Trustreet
Properties, Inc.
|
_____________________________________________________________________________________________
|
(Exact
name of registrant as specified in its
charter)
|
Maryland
|
75-2687420
|
|
(State
or other jurisdiction
|
(IRS
Employer
|
|
of
incorporation)
|
Identification
No.)
|
450
South Orange Avenue
Orlando,
Florida
|
32801
|
_________________________________________
|
______________________________
|
(Address
of principal executive offices)
|
(Zip
Code)
|
_____________________________________________________________________________________________
|
Part
I
|
Page
|
Item
1. Financial
Statements:
|
|
Condensed
Consolidated Balance Sheets
|
3-4
|
Condensed
Consolidated Statements of Income
|
5
|
Condensed
Consolidated Statements of
|
|
Stockholders’
Equity and Comprehensive Income/(Loss)
|
6-7
|
Condensed
Consolidated Statements of Cash Flows
|
8-9
|
Notes
to Condensed Consolidated Financial
|
|
Statements
|
10-37
|
Item
2. Management’s
Discussion and Analysis of Financial
|
|
Condition
and Results of Operations
|
38-59
|
Item
3. Quantitative
and Qualitative Disclosures About
|
|
Market
Risk
|
59
|
Item
4. Controls
and Procedures
|
59-60
|
Part
II
|
|
Other Information
|
61-64
|
September
30, 2005
|
December
31, 2004
|
||||||
ASSETS
|
|||||||
Real
estate investment properties
|
$
|
1,637,117
|
$
|
524,270
|
|||
Net
investment in direct financing leases
|
152,665
|
96,455
|
|||||
Real
estate held for sale
|
239,807
|
160,808
|
|||||
Mortgage,
equipment and other notes receivable, net of allowance
of
$6,394 and $7,261, respectively
|
93,545
|
290,140
|
|||||
Other
investments
|
17,081
|
16,495
|
|||||
Cash
and cash equivalents
|
27,103
|
22,744
|
|||||
Restricted
cash
|
28,649
|
7,402
|
|||||
Receivables,
less allowance for doubtful accounts
of
$2,157 and $2,136, respectively
|
7,074
|
7,391
|
|||||
Accrued
rental income
|
33,386
|
27,709
|
|||||
Intangible
lease costs
|
76,445
|
—
|
|||||
Goodwill
|
225,074
|
56,260
|
|||||
Other
assets
|
51,278
|
33,975
|
|||||
$
|
2,589,224
|
$
|
1,243,649
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Revolver
|
$
|
142,000
|
$
|
21,000
|
|||
Notes
payable
|
478,930
|
162,810
|
|||||
Mortgage
warehouse facilities
|
139,106
|
101,394
|
|||||
Subordinated
note payable
|
—
|
21,875
|
|||||
Bonds
payable
|
773,069
|
405,421
|
|||||
Below
market lease liability, net of accumulated amortization of
$2,712
in 2005
|
26,382
|
—
|
|||||
Due
to related parties
|
346
|
37,172
|
|||||
Other
payables
|
58,175
|
33,736
|
|||||
Total
liabilities
|
$
|
1,618,008
|
$
|
783,408
|
September
30,
2005
|
December
31,
2004
|
||||||
Minority
interests, including redeemable partnership interest in
2004
|
$
|
4,092
|
$
|
6,819
|
|||
Commitments
and contingencies (Note 16)
|
|||||||
Stockholders’
equity:
|
|||||||
Preferred
stock, $0.001 par value per share. 84,500 shares authorized and
unissued
|
—
|
—
|
|||||
Preferred
stock, $0.001 par value per share: Series A Cumulative Convertible
Preferred Stock - 8,000 shares authorized, 7,834 shares issued and
outstanding at September 30, 2005 (aggregate liquidation value of
$195,855)
|
8
|
—
|
|||||
Preferred
stock, $0.001 par value per share: Series C Redeemable
Convertible Preferred Stock - 7,500 shares authorized, 7,244 shares
issued
and outstanding at September 30, 2005 (aggregate liquidation value
of
$181,101)
|
7
|
—
|
|||||
Excess
shares, $0.001 par value per share. 400,000 shares authorized and
unissued
|
—
|
—
|
|||||
Common
stock, $0.001 par value per share; 300,000 shares authorized,
58,113 and 45,286 shares issued at September 30, 2005 and December
31,
2004, respectively, and 58,094 and 45,249 shares outstanding at
September
30, 2005 and December 31, 2004, respectively
|
58
|
452
|
|||||
Capital
in excess of par value
|
1,360,117
|
825,134
|
|||||
Accumulated
other comprehensive income (loss)
|
3,424
|
(12,434
|
)
|
||||
Accumulated
distributions in excess of net income
|
(396,490
|
)
|
(359,730
|
)
|
|||
Total
stockholders’ equity
|
967,124
|
453,422
|
|||||
$
|
2,589,224
|
$
|
1,243,649
|
Quarter
ended
|
Nine
months ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Revenues:
|
|||||||||||||
Rental
income from operating leases
|
$
|
42,419
|
$
|
14,191
|
$
|
104,594
|
$
|
42,132
|
|||||
Earned
income from direct financing leases
|
2,957
|
2,470
|
8,865
|
7,479
|
|||||||||
Interest
income from mortgage, equipment and
other
notes receivables
|
3,025
|
6,635
|
15,860
|
19,962
|
|||||||||
Investment
and interest income
|
704
|
1,641
|
1,697
|
3,811
|
|||||||||
Other
income
|
1,658
|
2,128
|
4,358
|
4,633
|
|||||||||
50,763
|
27,065
|
135,374
|
78,017
|
||||||||||
Expenses:
|
|||||||||||||
General
operating and administrative
|
7,308
|
6,107
|
28,240
|
19,065
|
|||||||||
Interest
expense
|
24,213
|
12,246
|
65,972
|
36,070
|
|||||||||
Property
expenses, state and other taxes
|
2,242
|
47
|
5,402
|
384
|
|||||||||
Depreciation
and amortization
|
8,551
|
2,976
|
22,400
|
8,631
|
|||||||||
Loss
on termination of cash flow hedge
|
8,558
|
—
|
8,558
|
940
|
|||||||||
Impairment
provisions on assets
|
622
|
1,724
|
298
|
2,775
|
|||||||||
51,494
|
23,100
|
130,870
|
67,865
|
||||||||||
Income/(loss)
from continuing operations before minority interest and equity in
earnings
of unconsolidated joint ventures
|
(731
|
)
|
3,965
|
4,504
|
10,152
|
||||||||
Minority
interest
|
(78
|
)
|
(640
|
)
|
(1,627
|
)
|
(2,597
|
)
|
|||||
Equity
in earnings of unconsolidated joint ventures
|
28
|
32
|
90
|
97
|
|||||||||
Income/(loss)
from continuing operations
|
(781
|
)
|
3,357
|
2,967
|
7,652
|
||||||||
Income
from discontinued operations, after income taxes
|
10,025
|
11,425
|
27,853
|
27,194
|
|||||||||
Gain
on sale of assets
|
9,620
|
134
|
9,643
|
140
|
|||||||||
Net
income
|
18,864
|
14,916
|
40,463
|
34,986
|
|||||||||
Dividends
to preferred stockholders
|
(7,176
|
)
|
—
|
(17,275
|
)
|
—
|
|||||||
Net
income allocable to common stockholders
|
$
|
11,688
|
$
|
14,916
|
$
|
23,188
|
$
|
34,986
|
|||||
Basic
and diluted net income per share:
|
|||||||||||||
Income/(loss)
from continuing operations allocable to
common
stockholders
|
$
|
0.03
|
$
|
0.10
|
$
|
(0.09
|
)
|
$
|
0.22
|
||||
Income
from discontinued operations
|
0.17
|
0.33
|
0.53
|
0.78
|
|||||||||
Basic
and diluted net income per share
|
$
|
0.20
|
$
|
0.43
|
$
|
0.44
|
$
|
1.00
|
|||||
Weighted
average number of shares of common stock
outstanding
(Notes 2 and 14):
|
|||||||||||||
Basic
|
57,846
|
35,032
|
53,204
|
35,032
|
|||||||||
Diluted
|
57,857
|
35,032
|
53,204
|
35,032
|
Preferred
Stock
Series
A
|
Preferred
Stock
Series
C
|
Common
Stock
|
|
Accumulated
distributions
|
Accumulated
other
compre-
|
Compre-
|
|||||||||||||||||||||||||||||||
Number
of
shares
|
Par
value
|
Number
of
shares
|
Par
value
|
Number
of
Shares
|
Par
value
|
Capital
in excess ofpar
value
|
Loans
to
Stockholders
|
in
excess of netincome
|
hensive
income/(loss)
|
Total
|
hensive income/(loss)
|
||||||||||||||||||||||||||
Balance
at December 31, 2004
|
—
|
$
|
—
|
—
|
$
|
—
|
45,249
|
$
|
452
|
$
|
825,134
|
$
|
—
|
$
|
(359,730
|
)
|
$
|
(12,434
|
)
|
$
|
453,422
|
||||||||||||||||
Effect
of USRP Merger:
|
|||||||||||||||||||||||||||||||||||||
Assumption
of USRP equity
|
4,084
|
4
|
—
|
—
|
22,599
|
23
|
440,483
|
(224
|
)
|
—
|
—
|
440,286
|
|||||||||||||||||||||||||
Conversion
of CNLRP common shares
|
—
|
—
|
7,244
|
7
|
(10,223
|
)
|
(417
|
)
|
410
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Acquisition
of Income Funds
|
3,750
|
4
|
—
|
—
|
—
|
—
|
88,231
|
—
|
—
|
—
|
88,235
|
||||||||||||||||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
40,463
|
—
|
40,463
|
$
|
40,463
|
||||||||||||||||||||||||
Other
comprehensive income, market revaluation on available for sale
securities
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
799
|
799
|
799
|
|||||||||||||||||||||||||
Reclassification
of cash flow hedge losses to statement of income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
10,581
|
10,581
|
10,581
|
||||||||||||||||||||||||||
Current
period adjustment to recognize change in fair value of cash flow
hedges,
inclusive of $1,650 in tax provision
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
4,478
|
4,478
|
4,478
|
|||||||||||||||||||||||||
Total
comprehensive income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
$
|
56,321
|
||||||||||||||||||||||||
Repayment
by stockholder of loan
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
224
|
—
|
—
|
224
|
||||||||||||||||||||||||||
Distributions
declared on common stock
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(59,948
|
)
|
—
|
(59,948
|
)
|
||||||||||||||||||||||||
Distributions
declared on preferred stock
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(17,275
|
)
|
—
|
(17,275
|
)
|
||||||||||||||||||||||||
Issuance
of common stock to directors and employees
|
—
|
—
|
—
|
—
|
119
|
—
|
2,053
|
—
|
—
|
—
|
2,053
|
||||||||||||||||||||||||||
Preferred
Stock
Series
A
|
Preferred
Stock
Series
C
|
Common
Stock
|
Capital
in
|
Accumulated
distributions
in
excess
|
Accumulated
other
compre-
|
Compre-
hensive
|
|||||||||||||||||||||||||||||||
Number
of
shares
|
Par
value
|
Number
of
shares
|
Par
value
|
Number
of
shares
|
Par
value
|
excess
of
par
value
|
Loans
to
Stockholders
|
of
net
income
|
hensive
income/(loss)
|
Total
|
income/
(loss)
|
||||||||||||||||||||||||||
Issuance
of restricted stock to directors and employees
|
—
|
—
|
—
|
—
|
138
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||||
Forfeiture
of restricted stock
|
—
|
—
|
—
|
—
|
(18
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||||
Stock
based compensation expense
|
—
|
—
|
—
|
—
|
—
|
—
|
375
|
—
|
—
|
—
|
375
|
||||||||||||||||||||||||||
Proceeds
from exercised stock options
|
—
|
—
|
—
|
—
|
41
|
—
|
563
|
—
|
—
|
—
|
563
|
||||||||||||||||||||||||||
Issuance
of common stock
|
—
|
—
|
—
|
—
|
189
|
—
|
3,130
|
—
|
—
|
—
|
3,130
|
||||||||||||||||||||||||||
Stock
issuance costs
|
—
|
—
|
—
|
—
|
—
|
(262
|
)
|
—
|
—
|
—
|
(262
|
)
|
|||||||||||||||||||||||||
Balance at September 30, 2005
|
7,834
|
$
|
8
|
7,244
|
$
|
7
|
58,094
|
$
|
58
|
$
|
1,360,117
|
$
|
—
|
$
|
(396,490
|
)
|
$
|
3,424
|
$
|
967,124
|
Nine
months ended
September
30,
|
|||||||
2005
|
2004
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
40,463
|
$
|
34,986
|
|||
Adjustments
to reconcile net income to net cash
provided
by operating activities:
|
|||||||
Depreciation
and amortization on real estate assets
|
21,773
|
8,122
|
|||||
Depreciation
and amortization on non-real estate assets
|
1,420
|
1,268
|
|||||
Amortization
of above and below market leases
|
371
|
—
|
|||||
Amortization
of deferred financing costs
|
7,439
|
4,166
|
|||||
Provision
for loss on loans
|
777
|
—
|
|||||
Impairments
and provisions on assets
|
510
|
4,861
|
|||||
Gain
on sales of assets
|
(13,355
|
)
|
(2,690
|
)
|
|||
Gain
on investment in securities
|
—
|
(495
|
)
|
||||
Loss
on termination of hedge
|
8,558
|
—
|
|||||
Stock
based compensation
|
2,427
|
—
|
|||||
Increase
in income tax payable
|
227
|
5,284
|
|||||
Decrease
in deferred tax asset
|
613
|
—
|
|||||
Increase
in accrued rental income
|
(5,895
|
)
|
(2,972
|
)
|
|||
Amortization
of investment in direct financing leases
|
4,006
|
1,626
|
|||||
Changes
in inventories of real estate held for sale
|
(34,143
|
)
|
(47,725
|
)
|
|||
Changes
in other operating assets and liabilities
|
(1,955
|
)
|
(4,575
|
)
|
|||
Net
cash provided by operating activities
|
33,236
|
1,856
|
|||||
Cash
flows from investing activities:
|
|||||||
Additions
to real estate investment properties and intangibles
|
(178,319
|
)
|
(13,997
|
)
|
|||
Proceeds
from sale of assets
|
228,205
|
15,826
|
|||||
Proceeds
from sale of other investments
|
—
|
11,200
|
|||||
Increase
in restricted cash
|
(3,159
|
)
|
(180
|
)
|
|||
Acquisition
of Income Funds
|
(449,997
|
)
|
—
|
||||
Cash
acquired through merger
|
43,646
|
—
|
|||||
Payment
of merger costs for USRP reverse merger
|
(14,188
|
)
|
—
|
||||
Investment
in mortgage, equipment and other notes receivable
|
(2,828
|
)
|
—
|
||||
Collection
on mortgage, equipment and other notes receivable
|
20,208
|
19,572
|
|||||
Net
cash provided by/(used in) investing activities
|
(356,432
|
)
|
32,421
|
Nine
months ended
September
30,
|
|||||||
2005
|
2004
|
||||||
Cash
flows from financing activities:
|
|||||||
Payment
of stock issuance costs
|
(1,751
|
)
|
(1,493
|
)
|
|||
Repayment
of loan to stockholder
|
(33,860
|
)
|
—
|
||||
Proceeds
from borrowings on revolver, term loan and note payable
|
1,201,362
|
37,000
|
|||||
Payment
on revolver and note payable
|
(1,259,629
|
)
|
(66,493
|
)
|
|||
Proceeds
from borrowings on mortgage warehouse facilities
|
163,465
|
185,044
|
|||||
Payments
on mortgage warehouse facilities
|
(125,753
|
)
|
(143,376
|
)
|
|||
Proceeds
from borrowings on senior notes
|
301,188
|
—
|
|||||
Proceeds
from issuance of bonds
|
275,000
|
5,000
|
|||||
Retirement
of bonds payable
|
(51,039
|
)
|
(24,547
|
)
|
|||
Payment
of bond issuance and debt refinancing costs
|
(27,678
|
)
|
(920
|
)
|
|||
Proceeds
from termination of hedge
|
1,685
|
—
|
|||||
Payment
for termination of hedge
|
(8,558
|
)
|
—
|
||||
Proceeds
from exercised stock options
|
563
|
—
|
|||||
Retirement
of convertible preferred stock
|
(32,500
|
)
|
—
|
||||
Loans
from stockholder
|
—
|
10,900
|
|||||
Acquisition
of minority interest
|
(655
|
)
|
—
|
||||
Distributions
to minority interest
|
(2,075
|
)
|
(2,339
|
)
|
|||
Proceeds
from issuance of common stock
|
3,129
|
—
|
|||||
Distributions
to common stockholders
|
(56,076
|
)
|
(52,509
|
)
|
|||
Distributions
to preferred stockholders
|
(19,263
|
)
|
—
|
||||
Net
cash provided by/(used in) financing activities
|
327,555
|
(53,733
|
)
|
||||
Net
increase (decrease) in cash and cash equivalents
|
4,359
|
(19,456
|
)
|
||||
Cash
and cash equivalents at beginning of period
|
22,744
|
36,955
|
|||||
Cash
and cash equivalents at end of period
|
$
|
27,103
|
$
|
17,499
|
|||
Supplemental
disclosures of cash flow information:
|
|||||||
Interest
paid
|
$
|
49,991
|
$
|
33,495
|
|||
Interest
capitalized
|
$
|
52
|
$
|
17
|
|||
Income
taxes paid
|
$
|
5,934
|
$
|
2,343
|
|||
Supplemental
disclosures of non-cash investing and financing
activities:
|
|||||||
Redemption
of minority interest in lieu of payment on accounts
receivable
|
$
|
1,798
|
$
|
894
|
|||
Foreclosure
on notes receivable and acceptance of underlying real
estate
collateral
|
$
|
—
|
$
|
452
|
|||
Notes
receivable accepted in exchange for sale of properties
|
$
|
—
|
$
|
3,490
|
|||
Restricted
cash accepted in exchange for convenience and gas store operations
and
interest in fuel loading terminal
|
$
|
10,253
|
$
|
—
|
|||
Distributions
declared and unpaid at September 30
|
$
|
6,392
|
$
|
—
|
1.
|
Organization
and Nature of Business:
|
2.
|
Basis
of Presentation:
|
2.
|
Basis
of Presentation - Continued:
|
3.
|
Adoption
of New Accounting Standards:
|
4.
|
Merger:
|
4.
|
Merger
- Continued:
|
·
|
The
fair value of land and buildings was estimated as if the properties
were
vacant. The land value was estimated and the buildings were valued
at
estimated replacement cost less
depreciation.
|
·
|
For
properties currently under lease, an analysis was performed to determine
whether the current lease terms were above or below market rate and
an
asset or liability, respectively, was determined using discounted
cash
flows.
|
·
|
For
properties currently under lease, the value associated with having
a lease
in place was estimated by evaluating the present value of the lost
rents
for each property that would have resulted if the properties had
to be
constructed and the costs related to executing the lease.
|
·
|
The
benefit of having a tenant in each specific property with a high
likelihood of renewing the lease at the end of the current term was
evaluated and a value was determined using the present value of rents
during a standard re-lease period.
|
Equity
Interest
|
Shares
(in
thousands)
|
Price
|
Total
Market Value
(in
thousands)
|
||||||||||
Series
A Preferred Stock
|
4,084
|
$
|
23.53
|
$
|
96,099
|
||||||||
Series
B Preferred Stock
|
25
|
1,300.00
|
32,500
|
(a) |
|
|
|||||||
Common
Stock
|
22,599
|
15.24
|
344,411
|
||||||||||
473,010
|
|||||||||||||
Transaction
costs
|
14,414
|
||||||||||||
Total
|
$
|
487,424
|
4.
|
Merger
- Continued:
|
(In
thousands)
|
||||
Cash
Consideration
|
$
|
449,997
|
||
Preferred
Share Consideration (3,749.9 million shares at $23.53 per
share)
|
88,235
|
|||
Purchase
Price including transaction costs
|
$
|
538,232
|
4.
|
Merger
- Continued:
|
(In
thousands)
|
|||||||
Consideration:
|
|||||||
Exchange
of equity interests
|
$
|
473,010
|
|||||
Transaction
costs
|
14,414
|
||||||
Cash
|
449,997
|
||||||
Series
A Preferred Shares
|
88,235
|
||||||
Total
consideration
|
$
|
1,025,656
|
|||||
Assets
Acquired:
|
|||||||
Real
estate investment properties
|
$
|
966,054
|
|||||
Net
investment in direct financing leases
|
63,648
|
||||||
Real
estate held for sale
|
62,077
|
||||||
Cash
|
43,646
|
||||||
Restricted
cash
|
7,835
|
||||||
Mortgage
and equipment notes receivable
|
15,235
|
||||||
Accounts
receivable
|
2,925
|
||||||
Other
assets:
|
|||||||
Above
market leases
|
44,093
|
||||||
Leases
in place
|
15,214
|
||||||
Tenant
relationships
|
9,117
|
||||||
Other
|
10,104
|
||||||
Goodwill
|
168,814
|
(1) |
|
|
|||
Total
|
1,408,762
|
||||||
Liabilities
Assumed:
|
|||||||
Revolver
|
14,150
|
||||||
Notes
payable
|
158,189
|
||||||
Bonds
payable
|
143,505
|
||||||
Due
to related parties
|
270
|
||||||
Other
payables:
|
|||||||
Below
market leases
|
27,584
|
||||||
Environmental
and exit costs liability
|
4,775
|
||||||
Distributions
payable
|
4,506
|
||||||
Other
|
22,757
|
||||||
Minority
interests
|
7,594
|
||||||
Loan
due from stockholder (reduction of equity)
|
(224
|
)
|
|||||
Total
|
383,106
|
||||||
Net
assets acquired
|
$
|
1,025,656
|
4.
|
Merger
- Continued:
|
4.
|
Merger
- Continued:
|
Proforma
(in
thousands)
|
|||||||||||||
Quarter
Ended
September 30, 2005
|
Quarter
Ended
September 30, 2004
|
Nine
Months Ended September 30, 2005
|
Nine
Months Ended September 30, 2004
|
||||||||||
Revenues
|
$
|
50,763
|
$
|
56,607
|
$
|
154,771
|
$
|
168,700
|
|||||
Net
income
|
18,864
|
18,851
|
34,452
|
53,792
|
|||||||||
Dividends
to preferred stockholders
|
(7,176
|
)
|
(7,185
|
)
|
(21,527
|
)
|
(21,536
|
)
|
|||||
Net
income allocable to common
stockholders
|
$
|
11,688
|
$
|
11,666
|
$
|
12,925
|
$
|
32,256
|
|||||
Basic
and diluted earnings per share
|
$
|
0.20
|
$
|
0.20
|
$
|
0.22
|
$
|
0.56
|
|||||
Weighted
average shares outstanding:
|
|||||||||||||
Basic
|
57,846
|
57,630
|
57,757
|
57,630
|
|||||||||
Diluted
|
57,857
|
57,630
|
57,757
|
57,630
|
The
proforma amounts for
the nine months ended September 30, 2005 include a non-cash tax charge
of
$2.7 million and $8.7 million of Merger
expenses.
|
5.
|
Intangible
Lease Costs:
|
(in
thousands)
|
|||||||
September
30, 2005
|
December
31, 2004
|
||||||
Intangible
lease origination costs:
|
|||||||
Leases
in place
|
$
|
30,095
|
$
|
—
|
|||
Tenant
relationships
|
9,891
|
—
|
|||||
39,986
|
—
|
||||||
Less
accumulated amortization
|
(4,192
|
)
|
—
|
||||
35,794
|
—
|
||||||
Above
market lease values
|
43,771
|
—
|
|||||
Less
accumulated amortization
|
(3,120
|
)
|
—
|
||||
40,651
|
—
|
||||||
Total
|
$
|
76,445
|
$
|
—
|
5.
|
Intangible
Lease Costs - Continued:
|
6.
|
Real
Estate Investment Properties:
|
(In
thousands)
|
|||||||
September
30,
2005
|
December
31,
2004
|
||||||
Land
|
$
|
874,841
|
$
|
273,776
|
|||
Buildings
|
837,079
|
310,056
|
|||||
Equipment
and other
|
3,374
|
1,251
|
|||||
1,715,294
|
585,083
|
||||||
Less
accumulated depreciation
|
(78,177
|
)
|
(60,813
|
)
|
|||
$
|
1,637,117
|
$
|
524,270
|
(In
thousands)
|
||||
2005
|
$
|
39,949
|
||
2006
|
158,288
|
|||
2007
|
156,238
|
|||
2008
|
153,960
|
|||
2009
|
151,363
|
|||
Thereafter
|
1,195,054
|
|||
$
|
1,854,852
|
(In
thousands)
|
|||||||
September
30, 2005
|
December
31, 2004
|
||||||
Minimum
lease payments receivable
|
$
|
222,848
|
$
|
172,902
|
|||
Estimated
residual values
|
42,507
|
24,554
|
|||||
Interest
receivable from secured equipment leases
|
4
|
7
|
|||||
Less
unearned income
|
(112,694
|
)
|
(101,008
|
)
|
|||
Net
investment in direct financing leases
|
$
|
152,665
|
$
|
96,455
|
(In
thousands)
|
||
2005
|
$
4,687
|
|
2006
|
18,805
|
|
2007
|
18,945
|
|
2008
|
19,075
|
|
2009
|
19,126
|
|
Thereafter
|
142,210
|
|
$
222,848
|
8.
|
Real
Estate Held for Sale:
|
(In
thousands)
|
|||||||||||||
Quarters
ended
September
30,
|
Nine
months ended
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Rental
income
|
$
|
3,533
|
$
|
4,388
|
$
|
8,833
|
$
|
10,916
|
|||||
Food,
beverage and retail revenues
|
14,317
|
3,549
|
34,776
|
11,106
|
|||||||||
Food,
beverage and retail expenses
|
(14,281
|
)
|
(3,839
|
)
|
(33,878
|
)
|
(11,564
|
)
|
|||||
Other
property related expenses
|
(408
|
)
|
(762
|
)
|
(1,918
|
)
|
(1,342
|
)
|
|||||
Interest
expense
|
(1,682
|
)
|
(1,085
|
)
|
(3,758
|
)
|
(2,575
|
)
|
|||||
Impairment
provisions
|
(64
|
)
|
(876
|
)
|
(415
|
)
|
(2,087
|
)
|
|||||
Earnings
from discontinued operations
|
1,415
|
1,375
|
3,640
|
4,454
|
|||||||||
Sales
of real estate
|
72,015
|
97,619
|
213,285
|
224,088
|
|||||||||
Cost
of real estate sold
|
(62,057
|
)
|
(83,177
|
)
|
(181,316
|
)
|
(193,722
|
)
|
|||||
Gain
on disposal of discontinued operations
|
9,958
|
14,442
|
31,969
|
30,366
|
|||||||||
Income
tax provision
|
(1,348
|
)
|
(4,392
|
)
|
(7,756
|
)
|
(7,626
|
)
|
|||||
Income
from discontinued operations, after income tax
|
$
|
10,025
|
$
|
11,425
|
$
|
27,853
|
$
|
27,194
|
9.
|
Mortgage,
Equipment and Other Notes Receivable:
|
10.
|
Borrowings:
|
September
30, 2005
|
December
31, 2004
|
|||||||||
Amount
(In
thousands)
|
Average
Rate
|
Capacity
|
Expected
maturity/
retirement
date
|
Amount
(In
thousands)
|
Average
rate
|
|||||
Revolver
|
$
142,000
|
5.69%
|
$
175,000
|
April
2008
|
$
21,000
|
4.04%
|
||||
Term
loan
|
175,000
|
5.43%
|
175,000
|
April
2010
|
—
|
—
|
||||
Senior
unsecured notes
|
300,000
|
7.50%
|
300,000
|
April
2015
|
—
|
—
|
||||
Notes
payable
|
1,913
|
6.54%
|
6,150
|
2010
|
162,810
|
5.83%
|
||||
Mortgage
note payable (a)
|
839
|
8.00%
|
839
|
June
2007
|
—
|
—
|
||||
Mortgage
warehouse facilities
|
139,106
|
4.51%
|
260,000
|
Annual
|
101,394
|
2.78%
|
||||
Subordinated
note payable
|
—
|
—
|
—
|
—
|
21,875
|
7.00%
|
||||
Series
2000-A bonds payable
|
227,150
|
7.97%
|
227,150
|
2009-2017
|
239,165
|
7.96%
|
||||
Series
2001-A bonds payable (a)
|
135,102
|
3.63%
|
135,102
|
August
2006
|
—
|
—
|
||||
Series
2001-4 bonds payable
|
25,920
|
8.90%
|
25,920
|
2009-2013
|
28,489
|
8.90%
|
||||
Series
2001 bonds payable
|
106,531
|
3.51%
|
106,531
|
October
2006
|
111,577
|
1.89%
|
||||
Series
2003 bonds payable
|
9,722
|
7.76%
|
9,722
|
2005-2011
|
26,190
|
6.02%
|
||||
Series
2005 bonds payable
|
268,644
|
4.67%
|
268,644
|
2011-2012
|
—
|
—
|
||||
$
1,531,927
|
$
1,690,058
|
$
712,500
|
||||||||
Senior
unsecured notes premium
|
1,178
|
—
|
||||||||
$
1,533,105
|
$
1,690,058
|
(a)
|
Assumed
debt as a result of the Merger described in Note
4.
|
10.
|
Borrowings
- Continued:
|
10.
|
Borrowings
- Continued:
|
10.
|
Borrowings
- Continued:
|
(In
thousands)
|
||||
2005
|
$
|
10,274
|
||
2006
|
402,251
|
|||
2007
|
27,805
|
|||
2008
|
172,597
|
|||
2009
|
34,929
|
|||
Thereafter
|
884,071
|
|||
$
|
1,531,927
|
11.
|
Income
Tax:
|
11.
|
Income
Tax - Continued:
|
12.
|
Related
Party Transactions:
|
13.
|
Stock
Options and Restricted Shares:
|
13.
|
Stock
Options and Restricted Shares - Continued:
|
$12.23
|
$15.50
|
All
options
|
||||||||
Options
outstanding (in thousands)
|
4
|
8
|
12
|
|||||||
Average
option price per share
|
$
|
12.23
|
$
|
15.50
|
$
|
14.36
|
||||
Weighted
average contractual life (years)
|
2.68
|
1.08
|
1.63
|
|||||||
Options
exercisable (in thousands)
|
4
|
8
|
12
|
|||||||
Average
option price per share
|
$
|
12.23
|
$
|
15.50
|
$
|
14.36
|
Number
of options
(in
thousands)
|
Weighted
average exercise price at grant date
|
||||||
Options
outstanding at December 31, 2004
|
0
|
$
|
—
|
||||
Options
assumed through Merger
|
71
|
14.95
|
|||||
Exercised
|
(41
|
)
|
13.72
|
||||
Forfeited
|
—
|
—
|
|||||
Expired
|
(18
|
)
|
20.50
|
||||
Options
outstanding and exercisable at September 30, 2005
|
12
|
$
|
14.36
|
Number
of
shares
(in
thousands)
|
Weighted
average fair value at grant date
|
||||||
Non-vested
shares at beginning of period
|
—
|
$
|
—
|
||||
Granted
|
138
|
17.01
|
|||||
Vested
|
—
|
—
|
|||||
Forfeited
|
(18
|
)
|
17.20
|
||||
Non-vested
shares at September 30, 2005
|
120
|
$
|
16.98
|
13.
|
Stock
Options and Restricted Shares - Continued:
|
14.
|
Stockholders’
Equity:
|
14.
|
Stockholders’
Equity - Continued:
|
Computation
of Earnings Per Common Share
-
For the quarters and nine months ended September 30, 2005 and 2004,
basic
and diluted earnings per common share for income (loss) from continuing
operations available to common shareholders has been computed as
follows:
|
Quarter
ended September 30, 2005
|
||||||||||||||||
Income
(in
thousands)
(Numerator)
|
Shares
(in
thousands)
(Denominator)
|
Per-Share
Amount
|
||||||||||||||
Loss
from continuing operations
|
$
|
(781
|
)
|
|||||||||||||
Gain
on sale of assets
|
9,620
|
|||||||||||||||
Less:
Preferred stock dividends
|
(7,176
|
)
|
||||||||||||||
Basic
Earnings Per Share:
|
||||||||||||||||
Income
from continuing operations available to common
stockholders
|
1,663
|
57,846
|
$
|
0.03
|
||||||||||||
Effect
of dilutive securities:
|
||||||||||||||||
Stock
options
|
—
|
2
|
||||||||||||||
Restricted
stock
|
—
|
(1) |
|
|
9
|
(1) |
|
|
||||||||
Convertible
Preferred Stock
|
—
|
(1) |
|
|
—
|
(1) |
|
|
||||||||
Diluted
Earnings Per Share:
|
||||||||||||||||
Loss
from continuing operations available to common
shareholders
|
$
|
1,663
|
57,857
|
$
|
0.03
|
|||||||||||
14.
|
Stockholders’
Equity - Continued:
|
Quarter
ended September 30, 2004
|
||||||||||
Income
(in
thousands)
(Numerator)
|
Shares
(in
thousands)
(Denominator)
|
Per-Share
Amount
|
||||||||
Income
from continuing operations
|
$
|
3,357
|
||||||||
Gain
on sale of assets
|
134
|
|||||||||
Basic
and Diluted Earnings Per Share:
|
||||||||||
Income
from continuing operations available to common
stockholders
|
$
|
3,491
|
35,032
|
$
|
0.10
|
Nine
months ended September 30, 2005
|
||||||||||||||||
Income
(in
thousands)
(Numerator)
|
Shares
(in
thousands)
(Denominator)
|
Per-Share
Amount
|
||||||||||||||
Income
from continuing operations
|
$
|
2,967
|
||||||||||||||
Gain
on sale of assets
|
9,643
|
|||||||||||||||
Less:
Preferred stock dividends
|
(17,275
|
)
|
||||||||||||||
Basic
Earnings Per Share:
|
||||||||||||||||
Loss
from continuing operations available
to
common stockholders
|
(4,665
|
)
|
53,204
|
$
|
(0.09
|
)
|
||||||||||
Effect
of dilutive securities:
|
||||||||||||||||
Stock
options
|
—
|
(2) |
|
|
—
|
(2) |
|
|
||||||||
Restricted
stock
|
—
|
(2) |
|
|
—
|
(2) |
|
|
||||||||
Convertible
Preferred Stock
|
—
|
(2) |
|
|
—
|
(2) |
|
|
||||||||
Diluted
Earnings Per Share:
|
||||||||||||||||
Loss
from continuing operations
available
to common shareholders
|
$
|
(4,665
|
)
|
53,204
|
$
|
(0.09
|
)
|
|||||||||
14.
|
Stockholders’
Equity - Continued:
|
Nine
months ended September 30, 2004
|
|||||||||||||
Income
(in
thousands)
(Numerator)
|
Shares
(in
thousands)
(Denominator)
|
|
Per-Share
Amount
|
||||||||||
Income
from continuing operations
|
$
|
7,652
|
|||||||||||
Gain
on sale of assets
|
140
|
||||||||||||
Basic
and Diluted Earnings Per Share:
|
|||||||||||||
Income
from continuing operations
available
to common stockholders
|
$
|
7,792
|
35,032
|
$
|
0.22
|
(1)
|
For
the quarter ended September 30, 2005, the potential dilution from
the
conversion of Series A and Series C Preferred Stock into 16.6 million
shares of common stock and approximately 0.1 million shares of restricted
common stock were excluded from the computation of diluted earnings
per
share as these Common Stock Equivalents were
anti-dilutive.
|
(2)
|
For
the nine months ended September 30, 2005, the potential dilution
from the
Company’s outstanding Common Stock Equivalents was anti-dilutive to the
loss from continuing operations per share calculation. As such, these
amounts were excluded from weighted average shares. Stock options
to
purchase approximately 0.012 million shares of common stock, approximately
0.12 million shares of restricted common stock and the conversion
of
Series A and Series C Preferred Stock into 16.6 million shares of
common
stock were excluded from the computation of diluted earnings per
share as
these Common Stock Equivalents were
anti-dilutive.
|
14.
|
Stockholders’
Equity - Continued:
|
(In
thousands)
|
|||||||||||||
Quarters
ended
September
30,
|
Nine
months ended
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Historical
income (loss) from continuing operations and gain of sale of assets
less
preferred stock dividends
|
$
|
1,663
|
$
|
3,491
|
$
|
(4,665
|
)
|
$
|
7,792
|
||||
Proforma
adjustment for Series C Preferred Stock dividends
|
—
|
(3,396
|
)
|
(2,264
|
)
|
(10,188
|
)
|
||||||
Proforma
income (loss) from continuing operations allocable to common
stockholders
|
$
|
1,663
|
$
|
95
|
$
|
(6,929
|
)
|
$
|
(2,396
|
)
|
|||
Basic
and diluted proforma earnings (loss) per share:
|
|||||||||||||
From
continuing operations
|
$
|
0.03
|
$
|
—
|
$
|
(0.13
|
)
|
$
|
(0.07
|
)
|
|||
From
discontinued operations
|
0.17
|
0.33
|
0.53
|
0.78
|
|||||||||
$
|
0.20
|
$
|
0.33
|
$
|
0.40
|
$
|
0.71
|
15.
|
Segment
Information:
|
15.
|
Segment
Information - Continued:
|
Quarter
ended September 30, 2005
(In
thousands)
|
|||||||||||||
Real
estate segment
|
Specialty
finance segment
|
Other
|
Consolidated
Totals
|
||||||||||
Revenues
|
$
|
48,728
|
$
|
3,333
|
$
|
(1,298
|
)
|
$
|
50,763
|
||||
Expenses:
|
|||||||||||||
General
operating and administrative
|
2,522
|
5,697
|
(911
|
)
|
7,308
|
||||||||
Interest
expense
|
22,393
|
2,145
|
(325
|
)
|
24,213
|
||||||||
Property
expenses, state and other taxes
|
2,111
|
183
|
(52
|
)
|
2,242
|
||||||||
Depreciation
and amortization
|
8,092
|
459
|
—
|
8,551
|
|||||||||
Loss
on termination of cash flow hedge
|
8,558
|
—
|
—
|
8,558
|
|||||||||
Impairments
and provisions/(recovery) on assets
|
1,250
|
(628
|
)
|
—
|
622
|
||||||||
Minority
interest net of equity in earnings
|
50
|
—
|
—
|
50
|
|||||||||
44,976
|
7,856
|
(1,288
|
)
|
51,544
|
|||||||||
Discontinued
operations:
|
|||||||||||||
Income
from discontinued operations, net of income tax
|
3,313
|
6,712
|
—
|
10,025
|
|||||||||
Gain
on sale of assets
|
9,620
|
—
|
—
|
9,620
|
|||||||||
Net
income/(loss)
|
$
|
16,685
|
$
|
2,189
|
$
|
(10
|
)
|
$
|
18,864
|
||||
Assets
at September 30, 2005
|
$
|
2,200,501
|
$
|
395,707
|
$
|
(6,984
|
)
|
$
|
2,589,224
|
||||
Investments
accounted for under the equity method at September 30,
2005
|
$
|
860
|
$
|
—
|
$
|
—
|
$
|
860
|
|||||
15.
|
Segment
Information - (Continued):
|
Quarter
ended September 30, 2004
(In
thousands)
|
|||||||||||||
Real
estate segment
|
Specialty
finance segment
|
Other
|
Consolidated
Totals
|
||||||||||
Revenues
|
$
|
19,860
|
$
|
8,133
|
$
|
(928
|
)
|
$
|
27,065
|
||||
Expenses:
|
|||||||||||||
General
operating and administrative
|
1,705
|
4,872
|
(470
|
)
|
6,107
|
||||||||
Interest
expense
|
7,441
|
4,657
|
148
|
12,246
|
|||||||||
Property
expenses, state and other taxes
|
47
|
—
|
—
|
47
|
|||||||||
Depreciation
and amortization
|
2,730
|
246
|
—
|
2,976
|
|||||||||
Impairments
and provisions on assets
|
1,422
|
302
|
—
|
1,724
|
|||||||||
Minority
interest net of equity in earnings
|
2
|
606
|
—
|
608
|
|||||||||
13,347
|
10,683
|
(322
|
)
|
23,708
|
|||||||||
Discontinued
operations:
|
|||||||||||||
Income
from discontinued operations, net of income tax
|
1,894
|
9,531
|
—
|
11,425
|
|||||||||
Gain
on sale of assets
|
134
|
—
|
—
|
134
|
|||||||||
Net
income/(loss)
|
$
|
8,541
|
$
|
6,981
|
$
|
(606
|
)
|
$
|
14,916
|
||||
Assets
at September 30, 2004
|
$
|
788,998
|
$
|
499,731
|
$
|
(2,694
|
)
|
$
|
1,286,035
|
||||
Investments
accounted for under the equity
method at September 30, 2004
|
$
|
995
|
$
|
—
|
$
|
—
|
$
|
995
|
|||||
15.
|
Segment
Information - (Continued):
|
Nine
months ended September 30, 2005
(In
thousands)
|
|||||||||||||
Real
estate segment
|
Specialty
finance segment
|
Other
|
Consolidated
Totals
|
||||||||||
Revenues
|
$
|
126,319
|
$
|
12,532
|
$
|
(3,477
|
)
|
$
|
135,374
|
||||
Expenses:
|
|||||||||||||
General
operating and administrative
|
9,636
|
21,165
|
(2,561
|
)
|
28,240
|
||||||||
Interest
expense
|
58,260
|
8,186
|
(474
|
)
|
65,972
|
||||||||
Property
expenses, state and other taxes
|
5,331
|
489
|
(418
|
)
|
5,402
|
||||||||
Depreciation
and amortization
|
21,383
|
1,017
|
—
|
22,400
|
|||||||||
Loss
on termination of cash flow hedge
|
8,558
|
—
|
—
|
8,558
|
|||||||||
Impairments
and provisions/(recovery) on assets
|
797
|
(499
|
)
|
—
|
298
|
||||||||
Minority
interest net of equity in earnings
|
150
|
1,387
|
—
|
1,537
|
|||||||||
104,115
|
31,745
|
(3,453
|
)
|
132,407
|
|||||||||
Discontinued
operations:
|
|||||||||||||
Income
from discontinued operations, net of income tax
|
4,648
|
23,205
|
—
|
27,853
|
|||||||||
Gain
on sale of assets
|
9,643
|
—
|
—
|
9,643
|
|||||||||
Net
income/(loss)
|
$
|
36,495
|
$
|
3,992
|
$
|
(24
|
)
|
$
|
40,463
|
||||
15.
|
Segment
Information - (Continued):
|
Nine
months ended September 30, 2004
(In
thousands)
|
|||||||||||||
Real
estate segment
|
Specialty
finance segment
|
Other
|
Consolidated
Totals
|
||||||||||
Revenues
|
$
|
58,299
|
$
|
22,061
|
$
|
(2,343
|
)
|
$
|
78,017
|
||||
Expenses:
|
|||||||||||||
General
operating and administrative
|
6,079
|
14,497
|
(1,511
|
)
|
19,065
|
||||||||
Interest
expense
|
21,805
|
14,067
|
198
|
36,070
|
|||||||||
Property
expenses, state and other taxes
|
384
|
—
|
—
|
384
|
|||||||||
Depreciation
and amortization
|
8,013
|
618
|
—
|
8,631
|
|||||||||
Loss
on termination of cash flow hedge
|
—
|
940
|
—
|
940
|
|||||||||
Impairments
and provisions on assets
|
2,115
|
660
|
—
|
2,775
|
|||||||||
Minority
interest net of equity in earnings
|
33
|
2,467
|
—
|
2,500
|
|||||||||
38,429
|
33,249
|
(1,313
|
)
|
70,365
|
|||||||||
Discontinued
operations:
|
|||||||||||||
Income
from discontinued
operations,
net of income tax
|
3,886
|
23,308
|
—
|
27,194
|
|||||||||
Gain
on sale of assets
|
140
|
—
|
—
|
140
|
|||||||||
Net
income/(loss)
|
$
|
23,896
|
$
|
12,120
|
$
|
(1,030
|
)
|
$
|
34,986
|
16.
|
Commitments
and Contingencies:
|
(In
thousands)
|
||||
2005
|
$
|
1,005
|
||
2006
|
3,527
|
|||
2007
|
3,077
|
|||
2008
|
2,344
|
|||
2009
|
1,605
|
|||
Thereafter
|
2,605
|
|||
$
|
14,163
|
16.
|
Commitments
and Contingencies:
|
17.
|
Subsequent
Event:
|
·
|
changes
in general economic conditions;
|
·
|
general
risks affecting the real estate industry (including, without limitation,
the inability to enter into or renew leases on favorable terms, dependence
on tenants’ financial condition, and competition from other developers,
owners and operators of real
estate);
|
·
|
general
risks affecting the restaurant industry (including, without limitation,
any disruption in the supply or quality of ingredients, the availability
of labor, and the continued demand for restaurant
dining);
|
·
|
financing
may not be available on favorable terms or at all, and our cash flow
from
operations and access to attractive capital may be insufficient to
fund
existing operations, or growth in new acquisitions and
developments;
|
·
|
changes
in interest rates;
|
·
|
our
ability to refinance existing financial obligations at favorable
terms;
|
·
|
our
ability to locate suitable tenants for our properties and similarly
resolve any mortgage loan
delinquencies;
|
·
|
the
ability of tenants and borrowers to make payments under their agreements
with us;
|
·
|
possible
adverse changes in tax and environmental laws, as well as the impact
of
newly adopted accounting principles on our accounting policies and
on
period-to-period comparisons of financial
results;
|
·
|
risks
associated with our potential failure to qualify as a REIT under
the
Internal Revenue Code of 1986, as
amended;
|
·
|
our
ability to effect an integration of recently merged properties and
operations;
|
·
|
our
ability to re-lease or sell properties that are currently vacant
or that
may become vacant; and
|
·
|
our
ability to sell mortgage loans or net lease properties on a favorable
and
timely basis.
|
1.
|
restaurant
operators of major national and regional
chains;
|
2.
|
restaurant
property investors; and
|
3.
|
retail
real estate developers.
|
1.
|
financing
free-standing restaurant and retail real
estate;
|
2.
|
maximizing
the potential of our real estate
portfolio;
|
3.
|
sale
of real estate to investors; and
|
4.
|
property
improvement and redevelopment.
|
·
|
$2.3
billion in properties purchased under sale leaseback terms including
approximately $364.6 million during the nine months ended September
30,
2005 and $247 million throughout 2004;
and
|
·
|
$3.3
billion in mortgage loans, including $2.2 billion more recently through
our strategic alliance with Bank of America.
|
·
|
consistent
source of financing dedicated almost exclusively to the restaurant
industry for more than twenty
years;
|
·
|
our
ability to finance transactions in excess of $100
million;
|
·
|
relationships
with most of the major restaurant concepts and significant franchisees
in
those systems;
|
·
|
the
experience and expertise of our senior marketing
representatives;
|
·
|
the
intellectual capital that resides in our investment banking services
group; and
|
·
|
our
strategic alliance that offers a source of mortgage
financing.
|
·
|
credit
underwriting of the restaurant
concept;
|
·
|
credit
underwriting of the potential
tenant;
|
·
|
physical
inspection of the real estate;
|
·
|
assessment
of whether the properties should be held for long-term investment
or held
for sale; and
|
·
|
review
and approval by our Investment Committee that includes senior executives,
including the CEO and CFO, separate from the marketing
team.
|
Concept
|
Number
of Properties
|
Percentage
of Total Properties
|
Percentage
of Total Annualized Base Rent
|
Average
Remaining Lease Term (Years)
|
||||
Burger
King
|
174
|
9.1%
|
7.7%
|
10.18
|
||||
Golden
Corral
|
85
|
4.4%
|
7.6%
|
6.75
|
||||
Jack
in the Box (*)
|
114
|
6.0%
|
7.0%
|
9.00
|
||||
Arby’s
|
151
|
7.9%
|
6.3%
|
10.71
|
||||
International
House of Pancakes
|
63
|
3.3%
|
4.3%
|
14.04
|
||||
Captain
D’s
|
102
|
5.3%
|
3.7%
|
17.40
|
||||
Bennigan’s
|
30
|
1.6%
|
3.6%
|
11.38
|
||||
Wendy’s
|
55
|
2.9%
|
3.0%
|
13.60
|
||||
Denny’s
|
47
|
2.5%
|
2.7%
|
8.64
|
||||
Pizza
Hut
|
121
|
6.3%
|
2.6%
|
7.51
|
Tenant
|
Number
of Properties
|
Percentage
of Total Properties
|
Percentage
of Total Annualized Base Rent
|
Average
Remaining Lease Term (Years)
|
||||
Jack
in the Box, Inc. and Jack in the
Box
Eastern Division L.P.
|
114
|
6.0%
|
7.1%
|
9.04
|
||||
Golden
Corral Corporation
|
71
|
3.7%
|
6.3%
|
6.31
|
||||
IHOP
Properties
|
60
|
3.1%
|
4.2%
|
14.16
|
||||
S&A
Properties Corporation
|
34
|
1.8%
|
3.5%
|
12.79
|
||||
Captain
D’s, LLC
|
93
|
4.9%
|
3.5%
|
17.88
|
||||
Sybra
Inc.
|
85
|
4.4%
|
3.4%
|
11.37
|
||||
Texas
Taco Cabana, LP
|
31
|
1.6%
|
2.2%
|
11.72
|
||||
El
Chico Restaurants, Inc.
|
23
|
1.2%
|
1.9%
|
10.15
|
||||
Carrols
Corporation
|
38
|
2.0%
|
1.9%
|
8.54
|
||||
The
Restaurant Company
|
18
|
0.9%
|
1.9%
|
19.84
|
State
|
Number
of Properties
|
Percentage
of Total Properties
|
Percentage
of Total Annualized Base Rent
|
Average
Remaining Lease Term (Years)
|
||||
Texas
|
406
|
21.2%
|
19.8%
|
9.83
|
||||
Florida
|
179
|
9.4%
|
11.2%
|
11.08
|
||||
Georgia
|
121
|
6.3%
|
5.6%
|
12.17
|
||||
Ohio
|
89
|
4.7%
|
4.8%
|
9.94
|
||||
Illinois
|
66
|
3.5%
|
4.2%
|
10.04
|
||||
Tennessee
|
94
|
4.9%
|
3.9%
|
10.97
|
||||
North
Carolina
|
94
|
4.9%
|
3.9%
|
9.32
|
||||
California
|
59
|
3.1%
|
3.9%
|
10.28
|
||||
Missouri
|
52
|
2.7%
|
3.0%
|
11.45
|
||||
Arizona
|
46
|
2.4%
|
2.7%
|
9.78
|
·
|
operating
expenses;
|
·
|
current
debt service requirements;
|
·
|
distributions
on our common and preferred equity;
|
·
|
federal
income taxes.
|
Debt
|
Balance
(in
millions)
|
Approximate
Interest
Rates
|
Expected
Maturity Date
|
Type
|
||||
Mortgage
Warehouse Facility
|
$
77.5
|
LIBOR
+ .90%
|
Feb-06
|
Collateralized
|
||||
Mortgage
Warehouse Facility
|
61.6
|
LIBOR
+ .90%
|
May-06
|
Collateralized
|
||||
Series
2001-A Bonds (a)
|
135.1
|
LIBOR
+ .98%
|
Aug-06
|
Collateralized
|
||||
Series
2001 Bonds (a)
|
106.5
|
LIBOR
+ .94%
|
Oct-06
|
Collateralized
|
||||
Notes
Payable (a)
|
2.8
|
Commercial
Paper + 1.25%
|
2005-2011
|
Collateralized
|
||||
Revolver
(a)
|
142.0
|
LIBOR
+ 2.25%
|
April-08
|
Collateralized
|
||||
Five
Year Term Loan (a)
|
175.0
|
LIBOR
+ 2.00%
|
April-10
|
Collateralized
|
||||
Series
2003 Bonds (a)
|
9.7
|
LIBOR
+ 5.00%
|
2005-2011
|
Collateralized
|
||||
Series
2001-4 Bonds
|
25.9
|
8.90%
|
2009-2013
|
Collateralized
|
||||
Series
2005 Bonds
|
268.6
|
4.67%
|
2011-2012
|
Collateralized
|
||||
Senior
Unsecured Notes (b)
|
301.2
|
7.50%
|
Apr-15
|
Uncollateralized
|
||||
Series
2000-A Bonds
|
227.2
|
7.97%
|
2009-2017
|
Collateralized
|
||||
Total
Debt
|
$
1,533.1
|
(a)
|
We
have entered into hedging transactions to minimize the sensitivity
of
floating rate debt in the form of swaps and caps, as described further
under “Market Risk”.
|
(b)
|
Balance
includes a premium of $1.2 million at September 30,
2005.
|
(in
millions)
|
||||
Mortgage
Warehouse Facilities
|
$
|
120.9
|
||
Revolver
|
33.0
|
|||
Cash
and Cash Equivalents
|
27.1
|
|||
$
|
181.0
|
Nine
Months ended
September
30, 2005
|
Nine
Months ended
September
30, 2004
|
|||||||||
(in
millions)
|
||||||||||
Cash
flows provided by operating activities
|
$
|
33.2
|
$
|
1.8
|
||||||
Cash
flows provided by/(used in) investing activities
|
(356.4
|
)
|
32.4
|
|||||||
Cash
flows provided by/(used in) financing activities
|
327.6
|
(53.7
|
)
|
|||||||
Net
increase (decrease) in cash and cash equivalents
|
4.4
|
(19.5
|
)
|
|||||||
Cash
and cash equivalents at beginning of year
|
22.7
|
37.0
|
||||||||
Cash
and cash equivalents at end of period
|
$
|
27.1
|
$
|
17.5
|
Mortgage
loans
|
Bonds
outstanding
|
||||||
in
pool at par
|
at
face value
|
||||||
(in
millions)
|
|||||||
Loans
and debt supporting 1998-1 Certificates
|
$
|
141.5
|
$
|
141.5
|
|||
Loans
and debt supporting 1999-1 Certificates
|
206.3
|
206.3
|
|||||
$
|
347.8
|
$
|
347.8
|
||||
Payments
due by period (in millions)
|
||||||||||||||||
Contractual
cash obligations:
|
thru
2005
|
2006
to 2007
|
2008
to
2009
|
Thereafter
|
Total
|
|||||||||||
Borrowings
(1)
|
$
|
10.3
|
$
|
430.1
|
$
|
207.5
|
$
|
884.0
|
$
|
1,531.9
|
||||||
Ground
leases
|
1.0
|
6.6
|
4.0
|
2.6
|
14.2
|
|||||||||||
Leased
office space (2)
|
0.4
|
2.4
|
2.5
|
6.8
|
12.1
|
|||||||||||
Total
contractual cash obligations
|
$
|
11.7
|
$
|
439.1
|
$
|
214.0
|
$
|
893.4
|
$
|
1,558.2
|
Estimated
payments due by period (in millions)
|
||||||||||||||||
Commitments,
contingencies and
guarantees
|
thru
2005
|
2006
to
2007
|
2008
to
2009
|
Thereafter
|
Total
|
|||||||||||
Guaranty
of unsecured promissory
note
(2)
|
$
|
1.2
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1.2
|
||||||
Property
purchase commitments (3)
|
103.5
|
—
|
—
|
—
|
103.5
|
|||||||||||
Fuel
purchase commitments (4)
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
Litigation
(5)
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
Total
commitments, contingencies
and
guarantees
|
$
|
104.7
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
104.7
|
(1)
|
The
maturities on outstanding indebtedness assumes loan repayments are
made on
the mortgage warehouse facilities in accordance with the contractual
obligation even though these warehouses are typically renewed each
year.
The maturities on outstanding indebtedness also assumes that bonds
payable
amortize in accordance with estimated payment amounts.
|
(2)
|
We
own an interest in two limited partnerships and affiliates of two
of our
directors own the remaining partnership interests. We severally guaranteed
$1.2 million of the limited partnerships’ $14 million unsecured promissory
notes. The guaranty continues through December 31, 2010 when the
note
matures. We lease our office space from these limited partnerships
at
approximately $1.5 million per year, with scheduled rent increases.
Our
lease expires in 2014.
|
(3)
|
Represents
opportunities for net lease property purchases approved for funding
and
accepted by sellers as of September 30, 2005. During October 2005
we had
$9 million in property purchases and as of November 7, 2005 had total
commitments worth $123 million subject to a leaseback.
|
(4)
|
As
part of the Merger, we assumed several products sales contracts that
committed us to purchase a minimum quantity of fuel, at a predetermined
margin over an index, at terms ranging from one to three years relating
to
certain gas station properties and the fuel terminal operations.
The
contracts are customary in the retail petroleum industry and secure
a
readily available supply of fuel at competitive market prices. We
are in
the process of transferring the majority of these purchase commitments
to
the buyer of the fuel terminal operation. We intend to transfer or
terminate, where possible, any remaining purchase commitment when
it
relates to properties or operations sold. In addition, in connection
with
certain gas station properties, we assumed certain agreements that
obligate us to pay a release price should a gas station property
change
gas brands. The agreements are customary in the retail petroleum
industry.
Some, but not all, of the agreements release us from the aforementioned
obligation upon the sale of the property to a third
party.
|
(5)
|
We
are subject to various legal proceedings and claims that arise in
the
ordinary course of business. These matters are generally covered
by
insurance. While the resolution of these matters cannot be predicted
with
certainty, we believe that the final outcome of such matters will
not have
a material adverse effect on our consolidated financial statements.
In
addition:
|
a.
|
On
January 18, 2005, Robert Lewis and Sutter Acquisition Fund, LLC,
two
limited partners in several of the Income Funds, filed a purported
class
action lawsuit on behalf of the limited partners against the general
partners of the Income Funds, CNLRP and USRP. The complaint alleges
that
the general partners breached their fiduciary duties in connection
with
the mergers and that the parties to the merger aided and abetted
in the
alleged breaches of fiduciary duties. The complaint further alleges
that
the general partners violated provisions of the Income Fund partnership
agreements and demands an accounting as to the affairs of the Income
Funds. The plaintiffs are seeking unspecified compensatory and exemplary
damages and equitable relief, which also included an injunction preventing
the defendants from proceeding with the mergers, which was unsuccessful.
On April 26, 2005, a supplemental plea to jurisdiction hearing was
held.
On May 2, 2005, the plaintiffs amended their lawsuit to add allegations
that the general partners of the Income Funds, with CNLRP and USRP,
prepared and distributed a false and misleading final proxy statement
filing to the limited partners of the Income Funds and the shareholders
of
CNLRP and USRP. On May 26, 2005, the Court entered a Final Order
Dismissing Action for lack of subject matter jurisdiction. On June
22,
2005, the plaintiffs filed a Notice of Appeal of the Order of Dismissal.
We believe the lawsuit, including the request for certification,
is
without merit and intend to defend vigorously against its
claims.
|
b.
|
During
2004, Management Strategies, Inc. filed a lawsuit against USRP. The
complaint alleges that we owe approximately $3 million in sales and
fuel
tax liabilities to the State of Georgia. We have filed a counterclaim
for
$2 million related to an unpaid note plus interest. We believe the
claims
against the Company are without merit and intend to defend vigorously
against such claims.
|
Type
of Hedge
($
in millions)
|
Notional
Amount
(in
millions)
|
Cap
Strike Price or Swap Rate
|
Trade
Date
|
Maturity
Date
|
Estimated
Value
at
September
30, 2005
(in
millions)
|
|||||||||||
Interest
Rate Swap (five Year Term Loan)
|
$
|
175
|
4.202
|
%
|
5/16/05
|
4/1/10
|
$
|
2.1
|
||||||||
Interest
Rate Cap (series 2001-A Bonds)
|
$
|
180
|
6.000
|
%
|
8/13/01
|
8/26/06
|
$
|
—
|
||||||||
Interest
Rate Cap (Series 2001 Bonds)
|
$
|
132
|
4.500
|
%
|
9/28/01
|
10/25/06
|
$
|
0.2
|
||||||||
Interest
Rate Cap (Series 2003 Bonds)
|
$
|
30
|
3.500
|
%
|
12/17/03
|
2/1/11
|
$
|
0.7
|
Quarter
ended September 30,
(in
thousands)
|
|||||||
2005
|
2004
|
||||||
Revenues:
|
|||||||
Real
estate
|
$
|
48,728
|
$
|
19,860
|
|||
Specialty
finance
|
3,333
|
8,133
|
|||||
Other*
|
(1,298
|
)
|
(928
|
)
|
|||
Total
revenues
|
50,763
|
27,065
|
|||||
Expenses:
|
|||||||
Operating
expenses excluding interest, depreciation, and
amortization:**
|
|||||||
Real
estate
|
5,933
|
3,176
|
|||||
Specialty
finance
|
5,252
|
5,780
|
|||||
Other*
|
(963
|
)
|
(470
|
)
|
|||
Total
operating expenses excluding interest, depreciation, and
amortization**
|
10,222
|
8,486
|
|||||
Depreciation
and amortization expense:
|
|||||||
Real
estate
|
8,092
|
2,730
|
|||||
Specialty
finance
|
459
|
246
|
|||||
Total
depreciation and amortization expense
|
8,551
|
2,976
|
|||||
Interest
expense:
|
|||||||
Real
estate
|
22,393
|
7,441
|
|||||
Specialty
finance
|
2,145
|
4,657
|
|||||
Other*
|
(325
|
)
|
148
|
||||
Total
interest expense
|
24,213
|
12,246
|
|||||
Loss
on termination of cash flow hedge - Real estate
|
8,558
|
—
|
|||||
Total
expenses
|
51,544
|
23,708
|
|||||
Income/(loss)
from continuing operations, net
|
(781
|
)
|
3,357
|
||||
Income
from discontinued operations, after income taxes:
|
|||||||
Real
estate
|
3,313
|
1,894
|
|||||
Specialty
finance
|
6,712
|
9,531
|
|||||
Total
income from discontinued operations, after income taxes
|
10,025
|
11,425
|
|||||
Gain
on sale of assets - Real estate
|
9,620
|
134
|
|||||
Net
income
|
$
|
18,864
|
$
|
14,916
|
Nine
months ended September 30,
(in
thousands)
|
|||||||
2005
|
2004
|
||||||
Revenues:
|
|||||||
Real
estate
|
$
|
126,319
|
$
|
58,299
|
|||
Specialty
finance
|
12,532
|
22,061
|
|||||
Other*
|
(3,477
|
)
|
(2,343
|
)
|
|||
Total
revenues
|
135,374
|
78,017
|
|||||
Expenses:
|
|||||||
Operating
expenses excluding interest, depreciation, and
amortization:**
|
|||||||
Real
estate
|
15,914
|
8,611
|
|||||
Specialty
finance
|
22,542
|
17,624
|
|||||
Other*
|
(2,979
|
)
|
(1,511
|
)
|
|||
Total
operating expenses excluding interest, depreciation, and
amortization**
|
35,477
|
24,724
|
|||||
Depreciation
and amortization expense:
|
|||||||
Real
estate
|
21,383
|
8,013
|
|||||
Specialty
finance
|
1,017
|
618
|
|||||
Total
depreciation and amortization expense
|
22,400
|
8,631
|
|||||
Interest
expense:
|
|||||||
Real
estate
|
58,260
|
21,805
|
|||||
Specialty
finance
|
8,186
|
14,067
|
|||||
Other*
|
(474
|
)
|
198
|
||||
Total
interest expense
|
65,972
|
36,070
|
|||||
Loss
on termination of cash flow hedge:
|
|||||||
Real
estate
|
8,558
|
—
|
|||||
Specialty
finance
|
—
|
940
|
|||||
Total
loss on termination of cash flow hedge
|
8,558
|
940
|
|||||
Total
expenses
|
132,407
|
70,365
|
|||||
Income
from continuing operations, net
|
2,967
|
7,652
|
|||||
Income
from discontinued operations, after income taxes:
|
|||||||
Real
estate
|
4,648
|
3,886
|
|||||
Specialty
finance
|
23,205
|
23,308
|
|||||
Total
income from discontinued operations, after income taxes
|
27,853
|
27,194
|
|||||
Gain
on sale of assets - Real estate
|
9,643
|
140
|
|||||
Net
income
|
$
|
40,463
|
$
|
34,986
|
**
|
also
includes the minority interest in earnings of consolidated joint
ventures
net of the equity in earnings of unconsolidated
subsidiaries
|
Quarter
Ended September 30,
(in
thousands)
|
Nine
Months Ended September 30,
(in
thousands)
|
||||||||||||||||||||||||
2005
|
%
of total
segment
revenues
|
2004
|
%
of total
segment
revenues
|
2005
|
%
of total
segment
revenues
|
2004
|
%
of total
segment
revenues
|
||||||||||||||||||
Rental
income
|
$
|
45,119
|
93
|
%
|
$
|
16,661
|
84
|
%
|
$
|
113,503
|
90
|
%
|
$
|
49,611
|
85
|
%
|
|||||||||
Interest
income
|
2,030
|
4
|
%
|
1,478
|
7
|
%
|
8,687
|
7
|
%
|
3,923
|
7
|
%
|
|||||||||||||
Other
|
1,579
|
3
|
%
|
1,721
|
9
|
%
|
4,129
|
3
|
%
|
4,765
|
8
|
%
|
|||||||||||||
Total
Revenues
|
$
|
48,728
|
100
|
%
|
$
|
19,860
|
100
|
%
|
$
|
126,319
|
100
|
%
|
$
|
58,299
|
100
|
%
|
Quarter
Ended September 30,
(in
thousands)
|
Nine
Months Ended September 30,
(in
thousands)
|
||||||||||||||||||||||||
2005
|
%
of total
segment
revenues
|
2004
|
%
of total
segment
revenues
|
2005
|
%
of total
segment
revenues
|
2004
|
%
of total
segment
revenues
|
||||||||||||||||||
General
operating
and
administrative
|
$
|
2,522
|
5
|
%
|
$
|
1,705
|
9
|
%
|
$
|
9,635
|
8
|
%
|
$
|
6,079
|
10
|
%
|
|||||||||
Property
expenses,
state
and other
taxes
|
2,111
|
4
|
%
|
47
|
—
|
5,331
|
4
|
%
|
384
|
1
|
%
|
||||||||||||||
Other
|
1,300
|
3
|
%
|
1,424
|
7
|
%
|
948
|
1
|
%
|
2,148
|
4
|
%
|
|||||||||||||
$
|
5,933
|
12
|
%
|
$
|
3,176
|
16
|
%
|
$
|
15,914
|
13
|
%
|
$
|
8,611
|
15
|
%
|
Quarter
Ended
September
30,
(in
thousands)
|
Nine
Months Ended September 30,
(in
thousands)
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
General
operating and administrative
|
$
|
5,697
|
$
|
4,872
|
$
|
21,165
|
$
|
14,497
|
|||||
Property
expenses, state and other taxes
|
183
|
—
|
489
|
—
|
|||||||||
Other
|
(628
|
)
|
908
|
888
|
3,127
|
||||||||
$
|
5,252
|
$
|
5,780
|
$
|
22,542
|
$
|
17,624
|
·
|
Our
expenses in this segment include a $2.0 million charge in the current
nine-month period allocated to this segment resulting from a grant
of
stock and related cash compensation to members of our Board of Directors
and employees.
|
·
|
The
specialty finance segment provides lease and loan servicing to our
real
estate segment and to third parties. As servicer, we utilize property
management software to account for leasing transactions and to capture
other tenant and lease information. More than a year ago, we decided
to
upgrade our technology platform supporting this function. We incurred
certain costs during the current quarter and nine month period necessary
to assure a successful transition to the new application and the
integration of USRP and Income Fund assets.
|
·
|
We
have incurred additional expenses with the integration of the merged
portfolios. While our servicing fee income in this segment for the
management of the larger portfolio was increased for the seven-month
period after the merger, we incurred various one-time setup expenses
in
the nine month period to add new properties creating an excess of
new
expenses over new revenues that should stabilize in the future. The
Income
Fund portfolio had been previously serviced by the specialty finance
segment, and did not create significant additional integration costs.
|
·
|
Prior
to 2005 certain services were purchased from affiliates of two of
our
board members. These included human resources, tax planning and
compliance, computer systems support, investor relations and other
services. Throughout the nine months ended September 30, 2005, we
brought
substantially all of these functions internally in an initiative
that
began in November 2004. During this process, we incurred certain
expenses
such as recruitment and training of new employees and the separate
licensure and maintenance of software previously leveraged among
a wider
enterprise affiliated with certain Board members.
|
·
|
We
have shifted the internal reporting of certain property improvement
and
redevelopment activities previously reported through the real estate
segment, as we view those expanding activities as more appropriately
aligned with the specialty finance segment. Direct and indirect payroll
relating to the property improvement and redevelopment activities
approximated $0.8 million and $2.4 million in the quarter and nine
months
ended September 30, 2005,
respectively.
|
Quarter
Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
(in
thousands)
|
September
30,
(in
thousands)
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Real
estate
|
$
|
22,393
|
$
|
7,441
|
$
|
58,260
|
$
|
21,805
|
|||||
Specialty
finance
|
2,145
|
4,657
|
8,186
|
14,067
|
|||||||||
Other
|
(325
|
)
|
148
|
(474
|
)
|
198
|
|||||||
$
|
24,213
|
$
|
12,246
|
$
|
65,972
|
$
|
36,070
|
Quarter
Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
(in
thousands)
|
September
30,
(in
thousands)
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Real
estate
|
$
|
8,092
|
$
|
2,730
|
$
|
21,383
|
$
|
8,013
|
|||||
Specialty
finance
|
459
|
246
|
1,017
|
618
|
|||||||||
$
|
8,551
|
$
|
2,976
|
$
|
22,400
|
$
|
8,631
|
Quarter
Ended September 30,
(in
thousands)
|
||||||||||||||||
2005
|
2005
|
2004
|
2004
|
|||||||||||||
Real
Estate
Segment
|
Specialty
Finance
Segment
|
Real
Estate
Segment
|
Specialty
Finance
Segment
|
|||||||||||||
Sale
of real estate
|
$
|
19,473
|
$
|
52,542
|
$
|
7,755
|
$
|
89,864
|
||||||||
Cost
of real estate sold
|
16,581
|
45,476
|
4,822
|
78,355
|
||||||||||||
Gain
on sale of real estate
|
2,892
|
7,066
|
2,933
|
11,509
|
||||||||||||
Net
other income (expense)
|
421
|
958
|
(749
|
)
|
2,414
|
|||||||||||
Earnings
from real estate discontinued operations before tax
|
3,313
|
8,024
|
2,184
|
13,923
|
||||||||||||
Retail
operations revenue
|
—
|
14,317
|
3,549
|
—
|
||||||||||||
Retail
cost of sales
|
—
|
14,281
|
3,839
|
—
|
||||||||||||
Earnings
(loss) from retail discontinued operations before tax
|
—
|
36
|
(290
|
)
|
—
|
|||||||||||
Income
tax provision
|
—
|
(1,348
|
)
|
—
|
(4,392
|
)
|
||||||||||
Income
from discontinued operations, after income taxes
|
$
|
3,313
|
$
|
6,712
|
$
|
1,894
|
$
|
9,531
|
Nine
Months Ended September 30,
(in
thousands)
|
||||||||||||||||
2005
|
2005
|
2004
|
2004
|
|||||||||||||
Real
Estate
Segment
|
Specialty
Finance
Segment
|
Real
Estate
Segment
|
Specialty
Finance
Segment
|
|||||||||||||
Sale
of real estate
|
$
|
32,950
|
$
|
180,335
|
$
|
26,728
|
$
|
197,360
|
||||||||
Cost
of real estate sold
|
29,230
|
152,086
|
21,835
|
171,887
|
||||||||||||
Gain
on sale of real estate
|
3,720
|
28,249
|
4,893
|
25,473
|
||||||||||||
Net
other income (expense)
|
928
|
1,814
|
(549
|
)
|
5,461
|
|||||||||||
Earnings
from real estate discontinued
operations before
tax
|
4,648
|
30,063
|
4,344
|
30,934
|
||||||||||||
Retail
operations revenue
|
—
|
34,776
|
11,106
|
—
|
||||||||||||
Retail
cost of sales
|
—
|
33,878
|
11,564
|
—
|
||||||||||||
Earnings
(loss) from retail discontinued
operations before tax
|
—
|
898
|
(458
|
)
|
—
|
|||||||||||
Income
tax provision
|
—
|
(7,756
|
)
|
—
|
(7,626
|
)
|
||||||||||
Income
from discontinued operations,
after income taxes
|
$
|
4,648
|
$
|
23,205
|
$
|
3,886
|
$
|
23,308
|
·
|
pertain
to the maintenance of records that in reasonable detail accurately
and
fairly reflect the transactions and dispositions of the Company’s
assets;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with generally
accepted
accounting principles, and that the Company’s receipts and expenditures
are being made only in accordance with authorizations of management
or the
Company’s Board of Directors; and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that
could have a material adverse effect on the Company’s financial
statements.
|
2.1
|
Agreement
and Plan of Merger by and between the Registrant and CNL Restaurant
Properties, Inc., dated as of August 9, 2004 (previously filed as
Exhibit
2.1 to the Registrant’s current report on Form 8-K filed on August 10,
2004 and incorporated herein by
reference).
|
2.2
|
Agreements
and Plans of Merger by and among the Registrant, a separate, wholly-owned
subsidiary of the operating partnership of the Registrant and each
of the
18 CNL Income Funds (previously filed as Exhibits 2.2 - 2.19 to the
Registrant’s current report on Form 8-K filed on August 10, 2004 and
incorporated herein by reference).
|
3.1
|
Restated
Articles of Incorporation of the Registrant dated November 11, 1997,
as
amended by the Articles of Amendment to the Articles of Restatement
of the
Registrant dated February 24, 2005 and the Articles of Amendment
to the
Articles of Restatement of the Registrant dated February 24, 2005
(previously filed as Exhibit 3.1 to the Registrant’s quarterly report on
Form 10-Q for the fiscal quarter ended March 31, 2005 and incorporated
herein by reference).
|
3.2
|
Third
Amended and Restated Bylaws (previously filed as Exhibit 3.1 on the
Company’s current report on Form 8-K filed on August 15, 2005 and
incorporated herein by reference).
|
4.1
|
Specimen
of Common Stock Certificate (previously filed as Exhibit 4.1 to the
Registrant’s Registration Statement on Form S-4 (File No. 333-21403) and
incorporated herein by reference).
|
4.2
|
Articles
Supplementary Classifying and Designating a Series of Preferred Stock
as
Series A Cumulative Convertible Preferred Stock (previously filed
as
Exhibit 3.2 to the Registrant’s current report on Form 8-K filed on
November 14, 1997 and incorporated herein by
reference).
|
4.3
|
Amendment
to Articles Supplementary Classifying and Designating a Series of
Preferred Stock as Series A Cumulative Convertible Preferred Stock
(previously filed as Exhibit 3.2 to the Registrant’s current report on
Form 8-K filed on February 25, 2005 and incorporated herein by
reference).
|
4.4
|
Articles
Supplementary Classifying and Designating a Series of Preferred Stock
as
8% Series B Convertible Preferred Stock (previously filed as Exhibit
4.01
to the Registrant’s Form 10-Q for the fiscal quarter ended June 30, 2003
and incorporated herein by
reference).
|
4.5
|
Articles
Supplementary Classifying and Designating a Series of Preferred Stock
as
8% Series B-1 Convertible Preferred Stock (previously filed as Exhibit
99.5 to the Registrant’s current report on Form 8-K filed on September 16,
2004 and incorporated herein by
reference).
|
4.6
|
Articles
Supplementary Establishing and Fixing The Rights and Preferences
of 7.5%
Series C Redeemable Convertible Preferred Stock (previously filed
as
Exhibit 4.1 to the Registrant’s registration statement on Form 8-A (File
No. 001-13089) and incorporated herein by
reference).
|
4.7
|
Specimen
of 7.5% Series C Redeemable Convertible Preferred Stock Certificate
(previously filed as Exhibit 4.2 to the Registrant’s registration
statement on Form 8-A (File No. 001-13089) and incorporated herein
by
reference).
|
4.8
|
Indenture
dated as of March 4, 2005, among Net Lease Funding 2005, LP, MBIA
Insurance Corporation and Wells Fargo Bank, N.A., as indenture trustee
relating to $275,000,000 Triple Net Lease Mortgage Notes, Series
2005
(previously filed as Exhibit 99.1 to the Registrant’s current report on
Form 8-K filed on March 10, 2005 and incorporated herein by
reference).
|
4.9
|
Securities
Purchase Agreement relating to the Series B Preferred Stock (previously
filed as Exhibit 4.02 to the Registrant’s Form 10-Q for the fiscal quarter
ended June 30, 2003 and incorporated herein by
reference).
|
4.10
|
Registration
Rights Agreement relating to Series B Preferred Stock (previously
filed as
Exhibit 4.03 to the Registrant’s Form 10-Q for the fiscal quarter ended
June 30, 2003 and incorporated herein by
reference).
|
4.11
|
Stock
Purchase Warrant - Omnicron Master Trust (previously filed as Exhibit
4.04
to the Registrant’s Form 10-Q for the fiscal quarter ended June 30, 2003
and incorporated herein by
reference).
|
4.12
|
Stock
Purchase Warrant - The Riverview Group, LLC (previously filed as
Exhibit
4.05 to the Registrant’s Form 10-Q for the fiscal quarter ended June 30,
2003 and incorporated herein by
reference).
|
4.13
|
Registration
Rights Agreement by and between the Registrant, LSF3 Capital Investments
I, LLC and LSF3 Capital Investments II, LLC dated as of March 9,
2001
(previously filed as Exhibit 10.5 to the Schedule 13D filed by LSF3
Capital Investments I, LLC, and the other reporting persons named
therein,
on March 19, 2001 and incorporated herein by
reference).
|
4.14
|
Indenture,
dated as of March 23, 2005, between the Registrant and Wells Fargo
Bank,
National Association, as trustee, relating to the Registrant’s 7 ½% Senior
Noted due 2015 (previously filed as Exhibit 4.1 to the Registrant’s
current report on Form 8-K filed on March 28, 2005 and incorporated
herein
by reference).
|
4*
|
Pursuant
to Regulation S-K Item 601(b)(4)(iii), the Registrant by this filing
agrees, upon request, to furnish to the Securities and Exchange Commission
a copy of instruments defining the rights of holders of long-term
debt of
the Registrant.
|
10.6
|
Registrant
Flexible Incentive Plan (previously filed as Exhibit 10.1 to the
Registrant’s Form 10-Q for the fiscal quarter ended March 31, 2003 and
incorporated herein by reference).
|
10.7
|
Bridge
Credit Agreement dated as of February 25, 2005, by and among the
Registrant, as borrower, certain subsidiaries of the Registrant,
as
guarantors, Bank of America, N.A., as Administrative Agent, L/C Issuer
and
Swing Line Lender, and certain other lenders party thereto, and Banc
of
America Securities LLC, as Sole Lead Arranger and Sole Book Manager
(previously filed as Exhibit 10.1 to the Registrant’s current report on
Form 8-K filed on March 3, 2005 and incorporated herein by
reference).
|
10.8
|
Bridge
Credit Agreement dated as of February 25, 2005, by and among Net
Lease
Funding 2005, LP, as borrower, Bank of America, as Administrative
Agent,
and certain other lenders party thereto, and Banc of America Securities
LLC, as Sole Lead Arranger and Sole Book Manager (previously filed
as
Exhibit 10.2 to the Registrant’s current report on Form 8-K filed on March
3, 2005 and incorporated herein by
reference).
|
10.9
|
Credit
Agreement, dated as of April 8, 2005, by and among the Registrant,
as
borrower, certain subsidiaries of the Registrant, as guarantors,
Bank of
America, N.A., as Administrative Agent, L/C Issuer and Swing Line
Lender,
Bank of America Securities LLC, as Sole Lead Arranger and Sole Book
Manager, Key Bank, National Association, as Syndication Agent, Credit
Suisse First Boston, Societe Generale, and Wachovia Bank National
Association, as Co-Documentation Agents, and the lenders party thereto
(previously filed as Exhibit 10.1 to the Registrant’s current report on
Form 8-K filed on April 13, 2005 and incorporated herein by
reference).
|
10.10
|
Pledge
Agreement, dated as of April 8, 2005, by substantially all of the
Borrower’s domestic subsidiaries, in favor of Bank of America, N.A., in
its capacity as Administrative Agent (previously filed as Exhibit
10.2 to
the Registrant’s current report on Form 8-K filed on April 13, 2005 and
incorporated herein by reference).
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) as adopted
pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) as adopted
pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
Date:
November 9, 2005
|
TRUSTREET
PROPERTIES, INC.
|
|
By:
|
||
/s/
CURTIS B. MCWILLIAMS
|
||
Curtis
B. McWilliams
|
||
Chief
Executive Officer
|
||
By:
|
||
/s/
STEVEN D. SHACKELFORD
|
||
Steven
D. Shackelford
|
||
Chief
Financial Officer
|
||
2.1
|
Agreement
and Plan of Merger by and between the Registrant and CNL Restaurant
Properties, Inc., dated as of August 9, 2004 (previously filed as
Exhibit
2.1 to the Registrant’s current report on Form 8-K filed on August 10,
2004 and incorporated herein by
reference).
|
2.2
|
Agreements
and Plans of Merger by and among the Registrant, a separate, wholly-owned
subsidiary of the operating partnership of the Registrant and each
of the
18 CNL Income Funds (previously filed as Exhibits 2.2 - 2.19 to the
Registrant’s current report on Form 8-K filed on August 10, 2004 and
incorporated herein by reference).
|
3.1
|
Restated
Articles of Incorporation of the Registrant dated November 11, 1997,
as
amended by the Articles of Amendment to the Articles of Restatement
of the
Registrant dated February 24, 2005 and the Articles of Amendment
to the
Articles of Restatement of the Registrant dated February 24, 2005
(previously filed as Exhibit 3.1 to the Registrant’s quarterly report on
Form 10-Q for the fiscal quarter ended March 31, 2005 and incorporated
herein by reference).
|
3.2
|
Third
Amended and Restated Bylaws (previously filed as Exhibit 3.1 on the
Company’s current report on Form 8-K filed on August 15, 2005 and
incorporated herein by reference).
|
4.1
|
Specimen
of Common Stock Certificate (previously filed as Exhibit 4.1 to the
Registrant’s Registration Statement on Form S-4 (File No. 333-21403) and
incorporated herein by reference).
|
4.2
|
Articles
Supplementary Classifying and Designating a Series of Preferred Stock
as
Series A Cumulative Convertible Preferred Stock (previously filed
as
Exhibit 3.2 to the Registrant’s current report on Form 8-K filed on
November 14, 1997 and incorporated herein by
reference).
|
4.3
|
Amendment
to Articles Supplementary Classifying and Designating a Series of
Preferred Stock as Series A Cumulative Convertible Preferred Stock
(previously filed as Exhibit 3.2 to the Registrant’s current report on
Form 8-K filed on February 25, 2005 and incorporated herein by
reference).
|
4.4
|
Articles
Supplementary Classifying and Designating a Series of Preferred Stock
as
8% Series B Convertible Preferred Stock (previously filed as Exhibit
4.01
to the Registrant’s Form 10-Q for the fiscal quarter ended June 30, 2003
and incorporated herein by
reference).
|
4.5
|
Articles
Supplementary Classifying and Designating a Series of Preferred Stock
as
8% Series B-1 Convertible Preferred Stock (previously filed as Exhibit
99.5 to the Registrant’s current report on Form 8-K filed on September 16,
2004 and incorporated herein by
reference).
|
4.6
|
Articles
Supplementary Establishing and Fixing The Rights and Preferences
of 7.5%
Series C Redeemable Convertible Preferred Stock (previously filed
as
Exhibit 4.1 to the Registrant’s registration statement on Form 8-A (File
No. 001-13089) and incorporated herein by
reference).
|
4.7
|
Specimen
of 7.5% Series C Redeemable Convertible Preferred Stock Certificate
(previously filed as Exhibit 4.2 to the Registrant’s registration
statement on Form 8-A (File No. 001-13089) and incorporated herein
by
reference).
|
4.8
|
Indenture
dated as of March 4, 2005, among Net Lease Funding 2005, LP, MBIA
Insurance Corporation and Wells Fargo Bank, N.A., as indenture trustee
relating to $275,000,000 Triple Net Lease Mortgage Notes, Series
2005
(previously filed as Exhibit 99.1 to the Registrant’s current report on
Form 8-K filed on March 10, 2005 and incorporated herein by
reference).
|
4.9
|
Securities
Purchase Agreement relating to the Series B Preferred Stock (previously
filed as Exhibit 4.02 to the Registrant’s Form 10-Q for the fiscal quarter
ended June 30, 2003 and incorporated herein by
reference).
|
4.10
|
Registration
Rights Agreement relating to Series B Preferred Stock (previously
filed as
Exhibit 4.03 to the Registrant’s Form 10-Q for the fiscal quarter ended
June 30, 2003 and incorporated herein by
reference).
|
4.11
|
Stock
Purchase Warrant - Omnicron Master Trust (previously filed as Exhibit
4.04
to the Registrant’s Form 10-Q for the fiscal quarter ended June 30, 2003
and incorporated herein by
reference).
|
4.12
|
Stock
Purchase Warrant - The Riverview Group, LLC (previously filed as
Exhibit
4.05 to the Registrant’s Form 10-Q for the fiscal quarter ended June 30,
2003 and incorporated herein by
reference).
|
4.13
|
Registration
Rights Agreement by and between the Registrant, LSF3 Capital Investments
I, LLC and LSF3 Capital Investments II, LLC dated as of March 9,
2001
(previously filed as Exhibit 10.5 to the Schedule 13D filed by LSF3
Capital Investments I, LLC, and the other reporting persons named
therein,
on March 19, 2001 and incorporated herein by
reference).
|
4.14
|
Indenture,
dated as of March 23, 2005, between the Registrant and Wells Fargo
Bank,
National Association, as trustee, relating to the Registrant’s 7 ½% Senior
Noted due 2015 (previously filed as Exhibit 4.1 to the Registrant’s
current report on Form 8-K filed on March 28, 2005 and incorporated
herein
by reference).
|
4*
|
Pursuant
to Regulation S-K Item 601(b)(4)(iii), the Registrant by this filing
agrees, upon request, to furnish to the Securities and Exchange Commission
a copy of instruments defining the rights of holders of long-term
debt of
the Registrant.
|
10.6
|
Registrant
Flexible Incentive Plan (previously filed as Exhibit 10.1 to the
Registrant’s Form 10-Q for the fiscal quarter ended March 31, 2003 and
incorporated herein by reference).
|
10.7
|
Bridge
Credit Agreement dated as of February 25, 2005, by and among the
Registrant, as borrower, certain subsidiaries of the Registrant,
as
guarantors, Bank of America, N.A., as Administrative Agent, L/C Issuer
and
Swing Line Lender, and certain other lenders party thereto, and Banc
of
America Securities LLC, as Sole Lead Arranger and Sole Book Manager
(previously filed as Exhibit 10.1 to the Registrant’s current report on
Form 8-K filed on March 3, 2005 and incorporated herein by
reference).
|
10.8
|
Bridge
Credit Agreement dated as of February 25, 2005, by and among Net
Lease
Funding 2005, LP, as borrower, Bank of America, as Administrative
Agent,
and certain other lenders party thereto, and Banc of America Securities
LLC, as Sole Lead Arranger and Sole Book Manager (previously filed
as
Exhibit 10.2 to the Registrant’s current report on Form 8-K filed on March
3, 2005 and incorporated herein by
reference).
|
10.9
|
Credit
Agreement, dated as of April 8, 2005, by and among the Registrant,
as
borrower, certain subsidiaries of the Registrant, as guarantors,
Bank of
America, N.A., as Administrative Agent, L/C Issuer and Swing Line
Lender,
Bank of America Securities LLC, as Sole Lead Arranger and Sole Book
Manager, Key Bank, National Association, as Syndication Agent, Credit
Suisse First Boston, Societe Generale, and Wachovia Bank National
Association, as Co-Documentation Agents, and the lenders party thereto
(previously filed as Exhibit 10.1 to the Registrant’s current report on
Form 8-K filed on April 13, 2005 and incorporated herein by
reference).
|
10.10
|
Pledge
Agreement, dated as of April 8, 2005, by substantially all of the
Borrower’s domestic subsidiaries, in favor of Bank of America, N.A., in
its capacity as Administrative Agent (previously filed as Exhibit
10.2 to
the Registrant’s current report on Form 8-K filed on April 13, 2005 and
incorporated herein by reference).
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) as adopted
pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) as adopted
pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|