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TSRE > SEC Filings for TSRE > Form 8-K/A on 2-Aug-2013All Recent SEC Filings

Show all filings for TRADE STREET RESIDENTIAL, INC.

Form 8-K/A for TRADE STREET RESIDENTIAL, INC.


2-Aug-2013

Financial Statements and Exhibits


Item 9.01. Financial Statements and Exhibits.

(a)  Financial Statements of Business Acquired.

     Report of Independent Auditors                                              4

     Statements of Revenues and Certain Expenses for the three month             5
     period ended March 31, 2013 (unaudited) and for the period from
     August 1, 2012 (inception of operations) through December 31, 2012

     Notes to Statements of Revenue and Certain Expenses                         6

(b)  Pro Forma Financial Information.

     Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March        9
     31, 2013

     Unaudited Pro Forma Condensed Consolidated Statement of Operations         10
     for the three months ended March 31, 2013

     Unaudited Pro Forma Condensed Consolidated Statement of Operations         11
     for the year ended December 31, 2012

     Notes Pro Forma Condensed Consolidated Financial Statements                12

(d)  Exhibits.

     23.1  Consent of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT AUDITORS

To Trade Street Residential, Inc.

Aventura, Florida

We have audited the accompanying statement of revenues and certain expenses (as described in Note 2) of Woodfield Creekstone Apartment Homes (the "Property") for the period from August 1, 2012 (inception of operations) through December 31, 2012. This statement of revenues and certain expenses is the responsibility of the Property's management. Our responsibility is to express an opinion on this statement based on our audit.

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

The accompanying statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in a Form 8-K of Trade Street Residential, Inc. as described in Note 2, and is not intended to be a complete presentation of the Property's revenues and expenses.

In our opinion, the statement referred to above presents fairly, in all material respects, the revenues and certain expenses, as described in Note 2 of Woodfield Creekstone Apartment Homes for the period from August 1, 2012 (inception of operations) through December 31, 2012, in conformity with U.S. generally accepted accounting principles.

/s/ Mallah Furman

Miami, Florida

April 3, 2013, except for Notes 1 and 4

which are as of August 1, 2013

Woodfield Creekstone Apartment Homes
Statements of Revenues and Certain Expenses
For the three month period ended March 31, 2013
and the period from August 1, 2012 (inception of operations) through December 31, 2012

                                                                             Period from
                                                                           August 1, 2012
                                                                            (inception of
                                                      Three month            operations)
                                                      period ended             through
                                                     March 31, 2013       December 31, 2012
                                                      (Unaudited)

Revenues:
   Rental revenue, net                              $        393,572     $           142,343
   Other property income                                      77,905                  34,716
       Revenues- Total                                       471,477                 177,059
Certain expenses:
   Payroll and benefits                                      106,445                 149,949
   Repairs and maintenance                                     4,059                       -
   Property Insurance                                          9,118                  13,034
   Real estate taxes                                          10,628                  17,713
   Utilities                                                  56,215                  37,032
   General and administrative                                 43,267                  49,270
   Other property operating expenses                          37,304                  12,610
       Certain Expenses- Total                               267,036                 279,608
Revenues in excess of certain expenses              $        204,441     $          (102,549 )

The accompanying notes are an integral part of these financial statements

Woodfield Creekstone Apartment Homes

Notes to Statements of Revenues and Certain Expenses

NOTE 1. DESCRIPTION OF OPERATIONS

The accompanying statements of revenues and certain expenses include the operations of Woodfield Creekstone Apartment Homes (the "Property"), a 256 unit multi-family rental apartment complex contained in 10 three and four story apartment buildings, located in Durham, North Carolina. The Property was acquired by Trade Street Residential, Inc. on May 17, 2013 and was approximately 67% and 57% occupied as of March 31, 2013 and December 31, 2012, respectively.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying statements of revenues and certain expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. These statements of revenues and certain expenses are not intended to be a complete presentation of the actual operations of the Property for the applicable periods, as certain expenses which may not be compatible to the expenses to be incurred in the proposed future operations of the Property have been excluded. Expenses excluded consist of third party property management fees and capital expenditures charged to operations. Management is not aware of any other non-compatible expenses related to the Property, other than those discussed, that would cause the statements of revenues and certain expenses not to be indicative of future operating results.

Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that in certain circumstances may affect the reported revenues and certain expenses. Actual results could materially differ from these estimates.

Revenue recognition

The residential property is leased under operating leases with terms of generally one year or less. Rental revenues from residential leases, which may include periods of free rent and/or scheduled increases of rental rates over the term of the lease are recognized on the straight-line basis.

Under the terms of the residential leases, residents are obliged to reimburse the Property for water usage and trash, where the Property is the primary obligor to the local utility. These reimbursements are included in other property income in the accompanying statements of revenues and certain expenses. The reimbursements for the three month period ended March 31, 2013 and the period August 1, 2012 through December 31, 2012 were approximately $19,800 and $8,500, respectively.

Operating expenses

Operating expenses represent the direct expenses of operating the Property and consist primarily of payroll and benefits, repairs and maintenance, real estate taxes, utilities, marketing and other operating expenses that are expected to continue in the proposed future operations of the Property.

Woodfield Creekstone Apartment Homes

Notes to Statements of Revenues and Certain Expenses (Continued)

NOTE 3. COMMITMENTS AND CONTINGENCIES

The Property is a party to various contracts with third parties for certain services and maintenance. Some of these contracts may span more than one year in duration. The total amount of these commitments has not been determined.

The Property is not presently involved in any material litigation, nor, to Management's knowledge is any material litigation threatened against the Property, other than routine litigation arising in the ordinary course of business such as disputes with tenants. The Property believes that the costs and related liabilities, if any, which may result from such actions will not materially affect the Property's operating results.

NOTE 4. SUBSEQUENT EVENTS

Property management has evaluated events and transactions for potential recognition or disclosure through August 1, 2013, the date this financial information was available to be issued. Management has determined that there are no subsequent events or transactions to report.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma financial statements have been prepared to provide pro forma information with regard to the acquisition of Woodfield Creekstone Apartment Homes ("Creekstone"), which Trade Street Residential, Inc. ("the Company"), through Trade Street Operating Partnership, L.P., its majority-owned subsidiary, acquired from an unrelated party on May 17, 2013.

The unaudited pro forma condensed consolidated balance sheet for the Company and Creekstone is presented as if the acquisition had occurred as of March 31, 2013.

The unaudited pro forma condensed consolidated statements of operations for the Company and Creekstone for the twelve months ended December 31, 2012and the three months ended March 31, 2013, give effect to the Company's acquisition of Creekstone, as if it had occurred on the first day of the earliest period presented. The pro forma adjustments column presented on the pro forma consolidated statement of operations for the year ended December 31, 2012 includes the financial information for Creekstone for the period from August 1, 2012 (inception of operations) through December 31, 2012. The pro forma adjustments column presented on the pro forma consolidated statement of operations for the three months ended March 31, 2013, includes the financial information for Creekstone for the full three months, as Creekstone was acquired subsequent to March 31, 2013 and therefore was not included in Trade Street's historical financial statements.

The unaudited pro forma condensed consolidated financial statements have been prepared by the Company's management based upon the historical financial statements of the Company and subsidiaries and of Creekstone. These pro forma statements may not be indicative of the results that actually would have occurred had the acquisition been in effect on the dates indicated or which may be obtained in the future.

This unaudited pro forma consolidated financial information is presented for informational purposes only and does not purport to be indicative of the Company's financial results as if the transactions reflected herein had occurred on the date or been in effect during the period indicated. This pro forma consolidated financial information should not be viewed as indicative of the Company's financial results in the future and should be read in conjunction with the Company's financial statements for the year ended December 31, 2012 included in the Company's Registration Statement on Form S-11 (File No. 333-1855936), as amended, and the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2013.

                         TRADE STREET RESIDENTIAL INC.

                 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

                                 MARCH 31, 2013

                                  (Unaudited)



                                                                   Pro Forma         Pro Forma
                                                Historical        Adjustments      Consolidated
                                                    (A)               (B)
ASSETS:
Real estate:
Land and improvements                          $  42,398,134     $   3,993,562     $  46,391,696
Buildings and improvements                       161,268,977        30,823,316       192,092,293
Furniture, fixtures, and equipment                 6,900,080           301,982         7,202,062
                                                 210,567,191        35,118,860       245,686,051
Less accumulated depreciation                     (9,160,754 )                        (9,160,754 )
Net investment in operating properties           201,406,437        35,118,860       236,525,297

Land held for future development                  44,113,093                          44,113,093
Operating properties held for sale                26,920,951                          26,920,951
Net real estate assets                           272,440,481        35,118,860       307,559,341

Other assets:
Cash and cash equivalents                          3,227,547       (12,901,270 )      (9,673,723 )(C)
Restricted cash and lender reserves                2,681,459                           2,681,459
Intangible asset - In place leases                 1,309,641           681,140         1,990,781
Investment in unconsolidated joint venture         2,518,886                           2,518,886
Deferred financing costs                           2,340,228                           2,340,228
Due from related parties                             820,417                             820,417
Deferred offering costs                            3,987,557           351,270         4,338,827
Prepaid expenses and other assets                  4,039,391                           4,039,391
Discontinued operations                              736,631                             736,631
                                                  21,661,757       (11,868,860 )       9,792,897

TOTAL ASSETS                                   $ 294,102,238     $  23,250,000     $ 317,352,238

LIABILITIES:
Indebtedness                                     162,865,950        23,250,000       186,115,950
Accrued interest payable                             847,479                             847,479
Accounts payable and accrued expenses              4,942,261                           4,942,261
Dividends payable                                    127,264                             127,264
Due to related parties                               235,536                             235,536
Security deposits and deferred rent                  598,559                             598,559
Payable for the redemption of noncontrolling
interest                                           6,007,500                           6,007,500
Acquisition consideration payable in
preferred stock                                      294,000                             294,000
Discontinued operations                           26,620,845                          26,620,845
TOTAL LIABILITIES                                202,539,394        23,250,000       225,789,394

Commitments & contingencies

STOCKHOLDERS' EQUITY:
Class A preferred stock                                3,091                               3,091
Common stock                                          47,174                              47,174
Additional paid-in capital                       111,479,771                         111,479,771
Accumulated deficit                              (40,105,111 )                       (40,105,111 )
TOTAL STOCKHOLDERS' EQUITY - TRADE STREET
RESIDENTIAL, INC.                                 71,424,925                 -        71,424,925
Noncontrolling interests                          20,137,919                          20,137,919
TOTAL STOCKHOLDERS' EQUITY                        91,562,844                 -        91,562,844

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $ 294,102,238     $  23,250,000     $ 317,352,238

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

                         TRADE STREET RESIDENTIAL INC.

            PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                   FOR THE THREE MONTHS ENDED MARCH 31, 2013

                                  (Unaudited)



                                                                     Pro Forma            Pro Forma
                                                   Historical       Adjustments         Consolidated
                                                      (D)

REVENUE:
Rental revenue                                    $  5,481,772     $     393,572 (E)    $   5,875,344
Other property revenues                                552,534            77,905 (E)          630,439
TOTAL REVENUE                                        6,034,306           471,477            6,505,783

OPERATING EXPENSES:
Property operations                                  1,909,474           204,023 (E)        2,113,497
Real estate taxes and insurance                        919,135            19,746 (E)          938,881
General and administrative                           1,564,684            43,267 (E)        1,607,951
Depreciation and amortization                        2,415,845           531,324 (F)        2,947,169
Acquisition costs                                      222,176                 -              222,176
TOTAL OPERATING EXPENSES                             7,031,314           798,360            7,829,674

LOSS FROM OPERATIONS                                  (997,008 )        (326,883 )         (1,323,891 )

OTHER INCOME (EXPENSES), NET:
Income from unconsolidated joint venture                37,331                 -               37,331
Interest income                                         21,809                 -               21,809
Interest expense                                    (3,402,891 )        (234,306 )(G)      (3,637,197 )

TOTAL OTHER EXPENSE, NET                            (3,343,751 )        (234,306 )         (3,578,057 )

LOSS FROM CONTINUING OPERATIONS                     (4,340,759 )        (561,189 )         (4,901,948 )

Loss allocated to noncontrolling interest
holders                                                555,223                 -              555,223
Dividends declared and accreted on preferred
stock and units                                       (254,269 )               -             (254,269 )
Extinguishment of equity securities                 11,715,683                 -           11,715,683
Adjustments attributable to participating
securities                                          (2,520,772 )               -           (2,520,772 )
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS                                      $  5,155,106     $    (561,189 )      $   4,593,917

Net income attributable to common stockholders    $       1.09                          $        0.97

Weighted average number of shares - basic and
diluted                                              4,717,375                              4,717,375

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

                         TRADE STREET RESIDENTIAL INC.

            PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                      FOR THE YEAR ENDED DECEMBER 31, 2012

                                  (Unaudited)



                                                                    Pro Forma            Pro Forma
                                                   Historical      Adjustments         Consolidated
                                                      (H)

REVENUE:
Rental revenue                                    $ 15,808,840     $    142,343 (I)    $  15,951,183
Other property revenues                              1,791,588           34,716 (I)        1,826,304
Advisory fees from related party                       189,980                -              189,980
TOTAL REVENUE                                       17,790,408          177,059           17,967,467

OPERATING EXPENSES:
Property operations                                  6,634,054          199,591 (I)        6,833,645
Real estate taxes and insurance                      2,636,288           30,747 (I)        2,667,035
General and administrative                           3,794,038           49,270 (I)        3,843,308
Depreciation and amortization                        6,099,926          885,540 (J)        6,985,466
Acquisition costs                                    2,336,050                -            2,336,050
TOTAL OPERATING EXPENSES                            21,500,356        1,165,148           22,665,504

LOSS FROM OPERATIONS                                (3,709,948 )       (988,089 )         (4,698,037 )

OTHER INCOME (EXPENSES), NET:
Income from unconsolidated joint venture                45,739                -               45,739
Interest income                                         77,095                -               77,095
Interest expense                                    (5,738,123 )       (390,510 )(K)      (6,128,633 )

TOTAL OTHER EXPENSE, NET                            (5,615,289 )       (390,510 )         (6,005,799 )

LOSS FROM CONTINUING OPERATIONS                     (9,325,237 )     (1,378,599 )        (10,703,836 )

Loss allocated to noncontrolling interest
holders                                              1,708,734                -            1,708,734
Dividends declared and accreted on preferred
stock and units                                       (375,482 )              -             (375,482 )
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS      $ (7,991,985 )   $ (1,378,599 )      $  (9,370,584 )

Net loss attributable to common stockholders      $      (3.51 )                       $       (4.11 )

Weighted average number of shares - basic and
diluted                                              2,278,094                             2,278,094

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

TRADE STREET RESIDENTIAL, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

BALANCE SHEET

A. Reflects the historical condensed consolidated balance sheet of Trade Street Residential, Inc. (the "Company") as of March 31, 2013.

B. On May 17, 2013, the Company completed the acquisition of Woodfield Creekstone Apartment Homes ("Creekstone"). The acquisition consideration of $35,800,000 was paid with cash of $12,550,000 and a new mortgage loan of $23,250,000. The mortgage has a 10 year term and bears interest at a fixed rate of 3.88% with monthly payments of interest only for the initial 36 months and monthly payments of principal and interest thereafter until maturity. The costs of the acquired tangible and intangible assets were allocated as follows based on estimates of their fair value in accordance with ASC 805, Business Combinations.

                 Land                               $  2,969,485
                 Site improvements                     1,024,077
                 Building                             30,823,316
                 Furniture fixtures and equipment        301,982
                 In-place leases                         681,140
                 Net assets acquired                $ 35,800,000

In conjunction with obtaining the mortgage loan, the Company recorded deferred loan costs of $351,270, which will be amortized using the straight line method over the life of the loan.

C. Does not reflect the Company's public offering on May 16, 2013 of 6,250,000 shares of its common stock at a public offering price of $10.00 per share. The Company received approximately $56.3 million in total net proceeds from the offering after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, prior to the exercise of the underwriters' over-allotment option. The Company used $12,550,000 of the net proceeds of the offering to fund the cash portion of the purchase price of Creekstone.

STATEMENT OF OPERATIONS

D. Reflects the historical condensed consolidated statement of operations of the Company for the threemonths ended March 31, 2013.

E. Reflects the historical operations of Creekstone for the three month period ended March 31, 2013.

F. Represents the depreciation of the buildings (over 14-49 years), furniture and fixtures (over 5 years) and in-place leases (over six months) based on the purchase price allocation in accordance with ASC 805, assuming the acquisition of Creekstone took place on January 1, 2012.

G. Represents interest expense on the mortgage loan at 3.88%, assuming the acquisition of Creekstone took place on January 1, 2012.

H. Reflects the historical condensed consolidated statements of operations of the Company for the year ended December 31, 2012. The historical loss from continuing operations for the year ended December 31, 2012 excludes certain discontinued operations that had previously been reported in continuing operations.

I. Reflects the historical operations of Creekstone for the period from August 1, 2012 (inception of operations) through December 31, 2012.

J. Represents the depreciation of the buildings (over 14-49 years), furniture and fixtures (over 5 years) and in-place leases (over six months) based on the purchase price allocation in accordance with ASC 805, assuming the acquisition of Creekstone took place on January 1, 2012.

K. Represents interest expense on the mortgage loan at 3.88%, assuming the acquisition of Creekstone took place on January 1, 2012.

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