2013-28438 Reso RESOLUTION NO. 2013-28438
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA AUTHORIZING THE CITY MANAGER TO
DECLINE, IN WRITING, THE RIGHT OF FIRST OFFER TRANSACTION,
AS REQUIRED PURSUANT TO THE TERMS OF SECTION 36.2 OF THE
AGREEMENT OF LEASE ("LEASE") BETWEEN THE CITY ("OWNER")
AND PELICAN INVESTMENT HOLDINGS, LLC ("TENANT"), DATED AS
OF DECEMBER 1, 1999, INVOLVING THE IMPROVEMENTS TO
PROPERTY (THE "PROJECT") LOCATED AT 1027 COLLINS AVENUE,
MIAMI BEACH, FLORIDA,AND 1041 COLLINS AVENUE, MIAMI BEACH,
FLORIDA; AND FURTHER APPROVING TENANT'S SALE OF THE
PROJECT TO THE PROPOSED PURCHASER, LIPT COLLINS AVENUE,
LLC, A DELAWARE LIMITED LIABILITY CORPORATION, WHICH IS A
WHOLLY OWNED SUBSIDIARY OF JONES LANG LASALLE INCOME
PROPERTY TRUST, INC.,SUBJECT TO AND CONDITIONED UPON CITY
STAFF'S SUCCESSFUL COMPLETION OF ITS EVALUATION OF THE
PROPOSED PURCHASER IN ACCORDANCE WITH ARTICLE 10 OF THE
.
LEASE (THE "CITY'S DUE DILIGENCE"); PAYMENT TO THE CITY OF
ITS REASONABLE COSTS INCURRED IN CONNECTION WITH THE
PROPOSED SALE INCLUDING, WITHOUT LIMITATION,
REIMBURSEMENT OF THE CITY'S DUE DILIGENCE COSTS, AND
PAYMENT TO THE CITY OF THE "SETTLEMENT OFFER" (AS SUCH
TERM IS HEREINAFTER DEFINED IN THIS RESOLUTION); AND
FURTHER AUTHORIZING THE CITY MANAGER AND CITY CLERK TO
EXECUTE ANY AND ALL CLOSING DOCUMENTS ON BEHALF OF THE
CITY IN CONNECTION WITH THE PROPOSED SALE.
WHEREAS, on January 5, 1998, the City issued Request for Proposals No. 20-
97/98, seeking proposals for the development of Public-Private Parking Facilities (the
RFP); on April 6, 1998, proposals from five (5) different development teams were
submitted and evaluated by an Evaluation Committee; and on July 15, 1998, the City
Commission authorized negotiations with four (4) of the proposed development projects;
and
WHEREAS, as a result of said negotiations, on October 20, 1999, the Mayor and
City Commission adopted Resolution No. 99-23372, approving an Agreement of Lease(the
"Lease")and Development Agreement between the City and Pelican Development LLC,for
development of a public parking garage with ground floor retail space (not to exceed 5,000
square feet), on the City-owned land located at 1027 Collins Avenue, and 1041 Collins
Avenue (the "Project"); and
WHEREAS, an Agreement of Lease (the "Lease") was executed between the City
("Owner") and Pelican Development, LLC, dated as of December 1, 1999; and
1 1 1
WHEREAS, on or about June 1, 2004,the Project was sold and transferred from the
original tenant, Pelican Development to Ocean Blvd 11, LLC, an Indiana limited liability
company, and on or about May 27, 2010, the Project was sold and transferred from Ocean
Blvd II, LLC to the current tenant, Pelican Investment Holdings, LLC, a Florida limited
liability company ("Tenant"); and
WHEREAS, in accordance with Article 10 of the Lease, on October 29, 2013, the
Tenant notified the City in writing ("Offer"), requesting the City's consent to the proposed
sale and assignment of Tenant's 100% interest in the Project (the "Sale") to a real estate
investment trust, LIPT Collins Avenue, LLC, a Delaware limited liability corporation, which
is a wholly owned subsidiary of Jones Lang LaSalle Income Property Trust, Inc. ("Proposed
Purchaser"), for a total cash sum of$22,500,000.00 ("Purchase Price"); and
WHEREAS, pursuant to Section 26.2(c)(iii) of the Lease, the City has until
December 26, 2013, in which to approve or disapprove of the Sale of the Project to the
Proposed Purchaser; and
WHEREAS, in accordance with Section 36.2 of the Lease, "Owner's Reciprocal
Right of First Refusal", the City also has the right to elect, in writing, whether to
consummate the Right of First Offer Transaction, at the same price and upon such other
material terms set forth in the Offer Notice ("Offer"); the City has until December 13, 2013
to exercise this Right of First Refusal; and
WHEREAS, the Lease is also subject to a 1999 settlement agreement with KTKL
Corporation (the "KTKL Settlement"), under which the City is obligated, for a term of thirty
years (which commenced on October 31, 2002), to pay KTKL for the City's lease of 28
spaces (the "KTKL Spaces") in the Project; and
WHEREAS, although the KTKL Spaces have been historically utilized by the Tenant
since the opening of the Project, the Proposed Purchaser, as part of its due diligence, is
requesting an estoppel certificate from the City, which among other matters, representing
that, during the remaining Term of the Lease, the City will continue not to utilize the KTKL
Spaces; and
WHEREAS, following negotiations with City staff, the Tenant has offered the City
the total sum of $250,000.00, as consideration for said representation and agreement
("Settlement Offer"); and
WHEREAS, after considering the revenue figures from surrounding City-owned and
managed parking garages (as compared to the Project garage, which is a privately
managed garage); the financials for the Project; the $250,000.00 Settlement Offer to the
City; and the expense of the annual KTKL Settlement payments, City staff determined that
it would take the City 14.70 years to break even if the City exercised the Owner's
Reciprocal Right of First Refusal; and
WHEREAS, based upon the fact that the Offer materially exceeds the cost per
space to construct a City-owned parking facility and, further,that the Project will revert back
to the City at the end of the Lease term, the Administration is not prepared to recommend
that the City exercise the Reciprocal Right of First Offer Transaction; and
WHEREAS, the Administration further recommends that the City Commission
approve the proposed Sale of the Project to the Proposed Purchaser, Jones Lang LaSalle
Income Property Trust, Inc., subject to City staff's successful completion of the City's Due
Diligence, Tenant's payment of the City's Due Diligence costs, and payment to the City of
the Settlement Offer.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission hereby authorize the City Manager to decline, in writing, the Right of First
Offer Transaction, as required pursuant to the terms of Section 36.2 of the Agreement of
Lease ("Ground Lease") between City ("Owner") and Pelican Investment Holdings, LLC
("Tenant"), dated as of December 1, 1999, involving the improvements to Property (the
"Project") located at 1027 Collins Avenue, Miami Beach, Florida, and 1041 Collins Avenue,
Miami Beach, Florida; and further approve the Sale of the Project to the Proposed
Purchaser, LIPT Collins Avenue, LLC, a Delaware limited liability corporation, which is a
wholly owned subsidiary of Jones Lang LaSalle Income Property Trust, Inc., subject to and
conditioned upon City staffs successful completion of its evaluation of the Proposed
Purchaser in accordance with Article 10 of the Lease (the "City's Due Diligence"); and
payment to the City of its reasonable costs incurred in connection with the proposed Sale
including, without limitation, reimbursement of the City's Due Diligence costs and payment
of the Settlement Offer; and further authorizing the City Manager and City Clerk to execute
any and all closing documents on behalf of the City.
PASSED and ADOPTED this 11th day of December 2013.
MAY
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CITY C ERIC
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Condensed Title: COMMISSION ITEM SUMMARY
Resolution of the Mayor and City Commission of the City of Miami Beach, authorizing the City Manager to decline, the Right of First
Offer Transaction, as required pursuant to the terms of the Ground Lease between City ("Owner") and Pelican Investment Holdings,
LLC ("Tenant"), dated December 1, 1999, involving improvements at 1027-1041 Collins Avenue ("Project"); approving the Sale of the
Project subject to satisfactory completion by City staff of the City's Due Diligence, and payment by Tenant to City of the City's Due
Diligence Costs and the "Settlement Offer"; further authorizing the City Manager and City Clerk to execute any and all closing
documents,on behalf of the City.
Key Intended Outcome Supported:
Improve parking availability
Supporting Data (Surveys, Environmental Scan, etc.):
Approximately 21% of residents rate the availability of parking throughout the City as about the right amount; and 28% of businesses
rate the availability of parking for customers and employees as excellent or good.
Issue:
Shall the City Commission authorize the City Manager to decline the Right of First Offer Transaction, approve the Sale to the
Proposed Purchaser,and authorize the City Manager and City Clerk to execute all necessary closing documents?
Item Summa /Recommendation:
KTKL Settlement: In 1993, the City purchased land from KTKL, which it needed in order to secure a developer for the construction of
the Project. The Project included a Parking Facility which was urgently needed at the time. In connection with said purchase
agreement, KTKL had the right to exclusive use of 28 spaces at the Parking Facility for a period of 30 years ("KTKL Spaces"). The
City and KTKL thereafter entered into a Settlement Agreement,whereby the City leased back from KTKL its 28 spaces with respect to
the value of 28 parking spaces in the Parking Facility, based upon a formula of net income from the Parking Facility ("KTKL
Memorandum"). KTKL then sued the City citing underpayment under the Memorandum and the City and KTKL settled the alleged
sums ("KTKL Settlement"), which involved annual payments from the City to KTKL though October 31, 2032, the thirty year lease
period of the KTKL spaces.
The City entered into a Ground Lease and Development Agreement with the original tenant(which also developed the Project),for an
initial forty year term, ending January 31, 2040,with one additional ten year option. The Project was completed on October 31, 2002
and has a parking garage with 328 spaces and ground retail space of approximately 3,350 square feet.
On October 29, 2013,the current tenant, Pelican Investment Holdings, LLC ("Tenant"), provided City with notice that Tenant intended
to sell 100% of its leasehold interest in the Project to Jones Lang LaSalle Income Property Trust, Inc., for the total sum of
$22,500,000.00 in cash ("Offer"). The City, under the Lease, has until December 26, 2013 to approve the Proposed Purchaser.
Additionally, per the Lease,the City has until December 13,2013,to notify Tenant,whether or not the City intends to consummate the
Right of First Offer Transaction, at the same price and upon such other material terms set forth in the Offer Notice.
The Ground Lease is subject to this KTKL Settlement and the Proposed Purchaser is requesting assurances that during the Term of
the Ground Lease,the City will continue not to utilize the KTKL Spaces,as their Offer relies upon the ability to sublease all the parking
spaces in the Garage Facility. The Proposed Purchaser has offered the City the total sum of$250,000.00 (the"Settlement Offer") as
consideration for said representation and agreement("Settlement Offer").
After considering the revenue figures from surrounding City-owned and managed parking garages, as compared to the Pelican
Parking Facility, which is a privately managed; the comparison of the cost to construct a public Parking Facility; the $250,000
Settlement Offer and the expense of the annual KTKL Settlement payments, staff determined that it would take the City 14.70 years to
break even if the City exercised the Owner's Reciprocal Right of First Refusal. Additionally, at the end of the Lease term,the Project
will revert back to the City. Therefore, staff is recommending that the City reject the Right of First Refusal, and authorize the City
Manager to approve the proposed Sale.
CONCLUSION
The Administration recommends that the Mayor and City Commission approve the attached Resolution, authorizing the City Manager
to decline, in writing,the Right of First Offer Transaction, as required pursuant to the terms of Section 36.2 of the Agreement of Lease
("Ground Lease") between the City ("Owner") and Pelican Investment Holdings, LLC ("Tenant"), dated as of December 1, 1999,
involving the improvements to Property (the "Project") located at 1027 Collins Avenue, Miami Beach, Florida and 1041 Collins
Avenue, Miami Beach, Florida; and further approving the Sale of the Project to the Proposed Purchaser, Jones Lang LaSalle Income
Property Trust, Inc., upon satisfactory completion of the City's Due Diligence in connection with said proposed Sale, and payment of
the City's Due Diligence Costs and of the Settlement Agreement; and further authorizing the City Manager and City Clerk to execute
any and all closing documents on behalf of the City.
Advisory Board Recommendation:
n/a
Financial Information:
Source of Funds: Amount Account
1
Financial Impact Summary:
City Clerk's Office Legislative Tracking:
Max Sklar, Ext. 6116
Sign-Offs:
RHCD Director Assistant Cityloanager City Malb@ger
MS KGB JLM
AGENDA ITE C-
NEW M IAMIBEACH DATE
MIAMIBEACH
City of Miami Beath, 1700 Convention Center Drive,Miami Beach, Florida 33139,www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Philip Levine and Members o the City Co mission
FROM: Jimmy L. Morales, City Manager
DATE: December 11, 2013
SUBJECT: A RESOLUTION OF THE MAYO AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FL RIDA AUTHORIZING THE CITY
MANAGER TO DECLINE, IN WRITING, THE RIGHT OF FIRST OFFER
TRANSACTION, AS REQUIRED PURSUANT TO THE TERMS OF
SECTION 36.2 OF THE AGREEMENT OF LEASE ("GROUND
LEASE") BETWEEN THE CITY ("OWNER") AND PELICAN
INVESTMENT HOLDINGS, LLC ("TENANT"), DATED AS OF
DECEMBER 1, 1999, INVOLVING THE IMPROVEMENTS TO
PROPERTY (THE "PROJECT") LOCATED AT 1027 COLLINS
AVENUE, MIAMI BEACH, FLORIDA, AND 1041 COLLINS AVENUE,
MIAMI BEACH, FLORIDA; AND FURTHER APPROVING TENANT'S
SALE OF THE PROJECT TO THE PROPOSED PURCHASER, JONES
LANG LASALLE INCOME PROPERTY TRUST, INC., SUBJECT TO
AND CONDITIONED UPON CITY STAFF'S SUCCESSFUL
COMPLETION OF ITS EVALUATION OF THE PROPOSED
PURCHASER IN ACCORDANCE WITH ARTICLE 10 OF THE LEASE
(THE "CITY'S DUE DILIGENCE"), AND PAYMENT TO THE CITY OF
ITS REASONABLE COSTS INCURRED IN CONNECTION WITH THE
PROPOSED SALE INCLUDING, WITHOUT LIMITATION,
REIMBRUSEMENT OF THE CITY'S DUE DILIGENCE COSTS, AND
PAYMENT, OF THE "SETTLEMENT OFFER" (AS SUCH TERM IS
HEREINAFTER DEFINED IN THIS RESOLUTION); AND FURTHER
AUTHORIZING THE CITY MANAGER AND CITY CLERK TO
EXECUTE ANY AND ALL CLOSING DOCUMENTS ON BEHALF OF
THE CITY.
Background
On January 5, 1998, the City issued RFP No. 20-97/98, seeking proposals for the
development of Public-Private Parking facilities (the "UP"). On April 6, 1998, proposals
from five (5) different development teams were submitted and evaluated by an
Evaluation Committee, and on July 15, 1998, the City Commission authorized
negotiations with four (4) of the proposed development projects.
As a result of said negotiations, on October 20, 1999, the Mayor and City Commission
adopted Resolution No. 99-23372, approving an Agreement of Lease (the "Lease") and
Development Agreement between the City (also "Owner") and Pelican Development LLC
Commission Memo Sale of the Pelican Garage
1027-1041 Collins Avenue
December 11,2013
Page 2 of 5
("Pelican Development"), for Pelican Development to develop a parking garage ("Parking
Facility"), with ground floor retail space ("Retail Space"), not to exceed 5,000 square feet
(the "Project") on the City-owned land located at 1027 Collins Avenue, Miami Beach,
Florida and 1041 Collins Avenue, Miami Beach, Florida. The Lease was executed on
December 1, 1999, for an initial forty (40) year term, which ends on January 31, 2040,
with one additional ten (10) year option (the "Term").
The Project received its Certificate of Occupancy on October 31, 2002, for the Parking
Facility, having 328 total parking spaces, and the Retail Space, having approximately
3,350 square feet. On or about January 17, 2001, Pelican Development entered into a
lease with E. Levy Corporation, Inc., in connection with the entire Retail Space, located
at 1041 Collins Avenue ("Retail Tenant").
On or about June 1, 2004, the Project was sold and transferred from Pelican
Development to Ocean Blvd II, LLC, an Indiana limited liability company.
On or about May 27, 2010, the Project was again sold and transferred from Ocean Blvd
Il, LLC to the current tenant, Pelican Investment Holdings, LLC, a Florida limited liability
company ("Tenant").
Analysis
Pursuant to Section 10.5 of the Lease ("Required Notices"), a proposed transfer and/or
sale of the Project requires written notice to the Owner, with the identity of the transferor,
transferee, nature of the transaction, percentage of interest conveyed and such other
information requested b Owner the "Notice of Sale"). On October 29 2013 Tenant
q Y ( ) ,
provided Owner with a Notice of-Sale that Tenant intended to sell 100% of its leasehold
interest in the Project (the "Sale"), as follows:
Owner of Ground Lease: City of Miami Beach;
Seller: Pelican Investment Holdings, LLC;
Proposed Purchaser: Jones Lang LaSalle Income Property Trust, Inc.;
Purchase Price: $22,500,000.00 in cash.
A copy of the Notice of Sale, including the Section 10.5 disclosures, the letter of intent
and the Proposed Purchaser's financials is attached hereto as Composite Exhibit "V'.
The Lease further provides that the City, as part of its approval of the proposed Sale,
may request additional information in connection therewith, and to evaluate the
proposed Purchaser of the Project (the "City's Due Diligence"). The City must approve
or disapprove the proposed Sale by.December 26, 2013. City staff is in the process of
finalizing its Due Diligence in connection with the proposed Sale.
Additionally, in accordance with Section 36.2 of the Lease ("Owner's Reciprocal Right of
First Refusal"), the City has the right to elect, in writing, within 45 days after Owner's
receipt of the Offer Notice (i.e. December 13, 2013), whether or not to consummate the
Right of First Offer Transaction, at the same price and upon such other material terms
set forth in the Offer Notice.
The Project consists of a seven story parking garage, having 328 parking spaces and
3,350 square feet of retail space, currently sub-leased to E. Levy Corporation Inc., a surf
and bathing suit apparel retail store. This sub-tenant pays rent, in the total sum of
Commission Memo Sale of the Pelican Garage
1027-1041 Collins Avenue
December 11,2013
Page 3 of 5
$20,521.00/month and $246,257.00/year. For the calendar year 2012, the Garage
Facility earned a total of $2,251,987.00, and the Retail Space earned a total of
$252,021.00, as evidenced from the 2012 Statement of Operating Revenues and
Expenses, attached hereto and made a part hereof as Exhibit "2'.
In determining whether or not to recommend exercising the Owner's Reciprocal Right of
First Refusal, City staff requested revenue figures from City-owned and managed
parking garages and prepared the following comparison:
Yearly revenue
No.Spaces -- Income for FY11112 Per Space
The Pelican 328 $2,251,987.00 $6,865.81
10th Street-and Collins Retail port ion $252,021.00
- - I i I I
7th Street City Garage 646 $2,166,255.75 $3,353.34
7th Street and Collins {
16th Street City Garage 803 3,117,461.80 $3,882.27
16th Street and Collins
If City operated the Pelican Garage Facility,based upon a yearly revenue of$3,900.00,using a best case
scenario,the gross revenues for the 328 spaces would total$1,279,200.00+$252,021.00(Retail)=$1,531,221.00
per year(Based upon 2012 figures),it would take the City 14.70 years to recoup the purchase price,assuming
Retail Tenant does not default. i
The City, via applicable City ordinances, has had a longstanding position of keeping the
parking rates below market for the benefit of its residents and visitors and therefore
cannot compete with the income stream of a privately operated garage. The average
gross revenues per parking space for the 7th Street and 16th Street City-owned garages
is approximately 53% of the gross revenues generated by the Pelican Garage Facility
and, based upon the Offer proposed, it would take the City 14.70 years to break even,
based upon the gross revenue disparity, without taking into consideration the operating
costs of the garage.
Additionally, the Purchase Price of $22,500,000.00 equates to approximately
$68,597.56/s pace. In order to evaluate the offer, staff has obtained, from the Capital
Improvement Projects Department, the below chart with respect to the cost per space of
constructing a parking garage.
Cost Adjusted Cost/space
ttof Office/Retail Adjusted for
Year Cost Cost/space for inflation
spaces SF (2015) inflation
(2015)
CrrY OWNED
.City Hall Garage w liner building) 2009 655 31637 $27,676,000 $42,253 $31,943,639 $48,769
.Pennsylvania Ave Garage 2010 535 7 655 $13,500,000 $25,234 $15,234,750 $28,476
Sunset Harbor Garage 1 2012 1 435 1 29,350 $10,194,000 $23,411 $10,96.9,186 $25 mmd
The Purchase Price far exceeds the cost of constructing the garage, even with the
adjustment for inflation as of the year 2015.
Pursuant to the Lease, the City currently receives Base Rent, in the total sum of
Commission Memo Sale of the Pelican Garage
1027-1041 Collins Avenue
December 11,2013
Page 4 of 5
$94,080.00 per year/$7,840.00 per month. The Base Rent is scheduled to increase on
January 1, 2016 by the lesser of the cumulative CPI over the previous five year term or
12%. Additionally, the City receives Percentage Rent, which is due within sixty (60)
days from the end of each year, in the amount of 2.5% of the Project Revenue (based
upon gross revenues for the year from the Project). The City received a total sum of
$59,100.03 for Percentage Rent for the 2012 calendar year, for a total rental income of
$1531180.03.
K.T.K.L. Settlement:
Additionally, the Lease is subject to a settlement agreement between the City and
K.T.K.L. Corporation ("KTKL"), which was the original owner of one of the lots ("KTKL
Lot"), which the City purchased, to acquire the lands in connection with the development
of this Project. Originally, pursuant to the purchase and sale agreement between KTKL
and the City, dated as of November 18, 1993 ("KTKL Purchase Agreement"), as part of
the consideration for the sale of the KTKL Lot, KTKL wanted exclusive use of 28 spaces
(3 of which were slated to be used to build a dumpster on the ground floor) at the
Garage Facility ("KTKL Spaces"), and also had the right to purchase the Garage Facility
if the City did not complete the construction of the Garage Facility timely. The
construction did not occur timely and, as a result, the parties entered into a settlement
Agreement, titled "KTKL Memorandum", approved by Agreed Order of Approval, dated
July 27, 1999, KTKL relinquished its right to purchase back the KTKL Lot and, instead,
leased the KTKL Spaces back to the City, based upon a net revenue formula.
Thereafter, KTKL sued to enforce the KTKL Memorandum, citing that the payments they
were receiving in connection with the KTKL Spaces were incorrect and thereafter the
parties entered into a settlement agreement, dated September 15, 2010 ("KTKL
Settlement"), whereby the City pays KTKL a determined annual payment for the balance
of the thirty year period involving the KTKL Spaces. Based upon said KTKL Settlement,
the annual payment for the year 2012 was $98,345.43.
As the Lease is subject to the KTKL Settlement, the Proposed Purchaser (as part of its
due diligence) is requesting assurances from the City that, during the remaining Term of
the Lease, the City will continue not to utilize the KTKL Spaces (as the proposed
Purchase Price relies upon the ability to sublease all the parking spaces in the Garage
Facility). The Proposed Purchaser has offered the City the total sum of $250,000.00
("Settlement Offer") as consideration for said representation and agreement. The City
has historically not used these spaces, and has collected the Base Rent and Percentage
Rent generated from the Project from the Tenant, and is therefore recommending
acceptance of this Settlement Offer.
Additionally, in light of the fact that it would take the City 14.70 years to break even if the
City exercised the Owner's Reciprocal Right of First Refusal, staff prepared the following
chart, comparing both options, based upon the Income/gross revenues for the calendar
year 2012 and the KTKL Settlement payments over the next fourteen years, as follows:
Commission Memo Sale of the Pelican Garage
1027-1041 Collins Avenue
December 11,2013
Page 5 of 5
Scenario if City Purchased The Pelican, based upon
YR 2012 Income &Expenses for the next 14Years
Income $21,437,094.00
KTKL Payments* -$1,730,772.77
Less purchase price -$22,500,000.00
Total gross earnings -$2,793,678.77
Scenario if City Did not Purchase The Pelican based
upon YR 2012 Income &Expenses forthe next 14Years
Income $2,144,520.42
KTKL Payments* -$1,730,772.77
Settlement $250,000.00
Total gross earnings $663,747.65
* KTKL Payments from January 2014-January, 2027(14 years)
Based upon the foregoing, and the fact that the Project will revert back to the City at the
end of the Term, staff is recommending that the City reject the Right of First Refusal and
approve the Sale of the Project to the Proposed Purchaser.
CONCLUSION
The Administration therefore recommends that the Mayor and City Commission approve
the Resolution authorizing the City Manager to decline, in writing, the Right of First Offer
Transaction, as required pursuant to the terms of Section 36.2 of the Lease; and further
approve the Sale of the Project to the Proposed Purchaser, Jones Lang LaSalle Income
Property Trust, Inc., upon satisfactory completion of the City's Due Diligence in
connection with said Sale, reimbursement of the City's Due Diligence costs, and
payment of the "Settlement Offer'. The Administration further recommends that the City
Commission authorize the City Manager and City Clerk to execute any and all closing
documents, on behalf of the City, in connection with the City's approval of the proposed
Sale.
JLM\KGB\MS\GNT
Attachments:
"1" - letter of intent and the Proposed Purchaser's financials
"2" - Statement of Operating Revenues and Expenses for Tenant
cc: Jimmy L. Morales, City Manager
Kathie G. Brooks, Assistant City Manager
Max Sklar, Director for Tourism, Culture and Economic Development
Gisela Nanson Torres, Leasing Specialist
F.IECOM$ALLIASSETIRESOLUTIONSIPELICAN GARAGEIRESOLUTIONSICOMMISSION MEMO SALE OF THE
PELICAN GARAGE DECEMBER 11,2013
Torres, Gisela
From: Daniel Unger [daniel @fortcap.ital.com]
Sent: Tuesday, October 29, 2013 11:41 AM
To: Torres, Gisela
Cc: Mike Conaghan; Aguila, Raul; Sklar, Max; atachmes @shutts.com
Subject: RE: Right of First Offer Transaction -The Pelican Garage 1040 Collins Avenue
Attachments: G. Pelican Title Policy.pdf; H. Pelican LOI executed.pdf; I.-Most recent financial statement
from buyer REIT Jones_Lang_LaSalle_Income_Property_Trust_Inc 2Q13_10-Q.pdf
Hello Gisela,
I am submitting here the information you requested on the offer and the buyer.
Following your points:
a. Name of Transferee;A SINGLE PURPOSE ENTITY THAT WILL BE A WHOLLY-OWNED SUBSIDIARY OF
JONES LANG LASALLE INCOME PROPERTY,TRUST., INC(JLLIPT).
1. The REIT's website is www.illipt.com
2. Its prospectus can be found here: http://www.illipt.com/content/pdf/JLLIPT Prospectus 3-28-
2013 with Supp 12.pdf
b. Name of Transferor; PELICAN INVESTMENT HOLDINGS, LLC.
c. Nature of Transaction;ARMS LENGTH SALE OF THE LEASEHOLD INTEREST TO AN UNRELATED THIRD
PARTY.
d. Percentage of interest to be conveyed; 100% INTEREST.
e. Other additional information in order to evaluate the purchaser,such as evidence that the intended
purchaser is adequately capitalized to perform its responsibilities under the Lease (information may vary
depending upon the transaction and parties thereto)REFER TO POINTS ABOVE and see attachment("I.
Most recent financial statement from buyer REIT Jones Lang LaSalle Income Property Trust Inc 2Q13
10-Q.pdf") .
f. Purchase Price of offer;$22,500,000.00.
g. All material terms of offer; INCLUDED WITHIN LETTER OF INTENT—LOI (ATTACHED).
h. Closing Date timeline; 15 DAYS OF THE LATTER OF CITY WAIVING ITS RIGHT OF FIRST OFFER OR UPON
COMPLETION OF PURCHASER'S 21 DAY DUE DILIGENCE PERIOD.
i. Indicating which closing costs shall be borne by each party;AS PER SECTION VIII OF THE LOI,
PURCHASER WILL PAY FOR COST INCURRED IN PERFORMING DUE DILIGENCE INCLUDING ITS LEGAL
COUNSEL, PHYSICAL AND ENVIRONMENTAL INSPECTIONS,TITLE INSURANCE AND ANY UPDATES TO
THE SURVEY. SELLER WILL BE RESPONSIBLE FOR RECORDING FEES, ESCROW FEES,TRANSFER TAXES,
DOCUMENTARY STAMP TAXES, ITS LEGAL FEES,AND FOR PROVIDING A CURRENT ALTA SURVEY. ALL
OTHER COSTS WILL BE SPLIT EVENLY(50/50) BETWEEN PURCHASER AND SELLER.
j. Deed/Title TITLE ATTACHED.
Let me know if you need any more information on the buyer's side,
Thank you again,
DANIEL UNGER
FORT CAPITAL MANAGEMENT
x w"Jortcapital.com
176 NE 43RD STREET.
MIAMI,FLORIDA 33137
C.+1.770.671.8817
T.+1.305.571.8228
Exhibit 1
LASALLE
INVESTMENT MANAGEMENT"
Acquisitions Group
100 East Pratt Street Baltimore Maryland 21202
Tel+1410 878 4800 Fax+1410 878 4901
October 18,2013
VIA E-MAIL
Luis Castillo
Director
Holliday Fenoglio Fowler
1450 Brickell Avenue
Suite 2950
Miami, FL 33131
RE: Pelican Garage
Miami Beach, Florida
Revised
Dear Luis:
The purpose of this letter is to outline some of the general business terms and conditions
under which LaSalle Investment Management, Inc., as agent for an investor client
("Purchaser'), will purchase a 100% leasehold interest in the Pelican Garage ("Property") from
Pelican Investment Holdings, LLC("Seller'). This letter supersedes our letter of October 8,2013
This letter should not be construed as a purchase offer or commitment as it is subject to the
conditions set forth in this letter, including the execution of a mutually satisfactory Purchase
and Sale Agreement The general business terms and conditions of the proposed agreement
are as follows:
I. PURCHASER
LaSalle Investment Management, Inc. as agent for Jones Lang LaSalle Income
Property Trust, Inc.("Purchaser').
11. SELLER
Pelican Investment Holdings, LLC("Seller).
111. THE PROPERTY(S)
Pelican Garage, located at 1021 Collins Avenue in Miami Beach, Florida. The Property
consists of a 329 space Parking Garage that also contains 3,350 square feet of rentable
retail space. Purchaser will acquire a 100%leasehold interest in the Property.
IV. PURCHASE PRICE
The total purchase price for the Property will be$22,500,000.
A member of the Janes Lang LaSalle group
Authorised and regulated by the f=inancial Services Authority
Registered in England Number 2597050
LASALLE
INVESTMENT MANAGEMENT.,
Pelican Garage
Page 2
V. TENANT IMPROVEMENTS,COMMISSIONS,AND CAPITAL
IMPROVEMENTS
All pre-existing tenant improvements, commissions, and capital expenditure
obligations will be the responsibility of the Seller.
V1. PROPERTY MANAGEMENT AND LEASING
All existing management, leasing,and service contracts shall be terminable at closing.
V11. PROPERTY BROKERAGE COMMISSIONS
Seiler shall pay any brokerage commissions due related to this transaction. Purchaser has
not worked with any other broker, and Purchaser shall be responsible for any fee or
commission due to LaSalle Investment Management,Inc.
VIII. CLOSING COSTS
Purchaser will pay for costs incurred in performing Purchaser's due diligence including its
legal counsel, physical and environmental inspections, and title insurance. Seller will be
responsible for recording fees, escrow fees, transfer taxes, documentary stamp taxes, its
legal fees, and for providing a current ALTA Survey. Purchaser will pay for any updates
to the survey. All other costs will be split evenly (50/50) between Purchaser and
Seller. The closing of the purchase shall be subject to normal prorations.
Purchaser will select the Title Company.
IX. CONDITIONS
The terms and conditions set forth in this letter are predicated upon information provided by
Seller and the Seller's representative, Holliday Fenoglio Fowler_ The closing of the
proposed transaction is subject to Purchaser's satisfaction with its review of all legal
documents and certain other information relating to the Property. Such review will
include, without limitation, management agreement, tenant leases, service contracts,
historical operating statements and real estate taxes, historical financial statements,
operating and capital budgets, ongoing brokerage commission obligations for existing
leases, if any, building plans and specifications,applicable zoning and subdivision laws,and
survey and title insurance documentation.
LASALLE
INVESTMENT MANAGEMENT'
Pelican Garage
Page 3
The closing of any transaction is further subject to: (i) Purchaser's satisfaction with its
physical and environmental inspections of the Property, including without limitation,
inspections for asbestos-containing and other hazardous materials; (ii)satisfactory
interviews with tenants including analysis of the credit worthiness of tenants; (iii) the
execution by Purchaser and Seller of a mutually satisfactory Purchase and Sale
Agreement;and(iv)satisfactory tenant estoppels.
X. APPROVAL,EARNEST MONEY AND CLOSING
Purchaser contemplates the following time frames regarding due diligence,
documentation,final approval,and closing.
1) Purchaser and Seller execute Letter of Intent_
2) Within five(5)business days of(1), LaSalle Investment Management's Investment
Committee will formally authorize the transaction. This Investment is
discretionary to LaSalle Investment Management's Investment Committee.
3) Within 10 days after(1), Purchaser and Seller will negotiate and execute a Purchase
and Sale Agreement. At contract execution, Purchaser will deposit $750,000 of
refundable earnest money in escrow. After the completion of(2), Purchaser will also
begin its'due diligence while simultaneously negotiating the
Purchase and Sale Agreement.
4) Within twenty one (21)days of(2), Purchaser will complete its due diligence.. .
At completion of due diligence period, Purchaser will deposit an additional
$1,500,000 and its earnest money deposits will become non-refundable subject to the
City of Miami Beach waiving its'ROFO.
5) Within forty-five(45)days of(2), City will waive its' ROFO. In the event the City
exercises its' ROFO, Seller will reimburse Purchaser for its' reasonable due
diligence and legal costs.
6) Closing will occur within fifteen(15)days of the latter of(4)or(5).
XI. ESTOPPEL
Our attorneys reviewed the"form estoppel. Their comments are below:
1) The ROFO described in Section 36.2 will need to be waived. This can be done in a
separate document if necessary.
2) The transfer of the Ground Lease to our buying entity will have to be consented to by
Ground Landlord in accordance with Section 10.3(c).
LASALLE
INVESTMENT MANAGEMENT
Pelican Garage
Page 4
3) Since our buyer will be a subsidiary of a public, non-traded REIT with continual
share offerings and redemptions,the Ground Landlord will need to waive Section
10.3(c) to allow for transfers of non-controlling interests (and the issuance of new
shares,etc.).
4) Since our REIT structure necessitates a lease with the parking operator,the Ground
Landlord will have to consent in advance to such a"Master Sublease." Currently,a
Master Sublease requires Ground Landlord's consent.
5) We would like to add a statement in the estoppel confirming that Article 23 of the
Lease(KTKL Settlement)is superseded by the KTKL settlement agreement
Our attorneys are available to discuss these points with the Seller and their attorney.
These comments will be addressed within the estoppel or documentation will be provided
to Buyer to accomplish same.
XII. ASSIGNMENT
Purchaser may assign its interests under this letter.
XIII. CONFIDENTIALITY
The parties acknowledge and agree that the contents of this letter and the terms of the
proposed transaction will be kept confidential in accordance with that Confidentiality
Agreement entered into between the parties as of August 281h,2013.
This Letter of Intent is only intended to set forth general understandings of the parties and to
provide the basis for negotiating the Purchase and Sale Agreement The parties acknowledge
that, except for the sections concerning Confidentiality and exclusivity, this letter is not a
binding commitment or agreement between the parties and execution of a mutually satisfactory
Purchase and Sale Agreement, containing all the essential terms of an agreement between
Purchaser and Seller is a condition precedent to the creation of a binding contract between the
two parties. This Letter of Intent does not obligate either party to proceed to the completion of
a purchase and sale agreement nor should Seller construe the delivery and execution of this
Letter of Intent as a reasonable basis to believe that a closing will in fact occur. Further, this
Letter does not obligate the parties to negotiate toward the execution and delivery of a
Purchase and Sale Agreement.
Seller reserves the right to accept back up offers. Unless accepted by Seller, this letter shall
terminate at 5:00 p.m. (EST),on Friday November 1111,2013.
If the business terms and conditions for the proposed transaction meet with your client's
approval, please have your client sign this letter, keep one copy for your files and return one copy to
LaSalle Investment Management,Inc.
LASALLE
INVESTMENT MANAGEMENT"
Pelican Garage
Page.5
We look forward to working with you on this transaction.
Very Wy.yours,
Richard R. Reese Jr.
Managing Director-of LaSalle Investment, Management, Inc:
As agent for its investor client
cc: Patrick McCormick
AGREED TO AND ACCEPTED
This day
Title: C4-4\CA. n �`.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,D.C.20549
FORM 10-Q
El QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30,2013
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:0-51948
Jones Lang LaSalle Income Property Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland 20-1432284
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
200 East Randolph Drive,Chicago IL,60601
(Address of principal executive offices,including Zip Code)
(312)782-5800
(Registrant's telephone number,including area code)
N/A
(Former name,former address and former fiscal year,if changed since last report)
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 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 the past 90 days. YES ❑x NO ❑
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,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 ® NO ❑
Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,or a non-accelerated filer.
Large accelerated filer ❑ Accelerated filer ❑
Non-accelerated filer El Smaller reporting company ❑
Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).YES ❑
NO O
The number of shares of the registrant's Common Stock,$.01 par value,outstanding on August 8,2013 were 26,444,843
shares of Class E Common Stock, 10,425,137 shares of Class A Common Stock,and 1,791,607 shares of Class M Common
Stock.
Jones Lang LaSalle Income Property Trust,Inc.
INDEX
PAGE
NUMBER
Part I-FINANCIAL INFORMATION
Item 1.Financial Statements 3.
Consolidated Balance Sheets as of June 30,2013(unaudited)and December 31,2012 3
Consolidated Statements of Operations and Comprehensive Income(Loss)for the three months
and six months ended June 30,2013 and 2012(unaudited) 4
Consolidated Statements of Equity for the six months ended June 30,2013 and 2012(unaudited) 5
Consolidated Statements of Cash Flows for the six months ended June 30,2013 and 2012
(unaudited) 6
Notes to Consolidated Financial Statements(unaudited) 8
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations 20
Item 3.Quantitative and Qualitative Disclosures About Market Risk 38
Item 4.Controls and Procedures 39
Part II-OTHER INFORMATION
Item 1.Legal Proceedings 39
Item IA.Risk Factors 39
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds 39
i
Item 3.Defaults Upon Senor Securities 40
Item 4.Mine Safety Disclosures 40
Item 5.Other Information 40
Item 6.Exhibits 41
SIGNATURES 42
2
Item 1.Financial Statements.
Jones Lang LaSalle Income Property Trust,Inc.
CONSOLIDATED BALANCE SHEETS
$in thousands,except per share amounts
June 30,2013 December 31,2012
(Unaudited)
ASSETS
Investments in real estate:
Land(including from VIEs of$32,593 and$32,593,respectively) $ 135,192 $ 126,555
Buildings and equipment(including from VIEs of$230,638 and$232,423,respectively) 719,041 669,901,
Less accumulated depreciation(including from VIES of$(28,452)and$(28,027)
respectively) (88,181) (82,428)
Net property and equipment 766,052 714,028
Investment in unconsolidated real estate affiliate 19,895 19,988
Net investments in real estate 785,947 734,016
Cash and cash equivalents(including from VIES of$2,626 and$2,500,respectively) 20,769 36,986
Restricted cash(including from VIEs of$3,639 and$3,051,respectively) 10,719 15,880
Tenant accounts receivable,net(including from VIEs of$1,674 and$1,203,respectively) 2,437 1,825
Deferred expenses,net(including from VIEs of$619 and$783,respectively) 6,747 6,208
Acquired intangible assets,net(including from VIEs of$4,293 and$4,548,respectively) 37,342 41,125
Deferred rent receivable,net(including from VIEs of$833 and$1,074,respectively) 6,306 4,575
Prepaid expenses and other assets(including from VIEs of$764 and$364,respectively) 3,122 1,419
TOTAL ASSETS $ 873,389 $ 842,034
LIABILITIES AND EQUITY
Mortgage notes and other debt payable,net(including from VIEs of$185,861 and$187,234,
respectively) $ 459,547 $ 492,985
Accounts payable and other accrued expenses(including from VIEs of$2,056 and$2,953,
respectively) 21,154 15,615
Distributions payable 3,509 2,975
Accrued interest(including from VIEs of$880 and$909,respectively) 1,813 2,033
Accrued real estate taxes(including from VIEs of$1,939 and$638,respectively) 3,184 937
Advisor fees payable 385 324
Acquired intangible liabilities,net 5,577 10,080
TOTAL LIABILITIES 495,169 524,949
.... ...........
Commitments and contingencies
Equity:
Class E common stock:$0.01 par value;200,000,000 shares authorized;26,444,843 shares
issued and outstanding at June 30,2013 and December 31,2012,respectively 264 264
Class A common stock:$0.01 par value;400,000,000 shares authorized;9,320,989 and
3,612,169 shares issued and outstanding at June 30,2013 and December 31,2012,
respectively 93 36
Class M common stock:$0.01 par value;400,000,000 shares authorized; 1,629,313 and
104,282 shares issued and outstanding at June 30,2013 and December 31,2012,
respectively 16 1
Additional paid-in capital(net of offering costs of$6,549 and$3,219 as of June 30,2013
and December 31,2012,respectively) 582,930 512,383
Accumulated other comprehensive income 13 .542
Distributions to stockholders (97,392) (90,691)
..... . .. .. _,
Accumulated deficit (118,098) (115,851)
Total Jones Lang LaSalle Income Property Trust,Inc.stockholders'equity 367,826 306,684
Noncontrolling interests 10,394 10,401
Total equity 378,220 317,085
TOTAL LIABILITIES AND EQUITY $ 873,389 $ 8427034
The abbreviation"VIEs"above means Variable Interest Entities.
See notes to consolidated financial statements.
3
Jones Lang LaSalle Income Property Trust,Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(LOSS)
$in thousands,except per share amounts
(Unaudited)
Three months Three months Six months Six months
ended June 30, ended June 30, ended June 30, ended June 30,
2013 2012 2013 2012
Revenues:
Minimum rents $ 19,762 $ 15,921 $ 42,533 $ 32,307
Tenant recoveries and other rental income 5,459 3,480 9,058 6,983
Total revenues 25,221 19,401 51,591 39,290
Operating expenses:
Real estate taxes 2,552 2,223 5,007 4,402
Property operating 6,609 5,563 12,691 10,907
Net(recovery of)provision for doubtful accounts (7) 35 (169) 152
Advisor fees 1,121 572 2,107 1,302
Company level expenses 606 688 999 1,339
General and administrative 399 344 796 543
Depreciation and amortization 6,798 4,997 19,189 10,004
Total operating expenses 18,078 14,422 40,620 28,649
Operating income 7,143 4,979 10,971 10,641
Other income and(expenses):
Interest expense (6,419) (6,415) (12,878) (13,317)
Debt modification expenses - - (182) -
Equity in loss of unconsolidated affiliates (71) (416) (92) (240)
Total other income and(expenses) (6,490) (6,831) (13,152) (13,557)
Income(loss)from continuing operations 653 (1,852) (2,181) (2,916)
Discontinued operations:
Loss from discontinuing operations - (898) - (2,951)
Loss on sale of discontinued operations - (117) - (1 l 7)
Gain on transfer of property and extinguishment of debt - - - 11,791
Total(loss)income from discontinued operations - (1,015) - 8,723
Net income(loss) 653 (2,867) (2,181) 5,807
Less:Net income attributable to the noncontrolling
interests (27) (45) (66) (137)
Net income(loss)attributable to Jones Lang LaSalle Income
Property Trust,Inc. 626 (2,912) (2,247) 5,670
Net income(loss)from continuing operations attributable to
Jones Lang LaSalle Income Property Trust,Inc.per share-
basic and diluted $ 0.02 $ (0.08) $ (0.07) $ (0.13)
Total(loss)income from discontinued operations per share-
basic and diluted $ - $ (0.04) $ - $ 0.36
Net income(loss)attributable to Jones Lang LaSalle Income
Property Trust,Inc.per share-basic and diluted $ 0.02 $ (0.12) $ (0.07) $ 0.23
Weighted average common stock outstanding-basic and
diluted 35,343,798 24,022,500 33,445,787 24,008,932
Other comprehensive(loss)income:
Foreign currency translation adjustment (311) (205) (529) (23)
Total other comprehensive(loss)income (311) (205) (529) (23)
Net comprehensive income(loss) $ 315 $ (3,117) $ (2,776) $ 5,647
See notes to consolidated financial statements.
4
Jones Lang LaSalle Income Property Trust,Inc.
CONSOLIDATED STATEMENTS OF EQUITY
$in thousands,except per share amounts
(Unaudited)
Common Stock Class E Common Stock Class A Common Stuck Class M Additional Accumulated
Paid In other Distributions Accumulated NoncontroWng Total
re
Shas Amount Shares Amount Shares Amount Capital Comprehensive
Income(l to Stockholders Defitlt Interests Equity
oco)
Balance,January 1,2013 26,444,843 $ 264 3,612,169 $ 36 104,282 $ 1 $ 512,383 $ 542 $ (90,691) $(115,851) $ 10,401 $ 317,085
Issuance of common stock — — 5,734,868 57 1,521,031 15 74,102 — — — — 74,174
Repurchase of shares — -- (26,048) — — — (266) — — — — (266)
Offering costs — — — — — — (3,330) — — — — (3,330)
Stock based compensation — — — — 4,000 — 41 — — — — 41
Net(loss)income — — — — — — — — — (2,247) 66 (2,181)
Other comprehensive loss — — — — — (529) — — — (529)
Cash contributed from
noncontrolling interests — — — — — — — — — — 208 208
Cash distributed to
noncontrolling interests — — — — — — — — — — (281) (281)
Distributions declared($0.10)
per share — — — — — — — — (6,701) — — (6,701)
Balance,June 30,2013 26,444,843 $ 264 9,320,989 $ 93 1,629,313 $ 16 $ 582,930 $ 13 $ (97,392) $(118,098) $ 10,394 $ 378,220
Common Stock Class E Common Stock Class A Common Stock Class M Accumulated
Additional Other
Paid In Comprehensive Distributions Amumulated Noncuntrolling Total
Shares Amount Shares Amount Shares Amount Capital Income(loss) to Stockholders Dericit Interests Equity
Balance,January 1,2012 23,995,352 $ 41 — — — — $ 453,861 $ 322 $ (80,636) $(153,327) $ 10,818 $ 231,079
Contributions 41,752 1 - - — - 398 — — — — 399
Net income — — — — — — — — — 5,670 137 5,807
Other comprehensive income — — — — — — — (23) — — — (23)
Cash contributed from
noncontrolling interests — — — — — — — — — — 109 109
Cash distributed to
noncontrolling interests — — — - — - — — — — (305) (305)
Distributions declared
($0.09506)per share — — — — — — — — (4,566) — — (4,566)
Balance,June 30,2012 24,037,104 $ 42 — — — — $ 454,259 $ 299 $ (85,202) $(147,657) $ 10,759 $ 232,500
See notes to consolidated financial statements.
5
Jones Lang LaSalle Income Property Trust,Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
$in thousands,except per share amounts
(Unaudited)
Six months ended Six months ended
.._ .._.... ._ ._:... ... . _._ ...
June 30,2013 June 30,2012
.. ........
CASH FLOWS FROM OPERATING ACTIVITIES:
Net(loss)income $ (2,181) $ 5,807
Adjustments to reconcile(loss)income to net cash provided by operating activities:
Depreciation(including discontinued operations) 8,548 8,227
Amortization of in-place lease intangible assets(including discontinued operations) 10,189 2,352
Amortization of net above-and below-market in-place leases(including discontinued operations) (4,303) (363)
Amortization of financing fees(including discontinued operations) 402 656
Amortization of debt premium and discount(including discontinued operations) (471) (107)
Amortization of lease commissions(including discontinued operations) 452 515
Loss on sale of discontinued operations — 117
Gain on transfer of property and extinguishment of debt(including discontinued operations) = (11,791)
Net(recovery of)provision for doubtful accounts(including discontinued operations) (169) 183
Straight line rent(including discontinued operations) (1,746) (96)
Impairment of real estate(including discontinued operations) — 913
Equity in loss of unconsolidated affiliates 92 240
Net changes in assets and liabilities:
Tenant accounts receivable (439) 409
Prepaid expenses and other assets (564) (208)
Advisor fees payable 61 171
Accounts payable and other accrued expenses 167 5,460
Net cash provided by operating activities 10,038 12,485
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate investment (58,820) —
Proceeds from sale of real estate investments,net — 5,120
Capital improvements and lease commissions (5,633) (3,959)
Loan escrows 5,161 (4,882)
Net cash used in investing activities (59,292) (3,721)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 72,451 —
Repurchase of shares (266) —
Offering costs (1,620) —
Distributions to stockholders (5,544) (1,882)
Distributions paid to noncontrolling interests (281) (305)
Contributions received from noncontrolling interests 208 109
Draws on credit facility 7,000 —
Proceeds from mortgage notes 12,000 —
Debt issuance costs (472) —
Principal payments on mortgage notes and other debt payable (50,384) (2,750)
Net cash provided by(used in)financing activities 33,092 (4,828)
Net(decrease)increase in cash and cash equivalents (16,162) 3,936
Effect of exchange rates (55) (11)
Cash and cash equivalents at the beginning of the period 36,986 28,033
Cash and cash equivalents at the end of the period $ 20,769 $ 31,958
Supplemental disclosure of cash flow information:
Interest paid $ 13,173 $ 14,119
6
-;Non cash activities - -�
Write-offs of receivables $ 249 $ 82
Write-offs of retired assets 10,250 2,125
Change in liability for capital expenditures 6,142 85
Liabilities assumed at acquisition (123) —
Stock issued through dividend reinvestment plan 623 399
Stock based compensation 41
Change in issuance of common stock receivable 1,141 —
Change in accrued offering cogs 1,710
_
Distribution payable 3,509 2,285
Transfers P,e rty in ht odebt.settlement 41,834 xn uismenof ro
_.
See notes to consolidated financial statements.
7
Jones Lang LaSalle Income Property Trust,Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$in thousands,except per share amounts
NOTE 1—ORGANIZATION
General
Except where the context suggests otherwise, the terms "we," "us," "our"and the "Company"refer to Jones Lang
LaSalle Income Property Trust, Inc. The terms "Advisor"and "LaSalle"refer to LaSalle Investment Management,Inc.
Jones Lang LaSalle Income Property Trust,Inc.is an externally managed,non-listed,daily valuation perpetual-life
real estate investment trust("REIT")that owns and manages a diversified portfolio of apartment,industrial,office and retail
properties located primarily in the United States.We expect over time that our real estate portfolio will be further diversified
on a global basis through the acquisition of additional properties outside of the United States and will be complemented by
investments in real estate-related debt and securities.We were originally incorporated on May 28,2004 under the laws of
the State of Maryland.We believe that we have operated in such a manner to qualify to be taxed as a REIT for federal
income tax purposes commencing with the taxable year ended December 31,2004,when we first elected REIT status.As of
June 30,2013,we owned(i)interests in a total of 34 consolidated properties located in ten states and one in Canada and(ii)
an interest in one unconsolidated property located in the United States.
From our inception to October 1,2012,we raised proceeds through private offerings of shares of our undesignated
common stock.On October 1,2012,the Securities and Exchange Commission(the"SEC")declared effective our
Registration Statement on Form S-11 (Commission File No.333-177963)(the"Registration Statement")with respect to our
continuous public offering of up to$3,000,000 in any combination of Class A and Class M shares of common stock(the
"Offering").In order to facilitate the Offering,on September 27,2012,with the approval of our stockholders,we amended
and restated our charter to,among other things,(i)designate our outstanding common stock as Class E common stock,(ii)
create two new classes of common stock,Class A and Class M,and(iii)make certain additional changes requested by state
securities administrators.We also amended and restated our bylaws on September 27,2012 in connection with the
Registration Statement being declared effective by the SEC.Additionally,on October 1,2012,we effected a stock dividend
for all Class E shares at a ratio of 4.786-to-1 in order to achieve a net asset value("NAV")per share for each of the Class A,
Class M and Class E shares of$10.00 as of the date we commenced the Offering. Affiliates of our sponsor,Jones Lang
LaSalle Incorporated("Jones Lang LaSalle"or our"Sponsor"),have invested an aggregate of$60,200 through purchases of
shares of our Class E common stock.As of June 30,2013,26,444,843 shares of Class E common stock,9,320,989,shares
of Class A common stock and 1,629,313 shares of Class M common stock were outstanding and held by a total of 2,703
stockholders.
Prior to November 14,2011,the Company(previously named Excelsior LaSalle Property Fund,Inc.)was managed by
Bank of America Capital Advisors LLC(the"Former Manager"),a registered investment adviser with the SEC,that had the
day-to-day responsibility for our management and administration pursuant to a management agreement between the Company
and the Former Manager(the"Management Agreement").On November 14,2011,the Former Manager assigned its right,
duties and obligations as manager of the Company under the Management Agreement to LaSalle and since that date,the
Former Manager has had no responsibility for the management of the Company.
LaSalle acts as our advisor pursuant to the amended and restated advisory agreement between the Company and LaSalle,
which became effective on October 1,2012(the"Advisory Agreement").Our Advisor,a registered investment adviser with the
SEC,has broad discretion with respect to our investment decisions and is responsible for selecting our investments and for
managing our investment portfolio pursuant to the terms of the Advisory Agreement.LaSalle is a wholly owned,but
operationally independent subsidiary of Jones Lang LaSalle,a New York Stock Exchange-listed global real estate,investment
management firm.We have no employees as all operations are managed by our Advisor.We have executive officers,but they
are employees of and compensated by our Advisor.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U.S.generally accepted
accounting principles("GAAP"),the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and include the accounts of
our wholly-owned subsidiaries,consolidated variable interest entities("VIE")and the unconsolidated investments in real estate
affiliates accounted for under the equity method of accounting.We consider the authoritative guidance of accounting for
8
investments in common stock,investments in real estate ventures,investors accounting for an investee when the investor has
the majority of the voting interest but the minority partners have certain approval or veto rights,determining whether a general
partner or general partners as a group controls a limited partnership or similar entity when the limited partners have certain
rights,and the consolidation of VIES in which we own less than a 100%interest. All significant intercompany balances and
transactions have been eliminated in consolidation.
Parenthetical disclosures are shown on our Consolidated Balance Sheets regarding the amounts of VIE assets and
liabilities that are consolidated.Our VIEs include entities owning The District at Howell Mill,Cabana Beach San Marcos,
Cabana Beach Gainesville,The Lodge of Athens,Campus Lodge Columbia,The Edge at Lafayette and Campus Lodge Tampa
as we maintain control over significant decisions,which began at the time of acquisition of the properties.The creditors of our
VIEs do not have general recourse to us.
Noncontrolling interests represent the minority members'proportionate share of the equity in our VIES.At acquisition,
the assets,liabilities and non-controlling interests were measured and recorded at the estimated fair value.Noncontrolling
interests will increase for the minority members'share of net income of these entities and contributions and decrease for the
minority members'share of net loss and distributions.As of June 30,2013,noncontrolling interests represented the minority
members'proportionate share of the equity of the entities listed above as VIES.
The accompanying unaudited interim financial statements have been prepared in accordance with the accounting policies
described in the financial statements and related notes included in the Company's Form 10-K filed with the SEC on March 7,
2013(our"2012 Form 10-K")and should be read in conjunction with such financial statements and related notes.The
following notes to these interim financial statements highlight changes to the notes included in the December 31,2012 audited
financial statements included in our 2012 Form 10-K and present interim disclosures as required by the SEC.
The interim financial data as of June 30,2013 and for the three and six months ended June 30,2013 and 2012 is
unaudited.In the opinion of the Company,the interim data includes all adjustments,consisting only of normal recurring
adjustments,necessary for a fair statement of the results for the interim periods.
Allowance for Doubtful Accounts
An allowance for doubtful accounts is provided against the portion of accounts receivable and deferred rent receivable
that is estimated to be uncollectible.Such allowance is reviewed periodically based upon our recovery experience.At June 30,
2013 and December 31,2012,our allowance for doubtful accounts was$152 and$570,respectively.
Deferred Expenses
Deferred expenses consist of debt issuance costs and lease commissions.Debt issuance costs are capitalized and
amortized over the terms of the respective agreements as a component of interest expense.Lease commissions are capitalized
and amortized over the term of the related lease as a component of depreciation and amortization expense.Accumulated
amortization of deferred expenses at June 30,2013 and December 31,2012 was$4,025 and$4,013,respectively.
Acquisitions
We have allocated purchase price to acquired intangible assets,which include acquired in-place lease intangibles,
acquired above-market in-place lease intangibles and acquired ground lease intangibles,which are reported net of accumulated
amortization of$22,505 and$26,515 at June 30,2013 and December 31,2012,respectively,on the accompanying
Consolidated Balance Sheets.The acquired intangible liabilities represent acquired below-market in-place leases,which are
reported net of accumulated amortization of$2,582 and$5,465 at June 30,2013 and December 31,2012,respectively,on the
accompanying Consolidated Balance Sheets.
Fair Value Disclosure
The authoritative guidance requires the disclosure of the fair value of our financial instruments for which it is practicable
to estimate that value.The guidance does not apply to all balance sheet items.Market information as available or present value
techniques have been utilized to estimate the amounts required to be disclosed.Since such amounts are estimates,there can be
no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument.
We have estimated the fair value of our mortgage notes and other debt payable reflected in the accompanying Consolidated
Balance Sheets at amounts that are based upon an interpretation of available market information and valuation methodologies
(including discounted cash flow analysis with regard to fixed rate debt)for similar loans made to borrowers with similar credit
ratings and for the same maturities.The fair value of our mortgage notes and other debt payable,including our line of credit
which was entered into at market rates,using level two inputs was approximately$4,708 higher and$17,136 higher than the
9
aggregate carrying amounts at June 30,2013 and December 31,2012,respectively.Such fair value estimates are not necessarily
indicative of the amounts that would be realized upon disposition of our mortgage notes payable.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions.These
estimates and assumptions impact the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
For example,significant estimates and assumptions have been made with respect to useful lives of assets,recoverable amounts
of receivables,initial valuations and related amortization periods of deferred costs and intangibles,particularly with respect to
property acquisitions.Actual results could differ from those estimates.
NOTE 3—PROPERTY
The primary reason we make acquisitions of real estate investments in the apartment,industrial,office and retail property
sectors is to invest capital contributed by stockholders in a diversified portfolio of real estate assets.The consolidated properties
acquired by the Company during 2013 are as follows:
Square Ownership Gross Acquisition
Property Sector Feet Location % Acquisition Date Price
Joliet Distribution Center Industrial 442,000 Joliet,IL 100% June 26,2013 $ 21,000
Suwanee Distribution Center Industrial 559,000 Atlanta,GA 100% June 28,2013 37,943
We allocated the purchase price of our 2013 acquisitions in accordance with authoritative guidance as follows:
2013 Acquisitions
Land $ 8,955
Building and equipment 43,360
In-place lease intangible 6,554
Above-market lease intangible 103
Below-market lease intangible (29)
$ 58,943
Weighted average amortization period for intangible assets and liabilities 2- 10 years
The following table summarizes the loss from discontinued operations for Georgia Door Sales Distribution Center,
Metropolitan Park North and Marketplace at Northglenn for the three and six months ended June 30,2012:
Three months ended Six months ended
June 30,2012 June 30,2012
Total revenue $ 1,863 $ 4,896
Real estate taxes (327) (778)
Property operating (236) (669)
Provision for doubtful accounts 7 (31)
General and administrative (16) (103)
Net provision for impairment — (913)
Depreciation and amortization (326) (1,090)
Interest expense (1,863) (4,263)
Loss from discontinued operations $ (898) $ (2,951)
10
NOTE 4—UNCONSOLIDATED REAL ESTATE AFFILIATES
We own a 46.5%interest in Legacy Village.On December 4,2012,we acquired the remaining 20%interest in 1 l 1 Sutter
Street.We had previously owned a majority,but non-controlling,interest in 1 I 1 Sutter Street from March 29,2005 through
December 4,2012.The following table summarizes financial information for our unconsolidated real estate affiliate:
Summarized Combined Balance Sheets-Unconsolidated Real Estate Affiliate
June 30,2013 December 31,2012
Total assets $ 102,394 $ 104,882
Total liabilities $ 88,947 $ 91,176
Members'equity 13,447 13,706
Total liabilities and members'equity $ 102,394 $ 104,882
Company Investment in Unconsolidated Real Estate Affiliate
June 30,2013 December 31,2012
Members'equity $ 13,447 $ 13,706
Less:other members'equity (8,303) (8,442)
Basis differential in investment in unconsolidated real estate affiliates,net(1) 14,751 14,724
Investments in unconsolidated real estate affiliates $ 19,895 $ 19,988
(1) The basis differential in investment in the equity of the unconsolidated real estate affiliate is attributable to a difference
in the fair value of Legacy Village over its historical cost at acquisition plus our own acquisition costs for Legacy
Village.We amortize the basis differential over the lives of the related assets and liabilities that make up the fair value
difference,primarily buildings and improvements.In some instances,the useful lives of these assets and liabilities differ
from the useful lives being used to amortize the assets and liabilities by the other members.The basis differential
allocated to land is not subject to amortization.
Summarized Combined Statements of Operations-Unconsolidated Real Estate Affiliates
Three months ended Three months ended Six months ended Six months ended
June 30,2013 June 30,2012 June 30,2013 June 30,2012
Total revenues $ 4,521 $ 61390 $ 9,054 $ 13,058
Total operating expenses 3,498 4,989 6,890 9,054
Operating income 1,023 1,401 2,164 4,004
Total other expenses 1,205 2,028 2,423 4,070
Net loss $ (182) $ (627) $ (259) $ (66)
Company Equity in Income of Unconsolidated Real Estate Affiliates
Three months ended Three months ended Six months ended Six months ended
June 30,2013 June 30,2012 June 30,2013 June 30,2012
Net loss of unconsolidated real estate
affiliates $ (182) $ (627) $ (259) $ (66)
Other members'share of net loss
(income) 98 224 140 (178)
Adjustments and other expenses 13 (10) 27 10
Other expense from unconsolidated real
estate affiliates — (3) — (6)
Company equity in loss of
unconsolidated real estate affiliates $ (71) $ (416) $ (92) $ (240)
11
NOTE 5—MORTGAGE NOTES AND OTHER DEBT PAYABLE
Mortgage notes and other debt payable have various maturities through 2027 and consist of the following:
Maturity/ Interest Amount payable as of
Property Extinguishment Date Rate June 30,2013 December 31,2012
Mortgage notes payable(1)(2) July 2013-March 2027 2.94%-6.14% $ 451,239 $ 479,206
Line of credit June 2015 2.70% 7,000 —
Other debt payable(3) January 2013 4.75% — 12,000
Mortgage notes and other debt payable 458,239 491,206
Net debt premium on assumed debt 1,308 1,779
Mortgage notes and other debt payable,net $ 459,547 $ 492,985
(1) On June 20,2013,we entered into a$12,000 mortgage note payable secured by 4001 North Norfleet Road. The note
matures February 1,2017 and has a floating interest rate equal to LIBOR plus 2.75%(2.94%at June 30,2013).
(2) On July 1,2013,we retired the mortgage note payable on 36 Research Park Drive.The outstanding balance on the
mortgage note payable,including accrued interest,was approximately$10,650,000. We negotiated a discounted payoff
in the amount of$9,500.
(3) The seller of 111 Sutter Street provided short-term financing at closing at the prime rate(3.25%at December 31,2012)
plus 150 basis points. In January 2013,we retired the$12,000 note payable.
Aggregate principal payments of mortgage notes payable as of June 30,2013 are as follows:
Year Amount
2013 $ 56,686
2014 138,857
2015 24,452
2016 33,530
2017 112,621
Thereafter 85,093
Total $ 451,239
Line of Credit
On June 25,2013,we entered into a$40,000 revolving line of credit agreement with Bank of America,N.A.to cover
short-term capital needs for new property acquisitions and working cash.The line of credit has a two year term and bears
interest based on LIBOR plus a spread ranging from 1.50%to 2.75%depending on the Company's leverage ratio(2.25%
spread at June 30,2013). We may not draw funds on our line of credit if we experience a Material Adverse Effect,which is
defined to include,among other things,(a)a material adverse effect upon the operations,business,assets,liabilities,or
financial condition of the Company,taken as a whole;(b)a material impairment of the rights and remedies of lender under any
loan document or the ability of any loan party to perform its obligations under any loan document;or(c)a material adverse
effect upon the legality,validity,binding effect or enforceability against any loan party of any loan document to which it is a
party. As of June 30,2013,there were no material adverse effects. Our line of credit does require us to meet certain
customary debt covenants which include a maximum leverage ratio,a minimum debt service ratio as well as minimum amounts
of equity and liquidity.
At June 30,2013,we were in compliance with all debt covenants.
NOTE 6—COMMON STOCK
We have three classes of common stock outstanding as of June 30,2013. Our previously existing class of undesignated
common stock was designated as Class E common stock on September 27,2012. The outstanding shares of Class E common
stock will convert to Class M common stock on October 1,2013. We will not issue any additional shares of Class E common
12
stock.Shares of Class A and M common stock are currently being sold under our continuous public Offering. The fees payable
to our dealer manager with respect to each outstanding share of each class,as a percentage of NAV,are as follows:
Selling Commission Dealer Manager Fee Distribution Fee
Class A Shares up to 3.5% 0.55% 0.50%
Class M Shares None 0.55% None
Class E Shares None None None
The selling commission,dealer manager fee and distribution fee are offering costs and are recorded as a reduction of
capital in excess of par value.
Stock Issuances
The stock issuances for our three classes of shares for the six months ended June 30,2013 and for the year ended
December 31,2012 were as follows:
Six months ended Year ended
June 30,2013 December 31,2012
#of shares Amount #of shares Amount
Class A Shares 5,734,868 $ 58,692 3,612,169 $ 37,035
Class M Shares 1,525,031 15,523 104,282 1,057
Class E Shares(1) — — 5,202,625 50,794
Total $ 74,215 $ 88,886
(1) On August 8,2012,we sold 5,120,355 shares of our undesignated common stock to an affiliate of our Advisor at our
June 30,2012 net asset value of approximately$9.76 per share. The undesignated shares of our common stock were
designated as Class E shares on September 27,2012.
Stock Dividend
On October 1,2012,we declared a stock dividend with respect to all Class E shares at a ratio of 4.786-to-1.The effects of
the stock dividend,which was effected as a stock split,have been applied retroactively to all share and per share amounts for all
periods presented.
Share Repurchase Plan
On October 1,2012,we adopted a new share repurchase plan whereby on a daily basis stockholders may request we
repurchase all or a portion of their shares of Class A and Class M common stock at that day's NAV per share. The share
repurchase plan is subject to a one-year holding period,with certain exceptions,and limited to 5%of NAV per quarter with
certain limitations based on the size of the capital raise in our Offering. Class E shares are not eligible to participate in the
share repurchase plan. For the three and six months ended June 30,2013,we repurchased 26,048 shares of Class A common
stock that were issued through our distribution reinvestment plan.
Distribution Reinvestment Plan
From January 1,2012 through September 30,2012,we issued 82,270 shares of common stock for approximately$794
pursuant to our dividend reinvestment plan that was in effect prior to the commencement of the Offering on October 1,2012.
On October 1,2012,we terminated our existing dividend reinvestment plan and adopted a new distribution reinvestment plan
whereby Class A and Class M shares may elect to have their cash distributions reinvested in additional shares of our Common
Stock at the NAV per share on the distribution date. Class E shares are not eligible to participate in the distribution
reinvestment plan. For the six months ended June 30,2013,we issued 52,291 and 9,229 shares of Class A and Class M
Common Stock,respectively,for$623 under the distribution reinvestment plan.
Earnings Per Share("EPS'9
Basic per share amounts are based on the weighted average of shares outstanding of 35,343,798 and 33,445,787 for the
three and six months ended June 30,2013 and 24,022,500 and 24,008,932 for the three and six months ended June 30,2012,
respectively.We have no dilutive or potentially dilutive securities.The computations of basic and diluted EPS were adjusted
retroactively for all periods presented to reflect the stock dividend that occurred on October 1,2012.
13
Organization and Offering Costs
Organization and offering expenses include,but are not limited to,legal,accounting and printing fees and personnel
costs of our Advisor(including reimbursement of personnel costs for our executive officers)attributable to our organization,
preparation of the registration statement,registration and qualification of our common stock for sale with the SEC and in the
various states and filing fees incurred by our Advisor.LaSalle agreed to fund our organization and offering expenses through
October 1,2012,which is the date the SEC declared our registration statement effective,following which time we commenced
reimbursing LaSalle over 36 months for organization and offering expenses incurred prior to the commencement date.
Following the Offering commencement date,we began paying directly or reimbursing LaSalle if it pays on our behalf any
organization and offering expenses incurred during the Offering period(other than selling commissions,the dealer manager
fee and distribution fees)as and when incurred.After the termination of the Offering,our Advisor has agreed to reimburse us
to the extent that the organization and offering expenses that we incur exceed 15%of our gross proceeds from the Offering.
Organization costs are expensed,whereas offering costs are recorded as a reduction of capital in excess of par value.As of
June 30,2013 and December 31,2012,LaSalle had paid$4,211 and$2,719,respectively,of organization and offering
expenses on our behalf which we had not reimbursed.These costs are included in Accounts payable and other accrued
expenses.
NOTE 7-RELATED PARTY TRANSACTIONS
Effective as of October 1,2012,we entered into a First Amended and Restated Advisory Agreement with LaSalle,
pursuant to which we pay a fixed advisory fee of 1.25%of our NAV calculated daily.The Advisory Agreement allows for a
performance fee to be earned for each share class based on the total return of that share class during the calendar year. The
performance fee is calculated as 10%of the return in excess of 7%per annum.
Prior to October 1,2012,under the terms of the Management and Advisory Agreements,we paid each of the Former
Manager and Advisor an annual fixed fee equal to 0.75%of NAV,calculated quarterly. Effective January 1,2010,the Former
Manager's fixed fee was reduced from 0.75%of NAV to 0.10%of NAV.Beginning on November 14,2011,when the Former
Manager assigned the Management Agreement to the Advisor,we began paying the Former Manager's fixed fee to the Advisor.
As a result,we began paying the Advisor total aggregate compensation of 0.85%of NAV for management and advisory
services provided to the Company. Additionally,under the terms of the Management and Advisory Agreements,we paid the
Former Manager and our Advisor an aggregate annual variable fee equal to 7.50%of the Variable Fee Base Amount,as defined
in the Advisory Agreement,calculated quarterly.The Former Manager'was allocated an increasing proportion of the variable
fee to the extent the Company's NAV increased,up to a maximum of 1.87%of the 7.50%fee paid.Effective January 1,2010,
the Former Manager waived its participation in the variable fee and the Advisor waived its participation in the variable fee per
the terms of the Management Agreement.
The fixed advisory fee for the three and six months ended June 30,2013 was$1,121 and$2,107, respectively. The
fixed management and advisory fees for the three and six months ended June 30,2012 were$488 and$971,respectively. The
fixed advisory fees payable at June 30,2013 and December 31,2012 was$385 and$324,respectively.The variable fee for the
three and six months ended June 30,2012 was$84 and$331,respectively.No variable fee expense was included in Advisor
fees payable at December 31,2012.No performance fee was earned for the three and six months ended June 30,2013.
We pay Jones Lang LaSalle Americas,Inc.("JLL Americas"),an affiliate of the Advisor,for property management and
leasing services performed at various properties we own,on terms no less favorable than we could receive from other third
party service providers. For the three and six months ended June 30,2013,we paid JLL Americas$52 and$104,respectively.
For the three and six months ended June 30,2012,we paid JLL Americas$50 and$90,respectively. During the three months
ended June 30,2013,we paid JLL Americas$100 in loan placement fees related to the mortgage debt on 4001 North Norfleet
and the line of credit.
LaSalle Investment Management Distributors,LLC,an affiliate of our Advisor,is the dealer manager(the"Dealer
Manager")for our Offering. For the three and six months ended June 30,2013,we paid the Dealer Manager selling
commissions,dealer manager fees and distribution fees totaling$535 and$853,respectively. A majority of the selling
commissions,dealer manager fees and distribution fees are reallowed to participating broker-dealers.
As of June 30,2013,we owed$4,211 for organization and offering costs paid by LaSalle(see Note 6-Common Stock).
These costs are included in Accounts payable and other accrued expenses at June 30,2013.
14
NOTE 8—COMMITMENTS AND CONTINGENCIES
The Dignity Health Office Portfolio mortgage debt requires that we deposit an annual amount of$855,up to a cumulative
maximum of$1,900,into an escrow account to fund future tenant improvements and leasing commissions.The amount of the
escrow funded by each of the 15 buildings in the portfolio is capped individually pursuant to each loan agreement.At June 30,
2013,we had approximately$1,217 deposited in this escrow,and we expect to fund$348 during the remainder of 2013.
Additionally,we are required to deposit approximately$151 per year into an escrow account to fund capital expenditures.At
June 30,2013,our capital account escrow account balance was$163.These escrow accounts allow us to withdraw funds as we
incur costs related to tenant improvements,leasing commissions and capital expenditures.Additionally,on a monthly basis,we
are required to fund an escrow account for the future payment of real estate taxes and insurance costs in an amount equal to
1/12th of the estimated real estate taxes and insurance premium.At June 30,2013,our real estate tax and insurance escrow
balance was$693.We expect to fund the loan escrows from property operations.
As part of the lease with our single tenant at the 4001 North Norfleet Road property,we provided the tenant a right to
expand the current building by up to 286,000 square feet of space.If the tenant exercises this right,we will be obligated to
construct this expansion space.The tenant has the right to provide notice to us of its desire to expand at any time prior to
February 28,2016(the end of the ninth year of the lease),or if the lease is extended,until any time prior to the end of the
fourth year of any extension.As of June 30,2013,we had not received an expansion notice from the tenant.
NOTE 9—SEGMENT REPORTING
We have four operating segments:apartment properties,industrial properties,office properties,and retail properties.
Consistent with how we review and manage our properties,the financial information summarized below is presented by
reportable operating segment and reconciled to income(loss)from continuing operations as of and for the three and six months
ended June 30,2013 and 2012.
15
Apartments Industrial Office Retail Total
Assets as of June 30,2013 $ 231,089 $ 102,453 $422,625 $ 90,5,55 $ 846,722 ,
Assets as of December 31,2012 $ 232,387 $ 43,867 $429,407 $ 91,222 $ 796,883
Three Months Ending June 30,2013
`Revenues:
Minimum rents $ 7,844 $ 1,051 $ 9,366 $ 1,501 $ 19,762
Tenant recoveries and other rental income 448 212 4,236 563 5,459
Total revenues $ 8,292 $ 1,263 $ 13,602 $ 2,064 $ 25,221
Operating expenses:
Real estate taxes $ 843 $ 166 $ 1,190 $ 353 $ 2,552
Property operating 39229 30 3,043 307 6,609
(Recovery of)provision for doubtful accounts 47 - (56) 2 (7)
Total segment operating expenses $ 4,119 $ 196 $ 4,177 $ 662 $ 9,154
Operating income-Segments $ 4,173 $ 1,067 $ 9,425 $ 1,402 $ 16,067
Capital expenditures by segment $ 596 $ 7 $ 3,709 $ 74 $ 4,386
Reconciliation to income from continuing operations
.__ _. _
Operating income-Segments $ 16,067
Advisor fees 1,121
Company level expenses 606
General and administrative 399
Depreciation and amortization 6,798
Operating income $ 7,143
Other income and(expenses):
Interest expense $ (6,419)
....... .. .... .._
Equity in loss of unconsolidated affiliates (71)
Total other income and(expenses) $ (6,490)
Income from continuing operations $ 653
Reconciliation to total consolidated assets as of June 30,2013
Assets per reportable segments $ 846,722
......... _.... ....._. ........._.
Corporate level.assets 26,667
Total consolidated assets $ 873,389
Reconciliation to total consolidated assets as of December 31,2012
Assets per reportable segments $ 796,883
Corporate level assets 45,151
.......
Total consolidated assets $ 842,034
16
Apartments Industrial Office Retail Total
Three Months Ended June 30,2012
,Revenues:
Minimum rents $ 7,757 $ 1,026 $ 5,661 $ 1,477 $ 15,921
Tenant recoVeries and other re'ntal.income 469 233, 2,259 519 3,480
Total revenues $ 8,226 $ 1,259 $ 7,920 $ 1,996 $ 19,401
Operating ezpenses
Real estate taxes $ 796 $ 195 $ 941 $ 291 $ 2,223
Property operating 3,129 87 2,024 323 5,563
Provision for doubtful accounts 19 — 16 — 35
Total segment operating expenses. $ 3,944 $ 282 $ 2,981 $ 614 7,821
Operating income Segments $ 4,282 $ 977 $ 4,939 $ 1,382 $ 11,580
Capital expenditures by segment $ 552 $ 26 $ 1,370 $ 76 $ 2,024
Reconciliation to income from continuing operations
Operating income-Segments' $ 11,580
..............
Advisor fees 572
_......
Company level expenses 688
General and administrative 344
.........
Depreciation and amortization 4,997
Operating income $ 4,979
;Other income and(expenses):
Interest expense $ (6,415)
Equity in income of unconsolidated affiliates (416)
... .......... . . . ...... -..
Total other income and(expenses) $ (6,831)
....... ..
Loss from continuing operations $ (1,852)
17
Apartments Industrial Office Retail Total
Six Months Ending June 30,2013
Revenues:.,,.
Minimum rents $ 15,849 $ 2,084 $21,567 $ 3,033 $ 42,533
Tenant recoveries and other rental income 811.' 386 6,736 1;125 9,058
Total revenues $ 16,660 $ 2,470 $28,303 $ 4,158 $ 51,591
Operating expenses
Real estate taxes $ 1,684 $ 327 $ 2,368 $ 628 $ 5,007
Property operating 6,414 57 5,641 579 12,691
Provision for doubtful accounts 97 - (301) 35 (169)
Total segment operating expenses $ 8,195 $ 384 $ 7,708 $ 1;242 $ 17,529
Operating income-Segments $ 8,465 $ 2,086 $20,595 $ 2,916 $ 34,062
Capital expenditures by segment $ 959 $ 41 $ 10,166 $ 74 $ 11,240
Reconciliation to income from continuing operations
Operating income-Segments $ 34,062
_..
Advisor fees 2,107
....._..
Company aevel expenses 999
General and administrative 796
Depredation and amortization 19189
....
Operating income $ 10,971
Other income and(expenses):
Interest expense $ (12,878
.
Debt modification expenses' (182)
......... .:_.. _...
Equity in loss of unconsolidated affiliates (92)
'Total other income and(expenses).` $ (13,152)
- e _.
Loss from continuing operations $ (2,181)
18
Apartments Industrial Office Retail Total
Six Months Ended June 30,2012
Revenues:
Minimum rents $ 15,758 $ 2,073 $ 11,482 $ 2,994 $ 32,307
Tenant recoveries and other rental income 849 480 4,624 1,030 6,983
Total revenues $ 16,607 $ 2,553 $ 16,106 $ 4,024 $ 39,290
Operating expenses:
Real estate taxes $ 1,532 $ 389 $ 1,899 $ 582 $ 4,402
Property operating 6,177 114 4,005 611 10,907
Provision for doubtful accounts 23 - 106 23 152
Total segment operating expenses $ 7,732 $ 503 $ 6,010 $ 1,216 $ 15,461
Operating income-Segments $ 8,875 $ 2,050 $ 10,096 $ 2,808 $ 23,829
Capital expenditures by segment $ 786 $ 26 $ 2,550 $ 83 $ 3,445
Reconciliation to income from continuing operations
Operating income-Segments $ 23,829
Advisor fees 1,302
Company level expenses 1,339
General and administrative 543
Depreciation and amortization 10,004
Operating income $ 10,641
Other income and(expenses):
Interest expense $ (13,317)
Equity in income of unconsolidated affiliates (240)
Total other income and(expenses) $ (13,557)
Loss from continuing operations $ (2,916)
I
NOTE 10-DISTRIBUTIONS PAYABLE
On May 7,2013,our board of directors declared for the second quarter of 2013 a gross dividend in the amount of$0.10
per share to holders of each class of our common stock of record as of June 27,2013.The dividend was paid on August 2,
2013.Class E stockholders received$0.10 per share.Class A and Class M stockholders received$0.10 per share less applicable
class-specific per share fees resulting in a net dividend of$0.07818 and$0.08881,respectively.
NOTE 11-SUBSEQUENT EVENTS
On July 1,2013,we retired the mortgage note payable on 36 Research Park Drive.The outstanding balance on the
mortgage note payable,including accrued interest,was approximately$10,650. We negotiated a discounted payoff in the
amount of$9,500,which was funded with a$7,000 draw on our line of credit and cash on hand. The discounted payoff
will be reflected as a gain on extinguishment of debt. As a result,we own the property free and clear of mortgage debt.
On August 6,2013,our board of directors approved a gross dividend for the third quarter of 2013 of$0.10 per share
to stockholders of record as of September 27,2013,payable on November 1,2013. Class E stockholders receive$0.10 per
share.Class A and Class M stockholders will receive$0.10 per share less applicable class-specific fees.
19
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
$in thousands,except per share amounts
Cautionary Note Regarding Forward-Looking Statements
This Quarterly report on Form 10-Q may contain forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934,as amended(the"Exchange Act")and Section 27A of the Securities Act of 1933,as amended
(the"Securities Act"),regarding,among other things,our plans,strategies and prospects,both business and financial.Forward-
looking statements include,but are not limited to,statements that represent our beliefs concerning future operations,strategies,
financial results or other developments.Forward-looking statements can be identified by the use of forward-looking
terminology such as,but not limited to,"may,""should,""expect,""anticipate,""estimate,""would be,""believe,"or
"continue"or the negative or other variations of comparable terminology.Because these forward-looking statements are based
on estimates and assumptions that are subject to significant business,economic and competitive uncertainties,many of which
are beyond our control or are subject to change,actual results could be materially different.Although we believe that our plans,
intentions and expectations reflected in or suggested by these forward-looking statements are reasonable,we cannot assure you
that we will achieve or realize these plans,intentions or expectations.Forward-looking statements are inherently subject to
risks,uncertainties and assumptions.Readers are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date this Form 10-Q is filed with the SEC.Except as required by law,we do not undertake to update
or revise any forward-looking statements contained in this Form 10-Q.Important factors that could cause actual results to differ
materially from the forward-looking statements are disclosed in"Item IA.Risk Factors,""Item 1.Business"and"Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations"contained in the Company's 2012
Form 10-K and our periodic reports filed with the SEC.
Management Overview
The following Management's Discussion and Analysis of Financial Condition and Results of Operations("MD&A")is
intended to help the reader understand our results of operations and financial condition.This MD&A is provided as a
supplement to,and should be read in conjunction with,our consolidated financial statements and the accompanying notes to the
consolidated financial statements appearing elsewhere in this Form IO-Q.All references to numbered Notes are to specific
notes to our Consolidated Financial Statements beginning on page 8 of this Form 10-Q,and the descriptions referred to are
incorporated into the applicable portion of this section by reference.References to"base rent"in this Form I 0-Q refer to cash
payments made under the relevant lease(s),excluding real estate taxes and certain property operating expenses that are paid by
us and are recoverable under the relevant lease(s)and exclude adjustments for straight-line rent revenue and above-and below-
market lease amortization.
The discussions surrounding our Consolidated Properties refer to our wholly or majority owned and controlled properties,
which as of June 30,2013,were comprised of:
Apartments
• Station Nine Apartments,
• Cabana Beach San Marcos,
• Cabana Beach Gainesville,
• Campus Lodge Athens,
• Campus Lodge Columbia,
• The Edge at Lafayette and
• Campus Lodge Tampa.
Industrial
• 105 Kendall Park Lane,
• 4001 North Norfleet Road,
• Joliet Distribution Center and
• Suwanee Distribution Center.
Office
• Monument IV at Worldgate,
• 111 Sutter Street,
20
• the Dignity Health Office Portfolio,
• 4 Research Park Drive,
• 36 Research Park Drive,
• Canyon Plaza and
• Railway Street Corporate Centre.
Retail
• Stirling Slidell Shopping Centre and
• The District at Howell Mill.
Our Unconsolidated Property,owned through a joint venture arrangement as of June 30,2013,refers to Legacy Village.
Because management's operating strategies are generally the same whether the properties are consolidated or unconsolidated,
we believe that financial information and operating statistics with respect to all properties,both consolidated and
unconsolidated,provide important insights into our operating results,including the relative size and significance of these
elements to our overall operations.Collectively,we refer to our Consolidated and Unconsolidated Properties as our"Company
Portfolio."
Our primary business is the ownership and management of a diversified portfolio of office,retail,industrial and
apartment properties primarily located in the United States.It is expected that over time our real estate portfolio will be further
diversified on a global basis and will be complemented by investments in real estate-related assets.
We are managed by our Advisor,LaSalle Investment Management,Inc.,a subsidiary of our Sponsor,Jones Lang LaSalle
Incorporated(NYSE:JLL),a leading global real estate investment management and services firm.We hire property
management and leasing companies to provide the on-site,day-to-day management and leasing services for our properties.
When selecting a property management or leasing company for one of our properties,we look for service providers that have a
strong local market or industry presence,create portfolio efficiencies,have the ability to develop new business for us and will
provide a strong internal control environment that will comply with our Sarbanes-Oxley Act of 2002("Sarbanes-Oxley")
internal control requirements.We currently use a mix of property management and leasing service providers that include large
national real estate service firms,including an affiliate of our Advisor,and smaller local firms.
We seek to minimize risk and maintain stability of income and principal value through broad diversification across
property sectors and geographic markets and by balancing tenant lease expirations and debt maturities across the
Company Portfolio.Our diversification goals also take into account investing in sectors or regions we believe will create
returns consistent with our investment objectives.Under normal conditions,we intend to pursue investments principally
in well-located,well-leased assets within the apartment,industrial,office and retail sectors.We expect to actively manage
the mix of properties and markets over time in response to changing operating fundamentals within each property sector
and to changing economies and real estate markets in the geographic areas considered for investment.When consistent
with our investment objectives,we also seek to maximize the tax efficiency of our investments through like-kind
exchanges and other tax planning strategies.
The following tables summarize our diversification by property sector and geographic region based upon the fair value of
our Consolidated and Unconsolidated Properties.These tables provide examples of how our Advisor evaluates the Company
Portfolio when making investment decisions.
21
Property Sector Diversification
Estimated Percent of Fair Value as of June 30,2013
Consolidated and
Consolidated Properties Unconsolidated Property Unconsolidated Properties
Apartment 26% — 23%
Industrial 14% — 13%
Office 51% — 47%
Retail 9% 100% 17%
Geographic Region Diversification
Estimated Percent of Fair Value as of June 30,2013
Consolidated and
Consolidated Properties Unconsolidated Property Unconsolidated Properties
West 36% — 32%
South 31% — 29%
East 15% — 14%
Midwest 13% 100% 20%
International 5% — 5%
Seasonality
For our six student-oriented apartment communities,the majority of our leases commence mid-August and terminate the
last day of July.These dates generally coincide with the commencement of the universities'fall academic term and the
completion of the subsequent summer school session.In certain cases we enter into leases for less than the full academic year,
including nine-month or shorter-term leases.As a result,cash flows may be reduced during the summer months at properties
having lease terms shorter than 12 months.The annual releasing cycle results in significant turnover in the tenant population
from year to year.Accordingly,certain property revenues and operating expenses tend to be seasonal in nature,and therefore
not incurred ratably over the course of the year.Prior to the commencement of each new lease period,mostly during the first
two weeks of August,we prepare the units for new incoming tenants.Other than revenue generated by in-place leases for
returning tenants,we do not generally recognize lease revenue during this period,referred to as"Turn",as we have no leases in
place.In addition,during Turn we incur significant expenses making our units ready for occupancy,which we recognize
immediately.This lease Turn period results in seasonality impacts on our operating results during the second and third quarter
of each year.
With the exception of our student-oriented apartment communities described above,our investments are not materially
impacted by seasonality,despite certain of our retail tenants being impacted by seasonality.Percentage rents(rents computed as
a percentage of tenant sales)that we earn from investments in retail properties may,in the future,be impacted by seasonality.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions.These
estimates and assumptions impact the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
For example,significant estimates and assumptions have been made with respect to the useful lives of assets,recoverable
amounts of receivables and initial valuations and related amortization periods of deferred costs and intangibles,particularly
with respect to property acquisitions.Actual results could differ from those estimates.
Critical Accounting Policies
The MD&A is based upon our consolidated financial statements,which have been prepared in accordance with GAAP.
The preparation of these consolidated financial statements requires management to make estimates and judgments that affect
the reported amounts of assets,liabilities,revenues and expenses.Management bases its estimates on historical experience and
assumptions that are believed to be reasonable under the circumstances,the results of which form the basis for making
22
judgments about carrying value of assets and liabilities that are not readily apparent from other sources.Actual results may
differ from these estimates under different assumptions or conditions.We believe there have been no significant changes during
the three and six months ended June 30,2013 to the items that we disclosed as our critical accounting policies and estimates
under"Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations,"in our 2012 Form
10-K.
Consolidated Properties
Consolidated Properties owned at June 30,2013 are as follows:
Percentage
Leased as of
Ownership Net Rentable June 30,
Property Name Location Acquisition Date % Square Feet 2013
Apartment Segment:
Station Nine Apartments Durham,NC April 16,2007 100% 312,000 98%
Cabana Beach San Marcos(1)(2) San Marcos,TX November 21,2007 78 258,000 88
Cabana Beach Gainesville(1)(2) Gainesville,FL November 21,2007 78 598,000 89
Campus Lodge Athens(1)(2) Athens,GA November 21,2007 78 229,000 95
Campus Lodge Columbia(1)(2) Columbia,MO November 21,2007 78 256,000 90
The Edge at Lafayette(1)(2) Lafayette,LA January15,2008 78 207,000 97
Campus Lodge Tampa(1)(2) Tampa,FL February 29,2008 78 477,000 97
Industrial Segment:
105 Kendall Park Lane Atlanta,GA June 30,2005 100 409,000 100
4001 North Norfleet Road Kansas City,MO February 27,2007 100 702,000 100
Joliet Distribution Center Joliet,IL June 26,2013 100 442,000 100
Suwanee Distribution Center Atlanta,GA June 28,2013 100 559,000 100
Office Segment:
Monument IV at Worldgate Herndon,VA August 27,2004 100 228,000 83
111 Sutter Street San Francisco,CA March 29,2005 100 286,000 93
Dignity Health Office Portfolio CA and AZ December 21,2005 100 757,000 79
_. . .. ..........
4 Research Park Drive St.Charles,MO June 13,2007 100 60,000 100
36 Research Park Drive St.Charles,MO June 13,2007 100 81,000 100
Canyon Plaza San Diego,CA June 26,2007 100 199,000 59
Railway Street Corporate Centre Calgary,Canada August 30,2007 100 135,000 90
Retail Segment:
Stirling Slidell Shopping Centre Slidell,LA December 14,2006 100 139,000 80
The District at Howell Mill(3) Atlanta,GA June 15,2007 87.85 306,000 98
(1) This apartment property is located near a university,and during summer months the occupancy will fluctuate due to
leasing efforts before the school year.
(2) We own a 78%interest in the joint venture that owns a fee interest in this property.
(3) We own an 87.85%interest in the joint venture that owns a fee interest in this property.
Unconsolidated Property
Unconsolidated Property owned at June 30,2013 was:
Percentage
Ownership Net Rentable Leased as of
Property Name Type Location Acquisition Date % Square Feet June 30,2013
Legacy Village Retail Lyndhurst OH August 25,2004 46.5% 595,000 94%
23
Operating Statistics
We generally hold investments in properties with high occupancy rates leased to quality tenants under long-tenor,non-
cancelable leases.We believe these leases are beneficial to achieving our investment objectives.The following table shows our
operating statistics by property type for our Consolidated Properties as of June 30,2013:
Average Minimum
Number of Total Area %of Total Base Rent per
Properties (Sq Ft) Area Occupancy% Occupied Sq Ft(1)
Apartment 7 2,337,000 35% 93% $ 15.38
Industrial(2) 4 2,112,000 32 100 2.11
Office 21 1,749,000 26 82 22.15
Retail 2 445,000 7 92 14.51
Total 34 6,643,000 100% 93% $ 12.01
(1) Amount calculated as in-place minimum base rent for all occupied space at June 30,2013 and excludes any straight line
rents,tenant recoveries and percentage rent revenues.
(2) Approximately 795,000 square feet of industrial square footage becomes rent bearing on August 1,2013. The Average
Minimum Base Rent per Occupied Square Foot for our industrial sector will be approximately$3.79 at that time.
The following table shows our operating statistics for our Unconsolidated Property as of June 30,2013:
Average Minimum
Number of Total Area %of Total Base Rent per
Properties (Sq Ft) Area Occupancy% Occupied Sq Ft(1)
Retail 1 595,000 100% 94% $21.32
(1) Amount calculated as in-place minimum base rent for all occupied space at June 30,2013 and excludes any straight line
rents,tenant recoveries and percentage rent revenues.
As of June 30,2013,our average effective annual rent per square foot,calculated as average minimum base rent per
occupied square foot less tenant concessions and allowances,was$14.72 for our Consolidated Properties and$20.39
for our Unconsolidated Property.
Recent Events and Outlook
General Company and Market Commentary
On October 1,2012,the SEC declared effective our registration statement on Form S-11 (File No.333-177963)with
respect to our continuous public Offering of up to$3,000,000 in any combination of Class A and Class M shares of Common
Stock,consisting of up to$2,700,000 of shares in our primary Offering and up to$300,000 of shares pursuant to our
distribution reinvestment plan.We intend to offer shares of our Common Stock on a continuous basis for an indefinite period of
time by filing a new registration statement before the end of each offering,subject to regulatory approval.The per share
purchase price varies from day-to-day and,on each day,equals our NAV per share for each class of Common Stock,plus,for
Class A shares only,applicable selling commissions. LaSalle Investment Management Distributors,LLC,our affiliate and the
dealer manager of our Offering,has agreed to distribute shares of our Common Stock exclusively through Merrill Lynch,
Pierce,Fenner&Smith Incorporated for up to one year following the Offering commencement date,subject to certain
exceptions. We intend to use the net proceeds from the Offering,after we pay the fees and expenses attributable to the Offering
and our operations,to(1)grow and further diversify our portfolio by making investments in accordance with our investment
strategy and policies,(2)reduce borrowings and repay indebtedness incurred under various financing instruments and(3)fund
repurchases of our shares under our share repurchase plan.
Using capital raised since our Offering went effective,we executed on a number of our key strategic initiatives during the
six months ended June 30,2013,including:
• executed a new three year lease at Monument IV at Worldgate with Fannie Mae;
• retired the remaining balance on the$12,000 note payable related to the December 2012 acquisition of 111 Sutter
Street in San Francisco,California;
• extended the maturity date and reduced our interest rate on the existing$53,922 mortgage loan for 111 Sutter Street;
24
• retired the mortgage note payable on Monument IV at Worldgate,in the amount of$35,351 including accrued interest,
in advance of its September 1,2013 maturity date;
• purchased Joliet Distribution Center for$21,000;
• purchased Suwanee Distribution Center for$38,000;and
• secured a$40,000 revolving credit facility.
Through these specific and other important accomplishments we continued to reduce our Company leverage ratio,
increased cash reserves and provided cash flow to our stockholders through quarterly dividend payments.
Our primary investment objectives are:
• to generate an attractive level of current income for distribution to our stockholders;
• to preserve and protect our stockholders'capital investments;
• to achieve appreciation of our NAV over time;and
• to enable stockholders to utilize real estate as an asset class in diversified,long-term investment portfolios.
The cornerstone of our investment strategy is to acquire and manage income-producing commercial real estate properties
and real estate-related assets around the world.We believe this strategy will enable us to provide our stockholders with a
portfolio that is well-diversified across property type,geographic region and industry,both in the United States and
internationally.It is our belief that adding international investments to our portfolio over time will serve as an effective tool to
construct a well-diversified portfolio designed to provide our stockholders with stable distributions and attractive long-term
risk-adjusted returns.
We believe that our broadly diversified portfolio will benefit our stockholders by providing:
• diversification of sources of income;
• access to attractive real estate opportunities currently in the United States and,over time,around the world;and
• exposure to a diversified basket of currencies,over time.
Since real estate markets are often cyclical in nature,our strategy will allow us to more effectively deploy capital into
property types and geographic regions where the underlying investment fundamentals are relatively strong or strengthening and
away from those property types and geographic regions where such fundamentals are relatively weak or weakening.We intend
to meet our investment objectives by selecting investments across multiple property types and geographic regions to achieve
portfolio stability,diversification,current income and favorable risk-adjusted returns.To a lesser degree,we also intend to
invest in debt and equity interests backed principally by real estate,which we refer to collectively as"real estate-related assets."
Our board of directors has adopted investment guidelines for our Advisor to implement and actively monitor in order to
allow us to achieve and maintain diversification in our overall investment portfolio.Our board of directors formally reviews
our investment guidelines on an annual basis and our investment portfolio on a quarterly basis or,in each case,more often as
they deem appropriate.Our board of directors reviews the investment guidelines to ensure that the guidelines are being
followed and are in the best interests of our stockholders.
After we have raised substantial proceeds in the Offering,and our total NAV has reached$800,000,which we refer to as
our ramp-up period,we will seek to invest:
• up to 80%of our assets in properties;
• up to 25%of our assets in real estate-related assets;and
• up to 15%of our assets in cash,cash equivalents and other short-term investments.
Notwithstanding the above,the actual percentage of our portfolio that is invested in each investment type may from time
to time be outside these target levels due to numerous factors including,but not limited to,large inflows of capital over a short
period of time,lack of attractive investment opportunities or increases in anticipated cash requirements for repurchase requests.
During the ramp-up period,we will balance the goals of achieving a more diversified portfolio and reducing our leverage.
Our strategy to reduce leverage may include working aggressively with existing lenders to allow us to negotiate more favorable
loan terms.
During the ramp-up period;we intend to use lower leverage,or in some cases possibly no leverage,to finance our new
acquisitions in order to reduce our overall Company leverage.Our Company leverage ratio(calculated as our share of total
liabilities divided by our share of the fair value of total assets),was 57%as of June 30,2013,down from 63%at December 31,
25
2012 as a result of debt extinguishments,increasing property values and raising new equity. After the ramp-up period,we
expect to maintain a targeted Company leverage ratio of between 30%and 50%.
2013 Key Initiatives
During 2013,we intend to use capital raised from our Offering to make new acquisitions that will further our investment
objectives and are in keeping with our investment strategy. Likely acquisition candidates may include well located,well leased
industrial properties and grocery-anchored community oriented retail properties. We will look to acquire other property types
when the opportunities and risk profile match our investment objectives and strategy.We also intend to use capital to repay or
refinance loans in our existing portfolio in order to reduce our overall Company leverage and to take advantage of the current
favorable interest rate environment.
In keeping with our strategy to repay or refinance our existing mortgage loans,we intend to retire loans when certain
windows of prepayment allow us to pay them off without incurring prepayment penalties.We may also refinance properties
with current rate mortgages at lower interest rates and loan to values.We also intend to use our revolving line of credit to allow
us to more efficiently manage our cash flows.
We continue to evaluate the strategic alternatives for our investment in the Dignity Health Office Portfolio as three of the
mortgage loan pools mature in November 2013 and the fourth pool matures in March 2014. Our strategic alternatives include
refinancing the loans,selling the entire portfolio or selling portions of the portfolio. We will also evaluate dispositions of other
properties in the portfolio to potentially redeploy capital in a manner aligned with our investment objectives and strategy.
2013 Key Events and Accomplishments
During January 2013,we retired the$12,000 note payable related to our purchase of 111 Sutter Street.
On March 27,2013,we entered into a loan modification agreement with the existing lender on the$53,922 mortgage for
111 Sutter Street. The loan modification extended the maturity date by eight years from July 2015 to April 2023,provides for
interest-only payments for the first four years of the new term and reduces the fixed-rate interest from 5.58%to 4.50%. The
loan modification is expected to save annually in excess of$550 in interest expense and defers in excess of$850 in annual
principal amortization payments.
On April 30,2013,we retired the mortgage note payable on Monument IV at Worldgate in advance of its September 1,
2013 maturity date.The outstanding balance,including accrued interest,was approximately$35,351 which was funded with
cash on hand.The loan had a 5.29%interest rate and its prepayment will save in excess of$1,850 in annual interest expense.
As a result,we own the property free and clear of mortgage debt.This loan prepayment was in keeping with our objectives to
deleverage our portfolio and further decreased our Company leverage.
On June 20,2013,we entered into a$12,000 mortgage note payable on 4001 North Norfleet Road. The loan matures on
February 1,2017 and bears floating rate interest at a rate equal to LIBOR plus 2.75%. Proceeds of the loan were used for the
property acquisitions made in June 2013.
On June 25,2013,we entered into a$40,000 revolving line of credit agreement with Bank of America,N.A. The line of
credit has a two year term and bears interest based on LIBOR plus a spread ranging from 1.50%to 2.75%depending on the
Company's consolidated leverage ratio.
On June 26,2013,we acquired Joliet Distribution Center,a 442,000 square foot industrial property located in Joliet,
Illinois for approximately$21,000,using cash on hand. The property is 100%leased to two tenants with a weighted average
remaining lease term of approximately six years.
On June 28,2013,we acquired Suwanee Distribution Center,a 559,000 square foot industrial property located in
suburban Atlanta,Georgia for approximately$38,000,using a$7,000 draw on our revolving line of credit and cash on hand.
The property is 100%leased to Mitsubishi Electric&Electronics USA with a remaining lease term of 10 years.
On July 1,2013,we retired the$10,650 mortgage note payable on 36 Research Park Drive. We negotiated a discounted
payoff for the mortgage note in the amount of$9,500,using a$7,000 draw on our revolving line of credit and cash on hand.
The loan had a 5.60%interest rate and its payoff will save in excess of$575 in annual interest expense.We now own the
property free and clear of mortgage debt.This loan repayment was in keeping with our objectives to deleverage our portfolio
and further decreased our Company leverage.
26
Results of Operations
General
Our revenues are primarily received from tenants in the form of fixed minimum base rents and recoveries of operating
expenses.Our expenses primarily relate to the costs of operating and financing the properties.Our share of the net income or
net loss from Unconsolidated Properties is included in the equity in loss of unconsolidated affiliates.We believe the following
analysis of reportable segments provides important information about the operating results of our real estate investments,such
as trends in total revenues or operating expenses that may not be as apparent in a period-over-period comparison of the entire
Company. We group our investments in real estate assets from continuing operations into four reportable operating segments
based on the type of property,which are apartments,industrial,office and retail. Operations from corporate level items and real
estates assets held for sale are excluded from reportable segments.
With respect to the discussions of revenues and operating expenses below,the office segment includes 111 Sutter Street
for the three and six months ended June 30,2013 as a result of the consolidation on December 4,2012.The consolidation was a
result of acquiring the remaining 20%interest in the property. 111 Sutter Street is included in equity in loss of unconsolidated
affiliates for the three and six months ended June 30,2012.Revenues and expenses related to Georgia Door Sales Distribution
Center,Metropolitan Park North and Marketplace at Northglenn are shown as discontinued operations for the three and six
months ended June 30,2012.
Results of Operations for the Three Months Ended June 30,2013 and 2012
Revenues
The following chart sets forth revenues from continuing operations,by reportable segment,for the three months ended
June 30,2013 and 2012:
Three months ended Three months ended $ %
June 30,2013 June 30,2012 Change Change
Revenues:
Minimum rents
Apartments $ 7,844 $ 7,757 $ 87 1.1 %
Industrial 1,051 1,026 25 2.4
Office 9,366 5,661 3,705 65.4
Retail 1,501 1,477 24 1.6
Total $ 19,762 $ 15,921 $ 3,841 24.1 %
Tenant recoveries and other rental income
Apartments $ 448 $ 469 $ (21) (4.5)%
Industrial 212 233 (21) (9.0)
Office 4,236 2,259 1,977 87.5
Retail 563 519 44 8.5
Total $ 5,459 $ 3,480 $ 1,979 56.9 %
Total revenues $ 25,221 $ 19,401 $ 5,820 30.0 %
Minimum rents increased by$3,841 for the three months ended June 30,2013 as compared to the same period in 2012.
The increase is primarily due to minimum rents of$3,066 at 11 l Sutter Street as a result of the consolidation of the property on
December 4,2012.Additionally,minimum rents increased by$858 at Monument IV at Worldgate related to the commencement
of the Amazon Corporate LLC and Fannie Mae leases.Partially offsetting the increase was a decrease of$314 at Canyon Plaza
related to the default and subsequent bankruptcy of Conexant Systems,Inc.("Conexant")during the period ended June 30,
2013.
Tenant recoveries relate mainly to real estate taxes and certain property operating expenses that are paid by us and are
recoverable under the various tenants'leases.Tenant recoveries and other rental income at our properties increased by$1,979
27
for the three months ended June 30,2013 as compared to the same period in 2012.The increase is primarily related to lease
termination revenue of$1,911 at Canyon Plaza related to the default and subsequent bankruptcy of Conexant during the period
ended June 30,2013.Additionally,there was an increase of recovery revenue of$200 at 111 Sutter Street due to the
consolidation of the property on December 4,2012.
Operating Expenses
The following chart sets forth real estate taxes,property operating expenses and(recovery of)provisions for doubtful
accounts from continuing operations,by reportable segment,for the three months ended June 30,2013 and 2012:
Three months ended Three months ended $ %
June 30,2013 June 30,2012 Change Change
Operating expenses:
Real estate taxes
Apartments $ 843 $ 796 $ 47 5.9%
Industrial 166 195 (29) (14.9)
Office 1,190 941 249 26.5
Retail 353 291 62 21.3
Total $ 2,552 $ 2,223 $ 329 14.8 %
Property operating
Apartments $ 3,229 $ 3,129 $ 100 3.2 %
Industrial 30 87 (57) (65.5)
Office 3,043 2,024 1,019 50.3
Retail 307 323 (16) (5.0)
Total $ 6,609 $ 5,563 $ 1,046 18.8 %
Net(recovery of)provision for doubtful
accounts
Apartments $ 47 $ 19 $ 28 147.4 %
Office (56) 16 (72) (450.0)
Retail 2 — 2 100.0
Total $ (7) $ 35 $ (42) (120.0)%
Total operating expenses $ 9,154 $ 7,821 $ 1,333 17.0 %
Real estate tax expense increased by$329 for the three months ended June 30,2013 as compared to the same period in
2012 primarily due to the consolidation of 111 Sutter Street causing real estate taxes to increase by$151.Additionally,there
were increases of$68 and$61 at Railway Street Corporate Center and The District at Howell Mill,respectively,related to
tax reassessments in the three months ended June 30,2013.
Property operating expenses consist of the costs of ownership and operation of the real estate investments,many of
which are recoverable under net leases.Examples of property operating expenses include insurance,utilities and repair and
maintenance expenses.Property operating expenses increased$1,046 for the three months ended June 30,2013 as compared
to the same period of 2012.The increase is primarily related to an increase of$733 at 111 Sutter Street due to property
consolidation on December 4,2012.The increase was also related to increases in utility expenses and repair and maintenance
expenses totaling approximately$243 at Canyon Plaza related to the decrease in occupancy,causing us to incur expenses for
the vacant space during the three months ended June 30,2013 as compared to the same period in 2012,which were previously
incurred by the tenant. Additionally,we incurred increased insurance costs and water usage expense totaling approximately
$101 at our apartment properties during the three months ended June 30,2013 as compared to the same period in 2012.
Net(recovery of)provision for doubtful accounts relates to receivables deemed potentially uncollectible due to the age of
the receivable or the status of the tenant.Provision for doubtful accounts decreased by$42 for the three months ended June 30,
2013 as compared to the period ended June 30,2012,primarily related to collections of previously reserved accounts of$72 at
the Dignity Health Office Portfolio. This was partially offset by an increase of$29 at our apartment properties due to higher
bad debts during the three months ended June 30,2013.
28
The following chart sets forth expenses not directly related to the operations of the reportable segments for the three
months ended June 30,2013 and 2012:
Three months ended Three months ended $ %
June 30,2013 June 30,2012 Change Change
Advisor fees $ 1,121 $ 572 $ 549 96.0%
Company level expenses 606 688 (82) (11.9)
General and administrative 399 344 55 16.0
Depreciation and amortization 6,798 4,997 1,801 36.0
Interest expense 6,419 6,415 4 0.1
Equity in loss of unconsolidated affiliates 71 416 (345) (82.9)
Loss from discontinued operations — 898 (898) (100.0)
Loss on sale of discontinued operations — 117 (117) (100.0)
Total expenses $ 15,414 $ 14,447 $ 967 6.7%
Advisor fees relate to the fixed and variable management and advisory fees earned by the Former Manager and the
Advisor during 2012 and fixed advisor fees earned by the Advisor during 2013.Fixed fees increase or decrease based on
changes in the NAV which will be primarily impacted by changes in capital raised and the value of our properties.Variable fees
earned during 2012 were calculated as a formula of cash flow generated from owning and operating the real estate investments
and fluctuated as cash flows fluctuated.The increase in advisor fees of$549 for the three months ended June 30,2013 as
compared to the same period of 2012 is primarily related to the increase in NAV over the prior year.
Our Company level expenses relate mainly to our compliance and administration related costs.Company level expenses
decreased$82 for the three months ended June 30,2013 as compared to the same period in 2012 primarily due to a decrease in
investor service fees and corporate legal fees.
General and administrative expenses relate mainly to property expenses unrelated to the operations of the property.
General and administrative expenses increased$55 for the three months ended June 30,2013 as compared to the same period
in 2012.The increase is primarily related to an increase of$104 at 111 Sutter Street due to property consolidation on
December 4,2012. These increases were partially offset by a decrease of$83 in property related legal fees incurred during
the three months ended June 30,2013.
Depreciation and amortization expense is impacted by the values assigned to buildings,personal property and in-place
lease assets as part of the initial purchase price allocation.The increase of$1,801 in depreciation and amortization expense for
the three months ended June 30,2013 as compared to the period ended June 30,2012 is primarily related to an increase of
$2,064 that we recorded at 111 Sutter Street as a result of the consolidation of the property on December 4,2012.This increase
was partially offset by a decrease of$356 at Canyon Plaza due to accelerated amortization of the in-place lease intangible asset
related to the default and subsequent bankruptcy of Conexant during the first quarter of 2013.
Interest expense decreased by$4 for the three months ended June 30,2013 as compared to the period ended June 30,
2012.The decreases in interest expense were related to the debt retirements at Monument IV at Worldgate,4001 North
Norfleet,and 105 Kendall Park Lane,which occurred on April 30,2013,December 27,2012 and July 2,2012,respectively.
These decreases were partially offset by an increase at 111 Sutter Street due to the debt assumed at the property consolidated on
December 4,2012.
Equity in loss of unconsolidated affiliates represents our share of net loss from our investments in Unconsolidated
Properties. The loss decreased by$345 for the three months ended June 30,2013 as compared to the period ended June 30,
2012,primarily related to 111 Sutter Street being consolidated as of December 4,2012.
Loss from discontinued operations is related to the dispositions of Georgia Door Sales Distribution Center,Metropolitan
Park North and Marketplace at Northglenn during 2012.
Loss on sale of discontinued operations is related to the disposition of Georgia Door Sales Distribution Center during
2012.
29
Results of Operations for the Six Months Ended June 30,2013 and 2012
Revenues
The following chart sets forth revenues from continuing operations,by reportable segment,for the six months ended
June 30,2013 and 2012:
Six months ended Six months ended $ %
June 30,2013 June 30,2012 Change Change
Revenues:
Minimum rents
Apartments $ 15,849 $ .15,758 $ 91 0.6 %
Industrial 2,084 2,073 11 0.5
Office 21,567 11,482 10,085 87.8
Retail 3,033 2,994 39 1.3
Total $ 42,533 $ 32,307 $ 10,226 31.7 %
Tenant recoveries and other rental income
Apartments $ 811 $ 849 $ (38) (4.5)%
Industrial 386 480 (94) (19.6)
Office 6,736 4,624 2,112 45.7
Retail 1,125 1,030 95 9.2
Total $ 9,058 $ 6,983 $ 2,075 29.7 %
Total revenues $ 51,591 $ 39,290 $ 12,301 31.3 %
Minimum rents increased by$10,226 for the six months ended June 30,2013 as compared to the same period in 2012.
The increase is primarily related to minimum rents of$5,964 for 111 Sutter Street due to the consolidation of the property on
December 4,2012.The increase also relates to$2,888 of accelerated amortization for the below-market lease intangible
liability at Canyon Plaza related to the default and subsequent bankruptcy of Conexant during the period ended June 30,2013.
Additionally,minimum rents increased by$1,230 at Monument IV at Worldgate related to the commencement of the Amazon
Corporate LLC and Fannie Mae leases.
Tenant recoveries relate mainly to real estate taxes and certain property operating expenses that are paid by us and are
recoverable under the various tenants'leases.Tenant recoveries and other rental income at our properties increased by$2,075
for the six months ended June 30,2013 as compared to the same period in 2012.The increase is primarily related to lease
termination revenue of$1,911 at Canyon Plaza related to the default and subsequent bankruptcy of Conexant during the period
ended June 30,2013.Additionally,there was an increase of recovery revenue of$368 at I 1 l Sutter Street due to the
consolidation of the property on December 4,2012.
30
Operating Expenses
The following chart sets forth real estate taxes,property operating expenses and(recovery of)provisions for doubtful
accounts from continuing operations,by reportable segment,for the six months ended June 30,2013 and 2012:
Six months ended Six months ended S %
June 30,2013 June 30,2012 Change Change
Operating expenses:
Real estate taxes
Apartments $ 1,684 $ 1,532 $ 152 9.9%
Industrial 327 389 (62) (15.9)
Office 2,368 1,899 469 24.7
Retail 628 582 46 7.9
Total $ 5,007 $ 4,402 $ 605 13.7 %
Property operating
Apartments $ 6,414 $ 6,177 $ 237 3.8 %
Industrial 57 114 (57) (50.0)
Office 5,641 4,005 1,636 40.8
Retail 579 611 (32) (5.2)
Total $ 12,691 $ 10,907 $ 1,784 16.4 %
Net(recovery of)provision for doubtful
accounts
Apartments $ 97 $ 23 $ 74 321.7 %
Office (301) 106 (407) (384.0)
Retail 35 23 12 52.2
Total $ (169) $ 152 $ (321) (211.2)%
Total operating expenses $ 17,529 $ 15,461 $ 2,068 13.4 %
Real estate tax expense increased by$605 for the six months ended June 30,2013 as compared to the same period in
2012 primarily due to the consolidation of 111 Sutter Street causing real estate taxes to increase by$395.Additionally,there
was an increase of$76 at Railway Street Corporate Center due to a reassessment in the six months ended June 30,2013 and
an increase of $70 at Cabana Beach Gainesville due to a tax refund received in the six months ended June 30,2012 related
to a successful tax appeal for the 2011 tax payment.
Property operating expenses consist of the costs of ownership and operation of the real estate investments,many of
which are recoverable under net leases.Examples of property operating expenses include insurance,utilities and repair and
maintenance expenses.Property operating expenses increased$1,784 for the six months ended June 30,2013 as compared to
the same period of 2012.The increase is primarily related to an increase of$1,360 at 111 Sutter Street due to property
consolidation on December 4,2012.We also incurred approximately$329 of property operating expenses for the vacant space
at Canyon Plaza related to the decrease in occupancy during the six months ended June 30,2013 as compared to the same
period in 2012.Additionally,we incurred increased insurance costs and water usage expense totaling$236 at our apartment
properties during the six months ended June 30,2013 as compared to the same period in 2012.
Net(recovery of)provision for doubtful accounts relates to receivables deemed potentially uncollectible due to the age of
the receivable or the status of the tenant.Provision for doubtful accounts decreased by$321 for the six months ended June 30,
2013 as compared to the period ended June 30,2012,primarily related to the collection of previously reserved accounts of
$226 at Canyon Plaza,related to the Conexant default. We received cash from a letter of credit issued by Conexant to cover
rent payments for December 2012 through the date of their bankruptcy. Additionally,we benefited from a decrease of$180 at
the Dignity Health Office Portfolio related to fewer bad debts and collections of previously reserved charges during the six
months ended June 30,2013.
31
The following chart sets forth expenses not directly related to the operations of the reportable segments for the six months
ended June 30,2013 and 2012:
Six months ended Six months ended $ %
June 30,2013 June 30,2012 Change Change
Advisor fees $ 2,107 $ 1,302 $ 805 61.8%
Company level expenses 999 1,339 (340) (25.4)
General and administrative 796 543 253 46.6
Depreciation and amortization 19,189 10,004 9,185 91.8
Interest expense 12,878 13,317 (439) (3.3)
Debt modification expenses 182 — 182 100.0
Equity in loss of unconsolidated affiliates 92 240 (148) (61.7)
Loss from discontinuing operations — 2,951 (2,951) (100.0)
Gain on transfer of property and extinguishment of debt — (11,791) 11,791 (100.0)
Loss on sale of discontinued operations — 117 (117) (100.0)
Total expenses $ 36,243 $ 18,022 $ 18,221 101.1%
Advisor fees relate to the fixed and variable management and advisory fees earned by the Former Manager and the
Advisor during 2012 and fixed advisor fees earned by the Advisor during 2013.Fixed fees increase or decrease based on
changes in the NAV which will be primarily impacted by changes in capital raised and the value of our properties.Variable fees
earned during 2012 were calculated as a formula of cash flow generated from owning and operating the real estate investments
and fluctuated as cash flows fluctuated.The increase in advisor fees of$805 for the six months ended June 30,2013 as
compared to the same period of 2012 is primarily related to the increase in NAV over the prior year.
Our Company level expenses relate mainly to our compliance and administration related costs.Company level expenses
decreased$340 for the six months ended June 30,2013 as compared to the same period in 2012 primarily due to a decrease in
investor service fees and corporate legal fees.
General and administrative expenses relate mainly to property expenses unrelated to the operations of the property.
General and administrative expenses increased$253 for the six months ended June 30,2013 as compared to the same period
in 2012.The increase is primarily related to expenses of$166 at 111 Sutter Street due to property consolidation on December
4,2012.Additionally,we incurred higher legal fees of$102 at Canyon Plaza related to the Conexant default and subsequent
bankruptcy.
Depreciation and amortization expense is impacted by the values assigned to buildings,personal property and in-place
lease assets as part of the initial purchase price allocation.The increase of$9,185 in depreciation and amortization expense for
the six months ended June 30,2013 as compared to the period ended June 30,2012 is primarily related to an increase of$5,586
at Canyon Plaza due to accelerated amortization of the in-place lease intangible asset related to the Conexant default.
Additionally,we recorded$3,471 of depreciation and amortization at 111 Sutter Street due to property consolidation on
December 4,2012.
Interest expense decreased by$439 for the six months ended June 30,2013 as compared to the period ended June 30,
2012.The decreases in interest expense were due to the debt retirements at Monument IV at Worldgate,4001 North Norfleet,
and 105 Kendall Park Lane,which occurred on April 30,2013,December 27,2012 and July 2,2012,respectively. These
decreases were partially offset by increase at 111 Sutter Street as a result of the debt assumed at the property consolidated on
December 4,2012.
Debt modification expenses in 2013 are due to expenses incurred for the loan modification at 11 l Sutter Street on March
27,2013.
Equity in loss of unconsolidated affiliates represents our share of net income or loss from our investments in
Unconsolidated Properties. The loss decreased by$148 for the six months ended June 30,2013 as compared to the period
ended June 30,2012.The decrease was primarily related to an equity loss of$408 at 111 Sutter Street in the six months
ended June 30,2012 not included in the six months ended June 30,2013 due to 111 Sutter Street being consolidated on
December 4,2012.This was partially offset by a higher net loss at Legacy Village as the six months ended June 30,2012
included a successful settlement of a real estate tax dispute with the local school district.
32
Loss from discontinuing operations is related to the dispositions of Georgia Door Sales Distribution Center,
Metropolitan Park North and Marketplace at Northglenn during 2012.
Gain on transfer of property and extinguishment of debt is related to the transfer of ownership of Metropolitan Park North
on March 23,2012.
Loss on sale of discontinued operations is related to the disposition of Georgia Door Sales Distribution Center during
2012.
Funds From Operations
Consistent with real estate industry and investment community preferences,we consider funds from operations,or FFO,
as a supplemental measure of the operating performance for a real estate investment trust and a complement to GAAP measures
because it facilitates an understanding of the operating performance of our properties.The National Association of Real Estate
Investment Trusts("NAREIT")defines FFO as net income(loss)attributable to the Company(computed in accordance with
GAAP),excluding gains or losses from cumulative effects of accounting changes,extraordinary items,impairment write-
downs of depreciable real estate and sales of properties,plus real estate related depreciation and amortization and after
adjustments for these items related to noncontrolling interests and unconsolidated affiliates.
FFO does not give effect to real estate depreciation and amortization because these amounts are computed to allocate the
cost of a property over its useful life.Because values for well-maintained real estate assets have historically increased or
decreased based upon prevailing market conditions,we believe that FFO provides investors with a clearer view of our
operating performance.
In order to provide a better understanding of the relationship between FFO and GAAP net income,the most directly
comparable GAAP financial reporting measure,we have provided a reconciliation of GAAP net income(loss)attributable to
Jones Lang LaSalle Income Property Trust,Inc.,to FFO.FFO does not represent cash flow from operating activities in
accordance with GAAP,should not be considered as an alternative to GAAP net income and is not necessarily indicative of
cash available to fund cash needs.
Three months Three months Six months Six months
ended ended ended ended
June 30,2013 June 30,2012 June 30,2013 June 30,2012
Net income(loss)attributable to Jones Lang LaSalle
Income Property Trust,Inc. $ 626 $ (2,912) $ (2,247) $ 5,670
Plus:Real estate depreciation and amortization 6,798 4,997 19,189 10,004
Loss from sale of real estate — 117 — 117
Real estate depreciation and amortization from
discontinued operations — 326 — 1,090
Real estate depreciation and amortization attributable
to noncontrolling interests (313) (332) (632) (654)
Share of real estate depreciation and amortization
from unconsolidated real estate affiliates 518 915 1,030 1,793
Gain on transfer of property — — — (6,018)
Impairment of real estate held for sale — — — 913
Funds from operations attributable to Jones Lang
LaSalle Income Property Trust,Inc. $ 7,629 $ 3,111 $ 17,340 $ 12,915
Weighted average shares outstanding,basic and
diluted(1) 35,343,798 24,022,500 33,445,787 24,008,932
Funds from operations per share,basic and diluted(1) $ 0.22 $ 0.13 $ 0.52 $ 0.54
(1) On October 1,2012,we declared a stock dividend with respect to all Class E shares at a ratio of 4.786-to-1. The
effects of the stock dividend have been applied retroactively to all share and per share amounts for all periods
presented.
33
Below is additional information related to certain items that significantly impact the comparability of our FFO or
significant non-cash items from the periods presented:
Three months Three months Six months Six months
ended ended ended ended
June 30,2013 June 30,2012 June 30,2013 June 30,2012
Straight-line rental income (976) (160) (2,003) (271)
Amortization of above-and below-market leases (635) (159) (4,303) (325)
Amortization of net discount on assumed debt (50) (71) (484) (120)
Loss(gain)on debt modification or
extinguishment — — 182 (5,773)
Acquisition expense 91 — 91 —
NAV per Share
Prior to October 1,2012,we established our NAV per share of common stock on a quarterly basis for the purposes of
establishing the price of shares sold in our private offerings and the repurchase price for shares purchased in our share
repurchase program.We determined our NAV as of the end of each of the first three quarters of a fiscal year within 45 calendar
days following the end of such quarter,and our fourth quarter NAV after the completion of our year-end audit.We calculated
our quarterly NAV as of the determination date as follows:(i)the aggregate value of(A)our interests in real estate investments,
plus(B)all our other assets,minus(ii)the aggregate fair value of our indebtedness and other outstanding obligations.
Beginning on October 1,2012,our Advisor calculates our NAV for each class of our common stock(Class A,Class E
and Class M)after the end of each business day that the New York Stock Exchange is open for unrestricted trading.The
valuation guidelines we have adopted for purposes of the daily determination of NAV per share differ from the valuation
methodologies we employed in connection with our historical quarterly NAV per share calculations in certain respects.For
example,for purposes of calculating our historical quarterly NAV per share,our mortgage debt payable was recorded at fair
value on a quarterly basis.This method resulted in an asset or liability,depending on current lending rates for similar mortgages
to those we held.Our new valuation guidelines provide that,for purposes of calculating NAV per share on a daily basis,
mortgage debt payable will be valued at the outstanding loan balance. We disclosed our NAV per share policy under"Item 5.
Market for Registrant's Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities,"in our 2012
Form 10-K.
NAV as of June 30,2013
The NAV per share for our Class A,Class M and Class E shares as of June 30,2013 was$10.12,$10.12 and$10.14,
respectively. The NAV of all share classes remained relatively flat as compared to December 31,2012 as dividends declared
offset property operations for the first half of 2013.
The following table provides a breakdown of the major components of our NAV per share as of June 30,2013 and
December 31,2012:
June 30,2013 December 31,2012
Class A Class M Class E Class A Class M Class E
Component of NAV Shares Shares Shares Shares Shares Shares
Real estate investments(1) $ 22.05 $ 22.07 $ 22.11 $ 25.07 $ 25.09 $ 25.10
Debt (12.29) (12.30) (12.32) (16.37) (16.39) (16.40)
Other assets and liabilities,net 0.36 0.35 0.35 1.42 1.43 1.44
Estimated enterprise value premium None None None None None None
Assumed Assumed Assumed Assumed Assumed Assumed
NAV per share $ 10.12 $ 10.12 $ 10.14 $ 10.12 $ 10.13 $ 10.14
Number of outstanding shares 9,320,989 1,629,313 26,444,843 3,612,169 104,282 26,444,843
(1) The value of our real estate investments was less than the historical cost by approximately 13.2%and 14.2%as of
June 30,2013 and December 31,2012,respectively.
34
The following are key assumptions(shown on a weighted-average basis)that are used in the discounted cash flow models
to estimate the value of our real estate investments as of June 30,2013:
Total
Apartment Industrial Office Retail Company
Exit capitalization rate 6.97% 7.14% 7.23% 7.43% 7.19%
Discount rate/internal rate of return(IRR) 8.18% 7.63% 8.41% 7.92% 8.18%
Annual market rent growth rate 2.84% 2.78% 3.33% 3.12% 3.11%
Holding period(years) 10.00 10.00 10.00 10.00 10.00
The following are key assumptions(shown on a weighted-average basis)that are used in the discounted cash flow models
to estimate the value of our real estate investments as of December 31,2012:
Total
Apartment Industrial Office Retail Company
Exit capitalization rate 7.30% 7.43% 7.83% 6.98% 7.30%
Discount rate/internal rate of return(IRR) 8.48% 7.90% 8.50% 7.25% 8.27%
Annual market rent growth rate 3.32% 3.08% 2.59% 3.00% 3.09%
Holding period(years) 10.00 10.00 10.00 10.00 10.00
While we believe our assumptions are reasonable,a change in these assumptions would impact the calculation of the
value of our real estate assets.For example,assuming all other factors remain unchanged,an increase in the weighted-average
discount rate/internal rate of return(MR)used as of June 30,2013 of 0.25%would yield a decrease in our total real estate asset
value of 1.85%and our NAV per each share class would have been$9.71,$9.71 and$9.73 for Class A,Class M and Class E,
respectively.An increase in the weighted-average discount rate/internal rate of return(IRR)used as of December 31,2012 of
0.25%would yield a decrease in our total real estate asset value of 1.80%and our NAV per each share class would have been
$9.68,$9.70 and$9.71 for Class A,Class M,and Class E,respectively.
Limitations and Risks
As with any valuation methodology,our methodology is based upon a number of estimates and assumptions that may not
be accurate or complete.Different parties with different assumptions and estimates could derive a different NAV per share.
Accordingly,with respect to our NAV per share,we can provide no assurance that:
• a stockholder would be able to realize this NAV per share upon attempting to resell his or her shares;
• we would be able to achieve,for our stockholders,the NAV per share,upon a listing of our shares of common stock on
a national securities exchange,selling our real estate portfolio,or merging with another company;or
• the NAV per share,or the methodologies relied upon to estimate the NAV per share,will be found by any regulatory
authority to comply with any regulatory requirements.
Furthermore,the NAV per share was calculated as of a particular point in time.The NAV per share will fluctuate over time
in response to,among other things,changes in real estate market fundamentals,capital markets activities,and attributes specific
to the properties and leases within our portfolio.
35
Liquidity and Capital Resources
Our primary uses and sources of cash are as follows:
Uses Sources
Short-term liquidity and capital needs such as:
• Interest payments on debt 0 Operating cash flow,including the receipt of
• Distributions to stockholders distributions of our share of cash flow produced by
our unconsolidated real estate affiliates
• Fees payable to the Advisor 0 Proceeds from secured loans collateralized by
• Minor improvements made to individual properties that individual properties
are not recoverable through expense recoveries or
common area maintenance charges to tenants 0 Proceeds from our revolving line of credit
• General and administrative costs Sales of our shares
• Costs associated with our continuous public offering 0 Sales of real estate investments
• Other Company level expenses 0 Draws from lender escrow accounts
• Lender escrow accounts for real estate taxes,insurance,
and capital expenditures
• Fees payable to our Dealer Manager
Longer-term liquidity and capital needs such as:
• Acquisitions of new real estate investments
• Expansion of existing properties
• Tenant improvements and leasing commissions
• Debt repayment requirements,including both principal
and interest
• Repurchases of our shares pursuant to our Share
Repurchase Plan
The sources and uses of cash for the six months ended June 30,2013 and 2012 were as follows:
Six months ended Six months ended
June 30,2013 June 30,2012 S Change
Net cash provided by operating activities $ 10,038 $ 12,485 $ (2,447)
Net cash used in investing activities (59,292) (3,721) (55,571)
Net cash provided by(used in)financing activities 33,092 (4,828) 37,920
Cash provided by operating activities decreased by$2,447 for the six months ending June 30,2013,as compared to the
same period in 2012. An increase of$4,160 in cash from operating activities is primarily related to consolidation of 111 Sutter
Street on December 4,2012 and the lease termination fee received from Conexant.Also impacting our cash provided by
operating activities are changes in our working capital,which include tenant accounts receivable,prepaid expenses and other
assets,Advisor fee payable,and accounts payable and other accrued expenses.These changes in our working capital caused a
decrease to cash provided by operating activities of$6,607 between the six months ended June 30,2013 and the same period in
2012,primarily related to lower accrued real estate taxes and accrued interest.
Cash used in investing activities increased by$55,571 for the six months ending June 30,2013,as compared to the same
period in 2012. The overall increase was primarily related to the acquisition of two industrial properties totaling$58,820
between the six months ended June 30,2013 and the same period in 2012.
Cash provided by financing activities increased by$37,920 for the six months ended June 30,2013 as compared to the
same period in 2012. The increase is primarily related to the issuance of common stock of$72,451 in 2013.Partially offsetting
the increase are net principal payments on mortgage loans and other debt payable of$31,384 primarily related to the
36
retirements of the seller financing note payable from the acquisition of 11 I Sutter Street and the mortgage on Monument IV at
Worldgate in excess of proceeds received from new mortgage notes and other debt payable. We expect to continue to raise
capital from the Offering and will use portions of the capital raise to acquire new properties,retire debt and repurchase
common stock.
Financing
We have relied primarily on fixed-rate financing,locking in what were favorable spreads between real estate income
yields and mortgage interest rates and have tried to maintain a balanced schedule of debt maturities.The following consolidated
debt table provides information on the outstanding principal balances and the weighted average interest rate at June 30,2013
and December 31,2012 for such debt.The unconsolidated debt table provides information on our pro rata share of debt
associated with our unconsolidated joint ventures.
Consolidated Debt
June 30,2013 December 31,2012
Principal Weighted Average Principal Weighted Average
Balance Interest Rate Balance Interest Rate
Fixed $ 439,239 5.48% $ 479,206 5.59%
Variable 19,000 2.85 12,000 4.75
Total $ 458,239 5.37% $ 491,206 5.57%
Unconsolidated Debt
June 30,2013 December 31,2012
Pro-rata share of Weighted Average Pro-rata share of Weighted Average
Principal Balance Interest Rate Principal Balance Interest Rate
Fixed $ 382960 5.63% $ 39,724 5.63%
Variable — — — —
Total $ 38,960 5.63% $ 39,724 5.63%
Contractual Cash Obligations and Commitments
The Dignity Health Office Portfolio mortgage debt requires that we deposit an annual amount of$855,up to a cumulative
maximum of$1,900,into an escrow account to fund future tenant improvements and leasing commissions.The amount of the
escrow funded by each of the 15 buildings in the portfolio is capped individually pursuant to each loan agreement.At June 30,
2013,we had approximately$1,217 deposited in this escrow account,and we expect to fund$348 during the remainder of
2013.Additionally,we are required to deposit approximately$151 per year into an escrow account to fund capital expenditures.
At June 30,2013,our capital account escrow account balance was$163.These escrow accounts allow us to withdraw funds as
we incur costs related to tenant improvements,leasing commissions and capital expenditures.Additionally,on a monthly basis,
we are required to fund an escrow account for the future payment of real estate taxes and insurance costs in an amount equal to
1/12`h of the estimated real estate taxes and insurance premium.At June 30,2013,our real estate tax and insurance escrow
balance was$693.We expect to fund the loan escrows from property operations.
As part of the lease with our single tenant at the 4001 North Norfleet Road property,we provided the tenant a right to
expand the current building by up to 286,000 square feet of space.If the tenant exercises this right,we will be obligated to
construct this expansion space.The tenant has the right to provide notice to us of its desire to expand at any time prior to
February 28,2016(the end of the ninth year of the lease),or if the lease is extended,until any time prior to the end of the
fourth year of any extension.As of June 30,2013,we had not received an expansion notice from the tenant.
Off Balance Sheet Arrangements
At June 30,2013 and December 31,2012,we had approximately$150 in outstanding letters of credit,none of which are
reflected as liabilities on our balance sheet.We have no other off balance sheet arrangements.
37
Distributions to Stockholders
To remain qualified as a REIT for federal income tax purposes,we must distribute or pay tax on 100%of our capital
gains and distribute at least 90%of ordinary taxable income to stockholders.
The following factors,among others,will affect operating cash flow and,accordingly,influence the decisions of our
board of directors regarding distributions:
• scheduled increases in base rents of existing leases;
• changes in minimum base rents and/or overage rents attributable to replacement of existing leases with new or renewal
leases;
• changes in occupancy rates at existing properties and procurement of leases for newly acquired or developed
properties;
• necessary capital improvement expenditures or debt repayments at existing properties;and
• our share of distributions of operating cash flow generated by the unconsolidated real estate affiliate,less management
costs and debt service on additional loans that have been or will be incurred.
We anticipate that operating cash flow,cash on hand,proceeds from dispositions of real estate investments,or
refinancings will provide adequate liquidity to conduct our operations,fund general and administrative expenses,fund
operating costs and interest payments and allow distributions to our stockholders in accordance with the REIT qualification
requirements of the Internal Revenue Code of 1986,as amended.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are subject to market risk associated with changes in interest rates in terms of the price of new fixed-rate debt for
refinancing of existing debt.We manage our interest rate risk exposure by obtaining fixed-rate loans where possible.As of
June 30,2013,we had consolidated debt of$458,239, $19,000 of which was variable-rate debt.Including the$1,308 net
premium on the assumption of debt,we had consolidated debt of$459,547 at June 30,2013.None of the variable-rate debt was
subject to interest rate swap or cap agreements.A 25 basis point movement in the interest rate on the$19,000 of variable-rate
debt would have resulted in an approximately$48 annualized increase or decrease in consolidated interest expense and cash
flow from operating activities.
As of December 31,2012,we had consolidated debt of$491,206,which included$12,000 of variable-rate debt.
Including the$1,779 net premium on the assumption of debt,we had consolidated debt of$492,985 at December 31,2012.
None of the variable-rate debt was subject to interest rate swap or cap agreements.A 25 basis point movement in the interest
rate on the$12,000 of variable-rate debt would have resulted in an approximately$30 annualized increase or decrease in
consolidated interest expense and cash flow from operating activities.
Our Unconsolidated Property is financed with fixed-rate debt;therefore,we are not subject to interest rate exposure at
this property,except to the extent changes in interest rates impact the fair value of our fixed-rate financing as discussed below.
We are subject to interest rate risk with respect to our fixed-rate financing in that changes in interest rates will impact the
fair value of our fixed-rate financing.To determine fair market value,the fixed-rate debt is discounted at a rate based on an
estimate of current lending rates,assuming the debt is outstanding through maturity and considering the collateral.At June 30,
2013,the fair value of our mortgage notes payable was estimated to be approximately$4,708 higher than the carrying value of
$458,239.If treasury rates were 25 basis points higher at June 30,2013,the fair value of our mortgage notes payable would
have been approximately$1,175 higher than the carrying value.
At December 31,2012,the fair value of our mortgage notes payable was estimated to be approximately$17,136 higher
than the carrying value of$491,206.If treasury rates were 25 basis points higher at December 31,2012,the fair value of our
mortgage notes payable would have been approximately$13,755 higher than the carrying value.
In August 2007,we purchased Railway Street Corporate Centre located in Calgary,Canada.For this investment,we use
the Canadian dollar as the functional currency.When preparing consolidated financial statements,assets and liabilities of
foreign entities are translated at the exchange rates at the balance sheet date,while income and expense items are translated at
weighted average rates for the period.Foreign currency translation adjustments are recorded in accumulated other
comprehensive income on the Consolidated Balance Sheet and foreign currency translation adjustment on the Consolidated
Statement of Operations and Comprehensive Income(Loss).
38
As a result of our Canadian investment,we are subject to market risk associated with changes in foreign currency
exchange rates.These risks include the translation of local currency balances of our Canadian investment and transactions
denominated in Canadian dollars.Our objective is to control our exposure to these risks through our normal operating
activities.For the six months ended June 30,2013 and 2012,we recognized a foreign currency translation loss of$529 and$23,
respectively.At June 30,2013,a 10%unfavorable exchange rate movement would have caused our$529 foreign currency
translation loss to be increased by$860 resulting in a foreign currency translation loss of approximately$1,389.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management,including the chief executive officer and chief
financial officer,we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and
procedures(as defined in Rules 13a-15(e)and 15d-15(e)under the Exchange Act),as of the end of the period covered by this
report.Based on management's evaluation as of June 30,2013,our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be
disclosed by us in our reports that we file or submit under the Exchange Act is recorded,processed,summarized and reported
within the time periods specified in the SEC's rules and forms and such information is accumulated and communicated to
management,including our chief executive officer and chief financial officer,as appropriate,to allow timely decisions
regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting during the quarter ended June 30,2013 that have
materially affected,or are reasonably likely to materially affect,our internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
We are involved in various claims and litigation matters arising in the ordinary course of business,some of which involve
claims for damages.Many of these matters are covered by insurance,although they may nevertheless be subject to deductibles
or retentions.Although the ultimate liability for these matters cannot be determined,based upon information currently
available,we believe the ultimate resolution of such claims and litigation will not have a material adverse effect on our
financial position,results of operations,or liquidity.
Item 1A. Risk Factors.
The most significant risk factors applicable to the Company are described in Item I of our 2012 Form 10-K.There have
been no material changes from those previously-disclosed risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Our share repurchase plan limits repurchases during any calendar quarter to shares with an aggregate value(based on the
repurchase price per share on the day the repurchase is effected)of 5%of the combined NAV of all classes of shares(including
the Class E shares which are not eligible for repurchase)as of the last day of the previous calendar quarter,which means that in
any 12-month period,we limit repurchases to approximately 20%of our total NAV.If the quarterly volume limitation is
reached on or before the third business day of a calendar quarter,repurchase requests during the next quarter will be satisfied
on a stockholder by stockholder basis,which we refer to as a"per stockholder allocation,"instead of a first-come,first-served
basis.Pursuant to the per stockholder allocation,each of our stockholders would be allowed to request repurchase at any time
during such quarter of a total number of shares not to exceed five percent of the shares of common stock the stockholder held
as of the end of the prior quarter.The per stockholder allocation requirement will remain in effect for each succeeding quarter
for which the total repurchases for the immediately preceding quarter exceeded four percent of our NAV on the last business
day of such preceding quarter.If total repurchases during a quarter for which the per stockholder allocation applies are equal to
or less than four percent of our NAV on the last business day of such preceding quarter,then repurchases will again be first-
come,first-served for the next succeeding quarter and each quarter thereafter.
39
Moreover,until our total NAV has reached$600,000,repurchases for shares of all classes in the aggregate may not
exceed 25%of the gross proceeds received by us from the commencement of our offering through the last day of the prior
calendar quarter.
During the six months ended June 30,2013,we repurchased 26,048 shares of Class A common stock under the share
repurchase plan.We did not issue any securities during this period that were not registered under the Securities Act.
Total Number of Shares Maximum Number of Shares
Total Number of Average Price Purchased as Part of Publicly that May Yet Be Purchased
Period Shares Redeemed Paid per Share Announced Plans or Programs(1) Pursuant to the Program(2)
May 1-May 31,2013 26,048 $10.22 26,048 --
(1) On October 1,2012,we adopted the new share repurchase plan.
(2) Redemptions are limited as described above.
On October 1,2012,our registration statement on Form S-11 (File No.333-177963),covering our Offering of up to
$3,000,000 of shares of common stock,of which$2,700,000 of shares of common stock are being offered pursuant to our
primary offering and$300,000 of shares of common stock are being offered pursuant to our distribution reinvestment plan,was
declared effective under the Securities Act.We commenced the Offering on the same date.The per share price for each class
equals the daily NAV per share for such class,plus,for Class A shares only,applicable selling commissions,with discounts
available to certain categories of purchasers.
As of June 30,2013,we have sold the following common shares and raised the following proceeds in connection with the
Offering:
Shares Proceeds
Primary Offering
Class A Shares 9,294,746 $ 95,209
Class M Shares 1,579,084 16,066
Distribution Reinvestment Plan
Class A Shares 52,291 529
Class M Shares 9,229 94
Total 10,935,350 $ 111,898
As of June 30,2013,we incurred the following costs in connection with the issuance and distribution of the registered
securities:
Type of Cost Amount
Offering costs to related parties $6,549
(1) Comprised of$636 in selling commissions,$214 in dealer manager fees,$170 in distribution fees and$5,529 in other
offering costs.$1,018 of the selling commissions,dealer manager fees and distribution fees have been reallowed to
third parties.
From the commencement of the Offering through June 30,2013,the net proceeds to us from our Offering,after deducting
the total expenses incurred described above,were$109,320.From the commencement of the Offering through June 30,2013,
net proceeds from our Offering have been allocated to reduce borrowings by$71,488 and to purchase interests in real estate of
$37,832.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
40
Item 6. Exhibits.
The Exhibit Index that immediately follows the signature page to this Form 10-Q is incorporated herein by reference.
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)of the Securities Exchange Act of 1934,the Registrant,Jones Lang
LaSalle Income Property Trust,Inc.,has duly caused this report to be signed on its behalf by the undersigned,thereunto duly
authorized.
JONES LANG LASALLE INCOME PROPERTY TRUST,INC.
Date: August 8,2013 By: /s/C.Allan Swaringen
C.Allan Swaringen
President,Chief Executive Officer
42
EXHIBIT INDEX
Exhibit No. Description
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* XBRL Instance Document
l0l.SCH* XBRL Schema Document
I01.CAL* XBRL Calculation Linkbase Document
101.DEF* Definition Linkbase Document
10LLAB* XBRL Labels Linkbase Document
IOI.PRE* XBRL Presentation Linkbase Document
* Pursuant to Rule 406T of Regulation S-T,this interactive data file is deemed not filed or part of a registration
statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933,is deemed not filed for purposes of
section 18 of the Securities Exchange Act of 1934,and otherwise is not subject to liability under these sections.
43
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I,C.Allan Swaringen,certify that:
1.I have reviewed this quarterly report on Form 10-Q of Jones Lang LaSalle Income Property Trust,Inc.;
2.Based on my knowledge,this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made,in light of the circumstances under which such statements were made,not misleading with
respect to the period covered by this report;
3.Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all
material respects the financial condition,results of operations and cash flows of the registrant as of,and for,the periods presented in
this report;
I
4.The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as
defined in Exchange Act Rules 13a-15(e)and 15d-15(e))and internal control over financial reporting(as defined in Exchange Act
Rules 13a-15(f)and 15d-15(f))for the registrant and have:
a)Designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under
our supervision,to ensure that material information relating to the registrant,including its consolidated subsidiaries,is made
known to us by others within those entities,particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting,or caused such internal control over financial reporting to be designed
under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures,as of the end of the period covered by this report based on
such evaluation;and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter in the case of an annual report)that has materially
affected,or is reasonably likely to materially affect,the registrant's internal control over financial reporting;and
5.The registrant's other certifying officer and I have disclosed,based on our most recent evaluation of internal control over financial
reporting,to the registrant's auditors and the audit committee of the registrant's board of directors(or persons performing the
equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record,process,summarize and report financial
information;and
b)Any fraud,whether or not material,that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date:August 8,2013
/s/ C.ALLAN SWARiNGEN
C.Allan Swaringen
President and Chief Executive Officer
I
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I,Gregory A.Falk,certify that:
1.I have reviewed this quarterly report on Form 10-Q of Jones Lang LaSalle Income Property Trust,Inc.;
2.Based on my knowledge,this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made,in light of the circumstances under which such statements were made,not misleading with
respect to the period covered by this report;
3.Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all
material respects the financial condition,results of operations and cash flows of the registrant as of,and for,the periods presented in
this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as
defined in Exchange Act Rules 13a-15(e)and 15d-15(e))and internal control over financial reporting(as defined in Exchange Act
Rules 13a-15(f)and 15d-15(f))for the registrant and have:
a)Designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under
our supervision,to ensure that material information relating to the registrant,including its consolidated subsidiaries,is made
known to us by others within those entities,particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting,or caused such internal control over financial reporting to be designed
under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures,as of the end of the period covered by this report based on
such evaluation;and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter in the case of an annual report)that has materially
affected,or is reasonably likely to materially affect,the registrant's internal control over financial reporting;and
5.The registrant's other certifying officer and I have disclosed,based on our most recent evaluation of internal control over financial
reporting,to the registrant's auditors and the audit committee of the registrant's board of directors(or persons performing the
equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record,process,summarize and report financial
information;and
b)Any fraud,whether or not material,that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date:August 8,2013
/s/ GREGORY A.FALK
Gregory A.Falk
Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Jones Lang LaSalle Income Property Trust,Inc.(the"Company")on Form 10-Q for
the period ending June 30,2013,as filed with the Securities and Exchange Commission on the date hereof(the"Report"),I,C.Allan
Swaringen,in my capacity as Chief Executive Officer of the Company,do hereby certify,pursuant to 18 U.S.C.Section 1350,as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that:
(1)The Report fully complies with the requirements of Section 13(a)or 15(d)of the Securities Exchange Act of 1934;and
(2)The information contained in the Report fairly presents,in all material respects,the financial condition and results of
operations of the Company.
/s/ C.ALLAN SWARINGEN
C.Allan Swaringen
President and Chief Executive Officer
August 8,2013
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906
OF THE SARBANES-OXLEV ACT OF 2002
In connection with the Quarterly Report of Jones Lang LaSalle Income Property Trust,Inc.(the"Company")on Form 10-Q for
the period ending June 30,2013,as filed with the Securities and Exchange Commission on the date hereof(the"Report"),I,Gregory
A.Falk,in my capacity as Chief Financial Officer of the Company,do hereby certify,pursuant to 18 U.S.C.Section 1350,as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that:
(1)The Report fully complies with the requirements of Section 13(a)or 15(d)of the Securities Exchange Act of 1934;and
(2)The information contained in the Report fairly presents,in all material respects,the financial condition and results of
operations of the Company.
/s/ GREGORY A.FALK
Gregory A.Falk
Chief Financial Officer
August 8,2013
STATEMENT OF OPERATING REVENUES
AND EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2012
PELICAN INVESTMENT HOLDINGS LLC
MIAMI BEACH, FLORIDA
Exhibit 2
TURNER & ASSOCIATES, L LP
CERTIFIED PUBLIC.ACCOUNTANTS AND BUSINESS ADVISORS
Miami lakes Office Center Telephone:305-377-0777
15291 NW 60th Avenue,Suite 100 Facsimile:305-556-5601
Miami Lakes,FL 33014 www.tumercpas.com
INDEPENDENT AUDITORS' REPORT
To the Members
Pelican Investment Holdings LLC
Miami Beach, Florida
We have audited the accompanying statement of operating revenues and expenses of Pelican investments
Holdings LLC(a Florida corporation)for the year ended December 31,2012,and the related notes.
Management's Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of this financial statement in accordance with
accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of the
financial statement that is free from material misstatement,whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit
in accordance with auditing standards. generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement
is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statement. The procedures selected depend on the auditor's judgment, including the assessment of the
risks of material misstatement of the financial statement, 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
financial statement 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 financial statement.
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 financial statements referred to above presents fairly, in all material respects, the operating
revenues and expenses of Pelican Investment Holdings LLC for the year ended December 31, 2012, in
accordance with accounting principles generally accepted in the United States of America.
Emphasis-of-Matter
This report is intended solely for the information and use of the members and management of Pelican Investment
Holdings LLC and the City_ of Miami Beach, Florida and is not intended to be and should not be used by anyone
other than these specified parties.
r
July 2,2013
Members American Institute of Certified Public Accountants and Florida Institute of Certified Public Accountants
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NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2012
PELICAN INVESTMENT HOLDINGS LLC
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Pelican Investment Holdings LLC (the "Company") was incorporated under the laws of the State
of Florida on May 6, 2010. On May 27, 2010 the Company purchased a parking garage from
Ocean Blvd II, LLC. The parking garage is located on land leased from the City of Miami Beach,
Florida. In conjunction with the purchase transaction, the Company assumed the land lease
from Ocean Blvd II, LLC. The land lease from the City of Miami Beach expires on September 30,
2041. This sale was approved by the City of Miami Beach.
BASIS OF ACCOUNTING
The Company has prepared the accompanying special-purpose financial statements to present
the operating revenues and expenses of the Company pursuant to Section 28.1 of a lease
agreement dated December 1, 1999, between Pelican Development LLC,the original lessee, and
City of Miami--Beach, Florida. The lease agreement specifies that the Company prepare financial
statements for the premises on a annual basis in accordance with generally accepted accounting
principles as promulgated by the American Institute of Certified Public Accountants, except as
otherwise provided by this lease, with such changes as the Company and the City of Miami
Beach, Florida shall mutually agree are consistent with this lease in order to reflect technologies
and methodologies not addressed in the accounting principles.
These financial statements are presented in accordance with accounting principles generally
accepted in the United States of America except for the omission of depreciation, interest
expense, income taxes and any expenses related to any contingent liabilities.
NOTE 2-RELATED PARTY TRANSACTION
Included in these statements is $27,891 of general and administrative expenses allocated to the
Company from a related party.
See independent auditors' report
Page 3of3
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