Business Context and Reporting Period
American Realty Capital Global Daily Net Asset Value Trust, Inc. (the filing entity identified in the report; now associated with Global Net Lease, Inc.) filed this unaudited Form 10-Q for the quarter ended June 30, 2012. The company was incorporated on July 13, 2011, remained in the development stage, and had not commenced active operations or acquired any real estate.
The company commenced a reasonable-best-efforts initial public offering on April 20, 2012, targeting up to approximately $1.5 billion of common stock. Its strategy was to acquire diversified commercial real estate, primarily single-tenant net-leased properties, with a geographic focus on the United States and permitted investments in Europe and other international markets.
Financial Metrics
| Metric | Three months ended June 30, 2012 | Six months ended June 30, 2012 | June 30, 2012 |
|---|---|---|---|
| Revenue | $0 | $0 | |
| General and administrative expense | $63,000 | $64,000 | |
| Net loss | $63,000 | $64,000 | Accumulated deficit: $80,000 since inception |
| Net cash used in operating activities | $61,000 | ||
| Cash and cash equivalents | $0 | ||
| Total assets | $29,000 | ||
| Accounts payable and accrued expenses | $1.446 million | ||
| Stockholders’ equity (deficit) | $(1.417) million | ||
| Long-term debt | None |
Operating expenses were approximately $63,000 for the quarter and $64,000 for the first six months. Revenue, operating margins, FFO and MFFO were not meaningful because the company owned no properties and had not begun operations. Financing activities provided $61,000 during the six months, including $215,000 of advances from an affiliate, offset by $154,000 of offering-cost payments. The company reported no cash balance at June 30, 2012.
Material Changes Versus Prior Comparable Period
- The IPO began on April 20, 2012, but escrow had not been broken and total gross proceeds were only approximately $200,000 as of June 30, 2012.
- Shares outstanding increased to 31,222 from 22,222 at December 31, 2011, including 9,000 restricted shares issued to independent directors.
- Total assets declined to $29,000 from $559,000 at year-end, principally because deferred offering costs were reclassified to stockholders’ equity when the IPO commenced.
- Stockholders’ equity declined from $184,000 to a deficit of $1.417 million, primarily reflecting $1.540 million of offering costs and the period loss.
- Accounts payable and accrued expenses increased to $1.446 million from $375,000. Approximately $400,000 was payable to affiliated entities at June 30, 2012, compared with approximately $200,000 at year-end.
- No properties, purchase contracts, repurchases, distributions, long-term debt, or derivative instruments were reported.
Guidance, Outlook, Risks and Unusual Items
- Management intended to use IPO proceeds primarily for acquisitions of income-producing real estate and potentially first mortgage loans. No specific acquisition had been identified or contracted for at the reporting date.
- The company intended to elect REIT status for the taxable year ending December 31, 2012, but stated that qualification could not be assured.
- Management expected to begin distributions no later than the first calendar month after the first real estate investment; no distributions had been paid, and future distributions were not assured.
- The charter permits total indebtedness up to 300% of net assets, subject to specified exceptions. Management stated an intention to limit aggregate borrowings to 45% of asset fair value after investment of offering proceeds, although no debt existed at quarter-end.
- Offering costs totaled approximately $1.5 million and exceeded gross stock proceeds by approximately $1.3 million at June 30, 2012. The Advisor had elected to cap cumulative offering costs incurred by the company, net of unpaid amounts, at 15% of gross common-stock proceeds during the offering period.
- Material risks included limited operating history, blind-pool investment risk, dependence on affiliated management, conflicts of interest, illiquidity and the absence of a public trading market, uncertainty regarding future acquisitions and distributions, tenant and real estate market risks, interest-rate and foreign-currency exposure, and the possibility of failing to qualify as a REIT.
- The company had no material pending legal proceedings, no material off-balance-sheet arrangements, and reported effective disclosure controls as of June 30, 2012.
Investor Verification Points
- Verify the entity-name continuity between this 2012 filing and Global Net Lease, Inc., including any subsequent mergers, reorganizations, or name changes.
- Confirm whether the IPO ultimately broke escrow, the amount of capital raised, and how offering costs and affiliate advances were settled.
- Review subsequent filings for the timing and terms of the first property acquisitions, debt financings, NAV calculations, and commencement of distributions.
- Assess related-party fees, reimbursements, expense caps, and conflicts involving the Advisor, Dealer Manager, Property Manager, Sponsor, and European Service Provider.
- Monitor REIT qualification, liquidity, share-repurchase restrictions, and the company’s ability to fund operations before generating property-level cash flow.