Attached files

file filename
EX-23.1 - CONSENT OF DELOITTE & TOUCHE, LLP - Excel Trust, Inc.dex231.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): April 5, 2011

 

 

EXCEL TRUST, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Maryland   001-34698   27-1493212

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File No.)

 

(I.R.S. Employer

Identification No.)

17140 Bernardo Center Drive, Suite 300

San Diego, California 92128

(Address of Principal Executive Offices, Including Zip Code)

(858) 613-1800

(Registrant’s Telephone Number, Including Area Code)

 

 

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))

 

 

 


This Current Report on Form 8-K/A is being filed by Excel Trust, Inc. to provide the financial statements that were previously omitted in Item 9.01 of the Current Report on Form 8-K filed on April 7, 2011 relating to the acquisition of Gilroy Crossing located in Gilroy, California. In evaluating this acquisition and determining the appropriate amount of consideration to be paid, we considered a variety of factors including property type, geographic markets and demographics, tenants and lease terms.

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired

Independent Auditors’ Report

Statement of Revenues and Expenses of Gilroy Crossing for the year ended December 31, 2010

Notes to Statement of Revenues and Certain Expenses

 

(b) Unaudited Pro Forma Financial Information.

Unaudited Pro Forma Condensed Consolidated Balance Sheet of Excel Trust, Inc. as of December 31, 2010

Unaudited Pro Forma Condensed Consolidated Statement of Operations of Excel Trust, Inc. for the period from April 28, 2010 to December 31, 2010

Unaudited Pro Forma Condensed Combined Statement of Operations of Excel Trust, Inc. Predecessor for the period from January 1, 2010 to April 27, 2010

Notes to Pro Forma Condensed Consolidated and Combined Statements of Operations of Excel Trust, Inc. and Excel Trust, Inc. Predecessor

 

(d) Exhibits

The following exhibits are filed herewith:

 

Exhibit

  

Description of Exhibit

10.1

   Purchase and Sale Agreement and Joint Escrow Instructions dated December 9, 2010. (1)

23.1

   Consent of Deloitte & Touche, LLP (2)

 

(1) Incorporated herein by reference to Excel Trust, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 7, 2011.
(2) Filed herewith.


INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of Excel Trust, Inc.

We have audited the accompanying statement of revenues and certain expenses (the “Historical Summary”) of Gilroy Crossing located in Gilroy, California (the “Property”) for the year ended December 31, 2010. This Historical Summary is the responsibility of the Property’s management. Our responsibility is to express an opinion on the Historical Summary 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 Historical Summary is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summaries, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.

The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in this Current Report on Form 8-K/A) as described in Note 1 to the Historical Summary and are not intended to be a complete presentation of the Property’s revenue and expenses.

In our opinion, the Historical Summary of the Property presents fairly, in all material respects, the revenues and certain expenses described in Note 1 to the Historical Summary of Gilroy Crossing located in Gilroy, California for the year ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
May 4, 2011


GILROY CROSSING, GILROY, CALIFORNIA

STATEMENT OF REVENUE AND CERTAIN EXPENSES

For the Year Ended December 31, 2010

 

     Year ended
December 31, 2010
 

Revenues:

  

Rental revenues

   $ 5,245,000   

Tenant reimbursements

     1,562,000   

Other income

     10,000   
        

Total revenues

     6,817,000   

Certain expenses

  

Property operating and maintenance

     639,000   

Property taxes

     909,000   

Management fees

     257,000   

Insurance

     71,000   
        

Total certain expenses

     1,876,000   
        

Revenues in excess of certain expenses

   $ 4,941,000   
        

See accompanying notes to statements of revenues and certain expenses.


GILROY CROSSING, GILROY, CALIFORNIA

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES

1. Organization and Summary of Significant Accounting Policies

Organization

The accompanying statement of revenues and certain expenses includes the operations of Gilroy Crossing located in Gilroy, California (the “Property”). The Property represents a 473,640 square foot retail shopping center (of which 325,431 square feet are owned). Gilroy Crossing was acquired by Excel Trust, Inc. (the “Company”) from a nonaffiliated third party for a purchase price of approximately $68.5 million, of which approximately $48.0 million was assumed mortgage debt.

Basis of Presentation

The statement of revenues and certain operating expenses (the “Historical Summary”) has been prepared for the purpose of complying with the provisions of Article 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The Historical Summary includes the historical revenues and certain operating expenses of the Property, exclusive of items which may not be comparable to the proposed future operations of the Property. Material amounts that would not be directly attributable to future operating results of the Property are excluded, and the Historical Summary is not intended to be a complete presentation of the Property’s revenues and expenses. Items excluded consist of depreciation, interest expense and federal and state income taxes.

The accompanying statement is not representative of the actual operations for the period presented, as certain expenses that may not be comparable to the expenses expected to be incurred by the Company in the future operations of the Property have been excluded.

In the preparation of the accompanying Historical Summary, subsequent events were evaluated through May 4, 2011, the date the financial statements were issued.

Revenue Recognition

Rental revenue is recognized on an accrual basis as it is earned over the lives of the respective tenant leases on a straight-line basis. Estimated recoveries from certain tenants for their pro rata share of real estate taxes, insurance and other operating expense are recognized as revenues in the period the applicable expenses are incurred or as specified in the leases. Rental receivables are periodically evaluated for collectability.

Repairs and Maintenance

Expenditures for repairs and maintenance are expensed as incurred.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ materially from the estimates in the near term.

Concentration of Credit Risk

The Property had no tenants account for more than 10% of revenues in the year ended December 31, 2010.


2. Leases

The aggregate annual future minimum lease payments to be received under existing operating leases as of December 31, 2010 are as follows:

 

2011

   $ 5,242,000   

2012

     5,314,000   

2013

     5,097,000   

2014

     4,024,000   

2015

     1,853,000   

2016 and thereafter

     11,822,000   
        
   $ 33,172,000   
        

The Property was completed in 2004 and was approximately 100% occupied at December 31, 2010 . The Property is generally leased to tenants under lease terms that provide for the tenants to pay a pro rata share of their operating expenses. The above future minimum lease payments do not include amounts for tenant reimbursements of operating expenses.

Certain tenants have lease termination options built into their leases, which are subject to termination fees. In the event that a tenant does exercise its option to terminate its lease early and the terminated space is not subsequently leased out, the amount of future minimum rent received will be reduced.

3. Related Party Transactions

In the year ended December 31, 2010, $257,000 in property management fees were paid to a company affiliated with the sellers of the Property.

4. Commitments and Contingencies

The Company may be subject to legal claims in the ordinary course of business as a property owner. The Company believes that the ultimate settlement of any potential claims will not have a material impact on the Property’s results of operations.


Excel Trust, Inc.

Pro Forma Condensed Consolidated Financial Statements

(Unaudited)

The following unaudited pro forma financial information of Excel Trust, Inc. (the “Company”) is based on the historical financial statements of the Company and Excel Trust, Inc. Predecessor (the “Predecessor”). The unaudited pro forma condensed consolidated balance sheet as of December 31, 2010 and condensed consolidated and combined statements of operations of the Company for the period April 28, 2010 to December 31, 2010 and the Predecessor for the period from January 1, 2010 to April 28, 2010 have been prepared as if the acquisition of Gilroy Crossing (the “Property”) had occurred on January 1, 2010.

Such unaudited pro forma financial information should be read in conjunction with the historical combined financial statements of the Company and Predecessor filed with the Securities and Exchange Commission on the Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2010, June 30, 2010 and September 30, 2010, and the Company’s Annual Report on Form 10-K for the years ended December 31, 2010. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations of the Company and Predecessor that would have occurred if the acquisition of the Property had been completed on the date indicated, nor does it purport to represent the Company and Predecessor’s results of operations as of any future date or for any future period. In addition, the pro forma condensed consolidated and combined financial statements are based upon pro forma allocations of the purchase price of the Property based upon preliminary estimates of fair value of the assets and liabilities acquired in connection with the acquisition. These allocations may be adjusted in the future upon finalization of these preliminary estimates. Management believes all material adjustments necessary to reflect the effect of their acquisition have been made to the unaudited pro forma financial information.


EXCEL TRUST, INC

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2010

(in thousands, except per share amounts)

 

     Company
Historical (A)
     Acquisition
of Gilroy
Crossing at
Gilroy,
California
(B)
    Company
Pro Forma
 

ASSETS:

       

Property, net

   $ 365,112       $ 60,070      $ 425,182   

Cash and cash equivalents

     6,525         (240     6,285   

Lease intangibles, net

     53,024         9,418        62,442   

Other

     16,427         240       16,667   
                         

Total Assets

   $ 441,088       $ 69,488      $ 510,576   
                         

LIABILITIES AND EQUITY:

       

Liabilities:

       

Mortgage and notes payable

   $ 222,427       $ 68,899     $ 291,326   

Accounts payable and other liabilities

     14,901         —          14,901   

Lease intangibles, net

     7,150         589        7,739   
                         

Total liabilities

     244,478         69,488        313,966   

Equity:

       

Total stockholder’s equity

     187,511         —          187,511   

Non-controlling interests

     9,099         —          9,099   
                         

Total equity

     196,610         —          196,610   
                         

Total liabilities and equity

   $ 441,088       $ 69,488      $ 510,576   
                         

See accompanying notes


EXCEL TRUST, INC

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Period from April 28, 2010 to December 31, 2010

(in thousands, except per share amounts)

 

     Company
Historical (C)
    Acquisition of
Gilroy Crossing at
Gilroy, California
(D)
    Company
Pro Forma
 

REVENUES:

      

Rental revenue

   $ 13,641      $ 3,459      $ 17,100   

Tenant recoveries

     2,134        1,093        3,227   

Other income

     143        7        150   
                        

Total revenues

     15,918        4,559        20,477   

EXPENSES:

      

Maintenance and repairs

     707        160        867   

Real estate taxes

     1,685        652        2,337   

Management fees

     119        —          119   

Other operating expenses

     853        323        1,176   

General and administrative

     7,152        —          7,152   

Depreciation and amortization

     6,727        1,623        8,350   
                        

Total expenses

     17,243        2,758        20,001   

Net operating (loss) income

     (1,325     1,801        476   

Interest expense

     (3,692     (2,197     (5,889

Interest income

     166        —          166   

Gain on acquisition of real estate

     978        —          978   
                        

Net (loss) income

     (3,873     (396     (4,269

Non-controlling interest

     (148     (15     (163
                        

Net (loss) income attributable to the common stockholders

   $ (3,725   $ (380   $ (4,105
                        

Basic and diluted loss per share

   $ (0.24     $ (0.26
                  

Weighted-average common shares outstanding - basic and diluted

     15,510          15,510   
                  

See accompanying notes


EXCEL TRUST, INC. PREDECESSOR

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

Period from January 1, 2010 to April 27, 2010

(in thousands)

 

     Company
Historical (C)
    Acquisition
of Gilroy Crossing at
Gilroy, California
(D)
    Company
Pro Forma
 

REVENUES:

      

Rental revenue

   $ 1,455      $ 1,632      $ 3,087   

Tenant recoveries

     113        517        630   

Other income

     —          3        3   
                        

Total revenues

     1,568        2,152        3,720   

EXPENSES:

      

Maintenance and repairs

     98        75        173   

Real estate taxes

     140        307        447   

Management fees

     43        —          43   

Other operating expenses

     98        152        250   

General and administrative

     8        —          8   

Depreciation and amortization

     542        766        1,308   
                        

Total expenses

     929        1,300        2,229   

Net operating income

     639        852        1,491   

Interest expense

     (483     (1,037     (1,520

Interest income

     —          —          —     
                        

Net income

     156        (185     (29

Non-controlling interest

     290        —          290   
                        

Net (loss) income attributable to the controlling interest

   $ (134   $ (185   $ (319
                        

See accompanying notes


EXCEL TRUST, INC. AND

EXCEL TRUST, INC. PREDECESSOR

NOTES TO CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

(A) Derived from the Company’s condensed consolidated and combined financial statements as of December 31, 2010.

(B) To reflect the acquisition of Gilroy Crossing as if it was acquired December 31, 2010 for a purchase price of $68.5 million, not including closing costs. The acquisition was funded by an assumed mortgage note of approximately $48.0 million and cash from a draw on the Company’s credit facility. The acquisition method of accounting was used to allocate the purchase price to tangible and identifiable intangible assets and liabilities and other working capital liabilities assumed according to their fair values. The purchase price has been allocated for the pro forma adjustments as follows:

 

Land

   $ 12,061   

Building

     43,105   

Site improvements

     2,046   

Tenant improvements

     2,858   

Lease intangible assets

     9,418   

Debt premium

     (399

Lease intangible liabilities

     (589
        
   $ 68,500   
        

(C) Derived from the Company’s and the Predecessor’s condensed consolidated and combined financial statements of operations for the period from April 28, 2010 to December 31, 2010 and the period from January 1, 2010 to April 27, 2010.

(D) To reflect the acquisition of Gilroy Crossing as if it was acquired on January 1, 2010. The pro forma adjustments include the pro forma operations of the property. The acquisition method of accounting was used to allocate the purchase price to tangible and identified intangible assets and liabilities according to their fair values. The amount allocated to building, site improvements and tenant improvements is depreciated over an estimated useful life of 40 years, 8 years and an average of five years, respectively. The amounts allocated to intangible lease assets and liabilities are amortized over the lives of the leases, both with an average life of five years.

Historical revenue of $3,564 and $1,681, is decreased by $105 and $49, for the pro forma net amortization of above and below market leases for the period from April 28, 2010 to December 31, 2010 and the period from January 1, 2010 to April 27, 2010, respectively.

Expenses are based on historical operations of the previous owner except for real estate property tax which is calculated based on an estimated reassessed tax basis subsequent to the acquisition. Tenant recoveries have been adjusted to reflect the estimated property tax expense.

Interest expense reflects: 1) Assumption of a $48.0 million mortgage payable. The mortgage bears interest at a rate of 5.01%. 2) Borrowing of $20,491 from the Company’s credit facility used to fund the acquisition. Interest is assumed to be 4.25%. The Company’s credit facility bears interest at LIBOR plus a margin of 2.75%, with a LIBOR floor of 1.50%. As LIBOR was approximately 0.26% at December 31, 2010, an increase or decrease in LIBOR of up to 0.125% would have no effect on the Company’s interest rate given the LIBOR floor. 3) Amortization of approximately $240 of loan costs and approximately $399 of debt premium over the remaining life of the loan which matures October 2014.


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.

 

Date: May 4, 2011   Excel Trust, Inc.
  By:  

/S/    JAMES Y. NAKAGAWA        

    James Y. Nakagawa
    Chief Financial Officer


EXHIBITS

 

Exhibit

  

Description of Exhibit

10.1

   Purchase and Sale Agreement and Joint Escrow Instructions dated December 9, 2010. (1)

23.1

   Consent of Deloitte & Touche, LLP (2)

 

(1) Incorporated herein by reference to Excel Trust, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 7, 2011.
(2) Filed herewith.