x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|
|||
EXCHANGE
ACT OF 1934
|
||||
For
the quarterly period ended June 30, 2010
|
||||
OR
|
||||
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|
|||
EXCHANGE
ACT OF 1934
|
Maryland
|
71-1036989
|
|
(State
or other jurisdiction
of
incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
106
York Road
Jenkintown, PA
|
19046
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(215) 887-2189
|
(Registrant’s
telephone number, including area
code)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
|
Non-accelerated
filer (Do
not check if a smaller reporting company) x
|
Smaller
reporting company ¨
|
PART
I — FINANCIAL INFORMATION
|
|
Item 1.
Financial Statements
|
|
Consolidated
Balance Sheets as of June 30, 2010 (Unaudited) and December 31,
2009
|
3
|
Consolidated
Statements of Operations for the three months and six months ended June
30, 2010 and 2009 (Unaudited)
|
4
|
Consolidated
Statement of Equity for the six months ended June 30, 2010
(Unaudited)
|
5
|
Consolidated
Statements of Cash Flows for the six months ended June 30, 2010 and 2009
(Unaudited)
|
6
|
Notes
to Consolidated Financial Statements (Unaudited)
|
7
|
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
|
32
|
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
|
45
|
Item 4.
Controls and Procedures
|
46
|
PART
II — OTHER INFORMATION
|
46
|
Item 1.
Legal Proceedings
|
46
|
Item
1A. Risk Factors
|
46
|
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
|
46
|
Item 3.
Defaults Upon Senior Securities
|
46
|
Item 4.
Reserved
|
47
|
Item 5.
Other Information
|
47
|
Item 6.
Exhibits
|
47
|
Signatures
|
48
|
June
30,
2010
|
December
31,
2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Real
estate investments, at cost:
|
||||||||
Land
|
$
|
67,678
|
$
|
37,779
|
||||
Buildings,
fixtures and improvements
|
390,481
|
261,939
|
||||||
Acquired
intangible lease assets
|
62,581
|
38,838
|
||||||
Total
real estate investments, at cost
|
520,740
|
338,556
|
||||||
Less
accumulated depreciation and amortization
|
(19,758
|
)
|
(11,292
|
)
|
||||
Total real estate investments, net
|
500,982
|
327,264
|
||||||
Cash
and cash equivalents
|
8,979
|
5,010
|
||||||
Restricted
cash
|
64
|
43
|
||||||
Prepaid
expenses and other assets
|
7,231
|
4,458
|
||||||
Deferred
financing costs, net
|
3,663
|
2,502
|
||||||
Total
assets
|
$
|
520,919
|
$
|
339,277
|
Short-term
bridge equity funds
|
$
|
—
|
$
|
15,878
|
||||
Mortgage
notes payable
|
245,855
|
183,811
|
||||||
Long-term
notes payable
|
13,000
|
13,000
|
||||||
Below-market
lease liabilities, net
|
8,928
|
9,085
|
||||||
Derivatives,
at fair value
|
5,619
|
2,768
|
||||||
Accounts
payable and accrued expenses
|
2,845
|
1,536
|
||||||
Deferred
rent and other liabilities
|
1,614
|
1,144
|
||||||
Distributions
payable
|
1,637
|
1,499
|
||||||
Total
liabilities
|
279,498
|
228,721
|
||||||
Preferred
stock, $0.01 par value; 10,000,000 shares authorized, none issued and
outstanding
|
—
|
—
|
||||||
Common
stock, $.01 par value; 240,000,000 shares authorized, 30,069,412 and
14,672,237 shares issued and outstanding at June 30, 2010 and December 31,
2009, respectively
|
300
|
147
|
||||||
Additional
paid-in capital
|
255,621
|
122,506
|
||||||
Unamortized
restricted shares
|
(88)
|
—
|
||||||
Accumulated
other comprehensive loss
|
(4,197
|
)
|
(1,737
|
)
|
||||
Accumulated
deficit
|
(22,260
|
)
|
(13,669
|
)
|
||||
Total
American Realty Capital Trust, Inc. stockholders’ equity
|
229,376
|
107,247
|
||||||
Noncontrolling
interests
|
12,045
|
3,309
|
||||||
Total
equity
|
241,421
|
110,556
|
||||||
Total
liabilities and equity
|
$
|
520,919
|
$
|
339,277
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||
Revenue:
|
||||||||||||||
Rental
income
|
$
|
9,382
|
$
|
2,935
|
$
|
16,810
|
$
|
5,862
|
||||||
Operating
expenses:
|
||||||||||||||
Asset
management fees to affiliate
|
350
|
—
|
350
|
—
|
||||||||||
Acquisition
and transaction related
|
640
|
—
|
981
|
—
|
||||||||||
General
and administrative
|
340
|
72
|
562
|
198
|
||||||||||
Depreciation
and amortization
|
4,721
|
1,730
|
8,506
|
3,460
|
||||||||||
Total
operating expenses
|
6,051
|
1,802
|
10,399
|
3,658
|
||||||||||
Operating
income
|
3,331
|
1,133
|
6,411
|
2,204
|
||||||||||
Other
income (expense):
|
||||||||||||||
Interest
expense
|
(4115
|
)
|
(2,319
|
)
|
(7,788
|
)
|
(4,770
|
)
|
||||||
Interest
income
|
22
|
1
|
33
|
5
|
||||||||||
Gains
on sales to noncontrolling interest holders, net
|
17
|
—
|
352
|
—
|
||||||||||
Gains
(losses) on derivative instruments
|
(239
|
)
|
512
|
(391
|
)
|
549
|
||||||||
Total
other expenses
|
(4,315
|
)
|
(1,806
|
)
|
(7,794
|
)
|
(4,216
|
)
|
||||||
Net
loss
|
(984
|
)
|
(673
|
)
|
(1,383
|
)
|
(2,012
|
)
|
||||||
Net
(income)loss attributable to noncontrolling interests
|
(8
|
)
|
—
|
4
|
—
|
|||||||||
Net
loss attributable to American Realty Capital Trust, Inc.
|
$
|
(992
|
)
|
$
|
(673
|
)
|
$
|
(1,379
|
)
|
$
|
(2,012
|
)
|
||
Basic
and diluted weighted average
|
||||||||||||||
common
shares outstanding
|
25,164,559
|
3,151,715
|
21,130,867
|
2,343,796
|
||||||||||
Basic
and diluted loss per share attributable to
American
Realty Capital Trust, Inc.
|
$
|
(0.04
|
)
|
$
|
(0.21
|
)
|
$
|
(0.07
|
)
|
$
|
(0.86
|
)
|
AMERICAN
REALTY CAPITAL TRUST, INC.
|
CONSOLIDATED
STATEMENTOF EQUITY
|
SIX
MONTHS ENDED JUNE 30, 2010
|
(In
thousands except share data)
|
Common Stock
|
Additional
|
Unamortized
|
Accumulated
Other
|
Total
American
Realty
Capital
Trust,
Inc.
|
|||||||||||||||||||||||||||||||
Number of
Shares
|
Par
Value
|
Paid-In
Capital
|
Restricted
Shares
|
Comprehensive
Loss
|
Accumulated
Deficit
|
Stockholders’
Equity
|
Noncontrolling
Interests
|
Total
Equity
|
|||||||||||||||||||||||||||
Balance,
December 31, 2009
|
14,672,237
|
$
|
147
|
$
|
122,506
|
$ |
—
|
$
|
(1,737
|
)
|
$
|
(13,669
|
)
|
$
|
107,247
|
$
|
3,309
|
$
|
110,556
|
||||||||||||||||
Issuance
of common stock, net
|
15,133,086
|
152
|
150,404
|
—
|
—
|
—
|
150,556
|
—
|
150,556
|
||||||||||||||||||||||||||
Offering
costs, commissions and dealer manager fees
|
—
|
—
|
(18,919
|
)
|
—
|
—
|
—
|
(18,919
|
)
|
—
|
(18,919
|
)
|
|||||||||||||||||||||||
Common
stock issued through distribution reinvestment plan
|
329,848
|
3
|
3,130
|
—
|
—
|
—
|
3,133
|
—
|
3,133
|
||||||||||||||||||||||||||
Common
stock redemptions
|
(74,759
|
)
|
(2
|
)
|
(1,590
|
)
|
—
|
(1,592
|
)
|
(1,592
|
)
|
||||||||||||||||||||||||
Issuance
of Restricted Shares
|
9,000
|
90
|
(90
|
)
|
—
|
—
|
|||||||||||||||||||||||||||||
Amortization
of Restricted Shares
|
2
|
2
|
2 | ||||||||||||||||||||||||||||||||
Distributions
declared
|
—
|
—
|
—
|
—
|
—
|
(7,212
|
)
|
(7,212
|
)
|
—
|
(7,212
|
)
|
|||||||||||||||||||||||
Contributions
from noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
9,627
|
9,627
|
||||||||||||||||||||||||||
Distributions
to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(354
|
)
|
(354
|
)
|
||||||||||||||||||||||||
Gain
on sale of assets to noncontrolling interest holders
|
—
|
(533
|
)
|
(533
|
)
|
||||||||||||||||||||||||||||||
Designated
derivatives fair value adjustment
|
—
|
—
|
—
|
—
|
(2,460
|
)
|
—
|
(2,460
|
)
|
—
|
(2,460
|
)
|
|||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(1,379
|
)
|
(1,379
|
)
|
(4
|
)
|
(1,383
|
)
|
||||||||||||||||||||||
Total
comprehensive loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(3,839
|
)
|
(4
|
)
|
(3,843
|
)
|
|||||||||||||||||||||||
Balance,
June 30, 2010
|
30,069,412
|
$
|
300
|
$
|
255,621
|
$ |
(88
|
)
|
$
|
(4,197
|
)
|
$
|
(22,260
|
)
|
$
|
229,376
|
$
|
12,045
|
$
|
241,421
|
Six
Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$
|
(1,383
|
)
|
$
|
(2,012
|
)
|
||
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
||||||||
Depreciation
|
6,842
|
2,764
|
||||||
Amortization
of intangibles
|
1,664
|
696
|
||||||
Amortization
of deferred finance costs
|
365
|
276
|
||||||
Amortization
of restricted share grants
|
2
|
—
|
||||||
Accretion
of below-market lease liability
|
(157
|
)
|
(157
|
)
|
||||
Gains
on sales to noncontrolling interest holders
|
(533
|
)
|
—
|
|||||
Losses
(gains) on derivative instruments
|
391
|
(549
|
)
|
|||||
Changes
in assets and liabilities:
|
||||||||
Prepaid
expenses and other assets
|
(2,603
|
)
|
(2,219
|
)
|
||||
Accounts
payable and accrued expenses
|
1,309
|
(935
|
)
|
|||||
Due
from affiliated entity
|
—
|
(2,223
|
)
|
|||||
Deferred
rent and other liabilities
|
470
|
15
|
||||||
Net
cash provided by (used in) operating activities
|
6,367
|
(4,344
|
)
|
|||||
Cash
flows from investing activities:
|
||||||||
Investment
in real estate and other assets
|
(182,184
|
)
|
(163
|
)
|
||||
Net
cash used in investing activities
|
(182,184
|
)
|
(163
|
)
|
||||
Cash
flows from financing activities:
|
||||||||
Proceeds
on mortgage notes payable
|
76,687
|
—
|
||||||
Payments
on mortgage notes payable
|
(14,643
|
)
|
(492
|
)
|
||||
Payments
on related party bridge facility
|
—
|
(5,424
|
)
|
|||||
Payments
on short-term convertible redeemable preferred
|
—
|
(3,995
|
)
|
|||||
Payments
on related party convertible bridge revolver
|
—
|
(6,500
|
)
|
|||||
Payments
on short-term bridge funds
|
(15,878
|
)
|
(11,954
|
)
|
||||
Proceeds
from long-term notes payable
|
—
|
11,911
|
||||||
Contributions
from noncontrolling interests
|
9,627
|
—
|
||||||
Distributions
to noncontrolling interests
|
(354
|
)
|
—
|
|||||
Proceeds
from issuances of common stock, net
|
131,425
|
24,850
|
||||||
Payments
of deferred financing costs
|
(1,526
|
)
|
(954
|
)
|
||||
Distributions
paid
|
(3,939
|
)
|
(395
|
)
|
||||
Payments
for share redemptions
|
(1,592
|
)
|
—
|
|||||
Restricted
cash
|
(21
|
)
|
3
|
|||||
Net
cash provided by financing activities
|
179,786
|
7,050
|
||||||
Net
increase in cash
|
3,969
|
2,543
|
||||||
Cash,
beginning of period
|
5,010
|
887
|
||||||
Cash,
end of period
|
$
|
8,979
|
|
$
|
3,430
|
|||
Supplemental
Disclosures of Investing and Financing Activities:
|
||||||||
Cash
paid for income taxes
|
$
|
383
|
$
|
—
|
||||
Cash
paid for interest
|
$
|
7,636
|
$
|
4,909
|
Real
estate investments, at cost:
|
Three
Months Ended
June
30, 2010
|
Six
Months Ended
June
30, 2010
|
||||||
Land
|
$ | 18,822 | $ | 29,899 | ||||
Buildings,
fixtures and improvements
|
69,502 | 128,542 | ||||||
88,324 | 158,441 | |||||||
Acquired
intangibles:
|
||||||||
In-place
leases
|
12,422 | 23,743 | ||||||
Below-market
lease liabilities, net
|
— | — | ||||||
Total
assets acquired
|
100,746 | 182,184 | ||||||
Cash
paid for acquired real estate investments
|
$ | 100,746 | $ | 182,184 | ||||
Number
of properties purchased during the period
|
21 | 41 |
Seller / Property
Name
|
Acquisition
Date
|
No. of
Buildings
|
Square
Feet
|
Ownership
Percentage |
Remaining
Lease
Term (1)
|
Base
Purchase
Price (2)
|
Capitalization
Rate (3)
|
Net
Operating
Income (4)
|
Total Purchase Price (5) | |||||||
FedEx
Distribution Center
|
March
2008
|
1
|
55,440
|
51%
|
8.4
|
$
|
9,694
|
7.53%
|
$
|
730
|
$
|
10,208
|
||||
First
Niagara Bank (formerly Harleysville National Bank)
Portfolio
|
March
2008
|
15
|
177,774
|
100%
|
12.5
|
40,976
|
7.48%
|
3,064
|
41,676
|
|||||||
Rockland
Trust Company Portfolio
|
May
2008
|
18
|
121,057
|
100%
|
11.1
|
32,188
|
7.86%
|
2,530
|
33,117
|
|||||||
PNC
Bank (formerly National City Bank)
|
September
& October 2008
|
2
|
8,403
|
(6)
|
18.6
|
6,664
|
8.21%
|
547
|
6,853
|
|||||||
Rite
Aid
|
September
2008
|
6
|
74,919
|
100%
|
13.0
|
18,576
|
7.79%
|
1,447
|
18,839
|
|||||||
PNC
Bank Portfolio
|
November
2008
|
50
|
275,436
|
100%
|
8.4
|
42,286
|
7.35%
|
3,108
|
44,813
|
|||||||
FedEx
Distribution Center
|
July
2009
|
1
|
152,640
|
100%
|
13.3
|
31,692
|
8.84%
|
2,803
|
31,692
|
|||||||
Walgreens
|
July
2009
|
1
|
14,820
|
56%
|
22.0
|
3,818
|
8.12%
|
310
|
3,818
|
|||||||
CVS
I
|
September
2009
|
10
|
131,105
|
(7)
|
23.8
|
40,649
|
8.48%
|
3,448
|
40,649
|
|||||||
CVS
II
|
November
2009
|
15
|
198,729
|
100%
|
24.1
|
59,788
|
8.48%
|
5,071
|
59,788
|
|||||||
Home
Depot
|
December
2009
|
1
|
465,600
|
100%
|
19.5
|
23,532
|
9.31%
|
2,192
|
23,532
|
|||||||
Bridgestone
Firestone I
|
December
2009 & January 2010
|
6
|
57,336
|
100%
|
13.9
|
15,041
|
9.24%
|
1,390
|
15,041
|
|||||||
Advance
Auto
|
December
2009
|
1
|
7,000
|
100%
|
11.4
|
1,730
|
9.25%
|
160
|
1,730
|
|||||||
Fresenius
|
January
2010
|
2
|
140,000
|
100%
|
12.1
|
12,462
|
9.30%
|
1,159
|
12,462
|
|||||||
Reckitt
Benckiser
|
February
2010
|
1
|
574,106
|
85%
|
11.6
|
31,735
|
8.41%
|
2,668
|
31,735
|
|||||||
Jack
in the Box
|
February
2010 &
April
2010
|
5
|
12,253
|
100%
|
19.7
|
10,010
|
7.80%
|
781
|
10,010
|
|||||||
Bridgestone
Firestone
II
|
February
& March 2010
|
12
|
93,599
|
(8)
|
13.5
|
26,414
|
8.70%
|
2,299
|
26,414
|
Seller / Property
Name
|
Acquisition
Date
|
No. of
Buildings
|
Square
Feet
|
Ownership
Percentage |
Remaining
Lease
Term (1)
|
Base
Purchase
Price (2)
|
Capitalization
Rate (3)
|
Net
Operating
Income (4)
|
Total
Purchase
Price (5)
|
||||||||||||||||||||||||
FedEx
Distribution Center
|
April
2010
|
1 | 118,796 | 85 | % | 11.0 | $ | 34,171 | 9.03 | % | $ | 3,087 | $ | 34,171 | |||||||||||||||||||
Jared
Jewelry
|
May
2010
|
3 | 19,534 | 100 | % | 18.6 | 5,457 | 12.44 | % | 679 | 5,457 | ||||||||||||||||||||||
Walgreens
II
|
May
2010
|
1 | 14,820 | 100 | % | 22.8 | 5,684 | 7.97 | % | 453 | 5,684 | ||||||||||||||||||||||
IHOP
|
May
2010
|
1 | 5,172 | 100 | % | 15.8 | 2,445 | 8.22 | % | 201 | 2,445 | ||||||||||||||||||||||
Advance
Auto II
|
June
2010
|
3 | 19,253 | 100 | % | 13.0 | 3,674 | 8.38 | % | 308 | 3,674 | ||||||||||||||||||||||
Super
Stop & Shop
|
June
2010
|
1 | 59,032 | 100 | % | 12.7 | 23,795 | 8.18 | % | 1,946 | 23,795 | ||||||||||||||||||||||
IHOP
II
|
June
2010
|
1 | 4,139 | 100 | % | 11.8 | 2,300 | 8.87 | % | 204 | 2,300 | ||||||||||||||||||||||
IHOP
III
|
June
2010
|
1 | 5,111 | 100 | % | 21.1 | 3,319 | 9.13 | % | 303 | 3,319 | ||||||||||||||||||||||
Jared
Jewelry II
|
June
2010
|
1 | 6,157 | 100 | % | 16.6 | 1,635 | 12.78 | % | 209 | 1,635 | ||||||||||||||||||||||
Jack
in the box II
|
June
2010
|
6 | 14,975 | 100 | % | 20.0 | 11,396 | 7.83 | % | 892 | 11,396 | ||||||||||||||||||||||
Walgreens
III
|
June
2010
|
1 | 13,386 | 100 | % | 23.9 | 5,062 | 7.61 | % | 385 | 5,062 | ||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
Total
|
167 | 2,840,592 | 15.4 | $ | 506,193 | 8.37 | % | $ | 42,374 | $ | 511,315 |
(1)
|
-
|
Remaining
lease term as of June 30, 2010, in years. If the portfolio has multiple
locations with varying lease expirations, remaining lease term is
calculated on a weighted-average basis.
|
|
(2)
|
-
|
Contract
purchase price excluding acquisition related costs.
|
|
(3)
|
-
|
Net
operating income divided by base purchase price.
|
|
(4)
|
-
|
Annualized
2010 rental income less property operating expenses, as
applicable.
|
|
(5)
|
-
|
Base
purchase for acquisitions prior to January 1, 2009 include capitalized
acquisition related costs. Effective January 1, 2009, acquisition and
transaction related costs are required to be expensed as incurred in
accordance with generally accepted accounting
principals
|
|
(6)
|
Ownership
percentage is 51% of one property and 65% of one
property.
|
||
(7)
|
Ownership
percentage of three properties is 51% and 100% of the remaining seven
properties.
|
||
(8)
|
Ownership
percentage of six properties is 88% and 100% of the remaining six
properties.
|
2010
|
2009
|
|||||||
CVS
|
20 | % | — | |||||
FedEx
|
16 | % | 15 | % | ||||
PNC
Bank
|
9 | % | 32 | % | ||||
First
Niagara
|
7 | % | 27 | % | ||||
Rockland
Trust Company
|
6 | % | 22 | % | ||||
Rite
Aid
|
3 | % | 13 | % |
Funds
|
Property
|
Bridge
Equity
Amount (1)
|
Effective
Interest Rate
|
Interest
Rate
|
||||||
Related
party bridge facility
|
Various
|
$
|
15,878
|
5.75
|
%
|
Variable
(2)
|
(1)
Amount was repaid in January 2010
|
(2) Funds
bear a floating interest rate based on the greater of prime rate plus
0.75% or
5.75%
|
Property
|
Encumbered
Properties
|
Outstanding
Loan
Amount
|
Effective
Interest Rate
|
Interest
Rate
|
Maturity
|
|||||||
FedEx
Distribution Center
|
1
|
$
|
6,965
|
6.29
|
%
|
Fixed
|
September
2037
|
|||||
First
Niagara Bank (formerly Harleysville National Bank)
Portfolio
|
15
|
31,000
|
6.59
|
%
|
(1)
|
Fixed
|
January
2018
|
|||||
Rockland
Trust Company Portfolio
|
18
|
23,414
|
4.92
|
%
|
(2)
|
Fixed
|
May
2013
|
|||||
PNC
Bank (formerly National City Bank) Portfolio
|
2
|
4,375
|
4.58
|
%
|
(3)
|
Fixed
|
September
2013
|
|||||
Rite
Aid
|
6
|
12,808
|
6.97
|
%
|
Fixed
|
September
2017
|
||||||
PNC
Bank Portfolio
|
50
|
32,704
|
5.25
|
%
|
(4)
|
Fixed
|
November
2013
|
|||||
FedEx
Distribution Center
|
1
|
16,184
|
6.03
|
%
|
(5)
|
Fixed
|
January
2015
|
|||||
Walgreens
|
1
|
1,550
|
6.64
|
%
|
(6)
|
Fixed
|
August
2019
|
|||||
CVS
I
|
10
|
23,587
|
6.88
|
%
|
(7)
|
Fixed
|
October
2019
|
|||||
CVS
II
|
15
|
32,901
|
6.64
|
%
|
Fixed
|
December
2014
|
||||||
Home
Depot
|
1
|
12,150
|
6.03
|
%
|
Fixed
|
July
2020
|
||||||
Bridgestone
Firestone I
|
6
|
3,832
|
6.61
|
%
|
(8)
|
Fixed
|
June
2015
|
|||||
Fresenius
|
2
|
6,068
|
6.72
|
%
|
Fixed
|
February
2015
|
||||||
Reckitt
Benckiser
|
1
|
14,962
|
6.23
|
%
|
(9)
|
Fixed
|
February
2017
|
|||||
Jack
in the Box
|
4
|
4,384
|
6.45
|
%
|
Fixed
|
March
2015
|
||||||
Jack
in the Box
|
1
|
971
|
6.26
|
%
|
Fixed
|
June
2015
|
||||||
FedEx
Distribution Center
|
1
|
15,000
|
5.57
|
%
|
Fixed
|
May
2015
|
||||||
Walgreens
II
|
1
|
3,000
|
5.58
|
%
|
Fixed
|
March
2015
|
||||||
Total
|
136
|
$
|
245,855
|
6.10
|
%
|
Property
|
Encumbered
Properties
|
Outstanding
Loan
Amount
|
Effective
Interest Rate
|
Interest
Rate
|
Maturity
|
|||||||
FedEx
Distribution Center
|
1
|
$
|
6,965
|
6.29
|
%
|
Fixed
|
September
2037
|
|||||
First
Niagara (formerly Harleysville National Bank) Portfolio
|
15
|
31,000
|
6.59
|
%
|
(1)
|
Fixed
|
January
2018
|
|||||
Rockland
Trust Company Portfolio
|
18
|
23,649
|
4.92
|
%
|
(2)
|
Fixed
|
May
2013
|
|||||
PNC
Bank (formerly National City Bank) Portfolio
|
2
|
4,412
|
4.89
|
%
|
(3)
|
Fixed
|
September
2013
|
|||||
Rite
Aid
|
6
|
12,808
|
6.97
|
%
|
Fixed
|
September
2017
|
||||||
PNC
Bank Portfolio
|
50
|
32,933
|
5.25
|
%
|
(4)
|
Fixed
|
November
2013
|
|||||
Walgreens
|
1
|
1,550
|
6.64
|
%
|
(6)
|
Fixed
|
August
2019
|
|||||
CVS
I
|
10
|
23,710
|
6.88
|
%
|
(7)
|
Fixed
|
October
2019
|
|||||
CVS
II
|
15
|
33,068
|
6.64
|
%
|
Fixed
|
December
2014
|
||||||
Home
Depot
|
1
|
13,716
|
6.34
|
%
|
Fixed
|
December
2012
|
||||||
Total
|
120
|
$
|
183,811
|
6.15
|
%
|
(1)
|
-
|
The
effective interest rate resets at the end of year five to the then current
5-year Treasury rate plus 2.25%, but in no event will be less than
6.5%.
|
-
|
Fixed
as a result of entering into a rate lock agreement with a LIBOR floor and
cap of 3.54% and 4.125%, respectively.
|
|
(3)
|
-
|
Fixed
as a result of entering into a swap agreement with a rate of 3.565% for a
notional amount of $0.3 million and a rate lock agreement on a notional
amount of $4.1 million with a LIBOR floor and cap of 3.37% and 4.45%,
respectively, in connection with the entering into the
mortgage.
|
(4)
|
-
|
Fixed
as a result of entering in a swap agreement for 3.6% plus a spread of
1.65% in connection with the entering into the
mortgage.
|
(5)
|
-
|
Fixed
as a result of entering in a swap agreement for 2.775% plus a spread of
3.18% in connection with the entering into the
mortgage.
|
(6)
|
-
|
The
effective interest rate is fixed until 2014 then adjusts to the greater of
6.55% or the five-year U.S. Treasury rate plus 3.50%. The note can be
prepaid with no less than 30 days notice with a 1% minimum premium of the
then outstanding principal balance.
|
(7)
|
-
|
The
effective interest rate adjusts at the discretion of the lender at the end
of the sixth year.
|
(8)
|
-
|
The
effective rate is fixed for five years then adjusts based on the five-year
treasury rate plus 4.00%
|
(9)
|
-
|
Fixed
as a result of entering in a swap agreement for 3.295% plus a spread of
2.85% in connection with the entering into the
mortgage.
|
Total
|
||||
July 2010 to December
2010
|
$
|
1,069
|
||
2011
|
3,039
|
|||
2012
|
3,230
|
|||
2013
|
60,133
|
|||
2014
|
33,677
|
|||
2015 and
thereafter
|
144,707
|
|||
Total
|
$
|
245,855
|
Quoted
Prices in
Active
Markets
Level
1
|
Significant
Other Observable Inputs
Level
2
|
Significant
Unobservable
Inputs
Level
3
|
Total
|
|||||||||||||
June
30, 2010:
|
||||||||||||||||
Total
derivatives liability, net
|
$
|
—
|
$
|
5,619
|
$
|
—
|
$
|
5,619
|
||||||||
December
31, 2009:
|
||||||||||||||||
Total
derivatives liability, net
|
$
|
—
|
$
|
2,768
|
$
|
—
|
$
|
2,768
|
Carrying
Amount at
June
30, 2010
|
Fair
Value at
June
30, 2010
|
Carrying
Amount
at
December
31, 2009
|
Fair
Value at
December
31, 2009
|
|||||||||||||
Mortgage
notes payable
|
$
|
245,855
|
$
|
243,340
|
$
|
183,811
|
$
|
171,728
|
||||||||
Other
long-term notes payable
|
13,000
|
13,000
|
13,000
|
13,000
|
Interest
Rate Derivative
|
Number of Instruments |
Notional
|
||||
Interest
Rate Swaps
|
4
|
$
|
63,975
|
|||
Interest
Rate Collars
|
1
|
4,115
|
Interest
Rate Derivative
|
Number of Instruments |
Notional
|
||||
Interest
Rate Swaps
|
2
|
$
|
33,093
|
|||
Interest
Rate Collars
|
1
|
4,115
|
Fair
Value (Liability)
|
|||||||||
Balance
Sheet Location
|
June
30, 2010
|
December
31, 2009
|
|||||||
Derivatives
designated as hedging instruments:
|
|||||||||
Interest
Rate Products
|
Derivatives,
at fair value
|
$ | (4,105 | ) | $ | (1,646 | ) | ||
Derivatives
not designated as hedging instruments:
|
|||||||||
Interest
Rate Products
|
Derivatives,
at fair value
|
(1,514 | ) | (1,122 | ) |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Amount
of gain recognized in accumulated other comprehensive income as
interest rate derivatives (effective portion)
|
$ | 2,256 | $ | 709 | $ | 3,400 | $ | 483 | ||||||||
Amount
of loss reclassified from accumulated other comprehensive
income into income as interest expense (effective portion)
|
(516 | ) | (300 | ) | (940 | ) | (585 | ) | ||||||||
Amount
of gain recognized in income on derivative as gain on derivative
instruments (ineffective portion and amount excluded from effectiveness
testing)
|
— | — | — | — |
Location of Gain
or (Loss)
Recognized
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||||
in
Income on Derivative
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Interest
expense
|
$ | 4 | $ | (190 | ) | $ | 4 | $ | (369 | ) | ||||||
Gains
(losses) on derivative instruments
|
(239 | ) | 512 | (391 | ) | 549 | ||||||||||
Total
|
(235 | ) | 322 | (387 | ) | 180 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Total
commissions paid to Dealer Manager
|
$ | 8,981 | $ | 2,126 | $ | 14,338 | $ | 2,832 | ||||||||
Less:
|
||||||||||||||||
Commissions
to participating broker dealers
|
(6,039 | ) | (1,490 | ) | (9,804 | ) | (1,973 | ) | ||||||||
Reallowance
to participating broker dealers
|
(649 | ) | (161 | ) | (1,254 | ) | (206 | ) | ||||||||
Net
to affiliated Dealer Manager (1)
|
$ | 2,293 | $ | 475 | $ | 3,280 | $ | 653 |
(1)
|
Dealer
Manager is responsible for commission payments due to their employees as
well as its general overhead and various selling related
expenses.
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Acquisition
fees and related cost reimbursements
|
$ | 987 | $ | — | $ | 1,785 | $ | — | ||||||||
Financing
coordination fees
|
350 | — | 767 | — | ||||||||||||
Organizational
and offering expense reimbursements
|
1,175 | — | 2,278 | — | ||||||||||||
Total
Fees and Reimbursements
|
$ | 2,512 | $ | — | $ | 4,830 | $ | — |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Earned
asset management fee
|
$ | 1,122 | $ | 416 | $ | 2,013 | $ | 771 | ||||||||
Waived
by affiliate (not deferred)
|
(772 | ) | (416 | ) | (1,663 | ) | (771 | ) | ||||||||
Paid
to affiliate
|
350 | — | 350 | — | ||||||||||||
Prepaid
asset management fees
|
$ | 571 | $ | — | $ | 2,583 | $ | 950 |
Three
Months Ended June 30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
loss attributable to American Realty Capital Trust, Inc.
|
$ | (992 | ) | $ | (673 | ) | $ | (1,379 | ) | $ | (2,012 | ) | ||||
Weighted
average common shares outstanding
|
25,165 | 3,152 | 21,131 | 2,344 | ||||||||||||
Loss
per share, basic and diluted
|
$ | (0.04 | ) | $ | (0.21 | ) | $ | (0.07 | ) | $ | (0.86 | ) |
Seller
/ Property Name
|
Acquisition
Date
|
No.
of Buildings
|
Square
Feet
|
Remaining
Lease
Term
(1)
|
Base
Purchase Price (2)
|
Capitalization
Rate (3)
|
Net
Operating Income (4)
|
Purchase
Price (5)
|
|||||||||||||||||||||
Total
portfolio – June 30, 2010
|
167 | 2,840,592 | 15.3 | $ | 506,193 | 8.27 | % | $ | 42,374 | $ | 511,315 | ||||||||||||||||||
Dollar
General
|
July
2010
|
1 | 8,988 | 14.3 | 1,228 | 9.61 | % | 118 | 1,228 | ||||||||||||||||||||
Tractor
Supply
|
July 2010
|
1 | 18,976 | 14.9 | 2,846 | 8.71 | % | 248 | 2,846 | ||||||||||||||||||||
Advance
Auto
|
July
2010
|
3 | 19,752 | 13.0 | 4,385 | 8.16 | % | 358 | 4,385 | ||||||||||||||||||||
CSAA
Portfolio
|
August
2010
|
8 | 105,998 | 21.7 | 38,482 | 7.36 | % | 2,833 | 38,482 | ||||||||||||||||||||
Total
portfolio – August 11,2010
|
180 | 2,994,306 | 15.7 | $ | 553,134 | 8.30 | % | $ | 45,931 | $ | 558,256 |
(1)
-
|
Remaining
lease term in years as of Aug 11, 2010. If the portfolio has multiple
locations with varying lease expirations, remaining lease term is
calculated on a weighted-average basis.
|
(2)
-
|
Contract
purchase price excluding acquisition related
costs.
|
(3)
-
|
Net
operating income divided by base purchase
price.
|
(4)
-
|
Annualized
rental income less property operating expenses, as
applicable.
|
(5)
-
|
Base
purchase for acquisitions prior to January 1, 2009 include capitalized
acquisition related costs. Effective January 1, 2009, acquisition and
transaction related costs are required to be expensed as incurred in
accordance with generally accepted accounting
principals.
|
Total
Purchase Price
|
Mortgage
Notes (1)
|
Effective
Interest
Rate
|
Leverage
Ratio (2)
|
|||||||||||||
Total
portfolio – June 30, 2010
|
$
|
511,315
|
$
|
245,855
|
6.10
|
%
|
48.1
|
%
|
||||||||
Super
Stop & Shop (3)
|
—
|
10,800
|
5.25
|
%
|
45.4
|
%
|
||||||||||
Dollar
General
|
1,228
|
—
|
—
|
—
|
||||||||||||
Tractor
Supply
|
2,846
|
—
|
—
|
—
|
||||||||||||
Advance
Auto
|
4,385
|
—
|
—
|
—
|
||||||||||||
CSAA
Portfolio
|
38,482
|
—
|
—
|
—
|
||||||||||||
Less:
amortization of principal
|
—
|
(183
|
)
|
—
|
—
|
|||||||||||
Total
portfolio – August 11, 2010 (4)
|
$
|
558,256
|
$
|
256,472
|
6.07
|
%
|
50.2
|
%
|
(1)
-
|
Consists
of long-term mortgage notes.
|
(2)
-
|
Mortgage
notes divided by total purchase price.
|
(3)
|
Purchase
price included in total portfolio as of June 30, 2010.
|
(4)
-
|
Weighted-average,
as applicable.
|
Source
of Capital
|
Inception
to
June
30, 2010
|
July
1 to August
11,
2010
|
Total
|
|||||||||
Common shares
|
$
|
296,714
|
$
|
53,132
|
$
|
349,846
|
||||||
Notes payable
|
13,000
|
—
|
13,000
|
|||||||||
Exchange proceeds, net (1)
|
13,085
|
1,039
|
14,124
|
|||||||||
Total
|
$
|
322,799
|
$
|
54,171
|
$
|
376,970
|
(1)
|
Includes
amounts received by the Company in connection with transactions completed
through its affiliate, American Realty Capital Exchange,
LLC. Such transactions include joint ventures whereby
unaffiliated third-party investors co-invested in investment properties
that are majority owned and controlled by the
Company.
|
•
|
Neither
we nor our Advisor have a prior operating history and our Advisor does not
have any experience operating a public company. This inexperience makes
our future performance difficult to
predict.
|
•
|
All
of our executive officers are also officers, managers and/or holders of a
direct or indirect controlling interest in our Advisor, our dealer manager
and other affiliated entities. As a result, our executive officers, our
Advisor and its affiliates face conflicts of interest, including
significant conflicts created by our Advisor’s compensation arrangements
with us and other investors advised by American Realty Capital affiliates
and conflicts in allocating time among us and these other investors. These
conflicts could result in unanticipated
actions.
|
•
|
Because
investment opportunities that are suitable for us may also be suitable for
other American Realty Capital-advised investors, our Advisor and its
affiliates face conflicts of interest relating to the purchase of
properties and such conflicts may not be resolved in our favor, meaning
that we could invest in less attractive properties, which could reduce the
investment return to our
stockholders.
|
•
|
If
we raise substantially less than the maximum offering in our ongoing
initial public offering, we may not be able to invest in a diverse
portfolio of real estate assets and the value of an investment in us may
vary more widely with the performance of specific
assets.
|
•
|
While
we are raising capital and investing the proceeds of our ongoing initial
public offering, the high demand for the type of properties we desire to
acquire may cause our distributions and the long-term returns of our
investors to be lower than they otherwise
would.
|
•
|
We
depend on tenants for our revenue, and, accordingly, our revenue is
dependent upon the success and economic viability of our
tenants.
|
•
|
Increases
in interest rates could increase the amount of our debt payments and limit
our ability to pay distributions to our
stockholders.
|
•
|
a
significant decrease in the market price of a long-lived
asset;
|
•
|
a
significant adverse change in the extent or manner in which a long-lived
asset is being used or in its physical
condition;
|
•
|
a
significant adverse change in legal factors or in the business climate
that could affect the value of a long-lived asset, including an adverse
action or assessment by a
regulator;
|
•
|
an
accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of a long-lived asset;
and
|
•
|
a
current-period operating or cash flow loss combined with a history of
operating or cash flow losses or a projection or forecast that
demonstrates continuing losses associated with the use of a long-lived
asset.
|
·
|
Acquisition-related
costs. In evaluating investments in real estate, management’s
investment models and analysis differentiate costs to acquire the
investment from the operations derived from the investment. Prior to
2009, acquisition costs for these types of investments were capitalized;
however beginning in 2009 acquisition costs related to business
combinations are expensed. We believe by excluding expensed
acquisition costs, MFFO provides useful supplemental information that is
comparable with other companies that do not currently engage in
acquisition activities and is consistent with management’s analysis of the
investing and operating performance of our
properties.
|
·
|
Other infrequent
charges not related to the operating performance or our properties.
Impairment charges, write-offs of previously capitalized
assets such as costs associated with financing activities and other
infrequent charges, if any, may be excluded from MFFO if we believe these
charges are not useful in the evaluation of our operating performance. An
impairment charge represents a downward adjustment to the carrying amount
of a long-lived asset to reflect the current valuation of the asset even
when the asset is intended to be held long-term. Such adjustment,
when properly recognized under GAAP, may lag the underlying consequences
related to rental rates, occupancy and other operating performance
trends. The valuation is also based, in part, on the impact of
current market fluctuations and estimates of future capital requirements
and long-term operating performance that may not be directly attributable
to current operating performance. Other charges such as the
write-off of capitalized financing costs upon the early disposition of a
debt obligation or other non recurring charges are adjustments excluded
from MFFO because we believe that MFFO provides useful supplemental
information by focusing on the changes in our operating fundamentals
rather than on market valuation changes or other infrequent events not
related to our normal operations.
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009 (5)
|
|||||||||||||
Net
loss
|
$ | (992 | ) | $ | (673 | ) | $ | (1,379 | ) | $ | (2,012 | ) | ||||
Add:
|
||||||||||||||||
Depreciation
of real estate assets
|
3,748 | 1,362 | 6,802 | 2,724 | ||||||||||||
Amortization
of intangible lease assets
|
875 | 269 | 1,506 | 538 | ||||||||||||
Fair
value adjustment (1)
|
233 | (524 | ) | 391 | (581 | ) | ||||||||||
Noncontrolling interest
adjustment (2)
|
(242 | ) | — | (390 | ) | — | ||||||||||
Gains
on sales to noncontrolling interest holders, net
|
(17 | ) | — | (352 | ) | — | ||||||||||
FFO
|
3,605 | 434 | 6,578 | 669 | ||||||||||||
Acquisition
and transaction related costs
|
640 | — | 981 | — | ||||||||||||
Modified
FFO
|
$ | 4,245 | $ | 434 | $ | 7,559 | $ | 669 | ||||||||
Distributions
paid (3)(4)
|
3,844 | 410 | 7,072 | 630 | ||||||||||||
Modified
FFO coverage ratio
|
110.4 | % | 105.9 | % | 106.9 | % | 106.2 | % | ||||||||
Modified
FFO payout ratio
|
90.6 | % | 94.4 | % | 93.6 | % | 94.2 | % |
(1)
-
|
This
adjustment represents a non-cash fair value adjustment relating to the use
of hedging our debt yield. It is the Companies general strategy to fix its
variable rate debt to mitigate against interest rate volatility. The
Company excludes this non-cash fair value adjustment relating to its
hedging activities from its FFO
calculation.
|
(2)
-
|
Amounts
represent noncontrolling interest portion of depreciation of real estate
assets, amortization of intangible lease assets and fair value
adjustments.
|
(3)
-
|
Includes
a special dividend of $0.7 million paid in January
2010.
|
(4)
-
|
Includes
the value of common shares issued under the
DRIP.
|
Interest
Payments Due:
|
||||||||||||||||||||
Mortgage
notes payable
|
$
|
102,583
|
$
|
14,983
|
$
|
29,291
|
$
|
21,822
|
$
|
36,487
|
||||||||||
Other
notes payable
|
1,764
|
1,175
|
589
|
—
|
—
|
|||||||||||||||
Purchase
obligations (1)
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
$
|
104,347
|
$
|
16,158
|
$
|
29,880
|
$
|
21,822
|
$
|
36,487
|
(1)
|
Subsequent
to June 30, 2010, we acquired a Dollar General property, a Tractor Supply,
a CVS Pharmacy location, two Fifth Third Bank locations, five Walgreen
properties and three Advance Auto locations. See Note 15 of the
consolidated financial statements included in this Form 10-Q for more
information about the financing arrangements related to these
acquisitions.
|
American
Realty Capital Trust, Inc.
|
|||||
By:
|
/s/
Nicholas S. Schorsch
|
||||
Nicholas
S. Schorsch
|
|||||
Chief
Executive Officer (Principal Executive Officer)
|
|||||
By:
|
/s/
Brian S. Block
|
||||
Brian
S. Block
|
|||||
Executive Vice
President, Chief Financial Officer
(Principal
Accounting Officer)
|
Exhibit
No.
|
Description
|
31.1
|
Certification
of the Principal Executive Officer of the Company pursuant to Securities
Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
31.2
|
Certification
of the Principal Financial Officer of the Company pursuant to Securities
Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
Written
statements of the Principal Executive Officer and Principal Financial
Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|