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TSRE > SEC Filings for TSRE > Form 8-K/A on 4-Apr-2014All Recent SEC Filings

Show all filings for TRADE STREET RESIDENTIAL, INC.

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


4-Apr-2014

Financial Statements and Exhibits


Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

    Miller Creek at Germantown Apartments

    Report of Independent Auditors                                                4

    Statement of Revenues and Certain Expenses for the period from March 1,
    2013 (inception of operations) through December 31, 2013                      5

    Notes to Statement of Revenues and Certain Expenses                           6

    Estates at Wake Forest Apartments

    Statement of Revenues and Certain Expenses for the period from September
    1, 2013 (inception of operations) through December 31, 2013 (unaudited)       8

    Notes to Statement of Revenues and Certain Expenses                           9

(b) Pro Forma Financial Information.

    Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December      12
    31, 2013

    Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
    year ended December 31, 2013                                                 13

    Notes to Pro Forma Condensed Consolidated Financial Statements               14

(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 Miller Creek at Germantown Apartments (the "Property") for the period from March 1, 2013 (inception of operations) through December 31, 2013. 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 Miller Creek at Germantown Apartments for the period from March 1, 2013 (inception of operations) through December 31, 2013, in conformity with U.S. generally accepted accounting principles.

/s/ Mallah Furman

Miami, Florida

February 24, 2014

Miller Creek at Germantown Apartments
Statements of Revenues and Certain Expenses For the period from March 1, 2013 (inception of operations) through December 31, 2013

Revenues:
   Rental revenue, net                   $ 1,434,406
   Other property income                     235,859
       Revenues- Total                     1,670,265
Certain expenses:
  Payroll and benefits                       240,324
  Advertising and marketing                   98,665
  Real estate taxes and insurance             93,821
  Utilities                                   90,662
  General and administrative                  66,468
  Other property operating expenses           56,443
  Repairs and maintenance                     23,985
       Certain Expenses- Total               670,368
Revenues in excess of certain expenses   $   999,897

The accompanying notes are an integral part of these financial statements

Miller Creek at Germantown Apartment

Notes to Statements of Revenues and Certain Expenses

NOTE 1. DESCRIPTION OF OPERATIONS

The accompanying statement of revenues and certain expenses includes the operations of Miller Creek at Germantown Apartments (the "Property"), a 330 unit multi-family rental apartment complex contained in 16 three-story apartment buildings, located in Memphis, Tennessee. This Property was acquired by Trade Street Residential, Inc. on January 21, 2014. The Property began leasing units in March, 2013 and was approximately 72% occupied (which includes 11 units leased to a non recurring corporate tenant) as of December 31, 2013.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying statement of revenues and certain expenses has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. The statement of revenues and certain operating expenses is not intended to be a complete presentation of the actual operations of the Property for the applicable period, as certain revenue and expenses which may not be compatible to the proposed future operations of the Property have been excluded. Revenues and expenses excluded consist of those related to the one time rental of certain units to local corporations, and property management fees not expected to be incurred in the future. Management is not aware of any material factors related to the Property other than those discussed that would cause the statement 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 valet trash pickup, where the Property is the primary obligor to the local utility. These reimbursements are included in other property income in the accompanying statement of revenues and certain expenses. These reimbursements approximated $50,000 for the period ended December 31, 2013.

During the period ended December 31, 2013, the Property also recognized approximately $70,000 of administrative and application fee income related to its initial leasing activities. These amounts are also included in other property income in the accompanying statement of revenues and certain expenses.

Operating expenses

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

Miller Creek at Germantown Apartment

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 February 24, 2014, the date this financial information was available to be issued. Management has determined that there are no subsequent events or transactions to report.

Estates of Wake Forest Apartments
Statements of Revenues and Certain Expenses For the period from September 1, 2013 (inception of operations) through December 31, 2013
(unaudited)

Revenues:
   Rental revenue, net                   $ 311,702
   Other property income                    48,780
       Revenues- Total                     360,482
Certain expenses:
  Payroll and benefits                     220,466
  Advertising and marketing                 60,411
  Utilities                                 48,469
  Other property operating expenses         32,517
  General and administrative                30,051
  Real estate taxes and insurance           14,584
  Repairs and maintenance                    3,103
       Certain Expenses- Total             409,601
Certain expenses in excess of revenues   $ (49,119 )

The accompanying notes are an integral part of these financial statements

Estates at Wake Forest Apartments

Notes to Statement of Revenues and Certain Expenses

(Unaudited)

NOTE 1. DESCRIPTION OF OPERATIONS

The accompanying statement of revenues and certain expenses includes the operations of Estates at Wake Forest Apartments (the "Property"), a 288 unit multi-family rental apartment complex contained in 11 three story apartment buildings, located in Wake Forest, North Carolina. This Property was acquired by Trade Street Residential, Inc. on January 21, 2014. The Property began leasing units in September, 2013 and was approximately 35% occupied as of December 31, 2013.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying statement of revenues and certain expenses has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. This statement of revenues and certain operating expenses is not intended to be a complete presentation of the actual operations of the Property for the applicable period, as certain revenue and expenses which may not be compatible to those that will be realized and incurred in the proposed future operations of the Property have been excluded. Items excluded consist of property management fees and certain start-up costs charged to operations. Management is not aware of any material factors related to the Property, other than those discussed, that would cause the statement 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 trash removal, where the Property is the primary obligor to the service provider. These reimbursements are included in other property income in the accompanying statement of revenues and certain expenses. The reimbursements for the period ended December 31, 2013 were approximately $10,000.

During the period ended December 31, 2013, the Property recognized approximately $23,000 of satellite and internet fees. These amounts are also included in other property income in the accompanying statement of revenues and certain expenses.

Operating expenses

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

Estates at Wake Forest Apartments

Notes to Statement of Revenues and Certain Expenses (Continued)

(Unaudited)

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 February 4, 2014, 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 acquisitions of Miller Creek at Germantown Apartments ("Miller Creek") and Estates at Wake Forest Apartments ("Wake Forest"), which each of Trade Street Residential, Inc. ("the Company"), through Trade Street Operating Partnership, L.P., its majority-owned subsidiary, acquired from an unrelated party on January 21, 2014.

The unaudited pro forma condensed consolidated balance sheet for the Company, Miller Creek and Wake Forest is presented as if the acquisition had occurred as of December 31, 2013.

The unaudited pro forma condensed consolidated statement of operations for the Company, Miller Creek and Wake Forest for the twelve months ended December 31, 2013, gives effect to the Company's acquisitions of Miller Creek and Wake Forest, as if they 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, 2013 includes the financial information for Miller Creek for the period from March 1, 2013 (inception of operations) through December 31, 2013 and Wake Forest for the period from September 1, 2013 (inception of operations) through December 31, 2013.

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 those of Miller Creek and Wake Forest. These pro forma statements may not be indicative of the results that actually would have occurred had the acquisitions been in effect on the dates indicated or which may be obtained in future operations.

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, 2013 included in the Company's Annual Report on Form 10-K (File No. 001-32365).

TRADE STREET RESIDENTIAL INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

DECEMBER 31, 2013

(unaudited)

                                                             Completed Acquisitions
                                                                                                Pro Forma
                                        Historical      Miller Creek        Wake Forest       Consolidated
                                           (A)               (B)                (C)
ASSETS:                                                          (in thousands)
Real estate:
Land and improvements                  $     58,560     $       4,633      $       5,295     $        68,488
Buildings and improvements                  272,849            37,332             30,633             340,814
Furniture, fixtures, and equipment            9,016             1,011                860              10,887
                                            340,425            42,976             36,788             420,189
Less accumulated depreciation               (14,369 )               -                  -             (14,369 )
Net investment in operating
properties                                  326,056            42,976             36,788             405,820

Land held for future development             31,963                 -                  -              31,963
Net real estate assets                      358,019            42,976             36,788             437,783

Other assets:
Investment in unconsolidated joint
venture                                       2,421                 -                  -               2,421
Cash and cash equivalents                     9,037           (18,036 )          (18,883 )           (27,882 )(D)
Restricted cash and lender reserves           3,203                 -                  -               3,203
Deferred financing costs                      3,022               536                258               3,816
Intangible asset, net                         1,571               774                462               2,807
Due from related parties                        803                 -                  -                 803
Prepaid expenses and other assets             9,560                 -                  -               9,560
                                             29,617           (16,726 )          (18,163 )            (5,272 )

TOTAL ASSETS                           $    387,636     $      26,250      $      18,625     $       432,511

LIABILITIES:
Indebtedness                           $    249,584     $      26,250      $      18,625     $       294,459
Accrued interest payable                        840                 -                  -                 840
Accounts payable and accrued
expenses                                      6,119                 -                  -               6,119
Dividends payable                             1,247                 -                  -               1,247
Due to related parties                          120                 -                  -                 120
Security deposits and deferred rent           1,029                 -                  -               1,029
Acquisition consideration payable in
preferred stock                                 294                 -                  -                 294
TOTAL LIABILITIES                           259,233            26,250             18,625             304,108

Commitments & contingencies

STOCKHOLDERS' EQUITY:
Class A preferred stock                           3                 -                  -                   3
Common stock                                    115                 -                  -                 115
Additional paid-in capital                  162,681                 -                  -             162,681
Accumulated deficit                         (52,053 )               -                  -             (52,053 )
TOTAL STOCKHOLDERS' EQUITY - TRADE
STREET RESIDENTIAL, INC.                    110,746                 -                  -             110,746
Noncontrolling interests                     17,657                 -                  -              17,657
TOTAL STOCKHOLDERS' EQUITY                  128,403                 -                  -             128,403

TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY                                 $    387,636     $      26,250      $      18,625     $       432,511

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, 2013

                                  (unaudited)



                                                                  Completed Acquisitions
                                                                                                         Pro Forma
                                          Historical         Miller Creek          Wake Forest         Consolidated
                                             (E)                 (F)                   (G)
                                             (in thousands, except for per share amounts)
Property Revenue
Rental revenue                          $       26,261      $        1,434        $         312       $        28,007
Other property revenues                          2,696                 236                   49                 2,981
Total property revenues                         28,957               1,670                  361                30,988

Property Expenses
Property operations                              9,243                 576                  395                10,214
Real estate taxes and insurance                  3,942                  94                   15                 4,051
 Total property expenses                        13,185                 670                  410                14,265

Other expenses
General and administrative                       8,683                   -                    -                 8,683
Interest expense                                 8,947               1,051 (H)              354 (J)            10,352
Depreciation and amortization                   11,918               1,617 (I)              611 (K)            14,146
Development and pursuit costs                      180                   -                    -                   180
Acquisition costs                                  919                   -                    -                   919
Asset impairment losses                         12,419                   -                    -                12,419
Amortization of deferred financing
costs                                            1,443                   -                    -                 1,443
Loss on early extinguishment of debt             1,146                   -                    -                 1,146
 Total other expenses                           45,655               2,668                  965                49,288

Other income                                        88                   -                    -                    88
Income from unconsolidated joint
venture                                             67                   -                    -                    67
Gain on bargain purchase                         6,900                   -                    -                 6,900

Loss from continuing operations                (22,828 )            (1,668 )             (1,014 )             (25,510 )
Loss allocated to noncontrolling
interest holders                                 2,462                   -                    -                 2,462
Dividends declared and accreted on
preferred stock and units                         (940 )                 -                    -                  (940 )
Dividends to restricted stockholders               (52 )                 -                    -                   (52 )
Extinguishment of equity securities             11,716                   -                    -                11,716
Adjustments attributable to
participating securities                        (2,241 )                 -                    -                (2,241 )
Net loss attributable to common
stockholders                            $      (11,883 )    $       (1,668 )      $      (1,014 )     $       (14,565 )

Loss per common share - basic and
diluted                                 $        (1.36 )                                              $         (1.66 )

Weighted average number of shares -
basic and diluted                                8,762                                                          8,762

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