UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 3, 2017 (January 31, 2017)
American Finance Trust, Inc.
(Exact Name of Registrant as Specified in Charter)
| Maryland | 000-55197 | 90-0929989 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
|
405 Park Avenue, 14th Floor New York, New York 10022 |
|
(Address, including zip code, of Principal Executive Offices)
Registrant’s telephone number, including area code: (212) 415-6500 |
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:
x 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 January 31, 2017, American Finance Trust, Inc. (the “Company”) consummated the previously disclosed disposition of three properties leased to Merrill Lynch, Pierce, Fenner & Smith located in Hopewell, New Jersey (the “Merrill Lynch Properties”) pursuant to a purchase and sale agreement dated as of October 11, 2016, as amended on November 10, 2016, November 18, 2016, November 23, 2016 and December 1, 2016, for a contract purchase price of $148.0 million, exclusive of closing costs (the “Disposition”). The buyer, Capital Commercial Investments, Inc. (the “Buyer”), is an unaffiliated third party. The Company does not have a material relationship with the Buyer, and the Disposition was not an affiliated transaction.
| Item 9.01. | Financial Statements and Exhibits. |
| (b) | Pro Forma Financial Information. |
Set forth in this Item 9.01(b) are the following unaudited pro forma consolidated financial statements illustrating the estimated effect of the Disposition described in Item 2.01 above as if the Disposition had previously occurred on the dates specified below:
| · | The accompanying Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2016 has been prepared as if the Disposition had occurred as of that date. |
| · | The accompanying Unaudited Pro Forma Consolidated Statements of Operations and Comprehensive Loss for the nine months ended September 30, 2016 and the year ended December 31, 2015 have been prepared as if the Disposition occurred as of January 1, 2015. |
AMERICAN FINANCE TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2016
(In thousands)
| Consolidated American Finance Trust, Inc. (1) | Pro Forma Merrill Lynch Disposition Adjustments | Pro Forma American Finance Trust, Inc. | ||||||||||
| ASSETS | ||||||||||||
| Real estate investments, at cost: | ||||||||||||
| Land | $ | 345,221 | $ | (6,545 | ) (2) | $ | 338,676 | |||||
| Buildings, fixtures and improvements | 1,555,548 | (140,964 | ) (2) | 1,414,584 | ||||||||
| Acquired intangible lease assets | 319,268 | (17,927 | ) (2) | 301,341 | ||||||||
| Total real estate investments, at cost | 2,220,037 | (165,436 | ) | 2,054,601 | ||||||||
| Less: accumulated depreciation and amortization | (291,207 | ) | 27,280 | (2) | (263,927 | ) | ||||||
| Total real estate investments, net | 1,928,830 | (138,156 | ) | 1,790,674 | ||||||||
| Cash and cash equivalents | 143,386 | 140,472 | (3) | 283,858 | ||||||||
| Restricted cash | 7,890 | 5,000 | (3) | 12,890 | ||||||||
| Commercial mortgage loan, held for investment, net | 17,163 | — | 17,163 | |||||||||
| Prepaid expenses and other assets | 27,273 | (3,387 | ) (4) | 23,886 | ||||||||
| Deferred costs, net | 4,859 | — | 4,859 | |||||||||
| Total assets | $ | 2,129,401 | $ | 3,929 | $ | 2,133,330 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Mortgage notes payable, net of deferred financing costs | $ | 1,022,344 | $ | — | $ | 1,022,344 | ||||||
| Mortgage premiums, net | 11,671 | — | 11,671 | |||||||||
| Market lease liabilities, net | 15,460 | — | 15,460 | |||||||||
| Accounts payable and accrued expenses | 15,581 | — | 15,581 | |||||||||
| Deferred rent and other liabilities | 7,704 | — | 7,704 | |||||||||
| Distributions payable | 8,902 | — | 8,902 | |||||||||
| Total liabilities | 1,081,662 | — | 1,081,662 | |||||||||
| Preferred stock | — | — | — | |||||||||
| Common stock | 658 | — | 658 | |||||||||
| Additional paid-in capital | 1,449,647 | — | 1,449,647 | |||||||||
| Accumulated deficit | (402,566 | ) | 3,929 | (398,637 | ) | |||||||
| Total stockholders’ equity | 1,047,739 | 3,929 | 1,051,668 | |||||||||
| Total liabilities and stockholders’ equity | $ | 2,129,401 | $ | 3,929 | $ | 2,133,330 | ||||||
| (1) | As reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016. |
| (2) | Reflects the carrying value of the Merrill Lynch Properties as of September 30, 2016. |
| (3) | Reflects the cash proceeds, net of closing costs, from the disposition of the Merrill Lynch Properties. $5.0 million of the cash proceeds were placed in escrow at closing; thus, those proceeds are classified as restricted cash in the pro forma consolidated balance sheet as of September 30, 2016. |
| (4) | Reflects the write-off of the accrued straight-line rental income of the Merrill Lynch Properties as of September 30, 2016. |
AMERICAN FINANCE TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
NINE MONTHS ENDED SEPTEMBER 30, 2016
(In thousands, except share and per share data)
| Consolidated American Finance Trust, Inc. (1) | Pro Forma Merrill Lynch Disposition Adjustments (2) | Pro Forma American Finance Trust, Inc. | ||||||||||
| Revenues: | ||||||||||||
| Rental income | $ | 123,033 | $ | (9,535 | ) | $ | 113,498 | |||||
| Operating expense reimbursements | 8,979 | (7,042 | ) | 1,937 | ||||||||
| Interest income from debt investments | 809 | — | 809 | |||||||||
| Total revenues | 132,821 | (16,577 | ) | 116,244 | ||||||||
| Operating expenses: | ||||||||||||
| Asset management fees to related party | 13,500 | — | 13,500 | |||||||||
| Property operating | 10,131 | (7,041 | ) | 3,090 | ||||||||
| Impairment charges | 117 | — | 117 | |||||||||
| Acquisition and transaction related | 5,458 | — | 5,458 | |||||||||
| General and administrative | 8,840 | — | 8,840 | |||||||||
| Depreciation and amortization | 76,477 | (6,820 | ) | 69,657 | ||||||||
| Total operating expenses | 114,523 | (13,861 | ) | 100,662 | ||||||||
| Operating income | 18,298 | (2,716 | ) | 15,582 | ||||||||
| Other (expense) income: | ||||||||||||
| Interest expense | (37,533 | ) | — | (37,533 | ) | |||||||
| Gain on sale of real estate investments | 454 | — | 454 | |||||||||
| Other income | 121 | — | 121 | |||||||||
| Total other expense, net | (36,958 | ) | — | (36,958 | ) | |||||||
| Net loss | $ | (18,660 | ) | $ | (2,716 | ) | $ | (21,376 | ) | |||
| Basic and diluted net loss per share | $ | (0.29 | ) | $ | (0.33 | ) | ||||||
| Basic and diluted weighted average shares outstanding | 65,334,465 | 65,334,465 | ||||||||||
| (1) | As reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016. |
| (2) | Reflects the actual operating results for revenues and expenses for the nine months ended September 30, 2016 for the Merrill Lynch Properties. |
AMERICAN FINANCE TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
YEAR ENDED DECEMBER 31, 2015
(In thousands, except share and per share data)
| Consolidated American Finance Trust, Inc. (1) | Pro Forma Merrill Lynch Disposition Adjustments (2) | Pro Forma American Finance Trust, Inc. | ||||||||||
| Revenues: | ||||||||||||
| Rental income | $ | 160,865 | $ | (12,714 | ) | $ | 148,151 | |||||
| Operating expense reimbursements | 11,495 | (9,135 | ) | 2,360 | ||||||||
| Interest income from debt investments | 2,138 | — | 2,138 | |||||||||
| Total revenues | 174,498 | (21,849 | ) | 152,649 | ||||||||
| Operating expenses: | ||||||||||||
| Asset management fees to related party | 13,009 | — | 13,009 | |||||||||
| Property operating | 13,258 | (9,238 | ) | 4,020 | ||||||||
| Acquisition and transaction related | 2,220 | — | 2,220 | |||||||||
| General and administrative | 11,314 | (8 | ) | 11,306 | ||||||||
| Depreciation and amortization | 101,546 | (9,093 | ) | 92,453 | ||||||||
| Total operating expenses | 141,347 | (18,339 | ) | 123,008 | ||||||||
| Operating income | 33,151 | (3,510 | ) | 29,641 | ||||||||
| Other (expense) income: | ||||||||||||
| Interest expense | (40,891 | ) | — | (40,891 | ) | |||||||
| Loss on extinguishment of debt | (7,564 | ) | — | (7,564 | ) | |||||||
| Loss on sale of commercial mortgage-backed securities | (1,585 | ) | — | (1,585 | ) | |||||||
| Distribution income from other real estate securities | 363 | — | 363 | |||||||||
| Gain on sale of other real estate securities, net | 738 | — | 738 | |||||||||
| Loss on assets held for sale | (5,476 | ) | — | (5,476 | ) | |||||||
| Other income | 147 | — | 147 | |||||||||
| Total other expense, net | (54,268 | ) | — | (54,268 | ) | |||||||
| Net loss | $ | (21,117 | ) | $ | (3,510 | ) | $ | (24,627 | ) | |||
| Other comprehensive loss: | ||||||||||||
| Change in unrealized income on investment securities | (463 | ) | — | (463 | ) | |||||||
| Comprehensive loss | $ | (21,580 | ) | $ | (3,510 | ) | $ | (25,090 | ) | |||
| Basic and diluted net loss per share | $ | (0.32 | ) | $ | (0.37 | ) | ||||||
| Basic and diluted weighted average shares outstanding | 66,028,245 | 66,028,245 | ||||||||||
| (1) | As reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. |
| (2) | Reflects the actual operating results for revenues and expenses for the year ended December 31, 2015 for the Merrill Lynch Properties. The estimated $3.9 million gain on disposition of the Merrill Lynch Properties has not been reflected on the unaudited pro forma consolidated statement of operations and comprehensive loss for the year ended December 31, 2015, as it will not have a continuing impact. |
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 hereunto duly authorized.
| AMERICAN FINANCE TRUST, INC. | |||
| Date: February 3, 2017 | By: | /s/ Nicholas Radesca | |
Nicholas Radesca Chief Financial Officer, Secretary and Treasurer | |||