HINES REAL ESTATE INVESTMENT TRUST INC - FORM 8-K - August 11, 2016



UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
 
Date of Report (Date of Earliest Event Reported):
 
August 8, 2016
 
Hines Real Estate Investment Trust, Inc.
__________________________________________
 (Exact name of registrant as specified in its charter)
 
 
 
 
Maryland
000-50805
20-0138854
____________________
(State or other jurisdiction
_____________
(Commission
______________
(I.R.S. Employer
of incorporation)
File Number)
Identification No.)
 
 
 
2800 Post Oak Blvd, Suite 5000, Houston, Texas
 
77056-6118
_________________________________
(Address of principal executive offices)
 
___________
(Zip Code)
 
 
 
 
 
Registrant’s telephone number, including area code:
 
(888) 220-6121
 
Not Applicable
______________________________________________
Former name or former address, if changed since last report
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.01 Completion of Acquisition or Disposition of Assets.

On August 8, 2016, each of HR Venture Properties I LLC, HR Parkland LLC, HR Thompson Bridge LLC and HR Heritage Station LLC, which are wholly-owned subsidiaries of Hines Real Estate Investment Trust, Inc. (“Hines REIT”) sold seven of the Grocery-Anchored Portfolio properties to New Market Properties, LLC (the “Purchaser”). The Grocery-Anchored Portfolio consists of eight grocery-anchored shopping centers located in four states primarily in the southeastern United States. The Purchaser is not affiliated with Hines REIT or its affiliates.

The sales price for the Grocery-Anchored Portfolio properties, exclusive of the shopping center called Champions Village located in Houston, Texas, was approximately $158.0 million in aggregate, prior to the deduction of transaction costs and certain other closing credits and any adjustments for prorations. The net proceeds received by Hines REIT from this sale were $147.2 million after transaction costs.

Item 9.01 Financial Statements and Exhibits.

(b) Pro Forma Financial Information. The following financial information is submitted at the end of this Current Report on Form 8-K and is filed herewith and incorporated herein by reference:

Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2016
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and the Year Ended December 31, 2015
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements







1


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
HINES REAL ESTATE INVESTMENT TRUST, INC.
 
 
 
 
 
August 11, 2016
 
By:
/s/ J. Shea Morgenroth
 
 
 
 
J. Shea Morgenroth
 
 
 
 
Chief Accounting Officer and Treasurer
 




2



Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
 
On August 8, 2016, each of HR Venture Properties I LLC, HR Parkland LLC, HR Thompson Bridge LLC and HR Heritage Station LLC, which are wholly-owned subsidiaries of Hines Real Estate Investment Trust, Inc. (“Hines REIT”) sold seven of the Grocery-Anchored Portfolio properties to New Market Properties, LLC (the “Purchaser”). The Grocery-Anchored Portfolio consists of eight grocery-anchored shopping centers located in four states primarily in the southeastern United States. The sales price for seven of the Grocery-Anchored Portfolio properties, exclusive of the shopping center called Champions Village located in Houston, Texas (“Champions Village”) was approximately $158.0 million in aggregate, prior to the deduction of transaction costs and certain other closing credits and any adjustments for prorations. The net proceeds received from this sale were $147.2 million after transaction costs. The Purchaser is not affiliated with Hines REIT or its affiliates.
 
The following unaudited pro forma condensed consolidated financial information gives effect to the disposition of seven of the Grocery-Anchored Portfolio properties, excluding Champions Village, including the receipt of proceeds from the sale.  In our opinion, all material adjustments necessary to reflect the effects of the above transaction have been made.

3


Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 2016
(In thousands)

The following unaudited Pro Forma Condensed Consolidated Balance Sheet is presented assuming the disposition of seven of the Grocery-Anchored Portfolio properties, excluding Champions Village, had occurred as of March 31, 2016.  This unaudited Pro Forma Condensed Consolidated Balance Sheet should be read in conjunction with our unaudited Pro Forma Condensed Consolidated Statements of Operations appearing herein and our historical financial statements and notes thereto as filed in our quarterly report on Form 10-Q for the three months ended March 31, 2016.  This unaudited Pro Forma Condensed Consolidated Balance Sheet is not necessarily indicative of what our actual financial position would have been had we completed this transaction on March 31, 2016, nor does it purport to represent our future financial position.

 
 
As of
 March 31, 2016 (a)
 
Adjustments for the
Grocery-Anchored Portfolio, exclusive of Champions Village
 
 
Adjustments for
JPMorgan Chase Tower
 
 
Pro Forma
ASSETS
 
 
 
 
 
 
 
 
 
 
Investment property, at cost:
 
 
 
 
 
 
 
 
 
 
Buildings and improvements, net
 
$
1,252,530

 
$
(66,586
)
 
(b)
$
(205,427
)
 
(e)
$
980,517

Land
 
437,701

 
(45,350
)
 
(b)
(8,768
)
 
(e)
383,583

Total investment property
 
1,690,231

 
(111,936
)
 
 
(214,195
)
 
 
1,364,100

 
 
 
 
 
 
 
 
 
 


Investments in unconsolidated entities
 
97,249

 
—

 
 
—

 
 
97,249

Cash and cash equivalents
 
49,610

 
143,702

 
(c)
211,765

 
(f)
405,077

Restricted cash
 
1,281

 
—

 
 
—

 
 
1,281

Distributions receivable
 
1,209

 
—

 
 
—

 
 
1,209

Tenant and other receivables, net
 
43,982

 
(925
)
 
(b)
(10,879
)
 
(e)
32,178

Intangible lease assets, net
 
115,196

 
(9,852
)
 
(b) 
(3,726
)
 
(e)
101,618

Deferred leasing costs, net
 
154,334

 
(3,286
)
 
(b) 
(46,059
)
 
(e)
104,989

Deferred financing costs, net
 
416

 
—

 
(b) 
—

 
(e)
416

Other assets
 
4,411

 
(38
)
 
(b) 
(166
)
 
(e)
4,207

TOTAL ASSETS
 
$
2,157,919

 
$
17,665

 
 
$
(63,260
)
 
 
$
2,112,324

 
 
 
 
 
 
 
 
 
 

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 

Liabilities:
 
 
 
 
 
 
 
 
 

Accounts payable and accrued expenses
 
$
56,125

 
$
(2,555
)
 
(b) 
$
(4,238
)
 
(e)
$
49,332

Due to affiliates
 
4,572

 
—

 
(b) 
(8
)
 
(e)
4,564

Intangible lease liabilities, net
 
28,619

 
(11,849
)
 
(b) 
(2,406
)
 
(e)
14,364

Other liabilities
 
16,295

 
(573
)
 
(b) 
(981
)
 
(e)
14,741

Interest rate swap contracts
 
13,491

 
—

 
 
—

 
 
13,491

Participation interest liability
 
130,386

 
—

 
 
—

 
 
130,386

Distributions payable
 
15,026

 
—

 
 
—

 
 
15,026

Notes payable, net
 
836,583

 
(5,065
)
 
(b) 
(49,035
)
 
(e)
782,483

Total liabilities
 
1,101,097

 
(20,042
)
 
 
(56,668
)
 
 
1,024,387

 
 
 
 
 
 
 
 
 
 


Commitments and contingencies
 
—

 
—

 
 
—

 
 
—

 
 
 
 
 
 
 
 
 
 

Equity:
 
 
 
 
 
 
 
 
 

Preferred shares
 
—

 
—

 
 
—

 
 
—

Common shares
 
223

 
—

 
 
—

 
 
223

Additional paid-in capital
 
2,099,093

 
—

 
 
—

 
 
2,099,093

Accumulated distributions in excess of earnings
 
(1,041,421
)
 
37,707

 
(d)
(6,592
)
 
(g)
(1,010,306
)
Accumulated other comprehensive income (loss)
 
(1,073
)
 
—

 
 
—

 
 
(1,073
)
Total stockholders’ equity
 
1,056,822

 
37,707

 
 
(6,592
)
 
 
1,087,937

Noncontrolling interests
 
—

 
—

 
 
—

 
 
—

Total equity
 
1,056,822

 
37,707

 
 
(6,592
)
 
 
1,087,937

TOTAL LIABILITIES AND EQUITY
 
$
2,157,919

 
$
17,665

 
 
$
(63,260
)
 
 
$
2,112,324


See notes to unaudited pro forma condensed consolidated financial statements.

4


Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2016
(In thousands, except per share amounts)
 
The following unaudited Pro Forma Condensed Consolidated Statement of Operations is presented assuming the disposition of seven of the Grocery-Anchored Portfolio properties, excluding Champions Village, had occurred as of January 1, 2015.  This unaudited Pro Forma Condensed Consolidated Statement of Operations should be read in conjunction with our unaudited Pro Forma Condensed Consolidated Balance Sheet and our historical financial statements and notes thereto as filed in our quarterly report on Form 10-Q for the three months ended March 31, 2016.  This unaudited Pro Forma Condensed Consolidated Statement of Operations is not necessarily indicative of what our actual results of operations would have been had we completed this transaction on January 1, 2015, nor does it purport to represent our future operations.
 
 
 
Three Months Ended
 March 31, 2016 (a)
 
Adjustments for the Grocery-Anchored Portfolio, exclusive of Champions Village (b)
 
Adjustments for JPMorgan Chase Tower (c)
 
Pro Forma
Revenues:
 
 

 
 
 
 

 
 

Rental revenue
 
$
48,106

 
$
(2,913
)
 
$
(6,060
)
 
$
39,133

Other revenue
 
4,989

 
(47
)
 
(856
)
 
4,086

Total revenues 
 
53,095

 
(2,960
)
 
(6,916
)
 
43,219

Expenses:
 
 
 
 
 
 
 

Property operating expenses
 
13,764

 
(346
)
 
(2,334
)
 
11,084

Real property taxes
 
8,446

 
(320
)
 
(1,627
)
 
6,499

Property management fees
 
1,385

 
(106
)
 
(166
)
 
1,113

Depreciation and amortization
 
19,593

 
(846
)
 
(2,115
)
 
16,632

Asset management and acquisition fees
 
8,419

 
—

 
—

 
8,419

General and administrative
 
1,950

 
—

 
(3
)
 
1,947

Total expenses
 
53,557

 
(1,618
)
 
(6,245
)
 
45,694

Operating income (loss)
 
(462
)
 
(1,342
)
 
(671
)
 
(2,475
)
Other income (expenses):
 
 
 
 
 
 
 


Gain (loss) on derivative instruments, net
 
3,957

 
—

 
—

 
3,957

Equity in earnings (losses) of unconsolidated entities, net
 
16,347

 
—

 
—

 
16,347

Gain (loss) on sale of real estate investments
 
2

 
—

 
—

 
2

Interest expense
 
(8,639
)
 
51

 
539

 
(8,049
)
Interest income
 
26

 
(1
)
 
(2
)
 
23

Income (loss) from continuing operations before benefit (provision) for income taxes
 
11,231

 
(1,292
)
 
(134
)
 
9,805

Benefit (provision) for income taxes
 
(39
)
 
2

 
25

 
(12
)
Income (loss) from continuing operations
 
$
11,192

 
$
(1,290
)
 
$
(109
)
 
$
9,793

Income (loss) from continuing operations per common share
 
$
0.05

 
 
 
 

 
$
0.04

Weighted average number common shares outstanding
 
222,106

 
 
 
 

 
222,106

 
See notes to unaudited pro forma condensed consolidated financial statements.

5


Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2015
(In thousands, except per share amounts)
 
The following unaudited Pro Forma Condensed Consolidated Statement of Operations is presented assuming the disposition of seven of the Grocery-Anchored Portfolio properties, excluding Champions Village, had occurred as of January 1, 2015. This unaudited Pro Forma Condensed Consolidated Statement of Operations should be read in conjunction with our unaudited Pro Forma Condensed Consolidated Balance Sheet and our historical financial statements and notes thereto as filed in our annual report on Form 10-K for the year ended December 31, 2015.  This unaudited Pro Forma Condensed Consolidated Statement of Operations is not necessarily indicative of what our actual results of operations would have been had we completed this transaction on January 1, 2015, nor does it purport to represent our future operations. 

 
 
Year Ended December 31, 2015 (a)
 
Adjustments for
the Grocery-Anchored Portfolio, exclusive of Champions Village (b)
 
Adjustments for
JPMorgan Chase Tower
(c)
 
Adjustments for 2555 Grand (d)
 
Pro Forma
Revenues:
 
 

 
 
 
 
 
 
 
 

Rental revenue
 
$
198,684

 
$
(11,738
)
 
$
(28,088
)
 
$
(9,945
)
 
$
148,913

Other revenue
 
20,105

 
(253
)
 
(3,696
)
 
(546
)
 
15,610

Total revenues 
 
218,789

 
(11,991
)
 
(31,784
)

(10,491
)
 
164,523

Expenses:
 
 
 
 
 
 
 
 
 

Property operating expenses
 
59,996

 
(1,540
)
 
(10,663
)
 
(2,675
)
 
45,118

Real property taxes
 
30,931

 
(1,258
)
 
(5,514
)
 
(641
)
 
23,518

Property management fees
 
5,683

 
(382
)
 
(849
)
 
(242
)
 
4,210

Depreciation and amortization
 
87,923

 
(3,612
)
 
(9,716
)
 
(2,459
)
 
72,136

Acquisition related expense
 
505

 
—

 
—

 
—

 
505

Asset management and acquisition fees
 
36,576

 
—

 
—

 
—

 
36,576

General and administrative
 
6,635

 
—

 
(3
)
 
—

 
6,632

Impairment losses
 
19,663

 
—

 
(11,865
)
 
—

 
7,798

Total expenses
 
247,912

 
(6,792
)
 
(38,610
)

(6,017
)
 
196,493

Operating income (loss)
 
(29,123
)
 
(5,199
)
 
6,826


(4,474
)
 
(31,970
)
Other income (expenses):
 
 
 
 
 
 
 
 
 

Gain (loss) on derivative instruments, net
 
16,945

 
—

 
—

 
—

 
16,945

Equity in earnings (losses) of unconsolidated entities, net
 
43,267

 
—

 
—

 
—

 
43,267

Gain (loss) on sale of real estate investments
 
50,144

 
—

 
—

 
(20,747
)
 
29,397

Interest expense
 
(37,684
)
 
215

 
4,415

 
—

 
(33,054
)
Interest income
 
46

 
(6
)
 
(2
)
 
(1
)
 
37

Income (loss) from continuing operations before benefit (provision) for income taxes
 
43,595

 
(4,990
)
 
11,239


(25,222
)
 
24,622

Benefit (provision) for income taxes
 
(225
)
 
5

 
186

 
—

 
(34
)
Income (loss) from continuing operations
 
$
43,370

 
$
(4,985
)
 
$
11,425


$
(25,222
)
 
$
24,588

Income (loss) from continuing operations per common share
 
$
0.19

 
 
 
 
 
 
 
$
0.11

Weighted average number common shares outstanding
 
223,369

 
 
 
 
 
 
 
223,369


 See notes to unaudited pro forma condensed consolidated financial statements.


6


Hines Real Estate Investment Trust, Inc.
Unaudited Notes to Pro Forma Condensed Consolidated Financial Statements

Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2016
a.
Reflects the Company's historical condensed consolidated balance sheet as of March 31, 2016.
b.
Reflects the Company's disposition of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village. Amounts represent the adjustments necessary to remove the assets and liabilities associated with the Grocery-Anchored Portfolio, exclusive of Champions Village.
c.
Reflects the proceeds received from the sale of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, less any cash on hand at the Grocery-Anchored Portfolio, exclusive of Champions Village, as of March 31, 2016.
d.
Reflects the adjustments related to the disposition of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, and the gain on sale.
e.
Reflects the Company's disposition of JPMorgan Chase Tower. Amounts represent the adjustments necessary to remove the assets and liabilities associated with JPMorgan Chase Tower.
f.
Reflects the proceeds received from the sale of JPMorgan Chase Tower less any cash on hand at JPMorgan Chase Tower as of March 31, 2016.
g.
Reflects the adjustments related to the disposition of JPMorgan Chase Tower and the gain on sale.
 
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2016
a.
Reflects the Company's historical condensed consolidated statement of operations for the three months ended March 31, 2016.
b.
Reflects the Company's disposition of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village. Amounts represent the adjustments necessary to remove the historical revenues and expenses of the Grocery-Anchored Portfolio, exclusive of Champions Village, including property operating expenses, property taxes, management fees, depreciation and amortization, general and administrative expenses, interest expense and interest income associated with the Grocery-Anchored Portfolio, exclusive of Champions Village. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.
c.
Reflects the Company's disposition of JPMorgan Chase Tower. Amounts represent the adjustments necessary to remove the historical revenues and expenses of JPMorgan Chase Tower, including property operating expenses, property taxes, management fees, depreciation and amortization, general and administrative expenses, interest expense and interest income associated with JPMorgan Chase Tower. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.

 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2015
a.
Reflects the Company's historical condensed consolidated statement of operations for the year ended December 31, 2015.
b.
Reflects the Company's disposition of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village. Amounts represent the adjustments necessary to remove the historical revenues and expenses of the Grocery-Anchored Portfolio, exclusive of Champions Village, including property operating expenses, property taxes, management fees, depreciation and amortization, general and administrative expenses, interest expense and interest income associated with the Grocery-Anchored Portfolio, exclusive of Champions Village. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.
c.
Reflects the Company's disposition of JPMorgan Chase Tower. Amounts represent the adjustments necessary to remove the historical revenues and expenses of JPMorgan Chase Tower, including property operating expenses, property taxes, management fees, depreciation and amortization, general and administrative expenses, interest expense, interest income and impairment losses associated with JPMorgan Chase Tower. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.
d.
Reflects the Company's disposition of 2555 Grand. Amounts represent the adjustments necessary to remove the historical revenues and expenses of 2555 Grand, including property operating expenses, property taxes, management fees, depreciation and amortization and interest income associated with 2555 Grand. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.

7

HINES REAL ESTATE INVESTMENT TRUST INC Reports