VANCOUVER, May 8, 2015 /PRNewswire/ -- City Office
REIT, Inc. (NYSE: CIO) (the "Company" or "City Office"), today
announced its results for the quarter ended March 31, 2015.
First Quarter Highlights
- Achieved Core Funds From Operations ("Core FFO") of
$4.0 million, or $0.26 per fully diluted share;
- Reported Adjusted Funds From Operations ("AFFO") of
$3.4 million, or $0.21 per fully diluted share;
- Closed the Logan Tower acquisition in Denver, Colorado, a 69,968 square foot office
property, for $10.5 million;
- City Office's 2.4 million square feet of net rentable space was
93.7% leased at March 31, 2015;
- Commenced approximately 101,000 square feet of new and renewal
leases during the quarter, including 78,000 square feet of early
renewals;
- Executed approximately 15,000 square feet of new leases during
the quarter that will commence subsequent to quarter end. At
March 31, 2015, there were a total of
19,000 square feet of leases that will commence subsequent to the
end of the first quarter;
- Declared and paid a first quarter dividend of $0.235 per share; and
- Subsequent to the end of the first quarter, entered into an
agreement of purchase and sale for the acquisition of Superior
Pointe, a 149,006 square foot property in the Denver, Colorado metropolitan area, for
$25.8 million.
"During the quarter, our focus continued to be on sourcing
acquisition opportunities and implementing specific plans to
enhance the value of our properties," commented James Farrar, City Office's Chief Executive
Officer. "Management has been working to extend in-place
lease maturities on a long term basis. During the quarter, we
successfully concluded the early renewal of Planar Systems, Inc. at
our Amberglen property in Portland. This resulted in the extension of
72,000 square feet of space until 2022 at a 20% higher base rental
rate. We remain confident that our efforts at other
properties will achieve similar favorable results."
Financial Results for the First Quarter 2015
Core FFO was $4.0 million or
$0.26 per fully diluted share.
AFFO was $3.4 million or $0.21 per fully diluted share. Net loss
attributable to the Company for the three months ended March 31, 2015 was $0.7
million, or ($0.06) 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 March 31, 2015 contained 2.4 million net rentable
square feet and was 93.7% occupied, including recently signed
leases not commenced, at the end of the first quarter 2015.
Excluding the impact of acquisitions that occurred during the
quarter, this represents an approximately 30 basis point increase
compared to the end of the prior quarter. City Office's net
operating income ("NOI") was $7.1
million on a GAAP basis and $7.2
million on a cash basis during the first quarter of
2015.
Leasing Activity
During the first quarter of 2015, the Company commenced 5 new
leases for 14,000 square feet and 2 renewals for 9,000 square
feet. Early renewals signed in the first quarter totalled
78,000 square feet, taking the total leasing activity in the
quarter to 101,000 square feet.
New Leasing – During the first quarter of 2015, the Company
signed 21,000 square feet of new leases with a weighted average
lease term of 6.7 years at an average rent per square foot of
$21.80 and at an average cost of
$4.42 per square foot per year.
Renewal Leasing – 2 of 4 expiring leases renewed in the first
quarter of 2015. The Company signed 9,000 square feet of
renewal leases at an average rent per square foot of $21.32 and at an average cost of $1.81 per square foot per year.
Acquisitions
The Company completed the acquisition of Logan Tower on
February 4, 2015 for a purchase price
of $10.5 million. Logan Tower
is a 69,968 square foot multi-tenant office building that is 95%
occupied and located in downtown Denver. 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 City Office REIT's credit facility as additional
security.
Subsequent Events
On April 20, 2015, the Company
announced that it entered into an Agreement of Purchase and Sale to
acquire Superior Pointe in the Denver,
Colorado metropolitan area for a purchase price of
$25.8 million. Superior Pointe
is a 149,006 square foot Class 'A' multi-tenant office property
that is 90% occupied in the growing Northwest/Boulder submarket.
The acquisition is anticipated to generate an initial full-year
cash net operating income yield of approximately 7.5% based on the
purchase price and the Company's planned capital
improvements. The major conditions to the acquisition have
been satisfied and the transaction is anticipated to close in
June 2015.
Capital Structure
As of March 31, 2015, the Company
had total outstanding debt of approximately $189.7 million. All of the Company's outstanding
debt is at fixed rates with a weighted average maturity of 6.0
years.
Dividend
On March 19, 2015, the Company's
board of directors declared a cash dividend of $0.235 per share for the three months ended
March 31, 2015. The dividend
was paid to stockholders and common unitholders on April 17, 2015.
Webcast and Conference Call Details
City Office's management will hold a conference call at
11:00 am Eastern Time on May 8, 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
May 8, 2015, continuing through
11:59pm
Eastern Time on August 6, 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 10063537. A replay will also be available for
twelve months following the call 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 Core 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. These factors include, but
are not limited to, the Company's ability to source and acquire
properties on attractive terms, or at all; the Company's
expectations and forecasts of future leasing activity at its
current and future properties, and the Company's ability to
accurately model the income yield, capitalization rate, and other
financial metrics used to evaluate its properties. These and other
material risks are described in the Company's Annual Report on 10-K
for the year ended December 31, 2014
and any other documents filed by the Company from time to time,
which are available from the Company and from the SEC, and you
should read and understand these risks when evaluating any
forward-looking statement. 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
|
Condensed
Consolidated and Combined Balance Sheets
|
(Unaudited)
|
|
(In thousands,
except par value and share data)
|
|
|
|
|
|
March
31, 2015
|
|
December 31,
2014
|
Assets
|
|
|
|
Real estate
properties, cost
|
|
|
|
Land
|
$ 67,510
|
|
$ 66,204
|
Buildings and
improvements
|
140,933
|
|
132,964
|
Tenant
improvement
|
28,482
|
|
27,773
|
Furniture, fixtures
and equipment
|
198
|
|
198
|
|
237,123
|
|
227,139
|
Accumulated
depreciation
|
(17,719 )
|
|
(15,311 )
|
|
219,404
|
|
211,828
|
Cash and cash
equivalents
|
23,985
|
|
34,862
|
Restricted
cash
|
9,227
|
|
11,093
|
Rents receivable,
net
|
9,252
|
|
7,981
|
Deferred financing
costs, net of accumulated amortization
|
2,731
|
|
2,901
|
Deferred leasing
costs, net of accumulated amortization
|
3,003
|
|
2,618
|
Acquired lease
intangibles assets, net
|
28,669
|
|
29,391
|
Prepaid expenses and
other assets
|
322
|
|
832
|
Total
Assets
|
$ 296,593
|
|
$ 301,506
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Liabilities:
|
|
|
|
Debt
|
$ 189,669
|
|
$ 189,940
|
Accounts payable and
accrued liabilities
|
3,917
|
|
4,080
|
Deferred
rent
|
1,526
|
|
2,212
|
Tenant rent
deposits
|
1,877
|
|
1,862
|
Acquired lease
intangibles liability, net
|
855
|
|
606
|
Dividend distributions
payable
|
3,571
|
|
3,571
|
Earn-out
liability
|
8,000
|
|
8,000
|
Total
Liabilities
|
209,415
|
|
210,271
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
Equity:
|
|
|
|
Common stock, $0.01
par value, 100,000,000 shares authorized, 12,279,110
shares issued and
outstanding
|
123
|
|
123
|
Additional paid-in
capital
|
91,717
|
|
91,308
|
Accumulated
deficit
|
(15,634 )
|
|
(11,320 )
|
Total Stockholders'
Equity
|
76,206
|
|
80,111
|
Operating Partnership
unitholders' non-controlling interests
|
11,701
|
|
11,878
|
Non-controlling
interests in properties
|
(729 )
|
|
(754 )
|
Total
Equity
|
87,178
|
|
91,235
|
Total Liabilities
and Equity
|
$ 296,593
|
|
$ 301,506
|
|
|
|
|
City Office REIT,
Inc. and Predecessor
|
Condensed
Consolidated and Combined Statements of Operations
|
(Unaudited)
|
|
(In thousands,
except per share data)
|
|
|
|
Three Months Ended
March 31,
|
|
2015
|
|
2014
|
Revenues:
|
|
|
|
Rental
income
|
$
10,040
|
|
$ 7,237
|
Expense
reimbursement
|
891
|
|
450
|
Other
|
328
|
|
295
|
Total
Revenues
|
11,259
|
|
7,982
|
|
|
|
|
Operating
Expenses:
|
|
|
|
Property operating
expenses
|
4,116
|
|
3,126
|
Acquisition
costs
|
209
|
|
806
|
Stock-based
compensation
|
409
|
|
—
|
General and
administrative
|
408
|
|
—
|
Base management
fee
|
332
|
|
—
|
Depreciation and
amortization
|
4,406
|
|
3,160
|
Total Operating
Expenses
|
9,880
|
|
7,092
|
Operating
income
|
1,379
|
|
890
|
Interest
Expense:
|
|
|
|
Contractual interest
expense
|
(2,009)
|
|
(2,169)
|
Amortization of
deferred financing costs
|
(169)
|
|
(992)
|
|
|
|
|
|
(2,178)
|
|
(3,161 )
|
Gain on equity
investment
|
—
|
|
4,475
|
Net
(loss)/income
|
(799)
|
|
2,204
|
Less:
|
|
|
|
Net (income)/loss
attributable to non-controlling interests in properties
|
(121 )
|
|
10
|
Net income
attributable to Predecessor
|
—
|
|
2,214
|
Net loss attributable
to Operating Partnership unitholders' non-controlling
interests
|
177
|
|
|
Net loss
attributable to stockholders
|
$
(743)
|
|
|
Net loss per
share:
|
|
|
|
Basic and
diluted
|
$ (0.06
)
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
Basic and
diluted
|
12,279
|
|
|
Dividend
distributions declared per common share and unit
|
$
0.235
|
|
|
|
|
|
|
City Office REIT,
Inc.
|
Reconciliation of
Net Operating Income
|
(Unaudited)
|
|
(In
thousands)
|
|
|
|
Three Months
Ended March 31,
2015
|
|
|
|
Net loss
|
$
(799)
|
Adjustments to net
loss:
|
|
|
General and
administrative
|
408
|
|
Contractual interest
expense
|
2,009
|
|
Amortization of
deferred financing costs
|
169
|
|
Depreciation and
amortization
|
4,406
|
|
Acquisition
costs
|
209
|
|
Stock based
compensation
|
409
|
|
Base management
fee
|
332
|
Net Operating
Income ("NOI")
|
$
7,143
|
|
Net straight line
rent adjustment
|
(99)
|
|
Net amortization of
above and below market leases
|
118
|
Portfolio Adjusted
Cash NOI
|
$
7,162
|
|
Non-controlling
interests in properties - share in cash NOI
|
(313)
|
Adjusted Cash NOI
(CIO share)
|
$
6,849
|
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 March 31,
2015
|
|
|
|
Net loss attributable
to stockholders
|
$
(743)
|
|
(+) Depreciation and
amortization
|
4,406
|
|
(-) Operating
Partnership unitholders' noncontrolling interest
|
(177)
|
|
|
3,486
|
|
Non-controlling
interests in properties:
|
|
|
(-) Share of net
loss
|
121
|
|
(-) Share of
FFO
|
(229)
|
Funds from
Operations ("FFO")
|
$
3,378
|
|
(+) Acquisition
costs
|
209
|
|
(+) Stock based
compensation
|
409
|
Core
FFO
|
$
3,996
|
|
(-) Net straight line
rent adjustment
|
(99)
|
|
(+) Net amortization
of above and below market leases
|
118
|
|
(+) Net amortization
of deferred financing costs
|
164
|
|
(-) Net
recurring tenant improvement
|
(269)
|
|
(-) Net recurring
leasing commissions
|
(457)
|
|
(-) Net recurring
capital expenditures
|
(101)
|
Adjusted Funds
from Operations ("AFFO")
|
$
3,352
|
|
|
|
Core FFO per share
and common unit
|
$
0.26
|
AFFO per share and
common unit
|
$
0.21
|
|
|
|
Dividends per
share and common unit
|
$
0.235
|
Core FFO Payout
Ratio
|
92%
|
AFFO Payout
Ratio
|
109%
|
|
|
|
Weighted average
common stock and common units outstanding
|
15,602,333
|
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-first-quarter-2015-results-300080112.html
SOURCE City Office REIT, Inc.