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TSRE > SEC Filings for TSRE > Form 8-K/A on 20-May-2014All Recent SEC Filings

Show all filings for TRADE STREET RESIDENTIAL, INC.

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


20-May-2014

Financial Statements and Exhibits


Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

    Statement of Revenues and Certain Expenses for the period from July 1, 2013  4
    (inception of operations) through December 31, 2013  (unaudited)

    Notes to Statement of Revenues and Certain Expenses                          5

(b) Pro Forma Financial Information

    Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31,  8
    2013

    Unaudited Pro Forma Condensed Consolidated Statement of Operations for the   9
    year ended December 31, 2013

    Notes to Pro Forma Condensed Consolidated Financial Statements              10

The Avenues at Craig Ranch

Statement of Revenues and Certain Expenses

For the period from July 1, 2013

(inception of operations) through December 31, 2013

(Unaudited)

Revenues:
   Rental revenue, net                   $ 508,650
   Other property income                    30,777
       Revenues- Total                     539,427
Certain expenses:
   Payroll and benefits                    225,371
   Real estate taxes and insurance         114,536
   General and administrative               53,663
   Utilities                                39,227
   Advertising and marketing                34,382
   Repairs and maintenance                  18,605
   Other property operating expenses        17,324
       Certain Expenses- Total             503,108
Revenues in excess of certain expenses   $  36,319

The accompanying notes are an integral part of this financial statement

The Avenues at Craig Ranch

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 The Avenues at Craig Ranch (the "Property"), a 334 unit multi-family rental apartment complex contained in 10 three-story apartment buildings, located in McKinney, Texas. This Property was acquired by Trade Street Residential, Inc. on March 18, 2014. The Property began leasing units in July 2013 and was approximately 43% 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 certain one-time administrative fee revenue related to initial leasing activities. Management is not aware of any material factors related to the Property, other than 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 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 and sewer, 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. The reimbursements for the period ended December 31, 2013 were approximately $3,100.

During the period ended December 31, 2013, the Property recognized approximately $11,500 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, real estate taxes and other operating expenses that are expected to continue in the proposed future operations of the Property.

The Avenues at Craig Ranch

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 May 20, 2014, the date this interim 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 consolidated financial statements have been prepared to provide pro forma information with regard to the acquisition of The Avenues at Craig Ranch ("Craig Ranch"), which Trade Street Residential, Inc. ("the Company"), through Trade Street Operating Partnership, L.P., its majority-owned subsidiary, acquired from an unrelated party on March 18, 2014.

The unaudited pro forma condensed consolidated balance sheet for the Company and Craig Ranch 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 and Craig Ranch for the twelve months ended December 31, 2013 give effect to the Company's acquisition of Craig Ranch, 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, 2013 includes the financial information for Craig Ranch for the period from July 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 Craig Ranch. These pro forma consolidated financial 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 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 filed with the Securities and Exchange Commission on March 26, 2014.

                         TRADE STREET RESIDENTIAL INC.

                 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

                               DECEMBER 31, 2013

                           (unaudited, in thousands)



                                                                   Completed
                                                                  Acquisition
                                                                                      Pro Forma
                                                 Historical       Craig Ranch       Consolidated
                                                    (A)               (B)

ASSETS:
Real estate:
Land and improvements                           $     58,560     $       6,654     $        65,214
Buildings and improvements                           272,849            33,317             306,166
Furniture, fixtures, and equipment                     9,016             1,673              10,689
                                                     340,425            41,644             382,069
Less accumulated depreciation                        (14,369 )               -             (14,369 )
Net investment in operating properties               326,056            41,644             367,700

Land held for future development                      31,963                 -              31,963
Net real estate assets                               358,019            41,644             399,663

Other assets:
Investment in unconsolidated joint venture             2,421                 -               2,421
Cash and cash equivalents                              9,037           (21,438 )           (12,401 )(C)
Restricted cash and lender reserves                    3,203                 -               3,203
Deferred financing costs                               3,022               263               3,285
Intangible asset, net                                  1,571               731               2,302
Due from related parties                                 803                 -                 803
Prepaid expenses and other assets                      9,560                 -               9,560
                                                      29,617           (20,444 )             9,173

TOTAL ASSETS                                    $    387,636     $      21,200     $       408,836

LIABILITIES:
Indebtedness                                    $    249,584     $      21,200     $       270,784
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            21,200             280,433

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     $      21,200     $       408,836

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, in thousands, except for per share amounts)



                                                                    Completed
                                                                   Acquisition
                                                                                         Pro Forma
                                                  Historical       Craig Ranch         Consolidated
                                                     (D)               (E)

Property Revenue
Rental revenue                                   $     26,261     $         508       $        26,769
Other property revenues                                 2,696                31                 2,727
Total property revenues                                28,957               539                29,496

Property Expenses
Property operations                                     9,243               388                 9,631
Real estate taxes and insurance                         3,942               115                 4,057
 Total property expenses                               13,185               503                13,688

Other expenses
General and administrative                              8,683                 -                 8,683
Interest expense                                        8,947               419 (F)             9,366
Depreciation and amortization                          11,918             1,255 (G)            13,173
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             1,674                47,329

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 )          (1,638 )             (24,466 )
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 )   $      (1,638 )     $       (13,521 )

Loss per common share - basic and diluted        $      (1.36 )                       $         (1.54 )

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

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 December 31, 2013.

B. On March 18, 2014, the Company, through its operating partnership, Trade Street Operating Partnership ("the "Operating Partnership"), completed the acquisition of The Avenues of Craig Ranch ("Craig Ranch"). The acquisition consideration of $42.4 million was paid with cash of $21.2 million from the Company's rights offering to its existing stockholders and certain related transactions (the "Offering") and proceeds from a new mortgage loan in the amount of $21.2 million. The mortgage has a 7-year term and a fixed interest rate of 3.78% with monthly payments of interest only for the term of the loan. The costs of the acquired tangible and intangible assets were allocated as follows based on estimates of their fair value in accordance with Accounting Standards Codification Topic 805, Business Combinations.

                                                   (in thousands)
                Land                               $         3,444
                Site improvements                            3,210
                Building                                    33,317
                Furniture fixtures and equipment             1,673
                In-place leases                                731
                Net assets acquired                $        42,375

In conjunction with obtaining the mortgage loan, the Company recorded deferred loan costs of $0.3 million, which will be amortized using the straight line method over the life of the loan.

C. Does not reflect the Offering, pursuant to which the Company issued 24,881,517 shares of its common stock at a subscription rights offering price of $6.33 per share. The Company received approximately $147.5 million in total net proceeds from the offering after deducting offering expenses paid by the Company. The Company used $21.2 million of the net proceeds of the Offering to fund the cash portion of the purchase price of Craig Ranch.

STATEMENT OF OPERATIONS

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

E. Reflects the historical operations of Craig Ranch for the period from July 1, 2013 (inception of operations) through December 31, 2013.

F. Represents the depreciation of the buildings (over 50 years), site improvements (over 15 years), furniture and fixtures (over 10 years) and in-place leases (over six months) based on the purchase price allocation in accordance with ASC 805, assuming the acquisition of Craig Ranch took place on July 1, 2013 (inception of operations).

G. Represents interest expense on the mortgage loan at 3.78%, assuming the acquisition of Craig Ranch took place on July 1, 2013 (inception of operations).

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