Toggle SGML Header (+)


Section 1: 10-K/A (10-K/A)

sret_Current Folio_10K_A

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

(Amendment #1) 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2016

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File Number 000-54295

 

Sterling Real Estate Trust

d/b/a Sterling Multifamily Trust

(Exact name of registrant as specified in its charter)

 

North Dakota

 

90-0115411

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

 

1711 Gold Drive South, Suite 100

Fargo, North Dakota

 

58103

(Address of principal executive offices)

 

(Zip Code)

(701) 353-2720

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Shares of Beneficial Interest

(Title of Class)

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ◻ Yes ☑ No

 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ◻ Yes ☑ No

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ◻ No

 

Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). ☑ Yes ◻ No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☑ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ◻ Yes ☑ No

 

The aggregate market value of the common shares of beneficial interest held by non-affiliates as of June 30, 2016 was approximately $108,329,193, computed by reference to the price at which the common shares was last sold as of such date. The common shares of beneficial interest are not listed on any national exchange or over-the-counter market or quoted on any national securities market.

 

Indicate the number of shares outstanding of each of the issuer’s classes of common shares, as of the latest practicable date.

 

Class

    

Outstanding at March 9, 2017

Common Shares of Beneficial Interest, $0.01 par value per share

 

8,115,588

 

Documents Incorporated by Reference: Portions of Sterling’s Proxy Statement for its 2017 Annual Meeting of Shareholders, which Sterling intends to file with the Securities and Exchange Commission within 120 days after the end of Sterling’s fiscal year ended December 31, 2016, are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on Form 10-K to the extent described herein. If Sterling does not file its Proxy Statement on or before 120 days after the end of its 2016 fiscal year, Sterling will file the required information in an amendment to this Annual Report on Form 10-K.

 

 

 


 

Table of Contents

EXPLANATORY NOTE

 

This Amendment No. 1 on Form 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K of Sterling Real Estate Trust (the “Company”) for the year ended December 31, 2016, originally filed on March 15, 2017 (the “Original Filing”).  The Company is filing the Amendment solely to amend and restate in its entirety the Report of the Independent Registered Public Accounting Firm included in Item 8 of the Original Filing to correct the omission of the auditor’s electronic signature. Except as described above, no other changes have been made to Item 8 of Part II or are being made to the Annual Report.  This Form 10-K/A does not reflect events occurring after the March 15, 2017 filing of the Annual Report nor does it modify or update the disclosure contained in the Annual Report in any way other than described in this Explanatory Note.  The Amendment also includes, as did the Annual Report, the certifications of the registrant’s executive officers pursuant to Item 15 of the Annual Report.  The Amendment presents Item 8 of Part II, as amended in its entirety.

 

Sterling Real Estate Trust

FORM 10-K/A (Amendment No. 1)

 

INDEX

 

 

PAGE

PART II

 

Item 8. Financial Statements and Supplementary Data 

PART IV 

 

Item 15. Exhibits and Financial Statement Schedules 

Report of Independent Registered Public Accounting Firm and Financial Statements 

Signatures 

47 

Consent of Independent Registered Public Accounting Firm 

 

Section 302 Certification of Chief Executive Officer

 

Section 302 Certification of Chief Accounting Officer

 

Section 906 Certification of Chief Executive Officer and Chief Accounting Officer

 

 

 

 

 


 

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Our consolidated financial statements included in this Annual Report are listed in Item 15 and begin immediately after the signature pages.

 

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) The financial statements listed below are included in this report

 

Report of Independent Registered Public Accounting Firm

 

Consolidated Financial Statements

 

Consolidated Balance Sheets at December 31, 2016 and 2015

 

Consolidated Statements of Operations and Other Comprehensive Income for the Years Ended December 31, 2016, 2015 and 2014

 

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2016, 2015 and 2014

 

Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014

 

Notes to Consolidated Financial Statements

 

Real Estate and Accumulated Depreciation (Schedule III)

 

(a)(3) Exhibits

 

See the Exhibit Index filed as part of this Annual Report on Form 10-K.

 

 

 

1


 

Table of Contents

 

 

 

 

 

 

 

Sterling Trust Logo

 

 

 

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2016 AND 2015,

AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS,

EQUITY AND CASH FLOWS FOR THE YEARS ENDED

DECEMBER 31, 2016, 2015 AND 2014,

 INCLUDING NOTES

and

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

 

 

 


 

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

 

 

PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

 

Consolidated Balance Sheets 

Consolidated Statements of Operations and Other Comprehensive Income 

Consolidated Statements of Shareholders’ Equity 

Consolidated Statements of Cash Flows 

Notes to Consolidated Financial Statements 

10 

Real Estate and Accumulated Depreciation (Schedule III) 

39 

 

 

 

 

 

 


 

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders, Audit Committee and Board of Directors

Sterling Real Estate Trust

Fargo, ND

 

We have audited the accompanying consolidated balance sheets of Sterling Real Estate Trust as of December 31, 2016 and 2015, and the related consolidated statements of operations and other comprehensive income,  shareholders' equity and cash flows for each of the years in the three‑year period ended December 31, 2016.  Our audits also included the financial statement schedule listed in the accompanying index to the consolidated financial statements. These consolidated financial statements and financial statement schedules are the responsibility of the company's management.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall consolidated financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sterling Real Estate Trust as of December 31, 2016 and 2015 and the results of its operations and cash flows for each of the years in the three‑year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

 

/s/ Baker Tilly Virchow Krause, LLP

 

 

 

Chicago, Illinois

March 15, 2017

 

 

 

 

4


 

Table of Contents

PART I – FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

as of December 31, 2016 and 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

    

2016

    

2015

 

 

(in thousands)

ASSETS

 

 

 

 

 

 

Real estate investments

 

$

622,975

 

$

594,509

Cash and cash equivalents

 

 

12,034

 

 

6,461

Restricted deposits and funded reserves

 

 

7,213

 

 

6,115

Investment in unconsolidated affiliates

 

 

3,653

 

 

9,022

Due from related party

 

 

34

 

 

60

Receivables

 

 

4,258

 

 

3,428

Prepaid expenses

 

 

433

 

 

844

Notes receivable

 

 

600

 

 

651

Financing and lease costs, less accumulated amortization of $1,720 in 2016 and $1,356 in 2015

 

 

950

 

 

1,240

Assets held for sale

 

 

2,482

 

 

1,721

Lease intangible assets, less accumulated amortization of $10,770 in 2016 and $7,655 in 2015

 

 

15,852

 

 

18,184

Other assets

 

 

29

 

 

140

 

 

 

 

 

 

 

Total Assets

 

$

670,513

 

$

642,375

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Mortgage notes payable, net

 

$

390,479

 

$

379,911

Special assessments payable

 

 

480

 

 

1,659

Dividends payable

 

 

5,925

 

 

5,319

Due to related party

 

 

957

 

 

440

Tenant security deposits payable

 

 

3,851

 

 

3,763

Subordinated debt

 

 

175

 

 

200

Lease intangible liabilities, less accumulated amortization of $1,122 in 2016 and $803 in 2015

 

 

2,075

 

 

2,253

Accounts payable - trade

 

 

438

 

 

819

Retainage payable

 

 

288

 

 

6

Liabilities related to assets held for sale

 

 

125

 

 

659

Fair value of interest rate swaps

 

 

145

 

 

219

Deferred insurance proceeds

 

 

102

 

 

69

Accrued expenses and other liabilities

 

 

6,818

 

 

6,631

Total Liabilities

 

 

411,858

 

 

401,948

 

 

 

 

 

 

 

COMMITMENTS and CONTINGENCIES - Note 18

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Noncontrolling interest

 

 

 

 

 

 

Operating partnership

 

 

170,138

 

 

154,810

Partially owned properties

 

 

3,935

 

 

4,537

Beneficial interest

 

 

84,727

 

 

81,299

Accumulated other comprehensive loss

 

 

(145)

 

 

(219)

Total Shareholders' Equity

 

 

258,655

 

 

240,427

 

 

 

 

 

 

 

 

 

$

670,513

 

$

642,375

 

See Notes to Consolidated Financial Statements

5


 

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 and 2014 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

December 31,

 

2016

    

2015

    

2014

 

(in thousands, except per share data)

Income from rental operations

 

 

 

 

Real estate rental income

$

101,885

 

$

93,330

 

$

68,706

Tenant reimbursements

 

6,178

 

 

3,852

 

 

2,230

 

 

108,063

 

 

97,182

 

 

70,936

Expenses

 

 

 

 

 

 

 

 

Expenses from rental operations

 

 

 

 

 

 

 

 

Interest

 

18,366

 

 

17,141

 

 

12,958

Depreciation and amortization

 

22,145

 

 

19,574

 

 

13,575

Real estate taxes

 

9,524

 

 

7,852

 

 

5,320

Property management fees

 

10,852

 

 

9,617

 

 

6,511

Utilities

 

7,672

 

 

7,220

 

 

5,614

Repairs and maintenance

 

21,267

 

 

17,726

 

 

11,721

Insurance

 

1,375

 

 

2,292

 

 

1,647

Loss on lease terminations

 

299

 

 

 —

 

 

58

Loss on impairment of property

 

 —

 

 

412

 

 

 —

 

 

91,500

 

 

81,834

 

 

57,404

Administration of REIT

 

 

 

 

 

 

 

 

Administrative expenses

 

360

 

 

338

 

 

281

Advisory fees

 

2,644

 

 

2,401

 

 

1,855

Acquisition and disposition expenses

 

2,081

 

 

2,323

 

 

4,201

Trustee fees

 

59

 

 

51

 

 

56

Legal and accounting

 

456

 

 

534

 

 

431

 

 

5,600

 

 

5,647

 

 

6,824

Total expenses

 

97,100

 

 

87,481

 

 

64,228

Income from operations

 

10,963

 

 

9,701

 

 

6,708

Other income (expense)

 

 

 

 

 

 

 

 

Equity in income of unconsolidated affiliates

 

1,019

 

 

957

 

 

1,086

Other income

 

78

 

 

59

 

 

376

Gain (Loss) on sale of real estate investments

 

(316)

 

 

470

 

 

69

Gain on change in control of real estate investments

 

550

 

 

 —

 

 

 —

Gain on sale of investment in equity method investee

 

597

 

 

 —

 

 

 —

Gain (Loss) on involuntary conversion

 

(34)

 

 

197

 

 

398

Gain on disposal of marketable securities

 

 —

 

 

 —

 

 

666

 

 

1,894

 

 

1,683

 

 

2,595

Net income

$

12,857

 

$

11,384

 

$

9,303

Net income (loss) attributable to noncontrolling interest:

 

 

 

 

 

 

 

 

Operating Partnership

 

9,034

 

 

7,684

 

 

6,715

Partially owned properties

 

(602)

 

 

(586)

 

 

9

Net income attributable to Sterling Real Estate Trust

$

4,425

 

$

4,286

 

$

2,579

 

 

 

 

 

 

 

 

 

Net income per common share, basic and diluted

$

0.56

 

$

0.59

 

$

0.47

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

Net income

$

12,857

 

$

11,384

 

$

9,303

Other comprehensive gain - change in fair value of interest rate swaps

 

74

 

 

53

 

 

37

Comprehensive income

 

12,931

 

 

11,437

 

 

9,340

Comprehensive income attributable to noncontrolling interest

 

8,482

 

 

7,134

 

 

6,750

Comprehensive income attributable to Sterling Real Estate Trust

$

4,449

 

$

4,303

 

$

2,590

 

See Notes to Consolidated Financial Statements

 

6


 

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY 

FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Noncontrolling

 

 

 

 

 

 

 

 

 

 

 

 

Distributions

 

Total

 

Interest

 

Accumulated

 

 

 

 

 

Common

 

Paid-in

 

in Excess of

 

Beneficial

 

Operating

 

Partially Owned

 

Comprehensive

 

 

 

 

  

Shares

  

Capital

  

Earnings

  

Interest

  

Partnership

  

Properties

  

Income (Loss)

  

Total

 

 

(in thousands)

BALANCE AT DECEMBER 31, 2013

 

5,454

 

$

68,051

 

$

(12,075)

 

$

55,976

 

$

141,539

 

$

 —

 

$

(309)

 

$

197,206

Shares issued under trustee compensation plan

 

2

 

 

23

 

 

 

 

 

23

 

 

 

 

 

 

 

 

 

 

 

23

Contribution of assets in exchange for the issuance of noncontrolling interest shares

 

 

 

 

 

 

 

 

 

 

 

 

 

17,461

 

 

 —

 

 

 

 

 

17,461

Shares/units redeemed

 

(238)

 

 

(3,338)

 

 

 

 

 

(3,338)

 

 

(1,566)

 

 

 —

 

 

 

 

 

(4,904)

Dividends declared

 

 

 

 

 

 

 

(4,948)

 

 

(4,948)

 

 

(12,954)

 

 

 —

 

 

 

 

 

(17,902)

Dividends reinvested - stock dividend

 

231

 

 

3,238

 

 

 

 

 

3,238

 

 

 

 

 

 

 

 

 

 

 

3,238

Issuance of shares under optional purchase plan

 

128

 

 

1,892

 

 

 

 

 

1,892

 

 

 

 

 

 

 

 

 

 

 

1,892

UPREIT units converted to REIT common shares

 

47

 

 

700

 

 

 

 

 

700

 

 

(700)

 

 

 —

 

 

 

 

 

 —

Purchase of subsidary ownership from noncontrolling interest

 

 

 

 

(810)

 

 

 

 

 

(810)

 

 

101

 

 

 

 

 

 

 

 

(709)

Change in fair value of interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 

 

37

Distributions paid to consolidated real estate entity noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

(11)

 

 

 —

 

 

 

 

 

(11)

Net income

 

 

 

 

 

 

 

2,579

 

 

2,579

 

 

6,724

 

 

 —

 

 

 

 

 

9,303

BALANCE AT DECEMBER 31, 2014

 

5,624

 

$

69,756

 

$

(14,444)

 

$

55,312

 

$

150,594

 

$

 —

 

$

(272)

 

$

205,634

Issuance of common shares

 

1,677

 

 

25,750

 

 

 

 

 

25,750

 

 

 

 

 

 

 

 

 

 

 

25,750

Shares issued under trustee compensation plan

 

4

 

 

56

 

 

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

56

Contribution of assets in exchange for the issuance of noncontrolling interest shares

 

 

 

 

 

 

 

 

 

 

 

 

 

11,228

 

 

 —

 

 

 

 

 

11,228

Shares/units redeemed

 

(132)

 

 

(1,915)

 

 

 

 

 

(1,915)

 

 

(633)

 

 

 —

 

 

 

 

 

(2,548)

Dividends declared

 

 

 

 

 

 

 

(6,885)

 

 

(6,885)

 

 

(13,976)

 

 

 —

 

 

 

 

 

(20,861)

Dividends reinvested - stock dividend

 

284

 

 

4,160

 

 

 

 

 

4,160

 

 

 

 

 

 

 

 

 

 

 

4,160

Issuance of shares under optional purchase plan

 

116

 

 

1,783

 

 

 

 

 

1,783

 

 

 

 

 

 

 

 

 

 

 

1,783

UPREIT units converted to REIT common shares

 

6

 

 

87

 

 

 

 

 

87

 

 

(87)

 

 

 —

 

 

 

 

 

 —

Syndication costs

 

 

 

 

 

 

 

(1,335)

 

 

(1,335)

 

 

 —

 

 

 —

 

 

 

 

 

(1,335)

Change in fair value of interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53

 

 

53

Contributions from consolidated real estate entity noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,123

 

 

 —

 

 

5,123

Net income

 

 

 

 

 

 

 

4,286

 

 

4,286

 

 

7,684

 

 

(586)

 

 

 

 

 

11,384

BALANCE AT DECEMBER 31, 2015

 

7,579

 

$

99,677

 

$

(18,378)

 

$

81,299

 

$

154,810

 

$

4,537

 

$

(219)

 

$

240,427

Shares issued pursuant to trustee compensation plan

 

4

 

 

60

 

 

 

 

 

60

 

 

 

 

 

 

 

 

 

 

 

60

Contribution of assets in exchange for the issuance of noncontrolling interest shares

 

 

 

 

 

 

 

 

 

 

 

 

 

23,468

 

 

 —

 

 

 

 

 

23,468

Shares/units redeemed

 

(80)

 

 

(1,194)

 

 

 

 

 

(1,194)

 

 

(868)

 

 

 —

 

 

 

 

 

(2,062)

Dividends declared

 

 

 

 

 

 

 

(7,527)

 

 

(7,527)

 

 

(15,552)

 

 

 —

 

 

 

 

 

(23,079)

Dividends reinvested - stock dividend

 

315

 

 

4,760

 

 

 

 

 

4,760

 

 

 

 

 

 

 

 

 

 

 

4,760

Issuance of shares under optional purchase plan

 

136

 

 

2,150

 

 

 

 

 

2,150

 

 

 

 

 

 

 

 

 

 

 

2,150

UPREIT units converted to REIT common shares

 

47

 

 

754

 

 

 

 

 

754

 

 

(754)

 

 

 —

 

 

 

 

 

 —

Change in fair value of interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

74

 

 

74

Net income

 

 

 

 

 

 

 

4,425

 

 

4,425

 

 

9,034

 

 

(602)

 

 

 

 

 

12,857

BALANCE AT DECEMBER 31, 2016

 

8,001

 

$

106,207

 

$

(21,480)

 

$

84,727

 

$

170,138

 

$

3,935

 

$

(145)

 

$

258,655

 

See Notes to Consolidated Financial Statements

 

 

7


 

Table of Contents

 

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 and 2014    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

December 31,

 

    

2016

    

2015

    

2014

 

 

(in thousands)

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net income

 

$

12,857

 

$

11,384

 

$

9,303

Adjustments to reconcile net income to net cash from operating activities

 

 

 

 

 

 

 

 

 

(Gain) loss on sale of real estate and non-real estate investments

 

 

320

 

 

(470)

 

 

(69)

(Gain) on change in control of real estate investment

 

 

(550)

 

 

 —

 

 

 —

(Gain) on sale of joint venture interest

 

 

(597)

 

 

 —

 

 

 —

Loss on extinguishment of debt

 

 

 —

 

 

 —

 

 

18

Net gain on investment in marketable securities

 

 

 —

 

 

 —

 

 

(666)

(Gain) loss on involuntary conversion

 

 

34

 

 

(197)

 

 

(398)

Loss on impairment of property

 

 

 —

 

 

412

 

 

 —

Loss on lease terminations

 

 

299

 

 

 —

 

 

58

Equity in income of unconsolidated affiliates

 

 

(1,019)

 

 

(957)

 

 

(1,086)

Distributions of earnings of unconsolidated affiliates

 

 

1,014

 

 

900

 

 

1,086

Depreciation

 

 

18,507

 

 

16,466

 

 

12,116

Amortization

 

 

3,539

 

 

3,076

 

 

1,434

Amortization of debt issuance costs

 

 

694

 

 

666

 

 

463

Effects on operating cash flows due to changes in

 

 

 

 

 

 

 

 

 

Restricted deposits - tenant security deposits

 

 

(120)

 

 

(1,169)

 

 

(304)

Restricted deposits - real estate tax and insurance escrows

 

 

(159)

 

 

330

 

 

523

Due from related party

 

 

26

 

 

49

 

 

(45)

Receivables

 

 

(474)

 

 

(475)

 

 

199

Prepaid expenses

 

 

411

 

 

737

 

 

(372)

Marketable securities

 

 

 —

 

 

 —

 

 

666

Other assets

 

 

111

 

 

(64)

 

 

23

Due to related party

 

 

179

 

 

(2,037)

 

 

2,229

Tenant security deposits payable

 

 

103

 

 

159

 

 

244

Accounts payable - trade

 

 

(432)

 

 

(815)

 

 

439

Accrued expenses and other liabilities

 

 

(24)

 

 

320

 

 

2,066

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

 

34,719

 

 

28,315

 

 

27,927

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Purchase of real estate investment properties

 

 

(9,745)

 

 

(23,480)

 

 

(43,932)

Capital expenditures and tenant improvements

 

 

(10,848)

 

 

(5,759)

 

 

(10,536)

Proceeds from sale of real estate investments

 

 

1,409

 

 

1,424

 

 

625

Proceeds from involuntary conversion

 

 

973

 

 

529

 

 

906

Proceeds from sale of joint venture interest

 

 

2,600

 

 

 —

 

 

 —

Investment in unconsolidated affiliates

 

 

(67)

 

 

(37)

 

 

(674)

Distributions in excess of earnings received from unconsolidated affiliates

 

 

542

 

 

152

 

 

274

Restricted deposits - replacement reserve escrows

 

 

(841)

 

 

1,456

 

 

(1,367)

Notes receivable issued

 

 

 —

 

 

(51)

 

 

(600)

Notes receivable payments received

 

 

9

 

 

 —

 

 

 —

NET CASH USED IN INVESTING ACTIVITIES

 

 

(15,968)

 

 

(25,766)

 

 

(55,304)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Payments for financing, debt issuance and lease costs

 

 

(446)

 

 

(1,938)

 

 

(1,668)

Payments on investment certificates and subordinated debt

 

 

(50)

 

 

(319)

 

 

(64)

Reinvested proceeds from investment certificates

 

 

 —

 

 

 —

 

 

17

Principal payments on special assessments payable

 

 

(1,984)

 

 

(117)

 

 

(35)

Proceeds from issuance of mortgage notes payable and subordinated debt

 

 

20,271

 

 

36,385

 

 

24,540

Principal payments on mortgage notes payable

 

 

(13,345)

 

 

(27,160)

 

 

(7,898)

Advances on lines of credit

 

 

6,669

 

 

16,305

 

 

29,630

Payments on lines of credit

 

 

(6,669)

 

 

(32,725)

 

 

(13,210)

Proceeds from contributions received from noncontrolling interest - partially owned properties

 

 

 —

 

 

5,123

 

 

 —

Proceeds from issuance of common shares

 

 

 —

 

 

25,750

 

 

 —

Proceeds from issuance of shares under optional purchase plan

 

 

2,150

 

 

1,783

 

 

1,892

Shares/units redeemed

 

 

(2,062)

 

 

(2,548)

 

 

(4,904)

Dividends/distributions paid

 

 

(17,712)

 

 

(15,935)

 

 

(14,129)

Payment of syndication costs

 

 

 —

 

 

(1,335)

 

 

 —

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

 

(13,178)

 

 

3,269

 

 

14,171

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

5,573

 

 

5,818

 

 

(13,206)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

 

6,461

 

 

643

 

 

13,849

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

12,034

 

$

6,461

 

$

643

 

See Notes to Consolidated Financial Statements

 

 

8


 

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 and 2014 (Continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

December 31,

 

    

2016

    

2015

    

2014

 

 

(in thousands)

SCHEDULE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

Cash paid during the period for interest, net of capitalized interest

 

$

18,319

 

$

16,249

 

$

12,395

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Dividends reinvested

 

$

4,760

 

$

4,160

 

$

3,238

Dividends declared and not paid

 

 

1,920

 

 

1,762

 

 

1,264

UPREIT distributions declared and not paid

 

 

4,005

 

 

3,557

 

 

3,290

UPREIT units converted to REIT common shares

 

 

754

 

 

87

 

 

700

Stock issued pursuant to trustee compensation plan

 

 

60

 

 

56

 

 

23

Acquisition of assets in exchange for the issuance of noncontrolling interest units in UPREIT

 

 

23,468

 

 

11,228

 

 

16,771

Contributed assets in real estate venture

 

 

 —

 

 

 —

 

 

1,316

Purchase of subsidiary ownership from noncontrolling interest in exchange for the issuance of noncontrolling interest units in UPREIT

 

 

 —

 

 

 —

 

 

810

Increase in land improvements due to increase in special assessments payable

 

 

908

 

 

850

 

 

172

Unrealized gain on interest rate swaps

 

 

74

 

 

53

 

 

37

Acquisition of assets with new financing

 

 

2,662

 

 

45,830

 

 

67,813

Acquisition of assets through assumption of debt and liabilities

 

 

78

 

 

2,051

 

 

2,636

Capitalized interest and real estate taxes related to construction in progress