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Real Estate Assets and Lease Intangibles
 9 Months Ended
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 $0.23 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 purchased 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 1980. The land consists of approximately 38,600 square feet with a building on it of approximately15,335 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 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 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-placeLeasing 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 BelowTotal
     Buildings Improve-  In-place Leasing Market Purchase
   Land and other  ments  Leases  Costs  LeasesPrice
                     
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.