VANCOUVER, March 5, 2015 /CNW/ -- City Office REIT, Inc.
(NYSE: CIO) (the "Company"), today announced its results for the
quarter and full year ended December 31,
2014.
Fourth Quarter Highlights
- Achieved Core Funds From Operations ("Core FFO") of
$3.3 million, or $0.26 per fully diluted share;
- Reported Adjusted Funds From Operations ("AFFO") of
$2.9 million or $0.23 per fully diluted share;
- Closed the Florida Research Park acquisition in Orlando, Florida, a 124,500 square foot office
property for $26.5 million;
- City Office's 2.3 million square feet of net rentable space was
94.1% leased at December 31, 2014,
including recently signed leases not commenced;
- Commenced approximately 59,000 square feet of new and renewal
leases during the quarter. Renewal lease rents increased an average
of 6% over expiring rents;
- Executed approximately 8,000 square feet of new leases during
the quarter that will occupy subsequent to quarter end. At
December 31, 2014, there was a total
of 15,000 square feet of leases that will commence subsequent to
the end of the fourth quarter;
- Raised total gross proceeds of $53,283,300 in a public follow-on offering of
4,262,664 shares of common stock, including the exercise of the
underwriters' overallotment option, at a price of $12.50 per share;
- Declared and paid a fourth quarter dividend of $0.235 per share; and
- Subsequent to the end of the fourth quarter, acquired
Logan Tower, a 69,968 square foot
property in downtown Denver,
Colorado for $10.5
million.
"We continue to see strong underlying real estate fundamentals
in our target markets and increasing demand for office space from a
variety of users," commented James
Farrar, Chief Executive Officer. "During the quarter
we focused on sourcing acquisition opportunities and enhancing the
value of our portfolio. Our specific priorities included
extending in-place lease maturities as well as leasing vacant
space. The results of these efforts was the commencement of
59,000 square feet of new and renewal leases increasing our total
occupancy to 94.1% including signed leases that will commence
subsequent to quarter end."
"Our relationships with local operators enable us to continue to
source attractive deals. Since completing our IPO in April, we have
closed four acquisitions in great locations representing 555,000
square feet in the Dallas,
Denver and Orlando markets. These cities are among
our most favored due to the strength of their economies and the
demonstrated job growth. The combined acquisition price
totalled $90 million at an 8.2%
average capitalization rate. We believe that the quality of
our properties together with the demand for office space in our
markets positions City Office to increase its net operating income
and create value for our
stockholders."
Financial Results for the Fourth Quarter 2014
Core FFO was $3.3 million or
$0.26 per fully diluted share.
AFFO was $2.9 million or $0.23 per fully diluted share. Net loss
attributable to the Company for the three months ended December 31, 2014 was $1.3
million, or ($0.14) per fully
diluted share.
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 December 31, 2014 contained 2.3 million net
rentable square feet and was 94.1% occupied, including recently
signed leases not commenced. Excluding the impact of
acquisitions that occurred during the quarter, this represents an
approximately 60 basis point increase compared to the end of the
prior quarter. City Office's net operating income ("NOI") was
$6.4 million on a GAAP basis during
the fourth quarter of 2014.
Leasing Activity
During the fourth quarter of 2014, the Company commenced seven
new leases and four renewals totaling 59,000 square feet, and
executed approximately 8,000 square feet of new leases that will
commence subsequent to the end of the fourth quarter. This
increased the total signed leases not commenced to 15,000 square
feet.
New Leasing – During the fourth quarter of 2014, the Company
signed 13,000 square feet of new leases with a weighted average
lease term of 7.3 years at an average rent per square foot of
$18.37 and at an average cost of
$5.05 per square foot per
year.
Renewal Leasing – Tenant retention during the fourth quarter of
2014 was 99%. The Company signed 29,000 square feet of
renewal leases at an average rent per square foot of $23.48 representing a 6% rate increase from the
expiring rent. The average cost of renewal leases was
$3.45 per square foot per
year.
Acquisition Activity
The Company completed the acquisition of Florida Research Park
in Orlando, Florida on
November 18, 2014 for a purchase
price of $26.5 million. Florida
Research Park is a 124,500 square foot office property in
Orlando's Central Florida Research
Park submarket. The property was constructed in 1999 and is
fully leased through 2021. The acquisition is
anticipated to generate an initial full-year cash net operating
income yield of approximately 9% based on the purchase price with
contractual annual rent escalations. The acquisition was
financed with a $17 million mortgage
that has been fixed at a 4.44% interest rate for 10 years.
Subsequent Events
On February 4, 2015, the Company
acquired Logan Tower in Denver, Colorado for a purchase price of
$10.5 million. Logan Tower is a 69,968 multi-tenant office
building. The property, located in the vibrant Uptown submarket of
downtown Denver, was purchased
with below market in-place rents, which provides significant net
operating income growth potential as leases roll over. The
acquisition is anticipated to generate an initial full-year cash
net operating income yield of approximately 8.0% based on the
purchase price. The purchase was closed all cash and the
property was contributed to the Company's credit facility as
additional security.
Capital Structure
On December 10, 2014, the Company
completed a public follow-on offering of 3,750,000 shares of its
common stock at an offering price of $12.50 per share for total gross proceeds of
$46,875,000. On December 23, 2014, the underwriters exercised
their overallotment option to purchase an additional 512,664 shares
of its common stock at the offering price of $12.50 per share, less underwriting
discounts. Net proceeds from the overallotment were used to
redeem a portion of the common stock of City Office REIT, Inc. and
common units of City Office REIT Operating Partnership, L.P. held
by certain Second City entities, from whom we acquired our initial
properties.
As of December 31, 2014, the
Company had total outstanding debt of approximately $189.9 million. All of the Company's outstanding
debt is fixed rate with a weighted average maturity of 6.2
years.
Dividend
On December 15, 2014, the
Company's board of directors declared a cash dividend of
$0.235 per share for the three months
ended December 31, 2014. The
dividend was paid to stockholders and common unitholders on
January 16, 2015.
2015 Outlook
For the nine properties which the Company owned as of
December 31, 2014, the Company is
providing a 2015 Cash NOI outlook range of $27.7 to $28.3 million and a GAAP NOI outlook
range of $27.2 to $27.8 million. The
Company is also reiterating its' previous estimates of full year
general and administrative expenses of $1.8
million (excluding stock-based compensation and the base
management fee). The Company will continue to disclose the
expected first year cash NOI, for each acquisition announcement in
2015.
Webcast and Conference Call Details
City Office's management will hold a conference call at
11:00 am Eastern Time on March 5, 2015.
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 1-866-262-0919 for
domestic callers and 1-412-902-4106 for international
callers.
A replay of the call will be available later in the day on
March 5, 2015, continuing through
midnight Eastern Time on April 21, 2015 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
10059415. 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.
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") – 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, loss on early
extinguishment of debt, changes in the fair value of the earn-out
and the amortization of stock based compensation.
Adjusted Funds From Operations ("AFFO") – 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 recurring tenant improvements, leasing commissions, and
capital expenditures, and eliminating the net effect of
straight-line rents, deferred market rent and debt fair value
amortization. Recurring capital expenditures exclude
development / redevelopment activities, capital expenditures
planned at acquisition and costs to reposition a property. We
exclude first generation leasing costs within the first two years
of our initial public offering or acquisition, which are generally
to fill vacant space in properties we acquire or were planned at
acquisition. 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.
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.
City Office REIT,
Inc. and Predecessor
|
Consolidated and
Combined Balance Sheets
|
(in thousands,
except par value and share data)
|
|
|
December
31,
|
|
2014
|
|
Predecessor
2013
|
Assets
|
|
|
|
Real estate
properties, cost
|
|
|
|
Land
|
$
66,204
|
|
$
30,165
|
Building and
improvement
|
132,964
|
|
62,908
|
Tenant
improvement
|
27,773
|
|
14,591
|
Furniture, fixtures
and equipment
|
198
|
|
198
|
|
227,139
|
|
107,862
|
Accumulated
depreciation
|
(15,311)
|
|
(7,735 )
|
|
211,828
|
|
100,127
|
|
|
|
|
Investments in
unconsolidated entity
|
—
|
|
4,338
|
Cash and cash
equivalents
|
34,862
|
|
7,128
|
Restricted
cash
|
11,093
|
|
7,368
|
Rents receivable, net
|
7,981
|
|
4,680
|
Deferred financing
costs, net of accumulated amortization
|
2,901
|
|
1,168
|
Deferred leasing
costs, net of accumulated amortization
|
2,618
|
|
2,303
|
Acquired lease
intangibles assets, net
|
29,391
|
|
13,752
|
Prepaid expenses and
other assets
|
832
|
|
297
|
Deferred offering
costs
|
—
|
|
1,829
|
Total
Assets
|
$
301,506
|
|
$
142,990
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Liabilities:
|
|
|
|
Debt
|
$
189,940
|
|
$
109,916
|
Accounts payable and
accrued liabilities
|
4,080
|
|
2,348
|
Deferred rent
|
2,212
|
|
1,489
|
Tenant rent deposits
|
1,862
|
|
1,362
|
Acquired lease
intangibles liability, net
|
606
|
|
167
|
Dividend distributions
payable
|
3,571
|
|
—
|
Earn-out
liability
|
8,000
|
|
—
|
Total
Liabilities
|
210,271
|
|
115,282
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
Equity:
|
|
|
|
Common stock, $0.01
par value, 100,000,000 shares authorized, 12,279,110
shares issued and outstanding
|
123
|
|
—
|
Additional paid-in
capital
|
91,308
|
|
—
|
Accumulated
deficit
|
(11,320 )
|
|
—
|
Predecessor equity
|
—
|
|
26,624
|
Total Stockholders'
and
Predecessor Equity
|
80,111
|
|
26,624
|
Operating Partnership
unitholders'
non-controlling interests
|
11,878
|
|
—
|
Non-controlling
interests in properties
|
(754 )
|
|
1,084
|
Total
Equity
|
91,235
|
|
27,708
|
Total Liabilities
and Equity
|
$
301,506
|
|
$
142,990
|
|
|
|
|
City Office REIT,
Inc. and Predecessor
|
Consolidated and
Combined Statements of Operations
|
(in thousands,
except share and per share data)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues:
|
|
|
|
|
|
|
|
Rental
income
|
$ 9,255
|
|
$ 5,489
|
|
$ 33,236
|
|
$ 18,428
|
Expense
reimbursement
|
1,073
|
|
223
|
|
2,869
|
|
1,316
|
Other
|
201
|
|
153
|
|
791
|
|
747
|
Total
Revenues
|
10,529
|
|
5,865
|
|
36,896
|
|
20,491
|
Operating
Expenses:
|
|
|
|
|
|
|
|
Property operating
expenses
|
4,142
|
|
2,673
|
|
14,332
|
|
8,466
|
Acquisition
costs
|
582
|
|
—
|
|
2,133
|
|
1,479
|
Stock-based
compensation
|
424
|
|
—
|
|
1,091
|
|
—
|
General and
administrative
|
493
|
|
—
|
|
1,314
|
|
—
|
Base management
fee
|
271
|
|
—
|
|
682
|
|
—
|
Depreciation and
amortization
|
4,103
|
|
2,474
|
|
14,729
|
|
7,775
|
Total Operating
Expenses
|
10,015
|
|
5,147
|
|
34,281
|
|
17,720
|
Operating
income
|
514
|
|
718
|
|
2,615
|
|
2,771
|
Interest
Expense:
|
|
|
|
|
|
|
|
Contractual interest
expense
|
(2,032)
|
|
(1,661)
|
|
(7,854)
|
|
(5,050)
|
Amortization of
deferred financing costs
|
(155)
|
|
(58)
|
|
(1,443)
|
|
(318)
|
Loss on early
extinguishment of Predecessor
debt
|
—
|
|
—
|
|
(1,655)
|
|
—
|
|
(2,187)
|
|
(1,719)
|
|
(10,952)
|
|
(5,368)
|
Change in fair value
of earn-out
|
—
|
|
—
|
|
(1,048)
|
|
—
|
Gain on equity
investment
|
—
|
|
—
|
|
4,475
|
|
—
|
Canadian offering
costs
|
—
|
|
(1,983)
|
|
—
|
|
(1,983)
|
Equity in income of
unconsolidated entity
|
—
|
|
147
|
|
—
|
|
403
|
Net
loss
|
(1,673)
|
|
(2,837)
|
|
(4,910)
|
|
(4,177)
|
Less:
|
|
|
|
|
|
|
|
Net (income)/loss
attributable to noncontrolling
interests in properties
|
(73)
|
|
(16)
|
|
(82)
|
|
44
|
Net income
attributable to Predecessor
|
|
|
|
|
(1,973)
|
|
|
Net loss attributable
to Predecessor
|
—
|
|
(2,853)
|
|
|
|
(4,133)
|
Net loss attributable
to Operating Partnership
unitholders' noncontrolling interests
|
447
|
|
|
|
1,955
|
|
|
Net loss
attributable to stockholders
|
$
(1,299)
|
|
|
|
$
(5,010)
|
|
|
Net loss per
share
|
|
|
|
|
|
|
|
Basic and
diluted
|
$
(0.14)
|
|
|
|
$
(0.59)
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic and
diluted
|
9,471,094
|
|
|
|
8,475,697
|
|
|
Dividend
distributions declared per common share and
unit
|
$
0.235
|
|
|
|
$
0.653
|
|
|
|
|
|
|
|
|
|
|
City Office REIT,
Inc.
|
Reconciliation of
Net Operating Income
|
(Unaudited)
|
(in
thousands)
|
|
|
|
Three
Months
|
|
|
Ended Dec
31,
|
|
|
2014
|
|
|
|
Net loss
|
$
(1,673)
|
Adjustments to net
loss:
|
|
|
General and
administrative
|
493
|
|
Interest
expense
|
2,032
|
|
Amortization of
financing costs
|
155
|
|
Depreciation and
Amortization
|
4,103
|
|
Acquisition
costs
|
582
|
|
Stock based
compensation
|
424
|
|
Base management
fee
|
271
|
Net Operating
Income ("NOI")
|
$
6,387
|
|
Straight-line rent
adjustments
|
(176)
|
|
Amortization of
acquired above market leases
|
156
|
|
Free rent funded by
predecessor at closing of IPO
|
115
|
Portfolio adjusted
cash NOI
|
$
6,482
|
|
Noncontrolling
interest in properties -
share in cash NOI
|
(271)
|
Adjusted Cash NOI
(CIO Share)
|
$
6,211
|
|
|
|
City Office REIT,
Inc.
|
Reconciliation of
Net Income to Adjusted Funds from Operations
|
(Unaudited)
|
(in thousands,
except share and per share data)
|
|
|
|
Three
Months
|
|
|
Ended Dec
31,
|
|
|
2014
|
|
|
|
Net loss attributable
to stockholders
|
$
(1,299)
|
|
(+) Depreciation and
amortization
|
4,103
|
|
(-) Operating
Partnership unitholders'
noncontrolling interest
|
(447)
|
|
|
2,357
|
|
Non-controlling
interests in properties:
|
|
|
(-) Share of net
loss
|
73
|
|
(-) Share of
FFO
|
(186)
|
Funds from
Operations ("FFO")
|
$
2,244
|
|
(+) Acquisition
costs
|
582
|
|
(+) Stock based
compensation
|
424
|
Core
FFO
|
$
3,250
|
|
(-) Straight line
rent adjustment
|
(176)
|
|
(+) Amortization of
above and below market lease
|
156
|
|
(+) Amortization of
deferred financing costs
|
152
|
|
(-) Net recurring
tenant improvement
|
(123)
|
|
(-) Net recurring
leasing commissions
|
(47)
|
|
(-) Net recurring
capital expenditures
|
(460)
|
|
(+) Free rent funded
at closing
|
115
|
Adjusted Funds
from Operations ("AFFO")
|
$
2,867
|
|
|
|
Core FFO per share
and common unit
|
$
0.26
|
AFFO per share and
common unit
|
$
0.23
|
|
|
|
Dividends per
share and common unit
|
$
0.235
|
Core FFO Payout
Ratio
|
92%
|
AFFO Payout
Ratio
|
104%
|
|
|
|
Weighted average
common stock and common
units outstanding
|
12,693,764
|
Contact
City Office REIT, Inc.
Anthony Maretic, CFO
+1-604-806-3366
investorrelations@cityofficereit.com
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/city-office-reit-announces-fourth-quarter-2014-results-300045972.html
SOURCE City Office REIT, Inc.