Maryland | 32-0467957 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. No.) | |
1819 Main Street, Suite 212 Sarasota, FL (Address of principal executive offices) | 20036 (Zip Code) |
· | our ability to effectively deploy the proceeds raised in our securities offering, |
· | changes in economic conditions generally and in the real estate and securities markets, specifically, |
· | the ability of our manager to source, originate and acquire suitable investment opportunities, |
· | our expectation that there will be opportunities to acquire additional properties leased to the United States of America, |
· | our expectations regarding demand for leased space by the federal government, |
· | that our tenants will renew or extend their leases and not exercise early termination options pursuant to their leases or that we will be successful in finding replacement tenants, |
· | the impact of changes in real estate needs and financial conditions of federal, state and local governments, |
· | acts of terrorism and other disasters that are beyond our control, |
· | legislative or regulatory changes impacting our business or our assets (including changes to the laws governing the taxation of real estate investment trust (“REITs”) and SEC guidance related to Regulation A or the JOBS Act), |
· | our ability to raise equity or debt capital, |
· | our compliance with applicable local, state and federal laws, including the Investment Advisers Act of 1940, as amended (the “Advisers Act”), the Investment Company Act and other laws; and |
· | changes to generally accepted account principles, or GAAP. |
· | As of the date of this report, we own 4 GSA Properties that are 100% leased to the United States and we will acquire an additional seven as of the initial closing of our Initial Offering. We refer to such 11 properties as our “initial portfolio.” As of March 31, 2017, based on net operating income, the weighted average age of our initial portfolio was approximately 8 years, and the weighted average remaining lease term was approximately 10.0 years if none of the early termination rights are exercised and 7.0 if all of the early termination rights are exercised. |
· | All of our initial portfolio properties are occupied by U.S. Government agencies that serve mission-critical or citizen service functions. |
· | These properties generally meet our investment criteria, which target GSA Properties across secondary or smaller markets, within size ranges of 5,000-50,000 rentable square feet, and in their first term after construction or retrofitted to post-9/11 standards. |
· | Upon completion of this offering and the formation transactions, assuming we sell the maximum amount pursuant to this offering, our senior management team will own approximately 30.5% of our common stock on a fully diluted basis, which will help to align their interests with those of our stockholders. This amount does not include equity issuable to our Manager in payment of acquisition fees, which will equal 1% of acquisition costs for each property we acquire. |
· | A significant portion of our Manager’s fees will be accrued and eventually paid in stock, which will be issued upon the earlier of listing on a national exchange or 48 months from the initial closing of our Initial Offering, which will also align the interests of our Manager with those of our stockholders. |
· | Considerable experience in developing, financing, owning, managing, and leasing, including federal government-leased properties across the U.S. (transactions involving approximately $3 billion of GSA Properties and other government leased assets). |
· | Relationships with real estate owners, developers, brokers and lenders should allow our company to source off-market or limited-competitive acquisition opportunities at attractive cap rates. |
· | In-depth knowledge of the GSA procurement process, GSA requirements, and GSA organizational dynamics. The GSA build-to-suit lease process is detailed and requires significant process-specific expertise as well as extensive knowledge of GSA building requirements and leases. |
· | Strong network of professional and advisory relationships, including BB&T Capital Markets, financial advisor to our Manager. |
· | Significant experience in property management and management of third party property managers, focusing on the day-to-day management of our portfolio, including cleaning, repairs, landscaping, collecting rents, handling compliance with zoning and regulations. |
· | Leases are full faith and credit obligations of the United States and, as such, are not subject to the risk of annual appropriations. |
· | High lease renewal rates for GSA Properties in first term (average of 93% for single-tenant properties, 95% for single-tenant, built-to-suit properties).3 |
· | Based on 2014 GSA statistics, since 2001 average duration of occupancy for federal agencies in the same leased building is 25 years. From 2001 through 2010, the GSA exercised the right to terminate prior to the end of the full lease term at a rate of 1.73%4, according to Colliers International research. |
· | Leases typically include inflation-linked rent increases associated with certain property operating costs, which the Company believes will mitigate expense variability. |
· | Our Manager has observed that the market of owners and developers of targeted assets appears highly fragmented with the majority of ownership distributed among small regional owners and developers. |
· | Based on our research, federally leased, single-tenant properties with significant remaining lease term (more than 7 years), traded at an approximate average cap rate of 6.75% compared to 4.2% - 5.2%5 for office cap rates in primary and secondary markets and interest rates of less than 2.5% for 10-year U.S. Treasury bonds. |
· | Over 1,300 GSA Properties in our targeted size are spread throughout U.S. |
· | Company strategy of mitigating lease renewal risk by owning specialized, mission critical and customer service functioned properties, portfolio diversification by agency and location and through careful acquisition of staggered lease expirations. |
· | Our management team focuses on the efficient management of our properties and on improvements to our properties that enhance their value for a tenant agency and improve the likelihood of lease renewal. |
· | We also seek to reduce operating costs at all of our properties, often by implementing energy efficiency programs that help the U.S. Government achieve its conservation and efficiency goals. |
· | Our asset management team also conducts frequent audits of each of our properties in concert with the GSA and the tenant agency so as to keep each facility in optimal condition, allowing the tenant agency to better perform its stated mission and helping to position us as a GSA partner of choice. |
· | We intend to renew leases at our GSA-leased properties at positive spreads upon expiration. |
· | Upon lease renewal, GSA rental rates are typically reset based on a number of factors, including inflation, the replacement cost of the building at the time of renewal and enhancements to the property since the date of the prior lease. |
· | During the term of a GSA lease, we work in close partnership with the GSA to implement improvements at our properties to enhance the U.S. Government occupying agency’s ability to perform its stated mission, thereby increasing the importance of the building to the tenant agency and the probability of an increase in rent upon lease renewal. |
· | We manage our properties to increase our income, continuing to reduce property-level operating costs. |
· | We manage our properties in a cost-efficient manner so as to eliminate any excess spending and streamline our operating costs. |
· | When we acquire a property, we review all property-level operating expenditures to determine whether and how the property can be managed more efficiently. |
March 11, 2016 | ||||||||||||
(inception) to | ||||||||||||
December 31, 2016 | December 31, 2016 | December 31, 2015 | ||||||||||
HC Gov Realty | ||||||||||||
Trust, Inc. | Contributed | Contributed | ||||||||||
Historical | Properties | Properties | ||||||||||
Revenues | $ | 747,477 | $ | 3,711,168 | $ | 3,005,533 | ||||||
Less: | ||||||||||||
Operating expenses | 195,210 | 1,058,951 | 1,057,920 | |||||||||
Management fees | 119,656 | 107,674 | 90,166 | |||||||||
314,866 | 1,166,625 | 1,148,086 | ||||||||||
Net Operating Income | 432,611 | 2,544,543 | 1,857,447 | |||||||||
Less: | ||||||||||||
Depreciation and amortization | 302,484 | 1,228,062 | 981,801 | |||||||||
Interest expense | 256,171 | 1,224,717 | 1,069,831 | |||||||||
558,655 | 2,452,779 | 2,051,632 | ||||||||||
Net loss | (126,044 | ) | 91,764 | (194,185 | ) | |||||||
Less: Preferred dividend | (104,636 | ) | — | — | ||||||||
Net income(loss) attributed to common shareholders | $ | (230,680 | ) | $ | 91,764 | $ | (194,185 | ) |
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Amount and Nature of Beneficial Ownership Acquirable | Percent of Class | ||||
Common | Edwin M. Stanton1 | 50,000 Shares | N/A | 25%2 | ||||
Common | Robert R. Kaplan, Jr.1 | 50,000 Shares | N/A | 25%2 | ||||
Common | Philip Kurlander1 | 50,000 Shares | N/A | 25%2 | ||||
Common | Robert R. Kaplan1 | 50,000 Shares | N/A | 25%2 |
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Amount and Nature of Beneficial Ownership Acquirable | Percent of Class | ||||
Series A Preferred Stock | All Executive Officers and Directors | 44,000 Shares | N/A | 30.45%3 | ||||
Series A Preferred Stock | Gerald Kreinces4 | 18,000 Shares | N/A | 12.46% | ||||
Series A Preferred Stock | Philip Kurlander1 | 26,000 Shares | N/A | 17.99% |
HC Government Realty Trust, Inc.
Consolidated Financial Statements
As of December 31, 2016 and for the period from March 11, 2016 (date of inception) to December 31, 2016
And Report of Independent Registered Public Accounting Firm
14
HC Government Realty Trust, Inc.
Table of Contents
Page | |
Report of Independent Registered Public Accounting Firm | 16 |
Audited Financial Statements | |
Consolidated Balance Sheet | 17 |
Consolidated Statement of Operations | 18 |
Consolidated Statement of Changes in Stockholders’ Equity | 19 |
Consolidated Statement of Cash Flows | 20 |
Notes to Consolidated Financial Statements | 21 |
15
2016 | ||||
ASSETS | ||||
Investment in real estate, net: | $ | 10,435,991 | ||
Cash and cash equivalents | 247,137 | |||
Deposits in escrow | 51,656 | |||
Rent and other tenant accounts receivables, net | 126,590 | |||
Related parties receivables | 525,397 | |||
Prepaids and other assets | 182,376 | |||
Leasehold intangibles, net | 326,279 | |||
Total Assets | $ | 11,895,426 | ||
LIABIILTIES | ||||
Mortgages payable, net of unamortized debt costs | $ | 7,068,067 | ||
Note payable | 1,992,140 | |||
Other note payable | 111,821 | |||
Accrued interest payable | 35,379 | |||
Other liabilities | 378,684 | |||
Total Liabilities | 9,586,091 | |||
STOCKHOLDERS' EQUITY | ||||
Preferred stock ($0.001 par value, 750,000,000 shares authorized | 3,612,500 | |||
and 144,000 shares issued and outstanding) | ||||
Common stock ($0.001 par value, 250,000,000 shares authorized | 2,000 | |||
and 2,000 shares issued and outstanding) | ||||
Offering costs | (1,074,485 | ) | ||
Accumulated deficit | (230,680 | ) | ||
Total Stockholders' Equity | 2,309,335 | |||
Total Liabilities and Stockholders' Equity | $ | 11,895,426 |
Revenues: | ||||
Rental revenues | $ | 720,850 | ||
Real estate tax reimbursments and other revenues | 26,627 | |||
Total Revenues | 747,477 | |||
Other Property Operations: | ||||
Repairs and maintenance | 36,373 | |||
Utilities | 35,267 | |||
Real estate and other taxes | 50,723 | |||
Depreciation and amortization | 302,484 | |||
Other operating expense | 27,298 | |||
Management fees | 57,309 | |||
Professional expenses | 3,864 | |||
Insurance | 32,510 | |||
General and administrative | 71,522 | |||
Total Operating Expenses | 617,350 | |||
Interest expense | 256,171 | |||
Net loss | (126,044 | ) | ||
Less: Preferred dividends | (104,636 | ) | ||
Net loss attributable to common shareholders | $ | (230,680 | ) | |
Net loss per basic common shares | $ | (144.18 | ) | |
Weighted average number of common shares outstanding, basic | 1,600 |
Series A | Total | |||||||||||||||||||
Preferred | Common | Offering | Accumulated | Stockholders' | ||||||||||||||||
Stock | Stock | Costs | Deficit | Equity | ||||||||||||||||
Balance, March 11, 2016 | $ | - | $ | - | $ | - | $ | - | ||||||||||||
Proceeds from issuance of stock | 3,612,500 | 2,000 | - | 3,614,500 | ||||||||||||||||
Dividends | - | - | (104,636 | ) | (104,636 | ) | ||||||||||||||
Offering Costs | - | - | (1,074,485 | ) | - | (1,074,485 | ) | |||||||||||||
Net loss | - | - | (126,044 | ) | (126,044 | ) | ||||||||||||||
Balance, December 31, 2016 | $ | 3,612,500 | $ | 2,000 | $ | (1,074,485 | ) | $ | (230,680 | ) | $ | 2,309,335 |
2016 | ||||
Cash flows from operating activities: | ||||
Net loss | $ | (126,044 | ) | |
Adjustments to reconcile net loss to net cash used in | ||||
operating activities: | ||||
Depreciation | 244,029 | |||
Amortization of acquired lease-up costs | 23,862 | |||
Amortization of in-place leases | 34,593 | |||
Amortization of above/below-market leases | (14,158 | ) | ||
Amortization of debt issuance costs | 19,584 | |||
Change in assets and liabilities | ||||
Rent and other tenant accounts receivables, net | (126,590 | ) | ||
Prepaid expense and other assets | (182,376 | ) | ||
Deposits in escrow | (51,656 | ) | ||
Accounts payable and other accrued expenses | 378,684 | |||
Accrued interest payable | 35,379 | |||
Related party receivables | (525,397 | ) | ||
Net cash used in operating activities | (290,090 | ) | ||
Cash flows from investing activities: | ||||
Investment property acquisitions | (11,050,596 | ) | ||
Net cash used in investing activities | (11,050,596 | ) | ||
Cash flows from financing activities: | ||||
Issuance of common stock | 2,000 | |||
Issuance of preferred stock | 3,612,500 | |||
Offering costs | (1,074,485 | ) | ||
Mortgage proceeds | 7,225,000 | |||
Mortgage principal payments | (71,445 | ) | ||
Proceeds from Seller note payable | 2,019,789 | |||
Proceeds from other note payable | 124,000 | |||
Notes payable repayments | (39,828 | ) | ||
Debt costs | (105,072 | ) | ||
Dividends paid | (104,636 | ) | ||
Net cash from financing activities | 11,587,823 | |||
Net increase in cash and cash equivalents | 247,137 | |||
Cash and cash equivalents, beginning of period | - | |||
Cash and cash equivalents, end of period | $ | 247,137 | ||
Supplemental cash flow information: | ||||
Interest paid during the period | $ | 201,208 |
Interest paid during the year | ||||
Interest expense (per income statement) | $ | 256,171 | ||
Less: Accrued interest (accounts 20502 and 21020) | (35,379 | ) | ||
Less: Debt amortization | (19,584 | ) | ||
Interest paid | $ | 201,208 |
1. | Organization |
2. | Significant Accounting Policies |
3. | Investment in Real Estate |
Date | Acquisition | ||||
Acquired | Costs | ||||
2016 Acquisitions | |||||
Lawton, OK | June 2016 | $ | 2,287,687 | ||
Moore, OK | June 2016 | 5,015,422 | |||
Lakewood, CO | June 2016 | 3,747,487 | |||
$ | 11,050,596 |
2016 | ||||
Land | $ | 841,155 | ||
Buildings and improvements | 8,420,511 | |||
Tenant Improvements | 1,418,354 | |||
Acquired In-place leases | 366,167 | |||
Acquired lease-up costs | 268,127 | |||
Above(below)-market leases | (263,718 | ) | ||
$ | 11,050,596 |
Above (Below) | Intangible | |||||||
Market | Lease | |||||||
Leases | Costs | |||||||
Year ending December 31: | ||||||||
2017 | $ | (25,334 | ) | $ | 104,637 | |||
2018 | (25,334 | ) | 104,637 | |||||
2019 | (25,334 | ) | 104,637 | |||||
2020 | (24,397 | ) | 93,869 | |||||
2021 | (22,821 | ) | 75,737 | |||||
Thereafter | (126,340 | ) | 92,322 | |||||
$ | (249,560 | ) | $ | 575,839 |
2016 | ||||
Land | $ | 841,155 | ||
Buildings and improvements | 8,420,511 | |||
Tenant improvements | 1,418,354 | |||
10,680,020 | ||||
Accumulated depreciation | (244,029 | ) | ||
Investments in real estate, net | $ | 10,435,991 |
The following is a summary of Leasehold intangibles, net:
Acquired in-place leases | $ | 366,167 | ||
Acquired lease-up costs | 268,127 | |||
Acquired above-(below) market lease | (263,718 | ) | ||
370,576 | ||||
Accumulated amortization | (44,297 | ) | ||
Leasehold intangibles, net | $ | 326,279 |
4. | Debt |
Mortgages | Notes | |||||||
Payable | Payable | |||||||
2017 | $ | 182,388 | $ | 2,103,961 | ||||
2018 | 190,275 | - | ||||||
2019 | 6,780,891 | - | ||||||
$ | 7,153,554 | $ | 2,103,961 |
5. | Notes Payable |
6. | Related Parties |
7. | Leases and Tenants |
Future | ||||
Minimum | ||||
Rents | ||||
2017 | 1,243,849 | |||
2018 | 1,243,849 | |||
2019 | 1,243,849 | |||
2020 | 1,138,238 | |||
2021 | 962,477 | |||
Thereafter | 1,223,876 | |||
Total | 7,056,138 |
8. | Income Taxes |
2016 | ||||
Deferred tax assets | ||||
Book over tax depreciation fixed assets | $ | 263,277 | ||
Total deferred tax assets | 263,277 | |||
Deferred tax liabilities | ||||
Tax over book amortization intangibles | 216,909 | |||
Valuation allowance | 46,368 | |||
Total deferred tax liabilities | 263,277 | |||
Deferred tax, net | $ | - |
9. | Stockholders’ Equity |
9. | Stockholders’ Equity (continued): |
10. | Commitments and Contingencies |
11. | Subsequent Events |
Holmwood Capital, LLC
Consolidated Financial Statements
December 31, 2016 and 2015
(with Report of Independent Registered Public Accounting Firm
30
Holmwood Capital, LLC
Table of Contents
Page | |
Report of Independent Registered Public Accounting Firm | 32 |
Audited Financial Statements | |
Consolidated Balance Sheets | 33 |
Consolidated Statements of Operations | 34 |
Consolidated Statements of Changes in Partners’ Capital | 35 |
Consolidated Statements of Cash Flows | 36 |
Notes to Consolidated Financial Statements | 37 |
31
2016 | 2015 | |||||||
ASSETS | ||||||||
Investment in real estate, net: | $ | 29,107,886 | $ | 30,040,892 | ||||
Cash and cash equivalents | 258,840 | 292,100 | ||||||
Deposits in escrow | 239,221 | 122,851 | ||||||
Rent and other tenant accounts receivables, net | 336,464 | 245,627 | ||||||
Prepaids and other assets | 52,579 | 166,349 | ||||||
Leasehold intangibles, net | 1,019,970 | 1,197,853 | ||||||
Total Assets | $ | 31,014,960 | $ | 32,065,672 | ||||
LIABILITIES | ||||||||
Mortgages payable, net of unamortized debt costs | $ | 22,455,942 | $ | 24,183,225 | ||||
Note payable | 1,387,901 | 869,027 | ||||||
Accrued interest payable | 94,942 | 81,278 | ||||||
Related party payable | 410,861 | - | ||||||
Other liabilities | 405,801 | 389,504 | ||||||
Total Liabilities | 24,755,447 | 25,523,034 | ||||||
PARTNERS' CAPITAL | ||||||||
Partners' capital, net | 6,804,872 | 7,179,761 | ||||||
Accumulated deficit | (545,359 | ) | (637,123 | ) | ||||
Total Partners' Capital | 6,259,513 | 6,542,638 | ||||||
Total Liabilities and Partners' Capital | $ | 31,014,960 | $ | 32,065,672 |
2016 | 2015 | |||||||
Revenues: | ||||||||
Rental revenues | $ | 3,564,278 | $ | 2,925,153 | ||||
Real estate tax reimbursments and other revenues | 146,890 | 80,380 | ||||||
Total Revenues | 3,711,168 | 3,005,533 | ||||||
Other Property Operations: | ||||||||
Repairs and maintenance | 210,693 | 138,415 | ||||||
Utilities | 161,048 | 149,682 | ||||||
Real estate and other taxes | 237,959 | 270,824 | ||||||
Depreciation and amortization | 1,228,062 | 981,801 | ||||||
Other operating expense | 169,174 | 123,695 | ||||||
Management fees | 192,652 | 155,789 | ||||||
Ground lease | 71,094 | 51,600 | ||||||
Professional expenses | 54,125 | 189,181 | ||||||
Insurance | 54,149 | 51,605 | ||||||
General and administrative | 15,731 | 17,295 | ||||||
Total Operating Expenses | 2,394,687 | 2,129,887 | ||||||
Interest expense | 1,224,717 | 1,069,831 | ||||||
Net income (loss) | $ | 91,764 | $ | (194,185 | ) |
Total | ||||||||||||
Contributions | Accumulated | Partners' | ||||||||||
(Distributions) | Deficit | Capital, net | ||||||||||
Balance, January 1, 2015 | $ | 3,814,762 | $ | (442,938 | ) | $ | 3,371,824 | |||||
Contributions | 3,264,999 | - | 3,264,999 | |||||||||
Notes payable converted to equity | 100,000 | - | 100,000 | |||||||||
Net loss | - | (194,185 | ) | (194,185 | ) | |||||||
Balance, December 31, 2015 | 7,179,761 | (637,123 | ) | 6,542,638 | ||||||||
Distributions | (374,889 | ) | - | (374,889 | ) | |||||||
Net income | - | 91,764 | 91,764 | |||||||||
Balance, December 31, 2016 | $ | 6,804,872 | $ | (545,359 | ) | $ | 6,259,513 |
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net income(loss) | $ | 91,764 | $ | (194,185 | ) | |||
Adjustments to reconcile net income(loss) to net cash provided by | ||||||||
operating activities: | ||||||||
Depreciation | 946,751 | 752,674 | ||||||
Amortization of acquired lease-up costs | 136,234 | 110,606 | ||||||
Amortization of in-place leases | 145,079 | 118,521 | ||||||
Amortization of above/below-market leases | (103,429 | ) | (91,147 | ) | ||||
Amortization of debt costs | 138,095 | 95,762 | ||||||
Change in assets and liabilities | ||||||||
Rent and other tenant accounts receivables, net | (90,837 | ) | (86,971 | ) | ||||
Prepaid expense and other assets | 113,770 | 36,636 | ||||||
Deposits in escrow | (116,370 | ) | (51,726 | ) | ||||
Accounts payable and other accrued expenses | 16,297 | 117,087 | ||||||
Related party payable | 410,861 | - | ||||||
Accrued interest payable | 13,664 | 35,009 | ||||||
Net cash provided by operating activities | 1,701,879 | 842,266 | ||||||
Cash flows from investing activities: | ||||||||
Investment property acquisitions | - | (13,986,180 | ) | |||||
Improvements to investment properties | (13,745 | ) | (6,195 | ) | ||||
Returned deposit for property under contract | - | 35,500 | ||||||
Net cash used in investing activities | (13,745 | ) | (13,956,875 | ) | ||||
Cash flows from financing activities: | ||||||||
Contributions from partners | - | 3,264,999 | ||||||
Distributions to partners | (374,889 | ) | - | |||||
Notes payable proceeds | 1,000,000 | 100,000 | ||||||
Mortgage proceeds | 2,450,000 | 11,380,000 | ||||||
Mortgage principal payments | (4,198,676 | ) | (1,056,322 | ) | ||||
Note payable principal repayments | (465,036 | ) | (284,294 | ) | ||||
Debt issuance costs | (132,793 | ) | (112,020 | ) | ||||
Net cash from financing activities | (1,721,394 | ) | 13,292,363 | |||||
Net increase(decrease) in cash and cash equivalents | (33,260 | ) | 177,754 | |||||
Cash and cash equivalents, beginning of year | 292,100 | 114,346 | ||||||
Cash and cash equivalents, end of year | $ | 258,840 | $ | 292,100 | ||||
Supplemental cash flow information: | ||||||||
Interest paid during the year | $ | 1,084,704 | $ | 974,070 | ||||
Noncash financing and investing activities: | ||||||||
Note payable converted to equity | $ | - | $ | 100,000 |
1. | Organization |
2. | Significant Accounting Policies |
3. | Investment in Real Estate |
Date | Acquisition | ||||
Acquired | Costs | ||||
2015 Acquisitions | |||||
Johnson City, TN and | |||||
Port Canaveral, FL | March 2015 | $ | 10,260,504 | ||
Silt, CO | December 2015 | 3,725,676 | |||
$ | 13,986,180 |
2015 | ||||
Land | $ | 1,388,420 | ||
Buildings and improvements | 11,032,485 | |||
Tenant Improvements | 883,403 | |||
Acquired In-place leases | 497,411 | |||
Acquired lease-up costs | 448,764 | |||
Above(below)-market leases | (264,303 | ) | ||
$ | 13,986,180 |
Above (Below) | Intangible | |||||||
Market | Lease | |||||||
Leases | Costs | |||||||
Year ending December 31: | ||||||||
2017 | $ | (103,483 | ) | $ | 280,827 | |||
2018 | (103,483 | ) | 280,827 | |||||
2019 | (103,483 | ) | 280,827 | |||||
2020 | (103,483 | ) | 280,827 | |||||
2021 | (90,894 | ) | 255,890 | |||||
Thereafter | (234,727 | ) | 380,325 | |||||
$ | (739,553 | ) | $ | 1,759,523 |
2016 | 2015 | |||||||
Land, building and improvements | $ | 29,549,302 | $ | 29,535,557 | ||||
Tenant improvements | 2,278,862 | 2,278,862 | ||||||
31,828,164 | 31,814,419 | |||||||
Accumulated depreciation | (2,720,278 | ) | (1,773,527 | ) | ||||
Investments in real estate, net | $ | 29,107,886 | $ | 30,040,892 |
2016 | 2015 | |||||||
Acquired in-place leases | $ | 1,320,305 | $ | 1,320,305 | ||||
Acquired lease-up costs | 1,285,251 | 1,285,251 | ||||||
Acquired above-(below) market lease | (1,057,409 | ) | (1,057,409 | ) | ||||
1,548,147 | 1,548,147 | |||||||
Accumulated amortization | (528,177 | ) | (350,294 | ) | ||||
Leasehold intangibles, net | $ | 1,019,970 | $ | 1,197,853 |
4. Debt
2016 | Outstanding Principal | ||||||||||||||||
Initial | Interest | Balance at December 31, | |||||||||||||||
Entered | Balance | Rate | Maturity | 2016 | 2015 | ||||||||||||
July 2013 | $ | 10,700,000 | 5.27% | August 2023 | $ | 10,159,209 | $ | 10,330,742 | |||||||||
December 2014 | 3,700,000 | 3.93% | April 2016 | - | 3,700,000 | ||||||||||||
June 2016 | 2,450,000 | 3.93% | June 2019 | 2,425,773 | - | ||||||||||||
April 2015 | 7,600,000 | 2.89% | March 2018 | 7,115,152 | 7,407,801 | ||||||||||||
December 2015 | 3,080,000 | 4.07% | June 2017 | 3,069,733 | 3,080,000 | ||||||||||||
22,769,867 | 24,518,543 | ||||||||||||||||
Debt issuance costs | (540,812 | ) | (476,669 | ) | |||||||||||||
Accumulated amortization | 226,887 | 141,351 | |||||||||||||||
Debt issuance costs, net of accumulated amortization | (313,925 | ) | (335,318 | ) | |||||||||||||
Mortgage payable net of unamortized debt costs | $ | 22,455,942 | $ | 24,183,225 |
2016 | Outstanding Principal | ||||||||||||||||
Initial | Interest | Balance at December 31, | |||||||||||||||
Entered | Balance | Rate | Maturity | 2016 | 2015 | ||||||||||||
June 2016 | $ | 338,091 | 5.50% | June 2019 | $ | 338,091 | $ | - | |||||||||
June 2016 | 661,909 | 5.50% | June 2018 | 502,602 | - | ||||||||||||
July 2013 | 1,500,000 | 7.25% | August 2018 | 563,299 | 869,027 | ||||||||||||
1,403,992 | 869,027 | ||||||||||||||||
Debt issuance costs | (19,750 | ) | - | ||||||||||||||
Accumulated amortization | 3,659 | - | |||||||||||||||
Debt issuance costs, net of accumulated amortization | (16,091 | ) | - | ||||||||||||||
Notes payable net of unamortized debt costs | $ | 1,387,901 | $ | 869,027 |
Mortgages | Notes | |||||||
Payable | Payable | |||||||
2017 | $ | 10,436,553 | $ | 661,046 | ||||
2018 | 253,556 | 571,455 | ||||||
2019 | 2,521,959 | 171,491 | ||||||
2020 | 221,045 | - | ||||||
2021 | 234,398 | - | ||||||
Thereafter | 9,102,356 | - | ||||||
$ | 22,769,867 | $ | 1,403,992 |
5. Related Parties
6. | Leases and Tenants |
Future | ||||
Minimum | ||||
Rents | ||||
2017 | $ 3,465,838 | |||
2018 | 3,465,838 | |||
2019 | 3,465,838 | |||
2020 | 3,465,838 | |||
2021 | 3,381,837 | |||
Thereafter | 5,258,727 | |||
Total | $ 22,503,916 |
7. | Distributions |
8. | Commitments and Contingencies |
9. | Subsequent Events |
Exhibit Number | Description | |
2.1 | Articles of Incorporation of HC Government Realty Trust, Inc., incorporated by reference to Exhibit 2.1 to the Company’s Offering Statement on Form 1-A filed on June 15, 2016 | |
2.2 | Articles Supplementary of HC Government Realty Trust, Inc., incorporated by reference to Exhibit 2.2 to the Company’s Offering Statement on Form 1-A filed on June 15, 2016 | |
2.3 | Bylaws of HC Government Realty Trust, Inc., incorporated by reference to Exhibit 2.3 to the Company’s Offering Statement on Form 1-A filed on June 15, 2016 | |
4.1 | Form of Subscription Agreement, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 1-U filed on April 25, 2017 | |
6.1 | Agreement of Limited Partnership of HC Government Realty Holdings, L.P., incorporated by reference to Exhibit 6.1 to the Company’s Offering Statement on Form 1-A filed on June 15, 2016 | |
6.2 | First Amendment to the Agreement of Limited Partnership of HC Government Realty Holdings, L.P., incorporated by reference to Exhibit 6.2 to the Company’s Offering Statement on Form 1-A filed on June 15, 2016 | |
6.3 | Limited Liability Company Agreement of Holmwood Portfolio Holdings, LLC, incorporated by reference to Exhibit 6.3 to the Company’s Offering Statement on Form 1-A filed on June 15, 2016 | |
6.4 | Contribution Agreement by and between Holmwood Capital, LLC and HC Government Realty Holdings, L.P., incorporated by reference to Exhibit 6.4 to the Company’s Pre-Qualification Amendment No. 2 to its Offering Statement on Form 1-A filed on September 16, 2016 | |
6.5 | Form of Tax Protection Agreement by and between Holmwood Capital, LLC and HC Government Realty Holdings, L.P., incorporated by reference to Exhibit 6.5 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.6 | Form of Registration Rights Agreement by and between Holmwood Capital, LLC and HC Government Realty Trust, Inc., incorporated by reference to Exhibit 6.6 to the Company’s Pre-Qualification Amendment No. 4 to its Offering Statement on Form 1-A filed on October 24, 2016 | |
6.7 | Form of Registration Rights Agreement by and between Holmwood Capital Advisors, LLC and HC Government Realty Trust, Inc., incorporated by reference to Exhibit 6.7 to the Company’s Pre-Qualification Amendment No. 4 to its Offering Statement on Form 1-A filed on October 24, 2016 | |
6.8 | Management Agreement by and among Holmwood Capital Advisors, LLC, HC Government Realty Trust, Inc. and HC Government Realty Holdings, L.P., incorporated by reference to Exhibit 6.8 to the Company’s Offering Statement on Form 1-A filed on June 15, 2016 | |
6.9 | Form of Independent Director Agreement, incorporated by reference to Exhibit 6.9 to the Company’s Offering Statement on Form 1-A filed on June 15, 2016 | |
6.10 | Form of Independent Director Indemnification Agreement, incorporated by reference to Exhibit 6.10 to the Company’s Offering Statement on Form 1-A filed on June 15, 2016 | |
6.11 | Form of Officer/Director Indemnification Agreement, incorporated by reference to Exhibit 6.11 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.12 | 2016 HC Government Realty Trust, Inc. Equity Incentive Plan, incorporated by reference to Exhibit 6.12 to the Company’s Pre-Qualification Amendment No. 4 to its Offering Statement on Form 1-A filed on October 24, 2016 | |
6.13 | Promissory Note by GOV Lawton SSA, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.13 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.14 | Mortgage, Security Agreement and Fixture Filing (With Power of Sale) by GOV Lawton SSA, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.14 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 |
6.15 | Junior Mortgage, Security Agreement and Fixture Filing (With Power of Sale) by GOV Lawton SSA, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.15 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.16 | Promissory Note by GOV Ft. Smith, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.16 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.17 | Mortgage, Security Agreement and Fixture Filing (With Power of Sale) by GOV Ft. Smith, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.17 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.18 | Junior Mortgage, Security Agreement and Fixture Filing (With Power of Sale) by GOV Ft. Smith, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.18 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.19 | Promissory Note by GOV Moore SSA, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.19 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.20 | Mortgage, Security Agreement and Fixture Filing (With Power of Sale) by GOV Moore SSA, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.20 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.21 | Junior Mortgage, Security Agreement and Fixture Filing (With Power of Sale) by GOV Moore SSA, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.21 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.22 | Promissory Note by GOV Lakewood DOT, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.22 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.23 | Deed of Trust, Security Agreement, and Fixture Filing by GOV Lakewood DOT, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.23 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.24 | Guaranty of Affiliate Loans by GOV Lakewood DOT, LLC to and for the benefit of CorAmerica Loan Company, LLC, dated as of June 10, 2016, incorporated by reference to Exhibit 6.24 to the Company’s Pre-Qualification Amendment No. 1 to its Offering Statement on Form 1-A filed on July 29, 2016 | |
6.25 | First Amendment to Contribution Agreement by and between Holmwood Capital, LLC and HC Government Realty Holdings, L.P., dated as of June 10, 2016, incorporated by reference to Exhibit 6.25 to the Company’s Pre-Qualification Amendment No. 2 to its Offering Statement on Form 1-A filed on September 16, 2016 | |
6.26 | Purchase and Sale Agreement by and between USAA Real Estate Company and HC Government Realty Holdings, L.P., dated as of December 28, 2016, incorporated by reference to Exhibit 6.1 to the Company’s Current Report on Form 1-U filed on March 7, 2017 | |
6.27 | First Amendment to Purchase and Sale Agreement by and between USAA Real Estate Company and HC Government Realty Holdings, L.P., dated as of January 19, 2017, incorporated by reference to Exhibit 6.2 to the Company’s Current Report on Form 1-U filed on March 7, 2017 | |
6.28 | Second Amendment to Purchase and Sale Agreement by and between USAA Real Estate Company and HC Government Realty Holdings, L.P., dated as of January 27, 2017, incorporated by reference to Exhibit 6.3 to the Company’s Current Report on Form 1-U filed on March 7, 2017 | |
6.29 | Third Amendment to Purchase and Sale Agreement by and between USAA Real Estate Company and HC Government Realty Holdings, L.P., dated as of February 8, 2017, incorporated by reference to Exhibit 6.4 to the Company’s Current Report on Form 1-U filed on March 7, 2017 | |
8.1 | Form of Escrow Agreement by and among Branch Banking & Trust Company, HC Government Realty Trust, Inc., and Orchard Securities, LLC, incorporated by reference to Exhibit 8.1 to the Company’s Pre-Qualification Amendment No. 4 to its Offering Statement on Form 1-A filed on October 24, 2016 | |
8.2 | Assignment of Escrow Agreement by and among HC Government Realty Trust, Inc., Branch Banking & Trust Company, Orchard Securities, LLC and SANDLAPPER Securities, LLC, dated as of April 10, 2017, incorporated by reference to Exhibit 8.1 to the Company’s Current Report on Form 1-U filed on April 25, 2017 | |
SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HC GOVERNMENT REALTY TRUST, INC. | |
By: | /s/ Edwin M. Stanton |
Edwin M. Stanton | |
Director and Chief Executive Officer |
Pursuant to the requirements of Regulation A, this report has been signed by the following persons in the capacities and on the dates indicated.
Name | Title | Date | ||
/s/ Edwin M. Stanton | Director and Chief Executive Officer | April 27, 2017 | ||
Edwin M. Stanton | (principal executive officer) | |||
/s/ Elizabeth L. Watson | Chief Financial Officer | April 27, 2017 | ||
Elizabeth L. Watson | (principal financial officer and principal accounting officer) |
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