Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - City Office REIT, Inc. | d798289d8ka.htm |
| EX-99.1 - EX-99.1 - City Office REIT, Inc. | d798289dex991.htm |
Exhibit 99.2
City Office REIT, Inc.
Pro Forma Consolidated and Combined Financial Statements
(Unaudited)
As previously announced, on July 18, 2014, City Office REIT, Inc. closed on the acquisition of a two-storey, 163,336 square foot office building in the Lewisville submarket of Dallas, Texas (“Lake Vista Pointe”). The contract purchase price for the two-storey building office property was $28.4 million, exclusive of closing costs. The Company funded 35% of the purchase with cash and 65% through debt. Lake Vista Pointe is 100% leased to Ally Financial, Inc.
The accompanying unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2014 reflects the acquisition of Lake Vista Pointe as if the purchase had occurred on June 30, 2014. The unaudited Pro Forma Consolidated and Combined Statements of Operations for the six months ended June 30, 2014 and the year ended December 31, 2013, reflects the acquisition of Lake Vista Pointe as if the purchase had occurred on January 1, 2013. The Pro Forma Consolidated Balance Sheet and Consolidated and Combined Statement of Operations for the six months ended June 30, 2014 of the Company, prior to the Lake Vista Pointe acquisition has been derived from the unaudited Pro Forma Consolidated Balance Sheet and Consolidated and Combined Statement of Operations included in the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2014, filed with the SEC on August 14, 2014. The accompanying unaudited Pro Forma Consolidated and Combined Statement of Operations for the year ended December 31, 2013 of the Company, prior to the Lake Vista Pointe acquisition was derived from the unaudited Pro Forma Consolidated and Combined Statement of Operations for the year ended December 31, 2013, included in the Company’s Prospectus filing on Form 424B4 filed with the SEC on April 16, 2014. The unaudited Pro Forma Consolidated and Combined Statement of Operations for the six months ended June 30, 2014 and the year ended December 31, 2013 include the Plaza 25 acquisition on a Pro Forma basis as explained in Note 3.
Pro forma information is intended to provide investors with information about the impact of transactions by showing how specific transactions might have affected historical financial statements, illustrating the scope of the change in the historical financial position and results of operations. The adjustments made to historical financial information give effect to events that are directly attributable to the acquisition of the property and are factually supportable. The unaudited Pro Forma Consolidated and Combined Financial Statements are prepared in accordance with Article 11 of Regulation S-X.
The unaudited Pro Forma Consolidated and Combined Financial Statements set forth below are not fact and there can be no assurance that the Company’s results would not have differed significantly from those set forth below if the acquisition had actually occurred on January 1, 2013. Accordingly, the unaudited Pro Forma Consolidated and Combined Financial Statements are presented for illustrative purposes only and do not purport to represent, and are not necessarily indicative of, what our actual financial position and results of operations would have been had the acquisition of the property occurred on the dates indicated, nor are they indicative of our future financial position or results of operations. Readers are cautioned not to place undue reliance on such information and the Company makes no representations regarding the information set forth below or its ultimate performance compared to it. The unaudited Pro Forma Consolidated and Combined Financial Statements exclude any non-recurring charges or credits directly attributable to the acquisition.
City Office REIT, Inc.
Pro Forma Consolidated Balance Sheet
As of June 30, 2014
(Unaudited)
| Pro Forma City Office REIT Inc. Prior to Acquisition |
Lake Vista Pointe Acquisition |
Pro Forma Reflecting Acquisition |
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| Assets |
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| Real estate properties, net |
$ | 167,095,617 | $ | 23,013,392 | (A | ) | $ | 190,109,009 | ||||||||
| Cash and cash equivalents |
10,175,937 | (8,111,991 | ) | (C | ) | 2,063,946 | ||||||||||
| Restricted cash |
12,809,664 | — | 12,809,664 | |||||||||||||
| Rents receivable, net |
6,287,588 | — | 6,287,588 | |||||||||||||
| Deferred financing costs, net of accumulated amortization |
2,734,641 | 333,201 | (C | ) | 3,067,842 | |||||||||||
| Deferred leasing costs, net of accumulated amortization |
2,482,529 | — | 2,482,529 | |||||||||||||
| Acquired lease intangibles assets, net |
25,281,548 | 3,682,828 | (A | ) | 28,964,376 | |||||||||||
| Prepaid expenses and other assets |
2,386,945 | 29,610 | (B | ) | 2,416,555 | |||||||||||
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| Total Assets |
$ | 229,254,469 | $ | 18,947,040 | $ | 248,201,509 | ||||||||||
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| Liabilities and Equity |
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| Liabilities: |
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| Debt |
$ | 155,002,462 | $ | 18,460,000 | (C | ) | $ | 173,462,462 | ||||||||
| Accounts payable and accrued liabilities |
4,817,775 | 388,159 | (B | ) | 5,205,934 | |||||||||||
| Deferred rent |
438,770 | 98,881 | (B | ) | 537,651 | |||||||||||
| Tenant rent deposits |
1,861,194 | — | 1,861,194 | |||||||||||||
| Acquired lease intangibles liability, net |
692,085 | — | 692,085 | |||||||||||||
| Dividends payable |
2,094,400 | — | 2,094,400 | |||||||||||||
| Earn-out liability |
7,057,351 | — | 7,057,351 | |||||||||||||
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| Total Liabilities |
171,964,037 | 18,947,040 | 190,911,077 | |||||||||||||
| Commitments and Contingencies |
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| Equity |
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| Stockholders’ Equity: |
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| Common stock, $0.01 par value, 100,000,000 shares authorized, 8,192,915 shares issued and outstanding |
81,939 | — | 81,939 | |||||||||||||
| Additional paid in capital |
45,121,480 | — | 45,121,480 | |||||||||||||
| Accumulated deficit |
(3,443,504 | ) | — | (3,443,504 | ) | |||||||||||
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| Total Stockholders’ and Predecessor Equity |
41,759,915 | — | 41,759,915 | |||||||||||||
| Operating Partnership noncontrolling interests |
16,274,888 | — | 16,274,888 | |||||||||||||
| Noncontrolling interests in properties |
(744,371 | ) | — | (744,371 | ) | |||||||||||
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| Total Equity |
57,290,432 | — | 57,290,432 | |||||||||||||
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| Total Liabilities and Stockholder Equity |
$ | 229,254,469 | $ | 18,947,040 | $ | 248,201,509 | ||||||||||
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City Office REIT, Inc.
Pro Forma Consolidated and Combined Statement of Operations
For the Six Months Ended June 30, 2014
(Unaudited)
| Pro Forma City Office REIT Inc. Prior to Acquisitions |
Lake Vista Pointe Acquisition (Note 2) |
Second Quarter Acquisition - Plaza 25 (Note 3) |
Pro Forma Reflecting Acquisitions |
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| Revenue: |
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| Rental income |
$14,951,033 | $778,084 | $1,522,682 | $17,251,799 | ||||||||||||
| Expense reimbursement |
952,814 | 444,707 | 87,631 | 1,485,152 | ||||||||||||
| Other |
471,822 | — | 3,551 | 475,373 | ||||||||||||
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| Total Revenues |
16,375,669 | 1,222,791 | 1,613,864 | 19,212,324 | ||||||||||||
| Operating Expenses: |
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| Property operating expenses |
4,522,074 | 252,324 | 558,365 | 5,332,763 | ||||||||||||
| Insurance |
322,426 | 19,591 | 14,912 | 356,929 | ||||||||||||
| Property taxes |
1,022,312 | 184,141 | 231,003 | 1,437,456 | ||||||||||||
| Property management fees |
393,779 | 22,404 | 29,943 | 446,126 | ||||||||||||
| Acquisition costs |
1,150,147 | — | — | 1,150,147 | ||||||||||||
| Base management fee |
185,176 | — | — | 185,176 | ||||||||||||
| Stock based compensation |
285,142 | — | — | 285,142 | ||||||||||||
| General and administrative |
414,303 | — | — | 414,303 | ||||||||||||
| Depreciation and amortization |
6,575,784 | 619,387 | 878,554 | 8,073,725 | ||||||||||||
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| Total Operating Expenses |
14,871,143 | 1,097,847 | 1,712,777 | 17,681,767 | ||||||||||||
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| Operating Income |
1,504,526 | 124,944 | (98,913 | ) | 1,530,557 | |||||||||||
| Interest Expense: |
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| Contractual interest expense |
(3,954,535 | ) | (395,044 | ) | — | (4,349,579 | ) | |||||||||
| Amortization of deferred financing costs |
(1,129,046 | ) | — | — | (1,129,046 | ) | ||||||||||
| Loss on early extinguishment of Predecessor debt |
(1,654,826 | ) | — | — | (1,654,826 | ) | ||||||||||
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| (6,738,407 | ) | (395,044 | ) | — | (7,133,451 | ) | ||||||||||
| Change in fair value of earn-out |
(104,865 | ) | — | — | (104,865 | ) | ||||||||||
| Gain on equity investment |
4,474,644 | — | — | 4,474,644 | ||||||||||||
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| Net loss |
(864,102 | ) | (270,100 | ) | (98,913 | ) | (1,233,115 | ) | ||||||||
| Less: |
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| Net loss attributable to noncontrolling interests in properties |
78,970 | — | — | 78,970 | ||||||||||||
| Net income attributable to Predecessor |
(1,973,197 | ) | — | — | (1,973,197 | ) | ||||||||||
| Net loss attributable to Operating Partnership unitholders’ noncontrolling interests |
814,127 | — | — | 814,127 | ||||||||||||
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| Net loss attributable to stockholders |
$(1,944,202 | ) | $(270,100 | ) | $(98,913 | ) | $(2,313,215 | ) | ||||||||
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| Pro forma weighted average common shares outstanding - basic and diluted |
8,057,521 | |||||||||||||||
| Pro forma basic and diluted loss per share |
$ (0.29 | ) | ||||||||||||||
City Office REIT, Inc.
Pro Forma Consolidated and Combined Statement of Operations
For the Year Ended December 31, 2013
(Unaudited)
| Pro Forma City Office REIT Inc. Prior to Acquisitions |
Lake Vista Pointe Acquisition (Note 2) |
Second Quarter Acquisition - Plaza 25 (Note 3) |
Pro Forma Reflecting Acquisitions |
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| Revenue: |
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| Rental income |
$ | 29,598,376 | $ | 1,178,787 | $ | 3,000,086 | $ | 33,777,249 | ||||||||
| Expense reimbursement |
2,185,817 | 796,694 | 184,733 | 3,167,244 | ||||||||||||
| Other |
785,162 | — | 4,841 | 790,003 | ||||||||||||
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| Total Revenues |
32,569,355 | 1,975,481 | 3,189,660 | 37,734,496 | ||||||||||||
| Operating Expenses: |
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| Property operating expenses |
8,873,869 | 520,172 | 1,136,854 | 10,530,895 | ||||||||||||
| Insurance |
610,906 | 39,851 | 34,131 | 684,888 | ||||||||||||
| Property taxes |
1,805,440 | 368,526 | 543,211 | 2,717,177 | ||||||||||||
| Property acquisition costs |
1,479,292 | — | — | 1,479,292 | ||||||||||||
| Base management fee |
951,365 | — | — | 951,365 | ||||||||||||
| General and administrative |
1,477,000 | — | — | 1,477,000 | ||||||||||||
| Property management fees |
665,325 | 79,696 | 63,914 | 808,935 | ||||||||||||
| Stock based compensation |
1,467,792 | — | — | 1,467,792 | ||||||||||||
| Depreciation and amortization |
13,065,765 | 1,248,073 | 2,124,311 | 16,438,149 | ||||||||||||
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| Total Operating Expenses |
30,396,754 | 2,256,318 | 3,902,421 | 36,555,493 | ||||||||||||
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| Operating Income |
2,172,601 | (280,837 | ) | (712,761 | ) | 1,179,003 | ||||||||||
| Canadian offering costs |
(1,983,195 | ) | — | — | (1,983,195 | ) | ||||||||||
| Interest expense, net |
(7,197,139 | ) | (790,088 | ) | — | (7,987,227 | ) | |||||||||
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| Net loss |
(7,007,733 | ) | (1,070,925 | ) | (712,761 | ) | (8,791,419 | ) | ||||||||
| Net income Attributable to properties |
(190,624 | ) | — | — | (190,624 | ) | ||||||||||
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| (7,198,357 | ) | (1,070,925 | ) | (712,761 | ) | (8,982,043 | ) | |||||||||
| Net loss Attributable to Noncontrolling Interests in Operating Partnership |
2,358,069 | — | — | 2,358,069 | ||||||||||||
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| Net loss Attributable to City Office REIT, Inc. |
$ | (4,840,288 | ) | $ | (1,070,925 | ) | $ | (712,761 | ) | $ | (6,623,974 | ) | ||||
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| Pro forma weighted average common shares outstanding - basic and diluted |
8,057,521 | |||||||||||||||
| Pro forma basic and diluted loss per share |
$ | (0.82 | ) | |||||||||||||
City Office REIT, Inc.
Notes and Management’s Assumption to Unaudited Pro Forma Consolidated and Combined Financial Statements
Basis of Pro Forma Presentation
1. Notes to the Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2014
(A) The acquisition of the Lake Vista Pointe was accounted for using preliminary estimates of the fair value of the tangible and intangible assets acquired and liabilities assumed in connection with the acquisition and are therefore subject to change.
(B) Reflects the working capital acquired and assumed through the Lake Vista Pointe acquisition.
(C) Reflects the cash paid and the mortgage loan and related deferred financing costs established upon the acquisition of Lake Vista Pointe.
2. Notes to the Unaudited Pro Forma Consolidated and Combined Statements of Operations for the six month period ended June 30, 2014 and the year ended December 31, 2013
Revenue and property expenses for the Lake Vista Pointe acquisition are based on the historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation expense and interest expense. Depreciation expense is based on the preliminary estimates of fair value for the tangible and intangible assets acquired and is therefore subject to change. Interest expenses related to the Company borrowings, under the mortgage loan, are at a fixed rate of 4.28%.
3. Second Quarter Acquisition - Plaza 25
During the second quarter of 2014, the Company acquired the Plaza 25 property. Financial results for the year ended December 31, 2013 and other information relating to the Plaza 25 acquisition was included in a previously filed Form 8-K/A, filed on August 8, 2014. Financial results for the six months ended June 30, 2014 and the year ended December 31, 2013, related to the Plaza 25 property prior to its acquisition on June 4, 2014, represents the results of operations under the previous owners on a Pro Forma basis, with the exception of depreciation expense which has been based on the preliminary estimates of fair value for the tangible and intangible assets acquired and has been revised from the depreciation expense estimate that was previously included in the Form 8-K/A filed on August 9, 2014. Financial results since the acquisition are included in the Company’s historical consolidated results of operations for the six months ended June 30, 2014.