VANCOUVER, Aug. 14, 2014 /PRNewswire/ -- City Office
REIT, Inc. (NYSE: CIO), today announced its results for the quarter
ended June 30, 2014.
Second Quarter Highlights
- Achieved Core Funds From Operations ("Core FFO") of
$2.6 million, or $0.22 per fully diluted share;
- Built a portfolio of 2.1 million square feet which was 92.5%
leased at June 30, 2014, including
recently signed leases not commenced;
- Commenced new and renewal leases during the quarter
totaling approximately 37,000 square feet and executed
approximately 12,000 square feet of new leases that will commence
subsequent to the end of the second quarter;
- Closed on the acquisition of Plaza 25 in Denver, Colorado, a three building 197,000
square foot office property in the exclusive Greenwood Village submarket, for $25.1 million; and
- Declared a prorated dividend in the amount of $0.183 per share for the second quarter 2014,
which was paid on July 17, 2014.
"We are very pleased with our second quarter performance,"
commented James Farrar, Chief
Executive Officer. "Since completing our IPO in April, we
have closed on two acquisitions in key target markets, built a
robust pipeline of future opportunities while continuing to enhance
the value of our existing portfolio. Our portfolio's
occupancy levels, including recently signed leases that have not
commenced increased to 92.5% at quarter end. During the quarter we
refinanced the existing debt on our Amberglen property with a 5
year mortgage. At the end of the quarter 100% of our debt was
fixed rate with a weighted average maturity of 5.9 years. The
stability of our portfolio combined with the strong performance of
our targeted submarkets and our conservative capital structure
enabled us to pay our inaugural quarterly dividend of $0.235, which was prorated to $0.183 per share for the period we were a
publicly traded company. We believe that the strength of our
existing properties together with the demand for office space in
our markets positions us to increase net operating income and
create value for our
stockholders."
Financial Results for the Second Quarter 2014
Core Funds From Operations (Core FFO) was $2.6 million or $0.22 per fully diluted share. Adjusted
funds from operations (AFFO) was also $0.22 per fully diluted share. Net loss
attributable to the Company since the IPO was $1.9 million, or ($0.24) per fully diluted share. The
Company began operations upon completion of its formation
transactions and initial public offering ("IPO") in April 2014 and therefore had no comparative
results for the second quarter of 2013. Second quarter
results include the operations of the Predecessor Company for the
period between April 1, 2014 and
April 20, 2014. Results for this
period reflect the Predecessor Company's interest expense. A
majority of the Predecessor Company's debt was refinanced in
conjunction with the IPO.
A reconciliation of Core FFO and AFFO to GAAP net income can be
found at the bottom of this release.
Portfolio Operations
The Company reported that its total portfolio as of June 30, 2014 contained 2.1 million net rentable
square feet and was 92.5% occupied, including recently signed
leases not commenced, at the end of the second quarter 2014. The
occupancy level will increase to 93.1% based on the inclusion of
the Lake Vista Pointe acquisition, which was completed on
July 18, 2014.
Leasing
During the second quarter, the Company commenced 3 new
leases and 2 renewals totaling 37,000 square feet and executed
12,000 square feet of new leases that will commence subsequent to
the end of the second quarter.
Acquisitions
The Company completed the acquisition of Plaza 25 in
Denver, Colorado on June 4, 2014 for a purchase price of $25.1 million. Plaza 25 is a three building
197,000 square foot office property in the exclusive Greenwood Village submarket. The
property was 93.3% occupied at closing and is anticipated to
generate an initial full-year cash net operating income yield of
approximately 8.1% based on the purchase price.
Subsequent Events
On July 18, 2014, the Company
announced the completion of the acquisition of Lake Vista Pointe in
Dallas, Texas for a purchase price
of $28.4 million. Lake Vista
Pointe is a 163,000 square foot office property in the growing
Lewisville, Texas submarket.
The property is leased to a single tenant through 2021, with a 5
year extension option. The acquisition is anticipated
to generate an initial full-year cash net operating income yield of
approximately 7.8% based on the purchase price, with contractual
annual rent escalations. The acquisition was financed with an
$18.5 million mortgage that has been
fixed at a 4.28% interest rate for 10 years.
Capital Structure
During the quarter the Company completed its IPO resulting in
net proceeds of approximately $72.5
million.
As of June 30, 2014, the Company
had total outstanding debt of approximately $155.0 million. All of the Company's outstanding
debt is fixed rated with a weighted average maturity of 5.9
years. In June 2014, the
Company increased the total borrowing capacity on its revolving
credit facility from $15 million to
$30 million with the addition of the
Plaza 25 property to the borrowing base collateral.
Dividend
On May 12, 2014, the Company's
board of directors declared an initial, prorated cash dividend of
$0.183 per share for the quarterly
period from April 21, 2014 through
June 30, 2014, which is equivalent to
a full quarterly dividend of $0.235. The dividend was paid to
stockholders and common unitholders on July
17, 2014.
Webcast and Conference Call Details
City Office's management will hold a conference call at
11:00 am Eastern Time on August 14, 2014.
The webcast will be available under the "Investor Relations"
section of the Company's website at www.cityofficereit.com.
The conference call can be accessed by dialing 1-888-317-6016 for
domestic callers and 1-412-317-6016 for international
callers.
A replay of the call will be available later in the day on
August 14, 2014, continuing through
midnight Eastern Time on October 14, 2014 and can be accessed by dialing
1-877-344-7529 for domestic callers and 1-412-317-0088 for
international callers. The passcode for the replay is
10049830. A replay will also be available at "Webcasts &
Events" in the "Investor Relations" section of the company's
website.
A supplemental financial package to accompany the discussion of
the results will be posted on www.cityofficereit.com under the
"Investor Relations" section.
Forward-looking Statements
This press release contains "forward looking statements" within
the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and other federal
securities laws. All statements that are not statements of
historical facts are, or may be deemed to be, forward looking
statements. Forward looking statements reflect our current
expectations concerning future results, objectives, plans and
goals, and involve known and unknown risks, uncertainties and other
factors that are difficult to predict and which may cause future
results, performance or achievements to differ. These risks,
uncertainties and other factors include factors described in our
news releases and filings with the Securities and Exchange
Commission. The Company does not have any obligation to
publicly update any forward looking statements to reflect
subsequent events or circumstances.
Non-GAAP Financial Measures
FFO, Core FFO and AFFO are supplemental non-GAAP financial
measures.
Funds from Operations ("FFO") – The National Association
of Real Estate Investment Trusts ("NAREIT') states FFO should
represent net income or loss (computed in accordance with GAAP)
plus real estate related depreciation and amortization (excluding
amortization of deferred financing costs) and after adjustments of
unconsolidated partnerships and joint ventures, gains or losses on
the sale of property and impairments to real
estate.
The Company uses FFO as a supplemental performance measure
because it believes that FFO is beneficial to investors as a
starting point in measuring the Company's operational
performance. We also believe that, as a widely recognized
measure of the performance of REITs, FFO will be used by investors
as a basis to compare the Company's operating performance with that
of other REITs.
However, because FFO excludes depreciation and amortization and
captures neither the changes in the value of the Company's
properties that result from use or market conditions nor the level
of capital expenditures and leasing commissions necessary to
maintain the operating performance of the Company's properties, all
of which have real economic effects and could materially impact the
Company's results from operations, the utility of FFO as a measure
of the Company's performance is limited. In addition, other
equity REITs may not calculate FFO in accordance with the NAREIT
definition as the Company does, and, accordingly, the Company's FFO
may not be comparable to such other REITs' FFO. Accordingly,
FFO should be considered only as a supplement to net income as a
measure of the Company's performance.
Core Funds from Operations ("Core FFO") – Management
believes that Core FFO is a useful measure of our operating
performance. We calculate Core FFO by using FFO as defined by
NAREIT and adjusting for certain other non-core
items. We also exclude from our Core FFO calculation
acquisition costs, the one-time loss on early extinguishment of
Predecessor debt, changes in the fair value of the earn-out and the
amortization of stock based compensation.
Adjusted Funds From Operations ("AFFO") – Management
believes that AFFO is a useful measure of our liquidity. We
compute AFFO by adding to FFO the non-cash amortization of deferred
financing fees, and non-real estate depreciation, and then
subtracting cash paid for any tenant improvements, leasing
commissions, and capital expenditures, and eliminating the net
effect of straight-line rents, deferred market rent and debt fair
value amortization. For the second quarter, we have
further excluded all costs associated with tenant
improvements, leasing commissions and capital expenditures which
were funded by the entity contributing the properties at
closing.
City Office REIT,
Inc. and Predecessor
|
Condensed
Consolidated and Combined Balance Sheets
|
(Unaudited)
|
|
June 30,
2014
|
Predecessor
December 31,
2013
|
|
|
|
|
|
Assets
|
|
|
|
Real estate
properties, cost
|
|
|
|
Land
|
$ 57,673,760
|
$ 30,164,513
|
|
Building and
improvement
|
97,665,522
|
62,908,338
|
|
Tenant
improvement
|
22,507,580
|
14,590,971
|
|
Furniture, fixtures
and equipment
|
198,114
|
198,114
|
|
|
178,044,976
|
107,861,936
|
|
Accumulated
depreciation
|
(10,949,359)
|
(7,735,450)
|
|
|
|
|
|
|
167,095,617
|
100,126,486
|
|
|
|
|
|
Investments in
unconsolidated entity
|
—
|
4,337,899
|
|
Cash and cash
equivalents
|
10,175,937
|
7,127,764
|
|
Restricted
cash
|
12,809,664
|
7,368,124
|
|
Rents receivable,
net
|
6,287,588
|
4,680,284
|
|
Deferred financing
costs, net of accumulated amortization
|
2,734,641
|
1,167,666
|
|
Deferred leasing
costs, net of accumulated amortization
|
2,482,529
|
2,302,841
|
|
Acquired lease
intangibles assets, net
|
25,281,548
|
13,751,563
|
|
Prepaid expenses and
other assets
|
2,386,945
|
296,572
|
|
Deferred offering
costs
|
—
|
1,830,950
|
|
Total
Assets
|
$ 229,254,469
|
$ 142,990,149
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Liabilities:
|
|
|
|
Debt
|
$ 155,002,462
|
$ 109,916,430
|
|
Accounts payable and
accrued liabilities
|
4,817,775
|
2,347,999
|
|
Deferred
rent
|
438,770
|
1,488,618
|
|
Tenant rent
deposits
|
1,861,194
|
1,361,641
|
|
Acquired lease
intangibles liability, net
|
692,085
|
167,346
|
|
Dividends
payable
|
2,094,400
|
—
|
|
Earn-out
liability
|
7,057,351
|
—
|
|
Total
Liabilities
|
171,964,037
|
115,282,034
|
|
|
|
|
|
Commitments and
Contingencies (Note 9)
|
|
|
|
Equity:
|
|
|
|
Common stock, $0.01
par value, 100,000,000 shares authorized,
8,192,915 shares issued and
outstanding
|
81,939
|
—
|
|
Additional paid in
capital
|
45,121,480
|
—
|
|
Accumulated
deficit
|
(3,443,504)
|
—
|
|
Predecessor
equity
|
—
|
26,624,375
|
|
Total Stockholders'
and Predecessor
Equity
|
41,759,915
|
26,624,375
|
|
Operating Partnership
noncontrolling interests
|
16,274,888
|
—
|
|
Noncontrolling
interests in properties
|
(744,371)
|
1,083,740
|
|
Total
Equity
|
57,290,432
|
27,708,115
|
|
Total Liabilities
and Equity
|
$ 229,254,469
|
$ 142,990,149
|
|
|
|
|
|
|
|
City Office REIT,
Inc. and Predecessor
|
Condensed
Consolidated and Combined Statements of Operations
|
(Unaudited)
|
|
Three Months
Ended June 30,
2014
|
Six Months
Ended June 30,
2014
|
|
|
|
|
|
Revenues:
|
|
|
|
Rental
income
|
$ 7,714,275
|
$ 14,951,033
|
|
Expense
reimbursement
|
502,772
|
952,814
|
|
Other
|
176,162
|
471,822
|
|
Total
Revenues
|
8,393,209
|
16,375,669
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
Property operating
expenses
|
2,267,612
|
4,522,074
|
|
Insurance
|
169,568
|
322,426
|
|
Property
taxes
|
561,208
|
1,022,312
|
|
Property management
fees
|
186,162
|
393,779
|
|
Acquisition
costs
|
343,803
|
1,150,147
|
|
Base management
fee
|
185,176
|
185,176
|
|
Stock based
compensation
|
285,142
|
285,142
|
|
General and
administrative
|
364,303
|
414,303
|
|
Depreciation and
amortization
|
3,415,807
|
6,575,784
|
|
Total Operating
Expenses
|
7,778,781
|
14,871,143
|
|
Operating
income/(loss)
|
614,428
|
1,504,526
|
|
Interest
Expense:
|
|
|
|
Contractual interest
expense
|
(1,785,288)
|
(3,954,535)
|
|
Amortization of
deferred financing costs
|
(136,879)
|
(1,129,046)
|
|
Loss on early
extinguishment of Predecessor debt
|
(1,654,826)
|
(1,654,826)
|
|
|
(3,576,993)
|
(6,738,407)
|
|
Change in fair value
of earn-out
|
(104,865)
|
(104,865)
|
|
Gain on equity
investment
|
—
|
4,474,644
|
|
Equity in income of
unconsolidated entity
|
—
|
—
|
|
Net
loss
|
(3,067,430)
|
(864,102)
|
|
Less:
|
|
|
|
Net loss attributable
to noncontrolling interests in properties
|
69,044
|
78,970
|
|
Net loss/(income)
attributable to Predecessor
|
240,057
|
(1,973,197)
|
|
Net loss attributable
to Operating Partnership unitholders'
noncontrolling interests
|
814,127
|
814,127
|
|
Net loss
attributable to stockholders
|
$ (1,944,202)
|
$ (1,944,202)
|
|
|
|
|
|
|
|
|
|
Net loss per
share:
|
|
|
Basic and
diluted
|
$
(0.24)
|
$
(0.24)
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
Basic and
diluted
|
8,057,521
|
8,057,521
|
|
|
|
|
|
Dividends/distributions declared per common share and
unit
|
$
0.18
|
$
0.18
|
|
|
|
|
|
City Office REIT,
Inc.
Reconciliation of
Net Income to Adjusted Funds from Operations
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended June 30,
2014
|
|
|
|
|
|
|
|
|
Net loss attributable
to stockholders1,2,3,4
|
|
|
|
$ (1,944,202)
|
|
|
Depreciation and
amortization
|
|
|
|
3,415,807
|
|
|
Operating Partnership
unitholders' noncontrolling interest
|
|
|
|
(814,127)
|
|
|
Net loss attributable
to Predecessor
|
|
|
|
(240,057)
|
|
|
|
|
|
|
417,421
|
|
|
Non-controlling
interests in properties:
|
|
|
|
|
|
|
Share of net
loss
|
|
|
|
(69,044)
|
|
|
Share of
FFO
|
|
|
|
(183,291)
|
|
Funds from
Operations ("FFO")1,2,3,4
|
|
|
|
$
165,086
|
|
|
Acquisition
costs
|
|
|
|
343,803
|
|
|
Loss on early
extinguishment of Predecessor debt
|
|
|
|
1,654,826
|
|
|
Change in fair value
of earn-out
|
|
|
|
104,865
|
|
|
Stock based
compensation
|
|
|
|
285,142
|
|
Core
FFO1,2,3,4
|
|
|
|
$
2,553,722
|
|
|
Straight line rent
adjustment
|
|
|
|
(416,847)
|
|
|
Above and below
market leases
|
|
|
|
101,497
|
|
|
Amortization of
deferred financing costs
|
|
|
|
136,879
|
|
|
Net tenant
improvement
|
|
|
|
(65,430)
|
|
|
Net leasing
commissions
|
|
|
|
(85,190)
|
|
|
Net capital
expenditures
|
|
|
|
(85,836)
|
|
|
Free rent funded at
closing
|
|
|
|
401,160
|
|
Adjusted Funds
from Operations ("AFFO")1,2,3,4
|
|
|
|
$
2,539,955
|
|
|
|
|
|
|
|
Total number of
common stock and common units outstanding at June 30,
2014
|
|
|
|
11,797,091
|
|
|
|
|
|
|
|
Core FFO per
share
|
|
|
|
$0.22
|
|
AFFO per
share
|
|
|
|
$0.22
|
|
|
|
|
|
|
|
|
|
(1) The
results of operations for the three months ended June 30, 2014
reflect the results of operations of the Predecessor from April 1,
2014 through April 20, 2014 and of City Office REIT, Inc. from
April 21, 2014 to June 30, 2014.
|
(2) Interest
expense was approximately $148,000 higher due to larger debt
balances and higher interest rates of the Predecessor prior to City
Office REIT's IPO on April 21, 2014.
|
(3) Includes
Plaza 25 results beginning at acquisition date on June 4,
2014.
|
(4) Excludes
the results of Lake Vista Pointe as the asset was acquired
subsequent to quarter-end.
|
Contact
City Office REIT, Inc.
Anthony Maretic
+1-604-806-3366
investorrelations@cityofficereit.com
SOURCE City Office REIT, Inc.