Business Context and Reporting Period
Company: Empire American Realty Trust, Inc. (Note: Input metadata referenced "Independence Realty Trust," but the filing text identifies the registrant as Empire American Realty Trust, Inc.)
Reporting Period: Quarter and nine months ended September 30, 2010.
Status: Development Stage Company. The Company was incorporated on March 26, 2009, and has not yet commenced operations or acquired any real estate assets. It is currently in the process of a public offering (commenced May 18, 2010) to raise up to $1 billion to acquire a diversified portfolio of multifamily properties and real estate-related securities. The Company intends to qualify as a Real Estate Investment Trust (REIT) beginning with the taxable year ending December 31, 2011.
Key Financial Metrics
| Metric | As of/For Period Ended Sep 30, 2010 | As of/For Period Ended Dec 31, 2009 |
|---|---|---|
| Total Assets | $1,339,425 | $206,227 |
| Cash and Cash Equivalents | $209,425 | $205,667 |
| Subscription Escrow | $1,130,000 | $0 |
| Total Liabilities | $1,132,294 | $3,031 |
| Stockholders' Equity | $207,131 | $203,196 |
| Revenue (9 Months) | $5,370 (Interest Income) | $1,000 (Interest Income) |
| Net Income (9 Months) | $3,935 | $356 |
| Net Income (3 Months) | $(1,185) | $577 |
| Debt | $0 (No outstanding debt) | $0 |
Material Changes vs. Prior Period
- Asset Growth: Total assets increased from $206,227 to $1,339,425, primarily driven by the receipt of $1,130,000 in stock subscriptions held in escrow.
- Liabilities: Total liabilities increased significantly to $1,132,294 due to the recording of a $1,130,000 subscription payable, which offsets the escrowed funds pending the satisfaction of offering conditions.
- Operating Results: The Company reported a net loss of $1,185 for the three months ended September 30, 2010, compared to a net income of $577 in the same period in 2009. This was due to filing fees of $366 and an income tax provision of $819, with no revenue generated in the quarter.
- Related Party Loans: The Company repaid a $200,000 short-term loan to its sponsor in June 2010, which had generated $5,370 in interest income for the nine-month period.
Outlook, Risks, and Management Commentary
- Offering Status: As of November 15, 2010, the Company received subscriptions for 125,555 shares. Shares will be issued upon satisfying conditions in the registration statement. The Company has not yet raised its minimum offering requirements.
- REIT Qualification: The Company determined it would not qualify as a REIT for the 2010 tax year but intends to elect REIT status for the 2011 tax year. Failure to qualify would subject the Company to regular corporate income taxes.
- Related Party Fees: The Company has agreements with its Advisor, Dealer Manager, and Property Manager (all affiliates) for various fees including selling commissions (up to 7%), dealer manager fees (up to 3%), acquisition fees (2.5%), and asset management fees (0.75% of average invested assets). These fees are contingent on the successful completion of the offering and subsequent operations.
- Risks: Key risks include the inability to raise minimum offering proceeds, reliance on the Advisor for operations, potential conflicts of interest with affiliates, and the impact of general economic conditions on real estate markets. The Company has no prior operating history.
Investor Verification Checklist
- Offering Minimums: Verify if the Company has met the minimum offering requirements to proceed with the issuance of subscribed shares and commencement of operations.
- Escrow Conditions: Confirm the specific conditions required to release the $1,130,000 held in subscription escrow.
- REIT Status: Monitor the Company's ability to qualify as a REIT for the 2011 tax year to avoid corporate income tax liability.
- Related Party Costs: Review the total organization and offering costs incurred by the Advisor ($1,885,107 as of Sep 30, 2010) and the potential impact of these costs on net proceeds.
- Asset Acquisition: Confirm if any specific real estate assets have been identified or contracted for purchase, as none were identified as of the filing date.