hedges. These judgments determine if the changes in fair value of the derivative instruments are reported in the condensed consolidated statements of operations and comprehensive income (loss) as a component of net loss or as a component of comprehensive income and as a component of stockholders' equity on the condensed consolidated balance sheets. Although management believes its judgments are reasonable, a change in a derivative's effectiveness as a hedge could materially affect expenses, net income and equity.

Redeemable Common Stock—Under our share repurchase program, the maximum amount of common stock that we are required to redeem during any calendar year is limited, among other things, to 5% of the weighted-average number of shares outstanding during the prior calendar year. The maximum amount is reduced each reporting period by the current year share redemptions to date. We record amounts that are redeemable under the share repurchase program as redeemable common stock outside of permanent equity in our condensed consolidated balance sheets because redemptions are at the option of the holders and are not solely within our control. Changes in the amount of redeemable common stock from period to period are recorded as an adjustment to capital in excess of par value.
 
Earnings Per Share—Earnings per share are calculated based on the weighted-average number of common shares outstanding during each period. Diluted income per share considers the effect of any potentially dilutive share equivalents for the three and nine months ended September 30, 2014 and 2013.
 
There were 1,818,236 and 319,390 Class B units of the Operating Partnership outstanding and held by the Advisor and the Sub-advisor as of September 30, 2014 and 2013, respectively. The vesting of the Class B units is contingent upon a market condition and service condition. The satisfaction of the market or service condition was not probable as of September 30, 2014 and 2013, respectively, and therefore, the Class B units are not included in earnings per share.
 

7



Impact of Recently Issued Accounting Pronouncements—In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this update raise the threshold for a property disposal to qualify as a discontinued operation and require new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. Unless we elect early adoption, the standard will be effective for us on January 1, 2015. In future periods, the adoption of this pronouncement may result in property disposals not qualifying for discontinued operations presentation, and thus the results of those disposals will remain in income from continuing operations.

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 will eliminate the transaction- and industry-specific revenue recognition guidance currently in place under GAAP and will replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 does not apply to lease contracts accounted for under Accounting Standards Codification (“ASC”) 840, Leases. ASU 2014-09 will be effective for annual and interim periods beginning after December 15, 2016, and early adoption is prohibited. We are currently assessing the impact the adoption of ASU 2014-09 will have on our financial statements.

3. EQUITY
 
General—We have the authority to issue a total of 1 billion shares of common stock with a par value of $0.01 per share and 10 million shares of preferred stock, $0.01 par value per share. As of September 30, 2014, we had issued 180.9 million shares of common stock generating gross cash proceeds of $1.79 billion.  As of September 30, 2014, there were 180.6 million shares of our common stock outstanding, which is net of 0.3 million shares repurchased from stockholders pursuant to our share repurchase program, and we had issued no shares of preferred stock. The holders of common stock are entitled to one vote per share on all matters voted on by stockholders, including election of the board of directors. Our charter does not provide for cumulative voting in the election of directors.
 
Dividend Reinvestment Plan—We have adopted the DRP that allows stockholders to invest distributions in additional shares of our common stock at a price equal to $9.50 per share. Stockholders who elect to participate in the DRP, and who are subject to U.S. federal income taxation laws, will incur a tax liability on an amount equal to the fair value on the relevant distribution date of the shares of our common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the distributions in cash.  Distributions reinvested through the DRP for the three months ended September 30, 2014 and 2013, were $16.0 million and $5.3 million, respectively.  Distributions reinvested through the DRP for the nine months ended September 30, 2014 and 2013, were $47.0 million and $8.5 million, respectively.
 
Share Repurchase Program—Our share repurchase program may provide a limited opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations, at a price equal to or at a discount from the stockholders' original purchase prices paid for the shares being repurchased.
 
Repurchase of shares of common stock will be made monthly upon written notice received by us at least five days prior to the end of the applicable month. Stockholders may withdraw their repurchase request at any time up to five business days prior to the repurchase date.
 
The board of directors may, in its sole discretion, amend, suspend, or terminate the share repurchase program at any time. If the board of directors decides to amend, suspend or terminate the share repurchase program, stockholders will be provided with no less than 30 days’ written notice. During the three months ended September 30, 2014 and 2013, there were 136,203 and 21,084 shares repurchased for $1.3 million and $0.2 million, respectively, under the share repurchase program for an average repurchase price of $9.75 and $9.87 per share, respectively.  During the nine months ended September 30, 2014 and 2013, there were 223,270 and 58,764 shares repurchased for $2.2 million and $0.6 million, respectively, under the share repurchase program for an average repurchase price of $9.76 and $9.90 per share, respectively.  As of September 30, 2014, we recorded a liability of $0.5 million that represents our obligation to repurchase 48,451 shares of common stock submitted for repurchase as of September 30, 2014 but not yet repurchased. As of December 31, 2013, we recorded a liability of $76,000 that represented our obligation to repurchase 8,072 shares of common stock submitted for repurchase as of December 31, 2013 but not yet repurchased at that time.

4. FAIR VALUE MEASUREMENT
 
ASC 820, Fair Value Measurement (“ASC 820”) defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement. Fair value is defined by ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

8



participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:
Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).
Level 3—Unobservable inputs, only used to the extent that observable inputs are not available, reflect our assumptions about the pricing of an asset or liability.
 
The following describes the methods we use to estimate the fair value of our financial and non-financial assets and liabilities:
 
Cash and cash equivalents, restricted cash and investments, accounts receivable, and accounts payable—We consider the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization.

Real estate investments—The purchase prices of the investment properties, including related lease intangible assets and liabilities, were allocated at estimated fair value based on Level 3 inputs, such as discount rates, capitalization rates, comparable sales, replacement costs, income and expense growth rates and current market rents and allowances as determined by management.
 
Mortgages and loans payable —We estimate the fair value of our debt by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by our lenders using Level 3 inputs.  The discount rate used approximates current lending rates for loans or groups of loans with similar maturities and credit quality, assuming the debt is outstanding through maturity and considering the debt’s collateral (if applicable).  Such discount rates for fixed-rate debt were 3.50% and 4.5% as of September 30, 2014 and December 31, 2013, respectively. The discount rates for secured and unsecured variable-rate debt were 2.66% and 1.46%, respectively, as of September 30, 2014. We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed.  The fair value and recorded value of our borrowings, as of September 30, 2014, were $533.7 million and $518.7 million, respectively.  The fair value and recorded value of our borrowings, as of December 31, 2013, were $201.4 million and $200.9 million, respectively.
 
Derivative instruments As of September 30, 2014, we were party to one interest rate swap agreement with a notional amount of $11.7 million, assumed as part of the acquisition of Townfair Shopping Center, which is measured at fair value on a recurring basis. The interest rate swap agreement effectively fixes the variable interest rate of our secured variable-rate mortgage note, secured by Townfair Shopping Center, at an annual interest rate of 5.22% through June 10, 2018.

As of December 31, 2013, we were a party to one interest rate swap agreement with a notional amount of $50.0 million that was measured at fair value on a recurring basis.  The interest rate swap agreement effectively fixed the variable interest rate of a $50.0 million portion of our unsecured credit facility at 2.10% through December 2017. On February 21, 2014, we sold this interest rate swap to an unaffiliated party.
 
The fair values of the interest rate swap agreements as of September 30, 2014 and December 31, 2013 were based on the estimated amounts we would receive or pay to terminate the contracts at the reporting date and were determined using interest rate pricing models and interest rate related observable inputs.  Although we determined that the significant inputs used to value our derivatives fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of September 30, 2014 and December 31, 2013, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivative. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
 

9



Considerable judgment is necessary to develop estimated fair values of financial and non-financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we did or could actually realize upon disposition of the financial assets and liabilities previously sold or currently held (see Note 10).
 
A summary of our financial assets and liabilities that were measured at fair value, by level within the fair value hierarchy is as follows (in thousands):
  
September 30, 2014
 
December 31, 2013
  
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Derivative asset designated as a hedging instrument:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap
$

 
$

 
$

 
$

 
$

 
$
818

 
$

 
$
818

Derivative liability not designated as a hedging instrument:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap

 
545

 

 
545

 

 

 

 

 
5. REAL ESTATE ACQUISITIONS
 
During the nine months ended September 30, 2014, we acquired 48 grocery-anchored retail centers and one strip center adjacent to a previously acquired grocery-anchored retail center for a combined purchase price of approximately $770.9 million, including $183.5 million of assumed debt with a fair value of $189.0 million.  Additionally, we assumed an interest rate swap agreement valued as a $0.7 million liability at the time of our acquisition of Townfair Shopping Center. The following tables present certain additional information regarding our acquisitions of properties which were deemed individually immaterial when acquired, but are material in the aggregate.  We allocated the purchase price of these acquisitions to the fair value of the assets acquired and lease liabilities assumed as follows (in thousands):
 
 
Nine Months Ended September 30, 2014
Land
 
$
178,661

Building and improvements
 
527,334

Acquired in-place leases
 
67,366

Acquired above-market leases
 
17,035

Acquired below-market leases
 
(19,526
)
Total
 
$
770,870


The weighted-average amortization periods for acquired in-place lease, above-market lease, and below market lease intangibles acquired during the nine months ended September 30, 2014 are 7 years, 10 years, and 11 years, respectively. 

The amounts recognized for revenues, acquisition expenses and net loss from each respective acquisition date to September 30, 2014 related to the operating activities of our acquisitions are as follows (in thousands):
 
 
Nine Months Ended September 30, 2014
Revenues
 
$
29,976

Acquisition expenses
 
15,116

Net loss
 
12,153

  
The following unaudited pro forma information summarizes selected financial information from our combined results of operations, as if all of our acquisitions for 2013 and 2014 had been acquired on January 1, 2013.
 
We estimated that revenues, on a pro forma basis, for the three months ended September 30, 2014 and 2013, would have been approximately $52.8 million and $52.6 million, respectively, and our net income attributable to our stockholders, on a pro forma basis, would have been approximately $6.5 million and $7.7 million, respectively. The pro forma net income per share would have been approximately $0.04 for the three months ended September 30, 2014 and 2013.

We estimated that revenues, on a pro forma basis for the nine months ended September 30, 2014 and 2013, would have been approximately $158.7 million and $158.6 million, respectively. Our net income or net loss attributable to our stockholders, on a

10



pro forma basis, would have been net income of approximately $20.4 million and a net loss of approximately $9.1 million for the nine months ended September 30, 2014 and 2013, respectively. The pro forma net income or net loss per share would have been net income per share of approximately $0.12 and net loss per share of approximately $0.05 for the nine months ended September 30, 2014 and 2013, respectively.

This pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of the period, nor does it purport to represent the results of future operations.
 
6. ACQUIRED INTANGIBLE ASSETS

Acquired intangible lease assets consisted of the following (in thousands):
  
September 30, 2014
 
December 31, 2013
Acquired in-place leases, net of accumulated amortization of $27,761 and $10,363, respectively
$
141,797

 
$
91,829

Acquired above-market leases, net of accumulated amortization of $7,549 and $3,967, respectively
29,356

 
15,901

Total 
$
171,153

 
$
107,730

 
Amortization recorded on the intangible assets for the three months ended September 30, 2014 and 2013 was $8.1 million and $2.8 million, respectively.  Amortization recorded on the intangible assets for the nine months ended September 30, 2014 and 2013 was $21.0 million and $6.7 million, respectively.
 
Estimated future amortization on the respective acquired intangible lease assets as of September 30, 2014 for the remainder of 2014 and for each of the four succeeding calendar years and thereafter is as follows (in thousands):
 
Year
In-Place Leases
 
Above-Market Leases
October 1 to December 31, 2014
$
6,922

 
$
1,399

2015
27,940

 
5,550

2016
25,851

 
4,638

2017
23,123

 
3,823

2018
18,152

 
3,045

2019 and thereafter
39,809

 
10,901

Total
$
141,797

 
$
29,356


The weighted-average amortization periods for acquired in-place lease and above-market lease intangibles are seven years and eight years, respectively. 

7. MORTGAGES AND LOANS PAYABLE
 
As of September 30, 2014 and December 31, 2013, we had approximately $359.1 million and $196.1 million, respectively, of outstanding mortgage notes payable, excluding fair value of debt adjustments.  Each mortgage note payable is secured by the respective property on which the debt was placed. 
 
As of September 30, 2014, we also had access to a $350 million unsecured revolving credit facility, which may be expanded to $600 million, with a $151.0 million outstanding principal balance from which we may draw additional funds to pay certain long-term debt obligations as they mature.  As of September 30, 2014, the current borrowing capacity of the unsecured revolving credit facility was $217.0 million, as calculated using properties eligible to be included in the calculation of the borrowing base as defined by the terms of the credit facility.  The interest rate on amounts outstanding under this credit facility is currently LIBOR plus 1.30%. The credit facility matures on December 18, 2017, with two six-month options to extend the maturity to December 18, 2018.

Of the amount outstanding on our mortgage notes and loans payable at September 30, 2014, $6.4 million is for a loan that matures in 2014, excluding monthly scheduled principal payments. Subsequent to September 30, 2014, the principal balance of

11



that loan was repaid. As of September 30, 2014 and December 31, 2013, the weighted-average interest rate for the loans was 4.34% and 5.61%, respectively.
During the nine months ended September 30, 2014, in conjunction with our acquisition of 15 real estate properties, we assumed debt of $183.5 million with a fair value of $189.0 million. During the nine months ended September 30, 2013, in conjunction with our acquisition of eight real estate properties, we assumed debt of $90.3 million with a fair value of $93.9 million. The assumed debt market adjustment will be amortized over the remaining life of the loans, and this amortization is classified as interest expense. The amortization recorded on the assumed below-market debt adjustment was $0.6 million and $0.4 million for the three months ended September 30, 2014 and 2013, respectively. The amortization recorded on the assumed below-market debt adjustment was $1.8 million and $0.8 million for the nine months ended September 30, 2014 and 2013, respectively.

The following is a summary of our debt obligations as of September 30, 2014 and December 31, 2013 (in thousands):
 
  
September 30, 2014
 
December 31, 2013
  
Outstanding Principal Balance
 
Maximum Borrowing Capacity
 
Outstanding Principal Balance
 
Maximum Borrowing Capacity
Fixed-rate mortgages payable(1)(2)
$
359,136

 
$
359,136

 
$
196,052

 
$
196,052

Unsecured credit facility - fixed-rate(3)

 

 

 
50,000

Unsecured credit facility - variable-rate
151,000

 
216,979

 

 
176,745

Assumed below-market debt adjustment
8,539

 
 N/A

 
4,820

 
N/A

Total
$
518,675

 
$
576,115

 
$
200,872

 
$
422,797

(1) 
Due to the non-recourse nature of certain mortgages, the assets and liabilities of the following properties are neither available to pay the debts of the consolidated limited liability companies nor constitute obligations of the consolidated limited liability companies: Baker Hill Center, Broadway Plaza, Publix at Northridge, Kleinwood Center, Murray Landing, Vineyard Center, Sunset Center, Westwoods Shopping Center, Stockbridge Commons, East Burnside Plaza, Fresh Market, Collington Plaza, Stop & Shop Plaza, Arcadia Plaza, Savoy Plaza, Coppell Market Center, Statler Square, Hamilton Village, Waynesboro Plaza, Thompson Valley Towne Center, Lumina Commons, Driftwood Village, and Orchard Square. The outstanding principal balance of these non-recourse mortgages as of September 30, 2014 and December 31, 2013 was $259.5 million and $157.8 million, respectively.
(2) 
As of September 30, 2014, the interest rate on $11.7 million outstanding under one of our variable-rate mortgage notes payable was, in effect, fixed at 5.22% by an interest rate swap agreement (see Notes 4 and 10).
(3) 
As of December 31, 2013, the interest rate on $50.0 million of the amount available under our unsecured credit facility was, in effect, fixed at 2.10% by an interest rate swap agreement (see Notes 4 and 10).

Below is a listing of our maturity schedule with the respective principal payment obligations (in thousands) and weighted-average interest rates:
  
2014 (1)
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Maturing debt:(2)
  

 
  

 
  

 
  

 
  

 
  

 
  

Fixed-rate mortgages payable(3)(4)
$
8,178

 
$
65,851

 
$
104,836

 
$
47,275

 
$
20,846

 
$
112,150

 
$
359,136

Unsecured credit facility - variable-rate

 

 

 
151,000

 

 

 
151,000

Total maturing debt
$
8,178

 
$
65,851

 
$
104,836

 
$
198,275

 
$
20,846

 
$
112,150

 
$
510,136

Weighted-average interest rate on debt:
  

 
  

 
  

 
  

 
  

 
  

 
  

Fixed-rate mortgages payable(3)(4)
5.6
%
 
5.3
%
 
5.7
%
 
5.3
%
 
6.3
%
 
5.2
%
 
5.5
%
Unsecured credit facility - variable-rate
%
 
%
 
%
 
1.5
%
 
%
 
%
 
1.5
%
Total
5.6
%
 
5.3
%
 
5.7
%
 
2.4
%
 
6.3
%
 
5.2
%
 
4.3
%
(1) 
Includes only October 1, 2014 through December 31, 2014. Of the $8.2 million, $6.4 million is for principal payment obligations on a loan that was repaid subsequent to September 30, 2014 and $1.8 million is for principal payment obligations on loans that mature after 2014.
(2) 
The debt maturity table does not include any below-market debt adjustment, of which $8.5 million, net of accumulated amortization, was outstanding as of September 30, 2014.
(3) 
As of September 30, 2014, the interest rate on $11.7 million outstanding under one of our variable-rate mortgage notes payable was, in effect, fixed at 5.22% by an interest rate swap agreement (see Notes 4 and 10).
(4) 
All but $6.4 million of the fixed-rate debt represents loans assumed as part of certain acquisitions. 


12



8. ACQUIRED BELOW-MARKET LEASE INTANGIBLES

Amortization recorded on the intangible liabilities for the three months ended September 30, 2014 and 2013 was $1.4 million and $0.5 million, respectively.  Amortization recorded on the intangible liabilities for the nine months ended September 30, 2014 and 2013 was $3.4 million and $1.2 million, respectively.

Estimated future amortization income of the intangible lease liabilities as of September 30, 2014 for the remainder of 2014 and for each of the four succeeding calendar years and thereafter is as follows (in thousands):
Year
Below-Market Leases
October 1 to December 31, 2014
$
1,468

2015
5,987

2016
5,464

2017
4,516

2018
3,464

2019 and thereafter
15,621

Total
$
36,520


The weighted-average amortization period for below-market lease intangibles is 11 years.

9. COMMITMENTS AND CONTINGENCIES
 
Litigation
 
In the ordinary course of business, we may become subject to litigation or claims. There are no material legal proceedings pending, or known to be contemplated, against us.
 
Environmental Matters
 
In connection with the ownership and operation of real estate, we may be potentially liable for costs and damages related to environmental matters. We have not been notified by any governmental authority of any material non-compliance, liability or other claim, nor are we aware of any other environmental condition that we believe will have a material impact on our condensed consolidated financial statements.

10. DERIVATIVES AND HEDGING ACTIVITIES
 
Risk Management Objective of Using Derivatives
 
We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposure to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings.
 
Cash Flow Hedges of Interest Rate Risk
 
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
 
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged

13



forecasted transaction affects earnings. During 2014, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings prior to de-designation. 

During the nine months ended September 30, 2014, we terminated our only designated interest rate swap and accelerated the reclassification of amounts in other comprehensive income to earnings as a result of the hedged forecasted transactions becoming probable not to occur. The accelerated amounts resulted in a gain of $690,000 recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive income (loss) for the nine months ended September 30, 2014. As a result of the hedged forecasted transaction becoming probable not to occur, the swap was de-designated as a cash flow hedge in February 2014, and changes in fair value of a loss of $326,000 were recorded directly in other income (expense) during the nine months ended September 30, 2014.

As of September 30, 2014, we had no active outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk.

Derivatives Not Designated as Hedging Instruments
Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements to be classified as hedging instruments. Changes in the fair value of these derivative instruments are recorded directly in other income (expense) and resulted in a gain of $41,000 and a loss of $259,000 for the three and nine months ended September 30, 2014, respectively, including the loss recorded in relation to the aforementioned de-designated swap. We did not have any derivatives that were not designated as hedges during the three and nine months ended September 30, 2013.

Tabular Disclosure of the Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)  
 
The table below presents the effect of our derivative financial instruments on the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2014 and September 30, 2013, respectively (in thousands). 
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
Derivatives in Cash Flow Hedging Relationships (Interest Rate Swap)
 
2014
 
2013
 
2014
 
2013
Amount of gain (loss) recognized in other comprehensive income on derivative 
 
$

 
$
(357
)
 
$

 
$
557

Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense 
 

 
24

 

 
(57
)
Amount of gain (loss) recognized in income on derivative (ineffective portion, reclassifications of missed forecasted transactions and amounts excluded from effectiveness testing)
 

 
(57
)
 
690

 
(47
)

Credit-risk-related Contingent Features

We have an agreement with our derivative counterparty that contains a provision where, if we either default or are capable of being declared in default on any of our indebtedness, we could also be declared to be in default on our derivative obligations.

As of September 30, 2014, the fair value of our derivative was a net liability position including accrued interest, but excluding any adjustment for nonperformance risk related to this agreement. As of September 30, 2014, we have not posted any collateral related to this agreement.

11. RELATED PARTY TRANSACTIONS

Economic Dependency—We are dependent on the Advisor, the Sub-advisor, the Property Manager, and their respective affiliates for certain services that are essential to us, asset acquisition and disposition decisions, asset management, operating and leasing of our properties, and other general and administrative responsibilities. In the event that the Advisor, the Sub-advisor, and/or the Property Manager, and their respective affiliates are unable to provide such services, we would be required to find alternative service providers or sources of capital, which could result in higher costs and expenses.

14



 
Advisory Agreement—Pursuant to our advisory agreement, the Advisor is entitled to specified fees for certain services, including managing our day-to-day activities and implementing our investment strategy. The Advisor has entered into a sub-advisory agreement with the Sub-advisor, which manages our day-to-day affairs and our portfolio of real estate investments on behalf of the Advisor, subject to the board’s supervision and certain major decisions requiring the consent of both the Advisor and Sub-advisor. The expenses to be reimbursed to the Advisor and Sub-advisor will be reimbursed in proportion to the amount of expenses incurred on our behalf by the Advisor and Sub-advisor, respectively.
 
Organization and Offering Costs—Under the terms of the advisory agreement, we are to reimburse on a monthly basis the Advisor, the Sub-advisor or their respective affiliates for cumulative organization and offering costs and future organization and offering costs they may incur on our behalf but only to the extent that the reimbursement would not exceed 1.5% of gross offering proceeds over the life of our primary initial public offering and our DRP offering. As of September 30, 2014, the Advisor, Sub-advisor and their affiliates have charged us approximately $27.4 million of cumulative organization and offering costs, and we have reimbursed $27.3 million of such costs, resulting in a net payable of $0.1 million. As of December 31, 2013, the Advisor, Sub-advisor and their affiliates had charged us approximately $26.3 million of cumulative organization and offering costs, and we had reimbursed $25.9 million of such costs, resulting in a net payable of $0.4 million.
 
Acquisition Fee—We pay the Advisor an acquisition fee related to services provided in connection with the selection and purchase or origination of real estate and real estate-related investments. The acquisition fee is equal to 1.0% of the cost of investments we acquire or originate, including any debt attributable to such investments.

Acquisition Expenses—We reimburse the Sub-advisor for expenses actually incurred related to selecting, evaluating, and acquiring assets on our behalf.  During the three and nine months ended September 30, 2014, we reimbursed the Sub-advisor for personnel costs related to due diligence services for assets we acquired during the period.
 
Asset Management Subordinated Participation—Within 60 days after the end of each calendar quarter (subject to the approval of our board of directors), we will pay an asset management subordinated participation by issuing a number of restricted operating partnership units designated as Class B Units to the Advisor and Sub-advisor equal to: (i) the excess of the product of (x) the cost of our assets multiplied by (y) 0.25%; divided by (ii) the value of one share of common stock as of the last day of such calendar quarter net of the selling commissions and dealer manager fees payable on shares of our common stock in our initial public offering.

The Advisor and Sub-advisor are entitled to receive distributions on the vested and unvested Class B units they receive in connection with their asset management subordinated participation at the same rate as distributions are paid to common stockholders. Such distributions are in addition to the incentive fees that our Advisor Entities and their affiliates may receive from us. During the nine months ended September 30, 2014, the Operating Partnership issued 1,285,855 Class B units to the Advisor and the Sub-advisor under the advisory agreement for the asset management services performed by the Advisor and the Sub-advisor during the period from October 1, 2013 to June 30, 2014. These Class B units will not vest until an economic hurdle has been met. The Advisor and Sub-advisor continue to provide advisory services through the date that such economic hurdle is met. The economic hurdle will be met when the value of the Operating Partnership’s assets plus all distributions made equal or exceed the total amount of capital contributed by investors plus a 6% cumulative, pre-tax, non-compounded annual return thereon.
 
Financing Fee—We pay the Advisor or Sub-advisor a financing fee equal to 0.75% of all amounts made available under any loan or line of credit.
 
Disposition Fee—For substantial assistance by the Advisor, Sub-advisor or any of their affiliates in connection with the sale of properties or other investments, we will pay the Advisor or its assignee 2.0% of the contract sales price of each property or other investment sold. The conflicts committee of our board of directors will determine whether the Advisor, Sub-advisor or their respective affiliates have provided substantial assistance to us in connection with the sale of an asset. Substantial assistance in connection with the sale of a property includes the Advisor’s or Sub-advisor’s preparation of an investment package for the property (including an investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a structural report and exhibits) or such other substantial services performed by the Advisor or Sub-advisor in connection with a sale. However, if we sell an asset to an affiliate, our organizational documents will prohibit us from paying the Advisor, the Sub-advisor or their respective affiliates a disposition fee. As of September 30, 2014, we have not disposed of any properties or other investments, and no disposition fees have been earned by or paid to the Advisor or Sub-advisor.
 

15



General and Administrative Expenses—As of September 30, 2014 and December 31, 2013, we owed the Advisor, the Sub-advisor and their affiliates $38,000 and $85,000, respectively, for general and administrative expenses paid on our behalf.  As of September 30, 2014, neither the Advisor nor the Sub-advisor has allocated any portion of their employees’ salaries to general and administrative expenses.

Summarized below are the fees earned by and the expenses reimbursable to the Advisor and the Sub-advisor, except for organization and offering costs and general and administrative expenses, which we disclose above, for the three and nine months ended September 30, 2014 and 2013 and any related amounts unpaid as of September 30, 2014 and December 31, 2013 (in thousands):

  
For the Three Months Ended
 
For the Nine Months Ended
 
Unpaid Amount as of
  
September 30,
 
September 30,
 
September 30,
 
December 31,
  
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Acquisition fees
$
1,651

 
$
2,029

 
$
7,654

 
$
5,519

 
$

 
$

Acquisition expenses
237

 

 
905

 

 

 

Asset management fees(1)

 
250

 

 
748

 

 

Class B unit distribution(2)
281

 
41

 
598

 
69

 
72

 
30

Financing fees
334

 
289

 
1,376

 
2,384

 

 

Disposition fees

 

 

 

 

 

(1) 
Paid by the CBRE Investors pursuant to the advisory agreement between the Joint Venture and the Advisor.
(2) 
Represents the distributions paid to the Advisor and the Sub-advisor as holders of Class B units of the Operating Partnership.
 
Subordinated Participation in Net Sales Proceeds—The Operating Partnership will pay to PE-ARC Special Limited Partner, LLC (the “Special Limited Partner”) a subordinated participation in the net sales proceeds of the sale of real estate assets equal to 15.0% of remaining net sales proceeds after return of capital contributions to stockholders plus payment to stockholders of a 7.0% cumulative, pre-tax, non-compounded return on the capital contributed by stockholders.  The Advisor has a 15.0% interest and the Sub-advisor has an 85.0% interest in the Special Limited Partner.  No sales of real estate assets have occurred to date.
 
Subordinated Incentive Listing Distribution—The Operating Partnership will pay to the Special Limited Partner a subordinated incentive listing distribution upon the listing of our common stock on a national securities exchange.  Such incentive listing distribution is equal to 15.0% of the amount by which the market value of all of our issued and outstanding common stock plus distributions exceeds the aggregate capital contributed by stockholders plus an amount equal to a 7.0% cumulative, pre-tax non-compounded annual return to stockholders. 
 
Neither the Special Limited Partner nor any of its affiliates can earn both the subordinated participation in net sales proceeds and the subordinated incentive listing distribution.  No subordinated incentive listing distribution has been earned to date.
 
Subordinated Distribution Upon Termination of the Advisor Agreement—Upon termination or non-renewal of the advisory agreement, the Special Limited Partner shall be entitled to a subordinated termination distribution in the form of a non-interest bearing promissory note equal to 15.0% of the amount by which the cost of our assets plus distributions exceeds the aggregate capital contributed by stockholders plus an amount equal to a 7.0% cumulative, pre-tax non-compounded annual return to stockholders.  In addition, the Special Limited Partner may elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or a liquidity event occurs. No such termination has occurred to date.
 
Property Manager—All of our real properties are managed and leased by Phillips Edison & Company Ltd. (the “Property Manager”), an affiliated property manager. The Property Manager is wholly owned by our Phillips Edison sponsor and was organized on September 15, 1999. The Property Manager also manages real properties acquired by the Phillips Edison affiliates or other third parties.
 
Commencing June 1, 2014, the amount we pay to the Property Manager in monthly property management fees decreased from 4.5% to 4.0% of the monthly gross cash receipts from the properties managed by the Property Manager. In the event that we contract directly with a non-affiliated third-party property manager with respect to a property, we will pay the Property Manager a monthly oversight fee equal to 1.0% of the gross revenues of the property managed. In addition to the property management fee or oversight fee, if the Property Manager provides leasing services with respect to a property, we pay the Property Manager leasing fees in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable

16



services based on national market rates. The Property Manager shall be paid a leasing fee in connection with a tenant’s exercise of an option to extend an existing lease, and the leasing fees payable to the Property Manager may be increased by up to 50% in the event that the Property Manager engages a co-broker to lease a particular vacancy. We reimburse the costs and expenses incurred by the Property Manager on our behalf, including employee compensation, legal, travel and other out-of-pocket expenses that are directly related to the management of specific properties, as well as fees and expenses of third-party accountants.

If we engage the Property Manager to provide construction management services with respect to a particular property, we pay a construction management fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the property.
 
The Property Manager hires, directs and establishes policies for employees who have direct responsibility for the operations of each real property it manages, which may include, but is not limited to, on-site managers and building and maintenance personnel. Certain employees of the Property Manager may be employed on a part-time basis and may also be employed by the Sub-advisor or certain of its affiliates. The Property Manager also directs the purchase of equipment and supplies and will supervise all maintenance activity.
 
Summarized below are the fees earned by and the expenses reimbursable to the Property Manager for the three and nine months ended September 30, 2014 and 2013 and any related amounts unpaid as of September 30, 2014 and December 31, 2013 (in thousands):
 
  
For the Three Months Ended
 
For the Nine Months Ended
 
Unpaid Amount as of
  
September 30,
 
September 30,
 
September 30,
 
December 31,
  
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Property management fees
$
1,895

 
$
851

 
$
5,202

 
$
1,884

 
$
680

 
$
418

Leasing commissions
1,062

 
429

 
2,770

 
896

 
310

 
80

Construction management fees
191

 
84

 
441

 
160

 
73

 
50

Other fees and reimbursements
766

 
191

 
1,504

 
453

 
275

 
89

Total
$
3,914

 
$
1,555

 
$
9,917

 
$
3,393

 
$
1,338

 
$
637

 
Dealer Manager— The dealer manager for the primary portion of our initial public offering was Realty Capital Securities, LLC (the “Dealer Manager”). The Dealer Manager is a member firm of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and was organized on August 29, 2007. The Dealer Manager is a subsidiary of an entity which is under common control with our AR Capital sponsor and provided certain sales, promotional and marketing services in connection with the distribution of the shares of common stock offered under the primary portion of our initial public offering. Excluding shares sold pursuant to the “friends and family” program, the Dealer Manager was generally paid a sales commission equal to 7.0% of the gross proceeds from the sale of shares of the common stock sold in the primary offering and a dealer manager fee equal to 3.0% of the gross proceeds from the sale of shares of the common stock sold in the primary offering.  The Dealer Manager typically reallowed 100% of the selling commissions and a portion of the dealer manager fee to participating broker-dealers. Our agreement with the Dealer Manager terminated by its terms in connection with the close of our primary offering on February 7, 2014.
 
Summarized below are the fees earned by the Dealer Manager for the three and nine months ended September 30, 2014 and 2013 (in thousands):
  
For the Three Months Ended
 
For the Nine Months Ended
  
September 30,
 
September 30,
  
2014
 
2013
 
2014
 
2013
Selling commissions 
$

 
$
32,296

 
$
157

 
$
57,761

Selling commissions reallowed

 
32,296

 
157

 
57,761

Dealer manager fees

 
15,412

 
72

 
27,422

Dealer manager fees reallowed

 
5,381

 
29

 
9,585


Share Purchases by Sub-advisor—The Sub-advisor agreed to purchase on a monthly basis sufficient shares sold in our public offering such that the total shares owned by the Sub-advisor was equal to at least 0.10% of our outstanding shares (excluding shares issued after the commencement of, and outside of, the initial public offering) at the end of each immediately preceding

17



month. The Sub-advisor purchased shares at a purchase price of $9.00 per share, reflecting no dealer manager fee or selling commissions paid on such shares.
 
As of September 30, 2014 and December 31, 2013, the Sub-advisor owned 176,509 shares of our common stock, or approximately 0.10% of our common stock issued during our initial public offering period, which closed on February 7, 2014. The Sub-advisor may not sell any of these shares while serving as the Sub-advisor.

12. OPERATING LEASES
 
The terms and expirations of our operating leases with our tenants vary. The lease agreements frequently contain options to extend the terms of leases and other terms and conditions as negotiated. We retain substantially all of the risks and benefits of ownership of the real estate assets leased to tenants.
 
Approximate future rentals to be received under non-cancelable operating leases in effect at September 30, 2014, assuming no new or renegotiated leases or option extensions on lease agreements, are as follows (in thousands):
Year
Amount
October 1 to December 31, 2014
$
39,563

2015
153,244

2016
139,573

2017
123,757

2018
106,366

2019 and thereafter
454,246

Total
$
1,016,749

 
No single tenant comprised 10% or more of our aggregate annualized effective rent as of September 30, 2014.
 
13. SUBSEQUENT EVENTS
 
Distributions
 
On October 1, 2014, we paid a distribution equal to a daily amount of $0.00183562 per share of common stock outstanding for stockholders of record for the period from September 1, 2014 through September 30, 2014. The total gross amount of the distribution was approximately $9.9 million, with $5.2 million being reinvested in the DRP, for a net cash distribution of $4.7 million.
 
On November 3, 2014, we paid a distribution equal to a daily amount of $0.00183562 per share of common stock outstanding for stockholders of record for the period from October 1, 2014 through October 31, 2014. The total gross amount of the distribution was approximately $10.3 million, with $5.4 million being reinvested in the DRP, for a net cash distribution of $4.9 million.

Amendment to Unsecured Revolving Credit Facility

On October 9, 2014, we executed an amendment to our unsecured revolving credit facility that removed the prior borrowing base of properties. As a result, our borrowing capacity under the facility increased from $217.0 million as of September 30, 2014 to $350 million.


18



Acquisitions

Subsequent to September 30, 2014, we acquired a 100% ownership in the following properties (dollars in thousands):
Property Name
 
Location
 
Anchor Tenant
 
Acquisition Date
 
Purchase Price
 
Square Footage
 
Leased % of Rentable Square Feet at Acquisition
Beavercreek Towne Centre
 
Beavercreek, OH
 
Fresh Thyme
 
10/24/2014
 
$
47,480

 
355,881
 
100.0
%
Fairfield Crossing
 
Beavercreek, OH
 
Walmart
 
10/24/2014
 
14,020

 
71,170
 
100.0
%
Grayson Village
 
Loganville, GA
 
Publix
 
10/24/2014
 
9,650

 
83,155
 
77.6
%
The Fresh Market Shopping Center
 
Pawleys Island, SC
 
The Fresh Market
 
10/28/2014
 
8,125

 
32,442
 
89.6
%
 
The supplemental purchase accounting disclosures required by GAAP relating to the recent acquisitions of the aforementioned properties have not been presented as the initial accounting for these acquisitions was incomplete at the time this Quarterly Report on Form 10-Q was filed with the SEC. The initial accounting was incomplete due to the late closing dates of the acquisitions.



19



Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Cautionary Note Regarding Forward-Looking Statements
 
Certain statements contained in this Quarterly Report on Form 10-Q of Phillips Edison—ARC Shopping Center REIT Inc. (“we”, the “Company”, “our” or “us”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the U.S. Securities and Exchange Commission (“SEC”). We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Quarterly Report on Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
 
Any such forward-looking statements are subject to risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual conditions, our ability to accurately anticipate results expressed in such forward-looking statements, including our ability to generate positive cash flow from operations, make distributions to stockholders, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A in Part II of this Form 10-Q and Item 1A in Part I of our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on March 13, 2014, for a discussion of some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause actual results to differ materially from those presented in our forward-looking statements.
 
Overview
 
Organization
 
Phillips EdisonARC Shopping Center REIT Inc. was formed as a Maryland corporation on October 13, 2009 and elected to be taxed as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2010. On January 13, 2010, we filed a registration statement on Form S-11 (Registration No. 333-164313) with the SEC to offer a maximum of 180 million shares of common stock for sale to the public, of which 150 million shares were registered in our primary offering and 30 million shares were registered under the dividend reinvestment plan (“DRP”). The SEC declared our registration statement effective on August 12, 2010. On November 19, 2013, we reallocated 26.5 million shares from the DRP to the primary offering. We ceased offering shares of common stock in our primary offering on February 7, 2014. Subsequent to the end of our primary offering, we reallocated approximately 2.7 million unsold shares from the primary offering to the DRP. On June 18, 2014, we filed a registration statement on Form S-3 (Registration No. 333-196870) with the SEC to register an additional 12 million shares to be offered pursuant to the DRP. We continue to offer up to a total of approximately 18.2 million shares of common stock under the DRP.
 
Our advisor is American Realty Capital II Advisors, LLC (the “Advisor”), a limited liability company that was organized in the State of Delaware on December 28, 2009 and that is under common control with AR Capital LLC (the “AR Capital sponsor”). Under terms of the advisory agreement between the Advisor and us, the Advisor is responsible for the management of our day-to-day activities and the implementation of our investment strategy. The Advisor has delegated most of its duties under the advisory agreement, including the management of our day-to-day operations and our portfolio of real estate assets, to Phillips Edison NTR LLC (the “Sub-advisor”), which is directly or indirectly owned by Phillips Edison Limited Partnership (the “Phillips Edison sponsor”) and Michael Phillips and Jeffrey Edison, principals of our Phillips Edison sponsor. Notwithstanding such delegation to the Sub-advisor, the Advisor retains ultimate responsibility for the performance of all the matters entrusted to it under the advisory agreement.

We invest primarily in well-occupied grocery-anchored neighborhood and community shopping centers having a mix of creditworthy national and regional retailers selling necessity-based goods and services in strong demographic markets throughout the United States. In addition, we may invest in other retail properties including power and lifestyle shopping centers, multi-tenant shopping centers, free-standing single-tenant retail properties, and other real estate and real estate-related

20



loans and securities depending on real estate market conditions and investment opportunities that we determine are in the best interests of our stockholders. We expect that retail properties primarily would underlie or secure the real estate-related loans and securities in which we may invest.
 
Equity Raise Activity
 
As of September 30, 2014, we had issued a total of 180.9 million shares of common stock including 7.1 million shares issued through the DRP, generating gross cash proceeds of $1.79 billion.  During the nine months ended September 30, 2014, we issued 5.2 million shares of common stock, including 4.9 million shares issued through the DRP, generating gross cash proceeds of $49.5 million. Although we ceased offering shares of common stock in our primary offering on February 7, 2014, we continue to offer shares through the DRP.
 
Portfolio
 
Below are statistical highlights of our portfolio’s activities from inception to date and for the properties acquired during the three months ended September 30, 2014:
  
  
 
Property Acquisitions
  
Cumulative
 
during the  
  
Portfolio through
 
Three Months Ended
  
September 30, 2014
 
September 30, 2014
Number of properties
131

 
11

Number of states
27

 
10

Weighted average capitalization rate(1)
7.1
%
 
7.2
%
Weighted average capitalization rate with straight-line rent(2)
7.3
%
 
7.4
%
Total acquisition purchase price (in thousands)
$
1,985,253

 
$
165,077

Total square feet
13,886,069

 
1,283,170

Leased % of rentable square feet(3)
94.7
%
 
91.0
%
Average remaining lease term in years(3)
6.1

 
5.7

(1) 
The capitalization rate is calculated by dividing the annualized in-place net operating income of a property as of the date of acquisition by the contract purchase price of the property.  Annualized in-place net operating income is calculated by subtracting the estimated annual operating expenses of a property from the annualized rents to be received from tenants occupying space at the property as of the date of acquisition.
(2) 
The capitalization rate with straight-line rent is calculated by dividing the annualized in-place net operating income, inclusive of straight-line rental income, of a property as of the date of acquisition by the contract purchase price of the property.  This annualized in-place net operating income is calculated by subtracting the estimated annual operating expenses of a property from the straight-line annualized rents to be received from tenants occupying space at the property as of the date of acquisition.
(3) 
As of September 30, 2014


21



As of September 30, 2014, we owned 131 real estate properties, acquired from third parties unaffiliated with us, the Advisor, or the Sub-advisor. The following table presents information regarding each of our properties as of September 30, 2014 (dollars in thousands):
Property Name
 
City, State
 
Anchor Tenant
 
Date
Acquired
 
Contract Purchase Price(1)
 
Rentable
Square
Feet
 
Average
Remaining
Lease Term
in Years as of September 30, 2014
 
% of Rentable Square Feet
Leased as of September 30, 2014
Lakeside Plaza
 
Salem, VA
 
Kroger
 
12/10/2010
 
$
8,750

 
82,798

 
3.6
 
100.0
%
Snow View Plaza
 
Parma, OH
 
Giant Eagle
 
12/15/2010
 
12,300

 
100,460

 
4.8
 
97.0
%
St. Charles Plaza
 
Haines City, FL
 
Publix
 
6/10/2011
 
10,100

 
65,000

 
9.1
 
96.3
%
Centerpoint
 
Easley, SC
 
Publix
 
10/14/2011
 
6,850

 
72,287

 
9.0
 
89.8
%
Southampton Village
 
Tyrone, GA
 
Publix
 
10/14/2011
 
8,350

 
77,956

 
6.7
 
97.8
%
Burwood Village Center
 
Glen Burnie, MD
 
Food Lion(2)
 
11/9/2011
 
16,600

 
105,834

 
6.9
 
100.0
%
Cureton Town Center
 
Waxhaw, NC
 
Harris Teeter(3)
 
12/29/2011
 
13,950

 
84,357

 
8.4
 
100.0
%
Tramway Crossing
 
Sanford, NC
 
Food Lion(2)
 
2/23/2012
 
5,500

 
62,382

 
3.9
 
100.0
%
Westin Centre
 
Fayetteville, NC
 
Food Lion(2)
 
2/23/2012
 
6,050

 
66,890

 
1.4
 
100.0
%
The Village at Glynn Place
 
Brunswick, GA
 
Publix
 
4/27/2012
 
11,350

 
111,924

 
6.2
 
95.2
%
Meadowthorpe Shopping Center
 
Lexington, KY
 
Kroger
 
5/9/2012
 
8,550

 
87,384

 
2.8
 
97.0
%
New Windsor Marketplace
 
Windsor, CO
 
King Soopers(3)
 
5/9/2012
 
5,550

 
95,877

 
5.4
 
95.6
%
Vine Street Square
 
Kissimmee, FL
 
Walmart(4)
 
6/4/2012
 
13,650

 
120,699

 
5.6
 
98.3
%
Northtowne Square
 
Gibsonia, PA
 
Giant Eagle
 
6/19/2012
 
10,575

 
113,372

 
7.5
 
100.0
%
Brentwood Commons
 
Bensenville, IL
 
Dominick's(5)
 
7/5/2012
 
14,850

 
125,550

 
5.5
 
99.1
%
Sidney Towne Center
 
Sidney, OH
 
Kroger
 
8/2/2012
 
4,300

 
118,360

 
4.8
 
100.0
%
Broadway Plaza
 
Tucson, AZ
 
Sprouts
 
8/13/2012
 
12,675

 
83,612

 
5.3
 
84.3
%
Richmond Plaza
 
Augusta, GA
 
Kroger
 
8/30/2012
 
19,500

 
178,167

 
4.7
 
89.5
%
Publix at Northridge
 
Sarasota, FL
 
Publix
 
8/30/2012
 
11,500

 
65,320

 
8.0
 
89.9
%
Baker Hill Center
 
Glen Ellyn, IL
 
Dominick's(5)
 
9/6/2012
 
21,600

 
135,355

 
3.8
 
96.7
%
New Prague Commons
 
New Prague, MN
 
Coborn's
 
10/12/2012
 
10,150

 
59,948

 
7.2
 
100.0
%
Brook Park Plaza
 
Brook Park, OH
 
Giant Eagle
 
10/23/2012
 
10,140

 
148,259

 
4.4
 
100.0
%
Heron Creek Towne Center
 
North Port, FL
 
Publix
 
12/17/2012
 
8,650

 
64,664

 
5.0
 
92.5
%
Quartz Hill Towne Centre
 
Lancaster, CA
 
Vons(4)
 
12/26/2012
 
20,970

 
110,306

 
3.0
 
95.7
%
Hilfiker Square
 
Salem, OR
 
Trader Joe's
 
12/28/2012
 
8,000

 
38,558

 
6.5
 
100.0
%
Village One Plaza
 
Modesto, CA
 
Raley's
 
12/28/2012
 
26,500

 
105,658

 
12.5
 
92.4
%
Butler Creek
 
Acworth, GA
 
Kroger
 
1/15/2013
 
10,650

 
95,597

 
3.4
 
94.0
%
Fairview Oaks
 
Ellenwood, GA
 
Kroger
 
1/15/2013
 
9,300

 
77,052

 
2.3
 
100.0
%
Grassland Crossing
 
Alpharetta, GA
 
Kroger
 
1/15/2013
 
9,700

 
90,906

 
5.6
 
100.0
%
Hamilton Ridge
 
Buford, GA
 
Kroger
 
1/15/2013
 
11,800

 
90,996

 
6.5
 
87.4
%
Mableton Crossing
 
Mableton, GA
 
Kroger
 
1/15/2013
 
11,500

 
86,819

 
2.7
 
96.1
%
The Shops at Westridge
 
McDonough, GA
 
Publix
 
1/15/2013
 
7,550

 
66,297

 
8.6
 
83.1
%
Fairlawn Town Centre
 
Fairlawn, OH
 
Giant Eagle
 
1/30/2013
 
42,200

 
347,255

 
6.8
 
95.1
%
Macland Pointe
 
Marietta, GA
 
Publix
 
2/13/2013
 
9,150

 
79,699

 
2.7
 
91.3
%
Murray Landing
 
Irmo, SC
 
Publix
 
3/21/2013
 
9,920

 
64,359

 
6.6
 
100.0
%
Vineyard Center
 
Tallahassee, FL
 
Publix
 
3/21/2013
 
6,760

 
62,821

 
7.3
 
83.8
%
Kleinwood Center
 
Spring, TX
 
H-E-B
 
3/21/2013
 
32,535

 
148,863

 
6.8
 
99.2
%
Lutz Lake Station
 
Lutz, FL
 
Publix
 
4/4/2013
 
9,800

 
64,986

 
6.2
 
98.0
%
Publix at Seven Hills
 
Spring Hill, FL
 
Publix
 
4/4/2013
 
8,500

 
72,590

 
3.0
 
92.3
%
Hartville Centre
 
Hartville, OH
 
Giant Eagle
 
4/23/2013
 
7,300

 
108,412

 
5.3
 
75.7
%
Sunset Center
 
Corvallis, OR
 
Safeway
 
5/31/2013
 
24,900

 
164,796

 
5.2
 
94.8
%
Savage Town Square
 
Savage, MN
 
Cub Foods(6)
 
6/19/2013
 
14,903

 
87,181

 
7.5
 
98.6
%
Northcross
 
Austin, TX
 
Walmart(4)
 
6/24/2013
 
61,500

 
280,243

 
14.3
 
97.1
%
Glenwood Crossing
 
Kenosha, WI
 
Pick 'n Save
 
6/27/2013
 
12,822

 
87,504

 
12.4
 
99.6
%
Pavilions at San Mateo
 
Albuquerque, NM
 
Walmart(4)
 
6/27/2013
 
28,350

 
149,287

 
4.1
 
84.7
%
Shiloh Square
 
Kennesaw, GA
 
Kroger
 
6/27/2013
 
14,500

 
139,720

 
3.7
 
80.6
%
Boronda Plaza
 
Salinas, CA
 
Food 4 Less(7)
 
7/3/2013
 
22,700

 
93,071

 
6.0
 
98.7
%

22



Property Name
 
City, State
 
Anchor Tenant
 
Date
Acquired
 
Contract Purchase Price(1)
 
Rentable
Square
Feet
 
Average
Remaining
Lease Term
in Years as of September 30, 2014
 
% of Rentable Square Feet
Leased as of September 30, 2014
Rivergate
 
Macon, GA
 
Publix
 
7/18/2013
 
$
32,354

 
207,567

 
5.5
 
78.8
%
Westwoods Shopping Center
 
Arvada, CO
 
King Soopers(3)