Attached files
| file | filename |
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| 8-K - 8-K - VEREIT Operating Partnership, L.P. | d880796d8k.htm |
Exhibit 99.1
TABLE OF CONTENTS
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| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Certain Sections Restated)
As used herein, “ARCP OP” means ARCP OP by itself and not including any of its subsidiaries; “ARCP” means ARCP by itself and not including any of its subsidiaries; and the terms “we,” “our” and “us” or similar references mean ARCP and its consolidated subsidiaries, including, without limitation ARCP OP.
Overview
ARCP OP is an entity through which ARCP, a self-managed and self-administered REIT, and its sole general partner, conducts substantially all of its business. As of June 30, 2014, ARCP held approximately 97.3% of the common equity interests (“OP Units”) in ARCP OP. OP Units held by ARCP are referred to as General Partner OP Units and OP Units held by other holders are referred to as Limited Partner OP Units. The actions of the Operating Partnership and its relationship with ARCP are governed by that certain Third Amended and Restated Agreement of Limited Partnership (the “LPA”), effective as of January 3, 2014. ARCP does not have any significant assets other than its investment in ARCP OP. Therefore, the assets and liabilities of ARCP and ARCP OP are substantially the same. Additionally, pursuant to the LPA, all administrative expenses and expenses associated with the formation and continuity of existence and operation of ARCP incurred by ARCP on ARCP OP’s behalf shall be treated as expenses of ARCP OP.
Under the LPA, after holding OP Units for a period of one year, a limited partner has the right to require ARCP OP to redeem OP Units for, at ARCP’s option, a certain number of shares of ARCP’s common stock, or the cash value of such number of shares of ARCP’s common stock. For each share, if any, of ARCP’s common stock issued by ARCP in the redemption, ARCP OP will issue a corresponding amount of OP Units to ARCP. The remaining rights of the limited partners are limited and do not include the ability to replace ARCP as general partner or to approve the sale, purchase or refinancing of ARCP OP’s assets.
Our business operates in two business segments, net lease real estate investment (“REI”) and private capital investment management (“Cole Capital”). Through our REI segment, we acquire, own and operate single-tenant, freestanding commercial real estate properties, primarily subject to net leases with high credit quality tenants. We focus on investing in properties that are net leased to credit tenants. Our long-term business strategy is to continue invest in net leased assets to further develop our diverse portfolio consisting of approximately 70% long-term leases and 30% medium-term leases, with an average remaining lease term of 10 to 12 years. We seek to acquire net lease assets granularly, by self-originating or purchasing such assets, or executing sale-leaseback transactions, small portfolio acquisitions and in connection with build-to-suit opportunities, to the extent they are appropriate in terms of capitalization rate and scale. We expect this investment strategy to provide for stable income from credit tenants and for growth opportunities from re-leasing of current below market leases. We entered into an agreement pursuant to which we will dispose of the multi-tenant assets comprising the portfolio we previously announced would be spun off into American Realty Capital Centers, Inc., as further described under “Prospectus Summary—Recent Developments—Disposition of Multi-Tenant Shopping Center Business.” We believe such disposition will bring enhanced focus to our core strategy of developing a strong portfolio of single-tenant net lease assets. We have advanced our investment objectives by growing our net lease portfolio through the self-origination of property acquisitions and strategic mergers and acquisitions. Our total asset base was approximately $21.3 billion as of June 30, 2014. See Note 3 - Mergers and Acquisitions (As Restated) for further discussion.
As a result of the Cole Merger (as defined below), in addition to operating a diverse portfolio of core commercial real estate investments, we, through Cole Capital Advisors, Inc. (“CCA”), are responsible for managing certain non-traded real estate investment trusts (the “Managed REITs”) on a day-to-day basis, identifying and making acquisitions and investments on
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the Managed REITs’ behalf and recommending to each of the Managed REITs’ respective board of directors an approach for providing investors with liquidity. We receive compensation and reimbursement for services relating to the Managed REITs’ offerings and investment, management, financing and disposition of their respective assets, as applicable. Cole Capital allows us to generate earnings without the corresponding need to invest capital in that business or incur debt in order to fund or expand operations. As of June 30, 2014, the Managed REITs’ total assets were approximately $6.6 billion. We own CCA through a wholly owned subsidiary of ARCP OP. We and CCA have jointly elected to treat CCA as a taxable REIT subsidiary (“TRS”) for U.S. federal income tax purposes. In order to avoid a potential adverse impact on ARCP’s status as a REIT, we conduct substantially all of our investment management business through the TRS.
During the year ended December 31, 2013, we retained the Former Manager, a wholly owned subsidiary of AR Capital, LLC (“ARC”), to manage our affairs on a day-to-day basis, and, as a result, we were generally externally managed, with the exception of certain acquisition, accounting and portfolio management services performed by our employees. In August 2013, our board of directors determined that it is in our best interests to become self-managed, and we completed our transition to self-management on January 8, 2014. In connection with becoming self-managed, we terminated the existing management agreement with the Former Manager, and entered into employment and incentive compensation arrangements with our executives. See Note 19 — Related Party Transactions and Arrangements (As Restated) and Note 24 — Subsequent Events (As Restated) for further discussion.
As of June 30, 2014, we owned 3,966 properties consisting of 106.8 million square feet, which properties were 98.8% leased with a weighted average remaining lease term of 9.95 years. In constructing our portfolio, we are committed to diversification by industry, tenant and geography. As of June 30, 2014, rental revenues derived from investment-grade tenants and tenants affiliated with investment-grade entities as determined by a major rating agency approximated 49%. We have attributed the rating of each parent company to its wholly owned subsidiary for purposes of this disclosure. Our core strategy encompasses receiving the majority of our REI revenue from investment grade tenants as we further acquire properties and enter into, or assume, lease arrangements.
Completed Mergers and Major Acquisitions
American Realty Capital Trust III, Inc. Merger
On December 14, 2012, ARCP entered into an agreement and plan of merger (the “ARCT III Merger Agreement”) with American Realty Capital Trust III, Inc. (“ARCT III”) and certain subsidiaries of each company. The ARCT III Merger Agreement provided for the merger of ARCT III with and into a subsidiary of ARCP (the “ARCT III Merger”). The ARCT III Merger was consummated on February 28, 2013.
Pursuant to the terms and subject to the conditions set forth in the ARCT III Merger Agreement, each outstanding share of common stock of ARCT III, including restricted shares that became vested, was converted into the right to receive (i) 0.95 of a share of ARCP’s common stock, or (ii) $12.00 in cash. In addition, each outstanding unit of equity ownership of American Realty Capital Operating Partnership III, L.P. (“ARCT III OP”) was converted into the right to receive 0.95 of the same class of unit of OP Units.
Upon the closing of the ARCT III Merger on February 28, 2013, 29.2 million shares, or 16.5% of the then outstanding shares of ARCT III’s common stock were received in cash consideration at $12.00 per share, the equivalent to 27.7 million shares of ARCP’s common stock based at the exchange ratio. In addition, 148.1 million shares of ARCT III’s common stock were converted to shares of ARCP common stock at the exchange ratio, resulting in an additional 140.7 million shares of ARCP common stock outstanding after the exchange. In accordance with the LPA, ARCP OP issued a corresponding number of General Partner OP Units to ARCP when ARCP issued common stock to former common stockholders of ARCT III.
Upon the consummation of the ARCT III Merger, American Realty Capital Trust III Special Limited Partner, LLC, the holder of the special limited partner interest in ARCT III OP, was entitled to subordinated distributions of net sales proceeds from ARCT III OP, which resulted in the issuance of units of limited partner interests in ARCT III OP, which, in turn, after applying the exchange ratio, resulted in the issuance of an additional 7.3 million Limited Partner OP Units to affiliates of the Former Manager. The parties agreed that such OP Units would be subject to a minimum one-year holding period before being exchangeable into ARCP common stock.
Also in connection with the ARCT III Merger, ARCP entered into an agreement with the Former Manager and its affiliates to internalize certain functions performed by them prior to the ARCT III Merger, reduce certain fees paid to affiliates, purchase certain corporate assets and pay certain merger related fees. See Note 19 — Related Party Transactions and Arrangements (As Restated) for further discussion.
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Accounting Treatment of the ARCT III Merger
ARCP and ARCT III, from inception to the ARCT III Merger date, were considered to be entities under common control. Both entities’ advisors were wholly owned subsidiaries of ARC, the parent of the Former Manager. ARC and its related parties had significant ownership interests in ARCP and ARCT III through the ownership of shares of common stock and other equity interests. In addition, the advisors of both entities were contractually eligible to charge potential fees for their services to both of the companies, including asset management fees, incentive fees and other fees and continue to charge fees to ARCP. Due to the significance of these fees, the advisors, and ultimately ARC, were determined to have a significant economic interest in both companies in addition to having the power to direct the significant activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with generally accepted accounting principles in the United States (“GAAP”). The acquisition of an entity under common control is accounted for on the carryover basis of accounting whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the merger date. In addition, GAAP requires that historical financial information be presented as if the merger had occurred as of the earliest period of common control. Therefore, the accompanying financial statements, including the notes thereto, are presented as if the ARCT III Merger had occurred at inception.
GE Capital Portfolio Acquisition
On June 27, 2013, ARCP, through subsidiaries of ARCP OP, acquired from certain affiliates of GE Capital Corp. (“GE Capital”) the equity interests in entities owning a real estate portfolio comprised of 447 properties (the “GE Capital Portfolio”) for a purchase price of $773.9 million, exclusive of closing costs. The 447 properties are subject to 409 property operating leases, as well as 38 direct financing leases.
During the year ended December 31, 2013, ARCT IV acquired from certain affiliates of GE Capital, the equity interests in entities owning a real estate portfolio comprised of 924 properties for a purchase price of $1.4 billion, exclusive of closing costs, with no liabilities assumed. The 924 properties are subject to 912 property operating leases, as well as 12 direct financing leases.
CapLease, Inc. Merger
On May 28, 2013, ARCP entered into an agreement and plan of merger (the “CapLease Merger Agreement”) with CapLease, Inc., a Maryland corporation (“CapLease”), and certain subsidiaries of each company. The CapLease Merger Agreement provided for the merger of CapLease with and into a subsidiary of ARCP OP (the “CapLease Merger”). ARCP consummated the CapLease Merger on November 5, 2013.
On November 5, 2013, we completed the merger with CapLease based on the terms of the CapLease Merger Agreement. Pursuant to the terms set forth in the CapLease Merger Agreement, at the effective time of the CapLease Merger, each outstanding share of common stock of CapLease, other than shares owned by ARCP, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive $8.50. Each outstanding share of preferred stock of CapLease, other than shares owned by ARCP, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive an amount in cash, equal to the sum of $25.00 plus all accrued and unpaid dividends on such shares of preferred stock. In addition, in connection with the merger of CapLease, LP with and into ARCP OP (the “CapLease Partnership Merger”), each outstanding unit of equity ownership in the CapLease other than units owned by CapLease or any wholly owned subsidiary of CapLease was converted into the right to receive $8.50. Shares of CapLease’s outstanding restricted stock were accelerated and became fully vested, and restricted stock and any outstanding performance shares were fully earned and received $8.50 per share. In total, cash consideration of $920.7 million was paid to the common and preferred stockholders of CapLease.
Accounting Treatment for the CapLease Merger
The CapLease Merger has been accounted for under the acquisition method of accounting under GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from CapLease have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values has been recorded as goodwill. Results of operations for CapLease will be included in ARCP OP’s consolidated financial statements from the date of acquisition. See Note 6 — CapLease Acquisition (As Restated) for further discussion.
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American Realty Capital Trust IV, Inc. Merger
On July 1, 2013, ARCP and ARCP OP entered into an agreement and plan of merger, as amended on October 6, 2013 and October 11, 2013, (the “ARCT IV Merger Agreement”) with American Realty Capital Trust IV, Inc., a Maryland corporation (“ARCT IV”), and certain subsidiaries of ARCP and ARCT IV. The ARCT IV Merger Agreement provided for the merger of ARCT IV with and into a subsidiary of ARCP OP (the “ARCT IV Merger”). ARCP consummated the ARCT IV Merger on January 3, 2014.
Pursuant to the terms of the ARCT IV Merger Agreement, as amended, each outstanding share of common stock of ARCT IV, including unvested restricted shares that vested in conjunction with the ARCT IV Merger, was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a share of ARCP’s common stock (the “ARCT IV Exchange Ratio”) and (iii) 0.5937 of a share of a new series of preferred stock of ARCP designated as the 6.70% Series F Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”) and each outstanding unit of ARCT IV’s operating partnership (“ARCT IV OP Unit”), other than ARCT IV OP Units held by American Realty Capital Trust IV Special Limited Partner, LLC, (the “ARCT IV Special Limited Partner”) and American Realty Capital Advisors IV, LLC (the “ARCT IV Advisor”) was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a Limited Partner OP Unit and (iii) 0.5937 of a Limited Partner OP Unit designated as Series F Preferred Units (“Limited Partner Series F Preferred Units”). In total, ARCP paid $651.4 million in cash, issued 36.9 million shares of common stock and 42.2 million shares of Series F Preferred Stock, and ARCP OP issued 0.7 million units of Limited Partner Series F Preferred units and 0.7 million Limited Partner OP Units to the former ARCT IV shareholders and ARCT IV OP Unit holders in connection with the consummation of the ARCT IV Merger. In addition, each outstanding ARCT IV Class B Unit (as defined below) and each outstanding ARCT IV OP Unit held by the ARCT IV Special Limited Partner and the ARCT IV Advisor was converted into 2.3961 OP Units, resulting in ARCP OP issuing 1.2 million Limited Partner OP Units. In accordance with the LPA, ARCP OP issued a corresponding number of General Partner OP Units and Series F Preferred Units to ARCP when shares of ARCP’s common stock and Series F Preferred Stock were issued to former common stockholders of ARCT IV, respectively.
In connection with the ARCT IV Merger and pursuant to the terms of the agreement of limited partnership of ARCT IV’s operating partnership, ARCT IV’s external advisor received subordinated distributions of net sales proceeds in an approximate amount of $63.2 million. Such subordinated distributions of net sales proceeds were paid in the form of equity units of ARCT IV’s operating partnership that were automatically converted into 6.7 million Limited Partner OP Units upon the consummation of the ARCT IV Merger the OP Units had a fair value of $78.2 million and are subject to a minimum two-year holding period from the date of issuance before being exchangeable into ARCP’s common stock.
Accounting Treatment of the ARCT IV Merger
ARCP and ARCT IV were considered to be entities under common control. Both entities’ advisors are wholly owned subsidiaries of ARC. The Former Manager and its related parties had ownership interests in ARCP and ARCT IV through the ownership of shares of common stock and other equity interests. In addition, the advisors of both entities were contractually eligible to charge potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and will continue to charge fees to ARCP following the ARCT IV Merger. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the merger date. In addition, GAAP requires that historical financial information be presented as if the merger had occurred as of the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT IV Merger had occurred at inception.
Fortress Portfolio Acquisition
On July 24, 2013, ARC and another related entity, on behalf of ARCP and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with affiliates of funds managed by Fortress Investment Group LLC (“Fortress”) for the purchase of 196 properties owned by Fortress. Of the 196 properties, 120 properties were allocated to and assigned by ARCP (the “Fortress Portfolio”) for an aggregate contract purchase price of $972.5 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which were allocated to ARCP based on the pro rata fair value of the properties acquired by ARCP relative to the fair value of all 196 properties to be acquired from Fortress. On October 1, 2013, we closed on 41 of the 120 properties for a total purchase price of $200.3 million, exclusive of closing costs. During the six months ended June 30, 2014, ARCP closed the acquisition of the remaining 79 properties in the Fortress Portfolio for total purchase price of $400.9 million, exclusive of closing costs. The total purchase price of the Fortress Portfolio was $601.2 million, exclusive of closing costs. During the year ended December 31, 2013, ARCP deposited $72.2 million into escrow in relation to the Fortress Portfolio, which has been included in prepaid expenses and other assets in the consolidated balance sheets.
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Inland Portfolio Acquisition
On August 8, 2013, ARC and another related entity, on behalf of ARCP and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with Inland American Real Estate Trust, Inc. (“Inland”) for the purchase of the equity interests of 67 companies owned by Inland for an aggregate contract purchase price of approximately $2.3 billion, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs. Of the 67 companies, the equity interests of 10 companies were acquired, in total, by ARCP from Inland for a purchase price of approximately $501.0 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which was allocated to ARCP based on the pro rata fair value of the Inland Portfolio relative to the fair value of all 67 companies to be acquired from Inland by ARCP and the other entities sponsored directly or indirectly by ARC. The Inland Portfolio is comprised of 33 properties. As of June 30, 2014, ARCP had closed on 32 of the 33 properties for a total purchase price of $288.2 million, exclusive of closing costs. ARCP will not close on the remaining one property.
Cole Real Estate Investments, Inc. Merger
On October 22, 2013, ARCP entered into an agreement and plan of merger (the “Cole Merger Agreement”) with Cole Real Estate Investments, Inc. (“Cole”), a Maryland corporation, and a wholly owned subsidiary of ARCP. The Cole Merger Agreement provided for the merger of Cole with and into the wholly owned subsidiary (the “Cole Merger”). ARCP consummated the Cole Merger on February 7, 2014 (the “Cole Acquisition Date”).
Pursuant to the terms of the Cole Merger Agreement, each share of common stock of Cole issued and outstanding immediately prior to the effectiveness of the Cole Merger, including unvested restricted stock units and performance stock units that vested in conjunction with the Cole Merger was converted into the right to receive either (i) 1.0929 shares of ARCP common stock, par value $0.01 per share, (the “Stock Consideration”), or (ii) $13.82 in cash (the “Cash Consideration” and together with the Stock Consideration, the “Merger Consideration”). Approximately 98% of all outstanding Cole holders received Stock Consideration and approximately 2% of outstanding Cole shares elected to receive Cash Consideration, pursuant to the terms of the Cole Merger Agreement, resulting in ARCP issuing approximately 520.8 million shares of its common stock and paying $181.8 million to holders of Cole shares based on their elections. In accordance with the LPA, ARCP OP issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former common stockholders of Cole.
In addition, ARCP issued approximately 2.8 million shares of its common stock, in the aggregate, to certain executives of Cole pursuant to letter agreements entered into between ARCP and such individuals concurrently with the execution of the Cole Merger Agreement, as previously disclosed. Additionally, effective as of the Cole Acquisition Date, ARCP issued, but has not yet allocated, 0.4 million shares with dividend rights commensurate with those of its common stock. In accordance with the LPA, ARCP OP issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former executives of Cole.
ARCP is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the Cole Acquisition Date totaled approximately $7.5 billion and consisted of the following (in thousands):
| As of Cole Acquisition Date (Preliminary) |
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| Estimated Fair Value of Consideration Transferred: |
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| Cash |
$ | 181,731 | ||
| ARCP Common stock |
7,285,877 | |||
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| Total consideration transferred |
$ | 7,467,608 | ||
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|
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The fair value of the 520.8 million shares of common stock issued, excluding those common shares transferred to former Cole executives, was determined based on the closing market price of ARCP’s common stock on the Cole Acquisition Date.
Accounting Treatment for the Cole Merger
The Cole Merger will be accounted for under the acquisition method of accounting under GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from Cole will be recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values will be recorded as goodwill. Results of operations for Cole will be included in ARCP OP’s consolidated financial statements from the date of acquisition.
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The operating results for the year ended December 31, 2013 do not address the impact of the Cole Merger and the acquisitions of the Fortress and Inland Portfolios, which closed after December 31, 2013, and do not include the other recent organic acquisitions that were acquired subsequent to December 31, 2013. Accordingly, the operating results in 2013 are not indicative of our future operating results.
Cole Credit Property Trust, Inc. Merger
On March 17, 2014, ARCP entered into the CCPT Merger Agreement with CCPT. The CCPT Merger Agreement provided for the merger of CCPT with and into a wholly owned subsidiary of ARCP. We consummated the CCPT Merger on May 19, 2014.
Accounting Treatment for the CCPT Merger
The CCPT Merger will be accounted for under the acquisition method of accounting under GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from CCPT will be recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values will be recorded as goodwill. Results of operations for CCPT will be included in ARCP OP’s consolidated financial statements from the date of acquisition.
Significant Accounting Estimates and Critical Accounting Policies
Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our 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 our management. As a result, these estimates are subject to a degree of uncertainty. These significant accounting estimates include:
Revenue Recognition
Upon the acquisition of real estate, certain properties will have leases where minimum rent payments increase during the term of the lease. We will record rental revenue for the full term of each lease on a straight-line basis. When we acquire a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Cost recoveries from tenants are included in tenant reimbursement income in the period the related costs are incurred, as applicable.
Our revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record a receivable, and include in revenues, unbilled rent receivables that we will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. We defer the revenue related to lease payments received from tenants in advance of their due dates.
We continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, we will record an increase in the allowance for uncollectible accounts or record a direct write-off of the receivable in the consolidated statements of operations and comprehensive loss. As of December 31, 2013, we recorded an allowance for uncollectible accounts of $187,000. As of December 31, 2012, we determined that no allowance for uncollectible accounts was necessary.
Real Estate Investments
We record acquired real estate at cost and make assessments as to the useful lives of depreciable assets. We consider the period of future benefit of the asset to determine the appropriate useful lives. Depreciation is computed using a straight-line method over the estimated useful life of 40 years for buildings, five to 15 years for building fixtures and improvements and the remaining lease term for acquired intangible lease assets.
Allocation of Purchase Price of Business Combinations and Acquired Assets
In accordance with the guidance for business combinations, we determine whether a transaction or other event is a business combination. If the transaction is determined to be a business combination, we determine if the transaction is considered to be between entities under common control. The acquisition of an entity under common control is accounted for on the carryover basis of accounting whereby the assets and liabilities of the companies are recorded upon the merger on the
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same basis as they were carried by the companies on the merger date. All other business combinations are accounted for by applying the acquisition method of accounting. Under the acquisition method, we recognize the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity. In addition, we evaluate the existence of goodwill or a gain from a bargain purchase. We will immediately expense acquisition-related costs and fees associated with business combinations and asset acquisitions.
We allocate the purchase price of acquired properties and business combinations accounted for under the acquisition method of accounting to tangible and identifiable intangible assets acquired based on their respective fair values to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, buildings, equipment and tenant improvements on an as-if vacant basis. We utilize various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Identifiable intangible assets include amounts allocated to acquired leases for above-market and below-market lease rates, the value of in-place leases and the value of customer relationships.
Amounts allocated to land, buildings, equipment and fixtures are based on cost segregation studies performed by independent third-parties or on our analysis of comparable properties in its portfolio.
The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by us in our analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period, which typically ranges from six to 18 months. We also estimate costs to execute similar leases including leasing commissions, legal and other related expenses.
Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, including any bargain option renewal periods. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease. The capitalized below-market lease values are amortized as an increase to rental income over the remaining term, including any bargain option renewal periods. In determining the amortization period for below-market lease intangibles, we initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
The fair value of investments and debt are valued using techniques consistent with those disclosed in Note 10 — Fair Value of Financial Instruments (As Restated), depending on the nature of the investment or debt. The fair value of all other assumed assets and liabilities based on the best information available.
The value of in-place leases is amortized to expense over the initial term of the respective leases, which range primarily from two to 20 years. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.
In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. We also consider information obtained about each property as a result of its pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Derivative Instruments
We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings. Certain of the techniques used to hedge exposure to interest rate fluctuations may also be used to protect against declines in the market value of assets that result from general trends in debt markets. The principal objective of such agreements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions.
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We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain of our risk, even though hedge accounting does not apply or we elect not to apply hedge accounting.
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment. If we elect not to apply hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the consolidated statements of operations and comprehensive loss. If the derivative is designated and qualifies for hedge accounting treatment the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.
Recently Issued Accounting Pronouncements
Recently issued accounting pronouncements are described in Note 4 — Summary of Significant Accounting Policies (As Restated).
Results of Operations (As Restated)
As a result of the Cole Merger, we evaluate our operating results by our two business segments, REI and Cole Capital.
REI Segment
Our results of operations are influenced by the timing of acquisitions and the operating performance of our real estate investments. The following table shows the property statistics of our real estate assets, including consolidated joint ventures, as of June 30, 2014 and 2013:
| June 30, | ||||||||
| 2014 | 2013 | |||||||
| Number of commercial properties(1) |
3,966 | 1,766 | ||||||
| Approximate rentable square feet (in millions)(2) |
106.8 | 25.3 | ||||||
| Percentage of rentable square feet leased |
98.8 | % | 100 | % | ||||
| (1) | Excludes properties owned through the Unconsolidated Joint Ventures. |
| (2) | Includes square feet of the buildings on land that are subject to ground leases. |
Comparison of the Three Months Ended June 30, 2014 to the Three Months Ended June 30, 2013
Total Real Estate Investment Revenue
REI revenue increased $290.0 million to $345.0 million for the three months ended June 30, 2014, compared to $54.9 million for the three months ended June 30, 2013. Our REI revenue consisted primarily of rental income from net leased commercial properties, which accounted for 91% and 96% of total REI revenue during the three months ended June 30, 2014 and 2013, respectively.
Rental Income
Rental income increased approximately $261.8 million to $314.5 million for the three months ended June 30, 2014, compared to $52.7 million for the three months ended June 30, 2013. The increase was primarily due to our net acquisition of 2,178 properties (which excludes 47 properties that are accounted for as direct financing leases) primarily through various mergers and portfolio acquisitions subsequent to June 30, 2013.
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Direct Financing Lease Income
Direct financing lease income of $1.2 million was recognized for the three months ended June 30, 2014. Direct financing lease income was primarily driven by our net acquisition of 47 properties comprised of $62.1 million of net investments subject to direct financing leases acquired at the end of or subsequent to the second quarter of 2013. As such, we had no direct financing lease income during the three months ended June 30, 2013.
Operating Expense Reimbursements
Operating expense reimbursements increased by $27.0 million to $29.3 million for the three months ended June 30, 2014 compared to $2.3 million for the three months ended June 30, 2013. Operating expense reimbursements represent reimbursements for taxes, property maintenance and other charges contractually due from the tenant per the respective lease. Operating expense reimbursements increase was driven by our net acquisition of 2,153 properties subsequent to June 30, 2013.
We also review our stabilized operating results from properties that we owned for the entirety of both the current and prior year reporting periods, referred to as “same store.” Cash same store rents on the 815 properties held for the full period in each of the three months ended June 30, 2014 and 2013 increased $0.2 million, or 0.5%, to $44.5 million compared to $44.3 million for the three months ended June 30, 2013, respectively. Same store annualized average rental income per square foot was $9.67 at June 30, 2014 compared to $9.62 at June 30, 2013.
Acquisition Related Expenses
Acquisition related expenses decreased $30.1 million to $7.2 million for the three months ended June 30, 2014, compared to $37.3 million for the three months ended June 30, 2013. During the three months ended June 30, 2014, acquisition costs consisted of legal costs, deed transfer costs and other costs related to real estate purchase transactions. In addition to the costs above, during the three months ended June 30, 2013, we paid acquisition fees to the Former Manager for acquisitions by ARCT IV. In conjunction with the ARCT IV Merger, it was agreed that the Former Manager would no longer charge acquisition fees.
Merger and Other Non-routine Transaction Related Expenses
Costs related to various mergers, as well as other transaction costs increased $0.1 million to $6.0 million for the three months ended June 30, 2014, compared to $5.9 million for the three months ended June 30, 2013. The increase in merger and other non-routine transactions was primarily associated with costs incurred for the CCPT Merger and the pending disposition of the 67 multi-tenant properties and nine single-tenant properties and the adjacent land and related property (the “Multi-Tenant Portfolio”).
The Audit Committee’s investigation identified certain payments made by us to the Former Manager and its affiliates that were not sufficiently documented or that otherwise warrant scrutiny. The Company is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statements related to any potential recovery. See Note 20 — Related Party Transactions and Arrangements (As Restated) for further discussion.
Property Operating Expenses
Property operating expenses increased $36.2 million to $39.3 million for the three months ended June 30, 2014, compared to $3.1 million for the three months ended June 30, 2013. The increase was primarily due to increased property taxes, utilities, repairs and maintenance and insurance expenses relating to the net acquisition of 2,153 rental income-producing properties subsequent to June 30, 2013. The primary property operating expense items are property taxes and repairs and maintenance.
General and Administrative Expenses
General and administrative expenses increased $11.7 million to $18.0 million for the three months ended June 30, 2014, compared to $6.3 million for the three months ended June 30, 2013. The increase in general and administrative expenses was primarily driven by an increase in the REI segment’s allocation of compensation expense due to becoming self-managed on January 8, 2014. General and administrative expenses primarily included the REI segment’s share of employee compensation and benefits, including legal, accounting and professional fees and escrow and trustee fees.
In addition, included in general and administrative expenses is equity-based compensation that increased $117,000 to $3.6 million for the three months ended June 30, 2014, compared to $3.5 million for the three months ended June 30, 2013. The increase was primarily due to equity-based compensation expenses related to the multi-year outperformance plan (the “New OPP”), which was entered into upon ARCP’s transition to self-management on January 8, 2014, as well as an increase in the amortization of restricted stock for the awards granted subsequent to June 30, 2013.
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Depreciation and Amortization Expense
Depreciation and amortization expenses increased $192.3 million to $226.0 million for the three months ended June 30, 2014, compared to $33.7 million for the three months ended June 30, 2013. The increase in depreciation and amortization was primarily driven by our net acquisition of 2,153 properties subsequent to June 30, 2013.
Interest Expense, Net
Interest expense, net increased $92.5 million to $103.9 million for the three months ended June 30, 2014, compared to $11.4 million during the three months ended June 30, 2013. The increase in interest expense was due to an increase in the average debt balance of $10.0 billion for the three months ended June 30, 2014 compared to $888.6 million for the three months ended June 30, 2013. The increase in debt was primarily due to the assumption of mortgage notes in connection with the various mergers and portfolio acquisitions and the issuance of the corporate bonds. The average annualized interest rate on all debt, including the effect of derivative instruments used to hedge the effects of interest rate volatility but excluding amortization of deferred financing costs and non-usage fees, for the three months ended June 30, 2014 and 2013 was 3.72% and 3.48%, respectively.
Other Income (Expense), Net
Other income (expense) increased $2.8 million to an income of $4.3 million for the three months ended June 30, 2014, compared to income of $1.5 million for the three months ended June 30, 2013. Other income (expense) primarily consisted of state and franchise taxes of $2.8 million for the three months ended June 30, 2014. During the three months ended June 30, 2013, we recorded $1.2 million in income from investments.
Gain (Loss) on Derivative Instruments, Net
Gain on derivative instruments for the three months ended June 30, 2014 was $14.2 million, which primarily related to marking the Series D Preferred Stock embedded derivative to fair value. The gain was partially offset by a loss on derivative instruments resulting from marking our derivative instruments to fair value. We recorded a loss on derivative instruments of $31.2 million during the three months ended June 30, 2013 that resulted from marking our derivate instruments to fair value.
Gain on Disposition of Properties, Net
During the three months ended June 30, 2014, we recorded a loss on the sale of eight properties of $1.3 million. We did not sell any properties during the three months ended June 30, 2013.
Gain on Sale of Investment Securities
No investment securities were sold during the three months ended June 30, 2013 or 2014.
Comparison of the Six Months Ended June 30, 2014 to the Six Months Ended June 30, 2013
Total Real Estate Investment Revenue
REI revenue increased $514.0 million to $611.9 million for the six months ended June 30, 2014, compared to $97.8 million for the six months ended June 30, 2013. Our REI revenue consisted primarily of rental income from net leased commercial properties, which accounted for 91% and 96% of total REI revenue during the six months ended June 30, 2014 and 2013, respectively.
Rental Income
Rental income increased $465.3 million to $558.9 million for the six months ended June 30, 2014, compared to $93.7 million for the six months ended June 30, 2013. The increase was primarily due to our net acquisition of 2,153 properties (which excludes 47 properties that are accounted for as direct financing leases) primarily through various mergers and portfolio acquisitions subsequent to June 30, 2013.
Direct Financing Lease Income
Direct financing lease income of $2.2 million was recognized for the six months ended June 30, 2014. Direct financing lease income was primarily driven by our net acquisition of 47 properties comprised of $62.1 million of net investments subject to direct financing leases acquired at the end of or subsequent to the second quarter of 2013. As such, we had no direct financing lease income during the six months ended June 30, 2013.
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Operating Expense Reimbursements
Operating expense reimbursements increased by $46.5 million to $50.7 million for the six months ended June 30, 2014 compared to $4.2 million for the six months ended June 30, 2013. Operating expense reimbursements represent reimbursements for taxes, property, maintenance and other charges contractually due from the tenant per their respective leases. Operating expense reimbursements increase was driven by our net acquisition of 2,153 properties subsequent to June 30, 2013.
We also review our stabilized operating results from properties that we owned for the entirety of both the current and prior year reporting periods, referred to as “same store.” Cash same store rents on the 701 properties held for the full period in each of the six months ended June 30, 2014 and 2013 increased $0.4 million, or 0.6%, to $73.3 million compared to $72.9 million for the six months ended June 30, 2013, respectively. Same store annualized average rental income per square foot was $9.29 at June 30, 2014 compared to $9.24 at June 30, 2013.
Acquisition Related Expenses
Acquisition related expenses decreased $27.0 million to $20.6 million for the six months ended June 30, 2014, compared to $47.6 million for the six months ended June 30, 2013. During the six months ended June 30, 2014, acquisition costs consisted of legal costs, deed transfer costs and other costs related to real estate purchase transactions. In addition to the costs described above, during the six months ended June 30, 2013, we paid acquisition fees to the Former Manager. In conjunction with the ARCT III Merger and ARCT IV Merger, it was agreed that the Former Manager would no longer charge acquisition fees for ARCP acquisitions.
Merger and Other Non-routine Transaction Related Expenses
Costs related to various mergers, as well as other transaction costs increased $36.4 million to $165.8 million for the six months ended June 30, 2014, compared to $129.4 million for the six months ended June 30, 2013. Upon the consummation of the ARCT IV Merger, an affiliate of ARCT IV’s advisor received a subordinated incentive distribution upon the attainment of certain performance hurdles. For the six months ended June 30, 2014, $78.2 million was recorded for this fee. We issued 6.7 million OP Units to the affiliate as compensation for this fee. In addition, merger and other non-routine transactions consisted of expenses related to the corporate bond issuance and internalization as well as professional fees, printing fees, proxy services, debt assumption fees and other costs associated with entering into and completing the Cole Merger and CCPT Merger, as well as expenses related to the corporate bond issuance and becoming self-managed.
The Audit Committee’s investigation identified certain payments made by us to the Former Manager and its affiliates that were not sufficiently documented or that otherwise warrant scrutiny. The Company is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statements related to any potential recovery. See Note 19 — Related Party Transactions and Arrangements (As Restated) for further discussion.
Property Operating Expenses
Property operating expenses increased $63.4 million to $69.0 million for the six months ended June 30, 2014, compared to $5.6 million for the six months ended June 30, 2013. The increase was primarily due to increased property taxes, utilities, repairs and maintenance and insurance expenses relating to the acquisition of 2,153 rental income-producing properties subsequent to June 30, 2013. The primary property operating expense items are property taxes and repairs and maintenance.
General and Administrative Expenses
General and administrative expenses increased $39.6 million to $53.6 million for the six months ended June 30, 2014, compared to $14.1 million for the six months ended June 30, 2013. The increase in general and administrative expenses was primarily driven by an increase in the REI segment’s allocation of compensation expense due to becoming self-managed on January 8, 2014. General and administrative expenses primarily included the REI segment’s share of employee compensation and benefits, including legal, accounting and professional fees and escrow and trustee fees.
In addition, included in general and administrative expenses is equity-based compensation that increased $20.4 million to $27.2 million for the six months ended June 30, 2014, compared to $6.8 million for the six months ended June 30, 2013. The decrease was primarily due to equity-based compensation expenses related to the New OPP, which was entered into upon ARCP’s transition to self-management on January 8, 2014, as well as an increase in the amortization of restricted stock for the awards granted subsequent to June 30, 2013.
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Depreciation and Amortization Expense
Depreciation and amortization expenses increased $325.0 million to $385.4 million for the six months ended June 30, 2014, compared to $60.4 million for the six months ended June 30, 2013. The increase in depreciation and amortization was driven by our net acquisition of 2,153 properties subsequent to June 30, 2013.
Interest Expense, Net
Interest expense increased $206.6 million to $224.8 million for the six months ended June 30, 2014, compared to $18.2 million during the six months ended June 30, 2013. The increase in interest expense was due to an increase in the average debt balance of $7.0 billion for the six months ended June 30, 2014 compared to $630.9 million for the six months ended June 30, 2013. The increase in debt was primarily due to the assumption of mortgage notes in connection with the various mergers and portfolio acquisitions and the issuance of the corporate bonds. Additionally, we recorded $32.6 million in interest expense as amortization of deferred financing costs associated with the termination of the Barclays Facility and recorded prepayment fees in connection with the defeasance of mortgage notes payable of $32.9 million during the six months ended June 30, 2014. The average annualized interest rate on all debt, including the effect of derivative instruments used to hedge the effects of interest rate volatility but excluding amortization of deferred financing costs and non-usage fees, for the six months ended June 30, 2014 and 2013 was 3.72% and 3.51%, respectively.
Other Income, Net
Other income decreased approximately $5.8 million to a loss of $8.3 million for the six months ended June 30, 2014, compared to income of $2.5 million for the six months ended June 30, 2013. Other income primarily consisted of interest income from CMBS securities of $5.9 million for the six months ended June 30, 2014. During the six months ended June 30, 2013, we recorded $2.3 million in income from investments.
Gain (Loss) on Derivative Instruments, Net
Gain on derivative instruments for the six months ended June 30, 2014 was $7.1 million, which primarily related to the defeasance of mortgage notes payable that were subject to interest rate swap agreements. See Note 12 — Mortgage Notes Payable for further discussion. The gain was partially offset by a loss on derivative instruments resulting from marking our derivative instruments to fair value. We recorded a loss on derivative instruments of $31.2 million during the six months ended June 30, 2013 that resulted from marking our derivate instruments to fair value.
Gain on Disposition of Properties, Net
During the six months ended June 30, 2014, we recorded a loss on the sale of 25 properties of $18.9 million. We did not sell any properties during the six months ended June 30, 2013.
Gain on Sale of Investment Securities
We recorded a gain on the sale of investment securities of $0.5 million for the six months ended June 30, 2013, which resulted from selling the preferred debt and equity securities that we held. We did not sell any investment securities during the six months ended June 30, 2014.
Cole Capital
Effective February 7, 2014, we consummated the Cole Merger and acquired Cole Capital. As we did not commence operations for Cole Capital until February 7, 2014, comparative financial data is not presented for the three and six months ended June 30, 2013.
Three Months Ended June 30, 2014
Cole Capital Revenue
Cole Capital revenue for the three months ended June 30, 2014 was $37.2 million. Cole Capital revenue primarily consisted of transaction services revenue of $14.4 million, which included acquisition fees related to the acquisition of properties on behalf of certain of the Managed REITs. In addition, we recorded management fees and reimbursements of $12.8 million, which consisted of advisory fees and asset and property management fees of $10.1 million from certain Managed REITs and other programs sponsored by us and reimbursements of $2.7 million for expenses incurred in providing advisory and asset and property management services to certain Managed REITs. We also recorded dealer manager and distribution fees, selling commissions and offering reimbursements of $10.0 million, of which $7.1 million was reallowed to participating broker-dealers as discussed below and $2.0 million related to organization and offering expense reimbursements from the Managed REITs.
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Cole Capital Reallowed Fees and Commissions
Cole Capital reallowed fees and commissions totaling $7.1 million for the three months ended June 30, 2014. We reallowed $6.1 million, or 100%, of selling commissions earned by participating broker-dealers related to the sale of securities of the Managed REITs in offering for the three months ended June 30, 2014 and $1.0 million, or 50.2%, related to the payment of all or a portion of our dealer manager fees to participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers.
General and Administrative Expenses
General and administrative expenses were $22.0 million for the three months ended June 30, 2014, which primarily consisted of employee compensation and benefits expense. Other general and administrative expenses included insurance, legal, accounting and professional fees and other operating costs (including rent, supplies and facility maintenance).
Depreciation and Amortization Expenses
Depreciation and amortization expenses were $24.8 million for the three months ended June 30, 2014, which primarily consisted of amortization related to the intangible assets acquired in connection with the Cole Merger of $24.0 million. Depreciation and amortization expenses also includes depreciation and amortization related to leasehold improvements and property and equipment.
Other Income
Other income for the three months ended June 30, 2014 was $7.6 million, which primarily consisted of a benefit from income taxes recorded of $7.5 million related to our TRS. While most of the business activities of Cole Capital are conducted through the TRS, revenues and expenses recorded in the TRS for tax purposes are not the same as those included in Cole Capital in accordance with U.S. GAAP.
Six Months Ended June 30, 2014
Cole Capital Revenue
Cole Capital revenue for the six months ended June 30, 2014 was $91.5 million. Cole Capital revenue primarily consisted of dealer manager and distribution fees, selling commissions and offering reimbursements of $52.4 million, of which $41.5 million was reallowed to participating broker-dealers as discussed below and $5.9 million related to organization and offering expense reimbursements from the Managed REITs. In addition, we recorded transaction services revenue of $19.0 million, which included acquisition fees related to the acquisition of properties on behalf of certain of the Managed REITs. We also recorded management fees and reimbursements of $20.1 million, which consisted of advisory fees and asset and property management fees of $15.9 million from certain Managed REITs and other programs sponsored by us and reimbursements of $4.2 million for expenses incurred in providing advisory and asset and property management services to certain Managed REITs.
Cole Capital Reallowed Fees and Commissions
Cole Capital reallowed fees and commissions totaling $41.5 million for the six months ended June 30, 2014. We reallowed $35.6 million, or 100%, of selling commissions earned by participating broker-dealers related to the sale of securities of the Managed REITs in offering for the six months ended June 30, 2014 and $5.9 million, or 50.2%, related to the payment of all or a portion of our dealer manager fees to participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers.
General and Administrative Expenses
General and administrative expenses were $42.9 million for the six months ended June 30, 2014, which primarily consisted of employee compensation and benefits expense. Other general and administrative expenses included insurance, legal, accounting and professional fees and other operating costs (including rent, supplies and facility maintenance).
Depreciation and Amortization Expenses
Depreciation and amortization expenses were $39.1 million for the six months ended June 30, 2014, which primarily consisted of amortization related to the intangible assets acquired in connection with the Cole Merger of $38.0 million. Depreciation and amortization expenses also includes depreciation and amortization related to leasehold improvements and property and equipment.
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Other Income
Other income for the six months ended June 30, 2014 was $13.9 million, which primarily consisted of a benefit from income taxes recorded of $13.7 million related to our TRS. While most of the business activities of Cole Capital are conducted through the TRS, revenues and expenses recorded in the TRS for tax purposes are not the same as those included in Cole Capital in accordance with U.S. GAAP.
Comparison of the Year Ended December 31, 2013 to Year Ended December 31, 2012
Rental Income
Rental income increased $245.2 million to $310.5 million for the year ended December 31, 2013 compared to $65.3 million for the year ended December 31, 2012. Rental income was driven by our acquisition of 1,807 properties, which excludes 50 properties that are accounted for as direct financing leases, acquired during the year ended December 31, 2013 for an aggregate purchase price of $5.5 billion. The annualized rental income per square foot of the properties at December 31, 2013 was $12.66 with a weighted-average remaining lease term of 9.4 years, compared to $9.59 per square foot at December 31, 2012.
Our properties are generally leased from two to 20 years and 60% are leased to investment grade tenants and affiliates of investment grade tenants, as determined by major credit rating agencies. Cash same store rents on the 129 properties held for the full period in each of the years ended December 31, 2013 and 2012 increased $0.2 million, or 1.3%, to $16.2 million compared to $16.0 million for the years ended December 31, 2013 and 2012, respectively. Same store annualized average rental income per square foot was $11.37 at December 31, 2013 compared to $11.23 at December 31, 2012.
Direct Financing Lease Income
Direct financing lease income of $2.2 million was recognized for the year ended December 31, 2013. Direct financing lease income was primarily driven by our 2013 acquisition of 50 properties comprised of $66.1 million of net investments subject to direct financing leases during the year ended December 31, 2013.
Operating Expense Reimbursements
Operating expense reimbursements increased by $14.7 million to $16.6 million for the year ended December 31, 2013 compared to $1.9 million for the year ended December 31, 2012. Operating expense reimbursements represent reimbursements for taxes, property maintenance and other charges contractually due from tenants per their respective leases. Operating expense reimbursements were driven by our acquisition of 1,807 properties since December 31, 2012.
Acquisition Related Expenses
Acquisition related costs increased by $31.0 million to $76.1 million for the year ended December 31, 2013 compared to $45.1 million for the year ended December 31, 2012. Acquisition expenses mainly consisted of acquisition fees, legal costs, deed transfer costs and other costs related to real estate purchase transactions. The increase is driven by our acquisition of 1,807 properties during the year ended December 31, 2013 compared to 573 during the year ended December 31, 2012. This increase was offset by the agreement with the Former Manager in conjunction with the ARCT III Merger, where it was agreed that the Former Manager would no longer charge acquisition fees. Subsequent to December 31, 2013, the management agreement was terminated as a result of our transition to self-management. See Note 24 — Subsequent Events (As Restated) for further discussion.
Merger and Other Non-routine Transactions
Expenses related to various mergers, as well as other non-routine transaction expenses, increased by $207.9 million to $210.5 million for the year ended December 31, 2013 compared to $2.6 million for the year ended December 31, 2012. Upon the consummation of the ARCT III Merger, an affiliate of ARCT III received a subordinated incentive distribution upon the attainment of certain performance hurdles. For the year ended December 31, 2013, $98.4 million was recorded for this fee, which was settled in 7.3 million OP Units issued to the affiliate. During the year ended December 31, 2013, the Company incurred $62.3 million of strategic advisory services, $16.0 million of legal fees and $8.9 million of transfer taxes relating to the various mergers and acquisitions. In addition, merger and other non-routine transaction related expenses for the year ended December 31, 2013 included $24.9 million in post-transaction support fees, printing fees, proxy services and other costs associated with entering into and completing the various mergers and acquisitions. During the year ended December 31, 2012, the $2.6 million of merger and other non-routine transaction related expenses consisted of legal fees related to the merger with ARCT III announced in December 2012. See Note 4 — Summary of Significant Accounting Policies (As Restated) for a breakdown of costs.
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The Audit Committee’s investigation identified certain payments made by us to the Former Manager and its affiliates that were not sufficiently documented or that otherwise warrant scrutiny. The Company is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statements related to any potential recovery. See Note 19—Related Party Transactions and Arrangements (As Restated) for further discussion.
Property Operating Expenses
Property expenses increased by $20.1 million to $23.6 million for the year ended December 31, 2013 compared to $3.5 million for the year ended December 31, 2012. These costs relate to expenses associated with maintaining certain properties, including real estate taxes, ground lease rent, insurance and repairs and maintenance expenses. The increase in property expenses are primarily due to our acquisition of properties with modified gross leases subsequent to December 31, 2012, and an increased number of properties for which we pay expenses, which are reimbursed by the tenant.
Management Fees to Affiliates
Prior to the consummation of the ARCT III Merger, we paid the Former Manager an annual base management fee equal to 0.50% per annum of the average unadjusted book value of our real estate assets, calculated and payable monthly in advance, provided that the full amount of the distributions we have declared for the six immediately preceding months is equal to or greater than certain net income thresholds related to our operations. Subsequent to the consummation of the ARCT III Merger, we paid the Former Manager an annual base management fee equal to 0.50% per annum for up to $3.0 billion of unadjusted book value of assets and 0.40% of unadjusted book value of assets greater than $3.0 billion. For the years ended December 31, 2013 and 2012, the Former Manager waived base management fees earned of $6.1 million and $1.8 million, respectively.
We may have been required to pay the Former Manager a quarterly incentive fee, equal to the difference between (1) the product of (a) 20% and (b) the excess our annualized core earnings (as defined in the management agreement with the Former Manager) over the product of (i) the weighted-average number of shares multiplied by the weighted-average issuance price per share of common stock (ii) 8% and (2) the sum of any incentive compensation paid to the Former Manager with respect to the first three calendar quarters of the previous 12-month period. One half of each quarterly installment of the incentive fee may have been payable in shares of common stock. The remainder of the incentive fee may have been payable in cash. No incentive fees were earned for the years ended December 31, 2013 and 2012, respectively. Subsequent to December 31, 2013, the management agreement was terminated as a result of our transition to self-management. See Note 24 — Subsequent Events (As Restated) for further discussion.
Management fees to affiliates increased by $17.3 million to $17.5 million for the year ended December 31, 2013 compared to $0.2 million for the year ended December 31, 2012. Of the $17.3 million, $5.0 million related to base management fees, $11.7 million related to ARCT III asset management fees settled in OP Units upon the closing of the ARCT III Merger and for services performed during a 60-day period following the ARCT III Merger and $0.8 million related to property management services. For the year ended December 31, 2012, the Former Manager waived all but $0.2 million of base management fees.
General and Administrative Expenses
General and administrative expenses increased by $117.7 million to $123.2 million for the year ended December 31, 2013 compared to $5.5 million for the year ended December 31, 2012. General and administrative expenses increased primarily as a result of higher professional fees, such as legal fees, accountant fees and financial printer services fees, insurance expense, salary-related expenses and board member compensation to support our increased real estate portfolio.
Also, included in general and administrative expenses is equity-based compensation expense, which increased by $99.1 million to $100.3 million for the year ended December 31, 2013 compared to $1.2 million for the year ended December 31, 2012. Equity-based compensation expenses for the current year primarily included expenses for the OPP, which was entered into upon consummation of the ARCT III Merger, as well as the amortization of restricted stock. During the year ended December 31, 2013, we recorded equity-based compensation of $92.3 million for the OPP, of which $59.6 million related to accelerating the vesting of OP units in relation to our transition to self-management and $32.7 million of the expense was locked in based on OPP provisions. During the year ended December 31, 2012, equity-based compensation expense related only to the amortization of restricted stock.
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Depreciation and Amortization Expense
Depreciation and amortization expense increased by $170.0 million to $211.0 million for the year ended December 31, 2013 compared to $41.0 million for the year ended December 31, 2012. The increase in depreciation and amortization expense was driven by our acquisition of 1,807 properties since December 31, 2012 for an aggregate purchase price of $3.5 billion.
Impairment of Real Estate
For the year ended December 31, 2013, we recorded an impairment loss of $3.3 million. No impairments were recorded for the year ended December 31, 2012. After reviewing our portfolio for impairment indicators, we performed a recoverability test as of the dates on which the indicators existed. Certain properties failed the recoverability test, as such a fair value analysis was performed to determine the amount of impairment. An impairment loss was calculated based on the difference between the carrying amount of each property and the estimated fair value of each property as of the respective measurement dates.
Interest Expense
Interest expense increased by $93.6 million to $105.5 million for the year ended December 31, 2013 compared to $11.9 million for the year ended December 31, 2012. The increase in interest expense was due to increases in debt balances used to fund portfolio acquisitions, partially offset by a decrease in the weighted-average annualized interest rate on borrowings. The weighted-average debt balances for the years ended December 31, 2013 and 2012 were $1.8 billion and $205.1 million, respectively. The weighted-average annualized interest rate on all debt, including the effect of derivative instruments used to hedge the effects of interest rate volatility but excluding amortization of deferred financing costs and non-usage fees, for the years ended December 31, 2013 and 2012 was 3.40% and 4.16%, respectively.
Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the level of proceeds raised in offerings, our credit rating, the cost of borrowings, and the opportunity to acquire real estate assets which meet our investment objectives.
Other Income, Net
Other income increased by $2.8 million to $3.8 million for the year ended December 31, 2013 compared to other income of $1.0 million for the year ended December 31, 2012. The increase is primarily related to income earned on investments in redeemable preferred stock, senior notes and common stock, all of which were sold as of December 31, 2013, and investment income on certain assets acquired from CapLease during the fourth quarter of the year ended December 31, 2013.
Loss on Derivative Instruments, Net
Loss on the fair value of derivative instruments for the year ended December 31, 2013 was $67.9 million, which primarily consisted of a loss on contingent value rights. The loss pertains to the fair value of our obligation to pay certain preferred and common stockholders for the difference between the value of our shares on certain measurement dates and the value of the shares at the time of issuance as set forth by the contingent value rights agreement. The obligations were settled in full on during the year ended December 31, 2013. The loss was partially offset by a gain on derivative instruments resulting from marking our derivative instruments to fair value. No gain or loss on derivative instruments was recorded during the year ended December 31, 2012.
Loss on Sale of Investment in Affiliates
Loss on sale of investment in affiliates for the year ended December 31, 2013 was $0.4 million resulting from the sale of our investment in a real estate fund sponsored by ARC purchased during the year ended December 31, 2013. No loss on the sale of investment in such funds was recorded during the year ended December 31, 2012.
Loss on Sale of Investments
Loss on sale of investment securities, net for the year ended December 31, 2013 of $1.8 million primarily related to a $2.3 million loss on the sale of investments in redeemable preferred stock, senior notes and common stock, all of which were purchased in 2013 and sold as of December 31, 2013, partially offset by a $0.5 million gain on sale of investments in redeemable preferred stock, all of which were purchased in 2012 and sold as of December 31, 2013. We did not sell any investment securities during the year ended December 31, 2012.
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Net Loss from Discontinued Operations
Net loss from discontinued operations decreased by $0.7 million to a net loss of approximately $34,000 for the year ended December 31, 2013 compared to net loss of $0.7 million for the year ended December 31, 2012. As of December 31, 2013 and 2012, we classified one property as held for sale on the consolidated balance sheets and reported in discontinued operations on the consolidated statements of operations and comprehensive loss. The net losses from discontinued operations during each year were primarily due to impairment on the held for sale property representing the difference between the carrying value and estimated proceeds from the sale of the property less estimated selling costs.
Comparison of the Year Ended December 31, 2012 to Year Ended December 31, 2011
Rental Income
Rental income increased by $61.5 million to $65.3 million for the year ended December 31, 2012 compared to $3.8 million for the year ended December 31, 2011. Rental income was driven by our acquisition of 573 properties during the year ended December 31, 2012 for an aggregate purchase price of $1.7 billion, as well as revenue for a full year from the 129 properties held as of December 31, 2011. The annualized rental income per square foot of the properties at December 31, 2012 was $9.59 with a weighted-average remaining lease term of 10.4 years, compared to $11.59 per square foot at December 31, 2011. There were no properties held for sale for the full period in each of the years ended December 31, 2012 and 2011.
Operating Expense Reimbursements
Operating expense reimbursements increased by $1.7 million to $1.9 million for the year ended December 31, 2012 compared to $0.2 million for the year ended December 31, 2011. Operating expense reimbursements represent reimbursements for taxes, property maintenance and other charges contractually due from tenants per their respective leases. Operating expense reimbursements were driven by our acquisition of 573 properties during the year ended December 31, 2012 as well as reimbursements for a full year from the 129 properties held as of December 31, 2011.
Acquisition Related Expenses
Acquisition related expenses increased by $41.2 million to $45.1 million for the year ended December 31, 2012 compared to $3.9 million for the year ended December 31, 2011. The increase is driven by our acquisition of 573 properties during the year ended December 31, 2012 compared to 69 during the year ended December 31, 2011. Acquisition and related costs represent the costs related to the acquisition of properties. Acquisition costs mainly consisted of legal costs, deed transfer costs and other costs related to real estate purchase transactions.
Merger and Other Non-routine Transaction Expenses
During the year ended December 31, 2012, expenses related to the merger with ARCT III announced in December 2012 and other transaction costs were $2.6 million. These costs primarily consisted of legal fees, accountant fees and other costs associated with entering into the ARCT III merger agreement. There were no such merger expenses incurred during the year ended December 31, 2011.
Property Expenses
Property expenses increased by $3.3 million to $3.5 million for the year ended December 31, 2012 compared to $0.2 million for the year ended December 31, 2011. These expenses relate to costs associated with maintaining certain properties, including real estate taxes, ground lease rent, insurance and repairs and maintenance expenses. The increase in property expenses is mainly due to our acquisition of properties with modified gross leases during the year ended December 31, 2012 and an increased number of properties for which we pay expenses, which are reimbursed by the tenant.
Management Fees to Affiliates
We paid the Former Manager an annual base management fee equal to 0.50% per annum of the average unadjusted book value of our real estate assets, calculated and payable monthly in advance, provided that the full amount of the distributions we have declared for the six immediately preceding months is equal to or greater than certain net income thresholds related to our operations. The Former Manager waived such portion of its management fee in excess of such thresholds. For the years ended December 31, 2012 and 2011, the Former Manager waived base management fees earned of $1.8 million and $0.3 million, respectively.
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We were required to pay the Former Manager a quarterly incentive fee, calculated based on 20% of the excess our annualized core earnings (as defined in the management agreement with the Former Manager) over the weighted-average number of shares multiplied by the weighted-average price per share of common stock. One half of each quarterly installment of the incentive fee would be payable in shares of common stock. The remainder of the incentive fee would be payable in cash. No incentive fees were earned for the years ended December 31, 2012 and 2011, respectively.
Management fees to affiliates were $0.2 million for the year ended December 31, 2012, compared to no such fees for the year ended December 31, 2011, which was the result of decisions by the Former Manager to not waive base management fees of $0.2 million in 2012 whereas the Former Manager waived all fees in 2011.
General and Administrative Expenses
General and administrative expenses increased by $4.8 million to $5.5 million for the year ended December 31, 2012 compared to $0.7 million for the year ended December 31, 2011. General and administrative expenses increased primarily as a result of higher professional fees, such as legal fees, accountant fees and financial printer services fees, insurance expense and board member compensation to support our increased real estate portfolio.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by $38.9 million to $41.0 million for the year ended December 31, 2012 compared to $2.1 million for the year ended December 31, 2011. The increase in depreciation and amortization expense was driven by our acquisition of 573 properties during the year ended December 31, 2012 for an aggregate purchase price of $1.7 billion as well as depreciation and amortization expense for a full year from the 129 properties held as of December 31, 2011.
Interest Expense
Interest expense increased by $10.9 million to $11.9 million for the year ended December 31, 2012 compared to $1.0 million for the year ended December 31, 2011. The increase primarily related to the increase in debt balances used to fund portfolio acquisitions as the outstanding balance on our senior secured revolving credit facility increased by $82.2 million during the year ended December 31, 2012. Interest expense also related to outstanding mortgage notes payable, which increased $229.8 million during the year ended December 31, 2012, partially offset by a slightly lower weighted-average effective interest rate during 2012 as compared to 2011.
Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the level of proceeds raised in offerings, our credit ratings, the cost of borrowings, and the opportunity to acquire real estate assets which meet our investment objectives.
Other Income, Net
Other income increased by $1.0 million to $1.0 million for the year ended December 31, 2012 compared to approximately $4,000 for the year ended December 31, 2011. The increase was primarily due to income on investment securities purchased during the year ended December 31, 2012.
Net Loss from Discontinued Operations
Net loss from discontinued operations decreased by $0.2 million to $0.7 million for the year ended December 31, 2012 compared to $0.9 million for the year ended December 31, 2011. As of the year ended December 31, 2012 and 2011, we had one and two vacant properties, respectively, classified as held for sale on the consolidated balance sheets and reported in discontinued operations on the consolidated statements of operations and comprehensive loss. The net losses from discontinued operations during each year were primarily due to impairments on the held for sale properties representing the difference between the carrying value and estimated proceeds from the sale of the properties less estimated selling costs. On July 3, 2012, one of the properties was sold for $0.6 million of net proceeds.
Cash Flows for the Six Months Ended June 30, 2014 (As Restated)
During the six months ended June 30, 2014, net cash provided by operating activities was $31.2 million. The level of cash flows used in or provided by operating activities is affected by acquisition and transaction costs, the timing of interest payments, as well as the receipt of scheduled rent payments. Cash flows provided by operating activities during the six months
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ended June 30, 2014 was mainly due to adjusted net income of $231.7 million (net loss of $362.4 million adjusted for non-cash items including the issuance of operating partnership units, depreciation and amortization, gain on sale of properties, equity-based compensation, gain on derivative instruments and gain on the early extinguishment of debt totaling $594.1 million, in the aggregate), offset by a decrease in accounts payable and accrued expenses of $51.8 million, a decrease in prepaid and other assets of $93.6 million and a decrease in deferred rent, derivative and other liabilities of $8.7 million.
Net cash used in investing activities for the six months ended June 30, 2014 was $2.0 billion, primarily related to the cash considerations of $756.2 million for the ARCT IV Merger, Cole Merger and CCPT Merger and acquisition of 337 properties for total cash considerations of $1.2 billion. The net cash used in investing activities was partially offset by the proceeds from the sale of properties of $94.8 million.
Net cash provided by financing activities was $2.1 billion during the six months ended June 30, 2014 related to proceeds from the issuance of corporate bonds of $2.5 billion, proceeds from mortgage notes payable of $718.3 million and proceeds from the issuance of common units of $1.6 billion. These inflows were partially offset by repayments net of borrowings from our credit facilities of $1.4 billion, payments on mortgage notes payable of $876.9 million, total distributions paid of $427.6 million and $84.2 million of deferred financing cost payments.
Cash Flows for the Six Months Ended June 30, 2013 (As Restated)
During the six months ended June 30, 2013, net cash used in operating activities was $10.2 million. The level of cash flows used in or provided by operating activities is affected by acquisition and transaction costs, the timing of interest payments, as well as the receipt of scheduled rent payments. Cash flows used in operating activities during the six months ended June 30, 2013 was mainly due to an adjusted net loss of $8.1 million (net loss of $218.2 million adjusted for non-cash items, including the issuance of common units, depreciation and amortization, amortization of deferred financing costs, equity-based compensation, loss on held for sale properties, loss on derivative instruments, and gain on sale on investments of $210.1 million, in the aggregate), and a decrease in deferred costs and other assets of $10.3 million, partially offset by an increase in accounts payable and accrued expenses of $4.2 million.
Net cash used in investing activities for the six months ended June 30, 2013 was $2.3 billion, primarily related to the acquisition of 1,011 properties with an aggregate purchase price of $2.1 billion, the purchase of investment securities of $81.5 million, and the investment in direct financing leases of $76.4 million, partially offset by the proceeds from the sales of investment securities of $44.2 million.
Net cash provided by financing activities of $2.3 billion during the six months ended June 30, 2013 related to proceeds net of offering-related costs from the issuance of common units of $1.8 billion, proceeds from the issuance of preferred units of $445.0 million, proceeds net of repayments from our credit facilities of $475.4 million and $29.8 million of contributions from our affiliate. These inflows were partially offset by common unit repurchases of $350.4 million, $41.5 million of deferred financing cost payments, total distributions paid of $90.7 million, and distributions to non-controlling interest holders of $3.1 million.
Cash Flows for the Year Ended December 31, 2013 (As Restated)
During the year ended December 31, 2013, net cash provided by operating activities was $11.9 million. The level of cash flows used in or provided by operating activities is affected by acquisition and transaction costs, the timing of interest payments, as well as the receipt of scheduled rent payments. Cash flows provided by operating activities during the year ended December 31, 2013 included adjusted net loss of $43.9 million (net loss of $507.8 million adjusted for non-cash items, the most significant of which were depreciation and amortization expense, the issuance of operating partnership units, equity-based compensation, and the loss on extinguishment of General Partner OP Units designated as Series C Preferred Units, which totaled to $446.3 million, in the aggregate). In addition, we incurred a one-time expense related to the loss in the extinguishment of Series C Preferred Units of $13.7 million. Cash inflows included an increase in accounts payable and accrued expenses of $20.8 million and in increase in deferred rent and other liabilities of $8.6 million, partially offset by an increase in prepaid and other assets of $19.9 million.
Net cash used in investing activities for the year ended December 31, 2013 of $4.5 billion primarily related to the investment in real estate assets and the CapLease Merger of $4.4 billion, deposits for real estate investments of $101.9 million, the purchase of investment securities of $81.6 million and investments in direct financing leases of $68.6 million, partially offset by the proceeds from the sales of investment securities of $119.5 million.
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Net cash provided by financing activities was $4.3 billion during the year ended December 31, 2013. This was primarily driven by the issuance of stock and debt during the year, most notably $2.0 billion of proceeds net of offering-related costs from the issuance of common stock, $1.7 billion of proceeds, net of repayments, from our credit facilities, $967.8 million of proceeds from issuance of convertible debt and $288.0 million of proceeds from the issuance of General Partner OP Units designated as Series D Preferred Units and $30.9 million of contributions from non-controlling interest holders. These inflows were partially offset by cash outflows, the most significant of which were common stock repurchases of $359.2 million, total distributions paid of $243.1 million, payments of deferred financing costs of $101.2 million and payments on mortgage notes and other debt of $15.1 million.
Cash Flows for the Year Ended December 31, 2012 (As Restated)
During the year ended December 31, 2012, net cash provided by operating activities was $9.4 million. The level of cash flows used in or provided by operating activities is affected by acquisition and transaction costs, the timing of interest payments, as well as the receipt of scheduled rent payments. Cash flows provided by operating activities during the year ended December 31, 2012 was primarily due to an increase in adjusted net income of $2.7 million (net loss of $42.2 million adjusted for non-cash items, the most significant of which were depreciation and amortization expense and equity-based compensation, which totaled $44.4 million, in the aggregate). Cash inflows included an increase in accounts payable and accrued expenses of $8.3 million and in increase in deferred rent and other liabilities of $3.5 million, partially offset by an increase in prepaid and other assets of $5.1 million.
Net cash used in investing activities for the year ended December 31, 2012 was $1.7 billion, primarily related to an increase in investment in real estate assets paid for with cash of $1.7 billion and the purchase of investment securities of $41.7 million.
Net cash provided by financing activities of $2.0 billion during the year ended December 31, 2012 primarily related to cash inflows from the issuances of stock and debt, most notably $1.7 billion of proceeds net of offering-related costs from the issuance of common and preferred stock, $229.8 million of proceeds from mortgage notes payable and $82.2 million of proceeds from our senior secured revolving credit facility. These inflows were partially offset by cash outflows, most notably by total distributions paid of $38.3 million and payments related to deferred financing costs of $14.0 million.
Liquidity and Capital Resources
In the normal course of business, our principal demands for funds will continue to be for property acquisitions, either directly or through investment interests, for the payment of operating expenses, distributions to our investors and for the payment of principal and interest on our outstanding indebtedness. We expect to meet our future short-term operating liquidity requirements through net cash provided by our current property operations. Management expects that our properties will generate sufficient cash flow to cover all operating expenses and the payment of a monthly distribution. The majority of our net leases contain contractual rent escalations during the primary term of the lease. Other potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from offerings, including ARCP’s ATM (as defined below) program, proceeds from the sale of properties and undistributed funds from operations. With the stabilization of the investment portfolio, we expect to significantly increase the amount of cash flow generated from operating activities in future periods. Such increased cash flow will positively impact the amount of funds available for dividends.
As of June 30, 2014, we had $195.5 million of cash and cash equivalents. As of December 31, 2013, we had $52.7 million of cash and cash equivalents.
Sources of Funds
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP financial measures we use as performance measures for benchmarking against our peers and as internal measures of business operating performance. We believe EBITDA and Adjusted EBITDA provide a meaningful perspective of the underlying operating performance of our current business. This is especially true since these measures exclude real estate depreciation, and we believe that real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time.
We define EBITDA as net income from continuing operations before interest, taxes, depreciation and amortization. We present EBITDA because we consider it a useful analytical tool for measuring our ability to service our debt and generate cash for other purposes. EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or as an
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alternative to cash flows from operating activities as a measure of our profitability or liquidity. We understand that although EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, our calculation of EBITDA may not be comparable to other similarly titled measures of other companies. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, adjusted to exclude fair value adjustments on derivatives, acquisition related expenses (which represents expenses incurred in connection with purchases of properties), merger and other transaction related fees and expenses, equity-based compensation and other items. We present Adjusted EBITDA because we consider it a useful analytical tool for measuring our ability to service our debt and generate cash for other purposes, and we believe it is more indicative of these measures than EBITDA. Adjusted EBITDA does not represent and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity. Our calculations of Adjusted EBITDA are not comparable to similarly titled measures of other companies due to the nature of the adjustments.
The table below sets forth a reconciliation of EBITDA and Adjusted EBITDA from net loss as determined in accordance with GAAP for the six months ended June 30, 2014 and 2013 (in thousands):
| Six Months Ended June 30, | ||||||||
| 2014 (as restated) |
2013 (as restated) |
|||||||
| Loss from continuing operations |
$ | (362,438 | ) | $ | (218,232 | ) | ||
| Interest expense, net and income tax benefit |
211,119 | 18,225 | ||||||
| Depreciation and amortization |
424,581 | 60,434 | ||||||
|
|
|
|
|
|||||
| EBITDA |
273,262 | (139,573 | ) | |||||
| Loss on derivative instruments, net |
(7,086 | ) | 31,179 | |||||
| Acquisition related expenses |
20,618 | 47,593 | ||||||
| Merger and other non-routine transaction related expenses |
167,720 | 129,433 | ||||||
| Equity-based compensation |
27,264 | 6,791 | ||||||
| Other non-recurring gains (losses) |
18,874 | (451 | ) | |||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
$ | 500,652 | $ | 74,972 | ||||
|
|
|
|
|
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The table below sets forth a reconciliation of EBITDA and Adjusted EBITDA from net loss as determined in accordance with GAAP for the years ended December 31, 2013, 2012 and 2011 (in thousands):
| Year Ended December 31, | ||||||||||||
| 2013 (as restated) |
2012 (as restated) |
2011 | ||||||||||
| Loss from continuing operations |
$ | (507,781 | ) | $ | (41,492 | ) | $ | (3,952 | ) | |||
| Interest expense, net |
105,548 | 11,856 | 960 | |||||||||
| Depreciation and amortization |
210,976 | 40,957 | 2,097 | |||||||||
|
|
|
|
|
|
|
|||||||
| EBITDA |
(191,257 | ) | 11,321 | (895 | ) | |||||||
| Loss on derivative instruments, net |
67,946 | — | (2 | ) | ||||||||
| Acquisition related expenses |
76,113 | 45,070 | 3,898 | |||||||||
| Merger and other non-routine transaction related expenses |
210,543 | 2,603 | — | |||||||||
| Equity-based compensation |
100,261 | 1,230 | 225 | |||||||||
|
|
|
|
|
|
|
|||||||
| Adjusted EBITDA |
$ | 263,606 | $ | 60,224 | $ | 3,226 | ||||||
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|
|
|
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Capital Markets
The following are ARCP’s offerings of common stock during the year ended December 31, 2013 (dollars in millions):
| Type of offering | Closing Date |
Number of Shares(1) |
Gross Proceeds |
|||||||
| Registered follow-on offering |
January 29, 2013 | 2,070,000 | $ | 26.8 | ||||||
| ATM |
January 1— September 30, 2013 | 553,300 | 8.9 | |||||||
| Private placement offering |
June 7, 2013 | 29,411,764 | 455.0 | |||||||
| Private placement offering |
November 12, 2013 | 15,126,498 | 186.0 | |||||||
|
|
|
|
|
|||||||
| Total—Year end December 31, 2013 |
47,161,562 | $ | 676.7 | |||||||
|
|
|
|
|
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| (1) | Excludes 140.7 million shares of common stock that were issued to the stockholders of ARCT III’s common stock in conjunction with the ARCT III Merger. |
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For each common share ARCP issued, ARCP OP issued a corresponding number of General Partner OP Units to ARCP in exchange for the contribution of the net proceeds from the stock issuance. The gross proceeds summarized above were contributed to ARCP OP net of offering costs of $165.4 million for the year ended December 31, 2013.
On August 1, 2012, ARCP filed a $500.0 million universal shelf registration statement and a resale registration statement with the SEC. Both registration statements became effective on August 17, 2012. As of December 31, 2013, ARCP had issued a total of approximately 2.1 million shares of common stock through a registered follow-on offering and an ATM offering under such universal shelf registration statement. No preferred stock, debt or equity-linked security have been issued under the universal shelf registration statement. The resale registration statement, as amended, registers the resale of up to 1,882,248 shares of common stock issued in connection with any future conversion of certain currently outstanding restricted shares, convertible preferred stock or limited partnership interests in ARCP OP.
On March 14, 2013, ARCP filed a universal automatic shelf registration statement and achieved well-known seasoned issuer (“WKSI”) status. As a result of the delayed filing of certain of our periodic reports with the SEC, the General Partner is not currently eligible to use a shelf registration statement for the offer and sale of our securities.
In January 2013, ARCP commenced an “at the market” equity offering program (“ATM”) in which ARCP may from time to time offer and sell shares of ARCP common stock having an aggregate offering proceeds of up to $60.0 million. The shares will be issued pursuant to ARCP’s $500.0 million universal shelf registration statement. For each share of common stock ARCP sells under the ATM, ARCP OP will issue a corresponding number of OP Units to ARCP.
In addition to its common stock offerings, on June 7, 2013, ARCP issued 28.4 million shares of convertible preferred stock (the “Series C Shares”) for gross proceeds of $445.0 million. Concurrently, ARCP OP issued to ARCP 28.4 million Series C Preferred Units underlying the Series C Shares. On November 12, 2013, ARCP elected to convert all outstanding Series C Shares into its common stock. Pursuant to the Series C Articles Supplementary, the number of shares of common stock that could be issued upon conversion of Series C Shares was limited to an exchange cap. Therefore, ARCP converted 1.1 million Series C Shares into 1.4 million shares of its common stock. With respect to the 27.3 million Series C Shares for which ARCP could not issue shares of its common stock upon conversion due to the exchange cap, ARCP paid holders of Series C Shares an aggregate cash amount equal to approximately $441.4 million in exchange for such Series C Shares. Concurrently, ARCP OP issued to ARCP 1.4 million OP Units in respect of the issuances of such common stock upon the conversion of the Series C Shares. Based on ARCP’s share price on the conversion date, the total settlement value was $458.8 million. See Note 12 — Other Debt for a description of the conversion features of the Series C Shares.
On September 15, 2013, ARCP entered into definitive purchase agreements pursuant to which ARCP agreed to issue Series D Preferred Stock and common stock to certain institutional holders promptly following the close of the CapLease Merger. Pursuant to the definitive purchase agreements, ARCP issued approximately 21.7 million shares of Series D Preferred Units and 15.1 million shares of common stock, for gross proceeds of $288.0 million and $186.0 million, respectively, on November 8, 2013. Concurrently, ARCP OP issued ARCP 21.7 million Series D OP Units and 15.1 Limited Partner.
Upon consummation of the ARCT IV merger on January 3, 2014, ARCP issued 42.2 million shares of Series F Preferred Stock to ARCT IV stockholders. There were no shares issued and outstanding of Series F Preferred Stock as of December 31, 2013. Concurrently, ARCP OP issued ARCP 42.2 million Limited Partner OP Units designated as Series F Preferred Units. See Note 17 — Preferred and Common OP Units (As Restated) for a description of the Series D Preferred Stock and Series F Preferred Stock.
Upon consummation of the Cole Merger on February 7, 2014, ARCP issued approximately 520.8 million shares of its common stock to Cole stockholders, and approximately 2.8 million shares of its common stock to certain Cole executives pursuant to certain letter agreements between ARCP and such executives. Additionally, on the same date, ARCP issued, but has not yet allocated, 0.4 million shares of common stock with dividend rights commensurate with those of its existing common stock. Concurrently, ARCP OP issued ARCP a corresponding number of General Partner OP Units.
On May 28, 2014, ARCP issued 138.0 million shares of common stock at a price of $12.00 per share (before underwriting discounts and commissions). ARCP received total net proceeds of approximately $1.59 billion, after deducting underwriting discounts, commissions and estimated expenses. ARCP used the proceeds primarily to repay $1.3 billion of outstanding borrowings under the senior unsecured credit facility. Concurrently, ARCP OP issued ARCP 138.0 million General Partner OP Units.
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Availability of Funds from Credit Facilities (As Restated)
On June 30, 2014, ARCP OP (as borrower) and ARCP (as guarantor) amended and restated the senior unsecured credit facility to, among other things, increase the amount of revolving commitments (including the addition of a multi-currency sub-facility) and term loan commitments. The senior unsecured credit facility is comprised of a $1.2 billion term loan facility (with a delayed draw component equal to $200.0 million), a $3.15 billion dollar-denominated revolving credit facility and a $250.0 million multi-currency revolving facility (all of which can be borrowed in dollars, at ARCP OP’s discretion). At June 30, 2014, we had approximately $1.9 billion outstanding, consisting of $1.0 billion outstanding on the term loan and $0.9 billion outstanding on the revolver, and up to $2.7 billion available to us for future borrowings under the senior unsecured credit facility. The senior unsecured credit facility includes an accordion feature, which, if exercised in full, allows us to increase the aggregate commitments under the senior unsecured credit facility to $6.0 billion, subject to the receipt of such additional commitments and the satisfaction of certain customary conditions.
The revolving credit facility generally bears interest at an annual rate of LIBOR plus 1.00% to 1.80% or Base Rate plus 0.00% to 0.80% (based upon ARCP’s then current credit rating). “Base Rate” is defined as the highest of the prime rate, the federal funds rate plus 0.50% or a floating rate based on one month LIBOR, determined on a daily basis. The term loan facility generally bears interest at an annual rate of LIBOR plus 1.15% to 2.05% or Base Rate plus 0.15% to 1.05% (based upon ARCP’s then current credit rating). Loans will initially be priced with an applicable margin of 1.35% in the case of LIBOR revolving loans and 1.60% in the case of LIBOR term loans. In addition, the senior unsecured credit facility provides the flexibility for interest rate auctions, pursuant to which, at our election, we may request that lenders make competitive bids to provide revolving loans, which competitive bids may be at pricing that differs from the foregoing interest rates.
The senior unsecured credit facility provides for monthly interest payments. In the event of an event of default, at the election of the majority of the lenders (or automatically upon a bankruptcy event of default with respect to ARCP OP or ARCP), the commitments of the lenders under the senior unsecured credit facility terminate, and payment of any unpaid amounts in respect of the senior unsecured credit facility is accelerated. The revolving credit facility and the term loan facility both terminate on June 30, 2018, in each case, unless extended in accordance with the terms of the senior unsecured credit facility. The senior unsecured credit facility provides for a one-year extension option with respect to each of the revolving credit facility and the term loan facility, exercisable at our election and subject to certain customary conditions, as well as certain customary “amend and extend” provisions. At any time, upon timely notice by us and subject to any breakage fees, we may prepay borrowings under the senior unsecured credit facility (subject to certain limitations applicable to the prepayment of any loans obtained through an interest rate auction, as described above). We incur a fee equal to 0.15% to 0.25% per annum (based upon ARCP’s then current credit rating) multiplied by the commitments (whether or not utilized) in respect of the dollar-denominated revolving credit facility and the multi-currency credit facility. We incur an unused fee of 0.25% per annum on the unused amount of the delayed draw term loan commitments. In addition, we incur customary administrative agent, letter of credit issuance, letter of credit fronting, extension and other fees. The senior unsecured credit facility also includes customary restrictions on, among other things, liens, negative pledges, restrictions on intercompany transfers, fundamental changes, investments, transactions with affiliates and restricted payments.
See Note 24 – Subsequent Events (As Restated) for further discussion of significant recent events.
Principal Use of Funds
Acquisitions
Generally, cash needs for property acquisitions will be met through proceeds from the public or private offerings of debt and equity, credit facilities and other financings. We may also from time to time enter into other agreements with third parties whereby third parties will make equity investments in specific properties or groups of properties that we acquire.
We evaluate potential acquisitions of real estate and real estate-related assets and engage in negotiations with sellers and borrowers. Investors and stockholders should be aware that after a purchase contract is executed that contains specific terms the property will not be purchased until the successful completion of due diligence and negotiation of final binding agreements. During this period, we may decide to temporarily invest any unused proceeds from equity offerings in certain investments that could yield lower returns than the properties. These lower returns may affect our ability to make distributions.
We financed the aggregate purchase prices of the recent mergers and acquisitions discussed in Note 3 — Mergers and Acquisitions (As Restated), in part through the assumption of outstanding indebtedness, and through a combination of available cash on hand from: (a) a portion of the $676.7 million in gross proceeds for the year ended December 31, 2013 from the sale of shares of ARCP common stock and convertible preferred stock in separate previously disclosed private placement transactions; (b) a portion of the $967.8 million in net proceeds from the sale of the old notes; (c) funds available from the issuance of common stock through ARCP’s current ATM program or any successor program thereto; and (d) financing available under our senior unsecured credit facility; and (e) additional alternative financing arrangements, as needed, from the issuance of additional common stock, preferred securities or other debt, equity or equity-linked financings.
23
Dividends
The amount of dividends payable to ARCP’s stockholders is determined by ARCP’s board of directors and is dependent on a number of factors, including funds available for dividends, financial condition, capital expenditure requirements, as applicable, and annual dividend requirements needed to qualify and maintain ARCP’s status as a REIT under the Internal Revenue Code. Operating cash flows are expected to increase as additional properties are acquired in our investment portfolio. ARCP funds dividend payments primarily with distributions from ARCP OP and ARCP OP funds dividends primarily from cash flows generated from operations by it and its subsidiaries. As our real estate portfolio matures, we expect cash flows from operations to cover our dividends.
Loan Obligations
At June 30, 2014, our leverage ratio (net debt, excluding debt convertible to common stock, divided by enterprise value) was 41.7%.
The payment terms of our loan obligations vary. In general, only interest amounts are payable monthly with all unpaid principal and interest due at maturity. Some of our loan agreements stipulate that we comply with specific reporting and financial covenants mainly related to debt coverage ratios and loan to value ratios. Each loan that has these requirements has specific ratio thresholds that must be met.
As of June 30, 2014, we had non-recourse mortgage indebtedness of $4.1 billion, which was collateralized by 757 properties. Our mortgage indebtedness bore interest at the weighted average rate of 4.90% per annum and had a weighted average maturity of 6.0 years. We may in the future incur additional mortgage debt on the properties we currently own or use long-term non-recourse financing to acquire additional properties in the future.
As of June 30, 2014, we had approximately $1.9 billion outstanding under the senior unsecured credit facility. There is $1.0 billion outstanding in term loans on the Credit Facility which is fixed through the use of derivative instruments used to hedge interest rate volatility. Including the spread, which can vary based on ARCP’s credit rating, the weighted average interest on this portion was 2.84% at June 30, 2014. At June 30, 2014, up to $2.7 billion was available to us for future borrowings, subject to borrowing availability.
Our loan obligations require the maintenance of financial covenants, as well as restrictions on corporate guarantees, the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios), as well as the maintenance of a minimum net worth. At June 30, 2014, March 31, 2014 and December 31, 2013, we were in compliance with the debt covenants under all of our loan obligations.
Convertible Senior Note Offering
On July 29, 2013, ARCP issued $300.0 million of Convertible Senior Notes due 2018 (the “2018 Notes”) and, pursuant to an over-allotment exercise by the underwriters of such 2018 Notes offering, issued an additional $10.0 million of its 2018 Notes on August 1, 2013. On December 10, 2013, ARCP issued an additional $287.5 million of the 2018 Notes through a reopening of the 2018 Notes indenture agreement. On December 10, 2013, ARCP issued $402.5 million of Convertible Senior Notes due 2020 (the “2020 Notes”, collectively with the 2018 Notes, the “Convertible Notes”). The 2018 Notes mature August 1, 2018 and the 2020 Notes mature on December 15, 2020. The Convertible Notes are convertible to cash or shares of ARCP’s common stock at its option. In accordance with GAAP, the notes are accounted for as a liability with a separate equity component recorded for the conversion option. A liability was recorded for the Convertible Notes on the issuance date at fair value based on a discounted cash flow analysis using current market rates for debt instruments with similar terms. The difference between the initial proceeds from the Convertible Notes and the estimated fair value of the debt instruments resulted in a debt discount, with an offset recorded to additional paid-in capital representing the equity component. The debt discount is being amortized to interest expense over the expected lives of the Convertible Notes.
ARCP funds the interest payments on the 2018 and the 2020 notes, respectively, with payments from ARCP OP in accordance with the terms of intercompany notes that have substantially similar terms to the 2018 and 2020 notes, respectively.
See Note 24 – Subsequent Events (As Restated) for further discussion of significant recent events.
24
Bond Offering
On February 6, 2014, ARCP OP issued, in a private offering, the old notes exchanged hereby, a portion of the net proceeds from which it were to partially fund the cash consideration, fees and expenses relating to Cole Merger and repayment of Cole’s credit facility. ARCP used the remaining portion of the net proceeds from the offering to repay $900.0 million outstanding under its senior unsecured credit facility and for other general corporate purposes.
See Note 24 – Subsequent Events (As Restated) for further discussion of significant recent events.
Contractual Obligations
The following is a summary of ARCP OP’s contractual obligations as of June 30, 2014 (in thousands):
| Total | July 1, - December 31, 2014 |
2015-2016 | 2017-2018 | Thereafter | ||||||||||||||||
| Principal payments due on mortgage notes payable |
$ | 4,125,621 | $ | 104,043 | $ | 521,724 | $ | 774,947 | $ | 2,724,907 | ||||||||||
| Interest payments due on mortgage notes payable |
1,174,482 | 102,150 | 368,120 | 284,221 | 419,991 | |||||||||||||||
| Principal payments due on credit facility |
1,896,000 | — | — | 1,896,000 | — | |||||||||||||||
| Interest payments due on credit facility |
213,190 | 20,984 | 95,698 | 96,508 | — | |||||||||||||||
| Principal payments due on corporate bonds |
2,550,000 | — | — | 1,300,000 | 1,250,000 | |||||||||||||||
| Interest payments due on corporate bonds |
391,702 | 35,750 | 143,000 | 93,528 | 119,424 | |||||||||||||||
| Principal payments due on convertible debt units |
1,000,000 | — | — | 597,500 | 402,500 | |||||||||||||||
| Interest payments due on convertible debt units |
170,633 | 16,509 | 66,038 | 58,569 | 29,517 | |||||||||||||||
| Principal payments due on other debt |
149,804 | 54,339 | 24,378 | 20,947 | 50,140 | |||||||||||||||
| Interest payments due on other debt |
78,154 | 3,438 | 11,621 | 8,721 | 54,374 | |||||||||||||||
| Payments due on lease obligations |
126,397 | 12,922 | 21,823 | 7,918 | 83,734 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 11,875,983 | $ | 350,135 | $ | 1,252,402 | $ | 5,138,859 | $ | 5,134,587 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The following is a summary of ARCP OP’s contractual obligations as of December 31, 2013 (in thousands):
| Total | 2014 | 2015-2016 | 2017-2018 | Thereafter | ||||||||||||||||
| Principal payments due on mortgage notes payable |
$ | 1,258,661 | $ | 86,933 | $ | 677,200 | $ | 293,869 | $ | 200,659 | ||||||||||
| Interest payments due on mortgage notes payable |
204,982 | 63,581 | 82,666 | 25,064 | 33,671 | |||||||||||||||
| Principal payments due on senior corporate credit facility |
1,819,800 | — | — | 1,819,800 | — | |||||||||||||||
| Interest payments due on senior corporate credit facility |
186,585 | 47,048 | 94,095 | 45,442 | — | |||||||||||||||
| Principal payments due on secured credit facility |
150,000 | 150,000 | — | — | — | |||||||||||||||
| Interest payments due on secured credit facility |
4,410 | 4,410 | — | — | — | |||||||||||||||
| Principal payments due on convertible debt units |
1,000,000 | — | — | 597,500 | 402,500 | |||||||||||||||
| Interest payments due on convertible debt units |
187,235 | 33,019 | 66,038 | 58,619 | 29,559 | |||||||||||||||
| Principal payments due on other debt |
108,316 | 12,851 | 24,378 | 40,157 | 30,930 | |||||||||||||||
| Interest payments due on other debt |
65,659 | 6,808 | 11,469 | 6,802 | 40,580 | |||||||||||||||
| Payments due on lease obligations |
84,441 | 4,541 | 8,657 | 7,456 | 63,787 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 5,070,089 | $ | 409,191 | $ | 964,503 | $ | 2,894,709 | $ | 801,686 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Election as a REIT
ARCP elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with the taxable year ended December 31, 2011. If ARCP continues to qualify for taxation as a REIT, it generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to stockholders, and so long as it distributes at least 90% of its REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain. REITs are subject to a number of other organizational and operational requirements. Even if ARCP qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. ARCP believes it is organized and operating in such a manner as to qualify to be taxed as a REIT for the taxable year ending December 31, 2014.
25
Inflation
We may be adversely impacted by inflation on any leases that do not contain indexed escalation provisions. In addition, our net leases may require the tenant to pay its allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance. This may reduce our exposure to increases in costs and operating expenses resulting from inflation.
Related-Party Transactions and Agreements (As Restated)
We have entered into agreements with affiliates, whereby we pay or have paid in the past certain fees or reimbursements to ARC or its affiliates for acquisition fees and expenses, organization and offering costs, asset management fees and reimbursement of operating costs and have in the past paid sales commissions and dealer manager fees. See Note 19 — Related Party Transactions and Arrangements (As Restated) for a discussion of the various related-party transactions, agreements and fees. In August 2013, ARCP’s board of directors determined that it is in the best interests of ARCP and its stockholders to become self-managed, and ARCP completed its transition to self-management on January 8, 2014.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Quantitative and Qualitative Disclosures About Market Risk
The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to variable-rate borrowings. To meet our short-term and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We would not hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.
As of June 30, 2014, our debt included fixed-rate debt, including debt that has interest rates that are fixed with the use of derivative instruments, with a carrying and fair value of $8.7 billion and $9.0 billion, respectively. Changes in market interest rates on our fixed rate debt impact fair value of the debt, but they have no impact on interest incurred or cash flow. For instance, if interest rates rise 100 basis points and our fixed rate debt balance remains constant, we expect the fair value of our debt to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our fixed-rate debt assumes an immediate 100 basis point move in interest rates from their June 30, 2014 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed rate debt by approximately $233.7 million. A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt by $241.6 million.
As of June 30, 2014, our debt included variable-rate debt with a carrying and fair value of $1.0 billion. The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from their June 30, 2014 levels, with all other variables held constant. A 100 basis point increase or decrease in variable interest rates on our variable-rate notes payable would increase or decrease our interest expense by approximately $9.8 million annually.
As the information presented above includes only those exposures that existed as of June 30, 2014, it does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.
These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs, and, assume no other changes in our capital structure.
26
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | ||||
| Financial Statements (As Restated) (1) |
||||
| Report of Independent Registered Public Accounting Firm |
F-2 | |||
| Consolidated Balance Sheets as of December 31, 2013 and 2012 |
F-3 | |||
| Consolidated Statements of Operations or the Years Ended December 31, 2013, 2012 and 2011 |
F-4 | |||
| Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2013, 2012 and 2011 |
F-5 | |||
| Consolidated Statement of Changes in Equity for the Years Ended December 31, 2013, 2012 and 2011 |
F-6 | |||
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011 |
F-8 | |||
| Notes to Consolidated Financial Statements |
F-10 | |||
| Schedule of Real Estate and Accumulated Depreciation |
F-87 | |||
| Schedule of Mortgage Loans on Real Estate |
F-159 | |||
| Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013 |
F-160 | |||
| Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2014 and 2013 (unaudited) |
F-161 | |||
| Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2014 and 2013 (unaudited) |
F-162 | |||
| Consolidated Statement of Changes in Equity for the Six Months Ended June 30, 2014 and 2013 (unaudited) |
F-163 | |||
| Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013 (unaudited) |
F-165 | |||
| Notes to Consolidated Financial Statements (unaudited) |
F-166 | |||
| (1) | These financial statements are those that reflect the recast in applying the carryover basis of accounting to include American Realty Capital Trust IV, Inc. (“ARCT IV”), as a result of American Realty Capital Properties, Inc.’s merger with ARCT IV, as discussed in Note 1 — Organization. |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors of General Partner and Limited Partners
ARC Properties Operating Partnership, L.P. and subsidiaries
We have audited the accompanying consolidated balance sheets of ARC Properties Operating Partnership, L.P. (a Delaware limited partnership) and subsidiaries (collectively the “Operating Partnership”) as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, changes in equity, and cash flows for each of the three years in the period ended December 31, 2013. Our audits of the basic consolidated financial statements included the financial statement schedules listed in the Index to Consolidated Financial Statements. These financial statements and financial statement schedules are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Operating Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Operating Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ARC Properties Operating Partnership, L.P. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As described in Note 2 – Restatement of Previously Issued Financial Statements, the Operating Partnership has restated its consolidated financial statements for 2013 and 2012.
/s/ GRANT THORNTON LLP
Phoenix, Arizona
March 2, 2015
F-2
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS (In thousands, except for unit data)
| December 31, | ||||||||
| 2013 (As Restated) (1) |
2012 (As Restated) (1) |
|||||||
| ASSETS | ||||||||
| Real estate investments, at cost: |
||||||||
| Land |
$ | 1,380,308 | $ | 262,906 | ||||
| Buildings, fixtures and improvements |
5,297,400 | 1,391,209 | ||||||
| Land and construction in progress |
21,839 | — | ||||||
| Acquired intangible lease assets |
759,595 | 221,500 | ||||||
|
|
|
|
|
|||||
| Total real estate investments, at cost |
7,459,142 | 1,875,615 | ||||||
| Less: accumulated depreciation and amortization |
(267,278 | ) | (56,524 | ) | ||||
|
|
|
|
|
|||||
| Total real estate investments, net |
7,191,864 | 1,819,091 | ||||||
| Cash and cash equivalents |
52,725 | 292,575 | ||||||
| Investment in direct financing leases, net |
66,112 | — | ||||||
| Investment securities, at fair value |
62,067 | 41,654 | ||||||
| Loans held for investment, net |
26,279 | — | ||||||
| Derivative assets, at fair value |
9,189 | — | ||||||
| Restricted cash |
35,921 | 1,108 | ||||||
| Prepaid expenses and other assets |
186,726 | 11,984 | ||||||
| Goodwill |
92,789 | — | ||||||
| Deferred costs, net |
84,746 | 15,118 | ||||||
| Assets held for sale |
665 | 665 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 7,809,083 | $ | 2,182,195 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND EQUITY | ||||||||
| Mortgage notes payable, net |
$ | 1,301,114 | $ | 265,118 | ||||
| Convertible debt due to General Partner, net |
972,490 | — | ||||||
| Senior secured revolving credit facility |
— | 124,604 | ||||||
| Senior corporate credit facilities |
1,819,800 | — | ||||||
| Secured credit facility |
150,000 | — | ||||||
| Other debt |
104,804 | — | ||||||
| Below-market lease liabilities, net |
77,169 | — | ||||||
| Derivative liabilities, at fair value |
18,455 | 3,830 | ||||||
| Accounts payable and accrued expenses |
730,571 | 102,740 | ||||||
| Deferred rent and other liabilities |
21,816 | 4,516 | ||||||
| Distributions payable |
10,903 | 11,105 | ||||||
| Due to affiliates |
103,434 | 1,522 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
5,310,556 | 513,435 | ||||||
|
|
|
|
|
|||||
| General partner’s Series D Preferred equity — 21,735,008 and zero General Partner Preferred Units issued and outstanding at December 31, 2013 and December 31, 2012, respectively |
269,299 | — | ||||||
|
|
|
|
|
|||||
| General partner’s common equity — 239,248,853 and 184,553,676 General Partner OP Units issued and outstanding at December 31, 2013 and December 31, 2012, respectively |
1,018,123 | 1,489,587 | ||||||
| General partner’s preferred equity (excluding Series D Preferred equity) — 42,199,547 and 6,990,328 General Partner Preferred Units issued and outstanding at December 31, 2013 and December 31, 2012, respectively |
1,054,989 | 163,047 | ||||||
| Limited partners’ common equity — 17,832,274 and 1,621,349 Limited Partner OP Units issued and outstanding at December 31, 2013 and December 31, 2012, respectively |
139,083 | 16,126 | ||||||
| Limited partners’ preferred equity — 721,465 and zero Limited Partner Preferred Units issued and outstanding at December 31, 2013 and December 31, 2012, respectively |
16,466 | — | ||||||
|
|
|
|
|
|||||
| Total partners’ equity |
2,228,661 | 1,668,760 | ||||||
|
|
|
|
|
|||||
| Non-controlling interests |
567 | — | ||||||
|
|
|
|
|
|||||
| Total equity |
2,229,228 | 1,668,760 | ||||||
|
|
|
|
|
|||||
| Total liabilities and equity |
$ | 7,809,083 | $ | 2,182,195 | ||||
|
|
|
|
|
|||||
| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-3
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data)
| Year Ended December 31, | ||||||||||||
| 2013 (As Restated)(1) |
2012 (As Restated)(1) |
2011 | ||||||||||
| Revenues: |
||||||||||||
| Rental income |
$ | 310,508 | $ | 65,262 | $ | 3,762 | ||||||
| Direct financing lease income |
2,244 | — | — | |||||||||
| Operating expense reimbursements |
16,571 | 1,945 | 208 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total revenues |
329,323 | 67,207 | 3,970 | |||||||||
|
|
|
|
|
|
|
|||||||
| Operating expenses: |
||||||||||||
| Acquisition related (including $37,602, $28,656 and $1,692 to affiliates, respectively) |
76,113 | 45,070 | 3,898 | |||||||||
| Merger and other non-routine transactions (including $156,146, $0 and $0 to affiliates, respectively) |
210,543 | 2,603 | — | |||||||||
| Property operating |
23,616 | 3,522 | 220 | |||||||||
| Management fees to affiliates |
17,462 | 212 | — | |||||||||
| General and administrative (including $103,206, $826 and $168 to affiliates, respectively) |
123,172 | 5,458 | 749 | |||||||||
| Depreciation and amortization |
210,976 | 40,957 | 2,097 | |||||||||
| Impairment of real estate |
3,346 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total operating expenses |
665,228 | 97,822 | 6,964 | |||||||||
|
|
|
|
|
|
|
|||||||
| Operating loss |
(335,905 | ) | (30,615 | ) | (2,994 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Other (expense) income: |
||||||||||||
| Interest expense |
(105,548 | ) | (11,856 | ) | (960 | ) | ||||||
| Other income, net |
3,824 | 979 | 4 | |||||||||
| Loss on derivative instruments, net |
(67,946 | ) | — | (2 | ) | |||||||
| Loss on sale of investments in affiliates |
(411 | ) | — | — | ||||||||
| Loss on sale of investments |
(1,795 | ) | — | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Total other expenses, net |
(171,876 | ) | (10,877 | ) | (958 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Loss from continuing operations attributable to unitholders |
(507,781 | ) | (41,492 | ) | (3,952 | ) | ||||||
| Discontinued operations: |
||||||||||||
| Loss from operations of held for sale properties |
(34 | ) | (145 | ) | (37 | ) | ||||||
| Loss on held for sale properties |
— | (600 | ) | (815 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net loss from discontinued operations attributable to unitholders |
(34 | ) | (745 | ) | (852 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net loss attributable to unitholders |
$ | (507,815 | ) | $ | (42,237 | ) | $ | (4,804 | ) | |||
|
|
|
|
|
|
|
|||||||
| Basic and diluted net loss per share from continuing operations attributable to common unitholders |
$ | (2.37 | ) | $ | (0.40 | ) | $ | (1.04 | ) | |||
|
|
|
|
|
|
|
|||||||
| Basic and diluted net loss per share attributable to common unitholders |
$ | (2.37 | ) | $ | (0.41 | ) | $ | (1.26 | ) | |||
|
|
|
|
|
|
|
|||||||
| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-4
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
| Year Ended December 31, | ||||||||||||
| 2013 (As Restated) (1) |
2012 (As Restated) (1) |
2011 | ||||||||||
| Net loss attributable to unitholders |
$ | (507,815 | ) | $ | (42,237 | ) | $ | (4,804 | ) | |||
|
|
|
|
|
|
|
|||||||
| Other comprehensive income (loss): |
||||||||||||
| Designated derivatives, fair value adjustments |
11,481 | (3,743 | ) | (98 | ) | |||||||
| Unrealized gain (loss) on investment securities |
119 | (93 | ) | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Total other comprehensive income (loss) |
11,600 | (3,836 | ) | (98 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total comprehensive loss attributable to unitholders |
$ | (496,215 | ) | $ | (46,073 | ) | $ | (4,902 | ) | |||
|
|
|
|
|
|
|
|||||||
| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-5
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except for unit data)
(As restated for the years ended December 31, 2013 and 2012) (1)
| Preferred Units | Common Units | |||||||||||||||||||||||||||||||||||||||||||
| Number of General Partner Preferred Units |
General Partner’s Equity |
Number of Limited Partner Preferred Units |
Limited Partners’ Equity |
Number of General Partner OP Units |
General Partner’s Equity |
Number of Limited Partner OP Units |
Limited Partners’ Equity |
Total Partners’ Equity |
Non- controlling Interest |
Total Equity |
||||||||||||||||||||||||||||||||||
| Balance, January 1, 2011 |
— | $ | — | — | $ | — | 20,000 | $ | 200 | — | $ | — | $ | 200 | $ | — | $ | 200 | ||||||||||||||||||||||||||
| Issuance of Common OP Units |
— | — | — | — | 16,929,184 | 186,127 | — | — | 186,127 | — | $ | 186,127 | ||||||||||||||||||||||||||||||||
| Issuance of Common OP Units through distribution reinvestment plan |
— | — | — | — | 27,169 | 271 | — | — | 271 | — | $ | 271 | ||||||||||||||||||||||||||||||||
| Offering costs, commissions and dealer manager fees (2) |
— | — | — | — | — | (21,752 | ) | — | — | (21,752 | ) | — | $ | (21,752 | ) | |||||||||||||||||||||||||||||
| Repurchases of Common OP Units |
— | — | — | — | — | (25 | ) | — | — | (25 | ) | — | $ | (25 | ) | |||||||||||||||||||||||||||||
| Equity-based compensation |
— | — | — | — | 185,663 | 225 | — | — | 225 | — | $ | 225 | ||||||||||||||||||||||||||||||||
| Distributions declared on Common OP Units |
— | — | — | — | — | (2,519 | ) | — | — | (2,519 | ) | — | $ | (2,519 | ) | |||||||||||||||||||||||||||||
| Contribution transactions |
— | — | — | — | — | (16,769 | ) | — | — | (16,769 | ) | — | $ | (16,769 | ) | |||||||||||||||||||||||||||||
| Contributions from non-controlling interest holders |
— | — | — | — | — | (3,875 | ) | 310,000 | 3,875 | — | — | $ | — | |||||||||||||||||||||||||||||||
| Distributions to non-controlling interest holders |
— | — | — | — | — | — | — | (68 | ) | (68 | ) | — | $ | (68 | ) | |||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | (4,699 | ) | — | (105 | ) | (4,804 | ) | — | $ | (4,804 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income |
— | — | — | — | — | (96 | ) | — | (2 | ) | (98 | ) | — | $ | (98 | ) | ||||||||||||||||||||||||||||
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|||||||||||||||||||||||
| Balance, December 31, 2011 |
— | — | — | — | 17,162,016 | 137,088 | 310,000 | 3,700 | 140,788 | — | $ | 140,788 | ||||||||||||||||||||||||||||||||
| Issuance of Common OP Units |
— | — | — | — | 164,775,688 | 1,758,789 | — | — | 1,758,789 | — | $ | 1,758,789 | ||||||||||||||||||||||||||||||||
| Issuance of Common OP Units through distribution reinvestment plan |
— | — | — | — | 2,686,141 | 27,136 | — | — | 27,136 | — | $ | 27,136 | ||||||||||||||||||||||||||||||||
| Offering costs, commissions and dealer manager fees (2) |
— | — | — | — | — | (218,431 | ) | — | — | (218,431 | ) | — | $ | (218,431 | ) | |||||||||||||||||||||||||||||
| Repurchases of Common OP Units |
— | — | — | — | (183,119 | ) | (1,953 | ) | — | — | (1,953 | ) | — | $ | (1,953 | ) | ||||||||||||||||||||||||||||
| Issuance of Preferred OP Units |
828,472 | 9,000 | — | — | — | — | — | — | 9,000 | — | $ | 9,000 | ||||||||||||||||||||||||||||||||
| Excess of ARCT IV Merger considerations over historical cost |
6,161,856 | 154,047 | — | — | — | — | — | — | 154,047 | — | $ | 154,047 | ||||||||||||||||||||||||||||||||
| Conversion of Limited Partners’ Common OP Units to General Partner’s Common OP units |
— | — | — | — | — | (93,421 | ) | — | — | (93,421 | ) | — | $ | (93,421 | ) | |||||||||||||||||||||||||||||
| Conversion of Limited Partners’ Preferred OP Units to General Partner’s Preferred OP units |
— | — | — | — | — | — | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||
| Issuance of Restricted Common OP Units and LTIP Units |
— | — | — | — | — | — | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||
| Equity-based compensation |
— | — | — | — | — | — | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||
| Distributions declared on Common OP Units |
— | — | — | — | 112,950 | 1,230 | — | — | 1,230 | — | $ | 1,230 | ||||||||||||||||||||||||||||||||
| Issuance of Limited |
||||||||||||||||||||||||||||||||||||||||||||
| Partner OP Units, net |
— | — | — | — | — | (75,416 | ) | — | — | (75,416 | ) | — | $ | (75,416 | ) | |||||||||||||||||||||||||||||
| Distributions to limited partner OP units, LTIPs and noncontrolling interest holders |
— | — | — | — | — | — | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||
| Distributions to restricted units |
— | — | — | — | — | — | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||
| Distributions to preferred units |
— | — | — | — | — | — | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||
| Contribution transactions |
— | — | — | — | — | — | 576,376 | 6,352 | 6,352 | — | $ | 6,352 | ||||||||||||||||||||||||||||||||
The consolidated statements of changes in equity continues onto the next page.
F-6
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY – (Continued)
(In thousands, except for unit data)
(As restated for the years ended December 31, 2013 and 2012 (1)
| Preferred Units | Common Units | |||||||||||||||||||||||||||||||||||||||||||
| Number of General Partner Preferred Units |
General Partner’s Equity |
Number of Limited Partner Preferred Units |
Limited Partner’s Equity |
Number of General Partner OP Units |
General Partner’s Equity |
Number of Limited Partner OP Units |
Limited Partners’ Equity |
Total Partners’ Equity |
Non- controlling Interest |
Total Equity |
||||||||||||||||||||||||||||||||||
| Contributions from non-controlling interest holders |
— | — | — | — | — | — | 734,973 | 7,375 | 7,375 | — | $ | 7,375 | ||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest holders |
— | — | — | — | — | — | — | (663 | ) | (663 | ) | — | $ | (663 | ) | |||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | (41,652 | ) | — | (585 | ) | (42,237 | ) | — | $ | (42,237 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income |
— | — | — | — | — | (3,783 | ) | — | (53 | ) | (3,836 | ) | — | $ | (3,836 | ) | ||||||||||||||||||||||||||||
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|||||||||||||||||||||||
| Balance, December 31, 2012 (as restated) |
6,990,328 | 163,047 | — | — | 184,553,676 | 1,489,587 | 1,621,349 | 16,126 | 1,668,760 | — | $ | 1,668,760 | ||||||||||||||||||||||||||||||||
| Issuance of Common OP Units |
— | — | — | — | 78,215,719 | 1,253,343 | — | — | 1,253,343 | — | $ | 1,253,343 | ||||||||||||||||||||||||||||||||
| Issuance of Common OP Units through distribution reinvestment plan |
— | — | — | — | 940,737 | 25,564 | — | — | 25,564 | — | $ | 25,564 | ||||||||||||||||||||||||||||||||
| Offering costs, commissions and dealer manager fees (2) |
— | — | — | — | — | (165,531 | ) | — | — | (165,531 | ) | — | $ | (165,531 | ) | |||||||||||||||||||||||||||||
| Repurchases of Common OP Units |
— | — | — | — | (28,305,844 | ) | (358,041 | ) | — | — | (358,041 | ) | — | $ | (358,041 | ) | ||||||||||||||||||||||||||||
| Issuance of Preferred OP Units |
36,037,691 | 900,942 | 721,465 | 16,466 | — | — | 630,689 | 14,395 | 931,803 | — | $ | 931,803 | ||||||||||||||||||||||||||||||||
| Excess of ARCT IV Merger considerations over historical cost |
— | — | — | — | — | (558,089 | ) | — | — | (558,089 | ) | — | $ | (558,089 | ) | |||||||||||||||||||||||||||||
| Conversion of Limited Partners’ Common OP Units to General Partner’s Common OP units |
— | — | — | — | 599,233 | 5,800 | (599,233 | ) | (5,800 | ) | — | — | $ | — | ||||||||||||||||||||||||||||||
| Conversion of General Partner’s Preferred Units to General Partner’s Common OP Units |
(828,472 | ) | (9,000 | ) | — | — | 829,629 | 9,000 | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||
| Issuance of Common OP Units in conversion of Convertible Preferred OP Units Series C |
— | — | — | — | 1,411,030 | 17,396 | — | — | 17,396 | — | $ | 17,396 | ||||||||||||||||||||||||||||||||
| Equity-based compensation |
— | — | — | — | 1,004,673 | 7,962 | 8,241,100 | 32,700 | 40,662 | — | $ | 40,662 | ||||||||||||||||||||||||||||||||
| Equity component of convertible debt |
— | — | — | — | — | 28,559 | — | — | 28,559 | — | $ | 28,559 | ||||||||||||||||||||||||||||||||
| Contribution from Advisor |
— | — | — | — | — | 2,313 | — | — | 2,313 | — | $ | 2,313 | ||||||||||||||||||||||||||||||||
| Consideration paid for assets of Advisor in excess of carryover basis |
— | — | — | — | — | — | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||
| Distributions declared on Common OP Units |
— | — | — | — | — | (259,468 | ) | — | — | (259,468 | ) | — | $ | (259,468 | ) | |||||||||||||||||||||||||||||
| Issuance of Common OP Units |
— | — | — | — | — | — | 8,029,545 | 107,771 | 107,771 | — | $ | 107,771 | ||||||||||||||||||||||||||||||||
| Contributions from non-controlling interest holders |
— | — | — | — | — | — | — | — | — | — | $ | — | ||||||||||||||||||||||||||||||||
| Non-controlling interest retained in Caplease merger |
— | — | — | — | — | — | — | — | — | 567 | $ | 567 | ||||||||||||||||||||||||||||||||
| Redemption of Common OP Units |
— | — | — | — | — | — | (91,176 | ) | (1,152 | ) | (1,152 | ) | — | $ | (1,152 | ) | ||||||||||||||||||||||||||||
| Distributions to non-controlling interest holders |
— | — | — | — | — | — | — | (9,014 | ) | (9,014 | ) | — | $ | (9,014 | ) | |||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | (491,499 | ) | — | (16,316 | ) | (507,815 | ) | — | $ | (507,815 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income |
— | — | — | — | — | 11,227 | — | 373 | 11,600 | — | $ | 11,600 | ||||||||||||||||||||||||||||||||
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| Balance, December 31, 2013 (as restated) |
42,199,547 | $ | 1,054,989 | 721,465 | $ | 16,466 | 239,248,853 | $ | 1,018,123 | 17,832,274 | $ | 139,083 | $ | 2,228,661 | $ | 567 | $ | 2,229,228 | ||||||||||||||||||||||||||
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| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
| (2) | Includes $159.4 million, $211.4 million and $14.3 million to affiliates for the years ended December 31, 2013, 2012 and 2011, respectively. |
The accompanying notes are an integral part of these statements.
F-7
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
| Year Ended December 31, | ||||||||||||
| 2013 (As Restated) (1) |
2012 | 2011 | ||||||||||
| Cash flows from operating activities: |
||||||||||||
| Net loss |
$ | (507,815 | ) | $ | (42,237 | ) | $ | (4,804 | ) | |||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
||||||||||||
| Issuance of OP Units for the ARCT III Merger |
107,771 | — | — | |||||||||
| Depreciation and amortization |
238,307 | 43,152 | 2,323 | |||||||||
| Loss on held for sale properties |
— | 600 | 815 | |||||||||
| Impairment of real estate |
3,346 | — | — | |||||||||
| Equity-based compensation |
100,261 | 1,230 | 225 | |||||||||
| Unrealized gain on derivative instruments |
(1,739 | ) | — | — | ||||||||
| Loss on sale of investments, net |
2,206 | — | — | |||||||||
| Loss in extinguishment of Series C Preferred Units |
13,749 | — | — | |||||||||
| Changes in assets and liabilities: |
||||||||||||
| Investment in direct financing leases |
2,505 | — | — | |||||||||
| Prepaid expenses and other assets |
(19,851 | ) | (5,089 | ) | (546 | ) | ||||||
| Accounts payable and accrued expenses |
20,789 | 8,277 | 843 | |||||||||
| Deferred rent and other liabilities |
8,555 | 3,507 | 887 | |||||||||
| Due to affiliates |
43,834 | — | — | |||||||||
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|
|
|
|
|
|
|||||||
| Net cash provided by (used in) operating activities |
11,918 | 9,440 | (257 | ) | ||||||||
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|
|
|||||||
| Cash flows from investing activities: |
||||||||||||
| Investments in real estate and other assets |
(3,520,412 | ) | (1,659,536 | ) | (89,981 | ) | ||||||
| Acquisition of a real estate business, net of cash acquired of $41,779 |
(878,898 | ) | — | — | ||||||||
| Investment in direct financing leases |
(68,617 | ) | — | — | ||||||||
| Capital expenditures |
(9,755 | ) | (54 | ) | — | |||||||
| Principal repayments received from borrowers |
442 | — | — | |||||||||
| Investment in other assets |
(543 | ) | — | — | ||||||||
| Proceeds from sale of property held for sale |
— | 553 | — | |||||||||
| Deposits for real estate investments |
(101,887 | ) | (638 | ) | — | |||||||
| Purchases of investment securities |
(81,590 | ) | (41,747 | ) | — | |||||||
| Proceeds from sale of investment securities |
119,542 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Net cash used in investing activities |
(4,541,718 | ) | (1,701,422 | ) | (89,981 | ) | ||||||
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|
|
|
|
|||||||
| Cash flows from financing activities: |
||||||||||||
| Proceeds from mortgage notes payable |
6,924 | 229,798 | 21,470 | |||||||||
| Payments on mortgage notes payable |
(5,711 | ) | — | — | ||||||||
| Payments on other debt |
(9,368 | ) | — | — | ||||||||
| Proceeds from senior secured revolving credit facility |
— | 82,319 | 2,066 | |||||||||
| Payments on senior secured revolving credit facility |
(124,604 | ) | (122 | ) | (11,159 | ) | ||||||
| Proceeds from senior corporate credit facility |
1,889,800 | — | — | |||||||||
| Payments on senior corporate credit facility |
(830,000 | ) | — | — | ||||||||
| Proceeds from secured credit facility |
789,000 | — | — | |||||||||
| Payments of deferred financing costs |
(101,196 | ) | (13,974 | ) | (3,108 | ) | ||||||
| Proceeds from issuance of convertible debt |
967,786 | — | — | |||||||||
| Repurchases of OP units |
(359,193 | ) | (1,534 | ) | — | |||||||
| Proceeds from issuances of preferred units |
— | 9,000 | — | |||||||||
| Proceeds from issuance of Series C Preferred Units |
445,000 | — | — | |||||||||
| Cash payment on settlement of Series C Preferred Units |
(441,353 | ) | — | — | ||||||||
| Proceeds from issuance of Series D Preferred Units |
287,991 | — | — | |||||||||
| Proceeds from issuance of OP Units |
2,158,486 | 1,909,520 | 122,993 | |||||||||
| Payments of offering costs and fees related to stock issuances |
(165,327 | ) | (218,108 | ) | (20,884 | ) | ||||||
| Contributions from affiliate |
— | — | 2 | |||||||||
| Contributions from non-controlling interest holders |
30,861 | 7,375 | — | |||||||||
| Distributions to non-controlling interest holders |
(8,219 | ) | (663 | ) | (68 | ) | ||||||
| Distributions paid |
(234,897 | ) | (37,673 | ) | (1,743 | ) | ||||||
The consolidated statements of cash flows continue onto the next page.
F-8
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
| Year Ended December 31, | ||||||||||||
| 2013 (As Restated) (1) |
2012 | 2011 | ||||||||||
| Advances from affiliates, net |
$ | (376 | ) | $ | 396 | $ | — | |||||
| Change in restricted cash |
(5,654 | ) | (1,108 | ) | — | |||||||
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|||||||
| Net cash provided by financing activities |
4,289,950 | 1,965,226 | 109,569 | |||||||||
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|
|||||||
| Net change in cash and cash equivalents |
(239,850 | ) | 273,244 | 19,331 | ||||||||
| Cash and cash equivalents, beginning of period |
292,575 | 19,331 | — | |||||||||
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| Cash and cash equivalents, end of period |
$ | 52,725 | $ | 292,575 | $ | 19,331 | ||||||
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|||||||
| Supplemental Disclosures: |
||||||||||||
| Cash paid for interest |
$ | 49,549 | $ | 8,983 | $ | 622 | ||||||
| Cash paid for income taxes |
$ | 1,711 | $ | 173 | $ | — | ||||||
| Non-cash investing and financing activities: |
||||||||||||
| OP units issued to acquire real estate investments |
$ | — | $ | 6,352 | $ | — | ||||||
| Common stock issued through distribution reinvestment plan |
$ | 25,568 | $ | 27,136 | $ | 271 | ||||||
| Initial proceeds from credit facility used to pay down mortgages assumed at formation |
$ | — | $ | — | $ | 51,500 | ||||||
| Mortgage note payable contributed in formation |
$ | — | $ | — | $ | 13,850 | ||||||
| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-9
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013
Note 1 — Organization (As Restated)
ARC Properties Operating Partnership, L.P. (together with its subsidiaries the “Operating Partnership”) is a Delaware limited partnership formed by American Realty Capital Properties, Inc. (the “General Partner” or “ARCP”), the Operating Partnership’s general partner, on January 13, 2011 to conduct the business of acquiring, owning and operating single-tenant, freestanding commercial real estate properties. The Operating Partnership is the entity through which substantially all of the General Partner’s operations are conducted. The actions of the Operating Partnership and its relationship with ARCP are governed by that certain Third Amended and Restated Agreement of Limited Partnership (the “LPA”), effective as of January 3, 2014. The General Partner does not have any significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the General Partner and the Operating Partnership are substantially the same. Additionally, pursuant to the LPA, all administrative expenses and expenses associated with the formation and continuity of existence and operation of the General Partner incurred by the General Partner on the Operating Partnership’s behalf shall be treated as expenses of the Operating Partnership. Further, when the General Partner issues any equity instrument that has been approved by the General Partner’s board of directors to date, the LPA requires the Operating Partnership to issue the General Partner equity instruments with substantially similar terms. The LPA will be amended to provide for the issuance of any additional class of equivalent equity instruments to the extent the General Partner’s board of directors authorizes the issuance of any new class of equity securities.
The General Partner, a self-managed real estate investment trust (“REIT”), holds 96.1% of the common equity interests (“OP Units”) in the Operating Partnership as of December 31, 2013. As of December 31, 2013, certain affiliates of the General Partner and certain unaffiliated investors are limited partners and owners of 3.3% and 0.6%, respectively, of the OP Units in the Operating Partnership. Under the limited partnership agreement, after holding OP Units of limited partner interests in the Operating Partnership (“Limited Partner OP Units”) for a period of one year, unless otherwise consented to by the General Partner, holders of Limited Partner OP Units have the right to redeem the Limited Partner OP Units for the cash value of a corresponding number of shares of the General Partner’s common stock or, at the option of the General Partner, a corresponding number of ARCP common shares. In the event that the Limited Partner OP Units are converted into ARCP common shares, the Operating Partnership will issue ARCP an equivalent number of OP Units with General Partner interests (“General Partner OP Units”). The remaining rights of the holders of Limited Partner OP Units are limited and do not include the ability to replace the General Partner or to approve the sale, purchase or refinancing of the Operating Partnership’s assets.
The Operating Partnership acts on behalf of the General Partner and therefore executes ARCP’s focus on investing in properties that are net leased to credit tenants, which are generally large public companies with investment-grade ratings and other creditworthy tenants. ARCP’s long-term business strategy is to acquire a diverse portfolio consisting of approximately 70% long-term leases and 30% medium-term leases, with an average portfolio remaining lease term of approximately 10 to 12 years. ARCP considers properties that are leased on a “medium-term” basis to mean properties originally leased long-term (10 years or longer) that currently have a primary remaining lease duration of generally three to eight years, on average. ARCP seeks to acquire granular, self-originated single-tenant net lease assets, which may be purchased through sale-leaseback transactions, small portfolio and in connection with build-to-suit opportunities to the extent they are appropriate in terms of capitalization rate and scale. ARCP expects this investment strategy to provide for stable income from credit tenants and for growth opportunities from re-leasing of current below market leases.
On behalf of ARCP, the Operating Partnership has advanced ARCP’s investment objectives by growing ARCP’s net lease portfolio through organic acquisitions and also through strategic mergers and acquisitions. See Note 3 — Mergers and Acquisitions (As Restated).
During the year ended December 31, 2013, ARC Properties Advisors, LLC (the General Partner’s “Former Manager”), a wholly owned subsidiary of AR Capital, LLC (“ARC”), managed ARCP’s affairs on a day-to-day basis and, as a result, the Operating Partnership’s actions were generally externally managed, with the exception of certain acquisition, accounting and portfolio management services performed by employees of the Operating Partnership. In August 2013, the General Partner’s board of directors determined that it was in the best interests of ARCP and its stockholders to become self-managed, and ARCP completed its transition to self-management on January 8, 2014. In connection with becoming self-managed, the General Partner terminated the management agreement with its Former Manager and ARCP and the Operating Partnership entered into employment and incentive compensation arrangements with ARCP’s executives.
On June 11, 2014, the Operating Partnership, through its indirect subsidiaries (the “Sellers”), entered into an agreement of purchase and sale (the “Agreement”) with BRE DDR Retail Holdings III LLC (the “Purchaser”), an entity indirectly jointly
F-10
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
owned by affiliates of Blackstone Real Estate Partners VII L.P. and DDR Corp., by which the Sellers have agreed to sell to the Purchaser and the Purchaser has agreed to purchase from the Sellers 67 multi-tenant properties and nine single-tenant properties and the adjacent land and related property (the “Multi-Tenant Portfolio”). The purchase price of the Multi-Tenant Portfolio is $1.975 billion, subject to customary real estate adjustments. Properties may be excluded from the transaction in certain circumstances, in which case the purchase price will be reduced by the portion of the purchase price allocated to the excluded properties.
As discussed in Note 3 — Mergers and Acquisitions (As Restated), on January 3, 2014, the General Partner, through a wholly owned subsidiary of the Operating Partnership, acquired American Realty Capital Trust IV, Inc. (“ARCT IV”). The General Partner and ARCT IV, from inception to January 3, 2014, were considered to be entities under common control because the entities’ advisors were wholly owned subsidiaries of ARC. ARC and its related parties had ownership interests in the General Partner, Operating Partnership and ARCT IV through the ownership of OP Units and other equity interests. In addition, the advisors of both ARCP and ARCT IV were contractually eligible to receive potential fees for their services from both of the companies, including asset management fees, incentive fees and other fees and had continued to receive fees from ARCP, paid by the Operating Partnership, prior to the General Partner’s transition to self-management, which was completed on January 8, 2014. Due to the significance of these fees, the entities’ advisors and ultimately ARC were determined to have a significant economic interest in both companies, in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
See Note 24 — Subsequent Events (As Restated) for significant events that occurred subsequent to December 31, 2013.
Note 2 — Restatement of Previously Issued Financial Statements
The Operating Partnership has restated its consolidated balance sheets as of December 31, 2013 and 2012 and its consolidated statements of operations, consolidated statements of comprehensive loss and consolidated statements of changes in equity for the years ended December 31, 2013 and 2012, along with certain related notes to such restated consolidated financial statements. In addition, the Operating Partnership has restated its consolidated statement of cash flows for the year ended December 31, 2013. The financial statements, as disclosed in Note 1 — Organization, have also been recast in applying the carryover basis of accounting to include the effects of the General Partner’s merger with ARCT IV.
The General Partner determined that the restatement was necessary after an investigation was conducted by the Audit Committee of the General Partner’s Board of Directors (the “Audit Committee”) with the assistance of independent counsel and forensic accountants. The Audit Committee initiated the investigation in response to concerns regarding accounting practices and other matters that were first reported to it on September 7, 2014. The restatement corrects errors that were identified as a result of the investigation, as well as certain other errors that were identified by the General Partner. In addition, the restatement reflects corrections of certain immaterial errors and certain previously identified errors that were identified by the General Partner in the normal course of business and were determined to be immaterial, both individually and in the aggregate, when the consolidated financial statements for the year ended December 31, 2013 were originally issued. In connection with the restatement, the General Partner has determined that it would be appropriate to correct such errors.
Error Corrections
Merger and Other Non-routine Transaction Related
In light of the findings of the investigation conducted by the Audit Committee, the General Partner performed an internal review of all acquisition, merger and other non-routine transaction related expenses. The work resulted in the identification of the following errors:
| • | The General Partner improperly classified $75.7 million of expenses as “merger-related” for the year ended December 31, 2013. As restated, the amount has been reclassified from merger and other non-routine transaction related expenses to general and administrative expenses. The largest component of the misclassified amount was $59.6 million of equity- based compensation expense relating to the OPP (as defined in Note 18 – Equity-based Compensation (As Restated)). |
| • | The General Partner identified a net amount of $14.5 million of merger and other non-routine transaction related expenses that were incorrectly excluded in the year ended December 31, 2013. As such, the General Partner recorded additional merger and other non-routine transaction related expenses for this amount. |
F-11
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
| • | The General Partner identified $13.0 million of management fees that were improperly classified as merger and other non-routine transaction related expenses. Such amounts have been properly classified as management fees to affiliates for the year ended December 31, 2013. |
| • | The General Partner identified $5.9 million of expenses that were improperly recorded as merger and other transaction related expenses that should have been capitalized as deferred financing costs and amortized accordingly. As such, an adjustment to properly record and amortize the deferred financing costs has been made for the year ended December 31, 2013. As a result of capitalizing these deferred financing costs, additional interest expense of $2.3 million was recorded for the year ended December 31, 2013. This resulted in a net adjustment of $3.6 million to deferred financing costs reported on the balance sheet. |
| • | Upon consummation of the ARCT III Merger (as defined in Note 3 – Mergers and Acquisitions (As Restated)), the OP entered into an agreement with an affiliate to acquire certain furniture, fixtures, equipment (“FF&E”) and other assets. The General Partner originally capitalized $4.1 million of FF&E costs and expensed $1.7 million of costs. The General Partner has concluded that there was no evidence of the receipt and it could not support the value of the FF&E. As such, the Operating Partnership has expensed the amount originally capitalized and recognized the expense in merger and other non-routine transaction related expense for the year ended December 31, 2013. See Note 19 – Related Party Transactions and Arrangements (As Restated) for further discussion. |
| • | The General Partner has determined that it should have recorded a controlling interest transfer tax liability totaling $8.9 million upon consummation of the ARCT III Merger and CapLease Merger (each, as defined in Note 3 – Merger and Acquisitions (As Restated)). The accrual and corresponding merger and other non-routine transaction related expense are recorded for the year ended December 31, 2013. |
The Operating Partnership has updated the caption from “merger and other transaction related” to “merger and other non-routine transactions” to appropriately include non-recurring costs that may not have been incurred solely for a merger transaction. See Note 4 – Summary of Significant Accounting Policies (As Restated) for a further breakout of the merger costs and other non-routine transactions.
Operating Fees to Affiliate
The General Partner identified $1.2 million of expenses that were incorrectly recorded as operating fees to affiliate. Therefore, the Operating Partnership decreased operating fees to affiliate by this amount for the year ended December 31, 2013 and recorded the adjustment to the proper income statement account. This line item caption has been updated to management fees to affiliates in the accompanying consolidated statements of operations.
General and Administrative
The General Partner has concluded that $35.0 million in equity-based compensation originally reported on a separate line item should be presented within general and administrative expenses, in the same manner as cash compensation paid to the same employees.
The General Partner identified $1.8 million in bonuses paid in 2014 that should have been, but were not, recorded as an accrued expense for the year ended December 31, 2013. As such, the Operating Partnership has increased the 2013 bonus accrual and the corresponding general and administrative expense by this amount.
Impairment of Real Estate
The General Partner originally believed that the risk of impairment of its real estate and related assets was mitigated by the fact that substantially all of the General Partner’s real estate portfolio had been acquired in 2012 and 2013. As a result, the General Partner had failed to monitor events and changes in circumstances that could indicate that the carrying amount of its real estate and related assets may not be recoverable. The General Partner performed a detailed analysis of the portfolio in connection with the restatement and noted four properties with impairment indicators. The General Partner assessed the recoverability of the carrying amounts of such properties as of the date in which such indicators existed. Based on this assessment, the General Partner noted two properties with carrying amounts in excess of their expected undiscounted cash flows. As a result, the Operating Partnership reduced the carrying amount of the real estate and related net assets to their estimated fair values by recognizing an impairment loss of $3.3 million for the year ended December 31, 2013.
F-12
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Net Loss Attributable to Non-controlling Interests
The original calculation of the net loss attributable to non-controlling interest holders for the year ended December 31, 2013 and 2012 excluded expenses that were improperly recorded at the General Partner level. These expenses were incurred by the OP, and therefore should have been included in the General Partner’s determination of the net loss attributable to its non-controlling interest holders. In addition, the net loss attributable to the non-controlling interest holders has been adjusted to reflect the impact of the cumulative restatement adjustments discussed and presented herein. As a result, the 2013 and 2012 restated consolidated financial statements reflect an increase of $10.6 million and $0.3 million, respectively, for net loss attributable to non-controlling interest holders and corresponding decreases in net loss attributable to stockholders.
Goodwill
Subsequent to the CapLease Merger, the General Partner disposed of certain properties acquired in that transaction. The disposition of such properties resulted in a net loss on disposition; however, the General Partner accounted for such losses by adjusting its purchase price allocation to increase the amount of goodwill and decrease the associated real estate investments recorded in connection with the CapLease Merger by $12.0 million when issuing the recasted financial statements to reflect the common control merger with ARCT IV. The General Partner has determined that there was not sufficient evidence to support adjusting the Operating Partnership’s goodwill as a measurement period adjustment. As a result, the Operating Partnership has reversed the measurement period adjustments that were made to goodwill and related assets and liabilities acquired in the CapLease Merger and recognized a net loss on the dispositions in 2014 when the dispositions occurred. In addition, the Operating Partnership has recorded a decrease to goodwill of $0.6 million for the year ended December 31, 2013 to reflect valid measurement period adjustments that were identified subsequent to the initial purchase price allocation. Additionally, the General Partner has identified certain liabilities assumed and subsequent payments of such liabilities by the former manager from the CapLease Merger that were not recorded properly. To correct the accounting, the Operating Partnership has increased goodwill by $3.0 million, decreased merger and non-routine transaction related expenses by $0.7 million and increased equity contributions by $2.3 million.
Due to Affiliates
Amounts due to affiliates of the General Partner of $103.4 million, previously reported in accounts payable and accrued expenses, are now reported on a separate line item on the consolidated restated balance sheet.
Other Changes
Along with restating the consolidated financial statements to correct the errors discussed above, the Operating Partnership recorded adjustments for certain previously identified immaterial accounting errors related to the year ended December 31, 2013 that arose in the normal course of business. In connection with the original financial statement issuance, the General Partner assessed the impact of these immaterial errors and concluded that they were not material, individually or in the aggregate, to the consolidated financial statements for the year ended December 31, 2013 and each reported fiscal quarter within the year. However, in conjunction with the restatement, the General Partner determined that it would be appropriate to correct such errors.
The Operating Partnership also recorded certain reclassifications to conform the presentation of its consolidated statement of operations for the year ended December 31, 2013 to the current period classification and maintain comparability.
In addition to the restatement of the consolidated financial statements, the Operating Partnership has also restated the following notes for the years ended December 31, 2012 and December 31, 2013 to reflect the error corrections noted above.
| • | Note 3 – Mergers and Acquisitions |
| • | Note 4 – Summary of Significant Accounting Policies |
| • | Note 5 – Real Estate Investments |
| • | Note 6 – CapLease Acquisition |
| • | Note 8 – Prepaid Expenses and Other Assets |
| • | Note 10 – Fair Value of Financial Instruments |
F-13
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
| • | Note 14 – Accounts Payable and Accrued Expenses |
| • | Note 17 — Preferred and Common OP Units |
| • | Note 18 – Equity-based Compensation |
| • | Note 19 – Related Party Transactions and Arrangements |
| • | Note 21 – Net Loss Per Share |
| • | Note 23 – Quarterly Results (Unaudited) |
| • | Note 24 – Subsequent Events |
The following tables present the combined impact of all changes, as described above, to the applicable line items in the consolidated financial statements to the General Partner’s previously reported consolidated financial statements for the years ended December 31, 2012 and 2013 (in thousands, except share amounts):
2012 Restated Consolidated Balance Sheet (Adjusted Line Items)
| December 31, 2012 | ||||||||||||
| As Previously Reported (1) |
Restatement Adjustments |
As Restated | ||||||||||
| General partner’s common equity — 184,553,676 General Partner OP Units issued and outstanding at December 31, 2012 |
$ | 1,582,880 | $ | (93,293 | ) | $ | 1,489,587 | |||||
| General partner’s preferred equity (excluding Series D Preferred equity) — 6,990,328 General Partner Preferred Units issued and outstanding at December 31, 2012 |
$ | 73,349 | $ | 89,698 | $ | 163,047 | ||||||
| Limited partners’ common equity — 1,621,349 Limited Partner OP Units issued and outstanding at December 31, 2012 |
$ | 16,465 | $ | (339 | ) | $ | 16,126 | |||||
| Accumulated other comprehensive income (loss) |
$ | (3,934 | ) | 3,934 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
| Total partners’ equity |
$ | 1,668,760 | $ | — | $ | 1,668,760 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
F-14
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
2013 Restated Consolidated Balance Sheet
| December 31, 2013 | ||||||||||||||||
| As Previously Reported (1) |
Reclassifications | Restatement Adjustments |
As Restated |
|||||||||||||
| ASSETS | ||||||||||||||||
| Real estate investments, at cost: |
||||||||||||||||
| Land |
$ | 1,379,453 | $ | — | $ | 855 | $ | 1,380,308 | ||||||||
| Buildings, fixtures and improvements |
5,291,031 | — | 6,369 | 5,297,400 | ||||||||||||
| Land and construction in progress |
21,839 | — | — | 21,839 | ||||||||||||
| Acquired intangible lease assets |
758,376 | 382 | 837 | 759,595 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total real estate investments, at cost |
7,450,699 | 382 | 8,061 | 7,459,142 | ||||||||||||
| Less: accumulated depreciation and amortization |
(267,352 | ) | (155 | ) | 229 | (267,278 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total real estate investments, net |
7,183,347 | 227 | 8,290 | 7,191,864 | ||||||||||||
| Cash and cash equivalents |
52,725 | — | — | 52,725 | ||||||||||||
| Investment in direct financing leases, net |
66,112 | — | — | 66,112 | ||||||||||||
| Investment securities, at fair value |
62,067 | — | — | 62,067 | ||||||||||||
| Loans held for investment, net |
26,279 | — | — | 26,279 | ||||||||||||
| Derivative assets, at fair value |
9,189 | — | — | 9,189 | ||||||||||||
| Restricted cash |
35,921 | — | — | 35,921 | ||||||||||||
| Prepaid expenses and other assets (2) |
187,930 | — | (1,204 | ) | 186,726 | |||||||||||
| Goodwill |
102,419 | — | (9,630 | ) | 92,789 | |||||||||||
| Deferred costs, net |
81,311 | (227 | ) | 3,662 | 84,746 | |||||||||||
| Assets held for sale |
679 | — | (14 | ) | 665 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | 7,807,979 | $ | — | $ | 1,104 | $ | 7,809,083 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| LIABILITIES AND EQUITY | ||||||||||||||||
| Mortgage notes payable, net |
$ | 1,301,114 | $ | — | $ | — | $ | 1,301,114 | ||||||||
| Convertible debt, net |
972,490 | — | — | 972,490 | ||||||||||||
| Senior corporate credit facilities |
1,819,800 | — | — | 1,819,800 | ||||||||||||
| Secured credit facility |
150,000 | — | — | 150,000 | ||||||||||||
| Other debt |
104,804 | — | — | 104,804 | ||||||||||||
| Below-market lease liabilities, net |
77,789 | — | (620 | ) | 77,169 | |||||||||||
| Derivative liabilities, at fair value |
18,455 | — | — | 18,455 | ||||||||||||
| Accounts payable and accrued expenses |
808,900 | — | (78,329 | ) | 730,571 | |||||||||||
| Deferred rent and other liabilities |
21,816 | — | — | 21,816 | ||||||||||||
| Distributions payable |
10,278 | — | 625 | 10,903 | ||||||||||||
| Due to affiliates (3) |
— | — | 103,434 | 103,434 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
5,285,446 | — | 25,110 | 5,310,556 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| General partner’s Series D Preferred equity — 21,735,008 General Partner Preferred Units issued and outstanding at December 31, 2013 |
269,299 | — | — | 269,299 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| General partner’s common equity — 239,248,853 General Partner OP Units issued and outstanding at December 31, 2013 (4) |
1,686,103 | — | (667,980 | ) | 1,018,123 | |||||||||||
| General partner’s preferred equity (excluding Series D Preferred equity) — 42,199,547 General Partner Preferred Units issued and outstanding at December 31, 2013 |
391,482 | — | 663,507 | 1,054,989 | ||||||||||||
| Limited partners’ common equity — 17,832,274 Limited Partner OP Units issued and outstanding at December 31, 2013 |
151,721 | — | (12,638 | ) | 139,083 | |||||||||||
| Limited partners’ preferred equity — 721,465 Limited Partner Preferred Units issued and outstanding at December 31, 2013 |
14,614 | — | 1,852 | 16,466 | ||||||||||||
| Accumulated other comprehensive income (loss) |
7,666 | — | (7,666 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total partners’ equity |
2,251,586 | — | (22,925 | ) | 2,228,661 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Non-controlling interests |
1,648 | — | (1,081 | ) | 567 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total equity |
2,253,234 | — | (24,006 | ) | 2,229,228 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities and equity |
$ | 7,807,979 | $ | — | $ | 1,104 | $ | 7,809,083 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | These financial statements have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
| (2) | Certain line item captions have been updated since the recasted filing, which applied the carryover basis of accounting to include the effects of the merger with ARCT IV. This line item caption has been updated to prepaid expenses and other assets, net in the accompanying consolidated balance sheets. |
| (3) | This line item caption has been added and is included in the accompanying consolidated balance sheets. |
| (4) | General partner’s common equity was previously reported as 239,234,725 and has been restated by 14,128 shares. |
F-15
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
2013 Restated Statement of Operations
| December 31, 2013 | ||||||||||||||||
| As Previously Reported (1) |
Reclassifications | Restatement Adjustments |
As Restated | |||||||||||||
| Revenues: |
||||||||||||||||
| Rental income |
$ | 309,839 | $ | 669 | $ | — | $ | 310,508 | ||||||||
| Direct financing lease income |
2,244 | — | — | 2,244 | ||||||||||||
| Operating expense reimbursements |
17,795 | (669 | ) | (555 | ) | 16,571 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
329,878 | — | (555 | ) | 329,323 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Acquisition related |
76,136 | — | (23 | ) | 76,113 | |||||||||||
| Merger and other transaction related (2) |
278,319 | — | (67,776 | ) | 210,543 | |||||||||||
| Property operating |
23,616 | — | — | 23,616 | ||||||||||||
| Operating fees to affiliate (3) |
5,654 | — | 11,808 | 17,462 | ||||||||||||
| General and administrative |
10,645 | 46 | 112,481 | 123,172 | ||||||||||||
| Equity-based compensation (4) |
34,962 | — | (34,962 | ) | — | |||||||||||
| Depreciation and amortization |
211,372 | (46 | ) | (350 | ) | 210,976 | ||||||||||
| Impairment of real estate (5) |
— | — | 3,346 | 3,346 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
640,704 | — | 24,524 | 665,228 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating loss |
(310,826 | ) | — | (25,079 | ) | (335,905 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other (expense) income: |
||||||||||||||||
| Interest expense |
(102,305 | ) | (977 | ) | (2,266 | ) | (105,548 | ) | ||||||||
| Other income, net |
2,847 | 977 | — | 3,824 | ||||||||||||
| Loss on derivative instruments, net |
(67,946 | ) | — | — | (67,946 | ) | ||||||||||
| Loss on sale of investments in affiliates |
(411 | ) | — | — | (411 | ) | ||||||||||
| Loss on sale of investments |
(1,795 | ) | — | — | (1,795 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other expenses, net |
(169,610 | ) | — | (2,266 | ) | (171,876 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from continuing operations attributable to unitholders |
(480,436 | ) | — | (27,345 | ) | (507,781 | ) | |||||||||
| Discontinued operations: |
||||||||||||||||
| Loss from operations of held for sale properties |
(34 | ) | — | — | (34 | ) | ||||||||||
| Gain (loss) on held for sale properties (6) |
14 | — | (14 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss from discontinued operations attributable to unitholders |
(20 | ) | — | (14 | ) | (34 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to unitholders |
$ | (480,456 | ) | $ | — | $ | (27,359 | ) | $ | (507,815 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted net loss per share from continuing operations attributable to common unitholders |
$ | (2.26 | ) | $ | — | $ | (0.11 | ) | $ | (2.37 | ) | |||||
| Basic and diluted net loss per share attributable to common unitholders |
$ | (2.26 | ) | $ | — | $ | (0.13 | ) | $ | (2.39 | ) | |||||
| (1) | These financial statements have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
| (2) | This line item caption has been updated to merger and other non-routine transactions in the accompanying consolidated statements of operations. |
| (3) | This line item caption has been updated to management fees to affiliates in the accompanying consolidated statements of operations. |
| (4) | As disclosed above, this line item has been reclassified into general and administrative in the accompanying consolidated statements of operations. |
| (5) | As disclosed above, this line item has been added and is included in the accompanying consolidated statements of operations. |
| (6) | This line item caption has been updated to loss on held for sale properties in the accompanying consolidated statements of operations. |
F-16
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
2013 Restated Statement of Comprehensive Loss (1)
| Year Ended December 31, 2013 | ||||||||||||
| As Previously Reported (2) |
Restatement Adjustments |
As Restated | ||||||||||
| Net loss attributable to unitholders (3) |
$ | (480,456 | ) | $ | (27,359 | ) | $ | (507,815 | ) | |||
| Other comprehensive income (loss): |
||||||||||||
| Designated derivatives, fair value adjustments |
11,480 | 1 | 11,481 | |||||||||
| Change in unrealized gain/loss on investment securities (4) |
119 | — | 119 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total other comprehensive income (loss) (5) |
11,599 | 1 | 11,600 | |||||||||
|
|
|
|
|
|
|
|||||||
| Comprehensive loss |
$ | (468,857 | ) | $ | (27,358 | ) | $ | (496,215 | ) | |||
|
|
|
|
|
|
|
|||||||
| (1) | The statement of comprehensive loss was originally included within the consolidated statement of operations in the recasted filing, which applied the carryover basis of accounting to include the effects of the merger with ARCT IV; it is now presented as a standalone financial statement. |
| (2) | These financial statements have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
| (3) | The statement of comprehensive loss previously began with net loss attributable to common stockholders . The statement has been updated to begin with net loss to properly show the total comprehensive loss. |
| (4) | This line item has been updated to unrealized gain (loss) on investment securities in the accompanying statements of comprehensive loss. |
| (5) | The total other comprehensive income (loss) line item has been added and included in the accompanying statements of comprehensive loss. |
| (6) | This line item caption has been updated to total comprehensive loss in the accompanying statements of comprehensive loss. |
F-17
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
2013 Restated Statement of Cash Flows
| December 31, 2013 | ||||||||||||||||
| As Previously Reported (1) |
Reclassifications | Restatement Adjustments |
As Restated | |||||||||||||
| Cash flows from operating activities: |
||||||||||||||||
| Net loss |
$ | (480,456 | ) | $ | — | $ | (27,359 | ) | $ | (507,815 | ) | |||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
||||||||||||||||
| Issuance of OP Units for ARCT III Merger |
108,247 | — | (476 | ) | 107,771 | |||||||||||
| Depreciation (2) |
162,027 | 74,364 | 1,916 | 238,307 | ||||||||||||
| Amortization of intangible lease assets (2) |
49,345 | (49,345 | ) | — | — | |||||||||||
| Amortization of deferred costs (2) |
26,895 | (26,895 | ) | — | — | |||||||||||
| Amortization of above- and below-market lease asset (2) |
(176 | ) | 176 | — | — | |||||||||||
| Amortization of discounts and premiums (2) |
(1,700 | ) | 1,700 | — | — | |||||||||||
| Loss on held for sale properties (3) |
(14 | ) | — | 14 | — | |||||||||||
| Impairment of real estate (4) |
— | — | 3,346 | 3,346 | ||||||||||||
| Equity-based compensation |
43,565 | — | 56,696 | 100,261 | ||||||||||||
| Unrealized gain on derivative instruments |
(1,739 | ) | — | — | (1,739 | ) | ||||||||||
| Loss on sale of investments, net |
2,206 | — | — | 2,206 | ||||||||||||
| Loss in extinguishment of Series C Preferred Units |
13,749 | — | — | 13,749 | ||||||||||||
| Changes in assets and liabilities: |
||||||||||||||||
| Investment in direct financing leases |
2,505 | — | — | 2,505 | ||||||||||||
| Prepaid expenses and other assets |
(20,406 | ) | — | 555 | (19,851 | ) | ||||||||||
| Accounts payable and accrued expenses |
100,166 | — | (79,377 | ) | 20,789 | |||||||||||
| Deferred rent and other liabilities |
8,555 | — | — | 8,555 | ||||||||||||
| Due to affiliates (5) |
— | — | 43,834 | 43,834 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net cash provided by (used in) operating activities |
12,769 | — | (851 | ) | 11,918 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cash flows from investing activities: |
||||||||||||||||
| Investments in real estate and other assets |
(3,520,412 | ) | — | — | (3,520,412 | ) | ||||||||||
| Acquisition of a real estate business, net of cash acquired of $41,779 |
(878,898 | ) | — | — | (878,898 | ) | ||||||||||
| Investment in direct financing leases |
(68,617 | ) | — | — | (68,617 | ) | ||||||||||
| Capital expenditures |
(9,755 | ) | — | — | (9,755 | ) | ||||||||||
| Principal repayments received from borrowers |
442 | — | — | 442 | ||||||||||||
| Purchase of assets from Manager (6) |
(1,584 | ) | — | 1,041 | (543 | ) | ||||||||||
| Deposits for real estate investments |
(101,887 | ) | — | — | (101,887 | ) | ||||||||||
| Purchases of investment securities |
(81,590 | ) | — | — | (81,590 | ) | ||||||||||
| Proceeds from sale of investment securities |
119,542 | — | — | 119,542 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net cash used in investing activities |
(4,542,759 | ) | — | 1,041 | (4,541,718 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cash flows from financing activities: |
||||||||||||||||
| Proceeds from mortgage notes payable |
6,924 | — | — | 6,924 | ||||||||||||
| Payments on mortgage notes payable |
(5,711 | ) | — | — | (5,711 | ) | ||||||||||
| Payments on other debt |
(9,368 | ) | — | — | (9,368 | ) | ||||||||||
| Payments on senior secured revolving credit facility |
(124,604 | ) | — | — | (124,604 | ) | ||||||||||
| Proceeds from senior corporate credit facility |
1,889,800 | — | — | 1,889,800 | ||||||||||||
| Payments on senior corporate credit facility |
(830,000 | ) | — | — | (830,000 | ) | ||||||||||
| Proceeds from secured credit facility |
789,000 | — | — | 789,000 | ||||||||||||
The 2013 restated consolidated statement of cash flows continues onto the next page.
F-18
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
| December 31, 2013 | ||||||||||||||||
| As Previously Reported (1) |
Reclassifications | Restatement Adjustments |
As Restated | |||||||||||||
| Payments of deferred financing costs |
$ | (95,268 | ) | $ | — | $ | (5,928 | ) | $ | (101,196 | ) | |||||
| Proceeds from issuance of convertible debt |
967,786 | — | — | 967,786 | ||||||||||||
| Repurchases of OP units |
(359,193 | ) | — | — | (359,193 | ) | ||||||||||
| Proceeds from issuance of Series C preferred Units |
445,000 | — | — | 445,000 | ||||||||||||
| Cash payment on settlement of Series C Preferred Units |
(441,353 | ) | — | — | (441,353 | ) | ||||||||||
| Proceeds from issuance of Series D Preferred Units |
287,991 | — | — | 287,991 | ||||||||||||
| Proceeds from issuances of OP Units |
2,158,486 | — | — | 2,158,486 | ||||||||||||
| Payments of offering costs and fees related to stock issuances |
(165,327 | ) | — | — | (165,327 | ) | ||||||||||
| Consideration to Former Manager for internalization |
(5,738 | ) | — | 5,738 | — | |||||||||||
| Contributions from non-controlling interest holders |
30,861 | — | — | 30,861 | ||||||||||||
| Distributions to non-controlling interest holders |
(8,219 | ) | — | — | (8,219 | ) | ||||||||||
| Distributions paid |
(234,897 | ) | — | — | (234,897 | ) | ||||||||||
| Advances from affiliates, net |
(376 | ) | — | — | (376 | ) | ||||||||||
| Change in restricted cash |
(5,654 | ) | — | — | (5,654 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net cash provided by financing activities |
4,290,140 | — | (190 | ) | 4,289,950 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net change in cash and cash equivalents |
(239,850 | ) | — | — | (239,850 | ) | ||||||||||
| Cash and cash equivalents, beginning of period |
292,575 | — | — | 292,575 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cash and cash equivalents, end of period |
$ | 52,725 | $ | — | $ | — | $ | 52,725 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | These financial statements have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
| (2) | These five depreciation and amortization line items have been consolidated into one line item named depreciation and amortization in the accompanying consolidated statements of cash flows. |
| (3) | This line item caption has been updated to loss on held for sale properties in the accompanying consolidated statements of cash flows. |
| (4) | As disclosed above, this line item has been added and is included in the accompanying consolidated statements of cash flows. |
| (5) | This line item caption has been added and is included in the accompanying consolidated statements of cash flows. |
| (6) | This line item caption has been updated to investments in other assets in the accompanying consolidated statements of cash flows. |
Note 3 — Mergers and Acquisitions (As Restated)
Completed Mergers and Significant Acquisitions
American Realty Capital Trust III, Inc. Merger
On December 14, 2012, the General Partner entered into an Agreement and Plan of Merger (the “ARCT III Merger Agreement”) with American Realty Capital Trust III, Inc. (“ARCT III”) and certain subsidiaries of each company. The ARCT III Merger Agreement provided for the merger of ARCT III with and into a subsidiary of the General Partner (the “ARCT III Merger”). The ARCT III Merger was consummated on February 28, 2013 (the “ARCT III Merger Date”).
Pursuant to the terms and subject to the conditions set forth in the ARCT III Merger Agreement, each outstanding share of common stock of ARCT III, including restricted shares which became vested, was converted into the right to receive (i) 0.95 of a share of ARCP’s common stock, (the “ARCT III Exchange Ratio”) or (ii) $12.00 in cash. In addition, each outstanding unit of equity ownership of American Realty Capital Operating Partnership III, L.P. (the “ARCT III OP”) was converted into the right to receive 0.95 of the same class of unit of equity ownership in the Operating Partnership.
Upon the closing of the ARCT III Merger on February 28, 2013, the Operating Partnership, on ARCP’s behalf, paid an aggregate of $350.4 million in cash for the 29.2 million shares, or 16.5% of the then outstanding shares of ARCT III’s common stock (which is equivalent to 27.7 million shares of ARCP’s common stock based on the ARCT III Exchange Ratio). In addition, 140.7 million shares of ARCP’s common stock were issued in exchange for 148.1 million shares of ARCT III’s common stock adjusted for the ARCT III Exchange Ratio. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when ARCP issued common stock to former common stockholders of ARCT III.
F-19
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Upon the consummation of the ARCT III Merger, American Realty Capital Trust III Special Limited Partner, LLC (the “ARCT III Special Limited Partner”), the holder of the special limited partner interest in the ARCT III OP, was entitled to subordinated distributions of net sales proceeds from ARCT III OP which resulted in the issuance of units of limited partner interests in the ARCT III OP, when after applying the ARCT III Exchange Ratio, resulted in the issuance of an additional 7.3 million Limited Partner OP Units to an affiliate of the Former Manager. The parties had agreed that such OP Units would be subject to a minimum one-year holding period from the date of issuance before being exchangeable into the General Partner’s common stock.
Also in connection with the ARCT III Merger, the General Partner entered into an agreement with ARC and its affiliates to internalize certain functions performed by them prior to the ARCT III Merger, reduce certain fees paid to affiliates, purchase certain corporate assets and pay certain merger related fees. See Note 19 — Related Party Transactions and Arrangements (As Restated).
Accounting Treatment for the ARCT III Merger
The General Partner and ARCT III, from inception to the ARCT III Merger Date, were considered to be entities under common control. Both entities’ advisors were wholly owned subsidiaries of ARC. ARC and its related parties had significant ownership interests in the General Partner, Operating Partnership and ARCT III through the ownership of shares, OP Units and other equity interests. In addition, the advisors of both ARCP and ARCT III were contractually eligible to receive potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and continued to receive fees from the Operating Partnership, on behalf of ARCP, prior to ARCP’s transition to self-management. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the significant activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting, whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT III Merger Date. In addition, U.S. GAAP requires the Operating Partnership to present historical financial information as if the merger had occurred as of the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT III Merger had occurred on at inception.
GE Capital Portfolio Acquisitions
On June 27, 2013, on behalf of ARCP, the Operating Partnership acquired, through its wholly owned subsidiaries, from certain affiliates of GE Capital Corp., the equity interests in the entities that own a real estate portfolio comprised of 447 properties (the “GE Capital Portfolio”) for a purchase price of $773.9 million, exclusive of closing costs, with no liabilities assumed. The 447 properties are subject to 409 property operating leases, as well as 38 direct financing leases.
During the year ended December 31, 2013, ARCT IV acquired, from certain affiliates of GE Capital Corp., the equity interests in the entities that own a real estate portfolio comprised of 924 properties (the “ARCT IV GE Capital Portfolio”) for a purchase price of $1.4 billion, exclusive of closing costs, with no liabilities assumed. The 924 properties are subject to 912 property operating leases, as well as 12 direct financing leases.
CapLease, Inc. Merger
On May 28, 2013, ARCP entered into an Agreement and Plan of Merger (the “CapLease Merger Agreement”) with CapLease, Inc., a Maryland corporation (“CapLease”), and certain subsidiaries of each company. The CapLease Merger Agreement provided for the merger of CapLease with and into a subsidiary of ARCP (the “CapLease Merger”).
On November 5, 2013 (the “CapLease Acquisition Date”), ARCP and the Operating Partnership completed the merger with CapLease pursuant to the CapLease Merger Agreement. Pursuant to the terms of the CapLease Merger Agreement, each outstanding share of common stock of CapLease, other than shares owned by the General Partner, Operating Partnership, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive $8.50. Each outstanding share of preferred stock of CapLease, other than shares owned by the General Partner, Operating Partnership, CapLease or any
F-20
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
of their respective wholly owned subsidiaries, was converted into the right to receive an amount in cash equal to the sum of $25.00 plus all accrued and unpaid dividends on such shares of preferred stock. In addition, in connection with the merger of CapLease, LP (the “CapLease OP”) with and into the Operating Partnership (the “CapLease Partnership Merger”), each outstanding unit of equity ownership of CapLease OP, other than units owned by CapLease, the Operating Partnership or any of their respective wholly owned subsidiaries, was converted into the right to receive $8.50. Shares of CapLease’s outstanding restricted stock were accelerated and became fully vested, and restricted stock and any outstanding performance shares were fully earned and received $8.50 per share. In total, cash consideration of $920.7 million was paid to the common and preferred shareholders.
Accounting Treatment for the CapLease Merger
The CapLease Merger has been accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from CapLease have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values is recorded as goodwill. Results of operations for CapLease are included in the Operating Partnership’s consolidated financial statements from the date of acquisition. See Note 6 — CapLease Acquisition (As Restated).
American Realty Capital Trust IV, Inc. Merger
On July 1, 2013, the General Partner entered into an Agreement and Plan of Merger, as amended on October 6, 2013 and October 11, 2013, (the “ARCT IV Merger Agreement”) with ARCT IV, and certain subsidiaries of each company. The ARCT IV Merger Agreement provided for the merger of ARCT IV with and into a wholly owned subsidiary of the Operating Partnership (the “ARCT IV Merger”). The ARCT IV Merger was consummated on January 3, 2014 (the “ARCT IV Merger Date”).
Pursuant to the terms of the ARCT IV Merger Agreement, as amended, each outstanding share of common stock of ARCT IV, including unvested restricted shares that vested in conjunction with the ARCT IV Merger, was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a share of ARCP’s common stock (the “ARCT IV Exchange Ratio”) and (iii) 0.5937 of a new series of preferred stock designated as the 6.70% Series F Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”) and each outstanding unit of American Realty Capital Operating Partnership IV, L.P. (the “ARCT IV OP” and each unit, an “ARCT IV OP Unit”), other than ARCT IV OP Units held by American Realty Capital Trust IV Special Limited Partner, LLC (the “ARCT IV Special Limited Partner”) and American Realty Capital Advisors IV, LLC (the “ARCT IV Advisor”), was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a Limited Partner OP Unit and (iii) 0.5937 of a Limited Partner OP Unit designated as Series F Preferred Units (“Limited Partner Series F Preferred Units”). In total, the Operating Partnership, on ARCP’s behalf, paid $651.4 million in cash, and ARCP issued 36.9 million shares of common stock and 42.2 million shares of Series F Preferred Stock to former ARCT IV stockholders, and the Operating Partnership issued 0.7 million units of Limited Partner Series F Preferred Units and 0.6 million Limited Partner OP Units to the former ARCT IV OP Unit holders in connection with the consummation of the ARCT IV Merger. In addition, each outstanding ARCT IV Class B Unit (as defined below) and each outstanding ARCT IV OP Unit held by the ARCT IV Special Limited Partner and the ARCT IV Advisor was converted into 2.3961 Limited Partner OP Units, resulting in the Operating Partnership issuing 1.2 million Limited Partner OP Units. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock and Series F Preferred Stock were issued to former common stockholders of ARCT IV, respectively.
On January 3, 2014, the Operating Partnership entered into a Contribution and Exchange Agreement (the “ARCT IV Contribution and Exchange Agreement”) with the ARCT IV OP, ARCT IV Special Limited Partner and ARC Real Estate Partners, LLC, an entity under common ownership with the Former Manager. The ARCT IV Special Limited Partner was entitled to receive certain distributions from the ARCT IV OP, including the subordinated distribution of net sales proceeds resulting from an “investment liquidity event” (as defined in the agreement of limited partnership of the ARCT IV OP). The ARCT IV Merger constituted an “investment liquidity event,” as a result of which the ARCT IV Special Limited Partner, in connection with management’s successful attainment of the 6.0% performance hurdle and the return to ARCT IV’s stockholders of approximately $358.3 million in addition to their initial investment, was entitled to receive a subordinated distribution of net sales proceeds from the ARCT IV OP equal to approximately $63.2 million. Pursuant to the ARCT IV Contribution and Exchange Agreement, the ARCT IV Special Limited Partner contributed its interest in the ARCT IV OP, inclusive of the subordinated distribution proceeds received, to the ARCT IV OP in exchange for 2.8 million equity units of the ARCT IV OP, based on a price per share of $22.50. The fair value of these units at the date of issuance was $78.2 million and has been included in merger and other non-routine transactions in the accompanying consolidated statement of operations. Upon
F-21
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
consummation of the ARCT IV Merger, these equity units were immediately converted to 6.7 million Limited Partner OP Units after application of the exchange ratio of 2.3961 per share. In conjunction with the ARCT IV Merger Agreement, the ARCT IV Special Limited Partner agreed to a minimum two-year holding period for these Limited Partner OP Units before having the right to convert them to common stock of ARCP.
In addition, as part of the ARCT IV Contribution and Exchange Agreement, ARC Real Estate Partners, LLC, contributed $750,000 in cash to the ARCT IV OP, effective prior to the consummation of the ARCT IV Merger, in exchange for ARCT IV OP Units. Upon the consummation of the ARCT IV Merger, these equity units converted at an exchange ratio of 2.3961 Limited Partner OP Units per ARCT IV OP Unit, resulting in the Operating Partnership issuing 0.1 million Limited Partner OP Units to ARC Real Estate Partners, LLC.
Accounting Treatment for the ARCT IV Merger
The General Partner and ARCT IV, from inception to the ARCT IV Merger Date, were considered to be entities under common control. Both entities’ advisors were wholly owned subsidiaries of ARC. ARC and its related parties had ownership interests in the General Partner, Operating Partnership and ARCT IV through the ownership of shares, OP Units and other equity interests. In addition, the advisors of both ARCP and ARCT IV were contractually eligible to receive potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and had continued to receive fees from the Operating Partnership prior to ARCP’s transition to self-management. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting, whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT IV Merger Date. In addition, U.S. GAAP requires the Operating Partnership to present historical financial information as if the merger had occurred as of the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT IV Merger, including the impact of the equity transactions entered to consummate the merger, had occurred on inception.
Fortress Portfolio Acquisition
On July 24, 2013, ARC and another related entity, on behalf of the General Partner and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with affiliates of funds managed by Fortress Investment Group LLC (“Fortress”) for the purchase of 196 properties owned by Fortress, for an aggregate contract purchase price of $972.5 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which were allocated to ARCP based on the pro rata fair value of the properties acquired by ARCP relative to the fair value of all 196 properties to be acquired from Fortress. Of the 196 properties, 120 properties were allocated to ARCP (the “Fortress Portfolio”). On October 1, 2013, ARCP, through wholly owned subsidiaries of the Operating Partnership, closed on 41 of the 120 properties with a total purchase price of $200.3 million, exclusive of closing costs. Those Operating Partnership subsidiaries closed the acquisition of the remaining 79 properties in the Fortress Portfolio on January 8, 2014, for an aggregate contract purchase price of $400.9 million, exclusive of closing costs. The total purchase price of the Fortress Portfolio was $601.2 million, exclusive of closing costs. During the year ended December 31, 2013, the Operating Partnership deposited $72.2 million into escrow in relation to the Fortress Portfolio, which has been included in prepaid expenses and other assets in the consolidated balance sheet as of December 31, 2013.
Cole Real Estate Investments, Inc. Merger
On October 22, 2013, the General Partner entered into an agreement and plan of merger (the “Cole Merger Agreement”) with Cole Real Estate Investments, Inc. (“Cole”), a Maryland corporation, and a wholly owned subsidiary of the General Partner. The Cole Merger Agreement provided for the merger of Cole with and into a wholly owned subsidiary of the General Partner (the “Cole Merger”). The Operating Partnership consummated the Cole Merger on February 7, 2014 (the “Cole Acquisition Date”).
Pursuant to the terms of the Cole Merger Agreement, each share of common stock of Cole issued and outstanding immediately prior to the effectiveness of the Cole Merger, including unvested restricted stock units (“RSUs”) and performance stock units that vested in conjunction with the Cole Merger, other than shares owned by the General Partner, Cole or any of their respective subsidiaries, was converted into the right to receive either (i) 1.0929 shares of ARCP’s common stock (the “Stock Consideration”) or (ii) $13.82 in cash (the “Cash Consideration” and together with the Stock Consideration, the “Merger
F-22
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Consideration”). Approximately 98% of all outstanding Cole holders received Stock Consideration and approximately 2% of outstanding Cole shares elected to receive Cash Consideration, pursuant to the terms of the Cole Merger Agreement, resulting in ARCP issuing approximately 520.8 million shares of common stock and the Operating Partnership, on ARCP’s behalf, paying $181.8 million to holders of Cole shares based on their elections. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former common stockholders of Cole.
In addition, ARCP issued approximately 2.8 million shares of common stock, in the aggregate, to certain executives of Cole pursuant to letter agreements entered into between the General Partner and such individuals, concurrently with the execution of the Cole Merger Agreement, as previously disclosed by the General Partner. Additionally, effective as of the Cole Acquisition Date, ARCP issued, but has not yet allocated, 0.4 million shares with dividend equivalent rights commensurate with ARCP’s common stock. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former executives of Cole.
The Operating Partnership is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the Cole Acquisition Date totaled approximately $7.5 billion and consisted of the following (in thousands):
| As of Cole Acquisition Date (As Restated) |
||||
| Estimated Fair Value of Consideration Transferred: |
||||
| Cash |
$ | 181,775 | ||
| ARCP Common stock |
7,285,868 | |||
|
|
|
|||
| Total consideration transferred |
$ | 7,467,643 | ||
|
|
|
|||
The fair value of the 520.8 million shares of ARCP’s common stock issued, excluding those transferred to former Cole executives, was determined based on the closing market price of the ARCP’s common stock on the Cole Acquisition Date.
Accounting Treatment for the Cole Merger
The Cole Merger will be accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from Cole will be recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values will be recorded as goodwill. Results of operations for Cole will be included in the Operating Partnership’s consolidated financial statements subsequent to the Cole Acquisition Date. The initial accounting for the business combination has not been completed due to the significant judgments and time necessary to complete third-party valuation of real estate and other assets.
Pending Significant Acquisition
Inland Portfolio Acquisition
On August 8, 2013, ARC and another related entity, on behalf of the General Partner and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with Inland American Real Estate Trust, Inc. (“Inland”) for the purchase of the equity interests of 67 companies owned by Inland for an aggregate contract purchase price of approximately $2.3 billion, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs. Of the 67 companies, the equity interests of 10 companies (the “Inland Portfolio”) will be acquired, in total, by the Operating Partnership, on behalf of ARCP, from Inland for a purchase price of approximately $501.0 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which was allocated to the ARCP based on the pro rata fair value of the Inland Portfolio relative to the fair value of all 67 companies to be acquired from Inland by the Operating Partnership, on ARCP’s behalf, and the other entities sponsored directly or indirectly by ARC. The Inland Portfolio is comprised of 33 properties. As of December 31, 2013, ARCP had closed on five of the 33 properties for a total purchase price of $56.4 million, exclusive of closing costs. ARCP closed the acquisition of 27 additional properties in the Inland Portfolio subsequent to December 31, 2013. The General Partner will not close on the remaining property. During the year ended December 31, 2013, the Operating Partnership, on ARCP’s behalf, deposited $28.6 million into escrow in relation to the Inland Portfolio, which has been included in prepaid expenses and other assets in the consolidated balance sheets.
F-23
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Purchase Agreement for Red Lobster Portfolio
On May 16, 2014, the Operating Partnership, through a wholly owned subsidiary, entered into a master purchase agreement to acquire 521 properties, substantially all of which are operating as Red Lobster® restaurants (the “Red Lobster Portfolio”) from a third party. The transaction is structured as a sale-leaseback in which the Operating Partnership will purchase the Red Lobster Portfolio and will immediately lease the portfolio back to the third party pursuant to the terms of multiple master leases (the “Master Leases”). The purchase price of the Red Lobster Portfolio is approximately $1.59 billion, exclusive of closing costs and related expenses. The Master Leases will provide annual rental income of $152.0 million. Approximately 95.0% of the Master Leases will be structured with a 25-year initial term and approximately 5.0% will have a weighted average 18.7-year initial term.
On July 28, 2014, the Operating Partnership closed on 492 of the properties constituting the Red Lobster Portfolio, and on July 30, 2014 closed on the remaining 29 properties.
Note 4 — Summary of Significant Accounting Policies (As Restated)
Basis of Accounting
The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with U.S. GAAP.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Operating Partnership, its subsidiaries and consolidated joint venture arrangements. The portions of the consolidated joint venture arrangement not owned by the Operating Partnership are presented as noncontrolling interests. In addition, as discussed in Note 3 — Mergers and Acquisitions (As Restated), the historical information of ARCT III and ARCT IV has been presented as if the mergers had occurred as of the beginning of the earliest period presented.
All intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Operating Partnership has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity of which the Operating Partnership is the primary beneficiary.
Reclassification
Certain reclassifications have been made to the previously issued historical financial statements of the Company to conform to this presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, investments in real estate, business combinations, and derivative financial instruments and hedging activities, as applicable.
Real Estate Investments
The Operating Partnership records acquired real estate at cost and makes assessments as to the useful lives of depreciable assets. The Operating Partnership considers the period of future benefit of the asset to determine the appropriate useful lives. Depreciation is computed using a straight-line method over the estimated useful life of 40 years for buildings, five to 15 years for building fixtures and improvements and the remaining lease term for acquired intangible lease assets.
Assets Held for Sale
The Operating Partnership classifies real estate investments as held for sale when the Operating Partnership has entered into a contract to sell the property, all material due diligence requirements have been satisfied, and the Operating Partnership believes it is probable that the disposition will occur, or the Operating Partnership is actively marketing the property and management has the intent to sell the property, among other conditions. Assets held for sale are recorded at the lower of carrying value or estimated fair value, less estimated cost to dispose of the asset. The results of operations and the related gain
F-24
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
or loss on sale of properties that have been sold or that are classified as held for sale are included in discontinued operations in the consolidated statements of operations and comprehensive loss for all periods presented. At both December 31, 2013 and 2012, the Company had one property that was classified as held for sale. See Note 22 — Discontinued Operations and Properties Held for Sale.
If circumstances arise that the Operating Partnership previously considered unlikely and, as a result, the Operating Partnership decides not to sell a property previously classified as held for sale, the Operating Partnership will reclassify the property as held and used. The Operating Partnership measures and records a property that is reclassified as held and used at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used or (ii) the estimated fair value at the date of the subsequent decision not to sell.
Development Activities
Project costs and expenses, which include interest expense, associated with the development, construction and lease-up of a real estate project are capitalized as construction in progress. Once the development and construction of the building is substantially completed, the amounts capitalized to construction in progress are transferred to (i) land and (ii) buildings and improvements. As required by U.S. GAAP, the Operating Partnership computes interest expense on the full amount it has invested in the project, whether or not such investment is externally financed.
Impairment of Long Lived Assets
Periodically, or when circumstances indicate the carrying value of a property may not be recoverable, the Operating Partnership assesses real estate investments for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. The Operating Partnership has determined that the significant inputs used to estimate the fair value of the property fall within Level 2 or Level 3 of the fair value hierarchy. The Operating Partnership recorded $3.3 million in impairment charges on real estate investments from continuing operations during the year ended December 31, 2013. The Company did not record any impairment charges on real estate investments from continuing operations during the years ended December 31, 2012 or 2011. The Operating Partnership did not record any impairment on real estate investments from discontinued operations during the year ended December 31, 2013. For the years ended December 31, 2012 and 2011, the Operating Partnership recorded $0.6 million and $0.8 million as impairment charges from discontinued operations.
The Operating Partnership reviews its direct financing leases at least annually to determine whether there has been an other-than-temporary decline in the current estimate of residual value of the property. The Operating Partnership has determined that the significant inputs used to value these investments fall within Level 3 of the fair value accounting. The residual value is an estimate of what the Operating Partnership could realize upon the sale of the property at the end of the lease term, based on market information. If this review indicates that a decline in residual value has occurred that is other-than-temporary, the Operating Partnership recognizes an impairment charge equal to the difference between the fair value and carrying value, which is discounted at the internal rate of return of the direct financing lease. The Operating Partnership did not record any impairment charges on direct financing leases during the years ended December 31, 2013, 2012 and 2011.
Allocation of Purchase Price of Business Combinations including Acquired Properties
In accordance with the guidance for business combinations, the Operating Partnership determines whether a transaction or other event is a business combination. If the transaction is determined to be a business combination, the Operating Partnership determines if the transaction is considered to be between entities under common control. The acquisition of an entity under common control is accounted for on the carryover basis of accounting whereby the assets and liabilities of the acquired companies are recorded upon the merger on the same basis as they were carried by the acquired companies on the merger date. All other business combinations are accounted for by applying the acquisition method of accounting. Under the acquisition method, the Operating Partnership recognizes the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity at fair value. In addition, the Operating Partnership evaluates the existence of goodwill or a gain from a bargain purchase. The Operating Partnership will immediately expense acquisition-related costs and fees associated with business combinations and asset acquisitions.
F-25
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The Operating Partnership allocates the purchase price of acquired properties and businesses accounted for under the acquisition method of accounting to tangible and identifiable intangible assets and liabilities acquired based on their respective fair values. Tangible assets include land, buildings, equipment and tenant improvements on an as-if vacant basis. The Operating Partnership utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Identifiable intangible assets and liabilities include amounts allocated to acquired leases for above-market and below-market lease rates and the value of in-place leases.
Amounts allocated to land, buildings, equipment and fixtures are based on cost segregation studies performed by independent third parties or on the Operating Partnership’s analysis of comparable properties in its portfolio.
The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by the Operating Partnership in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Operating Partnership includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period, which typically ranges from six to 18 months. The Operating Partnership also estimates costs to execute similar leases including leasing commissions, legal and other related expenses.
Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, including any bargain renewal periods. Above-market leases are amortized as a reduction to rental income over the remaining terms of the respective leases. Below-market leases are amortized as an increase to rental income over the remaining terms of the respective leases, including any bargain renewal periods.
The fair value of investments and debt are valued using techniques consistent with those disclosed in Note 10 — Fair Value of Financial Instruments (As Restated), depending on the nature of the investment or debt. The fair value of all other assumed assets and liabilities based on the best information available.
The value of in-place leases is amortized to expense over the initial term of the respective leases, which range primarily from two to 20 years. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.
In making estimates of fair values for purposes of allocating purchase price, the Operating Partnership utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Operating Partnership also considers information obtained about each property as a result of its pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
F-26
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Intangible lease assets and liabilities of the Operating Partnership consist of the following as of December 31, 2013 and 2012 (amounts in thousands):
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| Intangible lease assets: |
||||||||
| In-place leases, gross |
$ | 749,862 | $ | 219,649 | ||||
| Accumulated amortization on in-place leases |
(60,753 | ) | (11,247 | ) | ||||
|
|
|
|
|
|||||
| In-place leases, net of accumulated amortization |
689,109 | 208,402 | ||||||
|
|
|
|
|
|||||
| Above-market leases, gross |
9,351 | 1,504 | ||||||
| Accumulated amortization on above market leases |
(658 | ) | (118 | ) | ||||
|
|
|
|
|
|||||
| Above-market leases, net of accumulated amortization |
8,693 | 1,386 | ||||||
| Leasing commissions |
382 | 347 | ||||||
| Accumulated amortization on leasing commissions |
(155 | ) | (109 | ) | ||||
|
|
|
|
|
|||||
| Leasing commissions, net of accumulated amortization |
227 | 238 | ||||||
|
|
|
|
|
|||||
| Total intangible lease assets, net |
$ | 698,029 | $ | 210,026 | ||||
|
|
|
|
|
|||||
| Intangible lease liabilities: |
||||||||
| Below-market leases, gross |
$ | 77,884 | $ | — | ||||
| Accumulated amortization on below market leases |
(715 | ) | — | |||||
|
|
|
|
|
|||||
| Below-market leases, net of accumulated amortization |
77,169 | — | ||||||
|
|
|
|
|
|||||
| Total intangible lease liabilities, net |
$ | 77,169 | $ | — | ||||
|
|
|
|
|
|||||
The following table provides the remaining weighted-average amortization period as of December 31, 2013 for intangible assets and liabilities excluding the amortization of leasing commissions, and the projected amortization expense and adjustments to rental income for the next five years (amounts in thousands):
| Remaining Weighted- Average Amortization Period in Years |
2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||||||
| In-place leases: |
||||||||||||||||||||||
| Total to be included in amortization expense |
10.2 | $ | 81,139 | $ | 75,235 | $ | 69,915 | $ | 64,735 | $ | 62,560 | |||||||||||
| Above-market lease assets: |
||||||||||||||||||||||
| Total to be deducted from rental income |
11.9 | $ | 1,525 | $ | 1,525 | $ | 1,516 | $ | 1,388 | $ | 1,359 | |||||||||||
| Below-market lease liabilities: |
||||||||||||||||||||||
| Total to be included in rental income |
22.7 | $ | (4,173 | ) | $ | (4,169 | ) | $ | (4,151 | ) | $ | (4,151 | ) | $ | (4,144 | ) | ||||||
Goodwill
In the case of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration paid over the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill. Goodwill that arose as a result of the Operating Partnership’s mergers and acquisitions was recorded in the Operating Partnership’s consolidated financial statements.
In the event the Operating Partnership disposes of a property that constitutes a business under U.S. GAAP from a reporting unit with goodwill, the Operating Partnership will allocate a portion of the reporting unit’s goodwill to that business in determining the gain or loss on the disposal of the business. The amount of goodwill allocated to the business will be based on the relative fair value of the business to the fair value of the reporting unit. Goodwill acquired in the CapLease Merger comprises one reporting unit.
The Operating Partnership will evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value, by reporting unit, may not be recoverable. The Operating Partnership’s annual testing date is during the fourth quarter. The Operating Partnership will test goodwill for impairment by first comparing the book value of net assets to the fair value of each reporting unit. If the fair value is determined to be less than the book value or if qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the
F-27
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Operating Partnership will estimate the fair value of the reporting units using discounted cash flows and relevant competitor multiples. The evaluation of goodwill for potential impairment requires the Operating Partnership’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions.
Cash and Cash Equivalents
Cash and cash equivalents include cash in bank accounts, as well as investments in highly-liquid money market funds with original maturities of three months or less.
The Operating Partnership deposits cash with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company (“FDIC”) up to an insurance limit. At December 31, 2013 and 2012, the Operating Partnership had deposits of $52.7 million and $292.6 million, respectively, of which $44.3 million and $288.9 million were in excess of the amount insured by the FDIC. Although the Operating Partnership bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result due to the high quality of the institutions.
Restricted Cash
Restricted cash primarily consists of reserves related to lease expirations, as well as maintenance, structural and debt service reserves.
Investment in Direct Financing Leases
The Operating Partnership has acquired certain properties that are subject to leases that qualify as direct financing leases in accordance with U.S. GAAP due to the significance of the lease payments from the inception of the leases compared to the fair value of the property. Investments in direct financing leases represent the fair value of the remaining lease payments on the leases and the estimated fair value of any expected residual property value at the end of the lease term. The fair value of the remaining lease payments is estimated using a discounted cash flow based on interest rates that would represent the Operating Partnership’s incremental borrowing rate for similar types of debt. The expected residual property value at the end of the lease term is estimated using market data and assessments of the remaining useful lives of the properties at the end of the lease terms, among other factors. Income from direct financing leases is calculated using the effective interest method over the remaining term of the lease.
As part of the update to the provisional allocation of the purchase price for the GE Capital Portfolio during the measurement period, the Operating Partnership reclassified approximately $9.9 million from investment in direct financing leases receivables to investments in real estate, at cost.
Loans Held for Investments
The Operating Partnership classifies its loans as long-term investments, as the Operating Partnership intends to hold the loans for the foreseeable future or until maturity. Loan investments are carried on the Operating Partnership’s consolidated balance sheets at amortized cost (unpaid principal balance adjusted for unearned discount or premium and loan origination fees), net of any allowance for loan losses. Unearned discounts or premiums and loan origination fees are amortized as a component of interest income using the effective interest method over the life of the loan.
From time to time, the Operating Partnership may determine to sell a loan in which case it must reclassify the asset as held for sale. Loans held for sale are carried at lower of cost or estimated fair value. From the period the Operating Partnership acquired the loan investments through December 31, 2013, the Operating Partnership has not sold or reclassified any loans as held for sale.
The Operating Partnership evaluates its loan investments for possible impairment on a quarterly basis. Refer to Note 7 — Investment Securities, at Fair Value.
F-28
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Commercial Mortgage-Backed Securities
The Operating Partnership classifies all of its commercial mortgage-backed securities (“CMBS”) as available for sale for financial accounting purposes. Under U.S. GAAP, securities classified as available for sale are carried on the consolidated balance sheet at fair value with the net unrealized gains or losses included in accumulated other comprehensive income (loss), a component of Partners’ Capital.
The Operating Partnership estimates fair value on all securities investments quarterly based on a variety of inputs. Under applicable accounting guidance, securities where the fair value is less than the Operating Partnership’s cost are deemed impaired, and, therefore, must be measured for other-than-temporary impairment. If an impaired security (i.e., fair value below cost) is intended to be sold or required to be sold prior to expected recovery of the impairment loss, the full amount of the loss must be charged to earnings as other-than-temporary impairment. Otherwise, temporary impairment losses are charged to other comprehensive income (loss). Any premiums or discounts on securities are amortized as a component of interest income using the effective interest method.
In estimating credit or other-than-temporary impairment losses, management considers a variety of factors including (1) the financial condition and near-term prospects of the credit, including credit rating of the security and the underlying tenant and an estimate of the likelihood, amount and expected timing of any default, (2) whether the Operating Partnership expects to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value, (3) the length of time and the extent to which the fair value has been below cost, (4) current market conditions, (5) expected cash flows from the underlying collateral and an estimate of underlying collateral values and (6) subordination levels within the securitization pool. These estimates are highly subjective and could differ materially from actual results. From the period the Operating Partnership acquired the CMBS through December 31, 2013, the Operating Partnership had no other-than-temporary impairment losses.
Deferred Costs, Net
Deferred costs, net consists of deferred financing costs net of accumulated amortization and deferred leasing costs net of accumulated amortization.
Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined the financing will not close. At December 31, 2013 and 2012, the Operating Partnership had $84.7 million and $15.1 million, respectively, of deferred financing costs net of accumulated amortization.
Deferred leasing costs, consisting primarily of lease commissions and payments made to assume existing leases, are deferred and amortized over the term of the lease. At December 31, 2013 and 2012, the Operating Partnership had no deferred leasing costs.
Deferred offering costs represent professional fees, fees paid to various regulatory agencies, and other costs incurred in connection with registering to sell shares of the Company’s common stock. As of December 31, 2013 and 2012, the Company had no deferred offering costs.
Convertible Obligation to Series C Convertible Preferred Stockholders
On June 7, 2013, the General Partner issued 28.4 million shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) for gross proceeds of $445.0 million. Concurrently, the Operating Partnership issued to the General Partner 28.4 million General Partner OP Units designated as Series C Convertible Preferred Units underlying the Series C Preferred Stock. Due to an unconditional obligation to either redeem or convert the Series C Preferred Stock into a variable number of shares of common stock that was predominantly based on a fixed monetary amount, the preferred securities were classified as an obligation under U.S. GAAP and were presented in the consolidated balance sheet as a liability prior to their settlement in November 2013. Promptly following the CapLease Merger Date, ARCP converted the Series C Preferred Stock, in accordance with the terms of the original agreement and into 1.4 million shares of common stock, with the remaining balance of Series C Preferred Stock settled in cash consideration of $441.4 million. Concurrently, the Operating Partnership issued to the General Partner 1.4 million General Partner OP Units in respect of such common stock.
Contingent Valuation Rights
On June 7, 2013, the General Partner issued 29.4 million common stock contingent value rights (“Common Stock CVRs”) and 28.4 million preferred stock contingent value rights (“Preferred Stock CVRs”). Concurrently, the Operating
F-29
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Partnership issued the General Partner contingent value rights with identical terms. In September 2013, a portion of the Common Stock CVR holders received $20.4 million representing the maximum payment of $1.50 per share as defined in the agreement. The remaining Common Stock CVR holders received settlement of the amount owed to them of $23.8 million promptly following the CapLease Merger, which consummated on November 5, 2013, representing the maximum payment of $1.50 per share. Concurrently with the settlement of the Common Stock CVRs, the General Partner settled its contingent value rights with the Operating Partnership for the identical considerations.
ARCP settled the Preferred Stock CVRs promptly following the CapLease Merger Date. ARCP settled the Preferred Stock CVRs for $0.90 per Preferred Stock CVR for total cash consideration of $25.6 million. Concurrently with the settlement of the Preferred Stock CVRs, the Operating Partnership settled its contingent value rights with the General Partner for identical considerations.
Changes in the fair value of the contingent valuation rights obligation subsequent to issuance date were recorded in the consolidated statements of operations and comprehensive loss within gain/loss on derivatives, net in the period incurred. For the year ended December 31, 2013, the Operating Partnership recorded a loss on the CVRs of $69.7 million, representing the settled value.
Convertible Debt
On July 29, 2013, ARCP issued $300.0 million of Convertible Senior Notes due 2018 (the “2018 Notes”) and issued an additional $10.0 million of the 2018 Notes on August 1, 2013 to various purchasers. On December 10, 2013, ARCP issued an additional $287.5 million of the 2018 Notes through a reopening of the “2018 Notes” indenture agreement. Also on December 10, 2013, ARCP issued $402.5 million of Convertible Senior Notes due 2020 (the “2020 Notes”, collectively with the 2018 Notes, the “Convertible Notes”). Concurrently, the Operating Partnership issued the General Partner convertible senior notes with identical terms (the “General Partner Convertible Notes”). The 2018 Notes mature August 1, 2018 and the 2020 Notes mature on December 15, 2020. The Convertible Notes are convertible to cash or common stock of ARCP, and the General Partner Convertible Notes are convertible upon identical terms. In accordance with U.S. GAAP, the notes are accounted for as a liability with a separate equity component recorded for the conversion option. A liability was recorded for the General Partner Convertible Notes on the issuance date at fair value based on a discounted cash flow analysis using current market rates for debt instruments with similar terms. The difference between the initial proceeds from the General Partner Convertible Notes and the estimated fair value of the debt instruments resulted in a debt discount, with an offset recorded to General Partner’s capital representing the equity component. The debt discount is being amortized to interest expense over the expected lives of the General Partner Convertible Notes.
Derivative Instruments
The Operating Partnership may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with its borrowings. Certain of the techniques used to hedge exposure to interest rate fluctuations may also be used to protect against declines in the market value of assets that result from general trends in debt markets. The principal objective of such agreements is to minimize the risks and/or costs associated with the Operating Partnership’s operating and financial structure as well as to hedge specific anticipated transactions.
The Operating Partnership records all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Operating Partnership has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Operating Partnership may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Operating Partnership elects not to apply hedge accounting.
F-30
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment. If the Operating Partnership elects not to apply hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the consolidated statements of operations and comprehensive loss. If the derivative is designated and qualifies for hedge accounting treatment the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.
Share Repurchase Programs
ARCT III’s and ARCT IV’s boards of directors had adopted Share Repurchase Programs (the “ARCT III SRP” and the “ARCT IV SRP”, respectively, and collectively the “SRPs”) that enabled stockholders to sell their shares to ARCT III and ARCT IV, respectively, for repurchase in limited circumstances. The SRPs permitted investors to sell their shares back to ARCT III or ARCT IV, as applicable, after they had held them for at least one year, in most circumstances, subject to the significant conditions and limitations described below.
The purchase price per share of the ARCT III SRP depended on the length of time investors had held such shares as follows: after one year from the purchase date — the lower of $9.25 and 92.5% of the amount they actually paid for each share; after two years from the purchase date — the lower of $9.50 and 95.0% of the amount they actually paid for each share; after three years from the purchase date — the lower of $9.75 and 97.5% of the amount they actually paid for each share; and after four years from the purchase date — the lower of $10.00 and 100% of the amount they actually paid for each share.
The purchase price per share of the ARCT IV SRP depended on the length of time investors had held such shares as follows: after one year from the purchase date — the lower of $23.13 and 92.5% of the amount they actually paid for each share; after two years from the purchase date — the lower of $23.75 and 95.0% of the amount they actually paid for each share; after three years from the purchase date — the lower of $24.38 and 97.5% of the amount they actually paid for each share; and after four years from the purchase date — the lower of $25.00 and 100.0% of the amount they actually paid for each share.
Both ARCT III and ARCT IV were only authorized to repurchase shares pursuant to the SRPs up to the value of shares issued under their respective DRIPs (as defined below) and limited the amount spent to repurchase shares in a given quarter to the value of the shares issued under their DRIPs in that same quarter.
When a stockholder requested repurchases and the repurchases were approved by ARCT III’s or ARCT IV’s board of directors, as applicable, such action reclassified such obligation from equity to a liability based on the settlement value of the obligation. The following table reflects the number of shares repurchased for the years ended December 31, 2013, 2012 and 2011.
| Number of Requests |
Number of Shares |
Average Price per Share |
||||||||||
| 2011 |
1 | 2,375 | $ | 10.00 | ||||||||
| 2012 |
75 | 180,744 | 10.07 | |||||||||
| 2013 |
11 | 4,956 | 24.98 | |||||||||
|
|
|
|
|
|
|
|||||||
| Cumulative repurchase requests as of December 31, 2013 |
87 | 188,075 | $ | 10.46 | ||||||||
|
|
|
|
|
|
|
|||||||
In accordance with the LPA, the Operating Partnership repurchased a corresponding number of General Partner OP Units from the General Partner when shares were repurchased from stockholders on the same terms as the shares were repurchased pursuant to the SRPs.
Upon the ARCT III Merger, the ARCT III SRP was terminated. Upon the ARCT IV Merger, the ARCT IV SRP was terminated.
Upon the closing of the ARCT III Merger on February 28, 2013, pursuant to the terms of the ARCT III Merger Agreement, 29.2 million shares, or 16.5% of the then outstanding shares of ARCT III’s common stock, were paid in cash at $12.00 per share, which is equivalent to 27.7 million shares of ARCP’s common stock based on the ARCT III Exchange Ratio. Concurrently, the Operating Partnership repurchased an equivalent number of General Partner OP Units at the same rate. See Note 3 — Mergers and Acquisitions (As Restated).
F-31
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
On August 20, 2013, the General Partner’s board of directors reauthorized its $250 million share repurchase program which was originally authorized in February 2013. During the year ended December 31, 2013, the General Partner repurchased approximately 0.6 million shares of common stock at an average price of $13.07 per share or $7.5 million in total. Concurrently, the Operating Partnership repurchased an equivalent number of General Partner OP Units at the same rate.
Distribution Reinvestment Plans
Pursuant to the ARCT III distribution reinvestment plan (“ARCT III DRIP”), stockholders could have elected to receive shares of ARCT III common stock in lieu of receiving cash distributions. No dealer manager fees or selling commissions were paid with respect to shares issued pursuant to the ARCT III DRIP. Shares issued pursuant to the ARCT III DRIP had the same rights and were treated in the same manner as if such shares were issued pursuant to ARCT III’s initial public offering (the “ARCT III IPO”). Shares issued pursuant to the ARCT III DRIP were recorded within partners’ equity in the accompanying consolidated balance sheets in the period distributions were declared. During the years ended December 31, 2013, 2012 and 2011, ARCT III issued 0.5 million, 2.7 million and 27,169 shares of common stock, respectively, with a value of $4.9 million, $27.1 million and $0.3 million, respectively, in each case with a par value per share of $0.01, pursuant to the DRIP. Concurrently, the Operating Partnership issued the General Partner an equivalent number of General Partner OP Units. Upon the closing of the ARCT III Merger, the DRIP was terminated.
Pursuant to the ARCT IV distribution reinvestment plan (“ARCT IV DRIP”), stockholders could have elected to receive shares of ARCT IV common stock in lieu of receiving cash distributions. No dealer manager fees or selling commissions were paid with respect to shares purchased pursuant to the ARCT IV DRIP. Participants purchasing shares pursuant to the ARCT IV DRIP had the same rights and were treated in the same manner as if such shares were issued pursuant to ARCT IV’s initial public offering (the “ARCT IV IPO”). Shares issued pursuant to the ARCT IV DRIP were recorded within partners’ equity in the accompanying consolidated balance sheet in the period distributions are declared. During the years ended December 31, 2013 and 2012, ARCT IV issued 0.5 million and 7,690 shares of common stock with a value of $20.7 million and $0.4 million, respectively, and a par value per share of $0.01 pursuant to the ARCT IV DRIP. Concurrently, the Operating Partnership issued the General Partner an equivalent number of General Partner OP Units.
Revenue Recognition
Upon the acquisition of real estate, certain properties will have leases where minimum rent payments change during the term of the lease. The Operating Partnership will record rental revenue for the full term of each lease on a straight-line basis. When the Operating Partnership acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Cost recoveries from tenants are included in tenant reimbursement income in the period the related costs are incurred, as applicable.
The Operating Partnership’s revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires the Operating Partnership to record a receivable, and include in revenues, unbilled rent receivables that the Operating Partnership will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. Straight-line rent receivables are included in prepaid expenses and other assets on the consolidated balance sheets. See Note 8 — Prepaid Expenses and Other Assets (As Restated). The Operating Partnership defers the revenue related to lease payments received from tenants in advance of their due dates. As of December 31, 2013 and 2012, the Operating Partnership had $20.4 million and $4.4 million, respectively, of deferred rental income, which is included in deferred rent and other liabilities on the consolidated balance sheets.
The Operating Partnership continually reviews receivables related to rent and unbilled rent receivables and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, the Operating Partnership will record an increase in the allowance for uncollectible accounts or record a direct write-off of the receivable in the consolidated statements of operations and comprehensive loss. As of December 31, 2013, the Company recorded an allowance for uncollectible accounts of $187,000. As of December 31, 2012, the Operating Partnership determined that no allowance for uncollectible accounts was necessary.
F-32
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Contingent Rental Income
The Operating Partnership owns certain properties that have associated leases that require the tenant to pay contingent rental income based on a percentage of the tenant’s sales after the achievement of certain sales thresholds, which may be monthly, quarterly or annual targets. As a lessor, the Operating Partnership defers the recognition of contingent rental income until the specified target that triggered the contingent rental income is achieved, or until such sales upon which percentage rent is based are known.
Offering and Related Costs
Offering and related costs include costs incurred in connection with the General Partner’s issuance of common stock. These costs include, but are not limited to, (i) legal, accounting, printing, mailing and filing fees (ii) escrow related fees and (iii) reimbursement to the dealer manager for amounts they paid to reimburse the bonified due diligence expenses of broker-dealers.
Acquisition Related Expenses and Merger and Other Non-routine Transaction Related Expenses
All direct costs incurred as a result of a business combination are classified as acquisition costs or merger and other non-routine transaction costs and expensed as incurred. In addition, indirect costs, such as internal salaries, that are tracked and documented in a manner that clearly indicate that the activities driving the cost directly relate to activities necessary to complete, or effect, a business combination are classified as acquisition related expenses. Similar costs incurred in relation to mergers with entities under common control (which are not accounted for as acquisitions) are included in the caption “merger and other non-routine transactions.” Acquisition related expenses include legal and other transaction related costs incurred in connection with self-originated acquisitions including purchases of portfolios. Other non-routine transaction costs are also presented within the line item merger and other non-routine transactions in the consolidated statements of operations and comprehensive loss.
Merger and other non-routine transaction related expenses include the following costs (amounts in thousands):
| Year Ended December 31, | ||||||||||||
| 2013 (As Restated) |
2012 | 2011 | ||||||||||
| Merger related costs: |
||||||||||||
| Strategic advisory services |
$ | 62,332 | $ | — | $ | — | ||||||
| Transfer taxes |
8,931 | — | — | |||||||||
| Legal fees and expenses |
15,081 | 2,603 | — | |||||||||
| Personnel costs and other reimbursements |
3,612 | — | — | |||||||||
| Other fees and expenses |
8,450 | — | — | |||||||||
| Other non-routine costs: |
||||||||||||
| Post-transaction support services |
4,000 | — | — | |||||||||
| Subordinated distribution fee |
98,360 | — | — | |||||||||
| Furniture, fixtures and equipment |
5,800 | — | — | |||||||||
| Legal fees and expenses |
950 | — | — | |||||||||
| Personnel costs and other reimbursements |
2,546 | — | — | |||||||||
| Other fees and expenses |
481 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 210,543 | $ | 2,603 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
Equity-based Compensation
The General Partner has an equity-based incentive award plan for the Former Manager, non-executive directors, officers, other employees and independent contractors who are providing services to the General Partner, as applicable, and a non-executive director restricted share plan, which are accounted for under the guidance for share-based payments. The expense for such awards is recognized over the vesting period or when the requirements for exercise of the award have been met. See Note 18 — Equity-based Compensation (As Restated) for additional information on these plans.
F-33
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Per Unit Data
Income (loss) per basic common partnership unit is calculated by dividing net income (loss) less dividends on unvested restricted stock and dividends on preferred shares by the weighted-average number of common partnership units issued and outstanding during such period. Diluted income (loss) per common partnership unit considers the effect of potentially dilutive common partnership units during the period. As the Operating Partnership has the ability and intent to settle all outstanding convertible debt in cash, the Operating Partnership has excluded the if-converted shares from its calculation of diluted shares.
Income Taxes
The Operating Partnership is classified as a partnership for federal income tax purposes. As a partnership, the Operating Partnership is not a taxable entity for federal income tax purposes. Instead, each partner in the Operating Partnership is required to take into account its allocable share of the Operating Partnership’s income, gains, losses, deductions, and credits for each taxable year. However, the Operating Partnership may be subject to certain state and local taxes on its income and property.
The General Partner and ARCT III qualified as REITs under Sections 856 through 860 of the Internal Revenue Code (the “Code”) commencing with the taxable year ended December 31, 2011. ARCT IV qualified as a REIT under Sections 856 through 860 of the Internal Revenue Code (the “Code”) commencing with the taxable year ended December 31, 2012. As REITs, each of the General Partner, ARCT III and ARCT IV generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, and so long as it distributes at least 90% of its REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain. REITs are subject to a number of other organizational and operational requirements. Each of the General Partner, ARCT IV and ARCT III may still be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.
As of December 31, 2013, the Operating Partnership, General Partner, ARCT III and ARCT IV had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended December 31, 2010 remain open to examination by the major taxing jurisdictions to which the Operating Partnership, General Partner, ARCT III and ARCT IV are subject.
Under the partnership agreement, the Operating Partnership is to conduct business in such a manner as to permit the General Partner at all times to qualify as a REIT.
Reportable Segments
The Operating Partnership has determined that it has one reportable segment with activities related to investing in real estate and real estate-related assets. The Operating Partnership’s investments in real estate generate rental revenue and other income through the leasing of properties, which comprised 100% of its total consolidated revenues. Although the Operating Partnership’s investments in real estate will be geographically diversified throughout the United States, management evaluates operating performance on an individual property level. The Operating Partnership’s properties have been aggregated into one reportable segment.
Recent Accounting Pronouncements
In December 2011, the U.S. Financial Accounting Standards Board (“FASB”) issued guidance regarding disclosures about offsetting assets and liabilities, which requires entities to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance was effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented. The adoption of this guidance, which is related to disclosure only, did not have a material impact on the Operating Partnership’s consolidated financial position, results of operations or cash flows. Refer to Note 7 — Derivatives and Hedging Activities for the Operating Partnership’s disclosure of information about offsetting and related arrangements.
In July 2012, the FASB issued revised guidance intended to simplify how an entity tests indefinite-lived intangible assets for impairment. The amendments allow an entity to initially assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. An entity is no longer required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative test unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments were effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this guidance did not have a material impact on the Operating Partnership’s consolidated financial position, results of operations or cash flows.
F-34
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
In February 2013, the FASB issued guidance which requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The guidance was effective for annual and interim periods beginning after December 15, 2012. The adoption of this guidance, which is related to disclosure only, did not have a material impact on the Operating Partnership’s consolidated financial position, results of operations or cash flows. Refer to Note 15 — Derivatives and Hedging Activities for the Operating Partnership’s disclosure of the information about the amounts reclassified out of accumulated other comprehensive income by component.
In February 2013, the FASB issued new accounting guidance clarifying the accounting and disclosure requirements for obligations resulting from joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. The Operating Partnership does not expect the adoption of this guidance to have a material impact on the Operating Partnership’s consolidated financial position, results of operations or cash flows.
In April 2014, the FASB issued Accounting Standards Update, 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which amends the reporting requirements for discontinued operations by updating the definition of a discontinued operation to be a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, resulting in fewer disposals that qualify for discontinued operations reporting yet the pronouncement also requires expanded disclosures for discontinued operations. The Operating Partnership adopted ASU 2014-08 effective January 1, 2014. Starting with the first quarter of 2014, the results of operations for disposals and properties that were previously reported in discontinued operations but do not qualify under the new guidance will be presented within income from continuing operations on the accompanying consolidated statements of income.
In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. The Operating Partnership is currently evaluating the impact of the new standard on its financial statements.
Note 5 — Real Estate Investments (As Restated)
Excluding the CapLease Merger, the following table presents the allocation of the assets acquired and liabilities assumed during the periods presented (dollar amounts in thousands):
| Year Ended December 31, | ||||||||
| 2013 (1) | 2012 | |||||||
| Real estate investments, at cost: |
||||||||
| Land |
$ | 883,491 | $ | 237,282 | ||||
| Buildings, fixtures and improvements |
2,311,211 | 1,229,230 | ||||||
|
|
|
|
|
|||||
| Total tangible assets |
3,194,702 | 1,466,512 | ||||||
|
|
|
|
|
|||||
| Acquired intangible assets: |
||||||||
| In-place leases |
334,839 | 197,873 | ||||||
| Above market leases |
12,317 | 1,503 | ||||||
|
|
|
|
|
|||||
| Total assets acquired, net |
3,541,858 | 1,665,888 | ||||||
|
|
|
|
|
|||||
| Assumed intangible liabilities: |
||||||||
| Below market leases |
(21,446 | ) | — | |||||
|
|
|
|
|
|||||
| Total liabilities acquired, net |
(21,446 | ) | — | |||||
| OP Units issued to acquire real estate investments |
— | (6,352 | ) | |||||
|
|
|
|
|
|||||
| Cash paid for acquired real estate investments |
$ | 3,520,412 | $ | 1,659,536 | ||||
|
|
|
|
|
|||||
| Number of properties acquired |
1,739 | 573 | ||||||
|
|
|
|
|
|||||
| (1) | Excludes 50 properties comprised of $66.1 million of net investments subject to direct financing leases. |
F-35
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The following table presents unaudited pro forma information as if the acquisitions, including the CapLease Merger discussed in Note 6 — CapLease Acquisition (As Restated), during the year ended December 31, 2013 had been consummated on January 1, 2012. These amounts have been calculated after applying the Operating Partnership’s accounting policies and adjusting the results of acquisitions to reflect the additional depreciation and amortization and interest expense that would have been charged had the acquisitions occurred on January 1, 2012. Additionally, the unaudited pro forma net loss attributable to unitholders was adjusted to exclude acquisition related expenses of $76.1 million (as restated) and $45.1 million for the years ended December 31, 2013 and 2012, respectively, and merger and other non-routine transaction related expenses of $210.5 million (as restated) and $2.6 million for the years ended December 31, 2013 and 2012, respectively (amounts in thousands).
| Year Ended December 31, | ||||||||
| 2013 As Restated |
2012 As Restated |
|||||||
| Pro forma revenues |
$ | 573,503 | $ | 467,434 | ||||
| Pro forma net loss attributable to unitholders |
$ | (91,891 | ) | $ | (15,424 | ) | ||
Future Lease Payments
The following table presents future minimum base rental cash payments due to the Operating Partnership, to be received on ARCP’s behalf, over the next five years and thereafter. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items (amounts in thousands):
| Future Minimum Operating Lease Base Rent Payments |
Future Minimum Direct Financing Lease Payments (1) |
|||||||
| 2014 |
$ | 522,563 | $ | 5,402 | ||||
| 2015 |
512,833 | 5,028 | ||||||
| 2016 |
496,691 | 4,946 | ||||||
| 2017 |
460,070 | 4,545 | ||||||
| 2018 |
424,934 | 3,455 | ||||||
| Thereafter |
2,734,499 | 10,352 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 5,151,590 | $ | 33,728 | ||||
|
|
|
|
|
|||||
| (1) | 50 properties are subject to direct financing leases and, therefore, revenue with respect to such properties is recognized as direct financing lease income on the discounted cash flows of the lease payments. Amounts reflected are the cash rent on these respective properties. |
Net Investment in Direct Financing Leases
The components of the Operating Partnership’s net investment in direct financing leases as of December 31, 2013 are as follows (amounts in thousands):
| December 31, 2013 | ||||
| Future minimum lease payments receivable |
$ | 33,729 | ||
| Unguaranteed residual value of property |
46,172 | |||
| Unearned income |
(13,789 | ) | ||
|
|
|
|||
| Net investment in direct financing leases |
$ | 66,112 | ||
|
|
|
|||
The Operating Partnership had no investments in direct financing leases as of December 31, 2012.
F-36
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Development Activities
Prior to the CapLease Acquisition Date (as defined below), Caplease entered into an agreement to construct a distribution warehouse in Columbia, South Carolina on a build-to-suit basis for a large private company tenant. The new build-to-suit project has an estimated total investment of $22.1 million. Construction activity and funding of the project commenced during June 2013.
Also prior to the CapLease Acquisition Date, CapLease entered into an agreement with a major Texas-based developer to develop a 150,000 square foot speculative office building in The Woodlands, Texas, adjacent to and part of the same development as an existing office building owned by CapLease and purchased in 2012. Costs of the project which are budgeted to be $34.0 million are scheduled to be funded by equity contributions from the Operating Partnership and its developer partner, and $17.0 million of advances during the construction period under a development loan entered into with Amegy Bank. All equity contributions are scheduled to be borne as follows: the Operating Partnership, on ARCP’s behalf, 90%; and the developer, 10%; except for cost overruns, which will be borne 50% by each. Because the Operating Partnership has a controlling financial interest in the investment, it consolidates the investment for financial accounting purposes. ARCP has an option to purchase, and the developer the option to sell to ARCP, in each case at fair market value, the developer’s interest in the project upon (i) substantial completion of the project and (ii) leases being entered into for 95% of the square footage of the project. Construction activity and funding of the project commenced during the quarter ended September 30, 2013.
The table below details the Operating Partnership’s investment in its pending development projects as of December 31, 2013. The information included in the table below represents management’s estimates and expectations at December 31, 2013 which are subject to change. The Operating Partnership’s disclosures regarding certain projections or estimates of completion dates for the Operating Partnership’s projects may not reflect actual results (dollar amounts in thousands).
| Location | Tenant | Property Type |
Approximate Square Feet |
Lease Term (years) |
Percent Owned |
Investment through 12/31/13 |
Estimated Remaining Investment |
Estimated Total Investment |
Estimated Completion Date | |||||||||||||||||||||
| Columbia, South Carolina |
Large private company |
Warehouse | 450,000 | 10.5 | (1) | 100 | % | $ | 14,745 | $ | 7,325 | $ | 22,070 | Q1 2014 | ||||||||||||||||
| The Woodlands, Texas |
N/A — speculative development |
Office building |
150,000 | N/A | 90 | % | $ | 7,257 | $ | 26,775 | $ | 34,032 | Q3 2014 | |||||||||||||||||
| (1) | The lease is in force and the 10.5-year lease term will commence upon substantial completion of the building. |
The amount of the “Investment” as of December 31, 2013 includes capitalized interest of approximately $37,000 for the Columbia, South Carolina project and approximately $45,000 for The Woodlands, Texas project. The amount of capitalized interest subsequent to the CapLease Acquisition Date through December 31, 2013 was not significant.
Tenant Concentration
The following table lists tenants whose annualized rental income on a straight-line basis represented greater than 10% of consolidated annualized rental income on a straight-line basis as of December 31, 2013. Annualized rental income for net leases is rental income on a straight-line basis as of the period reported, which includes the effect of tenant concessions such as free rent, as applicable. There were no tenants exceeding 10% of consolidated annualized rental income on a straight-line basis at December 31, 2013.
| Year Ended December 31, | ||||||||
| 2013 | 2012 | |||||||
| Citizens Bank |
* | 13.8 | % | |||||
| Dollar General |
* | 12.3 | % | |||||
| FedEx |
* | 10.2 | % | |||||
| * | The tenants’ annualized rental income was not greater than 10% of total consolidated annualized rental income for all portfolio properties as of the end of the period specified. |
No other tenant represents more than 10% of total consolidated annualized rental income on a straight-line basis for the periods presented.
F-37
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Geographic Concentration
The following table lists the states where the Operating Partnership has concentrations of properties where annual rental income on a straight-line basis represented greater than 10% of consolidated annualized rental income on a straight-line basis as of December 31, 2013 and 2012:
| Year Ended December 31, | ||||||||
| 2013 | 2012 | |||||||
| Texas |
10.7 | % | * | |||||
| Illinois |
* | 11.2 | % | |||||
| * | The geographical concentration’s annualized rental income was not greater than 10% of total consolidated annualized rental income for all portfolio properties as of the end of the periods specified. |
Note 6 — CapLease Acquisition (As Restated)
On the CapLease Acquisition Date, ARCP completed its acquisition of CapLease, a REIT that primarily owned and managed a diversified portfolio of single tenant commercial real estate properties subject to long-term leases, the majority of which were net leases, to high credit quality tenants, by acquiring 100% of the outstanding common shares and voting interests of CapLease. The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The Operating Partnership’s consolidated financial statements include the results of operations of CapLease subsequent to the CapLease Acquisition Date.
The purchase price includes a cash payment of $920.7 million, which was funded by the Operating Partnership, on ARCP’s behalf, through additional borrowings under its revolving credit facility and the credit facility assumed from CapLease, see Note 12 — Other Debt and Note 13 — Credit Facilities.
The purchase price allocation for the CapLease Merger is considered preliminary, and additional adjustments may be recorded during the measurement period in accordance with U.S. GAAP. The purchase price allocation will be finalized as the Operating Partnership receives additional information relevant to the acquisition, including a final valuation of the assets purchased and liabilities assumed.
F-38
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The preliminary purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair value and reflects the goodwill adjustment discussed in Note 2 — Restatement of Previously Issued Financial Statements. The following table presents the allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the CapLease Acquisition Date (in thousands):
| As of CapLease Acquisition Date (As Restated) |
||||
| Fair value of consideration given |
$ | 920,697 | ||
|
|
|
|||
| Assets purchased, at fair value: |
||||
| Land |
$ | 235,843 | ||
| Buildings, fixtures and improvements |
1,596,481 | |||
| Land and construction in process |
12,352 | |||
| Acquired intangible lease assets |
191,964 | |||
|
|
|
|||
| Total real estate investments |
2,036,640 | |||
|
|
|
|||
| Cash and cash equivalents |
41,799 | |||
| Investment securities |
60,730 | |||
| Loans held for investment |
26,457 | |||
| Restricted cash |
29,119 | |||
| Prepaid expenses and other assets |
21,249 | |||
| Deferred costs |
325 | |||
|
|
|
|||
| Total identifiable assets purchased |
2,216,319 | |||
|
|
|
|||
| Liabilities assumed, at fair value: |
||||
| Mortgage notes payable |
1,037,510 | |||
| Secured credit facility |
121,000 | |||
| Other debt |
114,208 | |||
| Below-market leases |
57,058 | |||
| Derivative liabilities |
158 | |||
| Accounts payable and accrued expenses |
49,291 | |||
| Deferred rent and other liabilities |
8,619 | |||
|
|
|
|||
| Total liabilities assumed |
1,387,844 | |||
|
|
|
|||
|
|
||||
|
|
|
|||
| Non-controlling interest retained by third party |
567 | |||
|
|
|
|||
|
|
||||
|
|
|
|||
| Net identifiable assets acquired by Company |
827,908 | |||
|
|
|
|||
| Goodwill |
$ | 92,789 | ||
|
|
|
|||
Management is in the process of further evaluating the purchase price accounting. The fair value of real estate investments and below-market leases have been estimated by the Operating Partnership with the assistance of third-party valuation firms. Based on analyses received to date, the estimated fair value of these assets and liabilities total $2.0 billion and $57.1 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analyses, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result.
The fair value of the noncontrolling interest has been estimated based on the fair value of the percentage ownership of The Woodlands, Texas development activity not held by the Operating Partnership on ARCP’s behalf. Refer to Note 5 — Real Estate Investments (As Restated).
The fair value of the remaining CapLease assets and liabilities have been calculated in accordance with the Operating Partnership’s policy on purchase price allocation, as disclosed in Note 4 — Summary of Significant Accounting Policies (As Restated).
F-39
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The $92.8 million of goodwill is expected to be assigned to the real estate segment upon completion of the external valuation. The goodwill recognized is attributed to the enhancement of the Operating Partnership’s year-round rental revenue stream, expected synergies and the assembled work force at CapLease.
The amounts of revenue and net loss of CapLease included in the Operating Partnership’s consolidated statements of operations and comprehensive loss from the CapLease Acquisition Date to the period ended December 31, 2013 was $29.5 million and $6.3 million, respectively.
The pro forma consolidated statement of operation as if CapLease had been included in the consolidated results of the Operating Partnership for the entire years ended December 31, 2013 and 2012 have been reflected in Note 5 — Real Estate Investments (As Restated).
Note 7 — Investment Securities, at Fair Value
Investment securities are considered available-for-sale and, therefore, increases or decreases in the fair value of these investments are recorded in accumulated other comprehensive income (loss) as a component of equity on the consolidated balance sheets unless the securities are considered to be other than temporarily impaired at which time the losses are reclassified to expense.
The following table details the unrealized gains and losses on investment securities as of December 31, 2013 and 2012 (amounts in thousands):
| Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
| As of December 31, 2013 |
||||||||||||||||
| Investments in real estate fund |
$ | 1,589 | $ | — | $ | (105 | ) | $ | 1,484 | |||||||
| CMBS |
60,452 | 498 | (367 | ) | 60,583 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 62,041 | $ | 498 | $ | (472 | ) | $ | 62,067 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| As of December 31, 2012 |
||||||||||||||||
| Preferred securities |
$ | 41,747 | $ | 223 | $ | (316 | ) | $ | 41,654 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
Investment in Real Estate Fund
On June 4, 2013, the Operating Partnership invested $10.0 million in a real estate fund that is sponsored by an affiliate of the Former Manager and which invests primarily in equity securities of other publicly traded REITs. During the year ended December 31, 2013, the Operating Partnership reinvested distributions totaling $0.1 million into the real estate fund. During the fourth quarter of 2013, the Operating Partnership sold such investments with an original cost of $8.5 million for total proceeds of $8.1 million. The realized loss of $0.4 million has been recorded to losses on investments in affiliates within the consolidated statements of operations and comprehensive loss. Refer to Note 19 — Related Party Transactions and Arrangements (As Restated).
Commercial Mortgage-Backed Securities (“CMBS”)
In connection with ARCP’s merger with CapLease, the Operating Partnership acquired 10 CMBS, with a fair value of $60.7 million. At December 31, 2013, the CMBS had a carrying value of $60.6 million and carried interest rates ranging from 5.88% to 8.95%. The Operating Partnership had no CMBS as of December 31, 2012.
As of December 31, 2013, the fair value of four CMBS was below its carrying value. The Operating Partnership evaluated each of its securities for other-than-temporary impairment at December 31, 2013, and determined that no other-than-temporary impairment charges on its securities were appropriate. The Operating Partnership believes that none of the unrealized losses on investment securities are other-than-temporary because management expects the Operating Partnership will receive all contractual principal and interest related to these investments. In addition, the Operating Partnership did not have the intent to sell the securities or believe it would be required to sell them as of December 31, 2013.
F-40
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Redeemable Preferred Stock, Senior Notes and Common Stock
At December 31, 2012, the Operating Partnership had investments in redeemable preferred stock, accounted for as debt securities by the Operating Partnership, with a fair value of $41.7 million. These investment securities were sold during the year ended December 31, 2013, resulting in a gain on sale of investments of $0.5 million.
During 2013, the Operating Partnership acquired additional investments in redeemable preferred stock, as well as investments in senior notes and common stock, with an aggregate cost basis of $69.5 million. The Operating Partnership sold all of these investment securities during 2013 for $67.2 million, resulting in a loss on sale of $2.3 million. As of December 31, 2013, the Operating Partnership had no remaining investments in redeemable preferred stock, senior notes or common stock.
Note 8 — Prepaid Expenses and Other Assets (As Restated)
Prepaid expenses and other assets consisted of the following as of December 31, 2013 and 2012 (amounts in thousands):
| Year Ended December 31, | ||||||||
| 2013 (As Restated) |
2012 | |||||||
| Restricted escrow deposits |
$ | 101,813 | $ | 138 | ||||
| Accounts receivable(1) |
16,254 | 7,174 | ||||||
| Straight line rent receivable |
19,010 | 3,738 | ||||||
| Prepaid expenses |
43,801 | 905 | ||||||
| Other assets |
5,848 | 29 | ||||||
|
|
|
|
|
|||||
| $ | 186,726 | $ | 11,984 | |||||
|
|
|
|
|
|||||
| (1) | Allowance for doubtful accounts was $187,000 as of December 31, 2013. There was no allowance for doubtful accounts as of December 31, 2012. |
Note 9 — Loans Held for Investment
In connection with ARCP’s merger with CapLease, the Operating Partnership acquired 12 loans held for investment, which consist predominantly of mortgage loans on properties subject to leases to investment grade tenants, with a fair value of $26.5 million at the CapLease Merger Date. At December 31, 2013, the loans held for investment had a carrying value of $26.3 million and carried interest rates ranging from 5.28% to 7.24%. The fair value adjustment is being amortized to interest expense in the consolidated statements of operations and comprehensive loss over the life of the Secured Term. The Operating Partnership, had no loans held for investment as of December 31, 2012.
The Operating Partnership’s loan portfolio is comprised primarily of fully amortizing or nearly fully amortizing first mortgage loans on commercial real estate leased to a single tenant. Payments of debt service on such loans is, in substantially all cases, funded directly by rent payments paid into a lockbox account by the underlying tenant. Therefore, the Operating Partnership’s monitoring of the credit quality of its loans held for investment is focused primarily on an analysis of the tenant, including review of tenant credit ratings (including changes in ratings) and other measures of tenant credit quality, trends in the tenant’s industry and general economic conditions, and an analysis of measures of collateral coverage, such as an estimate of the loan’s loan-to-value (“LTV”) ratio (principal amount outstanding divided by estimated value of the property) and its remaining term until maturity. As of December 31, 2013, the Operating Partnership did not record a reserve for loan loss.
F-41
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Note 10 — Fair Value of Financial Instruments (As Restated)
The Operating Partnership determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The guidance defines three levels of inputs that may be used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 — Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Operating Partnership evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Operating Partnership expects that changes in classifications between levels will be rare.
Although the Operating Partnership has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Operating Partnership and its counterparties. However, as of December 31, 2013, the Operating Partnership has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Operating Partnership’s derivatives. As a result, the Operating Partnership has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. As of December 31, 2013, the Operating Partnership’s interest rate cap derivative measured at fair value on a recurring basis was zero and was classified in Level 2 of the fair value hierarchy.
In addition, during the year ended December 31, 2013, real estate assets with a carrying amounts of $4.5 million related to two properties were deemed to be impaired and their carrying amount was reduced to their estimated fair value, resulting in an impairment charge of $3.3 million, which is included in impairment of real estate on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2013. The Operating Partnership’s estimated fair values of its real estate assets were primarily based upon an income approach utilizing a present value technique to discount the expected cash flows using market participant assumptions for market rent and terminal values, which are considered to be Level 3 inputs, or based upon recent comparable sales transactions, which are considered to be Level 2 inputs. The aggregate fair value as of December 31, 2013 was $1.2 million. No impairments were noted during the year ended December 31, 2012.
F-42
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The following table presents information about the Operating Partnership’s assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of December 31, 2013 and 2012, aggregated by the level in the fair value hierarchy within which those instruments fall (amounts in thousands):
| Quoted Prices in Active Markets Level 1 |
Significant Other Observable Inputs Level 2 |
Significant Unobservable Inputs Level 3 |
Total | |||||||||||||
| December 31, 2013 |
||||||||||||||||
| Investments in real estate fund |
$ | — | $ | 1,484 | $ | — | $ | 1,484 | ||||||||
| CMBS |
— | — | 60,583 | 60,583 | ||||||||||||
| Interest rate swap assets |
— | 9,189 | — | 9,189 | ||||||||||||
| Interest rate swap liabilities |
— | (1,719 | ) | — | (1,719 | ) | ||||||||||
| Series D Preferred Units embedded derivative (1) |
— | — | (16,736 | ) | (16,736 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | — | $ | 8,954 | $ | 43,847 | $ | 52,801 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2012 |
||||||||||||||||
| Investment securities |
$ | 41,654 | $ | — | $ | — | $ | 41,654 | ||||||||
| Interest rate swaps |
— | (3,830 | ) | — | (3,830 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 41,654 | $ | (3,830 | ) | $ | — | $ | 37,824 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Corresponding Series D Preferred Stock issued by ARCP. |
Investment in real estate fund — The fair value of the Operating Partnership’s investment in real estate fund is based on published pricing.
Commercial mortgage-backed securities — The fair values of the Operating Partnership’s CMBS are valued using broker quotations, collateral values, subordination levels, and liquidity of the individual securities.
Derivatives — The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Operating Partnership’s potential nonperformance risk and the performance risk of the counterparties.
Series D Preferred Units embedded derivative — The valuation of this derivative instrument is determined using a binomial option pricing model. Key inputs in the model include the expected term, risk-free interest rate, volatility, and dividend yield.
The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, due to affiliates and accounts payable approximate their carrying value on the accompanying consolidated balance sheets due to their short-term nature and are classified as Level 1 under the fair value hierarchy.
A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 or Level 3 of the fair value hierarchy during the year ended December 31, 2013.
F-43
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The following is a reconciliation of the beginning and ending balance for the changes in instruments with Level 3 inputs in the fair value hierarchy for the year ended December 31, 2013 (amounts in thousands):
| CMBS | Series D Preferred Units Embedded Derivative |
Total | ||||||||||
| Beginning balance |
$ | — | $ | — | $ | — | ||||||
| Fair value at purchase/issuance |
60,730 | (18,692 | ) | 42,038 | ||||||||
| Sales of CMBS |
(278 | ) | — | (278 | ) | |||||||
| Fair value adjustment (1) |
131 | 1,956 | 2,087 | |||||||||
|
|
|
|
|
|
|
|||||||
| Ending balance |
$ | 60,583 | $ | (16,736 | ) | $ | 43,847 | |||||
|
|
|
|
|
|
|
|||||||
| (1) | The change in fair value in the CMBS and Series D Preferred Units embedded derivative is recorded in unrealized gain (loss) on investment securities, net and loss on derivative instruments, net, respectively, on the consolidated statement of operations and comprehensive loss. |
The fair values of the Operating Partnership’s financial instruments that are not reported at fair value on the consolidated balance sheets are reported below (amounts in thousands):
| Level | Carrying Amount at December 31, 2013 |
Fair Value at December 31, 2013 |
Carrying Amount at December 31, 2012 |
Fair Value at December 31, 2012 |
||||||||||||||||
| Assets: |
||||||||||||||||||||
| Loans held for investment |
3 | $ | 26,279 | $ | 26,435 | $ | — | $ | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Liabilities: |
||||||||||||||||||||
| Convertible debt |
3 | $ | 972,490 | $ | 976,629 | $ | — | $ | — | |||||||||||
| Mortgage notes payable |
3 | 1,301,114 | 1,305,823 | 265,118 | 271,056 | |||||||||||||||
| Senior secured revolving credit facility |
3 | — | — | 124,604 | 124,604 | |||||||||||||||
| Senior corporate credit facilities |
3 | 1,819,800 | 1,819,800 | — | — | |||||||||||||||
| Secured credit facility |
3 | 150,000 | 150,000 | — | — | |||||||||||||||
| Trust preferred notes |
3 | 26,548 | 23,345 | — | — | |||||||||||||||
| Secured term loan |
3 | 58,979 | 59,049 | — | — | |||||||||||||||
| Other debt |
3 | 19,277 | 19,350 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities |
$ | 4,348,208 | $ | 4,353,996 | $ | 389,722 | $ | 395,660 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
Loans held for investment — The fair value of the Operating Partnership’s fixed-rate loan portfolio is estimated with a discounted cash flow analysis, utilizing scheduled cash flows and discount rates estimated by management to approximate those that a willing buyer and seller might use.
Credit facilities — Management believes that the stated interest rates (which float based on short-term interest rates) approximates market rates. As such, the fair values of these obligations is estimated to be equal to the outstanding principal amounts.
Convertible debt, mortgage notes payable and secured term loan — The fair value of mortgages payable on real estate investments and the secured term loan is estimated using a discounted cash flow analysis, based on management’s estimates of market interest rates. For mortgages where the Operating Partnership has an early prepayment right, management also considers the prepayment amount to evaluate the fair value.
Trust preferred notes — The fair value of the Operating Partnership’s other long-term debt is estimated using a discounted cash flow analysis, based on management’s estimates of market interest rates.
F-44
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Note 11 — Mortgage Notes Payable
The Operating Partnership’s mortgage notes payable consist of the following as of December 31, 2013 and 2012 (dollar amounts in thousands):
| Encumbered Properties |
Outstanding Loan Amount |
Weighted-Average Effective Interest Rate (1) |
Weighted-Average Maturity (2) |
|||||||||||||
| December 31, 2013 |
177 | $ | 1,258,661 | 3.42 | % | 3.41 | ||||||||||
| December 31, 2012 |
164 | $ | 265,118 | 4.28 | % | 5.51 | ||||||||||
| (1) | Mortgage notes payable have fixed rates or are fixed by way of interest rate swap arrangements. Effective interest rates range from 1.83% to 6.28% at December 31, 2013 and 3.32% to 6.13% at December 31, 2012. |
| (2) | Weighted-average remaining years until maturity as of December 31, 2013 and 2012, respectively. |
In conjunction with the CapLease Merger, aggregate net premiums totaling $45.2 million were recorded upon assumption of the mortgages for above-market interest rates. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective mortgages using a method that approximates the effective-interest method. As of December 31, 2013, there was $42.5 million in unamortized net premiums included in mortgage notes payable, net on the consolidated balance sheets.
The following table summarizes the scheduled aggregate principal repayments subsequent to December 31, 2013 (amounts in thousands):
| Principal Repayment | ||||
| 2014 |
$ | 86,933 | ||
| 2015 |
381,574 | |||
| 2016 |
295,627 | |||
| 2017 |
257,658 | |||
| 2018 |
36,210 | |||
| Thereafter |
200,659 | |||
|
|
|
|||
| $ | 1,258,661 | |||
|
|
|
|||
The Operating Partnership’s mortgage loan agreements generally require restrictions on corporate guarantees and the maintenance of financial covenants including maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios). As of December 31, 2013, the Operating Partnership was in compliance with the debt covenants under the mortgage loan agreements.
Note 12 — Other Debt
Convertible Obligation to Series C Convertible Preferred Stockholders
On June 7, 2013, ARCP issued 28.4 million shares of Series C Stock through a private placement for gross proceeds of $445.0 million. Concurrently, the Operating Partnership issued to the General Partner 28.4 million Series C Convertible Preferred Units underlying the Series C Preferred Stock. Due to an unconditional obligation to either redeem or convert the Series C Stock into a variable number of shares of common stock that is predominantly based on a fixed monetary amount, the preferred securities were classified as an obligation under U.S. GAAP and were presented in the consolidated balance sheets as a liability prior to their conversion on November 12, 2013. On November 12, 2013, ARCP converted all outstanding Series C Stock into common shares of ARCP. Pursuant to the Series C Articles Supplementary, the number of common shares that could be issued upon conversion of Series C Stock was limited by the exchange cap. Therefore, ARCP converted 1.1 million shares of Series C Stock into 1.4 million common shares of ARCP and, concurrently, the Operating Partnership converted 1.1 million Series C Convertible Preferred Units into 1.4 million General Partner OP Units. With respect to the 27.3 million shares of Series C Stock for which Common Shares could not be issued upon conversion due to the exchange cap, ARCP, through the Operating Partnership, paid holders of Series C Stock an aggregate cash amount equal to approximately $441.4 million in exchange for such Series C Stock. Based on ARCP’s share price on the conversion date, the total settlement value was $458.8 million. Settlement of the Series C Stock resulted in a loss of $13.8 million, which is recorded as interest expense in the consolidated statements of operations and comprehensive loss.
F-45
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Convertible Senior Note Offering
Effective July 29, 2013, the Operating Partnership issued to the General Partner $300.0 million of the 2018 Notes and issued an additional $10.0 million of its 2018 Notes on August 1, 2013 (collectively, the “Original 2018 Notes”). Effective December 10, 2013, the Operating Partnership issued an additional $287.5 million through a reopening of the 2018 Notes indenture agreement (the “Reopened 2018 Notes,” together with the Original 2018 Notes, the “2018 Notes”). The 2018 Notes mature on August 1, 2018. Such issuances were identical to ARCP’s registered issuances of the same amount of notes to various purchasers in a public offering. The fair value of the Original 2018 Notes and Reopened 2018 Notes was determined at issuance to be $299.6 million and $282.1 million, respectively, resulting in a debt discount of $10.4 million and $5.4 million, respectively, with an offset recorded to partners’ equity representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected lives of the 2018 Notes. As of December 31, 2013, the carrying value of the Original 2018 Notes and Reopened 2018 Notes was $300.5 million and $282.2 million, respectively. In connection with any permissible conversion election made by the holders of the convertible notes issued by ARCP, the General Partner may make the same election to convert the 2018 Notes into cash, General Partner OP Units or a combination thereof, in limited circumstances prior to February 1, 2018 and may convert the 2018 Notes at any time into such consideration on or after February 1, 2018. The initial conversion rate is 59.805 General Partner OP Units per $1,000 principal amount of 2018 Notes.
Effective December 10, 2013, the Operating Partnership issued to the General Partner $402.5 million of the 2020 Notes. The 2020 Notes mature on December 15, 2020. Such issuance was identical to ARCP’s registered issuance of the same amount of notes to various purchasers in a public offering. The fair value of the 2020 Notes was determined at issuance to be $389.7 million, resulting in a debt discount of $12.8 million with an offset recorded to partners’ equity representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected life of the 2020 Notes. As of December 31, 2013, the carrying value of the 2020 Notes was $389.8 million. The General Partner may elect to convert the 2020 Notes into cash, General Partner OP Units or a combination thereof in limited circumstances prior to June 15, 2020 and may convert the 2020 Notes at any time into such consideration on or after June 15, 2020. The initial conversion rate is 66.0262 General Partner OP Units per $1,000 principal amount of 2020 Notes.
In connection with the 2018 Notes and 2020 Notes, the remaining unamortized discount totaled $27.5 million.
See Note 24 – Subsequent Events (As Restated) for further discussion.
Trust Preferred Notes
As part of the CapLease Merger, the Operating Partnership assumed $30.9 million in aggregate principal amount of fixed/floating rate preferred notes with a fair value of $26.5 million at the CapLease Acquisition Date. The trust preferred securities represent an unsecured subordinated recourse debt obligation of the Operating Partnership and require quarterly interest payments calculated at a fixed interest rate equal to 7.68% per annum through January 30, 2016, and subsequently at a variable interest rate equal to LIBOR plus 2.60% per annum. The notes must be redeemed on January 30, 2036, and may be redeemed, in whole or in part, at par, at the Operating Partnership’s option, at any time. The discount recorded on the notes is being amortized to interest expense on the consolidated statements of operations and comprehensive loss over the life of the preferred notes. As of December 31, 2013, the carrying value of the preferred securities was $26.5 million.
Secured Term Loan
As part of the CapLease Merger, the Operating Partnership assumed a secured term loan with KBC Bank, N.V. with a principal balance of $59.8 million and a fair value of $60.7 million at the CapLease Acquisition Date. The interest coupon on the loan is fixed at 5.81% annually until the loan matures in January 2018. The loan is non-recourse to the Operating Partnership, subject to limited non-recourse exceptions. During the period between the CapLease Acquisition Date and December 31, 2013, the Operating Partnership made principal payments of $1.7 million. The premium is being amortized to interest expense on the consolidated statements of operations and comprehensive loss over the life of the secured term loan. As of December 31, 2013, the carrying value of the secured term loan was $59.0 million.
F-46
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Amounts related to the secured term loan as of December 31, 2013 were as follows (amounts in thousands):
| Borrowings | Collateral Carrying Value | |||||||
| Loans held for investment |
$ | 14,065 | $ | 22,496 | ||||
| Intercompany mortgage loans on CapLease properties |
9,195 | 21,114 | ||||||
| CMBS |
34,915 | 46,054 | ||||||
|
|
|
|
|
|||||
| $ | 58,175 | $ | 89,664 | |||||
|
|
|
|
|
|||||
Other Debt
As part of the CapLease Merger, ARCP assumed $19.2 million of senior notes (the “Senior Notes”) that bear interest at an annual interest rate of 7.50%, payable semi-annually on April 1 and October 1, with a fair value of $19.3 million at the CapLease Acquisition Date. The Senior Notes mature on October 1, 2027. ARCP has the right to redeem the Senior Notes in whole or in part for cash at any time or from time to time at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed, plus any accrued and unpaid interest. The holder of the Senior Notes may require ARCP to repurchase their Senior Notes, in whole or in part, on October 1, 2017 and October 1, 2022, for a cash price equal to 100% of the principal amount of the Senior Notes to be repurchased, plus any accrued and unpaid interest. On the CapLease Acquisition Date, the Operating Partnership issued the General Partner notes that had identical terms as the Senior Notes (“General Partner Senior Notes”). The discount is being amortized to interest expense on the consolidated statements of operations and comprehensive loss over the life of the General Partner Senior Notes. As of December 31, 2013, the carrying value of the General Partner Senior Notes was $19.3 million.
In conjunction with the CapLease Merger, aggregate net discounts totaling $3.5 million were recorded upon assumption of the trust preferred notes, secured term loan and senior notes. As of December 31, 2013, unamortized net discounts were $3.5 million in unamortized net discounts included in other debt on the consolidated balance sheets.
Future Minimum Repayments
The following table summarizes the scheduled aggregate principal repayments of our convertible debt, trust preferred notes, secured term loan and other debt subsequent to December 31, 2013 (amounts in thousands):
| Principal Repayment | ||||
| 2014 |
$ | 12,851 | ||
| 2015 |
11,862 | |||
| 2016 |
12,516 | |||
| 2017 |
26,890 | |||
| 2018 |
610,767 | |||
| Thereafter |
433,430 | |||
|
|
|
|||
| $ | 1,108,316 | |||
|
|
|
|||
Barclay’s Facility
As of December 31, 2013, the Operating Partnership had available commitments from Barclays Bank PLC, and other committed parties, for up to $2.1 billion in senior secured term loans (the “Barclays Facility”) in order to fund cash amounts payable in connection with the Cole Merger, which were subject to certain conditions, including the absence of a material adverse effect in respect of Cole, the negotiation of definitive documentation and pro forma compliance with financial covenants. Any other long-term debt obtained by the Operating Partnership would have reduced the commitments under the Barclays Facility. The Barclays Facility contained an accordion feature to allow the Operating Partnership, under certain circumstances, to increase commitments thereunder by up to $350.0 million.
The Operating Partnership could have elected to use the Barclays Facility to fund a portion of the consideration to be paid pursuant to the Cole Merger, to refinance existing indebtedness of Cole and to pay related fees and expenses. The commitments received in the Barclays Facility were schedule to terminate upon the occurrence of certain customary events, and in any event on April 22, 2014, which date may be extended by an additional three months under certain circumstances. The Barclays Facility was terminated upon the issuance of the senior unsecured notes in February 2014, as discussed below.
F-47
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Bond Offering
On February 6, 2014, the Operating Partnership issued, in a private offering, $2.55 billion aggregate principal amount of senior unsecured notes consisting of $1.3 billion aggregate principal amount of 2.00% senior notes due 2017 (the “2017 Notes”), $750.0 million aggregate principal amount of 3.00% senior notes due 2019 (the “2019 Notes”) and $500.0 million aggregate principal amount of 4.60% senior notes due 2024 (the “2024 Notes”, and, together with the 2017 Notes and 2019 Notes, the “Notes”). The Notes are guaranteed by the General Partner. The Operating Partnership may redeem all or a part of any series of the Notes at any time at its option at the redemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest on the principal amount of the Notes of such series being redeemed to, but excluding, the applicable redemption date. With respect to the 2019 Notes and the 2024 Notes, if such Notes are redeemed on or after January 6, 2019, with respect to the 2019 Notes, or November 6, 2023, with respect to the 2024 Notes, the redemption price will equal 100% of the principal amount of the Notes of the applicable series to be redeemed, plus accrued and unpaid interest on the amount being redeemed to, but excluding, the applicable redemption date.
See Note 24 – Subsequent Events (As Restated) for further discussion.
Note 13 — Credit Facilities
Senior Corporate Credit Facility
The Operating Partnership and the General Partner are parties to a senior corporate credit facility with Wells Fargo, National Association (the “Credit Facility”), as administrative agent and other lenders party thereto.
At December 31, 2013, the Credit Facility had commitments of $2.4 billion. The Credit Facility has an accordion feature, which, if exercised in full, would allow the Operating Partnership to increase borrowings under the Credit Facility to $3.0 billion, subject to additional lender commitments, borrowing base availability and other conditions.
At December 31, 2013, the Credit Facility contained a $940.0 million term loan facility and a $1.5 billion revolving credit facility, of which $940.0 million and $119.8 million was outstanding, respectively. In November 2013, the Credit Facility was amended and certain modifications were made to the terms of the agreement. Loans under the Credit Facility are priced at the applicable rate (at the Operating Partnership’s election, either a floating interest rate based on one month LIBOR, determined on a daily basis) plus 2.25% to 3.00%, or a prime-based interest rate, based upon the Operating Partnership’s current leverage. From the amendment date until the first completed fiscal quarter, the applicable LIBOR rate is increased by 3.00%. To the extent that ARCP receives an investment-grade credit rating as determined by a major credit rating agency, at the Operating Partnership’s election, advances under the revolving credit facility will be priced at their applicable rate plus 0.90% to 1.75% and term loans will be priced at a floating interest rate of LIBOR plus 1.15% to 2.00%, based upon ARCP’s then current investment grade credit rating. The Operating Partnership may also make fixed rate borrowings under the Credit Facility. At December 31, 2013, the Operating Partnership had undrawn commitments of $1.4 billion under the Credit Facility.
The Credit Facility provides for monthly interest payments. In event of a default, each lender has the right to terminate its obligations under the Credit Facility, and to accelerate the payment on any unpaid principal amount of all outstanding loans. The General Partner has guaranteed the obligations under the Credit Facility. The revolving credit facility will terminate on February 14, 2017, unless extended for an additional year pursuant to the terms of the agreement. The Operating Partnership may prepay borrowings under the Credit Facility and the Operating Partnership may incur an unused fee of 0.15% to 0.25% per annum on the unused amount depending on the unused balance as a percentage of the total facility and the type of funding. As of December 31, 2013, the Credit Facility also required the Operating Partnership to maintain certain property available for collateral as a condition to funding.
As of December 31, 2013, the outstanding balance on the Credit Facility was $1.1 billion, of which $544.8 million bore interest at a floating rate of 3.17%. $515.0 million outstanding on the Credit Facility is fixed through the use of derivative instruments used to hedge interest rate volatility. Including the spread, which can vary based on the Operating Partnership’s leverage, interest on this portion was 3.85% at December 31, 2013. At December 31, 2013, there was up to $1.9 billion available to the Operating Partnership for future borrowings, subject to additional lender commitments and borrowing availability. The credit facility matures on June 30, 2018.
The Credit Facility requires restrictions on corporate guarantees as well as the maintenance of financial covenants including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) and the maintenance of a minimum net worth. At December 31, 2013, the Operating Partnership was in compliance with the debt covenants under the Credit Facility.
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ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
On June 30, 2014, the Operating Partnership amended and restated the Credit Facility to, among other things, increase the amount of revolving commitments (including the addition of a multicurrency sub-facility) and term loan commitments. The amended Credit Facility is comprised of a $1.2 billion term loan facility, a $3.15 billion dollar-denominated revolving credit facility and a $250.0 million multi-current facility (from which the Operating Partnership may borrow in dollars). The amended Credit Facility includes an accordion feature, which, if exercised in full, allows the Operating Partnership to increase the aggregate commitments under the amended Credit Facility to $6.0 billion, subject to certain customary conditions.
See Note 24 – Subsequent Events (As Restated) for further discussion.
ARCT IV Senior Secured Credit Facility
On June 18, 2013, the Operating Partnership obtained a credit agreement (the “Credit Agreement”) with Regions Bank, JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, National Association and RBS Citizens, N.A (collectively, the “Lenders”) relating to a $750.0 million senior secured credit facility (the “Senior Secured Credit Facility”).
Initially, the Senior Secured Credit Facility contained a $300.0 million term loan facility and a $450.0 million revolving credit facility. The Senior Secured Credit Facility contained an “accordion” feature to allow the Operating Partnership, under certain circumstances, to increase the aggregate commitments under the Senior Secured Credit Facility to up to $1.5 billion. On October 16, 2013, the Operating Partnership entered into agreements that amended the Credit Agreement, increasing the maximum principal amount under the revolving credit facility to $500.0 million and the aggregate commitment under the Senior Secured Credit Facility to $800.0 million.
As of December 31, 2013, the Operating Partnership had $760.0 million outstanding under the Credit Agreement. The effective annualized interest rate on the Credit Agreement was 1.71% as of December 31, 2013. The Operating Partnership had $40.0 million of unused borrowing capacity under the Credit Agreement as of December 31, 2013.
The Senior Secured Credit Facility required the Operating Partnership to meet certain financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. As of December 31, 2013, the Operating Partnership was in compliance with the financial covenants under the Credit Agreement.
In connection with the ARCT IV Merger, the Operating Partnership notified the Administrative Agent in December 2013 and on January 3, 2014, prepaid all of its loans pursuant to, and terminated all commitments available under, the Credit Agreement.
Secured Credit Facility
As part of the CapLease Merger, the Operating Partnership assumed a secured credit facility with Wells Fargo, National Association (the “Secured Credit Facility”), which had commitments of up to $150.0 million at December 31, 2013. The Secured Credit Facility was fully drawn with $150.0 million outstanding at December 31, 2013.
The borrowings under the Secured Credit Facility bear interest at an annual rate of one-month LIBOR or LIBOR based on an interest period of one, three or six months, at the Operating Partnership’s election, plus an applicable margin of 2.75%, payable quarterly in arrears. The Secured Credit Facility matures on December 31, 2014 and may be prepaid, in whole or in part, without premium or penalty, at the Operating Partnership’s option, at any time.
The obligations under the Secured Credit Facility are secured by mortgages on certain real property assets acquired from CapLease comprising the borrowing base. The Secured Credit Facility includes affirmative and negative covenants and financial performance covenants. At December 31, 2013, the Operating Partnership was in compliance with the debt covenants under the Secured Credit Facility.
Repayment of Previous Credit Facilities
On February 28, 2013, the Operating Partnership repaid all of the outstanding borrowings under its previous senior secured revolving credit facility in the amount of $124.6 million, and the credit agreement for such facility was terminated. The
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ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
average interest rate on the borrowings outstanding during the period was 3.11%. On February 14, 2013, simultaneous with entering into the Credit Facility, the Operating Partnership terminated its secured credit facility agreement, which had been unused.
Note 14 — Accounts Payable and Accrued Expenses (As Restated)
Accounts payable and accrued expenses consisted of the following as of December 31, 2013 and 2012 (amounts in thousands):
| Year Ended December 31, | ||||||||
| 2013 (As Restated) |
2012 | |||||||
| Accounts payable |
$ | 5,887 | $ | 2,690 | ||||
| Accrued interest |
14,189 | (114 | ) | |||||
| Accrued real estate taxes |
24,658 | 919 | ||||||
| Accrued merger costs |
651,430 | — | ||||||
| Accrued other |
34,407 | 99,245 | ||||||
|
|
|
|
|
|||||
| $ | 730,571 | $ | 102,740 | |||||
|
|
|
|
|
|||||
Note 15 — Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Operating Partnership may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Operating Partnership’s operating and financial structure as well as to hedge specific anticipated transactions. The Operating Partnership does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Operating Partnership only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Operating Partnership and its affiliates may also have other financial relationships. The Operating Partnership does not anticipate that any of the counterparties will fail to meet their obligations.
Cash Flow Hedges of Interest Rate Risk
The Operating Partnership’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Operating Partnership primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Operating Partnership making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract and payments of variable-rate amounts if interest rates fall below the floor strike rate on the contract.
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 forecasted transaction affects earnings. During 2013, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
Amounts reported in accumulated other comprehensive income related to derivatives that will be reclassified to interest expense as interest payments are made on the Operating Partnership’s variable-rate debt. During the next 12 months, the Operating Partnership estimates that an additional $5.8 million will be reclassified from other comprehensive income as an increase to interest expense. During the year ended December 31, 2013, the Operating Partnership 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 were a loss of less than $27,000.
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ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
As of December 31, 2013, the Operating Partnership had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):
| Interest Rate Derivative | Number of Instruments | Notional Amount | ||||||
| Interest rate swaps |
16 | $ | 700,390 | |||||
The table below presents the fair value of the Operating Partnership’s derivative financial instruments as well as their classification on the consolidated balance sheets as of the years ended December 31, 2013 and 2012 (dollar amounts in thousands):
| Year Ended December 31, | ||||||||||
| Derivatives Designated as Hedging Instruments | Balance Sheet Location | 2013 | 2012 | |||||||
| Interest rate products |
Derivative assets, at fair value | $ | 9,189 | $ | — | |||||
| Interest rate products |
Derivative liabilities, at fair value | $ | (1,719 | ) | $ | (3,830 | ) | |||
The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the years ended December 31, 2013 and 2012, respectively (amounts in thousands):
| Year Ended December 31, | ||||||||
| Derivatives in Cash Flow Hedging Relationships | 2013 | 2012 | ||||||
| Amount of gain (loss) recognized in accumulated other comprehensive income on interest rate derivatives (effective portion) |
$ | 6,946 | $ | (4,684 | ) | |||
|
|
|
|
|
|||||
| Amount of loss reclassified from accumulated other comprehensive income into income as interest expense (effective portion) |
$ | (4,535 | ) | $ | (941 | ) | ||
|
|
|
|
|
|||||
| Amount of loss recognized in income on derivative (ineffective portion, reclassifications of missed forecasted transactions and amounts excluded from effectiveness testing) |
$ | (79 | ) | $ | (1 | ) | ||
|
|
|
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|
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Derivatives Not Designated as Hedging Instruments
Derivatives not designated as hedges are not speculative and are used to manage the Operating Partnership’s 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 derivatives not designated in hedging relationships are recorded directly in earnings and were approximately $19,000 for the year ended December 31, 2013. The Operating Partnership did not have any derivatives that were not designated as of December 31, 2012.
As of December 31, 2013, the Operating Partnership had the following outstanding interest rate derivatives that were not designated as hedges of in qualifying hedging relationships (dollar amounts in thousands):
| Interest Rate Derivative | Number of Instruments | Notional Amount | ||||||
| Interest Rate Cap |
1 | $ | 500,000 | |||||
The table below presents the fair value of the Operating Partnership’s derivate financial instruments not designated as hedges as well as their classification as liabilities on the consolidated balance sheets as of December 31, 2013 and 2012. There were no derivatives classified as not hedging instruments as assets as of December 31, 2013 and 2012 (amounts in thousands):
| Year Ended December 31, | ||||||||||
| Derivatives Not Designated as Hedging Instruments | Balance Sheet Location | 2013 | 2012 | |||||||
| Series D Preferred Units embedded derivative |
Derivative liabilities, at fair value | $ | (16,736 | ) | $ | — | ||||
Refer to Note 17 — Preferred and Common Stock (As Restated) for additional information for the Series D Preferred Units embedded derivative.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Tabular Disclosure Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Operating Partnership’s derivatives as of December 31, 2013 and 2012. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets (amounts in thousands).
| Offsetting of Derivative Assets and Liabilities |
||||||||||||||||||||||||||||||||
| Gross Amounts of Recognized Assets |
Gross Amounts of Recognized Liabilities |
Gross Amounts Offset in the Consolidated Balance Sheets |
Net Amounts of Assets Presented in the Consolidated Balance Sheets |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets |
Financial Instruments |
Cash Collateral Received |
Net Amount |
|||||||||||||||||||||||||
| December 31, 2013 |
$ | 9,189 | $ | (18,455 | ) | $ | — | $ | 9,189 | $ | (18,455 | ) | $ | — | $ | — | $ | (9,266 | ) | |||||||||||||
| December 31, 2012 |
$ | — | $ | (3,830 | ) | $ | — | $ | — | $ | (3,830 | ) | $ | — | $ | — | $ | (3,830 | ) | |||||||||||||
Credit-risk-related Contingent Features
The Operating Partnership has agreements with each of its derivative counterparties that contain a provision where if the Operating Partnership either defaults or is capable of being declared in default on any of its indebtedness, then the Operating Partnership could also be declared in default on its derivative obligations.
As of December 31, 2013, the fair value of the interest rate derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $1.7 million. As of December 31, 2013, the Operating Partnership has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Operating Partnership had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $1.7 million at December 31, 2013.
Note 16 — Commitments and Contingencies
Contractual Lease Obligations
The following table reflects the minimum base rental cash payments due from the Operating Partnership over the next five years and thereafter for certain ground and office lease obligations (amounts in thousands):
| Future Minimum Lease Payments | ||||
| 2014 |
$ | 4,541 | ||
| 2015 |
4,443 | |||
| 2016 |
4,214 | |||
| 2017 |
4,244 | |||
| 2018 |
3,212 | |||
| Thereafter |
63,787 | |||
|
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|
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| $ | 84,441 | |||
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|
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Litigation
In the ordinary course of business, the Operating Partnership may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Operating Partnership, except as follows:
ARCT III Litigation Matters
After the announcement of the ARCT III Merger Agreement on December 17, 2012, Randell Quaal filed a putative class action lawsuit filed on January 30, 2013 against the General Partner, the Operating Partnership, ARCT III, ARCT III OP, the members of the board of directors of ARCT III and certain subsidiaries of the General Partner in the Supreme Court of the State of New York. The plaintiff alleges, among other things, that the board of ARCT III breached its fiduciary duties in connection with the transactions
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
contemplated under the ARCT III Merger Agreement. In February 2013, the parties agreed to a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of ARCT III stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required ARCT III to make certain additional disclosures related to the ARCT III Merger, which were included in a Current Report on Form 8-K filed by ARCT III with the SEC on February 21, 2013. The memorandum of understanding also added that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to ARCT III’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
CapLease Litigation Matters
Since the announcement of the CapLease Merger Agreement on May 28, 2013, the following lawsuits have been filed:
On May 28, 2013, Jacquelyn Mizani filed a putative class action lawsuit in the Supreme Court for the State of New York against the General Partner, the Operating Partnership, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Mizani Action”). The complaint alleges, among other things, that the merger agreement at issue was the product of breaches of fiduciary duty by the CapLease directors because the proposed merger transaction (the “CapLease Transaction”) purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that CapLease, the General Partner, the Operating Partnership and Safari Acquisition LLC aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.
On July 3, 2013, Fred Carach filed a putative class action and derivative lawsuit in the Supreme Court for the State of New York against the General Partner, the Operating Partnership, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Carach Action”). The complaint alleges, among other things, that the merger agreement was the product of breaches of fiduciary duty by the CapLease directors because the merger purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that with respect to the Registration Statement and draft joint proxy statement issued in connection with the proposed CapLease Transaction on July 2, 2013, that disclosures made therein were insufficient or otherwise improper. The complaint also alleges that CapLease, the General Partner, the Operating Partnership and Safari Acquisition LLC aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.
On June 25, 2013, Dewey Tarver filed a putative class action and derivative lawsuit in the Circuit Court for Baltimore City against the General Partner, the Operating Partnership, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Tarver Action”). The complaint alleges, among other things, that the merger agreement was the product of breaches of fiduciary duty by the CapLease directors because the CapLease Transaction purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that CapLease, CapLease LP, CLF OP General Partner, LLC, the General Partner, the Operating Partnership and Safari Acquisition, LLC aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.
Counsel who filed each of these three cases reached an agreement with each other as to who will serve as lead plaintiff and lead plaintiffs’ counsel in the cases and where they will be prosecuted. Thus, on August 9, 2013, counsel in the Tarver Action filed a motion for stay in the Baltimore Court, informing the court that they had agreed to join and participate in the prosecution of the Mizani and Carach Actions in the New York Court. The Defendants consented to the stay of the Tarver
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ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Action in the Baltimore Court, and on September 5, 2013, Judge Pamela J. White issued an order granting that stay. Consequently, there has been no subsequent activity in the Baltimore Court in the Tarver Action. Also on August 9, 2013, all counsel involved in the Mizani and Carach Actions filed a joint stipulation in the New York Court, reflecting agreement among all parties that the Mizani and Carach Actions should be consolidated (jointly, “the Consolidated Actions”) and setting out a schedule for early motion practice in response to the complaints filed (the “Consolidation Stipulation”). Pursuant to the Consolidation Stipulation, an amended complaint was also filed in the New York court on August 9, 2013 and was designated as the operative complaint in the Consolidated Actions (“Operative Complaint”). Pursuant to the Consolidation Stipulation, all Defendants filed a motion to dismiss all claims asserted in the Operative Complaint on September 23, 2013. Plaintiffs’ response was due on or before November 7, 2013. On November 7, 2013, Plaintiffs filed a motion seeking leave to file a second amended complaint, which the Defendants have opposed. On March 24, 2014, Plaintiffs’ counsel in the Consolidated Actions dismissed those claims without prejudice. Consequently, only the Tarver Action currently remains pending among these cases, although it remains stayed.
On October 8, 2013, John Poling filed a putative class action lawsuit in the Circuit Court for Baltimore City against the General Partner, the Operating Partnership, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Poling Action”). The complaint alleges that the merger agreement breaches the terms of the CapLease’ 8.375% Series B Cumulative Redeemable Preferred Stock (“Series B”) and the terms of the 7.25% Series C Cumulative Redeemable Preferred Stock (“Series C”) and is in violation of the Series B Articles Supplementary and the Series C Articles Supplementary. The Complaint alleges claims for breach of contract and breach of fiduciary duty against the CapLease entities and the CapLease board of directors. The complaint also alleges that the General Partner, the Operating Partnership and Safari Acquisition, LLC aided and abetted CapLease and the CapLease directors’ alleged breach of contract and breach of fiduciary duty.
On November 13, 2013, all counsel involved in the Poling Action filed a joint stipulation, reflecting agreement among all parties concerning a schedule for early motion practice in response to the complaint filed (the “Scheduling Stipulation”). Pursuant to the Scheduling Stipulation, all Defendants filed a motion to dismiss all claims asserted in the Operative Complaint on December 20, 2013. Plaintiff has filed an opposition to that motion, which remains pending.
Cole Litigation Matters
Three putative class action and/or derivative lawsuits, which were filed earlier this year, assert claims for breach of fiduciary duty, abuse of control, corporate waste, unjust enrichment, aiding and abetting breach of fiduciary duty and other claims relating to the merger between a wholly owned subsidiary of Cole and Cole Holdings Corporation, pursuant to which Cole became a self-managed REIT. On October 22, 2013, the Circuit Court for Baltimore City granted all defendants’ motion to dismiss with prejudice the action pending before the court, but the plaintiffs have appealed that dismissal. The other two lawsuits, which also purport to assert shareholder class action claims under the Securities Act of 1933, as amended (the “Securities Act”), are pending in the United States District Court for the District of Arizona. Defendants filed a motion to dismiss both complaints on January 10, 2014. Subsequently, both of those lawsuits have been stayed by the Court pursuant to a joint request made by all parties pending final approval of the consolidated Baltimore Cole Merger Actions described below.
To date, eleven lawsuits have been filed in connection with the Cole Merger. Two of these suits — Wunsch v. Cole, et al (“Wunsch”), No. 13-CV-2186, and Sobon v. Cole, et al (“Sobon”) — were filed as putative class actions on October 25, 2013 and November 18, 2013, respectively, in the U.S. District Court for the District of Arizona. Between October 30, 2013 and November 14, 2013, eight other putative stockholder class action or derivative lawsuits were filed in the Circuit Court for Baltimore City, Maryland, captioned as: (i) Operman v. Cole, et al (“Operman”); (ii) Branham v. Cole, et al (“Branham”); (iii) Wilfong v. Cole, et al. (“Wilfong”); (iv) Polage v. Cole, et al. (“Polage”); (v) Corwin v. Cole, et al (“Corwin”); (vi) Green v. Cole, et al (“Green”); (vii) Flynn v. Cole, et al (“Flynn”) and (viii) Morgan v. Cole, et al. (“Morgan”). All of these lawsuits name the General Partner, Cole and Cole’s board of directors as defendants; Wunsch, Sobon, Branham, Wilfong, Flynn, Green, Morgan and Polage also name CREInvestments, LLC, a Maryland limited liability company and a wholly owned subsidiary of the Cole, as a defendant. All of the named plaintiffs claim to be Cole stockholders and purport to represent all holders of Cole’s stock. Each complaint generally alleges that the individual defendants breached fiduciary duties owed to plaintiff and the other public stockholders of Cole in connection with the Cole Merger, and that certain entity defendants aided and abetted those breaches. The breach of fiduciary duty claims asserted include claims that the Cole Merger does not provide for full and fair value for the Cole shareholders, that the Cole Merger was the product of an “inadequate sale process,” that the Cole Merger Agreement contains coercive deal protection measures and the Cole Merger Agreement and that the Cole Merger were approved as a result of or in a manner which facilitates improper self-dealing by certain defendants. In addition, the Flynn,
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ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Corwin, Green, Wilfong, Polage and Branham lawsuits claim that the individual defendants breached their duty of candor to shareholders and the Branham and Polage lawsuits assert claims derivatively against the individual defendants for their alleged breach of fiduciary duties owed to Cole. The Polage lawsuit also asserts derivative claims for waste of corporate assets and unjust enrichment. The Wunsch and Sobon lawsuits also assert claims against Cole and the individual defendants under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), based on allegations that the proxy materials omitted to disclose allegedly material information, and a claim against the individual defendants under Section 20(a) of the Exchange Act based on the same allegations. Among other remedies, the complaints seek unspecified money damages, costs and attorneys’ fees.
In January 2014, the parties to the eight lawsuits filed in the Circuit Court for Baltimore City, Maryland (the “consolidated Baltimore Cole Merger Actions”) entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of Cole stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required Cole to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by Cole with the SEC on January 14, 2014. The memorandum of understanding also contemplated that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to Cole’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
The Sobon lawsuit was voluntarily dismissed on February 3, 2014. The General Partner believes that the Wunsch lawsuit in connection with the Cole Merger is without merit and that it has substantial meritorious defenses to the claims set forth in the complaint.
On December 27, 2013, Realistic Partners filed a putative class action lawsuit against the General Partner and the members of its board of directors in the Supreme Court for the State of New York. Cole was later added as a defendant also. The plaintiff alleges, among other things, that the board of the General Partner breached its fiduciary duties in connection with the transactions contemplated under the Cole Merger Agreement and that Cole aided and abetted those breaches. In January 2014, the parties entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of the General Partner’s stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required the General Partner to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by the General Partner with the SEC on January 17, 2014. The memorandum of understanding also contemplated that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to the General Partner’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
The General Partner maintains directors and officers liability insurance, which the General Partner believes should provide coverage to the General Partner and its officers and directors for most or all of any costs, settlements or judgments resulting from the lawsuits.
See Note 24 — Subsequent Events (As Restated) for significant litigation matters that occurred subsequent to December 31, 2013.
Environmental Matters
In connection with the ownership and operation of real estate, the Operating Partnership may potentially be liable for costs and damages related to environmental matters. The Operating Partnership has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition, in each case, that it believes will have a material adverse effect on the results of operations.
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ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Note 17 — Preferred and Common OP Units (As Restated)
Series A and Series B Convertible Preferred Units
During the year ended December 31, 2013, the General Partner converted all 545,454 shares of Series A Convertible Preferred Stock and all 283,018 shares of Series B Convertible Preferred Stock into 829,629 shares of ARCP common stock, which included dividends on the Series A Convertible Preferred Stock. Concurrently, the Operating Partnership converted all 545,454 Limited Partner OP Units designated as Series A Convertible Preferred Units and all 283,018 Limited Partner OP Units designated as Series B Convertible Preferred Units into 829,629 General Partner OP Units.
Series D and Series E Preferred Units
On September 12, 2013, the General Partner’s board of directors unanimously approved the issuance of Series D Cumulative Convertible Preferred Stock (“Series D Preferred Stock”) and the issuance of Series E Cumulative Preferred Stock (“Series E Preferred Stock”). Concurrently, the Operating Partnership was approved to issue to the General Partner, General Partner OP Units designated as General Partner Series D Preferred Units and General Partner OP Units designated as General Partner Series E Preferred Units, if applicable.
On September 15, 2013, the General Partner entered into definitive purchase agreements to issue Series D Preferred Stock and common stock, necessitating that the Operating Partnership concurrently issue General Partner Series D Preferred Units and General Partner OP Units to ARCP, promptly following the close of the CapLease Merger. Pursuant to the definitive purchase agreements, the General Partner issued approximately 21.7 million shares of Series D Preferred Stock and 15.1 million shares of ARCP common stock, for proceeds of $288.0 million and $186.0 million, respectively, on November 12, 2013. The Operating Partnership concurrently issued 21.7 million Series D Preferred Units and 15.1 million General Partner OP Units to the General Partner. The Series D Preferred Stock and General Partner Series D Preferred Units pay dividends at the rate of 5.81% per annum on its face amount of $13.59 per share (equivalent to $0.79 per share on an annualized basis). The Series D Preferred Stock is redeemable on August 31, 2014 (the “Redemption Date”). If redeemed, corresponding General Partner Series D Preferred Units will be redeemed. Subsequent to that date, or in certain other circumstances, the Series D Preferred Stock is convertible into ARCP common stock or Series E Preferred Stock or redeemable into cash, at the discretion of the General Partner upon such request for conversion of the Series D Preferred Stock.
In the event of a liquidation, the Series D Preferred Stock holder is entitled to receive the greater of (a) $13.59 per share plus accrued and unpaid dividends (the “Liquidation Preference”) plus a 20% premium and (b) an amount the Series D Preferred Stock holder would have received had they converted into ARCP common stock immediately prior to the liquidation event.
If the General Partner elects to redeem on the Redemption Date, the General Partner shall pay the greater of (a) the product of the number of Series D Preferred Stock and the 102% of the Liquidation Preference and (b) product of the number of ARCP common stock that would be issued if the Series D Preferred Stock converted immediately prior to the Redemption Date and 102% of the one-day VWAP.
At any time after the Redemption Date, the holder of Series D Preferred Stock may convert some or all of their outstanding Series D Preferred Stock into ARCP common stock. Upon such an election to convert, the General Partner may elect the following settlement options (1) convert the Series D Preferred Stock into the number of fully paid and non-assessable ARCP common stock obtained by dividing the aggregate Liquidation Preference of such Series D Preferred Stock by the Conversion Price, as defined below, (2) convert the Series D Preferred Stock into an equal number of Series E Preferred Stock, additional units of Series E Preferred Stock may be issued under certain circumstances, or (3) an amount equal to the product of the number of shares of Series D Preferred Stock and the Cash Conversion Price, as defined below.
The Conversion Price shall be the lowest of (i) a 2% discount to the VWAP of ARCP’s common stock for the 10 Trading Days prior to the Conversion Election Date, (ii) a 2% discount to the closing price on the Conversion Election Date, and (iii) $13.59. The Cash Conversion Price shall be the greater of (i) 102% of the Liquidation Preference and (ii) the one day VWAP of ARCP’s common stock on the date of the election.
The General Partner has concluded that the conversion option qualifies as a derivative and should be bifurcated from the host instrument. At issuance, the conversion option had a fair value of $18.7 million. As of December 31, 2013, the fair value of the conversion option had a fair value of $16.7 million. The Operating Partnership recorded the change in fair value of $2.0 million in gain (loss) on derivative instruments in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2013.
F-56
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
As the holder of Series D Preferred Stock is entitled to receive liquidation preferences that other equity holders are not entitled to, the General Partner determined the Series D Preferred Stock meets the definition of a deemed liquidation event and therefore should be classified as temporary equity under U.S. GAAP. At the date of issuance, the fair value of the Series D Preferred stock was $269.3 million. As of December 31, 2013, the General Partner has determined that a liquidation event is not probable; therefore, the General Partner has concluded that the Series D Preferred Units are not currently redeemable or likely to become redeemable. As such, the Operating Partnership has not accreted the initial value of the Series D Preferred Units.
As of December 31, 2013, there were 21,735,008 units of General Partner Series D Preferred Units issued and no units of General Partner Series E Preferred Units issued.
Series F Preferred Units
On October 6, 2013, in connection with the modification to the ARCT IV Merger, the General Partner’s board of directors unanimously approved the issuance of Series F Preferred Stock. Upon consummation of the ARCT IV Merger on January 3, 2014, 42.2 million shares of Series F Preferred Stock were issued to ARCT IV shareholders, resulting in the Operating Partnership concurrently issuing 42.2 million General Partner Series F Preferred Units to the General Partner, and 0.7 million Limited Partner Series F Preferred Units were issued to the ARCT IV OP Unit holders. To comply with the carryover basis of accounting required in relation to an acquisition of an entity under common control, the financial statements reflect the ARCT IV Merger as if it occurred at the beginning of the periods presented. As such, the accompanying consolidated balance sheet depicts that 42.2 million Series F Preferred Units were outstanding as of December 31, 2013.
The Series F Preferred Units contain the same terms as the Series F Preferred Stock. Therefore, the Series F Preferred Units will pay cumulative cash dividends at the rate of 6.70% per annum on its liquidation preference of $25.00 per unit (equivalent to $1.675 per unit on an annual basis). The Series F Preferred Units will not be redeemable by the Operating Partnership before the fifth anniversary of the date on which such Series F Preferred Units were issued (the “Initial Redemption Date”), except under circumstances intended to preserve the General Partner’s status as a real estate investment trust for federal and/or state income tax purposes and except upon the occurrence of a change of control. On and after the Initial Redemption Date, the Operating Partnership may redeem units of the Series F Preferred Units, in whole or from time to time in part, at a redemption price of $25.00 per unit plus, subject to exceptions, any accrued and unpaid dividends thereon to the date fixed for redemption. The Series F Preferred Units have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Operating Partnership redeems or otherwise repurchases them or they become convertible and are converted into General Partner OP Units (or, if applicable, alternative consideration).
Offerings
On August 1, 2012, the General Partner filed a $500.0 million universal shelf registration statement and a resale registration statement with the SEC. Both registration statements became effective on August 17, 2012. As of December 31, 2013, the General Partner had issued a total of approximately 2.1 million shares of ARCP common stock under the universal shelf registration statement. Concurrently with the issuance of the 2.1 million shares described above, the Operating Partnership issued 2.1 million General OP Units to the General Partner. The resale registration statement, as amended, registers the resale of up to 1,882,248 shares of ARCP’s common stock issued in connection with any future conversion of certain currently outstanding restricted shares, convertible preferred stock or Limited Partner OP Units.
In January 2013, the General Partner commenced its “at the market” equity offering program (“ATM”) in which it may from time to time offer and sell shares of its common stock having an aggregate offering proceeds of up to $60.0 million. The shares will be issued pursuant to the General Partner’s universal shelf registration statement. For each share of common stock the General Partner sells under the ATM, the Operating Partnership will issue a corresponding number of General Partner OP Units to the General Partner.
On March 13, 2013, the General Partner filed a universal automatic shelf registration statement that was automatically declared effective and achieved well-known seasoned issuer (“WKSI”) status. As a result of the delayed filing of certain of our periodic reports with the SEC, the General Partner is not currently eligible to use a shelf registration statement for the offer and sale of our securities.
F-57
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The following are ARCP’s equity offerings of common stock and gross proceeds of the equity offering for the years ended December 31, 2013, 2012 and 2011 (dollar amounts in millions):
| Type of offering |
Closing Date | Number of ARCP Common Shares (1) |
Gross Proceeds |
|||||||
| IPO |
September 7, 2011 | 5,574,131 | $ | 67.4 | ||||||
| Follow-on offering |
November 2, 2011 | 1,497,924 | 15.8 | |||||||
| Underwriters’ over allotment |
November 7, 2011 | 74,979 | 0.8 | |||||||
|
|
|
|
|
|||||||
| Total — Year end December 31, 2011 (2) |
7,147,034 | 84.0 | ||||||||
|
|
|
|
|
|||||||
| Follow-on offering |
June 18, 2012 | 3,250,000 | 30.3 | |||||||
| Underwriters’ over allotment |
July 9, 2012 | 487,500 | 4.6 | |||||||
|
|
|
|
|
|||||||
| Total — Year end December 31, 2012 (3) |
3,737,500 | 34.9 | ||||||||
|
|
|
|
|
|||||||
| Registered follow-on offering |
January 29, 2013 | 2,070,000 | 26.8 | |||||||
| ATM |
January 1 - April 17, 2017 | 553,300 | 8.9 | |||||||
| Private placement offering |
June 7, 2013 | 29,411,764 | 455.0 | |||||||
| Private placement offering |
November 7, 2013 | 15,126,498 | 186.0 | |||||||
|
|
|
|
|
|||||||
| Total — Year end December 31, 2013 (4) |
47,161,562 | $ | 676.7 | |||||||
|
|
|
|
|
|||||||
| (1) | Excludes 140.7 million shares of common stock that were issued to the stockholders of ARCT III’s common stock in conjunction with the ARCT III Merger and any shares issued upon the conversion of OP Units or preferred stock. |
| (2) | Excludes 9.8 million shares of common stock that were issued by ARCT III for gross proceeds of $102.2 million. |
| (3) | Excludes 155.7 million and 5.4 million shares of common stock that were issued by ARCT III and ARCT IV, respectively, for gross proceeds of $1.6 billion and $255.0 million, respectively. |
| (4) | Excludes 31.0 million shares of common shares that were issued by ARCT IV for gross proceeds of $1.5 billion. |
See Note 24 — Subsequent Events (As Restated) for significant subsequent events.
For each common share the General Partner issued, the Operating Partnership issued a corresponding General Partner OP Unit to the General Partner in exchange for the contribution of the net proceeds from the stock issuance. The gross proceeds summarized above were contributed to the Operating Partnership net of offering costs of $165.4 million, $218.4 million and $21.8 million for the years ended December 31, 2013, 2012 and 2011, respectively.
On May 28, 2014, the General Partner closed on an underwriting agreement relating to a public offering of 138.0 million shares of ARCP common stock, par value $0.01 per share. The offering price to public was $12.00 per share. The net proceeds to ARCP were approximately $1.59 billion after deducting underwriting discounts and commissions, but excluding expenses which include a $2.0 million structuring fee paid to RCS.
F-58
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Dividends
In October 2011, in connection with the same action by ARCP, the Operating Partnership began paying dividends on the 15th day of each month to unitholders of record on the eighth day of such month. Since inception, the board of directors of the General Partner has authorized the following increases in ARCP’s dividend which, accordingly, was implemented by the Operating Partnership.
| Dividend increase declaration date | Annualized dividend per share |
Effective date | ||||
| September 7, 2011 |
$ | 0.875 | October 9, 2011 | |||
| February 27, 2012 |
$ | 0.880 | March 9, 2012 | |||
| March 16, 2012 |
$ | 0.885 | June 9, 2012 | |||
| June 27, 2012 |
$ | 0.890 | September 9, 2012 | |||
| September 30, 2012 |
$ | 0.895 | November 9, 2012 | |||
| November 29, 2012 |
$ | 0.900 | February 9, 2013 | |||
| March 17, 2013 |
$ | 0.910 | June 8, 2013 | |||
| May 28, 2013 |
$ | 0.940 | December 8, 2013 (1) | |||
| October 23, 2013 |
$ | 1.000 | February 7, 2014 (2) | |||
| (1) | The dividend increase became effective at the close of the CapLease Merger, which was consummated on November 5, 2013. |
| (2) | The dividend increase was contingent upon, and became effective with, the close of the Cole Merger, which was consummated on February 7, 2014. |
The annualized dividend rate at December 31, 2013 was $0.940 per share.
Note 18 — Equity-based Compensation (As Restated)
Equity Plan
The General Partner has adopted the American Realty Capital Properties, Inc. Equity Plan (the “Equity Plan”), which provides for the grant of stock options, restricted shares of common stock, restricted stock units, dividend equivalent rights and other equity-based awards to the General Partner’s and its affiliates’ non-executive directors, officers and other employees and advisors and consultants who are providing services to the General Partner or its affiliates. For each share awarded under the Equity Plan, the Operating Partnership issues a General Partner OP Unit to the General Partner with similar terms.
The General Partner authorized and reserved a total number of shares equal to 10.0% of the total number of issued and outstanding shares of its common stock (on a fully diluted basis assuming the redemption of all Limited Partner OP Units for shares of common stock) to be issued at any time under the Equity Plan for equity incentive awards excluding an initial grant of 167,400 shares to its Former Manager in connection with the IPO, all of which were vested as of December 31, 2013.
Director Stock Plan
The General Partner has adopted the American Realty Capital Properties, Inc. Non-Executive Director Stock Plan (the “Director Stock Plan”), which provides for the grant of restricted shares of common stock to each of the General Partner’s independent directors, each of whom is a non-executive director. For each share awarded under the Director Stock Plan, the Operating Partnership issues a General Partner OP Unit to the General Partner with identical terms. Awards of restricted stock will vest ratably over a five-year period following the date of grant in increments of 20.0% per annum, subject to the director’s continued service on the board of directors, and shall provide for “distribution equivalents” with respect to this restricted stock, whether or not vested, at the same time and in the same amounts as distributions are paid to the stockholders. At December 31, 2013, a total of 99,000 shares of ARCP common stock are reserved for issuance under the Director Stock Plan.
The fair value of restricted common stock awards, as well as the underlying General Partner OP Units, issued under the Equity Plan and Director Stock Plan is determined on the grant date using the closing stock price on NASDAQ that day. The fair value of restricted common stock awarded to the non-employees under the Equity Plan, as well as the underlying General Partner OP Units issued in respect thereof, are measured based upon the fair value of goods or services received or the equity instruments granted, whichever is more reliably determinable.
F-59
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
ARCT III Restricted Share Plan
ARCT III had an employee and director incentive restricted share plan (the “ARCT III RSP”) which provided for the automatic grant of 3,000 restricted shares of common stock to each of its independent directors, without any further action by ARCT III’s board of directors or its stockholders, on the date of initial election to the board of directors and on the date of each annual stockholder’s meeting thereafter. Restricted stock issued to independent directors vested over a five-year period following the date of grant in increments of 20.0% per annum. The ARCT III RSP provided ARCT III with the ability to grant awards of restricted shares to its directors, officers and employees (if ARCT III ever had employees), employees of ARCT III’s advisor and its affiliates, employees of entities that provided services to ARCT III, directors of the ARCT III Advisor or of entities that provided services to ARCT III, certain consultants to ARCT III and the ARCT III Advisor and its affiliates or to entities that provided services to ARCT III. For each share awarded under the ARCT III RSP, the Operating Partnership issued a General Partner OP Unit to the General Partner with similar terms.
Immediately prior to the effective time of the ARCT III Merger, each then-outstanding share of ARCT III restricted stock fully vested. All shares of ARCT III common stock then-outstanding as a result of the full vesting of shares of ARCT III restricted stock, and the satisfaction of any applicable withholding taxes, had the right to receive a number of shares of the ARCP’s common stock based on the ARCT III Exchange Ratio.
ARCT IV Restricted Share Plan
ARCT IV had an employee and director incentive restricted share plan (the “ARCT IV RSP”) which provided for the automatic grant of 1,333 restricted shares of common stock to each of its independent directors without any further action by ARCT IV’s board of directors or its stockholders on the date of initial election to the board of directors and on the date of each annual stockholder’s meeting thereafter. Restricted stock issued to independent directors vested over a five-year period following the date of grant in increments of 20% per annum. ARCT IV issued 5,333 and 2,667 restricted shares under the ARCT IV RSP during the year ended December 31, 2013 and 2012, respectively. All restricted shares issued under the ARCT IV RSP had an issue price of $22.50. The ARCT IV RSP provided ARCT IV with the ability to grant awards of restricted shares to its directors, officers and employees, employees of the ARCT IV Advisor and its affiliates, employees of entities that provided services to ARCT IV, directors of the ARCT IV Advisor or of entities that provided services to ARCT IV, certain consultants to ARCT IV and the ARCT IV Advisor and its affiliates or to entities that provided services to ARCT IV. For each share awarded under the ARCT IV RSP, the Operating Partnership issued a General Partner OP Unit to the General Partner with similar terms
Immediately prior to the effective time of the ARCT IV Merger, each then-outstanding share of ARCT IV restricted stock fully vested. All shares of ARCT IV common stock then-outstanding as a result of the full vesting of shares of ARCT IV restricted stock, and the satisfaction of any applicable withholding taxes, received shares of ARCP’s common stock based on the ARCT IV Exchange Ratio.
F-60
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The following table details the General Partner OP Units granted in respect of the restricted share awards under the Equity Plan, Director Stock Plan and RSP Plans during the years ended December 31, 2013, 2012 and 2011:
Restricted Share Awards:
| General Partner OP Units | Equity Plan | ARCT III RSP & Director Stock Plan | ||||||||||||||
| Number of General Partner OP Units |
Weighted-Average Issue Price |
Number of General Partner OP Units |
Weighted-Average Issue Price |
|||||||||||||
| Awarded, January 1, 2011 |
— | $ | — | — | $ | — | ||||||||||
| Granted |
167,400 | 12.50 | 14,700 | 11.50 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Awarded December 31, 2011 |
167,400 | 12.50 | 14,700 | 11.50 | ||||||||||||
| Granted |
93,683 | 10.65 | 30,634 | 10.45 | ||||||||||||
| Forfeited |
(1,174 | ) | 10.65 | (13,650 | ) | 11.54 | ||||||||||
|
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|
|
|
|
|
|
|
|||||||||
| Awarded December 31, 2012 |
259,909 | 11.84 | 31,684 | 10.47 | ||||||||||||
| Granted |
932,527 | 13.82 | 20,768 | 14.58 | ||||||||||||
| Forfeited |
(1,085 | ) | 12.85 | (3,000 | ) | 12.99 | ||||||||||
|
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|
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|
|
|||||||||
| Awarded December 31, 2013 |
1,191,351 | $ | 13.39 | 49,452 | $ | 12.04 | ||||||||||
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|
|
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The following table details the status of unvested General Partner OP Units granted in respect of the restricted share awards under the Equity Plan, Director Stock Plan and ARCT III RSP during the years ended December 31, 2013, 2012 and 2011:
Unvested Restricted Share Awards:
| Unvested General Partner OP Unit | Equity Plan | ARCT III RSP & Director Stock Plan | ||||||||||||||
| Number of General Partner OP Units |
Weighted-Average Issue Price |
Number of General Partner OP Units |
Weighted-Average Issue Price |
|||||||||||||
| Unvested, January 1, 2011 |
— | $ | — | — | $ | — | ||||||||||
| Granted |
167,400 | 12.50 | 14,700 | 11.50 | ||||||||||||
| Vested |
(27,900 | ) | 12.50 | — | — | |||||||||||
|
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|
|
|
|
|
|
|
|||||||||
| Unvested, December 31, 2011 |
139,500 | 12.50 | 14,700 | 11.50 | ||||||||||||
| Granted |
93,683 | 10.65 | 30,634 | 10.45 | ||||||||||||
| Vested |
(59,556 | ) | 12.38 | (2,370 | ) | 11.88 | ||||||||||
| Forfeited |
(1,174 | ) | 10.65 | (13,650 | ) | 11.54 | ||||||||||
|
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|
|
|
|
|
|
|
|||||||||
| Unvested, December 31, 2012 |
172,453 | 11.55 | 29,314 | 10.35 | ||||||||||||
| Granted |
932,527 | 13.82 | 20,768 | 14.58 | ||||||||||||
| Vested |
(172,453 | ) | 11.55 | (28,207 | ) | 11.03 | ||||||||||
| Forfeited |
(1,085 | ) | 12.85 | (3,000 | ) | 12.99 | ||||||||||
|
|
|
|
|
|
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|
|
|||||||||
| Unvested, December 31, 2013 |
931,442 | $ | 13.82 | 18,875 | $ | 13.52 | ||||||||||
|
|
|
|
|
|
|
|
|
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For the years ended December 31, 2013, 2012 and 2011, compensation expense for restricted shares under the above plans was $8.0 million, $1.2 million and $0.2 million, respectively. In addition, the Operating Partnership recognized $2.7 million as a distribution to its Former Manager, which is included in consideration to Former Manager for internalization in the accompanying consolidated statements of changes in equity due to the Former Manager’s restricted shares accelerated vesting due to the Operating Partnership’s pending Cole Merger.
Multi-Year Outperformance Plan
Upon consummation of the ARCT III Merger, the General Partner entered into the 2013 Advisor Multi-Year Outperformance Agreement (the “OPP”) with the Former Manager, whereby the Former Manager was able to potentially earn compensation upon the attainment of stockholder value creation targets.
F-61
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Under the OPP, the Former Manager was granted 8,241,101 long term incentive plan units (“LTIP Units”) of the Operating Partnership, which are earned or forfeited based on the General Partner’s total return to stockholders (including both share price appreciation and common stock distributions) (“Total Return”), for the three-year period consisting of:
| • | Absolute Component: 4% of any excess Total Return attained above an absolute hurdle of 7% for each annual measurement period, non-compounded, 14% for the interim measurement period and 21% for the full performance period; and |
| • | Relative Component: 4% of any excess Total Return attained above the Total Return for the performance period of a peer group comprised of the following companies: EPR Properties; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc.; and Realty Income Corporation. |
The award was funded (“OPP Pool”) up to a maximum award opportunity equal to 5% of the General Partner’s equity market capitalization at the ARCT III Merger date of $2.1 billion (the “OPP Cap”). Awards under the OPP are dependent on achieving an annual hurdle that commenced December 11, 2012, an interim (two-year) hurdle and then the aforementioned three-year hurdle ending on December 31, 2015.
In order to further ensure that the interests of the Former Manager are aligned with its investors, the Relative Component is subject to a ratable sliding scale factor as follows:
| • | 100% will be earned if the General Partner attains a median Total Return of at least 6% for each annual measurement period, non-compounded, at least 12% for the interim measurement period and at least 18% for the full performance period; |
| • | 50% will be earned if the General Partner attains a median Total Return of at least 0% for each measurement period; |
| • | 0% will be earned if the General Partner attains a median Total Return of less than 0% for each measurement period; and |
| • | A percentage from 50% to 100% calculated by linear interpolation will be earned if the General Partner’s median Total Return is between 0% and the percentage set for each measurement period. |
For each year during the performance period, a portion of the OPP Cap equal to a maximum of up to 1.25% of the General Partner’s equity market capitalization of $2.1 billion will be “locked-in” based upon the attainment of the performance hurdles set forth above for each annual measurement period. In addition, a portion of the OPP Cap equal to a maximum of up to 3% of the General Partner’s equity market capitalization will be “locked-in” based upon the attainment of the performance hurdles set forth above for the interim measurement period, which if achieved, will supersede and negate any prior “locked-in” portion based upon annual performance through the first and second valuation dates on December 31, 2013 and 2014, respectively (i.e., a maximum award opportunity equal to a maximum of up to 3% of the General Partner’s equity market capitalization may be “locked-in” through December 31, 2014). Since certain awards under the OPP plan are dependent on the comparison of the General Partner’s current market capitalization to the General Partner’s market capitalization at the inception of plan, the issuance of additional common shares by the General Partner may result in higher awards.
Following the performance period, the Absolute Component and the Relative Component will be calculated separately and then added together to determine the aggregate award earned under the OPP, which in no event may exceed the OPP Cap. The OPP Pool will be used to determine the number of LTIP Units that vest. Any unvested LTIP Units will be immediately forfeited on December 31, 2015. At December 31, 2013, 100% of the OPP Pool has been allocated.
Pursuant to previous authorization of the General Partner’s board of directors, as a result of the termination of the management agreement with the Former Manager, all 8,241,101 LTIP Units and were deemed earned upon the consummation of the General Partner’s transition to self-management on January 8, 2014 and were converted into OP Units on such date.
The Former Manager is entitled to receive a tax gross-up in the event that any amounts paid to it under the OPP constitute “parachute payments” as defined in Section 280G of the Code.
During the year ended December 31, 2013, the Operating Partnership has recorded expenses of $92.3 million for the OPP, which is included in general and administrative expense on the consolidated statements of operations. As of December 31, 2013, 2.3 million LTIP Units were earned and $32.7 million of the expense was locked-in and has been included in non-controlling interest on the consolidated balance sheets. The remaining $59.6 million expense has been accrued and is included in due to affiliates in the consolidated balance sheet as of December 31, 2013.
F-62
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
New Multi-Year Outperformance Plan
On October 21, 2013, the Company approved a multi-year outperformance plan (the “New OPP”), to be effective as of the Company’s transition to self-management, which occurred on January 8, 2014. Under the New OPP, individual agreements will be entered into between the Company and the participants selected by the Company’s board of directors (the “Participants”) that set forth the Participant’s participation percentage in the New OPP and the number of LTIP Units subject to the award (“OPP Agreements”). Under the OPP Agreements, the Participants will be eligible to earn performance-based bonus awards equal to the Participant’s participation percentage of a pool that will be funded up to a maximum award opportunity (the “New OPP Cap”) equal to approximately 5% of the Company’s equity market capitalization (“the Initial Market Cap”) on October 1, 2013. Subject to the New OPP Cap, the pool will equal an amount to be determined based on the Company’s achievement to total return to stockholders, including both share price appreciation and common stock distributions (“Total Return”), for a three-year performance period (the “Performance Period”); each 12-month period during the Performance Period (each an “Annual Period”) and the initial 24-month period of the Performance Period (the “Interim Period”), as follows:
| Performance Period | Annual Period | Interim Period | ||||||||||||
| Absolute Component: 4% of any excess Total Return attained above an absolute hurdle measured from the beginning of such period: |
21 | % | 7 | % | 14 | % | ||||||||
| Relative Component: 4% of any excess Total Return attained above the median Total Return for the performance period of the Peer Group(1), subject to a ratable sliding scale factor as follows based on achievement of cumulative Total Return measured from the beginning of such period: |
||||||||||||||
| • |
100% will be earned if cumulative Total Return achieved is at least: | 18 | % | 6 | % | 12 | % | |||||||
| • |
50% will be earned if a cumulative Total Return achieved is: | — | % | — | % | — | % | |||||||
| • |
0% will be earned if cumulative Total Return achieved is less than: | — | % | — | % | — | % | |||||||
| • |
a percentage from 50% to 100% calculated by linear interpolation will be earned if cumulative Total Return achieved is if between: | 0% — 18 | 0% — 6 | 0% — 12 | % | |||||||||
| (1) | The “Peer Group” is comprised of the following companies: EPR Properties; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc.; Realty Income Corporation; and Spirit Realty Capital, Inc. |
The Participant’s will be entitled to receive a tax gross-up in the event that any amounts paid to the Participant under the New OPP constitute “parachute payments” as defined in Section 280G of the Code. The LTIP Units granted under the New OPP represent units of equity ownership in the OP that are structured as a profits interest therein. Subject to the Participant’s continued service through each vesting date, 1/3 of any earned LTIP Units will vest on each of the third, fourth and fifth anniversaries of October 1, 2013. The Participant will be entitled to receive distributions on their LTIP Units to the extent provided for in the limited partnership agreement of the OP, as amended from time to time.
For the status of the New OPP, see Note 24 — Subsequent Events (As Restated).
Note 19 — Related Party Transactions and Arrangements (As Restated)
General Partner, ARCT III and ARCT IV have incurred commissions, fees and expenses payable to the Former Manager and its affiliates including Realty Capital Securities, LLC (“RCS”), RCS Advisory Services, LLC (“RCS Advisory”), ARC, ARC Advisory Services, LLC (“ARC Advisory”), the ARCT III Advisor, the ARCT IV Advisor, American National Stock Transfer, LLC (“ANST”) and ARC Real Estate. References throughout this Note 19 — Related Party Transactions and Arrangements (As Restated) to expenses incurred by ARCT III or ARCT IV are to expenses incurred before their acquisitions by the General Partner on February 28, 2013 and January 3, 2014, respectively.
F-63
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
The Audit Committee’s investigation identified certain payments made by the General Partner to the Former Manager and certain affiliates of the Former Manager that were not sufficiently documented or otherwise warrant scrutiny. As described below, the General Partner has recovered consideration valued at approximately $8.5 million in respect of certain such payments. The General Partner is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statements related to any potential recovery.
The following table summarizes the related party fees and expenses incurred by the General Partner, ARCT III and ARCT IV by category and the aggregate amounts contained in such categories for the periods presented (in thousands):
| Year Ended December 31, | ||||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| Related party transactions: |
||||||||||||
| Financing fees and reimbursements |
$ | 14,277 | $ | 3,350 | $ | 182 | ||||||
| Offering related costs |
159,435 | 211,391 | 18,218 | |||||||||
| Acquisition related expenses |
37,564 | 28,656 | 1,692 | |||||||||
| Merger and other non-routine transactions |
156,146 | — | — | |||||||||
| Management fees to affiliates |
17,462 | 212 | — | |||||||||
| General and administrative expenses |
103,206 | 826 | 168 | |||||||||
| Indirect affiliate expenses |
68 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 488,158 | $ | 244,435 | $ | 20,260 | ||||||
|
|
|
|
|
|
|
|||||||
The following sections below further expand on the summarized related party transactions listed above.
Financing Fees and Reimbursements
The General Partner, ARCT III and ARCT IV paid the Former Manager, the ARCT III Advisor and the ARCT IV Advisor, respectively, a financing fee equal to 0.75% of the amount available under any secured mortgage financing or refinancing that the General Partner, ARCT III or ARCT IV obtained and used for the acquisition of properties that was arranged by the Former Manager, ARCT III Advisor or ARCT IV Advisor, respectively. The financing fee was payable in cash at the closing of each financing. In conjunction with the closing of the ARCT III Merger, it was agreed that these fees would no longer be paid by the General Partner to the Former Manager. These fees were paid by ARCT IV throughout 2013. Financing fees and reimbursements of $14.3 million, $3.4 million and $0.2 million as of December 31, 2013, 2012 and 2011, respectively, are included in deferred costs, net in the accompanying consolidated balance sheets.
Offering Related Costs
The General Partner, ARCT III and ARCT IV recorded commissions, fees and offering cost reimbursements as shown in the table below for services provided to the General Partner, ARCT III and ARCT IV, as applicable, by affiliates of the Former Manager during the periods indicated (in thousands):
| Year Ended December 31, | ||||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| Offering related costs: |
| |||||||||||
| Commissions and fees |
$ | 148,232 | $ | 184,384 | $ | 13,835 | ||||||
| Offering costs and other reimbursements |
11,203 | 27,007 | 4,383 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 159,435 | $ | 211,391 | $ | 18,218 | ||||||
|
|
|
|
|
|
|
|||||||
RCS served as the dealer manager of the ARCT III IPO and the ARCT IV IPO. RCS received fees and compensation in connection with the sale of ARCT III’s and ARCT IV’s common stock in the respective IPOs. RCS received a selling commission of 7% of gross offering proceeds before reallowance of commissions earned by participating broker-dealers in each of the IPOs. RCS received 3% of the gross proceeds from the sale of common stock, before reallowance to participating broker-dealers, as a dealer manager fee in each of the IPOs. In addition, ARCT III and ARCT IV reimbursed the ARCT III Advisor, the ARCT IV Advisor and RCS, as applicable, for services relating to the ARCT III IPO and the ARCT IV IPO. Offering related costs are included in offering costs, commissions and dealer manager fees in the accompanying consolidated statements of changes in equity.
F-64
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
Acquisition Related Expenses
Separate from acquisition fees related to the acquisition of certain properties in the GE Capital Portfolio discussed below, the General Partner, ARCT III and ARCT IV paid acquisition fees to the Former Manager and its affiliates equal to 1.0% of the contract purchase price, inclusive of indebtedness, of each property acquired by the General Partner, ARCT III or ARCT IV, as applicable. The General Partner, ARCT III and ARCT IV additionally reimbursed certain expenses as permitted under the advisory agreements. These fees and reimbursements (as applicable), totaled $12.3 million, $28.7 million and $1.7 million during the years ended December 31, 2013, 2012 and 2011, respectively. The General Partner and ARCT III were no longer required to pay these fees as of the ARCT III Merger, except for those properties in the General Partner’s acquisition pipeline as of that date. ARCT IV incurred these fees throughout 2013 and 2012.
During the year ended December 31, 2013, the General Partner paid a fee of $1.9 million (equal to 0.25% of the contract purchase price) to RCS and reimbursed expenses of $6.1 million to the Former Manager and its affiliates related to its acquisition of certain properties in the GE Capital Portfolio.
During the year ended December 31, 2013, ARCT IV paid a fee of $3.5 million (equal to 0.25% of the contract purchase price) to RCS and also paid an acquisition fee of $13.8 million to the affiliates of the Former Manager related to its acquisition of certain properties in the GE Capital Portfolio.
Merger and Other Non-routine Transactions
The General Partner, ARCT III and ARCT IV incurred fees and expenses payable to the Former Manager and its affiliates for services related to mergers and other non-routine transactions, as discussed below. These fees are included in merger and other non-routine transactions in the accompanying consolidated statements of operations. The table below shows fees and expenses attributable to each merger and other non-routine transaction during the period indicated (in thousands):
| Year Ended December 31, 2013 | ||||||||||||||||||||||||
| ARCT III Merger |
ARCT IV Merger |
Cole Merger | CapLease Merger |
Other | Total | |||||||||||||||||||
| Merger related costs: |
||||||||||||||||||||||||
| Strategic advisory services |
$ | — | $ | 16,075 | $ | 14,215 | $ | 5,563 | $ | 243 | $ | 36,096 | ||||||||||||
| Legal fees and expenses |
126 | 500 | — | 3,000 | 40 | 3,666 | ||||||||||||||||||
| Personnel costs and other reimbursements |
522 | 2,137 | 169 | 567 | 178 | 3,573 | ||||||||||||||||||
| Other fees and expenses |
— | 640 | — | 250 | — | 890 | ||||||||||||||||||
| Other non-routine transactions: |
||||||||||||||||||||||||
| Subordinated distribution fee |
98,360 | — | — | — | — | 98,360 | ||||||||||||||||||
| Furniture, fixtures and equipment |
5,800 | — | — | — | — | 5,800 | ||||||||||||||||||
| Legal fees and expenses |
950 | — | — | — | — | 950 | ||||||||||||||||||
| Personnel costs and other reimbursements |
— | 1,107 | 1,463 | — | 109 | 2,679 | ||||||||||||||||||
| Post-transaction support services |
2,000 | 2,000 | — | — | — | 4,000 | ||||||||||||||||||
| Other fees and expenses |
— | — | — | 132 | — | 132 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 107,758 | $ | 22,459 | $ | 15,847 | $ | 9,512 | $ | 570 | $ | 156,146 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
No expenses payable to affiliates of the Former Manager relating to mergers or other non-routine transactions were incurred during the years ended December 31, 2012 and 2011.
F-65
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
Merger Costs
Unless otherwise indicated, all of the fees and reimbursements discussed below were incurred and recognized during the year ended December 31, 2013.
ARCT III Merger
The General Partner and ARCT III incurred and paid $0.3 million to ARC Advisory and $0.4 million to RCS Advisory for expense reimbursements in connection with the ARCT III Merger.
ARCT IV Merger
The General Partner entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the General Partner in connection with the ARCT IV Merger. The General Partner paid $7.7 million (equal to 0.25% of the transaction value) upon the consummation of the ARCT IV Merger and reimbursed out of pocket expenses of $0.6 million pursuant to this agreement.
The General Partner entered into an agreement with RCS, RCS Advisory and ANST under which they agreed to provide financial advisory and information agent services in connection with the ARCT IV Merger and the related proxy solicitation seeking approval from the General Partner’s stockholders in connection with such merger. The agreement provided that these services included facilitation of the preparation, distribution and accumulation of proxy materials, stockholder, analyst and financial advisor communications and consultation on materials and communications made to the public and regulatory agencies regarding the ARCT IV Merger. However, effective October 6, 2013 pursuant to the first amendment to the ARCT IV Merger Agreement, a vote by they General Partner’s stockholders was no longer required. The General Partner paid $0.6 million in fees pursuant to this agreement.
ARCT IV entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to assist ARCT IV with its alternatives for a potential liquidity event. ARCT IV paid $7.7 million (equal to 0.25% of the transaction value) upon the consummation of the ARCT IV Merger and reimbursed out of pocket expenses of $0.8 million.
ARCT IV entered into an agreement with ARC Advisory and RCS Advisory under which they agreed to provide legal support services up to the date that ARCT IV entered into the ARCT IV Merger Agreement. ARCT IV paid $0.5 million in fees pursuant to this agreement.
ARCT IV entered into an agreement with RCS, RCS Advisory, and ANST under which they agreed to provide advisory and information agent services in connection with the ARCT IV Merger and the related proxy solicitation seeking approval of such merger by ARCT IV’s stockholders. The agreement provided that these services included facilitation of the preparation, distribution and accumulation of proxy materials, stockholder, analyst and financial advisor communications and consultation on materials and communications made to the public and regulatory agencies regarding the ARCT IV Merger. ARCT IV paid $0.8 million in fees and reimbursed $0.2 million of expenses pursuant to this agreement.
The General Partner and ARCT IV incurred and paid $0.5 million to RCS Advisory for expense reimbursements in connection with the ARCT IV Merger.
Pursuant to ARCT IV’s advisory agreement with the ARCT IV Advisor, ARCT IV agreed to pay the ARCT IV Advisor a brokerage commission on the sale of property in connection with the ARCT IV Merger. No fees were incurred under this agreement during the year ended December 31, 2013. ARCT IV incurred and paid $8.4 million as a brokerage commission, pursuant to the advisory agreement, in 2014.
F-66
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
Cole Merger
The General Partner entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the General Partner in connection with the Cole Merger. The General Partner paid a fee equal to 0.25% of the transaction value and reimbursed out of pocket expenses. The General Partner incurred and recognized $14.2 million in expense from this agreement in 2013. The amount recognized in 2013 constitutes one-half of the total fee of $28.4 million which was paid in 2014. The General Partner incurred and paid an additional $0.2 million to ARC Advisory for expense reimbursements in connection with the Cole Merger.
CapLease Merger
The General Partner entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the General Partner in connection with the CapLease Merger. The General Partner paid a fee equal to 0.25% of the transaction value and reimbursed out of pocket expenses. The General Partner incurred and paid $5.6 million in fees pursuant to this agreement. The General Partner incurred and paid an additional $0.2 million to ARC Advisory and $3.6 million to RCS Advisory for expense reimbursements in connection with the CapLease Merger.
F-67
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
Other Non-routine Transactions
ARCT III Merger Subordinated Distribution Fee
On February 28, 2013, the OP entered into a Contribution and Exchange Agreement (the “Contribution and Exchange Agreement”) with the ARCT III OP and the ARCT III Special Limited Partner, the holder of the special limited partner interest in the ARCT III OP. The ARCT III Special Limited Partner was entitled to receive certain distributions from the ARCT III OP, including a subordinated distribution of net sales proceeds resulting from an “investment liquidity event” (as defined in the agreement of limited partnership of the ARCT III OP). The ARCT III Merger constituted an “investment liquidity event,” due to the attainment of the 6.0% performance hurdle and the return to ARCT III’s stockholders in addition to their initial investment. Pursuant to the Contribution and Exchange Agreement, the ARCT III Special Limited Partner contributed its interest in the ARCT III OP, inclusive of the $98.4 million subordinated distribution proceeds received, to the ARCT III OP in exchange for 7.6 million ARCT III OP Units. Upon consummation of the ARCT III Merger, these ARCT III OP Units were immediately converted into 7.3 million OP Units after application of the ARCT III Exchange Ratio. The OP recorded an expense of $98.4 million in connection with this transaction. In conjunction with the ARCT III Merger Agreement, the ARCT III Special Limited Partner agreed to hold its OP Units for a minimum of one year before converting them into shares of the General Partner’s common stock.
Furniture, Fixtures and Equipment and Other Assets
The OP entered into three agreements with affiliates of the Former Manager and the Former Manager (the “Sellers”), as applicable, pursuant to which, concurrently with the closing of the ARCT III Merger and ARCT IV Merger and the General Partner’s transition to self-management, the Sellers agreed to sell to the OP certain FF&E and other assets used by the Sellers in connection with managing the property level business and operations and accounting functions of the General Partner and the OP. During the year ended December 31, 2013, the General Partner expensed $5.8 million of costs associated with the acquisition of FF&E and other assets. In the first quarter of 2014, the General Partner expensed an additional $15.8 million of costs associated with the acquisition of FF&E and other assets.
Legal Fees and Expenses
On December 12, 2012, ARCT III and the ARCT III entered into a legal services reimbursement agreement with ARC Advisory to provide legal support services through the date of the ARCT III Merger. ARCT III incurred expenses of $0.5 million in connection with this agreement in 2013. Additional expenses of $0.5 million were paid to ARC Advisory during 2013 as reimbursement for litigation services.
Post-Transaction Support Services
ARCT III entered into an agreement with ARC Advisory under which ARC Advisory agreed to provide support services including legal, accounting, marketing, human resources and information technology, among other services, until the earlier of the ARCT III Merger closing date or one year (and an agreed upon period of up to 60 days following the ARCT III Merger). ARCT III incurred $2.0 million in fees pursuant to this agreement.
ARCT IV entered into an agreement with ARC Advisory and RCS Advisory under which they agreed to provide support services including legal, accounting, marketing, human resources and information technology, among other services, until the earlier of the ARCT IV Merger closing date or one year (and an agreed upon period of up to 60 days following the ARCT IV Merger). ARCT IV incurred $2.0 million in expenses pursuant to this agreement.
Personnel Costs and Other Reimbursements
The General Partner, ARCT III and ARCT IV incurred expenses of and paid, $2.5 million to RCS Advisory and $0.2 million to ANST for personnel costs and reimbursements in connection with non-recurring transactions.
Management Fees to Affiliates
The General Partner, ARCT III and ARCT IV recorded fees and reimbursements as shown in the table below for services provided by the Former Manager and its affiliates related to the operations of the General Partner, ARCT III and ARCT IV during the periods indicated (in thousands):
| Year Ended December 31, | ||||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| Management fees to affiliates: |
||||||||||||
| Base management fees |
$ | 4,969 | $ | 212 | $ | — | ||||||
| Asset management fees |
11,693 | — | — | |||||||||
| Property management fees |
800 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 17,462 | $ | 212 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
F-68
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
Base Management Fees
Prior to the termination of the amended and restated management agreement, the General Partner paid the Former Manager an annual base management fee equal to 0.50% per annum of the average unadjusted book value of the General Partner’s real estate assets, calculated and payable monthly in advance, for the value of assets up to $3.0 billion and 0.40% per annum for the unadjusted book value of assets over $3.0 billion. The management fee was generally payable in cash however in lieu of cash, on January 21, 2014, the Former Manager agreed to settle all outstanding balances in stock, resulting in the General Partner issuing 388,461 shares of common stock to the Former Manager. Prior to the ARCT III Merger, the Former Manager was entitled to an annual base management fee equal to 0.50% per annum for the unadjusted book value of assets with no asset threshold limitations. The General Partner incurred expenses of $5.0 million and $0,2 million that were not waived during the years ended December 31, 2013 and 2012, respectively. The Former Manager waived the portion of its management fee in excess of certain net income thresholds related to the General Partner’s operations during certain periods in 2013, 2012 and 2011. These waived fees totaled $6.1 million, $1.8 million and $0.3 million during the years ended December 31, 2013, 2012 and 2011, respectively.
Asset Management Fees
ARCT III
Until July 1, 2012, the ARCT III Advisor was entitled to an asset management fee of 0.75% per annum from ARCT III equal to the cost of its assets (cost includes the purchase price, acquisition expenses, capital expenditures and other customarily capitalized costs, but excludes acquisition fees) plus costs and expenses incurred by the ARCT III Advisor in providing asset management services. However, the asset management fee was to be reduced by any amounts payable to ARCT III’s property manager as an oversight fee, such that the aggregate of the asset management fee and the oversight fee did not exceed 0.75% per annum of the cost of ARCT III’s assets plus costs and expenses incurred by the ARCT III Advisor in providing asset management services. Prior to July 1, 2012, this fee was payable in monthly installments at the discretion of ARCT III’s board of directors in cash, common stock or restricted stock grants, or any combination thereof. Asset management fees for the year ended December 31, 2013 are included in management fees to affiliates in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2013. These asset management fees for the years ended December 31, 2012 and 2011 were waived.
Effective July 1, 2012, the payment of asset management fees in monthly installments in cash, shares or restricted stock grants, or any combination thereof to the ARCT III Advisor was eliminated. Instead, ARCT III issued (subject to periodic approval by its board of directors) to the ARCT III Advisor performance-based restricted partnership units of the ARCT III OP designated as “ARCT III Class B units,” which were intended to be profits interests and to vest, and no longer be subject to forfeiture, at such time as: (x) the value of the ARCT III OP’s assets plus all distributions equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “economic hurdle”); and (y) a liquidity event had occurred.
The ARCT III Advisor received distributions on unvested ARCT III Class B units equal to the distribution rate received on ARCT III common stock. These distributions were included in management fees to affiliates in the accompanying consolidated statements of operations and comprehensive loss until the performance condition was considered probable to occur. In 2012, the ARCT III board of directors approved the issuance of 145,022 ARCT III Class B units to the ARCT III Advisor for asset management services it provided. In 2013, the ARCT III board of directors approved issuance of an additional 603,599 ARCT III Class B units to the ARCT III Advisor for asset management services it provided. As of December 31, 2012, ARCT III did
F-69
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
not consider achievement of the performance condition to be probable as the shareholder vote for the ARCT III Merger, which would allow vesting of these ARCT III Class B Units, was not completed. The performance condition related to these ARCT III Class B units was satisfied upon the completion of the ARCT III Merger and as a result a $9.4 million expense was recorded at that time. The 748,621 total ARCT III Class B units then converted into ARCT III OP Units which converted on a one-to-one basis into 711,190 OP Units after the application of the ARCT III Exchange Ratio.
In connection with a 60-day extension of the advisory agreement which was executed in order to facilitate the smooth transition of advisory services following the consummation of the ARCT III Merger, the General Partner incurred and paid additional asset management fees of $2.3 million during 2013.
ARCT IV
In connection with the asset management services provided by the ARCT IV Advisor, ARCT IV issued (subject to periodic approval by the ARCT IV board of directors) to the ARCT IV Advisor performance-based restricted partnership units of the ARCT IV OP designated as “ARCT IV Class B Units,” which were intended to be profits interests and to vest, and no longer be subject to forfeiture, at such time as: (x) the value of the ARCT IV OP’s assets plus all distributions that equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “economic hurdle”); (y) any one of the following occurs: (1) the termination of the advisory agreement by an affirmative vote of a majority of ARCT IV’s independent directors without cause; (2) a listing; or (3) another liquidity event; and (z) the ARCT IV Advisor was still providing advisory services to ARCT IV.
The calculation of the ARCT IV asset management fees was equal to: (i) 0.1875% of the cost of ARCT IV’s assets; divided by (ii) the value of one share of ARCT IV common stock as of the last day of such calendar quarter. When approved by the ARCT IV board of directors, the ARCT IV Class B Units were issued to the ARCT IV Advisor quarterly in arrears pursuant to the terms of the ARCT IV OP agreement. During the year ended December 31, 2013, the ARCT IV board of directors approved the issuance of 492,483 ARCT IV Class B Units to the ARCT IV Advisor in connection with this arrangement. As of December 31, 2013, ARCT IV did not consider achievement of the performance condition to be probable and no expense was recorded at that time. The ARCT IV Advisor received distributions on unvested ARCT IV Class B Units equal to the distribution rate received on the ARCT IV common stock. The performance condition related to the 498,857 ARCT IV Class B Units, which includes units issued for the period of January 1, 2014 through the ARCT IV Merger Date, was satisfied upon the completion of the ARCT IV Merger. These ARCT IV Class B Units immediately converted into OP Units at the 2.3961 exchange ratio and the Company recorded an expense of $13.9 million based on the fair value of the ARCT IV Class B Units during 2014.
Property Management Fees
ARCT III also had agreed to pay an affiliate of ARC, unless it contracted with a third party, a property management fee of up to 2% of gross revenues from ARCT III’s stand-alone single-tenant net leased properties and 4% of gross revenues from its multi-tenant properties, plus, in each case, market-based leasing commissions applicable to the geographic location of the property. ARCT III also reimbursed the affiliate for property level expenses. If ARCT III contracted directly with third parties for such services, it paid them customary market fees and paid the affiliated property manager an oversight fee of up to 1% of the gross revenues of the property managed. The fees totaled $0.8 million during 2013.
Quarterly Incentive Fee
Prior to the termination of the amended and restated management agreement upon the transition to self-management, the General Partner was required to pay the Former Manager a quarterly incentive fee, calculated based on 20% of the excess of General Partner’s annualized core earnings (as defined in the management agreement with the Former Manager) over the weighted-average number of shares multiplied by the weighted-average price per share of common stock. One half of each quarterly installment of the incentive fee was payable in shares of common stock. The remainder of the incentive fee was payable in cash. No such incentive fees were incurred or paid to the Former Manager from inception through termination of the management agreement.
F-70
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
General and Administrative Expenses
The General Partner, ARCT III and ARCT IV recorded general and administrative expenses as shown in the table below for services provided by the Former Manager and its affiliates related tot the operations of the General Partner during the periods indicated (in thousands):
| Year Ended December 31, | ||||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| General and administrative expenses: |
||||||||||||
| Advisory fees and reimbursements |
$ | 5,602 | $ | 826 | $ | 168 | ||||||
| Equity awards |
97,604 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 103,206 | $ | 826 | $ | 168 | ||||||
|
|
|
|
|
|
|
|||||||
Advisory Fees and Reimbursements
The General Partner, ARCT III and ARCT IV agreed to reimburse the Former Manager and its affiliates, as applicable, for their out-of-pocket costs incurred by those entities, including without limitation, legal fees and expenses, transfer agent fees, due diligence fees and expenses, other third party fees and expenses, costs of appraisals, travel expenses, nonrefundable option payments and deposits on properties not acquired, accounting fees and expenses, title insurance premiums and other closing costs, personnel costs and miscellaneous expenses relating to the selection, acquisition and due diligence of properties or general operation of the company.
Equity Awards
Upon consummation of the ARCT III Merger, the General Partner entered into the OPP with the Former Manager. The OPP gave the Former Manager the opportunity to earn compensation upon the attainment of certain stockholder value-creation targets. Pursuant to previous authorization of the Company’s board of directors, as a result of the termination of the management agreement with the Former Manager, all LTIP Units awarded under the OPP were deemed earned and vested upon the consummation of the General Partner’s transition to self-management on January 8, 2014 and were converted into OP Units on such date. The General Partner recorded an expense of $32.7 million for the valuation of the award through December 31, 2013 and an additional expense of $59.6 million due to the accelerated vesting of the OPP. This accelerated vesting was recorded in 2013 as the General Partner determined that the required service had been effectively complete as of December 31, 2013. See Note 18 – Equity-based Compensation (As Restated) for a more detailed description of this plan. This total expense of $92.3 million is included in general and administrative expenses in the accompanying consolidated statements of operations.
The General Partner granted 620,000 and 93,683 restricted share awards to employees of affiliates of the Former Manager during the years ended December 31, 2013 and 2012, respectively. These were three separate grants and the grant date fair values for these issuances were $1.0 million in June 2012, $4.5 million in February 2013 and $4.4 million in July 2013.
Separately, as a result of the ARCT III Merger and the termination of the Management Agreement with the Former Manager, certain restricted shares held by employees of affiliates of the Former Manager were fully vested. This aggregate expense of $5.3 million is included in general and administrative expense in the accompanying consolidated statements of operations.
Indirect Affiliate Expenses
During the year ended December 31, 2013, a wholly owned subsidiary of ARC Real Estate purchased a historic building in Newport, Rhode Island (“Audrain”) with plans to renovate the second floor to serve as offices for certain executives of the General Partner and affiliates of the Former Manager. ARC Real Estate requested that invoices relating to the second floor renovation and tenant improvements and all building operating expenses either be reimbursed by the OP to the affiliate of the Former Manager or be paid directly to the contractors and vendors. During the year ended December 31, 2013, the OP paid $27,000 for architectural costs relating to the renovation directly to a third party. Tenant improvement, furniture and operating expenses incurred during 2014 in respect of Audrain totaled $8.8 million.
F-71
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
In addition in 2013, the OP entered into a lease agreement with the subsidiary of ARC Real Estate for a term of 15 years with base rent of $0.4 million due annually beginning October 2013. As there were tenants occupying the building when it was purchased, these tenants subleased their premises from the Company until their leases terminated. During the year ended December 31, 2013, the OP incurred and paid $96,000 for base rent, which was partially offset by $55,000 of rental revenue received from the subtenants. Net rent expense incurred during 2014 totaled $0.2 million.
In November 2014, as a result of findings of the investigation conducted by the Audit Committee, the OP terminated the lease agreement and was reimbursed for the tenant improvement and furniture costs incurred by the OP totaling approximately $8.5 million, including the architectural costs of $27,000 incurred by the OP in 2013. Reimbursement was made by delivery and retirement of 916,423 OP Units held by an affiliate of the Former Manager. The General Partner never moved into or occupied the building.
Additional Related Party Transactions
The following related party transactions were not included in the tables above.
Tax Protection Agreement
The OP is party to a tax protection agreement with ARC Real Estate, which contributed its 100% indirect ownership interests in 63 of the General Partner’s properties to the Operating Partnership in the formation transactions related to the General Partner’s IPO. Pursuant to the tax protection agreement, the OP has agreed to indemnify ARC Real Estate for its tax liabilities (plus an additional amount equal to the taxes incurred as a result of such indemnity payment) attributable to its built-in gain, as of the closing of the formation transactions, with respect to its interests in the contributed properties (other than two vacant properties contributed), if the General Partner sells, conveys, transfers or otherwise disposes of all or any portion of these interests in a taxable transaction on or prior to September 6, 2021. The tax protection agreement provides that the sole and exclusive rights and remedies of ARC Real Estate under the tax protection agreement will be a claim against the Operating Partnership for ARC Real Estate’s tax liabilities as calculated in the tax protection agreement, and ARC Real Estate shall not be entitled to pursue a claim for specific performance or bring a claim against any person that acquires a protected party from the Operating Partnership in violation of the tax protection agreement.
Investment from the ARCT III Special Limited Partner
In connection with the ARCT III Merger, the ARCT III Special Limited Partner invested $0.8 million in the ARCT III OP and was subsequently issued 56,797 OP Units in respect thereof upon the closing of the ARCT III Merger after giving effect to the ARCT III Exchange Ratio. This investment is included in non-controlling interests in the accompanying consolidated balance sheets.
Investment in an Affiliate of the Former Manager
During the year ended December 31, 2013, the General Partner invested $10.0 million in a real estate fund advised by an affiliate of the Former Manager, American Real Estate Income Fund, which invests primarily in equity securities of other publicly traded REITs, and subsequently reinvested dividends totaling $0.1 million in the fund. During the fourth quarter of 2013, the General Partner sold a portion of such investments with an original cost of $8.5 million at a loss of $0.4 million. The fair value of the investment at December 31, 2013 was $1.5 million.
Ownership by Affiliates of the Former Manager
Certain affiliates of the Former Manager own shares of the General Partner’s common stock, shares of unvested restricted common stock, OP Units and LTIP Units. As of December 31, 2013 and 2012, 4.37% and 1.35%, respectively, of the total equity units issued by the General Partner and the OP were owned by affiliates.
F-72
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013
Due to Affiliates
Due to affiliates, as reported in the accompanying consolidated balance sheets, is comprised of the following amounts discussed above (in thousands):
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| Due to affiliates: |
||||||||
| Offering related costs |
$ | 220 | $ | 100 | ||||
| Merger and other non-routine transactions |
38,645 | 1,046 | ||||||
| Management fees to affiliates |
4,969 | — | ||||||
| General and administrative |
59,600 | 376 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 103,434 | $ | 1,522 | ||||
|
|
|
|
|
|||||
See Note 24 — Subsequent Events (As Restated) for significant subsequent events.
For the year ended December 31, 2013, the OP excluded 9,591,173 OP Units outstanding, which are convertible to an equal number of shares of the General Partner’s common stock, all LTIP Units,
F-73
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Note 20 — Economic Dependency
Prior to transitioning to self-management on January 8, 2014, the General Partner engaged, under various agreements, the Former Manager and its affiliates to provide certain services that are essential to the Operating Partnership, including asset management services and supervision of the management and leasing of properties owned by the Operating Partnership, as well as other administrative responsibilities for the Operating Partnership including information technology, legal services and investor relations. See Note 24 — Subsequent Events (As Restated) for additional information on the General Partner’s transition to self-management.
As a result of these relationships, the Operating Partnership was dependent upon the Former Manager, ARC and their affiliates. In the event that these companies were unable to provide the Operating Partnership with the respective services, the Operating Partnership would have been required to find alternative providers of these services. As a result of the ARCT III Merger, ARCP internalized certain accounting and property acquisition services previously performed by the Former Manager and its affiliates. ARCP may from time to time engage the Former Manager for legal, information technology or other support services for which it will pay a fee.
Note 21 — Net Loss Per Unit (As Restated)
The following is a summary of the basic and diluted net loss per unit computation for the years ended December 31, 2013, 2012 and 2011 (amounts in thousands, expect for units and per unit data):
| Year Ended December 31, | ||||||||||||
| 2013 (As Restated) |
2012 (As Restated) |
2011 | ||||||||||
| Net loss from continuing operations attributable to unitholders |
$ | (507,781 | ) | $ | (41,492 | ) | $ | (3,952 | ) | |||
| Net loss from discontinued operations attributable to common unitholders |
(34 | ) | (745 | ) | (852 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net loss attributable to common unitholders |
(507,815 | ) | (42,237 | ) | (4,804 | ) | ||||||
| Less: dividends declared on preferred units and RSUs |
(3,631 | ) | (368 | ) | — | |||||||
|
|
|
|
|
|
|
|||||||
| Net loss attributable to common unitholders, net of dividends on preferred unit and RSUs |
$ | (511,446 | ) | $ | (42,605 | ) | $ | (4,804 | ) | |||
|
|
|
|
|
|
|
|||||||
| Weighted-average common units outstanding (1) |
214,352,289 | 104,083,222 | 3,818,872 | |||||||||
|
|
|
|
|
|
|
|||||||
| Basic and diluted net loss per share from continuing operations attributable to common unitholders |
$ | (2.37 | ) | $ | (0.40 | ) | $ | (1.04 | ) | |||
|
|
|
|
|
|
|
|||||||
| Basic and diluted net loss per share from discontinued operations attributable to common unitholders |
$ | — | $ | (0.01 | ) | $ | (0.22 | ) | ||||
|
|
|
|
|
|
|
|||||||
| Basic and diluted net loss per share attributable to common unitholders |
$ | (2.37 | ) | $ | (0.41 | ) | $ | (1.26 | ) | |||
|
|
|
|
|
|
|
|||||||
| (1) | Weighted-average units for the year ended December 31, 2013 are adjusted as if the acquisition of all outstanding shares of ARCT III common stock for cash in conjunction with the ARCT III Merger, had been completed at inception. Weighted-average units for the year ended December 31, 2013, excluding this pro forma adjustment, were 218,711,185 and net loss was $2.34 per unit, basic and diluted. |
For the year ended December 31, 2013, the Operating Partnership excluded 946,442 shares of unvested restricted units outstanding and 21,735,008 Series D Preferred Units outstanding as of December 31, 2013 from the calculation of diluted net loss per share as the effect would have been antidilutive.
F-74
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Note 22 — Discontinued Operations and Properties Held for Sale
The Operating Partnership separately classifies properties held for sale in the accompanying consolidated balance sheets and operating results for those properties as discontinued operations in the accompanying consolidated statements of operations and comprehensive loss. In the normal course of business, changes in the market or changes in credit risk of certain tenants, among other factors, may compel the Operating Partnership to decide to classify a property as held for sale or reclassify a property that is designated as held for sale back to held for investment. In these situations, the property is transferred to held for sale or back to held for investment at the lesser of fair value or depreciated cost. As of December 31, 2013 and 2012, the Operating Partnership held one and two properties, respectively, classified as held for sale on the accompanying respective consolidated balance sheets.
On March 5, 2013, the Operating Partnership executed a purchase and sale agreement to sell a Citizens Bank branch in Worth, IL classified as held for sale as of December 31, 2013. The sale price of the asset is $0.7 million in cash, which approximates the carrying value of the property.
F-75
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Note 23 — Quarterly Results (Unaudited) (As Restated)
Presented below is a summary of the unaudited quarterly financial information for the year ended December 31, 2013 (in thousands, except unit and per unit amounts). See Note 2 — Restatement of Previously Issued Financial Statements in the Company’s Quarterly Reports on Form 10-Q/A for the fiscal periods ended March 31, 2014 and June 30, 2014, respectively, and Form 10-Q for the fiscal periods ended September 30, 2014, for further discussion on the Quarterly Results as restated.
| Quarters Ended (1) | ||||||||||||||||
| March 31, 2013 (As Restated) |
June 30, 2013 (As Restated) |
September 30, 2013 (As Restated) |
December 31, 2013 (As Restated) |
|||||||||||||
| Revenues |
$ | 43,235 | $ | 54,945 | $ | 95,255 | $ | 136,226 | ||||||||
| Net loss from continuing operations attributable to unitholders |
(145,937 | ) | (72,311 | ) | (83,450 | ) | (206,083 | ) | ||||||||
| Net income (loss) from discontinued operations attributable to common unitholders |
(2 | ) | 36 | 96 | (150 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to common unitholders |
(145,939 | ) | (72,275 | ) | (83,354 | ) | (206,233 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Less: dividends declared on preferred units and RSUs |
(193 | ) | (233 | ) | (199 | ) | (3,006 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to common unitholders, net of dividends on preferred units and RSUs |
$ | (146,132 | ) | $ | (72,508 | ) | $ | (83,553 | ) | $ | (209,239 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average units outstanding |
172,351,898 | 209,408,106 | 231,682,236 | 242,467,964 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted loss per share from continuing operations attributable to common unitholders |
$ | (0.85 | ) | $ | (0.35 | ) | $ | (0.36 | ) | $ | (0.85 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted loss per share from discontinued operations attributable to common unitholders |
$ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted loss per share attributable to common unitholders |
$ | (0.85 | ) | $ | (0.35 | ) | $ | (0.36 | ) | $ | (0.85 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | The historical financial statements have been adjusted for discontinued operations and figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
The following tables present the combined impact of all changes to the applicable line items in the consolidated financial statements to the Company’s previously issued consolidated financial statements each of the fiscal quarters in for the year ended December 31, 2013, as disclosed in Note 2— Restatement of Previously Issued Financial Statements (in thousands, except share amounts):
| Three Months Ended March 31, 2013 | Three Months Ended June 30, 2013 | |||||||||||||||||||||||
| As Previously Reported (1) |
Restatement Adjustments |
As Restated | As Previously Reported (1) |
Restatement Adjustments |
As Restated | |||||||||||||||||||
| Revenues |
$ | 42,897 | $ | — | $ | 42,897 | $ | 54,945 | $ | — | $ | 54,945 | ||||||||||||
| Net loss from continuing operations attributable to stockholders |
(141,161 | ) | (2,703 | ) | (143,864 | ) | (71,992 | ) | 2,389 | (69,603 | ) | |||||||||||||
| Net loss from discontinued operations attributable to stockholders |
(2 | ) | (14 | ) | (16 | ) | 34 | (34 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss attributable to the Company |
(141,163 | ) | (2,717 | ) | (143,880 | ) | (71,958 | ) | 2,355 | (69,604 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less: dividends declared on preferred shares and RSUs |
(193 | ) | — | (193 | ) | (233 | ) | — | (233 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss attributable to the common stockholders |
$ | (141,356 | ) | $ | (2,717 | ) | $ | (144,073 | ) | $ | (72,191 | ) | $ | 2,355 | $ | (69,836 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Weighted-average shares outstanding |
167,847,516 | — | 167,847,516 | 198,956,355 | — | 198,956,355 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Basic and diluted loss per share from continuing operations attributable to common stockholders |
$ | (0.84 | ) | $ | (0.02 | ) | $ | (0.86 | ) | $ | (0.36 | ) | $ | 0.01 | $ | (0.35 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Basic and diluted net loss per share attributable to common stockholders |
$ | (0.84 | ) | $ | (0.02 | ) | $ | (0.86 | ) | $ | (0.36 | ) | $ | 0.01 | $ | (0.35 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
F-76
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
| Three Months Ended September 30, 2013 | Three Months Ended December 31, 2013 | |||||||||||||||||||||||
| As Previously Reported (1) |
Restatement Adjustments |
As Restated | As Previously Reported (1) |
Restatement Adjustments |
As Restated | |||||||||||||||||||
| Revenues |
$ | 95,255 | $ | — | $ | 95,255 | $ | 136,781 | $ | (555 | ) | $ | 136,226 | |||||||||||
| Net loss from continuing operations attributable to stockholders |
(82,768 | ) | 2,598 | (80,170 | ) | (178,800 | ) | (19,029 | ) | (197,829 | ) | |||||||||||||
| Net loss from discontinued operations attributable to stockholders |
91 | (122 | ) | (31 | ) | (142 | ) | 156 | 14 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss attributable to the Company |
(82,677 | ) | 2,476 | (80,201 | ) | (178,942 | ) | (18,873 | ) | (197,815 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less: dividends declared on preferred shares and RSUs |
(199 | ) | — | (199 | ) | (3,006 | ) | — | (3,006 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss attributable to the common stockholders |
$ | (82,876 | ) | $ | 2,476 | $ | (80,400 | ) | $ | (181,948 | ) | $ | (18,873 | ) | $ | (200,821 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Weighted-average shares outstanding |
221,707,934 | — | 221,707,920 | 231,969,433 | — | 231,969,433 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Basic and diluted loss per share from continuing operations attributable to common stockholders |
$ | (0.37 | ) | $ | 0.01 | $ | (0.36 | ) | $ | (0.77 | ) | $ | (0.10 | ) | $ | (0.87 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Basic and diluted loss per share from discontinued operations attributable to common stockholders |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Basic and diluted net loss per share attributable to common stockholders |
$ | (0.37 | ) | $ | 0.01 | $ | (0.36 | ) | $ | (0.78 | ) | $ | (0.09 | ) | $ | (0.87 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
Presented below is a summary of the unaudited quarterly financial information for each of the fiscal quarters in the year ended December 31, 2012 (in thousands, except share and per share amounts):
| Quarters Ended (1) | ||||||||||||||||
| March 31, 2012 |
June 30, 2012 |
September 30, 2012 |
December 31, 2012 |
|||||||||||||
| Revenues |
$ | 6,240 | $ | 11,534 | $ | 18,945 | $ | 30,488 | ||||||||
| Net loss from continuing operations attributable to unitholders |
(5,154 | ) | (7,084 | ) | (12,833 | ) | (16,421 | ) | ||||||||
| Net income (loss) from discontinued operations attributable to common unitholders |
(336 | ) | (166 | ) | (3 | ) | (240 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to common unitholders |
(5,490 | ) | (7,250 | ) | (12,836 | ) | (16,661 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Less: dividends declared on preferred units and RSUs |
— | (70 | ) | (140 | ) | (158 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to common unitholders, net of dividends on preferred units and RSUs |
$ | (5,490 | ) | $ | (7,320 | ) | $ | (12,976 | ) | $ | (16,819 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average shares outstanding |
23,924,122 | 68,819,321 | 139,241,957 | 182,324,209 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted loss per share from continuing operations attributable to common unitholders |
$ | (0.22 | ) | $ | (0.10 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted loss per share from discontinued operations attributable to common unitholders |
$ | (0.01 | ) | $ | — | $ | — | $ | — | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted loss per share attributable to common unitholders |
$ | (0.23 | ) | $ | (0.11 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Certain historical balances have been restated for discontinued operations. |
F-77
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
The following tables present the combined impact of all changes to the applicable line items in the consolidated financial statements to the Company’s previously issued consolidated financial statements for the year ended December 31, 2012, as disclosed in Note 2— Restatement of Previously Issued Financial Statements (in thousands, except share amounts):
| Three Months Ended March 31, 2012 | Three Months Ended June 30, 2012 | |||||||||||||||||||||||
| As Previously Reported (1) |
Restatement Adjustments |
As Restated | As Previously Reported (1) |
Restatement Adjustments |
As Restated | |||||||||||||||||||
| Revenues |
$ | 6,240 | $ | — | $ | 6,240 | $ | 11,534 | $ | — | $ | 11,534 | ||||||||||||
| Net loss from continuing operations attributable to stockholders |
(4,722 | ) | — | (4,722 | ) | (7,012 | ) | — | (7,012 | ) | ||||||||||||||
| Net loss from discontinued operations attributable to stockholders |
(322 | ) | — | (322 | ) | (77 | ) | — | (77 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss attributable to the Company |
(5,044 | ) | — | (5,044 | ) | (7,089 | ) | — | (7,089 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less: dividends declared on preferred shares and RSUs |
— | — | — | (70 | ) | — | (70 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss attributable to the common stockholders |
$ | (5,044 | ) | $ | — | $ | (5,044 | ) | $ | (7,159 | ) | $ | — | $ | (7,159 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Weighted-average shares outstanding |
23,614,122 | — | 23,614,122 | 68,317,195 | — | 68,317,195 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Basic and diluted loss per share from continuing operations attributable to common stockholders |
$ | (0.20 | ) | $ | — | $ | (0.20 | ) | $ | (0.10 | ) | $ | — | $ | (0.10 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Basic and diluted loss per share from discontinued operations attributable to common stockholders |
$ | (0.01 | ) | $ | — | $ | (0.01 | ) | $ | — | $ | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Basic and diluted net loss per share from continuing operations attributable to common stockholders |
$ | (0.21 | ) | $ | — | $ | (0.21 | ) | $ | (0.10 | ) | $ | — | $ | (0.10 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
| Three Months Ended September 30, 2012 | Three Months Ended December 31, 2012 | |||||||||||||||||||||||
| As Previously Reported (1) |
Restatement Adjustments |
As Restated | As Previously Reported (1) |
Restatement Adjustments |
As Restated | |||||||||||||||||||
| Revenues |
$ | 18,945 | $ | — | $ | 18,945 | $ | 30,488 | $ | — | $ | 30,488 | ||||||||||||
| Net loss from continuing operations attributable to stockholders |
(12,768 | ) | — | (12,768 | ) | (16,735 | ) | 276 | (16,459 | ) | ||||||||||||||
| Net loss from discontinued operations attributable to stockholders |
(41 | ) | — | (41 | ) | (259 | ) | 8 | (251 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss attributable to the Company |
(12,809 | ) | — | (12,809 | ) | (16,994 | ) | 284 | (16,710 | ) | ||||||||||||||
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| Less: dividends declared on preferred shares and RSUs |
(140 | ) | — | (140 | ) | (158 | ) | — | (158 | ) | ||||||||||||||
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| Net loss attributable to the common stockholders |
$ | (12,949 | ) | $ | — | $ | (12,949 | ) | $ | (17,152 | ) | $ | 284 | $ | (16,868 | ) | ||||||||
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| Weighted-average shares outstanding |
138,348,622 | — | 138,348,622 | 180,931,150 | — | 180,931,150 | ||||||||||||||||||
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| Basic and diluted loss per share from continuing operations attributable to common stockholders |
$ | (0.09 | ) | $ | — | $ | (0.09 | ) | $ | (0.09 | ) | $ | — | $ | (0.09 | ) | ||||||||
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| Basic and diluted loss per share from discontinued operations attributable to common stockholders |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
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| Basic and diluted net loss per share from continuing operations attributable to common stockholders |
$ | (0.09 | ) | $ | — | $ | (0.09 | ) | $ | (0.09 | ) | $ | — | $ | (0.09 | ) | ||||||||
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| (1) | These financial figures have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV. |
F-78
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Note 24 — Subsequent Events (As Restated)
The following significant events occurred subsequent to December 31, 2013:
Completion of Acquisition of Assets
The following table presents certain information about the properties that the Operating Partnership (on behalf of ARCP) acquired from January 1, 2014 to February 26, 2015 (dollar amounts in millions):
| No. of Buildings | Square Feet (in millions) |
Base Purchase Price (1) |
||||||||||
| Total Portfolio — December 31, 2013 (2) |
2,559 | 43,834,493 | $ | 7,392,610 | ||||||||
| Acquisitions, net of disposals (3) (4) |
2,101 | 59,373,760 | 10,468,192 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Portfolio — February 26, 2015 (2) |
4,660 | 103,208,253 | $ | 17,860,802 | ||||||||
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| (1) | Contract purchase price, excluding acquisition and transaction related costs. |
| (2) | Total portfolio excludes one vacant property contributed in September 2011, which was classified as held for sale as of December 31, 2013. |
| (3) | As part of the Cole Merger, the Company acquired 1,053 properties in February 2014 for a base purchase price of $8.7 billion. |
| (4) | The Red Lobster portfolio, which consists of 542 properties, was purchased in July 2014 for a base purchase price of $1.7 billion. |
Transition to Self-Management
On January 8, 2014, the General Partner completed its transition to self-management. In connection with becoming self-managed, the General Partner terminated its management agreement with the Former Manager and certain former executives and employees of the Former Manager and its affiliates became employees of the Operating Partnership.
Termination of Management Agreement
In connection with the transition by the General Partner to self-management, on January 8, 2014, the General Partner and the Former Manager entered into an Amendment and Acknowledgment of Termination of Amended and Restated Management Agreement (the “Termination Agreement”), dated January 8, 2014. The Termination Agreement provided for termination of the Amended and Restated Management Agreement, dated February 28, 2013, between the General Partner and the Former Manager, effective January 8, 2014. Pursuant to the Termination Agreement, the Former Manager agreed to continue to provide services previously provided under the Management Agreement, to the extent required by the Operating Partnership, for a period of 60 days following January 8, 2014 and received a payment in the amount of $10.0 million for providing such services.
Pursuant to an Assignment and Assumption Agreement (the “Assignment”) dated January 8, 2014 between ARC, an affiliate of the Former Manager and RCS Advisory Services, LLC, ARC assigned to the General Partner, and the General Partner assumed, certain of the rights and obligations under that certain Services Agreement dated as of June 10, 2013 between ARC and RCS Advisory Services, LLC (the “Services Agreement”). Under the Services Agreement, RCS Advisory Services, LLC and its affiliates had been providing to the General Partner and Operating Partnership certain transaction management services and other services, employees and other resources. The Assignment enables the General Partner and Operating Partnership to continue to receive the services and resources contemplated under the Services Agreement, at the General Partner’s discretion.
In addition, pursuant to a separate Transition Services Agreement (the “Transition Services Agreement”), dated October 21, 2013, affiliates of the Former Manager agreed to provide certain transition services, including accounting support, acquisition support, investor relations support, public relations support, human resources and administration, general human resources duties, payroll services, benefits services, insurance and risk management, information technology, telecommunications and Internet and services relating to office supplies. The Transition Services Agreement was in effect for a 60-day term beginning on the date the General Partner became self-managed. To the extent the General Partner or the Operating Partnership requested any services, the General Partner and Operating Partnership were required to pay a fee at an hourly rate or flat rate to be agreed on, not to exceed a market rate for the services to be provided pursuant to the Transition Services Agreement.
F-79
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Furniture, Fixtures and Equipment
On January 8, 2014, the Operating Partnership entered into the Asset Purchase and Sale Agreement with the Former Manager (the “Purchase Agreement”), pursuant to which the Former Manager agreed to sell to the Operating Partnership certain furniture, fixtures and equipment and other assets used by the Former Manager in connection with the business of the Operating Partnership. Under the Purchase Agreement, the Operating Partnership paid the Former Manager $10.0 million for the furniture, fixtures and equipment and other assets. The Operating Partnership incurred and recorded a total of $15.8 million of expenses associated with the purchase of the FF&E and other assets in 2014. See Note 19 — Related Party Transactions and Arrangements (As Restated).
Repayment of Debt
On July 14, 2014, the Operating Partnership repaid in full $19.2 million of the Senior Notes and, on July 30, 2014, the Operating Partnership repaid in full $30.9 million of the Trust Preferred Notes, both of which were assumed as part of the CapLease Merger. In addition, on June 6, 2014 the Operating Partnership repaid in full $150.0 million of the Secured Credit Facility assumed as part of the CapLease Merger.
Executive Leadership Changes and Audit Committee Investigation
On September 30, 2014, the General Partner announced that, effective October 1, 2014, David S. Kay would become Chief Executive Officer of the General Partner and Lisa E. Beeson would become the General Partner’s President. Nicholas S. Schorsch, who had served as the General Partner’s Chief Executive Officer, would remain the General Partner’s Executive Chairman.
On October 29, 2014, the General Partner filed a Current Report on Form 8-K with the SEC disclosing the General Partner’s conclusion that the previously issued consolidated financial statements and other financial information contained in the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and the Company’s Quarterly Reports on Form 10-Q for the fiscal periods ended March 31, 2014 and June 30, 2014, and the General Partner’s earnings releases and other financial communications for these periods, should no longer be relied upon. Results of the investigation are further discussed within Note 2 – Restatement of Previously Issued Financial Statements.
On October 28, 2014, Brian S. Block and Lisa Pavelka McAlister, the General Partner’s Executive Vice President, Chief Financial Officer, Treasurer and Secretary and Senior Vice President and Chief Accounting Officer, respectively resigned from the General Partner. The General Partner’s board of directors appointed Michael Sodo to serve as the General Partner’s Chief Financial Officer and Gavin Brandon to serve as the General Partner’s Chief Accounting Officer.
On December 12, 2014, Nicholas S. Schorsch resigned as Executive Chairman and a director of the General Partner. He also resigned from all other employment and board positions that he held at the General Partner and its subsidiaries and certain General Partner-related entities (including the non-traded real estate investment trusts sponsored or managed by the General Partner or its affiliates).
On December 15, 2014, David S. Kay resigned as Chief Executive Officer (“CEO”) and a director of the General Partner and as CEO of the Operating Partnership. Lisa E. Beeson also resigned as President and Chief Operating Officer of the General Partner and Operating Partnership. In addition, each of them resigned from any other employment or board positions held with the General Partner, its subsidiaries and certain General Partner-related entities (including the non-traded real estate investment trusts sponsored or managed by the General Partner or its affiliates).
In connection with resignations, Messrs. Schorsch, Block and Kay and Ms. Beeson relinquished approximately 2.7 million shares of stock as well as outstanding interests in the Company’s 2014 Outperformance Plan.
Effective December 15, 2014, William G. Stanley, who had been serving as the General Partner’s Lead Independent Director, became the General Partner’s Interim Chief Executive Officer and Interim Chairman of the General Partner’s board of directors, thus resigning from his role as Lead Independent Director, which was assumed by another independent director. Mr. Stanley will lead the General Partner until permanent replacements are named. The Compensation Committee of the General Partner’s board of directors has commenced a search for a new Chief Executive Officer and a new Chairman of the General Partner’s board of directors.
Unconsummated Sale of Cole Capital to RCS
On October 1, 2014, the General Partner announced that the OP had entered into an equity purchase agreement (the “Agreement”), dated as of September 30, 2014 with and RCS Capital Corporation (“RCAP”), pursuant to which RCAP would acquire Cole Capital, the General Partner’s private capital management business, for at least $700.0 million. As part of the transaction, the General Partner would be entitled to an earn-out of up to an additional $130.0 million based upon Cole Capital’s 2015 EBITDA.
On November 3, 2014, the General Partner received notice from RCAP purporting to terminate the Agreement.
F-80
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
On December 4, 2014, the General Partner issued a press release announcing that it had entered into a settlement agreement with RCAP that resolved their dispute relating to the Agreement. The settlement, in which the General Partner received $60.0 million, resolved litigation brought by the General Partner in the Delaware Court of Chancery to enforce its rights under the Agreement.
The settlement included: $42.7 million in cash paid by RCAP to the General Partner; a $15.3 million unsecured note issued by RCAP to the General Partner; and a release of the General Partner from its obligation to pay $2.0 million to RCAP or its affiliates relating to another matter described in the press release. The $42.7 million in cash included a $10.0 million payment already delivered to the General Partner by RCAP in connection with the Agreement. The two-year unsecured note bears interest at an 8.0% interest rate per annum. In addition, the General Partner and RCAP have agreed to terminate, unwind or otherwise discontinue all agreements, arrangements and understandings between the two parties and any of their respective subsidiaries.
Abandoned Spin-off of Multi-Tenant Shopping Center Portfolio
On March 13, 2014, the General Partner announced its intention to spin off its multi-tenant shopping center business into a publicly traded REIT, American Realty Capital Centers, Inc., which was expected to operate under the name “ARCenters” and to trade on the NASDAQ Global Market under the symbol “ARCM.” The Operating Partnership was expected to retain 25% ownership of ARCM. The spin-off was expected to be effectuated through a pro rata taxable special distribution of one share of ARCM common stock for every 10 shares of the General Partner’s common stock and every 10 Limited Partner OP Units held by third parties in the Operating Partnership. On April 4, 2014, ARCM filed a Registration Statement on Form 10 to register ARCM’s common stock, par value $0.01 per share, pursuant to Section 12(b) of the Exchange Act so that, upon consummation of the spin-off, shares of ARCM received by holders of the General Partner’s common stock, or Limited Partner OP Units, as applicable, could freely trade their newly received ARCM common stock. ARCM was expected to be externally managed by the General Partner. On May 21, 2014, the General Partner announced that it had reassessed its plans for the multi-tenant shopping center portfolio and entered into a letter of intent to sell such portfolio to Blackstone, expecting to finalize pertinent documentation related thereto within 30 days of such date. The properties included in such sale were the same properties that would have been spun off into ARCM and, consequently, the General Partner abandoned its proposed spin-off at such time. On June 11, 2014, indirect subsidiaries of the OP entered into an Agreement of Purchase and Sale with BRE DDR Retail Holdings III LLC, an entity indirectly jointly owned by affiliates of Blackstone Real Estate Partners VII L.P. and DDR Corp., pursuant to which the parties definitively documented the sale of the General Partner’s multi-tenant shopping center portfolio. Such sale was consummated on October 17, 2014, as described further below. The General Partner expects to withdraw its filed Registration Statement on Form 10 intended to register shares of common stock of ARCM.
Multi-tenant Shopping Center Portfolio Sale
On October 17, 2014, the General Partner completed the sale of its multi-tenant shopping center portfolio for $1.9 billion to a joint venture (the “Joint Venture”) between affiliates of Blackstone Real Estate Partners VII (“Blackstone”) and DDR Corp (“DDR”). Additionally, the General Partner entered into a letter of intent with an unrelated third party to sell five multi-tenant properties for $52.3 million bringing total sale proceeds to $2.0 billion. The transaction aimed to simplify the General Partner’s business model, allowing it to focus solely on its single-tenant, net lease investments. The disposition to Blackstone and DDR provided $1.3 billion of net proceeds, of which $1.2 billion were used to reduce the General Partner’s leverage by paying down the General Partner’s line of credit, and a loss on sale of $261.1 million, which includes the write-off of $195.5 million of goodwill allocated to the cost basis of the Multi-Tenant Portfolio.
Line of Credit, Agreements, and Waivers
The OP has substantial amounts of indebtedness outstanding upon which it relies for funding of future capital needs. As discussed within Note 13 — Credit Facilities, at December 31, 2013, the Credit Facility had commitments of $2.4 billion. The Credit Facility had an accordion feature, which, if exercised in full, would allow the OP to increase borrowings under the Credit Facility to $3.0 billion, subject to additional lender commitments, borrowing base availability and other conditions.
On June 30, 2014, the General Partner, as guarantor, and the Operating Partnership, as borrower, entered into the Credit Agreement, which increased the available borrowings, extended the term and decreased the interest rates associated with the Credit Facility prior to the execution of the Credit Agreement. The Credit Agreement provided an accordion feature, which, if exercised in full, would allow the General Partner to increase the aggregate commitments under the Credit Facility to $6.0 billion, subject to the receipt of such additional commitments and the satisfaction of certain customary conditions. Subsequent to the execution of the Credit Agreement, the General Partner accepted an additional $50.0 million commitment on the revolving credit facility from one of the original 20 financial institutions, bringing the total Credit Facility commitments to $4.7 billion.
On November 12, 2014, the General Partner and the OP entered into a consent, waiver and amendment (“the Amendment”) with its lenders under its unsecured credit facility for an extension regarding the delivery of the General Partner’s third quarter
F-81
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
2014 financial statements and certain other financial deliverables until the earlier of five days following the date the General Partner files with the SEC its third quarter 2014 10-Q and January 5, 2015. The Amendment allowed the OP to remain compliant with its borrowing obligations under its Credit Facility as the General Partner’s external auditors completed their review of the General Partner’s previously filed 2013 and 2014 financial statements. As part of the Amendment, in order to better align the size of the facility with anticipated future usage, the General Partner elected to reduce the maximum amount of indebtedness from $4.65 billion to $4.0 billion. Additionally, until the 2013 and 2014 financial statements are filed with the SEC, the maximum principal amount of indebtedness outstanding under the Credit Facility was temporarily reduced thereunder to $3.6 billion.
On December 23, 2014, the General Partner and the Operating Partnership, as the borrower, entered into a Consent and Waiver Agreement (the “Consent and Waiver”) with respect to the Credit Agreement, as amended. The Consent and Waiver, among other things, (i) provided for a further extension regarding the delivery of the General Partner’s third quarter 2014 financial statements and certain other financial deliverables that the General Partner agreed to provide under the Amendment, until the earlier of March 2, 2015 and 45 days following the receipt of a notice of breach or default from an applicable trustee or the requisite percentage of holders under the General Partner’s and the Operating Partnership’s respective debt indentures, (ii) provided an extension from the lenders for the delivery of the General Partner’s full-year 2014 audited financial statements until the earlier of the fifth day after the date that the General Partner files its Annual Report on Form 10-K with the SEC for the fiscal year ended December 31, 2014 and March 31, 2015, (iii) permanently reduced the maximum amount of indebtedness under the Credit Agreement to $3.6 billion, including the reduction of commitments under the General Partner’s revolving facilities and the elimination of the $25 million swingline facility, (iv) provided that until the date that all required financial deliverables have been delivered, no further loans or letters of credit would be requested under the Credit Agreement, as amended, by the OP, other than in accordance with the cash flow forecast provided by the General Partner to the Lenders thereunder, and that neither the General Partner nor the Operating Partnership would pay any dividends on, or make any other Restricted Payment (as defined in the Credit Agreement) on, its respective common equity and (v) provided that the General Partner would provide additional financial and other information to the Lenders from time to time. In connection with the Amendment and Consent and Waiver, the General Partner agreed to pay certain customary fees to the consenting Lenders and agreed to reimburse certain customary expenses of the arrangers. On February 20, 2015, the General Partner and the OP entered into a third consent (the “Third Consent”) to confirm that certain revisions to the required financial deliverables were agreed with the Lenders.
Agreement in Principle with Senior Noteholder Group; Convertible Notes
On January 22, 2015, the General Partner announced that the OP had entered into an agreement in principle with an ad hoc group of holders (the “Senior Noteholder Group”), which the General Partner had been advised then represented a majority of the aggregate principal amounts outstanding of each of the 2.000% senior notes due 2017, the 3.000% senior notes due 2019 and the 4.600% senior notes due 2024, which, in each case, were issued by the Operating Partnership, of which the General Partner is the sole general partner, and guaranteed by us under an Indenture, dated February 6, 2014 (the “Indenture”), by and among the Operating Partnership, U.S. Bank National Association, as trustee, and the guarantors named therein. Pursuant to such agreement, the Senior Noteholder Group agreed not to issue a notice of default, prior to March 3, 2015, for the OP failure to timely deliver a Third Quarter 10-Q containing financial information required to be included therein in respect of the Operating Partnership, which is required to be delivered pursuant to the terms of the Indenture. In exchange, the OP agreed to sign a confidentiality agreement with the Senior Noteholder Group’s counsel and pay reasonable and documented fees and out-of-pocket expenses of such counsel up to $300,000. Furthermore, the parties agreed that in the event a notice of default related to our failure to timely deliver such Third Quarter 10-Q is issued by the senior noteholders on or after March 3, 2015, the 60-day cure period set forth in the Indenture will be reduced by one day for each day after January 19, 2015 that such notice of default is given. Such agreement was subsequently definitively documented and a supplement to the Indenture was entered into on February 9, 2015. The agreement was reached after the ad hoc group recently and directed counsel to the Senior Noteholder Group to engage in discussions with the General Partner regarding the terms of a possible resolution in response to our failure to timely deliver such third quarter 2014 financial information regarding the Operating Partnership.
In addition, the General Partner announced on January 22, 2015 that it received at its Phoenix, Arizona corporate office notice (the “Notice”) from the trustee under the indentures (the “Convertible Indentures”) governing the Convertible Notes of the General Partner’s failure to timely deliver its Third Quarter 10-Q, which was required to be delivered pursuant to the terms of the Convertible Indentures. Subsequent to the General Partner’s announcement, the General Partner learned that it also received the Notice on January 16, 2015, at an address in New York City that was formerly the General Partner’s principal place of business. Pursuant to the terms of the Convertible Indentures, the General Partner has 60 days following its receipt of a notice of default to deliver the required financial statements, after which such failure would become an event of default under each of the Convertible Indentures. Our Third Quarter 10-Q will be filed with the SEC concurrent herewith.
F-82
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Non-Compliance Associated with the General Partner’s Filings
The federal securities laws require companies subject to the Exchange Act to disclose information on an ongoing basis. These laws include deadlines for public companies based on the category of the filer as well as type of form filed.
The General Partner is classified as a Large Accelerated Filer. The deadlines associated with our filing category are as follows:
| • | The General Partner’s Annual Report on Form 10-K must be submitted within 60 days of the General Partner’s fiscal year end; and |
| • | The General Partner’s Quarterly Report on Form 10-Q must be submitted within 40 days of the General Partner’s fiscal quarter end. |
In light of the non-reliance on the General Partner’s financial statements and the ongoing Audit Committee investigation, such deadlines with the SEC were not met with respect to the General Partner’s Quarterly Report on Form 10-Q for the three months ended September 30, 2014. Additionally since November 13, 2014, the General Partner has received subpoenas, as expected, from the SEC requesting the production of certain documents and communications that relate to, among other things, the matters surrounding the investigation. The General Partner has cooperated with the SEC.
On November 12, 2014, the General Partner received a notification letter (the “Letter”) from the NASDAQ Listing Qualifications Department (“NASDAQ”) stating that because the General Partner had not yet filed its Quarterly Report on Form 10-Q for the period ended September 30, 2014 (the “Form 10-Q”) with the SEC, it was not in compliance with the continued listing requirements under NASDAQ Listing Rule 5250(c)(1). The General Partner also received, and has cooperated with, a letter (the “NASDAQ Information Request”) from NASDAQ requesting certain information relating to the matters described in the Current Report on Form 8-K filed October 29, 2014.
Pursuant to the Letter, we were required to submit a plan to NASDAQ to regain compliance with the applicable NASDAQ Listing Rule within 60 days of November 12, 2014 and complied with such obligation. After review of our plan for regaining compliance, NASDAQ granted us an extension until April 15, 2015 to deliver our third quarter 2014 financial statements.
Dividend Policy
As of December 24, 2014, the General Partner determined that, until it has delivered its 2013 financial statements, 2014 financial statements and related compliance certificates, neither it nor the Operating Partnership will pay any dividends on, or make any other Restricted Payment (as defined in the Amended Credit Agreement) on, its respective common equity. Following the delivery of its financial statements, the General Partner will reevaluate a reinstatement of its dividend at a rate that is in line with its industry peers.
Redemption of Series D Preferred Stock
As described in Note 19 — Related Party Transactions and Arrangements (As Restated), the General Partner issued 21.7 million shares of Series D Preferred Stock on November 12, 2013 to various holders pursuant to a private placement. The Articles Supplementary designating the terms of the Series D Preferred Stock provided that such shares were redeemable on the Redemption Date. If the General Partner did not choose to redeem the shares on the Redemption Date, the holders of Series D Preferred Stock were entitled to convert some or all of their outstanding shares of Series D Preferred Stock and the General Partner would then elect whether to (1) convert the shares of Series D Preferred Stock into the number of fully paid and non-assessable shares of common stock obtained by dividing the aggregate Liquidation Preference of such Series D Preferred Stock by the Conversion Price, (2) convert the shares of Series D Preferred Stock into an equal number of shares of Series E Preferred Stock (additional shares of Series E
F-83
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
Preferred Stock could have been issued under certain circumstances) or (3) pay the holders a cash amount equal to the product of the number of shares of Series D Preferred Stock and the Cash Conversion Price. In advance of the Redemption Date, the General Partner sent the required notice to the holders of the Series D Preferred Stock indicating its intention to redeem all of the shares of Series D Preferred Stock on August 31, 2014. Upon settlement on the Redemption Date, the General Partner paid the holders of the Series D Preferred Stock the net amount due to them of $315.8 million and cancelled all outstanding shares of Series D Preferred Stock. As of the date of this filing, there are zero outstanding General Partner Series D Preferred Units.
CapLease and Cole Litigation Matters
On March 24, 2014, plaintiffs’ counsel in the Consolidated Actions brought by former CapLease stockholders concerning the CapLease Transaction dismissed those claims without prejudice. Consequently, the only litigation brought by former CapLease stockholders with respect to the CapLease Transaction that is still pending is the Tarver Action, which remains stayed.
On July 31, 2014, plaintiffs in the putative class action filed in the Circuit Court for Baltimore City challenging the merger between Cole and Cole Holdings, pursuant to which Cole became a self-managed REIT, dismissed their pending appeal based on an agreement by defendants to reimburse plaintiffs in the amount of $100,000. The other two lawsuits filed in connection with the Cole Holdings transaction have been stayed by the court pursuant to a joint request made by all parties pending final approval of the consolidated Baltimore Actions relating to the Cole Merger, described below.
On August 14, 2014, the parties in the consolidated Baltimore Actions, which were brought by Cole stockholders challenging the Cole Merger, executed a Stipulation and Release and Agreement of Compromise and Settlement (the “Settlement Stipulation”), and the parties in the consolidated Baltimore Actions submitted the Settlement Stipulation, along with related filings, for approval by the Maryland court on August 18, 2014. On August 25, 2014, the Baltimore Circuit Court entered an Order on Preliminary Approval of Derivative and Class Action Settlement and Class Action Certification (the “Preliminary Approval Order”). Pursuant to the Preliminary Approval Order, the defendants mailed the Notice of Pendency of Derivative and Class Action (the “Class Notice”) to the Cole shareholders on October 7, 2014. On December 3, 2014, the parties in the consolidated Baltimore Actions executed an Amended Stipulation and Release and Agreement of Compromise and Settlement (the “Amended Stipulation”) modifying the Stipulation. A final settlement hearing in the consolidated Baltimore Actions was held on December 12, 2014, and on January 13, 2015, the Baltimore Circuit Court issued an order approving the settlement pursuant to the terms of the Amended Stipulation. Two objectors have since filed a notice of appeal of the settlement order. Following court approval of the settlement of the consolidated Baltimore Actions, the Wunsch case was dismissed voluntarily on January 21, 2015.
Regulatory Investigations and Litigation Relating to the Audit Committee Investigation
On October 29, 2014, the General Partner filed a Current Report on Form 8-K (the “October 29 8-K”) reporting the Audit Committee’s conclusion, based on the preliminary findings of its investigation, that certain previously issued consolidated financial statements of the General Partner, including those included in the General Partner’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 originally filed on May 8, 2014, and related financial information should no longer be relied upon. On October 30, 2014, the Company filed a Current Report on Form 8-K in which the Company reported that the Audit Committee of the Board of Directors of the General Partner concluded that the previously-issued annual audited consolidated financial statements and other financial information for the fiscal year ended December 31, 2013 contained in the Company’s Final Prospectus filed pursuant to Rule 424(b)(3), dated September 12, 2014, contained in the Company’s Registration Statement on Form S-4 (File no. 333-197780) (the “Prospectus”), the previously-issued unaudited consolidated financial statements and other financial information as of June 30, 2014 and for the periods then ended contained in the Prospectus and the Company’s other financial communications for such periods should no longer be relied upon.
As discussed below, the Company and certain of its current and former directors and officers have been named as defendants in a number of lawsuits filed in response to the October 29 8-K, including class actions, derivative actions, and individual actions under the federal securities laws and state common and corporate laws in both federal and state courts in New York and Maryland.
Between October 30, 2014 and January 20, 2015, the Company and its current and former officers and directors (in addition to underwriters for certain of the Company’s securities offerings) were named as defendants in ten putative securities class action complaints in the United States District Court for the Southern District of New York (the “SDNY Actions”): Ciraulu v. American Realty Capital, Inc., et al., No. 14-cv-8659 (AKH); Priever v. American Realty Capital Properties, Inc., et al., No. 14-cv-8668 (AKH); Rubinstein v. American Realty Capital Properties, Inc., et al., No. 14-cv-8669 (AKH); Patton v. American Realty Capital Properties, Inc., et al., No. 14-cv-8671 (AKH); Edwards v. American Realty Capital Properties, Inc., et al., No. 14-cv-8721 (AKH); Harris v. American Realty Capital Properties, Inc., et al., No. 14-cv-8740 (AKH); Abadi v. American Realty Capital Properties, Inc., et al., No. 14-cv-9006 (AKH); City of Tampa General Employees Retirement Fund v. American Realty Capital Properties, Inc., et al., No. 14-cv-10134 (AKH); Teachers Insurance and Annuity Association of America v. American Realty Capital Properties, Inc., et al., No. 15-cv-0421 (AKH); and New York City Employees Retirement System v. American Realty Capital Properties, Inc., et al., No. 15-cv-0422 (AKH). At a February 10, 2015 status conference, the court consolidated the SDNY Actions, appointed a lead plaintiff, and set a deadline of April 10, 2015 for the defendants to respond to the consolidated class action complaint, namely, the complaint filed in Teachers Insurance and Annuity Association of America v. American Realty Capital Properties, Inc., et al., No. 15-cv-0421 (AKH). The consolidated class action complaint asserts claims for violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, arising out of allegedly false and misleading statements in connection with the purchase or sale of the Company’s securities. The proposed class period runs from May 6, 2013 to October 29, 2014.
In addition, on November 25, 2014, the Company and certain of its current and former officers and directors were named as defendants in a putative securities class action filed in the Circuit Court for Baltimore County, Maryland, captioned Wunsch v. American Realty Capital Properties, Inc., et al., No. 03-C-14-012816 (the “Maryland Securities Action” and together with the SDNY Actions, the “Securities Actions”). On December 23, 2014, the Company removed the Maryland Securities Action to the United States District Court for the District of Maryland (Northern Division), under the caption Wunsch v. American Realty Capital Properties, Inc., et al., No. 14-cv-4007 (ELH), and to transfer the action to the United States District Court for the Southern District of New York. The Maryland Securities Action asserts claims for violations of Sections 11 and 15 of the Securities Act of 1933, arising out of allegedly false and misleading statements made in connection with the Company’s securities issued in connection with the Cole Merger. The Company is not yet required to respond to this complaint.
Between November 17, 2014 and February 2, 2015, six shareholder derivative actions, purportedly in the name and for the benefit of the Company, were filed against certain of the Company’s current and former officers and directors, amongst others, in the United States District Court for the Southern District of New York (the “SDNY Derivative Actions”): Michelle Graham Turner 1995 Revocable Trust v. Schorsch, et al., No. 14-cv-9140 (AKH); Froehner v. Schorsch, et al., No. 14-cv-9444 (AKH); Serafin v. Schorsch, et al., No. 14-cv-9672 (AKH); Hopkins v. Schorsch, et al., No. 15-cv-262 (AKH); Appolito v. Schorsch, et al., No. 15-cv-644 (AKH); and The Joel and Robin Staadecker Living Trust v. Schorsch, et al., No. 15-cv-768 (AKH). In addition, between December 30, 2014 and January 16, 2015, the Company and certain of its current and former officers and directors were named as defendants in two shareholder derivative actions filed in the Circuit Court for Baltimore City, Maryland (the “Maryland Derivative Actions”): Meloche v. Schorsch, et al., No. 24-C-14-008210 and Botifoll v. Schorsch, et al., No. 24-C-15-000245. In addition, on January 29, 2015, the Company and certain of its current directors, amongst others,
F-84
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
were named as defendants in a shareholder derivative action filed in the Supreme Court of the State of New York, captioned Fran Kosky Roth IRA v. Rendell, et al., No. 15-650269 (the “New York Derivative Action,” and together with the SDNY Derivative Actions and the Maryland Derivative Actions, the “Derivative Actions”). On February 9, 2015 and February 20, 2015, three plaintiffs who filed SDNY Derivative Actions—Appolito, Hopkins and The Joel and Robin Staadecker Living Trust—voluntarily dismissed their actions without prejudice. The Derivative Actions seek money damages and other relief on behalf of the Company for, among other things, alleged breaches of fiduciary duty, abuse of control, gross mismanagement and unjust enrichment in connection with the alleged conduct underlying the claims asserted in the Securities Actions negligence and breach of contract. At a February 10, 2015 status conference, the court consolidated the SDNY Derivative Actions and directed the plaintiffs to file a consolidated amended complaint by March 10, 2015. The court set a deadline of April 3, 2015 for the defendants to respond to the consolidated complaint. On February 18, 2015, the parties to the New York Derivative Action entered into a stipulation setting a deadline of April 20, 2015 for the Company and defendants to respond to the complaint in that action. The Company and defendants are not yet required to respond to the complaints in the Maryland Derivative Actions.
On December 18, 2014, a former employee, Lisa McAlister, filed a defamation action against the Company and certain of its former officers and directors in the Supreme Court for the State of New York, captioned McAlister v. American Realty Capital Properties, Inc., et al., No. 14-162499. The complaint sought, among other things, compensatory and punitive damages and alleged that the October 29 8-K falsely blamed plaintiff for improper accounting and financial reporting practices. On January 26, 2015, the Company and the other defendants filed motions to dismiss plaintiff’s complaint. Subsequently, Ms. McAlister dismissed this action without prejudice.
On January 7, 2015, Ms. McAlister also filed a complaint, No. 2-4173-15-016, with the Occupational Safety and Health Administration of the United States Department of Labor. The complaint seeks, among other things, compensatory and punitive damages and asserts claims for wrongful termination of employment for allegedly reporting concerns relating to alleged improper accounting practices by the Company. Ms. McAlister has withdrawn the complaint without prejudice.
F-85
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2013
On January 15, 2015, the Company and certain of its former directors and officers were named as defendants in an individual securities fraud action filed in the United States District Court for the Southern District of New York, captioned Jet Capital Master Fund, L.P. v. American Realty Capital Properties, Inc., et al., No. 15-cv-307 (AKH) (the “Jet Capital Action”). The Jet Capital Action seeks money damages and asserts claims for alleged violations of Sections 10(b), 18 and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, as well as common law fraud under New York law in connection with the purchase of the Company’s securities. The court set a deadline of April 10 for the defendants to respond to the complaint.
On February 20, 2015, the Company, certain of its current and former directors and officers, and ARC Properties Operating Partnership L.P. (in addition to several other individuals and entities) were named as defendants in an individual securities fraud action filed in the United States District Court for the Southern District of New York, captioned Twin Securities, Inc. v. American Realty Capital Properties, Inc., et al., No. 15-cv-1291 (the “Twin Securities Action”). The Twin Securities Action seeks money damages and asserts claims for alleged violations of Sections 10(b), 14(a), 18, and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as well as common law fraud under New York law in connection with the purchase of the Company’s securities. The Company and defendants are not yet required to respond to the complaint in the Twin Securities Action.
F-86
Real Estate and Accumulated Depreciation
Schedule III
December 31, 2013
(in thousands)
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| 24 Hour Fitness |
Woodlands | TX | $ | — | (1) | $ | 2,690 | $ | 8,312 | $ | — | $ | 11,002 | $ | 135 | 9/24/2013 | 2001 | |||||||||||||||||
| 7-Eleven |
Sarasota | FL | — | (1) | 1,312 | 1,312 | — | 2,624 | 80 | 11/19/2012 | 2000 | |||||||||||||||||||||||
| 7-Eleven |
Gloucester | VA | — | (1) | 144 | 578 | — | 722 | 32 | 12/24/2012 | 1985 | |||||||||||||||||||||||
| 7-Eleven |
Hampton | VA | — | (1) | 69 | 624 | — | 693 | 35 | 12/24/2012 | 1986 | |||||||||||||||||||||||
| 7-Eleven |
Hampton | VA | — | (1) | 161 | 644 | — | 805 | 36 | 12/24/2012 | 1959 | |||||||||||||||||||||||
| Abbott Laboratories |
Waukegan | IL | 13,649 | 4,734 | 21,319 | — | 26,053 | 193 | 11/5/2013 | 2000 | ||||||||||||||||||||||||
| Abbott Laboratories |
Columbus | OH | — | (2) | 800 | 11,385 | — | 12,185 | 122 | 11/5/2013 | 2004 | |||||||||||||||||||||||
| Academy Sports |
Fayetteville | AR | — | 1,900 | 7,601 | — | 9,501 | 534 | 12/28/2012 | 2012 | ||||||||||||||||||||||||
| Academy Sports |
Dalton | GA | — | 998 | 5,656 | — | 6,654 | 331 | 2/20/2013 | 2012 | ||||||||||||||||||||||||
| Advance Auto |
Birmingham | AL | — | (1) | 330 | 494 | — | 824 | 23 | 2/28/2013 | 1999 | |||||||||||||||||||||||
| Advance Auto |
Birmingham | AL | — | (1) | 455 | 373 | — | 828 | 17 | 2/28/2013 | 1997 | |||||||||||||||||||||||
| Advance Auto |
Calera | AL | — | (1) | 723 | 723 | — | 1,446 | 41 | 12/27/2012 | 2008 | |||||||||||||||||||||||
| Advance Auto |
Dothan | AL | — | (1) | 326 | 326 | — | 652 | 18 | 12/31/2012 | 1997 | |||||||||||||||||||||||
| Advance Auto |
Enterprise | AL | — | (1) | 280 | 420 | — | 700 | 24 | 12/31/2012 | 1995 | |||||||||||||||||||||||
| Advance Auto |
Albany | GA | — | (1) | 210 | 629 | — | 839 | 35 | 12/31/2012 | 1995 | |||||||||||||||||||||||
| Advance Auto |
Cairo | GA | — | (1) | 140 | 326 | — | 466 | 18 | 12/31/2012 | 1993 | |||||||||||||||||||||||
| Advance Auto |
Hazlehurst | GA | — | (1) | 113 | 451 | — | 564 | 25 | 12/31/2012 | 1998 | |||||||||||||||||||||||
| Advance Auto |
Hinesville | GA | — | (1) | 352 | 430 | — | 782 | 24 | 12/31/2012 | 1994 | |||||||||||||||||||||||
| Advance Auto |
Perry | GA | — | (1) | 209 | 487 | — | 696 | 27 | 12/31/2012 | 1994 | |||||||||||||||||||||||
| Advance Auto |
Thomasville | GA | — | (1) | 251 | 377 | — | 628 | 21 | 12/31/2012 | 1997 | |||||||||||||||||||||||
| Advance Auto |
Auburn | IN | — | 337 | 1,347 | — | 1,684 | 132 | 3/29/2012 | 2007 | ||||||||||||||||||||||||
| Advance Auto |
Clinton | IN | — | (1) | 182 | 729 | — | 911 | 24 | 6/5/2013 | 2004 | |||||||||||||||||||||||
| Advance Auto |
Fort Wayne | IN | — | (1) | 193 | 450 | — | 643 | 21 | 2/28/2013 | 1998 | |||||||||||||||||||||||
| Advance Auto |
Fort Wayne | IN | — | (1) | 200 | 371 | — | 571 | 17 | 2/28/2013 | 1998 | |||||||||||||||||||||||
| Advance Auto |
Salina | KS | — | (1) | 195 | 782 | — | 977 | 29 | 4/30/2013 | 2006 | |||||||||||||||||||||||
| Advance Auto |
Barbournville | KY | — | (1) | 194 | 1,098 | — | 1,292 | 46 | 4/15/2013 | 2006 | |||||||||||||||||||||||
| Advance Auto |
Bardstown | KY | — | (1) | 272 | 1,090 | — | 1,362 | 66 | 12/10/2012 | 2005 | |||||||||||||||||||||||
| Advance Auto |
Brandenburg | KY | — | (1) | 186 | 742 | — | 928 | 45 | 12/10/2012 | 2005 | |||||||||||||||||||||||
F-87
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Advance Auto |
Hardinsburg | KY | — | (1) | 94 | 845 | — | 939 | 51 | 12/10/2012 | 2007 | |||||||||||||||||||||||
| Advance Auto |
Inez | KY | — | (1) | 130 | 1,174 | — | 1,304 | 88 | 8/22/2012 | 2010 | |||||||||||||||||||||||
| Advance Auto |
Leitchfield | KY | — | (1) | 104 | 939 | — | 1,043 | 57 | 12/10/2012 | 2005 | |||||||||||||||||||||||
| Advance Auto |
West Liberty | KY | — | (1) | 249 | 996 | — | 1,245 | 42 | 4/15/2013 | 2006 | |||||||||||||||||||||||
| Advance Auto |
Rayne | LA | — | (1) | 122 | 490 | — | 612 | 16 | 5/21/2013 | 2000 | |||||||||||||||||||||||
| Advance Auto |
Caro | MI | — | (8) | 117 | 665 | — | 782 | 78 | 11/23/2011 | 2002 | |||||||||||||||||||||||
| Advance Auto |
Charlotte | MI | — | (8) | 123 | 697 | — | 820 | 82 | 11/23/2011 | 2002 | |||||||||||||||||||||||
| Advance Auto |
Flint | MI | — | (1) | 133 | 534 | — | 667 | 62 | 11/23/2011 | 2002 | |||||||||||||||||||||||
| Advance Auto |
Livonia | MI | — | (8) | 210 | 629 | 14 | 853 | 74 | 12/12/2011 | 2003 | |||||||||||||||||||||||
| Advance Auto |
Manistee | MI | — | (1) | 348 | 1,043 | — | 1,391 | 44 | 4/15/2013 | 2007 | |||||||||||||||||||||||
| Advance Auto |
Sault Ste. Marie | MI | — | (8) | 75 | 671 | — | 746 | 78 | 11/23/2011 | 2003 | |||||||||||||||||||||||
| Advance Auto |
Ypsilanti | MI | — | (1) | 85 | 483 | — | 568 | 57 | 11/23/2011 | 2002 | |||||||||||||||||||||||
| Advance Auto |
Eden | NC | — | (1) | 320 | 746 | — | 1,066 | 17 | 7/16/2013 | 2004 | |||||||||||||||||||||||
| Advance Auto |
Granite Falls | NC | — | (1) | 251 | 1,005 | — | 1,256 | 80 | 8/9/2012 | 2010 | |||||||||||||||||||||||
| Advance Auto |
Lakewood | NJ | — | (1) | 750 | 1,750 | — | 2,500 | 131 | 8/22/2012 | 2010 | |||||||||||||||||||||||
| Advance Auto |
Woodbury | NJ | — | (1) | 446 | 1,784 | — | 2,230 | 150 | 6/20/2012 | 2007 | |||||||||||||||||||||||
| Advance Auto |
Eaton | OH | — | (1) | 157 | 471 | — | 628 | 15 | 6/13/2013 | 1987 | |||||||||||||||||||||||
| Advance Auto |
Franklin | OH | — | (1) | 218 | 873 | — | 1,091 | 69 | 8/9/2012 | 1984 | |||||||||||||||||||||||
| Advance Auto |
Springfield | OH | — | (1) | 461 | 1,075 | — | 1,536 | 60 | 12/31/2012 | 2005 | |||||||||||||||||||||||
| Advance Auto |
Van Wert | OH | — | (1) | 33 | 630 | — | 663 | 21 | 6/13/2013 | 1998 | |||||||||||||||||||||||
| Advance Auto |
Warren | OH | — | 83 | 745 | — | 828 | 73 | 4/12/2012 | 2003 | ||||||||||||||||||||||||
| Advance Auto |
Oklahoma City | OK | — | (1) | 208 | 1,178 | — | 1,386 | 94 | 8/9/2012 | 2007 | |||||||||||||||||||||||
| Advance Auto |
Chambersburg | PA | — | (1) | 553 | 830 | — | 1,383 | 39 | 2/28/2013 | 1997 | |||||||||||||||||||||||
| Advance Auto |
Selinsgrove | PA | — | (1) | 99 | 891 | — | 990 | 29 | 6/3/2013 | 2003 | |||||||||||||||||||||||
| Advance Auto |
Titusville | PA | — | (1) | 207 | 1,172 | — | 1,379 | 71 | 12/12/2012 | 2010 | |||||||||||||||||||||||
| Advance Auto |
Chapin | SC | — | (1) | 395 | 922 | — | 1,317 | 78 | 6/20/2012 | 2007 | |||||||||||||||||||||||
| Advance Auto |
Chesterfield | SC | — | (1) | 131 | 745 | — | 876 | 63 | 6/27/2012 | 2008 | |||||||||||||||||||||||
| Advance Auto |
Greenwood | SC | — | 210 | 630 | — | 840 | 65 | 3/9/2012 | 1995 | ||||||||||||||||||||||||
| Advance Auto |
Sweetwater | TN | — | (1) | 360 | 839 | — | 1,199 | 51 | 11/29/2012 | 2006 | |||||||||||||||||||||||
| Advance Auto |
Alton | TX | — | (1) | 169 | 958 | — | 1,127 | 63 | 10/18/2012 | 2006 | |||||||||||||||||||||||
| Advance Auto |
Houston | TX | — | (3) | 248 | 991 | — | 1,239 | 125 | 9/30/2011 | 2006 | |||||||||||||||||||||||
| Advance Auto |
Houston | TX | — | (3) | 343 | 1,029 | — | 1,372 | 130 | 9/30/2011 | 2006 | |||||||||||||||||||||||
| Advance Auto |
Houston | TX | — | (1) | 837 | 685 | — | 1,522 | 51 | 8/21/2012 | 2007 | |||||||||||||||||||||||
| Advance Auto |
Pasadena | TX | — | (1) | 382 | 1,146 | — | 1,528 | 97 | 7/6/2012 | 2008 | |||||||||||||||||||||||
F-88
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Advance Auto |
Fort Atkinson | WI | — | (1) | 353 | 824 | — | 1,177 | 15 | 8/26/2013 | 2004 | |||||||||||||||||||||||
| Advance Auto |
Kenosha | WI | — | (1) | 569 | 465 | — | 1,034 | 22 | 3/13/2013 | 2004 | |||||||||||||||||||||||
| Advance Auto |
St. Marys | WY | — | (1) | 309 | 928 | — | 1,237 | 52 | 12/28/2012 | 2007 | |||||||||||||||||||||||
| Aetna Life Insurance Company |
Fresno | CA | 16,043 | 3,405 | 22,343 | — | 25,748 | 207 | 11/5/2013 | 2008 | ||||||||||||||||||||||||
| Ale House |
Orlando | FL | — | (1) | 290 | 3,647 | — | 3,937 | 105 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Ale House |
Orlando | FL | — | (1) | 270 | 3,668 | — | 3,938 | 105 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Ale House |
Saint Petersburg | FL | — | 930 | 3,116 | — | 4,046 | 89 | 6/27/2013 | 1998 | ||||||||||||||||||||||||
| Allstate Insurance Company |
Charlotte | NC | 18,846 | 8,320 | 23,409 | — | 31,729 | 265 | 11/5/2013 | 1990 | ||||||||||||||||||||||||
| Allstate Insurance Company |
Roanoke | VA | 20,064 | 6,176 | 27,085 | — | 33,261 | 281 | 11/5/2013 | 1981 | ||||||||||||||||||||||||
| AMCOR |
Alhambra | MI | — | (1) | 7,143 | 8,730 | — | 15,873 | 488 | 1/24/2013 | 1966 | |||||||||||||||||||||||
| AMEC plc |
Houston | TX | 15,765 | 2,524 | 30,398 | — | 32,922 | 255 | 11/5/2013 | 2003 | ||||||||||||||||||||||||
| Ameriprise |
Ashwaubenon | WI | — | 751 | 14,260 | — | 15,011 | 631 | 1/25/2013 | 2000 | ||||||||||||||||||||||||
| AON Corporation |
Lincolnshire | IL | — | 5,337 | 124,776 | — | 130,113 | 7,297 | 11/16/2012 | 1998 | ||||||||||||||||||||||||
| Applebee’s |
Clinton | IA | — | (1) | 490 | 1,184 | — | 1,674 | 34 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Applebee’s |
Fort Dodge | IA | — | (1) | — | 1,363 | — | 1,363 | 39 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Applebee’s |
Marshalltown | IA | — | (1) | 660 | 1,175 | — | 1,835 | 34 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Applebee’s |
Mason City | IA | — | (1) | 340 | 1,495 | — | 1,835 | 43 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Applebee’s |
Muscatine | IA | — | (1) | 330 | 1,266 | — | 1,596 | 36 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Applebee’s |
Sterling | IL | — | (1) | 390 | 1,291 | — | 1,681 | 37 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Applebee’s |
Hopkinsville | KY | — | (1) | 460 | 1,265 | — | 1,725 | 36 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Applebee’s |
Greenville | SC | — | (1) | 600 | 2,166 | — | 2,766 | 62 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Applebee’s |
Antioch | TN | — | (1) | 470 | 878 | — | 1,348 | 25 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Applebee’s |
Clarksville | TN | — | (1) | 570 | 1,729 | — | 2,299 | 50 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Applebee’s |
Columbia | TN | — | (1) | 590 | 1,823 | — | 2,413 | 52 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Applebee’s |
Cookeville | TN | — | (1) | 410 | 1,128 | — | 1,538 | 32 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Applebee’s |
Hermitage | TN | — | (1) | 530 | 1,491 | — | 2,021 | 43 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Applebee’s |
Lebanon | TN | — | (1) | 460 | 1,120 | — | 1,580 | 32 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Applebee’s |
Madison | TN | — | (1) | 460 | 772 | — | 1,232 | 22 | 6/27/2013 | 1995 | |||||||||||||||||||||||
F-89
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Arby’s |
Arab | AL | — | (1) | 40 | 887 | — | 927 | 25 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Arby’s |
Hampton Cove | AL | — | (1) | 310 | 986 | — | 1,296 | 27 | 6/27/2013 | 2007 | |||||||||||||||||||||||
| Arby’s |
Sacramento | CA | — | (1) | 520 | 195 | — | 715 | 5 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Arby’s |
Arvada | CO | — | (1) | 190 | 1,465 | — | 1,655 | 41 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Arby’s |
Orange Park | FL | — | (1) | 420 | 1,256 | — | 1,676 | 35 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Arby’s |
Canton | GA | — | (1) | 370 | 1,200 | — | 1,570 | 33 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Arby’s |
Douglasville | GA | — | (1) | 370 | 1,692 | — | 2,062 | 47 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Arby’s |
Suwanee | GA | — | (1) | 370 | 1,561 | — | 1,931 | 43 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Arby’s |
Avon | IN | — | (1) | 500 | 812 | — | 1,312 | 22 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Arby’s |
Indianapolis | IN | — | (1) | 530 | 1,236 | — | 1,766 | 34 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Arby’s |
Indianapolis | IN | — | (1) | 370 | 1,130 | — | 1,500 | 31 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Arby’s |
Kansas City | KS | — | (1) | 280 | 364 | — | 644 | 10 | 6/27/2013 | 1970 | |||||||||||||||||||||||
| Arby’s |
Salina | KS | — | (1) | 540 | 300 | — | 840 | 8 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Arby’s |
Topeka | KS | — | (1) | 240 | 291 | — | 531 | 8 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Arby’s |
Topeka | KS | — | (1) | 270 | 433 | — | 703 | 12 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Arby’s |
Alma | MI | — | (1) | 380 | 408 | — | 788 | 11 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Arby’s |
Chesterfield | MI | — | (1) | 210 | 841 | — | 1,051 | 23 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Arby’s |
Davison | MI | — | (1) | 420 | 631 | — | 1,051 | 17 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Arby’s |
Flint | MI | — | (1) | 110 | 1,422 | — | 1,532 | 39 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Arby’s |
Flint | MI | — | (1) | 230 | 1,428 | — | 1,658 | 40 | 6/27/2013 | 1962 | |||||||||||||||||||||||
| Arby’s |
Midland | MI | — | (1) | 340 | 753 | — | 1,093 | 21 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Arby’s |
Pontiac | MI | — | (1) | 180 | 962 | — | 1,142 | 27 | 6/27/2013 | 1968 | |||||||||||||||||||||||
| Arby’s |
Port Huron | MI | — | (1) | 210 | 868 | — | 1,078 | 24 | 6/27/2013 | 1975 | |||||||||||||||||||||||
| Arby’s |
Saginaw | MI | — | (1) | 310 | 1,110 | — | 1,420 | 31 | 6/27/2013 | 1970 | |||||||||||||||||||||||
| Arby’s |
South Haven | MI | — | (1) | 260 | 573 | — | 833 | 16 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Arby’s |
Walker | MI | — | (1) | 360 | 1,002 | — | 1,362 | 28 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Arby’s |
Fayetteville | NC | — | (1) | 420 | 2,001 | — | 2,421 | 55 | 6/27/2013 | 2006 | |||||||||||||||||||||||
| Arby’s |
Greensboro | NC | — | (1) | 300 | 906 | — | 1,206 | 25 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Arby’s |
Greenville | NC | — | (1) | 310 | 681 | — | 991 | 19 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Arby’s |
Jonesville | NC | — | (1) | 350 | 908 | — | 1,258 | 25 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Arby’s |
Kernersville | NC | — | (1) | 280 | 774 | — | 1,054 | 21 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Arby’s |
Kinston | NC | — | (1) | 350 | 832 | — | 1,182 | 23 | 6/27/2013 | 1995 | |||||||||||||||||||||||
F-90
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Arby’s |
Lexington | NC | — | (1) | 360 | 873 | — | 1,233 | 24 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Arby’s |
Columbus | OH | — | (1) | 400 | 1,155 | — | 1,555 | 32 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Arby’s |
Reynoldsburg | OH | — | (1) | 370 | 945 | — | 1,315 | 26 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Arby’s |
Willard | OH | — | (1) | 230 | 599 | — | 829 | 17 | 6/27/2013 | 2005 | |||||||||||||||||||||||
| Arby’s |
Allentown | PA | — | (1) | 600 | 1,652 | — | 2,252 | 46 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Arby’s |
Carlisle | PA | — | (1) | 200 | 472 | — | 672 | 13 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Arby’s |
Hanover | PA | — | (1) | 400 | 921 | — | 1,321 | 26 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Arby’s |
Myrtle Beach | SC | — | (1) | 370 | 1,132 | — | 1,502 | 31 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Arby’s |
Amarillo | TX | — | (1) | 260 | 627 | — | 887 | 17 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| AT&T |
Richardson | TX | 20,224 | 1,891 | 31,118 | — | 33,009 | 262 | 11/5/2013 | 1987 | ||||||||||||||||||||||||
| Auto Zone |
Chicago | IL | — | (1) | 698 | 1,047 | — | 1,745 | 39 | 4/30/2013 | 2007 | |||||||||||||||||||||||
| Bandana’s Bar-B-Q Restaurant |
Collinsville | IL | — | (1) | 340 | 627 | — | 967 | 18 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Bandana’s Bar-B-Q Restaurant |
Arnold | MO | — | (1) | 460 | 433 | — | 893 | 12 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Baxter International, Inc. |
Bloomington | IN | — | (2) | 1,310 | 8,216 | — | 9,526 | 84 | 11/5/2013 | 2004 | |||||||||||||||||||||||
| Bed Bath & Beyond |
Stockton | CA | — | 2,761 | 52,454 | — | 55,215 | 4,266 | 8/17/2012 | 2003 | ||||||||||||||||||||||||
| Big O Tires |
Los Lunas | NM | — | (1) | 316 | 1,265 | — | 1,581 | 116 | 6/1/2012 | 2006 | |||||||||||||||||||||||
| BJ’s Wholesale Club |
Canton | OH | — | 456 | 8,668 | — | 9,124 | 507 | 2/20/2013 | 1998 | ||||||||||||||||||||||||
| Black Angus |
Dublin | CA | — | (1) | 620 | 2,467 | — | 3,087 | 71 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Bojangles |
Winder | GA | — | (1) | 645 | 1,198 | — | 1,843 | 120 | 7/30/2012 | 2011 | |||||||||||||||||||||||
| Bojangles |
Biscoe | NC | — | (1) | 247 | 986 | — | 1,233 | 75 | 11/29/2012 | 2010 | |||||||||||||||||||||||
| Bojangles |
Boone | NC | — | (1) | 278 | 833 | — | 1,111 | 83 | 7/27/2012 | 1980 | |||||||||||||||||||||||
| Bojangles |
Dobson | NC | — | (1) | 251 | 1,004 | — | 1,255 | 100 | 7/30/2012 | 2010 | |||||||||||||||||||||||
| Bojangles |
Indian Trail | NC | — | (1) | 655 | 1,217 | — | 1,872 | 121 | 7/27/2012 | 2011 | |||||||||||||||||||||||
| Bojangles |
Morganton | NC | — | 566 | 1,321 | — | 1,887 | 132 | 7/27/2012 | 2010 | ||||||||||||||||||||||||
| Bojangles |
Roanoke Rapids | NC | — | (1) | 442 | 1,032 | — | 1,474 | 103 | 7/27/2012 | 2011 | |||||||||||||||||||||||
| Bojangles |
Southport | NC | — | (1) | 505 | 1,179 | — | 1,684 | 118 | 7/30/2012 | 2011 | |||||||||||||||||||||||
| Bojangles |
Chapin | SC | — | (1) | 577 | 1,071 | — | 1,648 | 107 | 8/9/2012 | 2009 | |||||||||||||||||||||||
| Bojangles |
Clinton | SC | — | (1) | 397 | 926 | — | 1,323 | 92 | 7/27/2012 | 2009 | |||||||||||||||||||||||
| Bojangles |
Greenwood | SC | — | (1) | 440 | 1,320 | — | 1,760 | 77 | 2/28/2013 | 2011 | |||||||||||||||||||||||
| Bojangles |
Moncks Corner | SC | — | (1) | 505 | 1,179 | — | 1,684 | 90 | 11/29/2012 | 2010 | |||||||||||||||||||||||
| Bojangles |
Walterboro | SC | — | (1) | 454 | 1,363 | — | 1,817 | 104 | 11/29/2012 | 2010 | |||||||||||||||||||||||
F-91
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Boston Market |
Indianapolis | IN | — | (1) | 930 | — | — | 930 | — | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Boston Market |
Indianapolis | IN | — | (1) | 410 | 1,070 | — | 1,480 | 30 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Boston Market |
Fayetteville | NC | — | (1) | 460 | 1,520 | — | 1,980 | 42 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Boston Market |
Raleigh | NC | — | (1) | 280 | 1,015 | — | 1,295 | 28 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Brangus Steakhouse |
Jasper | AL | — | (1) | 140 | 219 | — | 359 | 6 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Bruegger’s Bagels |
Iowa City | IA | — | (1) | 40 | 379 | — | 419 | 10 | 6/27/2013 | 2013 | |||||||||||||||||||||||
| Bruegger’s Bagels |
Raleigh | NC | — | (1) | 230 | 654 | — | 884 | 18 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Buca di Beppo Italian |
Wheeling | IL | — | (1) | 450 | 1,272 | — | 1,722 | 36 | 6/27/2013 | 1975 | |||||||||||||||||||||||
| Buca di Beppo Italian |
Westlake | OH | — | (1) | 370 | 887 | — | 1,257 | 25 | 6/27/2013 | 1900 | |||||||||||||||||||||||
| Bunge North America, Inc. |
Fort Worth | TX | 6,262 | 1,100 | 8,433 | — | 9,533 | 76 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
| Burger King |
Tucson | AZ | — | (1) | 300 | 1,307 | — | 1,607 | 36 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Burger King |
Atlanta | GA | — | (1) | 380 | 499 | — | 879 | 14 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Burger King |
Fort Oglethorpe | GA | — | (1) | 170 | 2,175 | — | 2,345 | 60 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Burger King |
Marietta | GA | — | (1) | 350 | 916 | — | 1,266 | 25 | 6/27/2013 | 1983 | |||||||||||||||||||||||
| Burger King |
Chicago | IL | — | (1) | 580 | 1,413 | — | 1,993 | 39 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Burger King |
Highland | IN | — | (1) | 410 | 992 | — | 1,402 | 27 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Burger King |
Madisonville | KY | — | (1) | 550 | 1,067 | — | 1,617 | 30 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Burger King |
Caribou | ME | — | (1) | 770 | 440 | — | 1,210 | 12 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Burger King |
Grand Rapids | MI | — | (1) | 490 | 545 | — | 1,035 | 15 | 6/27/2013 | 1968 | |||||||||||||||||||||||
| Burger King |
Grand Rapids | MI | — | (1) | 260 | 780 | — | 1,040 | 22 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Burger King |
Holland | MI | — | (1) | 420 | 707 | — | 1,127 | 20 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Burger King |
Sparta | MI | — | (1) | 640 | 570 | — | 1,210 | 16 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Burger King |
Walled Lake | MI | — | (1) | 470 | 433 | — | 903 | 12 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Burger King |
Durham | NC | — | (1) | 170 | 352 | — | 522 | 10 | 6/27/2013 | 1990 | |||||||||||||||||||||||
F-92
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Burger King |
Rockingham | NC | — | 430 | 1,171 | — | 1,601 | 32 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
| Burger King |
Edison | NJ | — | (1) | 480 | 1,075 | — | 1,555 | 30 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Burger King |
Manahawkin | NJ | — | (1) | 310 | 748 | — | 1,058 | 21 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Burger King |
Elko | NV | — | (1) | 260 | 1,001 | — | 1,261 | 28 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Burger King |
Albany | NY | — | (1) | 330 | 850 | — | 1,180 | 24 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Burger King |
Central Square | NY | — | (1) | 500 | 1,189 | — | 1,689 | 33 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Burger King |
Cohoes | NY | — | (1) | 270 | 563 | — | 833 | 16 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Burger King |
Montgomery | NY | — | (1) | 480 | 1,042 | — | 1,522 | 29 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Burger King |
Schenectady | NY | — | (1) | 380 | 936 | — | 1,316 | 26 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Burger King |
Willoughby | OH | — | (1) | 410 | 1,005 | — | 1,415 | 28 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Burger King |
Ardmore | OK | — | (1) | 270 | 1,023 | — | 1,293 | 28 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Burger King |
Corvallis | OR | — | (1) | 170 | 195 | — | 365 | 5 | 6/27/2013 | 1977 | |||||||||||||||||||||||
| Burger King |
Roseburg | OR | — | (1) | 350 | 886 | — | 1,236 | 25 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Burger King |
Old Forge | PA | — | (1) | 390 | 905 | — | 1,295 | 25 | 6/27/2013 | 1977 | |||||||||||||||||||||||
| Burger King |
Gaffney | SC | — | (1) | 370 | 880 | — | 1,250 | 24 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Burger King |
Greenville | SC | — | (1) | 420 | 571 | — | 991 | 16 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Burger King |
Chattanooga | TN | — | (1) | 740 | 1,591 | — | 2,331 | 44 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Burger King |
Cleburne | TX | — | (1) | 300 | 603 | — | 903 | 17 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Burger King |
Bluefield | WV | — | (1) | 210 | 1,163 | — | 1,373 | 32 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Cadbury Holdings Limited |
Whippany | NJ | 31,793 | 2,767 | 38,018 | — | 40,785 | 304 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
| Capital One Financial Corporation |
Plano | TX | — | (2) | 8,440 | 23,212 | 191 | 31,843 | 298 | 11/5/2013 | 2005 | |||||||||||||||||||||||
| Captain D’s |
Statesboro | GA | — | (1) | 350 | 401 | — | 751 | 11 | 6/27/2013 | 1974 | |||||||||||||||||||||||
| Captain D’s |
Southaven | MS | — | (1) | 270 | 564 | — | 834 | 16 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Captain D’s |
Memphis | TN | — | (1) | 230 | 338 | — | 568 | 9 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Captain D’s |
Dallas | TX | — | (1) | 160 | 535 | — | 695 | 15 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Captain D’s |
Grand Prairie | TX | — | (1) | 260 | 338 | — | 598 | 9 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Caribou Coffee |
Grosse Pointe Woods | MI | — | (1) | 140 | 1,046 | — | 1,186 | 29 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Carlos O’Kelly’s |
Mason City | IA | — | (1) | 290 | 1,255 | — | 1,545 | 36 | 6/27/2013 | 1955 | |||||||||||||||||||||||
| Carlos O’Kelly’s |
Bloomington | IL | — | (1) | 270 | 1,375 | — | 1,645 | 39 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Carlos O’Kelly’s |
Springfield | MO | — | (1) | 840 | 730 | — | 1,570 | 21 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Charleston’s |
Carmel | IN | — | (1) | 140 | 3,016 | — | 3,156 | 86 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Check City |
Taylorsville | UT | — | (1) | 180 | 953 | — | 1,133 | 27 | 6/27/2013 | 1997 | |||||||||||||||||||||||
F-93
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Checkers |
Huntsville | AL | — | (1) | 689 | — | — | 689 | — | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Checkers |
Hollywood | FL | — | (1) | 160 | 2,220 | — | 2,380 | 64 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Checkers |
Lauderhill | FL | — | (1) | 280 | 1,951 | — | 2,231 | 56 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Checkers |
Plantation | FL | — | (1) | 220 | 1,461 | — | 1,681 | 42 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Checkers |
Fayetteville | GA | — | (1) | 681 | — | — | 681 | — | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Chevys |
Greenbelt | MD | — | (1) | 530 | 2,399 | — | 2,929 | 69 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Chevys |
Lake Oswego | OR | — | (1) | 590 | 1,693 | — | 2,283 | 49 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Chili’s |
Fayetteville | AR | — | (1) | 1,370 | 1,714 | — | 3,084 | 49 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Chili’s |
Boise | ID | — | (1) | 400 | 751 | — | 1,151 | 22 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Chili’s |
Riverdale | UT | — | (1) | 800 | 899 | — | 1,699 | 26 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Chili’s |
Cheyenne | WY | — | (1) | 270 | 815 | — | 1,085 | 23 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Chipper’s Grill |
Streator | IL | — | (1) | 190 | 255 | — | 445 | 7 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Cimarex Energy Company |
Tulsa | OK | 30,676 | 2,802 | 68,732 | — | 71,534 | 550 | 11/5/2013 | In process | ||||||||||||||||||||||||
| Circle K |
Phoenix | AZ | — | (1) | 344 | 1,377 | — | 1,721 | 129 | 5/4/2012 | 1986 | |||||||||||||||||||||||
| Circle K |
Martinez | GA | — | (1) | 348 | 813 | — | 1,161 | 61 | 8/28/2012 | 2003 | |||||||||||||||||||||||
| Circle K |
Akron | OH | — | (1) | 675 | 1,254 | — | 1,929 | 88 | 9/27/2012 | 1996 | |||||||||||||||||||||||
| Citizens Bank |
Colchester | CT | — | (1) | 185 | 1,049 | — | 1,234 | 70 | 9/26/2012 | 1981 | |||||||||||||||||||||||
| Citizens Bank |
Deep River | CT | — | (1) | 453 | 1,812 | — | 2,265 | 121 | 9/26/2012 | 1851 | |||||||||||||||||||||||
| Citizens Bank |
East Hampton | CT | — | (7) | 312 | 935 | — | 1,247 | 84 | 4/26/2012 | 1984 | |||||||||||||||||||||||
| Citizens Bank |
East Lyme | CT | — | (1) | 258 | 1,032 | — | 1,290 | 69 | 9/26/2012 | 1972 | |||||||||||||||||||||||
| Citizens Bank |
Hamden | CT | — | (1) | 581 | 475 | — | 1,056 | 32 | 9/26/2012 | 1893 | |||||||||||||||||||||||
| Citizens Bank |
Higganum | CT | — | (9) | 171 | 971 | — | 1,142 | 219 | 10/1/2008 | 1983 | |||||||||||||||||||||||
| Citizens Bank |
Montville | CT | — | (1) | 413 | 2,342 | — | 2,755 | 157 | 9/26/2012 | 1984 | |||||||||||||||||||||||
| Citizens Bank |
New London | CT | — | (1) | 94 | 534 | — | 628 | 121 | 10/1/2008 | 1900 | |||||||||||||||||||||||
| Citizens Bank |
Stonington | CT | — | (1) | 104 | 937 | — | 1,041 | 54 | 12/14/2012 | 1982 | |||||||||||||||||||||||
| Citizens Bank |
Stonington | CT | — | (1) | 190 | 1,079 | — | 1,269 | 72 | 9/26/2012 | 1960 | |||||||||||||||||||||||
| Citizens Bank |
Lewes | DE | — | (1) | 102 | 916 | — | 1,018 | 41 | 2/22/2013 | 1968 | |||||||||||||||||||||||
| Citizens Bank |
Smyrna | DE | — | (9) | 183 | 1,036 | — | 1,219 | 215 | 3/1/2009 | 1940 | |||||||||||||||||||||||
| Citizens Bank |
Wilmington | DE | — | (7) | 250 | 464 | — | 714 | 41 | 4/26/2012 | 1950 | |||||||||||||||||||||||
| Citizens Bank |
Wilmington | DE | — | (7) | 299 | 299 | — | 598 | 27 | 4/26/2012 | 1981 | |||||||||||||||||||||||
| Citizens Bank |
Alsip | IL | — | (1) | 226 | 1,280 | — | 1,506 | 289 | 10/1/2008 | 1981 | |||||||||||||||||||||||
| Citizens Bank |
Calumet City | IL | — | (7) | 168 | 393 | — | 561 | 35 | 4/26/2012 | 1975 | |||||||||||||||||||||||
F-94
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Citizens Bank |
Chicago | IL | — | (7) | 189 | 81 | — | 270 | 7 | 4/26/2012 | 1990 | |||||||||||||||||||||||
| Citizens Bank |
Chicago | IL | — | (1) | 267 | 1,511 | — | 1,778 | 341 | 10/1/2008 | 1923 | |||||||||||||||||||||||
| Citizens Bank |
Chicago | IL | — | (1) | 191 | 1,082 | — | 1,273 | 244 | 10/1/2008 | 1979 | |||||||||||||||||||||||
| Citizens Bank |
Elmwood Park | IL | — | (1) | 431 | 2,441 | — | 2,872 | 481 | 6/1/2009 | 1977 | |||||||||||||||||||||||
| Citizens Bank |
Evergreen Park | IL | — | (1) | 167 | 944 | — | 1,111 | 213 | 10/1/2008 | 1982 | |||||||||||||||||||||||
| Citizens Bank |
Lyons | IL | — | (1) | 214 | 1,212 | — | 1,426 | 274 | 10/1/2008 | 1957 | |||||||||||||||||||||||
| Citizens Bank |
Olympia Fields | IL | — | (7) | 426 | 1,704 | — | 2,130 | 152 | 4/26/2012 | 1974 | |||||||||||||||||||||||
| Citizens Bank |
Wilmington | IL | — | (1) | 330 | 1,872 | — | 2,202 | 349 | 9/1/2009 | 1964 | |||||||||||||||||||||||
| Citizens Bank |
Dorchester | MA | — | 386 | 386 | — | 772 | 34 | 4/26/2012 | 1960 | ||||||||||||||||||||||||
| Citizens Bank |
Ludlow | MA | — | (1) | 810 | 540 | — | 1,350 | 36 | 9/26/2012 | 1948 | |||||||||||||||||||||||
| Citizens Bank |
Malden | MA | — | (1) | 488 | 596 | — | 1,084 | 40 | 9/26/2012 | 1920 | |||||||||||||||||||||||
| Citizens Bank |
Malden | MA | — | 484 | 1,935 | — | 2,419 | 130 | 9/26/2012 | 1988 | ||||||||||||||||||||||||
| Citizens Bank |
Medford | MA | — | 589 | 1,094 | — | 1,683 | 73 | 9/26/2012 | 1938 | ||||||||||||||||||||||||
| Citizens Bank |
New Bedford | MA | — | (1) | 297 | 694 | — | 991 | 46 | 9/26/2012 | 1983 | |||||||||||||||||||||||
| Citizens Bank |
Randolph | MA | — | 480 | 1,439 | — | 1,919 | 96 | 9/26/2012 | 1979 | ||||||||||||||||||||||||
| Citizens Bank |
Somerville | MA | — | (1) | 561 | 561 | — | 1,122 | 38 | 9/26/2012 | 1940 | |||||||||||||||||||||||
| Citizens Bank |
South Dennis | MA | — | (1) | — | 1,294 | — | 1,294 | 75 | 12/14/2012 | 1986 | |||||||||||||||||||||||
| Citizens Bank |
Springfield | MA | — | (1) | 187 | 747 | — | 934 | 27 | 5/10/2013 | 1975 | |||||||||||||||||||||||
| Citizens Bank |
Tewksbury | MA | — | (7) | 266 | 1,063 | — | 1,329 | 95 | 4/26/2012 | 1998 | |||||||||||||||||||||||
| Citizens Bank |
Watertown | MA | — | (1) | 443 | 542 | — | 985 | 36 | 9/26/2012 | 1950 | |||||||||||||||||||||||
| Citizens Bank |
Wilbraham | MA | — | (7) | 148 | 591 | — | 739 | 53 | 4/26/2012 | 1967 | |||||||||||||||||||||||
| Citizens Bank |
Winthrop | MA | — | (1) | 390 | 724 | — | 1,114 | 48 | 9/26/2012 | 1974 | |||||||||||||||||||||||
| Citizens Bank |
Woburn | MA | — | (1) | 350 | 816 | — | 1,166 | 47 | 12/14/2012 | 1991 | |||||||||||||||||||||||
F-95
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Citizens Bank |
Clinton Township | MI | — | (1) | 574 | 3,250 | — | 3,824 | 746 | 9/1/2008 | 1970 | |||||||||||||||||||||||
| Citizens Bank |
Dearborn | MI | — | (1) | 434 | 2,461 | — | 2,895 | 459 | 9/1/2009 | 1977 | |||||||||||||||||||||||
| Citizens Bank |
Dearborn | MI | — | (1) | 385 | 2,184 | — | 2,569 | 407 | 9/1/2009 | 1974 | |||||||||||||||||||||||
| Citizens Bank |
Detroit | MI | — | (1) | 112 | 636 | — | 748 | 148 | 8/1/2008 | 1958 | |||||||||||||||||||||||
| Citizens Bank |
Detroit | MI | — | (1) | 204 | 1,159 | — | 1,363 | 270 | 8/1/2008 | 1956 | |||||||||||||||||||||||
| Citizens Bank |
Grosse Pointe | MI | — | (1) | 410 | 2,322 | — | 2,732 | 508 | 12/1/2008 | 1975 | |||||||||||||||||||||||
| Citizens Bank |
Harper Woods | MI | — | (1) | 207 | 1,171 | — | 1,378 | 273 | 8/1/2008 | 1983 | |||||||||||||||||||||||
| Citizens Bank |
Highland Park | MI | — | (1) | 150 | 848 | — | 998 | 198 | 8/1/2008 | 1967 | |||||||||||||||||||||||
| Citizens Bank |
Lathrup Village | MI | — | (1) | 283 | 1,602 | — | 1,885 | 362 | 10/1/2008 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
Livonia | MI | — | (1) | 261 | 1,476 | — | 1,737 | 344 | 8/1/2008 | 1959 | |||||||||||||||||||||||
| Citizens Bank |
Richmond | MI | — | (1) | 168 | 951 | — | 1,119 | 222 | 8/1/2008 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
Southfield | MI | — | (1) | 283 | 1,605 | — | 1,888 | 368 | 9/1/2008 | 1975 | |||||||||||||||||||||||
| Citizens Bank |
St. Clair Shores | MI | — | (1) | 309 | 1,748 | — | 2,057 | 407 | 8/1/2008 | 1961 | |||||||||||||||||||||||
| Citizens Bank |
Utica | MI | — | (1) | 376 | 2,133 | — | 2,509 | 466 | 12/1/2008 | 1982 | |||||||||||||||||||||||
| Citizens Bank |
Warren | MI | — | (1) | 178 | 1,009 | — | 1,187 | 228 | 10/1/2008 | 1963 | |||||||||||||||||||||||
| Citizens Bank |
Keene | NH | — | 132 | 2,511 | — | 2,643 | 146 | 12/14/2012 | 1900 | ||||||||||||||||||||||||
| Citizens Bank |
Manchester | NH | — | (1) | — | 1,568 | — | 1,568 | 91 | 12/14/2012 | 1985 | |||||||||||||||||||||||
| Citizens Bank |
Manchester | NH | — | (1) | 640 | 782 | — | 1,422 | 52 | 9/26/2012 | 1941 | |||||||||||||||||||||||
| Citizens Bank |
Ossipee | NH | — | (7) | 176 | 264 | — | 440 | 24 | 4/26/2012 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
Pelham | NH | — | (7) | 113 | 340 | — | 453 | 30 | 4/26/2012 | 1983 | |||||||||||||||||||||||
| Citizens Bank |
Pittsfield | NH | — | (1) | 160 | 908 | — | 1,068 | 205 | 10/1/2008 | 1976 | |||||||||||||||||||||||
| Citizens Bank |
Rollinsford | NH | — | (1) | 78 | 444 | — | 522 | 100 | 10/1/2008 | 1977 | |||||||||||||||||||||||
| Citizens Bank |
Salem | NH | — | (1) | 328 | 1,312 | — | 1,640 | 76 | 12/14/2012 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
Haddon Heights | NJ | — | (1) | 316 | 948 | — | 1,264 | 21 | 7/23/2013 | 1960 | |||||||||||||||||||||||
| Citizens Bank |
Marlton | NJ | — | (7) | 444 | 825 | — | 1,269 | 74 | 4/26/2012 | 1988 | |||||||||||||||||||||||
| Citizens Bank |
Albany | NY | — | (9) | 232 | 1,315 | — | 1,547 | 245 | 9/1/2009 | 1994 | |||||||||||||||||||||||
| Citizens Bank |
Amherst (Buffalo) | NY | — | (9) | 238 | 1,348 | — | 1,586 | 266 | 6/1/2009 | 1995 | |||||||||||||||||||||||
| Citizens Bank |
East Aurora | NY | — | (9) | 162 | 919 | — | 1,081 | 181 | 6/1/2009 | 1996 | |||||||||||||||||||||||
| Citizens Bank |
Greene | NY | — | (9) | 216 | 1,227 | — | 1,443 | 229 | 9/1/2009 | 1994 | |||||||||||||||||||||||
| Citizens Bank |
Johnstown | NY | — | (9) | 163 | 923 | — | 1,086 | 172 | 9/1/2009 | 1994 | |||||||||||||||||||||||
| Citizens Bank |
Port Jervis | NY | — | (9) | 143 | 811 | — | 954 | 169 | 3/1/2009 | 1964 | |||||||||||||||||||||||
| Citizens Bank |
Rochester | NY | — | (9) | 166 | 943 | — | 1,109 | 186 | 6/1/2009 | 1962 | |||||||||||||||||||||||
F-96
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Citizens Bank |
Schenectady | NY | — | (9) | 292 | 1,655 | — | 1,947 | 309 | 9/1/2009 | 1994 | |||||||||||||||||||||||
| Citizens Bank |
Vails Gate | NY | — | (9) | 284 | 1,610 | — | 1,894 | 300 | 9/1/2009 | 1968 | |||||||||||||||||||||||
| Citizens Bank |
Whitesboro | NY | — | (9) | 130 | 739 | — | 869 | 138 | 9/1/2009 | 1994 | |||||||||||||||||||||||
| Citizens Bank |
Alliance | OH | — | (1) | 204 | 1,156 | — | 1,360 | 274 | 7/1/2008 | 1972 | |||||||||||||||||||||||
| Citizens Bank |
Bedford | OH | — | (7) | 175 | 699 | — | 874 | 62 | 4/26/2012 | 2005 | |||||||||||||||||||||||
| Citizens Bank |
Boardman | OH | — | (1) | 280 | 1,589 | — | 1,869 | 376 | 7/1/2008 | 1984 | |||||||||||||||||||||||
| Citizens Bank |
Broadview Heights | OH | — | (1) | 201 | 1,140 | — | 1,341 | 237 | 3/1/2009 | 2000 | |||||||||||||||||||||||
| Citizens Bank |
Brunswick | OH | — | (1) | 186 | 1,057 | — | 1,243 | 250 | 7/1/2008 | 2004 | |||||||||||||||||||||||
| Citizens Bank |
Cleveland | OH | — | (1) | 239 | 1,357 | — | 1,596 | 321 | 7/1/2008 | 2003 | |||||||||||||||||||||||
| Citizens Bank |
Cleveland | OH | — | (1) | 210 | 1,190 | — | 1,400 | 282 | 7/1/2008 | 1950 | |||||||||||||||||||||||
| Citizens Bank |
Cleveland | OH | — | (1) | 182 | 1,031 | — | 1,213 | 244 | 7/1/2008 | 1960 | |||||||||||||||||||||||
| Citizens Bank |
Fairlawn | OH | — | 511 | 2,045 | — | 2,556 | 119 | 12/14/2012 | 1979 | ||||||||||||||||||||||||
| Citizens Bank |
Lakewood | OH | — | (1) | 196 | 1,111 | — | 1,307 | 207 | 9/1/2009 | 1965 | |||||||||||||||||||||||
| Citizens Bank |
Louisville | OH | — | (1) | 191 | 1,080 | — | 1,271 | 255 | 7/1/2008 | 1960 | |||||||||||||||||||||||
| Citizens Bank |
Massillon | OH | — | (1) | 287 | 1,624 | — | 1,911 | 384 | 7/1/2008 | 1976 | |||||||||||||||||||||||
| Citizens Bank |
Massillon | OH | — | (1) | 212 | 1,202 | — | 1,414 | 284 | 7/1/2008 | 1958 | |||||||||||||||||||||||
| Citizens Bank |
Mentor | OH | — | (1) | 178 | 1,011 | — | 1,189 | 228 | 10/1/2008 | 1976 | |||||||||||||||||||||||
| Citizens Bank |
Northfield | OH | — | (1) | 317 | 1,797 | — | 2,114 | 406 | 10/1/2008 | 1960 | |||||||||||||||||||||||
| Citizens Bank |
Parma | OH | — | (7) | 248 | 744 | — | 992 | 66 | 4/26/2012 | 1972 | |||||||||||||||||||||||
| Citizens Bank |
Parma | OH | — | (1) | 475 | 581 | — | 1,056 | 34 | 12/14/2012 | 1971 | |||||||||||||||||||||||
| Citizens Bank |
Rocky River | OH | — | (1) | 283 | 1,602 | — | 1,885 | 299 | 9/1/2009 | 1965 | |||||||||||||||||||||||
| Citizens Bank |
South Russell | OH | — | (1) | 106 | 957 | — | 1,063 | 56 | 12/14/2012 | 1981 | |||||||||||||||||||||||
| Citizens Bank |
Wadsworth | OH | — | (1) | 158 | 893 | — | 1,051 | 211 | 7/1/2008 | 1994 | |||||||||||||||||||||||
| Citizens Bank |
Willoughby | OH | — | (1) | 395 | 2,239 | — | 2,634 | 506 | 10/1/2008 | 1920 | |||||||||||||||||||||||
| Citizens Bank |
Allison Park | PA | — | (1) | 314 | 733 | — | 1,047 | 49 | 9/26/2012 | 1972 | |||||||||||||||||||||||
| Citizens Bank |
Altoona | PA | — | (1) | 153 | 459 | — | 612 | 27 | 12/14/2012 | 1971 | |||||||||||||||||||||||
| Citizens Bank |
Ambridge | PA | — | (9) | 215 | 1,217 | — | 1,432 | 227 | 9/1/2009 | 1925 | |||||||||||||||||||||||
| Citizens Bank |
Ashley | PA | — | (1) | 225 | 675 | — | 900 | 39 | 12/14/2012 | 1928 | |||||||||||||||||||||||
| Citizens Bank |
Beaver Falls | PA | — | (1) | 138 | 553 | — | 691 | 37 | 9/26/2012 | 1968 | |||||||||||||||||||||||
| Citizens Bank |
Carlisle | PA | — | (7) | 234 | 546 | — | 780 | 49 | 4/26/2012 | 1960+ | |||||||||||||||||||||||
| Citizens Bank |
Dallas | PA | — | (1) | 213 | 1,205 | — | 1,418 | 81 | 9/26/2012 | 1949 | |||||||||||||||||||||||
| Citizens Bank |
Dillsburg | PA | — | (1) | 232 | 926 | — | 1,158 | 54 | 12/14/2012 | 1935 | |||||||||||||||||||||||
F-97
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Citizens Bank |
Drexel Hill | PA | — | (1) | 266 | 1,064 | — | 1,330 | 62 | 12/14/2012 | 1950 | |||||||||||||||||||||||
| Citizens Bank |
Erie | PA | — | (1) | 168 | 671 | — | 839 | 39 | 12/14/2012 | 1954 | |||||||||||||||||||||||
| Citizens Bank |
Glenside | PA | — | 343 | 1,370 | — | 1,713 | 43 | 5/22/2013 | 1958 | ||||||||||||||||||||||||
| Citizens Bank |
Grove City | PA | — | (7) | 292 | 239 | — | 531 | 21 | 4/26/2012 | 1977 | |||||||||||||||||||||||
| Citizens Bank |
Grove City | PA | — | (7) | 41 | 782 | — | 823 | 70 | 4/26/2012 | 1920 | |||||||||||||||||||||||
| Citizens Bank |
Harrisburg | PA | — | (7) | 512 | 419 | — | 931 | 37 | 4/26/2012 | 1967 | |||||||||||||||||||||||
| Citizens Bank |
Havertown | PA | — | (1) | 219 | 875 | — | 1,094 | 59 | 9/26/2012 | 2003 | |||||||||||||||||||||||
| Citizens Bank |
Homestead | PA | — | (1) | 202 | 807 | — | 1,009 | 54 | 9/26/2012 | 1960 | |||||||||||||||||||||||
| Citizens Bank |
Kingston | PA | — | (1) | 404 | 943 | — | 1,347 | 55 | 12/14/2012 | 1977 | |||||||||||||||||||||||
| Citizens Bank |
Kutztown | PA | — | (7) | 81 | 725 | — | 806 | 65 | 5/11/2012 | 1974 | |||||||||||||||||||||||
| Citizens Bank |
Lancaster | PA | — | (7) | 368 | 552 | — | 920 | 49 | 4/26/2012 | 1965 | |||||||||||||||||||||||
| Citizens Bank |
Lancaster | PA | — | (1) | 383 | 468 | — | 851 | 31 | 9/26/2012 | 1967 | |||||||||||||||||||||||
| Citizens Bank |
Latrobe | PA | — | (1) | 148 | 591 | — | 739 | 34 | 12/14/2012 | 1969 | |||||||||||||||||||||||
| Citizens Bank |
Lititz | PA | — | (7) | 37 | 708 | — | 745 | 63 | 4/26/2012 | 1964 | |||||||||||||||||||||||
| Citizens Bank |
Lower Burrell | PA | — | (1) | 180 | 722 | — | 902 | 42 | 12/14/2012 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
Mechanicsburg | PA | — | 288 | 2,590 | — | 2,878 | 174 | 9/26/2012 | 1900 | ||||||||||||||||||||||||
| Citizens Bank |
Mercer | PA | — | (1) | 105 | 314 | — | 419 | 18 | 12/14/2012 | 1964 | |||||||||||||||||||||||
| Citizens Bank |
Metamoras | PA | — | (1) | 509 | 946 | — | 1,455 | 55 | 12/14/2012 | 1920 | |||||||||||||||||||||||
| Citizens Bank |
Milford | PA | — | (1) | 513 | 769 | — | 1,282 | 45 | 12/14/2012 | 1981 | |||||||||||||||||||||||
| Citizens Bank |
Monesson | PA | — | (9) | 198 | 1,123 | — | 1,321 | 209 | 9/1/2009 | 1930 | |||||||||||||||||||||||
| Citizens Bank |
Mount Lebanon | PA | — | 215 | 1,939 | — | 2,154 | 130 | 9/26/2012 | 1960 | ||||||||||||||||||||||||
| Citizens Bank |
Mountain Top | PA | — | (1) | 111 | 631 | — | 742 | 37 | 12/14/2012 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
Munhall | PA | — | (7) | 191 | 191 | — | 382 | 17 | 4/26/2012 | 1973 | |||||||||||||||||||||||
| Citizens Bank |
Narberth | PA | — | (9) | 420 | 2,381 | — | 2,801 | 548 | 9/1/2009 | 1935 | |||||||||||||||||||||||
| Citizens Bank |
New Stanton | PA | — | (7) | 330 | 612 | — | 942 | 55 | 4/26/2012 | 1975 | |||||||||||||||||||||||
| Citizens Bank |
Oakmont | PA | — | (1) | 199 | 1,127 | — | 1,326 | 65 | 12/14/2012 | 1967 | |||||||||||||||||||||||
| Citizens Bank |
Philadelphia | PA | — | (7) | 184 | 735 | — | 919 | 66 | 4/26/2012 | 1904 | |||||||||||||||||||||||
F-98
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Citizens Bank |
Philadelphia | PA | — | (1) | 127 | 722 | — | 849 | 42 | 12/14/2012 | 1920 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (1) | 185 | 1,051 | — | 1,236 | 61 | 12/14/2012 | 1960 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (1) | 389 | 1,168 | — | 1,557 | 68 | 12/14/2012 | 1940 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (1) | 146 | 2,770 | — | 2,916 | 161 | 12/14/2012 | 1900 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | 470 | 2,661 | — | 3,131 | 154 | 12/14/2012 | 1980 | ||||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (1) | 215 | 1,219 | — | 1,434 | 82 | 9/26/2012 | 1970 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (1) | 256 | 767 | — | 1,023 | 51 | 9/26/2012 | 1970 | |||||||||||||||||||||||
| Citizens Bank |
Shippensburg | PA | — | (7) | 143 | 429 | — | 572 | 38 | 4/26/2012 | 1985 | |||||||||||||||||||||||
| Citizens Bank |
Slovan | PA | — | (7) | 217 | 117 | — | 334 | 10 | 4/26/2012 | 1975 | |||||||||||||||||||||||
| Citizens Bank |
State College | PA | — | (7) | 256 | 475 | — | 731 | 42 | 4/26/2012 | 1966 | |||||||||||||||||||||||
| Citizens Bank |
Temple | PA | — | (1) | 268 | 626 | — | 894 | 42 | 9/26/2012 | 1936 | |||||||||||||||||||||||
| Citizens Bank |
Turtle Creek | PA | — | (1) | 308 | 923 | — | 1,231 | 62 | 9/26/2012 | 1970 | |||||||||||||||||||||||
| Citizens Bank |
Tyrone | PA | — | (1) | 146 | 583 | — | 729 | 34 | 12/14/2012 | 1967 | |||||||||||||||||||||||
| Citizens Bank |
Upper Darby | PA | — | (1) | 411 | 617 | — | 1,028 | 36 | 12/14/2012 | 1966 | |||||||||||||||||||||||
| Citizens Bank |
Verona | PA | — | (7) | 264 | 616 | — | 880 | 55 | 4/26/2012 | 1972 | |||||||||||||||||||||||
| Citizens Bank |
West Grove | PA | — | (7) | 181 | 725 | — | 906 | 65 | 4/26/2012 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
West Hazelton | PA | — | (1) | 279 | 2,509 | — | 2,788 | 168 | 9/26/2012 | 1900 | |||||||||||||||||||||||
| Citizens Bank |
York | PA | — | (7) | 337 | 626 | — | 963 | 56 | 4/26/2012 | 1955 | |||||||||||||||||||||||
| Citizens Bank |
Coventry | RI | — | (1) | 559 | 559 | — | 1,118 | 37 | 9/26/2012 | 1968 | |||||||||||||||||||||||
| Citizens Bank |
Johnston | RI | — | (1) | 343 | 1,030 | — | 1,373 | 69 | 9/26/2012 | 1972 | |||||||||||||||||||||||
| Citizens Bank |
North Providence | RI | — | 200 | 1,800 | — | 2,000 | 96 | 12/31/2012 | 1971 | ||||||||||||||||||||||||
| Citizens Bank |
Wakefield | RI | — | (1) | 517 | 959 | — | 1,476 | 64 | 9/26/2012 | 1976 | |||||||||||||||||||||||
| Citizens Bank |
Warren | RI | — | (1) | 328 | 609 | — | 937 | 41 | 9/26/2012 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
Warwick | RI | — | (1) | 1,570 | 5,544 | — | 7,114 | 58 | 9/24/2013 | 1996 | |||||||||||||||||||||||
| Citizens Bank |
Warwick | RI | — | (1) | 1,870 | 9,662 | — | 11,532 | 102 | 9/24/2013 | 1995 | |||||||||||||||||||||||
| Citizens Bank |
Middlebury | VT | — | (1) | 363 | 544 | — | 907 | 32 | 12/14/2012 | 1969 | |||||||||||||||||||||||
| Citizens Bank |
Poultney | VT | — | (1) | 149 | 847 | — | 996 | 176 | 3/1/2009 | 1860 | |||||||||||||||||||||||
| Citizens Bank |
St. Albans | VT | — | (1) | 141 | 798 | — | 939 | 166 | 3/1/2009 | 1989 | |||||||||||||||||||||||
| Citizens Bank |
White River Junction | VT | — | (1) | 183 | 1,039 | — | 1,222 | 216 | 3/1/2009 | 1975 | |||||||||||||||||||||||
| Comcast Corporation |
Englewood | CO | — | 1,490 | 5,060 | — | 6,550 | 45 | 11/5/2013 | 2011 | ||||||||||||||||||||||||
| Community Bank |
Whitehall | NY | — | (9) | 106 | 600 | — | 706 | 112 | 9/1/2009 | 1950 | |||||||||||||||||||||||
| Community National Bank |
Lake Mary | FL | — | 1,230 | 1,504 | — | 2,734 | 18 | 10/1/2013 | 1990 | ||||||||||||||||||||||||
F-99
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Cooper Tire & Rubber Company |
Franklin | IN | 16,998 | 4,438 | 33,994 | — | 38,432 | 346 | 11/5/2013 | 2009 | ||||||||||||||||||||||||
| County of Yolo, California |
Woodland | CA | 10,332 | 2,640 | 13,681 | — | 16,321 | 108 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
| Cracker Barrel |
Braselton | GA | — | 1,294 | 2,403 | — | 3,697 | 197 | 11/13/2012 | 2005 | ||||||||||||||||||||||||
| Cracker Barrel |
Bremen | GA | — | 1,012 | 2,361 | — | 3,373 | 194 | 11/13/2012 | 2006 | ||||||||||||||||||||||||
| Cracker Barrel |
Mebane | NC | — | 1,106 | 2,054 | — | 3,160 | 169 | 11/13/2012 | 2004 | ||||||||||||||||||||||||
| Cracker Barrel |
Emporia | VA | — | 972 | 2,267 | — | 3,239 | 186 | 11/13/2012 | 2004 | ||||||||||||||||||||||||
| Cracker Barrel |
Woodstock | VA | — | 928 | 2,164 | — | 3,092 | 178 | 11/13/2012 | 2005 | ||||||||||||||||||||||||
| Crozer-Keystone Health System |
Ridley Park | PA | 2,332 | — | 6,114 | — | 6,114 | 51 | 11/5/2013 | 2004 | ||||||||||||||||||||||||
| CVS |
Phoenix | AZ | — | 1,511 | 4,533 | — | 6,044 | 62 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Phoenix | AZ | — | 901 | 2,704 | — | 3,605 | 37 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Fresno | CA | — | 1,890 | 4,409 | — | 6,299 | 60 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Palmdale | CA | — | 2,493 | 4,630 | — | 7,123 | 63 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Sacramento | CA | — | 2,163 | 4,016 | — | 6,179 | 55 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Norwich | CT | — | 1,998 | 5,995 | — | 7,993 | 82 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
Lakeland | FL | — | 587 | 2,347 | — | 2,934 | 32 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
St. Cloud | FL | — | 1,534 | 1,875 | — | 3,409 | 84 | 4/12/2013 | 2002 | ||||||||||||||||||||||||
| CVS |
Alpharetta | GA | — | (1) | 572 | 858 | — | 1,430 | 64 | 9/28/2012 | 1994 | |||||||||||||||||||||||
| CVS |
Stockbridge | GA | — | (1) | 855 | 1,283 | — | 2,138 | 64 | 2/28/2013 | 1998 | |||||||||||||||||||||||
| CVS |
Vidalia | GA | — | (1) | 368 | 1,105 | — | 1,473 | 83 | 9/28/2012 | 2000 | |||||||||||||||||||||||
| CVS |
Franklin | IN | — | (1) | 310 | 2,787 | — | 3,097 | 293 | 3/29/2012 | 1999 | |||||||||||||||||||||||
| CVS |
Mandeville | LA | — | 2,385 | 2,915 | — | 5,300 | 40 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Metairie | LA | — | 1,895 | 3,519 | — | 5,414 | 48 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
New Orleans | LA | — | 2,439 | 2,439 | — | 4,878 | 34 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Slidell | LA | — | 1,142 | 4,568 | — | 5,710 | 63 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Hingham | MA | — | 1,873 | 5,619 | — | 7,492 | 76 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Malden | MA | — | 1,757 | 5,271 | — | 7,028 | 72 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Detroit | MI | — | (1) | 270 | 2,427 | — | 2,697 | 121 | 2/28/2013 | 1999 | |||||||||||||||||||||||
| CVS |
Harper Woods | MI | — | (1) | 499 | 2,829 | — | 3,328 | 141 | 2/28/2013 | 1999 | |||||||||||||||||||||||
| CVS |
St. Joseph | MO | — | 1,022 | 3,067 | — | 4,089 | 42 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Beaufort | NC | — | 378 | 3,404 | — | 3,782 | 46 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
Albuquerque | NM | — | 975 | 3,899 | — | 4,874 | 53 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
F-100
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12) (13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| CVS |
Albuquerque | NM | — | 1,029 | 4,118 | — | 5,147 | 57 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
Las Cruces | NM | — | 1,295 | 5,178 | — | 6,473 | 71 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Las Vegas | NV | — | 1,374 | 3,207 | — | 4,581 | 257 | 8/22/2012 | 2004 | ||||||||||||||||||||||||
| CVS |
Rochester | NY | — | (1) | 965 | 1,180 | — | 2,145 | 83 | 11/8/2012 | 1997 | |||||||||||||||||||||||
| CVS |
Tulsa | OK | — | 950 | 2,216 | — | 3,166 | 30 | 10/1/2013 | 2010 | ||||||||||||||||||||||||
| CVS |
Freeland | PA | — | 122 | 1,096 | — | 1,218 | 93 | 8/8/2012 | 2004 | ||||||||||||||||||||||||
| CVS |
Mechanicsburg | PA | — | 1,155 | 3,465 | — | 4,620 | 225 | 11/29/2012 | 2008 | ||||||||||||||||||||||||
| CVS |
Shippensburg | PA | — | 351 | 1,988 | — | 2,339 | 109 | 2/8/2013 | 2002 | ||||||||||||||||||||||||
| CVS |
Greenville | SC | — | (1) | 169 | 1,520 | — | 1,689 | 76 | 2/28/2013 | 1997 | |||||||||||||||||||||||
| CVS |
Jackson | TN | — | 1,209 | 2,822 | — | 4,031 | 38 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Knoxville | TN | — | 1,190 | 2,210 | — | 3,400 | 30 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
Nashville | TN | — | (1) | 203 | 1,148 | — | 1,351 | 86 | 9/28/2012 | 1996 | |||||||||||||||||||||||
| CVS |
Converse | TX | — | 1,390 | 3,243 | — | 4,633 | 45 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
Dumas | TX | — | 846 | 2,537 | — | 3,383 | 35 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
Elsa | TX | — | 915 | 2,744 | — | 3,659 | 37 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
Fort Worth | TX | — | 2,453 | 3,679 | — | 6,132 | 50 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
San Antonio | TX | — | 1,996 | 2,993 | — | 4,989 | 41 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
San Antonio | TX | — | 2,034 | 3,778 | — | 5,812 | 52 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
San Antonio | TX | — | 868 | 2,605 | — | 3,473 | 36 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
San Juan | TX | — | 610 | 2,441 | — | 3,051 | 34 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Norfolk | VA | — | 697 | 2,789 | — | 3,486 | 38 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
Portsmouth | VA | — | 1,230 | 3,690 | — | 4,920 | 50 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Roanoke | VA | — | 825 | 2,474 | — | 3,299 | 34 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| CVS |
Virginia Beach | VA | — | 683 | 3,868 | — | 4,551 | 53 | 10/1/2013 | 2012 | ||||||||||||||||||||||||
| CVS |
Williamsburg | VA | — | 907 | 5,137 | — | 6,044 | 70 | 10/1/2013 | 2011 | ||||||||||||||||||||||||
| Dairy Queen |
Mauldin | SC | — | (1) | 133 | — | — | 133 | — | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Dairy Queen |
Alto | TX | — | (1) | 50 | 110 | — | 160 | 3 | 6/27/2013 | 1972 | |||||||||||||||||||||||
F-101
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dairy Queen |
Pineland | TX | — | (1) | 40 | 120 | — | 160 | 3 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Dairy Queen |
Silsbee | TX | — | (1) | 60 | 100 | — | 160 | 3 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| DaVita Dialysis |
Osceola | AR | — | (1) | 137 | 1,232 | — | 1,369 | 43 | 3/28/2013 | 2009 | |||||||||||||||||||||||
| DaVita Dialysis |
Allen Park | MI | — | (1) | 209 | 1,885 | — | 2,094 | 102 | 12/31/2012 | 1955 | |||||||||||||||||||||||
| DaVita Dialysis |
St. Pauls | NC | — | (1) | 138 | 1,246 | — | 1,384 | 24 | 8/2/2013 | 2006 | |||||||||||||||||||||||
| DaVita Dialysis |
Beeville | TX | — | (1) | 99 | 1,879 | — | 1,978 | 102 | 12/31/2012 | 2002 | |||||||||||||||||||||||
| DaVita Dialysis |
Federal Way | WA | — | 1,929 | 22,357 | — | 24,286 | 1,509 | 11/21/2012 | 2000 | ||||||||||||||||||||||||
| DC Sports Bar & Steakhouse |
Eunice | LA | — | (1) | 500 | 262 | — | 762 | 8 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Del Monte Corporation |
Lathrop | CA | 32,694 | — | 41,318 | — | 41,318 | 420 | 11/5/2013 | 1994 | ||||||||||||||||||||||||
| Denny’s |
Winter Springs | FL | — | (1) | 550 | 1,668 | — | 2,218 | 48 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Denny’s |
Merriam | KS | — | (1) | 390 | 1,150 | — | 1,540 | 33 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Denny’s |
Topeka | KS | — | (1) | 630 | 446 | — | 1,076 | 13 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Denny’s |
Branson | MO | — | (1) | 620 | 2,209 | — | 2,829 | 63 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Denny’s |
Kansas City | MO | — | (1) | 750 | 686 | — | 1,436 | 20 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Denny’s |
North Kansas City | MO | — | (1) | 630 | 937 | — | 1,567 | 27 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Denny’s |
Sedalia | MO | — | (1) | 500 | 783 | — | 1,283 | 22 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Denny’s |
Black Mountain | NC | — | (1) | 210 | 505 | — | 715 | 14 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Denny’s |
Mooresville | NC | — | (1) | 250 | 841 | — | 1,091 | 24 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Denny’s |
Watertown | NY | — | (1) | 330 | 1,107 | — | 1,437 | 32 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Denny’s |
Fremont | OH | — | (1) | 320 | 975 | — | 1,295 | 28 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Denny’s |
Ontario | OR | — | (1) | 240 | 1,067 | — | 1,307 | 31 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Denny’s |
Columbia | SC | — | (1) | 490 | 1,115 | — | 1,605 | 32 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Denny’s |
Greenville | SC | — | (1) | 570 | 554 | — | 1,124 | 16 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Denny’s |
Pasadena | TX | — | (1) | 500 | 1,316 | — | 1,816 | 38 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Dollar General |
Birmingham | AL | — | (1) | 156 | 882 | — | 1,038 | 78 | 6/6/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Chunchula | AL | — | (1) | 174 | 697 | — | 871 | 65 | 4/25/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Moulton | AL | — | (1) | 517 | 1,207 | — | 1,724 | 113 | 4/26/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Gardendale | AL | — | (1) | 142 | 805 | — | 947 | 64 | 8/9/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Red Level | AL | — | 120 | 680 | — | 800 | 83 | 10/31/2011 | 2010 | ||||||||||||||||||||||||
| Dollar General |
Tarrant | AL | — | (5) | 217 | 869 | — | 1,086 | 102 | 12/12/2011 | 2011 | |||||||||||||||||||||||
| Dollar General |
Tuscaloosa | AL | — | 133 | 756 | — | 889 | 85 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Ash Flat | AR | — | (1) | 44 | 132 | — | 176 | 11 | 6/19/2012 | 1997 | |||||||||||||||||||||||
F-102
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
Batesville | AR | — | (1) | 32 | 285 | — | 317 | 7 | 7/25/2013 | 1998 | |||||||||||||||||||||||
| Dollar General |
Batesville | AR | — | (1) | 42 | 374 | — | 416 | 9 | 7/25/2013 | 1999 | |||||||||||||||||||||||
| Dollar General |
Beebe | AR | — | (1) | 51 | 458 | — | 509 | 11 | 7/25/2013 | 1999 | |||||||||||||||||||||||
| Dollar General |
Bella Vista | AR | — | (1) | 129 | 302 | — | 431 | 37 | 11/10/2011 | 2005 | |||||||||||||||||||||||
| Dollar General |
Bergman | AR | — | (1) | 113 | 639 | — | 752 | 54 | 7/2/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Blytheville | AR | — | (1) | 30 | 274 | — | 304 | 6 | 7/25/2013 | 2000 | |||||||||||||||||||||||
| Dollar General |
Carlisle | AR | — | (1) | 13 | 245 | — | 258 | 30 | 11/10/2011 | 2005 | |||||||||||||||||||||||
| Dollar General |
Des Arc | AR | — | (1) | 56 | 508 | — | 564 | 12 | 7/25/2013 | 1999 | |||||||||||||||||||||||
| Dollar General |
Dumas | AR | — | (1) | 46 | 412 | — | 458 | 10 | 7/25/2013 | 1998 | |||||||||||||||||||||||
| Dollar General |
Flippin | AR | — | (1) | 53 | 64 | — | 117 | 5 | 6/19/2012 | 1994 | |||||||||||||||||||||||
| Dollar General |
Gassville | AR | — | (1) | 54 | 305 | — | 359 | 7 | 7/25/2013 | 1999 | |||||||||||||||||||||||
| Dollar General |
Green Forest | AR | — | (1) | 52 | 293 | — | 345 | 36 | 11/10/2011 | 2005 | |||||||||||||||||||||||
| Dollar General |
Higdon | AR | — | (1) | 52 | 469 | — | 521 | 11 | 7/25/2013 | 1999 | |||||||||||||||||||||||
| Dollar General |
Lake Village | AR | — | (1) | 64 | 362 | — | 426 | 8 | 7/25/2013 | 1998 | |||||||||||||||||||||||
| Dollar General |
Lepanto | AR | — | (1) | 43 | 389 | — | 432 | 9 | 7/25/2013 | 1998 | |||||||||||||||||||||||
| Dollar General |
Little Rock | AR | — | (1) | 73 | 412 | — | 485 | 10 | 7/25/2013 | 1999 | |||||||||||||||||||||||
| Dollar General |
Marvell | AR | — | (1) | 40 | 358 | — | 398 | 8 | 7/25/2013 | 1999 | |||||||||||||||||||||||
| Dollar General |
Maynard | AR | — | (1) | 73 | 654 | — | 727 | 40 | 12/4/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
McGehee | AR | — | (1) | 25 | 228 | — | 253 | 5 | 7/25/2013 | 1998 | |||||||||||||||||||||||
| Dollar General |
Quitman | AR | — | (1) | 45 | 405 | — | 450 | 9 | 7/25/2013 | 2001 | |||||||||||||||||||||||
| Dollar General |
Searcy | AR | — | (1) | 29 | 263 | — | 292 | 6 | 7/25/2013 | 1998 | |||||||||||||||||||||||
| Dollar General |
Tuckerman | AR | — | (1) | 49 | 280 | — | 329 | 7 | 7/25/2013 | 1999 | |||||||||||||||||||||||
| Dollar General |
Whitehall | AR | — | (1) | 43 | 388 | — | 431 | 9 | 7/25/2013 | 1999 | |||||||||||||||||||||||
| Dollar General |
Wooster | AR | — | (1) | 74 | 664 | — | 738 | 40 | 12/4/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Grand Ridge | FL | — | 76 | 684 | — | 760 | 77 | 12/30/2011 | 2010 | ||||||||||||||||||||||||
| Dollar General |
Molina | FL | — | 178 | 1,007 | — | 1,185 | 123 | 10/31/2011 | 2010 | ||||||||||||||||||||||||
| Dollar General |
Panama City | FL | — | (1) | 139 | 312 | — | 451 | 23 | 6/19/2012 | 1987 | |||||||||||||||||||||||
| Dollar General |
Chariton | IA | — | (1) | 165 | 934 | — | 1,099 | 70 | 8/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Estherville | IA | — | (1) | 226 | 903 | — | 1,129 | 59 | 10/25/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Hampton | IA | — | (5) | 188 | 751 | — | 939 | 81 | 2/1/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Lake Milles | IA | — | (5) | 81 | 728 | — | 809 | 78 | 2/1/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Nashua | IA | — | (1) | 136 | 768 | — | 904 | 58 | 9/6/2012 | 2012 | |||||||||||||||||||||||
F-103
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
Ottumwa | IA | — | (1) | 143 | 812 | — | 955 | 42 | 1/31/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Altamont | IL | — | (6) | 211 | 844 | — | 1,055 | 87 | 3/9/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Carthage | IL | — | (1) | 48 | 908 | — | 956 | 68 | 8/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Jacksonville | IL | — | (1) | 145 | 823 | — | 968 | 62 | 8/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Jonesboro | IL | — | (1) | 77 | 309 | — | 386 | 38 | 11/10/2011 | 2007 | |||||||||||||||||||||||
| Dollar General |
Lexington | IL | — | (1) | 100 | 899 | — | 999 | 63 | 9/21/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Marion | IL | — | (1) | 153 | 867 | — | 1,020 | 61 | 9/24/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Mt Morris | IL | — | (1) | 97 | 877 | — | 974 | 49 | 12/17/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Monroeville | IN | — | (5) | 112 | 636 | — | 748 | 71 | 12/22/2011 | 2011 | |||||||||||||||||||||||
| Dollar General |
Auburn | KS | — | (1) | 42 | 801 | — | 843 | 60 | 8/31/2012 | 2009 | |||||||||||||||||||||||
| Dollar General |
Caney | KS | — | (1) | 31 | 178 | — | 209 | 15 | 6/19/2012 | 2002 | |||||||||||||||||||||||
| Dollar General |
Cottonwood Falls | KS | — | (1) | 89 | 802 | — | 891 | 60 | 8/31/2012 | 2009 | |||||||||||||||||||||||
| Dollar General |
Erie | KS | — | (1) | 42 | 790 | — | 832 | 59 | 8/31/2012 | 2009 | |||||||||||||||||||||||
| Dollar General |
Garden City | KS | — | (1) | 136 | 771 | — | 907 | 58 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Harper | KS | — | (1) | 91 | 818 | — | 909 | 61 | 8/31/2012 | 2009 | |||||||||||||||||||||||
| Dollar General |
Humboldt | KS | — | (1) | 44 | 828 | — | 872 | 62 | 8/31/2012 | 2009 | |||||||||||||||||||||||
| Dollar General |
Kingman | KS | — | (1) | 142 | 804 | — | 946 | 60 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Medicine Lodge | KS | — | (1) | 40 | 765 | — | 805 | 57 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Minneapolis | KS | — | (1) | 43 | 816 | — | 859 | 61 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Pomona | KS | — | (1) | 42 | 796 | — | 838 | 60 | 8/31/2012 | 2009 | |||||||||||||||||||||||
| Dollar General |
Sedan | KS | — | (1) | 42 | 792 | — | 834 | 59 | 8/31/2012 | 2009 | |||||||||||||||||||||||
| Dollar General |
Syracuse | KS | — | (1) | 43 | 817 | — | 860 | 61 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Nancy | KY | — | (1) | 81 | 733 | — | 814 | 69 | 4/26/2012 | 2011 | |||||||||||||||||||||||
F-104
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
Choudrant | LA | — | 83 | 745 | — | 828 | 80 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Converse | LA | — | (1) | 84 | 756 | — | 840 | 53 | 9/26/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Doyline | LA | — | (1) | 88 | 793 | — | 881 | 48 | 11/27/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Gardner | LA | — | (6) | 138 | 784 | — | 922 | 81 | 3/8/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Jonesville | LA | — | (1) | 103 | 929 | — | 1,032 | 65 | 9/27/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Keithville | LA | — | (1) | 83 | 750 | — | 833 | 60 | 7/26/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Lake Charles | LA | — | 102 | 919 | — | 1,021 | 95 | 2/29/2012 | 2012 | ||||||||||||||||||||||||
| Dollar General |
Mangham | LA | — | 40 | 759 | — | 799 | 82 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Mt. Hermon | LA | — | (1) | 94 | 842 | — | 936 | 91 | 2/6/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
New Iberia | LA | — | (1) | 315 | 736 | — | 1,051 | 69 | 4/26/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Patterson | LA | — | 259 | 1,035 | — | 1,294 | 97 | 4/26/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Richwood | LA | — | (1) | 97 | 869 | — | 966 | 94 | 2/6/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Sarepta | LA | — | (1) | 131 | 743 | — | 874 | 59 | 8/9/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
West Monroe | LA | — | (1) | 153 | 869 | — | 1,022 | 89 | 3/9/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Zachary | LA | — | (1) | 248 | 743 | — | 991 | 70 | 4/26/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Bangor | MI | — | (1) | 173 | 691 | — | 864 | 58 | 7/10/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Cadillac | MI | — | (6) | 187 | 747 | — | 934 | 73 | 3/16/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Carleton | MI | — | (6) | 222 | 666 | — | 888 | 65 | 3/16/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Covert | MI | — | (1) | 37 | 704 | — | 741 | 53 | 8/30/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Durand | MI | — | (1) | 181 | 726 | — | 907 | 65 | 5/18/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
East Jordan | MI | — | (1) | 125 | 709 | — | 834 | 60 | 7/10/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Flint | MI | — | (6) | 83 | 743 | — | 826 | 66 | 5/18/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Flint | MI | — | (1) | 91 | 820 | — | 911 | 54 | 10/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Gaylord | MI | — | (1) | 172 | 687 | — | 859 | 58 | 7/10/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Iron River | MI | — | (1) | 86 | 777 | — | 863 | 58 | 8/30/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Melvindale | MI | — | (1) | 242 | 967 | — | 1,209 | 81 | 6/26/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Negaunee | MI | — | (1) | 87 | 779 | — | 866 | 58 | 8/30/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Roscommon | MI | — | (1) | 87 | 781 | — | 868 | 58 | 8/30/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Melrose | MN | — | (1) | 96 | 863 | — | 959 | 48 | 12/17/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Montgomery | MN | — | (1) | 87 | 783 | — | 870 | 44 | 12/17/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Olivia | MN | — | (1) | 98 | 884 | — | 982 | 46 | 1/31/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Rush City | MN | — | (1) | 126 | 716 | — | 842 | 57 | 7/25/2012 | 2012 | |||||||||||||||||||||||
F-105
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
Springfield | MN | — | (1) | 88 | 795 | — | 883 | 45 | 12/26/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Virginia | MN | — | (1) | 147 | 831 | — | 978 | 47 | 1/14/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Appleton City | MO | — | (1) | 22 | 124 | — | 146 | 15 | 11/10/2011 | 2004 | |||||||||||||||||||||||
| Dollar General |
Ash Grove | MO | — | (1) | 35 | 315 | — | 350 | 38 | 11/10/2011 | 2006 | |||||||||||||||||||||||
| Dollar General |
Ashland | MO | — | (1) | 70 | 398 | — | 468 | 48 | 11/10/2011 | 2006 | |||||||||||||||||||||||
| Dollar General |
Auxvasse | MO | — | (2) | 72 | 650 | — | 722 | 76 | 11/22/2011 | 2011 | |||||||||||||||||||||||
| Dollar General |
Belton | MO | — | (1) | 105 | 948 | — | 1,053 | 75 | 8/3/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Berkeley | MO | — | (1) | 132 | 748 | — | 880 | 53 | 10/9/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Bernie | MO | — | (1) | 35 | 314 | — | 349 | 38 | 11/10/2011 | 2007 | |||||||||||||||||||||||
| Dollar General |
Bloomfield | MO | — | (1) | 23 | 209 | — | 232 | 25 | 11/10/2011 | 2005 | |||||||||||||||||||||||
| Dollar General |
Cardwell | MO | — | (1) | 89 | 805 | — | 894 | 60 | 8/24/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Carterville | MO | — | (8) | 10 | 192 | — | 202 | 23 | 11/10/2011 | 2004 | |||||||||||||||||||||||
| Dollar General |
Caruthersville | MO | — | (1) | 98 | 878 | — | 976 | 62 | 9/27/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Clarkton | MO | — | (1) | 19 | 354 | — | 373 | 43 | 11/10/2011 | 2007 | |||||||||||||||||||||||
| Dollar General |
Clever | MO | — | (1) | 136 | 542 | — | 678 | 46 | 6/19/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Concordia | MO | — | (1) | 40 | 161 | — | 201 | 14 | 6/19/2012 | 1998 | |||||||||||||||||||||||
| Dollar General |
Conway | MO | — | (2) | 37 | 694 | — | 731 | 81 | 11/22/2011 | 2011 | |||||||||||||||||||||||
| Dollar General |
Diamond | MO | — | (1) | 44 | 175 | — | 219 | 21 | 11/10/2011 | 2005 | |||||||||||||||||||||||
| Dollar General |
Edina | MO | — | (1) | 127 | 722 | — | 849 | 54 | 9/13/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Ellsinore | MO | — | (8) | 30 | 579 | — | 609 | 70 | 11/10/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
Gower | MO | — | (1) | 118 | 668 | — | 786 | 50 | 8/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Greenfield | MO | — | (1) | 42 | 378 | — | 420 | 32 | 6/19/2012 | 2000 | |||||||||||||||||||||||
| Dollar General |
Hallsville | MO | — | (8) | 29 | 263 | — | 292 | 32 | 11/10/2011 | 2004 | |||||||||||||||||||||||
| Dollar General |
Hawk Point | MO | — | (1) | 177 | 709 | — | 886 | 53 | 8/24/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Humansville | MO | — | (1) | 69 | 277 | — | 346 | 23 | 6/19/2012 | 2007 | |||||||||||||||||||||||
| Dollar General |
Jennings | MO | — | (1) | 445 | 826 | — | 1,271 | 70 | 7/13/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Kansas City | MO | — | (1) | 313 | 731 | — | 1,044 | 51 | 9/21/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
King City | MO | — | (2) | 33 | 625 | — | 658 | 73 | 11/22/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
Lawson | MO | — | (1) | 29 | 162 | — | 191 | 20 | 11/10/2011 | 2003 | |||||||||||||||||||||||
| Dollar General |
Lebanon | MO | — | (1) | 278 | 835 | — | 1,113 | 59 | 9/26/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Lebanon | MO | — | (1) | 177 | 708 | — | 885 | 50 | 9/24/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Licking | MO | — | (2) | 76 | 688 | — | 764 | 80 | 11/22/2011 | 2010 | |||||||||||||||||||||||
F-106
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
Lilbourne | MO | — | (8) | 62 | 554 | — | 616 | 67 | 11/10/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
Marble Hill | MO | — | (1) | 104 | 935 | — | 1,039 | 70 | 9/11/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Marionville | MO | — | (1) | 89 | 797 | — | 886 | 52 | 10/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Marthasville | MO | — | 41 | 782 | — | 823 | 84 | 2/1/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Maysville | MO | — | (2) | 107 | 607 | — | 714 | 74 | 10/31/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
Morehouse | MO | — | (1) | 87 | 783 | — | 870 | 59 | 9/7/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
New Haven | MO | — | (1) | 176 | 702 | — | 878 | 66 | 4/27/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Oak Grove | MO | — | (1) | 27 | 106 | — | 133 | 9 | 6/19/2012 | 1999 | |||||||||||||||||||||||
| Dollar General |
Oran | MO | — | (6) | 83 | 747 | — | 830 | 73 | 3/30/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Osceola | MO | — | (1) | 93 | 835 | — | 928 | 39 | 2/19/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Ozark | MO | — | (6) | 190 | 758 | — | 948 | 71 | 4/27/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Ozark | MO | — | (1) | 149 | 842 | — | 991 | 59 | 9/24/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Pacific | MO | — | (1) | 151 | 853 | — | 1,004 | 76 | 6/6/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Palmyra | MO | — | (1) | 40 | 225 | — | 265 | 19 | 6/19/2012 | 2003 | |||||||||||||||||||||||
| Dollar General |
Plattsburg | MO | — | (1) | 44 | 843 | — | 887 | 67 | 8/9/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Qulin | MO | — | (8) | 30 | 573 | — | 603 | 70 | 11/10/2011 | 2009 | |||||||||||||||||||||||
| Dollar General |
Robertsville | MO | — | (1) | 131 | 744 | — | 875 | 56 | 8/24/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Rocky Mount | MO | — | (1) | 88 | 789 | — | 877 | 59 | 8/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Sedalia | MO | — | (1) | 273 | 637 | — | 910 | 48 | 9/7/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Senath | MO | — | (1) | 61 | 552 | — | 613 | 47 | 6/19/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Seneca | MO | — | (1) | 47 | 189 | — | 236 | 16 | 6/19/2012 | 1962 | |||||||||||||||||||||||
| Dollar General |
Sikeston | MO | — | (6) | 56 | 1,056 | — | 1,112 | 109 | 2/24/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Sikeston | MO | — | (1) | 144 | 819 | — | 963 | 61 | 8/24/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Springfield | MO | — | (1) | 378 | 702 | — | 1,080 | 62 | 6/14/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
St James | MO | — | (1) | 81 | 244 | — | 325 | 21 | 6/19/2012 | 1999 | |||||||||||||||||||||||
| Dollar General |
St. Clair | MO | — | 220 | 879 | — | 1,099 | 99 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
F-107
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
St. Louis | MO | — | (1) | 372 | 692 | — | 1,064 | 52 | 8/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
St. Louis | MO | — | (1) | 260 | 606 | — | 866 | 43 | 9/26/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Stanberry | MO | — | (3) | 111 | 629 | — | 740 | 74 | 11/22/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
Steele | MO | — | (8) | 31 | 598 | — | 629 | 73 | 11/10/2011 | 2009 | |||||||||||||||||||||||
| Dollar General |
Strafford | MO | — | (8) | 51 | 461 | 10 | 522 | 56 | 11/10/2011 | 2009 | |||||||||||||||||||||||
| Dollar General |
Vienna | MO | — | (6) | 78 | 704 | — | 782 | 72 | 2/24/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Willow Springs | MO | — | (1) | 24 | 213 | — | 237 | 18 | 6/19/2012 | 2002 | |||||||||||||||||||||||
| Dollar General |
Winona | MO | — | (1) | 52 | 155 | — | 207 | 13 | 6/19/2012 | 2001 | |||||||||||||||||||||||
| Dollar General |
Edwards | MS | — | 75 | 671 | — | 746 | 75 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Greensville | MS | — | 82 | 739 | — | 821 | 83 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Hickory | MS | — | (1) | 77 | 692 | — | 769 | 58 | 7/2/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Jackson | MS | — | (1) | 198 | 793 | — | 991 | 56 | 9/27/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Meridian | MS | — | (1) | 178 | 713 | — | 891 | 53 | 9/13/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Meridian | MS | — | (1) | 40 | 754 | — | 794 | 56 | 9/13/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Moorhead | MS | — | (6) | 107 | 606 | — | 713 | 57 | 5/1/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Natchez | MS | — | (1) | 166 | 664 | — | 830 | 59 | 6/11/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Soso | MS | — | (6) | 116 | 658 | — | 774 | 65 | 4/12/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Stonewall | MS | — | (1) | 116 | 655 | — | 771 | 55 | 7/2/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Stringer | MS | — | (1) | 116 | 655 | — | 771 | 55 | 7/2/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Walmut Grove | MS | — | 71 | 641 | — | 712 | 72 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Fayetteville | NC | — | 216 | 647 | — | 863 | 70 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Hickory | NC | — | (1) | 89 | 804 | — | 893 | 64 | 8/13/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Ocean Isle Beach | NC | — | 341 | 633 | — | 974 | 68 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Tryon | NC | — | (1) | 139 | 789 | — | 928 | 63 | 8/13/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Vass | NC | — | 226 | 528 | — | 754 | 57 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Farmington | NM | — | (1) | 269 | 807 | — | 1,076 | 60 | 9/6/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Forest | OH | — | 76 | 681 | — | 757 | 83 | 10/31/2011 | 2010 | ||||||||||||||||||||||||
| Dollar General |
Greenfield | OH | — | 110 | 986 | — | 1,096 | 102 | 2/23/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Loudonville | OH | — | (1) | 236 | 945 | — | 1,181 | 84 | 6/6/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Lucasville | OH | — | (1) | 223 | 893 | — | 1,116 | 79 | 5/16/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
New Carlisle | OH | — | (1) | 215 | 860 | — | 1,075 | 72 | 7/10/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
New Matamoras | OH | — | 123 | 696 | — | 819 | 85 | 10/31/2011 | 2010 | ||||||||||||||||||||||||
F-108
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
Payne | OH | — | (3) | 81 | 729 | — | 810 | 89 | 10/31/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
Pleasant City | OH | — | (3) | 131 | 740 | — | 871 | 90 | 10/31/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
Calera | OK | — | (1) | 136 | 770 | — | 906 | 58 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Commerce | OK | — | (1) | 38 | 341 | — | 379 | 41 | 11/10/2011 | 2006 | |||||||||||||||||||||||
| Dollar General |
Hartshorne | OK | — | (1) | 100 | 898 | — | 998 | 67 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Lexington | OK | — | (1) | 85 | 761 | — | 846 | 57 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Maud | OK | — | (1) | 76 | 688 | — | 764 | 51 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Maysville | OK | — | (1) | 41 | 785 | — | 826 | 59 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Nowata | OK | — | (1) | 43 | 128 | — | 171 | 11 | 6/19/2012 | 1998 | |||||||||||||||||||||||
| Dollar General |
Rush Spring | OK | — | (1) | 87 | 779 | — | 866 | 58 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Doyle | TN | — | (1) | 75 | 679 | — | 754 | 51 | 8/22/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Manchester | TN | — | (1) | 114 | 646 | — | 760 | 51 | 7/26/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
McMinnville | TN | — | (1) | 120 | 679 | — | 799 | 57 | 7/12/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Pleasant Hill | TN | — | 39 | 747 | — | 786 | 84 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Academy | TX | — | (1) | 122 | 693 | — | 815 | 65 | 4/27/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Alto Bonito | TX | — | (5) | 163 | 652 | — | 815 | 70 | 2/1/2012 | 2011 | |||||||||||||||||||||||
| Dollar General |
Blessing | TX | — | (1) | 83 | 745 | — | 828 | 42 | 12/18/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Bryan | TX | — | (1) | 148 | 840 | — | 988 | 63 | 9/14/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Bryan | TX | — | (1) | 193 | 772 | — | 965 | 58 | 9/14/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Bryan | TX | — | (1) | 185 | 740 | — | 925 | 55 | 8/31/2012 | 2009 | |||||||||||||||||||||||
| Dollar General |
Canyon Lake | TX | — | (1) | 149 | 843 | — | 992 | 59 | 10/12/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Como | TX | — | (6) | 76 | 683 | — | 759 | 64 | 4/20/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Corpus Christi | TX | — | (1) | 270 | 809 | — | 1,079 | 45 | 12/26/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Dickinson | TX | — | (1) | 87 | 786 | — | 873 | 55 | 9/25/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Donna | TX | — | (1) | 136 | 768 | — | 904 | 58 | 9/11/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Donna | TX | — | (1) | 200 | 799 | — | 999 | 56 | 10/12/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Donna | TX | — | (1) | 145 | 820 | — | 965 | 42 | 1/31/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Edinburg | TX | — | (1) | 136 | 769 | — | 905 | 58 | 9/7/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Elemdorf | TX | — | (1) | 94 | 847 | — | 941 | 56 | 10/23/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Gladewater | TX | — | (1) | 184 | 736 | — | 920 | 55 | 8/31/2012 | 2009 | |||||||||||||||||||||||
| Dollar General |
Gordonville | TX | — | (6) | 38 | 717 | — | 755 | 67 | 4/20/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Kyle | TX | — | (1) | 132 | 747 | — | 879 | 52 | 9/26/2012 | 2012 | |||||||||||||||||||||||
F-109
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
LaMarque | TX | — | (1) | 102 | 917 | — | 1,019 | 69 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Laredo | TX | — | (1) | 253 | 758 | — | 1,011 | 60 | 7/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Lubbock | TX | — | (1) | 267 | 801 | — | 1,068 | 60 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Lyford | TX | — | 80 | 724 | — | 804 | 81 | 12/30/2011 | 2010 | ||||||||||||||||||||||||
| Dollar General |
Morgans Point | TX | — | (1) | 145 | 821 | — | 966 | 61 | 9/13/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Mount Pleasant | TX | — | (1) | 214 | 858 | — | 1,072 | 64 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
New Braunfels | TX | — | (1) | 205 | 818 | — | 1,023 | 61 | 8/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Poteet | TX | — | (3) | 96 | 864 | — | 960 | 105 | 10/31/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
Progreso | TX | — | (3) | 169 | 957 | — | 1,126 | 116 | 10/31/2011 | 2009 | |||||||||||||||||||||||
| Dollar General |
Rio Grande City | TX | — | (3) | 137 | 779 | — | 916 | 95 | 10/31/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
Roma | TX | — | (3) | 253 | 1,010 | — | 1,263 | 123 | 10/31/2011 | 2010 | |||||||||||||||||||||||
| Dollar General |
San Antonio | TX | — | (1) | 252 | 756 | — | 1,008 | 50 | 10/22/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
San Antonio | TX | — | (1) | 222 | 888 | — | 1,110 | 58 | 10/22/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Silsbee | TX | — | (1) | 43 | 810 | — | 853 | 68 | 7/6/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Troy | TX | — | (1) | 93 | 841 | — | 934 | 63 | 9/12/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Tyler | TX | — | (1) | 219 | 875 | — | 1,094 | 66 | 8/31/2012 | 2010 | |||||||||||||||||||||||
| Dollar General |
Victoria | TX | — | (1) | 91 | 817 | — | 908 | 42 | 1/31/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Waco | TX | — | (1) | 192 | 767 | — | 959 | 57 | 8/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Weslaco | TX | — | (1) | 215 | 862 | — | 1,077 | 61 | 9/24/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Burkeville | VA | — | (1) | 160 | 906 | — | 1,066 | 85 | 5/8/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Chesterfield | VA | — | 242 | 726 | — | 968 | 78 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Danville | VA | — | 155 | 621 | — | 776 | 67 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Hopewell | VA | — | 584 | 713 | — | 1,297 | 77 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Hot Springs | VA | — | 283 | 661 | — | 944 | 71 | 2/6/2012 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Mellen | WI | — | 79 | 711 | — | 790 | 80 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Minong | WI | — | 38 | 727 | — | 765 | 82 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
F-110
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
Solon Springs | WI | — | 76 | 685 | — | 761 | 77 | 12/30/2011 | 2011 | ||||||||||||||||||||||||
| Dunkin’ Donuts/Baskin-Robbins |
Dearborn Heights | MI | — | (1) | 230 | 846 | — | 1,076 | 23 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Einstein Bros. Bagels |
Dearborn | MI | — | (1) | 190 | 724 | — | 914 | 20 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Exelis |
Herndon | VA | 39,519 | 1,384 | 53,584 | — | 54,968 | 434 | 11/5/2013 | 2006 | ||||||||||||||||||||||||
| Express Scripts |
St. Louis | MO | — | (4) | 5,706 | 32,333 | — | 38,039 | 3,661 | 1/25/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Rangeley | CO | — | (6) | 66 | 593 | — | 659 | 56 | 5/4/2012 | 2010 | |||||||||||||||||||||||
| Family Dollar |
Middleburg | FL | — | (1) | 274 | 822 | — | 1,096 | 27 | 6/4/2013 | 2008 | |||||||||||||||||||||||
| Family Dollar |
Ormond Beach | FL | — | 573 | 860 | — | 1,433 | 28 | 6/4/2013 | 2008 | ||||||||||||||||||||||||
| Family Dollar |
Lenox | GA | — | (1) | 90 | 809 | — | 899 | 53 | 11/9/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Arco | ID | — | (1) | 76 | 684 | — | 760 | 48 | 9/18/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Kimberly | ID | — | (1) | 219 | 657 | — | 876 | 28 | 4/10/2013 | 2013 | |||||||||||||||||||||||
| Family Dollar |
Brookston | IN | — | (1) | 126 | 715 | — | 841 | 50 | 10/1/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Greensburg | KS | — | (1) | 80 | 718 | — | 798 | 13 | 9/9/2013 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Chalmette | LA | — | (1) | 751 | 615 | — | 1,366 | 58 | 5/3/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Tickfaw | LA | — | (1) | 181 | 543 | — | 724 | 53 | 3/30/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Detroit | MI | — | (1) | 130 | 1,169 | — | 1,299 | 71 | 11/27/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Detroit | MI | — | (1) | 106 | 956 | — | 1,062 | 36 | 5/2/2013 | 1964 | |||||||||||||||||||||||
| Family Dollar |
Jackson | MI | — | (1) | 93 | 525 | — | 618 | 10 | 9/12/2013 | 2007 | |||||||||||||||||||||||
| Family Dollar |
St Louis | MO | — | (1) | 445 | 1,038 | — | 1,483 | 68 | 12/14/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
St. Louis | MO | — | (1) | 168 | 671 | — | 839 | 66 | 4/2/2012 | 2006 | |||||||||||||||||||||||
| Family Dollar |
St. Louis | MO | — | (1) | 445 | 1,039 | — | 1,484 | 63 | 10/23/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
St. Louis | MO | — | (1) | 215 | 1,219 | — | 1,434 | 46 | 4/30/2013 | 2013 | |||||||||||||||||||||||
| Family Dollar |
Biloxi | MS | — | (6) | 310 | 575 | — | 885 | 57 | 3/30/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Carriere | MS | — | (6) | 200 | 599 | — | 799 | 59 | 3/30/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
D’Iberville | MS | — | (1) | 241 | 561 | — | 802 | 50 | 5/21/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Gulfport | MS | — | (6) | 209 | 626 | — | 835 | 56 | 5/21/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Gulfport | MS | — | (1) | 270 | 629 | — | 899 | 44 | 9/20/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Gulfport | MS | — | (1) | 218 | 654 | — | 872 | 43 | 11/15/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Hattiesburg | MS | — | (1) | 225 | 674 | — | 899 | 35 | 1/30/2013 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Horn Lake | MS | — | (1) | 225 | 676 | — | 901 | 51 | 8/22/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Kiln | MS | — | (1) | 106 | 650 | — | 756 | 43 | 11/14/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Okolona | MS | — | (1) | 64 | 578 | — | 642 | 46 | 7/31/2012 | 2012 | |||||||||||||||||||||||
F-111
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Family Dollar |
Winona | MS | — | (1) | 146 | 585 | — | 731 | 47 | 7/31/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Lumberton | NC | — | 151 | 603 | — | 754 | 11 | 9/11/2013 | 2006 | ||||||||||||||||||||||||
| Family Dollar |
Fort Yates | ND | — | (5) | 126 | 715 | — | 841 | 77 | 1/31/2012 | 2010 | |||||||||||||||||||||||
| Family Dollar |
New Town | ND | — | (5) | 105 | 942 | — | 1,047 | 101 | 1/31/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Rolla | ND | — | (5) | 83 | 749 | — | 832 | 81 | 1/31/2012 | 2010 | |||||||||||||||||||||||
| Family Dollar |
Madison | NE | — | (5) | 37 | 703 | — | 740 | 79 | 12/30/2011 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Chimayo | NM | — | (1) | 158 | 632 | — | 790 | 33 | 1/30/2013 | 2009 | |||||||||||||||||||||||
| Family Dollar |
Mountainair | NM | — | (1) | 84 | 752 | — | 836 | 63 | 7/6/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Hawthorne | NV | — | (6) | 191 | 764 | — | 955 | 68 | 6/1/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Lovelock | NV | — | (6) | 185 | 742 | — | 927 | 69 | 5/4/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Silver Spring | NV | — | (1) | 202 | 808 | — | 1,010 | 57 | 9/21/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Wells | NV | — | (6) | 84 | 755 | — | 839 | 71 | 5/11/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Toledo | OH | — | (1) | 306 | 917 | — | 1,223 | 43 | 2/25/2013 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Warren | OH | — | (1) | 170 | 681 | — | 851 | 51 | 9/11/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Stillwell | OK | — | (5) | 40 | 768 | — | 808 | 86 | 1/6/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Tulsa | OK | — | (6) | 220 | 878 | — | 1,098 | 70 | 7/30/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Martin | SD | — | (5) | 85 | 764 | — | 849 | 82 | 1/31/2012 | 2009 | |||||||||||||||||||||||
| Family Dollar |
Harrison | TN | — | (1) | 74 | 420 | — | 494 | 10 | 7/23/2013 | 2006 | |||||||||||||||||||||||
| Family Dollar |
Avinger | TX | — | (1) | 40 | 761 | — | 801 | 50 | 10/22/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Caldwell | TX | — | (1) | 138 | 552 | — | 690 | 49 | 5/29/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Chireno | TX | — | (1) | 50 | 943 | — | 993 | 57 | 12/10/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Eagle Lake | TX | — | (1) | 100 | 566 | — | 666 | 48 | 7/6/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Floydada | TX | — | (5) | 36 | 681 | — | 717 | 77 | 12/30/2011 | 2010 | |||||||||||||||||||||||
| Family Dollar |
Kerens | TX | — | (6) | 73 | 658 | — | 731 | 68 | 2/29/2012 | 2011 | |||||||||||||||||||||||
| Family Dollar |
Oakhurst | TX | — | (1) | 36 | 683 | — | 719 | 42 | 12/12/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Plano | TX | — | (1) | 468 | 869 | — | 1,337 | 20 | 8/1/2013 | 2013 | |||||||||||||||||||||||
| Family Dollar |
Kemmerer | WY | — | (1) | 45 | 853 | — | 898 | 40 | 2/22/2013 | 2013 | |||||||||||||||||||||||
| Famous Dave’s |
Independence | MO | — | (1) | 620 | 422 | — | 1,042 | 12 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Farmers Group, Inc. |
Simi Valley | CA | 25,620 | 11,851 | 31,096 | — | 42,947 | 314 | 11/5/2013 | 1982 | ||||||||||||||||||||||||
| Farmers New World Life Insurance Company |
Mercer Island | WA | 29,161 | 24,287 | 28,210 | — | 52,497 | 231 | 11/5/2013 | 1982 | ||||||||||||||||||||||||
| FedEx |
Lowell | AR | — | (1) | 396 | 7,521 | — | 7,917 | 382 | 3/15/2013 | 2012 | |||||||||||||||||||||||
| FedEx |
Yuma | AZ | — | — | 2,076 | — | 2,076 | 148 | 10/17/2012 | 2011 | ||||||||||||||||||||||||
F-112
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| FedEx |
Chico | CA | — | (1) | 308 | 2,776 | — | 3,084 | 198 | 11/9/2012 | 2006 | |||||||||||||||||||||||
| FedEx |
Commerce City | CO | — | (4) | 6,556 | 26,224 | — | 32,780 | 2,799 | 3/20/2012 | 2007 | |||||||||||||||||||||||
| FedEx |
Melbourne | FL | — | (1) | 159 | 1,433 | — | 1,592 | 36 | 7/26/2013 | 1989 | |||||||||||||||||||||||
| FedEx |
Kankakee | IL | — | (1) | 195 | 1,103 | — | 1,298 | 107 | 5/31/2012 | 2003 | |||||||||||||||||||||||
| FedEx |
Mt. Vernon | IL | — | (1) | 222 | 1,259 | — | 1,481 | 122 | 5/31/2012 | 2009 | |||||||||||||||||||||||
| FedEx |
Quincy | IL | — | 371 | 2,101 | — | 2,472 | 160 | 9/28/2012 | 2012 | ||||||||||||||||||||||||
| FedEx |
Evansville | IN | — | (1) | 665 | 2,661 | — | 3,326 | 257 | 5/31/2012 | 2003 | |||||||||||||||||||||||
| FedEx |
Kokomo | IN | — | 186 | 3,541 | — | 3,727 | 378 | 3/16/2012 | 2012 | ||||||||||||||||||||||||
| FedEx |
Hazard | KY | — | 215 | 4,085 | — | 4,300 | 312 | 9/28/2012 | 2012 | ||||||||||||||||||||||||
| FedEx |
London | KY | — | (1) | 191 | 1,081 | — | 1,272 | 104 | 5/31/2012 | 2000 | |||||||||||||||||||||||
| FedEx |
Grand Rapids | MI | 4,800 | 1,797 | 7,189 | — | 8,986 | 694 | 6/14/2012 | 2012 | ||||||||||||||||||||||||
| FedEx |
Port Huron | MI | — | (1) | 125 | 1,121 | — | 1,246 | 40 | 5/31/2013 | 2003 | |||||||||||||||||||||||
| FedEx |
Roseville | MN | — | 1,462 | 8,282 | — | 9,744 | 547 | 11/30/2012 | 2012 | ||||||||||||||||||||||||
| FedEx |
Butte | MT | 5,060 | 403 | 7,653 | — | 8,056 | 1,050 | 9/27/2011 | 2011 | ||||||||||||||||||||||||
| FedEx |
Belmont | NH | — | (4) | 265 | 2,386 | — | 2,651 | 291 | 12/29/2011 | 2011 | |||||||||||||||||||||||
| FedEx |
Wendover | NV | — | (1) | 262 | 1,483 | — | 1,745 | 75 | 2/25/2013 | 2012 | |||||||||||||||||||||||
| FedEx |
Winnemucca | NV | — | (1) | 280 | 1,585 | — | 1,865 | 81 | 2/25/2013 | 2012 | |||||||||||||||||||||||
| FedEx |
Blauvelt | NY | — | 14,420 | 26,779 | — | 41,199 | 2,859 | 4/5/2012 | 2012 | ||||||||||||||||||||||||
| FedEx |
Chillicothe | OH | — | (1) | 143 | 1,284 | — | 1,427 | 124 | 5/31/2012 | 2000 | |||||||||||||||||||||||
| FedEx |
Mt. Pleasant | PA | — | (1) | 454 | 1,814 | 98 | 2,366 | 179 | 5/31/2012 | 2001 | |||||||||||||||||||||||
| FedEx |
Blountville | TN | — | (4) | 562 | 5,056 | — | 5,618 | 591 | 2/3/2012 | 2009 | |||||||||||||||||||||||
| FedEx |
Humboldt | TN | — | 239 | 4,543 | — | 4,782 | 416 | 7/11/2012 | 2008 | ||||||||||||||||||||||||
| FedEx |
Bryan | TX | — | (1) | 1,422 | 3,318 | — | 4,740 | 320 | 6/15/2012 | 2011 | |||||||||||||||||||||||
| FedEx |
Omak | WA | — | 252 | 1,425 | — | 1,677 | 109 | 9/27/2012 | 2012 | ||||||||||||||||||||||||
| FedEx |
Wenatchee | WA | — | 266 | 2,393 | — | 2,659 | 183 | 9/28/2012 | 2012 | ||||||||||||||||||||||||
| FedEx |
Parkersburg | WV | — | 193 | 3,671 | — | 3,864 | 280 | 9/20/2012 | 2012 | ||||||||||||||||||||||||
| FedEx Ground |
Greenville | NC | — | (5) | 363 | 6,903 | — | 7,266 | 772 | 2/22/2012 | 2011 | |||||||||||||||||||||||
F-113
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| FedEx Ground |
Tulsa | OK | — | (5) | 458 | 8,695 | — | 9,153 | 972 | 2/22/2012 | 2011 | |||||||||||||||||||||||
| First Bank |
Pinellas Park | FL | — | 630 | 1,470 | — | 2,100 | 18 | 10/1/2013 | 1981 | ||||||||||||||||||||||||
| Fresenius |
Aurora | IL | — | 287 | 2,584 | — | 2,871 | 182 | 7/13/2012 | 2009 | ||||||||||||||||||||||||
| Fresenius |
Chicago | IL | — | 588 | 1,764 | — | 2,352 | 117 | 7/31/2012 | 2009 | ||||||||||||||||||||||||
| Fresenius |
Waukegan | IL | — | 94 | 1,792 | — | 1,886 | 119 | 7/31/2012 | 2011 | ||||||||||||||||||||||||
| Fresenius |
Peru | IN | — | 69 | 1,305 | — | 1,374 | 92 | 6/27/2012 | 1982 | ||||||||||||||||||||||||
| Fresenius |
Bossier City | LA | — | (1) | 120 | 682 | — | 802 | 29 | 1/30/2013 | 2008 | |||||||||||||||||||||||
| Fresenius |
Caro | MI | — | (1) | 92 | 1,744 | — | 1,836 | 130 | 6/5/2012 | 2009 | |||||||||||||||||||||||
| Fresenius |
Jackson | MI | — | 137 | 2,603 | — | 2,740 | 194 | 6/5/2012 | 2008 | ||||||||||||||||||||||||
| Fresenius |
Albermarle | NC | — | (1) | 139 | 1,253 | — | 1,392 | 39 | 4/30/2013 | 2008 | |||||||||||||||||||||||
| Fresenius |
Angier | NC | — | (1) | 203 | 1,152 | — | 1,355 | 36 | 4/30/2013 | 2012 | |||||||||||||||||||||||
| Fresenius |
Asheboro | NC | — | 323 | 2,903 | — | 3,226 | 91 | 4/30/2013 | 2012 | ||||||||||||||||||||||||
| Fresenius |
Taylorsville | NC | — | (1) | 275 | 1,099 | — | 1,374 | 34 | 4/30/2013 | 2011 | |||||||||||||||||||||||
| Fresenius |
Warsaw | NC | — | (1) | 75 | 1,428 | — | 1,503 | 78 | 11/13/2012 | 2003 | |||||||||||||||||||||||
| Fresenius |
Kings Mills | OH | — | (1) | 399 | 598 | — | 997 | 45 | 6/5/2012 | 2007 | |||||||||||||||||||||||
| Fresenius |
Dallas | TX | — | (1) | 377 | 1,132 | — | 1,509 | 44 | 2/28/2013 | 1958 | |||||||||||||||||||||||
| GE Aviation |
Auburn | AL | — | 1,627 | 30,920 | — | 32,547 | 1,767 | 11/21/2012 | 2012 | ||||||||||||||||||||||||
| General Mills |
Geneva | IL | 16,555 | 7,457 | 22,371 | — | 29,828 | 2,161 | 5/23/2012 | 1998 | ||||||||||||||||||||||||
| General Mills |
Fort Wayne | IN | — | (1) | 2,533 | 48,130 | — | 50,663 | 3,425 | 10/18/2012 | 2012 | |||||||||||||||||||||||
| General Motors Financial Company |
Arlington | TX | 25,552 | 7,901 | 35,553 | — | 43,454 | 328 | 11/5/2013 | 1999 | ||||||||||||||||||||||||
| Golden Corral |
Albany | GA | — | (1) | 460 | 1,863 | — | 2,323 | 53 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Golden Corral |
Brunswick | GA | — | (1) | 390 | 2,093 | — | 2,483 | 60 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Golden Corral |
McDonough | GA | — | (1) | 930 | 3,936 | — | 4,866 | 113 | 6/27/2013 | 2004 | |||||||||||||||||||||||
| Golden Corral |
Council Bluffs | IA | — | (1) | 1,140 | 1,460 | — | 2,600 | 42 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Golden Corral |
Evansville | IN | — | (1) | 670 | 2,707 | — | 3,377 | 78 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Golden Corral |
Evansville | IN | — | (1) | 640 | 944 | — | 1,584 | 27 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Golden Corral |
Fort Wayne | IN | — | (1) | 820 | 1,935 | — | 2,755 | 55 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Golden Corral |
Kokomo | IN | — | (1) | 780 | 2,107 | — | 2,887 | 60 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Golden Corral |
Elizabethtown | KY | — | (1) | 760 | 2,753 | — | 3,513 | 79 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Golden Corral |
Henderson | KY | — | (1) | 600 | 1,586 | — | 2,186 | 45 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Golden Corral |
Blue Springs | MO | — | (1) | 810 | 1,346 | — | 2,156 | 39 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Golden Corral |
Flowood | MS | — | (1) | 680 | 2,730 | — | 3,410 | 78 | 6/27/2013 | 1999 | |||||||||||||||||||||||
F-114
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Golden Corral |
Aberdeen | NC | — | (1) | 690 | 1,566 | — | 2,256 | 45 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Golden Corral |
Burlington | NC | — | (1) | 840 | 2,319 | — | 3,159 | 66 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Golden Corral |
Hickory | NC | — | (1) | 260 | 2,658 | — | 2,918 | 76 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Golden Corral |
Bellevue | NE | — | (1) | 520 | 1,433 | — | 1,953 | 41 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Golden Corral |
Lincoln | NE | — | (1) | 300 | 2,930 | — | 3,230 | 84 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Golden Corral |
Farmington | NM | — | (1) | 270 | 3,174 | — | 3,444 | 91 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Golden Corral |
Columbus | OH | — | (1) | 770 | 2,476 | — | 3,246 | 71 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Golden Corral |
Tulsa | OK | — | (1) | 280 | 3,890 | — | 4,170 | 112 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Golden Corral |
Rock Hill | SC | — | (1) | 320 | 2,130 | — | 2,450 | 61 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Golden Corral |
Cookeville | TN | — | (1) | 800 | 1,937 | — | 2,737 | 56 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Golden Corral |
Bristol | VA | — | (1) | 750 | 2,276 | — | 3,026 | 65 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Goodfire BBQ |
San Antonio | TX | — | (1) | 350 | 341 | — | 691 | 10 | 6/27/2013 | 1983 | |||||||||||||||||||||||
| Grandy’s |
Hobbs | NM | — | (1) | 815 | — | — | 815 | — | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Grandy’s |
Ardmore | OK | — | (1) | 454 | — | — | 454 | — | 6/27/2013 | 1983 | |||||||||||||||||||||||
| Grandy’s |
Moore | OK | — | (1) | 320 | 428 | — | 748 | 12 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Grandy’s |
Oklahoma City | OK | — | (1) | 260 | 380 | — | 640 | 11 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Grandy’s |
Oklahoma City | OK | — | (1) | 320 | 289 | — | 609 | 8 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| GSA |
Birmingham | AL | 10,568 | 1,400 | 8,830 | — | 10,230 | 84 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
| GSA |
Mobile | AL | — | (1) | 268 | 5,095 | — | 5,363 | 420 | 6/19/2012 | 1995 | |||||||||||||||||||||||
| GSA |
Birmingham | AL | 17,640 | 2,982 | 19,982 | — | 22,964 | 193 | 11/5/2013 | 2007 | ||||||||||||||||||||||||
| GSA |
Springerville | AZ | — | (1) | 148 | 2,810 | — | 2,958 | 232 | 7/2/2012 | 2006 | |||||||||||||||||||||||
| GSA |
Craig | CO | — | (5) | 129 | 1,159 | — | 1,288 | 128 | 12/30/2011 | 2011 | |||||||||||||||||||||||
| GSA |
Cocoa | FL | — | 253 | 1,435 | — | 1,688 | 164 | 12/13/2011 | 2009 | ||||||||||||||||||||||||
| GSA |
Stuart | FL | — | (1) | 900 | 3,600 | — | 4,500 | 363 | 3/5/2012 | 2011 | |||||||||||||||||||||||
| GSA |
Grangeville | ID | — | 317 | 6,023 | — | 6,340 | 607 | 3/5/2012 | 2007 | ||||||||||||||||||||||||
| GSA |
Kansas City | KS | 16,872 | 4,264 | 29,678 | — | 33,942 | 276 | 11/5/2013 | 2003 | ||||||||||||||||||||||||
| GSA |
Springfield | MO | — | (1) | 131 | 2,489 | — | 2,620 | 228 | 5/15/2012 | 2011 | |||||||||||||||||||||||
| GSA |
Albany | NY | 10,137 | 2,470 | 11,836 | — | 14,306 | 124 | 11/5/2013 | 2008 | ||||||||||||||||||||||||
| GSA |
Freeport | NY | — | (1) | 843 | 3,372 | — | 4,215 | 371 | 1/10/2012 | 1960 | |||||||||||||||||||||||
| GSA |
Plattsburg | NY | — | (1) | 508 | 4,572 | — | 5,080 | 377 | 6/19/2012 | 2008 | |||||||||||||||||||||||
| GSA |
Warren | PA | — | (1) | 341 | 3,114 | — | 3,455 | 268 | 6/19/2012 | 2008 | |||||||||||||||||||||||
| GSA |
Ponce | PR | — | 1,780 | 9,297 | — | 11,077 | 128 | 11/5/2013 | 2000 | ||||||||||||||||||||||||
F-115
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| GSA |
Austin | TX | 5,046 | 1,570 | 3,057 | — | 4,627 | 37 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
| GSA |
Fort Worth | TX | — | (1) | 477 | 4,290 | — | 4,767 | 393 | 5/9/2012 | 2010 | |||||||||||||||||||||||
| GSA |
Gloucester | VA | — | (1) | 287 | 1,628 | — | 1,915 | 134 | 6/19/2012 | 1997 | |||||||||||||||||||||||
| Habanero’s Mexican Grill |
Hueytown | AL | — | (1) | 60 | 639 | — | 699 | 18 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Hanesbrands |
Rural Hall | NC | — | 1,082 | 22,565 | — | 23,647 | 1,426 | 12/21/2012 | 1989 | ||||||||||||||||||||||||
| Hardee’s |
Alma | GA | — | (1) | 80 | 502 | — | 582 | 14 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Hardee’s |
Brunswick | GA | — | (1) | 200 | 494 | — | 694 | 14 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Hardee’s |
Claxton | GA | — | (1) | 170 | 469 | — | 639 | 13 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Hardee’s |
Glennville | GA | — | (1) | 170 | 450 | — | 620 | 12 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Hardee’s |
Hazlehurst | GA | — | (1) | 300 | 263 | — | 563 | 7 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Hardee’s |
Metter | GA | — | (1) | 230 | 369 | — | 599 | 10 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Hardee’s |
Richmond Hill | GA | — | (1) | 390 | 149 | — | 539 | 4 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Hardee’s |
Savannah | GA | — | (1) | 130 | 456 | — | 586 | 13 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Hardee’s |
Swainsboro | GA | — | (1) | 470 | 107 | — | 577 | 3 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Hardee’s |
Vidalia | GA | — | (1) | 220 | 377 | — | 597 | 10 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Hardee’s |
Old Fort | NC | — | (1) | 300 | 904 | — | 1,204 | 25 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Hardee’s |
Aiken | SC | — | (1) | 220 | 450 | — | 670 | 12 | 6/27/2013 | 1977 | |||||||||||||||||||||||
| Hardee’s |
Chapin | SC | — | (1) | 380 | 741 | — | 1,121 | 21 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Hardee’s |
Bloomingdale | TN | — | (1) | 270 | 844 | — | 1,114 | 23 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Hardee’s |
Clinton | TN | — | (1) | 390 | 893 | — | 1,283 | 25 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Hardee’s |
Crossville | TN | — | (1) | 300 | 689 | — | 989 | 19 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Hardee’s Red Burrito |
Attalla | AL | — | (1) | 220 | 896 | — | 1,116 | 25 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Hash House A-Go-Go Restaurant |
Las Vegas | NV | — | (1) | 580 | 1,347 | — | 1,927 | 39 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Home Depot |
Columbia | SC | 13,776 | 2,911 | 15,463 | — | 18,374 | 2,748 | 11/1/2009 | 2009 | ||||||||||||||||||||||||
| Houlihan’s |
Plymouth Meeting | PA | — | (1) | 870 | 2,015 | — | 2,885 | 58 | 6/27/2013 | 1974 | |||||||||||||||||||||||
| Huntington National Bank |
Conneaut | OH | — | 205 | 477 | — | 682 | 5 | 10/1/2013 | 1971 | ||||||||||||||||||||||||
| Huntington National Bank |
Jefferson | OH | — | 255 | 765 | — | 1,020 | 9 | 10/1/2013 | 1963 | ||||||||||||||||||||||||
F-116
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Hy-Vee |
Vermillion | SD | — | 409 | 3,684 | — | 4,093 | 194 | 4/8/2013 | 2003 | ||||||||||||||||||||||||
| IHOP |
Homewood | AL | — | (1) | 610 | 1,762 | — | 2,372 | 50 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| IHOP |
Castle Rock | CO | — | (1) | 320 | 2,334 | — | 2,654 | 67 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| IHOP |
Greeley | CO | — | (1) | 120 | 1,538 | — | 1,658 | 44 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| IHOP |
Pueblo | CO | — | (1) | 330 | 1,589 | — | 1,919 | 46 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| IHOP |
Stockbridge | GA | — | (1) | 580 | 2,091 | — | 2,671 | 60 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| IHOP |
Natchitoches | LA | — | 750 | 89 | — | 839 | 3 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
| IHOP |
Roseville | MI | — | (1) | 340 | 1,071 | — | 1,411 | 31 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| IHOP |
Kansas City | MO | — | (1) | 630 | 1,002 | — | 1,632 | 29 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| IHOP |
Southaven | MS | — | (1) | 350 | 2,108 | — | 2,458 | 60 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| IHOP |
Poughkeepsie | NY | — | (1) | 430 | 1,129 | — | 1,559 | 32 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| IHOP |
Greenville | SC | — | (1) | 610 | 1,551 | — | 2,161 | 44 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| IHOP |
Clarksville | TN | — | (1) | 530 | 1,346 | — | 1,876 | 39 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| IHOP |
Memphis | TN | — | (1) | 750 | 2,009 | — | 2,759 | 58 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| IHOP |
Murfreesboro | TN | — | (1) | 600 | 1,687 | — | 2,287 | 48 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| IHOP |
Fort Worth | TX | — | (1) | 560 | 1,879 | — | 2,439 | 54 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| IHOP |
Houston | TX | — | (1) | 760 | 2,462 | — | 3,222 | 71 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| IHOP |
Killeen | TX | — | (1) | 380 | 1,028 | — | 1,408 | 29 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| IHOP |
Lake Jackson | TX | — | (1) | 370 | 2,018 | — | 2,388 | 58 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| IHOP |
Leon Valley | TX | — | (1) | 650 | 2,055 | — | 2,705 | 59 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| IHOP |
Auburn | WA | — | (1) | 780 | 1,878 | — | 2,658 | 54 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Invesco Holding Co. Ltd. |
Denver | CO | 43,700 | 12,650 | 66,398 | — | 79,048 | 607 | 11/5/2013 | 2008 | ||||||||||||||||||||||||
| Iron Mountain |
Columbus | OH | — | (1) | 405 | 3,642 | — | 4,047 | 278 | 9/28/2012 | 1954 | |||||||||||||||||||||||
| Jack in the Box |
Avondale | AZ | — | (1) | 110 | 2,237 | — | 2,347 | 62 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Jack in the Box |
Chandler | AZ | — | (1) | 450 | 1,447 | — | 1,897 | 40 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Jack in the Box |
Folsom | CA | — | (1) | 280 | 2,423 | — | 2,703 | 67 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Jack in the Box |
Fresno | CA | — | (1) | 190 | 1,810 | — | 2,000 | 50 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Jack in the Box |
West Sacramento | CA | — | (1) | 590 | 1,710 | — | 2,300 | 47 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Jack in the Box |
Burley | ID | — | (1) | 240 | 1,430 | — | 1,670 | 40 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Jack in the Box |
Moscow | ID | — | (1) | 350 | 1,110 | — | 1,460 | 31 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Jack in the Box |
Belleville | IL | — | (1) | 200 | 966 | — | 1,166 | 27 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Jack in the Box |
Florissant | MO | — | (1) | 502 | 1,515 | — | 2,017 | 42 | 6/27/2013 | 1997 | |||||||||||||||||||||||
F-117
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Jack in the Box |
St. Louis | MO | — | (1) | 420 | 1,494 | — | 1,914 | 41 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Jack in the Box |
Las Vegas | NV | — | (1) | 680 | 1,533 | — | 2,213 | 42 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Jack in the Box |
Salem | OR | — | (1) | 580 | 1,301 | — | 1,881 | 36 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
Tigard | OR | — | (1) | 620 | 1,361 | — | 1,981 | 38 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
Arlington | TX | — | (1) | 420 | 1,325 | — | 1,745 | 37 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Jack in the Box |
Arlington | TX | — | (1) | 420 | 1,365 | — | 1,785 | 38 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Jack in the Box |
Corinth | TX | — | (1) | 400 | 1,416 | — | 1,816 | 39 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Jack in the Box |
Farmers Branch | TX | — | (1) | 460 | 1,640 | — | 2,100 | 45 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Jack in the Box |
Fort Worth | TX | — | (1) | 490 | 1,702 | — | 2,192 | 47 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Jack in the Box |
Georgetown | TX | — | (1) | 600 | 1,508 | — | 2,108 | 42 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
Granbury | TX | — | (1) | 380 | 1,449 | — | 1,829 | 40 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
Grand Prairie | TX | — | (1) | 600 | 1,856 | — | 2,456 | 51 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Jack in the Box |
Grapevine | TX | — | (1) | 470 | 1,344 | — | 1,814 | 37 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Jack in the Box |
Gun Barrel City | TX | — | (1) | 300 | 961 | — | 1,261 | 27 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Jack in the Box |
Houston | TX | — | (1) | 460 | 1,437 | — | 1,897 | 40 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Jack in the Box |
Houston | TX | — | (1) | 390 | 1,172 | — | 1,562 | 32 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Jack in the Box |
Houston | TX | — | (1) | 330 | 1,845 | — | 2,175 | 51 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Jack in the Box |
Houston | TX | — | (1) | 410 | 1,621 | — | 2,031 | 45 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Jack in the Box |
Houston | TX | — | (1) | 450 | 1,396 | — | 1,846 | 39 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Jack in the Box |
Hutchins | TX | — | (1) | 330 | 1,363 | — | 1,693 | 38 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Jack in the Box |
Kingswood | TX | — | (1) | 430 | 955 | — | 1,385 | 26 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Jack in the Box |
Lufkin | TX | — | (1) | 440 | 1,544 | — | 1,984 | 43 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
Lufkin | TX | — | (1) | 450 | 1,563 | — | 2,013 | 43 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Jack in the Box |
Mesquite | TX | — | (1) | 560 | 1,652 | — | 2,212 | 46 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Jack in the Box |
Nacogdoches | TX | — | (1) | 340 | 1,320 | — | 1,660 | 37 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Jack in the Box |
Orange | TX | — | (1) | 270 | 1,661 | — | 1,931 | 46 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
Port Arthur | TX | — | (1) | 460 | 1,405 | — | 1,865 | 39 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Jack in the Box |
Rockwall | TX | — | (1) | 450 | 1,275 | — | 1,725 | 35 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Jack in the Box |
San Antonio | TX | — | (1) | 400 | 1,244 | — | 1,644 | 34 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
San Antonio | TX | — | (1) | 470 | 1,256 | — | 1,726 | 35 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
San Antonio | TX | — | (1) | 350 | 1,249 | — | 1,599 | 35 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Jack in the Box |
Spring | TX | — | (1) | 450 | 1,487 | — | 1,937 | 41 | 6/27/2013 | 1993 | |||||||||||||||||||||||
F-118
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Jack in the Box |
Spring | TX | — | (1) | 570 | 1,340 | — | 1,910 | 37 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
Tyler | TX | — | (1) | 450 | 1,025 | — | 1,475 | 28 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
Weatherford | TX | — | (1) | 480 | 1,329 | — | 1,809 | 37 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Jack in the Box |
Enumclaw | WA | — | (1) | 380 | 1,238 | — | 1,618 | 34 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Joe’s Crab Shack |
Lilburn | GA | — | (1) | 800 | 1,917 | — | 2,717 | 55 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Joe’s Crab Shack |
Houston | TX | — | (1) | 900 | 1,749 | — | 2,649 | 50 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| John Deere |
Davenport | IA | — | (1) | 1,161 | 22,052 | — | 23,213 | 2,130 | 5/31/2012 | 2003 | |||||||||||||||||||||||
| Johnson Controls, Inc. |
Pinellas Park | FL | 16,200 | 4,538 | 23,842 | — | 28,380 | 242 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
| Kaiser Foundation |
Cupertino | CA | — | (1) | 14,236 | 42,708 | — | 56,944 | 1,848 | 2/20/2013 | 2005 | |||||||||||||||||||||||
| Ker’s WingHouse Bar and Grill |
Brandon | FL | — | (1) | 340 | 654 | — | 994 | 19 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Ker’s WingHouse Bar and Grill |
Clearwater | FL | — | (1) | 550 | 627 | — | 1,177 | 18 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Key Bank |
Spencerport | NY | — | (1) | 59 | 1,112 | — | 1,171 | 35 | 6/5/2013 | 1960 | |||||||||||||||||||||||
| Key Bank |
Berea | OH | — | 234 | 1,326 | — | 1,560 | 16 | 10/1/2013 | 1958 | ||||||||||||||||||||||||
| KFC |
Deming | NM | — | (1) | 220 | 691 | — | 911 | 19 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| KFC |
Las Cruces | NM | — | (1) | 270 | 498 | — | 768 | 14 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| KFC |
Appleton | WI | — | (1) | 350 | 874 | — | 1,224 | 24 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Kohl’s |
Howell | MI | — | 547 | 10,399 | — | 10,946 | 548 | 3/28/2013 | 2003 | ||||||||||||||||||||||||
| Koninklijke Ahold, N.V. |
Levittown | PA | 13,340 | 4,716 | 9,955 | — | 14,671 | 83 | 11/5/2013 | 2006 | ||||||||||||||||||||||||
| Krystal |
Greenville | AL | — | (1) | 195 | 1,147 | — | 1,342 | 32 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Krystal |
Montgomery | AL | — | (1) | 259 | 1,036 | — | 1,295 | 91 | 9/21/2012 | 1964 | |||||||||||||||||||||||
| Krystal |
Montgomery | AL | — | (1) | 560 | 829 | — | 1,389 | 23 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Krystal |
Phoenix City | AL | — | (1) | 366 | 1,465 | — | 1,831 | 129 | 9/21/2012 | 1980 | |||||||||||||||||||||||
| Krystal |
Scottsboro | AL | — | (1) | 20 | 1,157 | — | 1,177 | 32 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Krystal |
Tuscaloosa | AL | — | (1) | 206 | 1,165 | — | 1,371 | 103 | 9/21/2012 | 1976 | |||||||||||||||||||||||
| Krystal |
Jacksonville | FL | — | (1) | 574 | 574 | — | 1,148 | 51 | 9/21/2012 | 1990 | |||||||||||||||||||||||
| Krystal |
Orlando | FL | — | (1) | 372 | 372 | — | 744 | 33 | 9/21/2012 | 1994 | |||||||||||||||||||||||
F-119
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Krystal |
Orlando | FL | — | (1) | 669 | 446 | — | 1,115 | 39 | 9/21/2012 | 1995 | |||||||||||||||||||||||
| Krystal |
Plant City | FL | — | (1) | 355 | 533 | — | 888 | 47 | 9/21/2012 | 2012 | |||||||||||||||||||||||
| Krystal |
St. Augustine | FL | — | (1) | 411 | 411 | — | 822 | 36 | 9/21/2012 | 2012 | |||||||||||||||||||||||
| Krystal |
Albany | GA | — | (1) | 309 | 721 | — | 1,030 | 63 | 9/21/2012 | 1962 | |||||||||||||||||||||||
| Krystal |
Atlanta | GA | — | (1) | 166 | 664 | — | 830 | 58 | 9/21/2012 | 1973 | |||||||||||||||||||||||
| Krystal |
Augusta | GA | — | (1) | 365 | 851 | — | 1,216 | 75 | 9/21/2012 | 1979 | |||||||||||||||||||||||
| Krystal |
Columbus | GA | — | (1) | 622 | 934 | — | 1,556 | 82 | 9/21/2012 | 1977 | |||||||||||||||||||||||
| Krystal |
Decatur | GA | — | (1) | 94 | 533 | — | 627 | 47 | 9/21/2012 | 1965 | |||||||||||||||||||||||
| Krystal |
East Point | GA | — | (1) | 221 | 664 | — | 885 | 55 | 10/26/2012 | 1984 | |||||||||||||||||||||||
| Krystal |
Macon | GA | — | (1) | 325 | 759 | — | 1,084 | 67 | 9/21/2012 | 1962 | |||||||||||||||||||||||
| Krystal |
Milledgeville | GA | — | (1) | 261 | 609 | — | 870 | 54 | 9/21/2012 | 2011 | |||||||||||||||||||||||
| Krystal |
Snellville | GA | — | (1) | 466 | 466 | — | 932 | 41 | 9/21/2012 | 1981 | |||||||||||||||||||||||
| Krystal |
Gulfport | MS | — | (1) | 215 | 861 | — | 1,076 | 76 | 9/21/2012 | 2011 | |||||||||||||||||||||||
| Krystal |
Jackson | MS | — | (1) | 285 | 1,140 | — | 1,425 | 100 | 9/21/2012 | 1978 | |||||||||||||||||||||||
| Krystal |
Jackson | MS | — | (1) | 198 | 1,120 | — | 1,318 | 99 | 9/21/2012 | 1983 | |||||||||||||||||||||||
| Krystal |
Pearl | MS | — | (1) | 426 | 638 | — | 1,064 | 56 | 9/21/2012 | 1976 | |||||||||||||||||||||||
| Krystal |
Chattanooga | TN | — | (1) | 336 | 784 | — | 1,120 | 69 | 9/21/2012 | 2010 | |||||||||||||||||||||||
| Krystal |
Chattanooga | TN | — | (1) | 500 | 947 | — | 1,447 | 26 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Krystal |
Knoxville | TN | — | (1) | 369 | 246 | — | 615 | 22 | 9/21/2012 | 1970 | |||||||||||||||||||||||
| Kum & Go |
Bentonville | AR | — | (1) | 587 | 1,370 | — | 1,957 | 83 | 11/20/2012 | 2009 | |||||||||||||||||||||||
| Kum & Go |
Lowell | AR | — | (1) | 774 | 1,437 | — | 2,211 | 87 | 11/20/2012 | 2009 | |||||||||||||||||||||||
| Kum & Go |
Paragould | AR | — | (1) | 708 | 2,123 | — | 2,831 | 149 | 9/28/2012 | 2012 | |||||||||||||||||||||||
| Kum & Go |
Rogers | AR | — | (1) | 668 | 1,559 | — | 2,227 | 95 | 11/20/2012 | 2008 | |||||||||||||||||||||||
| Kum & Go |
Sherwood | AR | — | (1) | 866 | 1,609 | — | 2,475 | 113 | 9/28/2012 | 2012 | |||||||||||||||||||||||
| Kum & Go |
Fountain | CO | — | (1) | 1,131 | 1,696 | — | 2,827 | 95 | 12/24/2012 | 2012 | |||||||||||||||||||||||
| Kum & Go |
Monument | CO | — | (1) | 1,192 | 1,457 | — | 2,649 | 82 | 12/24/2012 | 2012 | |||||||||||||||||||||||
| Kum & Go |
Muscatine | IA | — | (1) | 794 | 1,853 | — | 2,647 | 104 | 12/31/2012 | 2012 | |||||||||||||||||||||||
| Kum & Go |
Ottumwa | IA | — | (1) | 586 | 1,368 | — | 1,954 | 83 | 11/20/2012 | 1998 | |||||||||||||||||||||||
| Kum & Go |
Waukee | IA | — | (1) | 1,280 | 1,280 | — | 2,560 | 54 | 3/28/2013 | 2012 | |||||||||||||||||||||||
| Kum & Go |
Tioga | ND | — | (1) | 318 | 2,863 | — | 3,181 | 188 | 11/8/2012 | 2012 | |||||||||||||||||||||||
| Kum & Go |
Muskogee | OK | — | (1) | 423 | 1,691 | — | 2,114 | 40 | 7/22/2013 | 2013 | |||||||||||||||||||||||
| Kum & Go |
Cheyenne | WY | — | (1) | 411 | 2,327 | — | 2,738 | 131 | 12/27/2012 | 2012 | |||||||||||||||||||||||
F-120
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Leeann Chin |
Blaine | MN | — | (1) | 480 | 528 | — | 1,008 | 15 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Leeann Chin |
Chanhassen | MN | — | (1) | 450 | 763 | — | 1,213 | 21 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Leeann Chin |
Golden Valley | MN | — | (1) | 270 | 776 | — | 1,046 | 21 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Logan’s Roadhouse |
Huntsville | AL | — | (1) | 520 | 4,797 | — | 5,317 | 138 | 6/27/2013 | 2003 | |||||||||||||||||||||||
| Logan’s Roadhouse |
Fayetteville | AR | — | (1) | 1,570 | 2,182 | — | 3,752 | 63 | 6/27/2013 | 2004 | |||||||||||||||||||||||
| Logan’s Roadhouse |
Hattiesburg | MS | — | (1) | 890 | 4,012 | — | 4,902 | 115 | 6/27/2013 | 2006 | |||||||||||||||||||||||
| Logan’s Roadhouse |
Clarksville | TN | — | (1) | 1,010 | 4,424 | — | 5,434 | 127 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Logan’s Roadhouse |
Cleveland | TN | — | (1) | 890 | 3,902 | — | 4,792 | 112 | 6/27/2013 | 2003 | |||||||||||||||||||||||
| Logan’s Roadhouse |
El Paso | TX | — | (1) | 320 | 4,731 | — | 5,051 | 136 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Long John Silver’s |
Alamogordo | NM | — | (1) | 160 | 574 | — | 734 | 16 | 6/27/2013 | 1977 | |||||||||||||||||||||||
| LongHorn Steakhouse |
Tampa | FL | — | (1) | 370 | 1,852 | — | 2,222 | 53 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Lowe’s |
New Orleans | LA | 15,643 | 10,317 | 20,728 | — | 31,045 | 172 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
| Mattress Firm |
Boise | ID | — | (1) | 335 | 1,339 | — | 1,674 | 63 | 2/22/2013 | 2013 | |||||||||||||||||||||||
| Mattress Firm |
Columbus | IN | — | (1) | 157 | 891 | — | 1,048 | 58 | 11/6/2012 | 2012 | |||||||||||||||||||||||
| Mattress Firm |
Raleigh | NC | — | (1) | 1,091 | 1,091 | — | 2,182 | 77 | 9/28/2012 | 2012 | |||||||||||||||||||||||
| Mattress Firm |
Wilson | NC | — | (1) | 373 | 692 | — | 1,065 | 49 | 9/28/2012 | 2012 | |||||||||||||||||||||||
| Mattress Firm |
Florence | SC | — | (1) | 398 | 929 | — | 1,327 | 57 | 12/7/2012 | 2012 | |||||||||||||||||||||||
| Mattress Firm |
Rock Hill | SC | — | (1) | 385 | 898 | — | 1,283 | 17 | 8/21/2013 | 2008 | |||||||||||||||||||||||
| Mattress Firm |
Nederland | TX | — | (1) | 311 | 1,245 | — | 1,556 | 87 | 9/26/2012 | 2012 | |||||||||||||||||||||||
| McAlister’s |
Murfreesboro | TN | — | (1) | 310 | 720 | — | 1,030 | 21 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| MetroPCS Wireless |
Richardson | TX | — | 1,292 | 19,606 | — | 20,898 | 168 | 11/5/2013 | 1987 | ||||||||||||||||||||||||
| Michelin North America |
Louisville | KY | — | (2) | 1,120 | 7,763 | — | 8,883 | 79 | 11/5/2013 | 2011 | |||||||||||||||||||||||
| Monro Muffler |
Waukesha | WI | — | (1) | 228 | 684 | — | 912 | 17 | 7/23/2013 | 2002 | |||||||||||||||||||||||
| Morgan’s Food’s |
Pittsburgh | PA | — | 180 | 269 | — | 449 | 4 | 10/1/2013 | 1985 | ||||||||||||||||||||||||
| Morgan’s Food’s |
Benwood | WV | — | 123 | 287 | — | 410 | 4 | 10/1/2013 | 2006 | ||||||||||||||||||||||||
| Mo’s Irish Pub Restaurant |
Wauwatosa | WI | — | (1) | 550 | 818 | — | 1,368 | 23 | 6/27/2013 | 1977 | |||||||||||||||||||||||
| Mrs Baird’s |
Dallas | TX | — | (1) | 453 | 4,077 | — | 4,530 | 373 | 7/11/2012 | 2002 | |||||||||||||||||||||||
| Multi tenant (1000 Milwaukee Avenue) |
Glenview | IL | 55,523 | 14,016 | 73,313 | — | 87,329 | 665 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
| Multi tenant (15721 Park Row Boulevard) |
Houston | TX | 19,525 | 2,356 | 36,347 | — | 38,703 | 295 | 11/5/2013 | 2009 | ||||||||||||||||||||||||
| Multi tenant (1585 Sawdust Road) |
The Woodlands | TX | 22,440 | 4,724 | 40,332 | — | 45,056 | 321 | 11/5/2013 | 2009 | ||||||||||||||||||||||||
F-121
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Multi tenant (2211 Old Earhart Road) |
AnnArbor | MI | 29,356 | 3,520 | 39,594 | — | 43,114 | 314 | 11/5/2013 | 2013 | ||||||||||||||||||||||||
| Multi tenant (26501 Aliso Creek Road) |
Aliso Viejo | CA | 40,024 | 18,726 | 31,970 | — | 50,696 | 266 | 11/5/2013 | 2005 | ||||||||||||||||||||||||
| Multi tenant (5859 Farinon Drive) |
San Antonio | TX | 10,000 | 1,666 | 19,092 | — | 20,758 | 155 | 11/5/2013 | 2008 | ||||||||||||||||||||||||
| Multi tenant (Columbia Pike) |
Silver Spring | MD | — | 2,190 | 26,635 | 1,023 | 29,848 | 203 | 11/5/2013 | 1986 | ||||||||||||||||||||||||
| Multi tenant (Dodge Building) |
Omaha | NE | — | (2) | — | 7,358 | — | 7,358 | 112 | 11/5/2013 | 2011 | |||||||||||||||||||||||
| Multi tenant (Landmark Building) |
Omaha | NE | — | (2) | — | 10,156 | 4 | 10,160 | 253 | 11/5/2013 | 1991 | |||||||||||||||||||||||
| My Dentist |
Chickasha | OK | — | (1) | 100 | 186 | — | 286 | 6 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| National Tire & Battery |
Morrow | GA | — | (1) | 397 | 1,586 | — | 1,983 | 146 | 6/5/2012 | 1992 | |||||||||||||||||||||||
| National Tire & Battery |
St. Louis | MO | — | (1) | 756 | 924 | — | 1,680 | 63 | 10/31/2012 | 1998 | |||||||||||||||||||||||
| Nestle Holdings |
Breinigsville | PA | 46,494 | — | 66,948 | — | 66,948 | 681 | 11/5/2013 | 1994 | ||||||||||||||||||||||||
| O’Reilly Auto Parts |
Oneonta | AL | — | (1) | 81 | 460 | — | 541 | 37 | 8/2/2012 | 2000 | |||||||||||||||||||||||
| O’Reilly Auto Parts |
Laramie | WY | — | (1) | 144 | 1,297 | — | 1,441 | 91 | 10/12/2012 | 1999 | |||||||||||||||||||||||
| Pearson |
Lawrence | KS | 15,177 | 2,548 | 18,057 | — | 20,605 | 156 | 11/5/2013 | 1997 | ||||||||||||||||||||||||
| Pilot Flying J |
Carnesville | GA | — | (1) | 1,867 | 7,466 | — | 9,333 | 494 | 1/31/2013 | 2000 | |||||||||||||||||||||||
| Pizza Hut |
Cooper City | FL | — | (1) | 320 | 466 | — | 786 | 13 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Pizza Hut |
Marathon | FL | — | (1) | 530 | 187 | — | 717 | 5 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Pizza Hut |
Bozeman | MT | — | (1) | 150 | 343 | — | 493 | 10 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Pizza Hut |
Glasgow | MT | — | (1) | 120 | 217 | — | 337 | 6 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Pizza Hut |
Laurel | MT | — | (1) | 170 | 621 | — | 791 | 18 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Pizza Hut |
Livingston | MT | — | (1) | 130 | 245 | — | 375 | 7 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Pizza Hut |
Knoxville | TN | — | (1) | 300 | 546 | — | 846 | 16 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Pollo Tropical |
Davie | FL | — | (1) | 280 | 1,490 | — | 1,770 | 41 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Pollo Tropical |
Fort Lauderdale | FL | — | (1) | 190 | 1,242 | — | 1,432 | 34 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Pollo Tropical |
Lake Worth | FL | — | (1) | 280 | 1,182 | — | 1,462 | 33 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Popeyes |
Starke | FL | — | (1) | 380 | — | — | 380 | — | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Popeyes |
Thomasville | GA | — | (1) | 110 | 705 | — | 815 | 20 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Popeyes |
Valdosta | GA | — | (1) | 240 | 599 | — | 839 | 17 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Popeyes |
New Orleans | LA | — | (1) | 60 | 390 | — | 450 | 11 | 6/27/2013 | 1975 | |||||||||||||||||||||||
F-122
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Popeyes |
Channelview | TX | — | (1) | 220 | 401 | — | 621 | 11 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Popeyes |
Houston | TX | — | (1) | 300 | 244 | — | 544 | 7 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Popeyes |
Houston | TX | — | (1) | 190 | 452 | — | 642 | 13 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| PriceRite |
Rochester | NY | — | 569 | 3,222 | — | 3,791 | 285 | 9/27/2012 | 2007 | ||||||||||||||||||||||||
| Pulte Mortgage LLC |
Englewood | CO | — | 2,563 | 22,026 | — | 24,589 | 185 | 11/5/2013 | 2009 | ||||||||||||||||||||||||
| Qdoba |
Flint | MI | — | (1) | 110 | 990 | — | 1,100 | 52 | 3/29/2013 | 2006 | |||||||||||||||||||||||
| Qdoba |
Grand Blanc | MI | — | (1) | 165 | 935 | — | 1,100 | 49 | 3/29/2013 | 2006 | |||||||||||||||||||||||
| Rally’s |
Indianapolis | IN | — | (1) | 210 | 1,514 | — | 1,724 | 42 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Rally’s |
Kokomo | IN | — | (1) | 290 | 548 | — | 838 | 15 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Rally’s |
Muncie | IN | — | (1) | 310 | 1,196 | — | 1,506 | 33 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Rally’s |
Harvey | LA | — | (1) | 420 | 870 | — | 1,290 | 24 | 6/27/2013 | 2004 | |||||||||||||||||||||||
| Rally’s |
New Orleans | LA | — | (1) | 450 | 1,691 | — | 2,141 | 47 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Rally’s |
New Orleans | LA | — | (1) | 220 | 1,018 | — | 1,238 | 28 | 6/27/2013 | 2004 | |||||||||||||||||||||||
| Rally’s |
Hamtramck | MI | — | (1) | 230 | 1,020 | — | 1,250 | 28 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Razzoos |
Lewisville | TX | — | (1) | 780 | 1,503 | — | 2,283 | 43 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Reckitt Benckiser |
Chester | NJ | 5,500 | 886 | 7,972 | — | 8,858 | 513 | 8/16/2012 | 2006 | ||||||||||||||||||||||||
| Rite Aid |
Jeffersonville | IN | — | (1) | 824 | 2,472 | — | 3,296 | 161 | 11/30/2012 | 2008 | |||||||||||||||||||||||
| Rite Aid |
Lawrenceburg | KY | — | (1) | 567 | 2,267 | — | 2,834 | 147 | 11/30/2012 | 2008 | |||||||||||||||||||||||
| Rite Aid |
Lexington | KY | — | (1) | — | 1,943 | — | 1,943 | 126 | 11/30/2012 | 2007 | |||||||||||||||||||||||
| Rite Aid |
Paris | KY | — | (1) | 743 | 2,228 | — | 2,971 | 145 | 11/30/2012 | 2008 | |||||||||||||||||||||||
| Rite Aid |
Scottsville | KY | — | (1) | 153 | 2,904 | — | 3,057 | 189 | 11/30/2012 | 2007 | |||||||||||||||||||||||
| Rite Aid |
Stanford | KY | — | (1) | 152 | 2,886 | — | 3,038 | 188 | 11/30/2012 | 2009 | |||||||||||||||||||||||
| Rite Aid |
Lima | OH | — | (1) | 576 | 2,304 | — | 2,880 | 161 | 11/13/2012 | 2006 | |||||||||||||||||||||||
| Rite Aid |
Louisville | OH | — | (1) | 576 | 3,266 | — | 3,842 | 229 | 10/31/2012 | 2008 | |||||||||||||||||||||||
| Rite Aid |
Marion | OH | — | (1) | 508 | 2,877 | — | 3,385 | 201 | 11/13/2012 | 2006 | |||||||||||||||||||||||
| Rite Aid |
Huntington | WV | — | (1) | 964 | 2,250 | — | 3,214 | 146 | 11/30/2012 | 2008 | |||||||||||||||||||||||
| Rubbermaid |
Winfield | KS | 12,725 | 1,056 | 20,060 | — | 21,116 | 2,039 | 4/25/2012 | 2008 | ||||||||||||||||||||||||
| Rubbermaid |
Winfield | KS | — | (1) | 819 | 15,555 | — | 16,374 | 1,028 | 11/28/2012 | 2012 | |||||||||||||||||||||||
| Ruby Tuesday |
Colorado Springs | CO | — | (1) | 480 | 809 | — | 1,289 | 23 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Ruby Tuesday |
Dillon | CO | — | (1) | 400 | 1,628 | — | 2,028 | 47 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Ruby Tuesday |
Bartow | FL | — | (1) | 270 | 1,916 | — | 2,186 | 55 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Ruby Tuesday |
London | KY | — | (1) | 370 | 1,493 | — | 1,863 | 43 | 6/27/2013 | 1997 | |||||||||||||||||||||||
F-123
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Ruby Tuesday |
Somerset | KY | — | (1) | 480 | 1,120 | — | 1,600 | 32 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Sakura Tepanyaki Steakhouse |
Orem | UT | — | (1) | 340 | 658 | — | 998 | 19 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Sam’s Southern Eatery |
Kennesaw | GA | — | (1) | 210 | 46 | — | 256 | 1 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Scotts Company |
Orrville | OH | — | (1) | 611 | 1,134 | — | 1,745 | 98 | 7/30/2012 | 2008 | |||||||||||||||||||||||
| Scotts Company |
Orrville | OH | — | (1) | 609 | 11,576 | — | 12,185 | 1,000 | 7/30/2012 | 2008 | |||||||||||||||||||||||
| Scotts Company |
Orrville | OH | — | (1) | 278 | 2,502 | — | 2,780 | 191 | 9/28/2012 | 2008 | |||||||||||||||||||||||
| Shaw’s Supermarkets |
Plymouth | MA | — | (1) | 1,440 | 3,361 | — | 4,801 | 394 | 4/18/2012 | 2000 | |||||||||||||||||||||||
| Shoney’s |
Athens | AL | — | 560 | 110 | — | 670 | 3 | 6/27/2013 | 1982 | ||||||||||||||||||||||||
| Shoney’s |
Florence | AL | — | 100 | 484 | — | 584 | 14 | 6/27/2013 | 1966 | ||||||||||||||||||||||||
| Shoney’s |
Gadsden | AL | — | (1) | 220 | 707 | — | 927 | 20 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Shoney’s |
Oxford | AL | — | (1) | 670 | 25 | — | 695 | 1 | 6/27/2013 | 1977 | |||||||||||||||||||||||
| Shoney’s |
Valdosta | GA | — | 420 | 440 | — | 860 | 13 | 6/27/2013 | 2000 | ||||||||||||||||||||||||
| Shoney’s |
Elizabethtown | KY | — | (1) | 450 | 465 | — | 915 | 13 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Shoney’s |
Grayson | KY | — | (1) | 420 | 406 | — | 826 | 12 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Shoney’s |
Owensboro | KY | — | 390 | 129 | — | 519 | 4 | 6/27/2013 | 1988 | ||||||||||||||||||||||||
| Shoney’s |
Lafayette | LA | — | 530 | 138 | — | 668 | 4 | 6/27/2013 | 1989 | ||||||||||||||||||||||||
| Shoney’s |
Osage Beach | MO | — | 453 | 113 | — | 566 | 3 | 6/27/2013 | 1992 | ||||||||||||||||||||||||
| Shoney’s |
Hattiesburg | MS | — | (1) | 730 | 618 | — | 1,348 | 18 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Shoney’s |
Jackson | MS | — | (1) | 360 | 572 | — | 932 | 16 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Shoney’s |
Summerville | SC | — | (1) | 350 | 800 | — | 1,150 | 23 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Shoney’s |
Cookeville | TN | — | (1) | 510 | 760 | — | 1,270 | 22 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Shoney’s |
Lawrenceburg | TN | — | (1) | 330 | 873 | — | 1,203 | 25 | 6/27/2013 | 1983 | |||||||||||||||||||||||
| Shoney’s |
Charleston | WV | — | (1) | 190 | 543 | — | 733 | 16 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Shoney’s |
Lewisburg | WV | — | (1) | 110 | 642 | — | 752 | 18 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Shoney’s |
Princeton | WV | — | (1) | 90 | 593 | — | 683 | 17 | 6/27/2013 | 1975 | |||||||||||||||||||||||
| Shoney’s |
Ripley | WV | — | (1) | 200 | 599 | — | 799 | 17 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Smokey Bones BBQ |
Morrow | GA | — | 390 | 2,184 | — | 2,574 | 63 | 6/27/2013 | 1999 | ||||||||||||||||||||||||
| Sonny’s Real Pit Bar-B-Q |
Athens | GA | — | (1) | 460 | 1,280 | — | 1,740 | 37 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Sonny’s Real Pit Bar-B-Q |
Conyers | GA | — | (1) | 450 | 663 | — | 1,113 | 19 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Sonny’s Real Pit Bar-B-Q |
Marietta | GA | — | (1) | 290 | 1,772 | — | 2,062 | 51 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Spaghetti Warehouse |
Marietta | GA | — | (1) | 800 | 276 | — | 1,076 | 8 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Spaghetti Warehouse |
Aurora | IL | — | (1) | 480 | 805 | — | 1,285 | 23 | 6/27/2013 | 1993 | |||||||||||||||||||||||
F-124
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Spaghetti Warehouse |
Elk Grove Village | IL | — | (1) | 550 | 299 | — | 849 | 9 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Spaghetti Warehouse |
Oklahoma City | OK | — | (1) | 570 | 1,193 | — | 1,763 | 34 | 6/27/2013 | 1905 | |||||||||||||||||||||||
| Spaghetti Warehouse |
Tulsa | OK | — | (1) | 530 | 1,174 | — | 1,704 | 34 | 6/27/2013 | 1917 | |||||||||||||||||||||||
| Spaghetti Warehouse |
Memphis | TN | — | (1) | 100 | 283 | — | 383 | 8 | 6/27/2013 | 1905 | |||||||||||||||||||||||
| Spaghetti Warehouse |
Arlington | TX | — | (1) | 630 | 1,400 | — | 2,030 | 40 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Spaghetti Warehouse |
Dallas | TX | — | (1) | 810 | 1,656 | — | 2,466 | 47 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Spaghetti Warehouse |
Houston | TX | — | (1) | 980 | 2,284 | — | 3,264 | 65 | 6/27/2013 | 1906 | |||||||||||||||||||||||
| Spaghetti Warehouse |
Plano | TX | — | (1) | 540 | 1,060 | — | 1,600 | 30 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Spaghetti Warehouse |
San Antonio | TX | — | (1) | 1,140 | 1,434 | — | 2,574 | 41 | 6/27/2013 | 1907 | |||||||||||||||||||||||
| Subway |
Knoxville | TN | — | (1) | 160 | 349 | — | 509 | 10 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Sweet Tomatoes |
Coral Springs | FL | — | (1) | 790 | 1,625 | — | 2,415 | 47 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Synovus Bank |
Tampa | FL | — | (1) | 985 | 2,298 | — | 3,283 | 123 | 12/31/2012 | 1959 | |||||||||||||||||||||||
| T.G.I. Friday’s |
Homestead | PA | — | (1) | 970 | 3,455 | — | 4,425 | 99 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Taco Bell |
Daphne | AL | — | (1) | 180 | 1,278 | — | 1,458 | 35 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Taco Bell |
Foley | AL | — | (1) | 360 | 1,460 | — | 1,820 | 40 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Taco Bell |
Mobile | AL | — | (1) | 160 | 1,973 | — | 2,133 | 55 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Taco Bell |
SaraLand | AL | — | (1) | 150 | 1,063 | — | 1,213 | 29 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Taco Bell |
Jacksonville | FL | — | (1) | 440 | 1,167 | — | 1,607 | 32 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Taco Bell |
Jacksonville | FL | — | (1) | 340 | 1,383 | — | 1,723 | 38 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Taco Bell |
Pensacola | FL | — | (1) | 140 | 1,897 | — | 2,037 | 53 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Taco Bell |
Augusta | GA | — | (1) | 220 | 1,292 | — | 1,512 | 36 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Taco Bell |
Hephzibah | GA | — | (1) | 330 | 930 | — | 1,260 | 26 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Taco Bell |
Jesup | GA | — | (1) | 230 | 715 | — | 945 | 20 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Taco Bell |
Waycross | GA | — | (1) | 170 | 1,115 | — | 1,285 | 31 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Taco Bell |
St. Louis | MO | — | (1) | 190 | 1,951 | — | 2,141 | 44 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Taco Bell |
Wentzville | MO | — | (1) | 410 | 1,168 | — | 1,578 | 32 | 6/27/2013 | 2000 | |||||||||||||||||||||||
F-125
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Taco Bell |
Brunswick | OH | — | (1) | 400 | 1,267 | — | 1,667 | 35 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Taco Bell |
North Olmstead | OH | — | (1) | 390 | 904 | — | 1,294 | 25 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Taco Bell |
Kingston | TN | — | (1) | 280 | 714 | — | 994 | 20 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Taco Bell |
Dallas | TX | — | (1) | 400 | 1,225 | — | 1,625 | 34 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Taco Bell |
Colonial Heights | VA | — | (1) | 450 | 1,144 | — | 1,594 | 32 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Taco Bell |
Hayes | VA | — | (1) | 350 | — | — | 350 | — | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Taco Bell |
Portsmouth | VA | — | 350 | — | — | 350 | — | 6/27/2013 | 1997 | ||||||||||||||||||||||||
| Taco Bell |
Richmond | VA | — | (1) | 500 | 1,061 | — | 1,561 | 29 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Taco Bell |
Richmond | VA | — | (1) | 510 | 1,321 | — | 1,831 | 37 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Taco Bell/Long John Silvers |
Ashtabula | OH | — | (1) | 440 | 1,640 | — | 2,080 | 45 | 6/27/2013 | 2004 | |||||||||||||||||||||||
| Taco Bell/Pizza Hut |
Dallas | TX | — | (1) | 420 | 1,582 | — | 2,002 | 44 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Taco Cabana |
Austin | TX | — | (1) | 700 | 2,105 | — | 2,805 | 58 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Taco Cabana |
Pasadena | TX | — | (1) | 420 | 1,420 | — | 1,840 | 39 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Taco Cabana |
San Antonio | TX | — | (1) | 600 | 1,955 | — | 2,555 | 54 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Taco Cabana |
San Antonio | TX | — | (1) | 500 | 1,740 | — | 2,240 | 48 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Taco Cabana |
San Antonio | TX | — | (1) | 280 | 1,695 | — | 1,975 | 47 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Taco Cabana |
San Antonio | TX | — | (1) | 500 | 1,766 | — | 2,266 | 49 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Taco Cabana |
Schertz | TX | — | (1) | 520 | 1,408 | — | 1,928 | 39 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Talbots HQ |
Hingham | MA | — | 3,009 | 27,080 | — | 30,089 | 762 | 5/24/2013 | 1980 | ||||||||||||||||||||||||
| TCF National Bank |
Crystal | MN | — | (1) | 640 | 642 | — | 1,282 | 17 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| TD Bank |
Falmouth | ME | — | 4,057 | 23,489 | — | 27,546 | 864 | 3/18/2013 | 2002 | ||||||||||||||||||||||||
| Teva Pharmaceuticals Industries Limited |
Malvern | PA | — | (2) | 2,666 | 40,981 | — | 43,647 | 326 | 11/5/2013 | 2013 | |||||||||||||||||||||||
| Texas Roadhouse |
Cedar Rapids | IA | — | (1) | 430 | 2,194 | — | 2,624 | 63 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Texas Roadhouse |
Ammon | ID | — | (1) | 490 | 1,206 | — | 1,696 | 35 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Texas Roadhouse |
Shively | KY | — | (1) | 540 | 2,055 | — | 2,595 | 59 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Texas Roadhouse |
Concord | NC | — | (1) | 650 | 2,130 | — | 2,780 | 61 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Texas Roadhouse |
Gastonia | NC | — | (1) | 570 | 1,544 | — | 2,114 | 44 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Texas Roadhouse |
Hickory | NC | — | (1) | 580 | 1,831 | — | 2,411 | 53 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Texas Roadhouse |
Dickson City | PA | — | (1) | 640 | 1,897 | — | 2,537 | 54 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Texas Roadhouse |
College Station | TX | — | (1) | 670 | 2,299 | — | 2,969 | 66 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Texas Roadhouse |
Grand Prairie | TX | — | (1) | 780 | 1,867 | — | 2,647 | 54 | 6/27/2013 | 1997 | |||||||||||||||||||||||
F-126
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| The Kroger Co. |
Calhoun | GA | — | (2) | — | 6,279 | — | 6,279 | 52 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Lithonia | GA | — | (2) | — | 6,250 | — | 6,250 | 52 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Suwanee | GA | — | (2) | — | 7,574 | — | 7,574 | 63 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Suwanee | GA | — | (2) | — | 7,691 | — | 7,691 | 64 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Frankfort | KY | — | (2) | — | 5,794 | — | 5,794 | 48 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Georgetown | KY | — | (2) | — | 6,742 | — | 6,742 | 56 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Madisonville | KY | — | (2) | — | 5,715 | — | 5,715 | 48 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Murray | KY | — | (2) | — | 6,165 | — | 6,165 | 51 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Owensboro | KY | — | (2) | — | 6,073 | — | 6,073 | 51 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Franklin | TN | — | (2) | — | 7,782 | — | 7,782 | 65 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Kroger Co. |
Knoxville | TN | — | (2) | — | 7,642 | — | 7,642 | 64 | 11/5/2013 | 1996 | |||||||||||||||||||||||
| The Pantry, Inc. |
Montgomery | AL | — | (1) | 526 | 1,228 | — | 1,754 | 69 | 12/31/2012 | 1998 | |||||||||||||||||||||||
| The Pantry, Inc. |
Charlotte | NC | — | (1) | 1,332 | 1,332 | — | 2,664 | 75 | 12/31/2012 | 2004 | |||||||||||||||||||||||
| The Pantry, Inc. |
Charlotte | NC | — | (1) | 1,667 | 417 | — | 2,084 | 23 | 12/31/2012 | 1982 | |||||||||||||||||||||||
| The Pantry, Inc. |
Charlotte | NC | — | (1) | 1,191 | 1,787 | — | 2,978 | 100 | 12/31/2012 | 1987 | |||||||||||||||||||||||
| The Pantry, Inc. |
Charlotte | NC | — | (1) | 1,070 | 1,308 | — | 2,378 | 73 | 12/31/2012 | 1997 | |||||||||||||||||||||||
| The Pantry, Inc. |
Conover | NC | — | (1) | 1,144 | 936 | — | 2,080 | 53 | 12/31/2012 | 1998 | |||||||||||||||||||||||
| The Pantry, Inc. |
Cornelius | NC | — | (1) | 1,847 | 2,258 | — | 4,105 | 127 | 12/31/2012 | 1999 | |||||||||||||||||||||||
| The Pantry, Inc. |
Lincolnton | NC | — | (1) | 1,766 | 2,159 | — | 3,925 | 121 | 12/31/2012 | 2000 | |||||||||||||||||||||||
| The Pantry, Inc. |
Matthews | NC | — | (1) | 980 | 1,819 | — | 2,799 | 102 | 12/31/2012 | 1987 | |||||||||||||||||||||||
| The Pantry, Inc. |
Thomasville | NC | — | (1) | 1,175 | 1,436 | — | 2,611 | 81 | 12/31/2012 | 2000 | |||||||||||||||||||||||
| The Pantry, Inc. |
Fort Mill | SC | — | (1) | 1,311 | 1,967 | — | 3,278 | 110 | 12/31/2012 | 1988 | |||||||||||||||||||||||
| The Procter & Gamble Co. |
FortWayne | IN | 25,904 | — | 26,400 | — | 26,400 | 268 | 11/5/2013 | 1994 | ||||||||||||||||||||||||
| Thermo Process Systems |
Sugarland | TX | — | (1) | 1,680 | 7,778 | — | 9,458 | 82 | 9/24/2013 | 2005 | |||||||||||||||||||||||
| Tiffany & Co. |
Parsippany | NJ | 55,773 | 2,248 | 81,083 | — | 83,331 | 824 | 11/5/2013 | 2002 | ||||||||||||||||||||||||
| Tilted Kilt |
Hendersonville | TN | — | (1) | 310 | 763 | — | 1,073 | 22 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Time Warner Cable |
Milwaukee | WI | 20,570 | 3,081 | 22,512 | — | 25,593 | 217 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
| Tire Kingdom |
Dublin | OH | — | (6) | 373 | 1,119 | — | 1,492 | 108 | 4/27/2012 | 2003 | |||||||||||||||||||||||
| TJX Companies, Inc. |
Philadelphia | PA | 67,335 | 9,890 | 84,955 | — | 94,845 | 864 | 11/5/2013 | 2001 | ||||||||||||||||||||||||
| T-Mobile USA, Inc. |
Nashville | TN | 10,295 | 1,190 | 15,847 | — | 17,037 | 140 | 11/5/2013 | 2002 | ||||||||||||||||||||||||
| Tractor Supply |
Oneonta | AL | — | (1) | 359 | 1,438 | — | 1,797 | 46 | 4/18/2013 | 2012 | |||||||||||||||||||||||
| Tractor Supply |
Gray | LA | — | 550 | 2,202 | — | 2,752 | 149 | 8/7/2012 | 2011 | ||||||||||||||||||||||||
F-127
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Tractor Supply |
Negaunee | MI | — | (1) | 488 | 1,953 | — | 2,441 | 147 | 6/12/2012 | 2010 | |||||||||||||||||||||||
| Tractor Supply |
Plymouth | NH | — | 424 | 2,402 | — | 2,826 | 124 | 11/29/2012 | 2011 | ||||||||||||||||||||||||
| Tractor Supply |
Allentown | NJ | — | (5) | 697 | 3,949 | — | 4,646 | 361 | 1/27/2012 | 2011 | |||||||||||||||||||||||
| Tractor Supply |
Rio Grande City | TX | — | (1) | 469 | 1,095 | — | 1,564 | 78 | 6/19/2012 | 2008 | |||||||||||||||||||||||
| UPS e-Logistics |
Elizabethtown | KY | — | (1) | 1,460 | 10,923 | — | 12,383 | 155 | 9/24/2013 | 2001 | |||||||||||||||||||||||
| Bob’s Stores |
Randolph | MA | 6,929 | 2,840 | 6,826 | — | 9,666 | 68 | 11/5/2013 | 1993 | ||||||||||||||||||||||||
| Vacant |
Bethesda | MD | 54,554 | 8,538 | 31,879 | — | 40,417 | 292 | 11/5/2013 | 2012 | ||||||||||||||||||||||||
| Vacant |
Irving | TX | — | 2,610 | 4,470 | — | 7,080 | 34 | 11/5/2013 | 1997 | ||||||||||||||||||||||||
| Vacant (Development property) |
Columbia | SC | — | — | 6,941 | 7,006 | 13,947 | — | 11/5/2013 | in progress | ||||||||||||||||||||||||
| Vacant (Development property) |
The Woodlands | TX | — | — | 5,411 | 1,266 | 6,677 | — | 11/5/2013 | in progress | ||||||||||||||||||||||||
| Vitamin Shoppe |
Evergreen Park | IL | — | (1) | 476 | 1,427 | — | 1,903 | 53 | 4/19/2013 | 2012 | |||||||||||||||||||||||
| Vitamin Shoppe |
Ashland | VA | — | 2,400 | 19,663 | — | 22,063 | 200 | 11/5/2013 | 2013 | ||||||||||||||||||||||||
| Walgreens |
Wetumpka | AL | — | (5) | 547 | 3,102 | — | 3,649 | 341 | 2/22/2012 | 2007 | |||||||||||||||||||||||
| Walgreens |
Peoria | AZ | — | (1) | 837 | 1,953 | — | 2,790 | 98 | 2/28/2013 | 1996 | |||||||||||||||||||||||
| Walgreens |
Phoenix | AZ | — | (1) | 1,037 | 1,927 | — | 2,964 | 87 | 3/26/2013 | 1999 | |||||||||||||||||||||||
| Walgreens |
Coalings | CA | — | (3) | 396 | 3,568 | — | 3,964 | 482 | 10/11/2011 | 2008 | |||||||||||||||||||||||
| Walgreens |
Acworth | GA | — | (1) | 1,583 | 2,940 | — | 4,523 | 162 | 1/25/2013 | 2012 | |||||||||||||||||||||||
| Walgreens |
Chicago | IL | — | (1) | 1,212 | 2,829 | — | 4,041 | 156 | 1/30/2013 | 1999 | |||||||||||||||||||||||
| Walgreens |
Chicago | IL | — | (1) | 1,617 | 3,003 | — | 4,620 | 165 | 1/30/2013 | 2007 | |||||||||||||||||||||||
| Walgreens |
Anderson | IN | — | 807 | 3,227 | — | 4,034 | 274 | 7/31/2012 | 2001 | ||||||||||||||||||||||||
| Walgreens |
Orlando | FL | — | (1) | 1,007 | 1,869 | — | 2,876 | 28 | 9/30/2013 | 1996 | |||||||||||||||||||||||
| Walgreens |
Olathe | KS | — | (1) | 1,258 | 3,774 | — | 5,032 | 94 | 7/25/2013 | 2002 | |||||||||||||||||||||||
| Walgreens |
Frankfort | KY | — | (5) | 911 | 3,643 | — | 4,554 | 419 | 2/8/2012 | 2006 | |||||||||||||||||||||||
| Walgreens |
Shreveport | LA | — | (5) | 619 | 3,509 | — | 4,128 | 386 | 2/22/2012 | 2003 | |||||||||||||||||||||||
| Walgreens |
Baltimore | MD | — | (1) | 1,185 | 2,764 | — | 3,949 | 69 | 8/6/2013 | 2000 | |||||||||||||||||||||||
| Walgreens |
Clinton | MI | — | (1) | 1,463 | 3,413 | — | 4,876 | 239 | 11/13/2012 | 2002 | |||||||||||||||||||||||
| Walgreens |
Dearborn | MI | — | (1) | 190 | 3,605 | — | 3,795 | 162 | 4/1/2013 | 1998 | |||||||||||||||||||||||
F-128
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Walgreens |
Eastpointe | MI | — | (1) | 668 | 2,672 | — | 3,340 | 307 | 1/19/2012 | 1998 | |||||||||||||||||||||||
| Walgreens |
Lincoln Park | MI | — | 1,041 | 5,896 | — | 6,937 | 501 | 7/31/2012 | 2007 | ||||||||||||||||||||||||
| Walgreens |
Livonia | MI | — | (1) | 261 | 2,350 | — | 2,611 | 106 | 4/1/2013 | 1998 | |||||||||||||||||||||||
| Walgreens |
Stevensville | MI | — | (3) | 855 | 3,420 | — | 4,275 | 428 | 11/28/2011 | 2007 | |||||||||||||||||||||||
| Walgreens |
Troy | MI | — | (1) | — | 1,896 | — | 1,896 | 123 | 12/12/2012 | 2000 | |||||||||||||||||||||||
| Walgreens |
Warren | MI | — | (1) | 748 | 2,991 | — | 3,739 | 194 | 11/21/2012 | 1999 | |||||||||||||||||||||||
| Walgreens |
Columbia | MS | — | 452 | 4,072 | — | 4,524 | 244 | 12/21/2012 | 2011 | ||||||||||||||||||||||||
| Walgreens |
Greenwood | MS | — | (5) | 561 | 3,181 | — | 3,742 | 350 | 2/22/2012 | 2007 | |||||||||||||||||||||||
| Walgreens |
Maplewood | NJ | — | (3) | 1,071 | 6,071 | — | 7,142 | 759 | 11/18/2011 | 2011 | |||||||||||||||||||||||
| Walgreens |
Las Vegas | NV | — | 1,528 | 6,114 | — | 7,642 | 581 | 5/30/2012 | 2009 | ||||||||||||||||||||||||
| Walgreens |
Las Vegas | NV | — | (1) | 700 | 2,801 | — | 3,501 | 112 | 4/30/2013 | 2001 | |||||||||||||||||||||||
| Walgreens |
Staten Island | NY | — | — | 3,984 | — | 3,984 | 538 | 10/5/2011 | 2007 | ||||||||||||||||||||||||
| Walgreens |
Akron | OH | — | 664 | 1,548 | — | 2,212 | 54 | 5/31/2013 | 1994 | ||||||||||||||||||||||||
| Walgreens |
Bryan | OH | — | (5) | 219 | 4,154 | — | 4,373 | 457 | 2/22/2012 | 2007 | |||||||||||||||||||||||
| Walgreens |
Eaton | OH | — | 398 | 3,586 | — | 3,984 | 323 | 6/27/2012 | 2008 | ||||||||||||||||||||||||
| Walgreens |
Tahlequah | OK | — | 647 | 3,664 | — | 4,311 | 220 | 1/2/2013 | 2008 | ||||||||||||||||||||||||
| Walgreens |
Aibonito Pueblo | PR | — | 1,855 | 5,566 | — | 7,421 | 278 | 3/5/2013 | 2012 | ||||||||||||||||||||||||
| Walgreens |
Las Piedras | PR | — | 1,726 | 5,179 | — | 6,905 | 233 | 4/3/2013 | 2012 | ||||||||||||||||||||||||
| Walgreens |
Anderson | SC | — | (5) | 835 | 3,342 | — | 4,177 | 384 | 2/8/2012 | 2006 | |||||||||||||||||||||||
| Walgreens |
Easley | SC | — | 1,206 | 3,617 | — | 4,823 | 326 | 6/27/2012 | 2007 | ||||||||||||||||||||||||
| Walgreens |
Greenville | SC | — | 1,313 | 3,940 | — | 5,253 | 355 | 6/27/2012 | 2006 | ||||||||||||||||||||||||
| Walgreens |
Myrtle Beach | SC | — | (1) | — | 2,077 | — | 2,077 | 249 | 12/29/2011 | 2001 | |||||||||||||||||||||||
| Walgreens |
North Charleston | SC | — | 1,320 | 3,081 | — | 4,401 | 277 | 6/27/2012 | 2008 | ||||||||||||||||||||||||
| Walgreens |
Cordova | TN | — | 1,005 | 2,345 | — | 3,350 | 164 | 11/9/2012 | 2002 | ||||||||||||||||||||||||
| Walgreens |
Memphis | TN | — | 896 | 2,687 | — | 3,583 | 201 | 10/2/2012 | 2003 | ||||||||||||||||||||||||
| Walgreens |
Portsmouth | VA | 2,118 | 730 | 3,311 | — | 4,041 | 33 | 11/5/2013 | 1998 | ||||||||||||||||||||||||
| Wendy’s |
Atascadero | CA | — | (1) | 230 | 1,009 | — | 1,239 | 28 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Wendy’s |
Camarillo | CA | — | (1) | 320 | 2,253 | — | 2,573 | 62 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Wendy’s |
Paso Robles | CA | — | (1) | 150 | 1,603 | — | 1,753 | 44 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Wendy’s |
Worcester | MA | — | (1) | 370 | 1,288 | — | 1,658 | 36 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Wendy’s |
Salisbury | MD | — | (1) | 370 | 1,299 | — | 1,669 | 36 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Wendy’s |
Swanton | OH | — | (1) | 430 | 1,233 | — | 1,663 | 34 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Wendy’s |
Sylvania | OH | — | (1) | 300 | 799 | — | 1,099 | 22 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Wendy’s |
Knoxville | TN | — | (1) | 330 | 1,161 | — | 1,491 | 32 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Wendy’s |
Knoxville | TN | — | (1) | 330 | 1,132 | — | 1,462 | 31 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Wendy’s |
Millington | TN | — | (1) | 380 | 1,208 | — | 1,588 | 33 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Wendy’s |
Bluefield | VA | — | (1) | 450 | 1,927 | — | 2,377 | 53 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Wendy’s |
Midlothian | VA | — | (1) | 230 | 1,300 | — | 1,530 | 36 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Wendy’s |
Beaver | WV | — | (1) | 290 | 1,156 | — | 1,446 | 32 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| West Marine |
Deltaville | VA | — | (1) | 425 | 2,409 | — | 2,834 | 192 | 7/31/2012 | 2012 | |||||||||||||||||||||||
| Williams Sonoma |
Olive Branch | MS | 28,350 | 2,330 | 44,266 | — | 46,596 | 3,825 | 8/10/2012 | 2001 | ||||||||||||||||||||||||
| Abuelo’s |
Rogers | AR | — | (14) | 825 | 2,296 | — | 3,121 | 66 | 6/27/2013 | 2003 | |||||||||||||||||||||||
| Academy Sports |
Smyrna | TN | — | 2,109 | 8,434 | — | 10,543 | 68 | 11/1/2013 | 2012 | ||||||||||||||||||||||||
F-129
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Academy Sports |
Mobile | AL | — | 1,311 | 7,431 | — | 8,742 | 60 | 11/1/2013 | 2012 | ||||||||||||||||||||||||
| Advance Auto |
Opelika | AL | — | (14) | 289 | 1,156 | — | 1,445 | 43 | 4/24/2013 | 2013 | |||||||||||||||||||||||
| Aliberto’s Mexican Food |
Holbrook | AZ | — | (14) | 32 | 96 | — | 128 | 3 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Applebee’s |
Davenport | FL | — | (14) | 1,506 | 4,517 | — | 6,023 | 112 | 7/31/2013 | 2007 | |||||||||||||||||||||||
| Applebee’s |
Bradenton | FL | — | (14) | 2,475 | 3,713 | — | 6,188 | 92 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Applebee’s |
Rio Rancho | NM | — | (14) | 645 | 3,654 | — | 4,299 | 91 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Applebee’s |
Brandon | FL | — | (14) | 2,453 | 3,647 | — | 6,100 | 105 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Applebee’s |
Lakeland | FL | — | (14) | 1,959 | 3,638 | — | 5,597 | 90 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Applebee’s |
Temple Terrace | FL | — | (14) | 2,396 | 3,594 | — | 5,990 | 89 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Applebee’s |
Largo | FL | — | (14) | 2,334 | 3,501 | — | 5,835 | 87 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Applebee’s |
St. Petersburg | FL | — | (14) | 2,329 | 3,493 | — | 5,822 | 87 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Applebee’s |
Riverview | FL | — | (14) | 1,849 | 3,434 | — | 5,283 | 85 | 7/31/2013 | 2006 | |||||||||||||||||||||||
| Applebee’s |
Hobbs | NM | — | (14) | 600 | 3,401 | — | 4,001 | 84 | 7/31/2013 | 2002 | |||||||||||||||||||||||
| Applebee’s |
Valrico | FL | — | (14) | 1,202 | 3,274 | — | 4,476 | 94 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Applebee’s |
Wesley Chapel | FL | — | (14) | 3,272 | 3,272 | — | 6,544 | 81 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Applebee’s |
New Port Richey | FL | — | (14) | 1,695 | 3,147 | — | 4,842 | 78 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Applebee’s |
Inverness | FL | — | (14) | 1,977 | 2,965 | — | 4,942 | 74 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Applebee’s |
Corpus Christi | TX | — | (14) | 563 | 2,926 | — | 3,489 | 84 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Applebee’s |
Nampa | ID | — | (14) | 729 | 2,915 | — | 3,644 | 72 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Applebee’s |
Pueblo | CO | — | (14) | 960 | 2,879 | — | 3,839 | 71 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Applebee’s |
Plant City | FL | — | (14) | 2,079 | 2,869 | — | 4,948 | 82 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Applebee’s |
Evans | GA | — | (14) | 1,426 | 2,649 | — | 4,075 | 66 | 7/31/2013 | 2004 | |||||||||||||||||||||||
| Applebee’s |
Winter Haven | FL | — | (14) | 2,130 | 2,603 | — | 4,733 | 65 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Applebee’s |
Gresham | OR | — | 853 | 2,560 | — | 3,413 | 49 | 8/30/2013 | 2004 | ||||||||||||||||||||||||
| Applebee’s |
Garden City | ID | — | 628 | 2,512 | — | 3,140 | 48 | 8/30/2013 | 2003 | ||||||||||||||||||||||||
| Applebee’s |
Savannah | GA | — | (14) | 1,329 | 2,468 | — | 3,797 | 61 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Applebee’s |
Crystal River | FL | — | (14) | 1,328 | 2,467 | — | 3,795 | 61 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| Applebee’s |
Alamogordo | NM | — | 271 | 2,438 | — | 2,709 | 47 | 8/30/2013 | 2000 | ||||||||||||||||||||||||
| Applebee’s |
Lakeland | FL | — | (14) | 1,283 | 2,383 | — | 3,666 | 59 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Applebee’s |
Augusta | GA | — | (14) | 1,254 | 2,329 | — | 3,583 | 58 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Applebee’s |
Roswell | NM | — | (14) | 405 | 2,295 | — | 2,700 | 57 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Applebee’s |
Pueblo | CO | — | 752 | 2,257 | — | 3,009 | 43 | 8/30/2013 | 1998 | ||||||||||||||||||||||||
| Applebee’s |
Greeley | CO | — | (14) | 559 | 2,235 | — | 2,794 | 55 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Applebee’s |
Phenix City | AL | — | (14) | 1,488 | 2,232 | — | 3,720 | 55 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Applebee’s |
Oxford | AL | — | 1,162 | 2,157 | — | 3,319 | 41 | 8/30/2013 | 1995 | ||||||||||||||||||||||||
| Applebee’s |
Clackamas | OR | — | (14) | 901 | 2,103 | — | 3,004 | 52 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Applebee’s |
Tualatin | OR | — | (14) | 1,116 | 2,072 | — | 3,188 | 51 | 7/31/2013 | 2002 | |||||||||||||||||||||||
| Applebee’s |
Richland | WA | — | (14) | 1,112 | 2,064 | — | 3,176 | 51 | 7/31/2013 | 2003 | |||||||||||||||||||||||
| Applebee’s |
Edinburg | TX | — | (14) | 898 | 2,058 | — | 2,956 | 59 | 6/27/2013 | 2006 | |||||||||||||||||||||||
| Applebee’s |
Thornton | CO | — | 681 | 2,043 | — | 2,724 | 39 | 8/30/2013 | 1994 | ||||||||||||||||||||||||
| Applebee’s |
Colorado Springs | CO | — | (14) | 499 | 1,996 | — | 2,495 | 49 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Applebee’s |
McAllen | TX | — | (14) | 1,114 | 1,988 | — | 3,102 | 57 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Applebee’s |
Brighton | CO | — | (14) | 657 | 1,972 | — | 2,629 | 49 | 7/31/2013 | 1998 | |||||||||||||||||||||||
F-130
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Applebee’s |
Colorado Springs | CO | — | (14) | 629 | 1,888 | — | 2,517 | 47 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Applebee’s |
Vancouver | WA | — | 791 | 1,846 | — | 2,637 | 35 | 8/30/2013 | 2001 | ||||||||||||||||||||||||
| Applebee’s |
Pocatello | ID | — | (14) | 612 | 1,837 | — | 2,449 | 46 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Applebee’s |
San Antonio | TX | — | (14) | 732 | 1,796 | — | 2,528 | 51 | 6/27/2013 | 2003 | |||||||||||||||||||||||
| Applebee’s |
Milledgeville | GA | — | (14) | 1,174 | 1,761 | — | 2,935 | 44 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Applebee’s |
Boise | ID | — | (14) | 948 | 1,761 | — | 2,709 | 44 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Applebee’s |
Arvada | CO | — | (14) | 754 | 1,760 | — | 2,514 | 44 | 7/31/2013 | 1996 | |||||||||||||||||||||||
| Applebee’s |
Crestview | FL | — | (14) | 943 | 1,752 | — | 2,695 | 43 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Applebee’s |
Northglenn | CO | — | (14) | 578 | 1,734 | — | 2,312 | 43 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Applebee’s |
Auburn | AL | — | (14) | 1,155 | 1,732 | — | 2,887 | 43 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Applebee’s |
Ocean Springs | MS | — | (14) | 673 | 1,708 | — | 2,381 | 49 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Applebee’s |
Vancouver | WA | — | (14) | 718 | 1,675 | — | 2,393 | 42 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| Applebee’s |
Roseburg | OR | — | 717 | 1,673 | — | 2,390 | 32 | 8/30/2013 | 2000 | ||||||||||||||||||||||||
| Applebee’s |
Lake Oswego | OR | — | (14) | 1,352 | 1,652 | — | 3,004 | 41 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Applebee’s |
Newton | KS | — | (14) | 504 | 1,569 | — | 2,073 | 45 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Applebee’s |
Fall River | MA | — | 275 | 1,558 | — | 1,833 | 39 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Applebee’s |
New Braunfels | TX | — | (14) | 566 | 1,486 | — | 2,052 | 43 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Applebee’s |
Dublin | GA | — | (14) | 1,171 | 1,431 | — | 2,602 | 35 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Applebee’s |
North Canton | OH | — | 152 | 838 | — | 990 | 24 | 6/27/2013 | 1992 | ||||||||||||||||||||||||
| Arby’s |
Atlanta | GA | — | (14) | 1,207 | 987 | — | 2,194 | 22 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Arby’s |
Kennesaw | GA | — | (14) | 583 | 840 | — | 1,423 | 23 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Arby’s |
Memphis | TN | — | (14) | 449 | 835 | — | 1,284 | 18 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Arby’s |
Mount Vernon | IL | — | (14) | 911 | 764 | — | 1,675 | 21 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Arby’s |
Richmond Hill | GA | — | (14) | 430 | 755 | — | 1,185 | 21 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Arby’s |
Grandville | MI | — | (14) | 1,133 | 755 | — | 1,888 | 17 | 7/31/2013 | 1982 | |||||||||||||||||||||||
| Arby’s |
Prescott | AZ | — | 404 | 750 | — | 1,154 | 16 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Arby’s |
Schertz | TX | — | 499 | 748 | — | 1,247 | 16 | 7/31/2013 | 1996 | ||||||||||||||||||||||||
| Arby’s |
Apopka | FL | — | (14) | 464 | 697 | — | 1,161 | 15 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Arby’s |
Mobile | AL | — | 460 | 685 | — | 1,145 | 19 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
| Arby’s |
Wyoming | MI | — | (14) | 1,513 | 648 | — | 2,161 | 14 | 7/31/2013 | 1970 | |||||||||||||||||||||||
| Arby’s |
Fort Wayne | IN | — | 529 | 647 | — | 1,176 | 14 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
| Arby’s |
Louisville | KY | — | 336 | 625 | — | 961 | 26 | 5/30/2013 | 1979 | ||||||||||||||||||||||||
| Arby’s |
Phoenix | AZ | — | 559 | 618 | — | 1,177 | 17 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
| Arby’s |
Fountain Hills | AZ | — | 241 | 597 | — | 838 | 17 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
| Arby’s |
Orlando | FL | — | 251 | 585 | — | 836 | 13 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Arby’s |
Rockledge | FL | — | 381 | 571 | — | 952 | 13 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
| Arby’s |
Erie | PA | — | 188 | 552 | — | 740 | 15 | 6/27/2013 | 1966 | ||||||||||||||||||||||||
| Arby’s |
Merritt Island | FL | — | 297 | 552 | — | 849 | 12 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
| Arby’s |
Hopkinsville | KY | — | (14) | 432 | 528 | — | 960 | 12 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Arby’s |
Clovis | NM | — | 91 | 518 | — | 609 | 14 | 6/27/2013 | 1982 | ||||||||||||||||||||||||
| Arby’s |
Winchester | IN | — | 341 | 511 | — | 852 | 11 | 7/31/2013 | 1988 | ||||||||||||||||||||||||
| Arby’s |
Lexington | NC | — | 484 | 504 | — | 988 | 14 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Arby’s |
Guntersville | AL | — | 142 | 503 | — | 645 | 14 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
F-131
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Arby’s |
New Albany | IN | — | (14) | 456 | 470 | — | 926 | 13 | 6/27/2013 | 2005 | |||||||||||||||||||||||
| Arby’s |
Chattanooga | TN | — | (14) | 201 | 469 | — | 670 | 10 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Arby’s |
New Albany | IN | — | (14) | 325 | 465 | — | 790 | 13 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Arby’s |
Scottsburg | IN | — | (14) | 526 | 445 | — | 971 | 12 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Arby’s |
Corinth | MS | — | (14) | 753 | 429 | — | 1,182 | 12 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Arby’s |
Alexander City | AL | — | (14) | 527 | 401 | — | 928 | 11 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Arby’s |
Middlefield | OH | — | 379 | 388 | — | 767 | 11 | 6/27/2013 | 1988 | ||||||||||||||||||||||||
| Arby’s |
Rochester | NY | — | 128 | 384 | — | 512 | 8 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Arby’s |
Savannah | GA | — | 293 | 293 | — | 586 | 6 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Arby’s |
Albuquerque | NM | — | 217 | 246 | — | 463 | 7 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Arby’s |
Alexandria | LA | — | 82 | 245 | — | 327 | 5 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Arby’s |
Las Vegas | NM | — | 236 | 236 | — | 472 | 5 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Arby’s |
Toccoa | GA | — | 185 | 227 | — | 412 | 5 | 7/31/2013 | 1998 | ||||||||||||||||||||||||
| Arby’s |
Bullhead City | AZ | — | 550 | — | — | 550 | — | 6/27/2013 | 1999 | ||||||||||||||||||||||||
| Arby’s |
Omaha | NE | — | 359 | — | — | 359 | — | 7/31/2013 | 1984 | ||||||||||||||||||||||||
| Auto Pawn |
Columbus | GA | — | 170 | — | — | 170 | — | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Bandana’s Bar-B-Q Restaurant |
Fenton | MO | — | 470 | 314 | — | 784 | 6 | 8/30/2013 | 1986 | ||||||||||||||||||||||||
| Billboard |
Memphis | TN | — | 33 | — | — | 33 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Billboard |
Memphis | TN | — | 63 | — | — | 63 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Billboard |
Memphis | TN | — | 73 | — | — | 73 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Billboard |
Memphis | TN | — | 90 | — | — | 90 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Billboard |
Memphis | TN | — | 69 | — | — | 69 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Black Meg 43 |
Copperas Cove | TX | — | (14) | 151 | 151 | — | 302 | 4 | 6/27/2013 | 1969 | |||||||||||||||||||||||
| Bojangles |
Statesville | NC | — | (14) | 646 | 1,937 | — | 2,583 | 43 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Bojangles |
Denver | NC | — | (14) | 1,013 | 1,881 | — | 2,894 | 41 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Bojangles |
Hickory | NC | — | (14) | 749 | 1,789 | — | 2,538 | 50 | 6/27/2013 | 1973 | |||||||||||||||||||||||
| Bojangles |
Fountain Inn | SC | — | 287 | 1,150 | — | 1,437 | 20 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
| Bojangles |
Taylorsville | NC | — | (14) | 436 | 1,108 | — | 1,544 | 31 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Bojangles |
Troutman | NC | — | 718 | 1,077 | — | 1,795 | 19 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
| Bridgestone Firestone |
Kansas City | MO | — | (14) | 651 | 1,954 | — | 2,605 | 66 | 5/31/2013 | 2008 | |||||||||||||||||||||||
| Bruegger’s Bagels |
Durham | NC | — | (14) | 312 | 728 | — | 1,040 | 16 | 7/31/2013 | 1926 | |||||||||||||||||||||||
| Bucho’s Mexican Food |
Bolingbrook | IL | — | (14) | 470 | 137 | — | 607 | 4 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Buffalo Wild Wings |
Langhorne | PA | — | (14) | 815 | 815 | — | 1,630 | 20 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Burger King |
Augusta | GA | — | (14) | 693 | 2,080 | — | 2,773 | 46 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Burger King |
Spanaway | WA | — | 509 | 1,628 | — | 2,137 | 45 | 6/27/2013 | 1997 | ||||||||||||||||||||||||
| Burger King |
Cleveland | MS | — | (14) | 688 | 1,606 | — | 2,294 | 35 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Burger King |
Brandon | MS | — | (14) | 649 | 1,513 | — | 2,162 | 42 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Burger King |
North Augusta | SC | — | (14) | 256 | 1,451 | — | 1,707 | 32 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Burger King |
Troy | AL | — | (14) | 461 | 1,383 | — | 1,844 | 30 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Burger King |
Charlotte | NC | — | 1,105 | 1,372 | — | 2,477 | 38 | 6/27/2013 | 1997 | ||||||||||||||||||||||||
| Burger King |
Martinez | GA | — | (14) | 909 | 1,350 | — | 2,259 | 37 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Burger King |
Greenville | MS | — | (14) | 573 | 1,337 | — | 1,910 | 29 | 7/31/2013 | 2004 | |||||||||||||||||||||||
| Burger King |
Germantown | WI | — | (14) | 644 | 1,300 | — | 1,944 | 36 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Burger King |
Denver | CO | — | (14) | 872 | 1,242 | — | 2,114 | 34 | 6/27/2013 | 1994 | |||||||||||||||||||||||
F-132
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Burger King |
Alpharetta | GA | — | (14) | 501 | 1,219 | — | 1,720 | 34 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Burger King |
Amesbury | MA | — | (14) | 835 | 1,217 | — | 2,052 | 34 | 6/27/2013 | 1977 | |||||||||||||||||||||||
| Burger King |
Dothan | AL | — | (14) | 628 | 1,167 | — | 1,795 | 26 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Burger King |
Roswell | GA | — | (14) | 495 | 1,156 | — | 1,651 | 25 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Burger King |
Wahoo | NE | — | (14) | 196 | 1,109 | — | 1,305 | 24 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Burger King |
Dothan | AL | — | (14) | 594 | 1,104 | — | 1,698 | 24 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Burger King |
Cut Off | LA | — | 726 | 1,088 | — | 1,814 | 24 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
| Burger King |
Defuniak Springs | FL | — | (14) | 362 | 1,087 | — | 1,449 | 24 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Burger King |
Blair | NE | — | (14) | 272 | 1,087 | — | 1,359 | 24 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Burger King |
Maywood | IL | — | (14) | 860 | 1,051 | — | 1,911 | 23 | 7/31/2013 | 2003 | |||||||||||||||||||||||
| Burger King |
North Augusta | SC | — | (14) | 450 | 1,050 | — | 1,500 | 23 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Burger King |
Bainbridge | GA | — | (14) | 347 | 1,042 | — | 1,389 | 23 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Burger King |
Sierra Vista | AZ | — | 260 | 1,041 | — | 1,301 | 23 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Burger King |
Greenwood | MS | — | (14) | 692 | 1,038 | — | 1,730 | 23 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Burger King |
Kansas CIty | MO | — | 444 | 1,036 | — | 1,480 | 23 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
| Burger King |
Laredo | TX | — | (14) | 684 | 1,026 | — | 1,710 | 23 | 7/31/2013 | 2002 | |||||||||||||||||||||||
| Burger King |
Andalusia | AL | — | (14) | 181 | 1,025 | — | 1,206 | 23 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Burger King |
Kingsford | MI | — | (14) | 53 | 1,015 | — | 1,068 | 22 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Burger King |
Red Oak | IA | — | (14) | 334 | 1,002 | — | 1,336 | 22 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Burger King |
Austin | TX | — | (14) | 666 | 999 | — | 1,665 | 28 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Burger King |
Cairo | GA | — | (14) | 245 | 981 | — | 1,226 | 22 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Burger King |
Alpharetta | GA | — | (14) | 1,128 | 977 | — | 2,105 | 27 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Burger King |
Springfield | FL | — | (14) | 324 | 971 | — | 1,295 | 21 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Burger King |
Opelousas | LA | — | 964 | 964 | — | 1,928 | 21 | 7/31/2013 | 1998 | ||||||||||||||||||||||||
| Burger King |
Panama City | FL | — | (14) | 319 | 956 | — | 1,275 | 21 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Burger King |
Chattanooga | TN | — | (14) | 637 | 955 | — | 1,592 | 21 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Burger King |
Dover | NH | — | (14) | 1,159 | 952 | — | 2,111 | 26 | 6/27/2013 | 1970 | |||||||||||||||||||||||
| Burger King |
Des Moines | IA | — | (14) | 1,160 | 949 | — | 2,109 | 21 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Burger King |
Alpharetta | GA | — | (14) | 795 | 943 | — | 1,738 | 26 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Burger King |
Philadelphia | MS | — | (14) | 402 | 939 | — | 1,341 | 21 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Burger King |
Brewton | AL | — | (14) | 307 | 920 | — | 1,227 | 20 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Burger King |
Stuart | IA | — | (14) | 607 | 911 | — | 1,518 | 20 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Burger King |
Yazoo City | MS | — | (14) | 489 | 909 | — | 1,398 | 20 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Burger King |
Marshfield | WI | — | (14) | 232 | 885 | — | 1,117 | 25 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Burger King |
Thomson | GA | — | (14) | 748 | 876 | — | 1,624 | 24 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Burger King |
Wilmington | NC | — | (14) | 573 | 870 | — | 1,443 | 24 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Burger King |
Alpharetta | GA | — | (14) | 635 | 865 | — | 1,500 | 24 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Burger King |
Clarksdale | MS | — | (14) | 865 | 865 | — | 1,730 | 19 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Burger King |
Opp | AL | — | (14) | 214 | 857 | — | 1,071 | 19 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Burger King |
Cincinnati | OH | — | 353 | 824 | — | 1,177 | 18 | 7/31/2013 | 1974 | ||||||||||||||||||||||||
| Burger King |
Greenville | MS | — | (14) | 351 | 820 | — | 1,171 | 18 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Burger King |
Grand Rapids | MI | — | (14) | 346 | 807 | — | 1,153 | 18 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Burger King |
Grenada | MS | — | (14) | 536 | 805 | — | 1,341 | 18 | 7/31/2013 | 1989 | |||||||||||||||||||||||
F-133
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Burger King |
Clinton | NC | — | (14) | 494 | 801 | — | 1,295 | 22 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Burger King |
Chadbourn | NC | — | (14) | 353 | 797 | — | 1,150 | 22 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Burger King |
Texas City | TX | — | (14) | 421 | 782 | — | 1,203 | 17 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Burger King |
New Philadelphia | OH | — | 419 | 779 | — | 1,198 | 17 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Burger King |
Mansfield | OH | — | 191 | 766 | — | 957 | 17 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Burger King |
Lake Charles | LA | — | 610 | 746 | — | 1,356 | 16 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
| Burger King |
Warren | MI | — | 248 | 745 | — | 993 | 16 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
| Burger King |
Atmore | AL | — | (14) | 181 | 723 | — | 904 | 16 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Burger King |
Tallahassee | FL | — | (14) | 720 | 720 | — | 1,440 | 16 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Burger King |
Weston | WI | — | (14) | 329 | 718 | — | 1,047 | 20 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Burger King |
Walker | MI | — | (14) | 305 | 711 | — | 1,016 | 16 | 7/31/2013 | 1975 | |||||||||||||||||||||||
| Burger King |
Evergreen | AL | — | (14) | 172 | 689 | — | 861 | 15 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Burger King |
Chicago Ridge | IL | — | (14) | 431 | 684 | — | 1,115 | 19 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Burger King |
Perry | IA | — | (14) | 557 | 680 | — | 1,237 | 15 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Burger King |
Springfield | IL | — | (14) | 354 | 677 | — | 1,031 | 19 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Burger King |
Hudsonville | MI | — | (14) | 451 | 676 | — | 1,127 | 15 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Burger King |
Natchez | MS | — | 225 | 674 | — | 899 | 15 | 7/31/2013 | 1973 | ||||||||||||||||||||||||
| Burger King |
Irondequoit | NY | — | 988 | 659 | — | 1,647 | 14 | 7/31/2013 | 1980 | ||||||||||||||||||||||||
| Burger King |
Enterprise | AL | — | (14) | 437 | 655 | — | 1,092 | 14 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Burger King |
Nashua | NH | — | (14) | 655 | 655 | — | 1,310 | 14 | 7/31/2013 | 2008 | |||||||||||||||||||||||
| Burger King |
Claremont | NC | — | (14) | 646 | 646 | — | 1,292 | 18 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Burger King |
Pontiac | IL | — | 151 | 616 | — | 767 | 17 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
| Burger King |
L’Anse | MI | — | (14) | 32 | 616 | — | 648 | 14 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Burger King |
Hastings | MN | — | (14) | 328 | 608 | — | 936 | 13 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Burger King |
Gary | IN | — | (14) | 544 | 606 | — | 1,150 | 17 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Burger King |
Syracuse | NY | — | 606 | 606 | — | 1,212 | 13 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Burger King |
Rhinelander | WI | — | (14) | 260 | 606 | — | 866 | 13 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Burger King |
Monroeville | AL | — | (14) | 325 | 604 | — | 929 | 13 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Burger King |
Menominee | MI | — | (14) | 494 | 604 | — | 1,098 | 13 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Burger King |
Asheville | NC | — | 728 | 595 | — | 1,323 | 13 | 7/31/2013 | 1982 | ||||||||||||||||||||||||
| Burger King |
Clearwater | FL | — | (14) | 981 | 591 | — | 1,572 | 16 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Burger King |
Shenandoah | IA | — | (14) | 313 | 582 | — | 895 | 13 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Burger King |
Raceland | LA | — | 356 | 533 | — | 889 | 12 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
| Burger King |
Springfield | MA | — | 983 | 516 | — | 1,499 | 14 | 6/27/2013 | 1974 | ||||||||||||||||||||||||
| Burger King |
Spring Lake | MI | — | 341 | 512 | — | 853 | 11 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
| Burger King |
Harvey | IL | — | 403 | 507 | — | 910 | 14 | 6/27/2013 | 1997 | ||||||||||||||||||||||||
| Burger King |
Anchorage | AK | — | 427 | 489 | — | 916 | 14 | 6/27/2013 | 1982 | ||||||||||||||||||||||||
| Burger King |
Dayton | OH | — | (14) | 569 | 466 | — | 1,035 | 10 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Burger King |
Gonzales | LA | — | 380 | 465 | — | 845 | 10 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
| Burger King |
Gallatin | TN | — | (14) | 199 | 463 | — | 662 | 10 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Burger King |
Lake Charles | LA | — | 456 | 456 | — | 912 | 10 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Burger King |
Tallahassee | FL | — | (14) | 843 | 454 | — | 1,297 | 10 | 7/31/2013 | 1980 | |||||||||||||||||||||||
F-134
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Burger King |
Palatine | IL | — | 352 | 426 | — | 778 | 12 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
| Burger King |
Largo | FL | — | 683 | 412 | — | 1,095 | 11 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
| Burger King |
Harrisburg | PA | — | (14) | 619 | 412 | — | 1,031 | 9 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Burger King |
Belding | MI | — | 221 | 411 | — | 632 | 9 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Burger King |
Niceville | FL | — | (14) | 598 | 399 | — | 997 | 9 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Burger King |
Metairie | LA | — | 728 | 392 | — | 1,120 | 9 | 7/31/2013 | 1992 | ||||||||||||||||||||||||
| Burger King |
Hamburg | NY | — | (14) | 403 | 383 | — | 786 | 11 | 6/27/2013 | 1974 | |||||||||||||||||||||||
| Burger King |
Valdosta | GA | — | (14) | 564 | 376 | — | 940 | 8 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Burger King |
Cedar Lake | IN | — | 327 | 374 | — | 701 | 10 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
| Burger King |
Jenison | MI | — | 233 | 349 | — | 582 | 8 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Burger King |
Detroit | MI | — | (14) | 614 | 331 | — | 945 | 7 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Burger King |
Apex | NC | — | 366 | 324 | — | 690 | 9 | 6/27/2013 | 1992 | ||||||||||||||||||||||||
| Burger King |
East Greenbush | NY | — | 404 | 269 | — | 673 | 7 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
| Burger King |
Dunn | NC | — | 328 | 268 | — | 596 | 6 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
| Burnie Bistro’s |
Clearwater | FL | — | (14) | 25 | 14 | — | 39 | — | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Captain D’s |
Florence | KY | — | (14) | 248 | 325 | — | 573 | 9 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Captain D’s |
Duncanville | TX | — | 295 | 246 | — | 541 | 7 | 6/27/2013 | 1982 | ||||||||||||||||||||||||
| Carl’s Jr. |
Purcell | OK | — | (14) | 77 | 513 | — | 590 | 14 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Casa Del Rio |
Wadsworth | OH | — | 130 | 389 | — | 519 | 10 | 7/31/2013 | 1971 | ||||||||||||||||||||||||
| Cashland |
Celina | OH | — | 108 | 132 | — | 240 | 3 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
| Castle Dental |
Murfreesboro | TN | — | (14) | 256 | 256 | — | 512 | 6 | 7/31/2013 | 1996 | |||||||||||||||||||||||
| Chappala Mexican Restaurant |
Nampa | ID | — | 473 | 692 | — | 1,165 | 20 | 6/27/2013 | 1998 | ||||||||||||||||||||||||
| Checkers |
Jacksonville | FL | — | (14) | 731 | 1,096 | — | 1,827 | 24 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Checkers |
Tampa | FL | — | 736 | — | — | 736 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Checkers |
Miami | FL | — | 621 | — | — | 621 | — | 7/31/2013 | 1993 | ||||||||||||||||||||||||
| Checkers |
Orlando | FL | — | 1,033 | — | — | 1,033 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Checkers |
Winter Springs | FL | — | 734 | — | — | 734 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Cheddar’s Casual Cafe’ |
Brandon | FL | — | (14) | 860 | 3,071 | — | 3,931 | 88 | 6/27/2013 | 2003 | |||||||||||||||||||||||
| Cheddar’s Casual Cafe’ |
Lubbock | TX | — | (14) | 1,053 | 2,345 | — | 3,398 | 67 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Cheddar’s Casual Cafe’ |
Bolingbrook | IL | — | (14) | 1,344 | 1,760 | — | 3,104 | 50 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Chevys Fresh Mex |
Miami | FL | — | (14) | 1,455 | 783 | — | 2,238 | 19 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Chicago Steak & Lemonade |
Louisville | KY | — | 195 | 18 | — | 213 | 1 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
| Chicago Style Gyros |
Nashville | TN | — | 201 | 134 | — | 335 | 3 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Chili’s |
East Peoria | IL | — | (14) | 1,023 | 2,347 | — | 3,370 | 67 | 6/27/2013 | 2003 | |||||||||||||||||||||||
| Chili’s |
Amarillo | TX | — | 811 | 1,893 | — | 2,704 | 47 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
| China Buffet |
Alvin | TX | — | (14) | 110 | 299 | — | 409 | 9 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| China Buffet |
Angleton | TX | — | (14) | 127 | 272 | — | 399 | 8 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| China King |
Belen | NM | — | (14) | 94 | 94 | — | 188 | 3 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| China One |
Bay City | TX | — | (14) | 229 | 124 | — | 353 | 3 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Church’s Chicken |
Bay Minette | AL | — | (14) | 134 | 757 | — | 891 | 17 | 7/31/2013 | 2003 | |||||||||||||||||||||||
| Church’s Chicken |
Jackson | AL | — | (14) | 127 | 719 | — | 846 | 16 | 7/31/2013 | 1982 | |||||||||||||||||||||||
| Church’s Chicken |
Augusta | GA | — | (14) | 256 | 597 | — | 853 | 13 | 7/31/2013 | 1976 | |||||||||||||||||||||||
F-135
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Church’s Chicken |
Atmore | AL | — | (14) | 144 | 574 | — | 718 | 13 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Church’s Chicken |
Augusta | GA | — | (14) | 178 | 533 | — | 711 | 12 | 7/31/2013 | 1981 | |||||||||||||||||||||||
| Church’s Chicken |
Spartanburg | SC | — | (14) | 350 | 525 | — | 875 | 12 | 7/31/2013 | 1972 | |||||||||||||||||||||||
| Church’s Chicken |
Flomaton | AL | — | (14) | 173 | 518 | — | 691 | 11 | 7/31/2013 | 1981 | |||||||||||||||||||||||
| Church’s Chicken |
Greenville | SC | — | (14) | 325 | 487 | — | 812 | 11 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Church’s Chicken |
Greenville | SC | — | (14) | 254 | 472 | — | 726 | 10 | 7/31/2013 | 2009 | |||||||||||||||||||||||
| Church’s Chicken |
Augusta | GA | — | (14) | 196 | 458 | — | 654 | 10 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Church’s Chicken |
Columbia | SC | — | (14) | 437 | 437 | — | 874 | 10 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Church’s Chicken |
Columbia | SC | — | (14) | 231 | 428 | — | 659 | 9 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Church’s Chicken |
Augusta | GA | — | (14) | 178 | 414 | — | 592 | 9 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Church’s Chicken |
North Charleston | SC | — | (14) | 407 | 407 | — | 814 | 9 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Church’s Chicken |
Orlando | FL | — | (14) | 254 | 380 | — | 634 | 8 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Church’s Chicken |
Greenwood | SC | — | (14) | 188 | 349 | — | 537 | 8 | 7/31/2013 | 2002 | |||||||||||||||||||||||
| Church’s Chicken |
Charleston | SC | — | (14) | 421 | 344 | — | 765 | 8 | 7/31/2013 | 1973 | |||||||||||||||||||||||
| Church’s Chicken |
Greenville | SC | — | (14) | 280 | 342 | — | 622 | 8 | 7/31/2013 | 1970 | |||||||||||||||||||||||
| Church’s Chicken |
North Charleston | SC | — | (14) | 302 | 302 | — | 604 | 7 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Church’s Chicken |
Anderson | SC | — | (14) | 647 | 277 | — | 924 | 6 | 7/31/2013 | 1981 | |||||||||||||||||||||||
| Church’s Chicken |
Spartanburg | SC | — | (14) | 411 | 274 | — | 685 | 6 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Church’s Chicken |
Orangeburg | SC | — | (14) | 407 | 271 | — | 678 | 6 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Church’s Chicken |
Nashville | TN | — | (14) | 186 | 186 | — | 372 | 4 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Church’s Chicken |
Charleston | SC | — | (14) | 500 | 167 | — | 667 | 4 | 7/31/2013 | 1979 | |||||||||||||||||||||||
| Church’s Chicken |
Bowling Green | KY | — | (14) | 100 | 156 | — | 256 | 4 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Citizens Bank |
Milton | MA | — | (14) | 619 | 2,476 | — | 3,095 | 144 | 12/14/2012 | 1968 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (14) | 268 | 2,413 | — | 2,681 | 140 | 12/14/2012 | 1970 | |||||||||||||||||||||||
| Citizens Bank |
Orland Hills | IL | — | (14) | 1,253 | 2,327 | — | 3,580 | 135 | 12/14/2012 | 1988 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (14) | 206 | 1,852 | — | 2,058 | 107 | 12/14/2012 | 1923 | |||||||||||||||||||||||
| Citizens Bank |
Chicago Heights | IL | — | (14) | 182 | 1,637 | — | 1,819 | 80 | 1/24/2013 | 1996 | |||||||||||||||||||||||
| Citizens Bank |
Reading | PA | — | (14) | 269 | 1,524 | — | 1,793 | 61 | 4/12/2013 | 1919 | |||||||||||||||||||||||
| Citizens Bank |
Carnegie | PA | — | (14) | 73 | 1,396 | — | 1,469 | 81 | 12/14/2012 | 1920 | |||||||||||||||||||||||
| Citizens Bank |
Cranston | RI | — | (14) | 411 | 1,234 | — | 1,645 | 72 | 12/14/2012 | 1967 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (14) | 516 | 1,204 | — | 1,720 | 70 | 12/14/2012 | 1970 | |||||||||||||||||||||||
| Citizens Bank |
Butler | PA | — | (14) | 286 | 1,144 | — | 1,430 | 66 | 12/14/2012 | 1966 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (14) | 196 | 1,110 | — | 1,306 | 64 | 12/14/2012 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
Philadelphia | PA | — | (14) | 266 | 1,065 | — | 1,331 | 62 | 12/14/2012 | 1971 | |||||||||||||||||||||||
| Citizens Bank |
Kittanning | PA | — | (14) | 56 | 1,060 | — | 1,116 | 62 | 12/14/2012 | 1889 | |||||||||||||||||||||||
| Citizens Bank |
Pittsburgh | PA | — | (14) | 255 | 1,019 | — | 1,274 | 59 | 12/14/2012 | 1970 | |||||||||||||||||||||||
| Citizens Bank |
Troy | MI | — | (14) | 312 | 935 | — | 1,247 | 54 | 12/14/2012 | 1980 | |||||||||||||||||||||||
| Citizens Bank |
Warrendale | PA | — | (14) | 611 | 916 | — | 1,527 | 53 | 12/14/2012 | 1981 | |||||||||||||||||||||||
| Citizens Bank |
Providence | RI | — | (14) | 300 | 899 | — | 1,199 | 52 | 12/14/2012 | 1960 | |||||||||||||||||||||||
| Citizens Bank |
N. Providence | RI | — | (14) | 223 | 892 | — | 1,115 | 52 | 12/14/2012 | 1971 | |||||||||||||||||||||||
| Citizens Bank |
Pitcairn | PA | — | (14) | 46 | 867 | — | 913 | 50 | 12/14/2012 | 1985 | |||||||||||||||||||||||
| Citizens Bank |
Greensburg | PA | — | (14) | 45 | 861 | — | 906 | 50 | 12/14/2012 | 1957 | |||||||||||||||||||||||
| Citizens Bank |
Westchester | IL | — | (14) | 366 | 853 | — | 1,219 | 38 | 2/22/2013 | 1986 | |||||||||||||||||||||||
F-136
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Citizens Bank |
Ford City | PA | — | (14) | 89 | 802 | — | 891 | 47 | 12/14/2012 | 1975 | |||||||||||||||||||||||
| Citizens Bank |
Reading | PA | — | (14) | 267 | 802 | — | 1,069 | 47 | 12/14/2012 | 1970 | |||||||||||||||||||||||
| Citizens Bank |
Aliquippa | PA | — | (14) | 138 | 782 | — | 920 | 45 | 12/14/2012 | 1953 | |||||||||||||||||||||||
| Citizens Bank |
Wexford | PA | — | (14) | 180 | 719 | — | 899 | 42 | 12/14/2012 | 1975 | |||||||||||||||||||||||
| Citizens Bank |
Farmington | MI | — | (14) | 303 | 707 | — | 1,010 | 41 | 12/14/2012 | 1962 | |||||||||||||||||||||||
| Citizens Bank |
East Greenwich | RI | — | (14) | 227 | 680 | — | 907 | 39 | 12/14/2012 | 1959 | |||||||||||||||||||||||
| Citizens Bank |
Rumford | RI | — | (14) | 352 | 654 | — | 1,006 | 38 | 12/14/2012 | 1977 | |||||||||||||||||||||||
| Citizens Bank |
Highspire | PA | — | (14) | 216 | 649 | — | 865 | 38 | 12/14/2012 | 1974 | |||||||||||||||||||||||
| Citizens Bank |
Camp Hill | PA | — | (14) | 430 | 645 | — | 1,075 | 37 | 12/14/2012 | 1971 | |||||||||||||||||||||||
| Citizens Bank |
Parma Heights | OH | — | (14) | 426 | 638 | — | 1,064 | 37 | 12/14/2012 | 1957 | |||||||||||||||||||||||
| Citizens Bank |
Oil City | PA | — | (14) | 110 | 623 | — | 733 | 36 | 12/14/2012 | 1965 | |||||||||||||||||||||||
| City Buffet |
Alexander City | AL | — | (14) | 292 | 301 | — | 593 | 9 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Cowboy’s Express |
Monticello | AR | — | (14) | 43 | 36 | — | 79 | 1 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Cuco Mexican |
Circleville | OH | — | 149 | 164 | — | 313 | 5 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
| CVS |
Hoover | AL | — | (14) | 1,239 | 2,890 | — | 4,129 | 101 | 5/31/2013 | 2003 | |||||||||||||||||||||||
| CVS |
Columbia | SC | — | — | 2,811 | — | 2,811 | 84 | 7/2/2013 | 2006 | ||||||||||||||||||||||||
| CVS |
New Castle | PA | 1,562 | 412 | 2,337 | — | 2,749 | 164 | 10/31/2012 | 1999 | ||||||||||||||||||||||||
| CVS |
Hardy | VA | — | (14) | 686 | 2,059 | — | 2,745 | 72 | 5/16/2013 | 2005 | |||||||||||||||||||||||
| CVS |
Towanda | PA | — | (14) | — | 877 | — | 877 | 35 | 4/24/2013 | 2003 | |||||||||||||||||||||||
| Dairy Queen |
Woodville | TX | — | (14) | 98 | 65 | — | 163 | 1 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| DaVita Dialysis |
Hiawatha | KS | — | (14) | 69 | 1,302 | — | 1,371 | 36 | 5/30/2013 | 2012 | |||||||||||||||||||||||
| DaVita Dialysis |
Palatka | FL | — | 207 | 1,173 | — | 1,380 | 32 | 6/5/2013 | 2013 | ||||||||||||||||||||||||
| DaVita Dialysis |
Hartsville | SC | — | (14) | 126 | 1,136 | — | 1,262 | 31 | 5/30/2013 | 2013 | |||||||||||||||||||||||
| DaVita Dialysis |
Cincinnati | OH | — | (14) | 219 | 878 | — | 1,097 | 31 | 3/28/2013 | 2008 | |||||||||||||||||||||||
| DaVita Dialysis |
Georgetown | OH | — | (14) | 125 | 706 | — | 831 | 25 | 3/28/2013 | 2009 | |||||||||||||||||||||||
| Denny’s |
Tempe | AZ | — | 1,960 | 1,273 | (2,610 | ) | 623 | 36 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Denny’s |
Phoenix | AZ | — | 825 | 1,237 | — | 2,062 | 31 | 7/31/2013 | 2005 | ||||||||||||||||||||||||
| Denny’s |
Idaho Falls | ID | — | 538 | 1,183 | (1,093 | ) | 628 | 34 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Denny’s |
Mesa | AZ | — | 1,089 | 891 | — | 1,980 | 22 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Denny’s |
Tempe | AZ | — | 1,567 | 844 | — | 2,411 | 21 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Denny’s |
Scottsdale | AZ | — | (14) | 736 | 491 | — | 1,227 | 12 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Denny’s |
Peoria | AZ | — | 310 | 457 | — | 767 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Denny’s |
Marion | OH | — | (14) | 115 | 390 | — | 505 | 11 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Denny’s |
Spartanburg | SC | — | 656 | 353 | — | 1,009 | 9 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
| Denny’s |
Henrietta | NY | — | 361 | 241 | — | 602 | 6 | 7/31/2013 | 1970 | ||||||||||||||||||||||||
| Denny’s |
Bloomington | MN | — | 1,184 | — | — | 1,184 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Dollar General |
Holly Hill | SC | — | (14) | 259 | 2,333 | — | 2,592 | 109 | 3/6/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Presidio | TX | — | (14) | 72 | 1,370 | — | 1,442 | 58 | 3/28/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Savanna | IL | — | (14) | 273 | 1,093 | — | 1,366 | 61 | 12/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Chelyan | WV | — | 273 | 1,092 | — | 1,365 | 15 | 9/27/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Adams | MA | — | 254 | 1,016 | — | 1,270 | 14 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
| Dollar General |
Modena | NY | — | 249 | 996 | — | 1,245 | 14 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
| Dollar General |
Mount Morris | MI | — | (14) | 110 | 988 | — | 1,098 | 46 | 2/27/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Eldon | MO | — | (14) | 52 | 986 | — | 1,038 | 51 | 2/14/2013 | 2013 | |||||||||||||||||||||||
F-137
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
Malden | MO | — | 108 | 974 | — | 1,082 | 23 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Lytle | TX | — | 243 | 971 | — | 1,214 | 9 | 10/30/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
San Antonio | TX | — | (14) | 239 | 956 | — | 1,195 | 45 | 3/11/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
San Juan | TX | — | 169 | 956 | — | 1,125 | 9 | 11/15/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Henry | IL | — | (14) | 104 | 934 | — | 1,038 | 31 | 5/23/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
South Pekin | IL | — | 104 | 933 | — | 1,037 | 22 | 8/14/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
San Antonio | TX | — | (14) | 163 | 926 | — | 1,089 | 48 | 2/14/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Laurie | MO | — | 102 | 918 | — | 1,020 | 9 | 11/15/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Milaca | MN | — | 102 | 916 | — | 1,018 | 13 | 9/24/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Edinburg | TX | — | 102 | 914 | — | 1,016 | 21 | 7/16/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
De Soto | MO | — | (14) | 101 | 912 | — | 1,013 | 47 | 2/14/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Shelbina | MO | — | (14) | 101 | 911 | — | 1,012 | 30 | 5/22/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Kyle | TX | — | 101 | 910 | — | 1,011 | 4 | 12/6/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Eagle Grove | IA | — | 100 | 902 | — | 1,002 | 25 | 7/9/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Farmington | NM | — | 224 | 898 | — | 1,122 | 25 | 7/11/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Mission | TX | — | (14) | 158 | 894 | — | 1,052 | 38 | 3/27/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Adkins | TX | — | (14) | 157 | 889 | — | 1,046 | 50 | 12/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
New Braunfels | TX | — | 156 | 883 | — | 1,039 | 8 | 10/30/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Aurora | MO | — | (14) | 98 | 881 | — | 979 | 41 | 2/28/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Millwood | WV | — | 98 | 881 | — | 979 | 25 | 7/2/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
San Antonio | TX | — | 220 | 880 | — | 1,100 | 25 | 7/9/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Pequot Lakes | MN | — | 155 | 880 | — | 1,035 | 16 | 8/22/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Amarillo | TX | — | 97 | 877 | — | 974 | 21 | 8/13/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Mahomet | IL | — | 292 | 877 | — | 1,169 | 16 | 8/22/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Manistique | MI | — | (14) | 155 | 876 | — | 1,031 | 41 | 2/27/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
West Union | SC | — | 46 | 868 | — | 914 | 24 | 7/3/2013 | 2011 | ||||||||||||||||||||||||
| Dollar General |
Fairbury | IL | — | 96 | 867 | — | 963 | 28 | 6/7/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Amarillo | TX | — | 153 | 866 | — | 1,019 | 20 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Cedar Falls | IA | — | 96 | 862 | — | 958 | 16 | 8/28/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Mercedes | TX | — | 215 | 859 | — | 1,074 | 20 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Ganado | TX | — | 95 | 857 | — | 952 | 20 | 8/13/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
New Braunfels | TX | — | (14) | 95 | 855 | — | 950 | 44 | 2/14/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Manchester | MI | — | (14) | 213 | 853 | — | 1,066 | 40 | 2/27/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Guyton | GA | — | (14) | 213 | 852 | — | 1,065 | 28 | 6/3/2013 | 2011 | |||||||||||||||||||||||
| Dollar General |
Annandale | MN | — | 212 | 848 | — | 1,060 | 20 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Staples | MN | — | 150 | 848 | — | 998 | 16 | 9/4/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Lexington | MO | — | 149 | 846 | — | 995 | 16 | 9/13/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Whitesburg | KY | — | (14) | 211 | 845 | — | 1,056 | 28 | 5/30/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Lubbock | TX | — | (14) | 148 | 841 | — | 989 | 28 | 5/16/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Brookeland | TX | — | 93 | 840 | — | 933 | 20 | 8/15/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Bastrop | LA | — | 148 | 838 | — | 986 | 24 | 7/1/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Rolla | MO | — | 209 | 835 | — | 1,044 | 16 | 8/21/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Lonedell | MO | — | (14) | 208 | 833 | — | 1,041 | 31 | 4/26/2013 | 2013 | |||||||||||||||||||||||
F-138
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Dollar General |
Boling | TX | — | 92 | 831 | — | 923 | 19 | 8/13/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Avinger | TX | — | 44 | 830 | — | 874 | 19 | 8/8/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Roodhouse | IL | — | (14) | 207 | 829 | — | 1,036 | 47 | 12/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Lacy Lakeview | TX | — | (14) | 146 | 826 | — | 972 | 50 | 11/16/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Elkview | WV | — | 274 | 823 | — | 1,097 | 19 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Weslaco | TX | — | 205 | 822 | — | 1,027 | 8 | 10/16/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Buchanan Dam | TX | 562 | 145 | 820 | — | 965 | 58 | 9/28/2012 | 2012 | ||||||||||||||||||||||||
| Dollar General |
McMechen | WV | — | (14) | 91 | 819 | — | 910 | 46 | 1/9/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Sand Springs | OK | — | 43 | 819 | — | 862 | 15 | 9/3/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Joplin | MO | — | 144 | 816 | — | 960 | 8 | 11/12/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
San Antonio | TX | — | (14) | 271 | 812 | — | 1,083 | 27 | 5/23/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Skidmore | TX | — | (14) | 90 | 811 | — | 901 | 42 | 2/14/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Savannah | MO | — | 270 | 811 | — | 1,081 | 15 | 8/23/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Sand Springs | OK | — | 143 | 811 | — | 954 | 15 | 9/3/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Beeville | TX | — | (14) | 90 | 810 | — | 900 | 49 | 11/19/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Roseau | MN | — | 143 | 808 | — | 951 | 8 | 10/30/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
San Benito | TX | — | 202 | 807 | — | 1,009 | 15 | 8/23/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Belton | TX | — | (14) | 89 | 804 | — | 893 | 38 | 2/28/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Hawley | MN | — | 89 | 803 | — | 892 | 8 | 10/16/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
East Bernstadt | KY | — | (14) | 141 | 799 | — | 940 | 26 | 5/30/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Lubbock | TX | — | 199 | 796 | — | 995 | 15 | 8/28/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Wakefield | MI | — | (14) | 88 | 794 | — | 882 | 45 | 12/19/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Romulus | MI | — | (14) | 199 | 794 | — | 993 | 37 | 2/27/2013 | 2011 | |||||||||||||||||||||||
| Dollar General |
Amarillo | TX | — | 198 | 794 | — | 992 | 22 | 7/11/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Sand Springs | OK | — | 198 | 791 | — | 989 | 15 | 9/3/2013 | 2012 | ||||||||||||||||||||||||
| Dollar General |
Billings | MO | — | 139 | 790 | — | 929 | 7 | 10/17/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Caulfield | MO | — | (14) | 139 | 789 | — | 928 | 44 | 12/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
DeSoto | IL | — | (14) | 138 | 784 | — | 922 | 33 | 3/26/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Powhatan Point | WV | — | 138 | 784 | — | 922 | 22 | 7/2/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Cowen | WV | — | (14) | 196 | 783 | — | 979 | 40 | 1/16/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Camden | MI | — | (14) | 138 | 781 | — | 919 | 37 | 2/27/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Berea | KY | — | (14) | 138 | 781 | — | 919 | 26 | 5/30/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Moody | TX | — | 41 | 781 | — | 822 | 26 | 6/11/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Doolittle | MO | — | 137 | 778 | — | 915 | 18 | 8/2/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
San Antonio | TX | — | 333 | 776 | — | 1,109 | 18 | 8/13/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Eubank | KY | — | (14) | 137 | 775 | — | 912 | 25 | 5/30/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Center Point | IA | — | (14) | 136 | 772 | — | 908 | 43 | 12/31/2012 | 2012 | |||||||||||||||||||||||
| Dollar General |
Texarkana | TX | — | 136 | 772 | — | 908 | 7 | 10/25/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Coldiron | KY | — | (14) | 187 | 747 | — | 934 | 24 | 5/30/2013 | 2013 | |||||||||||||||||||||||
| Dollar General |
Diana | TX | — | 186 | 743 | — | 929 | 14 | 8/27/2013 | 2013 | ||||||||||||||||||||||||
| Dollar General |
Rapid City | MI | — | (14) | 179 | 716 | — | 895 | 34 | 2/27/2013 | 2012 | |||||||||||||||||||||||
| Dollar General |
Cedar Creek | TX | — | (14) | 291 | 680 | — | 971 | 41 | 11/16/2012 | 2012 | |||||||||||||||||||||||
| Dragon China Buffet |
Carlsbad | NM | — | (14) | 208 | 104 | — | 312 | 3 | 6/27/2013 | 1995 | |||||||||||||||||||||||
F-139
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| East Supreme Buffet |
Whitehall | PA | — | (14) | 492 | 505 | — | 997 | 14 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Eegee’s |
Tucson | AZ | — | 357 | 436 | — | 793 | 10 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
| El Chico |
Killeen | TX | — | 534 | 992 | — | 1,526 | 25 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
| El Tapatio Mexican Restaurant |
Page | AZ | — | (14) | 170 | 133 | — | 303 | 4 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Family Dollar |
Mount Vernon | IL | — | 117 | 1,050 | — | 1,167 | 30 | 7/11/2013 | 2012 | ||||||||||||||||||||||||
| Family Dollar |
Crosby | MN | — | 49 | 928 | — | 977 | 26 | 7/11/2013 | 1985 | ||||||||||||||||||||||||
| Family Dollar |
Toledo | OH | — | 226 | 905 | — | 1,131 | 25 | 7/11/2013 | 1942 | ||||||||||||||||||||||||
| Family Dollar |
Carlin | NV | — | 99 | 895 | — | 994 | 17 | 9/13/2013 | 2012 | ||||||||||||||||||||||||
| Family Dollar |
Cold Springs | NV | — | 217 | 869 | — | 1,086 | 16 | 9/13/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Des Moines | IA | — | 152 | 863 | — | 1,015 | 16 | 8/30/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Cincinnatus | NY | — | 287 | 862 | — | 1,149 | — | 12/30/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Etoile | TX | — | 45 | 850 | — | 895 | 20 | 8/6/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Mountain View | WY | — | 44 | 838 | — | 882 | 16 | 9/13/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Markesan | WI | — | 92 | 831 | — | 923 | 4 | 12/12/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Thorp | WI | — | 90 | 810 | — | 900 | 15 | 8/30/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Webster | WI | — | 43 | 808 | — | 851 | 23 | 7/11/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Oakwood | TX | — | 133 | 752 | — | 885 | 4 | 11/20/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Clarendon | TX | — | 83 | 749 | — | 832 | 11 | 9/17/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Gretna | VA | — | 131 | 744 | — | 875 | 21 | 7/2/2013 | 2012 | ||||||||||||||||||||||||
| Family Dollar |
Somerville | TX | — | (14) | 131 | 743 | — | 874 | 42 | 12/31/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Lovelady | TX | — | (14) | 82 | 740 | — | 822 | 31 | 3/27/2013 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Birch Run | MI | — | 81 | 729 | — | 810 | 20 | 7/11/2013 | 1950 | ||||||||||||||||||||||||
| Family Dollar |
Hoosick Falls | NY | — | (14) | 181 | 724 | — | 905 | 27 | 4/26/2013 | 2013 | |||||||||||||||||||||||
| Family Dollar |
Marble Hill | MO | — | 38 | 719 | — | 757 | 13 | 8/29/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Houston | TX | — | (14) | 174 | 696 | — | 870 | 26 | 4/26/2013 | 1985 | |||||||||||||||||||||||
| Family Dollar |
University Park | IL | — | 295 | 688 | — | 983 | 6 | 10/29/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Centerville | TX | — | 226 | 679 | — | 905 | 13 | 9/10/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Alderson | WV | — | 166 | 663 | — | 829 | 19 | 7/11/2013 | 2012 | ||||||||||||||||||||||||
| Family Dollar |
Torrington | WY | — | (14) | 72 | 645 | — | 717 | 24 | 5/9/2013 | 2007 | |||||||||||||||||||||||
| Family Dollar |
Tustin | MI | — | (14) | 33 | 633 | — | 666 | 36 | 12/18/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Custer | SD | — | 32 | 617 | — | 649 | 20 | 6/14/2013 | 2006 | ||||||||||||||||||||||||
| Family Dollar |
International Falls | MN | — | 32 | 608 | — | 640 | 9 | 9/30/2013 | 1966 | ||||||||||||||||||||||||
| Family Dollar |
Barryton | MI | — | (14) | 32 | 599 | — | 631 | 34 | 12/18/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Pulaski | IL | — | (14) | 31 | 588 | — | 619 | 33 | 12/31/2012 | 2012 | |||||||||||||||||||||||
| Family Dollar |
Lombard | IL | — | 1,008 | 543 | — | 1,551 | 3 | 12/12/2013 | 2013 | ||||||||||||||||||||||||
| Family Dollar |
Rushville | NE | — | (14) | 125 | 499 | — | 624 | 19 | 4/26/2013 | 2007 | |||||||||||||||||||||||
| Famous Dave’s |
Eden Prairie | MN | — | (14) | 824 | 549 | — | 1,373 | 14 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Fazoli’s |
Carmel | IN | — | (14) | 427 | 522 | — | 949 | 11 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Fazoli’s |
Appleton | WI | — | 705 | — | — | 705 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| FedEx |
Tinicum | PA | — | — | 32,170 | — | 32,170 | 818 | 8/15/2013 | 2013 | ||||||||||||||||||||||||
| FedEx |
Lebanon | OH | — | 1,492 | 8,452 | — | 9,944 | 172 | 8/26/2013 | 2013 | ||||||||||||||||||||||||
| FedEx |
Albany | GA | — | 195 | 3,711 | — | 3,906 | 57 | 10/11/2013 | 2013 | ||||||||||||||||||||||||
| FedEx |
London | KY | — | 350 | 3,151 | — | 3,501 | 48 | 10/11/2013 | 2013 | ||||||||||||||||||||||||
F-140
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| FedEx |
Waterloo | IA | — | (14) | 152 | 2,882 | — | 3,034 | 132 | 3/22/2013 | 2012 | |||||||||||||||||||||||
| FedEx |
Rapid City | SD | — | (14) | 305 | 2,741 | — | 3,046 | 167 | 12/21/2012 | 2012 | |||||||||||||||||||||||
| FedEx |
Ottumwa | IA | — | (14) | 134 | 2,552 | — | 2,686 | 182 | 10/30/2012 | 2012 | |||||||||||||||||||||||
| FedEx |
Independence | KS | — | (14) | 114 | 2,166 | — | 2,280 | 154 | 10/30/2012 | 2012 | |||||||||||||||||||||||
| FedEx |
Des Moines | IA | — | (14) | 733 | 1,361 | — | 2,094 | 55 | 4/18/2013 | 1986 | |||||||||||||||||||||||
| FedEx |
Riverton | WY | — | 431 | 1,006 | — | 1,437 | 10 | 10/23/2013 | 2013 | ||||||||||||||||||||||||
| FedEx |
Homewood | AL | — | 522 | 779 | — | 1,301 | 22 | 6/27/2013 | 2000 | ||||||||||||||||||||||||
| Flip It Bakery & Deli |
Washington | DC | — | (14) | 338 | 84 | — | 422 | 2 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Fresenius |
Fayetteville | NC | — | 178 | 3,379 | — | 3,557 | 79 | 6/28/2013 | 1999 | ||||||||||||||||||||||||
| Fresenius |
Clinton | NC | — | 139 | 2,647 | — | 2,786 | 62 | 6/28/2013 | 2003 | ||||||||||||||||||||||||
| Fresenius |
Foley | AL | — | 287 | 2,580 | — | 2,867 | 61 | 7/8/2013 | 2009 | ||||||||||||||||||||||||
| Fresenius |
Fayetteville | NC | — | 134 | 2,551 | — | 2,685 | 60 | 6/28/2013 | 2004 | ||||||||||||||||||||||||
| Fresenius |
Mobile | AL | — | 278 | 2,505 | — | 2,783 | 59 | 7/8/2013 | 1987 | ||||||||||||||||||||||||
| Fresenius |
Fayetteville | NC | — | 420 | 2,379 | — | 2,799 | 56 | 6/28/2013 | 1998 | ||||||||||||||||||||||||
| Fresenius |
Lumberton | NC | — | 117 | 2,216 | — | 2,333 | 52 | 6/28/2013 | 1986 | ||||||||||||||||||||||||
| Fresenius |
DeFuniak Springs | FL | — | 115 | 2,180 | — | 2,295 | 51 | 7/8/2013 | 2008 | ||||||||||||||||||||||||
| Fresenius |
Fairhope | AL | — | — | 2,035 | — | 2,035 | 48 | 7/8/2013 | 2006 | ||||||||||||||||||||||||
| Fresenius |
Red Springs | NC | — | 101 | 1,913 | — | 2,014 | 45 | 6/28/2013 | 2000 | ||||||||||||||||||||||||
| Fresenius |
Fairmont | NC | — | 201 | 1,812 | — | 2,013 | 43 | 6/28/2013 | 2002 | ||||||||||||||||||||||||
| Fresenius |
Pembroke | NC | — | 81 | 1,547 | — | 1,628 | 36 | 6/28/2013 | 2009 | ||||||||||||||||||||||||
| Fresenius |
Roseboro | NC | — | 74 | 1,404 | — | 1,478 | 33 | 6/28/2013 | 2011 | ||||||||||||||||||||||||
| Fresenius |
St. Pauls | NC | — | 73 | 1,389 | — | 1,462 | 33 | 6/28/2013 | 2008 | ||||||||||||||||||||||||
| Furr’s |
Garland | TX | — | (14) | 1,529 | 3,715 | — | 5,244 | 107 | 6/27/2013 | 2008 | |||||||||||||||||||||||
| Golden Corral |
Surprise | AZ | — | (14) | 1,258 | 4,068 | — | 5,326 | 117 | 6/27/2013 | 2007 | |||||||||||||||||||||||
| Golden Corral |
Harlingen | TX | — | 832 | 3,037 | — | 3,869 | 87 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
| Golden Corral |
Texarkana | TX | — | 758 | 3,031 | — | 3,789 | 67 | 7/31/2013 | 2001 | ||||||||||||||||||||||||
| Golden Corral |
Gilbert | AZ | — | (14) | 871 | 2,910 | — | 3,781 | 83 | 6/27/2013 | 2006 | |||||||||||||||||||||||
| Golden Corral |
Jacksonville | FL | — | 1,721 | 2,629 | — | 4,350 | 75 | 6/27/2013 | 1999 | ||||||||||||||||||||||||
| Golden Corral |
Houston | TX | — | 1,147 | 2,447 | — | 3,594 | 70 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
| Golden Corral |
Stockbridge | GA | — | 422 | 2,391 | — | 2,813 | 53 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
| Golden Corral |
Brownsville | TX | — | 604 | 2,302 | — | 2,906 | 66 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
| Golden Corral |
Norman | OK | — | 345 | 2,107 | — | 2,452 | 60 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
| Golden Corral |
Zanesville | OH | — | (14) | 487 | 2,030 | — | 2,517 | 58 | 6/27/2013 | 2002 | |||||||||||||||||||||||
| Golden Corral |
Goodyear | AZ | — | (14) | 686 | 1,939 | — | 2,625 | 56 | 6/27/2013 | 2006 | |||||||||||||||||||||||
| Golden Corral |
Baytown | TX | — | (14) | 596 | 1,788 | — | 2,384 | 39 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Golden Corral |
College Station | TX | — | 1,265 | 1,718 | — | 2,983 | 49 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
| Golden Corral |
Midwest City | OK | — | 1,175 | 1,708 | — | 2,883 | 49 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
| Golden Corral |
Wichita | KS | — | (14) | 560 | 1,306 | — | 1,866 | 29 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Golden Corral |
Jacksonville | FL | — | 1,033 | 1,084 | — | 2,117 | 31 | 6/27/2013 | 1997 | ||||||||||||||||||||||||
| Golden Corral |
Palatka | FL | — | (14) | 853 | 1,048 | — | 1,901 | 30 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Golden Corral |
Emporia | KS | — | (14) | 403 | 941 | — | 1,344 | 21 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Golden Corral |
Roswell | NM | — | 203 | 600 | — | 803 | 17 | 6/27/2013 | 2000 | ||||||||||||||||||||||||
| Golden Corral |
Rock Springs | WY | — | (14) | 354 | 90 | — | 444 | 3 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Grandy’s |
Abilene | TX | — | 803 | — | — | 803 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Arlington | TX | — | 734 | — | — | 734 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Carrollton | TX | — | 773 | — | — | 773 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Carrollton | TX | — | 847 | — | — | 847 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Fort Worth | TX | — | 777 | — | — | 777 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Fort Worth | TX | — | 811 | — | — | 811 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Garland | TX | — | 623 | — | — | 623 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Garland | TX | — | 859 | — | — | 859 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Grapevine | TX | — | 618 | — | — | 618 | — | 6/27/2013 | 1988 | ||||||||||||||||||||||||
| Grandy’s |
Irving | TX | — | 871 | — | — | 871 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
F-141
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Grandy’s |
Lancaster | TX | — | 780 | — | — | 780 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Lubbock | TX | — | 694 | — | — | 694 | — | 6/27/2013 | 1979 | ||||||||||||||||||||||||
| Grandy’s |
Mesquite | TX | — | 871 | — | — | 871 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Plano | TX | — | 871 | — | — | 871 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Dallas | TX | — | 725 | — | — | 725 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Dallas | TX | — | 357 | — | — | 357 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Grandy’s |
Greenville | TX | — | 847 | — | — | 847 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Great Clips |
Lombard | IL | — | 84 | 100 | — | 184 | 3 | 6/27/2013 | 1973 | ||||||||||||||||||||||||
| Hardee’s |
Jacksonville | FL | — | 875 | 583 | — | 1,458 | 13 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
| Hardee’s |
Williston | FL | — | (14) | 395 | 553 | — | 948 | 15 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Hardee’s |
Canton | GA | — | 488 | 539 | — | 1,027 | 15 | 6/27/2013 | 1983 | ||||||||||||||||||||||||
| Hardee’s |
Bremen | GA | — | (14) | 129 | 518 | — | 647 | 11 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Hardee’s |
Springfield | TN | — | (14) | 343 | 515 | — | 858 | 11 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Hardee’s |
Akron | OH | — | (14) | 207 | 483 | — | 690 | 11 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Hardee’s |
Mount Vernon | IA | — | 320 | 480 | — | 800 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Hardee’s |
Belleville | IL | — | 269 | 467 | — | 736 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Hardee’s |
Seville | OH | — | (14) | 151 | 454 | — | 605 | 10 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Hardee’s |
Pace | FL | — | (14) | 419 | 435 | — | 854 | 12 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Hardee’s |
Morristown | TN | — | (14) | 353 | 431 | — | 784 | 9 | 7/31/2013 | 1991 | |||||||||||||||||||||||
| Hardee’s |
Erwin | TN | — | (14) | 346 | 406 | — | 752 | 11 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Hardee’s |
Jefferson | OH | — | (14) | 242 | 363 | — | 605 | 8 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Hardee’s |
Sparta | NC | — | (14) | 372 | 346 | — | 718 | 10 | 6/27/2013 | 1983 | |||||||||||||||||||||||
| Hardee’s |
Minerva | OH | — | (14) | 214 | 321 | — | 535 | 7 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Hardee’s |
Beaver | WV | — | 217 | 318 | — | 535 | 9 | 6/27/2013 | 1983 | ||||||||||||||||||||||||
| Harley Davidson |
Round Rock | TX | — | (14) | 1,688 | 9,563 | — | 11,251 | 237 | 7/31/2013 | 2008 | |||||||||||||||||||||||
| Harvey’s Grill & Bar |
Saginaw | MI | — | (14) | 230 | 647 | — | 877 | 19 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Hayden’s Grill & Bar |
Canton | MI | — | (14) | 160 | 693 | — | 853 | 20 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Hooley House Sports Pub & Grille |
Brooklyn | OH | — | (14) | 291 | 321 | — | 612 | 9 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| IHOP |
Bossier City | LA | — | (14) | 541 | 1,342 | — | 1,883 | 38 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| IHOP |
Baytown | TX | — | (14) | 698 | 1,297 | — | 1,995 | 29 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| IHOP |
Auburn | AL | — | (14) | 1,111 | 933 | — | 2,044 | 27 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| IHOP |
Warren | MI | — | (14) | 605 | 830 | — | 1,435 | 24 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| IHOP |
Corpus Christi | TX | — | 1,176 | — | — | 1,176 | — | 7/31/2013 | N/A | ||||||||||||||||||||||||
| Indi’s Fast Food |
Louisville | KY | — | 292 | 157 | — | 449 | 3 | 7/31/2013 | 1972 | ||||||||||||||||||||||||
| Iron Chef Super Buffet |
Kissimmee | FL | — | (14) | 297 | 127 | — | 424 | 3 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Italian Villa, The |
Grand Island | NY | — | (14) | 38 | 101 | — | 139 | 3 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Jack in the Box |
Cleburne | TX | — | (14) | 291 | 1,647 | — | 1,938 | 36 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Jack in the Box |
Walker | LA | — | (14) | 543 | 1,196 | — | 1,739 | 33 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Jack in the Box |
Sacramento | CA | — | 476 | 1,110 | — | 1,586 | 24 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
| Jack in the Box |
Texas City | TX | — | 454 | 844 | — | 1,298 | 23 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
| Jack in the Box |
Missouri City | TX | — | (14) | 451 | 837 | — | 1,288 | 18 | 7/31/2013 | 1991 | |||||||||||||||||||||||
| Johnny Carino’s |
Houston | TX | — | (14) | 1,328 | 2,656 | — | 3,984 | 76 | 6/27/2013 | 2002 | |||||||||||||||||||||||
| Johnny Carino’s |
Rogers | AR | — | (14) | 997 | 2,540 | — | 3,537 | 73 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Johnny Carino’s |
Midland | TX | — | (14) | 998 | 2,329 | — | 3,327 | 58 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Johnny Carino’s |
Grand Prairie | TX | — | (14) | 997 | 2,327 | — | 3,324 | 58 | 7/31/2013 | 2001 | |||||||||||||||||||||||
F-142
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Johnny Carino’s |
Amarillo | TX | — | (14) | 993 | 2,317 | — | 3,310 | 57 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| Johnny Carino’s |
San Angelo | TX | — | (14) | 769 | 2,306 | — | 3,075 | 57 | 7/31/2013 | 2005 | |||||||||||||||||||||||
| Johnny Carino’s |
Muncie | IN | — | 540 | 2,160 | — | 2,700 | 41 | 8/30/2013 | 2003 | ||||||||||||||||||||||||
| Johnny Carino’s |
Columbus | IN | — | 809 | 1,888 | — | 2,697 | 36 | 8/30/2013 | 2004 | ||||||||||||||||||||||||
| Kentucky Fried Chicken |
Matteson | IL | — | (14) | 399 | 2,259 | — | 2,658 | 50 | 7/31/2013 | 1973 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Decatur | IL | — | (14) | 276 | 1,619 | — | 1,895 | 45 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Homewood | IL | — | (14) | 660 | 1,541 | — | 2,201 | 34 | 7/31/2013 | 1992 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Bloomington | IL | — | (14) | 576 | 1,466 | — | 2,042 | 41 | 6/27/2013 | 2004 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Greenwood | IN | — | (14) | 339 | 1,405 | — | 1,744 | 39 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Hazel Crest | IL | — | (14) | 153 | 1,376 | — | 1,529 | 30 | 7/31/2013 | 1982 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Franklin | IN | — | (14) | 205 | 1,375 | — | 1,580 | 38 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Lebanon | IN | — | (14) | 337 | 1,348 | — | 1,685 | 30 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Springfield | IL | — | (14) | 212 | 1,203 | — | 1,415 | 26 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Rockford | IL | — | (14) | 201 | 1,142 | — | 1,343 | 25 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
New Boston | TX | — | (14) | 125 | 1,127 | — | 1,252 | 25 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Granite City | IL | — | (14) | 102 | 1,083 | — | 1,185 | 30 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Crawfordsville | IN | — | (14) | 159 | 1,068 | — | 1,227 | 30 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Springfield | IL | — | (14) | 267 | 1,068 | — | 1,335 | 23 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Oak Forest | IL | — | (14) | 185 | 1,047 | — | 1,232 | 23 | 7/31/2013 | 1955 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Green Bay | WI | — | (14) | 208 | 1,022 | — | 1,230 | 28 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Mattoon | IL | — | (14) | 113 | 1,019 | — | 1,132 | 22 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Milwaukee | WI | — | (14) | 197 | 975 | — | 1,172 | 27 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Elmhurst | IL | — | (14) | 242 | 969 | — | 1,211 | 21 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Westchester | IL | — | (14) | 238 | 952 | — | 1,190 | 21 | 7/31/2013 | 1973 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Mount Pleasant | TX | — | (14) | 106 | 952 | — | 1,058 | 21 | 7/31/2013 | 1992 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Dolton | IL | — | (14) | 167 | 946 | — | 1,113 | 21 | 7/31/2013 | 1975 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Tipton | IN | — | (14) | 104 | 936 | — | 1,040 | 21 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Crawfordsville | IN | — | (14) | 234 | 934 | — | 1,168 | 21 | 7/31/2013 | 1991 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Milwaukee | WI | — | (14) | 138 | 924 | — | 1,062 | 26 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Germantown | WI | — | (14) | 368 | 913 | — | 1,281 | 25 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Lafayette | IN | — | (14) | 304 | 912 | — | 1,216 | 20 | 7/31/2013 | 1990 | |||||||||||||||||||||||
F-143
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Kentucky Fried Chicken |
Frankfort | IN | — | (14) | 99 | 893 | — | 992 | 20 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Hartford City | IN | — | (14) | 99 | 889 | — | 988 | 20 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Kokomo | IN | — | (14) | 199 | 798 | — | 997 | 18 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Milwaukee | WI | — | (14) | 281 | 795 | — | 1,076 | 22 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Milwaukee | WI | — | (14) | 396 | 773 | — | 1,169 | 21 | 6/27/2013 | 1991 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Shreveport | LA | — | (14) | 616 | 753 | — | 1,369 | 17 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Milwaukee | WI | — | (14) | 89 | 750 | — | 839 | 21 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
West Bend | WI | — | (14) | 185 | 705 | — | 890 | 20 | 6/27/2013 | 1972 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
South Milwaukee | WI | — | (14) | 197 | 695 | — | 892 | 19 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Allison Park | PA | — | (14) | 246 | 683 | — | 929 | 19 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Warren | OH | — | (14) | 426 | 640 | — | 1,066 | 14 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Minden | LA | — | (14) | 274 | 639 | — | 913 | 14 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Texarkana | AR | — | (14) | 111 | 630 | — | 741 | 14 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Wauwatosa | WI | — | (14) | 135 | 615 | — | 750 | 17 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Greenville | TX | — | 119 | 585 | — | 704 | 16 | 6/27/2013 | 1988 | ||||||||||||||||||||||||
| Kentucky Fried Chicken |
Green Bay | WI | — | (14) | 470 | 574 | — | 1,044 | 13 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Noblesville | IN | — | (14) | 363 | 545 | — | 908 | 12 | 7/31/2013 | 2005 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Shreveport | LA | — | (14) | 352 | 528 | — | 880 | 12 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Shreveport | LA | — | (14) | 427 | 522 | — | 949 | 11 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Shreveport | LA | — | (14) | 343 | 514 | — | 857 | 11 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
New Kensington | PA | — | (14) | 324 | 487 | — | 811 | 11 | 7/31/2013 | 1967 | |||||||||||||||||||||||
| Kentucky Fried Chicken |
Burnsville | MN | — | 267 | 267 | — | 534 | 6 | 7/31/2013 | 1988 | ||||||||||||||||||||||||
| Kentucky Fried Chicken / A&W |
Charleston | IL | — | (14) | 282 | 1,514 | — | 1,796 | 42 | 6/27/2013 | 2003 | |||||||||||||||||||||||
| Kentucky Fried Chicken / Taco Bell |
Canonsburg | PA | — | (14) | 176 | 1,586 | — | 1,762 | 35 | 7/31/2013 | 1996 | |||||||||||||||||||||||
| Kentucky Fried Chicken / Taco Bell |
Dunkirk | NY | — | (14) | 800 | 978 | — | 1,778 | 21 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Kentucky Fried Chicken / Taco Bell |
Geneva | NY | — | (14) | 569 | 695 | — | 1,264 | 15 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Kettle Restaurant |
College Station | TX | — | 225 | 249 | — | 474 | 7 | 6/27/2013 | 1981 | ||||||||||||||||||||||||
| Kettle Restaurant |
San Antonio | TX | — | 168 | 206 | — | 374 | 5 | 7/31/2013 | 1965 | ||||||||||||||||||||||||
| Krystal |
Memphis | TN | — | (14) | 257 | 1,029 | — | 1,286 | 48 | 4/23/2013 | 1975 | |||||||||||||||||||||||
| Krystal |
Huntsville | AL | — | (14) | 348 | 811 | — | 1,159 | 38 | 4/23/2013 | 1960 | |||||||||||||||||||||||
| Krystal |
Memphis | TN | — | (14) | 181 | 723 | — | 904 | 34 | 4/23/2013 | 1972 | |||||||||||||||||||||||
| Krystal |
Huntsville | AL | — | 305 | 712 | — | 1,017 | 29 | 6/10/2013 | 1985 | ||||||||||||||||||||||||
| Krystal |
Lawrenceburg | TN | — | (14) | 304 | 709 | — | 1,013 | 33 | 4/23/2013 | 1980 | |||||||||||||||||||||||
| Krystal |
Murfreesboro | TN | — | (14) | 465 | 698 | — | 1,163 | 33 | 4/23/2013 | 2008 | |||||||||||||||||||||||
| Krystal |
Valley | AL | — | (14) | 297 | 694 | — | 991 | 33 | 4/23/2013 | 1979 | |||||||||||||||||||||||
| Krystal |
Chattanooga | TN | — | (14) | 440 | 659 | — | 1,099 | 31 | 4/23/2013 | 1983 | |||||||||||||||||||||||
| Krystal |
Huntsville | AL | — | (14) | 352 | 654 | — | 1,006 | 31 | 4/23/2013 | 1971 | |||||||||||||||||||||||
| Krystal |
Corinth | MS | — | (14) | 279 | 652 | — | 931 | 31 | 4/23/2013 | 2007 | |||||||||||||||||||||||
| Krystal |
Montgomery | AL | — | (14) | 502 | 613 | — | 1,115 | 29 | 4/23/2013 | 1962 | |||||||||||||||||||||||
F-144
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Krystal |
Montgomery | AL | — | (14) | 303 | 562 | — | 865 | 26 | 4/23/2013 | 1962 | |||||||||||||||||||||||
| Krystal |
Vestavia Hills | AL | — | (14) | 342 | 513 | — | 855 | 24 | 4/23/2013 | 1979 | |||||||||||||||||||||||
| Kum & Go |
Gillette | WY | — | 878 | 2,048 | — | 2,926 | 58 | 6/28/2013 | 2013 | ||||||||||||||||||||||||
| Lee’s Famous Recipe Chicken |
Saint Louis | MO | — | 107 | 874 | — | 981 | 24 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
| Lee’s Famous Recipe Chicken |
Saint Ann | MO | — | 187 | 571 | — | 758 | 16 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
| Lee’s Famous Recipe Chicken |
Florissant | MO | — | 306 | 560 | — | 866 | 16 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
| Logan’s Roadhouse |
Mt. Juliet | TN | — | (14) | 1,366 | 2,538 | — | 3,904 | 63 | 7/31/2013 | 2006 | |||||||||||||||||||||||
| Logan’s Roadhouse |
Owasso | OK | — | (14) | 1,449 | 2,173 | — | 3,622 | 54 | 7/31/2013 | 2006 | |||||||||||||||||||||||
| Long John Silver’s |
Marion | IL | — | (14) | 305 | 1,059 | — | 1,364 | 29 | 6/27/2013 | 1983 | |||||||||||||||||||||||
| Long John Silver’s |
Litchfield | IL | — | (14) | 194 | 996 | — | 1,190 | 28 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Long John Silver’s |
West Frankfort | IL | — | (14) | 244 | 996 | — | 1,240 | 28 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Long John Silver’s |
Collinsville | IL | — | (14) | 220 | 940 | — | 1,160 | 26 | 6/27/2013 | 2006 | |||||||||||||||||||||||
| Long John Silver’s |
Merced | CA | — | (14) | 174 | 695 | — | 869 | 15 | 7/31/2013 | 1982 | |||||||||||||||||||||||
| Long John Silver’s |
Asheville | NC | — | (14) | 586 | 693 | — | 1,279 | 19 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Long John Silver’s |
Albuquerque | NM | — | 227 | 680 | — | 907 | 15 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
| Long John Silver’s |
Penn Hills | PA | — | 438 | 656 | — | 1,094 | 14 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
| Long John Silver’s |
Hays | KS | — | (14) | 160 | 624 | — | 784 | 17 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Long John Silver’s |
Las Cruces | NM | — | (14) | 242 | 565 | — | 807 | 12 | 7/31/2013 | 1975 | |||||||||||||||||||||||
| Long John Silver’s |
Arlington | TX | — | 365 | 537 | — | 902 | 15 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
| Long John Silver’s |
Garden City | KS | — | (14) | 120 | 530 | — | 650 | 15 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Long John Silver’s |
Fairview Heights | IL | — | (14) | 258 | 525 | — | 783 | 15 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Long John Silver’s |
Mount Carmel | IL | — | (14) | 105 | 484 | — | 589 | 13 | 6/27/2013 | 1977 | |||||||||||||||||||||||
| Long John Silver’s |
Vandalia | IL | — | (14) | 101 | 484 | — | 585 | 13 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Long John Silver’s |
Jacksonville | IL | — | (14) | 171 | 431 | — | 602 | 12 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Long John Silver’s |
Cleburne | TX | — | 205 | 380 | — | 585 | 8 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Long John Silver’s |
Clarksville | TN | — | 339 | 339 | — | 678 | 7 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
| Long John Silver’s |
Jackson | TN | — | (14) | 264 | 323 | — | 587 | 7 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Long John Silver’s |
Wood River | IL | — | (14) | 251 | 314 | — | 565 | 9 | 6/27/2013 | 1975 | |||||||||||||||||||||||
| Long John Silver’s |
Fairborn | OH | — | (14) | 103 | 300 | — | 403 | 8 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Long John Silver’s |
Englewood | OH | — | (14) | 547 | — | — | 547 | — | 6/27/2013 | 1974 | |||||||||||||||||||||||
| Long John Silver’s / A&W |
Kansas City | MO | — | 389 | 722 | — | 1,111 | 16 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
| Long John Silver’s / A&W |
Houston | TX | — | 480 | 495 | — | 975 | 14 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
| Long John Silver’s / A&W |
Austin | TX | — | (14) | 459 | 477 | — | 936 | 13 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Long John Silver’s / A&W |
Murfreesboro | TN | — | 219 | 219 | — | 438 | 5 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Long John Silver’s / KFC |
Green Bay | WI | — | (14) | 748 | 563 | — | 1,311 | 16 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Los Tios Mexican Restaurant |
Dalton | OH | — | (14) | 18 | 30 | — | 48 | 1 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Lowe’s |
Windham | ME | — | (14) | 12,640 | — | — | 12,640 | — | 6/3/2013 | 2006 | |||||||||||||||||||||||
| Mattress Firm |
Evansville | IN | — | (14) | 117 | 2,227 | — | 2,344 | 115 | 2/11/2013 | 2012 | |||||||||||||||||||||||
| Mattress Firm |
Spokane | WA | — | (14) | 409 | 1,685 | — | 2,094 | 72 | 4/4/2013 | 2013 | |||||||||||||||||||||||
| Mattress Firm |
Spokane | WA | — | (14) | 511 | 1,582 | — | 2,093 | 68 | 3/28/2013 | 2013 | |||||||||||||||||||||||
| Mattress Firm |
Mishawaka | IN | — | 375 | 1,500 | — | 1,875 | 35 | 7/30/2013 | 2013 | ||||||||||||||||||||||||
| Mattress Firm |
Tallahassee | FL | — | (14) | 924 | 1,386 | — | 2,310 | 52 | 5/14/2013 | 2013 | |||||||||||||||||||||||
F-145
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Mattress Firm |
Bountiful | UT | — | (14) | 736 | 1,367 | — | 2,103 | 77 | 12/31/2012 | 2012 | |||||||||||||||||||||||
| Mattress Firm |
Destin | FL | — | 693 | 1,287 | — | 1,980 | 42 | 6/5/2013 | 2013 | ||||||||||||||||||||||||
| Mattress Firm |
Rogers | AR | — | (14) | 321 | 1,284 | — | 1,605 | 66 | 2/6/2013 | 2012 | |||||||||||||||||||||||
| Mattress Firm |
Wilmington | NC | — | 412 | 1,257 | — | 1,669 | 53 | 3/29/2013 | 2013 | ||||||||||||||||||||||||
| Mattress Firm |
Lafayette | LA | — | (14) | — | 1,251 | — | 1,251 | 47 | 5/2/2013 | 2013 | |||||||||||||||||||||||
| Mattress Firm |
Daphne | AL | — | 528 | 1,233 | — | 1,761 | 17 | 10/1/2013 | 2013 | ||||||||||||||||||||||||
| Mattress Firm |
Dothan | AL | — | (14) | 406 | 1,217 | — | 1,623 | 46 | 5/14/2013 | 2013 | |||||||||||||||||||||||
| Mattress Firm |
Knoxville | TN | — | (14) | 586 | 1,088 | — | 1,674 | 46 | 3/19/2013 | 2012 | |||||||||||||||||||||||
| Mattress Firm |
Greenville | NC | — | (14) | 1,085 | 1,085 | — | 2,170 | 66 | 12/12/2012 | 2012 | |||||||||||||||||||||||
| Mattress Firm |
Bowling Green | KY | — | (14) | 648 | 973 | — | 1,621 | 36 | 4/25/2013 | 2012 | |||||||||||||||||||||||
| McDonald’s |
Scotland Neck | NC | — | (14) | 320 | — | — | 320 | — | 6/27/2013 | N/A | |||||||||||||||||||||||
| Mezcal Mexican Restaurant |
Grafton | OH | — | 64 | 191 | — | 255 | 5 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
| Monro Muffler |
Lewiston | ME | — | (14) | 279 | 1,115 | — | 1,394 | 43 | 5/10/2013 | 1976 | |||||||||||||||||||||||
| Monterey’s Tex Mex |
Tulsa | OK | — | 135 | 406 | — | 541 | 10 | 7/31/2013 | 2001 | ||||||||||||||||||||||||
| Native New Yorker |
Glendale | AZ | — | (14) | 254 | 420 | — | 674 | 12 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| O’Charley’s |
Dalton | GA | — | (14) | 406 | 1,817 | — | 2,223 | 52 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| O’Charley’s |
Tucker | GA | — | (14) | 1,037 | 866 | — | 1,903 | 25 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Parking Lot |
Kingston | PA | — | (14) | 29 | — | — | 29 | — | 6/27/2013 | N/A | |||||||||||||||||||||||
| Pizza Hut |
Chester | VA | — | (14) | 473 | 1,104 | — | 1,577 | 24 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Pizza Hut |
Ashland | VA | — | (14) | 589 | 1,093 | — | 1,682 | 24 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Pizza Hut |
Amarillo | TX | — | (14) | 339 | 1,016 | — | 1,355 | 22 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Pizza Hut |
Amarillo | TX | — | (14) | 254 | 1,015 | — | 1,269 | 22 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Pizza Hut |
Fort Stockton | TX | — | (14) | 252 | 1,007 | — | 1,259 | 22 | 7/31/2013 | 2008 | |||||||||||||||||||||||
| Pizza Hut |
Christiansburg | VA | — | (14) | 494 | 918 | — | 1,412 | 20 | 7/31/2013 | 1982 | |||||||||||||||||||||||
| Pizza Hut |
Odessa | TX | — | (14) | 588 | 882 | — | 1,470 | 19 | 7/31/2013 | 1972 | |||||||||||||||||||||||
| Pizza Hut |
Hopewell | VA | — | (14) | 707 | 864 | — | 1,571 | 19 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Pizza Hut |
Clifton Forge | VA | — | (14) | 287 | 861 | — | 1,148 | 19 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Pizza Hut |
Odessa | TX | — | (14) | 456 | 847 | — | 1,303 | 19 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Pizza Hut |
Richmond | VA | — | (14) | 666 | 814 | — | 1,480 | 18 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Pizza Hut |
Odessa | TX | — | (14) | 627 | 766 | — | 1,393 | 17 | 7/31/2013 | 1979 | |||||||||||||||||||||||
| Pizza Hut |
JACKSON | GA | — | (14) | 673 | 735 | — | 1,408 | 20 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Pizza Hut |
Salisbury | MD | — | (14) | 245 | 734 | — | 979 | 16 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Pizza Hut |
Delaware | OH | — | (14) | 270 | 721 | — | 991 | 20 | 6/27/2013 | 1975 | |||||||||||||||||||||||
| Pizza Hut |
Pecos | TX | — | (14) | 387 | 719 | — | 1,106 | 16 | 7/31/2013 | 1974 | |||||||||||||||||||||||
| Pizza Hut |
Petersburg | VA | — | (14) | 378 | 701 | — | 1,079 | 15 | 7/31/2013 | 1979 | |||||||||||||||||||||||
| Pizza Hut |
Odessa | TX | — | (14) | 457 | 685 | — | 1,142 | 15 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Pizza Hut |
Monahans | TX | — | (14) | 361 | 671 | — | 1,032 | 15 | 7/31/2013 | 1979 | |||||||||||||||||||||||
| Pizza Hut |
Bedford | VA | — | (14) | 548 | 670 | — | 1,218 | 15 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Pizza Hut |
San Angelo | TX | — | (14) | 214 | 641 | — | 855 | 14 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Pizza Hut |
San Angelo | TX | — | (14) | 268 | 624 | — | 892 | 14 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Pizza Hut |
Midland | TX | — | (14) | 506 | 619 | — | 1,125 | 14 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Pizza Hut |
Downers Grove | IL | — | 504 | 616 | — | 1,120 | 14 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Pizza Hut |
Detroit | MI | — | 501 | 612 | — | 1,113 | 13 | 7/31/2013 | 1984 | ||||||||||||||||||||||||
| Pizza Hut |
Newport News | VA | — | (14) | 394 | 591 | — | 985 | 13 | 7/31/2013 | 1969 | |||||||||||||||||||||||
| Pizza Hut |
Newport News | VA | — | (14) | 394 | 591 | — | 985 | 13 | 7/31/2013 | 1970 | |||||||||||||||||||||||
| Pizza Hut |
Columbia | SC | — | (14) | 881 | 588 | — | 1,469 | 13 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Pizza Hut |
Odessa | TX | — | (14) | 572 | 572 | — | 1,144 | 13 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Pizza Hut |
Tyler | TX | — | 238 | 555 | — | 793 | 15 | 6/27/2013 | 1981 | ||||||||||||||||||||||||
F-146
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Pizza Hut |
San Angelo | TX | — | (14) | 237 | 552 | — | 789 | 12 | 7/31/2013 | 1975 | |||||||||||||||||||||||
| Pizza Hut |
Dearborn | MI | — | 284 | 528 | — | 812 | 12 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
| Pizza Hut |
Aurora | IL | — | (14) | 281 | 522 | — | 803 | 11 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Pizza Hut |
Cheraw | SC | — | (14) | 415 | 507 | — | 922 | 11 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Pizza Hut |
Midland | TX | — | (14) | 414 | 506 | — | 920 | 11 | 7/31/2013 | 1975 | |||||||||||||||||||||||
| Pizza Hut |
Louisville | KY | — | (14) | 539 | 499 | — | 1,038 | 14 | 6/27/2013 | 1975 | |||||||||||||||||||||||
| Pizza Hut |
Batesburg | SC | — | (14) | 261 | 484 | — | 745 | 11 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Pizza Hut |
Greensboro | GA | — | (14) | 569 | 465 | — | 1,034 | 10 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Pizza Hut |
Crystal City | TX | — | (14) | 148 | 453 | — | 601 | 13 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Pizza Hut |
Abilene | TX | — | (14) | 549 | 449 | — | 998 | 10 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Pizza Hut |
Sweetwater | TX | — | 77 | 435 | — | 512 | 10 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
| Pizza Hut |
Detroit | MI | — | 105 | 421 | — | 526 | 9 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Pizza Hut |
Pageland | SC | — | (14) | 344 | 420 | — | 764 | 9 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Pizza Hut |
West Columbia | SC | — | (14) | 507 | 415 | — | 922 | 9 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Pizza Hut |
Edgefield | SC | — | (14) | 221 | 410 | — | 631 | 9 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Pizza Hut |
Coleman | TX | — | 69 | 391 | — | 460 | 9 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
| Pizza Hut |
Stevens Point | WI | — | 130 | 390 | — | 520 | 9 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
| Pizza Hut |
Laurens | SC | — | (14) | 454 | 371 | — | 825 | 8 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Pizza Hut |
Elmira | NY | — | 199 | 370 | — | 569 | 8 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
| Pizza Hut |
Wellsville | NY | — | 123 | 368 | — | 491 | 8 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
| Pizza Hut |
Ann Arbor | MI | — | 119 | 367 | — | 486 | 10 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
| Pizza Hut |
Bishopville | SC | — | (14) | 365 | 365 | — | 730 | 8 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Pizza Hut |
Cedar City | UT | — | 52 | 361 | — | 413 | 10 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
| Pizza Hut |
Eatonton | GA | — | (14) | 353 | 353 | — | 706 | 8 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Pizza Hut |
Saluda | SC | — | (14) | 346 | 346 | — | 692 | 8 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Pizza Hut |
Hampton | VA | — | (14) | 641 | 345 | — | 986 | 8 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Pizza Hut |
Merrill | WI | — | 83 | 331 | — | 414 | 7 | 7/31/2013 | 1980 | ||||||||||||||||||||||||
| Pizza Hut |
Red Bank | TN | — | (14) | 215 | 323 | — | 538 | 7 | 7/31/2013 | 1975 | |||||||||||||||||||||||
| Pizza Hut |
Colonial Heights | VA | — | (14) | 311 | 311 | — | 622 | 7 | 7/31/2013 | 1991 | |||||||||||||||||||||||
| Pizza Hut |
Richmond | VA | — | (14) | 311 | 311 | — | 622 | 7 | 7/31/2013 | 1991 | |||||||||||||||||||||||
| Pizza Hut |
Seminole | TX | — | 53 | 301 | — | 354 | 7 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
| Pizza Hut |
Tucker | GA | — | 192 | 288 | — | 480 | 6 | 7/31/2013 | 1974 | ||||||||||||||||||||||||
| Pizza Hut |
Front Royal | VA | — | (14) | 191 | 287 | — | 478 | 6 | 7/31/2013 | 1973 | |||||||||||||||||||||||
| Pizza Hut |
Mobile | AL | — | 127 | 276 | — | 403 | 8 | 6/27/2013 | 1974 | ||||||||||||||||||||||||
| Pizza Hut |
Dawson | GA | — | 131 | 274 | — | 405 | 8 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Pizza Hut |
Lafayette | LA | — | 68 | 271 | — | 339 | 8 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
| Pizza Hut |
Oklahoma City | OK | — | (14) | 268 | 268 | — | 536 | 6 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Pizza Hut |
Page | AZ | — | 66 | 263 | — | 329 | 6 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
| Pizza Hut |
Bowling Green | OH | — | 141 | 262 | — | 403 | 6 | 7/31/2013 | 1979 | ||||||||||||||||||||||||
| Pizza Hut |
Antigo | WI | — | 45 | 252 | — | 297 | 6 | 7/31/2013 | 1997 | ||||||||||||||||||||||||
| Pizza Hut |
Santee | SC | — | (14) | 371 | 248 | — | 619 | 5 | 7/31/2013 | 1972 | |||||||||||||||||||||||
| Pizza Hut |
Saint George | SC | — | (14) | 367 | 245 | — | 612 | 5 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Pizza Hut |
Ashburn | GA | — | 102 | 233 | — | 335 | 6 | 6/27/2013 | 1988 | ||||||||||||||||||||||||
F-147
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Pizza Hut |
Box Elder | SD | — | (14) | 68 | 217 | — | 285 | 6 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Pizza Hut |
Shamokin | PA | — | 54 | 217 | — | 271 | 5 | 7/31/2013 | 1976 | ||||||||||||||||||||||||
| Pizza Hut |
Kanab | UT | — | 52 | 210 | — | 262 | 5 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
| Pizza Hut |
Hayward | WI | — | 51 | 205 | — | 256 | 5 | 7/31/2013 | 1993 | ||||||||||||||||||||||||
| Pizza Hut |
Plover | WI | — | 85 | 199 | — | 284 | 4 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Pizza Hut |
Defiance | OH | — | 114 | 197 | — | 311 | 5 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
| Pizza Hut |
Schofield | WI | — | 106 | 196 | — | 302 | 4 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
| Pizza Hut |
Monticello | FL | — | 115 | 195 | — | 310 | 5 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Pizza Hut |
Abbotsford | WI | — | 159 | 195 | — | 354 | 4 | 7/31/2013 | 1980 | ||||||||||||||||||||||||
| Pizza Hut |
Marietta | OH | — | 104 | 193 | — | 297 | 4 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Pizza Hut |
Hurricane | WV | — | 126 | 188 | — | 314 | 4 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
| Pizza Hut |
East Syracuse | NY | — | 137 | 185 | — | 322 | 5 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
| Pizza Hut |
Cleveland | OH | — | 87 | 175 | — | 262 | 5 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
| Pizza Hut |
Toledo | OH | — | 58 | 173 | — | 231 | 5 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
| Pizza Hut |
Sandusky | OH | — | 140 | 171 | — | 311 | 4 | 7/31/2013 | 1982 | ||||||||||||||||||||||||
| Pizza Hut |
Abilene | TX | — | (14) | 397 | 170 | — | 567 | 4 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Pizza Hut |
Ronceverte | WV | — | 66 | 162 | — | 228 | 4 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
| Pizza Hut |
Eagle River | WI | — | 28 | 159 | — | 187 | 3 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
| Pizza Hut |
Middleburg Heights | OH | — | 128 | 156 | — | 284 | 3 | 7/31/2013 | 1985 | ||||||||||||||||||||||||
| Pizza Hut |
North Olmsted | OH | — | 122 | 153 | — | 275 | 4 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
| Pizza Hut |
Cross Lanes | WV | — | 122 | 149 | — | 271 | 3 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
| Pizza Hut |
Beckley | WV | — | 160 | 131 | — | 291 | 3 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
| Pizza Hut |
Stamford | TX | — | 38 | 115 | — | 153 | 3 | 7/31/2013 | 1970 | ||||||||||||||||||||||||
| Pizza Hut |
Norwalk | OH | — | (14) | 77 | 115 | — | 192 | 3 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Pizza Hut |
Ballinger | TX | — | 34 | 109 | — | 143 | 3 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
| Pizza Hut |
Strongsville | OH | — | 74 | 108 | — | 182 | 3 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
| Pizza Hut |
Neillsville | WI | — | 35 | 106 | — | 141 | 2 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
| Pizza Hut |
Milton | WV | — | 24 | 96 | — | 120 | 2 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
| Pizza Hut |
Waupaca | WI | — | 61 | 91 | — | 152 | 2 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
| Pizza Hut |
Tomahawk | WI | — | 35 | 81 | — | 116 | 2 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Pizza Hut |
Nedrow | NY | — | 55 | 80 | — | 135 | 2 | 6/27/2013 | 1979 | ||||||||||||||||||||||||
| Pizza Hut |
Clintonville | WI | — | 208 | 69 | — | 277 | 2 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
| Pizza Hut |
Rochester | NY | — | 62 | 62 | — | 124 | 1 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
| Pizza Hut |
Lambertville | MI | — | 110 | 6 | — | 116 | — | 7/31/2013 | 1995 | ||||||||||||||||||||||||
| Pizza Hut |
Huntington | WV | — | 190 | 4 | — | 194 | — | 7/31/2013 | 1979 | ||||||||||||||||||||||||
| Pizza Hut |
Adrian | MI | — | 265 | — | — | 265 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Pizza Hut |
Monroe | MI | — | 220 | — | — | 220 | — | 6/27/2013 | 1977 | ||||||||||||||||||||||||
| Pizza Hut |
Bedford | OH | — | 183 | — | — | 183 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Ponderosa |
Indiana | PA | — | 676 | 1,255 | — | 1,931 | 31 | 7/31/2013 | 2000 | ||||||||||||||||||||||||
| Ponderosa |
Massena | NY | — | 190 | 570 | — | 760 | 14 | 7/31/2013 | 1988 | ||||||||||||||||||||||||
| Ponderosa |
Scottsburg | IN | — | (14) | 430 | 141 | — | 571 | 4 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Popeyes |
Marksville | LA | — | (14) | 487 | 1,129 | — | 1,616 | 31 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Popeyes |
Tampa | FL | — | (14) | 673 | 1,065 | — | 1,738 | 30 | 6/27/2013 | 2000 | |||||||||||||||||||||||
F-148
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Popeyes |
Winter Haven | FL | — | (14) | 484 | 1,001 | — | 1,485 | 28 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Popeyes |
Greenville | MS | — | (14) | 513 | 977 | — | 1,490 | 27 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Popeyes |
Brandon | FL | — | (14) | 776 | 961 | — | 1,737 | 27 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Popeyes |
Jacksonville | FL | — | (14) | 781 | 955 | — | 1,736 | 21 | 7/31/2013 | 1955 | |||||||||||||||||||||||
| Popeyes |
Orlando | FL | — | (14) | 782 | 955 | — | 1,737 | 21 | 7/31/2013 | 2004 | |||||||||||||||||||||||
| Popeyes |
Lafayette | LA | — | (14) | 473 | 901 | — | 1,374 | 25 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Popeyes |
Lafayette | LA | — | (14) | 434 | 899 | — | 1,333 | 25 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Popeyes |
Eunice | LA | — | (14) | 382 | 891 | — | 1,273 | 20 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Popeyes |
Orange | TX | — | (14) | 456 | 847 | — | 1,303 | 19 | 7/31/2013 | 2004 | |||||||||||||||||||||||
| Popeyes |
Lakeland | FL | — | (14) | 830 | 830 | — | 1,660 | 18 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Popeyes |
Bayou Vista | LA | — | (14) | 375 | 709 | — | 1,084 | 20 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Popeyes |
Nederland | TX | — | (14) | 445 | 668 | — | 1,113 | 15 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Popeyes |
Omaha | NE | — | (14) | 264 | 615 | — | 879 | 14 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Popeyes |
Port Arthur | TX | — | (14) | 408 | 589 | — | 997 | 16 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Popeyes |
Franklin | LA | — | (14) | 283 | 538 | — | 821 | 15 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Popeyes |
Austin | TX | — | 1,216 | 533 | — | 1,749 | 15 | 6/27/2013 | 1996 | ||||||||||||||||||||||||
| Popeyes |
Omaha | NE | — | (14) | 343 | 515 | — | 858 | 11 | 7/31/2013 | 1996 | |||||||||||||||||||||||
| Popeyes |
Saint Louis | MO | — | (14) | 248 | 460 | — | 708 | 13 | 6/27/2013 | 1959 | |||||||||||||||||||||||
| Popeyes |
Saint Louis | MO | — | (14) | 288 | 431 | — | 719 | 9 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Popeyes |
Baton Rouge | LA | — | (14) | 323 | 394 | — | 717 | 9 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Popeyes |
Ferguson | MO | — | (14) | 128 | 383 | — | 511 | 8 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Popeyes |
Miami | FL | — | 220 | 330 | — | 550 | 7 | 7/31/2013 | 1962 | ||||||||||||||||||||||||
| Popeyes |
Houston | TX | — | 295 | 241 | — | 536 | 5 | 7/31/2013 | 1976 | ||||||||||||||||||||||||
| Popeyes |
Portsmouth | VA | — | (14) | 369 | 230 | — | 599 | 6 | 6/27/2013 | 2002 | |||||||||||||||||||||||
| Popeyes |
Houston | TX | — | 278 | 227 | — | 505 | 5 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
| Popeyes |
Newport News | VA | — | (14) | 381 | 217 | — | 598 | 6 | 6/27/2013 | 2002 | |||||||||||||||||||||||
| Popeyes |
Houston | TX | — | 111 | 166 | — | 277 | 4 | 7/31/2013 | 1976 | ||||||||||||||||||||||||
| Quincy’s Family Steakhouse |
Monroe | NC | — | 560 | 458 | — | 1,018 | 11 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
| Rally’s |
Indianapolis | IN | — | (14) | 1,168 | — | — | 1,168 | — | 7/31/2013 | N/A | |||||||||||||||||||||||
| Rally’s |
Indianapolis | IN | — | (14) | 1,168 | — | — | 1,168 | — | 7/31/2013 | N/A | |||||||||||||||||||||||
| Rancho Grande Grill |
Andalusia | AL | — | 94 | 251 | — | 345 | 7 | 6/27/2013 | 2004 | ||||||||||||||||||||||||
| Rite Aid |
Burton | MI | — | 128 | 2,541 | — | 2,669 | 63 | 7/26/2013 | 1999 | ||||||||||||||||||||||||
| Rite Aid |
Wilson | NC | — | 573 | 1,337 | — | 1,910 | 33 | 7/30/2013 | 2002 | ||||||||||||||||||||||||
| Rite Aid |
Adams | MA | — | 300 | 1,200 | — | 1,500 | 30 | 7/30/2013 | 2000 | ||||||||||||||||||||||||
| Rolls-Royce Corporation |
Indianapolis | IN | — | (14) | 5,770 | 64,063 | — | 69,833 | 2,100 | 5/9/2013 | 2000 | |||||||||||||||||||||||
| Rubbermaid |
Brimfield | OH | — | (14) | 1,552 | 29,485 | — | 31,037 | 1,650 | 1/31/2013 | 2012 | |||||||||||||||||||||||
| Rubbermaid |
Bowling Green | OH | — | 714 | 13,560 | — | 14,274 | 345 | 7/29/2013 | 2013 | ||||||||||||||||||||||||
| Saltwater Willy’s |
Grapevine | TX | — | (14) | 572 | 868 | — | 1,440 | 25 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Schlotzsky’s Deli |
Colorado Springs | CO | — | (14) | 530 | 530 | — | 1,060 | 15 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Schlotzsky’s Deli |
Louisville | KY | — | (14) | 321 | 342 | — | 663 | 9 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Senor Panchos |
Orrville | OH | — | (14) | 99 | 176 | — | 275 | 5 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Shoney’s |
Grenada | MS | — | 270 | 809 | — | 1,079 | 18 | 7/31/2013 | 1991 | ||||||||||||||||||||||||
| Shoney’s |
Columbia | SC | — | (14) | 446 | 545 | — | 991 | 12 | 7/31/2013 | 1985 | |||||||||||||||||||||||
F-149
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Shoney’s |
West Columbia | SC | — | (14) | 392 | 262 | — | 654 | 6 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Snowflake Donut Shop |
Gun Barrel City | TX | — | 241 | 383 | — | 624 | 11 | 6/27/2013 | 2008 | ||||||||||||||||||||||||
| Sonic Drive-In |
Crystal River | FL | — | (14) | 107 | 322 | — | 429 | 7 | 7/31/2013 | 2008 | |||||||||||||||||||||||
| Sonic Drive-In |
Mulberry | FL | — | (14) | 165 | 298 | — | 463 | 8 | 6/27/2013 | 2004 | |||||||||||||||||||||||
| Sonic Drive-In |
Wadesboro | NC | — | (14) | 137 | 266 | — | 403 | 7 | 6/27/2013 | 2007 | |||||||||||||||||||||||
| Sonic Drive-In |
Spring Hill | FL | — | (14) | 79 | 252 | — | 331 | 7 | 6/27/2013 | 2003 | |||||||||||||||||||||||
| Sonny’s BBQ |
Venice | FL | — | (14) | 338 | 507 | — | 845 | 13 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Sports Wings |
Sumter | SC | — | (14) | 73 | 109 | — | 182 | 2 | 7/31/2013 | 1988 | |||||||||||||||||||||||
| Stripes Gas & Convenience |
Rio Hondo | TX | — | (14) | 293 | 2,640 | — | 2,933 | 136 | 2/15/2013 | 2008 | |||||||||||||||||||||||
| Stripes Gas & Convenience |
Pharr | TX | — | (14) | 281 | 2,531 | — | 2,812 | 130 | 2/15/2013 | 1995 | |||||||||||||||||||||||
| Stripes Gas & Convenience |
Andrews | TX | — | (14) | 406 | 2,302 | — | 2,708 | 119 | 2/15/2013 | 2008 | |||||||||||||||||||||||
| Stripes Gas & Convenience |
La Feria | TX | — | (14) | 219 | 1,970 | — | 2,189 | 101 | 2/15/2013 | 2008 | |||||||||||||||||||||||
| Sun Trust Bank |
Waldorf | MD | — | (14) | 523 | 2,962 | — | 3,485 | 119 | 3/22/2013 | 1964 | |||||||||||||||||||||||
| Sun Trust Bank |
Mocksville | NC | — | (14) | 978 | 2,933 | — | 3,911 | 118 | 3/22/2013 | 2000 | |||||||||||||||||||||||
| Sun Trust Bank |
Annapolis | MD | — | 2,653 | 2,170 | — | 4,823 | 48 | 7/23/2013 | 1976 | ||||||||||||||||||||||||
| Sun Trust Bank |
Richmond | VA | — | (14) | 224 | 2,012 | — | 2,236 | 81 | 4/12/2013 | 1909 | |||||||||||||||||||||||
| Sun Trust Bank |
Tallahassee | FL | — | (14) | 828 | 1,933 | — | 2,761 | 78 | 4/12/2013 | 1991 | |||||||||||||||||||||||
| Sun Trust Bank |
Dunedin | FL | — | (14) | 479 | 1,917 | — | 2,396 | 77 | 3/22/2013 | 1995 | |||||||||||||||||||||||
| Sun Trust Bank |
Monroe | NC | — | (14) | 204 | 1,837 | — | 2,041 | 74 | 4/12/2013 | 1920 | |||||||||||||||||||||||
| Sun Trust Bank |
Plant City | FL | — | (14) | 751 | 1,753 | — | 2,504 | 70 | 3/22/2013 | 2000 | |||||||||||||||||||||||
| Sun Trust Bank |
Destin | FL | — | (14) | 572 | 1,717 | — | 2,289 | 69 | 4/12/2013 | 1998 | |||||||||||||||||||||||
| Sun Trust Bank |
Jesup | GA | — | (14) | 184 | 1,657 | — | 1,841 | 67 | 3/22/2013 | 1964 | |||||||||||||||||||||||
| Sun Trust Bank |
Atlanta | GA | — | (14) | 1,018 | 1,527 | — | 2,545 | 61 | 4/12/2013 | 1965 | |||||||||||||||||||||||
| Sun Trust Bank |
Coral Springs | FL | — | (14) | 654 | 1,525 | — | 2,179 | 61 | 4/12/2013 | 1996 | |||||||||||||||||||||||
| Sun Trust Bank |
Rocky Mount | VA | — | (14) | 265 | 1,504 | — | 1,769 | 47 | 5/22/2013 | 1961 | |||||||||||||||||||||||
| Sun Trust Bank |
Dunwoody | GA | — | (14) | 1,784 | 1,460 | — | 3,244 | 59 | 3/22/2013 | 1972 | |||||||||||||||||||||||
| Sun Trust Bank |
Melbourne | FL | — | (14) | 464 | 1,392 | — | 1,856 | 56 | 4/12/2013 | 1987 | |||||||||||||||||||||||
| Sun Trust Bank |
Durham | NC | — | (14) | 747 | 1,388 | — | 2,135 | 56 | 4/12/2013 | 1973 | |||||||||||||||||||||||
| Sun Trust Bank |
North Port | FL | — | (14) | 460 | 1,381 | — | 1,841 | 55 | 3/22/2013 | 1982 | |||||||||||||||||||||||
| Sun Trust Bank |
Hudson | FL | — | (14) | 448 | 1,345 | — | 1,793 | 54 | 3/22/2013 | 1979 | |||||||||||||||||||||||
| Sun Trust Bank |
Port Orange | FL | — | (14) | 563 | 1,314 | — | 1,877 | 53 | 3/22/2013 | 1982 | |||||||||||||||||||||||
| Sun Trust Bank |
Nashville | TN | — | (14) | 1,598 | 1,308 | — | 2,906 | 53 | 4/12/2013 | 1992 | |||||||||||||||||||||||
| Sun Trust Bank |
Chattanooga | TN | — | (14) | 223 | 1,263 | — | 1,486 | 51 | 3/22/2013 | 1953 | |||||||||||||||||||||||
| Sun Trust Bank |
Palm Harbor | FL | — | (14) | 535 | 1,249 | — | 1,784 | 50 | 4/12/2013 | 1994 | |||||||||||||||||||||||
| Sun Trust Bank |
Bowdon | GA | — | (14) | 416 | 1,247 | — | 1,663 | 50 | 3/22/2013 | 1900 | |||||||||||||||||||||||
| Sun Trust Bank |
Orlando | FL | — | (14) | 805 | 1,208 | — | 2,013 | 49 | 4/12/2013 | 1988 | |||||||||||||||||||||||
| Sun Trust Bank |
Madison | TN | — | (14) | 286 | 1,143 | — | 1,429 | 46 | 3/22/2013 | 1953 | |||||||||||||||||||||||
| Sun Trust Bank |
Miami | FL | — | (14) | 1,393 | 1,140 | — | 2,533 | 46 | 4/12/2013 | 1982 | |||||||||||||||||||||||
| Sun Trust Bank |
Lakeland | FL | — | (14) | 598 | 1,110 | — | 1,708 | 45 | 4/12/2013 | 1988 | |||||||||||||||||||||||
| Sun Trust Bank |
South Daytona Beach | FL | — | (14) | 592 | 1,099 | — | 1,691 | 44 | 4/12/2013 | 1985 | |||||||||||||||||||||||
| Sun Trust Bank |
Port Orange | FL | — | (14) | 590 | 1,095 | — | 1,685 | 44 | 3/22/2013 | 1989 | |||||||||||||||||||||||
| Sun Trust Bank |
Anderson | SC | — | (14) | 574 | 1,065 | — | 1,639 | 43 | 3/22/2013 | 1998 | |||||||||||||||||||||||
| Sun Trust Bank |
West Palm Beach | FL | — | (14) | 1,026 | 1,026 | — | 2,052 | 41 | 3/22/2013 | 1981 | |||||||||||||||||||||||
F-150
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Sun Trust Bank |
Frederick | MD | — | (14) | 991 | 991 | — | 1,982 | 35 | 4/26/2013 | 1880 | |||||||||||||||||||||||
| Sun Trust Bank |
Roswell | GA | — | (14) | 1,425 | 950 | — | 2,375 | 38 | 4/12/2013 | 1988 | |||||||||||||||||||||||
| Sun Trust Bank |
Ellicott City | MD | — | (14) | 1,728 | 931 | — | 2,659 | 37 | 3/22/2013 | 1975 | |||||||||||||||||||||||
| Sun Trust Bank |
Belmont | NC | — | (14) | 616 | 924 | — | 1,540 | 37 | 3/22/2013 | 1970 | |||||||||||||||||||||||
| Sun Trust Bank |
Lexington | NC | — | (14) | 447 | 831 | — | 1,278 | 33 | 4/12/2013 | 2001 | |||||||||||||||||||||||
| Sun Trust Bank |
Kissimmee | FL | — | (14) | 1,167 | 778 | — | 1,945 | 31 | 4/12/2013 | 1981 | |||||||||||||||||||||||
| Sun Trust Bank |
Greensboro | NC | — | (14) | 403 | 748 | — | 1,151 | 30 | 4/12/2013 | 1962 | |||||||||||||||||||||||
| Sun Trust Bank |
Travelers Rest | SC | — | (14) | 746 | 746 | — | 1,492 | 30 | 4/12/2013 | 1995 | |||||||||||||||||||||||
| Sun Trust Bank |
St. Simons Island | GA | — | (14) | 1,363 | 734 | — | 2,097 | 29 | 3/22/2013 | 1975 | |||||||||||||||||||||||
| Sun Trust Bank |
Pensacola | FL | — | (14) | 886 | 725 | — | 1,611 | 29 | 4/12/2013 | 1979 | |||||||||||||||||||||||
| Sun Trust Bank |
Concord | NC | — | (14) | 707 | 707 | — | 1,414 | 28 | 4/12/2013 | 1988 | |||||||||||||||||||||||
| Sun Trust Bank |
Lake Wales | FL | — | (14) | 671 | 671 | — | 1,342 | 27 | 3/22/2013 | 1988 | |||||||||||||||||||||||
| Sun Trust Bank |
Raleigh | NC | — | (14) | 658 | 658 | — | 1,316 | 26 | 3/22/2013 | 1997 | |||||||||||||||||||||||
| Sun Trust Bank |
Zebulon | NC | — | (14) | 515 | 630 | — | 1,145 | 25 | 3/22/2013 | 1972 | |||||||||||||||||||||||
| Sun Trust Bank |
Nashville | TN | — | (14) | 613 | 613 | — | 1,226 | 25 | 4/12/2013 | 1970 | |||||||||||||||||||||||
| Sun Trust Bank |
Belton | SC | — | (14) | 473 | 578 | — | 1,051 | 23 | 4/12/2013 | 1967 | |||||||||||||||||||||||
| Sun Trust Bank |
Burlington | NC | — | (14) | 446 | 545 | — | 991 | 22 | 4/12/2013 | 1995 | |||||||||||||||||||||||
| Sun Trust Bank |
Oakboro | NC | — | 360 | 540 | — | 900 | 12 | 7/23/2013 | 1970 | ||||||||||||||||||||||||
| Sun Trust Bank |
Carrboro | NC | — | (14) | 512 | 512 | — | 1,024 | 21 | 4/12/2013 | 1980 | |||||||||||||||||||||||
| Sun Trust Bank |
Cheriton | VA | — | (14) | 90 | 510 | — | 600 | 21 | 3/22/2013 | 1975 | |||||||||||||||||||||||
| Sun Trust Bank |
Atlanta | GA | — | (14) | 1,435 | 478 | — | 1,913 | 19 | 4/12/2013 | 1970 | |||||||||||||||||||||||
| Sun Trust Bank |
Lynchburg | VA | — | (14) | 251 | 466 | — | 717 | 19 | 3/22/2013 | 1973 | |||||||||||||||||||||||
| Sun Trust Bank |
Dunnellon | FL | — | (14) | 82 | 463 | — | 545 | 19 | 3/22/2013 | 1980 | |||||||||||||||||||||||
| Sun Trust Bank |
Norfolk | VA | — | (14) | 656 | 437 | — | 1,093 | 18 | 4/12/2013 | 1990 | |||||||||||||||||||||||
| Sun Trust Bank |
Richmond | VA | — | (14) | 277 | 416 | — | 693 | 17 | 3/22/2013 | 1959 | |||||||||||||||||||||||
| Sun Trust Bank |
Matthews | NC | — | (14) | 382 | 382 | — | 764 | 15 | 3/22/2013 | 1971 | |||||||||||||||||||||||
| Sun Trust Bank |
Yadkinville | NC | — | (14) | 200 | 371 | — | 571 | 15 | 4/12/2013 | 1975 | |||||||||||||||||||||||
| Sun Trust Bank |
Petersburg | VA | — | (14) | 102 | 306 | — | 408 | 12 | 4/12/2013 | 1975 | |||||||||||||||||||||||
| Sun Trust Bank |
Nashville | TN | — | 567 | 305 | — | 872 | 7 | 7/23/2013 | 1954 | ||||||||||||||||||||||||
| Sun Trust Bank |
La Vergne | TN | — | (14) | 171 | 209 | — | 380 | 8 | 3/22/2013 | 1985 | |||||||||||||||||||||||
| T.G.I. Friday’s |
Warwick | RI | — | 1,228 | 2,775 | — | 4,003 | 80 | 6/27/2013 | 1983 | ||||||||||||||||||||||||
| T.G.I. Friday’s |
Kentwood | MI | — | (14) | 281 | 2,533 | — | 2,814 | 63 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| T.G.I. Friday’s |
Bismarck | ND | — | (14) | 1,038 | 1,928 | — | 2,966 | 48 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| T.G.I. Friday’s |
Blasdell | NY | — | (14) | 1,215 | 1,913 | — | 3,128 | 55 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| T.G.I. Friday’s |
Ann Arbor | MI | — | (14) | 547 | 1,640 | — | 2,187 | 41 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| T.G.I. Friday’s |
Royal Palm Beach | FL | — | (14) | 1,530 | 1,530 | — | 3,060 | 38 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| T.G.I. Friday’s |
Rochester | MN | — | (14) | 1,347 | 1,102 | — | 2,449 | 27 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| T.G.I. Friday’s |
Novi | MI | — | (14) | 1,042 | 1,042 | — | 2,084 | 26 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Taco Bell |
Vacaville | CA | — | (14) | 522 | 1,513 | — | 2,035 | 42 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Taco Bell |
Suisun City | CA | — | (14) | 355 | 1,419 | — | 1,774 | 31 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Taco Bell |
Vacaville | CA | — | (14) | 1,184 | 1,375 | — | 2,559 | 38 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Taco Bell |
Fairfield | CA | — | (14) | 500 | 1,327 | — | 1,827 | 37 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Taco Bell |
Rancho Cucamonga | CA | — | (14) | 415 | 1,210 | — | 1,625 | 34 | 6/27/2013 | 1992 | |||||||||||||||||||||||
F-151
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Taco Bell |
Corona | CA | — | (14) | 306 | 1,138 | — | 1,444 | 32 | 6/27/2013 | 1990 | |||||||||||||||||||||||
| Taco Bell |
North Corbin | KY | — | (14) | 139 | 1,082 | — | 1,221 | 30 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Taco Bell |
Cullman | AL | — | (14) | 375 | 1,053 | — | 1,428 | 29 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Taco Bell |
Fontana | CA | — | (14) | 524 | 1,016 | — | 1,540 | 28 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Taco Bell |
Moreno Valley | CA | — | (14) | 367 | 998 | — | 1,365 | 28 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Taco Bell |
Marion | IN | — | (14) | 496 | 921 | — | 1,417 | 20 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Taco Bell |
Winfield | AL | — | (14) | 278 | 834 | — | 1,112 | 18 | 7/31/2013 | 2008 | |||||||||||||||||||||||
| Taco Bell |
Westerville | OH | — | (14) | 354 | 827 | — | 1,181 | 18 | 7/31/2013 | 1992 | |||||||||||||||||||||||
| Taco Bell |
Jasper | AL | — | (14) | 445 | 814 | — | 1,259 | 23 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Taco Bell |
Dora | AL | — | (14) | 348 | 813 | — | 1,161 | 18 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Taco Bell |
Hilliard | OH | — | (14) | 424 | 787 | — | 1,211 | 17 | 7/31/2013 | 1991 | |||||||||||||||||||||||
| Taco Bell |
Hartselle | AL | — | (14) | 378 | 781 | — | 1,159 | 22 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Taco Bell |
Albertville | AL | — | (14) | 419 | 778 | — | 1,197 | 17 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Taco Bell |
Dayton | OH | — | (14) | 129 | 732 | — | 861 | 16 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Taco Bell |
Pickerington | OH | — | (14) | 470 | 705 | — | 1,175 | 15 | 7/31/2013 | 1991 | |||||||||||||||||||||||
| Taco Bell |
Detroit | MI | — | 124 | 704 | — | 828 | 15 | 7/31/2013 | 1989 | ||||||||||||||||||||||||
| Taco Bell |
Warrior | AL | — | (14) | 364 | 675 | — | 1,039 | 15 | 7/31/2013 | 1996 | |||||||||||||||||||||||
| Taco Bell |
Marysville | OH | — | (14) | 412 | 618 | — | 1,030 | 14 | 7/31/2013 | 1992 | |||||||||||||||||||||||
| Taco Bell |
Anniston | AL | — | 80 | 609 | — | 689 | 17 | 6/27/2013 | 2000 | ||||||||||||||||||||||||
| Taco Bell |
Kennesaw | GA | — | (14) | 162 | 601 | — | 763 | 17 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Taco Bell |
Moraine | OH | — | 280 | 505 | — | 785 | 14 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
| Taco Bell / KFC |
Milwaukee | WI | — | (14) | 533 | 1,055 | — | 1,588 | 29 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Taco Bell / Pizza Hut |
Rubidoux | CA | — | (14) | 415 | 1,223 | — | 1,638 | 34 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Taco Bell / Pizza Hut |
Montclair | CA | — | (14) | 322 | 900 | — | 1,222 | 25 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Taco Bueno |
Arlington | TX | — | (14) | 597 | 895 | — | 1,492 | 20 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Taco Bueno |
Waco | TX | — | (14) | 595 | 893 | — | 1,488 | 20 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Taco Bueno |
Waco | TX | — | (14) | 595 | 892 | — | 1,487 | 20 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Taco Bueno |
Hutchinson | KS | — | (14) | 561 | 841 | — | 1,402 | 18 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Taco Bueno |
Springfield | MO | — | (14) | 753 | 753 | — | 1,506 | 17 | 7/31/2013 | 2006 | |||||||||||||||||||||||
| Taco Bueno |
Belton | MO | — | (14) | 476 | 701 | — | 1,177 | 19 | 6/27/2013 | 2006 | |||||||||||||||||||||||
| Taco Bueno |
Frisco | TX | — | (14) | 601 | 577 | — | 1,178 | 16 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Taco Bueno |
North Richland Hills | TX | — | (14) | 423 | 567 | — | 990 | 16 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Taco Bueno |
Lubbock | TX | — | (14) | 228 | 561 | — | 789 | 16 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Talbots |
Lakeville | MA | — | (14) | 6,302 | 25,199 | — | 31,501 | 897 | 5/17/2013 | 1987 | |||||||||||||||||||||||
| Texas Roadhouse |
Kenosha | WI | — | (14) | 1,061 | 1,835 | — | 2,896 | 53 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Tire Warehouse |
Bangor | ME | — | (14) | 289 | 1,400 | — | 1,689 | 39 | 6/27/2013 | 1977 | |||||||||||||||||||||||
| Tire Warehouse |
Fitchburg | MA | — | (14) | 203 | 704 | — | 907 | 20 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| TitleMax |
Gainesville | GA | — | (14) | 221 | 270 | — | 491 | 7 | 7/31/2013 | 2007 | |||||||||||||||||||||||
| Tommy Addison’s |
Edgewood | FL | — | (14) | 366 | 447 | — | 813 | 11 | 7/31/2013 | 2003 | |||||||||||||||||||||||
| Tractor Supply |
Los Banos | CA | — | (14) | 1,213 | 3,638 | — | 4,851 | 145 | 2/28/2013 | 2009 | |||||||||||||||||||||||
| Tractor Supply |
Mims | FL | — | 310 | 2,787 | — | 3,097 | 33 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
| Tractor Supply |
Plaistow | NH | — | 638 | 2,552 | — | 3,190 | 30 | 10/10/2013 | 2012 | ||||||||||||||||||||||||
| Tracy’s Seafood |
Port Arthur | TX | — | 43 | 72 | — | 115 | 2 | 6/27/2013 | 1998 | ||||||||||||||||||||||||
F-152
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Tumbleweed |
Zanesville | OH | — | (14) | 639 | 1,491 | — | 2,130 | 37 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Tumbleweed |
Owensboro | KY | — | (14) | 355 | 1,420 | — | 1,775 | 35 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Tumbleweed |
Louisville | KY | — | (14) | 468 | 1,404 | — | 1,872 | 35 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| Tumbleweed |
Terre Haute | IN | — | (14) | 434 | 1,303 | — | 1,737 | 32 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Tumbleweed |
Springfield | OH | — | (14) | 549 | 1,280 | — | 1,829 | 32 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Tumbleweed |
Bellefontaine | OH | — | (14) | 234 | 938 | — | 1,172 | 23 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Tumbleweed |
Mayesville | KY | — | (14) | 353 | 823 | — | 1,176 | 20 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Tumbleweed |
Wooster | OH | — | (14) | 342 | 799 | — | 1,141 | 20 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Vacant |
Albemarle | NC | — | 483 | 457 | — | 940 | 13 | 6/27/2013 | 1992 | ||||||||||||||||||||||||
| Velox Insurance |
Woodstock | GA | — | 155 | 127 | — | 282 | 3 | 7/31/2013 | 1988 | ||||||||||||||||||||||||
| Verizon Wireless |
Statesville | NC | — | 207 | 459 | — | 666 | 13 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
| Waffle House |
Roanoke | VA | — | 176 | 327 | — | 503 | 7 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
| Waffle House |
Cocoa | FL | — | 150 | 279 | — | 429 | 6 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Walgreens |
Denver | CO | — | — | 4,050 | — | 4,050 | 122 | 7/2/2013 | 2008 | ||||||||||||||||||||||||
| Walgreens |
Castle Rock | CO | — | 1,581 | 3,689 | — | 5,270 | 111 | 7/11/2013 | 2002 | ||||||||||||||||||||||||
| Wendy’s |
Columbus | GA | — | (14) | 478 | 2,209 | — | 2,687 | 61 | 6/27/2013 | 2003 | |||||||||||||||||||||||
| Wendy’s |
Owego | NY | — | (14) | 101 | 1,915 | — | 2,016 | 42 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Wendy’s |
Pasadena | MD | — | (14) | 1,049 | 1,902 | — | 2,951 | 53 | 6/27/2013 | 1997 | |||||||||||||||||||||||
| Wendy’s |
El Paso | TX | — | (14) | 630 | 1,889 | — | 2,519 | 42 | 7/31/2013 | 1996 | |||||||||||||||||||||||
| Wendy’s |
Hamilton | OH | — | (14) | 655 | 1,848 | — | 2,503 | 51 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Wendy’s |
Columbus | GA | — | (14) | 701 | 1,787 | — | 2,488 | 50 | 6/27/2013 | 1999 | |||||||||||||||||||||||
| Wendy’s |
Kingwood | TX | — | (14) | 304 | 1,724 | — | 2,028 | 38 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| Wendy’s |
Corning | NY | — | (14) | 191 | 1,717 | — | 1,908 | 38 | 7/31/2013 | 1996 | |||||||||||||||||||||||
| Wendy’s |
Richmond | IN | — | (14) | 735 | 1,716 | — | 2,451 | 38 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Wendy’s |
Albany | GA | — | (14) | 414 | 1,656 | — | 2,070 | 36 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Wendy’s |
Orange | CT | — | (14) | 1,343 | 1,641 | — | 2,984 | 36 | 7/31/2013 | 2003 | |||||||||||||||||||||||
| Wendy’s |
Woodbridge | VA | — | (14) | 1,193 | 1,598 | — | 2,791 | 44 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Wendy’s |
Arlington | TX | — | (14) | 1,322 | 1,546 | — | 2,868 | 43 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Wendy’s |
Middletown | OH | — | (14) | 494 | 1,481 | — | 1,975 | 33 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Wendy’s |
Fairborn | OH | — | (14) | 629 | 1,468 | — | 2,097 | 32 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Wendy’s |
Lake Wales | FL | — | (14) | 975 | 1,462 | — | 2,437 | 32 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Wendy’s |
Wintersville | OH | — | (14) | 621 | 1,450 | — | 2,071 | 32 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Wendy’s |
Kenosha | WI | — | (14) | 965 | 1,447 | — | 2,412 | 32 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Wendy’s |
Mcminnville | TN | — | (14) | 255 | 1,443 | — | 1,698 | 32 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
Centerville | OH | — | (14) | 615 | 1,434 | — | 2,049 | 32 | 7/31/2013 | 1997 | |||||||||||||||||||||||
| Wendy’s |
Emporia | VA | — | (14) | 631 | 1,424 | — | 2,055 | 39 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Wendy’s |
Louisville | KY | — | (14) | 857 | 1,421 | — | 2,278 | 39 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Wendy’s |
Kankakee | IL | — | (14) | 250 | 1,419 | — | 1,669 | 31 | 7/31/2013 | 2005 | |||||||||||||||||||||||
| Wendy’s |
Hillsboro | OH | — | (14) | 291 | 1,408 | — | 1,699 | 39 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Wendy’s |
Cincinnati | OH | — | (14) | 939 | 1,408 | — | 2,347 | 31 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Wendy’s |
Fairborn | OH | — | (14) | 604 | 1,408 | — | 2,012 | 31 | 7/31/2013 | 1992 | |||||||||||||||||||||||
| Wendy’s |
Pounding Mill | VA | — | (14) | 296 | 1,404 | — | 1,700 | 39 | 6/27/2013 | 2004 | |||||||||||||||||||||||
| Wendy’s |
Dublin | VA | — | (14) | 384 | 1,402 | — | 1,786 | 39 | 6/27/2013 | 1993 | |||||||||||||||||||||||
F-153
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Wendy’s |
Manchester | TN | — | (14) | 245 | 1,390 | — | 1,635 | 31 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
Louisville | KY | — | (14) | 834 | 1,379 | — | 2,213 | 38 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Wendy’s |
Horseheads | NY | — | (14) | 72 | 1,369 | — | 1,441 | 30 | 7/31/2013 | 1982 | |||||||||||||||||||||||
| Wendy’s |
Hamilton | OH | — | (14) | 908 | 1,362 | — | 2,270 | 30 | 7/31/2013 | 2002 | |||||||||||||||||||||||
| Wendy’s |
Madison | WI | — | (14) | 454 | 1,362 | — | 1,816 | 30 | 7/31/2013 | 1998 | |||||||||||||||||||||||
| Wendy’s |
Hogansville | GA | — | (14) | 240 | 1,359 | — | 1,599 | 30 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Wendy’s |
Brentwood | TN | — | (14) | 339 | 1,356 | — | 1,695 | 30 | 7/31/2013 | 1982 | |||||||||||||||||||||||
| Wendy’s |
Milwaukee | WI | — | (14) | 338 | 1,351 | — | 1,689 | 30 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Wendy’s |
Oak Creek | WI | — | (14) | 577 | 1,347 | — | 1,924 | 30 | 7/31/2013 | 1999 | |||||||||||||||||||||||
| Wendy’s |
Dayton | OH | — | (14) | 723 | 1,343 | — | 2,066 | 30 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Wendy’s |
Springboro | OH | — | (14) | 891 | 1,336 | — | 2,227 | 29 | 7/31/2013 | 1979 | |||||||||||||||||||||||
| Wendy’s |
Auburn | AL | — | (14) | 718 | 1,334 | — | 2,052 | 29 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Wendy’s |
Saint Marys | WV | — | (14) | 70 | 1,322 | — | 1,392 | 29 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| Wendy’s |
Fairburn | GA | — | (14) | 1,076 | 1,316 | — | 2,392 | 29 | 7/31/2013 | 2002 | |||||||||||||||||||||||
| Wendy’s |
Nashville | TN | — | (14) | 328 | 1,313 | — | 1,641 | 29 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Wendy’s |
Sharpsburg | GA | — | (14) | 649 | 1,299 | — | 1,948 | 36 | 6/27/2013 | 2002 | |||||||||||||||||||||||
| Wendy’s |
Connersville | IN | — | (14) | 324 | 1,298 | — | 1,622 | 29 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Wendy’s |
Hamilton | OH | — | (14) | 697 | 1,295 | — | 1,992 | 28 | 7/31/2013 | 1974 | |||||||||||||||||||||||
| Wendy’s |
Kenosha | WI | — | (14) | 322 | 1,290 | — | 1,612 | 28 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
Germantown | WI | — | (14) | 419 | 1,257 | — | 1,676 | 28 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Wendy’s |
Endicott | NY | — | (14) | 313 | 1,253 | — | 1,566 | 28 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Wendy’s |
Parkersburg | WV | — | (14) | 311 | 1,243 | — | 1,554 | 27 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Wendy’s |
Fitchburg | WI | — | (14) | 662 | 1,230 | — | 1,892 | 27 | 7/31/2013 | 2003 | |||||||||||||||||||||||
| Wendy’s |
Louisville | KY | — | (14) | 532 | 1,221 | — | 1,753 | 34 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Wendy’s |
Corpus Christi | TX | — | (14) | 646 | 1,199 | — | 1,845 | 26 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Wendy’s |
Fort Smith | AR | — | 195 | 1,186 | — | 1,381 | 33 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
| Wendy’s |
Columbus | GA | — | (14) | 743 | 1,185 | — | 1,928 | 33 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Wendy’s |
Phenix City | AL | — | (14) | 529 | 1,178 | — | 1,707 | 33 | 6/27/2013 | 2005 | |||||||||||||||||||||||
| Wendy’s |
Millville | NJ | — | 373 | 1,169 | — | 1,542 | 32 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
| Wendy’s |
El Dorado | AR | — | 413 | 1,151 | — | 1,564 | 32 | 6/27/2013 | 1975 | ||||||||||||||||||||||||
| Wendy’s |
Greenfield | WI | — | (14) | 487 | 1,137 | — | 1,624 | 25 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| Wendy’s |
Middletown | OH | — | (14) | 755 | 1,133 | — | 1,888 | 25 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Wendy’s |
Fairmont | WV | — | (14) | 224 | 1,119 | — | 1,343 | 31 | 6/27/2013 | 1983 | |||||||||||||||||||||||
| Wendy’s |
Sayre | PA | — | (14) | 372 | 1,115 | — | 1,487 | 25 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Wendy’s |
Nashville | TN | — | (14) | 592 | 1,100 | — | 1,692 | 24 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Wendy’s |
Murfreesboro | TN | — | (14) | 586 | 1,088 | — | 1,674 | 24 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Wendy’s |
Miamisburg | OH | — | (14) | 888 | 1,086 | — | 1,974 | 24 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Wendy’s |
Auburn | NY | — | (14) | 465 | 1,085 | — | 1,550 | 24 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Wendy’s |
West Allis | WI | — | (14) | 583 | 1,083 | — | 1,666 | 24 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
Bourbonnais | IL | — | (14) | 346 | 1,039 | — | 1,385 | 23 | 7/31/2013 | 1993 | |||||||||||||||||||||||
| Wendy’s |
Stuttgart | AR | — | (14) | 67 | 1,038 | — | 1,105 | 29 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Wendy’s |
Baltimore | MD | — | (14) | 904 | 1,036 | — | 1,940 | 29 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Wendy’s |
Lancaster | OH | — | (14) | 552 | 1,025 | — | 1,577 | 23 | 7/31/2013 | 1984 | |||||||||||||||||||||||
F-154
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Wendy’s |
Pine Bluff | AR | — | (14) | 221 | 1,022 | — | 1,243 | 28 | 6/27/2013 | 1989 | |||||||||||||||||||||||
| Wendy’s |
Benton | AR | — | 478 | 1,018 | — | 1,496 | 28 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
| Wendy’s |
Fort Smith | AR | — | 63 | 1,016 | — | 1,079 | 28 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
| Wendy’s |
Milwaukee | WI | — | (14) | 436 | 1,016 | — | 1,452 | 22 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Wendy’s |
Sheboygan | WI | — | (14) | 676 | 1,014 | — | 1,690 | 22 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Wendy’s |
Saint Bernard | OH | — | (14) | 432 | 1,009 | — | 1,441 | 22 | 7/31/2013 | 1985 | |||||||||||||||||||||||
| Wendy’s |
Lebanon | VA | — | (14) | 431 | 1,006 | — | 1,437 | 22 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Wendy’s |
Mokena | IL | — | (14) | 665 | 997 | — | 1,662 | 22 | 7/31/2013 | 1992 | |||||||||||||||||||||||
| Wendy’s |
Richmond | IN | — | (14) | 661 | 992 | — | 1,653 | 22 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Wendy’s |
Birmingham | AL | — | (14) | 562 | 990 | — | 1,552 | 27 | 6/27/2013 | 2005 | |||||||||||||||||||||||
| Wendy’s |
Ponca City | OK | — | (14) | 529 | 983 | — | 1,512 | 22 | 7/31/2013 | 1979 | |||||||||||||||||||||||
| Wendy’s |
South Hill | VA | — | 313 | 976 | — | 1,289 | 27 | 6/27/2013 | 1984 | ||||||||||||||||||||||||
| Wendy’s |
Hillsville | VA | — | (14) | 324 | 973 | — | 1,297 | 21 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| Wendy’s |
Fairfield | OH | — | (14) | 794 | 971 | — | 1,765 | 21 | 7/31/2013 | 1981 | |||||||||||||||||||||||
| Wendy’s |
Janesville | WI | — | (14) | 647 | 971 | — | 1,618 | 21 | 7/31/2013 | 1991 | |||||||||||||||||||||||
| Wendy’s |
Parkersburg | WV | — | (14) | 241 | 964 | — | 1,205 | 21 | 7/31/2013 | 1996 | |||||||||||||||||||||||
| Wendy’s |
Joliet | IL | — | (14) | 642 | 963 | — | 1,605 | 21 | 7/31/2013 | 1977 | |||||||||||||||||||||||
| Wendy’s |
Cortland | NY | — | (14) | 635 | 952 | — | 1,587 | 21 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
Norwich | CT | — | 703 | 937 | — | 1,640 | 26 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
| Wendy’s |
Minden | LA | — | (14) | 182 | 936 | — | 1,118 | 26 | 6/27/2013 | 2001 | |||||||||||||||||||||||
| Wendy’s |
Bowling Green | OH | — | 502 | 932 | — | 1,434 | 20 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Wendy’s |
Beloit | WI | — | (14) | 1,138 | 931 | — | 2,069 | 20 | 7/31/2013 | 2002 | |||||||||||||||||||||||
| Wendy’s |
West Chester | OH | — | (14) | 616 | 924 | — | 1,540 | 20 | 7/31/2013 | 2005 | |||||||||||||||||||||||
| Wendy’s |
Morrow | GA | — | (14) | 755 | 922 | — | 1,677 | 20 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Wendy’s |
Middletown | OH | — | (14) | 752 | 920 | — | 1,672 | 20 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Wendy’s |
Rogers | AR | — | 579 | 912 | — | 1,491 | 25 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
| Wendy’s |
Searcy | AR | — | 247 | 905 | — | 1,152 | 25 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
| Wendy’s |
Groton | CT | — | 1,099 | 900 | — | 1,999 | 20 | 7/31/2013 | 1978 | ||||||||||||||||||||||||
| Wendy’s |
Anderson | SC | — | 734 | 897 | — | 1,631 | 20 | 7/31/2013 | 1979 | ||||||||||||||||||||||||
| Wendy’s |
Wytheville | VA | — | (14) | 598 | 897 | — | 1,495 | 20 | 7/31/2013 | 2003 | |||||||||||||||||||||||
| Wendy’s |
Springdale | AR | — | 323 | 896 | — | 1,219 | 25 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
| Wendy’s |
Pendleton | IN | — | (14) | 448 | 895 | — | 1,343 | 25 | 6/27/2013 | 2005 | |||||||||||||||||||||||
| Wendy’s |
Enid | OK | — | (14) | 158 | 893 | — | 1,051 | 20 | 7/31/2013 | 2003 | |||||||||||||||||||||||
| Wendy’s |
Buckhannon | WV | — | (14) | 157 | 890 | — | 1,047 | 20 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Wendy’s |
Parkersburg | WV | — | (14) | 295 | 885 | — | 1,180 | 19 | 7/31/2013 | 1979 | |||||||||||||||||||||||
| Wendy’s |
Binghamton | NY | — | (14) | 293 | 879 | — | 1,172 | 19 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Wendy’s |
Little Rock | AR | — | 278 | 878 | — | 1,156 | 24 | 6/27/2013 | 1976 | ||||||||||||||||||||||||
| Wendy’s |
Batesville | AR | — | 155 | 878 | — | 1,033 | 19 | 7/31/2013 | 1995 | ||||||||||||||||||||||||
| Wendy’s |
Buckeye Lake | OH | — | (14) | 864 | 877 | — | 1,741 | 24 | 6/27/2013 | 2000 | |||||||||||||||||||||||
| Wendy’s |
Ripley | WV | — | (14) | 273 | 871 | — | 1,144 | 24 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
West Carrollton | OH | — | (14) | 708 | 865 | — | 1,573 | 19 | 7/31/2013 | 1979 | |||||||||||||||||||||||
| Wendy’s |
Whitehall | OH | — | (14) | 716 | 863 | — | 1,579 | 24 | 6/27/2013 | 1983 | |||||||||||||||||||||||
| Wendy’s |
North Myrtle Beach | SC | — | 464 | 861 | — | 1,325 | 19 | 7/31/2013 | 1983 | ||||||||||||||||||||||||
F-155
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Wendy’s |
Hayes | VA | — | (14) | 304 | 859 | — | 1,163 | 24 | 6/27/2013 | 1992 | |||||||||||||||||||||||
| Wendy’s |
Lynn Haven | FL | — | (14) | 446 | 852 | — | 1,298 | 24 | 6/27/2013 | 2005 | |||||||||||||||||||||||
| Wendy’s |
Panama City | FL | — | (14) | 445 | 837 | — | 1,282 | 23 | 6/27/2013 | 1987 | |||||||||||||||||||||||
| Wendy’s |
Conway | AR | — | 482 | 833 | — | 1,315 | 23 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
| Wendy’s |
Fayetteville | AR | — | 408 | 830 | — | 1,238 | 23 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
| Wendy’s |
Payson | AZ | — | 679 | 829 | — | 1,508 | 18 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Wendy’s |
Springdale | AR | — | 410 | 821 | — | 1,231 | 23 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
| Wendy’s |
Bridgeport | WV | — | (14) | 273 | 818 | — | 1,091 | 18 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
Milwaukee | WI | — | (14) | 810 | 810 | — | 1,620 | 18 | 7/31/2013 | 1979 | |||||||||||||||||||||||
| Wendy’s |
Burlington | WA | — | 425 | 806 | — | 1,231 | 22 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
| Wendy’s |
Baltimore | MD | — | (14) | 760 | 802 | — | 1,562 | 22 | 6/27/2013 | 1995 | |||||||||||||||||||||||
| Wendy’s |
The Dalles | OR | — | 201 | 802 | — | 1,003 | 18 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Wendy’s |
Eatontown | NJ | — | (14) | 651 | 796 | — | 1,447 | 17 | 7/31/2013 | 1987 | |||||||||||||||||||||||
| Wendy’s |
Baton Rouge | LA | — | 316 | 782 | — | 1,098 | 22 | 6/27/2013 | 1998 | ||||||||||||||||||||||||
| Wendy’s |
Douglasville | GA | — | 605 | 776 | — | 1,381 | 21 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
| Wendy’s |
Lithia Springs | GA | — | (14) | 668 | 774 | — | 1,442 | 21 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Wendy’s |
Little Rock | AR | — | 773 | 773 | — | 1,546 | 17 | 7/31/2013 | 1994 | ||||||||||||||||||||||||
| Wendy’s |
West Chester | OH | — | (14) | 944 | 772 | — | 1,716 | 17 | 7/31/2013 | 1982 | |||||||||||||||||||||||
| Wendy’s |
Titusville | FL | — | 414 | 770 | — | 1,184 | 17 | 7/31/2013 | 1996 | ||||||||||||||||||||||||
| Wendy’s |
Titusville | FL | — | (14) | 415 | 761 | — | 1,176 | 21 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
Crossville | TN | — | (14) | 190 | 760 | — | 950 | 17 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Wendy’s |
Anderson | IN | — | (14) | 505 | 757 | — | 1,262 | 17 | 7/31/2013 | 1995 | |||||||||||||||||||||||
| Wendy’s |
Van Buren | AR | — | 197 | 748 | — | 945 | 21 | 6/27/2013 | 1994 | ||||||||||||||||||||||||
| Wendy’s |
New Berlin | WI | — | (14) | 903 | 739 | — | 1,642 | 16 | 7/31/2013 | 1983 | |||||||||||||||||||||||
| Wendy’s |
Anderson | IN | — | (14) | 872 | 736 | — | 1,608 | 20 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Wendy’s |
Madison Heights | MI | — | (14) | 198 | 725 | — | 923 | 20 | 6/27/2013 | 1998 | |||||||||||||||||||||||
| Wendy’s |
Savannah | GA | — | (14) | 720 | 720 | — | 1,440 | 16 | 7/31/2013 | 2001 | |||||||||||||||||||||||
| Wendy’s |
Anderson | IN | — | (14) | 584 | 713 | — | 1,297 | 16 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Wendy’s |
Bentonville | AR | — | 648 | 708 | — | 1,356 | 20 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
| Wendy’s |
Anderson | IN | — | (14) | 859 | 708 | — | 1,567 | 20 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Wendy’s |
Cabot | AR | — | 524 | 707 | — | 1,231 | 20 | 6/27/2013 | 1991 | ||||||||||||||||||||||||
| Wendy’s |
Mechanicsville | VA | — | (14) | 521 | 704 | — | 1,225 | 20 | 6/27/2013 | 1988 | |||||||||||||||||||||||
| Wendy’s |
Vienna | WV | — | (14) | 301 | 702 | — | 1,003 | 15 | 7/31/2013 | 1976 | |||||||||||||||||||||||
| Wendy’s |
Melbourne | FL | — | (14) | 550 | 681 | — | 1,231 | 19 | 6/27/2013 | 1993 | |||||||||||||||||||||||
| Wendy’s |
Tinton Falls | NJ | — | 874 | 671 | — | 1,545 | 19 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
| Wendy’s |
Creedmoor | NC | — | 533 | 663 | — | 1,196 | 18 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
| Wendy’s |
Little Rock | AR | — | (14) | 532 | 650 | — | 1,182 | 14 | 7/31/2013 | 1978 | |||||||||||||||||||||||
| Wendy’s |
Russellville | AR | — | 356 | 638 | — | 994 | 18 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
| Wendy’s |
Arkadelphia | AR | — | 225 | 633 | — | 858 | 18 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
| Wendy’s |
Greenville | SC | — | 516 | 631 | — | 1,147 | 14 | 7/31/2013 | 1975 | ||||||||||||||||||||||||
| Wendy’s |
San Antonio | TX | — | 268 | 630 | — | 898 | 17 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
| Wendy’s |
Christiansburg | VA | — | (14) | 416 | 624 | — | 1,040 | 14 | 7/31/2013 | 1980 | |||||||||||||||||||||||
| Wendy’s |
Little Rock | AR | — | 990 | 623 | — | 1,613 | 17 | 6/27/2013 | 1982 | ||||||||||||||||||||||||
F-156
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Wendy’s |
Woodbridge | VA | — | (14) | 521 | 615 | — | 1,136 | 17 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Wendy’s |
Indialantic | FL | — | (14) | 592 | 614 | — | 1,206 | 17 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Wendy’s |
North Haven | CT | — | 729 | 610 | — | 1,339 | 17 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
| Wendy’s |
Conway | AR | — | 478 | 594 | — | 1,072 | 16 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
| Wendy’s |
Anniston | AL | — | (14) | 454 | 591 | — | 1,045 | 16 | 6/27/2013 | 1976 | |||||||||||||||||||||||
| Wendy’s |
Merritt Island | FL | — | 720 | 589 | — | 1,309 | 13 | 7/31/2013 | 1990 | ||||||||||||||||||||||||
| Wendy’s |
Bryant | AR | — | 529 | 575 | — | 1,104 | 16 | 6/27/2013 | 1995 | ||||||||||||||||||||||||
| Wendy’s |
Spartanburg | SC | — | 699 | 572 | — | 1,271 | 13 | 7/31/2013 | 1977 | ||||||||||||||||||||||||
| Wendy’s |
Port Orange | FL | — | (14) | 695 | 569 | — | 1,264 | 13 | 7/31/2013 | 1996 | |||||||||||||||||||||||
| Wendy’s |
Cocoa | FL | — | (14) | 249 | 567 | — | 816 | 16 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Wendy’s |
Ormond Beach | FL | — | (14) | 626 | 561 | — | 1,187 | 16 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Wendy’s |
North Tazewell | VA | — | 124 | 560 | — | 684 | 16 | 6/27/2013 | 1980 | ||||||||||||||||||||||||
| Wendy’s |
Stockbridge | GA | — | 480 | 558 | — | 1,038 | 15 | 6/27/2013 | 1897 | ||||||||||||||||||||||||
| Wendy’s |
North Little Rock | AR | — | 420 | 551 | — | 971 | 15 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
| Wendy’s |
Memphis | TN | — | 227 | 530 | — | 757 | 12 | 7/31/2013 | 1980 | ||||||||||||||||||||||||
| Wendy’s |
Panama City | FL | — | (14) | 461 | 529 | — | 990 | 15 | 6/27/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
Tallahassee | FL | — | (14) | 952 | 514 | — | 1,466 | 14 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Wendy’s |
Austell | GA | — | (14) | 383 | 506 | — | 889 | 14 | 6/27/2013 | 1994 | |||||||||||||||||||||||
| Wendy’s |
Indianapolis | IN | — | 214 | 505 | — | 719 | 14 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
| Wendy’s |
Tallahassee | FL | — | (14) | 855 | 505 | — | 1,360 | 14 | 6/27/2013 | 1986 | |||||||||||||||||||||||
| Wendy’s |
Ormond Beach | FL | — | (14) | 503 | 503 | — | 1,006 | 11 | 7/31/2013 | 1984 | |||||||||||||||||||||||
| Wendy’s |
Little Rock | AR | — | 501 | 501 | — | 1,002 | 11 | 7/31/2013 | 1983 | ||||||||||||||||||||||||
| Wendy’s |
Bellevue | NE | — | (14) | 338 | 484 | — | 822 | 13 | 6/27/2013 | 1981 | |||||||||||||||||||||||
| Wendy’s |
Eastman | GA | — | (14) | 258 | 473 | — | 731 | 13 | 6/27/2013 | 1996 | |||||||||||||||||||||||
| Wendy’s |
Little Rock | AR | — | 605 | 463 | — | 1,068 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Wendy’s |
Fayetteville | AR | — | (14) | 463 | 463 | — | 926 | 10 | 7/31/2013 | 1989 | |||||||||||||||||||||||
| Wendy’s |
San Antonio | TX | — | 410 | 451 | — | 861 | 13 | 6/27/2013 | 1987 | ||||||||||||||||||||||||
| Wendy’s |
Columbia | SC | — | 425 | 438 | — | 863 | 12 | 6/27/2013 | 1993 | ||||||||||||||||||||||||
| Wendy’s |
Brunswick | GA | — | (14) | 306 | 435 | — | 741 | 12 | 6/27/2013 | 1985 | |||||||||||||||||||||||
| Wendy’s |
Pine Bluff | AR | — | 105 | 433 | — | 538 | 12 | 6/27/2013 | 1978 | ||||||||||||||||||||||||
| Wendy’s |
South Daytona | FL | — | (14) | 531 | 432 | — | 963 | 12 | 6/27/2013 | 1980 | |||||||||||||||||||||||
| Wendy’s |
Starke | FL | — | 383 | 419 | — | 802 | 12 | 6/27/2013 | 1979 | ||||||||||||||||||||||||
| Wendy’s |
Smyrna | GA | — | 693 | 416 | — | 1,109 | 12 | 6/27/2013 | 1990 | ||||||||||||||||||||||||
| Wendy’s |
Hot Springs | AR | — | 593 | 395 | — | 988 | 9 | 7/31/2013 | 1974 | ||||||||||||||||||||||||
| Wendy’s |
New Smyrna Beach | FL | — | (14) | 476 | 394 | — | 870 | 11 | 6/27/2013 | 1982 | |||||||||||||||||||||||
| Wendy’s |
San Antonio | TX | — | 320 | 320 | — | 640 | 9 | 6/27/2013 | 1985 | ||||||||||||||||||||||||
| Wendy’s |
Suitland | MD | — | (14) | 332 | 275 | — | 607 | 8 | 6/27/2013 | 1979 | |||||||||||||||||||||||
| Wendy’s |
Landover | MD | — | (14) | 340 | 267 | — | 607 | 7 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Wendy’s |
Springs | TX | — | 217 | 266 | — | 483 | 6 | 7/31/2013 | 1987 | ||||||||||||||||||||||||
| Wendy’s |
Little Rock | AR | — | 762 | 258 | — | 1,020 | 7 | 6/27/2013 | 1977 | ||||||||||||||||||||||||
| Wendy’s |
Titusville | FL | — | (14) | 528 | 239 | — | 767 | 7 | 6/27/2013 | 1978 | |||||||||||||||||||||||
| Wendy’s |
Homewood | AL | — | 995 | — | — | 995 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
| Wendy’s |
Columbia | SC | — | 1,368 | — | — | 1,368 | — | 6/27/2013 | N/A | ||||||||||||||||||||||||
F-157
| Initial Costs | Costs Capitalized Subsequent to Acquisition |
Gross Amount Carried at December 31, 2013 (10) (11) |
||||||||||||||||||||||||||||||||
| Property |
City |
State |
Encumbrances at December 31, 2013 |
Land | Buildings, Fixtures and Improvements |
Accumulated Depreciation (12)(13) |
Date Acquired |
Date of Construction | ||||||||||||||||||||||||||
| Wendy’s |
Edmond | OK | — | 791 | — | — | 791 | — | 7/31/2013 | 1979 | ||||||||||||||||||||||||
| West Fork Roadhouse |
Youngstown | OH | — | 139 | 232 | — | 371 | 7 | 6/27/2013 | 1976 | ||||||||||||||||||||||||
| Whataburger |
El Campo | TX | — | 693 | 1,013 | — | 1,706 | 28 | 6/27/2013 | 1986 | ||||||||||||||||||||||||
| Whataburger |
Edna | TX | — | (14) | 290 | 869 | — | 1,159 | 19 | 7/31/2013 | 1986 | |||||||||||||||||||||||
| Whataburger |
Lubbock | TX | — | (14) | 432 | 647 | — | 1,079 | 14 | 7/31/2013 | 1992 | |||||||||||||||||||||||
| Whataburger |
Ingleside | TX | — | 1,106 | 474 | — | 1,580 | 10 | 7/31/2013 | 1986 | ||||||||||||||||||||||||
| Williams Fried Chicken |
Garland | TX | — | 265 | 137 | — | 402 | 4 | 6/27/2013 | 1983 | ||||||||||||||||||||||||
| Winn Dixie |
Jacksonville | FL | — | (14) | 4,360 | 82,825 | — | 87,185 | 2,736 | 4/24/2013 | 2000 | |||||||||||||||||||||||
| Zebb’s |
Amherst | NY | — | (14) | 150 | 1,347 | — | 1,497 | 33 | 7/31/2013 | 1994 | |||||||||||||||||||||||
| Zebb’s |
Orchard Park | NY | — | (14) | 69 | 1,320 | — | 1,389 | 33 | 7/31/2013 | 2000 | |||||||||||||||||||||||
| Zebb’s |
Rochester | NY | — | (14) | 126 | 1,137 | — | 1,263 | 28 | 7/31/2013 | 1990 | |||||||||||||||||||||||
| Zebb’s |
New Hartford | NY | — | (14) | 122 | 1,095 | — | 1,217 | 27 | 7/31/2013 | 1970 | |||||||||||||||||||||||
| Z’Tejas Grill |
Austin | TX | — | (14) | 837 | 1,797 | — | 2,634 | 52 | 6/27/2013 | 2007 | |||||||||||||||||||||||
| Capitalized land value on DFLs |
— | 6,932 | — | — | 6,932 | — | ||||||||||||||||||||||||||||
| Encumbrances allocated based on notes below |
2,152,878 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Total |
$ | 3,228,461 | $ | 1,382,232 | $ | 5,311,406 | $ | 5,909 | $ | 6,699,547 | $ | 205,712 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (1) | These properties collateralize a senior corporate credit facility of up to $2.42 billion, which had $1.06 billion outstanding as of December 31, 2013. |
| (2) | These properties collateralize a $150.0 million secured credit facility, which had $150.0 million outstanding as of December 31, 2013. |
| (3) | These properties collateralize a $54.3 million mortgage note payable of which $54.3 million was outstanding as of December 31, 2013. |
| (4) | These properties collateralize a $48.5 million mortgage note payable of which $48.5 million was outstanding as of December 31, 2013. |
| (5) | These properties collateralize a $36.6 million mortgage note payable of which $36.6 million was outstanding as of December 31, 2013. |
| (6) | These properties collateralize a $12.3 million mortgage note payable of which $12.3 million was outstanding as of December 31, 2013. |
| (7) | These properties collateralize a $15.0 million mortgage note payable of which $15.0 million was outstanding as of December 31, 2013. |
| (8) | These properties collateralize a $4.5 million mortgage note payable of which $4.5 million was outstanding as of December 31, 2013. |
| (9) | These properties collateralize a $11.9 million mortgage note payable of which $11.9 million was outstanding as of December 31, 2013. |
| (10) | Acquired intangible lease assets allocated to individual properties in the amount of $759.6 million are not reflected in the table above. |
| (11) | The tax basis of aggregate land, buildings and improvements as of December 31, 2013 was $5.1 million. |
| (12) | The accumulated depreciation column excludes $48.1 million of amortization associated with acquired intangible lease assets. |
| (13) | Depreciation is computed using the straight-line method over the estimated useful lives of up to forty years for buildings, five to fifteen years for building fixtures and improvements. |
| (14) | These properties collateralize a senior corporate facility of up to $800.0 million, which had $760.0 million outstanding as of December 31, 2013. |
A summary of activity for real estate and accumulated depreciation for the year ended December 31, 2013 (amounts in thousands):
| Year ended December 31, 2013 | ||||
| Real estate investments, at cost: |
||||
| Balance at beginning of year |
$ | 1,684,115 | ||
| Additions - acquisitions and improvements |
5,019,135 | |||
| Deductions - impairments |
(3,703 | ) | ||
|
|
|
|||
| Balance at end of the year |
$ | 6,699,547 | ||
|
|
|
|||
| Accumulated depreciation: |
||||
| Balance at beginning of year |
$ | 45,050 | ||
| Depreciation expense |
160,662 | |||
|
|
|
|||
| Balance at end of the year |
$ | 205,712 | ||
|
|
|
|||
F-158
AMERICAN REALTY CAPITAL PROPERTIES, INC.
LOANS HELD FOR INVESTMENT
SCHEDULE IV
December 31, 2013
(In thousands)
| Description |
Location |
Interest Rate |
Final Maturity Date |
Periodic Payment Terms |
Prior Liens |
Face Amount of Mortgages |
Carrying Amount of Mortgages |
Principal Amount of Loans Subject to Delinquent Principal or Interest |
||||||||||||||||
| Long-Term Mortgage Loans |
||||||||||||||||||||||||
| Bank Of America, N.A. |
Mt. Airy, MD | 6.42 | % | Dec 2026 | Principal and interest are payable monthly at a varying amount over the life to maturity |
$ | 2,973 | $ | 3,329 | $ | — | |||||||||||||
| CVS Caremark Corporation |
Evansville, IN | 6.22 | % | Jan 2033 | Principal and interest are payable monthly at a level amount over the life to maturity |
2,932 | 3,268 | — | ||||||||||||||||
| CVS Caremark Corporation |
Greensboro, GA | 6.52 | % | Jan 2030 | Principal and interest are payable monthly at a level amount over the life to maturity |
1,133 | 1,289 | — | ||||||||||||||||
| CVS Caremark Corporation |
Shelby Twp., MI | 5.98 | % | Jan 2031 | Principal and interest are payable monthly at a varying amount over the life to maturity |
2,237 | 2,443 | — | ||||||||||||||||
| Koninklijke Ahold, N.V. |
Bensalem, PA | 7.24 | % | May 2020 | Principal and interest are payable monthly at a varying amount over the life to maturity |
2,083 | 2,384 | — | ||||||||||||||||
| Lowes Companies, Inc. |
Framingham, MA | N/A | Sep 2031 | Principal and interest are payable monthly at a varying amount over the life to maturity |
5,692 | 1,399 | — | |||||||||||||||||
| Walgreen Co. |
Dallas, TX | 6.46 | % | Dec 2029 | Principal and interest are payable monthly at a level amount over the life to maturity |
2,851 | 3,231 | — | ||||||||||||||||
| Walgreen Co. |
Nacogdoches, TX | 6.8 | % | Sep 2030 | Principal and interest are payable monthly at a level amount over the life to maturity |
3,084 | 3,561 | — | ||||||||||||||||
| Walgreen Co. |
Rosemead, CA | 6.26 | % | Dec 2029 | Principal and interest are payable monthly at a level amount over the life to maturity |
4,369 | 4,888 | — | ||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| $ | 27,354 | $ | 25,792 | $ | — | |||||||||||||||||||
| Corporate Credit Notes |
||||||||||||||||||||||||
| Federal Express Corporation |
Bellingham, WA | 5.78 | % | Mar 2015 | Principal and interest are payable monthly at a level amount over the life to maturity |
$ | 81 | $ | 83 | $ | — | |||||||||||||
| Lowes Companies, Inc. |
N. Windham, ME | 5.28 | % | Sep 2015 | Principal and interest are payable monthly at a level amount over the life to maturity |
256 | 261 | — | ||||||||||||||||
| Walgreen Co. |
Jefferson City, TN | 5.49 | % | May 2015 | Principal and interest are payable monthly at a level amount over the life to maturity |
140 | 143 | — | ||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| $ | 477 | $ | 487 | $ | — | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Total |
$ | 27,831 | $ | 26,279 | $ | — | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Carrying Amount of Mortgages |
||||
| Balance - November 5, 2013 |
$ | 26,457 | ||
| Additions during the year: |
||||
| New Loan Investments |
— | |||
| Deductions during the year: |
||||
| Principal received |
(164 | ) | ||
| Allowance for loan losses |
— | |||
| Amortization of unearned discounts and premiums |
(14 | ) | ||
|
|
|
|||
| Balance - December 31, 2013 |
$ | 26,279 | ||
|
|
|
|||
F-159
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)
(Unaudited)
| June 30, 2014 (As Restated) (1) |
December 31, 2013 (As Restated) (1) |
|||||||
| ASSETS | ||||||||
| Real estate investments, at cost: |
||||||||
| Land |
$ | 3,343,235 | $ | 1,380,308 | ||||
| Buildings, fixtures and improvements |
12,420,626 | 5,297,400 | ||||||
| Land and construction in progress |
62,594 | 21,839 | ||||||
| Acquired intangible lease assets |
2,227,393 | 759,595 | ||||||
|
|
|
|
|
|||||
| Total real estate investments, at cost |
18,053,848 | 7,459,142 | ||||||
| Less: accumulated depreciation and amortization |
(660,617 | ) | (267,278 | ) | ||||
|
|
|
|
|
|||||
| Total real estate investments, net |
17,393,231 | 7,191,864 | ||||||
| Investment in unconsolidated entities |
102,047 | — | ||||||
| Investment in direct financing leases, net |
62,094 | 66,112 | ||||||
| Investment securities, at fair value |
219,204 | 62,067 | ||||||
| Loans held for investment, net |
97,587 | 26,279 | ||||||
| Cash and cash equivalents |
195,529 | 52,725 | ||||||
| Restricted cash |
69,544 | 35,921 | ||||||
| Intangible assets, net |
347,618 | — | ||||||
| Deferred costs and other assets, net |
418,199 | 280,661 | ||||||
| Goodwill |
2,293,020 | 92,789 | ||||||
| Due from affiliates |
73,686 | — | ||||||
| Assets held for sale |
38,737 | 665 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 21,310,496 | $ | 7,809,083 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND EQUITY | ||||||||
| Mortgage notes payable, net |
$ | 4,227,494 | $ | 1,301,114 | ||||
| Corporate bonds, net |
2,546,089 | — | ||||||
| Convertible debt due to General Partner, net |
975,003 | 972,490 | ||||||
| Credit facilities |
1,896,000 | 1,969,800 | ||||||
| Other debt, net |
146,158 | 104,804 | ||||||
| Below-market lease liabilities, net |
281,954 | 77,169 | ||||||
| Accounts payable and accrued expenses |
176,900 | 730,571 | ||||||
| Deferred rent, derivative and other liabilities |
223,419 | 40,271 | ||||||
| Distributions payable |
10,779 | 10,903 | ||||||
| Due to affiliates |
1,226 | 103,434 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
10,485,022 | 5,310,556 | ||||||
|
|
|
|
|
|||||
| General partner’s Series D Preferred equity—21,735,008 General Partner Preferred Units issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
269,299 | 269,299 | ||||||
|
|
|
|
|
|||||
| General partner’s common equity—907,932,949 and 239,248,853 General Partner OP Units issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
9,248,099 | 1,018,124 | ||||||
| General partner’s preferred equity (excluding Series D Preferred equity)—42,730,013 and 42,199,547 General Partner Preferred Units issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
1,030,642 | 1,054,989 | ||||||
| Limited partners’ common equity—35,515,913 and 17,832,274 Limited Partner OP Units issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
246,174 | 139,082 | ||||||
| Limited partners’ preferred equity—190,999 and 721,645 Limited Partner Preferred Units issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
5,666 | 16,466 | ||||||
|
|
|
|
|
|||||
| Total partners’ equity |
10,530,581 | 2,228,661 | ||||||
| Non-controlling interests |
25,594 | 567 | ||||||
|
|
|
|
|
|||||
| Total equity |
10,556,175 | 2,229,228 | ||||||
|
|
|
|
|
|||||
| Total liabilities and equity |
$ | 21,310,496 | $ | 7,809,083 | ||||
|
|
|
|
|
|||||
| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-160
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (As Restated)(1) | (As Restated)(1) | (As Restated)(1) | (As Restated)(1) | |||||||||||||
| Revenues: |
||||||||||||||||
| Rental income |
$ | 314,519 | $ | 52,664 | $ | 558,934 | $ | 93,651 | ||||||||
| Direct financing lease income |
1,181 | — | 2,187 | — | ||||||||||||
| Operating expense reimbursements |
29,256 | 2,281 | 50,732 | 4,191 | ||||||||||||
| Cole Capital revenue |
37,222 | — | 91,479 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
382,178 | 54,945 | 703,332 | 97,842 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Cole Capital reallowed fees and commissions |
7,068 | — | 41,504 | — | ||||||||||||
| Acquisition related (2) |
7,201 | 37,266 | 20,618 | 47,593 | ||||||||||||
| Merger and other non-routine transactions (3) |
7,422 | 5,865 | 167,720 | 129,433 | ||||||||||||
| Property operating |
39,286 | 3,086 | 69,041 | 5,635 | ||||||||||||
| Management fees to affiliate |
— | — | 13,888 | 12,493 | ||||||||||||
| General and administrative (4) |
40,012 | 6,283 | 96,504 | 14,055 | ||||||||||||
| Depreciation and amortization |
250,739 | 33,681 | 424,581 | 60,434 | ||||||||||||
| Impairment of real estate |
1,556 | — | 1,556 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
353,284 | 86,181 | 835,412 | 269,643 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
28,894 | (31,236 | ) | (132,080 | ) | (171,801 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other (expense) income: |
||||||||||||||||
| Interest expense, net |
(103,897 | ) | (11,424 | ) | (224,848 | ) | (18,225 | ) | ||||||||
| Extinguishment of debt, net |
(6,469 | ) | — | (15,868 | ) | — | ||||||||||
| Other income, net |
11,936 | 1,523 | 22,146 | 2,522 | ||||||||||||
| Gain (loss) on derivative instruments, net |
14,207 | (31,174 | ) | 7,086 | (31,179 | ) | ||||||||||
| Loss on disposition of properties and assets held for sale, net |
(1,269 | ) | — | (18,874 | ) | — | ||||||||||
| Gain on sale of investments |
— | — | — | 451 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other expenses, net |
(85,492 | ) | (41,075 | ) | (230,358 | ) | (46,431 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss from continuing operations |
(56,598 | ) | (72,311 | ) | (362,438 | ) | (218,232 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Discontinued operations: |
||||||||||||||||
| Income from operations of held for sale properties |
— | 36 | — | 20 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income from discontinued operations |
— | 36 | — | 20 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
(56,598 | ) | (72,275 | ) | (362,438 | ) | (218,212 | ) | ||||||||
| Net income attributable to non-controlling interests |
(272 | ) | — | (80 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to the unitholders |
$ | (56,870 | ) | $ | (72,275 | ) | $ | (362,518 | ) | $ | (218,212 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted net loss per share attributable to common unitholders |
$ | (0.10 | ) | $ | (0.35 | ) | $ | (0.58 | ) | $ | (1.14 | ) | ||||
| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
| (2) | Includes $113,000 and $19.9 million to affiliates for the three months ended June 30, 2014 and 2013, respectively, and $1.7 million and $26.8 million to affiliates for the six months ended June 30, 2014 and 2013, respectively. |
| (3) | Includes $40,000 and $255,000 to affiliates for the three months ended June 30, 2014 and 2013, respectively, and $137.8 million and $107.0 million to affiliates for the six months ended June 30, 2014 and 2013, respectively. |
| (4) | Includes $386,000 and $4.1 million to affiliates for the three months ended June 30, 2014 and 2013, respectively, and $14.9 million and $9.3 million to affiliates for the six months ended June 30, 2014 and 2013, respectively. |
The accompanying notes are an integral part of these statements.
F-161
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (As Restated)(1) | (As Restated)(1) | (As Restated)(1) | (As Restated)(1) | |||||||||||||
| Net loss attributable to unitholders |
$ | (56,870 | ) | $ | (72,275 | ) | $ | (362,518 | ) | $ | (218,212 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other comprehensive (loss) income: |
||||||||||||||||
| Designated derivatives, fair value adjustments |
(7,283 | ) | 14,058 | (9,581 | ) | 12,881 | ||||||||||
| Unrealized (loss) gain on investment securities, net |
5,878 | (1,793 | ) | 8,973 | (1,365 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other comprehensive (loss) income |
(1,405 | ) | 12,265 | (608 | ) | 11,516 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total comprehensive loss attributable to unitholders |
$ | (58,275 | ) | $ | (60,010 | ) | $ | (363,126 | ) | $ | (206,696 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-162
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands, except for unit data) (Unaudited)
(As restated for the six months ended June 30, 2014 and year ended December 31, 2013) (1)
| Preferred Units | Common Units | |||||||||||||||||||||||||||||||||||||||||||
| Number of General Partner Preferred Units |
General Partner’s Equity |
Number of Limited Partner Preferred Units |
Limited Partners’ Equity |
Number of General Partner OP Units |
General Partner’s Equity |
Number of Limited Partner OP Units |
Limited Partners’ Equity |
Total Partners’ Equity |
Non- Controlling Interests |
Total Equity |
||||||||||||||||||||||||||||||||||
| Balance, December 31, 2013 |
42,199,547 | $ | 1,054,989 | 721,465 | $ | 16,466 | 239,248,853 | $ | 1,018,124 | 17,832,274 | $ | 139,082 | $ | 2,228,661 | $ | 567 | $ | 2,229,228 | ||||||||||||||||||||||||||
| Issuance of Common OP Units, net |
— | — | — | — | 662,305,318 | 8,923,570 | 7,956,297 | 152,484 | 9,076,054 | — | 9,076,054 | |||||||||||||||||||||||||||||||||
| Issuance of Common OP Units through distribution reinvestment plan |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Offering costs, commissions and dealer manager fees |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Repurchases of Common OP Units |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Issuance of Preferred OP Units |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Excess of ARCT IV Merger considerations over historical cost |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Conversion of Limited Partners’ Common OP Units to General Partner’s Common OP units |
— | — | — | — | 1,017,355 | 14,725 | (1,017,355 | ) | (14,725 | ) | — | — | — | |||||||||||||||||||||||||||||||
| Conversion of Limited Partners’ Preferred OP Units to General Partner’s Preferred OP units |
530,466 | 10,800 | (530,466 | ) | (10,800 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Conversion of General Partner’s Preferred Units to General Partner’s Common OP Units |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Issuance of Common OP Units in conversion of Convertible Preferred OP Units Series C |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Issuance of Common OP Units |
— | — | — | — | 5,361,423 | (2,019 | ) | — | — | (2,019 | ) | — | (2,019 | ) | ||||||||||||||||||||||||||||||
| Equity-based compensation |
— | — | — | — | — | 20,384 | 10,744,697 | 6,880 | 27,264 | — | 27,264 | |||||||||||||||||||||||||||||||||
| Equity component of convertible debt |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Contribution from Advisor |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Consideration paid for assets of Advisor in excess of carryover basis |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Distributions declared on Common OP Units |
— | — | — | — | — | (370,619 | ) | — | (21,166 | ) | (391,785 | ) | (801 | ) | (392,586 | ) | ||||||||||||||||||||||||||||
| Distributions declared on Preferred OP Units |
— | (35,147 | ) | — | — | — | (9,321 | ) | — | — | (44,468 | ) | — | (44,468 | ) | |||||||||||||||||||||||||||||
| Issuance of Common OP Units |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Contributions from non-controlling interest holders |
— | — | — | — | — | — | — | — | — | 982 | 982 | |||||||||||||||||||||||||||||||||
| Non-controlling interest retained in Cole merger |
— | — | — | — | — | — | — | — | — | 24,766 | 24,766 | |||||||||||||||||||||||||||||||||
| Redemption of Common OP Units |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest holders |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | (346,164 | ) | — | (16,354 | ) | (362,518 | ) | 80 | (362,438 | ) | |||||||||||||||||||||||||||||
| Other comprehensive income |
— | — | — | — | — | (581 | ) | — | (27 | ) | (608 | ) | — | (608 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Balance, June 30, 2014 (as restated) |
42,730,013 | $ | 1,030,642 | 190,999 | $ | 5,666 | 907,932,949 | $ | 9,248,099 | 35,515,913 | $ | 246,174 | $ | 10,530,581 | $ | 25,594 | $ | 10,556,175 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-163
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands, except for unit data) (Unaudited)
(As restated for the six months ended June 30, 2013) (1)
| Preferred Units | Common Units | |||||||||||||||||||||||||||||||||||||||||||
| Number of General Partner Preferred Units |
General Partner’s Equity |
Number of Limited Partner Preferred Units |
Limited Partners’ Equity |
Number of General Partner OP Units |
General Partner’s Equity |
Number of Limited Partner OP Units |
Limited Partners’ Equity |
Total Partners’ Equity |
Non- Controlling Interests |
Total Equity |
||||||||||||||||||||||||||||||||||
| Balance, December 31, 2012 (as restated) |
6,990,328 | $ | 163,047 | — | $ | — | 184,553,676 | $ | 1,489,587 | 1,621,349 | $ | 16,126 | $ | 1,668,760 | $ | — | $ | 1,668,760 | ||||||||||||||||||||||||||
| Issuance of Common OP Units |
— | — | — | — | 63,056,895 | 1,070,030 | — | — | 1,070,030 | — | 1,070,030 | |||||||||||||||||||||||||||||||||
| Issuance of Common OP Units through distribution reinvestment plan |
— | — | — | — | 832,591 | 20,615 | — | — | 20,615 | — | 20,615 | |||||||||||||||||||||||||||||||||
| Offering costs, commissions and dealer manager fees |
— | — | — | — | — | (163,814 | ) | — | — | (163,814 | ) | — | (163,814 | ) | ||||||||||||||||||||||||||||||
| Repurchases of Common OP Units |
— | — | — | — | (27,697,412 | ) | (350,397 | ) | — | — | (350,397 | ) | — | (350,397 | ) | |||||||||||||||||||||||||||||
| Issuance of Preferred OP Units |
35,930,885 | 898,272 | 721,465 | 15,878 | — | — | 630,689 | 13,880 | 928,030 | — | 928,030 | |||||||||||||||||||||||||||||||||
| Excess of ARCT IV Merger considerations over historical cost |
— | — | — | — | — | (555,683 | ) | — | — | (555,683 | ) | — | (555,683 | ) | ||||||||||||||||||||||||||||||
| Conversion of Limited Partners’ Common OP Units to General Partner’s Common OP units |
— | — | — | — | 599,233 | 5,799 | (599,233 | ) | (5,799 | ) | — | — | — | |||||||||||||||||||||||||||||||
| Conversion of General Partner’s Preferred Units to General Partner’s Common OP Units |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Issuance of Common OP Units in conversion of Convertible Preferred OP Units Series C |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Equity-based compensation |
— | — | — | — | 345,491 | 3,109 | 8,241,100 | 3,682 | 6,791 | — | 6,791 | |||||||||||||||||||||||||||||||||
| Equity component of convertible debt |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Contribution from Advisor |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Consideration paid for assets of Advisor in excess of carryover basis |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Distributions declared on Common OP Units |
— | — | — | — | — | (109,987 | ) | — | (3,463 | ) | (113,450 | ) | — | (113,450 | ) | |||||||||||||||||||||||||||||
| Issuance of Common OP Units |
— | — | — | — | — | — | 8,029,545 | 107,771 | 107,771 | — | 107,771 | |||||||||||||||||||||||||||||||||
| Contributions from non-controlling interest holders |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Non-controlling interest retained in Caplease merger |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Redemption of Common OP Units |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest holders |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | (213,468 | ) | — | (4,729 | ) | (218,197 | ) | — | (218,197 | ) | |||||||||||||||||||||||||||||
| Other comprehensive income |
— | — | — | — | — | 11,266 | — | 250 | 11,516 | — | 11,516 | |||||||||||||||||||||||||||||||||
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| Balance, June 30, 2013 (as restated) |
42,921,213 | $ | 1,061,319 | 721,465 | $ | 15,878 | 221,690,474 | $ | 1,207,057 | 17,923,450 | $ | 127,718 | $ | 2,411,972 | $ | — | $ | 2,411,972 | ||||||||||||||||||||||||||
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| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-164
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
| Six Months Ended June 30, | ||||||||
| 2014 (As Restated)(1) |
2013 (As Restated)(1) |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (362,438 | ) | $ | (218,212 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Issuance of OP Units |
92,884 | 107,771 | ||||||
| Depreciation and amortization |
473,184 | 64,780 | ||||||
| Loss on disposition of properties and assets held for sale, net |
18,874 | — | ||||||
| Equity-based compensation |
27,264 | 6,791 | ||||||
| Equity in income of unconsolidated entities |
385 | — | ||||||
| Distributions from unconsolidated entities |
4,033 | — | ||||||
| (Gain) loss on derivative instruments |
(7,086 | ) | 45 | |||||
| Gain on sale of investments, net |
— | (451 | ) | |||||
| Impairment of real estate |
1,556 | — | ||||||
| Unrealized loss on contingent value rights obligations, net of settlement payments |
— | 31,134 | ||||||
| Gain on extinguishment of debt |
(16,985 | ) | — | |||||
| Changes in assets and liabilities: |
||||||||
| Investment in direct financing leases |
525 | — | ||||||
| Deferred costs and other assets, net |
(93,553 | ) | (10,263 | ) | ||||
| Due from affiliates |
(5,685 | ) | — | |||||
| Accounts payable and accrued expenses |
(51,771 | ) | 4,160 | |||||
| Deferred rent, derivative and other liabilities |
(8,732 | ) | 2,676 | |||||
| Due to affiliates |
(41,262 | ) | 1,349 | |||||
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| Net cash provided by (used in) operating activities |
31,193 | (10,220 | ) | |||||
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| Cash flows from investing activities: |
||||||||
| Investments in real estate and other assets |
(1,246,588 | ) | (2,129,677 | ) | ||||
| Acquisition of a real estate business, net of cash acquired |
(756,232 | ) | — | |||||
| Investment in direct financing leases |
— | (76,410 | ) | |||||
| Capital expenditures |
(9,989 | ) | (30 | ) | ||||
| Real estate developments |
(21,733 | ) | — | |||||
| Principal repayments received from borrowers |
4,155 | — | ||||||
| Investments in unconsolidated entities |
(2,500 | ) | — | |||||
| Proceeds from disposition of properties |
94,823 | — | ||||||
| Investment in intangible assets |
(266 | ) | — | |||||
| Deposits for real estate investments |
(129,602 | ) | (47,086 | ) | ||||
| Uses and refunds of deposits for real estate investments |
196,075 | — | ||||||
| Purchases of investment securities |
— | (81,460 | ) | |||||
| Line of credit advances to affiliates |
(80,300 | ) | — | |||||
| Line of credit repayments from affiliates |
15,600 | — | ||||||
| Proceeds from sale of investment securities |
— | 44,188 | ||||||
| Change in restricted cash |
(15,499 | ) | — | |||||
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| Net cash used in investing activities |
(1,952,056 | ) | (2,290,475 | ) | ||||
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| Cash flows from financing activities: |
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| Proceeds from mortgage notes payable |
718,275 | 6,924 | ||||||
| Payments on mortgage notes payable |
(876,874 | ) | — | |||||
| Payments on other debt |
(7,524 | ) | — | |||||
| Proceeds from credit facilities |
3,246,000 | 825,000 | ||||||
| Payments on credit facilities |
(4,628,800 | ) | (349,604 | ) | ||||
| Proceeds from corporate bonds |
2,545,760 | — | ||||||
| Payments of deferred financing costs |
(84,165 | ) | (41,461 | ) | ||||
| Repurchases of OP Units |
— | (350,396 | ) | |||||
| Proceeds from issuances of preferred units |
— | 445,000 | ||||||
| Proceeds from issuances of OP Units, net offering costs |
1,593,462 | 1,810,042 | ||||||
| Consideration to the Former Manager (as defined in Note 1) for internalization |
— | — | ||||||
| Contributions from non-controlling interest holders |
982 | 29,758 | ||||||
| Distributions to non-controlling interest holders |
(15,831 | ) | (3,111 | ) | ||||
| Distributions paid |
(427,618 | ) | (90,740 | ) | ||||
| Change in restricted cash |
— | (844 | ) | |||||
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| Net cash provided by financing activities |
2,063,667 | 2,280,568 | ||||||
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| Net change in cash and cash equivalents |
$ | 142,804 | $ | (20,127 | ) | |||
| Cash and cash equivalents, beginning of period |
52,725 | 292,575 | ||||||
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| Cash and cash equivalents, end of period |
$ | 195,529 | $ | 272,448 | ||||
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| Supplemental disclosures: |
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| Cash paid for interest |
$ | 137,844 | $ | 11,004 | ||||
| Cash paid for income taxes |
$ | 7,622 | $ | 382 | ||||
| Non-cash investing and financing activities: |
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| Accrued capital expenditures and real estate developments |
$ | 5,534 | — | |||||
| Common stock issued through distribution reinvestment plan |
$ | — | $ | 2,603 | ||||
| (1) | For discussion on the restatement adjustments, see Note 2 — Restatement of Previously Issued Financial Statements. |
The accompanying notes are an integral part of these statements.
F-165
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Note 1 — Organization (As Restated)
ARC Properties Operating Partnership, L.P. (together with its subsidiaries, the “OP” or the “Operating Partnership”) is a Delaware limited partnership formed by American Realty Capital Properties, Inc. (the “General Partner” or “ARCP”), the Operating Partnership’s sole general partner, on January 13, 2011 to conduct the business of acquiring, owning and operating single-tenant, freestanding commercial real estate properties. The Operating Partnership is the entity through which substantially all of the General Partner’s operations are conducted. The actions of the Operating Partnership and its relationship with ARCP are governed by that certain Third Amended and Restated Agreement of Limited Partnership (the “LPA”), effective as of January 3, 2014, as amended. The General Partner does not have any significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the General Partner and the Operating Partnership are substantially the same. Additionally, pursuant to the LPA, all administrative expenses and expenses associated with the formation and continuity of existence and operation of the General Partner incurred by the General Partner on the Operating Partnership’s behalf shall be treated as expenses of the Operating Partnership. Further, when the General Partner issues any equity instrument that has been approved by the General Partner’s board of directors to date, the LPA requires the Operating Partnership to issue the General Partner equity instruments with substantially similar terms. The LPA will be amended to provide for the issuance of any additional class of equivalent equity instruments to the extent the General Partner’s board of directors authorizes the issuance of any new class of equity securities.
The General Partner, a self-managed real estate investment trust (“REIT”), holds 97.3% of the common equity interests (“OP Units”) in the Operating Partnership as of June 30, 2014. As of June 30, 2014, certain affiliates of the General Partner and certain unaffiliated investors are limited partners and owners of 1.7% and 1.0%, respectively, of the OP units in the Operating Partnership. Under the LPA, after holding OP Units of limited partner interests in the Operating Partnership (“Limited Partner OP Units”) for a period of one year, unless otherwise consented to by the General Partner, holders of Limited Partner OP Units have the right to redeem the Limited Partner OP Units for the cash value of a corresponding number of shares of the General Partner’s common stock or, at the option of the General Partner, a corresponding number of ARCP common shares. In the event that the Limited Partner OP Units are converted into ARCP common shares, the Operating Partnership will issue ARCP an equivalent number of OP Units with General Partner interests (“General Partner OP Units”). The remaining rights of the holders of Limited Partner OP Units are limited and do not include the ability to replace the General Partner or to approve the sale, purchase or refinancing of the Operating Partnership’s assets.
The Operating Partnership acts on behalf of the General Partner and therefore executes ARCP’s focus on investing in properties that are net leased to credit tenants, which are generally large public companies with investment-grade ratings and other creditworthy tenants. ARCP’s long-term business strategy is to acquire a diverse portfolio consisting of approximately 70% long-term leases and 30% medium-term leases, with an average portfolio remaining lease term of approximately 10 to 12 years. ARCP considers properties that are leased on a “medium-term” basis to mean properties originally leased long-term (10 years or longer) that currently have a primary remaining lease duration of generally three to eight years, on average. ARCP seeks to acquire granular, self-originated single-tenant net lease assets, which may be purchased through sale-leaseback transactions, small portfolios and build-to-suit opportunities, to the extent they are appropriate in terms of capitalization rate and scale. ARCP expects this investment strategy to provide for stable income from credit tenants and to provide for growth opportunities from re-leasing of current below market leases.
On behalf of ARCP, the Operating Partnership has advanced ARCP’s investment objectives by growing ARCP’s net lease portfolio through organic acquisitions and also through strategic mergers and acquisitions. See Note 3 — Mergers and Acquisitions (As Restated).
During the year ended December 31, 2013, ARC Properties Advisors, LLC (the General Partner’s “Former Manager”), a wholly owned subsidiary of AR Capital, LLC (“ARC”), managed ARCP’s affairs on a day-to-day basis and, as a result, the Operating Partnership’s actions were generally externally managed, with the exception of certain acquisition, accounting and portfolio management services performed by employees of the Operating Partnership. In August 2013, the General Partner’s board of directors determined that it was in the best interests of ARCP and its stockholders to become self-managed, and ARCP completed its transition to self-management on January 8, 2014. In connection with becoming self-managed, the General Partner terminated the management agreement with the Former Manager and ARCP, and the Operating Partnership entered into employment and incentive compensation arrangements with ARCP’s executives.
F-166
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
On June 11, 2014, the Operating Partnership, through indirect subsidiaries of the Operating Partnership (the “Sellers”), entered into an agreement of purchase and sale with BRE DDR Retail Holdings III LLC (the “Purchaser”), an entity indirectly jointly owned by affiliates of Blackstone Real Estate Partners VII L.P. and DDR Corp., by which the Sellers have agreed to sell to the Purchaser and the Purchaser has agreed to purchase from the Sellers 67 multi-tenant properties and nine single-tenant properties and the adjacent land and related property (the “Multi-Tenant Portfolio”). The purchase price of the Multi-Tenant Portfolio is $1.975 billion, subject to customary real estate adjustments. Properties may be excluded from the transaction in certain circumstances, in which case the purchase price will be reduced by the portion of the purchase price allocated to the excluded properties.
Note 2 — Restatement of Previously Issued Financial Statements
The Operating Partnership has restated its consolidated balance sheets as of June 30, 2014 and December 31, 2013 and its consolidated statements of operations and consolidated statements of comprehensive loss for the three and six months ended June 30, 2014 and 2013. In addition, the Operating Partnership has restated its consolidated statements of changes in equity and consolidated statements of cash flows for the three and six months ended June 30, 2014 and 2013, along with certain related notes to such restated consolidated financial statements. In addition, the December 31, 2013 and June 30, 2013 financial statements, as disclosed in Note 3 — Mergers and Acquisitions (As Restated), have also been recast in applying the carryover basis of accounting to include the effects of the merger with American Realty Capital Trust IV, Inc. (“ARCT IV”).
The General Partner determined that the restatement was necessary after an investigation was conducted by the Audit Committee of the General Partner’s Board of Directors (the “Audit Committee”) with the assistance of independent counsel and forensic accountants. The Audit Committee initiated the investigation in response to concerns regarding accounting practices and other matters that were first reported to it on September 7, 2014. The restatement corrects errors that were identified as a result of the investigation, as well as certain other errors that were identified by the General Partner. In addition, the restatement reflects corrections of certain immaterial errors and certain previously identified errors that were identified by the General Partner in the normal course of business and were determined to be immaterial, both individually and in the aggregate, when the consolidated financial statements for the three months ended June 30, 2014 were originally issued. In connection with the restatement, the General Partner has determined that it would be appropriate to correct such errors.
Year ended December 31, 2013 Error Corrections
Corrections to the General Partner’s consolidated financial statements for the year ended December 31, 2013 are disclosed within Amendment No. 2 to the General Partner’s Annual Report on Form 10-K/A for the year ended December 31, 2013 filed with the U.S. Securities and Exchange Commission (“SEC”) (the “Amended 10-K”). The corrections reported in the Amended 10-K relate primarily to bonus accruals, real estate impairments, goodwill, merger and acquisition related expenses, transfer tax accrual and the accounting and reporting of non-controlling interests.
Three Months Ended and Six Months Ended June 30, 2013 Error Corrections
Merger and Other Non-routine Transaction Related
In light of findings of the investigation conducted by the Audit Committee, the General Partner performed an internal review of all acquisition, merger and other non-routine transaction related expenses. The work resulted in the identification of the following errors:
| • | The General Partner identified $13.0 million of management fees that the OP improperly classified as merger and other non-routine transaction related expenses. Such amounts have been properly classified as management fees to affiliates for the six months ended June 30, 2013. No such expenses were identified in the three months ended June 30, 2013. |
| • | Upon consummation of the ARCT III Merger (as defined in Note 3 — Mergers and Acquisitions (As Restated)), the OP entered into an agreement with an affiliate to acquire certain furniture, fixtures and equipment (“FF&E”) and other assets. The Operating Partnership originally capitalized $4.1 million of FF&E costs and expensed $1.7 million of costs during the six months ended June 30, 2013. The General Partner has concluded that there was no evidence of the receipt and it could not support the value of the FF&E. As such, the Operating Partnership has expensed the amount originally capitalized and recognized the expense in merger and other non-routine transaction related expense for the six months ended June 30, 2013. |
F-167
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
| No such expenses were identified in the three months ended June 30, 2013. See Note 20 — Related Party Transactions and Arrangements (As Restated) for further discussion. |
| • | The General Partner has determined that the Operating Partnership should have recorded a controlling interest transfer tax liability totaling $1.1 million upon consummation of the ARCT III Merger (each, as defined in Note 3 — Merger and Acquisitions (As Restated)). The accrual and corresponding merger and other non-routine transaction related expense are recorded for the six months ended June 30, 2013. No such expenses were identified in the three months ended June 30, 2013. |
| • | The General Partner identified $1.0 million of costs during the six months ended June 30, 2013 that the Operating Partnership improperly classified as merger and other non-routine transaction related expenses that should have been capitalized as deferred financing costs and amortized accordingly. As such, an adjustment to properly record and amortize the deferred financing costs has been made for the six months ended June 30, 2013. As a result of capitalizing these deferred financing costs, additional interest expense of $0.6 million was recorded for the six months ended June 30, 2013. No such expenses were identified in the three months ended June 30, 2013. |
| • | During the three and six months ended June 30, 2013, the Operating Partnership improperly classified $0.4 million and $5.9 million, respectively, as “merger-related.” As restated, the amounts have been reclassified from merger and other non-routine transaction related expenses to general and administrative expenses. |
| • | The General Partner identified a net amount of $87,000 of merger and other non-routine transaction related expenses that the Operating Partnership improperly recorded in each of the three and six months ended June 30, 2013. As such, the General Partner properly decreased merger and other non-routine transaction related expense by this amount in the period. |
The Operating Partnership has updated the caption from “merger and other transaction related” to “merger and other non-routine transactions” to appropriately include non-recurring costs that may not have been incurred solely for a merger transaction. See Note 4 — Summary of Significant Accounting Policies (As Restated) for a further breakout of the merger costs and other non-routine transactions.
In addition, the Operating Partnership has included $3.5 million and $4.3 million during the three and six months ended June 30, 2013, respectively, in equity-based compensation that was previously reported on a separate line item, within general and administrative expenses.
Operating Fees to Affiliate
The General Partner identified $0.5 million of operating fees to affiliate was incorrectly recorded in the six months ended June 30, 2013. Therefore, the Operating Partnership decreased operating fees to affiliate by this amount. No such expenses were identified in the three months ended June 30, 2013.
Net Loss Attributable to Non-controlling Interests
The original calculation of the net loss attributable to non-controlling interest holders for the six months ended June 30, 2013 excluded expenses that were improperly recorded at the General Partner level. These expenses were incurred by the OP, and therefore should have been included in the General Partner’s determination of the net loss attributable to its non-controlling interest holders. In addition, the net loss attributable to the non-controlling interest holders has been adjusted to reflect the impact of the cumulative restatement adjustments discussed and presented herein. As a result, the General Partner recorded an adjustment of $2.2 million for the three months ended June 30, 2013 and $3.8 million for the six months ended June 30, 2013 for net loss attributable to non-controlling interest holders was recorded.
F-168
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Three Months Ended and Six Months Ended June 30, 2014 Error Corrections
Merger and Other Non-routine Transaction Related
In light of the findings of the investigation conducted by the Audit Committee, the General Partner performed an internal review of all acquisition, merger and other non-routine transaction related expenses. The work resulted in the identification of the following errors:
| • | The General Partner identified a net amount of $16.1 million of merger and other non-routine transaction related expenses that were improperly recorded in the three months ended March 31, 2014. Of this amount, a net amount of $14.5 million has been properly recorded in the year ended December 31, 2013 and a net amount of $1.6 million has been properly recorded in the three months ended June 30, 2014. Additional expenses of $1.2 million were identified and recorded in the three months ended June 30, 2014. These adjustments resulted in a net decrease in merger and other non-routine transaction related expenses of $13.4 million for the six months ended June 30, 2014. |
| • | Upon consummation of the ARCT IV Merger (as defined in Note 3 — Mergers and Acquisitions (As Restated)), the Operating Partnership entered into an agreement with an affiliate to acquire certain FF&E and other assets. The Operating Partnership originally capitalized $2.1 million of FF&E costs during the six months ended June 30, 2014. The Operating Partnership has concluded that there was no evidence of the receipt and it could not support the value of the FF&E. As such, the Operating Partnership has expensed the amount originally capitalized and recognized the expense in merger and other non-routine transaction related expense for the six months ended June 30, 2014. No such expenses were identified in the three moths ended June 30, 2014. See Note 20 — Related Party Transactions and Arrangements (As Restated) for further discussion. |
| • | The General Partner identified $0.8 million and $21.3 million of costs during the three and six months ended June 30, 2014, respectively, that the Operating Partnership improperly classified as merger and other non-routine transaction related expense that should have been capitalized as deferred financing costs and amortized accordingly. As such, an adjustment to properly record and amortize the deferred financing costs has been made for the three and six months ended June 30, 2014. As a result of capitalizing these deferred financing costs, additional interest expense of $1.3 million and $10.0 million and extinguishment of debt expense of $0.9 million and $3.2 million was recorded for the three and six months ended June 30, 2014, respectively. |
| • | The General Partner identified $1.4 million of merger and other non-routine transaction related expenses the Operating Partnership should have been classified as loss on disposition of properties. Such amount has been properly classified for the three and six months ended June 30, 2014. |
| • | The Operating Partnership improperly classified $5.2 million and $14.5 million of expenses in the three and six months ended June 30, 2014, respectively, as merger related. However, the General Partner has determined that such amounts should have been accounted for as general and administrative expenses for the respective periods. |
| • | The Operating Partnership identified $13.8 million of management fees that were improperly classified as merger and other non-routine transaction related expenses. Such amounts have been properly classified as management fees to affiliates for the six months ended June 30, 2014. No such expenses were identified in the three months ended June 30, 2014. |
| • | Upon consummation of the ARCT III Merger and CapLease Merger (each, as defined in Note 3 – Merger and Acquisitions (As Restated)) in 2013, the General Partner did not properly accrue a controlling interest transfer tax liability for each respective merger. As such, the Operating Partnership properly recorded an estimated $8.9 million as of December 31, 2013. The General Partner considered its existing accrual amount for such liabilities, in determining the liability amounts for the ARCT IV and Cole mergers that were consummated, noting that it had over accrued for such liabilities, and as a result recorded too much expense. Therefore, the General Partner properly reduced the expense recorded in the period by recording $4.0 million less expense for the six months ended June 30, 2014. No such expenses were identified in the three months ended June 30, 2014. |
| • | The Operating Partnership improperly classified $0.7 million as merger and other non-routine transaction expenses that should have been classified as acquisition related expenses. Such amount has been properly classified for the three and six months ended June 30, 2014. |
F-169
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
The Operating Partnership has updated the caption to “merger and other non-routine transaction related” to appropriately include non-recurring costs that may not have been incurred solely for a merger transaction. See Note 4 — Summary of Significant Accounting Policies (As Restated) for a further breakout of the merger costs and non-routine transactions.
Acquisition-Related
The General Partner identified $0.5 million of general and administrative salary expense had been improperly recorded as acquisition related expense in the three months ended June 30, 2014. Additionally, the General Partner identified $1.0 million of acquisition related salary expense had been improperly recorded as general and administrative expense in the three months ended March 30, 2014 resulting in a net understatement of acquisition related expenses of $0.5 million in the six months ended June 30, 2014. As such, the General Partner properly recorded the expense in the three and six months ended June 30, 2014.
The General Partner identified $1.8 million of acquisition related expense had been recorded twice in the three and six months ended June 30, 2014. As such, the company properly adjusted the acquisition related expense and corresponding cash account
General and Administrative
The Operating Partnership’s estimate of annual bonuses of $5.8 million should have been accrued for and expensed as of and for the period ended June 30, 2014, in accordance with the Operating Partnership’s accounting policy of accruing estimated bonuses throughout the year. As such, the Operating Partnership recorded the bonus accrual and corresponding general and administrative expense for the three and six months ended June 30, 2014.
The General Partner identified $0.9 million and $2.5 million of general and administrative expenses that were recorded in the incorrect period. As such, the Operating Partnership recorded these amounts as additional expense in the three and six months ended June 30, 2014, respectively.
Equity-based Compensation
The investigation found that equity awards made to Nicholas S. Schorsch and Brian S. Block in connection with the General Partner’s transition from external to internal management contained vesting provisions that, as drafted, were more favorable to them than the Compensation Committee had authorized. In addition, the investigation found that the Compensation Committee’s intention in respect of the OPP was that the maximum award pool opportunity should have been based upon the General Partner’s equity market capitalization as of the date of the approval of the OPP in October 2013, equaling approximately $120.0 million, rather than $218.1 million which was derived from a pro forma equity market capitalization giving effect to the closing of various transactions as of the General Partner’s transition to self-management. These items resulted in a decrease to stock-based compensation reported in general and administrative expense for the three and six months ended June 30, 2014 of $2.2 million and $8.4 million, respectively.
In addition, the General Partner assessed its accrual for distributions recorded on LTIP units, noting distributions had not been properly recorded. As a result, the Operating Partnership increased the distributions recorded in equity and the accrual recorded for distributions payable for LTIP awards by $6.3 million as of June 30, 2014.
The General Partner also determined that the documentation of awards granted to its directors provided for accelerated vesting of shares upon voluntary resignation of the directors. As a result, the Operating Partnership determined there was no required service period for the vesting of such awards, which decreased the stock based compensation reported in general and administrative expense by $1.2 million and increased the expense by $2.1 million for the three and six months ended June 30, 2014, respectively. Based upon the findings of the Audit Committee and the General Partner in connection with the recent review of the General Partner’s previously filed financial statements, the General Partner has subsequently modified such awards to provide that voluntary resignation would not accelerate the vesting of such awards.
The General Partner originally reported $9.3 million and $31.8 million during the three and six months ended June 30, 2014, respectively, in equity-based compensation in its own line item, however it now reports such compensation as general and administrative expenses.
F-170
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Depreciation and Amortization
The General Partner identified that its depreciation expense was understated by $2.3 million in the three months ended March 31, 2014, and was overstated by the same amount in the three months ended June 30, 2014. As such, the Operating Partnership properly adjusted depreciation expense for these periods.
In addition, the Operating Partnership improperly recorded depreciation expense of $6.0 million in the three months ended June 30, 2014 for real estate properties acquired as of March 31, 2014. As such, the Operating Partnership decreased depreciation expense by this amount for the three months ended June 30, 2014 and properly recorded this expense in the three months ended March 31, 2014.
Other Expense
As a result of the restatement corrections, the Operating Partnership updated its tax provision calculation which resulted in additional tax expense of $2.2 million and $0.9 million for the three and six months ended June 30, 2014, respectively.
Gain (Loss) on Disposition of Properties and Held for Sale Assets
Subsequent to the CapLease Merger and Cole Merger (each, as defined in Note 3 — Mergers and Acquisitions (As Restated)), the Operating Partnership disposed of certain properties acquired in those mergers. The disposition of such properties resulted in a net gain on disposition for the three months ended June 30, 2014 and a net loss on disposition for the six months ended June 30, 2014; however, the Operating Partnership incorrectly adjusted its purchase price allocation by adjusting its goodwill recorded in connection with the mergers by $2.6 million and $10.9 million for the three and six months ended June 30, 2014, respectively. The General Partner has determined that there was not sufficient evidence to support adjusting its goodwill as a measurement period adjustment. As a result, the Operating Partnership reversed the measurement period adjustments that were made to goodwill and recognized a net gain and loss on disposition for the three and six months ended June 30, 2014.
In addition, the General Partner assigned goodwill associated with the certain mergers to the General Partner’s REI segment. However, the General Partner determined that it did not properly account for disposals of real estate because a portion of goodwill was not included in the carrying amount of the associated real estate in its determination of the gain or loss on disposition. To correct the accounting, the Operating Partnership allocated $2.2 million and $9.2 million in the three and six months ended June 30, 2014, respectively, of goodwill to real estate dispositions, which increased the loss on disposition of properties recognized in the three and six months ended June 30, 2014.
The General Partner did not properly classify a property as held for sale as of June 30, 2014. As such, the Operating Partnership adjusted the fair value of the property at that date and recognized a loss on held for sale assets of $1.8 million for the three and six months ended June 30, 2014.
Gain (Loss) on Derivative Instruments
The General Partner determined that a portion of one of its interest rate swaps was incorrectly designated as effective, rather than ineffective for the three and six months ended June 30, 2014. Therefore, the Operating Partnership incorrectly recorded the ineffective portion of the hedge through other comprehensive income (“OCI”), rather than earnings. The Operating Partnership recorded a gain of $0.5 million and $1.5 million for the three and six months ended June 30, 2014, respectively, and reversed the amounts from OCI for the respective periods.
As part of the Cole Merger, the Operating Partnership acquired a derivative liability in the amount of $10.0 million for interest rate swaps. The swaps were subsequently settled in connection with the extinguishment of the related debt. This settlement should have been recorded as a reduction of the derivative liability acquired; however, it was recorded as a loss on derivative instruments in the three months ended March 31, 2014. The Operating Partnership previously corrected this in the three months ended June 30, 2014. In order to correct the period in which this adjustment was made, the Operating Partnership decreased the amount recorded as a loss on derivative instruments in the three months ended March 31, 2014 and increased the amount recorded as a loss on derivative instruments in the three months ended June 30, 2014.
F-171
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
The General Partner identified a swap interest payment of $1.8 million was incorrectly classified as a loss on derivative instruments. To correct the accounting, the Operating Partnership reclassified the loss on derivative instruments to interest expense in the three and six months ended June 30, 2014. Additionally, the General Partner identified $2.1 million recorded as loss on derivative instruments that should have been recorded as interest expense. The General Partner reclassified loss on derivative instruments to interest expense in the six months ended June 30, 2014. No such expenses were identified in the three months ended June 30, 2014.
Interest Expense
The General Partner determined that the breakage costs of an interest rate lock were incorrectly recorded as interest expense in the six months ended June 30, 2014, rather than OCI and amortized over the term of the lock. As such, $3.9 million of expense was reclassified from interest expense to OCI in the period ended June 30, 2014. No such expenses were identified in the three months ended June 30, 2014.
The General Partner identified a credit for interest expense of $1.1 million was incorrectly recorded in the three and six months ended June 30, 2014 as the credit was already recorded through a separate transaction. As such, the Operating Partnership increased interest expense and decreased the receivable for this amount in the three and six months ended June 30, 2014.
The General Partner concluded that the interest expense related to a swap was underestimated by $1.4 million for the six months ended June 30, 2014. As such, the Operating Partnership recorded additional interest expense for the respective amount. No such expenses were identified in the three months ended June 30, 2014.
The General Partner concluded that $5.0 million and $12.8 million of debt extinguishment costs for the three and six months ended June 30, 2014, respectively, which were originally reported as interest expense, should be reported as a separate line item caption within the consolidated statements of operations for the three and six months ended June 30, 2014. As such, the Operating Partnership decreased interest expense by these amounts for the respective periods.
Net Loss Attributable to Non-controlling Interests
The original calculation of the net loss attributable to non-controlling interest holders for the three and six months ended June 30, 2014 excluded expenses that were improperly recorded at the General Partner level. These expenses were incurred by the OP, and therefore should have been included in the General Partner’s determination of the net loss attributable to its non-controlling interest holders. In addition, the net loss attributable to the non-controlling interest holders has been adjusted to reflect the impact of the cumulative restatement adjustments discussed and presented herein. As a result, the Operating Partnership recorded an adjustment of $1.1 million and $1.4 million for the three and six months ended June 30, 2014, respectively, for net loss attributable to non-controlling interest holders.
Other Changes
Along with restating the consolidated financial statements to correct the errors discussed above, the Operating Partnership recorded adjustments for certain previously identified immaterial accounting errors related to the three and six months ended June 30, 2014 that arose in the normal course of business. In connection with the original financial statement issuance, the Operating Partnership assessed the impact of these immaterial errors and concluded that they were not material, individually or in the aggregate, to the consolidated financial statements. However, in conjunction with the restatement, the General Partner determined that it would be appropriate to correct such errors.
The original calculations of net loss per share for the three and six months ended June 30, 2014 were based on an incorrect weighted average share count. The original weighted average share count treated a portion of certain restricted share awards as outstanding common stock prior to the actual vesting date of such awards, and as a result, the weighted average share count was overstated for both periods. Therefore, the 2014 restated consolidated financial statements reflect decreases of 334,276 shares and 322,939 shares to the weighted average share counts used in the net loss per share calculations for the three and six months ended June 30, 2014.
The Operating Partnership also recorded certain reclassifications to conform the presentation of its consolidated statement of operations for the six months ended June 30, 2014 and 2013.
F-172
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
In addition to the restatement of the consolidated financial statements, the Operating Partnership has also restated the following notes for the three months ended June 30, 2014 and June 30, 2013 to reflect the error corrections noted above.
| • | Note 3 – Mergers and Acquisitions |
| • | Note 4 – Summary of Significant Accounting Policies |
| • | Note 5 – Acquisitions of CapLease, Cole and CCPT |
| • | Note 6 – Segment Reporting |
| • | Note 7 – Real Estate Investments |
| • | Note 10 – Deferred Costs and Other Assets, Net |
| • | Note 11 – Fair Value of Financial Instruments |
| • | Note 12 – Mortgage Notes Payable |
| • | Note 15 – Derivatives and Hedging Activities |
| • | Note 16 – Accounts Payable and Accrued Expenses |
| • | Note 18 – Preferred and Common OP Units |
| • | Note 19 – Equity-based Compensation |
| • | Note 20 – Related Party Transactions and Arrangements |
| • | Note 22 – Net Loss Per Share |
| • | Note 23 – Property Dispositions |
| • | Note 24 – Income Taxes |
| • | Note 25 – Subsequent Events |
F-173
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
The following tables present the combined impact of all changes, as described above, to the applicable line items in the consolidated financial statements to the General Partner’s previously issued consolidated financial statements for the period ended June 30, 2014 and the year ended December 31, 2013 (in thousands, except share and per share amounts):
June 30, 2014 and December 31, 2013 Restated Consolidated Balance Sheets
| June 30, 2014 | December 31, 2013 | |||||||||||||||||||||||||||||||
| As Previously Reported |
Reclassifications | Restatement Adjustments |
As Restated |
As Previously Reported |
Reclassifications | Restatement Adjustments |
As Restated |
|||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||
| Real estate investments, at cost: |
||||||||||||||||||||||||||||||||
| Land |
$ | 3,361,195 | $ | — | $ | (17,960 | ) | $ | 3,343,235 | $ | 1,379,453 | $ | — | $ | 855 | $ | 1,380,308 | |||||||||||||||
| Buildings, fixtures and improvements |
12,445,972 | (3,623 | ) | (21,723 | ) | 12,420,626 | 5,291,031 | — | 6,369 | 5,297,400 | ||||||||||||||||||||||
| Land and construction in progress |
62,594 | — | — | 62,594 | 21,839 | — | — | 21,839 | ||||||||||||||||||||||||
| Acquired intangible lease assets |
2,231,675 | 382 | (4,664 | ) | 2,227,393 | 758,376 | 382 | 837 | 759,595 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total real estate investments, at cost |
18,101,436 | (3,241 | ) | (44,347 | ) | 18,053,848 | 7,450,699 | 382 | 8,061 | 7,459,142 | ||||||||||||||||||||||
| Less: accumulated depreciation and amortization |
(661,005 | ) | (281 | ) | 669 | (660,617 | ) | (267,352 | ) | (155 | ) | 229 | (267,278 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total real estate investments, net |
17,440,431 | (3,522 | ) | (43,678 | ) | 17,393,231 | 7,183,347 | 227 | 8,290 | 7,191,864 | ||||||||||||||||||||||
| Investment in unconsolidated entities |
102,047 | — | — | 102,047 | — | — | — | — | ||||||||||||||||||||||||
| Investment in direct financing leases, net |
62,094 | — | — | 62,094 | 66,112 | — | — | 66,112 | ||||||||||||||||||||||||
| Investment securities, at fair value |
219,204 | — | — | 219,204 | 62,067 | — | — | 62,067 | ||||||||||||||||||||||||
| Loans held for investment, net |
97,587 | — | — | 97,587 | 26,279 | — | — | 26,279 | ||||||||||||||||||||||||
| Cash and cash equivalents |
193,690 | — | 1,839 | 195,529 | 52,725 | — | — | 52,725 | ||||||||||||||||||||||||
| Derivative assets, at fair value (1) |
— | — | — | — | 9,189 | (9,189 | ) | — | — | |||||||||||||||||||||||
| Restricted cash |
69,544 | — | — | 69,544 | 35,921 | — | — | 35,921 | ||||||||||||||||||||||||
| Prepaid Expenses (1) |
— | — | — | — | 187,930 | (187,930 | ) | — | — | |||||||||||||||||||||||
| Intangible assets, net |
347,618 | — | — | 347,618 | — | — | — | — | ||||||||||||||||||||||||
| Deferred costs and other assets, net |
405,056 | 3,522 | 9,621 | 418,199 | — | 281,865 | (1,204 | ) | 280,661 | |||||||||||||||||||||||
| Goodwill |
2,304,880 | — | (11,860 | ) | 2,293,020 | 102,419 | — | (9,630 | ) | 92,789 | ||||||||||||||||||||||
| Due from affiliates |
73,336 | — | 350 | 73,686 | — | — | — | |||||||||||||||||||||||||
| Deferred Costs (1) |
— | — | — | — | 81,311 | (84,973 | ) | 3,662 | — | |||||||||||||||||||||||
| Assets held for sale |
— | 38,737 | 38,737 | 679 | — | (14 | ) | 665 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total assets |
$ | 21,315,487 | $ | — | $ | (4,991 | ) | $ | 21,310,496 | $ | 7,807,979 | $ | — | $ | 1,104 | $ | 7,809,083 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||||||||||||||||||||
| Mortgage notes payable, net |
$ | 4,227,494 | $ | — | $ | — | $ | 4,227,494 | $ | 1,301,114 | $ | — | $ | — | $ | 1,301,114 | ||||||||||||||||
| Corporate bonds, net |
2,546,089 | — | — | 2,546,089 | — | — | — | — | ||||||||||||||||||||||||
| Convertible debt, net |
975,003 | — | — | 975,003 | 972,490 | — | — | 972,490 | ||||||||||||||||||||||||
| Senior corporate credit facilities (2) |
— | — | — | — | 1,819,800 | (1,819,800 | ) | — | — | |||||||||||||||||||||||
| Secured credit facility (2) |
— | — | — | — | 150,000 | (150,000 | ) | — | — | |||||||||||||||||||||||
| Credit facilities |
1,896,000 | — | — | 1,896,000 | — | 1,969,800 | — | 1,969,800 | ||||||||||||||||||||||||
| Other debt, net |
146,158 | — | — | 146,158 | 104,804 | — | — | 104,804 | ||||||||||||||||||||||||
| Below-market lease liabilities, net |
283,518 | — | (1,564 | ) | 281,954 | 77,789 | — | (620 | ) | 77,169 | ||||||||||||||||||||||
| Accounts payable and accrued expenses |
154,741 | — | 22,159 | 176,900 | 808,900 | — | (78,329 | ) | 730,571 | |||||||||||||||||||||||
| Derivative liabilities, at fair value (3) |
— | — | — | — | 18,455 | (18,455 | ) | — | — | |||||||||||||||||||||||
The consolidated balance sheets continue onto the next page.
F-174
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
| June 30, 2014 | December 31, 2013 | |||||||||||||||||||||||||||||||
| As Previously Reported |
Reclassifications | Restatement Adjustments |
As Restated |
As Previously Reported |
Reclassifications | Restatement Adjustments |
As Restated |
|||||||||||||||||||||||||
| Deferred rent and other liabilities |
218,023 | — | 5,396 | 223,419 | 21,816 | 18,455 | — | 40,271 | ||||||||||||||||||||||||
| Distributions payable |
3,837 | — | 6,942 | 10,779 | 10,278 | — | 625 | 10,903 | ||||||||||||||||||||||||
| Due to affiliates |
835 | — | 391 | 1,226 | — | — | 103,434 | 103,434 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total liabilities |
10,451,698 | — | 33,324 | 10,485,022 | 5,285,446 | — | 25,110 | 5,310,556 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Series D preferred stock, $0.01 par value, 21,735,008 shares (part of 100,000,000 aggregate preferred shares authorized) issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
$ | 269,299 | $ | — | $ | — | $ | 269,299 | $ | 269,299 | $ | — | $ | — | $ | 269,299 | ||||||||||||||||
| General partner’s common equity—907,932,949 and 239,248,853 General Partner OP Units issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
9,918,549 | — | (670,477 | ) | 9,248,072 | 1,686,103 | — | (667,979 | ) | 1,018,124 | ||||||||||||||||||||||
| General partner’s preferred equity (excluding Series D Preferred equity)—42,730,013 and 42,199,547 General Partner Preferred Units issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
367,514 | — | 663,128 | 1,030,642 | 391,482 | — | 663,507 | 1,054,989 | ||||||||||||||||||||||||
| Limited partners’ common equity—35,515,913 and 17,832,274 Limited Partner OP Units issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
269,634 | — | (6,999 | ) | 262,635 | 151,721 | — | (12,639 | ) | 139,082 | ||||||||||||||||||||||
| Limited partners’ preferred equity—190,999 and 721,645 Limited Partner Preferred Units issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
3,435 | — | 2,231 | 5,666 | 14,614 | — | 1,852 | 16,466 | ||||||||||||||||||||||||
| Accumulated other comprehensive income |
12,392 | — | (12,392 | ) | — | 7,666 | — | (7,666 | ) | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total stockholders’ equity |
10,571,524 | — | (24,509 | ) | 10,547,015 | 2,251,586 | — | (22,925 | ) | 2,228,661 | ||||||||||||||||||||||
| Non-controlling interests |
22,966 | — | (13,806 | ) | 9,160 | 1,648 | — | (1,081 | ) | 567 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total equity |
10,594,490 | — | (38,315 | ) | 10,556,175 | 2,253,234 | — | (24,006 | ) | 2,229,228 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total liabilities and equity |
$ | 21,315,487 | $ | — | $ | (4,991 | ) | $ | 21,310,496 | $ | 7,807,979 | $ | — | $ | 1,104 | $ | 7,809,083 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) | This line item caption has been reclassified and included within deferred costs and other assets, net in the accompanying consolidated balance sheets for the period ended June 30, 2014. |
| (2) | This line item caption has been reclassified and included within credit facilities in the accompanying consolidated balance sheets for the period ended June 30, 2014. |
| (3) | This line item caption has been reclassified and included within deferred rent, derivative and other liabilities in the accompanying consolidated balance sheets for the period ended June 30, 2014. |
F-175
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Restated Consolidated Statements of Operations (for the three months ended June 30, 2014)
| Three Months Ended | ||||||||||||||||
| June 30, 2014 | ||||||||||||||||
| As Previously Reported |
Reclassifications | Restatement Adjustments |
As Restated | |||||||||||||
| Revenues: |
||||||||||||||||
| Rental income |
$ | 314,843 | $ | — | $ | (324 | ) | $ | 314,519 | |||||||
| Direct financing lease income |
1,181 | — | — | 1,181 | ||||||||||||
| Operating expense reimbursements |
28,545 | — | 711 | 29,256 | ||||||||||||
| Cole Capital revenue |
37,412 | (190 | ) | — | 37,222 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
381,981 | (190 | ) | 387 | 382,178 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Cole Capital reallowed fees and commissions |
7,068 | — | — | 7,068 | ||||||||||||
| Acquisition related |
8,453 | — | (1,252 | ) | 7,201 | |||||||||||
| Merger and other transaction related (1) |
13,286 | — | (5,864 | ) | 7,422 | |||||||||||
| Property operating |
39,372 | — | (86 | ) | 39,286 | |||||||||||
| General and administrative |
19,063 | 2,788 | 18,161 | 40,012 | ||||||||||||
| Equity-based compensation (2) |
9,338 | — | (9,338 | ) | — | |||||||||||
| Depreciation and amortization |
258,993 | — | (8,254 | ) | 250,739 | |||||||||||
| Impairment of real estate (3) |
— | — | 1,556 | 1,556 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
355,573 | 2,788 | (5,077 | ) | 353,284 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
26,408 | (2,978 | ) | 5,464 | 28,894 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other (expense) income: |
||||||||||||||||
| Interest expense, net |
(99,635 | ) | (4,619 | ) | 357 | (103,897 | ) | |||||||||
| Extinguishment of debt, net (3) |
— | — | (6,469 | ) | (6,469 | ) | ||||||||||
| Other income, net |
6,526 | 7,597 | (2,187 | ) | 11,936 | |||||||||||
| Gain (loss) on derivative instruments, net |
21,926 | — | (7,719 | ) | 14,207 | |||||||||||
| Loss on contingent value rights |
— | — | — | — | ||||||||||||
| Gain on disposition of properties, net |
1,510 | — | (2,779 | ) | (1,269 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other expenses, net |
(69,673 | ) | 2,978 | (18,797 | ) | (85,492 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss from continuing operations |
(43,265 | ) | — | (13,333 | ) | (56,598 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Discontinued operations: |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss from discontinued operations |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
(43,265 | ) | — | (13,333 | ) | (56,598 | ) | |||||||||
| Net loss attributable to non-controlling interests |
(272 | ) | — | — | (272 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to unitholders |
$ | (43,537 | ) | $ | — | $ | (13,333 | ) | $ | (56,870 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted net loss per share attributable to common unitholders |
$ | (0.08 | ) | $ | — | $ | — | $ | (0.10 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | This line item caption has been updated to merger and other non-routine transactions in the accompanying consolidated statements of operations. |
| (2) | As disclosed above, this line item caption has been reclassified into general and administrative in the accompanying consolidated statements of operations. |
| (3) | This line item caption has been added and is included in the accompanying consolidated statements of operations for the period ended June 30, 2014. |
F-176
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Restated Consolidated Statements of Operations (for the six months ended June 30, 2014)
| Six Months Ended | ||||||||||||||||
| June 30, 2014 | ||||||||||||||||
| As Previously Reported |
Reclassifications | Restatement Adjustments |
As Restated |
|||||||||||||
| Revenues: |
||||||||||||||||
| Rental income |
$ | 559,288 | $ | — | $ | (354 | ) | $ | 558,934 | |||||||
| Direct financing lease income |
2,187 | — | — | 2,187 | ||||||||||||
| Operating expense reimbursements |
49,641 | — | 1,091 | 50,732 | ||||||||||||
| Cole Capital revenue |
91,479 | — | — | 91,479 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
702,595 | — | 737 | 703,332 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Cole Capital reallowed fees and commissions |
41,504 | — | — | 41,504 | ||||||||||||
| Acquisition related |
20,337 | — | 281 | 20,618 | ||||||||||||
| Merger and other non-routine transactions (1) |
235,478 | — | (67,758 | ) | 167,720 | |||||||||||
| Property operating |
69,030 | — | 11 | 69,041 | ||||||||||||
| Management fees to affiliate |
— | — | 13,888 | 13,888 | ||||||||||||
| General and administrative |
44,748 | 3,911 | 47,845 | 96,504 | ||||||||||||
| Equity-based compensation (2) |
31,848 | — | (31,848 | ) | — | |||||||||||
| Depreciation and amortization |
424,356 | — | 225 | 424,581 | ||||||||||||
| Impairment of real estate (4) |
— | — | 1,556 | 1,556 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
867,301 | 3,911 | (35,800 | ) | 835,412 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
(164,706 | ) | (3,911 | ) | 36,537 | (132,080 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other (expense) income: |
||||||||||||||||
| Interest expense, net |
(216,347 | ) | (8,272 | ) | (229 | ) | (224,848 | ) | ||||||||
| Extinguishment of debt, net (3) |
— | — | (15,868 | ) | (15,868 | ) | ||||||||||
| Other income, net |
10,915 | 12,183 | (952 | ) | 22,146 | |||||||||||
| Gain (loss) on derivative instruments, net |
1,729 | — | 5,357 | 7,086 | ||||||||||||
| Loss on contingent value rights |
— | — | — | — | ||||||||||||
| Gain (loss) on disposition of properties and held for sale assets, net |
4,489 | — | (23,363 | ) | (18,874 | ) | ||||||||||
| Gain on sale of investments |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other expenses, net |
(199,214 | ) | 3,911 | (35,055 | ) | (230,358 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss from continuing operations |
(363,920 | ) | — | 1,482 | (362,438 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Discontinued operations: |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss from discontinued operations |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
(363,920 | ) | — | 1,482 | (362,438 | ) | ||||||||||
| Net loss attributable to non-controlling interests |
(80 | ) | — | — | (80 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to unitholders |
$ | (364,000 | ) | $ | — | $ | 1,482 | $ | (362,518 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted net loss per share attributable to common unitholders |
$ | (0.58 | ) | $ | — | $ | — | $ | (0.58 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | This line item caption has been updated to merger and other non-routine transactions in the accompanying consolidated statements of operations. |
| (2) | As disclosed above, this line item caption has been reclassified into general and administrative in the accompanying consolidated statements of operations. |
| (3) | This line item caption has been added and is included in the accompanying consolidated statements of operations for the period ended June 30, 2014. |
F-177
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Restated Statements of Comprehensive Loss (for the three and six months ended June 30, 2014)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, 2014 | June 30, 2014 | |||||||||||||||||||||||
| As Previously Reported |
Restatement Adjustments |
As Restated | As Previously Reported |
Restatement Adjustments |
As Restated | |||||||||||||||||||
| Net loss attributable to unitholders (1) |
$ | (43,537 | ) | $ | (13,333 | ) | $ | (56,870 | ) | $ | (364,000 | ) | $ | 1,482 | $ | (362,518 | ) | |||||||
| Other comprehensive (loss) income: |
||||||||||||||||||||||||
| Designated derivatives, fair value adjustments |
(6,883 | ) | (400 | ) | (7,283 | ) | (4,247 | ) | (5,334 | ) | (9,581 | ) | ||||||||||||
| Unrealized (loss) gain on investment securities, net |
5,878 | — | 5,878 | 8,973 | — | 8,973 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total other comprehensive (loss) income |
(1,005 | ) | (400 | ) | (1,405 | ) | 4,726 | (5,334 | ) | (608 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total comprehensive loss attributable to unitholders |
$ | (44,542 | ) | $ | (13,733 | ) | $ | (58,275 | ) | $ | (359,274 | ) | $ | (3,852 | ) | $ | (363,126 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | The statement of comprehensive loss previously began with net loss attributable to common stockholders . The statement has been updated to begin with net loss to properly show the total comprehensive loss. |
F-178
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Restated Statements of Cash Flows
| Six Months Ended June 30, 2014 |
Six Months Ended June 30, 2013 |
|||||||||||||||||||||||||||||||
| As Previously Reported |
Reclassifications | Restatement Adjustments |
As Restated |
As Previously Reported |
Reclassifications | Restatement Adjustments |
As Restated |
|||||||||||||||||||||||||
| Cash flows from operating activities: |
||||||||||||||||||||||||||||||||
| Net loss |
$ | (363,920 | ) | $ | — | $ | 1,482 | $ | (362,438 | ) | $ | (214,028 | ) | $ | — | $ | (4,184 | ) | $ | (218,212 | ) | |||||||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||||||||||||||||||||||||||
| Issuance of OP Units |
153,885 | — | (61,001 | ) | 92,884 | 108,247 | — | (476 | ) | 107,771 | ||||||||||||||||||||||
| Depreciation and amortization |
452,446 | — | 20,738 | 473,184 | 64,243 | — | 537 | 64,780 | ||||||||||||||||||||||||
| Gain on disposition of properties |
(4,489 | ) | — | 23,363 | 18,874 | (14 | ) | — | 14 | — | ||||||||||||||||||||||
| Equity-based compensation |
31,848 | — | (4,584 | ) | 27,264 | 6,717 | — | 74 | 6,791 | |||||||||||||||||||||||
| Equity in income of unconsolidated entities |
385 | — | — | 385 | — | — | — | — | ||||||||||||||||||||||||
| Distributions from unconsolidated entities (1) |
— | — | 4,033 | 4,033 | — | — | — | — | ||||||||||||||||||||||||
| Net direct financing lease adjustments (1) |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Loss on derivative instruments |
8,048 | — | (15,134 | ) | (7,086 | ) | 45 | — | — | 45 | ||||||||||||||||||||||
| Gain on sale of investments, net |
— | — | — | — | (451 | ) | — | — | (451 | ) | ||||||||||||||||||||||
| Impairment of real estate |
— | — | 1,556 | 1,556 | ||||||||||||||||||||||||||||
| Gain on extinguishment of debt |
(8,398 | ) | — | (8,587 | ) | (16,985 | ) | — | — | — | — | |||||||||||||||||||||
| Unrealized loss on contingent value rights obligations, net of settlement payments |
— | — | — | — | 31,134 | — | — | 31,134 | ||||||||||||||||||||||||
| Changes in assets and liabilities: |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| Investment in direct financing leases |
525 | — | — | 525 | — | — | — | — | ||||||||||||||||||||||||
| Deferred costs and other assets, net |
(62,175 | ) | — | (31,378 | ) | (93,553 | ) | (10,300 | ) | — | 37 | (10,263 | ) | |||||||||||||||||||
| Due from affiliates |
(5,335 | ) | — | (350 | ) | (5,685 | ) | — | — | — | — | |||||||||||||||||||||
| Accounts payable and accrued expenses |
(133,960 | ) | — | 84,147 | (51,771 | ) | 4,554 | — | (394 | ) | 4,160 | |||||||||||||||||||||
| Deferred rent, derivative and other liabilities |
(35,298 | ) | — | 26,566 | (8,774 | ) | 2,676 | — | — | 2,676 | ||||||||||||||||||||||
| Due to affiliates |
223 | — | (43,443 | ) | (41,262 | ) | — | — | 1,349 | 1,349 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net cash provided by (used in) operating activities |
33,785 | — | (2,592 | ) | 31,193 | (7,177 | ) | — | (3,043 | ) | (10,220 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cash flows from investing activities: |
||||||||||||||||||||||||||||||||
| Investments in real estate and other assets |
(1,246,588 | ) | — | — | (1,246,588 | ) | (2,129,677 | ) | — | — | (2,129,677 | ) | ||||||||||||||||||||
| Acquisition of a real estate business, net of cash acquired |
(755,701 | ) | — | (531 | ) | (756,232 | ) | — | — | — | — | |||||||||||||||||||||
| Investment in direct financing leases |
— | — | — | — | (76,410 | ) | — | — | (76,410 | ) | ||||||||||||||||||||||
| Capital expenditures |
(46,649 | ) | 21,733 | 14,927 | (9,989 | ) | (30 | ) | — | — | (30 | ) | ||||||||||||||||||||
| Real estate developments |
— | (21,733 | ) | — | (21,733 | ) | — | — | — | — | ||||||||||||||||||||||
| Distributions from unconsolidated entities (2) |
4,033 | — | (4,033 | ) | — | — | — | — | — | |||||||||||||||||||||||
| Principal repayments received from borrowers |
4,155 | — | — | 4,155 | — | — | — | — | ||||||||||||||||||||||||
| Investments in unconsolidated entities |
(2,500 | ) | — | — | (2,500 | ) | — | — | — | — | ||||||||||||||||||||||
| Return of investment from unconsolidated entities |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Proceeds from disposition of properties |
95,321 | — | (498 | ) | 94,823 | — | — | — | — | |||||||||||||||||||||||
| Investment in intangible assets |
(266 | ) | — | — | (266 | ) | — | — | — | — | ||||||||||||||||||||||
| Investment in other assets |
— | — | — | — | (1,041 | ) | — | 1,041 | — | |||||||||||||||||||||||
The consolidated statements of cash flows continue onto the next page.
F-179
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
| Six Months Ended June 30, 2014 |
Six Months Ended June 30, 2013 |
|||||||||||||||||||||||||||||||
| As Previously Reported |
Reclassifications | Restatement Adjustments |
As Restated | As Previously Reported (1) |
Reclassifications | Restatement Adjustments |
As Restated | |||||||||||||||||||||||||
| Deposits for real estate investments |
(129,602 | ) | — | — | (129,602 | ) | (47,086 | ) | — | — | (47,086 | ) | ||||||||||||||||||||
| Uses and refunds of deposits for real estate investments |
196,075 | — | — | 196,075 | — | — | — | — | ||||||||||||||||||||||||
| Purchases of investment securities |
— | — | — | — | (81,460 | ) | — | — | (81,460 | ) | ||||||||||||||||||||||
| Line of credit advances to affiliates |
$ | (80,300 | ) | $ | — | $ | — | $ | (80,300 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
| Line of credit repayments from affiliates |
15,600 | — | — | 15,600 | — | — | — | — | ||||||||||||||||||||||||
| Proceeds from sale of investment securities |
— | — | — | — | 44,188 | — | — | 44,188 | ||||||||||||||||||||||||
| Change in restricted cash |
— | — | (15,499 | ) | (15,499 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net cash used in investing activities |
(1,946,422 | ) | — | (5,634 | ) | (1,952,056 | ) | (2,291,516 | ) | — | 1,041 | (2,290,475 | ) | |||||||||||||||||||
| Cash flows from financing activities: |
||||||||||||||||||||||||||||||||
| Proceeds from mortgage notes payable |
718,275 | — | — | 718,275 | 6,924 | — | — | 6,924 | ||||||||||||||||||||||||
| Payments on mortgage notes payable |
(876,874 | ) | — | — | (876,874 | ) | — | — | — | — | ||||||||||||||||||||||
| Payments on other debt |
(7,524 | ) | — | — | (7,524 | ) | — | — | — | — | ||||||||||||||||||||||
| Proceeds from credit facilities |
3,246,000 | — | — | 3,246,000 | 825,000 | — | — | 825,000 | ||||||||||||||||||||||||
| Payments on credit facilities |
(4,628,800 | ) | — | — | (4,628,800 | ) | (349,604 | ) | — | — | (349,604 | ) | ||||||||||||||||||||
| Proceeds from corporate bonds |
2,545,760 | — | — | 2,545,760 | — | — | — | — | ||||||||||||||||||||||||
| Payments of deferred financing costs |
(80,515 | ) | — | (3,650 | ) | (84,165 | ) | (40,488 | ) | — | (973 | ) | (41,461 | ) | ||||||||||||||||||
| Repurchases of OP Units |
— | — | — | — | (350,396 | ) | — | — | (350,396 | ) | ||||||||||||||||||||||
| Proceeds from issuances of preferred units |
— | — | — | — | 445,000 | — | — | 445,000 | ||||||||||||||||||||||||
| Proceeds from issuances of OP Units, net offering costs |
1,595,735 | — | (2,273 | ) | 1,593,462 | 1,810,116 | — | (74 | ) | 1,810,042 | ||||||||||||||||||||||
| Consideration to Former Manager for internalization |
— | — | — | — | (3,035 | ) | — | 3,035 | — | |||||||||||||||||||||||
| Contributions from non-controlling interest holders |
1,043 | — | (61 | ) | 982 | 29,758 | — | — | 29,758 | |||||||||||||||||||||||
| Distributions to non-controlling interest holders |
(16,418 | ) | — | 587 | (15,831 | ) | (3,111 | ) | — | — | (3,111 | ) | ||||||||||||||||||||
| Distributions paid |
(427,541 | ) | — | (77 | ) | (427,618 | ) | (90,740 | ) | — | — | (90,740 | ) | |||||||||||||||||||
| Change in restricted cash |
(15,539 | ) | — | 15,539 | — | (844 | ) | — | — | (844 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net cash provided by financing activities |
2,053,602 | — | 10,065 | 2,063,667 | 2,278,580 | — | 1,988 | 2,280,568 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net change in cash and cash equivalents |
140,965 | — | 1,839 | 142,804 | (20,113 | ) | — | (14 | ) | (20,127 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cash and cash equivalents, beginning of period |
52,725 | — | — | 52,725 | 292,575 | 292,575 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cash and cash equivalents, end of period |
$ | 193,690 | $ | — | $ | 1,839 | $ | 195,529 | $ | 272,462 | $ | — | $ | (14 | ) | $ | 272,448 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) | This line item caption has been added and is included in the accompanying consolidated statements of cash flows for the period ended June 30, 2014. |
F-180
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Note 3 — Mergers and Acquisitions (As Restated)
Completed Mergers and Significant Acquisitions
American Realty Capital Trust III, Inc. Merger
On December 14, 2012, the General Partner entered into an Agreement and Plan of Merger (the “ARCT III Merger Agreement”) with American Realty Capital Trust III, Inc. (“ARCT III”) and certain subsidiaries of each company. The ARCT III Merger Agreement provided for the merger of ARCT III with and into a subsidiary of the General Partner (the “ARCT III Merger”). The ARCT III Merger was consummated on February 28, 2013 (the “ARCT III Merger Date”).
Pursuant to the terms and subject to the conditions set forth in the ARCT III Merger Agreement, each outstanding share of common stock of ARCT III, including restricted shares which became vested, was converted into the right to receive (i) 0.95 of a unit of ARCP’s common stock (the “ARCT III Exchange Ratio”) or (ii) $12.00 in cash. In addition, each outstanding unit of equity ownership of American Realty Capital Operating Partnership III, L.P. (the “ARCT III OP”) was converted into the right to receive 0.95 of the same class of unit of equity ownership in the Operating Partnership.
Upon the closing of the ARCT III Merger on February 28, 2013, the Operating Partnership, on ARCP’s behalf, paid an aggregate of $350 million in cash for 29.2 million shares, or 16.5% of the then outstanding shares of ARCT III’s common stock (which is equivalent to 27.7 million shares of ARCP’s common stock based on the ARCT III Exchange Ratio). In addition, 140.7 million shares of ARCP’s common stock were issued in exchange for 148.1 million shares of ARCT III’s common stock adjusted for the ARCT III Exchange Ratio. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when ARCP issued common stock to former common stockholders of ARCT III.
Upon the consummation of the ARCT III Merger, American Realty Capital Trust III Special Limited Partner, LLC (the “ARCT III Special Limited Partner”), the holder of the special limited partner interest in the ARCT III OP, was entitled to subordinated distributions of net sales proceeds from the ARCT III OP which resulted in the issuance of units of limited partner interests in the ARCT III OP, when after applying the ARCT III Exchange Ratio, resulted in the issuance of an additional 7.3 million Limited Partner OP Units to affiliates of the Former Manager. The parties had agreed that such OP Units would be subject to a minimum one-year holding period from the date of issuance before being redeemable by the holder for cash, or at the option of the General Partner, common stock of ARCP.
Also in connection with the ARCT III Merger, the General Partner entered into an agreement with ARC and its affiliates to internalize certain functions performed by them prior to the ARCT III Merger, reduce certain fees paid to affiliates, purchase certain corporate assets and pay certain merger related fees. See Note 20 — Related Party Transactions and Arrangements (As Restated).
Accounting Treatment for the ARCT III Merger
The General Partner and ARCT III, from inception to the ARCT III Merger Date, were considered to be entities under common control. Both entities’ advisors were wholly owned subsidiaries of ARC. ARC and its related parties had significant ownership interests in the General Partner, Operating Partnership and ARCT III through the ownership of shares, OP Units and other equity interests. In addition, the advisors of both ARCP and ARCT III were contractually eligible to receive potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and continued to receive fees from the Operating Partnership, on behalf of ARCP, prior to ARCP’s transition to self-management. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the significant activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The acquisition of an entity under common control is accounted for on the carryover basis of accounting, whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT III Merger Date. In addition, U.S. GAAP requires the Operating Partnership to present historical financial information as if the merger had occurred as of the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT III Merger had occurred at inception.
F-181
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
CapLease, Inc. Merger
On May 28, 2013, ARCP entered into an Agreement and Plan of Merger (the “CapLease Merger Agreement”) with CapLease, Inc., a Maryland corporation (“CapLease”), and certain subsidiaries of each company. The CapLease Merger Agreement provided for the merger of CapLease with and into a subsidiary of ARCP (the “CapLease Merger”).
On November 5, 2013 (the “CapLease Acquisition Date”), ARCP and the Operating Partnership completed the merger with CapLease pursuant to the CapLease Merger Agreement. Pursuant to the terms of the CapLease Merger Agreement, each outstanding share of common stock of CapLease, other than shares owned by the General Partner, Operating Partnership, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive $8.50. Each outstanding share of preferred stock of CapLease, other than shares owned by the General Partner, Operating Partnership, CapLease or any of their respective wholly owned subsidiaries, was converted into the right to receive an amount in cash equal to the sum of $25.00 plus all accrued and unpaid dividends on such shares of preferred stock. In addition, in connection with the merger of Caplease, LP (the “CapLease OP”) with and into the Operating Partnership (the “CapLease Partnership Merger”), each outstanding unit of equity ownership of the CapLease OP other than units owned by CapLease, the Operating Partnership or any of their respective wholly owned subsidiaries, was converted into the right to receive $8.50. Shares of CapLease’s outstanding restricted stock was accelerated and became fully vested, and restricted stock and any outstanding performance shares were fully earned and received $8.50 per share. In total, cash consideration of $920.7 million was paid to the common and preferred shareholders.
Accounting Treatment for the CapLease Merger
The CapLease Merger has been accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from CapLease have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values is recorded as goodwill. Results of operations for CapLease are included in the Operating Partnership’s consolidated financial statements from the date of acquisition. See Note 5—Acquisitions of CapLease, Cole and CCPT (As Restated).
American Realty Capital Trust IV, Inc. Merger
On July 1, 2013, the General Partner entered into an Agreement and Plan of Merger, as amended on October 6, 2013 and October 11, 2013 (the “ARCT IV Merger Agreement”), with ARCT IV, and certain subsidiaries of each company. The ARCT IV Merger Agreement provided for the merger of ARCT IV with and into a wholly owned subsidiary of the Operating Partnership (the “ARCT IV Merger”). The ARCT IV Merger was consummated on January 3, 2014 (the “ARCT IV Merger Date”).
Pursuant to the terms of the ARCT IV Merger Agreement, as amended, each outstanding share of common stock of ARCT IV, including unvested restricted shares that vested in conjunction with the ARCT IV Merger, was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a share of ARCP’s common stock (the “ARCT IV Exchange Ratio”) and (iii) 0.5937 of a share of a new series of preferred stock designated as the 6.70% Series F Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”) and each outstanding unit of American Realty Capital Operating Partnership IV, L.P. (“ARCT IV OP” and each unit, an “ARCT IV OP Unit”), other than ARCT IV OP Units held by American Realty Capital Trust IV Special Limited Partner, LLC, (the “ARCT IV Special Limited Partner”) and American Realty Capital Advisors IV, LLC (the “ARCT IV Advisor”) was exchanged for (i) $9.00 in cash, (ii) 0.5190 of a Limited Partner OP Unit and (iii) 0.5937 of a Limited Partner OP Unit designated as Series F Preferred Units (“Limited Partner Series F OP Units”). In total, the Operating Partnership, on ARCP’s behalf, paid $651.4 million in cash, ARCP issued 36.9 million shares of common stock and 42.2 million shares of Series F Preferred Stock to former ARCT IV stockholders, and the Operating Partnership issued 0.7 million units of Limited Partner Series F OP units and 0.6 million Limited Partner OP Units to the former ARCT IV OP Unit holders in connection with the consummation of the ARCT IV Merger. In addition, each outstanding ARCT IV Class B Unit (as defined below) and each outstanding ARCT IV OP Unit held by the ARCT IV Special Limited Partner and the ARCT IV Advisor was converted into 2.3961 Limited Partner OP Units, resulting in the Operating Partnership issuing 1.2 million Limited Partner OP Units. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units and General Partner Series F Preferred Units to ARCP when shares of ARCP’s common stock and Series F Preferred Stock were issued to former common stockholders of ARCT IV, respectively.
On January 3, 2014, the Operating Partnership entered into a Contribution and Exchange Agreement (the “ARCT IV Contribution and Exchange Agreement”) with the ARCT IV OP, the ARCT IV Special Limited Partner and ARC Real Estate Partners, LLC (“ARC Real Estate”), an entity affiliated with the Former Manager. The ARCT IV Special Limited Partner was entitled to receive certain distributions from the ARCT IV OP, including the subordinated distribution of net sales proceeds resulting from an
F-182
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
“investment liquidity event” (as defined in the agreement of limited partnership of the ARCT IV OP). The ARCT IV Merger constituted an “investment liquidity event,” as a result of which the ARCT IV Special Limited Partner, in connection with management’s successful attainment of the 6.0% performance hurdle and the return to ARCT IV’s stockholders of approximately $358.3 million in addition to their initial investment, was entitled to receive a subordinated distribution of net sales proceeds from the ARCT IV OP equal to approximately $63.2 million. Pursuant to the ARCT IV Contribution and Exchange Agreement, the ARCT IV Special Limited Partner contributed its interest in the ARCT IV OP, inclusive of the subordinated distribution proceeds received, to the ARCT IV OP in exchange for 2.8 million equity units of the ARCT IV OP, based on a price per share of $22.50. The fair value of these units at date of issuance was $78.2 million and has been included in merger and other non-routine transactions in the accompanying consolidated statements of operations for the six months ended June 30, 2014. Upon consummation of the ARCT IV Merger, these equity units were immediately converted to 6.7 million Limited Partner OP Units after application of the exchange ratio of 2.3961 per share. In conjunction with the ARCT IV Merger Agreement, the ARCT IV Special Limited Partner agreed to a minimum two-year holding period for these Limited Partner OP Units before having the right to redeem in cash, or at the option of the General Partner, convert them to common stock of ARCP.
In addition, as part of the ARCT IV Contribution and Exchange Agreement, ARC Real Estate Partners, LLC, contributed $750,000 in cash to the ARCT IV OP, effective prior to the consummation of the ARCT IV Merger, in exchange for ARCT IV OP Units. Upon the consummation of the ARCT IV Merger, these equity units converted at an exchange ratio of 2.3961 Limited Partner OP Units per ARCT IV OP Unit, resulting in the Operating Partnership issuing 0.1 million Limited Partner OP Units to ARC Real Estate Partners, LLC.
Accounting Treatment for the ARCT IV Merger
The General Partner and ARCT IV, from inception to the ARCT IV Merger Date, were considered to be entities under common control. Both entities’ advisors were wholly owned subsidiaries of ARC. ARC and its related parties had ownership interests in the General Partner, Operating Partnership and ARCT IV through the ownership of shares, OP Units and other equity interests. In addition, the advisors of both ARCP and ARCT IV were contractually eligible to receive potential fees for their services to both of the companies including asset management fees, incentive fees and other fees and had continued to receive fees from the Operating Partnership prior to ARCP’s transition to self-management. Due to the significance of these fees, the advisors and ultimately ARC were determined to have a significant economic interest in both companies in addition to having the power to direct the activities of the companies through advisory/management agreements, which qualified them as affiliated companies under common control in accordance with U.S. GAAP. The acquisition of an entity under common control is accounted for on the carryover basis of accounting, whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the ARCT IV Merger Date. In addition, U.S. GAAP requires the Operating Partnership to present historical financial information as if the merger had occurred as of the earliest period of common control. Therefore, the accompanying financial statements including the notes thereto are presented as if the ARCT IV Merger, including the impact of the equity transactions entered to consummate the merger, had occurred at inception.
Fortress Portfolio Acquisition
On July 24, 2013, ARC and another related entity, on behalf of the General Partner and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with affiliates of funds managed by Fortress Investment Group LLC (“Fortress”) for the purchase of 196 properties owned by Fortress, for an aggregate contract purchase price of $972.5 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which were allocated to ARCP based on the pro rata fair value of the properties acquired by ARCP relative to the fair value of all 196 properties to be acquired from Fortress. Of the 196 properties, 120 properties were allocated to ARCP (the “Fortress Portfolio”). On October 1, 2013, ARCP, through wholly owned subsidiaries of the Operating Partnership, closed on 41 of the 120 properties with a total purchase price of $200.3 million, exclusive of closing costs. Those Operating Partnership subsidiaries closed the acquisition of the remaining 79 properties in the Fortress Portfolio on January 8, 2014, for an aggregate contract purchase price of $400.9 million, exclusive of closing costs. The total purchase price of the Fortress Portfolio was $601.2 million, exclusive of closing costs.
F-183
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Cole Real Estate Investments, Inc. Merger
On October 22, 2013, the General Partner entered into an agreement and plan of merger (the “Cole Merger Agreement”) with Cole Real Estate Investments, Inc. (“Cole”), a Maryland corporation, and a wholly owned subsidiary of the General Partner. The Cole Merger Agreement provided for the merger of Cole with and into a wholly owned subsidiary of the General Partner (the “Cole Merger”). The Operating Partnership consummated the Cole Merger on February 7, 2014 (the “Cole Acquisition Date”).
Pursuant to the terms of the Cole Merger Agreement, each share of common stock of Cole issued and outstanding immediately prior to the effectiveness of the Cole Merger, including unvested restricted stock units (“RSUs”) and performance stock units that vested in conjunction with the Cole Merger, other than shares owned by the General Partner, Cole or any of their respective subsidiaries, was converted into the right to receive either (i) 1.0929 shares of ARCP’s common stock (the “Stock Consideration”) or (ii) $13.82 in cash (the “Cash Consideration” and together with the Stock Consideration, the “Merger Consideration”). Approximately 98% of all outstanding Cole shareholders received Stock Consideration and approximately 2% of outstanding Cole shareholders elected to receive Cash Consideration, pursuant to the terms of the Cole Merger Agreement, resulting in ARCP issuing approximately 520.8 million shares of common stock and the Operating Partnership, on ARCP’s behalf, paying $181.8 million in cash to holders of Cole shares based on their elections. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former common stockholders of Cole.
In addition, ARCP issued approximately 2.8 million shares of common stock, in the aggregate, to certain executives of Cole pursuant to letter agreements entered into between the General Partner and such individuals, concurrently with the execution of the Cole Merger Agreement, as previously disclosed by the General Partner.
Additionally, effective as of the Cole Acquisition Date, ARCP issued, but has not yet allocated, 0.4 million shares with dividend equivalent rights commensurate with the ARCP’s common stock. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former executives of Cole.
Accounting Treatment for the Cole Merger
The Cole Merger has been accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from Cole have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values is recorded as goodwill. Results of operations for Cole are included in the Operating Partnership’s consolidated financial statements subsequent to the Cole Acquisition Date.
Inland Portfolio Acquisition
On August 8, 2013, ARC and another related entity, on behalf of the General Partner and certain other entities sponsored directly or indirectly by ARC, entered into a purchase and sale agreement with Inland American Real Estate Trust, Inc. (“Inland”) for the purchase of the equity interests of 67 companies owned by Inland for an aggregate contract purchase price of approximately $2.3 billion, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs. Of the 67 companies, the equity interests of 10 companies (the “Inland Portfolio”) were allocated to ARCP for a purchase price of approximately $501.0 million, subject to adjustments set forth in the purchase and sale agreement and exclusive of closing costs, which was allocated to ARCP based on the pro rata fair value of the Inland Portfolio relative to the fair value of all 67 companies to be acquired from Inland by the Operating Partnership, on ARCP’s behalf, and the other entities sponsored directly or indirectly by ARC. The Inland Portfolio is comprised of 33 properties. As of June 30, 2014, the Operating Partnership had closed on 32 of the 33 properties for a total purchase price of $288.2 million, exclusive of closing costs. The General Partner will not close on the remaining one property.
Cole Credit Property Trust, Inc. Merger
On March 17, 2014, the General Partner and a wholly owned subsidiary of the General Partner entered into an Agreement and Plan of Merger (the “CCPT Merger Agreement”) with Cole Credit Property Trust, Inc., a Maryland corporation (“CCPT”). The CCPT Merger Agreement provided for the merger of CCPT with and into a subsidiary of the General Partner (the “CCPT Merger”). The General Partner consummated the CCPT Merger on May 19, 2014 (the “CCPT Acquisition Date”). The estimated fair value of the consideration transferred at the CCPT Acquisition Date totaled approximately $73.2 million, which was paid in cash.
F-184
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Pursuant to the CCPT Merger Agreement, the General Partner commenced a cash tender offer to purchase all of the outstanding shares of common stock of CCPT (the “CCPT Common Stock”) (other than shares owned by CCPT, the General Partner or any subsidiary of the General Partner), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated March 31, 2014, and the related Letter of Transmittal (together with any amendments or supplements to the foregoing, the “Offer”), at a price of $7.25 per share (the “Offer Price”), net to the seller in cash, without interest, less any applicable withholding tax. On May 19, 2014, the General Partner accepted for payment and paid for all shares of CCPT Common Stock that were validly tendered in the Offer. As of the expiration of the Offer, a total of 7,735,069 shares of CCPT Common Stock were validly tendered and not withdrawn, representing approximately 77% of the shares of CCPT Common Stock outstanding.
Immediately following the acceptance for payment and payment for the shares of CCPT Common Stock that were validly tendered in the Offer, the General Partner exercised its option (the “Top-Up Option”), granted pursuant to the CCPT Merger Agreement, to purchase, at a price per share equal to the Offer Price, 13,457,874 newly issued shares of CCPT Common Stock (collectively, the “Top-Up Shares”). The Top-Up Shares, taken together with the shares of CCPT Common Stock owned, directly or indirectly, by the General Partner and its subsidiaries immediately following the acceptance for payment and payment for the shares of CCPT Common Stock that were validly tendered in the Offer, constituted one share more than 90% of the outstanding shares of CCPT Common Stock (after giving effect to the issuance of all shares subject to the Top-Up Option), the applicable threshold required to effect a short-form merger under applicable Maryland law without stockholder approval.
Following the consummation of the Offer and the exercise of the Top-Up Option, in accordance with the CCPT Merger Agreement, the General Partner completed its acquisition of CCPT by effecting of a short-form merger under Maryland law, pursuant to which CCPT was merged with and into a subsidiary of the General Partner. The CCPT Merger became effective following the filing of the Articles of Merger with the State Department of Assessments and Taxation of Maryland and the filing of the Certificate of Merger with the Secretary of State of the State of Delaware with an effective date of May 19, 2014 (the “Effective Time”).
At the Effective Time, each share of CCPT Common Stock not purchased in the Offer (other than shares held by the CCPT, the General Partner or any subsidiary of the General Partner, which were automatically canceled and retired and ceased to exist) was converted into the right to receive an amount, in cash and without interest, equal to the Offer Price.
Accounting Treatment for the CCPT Merger
The CCPT Merger has been accounted for under the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting, the assets acquired and liabilities assumed from CCPT have been recorded as of the acquisition date at their respective fair values. Any excess of purchase price over the fair values is recorded as goodwill. Results of operations for CCPT are included in the Operating Partnership’s consolidated financial statements subsequent to the CCPT Acquisition Date.
Purchase Agreement for Red Lobster Portfolio
On May 16, 2014, the Operating Partnership, through a wholly owned subsidiary, entered into a master purchase agreement to acquire 521 properties, substantially all of which are operating as Red Lobster® restaurants (the “Red Lobster Portfolio”) from a third party. The transaction is structured as a sale-leaseback in which the Operating Partnership will purchase the Red Lobster Portfolio and will immediately lease the portfolio back to the third party pursuant to the terms of multiple master leases (the “Master Leases”). The purchase price of the Red Lobster Portfolio is approximately $1.59 billion, exclusive of closing costs and related expenses. The Master Leases will provide annual rental income of $152.0 million. Approximately 95.0% of the Master Leases will be structured with a 25-year initial term and approximately 5.0% will have a weighted average 18.7-year initial term.
F-185
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Note 4 — Summary of Significant Accounting Policies (As Restated)
The consolidated financial statements of the Operating Partnership included herein were prepared in conformity with U.S. GAAP for interim financial information and with the 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 U.S. GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results for the entire year or any subsequent interim period.
These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2013 of the Operating Partnership. There have been no significant changes to these policies during the six months ended June 30, 2014, other than the updates described below.
Investment in Unconsolidated Entities
Investment in Unconsolidated Joint Ventures
Investment in unconsolidated joint ventures as of June 30, 2014 consisted of the Operating Partnership’s interest in six joint ventures that owned six properties (the “Unconsolidated Joint Ventures”). As of June 30, 2014, the Operating Partnership owned aggregate equity investments of $98.1 million in the Unconsolidated Joint Ventures. The Operating Partnership accounts for the Unconsolidated Joint Ventures using the equity method of accounting as the Operating Partnership has the ability to exercise significant influence, but not control, over operating and financial policies of these investments. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Operating Partnership’s share of equity in the joint ventures’ earnings and distributions.
Investment in Managed REITs
As of June 30, 2014, the Operating Partnership owned aggregate equity investments of $3.9 million in the following publicly registered, non-traded REITs: Cole Credit Property Trust IV, Inc. (“CCPT IV”); Cole Corporate Income Trust, Inc. (“CCIT”); Cole Real Estate Income Strategy (Daily NAV), Inc. (“INAV”); Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”); and Cole Credit Property Trust V, Inc. (“CCPT V,” and collectively with CCPT IV, CCIT, INAV and CCIT II, the “Managed REITs”). Prior to the CCPT Acquisition Date, CCPT was a Managed REIT and accounted for using the equity method. As of the CCPT Acquisition Date, the Operating Partnership had an approximately $5,000 equity investment in CCPT. The Operating Partnership accounts for these investments using the equity method of accounting as the Operating Partnership has the ability to exercise significant influence, but not control, over the Managed REITs’ operating and financial policies through its advisory and property management agreements with the respective Managed REITs. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Operating Partnership’s share of equity in the respective Managed REIT’s earnings and distributions.
Leasehold Improvements and Property and Equipment
The Operating Partnership leases its office facilities under operating leases. Leasehold improvements related to these are recorded at cost less accumulated amortization. Leasehold improvements are amortized over the lesser of the estimated useful life or remaining lease term.
Property and equipment, which primarily include office furniture, fixtures and equipment and computer hardware and software, are stated at cost less accumulated depreciation. Property and equipment are depreciated on a straight-line method over the estimated useful lives of the assets, which range from five to seven years. The Operating Partnership reassesses the useful lives of its property and equipment and adjusts the future monthly depreciation expense based on the new useful life, as applicable. If the Operating Partnership disposes of an asset, the asset and related accumulated depreciation are written off upon disposal.
Impairments
Investment in Unconsolidated Entities
The Operating Partnership is required to determine whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of any of its investment in the unconsolidated entities. If an event or change in circumstance has occurred, the Operating Partnership is required to evaluate its investment in the unconsolidated entity for
F-186
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
potential impairment and determine if the carrying amount of its investment exceeds its fair value. An impairment charge is recorded when an impairment is deemed to be other-than-temporary. To determine whether an impairment is other-than-temporary, the Operating Partnership considers whether it has the ability and intent to hold the investment until the carrying amount is fully recovered. The evaluation of an investment in an unconsolidated entity for potential impairment requires the Operating Partnership’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions.
Leasehold Improvements and Property and Equipment
Leasehold improvements and property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If this review indicates that the carrying amount of the asset is not recoverable, the Operating Partnership records an impairment loss, measured at fair value by estimated discounted cash flows or market appraisals. The Operating Partnership identified properties during the three and six months ended June 30, 2014 with impairment indicators for which the undiscounted future cash flows expected as a result of the use and eventual disposition of the real estate and related assets was less than the carrying amount of each respective properties, as discussed in Note 11 — Fair Value of Financial Instruments (As Restated).
Goodwill
In the case of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration paid over the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill. Goodwill that arose as a result of the Operating Partnership’s mergers and acquisitions was recorded in the Operating Partnership’s consolidated financial statements.
In the event the Operating Partnership disposes of a property that constitutes a business under U.S. GAAP from a reporting unit with goodwill, the Operating Partnership will allocate a portion of the reporting unit’s goodwill to that business in determining the gain or loss on the disposal of the business. The amount of goodwill allocated to the business is based on the relative fair value of the business to the fair value of the reporting unit. The REI segment and Cole Capital each comprise one reporting unit.
The Operating Partnership will evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value, by reporting unit, may not be recoverable. The Operating Partnership’s annual testing date is during the fourth quarter. The Operating Partnership will test goodwill for impairment by first comparing the book value of net assets to the fair value of each reporting unit. If the fair value is determined to be less than the book value or if qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Operating Partnership will estimate the fair value of the reporting units using discounted cash flows and relevant competitor multiples. The evaluation of goodwill for potential impairment requires the Operating Partnership’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions.
The following summarizes the Operating Partnership’s goodwill activity during the six months ended June 30, 2014 by segment (in thousands):
| REI Segment | Cole Capital | Consolidated | ||||||||||
| Balance as of January 1, 2014 |
$ | 92,789 | $ | — | $ | 92,789 | ||||||
| Cole Merger (1) |
1,654,085 | 558,835 | 2,212,920 | |||||||||
| Goodwill allocated to dispositions (2) |
(12,722 | ) | — | (12,722 | ) | |||||||
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|
|
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| Balance as of June 30, 2014 |
$ | 1,734,152 | $ | 558,835 | $ | 2,292,987 | ||||||
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|
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|
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| (1) | Goodwill recognized from the Cole Merger was assigned to the REI segment and Cole Capital based on the excess consideration paid over the fair value of the assets and liabilities acquired and assumed in each segment. Refer to Note 5 — Acquisitions of CapLease, Cole and CCPT (As Restated) for further discussion. |
| (2) | Goodwill allocated to the cost basis of properties sold or classified as held for sale is included in loss on held for sale assets and disposition of properties, net, in the consolidated statement of operations. |
F-187
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Program Development Costs
The Operating Partnership pays for organization, registration and offering expenses associated with the sale of common stock of the Managed REITs. The reimbursement of these expenses by the Managed REITs is limited to a certain percentage of the proceeds raised from their offerings, in accordance with their respective advisory agreements and charters. Such expenses paid by the Operating Partnership on behalf of the Managed REITs in excess of these limits that are expected to be collected are recorded as program development costs. The Operating Partnership assesses the collectability of the program development costs, considering the offering period and historical and forecasted sales of shares under the Managed REITs’ respective offering and reserves for any balances considered not collectible. No reserves were recorded as of June 30, 2014, as the Operating Partnership expects to be reimbursed for all of the program development costs by the Managed REITs as additional proceeds from their respective offerings are raised. Program development costs are included in deferred costs and other assets, net in the accompanying consolidated balance sheets.
Acquisition Related Expenses and Merger and Other Non-routine Transaction Related Expenses
All direct costs incurred as a result of a business combination are classified as acquisition costs or merger and other non-routine transaction costs and expensed as incurred. In addition, indirect costs, such as internal salaries, that are tracked and documented in a manner that clearly indicate that the activities driving the cost directly relate to activities necessary to complete, or effect, a business combination are classified as acquisition related expenses. Similar costs incurred in relation to mergers with entities under common control (which are not accounted for as acquisitions) are included in the caption “merger and other non-routine transactions.” Acquisition related expenses include legal and other transaction related costs incurred in connection with self-originated acquisitions including purchases of portfolios. Other non-routine transaction costs are also presented within the line item merger and other non-routine transactions in the consolidated statements of operations and comprehensive loss.
Merger and other non-routine transaction related expenses include the following costs (amounts in thousands):
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (As Restated) | (As Restated) | (As Restated) | (As Restated) | |||||||||||||
| Merger related costs: |
||||||||||||||||
| Strategic advisory services |
$ | — | $ | 1,500 | $ | 32,615 | $ | 11,799 | ||||||||
| Transfer taxes |
— | — | 5,109 | 1,085 | ||||||||||||
| Legal fees and expenses |
1,563 | 1,511 | 4,547 | 3,191 | ||||||||||||
| Personnel costs and other reimbursements |
— | 255 | 751 | 639 | ||||||||||||
| Multi-tenant spin-off |
2,859 | — | 5,180 | — | ||||||||||||
| Other fees and expenses |
346 | 2,594 | 1,676 | 5,459 | ||||||||||||
| Other non-routine costs |
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| Post-transaction support services |
— | — | 14,251 | 2,000 | ||||||||||||
| Subordinated distribution fees |
— | — | 78,244 | 98,360 | ||||||||||||
| Furniture, fixtures and equipment |
— | — | 14,085 | 5,800 | ||||||||||||
| Legal fees and expenses |
— | — | 1,826 | 950 | ||||||||||||
| Personnel costs and other reimbursements |
275 | — | 2,718 | — | ||||||||||||
| Other fees and expenses |
2,379 | 5 | 6,718 | 150 | ||||||||||||
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| Total |
$ | 7,422 | $ | 5,865 | $ | 167,720 | $ | 129,433 | ||||||||
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Due from Affiliates
The Operating Partnership receives or may be entitled to receive compensation and reimbursement for services primarily relating to the Managed REITs’ offerings and the investment, management, financing and disposition of their respective assets. Refer to Note 20 — Related Party Transactions and Arrangements (As Restated) for further explanation.
F-188
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Reportable Segments
The Operating Partnership has concluded that it has two reportable segments as it has organized its operations into two segments for management and internal financial reporting purposes, REI and Cole Capital. The identification and aggregation of reportable segments requires the Operating Partnership’s management to exercise certain judgments. Refer to Note 6 — Segment Reporting (As Restated) for further information.
Revenue Recognition—Cole Capital
Revenue consists of securities sales commissions and dealer manager fees, real estate acquisition fees, property management fees, advisory fees, asset management fees and performance fees for services relating to the Managed REITs’ offerings and the investment and management of their respective assets, in accordance with the respective advisory and dealer manager agreements. The Operating Partnership records revenue related to acquisition fees, securities sales commissions and dealer manager fees upon completion of a transaction and advisory, asset and property management fees as services are performed. The Operating Partnership is also reimbursed for certain costs incurred in providing these services. Securities sales commission and dealer manager reimbursements are recorded as revenue as the expenses are incurred. Other reimbursements are recorded as revenue when reimbursements are reasonably assured.
Income Taxes
The Operating Partnership is classified as a partnership for federal income tax purposes. As a partnership, the Operating Partnership is not a taxable entity for federal income tax purposes. Instead, each partner in the Operating Partnership is required to take into account its allocable share of the Operating Partnership’s income, gains, losses, deductions and credits for each taxable year. However, the Operating Partnership may be subject to certain state and local taxes on its income and property.
The General Partner and ARCT III qualified as REITs under Sections 856 through 860 of the Internal Revenue Code (the “Code”) commencing with the taxable year ended December 31, 2011. ARCT IV qualified as a REIT under Sections 856 through 860 of the Code commencing with the taxable year ended December 31, 2012. As REITs, each of the General Partner, ARCT IV and ARCT III generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, and so long as it distributes at least 90% of its REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain. REITs are subject to a number of other organizational and operational requirements. Each of the General Partner, ARCT III and ARCT IV may still be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.
As of June 30, 2014, the Operating Partnership, General Partner, ARCT III and ARCT IV had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended December 31, 2010 remain open to examination by the major taxing jurisdictions to which the Operating Partnership, General Partner, ARCT III and ARCT IV are subject.
Under the LPA, the Operating Partnership is to conduct business in such a manner as to permit the General Partner at all times to qualify as a REIT.
The Operating Partnership conducts substantially all of its Cole Capital business operations through a taxable REIT subsidiary (“TRS”). A TRS is a subsidiary of a REIT that is subject to corporate federal, state and local income taxes, as applicable. The Operating Partnership’s use of a TRS enables it to engage in certain business activities that does not preclude the General Partner from complying with the REIT qualification requirements, and allows the Operating Partnership to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings. The General Partner conducts all of its business in the United States, and as a result, the General Partner files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. Certain inter-company transactions that have been eliminated in consolidation for financial accounting purposes are also subject to taxation.
The Operating Partnership provides for income taxes in accordance with current authoritative accounting and tax guidance. The tax expense or benefit related to significant, unusual or extraordinary items is recognized in the quarter in which those items occur. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the quarter in which the change occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.
F-189
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Repurchase Agreements
In certain circumstances, the Operating Partnership may obtain financing through a repurchase agreement. The Operating Partnership evaluates the initial transfer of a financial instrument and the related repurchase agreement for sale accounting treatment. In instances where the Operating Partnership maintains effective control over the transferred securities, the Operating Partnership accounts for the transaction as a secured borrowing, and accordingly, both the securities and related repurchase agreement payable are recorded separately in the accompanying consolidated balance sheets in investment securities, at fair value and other debt, net, respectively. In instances where the Operating Partnership does not maintain effective control over the transferred securities, the Operating Partnership accounts for the transaction as a sale of securities for proceeds consisting of cash and a forward purchase contract.
Recent Accounting Pronouncements
In April 2014, the FASB issued Accounting Standards Update, 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which amends the reporting requirements for discontinued operations by updating the definition of a discontinued operation to be a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, resulting in fewer disposals that qualify for discontinued operations reporting yet the pronouncement also requires expanded disclosures for discontinued operations. The Operating Partnership adopted ASU 2014-08 effective January 1, 2014. Starting with the first quarter of 2014, the results of operations for all qualifying disposals and properties classified as held for sale that were not previously reported in discontinued operations in the Amended 10-K for the year ended December 31, 2013 will be presented within income from continuing operations on the accompanying consolidated statements of income.
In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. The Operating Partnership is currently evaluating the impact of the new standard on its financial statements.
Note 5 — Acquisitions of CapLease, Cole and CCPT (As Restated)
CapLease Acquisition
On November 5, 2013 (the “CapLease Acquisition Date”), the General Partner completed the CapLease Merger, an acquisition of a REIT that primarily owned and managed a diversified portfolio of single tenant commercial real estate properties subject to long-term leases, the majority of which were net leases, to high credit quality tenants, by acquiring 100% of the outstanding common stock and voting interests of CapLease. The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The Operating Partnership’s consolidated financial statements include the results of operations of CapLease subsequent to the CapLease Acquisition Date.
The purchase price includes a cash payment of $920.7 million, which was funded by the Operating Partnership through additional borrowings under its revolving credit facility and the credit facility assumed from CapLease. See Note 13 — Other Debt and Note 14 — Credit Facilities.
The purchase price allocation for the CapLease Merger is considered preliminary, and additional adjustments may be recorded during the measurement period in accordance with U.S. GAAP. The purchase price allocation will be finalized as the Operating Partnership receives additional information relevant to the acquisition, including a final valuation of the assets purchased and liabilities assumed.
F-190
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
The preliminary purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair value and reflects a goodwill adjustment identified in the Amended 10-K in Note 2 — Restatement of Previously Issued Financial Statements. The following table presents the allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the CapLease Acquisition Date (in thousands):
| As of the CapLease Acquisition Date (1) |
||||
| Fair value of consideration given |
$ | 920,697 | ||
|
|
|
|||
| Assets purchased, at fair value: |
||||
| Land |
235,843 | |||
| Buildings, fixtures and improvements |
1,596,481 | |||
| Land and construction in process |
12,352 | |||
| Acquired intangible lease assets |
191,964 | |||
|
|
|
|||
| Total real estate investments |
2,036,640 | |||
| Cash and cash equivalents |
41,799 | |||
| Investment securities |
60,730 | |||
| Loans held for investment |
26,457 | |||
| Restricted cash |
29,119 | |||
| Deferred costs and other assets, net |
21,574 | |||
|
|
|
|||
| Total identifiable assets purchased |
2,216,319 | |||
|
|
|
|||
| Liabilities assumed, at fair value: |
||||
| Mortgage notes payable |
1,037,510 | |||
| Secured credit facility |
121,000 | |||
| Other debt |
114,208 | |||
| Below-market leases |
57,058 | |||
| Derivative liabilities |
158 | |||
| Accounts payable and accrued expenses |
49,291 | |||
| Deferred rent, derivative and other liabilities |
8,619 | |||
|
|
|
|||
| Total liabilities assumed |
1,387,844 | |||
|
|
|
|||
| Non-controlling interest retained by third party |
567 | |||
|
|
|
|||
| Net identifiable assets acquired by the Operating Partnership |
827,908 | |||
|
|
|
|||
| Goodwill |
$ | 92,789 | ||
|
|
|
|||
| (1) | As reported in the Form 8-K. |
Management is in the process of further evaluating the purchase price accounting. The fair value of real estate investments and below-market leases have been estimated by the Operating Partnership with the assistance of third party valuation firms. Based on a preliminary analysis received to-date, the estimated fair value of these assets and liabilities total $2.0 billion and $57.1 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analysis, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations.
The ascribed value of the non-controlling interest has been estimated based on the fair value of the percentage ownership of The Woodlands, Texas development activity not held by the Operating Partnership. See Note 7 — Real Estate Investments (As Restated) for further information on this development project.
The fair value of the remaining CapLease assets and liabilities have been calculated in accordance with the Operating Partnership’s policy on purchase price allocation, as disclosed in the Form 8-K for the year ended December 31, 2013.
F-191
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Goodwill of approximately $92.8 million is expected to be assigned to the REI segment upon completion of the valuation. The goodwill recognized is attributed to the enhancement of the Operating Partnership’s year-round rental revenue stream, expected synergies and the assembled work force at CapLease.
The pro forma consolidated statements of operations in Note 7 — Real Estate Investments (As Restated) are presented as if CapLease had been included in the consolidated results of the Operating Partnership for the entire periods ended June 30, 2014 and 2013.
Cole Acquisition
The Operating Partnership accounted for the Cole Merger as a business combination under the acquisition method of accounting. Therefore, the consolidated financial statements include the results of operations of Cole subsequent to the Cole Acquisition Date.
Fair Value of Consideration Transferred
The Operating Partnership is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the Cole Acquisition Date totaled approximately $7.5 billion and consisted of the following (in thousands):
| As of Cole Acquisition Date (Preliminary) |
||||
| Estimated Fair Value of Consideration Transferred: |
||||
| Cash |
$ | 181,775 | ||
| Common stock |
7,285,868 | |||
|
|
|
|||
| Total consideration transferred |
$ | 7,467,643 | ||
|
|
|
|||
The fair value of the 520.8 million shares of ARCP’s common stock issued, excluding those common shares transferred to former Cole executives, was determined based on the closing market price of ARCP’s common stock on the Cole Acquisition Date. In accordance with the LPA, the Operating Partnership issued a corresponding number of General Partner OP Units to ARCP when shares of ARCP’s common stock were issued to former stockholders of Cole.
Allocation of Consideration
The consideration transferred pursuant to the Cole Merger Agreement was allocated to the assets acquired and liabilities assumed for the REI segment and Cole Capital, based upon their preliminary estimated fair values as of the Cole Acquisition Date. The Operating Partnership is in the process of gathering certain additional information in order to finalize its assessment of the fair value of certain intangible assets; thus, the provisional measurements of intangible assets and goodwill are subject to change. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations. The measurement periods recorded for the period from the Cole Acquisition Date to June 30, 2014 are presented consolidated and by segments in the tables below.
F-192
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, including all measurement period adjustments, at the Cole Acquisition Date (in thousands):
| Preliminary | ||||||||||||
| REI Segment | Cole Capital | Total as of Cole Acquisition Date |
||||||||||
| Identifiable Assets Acquired at Fair Value: |
||||||||||||
| Land |
$ | 1,737,839 | $ | — | $ | 1,737,839 | ||||||
| Buildings, fixtures and improvements |
5,901,827 | — | 5,901,827 | |||||||||
| Acquired intangible lease assets |
1,324,217 | — | 1,324,217 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total real estate investments |
8,963,883 | — | 8,963,883 | |||||||||
| Investment in unconsolidated entities |
100,659 | 3,307 | 103,966 | |||||||||
| Investment in marketable securities |
151,197 | — | 151,197 | |||||||||
| Investment in notes receivable |
72,326 | — | 72,326 | |||||||||
| Cash and cash equivalents |
129,552 | 20,413 | 149,965 | |||||||||
| Restricted cash |
15,704 | — | 15,704 | |||||||||
| Intangible assets |
— | 385,368 | 385,368 | |||||||||
| Deferred costs and other assets |
43,774 | 50,893 | 94,667 | |||||||||
| Due from affiliates |
— | 3,301 | 3,301 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total identifiable assets acquired |
9,477,095 | 463,282 | 9,940,377 | |||||||||
|
|
|
|
|
|
|
|||||||
| Identifiable Liabilities Assumed at Fair Value: |
||||||||||||
| Mortgage notes payable, net |
$ | 2,706,585 | $ | — | $ | 2,706,585 | ||||||
| Credit facilities |
1,309,000 | — | 1,309,000 | |||||||||
| Other debt, net |
49,013 | — | 49,013 | |||||||||
| Acquired below market lease intangibles |
212,433 | — | 212,433 | |||||||||
| Accounts payable and accrued expenses |
87,628 | 54,615 | 142,243 | |||||||||
| Prepaid rent, derivative and other liabilities |
67,841 | 167,458 | 235,299 | |||||||||
| Dividends payable |
6,271 | — | 6,271 | |||||||||
|
|
|
|
|
|
|
|||||||
| Due to affiliates |
— | 44 | 44 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities assumed |
4,438,771 | 222,117 | 4,660,888 | |||||||||
|
|
|
|
|
|
|
|||||||
| Non-controlling interests |
24,766 | — | 24,766 | |||||||||
| Net identifiable assets acquired |
5,013,558 | 241,165 | 5,254,723 | |||||||||
| Goodwill |
1,654,085 | 558,835 | 2,212,920 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net assets acquired |
$ | 6,667,643 | $ | 800,000 | $ | 7,467,643 | ||||||
|
|
|
|
|
|
|
|||||||
The fair value of real estate investments, including acquired lease intangibles, and below-market lease liabilities allocated to the REI segment have been estimated by the Operating Partnership with the assistance of a third party valuation firm. Based on a preliminary analysis received to date, the estimated fair value of these assets and liabilities total $9.0 billion and $212.4 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analysis, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result.
The intangible assets acquired primarily consist of management and advisory contracts that the Operating Partnership has with the Managed REITs and are subject to an estimated useful life of approximately four years. The Operating Partnership recorded $38.0 million of amortization expense for the period from the Cole Acquisition Date to June 30, 2014. The estimated amortization expense for the remainder of the year ending December 31, 2014 is $48.6 million. The estimated amortization expense for each of the years ending December 31, 2015, 2016 and 2017 is $96.3 million and the estimated amortization expense for the year ending December 31, 2018 is $9.8 million.
F-193
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Goodwill of approximately $1.7 billion is expected to be assigned to the REI segment upon completion of the external valuation. The goodwill recognized is attributed to the enhancement of the Operating Partnership’s year-round rental revenue stream, realized and expected synergies, the impact of the merger on lowering the Operating Partnership’s cost of capital, as well as the benefits of critical mass, improved portfolio diversification, and enhanced access to capital markets. Goodwill of approximately $558.8 million is expected to be assigned to Cole Capital upon completion of the external valuation. The goodwill is primarily supported by management’s belief that Cole Capital brings an established management platform with numerous strategic benefits including growth from new income streams and the ability to offer new products. None of the goodwill is expected to be deductible for income tax purposes.
The fair value of the remaining Cole assets and liabilities have been calculated in accordance with the Operating Partnership’s policy on purchase price allocation, as disclosed in the Form 8-K for the year ended December 31, 2013.
The amounts of revenue and net income related to Cole property acquisitions and Cole Capital included in the accompanying consolidated statements of operations from the Cole Acquisition Date to the period ended June 30, 2014 was $366.2 million and $32.0 million, respectively.
The pro forma consolidated statements of operations in Note 7 — Real Estate Investments (As Restated) are presented as if Cole had been included in the consolidated results of the Operating Partnership for the entire periods ended June 30, 2014 and 2013.
CCPT Acquisition
On May 19, 2014, the General Partner completed its acquisition of CCPT, as discussed in Note 3 — Mergers and Acquisitions (As Restated). The Operating Partnership accounted for the CCPT Merger as a business combination under the acquisition method of accounting. Therefore, the Operating Partnership’s consolidated financial statements include the results of operations of CCPT subsequent to the CCPT Acquisition Date.
Fair Value of Consideration Transferred
The Operating Partnership is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the CCPT Acquisition Date totaled approximately $73.2 million, which was paid in cash. The acquisition was funded by the Operating Partnership through additional borrowings under its revolving credit facility.
F-194
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Allocation of Consideration
The consideration transferred pursuant to the CCPT Merger Agreement was allocated to the assets acquired and liabilities assumed based upon their preliminary estimated fair values as of the CCPT Acquisition Date. The Operating Partnership is in the process of gathering certain additional information in order to finalize its assessment of the fair value of certain intangible assets; thus, the provisional measurements of intangible assets and goodwill are subject to change. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed by segment at the CCPT Acquisition Date (in thousands):
| Preliminary May 19, 2014 |
||||
| Identifiable Assets Acquired at Fair Value: |
||||
| Land |
$ | 28,258 | ||
| Buildings, fixtures and improvements |
113,296 | |||
| Acquired intangible lease assets |
17,960 | |||
|
|
|
|||
| Total real estate investments |
159,514 | |||
| Cash and cash equivalents |
167 | |||
| Restricted cash |
2,420 | |||
| Prepaid expenses and other assets |
297 | |||
|
|
|
|||
| Total identifiable assets acquired |
162,398 | |||
|
|
|
|||
| Identifiable Liabilities Assumed at Fair Value: |
||||
| Mortgage notes payable |
85,286 | |||
| Unsecured credit facility |
800 | |||
| Accounts payable and accrued expenses |
443 | |||
| Below-market lease liability |
1,752 | |||
| Due to affiliates |
568 | |||
| Deferred rent and other liabilities |
390 | |||
|
|
|
|||
| Total liabilities assumed |
89,239 | |||
|
|
|
|||
| Net identifiable assets acquired |
$ | 73,159 | ||
|
|
|
|||
The fair value of real estate investments, including acquired lease intangibles, and below-market lease liabilities have been estimated by the Operating Partnership with the assistance of a third party valuation firm. Based on a preliminary analysis received to date, the estimated fair value of these assets and liabilities total $159.5 million and $1.8 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analysis, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result.
The fair value of the remaining CCPT assets and liabilities have been calculated in accordance with the Operating Partnership’s policy on purchase price allocation, as disclosed in the Form 8-K for the year ended December 31, 2013.
The amounts of revenue and net loss related to CCPT property acquisitions included in the accompanying consolidated statements of operations from the Cole Acquisition Date to the period ended June 30, 2014 were $1.5 million and $0.3 million, respectively.
Note 6 — Segment Reporting (As Restated)
The Operating Partnership operates under two segments, REI and Cole Capital.
REI — Through its REI segment, the Operating Partnership acquires, owns and operates primarily single-tenant, freestanding commercial real estate properties primarily subject to net leases with high credit quality tenants. The Operating Partnership focuses on investing in properties that are net leased to credit tenants, which are generally large public companies with investment-grade ratings and other creditworthy tenants. The Operating Partnership’s long-term business strategy is to continue to acquire a diverse portfolio consisting of approximately 70% long-term leases and 30% medium-term leases, with an average remaining primary lease term of approximately 10 to 12 years. The Operating Partnership considers properties that are
F-195
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
leased on a “medium-term” basis to mean properties originally leased long-term (10 years or longer) that currently have a primary remaining lease duration of generally three to eight years, on average. The Operating Partnership seeks to acquire granular, self-originated single-tenant net lease assets, which may be purchased through sale-leaseback transactions, small portfolio acquisitions and in connection with build-to-suit opportunities, to the extent they are appropriate in terms of capitalization rate and scale. The Operating Partnership expects this investment strategy to provide for stable income from credit tenants and for growth opportunities from re-leasing of current below market leases. As of June 30, 2014, the Operating Partnership owned 3,966 properties comprising 106.8 million square feet of single and multi-tenant retail and commercial space located in 49 states, which include properties owned through consolidated joint ventures. As of June 30, 2014, the rentable space at these properties was 98.8% leased with a weighted average remaining lease term of 9.95 years. As of June 30, 2014, the Operating Partnership also owned 25 commercial mortgage-backed securities (“CMBS”), 14 loans held for investment and, through the Unconsolidated Joint Ventures, had interests in six properties comprising 1.6 million rentable square feet of commercial and retail space.
Cole Capital — Cole Capital is contractually responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf and recommending to each of the Managed REIT’s respective board of directors an approach for providing investors with liquidity. Cole Capital serves as the dealer manager and distributes shares of common stock for certain Managed REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings. Cole Capital receives compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management, financing and disposition of their respective assets, as applicable. Cole Capital also develops new REIT offerings, including obtaining regulatory approvals from the SEC, the Financial Industry Regulatory Authority, Inc. (“FINRA”) and various blue sky jurisdictions for such offerings.
The Operating Partnership allocates certain operating expenses, such as audit and legal fees, board of director fees, employee-related costs and benefits and general overhead expenses between its two segments. The following tables present a summary of the comparative financial results and total assets for each business segment (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (As Restated) | (As Restated) | (As Restated) | (As Restated) | |||||||||||||
| REI: |
||||||||||||||||
| Rental income |
$ | 314,519 | $ | 52,664 | $ | 558,934 | $ | 93,651 | ||||||||
| Direct financing lease income |
1,181 | — | 2,187 | — | ||||||||||||
| Operating expense reimbursements |
29,256 | 2,281 | 50,732 | 4,191 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total real estate investment revenues |
344,956 | 54,945 | 611,853 | 97,842 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Acquisition related |
7,201 | 37,266 | 20,618 | 47,593 | ||||||||||||
| Merger and other non-routine transactions |
5,999 | 5,865 | 165,793 | 129,433 | ||||||||||||
| Property operating expenses |
39,286 | 3,086 | 69,041 | 5,635 | ||||||||||||
| Management fees to affiliate |
— | — | 13,888 | 12,493 | ||||||||||||
| General and administrative expenses |
17,977 | 6,283 | 53,638 | 14,055 | ||||||||||||
| Equity-based compensation |
— | — | — | — | ||||||||||||
| Depreciation and amortization |
225,965 | 33,681 | 385,448 | 60,434 | ||||||||||||
| Impairment of real estate |
1,556 | — | 1,556 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
297,984 | 86,181 | 709,982 | 269,643 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
46,972 | (31,236 | ) | (98,129 | ) | (171,801 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Interest expense, net |
(103,897 | ) | (11,424 | ) | (224,848 | ) | (18,225 | ) | ||||||||
| Extinguishment of debt, net |
(6,469 | ) | — | (15,868 | ) | — | ||||||||||
| Other (expense) income, net |
4,332 | 1,523 | 8,291 | 2,522 | ||||||||||||
| Gain (loss) on derivative instruments, net |
14,207 | (31,174 | ) | 7,086 | (31,179 | ) | ||||||||||
| Loss on contingent value rights |
— | — | — | — | ||||||||||||
| Gain on disposition of properties, net |
(1,269 | ) | — | (18,874 | ) | — | ||||||||||
F-196
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (As Restated) | (As Restated) | (As Restated) | (As Restated) | |||||||||||||
| Gain on sale of investments |
— | — | — | 451 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other expenses, net |
(93,096 | ) | (41,075 | ) | (244,213 | ) | (46,431 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss from continuing operations |
(46,124 | ) | (72,311 | ) | (342,342 | ) | (218,232 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Discontinued operations: |
||||||||||||||||
| Income from operations of held for sale properties |
$ | — | $ | 36 | $ | — | $ | 20 | ||||||||
| Gain on held for sale properties |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income from discontinued operations |
— | 36 | — | 20 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | (46,124 | ) | $ | (72,275 | ) | $ | (342,342 | ) | $ | (218,212 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cole Capital: |
||||||||||||||||
| Dealer manager and distribution fees, selling commissions and offering reimbursements |
9,969 | — | 52,422 | — | ||||||||||||
| Transaction service fees |
14,411 | — | 18,970 | — | ||||||||||||
| Management fees and reimbursements |
12,842 | — | 20,087 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Cole Capital revenues |
37,222 | — | 91,479 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cole Capital reallowed fees and commissions |
7,068 | — | 41,504 | — | ||||||||||||
| Merger and other non-routine transactions |
1,423 | — | 1,927 | — | ||||||||||||
| General and administrative expenses |
22,035 | — | 42,866 | — | ||||||||||||
| Depreciation and amortization |
24,774 | — | 39,133 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
55,300 | — | 125,430 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income |
7,604 | — | 13,855 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
(10,474 | ) | — | (20,096 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Company: |
||||||||||||||||
| Total revenues |
$ | 382,178 | $ | 54,945 | $ | 703,332 | $ | 97,842 | ||||||||
| Total operating expenses |
$ | 353,284 | $ | 86,181 | $ | 835,412 | $ | 269,643 | ||||||||
| Total other expense |
$ | (85,492 | ) | $ | (41,075 | ) | $ | (230,358 | ) | $ | (46,431 | ) | ||||
| Loss from continuing operations |
$ | (56,598 | ) | $ | (72,311 | ) | $ | (362,438 | ) | $ | (218,232 | ) | ||||
| Income from discontinued operations |
$ | — | $ | 36 | $ | — | $ | 20 | ||||||||
| Net loss |
$ | (56,598 | ) | $ | (72,275 | ) | $ | (362,438 | ) | $ | (218,212 | ) | ||||
| Total Assets | ||||||||
| June 30, 2014 | December 31, 2013 | |||||||
| (As Restated) | (As Restated) | |||||||
| REI |
$ | 20,182,178 | $ | 7,809,083 | ||||
| Cole Capital |
1,128,318 | — | ||||||
|
|
|
|
|
|||||
| Total |
$ | 21,310,496 | $ | 7,809,083 | ||||
|
|
|
|
|
|||||
F-197
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Note 7 — Real Estate Investments (As Restated)
Excluding the Cole Merger, the ARCT IV Merger and the CCPT Merger, the Operating Partnership acquired interests in 337 commercial properties, including 18 land parcels, for an aggregate purchase price of $1.5 billion during the six months ended June 30, 2014 (the “2014 Acquisitions”). The Operating Partnership is in the process of obtaining and reviewing the final third party appraisals for some of the 2014 Acquisitions, and as such, the fair value of the related asset acquired and liabilities assumed during the six months ended June 30, 2014 are provisionally allocated. The following table presents the allocation of the fair value of the assets acquired and liabilities assumed during the periods presented (dollar amounts in thousands):
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Real estate investments, at cost: |
||||||||||||||||
| Land |
$ | 109,075 | $ | 416,887 | $ | 239,663 | $ | 493,029 | ||||||||
| Buildings, fixtures and improvements |
482,074 | 1,129,906 | 1,185,641 | 1,424,900 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total tangible assets |
591,149 | 1,546,793 | 1,425,304 | 1,917,929 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Acquired intangible assets: |
||||||||||||||||
| In-place leases |
30,801 | 165,576 | 128,581 | 211,748 | ||||||||||||
| Above-market leases |
5,511 | — | 21,145 | — | ||||||||||||
| Assumed intangible liabilities: |
||||||||||||||||
| Below-market leases |
(1,869 | ) | — | (3,321 | ) | — | ||||||||||
| Fair value adjustment of assumed notes payable |
— | — | (23,589 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total purchase price of assets acquired, net |
625,592 | 1,712,369 | 1,548,120 | 2,129,677 | ||||||||||||
| Notes payable assumed |
— | — | 301,532 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cash paid for acquired real estate investments |
$ | 625,592 | $ | 1,712,369 | $ | 1,246,588 | $ | 2,129,677 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Number of properties acquired |
122 | 899 | 337 | 1,011 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following table presents unaudited pro forma information as if all of the 2014 Acquisitions and the Cole Merger, ARCT IV Merger and CCPT Merger, as discussed in Note 3 — Mergers and Acquisitions (As Restated), were completed on January 1, 2013 for each period presented below. These amounts have been calculated after applying the Operating Partnership’s accounting policies and adjusting the results of acquisitions to reflect the additional depreciation and amortization and interest expense that would have been charged had the acquisitions occurred on January 1, 2013. Additionally, the unaudited pro forma net loss attributable to unitholders was adjusted to exclude acquisition related expenses of $20.6 million and $47.6 million for the six months ended June 30, 2014 and 2013, respectively and merger and other non-routine transaction related expenses of $167.7 million and $129.4 million for the six months ended June 30, 2014 and 2013, respectively.
| (in thousands) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2014 | 2013 | |||||||
| (As Restated) | (As Restated) | |||||||
| Pro forma revenues |
$ | 828,299 | $ | 155,269 | ||||
| Pro forma net (loss) income attributable to unitholders |
$ | (64,362 | ) | $ | 10,849 | |||
F-198
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Future Lease Payments
The following table presents future minimum base rental cash payments due to the Operating Partnership over the next five years and thereafter. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items (in thousands):
| Future Minimum Operating Lease Base Rent Payments |
Future Minimum Direct Financing Lease Payments(1) |
|||||||
| July 1, 2014—December 31, 2014 |
$ | 677,188 | $ | 2,485 | ||||
| 2015 |
1,214,297 | 4,757 | ||||||
| 2016 |
1,191,214 | 4,674 | ||||||
| 2017 |
1,142,109 | 4,273 | ||||||
| 2018 |
1,087,444 | 3,183 | ||||||
| Thereafter |
7,706,549 | 10,052 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 13,018,801 | $ | 29,424 | ||||
|
|
|
|
|
|||||
| (1) | 47 properties are subject to direct financing leases and, therefore, revenue is recognized as direct financing lease income on the discounted cash flows of the lease payments. Amounts reflected are the cash rent on these respective properties. |
Investment in Direct Financing Leases, Net
The components of the Operating Partnership’s net investment in direct financing leases as of June 30, 2014 and December 31, 2013 are as follows (in thousands):
| June 30, 2014 | December 31, 2013 | |||||||
| Future minimum lease payments receivable |
$ | 29,685 | $ | 33,729 | ||||
| Unguaranteed residual value of property |
43,884 | 46,172 | ||||||
| Unearned income |
(11,475 | ) | (13,789 | ) | ||||
|
|
|
|
|
|||||
| Net investment in direct financing leases |
$ | 62,094 | $ | 66,112 | ||||
|
|
|
|
|
|||||
Development Activities
During the six months ended June 30, 2014, the Operating Partnership acquired 18 land parcels, upon which single-tenant commercial properties will be developed. Based on budgeted construction costs, the remaining costs to complete the buildings is estimated to be $15.3 million in aggregate. The land acquired for an aggregate amount of $8.2 million is included in land in the accompanying consolidated balance sheet. In addition, during the six months ended June 30, 2014, the Operating Partnership substantially completed the development of a 450,000 square foot distribution warehouse in Columbia, South Carolina. The build-to-suit project has an estimated total investment of $22.0 million. As of June 30, 2014, the Operating Partnership had a total investment of $20.4 million, including capitalized interest of $37,000, and an estimated remaining investment of $1.7 million related to the development project.
Prior to the CapLease Acquisition Date, CapLease entered into an agreement with a major Texas-based developer to develop a 150,000 square foot speculative office building in The Woodlands, Texas, adjacent to and part of the same development as an existing office building owned by CapLease since 2012. Costs of the project, which are budgeted to be $34.0 million, are scheduled to be funded by equity contributions from the Operating Partnership and its developer partner, and $17.0 million of advances during the construction period under a development loan entered into with Amegy Bank. All equity contributions are scheduled to be borne as follows: the Operating Partnership, 90%; and the developer, 10%; except for cost overruns, which will be borne 50% by each. Because the Operating Partnership has a controlling financial interest in the investment, the Operating Partnership consolidates the investment for financial accounting purposes. The Operating Partnership has an option to purchase, and the developer the option to sell to the Operating Partnership, in each case at fair market value, the developer’s interest in the project upon (i) substantial completion of the project and (ii) leases being entered into for 95% of the square footage of the project. Construction activity and funding of the project commenced during the quarter ended September 30, 2013 and was expected to be completed during the second half of 2014. As of June 30, 2014, the Operating Partnership had a total investment of $20.0 million, including capitalized interest of $68,000, and estimated remaining investment of $14.0 million related to the development project.
F-199
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Tenant Concentration
As of June 30, 2014 and June 30, 2013, there were no tenants exceeding 10% of consolidated annualized rental income. Annualized rental income for net leases is rental income as of the period reported, which includes the effect of tenant concessions such as free rent, as applicable.
Geographic Concentration
As of June 30, 2014, properties located in Texas represented 12.9% of consolidated annualized rental income determined on a straight-line basis. There were no geographic concentrations exceeding 10% of consolidated annualized rental income at June 30, 2013.
Note 8 — Investment Securities, at Fair Value
Investment securities are considered available-for-sale and, therefore, increases or decreases in the fair value of these investments are recorded in accumulated other comprehensive income (loss) as a component of equity on the consolidated balance sheets unless the securities are considered to be other-than-temporarily impaired at which time the losses are reclassified to expense.
The following tables detail the unrealized gains and losses on investment securities as of June 30, 2014 and December 31, 2013 (in thousands):
| June 30, 2014 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
| Investments in real estate fund |
$ | 1,621 | $ | 270 | $ | — | $ | 1,891 | ||||||||
| CMBS |
208,584 | 8,775 | (46 | ) | 217,313 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 210,205 | $ | 9,045 | $ | (46 | ) | $ | 219,204 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2013 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
| Investments in real estate fund |
$ | 1,589 | $ | — | $ | (105 | ) | $ | 1,484 | |||||||
| CMBS |
60,452 | 498 | (367 | ) | 60,583 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 62,041 | $ | 498 | $ | (472 | ) | $ | 62,067 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
CMBS
In connection with the Cole Merger, the Operating Partnership acquired 15 CMBS with an estimated aggregate fair value of $151.2 million as of the Cole Acquisition Date. As of June 30, 2014, the Operating Partnership owned 25 CMBS with an estimated aggregate fair value of $217.3 million. As of June 30, 2014, certain of these securities were pledged as collateral under repurchase agreements (the “Repurchase Agreements”), as discussed in Note 13 — Other Debt. As of December 31, 2013, the Operating Partnership owned 10 CMBS with an estimated aggregate fair value of $60.6 million.
As of June 30, 2014, the fair value of one CMBS was below its amortized cost by approximately $46,000. The Operating Partnership evaluated each of the securities for other-than-temporary impairment at June 30, 2014, and determined that no other-than-temporary impairment charges on its securities were appropriate. The Operating Partnership believes that none of the unrealized losses on investment securities are other-than-temporary because management expects the Operating Partnership will receive all contractual principal and interest related to these investments. In addition, the Operating Partnership is not required, and does not intend, to sell these securities.
F-200
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
The scheduled maturity of the Operating Partnership’s CMBS as of June 30, 2014 is as follows (in thousands):
| June 30, 2014 | ||||||||
| Amortized Cost | Fair Value | |||||||
| Due within one year |
$ | — | $ | — | ||||
| Due after one year through five years |
1,202 | 1,237 | ||||||
| Due after five years through 10 years |
178,922 | 186,042 | ||||||
| Due after 10 years |
28,460 | 30,034 | ||||||
|
|
|
|
|
|||||
| $ | 208,584 | $ | 217,313 | |||||
|
|
|
|
|
|||||
Investment in Real Estate Fund
As of June 30, 2014, the Operating Partnership had investments in a real estate fund that is sponsored by an affiliate of the Former Manager and which invests primarily in equity securities of other publicly traded REITs. This investment is accounted for under the equity method of accounting because the Operating Partnership has significant influence but not control.
Note 9 — Loans Held for Investment
During the six months ended June 30, 2014, in connection with the Cole Merger, the Operating Partnership acquired two mortgage notes receivable, each of which is secured by an office building. The mortgage notes had a fair value of $72.3 million as of the Cole Acquisition Date. As of December 31, 2013, the Operating Partnership owned 12 loans held for investment, which were acquired in connection with the CapLease Merger and consist predominantly of mortgage loans on properties subject to leases to investment-grade tenants. The loans had a fair value of $26.5 million at the CapLease Merger Date. At June 30, 2014, the Operating Partnership owned 14 loans held for investment, which had a carrying value of $97.6 million and carried interest rates ranging from 5.28% to 7.24%. As of December 31, 2013, the loans held for investment had a carrying value of $26.3 million and carried interest rates ranging from 5.28% to 7.24%. The fair value adjustment is being amortized to interest expense in the consolidated statements of operations over the term of the loan, using the effective interest method.
The Operating Partnership’s loan portfolio is comprised primarily of fully amortizing or nearly fully amortizing first mortgage loans on commercial real estate leased to a single tenant. Therefore, the Operating Partnership’s monitoring of the credit quality of its loans held for investment is focused primarily on an analysis of the tenant, including review of tenant credit ratings (including changes in ratings) and other measures of tenant credit quality, trends in the tenant’s industry and general economic conditions, and an analysis of measures of collateral coverage, such as an estimate of the loan’s loan-to-value (“LTV”) ratio (principal amount outstanding divided by estimated value of the property) and its remaining term until maturity. As of June 30, 2014 and December 31, 2013, the Operating Partnership had no reserve for loan loss.
F-201
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Note 10 — Deferred Costs and Other Assets, Net (As Restated)
Deferred costs and other assets, net consisted of the following as of June 30, 2014 and December 31, 2013 (in thousands):
| June 30, 2014 | December 31, 2013 | |||||||
| (As Restated) | (As Restated) | |||||||
| Deferred costs, net (1) |
$ | 156,911 | $ | 84,746 | ||||
| Accounts receivable, net (2) |
65,855 | 16,254 | ||||||
| Straight-line rent receivable |
43,892 | 19,010 | ||||||
| Prepaid expenses (1) |
17,379 | 43,801 | ||||||
| Leasehold improvements, property and equipment, net (3) |
21,028 | 531 | ||||||
| Restricted escrow deposits |
49,306 | 101,813 | ||||||
| Derivative assets, at fair value (1) |
5,522 | 9,189 | ||||||
| Other assets (1) |
58,306 | 5,317 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 418,199 | $ | 280,661 | ||||
|
|
|
|
|
|||||
| (1) | These line items have been updated since the 2013 OP Form S-4. Certain line items have been reclassified and included within the deferred costs and other assets, net in the accompanying consolidated balance sheet. For detail on the restatement and reclassification adjustments, see Note 2— Restatement of Previously Issued Financial Statements. |
| (2) | Allowance for doubtful accounts was $1.8 million and $0.2 million as of June 30, 2014 and December 31, 2013, respectively. |
| (3) | Amortization expense for leasehold improvements totaled $0.3 million and $0.5 million for the three and six months ended June 30, 2014, respectively. Accumulated amortization was $0.5 million and $0.0 million as of June 30, 2014 and December 31, 2013, respectively. Depreciation expense for property and equipment totaled $0.8 million and $0.7 million for the three and six months ended June 30, 2014, respectively. Accumulated depreciation was $0.7 million and $0.0 million as of June 30, 2014 and December 31, 2013, respectively. |
Note 11 — Fair Value of Financial Instruments (As Restated)
The Operating Partnership determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The guidance defines three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3—Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Operating Partnership evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Operating Partnership expects that changes in classifications between levels will be infrequent.
Although the Operating Partnership has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Operating Partnership and its counterparties.
F-202
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
However, as of June 30, 2014, the Operating Partnership has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Operating Partnership’s derivatives. As a result, the Operating Partnership has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
The following tables present information about the Operating Partnership’s assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013, aggregated by the level in the fair value hierarchy within which those instruments fall (in thousands):
| Level 1 | Level 2 | Level 3 | Balance as of June 30, 2014 (as restated) |
|||||||||||||
| Assets: |
||||||||||||||||
| Investments in real estate fund |
$ | — | $ | 1,891 | $ | — | $ | 1,891 | ||||||||
| CMBS |
— | — | 217,313 | 217,313 | ||||||||||||
| Interest rate swap assets |
— | 5,522 | — | 5,522 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | — | $ | 7,413 | $ | 217,313 | $ | 224,726 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Liabilities: |
||||||||||||||||
| Interest rate swap liabilities |
$ | — | $ | (12,811 | ) | $ | — | $ | (12,811 | ) | ||||||
| Series D Preferred Stock embedded derivative |
— | — | (11,520 | ) | (11,520 | ) | ||||||||||
| Contingent consideration arrangements |
— | — | (4,818 | ) | (4,818 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
$ | — | $ | (12,811 | ) | $ | (16,338 | ) | $ | (29,149 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Level 1 | Level 2 | Level 3 | Balance as of December 31, 2013 |
|||||||||||||
| Assets: |
||||||||||||||||
| Investments in real estate fund |
$ | — | $ | 1,484 | $ | — | $ | 1,484 | ||||||||
| CMBS |
— | — | 60,583 | 60,583 | ||||||||||||
| Interest rate swap assets |
— | 9,189 | — | 9,189 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | — | $ | 10,673 | $ | 60,583 | $ | 71,256 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Liabilities: |
||||||||||||||||
| Interest rate swap liabilities |
$ | — | $ | (1,719 | ) | $ | — | $ | (1,719 | ) | ||||||
| Series D Preferred Stock embedded derivative |
— | — | (16,736 | ) | (16,736 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
$ | — | $ | (1,719 | ) | $ | (16,736 | ) | $ | (18,455 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
Investments in real estate fund—The fair value of the Operating Partnership’s investments in real estate fund is based on published pricing.
CMBS—The fair values of the Operating Partnership’s CMBS are valued using broker quotations, collateral values, subordination levels and liquidity of the individual securities.
Derivatives—The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Operating Partnership’s potential nonperformance risk and the performance risk of the counterparties.
Series D Preferred Stock embedded derivative—The valuation of this derivative instrument is determined using a binomial option pricing model. Key inputs in the model include the expected term, risk-free interest rate, volatility and dividend yield.
Contingent consideration arrangements—The contingent consideration arrangements are carried at fair value. The fair value of the contingent payments related to property acquisitions is determined based on the estimated timing and probability of
F-203
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
successfully leasing vacant space subsequent to the Operating Partnership’s acquisition of certain properties. The estimated fair value of the property-related contingent consideration arrangements totaled $4.8 million as of June 30, 2014 and is included in the accompanying consolidated balance sheet in deferred rent, derivative and other liabilities. There were no property-related contingent consideration arrangements as of December 31, 2013.
The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, due to affiliates and accounts payable approximate their carrying value on the accompanying consolidated balance sheets due to their short-term nature and are classified as Level 1 under the fair value hierarchy.
A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 or Level 3 of the fair value hierarchy during the six months ended June 30, 2014.
The following is a reconciliation of the changes in instruments with Level 3 inputs in the fair value hierarchy for the six months ended June 30, 2014 (in thousands):
| CMBS | Series D Preferred Stock Embedded Derivative |
Contingent Consideration Arrangements |
Total | |||||||||||||
| Beginning balance as of December 31, 2013 |
$ | 60,583 | $ | (16,736 | ) | $ | — | $ | 43,847 | |||||||
| Total gains and losses: |
||||||||||||||||
| Unrealized gain included in other comprehensive income, net |
8,598 | — | — | 8,598 | ||||||||||||
| Changes in fair value included in net income, net |
— | 5,216 | (1,212 | ) | 4,004 | |||||||||||
| Purchases, issuances, settlements and amortization: |
||||||||||||||||
| Purchases/issuances |
151,197 | — | (3,606 | ) | 147,591 | |||||||||||
| Amortization included in net income, net |
(3,065 | ) | — | — | (3,065 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Ending balance as of June 30, 2014 |
$ | 217,313 | $ | (11,520 | ) | $ | (4,818 | ) | $ | 200,975 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
The fair values of the Operating Partnership’s financial instruments that are not reported at fair value on the consolidated balance sheets are reported below (dollar amounts in thousands):
| Level | Carrying Amount at June 30, 2014 |
Fair Value at June 30, 2014 |
Carrying Amount at December 31, 2013 |
Fair Value at December 31, 2013 |
||||||||||||||
| Assets: |
||||||||||||||||||
| Loans held for investment |
3 | $ | 97,587 | $ | 98,902 | $ | 26,279 | $ | 26,435 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities: |
||||||||||||||||||
| Mortgage notes payable, net |
3 | $ | 4,227,494 | $ | 4,328,230 | $ | 1,301,114 | $ | 1,305,823 | |||||||||
| Corporate bonds, net |
3 | 2,546,089 | 2,568,117 | — | — | |||||||||||||
| Convertible debt, net |
3 | 975,003 | 1,035,581 | 972,490 | 976,629 | |||||||||||||
| Credit facilities |
3 | 1,896,000 | 1,896,000 | 1,819,800 | 1,819,800 | |||||||||||||
| Secured term loan |
3 | 51,296 | 51,411 | 58,979 | 59,049 | |||||||||||||
| Unsecured Credit Facility |
3 | — | — | 150,000 | 150,000 | |||||||||||||
| Trust preferred notes |
3 | 26,579 | 23,485 | 26,548 | 23,345 | |||||||||||||
| Other debt |
3 | 68,283 | 68,414 | 19,278 | 19,350 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total liabilities |
$ | 9,790,744 | $ | 9,971,238 | $ | 4,348,209 | $ | 4,353,996 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
Loans held for investment—The fair value of the Operating Partnership’s fixed-rate loan portfolio is estimated with a discounted cash flow analysis, utilizing scheduled cash flows and discount rates estimated by management to approximate those that a willing buyer and seller might use.
F-204
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Credit facilities—Management believes that the stated interest rates (which float based on short-term interest rates) approximate market rates. As such, the fair values of these obligations is estimated to be equal to the outstanding principal amounts.
Convertible notes and Corporate bonds—The fair value of the convertible notes and corporate bonds is estimated by an independent third party using market comps from regularly traded bonds with similar terms.
Mortgage notes payable, Trust preferred notes, Other debt and Secured term loan—The fair value of mortgages payable on real estate investments and the secured term loan is estimated by an independent third party using a discounted cash flow analysis, based on management’s estimates of market interest rates.
Note 12 — Mortgage Notes Payable (As Restated)
The Operating Partnership’s mortgage notes payable consist of the following as of June 30, 2014 and December 31, 2013 (dollar amounts in thousands):
| Encumbered Properties |
Outstanding Loan Amount |
Weighted Average Effective Interest Rate(1) |
Weighted Average Maturity(2) |
|||||||||||||
| June 30, 2014 |
757 | $ | 4,125,621 | 4.90 | % | 6.00 | ||||||||||
| December 31, 2013 |
177 | $ | 1,258,661 | 3.42 | % | 3.41 | ||||||||||
| (1) | Mortgage notes payable primarily have fixed rates or are fixed by way of interest rate swap arrangements. Effective interest rates range from 2.40% to 7.20% at June 30, 2014 and 1.83% to 6.28% at December 31, 2013. |
| (2) | Weighted average remaining years until maturity as of June 30, 2014 and December 31, 2013, respectively. |
In conjunction with the various mergers and portfolio acquisitions, as described in Note 3 — Mergers and Acquisitions (As Restated), aggregate net premiums totaling $137.4 million were recorded upon the assumption of the mortgages for above-market interest rates. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective mortgages using the effective-interest method. As of June 30, 2014, there was $101.9 million in unamortized net premiums included in mortgage notes payable, net on the consolidated balance sheet.
The following table summarizes the scheduled aggregate principal repayments subsequent to June 30, 2014 (in thousands):
| Year | Total | |||
| July 1, 2014—December 31, 2014 |
$ | 104,043 | ||
| 2015 |
270,843 | |||
| 2016 |
250,881 | |||
| 2017 |
522,655 | |||
| 2018 |
252,292 | |||
| Thereafter |
2,724,907 | |||
|
|
|
|||
| Total |
$ | 4,125,621 | ||
|
|
|
|||
The Operating Partnership’s mortgage loan agreements generally require restrictions on corporate guarantees and the maintenance of financial covenants including maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios). As of June 30, 2014, the Operating Partnership was in compliance with the debt covenants under the mortgage loan agreements.
During the three and six months ended June 30, 2014, the Operating Partnership paid off $132.8 million and $855.1 million, respectively, of mortgage notes payable, including notes that were subject to interest rate swap agreements. In connection with the debt repayments, the Operating Partnership paid prepayment fees totaling $3.8 million and $32.9 million for the three and six months ended June 30, 2014, respectively, which are included in Extinguishment of debt, net in the accompanying statements of operations. In addition, the Operating Partnership paid $9.9 million during the six months ended June 30, 2014 for the settlement of interest rate swaps that were associated with certain of the mortgage notes, which
F-205
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
approximated the fair value of the interest rate swaps. No such swap settlements were paid during the three months ended June 30, 2014. The Operating Partnership wrote off the deferred financing costs and premiums and discounts associated with these mortgages, which resulted in a loss of $2.6 million during the three months ended June 30, 2014 and a gain of $17.0 million during the six months ended June 30, 2014, respectively. The recently paid off mortgages had a weighted average remaining interest rate of 4.86% and a weighted average remaining term of 2.5 years.
Note 13 — Other Debt
Corporate Bond Offering
On February 6, 2014, the Operating Partnership issued, in a private offering, $2.55 billion aggregate principal amount of senior unsecured notes consisting of $1.3 billion aggregate principal amount of 2.00% senior notes due 2017 (the “2017 Notes”), $750.0 million aggregate principal amount of 3.00% senior notes due 2019 (the “2019 Notes”) and $500.0 million aggregate principal amount of 4.60% senior notes due 2024 (the “2024 Notes,” and, together with the 2017 Notes and 2019 Notes, the “Notes”). The Notes are guaranteed by the General Partner. The Operating Partnership may redeem all or a part of any series of the Notes at any time at its option at the redemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest on the principal amount of the Notes of such series being redeemed to, but excluding, the applicable redemption date. With respect to the 2019 Notes and the 2024 Notes, if such Notes are redeemed on or after January 6, 2019 with respect to the 2019 Notes, or November 6, 2023 with respect to the 2024 Notes, the redemption price will equal 100% of the principal amount of the Notes of the applicable series to be redeemed, plus accrued and unpaid interest on the amount being redeemed to, but excluding, the applicable redemption date. In conjunction with this corporate bond offering, aggregate discounts totaling $4.2 million were recorded. As of June 30, 2014, the unamortized net discount totaled $3.9 million.
Convertible Senior Note Offering
Effective July 29, 2013, the Operating Partnership issued to the General Partner $300.0 million of the 3.00% convertible senior notes due in 2018 and issued an additional $10.0 million of its 2018 Notes on August 1, 2013 (collectively, the “Original 2018 Notes”). Effective December 10, 2013, the Operating Partnership issued an additional $287.5 million of the convertible senior notes due 2018 in connection with the General Partner’s reopening of the 2018 Notes indenture agreement (the “Reopened 2018 Notes,” together with the Original 2018 Notes, the “2018 Notes”). The 2018 Notes mature on August 1, 2018. Such issuances were identical to ARCP’s registered issuances of the same amount of notes to various purchasers in a public offering. The fair value of the Original 2018 Notes and Reopened 2018 Notes was determined at issuance to be $299.6 million and $282.1 million, respectively, resulting in a debt discount of $10.4 million and $5.4 million, respectively, with an offset recorded to partners’ equity representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected lives of the 2018 Notes. As of June 30, 2014, the carrying value of the Original 2018 Notes and Reopened 2018 Notes was $301.5 million and $282.7 million, respectively. In connection with any permissible conversion election made by the holders of the identical convertible notes issued by ARCP, the General Partner may elect to convert the 2018 Notes into cash, General Partner OP Units or a combination thereof, in limited circumstances prior to February 1, 2018 and may convert the 2018 Notes at any time into such consideration on or after February 1, 2018. The initial conversion rate is 59.805 General Partner OP Units per $1,000 principal amount of 2018 Notes.
Effective December 10, 2013, the Operating Partnership issued to the General Partner $402.5 million of 3.75% convertible senior notes due 2020 (the “2020 Notes”). The 2020 Notes mature on December 15, 2020. Such issuance was identical to ARCP’s registered issuance of the same amount of notes to various purchasers in a public offering. The fair value of the 2020 Notes was determined at issuance to be $389.7 million, resulting in a debt discount of $12.8 million with an offset recorded to partners’ equity representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected life of the 2020 Notes. As of June 30, 2014, the carrying value of the 2020 Notes was $390.7 million. In connection with any permissible conversion election made by the holders of the identical convertible notes issued by ARCP, the General Partner may elect to convert the 2020 Notes into cash, General Partner OP Units or a combination thereof, in limited circumstances prior to June 15, 2020 and may convert the 2020 Notes at any time into such consideration on or after June 15, 2020. The initial conversion rate is 66.0262 General Partner OP Units per $1,000 principal amount of 2020 Notes.
In connection with the 2018 Notes and 2020 Notes, the remaining unamortized discount totaled $25.0 million as of June 30, 2014.
F-206
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Trust Preferred Notes
As part of the CapLease Merger, the Operating Partnership assumed $30.9 million in aggregate principal amount of fixed/floating rate preferred notes with a fair value of $26.5 million at the CapLease Acquisition Date. The trust preferred securities represent an unsecured subordinated recourse debt obligation of the Operating Partnership and require quarterly interest payments calculated at a fixed interest rate equal to 7.68% per annum through January 30, 2016, and subsequently at a variable interest rate equal to LIBOR plus 2.60% per annum. The notes must be redeemed on January 30, 2036, and may be redeemed, in whole or in part, at par, at the Operating Partnership’s option, at any time. The discount recorded on the notes is being amortized to interest expense on the consolidated statements of operations over the life of the preferred notes. As of June 30, 2014, the carrying value of the preferred securities was $26.6 million, which is included in other debt, net in the accompanying consolidated balance sheets.
Subsequent to June 30, 2014, the Operating Partnership redeemed the Trust Preferred Notes at par.
Secured Term Loan
As part of the CapLease Merger, the Operating Partnership assumed a secured term loan with KBC Bank, N.V. with a principal balance of $59.8 million and a fair value of $60.7 million at the CapLease Acquisition Date. The interest coupon on the loan is fixed at 5.81% annually until the loan matures in January 2018. The loan is non-recourse to the Operating Partnership, subject to limited non-recourse exceptions. During the six months ended June 30, 2014, the Operating Partnership made principal payments of $7.5 million. The premium is being amortized to interest expense on the consolidated statements of operations over the life of the secured term loan. As of June 30, 2014, the carrying value of the secured term loan was $51.3 million, which is included in other debt, net in the accompanying consolidated balance sheets.
Amounts related to the secured term loan as of June 30, 2014 were as follows (in thousands):
| Borrowings | Collateral Carrying Value | |||||||
| Loans held for investment |
$ | 31,597 | $ | 44,670 | ||||
| Intercompany mortgage loans on CapLease properties |
5,525 | 17,124 | ||||||
| CMBS |
13,529 | 21,900 | ||||||
|
|
|
|
|
|||||
| $ | 50,651 | $ | 83,694 | |||||
|
|
|
|
|
|||||
Other Debt
As part of the CapLease Merger, ARCP assumed $19.2 million of senior notes (the “Senior Notes”) that bear interest at an annual interest rate of 7.50%, payable semi-annually on April 1 and October 1, with a fair value of $19.3 million at the CapLease Acquisition Date. The Senior Notes mature on October 1, 2027. ARCP has the right to redeem the Senior Notes in whole or in part for cash at any time or from time to time at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed, plus any accrued and unpaid interest. Holders of the Senior Notes may require ARCP to repurchase their Senior Notes, in whole or in part, on October 1, 2017 and October 1, 2022, for a cash price equal to 100% of the principal amount of the Senior Notes to be repurchased, plus any accrued and unpaid interest. On the CapLease Acquisition Date, the Operating Partnership issued the General Partner notes that had identical terms as the Senior Notes (“General Partner Senior Notes”). The discount is being amortized to interest expense on the consolidated statements of operations over the life of the General Partner Senior Notes. As of June 30, 2014, the carrying value of the Senior Notes was $19.3 million, which is included in other debt, net in the accompanying consolidated balance sheets.
In conjunction with the CapLease Merger, aggregate net discounts totaling $3.5 million were recorded upon assumption of the trust preferred notes, secured term loan and Senior Notes. As of June 30, 2014, unamortized net discounts were $3.6 million in unamortized net discounts included in other debt, net on the consolidated balance sheets.
Subsequent to June 30, 2014, ARCP repaid the $19.2 million outstanding on the Senior Notes at par. In conjunction with ARCP’s repayment, the Operating Partnership repaid the $19.2 million General Partner Senior Notes at par.
F-207
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Future Minimum Repayments
The following table summarizes the scheduled aggregate principal repayments on Other Debt subsequent to June 30, 2014 (in thousands):
| Principal Repayment | ||||
| July 1, 2014—December 31, 2014 |
$ | 54,339 | ||
| 2015 |
11,862 | |||
| 2016 |
12,516 | |||
| 2017 |
7,680 | |||
| 2018 |
13,267 | |||
| Thereafter |
50,140 | |||
|
|
|
|||
| $ | 149,804 | |||
|
|
|
|||
Barclay’s Facility
As of December 31, 2013, the Operating Partnership had available commitments from Barclays Bank PLC, and other committed parties, for up to $2.1 billion in senior secured term loans (the “Barclays Facility”) which, if funded, would have been available to fund cash amounts payable in connection with the Cole Merger. The Barclays Facility was terminated upon the issuance of the notes in February 2014. In connection with the termination, the Operating Partnership recorded $32.6 million as amortization of deferred financing costs associated with the Barclays Facility, which is included in interest expense, net in the accompanying consolidated statements of operations.
Repurchase Agreements
As part of the Cole Merger, the Operating Partnership assumed $49.0 million of repurchase agreements secured by a portion of the Operating Partnership’s CMBS portfolio. The Repurchase Agreements have interest rates ranging from LIBOR plus 1.35% to 1.75% and mature on various dates from July 2014 through September 2014. Upon maturity, the Operating Partnership may elect to renew the Repurchase Agreements for 90 day periods until the CMBS mature. The CMBS have a weighted average remaining term of 7.72 years. Under the Repurchase Agreements, the lender retains the right to mark the underlying collateral to fair value. A reduction in the value of the pledged assets would require the Operating Partnership to provide additional collateral to fund margin calls. As of June 30, 2014, the securities held as collateral had a fair value of $144.8 million and an amortized cost of $139.3 million. There was no cash collateral held by the counterparty as of June 30, 2014. The Repurchase Agreements are being accounted for as secured borrowings because the Operating Partnership maintains effective control of the financed assets. The Repurchase Agreements are non recourse to the Operating Partnership and the General Partner and are included in other debt, net in the accompanying consolidated balance sheets.
Note 14 — Credit Facilities
Senior Unsecured Credit Facility
The Operating Partnership, as borrower, and the General Partner, as guarantor, are parties to a senior corporate credit facility with Wells Fargo, National Association, as administrative agent and other lenders party thereto (the “Credit Facility”).
On June 30, 2014, the Operating Partnership, as borrower, and the General Partner, as guarantor, entered into an amended and restated credit agreement (the “Agreement”), which increased the available borrowings, extended the term and decreased the interest rates associated with the prior credit facility. The Operating Partnership and the General Partner accepted commitments from 20 financial institutions totaling $4.6 billion for the Credit Facility in advance of the execution of the Agreement. As of June 30, 2014, the Credit Facility is comprised of a $1.2 billion term loan facility (with a delayed draw component equal to $200.0 million), a $3.15 billion dollar-denominated revolving credit facility and a $250.0 million multi-currency revolving facility (all of which can be borrowed in dollars, at the Operating Partnership’s discretion). The Credit Facility includes an accordion feature, which, if exercised in full, allows the Operating Partnership to increase the aggregate commitments under the Credit Facility to $6.0 billion, subject to the receipt of such additional commitments and the satisfaction of certain customary conditions.
F-208
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
The revolving credit facility generally bears interest at an annual rate of LIBOR plus from 1.00% to 1.80% or Base Rate plus 0.00% to 0.80% (based upon ARCP’s then current credit rating). “Base Rate” is defined as the highest of the prime rate, the federal funds rate plus 0.50% or a floating rate based on one month LIBOR, determined on a daily basis. The term loan facility generally bears interest at an annual rate of LIBOR plus 1.15% to 2.05%, or Base Rate plus 0.15% to 1.05% (based upon ARCP’s then current credit rating). The Loans will initially be priced with an applicable margin of 1.35% in the case of LIBOR revolving loans and 1.60% in the case of LIBOR term loans. In addition, the Agreement provides the flexibility for interest rate auctions, pursuant to which, at the Operating Partnership’s election, the Operating Partnership may request that lenders make competitive bids to provide revolving loans, which competitive bids may be at pricing levels that differ from the foregoing interest rates.
The Agreement provides for monthly interest payments under the Credit Facility. In the event of default, at the election of the majority of the lenders (or automatically upon a bankruptcy event of default with respect to the Operating Partnership or ARCP), the commitments of the lenders under the Credit Facility terminate, and payment of any unpaid amounts in respect of the Credit Facility is accelerated. The revolving credit facility and the term loan facility both terminate on June 30, 2018, in each case, unless extended in accordance with the terms of the Agreement. The Agreement provides for a one-year extension option with respect to each of the revolving credit facility and the term loan facility, exercisable at the Operating Partnership’s election and subject to certain customary conditions, as well as certain customary “amend and extend” provisions. At any time, upon timely notice by the Operating Partnership and subject to any breakage fees, the Operating Partnership may prepay borrowings under the Credit Facility (subject to certain limitations applicable to the prepayment of any loans obtained through an interest rate auction, as described above). The Operating Partnership incurs a fee equal to 0.15% to 0.25% per annum (based upon ARCP’s then current credit rating) multiplied by the commitments (whether or not utilized) in respect of the dollar revolving credit facility and the multi-currency credit facility. The Operating Partnership incurs an unused fee of 0.25% per annum on the unused amount of the delayed draw term loan commitments. In addition, the Operating Partnership incurs customary administrative agent, letter of credit issuance, letter of credit fronting, extension and other fees.
The Credit Facility requires restrictions on corporate guarantees, as well as the maintenance of financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) and the maintenance of a minimum net worth. At June 30, 2014, the Operating Partnership was in compliance with the debt covenants under the Credit Facility.
In connection with the Agreement, the Operating Partnership expensed $3.9 million of unamortized deferred financing costs incurred in connection with the original Credit Facility, which is included in interest expense, net in the accompanying consolidated unaudited statements of operations.
As of June 30, 2014, the outstanding balance on the Credit Facility was $1.9 billion, of which $881.0 million bore a floating interest rate of 1.50%. The remaining outstanding balance on the Credit Facility of $1.0 billion is fixed through the use of derivative instruments used to hedge interest rate volatility. Including the spread, which can vary based on ARCP’s credit rating, the interest rate on this portion was 2.84% at June 30, 2014. At June 30, 2014, a maximum of $2.7 billion was available to the Operating Partnership for future borrowings, subject to borrowing availability. The credit facility matures on June 30, 2018.
Repayment of Previous Credit Facilities
As part of the ARCT IV Merger, the Operating Partnership assumed an $800.0 million senior unsecured credit facility with various lenders, with Regions Bank acting as the administrative agent (the “ARCT IV Credit Facility”). As of the date of the ARCT IV Merger, there was $760.0 million outstanding under the ARCT IV Credit Facility, which consisted of a $300.0 million term loan facility and $460.0 million under the revolving credit facility. In connection with the ARCT IV Merger, the Operating Partnership prepaid all of its loans pursuant to, and terminated all commitments available under, the ARCT IV Credit Facility.
As part of the CapLease Merger, the Operating Partnership assumed an unsecured credit facility with Wells Fargo, National Association, which had commitments of up to $150.0 million. In February 2014, such credit facility was amended and certain modifications were made to the terms of the agreement (the “CapLease Credit Facility”). On June 6, 2014, the Operating Partnership repaid the outstanding balance of $150.0 million and terminated the credit facility agreement. No prepayment premium or penalty was paid in connection with the termination of the CapLease Credit Facility.
F-209
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
On February 28, 2013, the Operating Partnership repaid all of the outstanding borrowings under its previous senior secured revolving credit facility in the amount of $124.6 million and the credit agreement for such facility was terminated. The average interest rate on the borrowings during the period the balance was outstanding was 3.11%. On February 14, 2013, simultaneous with entering into the Credit Facility, the Operating Partnership terminated its then effective unsecured credit facility agreement, which had been unused.
Note 15 — Derivatives and Hedging Activities (As Restated)
Risk Management Objective of Using Derivatives
The Operating Partnership may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Operating Partnership’s operating and financial structure as well as to hedge specific anticipated transactions. The Operating Partnership does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Operating Partnership only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Operating Partnership and its affiliates may also have other financial relationships. The Operating Partnership does not anticipate that any of the counterparties will fail to meet their obligations.
Cash Flow Hedges of Interest Rate Risk
The Operating Partnership’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Operating Partnership primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Operating Partnership making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract and payments of variable-rate amounts if interest rates fall below the floor strike rate on the contract.
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 forecasted transaction affects earnings. During the six months ended June 30, 2014, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Operating Partnership’s variable-rate debt. During the next 12 months, the Operating Partnership estimates that an additional $10.5 million will be reclassified from other comprehensive income as an increase to interest expense. During the three and six months ended ended June 30, 2014, the Operating Partnership accelerated the reclassification of amounts in other comprehensive income to earnings as a result of the hedged forecasted transactions becoming probable not to occur.
As of June 30, 2014, the Operating Partnership had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):
| Interest Rate Derivative | Number of Instruments |
Notional Amount |
||||||
| Interest rate swaps |
17 | $ | 1,174,367 | |||||
F-210
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
The table below presents the fair value of the Operating Partnership’s derivative financial instruments as well as their classification on the consolidated balance sheets as of June 30, 2014 and December 31, 2013 (in thousands):
| Derivatives Designated as Hedging |
Balance Sheet Location |
June 30, 2014 | December 31, 2013 | |||||||
| Interest rate products |
Deferred costs and other assets, net | $ | 4,665 | $ | 9,189 | |||||
| Interest rate products |
Deferred rent, derivative and other liabilities | $ | (9,190 | ) | $ | (1,719 | ) | |||
The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three and six months ended June 30, 2014 and 2013, respectively (in thousands):
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| Derivatives in Cash Flow Hedging Relationships |
2014 | 2013 | 2014 | 2013 | ||||||||||||
| Amount of (loss) gain recognized in accumulated other comprehensive income on interest rate derivatives (effective portion) |
$ | (9,857 | ) | $ | 12,786 | $ | (13,696 | ) | $ | 10,926 | ||||||
| Amount of loss reclassified from accumulated other comprehensive income into income as interest expense (effective portion) |
$ | 2,574 | $ | 1,272 | $ | 4,115 | $ | 1,955 | ||||||||
Derivatives Not Designated as Hedging Instruments
Derivatives not designated as hedges are not speculative and are used to manage the Operating Partnership’s exposure to interest rate movements and other identified risks but do not meet the requirements to be classified as hedging instruments. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and were approximately a gain of $13.7 million and a gain of $5.7 million for the three and six months ended June 30, 2014, respectively. The Operating Partnership did not have any derivatives that were not designated during the six months ended June 30, 2013.
As of June 30, 2014, the Operating Partnership had the following outstanding interest rate derivatives that were not designated as qualifying hedging relationships (in thousands):
| Interest Rate Derivative |
Number of Instruments |
Notional Amount |
||||||
| Interest rate swaps |
6 | $ | 234,316 | |||||
The table below presents the fair value of the Operating Partnership’s derivate financial instruments not designated as hedges as well as their classification on the consolidated balance sheets as of June 30, 2014 and December 31, 2013 (in thousands):
| Derivatives Not Designated as Hedging |
Balance Sheet Location |
June 30, 2014 |
December 31, 2013 |
|||||||
| Series D Preferred Units embedded derivative |
Deferred rent, derivative and other liabilities | $ | (11,520 | ) | $ | (16,736 | ) | |||
| Interest rate products |
Deferred rent, derivative and other liabilities | $ | (3,621 | ) | $ | — | ||||
| Interest rate products |
Deferred costs and other assets, net | $ | 857 | $ | — | |||||
F-211
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Tabular Disclosure Offsetting Derivatives
The table below details a gross presentation, the effects of offsetting and a net presentation of the Operating Partnership’s derivatives as of June 30, 2014 and December 31, 2013. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets.
| Offsetting of Derivative Assets and Liabilities (in thousands) |
||||||||||||||||||||||||||||||||
| Gross Amounts of Recognized Assets |
Gross Amounts of Recognized Liabilities |
Gross Amounts Offset in the Consolidated Balance Sheets |
Net Amounts of Assets Presented in the Consolidated Balance Sheets |
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets |
Financial Instruments |
Cash Collateral Received |
Net Amount |
|||||||||||||||||||||||||
| June 30, 2014 |
$ | 5,522 | $ | (24,331 | ) | $ | — | $ | 5,522 | $ | (24,331 | ) | $ | — | $ | — | $ | (18,809 | ) | |||||||||||||
| December 31, 2013 |
$ | 9,189 | $ | (18,455 | ) | $ | — | $ | 9,189 | $ | (18,455 | ) | $ | — | $ | — | $ | (9,266 | ) | |||||||||||||
Credit-risk-related Contingent Features
The Operating Partnership has agreements with each of its derivative counterparties that contain a provision where if the Operating Partnership either defaults or is capable of being declared in default on any of its indebtedness, then the Operating Partnership could also be declared in default on its derivative obligations.
As of June 30, 2014, the fair value of the interest rate derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $14.6 million. As of June 30, 2014, the Operating Partnership has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Operating Partnership had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $14.6 million at June 30, 2014.
Note 16 — Accounts Payable and Accrued Expenses (As Restated)
Accounts payable and accrued expenses consisted of the following as of June 30, 2014 and December 31, 2013 (in thousands):
| June 30, 2014 (As Restated) |
December 31, 2013 (As Restated) |
|||||||
| Accrued other |
$ | 66,627 | $ | 34,407 | ||||
| Accrued interest |
54,932 | 14,189 | ||||||
| Accrued real estate taxes |
49,966 | 24,658 | ||||||
| Accounts payable |
5,375 | 5,887 | ||||||
| Accrued merger costs |
— | 651,430 | ||||||
| Accrued Outperformance Plan (OPP) obligation |
— | — | ||||||
|
|
|
|
|
|||||
| $ | 176,900 | $ | 730,571 | |||||
|
|
|
|
|
|||||
Note 17 — Commitments and Contingencies
Litigation
In the ordinary course of business, the Operating Partnership may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Operating Partnership, except as follows:
ARCT III Litigation Matters
After the announcement of the ARCT III Merger Agreement on December 17, 2012, Randell Quaal filed a putative class action lawsuit filed on January 30, 2013 against the General Partner, the Operating Partnership, ARCT III, ARCT III OP, the members of the board of directors of ARCT III and certain subsidiaries of the General Partner in the Supreme Court of the State of New York. The
F-212
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
plaintiff alleges, among other things, that the board of ARCT III breached its fiduciary duties in connection with the transactions contemplated under the ARCT III Merger Agreement. In February 2013, the parties agreed to a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of ARCT III stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required ARCT III to make certain additional disclosures related to the ARCT III Merger, which were included in a Current Report on Form 8-K filed by ARCT III with the SEC on February 21, 2013. The memorandum of understanding also added that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to ARCT III’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
CapLease Litigation Matters
Since the announcement of the CapLease Merger Agreement on May 28, 2013, the following lawsuits have been filed:
On May 28, 2013, Jacquelyn Mizani filed a putative class action lawsuit in the Supreme Court for the State of New York against the General Partner, the Operating Partnership, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Mizani Action”). The complaint alleges, among other things, that the merger agreement at issue was the product of breaches of fiduciary duty by the CapLease directors because the proposed merger transaction (the “CapLease Transaction”) purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that CapLease, the General Partner, the Operating Partnership and Safari Acquisition LLC aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.
On July 3, 2013, Fred Carach filed a putative class action and derivative lawsuit in the Supreme Court for the State of New York against the General Partner, the Operating Partnership, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Carach Action”). The complaint alleges, among other things, that the merger agreement was the product of breaches of fiduciary duty by the CapLease directors because the merger purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that with respect to the Registration Statement and draft joint proxy statement issued in connection with the proposed CapLease Transaction on July 2, 2013, that disclosures made therein were insufficient or otherwise improper. The complaint also alleges that CapLease LP, CLF OP General Partner, LLC, the General Partner, the Operating Partnership and Safari Acquisition LLC aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.
On June 25, 2013, Dewey Tarver filed a putative class action and derivative lawsuit in the Circuit Court for Baltimore City against the General Partner, the Operating Partnership, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Tarver Action”). The complaint alleges, among other things, that the merger agreement was the product of breaches of fiduciary duty by the CapLease directors because the CapLease Transaction purportedly does not provide for full and fair value for the CapLease shareholders, the CapLease Transaction allegedly was not the result of a competitive bidding process, the merger agreement allegedly contains coercive deal protection measures and the merger agreement and the CapLease Transaction purportedly were approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleges that CapLease, CapLease LP, CLF OP General Partner, LLC, the General Partner, the Operating Partnership and Safari Acquisition, LLC aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.
F-213
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Counsel who filed each of these three cases reached an agreement with each other as to who will serve as lead plaintiff and lead plaintiffs’ counsel in the cases and where they will be prosecuted. Thus, on August 9, 2013, counsel in the Tarver Action filed a motion for stay in the Baltimore Court, informing the court that they had agreed to join and participate in the prosecution of the Mizani and Carach Actions in the New York Court. The Defendants consented to the stay of the Tarver Action in the Baltimore Court, and on September 5, 2013, Judge Pamela J. White issued an order granting that stay. Consequently, there has been no subsequent activity in the Baltimore Court in the Tarver Action. Also on August 9, 2013, all counsel involved in the Mizani and Carach Actions filed a joint stipulation in the New York Court, reflecting agreement among all parties that the Mizani and Carach Actions should be consolidated (jointly, “the Consolidated Actions”) and setting out a schedule for early motion practice in response to the complaints filed (the “Consolidation Stipulation”). Pursuant to the Consolidation Stipulation, an amended complaint was also filed in the New York court on August 9, 2013 and was designated as the operative complaint in the Consolidated Actions (“Operative Complaint”). Pursuant to the Consolidation Stipulation, all Defendants filed a motion to dismiss all claims asserted in the Operative Complaint on September 23, 2013. Plaintiffs’ response was due on or before November 7, 2013. On November 7, 2013, Plaintiffs filed a motion seeking leave to file a second amended complaint, which the Defendants have opposed. On March 24, 2014, Plaintiffs’ counsel in the Consolidated Actions dismissed those claims without prejudice. Consequently, only the Tarver Action currently remains pending among these cases, although it remains stayed.
On October 8, 2013, John Poling filed a putative class action lawsuit in the Circuit Court for Baltimore City against the General Partner, the Operating Partnership, Safari Acquisition LLC, CapLease, CapLease LP, CLF OP General Partner, LLC and the members of the CapLease board of directors (the “Poling Action”). The complaint alleges that the merger agreement breaches the terms of the CapLease’ 8.375% Series B Cumulative Redeemable Preferred Stock (“Series B”) and the terms of the 7.25% Series C Cumulative Redeemable Preferred Stock (“Series C”) and is in violation of the Series B Articles Supplementary and the Series C Articles Supplementary. The Complaint alleges claims for breach of contract and breach of fiduciary duty against the CapLease entities and the CapLease board of directors. The complaint also alleges that the General Partner, the Operating Partnership and Safari Acquisition, LLC aided and abetted CapLease and the CapLease directors’ alleged breach of contract and breach of fiduciary duty.
On November 13, 2013, all counsel involved in the Poling Action filed a joint stipulation, reflecting agreement among all parties concerning a schedule for early motion practice in response to the complaint filed (the “Scheduling Stipulation”). Pursuant to the Scheduling Stipulation, all Defendants filed a motion to dismiss all claims asserted in the Operative Complaint on December 20, 2013. Plaintiff has filed an opposition to that motion, which remains pending.
Cole Litigation Matters
Three putative class action and/or derivative lawsuits, which were filed in March and April 2013, assert claims for breach of fiduciary duty, abuse of control, corporate waste, unjust enrichment, aiding and abetting breach of fiduciary duty and other claims relating to the merger between a wholly owned subsidiary of Cole and Cole Holdings Corporation, pursuant to which Cole became a self-managed REIT. On October 22, 2013, the Circuit Court for Baltimore City granted all defendants’ motion to dismiss with prejudice the action pending before the court, but the plaintiffs have appealed that dismissal. The other two lawsuits, which also purport to assert shareholder class action claims under the Securities Act of 1933, as amended (the “Securities Act”), are pending in the United States District Court for the District of Arizona. Defendants filed a motion to dismiss both complaints on January 10, 2014. Subsequently, both of those lawsuits have been stayed by the Court pursuant to a joint request made by all parties pending final approval of the consolidated Baltimore Cole Merger Actions described below.
To date, eleven lawsuits have been filed in connection with the Cole Merger. Two of these suits—Wunsch v. Cole, et al (“Wunsch”), No. 13-CV-2186, and Sobon v. Cole, et al (“Sobon”)—were filed as putative class actions on October 25, 2013 and November 18, 2013, respectively, in the U.S. District Court for the District of Arizona. Between October 30, 2013 and November 14, 2013, eight other putative stockholder class action or derivative lawsuits were filed in the Circuit Court for Baltimore City, Maryland, captioned as: (i) Operman v. Cole, et al (“Operman”); (ii) Branham v. Cole, et al (“Branham”); (iii) Wilfong v. Cole, et al. (“Wilfong”); (iv) Polage v. Cole, et al. (“Polage”); (v) Corwin v. Cole, et al (“Corwin”); (vi) Green v. Cole, et al (“Green”); (vii) Flynn v. Cole, et al (“Flynn”) and (viii) Morgan v. Cole, et al. (“Morgan”). All of these lawsuits name ARCP, Cole and Cole’s board of directors as defendants; Wunsch, Sobon, Branham, Wilfong, Flynn, Green, Morgan and Polage also name CREInvestments, LLC, a Maryland limited liability company and a wholly-owned subsidiary of the Cole, as a defendant. All of the named plaintiffs claim to be Cole stockholders and purport to represent all holders of Cole’s stock. Each complaint generally alleges that the individual defendants breached fiduciary duties owed to plaintiff and the other public stockholders of Cole in connection with the Cole Merger,
F-214
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
and that certain entity defendants aided and abetted those breaches. The breach of fiduciary duty claims asserted include claims that the Cole Merger does not provide for full and fair value for the Cole shareholders, that the Cole Merger was the product of an “inadequate sale process,” that the Cole Merger Agreement contains coercive deal protection measures and the Cole Merger Agreement and that the Cole Merger were approved as a result of or in a manner which facilitates improper self-dealing by certain defendants. In addition, the Flynn, Corwin, Green, Wilfong, Polage and Branham lawsuits claim that the individual defendants breached their duty of candor to shareholders and the Branham and Polage lawsuits assert claims derivatively against the individual defendants for their alleged breach of fiduciary duties owed to Cole. The Polage lawsuit also asserts derivative claims for waste of corporate assets and unjust enrichment. The Wunsch and Sobon lawsuits also assert claims against Cole and the individual defendants under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), based on allegations that the proxy materials omitted to disclose allegedly material information, and a claim against the individual defendants under Section 20(a) of the Exchange Act based on the same allegations. Among other remedies, the complaints seek unspecified money damages, costs and attorneys’ fees.
In January 2014, the parties to the eight lawsuits filed in the Circuit Court for Baltimore City, Maryland (“the consolidated Baltimore Cole Merger Actions”) entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of Cole stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required Cole to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by Cole with the SEC on January 14, 2014. The memorandum of understanding also contemplated that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to Cole’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
The Sobon lawsuit was voluntarily dismissed on February 3, 2014. The General Partner believes that the Wunsch lawsuit in connection with the Cole Merger is without merit and that it has substantial meritorious defenses to the claims set forth in the complaint.
On December 27, 2013, Realistic Partners filed a putative class action lawsuit against the General Partner and the members of its board of directors in the Supreme Court for the State of New York. Cole was later added as a defendant also. The plaintiff alleges, among other things, that the board of the General Partner breached its fiduciary duties in connection with the transactions contemplated under the Cole Merger Agreement and that Cole aided and abetted those breaches. In January 2014, the parties entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of the General Partner’s stockholders. In connection with the settlement contemplated by that memorandum of understanding, the class action and all claims asserted therein will be dismissed, subject to court approval. The proposed settlement terms required the General Partner to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by the General Partner with the SEC on January 17, 2014. The memorandum of understanding also contemplated that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including confirmatory discovery and court approval following notice to the General Partner’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding, therefore any losses that may be incurred to settle this matter are not determinable.
The General Partner maintains directors and officers liability insurance, which the Operating Partnership believes should provide coverage to the Operating Partnership and its officers and directors for most or all of any costs, settlements or judgments resulting from the above mentioned lawsuits.
F-215
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Contractual Lease Obligations
The following table reflects the minimum base rental cash payments due from the Operating Partnership over the next five years and thereafter for certain ground and office lease obligations (in thousands):
| Future Minimum Base Rent Payments |
||||
| July 1, 2014—December 31, 2014 |
$ | 6,845 | ||
| 2015 |
12,922 | |||
| 2016 |
11,575 | |||
| 2017 |
10,248 | |||
| 2018 |
7,918 | |||
| Thereafter |
83,734 | |||
|
|
|
|||
| Total |
$ | 133,242 | ||
|
|
|
|||
Purchase Commitments
The Operating Partnership enters into purchase and sale agreements and deposits funds into escrow towards the purchase of such acquisitions, some of which are expected to be assigned to one of the Managed REITs at or prior to the closing of the respective acquisition. As of June 30, 2014, the Operating Partnership was a party to 70 purchase and sale agreements with unaffiliated third-party sellers to purchase a 100% interest in 416 properties, subject to meeting certain criteria, for an aggregate purchase price of $1.5 billion, exclusive of closing costs. As of June 30, 2014, the Operating Partnership had $41.8 million of property escrow deposits held by escrow agents in connection with these future property acquisitions, which may be forfeited if the transactions are not completed under certain circumstances. The Operating Partnership will be reimbursed by the assigned Managed REIT for amounts escrowed when it acquires a property.
Environmental Matters
In connection with the ownership and operation of real estate, the Operating Partnership may potentially be liable for costs and damages related to environmental matters. The Operating Partnership has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition, in each case, that it believes will have a material adverse effect on the results of operations.
Note 18 — Preferred and Common OP Units (As Restated)
Series D and Series E Preferred Units
On September 12, 2013, the General Partner’s board of directors unanimously approved the issuance of Series D Cumulative Convertible Preferred Stock (“Series D Preferred Stock”) and the issuance of Series E Cumulative Preferred Stock (“Series E Preferred Stock”). Concurrently, the Operating Partnership was approved to issue to the General Partner Series D Cumulative Convertible Preferred Units (“General Partner Series D Preferred Units”) and Series E Cumulative Preferred Units (“General Partner Series E Preferred Units”), if applicable.
On September 15, 2013, the General Partner entered into definitive purchase agreements to issue Series D Preferred Stock and common stock, necessitating that the Operating Partnership concurrently issue General Partner Series D Preferred Units and General Partner OP Units to the General Partner, promptly following the close of the CapLease Merger. Pursuant to the definitive purchase agreements, the General Partner issued approximately 21.7 million shares of General Partner Series D Preferred Stock and 15.1 million shares of ARCP common stock, for gross proceeds of $288.0 million and $186.0 million, respectively, on November 12, 2013. The Operating Partnership concurrently issued 21.7 million shares of Series D Preferred Units and 15.1 million General Partner OP Units to the General Partner. The Series D Preferred Stock and General Partner Series D Preferred Units pays dividends at the rate of 5.81% per annum on its face amount of $13.59 per share (equivalent to $0.79 per share on an annualized basis). The Series D Preferred Stock is redeemable on August 31, 2014 (the “Redemption Date”). If redeemed, corresponding General Partner Series D Preferred Units will be redeemed. Subsequent to that date, or in certain other circumstances, the Series D Preferred Stock are
F-216
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
convertible into ARCP common stock or Series E Preferred Stock or redeemable into cash, at the discretion of the General Partner upon such request for conversion by the holders of Series D Preferred Stock.
In the event of a liquidation, the Series D Preferred Stock holder is entitled to receive the greater of: (a) $13.59 per share plus accrued and unpaid dividends (the “Liquidation Preference”) plus a 20% premium; and (b) an amount the Series D Preferred Stock holder would have received had they converted into ARCP common stock immediately prior to the liquidation event.
If the General Partner elects to redeem on the Redemption Date, the General Partner shall pay the greater of: (a) the product of the number of Series D Preferred Stock and the 102% of the Liquidation Preference; and (b) the product of the number of ARCP common stock that would be issued if the Series D Preferred Stock converted immediately prior to the Redemption Date and 102% of the one-day VWAP.
At any time after the Redemption Date, the holder of Series D Preferred Stock may convert some or all of their outstanding Series D Preferred Stock into ARCP common stock. Upon such an election to convert, the General Partner may elect the following settlement options: (1) convert the Series D Preferred Stock into the number of fully paid and non-assessable ARCP common stock obtained by dividing the aggregate Liquidation Preference of such Series D Preferred Stock by the Conversion Price, as defined below; (2) convert the Series D Preferred Stock into an equal number of Series E Preferred Stock, additional units of Series E Preferred Stock may be issued under certain circumstances; or (3) an amount equal to the product of the number of shares of Series D Preferred Stock and the Cash Conversion Price, as defined below.
The Conversion Price shall be the lowest of: (i) a 2% discount to the VWAP of ARCP’s common stock for the 10 Trading Days prior to the Conversion Election Date; (ii) a 2% discount to the closing price on the Conversion Election Date; and (iii) $13.59. The Cash Conversion Price shall be the greater of: (i) 102% of the Liquidation Preference and (ii) the one-day VWAP of the ARCP’s common stock on the date of the election.
The General Partner has concluded that the conversion option qualifies as a derivative and should be bifurcated from the host instrument. At issuance, the conversion option had a fair value of $18.7 million. As of June 30, 2014, the fair value of the conversion option had a fair value of $11.5 million, compared to a fair value of $16.7 million as of December 31, 2013. The Operating Partnership recorded a gain of $5.2 million due to the change in fair value of the conversion option in gain (loss) on derivative instruments, net in the consolidated statements of operations for the six months ended June 30, 2014.
As the holder of Series D Preferred Stock is entitled to receive liquidation preferences that other equity holders are not entitled to, the General Partner determined the Series D Preferred Stock meets the definition of a deemed liquidation event and therefore should be classified as temporary equity under U.S. GAAP. At the date of issuance, the fair value of the Series D Preferred Stock was $269.3 million. As of June 30, 2014, the General Partner has determined that a liquidation event is not probable; therefore, the General Partner has concluded that the Series D Preferred Stock is not currently redeemable or likely to become redeemable pursuant to a liquidation event. As such, the Operating Partnership has not accreted the initial value of the Series D Preferred Units.
As of June 30, 2014, there were 21,735,008 authorized and issued Series D Preferred Units and no authorized and issued Series E Preferred Units, respectively.
Series F Preferred Stock
On October 6, 2013, in connection with the modification to the ARCT IV Merger Agreement, the General Partner’s board of directors unanimously approved the issuance of Series F Preferred Stock. Upon consummation of the ARCT IV Merger on January 3, 2014, 42.2 million shares of Series F Preferred Stock were issued to ARCT IV shareholders, resulting in the Operating Partnership concurrently issuing 42.2 million General Partner Series F Preferred Units to the General Partner, and the Operating Partnership issued 0.7 million Limited Partner Series F Preferred Units to the ARCT IV OP Unit holders. Subsequent to original issuance and through June 30, 2014, 0.5 million Limited Partner Series F Preferred Units were converted to an equivalent number of the General Partner’s Series F Preferred Stock. Concurrently, 0.5 million General Partner Series F Preferred Units were issued to the General Partner. As of June 30, 2014, there were 42.7 million shares of General Partner Series F Preferred Units and 0.2 million Limited Partner Series F Preferred Units issued and outstanding.
F-217
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
The Series F Preferred Units contain the same terms as the Series F Preferred Stock. Therefore, the Series F Preferred Units will pay cumulative cash dividends at the rate of 6.70% per annum on its liquidation preference of $25.00 per unit (equivalent to $1.675 per unit on an annual basis). The Series F Preferred Units will not be redeemable by the Operating Partnership before the fifth anniversary of the date on which such Series F Preferred Units were issued (the “Initial Redemption Date”), except under circumstances intended to preserve the General Partner’s status as a REIT for federal and/or state income tax purposes and except upon the occurrence of a change of control. On and after the Initial Redemption Date, the Operating Partnership may, at its option, redeem units of the Series F Preferred Units, in whole or from time to time in part, at a redemption price of $25.00 per unit plus, subject to exceptions, any accrued and unpaid dividends thereon to the date fixed for redemption. The Series F Preferred Units have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Operating Partnership redeems or otherwise repurchases them or they become convertible and are converted into General Partner OP Units (or, if applicable, alternative consideration).
Offerings
On August 1, 2012, the General Partner filed a $500.0 million universal shelf registration statement and a resale registration statement with the SEC. Both registration statements became effective on August 17, 2012. As of June 30, 2014, the General Partner had issued a total of approximately 2.1 million shares of ARCP common stock under the universal shelf registration statement. Concurrently with the issuance of the 2.1 million shares of ARCP common stock described above, the Operating Partnership issued 2.1 million General Partner OP Units to the General Partner. The resale registration statement, as amended, registers the resale of up to 1,882,248 shares of ARCP’s common stock issued in connection with any future conversion of certain currently outstanding restricted shares, convertible preferred units or Limited Partner OP Units.
In January 2013, the General Partner commenced its at-the-market equity offering program (the “ATM”) in which it may from time to time offer and sell shares of its common stock having aggregate offering proceeds of up to $60.0 million. The shares will be issued pursuant to the General Partner’s universal shelf registration statement. For each share of common stock the General Partner Sells under the ATM, the Operating Partnership will issue a corresponding number of General Partner OP Units to the General Partner.
On March 13, 2013, the General Partner filed a universal automatic shelf registration statement that was automatically declared effective and achieved well-known seasoned issuer (“WKSI”) status. As a result of the delayed filing of certain of its periodic reports with the SEC, the General Partner is not currently eligible to use a shelf registration statement for the offer and sale of our securities.
On May 28, 2014, the General Partner closed on an underwriting agreement relating to a public offering of 138.0 million shares of ARCP common stock, par value $0.01 per share. The offering price to public was $12.00 per share. The net proceeds to ARCP were approximately $1.59 billion after deducting underwriting discounts and commissions, but excluding expenses which included a $2.0 million structuring fee paid to RCS. Concurrently, the Operating Partnership issued the General Partner 138.0 million General Partner OP Units.
Dividends
In October 2011, in connection with the same action by ARCP, the Operating Partnership began paying dividends on the 15th day of each month to unitholders of record on the eighth day of such month. On October 23, 2013, the board of directors of the ARCP authorized an annualized dividend per share of $1.00, which became effective February 7, 2014. The per unit annualized dividend of $1.00 reflects an increase of $0.06 per share from an annualized dividend of $0.94 per unit. The annualized dividend rate at June 30, 2014 was $1.00 per unit.
Common Stock Repurchases
Upon the closing of the ARCT III Merger, on February 28, 2013, 29.2 million shares, or 16.5% of the then-outstanding shares of ARCT III’s common stock, were paid in cash at $12.00 per share, which is equivalent to 27.7 million General Partner OP Units based on the ARCT III Exchange Ratio. In addition, 148.1 million shares of ARCT III’s common stock were converted into ARCP common stock at the ARCT III Exchange Ratio, resulting in an additional 140.7 million General Partner OP Units outstanding after the exchange.
F-218
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Note 19 — Equity Based Compensation (As Restated)
Equity Plan
The General Partner has adopted the American Realty Capital Properties, Inc. Equity Plan (the “Equity Plan”), which provides for the grant of stock options, stock appreciation rights, restricted shares of common stock, restricted stock awards, dividend equivalent rights and other stock-based awards to the General Partner’s and its affiliates’ non-executive directors, officers and other employees and advisors or consultants who are providing services to the General Partner or its affiliates. For each share awarded under the Equity Plan, the Operating Partnership issues a General Partner OP Unit to the General Partner with similar terms.
The General Partner authorized and reserved a total number of shares equal to 10.0% of the total number of issued and outstanding shares of common stock (on a fully diluted basis assuming the redemption of all Limited Partner OP Units for shares of common stock) to be issued at any time under the Equity Plan for equity incentive awards excluding an initial grant of 167,400 shares to its Former Manager in connection with the IPO, all of which were vested as of June 30, 2014. As of June 30, 2014, the Operating Partnership has issued 6,796,599 General Partner OP Units to the General Partner in connection with the Equity Plan. In the first quarter of 2014, the General Partner issued 282,854 shares to its non-executive directors pursuant to the Equity Plan. Upon issuance, the documentation provided for accelerated vesting of shares upon voluntary resignation of the independent directors. As a result, the General Partner determined there was no required service period and $3.6 million has been recorded as expense during the six months ended June 30, 2014. However, based upon the findings of the Audit Committee and the Operating Partnership in connection with the recent review of the Operating Partnership’s previously filed financial statements, the General Partner subsequently modified such awards to provide that voluntary resignation would not accelerate the vesting of such awards.
Director Stock Plan
The General Partner has adopted the American Realty Capital Properties, Inc. Non-Executive Director Stock Plan (the “Director Stock Plan”), which provides for the grant of restricted shares of common stock to each of the General Partner’s independent directors, each of whom is a non-executive director. For each share awarded under the Director Stock Plan, the Operating Partnership issues a General Partner OP Unit to the General Partner with identical terms. Awards of restricted stock will vest in accordance with the award agreements, which generally provide for ratable vesting over a five-year period following the date of grant. The awards of restricted stock provide for “distribution equivalents” with respect to this restricted stock, whether or not vested, at the same time and in the same amounts as distributions are paid to the stockholders. At June 30, 2014, a total of 99,000 shares of ARCP common stock are reserved for issuance under the Director Stock Plan. As of June 30, 2014, the Operating Partnership has issued 45,000 General Partner OP Units to the General Partner in connection with the Director Stock Plan.
The fair value of restricted common stock awards, as well as the underlying General Partner OP Units, issued under the Equity Plan and Director Stock Plan is determined on the grant date using the closing stock price on NASDAQ that day. The fair value of restricted common stock awarded to the non-employees under the Equity Plan, as well as the underlying General Partner OP Units issued in respect thereof, are remeasured at the end of each quarter based on the current quarter end closing stock price through the final vesting date.
ARCT IV Restricted Share Plan
ARCT IV had an employee and director incentive restricted share plan (the “ARCT IV RSP”) which provided for the automatic grant of 1,333 restricted shares of common stock to each of its independent directors without any further action by ARCT IV’s board of directors or its stockholders on the date of initial election to the board of directors and on the date of each annual stockholder’s meeting thereafter. Restricted stock issued to independent directors vested over a five-year period following the date of grant in increments of 20% per annum. The ARCT IV RSP provided ARCT IV with the ability to grant awards of restricted shares to its directors, officers and employees (if ARCT IV ever had employees), employees of the ARCT IV Advisor and its affiliates, employees of entities that provided services to ARCT IV, directors of the ARCT IV Advisor or of entities that provided services to ARCT IV, certain consultants to ARCT IV and the ARCT IV Advisor and its affiliates or to entities that provided services to ARCT IV.
Immediately prior to the effective time of the ARCT IV Merger, each then-outstanding share of ARCT IV restricted stock fully vested. All shares of ARCT IV common stock then-outstanding as a result of the full vesting of shares of ARCT IV restricted stock, and the satisfaction of any applicable withholding taxes, received shares of ARCP’s common stock and additional consideration pursuant to the terms of the ARCT IV Merger Agreement based on the ARCT IV Exchange Ratio. Concurrently, for each share of ARCP common stock issued, the Operating Partnership issued a General Partner OP Unit to the General Partner.
F-219
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Multi-Year Performance Plan
Upon consummation of the ARCT III Merger, the Operating Partnership entered into the 2013 Advisor Multi-Year Outperformance Agreement (the “OPP”) with the Former Manager, whereby the Former Manager was able to potentially earn compensation upon the attainment of stockholder value creation targets.
Under the OPP, the Former Manager was granted 8,241,101 long-term incentive plan units (“LTIP Units”) of the Operating Partnership, which were to be earned or forfeited based on the General Partner’s total return to stockholders (including both share price appreciation and common stock distributions) (“Total Return”), for the three-year period that commenced on December 11, 2012.
Pursuant to previous authorization of the General Partner’s board of directors, as a result of the termination of the Management Agreement, all 8,241,101 LTIP Units became fully earned, vested and convertible into Limited Partner units upon the consummation of ARCP’s transition to self-management on January 8, 2014. During the six months ended June 30, 2014, the Operating Partnership recorded expenses of $1.6 million for the LTIP Units under the OPP, which is recorded in general and administrative expenses in the accompanying consolidated statements of operations.
New Multi-Year Outperformance Plan
On October 3, 2013, the General Partner approved a multi-year outperformance plan (the “New OPP”) which became effective upon the General Partner’s transition to self-management, which occurred on January 8, 2014. Under the New OPP, individual agreements were entered into between the General Partner and the participants selected by the General Partner’s board of directors (the “Participants”) that set forth the Participant’s participation percentage in the New OPP and the number of LTIP Units subject to the award (“OPP Agreements”). Under the New OPP and OPP Agreements, the Participants are eligible to earn performance-based bonus awards equal to the Participant’s participation percentage of a pool that is funded up to a maximum award opportunity (the “New OPP Cap”) of approximately 5% of the General Partner’s equity market capitalization at the time of the approval of the New OPP (“the Initial Market Cap”).
After the Audit Committee’s and the General Partner’s review of the OPP, such parties have determined that the Compensation Committee’s intention in respect of the OPP was that the maximum award pool opportunity should have been $120.0 million. In October 2013, the Compensation Committee approved an aggregate award pool to be measured by the Operating Partnership’s market capitalization as of the date of such approval; however, the OPP was definitively documented to measure market capitalization on a pro forma basis as of the Operating Partnership’s transition to self-management (including the pro forma impact of various transactions expected to be consummated prior to the Operating Partnership’s transition to self-management on January 8, 2014), which was calculated in December 2013.
Subject to the New OPP Cap, the pool will equal an amount to be determined based on the Operating Partnership’s level of achievement of total return to stockholders, including both share price appreciation and common stock distributions (“Total Return”), as measured against an absolute hurdle and against a peer group of companies for a three-year performance period that commenced on October 1, 2013 (the “Performance Period”), with valuation dates on which a portion of the LTIP Units up to a specified amount of the New OPP Cap could be earned on the last day of each 12-month period during the Performance Period (each an “Annual Period”) and the initial 24-month period of the Performance Period (the “Interim Period”), as follows:
| Performance Period |
Annual Period |
Interim Period |
||||||||||
| Absolute Component: 4% of any excess Total Return attained above an absolute hurdle measured from the beginning of such period: | 21 | % | 7 | % | 14 | % | ||||||
| Relative Component: 4% of any excess Total Return attained above the median Total Return for the performance period of the Peer Group(1), subject to a ratable sliding scale factor as follows based on achievement of cumulative Total Return measured from the beginning of such period: | ||||||||||||
| • 100% will be earned if cumulative Total Return achieved is at least: |
18 | % | 6 | % | 12 | % | ||||||
| • 50% will be earned if a cumulative Total Return achieved is: |
— | % | — | % | — | % | ||||||
| • 0% will be earned if cumulative Total Return achieved is less than: |
— | % | — | % | — | % | ||||||
| • a percentage from 50% to 100% calculated by linear interpolation will be earned if cumulative Total Return achieved is if between: | 0% -18 | % | 0% -6 | % |
|
0% -12 |
% | |||||
F-220
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
| (1) | The “Peer Group” is comprised of the following companies: EPR Properties; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc.; Realty Income Corporation; and Spirit Realty Capital, Inc. |
The New OPP provides for early calculation and vesting of the award in the event of a change in control of the General Partner, prior to the end of the Performance Period. The Participants are entitled to receive a tax gross-up in the event that any amounts paid to the Participant under the New OPP constitute “parachute payments” as defined in Section 280G of the Code. The LTIP Units granted under the New OPP represent units of equity ownership in the Operating Partnership that are structured as a profits interest therein. Subject to the Participant’s continued service through each vesting date, one-third of any earned LTIP Units will vest on October 1, 2016, October 1, 2017 and October 1, 2018, respectively. The Participants are entitled to receive distributions on their LTIP Units to the extent provided for in the LPA, as amended from time to time. During the three and six months ended June 30, 2014, the Operating Partnership recorded expenses of $4.9 million and $9.4 million, respectively, for the New OPP, which is recorded in equity-based compensation and included with general and administrative expense on the consolidated statement of operations. As of June 30, 2014, the Operating Partnership recorded a total payable for distributions on LTIP units related to the OPP and the New OPP of $6.9 million.
Note 20 — Related Party Transactions and Arrangements (As Restated)
The General Partner, ARCT III and ARCT IV have incurred commissions, fees and expenses payable to the Former Manager and its affiliates including Realty Capital Securities, LLC (“RCS”), RCS Advisory Services, LLC (“RCS Advisory”), ARC, ARC Advisory Services, LLC (“ARC Advisory”), American Realty Capital Advisors III, LLC (the “ARCT III Advisor”), American Realty Capital Advisors IV,LLC (the ARCT IV Advisor”), American National Stock Transfer, LLC (“ANST”) and ARC Real Estate Partners, LLC (“ARC Real Estate”). References throughout this Note 20 — Related Party Transactions and Arrangements (As Restated) to expenses incurred by ARCT III or ARCT IV are to expenses incurred before their acquisitions by the General Partner on February 28, 2013 and January 3, 2014, respectively.
The Audit Committee’s investigation identified certain payments made by the General Partner to the Former Manager and certain affiliates of the Former Manager that were not sufficiently documented or otherwise warrant scrutiny. As described below, the General Partner has recovered consideration valued at approximately $8.5 million in respect of certain such payments. The General Partner is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. No asset has been recognized in the financial statements related to any potential recovery.
F-221
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
The following table summarizes the related party fees and expenses incurred by the General Partner, ARCT III and ARCT IV by category and the aggregate amounts contained in such categories for the periods presented (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Related party transactions: |
||||||||||||||||
| Expenses and capitalized costs: |
||||||||||||||||
| Financing fees and reimbursements |
$ | — | $ | 6,296 | $ | — | $ | 13,796 | ||||||||
| Offering related costs |
2,000 | 22,669 | 2,150 | 158,657 | ||||||||||||
| Acquisition related expenses |
113 | 19,867 | 1,652 | 26,830 | ||||||||||||
| Merger and other non-routine transactions |
40 | 255 | 137,778 | 106,935 | ||||||||||||
| Management fees to affiliates |
— | — | 13,888 | 12,493 | ||||||||||||
| General and administrative expenses |
437 | 4,134 | 14,915 | 9,343 | ||||||||||||
| Indirect affiliate expenses |
3,997 | — | 4,495 | — | ||||||||||||
| Cole Capital revenues: |
||||||||||||||||
| Cole Capital offering related revenue |
9,969 | — | 52,422 | — | ||||||||||||
| Cole Capital operating revenue |
27,253 | — | 39,057 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 43,809 | $ | 53,221 | $ | 266,357 | $ | 328,054 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following sections below further expand on the summarized related party transactions listed above.
Financing Fees and Reimbursements
During the three and six months ended June 30, 2013, the General Partner, ARCT III, and ARCT IV paid the Former Manager, the ARCT III Advisor and the ARCT IV Advisor, respectively, financing coordination fees of $6.3 million and $13.8 million, respectively, which is equal to 0.75% of the amount available under any secured mortgage financing or refinancing that the General Partner, ARCT III or ARCT IV, obtained and used for the acquisition of properties that was arranged by the Former Manager, the ARCT III Advisor or the ARCT IV Advisor, respectively. The financing fees were payable in cash at the closing of each financing. In conjunction with the closing of the ARCT III Merger, it was agreed that these fees would no longer be paid by the General Partner to the Former Manager. These fees were paid by ARCT IV throughout 2013. No such fees were incurred during the six months ended June 30, 2014. Financing fees and reimbursements are included in deferred costs, net in the accompanying consolidated balance sheets.
Offering Related Costs
The General Partner, ARCT III and ARCT IV recorded commissions, fees and offering cost reimbursements as shown in the table below for services provided to the General Partner, ARCT III and ARCT IV, as applicable, by affiliates of the Former Manager during the periods indicated (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Offering related costs: |
||||||||||||||||
| Commissions and fees |
$ | — | $ | 21,754 | $ | — | $ | 147,686 | ||||||||
| Offering costs and other reimbursements |
2,000 | 915 | 2,150 | 10,971 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 2,000 | $ | 22,669 | $ | 2,150 | $ | 158,657 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
RCS served as the dealer-manager of the ARCT III IPO and the ARCT IV IPO. RCS received fees and compensation in connection with the sale of ARCT III’s and ARCT IV’s common stock in the respective IPOs. RCS received a selling commission of 7% of gross offering proceeds before reallowance of commissions earned by participating broker-dealers in each of the IPOs. RCS received 3% of the gross proceeds from the sale of common stock, before reallowance to participating broker-dealers, as a dealer-manager fee in each of the IPOs. In addition, ARCT III and ARCT IV reimbursed the ARCT III Advisor, the ARCT IV Advisor and RCS, as applicable, for services relating to the ARCT III IPO and the ARCT IV IPO during 2013 and for
F-222
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
services relating to the General Partner’s ATM equity program during 2014. During the three and six months ended June 30, 2014, reimbursements in connection with the ATM totaled $2.0 million and $2.2 million, respectively. During the three and six months ended June 30, 2013, reimbursements in connection with the ARCT IV IPO totaled $22.7 million and $158.7 million, respectively. Offering related costs are included in offering costs, commissions and dealer-manager fees in the accompanying consolidated statements of changes in equity.
Acquisition Related Expenses
During the six months ended June 30, 2014, the General Partner paid a fee of $1.0 million (equal to 0.25% of the contract purchase price) to RCS for strategic advisory services related to its acquisition of certain properties in the Fortress Portfolio and $0.6 million (equal to 0.25% of the contract purchase price) to RCS related to its acquisition of certain properties in the Inland Portfolio. During the three months ended June 30, 2014, the General Partner paid a fee of $0.1 million to RCS related to its acquisition of certain properties in the Inland portfolio. No fees were incurred during the six months ended June 30, 2013 in connection with these transactions.
Separate from acquisition fees related to the acquisition of certain properties in the GE Capital Portfolio discussed below, the General Partner, ARCT III and ARCT IV paid acquisition fees to the Former Manager and its affiliates equal to 1.0% of the contract purchase price, inclusive of indebtedness, of each property acquired by the General Partner, ARCT III or ARCT IV, as applicable. The General Partner, ARCT III and ARCT IV additionally reimbursed certain expenses as permitted under the advisory agreements. The General Partner and ARCT III were no longer required to pay these fees as of the ARCT III Merger, except for those properties in the General Partner’s acquisition pipeline as of that date. ARCT IV incurred these fees throughout 2013. During the three and six months ended June 30, 2013, these fees and additional reimbursements totaled $6.6 million and $13.5 million, respectively. No such fees were incurred during the six months ended June 30, 2014.
During the three and six months ended June 30, 2013, the General Partner paid a fee of $1.9 million (equal to 0.25% of the contract purchase price) to RCS and reimbursed expenses of $6.1 million to ARC related to its acquisition of certain properties in the GE Capital Portfolio. No such fees were incurred during the six months ended June 30, 2014 in relation to the GE Capital Portfolio.
During the three and six months ended June 30, 2013, ARCT IV incurred an acquisition fee of $5.3 million to ARC related to its acquisition of certain properties in the GE Capital Portfolio.
F-223
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
Merger and Other Non-routine Transactions
The General Partner, ARCT III and ARCT IV incurred fees and expenses payable to the Former Manager and its affiliates for services related to mergers and other non-routine transactions, as discussed below. These fees are included in merger and other non-routine transactions in the accompanying consolidated statements of operations. The tables below shows fees and expenses attributable to each merger and other non-routine transaction during the three and six months ended June 30, 2014 (in thousands):
| Three Months Ended June 30, 2014 | ||||||||||||||||||||
| ARCT IV Merger |
Internalization and Other |
Cole Merger | Multi-tenant Spin- Off |
Total | ||||||||||||||||
| Personnel costs and other reimbursements |
$ | — | $ | — | $ | 40 | $ | — | $ | 40 | ||||||||||
| Six Months Ended June 30, 2014 | ||||||||||||||||||||
| ARCT IV Merger |
Internalization and other |
Cole Merger | Multi-tenant Spin- Off |
Total | ||||||||||||||||
| Merger related costs: |
||||||||||||||||||||
| Strategic advisory services |
$ | 8,400 | $ | — | $ | 17,115 | $ | 1,750 | $ | 27,265 | ||||||||||
| Personnel costs and other reimbursements |
— | — | 72 | — | 72 | |||||||||||||||
| Other non-routine transactions: |
||||||||||||||||||||
| Subordinated distribution fees |
78,244 | — | — | — | 78,244 | |||||||||||||||
| Furniture, fixtures and equipment |
5,800 | 10,000 | — | — | 15,800 | |||||||||||||||
| Other fees and expenses |
— | — | 2,900 | — | 2,900 | |||||||||||||||
| Personnel costs and other reimbursements |
417 | — | 1,728 | — | 2,145 | |||||||||||||||
| Post-transaction support services |
1,352 | 10,000 | — | — | 11,352 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 94,213 | $ | 20,000 | $ | 21,815 | $ | 1,750 | $ | 137,778 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The tables below shows fees and expenses attributable to each merger and other non-routine transaction during the three and six months ended June 30, 2013 (in thousands):
| Three Months Ended June 30, 2013 | ||||||||||||||||
| ARCT III Merger |
ARCT IV Merger |
Other | Total | |||||||||||||
| Merger related costs: |
||||||||||||||||
| Personnel costs and other reimbursements |
$ | 188 | $ | 23 | $ | 44 | $ | 255 | ||||||||
F-224
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
| Six Months Ended June 30, 2013 | ||||||||||||||||
| ARCT III Merger |
ARCT IV Merger |
Other | Total | |||||||||||||
| Merger related costs: |
||||||||||||||||
| Legal fees and expenses |
$ | 125 | $ | — | $ | — | $ | 125 | ||||||||
| Personnel costs and other reimbursements |
522 | 23 | 44 | 589 | ||||||||||||
| Other non-routine transactions: |
||||||||||||||||
| Subordinated distribution fees |
98,360 | — | — | 98,360 | ||||||||||||
| Furniture, fixtures and equipment |
5,800 | — | — | 5,800 | ||||||||||||
| Legal fees and expenses |
61 | — | — | 61 | ||||||||||||
| Post-transaction support services |
2,000 | — | — | 2,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 106,868 | $ | 23 | $ | 44 | $ | 106,935 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Merger Related Costs
ARCT IV Merger
Pursuant to ARCT IV’s advisory agreement with the ARCT IV Advisor, ARCT IV agreed to pay the ARCT IV Advisor a brokerage commission on the sale of property in connection with the ARCT IV Merger. At the time of the ARCT IV Merger, ARCT IV paid $8.4 million to the ARCT IV Advisor in connection with this agreement. These commissions were included in merger and other non-routine transactions in the accompanying consolidated statements of operations for six months ended June 30, 2014. No fees were incurred under this agreement during the six months ended June 30, 2013 or during the three months ended June 30, 2014.
Cole Merger
The General Partner entered into an agreement with RCS, under which RCS agreed to provide strategic and financial advisory services to the General Partner in connection with the Cole Merger. The General Partner agreed to pay a fee equal to 0.25% of the transaction value upon the consummation of the transaction and reimburse out of pocket expenses. The General Partner incurred and recognized $14.2 million in expense from this agreement during the six months ended June 30, 2014. These fees are included in merger and other non-routine transactions in the accompanying consolidated statement of operations during the six months ended June 30, 2014. No fees relating to this agreement were incurred during the three months ended June 30, 2014 or during the six months ended June 30, 2013.
Pursuant to the Transaction Management Services Agreement dated December 9, 2013, ARCP and the General Partner agreed to pay RCS Advisory an aggregate fee of $2.9 million in connection with providing the following services: transaction management support related to the Cole Merger up to the date of the Transaction Management Services Agreement and ongoing transaction management support, marketing support, due diligence coordination and event coordination up to the date of the termination of the Transaction Management Services Agreement. The Transaction Management Services Agreement expired on the consummation of the General Partner’s transition to self-management on January 8, 2014. The General Partner paid RCS Advisory $2.9 million thereunder on January 8, 2014.
Multi-tenant Spin-off
The General Partner entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the General Partner in connection with the General Partner’s previously announced spin-off of its multi-tenant shopping center
F-225
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
portfolio. During the six months ended June 30, 2014, the General Partner incurred $1.8 million of such fees, which are included in merger and other non-routine transactions in the accompanying consolidated statement of operations for the six months ended June 30, 2014. No such fees were incurred during the six months ended June 30, 2013.
Other Non-routine Transactions
ARCT III Merger Subordinated Distribution Fees
On February 28, 2013, the OP entered into a Contribution and Exchange Agreement (the “ARCT III Contribution and Exchange Agreement”) with the ARCT III OP and the ARCT III Special Limited Partner, the holder of the special limited partner interest in the ARCT III OP. The ARCT III Special Limited Partner was entitled to receive certain distributions from the ARCT III OP, including a subordinated distribution of net sales proceeds resulting from an “investment liquidity event” (as defined in the agreement of limited partnership of the ARCT III OP). The ARCT III Merger constituted an “investment liquidity event,” due to the attainment of the 6.0% performance hurdle and the return to ARCT III’s stockholders in addition to their initial investment. Pursuant to the ARCT III Contribution and Exchange Agreement, the ARCT III Special Limited Partner contributed its interest in the ARCT III OP, inclusive of the $98.4 million subordinated distribution proceeds received, to the ARCT III OP in exchange for 7.6 million ARCT III OP Units. Upon consummation of the ARCT III Merger, these ARCT III OP Units were immediately converted into 7.3 million OP Units after application of the ARCT III Exchange Ratio. The General Partner recorded an expense of $98.4 million during the six months ended June 30, 2013 in connection with this transaction. In conjunction with the ARCT III Merger Agreement, the ARCT III Special Limited Partner agreed to hold its OP Units for a minimum of one year before converting them into shares of General Partner common stock.
ARCT IV Merger Subordinated Distribution Fees
On January 3, 2014, the OP entered into a Contribution and Exchange Agreement (the “ARCT IV Contribution and Exchange Agreement”) with the ARCT IV OP, ARCT IV Special Limited Partner and ARC Real Estate. The ARCT IV Special Limited Partner was entitled to receive certain distributions from the ARCT IV OP, including the subordinated distribution of net sales proceeds resulting from an “investment liquidity event” (as defined in the agreement of limited partnership of the ARCT IV OP). The ARCT IV Merger constituted an “investment liquidity event,” due to the attainment of the 6.0% performance hurdle and the return to ARCT IV’s stockholders of approximately $358.3 million in addition to their initial investment. Pursuant to the ARCT IV Contribution and Exchange Agreement, the ARCT IV Special Limited Partner contributed its interest in the ARCT IV OP, inclusive of the $78.2 million of subordinated distribution proceeds received, to the ARCT IV OP in exchange for 2.8 million ARCT IV OP Units. Upon consummation of the ARCT IV Merger, these ARCT IV OP Units were immediately converted into 6.7 million OP Units after application of the ARCT IV Exchange Ratio. In conjunction with the ARCT IV Merger Agreement, the ARCT IV Special Limited Partner agreed to hold its OP Units for a minimum of two years before converting them into shares of the General Partner’s common stock.
Furniture, Fixtures and Equipment and Other Assets
The OP entered into three agreements with affiliates of the Former Manager and the Former Manager (the “Sellers”), as applicable, pursuant to which, concurrently with the closing of the ARCT III Merger and ARCT IV Merger and the General Partner’s transition to self-management, the Sellers sold the OP certain FF&E and other assets used by the Sellers in connection with managing the property level business and operations and accounting functions of the General Partner and the OP. The General Partner incurred and recorded $15.8 million and $5.8 million to purchase the FF&E and Other Assets during the six months ended June 30, 2014 and 2013, respectively. No costs were incurred during the three months ended June 30, 2014 and 2013, respectively. The General Partner has concluded that there was no evidence of the receipt and it could not support the value of the FF&E and Other Assets . As such, the General Partner has expensed the amount originally capitalized and recognized the expense in merger and other non-routine transaction-related expense.
Other Fees and Expenses
In connection with the closing of the Cole Merger, the General Partner paid $2.9 million to RCS Advisory during the six months ended June 30, 2014. No such payments were made during the three months ended June 30, 2014 or the six months ended June 30, 2013.
Post-Transaction Support Services
ARCT III entered into an agreement with ARC Advisory under which ARC Advisory agreed to provide support services including legal, accounting, marketing, human resources and information technology, among other services, until the earlier of
F-226
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
the ARCT III Merger closing date or one year (and an agreed upon period of up to 60 days following the ARCT III Merger). ARCT III incurred and paid $2.0 million in fees pursuant to this agreement during the six months ended June 30, 2013. No fees were was incurred during the three months ended June 30, 2013 or for the three and six months ended June 30, 2014 in connection with this agreement.
In connection with its entry into the ARCT IV Merger Agreement, ARCT IV agreed to pay additional asset management fees, which totaled $1.3 million net of credits received from affiliates during the six months ended June 30, 2014. No such fees were incurred during the three month ended June 30, 2014.
Pursuant to the Amendment and Acknowledgment of Termination of Amended and Restated Management Agreement entered into as of January 8, 2014, the Former Manager agreed to provide certain transition services including accounting support, acquisition support, investor relations support, public relations support, human resources and administration, general human resources duties, payroll services, benefits services, insurance and risk management, information technology, telecommunications and Internet and services relating to office supplies. In consideration of the aforementioned services, the General Partner paid $10.0 million to the Former Manager on January 8, 2014. This arrangement was in effect for a 60-day term beginning on January 8, 2014.
Management Fees to Affiliates
The General Partner, ARCT III and ARCT IV recorded fees and reimbursements as shown in the table below for services provided by the Former Manager and its affiliates related to the operations of the General Partner, ARCT III and ARCT IV during the periods indicated (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Management fees to affiliates: |
||||||||||||||||
| Asset management fees |
$ | — | $ | — | $ | 13,888 | $ | 11,693 | ||||||||
| Property management fees |
— | — | — | 800 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | — | $ | — | $ | 13,888 | $ | 12,493 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Base Management Fees
Prior to the termination of the amended and restated management agreement, the General Partner paid the Former Manager an annual base management fee equal to 0.50% per annum of the average unadjusted book value of the General Partner’s real estate assets, calculated and payable monthly in advance, for the value of assets up to $3.0 billion and 0.40% per annum for the unadjusted book value of assets over $3.0 billion. The management fee was generally payable in cash however in lieu of cash. Prior to the ARCT III Merger, the Former Manager was entitled to an annual base management fee equal to 0.50% per annum for the unadjusted book value of assets with no asset threshold limitations. The Former Manager waived the management fee of $2.0 million and $2.4 million during the three and six months ended June 30, 2013, respectively.
F-227
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
Asset Management Fees
ARCT III
Effective July 1, 2012, as payment for the asset management fee, ARCT III issued (subject to periodic approval by its board of directors) to the ARCT III Advisor performance-based restricted partnership units of the ARCT III OP designated as “ARCT III Class B units,” which were intended to be profits interests and to vest, and no longer be subject to forfeiture, at such time as: (x) the value of the ARCT III OP’s assets plus all distributions that equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “economic hurdle”); and (y) a liquidity event had occurred.
The ARCT III Advisor received distributions on unvested ARCT III Class B units equal to the distribution rate received on ARCT III common stock. In 2012, the ARCT III board of directors approved the issuance of 145,022 ARCT III Class B units to the ARCT III Advisor for asset management services it provided. In 2013, the ARCT III board of directors approved issuance of an additional 603,599 ARCT III Class B units to the ARCT III Advisor for asset management services it provided. As of December 31, 2012, ARCT III did not consider achievement of the performance condition to be probable as the shareholder vote for the ARCT III Merger, which would allow vesting of these ARCT III Class B Units, was not completed. The performance condition related to these ARCT III Class B units was satisfied upon the completion of the ARCT III Merger and as a result a $9.4 million expense was recorded during the three months ended March 31, 2013. The 748,621 ARCT III Class B units converted into ARCT III OP Units, which converted on a one-to-one basis, into 711,190 OP Units after the application of the ARCT III Exchange Ratio.
In connection with a 60-day extension of the advisory agreement which was executed in order to facilitate the smooth transition of advisory services following the consummation of the ARCT III Merger, General Partner incurred and paid additional asset management fees of $2.3 million during the six months ended June 30, 2013. No such fees were incurred during the three months ended June 30, 2013 or during the six months ended June 30, 2014.
ARCT IV
In connection with the asset management services provided by the ARCT IV Advisor, ARCT IV issued (subject to periodic approval by ARCT IV’s board of directors) to the ARCT IV Advisor performance-based restricted partnership units of the ARCT IV OP designated as “ARCT IV Class B Units,” which were intended to be profit interests and to vest, and no longer be subject to forfeiture, at such time as: (x) the value of the ARCT IV OP’s assets plus all distributions that equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “economic hurdle”); (y) any one of the following occurs: (1) the termination of the advisory agreement by an affirmative vote of a majority of ARCT IV’s independent directors without cause; (2) a listing; or (3) another liquidity event; and (z) the ARCT IV Advisor was still providing advisory services to ARCT IV.
The calculation of the ARCT IV asset management fees was equal to: (i) 0.1875% of the cost of ARCT IV’s assets; divided by (ii) the value of one share of ARCT IV common stock as of the last day of such calendar quarter. When approved by the board of directors, the ARCT IV Class B Units were issued to the ARCT IV Advisor quarterly in arrears pursuant to the terms of the ARCT IV OP agreement. During the year ended December 31, 2013, ARCT IV’s board of directors approved the issuance of 492,483 ARCT IV Class B Units to the ARCT IV Advisor in connection with this arrangement. As of December 31, 2013, ARCT IV did not consider achievement of the performance condition to be probable and no expense was recorded at that time. The ARCT IV Advisor received distributions on unvested ARCT IV Class B Units equal to the distribution rate received on the ARCT IV common stock. The performance condition related to the 498,857 ARCT IV Class B Units, which includes units issued for the period of January 1, 2014 through the ARCT IV Merger Date, was satisfied upon the completion of the ARCT IV Merger. These ARCT IV Class B Units immediately converted into OP Units at the 2.3961 exchange ratio discussed in Note 3 — Mergers and Acquisitions and the General Partner recorded an expense of $13.9 million based on the fair value of the ARCT IV Class B Units during the six months ended June 30, 2014. No additional expense was recognized during the three months ended June 30, 2014.
Property Management Fees
ARCT III also agreed to pay an affiliate of ARC, unless it contracted with a third party, a property management fee of up to 2% of gross revenues from ARCT III’s stand-alone single-tenant net leased properties and 4% of gross revenues from its multi-tenant properties, plus, in each case, market-based leasing commissions applicable to the geographic location of the property. ARCT III also agreed to reimbursed the affiliate for property level expenses. If ARCT III contracted directly with third parties
F-228
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
for such services, it paid them customary market fees and paid the affiliated property manager an oversight fee of up to 1% of the gross revenues of the property managed. Property management fees of $0.8 million are recorded in management fees to affiliates in the accompanying consolidated statements of operations for the three and six months ended June 30, 2013. No property management fees were incurred during the three months ended June 30, 2013 or the six months ended June 30, 2014.
Quarterly Incentive Fee
Prior to the termination of the amended and restated management agreement as a result if internalization, the General Partner was required to pay the Former Manager a quarterly incentive fee, calculated based on 20% of the excess of annualized core earnings (as defined in the management agreement with the Former Manager) over the weighted-average number of shares multiplied by the weighted-average price per share of common stock. One half of each quarterly installment of the incentive fee would be payable in shares of common stock. The remainder of the incentive fee would be payable in cash. No incentive fees were incurred or paid during the six months ended June 30, 2014 or 2013.
General and Administrative Expenses
The General Partner, ARCT III and ARCT IV recorded general and administrative expenses as shown in the table below for services provided by the Former Manager and its affiliates related to the operations of the General Partner, ARCT III and ARCT IV during the periods indicated (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| General and administrative expenses: |
||||||||||||||||
| Advisory fees and reimbursements |
$ | 437 | $ | 1,066 | $ | 1,955 | $ | 3,667 | ||||||||
| Equity awards |
— | 3,068 | 12,960 | 5,676 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 437 | $ | 4,134 | $ | 14,915 | $ | 9,343 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Advisory Fees and Reimbursements
The General Partner, ARCT III and ARCT IV agreed to pay certain fees and reimbursements to the Former Manager and its affiliates, as applicable, for their out-of-pocket costs, including without limitation, legal fees and expenses, transfer agent fees, due diligence fees and expenses, other third party fees and expenses, costs of appraisals, travel expenses, nonrefundable option payments and deposits on properties not acquired, accounting fees and expenses, title insurance premiums and other closing costs, personnel costs and miscellaneous expenses relating to the selection, acquisition and due diligence of properties or general operations of the General Partner. During the three and six months ended June 30, 2014, these expenses totaled $0.4 million and $2.0 million, respectively. During the three and six months ended June 30, 2013, these expenses totaled $1.1 million and $3.7 million, respectively.
Equity Awards
Upon consummation of the ARCT III Merger, the General Partner entered into the OPP with the Former Manager. The OPP gave the Former Manager the opportunity to earn compensation upon the attainment of certain stockholder value creation targets.
F-229
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
The General Partner recorded $0.6 million and $3.7 million of expense during the three and six months ended June 30, 2013 in connection with the OPP. During the six months ended June 30, 2014, $1.6 million was recorded to general and administrative expenses as stock based compensation relating to the change in total return to stockholders used in computing the number of LTIP units earned between December 31, 2013 and January 8, 2014. No expenses were incurred during the three months ended June 30, 2014.
As a result of the ARCT III Merger, certain restricted shares held by employees of affiliates of the Former Manager were fully vested. This expense of $2.0 million is included in general and administrative expense in the accompanying consolidated statement of operations during the six months ended June 30, 2013. During the six months ended June 30, 2013, the General Partner granted 325,000 restricted stock awards to employees of affiliates of the Former Manager as compensation for certain services. The grant date fair value for this issuance was $4.5 million. No such awards were granted during the three months ended June 30, 2013.
During the six months ended June 30, 2014, the General Partner granted 796,075 restricted stock awards to employees of affiliates of the Former Manager as compensation for certain services and 87,202 restricted stock awards to two directors who are affiliates of the Former Manager. The grant date fair value of the awards of $12.5 million was recorded in general and administrative expenses in the accompanying consolidated statements of operations. No grants were made to employees of affiliates of the Former Manager during the three months ended June 30, 2014.
Indirect Affiliate Expenses
During 2014, the General Partner incurred fees and expenses payable to of the Former Manager affiliates or payable to a third party on behalf of the Former Manager affiliates for amenities related to certain buildings, as explained below. No such fees or expenses were incurred during 2013. These expenses are depicted in the table below for the periods indicated (in thousands):
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||
| 2014 | 2014 | |||||||
| Indirect affiliate expenses: |
||||||||
| Audrain building |
$ | 3,517 | $ | 3,922 | ||||
| ANST office build-out |
335 | 335 | ||||||
| New York (405 Park Ave) office |
116 | 187 | ||||||
| Dresher, PA office |
17 | 36 | ||||||
| North Carolina office |
12 | 15 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 3,997 | $ | 4,495 | ||||
|
|
|
|
|
|||||
Audrain Building
During the year ended December 31, 2013, a wholly owned subsidiary of ARC Real Estate purchased a historic building in Newport, Rhode Island (“Audrain”) with plans to renovate the second floor to serve as offices for certain executives of the General Partner, and affiliates of the Former Manager. ARC Real Estate requested that invoices relating to the second floor renovation and tenant improvements and all building operating expenses either be reimbursed by the OP to the affiliate of the Former Manager or be paid directly to the contractors and vendors. During the three and six months ended June 30, 2014, the OP paid $3.5 million and $3.8 million, respectively, for tenant improvements and furniture and fixtures relating to the renovation. These payments were made directly to third parties.
In addition, on October 4, 2013, the OP entered into a lease agreement with the subsidiary of ARC Real Estate for a term of 15 years with annual base rent of $0.4 million requiring monthly payments beginning on that date. As there were tenants occupying the building when it was purchased, these tenants subleased their premises from the OP until their leases terminated. During the three and six months ended June 30, 2014, the OP incurred and paid $0.1 million and $0.1 million, respectively, for base rent, which was partially offset by $9,000 and $17,000, respectively, of rental revenue received from the subtenants.
Subsequent to June 30, 2014, as a result of findings of the investigation conducted by the Audit Committee, the OP terminated the lease agreement and was reimbursed for the tenant improvement and furniture costs incurred by the OP
F-230
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
totaling approximately $8.5 million, which included the tenant improvements of approximately $3.8 million incurred by the OP in the six months ended June 30, 2014. Reimbursement was made by delivery and retirement of 916,423 OP Units held by an affiliate of the Former Manager. The General Partner never moved into or occupied the building.
ANST Office Build-out
During the six months ended June 30, 2014, as a result of the Cole Merger, the General Partner worked to develop a partnership with ANST to better service clients and shareholders more efficiently, as well as create more career opportunities for the employees. Plans were made to move ANST to part of the Cole Capital office building in 2014. In order to accommodate the ANST employees, the Cole Capital office building was to be remodeled. During the six months ended June 30, 2014, the General Partner paid $0.3 million directly to third parties for leasehold improvements and furniture and fixtures relating to the renovation.
Subsequently, ANST never moved into the building. The General Partner is considering its options with regard to recovery of such payments, although no decisions have been made at this time. No asset has been recognized in the financial statements related to any potential recovery.
Office Rents
During the three and six months ended June 30, 2014, the General Partner paid $0.1 million and $0.2 million, respectively, to an affiliate of the Former Manager for rent related to offices in New York, Pennsylvania and North Carolina where certain of the General Partner’s employees shared office space with an affiliate of the Former Manager.
Additional Related Party Transactions
The following related party transactions were not included in the tables above.
Tax Protection Agreement
The OP is party to a tax protection agreement with ARC Real Estate, which contributed its 100% indirect ownership interests in 63 of the General Partner’s properties to the Operating Partnership in the formation transactions related to the General Partner’s IPO. Pursuant to the tax protection agreement, the OP has agreed to indemnify ARC Real Estate for its tax liabilities (plus an additional amount equal to the taxes incurred as a result of such indemnity payment) attributable to its built-in gain, as of the closing of the formation transactions, with respect to its interests in the contributed properties (other than two vacant properties contributed), if the General Partner sells, conveys, transfers or otherwise disposes of all or any portion of these interests in a taxable transaction on or prior to September 6, 2021. The sole and exclusive rights and remedies of ARC Real Estate under the tax protection agreement will be a claim against the Operating Partnership for ARC Real Estate’s tax liabilities as calculated in the tax protection agreement, and ARC Real Estate shall not be entitled to pursue a claim for specific performance or bring a claim against any person that acquires a protected party from the Operating Partnership in violation of the tax protection agreement.
Investment from the ARCT III Special Limited Partner
In connection with the ARCT III Merger, the ARCT III Special Limited Partner invested $0.8 million in the ARCT III OP and was subsequently issued 56,797 OP Units in respect thereof upon the closing of the ARCT III Merger after giving effect to the ARCT III Exchange Ratio. This investment is included in non-controlling interests in the accompanying consolidated balance sheets.
Investment in an Affiliate of the Former Manager
As of June 30, 2014 and December 31, 2013, the General Partner held an investment valued at $1.7 million and $1.6 million, respectively, in a real estate fund advised by an affiliate of the Former Manager, American Real Estate Income Fund, which invests primarily in equity securities of other publicly traded REITs.
Ownership by Affiliates of the Former Manager
Certain affiliates of the Former Manager own shares of the General Partner’s common stock, shares of unvested restricted common stock, OP Units and LTIP Units. As of June 30, 2014 and December 31, 2013, 2.77% and 4.37%, respectively, of the total equity units issued by the General Partner and the OP were owned by affiliates.
F-231
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
Due to Affiliates
Due to affiliates, as reported in the accompanying consolidated balance sheets, is comprised of the following amounts discussed above (in thousands):
| June 30, 2014 | December 31, 2013 | |||||||
| (as Restated) | (as Restated) | |||||||
| Due to affiliates: |
||||||||
| Offering related costs |
$ | 2,000 | $ | 220 | ||||
| Merger and other non-routine transactions |
42 | 38,645 | ||||||
| General and administrative |
868 | 59,600 | ||||||
| Indirect affiliate expenses |
68 | — | ||||||
| Management fees to affiliates |
— | 4,969 | ||||||
| Managed REITS and Other |
206 | — | ||||||
|
|
|
|
|
|||||
| Total |
$ | 3,184 | $ | 103,434 | ||||
|
|
|
|
|
|||||
Cole Capital
Cole Capital is contractually responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf, and recommending to each of the Managed REIT’s respective board of directors an approach for providing investors with liquidity. In addition, Cole Capital distributes the shares of common stock for certain Managed REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings. Cole Capital receives compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management and disposition of their respective assets, as applicable.
Cole Capital Offering Related Revenue
Cole Capital generally receives a selling commission of up to 7.0% of gross offering proceeds related to the sale of shares of CCPT IV, CCIT II and CCPT V common stock in their primary offerings, before reallowance of commissions earned by participating broker-dealers. Cole Capital has and intends to continue to reallow 100% of selling commissions earned to participating broker-dealers. In addition, Cole Capital generally receives 2.0% of gross offering proceeds in the primary offerings, before reallowance to participating broker-dealers, as a dealer-manager fee in connection with the sale of CCPT IV, CCIT II and CCPT V shares of common stock. Cole Capital, in its sole discretion, may reallow all or a portion of its dealer-manager fee to such participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers. No selling commissions or dealer-manager fees are paid to Cole Capital or other broker-dealers with respect to shares sold under the respective Managed REIT’s distribution reinvestment plans, under which the stockholders may elect to have distributions reinvested in additional shares.
In connection with the sale of INAV shares of common stock, Cole Capital receives an asset-based dealer-manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to (i) 1/365th of 0.55% of the net asset value (“NAV”) for Wrap Class shares of common stock (“W Shares”) for such day, (ii) 1/365th of 0.55% of the NAV for Advisor Class shares of common stock (“A Shares”) for such day and (iii) 1/365th of 0.25% of the NAV for Institutional Class shares of common stock (“I Shares”) for such day. Cole Capital, in its sole discretion, may reallow a portion of its dealer-manager fee received on W Shares, A Shares and I Shares to participating broker-dealers. In addition, Cole Capital receives a selling commission on A Shares sold in the primary offering of up to 3.75% of the offering price per share for A Shares. Cole Capital has and intends to continue to reallow 100% of selling commissions earned to participating broker-dealers. Cole Capital also receives an asset-based distribution fee for A Shares that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.50% of the NAV for A Shares for such day. Cole Capital, in its sole discretion, may reallow a portion of the distribution fee to participating broker-dealers. No selling commissions are paid to Cole Capital or other broker-dealers with respect to W Shares or I Shares or on shares of any class of INAV common stock sold pursuant to INAV’s distribution reinvestment plan, under which the stockholders may elect to have distributions reinvested in additional shares, and no distribution fees are paid to Cole Capital or other broker-dealers with respect to W Shares or I Shares.
F-232
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
All other organization and offering expenses associated with the sale of the Managed REITs’ common stock (excluding selling commissions, if applicable, and the dealer-manager fee) are paid for in advance by Cole Capital and subject to reimbursement by the Managed REITs, up to certain limits per the respective advisory agreement. The organization and offering expenses incurred by Cole Capital which are subject to reimbursement included costs which are paid to affiliates. As these costs are incurred, they are recorded as reimbursement revenue, up to the respective limit, and are included in dealer-manager fees, selling commissions and offering reimbursements in the financial results for Cole Capital in Note 6 — Segment Reporting (As Restated). Expenses paid on behalf of the Managed REITs in excess of these limits that are expected to be collected are recorded as program development costs. As of June 30, 2014, Cole Capital had $7.0 million of organization and offering costs paid on behalf of the Managed REITs in excess of the limits that have not been reimbursed, which are expected to be reimbursed by the Managed REITs as they raise additional proceeds from the respective offering. The program development costs are included in deferred costs and other assets, net in the accompanying consolidated unaudited balance sheets.
Cole Capital recorded commissions, fees and expense reimbursements as shown in the table below for services provided to the Managed REITs (as described above) during the three months ended June 30, 2014 and the period from the Cole Acquisition Date to June 30, 2014 (in thousands). As the General Partner did not commence operations for Cole Capital until the Cole Acquisition Date, comparative financial data is not presented for the three and six months ended June 30, 2013.
| Three Months Ended June 30, 2014 | ||||||||||||||||||||
| CCPT IV (1) | CCPT V | CCIT II | INAV | Total | ||||||||||||||||
| Offering: |
||||||||||||||||||||
| Selling commission revenue |
$ | (12 | ) | $ | 1,347 | $ | 4,579 | $ | 195 | $ | 6,109 | |||||||||
| Selling commissions reallowance expense |
(12 | ) | 1,347 | 4,579 | 195 | 6,109 | ||||||||||||||
| Dealer-manager fee revenue |
(2 | ) | 416 | 1,372 | 123 | 1,909 | ||||||||||||||
| Dealer-manager fees reallowance expense |
107 | 178 | 668 | 6 | 959 | |||||||||||||||
| Other expense reimbursement revenue |
(18 | ) | 415 | 1,372 | 182 | 1,951 | ||||||||||||||
| (1) | Due to net cancellations during the quarter, related to shares sold prior to the fund closing on February 25, 2014. |
| Period from the Cole Acquisition Date to June 30, 2014 | ||||||||||||||||||||
| CCPT IV | CCPT V | CCIT II | INAV | Total | ||||||||||||||||
| Offering: |
||||||||||||||||||||
| Selling commission revenue |
$ | 29,113 | $ | 1,347 | $ | 4,950 | $ | 216 | $ | 35,626 | ||||||||||
| Selling commissions reallowance expense |
29,113 | 1,347 | 4,950 | 216 | 35,626 | |||||||||||||||
| Dealer-manager and distribution fee revenue |
8,771 | 416 | 1,486 | 188 | 10,861 | |||||||||||||||
| Dealer-manager fees reallowance expense |
4,971 | 178 | 721 | 8 | 5,878 | |||||||||||||||
| Other expense reimbursement revenue |
3,749 | 465 | 1,486 | 235 | 5,935 | |||||||||||||||
Cole Capital Operating Revenue
Cole Capital earns acquisition fees related to the acquisition, development or construction of properties on behalf of certain of the Managed REITs. In addition, Cole Capital is reimbursed for acquisition expenses incurred in the process of acquiring properties up to certain limits per the respective advisory agreement. Cole Capital is not reimbursed for personnel costs in connection with services for which it receives acquisition fees or real estate commissions. In addition, Cole Capital may earn disposition fees related to the sale of one or more properties, including those held indirectly through joint ventures, on behalf of a Managed REIT. Acquisition and disposition fees and reimbursements, as applicable, are included in transaction service fees in the financial results for Cole Capital in Note 6 — Segment Reporting (As Restated).
F-233
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
Cole Capital earns advisory and asset and property management fees from certain Managed REITs and other affiliates. In addition, Cole Capital may be reimbursed for expenses incurred in providing advisory and asset and property management services, subject to certain limitations. In connection with services provided by Cole Capital related to the origination or refinancing of any debt financing obtained by certain Managed REITs that is used to acquire properties or to make other permitted investments, or that is assumed, directly or indirectly, in connection with the acquisition of properties, Cole Capital is reimbursed for financing expenses incurred, subject to certain limitations. Advisory fees, asset and property management fees and reimbursements of expenses are included in management fees and reimbursements in the financial results for Cole Capital in Note 6 — Segment Reporting (As Restated).
Cole Capital recorded fees and expense reimbursements as shown in the table below for services provided primarily to the Managed REITs (as described above) during the three months ended June 30, 2014 and the period from the Cole Acquisition Date to June 30, 2014 (in thousands). As the General Partner did not commence operations for Cole Capital until the Cole Acquisition Date, comparative financial data is not presented for the three and six months ended June 30, 2013.
| Three Months Ended June 30, 2014 | ||||||||||||||||||||||||
| CCPT IV | CCPT V | CCIT | CCIT II | INAV | Other | |||||||||||||||||||
| Operations: |
||||||||||||||||||||||||
| Acquisition fee revenue |
$ | 6,787 | $ | 519 | $ | 3,232 | $ | 3,874 | $ | — | $ | (1 | ) | |||||||||||
| Asset management fee revenue |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | 252 | ||||||||||||
| Property management and leasing fee revenue |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | 284 | ||||||||||||
| Operating expense reimbursement revenue |
$ | 1,538 | $ | 166 | $ | 758 | $ | 79 | $ | 135 | $ | — | ||||||||||||
| Advisory and performance fee revenue |
$ | 4,747 | $ | 9 | $ | 4,561 | $ | 115 | $ | 198 | $ | — | ||||||||||||
| Period from the Cole Acquisition Date to June 30, 2014 | ||||||||||||||||||||||||
| CCPT IV | CCPT V | CCIT | CCIT II | INAV | Other | |||||||||||||||||||
| Operations: |
||||||||||||||||||||||||
| Acquisition fee revenue |
$ | 10,785 | $ | 585 | $ | 3,727 | $ | 3,874 | $ | — | $ | (1 | ) | |||||||||||
| Asset management fee revenue |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | 403 | ||||||||||||
| Property management and leasing fee revenue |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | 574 | ||||||||||||
| Operating expense reimbursement revenue |
$ | 2,603 | $ | 183 | $ | 1,187 | $ | 79 | $ | 135 | $ | — | ||||||||||||
| Advisory and performance fee revenue |
$ | 7,311 | $ | 9 | $ | 7,156 | $ | 141 | $ | 306 | $ | — | ||||||||||||
Investment in the Managed REITs
As of June 30, 2014, the Company owned aggregate equity investments of $3.9 million in the Managed REITs, which is included in investment in unconsolidated entities in the accompanying consolidated balance sheet. The table below presents certain information related to the Company’s investments in the Managed REITs as of June 30, 2014 (carrying amount in thousands):
| June 30, 2014 | ||||||||
| Managed REIT |
% of Outstanding Shares Owned | Carrying Amount of Investment | ||||||
| CCPT IV |
0.01 | % | $ | 137 | ||||
| CCPT V |
12.39 | % | 1,732 | |||||
| CCIT |
0.01 | % | 79 | |||||
| CCIT II |
3.79 | % | 1,809 | |||||
| INAV |
0.22 | % | 160 | |||||
|
|
|
|||||||
| $ | 3,917 | |||||||
|
|
|
|||||||
F-234
AMERICAN REALTY CAPITAL PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 (Unaudited) – (Continued)
Due from Affiliates
As of June 30, 2014, $73.7 million was expected to be collected from affiliates, including balances from the Managed REITs lines of credits, as well as balances for services provided by Cole Capital and expenses subject to reimbursement by the Managed REITs in accordance with their respective advisory and property management agreements and was included in due from affiliates on the accompanying consolidated balance sheet. In connection with the Cole Merger, the OP acquired a revolving line of credit agreement that provides for $10.0 million of available borrowings to CCIT II. During the six months ended June 30, 2014, the OP entered into a revolving line of credit agreement that provides for $10.0 million of available borrowings to CCPT V. The CCIT II and CCPT V line of credit agreements each bear an interest rate equal to the one-month LIBOR plus 2.20% and mature in January 2015 and March 2015, respectively. In addition, during the six months ended June 30, 2014, the OP increased the available borrowings under the revolving line of credit to CCIT II to $60.0 million. During the six months ended June 30, 2014, CCIT II and CCPT V borrowed $55.0 million and $9.7 million, respectively, on their lines of credit. These amounts remained outstanding as of June 30, 2014 and are included in due from affiliates in the accompanying consolidated balance sheets.
F-235
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
(Unaudited)
Note 21 — Economic Dependency
Prior to transitioning to self-management on January 8, 2014, the General Partner engaged, under various agreements, the Former Manager, and entities under common ownership with the Former Manager to provide certain services that are essential to the Operating Partnership, including asset management services and supervision of the management and leasing of properties owned by the Operating Partnership, as well as other administrative responsibilities for the Operating Partnership including information technology, legal services and investor relations.
As a result of these relationships, the General Partner was dependent upon the Former Manager, ARC and their affiliates. In the event that these companies were unable to provide the General Partner with the respective services, the General Partner would have been required to find alternative providers of these services. As a result of the ARCT III Merger, ARCP internalized certain accounting and property acquisition services previously performed by the Former Manager and its affiliates. ARCP may from time to time engage entities under common control with the Former Manager for legal, information technology or other support services for which it will pay a fee, subject to approval by ARCP’s independent directors. No such engagements are in place between ARCP and the Former Manager and its affiliates.
Note 22 — Net Loss Per Unit (As Restated)
The following is a summary of the basic and diluted net loss per unit computation for the three and six months ended June 30, 2014 and 2013 (dollar amounts in thousands, except for unit and per unit data):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net loss attributable to the Operating Partnership |
$ | (56,870 | ) | $ | (72,275 | ) | $ | (362,518 | ) | $ | (218,212 | ) | ||||
| Less: dividends declared on preferred units and participating securities |
23,291 | 233 | 46,723 | 426 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to common unitholders |
$ | (80,161 | ) | $ | (72,508 | ) | $ | (409,241 | ) | $ | (218,638 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted average common units outstanding: |
840,184,663 | 209,408,106 | 707,060,440 | 190,982,367 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic and diluted net loss per unit attributable to common unitholders |
$ | (0.10 | ) | $ | (0.35 | ) | $ | (0.58 | ) | $ | (1.14 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
As of June 30, 2014, the Operating Partnership excluded 5,649,968 shares of unvested restricted stock outstanding and 21,735,008 Series D Preferred Units outstanding from the calculation of diluted net loss per share as the effect would have been antidilutive.
Note 23 — Property Dispositions (As Restated)
During the six months ended June 30, 2014, the Operating Partnership disposed of 24 single-tenant properties and one multi-tenant property for an aggregate gross sales price of $96.4 million (the “2014 Property Dispositions”). There were no properties disposed of during the six months ended June 30, 2013. No disposition fees were paid in connection with the sale of the 2014 Property Dispositions and the Operating Partnership has no continuing involvement with these properties. As of June 30, 2014, there was one property classified as held for sale.
Note 24 — Income Taxes
As a REIT, the General Partner generally is not subject to federal income tax, with the exception of its TRS. However, the General Partner, including its TRS, and the Operating Partnership are still subject to certain state and local income taxes in the various jurisdictions in which the entities operate.
Based on the above, Cole Capital, substantially all of which is conducted through a TRS, recognized a benefit from federal and state income taxes of $7.5 million and $13.7 million for the three and six months ended June 30, 2014, respectively, which is included in other income, net in the accompanying consolidated statements of operations. No provision or benefit for income taxes was recognized for the three and six months ended June 30, 2013 as the Operating Partnership did not commence operations for Cole Capital until the Cole Acquisition Date. The difference in the benefit from income taxes reflected in the consolidated statements of operations as compared to the benefit calculated at the statutory federal income tax rate is primarily attributable to various permanent differences and state and local income taxes.
The REI segment recognized state income and franchise taxes of $2.8 million and $3.9 million during the three and six months ended June 30, 2014, respectively, and $0.1 million and $0.3 million during the three and six months ended June 30, 2013, respectively, which are included in other income, net in the accompanying consolidated statements of operations.
The Operating Partnership had no unrecognized tax benefits as of or during the six months ended June 30, 2014 and 2013. Any interest and penalties related to unrecognized tax benefits would be recognized within the provision for income taxes in the accompanying consolidated statements of operations. The Operating Partnership files income tax returns in the U.S. federal jurisdiction, as well as various state jurisdictions, and is subject to routine examinations by the respective tax authorities. With few exceptions, the Operating Partnership is no longer subject to federal or state examinations by tax authorities for years before 2010.
Note 25 — Subsequent Events
Significant events that occurred subsequent to June 30, 2014 are detailed within the December 31, 2013 Operating Partnership Financial Statements. Please refer to Note 24 — Subsequent Events (As Restated) in the December 31, 2013 Operating Partnership Financial Statements.
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