INLAND REAL ESTATE INCOME TRUST, INC. Item 9.01 Financial Statements and Exhibits.
These financial statements and exhibits are being filed solely to provide the required audited statements of revenues and certain operating expenses under Rule 3-14 of Regulation S-X with respect to the portfolio of eight properties (collectively identified as the "Inland Retail Property Fund Portfolio" or the "Properties") acquired by the Company onMay 17, 2022 . The performance of the Properties and their effect on the Company's future results may be materially different from the historical financial results of the Properties and the Company's pro forma financial information contained in this report due to various factors, including but not limited to those discussed under Item 1A. Risk Factors in our annual report on Form 10-K for the year endedDecember 31, 2021 and subsequent quarterly reports on Form 10-Q.
(a) Financial Statements of Properties Acquired.
• Combined Statement of Revenues and Certain Operating Expenses for the Inland
Retail Property Fund Portfolio for the three months ended March 31, 2022
(Unaudited).
• Combined Statement of Revenues and Certain Operating Expenses for the Inland
Retail Property Fund Portfolio for the year ended December 31, 2021 .
• Notes to Combined Statements of Revenues and Certain Operating Expenses for
the three months ended
December 31, 2021 .
(b) Pro Forma Financial Information.
• Unaudited pro forma condensed consolidated balance sheet as of
2022.
• Notes to unaudited pro forma condensed consolidated balance sheet as of
March 31, 2022 .
• Unaudited pro forma condensed consolidated statement of operations and
comprehensive income for the three months ended March 31, 2022 .
• Notes to unaudited pro forma condensed consolidated statement of operations
and comprehensive income for the three months ended March 31, 2022 .
• Unaudited pro forma condensed consolidated statement of operations and
comprehensive income for the year ended December 31, 2021 .
• Notes to unaudited pro forma condensed consolidated statement of operations
and comprehensive income for the year ended
(d) Exhibits Exhibit No Description 23.1 Consent ofKPMG LLP
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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Independent Auditors' Report
To the Stockholders and Board of Directors
Inland Real Estate Income Trust, Inc. :
We have audited the accompanying Combined Statement of Revenue and Certain
Operating Expenses of the Inland Retail Property Fund Portfolio for the year
ended
Management's Responsibility for the Statement
Management is responsible for the preparation and fair presentation of the Statement in accordance withU.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statement that is free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on the Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted inthe United States of America . Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statement. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Statement referred to above presents fairly, in all material respects, the revenues and certain operating expenses described in Note 2 of the Statement for the year endedDecember 31, 2021 , in accordance withU.S. generally accepted accounting principles.
Emphasis of Matter
We draw attention to Note 2 to the Statement, which describes that the Statement was prepared for the purpose of complying with the rules and regulations of theSecurities and Exchange Commission (for inclusion in the filing of Form 8-K ofInland Real Estate Income Trust, Inc. ) and is not intended to be a complete presentation of theInland Retail Property Fund Portfolio's revenues and expenses. Our opinion is not modified with respect to this matter. /s/KPMG LLP Chicago, Illinois July 29, 2022
-------------------------------------------------------------------------------- Inland Retail Property Fund Portfolio Combined Statements of Revenues and Certain Operating Expenses for the Three Months EndedMarch 31, 2022 (Unaudited) and for the Year EndedDecember 31, 2021 (in thousands) Three months ended March Year ended 31, 2022 December 31, (unaudited) 2021 Revenues: Rental income$ 5,839 $ 23,626 Other property income 33 323 Total revenues 5,872 23,949 Certain operating expenses: Property operating expenses 963 3,907 Real estate tax expense 1,151 4,471 Total certain operating expenses 2,114
8,378
Revenues in excess of certain operating expenses
15,571
See accompanying notes to the combined statements of revenues and certain
operating expenses.
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Inland Retail Property Fund, LP
Notes to Combined Statements of Revenues and Certain Operating Expenses for the
Three Months Ended March 31, 2022 (Unaudited) and for the Year Ended December
31, 2021
(Dollar amounts stated in thousands)
NOTE 1 - ORGANIZATION
OnMay 17, 2022 ,Inland Real Estate Income Trust, Inc. (the "Company") acquired eight properties (properties collectively referred to as "Inland Retail Property Fund Portfolio" or the "Properties") from subsidiaries ofInland Retail Property Fund, LP (collectively, the "Seller"). The Properties are leased primarily to grocery, retail and restaurant tenants. More specifically, seven of the Properties are grocery-anchored. The Properties are located across seven states and aggregate approximately 686,851 square feet. As ofMarch 31, 2022 , those leases had a weighted average remaining lease term of 6.3 years.Inland Retail Property Fund, LP is a fund managed by an affiliate of the Company's sponsor and business manager. Because the sale of the Properties was a related party transaction, it was approved by all of the Company's independent directors. The Company acquired the Properties for an aggregate purchase price of$278,153 , excluding closing costs. The Company funded the acquisition of the Properties with$5,563 of cash on hand and funds from additional term loans borrowed under its credit facility totaling$300,000 . The following table lists information about the Properties as ofMay 17, 2022 : Square Physical Economic Property Location Footage Occupancy Occupancy Northpark Village Square Valencia, California 87,103 98.6% 98.6% Rusty Leaf Plaza Orange, California 59,188 97.0% 97.0% CityPlace Woodbury, Minnesota 174,813 95.2% 95.2% Northville Park Place Northville, Michigan 78,421 100.0% 100.0% Denton Village Denton, Texas 48,280 100.0% 100.0% Lower Makefield Shopping Center Yardley, Pennsylvania 74,953 97.6% 97.6% New Town Village Owings Mills, Maryland 117,593 46.8% 46.8% Olde Ivy Village Smyrna, Georgia 46,500 93.7% 93.7%
NOTE 2 - BASIS OF PRESENTATION
The combined statements of revenues and certain operating expenses (the "Statements") have been prepared on the accrual basis of accounting. The Statements have been prepared for the purpose of complying with the rules and regulations of theSecurities and Exchange Commission (the "SEC") and with the provisions of SEC Rule 3-14 of Regulation S-X, which requires certain information with respect to real estate operations to be included with certain filings with theSEC . The Statements are not intended to be a complete presentation of the revenues and expenses for the Properties. The Statements exclude certain expenses such as interest, depreciation and amortization, non-recurring professional fees, and other revenues and expenses not directly related or comparable to, or expected to be incurred in, the future operations of the Properties. All intercompany transactions and balances, if any, have been eliminated in combination.
The Company is not aware of any other material factors relating to the Properties that would cause this financial information not to be indicative of future operating results.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Properties are leased to tenants under agreements that are classified as operating leases. The Properties recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term. In addition to minimum lease payments, some leases provide for the reimbursement of the tenant's pro rata share of certain operating expenses incurred by the landlord as recoveries, including real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees and certain capital repairs.
Expense Recognition
Property operating expenses represent the direct expenses of operating the Properties and include repairs and maintenance, insurance, and other property expenses that are expected to continue in the ongoing operations of the Properties. Expenditures for maintenance and repairs are charged to operations as incurred. -------------------------------------------------------------------------------- Use of Estimates The preparation of the Statements in conformity with accounting principles generally accepted inthe United States of America ("GAAP") requires management to make estimates, judgments and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period presented. The estimates, judgments and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from those estimates, judgments and assumptions. NOTE 4 - LEASES Space is leased to tenants pursuant to lease agreements. Tenant leases typically provide for minimum rent, percentage rent, and other charges to cover certain operating costs. Minimum future rentals under non-cancelable operating leases greater than one year in effect atDecember 31, 2021 , under which the Properties are lessor, are as follows: Lease Payments 2022$ 15,996 2023 15,916 2024 15,001 2025 13,892 2026 11,838 Thereafter 41,162 Total$ 113,805
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Properties are presently not subject to material litigation nor, to management's knowledge, is any material litigation threatened against the Properties.
NOTE 6 - SUBSEQUENT EVENTS
In preparing the Statements, the Company has evaluated events and transactions occurring throughJuly 29, 2022 , the date the Statements were available to be issued, and management did not identify any subsequent events requiring additional disclosure. --------------------------------------------------------------------------------Inland Real Estate Income Trust, Inc. Pro Forma Condensed Consolidated Financial Statements The following unaudited pro forma condensed consolidated financial statements have been prepared to comply with Article 11 of Regulation S-X, as promulgated by theSEC . These unaudited pro forma condensed consolidated financial statements of the Company have been prepared from and should be read in conjunction with the condensed consolidated financial statements and notes thereto presented in the Company's Quarterly Report on Form 10-Q for the three months endedMarch 31, 2022 and Annual Report on Form 10-K for the year endedDecember 31, 2021 . These unaudited pro forma condensed consolidated financial statements are presented as if the acquisitions of the properties (as described below) were completed, along with the pro forma adjustments associated with the acquisitions, as ofMarch 31, 2022 for purposes of the unaudited pro forma condensed consolidated balance sheet, and as ofJanuary 1, 2021 for purposes of the unaudited pro forma condensed consolidated statements of operations. Our pro forma condensed consolidated financial statements are presented for informational purposes only and are based on information and assumptions we consider appropriate and reasonable, and do not purport to (i) represent our financial position had the acquisitions reflected in these unaudited pro forma condensed consolidated financial statements occurred onMarch 31, 2022 , (ii) represent the results of our operations had the acquisitions and other adjustments described in these unaudited pro forma condensed consolidated financial statements occurred onJanuary 1, 2021 or (iii) project or forecast our financial position or results of operations as of any future date or for any future period, as applicable. The unaudited pro forma condensed consolidated financial statements include all adjustments that are normal and recurring in management's opinion. Acquisition of Properties OnMay 17, 2022 , the Company acquired eight properties (collectively, the "Inland Retail Properties Fund Portfolio", or the "Properties") from certain subsidiaries ofInland Retail Property Fund, LP (collectively, the "Seller") pursuant to the previously disclosed purchase and sale agreement among the Company and the Seller. The acquisition of the Properties is referred to herein as the "Transaction." The Properties are leased primarily to grocery, retail and restaurant tenants. More specifically, seven of the Properties are grocery-anchored. The Properties are located across seven states and aggregate approximately 686,851 square feet. As ofMarch 31, 2022 , those leases had a weighted average remaining lease term of 6.3 years.Inland Retail Property Fund, LP is a fund managed by an affiliate of the Company's sponsor and business manager. Thus, because the Transaction was a related party transaction, it was approved by all of the Company's independent directors. The Company acquired the Properties for an aggregate purchase price of$278,153 , excluding closing costs. The Company funded the acquisition of the Properties with$5,563 of cash on hand and funds from additional term loans under the Second Amended and Restated Credit Agreement, dated as ofFebruary 3, 2022 , amended onMay 17, 2022 by the First Amendment to Credit Agreement and Agreement Regarding Incremental Term Loans (collectively, the "Credit Agreement") totaling$300,000 . --------------------------------------------------------------------------------Inland Real Estate Income Trust, Inc. Pro Forma Condensed Consolidated Balance Sheet as ofMarch 31, 2022 (Unaudited, in thousands except share and per share data) Inland Real Estate Income Trust, Inc. Historical (a) The Properties Pro Forma Total ASSETS Assets: Investment properties held and used: Land$ 267,946 $ 62,510 (b) $ 330,456 Building and other improvements 994,632 192,730 (b) 1,187,362 Total 1,262,578 255,240 1,517,818 Less accumulated depreciation (255,024 ) - (255,024 ) Net investment properties held and used 1,007,554 255,240 1,262,794 Cash and cash equivalents 9,174 18,845 (c) 28,019 Restricted cash 6,067 - 6,067 Accounts and rent receivable 18,134 - 18,134 Acquired lease intangible assets, net 55,324 33,285 (b) 88,609 Operating lease right-of-use asset, net 14,463 - 14,463 Other assets 13,375 - 13,375 Total assets$ 1,124,091 $ 307,370 $ 1,431,461 LIABILITIES AND EQUITY Liabilities: Mortgages and credit facility payable, net$ 592,223 $ 297,716 (d) $ 889,939 Accounts payable and accrued expenses 8,713 - 8,713 Operating lease liability 24,489 - 24,489 Distributions payable 4,894 - 4,894 Acquired intangible liabilities, net 37,041 9,654 (b) 46,695 Due to related parties 2,829 - 2,829 Other liabilities 7,720 - 7,720 Total liabilities 677,909 307,370 985,279
Commitments and contingencies
Stockholders' equity: Preferred stock,$.001 par value, 40,000,000 shares authorized, none outstanding - - - Common stock,$.001 par value, 1,460,000,000 shares authorized, 36,079,247 shares issued and outstanding 36 - 36 Additional paid in capital 812,177 - 812,177 Accumulated distributions and net loss (372,029 ) - (372,029 ) Accumulated other comprehensive loss 5,998 - 5,998 Total stockholders' equity 446,182 - 446,182
Total liabilities and stockholders' equity
307,370
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Inland Real Estate Income Trust, Inc. Notes to Pro Forma Condensed Consolidated Balance Sheet as ofMarch 31, 2022 (Unaudited, in thousands)
(a) Historical unaudited financial information obtained from
ended March 31, 2022 .
(b) The Company records the assets acquired and liabilities assumed related to
the acquisition at fair value in accordance with Accounting Standards
Codification Section 805, Business Combinations (as disclosed in the
Company's Annual Report on Form 10-K), as if the acquisitions were
completed on March 31, 2022 . The Properties qualified as asset
acquisitions.
(c) Reflects the total cash paid for the acquisition of the Properties, net of
proceeds of
Facility.
(d) Reflects the additional term loans on the Company's Credit Facility net of
loan fees paid that were used to fund the acquisition of the Properties.
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Inland Real Estate Income Trust, Inc. Pro Forma Condensed Consolidated Statement of Operations and Comprehensive Income for the Three Months EndedMarch 31, 2022 (Unaudited, in thousands, except share and per share data) Inland Real Inland Real Estate Income The Estate Income Trust, Inc. Properties Pro Forma Trust, Inc. Pro Historical (a) (b) Adjustments Forma Income: Rental income $ 29,113$ 5,839 $ (9 ) (c) $ 34,943
Other property income 30 33 - 63 Total income 29,143 5,872 (9 ) 35,006 Expenses: Property operating expenses 5,593 963 21 (e) 6,577 Real estate tax expense 3,730 1,151 - 4,881 General and administrative expenses 1,412 - - 1,412 Business management fee 2,244 - 453 (f) 2,697 Depreciation and amortization 11,854 - 3,059 (d) 14,913 Total expenses 24,833 2,114 3,533 30,480 Other Income (Expense): Interest expense (5,567 ) - (2,959 ) (g) (8,526 ) Interest and other income (1 ) - - (1 ) Net income (loss) $ (1,258 )$ 3,758 $ (6,501 ) $ (4,001 ) Net loss per common share, basic and diluted $ (0.03 ) $ - $ - $ (0.11 ) Weighted average number of common shares outstanding, basic and diluted 36,084,505 - - 36,084,505 Comprehensive income (loss): Net income (loss) $ (1,258 )$ 3,758 $ (6,501 ) $ (4,001 ) Unrealized gain on derivatives 11,999 - - 11,999 Reclassification adjustment for amounts included in net loss 1,468 - - 1,468 Comprehensive income (loss) $ 12,209$ 3,758 $ (6,501 ) $ 9,466
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(a) Historical unaudited financial information obtained from
ended March 31, 2022 .
(b) Reflects operating results attributable to the Properties for the three
months ended
(c) The Company recognizes rental revenue for operating leases on a
straight-line basis over the life of the related lease, including any rent
steps or abatement provisions. An adjustment in the amount of
to reflect rental revenue on a straight-line basis as if the Company had
acquired the Property as of
records acquired above-market and below-market leases at their fair value
and recognizes the related amortization over the weighted average lives of
the related leases as an adjustment to rental revenue. As such, an
adjustment in the amount of
the Company had acquired the Properties as of January 1, 2021 .
(d) Reflects depreciation and amortization expense on the Properties during the
three months ended
amortization on a straight-line basis over the estimated useful lives,
ranging between 13 months and 30 years. For the three months ended March
31, 2022, total depreciation expense and total amortization expense for the
properties were $1,893 and $1,166 , respectively.
(e) Reflects the pro forma adjustment for the three months ended
for an adjustment to property management fees.
(f) Reflects an adjustment to the business management fee for the Company to
account for the additional properties under management following the
acquisition.
(g) Reflects the pro forma interest expense, using a weighted average interest
rate of 3.8% per annum, for the three months ended March 31, 2022 on the
$300,000 of term loans added to the Company's Credit Facility, which were
used to partially fund the acquisition of the Properties.
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Inland Real Estate Income Trust, Inc. Pro Forma Condensed Consolidated Statement of Operations and Comprehensive Income for the Year EndedDecember 31, 2021 (Unaudited, in thousands, except share and per share data) Inland Real Inland Real Estate Income The Estate Income Trust, Inc. Properties Pro Forma Trust, Inc. Pro Historical (a) (b) Adjustments Forma Income: Rental income$ 118,957 $ 23,626 $ (46 ) (c) $ 142,537
Other property income 183 323 - 506 Total income 119,140 23,949 (46 ) 143,043 Expenses: Property operating expenses 21,649 3,907 89 (e) 25,645 Real estate tax expense 14,388 4,471 - 18,859 General and administrative expenses 4,784 - - 4,784 Business management fee 8,950 - 1,813 (f) 10,763 Depreciation and amortization 48,906 - 12,426 (d) 61,332 Total expenses 98,677 8,378 14,328 121,383 Other Income (Expense): Interest expense (23,240 ) - (11,969 ) (g) (35,209 ) . . .
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