Assets and Liabilities Held for Sale

9 Months Ended

Sep. 30, 2014

Assets and Liabilities Held for Sale

5. Assets and Liabilities Held for Sale

On June 30, 2014, in connection with the Company’s evaluation of potential strategic alternatives for the Company as a whole, the Company committed to a plan to sell its German portfolio. As such, the portfolio met the criteria under U.S. GAAP to classify its German assets as held for sale. In August 2014, the Company signed a non-binding letter of intent for a sale of 94.9% of the equity of the entities that hold the German properties therefore retaining a non-controlling 5.1% interest with limited protective rights. All assets and liabilities of these entities have been classified as assets held for sale and liabilities held for sale, respectively, on the condensed consolidated balance sheets as of September 30, 2014 and December 31, 2013 and all operating results relating to these properties have been treated as discontinued operations for all periods presented. The financial statements reflect reclassifications of rental income, property expenses, interest expense and other income and expenses from continuing operations to income from discontinued operations.

In connection with the determination to sell its entities that hold the German properties, the Company determined that the carrying values of its 94.9% interest in those entities were recoverable based on expected proceeds, less costs to sell.

As of September 30, 2014 and December 31, 2013, assets held for sale consisted of the following:

	September 30, 2014			December 31, 2013
Land and land improvements	$	5,120,981		$	5,557,315
Building and improvements		15,445,160			16,761,170
Less: accumulated depreciation		(718,441	)		(564,769	)
Operating real estate held for sale		19,847,700			21,753,716
Lease intangibles, net		1,925,468			2,266,710
Deferred rent		50,580			40,969
Restricted cash		190,309			206,822
Loan costs, net		149,631			184,117
Other assets		135,369			157,636
Deferred tax asset, net		—			339,215
Total assets held for sale	$	22,299,057		$	24,949,185

As of September 30, 2014 and December 31, 2013, liabilities held for sale consisted of the following:

	September 30, 2014		December 31, 2013
Mortgages notes payable	$	13,805,993	$	14,982,338
Unearned rent		—		11,411
Accounts payable and accrued expenses		374,638		357,307
Due to related party		6,259		31,576
Total liabilities held for sale	$	14,186,890	$	15,382,632

These balance sheet amounts have been converted from Euros to U.S. dollars at an exchange rate of $1.27 per Euro and $1.38 per Euro as of September 30, 2014 and December 31, 2013, respectively.

The following is a summary of the income from discontinued operations for the quarters and nine months ended September 30, 2014 and 2013:

	Quarter Ended September 30,						Nine months Ended September 30,
	2014			2013			2014			2013
Revenues	$	538,556		$	661,681		$	1,830,369		$	1,896,782
Expenses		(168,976	)		(239,267	)		(553,925	)		(744,574	)
Depreciation and amortization		—			(212,949	)		(369,522	)		(635,153	)
Expense support		—			59,510			—			178,529
Operating income		369,580			268,975			906,922			695,584
Interest expense		(116,498	)		(125,241	)		(368,751	)		(370,585	)
Income from discontinued operations before income tax expense		253,082			143,734			538,171			324,999
Income tax expense		(20,781	)		(9,747	)		(371,943	)		(16,685	)
Income from discontinued operations	$	232,301		$	133,987		$	166,228		$	308,314

These statements of operations amounts have been converted from Euros to U.S. dollars at the exchange rate of $1.36 per Euro and $1.32 per Euro as of September 30, 2014 and 2013, respectively.