RE - GOV Prospectus for secondary offer 8.5 Million shares
Here is the prospectus for the offer:
xml.10kwizard.com
From the filing:"... Recent Developments
Investment Activity
Since the completion of our IPO on June 8, 2009, we have acquired four properties and have entered into binding purchase and sale agreements to acquire two additional properties. These properties are majority leased to government tenants and have an aggregate purchase price of approximately $161.7 million, including the assumption of $35.3 million of mortgage debt associated with the properties that we expect to acquire during the first quarter of 2010. These six properties include 1,086,240 rentable square feet and are 99.7% occupied with a weighted average remaining lease term (based on rentable square feet) of approximately 7.2 years.
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In August 2009, we acquired an industrial property in Nashua, New Hampshire with 321,800 rentable square feet, which is 100% leased to the United States Postal Service, or USPS, for $18.2 million.
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In December 2009, we acquired an office property in Sacramento, California with 163,425 rentable square feet, which is approximately 62% leased to the State of California and occupied by the California Department of Finance, for $40.0 million.
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In December 2009, we acquired a second office property in Sacramento, California with 110,500 rentable square feet, which is 100% leased to the State of California and occupied by the California National Guard, for $15.1 million.
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In December 2009, we acquired an office property in Arlington Heights, Illinois with 57,770 rentable square feet, which is 100% leased to the U.S. Government and occupied by the Occupational Health and Safety Administration, or OSHA, for $16.0 million.
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In November 2009, we entered into a binding purchase and sale agreement to acquire an office and warehouse building in Landover, Maryland with 266,000 rentable square feet, which is 100% leased to the U.S. Government and occupied by the Defense Intelligence Agency, with a purchase price of $43.7 million. This property is encumbered by a mortgage for $24.8 million that is currently not prepayable. We have completed our acquisition diligence for this property and expect to assume this mortgage and acquire this property during the first quarter of 2010; however, no assurance can be given that this acquisition will be consummated in that time period or at all.
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In December 2009, we entered into a binding purchase and sale agreement to acquire an office property in Lakewood, Colorado with 166,745 rentable square feet, which is 100% leased to the U.S. Government and occupied by the National Park Service, with a purchase price of $28.7 million. This property is encumbered by a mortgage for $10.5 million that is currently not prepayable. We have completed our acquisition diligence for this property and expect to assume this mortgage and acquire this property during the first quarter of 2010; however, no assurance can be given that this acquisition will be consummated in that time period or at all.
Beginning in the first quarter of 2009, we are required to expense all of the costs associated with acquiring properties. Prior to the first quarter 2009, these expenses were capitalized into the cost of acquired properties. As a result of our acquisition activity, we expect to incur approximately $818,000 in expenses in the fourth quarter of 2009. Given the timing of recent and pending acquisitions, we will record minimal revenues in the fourth quarter of 2009 for recent acquisitions we acquired in December 2009, and we will not record any revenue in the fourth quarter of 2009 for our pending acquisitions...."
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I like the company and I like the properties but I am not sure on the overall dilution from the additional 8.5 million shares and if this secondary is going to be accretive to per share earnings after adjusting for the new share count ind increased Pro Forma income.
Total assets (From pg 12)
Total assets
Before offering: $ 508,331 million
After offering: $ 635,966 million
Total Debt:
Before offering: $63.4 million
After offering: $36.9 million
(Note: company using proceeds of offering to pay down $26.5 million debt)
Total Assets After debt reduction ($26.5 million from offering) = ($635,966 + 26,500) = $662,466
Net Increase in Assets After offering (& debt reduction) $154.2 million (4.3%)
Shares outstanding Before: 21.5 million
Shares outstanding After: 30.0 million (28% increase)
Net Income Before: $27.45 M
Net Income After estimated Pro Forma: $31.92 (14% increase)
(Note I estimated based on the 9 month Pro Forma vs Actual on Pg 11)
Based on the pro forma, net income After the offering is estimated to increase by 14% (pg 11; $27.45M vs $31.92 M) while the share count increases 28%.
This translates to an adjusted payout of $1.31/share annual or about a 6% yield at the offer price of $21.50/share.
Therefore, I am not too compelled to add shares even at $21.50/share until there is a better history of the annual dividend payout. If the market was to price the stock as BEFORE the offering, the stock should trade down to $18.80/share to reflect a 7% yield.
I will keep the few share I have and if the stock trades down to the $18 - $19 range, I will begin adding shares again.
(NOTE: These are "back of the envelope" calculations and I may be wrong (have been wrong in the past). No rush to buy as there are many, many opportunities in the investment ocean.)
EKS |
