HINES REAL ESTATE INVESTMENT TRUST INC - FORM 8-K - August 5, 2015



UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
 
Date of Report (Date of Earliest Event Reported):
 
July 31, 2015
 
Hines Real Estate Investment Trust, Inc.
__________________________________________
 (Exact name of registrant as specified in its charter)
 
 
 
 
Maryland
000-50805
20-0138854
____________________
(State or other jurisdiction
_____________
(Commission
______________
(I.R.S. Employer
of incorporation)
File Number)
Identification No.)
 
 
 
2800 Post Oak Blvd, Suite 5000, Houston, Texas
 
77056-6118
_________________________________
(Address of principal executive offices)
 
___________
(Zip Code)
 
 
 
 
 
Registrant’s telephone number, including area code:
 
(888) 220-6121
 
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))





Item 2.01 Completion of Acquisition or Disposition of Assets.

Hines REIT 2555 Grand LLC, a subsidiary of Hines REIT Properties, L.P. (the “Operating Partnership”), which is a subsidiary of Hines Real Estate Investment Trust, Inc. (“Hines REIT”), sold 2555 Grand on July 31, 2015 to Grand Boulevard Acquisition LLC (the “Purchaser”). 2555 Grand is an office building located in Kansas City, Missouri. The Purchaser is not affiliated with Hines REIT or its affiliates.

The net contract sale price for 2555 Grand was approximately $153.5 million, exclusive of transaction costs and closing prorations. The net proceeds received by Hines REIT from this sale were $151.6 million after transaction costs.

Item 9.01 Financial Statements and Exhibits.

(b) Pro Forma Financial Information. The following financial information is submitted at the end of this Current Report on Form 8-K and is filed herewith and incorporated herein by reference:

Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2015
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and the Years Ended December 31, 2014, 2013 and 2012
Unaudited Notes to Pro Forma Condensed Consolidated Financial Statements







1


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 thereunto duly authorized.

 
 
HINES REAL ESTATE INVESTMENT TRUST, INC.
 
 
 
 
 
August 5, 2015
 
By:
/s/ J. Shea Morgenroth
 
 
 
 
J. Shea Morgenroth
 
 
 
 
Chief Accounting Officer and Treasurer
 




2



Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
 
On July 31, 2015, a subsidiary of Hines Real Estate Investment Trust, Inc. (“Hines REIT”), sold 2555 Grand, an office building located in Kansas City, Missouri, to Grand Boulevard Acquisition LLC (the “Purchaser”). The net proceeds received from this sale were $151.6 million after transaction costs. The Purchaser is not affiliated with Hines REIT or its affiliates.
 
The following unaudited pro forma condensed consolidated financial information gives effect to the disposition of 2555 Grand, including the receipt of proceeds from the sale.  In our opinion, all material adjustments necessary to reflect the effects of the above transaction have been made.

3


Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 2015
(In thousands)
 
The following unaudited Pro Forma Condensed Consolidated Balance Sheet is presented assuming the disposition of 2555 Grand had occurred as of March 31, 2015.  This unaudited Pro Forma Condensed Consolidated Balance Sheet should be read in conjunction with our unaudited Pro Forma Condensed Consolidated Statements of Operations appearing herein and our historical financial statements and notes thereto as filed in our quarterly report on Form 10-Q for the three months ended March 31, 2015.  This unaudited Pro Forma Condensed Consolidated Balance Sheet is not necessarily indicative of what the actual financial position would have been had we completed this transaction on March 31, 2015, nor does it purport to represent our future financial position.
 
 
As of
March 31, 2015 (a)
 
Adjustments for
2555 Grand
 
 
 
Pro Forma
ASSETS
 
 
 
 
 
 
 
 
Investment property, at cost:
 
 
 
 
 
 
 
 
Buildings and improvements, net
 
$
1,374,716

 
$
(102,083
)
 
(b)
 
$
1,272,633

Land
 
422,662

 
(1,194
)
 
(b)
 
421,468

Total investment property
 
1,797,378

 
(103,277
)
 
 
 
1,694,101

 
 
 
 
 
 
 
 
 
Investments in unconsolidated entities
 
164,079

 
—

 
 
 
164,079

Cash and cash equivalents
 
51,737

 
(186
)
 
(c)
 
51,551

Restricted cash
 
2,344

 
—

 
 
 
2,344

Distributions receivable
 
56,788

 
—

 
 
 
56,788

Tenant and other receivables, net
 
46,932

 
(8,736
)
 
(b)
 
38,196

Intangible lease assets, net
 
159,523

 
(17,463
)
 
(b) 
 
142,060

Deferred leasing costs, net
 
147,435

 
(14,442
)
 
(b) 
 
132,993

Deferred financing costs, net
 
3,118

 
—

 
(b) 
 
3,118

Other assets
 
3,735

 
(18
)
 
(b) 
 
3,717

TOTAL ASSETS
 
$
2,433,069

 
$
(144,122
)
 
 
 
$
2,288,947

 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
75,052

 
$
(11,583
)
 
(b) 
 
$
63,469

Due to affiliates
 
8,080

 
(965
)
 
(b) 
 
7,115

Intangible lease liabilities, net
 
30,281

 
—

 
(b) 
 
30,281

Other liabilities
 
15,371

 
(25
)
 
(b) 
 
15,346

Interest rate swap contracts
 
31,200

 
—

 
 
 
31,200

Participation interest liability
 
112,649

 
—

 
 
 
112,649

Distributions payable
 
15,004

 
—

 
 
 
15,004

Notes payable
 
1,025,362

 
—

 
(b) 
 
1,025,362

Total liabilities
 
1,312,999

 
(12,573
)
 
 
 
1,300,426

 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
—

 
—

 
 
 
—

 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
Preferred shares
 
—

 
—

 
 
 
—

Common shares
 
224

 
—

 
 
 
224

Additional paid-in capital
 
1,055,911

 
—

 
 
 
1,055,911

Retained earnings (deficit)
 
64,936

 
(131,549
)
 
(d)
 
(66,613
)
Accumulated other comprehensive income (loss)
 
(1,001
)
 
—

 
 
 
(1,001
)
Total stockholders’ equity
 
1,120,070

 
(131,549
)
 
 
 
988,521

Noncontrolling interests
 
—

 
—

 
 
 
—

Total equity
 
1,120,070

 
(131,549
)
 
 
 
988,521

TOTAL LIABILITIES AND EQUITY
 
$
2,433,069

 
$
(144,122
)
 
 
 
$
2,288,947


See notes to unaudited pro forma condensed consolidated financial statements.

4


Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2015
(In thousands, except per share amounts)
 
The following unaudited Pro Forma Condensed Consolidated Statement of Operations is presented assuming the disposition of 2555 Grand had occurred as of January 1, 2012.  This unaudited Pro Forma Condensed Consolidated Statement of Operations should be read in conjunction with our unaudited Pro Forma Condensed Consolidated Balance Sheet and our historical financial statements and notes thereto as filed in our quarterly report on Form 10-Q for the three months ended March 31, 2015.  This unaudited Pro Forma Condensed Consolidated Statement of Operations is not necessarily indicative of what the actual results of operations would have been had we completed this transaction on January 1, 2012, nor does it purport to represent our future operations.
 
 
 
Three Months Ended
 March 31, 2015 (a)
 
Adjustments for 2555 Grand (b)
 
Pro Forma
Revenues:
 
 

 
 
 
 

Rental revenue
 
$
51,826

 
$
(4,170
)
 
$
47,656

Other revenue
 
4,164

 
(233
)
 
3,931

Total revenues 
 
55,990

 
(4,403
)
 
51,587

Expenses:
 
 
 
 
 
 
Property operating expenses
 
14,832

 
(1,120
)
 
13,712

Real property taxes
 
7,652

 
(299
)
 
7,353

Property management fees
 
1,487

 
(105
)
 
1,382

Depreciation and amortization
 
22,483

 
(1,054
)
 
21,429

Acquisition related expenses
 
56

 
—

 
56

Asset management and acquisition fees
 
8,681

 
—

 
8,681

General and administrative
 
1,350

 
—

 
1,350

Total expenses
 
56,541

 
(2,578
)
 
53,963

Operating income
 
(551
)
 
(1,825
)
 
(2,376
)
Other income (expenses):
 
 
 
 
 
 
Gain (loss) on derivative instruments, net
 
3,193

 
—

 
3,193

Gain (loss) on sale or dissolution of unconsolidated joint venture
 
—

 
—

 
—

Equity in earnings (losses) of unconsolidated entities, net
 
33,199

 
—

 
33,199

Gain (loss) on sale of real estate investments
 
21,079

 
—

 
21,079

Interest expense
 
(9,481
)
 
—

 
(9,481
)
Interest income
 
10

 
—

 
10

Income (loss) from continuing operations before benefit (provision) for income taxes
 
47,449

 
(1,825
)
 
45,624

Benefit (provision) for income taxes
 
(86
)
 
—

 
(86
)
Income (loss) from continuing operations
 
$
47,363

 
$
(1,825
)
 
$
45,538

Income (loss) from continuing operations per common share
 
$
0.21

 
 
 
$
0.20

Weighted average number common shares outstanding
 
224,260

 
 
 
224,260

 
See notes to unaudited pro forma condensed consolidated financial statements.

5


Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2014
(In thousands, except per share amounts)
 
The following unaudited Pro Forma Condensed Consolidated Statement of Operations is presented assuming the disposition of 2555 Grand had occurred as of January 1, 2012.  This unaudited Pro Forma Condensed Consolidated Statement of Operations should be read in conjunction with our unaudited Pro Forma Condensed Consolidated Balance Sheet and our historical financial statements and notes thereto as filed in our annual report on Form 10-K for the year ended December 31, 2014.  This unaudited Pro Forma Condensed Consolidated Statement of Operations is not necessarily indicative of what the actual results of operations would have been had we completed this transaction on January 1, 2012, nor does it purport to represent our future operations.
 
 
 
Year Ended December 31, 2014 (a)
 
Adjustments for
2555 Grand
(b)
 
Pro Forma
Revenues:
 
 

 
 
 
 

Rental revenue
 
$
219,435

 
$
(18,414
)
 
$
201,021

Other revenue
 
16,588

 
(941
)
 
15,647

Total revenues 
 
236,023

 
(19,355
)
 
216,668

Expenses:
 
 
 
 
 
 
Property operating expenses
 
69,372

 
(4,676
)
 
64,696

Real property taxes
 
31,713

 
(1,153
)
 
30,560

Property management fees
 
5,943

 
(462
)
 
5,481

Depreciation and amortization
 
95,827

 
(4,528
)
 
91,299

Acquisition related expenses
 
375

 
—

 
375

Asset management and acquisition fees
 
37,042

 
—

 
37,042

General and administrative
 
6,950

 
—

 
6,950

Impairment losses
 
3,314

 
—

 
3,314

Total expenses
 
250,536

 
(10,819
)
 
239,717

Operating income (loss)
 
(14,513
)
 
(8,536
)
 
(23,049
)
Other income (expenses):
 
 
 
 
 
 
Gain (loss) on derivative instruments, net
 
33,258

 
—

 
33,258

Gain (loss) on settlement of derivative instruments
 
(12,334
)
 
—

 
(12,334
)
Gain (loss) on sale or dissolution of unconsolidated joint venture
 
13,381

 
—

 
13,381

Equity in earnings (losses) of unconsolidated entities, net
 
56,936

 
—

 
56,936

Gain (loss) on sale of real estate investments
 
18,525

 
—

 
18,525

Interest expense
 
(47,352
)
 
—

 
(47,352
)
Interest income
 
655

 
—

 
655

Income (loss) from continuing operations before benefit (provision) for income taxes
 
48,556

 
(8,536
)
 
40,020

Benefit (provision) for income taxes
 
(310
)
 
—

 
(310
)
Income (loss) from continuing operations
 
$
48,246

 
$
(8,536
)
 
$
39,710

Income (loss) from continuing operations per common share
 
$
0.21

 
 
 
$
0.18

Weighted average number common shares outstanding
 
226,412

 
 
 
226,412


 See notes to unaudited pro forma condensed consolidated financial statements.

6


Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2013
(In thousands, except per share amounts)
 
The following unaudited Pro Forma Condensed Consolidated Statement of Operations is presented assuming the disposition of 2555 Grand had occurred as of January 1, 2012.  This unaudited Pro Forma Condensed Consolidated Statement of Operations should be read in conjunction with our unaudited Pro Forma Condensed Consolidated Balance Sheet and our historical financial statements and notes thereto as filed in our annual report on Form 10-K for the year ended December 31, 2013.  This unaudited Pro Forma Condensed Consolidated Statement of Operations is not necessarily indicative of what the actual results of operations would have been had we completed this transaction on January 1, 2012, nor does it purport to represent our future operations.
 
 
 
Year Ended December 31, 2013 (a)
 
Adjustments for
2555 Grand
(b)
 
Pro Forma
Revenues:
 
 

 
 
 
 

Rental revenue
 
$
158,819

 
$
(17,262
)
 
$
141,557

Other revenue
 
9,289

 
(942
)
 
8,347

Total revenues 
 
168,108

 
(18,204
)
 
149,904

Expenses:
 
 
 
 
 
 
Property operating expenses
 
54,429

 
(4,483
)
 
49,946

Real property taxes
 
24,282

 
(178
)
 
24,104

Property management fees
 
4,132

 
(426
)
 
3,706

Depreciation and amortization
 
51,262

 
(4,528
)
 
46,734

Acquisition related expenses
 
330

 
—

 
330

Asset management and acquisition fees
 
27,970

 
—

 
27,970

General and administrative
 
7,281

 
—

 
7,281

Impairment losses
 
33,878

 
—

 
33,878

Total expenses
 
203,564

 
(9,615
)
 
193,949

Operating income (loss)
 
(35,456
)
 
(8,589
)
 
(44,045
)
Other income (expenses):
 
 
 
 
 

Gain (loss) on derivative instruments, net
 
33,559

 
—

 
33,559

Gain (loss) on settlement of derivative instruments
 
(5,374
)
 
—

 
(5,374
)
Gain (loss) on sale or dissolution of unconsolidated joint venture
 
16,087

 
—

 
16,087

Equity in earnings (losses) of unconsolidated entities, net
 
82,468

 
—

 
82,468

Gain (loss) on sale of real estate investments
 
—

 
—

 
—

Interest expense
 
(47,453
)
 
2,373

 
(45,080
)
Interest income
 
779

 
—

 
779

Income (loss) from continuing operations before benefit (provision) for income taxes
 
44,610

 
(6,216
)
 
38,394

Benefit (provision) for income taxes
 
(274
)
 
—

 
(274
)
Income (loss) from continuing operations
 
$
44,336

 
$
(6,216
)
 
$
38,120

Income (loss) from continuing operations per common share
 
$
0.19

 
 
 
$
0.16

Weighted average number common shares outstanding
 
231,551

 
 
 
231,551


 See notes to unaudited pro forma condensed consolidated financial statements.

7


Hines Real Estate Investment Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2012
(In thousands, except per share amounts)
 
The following unaudited Pro Forma Condensed Consolidated Statement of Operations is presented assuming the disposition of 2555 Grand had occurred as of January 1, 2012.  This unaudited Pro Forma Condensed Consolidated Statement of Operations should be read in conjunction with our unaudited Pro Forma Condensed Consolidated Balance Sheet and our historical financial statements and notes thereto as filed in our annual report on Form 10-K for the year ended December 31, 2012.  This unaudited Pro Forma Condensed Consolidated Statement of Operations is not necessarily indicative of what the actual results of operations would have been had we completed this transaction on January 1, 2012, nor does it purport to represent our future operations.
  
 
 
Year Ended December 31, 2012 (a)
 
Adjustments for
2555 Grand
(b)
 
Pro Forma
Revenues:
 
 

 
 
 
 

Rental revenue
 
$
163,125

 
$
(16,920
)
 
$
146,205

Other revenue
 
9,192

 
(954
)
 
8,238

Total revenues 
 
172,317

 
(17,874
)
 
154,443

Expenses:
 
 
 
 
 
 
Property operating expenses
 
54,186

 
(4,454
)
 
49,732

Real property taxes
 
22,246

 
(91
)
 
22,155

Property management fees
 
3,865

 
(411
)
 
3,454

Depreciation and amortization
 
55,042

 
(4,528
)
 
50,514

Acquisition related expenses
 
—

 
—

 
—

Asset management and acquisition fees
 
29,651

 
—

 
29,651

General and administrative
 
6,874

 
—

 
6,874

Impairment losses
 
53,483

 
—

 
53,483

Total expenses
 
225,347

 
(9,484
)

215,863

Operating income (loss)
 
(53,030
)
 
(8,390
)
 
(61,420
)
Other income (expenses):
 
 
 
 
 
 
Gain (loss) on derivative instruments, net
 
8,680

 
—

 
8,680

Gain (loss) on settlement of derivative instruments
 
—

 
—

 
—

Gain (loss) on sale or dissolution of unconsolidated joint venture
 
—

 
—

 
—

Equity in earnings (losses) of unconsolidated entities, net
 
9,460

 
—

 
9,460

Gain (loss) on sale of real estate investments
 
—

 
—

 
—

Interest expense
 
(55,987
)
 
4,730

 
(51,257
)
Interest income
 
736

 
(2
)
 
734

Income (loss) from continuing operations before benefit (provision) for income taxes
 
(90,141
)
 
(3,662
)
 
(93,803
)
Benefit (provision) for income taxes
 
(257
)
 
—

 
(257
)
Income (loss) from continuing operations
 
$
(90,398
)
 
$
(3,662
)
 
$
(94,060
)
Income (loss) from continuing operations per common share
 
$
(0.39
)
 
 
 
$
(0.41
)
Weighted average number common shares outstanding
 
230,049

 
 
 
230,049


See notes to unaudited pro forma condensed consolidated financial statements.


8


Hines Real Estate Investment Trust, Inc.
Unaudited Notes to Pro Forma Condensed Consolidated Financial Statements

Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2015
a.
Reflects the Company's historical condensed consolidated balance sheet as of March 31, 2015.
b.
Reflects the Company's disposition of 2555 Grand. Amounts represent the adjustments necessary to remove the assets and liabilities associated with 2555 Grand.
c.
Reflects the proceeds received from the sale of 2555 Grand less any cash on hand at 2555 Grand as of March 31, 2015.
d.
Reflects the adjustments related to the disposition of 2555 Grand and the gain on sale.
 
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2015
a.
Reflects the Company's historical condensed consolidated statement of operations for the three months ended March 31, 2015.
b.
Reflects the Company's disposition of 2555 Grand. Amounts represent the adjustments necessary to remove the historical revenues and expenses of 2555 Grand, including property operating expenses, property taxes, management fees, depreciation and amortization, interest expense and interest income associated with 2555 Grand. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.

 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2014
a.
Reflects the Company's historical condensed consolidated statement of operations for the year ended December 31, 2014.
b.
Reflects the Company's disposition of 2555 Grand. Amounts represent the adjustments necessary to remove the historical revenues and expenses of 2555 Grand, including property operating expenses, property taxes, management fees, depreciation and amortization, interest expense and interest income associated with 2555 Grand. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.

 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2013
a.
Reflects the Company's historical condensed consolidated statement of operations for the year ended December 31, 2013.
b.
Reflects the Company's disposition of 2555 Grand. Amounts represent the adjustments necessary to remove the historical revenues and expenses of 2555 Grand, including property operating expenses, property taxes, management fees, depreciation and amortization, interest expense and interest income associated with 2555 Grand. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2012
a.
Reflects the Company's historical condensed consolidated statement of operations for the year ended December 31, 2012.
b.
Reflects the Company's disposition of 2555 Grand. Amounts represent the adjustments necessary to remove the historical revenues and expenses of 2555 Grand, including property operating expenses, property taxes, management fees, depreciation and amortization, interest expense and interest income associated with 2555 Grand. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.


9

HINES REAL ESTATE INVESTMENT TRUST INC Reports