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TNP STRATEGIC RETAIL TRUST, INC. FILES (8-K/A) Disclosing Financial Statements and Exhibits
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Item 9.01 Financial Statements and Exhibits.
OnOctober 14, 2011 ,TNP Strategic Retail Trust, Inc. (the "Company") filed a Current Report on Form 8-K reporting the Company's acquisition of a fee simple interest in a multi-tenant necessity retail center located inKissimmee, Florida commonly known asOsceola Village (the "Osceola property") throughTNP SRT Osceola Village, LLC , a wholly owned subsidiary ofTNP Strategic Retail Operating Partnership, LP , the Company's operating partnership. The Company is filing this Current Report on Form 8-K/A to amend the Current Report on Form 8-K filed onOctober 14, 2011 to provide the required financial information related to the Company's acquisition of an indirect interest inOsceola Village .
(a) Financial Statements of Real Estate Property Acquired.
The following financial statements are submitted at the end of this Current Report on Form 8-K/A and are filed herewith.
Page Osceola Village I. Independent Auditors' Report
1
II. Statements of Revenues and Certain Expenses for the Nine Months Ended
2010
2
III. Notes to Statements of Revenues and Certain Expenses for the Nine
Months Ended
December 31, 2010 3 (b) Unaudited Pro Forma Financial Information.
The following financial information is submitted at the end of this Current Report on Form 8-K/A and is furnished herewith.
I. Unaudited Pro Forma Condensed Consolidated Balance Sheet as ofSeptember 30, 2011 8 II. Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year EndedDecember 31, 2010 9 III. Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine Months EndedSeptember 30, 2011 10 IV. Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet as ofSeptember 30, 2011 , Unaudited Pro Forma Statements of Operations for the Year EndedDecember 31, 2010 and the Nine Months EndedSeptember 30, 2011 11
(c) Shell Company Transactions.
Not applicable (d) Exhibits. None
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
We have audited the accompanying statement of revenues and certain expenses ofOsceola Village , or the Property, for the six months endedDecember 31, 2010 . This statement of revenues and certain expenses is the responsibility of the Property's management. Our responsibility is to express an opinion on the statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with auditing standards generally accepted inthe United States of America . Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of theSecurities and Exchange Commission , as described in Note 1 to the statement of revenues and certain expenses, and is not intended to be a complete presentation of the Property's revenues and expenses. In our opinion, the statement of revenues and certain expenses presents fairly, in all material respects, the revenues and certain expenses as described in Note 1 to the statement of revenues and certain expenses ofOsceola Village for the six months endedDecember 31, 2010 in conformity with accounting principles generally accepted inthe United States of America . /s/KMJ Corbin & Company LLP Costa Mesa, California December 27, 2011 1
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Table of Contents OSCEOLA VILLAGE STATEMENTS OF REVENUES AND CERTAIN EXPENSES For the Nine Months EndedSeptember 30, 2011 (unaudited) and For The Six Months Ended December 31, 2010 For the Nine Months Ended For the Six September 30, 2011 Months Ended (unaudited) December 31, 2010 Revenue: Rental income $ 1,371,000 $ 946,000 Certain expenses: Building and ground maintenance 75,000
57,000
Real estate taxes 255,000
170,000
Electricity, water and gas utilities 63,000 50,000 Property management fees 60,000 46,000 Insurance 44,000 31,000 General and administrative 30,000 19,000 Total certain expenses 527,000 373,000 Revenues in excess of certain expenses $ 844,000 $
573,000
The accompanying notes are an integral part of the statements of revenues and certain expenses. 2
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Table of ContentsOSCEOLA VILLAGE NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES For the Nine Months EndedSeptember 30, 2011 (unaudited) and For The Six Months EndedDecember 31, 2010
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Organization
The accompanying statements of revenues and certain expenses include the operations ofOsceola Village , or the Property, a multi-tenant retail center located inOsceola County, Florida . The Property has approximately 117,000 gross leaseable square feet and was approximately 79% and 77% occupied as ofSeptember 30, 2011 (unaudited) andDecember 31, 2010 , respectively.
Basis of Presentation
The accompanying statements of revenues and certain expenses have been prepared for the purpose of complying with the provisions of Article 3-14 of Regulation S-X promulgated by theU.S. Securities and Exchange Commission , or theSEC , which requires certain information with respect to real estate operations to be included with certain filings with theSEC . The statements of revenues and certain expenses include the historical revenues and certain operating expenses of the Property, exclusive of items which may not be comparable to the proposed future operations of the Property. Material amounts that would not be directly attributable to future operating results of the Property are excluded, and therefore, the statements of revenues and certain expenses are not intended to be a complete presentation of the Property's revenues and expenses. Items excluded consist of interest expense, depreciation and amortization and federal and state income taxes. The accompanying statements of revenues and certain expenses are not representative of the actual operations for the periods presented, as certain expenses that may not be comparable to the expenses expected to be incurred byTNP Strategic Retail Trust, Inc. , or the Company, in the future operations of the Property have been excluded. The accompanying audited statement of revenues and certain expenses is required to be presented for the year endedDecember 31, 2010 as the Property was acquired from an unaffiliated seller. Only the six months endedDecember 31, 2010 are presented in the accompanying audited statement of revenues and certain expenses due to information not being available for the first half of 2010.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the terms of the lease (including rent holidays). Tenant reimbursements for real estate taxes, common area maintenance and other recoverable costs are recognized as rental income in the period that the expenses are incurred.
Repairs and Maintenance
Repairs and maintenance costs are expensed as incurred, while significant improvements, renovations and replacements are capitalized.
Property Management Fees
For the nine months endedSeptember 30, 2011 and for the six months endedDecember 31, 2010 , the owners of the Property contracted with a related entity to manage the Property for a fee equal to 4.5% of Gross Receipts (as defined in the Property Management Agreement). For the nine months endedSeptember 30, 2011 (unaudited) and for the six months endedDecember 31, 2010 , the Property incurred property management fees of$60,000 and$46,000 , respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted inthe United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting periods. Actual results could differ materially from those estimates.
Unaudited Interim Information
The statement of revenues and certain expenses for the nine months endedSeptember 30, 2011 is unaudited. In the opinion of management, such financial statement reflects all adjustments necessary for a fair presentation of results of the interim period. All such adjustments are of a normal recurring nature. 3
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NOTE 3 - LEASES
The Property has entered into operating lease agreements with tenants that have terms that expire through 2028. The aggregate annual future minimum lease payments to be received under the existing non-cancelable operating leases as ofSeptember 30, 2011 are as follows: Minimum Lease Years Ending December 31, Payments 2011(1) $ 440,000 2012 1,809,000 2013 1,820,000 2014 1,746,000 2015 1,658,000 Thereafter 10,159,000 $ 17,632,000
(1) For the period from
The leases at the Property also require reimbursement of the tenants' proportional share of common area expenses, real estate taxes and other expenses, which are not included in the amounts above. The tenant leases generally include tenant renewal options that can extend the lease terms.
NOTE 4 - TENANT CONCENTRATIONS
For the nine months ended
Aggregate Base % Aggregate Base Rent For The Nine Months Rent For The Nine Months Date of Lease Ended September 30, 2011 Ended September 30, 2011 Tenant Name Expiration (unaudited)
(unaudited)
Publix Super Markets, Inc 10/31/2028 $ 419,000 42 % Gregg Appliances, Inc 10/31/2018 $ 360,000 36 %
Aggregate base rent is based on contractual base rent from leases in effect as of
For the six months ended
Aggregate Base % Aggregate Base Rent For The Six Months Rent For The Six Months Date of Lease Ended December 31, Ended December 31, Tenant Name Expiration 2010 2010
Publix Super Markets, Inc 10/31/2028 $ 279,000 42 % Gregg Appliances, Inc 10/31/2018 $ 240,000 36 %
Aggregate base rent is based on contractual base rent from leases in effect as of
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Litigation
The Property may be subject to legal claims in the ordinary course of business. Management is not aware of potential claims, of which the outcome is likely to have a material adverse effect on the Property's results of operations or financial condition.
Environmental Matters
In connection with the ownership and operation of real estate, the Property may be potentially liable for costs and damages related to environmental matters. The Property has not been notified by any governmental authority of any non-compliance, liability or other claim, and management is not aware of any other environmental condition that it believes will have a material adverse effect on the Property's results of operations. 4
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Other Matters
Other commitments and contingencies include the usual obligations of a real estate property in the normal course of business. In the opinion of management, these matters are not expected to have a material adverse effect on the Property's financial position and/or results of operations.
NOTE 6 - SUBSEQUENT EVENT
OnOctober 11, 2011 , the Company, throughTNP SRT Osceola Village, LLC , an wholly owned subsidiary ofTNP Strategic Retail Operating Partnership, LP , the Company's operating partnership, purchased the Property for a purchase price of$21,800,000 , plus closing costs. 5
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Table of Contents TNP STRATEGIC RETAIL TRUST, INC. Unaudited Pro forma Condensed Consolidated Financial Statements For the Nine Months EndedSeptember 30, 2011 and For The Six months endedDecember 31, 2010 As used herein, "we," "us," and "Company" refers toTNP Strategic Retail Trust, Inc. OnOctober 11, 2011 , we acquired a fee simple interest in a multi-tenant necessity retail center located inKissimmee, Florida commonly known asOsceola Village , or the Osceola Property, throughTNP SRT Osceola Village, LLC , or TNP SRT Osceola Village, a wholly owned subsidiary ofTNP Strategic Retail Operating Partnership, LP , or theOperating Partnership , pursuant to a Purchase and Sale Agreement and Joint Escrow Instructions, by and between TNP SRT Osceola Village andSo Wehren Holding Corp. , a third party seller. TNP SRT Osceola Village acquired the Osceola Property for an aggregate purchase price of$21,800,000 , exclusive of closing costs, or approximately$187 per square foot. TNP SRT Osceola Village financed the payment of the purchase price for the Osceola Property with (1) proceeds from our initial public offering and (2) the proceeds of a loan in the aggregate principal amount of$19,000,000 (the "Osceola Loan") fromAmerican National Insurance Company , aTexas insurance company. OnSeptember 23, 2011 , we acquired a fee simple interest in a multi-tenant necessity retail center located inHesperia, California commonly known asTopaz Marketplace , or the Topaz Property, throughTNP SRT Topaz Marketplace, LLC , or TNP SRT Topaz, a wholly owned indirect subsidiary of theOperating Partnership from an unaffiliated third party seller. TNP SRT Topaz acquired the Topaz Property for an aggregate purchase price of approximately$13,500,000 , exclusive of closing costs and certain fees payable to the seller, or approximately$268 per square foot. TNP SRT Topaz financed the payment of the purchase price for the Topaz Property with (1) proceeds from our initial public offering and (2) approximately$8,000,000 in funds borrowed under our existing revolving credit agreement (as amended from time to time, the "Credit Agreement") withKeyBank National Association . OnJuly 19, 2011 , we acquired a fee simple interest in a multi-tenant necessity retail center located at 40J.A. Cochran Bypass inChester, South Carolina commonly known asCochran Bypass throughTNP SRT Cochran Bypass, LLC , or TNP SRT Cochran Bypass, a wholly owned subsidiary of theOperating Partnership , from an affiliated third party seller. TNP SRT Cochran Bypass acquired Cochran Bypass for aggregate consideration of$2,585,000 , comprised of (1) an assumption of all outstanding obligations on and after the closing date of the senior loan fromFirst South Bank (the "Senior Loan") secured by Cochran Bypass in the aggregate principal amount of$1,220,000 , (2) an assumption of all outstanding obligations on and after the closing date of a junior loan from TNP 2008Participating Notes Program, LLC , a fund affiliated with our sponsor, secured by Cochran Bypass in the current principal amount of$775,000 , (the "Junior Loan"), and (3) a carryback promissory note from the affiliated seller of Cochran Bypass in an amount of$579,000 , (the "Carryback Promissory Note"). OnMay 26, 2011 , we acquired a fee simple interest in a multi-tenant necessity retail center located at901 West Interstate Avenue , Bismark,North Dakota commonly known asPinehurst Square East , orPinehurst East , throughTNP SRT Pinehurst East, LLC , or TNP SRT Pinehurst East, a wholly owned subsidiary of theOperating Partnership , from an unaffiliated third party seller. TNP SRT Pinehurst East acquired Pinehurst East for an aggregate purchase price of$15,000,000 , exclusive of closing costs. TNP SRT Pinehurst East financed the payment of the purchase price for Pinehurst East with (1) proceeds from our initial public offering, (2) approximately$9,750,000 in funds borrowed under the Credit Agreement, and (3) issuance of approximately 287,472 units of theOperating Partnership's common limited partnership interests (the "Units") to certain of the sellers who elected to receive Units for an aggregate value of approximately$2,587,000 . OnMarch 30, 2011 , we acquired a fee simple interest in a multi-tenant necessity retail center located at655 W. Craig Road , inNorth Las Vegas, Nevada commonly known as Craig Promenade throughTNP SRT Craig Promenade, LLC , or TNP SRT Craig Promenade, a wholly owned indirect subsidiary of theOperating Partnership , from an unaffiliated third party seller. TNP SRT Craig Promenade acquired Craig Promenade for an aggregate purchase price of$12,800,000 , exclusive of closing costs. TNP SRT Craig Promenade financed the payment of the purchase price for Craig Promenade with (1) proceeds from our initial public offering and (2) approximately$8,750,000 in funds borrowed under the Credit Agreement. The accompanying unaudited pro forma condensed consolidated financial statements (including the notes thereto) are qualified in their entirety by reference to, and should be read in conjunction with, our Annual Report on Form 10-K for the year endedDecember 31, 2010 and our Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2011 . In management's opinion, all adjustments necessary to reflect the transactions have been made. The accompanying unaudited pro forma condensed consolidated balance sheet is presented as if we acquiredOsceola Village , as ofSeptember 30, 2011 . The accompanying unaudited pro forma condensed consolidated statements of operations for the year endedDecember 31, 2010 and the nine months endedSeptember 30, 2011 are presented as if we acquiredOsceola Village , Topaz Marketplace, Cochran Bypass,Pinehurst Square East , and Craig Promenade onJanuary 1, 2010 , as applicable. The accompanying pro forma adjustments assume that we raised sufficient net offering proceeds in our initial public offering at a price of$10.00 per share to fund the purchase of the these properties as ofJanuary 1, 2010 . The accompanying unaudited pro forma condensed consolidated financial statements are unaudited and are subject to a number of estimates, assumptions, and other uncertainties, and do not purport to be indicative of the actual results of operations that would 6
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have occurred had the acquisition reflected therein in fact occurred on the date specified, nor do such financial statements purport to be indicative of the results of operations that may be achieved in the future. In addition, the unaudited pro forma condensed consolidated financial statements include pro forma allocations of the purchase price ofOsceola Village , Topaz Marketplace, Cochran Bypass,Pinehurst Square East , and Craig Promenade based upon preliminary estimates of the fair value of the assets acquired and liabilities assumed in connection with the acquisition and are subject to change. 7
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Table of Contents TNP STRATEGIC RETAIL TRUST, INC. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2011 Total Prior Acquisitions Pro Forma As of Pro Forma As of September 30, 2011 as Adjustments September 30, Reported (A) (B) 2011 ASSETS Investment in Real Estate Land $ 28,671,000 $ 6,497,000 $ 35,168,000 Building and Building Improvements 53,340,000 12,393,000 65,733,000 Tenant Improvements 2,705,000 1,007,000 3,712,000 84,716,000 19,897,000 104,613,000 Accumulated Depreciation (2,546,000 ) - (2,546,000 ) Investments in real estate, net 82,170,000 19,897,000 102,067,000 Investments in mortgage notes receivable, net 18,000,000 - 18,000,000 Investments in real estate and mortgage assets, net 100,170,000 19,897,000 120,067,000 Cash and Cash Equivalents 1,387,000 - 1,387,000 Restricted Cash 1,346,000 - 1,346,000 Prepaid Expenses and Other Assets 578,000 190,000 768,000 Accounts Receivable 904,000 10,000 914,000 Acquired Lease intangibles, net 10,314,000 2,242,000 12,556,000 Deferred Costs Organization and Offering 1,477,000 - 1,477,000 Financing Fees, net 1,272,000 594,000 1,866,000 Total deferred costs, net 2,749,000 594,000 3,343,000 Assets held for sale 3,194,000 - 3,194,000 Total assets $ 120,642,000 $ 22,933,000 $ 143,575,000 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 2,310,000 273,000 2,583,000 Amounts due to affiliates 1,537,000 - 1,537,000 Other liabilities 482,000 54,000 536,000 Notes payable 82,917,000 19,020,000 101,937,000 Acquired below market lease intangibles, net 3,375,000 339,000 3,714,000 Total liabilities 90,621,000 19,686,000 110,307,000 Commitments and contingencies Equity: Preferred stock,$0.01 par value per share; 50,000,000 shares authorized; none issued and outstanding as ofSeptember 30, 2011 and December 31, 2010, respectively - - - Common stock,$0.01 par value per share; 400,000,000 shares authorized, 4,591,090 and 2,382,317 shares issued and outstanding as ofSeptember 30, 2011 and December 31, 2010, respectively 46,000 4,000 50,000 Additional paid-in capital 40,858,000 4,129,000 44,987,000 Accumulated deficit (12,589,000 )
(886,000 )(C) (13,475,000 )
Total stockholders' equity 28,315,000 3,247,000 31,562,000 Non-controlling interests 1,706,000 - 1,706,000 Total equity 30,021,000 3,247,000 33,268,000 Total liabilities and equity $ 120,642,000 $
22,933,000
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