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EX-31.1 - EX-31.1 - COLE CORPORATE INCOME TRUST, INC. | g27219exv31w1.htm |
EX-31.2 - EX-31.2 - COLE CORPORATE INCOME TRUST, INC. | g27219exv31w2.htm |
EX-32.1 - EX-32.1 - COLE CORPORATE INCOME TRUST, INC. | g27219exv32w1.htm |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended March 31, 2011 |
OR
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from ____________ to ____________ |
Commission file number 333-166447
COLE CORPORATE INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland (State or other jurisdiction of incorporation or organization) |
27-2431980 (I.R.S. Employer Identification Number) |
2555 East Camelback Road, Suite 400 Phoenix, Arizona, 85016 (Address of principal executive offices; zip code) |
(602) 778-8700 (Registrants telephone number, including area code) |
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
|
Accelerated filer o | |||||
Non-accelerated filer (Do not check if smaller reporting company) x
|
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
o No x
As of May 11, 2011, there were 20,000 shares of common stock, par value $0.01, of Cole Corporate
Income Trust, Inc. outstanding.
COLE CORPORATE INCOME TRUST, INC.
INDEX
INDEX
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PART I
FINANCIAL INFORMATION
FINANCIAL INFORMATION
The accompanying condensed consolidated unaudited interim financial statements as of and for
the three months ended March 31, 2011 have been prepared by Cole Corporate Income Trust, Inc. (the
Company) pursuant to the rules and regulations of the Securities and Exchange Commission (the
SEC) regarding interim financial reporting. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted in the United States
of America (GAAP) for complete financial statements, and should be read in conjunction with the
audited consolidated balance sheet and related notes thereto included in the Companys Registration
Statement on Form S-11 as declared effective on February 10, 2011. The financial statements herein
should also be read in conjunction with the notes to the financial statements and Managements
Discussion and Analysis of Financial Condition and Results of Operations contained in this
Quarterly Report on Form 10-Q. The results of operations for the three months ended March 31, 2011
are not necessarily indicative of the operating results expected for the full year. The information
furnished in our accompanying condensed consolidated unaudited balance sheets and condensed
consolidated unaudited statement of operations, stockholders equity, and cash flows reflects all
adjustments that are, in our opinion, necessary for a fair presentation of the aforementioned
financial statements. Such adjustments are of a normal recurring nature.
Forward-looking statements that were true at the time made may ultimately prove to be
incorrect or false. We caution investors not to place undue reliance on forward-looking
statements, which reflect our managements view only as of the date of this Quarterly Report on
Form 10-Q. We undertake no obligation to update or revise forward-looking statements to reflect
changed assumptions, the occurrence of unanticipated events or changes to future operating results.
The forward-looking statements should be read in light of the risk factors identified in the Risk
Factors section of the Companys prospectus.
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COLE CORPORATE INCOME TRUST, INC.
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
March 31, 2011 | December 31, 2010 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 149,568 | $ | 200,000 | ||||
Restricted cash |
1,010,000 | | ||||||
Total assets |
$ | 1,159,568 | $ | 200,000 | ||||
LIABILITIES & STOCKHOLDERS EQUITY |
||||||||
Accrued expenses |
$ | 2,676 | $ | | ||||
Escrowed investor proceeds |
1,010,000 | | ||||||
Total liabilities |
1,012,676 | | ||||||
Commitments and contingencies |
||||||||
STOCKHOLDERS EQUITY |
||||||||
Preferred stock, $.01 par value,
10,000,000 shares authorized, none issued
and outstanding |
| | ||||||
Common stock, $.01 par value; 490,000,000
shares authorized, 20,000 shares issued
and outstanding |
200 | 200 | ||||||
Capital in excess of par value |
199,800 | 199,800 | ||||||
Accumulated deficit |
(53,108 | ) | | |||||
Total stockholders equity |
146,892 | 200,000 | ||||||
Total liabilities and stockholders equity |
$ | 1,159,568 | $ | 200,000 | ||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
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COLE CORPORATE INCOME TRUST, INC.
CONDENSED CONSOLIDATED UNAUDITED STATEMENT OF OPERATIONS
CONDENSED CONSOLIDATED UNAUDITED STATEMENT OF OPERATIONS
Three months ended | ||||
March 31, 2011 | ||||
Expenses: |
||||
General and administrative expenses |
$ | 53,108 | ||
Net loss |
$ | (53,108 | ) | |
Weighted average number of common shares outstanding |
20,000 | |||
Net loss per common share |
$ | (2.66 | ) | |
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
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COLE CORPORATE INCOME TRUST, INC.
CONDENSED CONSOLIDATED UNAUDITED STATEMENT OF STOCKHOLDERS EQUITY
CONDENSED CONSOLIDATED UNAUDITED STATEMENT OF STOCKHOLDERS EQUITY
Common Stock | Total | |||||||||||||||||||
Number of | Capital in Excess | Accumulated | Stockholders | |||||||||||||||||
Shares | Par Value | of Par Value | Deficit | Equity | ||||||||||||||||
Balance, January 1, 2011 |
20,000 | $ | 200 | $ | 199,800 | $ | | $ | 200,000 | |||||||||||
Net loss |
| | | (53,108 | ) | (53,108 | ) | |||||||||||||
Balance, March 31, 2011 |
20,000 | $ | 200 | $ | 199,800 | $ | (53,108 | ) | $ | 146,892 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
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COLE CORPORATE INCOME TRUST, INC.
CONDENSED CONSOLIDATED UNAUDITED STATEMENT OF CASH FLOWS
CONDENSED CONSOLIDATED UNAUDITED STATEMENT OF CASH FLOWS
Three months ended | ||||
March 31, 2011 | ||||
Cash flow from operating activities |
||||
Net loss |
$ | (53,108 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities |
||||
Changes in assets and liabilities |
||||
Accrued expenses |
2,676 | |||
Net cash used in operating activities |
(50,432 | ) | ||
Cash flow from investing activities |
||||
Restricted cash |
(1,010,000 | ) | ||
Net cash used in investing activities |
(1,010,000 | ) | ||
Cash flow from financing activities |
||||
Escrowed investor proceeds |
1,010,000 | |||
Net cash provided by financing activities |
1,010,000 | |||
Net decrease in cash and cash equivalents |
(50,432 | ) | ||
Cash and cash equivalents, beginning of period |
200,000 | |||
Cash and cash equivalents, end of period |
$ | 149,568 | ||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
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COLE CORPORATE INCOME TRUST, INC.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
March 31, 2011
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
March 31, 2011
NOTE 1 ORGANIZATION AND BUSINESS
Cole Corporate Income Trust, Inc. (the Company) was formed on April 6, 2010 and is a
Maryland corporation that intends to qualify as a real estate investment trust (REIT) for federal
income tax purposes. The Company is the sole general partner of and owns a 99.9% partnership
interest in Cole Corporate Income Operating Partnership, LP, a Delaware limited partnership (CCI
OP). Cole Corporate Income Advisors, LLC (CCI Advisors), the affiliated advisor to the Company,
is the sole limited partner and owner of an insignificant noncontrolling partnership interest of
0.1% of CCI OP. Substantially all of the Companys business is conducted through CCI OP.
On February 10, 2011, pursuant to a Registration Statement on Form S-11 under the Securities
Act of 1933, as amended, the Company commenced its initial public offering on a best efforts
basis of a minimum of 250,000 shares and a maximum of 250,000,000 shares of its common stock at a
price of $10.00 per share, and up to 50,000,000 additional shares pursuant to a distribution
reinvestment plan (the DRIP) under which its stockholders may elect to have distributions
reinvested in additional shares at a price of $9.50 per share (the Offering). The Company intends
to use substantially all of the net proceeds from the Offering to acquire and operate a diversified
portfolio of commercial real estate investments primarily consisting of single-tenant
income-producing, necessity corporate properties, which are leased to creditworthy tenants under
long-term net leases and strategically located throughout the United States. The Company expects
that most of the properties will be subject to net leases, whereby the tenant will be primarily
responsible for the cost of repairs, maintenance, property taxes, utilities, insurance and other
operating costs.
Pursuant to the terms of the Offering, the Company is required to deposit all subscription
proceeds in escrow pursuant to the terms of an escrow agreement with UMB Bank, N.A. (the Escrow
Agreement) until the Company receives subscriptions aggregating at least $2,500,000, excluding
subscriptions received from the Companys advisor or its affiliates. As of March 31, 2011, the
Company had $1.0 million in escrowed investor proceeds held in escrow, which consisted primarily of
amounts received from an affiliate of the Companys advisor.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The condensed consolidated unaudited financial statements of the Company have been prepared in
accordance with the rules and regulations of the SEC, including the instructions to Form 10-Q and
Article 10 of Regulation S-X, and do not include all of the information and footnotes required by
GAAP for complete financial statements. In the opinion of management, the statements for the
interim periods presented include all adjustments, which are of a normal and recurring nature,
necessary to present a fair presentation of the results for such periods. Results for these
interim periods are not necessarily indicative of full year results.
The accompanying condensed consolidated unaudited financial statements include the accounts of
the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP necessarily requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
8
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COLE CORPORATE INCOME TRUST, INC.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
Investment in and Valuation of Real Estate and Related Assets
The Company will be required to make subjective assessments as to the useful lives of its
depreciable assets. The Company will consider the period of future benefit of the asset to
determine the appropriate useful life of each asset. Real estate assets will be stated at cost,
less accumulated depreciation and amortization. Amounts capitalized to real estate assets will
consist of the cost of acquisition, excluding acquisition related expenses, construction and any
tenant improvements, major improvements and betterments that extend the useful life of the related
asset and leasing costs. All repairs and maintenance will be expensed as incurred.
Assets, other than land, will be depreciated or amortized on a straight-line basis. The
estimated useful lives of the Companys assets by class are generally as follows:
Building
|
40 years | ||
Tenant improvements
|
Lesser of useful life or lease term | ||
Intangible lease assets
|
Lesser of useful life or lease term |
The Company continually monitors events and changes in circumstances that could indicate that
the carrying amounts of its real estate and related intangible assets may not be recoverable.
Impairment indicators that the Company considers include, but are not limited to, bankruptcy or
other credit concerns of a propertys major tenant, such as a history of late payments, rental
concessions and other factors, a significant decrease in a propertys revenues due to lease
terminations, vacancies, co-tenancy clauses, reduced lease rates or other circumstances. When
indicators of potential impairment are present, the Company will assess the recoverability of the
assets by determining whether the carrying value of the assets will be recovered through the
undiscounted operating cash flows expected from the use of the assets and their eventual
disposition. In the event that such expected undiscounted operating cash flows do not exceed the
carrying value, the Company will adjust the real estate and related intangible assets and
liabilities to their fair value and recognize an impairment loss.
Projections of expected future cash flows will require the Company to use estimates such as
future market rental income amounts subsequent to the expiration of current lease agreements,
property operating expenses, terminal capitalization and discount rates, the number of months it
takes to re-lease the property, required tenant improvements and the number of years the property
will be held for investment. The use of alternative assumptions in the future cash flow analysis
could result in a different assessment of the propertys future cash flow and a different
conclusion regarding the existence of an impairment, the extent of such loss, if any, as well as
the carrying value of the real estate and related intangible assets.
When a real estate asset is identified as held for sale, the Company will cease depreciation
of the asset and estimate the sales price, net of selling costs. If, in the Companys opinion, the
net sales price of the asset is less than the net book value of the asset, an adjustment to the
carrying value would be recorded to reflect the estimated fair value of the property, net of
selling costs.
Allocation of Purchase Price of Real Estate and Related Assets
Upon the acquisition of real properties, the Company will allocate the purchase price of such
properties to acquired tangible assets, consisting of land, buildings and improvements, and
identified intangible assets and liabilities, consisting of the value of above market and below
market leases and the value of in-place leases, based in each case on their fair values.
Acquisition related expenses will be expensed as incurred. The Company will utilize independent
appraisals to assist in the determination of the fair values of the tangible assets of an acquired
property (which includes land and building). The Company will obtain an independent appraisal for
each real property acquisition. The information in the appraisal, along with any additional
information available to the Companys management, will be used by its management in estimating the
amount of the purchase price that will be allocated to land. Other information in the appraisal,
such as building value and market rents, may be used by the Companys management in estimating the
allocation of purchase price to the building and to intangible lease assets and liabilities. The
appraisal firm will have no involvement in managements allocation decisions other than providing
this market information.
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COLE CORPORATE INCOME TRUST, INC.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
The fair values of above market and below market in-place lease values will be recorded based
on the present value (using an interest rate which reflects the risks associated with the leases
acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place
leases and (ii) an estimate of fair market lease rates for the corresponding in-place leases, which
will generally be obtained from independent appraisals, measured over a period equal to the
remaining non-cancelable term of the lease including any bargain renewal periods, with respect to a
below market lease. The above market and below market lease values will be capitalized as
intangible lease assets or liabilities. Above market lease values will be amortized as an
adjustment of rental income over the remaining terms of the respective leases. Below market leases
will be amortized as an adjustment of rental income over the remaining terms of the respective
leases, including any bargain renewal periods. If a lease were to be terminated prior to its stated
expiration, all unamortized amounts of above market and below market in-place lease values relating
to that lease would be recorded as an adjustment to rental income. The fair values of in-place
leases will include direct costs associated with obtaining a new tenant and opportunity costs
associated with lost rentals which are avoided by acquiring an in-place lease. Direct costs
associated with obtaining a new tenant will include commissions and other direct costs and are
estimated in part by utilizing information obtained from independent appraisals and managements
consideration of current market costs to execute a similar lease. The value of opportunity costs
will be calculated using the contractual amounts to be paid pursuant to the in-place leases over a
market absorption period for a similar lease. These intangibles will be capitalized as intangible
lease assets and will be amortized to expense over the remaining term of the respective leases. If
a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place
lease assets relating to that lease would be expensed.
The determination of the fair values of the assets and liabilities acquired will require the
use of significant assumptions with regard to the current market rental rates, rental growth rates,
capitalization and discount rates, interest rates and other variables. The use of alternative
estimates would result in a different assessment of the Companys purchase price allocations, which
could impact the amount of its reported net income.
The Company will estimate the fair value of assumed mortgage notes payable based upon
indications of current market pricing for similar types of debt with similar maturities. Assumed
mortgage notes payable will initially be recorded at their estimated fair value as of the
assumption date, and the difference between such estimated fair value and the mortgage notes
outstanding principal balance will be amortized to interest expense over the term of the mortgage
note payable.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities when purchased of three
months or less to be cash equivalents. Cash equivalents may include short term investments and are
stated at cost, which approximates fair value.
Restricted Cash
Restricted cash as of March 31, 2011, consists of escrowed investor proceeds of $1.0 million
for which shares of common stock had not been issued. This amount consisted primarily of amounts
received from an affiliate of the Companys advisor.
Concentration of Credit Risk
As of March 31, 2011, the Company had cash on deposit, including restricted cash, at one
financial institution that had deposits in excess of federally insured levels totaling $760,000;
however, the Company has not experienced any losses in such account. The Company limits significant
cash holdings to accounts held by financial institutions with high credit standing; therefore, the
Company believes it is not exposed to any significant credit risk on cash.
Revenue Recognition
The Company expects that certain properties will have leases where minimum rent payments
increase during the term of the lease. The Company will record rental revenue for the full term of
each lease on a straight-line basis. When the Company acquires a property, the term of existing
leases will be considered to commence as of the acquisition date for the purposes of this
calculation. The Company will defer the recognition of contingent rental income, such as percentage
rents, until the specific target that triggers the contingent rental income is achieved.
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COLE CORPORATE INCOME TRUST, INC.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
Income Taxes
The Company intends to qualify and make an election to be taxed as a REIT for federal income
tax purposes under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended,
beginning with the taxable year ending December 31, 2011, or the first year during which the
Company commences material operations. If the Company qualifies for taxation as a REIT, the Company
generally will not be subject to federal corporate income tax to the extent it distributes its
taxable income to its stockholders, and as long as it distributes at least 90% of its taxable
income (excluding capital gains). REITs are subject to a number of other organizational and
operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject
to certain state and local taxes on its income and property, and federal income and excise taxes on
its undistributed income.
Offering and Related Costs
The Companys advisor funds all of the organization and offering expenses on the Companys
behalf and may be reimbursed for such costs up to 1.5% of the gross offering proceeds. As of March
31, 2011, CCI Advisors had incurred $1.5 million of costs related to the organization of the
Company and the Offering. These costs are not included in the balance sheet of the Company because
such costs are not a liability of the Company until subscriptions for the minimum number of shares
of common stock are received and accepted by the Company and such costs are not in excess of 1.5%
of the Offering proceeds. Offering costs include items such as legal and accounting fees,
marketing, promotional and printing costs. All offering costs will be recorded as a reduction of
capital in excess of par value.
Stockholders Equity
As of March 31, 2011, the Company was authorized to issue 490,000,000 shares of common stock
and 10,000,000 shares of preferred stock. All shares of such stock have a par value of $0.01 per
share. On April 29, 2010, the Company sold 20,000 shares of common stock, at $10.00 per share, to
Cole Holdings Corporation, the indirect owner of the Companys advisor and dealer-manager. The
Companys board of directors may authorize additional shares of capital stock and amend their terms
without obtaining shareholder approval.
The par value of investor proceeds raised from the Offering will be classified as common
stock, with the remainder allocated to capital in excess of par value. The Companys share
redemption program provides that (1) the Company will not redeem in excess of 5% of the weighted
average number of shares outstanding during the trailing twelve-month period prior to the
redemption date (provided, however, that while shares subject to a redemption requested upon the
death of a stockholder will be included in calculating the maximum number of shares that may be
redeemed, such shares will not be subject to this cap); and (2) funding for the redemption of
shares will be limited to the amount of net proceeds the Company receives from the sale of shares
under the DRIP. In an effort to accommodate redemption requests throughout the calendar year, the
Company intends to limit quarterly redemptions to approximately 1.25% of the weighted average
number of shares outstanding during the trailing twelve-month period (provided, however, that while
shares subject to a redemption requested upon the death of a stockholder will be included in
calculating the maximum number of shares that may be redeemed, such shares will not be subject to
this cap), and funding for redemptions for each quarter generally will be limited to the net
proceeds received from the sale of shares in the respective quarter under the Companys DRIP. The
Companys board of directors may waive these quarterly limitations in its sole discretion, subject
to the 5% cap on the number of shares that may be redeemed during the respective trailing twelve
month period.
Distributions Payable and Distribution Policy
In order to qualify and maintain its status as a REIT, the Company is required to, among other
things, make distributions each taxable year equal to at least 90% of its REIT taxable income
excluding capital gains. To the extent funds are available, the Company intends to pay regular
monthly distributions to stockholders. Distributions are paid to those stockholders who are
stockholders of record as of applicable record dates. The Company has not yet elected to be taxed,
and has not qualified, as a REIT.
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COLE CORPORATE INCOME TRUST, INC.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
The Companys board of directors authorized a daily distribution, based on 365 days in the
calendar year, of $0.001781016 (which equates to 6.5% on an annualized basis calculated at the
current rate, assuming a $10.00 per share purchase price) per share for stockholders of record as
of each day of the period commencing on the first day following the release from escrow of the
subscription proceeds received in the Offering, pursuant to the terms of the Escrow Agreement (the
Distribution Start Date), and ending on June 30, 2011. The payment date for each of the daily
distributions for each day of each calendar month in the period commencing on the Distribution
Start Date and ending on June 30, 2011 will be in the following calendar month. As of March 31,
2011, the requirements of the Escrow Agreement had not been met and the Company had no
distributions payable.
NOTE 3 FAIR VALUE MEASUREMENTS
ASC 820 defines fair value, establishes a framework for measuring fair value in GAAP and
expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is intended
to be a market-based measurement, as opposed to a transaction-specific measurement.
Fair value is defined by ASC 820 as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement
date. Depending on the nature of the asset or liability, various techniques and assumptions can be
used to estimate the fair value. Assets and liabilities are measured using inputs from three levels
of the fair value hierarchy, as follows:
Level 1 Inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement date. An active market
is defined as a market in which transactions for the assets or liabilities occur with sufficient
frequency and volume to provide pricing information on an ongoing basis.
Level 2 Inputs include quoted prices for similar assets and liabilities in active markets,
quoted prices for identical or similar assets or liabilities in markets that are not active
(markets with few transactions), inputs other than quoted prices that are observable for the
asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived
principally from or corroborated by observable market data correlation or other means (market
corroborated inputs).
Level 3 Unobservable inputs, only used to the extent that observable inputs are not
available, reflect the Companys assumptions about the pricing of an asset or liability.
The following describes the methods the Company uses to estimate the fair value of the
Companys financial assets and liabilities:
Cash and cash equivalents, restricted cash, and accrued expenses The Company considers the
carrying values of these financial instruments to approximate fair value because of the short
period of time between origination of the instruments and their expected realization.
NOTE 4 COMMITMENTS AND CONTINGENCIES
Purchase Agreement
On February 24, 2011, the Company entered into an agreement to purchase 100% of the membership
interests in a single-tenant office building (the Medtronic Property) for $32.85 million from an
affiliate of the Companys advisor, subject to certain conditions. See Note 5 for details of the
acquisition.
Litigation
In the ordinary course of business, the Company may become subject to litigation or claims.
The Company is not aware of any material pending legal proceedings of which the outcome is
reasonably likely to have a material adverse effect on its results of operations, financial
condition, or liquidity.
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COLE CORPORATE INCOME TRUST, INC.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
Environmental Matters
In connection with the ownership and operation of real estate, the Company potentially may be
liable for costs and damages related to environmental matters. In addition, the Company may acquire
certain properties that are subject to environmental remediation. The Company intends to carry
environmental liability insurance on its properties that will provide limited coverage for
remediation liability and pollution liability for third-party bodily injury and property damage
claims. The Company is not aware of any environmental matters which it believes will have a
material adverse effect on its condensed consolidated unaudited financial statements.
NOTE 5 RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS
Certain affiliates of the Company will receive fees and compensation in connection with the
Offering, and the acquisition, management and sale of the assets of the Company, however there were
no transactions which resulted in related party fees to be paid for the three months ended March
31, 2011.
Offering
Cole Capital Corporation (Cole Capital), the affiliated dealer-manager, will receive a
commission of up to 7% of gross offering proceeds before reallowance of commissions earned by
participating broker-dealers. Cole Capital intends to reallow 100% of commissions earned to
participating broker-dealers. In addition, up to 2% of gross offering proceeds before reallowance
to participating broker-dealers will be paid to Cole Capital as a dealer-manager fee. Cole Capital,
in its sole discretion, may reallow all or a portion of its dealer-manager fee to such
participating broker-dealers.
CCI Advisors may receive up to 1.5% of gross offering proceeds for reimbursement of other
organization and offering expenses (excluding selling commissions and the dealer-manager fee). All
organization and offering expenses (excluding selling commissions and the dealer-manager fee) are
paid for by CCI Advisors or its affiliates and could be reimbursed by the Company up to 1.5% of
aggregate gross offering proceeds. A portion of the other organization and offering expenses may be
underwriting compensation.
Acquisitions and Operations
CCI Advisors or its affiliates also will receive acquisition fees of up to 2% of: (i) the
contract purchase price of each property or asset the Company acquires; (ii) the amount paid in
respect of the development, construction or improvement of each asset the Company acquires; (iii)
the purchase price of any loan the Company acquires; and (iv) the principal amount of any loan the
Company originates.
The Company will pay CCI Advisors a monthly advisory fee based upon the Companys monthly
average invested assets, which is equal to the following amounts: (i) an annualized rate of 0.75%
will be paid on the Companys average invested assets that are between $0 to $2 billion; (ii) an
annualized rate of 0.70% will be paid on the Companys average invested assets that are between $2
billion to $4 billion; and (iii) an annualized rate of 0.65% will be paid on the Companys average
invested assets that are over $4 billion.
The Company will reimburse CCI Advisors for the expenses it paid or incurred in connection
with the services provided to the Company, subject to the limitation that the Company will not
reimburse for any amount by which its operating expenses (including the advisory fee) at the end of
the four preceding fiscal quarters exceeds the greater of (i) 2% of average invested assets, or
(ii) 25% of net income other than any additions to reserves for depreciation, bad debts or other
similar non-cash reserves and excluding any gain from the sale of assets for that period. The
Company will not reimburse for personnel costs in connection with services for which CCI Advisors
receives acquisition fees or disposition fees.
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COLE CORPORATE INCOME TRUST, INC.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
March 31, 2011
Liquidation/Listing
If CCI Advisors or its affiliates provides a substantial amount of services (as determined by
a majority of the Companys independent directors) in connection with the sale of properties, the
Company will pay CCI Advisors or its affiliate a disposition fee in an amount equal to up to
one-half of the brokerage commission paid on the sale of property, not to exceed 1% of the contract
price of each property sold; provided, however, in no event may the disposition fee paid to CCI
Advisors or its affiliates, when added to the real estate commissions paid to unaffiliated third
parties, exceed the lesser of the customary competitive real estate commission or an amount equal
to 6% of the contract sales price.
If the Company is sold or its assets are liquidated, CCI Advisors will be entitled to receive
a subordinated performance fee equal to 15% of the net sale proceeds remaining after investors have
received a return of their net capital invested and an 8% annual cumulative, non-compounded return.
Alternatively, if the Companys shares are listed on a national securities exchange, CCI Advisors
will be entitled to a subordinated performance fee equal to 15% of the amount by which the market
value of the Companys outstanding stock plus all distributions paid by the Company prior to
listing, exceeds the sum of the total amount of capital raised from investors and the amount of
distributions necessary to generate an 8% annual cumulative, non-compounded return to investors. As
an additional alternative, upon termination of the advisory agreement, CCI Advisors may be entitled
to a subordinated performance fee similar to that to which CCI Advisors would have been entitled
had the portfolio been liquidated (based on an independent appraised value of the portfolio) on the
date of termination.
Transactions and Agreements
On February 24, 2011, the Company entered into an agreement with an affiliate of the Companys
advisor to purchase 100% of the membership interests in Cole OF San Antonio TX, LLC (Cole OF SA),
a Delaware limited liability company which owns as its sole asset the Medtronic Property, for a
gross purchase price of $32.85 million. The acquisition is subject to a number of conditions,
including the Companys ability to receive subscription proceeds aggregating at least $2,500,000 in
the Offering to enable the release of the amounts from escrow, pursuant to the terms of the Escrow
Agreement. Due to the considerable conditions that must be satisfied in order to acquire the
membership interests in Cole OF SA, the Company cannot make any assurances that the closing of this
acquisition is probable. Other properties may be identified in the future that the Company may
acquire prior to or instead of the Medtronic Property.
NOTE 6 ECONOMIC DEPENDENCY
Under various agreements, the Company has engaged or will engage CCI Advisors and its
affiliates to provide certain services that are essential to the Company, including asset
management services, supervision of the management and leasing of properties owned by the Company,
asset acquisition and disposition decisions, the sale of shares of the Companys common stock
available for issue, as well as other administrative responsibilities for the Company including
accounting services and investor relations. As a result of these relationships, the Company is
dependent upon CCI Advisors and its affiliates. In the event that these companies are unable to
provide the Company with these services, the Company would be required to find alternative
providers of these services.
NOTE 7 NEW ACCOUNTING PRONOUNCEMENT
In December 2010, FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information
for Business Combinations, (ASU 2010-29), which clarifies the manner in which pro forma
disclosures are calculated and provides additional disclosure requirements regarding material
nonrecurring adjustments recorded as a result of a business
combination. ASU 2010-29 will be
effective for the Company as it begins to acquire properties.
NOTE 8 SUBSEQUENT EVENT
Status of the Offering
As of May 11, 2011, the Company had received subscription proceeds totaling $1.4 million,
including amounts received from affiliates of the Companys advisor, and therefore had not received
the minimum offering proceeds required to break escrow.
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ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our condensed consolidated unaudited financial statements, the
notes thereto, and the other unaudited financial data included elsewhere in this Quarterly Report
on Form 10-Q. The following discussion should also be read in conjunction with our audited
consolidated financial statements, and the notes thereto, and Managements Discussion and Analysis
of Financial Condition and Results of Operations included in our Registration Statement on Form
S-11. The terms we, us, our and the Company refer to Cole Corporate Income Trust, Inc.
Forward-Looking Statements
Except for historical information, this section contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, including discussion
and analysis of our financial condition and our subsidiaries, our anticipated capital expenditures,
amounts of anticipated cash distributions to our stockholders in the future and other matters.
These forward-looking statements are not historical facts but are the intent, belief or current
expectations of our management based on their knowledge and understanding of our business and
industry. Words such as may, will, anticipates, expects, intends, plans, believes,
seeks, estimates, would, could, should or comparable words, variations and similar
expressions are intended to identify forward-looking statements. All statements not based on
historical fact are forward looking statements. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other factors, some of which are beyond our
control, are difficult to predict and could cause actual results to differ materially from those
expressed or implied in the forward-looking statements. A full discussion of our Risk Factors may
be found in the Risk Factors section in our prospectus.
Forward-looking statements that were true at the time made may ultimately prove to be
incorrect or false. Investors are cautioned not to place undue reliance on forward-looking
statements, which reflect our managements view only as of the date of this Quarterly Report on
Form 10-Q. We undertake no obligation to update or revise forward-looking statements to reflect
changed assumptions, the occurrence of unanticipated events or changes to future operating results.
Factors that could cause actual results to differ materially from any forward-looking statements
made in this Quarterly Report on Form 10-Q include, among others, changes in general economic
conditions, changes in real estate conditions, construction costs that may exceed estimates,
construction delays, increases in interest rates, lease-up risks, rent relief, inability to obtain
new tenants upon the expiration or termination of existing leases, and the potential need to fund
tenant improvements or other capital expenditures out of operating cash flows. The forward-looking
statements should be read in light of the risk factors identified in the Risk Factors section of
our prospectus.
Managements discussion and analysis of financial condition and results of operations are
based upon our condensed consolidated unaudited financial statements, which have been prepared in
accordance with GAAP. The preparation of these financial statements requires our management to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we
evaluate these estimates. These estimates are based on managements historical industry experience
and on various other assumptions that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates.
Overview
We were formed on April 6, 2010, and we intend to qualify as a REIT beginning with the taxable
year ending December 31, 2011, or the first year in which we commence material operations. We
intend to use substantially all of the net proceeds from our offering to acquire and operate a
diversified portfolio of commercial real estate investments primarily consisting of single-tenant,
income producing necessity corporate properties, which are leased to creditworthy tenants under
long-term net leases and strategically located throughout the United States. We expect that most of
the properties will be subject to triple net or double net leases, whereby the tenant will be
primarily responsible for all or most of the expenses of maintaining the property, including real
estate taxes, special assessments and sales and use taxes, utilities, insurance, building repairs
and common area maintenance related to the property. We generally intend to hold each property we
acquire for an extended period of more than seven years.
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Results of Operations
As of March 31, 2011, we had not broken escrow in our initial public offering or acquired any
specific investments. For the three months ended March 31, 2011, we incurred a net loss of $53,108,
which related to general and administrative expenses including legal fees and board of directors
fees.
Our management is not aware of any material trends or uncertainties, other than national
economic conditions affecting real estate and the debt markets generally that may reasonably be
expected to have a material impact, favorable or unfavorable, on revenues or income from the
acquisition and operation of real properties and real estate-related investments.
Critical Accounting Policies and Estimates
Our accounting policies have been established to conform to GAAP. The preparation of financial
statements in conformity with GAAP requires us to use judgment in the application of accounting
policies, including making estimates and assumptions. These judgments affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenue and expenses during the reporting periods.
If our judgment or interpretation of the facts and circumstances relating to the various
transactions had been different, it is possible that different accounting policies would have been
applied, thus resulting in a different presentation of the financial statements. Additionally,
other companies may utilize different estimates that may impact comparability of our results of
operations to those of companies in similar businesses. Below are the accounting policies we
believe will be critical once we commence principal operations.
| Investment in and Valuation of Real Estate and Related Assets; | ||
| Allocation of Purchase Price of Real Estate and Related Assets; | ||
| Investment in Real Estate Loans Receivable; | ||
| Revenue Recognition; and | ||
| Income Taxes. |
A complete description of such policies and our considerations as of December 31, 2010 is
contained in our Registration Statement on Form S-11, and our critical accounting policies have not
changed during the three months ended March 31, 2011. The information included in this Quarterly
Report on Form 10-Q should be read in conjunction with our audited consolidated balance sheet as of
December 31, 2010, and related notes thereto.
Liquidity and Capital Resources
Recent Market Conditions
Beginning in late 2007, domestic and international financial markets experienced significant
disruptions that were brought about in large part by challenges in the world-wide banking system.
These disruptions severely impacted the availability of credit and have contributed to rising costs
associated with obtaining credit. Recently, the volume of mortgage lending for commercial real
estate has increased and lending terms have improved; however, such lending activity is
significantly less than previous levels. Although lending market conditions have improved, we
expect that we may experience more stringent lending criteria, which may affect our ability to
finance certain property acquisitions. For properties for which we are able to obtain financing,
the interest rates and other terms on such loans may be unacceptable. We expect to manage the
current mortgage lending environment considering alternative lending sources, including the
securitization of debt, utilizing fixed rate loans, short-term variable rate loans, assuming
existing mortgage loans in connection with property acquisitions, or entering into interest rate
lock or swap agreements, or any combination of the foregoing. Additionally, we may acquire our
properties for cash without financing. If we are unable to obtain suitable financing for future
acquisitions or we are unable to identify suitable properties at appropriate prices in the current
credit environment, we may have a larger amount of uninvested cash, which may adversely affect our
results of operations. We will continue to evaluate alternatives in the current market, including
purchasing or originating debt backed by real estate, which could produce attractive yields in the
current market environment. All of these events would have a material adverse effect on our results
of operations, financial condition and ability to pay distributions. The current economic
environment, including the dislocation of the credit markets, has lead to higher unemployment and a
decline in consumer spending. These economic trends have adversely impacted the retail and real
estate markets causing higher tenant vacancies, declining rental rates, and declining property
values. These factors may impact us as we acquire properties and begin principal operations.
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General
Our principal demands for funds will be for real estate and real estate-related investments,
for the payment of operating expenses, distributions and redemptions to stockholders and principal
and interest on any future indebtedness. Generally, we expect to meet cash needs for items other
than acquisitions from our cash flow from operations from our future investments, and we expect to
meet cash needs for acquisitions from the net proceeds of our Offering and from debt financings. We
expect the sources of our operating cash flows will primarily be driven by the rental income
received from future leased properties. We expect to continue to raise capital through our Offering
and to utilize such funds and future proceeds from secured or unsecured financing to complete
future property acquisitions.
Short-term Liquidity and Capital Resources
On a short-term basis, our principal demands for funds will be for operating expenses incurred
before we have raised the minimum offering of 250,000 shares. We do not expect our operating
expenses to be significant until we make an initial investment from the proceeds from the Offering.
After we make an initial investment, we expect our principal demands for funds will be for
operating expenses, distributions and interest and principal on any future indebtedness. We expect
to meet our short-term liquidity requirements through net cash provided by property operations and
proceeds from the Offering, as well as secured or unsecured borrowings from banks and other lenders
to finance our expected future acquisitions. We expect our operating cash flows to increase as
properties are added to our portfolio. We expect that approximately 87.2% of the gross proceeds
from the sale of our common stock will be invested in real estate, approximately 10.5% will be used
to pay sales commissions, dealer manager fees and offering and organizational costs, with the
remaining 2.3% used to pay acquisition and advisory fees and acquisition expenses. Our advisor pays
the offering and organizational and offering costs associated with the sale of our common stock,
which we reimburse in an amount up to 1.5% of the gross proceeds of the Offering. As of March 31,
2011, our advisor had paid $1.5 million of offering and organization costs since the inception of
the Offering. We had not reimbursed our advisor for such costs, as such costs are not our liability
until subscriptions for the minimum number of shares of common stock are received and accepted by
us.
Long-term Liquidity and Capital Resources
On a long-term basis, our principal demands for funds will be for the acquisition of real
estate and real estate-related investments and the payment of acquisition related expenses,
operating expenses, distributions and redemptions to stockholders and interest and principal on any
future indebtedness. We expect to meet our long-term liquidity requirements through proceeds from
the sale of our common stock, proceeds from secured or unsecured financings from banks and other
lenders, the selective and strategic sale of properties and net cash flows from operations.
We expect that substantially all net cash generated from operations will be used to pay
distributions to our stockholders after certain capital expenditures, including tenant improvements
and leasing commissions, are paid at the properties; however, we may use other sources to fund
distributions as necessary. To the extent that cash flows from operations are lower due to fewer
properties being acquired or lower than expected returns on the properties, distributions paid to
our stockholders may be lower. We expect that substantially all net cash resulting from our
Offering or debt financing will be used to fund acquisitions, certain capital expenditures
identified at acquisition, repayments of outstanding debt, or distributions to our stockholders.
We intend to borrow money to acquire properties and make other investments. There is no
limitation on the amount we may borrow against any single improved property. Our borrowings will
not exceed 300% of our net assets as of the date of any borrowing, which is the maximum level of
indebtedness permitted under the NASAA REIT Guidelines; however, we may exceed that limit if
approved by a majority of our independent directors. Our board of directors has adopted a policy to
further limit our borrowings to 60% of the greater of cost (before deducting depreciation or other
non-cash reserves) or fair market value of our gross assets, unless excess borrowing is approved by
a majority of the independent directors and disclosed to our stockholders in the next quarterly
report along with the justification for such excess borrowing. We expect that during certain
periods of our offering we will have borrowings in excess of these limitations since we will then
be in the process of raising our equity capital to acquire our portfolio.
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Distributions
Our Board of Directors authorized a daily distribution, based on 365 days in the calendar
year, of $0.001781016 (which equates to 6.5% on an annualized basis calculated at the current rate,
assuming a $10.00 per share purchase price) per share for stockholders of record as of each day of
the period commencing on the first day following the release from escrow of the subscription
proceeds received in the Companys public offering, pursuant to the terms of the Escrow Agreement
(the Distribution Start Date), and ending on June 30, 2011. The payment date for each of the
daily distributions for each day of each calendar month in the period commencing on the
Distribution Start Date and ending on June 30, 2011 will be in the following calendar month.
Election as a REIT
We intend to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning
with the year ending December 31, 2011, or the first year in which we commence material operations.
To qualify as a REIT, we must meet certain organizational and operational requirements, including a
requirement to distribute at least 90% of our ordinary taxable income to stockholders. As a REIT,
we generally will not be subject to federal income tax on taxable income that we distribute to our
stockholders. If we fail to qualify as a REIT in any taxable year, we will then be subject to
federal income taxes on our taxable income for four years following the year during which
qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory
provisions. Such an event could materially adversely affect our net income and net cash available
for distribution to stockholders. However, we believe that we are organized and operate in such a
manner as to qualify for treatment as a REIT for federal income tax purposes. No provision for
federal income taxes has been made in our accompanying condensed consolidated unaudited financial
statements. We are subject to certain state and local taxes related to the operations of properties
in certain locations, which have been provided for in our accompanying financial statements.
Inflation
We expect to be exposed to inflation risk as income from long-term leases will be the primary
source of our cash flows from operations. We expect that there will be provisions in certain of our
tenant leases that are intended to help protect us from, and mitigate the risk of, the impact of
inflation, including rent steps and clauses enabling us to receive payment of additional rent
calculated as a percentage of the tenants gross sales above pre-determined thresholds. In
addition, we expect most of our leases will require the tenant to pay all or a majority of the
operating expenses, including real estate taxes, special assessments and sales and use taxes,
utilities, insurance and building repairs, related to the property. However, due to the long-term
nature of the leases, the leases may not re-set frequently enough to adequately offset the effects
of inflation.
Commitments and Contingencies
We expect that we may be subject to certain contingencies and commitments with regard to
future transactions. Refer to Note 4 to our condensed consolidated unaudited financial statements
accompanying this Quarterly Report on Form 10-Q for further explanations.
Related-Party Transactions and Agreements
We have entered into agreements with CCI Advisors and its affiliates, whereby we agree to pay
certain fees, or reimburse certain expenses of, CCI Advisors or its affiliates for acquisition and
advisory fees and expenses, financing coordination fees, organization and offering costs, sales
commissions, dealer manager fees, asset and property management fees and expenses, leasing fees and
reimbursement of certain operating costs. In addition, we have entered into an agreement to
purchase a single-tenant office building for $32.85 million from an affiliate of our advisor,
subject to certain conditions. See Note 5 to our condensed consolidated unaudited financial
statements included in this Quarterly Report on Form 10-Q for a discussion of the various
related-party transactions, agreements and fees.
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Subsequent Events
Certain events occurred subsequent to March 31, 2011 through the date of this Quarterly Report
on Form 10-Q. Refer to Note 8 to our condensed consolidated unaudited financial statements included
in this Quarterly Report on Form 10-Q for further explanation.
New Accounting Pronouncements
There are no accounting pronouncements that have been issued but not yet adopted by us that
will have a material impact on our consolidated financial statements.
Off Balance Sheet Arrangements
As of March 31, 2011 and December 31, 2010, we had no material off-balance sheet arrangements
that had or are reasonably likely to have a current or future effect on our financial condition,
results of operations, liquidity or capital resources.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
When we commence principal operations, we will be exposed to interest rate changes primarily
as a result of long-term debt used to acquire properties and make loans and other permitted
investments. We intend to manage our interest rate risk by limiting the impact of interest rate
changes on earnings and cash flows and to lower overall borrowing costs. To achieve these
objectives, we expect to borrow primarily at fixed rates or variable rates with the lowest margins
available and, in some cases, with the ability to convert variable rates to fixed rates. With
regard to variable rate financing, we will assess interest rate cash flow risk by continually
identifying and monitoring changes in interest rate exposures that may adversely impact expected
future cash flows and by evaluating hedging opportunities. We may enter into derivative financial
instruments such as interest rate swaps, interest rate caps, and rate lock arrangements in order to
mitigate our interest rate risk.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), we, under the supervision and with the participation of our chief
executive officer and chief financial officer, carried out an evaluation of the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange
Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that
evaluation, our chief executive officer and chief financial officer concluded that our disclosure
controls and procedures, as of March 31, 2011, were effective in all material respects to ensure
that information required to be disclosed by us in this Quarterly Report on Form 10-Q is recorded,
processed, summarized and reported within the time periods specified by the rules and forms
promulgated under the Exchange Act, and is accumulated and communicated to management, including
our chief executive officer and chief financial officer, as appropriate to allow timely decisions
regarding required disclosures.
Changes in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d -15(f) of the Exchange Act) in connection with the foregoing evaluations that
occurred during the three months ended March 31, 2011 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
OTHER INFORMATION
Item 1. | Legal Proceedings |
We are not a party to any material pending legal proceedings.
Item 1A. | Risk Factors |
There have been no material changes from the risk factors set forth in our Registration
Statement on Form S-11.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
On April 29, 2010, the Company sold 20,000 shares of common stock, at $10.00 per share, to
Cole Holdings Corporation, the indirect owner of our Advisor and dealer manager. On February 10,
2011, our Registration Statement on Form S-11 (Registration No. 333-166447) for the offering of up
to 250,000,000 shares of common stock at a price of $10.00 per share, subject to reduction in
certain circumstances, was declared effective under the Securities Act of 1933, as amended. The
Registration Statement also covered the offering of up to 50,000,000 shares of common stock
pursuant to a distribution reinvestment plan, under which stockholders may elect to have
distributions reinvested in additional shares at a price of $9.50 per share.
Subscription proceeds will be placed in escrow until such time as subscriptions aggregating at
least the minimum offering of 250,000 shares of our common stock have been received and accepted by
us. Any shares purchased by our directors, officers, Advisor or their
respective affiliates will not be counted in calculating the
minimum offering. Funds in escrow will be invested in short-term investments, which may include
obligations of, or obligations guaranteed by, the U.S. government or bank money-market accounts or
certificates of deposit of national or state banks that have deposits insured by the Federal
Deposit Insurance Corporation (including certificates of deposit of any bank acting as a depository
or custodian for any such funds) that mature on or before February 10, 2012 or that can be readily
sold or otherwise disposed of for cash by such date without any dissipation of the Offering
proceeds. Amounts associated with these subscriptions will be reflected in restricted cash on our
balance sheet. During the three months ended March 31, 2011, we did not sell any equity securities
that were not registered under the Securities Act of 1933, as amended, and we did not repurchase
any of our securities.
Item 3. | Defaults Upon Senior Securities |
No events occurred during the three months ended March 31, 2011 that would require a response
to this item.
Item 4. | [Removed and Reserved] |
Item 5. | Other Information |
No events occurred during the three months ended March 31, 2011 that would require a response
to this item.
Item 6. | Exhibits |
The exhibits listed on the Exhibit Index (following the signatures section of this Quarterly
Report on Form 10-Q) are included herewith, or incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Cole Corporate Income Trust, Inc. (Registrant) |
||||
By: | /s/ Simon J. Misselbrook | |||
Simon J. Misselbrook | ||||
Vice President of Accounting (Principal Accounting Officer) |
||||
Date: May 11, 2011
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EXHIBIT INDEX
The following exhibits are included, or incorporated by reference, in this Quarterly Report on
Form 10-Q for the three months ended March 31, 2011 (and are numbered in accordance with Item 601
of Regulation S-K).
Exhibit No. | Description | |
3.1
|
Articles of Amendment and Restatement of Cole Corporate Income Trust, Inc. dated January 19, 2011 (Incorporated by reference to Exhibit 3.1 to the Companys pre-effective amendment to Form S-11 (File No. 333-166447), filed on January 25, 2011). | |
3.2
|
Bylaws of Cole Corporate Income Trust Inc. adopted January 18, 2011 (Incorporated by reference to Exhibit 3.2 to the Companys pre-effective amendment to Form S-11 (File No. 333-166447), filed on January 25, 2011). | |
3.3
|
Articles of Amendment to Articles of Amendment and Restatement effective February 23, 2011 (Incorporated by reference to Exhibit 3.1 to the Companys Form 8-K (File No. 333-166447), filed on February 28, 2011). | |
4.1
|
Form of Subscription Agreement and Subscription Agreement Signature Page (included as Exhibit 4.1 to the Companys post-effective amendment to Form S-11 (File No. 333-166447), filed on April 22, 2011). | |
4.2
|
Form of Additional Investment Subscription Agreement (included as Exhibit 4.2 to the Companys post-effective amendment to Form S-11 (File No. 333-166447), filed on April 22, 2011). | |
4.3
|
Form of Alternative Subscription Agreement (Incorporated by reference to Exhibit 4.3 to the Companys post-effective amendment to Form S-11 (File No. 333-166447), filed on April 22, 2011). | |
4.4
|
Form of Alternative Additional Investment Subscription Agreement (Incorporated by reference to Exhibit 4.4 to the Companys post-effective amendment to Form S-11 (File No. 333-166447), filed on April 22, 2011). | |
10.1
|
Advisory Agreement by and between Cole Corporate Income Trust, Inc. and Cole Corporate Income Advisors, LLC dated January 18, 2011 (Incorporated by reference to Exhibit 10.1 to the Companys pre-effective amendment to Form S-11 (File No. 333-166447), filed on January 25, 2011). | |
10.2
|
Agreement of Limited Partnership of Cole Corporate Income Operating Partnership, LP, by and between Cole Corporate Income Trust, Inc. and the limited partners thereto dated April 29, 2010 (Incorporated by reference to Exhibit 10.2 of the Companys pre-effective amendment to Form S-11 (File No. 333-166447), filed on January 25, 2011). | |
10.3
|
Distribution Reinvestment Plan (Incorporated by reference to Appendix D to the prospectus of the Company filed pursuant to Rule 424(b)(3) on May 4, 2011). | |
10.4
|
Escrow Agreement by and among Cole Corporate Income Trust, Inc., Cole Capital Corporation and UMB Bank, N.A. dated January 18, 2011 (Incorporated by reference to Exhibit 10.4 of the Companys pre-effective amendment to Form S-11 (File No. 333-166447), filed on January 25, 2011). | |
10.5
|
Purchase and Sale Agreement dated as of February 24, 2011 by and between Series C, LLC and Cole Corporate Income Operating Partnership, LP (Incorporated by reference to Exhibit 10.5 to the Companys post-effective amendment to Form S-11 (File No. 333-166447), filed on April 22, 2011. | |
31.1*
|
Certification of the Chief Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2*
|
Certification of the Chief Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1**
|
Certification of the Chief Executive Officer and Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Filed herewith |
|
** | In accordance with Item 601(b) (32) of Regulation S-K, this Exhibit is not deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. |
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