HINES REAL ESTATE INVESTMENT TRUST INC - FORM 8-K - August 25, 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 19, 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 19, 2016, Hines REIT 321 North Clark LLC, a wholly-owned subsidiary of Hines Real Estate Investment Trust, Inc. (“Hines REIT”) sold 321 North Clark to Diversified 321 North Clark LLC (the “Purchaser”). 321 North Clark is an office building located in Chicago, Illinois. The Purchaser is owned and controlled by an unaffiliated third party, which has a 95% interest in the Purchaser. Hines Interests Limited Partnership, the sponsor of Hines REIT, has a 5% interest in the Purchaser. Hines Interests Limited Partnership is owned and controlled by Jeffrey Hines, the Chairman of Hines REIT’s board of directors and his father, Gerald Hines.

The sales price for 321 North Clark was approximately $340.1 million, 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 $330.7 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 June 30, 2016
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2016 and the Years 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 25, 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 19, 2016, a wholly-owned subsidiary of Hines Real Estate Investment Trust, Inc. (“Hines REIT”) sold 321 North Clark, an office building located in Chicago, Illinois, to Diversified 321 North Clark LLC (the “Purchaser”). The sales price for 321 North Clark was approximately $340.1 million, 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 $330.7 million after transaction costs. The Purchaser is owned and controlled by an unaffiliated third party, which has a 95% interest in the Purchaser. Hines Interests Limited Partnership, the sponsor of Hines REIT, has a 5% interest in the Purchaser. Hines Interests Limited Partnership is owned and controlled by Jeffrey Hines, the Chairman of Hines REIT’s board of directors and his father, Gerald Hines.
 
The following unaudited pro forma condensed consolidated financial information gives effect to the disposition of 321 North Clark, 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 June 30, 2016
(In thousands) 
The following unaudited Pro Forma Condensed Consolidated Balance Sheet is presented assuming the disposition of 321 North Clark had occurred as of June 30, 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 six months ended June 30, 2016.  This unaudited Pro Forma Condensed Consolidated Balance Sheet is not necessarily indicative of what the actual financial position would have been had we completed this transaction on June 30, 2016, nor does it purport to represent our future financial position.
 
 
As of
June 30, 2016 (a)
 
Adjustments for
321 North Clark
 
 
 
Prior Dispositions Pro Forma Adjustments
 
 
Pro Forma
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Investment property, at cost:
 
 
 
 
 
 
 
 
 
 
 
Buildings and improvements, net
 
$
—

 
$
—

 
 
 
$
—

 
 
$
—

Land
 
—

 
—

 
 
 
—

 
 
—

Total investment property
 
—

 
—

 
 
 
—

 
 
—

 
 
 
 
 
 
 
 


 
 


Investments in unconsolidated entities
 
86,707

 
—

 
 
 
—

 
 
86,707

Cash and cash equivalents
 
52,182

 
329,018

 
(b)
 
358,446

(e)
 
739,646

Restricted cash
 
—

 
—

 
 
 
—

 
 
—

Distributions receivable
 
1,238

 
—

 
 
 
—

 
 
1,238

Tenant and other receivables, net
 
—

 
—

 
 
 
—

 
 
—

Intangible lease assets, net
 
—

 
—

 
 
 
—

 
 
—

Deferred leasing costs, net
 
—

 
—

 
 
 
—

 
 
—

Deferred financing costs, net
 
—

 
—

 
 
 
—

 
 
—

Other assets
 
—

 
—

 
 
 
—

 
 
—

Assets held for sale
 
1,869,686

 
(211,623
)
 
(c)
 
(396,886
)
(f)
 
1,261,177

TOTAL ASSETS
 
$
2,009,813

 
$
117,395

 
 
 
$
(38,440
)
 
 
$
2,088,768

 
 
 
 
 
 
 
 

 
 

LIABILITIES AND EQUITY
 
 
 
 
 
 
 

 
 

Liabilities:
 
 
 
 
 
 
 

 
 

Accounts payable and accrued expenses
 
$
—

 
$
—

 
 
 
$
—

 
 
$
—

Due to affiliates
 
5,667

 
(787
)
 
(c) 
 
6

(f)
 
4,886

Intangible lease liabilities, net
 
—

 
—

 
 
 
—

 
 
—

Other liabilities
 
—

 
—

 
 
 
—

 
 
—

Interest rate swap contracts
 
—

 
—

 
 
 
—

 
 
—

Participation interest liability
 
131,876

 
—

 
 
 
—

 
 
131,876

Distributions payable
 
14,994

 
—

 
 
 
—

 
 
14,994

Notes payable, net
 
—

 
—

 
 
 
—

 
 
—

Liabilities associated with assets held for sale
 
813,925

 
(152,890
)
 
(c)
 
(77,163
)
(f)
 
583,872

Total liabilities
 
966,462

 
(153,677
)
 
 
 
(77,157
)
 
 
735,628

 
 
 
 
 
 
 
 


 
 


Commitments and contingencies
 
—

 
—

 
 
 
—

 
 
—

 
 
 
 
 
 
 
 

 
 

Equity:
 
 
 
 
 
 
 

 
 

Preferred shares
 
—

 
—

 
 
 
—

 
 
—

Common shares
 
223

 
—

 
 
 
—

 
 
223

Additional paid-in capital
 
2,104,414

 
—

 
 
 
—

 
 
2,104,414

Accumulated distributions in excess of earnings
 
(1,060,217
)
 
271,072

 
(d)
 
38,717

(g)
 
(750,428
)
Accumulated other comprehensive income (loss)
 
(1,069
)
 
—

 
 
 
—

 
 
(1,069
)
Total stockholders’ equity
 
1,043,351

 
271,072

 
 
 
38,717

 
 
1,353,140

Noncontrolling interests
 
—

 
—

 
 
 
—

 
 
—

Total equity
 
1,043,351

 
271,072

 
 
 
38,717

 
 
1,353,140

TOTAL LIABILITIES AND EQUITY
 
$
2,009,813

 
$
117,395

 
 
 
$
(38,440
)
 
 
$
2,088,768

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 Six Months Ended June 30, 2016
(In thousands, except per share amounts)
 
The following unaudited Pro Forma Condensed Consolidated Statement of Operations is presented assuming the disposition of 321 North Clark 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 six months ended June 30, 2016.  This unaudited Pro Forma Condensed Consolidated Statement of Operations is not necessarily indicative of what the 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. 
 
 
Six Months Ended
 June 30, 2016 (a)
 
Adjustments for 321 North Clark (b)
 
Prior Dispositions Pro Forma Adjustments (c)
 
Pro Forma
Revenues:
 
 

 
 
 
 
 
 
Rental revenue
 
$
92,558

 
$
(14,164
)
 
$
(18,129
)
 
$
60,265

Other revenue
 
9,818

 
(491
)
 
(1,856
)
 
7,471

Total revenues 
 
102,376

 
(14,655
)
 
(19,985
)
 
67,736

Expenses:
 
 
 
 
 

 

Property operating expenses
 
27,619

 
(4,111
)
 
(5,727
)
 
17,781

Real property taxes
 
16,294

 
(3,958
)
 
(3,935
)
 
8,401

Property management fees
 
2,611

 
(485
)
 
(527
)
 
1,599

Depreciation and amortization
 
38,190

 
(3,715
)
 
(5,910
)
 
28,565

Asset management and acquisition fees
 
14,564

 
—

 
—

 
14,564

General and administrative
 
3,246

 
—

 
—

 
3,246

Transaction expenses
 
3,462

 
—

 
—

 
3,462

Impairment losses
 
23,463

 
—

 
(1,774
)
 
21,689

Total expenses
 
129,449

 
(12,269
)
 
(17,873
)
 
99,307

Operating income (loss)
 
(27,073
)
 
(2,386
)
 
(2,112
)
 
(31,571
)
Other income (expenses):
 
 
 
 
 


 


Gain (loss) on derivative instruments, net
 
8,398

 
—

 
—

 
8,398

Gain (loss) on settlement of debt
 
(598
)
 
—

 
—

 
(598
)
Equity in earnings (losses) of unconsolidated entities, net
 
7,043

 
—

 
—

 
7,043

Gain (loss) on sale of real estate investments
 
36,430

 
—

 
—

 
36,430

Interest expense
 
(16,822
)
 
4,046

 
1,038

 
(11,738
)
Interest income
 
63

 
(4
)
 
(7
)
 
52

Income (loss) from continuing operations before benefit (provision) for income taxes
 
7,441

 
1,656

 
(1,081
)
 
8,016

Benefit (provision) for income taxes
 
(75
)
 
—

 
63

 
(12
)
Income (loss) from continuing operations
 
$
7,366

 
$
1,656

 
$
(1,018
)
 
$
8,004

Income (loss) from continuing operations per common share
 
$
0.03

 
 
 
 
 
$
0.04

Weighted average number common shares outstanding
 
221,869

 
 
 
 
 
221,869


 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 321 North Clark 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 the 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
321 North Clark
(b)
 
Prior Dispositions Pro Forma Adjustments (c)
 
Pro Forma
Revenues:
 
 

 
 
 
 
 
 

Rental revenue
 
$
198,684

 
$
(27,090
)
 
$
(49,771
)
 
$
121,823

Other revenue
 
20,105

 
(950
)
 
(4,495
)
 
14,660

Total revenues 
 
218,789

 
(28,040
)
 
(54,266
)
 
136,483

Expenses:
 
 
 
 
 

 

Property operating expenses
 
59,996

 
(8,231
)
 
(14,878
)
 
36,887

Real property taxes
 
30,931

 
(7,416
)
 
(7,413
)
 
16,102

Property management fees
 
5,683

 
(946
)
 
(1,473
)
 
3,264

Depreciation and amortization
 
87,923

 
(7,415
)
 
(15,787
)
 
64,721

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

 
(24,008
)
 
(51,419
)
 
172,485

Operating income (loss)
 
(29,123
)
 
(4,032
)
 
(2,847
)
 
(36,002
)
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
)
 
8,114

 
4,630

 
(24,940
)
Interest income
 
46

 
(3
)
 
(9
)
 
34

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

 
4,079

 
(18,973
)
 
28,701

Benefit (provision) for income taxes
 
(225
)
 
—

 
191

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

 
$
4,079

 
$
(18,782
)
 
$
28,667

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

 
 
 
 
 
$
0.13

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 June 30, 2016
a.
Reflects the Company's historical condensed consolidated balance sheet as of June 30, 2016.
b.
Reflects the proceeds received from the sale of 321 North Clark less any cash on hand at 321 North Clark as of June 30, 2016.
c.
Reflects the Company's disposition of 321 North Clark. Amounts represent the adjustments necessary to remove the assets and liabilities associated with 321 North Clark.
d.
Reflects the adjustments related to the disposition of 321 North Clark and the gain on sale.
e.
Reflects the proceeds received from the sale of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, and JPMorgan Chase Tower less any cash on hand at the Grocery-Anchored Portfolio properties, exclusive of Champions Village, and JPMorgan Chase Tower as of June 30, 2016.
f.
Reflects the Company's dispositions of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, and JPMorgan Chase Tower. Amounts represent the adjustments necessary to remove the assets and liabilities associated with the Grocery-Anchored Portfolio, exclusive of Champions Village, and JPMorgan Chase Tower.
g.
Reflects the adjustments related to the dispositions of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, and JPMorgan Chase Tower and the gain on sale.
 
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2016
a.
Reflects the Company's historical condensed consolidated statement of operations for the six months ended June 30, 2016.
b.
Reflects the Company's disposition of 321 North Clark. Amounts represent the adjustments necessary to remove the historical revenues and expenses of 321 North Clark, including property operating expenses, property taxes, management fees, depreciation and amortization, interest expense and interest income associated with 321 North Clark. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.
c.
Reflects the Company's dispositions of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, and JPMorgan Chase Tower. Amounts represent the adjustments necessary to remove the historical revenues and expenses of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, and JPMorgan Chase Tower, including property operating expenses, property taxes, management fees, depreciation and amortization, impairment losses, interest expense and interest income associated with seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, and JPMorgan Chase Tower.

 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 321 North Clark. Amounts represent the adjustments necessary to remove the historical revenues and expenses of 321 North Clark, including property operating expenses, property taxes, management fees, depreciation and amortization, interest expense and interest income associated with 321 North Clark. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.
c.
Reflects the Company's dispositions of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, JPMorgan Chase Tower and 2555 Grand. Amounts represent the adjustments necessary to remove the historical revenues and expenses of seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, JPMorgan Chase Tower and 2555 Grand, including property operating expenses, property taxes, management fees, depreciation and amortization, general and administrative expenses, impairment losses, interest expense and interest income associated with seven of the Grocery-Anchored Portfolio properties, exclusive of Champions Village, JPMorgan Chase Tower and 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