UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the Quarterly Period Ended: June 30, 2012
Or
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
to
Commission File Number 1-6249
WINTHROP REALTY TRUST
(Exact name of Registrant as specified in its certificate of incorporation)
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|
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Ohio
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34-6513657
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification Number)
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7 Bulfinch Place, Suite 500,
Boston, Massachusetts
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02114
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(Address of principal executive offices)
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(Zip Code)
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(617) 570-4614
(Registrants telephone number, including area code)
Indicate by check mark whether
the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
|
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act
Rule12b-2). Yes
¨
No
x
As of August 1, 2012 there were 33,077,047 Common Shares of Beneficial Interest outstanding.
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
INDEX
2
Item 1. Financial Information
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
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|
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June 30,
|
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December 31,
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2012
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2011
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|
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(unaudited)
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(unaudited)
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ASSETS
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Investments in real estate, at cost
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Land
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$
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39,575
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$
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36,495
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Buildings and improvements
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350,243
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327,337
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389,818
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363,832
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Less: accumulated depreciation
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(49,818
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)
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(44,556
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)
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Investments in real estate, net
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340,000
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|
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319,276
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Cash and cash equivalents
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43,959
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40,952
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Restricted cash held in escrows
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10,678
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3,914
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Loans receivable, net
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123,872
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114,333
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Accounts receivable, net of allowances of $397 and $639, respectively
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19,261
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16,140
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Securities carried at fair value
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34,079
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28,856
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Loan securities carried at fair value
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5,385
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5,309
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|
Preferred equity investments
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5,500
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|
|
|
5,520
|
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Equity investments
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|
146,221
|
|
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|
162,142
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|
Lease intangibles, net
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34,678
|
|
|
|
36,305
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Deferred financing costs, net
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1,081
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1,180
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Assets held for sale
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6
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6
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|
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TOTAL ASSETS
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$
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764,720
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$
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733,933
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LIABILITIES
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Mortgage loans payable
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$
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229,891
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$
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230,940
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Non-recourse secured financings
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29,150
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29,150
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Revolving line of credit
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40,000
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Accounts payable and accrued liabilities
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16,696
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|
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16,174
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|
Dividends payable
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|
5,373
|
|
|
|
5,369
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|
Deferred income
|
|
|
1,010
|
|
|
|
502
|
|
Below market lease intangibles, net
|
|
|
2,602
|
|
|
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2,962
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|
|
|
|
|
|
|
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TOTAL LIABILITIES
|
|
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284,722
|
|
|
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325,097
|
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|
|
|
|
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COMMITMENTS AND CONTINGENCIES
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EQUITY
|
|
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Winthrop Realty Trust Shareholders Equity:
|
|
|
|
|
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Series D Cumulative Redeemable Preferred Shares, $25 per share liquidation preference, 5,060,000 shares authorized and 4,820,000
shares outstanding at June 30, 2012 and 1,840,000 shares authorized and 1,600,000 shares outstanding at December 31, 2011
|
|
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120,500
|
|
|
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40,000
|
|
Common Shares, $1 par, unlimited shares authorized; 33,066,280 and 33,041,034 issued and outstanding at June 30, 2012 and
December 31, 2011, respectively
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33,066
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|
|
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33,041
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|
Additional paid-in capital
|
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617,862
|
|
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626,099
|
|
Accumulated distributions in excess of net income
|
|
|
(314,091
|
)
|
|
|
(311,246
|
)
|
Accumulated other comprehensive loss
|
|
|
(149
|
)
|
|
|
(92
|
)
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|
|
|
|
|
|
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Total Winthrop Realty Trust Shareholders Equity
|
|
|
457,188
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|
|
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387,802
|
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Non-controlling interests
|
|
|
22,810
|
|
|
|
21,034
|
|
|
|
|
|
|
|
|
|
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Total Equity
|
|
|
479,998
|
|
|
|
408,836
|
|
|
|
|
|
|
|
|
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TOTAL LIABILITIES AND EQUITY
|
|
$
|
764,720
|
|
|
$
|
733,933
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
3
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
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|
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|
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|
|
|
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|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
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|
(unaudited)
|
|
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(unaudited)
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Revenue
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|
|
|
|
|
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|
|
|
|
|
|
|
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Rents and reimbursements
|
|
$
|
13,257
|
|
|
$
|
11,234
|
|
|
$
|
25,797
|
|
|
$
|
22,220
|
|
Interest, dividends and discount accretion
|
|
|
5,778
|
|
|
|
5,094
|
|
|
|
11,296
|
|
|
|
14,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,035
|
|
|
|
16,328
|
|
|
|
37,093
|
|
|
|
36,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating
|
|
|
3,779
|
|
|
|
3,987
|
|
|
|
8,331
|
|
|
|
8,032
|
|
Real estate taxes
|
|
|
1,017
|
|
|
|
1,087
|
|
|
|
2,271
|
|
|
|
2,342
|
|
Depreciation and amortization
|
|
|
4,479
|
|
|
|
3,312
|
|
|
|
8,198
|
|
|
|
6,793
|
|
Interest
|
|
|
3,512
|
|
|
|
3,963
|
|
|
|
7,301
|
|
|
|
8,576
|
|
General and administrative
|
|
|
3,264
|
|
|
|
2,758
|
|
|
|
6,295
|
|
|
|
5,282
|
|
State and local taxes
|
|
|
143
|
|
|
|
48
|
|
|
|
149
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,194
|
|
|
|
15,155
|
|
|
|
32,545
|
|
|
|
31,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from preferred equity investments
|
|
|
|
|
|
|
158
|
|
|
|
|
|
|
|
241
|
|
Equity in income of equity investments
|
|
|
586
|
|
|
|
2,875
|
|
|
|
1,010
|
|
|
|
1,520
|
|
Realized gain on sale of securities carried at fair value
|
|
|
15
|
|
|
|
7
|
|
|
|
41
|
|
|
|
131
|
|
Unrealized (loss) gain on securities carried at fair value
|
|
|
(791
|
)
|
|
|
(723
|
)
|
|
|
4,141
|
|
|
|
163
|
|
Unrealized (loss) gain on loan securities carried at fair value
|
|
|
(88
|
)
|
|
|
34
|
|
|
|
76
|
|
|
|
2,847
|
|
Gain on sale of equity investment
|
|
|
232
|
|
|
|
|
|
|
|
232
|
|
|
|
|
|
Interest income
|
|
|
90
|
|
|
|
443
|
|
|
|
192
|
|
|
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
2,794
|
|
|
|
5,692
|
|
|
|
5,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
2,885
|
|
|
|
3,967
|
|
|
|
10,240
|
|
|
|
11,322
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
90
|
|
|
|
(3
|
)
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
|
2,885
|
|
|
|
4,057
|
|
|
|
10,237
|
|
|
|
11,459
|
|
(Income) loss attributable to non-controlling interest
|
|
|
473
|
|
|
|
(329
|
)
|
|
|
1,374
|
|
|
|
(533
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Winthrop Realty Trust
|
|
|
3,358
|
|
|
|
3,728
|
|
|
|
11,611
|
|
|
|
10,926
|
|
Preferred dividend of Series C Preferred Shares
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
(117
|
)
|
Preferred dividend of Series D Preferred Shares
|
|
|
(2,787
|
)
|
|
|
|
|
|
|
(3,712
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Common Shares
|
|
$
|
571
|
|
|
$
|
3,670
|
|
|
$
|
7,899
|
|
|
$
|
10,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share dataBasic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.02
|
|
|
$
|
0.11
|
|
|
$
|
0.24
|
|
|
$
|
0.36
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Winthrop Realty Trust
|
|
$
|
0.02
|
|
|
$
|
0.11
|
|
|
$
|
0.24
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share dataDiluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.02
|
|
|
$
|
0.11
|
|
|
$
|
0.24
|
|
|
$
|
0.36
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Winthrop Realty Trust
|
|
$
|
0.02
|
|
|
$
|
0.11
|
|
|
$
|
0.24
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted-Average Common Shares
|
|
|
33,064
|
|
|
|
32,573
|
|
|
|
33,058
|
|
|
|
29,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Weighted-Average Common Shares
|
|
|
33,064
|
|
|
|
32,574
|
|
|
|
33,058
|
|
|
|
29,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
$
|
2,885
|
|
|
$
|
4,057
|
|
|
$
|
10,237
|
|
|
$
|
11,459
|
|
Change in unrealized gain (loss) on interest rate derivative
|
|
|
(25
|
)
|
|
|
|
|
|
|
(57
|
)
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
2,860
|
|
|
$
|
4,057
|
|
|
$
|
10,180
|
|
|
$
|
11,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
4
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Cumulative Redeemable
|
|
|
Common Shares of
|
|
|
Additional
|
|
|
Distributions
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
Series D Preferred Shares
|
|
|
Beneficial Interest
|
|
|
Paid-In
|
|
|
in Excess of
|
|
|
Comprehensive
|
|
|
Controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Net Income
|
|
|
Income
|
|
|
Interests
|
|
|
Total
|
|
Balance, December 31, 2011
|
|
|
1,600
|
|
|
$
|
40,000
|
|
|
|
33,041
|
|
|
$
|
33,041
|
|
|
$
|
626,099
|
|
|
$
|
(311,246
|
)
|
|
$
|
(92
|
)
|
|
$
|
21,034
|
|
|
$
|
408,836
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Winthrop Realty Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,611
|
|
|
|
|
|
|
|
|
|
|
|
11,611
|
|
Net income attributable to non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,374
|
)
|
|
|
(1,374
|
)
|
Distributions to non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(270
|
)
|
|
|
(270
|
)
|
Contributions from non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,975
|
|
|
|
3,975
|
|
Purchase of non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,695
|
)
|
|
|
|
|
|
|
|
|
|
|
(555
|
)
|
|
|
(6,250
|
)
|
Dividends paid or accrued on Common Shares of Beneficial Interest ($0.325 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,744
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,744
|
)
|
Dividends paid or accrued on Series D Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares ($1.15625 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,712
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,712
|
)
|
Series D Preferred Share offering
|
|
|
3,220
|
|
|
|
80,500
|
|
|
|
|
|
|
|
|
|
|
|
(2,785
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,715
|
|
Change in unrealized gain on interest rate derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
(57
|
)
|
Stock issued pursuant to dividend reinvestment plan
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
25
|
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2012
|
|
|
4,820
|
|
|
$
|
120,500
|
|
|
|
33,066
|
|
|
$
|
33,066
|
|
|
$
|
617,862
|
|
|
$
|
(314,091
|
)
|
|
$
|
(149
|
)
|
|
$
|
22,810
|
|
|
$
|
479,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Cumulative Redeemable
|
|
|
Common Shares of
|
|
|
Additional
|
|
|
Distributions
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
Series D Preferred Shares
|
|
|
Beneficial Interest
|
|
|
Paid-In
|
|
|
in Excess of
|
|
|
Comprehensive
|
|
|
Controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Net Income
|
|
|
Income
|
|
|
Interests
|
|
|
Total
|
|
Balance, December 31, 2010
|
|
|
|
|
|
$
|
|
|
|
|
27,030
|
|
|
$
|
27,030
|
|
|
$
|
569,586
|
|
|
$
|
(300,782
|
)
|
|
$
|
(63
|
)
|
|
$
|
14,076
|
|
|
$
|
309,847
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Winthrop Realty Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,926
|
|
|
|
|
|
|
|
|
|
|
|
10,926
|
|
Net income attributable to non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
533
|
|
|
|
533
|
|
Distributions to non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(194
|
)
|
|
|
(194
|
)
|
Contributions from non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
277
|
|
Dividends paid or accrued on Common Shares of Beneficial Interest ($0.325 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,748
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,748
|
)
|
Dividends paid or accrued on Series C Preferred Shares ($0.8125 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(117
|
)
|
|
|
|
|
|
|
|
|
|
|
(117
|
)
|
Change in unrealized gain on interest rate derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
63
|
|
Net proceeds from Common Shares offering
|
|
|
|
|
|
|
|
|
|
|
5,750
|
|
|
|
5,750
|
|
|
|
55,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,386
|
|
Shares issued pursuant to dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
reinvestment plan
|
|
|
|
|
|
|
|
|
|
|
118
|
|
|
|
118
|
|
|
|
1,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2011
|
|
|
|
|
|
$
|
|
|
|
|
32,898
|
|
|
$
|
32,898
|
|
|
$
|
626,472
|
|
|
$
|
(299,721
|
)
|
|
$
|
|
|
|
$
|
14,692
|
|
|
$
|
374,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
5
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
10,237
|
|
|
$
|
11,459
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amortization of of deferred financing costs)
|
|
|
5,460
|
|
|
|
4,629
|
|
Amortization of lease intangibles
|
|
|
2,884
|
|
|
|
2,337
|
|
Straight-lining of rental income
|
|
|
(2,476
|
)
|
|
|
(709
|
)
|
Loan discount accretion
|
|
|
(5,559
|
)
|
|
|
(8,793
|
)
|
Discount accretion received in cash
|
|
|
14,065
|
|
|
|
8,540
|
|
Earnings of preferred equity investments
|
|
|
|
|
|
|
(241
|
)
|
Distributions of income from preferred equity investments
|
|
|
97
|
|
|
|
60
|
|
Income of equity investments
|
|
|
(1,010
|
)
|
|
|
(1,520
|
)
|
Distributions of income from equity investments
|
|
|
4,788
|
|
|
|
3,813
|
|
Restricted cash held in escrows
|
|
|
(2,312
|
)
|
|
|
1,359
|
|
Gain on sale of equity investment
|
|
|
(232
|
)
|
|
|
|
|
Gain on sale of securities carried at fair value
|
|
|
(41
|
)
|
|
|
(131
|
)
|
Unrealized gain on securities carried at fair value
|
|
|
(4,141
|
)
|
|
|
(163
|
)
|
Unrealized gain on loan securities carried at fair value
|
|
|
(76
|
)
|
|
|
(2,847
|
)
|
Tenant leasing costs
|
|
|
(683
|
)
|
|
|
(581
|
)
|
Bad debt (recovery) expense
|
|
|
(242
|
)
|
|
|
191
|
|
Net change in interest receivable
|
|
|
(135
|
)
|
|
|
(161
|
)
|
Net change in accounts receivable
|
|
|
(418
|
)
|
|
|
(1,131
|
)
|
Net change in accounts payable and accrued liabilities
|
|
|
2,303
|
|
|
|
1,068
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
22,509
|
|
|
|
17,179
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Investments in real estate
|
|
|
(28,882
|
)
|
|
|
(4,139
|
)
|
Investment in equity investments
|
|
|
(33,546
|
)
|
|
|
(59,562
|
)
|
Investment in preferred equity investments
|
|
|
(4,000
|
)
|
|
|
(3,942
|
)
|
Proceeds from sale of investments in real estate
|
|
|
632
|
|
|
|
|
|
Proceeds from sale of equity investments
|
|
|
2,297
|
|
|
|
6,000
|
|
Return of capital distribution from equity investments
|
|
|
38,100
|
|
|
|
26,130
|
|
Purchase of securities carried at fair value
|
|
|
(5,655
|
)
|
|
|
(568
|
)
|
Proceeds from sale of securities carried at fair value
|
|
|
4,614
|
|
|
|
26,281
|
|
Proceeds from payoff of loan securities
|
|
|
|
|
|
|
8,748
|
|
Restricted cash held in escrows
|
|
|
(4,431
|
)
|
|
|
(1,417
|
)
|
Issuance and acquisition of loans receivable
|
|
|
(44,096
|
)
|
|
|
(44,161
|
)
|
Collection of loans receivable
|
|
|
29,798
|
|
|
|
12,717
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(45,169
|
)
|
|
|
(33,913
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued on next page)
|
|
See Notes to Consolidated Financial Statements.
6
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, continued)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from mortgage loans payable
|
|
|
2,051
|
|
|
|
11,000
|
|
Principal payments of mortgage loans payable
|
|
|
(3,100
|
)
|
|
|
(30,692
|
)
|
Proceeds from revolving line of credit
|
|
|
|
|
|
|
27,324
|
|
Proceeds from issuance of Series D Preferred Shares
|
|
|
77,715
|
|
|
|
|
|
Payment of revolving line of credit
|
|
|
(40,000
|
)
|
|
|
(52,774
|
)
|
Proceeds from note payable
|
|
|
|
|
|
|
15,150
|
|
Restricted cash held in escrows
|
|
|
(21
|
)
|
|
|
(501
|
)
|
Deferred financing costs
|
|
|
(99
|
)
|
|
|
(612
|
)
|
Contribution from non-controlling interest
|
|
|
3,975
|
|
|
|
277
|
|
Distribution to non-controlling interest
|
|
|
(270
|
)
|
|
|
(194
|
)
|
Purchase of non-controlling interests
|
|
|
(400
|
)
|
|
|
|
|
Issuance of Common Shares through offering
|
|
|
|
|
|
|
61,386
|
|
Issuance of Common Shares under Dividend Reinvestment Plan
|
|
|
268
|
|
|
|
1,368
|
|
Dividend paid on Common Shares
|
|
|
(10,740
|
)
|
|
|
(8,794
|
)
|
Dividend paid on Series D Preferred Shares
|
|
|
(3,712
|
)
|
|
|
|
|
Dividend paid on Series C Preferred Shares
|
|
|
|
|
|
|
(117
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
25,667
|
|
|
|
22,821
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
3,007
|
|
|
|
6,087
|
|
Cash and cash equivalents at beginning of period
|
|
|
40,952
|
|
|
|
45,257
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
43,959
|
|
|
$
|
51,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
7,072
|
|
|
$
|
8,865
|
|
|
|
|
|
|
|
|
|
|
Taxes paid
|
|
$
|
257
|
|
|
$
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure on Non-Cash Investing and Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Dividends accrued on Common Shares
|
|
$
|
5,373
|
|
|
$
|
5,346
|
|
|
|
|
|
|
|
|
|
|
Dividends accrued on Series C Preferred Shares
|
|
$
|
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures accrued
|
|
$
|
1,474
|
|
|
$
|
172
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to loan securities carried at fair value
|
|
$
|
|
|
|
$
|
662
|
|
|
|
|
|
|
|
|
|
|
Transfer from loans receivable
|
|
$
|
(2,938
|
)
|
|
$
|
(11,184
|
)
|
|
|
|
|
|
|
|
|
|
Transfer from preferred equity
|
|
$
|
(3,923
|
)
|
|
$
|
(2,022
|
)
|
|
|
|
|
|
|
|
|
|
Transfer to equity investment
|
|
$
|
6,861
|
|
|
$
|
12,544
|
|
|
|
|
|
|
|
|
|
|
Transfer to loan receivable
|
|
$
|
6,550
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Transfer from equity investment
|
|
$
|
(12,400
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to additional paid-in capital
|
|
$
|
5,487
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to non-controlling interests
|
|
$
|
363
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
7
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Winthrop Realty Trust (Winthrop), a real estate investment trust (REIT) under section 856-860 of the Internal
Revenue Code is an unincorporated association in the form of a business trust organized in Ohio under a Declaration of Trust dated August 1, 1961, as amended and restated on May 21, 2009, which has as its stated principal business activity
the ownership and management of, and lending to, real estate and related investments.
Winthrop conducts its business through WRT Realty L.P.,
a Delaware limited partnership (the Operating Partnership). Winthrop is the sole general partner of, and owns directly and indirectly, 100% of the limited partnership interest in the Operating Partnership. All references to the
Trust refer to Winthrop and its consolidated subsidiaries, including the Operating Partnership.
The Trust is engaged in the
business of owning real property and real estate related assets which it categorizes into three specific areas: (i) ownership of investment properties (operating properties); (ii) origination and acquisition of loans and debt
securities collateralized directly or indirectly by commercial and multi-family real property, including collateral mortgage-backed securities and collateral debt obligation securities (collectively loan assets); and (iii) equity
and debt interests in other real estate investment trusts (REIT securities).
2.
|
Summary of Significant Accounting Policies
|
Basis of Presentation
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim
financial statements and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the SEC). Accordingly, they do not include all of the information and footnotes required by
GAAP for complete financial statements, although management believes that the disclosures presented herein are adequate to make the accompanying unaudited consolidated interim financial statements not misleading. The accompanying unaudited
consolidated interim financial statements should be read in conjunction with the audited consolidated annual financial statements and the notes thereto included in the Trusts Annual Report on Form 10-K for the year ended December 31, 2011
filed with the SEC. In the opinion of management, all adjustments considered necessary for fair statements have been included, and all such adjustments are of a normal recurring nature. The results of operations for the three and six months ended
June 30, 2012 are not necessarily indicative of the operating results for the full year.
The accompanying unaudited consolidated
financial statements represent the consolidated results of Winthrop, its wholly-owned taxable REIT subsidiary, WRT TRS Management Corp. and the Operating Partnership. All majority-owned subsidiaries and affiliates over which the Trust has financial
and operating control and variable interest entities (VIEs) in which the Trust has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions
have been eliminated in consolidation. The Trust accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Trusts share of the earnings of these joint ventures and companies is included in
consolidated net income.
Earnings Per Share
The Trust determines basic earnings per share on the weighted average number of Common Shares outstanding during the period and reflects the impact of participating securities. Prior to November 18,
2011, when the Trust repurchased 100% of the Series B-1 Cumulative Convertible Redeemable Preferred Shares (Series B-1 Preferred Shares) and the Series C Cumulative Convertible Redeemable Preferred Shares (Series C Preferred Shares), the holders of
the Trusts Series B-1 Preferred Shares and Series C Preferred Shares were entitled to receive cumulative preferential dividends on a quarterly basis equal to the greater of (i) $0.40625 per share quarterly (6.5% of the liquidation
preference on an annualized basis) or (ii) cash dividends payable on the number of Common Shares into which the Series B-1 Preferred Shares and Series C Preferred Shares (assuming for this purpose that the conversion price of the Series C
Preferred Shares equals the conversion price of the Series B-1 Preferred Shares) were convertible. The Trust computes diluted earnings per share based on the weighted average number of Common Shares outstanding combined with the incremental weighted
average effect from all outstanding potentially dilutive instruments.
8
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The Trust has calculated earnings per share in accordance with relevant accounting guidance for
participating securities and the two class method. The reconciliation of earnings attributable to Common Shares outstanding for the basic and diluted earnings per share calculation is as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
2,885
|
|
|
$
|
3,967
|
|
|
$
|
10,240
|
|
|
$
|
11,322
|
|
(Income) loss attributable to non-controlling interest
|
|
|
473
|
|
|
|
(329
|
)
|
|
|
1,374
|
|
|
|
(533
|
)
|
Preferred dividend of Series C Preferred Shares
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
(117
|
)
|
Preferred dividend of Series D Preferred Shares
|
|
|
(2,787
|
)
|
|
|
|
|
|
|
(3,712
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations applicable to Common Shares
|
|
|
571
|
|
|
|
3,580
|
|
|
|
7,902
|
|
|
|
10,672
|
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
90
|
|
|
|
(3
|
)
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to Common Shares for earnings per share purposes
|
|
$
|
571
|
|
|
$
|
3,670
|
|
|
$
|
7,899
|
|
|
$
|
10,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average Common Shares
|
|
|
33,064
|
|
|
|
32,573
|
|
|
|
33,058
|
|
|
|
29,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.02
|
|
|
$
|
0.11
|
|
|
$
|
0.24
|
|
|
$
|
0.36
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per Common Share
|
|
$
|
0.02
|
|
|
$
|
0.11
|
|
|
$
|
0.24
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
2,885
|
|
|
$
|
3,967
|
|
|
$
|
10,240
|
|
|
$
|
11,322
|
|
(Income) loss attributable to non-controlling interest
|
|
|
473
|
|
|
|
(329
|
)
|
|
|
1,374
|
|
|
|
(533
|
)
|
Preferred dividend of Series C Preferred Shares
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
(117
|
)
|
Preferred dividend of Series D Preferred Shares
|
|
|
(2,787
|
)
|
|
|
|
|
|
|
(3,712
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations applicable to Common Shares
|
|
|
571
|
|
|
|
3,580
|
|
|
|
7,902
|
|
|
|
10,672
|
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
90
|
|
|
|
(3
|
)
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to Common Shares for earnings per share purposes
|
|
$
|
571
|
|
|
$
|
3,670
|
|
|
$
|
7,899
|
|
|
$
|
10,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average Common Shares
|
|
|
33,064
|
|
|
|
32,573
|
|
|
|
33,058
|
|
|
|
29,841
|
|
Series B-1 Preferred Shares (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C Preferred Shares (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options (3)
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average Common Shares
|
|
|
33,064
|
|
|
|
32,574
|
|
|
|
33,058
|
|
|
|
29,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.02
|
|
|
$
|
0.11
|
|
|
$
|
0.24
|
|
|
$
|
0.36
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per Common Share
|
|
$
|
0.02
|
|
|
$
|
0.11
|
|
|
$
|
0.24
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Series B-1 Preferred Shares were anti-dilutive for the three and six months ended June 30, 2011 and are not included in the weighted-average shares outstanding
for the calculation of diluted earnings per Common Share.
|
(2)
|
The Series C Preferred Shares were anti-dilutive for the three and six months ended June 30, 2011 and are not included in the weighted-average shares outstanding
for the calculation of diluted earnings per Common Share.
|
(3)
|
The Trusts outstanding stock options were anti-dilutive for the three months ended June 30, 2012 and are not included in the weighted average shares
outstanding for the calculation of diluted earnings per Common Share. The Trusts outstanding stock options were dilutive for the six months ended June 30, 2012 and the three and six months ended June 30, 2011. The weighted-average
stock options for the six months ended June 30, 2012 were less than one thousand shares.
|
9
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
3.
|
Fair Value Measurements
|
REIT securities, loan securities and derivative financial instruments are reported at fair value. The accounting standards establish a
framework for measuring fair value as well as disclosures about fair value measurements. They emphasize that fair value is a market based measurement, not an entity-specific measurement. Therefore a fair value measurement should be determined based
on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the standards establish a fair value hierarchy that distinguishes between
market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entitys own assumptions about market
participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
The Trusts Level 3 loan securities carried at
fair value primarily consist of non-agency mortgage-related securities. The non-agency mortgage-related securities market continued to be illiquid during the first half of 2012, with low transaction volumes, wide credit spreads, and limited
transparency. The Trust values the loan securities carried at fair value it holds based primarily on prices received from a pricing service. The techniques used by the pricing service to develop the prices generally are either: (a) a comparison
to transactions involving instruments with similar collateral and risk profiles; or (b) industry standard modeling, such as a discounted cash flow model. The significant inputs and assumptions used to determine the fair value of the
Trusts loan securities include payment rates, probability of default, loss severity and yield to maturity percentages.
Recurring
Measurements
The table below presents the Trusts assets
measured at fair value on a recurring basis as of June 30, 2012, according to the level in the fair value hierarchy within which those measurements fall (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Basis
|
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities carried at fair value
|
|
$
|
34,079
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
34,079
|
|
Loan securities carried at fair value
|
|
|
|
|
|
|
|
|
|
|
5,385
|
|
|
|
5,385
|
|
Interest rate caps
|
|
|
|
|
|
|
149
|
|
|
|
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,079
|
|
|
$
|
149
|
|
|
$
|
5,385
|
|
|
$
|
39,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below presents the Trusts assets measured at fair value on a recurring basis as of December 31, 2011, according to
the level in the fair value hierarchy within which those measurements fall (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Basis
|
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities carried at fair value
|
|
$
|
28,856
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
28,856
|
|
Loan securities carried at fair value
|
|
|
|
|
|
|
|
|
|
|
5,309
|
|
|
|
5,309
|
|
Interest Rate Caps
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,856
|
|
|
$
|
85
|
|
|
$
|
5,309
|
|
|
$
|
34,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The table below includes a roll forward of the balance sheet amounts from January 1, 2012 to
June 30, 2012, including the change in fair value, for financial instruments classified by the Trust within Level 3 of the valuation hierarchy (in thousands). When a determination is made to classify a financial instrument within Level 3 of the
valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement.
|
|
|
|
|
|
|
|
|
Loan Securities Carried at
Fair Value
|
|
Six Months Ended
June 30, 2012
|
|
|
Six Months Ended
June 30, 2011
|
|
Fair value, January 1
|
|
$
|
5,309
|
|
|
$
|
11,981
|
|
Net unrealized gain
|
|
|
76
|
|
|
|
2,847
|
|
Sales
|
|
|
|
|
|
|
(662
|
)
|
Payoff at par
|
|
|
|
|
|
|
(8,748
|
)
|
|
|
|
|
|
|
|
|
|
Fair value, June 30
|
|
$
|
5,385
|
|
|
$
|
5,418
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30, 2012 and 2011 there were no transfers between Level 1 and Level 2 fair value assets and
liabilities.
Quantitative Information about Level 3 Fair Value Measurements
The following table provides quantitative information about the significant unobservable inputs used for recurring fair value measurements categorized within Level 3. Refer to Assets measured at
fair value on a recurring basis for a complete valuation hierarchy summary.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
Measured at
Fair Value
(in thousands)
|
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Input Range
|
|
Weighted
Average
|
Loan
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
$
|
5,385
|
|
|
Discounted cash flow
|
|
Constant prepayment rate
|
|
0%
|
|
0%
|
|
|
|
|
|
|
|
|
Probability of default
|
|
0%
|
|
0%
|
|
|
|
|
|
|
|
|
Loss severity
|
|
0%
|
|
0%
|
|
|
|
|
|
|
|
|
Yield to maturity
|
|
6.30% -11.56%
|
|
9.01%
|
Prepayment rates, probability of default, loss severity and yield to maturity percentage are used to determine the fair value of the
loan securities. Increases or decreases in these inputs could cause the fair value of the assets to significantly decrease or increase respectively.
11
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Non-Recurring Measurements
The Trust did not have any non-recurring measurements of fair value of assets or liabilities during the three and six months ended June 30, 2012. These items would typically include investments in
real estate and equity investments.
Financial Instruments Not Reported at Fair Value
The carrying value and estimated fair value of financial instruments not recorded at
fair value on a recurring basis but required to be disclosed at fair value were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2012
|
|
|
|
|
|
|
|
|
|
Fair value hierarchy level
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets (liabilities)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable
|
|
$
|
123,872
|
|
|
$
|
128,936
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
128,936
|
|
Mortgage loans payable
|
|
|
(229,891
|
)
|
|
|
(219,036
|
)
|
|
|
|
|
|
|
|
|
|
|
(219,036
|
)
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
Assets (liabilities)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivable
|
|
$
|
114,333
|
|
|
$
|
123,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans payable
|
|
|
(230,940
|
)
|
|
|
(218,336
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Receivable and Mortgage Loans Payable
Fair values of loans receivable and mortgage loans payable are primarily determined by discounting the expected cash flows at current interest rates plus an applicable risk spread, which reflects credit
quality and maturity of the loans. The risk spread is based on loans with comparable credit quality, maturities and risk profile. Loans receivable may also be based on the fair value of the underlying real estate collateral less cost to sell, which
is estimated using appraised values. These are classified as Level 3.
Fair Value Option
The current accounting guidance for fair value measurement provides a fair value option election that allows companies to irrevocably elect fair value as
the measurement attribute for certain financial assets and liabilities. Changes in fair value for assets and liabilities for which the election is made are recognized in earnings on a quarterly basis based on the then market price regardless of
whether such assets or liabilities have been disposed of at such time. The fair value option guidance permits the fair value option election to be made on an instrument by instrument basis when it is initially recorded or upon an event that gives
rise to a new basis of accounting for that asset or liability. The Trust elected the fair value option for all loan securities and REIT securities acquired.
For the three months ended June 30, 2012 and 2011, the Trust recognized net unrealized losses of $879,000 and $689,000, respectively. For the six months ended June 30, 2012 and 2011, the Trust
recognized net unrealized gains of $4,217,000 and $3,010,000, respectively. The change in fair value of the REIT securities and loan securities for which the fair value option was elected is recorded as an unrealized gain or loss in the Trusts
Statement of Operations. Income related to securities carried at fair value is recorded as interest and dividend income.
12
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The following table presents as of June 30, 2012 and December 31, 2011 the
Trust's financial assets for which the fair value option was elected (in thousands):
|
|
|
|
|
|
|
|
|
Financial Instruments at Fair Value
|
|
June 30, 2012
|
|
|
December 31, 2011
|
|
Assets
|
|
|
|
|
|
|
|
|
Securities carried at fair value:
|
|
|
|
|
|
|
|
|
REIT preferred shares
|
|
$
|
|
|
|
$
|
4,277
|
|
REIT common shares
|
|
|
34,079
|
|
|
|
24,579
|
|
Loan securities carried at fair value
|
|
|
5,385
|
|
|
|
5,309
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,464
|
|
|
$
|
34,165
|
|
|
|
|
|
|
|
|
|
|
The table below presents as of June 30, 2012 the difference
between fair values and the aggregate contractual amounts due for which the fair value option has been elected (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
June 30, 2012
|
|
|
Amount Due
Upon Maturity
|
|
|
Difference
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan securities carried at fair value
|
|
$
|
5,385
|
|
|
$
|
7,494
|
|
|
$
|
2,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,385
|
|
|
$
|
7,494
|
|
|
$
|
2,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Acquisition, Disposition, Leasing and Financing Activities
|
Acquisition & Loan Origination Activity:
Fenway SheaLoan Asset
On April 5, 2012, the Trust originated a $2,250,000 first mortgage loan which bears interest at 12% per annum and matures on April 5, 2014, with one,
one-year extension right. Payments are interest only payable monthly with a balloon payment due at maturity. The loan is collateralized by a 45,655 square foot, two-story multi-tenant office building located at 4545 East Shea Boulevard, Phoenix,
Arizona.
Waterford Place ApartmentsOperating Property
On April 17, 2012, the Trust acquired a 320 unit class A
multi-family property situated on 27.9 acres in the Germantown/Collierville submarket of Memphis, Tennessee commonly referred to as Waterford Place for a purchase price of approximately $21,473,000. The property which had been foreclosed on by the
mortgage lender in May 2011 was constructed in 2001 and was 87% occupied at acquisition. Costs incurred to complete the acquisition have been expensed in the current period.
127 West
25
th
StreetLoan Asset
On May 14, 2012, the Trust originated a $9,000,000 mezzanine loan collateralized by 100% of the member interests in the entity that holds title to the 104,000 square foot, 12-story building
located at 127 West 25th Street, Manhattan, New York. The loan bears interest at a rate equal to the greater of 14% per annum or LIBOR plus 10%, requires payment of principal and interest and matures on April 30, 2015. In connection with
the entering into of the loan agreement, the Trust received a 1% origination fee of $90,000 and commitment fees totaling $591,500, which have been deferred and will be amortized as a yield adjustment over the life of the loan. The loan is
subordinate to a mortgage loan of $35,180,000 which bears interest at a rate of 4.5% per annum and requires payments of interest only.
Broward Financial CenterLoan Asset
On May 23, 2012, the Trust acquired for approximately $42,800,000 a matured first mortgage loan with a face value of $42,098,000 collateralized by
a 326,000 square-foot commercial building located at 500 East Broward Boulevard, Ft. Lauderdale, Florida, containing approximately 47,000 square feet of retail space and 279,000 square feet of office space that is currently 74% leased. Following the
acquisition of this loan, the Trust entered into a modification with the borrower, pursuant to which the maturity date was extended until October 15, 2012, the interest rate was increased to 9.836% per annum and the borrower made a payment
of approximately $12,800,000, which reduced the outstanding principal balance of the loan to $30,000,000.
Mentor BuildingLoan Asset
and Equity Investment
On March 6, 2012, the Trust purchased a first mortgage loan at par for $2,521,000 with a fixed interest rate of 7.5% per annum, requiring payments of principal and interest, and a maturity date of
September 10, 2012. The loan is secured by a 6,571 square foot retail condominium building known as the Mentor Building
13
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
located in Chicago, Illinois which is adjacent to the Sullivan Center property held by the Trusts WRT-Elad joint venture. On May 10, 2012, the Trust agreed to modify the terms of the
loan increasing the interest rate to 10% per annum, requiring payments of interest only and extending the maturity date to September 10, 2017. Concurrent with the loan modification, on May 10, 2012 the Trust also acquired for $300,000
a 20% interest in the borrower from a third party member and simultaneously made a $200,000 capital contribution to the borrower, which combined, resulted in a 49.9% aggregate equity investment for $500,000.
One East Erie / Ontario Operating Property Non-Controlling Interest
On June 1, 2012, the Trust purchased from Marc Realty its 20%
non-controlling interest in FT-Ontario Holdings LLC (Ontario) for $5,850,000. The property contains 126,000 square feet of retail and office space consisting of the first six floors in a mixed use building together with 208 parking
spaces located at One East Erie, Chicago, Illinois. The Trust now owns 100% of Ontario. The Trust accounted for the purchase as an equity transaction recording the difference in the $363,000 carrying value of the acquired non-controlling interest
and the purchase price as a $5,487,000 reduction in paid-in-capital.
Investments in Joint Ventures:
Southern California Office Portfolio (SoCal) Investment in Loan Asset
On April 6, 2012, WRT-SoCal Lender LLC
(Lender) a consolidated joint venture which holds an investment in a loan collateralized by the SoCal officer portfolio amended and restated its operating agreement to allow for the admission of IX SoCal Holdings LP
(Starwood) as a member. Starwood contributed $3,500,000 for a 10.2178% interest in the joint venture. The Trust received a special distribution from Lender equal to Starwoods contribution which was recorded as a contribution from
non-controlling interests. The admission of Starwood did not result in a change in control with respect to Lender, which the trust continues to consolidate. As a result, the Trust now owns a 50.2% effective interest in the SoCal loan investment on a
fully-diluted basis.
10 Metrotech Equity Investment Loan Asset
On April 18, 2012, the Trust funded $75,000 for a
33.33% interest in a joint venture (10 Metrotech JV). These funds were used to acquire from Sorin Real Estate CDO IV LTD, a $21,000,000, B Participation in the whole loan secured by a 364,968 square foot, seven story, class B/C office
building on a 0.58 acre land parcel in Brooklyn, New York referred to as 10 Metrotech. The B Participation is subordinate to a $39,400,000 senior participation. The senior participation and the B Participation collectively are referred to as the
Metrotech Loan. See Note 16 Subsequent Events for recent developments on this investment.
Concord
Additional Equity
Investment
On May 1, 2012, the Trust acquired from Lexington Realty Trust its 33.33% interest in both Concord Debt Holdings LLC (Concord) and CDH CDO LLC (CDH CDO) and its 50% interest in the collateral manager
of Concord Real Estate CDO 2006-1, Ltd. for an aggregate purchase price of $7,000,000. As a result, the Trust now holds a 66.67% interest in both Concord and CDH CDO and 100% of the economics of the collateral manager. This transaction did not
result in a change in control. In the event of a sale of the Trusts interest in CDH CDO or its interest in the collateral manager, additional proceeds may be payable to Lexington Realty Trust if the sales price exceeds the purchase price paid
by the Trust.
Vintage Housing Holdings LLC Equity Investment and Preferred Equity Investment
On June 1, 2012, the
Trust contributed an additional $5,500,000 to its Vintage Housing Holdings LLC (VHH) equity investment platform consisting of $1,500,000 in common equity and $4,000,000 in preferred equity with a 12% return. In connection with the
transaction, VHH acquired a general partner interest and development fees relating to a residential development project referred to as Vintage at Urban Center, a tax credit apartment community in Lynwood, Washington with a proposed village
development of 395 multi-family rental units and 4,000 square feet of retail space.
Disposition & Loan Repayments Activity:
Broadway / FII Co-Invest LLC Private Equity Securities
On April 10, 2012, the Trusts interest in FII
Co-Invest LLC was redeemed for $2,032,000, net of costs. The Trust recognized a $232,000 gain on the sale of this private equity investment for which it had a cost basis of $1,800,000.
160 Spear Street Loan Asset
On May 9, 2012, the Trusts 160 Spear loans receivable with a par value of $19,645,000 were paid off at par by the borrower. The Trusts
outstanding investment in these loans prior to payoff was $8,054,000.
MagazineLoan Asset
On May 9, 2012, the
Trusts Magazine loan receivable with a par value of $20,000,000 was paid off at par by the borrower. The Trusts outstanding investment in this loan prior to payoff was $17,525,000.
14
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
ChurchillOperating Property
On May 14, 2012, the Trust sold the portion of the
Churchill, Pennsylvania property that was not leased to Westinghouse for $914,000. No gain on loss was recognized as a result of this transaction, and it resulted in a $632,000 reduction of the basis in the Churchill property by the net proceeds
received. The Trust agreed to provide financing to the buyer in the aggregate amount of $675,000 to cover property operating expenses. At closing, the Trust provided $324,000 of financing to cover buyers expenses and taxes due. An additional
$175,000 will be advanced on each of August 20, 2012 and November 20, 2012 directly to the taxing authority to cover taxes due on the sold parcel. The loan is interest only and bears interest at LIBOR + 3.75%, matures on June 1, 2015
and is collateralized by the property.
Marc Realty 30 North MichiganEquity Investment
On May 31, 2012, the Trust sold
to its joint venture partner, Marc Realty, for $10,300,000 its equity interest in Michigan 30 LLC. The purchase price was financed with a $6,550,000 secured promissory note which bears interest at 10% per annum, requires payments of interest
only and matures on May 31, 2015. This note was fully satisfied on August 3, 2012. The Trust recognized a loss of approximately $95,000 on the transaction which is reflected in equity earnings.
Marc RealtyEquity Investments
On May 31, 2012, the Trust sold to its joint venture partner, Marc Realty for $2,100,000 all of its
equity interests in River Road LLC, Salt Creek LLC, and 900 Ridgebrook LLC equity investments for $1,000,000, $0 and $1,100,000, respectively. The Trust recognized an aggregate $16,000 gain on the transactions which is reflected in equity earnings.
The following table summarizes the Trusts loans receivable
at June 30, 2012 and December 31, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount
|
|
|
Contractual
|
|
|
|
|
|
Stated
|
|
June 30,
|
|
|
December 31,
|
|
|
Maturity
|
|
Description
|
|
Location Position
|
|
Interest Rate
|
|
2012
|
|
|
2011
|
|
|
Date
|
|
160 Spear (6)
|
|
B-Note
|
|
9.75%
|
|
$
|
|
|
|
$
|
11,555
|
|
|
|
|
|
160 Spear (6)
|
|
Mezzanine
|
|
15.00%
|
|
|
|
|
|
|
4,846
|
|
|
|
|
|
Magazine (6)
|
|
Mezzanine
|
|
LIBOR + 1.23%
|
|
|
|
|
|
|
18,805
|
|
|
|
|
|
Broward Financial Center
|
|
Whole Loan
|
|
9.84%
|
|
|
30,139
|
|
|
|
|
|
|
|
10/15/12
|
|
Hotel Wales
|
|
Whole Loan
|
|
LIBOR + 4.0% (2)
|
|
|
20,097
|
|
|
|
20,101
|
|
|
|
10/05/13
|
|
Renaissance Walk
|
|
Mezzanine
|
|
LIBOR + 12.0%(3)
|
|
|
3,000
|
|
|
|
3,000
|
|
|
|
01/01/14
|
|
Fenway Shea (1)
|
|
Whole Loan
|
|
12.00%
|
|
|
2,250
|
|
|
|
|
|
|
|
04/05/14
|
|
Legacy Orchard (1)
|
|
Corporate Loan
|
|
15.00%
|
|
|
9,750
|
|
|
|
9,750
|
|
|
|
10/31/14
|
|
San Marbeya
|
|
Whole Loan
|
|
5.88%
|
|
|
26,816
|
|
|
|
26,501
|
|
|
|
01/01/15
|
|
127 West 25th Street
|
|
Mezzanine
|
|
14.00% (5)
|
|
|
9,105
|
|
|
|
|
|
|
|
04/30/15
|
|
Marc Realty30 N Michigan (1)
|
|
Mezzanine
|
|
10.00%
|
|
|
6,607
|
|
|
|
|
|
|
|
05/31/15
|
|
Churchill (1)
|
|
Whole Loan
|
|
LIBOR + 3.75%
|
|
|
326
|
|
|
|
|
|
|
|
06/01/15
|
|
Rockwell
|
|
Mezzanine
|
|
12.00%
|
|
|
294
|
|
|
|
275
|
|
|
|
05/01/16
|
|
29 East Madison (1)
|
|
Mezzanine
|
|
8.00%
|
|
|
365
|
|
|
|
4,028
|
|
|
|
05/31/16
|
|
500-512 7th Ave
|
|
B-Note
|
|
7.19%
|
|
|
9,990
|
|
|
|
9,979
|
|
|
|
07/11/16
|
|
180 N. Michigan
|
|
Mezzanine
|
|
(4)
|
|
|
|
|
|
|
2,930
|
|
|
|
(4
|
)
|
Wellington Tower
|
|
Mezzanine
|
|
6.79%
|
|
|
2,622
|
|
|
|
2,563
|
|
|
|
07/11/17
|
|
Mentor Building
|
|
Whole Loan
|
|
10.00%
|
|
|
2,511
|
|
|
|
|
|
|
|
09/10/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
123,872
|
|
|
$
|
114,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Trust determined that certain loans receivable are variable interests in VIEs primarily based on the fact that the underlying entities do not have sufficient equity
at risk to permit the entity to finance its activities without additional subordinated financial support. The Trust does not have the power to direct the activities of the entity that most significantly impact the entitys economic performance
and is not required to consolidate the underlying entity.
|
(4)
|
Converted to equity investment during the three months ended March 31, 2012.
|
(5)
|
Interest rate is equal to the greater of 14.0% or LIBOR + 10%.
|
(6)
|
The loans were satisfied during the second quarter.
|
15
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The carrying amount of loans receivable includes accrued interest of $635,000 and $500,000 at
June 30, 2012 and December 31, 2011, respectively, and cumulative accretion of $1,408,000 and $9,914,000 at June 30, 2012 and December 31, 2011, respectively.
At June 30, 2012 and December 31, 2011, the Trusts loans receivable have unamortized discount yet to be recognized as income totaling $6,955,000 and $8,399,000.
The weighted average coupon on the Trusts loans receivable was 7.35% and 5.99% and the weighted average yield to maturity was 10.43% and 12.64% at
June 30, 2012 and December 31, 2011 respectively.
With the exception of the San Marbeya and Hotel Wales loans receivable, none of
the loans receivable are directly financed. Non-recourse secured financings in the amount of $29,150,000 related to these loans receivable were outstanding at June 30, 2012 and December 31, 2011.
Loan Receivable Activity
Activity related to loans receivable is as follows (in thousands):
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30, 2012
|
|
Balance at beginning of period
|
|
$
|
114,333
|
|
Purchase and advances
|
|
|
50,646
|
|
Interest (received) accrued, net
|
|
|
135
|
|
Repayments
|
|
|
(29,798
|
)
|
Loan discount accretion
|
|
|
5,559
|
|
Discount accretion received in cash
|
|
|
(14,065
|
)
|
Transfer 180 North Michigan loan to equity investments
|
|
|
(2,938
|
)
|
|
|
|
|
|
Balance at end of period
|
|
$
|
123,872
|
|
|
|
|
|
|
The following table summarizes the Trusts interest, dividend
and discount accretion income for the three and six months ended June 30, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Interest, dividends and discount accretion detail:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on loan assets
|
|
$
|
2,746
|
|
|
$
|
2,687
|
|
|
$
|
5,145
|
|
|
$
|
5,397
|
|
Accretion of loan discount
|
|
|
2,726
|
|
|
|
2,289
|
|
|
|
5,559
|
|
|
|
8,793
|
|
Interest and dividends on REIT securities
|
|
|
306
|
|
|
|
118
|
|
|
|
592
|
|
|
|
576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest, dividends, and discount accretion
|
|
$
|
5,778
|
|
|
$
|
5,094
|
|
|
$
|
11,296
|
|
|
$
|
14,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality of Loans Receivable and Loan Losses
The Trust evaluates impairment on its loan portfolio on an individual basis and has developed a loan grading system for all of its outstanding loans that are collateralized directly or indirectly by real
estate. Grading categories include debt yield, debt service coverage ratio, length of loan, property type, loan type, and other more subjective variables that include property or collateral location, market conditions, industry conditions, and
sponsors financial stability. Management reviews each category and assigns an overall numeric grade for each loan to determine the loans risk of loss and to provide a determination as to whether an individual loan is impaired and whether
a specific loan loss allowance is necessary. A loans grade of credit quality is determined quarterly.
All loans with a positive score
do not require a loan loss allowance. Any loan graded with a neutral score or zero is subject to further review of the collectability of the interest and principal based on current conditions and qualitative factors to determine if
impairment is warranted. Any loan with a negative score is deemed impaired and management then would measure the specific impairment of each loan separately using the fair value of the collateral less costs to sell.
16
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Management estimates the loan loss allowance by calculating the estimated fair value less costs to sell
of the underlying collateral securing the loan based on the fair value of underlying collateral and comparing the fair value to the loans net carrying value. If the fair value is less than the net carrying value of the loan, an allowance is
created with a corresponding charge to the provision for loan losses. The allowance for each loan will be maintained at a level the Trust believes will be adequate to absorb losses.
The table below summarizes the Trusts loans receivable by internal credit
rating at June 30, 2012 (in thousands, except for number of loans).
|
|
|
|
|
|
|
|
|
Internal Credit Quality
|
|
Number of
Loans
|
|
|
Carrying Value
of Loans
Receivable
|
|
Greater than zero
|
|
|
14
|
|
|
$
|
123,872
|
|
Equal to zero
|
|
|
|
|
|
|
|
|
Less than zero
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
$
|
123,872
|
|
|
|
|
|
|
|
|
|
|
Non-Performing Loans
The Trust considers a loan to be non-performing and places loans on non-accrual status at such time as management determines it is probable that it will
be unable to collect all amounts due according to the contractual terms of the loan. While on non-accrual status, based on the Trust's judgment as to collectability of principal, loans are either accounted for on a cash basis, where interest income
is recognized only upon actual receipt of cash, or on a cost-recovery basis, where all cash receipts reduce a loan's carrying value. If and when a loan is brought back into compliance with its contractual terms, the Trust will resume accrual of
interest. As of June 30, 2012 and December 31, 2011, there were no non-performing loans and no past due payments. The Trust recorded no provision for loan loss for the three and six months ended June 30, 2012 and 2011.
6.
|
Securities Carried at Fair Value
|
Securities carried at fair value are summarized in the table below
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2012
|
|
|
December 31, 2011
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
REIT Preferred shares
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,067
|
|
|
$
|
4,277
|
|
REIT Common shares
|
|
|
26,775
|
|
|
|
34,079
|
|
|
|
21,492
|
|
|
|
24,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,775
|
|
|
|
34,079
|
|
|
|
23,559
|
|
|
|
28,856
|
|
Loan securities
|
|
|
1,661
|
|
|
|
5,385
|
|
|
|
1,661
|
|
|
|
5,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,436
|
|
|
$
|
39,464
|
|
|
$
|
25,220
|
|
|
$
|
34,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three and six months ended June 30, 2012, securities carried at fair value and loan securities carried at fair value
were sold or paid off for total proceeds of approximately $312,000 and $4,614,000, respectively. The gross realized gains on these sales and payoffs totaled approximately $15,000 and $41,000, in the three and six months ended June 30, 2012,
respectively.
During the three and six months ended June 30, 2011, securities carried at fair value and loan securities carried at fair
value were sold or paid off for total proceeds of approximately $15,144,000 and $35,029,000, respectively. The gross realized gains on these sales and payoffs totaled approximately $7,000 and $131,000 in the three and six months ended June 30,
2011, respectively.
17
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
For purpose of determining gross realized gains, the cost of securities is based on specific
identification. For the six months ended June 30, 2012 and 2011, the Trust recognized net unrealized gains on securities carried at fair value and loan securities carried at fair value of $4,217,000, and $3,010,000 respectively, as the result
of the change in fair value of the financial assets for which the fair value option was elected.
For the three months ended June 30,
2012 and 2011, the Trust recognized net unrealized losses of securities carried at fair value and loan securities carried at fair value of $879,000 and $689,000, respectively.
The Trusts carrying amounts in its equity investments
consist of the following at June 30, 2012 and December 31, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Venture Partner
|
|
Equity Investment
|
|
Nominal % Ownership at
June 30, 2012
|
|
June 30,
2012
|
|
|
December 31,
2011
|
|
Marc Realty (2)
|
|
Michigan 30 LLC
|
|
|
|
|
|
|
|
|
10,049
|
|
Marc Realty (1)
|
|
Brooks Building LLC
|
|
50.0%
|
|
|
7,930
|
|
|
|
7,679
|
|
Marc Realty (1)
|
|
High Point Plaza LLC
|
|
50.0%
|
|
|
2,330
|
|
|
|
2,441
|
|
Marc Realty (2)
|
|
Salt Creek LLC
|
|
|
|
|
|
|
|
|
|
|
Marc Realty (1)
|
|
1701 Woodfield LLC
|
|
50.0%
|
|
|
1,979
|
|
|
|
2,047
|
|
Marc Realty (2)
|
|
River Road LLC
|
|
|
|
|
|
|
|
|
1,000
|
|
Marc Realty (3)
|
|
3701 Algonquin Road LLC
|
|
|
|
|
|
|
|
|
250
|
|
Marc Realty (1)
|
|
Enterprise Center LLC
|
|
50.0%
|
|
|
2,579
|
|
|
|
2,679
|
|
Marc Realty (2)
|
|
900 Ridgebrook LLC
|
|
|
|
|
|
|
|
|
1,000
|
|
Marc Realty (1)
|
|
Michigan 180 Property LLC
|
|
70.0%
|
|
|
6,950
|
|
|
|
|
|
Sealy (1)
|
|
Northwest Atlanta Partners LP
|
|
60.0%
|
|
|
8,373
|
|
|
|
8,537
|
|
Sealy (1)
|
|
Newmarket GP LLC
|
|
68.0%
|
|
|
1,344
|
|
|
|
2,811
|
|
Sealy (1)
|
|
Airpark Nashville GP
|
|
50.0%
|
|
|
|
|
|
|
|
|
Inland
|
|
Concord Debt Holdings LLC
|
|
33.33%
|
|
|
|
|
|
|
|
|
Inland
|
|
CDH CDO LLC
|
|
33.33%
|
|
|
|
|
|
|
|
|
Inland
|
|
Concord Hebt Holdings LLC (5)
|
|
33.33%
|
|
|
4,529
|
|
|
|
|
|
Inland
|
|
CDH CDO LLC (5)
|
|
33.33%
|
|
|
2,978
|
|
|
|
|
|
ROIC
|
|
WRT-ROIC Riverside LLC
|
|
50.0%
|
|
|
7,883
|
|
|
|
7,883
|
|
ROIC
|
|
WRT-ROIC Lakeside Eagle LLC
|
|
50.0%
|
|
|
1
|
|
|
|
7
|
|
Atrium Holding
|
|
RE CDO Management LLC
|
|
50.0%
|
|
|
1,794
|
|
|
|
1,296
|
|
VHH LLC (1)
|
|
Vintage Housing LLC
|
|
75.0%
|
|
|
30,144
|
|
|
|
29,887
|
|
Broadway Partners (4)
|
|
FII Co-Invest LLC
|
|
|
|
|
|
|
|
|
1,800
|
|
New Valley/Starwood (1)
|
|
Socal Office Portfolio Loan LLC
|
|
50.2%(6)
|
|
|
33,888
|
|
|
|
72,626
|
|
Elad Canada Ltd (1)
|
|
WRT-Elad One South State Equity LP
|
|
50.0%
|
|
|
2,087
|
|
|
|
|
|
Elad Canada Ltd
|
|
WRT-Elad One South State Lender LP
|
|
50.0%
|
|
|
22,629
|
|
|
|
10,150
|
|
Mack-Cali
|
|
WRT-Stamford LLC
|
|
20.0%
|
|
|
8,236
|
|
|
|
|
|
Atrium/Northstar (1)
|
|
10 Metrotech Loan LLC
|
|
33.3%
|
|
|
56
|
|
|
|
|
|
Freed
|
|
Mentor Retail LLC
|
|
49.9%
|
|
|
511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
146,221
|
|
|
$
|
162,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Trust has determined that these equity investments are investments in VIEs. The Trust has determined that it is not the primary beneficiary of these VIEs since the
Trust does not have the power to direct the activities that most significantly impact the VIEs economic performance.
|
(2)
|
Interest sold to Marc Realty on May 31, 2012.
|
(3)
|
Interest sold to Marc Realty on March 1, 2012.
|
(4)
|
Interest was redeemed on April 10, 2012.
|
(5)
|
Represents the interest acquired from Lexington Realty Trust on May 1, 2012.
|
(6)
|
Represents the Trusts ownership in the underlying entity.
|
18
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The following table reflects the activity of the Trusts equity investments for the
period ended June 30, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
Balance at
December 31,
2011
|
|
|
Contributions
|
|
|
Equity
Income
(loss)
|
|
|
Distributions
|
|
|
Sales
|
|
|
Balance at
June 30,
2012
|
|
Marc Realty
|
|
$
|
27,145
|
|
|
$
|
8,150
|
|
|
$
|
(344
|
)
|
|
$
|
(533
|
)
|
|
$
|
(12,650
|
)
|
|
$
|
21,768
|
|
Sealy
|
|
|
11,348
|
|
|
|
|
|
|
|
(1,631
|
)
|
|
|
|
|
|
|
|
|
|
|
9,717
|
|
Concord Debt Holdings LLC
|
|
|
|
|
|
|
|
|
|
|
351
|
|
|
|
(351
|
)
|
|
|
|
|
|
|
|
|
CDH CDO LLC
|
|
|
|
|
|
|
|
|
|
|
534
|
|
|
|
(534
|
)
|
|
|
|
|
|
|
|
|
Concord Debt Holdings LLC (1)
|
|
|
|
|
|
|
4,501
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
4,529
|
|
CDH CDO LLC (1)
|
|
|
|
|
|
|
2,500
|
|
|
|
478
|
|
|
|
|
|
|
|
|
|
|
|
2,978
|
|
WRT-ROIC Riverside LLC
|
|
|
7,883
|
|
|
|
|
|
|
|
468
|
|
|
|
(468
|
)
|
|
|
|
|
|
|
7,883
|
|
WRT-ROIC Lakeside Eagle LLC
|
|
|
7
|
|
|
|
10
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
1
|
|
SoCal Office Portfolio Loan LLC
|
|
|
72,626
|
|
|
|
|
|
|
|
(638
|
)
|
|
|
(38,100
|
)
|
|
|
|
|
|
|
33,888
|
|
RE CDO Management LLC
|
|
|
1,296
|
|
|
|
550
|
|
|
|
28
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
1,794
|
|
Vintage Housing LLC
|
|
|
29,887
|
|
|
|
2,029
|
|
|
|
934
|
|
|
|
(2,706
|
)
|
|
|
|
|
|
|
30,144
|
|
FII Co-invest LLC
|
|
|
1,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,800
|
)
|
|
|
|
|
WRT-Elad One South Street Equity LP
|
|
|
|
|
|
|
2,837
|
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
|
|
|
2,087
|
|
WRT-Elad One South Street Lender LP
|
|
|
10,150
|
|
|
|
11,214
|
|
|
|
1,265
|
|
|
|
|
|
|
|
|
|
|
|
22,629
|
|
WRT-Stamford LLC
|
|
|
|
|
|
|
8,036
|
|
|
|
316
|
|
|
|
(116
|
)
|
|
|
|
|
|
|
8,236
|
|
10 Metrotech Loan LLC
|
|
|
|
|
|
|
75
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
56
|
|
Mentor Retail LLC
|
|
|
|
|
|
|
505
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
162,142
|
|
|
$
|
40,407
|
|
|
$
|
1,010
|
|
|
$
|
(42,888
|
)
|
|
$
|
(14,450
|
)
|
|
$
|
146,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the interest acquired from Lexington Realty Trust on May 1, 2012.
|
WRT-Elad
The Trust
holds its mezzanine loan interest in Sullivan Center through WRT-Elad Lender LP and its profits participation interest through WRT-Elad Equity LP (Equity LP). The Trust has determined that One South State Street LLC is a variable
interest entity for which Equity LP is the primary beneficiary. Equity LP has consolidated Sullivan Center as of February 3, 2012, the date it acquired the profits participation interest, and has completed provisional purchase accounting
pursuant to the guidance for business combinations based on available information obtained from the managing member of Sullivan Center.
In
relation to its investment in Sullivan Center, the Trust has elected a one-month lag period in which it recognizes its share of the equity earnings of One South State Street LLC in arrears. The lag period is allowed under the provisions of ASC
810-10 and is necessary in order for the Trust to consistently meet its regulatory filing deadlines.
Marc Realty
On January 1, 2012, the Trust restructured one of its investments (180 North Michigan) and reclassified its investment from loans receivable
($2,938,000) and preferred equity ($3,923,000) to equity investments ($6,861,000) which is included in contributions in the above table.
Impairments
The Trust has determined
that the fair value of certain of its investments in the Marc Realty and Sealy ventures each marginally exceed their carrying values. While these ventures continue to aggressively market available space for lease and work with existing tenants for
lease renewal, declines in occupancy could cause impairment of certain of these ventures that could be material.
19
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Concord
On May 1, 2012, the Trust acquired from Lexington Realty Trust its 33.33% interest in Concord Debt Holdings LLC and CDH CDO LLC for an aggregate price of $7,000,000. This acquisition will be
accounted for using the equity method of accounting and will be separate from the on-going investment in Concord. This acquisition does not represent a funding of prior losses. The Trust will recognize its pro-rata share of income or loss in the new
investment.
Mortgage Loans Payable
The Trust had outstanding mortgage loans payable of $229,891,000 and $230,940,000 at June 30, 2012 and December 31, 2011, respectively. The
mortgage loan payments of principal and interest are generally due monthly, quarterly or semi-annually and are collateralized by applicable real estate of the Trust.
The Trusts mortgage loans payable at June 30, 2012 and December 31, 2011 are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Collateral
|
|
Maturity
|
|
Spread Over LIBOR/Prime
|
|
Interest Rate
at
June 30, 2012
|
|
June 30,
2012
|
|
|
December 31,
2011
|
|
Amherst, NY
|
|
Oct 2013
|
|
|
|
5.65%
|
|
$
|
15,457
|
|
|
$
|
15,682
|
|
Meriden, CT & Lisle, IL
|
|
Oct 2014
|
|
Libor + 2.5%(1)
|
|
2.77%
|
|
|
21,000
|
|
|
|
21,000
|
|
Chicago, IL
|
|
Apr 2015
|
|
|
|
5.50%
|
|
|
8,700
|
|
|
|
8,900
|
|
Indianapolis, IN
|
|
Apr 2015
|
|
|
|
5.82%
|
|
|
4,129
|
|
|
|
4,169
|
|
Chicago, IL
|
|
Mar 2016
|
|
|
|
5.75%
|
|
|
20,360
|
|
|
|
20,522
|
|
Houston, TX
|
|
Apr 2016
|
|
|
|
6.21%
|
|
|
54,301
|
|
|
|
56,423
|
|
New York, NY
|
|
May 2016
|
|
Libor + 2.5% (2)
|
|
3.50%
|
|
|
51,636
|
|
|
|
49,585
|
|
Lisle, IL
|
|
Mar 2017
|
|
|
|
5.55%
|
|
|
5,577
|
|
|
|
5,600
|
|
Orlando, FL
|
|
Jul 2017
|
|
|
|
6.40%
|
|
|
37,861
|
|
|
|
38,132
|
|
Plantation, FL
|
|
Apr 2018
|
|
|
|
6.48%
|
|
|
10,870
|
|
|
|
10,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
229,891
|
|
|
$
|
230,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The loan has an interest rate cap which caps at LIBOR at 1%.
|
(2)
|
The loan has a LIBOR floor of 1%.
|
Non-Recourse Secured Financing
The Trusts non-recourse secured financings at June 30, 2012 and December 31, 2011 are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral
|
|
Maturity
|
|
Spread Over
LIBOR/Prime
|
|
|
Interest Rate at
June
30, 2012
|
|
|
June 30,
2012
|
|
|
December
31, 2011
|
|
Hotel Wales Loan
|
|
Oct. 2013
|
|
|
Libor plus 1.25
|
%(1)
|
|
|
4.25
|
%
|
|
$
|
14,000
|
|
|
$
|
14,000
|
|
San Marbeya Loan
|
|
Jan. 2015
|
|
|
|
|
|
|
4.85
|
%
|
|
|
15,150
|
|
|
|
15,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,150
|
|
|
$
|
29,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The loan has a Libor floor of 3%.
|
9.
|
Revolving Line of Credit
|
The Trust has a revolving line of credit in the principal amount of $50,000,000 which bears interest at Libor plus 3% and has a
maturity date of March 3, 2014 with a one year option to extend the maturity date to March 3, 2015. The Trust must comply with financial covenants on an ongoing basis. The covenants are tested as of the end of each quarter based upon
results for the most recently ended quarter. The Trust was in compliance of its financial covenants under its revolving line of credit as of June 30, 2012.
20
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The revolving credit line is recourse and as such is effectively collateralized by all of the
Trusts assets. The revolving credit line requires monthly payments of interest only. To the extent that the amounts outstanding under the facility are in excess of the borrowing base (as calculated), the Trust is required to make a principal
payment to reduce such excess. The Trust may prepay from time to time without premium or penalty and re-borrow amounts prepaid.
The
outstanding balance under the facility was $0 and $40,000,000 at June 30, 2012 and December 31, 2011, respectively. The Trust is required to pay a commitment fee on the unused portion of the line, which amounted to approximately $43,000
and $62,000 for the three and six months ended June 30, 2012, respectively, and $56,000 and $65,000 for the three and six months ended June 30, 2011, respectively.
10.
|
Derivative Financial Instruments
|
The Trust has exposure to fluctuations in market interest rates. The Trust seeks to limit its risk to interest rate fluctuations
through match financing on its assets as well as through hedging transactions.
The Trusts objective in using interest rate derivatives
is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Trust primarily uses interest rate caps and interest rate swaps as part of its interest rate risk management strategy
relating to certain of its variable rate debt instruments.
The effective portion of changes in fair value of derivatives designated and that
qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change, if any, in
fair value of the derivatives is recognized directly in earnings. During the three and six months ended June 30, 2012, the interest rate cap was used to hedge the variable cash flows associated with existing variable-rate debt. The Trust also
assesses, both at its inception and on an ongoing basis, whether the hedging instrument is highly effective in achieving offsetting changes in the cash flows attributable to the hedged item. The Trust has recorded changes in fair value related to
the effective portion of its interest rate hedge designated and qualifying as a cash flow hedge totaling $25,000 and $57,000 for the three and six months ended June 30, 2012, and $0 and $63,000 for the three and six months ended June 30,
2011, respectively.
The table below presents information about the
Trusts interest rate cap that was designated as a cash flow hedge of interest rate risk at June 30, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
Strike Rate
|
|
|
Notional
Amount
of Hedge
|
|
|
Cost of
Hedge
|
|
|
Estimated Fair
Value of Cap in
Other
Comprehensive
Income
|
|
|
Unrealized Gain
on Settled Cap in
Other
Comprehensive
Income
|
|
|
Change in Cap
Valuations Included
in Other
Comprehensive
Income for the Six
Months
Ended
June 30, 2012
|
|
Oct 2014
|
|
|
1.00
|
%
|
|
$
|
21,000
|
|
|
$
|
174
|
|
|
$
|
(149
|
)
|
|
$
|
|
|
|
$
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below presents information about the Trusts interest rate caps that were not
designated as cash flow hedges (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
Strike Rate
|
|
Notional
Amount of
Hedge
|
|
|
Cost of Hedge
|
|
|
Estimated Fair
Value
|
|
May 2013
|
|
1.25%
|
|
$
|
51,982
|
|
|
$
|
196
|
|
|
$
|
|
|
May 2014
|
|
1.75%
|
|
|
51,982
|
|
|
|
434
|
|
|
|
6
|
|
21
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
11.
|
Discontinued Operations
|
The Trusts properties in Lafayette, Louisiana; St. Louis, Missouri and Knoxville, Tennessee are classified as discontinued
operations. All of these properties were sold in 2011.
Results for
discontinued operations for the three and six months ended June 30, 2012 and 2011 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2012
|
|
|
June 30, 2011
|
|
|
June 30, 2012
|
|
|
June 30, 2011
|
|
Revenues
|
|
$
|
|
|
|
$
|
126
|
|
|
$
|
|
|
|
$
|
265
|
|
Operating expenses
|
|
|
|
|
|
|
(36
|
)
|
|
|
(3
|
)
|
|
|
(126
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations
|
|
$
|
|
|
|
$
|
90
|
|
|
$
|
(3
|
)
|
|
$
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
Commitments and Contingencies
|
In addition to the initial purchase price of certain loans and operating properties, the Trust has future funding
commitments attributable to its 450 W 14
th
Street and
Churchill, Pennsylvania properties which total approximately $1,229,000 at June 30, 2012. The Trust also has ground lease commitments related to its property located at 450 W 14
th
Street, New York, New York which expires on June 1, 2053 of $622,000, $1,282,000, $1,405,000, $1,463,000,
$1,592,000 and $111,075,000 for the years ended December 31, 2012, 2013, 2014, 2015, 2016 and thereafter, respectively.
The Trust is
involved from time to time in litigation on various matters, including disputes with tenants and disputes arising out of agreements to purchase or sell properties. Given the nature of the Trusts business activities, these lawsuits are
considered routine to the conduct of its business. The result of any particular lawsuit cannot be predicted because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. The Trust does not expect
that the liabilities, if any, that may ultimately result from such legal actions will have a material adverse effect on its financial condition or results of operations.
Cypress Pointe Apartments
The Trust entered into a joint venture, HC Cypress Pointe LLC (Cypress Pointe) in April 2011 which holds a non-performing mezzanine loan collateralized
by the equity interest in a 194 unit apartment complex in Orange Park, Florida. Cypress Pointe was involved in a legal dispute with the borrower and other lenders related to certain foreclosure proceedings on the apartment complex. On
February 24, 2012 a settlement was reached by the parties to the lawsuits which required the implementation of a marketing plan to sell the property. The property is currently being marketed for sale. To date, the Trust has not made any
investment in the joint venture. Costs associated with the litigation have been expensed.
Churchill, Pennsylvania
In 2011 the
Trust was conveyed title to the land underlying the Churchill, Pennsylvania property. Prior to the conveyance of the land, a Phase II environmental study was performed. The study found that there were certain contaminants at the property all of
which were within permitted ranges. In addition, given the nature and use of the property currently and in the past, it is possible that additional contamination could occur which could require remediation. The Trust believes that based on
applicable law and existing agreements any such remediation costs would be the responsibility of a prior owner or tenant.
13.
|
Related-Party Transactions
|
FUR Advisors
The
activities of the Trust are administered by FUR Advisors LLC (FUR Advisors) pursuant to the terms of the Advisory Agreement between the Trust and FUR Advisors. FUR Advisors is controlled by and partially owned by the executive officers
of the Trust. Pursuant to the terms of the Advisory Agreement, FUR Advisors is responsible for providing asset management services to the Trust and coordinating with the Trusts shareholder transfer agent and property managers. FUR Advisors is
entitled to receive a base management fee of 1.5% and an incentive fee in accordance with the terms of the Advisory Agreement. In addition, FUR Advisors or its affiliate is also entitled to receive property and construction management fees subject
to the approval of the independent Trustees of the Trust.
22
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The following table sets forth the fees and reimbursements paid by the Trust for the three
and six months ended June 30, 2012 and 2011 to FUR Advisors and Winthrop Management (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2012
|
|
|
June 30, 2011
|
|
|
June 30, 2012
|
|
|
June 30, 2011
|
|
Base Asset Management
|
|
$
|
2,298
|
|
|
$
|
1,965
|
|
|
$
|
4,325
|
|
|
$
|
3,685
|
|
Property Management
|
|
|
133
|
|
|
|
139
|
|
|
|
249
|
|
|
|
271
|
|
Construction Management
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,463
|
|
|
$
|
2,104
|
|
|
$
|
4,606
|
|
|
$
|
3,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Asset Management Fee
Effective January 1, 2012, the Advisory Agreement was amended to reflect the redemption of the Series B-1 Preferred Shares and Series C Preferred Shares and the issuance of the Series D Preferred
Shares. Additionally, FUR Advisors receives a fee equal to 0.25% of any equity contributions by unaffiliated third parties to a venture managed by the Trust.
Winthrop Management
Winthrop Management L.P. (Winthrop Management), an
affiliate of FUR Advisors and the Trusts executive officers, assumed property management responsibilities for various properties owned by the Trust. Winthrop Management receives a property management fee pursuant to the terms of individual
property management agreements.
The Financial Accounting Standards Board (FASB) guidance on segment reporting establishes standards for the way that public
business enterprises report information about operating segments in financial statements and requires that those enterprises report selected financial information about operating segments in interim financial reports issued to shareholders.
Based on the Trusts method of internal reporting, management determined that it has three operating segments: (i) the ownership of
operating properties; (ii) the origination and acquisition of loans and debt securities secured directly or indirectly by commercial and multi-family real property collectively, loan assets; and (iii) the ownership of equity and
debt securities in other REITs REIT securities.
The operating properties segment includes all of the Trusts wholly and partially
owned operating properties. The loan assets segment includes all of the Trusts activities related to real estate loans including loans receivable, loan securities and equity investments in loan related entities. The REIT securities segment
includes all of the Trusts activities related to the ownership of securities in other publicly traded real estate companies. In addition to its three business segments, the Trust reports non-segment specific income and expense under corporate
income (expense).
23
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The following table summarizes the Trusts assets by business segment for the periods
ended June 30, 2012 and December 31, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2012
|
|
|
December 31, 2011
|
|
Assets
|
|
|
|
|
|
|
|
|
Operating properties
|
|
$
|
489,803
|
|
|
$
|
442,209
|
|
Loan assets
|
|
|
191,047
|
|
|
|
217,174
|
|
REIT securities
|
|
|
34,079
|
|
|
|
28,856
|
|
Corporate
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
43,959
|
|
|
|
40,952
|
|
Restricted cash
|
|
|
4,497
|
|
|
|
3,914
|
|
Accounts receivable and prepaids
|
|
|
1,085
|
|
|
|
504
|
|
Deferred financing costs
|
|
|
244
|
|
|
|
318
|
|
Discontinued operations
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
764,720
|
|
|
$
|
733,933
|
|
|
|
|
|
|
|
|
|
|
The Trust defines net operating income for each segment presented as all items of income and expense directly derived from or incurred
by each business segment before depreciation, amortization and interest expense. Interest on cash reserves, general and administrative expenses and other non-segment specific income and expense items are reported under corporate income (expense).
The following table presents a summary of revenues from operating properties, loan assets and REIT securities and expenses incurred by each
segment for the three and six months ended June 30, 2012 and June 30, 2011 (in thousands):
24
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
2012
|
|
|
June 30,
2011
|
|
|
June 30,
2012
|
|
|
June 30,
2011
|
|
Operating Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rents and reimbursements
|
|
$
|
13,257
|
|
|
$
|
11,234
|
|
|
$
|
25,797
|
|
|
$
|
22,220
|
|
Operating expenses
|
|
|
(3,779
|
)
|
|
|
(3,987
|
)
|
|
|
(8,331
|
)
|
|
|
(8,032
|
)
|
Real estate taxes
|
|
|
(1,017
|
)
|
|
|
(1,087
|
)
|
|
|
(2,271
|
)
|
|
|
(2,342
|
)
|
Equity in (loss) income of Sealy Northwest Atlanta
|
|
|
(108
|
)
|
|
|
5,133
|
|
|
|
(164
|
)
|
|
|
4,541
|
|
Equity in loss of Sealy Airpark Nashville
|
|
|
|
|
|
|
(256
|
)
|
|
|
|
|
|
|
(453
|
)
|
Equity in loss of Sealy Newmarket
|
|
|
(745
|
)
|
|
|
(633
|
)
|
|
|
(1,467
|
)
|
|
|
(1,144
|
)
|
Equity in income (loss) of Marc Realty investment
|
|
|
3
|
|
|
|
(175
|
)
|
|
|
(344
|
)
|
|
|
(120
|
)
|
Equity in (loss) income of WRT-Elad
|
|
|
(28
|
)
|
|
|
|
|
|
|
515
|
|
|
|
|
|
Equity income of Vintage
|
|
|
595
|
|
|
|
|
|
|
|
934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
8,178
|
|
|
|
10,229
|
|
|
|
14,669
|
|
|
|
14,670
|
|
Depreciation and amortization expense
|
|
|
(4,479
|
)
|
|
|
(3,312
|
)
|
|
|
(8,198
|
)
|
|
|
(6,793
|
)
|
Interest expense
|
|
|
(3,098
|
)
|
|
|
(3,296
|
)
|
|
|
(6,261
|
)
|
|
|
(7,115
|
)
|
Impairment loss on Sealy equity investment
|
|
|
|
|
|
|
(3,800
|
)
|
|
|
|
|
|
|
(3,800
|
)
|
Gain on sale of equity investment
|
|
|
232
|
|
|
|
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating properties net income (loss)
|
|
|
833
|
|
|
|
(179
|
)
|
|
|
442
|
|
|
|
(3,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
2,746
|
|
|
|
2,687
|
|
|
|
5,145
|
|
|
|
5,397
|
|
Discount accretion
|
|
|
2,726
|
|
|
|
2,289
|
|
|
|
5,559
|
|
|
|
8,793
|
|
Equity in earnings of preferred equity investment of Marc Realty
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
168
|
|
Equity in earnings of preferred equity investment of 450 W 14th Street
|
|
|
|
|
|
|
73
|
|
|
|
|
|
|
|
73
|
|
Unrealized (loss) gain on loan securities carried at fair value
|
|
|
(88
|
)
|
|
|
34
|
|
|
|
76
|
|
|
|
2,847
|
|
Equity in income of LW Sofi
|
|
|
|
|
|
|
262
|
|
|
|
|
|
|
|
262
|
|
Equity in income of ROIC Riverside
|
|
|
234
|
|
|
|
234
|
|
|
|
468
|
|
|
|
468
|
|
Equity in (loss) income of ROIC Lakeside Eagle
|
|
|
(4
|
)
|
|
|
922
|
|
|
|
(16
|
)
|
|
|
666
|
|
Equity in income of 46th Street Gotham
|
|
|
|
|
|
|
709
|
|
|
|
|
|
|
|
621
|
|
Equity in earnings of Lex-Win Concord
|
|
|
|
|
|
|
258
|
|
|
|
|
|
|
|
258
|
|
Equity in income of Concord Debt Holdings
|
|
|
55
|
|
|
|
221
|
|
|
|
351
|
|
|
|
221
|
|
Equity in income of CDH CDO
|
|
|
140
|
|
|
|
|
|
|
|
534
|
|
|
|
|
|
Equity in income of Concord Debt Holdings (1)
|
|
|
28
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
Equity in income of CDH CDO (1)
|
|
|
478
|
|
|
|
|
|
|
|
478
|
|
|
|
|
|
Equity in income of WRT-Stamford
|
|
|
227
|
|
|
|
|
|
|
|
316
|
|
|
|
|
|
Equity in loss of SoCal Office Loan Portfolio
|
|
|
(293
|
)
|
|
|
|
|
|
|
(638
|
)
|
|
|
|
|
Equity in income of RE CDO management
|
|
|
17
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
Equity in loss of 10 Metrotech
|
|
|
(19
|
)
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
Equity in income of Mentor
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
6,253
|
|
|
|
7,774
|
|
|
|
12,316
|
|
|
|
19,774
|
|
General and administrative expense
|
|
|
(20
|
)
|
|
|
(11
|
)
|
|
|
(25
|
)
|
|
|
(15
|
)
|
Interest expense
|
|
|
(334
|
)
|
|
|
(184
|
)
|
|
|
(668
|
)
|
|
|
(341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan assets net income
|
|
|
5,899
|
|
|
|
7,579
|
|
|
|
11,623
|
|
|
|
19,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REIT Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividends
|
|
|
306
|
|
|
|
118
|
|
|
|
592
|
|
|
|
576
|
|
Gain on sale of securities carried at fair value
|
|
|
15
|
|
|
|
7
|
|
|
|
41
|
|
|
|
131
|
|
Unrealized (loss) gain on securities carried at fair value
|
|
|
(791
|
)
|
|
|
(723
|
)
|
|
|
4,141
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(470
|
)
|
|
|
(598
|
)
|
|
|
4,774
|
|
|
|
870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from segments before corporate income (expense)
|
|
|
6,262
|
|
|
|
6,802
|
|
|
|
16,839
|
|
|
|
17,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliations to GAAP Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
90
|
|
|
|
443
|
|
|
|
192
|
|
|
|
536
|
|
Interest expense
|
|
|
(80
|
)
|
|
|
(483
|
)
|
|
|
(372
|
)
|
|
|
(1,120
|
)
|
General and administrative
|
|
|
(3,244
|
)
|
|
|
(2,747
|
)
|
|
|
(6,270
|
)
|
|
|
(5,267
|
)
|
State and local taxes
|
|
|
(143
|
)
|
|
|
(48
|
)
|
|
|
(149
|
)
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before non-controlling interest
|
|
|
2,885
|
|
|
|
3,967
|
|
|
|
10,240
|
|
|
|
11,322
|
|
Non-controlling interest
|
|
|
473
|
|
|
|
(329
|
)
|
|
|
1,374
|
|
|
|
(533
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Winthrop Realty Trust
|
|
|
3,358
|
|
|
|
3,638
|
|
|
|
11,614
|
|
|
|
10,789
|
|
Income (loss) from discontinued operations attributable to Winthrop Realty Trust
|
|
|
|
|
|
|
90
|
|
|
|
(3
|
)
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Winthrop Realty Trust
|
|
$
|
3,358
|
|
|
$
|
3,728
|
|
|
$
|
11,611
|
|
|
$
|
10,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating properties
|
|
$
|
4,831
|
|
|
$
|
896
|
|
|
$
|
6,076
|
|
|
$
|
3,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the interest acquired from Lexington Realty Trust on May 1, 2012.
|
25
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
15.
|
Variable Interest Entities
|
Consolidated Variable Interest Entities
Consolidated variable interest entities are those where the Trust is the primary beneficiary of a variable interest entity. The primary beneficiary is the party that has a controlling financial interest
in the VIE, which is defined by the entity having both of the following characteristics: 1) the power to direct the activities that, when taken together, most significantly impact the VIEs performance, and 2) the obligation to absorb losses
and right to receive the returns from the VIE that would be significant to the VIE. The Trust has identified three consolidated variable interest entities.
Variable Interest Entities Not Consolidated
Equity Method and Preferred Equity
Investments
The Trust has reviewed its various equity method and preferred equity investments and identified 12 investments for which the Trust holds a variable interest in a VIE. Of these 12 interests there are nine investments for which
the underlying entities do not have sufficient equity at risk to permit them to finance their activities without additional subordinated financial support. There are three additional entities for which the VIE assessment was primarily based on the
fact that the voting rights of the equity holders are not proportional to their obligations to absorb expected losses and rights to receive residual returns of the legal entities. These 12 unconsolidated joint ventures are those where the Trust is
not the primary beneficiary of a VIE.
Loans Receivable and Loan Securities
The Trust has reviewed its loans receivable and loan
securities and seven of these assets have been identified as variable interests in a VIE because the equity investment at risk at the borrowing entity level is not considered sufficient for the entity to finance its activities without additional
subordinated financial support.
Certain loans receivable and loan securities which have been determined to be VIEs are performing
assets, meeting their debt service requirements. In these cases the borrower holds legal title to the real estate collateral and has the power to direct the activities that most significantly impact the economic performance of the VIE, including
management and leasing activities. In the event of default under these loans, the Trust only has protective rights and its obligation to absorb losses is limited to the extent of its loan investment. The borrower has been determined to be the
primary beneficiary for these performing assets.
The Trust has determined that it does not currently have the power to direct the activities
of the ventures collateralizing any of its loans receivable and loan securities. For this reason, management believes that it does not control, nor is it the primary beneficiary of these ventures. Accordingly, the Trust accounts for these
investments under the guidance for loans receivable and real estate debt investments.
Lake Brandt
On June 11, 2012, a wholly-owned subsidiary of the Trust entered into an agreement to acquire a 284 unit
multi-family property for an aggregate purchase price of $17,500,000. The property, which is located in Greensboro, North Carolina, is presently 94% occupied. In connection with this acquisition, it is expected that the subsidiary will assume the
existing $13,600,000 non-recourse mortgage loan which bears interest at 6.22% per annum, matures on August 1, 2016 and requires payments of interest only. The closing is expected to occur in September or October 2012.
223 West Jackson
On July 2, 2012, the Trust and Marc Realty each contributed $3,524,000 to our joint venture investment in this
property. The proceeds were used to pay off the existing first mortgage loan collateralized by this property.
Waterford Place
On
July 19, 2012, the Trust obtained a $13,500,000 first mortgage loan secured by its Memphis, Tennessee (Waterford Place) property that was acquired on April 17, 2012 for approximately $21,473,000. The loan bears interest at LIBOR plus 2.50%
with a LIBOR floor of 0.50%, requires monthly principal and interest payments of $57,000 and matures on August 1, 2014, subject to two, one-year extensions. The Trust purchased an interest rate cap which caps LIBOR at 0.50%. The loan will have
an outstanding balance at the initial maturity date of $12,928,000.
Bond Offering
On August 7, 2012, the Trust commenced a public
offering of its 7.75% senior notes due 2022 (the Notes). The aggregate amount of the Notes to be issued in the offering will be $75,000,000, subject to increase to $86,250,000 to cover over-allotments. The Trust will be required to
pay quarterly interest on the Notes commencing November 15, 2012, and the Trust may redeem the Notes, in whole or in part, at any time or from time to time on or after August 15, 2015 at a redemption price in cash equal to 100% of the principal
amount redeemed plus accrued and unpaid interest to, but not including, the redemption date. The closing of the Notes offering is expected to occur on August 15, 2012. The Trust estimates that the net proceeds from the Notes offering,
after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Trust, will be approximately $72,250,000, or approximately $83,163,000 if the underwriters overallotment option is exercised in full.
26
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
10 Metrotech
On August
6, 2012, 10 Metrotech JV acquired at a discount the
$39,400,000 senior participation in the Metrotech Loan. As a result, 10 Metrotech JV now holds the entire mortgage loan. Following consummation of the acquisition, 10 Metrotech JV entered into a forbearance agreement with the borrower pursuant to
which, among other things, (i) the interest rate on the loan was increased to 9%, (ii) the principal amount of the loan was reset to $40,000,000 and (iii) 10 Metrotech JV agreed to forbear from foreclosing on the property pursuant to
current maturity default for two years, subject to any further defaults by the borrower. In connection with the acquisition of the senior participation, the Trust made an additional capital contribution of $10,840,000 to Metrotech JV.
27
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
ITEM 2MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements conta
i
ned herein constitute forward-looking statements as such term is
defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and
assumptions. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as approximates,
believes, expects, anticipates, intends, plans, would, may or similar expressions in this Quarterly Report on Form 10-Q. These forward-looking statements are subject
to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. Factors that may cause actual results to differ materially from those contemplated by the
forward-looking statements include, but are not limited to, those set forth in our Annual Report on Form 10-K for the year ended December 31, 2011 under Forward Looking Statements and ITEM 1A Risk Factors, as
well as our other filings with the Securities and Exchange Commission. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We
expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on forward-looking statements, which are based
on information, judgments and estimates at the time they are made, to anticipate future results or trends.
Managements Discussion and
Analysis of Financial Condition and Results of Operations include a discussion of our unaudited consolidated financial statements and footnotes thereto for the three and six months ended June 30, 2012 as compared with the three and six months
ended June 30, 2011. These unaudited financial statements are prepared in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual results could differ from those
estimates.
Overview
As a diversified REIT, we operate in three strategic segments: (i) operating properties; (ii) loan assets; and (iii) REIT securities. As
such, we seek to focus our investing in the segment we believe will generate the greater overall return to us given market conditions at the time. In prior years we have demonstrated our ability to adjust our business plan to capitalize on evolving
marketing conditions both with respect to business segment and capital structure. During 2012 we have and expect to continue to execute an investment strategy that focuses on a current yield and long term appreciation by pursuing value opportunities
in accretive real estate assets throughout the capital stack which includes investments in the acquisition of distressed debt and fulcrum securities, as well as new loan originations, operating properties, control transactions and publicly traded
securities. As opportunistic investors, we will continue to invest in value opportunity plays which we believe will yield superior risk adjusted returns. These investments may have returns weighted towards the back end of the invested life which may
negatively impact current earnings. We will mine our existing portfolio for follow-on opportunities and will seek to timely realize returns on such investments subject only to any limitations imposed in order to maintain our REIT status. Complex and
difficult investments have frequently been the basis for our best returns.
We believe that the economic recovery while slow will continue
throughout 2012 and 2013 with gradually increasing rental demand across most asset classes in most major markets. We also believe that lenders will continue to take advantage of their improved balance sheets by accelerating the disposition of their
real estate related assets, both debt and real property. Accordingly, we anticipate no diminishment in value opportunities for investing in 2012 and 2013, and we believe that our loan investment segment will continue to provide the most opportunity
for new investments.
During the second quarter of 2012 we invested $77,588,000. See Item 1, Note 4 for a description of our
acquisitions. In light of the favorable investing environment, we supplemented our cash reserves with $77,715,000 of net proceeds from our secondary offering of 9.25% Series D Cumulative Redeemable Preferred Shares, which we refer to as our Series D
Preferred Shares, in March 2012 and with $39,800,000 from the repayment of our Magazine and 160 Spear loans which will fund future acquisitions. See additional details in our Liquidity and Capital Resources section below.
28
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
We often acquire assets through joint ventures which allow us to employ third party co-investment
capital to maximize diversification of risk and reduce capital concentration while our joint venture partners are able draw on the experienced skill sets we bring to bear on debt restructuring. Our most notable joint venture investments in 2012
include the Sullivan Center mortgage which was restructured into a $100,000,000 non-recourse mortgage loan provided by a third party lender, together with a 15% $47,458,000 mezzanine loan held by our joint venture with Elad Canada, Inc. and the
$50,000,000 Stamford Portfolio mezzanine loan held by our joint venture with Mack-Cali, which is subordinate to $400,000,000 in senior debt.
Loan Assets
Our investment
strategy in 2012 has and will continue to focus heavily on our loan asset segment which we believe in the current environment will generate the greatest overall return to us.
All of our loans are currently performing in accordance with their terms. During the quarter ended June 30, 2012 we invested approximately $37,075,000 in new loan acquisitions and approximately
$11,574,000 in new loan originations. For a description of our loan assets acquired during the quarter see ITEM 1. Financial Statements, Note 4.
As we anticipated, our 160 Spear loans and our Magazine Loan have been repaid in 2012 providing approximately $39,800,000 in cash proceeds. Additionally, our Broward Financial Center loan receivable and
the loan held by our ROIC-Riverside joint venture are expected to be paid off during 2012 providing approximately $37,883,000 in cash proceeds.
In addition to the above, certain of our other loans, loan securities and loans in equity investments are scheduled to mature in 2012, and we anticipate
that they will either be restructured or extended. The loan receivable we hold through our SoCal Loan venture matures in August 2012. Although the property is generating positive cash to cover debt service, we believe that without additional equity,
the borrower will not easily obtain replacement financing. As a result, we anticipate that this loan may present a significant restructuring opportunity. The Mack-Cali venture loan was extended for one year pursuant to the terms of the loan
document.
Operating Properties
In addition to the opportunities captured in our loan asset segment, we are experiencing growth in our operating properties portfolio. This growth can also be attributed to distressed loans as lenders
seek to divest of real estate on which they previously foreclosed or loans which have a maturity default under which we are able to foreclose and take ownership of the property. For instance, our recently acquired Memphis, Tennessee property,
Waterford Place, was acquired from a lender who had previously foreclosed on the property.
During the second quarter of 2012 we saw increases
in our operating income from our operating properties as a result of favorable operating results from same store properties, that is, properties held during both three month periods, complemented by our new store property.
Consolidated Operating Properties
As of June 30, 2012 our consolidated properties, excluding Churchill, were approximately 90.4% leased
compared to approximately 89.7% leased at June 30, 2011.
On May 14, 2012, we sold to a third party the portion of our Churchill,
Pennsylvania property that is not leased to Westinghouse. The sale has, and we anticipate that it will continue to, favorably impact operating results for the remainder of 2012 as we will no longer be responsible for the propertys operating
expenses.
WRT-Elad Equity Investments in Operating Properties
During the first quarter of 2012 we increased our equity investment
operating property portfolio with our investment in Sullivan Center, a 942,000 square foot, office and retail property in downtown Chicago. Our contribution of $24,201,000 represents a 50% interest in (i) a $47,458,000 mezzanine loan
collateralized by the borrowers equity in the property and (ii) a 65% future profits participation.
Sealy Equity Investments in
Operating Properties
As of June 30, 2012 we continue to hold equity interests in three real estate ventures with Sealy & Co. which have an aggregate of approximately 2,097,000 rentable square feet consisting of 18 office flex
buildings and 13 light distribution and service center properties. Two of the investment properties are located in Atlanta, Georgia, (Northwest Business Park and Newmarket), which had occupancies of 70% and 52% respectively, at June 30, 2012 as
compared to occupancy of 77% and 52%, respectively at December 31, 2011. The third Sealy investment is located in Nashville, Tennessee and was 86% and 83% occupied at June 30, 2012 and December 31, 2011, respectively.
29
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The loan secured by the Newmarket property matures in 2016 and continues to be in special servicing. We,
together with our venture partner, are attempting to negotiate a restructuring of the debt with the special servicer. The venture has ceased making its debt service payments until the loan is restructured. There can be no assurance that a
restructuring of the loan will be accomplished.
With respect to the Nashville, Tennessee property the mortgage matured in May 2012 and is in
special servicing. We, together with our venture partner, continue to negotiate with the lender but to date have been unable to obtain an extension.
Marc Realty Equity Investments in Operating Properties
As of June 30, 2012, we held equity interests in five properties with Marc Realty which consist of an aggregate of approximately
895,000 rentable square feet of office and retail space which was 77.5% occupied at June 30, 2012 as compared to 79.3% occupied at December 31, 2011.
On January 1, 2012, we restructured one of our investments (180 North Michigan) and reclassified our investment from loans receivable ($2,938,000) and preferred equity ($3,923,000) to equity
investments ($6,861,000).
On February 27, 2012 we entered into an agreement with the principals of Marc Realty pursuant to which we will
convey our interests in the 30 North Michigan, Salt Creek, River Road, 3701 Algonquin Road and Ridgebrook properties to Marc Realty for $12,650,000. On March 1, 2012 we closed on the first of these transactions and sold our 50% interest in
the 3701 Algonquin property representing 193,000 square feet of suburban office property and received proceeds of $250,000. On June 1, 2012, we closed on the sale of the remaining four properties for an aggregate selling price of $12,400,000.
The selling price was financed with a $6,550,000 secured promissory note which bears interest at 10% and matures on June 1, 2015. The promissory note relates solely to the 30 N. Michigan property as all other interests were transferred for
cash. These four properties represented 328,000 square feet of the suburban office portfolio and 221,000 square feet of downtown office space.
In addition, on June 1, 2012 we acquired from the Marc Realty principals their 20% interest in One East Erie for a purchase price of $5,850,000.
Vintage Housing Equity Investments in Operating Properties
During the three and six months ended June 30, 2012, the
Vintage Housing Properties generated net income allocable to us of $595,000 and $934,000, respectively and made cash distributions to us of $1,310,000 and $2,706,000, respectively.
REIT Securities
During the second quarter of 2012 we acquired 181,393 additional
shares of common stock in Cedar Realty Trust, Inc. (Cedar) for an aggregate purchase price of approximately $849,000. Accordingly, we hold 6,250,716 shares of common stock in Cedar representing 9.02% of the total outstanding common stock
of Cedar as of the quarter ended June 30, 2012.
As of June 30, 2012 our portfolio of REIT securities had a fair value of
$34,079,000 compared to an original acquisition cost of $26,775,000.
Liquidity and Capital Resources
At June 30, 2012, we held $43,959,000 in unrestricted cash and cash equivalents and $34,079,000 in REIT securities. Based on the size of our holdings
of Cedar, we may be limited in how quickly we could liquidate these securities. In addition, as of June 30, 2012 we had, subject to covenant compliance, $50,000,000 available to draw on our revolving line of credit.
We believe that cash flow from operations will continue to provide adequate capital to fund our operating and administrative expenses, as well as debt
service obligations in the short term. As a REIT, we must distribute annually at least 90% of our REIT taxable income. As a result of this dividend requirement, we, like other REITs, are unable to reinvest all of our operating cash flow and are
dependent on raising capital through equity and debt issuances or forming ventures with investors to obtain funds with which to expand our business. Accordingly, we anticipate that capital with which to make future investment and financing
activities will be provided from proceeds from loan maturities and prepayment, borrowings, the issuance of additional equity and debt securities, as well as proceeds from sales of existing assets. In this regard, we anticipate the recycling of
capital to play a larger role in 2012 than in the past with $39,800,000 having been received in loan repayments and $7,800,000 expected from additional loan repayments scheduled over the next two quarters.
30
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Our primary sources of funds include:
|
|
|
the use of cash and cash equivalents;
|
|
|
|
rents and reimbursements received from our operating properties;
|
|
|
|
payments received under our loan assets;
|
|
|
|
disposition of REIT securities;
|
|
|
|
sale of existing assets;
|
|
|
|
cash distributions from joint ventures;
|
|
|
|
borrowings under our credit facilities;
|
|
|
|
asset specific borrowings; and
|
|
|
|
the issuance of equity and debt securities.
|
Public Offerings
On March 23, 2012 we executed an underwritten public offering of
3,220,000 shares of 9.25% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value of $1.00 per share. The shares were issued at a price of $25.0385 per share before underwriters discount and we received net proceeds
of approximately $77,715,000 after underwriting discounts, commissions and expenses.
The Series D Preferred Shares rank senior to our common
shares. Generally, we are not permitted to redeem the Series D Preferred Shares prior to November 28, 2016, except in limited circumstances. On or after November 28, 2016, we may, at our option, redeem the Series D Preferred Shares, in
whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on such Series D Preferred Shares up to but excluding the redemption date.
Debt Maturities
At June 30, 2012,
our balance sheet contains mortgage loans payable of $229,891,000. We have no mortgage debt maturing in 2012, $15,457,000 maturing in 2013 and $21,000,000 maturing in 2014 with the remainder maturing in 2015 or later. We have a $50,000,000 revolving
line of credit which matures in March 2014 with an option to extend to March 2015. On June 30, 2012, we had no borrowing outstanding on the line. We continually evaluate our debt maturities and except as noted above on our Sealy equity
investments, based on our current assessment, we believe there are viable financing and refinancing alternatives for debts as they mature that will not materially adversely impact our liquidity or our expected financial results.
Net Operating Loss Carry Forwards
The
utilization of a majority of our net operating loss carry forward in 2011 will limit our ability to shelter ordinary taxable income in the future which may require us to distribute funds and reduce cash available for reinvestment on a going forward
basis. We have capital loss carry forwards of $45,508,000 which expire from 2014 through 2015.
31
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Cash Flows
Our level of liquidity based upon cash and cash equivalents increased by approximately $3,007,000 from $40,952,000 at December 31, 2011 to $43,959,000 at June 30, 2012.
Our cash flow activities for the six months ended June 30, 2012 and 2011 are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2012
|
|
|
2011
|
|
Net cash flow provided by operating activities
|
|
$
|
22,509
|
|
|
$
|
17,179
|
|
Net cash flow used in investing activities
|
|
|
(45,169
|
)
|
|
|
(33,913
|
)
|
Net cash flow provided by financing activities
|
|
|
25,667
|
|
|
|
22,821
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
$
|
3,007
|
|
|
$
|
6,087
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
For the six months ended June 30, 2012, our operating activities generated consolidated net income of $10,237,000 and positive cash flow of $22,509,000. Our cash provided by operations reflects our
net income adjusted by: (i) a reduction for non-cash items of $5,433,000 representing primarily current period loan discount accretion and unrealized gains on securities carried at fair value offset by adding back depreciation and amortization
expenses; (ii) an increase of $14,065,000 for discount accretion received in cash; (iii) $4,885,000 of distributions from non-consolidated interests; and (iv) a net decrease due to changes in other operating assets and liabilities of
$1,245,000. See our discussion of Results of Operations below for additional details on our operations.
Investing Activities
Cash flow used in investing activities for the six months ended June 30, 2012 was approximately $45,169,000 as compared to
approximately $33,913,000 for the comparable period in 2011. This change of approximately $11,256,000 resulted primarily from investing activity resulting from the favorable investment environment.
Net cash used in investing activities of $45,169,000 for the six months ended June 30, 2012 was comprised primarily of the following:
|
|
|
$30,000,000 for the acquisition of the Broward loan receivable;
|
|
|
|
$21,473,000 for the acquisition of our Memphis, Tennessee (Waterford) Property;
|
|
|
|
$14,051,000 for investment in our WRT-Elad joint venture;
|
|
|
|
$11,574,000 for three new loan originations;
|
|
|
|
$8,036,000 for investment in our WRT-Stamford loan joint venture;
|
|
|
|
$7,409,000 for investment in capital and tenant improvements at our operating properties;
|
|
|
|
$7,000,000 for the acquisition of Lexington Realty Trusts investment in Concord;
|
|
|
|
$6,029,000 for investment in our Vintage Housing Holding joint venture;
|
|
|
|
$5,655,000 for purchases of REIT securities carried at fair value;
|
|
|
|
$2,521,000 for the acquisition of our Mentor loan receivable; and
|
|
|
|
$1,289,000 for investment in our Marc Realty equity investments;
|
These uses of cash flow were offset primarily by:
|
|
|
$38,100,000 in return of capital distributions from our SoCal Office Portfolio Loan equity investment;
|
|
|
|
$29,798,000 in collection of loans receivable;
|
|
|
|
$4,614,000 in proceeds from the sale of securities carried at fair value; and
|
|
|
|
$2,297,000 in proceeds from the sale of one of our Marc Realty investments and our FII Co-invest investment.
|
32
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Financing Activities
Cash flow provided by financing activities for the six months ended June 30, 2012 was approximately $25,667,000 as compared to cash flow provided by financing activities of approximately $22,821,000
for the comparable period in 2011. This change of approximately $2,846,000 resulted primarily from the purchase of non-controlling interests and dividends paid partially offset by proceeds from the issuance of shares and lower principal payments of
our mortgage loans payable.
Net cash provided by financing activities of $25,667,000 for the six months ended June 30, 2012 was
comprised primarily of the following:
|
|
|
$77,715,000 in proceeds from the issuance of Series D Preferred Shares;
|
|
|
|
$3,500,000 paid to us from contributions from Starwood for the admission into our SoCal Office joint venture; and
|
|
|
|
$2,051,000 in advances on our 450 W 14
th
Street property mortgage loan payable.
|
These sources of cash flow were offset primarily by:
|
|
|
$40,000,000 for payments on our revolving line of credit;
|
|
|
|
$10,740,000 for dividend payments on our Common Shares;
|
|
|
|
$3,100,000 for mortgage loan repayments;
|
|
|
|
$3,712,000 for dividend payments on our Series D Preferred Shares; and
|
|
|
|
$400,000 for the acquisition of non-controlling interests on our Deer Valley property.
|
Future Cash Commitments
Future
Funding Requirements
We have future funding requirements relating to our 450 W 14
th
Street property and our Churchill, Pennsylvania property which total
approximately $1,229,000 at June 30, 2012.
Common Share Dividends
In paying dividends we seek to have our quarterly dividends track cash flow from operations. As a result of our emphasis on total return, while we seek to achieve a stable, predictable dividend for
our shareholders, we do not select or manage our investments for short-term dividend growth, but rather towards achieving overall superior total return. While we intend to continue paying dividends each quarter, the amount of our dividend will
depend on the actual cash flow, financial condition, capital requirements, utilization of available capital losses and net operating loss carry forwards, distribution requirements for REITs under the Internal Revenue Code, and such other factors as
our Board of Trustees deem relevant. Subject to the foregoing, we expect to continue distributing our current cash flow from operations after reserving normal and customary amounts to maintain adequate capital reserves. In addition, when
deemed prudent or necessitated by applicable dividend requirements for REITs under the Internal Revenue Code, we may make one or more special dividends during any particular year. However, during a favorable investing environment, we expect that we
will utilize our carry forward capital losses to shelter gains from the disposition of our assets so we may use the proceeds for investment. We expect to continue applying these standards with respect to our dividends on a quarterly basis which may
cause the dividends to increase or decrease depending on these various factors.
During 2012 we paid a quarterly dividend of $0.1625 per
Common Share for each of the first and second quarters of 2012. We paid a regular quarterly dividend of $0.578125 per Series D Preferred Share in each of the first and second quarters of 2012.
Comparability of Financial Data from Period to Period
The comparability of
financial data from period to period is affected by several items including (i) the timing of our property acquisitions and leasing activities; (ii) the purchases and sales of assets and investments; (iii) when material
other-than-temporary impairment losses on assets in our portfolio are taken; (iv) fluctuations in the fair value of our securities and loan securities carried at fair value; and (v) the reclassification of assets.
33
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Results of Operations
Net income attributable to Common Shares was $7,899,000 or $0.24 per Common Share for the six months ended June 30, 2012 as compared with net income of $10,809,000 or $0.36 per Common Share for the
six months ended June 30, 2011. Funds From Operations (FFO) attributable to Common Shares was $22,074,000 or $0.67 per Common Share for the six months ended June 30, 2012 as compared to FFO of $24,292,000 or $0.81 per Common Share for the
six months ended June 30, 2011.
Net income attributable to Common Shares was $571,000 or $0.02 per Common Share for the three months
ended June 30, 2012 as compared with net income for the three months ended June 30, 2011, of $3,670,000 or $0.11 per Common Share. FFO attributable to Common Shares was $8,097,000 or $0.24 per Common Share for the three months ended
June 30, 2012, as compared to FFO of $12,319,000 or $0.38 per Common Share for the three months ended June 30, 2011. The decrease in per Common Share amounts is directly attributable to the effect of the full second quarter dividend
payable on the Series D preferred shares issued in March 2012. The $77,715,000 in proceeds from the offering along with capital recycled from certain liquidated investments have been invested or committed to investments, but the expected positive
impact to earnings from such investments will not begin to be recognized until the third quarter. In addition, as a value investor some of our more recent investments, such as the Southern California portfolio loan, have returns that are less
weighted to a current coupon but have a return that will be recognized through a liquidation event at the end of the investment life.
Our
results are discussed below by business segment:
|
|
|
Operating Propertiesour wholly and partially owned operating properties;
|
|
|
|
Loan Assetsour loans receivable, loan securities carried at fair value, and equity investments in loan assets;
|
|
|
|
REIT Securitiesour ownership of equity and debt securities in other real estate investment trusts; and
|
|
|
|
Corporatenon-segment specific results which includes interest on cash reserves, general and administrative expenses and other non-segment
specific income and expense items.
|
The following table summarizes our assets by business segment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
2012
|
|
|
December 31,
2011
|
|
Operating properties
|
|
$
|
489,803
|
|
|
$
|
442,209
|
|
Loan assets
|
|
|
191,047
|
|
|
|
217,174
|
|
REIT securities
|
|
|
34,079
|
|
|
|
28,856
|
|
Corporate
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
43,959
|
|
|
|
40,952
|
|
Restricted cash
|
|
|
4,497
|
|
|
|
3,914
|
|
Accounts receivable and prepaids
|
|
|
1,085
|
|
|
|
504
|
|
Deferred financing costs
|
|
|
244
|
|
|
|
318
|
|
Discontinued Operations
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
764,720
|
|
|
$
|
733,933
|
|
|
|
|
|
|
|
|
|
|
The increase in operating property assets was due primarily to our $24,201,000 investment in WRT-Elad which consolidates
the operations of Sullivan Center in Chicago, Illinois, the acquisition of the Waterford property in Memphis, Tennessee for $21,473,000 and the conversion of our 180 North Michigan property from a preferred equity loan asset to an equity investment
operating property ($6,861,000).
The decrease in loan assets was due primarily to the $38,100,000 return of capital distribution received in
partial redemption of our investment in SoCal Office Portfolio Loan, the repayment in full of our Magazine and 160 Spear loans receivable and the conversion of the 180 North Michigan property. These decreases were offset by loan acquisitions of
$48,182,000 and loan originations totaling $11,574,000.
The increase in REIT securities assets was primarily the result of additional
purchases and an increase in the fair market value of our Cedar shares.
34
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Comparison of Six Months ended June 30, 2012 versus Six Months ended June 30, 2011
The following table summarizes our results from continuing operations by business segment for the six months ended June 30, 2012
and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Operating properties
|
|
$
|
442
|
|
|
$
|
(3,038
|
)
|
Loan assets
|
|
|
11,623
|
|
|
|
19,418
|
|
REIT securities
|
|
|
4,774
|
|
|
|
870
|
|
Corporate expenses
|
|
|
(6,599
|
)
|
|
|
(5,928
|
)
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
10,240
|
|
|
$
|
11,322
|
|
|
|
|
|
|
|
|
|
|
Operating Properties
The following table summarizes our results from continuing operations for our operating properties business segment for the six months ended June 30, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Rents and reimbursements
|
|
$
|
25,797
|
|
|
$
|
22,220
|
|
Operating expenses
|
|
|
(8,331
|
)
|
|
|
(8,032
|
)
|
Real estate taxes
|
|
|
(2,271
|
)
|
|
|
(2,342
|
)
|
Equity in loss of Marc Realty investments
|
|
|
(344
|
)
|
|
|
(120
|
)
|
Equity in income (loss) of Sealy Northwest Atlanta
|
|
|
(164
|
)
|
|
|
4,541
|
|
Equity in loss of Sealy Airpark Nashville
|
|
|
|
|
|
|
(453
|
)
|
Equity in loss of Sealy Newmarket
|
|
|
(1,467
|
)
|
|
|
(1,144
|
)
|
Equity in income of Vintage
|
|
|
934
|
|
|
|
|
|
Equity in income of WRT-Elad
|
|
|
515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
14,669
|
|
|
|
14,670
|
|
Depreciation and amortization expense
|
|
|
(8,198
|
)
|
|
|
(6,793
|
)
|
Interest expense
|
|
|
(6,261
|
)
|
|
|
(7,115
|
)
|
Impairment loss on Sealy equity investments
|
|
|
|
|
|
|
(3,800
|
)
|
Gain on sale of equity investment
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
442
|
|
|
$
|
(3,038
|
)
|
|
|
|
|
|
|
|
|
|
Operating income from our operating properties, which we define for our consolidated operating properties as all items of
income and expense directly derived from or incurred by this segment before depreciation, amortization, interest expense and other non- recurring non-operating items and including our share of income or loss from equity investments remains stable
compared to the prior year period.
35
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The following table breaks out our operating results from same store properties (properties held
throughout both the current and prior year reporting periods) and new store properties (in thousands):
Consolidated Operating Properties
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2012
|
|
|
2011
|
|
Rents and reimbursements
|
|
|
|
|
|
|
|
|
Same store properties
|
|
$
|
22,191
|
|
|
$
|
22,220
|
|
New store properties
|
|
|
3,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,797
|
|
|
|
22,220
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Same store properties
|
|
|
5,996
|
|
|
|
8,032
|
|
New store properties
|
|
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,331
|
|
|
|
8,032
|
|
|
|
|
|
|
|
|
|
|
Real estate taxes
|
|
|
|
|
|
|
|
|
Same store properties
|
|
|
1,997
|
|
|
|
2,342
|
|
New store properties
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,271
|
|
|
|
2,342
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating properties operating income
|
|
|
|
|
|
|
|
|
Same store properties
|
|
|
14,198
|
|
|
|
11,846
|
|
New store properties
|
|
|
997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,195
|
|
|
$
|
11,846
|
|
|
|
|
|
|
|
|
|
|
The increase in operating income for our same store properties was primarily the result of a decrease in operating
expenses of $2,036,000 and a decrease in real estate taxes of $345,000.
|
|
|
Rental revenues increased by $3,577,000 due to new store revenues of $3,606,000, while same store revenues decreased by $29,000. The decrease in same
store revenue was the result of declines at our Churchill, Pennsylvania property; Chicago, Illinois (One East Erie) and one of our Lisle, Illinois properties which were partially offset by increased revenue at our Deer Valley, Arizona; Chicago,
Illinois (River City); Englewood, Colorado (Crossroads II); and one of our Lisle, Illinois properties;
|
|
|
|
Operating expenses increased by $299,000 due to expenses at our new store properties of $2,335,000. Same store operating expenses decreased by
$2,036,000 due primarily to a decrease in expenses of $1,887,000 at our Churchill, Pennsylvania property; and
|
|
|
|
Real estate tax expense remained relatively constant. Real estate tax of $274,000 at our new store properties was offset by a decrease of $345,000 at
our same store properties. The reduction at our same store properties was primarily due to lower taxes at our Churchill, Pennsylvania property.
|
Depreciation and amortization expense increased by $1,405,000 in 2012 primarily as a result of our new store properties. Interest expenses related to our operating properties decreased by $854,000
primarily as a result of refinancing our Meriden, Connecticut property and our Lisle, Illinois properties which resulted in decreased interest expense of $1,325,000. These decreases were partially offset by interest expense of $948,000 at our new
store property located in New York, New York.
Non-Consolidated Operating Properties: Equity Investments
Net operating loss from equity investments was $526,000 for the six months ended June 30, 2012 compared to net income of $2,824,000 for the six
months ended June 30, 2011. The increase in loss was due primarily to:
|
|
|
Operating income from our Sealy Northwest Atlanta investment decreased by $4,705,000 resulting in operating loss due primarily to the discounted payoff
of the first mortgage loan in June 2011. The discounted payoff resulted in an allocation of cancellation of debt income to us of approximately $5,522,000.
|
|
|
|
Operating loss from our Sealy Newmarket investment increased by $323,000 due primarily to additional interest expenses allocated to us in 2012 as a
result of the accrual of default interest on the first mortgage loan while it is in special servicing. Rental revenues were also lower at this property during the first six months of 2012 as a result of the loss of a significant tenant in April
2011.
|
|
|
|
Operating loss from our Marc Realty investments increased by $224,000 primarily as a result of the sale of three investments on June 1, 2011.
|
36
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Partially offset by:
|
|
|
Operating income from our Vintage portfolio which closed June 24, 2011 was $934,000 for the six months ended
|
June 30, 2012.
|
|
|
Operating income from our WRT-Elad investment which closed February 3, 2012 was $515,000 for the six months ended June 30, 2012.
|
Loan Assets
The following table summarizes our results from our loan assets business segment for the six months ended June 30, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Interest
|
|
$
|
5,145
|
|
|
$
|
5,397
|
|
Discount accretion
|
|
|
5,559
|
|
|
|
8,793
|
|
Equity in earnings of preferred equity investment in Marc Realty
|
|
|
|
|
|
|
168
|
|
Equity in earnings of preferred equity in 450 W 14th Street
|
|
|
|
|
|
|
73
|
|
Equity in earnings of LW SOFI
|
|
|
|
|
|
|
262
|
|
Equity in earnings of ROIC-Riverside LLC
|
|
|
468
|
|
|
|
468
|
|
Equity in loss of WRT-46th Street Gotham LLC
|
|
|
|
|
|
|
621
|
|
Equity in loss of ROIC-Lakeside Eagle LLC
|
|
|
(16
|
)
|
|
|
666
|
|
Equity in earnings of Concord Debt Holdings
|
|
|
351
|
|
|
|
221
|
|
Equity in earnings of CDH CDO
|
|
|
534
|
|
|
|
|
|
Equity in earnings of Concord Debt Holdings (1)
|
|
|
28
|
|
|
|
|
|
Equity in earnings of CDH CDO (1)
|
|
|
478
|
|
|
|
|
|
Earnings on Lex-Win Concord
|
|
|
|
|
|
|
258
|
|
Equity in earnings of WRT-Stamford
|
|
|
316
|
|
|
|
|
|
Equity in loss of SoCal Office Portfolio Loan
|
|
|
(638
|
)
|
|
|
|
|
Equity in loss of 10 Metrotech
|
|
|
(19
|
)
|
|
|
|
|
Equity in earnings of Mentor
|
|
|
6
|
|
|
|
|
|
Equity in earnings of RE CDO Management
|
|
|
28
|
|
|
|
|
|
Unrealized gain (loss) on loan securities carried at fair value
|
|
|
76
|
|
|
|
2,847
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
12,316
|
|
|
|
19,774
|
|
General and administrative expense
|
|
|
(25
|
)
|
|
|
(15
|
)
|
Interest expense
|
|
|
(668
|
)
|
|
|
(341
|
)
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,623
|
|
|
$
|
19,418
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the interest acquired from Lexington Realty Trust on May 1, 2012.
|
Operating income from loan assets, which we define as all items of income and expense directly derived from or incurred by this business segment before general and administrative and interest expense,
decreased by $7,458,000 as compared to the prior year period. The decrease was due primarily to:
|
|
|
a $2,771,000 decrease in unrealized gain on loan securities carried at fair value recognized in the first six months of 2012;
|
|
|
|
a $3,234,000 decrease in discount accretion due primarily to the repayment of our Metropolitan Tower and Beverly Hilton loans in 2011 which was
partially offset by an increase related to our 160 Spear and Magazine loans in May 2012;
|
|
|
|
a $252,000 decrease in interest income due primarily to the repayment of loans throughout 2011; and
|
|
|
|
a $1,201,000 decrease in net earnings from our equity investment loan assets primarily due to the payoff of several loan assets in 2011 which was
partially offset by an increase in earnings from our CDH CDO investment.
|
37
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
REIT Securities
The following table summarizes our results from our REIT securities business segment for the six months ended June 30, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Interest and dividends
|
|
$
|
592
|
|
|
$
|
576
|
|
Gain on sale of securities carried at fair value
|
|
|
41
|
|
|
|
131
|
|
Unrealized gain on securities carried at fair value
|
|
|
4,141
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
4,774
|
|
|
$
|
870
|
|
|
|
|
|
|
|
|
|
|
Operating income from REIT securities, which we define as all items of income and expense directly derived from or
incurred by this business segment before interest expense, increased by $3,904,000 as compared to the prior year period. The increase was primarily due to a $3,978,000 increase in unrealized gain on securities carried at fair value primarily as a
result of a change in the value of our shares of Cedar acquired subsequent to June 30, 2011.
Corporate
The following table summarizes our results from our corporate business segment for the six months ended June 30, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Interest income
|
|
$
|
192
|
|
|
$
|
536
|
|
General and administrative
|
|
|
(6,270
|
)
|
|
|
(5,267
|
)
|
Interest expense
|
|
|
(372
|
)
|
|
|
(1,120
|
)
|
State and local taxes
|
|
|
(149
|
)
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(6,599
|
)
|
|
$
|
(5,928
|
)
|
|
|
|
|
|
|
|
|
|
The decrease in corporate operations for the comparable periods was due primarily to a $1,003,000 increase in general and
administrative expenses due primarily to an increase in the base management fee of $640,000 as a result of an increase in the outstanding equity that is subject to the fee, a $345,000 increase in accounting fees which is the result of significant
transaction activity and a $123,000 increase in legal and transaction costs.
State income taxes were $149,000 and $77,000 for the six months
ended June 30, 2012 and 2011, respectively, due primarily to our anticipated taxable income for state purposes, after deductions for dividends paid and after the utilization of net operating loss carryforwards, where applicable.
38
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Comparison of Three Months ended June 30, 2012 versus Three Months ended June 30, 2011
The following table summarizes our results from continuing operations by business segment for the three months ended June 30,
2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Operating properties
|
|
$
|
833
|
|
|
$
|
(179
|
)
|
Loan assets
|
|
|
5,899
|
|
|
|
7,579
|
|
REIT securities
|
|
|
(470
|
)
|
|
|
(598
|
)
|
Corporate expenses
|
|
|
(3,377
|
)
|
|
|
(2,835
|
)
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
2,885
|
|
|
$
|
3,967
|
|
|
|
|
|
|
|
|
|
|
Operating Properties
The following table summarizes our results from continuing operations for our operating properties business segment for the three months ended June 30, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Rents and reimbursements
|
|
$
|
13,257
|
|
|
$
|
11,234
|
|
Operating expenses
|
|
|
(3,779
|
)
|
|
|
(3,987
|
)
|
Real estate taxes
|
|
|
(1,017
|
)
|
|
|
(1,087
|
)
|
Equity in income (loss) of Marc Realty investments
|
|
|
3
|
|
|
|
(175
|
)
|
Equity in income (loss) of Sealy Northwest Atlanta
|
|
|
(108
|
)
|
|
|
5,133
|
|
Equity in loss of Sealy Airpark Nashville
|
|
|
|
|
|
|
(256
|
)
|
Equity in loss of Sealy Newmarket
|
|
|
(745
|
)
|
|
|
(633
|
)
|
Equity in income of Vintage
|
|
|
595
|
|
|
|
|
|
Equity in loss of WRT-Elad
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
8,178
|
|
|
|
10,229
|
|
Depreciation and amortization expense
|
|
|
(4,479
|
)
|
|
|
(3,312
|
)
|
Interest expense
|
|
|
(3,098
|
)
|
|
|
(3,296
|
)
|
Impairment loss on Sealy equity investments
|
|
|
|
|
|
|
(3,800
|
)
|
Gain on sale of equity investment
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
833
|
|
|
$
|
(179
|
)
|
|
|
|
|
|
|
|
|
|
Operating income from our operating properties, which we define for our consolidated operating properties as all items of
income and expense directly derived from or incurred by this segment before depreciation, amortization, interest expense and other non-recurring non-operating items and including our share of income or loss from equity investments decreased by
$2,051,000 compared to the prior year period.
39
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The following table breaks out our operating results from same store properties (properties held
throughout both the current and prior year reporting periods) and new store properties (in thousands):
Consolidated Operating Properties
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
2012
|
|
|
2011
|
|
Rents and reimbursements
|
|
|
|
|
|
|
|
|
Same store properties
|
|
$
|
11,027
|
|
|
$
|
11,234
|
|
New store properties
|
|
|
2,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,257
|
|
|
|
11,234
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Same store properties
|
|
|
2,700
|
|
|
|
3,987
|
|
New store properties
|
|
|
1,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,779
|
|
|
|
3,987
|
|
|
|
|
|
|
|
|
|
|
Real estate taxes
|
|
|
|
|
|
|
|
|
Same store properties
|
|
|
842
|
|
|
|
1,087
|
|
New store properties
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,017
|
|
|
|
1,087
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating properties operating income
|
|
|
|
|
|
|
|
|
Same store properties
|
|
|
7,485
|
|
|
|
6,160
|
|
New store properties
|
|
|
976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,461
|
|
|
$
|
6,160
|
|
|
|
|
|
|
|
|
|
|
The increase in operating income for our same store properties was primarily the result of an increase in rents and
reimbursements of $2,023,000 and a decrease in operating expenses of $208,000.
|
|
|
Rental revenues increased due to new store revenues of $2,230,000, while same store revenues decreased by $207,000. The decrease in same store revenue
was primarily the result of the disposition of our Churchill, Pennsylvania property and declines at our Chicago, Illinois (One East Erie) and one of our Lisle, Illinois properties which were partially offset by increased revenue at our Deer Valley,
Arizona; Chicago, Illinois (River City); Englewood, Colorado (Crossroads II); and one of our Lisle, Illinois properties;
|
|
|
|
Operating expenses increased due to expenses at our new store properties of $1,079,000. Same store operating expenses decreased by $1,287,000 due
primarily to a decrease in expenses of $1,235,000 at our Churchill, Pennsylvania property; and
|
|
|
|
Real estate tax expense remained relatively constant. Real estate tax of $175,000 at our new store property was offset by a decrease of $245,000 at our
same store properties. The reduction at our same store properties was primarily due to lower taxes at our Churchill, Pennsylvania property.
|
Depreciation and amortization expense increased by $1,167,000 in 2012 primarily as a result of our new store properties. Interest expenses related to our operating properties decreased by $198,000
primarily as a result of refinancing our Meriden, Connecticut property and our Lisle, Illinois properties which resulted in decreased interest expense of $546,000. These decreases were partially offset by interest expense of $462,000 at our new
store property located in New York, New York.
Non-Consolidated Operating Properties: Equity Investments
Net operating loss from equity investments was $283,000 for the three months ended June 30, 2012 compared to a net income of $4,069,000 for the three
months ended June 30, 2011. The decrease was due primarily to:
|
|
|
Operating income from our Sealy Northwest Atlanta investment decreased by $5,241,000 due primarily to the discounted payoff of the first mortgage loan
in June 2011. The discounted payoff resulted in an allocation of cancellation of debt income to us of approximately $5,522,000.
|
|
|
|
Operating loss from our Sealy Newmarket investment increased by $112,000 due primarily to additional interest expense allocated to us in 2012.
|
Partially offset by:
40
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
|
|
|
Operating loss from our Marc Realty investments decreased by $178,000 resulting in operating income primarily as a result of the conversion of 180
North Michigan from a preferred equity investment to an equity investment.
|
|
|
|
Operating income from our Vintage portfolio which closed June 24, 2011 was $595,000 for the three months ended June 30, 2012.
|
Loan Assets
The following table summarizes our results from our loan assets business segment for the three months ended June 30, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Interest
|
|
$
|
2,746
|
|
|
$
|
2,687
|
|
Discount accretion
|
|
|
2,726
|
|
|
|
2,289
|
|
Equity in earnings of preferred equity investment in Marc Realty
|
|
|
|
|
|
|
85
|
|
Equity in earnings on preferred equity investment in 450 W 14th St.
|
|
|
|
|
|
|
73
|
|
Equity in earnings of LW SOFI
|
|
|
|
|
|
|
262
|
|
Equity in earnings of ROIC-Riverside LLC
|
|
|
234
|
|
|
|
234
|
|
Equity in loss of WRT-46th Street Gotham LLC
|
|
|
|
|
|
|
709
|
|
Equity in earnings (loss) of ROIC-Lakeside Eagle LLC
|
|
|
(4
|
)
|
|
|
922
|
|
Equity in earnings of Concord Debt Holdings
|
|
|
55
|
|
|
|
221
|
|
Equity in earnings of CDH CDO
|
|
|
140
|
|
|
|
|
|
Equity in earnings of Concord Debt Holdings (1)
|
|
|
28
|
|
|
|
|
|
Equity in earnings of CDH CDO (1)
|
|
|
478
|
|
|
|
|
|
Equity of Lex-Win Concord
|
|
|
|
|
|
|
258
|
|
Equity in earnings of WRT-Stamford
|
|
|
227
|
|
|
|
|
|
Equity in loss of SoCal Office Portfolio Loan
|
|
|
(293
|
)
|
|
|
|
|
Equity in earnings of RE CDO Management
|
|
|
17
|
|
|
|
|
|
Equity in loss of 10 Metrotech
|
|
|
(19
|
)
|
|
|
|
|
Equity in earnings of Mentor
|
|
|
6
|
|
|
|
|
|
Unrealized gain (loss) on loan securities carried at fair value
|
|
|
(88
|
)
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
6,253
|
|
|
|
7,774
|
|
General and administrative expense
|
|
|
(20
|
)
|
|
|
(11
|
)
|
Interest expense
|
|
|
(334
|
)
|
|
|
(184
|
)
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,899
|
|
|
$
|
7,579
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the interest acquired from Lexington Realty Trust on May 1, 2012.
|
Operating income from loan assets, which we define as all items of income and expense directly derived from or incurred by this business segment before general and administrative and interest expense,
decreased by $1,521,000 for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. The decrease was due primarily to:
|
|
|
a $122,000 decrease in unrealized gain on loan securities carried at fair value recognized in the three months ended June 30, 2012; and
|
|
|
|
a decrease in net earnings from our equity investment loan assets of $1,895,000 for the three months ended June 30, 2012 due primarily to the
payoff of the loans related to WRT-46
th
Street Gotham LLC
and ROIC-Lakeside Eagle LLC.
|
Partially offset by:
|
|
|
a $437,000 increase in discount accretion due primarily to the initial recognition of accretion on our San Marbeya loan receivable.
|
41
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
REIT Securities
The following table summarizes our results from our REIT securities business segment for the three months ended June 30, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Interest and dividends
|
|
$
|
306
|
|
|
$
|
118
|
|
Gain on sale of securities carried at fair value
|
|
|
15
|
|
|
|
7
|
|
Unrealized loss on securities carried at fair value
|
|
|
(791
|
)
|
|
|
(723
|
)
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(470
|
)
|
|
$
|
(598
|
)
|
|
|
|
|
|
|
|
|
|
Operating loss from REIT securities, which we define as all items of income and expense directly derived from or incurred
by this business segment before interest expense, decreased by $128,000 as compared to the prior year period. The decrease was primarily due to a $188,000 increase in interest and dividend income which was partially offset by a $68,000 increase in
unrealized loss on securities carried at fair value primarily as a result of a change in the value of our shares of Cedar acquired subsequent to the quarter ended June 30, 2011.
Corporate
The following table summarizes our results from our corporate business segment
for the three months ended June 30, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Interest income
|
|
$
|
90
|
|
|
$
|
443
|
|
General and administrative
|
|
|
(3,244
|
)
|
|
|
(2,747
|
)
|
Interest expense
|
|
|
(80
|
)
|
|
|
(483
|
)
|
State and local taxes
|
|
|
(143
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(3,377
|
)
|
|
$
|
(2,835
|
)
|
|
|
|
|
|
|
|
|
|
The decrease in corporate operations for the comparable periods was due primarily to a $497,000 increase in general and
administrative expenses due primarily to an increase in the base management fee of $333,000 as a result of an increase in the outstanding equity that is subject to the fee, a $131,000 increase in accounting and other professional fees.
State income taxes were $143,000 and $48,000 for the three months ended June 30, 2012 and 2011, respectively, due primarily to our anticipated
taxable income for state purposes, after deductions for dividends paid and after the utilization of net operating loss carryforwards, where applicable.
Funds From Operations
We have adopted the revised definition of Funds from
Operations (FFO), adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT). Management considers FFO to be an appropriate measure of performance of a REIT. We calculate FFO by
adjusting net income (loss) (computed in accordance with GAAP, including non-recurring items), for gains (or losses) from sales of properties, real estate related depreciation and amortization, and adjustment for unconsolidated partnerships and
ventures and impairments. Management believes that in order to facilitate a clear understanding of our historical operating results, FFO should be considered in conjunction with net income as presented in the consolidated financial statements
included elsewhere herein. Management considers FFO to be a useful measure for reviewing our comparative operating and financial performance because, by excluding gains and losses related to sales of previously depreciated operating real estate
assets and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating
performance of a companys real estate between periods or as compared to different companies.
42
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Our calculation of FFO may not be directly comparable to FFO reported by other REITs or similar real
estate companies that have not adopted the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO is not a GAAP financial measure and should not be considered as an alternative to net
income (loss), the most directly comparable financial measure of our performance calculated and presented in accordance with GAAP, as an indication of our performance. FFO does not represent cash generated from operating activities determined in
accordance with GAAP and is not a measure of liquidity or an indicator of our ability to pay dividends. We believe that to further understand our performance, FFO should be compared with our reported net income and considered in addition to cash
flows in accordance with GAAP, as presented in our consolidated financial statements.
Based on the October 31, 2011 and January 6,
2012 updated guidance on reporting FFO, we have excluded impairment losses on depreciable real estate as well as other-than-temporary impairment on equity method joint ventures in the calculations of FFO and have restated prior period calculations
to be consistent with this presentation. The other-than-temporary impairments have been excluded as they relate to decreases in the fair value of depreciable real estate held by the investee.
The following presents a reconciliation of net income to funds from operations for the three and six months ended June 30, 2012 and 2011 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Winthrop Realty Trust
|
|
$
|
3,358
|
|
|
$
|
3,728
|
|
|
$
|
11,611
|
|
|
$
|
10,926
|
|
Real estate depreciation
|
|
|
2,747
|
|
|
|
2,086
|
|
|
|
5,261
|
|
|
|
4,204
|
|
Amortization of capitalized leasing costs
|
|
|
1,732
|
|
|
|
1,226
|
|
|
|
2,937
|
|
|
|
2,591
|
|
Trust's share of real estate depreciation and amortization of unconsolidated interests
|
|
|
3,992
|
|
|
|
2,376
|
|
|
|
7,654
|
|
|
|
4,639
|
|
Gain on sale of equity investments
|
|
|
(232
|
)
|
|
|
|
|
|
|
(232
|
)
|
|
|
|
|
Impairment loss on equity investments
|
|
|
|
|
|
|
3,800
|
|
|
|
|
|
|
|
3,800
|
|
Less: Non-controlling interest share of depreciation and amortization
|
|
|
(713
|
)
|
|
|
(789
|
)
|
|
|
(1,445
|
)
|
|
|
(1,581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations attributable to the Trust
|
|
|
10,884
|
|
|
|
12,427
|
|
|
|
25,786
|
|
|
|
24,579
|
|
Preferred dividend of Series C Preferred Shares
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
(117
|
)
|
Preferred dividend of Series D Preferred Shares
|
|
|
(2,787
|
)
|
|
|
|
|
|
|
(3,712
|
)
|
|
|
|
|
Allocation of earnings to Series B-1 Preferred Shares
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(78
|
)
|
Allocation of earnings to Series C Preferred Shares
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
(92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO applicable to Common SharesBasic
|
|
$
|
8,097
|
|
|
$
|
12,319
|
|
|
$
|
22,074
|
|
|
$
|
24,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average Common Shares
|
|
|
33,064
|
|
|
|
32,573
|
|
|
|
33,058
|
|
|
|
29,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO Per Common ShareBasic
|
|
$
|
0.24
|
|
|
$
|
0.38
|
|
|
$
|
0.67
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations attributable to the Trust
|
|
$
|
10,884
|
|
|
$
|
12,427
|
|
|
$
|
25,786
|
|
|
$
|
24,579
|
|
Preferred dividend of Series C Preferred Shares
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
(117
|
)
|
Preferred dividend of Series D Preferred Shares
|
|
|
(2,787
|
)
|
|
|
|
|
|
|
(3,712
|
)
|
|
|
|
|
Allocation of earnings to Series B-1 Preferred Shares
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(78
|
)
|
Allocation of earnings to Series C Preferred Shares
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
(92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO applicable to Common Shares
|
|
$
|
8,097
|
|
|
$
|
12,319
|
|
|
$
|
22,074
|
|
|
$
|
24,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average Common Shares
|
|
|
33,064
|
|
|
|
32,573
|
|
|
|
33,058
|
|
|
|
29,841
|
|
Stock options
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Series B-1 Preferred Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C Preferred Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average Common Shares
|
|
|
33,064
|
|
|
|
32,574
|
|
|
|
33,058
|
|
|
|
29,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO Per Common ShareDiluted
|
|
$
|
0.24
|
|
|
$
|
0.38
|
|
|
$
|
0.67
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
Critical Accounting Policies and Estimates
A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2011.
Recently Issued Accounting Standards
None
44
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Interest Rate Risk
We have exposure to fluctuations in market interest rates. Market
interest rates are highly sensitive to many factors beyond our control. Various financial vehicles exist which would allow management to partially mitigate the potential negative effects of interest rate fluctuations on our cash flow and earnings.
Our liabilities include both fixed and variable rate debt. We seek to limit our risk to interest rate fluctuations through match financings
on our assets as well as through hedging transactions.
The table below presents information about the Trusts derivative financial
instruments at June 30, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
Maturity
|
|
|
Strike
Rate
|
|
|
Notional
Amount of
Hedge
|
|
|
Cost of Hedge
|
|
|
Estimated Fair
Value of Cap
|
|
Cap
|
|
|
October 2014
|
|
|
|
1.00
|
%
|
|
$
|
21,000
|
|
|
|
174
|
|
|
|
25
|
|
Cap
|
|
|
May 2013
|
|
|
|
1.25
|
%
|
|
|
51,982
|
|
|
|
196
|
|
|
|
|
|
Cap
|
|
|
May 2014
|
|
|
|
1.75
|
%
|
|
|
51,982
|
|
|
|
434
|
|
|
|
6
|
|
The fair value of our debt, based on discounted cash flows at the current rate at which similar loans would be made to
borrowers with similar credit ratings for the remaining term of such debt, was less than its carrying value by $10,855,000 and $12,604,000 at June 30, 2012 and December 31, 2011, respectively.
The following table shows what the annual effect a change in the LIBOR rate would have on interest expense based upon the unhedged balances in variable
rate debt at June 30, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in LIBOR(2)
|
|
|
|
-0.24%
|
|
|
1%
|
|
|
2%
|
|
|
3%
|
|
Change in consolidated interest expense
|
|
$
|
(51
|
)
|
|
$
|
159
|
|
|
$
|
|
|
|
$
|
34
|
|
Pro-rata share of change in interest expense of debt on non-consolidated entities (1)
|
|
|
(20
|
)
|
|
|
63
|
|
|
|
34
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in net income
|
|
$
|
(71
|
)
|
|
$
|
222
|
|
|
$
|
34
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents our pro-rata share of a change in interest expense in our Marc Realty equity investment.
|
The amount does not reflect our equity investment in Concord which has been written down to zero.
(2)
|
The one-month LIBOR rate at June 30, 2012 was 0.24475%.
|
45
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
The Trusts equity investment in Vintage holds floating rate debt of approximately $172,628,000 and
bears interest at a rate indexed to the Securities Industry and Financial Markets Association Municipal Swap Index (SIFMA). The following table shows what the annual effect a change in the SIFMA rate would have on interest expense based upon the
unhedged balances in variable rate debt at May 31, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in SIFMA(1)
|
|
|
|
-0.18%
|
|
|
1%
|
|
|
2%
|
|
|
3%
|
|
Change in consolidated interest expense
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Pro-rata share of change in interest expense of debt on non-consolidated Vintage
|
|
|
(250
|
)
|
|
|
1,080
|
|
|
|
2,160
|
|
|
|
3,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in net income
|
|
$
|
(250
|
)
|
|
$
|
1,080
|
|
|
$
|
2,160
|
|
|
$
|
3,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The one-month SIFMA rate at May 31, 2012 was 0.18%.
|
We may utilize various financial instruments to mitigate the potential negative impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis
of the interest rate environment and the costs and risks of such strategies. In addition, our variable rate loan assets with a face value aggregating $30,818,000 at June 30, 2012 and December 31, 2011, partially mitigate our exposure to
change in interest rates.
46
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the SEC is
recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.
As of June 30, 2012, an evaluation was
performed under the supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the
Securities Exchange Act of 1934). Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of June 30, 2012.
Other Matters
There have been no
changes in our internal controls over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
47
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibits required by Item 601 of Regulation S-K are filed herewith or incorporated herein by reference and are listed in the attached Exhibit Index.
48
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Trust has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
Winthrop Realty Trust
|
|
|
|
|
Date: August 9, 2012
|
|
|
|
By:
|
|
/s/ Michael L. Ashner
|
|
|
|
|
|
|
Michael L. Ashner
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
Date: August 9, 2012
|
|
|
|
By:
|
|
/s/ John A. Garilli
|
|
|
|
|
|
|
John A. Garilli
|
|
|
|
|
|
|
Chief Financial Officer
|
49
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
EXHIBIT INDEX
|
|
|
|
|
|
|
Exhibit
|
|
Description
|
|
Page
Number
|
|
|
|
|
3.1
|
|
Second Amended and Restated Declaration of Trust as of May 21, 2009Incorporated by reference to Exhibit 3.1 to the Trusts Quarterly Report on Form 10-Q for the period
ended June 30, 2009.
|
|
|
|
|
|
|
|
3.2
|
|
By-laws of Winthrop Realty Trust as amended and restated on November 3, 2009Incorporated by reference to Exhibit 3.1 to the Trusts Current Report on Form 8-K filed
November 6, 2009.
|
|
|
|
|
|
|
|
3.3
|
|
Amendment to By-lawsIncorporated by reference to Exhibit 3.1 to the Trusts Current Report on Form 8-K filed March 6, 2010.
|
|
|
|
|
|
|
|
4.1
|
|
Form of certificate for Common Shares of Beneficial Interest. Incorporated by reference to Exhibit 4.1 to the Trusts Annual Report on Form 10-K for the year ended December 31,
2008.
|
|
|
|
|
|
|
|
4.2
|
|
Warrant to purchase 500,000 shares of Beneficial Interest of TrustIncorporated by reference to Exhibit 4(l) to the Trusts Annual Report on Form 10-K for the year ended
December 31, 1998.
|
|
|
|
|
|
|
|
4.3
|
|
Agreement of Limited Partnership of WRT Realty L.P., dated as of January 1, 2005Incorporated by reference to Exhibit 4.1 to the Trusts Form 8-K filed January 4,
2005.
|
|
|
|
|
|
|
|
4.4
|
|
Amendment No. 1 to Agreement of Limited Partnership of WRT Realty, L.P., dated as of December 1, 2005 incorporated by reference to Exhibit 4.4 to the Trusts Form 10-K filed
March 15, 2012.
|
|
|
|
|
|
|
|
4.5
|
|
Amendment No. 2 to Agreement of Limited Partnership of WRT Realty, L.P., dated as of November 28, 2011Incorporated by reference to the Trusts Form 8-K filed November 28,
2011.
|
|
|
|
|
|
|
|
4.6
|
|
Amendment No. 3 to Agreement of Limited Partnership of WRT Realty, L.P., dated as of March 23, 2012Incorporated by reference to the Trusts Form 8-K filed March 23,
2012
|
|
|
|
|
|
|
|
4.7
|
|
Amended and restated Certificate of Designations of 9.25% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest - Incorporated by reference to the Trusts Form
8-K filed March 23, 2012.
|
|
|
|
|
|
|
|
4.8
|
|
Form of Specimen Certificate for the 9.25% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest - Incorporated by reference to Exhibit 4.2 to Trusts Form 8-A
filed with the Securities and Exchange Commission on November 23, 2011.
|
|
|
|
|
|
|
|
10.1
|
|
Stock Purchase Agreement between the Trust and FUR Investors, LLC, dated as of November 26, 2003, including Annex A thereto, being the list of Conditions to the Offer - Incorporated
by reference to Exhibit 10.1 to the Trusts Form 8-K filed December 1, 2003.
|
|
|
|
|
|
|
|
10.2
|
|
Second Amended and Restated Advisory Agreement dated March 5, 2009, between the Trust, WRT Realty L.P. and FUR Advisors LLC. Incorporated by reference to Exhibit 10.3 to the
Trusts Annual Report on Form 10-K for the year ended December 31, 2008.
|
|
|
|
|
|
|
|
10.3
|
|
Amendment No. 1 to Second Amended and Restated Advisory AgreementIncorporated by reference to Exhibit 10.30 to the Trusts Quarterly Report on Form 10-Q for the period
ended March 31, 2009.
|
|
|
|
|
50
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
|
|
|
|
|
|
|
10.4
|
|
Amendment No. 2 to Second Amended and Restated Advisory AgreementIncorporated by reference to Exhibit 10.1 to the Trusts Form 8-K filed January 29,
2010.
|
|
|
|
|
|
|
|
10.5
|
|
Amendment No. 3 to Second Amended and Restated Advisory AgreementIncorporated by reference to Exhibit 10.1 to the Trusts Form 8-K filed March 2, 2012.
|
|
|
|
|
|
|
|
10.6
|
|
Exclusivity Services Agreement between the Trust and Michael L. AshnerIncorporated by reference to Exhibit 10.4 to the Trusts Form 8-K filed December 1,
2003.
|
|
|
|
|
|
|
|
10.7
|
|
Amendment No. 1 to Exclusivity Agreement, dated November 7, 2005Incorporated by reference to Exhibit 10.7 to the Trusts Form 8-K filed November 10, 2005.
|
|
|
|
|
|
|
|
10.8
|
|
Covenant Agreement between the Trust and FUR Investors, LLCIncorporated by reference to Exhibit 10.5 to the Trusts Form 8-K filed December 1, 2003.
|
|
|
|
|
|
|
|
10.9
|
|
Amended and Restated Omnibus Agreement, dated March 16, 2005, among Gerald Nudo, Laurence Weiner and WRT Realty L.P.Incorporated by reference to Exhibit 10.1 to the
Trusts Form 8-K filed March 18, 2005.
|
|
|
|
|
|
|
|
10.10
|
|
Agreement, dated as of July 1, 2009, among Gerald Nudo, Laurence Weiner and WRT Realty L.P. Incorporated by reference to Exhibit 10.14 to the Trusts Form 10-Q for the period
ended June 30, 2009 filed August 10, 2009.
|
|
|
|
|
|
|
|
10.11
|
|
Winthrop Realty Trust 2007 Long Term Stock Incentive PlanIncorporated by reference to the Trusts Definitive Proxy Statement on Schedule 14A filed with the Securities and
Exchange Commission on March 30, 2007.
|
|
|
|
|
|
|
|
10.12
|
|
Amended and Restated Loan Agreement, dated as of March 3, 2011, between WRT Realty L.P. and KeyBank, National Association.Incorporated by reference to Exhibit 10.19 to the
Trusts 10-K filed March 16, 2011.
|
|
|
|
|
|
|
|
10.13
|
|
Guaranty from Winthrop Realty Trust and certain of its Subsidiaries in favor of KeyBank, National Association.
Incorporated by reference to Exhibit 10.20 to the Trusts 10-K filed March 16, 2011.
|
|
|
|
|
|
|
|
31
|
|
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
(1)
|
|
|
|
|
32
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
(1)
|
|
|
|
|
101.INS
|
|
XBRL Report Instance Document
|
|
|
(2)
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
(2)
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Calculation Linkbase Document
|
|
|
(2)
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Label Linkbase Document
|
|
|
(2)
|
|
|
|
|
101.PRE
|
|
XBRL Presentation Label Linkbase Document
|
|
|
(2)
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
(2)
|
|
(2)
|
The XBRL related information was previously furnished with the Registrants Form 10-Q for the quarter ended June 30, 2012 and is not deemed
filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended (the Securities Act), or Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise
subject to the liabilities of
|
51
WINTHROP REALTY TRUST
FORM 10-Q JUNE 30, 2012
|
those sections, and is not part of any registration statement to which it may relate, and is not incorporated by reference into any registration statement or other document filed under the
Securities Act or the Exchange Act, except as set forth by specific reference in such filing or document.
|
52
Grafico Azioni Winthrop (NYSE:FUR)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Winthrop (NYSE:FUR)
Storico
Da Lug 2023 a Lug 2024