ACQUISITIONS

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

ACQUISITIONS

3. ACQUISITIONS

              We account for operating real estate acquisitions as an acquisition of a business as we believe most operating real estate meets the definition of a “business” under GAAP. Accordingly, we allocate the purchase price of acquired properties to land, building and improvements, identifiable intangible assets and to the acquired liabilities based on their respective fair values. We determine fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends and specific market and economic conditions that may affect the property. Factors considered by management in our analysis of determining the as-if-vacant property value include (i) an estimate of carrying costs during the expected lease-up periods, considering market conditions, and (ii) costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and estimates of lost rentals at market rates during the expected lease-up periods, tenant demand and other economic conditions. Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related expenses. Identifiable intangibles related to in-place lease value and above and below-market leases are recorded as acquired lease intangibles and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. Below market leases include fixed-rate renewal periods where we believe the renewal is reasonably assured. Premiums or discounts on debt are amortized to interest expense over the remaining term of such debt. Costs related to acquiring operating properties are expensed as incurred.

Lantern Lane

              On June 25, 2014, we acquired the Lantern Lane shopping center from MIG III pursuant to an independent appraisal process for a purchase price of $22.7 million. Lantern Lane is a grocery-anchored shopping center located in Houston, Texas. The shopping center contains 81,567 square feet of GLA and was 100% occupied at the time of purchase. Major tenants at the property are Fresh Market and CVS/pharmacy. We acquired the property with a combination of cash on hand and borrowings of $20.5 million under our $75 Million Facility.

Inverness Townhomes

              During April and May 2014, we completed the purchase of 21 individual condominium units at the Inverness Townhomes, which are adjacent to our Uptown Park property for approximately $5.9 million as part of a plan for future development. The individually purchased condominiums collectively represent 20.3% of the combined total condominium units. The purchase was funded with cash on hand. We have allocated all of the purchase price to land as we believe the condominiums are obsolete.

              The table below details the total cash paid for Lantern Lane and Inverness Townhomes as reported on our consolidated statements of cash flows and the corresponding values assigned to its assets and liabilities (in thousands):

	Lantern Lane			Inverness		Total
Assets
Land	$	7,442		$	5,895	$	13,337
Building		13,252			—		13,252
Tenant improvements		398			—		398
Acquired lease intangibles, net		2,561			—		2,561
Other assets		581			—		581
Liabilities
Acquired below-market lease intangibles		(1,534	)		—		(1,534	)
Net cash paid for the acquisitions	$	22,700		$	5,895	$	28,595

Woodlake Square

          On September 18, 2013, we acquired the Woodlake Square shopping center from VIF II/AmREIT Woodlake, LP, a joint venture controlled by an unaffiliated institutional partner, for a purchase price of $41.6 million. Woodlake Square is a grocery-anchored shopping center located in Houston, Texas. The shopping center contains approximately 157,000 square feet of GLA and was 88.6% occupied at the time of purchase. Its major tenants include Randalls, Walgreens and Jos. A. Bank. Prior to the closing of the acquisition, we managed Woodlake Square through ARIC and its joint venture with AEW Capital, which owned a 90% interest in the joint venture. MIG III and MIG IV (affiliates of ours) also owned a 3% and 6% interest in the joint venture, respectively. The purchase price was negotiated on an arms-length basis between the Company and AEW Capital. We funded the purchase price with cash on hand and escrow deposits of approximately $18.1 million, a mortgage loan from PNC Bank in the amount of $23.0 million and assumption of approximately $449,000 in net liabilities and prorations (primarily accrued property taxes).

Preston Royal East land

          On July 17, 2013, we acquired the ownership of the underlying land at Preston Royal East for $15.4 million providing us with ownership of the shopping center improvements with the land. Prior to its purchase, Preston Royal East consisted of a leasehold interest with 27 years remaining on the ground lease.

Fountain Oaks

          On June 25, 2013, we completed the acquisition of Fountain Oaks, an approximately 161,000 square foot Kroger anchored retail shopping center located in Atlanta, Georgia, for approximately $27.7 million, exclusive of closing costs. The property was 88.7% leased on the closing date, and the acquisition was funded through a draw on our $75 million Facility, which we subsequently repaid using proceeds from our 2013 Follow-on Offering.

Loop 610 & Ella

          On April 4, 2013, we acquired 1.26 acres of unimproved land located at the intersection of Loop 610 & Ella Boulevard in Houston, Texas for $2.3 million. The property was acquired by ARIC with the intent to sell it in the near term. We entered into a long-term, build-to-suit lease with CVS/pharmacy on the site. We sold the property on November 12, 2013, for $7.5 million, which resulted in a gain of $2.3 million during the fourth quarter of 2013.

Pro Forma Results of Acquisitions

          The tables below present our pro forma results of operations for the three and six months ended June 30, 2014, assuming that we acquired Lantern Lane on January 1, 2014 (in thousands):

Three months ended June 30, 2014	Pro forma adjustments to
	Historical results		historical results		Pro forma results
Total revenues	$	12,541	$	503	$	13,044
Net income	$	1,130	$	32	$	1,162

Six months ended June 30, 2014	Pro forma adjustments to
	Historical results		historical results		Pro forma results
Total revenues	$	25,282	$	1,090	$	26,372
Net income	$	2,302	$	137	$	2,439

          The tables below present our pro forma results of operations for the three and six months ended June 30, 2013, assuming that we acquired Lantern Lane, Woodlake Square, Preston Royal East Land, and Fountain Oaks on January 1, 2013 (in thousands):

Three months ended June 30, 2013			Pro forma adjustments to historical results
	Historical results		Lantern Lane			Woodlake Square			Preston Royal East Land		Fountain Oaks			Pro forma results
Total revenues	$	10,735	$	503		$	809		$	—	$	615		$	12,662
Net income	$	981	$	(4	)	$	(188	)	$	130	$	(9	)	$	910

Six months ended June 30, 2013			Pro forma adjustments to historical results
	Historical results		Lantern Lane		Woodlake Square			Preston Royal East Land		Fountain Oaks			Pro forma results
Total revenues	$	22,614	$	1,090	$	1,618		$	—	$	1,229		$	26,551
Net income	$	9,377	$	101	$	(377	)	$	130	$	(17	)	$	9,214