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2012-12-24 8K Self Storage Sale


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 20, 2012
ACADIA REALTY TRUST
(Exact name of registrant as specified in its charter)

Maryland
1-12002
23-2715194
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)

1311 Mamaroneck Avenue
Suite 260
White Plains, New York 10605
(Address of principal executive offices) (Zip Code)
(914) 288-8100
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425 )
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.01 Completion of Acquisition or Disposition of Assets.

As previously disclosed, on December 14, 2012, subsidiaries of Acadia Strategic Opportunity Fund II, LLC ("Fund II") and Acadia Strategic Opportunity Fund III LLC ("Fund III" and collectively with Fund II, the "Funds"), which are subsidiaries of Acadia Realty Trust (the "Company"), entered into a purchase and sale agreement (the "Agreement"), to sell 14 self-storage properties (the "Portfolio") for an aggregate sales price of approximately $293.9 million to SP Holdings I LLC ("SP Holdings"), an unaffiliated entity. Prior to the closing of the transaction, SP Holdings assigned the contract to the ultimate acquiring entity, in which Fund III has a less than 0.5% interest. On December 20, 2012, the Funds completed the sale of 12 of the 14 properties for approximately $261.6 million. The sale of the remaining two properties is expected to be completed within the next 60 days, although this remains subject to customary closing conditions and, accordingly, no assurance can be given as to the timing or successful completion of the sale of all or a portion of the remaining two properties. Fund III has retained an ownership interest in the self-storage management company that it previously acquired in connection with its ownership of the self-storage portfolio that will continue as manager of the Portfolio.

The Funds received net proceeds of approximately $120.1 million after the repayment of $130.6 million of outstanding mortgage debt, payments to noncontrolling interest holders, and closing costs.

A copy of the Agreement will be filed as an exhibit to the Company's annual report on Form 10-K for the year ending December 31, 2012. The above description is a summary of the Agreement and is qualified in its entirety by the complete text of the Agreement.

In connection with the disposition of the Portfolio, the Company is hereby filing, as Exhibit 99.1 hereto, an unaudited pro forma consolidated balance sheet of the Company as of September 30, 2012, and unaudited pro forma consolidated statements of income for each of the nine months ended September 30, 2012 and 2011, and for each of the fiscal years ended December 31, 2011, 2010, and 2009 assuming the transaction occurred on January 1, 2009. Exhibit 99.1 is hereby incorporated by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number        Description

99.1            Unaudited Pro Forma Consolidated Financial Statements of Acadia Realty Trust





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ACADIA REALTY TRUST
(Registrant)
Date: December 27, 2012 By:/s/ Jonathan Grisham
Name: Jonathan Grisham
Sr. Vice President and Chief Financial Officer






EXHIBIT INDEX
Exhibit No.
Description
 
 
99.1

Unaudited Pro Forma Consolidated Financial Statements of Acadia Realty Trust



Exhibit 99.1 Self Storage Sale


ACADIA REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA FINANCIAL INFORMATION

As previously disclosed, on December 14, 2012, subsidiaries of Acadia Strategic Opportunity Fund II, LLC ("Fund II") and Acadia Strategic Opportunity Fund III LLC ("Fund III" and collectively with Fund II, the "Funds"), which are subsidiaries of Acadia Realty Trust (the "Company"), entered into a purchase and sale agreement (the "Agreement"), to sell 14 self-storage properties (the "Portfolio") for an aggregate sales price of approximately $293.9 million to SP Holdings I LLC ("SP Holdings"), an unaffiliated entity. Prior to the closing of the transaction, SP Holdings assigned the contract to the ultimate acquiring entity, in which Fund III has a less than 0.5% interest. On December 20, 2012, the Funds completed the sale of 12 of the 14 properties for approximately $261.6 million. The sale of the remaining two properties is expected to be completed within the next 60 days, although this remains subject to customary closing conditions and, accordingly, no assurance can be given as to the timing or successful completion of the sale of all or a portion of the remaining two properties. Fund III has retained an ownership interest in the self-storage management company that it previously acquired in connection with its ownership of the self-storage portfolio that will continue as manager of the Portfolio.

The accompanying Unaudited Pro Forma Consolidated Financial Statements are presented as if the entire Portfolio had been sold as of December 20, 2012. The Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2012 is presented as if the sale of the Portfolio occurred on September 30, 2012. The Unaudited Pro Forma Consolidated Statements of Income for each of the nine months ended September 30, 2012 and 2011, and for each of the fiscal years ended December 31, 2011, 2010, and 2009 are presented assuming the transaction occurred on January 1, 2009. The accompanying Unaudited Pro Forma Consolidated Financial Statements should be read in conjunction with the Company's 2011 Annual Report on Form 10-K and the Company's Quarterly Report on Form 10-Q for the nine months ended September 30, 2012.

Pro forma information is intended to provide investors with information about the continuing impact of a transaction by showing how a specific transaction might have affected historical financial statements, illustrating the scope of the change in the historical financial position and results of operations. The adjustments made to historical financial information give effect to events that are directly attributable to the sale, are factually supportable, and expected to have a continuing impact. The Unaudited Pro Forma Consolidated Financial Statements are prepared in accordance with Article 11 of Regulation S-X.

The Unaudited Pro Forma Consolidated Financial Statements set forth below are not fact and there can be no assurance that the Company's results will not differ significantly from those set forth below or that the impact of the sale will not differ significantly from those presented below. Accordingly, the Unaudited Pro Forma Consolidated Financial Statements are presented for illustrative purposes only and do not purport to represent, and are not necessarily indicative of, what our actual financial position and results of operations would have been had the sale occurred on the dates indicated, nor are they indicative of our future financial position or results of operations. Readers are cautioned not to place undue reliance on such information and the Company makes no representations regarding the information set forth below or its ultimate performance compared to it.




ACADIA REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of September 30, 2012
(Amount in thousands, except share and per share data)
Company Historical (a)
 
Disposition of Portfolio (b)
 
Company Pro Forma
 
 
 
 
 
 
ASSETS
 
 
 
 
 
Operating real estate
 
 
 
 
 
Land
$
355,586

 
$
(61,484
)
 
$
294,102

Building and improvements
1,107,680

 
(159,467
)
 
948,213

Construction in progress
10,244

 
(3,386
)
 
6,858

 
1,473,510

 
(224,337
)
 
1,249,173

Less: accumulated depreciation
203,404

 
(19,388
)
 
184,016

Net operating real estate
1,270,106

 
(204,949
)
 
1,065,157

Real estate under development
229,808

 
(53
)
 
229,755

Notes receivable, net
78,826

 
—

 
78,826

Investments in and advances to unconsolidated affiliates
88,572

 
—

 
88,572

Cash and cash equivalents
85,297

 
—

 
85,297

Cash in escrow
19,030

 
(683
)
 
18,347

Rents receivable, net
30,549

 
(1,403
)
 
29,146

Deferred charges, net
30,326

 
(1,696
)
 
28,630

Acquired lease intangibles, net
29,066

 
—

 
29,066

Prepaid expenses and other assets
38,003

 
(1,253
)
 
36,750

Total assets
$
1,899,583

 
$
(210,037
)
 
$
1,689,546

 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
Mortgage notes payable
$
871,243

 
$
(61,838
)
 
$
809,405

Convertible notes payable
930

 
—

 
930

Distributions in excess of income from, and investments in, unconsolidated affiliates
22,409

 
—

 
22,409

Accounts payable and accrued expenses
34,691

 
(1,495
)
 
33,196

Dividends and distributions payable
8,757

 
—

 
8,757

Acquired lease and other intangibles, net
9,420

 
—

 
9,420

Other liabilities
23,514

 
(828
)
 
22,686

Total liabilities
970,964

 
(64,161
)
 
906,803

EQUITY
 
 
 
 
 
Shareholders' equity
  Common shares, $.001 par value, authorized 100,000,000 shares; issued and outstanding 47,138,544
47

 
—

 
47

  Additional paid-in capital
450,163

 
—

 
450,163

  Accumulated other comprehensive loss
(4,763
)
 
—

 
(4,763
)
  Retained earnings
33,269

 
(27,804
)
 
5,465

Total shareholders' equity
478,716

 
(27,804
)
 
450,912

Noncontrolling interests
449,903

 
(118,072
)
 
331,831

Total equity
928,619

 
(145,876
)
 
782,743

Total liabilities and equity
$
1,899,583

 
$
(210,037
)
 
$
1,689,546


The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.




ACADIA REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 2012

(dollars in thousands, except per share amounts)
Company
Historical
(aa)
 
Disposition of Portfolio
(bb)
 
Company
Pro Forma
Revenues
 
 
 
 
 
Rental income
$
97,237

 
$
(18,100
)
 
$
79,137

Interest income
5,996

 
—

 
5,996

Expense reimbursements
17,973

 
(164
)
 
17,809

Other
3,536

 
(1,603
)
 
1,933

  Total revenues
124,742

 
(19,867
)
 
104,875

Operating Expenses
 
 
 
 
 
Property operating
21,462

 
(8,685
)
 
12,777

Other operating
2,929

 
—

 
2,929

Real estate taxes
15,903

 
(1,579
)
 
14,324

General and administrative
18,154

 
(14
)
 
18,140

Depreciation and amortization
29,326

 
(3,585
)
 
25,741

  Total operating expenses
87,774

 
(13,863
)
 
73,911

  Operating income
36,968

 
(6,004
)
 
30,964

Equity in earnings of unconsolidated affiliates
1,997

 
—

 
1,997

Other interest income
131

 
—

 
131

Interest and other finance expense
(26,675
)
 
2,689

 
(23,986
)
Income from continuing operations before income taxes
12,421

 
(3,315
)
 
9,106

Income tax provision
1,137

 
(6
)
 
1,131

  Income from continuing operations
11,284

 
(3,309
)
 
7,975

Discontinued Operations
 
 
 
 
 
Operating income from discontinued operations
783

 
—

 
783

Gain on sale of property
8,585

 
—

 
8,585

  Income from discontinued operations
9,368

 
—

 
9,368

  Net income
20,652

 
(3,309
)
 
17,343

Noncontrolling interests
 
 
 
 
 
Continuing operations
5,381

 
2,678

 
8,059

Discontinued operations
(7,604
)
 
—

 
(7,604
)
Net (income) loss attributable to noncontrolling interests
(2,223
)
 
2,678

 
455

  Net income attributable to Common Shareholders
$
18,429

 
$
(631
)
 
$
17,798

Basic Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.37

 
$
(0.01
)
 
$
0.36

Income from discontinued operations
0.04

 
—

 
0.04

Basic earnings per share
$
0.41

 
$
(0.01
)
 
$
0.40

 
 
 
 
 
 
Diluted Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.37

 
$
(0.01
)
 
$
0.36

Income from discontinued operations
0.04

 
—

 
0.04

Diluted earnings per share
$
0.41

 
$
(0.01
)
 
$
0.40


The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.




ACADIA REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 2011

(dollars in thousands, except per share amounts)
Company
Historical
(aa)
 
Disposition of Portfolio
(bb)
 
Company
Pro Forma
Revenues
 
 
 
 
 
Rental income
$
81,741

 
$
(16,360
)
 
$
65,381

Interest income
9,493

 
—

 
9,493

Expense reimbursements
16,049

 
(205
)
 
15,844

Other
3,018

 
(1,261
)
 
1,757

  Total revenues
110,301

 
(17,826
)
 
92,475

Operating Expenses
 
 
 
 
 
Property operating
20,888

 
(8,705
)
 
12,183

Other operating
665

 
—

 
665

Real estate taxes
13,683

 
(2,114
)
 
11,569

General and administrative
17,149

 
(11
)
 
17,138

Depreciation and amortization
23,960

 
(3,355
)
 
20,605

  Total operating expenses
76,345

 
(14,185
)
 
62,160

  Operating income
33,956

 
(3,641
)
 
30,315

Equity in earnings of unconsolidated affiliates
3,025

 
—

 
3,025

Other interest income
219

 
—

 
219

Gain on debt extinguishment
1,268

 
—

 
1,268

Interest and other finance expense
(27,450
)
 
2,825

 
(24,625
)
Income from continuing operations before income taxes
11,018

 
(816
)
 
10,202

Income tax provision
(4
)
 
(3
)
 
(7
)
  Income from continuing operations
11,022

 
(813
)
 
10,209

Discontinued Operations
 
 
 
 
 
Operating income from discontinued operations
2,745

 
—

 
2,745

Loss on impairment of asset
(6,925
)
 
—

 
(6,925
)
Gain on sale of property
32,498

 
—

 
32,498

  Income from discontinued operations
28,318

 
—

 
28,318

  Net income
39,340

 
(813
)
 
38,527

Noncontrolling interests
 
 
 
 
 
Continuing operations
5,035

 
658

 
5,693

Discontinued operations
(707
)
 
—

 
(707
)
Net (income) loss attributable to noncontrolling interests
4,328

 
658

 
4,986

  Net income attributable to Common Shareholders
$
43,668

 
$
(155
)
 
$
43,513

Basic Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.40

 
$
—

 
$
0.40

Income from discontinued operations
0.68

 
—

 
0.68

Basic earnings per share
$
1.08

 
$
—

 
$
1.08

 
 
 
 
 
 
Diluted Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.40

 
$
—

 
$
0.40

Income from discontinued operations
0.68

 
—

 
0.68

Diluted earnings per share
$
1.08

 
$
—

 
$
1.08


The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.





ACADIA REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31, 2011
(dollars in thousands, except per share amounts)
Company
Historical
(aa)
 
Disposition of Portfolio
(bb)
 
Company
Pro Forma
Revenues
 
 
 
 
 
Rental income
$
112,223

 
(22,051
)
 
$
90,172

Interest income
11,429

 
—

 
11,429

Expense reimbursements
22,388

 
(258
)
 
22,130

Lease termination income
96

 
—

 
96

Management fee income
1,677

 
(2
)
 
1,675

Other
2,348

 
(1,747
)
 
601

  Total revenues
150,161

 
(24,058
)
 
126,103

Operating Expenses
 
 
 
 
 
Property operating
29,371

 
(12,154
)
 
17,217

Real estate taxes
18,686

 
(2,765
)
 
15,921

General and administrative
23,086

 
(12
)
 
23,074

Depreciation and amortization
32,986

 
(4,547
)
 
28,439

  Total operating expenses
104,129

 
(19,478
)
 
84,651

Operating income
46,032

 
(4,580
)
 
41,452

Equity in earnings of unconsolidated affiliates
1,555

 
—

 
1,555

Other interest income
276

 
—

 
276

Gain on debt extinguishment
1,268

 
—

 
1,268

Interest and other finance expense
(37,109
)
 
3,736

 
(33,373
)
Income from continuing operations before income taxes
12,022

 
(844
)
 
11,178

Income tax provision
474

 
(3
)
 
471

Income from continuing operations
11,548

 
(841
)
 
10,707

Discontinued Operations
 
 
 
 
 
Operating income from discontinued operations
2,262

 
—

 
2,262

Loss on impairment of asset
(6,925
)
 
—

 
(6,925
)
Gain on sale of property
46,830

 
—

 
46,830

Income from discontinued operations
42,167

 
—

 
42,167

Net income
53,715

 
(841
)
 
52,874

Noncontrolling interests
 
 
 
 
 
Continuing operations
8,514

 
678

 
9,192

Discontinued operations
(10,674
)
 
—

 
(10,674
)
Net (income) loss attributable to noncontrolling interests
(2,160
)
 
678

 
(1,482
)
  Net income attributable to Common Shareholders
$
51,555

 
$
(163
)
 
$
51,392

Basic Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.50

 
$
—

 
$
0.50

Income from discontinued operations
0.77

 
—

 
0.77

Basic earnings per share
$
1.27

 
$
—

 
$
1.27

Diluted Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.49

 
$
—

 
$
0.49

Income from discontinued operations
0.77

 
—

 
0.77

Diluted earnings per share
$
1.26

 
$
—

 
$
1.26


The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.




ACADIA REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31, 2010
(dollars in thousands, except per share amounts)
Company
Historical
(aa)
 
Disposition of Portfolio
(bb)
 
Company
Pro Forma
Revenues
 
 
 
 
 
Rental income
$
97,475

 
(20,405
)
 
$
77,070

Interest income
19,161

 
(2
)
 
19,159

Expense reimbursements
20,499

 
(220
)
 
20,279

Lease termination income
290

 
—

 
290

Management fee income
1,424

 
—

 
1,424

Other
2,196

 
(1,645
)
 
551

  Total revenues
141,045

 
(22,272
)
 
118,773

Operating Expenses
 
 
 
 
 
Property operating
29,223

 
(10,608
)
 
18,615

Real estate taxes
17,255

 
(3,065
)
 
14,190

General and administrative
20,220

 
(9
)
 
20,211

Depreciation and amortization
28,808

 
(4,765
)
 
24,043

  Total operating expenses
95,506

 
(18,447
)
 
77,059

Operating income
45,539

 
(3,825
)
 
41,714

Equity in earnings of unconsolidated affiliates
10,971

 
—

 
10,971

Other interest income
408

 
—

 
408

Gain on bargain purchase
33,805

 
—

 
33,805

Interest and other finance expense
(40,498
)
 
9,511

 
(30,987
)
Income from continuing operations before income taxes
50,225

 
5,686

 
55,911

Income tax provision
2,890

 
—

 
2,890

Income from continuing operations
47,335

 
5,686

 
53,021

Discontinued Operations
 
 
 
 
 
Operating income from discontinued operations
3,332

 
—

 
3,332

Income from discontinued operations
3,332

 
—

 
3,332

Net income
50,667

 
5,686

 
56,353

Noncontrolling interests
 
 
 
 
 
Continuing operations
(19,075
)
 
(4,563
)
 
(23,638
)
Discontinued operations
(1,535
)
 
—

 
(1,535
)
Net income attributable to noncontrolling interests
(20,610
)
 
(4,563
)
 
(25,173
)
  Net income attributable to Common Shareholders
$
30,057

 
$
1,123

 
$
31,180

Basic Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.70

 
$
0.03

 
$
0.73

Income from discontinued operations
0.05

 
—

 
0.05

Basic earnings per share
$
0.75

 
$
0.03

 
$
0.78

Diluted Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.70

 
$
0.03

 
$
0.73

Income from discontinued operations
0.04

 
—

 
0.04

Diluted earnings per share
$
0.74

 
$
0.03

 
$
0.77


The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.




ACADIA REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31, 2009
(dollars in thousands, except per share amounts)
Company
Historical
(aa)
 
Disposition of Portfolio
(bb)
 
Company
Pro Forma
Revenues
 
 
 
 
 
Rental income
$
86,021

 
(10,855
)
 
$
75,166

Interest income
19,698

 
(4
)
 
19,694

Expense reimbursements
19,435

 
(260
)
 
19,175

Lease termination income
2,751

 
—

 
2,751

Management fee income
1,961

 
—

 
1,961

Other
4,579

 
(1,310
)
 
3,269

  Total revenues
134,445

 
(12,429
)
 
122,016

Operating Expenses
 
 
 
 
 
Property operating
28,143

 
(9,323
)
 
18,820

Real estate taxes
15,848

 
(2,345
)
 
13,503

General and administrative
22,006

 
(2
)
 
22,004

Depreciation and amortization
27,612

 
(3,967
)
 
23,645

Abandonment of project costs
2,487

 
—

 
2,487

Reserve for notes receivable
1,734

 
—

 
1,734

  Total operating expenses
97,830

 
(15,637
)
 
82,193

Operating income
36,615

 
3,208

 
39,823

Equity in losses of unconsolidated affiliates
(1,529
)
 
—

 
(1,529
)
Impairment of investment in unconsolidated affiliate
(3,768
)
 
—

 
(3,768
)
Other interest income
642

 
—

 
642

Gain on debt extinguishment
7,057

 
—

 
7,057

Interest and other finance expense
(35,632
)
 
8,146

 
(27,486
)
Income from continuing operations before income taxes
3,385

 
11,354

 
14,739

Income tax provision
1,541

 
(3
)
 
1,538

Income from continuing operations
1,844

 
11,357

 
13,201

Discontinued Operations
 
 
 
 
 
Operating income from discontinued operations
3,719

 
—

 
3,719

Gain on sale of property
7,143

 
—

 
7,143

Income from discontinued operations
10,862

 
—

 
10,862

Net income
12,706

 
11,357

 
24,063

Noncontrolling interests
 
 
 
 
 
Continuing operations
24,730

 
(9,203
)
 
15,527

Discontinued operations
(6,303
)
 
—

 
(6,303
)
Net loss (income) attributable to noncontrolling interests
18,427

 
(9,203
)
 
9,224

  Net income attributable to Common Shareholders
$
31,133

 
$
2,154

 
$
33,287

Basic Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.70

 
$
0.06

 
$
0.76

Income from discontinued operations
0.12

 
—

 
0.12

Basic earnings per share
$
0.82

 
$
0.06

 
$
0.88

Diluted Earnings per Share
 
 
 
 
 
Income from continuing operations
$
0.70

 
$
0.06

 
$
0.76

Income from discontinued operations
0.12

 
—

 
0.12

Diluted earnings per share
$
0.82

 
$
0.06

 
$
0.88


The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.




ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Adjustments to Unaudited Pro Forma Consolidated Balance Sheet

(a) Represents the historical consolidated balance sheet of the Company as of September 30, 2012.

(b) Reflects the disposition of the Portfolio and removal of the book value of the net assets and liabilities of the Portfolio.

Note 2 - Adjustments to Unaudited Pro Forma Consolidated Statements of Income

(aa) Represents the unaudited historical consolidated statement of income for the Company for each of the nine months ended September 30, 2012 and 2011, and the audited historical consolidated statements of income for the Company for each of the fiscal years ended December 31, 2011, 2010, and 2009.

(bb) Represents the unaudited historical statement of income for the Portfolio for each of the nine months ended September 30, 2012 and 2011, and the audited historical statements of income for the Portfolio for each of the fiscal years ended December 31, 2011, 2010, and 2009.