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During the third quarter of 2017, the Company acquired two real estate properties totaling approximately 147,000 square feet for an aggregate purchase price and cash consideration of approximately $28.3 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations ranging from 2022 through 2032. In addition, it funded a $5.0 million mezzanine loan to the tenant of one of the properties.
During the fourth quarter of 2017, through November 7, 2017, the Company acquired three real estate properties totaling approximately 105,500 square feet for an aggregate purchase price and cash consideration of approximately $25.9 million. Upon acquisition, the properties were 100% leased with lease expirations ranging from 2025 through 2032.
On July 26, 2017, the Company completed a public offering of 4,887,500 shares of its common stock, including 637,500 shares of common stock issued in connection with the exercise in full of the underwriters' option to purchase additional shares, and received net proceeds of approximately $108.9 million after deducting underwriting discount and commissions and estimated offering expenses payable by the Company. Proceeds from the offering were used to repay the outstanding balance on our revolving credit facility totaling $58.0 million and to fund the acquisitions described above. This equity offering reduced normalized funds from operations and AFFO for the three months ended September 30, 2017 by approximately $0.11 per diluted common share.
On November 2, 2017, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.395 per share. The dividend is payable on December 1, 2017 to stockholders of record on November 17, 2017.
The Company has four properties under definitive purchase agreements for an aggregate expected purchase price of approximately $20.3 million. The Company's expected return on these investments range from approximately 9% to 10.5%. The Company anticipates these properties will close during the fourth quarter. However, the Company is currently performing due diligence procedures customary for these types of transactions and cannot provide assurance as to the timing of when, or whether, these transactions will actually close.
The Company also has three properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $40.4 million. The Company expects to close on one of these properties sometime in the first half of 2018 and expects to close on the remaining two properties sometime in the second half of 2018. The Company's expected aggregate return on these investments ranges up to approximately 11%. However, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.
September 30, 2017
December 31, 2016
Real estate properties:
Land and land improvements
Buildings, improvements, and lease intangibles
Total real estate properties
Less accumulated depreciation
Total real estate properties, net
Cash and cash equivalents
Mortgage note receivable, net
Other assets, net
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities
Commitments and contingencies
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued and outstanding
Common stock, $0.01 par value; 450,000,000 shares authorized; 18,085,798 and 12,988,482 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
Additional paid-in capital
Cumulative net income
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders' equity
The Condensed Consolidated Balance Sheets do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
Three Months Ended September 30,
Nine Months Ended September 30,
General and administrative
Depreciation and amortization
OTHER INCOME (EXPENSE)
Interest and other income, net
NET INCOME PER COMMON SHARE:
Net income per common share – Basic
Net income per common share – Diluted
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING-BASIC
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING-DILUTED
The Condensed Consolidated Statements of Income do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
Three Months Ended September 30,
Real estate depreciation and amortization
Funds From Operations
Transaction costs (2)
Normalized Funds From Operations
Straight line rent
Funds from Operations per Common Share-Diluted
Normalized Funds From Operations Per Common Share-Diluted
AFFO Per Common Share-Diluted
Weighted Average Common Shares Outstanding-Diluted
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market conditions, many industry investors deem presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For that reason, the Company considers funds from operations ("FFO"), normalized FFO and adjusted funds from operations ("AFFO") to be appropriate measures of operating performance of an equity real estate investment trust ("REIT"). In particular, the Company believes that normalized FFO and AFFO are useful because they allow investors, analysts and Company management to compare the Company's operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by unanticipated items and other events.
The Company uses the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") definition of FFO. FFO and FFO per share are operating performance measures adopted by NAREIT. NAREIT defines FFO as the most commonly accepted and reported measure of a REIT's operating performance equal to "net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures." The Company has included normalized FFO which it has defined as FFO excluding certain expenses related to closing costs of properties acquired accounted for as business combinations and mortgages funded and has included AFFO which it has defined as normalized FFO excluding straight-line rent and deferred compensation and may include other non-cash items from time to time. Normalized FFO and AFFO presented herein may not be comparable to similar measures presented by other real estate companies due to the fact that not all real estate companies use the same definitions.
FFO, normalized FFO and AFFO should not be considered as alternatives to net income (determined in accordance with GAAP) as indicators of the Company's financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Company’s liquidity, nor are they necessarily indicative of sufficient cash flow to fund all of the Company’s needs. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO, normalized FFO and AFFO should be examined in conjunction with net income as presented elsewhere herein.
Upon the adoption of Accounting Standards Update ("ASU") No, 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, on January 1, 2017, the Company expects that substantially all of its acquisitions will be accounted for as asset acquisitions. As such, transaction costs related to its acquisitions will be capitalized into the real estate property. The transaction costs of $11,000 above for the three months ended September 30, 2017 relate to costs associated with the $5.0 million mezzanine loan.
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