UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

    

FORM 8-K/A
    

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 12, 2011
    

WELLS CORE OFFICE INCOME REIT, INC.
(Exact name of registrant specified in its charter)
    

Maryland
000-54248
26-0500668
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
IRS Employer
Identification No.

6200 The Corners Parkway
Norcross, Georgia 30092-3365
(Address of principal executive offices)

Registrant's telephone number, including area code: (770) 449-7800

Not Applicable
(Former name or former address, if changed since last report)

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))




INFORMATION TO BE INCLUDED IN THE REPORT

Wells Core Office Income REIT, Inc. (the “Registrant”) hereby amends its Current Report on Form 8-K dated May 12, 2011 and filed on May 13, 2011 to provide the required financial statements relating to the acquisition by the Registrant of the Duke Bridges I & II Buildings (the “Duke Bridges I & II Buildings”), as described in such Current Report.
Item 9.01.     Financial Statements and Exhibits.

(a)    Financial Statements. The following financial statements of the Duke Bridges I & II Buildings and the Registrant are submitted at the end of this Form 8-K/A and are filed herewith and incorporated herein by reference.

(b)    Pro Forma Financial Information. See Paragraph (a) above.
         
Duke Bridges I & II Buildings
 
 
 
 
 
Independent Auditors' Report
 
F-1
 
 
 
Statements of Revenues Over Certain Operating Expenses for the year ended December 31, 2010 (audited) and for the three months ended March 31, 2011 (unaudited)
 
F-2
 
 
 
Notes to Statements of Revenues Over Certain Operating Expenses for the year ended December 31, 2010 (audited) and for the three months ended March 31, 2011 (unaudited)
 
F-3
 
 
 
Wells Core Office Income REIT, Inc.
 
 
 
 
 
Unaudited Pro Forma Financial Statements
 
 
 
 
 
Summary of Unaudited Pro Forma Financial Statements
 
F-5
 
 
 
Pro Forma Balance Sheet as of March 31, 2011 (unaudited)
 
F-6
 
 
 
Pro Forma Statement of Operations for the three months ended March 31, 2011 (unaudited)
 
F-9
 
 
 
Pro Forma Statement of Operations for the year ended December 31, 2010 (unaudited)
 
F-11
 
 



2




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.
 
 
 
 
 
 
 
WELLS CORE OFFICE INCOME REIT, INC.
 
 
 
Dated: June 20, 2011
By:
 
/s/ Douglas P. Williams
 
 
 
Douglas P. Williams
 
 
 
Executive Vice President, Secretary and Treasurer





3



INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of
Wells Core Office Income REIT, Inc.
Atlanta, Georgia

We have audited the accompanying statement of revenues over certain operating expenses of the Duke Bridges I & II Buildings (the “Buildings”) for the year ended December 31, 2010. This statement is the responsibility of the Buildings' management. Our responsibility is to express an opinion on this statement based on our audit.

We conducted our audit in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The accompanying statement of revenues over certain operating expenses was prepared for the purpose of complying with the rules of the Securities and Exchange Commission, as described in Note 2, and is not intended to be a complete presentation of the Buildings' revenues and expenses.

In our opinion, the statement of revenues over certain operating expenses referred to above presents fairly, in all material respects, the revenues over certain operating expenses described in Note 2 of the Buildings for the year ended December 31, 2010 in conformity with U.S. generally accepted accounting principles.


/s/ Frazier & Deeter, LLC

Atlanta, Georgia
June 20, 2011




F-1



Duke Bridges I & II Buildings
Statements of Revenues Over Certain Operating Expenses
For the year ended December 31, 2010 (audited)
and the three months ended March 31, 2011 (unaudited)

 
March 31, 2011
 
December 31, 2010
 
(unaudited)
 
 
Revenues:
 
 
 
Base rent
$
1,330,608

 
$
5,322,430

Tenant reimbursements
329,951

 
1,289,015

Total revenues
1,660,559

 
6,611,445

 
 
 
 
Expenses:
 
 
 
Real estate taxes
229,818

 
887,649

Repairs and maintenance
8,187

 
112,684

Utilities
176,028

 
850,067

Cleaning
36,280

 
139,949

Management fees
29,016

 
119,037

Other
85,195

 
336,643

Total expenses
564,524

 
2,446,029

Revenues over certain operating expenses
$
1,096,035

 
$
4,165,416


See accompanying notes.

F-2



Duke Bridges I & II Buildings
Notes to Statements of Revenues Over Certain Operating Expenses
For the year ended December 31, 2010 (audited)
and the three months ended March 31, 2011 (unaudited)


1. Description of Real Estate Property Acquired

On May 12, 2011, the Registrant, through a wholly-owned subsidiary, acquired fee-simple interests in two three-story office buildings known as the Duke Bridges I & II Buildings (the "Buildings"). The Buildings contain approximately 284,200 rentable square feet and are located on approximately 22.6 acres of land in Frisco, Texas. The Buildings were purchased from KanAm Grund Kapitalanlagegesellschaft mBH (the "Seller"). Total consideration for the acquisition was approximately $49.0 million, exclusive of closing costs. The Registrant is a Maryland corporation that engages in the acquisition and ownership of commercial real estate properties throughout the United States. The Registrant was incorporated on July 3, 2007 and has elected to be taxed as a real estate investment trust for federal income tax purposes.

2. Basis of Accounting

The accompanying statement of revenues over certain operating expenses is presented in conformity with accounting principles generally accepted in the United States and in accordance with the applicable rules and regulations of the Securities and Exchange Commission for real estate properties acquired. Accordingly, the statements exclude certain historical expenses that are not comparable to the proposed future operations of the property such as certain ancillary income, amortization, depreciation, interest, and corporate expenses. Therefore, the statement will not be comparable to the statements of operations of the Buildings after their acquisition by the Registrant.

3. Significant Accounting Policies    

Revenues

Rental revenue is recognized on a straight-line basis over the terms of the related leases. The excess of rental income recognized over the amounts due pursuant to the lease terms is recorded as straight-line rent receivable. The adjustment to straight-line rent receivable decreased rental revenue by approximately $413,922 for the year ended December 31, 2010 and approximately $100,430 for the three months ended March 31, 2011.

Use of Estimates

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

4. Description of Leasing Arrangements

The Buildings are 100% leased to two tenants, including T-Mobile West Corporation (“T-Mobile West”), a subsidiary of T-Mobile USA, Inc. T-Mobile West occupies approximately 90% of the Buildings' rentable square footage through April 2017. T-Mobile West contributed approximately 92% of the rental income for the year ended December 31, 2010 and the three months ended March 31, 2011. Under the terms of the T-Mobile West lease, the tenant is required to reimburse the landlord for all operating expenses. Effective April 2014, T-Mobile West also has a one-time right to terminate its lease at Duke Bridges I with 12 months notice and the payment of a $5.9 million termination fee. Effective February 2014, T-Mobile West also has a one-time right to terminate its lease at Duke Bridges II with 12 months notice and the payment of a $5.8 million termination fee. The remaining rentable square footage is leased to DebtXS, L.P. through March 2017. Both of the tenants have the right to extend the term of its lease for one additional five-year renewal period at the then-current market rate.

F-3




5. Future Minimum Rental Commitments

At December 31, 2010, future minimum rental commitments for the years ended December 31 are as follows:

2011
$
5,765,150

2012
5,770,419

2013
5,786,715

2014
5,851,841

2015
5,875,690

Thereafter
7,483,676

 
$
36,533,491


Subsequent to December 31, 2010, T-Mobile West will contribute approximately 90% of the future minimum rental income from the leases in place at that date.

6. Interim Unaudited Financial Information

The statement of revenues over certain operating expenses for the three months ended March 31, 2011 is unaudited; however, in the opinion of management, all adjustments (consisting solely of normal, recurring adjustments) necessary for the fair presentation of the financial statement for the interim period have been included. The results of the interim period are not necessarily indicative of the results to be obtained for a full fiscal year.

7. Subsequent Events

Subsequent events related to the Buildings have been evaluated through June 20, 2011, which is the date the statement was available to be issued. All subsequent events, if any, requiring recognition as of December 31, 2010 have been incorporated into this statement.


F-4




WELLS CORE OFFICE INCOME REIT, INC.

Summary of Unaudited Pro Forma Financial Statements

This pro forma information should be read in conjunction with the consolidated financial statements and notes thereto of the Registrant included in its annual report filed on Form 10-K for the year ended December 31, 2010 and its quarterly report filed on Form 10-Q for the three months ended March 31, 2011. In addition, this pro forma information should be read in conjunction with the financial statements and notes thereto of certain acquired properties included in this current report.
The following unaudited pro forma balance sheet as of March 31, 2011 has been prepared to give effect to the acquisitions of the Duke Bridges I and II Buildings and the Miramar Centre II Building (the "Q2 2011 Acquisitions") as if the acquisitions occurred on March 31, 2011. Other adjustments provided in the following unaudited pro forma balance sheet are comprised of certain pro forma financing-related activities, including, but not limited to, capital raised through the issuance of additional common stock through the acquisition date of the Miramar Centre II Building and pay-down of acquisition-related debt subsequent to the pro forma balance sheet date.
The following unaudited pro forma statement of operations for the three months ended March 31, 2011 has been prepared to give effect to the acquisitions of the Westway One Building and the Q2 2011 Acquisitions as if the acquisitions occurred on January 1, 2010.
The following unaudited pro forma statement of operations for the year ended December 31, 2010 has been prepared to give effect to the acquisitions of the Royal Ridge V Building, the 333 East Lake Building (the "2010 Acquisitions"), the Westway One Building and the Q2 2011 Acquisitions as if the acquisitions occurred on January 1, 2010.
These unaudited pro forma financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the 2010 Acquisitions, the Westway One Building and the Q2 2011 Acquisitions been consummated as of January 1, 2010. In addition, the pro forma balance sheet includes pro forma allocations of the purchase price based upon preliminary estimates of the fair value of the assets and liabilities acquired in connection with the acquisitions of the Q2 2011 Acquisitions. These allocations may be adjusted in the future upon finalization of these preliminary estimates.



F-5



WELLS CORE OFFICE INCOME REIT, INC.
PRO FORMA BALANCE SHEET
MARCH 31, 2011
(in thousands)
(unaudited)

ASSETS
 
 
 
Pro Forma Adjustments
 
 
 
 
Q2 Acquisitions
 
 
 
 
Wells Core Office Income REIT, Inc.
Historical(a)
 
Duke Bridges
 
Miramar Centre II
 
Other
 
 Pro Forma
Total
Real estate assets, at cost:
 
 
 
 
 
 
 
 
 
Land
$
4,778

 
$
6,750

(b)
$
4,000

(b)
$

 
$
15,528

Buildings and improvements, less accumulated depreciation
47,548

 
31,688

(b)
13,125

(b)

 
92,361

Intangible lease assets, less accumulated amortization
5,077

 
8,450

(b)
3,500

(b)

 
17,027

Total real estate assets
57,403

 
46,888

 
20,625

 

 
124,916

 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
6,787

 
(12,967
)
(c)
(1,280
)
(c)
26,212

(d)
1,160

 
 
 
 
 

 
(592
)
(i)
 
 
 
 
 
 
 
 
(17,000
)
(e)
 
Tenant receivables
239

 

 

 

 
239

Prepaid expenses and other assets
235

 

 

 

 
235

Deferred financing costs, less accumulated amortization
1,062

 

 

 

 
1,062

Intangible lease origination costs, less accumulated amortization
2,352

 
2,113

(b)
875

(b)

 
5,340

Total assets
$
68,078

 
$
36,034

 
$
20,220

 
$
8,620

 
$
132,952




F-6




WELLS CORE OFFICE INCOME REIT, INC.
PRO FORMA BALANCE SHEET
MARCH 31, 2011
(in thousands)
(unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

 
 
 
Pro Forma Adjustments
 
 
 
 
Q2 Acquisitions
 
 
 
 
Wells Core Office Income REIT, Inc.
Historical(a)
 
Duke Bridges
 
Miramar Centre II
 
Other
 
 Pro Forma
Total
Liabilities:
 
 
 
 
 
 
 
 
 
Lines of credit and notes payable
$
19,900

 
$
35,500

(f)
$
19,300

(f)
$
(17,000
)
(e)
$
57,700

Accounts payable and accrued expenses
1,132

 
460

(g)
578

(g)

 
2,170

Due to affiliates
972

 

 

 

 
972

Distributions payable
133

 

 

 

 
133

Deferred income
371

 
74

(h)
342

(h)

 
787

Total liabilities
22,508

 
36,034

 
20,220

 
(17,000
)
 
61,762

 
 
 
 
 
 
 
 
 
 
Redeemable Common Stock
170

 

 

 

 
170

 
 
 
 
 
 
 
 
 
 
Stockholders' Equity:
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value; 1,000,000,000 shares authorized; and 2,225,330 issued and outstanding as of March 31, 2011
22

 

 

 
12

(d)
34

Additional paid-in capital
49,253

 

 

 
26,200

(d)
75,453

Cummulative distributions in excess of earnings
(3,705
)
 

 

 
(592
)
(i)
(4,297
)
Redeemable common stock
(170
)
 

 

 

 
(170
)
Total stockholders' equity
45,400

 

 

 
25,620

 
71,020

Total liabilities, redeemable common stock, and stockholders' equity
$
68,078

 
$
36,034

 
$
20,220

 
$
8,620

 
$
132,952


(a)
Historical financial information is derived from Wells Core REIT's quarterly report filed on Form 10-Q as of March 31, 2011.
(b)
Reflects the purchase price of the assets and liabilities obtained by Wells Core REIT in connection with the respective acquisition, net of any purchase price adjustments.
(c)
Represents cash used to fund purchase of the assets obtained by the Registrant in connection with the respective acquisition.
(d)
Reflects capital raised through issuance of additional common stock subsequent to March 31, 2011 through May 27, 2011, net of organizational and offering costs, commissions and dealer-manager fees.
(e)
Reflects pay down of acquisition-related borrowings using capital raised described in note (d) above.
(f)
Represents amounts drawn on the Regions Credit Facility that bears interest at rates equal to (1) LIBOR (subject to a LIBOR floor of 1.00%) plus the applicable LIBOR Margin (the “LIBOR Rate”) or (2) the greater of (a) the prime rate announced by Regions Bank, (b) the Federal Funds Effective Rate plus 0.5% or (c) the 30-day LIBOR (adjusted daily) plus 1.0%, plus the applicable base rate margin (the “Base Rate”). The applicable LIBOR margin may vary from 3.0% to 4.0% and the applicable base rate margin may vary from 2.0% to 3.0% based on our then current leverage ratio.
(g)
Represents real estate tax and deferred tenant allowance liabilities assumed at acquisition.
(h)
Represents operating expense reconciliation liability assumed at acquisition.
(i)
Represents acquisition fees of 2.0% of gross offering proceeds raised described in note (d) above.
The accompanying notes are an integral part of this statement.




F-7




WELLS CORE OFFICE INCOME REIT, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
(in thousands)
(unaudited)

 
 
 
Pro Forma Adjustments
 
 
 
 
 
 
 
Q2 2011 Acquisitions
 
 
Wells Core Office Income REIT, Inc.
Historical(a)
 
Westway One
 
 
Duke Bridges
 
 
Miramar Centre II
 
 Pro Forma
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
1,329

 
$
185

(b)
 
$
1,309

(b)
 
$
400

(b)
$
3,223

Tenant reimbursements
496

 
110

(c)
 
330

(c)
 
209

(c)
1,145

 
1,825

 
295

 
 
1,639

 
 
609

 
4,368

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Property operating costs
620

 
112

(d)
 
565

(d)
 
170

(d)
1,467

Asset and property management fees:
 
 
 
 
 
 
 
 
 
 
 
Related party
117

 
17

(e)
 
92

(e)
 
40

(e)
266

Other
23

 

 
 

 
 

 
23

Depreciation
469

 
76

(f)
 
198

(f)
 
81

(f)
824

Amortization
186

 
34

(g)
 
418

(g)
 
155

(g)
793

General and administrative
496

 

 
 

 
 

 
496

Acquisition fees and expenses
988

 

 
 

 
 

 
988

 
2,899

 
239

 
 
1,273

 
 
446

 
4,857

Real estate operating income (loss)
(1,074
)
 
56

 
 
366

 
 
163

 
(489
)
Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(480
)
 
(5
)
(h)
 
(8
)
(h)
 
(3
)
(h)
(496
)
Interest and other income

 

 
 

 
 

 

 
(480
)
 
(5
)
 
 
(8
)
 
 
(3
)
 
(496
)
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income tax expense
(1,554
)
 
51

 
 
358

 
 
160

 
(985
)
Income tax expense
(11
)
 

 
 

 
 

 
(11
)
Net income (loss)
$
(1,565
)
 
$
51

 
 
$
358

 
 
$
160

 
$
(996
)
Per-share information - basis and diluted
$
(1.14
)
 
 
 
 
 
 
 
 
 
$
(0.29
)
Weighted-average common shares outstanding - basic and diluted
1,378

 
 
 
 
 
 
 
 
 
3,410

(a)
Historical financial information derived from Wells Core REIT's quarterly report filed on Form 10-Q for the period ended March 31, 2011.
(b)
Rental income consists primarily of base rent, parking income and amortization of above-market lease assets and below-market lease liabilities. Base rent is recognized on a straight-line basis beginning on the pro forma acquisition date of January 1, 2010.
(c)
Consists of operating cost reimbursements from tenants as defined by the respective leases.
(d)
Consists of property operating expenses, primarily made up of real estate taxes, insurance, utilities and maintenance and support services.
(e)
Asset management fees calculated as 0.75% of the cost of the acquisitions on an annual basis.
(f)
Depreciation expense is calculated using the straight-line method based on the purchase price allocated to building over a 40-year life; tenant improvements over the shorter of the lease term or the useful life, and site improvements over a 15-year life.
(g)
Amortization of deferred leasing costs and lease intangibles is recognized using the straight-line method over the lives of the respective leases.
(h)
Represents additional interest expense that would have been incurred if the balance for the Regions Credit Facility had an average outstanding balance of $46.6 million for the three months ended March 31, 2011, calculated using an interest rate of approximately 4.26%, which is calculated using an average LIBOR rate of 0.26% plus an applicable margin of 400 bps.
The accompanying notes are an integral part of this statement.

F-8



WELLS CORE OFFICE INCOME REIT, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(in thousands)
(unaudited)


 
 
 
Pro Forma Adjustments
 
 
 
 
 
 
 
 
 
Q2 2011 Acquisitions
 
 
Wells Core Office Income REIT, Inc.
Historical(a)
 
2010 Acquisitions
 
Westway One
 
 
Duke Bridges
 
 
Miramar Centre II
 
 Pro Forma
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
657

 
2,541

(b)
$
2,557

(b)
 
$
5,234

(b)
 
$
1,598

(b)
$
12,587

Tenant reimbursements
98

 
569

(c)
1,518

(c)
 
1,289

(c)
 
1,510

(c)
4,984

 
755

 
3110
 
4,075

 
 
6,523

 
 
3,108

 
17,571

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating costs
226

 
1,223

(d)
1,545

(d)
 
2,446

(d)
 
1,348

(d)
6,788

Asset and property management fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
Related party
29

 
166

(e)
233

(e)
 
368

(e)
 
161

(e)
957

Other
15

 

 

 
 

 
 

 
15

Depreciation
252

 
838

(f)
1,050

(f)
 
792

(f)
 
328

(f)
3,260

Amortization
89

 
305

(g)
471

(g)
 
1,672

(g)
 
621

(g)
3,158

General and administrative
695

 
 
 

 
 

 
 

 
695

Acquisition fees and expenses
669

 
 
 

 
 

 
 

 
669

 
1,975

 
2532
 
3,299

 
 
5,278

 
 
2,458

 
15,542

Real estate operating income (loss)
(1,220
)
 
578
 
776

 
 
1,245

 
 
650

 
2,029

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(320
)
 
375

(i)
(510
)
(h)
 
(806
)
(h)
 
(354
)
(h)
(1,615
)
Interest and other income

 
 
 

 
 

 
 

 

 
(320
)
 
375
 
(510
)
 
 
(806
)
 
 
(354
)
 
(1,615
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income tax expense
(1,540
)
 
953

 
266

 
 
439

 
 
296

 
414

Income tax expense
(4
)
 
 
 

 
 

 
 

 
(4
)
Net income (loss)
$
(1,544
)
 
953
 
$
266

 
 
$
439

 
 
$
296

 
$
410

Per-share information - basis and diluted
$
(13.48
)
 
 
 
 
 
 
 
 
 
 
 
$
0.12

Weighted-average common shares outstanding - basic and diluted
115

 
 
 
 
 
 
 
 
 
 
 
3,410

(a)
Historical financial information derived from Wells Core REIT's annual report filed on Form 10-K for the year ended December 31, 2010.
(b)
Rental income consists primarily of base rent, parking income and amortization of above-market lease assets and below-market lease liabilities. Base rent is recognized on a straight-line basis beginning on the pro forma acquisition date of January 1, 2010.
(c)
Consists of operating cost reimbursements from tenants as defined by the respective leases.
(d)
Consists of property operating expenses, primarily made up of real estate taxes, insurance, utilities and maintenance and support services.
(e)
Asset management fees calculated as 0.75% of the cost of the acquisitions on an annual basis.
(f)
Depreciation expense is calculated using the straight-line method based on the purchase price allocated to building over a 40-year life; tenant improvements over the shorter of the lease term or the useful life, and site improvements over a 15-year life.
(g)
Amortization of deferred leasing costs and lease intangibles is recognized using the straight-line method over the lives of the respective leases.
(h)
Represents additional interest expense that would have been incurred if the balance for the Regions Credit Facility had an average outstanding balance of $46.6 million for the twelve months ended December 31, 2010, calculated using an interest rate of approximately 4.27%, which is calculated using an average LIBOR rate of 0.27% plus an applicable margin of 400 bps.
(i)
Represents additional interest expense that would have been incurred if the $11.1 million outstanding related to the for Royal Ridge V Loan had been entered into as of January 1, 2010 calculated using an interest rate of approximately 4.0% for the period from January 1, 2010 to October 7, 2010 (the acquisition date of the Royal Ridge V Building).

The accompanying notes are an integral part of this statement.

F-9