The Company uses non-GAAP financial measures in its filings and other public
disclosures. The following lists non-GAAP financial measures that the Company
commonly uses, a description for each measure, the reasons that management
believes the measure is useful to investors and, if material, additional uses of the
measure by management of the Company.
“Cash-Basis Net Operating Income” represents Net Operating Income excluding
straight-line rents, amortization of lease inducements, amortization of acquired above
and below market rents, and non-cash ground lease expense.
“EBITDAre” is a supplemental operating performance measure used in the real
estate industry. The Company calculates EBITDAre in accordance with the Nareit
definition, which is net income (loss) available to common stockholders (computed in
accordance with GAAP) plus interest expense, income tax expense, depreciation and
amortization, losses (gains) on the disposition of depreciated property, and
impairment. All additions include the Company's share of unconsolidated joint
ventures. Management believes that EBITDAre provides analysts and investors with
uniform and appropriate information to use in various ratios that evaluate the
Company's level of debt.
"Funds Available for Distribution” (“FAD”) represents FFO adjusted to exclude
the effect of non-cash items and transaction costs and include deductions for second
generation Capital Expenditures ("CAPEX"). Management believes that FAD provides
analysts and investors with information that assists in the comparability of the
Company's dividend policy with other real estate companies.
“Funds From Operations” (“FFO”) is a supplemental operating performance
measure used in the real estate industry. The Company calculates FFO in accordance
with the Nareit definition: net income (loss) available to common stockholders
(computed in accordance with GAAP), excluding extraordinary items, cumulative
effect of change in accounting principle and gains or losses from sales of depreciable
real property, plus depreciation and amortization of real estate assets, impairment on
depreciable investment property and after adjustments for unconsolidated
partnerships and joint ventures to reflect FFO on the same basis. FFO is used by
industry analysts and investors as a supplemental measure of an equity REIT's
operating performance. Historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably over time. Since
real estate values instead have historically risen or fallen with market conditions, many
industry investors and analysts have considered presentation of operating results for
real estate companies that use historical cost accounting to be insufficient by
themselves. Thus, Nareit created FFO as a supplemental measure of REIT operating
performance that excludes historical cost depreciation, among other items, from
GAAP net income. Management believes that the use of FFO, combined with the
required primary GAAP presentations, has been fundamentally beneficial, improving
the understanding of operating results of REITs among the investing public and
making comparisons of REIT operating results more meaningful. Company
management evaluates operating performance in part based on FFO. Additionally,
the Company uses FFO and FFO per share, along with other measures, as a
performance measure for incentive compensation to its officers and other key
employees.
“Net Debt” represents the Company's consolidated debt plus the Company's
share of unconsolidated debt, less consolidated cash and cash equivalents and our
share of unconsolidated cash and cash equivalents. The Company believes excluding
cash and cash equivalents from total debt provides an estimate of the net contractual
amount of borrowed capital to be repaid, which it believes is a beneficial disclosure to
investors and analysts.
“Net Operating Income” ("NOI") is used by industry analysts, investors and
Company management to measure operating performance of the Company's
properties. NOI, which is rental property revenues (excluding termination fee income)
less rental property operating expenses, excludes certain components from net
income in order to provide results that are more closely related to a property's results
of operations. Certain items, such as interest expense, while included in FFO and net
income, do not affect the operating performance of a real estate asset and are often
incurred at the corporate level as opposed to the property level. As a result,
management uses only those income and expense items that are incurred at the
property level to evaluate a property's performance. Depreciation, amortization,
gains or losses on sales of depreciated investment assets, and impairment are also
excluded from NOI for the reasons described under FFO.
“Same Property Net Operating Income” represents Net Operating Income or
Cash-Basis Net Operating Income for those office properties that were stabilized and
owned by the Company for the entirety of all comparable reporting periods
presented. Same Property Net Operating Income or Cash-Basis Same Property Net
Operating Income allows analysts, investors, and management to analyze continuing
operations and evaluate the growth trend of the Company's portfolio.
“Second Generation Tenant Improvements and Leasing Costs and Building
CAPEX” is used in the valuation and analysis of real estate. Because the Company
develops and acquires properties, in addition to operating existing properties, its
property acquisition and development expenditures included in the Statements of
Cash Flows includes both initial costs associated with developing and acquiring
investment assets and those expenditures necessary for operating and maintaining
existing properties at historic performance levels. The latter costs are referred to as
second generation costs and are useful in evaluating the economic performance of
the asset and in valuing the asset. Accordingly, the Company discloses the portion of
its property acquisition and development expenditures that pertain to second
generation space in its operating properties. The Company excludes from second
generation costs amounts incurred to lease vacant space in newly acquired buildings,
leasing costs for spaces that have been vacant for one year or more, building
improvements on newly acquired buildings that management identifies as necessary
to bring the building to the Company's operational standards, and building
improvements associated with properties identified as under redevelopment or
repositioning. In addition, the Company excludes building improvements intended to
attract tenants to increase revenues and/or occupancy rates.
