Attached files
| file | filename |
|---|---|
| EX-23.2 - EXHIBIT 23.2 - Urban Edge Properties | a232-consentofindependentr.htm |
| EX-23.1 - EXHIBIT 23.1 - Urban Edge Properties | a231consentofindependentre.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
CURRENT REPORT |
PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
Date of Report (Date of earliest event reported):
May 24, 2017
URBAN EDGE PROPERTIES
URBAN EDGE PROPERTIES LP
(Exact name of Registrant as specified in its charter)
Maryland (Urban Edge Properties) | 001-36523 (Urban Edge Properties) | 47-6311266 | ||
Delaware (Urban Edge Properties LP) | 333-212951-01 (Urban Edge Properties LP) | 36-4791544 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||
888 Seventh Avenue | ||
New York, NY 10019 | ||
(Address of Principal Executive offices) (Zip Code) | ||
Registrant’s telephone number including area code: (212) 956-2556 |
Former name or former address, if changed since last report: N/A |
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 (see General Instructions A.2.):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Explanatory Note
On May 25, 2017, Urban Edge Properties (the "Company") and its operating partnership, Urban Edge Properties LP (the "Operating Partnership", and together with the Company, "Urban Edge") filed a Current Report on Form 8-K (the "Initial Report") with regard to the acquisition of a portfolio of seven retail assets. This amendment is being filed for the sole purpose of filing the financial statements and pro forma financial information required by Item 9.01 of Form 8-K, and should be read in conjunction with the Initial Report.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Assets Acquired:
Overview
Independent Auditors' Report For Urban Edge Properties
Independent Auditors' Report For Urban Edge Properties LP
Combined Statements of Revenues and Certain Operating Expenses for the Three Months Ended March 31, 2017 (Unaudited) and the Year Ended December 31, 2016
Notes to the Combined Statements of Revenues and Certain Operating Expenses
(b) Pro Forma Financial Information:
Urban Edge Properties Pro Forma Consolidated Balance Sheet (Unaudited) as of March 31, 2017
Urban Edge Properties Pro Forma Consolidated Statement of Operations (Unaudited) for the Three Months Ended March 31, 2017
Urban Edge Properties Pro Forma Consolidated Statement of Operations (Unaudited) for the Year Ended December 31, 2016
Urban Edge Properties LP Pro Forma Consolidated Balance Sheet (Unaudited) as of March 31, 2017
Urban Edge Properties LP Pro Forma Consolidated Statement of Operations (Unaudited) for the Three Months Ended March 31, 2017
Urban Edge Properties LP Pro Forma Consolidated Statement of Operations (Unaudited) for the Year Ended December 31, 2016
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
(d) Exhibits:
23.1 - Consent of Independent Auditors for Urban Edge Properties
23.2 - Consent of Independent Auditors for Urban Edge Properties LP
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
URBAN EDGE PROPERTIES | ||
(Registrant) | ||
Date: July 31, 2017 | By: | /s/ Mark Langer |
Mark Langer, Chief Financial Officer | ||
URBAN EDGE PROPERTIES LP | ||
(Registrant) | ||
By: | Urban Edge Properties, General Partner | |
Date: July 31, 2017 | By: | /s/ Mark Langer |
Mark Langer, Chief Financial Officer | ||
INDEX TO EXHIBITS
Exhibit Number | Document | |
23.1 | Consent of Independent Auditors for Urban Edge Properties | |
23.2 | Consent of Independent Auditors for Urban Edge Properties LP | |
2
Overview
As described in the Initial Report, on May 24 and 25, 2017, Urban Edge Properties (the "Company") and its operating partnership, Urban Edge Properties LP (the "Operating Partnership", and together with the Company, "Urban Edge"), completed the previously announced acquisition of a portfolio of seven retail assets from certain contributing parties (the "Contributors") for a total agreed contribution value of $325 million. At closing, Urban Edge funded the transaction through the issuance of approximately $122 million of Operating Partnership units, the assumption of approximately $33 million of existing debt, the issuance of approximately $126 million of non-recourse, secured debt and approximately $44 million of cash. The assets comprise 1.5 million square feet of gross leasable area and are predominantly in the New York City metropolitan area.
The Company refers to all seven retail assets acquired, collectively, as the "Acquired Portfolio" or the "Portfolio". This table sets forth pertinent details with respect to the properties in the Portfolio as of May 25, 2017:
Property | Location | GLA SF | Occupancy | Key Tenants | ||||
Yonkers Gateway Center* | Yonkers, NY | 436,770 | 88% | Burlington, Best Buy, DSW, PetSmart, Alamo Drafthouse Cinema | ||||
The Plaza at Woodbridge | Woodbridge, NJ | 413,013 | 81% | Raymour & Flanigan, Toys "R" Us, Best Buy | ||||
The Plaza at Cherry Hill | Cherry Hill, NJ | 412,969 | 74% | Raymour & Flanigan, Aldi, LA Fitness | ||||
Manchester Plaza | Manchester, MO | 130,934 | 89% | Academy Sports, Bob's Furniture | ||||
Millburn Gateway Center | Millburn, NJ | 102,725 | 97% | Trader Joe's, CVS, PetSmart | ||||
21 E Broad St/One Lincoln Plaza | Westfield, NJ | 21,908 | 100% | PNC Bank, Five Guys, Cake Boss | ||||
Total | 1,518,319 | 83% | ||||||
_____________________
* Represents the remaining fee and leasehold interests in Yonkers Gateway Center that were not acquired in the transaction that closed on January 4, 2017.
3
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Trustees
Urban Edge Properties
New York, New York
We have audited the accompanying Combined Statement of Revenues and Certain Operating Expenses of Acklinis Yonkers Realty, L.L.C., Acklinis Realty Holding, LLC, Acklinis Original Building, L.L.C., A & R Woodbridge Shopping Center, L.L.C., Ackrik Associates, L.P., A & R Millburn Associates, L.P., A & R Manchester, LLC, A & R Westfield Lincoln Plaza, LLC, and A & R Westfield Broad Street, LLC (collectively, the "Company"), which are all under common ownership and common management, for the year ended December 31, 2016, and the related notes (the “combined financial statement”).
Management's Responsibility for the Combined Financial Statement
Management is responsible for the preparation and fair presentation of the combined financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the combined financial statement that is free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on the combined financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statement. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the combined financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the combined financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the combined financial statement referred to above presents fairly, in all material respects, the combined revenues and certain operating expenses discussed in Note 1 to the combined financial statement of the Company for the year ended December 31, 2016, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
We draw attention to Note 1 to the combined financial statement, which describes that the accompanying combined financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion on Form 8-K/A of Urban Edge Properties and Urban Edge Properties LP) and is not intended to be a complete presentation of the Company’s revenues and expenses. Our opinion is not modified with respect to this matter.
/s/ DELOITTE & TOUCHE LLP
New York, New York
July 31, 2017
4
INDEPENDENT AUDITORS' REPORT
Partners of
Urban Edge Properties LP
New York, New York
We have audited the accompanying Combined Statement of Revenues and Certain Operating Expenses of Acklinis Yonkers Realty, L.L.C., Acklinis Realty Holding, LLC, Acklinis Original Building, L.L.C., A & R Woodbridge Shopping Center, L.L.C., Ackrik Associates, L.P., A & R Millburn Associates, L.P., A & R Manchester, LLC, A & R Westfield Lincoln Plaza, LLC, and A & R Westfield Broad Street, LLC (collectively, the "Company"), which are all under common ownership and common management, for the year ended December 31, 2016, and the related notes (the “combined financial statement”).
Management's Responsibility for the Combined Financial Statement
Management is responsible for the preparation and fair presentation of the combined financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the combined financial statement that is free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on the combined financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statement. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the combined financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the combined financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the combined financial statement referred to above presents fairly, in all material respects, the combined revenues and certain operating expenses discussed in Note 1 to the combined financial statement of the Company for the year ended December 31, 2016, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
We draw attention to Note 1 to the combined financial statement, which describes that the accompanying combined financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion on Form 8-K/A of Urban Edge Properties and Urban Edge Properties LP) and is not intended to be a complete presentation of the Company’s revenues and expenses. Our opinion is not modified with respect to this matter.
/s/ DELOITTE & TOUCHE LLP
New York, New York
July 31, 2017
5
ACQUIRED PORTFOLIO
COMBINED STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
(In thousands)
Three Months Ended | Year Ended | |||||||
March 31, 2017 (Unaudited) | December 31, 2016 | |||||||
REVENUE | ||||||||
Property rentals | $ | 5,526 | $ | 20,079 | ||||
Tenant expense reimbursements | 2,634 | 8,329 | ||||||
Other income | 4 | 102 | ||||||
Total revenue | 8,164 | 28,510 | ||||||
CERTAIN OPERATING EXPENSES | ||||||||
Real estate taxes | 1,608 | 5,389 | ||||||
Repairs and maintenance | 688 | 2,049 | ||||||
Property operating | 348 | 1,321 | ||||||
Property insurance | 276 | 507 | ||||||
Utilities | 248 | 1,465 | ||||||
Salaries and related expenses | 119 | 752 | ||||||
Total certain operating expenses | 3,287 | 11,483 | ||||||
Revenue in excess of certain operating expenses | $ | 4,877 | $ | 17,027 | ||||
See notes to combined statements of revenues and certain operating expenses.
ACQUIRED PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
1. | BASIS OF PRESENTATION |
On May 24 and 25, 2017, Urban Edge Properties ("UE", "Urban Edge" or the "Company") acquired a portfolio of seven retail assets (the "Acquired Portfolio" or the "Portfolio") comprised of 1.5 million square feet of gross leasable area and located predominantly in the New York City metropolitan area.
The accompanying combined financial statements have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”) for inclusion on Form 8-K/A for the acquisition of real estate properties. The combined financial statements are not representative of the actual operations for the periods presented as revenues and certain operating expenses, which may not be directly attributable to the revenue and expenses expected to be incurred through future operations of the Acquired Portfolio, have been excluded. Such items include general and administrative expenses, depreciation and amortization expenses, interest expense, and interest income.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue and certain operating expenses during the reporting period. Actual results could differ from those estimates.
Unaudited Interim Statement — The combined statement of revenues and certain operating expenses for the three months ended March 31, 2017, is unaudited. In the opinion of management, all normal recurring adjustments necessary for a fair representation of the combined statement of revenues and certain operating expenses for the interim period have been made.
Revenue Recognition — The Company has the following revenue sources and revenue recognition policies with respect to the Acquired Portfolio:
• | Base Rent - the Acquired Portfolio recognizes income arising from minimum lease payments from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases. |
6
• | Expense Reimbursements - the Acquired Portfolio has revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the expenses are incurred. |
Operating Expenses — Represents the direct expenses of operating the properties and includes repairs and maintenance, utilities, property insurance, management fees and other property expenses that, with the exception of management fees, are expected to continue in the ongoing operations of the Portfolio. Expenditures for repairs and maintenance are expensed as incurred.
3. LEASES
There are various operating lease agreements in place with tenants of the Acquired Portfolio. The leases provide for the payment of fixed base rents payable monthly in advance as well as reimbursements of real estate taxes, insurance and maintenance costs.
As of March 31, 2017, the future base rental revenue under these non-cancelable operating leases is as follows:
(Amounts in thousands) | ||||
Year Ending December 31, | ||||
2017 (Nine months ending December 31, 2017) | $ | 15,840 | ||
2018 | 19,414 | |||
2019 | 16,167 | |||
2020 | 14,355 | |||
2021 | 11,803 | |||
Thereafter | 45,558 | |||
4. TENANT CONCENTRATION
For the three months ended March 31, 2017, and the year ended December 31, 2016, Best Buy accounted for approximately $2.5 million or 11% (unaudited) of the Acquired Portfolio's annualized base rent. If Best Buy was to default on its leases, the future revenue of the Portfolio may be materially and adversely impacted.
5. RELATED PARTY TRANSACTIONS
Nine affiliated property ownership entities owned the properties that comprise the Acquired Portfolio. The affiliated property ownership entities paid an affiliate of the General Partner property management fees based on agreements under which an affiliate of the General Partner provided management services to the Acquired Portfolio properties. Management fees are calculated as 4% of gross income at Yonkers Gateway Center and 5% of gross income for all other of the Acquired Portfolio properties.
6. COMMITMENTS AND CONTINGENCIES
The properties in the Acquired Portfolio are subject to legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the ultimate settlement of these actions will not have a material adverse affect on the Portfolio's results of operations.
7. SUBSEQUENT EVENTS
Pursuant to the Subsequent Events Topic of the FASB ASC, the Company has evaluated subsequent events and transactions through July 31, 2017, the date the combined financial statements were available to be issued, for potential recognition or disclosure in the combined financial statements. Based on this evaluation, the Company has determined there are no subsequent events required to be disclosed.
7
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On May 24 and 25, 2017, Urban Edge Properties (the "Company") and its operating partnership, Urban Edge Properties LP (the "Operating Partnership", and together with the Company, "Urban Edge"), acquired a portfolio of seven retail assets (the "Acquired Portfolio" or the "Portfolio") comprising 1.5 million square feet of gross leasable area, predominantly in the New York City metropolitan area. The Portfolio was purchased for a total purchase price of $325 million. At closing, Urban Edge funded the transaction through the issuance of approximately $122 million of Operating Partnership units, the assumption of approximately $33 million of existing debt, the issuance of approximately $126 million of non-recourse, secured debt and approximately $44 million of cash.
The unaudited pro forma consolidated balance sheet as of March 31, 2017 and unaudited pro forma consolidated statements of operations for the three months ended March 31, 2017 and the year ended December 31, 2016, are based upon the historical financial statements of the Company and the historical financial statements of the Acquired Portfolio.
The unaudited pro forma consolidated balance sheet as of March 31, 2017 has been prepared as if the acquisition had occurred on that date. The unaudited pro forma consolidated statements of operations for the three months ended March 31, 2017 and the year ended December 31, 2016, have been prepared as if the acquisition had occurred on January 1, 2016, the beginning of the most recent full fiscal year. The unaudited pro forma consolidated financial information has also been prepared including certain other pro forma adjustments, as described in the accompanying notes to the pro forma financial information.
The following pro forma financial information and accompanying notes should be read in conjunction with: (i) the Company's unaudited historical consolidated financial statements set forth in its Quarterly Report on Form 10-Q as of and for the three months ended March 31, 2017, as filed with the Securities and Exchange Commission ("SEC") on May 3, 2017; (ii) the Company's audited historical consolidated financial statements set forth in its Annual Report on Form 10-K as of and for the year ended December 31, 2016, as filed with the SEC on February 16, 2017; and (iii) the Acquired Portfolio's combined statements of revenue and certain operating expenses set forth in this Current Report on Form 8-K/A.
The pro forma adjustments reflected in the unaudited pro forma consolidated financial information are based upon currently available information and certain assumptions and estimates; therefore, the actual effects of these transactions will differ from the pro forma adjustments. However, the Company's management considers the pro forma adjustments to be factually supportable and to appropriately represent the expected impact of items that are directly attributable to the acquisition by the Company. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made.
The unaudited pro forma consolidated statements of operations are not necessarily indicative of what the Company’s actual results of operations would have been had it completed the above acquisition on January 1, 2016, nor does it purport to represent its future operations.
8
URBAN EDGE PROPERTIES
PRO FORMA CONSOLIDATED BALANCE SHEET
As of March 31, 2017
(Unaudited)
(In thousands, except share and per share amounts)
Urban Edge Historical (a) | Acquired Portfolio (b) | Other Pro Forma Adjustments | Urban Edge Pro Forma | ||||||||||||
ASSETS | |||||||||||||||
Real estate, at cost: | |||||||||||||||
Land | $ | 436,088 | $ | 84,711 | (c) | $ | — | $ | 520,799 | ||||||
Buildings and improvements | 1,719,079 | 262,766 | (c) | — | 1,981,845 | ||||||||||
Construction in progress | 108,401 | — | — | 108,401 | |||||||||||
Furniture, fixtures and equipment | 5,077 | — | — | 5,077 | |||||||||||
Total | 2,268,645 | 347,477 | — | 2,616,122 | |||||||||||
Accumulated depreciation and amortization | (553,649 | ) | — | — | (553,649 | ) | |||||||||
Real estate, net | 1,714,996 | 347,477 | — | 2,062,473 | |||||||||||
Cash and cash equivalents | 110,974 | (44,049 | ) | (d) | — | 66,925 | |||||||||
Restricted cash | 11,812 | — | — | 11,812 | |||||||||||
Tenant and other receivables, net of allowance for doubtful accounts | 11,841 | — | — | 11,841 | |||||||||||
Receivable arising from the straight-lining of rents, net of allowance for doubtful accounts | 86,176 | — | — | 86,176 | |||||||||||
Identified intangible assets, net of accumulated amortization | 73,879 | 66,853 | (c) | (43,183 | ) | (h) | 97,549 | ||||||||
Deferred leasing costs, net of accumulated amortization | 19,391 | — | — | 19,391 | |||||||||||
Deferred financing costs, net of accumulated amortization | 4,011 | — | — | 4,011 | |||||||||||
Prepaid expenses and other assets | 17,271 | (937 | ) | (e) | — | 16,334 | |||||||||
Total assets | $ | 2,050,351 | $ | 369,344 | $ | (43,183 | ) | $ | 2,376,512 | ||||||
LIABILITIES AND EQUITY | |||||||||||||||
Liabilities: | |||||||||||||||
Mortgages payable, net | $ | 1,256,955 | $ | 920 | (c) | $ | — | $ | 1,416,542 | ||||||
158,667 | (f) | ||||||||||||||
Identified intangible liabilities, net of accumulated amortization | 145,748 | 78,185 | (c) | (38,505 | ) | (h) | 185,428 | ||||||||
Accounts payable and accrued expenses | 54,286 | 9,288 | (e) | — | 63,574 | ||||||||||
Other liabilities | 16,154 | — | — | 16,154 | |||||||||||
Total liabilities | 1,473,143 | 247,060 | (38,505 | ) | 1,681,698 | ||||||||||
Commitments and contingencies | |||||||||||||||
Shareholders’ equity: | |||||||||||||||
Common shares: $0.01 par value; 500,000,000 shares authorized and 99,826,975 shares issued and outstanding | 998 | — | — | 998 | |||||||||||
Additional paid-in capital | 489,190 | — | 489,190 | ||||||||||||
Accumulated earnings (deficit) | (419 | ) | — | (4,678 | ) | (h) | (5,097 | ) | |||||||
Noncontrolling interests: | |||||||||||||||
Redeemable noncontrolling interests | 87,068 | 122,284 | (g) | — | 209,352 | ||||||||||
Noncontrolling interest in consolidated subsidiaries | 371 | — | — | 371 | |||||||||||
Total equity | 577,208 | 122,284 | (4,678 | ) | 694,814 | ||||||||||
Total liabilities and equity | $ | 2,050,351 | $ | 369,344 | $ | (43,183 | ) | $ | 2,376,512 | ||||||
See accompanying notes to pro forma consolidated financial statements.
9
URBAN EDGE PROPERTIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31, 2017
(Unaudited)
(In thousands, except share and per share amounts)
Urban Edge Historical (a) | Acquired Portfolio Historical (b) | Other Pro Forma Adjustments | Urban Edge Pro Forma | ||||||||||||
REVENUE | |||||||||||||||
Property rentals | $ | 62,498 | $ | 5,526 | $ | 1,036 | (d) | $ | 68,387 | ||||||
(321 | ) | (e) | |||||||||||||
(352 | ) | (c) | |||||||||||||
Tenant expense reimbursements | 23,771 | 2,634 | — | 26,405 | |||||||||||
Income from acquired leasehold interest | 39,215 | — | — | 39,215 | |||||||||||
Management and development fees | 479 | — | — | 479 | |||||||||||
Other income | 101 | 4 | — | 105 | |||||||||||
Total revenue | 126,064 | 8,164 | 363 | 134,591 | |||||||||||
EXPENSES | |||||||||||||||
Depreciation and amortization | 15,828 | — | 3,135 | (f) | 25,704 | ||||||||||
2,217 | (g) | ||||||||||||||
4,524 | (l) | ||||||||||||||
Real estate taxes | 13,392 | 1,608 | — | 15,000 | |||||||||||
Property operating | 13,368 | 1,679 | (269 | ) | (h) | 14,778 | |||||||||
General and administrative | 8,081 | — | — | 8,081 | |||||||||||
Real estate impairment loss | 3,164 | — | — | 3,164 | |||||||||||
Ground rent | 2,670 | — | (198 | ) | (c) | 2,472 | |||||||||
Transaction costs | 51 | — | — | 51 | |||||||||||
Provision for doubtful accounts | 193 | — | — | 193 | |||||||||||
Total expenses | 56,747 | 3,287 | 9,409 | 69,443 | |||||||||||
Operating income | 69,317 | 4,877 | (9,046 | ) | 65,148 | ||||||||||
Interest income | 127 | — | — | 127 | |||||||||||
Interest and debt expense | (13,115 | ) | — | (1,979 | ) | (i) | (15,127 | ) | |||||||
(33 | ) | (j) | |||||||||||||
Loss on extinguishment of debt | (1,274 | ) | — | — | (1,274 | ) | |||||||||
Income before income taxes | 55,055 | 4,877 | (11,058 | ) | 48,874 | ||||||||||
Income tax expense | (320 | ) | — | — | (320 | ) | |||||||||
Net income | 54,735 | 4,877 | (11,058 | ) | 48,554 | ||||||||||
Less (net income) loss attributable to noncontrolling interests in: | |||||||||||||||
Operating partnership | (4,138 | ) | — | (1,338 | ) | (k) | (5,476 | ) | |||||||
Consolidated subsidiaries | (11 | ) | — | — | (11 | ) | |||||||||
Net income attributable to common shareholders | $ | 50,586 | $ | 4,877 | $ | (12,396 | ) | $ | 43,067 | ||||||
Earnings per common share - Basic: | $ | 0.51 | $ | 0.43 | |||||||||||
Earnings per common share - Diluted: | $ | 0.50 | $ | 0.43 | |||||||||||
Weighted average shares outstanding - Basic | 99,639 | 99,639 | |||||||||||||
Weighted average shares outstanding - Diluted | 100,093 | 100,093 | |||||||||||||
See accompanying notes to pro forma consolidated financial statements.
10
URBAN EDGE PROPERTIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 2016
(Unaudited)
(In thousands, except share and per share amounts)
Urban Edge Historical (a) | Acquired Portfolio Historical (b) | Other Pro Forma Adjustments | Urban Edge Pro Forma | |||||||||||||
REVENUE | ||||||||||||||||
Property rentals | $ | 236,798 | $ | 20,079 | $ | 4,145 | (d) | $ | 259,738 | |||||||
(1,284 | ) | (e) | ||||||||||||||
Tenant expense reimbursements | 84,921 | 8,329 | — | 93,250 | ||||||||||||
Management and development fees | 1,759 | — | — | 1,759 | ||||||||||||
Other income | 2,498 | 102 | — | 2,600 | ||||||||||||
Total revenue | 325,976 | 28,510 | 2,861 | 357,347 | ||||||||||||
EXPENSES | ||||||||||||||||
Depreciation and amortization | 56,145 | — | 12,538 | (f) | 77,550 | |||||||||||
8,867 | (g) | |||||||||||||||
Real estate taxes | 51,429 | 5,389 | — | 56,818 | ||||||||||||
Property operating | 45,280 | 6,094 | (1,345 | ) | (h) | 50,029 | ||||||||||
General and administrative | 27,438 | — | — | 27,438 | ||||||||||||
Ground rent | 10,047 | — | — | 10,047 | ||||||||||||
Transaction costs | 1,405 | — | — | 1,405 | ||||||||||||
Provision for doubtful accounts | 1,214 | — | — | 1,214 | ||||||||||||
Total expenses | 192,958 | 11,483 | 20,060 | 224,501 | ||||||||||||
Operating income | 133,018 | 17,027 | (17,199 | ) | 132,846 | |||||||||||
Gain on sale of real estate | 15,618 | — | — | 15,618 | ||||||||||||
Interest income | 679 | — | — | 679 | ||||||||||||
Interest and debt expense | (51,881 | ) | — | (4,869 | ) | (i) | (56,884 | ) | ||||||||
(134 | ) | (j) | ||||||||||||||
Income before income taxes | 97,434 | 17,027 | (22,202 | ) | 92,259 | |||||||||||
Income tax expense | (804 | ) | — | — | (804 | ) | ||||||||||
Net income | 96,630 | 17,027 | (22,202 | ) | 91,455 | |||||||||||
Less net income attributable to noncontrolling interests in: | ||||||||||||||||
Operating partnership | (5,812 | ) | — | (269 | ) | (k) | (6,081 | ) | ||||||||
Consolidated subsidiaries | (3 | ) | — | — | (3 | ) | ||||||||||
Net income attributable to common shareholders | $ | 90,815 | $ | 17,027 | $ | (22,471 | ) | $ | 85,371 | |||||||
Earnings per common share - Basic: | $ | 0.91 | $ | 0.86 | ||||||||||||
Earnings per common share - Diluted: | $ | 0.91 | $ | 0.83 | ||||||||||||
Weighted average shares outstanding - Basic | 99,364 | 99,364 | ||||||||||||||
Weighted average shares outstanding - Diluted | 99,794 | 110,352 | ||||||||||||||
See accompanying notes to pro forma consolidated financial statements.
11
URBAN EDGE PROPERTIES LP
PRO FORMA CONSOLIDATED BALANCE SHEET
As of March 31, 2017
(Unaudited)
(In thousands, except share and per share amounts)
Urban Edge Historical (a) | Acquired Portfolio (b) | Other Pro Forma Adjustments | Urban Edge Pro Forma | ||||||||||||
ASSETS | |||||||||||||||
Real estate, at cost: | |||||||||||||||
Land | $ | 436,088 | $ | 84,711 | (c) | $ | — | $ | 520,799 | ||||||
Buildings and improvements | 1,719,079 | 262,766 | (c) | — | 1,981,845 | ||||||||||
Construction in progress | 108,401 | — | — | 108,401 | |||||||||||
Furniture, fixtures and equipment | 5,077 | — | — | 5,077 | |||||||||||
Total | 2,268,645 | 347,477 | — | 2,616,122 | |||||||||||
Accumulated depreciation and amortization | (553,649 | ) | — | — | (553,649 | ) | |||||||||
Real estate, net | 1,714,996 | 347,477 | — | 2,062,473 | |||||||||||
Cash and cash equivalents | 110,974 | (44,049 | ) | (d) | — | 66,925 | |||||||||
Restricted cash | 11,812 | — | — | 11,812 | |||||||||||
Tenant and other receivables, net of allowance for doubtful accounts | 11,841 | — | — | 11,841 | |||||||||||
Receivable arising from the straight-lining of rents, net of allowance for doubtful accounts | 86,176 | — | — | 86,176 | |||||||||||
Identified intangible assets, net of accumulated amortization | 73,879 | 66,853 | (c) | (43,183 | ) | (h) | 97,549 | ||||||||
Deferred leasing costs, net of accumulated amortization | 19,391 | — | — | 19,391 | |||||||||||
Deferred financing costs, net of accumulated amortization | 4,011 | — | — | 4,011 | |||||||||||
Prepaid expenses and other assets | 17,271 | (937 | ) | (e) | — | 16,334 | |||||||||
Total assets | $ | 2,050,351 | $ | 369,344 | $ | (43,183 | ) | $ | 2,376,512 | ||||||
LIABILITIES AND EQUITY | |||||||||||||||
Liabilities: | |||||||||||||||
Mortgages payable, net | $ | 1,256,955 | $ | 920 | (c) | $ | — | $ | 1,416,542 | ||||||
158,667 | (f) | ||||||||||||||
Identified intangible liabilities, net of accumulated amortization | 145,748 | 78,185 | (c) | (38,505 | ) | (h) | 185,428 | ||||||||
Accounts payable and accrued expenses | 54,286 | 9,288 | (e) | — | 63,574 | ||||||||||
Other liabilities | 16,154 | — | — | 16,154 | |||||||||||
Total liabilities | 1,473,143 | 247,060 | (38,505 | ) | 1,681,698 | ||||||||||
Commitments and contingencies | |||||||||||||||
Equity: | |||||||||||||||
Partners' capital | |||||||||||||||
General partner: 99,826,975 units outstanding | 490,188 | — | — | 490,188 | |||||||||||
Limited partners: 8,284,166 units outstanding | 86,330 | 122,284 | (g) | — | 208,614 | ||||||||||
Accumulated earnings (deficit) | 319 | — | (4,678 | ) | (h) | (4,359 | ) | ||||||||
Total partners' capital | 576,837 | 122,284 | (4,678 | ) | 694,443 | ||||||||||
Noncontrolling interest in consolidated subsidiaries | 371 | — | — | 371 | |||||||||||
Total equity | 577,208 | 122,284 | (4,678 | ) | 694,814 | ||||||||||
Total liabilities and equity | $ | 2,050,351 | $ | 369,344 | $ | (43,183 | ) | $ | 2,376,512 | ||||||
See accompanying notes to pro forma consolidated financial statements.
12
URBAN EDGE PROPERTIES LP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31, 2017
(Unaudited)
(In thousands, except share and per share amounts)
Urban Edge Historical (a) | Acquired Portfolio Historical (b) | Other Pro Forma Adjustments | Urban Edge Pro Forma | ||||||||||||
REVENUE | |||||||||||||||
Property rentals | $ | 62,498 | $ | 5,526 | $ | 1,036 | (d) | $ | 68,387 | ||||||
(321 | ) | (e) | |||||||||||||
(352 | ) | (c) | |||||||||||||
Tenant expense reimbursements | 23,771 | 2,634 | — | 26,405 | |||||||||||
Income from acquired leasehold interest | 39,215 | — | — | 39,215 | |||||||||||
Management and development fees | 479 | — | — | 479 | |||||||||||
Other income | 101 | 4 | — | 105 | |||||||||||
Total revenue | 126,064 | 8,164 | 363 | 134,591 | |||||||||||
EXPENSES | |||||||||||||||
Depreciation and amortization | 15,828 | — | 3,135 | (f) | 25,704 | ||||||||||
2,217 | (g) | ||||||||||||||
4,524 | (l) | ||||||||||||||
Real estate taxes | 13,392 | 1,608 | — | 15,000 | |||||||||||
Property operating | 13,368 | 1,679 | (269 | ) | (h) | 14,778 | |||||||||
General and administrative | 8,081 | — | — | 8,081 | |||||||||||
Real estate impairment loss | 3,164 | — | — | 3,164 | |||||||||||
Ground rent | 2,670 | — | (198 | ) | (c) | 2,472 | |||||||||
Transaction costs | 51 | — | — | 51 | |||||||||||
Provision for doubtful accounts | 193 | — | — | 193 | |||||||||||
Total expenses | 56,747 | 3,287 | 9,409 | 69,443 | |||||||||||
Operating income | 69,317 | 4,877 | (9,046 | ) | 65,148 | ||||||||||
Interest income | 127 | — | — | 127 | |||||||||||
Interest and debt expense | (13,115 | ) | — | (1,979 | ) | (i) | (15,127 | ) | |||||||
(33 | ) | (j) | |||||||||||||
Loss on extinguishment of debt | (1,274 | ) | — | — | (1,274 | ) | |||||||||
Income before income taxes | 55,055 | 4,877 | (11,058 | ) | 48,874 | ||||||||||
Income tax expense | (320 | ) | — | — | (320 | ) | |||||||||
Net income | 54,735 | 4,877 | (11,058 | ) | 48,554 | ||||||||||
Less (net income) loss attributable to noncontrolling interests in: | |||||||||||||||
Consolidated subsidiaries | (11 | ) | — | — | (11 | ) | |||||||||
Net income attributable to common unitholders | $ | 54,724 | $ | 4,877 | $ | (11,058 | ) | $ | 48,543 | ||||||
Earnings per common unit - Basic: | $ | 0.51 | $ | 0.43 | |||||||||||
Earnings per common unit - Diluted: | $ | 0.50 | $ | 0.43 | |||||||||||
Weighted average units outstanding - Basic | 107,483 | 112,008 | |||||||||||||
Weighted average units outstanding - Diluted | 108,254 | 112,462 | |||||||||||||
See accompanying notes to pro forma consolidated financial statements.
13
URBAN EDGE PROPERTIES LP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 2016
(Unaudited)
(In thousands, except share and per share amounts)
Urban Edge Historical (a) | Acquired Portfolio Historical (b) | Other Pro Forma Adjustments | Urban Edge Pro Forma | |||||||||||||
REVENUE | ||||||||||||||||
Property rentals | $ | 236,798 | $ | 20,079 | $ | 4,145 | (d) | $ | 259,738 | |||||||
(1,284 | ) | (e) | ||||||||||||||
Tenant expense reimbursements | 84,921 | 8,329 | — | 93,250 | ||||||||||||
Management and development fees | 1,759 | — | — | 1,759 | ||||||||||||
Other income | 2,498 | 102 | — | 2,600 | ||||||||||||
Total revenue | 325,976 | 28,510 | 2,861 | 357,347 | ||||||||||||
EXPENSES | ||||||||||||||||
Depreciation and amortization | 56,145 | — | 12,538 | (f) | 77,550 | |||||||||||
8,867 | (g) | |||||||||||||||
Real estate taxes | 51,429 | 5,389 | — | 56,818 | ||||||||||||
Property operating | 45,280 | 6,094 | (1,345 | ) | (h) | 50,029 | ||||||||||
General and administrative | 27,438 | — | — | 27,438 | ||||||||||||
Ground rent | 10,047 | — | — | 10,047 | ||||||||||||
Transaction costs | 1,405 | — | — | 1,405 | ||||||||||||
Provision for doubtful accounts | 1,214 | — | — | 1,214 | ||||||||||||
Total expenses | 192,958 | 11,483 | 20,060 | 224,501 | ||||||||||||
Operating income | 133,018 | 17,027 | (17,199 | ) | 132,846 | |||||||||||
Gain on sale of real estate | 15,618 | — | — | 15,618 | ||||||||||||
Interest income | 679 | — | — | 679 | ||||||||||||
Interest and debt expense | (51,881 | ) | — | (4,869 | ) | (i) | (56,884 | ) | ||||||||
(134 | ) | (j) | ||||||||||||||
Income before income taxes | 97,434 | 17,027 | (22,202 | ) | 92,259 | |||||||||||
Income tax expense | (804 | ) | — | — | (804 | ) | ||||||||||
Net income | 96,630 | 17,027 | (22,202 | ) | 91,455 | |||||||||||
Less net income attributable to noncontrolling interests in: | ||||||||||||||||
Consolidated subsidiaries | (3 | ) | — | — | (3 | ) | ||||||||||
Net income attributable to common unitholders | $ | 96,627 | $ | 17,027 | $ | (22,202 | ) | $ | 91,452 | |||||||
Earnings per common unit - Basic: | $ | 0.91 | $ | 0.83 | ||||||||||||
Earnings per common unit - Diluted: | $ | 0.91 | $ | 0.83 | ||||||||||||
Weighted average units outstanding - Basic | 105,455 | 109,981 | ||||||||||||||
Weighted average units outstanding - Diluted | 106,099 | 110,352 | ||||||||||||||
See accompanying notes to pro forma consolidated financial statements.
14
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
PRO FORMA ADJUSTMENTS
Consolidated balance sheet
(a) Reflects the historical consolidated balance sheet of Urban Edge as of March 31, 2017 as presented in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.
(b) Reflects the impact of the acquisition of the Portfolio as if it had occurred on March 31, 2017.
(c) Reflects the assets and liabilities acquired at fair value. The acquired assets and liabilities were allocated based on the Portfolio's aggregate purchase price of $325 million, inclusive of transaction costs of $10.2 million. The following table summarizes the purchase price allocation as of the Portfolio's acquisition date.
Amount | |||
(in thousands) | |||
Land | $ | 84,711 | |
Buildings and improvements | 262,766 | ||
Identified intangible assets | 66,853 | ||
Identified intangible liabilities | (78,185 | ) | |
Debt premium | (920 | ) | |
$ | 335,225 | ||
(d) Reflects the cash paid by the Company as partial consideration for the acquisition of the Portfolio.
(e) Reflects the $10.2 million of transaction costs incurred in connection with the Portfolio acquisition, $0.9 million of which were accrued prior to March 31, 2017. In January 2017, the FASB issued an update ("ASU 2017-01") Clarifying the Definition of a Business, which changes the definition of a business to exclude acquisitions where substantially all of the fair value of the assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets. While there are various differences between the accounting for an asset acquisition and a business combination, the largest impact is that transaction costs are capitalized for asset acquisitions rather than expensed. Accordingly, the Company has accounted for the Portfolio acquisition as an asset acquisition in accordance with ASU 2017-01, and transaction costs incurred, including closing costs, were capitalized as part of the aggregate purchase price.
(f) Reflects the $33 million of existing debt assumed in connection with the acquisition of Yonkers Gateway Center and the issuance of $126 million of non-recourse, secured debt. In conjunction with the issuance of debt, the Company extinguished $78.6 million of the existing historical debt of the Portfolio, with the exception of the $33 million mortgage secured by Yonkers Gateway Center.
(g) Reflects the issuance of 4,525,699 Operating Partnership units valued at $27.02 per unit, as partial consideration for the acquisition of the Portfolio.
(h) Reflects the settlement of the existing fee and leasehold interests in the Company's ground lease at Yonkers Gateway Center through the acquisition of the remaining fee and leaseholds interests in the property as a part of the Portfolio acquisition. As a result, the Company wrote-off the existing intangible assets and liabilities. Refer to adjustment (c) and (l) to the pro forma consolidated statements of income.
Consolidated statement of operations
(a) Reflects the historical consolidated statements of operations of Urban Edge for the three months ended March 31, 2017 and the year ended December 31, 2016, as presented in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 and its Annual Report on Form 10-K for the year ended December 31, 2016, respectively.
(b) Reflects the historical operations of the Acquired Portfolio as presented in the accompanying combined statements of revenues and certain operating expenses.
15
(c) Reflects the amortization of the existing above and below market lease intangibles incurred prior to the acquisition. Refer to adjustment (h) to the pro forma consolidated balance sheet.
(d) Reflects the amortization of below market in-place leases. The below-market rents are accreted to revenue over the remaining terms of the respective leases, which generally range from 5 to 25 years.
(e) Reflects the amortization of above market in-place leases. The above-market rents are amortized to revenue over the remaining terms of the respective leases, which generally range from 5 to 25 years.
(f) Reflects the depreciation expense of the acquired assets and liabilities in the Portfolio based on the fair values disclosed above in adjustment (c) to the pro forma consolidated balance sheet. Depreciation is recognized on a straight-line basis over estimated useful lives which range from 3 to 40 years.
(g) Reflects the amortization expense of the acquired in-place lease intangible assets based on the fair values disclosed above in adjustment (c) to the pro forma consolidated balance sheet. Tenant related intangibles and improvements are amortized on a straight-line basis over the related lease term, including any bargain renewal options.
(h) Reflects the pro forma effect of the termination of the management agreement in place prior to the acquisition and execution of new management agreement with the Company. In addition, this adjustment includes amounts required to eliminate the salaries and supervision expenses associated with the historical operations of the Portfolio.
(i) Reflects the interest expense incurred on debt issued and assumed in connection with the transaction, as described above in adjustment (f) to the consolidated balance sheet. In conjunction with the issuance of new debt, the Company extinguished $78.6 million of the existing historical debt of the Acquired Portfolio. Prior to acquisition, the Portfolio had historical interest expense of $5.1 million for the twelve months ended December 31, 2016 and $0.8 million for three months ended March 31, 2017 in connection with this extinguished debt.
The new debt issued and secured by the properties of One Lincoln Center, the Plaza at Woodbridge, and the Plaza at Cherry Hill, each bear interest at the one month LIBOR rate plus 160 basis points. The current underlying one month LIBOR rate, as used in these pro forma adjustments, was 1.16%. An increase (decrease) of 0.125% in LIBOR would increase (decrease) the annual pro forma interest expense by $0.1 million. The remainder of the Portfolio's interest expense is represented by fixed rate mortgages and is not expected to vary.
(j) Reflects the amortization of the debt premium on the mortgage loan assumed at Yonkers Gateway Center.
(k) As partial consideration for the Portfolio acquisition, the Company issued 4,525,699 Operating Partnership units valued at $27.02 per unit. This adjustment reflects the net income attributable to unitholders in the Operating Partnership.
(l) Reflects the accelerated amortization of intangible assets related to existing leases at Yonkers Gateway Center. Refer to adjustment (h) to the pro forma consolidated balance sheet.
16