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Real Estate Assets and Lease Intangibles | 9 Months Ended
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Sep. 30, 2012
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 September 30, 2012 is as follows:
|  |  |  |  |  |  |  |  |  |  | Real estate
|  |  | Date |  |  |  | Square |  | Property |  | assets, net
| Property Name |  | Acquired |  | Location |  | Footage |  | Description |  | (in thousands)
| Havana/Parker Complex |  | June 2006 |  | Aurora, Colorado |  | 114,000 |  | Office |  |  | 5,268.1
| Garden Gateway Plaza |  | March 2007 |  | Colorado Springs, Colorado |  | 115,052 |  | Office |  |  | 12,627.5
| World Plaza |  | September 2007 |  | San Bernardino, California |  | 55,098 |  | Retail |  |  | 6,908.1
| Regatta Square |  | October 2007 |  | Denver, Colorado |  | 5,983 |  | Retail |  |  | 1,989.0
| Sparky’s Palm Self-Storage |  | November 2007 |  | Highland, California |  | 50,250 |  | Self-Storage |  |  | 4,514.6
| Sparky’s Joshua Self-Storage |  | December 2007 |  | Hesperia, California |  | 149,750 |  | Self-Storage |  |  | 7,026.5
| Executive Office Park |  | July 2008 |  | Colorado Springs, Colorado |  | 65,084 |  | Office |  |  | 8,568.6
| Pacific Oaks Plaza |  | September 2008 |  | Escondido, California |  | 16,000 |  | Office |  |  | 4,458.3
| Morena Office Center |  | January 2009 |  | San Diego, California |  | 26,784 |  | Office |  |  | 5,935.6
| Fontana Medical Plaza |  | February 2009 |  | Fontana, California |  | 10,500 |  | Office |  |  | 2,071.2
| Rangewood Medical Office Building |  | March 2009 |  | Colorado Springs, Colorado |  | 18,222 |  | Office |  |  | 2,361.4
| Sparky’s Thousand Palms Self-Storage |  | August 2009 |  | Thousand Palms, California |  | 113,126 |  | Self-Storage |  |  | 5,724.6
| Sparky’s Hesperia East Self-Storage |  | December 2009 |  | Hesperia, California |  | 72,940 |  | Self-Storage |  |  | 2,703.3
| Sparky’s Rialto Self-Storage |  | May 2010 |  | Rialto, California |  | 101,343 |  | Self-Storage |  |  | 5,067.5
| Genesis Plaza |  | August 2010 |  | San Diego, California |  | 57,685 |  | Office |  |  | 9,266.8
| Dakota Bank Buildings |  | May 2011 |  | Fargo, North Dakota |  | 119,749 |  | Office |  |  | 8,823.3
| Yucca Valley Retail Center |  | September 2011 |  | Yucca Valley, California |  | 103,596 |  | Retail |  |  | 7,591.2
| Sparky’s Sunrise Self-Storage |  | December 2011 |  | Hesperia, California |  | 93,851 |  | Self-Storage |  |  | 2,203.3
| Port of San Diego Complex |  | December 2011 |  | San Diego, California |  | 146,700 |  | Industrial |  |  | 14,351.9
| Shoreline Medical Building |  | May 2012 |  | Half Moon Bay, California |  | 15,335 |  | Office |  |  | 6,304.0
| NetREIT, Inc properties |  |  |  |  |  |  |  |  |  |  | 123,764.8
|  |  |  |  |  |  | Homes |  |  |  |  |
| Model home properties |  | Various in |  | CA, AZ, WA, TX, SC, |  |  |  |  |  |  |
| held in limited partnerships |  | 2009-2012 |  | NC and NJ |  | 66 |  | Residential |  |  | 18,677.1
| Model home properties |  | Various in |  |  |  |  |  |  |  |  |
| held in income and investment funds |  | 2003-2008, |  | CA, AZ, TX, WA, OH, |  |  |  |  |  |  |
|  |  | 2010 & 2011 |  | NC, NV, NJ and MI |  | 21 |  | Residential |  |  | 5,967.5
| Model home properties |  |  |  |  |  |  |  |  |  |  | 24,644.6
|  |  |  |  | Total real estate assets and lease intangibles, net |  | $ | 148,409.4
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)
| Havana/Parker Complex |  | June 2006 |  | Aurora, Colorado |  | 114,000 |  | Office |  |  | 5,399.5
| 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
| 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 |  | Industrial |  |  | 14,500.0
| NetREIT, Inc properties |  |  |  |  |  |  |  |  |  |  | 118,626.8
| Model home properties |  | Various in |  |  |  | Homes |  |  |  |  |
| held in limited partnerships |  | 2009, 2010 |  | CA, AZ, OR, WA, TX, SC, |  | 59 |  | Residential |  |  | 10,027.9
|  |  | & 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 |  |  |  |  |  |  |  |  |  |  | 14,709.4
|  |  |  |  | Total real estate assets and lease intangibles, net |  | $ | 133,336.2
|  | The following table sets forth the components of the Company’s real estate assets:
|  |  |  | September 30, |  |  | December 31,
|  |  |  | 2012 |  |  | 2011
|  | Land | $ | 37,075,489 |  | $ | 34,330,356
|  | Buildings and other |  | 117,245,115 |  |  | 102,090,547
|  | Tenant improvements |  | 6,025,708 |  |  | 5,547,091
|  | Lease intangibles |  | 4,088,501 |  |  | 3,869,501
|  |  |  | 164,434,813 |  |  | 145,837,495
|  | Less: |  |  |  |  |
|  | Accumulated depreciation and amortization |  | (16,025,374) |  |  | (12,501,281)
|  | Real estate assets, net | $ | 148,409,439 |  | $ | 133,336,214
The Company disposed of the following properties in 2011: During the twelve months ended December 31, 2011, NetREIT Dubose and the other model home entities disposed of twenty-two model home properties. The sales price, net of selling costs, aggregated approximately $8.5 million and approximately $5.7 million in mortgage notes payable were retired in connection with these sales. Operations from each property are included in the Company's condensed consolidated financial statements from the date of acquisition. The Company acquired the following properties in the nine months ended September 30, 2012: In January 2012, Dubose Model Home Investors #201 LP acquired one model home property in Texas and leased it back to the home builder. The purchase price for the property was $0.38 million. The purchase price paid was through a cash payment of $0.15 million and a promissory note $0.2 3 million. In April 2012, NetREIT Dubose and Dubose Model Home Investors #201 LP acquired 19 model home properties in California and Arizona and leased them back to the home builder. The purchase price for the properties was approximately $8.2 million. The purchase price paid was through a cash payment of approximately $3.7 million and promissory notes totaling approximately $4.5 million. In May 2012, the Company acquired the former Rite Aid building in Yucca Valley, California, The building adjoins the Company's Yucca Valley Retail Center purchased in September 2011. The building was purchase d vacant as a result of the relocation of Rite Aid. However, the property remains under lease to the tenant for several more years. The purchase price was approximately $1.1 million all paid in cash. The building consists of approximately 17,600 rentable square feet. In June 2012, the Company acquired the Shoreline Medical Building for the purchase price of approximately $6.4 million. The Property is a two-story medical office building under a single tenant lease that was built in 198 0. The land consists of approximately 38,600 s quare feet with a building on it of approximately 15,335 rentable square feet in Half Moon Bay, California. Half Moon Bay is approximately 25 miles south of San Francisco and 10 miles west of San Mateo. The Company made a down payment of approximately $2.3 million and financed the remainder of the purchase price through a fixed rate mortgage with interest at 5.1%. The interest rate is subject to change at the third and sixth year anniversaries of the loan. In June 2012, NetREIT Dubose and Dubose Model Home Investors #201 LP acquired 14 model home properties in New Jersey and Pennsylvania and leased them back to the home builder. The purchase price for the properties was approximately $5.0 million. The purchase price paid was through a cash payment of approximately $2.0 million and promissory notes totaling approximately $3.0 million. The Company disposed of the following properties in 2012: During the nine months ended September 30, 2012, NetREIT Dubose and the other model home entities disposed of twenty-five model home properties. The sales price, net of selling costs, aggregated approximately $6.5 million and approximately $1.5 million in mortgage notes payable were retired in connection with these sales. The Company recognized a gain of $180,770 related to the sale of these model homes. 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 approximately 120,000 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 a 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 and the other model home entities disposed of twenty-two model home properties. The sales price, net of selling costs, aggregated approximately $8.5 million and approximately $5.7 million in mortgage notes payable were retired in connection with these sales.
The Company allocated the purchase price of the properties acquired during the nine months ended September 30, 2012.
as follows:
|  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  |  |  |
|  |  |  |  | Buildings |  | In-place | Leasing | Purchase |  |  |  |  |
|  | Land |  | and other |  | Leases | Costs | Price |  |  |  |
Rite Aid | $ | 366,000 |  | $ | 759,000 |  | $ | - |  | $ | - |  | $ | 1,125,000 |  |  |  |  |
Shoreline |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Medical Building |  | 1,820,000 |  |  | 4,311,000 |  |  | 83,000 |  |  | 136,000 |  |  | 6,350,000 |  |  |  |  |
Model Home |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Properties |  | 1,146,525 |  |  | 12,430,993 |  |  | - |  |  | - |  |  | 13,577,518 |  |  |  |  |
The Company allocation of the properties sold during the nine months ended September 30, 2012 as follows:
|  |  |  |  | Buildings |  | Total |  |  |  |  |  |  |  |  |  |  |
|  |  | Land |  | and other |  | Cost |  |  |  |  |  |  |  |  |  |  |
Model Home |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Properties | $ | 892,563 |  | $ | 6,100,079 |  | $ | 6,992,642 |  |  |  |  |  |  |  |  |  |  |
The Company allocated the purchase price of the properties acquired during the year ended December 31, 2011 as follows:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Above |  |
|  |  |  |  |  |  |  | Tenant |  |  |  |  |  |  |  | and Below | Total
|  |  |  |  | Buildings |  | Improve- |  | In-place |  | Leasing |  | Market | Purchase
|  |  | Land |  | and other |  | ments |  | Leases |  | Costs |  | Leases | Price
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
The Company allocation of the properties sold during the year ended December 31, 2011 as follows:
|  |  |  |  | Buildings |  | Total |  |  |  |  |  |  |  |  |  |  |
|  |  | Land |  | and other |  | Cost |  |  |  |  |  |  |  |  |  |  |
Model Home |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Properties | $ | 1,094,267 |  | $ | 7,331,915 |  | $ | 8,426,182 |  |  |  |  |  |  |  |  |  |  |
Lease Intangibles
The following table summarizes the net value of other intangible assets and the accumulated amortization for each
class of intangible asset:
|  |  | September 30, 2012 |  |  | December 31, 2011
|  |  |  |  |  |  |  |  | Lease |  |  |  |  |  |  |  |  | Lease
|  |  | Lease |  |  | Accumulated |  |  | intangibles, |  |  | Lease |  |  | Accumulated |  |  | intangibles,
|  |  | intangibles |  |  | amortization |  |  | net |  |  | intangibles |  |  | amortization |  |  | net
In-place leases | $ | 1,852,897 |  | $ | (1,074,925) |  | $ | 777,972 |  | $ | 1,769,897 |  | $ | (786,690) |  | $ | 983,207
Leasing costs |  | 1,130,184 |  |  | (668,909) |  |  | 461,275 |  |  | 994,184 |  |  | (274,414) |  |  | 719,770
Tenant |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| relationships | 332,721 |  |  | (332,721) |  |  | - |  |  | 332,721 |  |  | (332,721) |  |  | -
Below-market |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| leases | (841,425) |  |  | 30,403 |  |  | (811,022) |  |  | (841,425) |  |  | 9,296 |  |  | (832,129)
Above-market |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| leases | 1,614,124 |  |  | (721,206) |  |  | 892,918 |  |  | 1,614,124 |  |  | (347,317) |  |  | 1,266,807
|  | $ | 4,088,501 |  | $ | (2,767,358) |  | $ | 1,321,143 |  | $ | 3,869,501 |  | $ | (1,731,846) |  | $ | 2,137,655
As of September 30, 2012, the estimated aggregate amortization expense for three months ending
December 31, "&L15&"" and each of the five succeeding fiscal years and thereafter is as follows:
|  |  | Estimated
|  |  | Aggregate
|  |  | Amortization
|  |  | Expense
Three month period ending December 31, 2012 |  | $ | 238,741
2013 |  |  | 589,536
2014 |  |  | 512,357
2015 |  |  | 363,586
2016 |  |  | 107,636
Thereafter (principally below market rent amortization) |  |  | (490,713)
|  | $ | 1,321,143
The weighted average amortization period for the intangible assets, in-place leases, leasing costs, tenant
relationships and below-market leases acquired as of September 30, 2012 was 19.5 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 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 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 970 -SubTopic 360 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-28) -URI http://asc.fasb.org/extlink&oid=6590653&loc=d3e638233-123024 + Details
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