Attached files
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| 8-K - FORM 8-K - DC Industrial Liquidating Trust | d8k.htm |
Exhibit 99.1
INDUSTRIAL INCOME TRUST INC.
PRO FORMA FINANCIAL INFORMATION
(Unaudited)
The following pro forma financial statements have been prepared to provide pro forma information with regard to real estate acquisitions and financing transactions, as applicable. The unaudited pro forma financial statements should be read in conjunction with Industrial Income Trust Inc.’s (the “Company”, “we”, or “our”) historical Annual Report on Form 10-K for the period from inception (May 19, 2009) to December 31, 2009, filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2010, and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, filed with the SEC on November 15, 2010.
On August 25, 2010, the Company acquired a 100% fee interest in three institutional quality warehouse / distribution properties located in the Bell Gardens Industrial Park aggregating approximately 263,000 square feet on 11.5 acres (“Bell Gardens”). The total acquisition cost of Bell Gardens was approximately $15.5 million, exclusive of additional transfer taxes, due diligence and closing costs. The Company funded the acquisition using proceeds from its public offering of common stock.
On September 1, 2010, the Company acquired a 100% fee interest in one building located in the Bayside Business Park aggregating approximately 246,000 square feet on 10.4 acres, and a 100% fee interest in three properties located in the Pinole Point Business Park aggregating approximately 475,000 square feet on 30.0 acres (collectively the “Bay Area Portfolio).” The total acquisition cost of the Bay Area Portfolio was approximately $60.0 million, exclusive of additional transfer taxes, due diligence and closing costs. The Company funded the acquisition using proceeds from its public offering of common stock and debt financing.
On September 30, 2010, the Company acquired a 100% fee interest in 13 industrial properties located in the Northeast submarket of Portland Oregon aggregating approximately 475,000 square feet on 29.9 acres (collectively the “Portland Portfolio”). The total acquisition cost of the Portland Portfolio was approximately $28.0 million, exclusive of additional transfer taxes, due diligence and closing costs. The Company funded the acquisition using proceeds from its public offering of common stock and debt financing.
On June 30, 2010, the Company acquired a 100% fee interest in the Renton Industrial Building. The Renton Industrial Building consists of approximately 127,000 square feet of rentable area. The total purchase price was $12.6 million, exclusive of additional transfer taxes, due diligence and closing costs. Prior to our acquisition of the Renton Industrial Building, it was owner-occupied, and our current tenant, DHL Global Forwarding, was not a prior tenant. Therefore, prior period financial statements for the Renton Industrial Building as a rental property are not available, and pro forma financial information regarding the property’s operations and regarding the financing secured by the property has not been included in the accompanying pro forma condensed consolidated statement of operations.
The Renton Industrial Building is 100% leased to DHL Global Forwarding. A portion of the lease commenced on July 1, 2010, and the remainder of the lease will begin in December 2010 and will expire in October 2020 and contains two consecutive three-year renewal options. The lease provides for the rent to escalate periodically with average annual lease payments of approximately $1.1 million during the primary lease term. DHL Global Forwarding is responsible, subject to certain exceptions, for the operating expenses incurred in the operation and maintenance of the Renton Industrial Building. In addition, per the terms of the lease, Deutsche Post AG, the parent of DHL Global Forwarding, has executed a guaranty of any and all amounts due under the lease, up to an aggregate maximum amount which will be reduced incrementally for each year of the lease.
The Company also entered into the following financing transactions on the following dates, through and including September 30, 2010: (i) $7.6 million mortgage note payable secured by the Renton Industrial Building on August 31, 2010; (ii) $30.0 million mortgage note payable secured by the Bay Area Portfolio on September 1, 2010; (iii) $9.4 million mortgage note payable secured by Bell Gardens on September 30, 2010; and (iv) $17.3 million mortgage note payable secured by the Portland Portfolio on September 30, 2010.
On November 1, 2010, the Company acquired a 100% fee interest in a property located in Suwanee Pointe, Atlanta, Georgia (the “Atlanta Portfolio”), which is comprised of two industrial buildings located in northeast Atlanta, Georgia, aggregating approximately 232,000 square feet on 16.9 acres. The financial statements for the Atlanta Portfolio are required to be filed with the SEC on or before January 11, 2011, at which time, updated unaudited pro forma condensed consolidated financial statements will be provided that reflect the Atlanta Portfolio acquisition. Accordingly, no adjustments related to the Atlanta Portfolio have been included in the accompanying unaudited pro forma condensed consolidated financial statements.
An unaudited pro forma condensed consolidated balance sheet is not presented, because each of the real property and financing transactions described above, with the exception of the Atlanta Portfolio, occurred on or prior to September 30, 2010 and has been presented in our quarterly Report on Form 10-Q for the quarter ended September 30, 2010, filed with the SEC on November 15, 2010. The accompanying unaudited pro forma condensed consolidated statements of operations for the period from Inception (May 19, 2009) to December 31, 2009, and for the nine months ended September 30, 2010, combine our historical operations with the purchase of each of the real property and financing transactions described above, as if those transactions had occurred on May 19, 2009, with the exception of Renton Industrial Building, as discussed.
The unaudited pro forma condensed consolidated statements of operations have been prepared by our management based upon our historical financial statements and certain historical financial information of the acquired properties. These pro forma statements may not be indicative of the results that actually would have occurred if these transactions had been in effect on the dates indicated, nor do they purport to represent our future financial results. The accompanying unaudited pro forma condensed consolidated statements of operations do not contemplate certain amounts that are not readily determinable, such as additional general and administrative expenses that are probable, or interest income that would be earned on cash balances.
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INDUSTRIAL INCOME TRUST INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (MAY 19, 2009) TO DECEMBER 31, 2009
(Unaudited)
| Company Historical (1) |
Acquisitions (2) | Pro Forma Adjustments |
Consolidated Pro Forma |
|||||||||||||||||
| REVENUE |
||||||||||||||||||||
| Rental revenue |
$ | — | $ | 5,315,298 | $ | (237,902 | ) | (3) | $ | 5,077,396 | ||||||||||
| Reimbursement and other revenue |
— | 1,478,308 | — | 1,478,308 | ||||||||||||||||
| Total Revenue |
— | 6,793,606 | (237,902 | ) | 6,555,704 | |||||||||||||||
| OPERATING EXPENSES |
||||||||||||||||||||
| Rental expense |
— | 637,307 | — | 637,307 | ||||||||||||||||
| Real estate taxes |
— | 1,020,155 | — | 1,020,155 | ||||||||||||||||
| Real estate depreciation and amortization expense |
— | — | 2,900,912 | (3) | 2,900,912 | |||||||||||||||
| Organization expenses |
136,902 | — | — | 136,902 | ||||||||||||||||
| General and administrative expenses |
716,826 | — | — | 716,826 | ||||||||||||||||
| Asset management fees, related party |
— | — | 552,000 | (4) | 552,000 | |||||||||||||||
| Acquisition-related expenses, related party |
— | — | — | — | ||||||||||||||||
| Acquisition-related expenses |
— | — | — | — | ||||||||||||||||
| Total Expenses |
853,728 | 1,657,462 | 3,452,912 | 5,964,102 | ||||||||||||||||
| Operating Income (Loss) |
(853,728 | ) | 5,136,144 | (3,690,814 | ) | 591,602 | ||||||||||||||
| OTHER INCOME AND EXPENSE |
||||||||||||||||||||
| Net interest income (expense) and other |
— | — | (1,623,164 | ) | (5) | (1,623,164 | ) | |||||||||||||
| Net income (loss) |
(853,728 | ) | 5,136,144 | (5,313,978 | ) | (1,031,562 | ) | |||||||||||||
| Net loss attributable to noncontrolling interests |
776,168 | — | — | 776,168 | ||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS |
$ | (77,560 | ) | $ | 5,136,144 | $ | (5,313,978 | ) | $ | (255,394 | ) | |||||||||
| Weighted average shares outstanding |
N/A | 7,802,400 | (6) | |||||||||||||||||
| Net loss per common share - basic and diluted |
N/A | $ | (0.03 | ) | ||||||||||||||||
The accompanying notes are an integral part of this pro forma condensed consolidated financial statement.
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INDUSTRIAL INCOME TRUST INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
(Unaudited)
| Company Historical (1) |
Acquisitions (2) | Pro Forma Adjustments |
Consolidated Pro Forma |
|||||||||||||||||
| REVENUE |
||||||||||||||||||||
| Rental revenue |
$ | 810,330 | $ | 5,838,268 | $ | (260,894 | ) | (3) | $ | 6,387,704 | ||||||||||
| Reimbursement and other revenue |
— | 1,681,241 | — | 1,681,241 | ||||||||||||||||
| Total Revenue |
810,330 | 7,519,509 | (260,894 | ) | 8,068,945 | |||||||||||||||
| OPERATING EXPENSES |
||||||||||||||||||||
| Rental expense |
190,545 | 671,982 | — | 862,527 | ||||||||||||||||
| Real estate taxes |
— | 1,139,256 | — | 1,139,256 | ||||||||||||||||
| Real estate depreciation and amortization expense |
262,154 | — | 3,291,374 | (3) | 3,553,528 | |||||||||||||||
| Organization expenses |
1,557 | — | — | 1,557 | ||||||||||||||||
| General and administrative expenses |
1,246,964 | — | — | 1,246,964 | ||||||||||||||||
| Asset management fees, related party |
112,933 | — | 541,667 | (4) | 654,600 | |||||||||||||||
| Acquisition-related expenses, related party |
2,322,000 | — | (2,322,000 | ) | (3) | — | ||||||||||||||
| Acquisition-related expenses |
839,668 | — | (839,668 | ) | (3) | — | ||||||||||||||
| Total Expenses |
4,975,821 | 1,811,238 | 671,373 | 7,458,432 | ||||||||||||||||
| Operating Income (Loss) |
(4,165,491 | ) | 5,708,271 | (932,267 | ) | 610,513 | ||||||||||||||
| OTHER INCOME AND EXPENSE |
||||||||||||||||||||
| Net interest income (expense) and other |
(134,101 | ) | — | (1,713,498 | ) | (5) | (1,847,599 | ) | ||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS |
$ | (4,299,592 | ) | $ | 5,708,271 | (2,645,765 | ) | (1,237,086 | ) | |||||||||||
| Weighted average shares outstanding |
2,482,855 | 7,802,400 | (6) | |||||||||||||||||
| Net loss per common share - basic and diluted |
$ | (1.73 | ) | $ | (0.16 | ) | ||||||||||||||
The accompanying notes are an integral part of this pro forma condensed consolidated financial statement.
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INDUSTRIAL INCOME TRUST INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (MAY 19, 2009) TO DECEMBER 31, 2009 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2010
(Unaudited)
| (1) | Reflects our historical condensed consolidated statements of operations for the period from Inception (May 19, 2009) to December 31, 2009, and for the nine months ended September 30, 2010. Please refer to our historical condensed consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 26, 2010, and our Quarterly Report on Form 10-Q filed with the SEC on November 15, 2010. |
| (2) | The following tables set forth the incremental impact of the real properties acquired by us as of September 30, 2010, on rental revenue and rental expense: (i) Bell Gardens, (ii) the Bay Area Portfolio, and (iii) the Portland Portfolio. The amounts presented are based on the historical operations of the properties and management’s estimates. Included in rental revenue is base rent, presented on a straight-line basis. The straight-line rent adjustment resulted in an increase to rental income of approximately $99,000 and $161,000 for the period from Inception (May 19, 2009) to December 31, 2009, and for the nine months ended September 30, 2010, respectively. Included in reimbursement and other revenue are rental expense recoveries and other revenues. The amounts presented for rental expense include: (i) operating expenses, (ii) insurance expense, and (iii) property management fees. |
| Revenue Impact: |
For the Period from Inception (May 19, 2009) to December 31, 2009 (a) |
For the Nine Months Ended September 30, 2010 |
||||||||||||||||
| Acquisition |
Acquisition Date |
Incremental Rental Revenue |
Incremental Reimbursement Revenue |
Incremental Rental Revenue |
Incremental Reimbursement Revenue |
|||||||||||||
| Bell Gardens |
August 25, 2010 | $ | 812,527 | $ | 121,461 | $ | 896,447 | $ | 145,969 | |||||||||
| Bay Area Portfolio |
September 1, 2010 | 2,655,394 | 850,331 | 2,737,665 | 934,909 | |||||||||||||
| Portland Portfolio |
September 30, 2010 | 1,847,377 | 506,516 | 2,204,156 | 600,363 | |||||||||||||
| Total |
$ | 5,315,298 | $ | 1,478,308 | $ | 5,838,268 | $ | 1,681,241 | ||||||||||
| (a) | For the period from Inception (May 19, 2009) to December 31, 2009, we reviewed the 12 month historical operations of the acquired properties and determined that there were no significant fluctuations in the monthly revenue and reimbursement revenue during the period. As such, the historical financial statements of the acquired properties have been ratably allocated for the period from Inception (May 19, 2009) to December 31, 2009, for pro forma purposes. |
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| Expense Impact: |
For the Period from Inception (May 19, 2009) to December 31, 2009 (a) |
For the Nine Months Ended September 30, 2010 |
||||||||||||||||
| Acquisition |
Acquisition Date |
Incremental Rental Expense |
Incremental Real Estate Taxes |
Incremental Rental Expense |
Incremental Real Estate Taxes |
|||||||||||||
| Bell Gardens |
August 25, 2010 | $ | 92,838 | $ | 107,294 | $ | 84,710 | $ | 117,792 | |||||||||
| Bay Area Portfolio |
September 1, 2010 | 281,838 | 643,649 | 305,100 | 689,299 | |||||||||||||
| Portland Portfolio |
September 30, 2010 | 262,631 | 269,212 | 282,172 | 332,165 | |||||||||||||
| Total |
$ | 637,307 | $ | 1,020,155 | $ | 671,982 | $ | 1,139,256 | ||||||||||
| (a) | For the period from Inception (May 19, 2009) to December 31, 2009, we reviewed the 12 month historical operations of the acquired properties and determined that there were no significant fluctuations in the monthly rental expenses and real estate taxes were incurred on an approximate straight-line basis. As such, the historical financial statements of the acquired properties have been ratably allocated for the period from inception (May 19, 2009) to December 31, 2009, for pro forma purposes. |
| (3) | The following table sets forth the incremental depreciation and amortization expense of the real properties acquired by us as of September 30, 2010: (i) Bell Gardens, (ii) the Bay Area Portfolio, and (iii) the Portland Portfolio. Pursuant to the purchase price allocations, building and other costs include amounts allocated to intangible in-place lease assets, above-market lease intangible assets and below-market lease intangible liabilities. The amounts allocated to building will be depreciated on a straight-line basis over a period of 20 to 40 years, and the amounts allocated to intangible in-place lease assets will be amortized on a straight-line basis over the lease term. Above or below-market lease intangibles will be amortized on a straight-line basis over the lease term and included in rental revenue. The net adjustment of amortization of above and below market lease intangible assets and liabilities for the period from inception (May 19, 2009) to December 31, 2009, resulted in a net decrease to rental revenue of approximately $237,902. The net adjustment of amortization of above and below market lease intangible assets and liabilities for the nine months ended September 30, 2010, resulted in a net decrease to rental revenue of approximately $260,894. In addition, for the nine months ended September 30, 2010, we had incurred acquisition costs of $3,161,668 related to property acquisitions. These acquisition costs have been excluded from the presentation of the pro forma statement of operations as these costs were directly attributable to property acquisition transactions and are not recurring in nature. |
| For the Period from Inception (May 19, 2009) to December 31, 2009 |
For the Nine Months Ended September 30, 2010 |
|||||||||||||||||
| Acquisition |
Acquisition Date |
Incremental Depreciation and Amortization Expense |
Incremental Amortization of Above/Below Market Lease Intangibles, net |
Incremental Depreciation and Amortization Expense |
Incremental Amortization of Above/Below Market Lease Intangibles, net |
|||||||||||||
| Bell Gardens |
August 25, 2010 | $ | 257,576 | $ | 86,973 | $ | 274,748 | $ | 92,771 | |||||||||
| Bay Area Portfolio |
September 1, 2010 | 1,165,335 | 97,432 | 1,243,024 | 103,927 | |||||||||||||
| Portland Portfolio |
September 30, 2010 | 1,478,001 | 53,497 | 1,773,602 | 64,196 | |||||||||||||
| Total |
$ | 2,900,912 | $ | 237,902 | $ | 3,291,374 | $ | 260,894 | ||||||||||
| (4) | Asset management fees were calculated as though the real properties acquired by us during 2010 had been managed by our Advisor since May 19, 2009, the date of our inception. The management fee consists of a monthly fee of one-twelfth of 0.80% of the aggregate cost (including debt, whether borrowed or assumed) before non-cash reserves and depreciation of each real property asset within our portfolio. |
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| (5) | As of September 30, 2010, we entered into financing arrangements for approximately $64.2 million of mortgage notes payable. Approximately $56.6 million of the debt proceeds were used to fund the acquisitions described in these pro forma financial statements. Interest expense presented was calculated based on the terms of the mortgage notes payable as of September 30, 2010. The following table sets forth the calculation for the pro forma adjustments as if these financings were outstanding as of May 19, 2009: |
| Estimated Incremental Interest Expense |
||||||||||||||||||||||||
| Property Debt Secured By |
Issuance Date |
Maturity Date |
Interest Rate |
Amount Financed |
For the Period from Inception (May 19, 2009) to December 31, 2009 |
For the Nine Months Ended September 30, 2010 |
||||||||||||||||||
| Renton Industrial Building |
August 31, 2010 | September 1, 2015 | 4.16 | % | (a | ) | $ | 7,560,000 | (b | ) | (b | ) | ||||||||||||
| Bell Gardens |
September 30, 2010 | October 1, 2020 | 4.95 | % | 9,350,000 | 287,945 | 304,148 | |||||||||||||||||
| Bay Area Portfolio |
September 1, 2010 | September 1, 2017 | 4.31 | % | 30,000,000 | 803,983 | 848,221 | |||||||||||||||||
| Portland Portfolio |
September 30, 2010 | October 1, 2020 | 4.95 | % | 17,250,000 | 531,236 | 561,129 | |||||||||||||||||
| Total |
$ | 64,160,000 | $ | 1,623,164 | $ | 1,713,498 | ||||||||||||||||||
| (a) | This loan bears interest at a variable interest rate based on one-month LIBOR plus 2.50%. In order to protect against fluctuations in LIBOR, in conjunction with this loan agreement, the Company entered into a five year, LIBOR-based interest rate swap agreement with Wells Fargo as the counterparty. As of September 1, 2010, the interest rate on the loan was effectively fixed at 4.16% for the full term as a result of the swap transaction. |
| (b) | Estimated interest expense for the Renton Industrial Building was excluded from the pro forma statement of operations. Prior to our acquisition of the Renton Industrial Building, it was owner-occupied, and our current tenant, DHL Global Forwarding, was not a prior tenant. Therefore, prior period financial statements for the Renton Industrial Building as a rental property are not available, and pro forma financial information regarding the property’s operations and regarding the financing secured by the property has not been included. |
| (6) | The pro forma weighted average shares of common stock outstanding for the period from Inception (May 19, 2009) to December 31, 2009, and for the nine months ended September 30, 2010, were calculated to reflect all shares sold through September 30, 2010, as if they had been issued on May 19, 2009. |
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