City Office REIT, Inc. (NYSE: CIO) (the “Company,” “City
Office,” “we” or “our”) today announced its results for the quarter
ended March 31, 2021.
First Quarter Highlights
- Rental and other revenues were $39.5 million. GAAP net income
attributable to common stockholders was approximately $47.0
million, or $1.07 per fully diluted share;
- Core FFO was approximately $14.5 million, or $0.33 per fully
diluted share;
- AFFO was approximately $11.2 million, or $0.26 per fully
diluted share;
- Collected over 99% of first quarter contractual base rent;
- Same Store Cash NOI increased 5.0% in the first quarter as
compared to the same period in 2020;
- In-place occupancy closed the quarter at 90.5%;
- Executed approximately 208,000 square feet of new and renewal
leases during the quarter;
- Closed the disposition of the Cherry Creek property in Denver,
Colorado for a gross sale price of $95.0 million and generated a
gain on sale of approximately $47.4 million;
- Declared a first quarter dividend of $0.15 per share of common
stock, paid on April 23, 2021; and
- Declared a first quarter dividend of $0.4140625 per share of
Series A Preferred Stock, paid on April 23, 2021.
Highlights Subsequent to Quarter End
- Waived due diligence conditions on a $43.3 million acquisition
of two properties in the Sorrento Mesa submarket of San Diego,
California.
“Over the last 12 months, we have executed on a number of
important capital allocation and operational initiatives, ranging
from a share repurchase program to increasing cash flow at our
properties through the signing of major new leases and renewals at
higher rents,” commented James Farrar, the Company’s Chief
Executive Officer. “These successes are starting to flow through to
the bottom line and be visible in our per share results. This
quarter we experienced growth in Core FFO per share, AFFO per share
and Same Store Cash NOI, both compared to last quarter and to the
first quarter of 2020.”
“We are increasingly optimistic about the improving utilization
of office space in the second half of 2021. Tenant planning for a
return to the office has been assisted by higher rates of
vaccination and a reopening of schools across our markets. Our
focus for the balance of 2021 continues to be on increasing cash
flow per share by unlocking value in our existing portfolio and
finding additional pathways for growth.”
A reconciliation of certain non-GAAP financial measures,
including FFO, Core FFO, AFFO, NOI, Same Store NOI, Same Store Cash
NOI, Adjusted Cash NOI and their equivalent per share measures, to
the most directly comparable financial measure under U.S. generally
accepted accounting principles (“GAAP”) can be found at the end of
this release.
Portfolio Operations
The Company reported that its total portfolio as of March 31,
2021 contained 5.5 million net rentable square feet and was 90.5%
occupied.
The Company collected over 99% of contractual base rent for the
three months ended March 31, 2021.
Net Operating Income was approximately $25.4 million and
Adjusted Cash NOI (CIO share) was approximately $25.1 million for
the first quarter of 2021.
Same Store Cash NOI increased 5.0% for the three months ended
March 31, 2021 as compared to the same period in the prior
year.
Investment and Disposition Activity
During the first quarter, the Company completed the sale of its
Cherry Creek property in Denver, Colorado at a gross sale price of
$95.0 million. The disposition closed on February 10, 2021 and
generated a gain on sale of approximately $47.4 million. The
three-building, 356,000 square foot campus was 100% occupied by the
State of Colorado at the time of sale with approximately 5.3 years
of remaining lease term. The transaction represented an in-place
capitalization rate of approximately 5.8%.
Subsequent to quarter end, the Company entered into a purchase
and sale agreement for the acquisition of two properties in the
Sorrento Mesa submarket of San Diego, California. The acquisition,
if completed, would be highly complementary to the development
potential of the Company’s life science holdings. The purchase
price is $43.3 million and the Company has waived due diligence
conditions. The transaction is expected to close in May 2021,
subject to customary closing conditions. Further details on the
potential acquisition can be found in the Company’s May 2021
investor presentation under the “Investor Relations” section of the
Company’s website at www.cioreit.com.
Leasing Activity
The Company’s total leasing activity during the first quarter of
2021 was approximately 208,000 square feet, which included 72,000
square feet of new leasing and 136,000 square feet of renewals.
Approximately 194,000 square feet of leases signed within the
quarter will commence subsequent to quarter end.
New Leasing – New leases were signed with a weighted average
lease term of 6.7 years at a weighted average annual rent of $29.48
per square foot and at a weighted average cost of $5.68 per square
foot per year.
Renewal Leasing – Renewal leases were signed with a weighted
average lease term of 6.6 years at a weighted average annual rent
of $29.46 per square foot and at a weighted average cost of $3.02
per square foot per year.
Of note, the Company completed 93,000 square feet of leasing
with a tenant at the Carillon Point property in Tampa, Florida,
comprised of an eight-year, 78,000 square foot renewal commencing
in September 2021 and a 15,000 square foot expansion commencing
upon completion of the expansion space and no later than March
2022. The starting renewal rate is 2.5% higher than the current
rate, in line with the expiring rate and is subject to 2.5% annual
increases thereafter.
During the quarter, a 133,000 square foot tenant at the SanTan
property in Phoenix, Arizona whose lease was set to expire on
August 31, 2024 accelerated its lease maturity by two years. The
tenant will continue to pay full rent through August 31, 2022.
Subsequent to quarter end, the Company received a $3.8 million
termination payment from the tenant representing approximately half
of the remaining base rent that would otherwise have been payable
between September 1, 2022 and August 31, 2024. $0.1 million of this
termination income was recognized in the Company’s first quarter
results.
Capital Structure
As of March 31, 2021, the Company had total principal
outstanding debt of approximately $576.1 million. Approximately
$471.1 million, or 81.8%, of the Company’s outstanding debt was
fixed rate. When factoring in the $50 million term loan as fixed
rate debt due to an interest swap, approximately 90.5% of the
Company’s debt was effectively fixed rate. City Office’s total
principal outstanding debt had a weighted average maturity of
approximately 4.7 years and a weighted average interest rate of
3.7%.
In February 2021, the Company repaid its $83 million Midland
Life Insurance loan that was set to expire in May 2021, which was
secured by three of the Company’s properties.
Dividends
On March 23, 2021, the Company’s board of directors approved and
the Company declared a cash dividend of $0.15 per share of the
Company’s common stock for the three months ended March 31, 2021.
The dividend was paid on April 23, 2021 to common stockholders and
unitholders of record as of April 9, 2021.
On March 23, 2021, the Company’s board of directors approved and
the Company declared a cash dividend of $0.4140625 per share of the
Company’s 6.625% Series A Preferred Stock for the three months
ended March 31, 2021. The dividend was paid on April 23, 2021 to
preferred stockholders of record as of April 9, 2021.
Revised 2021 Outlook
The Company is updating its full year 2021 guidance based on
year-to-date performance and its expectations for the remainder of
the year. 2021 Core FFO per diluted share expectations were
increased primarily due to termination fee income, robust rental
collection resulting in a reduction to the Company’s general
provision for uncollectible rents and favorable variance in the
timing of expected acquisitions.
Full Year 2021 Guidance
Previous
Updated
Low
High
Low
High
Acquisitions
$0.0M
$100.0M
$43.3M
$100.0M
Dispositions
$95.0M
$95.0M
$95.0M
$95.0M
Net Operating Income
$95.0M
$97.0M
$98.5M
$100.5M
General & Administrative Expenses
$10.8M
$11.8M
$10.8M
$11.8M
2021 Core FFO per diluted share
$1.20
$1.24
$1.28
$1.31
Net Recurring Straight-Line Rent
Adjustment
$1.0M
$2.0M
$1.0M
$2.0M
Same Store Cash NOI Change
0.5%
2.0%
1.0%
2.5%
December 31, 2021 Occupancy
89.0%
91.0%
88.5%
90.5%
Material Considerations:
- Acquisitions in the Low scenario reflects the $43.3 million
acquisition under contract, which is expected to close in May 2021.
Acquisitions in the High scenario assumes incremental acquisitions
closing midway through the fourth quarter.
- Dispositions reflects the sale of the Cherry Creek property
that occurred on February 10, 2021 for a gross sale price of $95.0
million. No other dispositions have been assumed in 2021.
- Termination fee income of $2.0 million related to a tenant at
the SanTan property in Phoenix has been included in the 2021
guidance.
- The General and Administrative Expenses guidance includes
approximately $2.6 million for stock-based compensation. Our Core
FFO definition excludes stock-based compensation. Excluding
stock-based compensation, General and Administrative Expenses
guidance would have been $8.2 – $9.2 million.
- Annual weighted average fully diluted shares of common stock
outstanding are assumed to be approximately 44.1 million. No share
repurchases have been assumed.
The Company’s guidance is based on current plans and assumptions
and subject to the risks and uncertainties more fully described in
the Company’s filings with the United States Securities and
Exchange Commission. This outlook reflects management’s view of
current and future market conditions, including assumptions such as
the pace of future acquisitions and dispositions, rental rates,
occupancy levels, leasing activity, uncollectible rents, operating
and general administrative expenses, weighted average diluted
shares outstanding and interest rates. The Company reminds
investors that the impacts of the COVID-19 pandemic are uncertain
and impossible to predict. See “Forward-looking Statements”
below.
Webcast and Conference Call Details
City Office’s management will hold a conference call at 11:00 am
Eastern Time on May 7, 2021.
The webcast will be available under the “Investor Relations”
section of the Company’s website at www.cioreit.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
7, 2021, continuing through 11:59 pm Eastern Time on August 7, 2021
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 10155757. 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 information package to accompany the
discussion of the results will be posted on www.cioreit.com under
the “Investor Relations” section.
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 the Company 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, changes in fair
value of contingent consideration and the amortization of stock
based compensation.
We believe Core FFO provides a useful metric in comparing
operations between reporting periods and in assessing the
sustainability of our ongoing operating performance. Other equity
REITs may calculate Core FFO differently or not at all, and,
accordingly, the Company’s Core FFO may not be comparable to such
other REITs’ Core FFO.
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 rent / expense, 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.
Along with FFO and Core FFO, we believe AFFO provides investors
with appropriate supplemental information to evaluate the ongoing
operations of the Company. Other equity REITs may calculate AFFO
differently, and, accordingly, the Company’s AFFO may not be
comparable to such other REITs’ AFFO.
Net Operating Income (“NOI”), Adjusted Cash NOI (CIO
share) – We define NOI as rental and other revenues less
property operating expenses. We define Adjusted Cash NOI as NOI
less the effect of recurring straight-line rent / expense, deferred
market rent, and any amounts which are funded by the selling
entities and NCI in properties.
We consider NOI and Adjusted Cash NOI to be appropriate
supplemental performance measures to net income because we believe
they provide information useful in understanding the core
operations and operating performance of our portfolio.
Same Store Net Operating Income (“Same Store NOI”) and Same
Store Cash Net Operating Income (“Same Store Cash NOI”) – Same
Store NOI and Same Store Cash NOI is calculated as the NOI
attributable to the properties continuously owned and operated for
the entirety of the reporting periods presented. The Company’s
definition of Same Store NOI and Same Store Cash NOI excludes
properties that were not stabilized during both of the applicable
reporting periods. These exclusions may include, but are not
limited to, acquisitions, dispositions and properties undergoing
repositioning or significant renovations.
We believe Same Store NOI and Same Store Cash NOI is an
important measure of comparison because it allows for comparison of
operating results of stabilized properties owned and operated for
the entirety of both applicable periods and therefore eliminates
variations caused by acquisitions, dispositions or repositionings
during such periods. Other REITs may calculate Same Store NOI and
Same Store Cash NOI differently and our calculation should not be
compared to that of other REITs.
Forward-looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Certain statements contained in this press release, including those
that express a belief, expectation or intention, as well as those
that are not statements of historical fact, are forward-looking
statements within the meaning of the federal securities laws and as
such are based upon the Company’s current beliefs as to the outcome
and timing of future events. Forward-looking statements are
generally identifiable by use of forward-looking terminology such
as “approximately,” “anticipate,” “assume,” “believe,” “budget,”
“contemplate,” “continue,” “could,” “estimate,” “expect,” “future,”
“hypothetical,” “intend,” “may,” “outlook,” “plan,” “potential,”
“predict,” “project,” “seek,” “should,” “target,” “will” or other
similar words or expressions. There can be no assurance that actual
forward-looking statements, including projected capital resources,
projected profitability and portfolio performance, estimates or
developments affecting the Company will be those anticipated by the
Company. Examples of forward-looking statements include those
pertaining to expectations regarding our financial performance,
including under metrics such as NOI and FFO, market rental rates,
national or local economic growth, estimated replacement costs of
our properties, the Company’s expectations regarding tenant
occupancy, re-leasing periods, projected capital improvements,
expected sources of financing, expectations as to the likelihood
and timing of closing of acquisitions, dispositions, or other
transactions, the expected operating performance of the Company’s
current properties, anticipated near-term acquisitions and
descriptions relating to these expectations, including, without
limitation, the anticipated net operating income yield and cap
rates, and changes in local, regional, national and international
economic conditions, including as a result of the ongoing COVID-19
pandemic. Forward-looking statements presented in this press
release are based on management’s beliefs and assumptions made by,
and information currently available to, management.
The forward-looking statements contained in this press release
are based on historical performance and management’s current plans,
estimates and expectations in light of information currently
available to us and are subject to uncertainty and changes in
circumstances. There can be no assurance that future developments
affecting us will be those that we have anticipated. Actual results
may differ materially from these expectations due to the factors,
risks and uncertainties described above, changes in global,
regional or local political, economic, business, competitive,
market, regulatory and other factors described in our news releases
and filings with the SEC, including but not limited to those
described in our Annual Report on Form 10-K for the year ended
December 31, 2020 under the heading “Risk Factors” and in our
subsequent reports filed with the SEC, many of which are beyond our
control. Should one or more of these risks or uncertainties
materialize, or should any of our assumptions prove to be
incorrect, our actual results may vary in material respects from
what we may have expressed or implied by these forward-looking
statements. We caution that you should not place undue reliance on
any of our forward-looking statements. Any forward-looking
statement made by us in this press release speaks only as of the
date of this press release. Factors or events that could cause our
actual results to differ may emerge from time to time, and it is
not possible for us to predict all of them. The Company does not
guarantee that the assumptions underlying such forward-looking
statements contained in this press release are free from errors.
Unless otherwise stated, historical financial information and per
share and other data are as of March 31, 2021 or relate to the
quarter ended March 31, 2021. We undertake no obligation to
publicly update any forward-looking statement, whether as a result
of new information, future developments or otherwise, except as may
be required by applicable securities laws.
City Office REIT, Inc.
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands, except par value
and share data)
March 31, 2021
December 31, 2020
Assets
Real estate properties
Land
$
204,289
$
204,289
Building and improvement
778,749
777,184
Tenant improvement
105,195
104,694
Furniture, fixtures and equipment
642
642
1,088,875
1,086,809
Accumulated depreciation
(140,142
)
(131,220
)
948,733
955,589
Cash and cash equivalents
14,890
25,305
Restricted cash
18,295
20,646
Rents receivable, net
32,199
32,968
Deferred leasing costs, net
18,194
16,829
Acquired lease intangible assets, net
39,641
44,143
Other assets
16,199
15,758
Assets held for sale
—
46,054
Total Assets
$
1,088,151
$
1,157,292
Liabilities and Equity
Liabilities:
Debt
$
572,776
$
677,242
Accounts payable and accrued
liabilities
20,847
25,414
Deferred rent
7,248
7,295
Tenant rent deposits
4,653
4,801
Acquired lease intangible liabilities,
net
5,644
6,035
Other liabilities
17,370
18,099
Liabilities related to assets held for
sale
—
531
Total Liabilities
628,538
739,417
Commitments and Contingencies
Equity:
6.625% Series A Preferred stock, $0.01 par
value per share, 5,600,000 shares authorized, 4,480,000 issued and
outstanding as of March 31, 2021 and December 31, 2020
112,000
112,000
Common stock, $0.01 par value, 100,000,000
shares authorized, 43,397,117 shares issued and outstanding as of
March 31, 2021 and December 31, 2020
433
433
Additional paid-in capital
480,106
479,411
Accumulated deficit
(132,556
)
(172,958
)
Accumulated other comprehensive loss
(1,291
)
(1,960
)
Total Stockholders’ Equity
458,692
416,926
Non-controlling interests in
properties
921
949
Total Equity
459,613
417,875
Total Liabilities and Equity
$
1,088,151
$
1,157,292
City Office REIT, Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
(In thousands, except per share
data)
Three Months Ended March
31,
2021
2020
Rental and other revenues
$
39,516
$
40,122
Operating expenses:
Property operating expenses
14,118
14,694
General and administrative
2,801
2,783
Depreciation and amortization
14,415
14,953
Total operating expenses
31,334
32,430
Operating income
8,182
7,692
Interest expense:
Contractual interest expense
(6,243
)
(6,362
)
Amortization of deferred financing costs
and debt fair value
(330
)
(324
)
(6,573
)
(6,686
)
Net gain on sale of real estate
property
47,400
—
Net income
49,009
1,006
Less:
Net income attributable to non-controlling
interests in properties
(192
)
(182
)
Net income attributable to the
Company
48,817
824
Preferred stock distributions
(1,855
)
(1,855
)
Net income/(loss) attributable to
common stockholders
$
46,962
$
(1,031
)
Net income/(loss) per common share:
Basic
$
1.08
$
(0.02
)
Diluted
$
1.07
$
(0.02
)
Weighted average common shares
outstanding:
Basic
43,397
54,458
Diluted
44,043
54,458
Dividend distributions declared per common
share
$
0.150
$
0.150
City Office REIT, Inc.
Reconciliation of Net Income
to Net Operating Income and Adjusted Cash NOI
(Unaudited)
(In thousands)
Three Months Ended March 31,
2021
Net income
$
49,009
Adjustments to net income:
General and administrative
2,801
Contractual interest expense
6,243
Amortization of deferred financing costs
and debt fair value
330
Depreciation and amortization
14,415
Net gain on sale of real estate
property
(47,400
)
Net Operating Income (“NOI”)
$
25,398
Net recurring straight-line rent/expense
adjustment
(12
)
Net amortization of above and below market
leases
103
Portfolio Adjusted Cash NOI
$
25,489
NCI in properties – share in cash NOI
(425
)
Adjusted Cash NOI (CIO share)
$
25,064
City Office REIT, Inc.
Reconciliation of Net Income
to FFO, Core FFO and AFFO
(Unaudited)
(In thousands, except per share
data)
Three Months Ended March 31,
2021
Net income attributable to common
stockholders
$
46,962
(+) Depreciation and amortization
14,415
(-) Net gain on sale of real estate
property
(47,400
)
13,977
Non-controlling interests in
properties:
(+) Share of net income
192
(-) Share of FFO
(342
)
FFO attributable to common
stockholders
$
13,827
(+) Stock based compensation
645
Core FFO attributable to common
stockholders
$
14,472
(+) Net recurring straight-line
rent/expense adjustment
(12
)
(+) Net amortization of above and below
market leases
103
(+) Net amortization of deferred financing
costs and debt fair value
327
(-) Net recurring tenant improvements and
incentives
(734
)
(-) Net recurring leasing commissions
(2,063
)
(-) Net recurring capital expenditures
(858
)
AFFO attributable to common
stockholders
$
11,235
FFO per common share
$
0.31
Core FFO per common share
$
0.33
AFFO per common share
$
0.26
Dividends distributions declared per
common share
$
0.150
FFO Payout Ratio
48
%
Core FFO Payout Ratio
46
%
AFFO Payout Ratio
59
%
Weighted average common shares outstanding
- diluted
44,043
City Office REIT, Inc.
Reconciliation of Rental and
Other Revenues to Same Store NOI and Same Store Cash NOI
(Unaudited)
(In thousands)
Three Months Ended March
31,
2021
2020
Rental and other revenues
$
39,516
$
40,122
Property operating expenses
14,118
14,694
Net operating income (“NOI”)
$
25,398
$
25,428
Less: NOI of properties not included in
same store
(1,377
)
(2,068
)
Same store NOI
$
24,021
$
23,360
Less:
Termination fee income
(177
)
(380
)
Straight-line rent/expense adjustment
(50
)
(224
)
Above and below market leases
128
44
NCI in properties – share in cash NOI
(425
)
(416
)
Same store cash NOI
$
23,497
$
22,384
City Office REIT, Inc.
Reconciliation of Net Income
to Core FFO Guidance
(Unaudited)
(In thousands, except per share
data)
Full Year 2021 Outlook
Low
High
Net income attributable to common
stockholders
$
42,950
$
45,200
(+) Depreciation and amortization
59,000
58,000
(-) Net gain on sale of real estate
property
(47,400
)
(47,400
)
(-) Non-controlling interests in
properties
(650
)
(650
)
FFO attributable to common
stockholders
$
53,900
$
55,150
(+) Stock based compensation
2,600
2,600
Core FFO attributable to common
stockholders
$
56,500
$
57,750
FFO per common share
$
1.22
$
1.25
Core FFO per common share
$
1.28
$
1.31
Weighted average shares of common
stock
44,100
44,100
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210507005058/en/
City Office REIT, Inc. Anthony Maretic, CFO +1-604-806-3366
investorrelations@cioereit.com
Grafico Azioni City Office REIT (NYSE:CIO)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni City Office REIT (NYSE:CIO)
Storico
Da Lug 2023 a Lug 2024