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Real Estate Assets | 12 Months Ended
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Dec. 31, 2011
Real Estate and Accumulated Depreciation Disclosure [Abstract] |
Real Estate and Accumulated Depreciation Disclosure [Text Block] |
3. REAL ESTATE ASSETS AND LEASE INTANGIBLES
A summary of the properties owned by the Company as of December 31, 2011 is as follows:
|  |  |  |  |  |  |  |  |  |  | Real estate
|  |  | Date |  |  |  | Square |  | Property |  | assets, net
| Property Name |  | Acquired |  | Location |  | Footage | Description |  | (in thousands)
| Casa Grande Apartments |  | April 1999 |  | Cheyenne, Wyoming |  | 29,250 |  | Residential |  | $ | 1,428.5
| Havana/Parker Complex |  | June 2006 |  | Aurora, Colorado |  | 114,000 |  | Office |  |  | 5,399.5
| 7-Eleven |  | September 2006 |  | Escondido, California |  | 3,000 |  | Retail |  |  | 1,282.4
| Garden Gateway Plaza |  | March 2007 |  | Colorado Springs, Colorado |  | 115,052 |  | Office |  |  | 13,008.6
| World Plaza |  | September 2007 |  | San Bernardino, California |  | 55,098 |  | Retail |  |  | 6,933.7
| Regatta Square |  | October 2007 |  | Denver, Colorado |  | 5,983 |  | Retail |  |  | 2,027.6
| Sparky’s Palm Self-Storage |  | November 2007 |  | Highland, California |  | 50,250 |  | Self-Storage |  |  | 4,598.9
| Sparky’s Joshua Self-Storage |  | December 2007 |  | Hesperia, California |  | 149,750 |  | Self-Storage |  |  | 7,155.8
| Executive Office Park |  | July 2008 |  | Colorado Springs, Colorado |  | 65,084 |  | Office |  |  | 8,710.1
| Waterman Plaza |  | August 2008 |  | San Bernardino, California |  | 21,170 |  | Retail |  |  | 6,716.3
| Pacific Oaks Plaza |  | September 2008 |  | Escondido, California |  | 16,000 |  | Office |  |  | 4,536.2
| Morena Office Center |  | January 2009 |  | San Diego, California |  | 26,784 |  | Office |  |  | 5,918.8
| Fontana Medical Plaza |  | February 2009 |  | Fontana, California |  | 10,500 |  | Office |  |  | 2,118.4
| Rangewood Medical Office Building |  | March 2009 |  | Colorado Springs, Colorado |  | 18,222 |  | Office |  |  | 2,407.3
| Sparky’s Thousand Palms Self-Storage |  | August 2009 |  | Thousand Palms, California |  | 113,126 |  | Self-Storage |  |  | 5,832.4
| Sparky’s Hesperia East Self-Storage |  | December 2009 |  | Hesperia, California |  | 72,940 |  | Self-Storage |  |  | 2,724.8
| Sparky’s Rialto Self-Storage |  | May 2010 |  | Rialto, California |  | 101,343 |  | Self-Storage |  |  | 5,144.7
| Genesis Plaza |  | August 2010 |  | San Diego, California |  | 57,685 |  | Office |  |  | 9,428.2
| Dakota Bank Buildings |  | May 2011 |  | Fargo, North Dakota |  | 119,749 |  | Office |  |  | 9,287.0
| Yucca Valley Retail Center |  | September 2011 |  | Yucca Valley, California |  | 85,996 |  | Retail |  |  | 6,687.6
| Sparky’s Sunrise Self-Storage |  | December 2011 |  | Hesperia, California |  | 93,851 |  | Self-Storage |  |  | 2,207.2
| Port of San Diego Complex |  | December 2011 |  | San Diego, California |  | 146,700 |  | Commercial |  |  | 14,500.0
| NetREIT, Inc properties |  |  |  |  |  |  |  |  |  |  | 128,054.0
| Model home properties |  | Various in |  |  |  | Homes |  |  |  |  |
| held in limited partnerships |  | 2009, 2010 |  | CA, AZ, OR, WA, TX, SC, |  | 59 |  | Residential |  |  | 15,019.4
|  |  | & 2011 |  | NC, ID and FL |  |  |  |  |  |  |
| Model home properties |  | Various in |  |  |  |  |  |  |  |  |
| held in income and investment funds |  | 2003-2008, |  | TX, WA, OH, NC, |  |  |  |  |  |  |
|  |  | 2010 & 2011 |  | NV, CA, NJ and MI |  | 19 |  | Residential |  |  | 4,681.5
| Model home properties |  |  |  |  |  |  |  |  |  |  | 19,700.9
|  |  |  |  | Total real estate assets and lease intangibles, net |  | $ | 147,754.9
A summary of the properties owned by the Company as of December 31, 2010 is as follows:
|  |  |  |  |  |  |  |  |  |  | Real estate
|  |  | Date |  |  |  | Square |  | Property |  | assets, net
| Property Name |  | Acquired |  | Location |  | Footage | Description |  | (in thousands)
| Casa Grande Apartments |  | Apr-99 |  | Cheyenne, Wyoming |  | 29,250 |  | Residential |  | $ | 1,500.0
| Havana/Parker Complex |  | Jun-06 |  | Aurora, Colorado |  | 114,000 |  | Office |  |  | 5,469.8
| 7-Eleven |  | Sep-06 |  | Escondido, California |  | 3,000 |  | Retail |  |  | 1,304.0
| Garden Gateway Plaza |  | Mar-07 |  | Colorado Springs, Colorado |  | 115,052 |  | Office |  |  | 13,167.9
| World Plaza |  | Sep-07 |  | San Bernardino, California |  | 55,098 |  | Retail |  |  | 7,095.2
| Regatta Square |  | Oct-07 |  | Denver, Colorado |  | 5,983 |  | Retail |  |  | 2,005.0
| Sparky’s Palm Self-Storage |  | Nov-07 |  | Highland, California |  | 50,250 |  | Self Storage |  |  | 4,712.2
| Sparky’s Joshua Self-Storage |  | Dec-07 |  | Hesperia, California |  | 149,750 |  | Self Storage |  |  | 7,322.7
| Executive Office Park |  | Jul-08 |  | Colorado Springs, Colorado |  | 65,084 |  | Office |  |  | 8,894.2
| Waterman Plaza |  | Aug-08 |  | San Bernardino, California |  | 21,170 |  | Retail |  |  | 6,824.7
| Pacific Oaks Plaza |  | Sep-08 |  | Escondido, California |  | 16,000 |  | Office |  |  | 4,623.5
| Morena Office Center |  | Jan-09 |  | San Diego, California |  | 26,784 |  | Office |  |  | 6,117.6
| Fontana Medical Plaza |  | Feb-09 |  | Fontana, California |  | 10,500 |  | Office |  |  | 2,192.7
| Rangewood Medical Office Building |  | Mar-09 |  | Colorado Springs, Colorado |  | 18,222 |  | Office |  |  | 2,528.4
| Sparky’s Thousand Palms Self-Storage |  | Aug-09 |  | Thousand Palms, California |  | 113,126 |  | Self Storage |  |  | 5,976.1
| Sparky’s Hesperia East Self-Storage |  | Dec-09 |  | Hesperia, California |  | 72,940 |  | Self Storage |  |  | 2,755.6
| Sparky’s Rialto Self-Storage |  | May-10 |  | Rialto, California |  | 101,343 |  | Self Storage |  |  | 4,830.3
| Genesis Plaza |  | Aug-10 |  | San Diego, California |  | 57,685 |  | Office |  |  | 9,815.8
| NetREIT, Inc properties |  |  |  |  |  |  |  |  |  |  | 97,135.7
| Model home properties |  | Various in |  |  |  | Homes |  |  |  |  |
| held in limited partnerships |  | 2009 & 2010 |  | CA, AZ, OR, WA and TX |  | 45 |  | Residential |  |  | 13,138.7
| Model home properties, |  |  |  |  |  |  |  |  |  |  |
| held in income fund properties |  | Various |  | TX, AZ, WA, OH, NC, |  |  |  |  |  |  |
|  |  | 2003-2008 |  | NV, NJ and MI |  | 29 |  | Residential |  |  | 9,510.7
| Model home properties |  |  |  |  |  |  |  |  |  |  | 22,649.4
|  |  |  |  | Total real estate assets and lease intangibles, net |  | $ | 119,785.1
|  | The following table sets forth the components of the Company’s real estate assets:
|  |  |  | December 31, |  |  | December 31,
|  |  |  | 2011 |  |  | 2010
|  | Land | $ | 38,109,616 |  | $ | 23,783,950
|  | Buildings and other |  | 113,238,188 |  |  | 98,639,739
|  | Tenant improvements |  | 5,766,097 |  |  | 4,147,535
|  | Lease intangibles |  | 2,082,124 |  |  | 1,289,607
|  |  |  | 159,196,025 |  |  | 127,860,831
|  | Less: |  |  |  |  |
|  | Accumulated depreciation and amortization |  | (11,441,138) |  |  | (8,075,805)
|  | Real estate assets and lease intangibles, net | $ | 147,754,887 |  | $ | 119,785,026
Operations from each property are included in the Company's financial statements from the date of acquisition. The Company acquired the following properties in 2011: In January 2011, NetREIT Dubose acquired two model home properties in Texas and leased them back to the home builder. The purchase price for the properties was $0.45 million. NetREIT Dubose paid the purchase price through a cash payment of $0.23 million and two promissory notes totaling $0.22 million. In February 2011, NetREIT Dubose acquired five model home properties in California and leased them back to the home builder. The purchase price for the properties was $1.5 million. NetREIT Dubose paid the purchase price through a cash payment of $0.75 million and five promissory notes totaling $0.75 million. In March 2011, NetREIT Dubose acquired four model home properties in South Carolina, Florida and Texas and leased them back to the home builder. The purchase price for the properties was $1.0 million. NetREIT Dubose paid the purchase price through a cash payment of $0.50 million and four promissory notes totaling $0.50 million. In May 2011, the Company acquired vacant land consisting of approximately 3 acres adjacent to its Sparky's Rialto Self-Storage facility for approximately $0.4 million paid in cash. The Company intends to use the land for additional motor home parking or for other purposes. In May 2011, the Company acquired the Dakota Bank Buildings for the purchase price of approximately $9.6 million. The Property is a six-story, two building office complex built in 1981 and 1986 located on 1.58 acres and consists of approximately120,000 rentable square feet in downtown Fargo, North Dakota. The Company made a down payment of approximately $3.875 million and financed the remainder of the purchase price through a monthly adjustable rate mortgage with interest at 3.0% over the one month Libor with an interest rate floor of 5.75% and ceiling of 9.75%. In June 2011, NetREIT Dubose acquired three model home properties in Texas and leased them back to the home builder. The purchase price for the properties was approximately $0.60 million. NetREIT Dubose paid the purchase price through a cash payment of approximately $0.30 million and three promissory notes totaling approximately $0.30 million. In August 2011, NetREIT Dubose acquired eight model home properties in Texas, Florida, North Carolina and South Carolina and leased them back to the home builder. The purchase price for the properties was approximately $1.9 million. NetREIT Dubose paid the purchase price through a cash payment of approximately $1.0 million and eight promissory notes totaling approximately $0.90 million. In September 2011, the Company acquired the Yucca Valley Retail Center for the purchase price of approximately $6.8 million. The Property is a neighborhood shopping center complex built in approximately 1978 consisting of five separate parcels. The Property consists of approximately 86,000 rentable square feet and is currently 93% leased and anchored by a national chain grocery store. The Company paid the purchase price through a cash payment of approximately $3.5 million and assumed a loan secured by the property of approximately $3.3 million with an interest rate of 5.62%. In December 2011, the Company acquired the Sunrise Self-Storage facility for the purchase price of $2.2 million. The Company paid the purchase price in an all cash transaction. The Property is located within a mixed commercial and industrial area of Hesperia, California. The Property was built in 1985 and 1989 and consists of fourteen (14) one and two-story buildings comprising approximately 93,851 square feet with approximately 737 storage units on a 4.93 acre parcel. In December 2011, the Company completed the formation of a California limit ed partnership, NetREIT National City Partners, LP, (“NCP”) whereby a limited partner contributed its fee interest in two adjacent multi-tenant industrial properties located in National City, California. T he Company contributed approximately $0.5 million cash and 1,649.266 shares of $1,000 liquidation value, 6.3% convertible preferred stock to capitalize the limited partnership. The agreed upon value of the Property was $14.5 million. T he Company also contributed $2.9 million cash which was used to pay down the mortgage loan assumed by NCP to a balance of $9.5 million. After completing the transactions, NetREIT has an approximate 75% interest in the NCP and a single unrelated limited partner has an approximate 25% interest. The p roperty, referred to by the Company as the “Port of San Diego Complex”, consists of two adjacent multi-tenant light industrial buildings built in 1971 and was renovated in 2008. The Property is comprised of 6.13 acres and the buildings have 146,700 rentable square feet. As of the date of acquisition, the Property was 51.7% occupied. In December 2011, Dubose Model Home Investor Funds #201, LP acquired one model home properties in South Carolina and leased it back to the home builder. The purchase price for the property was approximately $0.3 million. NetREIT Dubose paid the purchase price through a cash payment of approximately $0.1 million and promissory note for the balance of the purchase price. The Company disposed of the following properties in 2011: During the twelve months ended Dec ember 3 1, 2011, NetREIT Dubose disposed of twenty-two model home properties. The sales price aggregated approximately $8.5 million and approximately $5.7 million in mortgage notes payable were retired in connection with these sales. The Company acquired the following properties in 2010: In May 2010, the Company completed the acquisition of Sparky's Rialto Self Storage (Formerly known as Las Colinas Self Storage) located in Rialto, California. The purchase price was $4.9 million. The Company paid the purchase price through a cash payment of approximately $2.0 million and a promissory note in the amount of approximately $2.9 million. The property consists of approximately 7.5 acres of land, 101,343 rentable square feet and approximately 771 self storage units. Rental revenue earned by the Company from the operations of this property in 2010 was approximately $233,000. In August, 2010, the Company completed the acquisition of Genesis Plaza. The purchase price was $10.0 million The Company paid the purchase price through a cash payment of $5.0 million and a new mortgage loan with an insurance company secured by the Property of $5.0 million. The loan bears interest at 4.65% with a 25 year amortization schedule and a maturity date of August, 24, 2015 that may be extended for an additional 5 years at the lender's discretion subject to a change in the interest rates and other terms of the agreement. The Property is a four-story suburban office building built in 1988 and located in the Kearny Mesa submarket of San Diego, California, consisting of 57,685 rentable square feet. Rental revenue earned by the Company from the operations of this property in 2010 was approximately $482,000. In October 2010, the Company acquired four model home properties in Arizona and leased them back to the home builder. The purchase price for the properties was $0.9 million. The Company paid the purchase price through a cash payment of $0.45 million and four promissory notes totaling $0.45 million. Rental revenue and fee income earned by the Company from the operations of these propertie s in 2010 was approximately $60,000. In October 2010, the Company acquired ten model home properties in Oregon, Idaho and Washington and leased them back to the home builder. The purchase price for the properties was $6.1 million. The Company paid the purchase price through a cash payment of $3.05 million and ten promissory notes totaling $3.05 million. Rental revenue and fee income earned by the Company from the operations of these properties in 2010 was approximately $87,000. In November 2010, the Company completed its tender offer for the purchase of outstanding partnership units of the three DMHI Funds. The tender resulted in the Company acquiring 73.6%, 70.5% and 66.6% of the outstanding units of DMHI Fund #3, DMHI Fund #4 and DMHI Fund #5, respectively through the issuance of 112,890 shares of common stock and $896,893 in cash. These funds own a total of 29 model home properties. Rental revenue earned by the Company from the operations of these properties in 2010 was approximately $88,000. In December 2010, the Company acquired twelve model home properties in Texas and leased them back to the home builder. The purchase price for the properties was $2.9 million. The Company paid the purchase price through a cash payment of $1.45 million and ten promissory notes totaling $1.45 million. Rental revenue and fee income earned by the Company from the operations of these properties in 2010 was approximately $116,000.
The Company allocated the purchase price of the properties acquired during the years ended December 31, 2011 and
2010 as follows:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Above |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | and Below | Total
|  |  |  |  | Buildings |  | Tenant |  | In-place |  | Leasing |  | Market | Purchase
|  |  | Land |  | and other |  | Improvements |  | Leases |  | Costs |  | Leases | Price
Sparky’s Rialto |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Self-Storage | $ | 1,055,000 |  | $ | 3,820,000 |  | $ | - |  | $ | - |  | $ | - |  | $ | - | $ | 4,875,000
Genesis Plaza |  | 1,400,000 |  |  | 7,543,510 |  |  | 200,954 |  |  | 219,070 |  |  | 247,774 |  |  | 388,692 |  | 10,000,000
Sparky’s Rialto |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Self-Storage |  | 415,000 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  | 415,000
Dakota Bank Buildings |  | 832,000 |  |  | 8,123,461 |  |  |  |  |  | 131,982 |  |  | 45,186 |  |  | 442,371 |  | 9,575,000
Yucca Valley |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Retail Center |  | 2,445,331 |  |  | 3,549,162 |  |  | 520,485 |  |  | 819,979 |  |  | - |  |  | (567,257) |  | 6,767,700
Sparky’s Sunrise |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Self-Storage |  | 1,123,000 |  |  | 1,077,000 |  |  | - |  |  | - |  |  | - |  |  | - |  | 2,200,000
Port of San Diego Complex |  | 9,613,000 |  |  | 4,078,816 |  |  | 141,373 |  |  | 29,470 |  |  | 128,448 |  |  | 508,893 |  | 14,500,000
Model Home Properties |  | 2,012,217 |  |  | 9,633,813 |  |  | - |  |  | - |  |  | - |  |  | - |  | 11,646,030
Pro Forma Information for Property Acquisitions The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company for the year ended December 31, 2011 as if the acquisitions in these two years had occurred on January 1, 2010. The Company acquired 5 sign i ficant income producing properties and three significant limited partnerships properties that owned and leased model homes to homebuilders during the year ended December 31, 2011. These acquisitions were accounted for as business combinations. The following unaudited pro forma information for the years ended December 31, 2011 and 2010 have been prepared to give effect to the acquisition of Port of San Diego Complex, Yucca Valley Retail Center, Dakota Bank Buildings, Genesis Plaza, Sparky's Rialto Self-Storage, and Dubose Model Home Income Funds #3, 4, 5 as if these acquisitions occurred on January 1, 2010. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had this acquisition occurred on these dates, nor do es it purport to predict the results of operations for future periods.
|  | For the year ended
|  | December 31, |
|  | 2011 |  | 2010 |
Revenues | $ | 18,582,090 |  | $ | 15,536,050 |
Depreciation and amortization |  | 5,424,430 |  |  | 4,995,060 |
Net loss |  | (1,613,620) |  |  | (2,137,520) |
Net loss per common share, |  |  |  |  |  |
| basic and diluted | $ | (0.11) |  | $ | (0.18) |
Weighted-average number of common |  |  |  |  |  |
| shares outstanding, basic and diluted (1) |  | 14,190,786 |  |  | 11,771,524 |
| (1) - Data adjusted for a 5% stock dividend declared in September 2011 |
The proforma information for the year ended December 31, 2011 was adjusted to exclude $157,000 of acquisition costs. In addition $872,000 of revenue was excluded for the year ended December 31, 2010 for the bargain purchase gain.
Lease Intangibles
The following table summarizes the net value of other intangible assets and the accumulated amortization for each
class of intangible asset:
|  |  | December 31, 2011 |  |  | December 31, 2010
|  |  |  |  |  |  |  |  | Lease |  |  |  |  |  |  |  |  | Lease
|  |  | Lease |  |  | Accumulated |  |  | intangibles, |  |  | Lease |  |  | Accumulated |  |  | intangibles,
|  |  | intangibles |  |  | Amortization |  |  | net |  |  | intangibles |  |  | Amortization |  |  | net
In-place leases | $ | 1,905,059 |  | $ | (838,512) |  | $ | 1,066,547 |  | $ | 1,031,792 |  | $ | (558,854) |  | $ | 472,938
Leasing costs |  | 1,176,285 |  |  | (595,386) |  |  | 580,899 |  |  | 894,487 |  |  | (423,738) |  |  | 470,749
Tenant |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| relationships | 332,721 |  |  | (332,721) |  |  | - |  |  | 332,721 |  |  | (332,721) |  |  | -
Below-market |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| leases | (841,425) |  |  | 9,296 |  |  | (832,129) |  |  | - |  |  | - |  |  | -
Above-market |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| leases | 1,614,124 |  |  | (347,317) |  |  | 1,266,807 |  |  | 388,692 |  |  | (42,772) |  |  | 345,920
|  | $ | 4,186,764 |  | $ | (2,104,640) |  | $ | 2,082,124 |  | $ | 2,647,692 |  | $ | (1,358,085) |  | $ | 1,289,607
The estimated aggregate amortization expense for each of the five succeeding fiscal years and thereafter is as
follows:
|  |  | Estimated
|  |  | Aggregate
|  |  | Amortization
|  |  | Expense
2012 |  | $ | 1,106,536
2013 |  |  | 599,003
2014 |  |  | 516,452
2015 |  |  | 363,513
2016 |  |  | 106,222
Thereafter |  |  | (609,602)
|  | $ | 2,082,124
The weighted average amortization period for the intangible assets, in-place leases, leasing costs, tenant
relationships and below-market leases acquired as of December 31, 2011 was 14.6 years.

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- Definition The entire disclosure for real estate and accumulated depreciation. This may include a schedule that describes the property and lists the initial cost of land, buildings and improvements, improvements and carrying costs capitalized after acquisition, and the total carrying cost for land, buildings and improvements for each property and in aggregate. The schedule also lists the accumulated depreciation for each property and in aggregate, the date each property was constructed and acquired, the useful life used to calculate depreciation and any encumbrances on the properties. The entity provides a reconciliation of the carrying amount of real estate from the beginning of the period to the end of the period. Any real estate investments that have been written down or reserved against are described, including the basis of the write-down. A material amount of intercompany profit in the total carrying amount of real estate is disclosed. The aggregate cost of all real estate investments for federal income tax purposes is also disclosed. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 970 -SubTopic 360 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-28) -URI http://asc.fasb.org/extlink&oid=6590653&loc=d3e638233-123024 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph c -Subparagraph Schedule III -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 28 -Article 12 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 10 -Section S99 -Paragraph 6 -Subparagraph (SX 210.5-04.(c) Schedule III) -URI http://asc.fasb.org/extlink&oid=6882300&loc=d3e5864-122674 + Details
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