UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 29, 2015
Terreno Realty Corporation
(Exact name of registrant as specified in its charter)
| Maryland | 001-34603 | 27-1262675 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
101 Montgomery Street, Suite 200
San Francisco, CA 94104
(Address of principal executive offices) (Zip Code)
(415) 655-4580
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K/A filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
This Form 8-K/A amends and supplements the registrant’s Form 8-K, filed on February 4, 2015 reporting the acquisition of V Street (the “Initial Report”), to include the historical financial statements and pro forma financial information required by Item 9.01(a) and (b) of Form 8-K. This Form 8-K/A should be read in conjunction with the Initial Report.
Item 9.01. Financial Statements and Exhibits
| (a) Financial Statements Under Rule 3-14 of Regulation S-X |
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| (i) Statement of Revenues and Certain Expenses of V Street |
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| 3 | ||||
| Statement of Revenues and Certain Expenses for the year ended December 31, 2014 |
5 | |||
| 6 | ||||
| (b) Unaudited Pro Forma Condensed Consolidated Information |
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| Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2014 |
9 | |||
| Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2014 |
10 | |||
| 11 | ||||
| 12 | ||||
(d) Exhibits
| Exhibit Number |
Title | |
| 23.1* | Consent of Independent Auditor | |
| * | Filed herewith |
Report of Independent Auditors
The Board of Directors and Stockholders of
Terreno Realty Corporation
We have audited the accompanying statement of revenues and certain expenses of V Street (the “Property”), for the year ended December 31, 2014, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the statement of revenues and certain expenses in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement of revenues and certain expenses that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement of revenues and certain expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the statement of revenues and certain expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the statement of revenues and certain expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the statement of revenues and certain expenses described in Note 1 of V Street for the year ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.
3
Basis of Accounting
As described in Note 1 to the financial statements, the statement of revenues and certain expenses of the Property have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K/A of Terreno Realty Corporation, and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to this matter.
| /s/ Ernst & Young LLP |
| San Francisco, California |
| March 16, 2015 |
4
Statement of Revenues and Certain Expenses
For the Year Ended December 31, 2014
(in thousands)
| Revenues: |
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| Rental |
$ | 5,347 | ||
| Tenant Reimbursements |
1,612 | |||
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| Total revenues |
6,959 | |||
| Certain expenses: |
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| Property operating expenses |
1,188 | |||
| Real estate taxes |
638 | |||
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| Total expenses |
1,826 | |||
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| Revenues in excess of certain expenses |
$ | 5,133 | ||
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See accompanying notes to statement of revenues and certain expenses.
5
Notes to Statement of Revenues and Certain Expenses
For the Year Ended December 31, 2014
1. Background and Basis of Presentation
The accompanying statement of revenues and certain expenses present the results of operations of V Street (the “Property”) for the year ended December 31, 2014. The Property was acquired by a wholly-owned subsidiary of Terreno Realty Corporation from a third-party seller, SMC-United Industrial Limited Partnership on January 29, 2015 for approximately $115.5 million. The Property is located in Washington, D.C. and consists of six distribution buildings containing 820,207 square feet (unaudited) at the time of acquisition.
The accompanying statement of revenues and certain expenses has been prepared on the accrual basis of accounting. The statement of revenues and certain expenses has been prepared for the purpose of complying with the provisions of Article 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission and for inclusion in this Current Report on Form 8-K/A of Terreno Realty Corporation and are not intended to be a complete presentation of the revenues and expenses of the Property for the year ended December 31, 2014 as certain expenses, primarily depreciation and amortization expense and other costs not comparable to the proposed future operations of the Property have been excluded. Management is not aware of any material factors at the Property other than those disclosed above, that would cause the reported financial information not to be necessarily indicative of future operating results.
2. Summary of Significant Accounting Policies
Revenue Recognition
Rental revenues from operating leases are recorded on a straight-line basis over the terms of the leases. Tenant reimbursements represent recoveries from tenants for utilities and certain property maintenance expenses. Tenant reimbursements are recognized as revenues in the period the applicable costs are accrued.
Property Operating Expenses
Property operating expenses represent the direct expenses of operating the Property and include maintenance, utilities, property management fees, repairs, and insurance costs that are expected to continue in the ongoing operations of the Property. Expenditures for maintenance and repairs are charged to operations as incurred.
6
Use of Estimates
The preparation of the statement of revenues and certain expenses in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions of the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from those estimates used in the preparation of the statement of revenues and certain expenses.
Tenant Concentration
For the year ended December 31, 2014, two tenants accounted for approximately 50% of total revenues.
Future Minimum Rental Income
Future minimum rents to be received under non-cancelable lease agreements as of December 31, 2014 were as follows (in thousands):
| 2015 |
$ | 5,477 | ||
| 2016 |
4,596 | |||
| 2017 |
3,521 | |||
| 2018 |
2,645 | |||
| 2019 |
1,828 | |||
| Thereafter |
2,353 | |||
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| Total |
$ | 20,420 | ||
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7
UNAUDITED PRO FORMA FINANCIAL INFORMATION OF TERRENO REALTY CORPORATION
The following unaudited pro forma financial information of Terreno Realty Corporation (the “Company”) is based on the historical financial statements of the Company. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2014 is based on the Company’s consolidated balance sheet and reflects the subsequent acquisitions of 10100 NW 25th, V Street, 9070 Junction and NW 81st and the related borrowings on the term loans payable as if such transactions had occurred on December 31, 2014. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2014 has been prepared to reflect the incremental effect of the acquisition of properties by the Company during the period from January 1, 2015 to March 13, 2015 (the “2015 Acquisitions”) and the year ended December 31, 2014 (the “2014 Acquisitions”) as if such transactions had occurred on January 1, 2014 for the December 31, 2014 statement.
The following table summarizes the 2015 and 2014 Acquisitions (in thousands):
| Property Name |
Location |
Acquisition Date |
Purchase Price (in thousands) |
Assumed Debt | ||||||||
| SW 34th Street |
Renton, WA | February 11, 2014 | $ | 6,600 | $ | 2,764 | ||||||
| Parkway |
Hanover, MD | March 26, 2014 | 18,000 | — | ||||||||
| Pulaski |
Bayonne, NJ | March 31, 2014 | 9,200 | — | ||||||||
| 747 Glasgow |
Inglewood, CA | April 22, 2014 | 3,450 | — | ||||||||
| Hampton |
Capitol Heights, MD | May 13, 2014 | 18,050 | — | ||||||||
| Burroughs |
San Leandro, CA | May 14, 2014 | 13,328 | — | ||||||||
| California |
Corona, CA | June 5, 2014 | 7,815 | — | ||||||||
| Las Hermanas |
Compton, CA | June 12, 2014 | 4,020 | — | ||||||||
| South Main II |
Carson, CA | July 18, 2014 | 8,500 | — | ||||||||
| 79th Ave South |
Kent, WA | July 25, 2014 | 2,770 | — | ||||||||
| Auburn 1307 |
Auburn, WA | August 22, 2014 | 9,530 | — | ||||||||
| 3401 Lind |
Renton, WA | October 3, 2014 | 9,975 | 5,657 | ||||||||
| 900 Hart |
Rahway, NJ | October 8, 2014 | 7,205 | — | ||||||||
| Kent 216th |
Kent, WA | October 24, 2014 | 9,214 | — | ||||||||
| 9020 Junction |
Annapolis Junction, MD | December 17, 2014 | 13,800 | — | ||||||||
| 11300 NW 131st |
Medley, FL | December 19, 2014 | 8,925 | — | ||||||||
| Terminal Way |
Avenel, NJ | December 25, 2014 | 7,445 | — | ||||||||
| 14605 Miller |
Fontana, CA | December 2, 2014 | 22,899 | — | ||||||||
| Park Union City |
Union City, CA | December 10, 2014 | 23,800 | — | ||||||||
| 75th Ave |
Landover, MD | December 17, 2014 | 31,215 | — | ||||||||
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| Subtotal 2014 Acquisitions |
235,741 | 8,421 | ||||||||||
| 10100 NW 25th |
Doral, FL | January 23, 2015 | $ | 9,875 | $ | — | ||||||
| V Street |
Washington, D.C. | January 29, 2015 | 115,500 | — | ||||||||
| 9070 Junction |
Annapolis Junction, MD | February 19, 2015 | 10,360 | — | ||||||||
| NW 81st |
Medley, FL | February 27, 2015 | 8,500 | — | ||||||||
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| Subtotal 2015 Acquisitions |
144,235 | — | ||||||||||
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| Total |
$ | 379,976 | $ | 8,421 | ||||||||
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The unaudited pro forma financial information is not necessarily indicative of what the Company’s results of operations or financial condition would have been assuming the acquisition of properties had occurred at the beginning of the periods presented, nor is it indicative of the Company’s results of operations or financial condition for future periods. In management’s opinion, all adjustments necessary to reflect the effects of these transactions have been made. The unaudited pro forma financial information and accompanying notes should be read in conjunction with the Company’s financial statements included on 2014 Form 10-K for the year ended December 31, 2014.
8
Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2014
(in thousands – except share and per share data)
(Unaudited)
| Terreno Realty Corporation (1) |
V Street (2) | Other 2015 Acquisitions (3) |
Pro Forma Terreno Realty Corporation |
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| ASSETS |
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| Investments in real estate, net |
$ | 862,142 | $ | 115,500 | $ | 28,735 | $ | 1,006,377 | ||||||||
| Cash and cash equivalents |
197,564 | (115,186 | ) | (28,648 | ) | 53,730 | ||||||||||
| Deferred financing costs, net |
2,986 | — | — | 2,986 | ||||||||||||
| Other assets, net |
14,074 | — | — | 14,074 | ||||||||||||
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| Total assets |
$ | 1,076,766 | $ | 314 | $ | 87 | $ | 1,077,167 | ||||||||
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| LIABILITIES AND EQUITY |
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| Liabilities |
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| Credit facility |
$ | — | $ | — | $ | — | $ | — | ||||||||
| Term loan payable |
200,000 | — | — | 200,000 | ||||||||||||
| Mortgage loans payable |
104,501 | — | — | 104,501 | ||||||||||||
| Security deposits |
5,315 | 314 | 87 | 5,716 | ||||||||||||
| Intangible liabilities |
3,556 | — | — | 3,556 | ||||||||||||
| Dividends payable |
6,859 | — | — | 6,859 | ||||||||||||
| Accounts payable and other liabilities |
9,499 | — | — | 9,499 | ||||||||||||
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| Total liabilities |
329,730 | 314 | 87 | 330,131 | ||||||||||||
| Commitments and contingencies |
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| Equity |
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| Stockholders’ equity |
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| Preferred stock: $0.01 par value, 100,000,000 shares authorized, and 1,840,000 (liquidation preference of $25.00 per share) issued and outstanding |
46,000 | — | — | 46,000 | ||||||||||||
| Common stock: $0.01 par value, 400,000,000 shares authorized, and 42,869,463 shares issued and outstanding |
428 | — | — | 428 | ||||||||||||
| Additional paid-in capital |
700,755 | — | — | 700,755 | ||||||||||||
| Retained earnings |
— | — | — | — | ||||||||||||
| Accumulated other comprehensive loss |
(147 | ) | — | — | (147 | ) | ||||||||||
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| Total stockholders’ equity |
747,036 | — | — | 747,036 | ||||||||||||
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| Total liabilities and equity |
$ | 1,076,766 | $ | 314 | $ | 87 | $ | 1,077,167 | ||||||||
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See accompanying notes to unaudited pro forma condensed consolidated balance sheet.
9
Notes to Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2014
(Unaudited)
| (1) | Represents the audited historical consolidated balance sheet of Terreno Realty Corporation (the “Company”) for the year ended December 31, 2014. See the historical consolidated financial statements and notes thereto included in the Company’s 2014 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on February 11, 2015. |
| (2) | Reflects the acquisition of V Street as if it had occurred on December 31, 2014 for approximately $115.5 million. The acquisition was funded by cash on hand. |
| (3) | Reflects the acquisitions of 10100 NW 25th, 9070 Junction and NW 81st for approximately $28.7 million. The acquisitions were funded by cash on hand. |
10
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2014
(in thousands – except share and per share data)
(Unaudited)
| Terreno Realty Corporation (1) |
2015 Acquisitions |
2014 Acquisitions |
Pro Forma Adjustments |
Pro Forma Terreno Realty Corporation |
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| REVENUES |
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| Rental revenues |
$ | 68,875 | $ | 7,379 | (2) | $ | 12,845 | (2) | $ | — | $ | 76,254 | ||||||||
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| Total revenues |
68,875 | 7,379 | 12,845 | — | 76,254 | |||||||||||||||
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| COSTS AND EXPENSES |
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| Property operating expenses |
19,161 | 1,562 | (2) | 3,775 | (2) | — | 20,723 | |||||||||||||
| Depreciation and amortization |
19,170 | 3,195 | (2) | 2,779 | (2) | — | 22,365 | |||||||||||||
| General and administrative |
9,496 | — | — | — | 9,496 | |||||||||||||||
| Acquisition costs |
3,740 | — | — | (3,740 | )(3) | — | ||||||||||||||
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| Total costs and expenses |
51,567 | 4,757 | 6,554 | (3,740 | ) | 52,584 | ||||||||||||||
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| OTHER INCOME (EXPENSE) |
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| Interest and other income |
1 | — | — | — | 1 | |||||||||||||||
| Interest expense, including amortization |
(6,591 | ) | — | (158 | ) | (2,245 | )(4) | (8,836 | ) | |||||||||||
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| Total other income and expenses |
(6,590 | ) | — | (158 | ) | (2,245 | ) | (8,835 | ) | |||||||||||
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| Net income |
10,718 | 2,622 | 6,134 | 1,495 | 14,835 | |||||||||||||||
| Preferred stock dividends |
(3,565 | ) | — | — | — | (3,565 | ) | |||||||||||||
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| Net income, net of preferred stock dividends |
7,153 | 2,622 | 6,134 | 1,495 | 11,270 | |||||||||||||||
| Allocation to participating securities |
(27 | ) | — | — | — | (27 | ) | |||||||||||||
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| Net income available to common stockholders, net of preferred stock dividends |
$ | 7,126 | $ | 2,622 | $ | 6,134 | $ | 1,495 | $ | 11,243 | ||||||||||
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| EARNINGS PER COMMON SHARE - BASIC AND DILUTED: |
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| Income from continuing operations available to common stockholders, net of preferred stock dividends |
$ | 0.23 | — | — | — | $ | 0.26 | |||||||||||||
| Income from discontinued operations |
— | — | — | — | — | |||||||||||||||
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| Net income available to common stockholders, net of preferred stock dividends |
$ | 0.23 | — | — | — | $ | 0.26 | |||||||||||||
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| BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
30,433,017 | — | — | 12,268,767 | (5) | 42,701,784 | ||||||||||||||
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See accompanying notes to unaudited pro forma condensed consolidated statement of operations.
11
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2014
(Unaudited)
| (1) | Represents the audited historical consolidated operations of Terreno Realty Corporation (the “Company”) for the year ended December 31, 2014. See the historical consolidated financial statements and notes thereto included in the Company’s 2014 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on February 11, 2015. |
| (2) | The following table sets forth the incremental rental revenues, operating expenses, depreciation and amortization and interest expense of the 2015 and 2014 Acquisitions for the year ended December 31, 2014 based on the historical and pro forma operations of such properties for the periods prior to acquisition by the Company as if the properties were acquired on January 1, 2014 (dollars in thousands). |
| Acquisition Date |
Rental Revenues |
Operating Expenses |
Depreciation and Amortization |
Interest Expense | Net (loss) income | |||||||||||||||||
| SW 34th Street |
February 11, 2014 | $ | 72 | $ | 9 | $ | 23 | $ | 15 | $ | 25 | |||||||||||
| Parkway |
March 26, 2014 | 529 | 152 | 124 | — | 253 | ||||||||||||||||
| Pulaski |
March 31, 2014 | 211 | 65 | 106 | — | 40 | ||||||||||||||||
| 747 Glasgow |
April 22, 2014 | 52 | 31 | 22 | — | (1 | ) | |||||||||||||||
| Hampton |
May 13, 2014 | 504 | 80 | 234 | — | 191 | ||||||||||||||||
| Burroughs |
May 14, 2014 | 393 | 89 | 121 | — | 183 | ||||||||||||||||
| California |
June 5, 2014 | 243 | 40 | 111 | — | 93 | ||||||||||||||||
| Las Hermanas |
June 12, 2014 | 135 | 40 | 21 | — | 73 | ||||||||||||||||
| South Main II |
July 18, 2014 | 482 | 163 | 37 | — | 282 | ||||||||||||||||
| 79th Ave South |
July 25, 2014 | 100 | 79 | 27 | — | (6 | ) | |||||||||||||||
| Auburn 1307 |
August 22, 2014 | 413 | 145 | 179 | — | 89 | ||||||||||||||||
| Lind |
October 3, 2014 | 657 | 152 | 112 | 143 | 251 | ||||||||||||||||
| Hart |
October 8, 2014 | 358 | 197 | 74 | — | 87 | ||||||||||||||||
| Kent 216 |
October 24, 2014 | 642 | 175 | 127 | — | 341 | ||||||||||||||||
| Junction |
December 17, 2014 | 1,226 | 175 | 255 | — | 795 | ||||||||||||||||
| 131st |
December 19, 2014 | 669 | 138 | 146 | — | 385 | ||||||||||||||||
| Terminal Way |
December 25, 2014 | 557 | 165 | 110 | — | 283 | ||||||||||||||||
| 14605 Miller |
December 2, 2014 | 1,715 | 394 | 162 | — | 1,159 | ||||||||||||||||
| Park Union City |
December 10, 2014 | 1,777 | 541 | 262 | — | 974 | ||||||||||||||||
| 75th Ave |
December 17, 2014 | 2,110 | 945 | 527 | — | 638 | ||||||||||||||||
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| Total 2014 Acquisitions |
$ | 12,845 | $ | 3,775 | $ | 2,779 | $ | 158 | $ | 6,134 | ||||||||||||
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| Acquisition Date |
Rental Revenues |
Operating Expenses |
Depreciation and Amortization |
Interest Expense | Net (loss) income | |||||||||||||||||
| 25th Street |
January 23, 2015 | 833 | 194 | 270 | — | 369 | ||||||||||||||||
| V Street |
January 29, 2015 | 6,209 | 1,188 | 2,704 | — | 2,317 | ||||||||||||||||
| 9070 Junction |
February 19, 2015 | 337 | 180 | 221 | — | (64 | ) | |||||||||||||||
| NW 81st |
February 27, 2015 | — | — | — | — | — | ||||||||||||||||
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| Total 2015 Acquisitions |
$ | 7,379 | $ | 1,562 | $ | 3,195 | $ | — | $ | 2,622 | ||||||||||||
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NW 81st was acquired from an unrelated third-party after a sale/leaseback transaction and did not have historical revenues and expenses as the property was owned and operated by the tenant. As such, no property operations have been reflected in the accompanying unaudited pro forma condensed consolidated statement of operations.
Rental revenues set forth above include adjustments for straight-line rents and amortization of lease intangibles.
12
| (3) | Reflects the adjustment to acquisitions costs as if the 2015 and 2014 Acquisitions had occurred on January 1, 2014. |
| (4) | Reflects the adjustment to interest expense as if the $50.0 million term loan at an interest rate of LIBOR plus the applicable LIBOR margin of 1.75% and the $100.0 million term loan at an interest rate of LIBOR plus the applicable LIBOR margin of 1.50% had occurred on January 1, 2014. |
| (5) | Reflects the adjustment to the basic and diluted weighted average common shares outstanding as if the May 22, 2014 follow-on offering of 8,050,000 shares of common stock at a price per share of $17.75 and the December 9, 2014 follow-on offering of 9,775,000 shares of common stock at a price per share of $19.60 had occurred on January 1, 2014. |
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Terreno Realty Corporation | ||||||
| Date: March 16, 2015 | By: | /s/ Jaime J. Cannon | ||||
| Jaime J. Cannon | ||||||
| Chief Financial Officer | ||||||
14
Exhibit Index
| Exhibit Number |
Title | |
| 23.1* | Consent of Independent Auditor | |
| * | Filed herewith |
15