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Real Estate Assets
 12 Months Ended
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 limited 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. The 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. The 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 property, 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 December 31, 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 properties 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 BelowTotal
     Buildings Tenant In-place Leasing Market Purchase
   Land and other  Improvements  Leases  Costs  LeasesPrice
                     
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 significant 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 does 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.