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8-K/A - FORM 8-K/A - City Office REIT, Inc.d10398d8ka.htm
EX-99.1 - EX-99.1 - City Office REIT, Inc.d10398dex991.htm
EX-99.2 - EX99.2 - City Office REIT, Inc.d10398dex992.htm

Exhibit 99.3

City Office REIT, Inc.

Pro Forma Consolidated Financial Statements

(Unaudited)

City Office REIT, Inc. (“Company,” “we,” “our” or “us”) was organized in the state of Maryland on November 26, 2013. On April 21, 2014, the Company completed its initial public offering (“IPO”) of shares of the Company’s common stock. The Company contributed the net proceeds of the IPO to City Office REIT Operating Partnership, L.P., a Maryland limited partnership (the “Operating Partnership”), in exchange for common units in our Operating Partnership. Both the Company and the Operating Partnership commenced operations upon completion of the IPO and certain related formation transactions (the “Formation Transactions”).

Neither the Company nor the Operating Partnership had any business activity prior to completion of the IPO and related Formation Transactions on April 21, 2014. Since completion of the IPO and the related Formation Transactions, the Company, through the Operating Partnership and its subsidiaries, has completed the acquisition of three properties during the year ended December 31, 2014 —the Plaza 25 property purchased on June 4, 2014, the Lake Vista Pointe property purchased on July 18, 2014, and the Florida Research Park property purchased on November 18, 2014. During the first quarter of 2015, the Company also acquired the Logan Tower property on February 4, 2015 and in the second quarter of 2015, the Company acquired Superior Pointe on June 17, 2015 and DTC Crossroads on June 30, 2015.

The Company announced on September 3, 2015 that it had closed on the acquisition of the 190 Office Center property in Dallas, Texas for $54.35 million and the Intellicenter property in Tampa, Florida for a purchase price of $44.6 million. The Company does not have a material relationship with the seller of the Property and the acquisition is not an affiliated transaction.

The accompanying unaudited Pro Forma Consolidated Balance Sheet and Consolidated Statement of Operations are presented to reflect the historical consolidated balance sheet of the Company as of June 30, 2015 and the historical consolidated statement of operations for the six months ended June 30, 2015 which includes the acquisition of Logan Tower, Superior Pointe, DTC Crossroads, 190 Office Center and Intellicenter as if the acquisitions had been completed on January 1, 2014. The accompanying unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2014 reflects the historical operations of the Predecessor for the period from January 1, 2014 through April 20, 2014 and the historical results of operations of the Company for the period from April 21, 2014 through December 31, 2014 and are presented as if the IPO and related Formation Transactions, and the acquisitions of Plaza 25, Lake Vista Pointe, Florida Research Park, Logan Tower, Superior Pointe, DTC Crossroads, 190 Office Center and Intellicenter were completed on January 1, 2014.

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 Financial Statements are prepared in accordance with Article 11 of Regulation S-X.

The unaudited Pro Forma Consolidated 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, 2014. Accordingly, the unaudited Pro Forma Consolidated


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 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, 2015

(Unaudited)

(In thousands, except share and per share data)

 

     City Office
REIT, Inc.
    Intellicenter
(A)
     190 Office
Center

(B)
     Company
Pro Forma
 

Assets

          

Real estate properties, net

   $ 271,689      $ 39,522       $ 46,851       $ 358,062   

Cash and cash equivalents

     11,293        —           —           11,293   

Restricted cash

     10,114        —           —           10,114   

Rents receivable, net

     11,635        —           —           11,635   

Deferred financing costs, net of accumulated amortization

     2,801        —           —           2,801   

Deferred leasing costs, net of accumulated amortization

     4,711        —           —           4,711   

Acquired lease intangibles assets, net

     33,583        7,742         5,673         46,998   

Prepaid expenses and other assets

     1,251        —           —           1,251   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Assets

   $ 347,077      $ 47,264       $ 52,524       $ 446,865   
  

 

 

   

 

 

    

 

 

    

 

 

 

Liabilities and Equity

          

Liabilities:

          

Debt

   $ 241,095      $ 46,279       $ 51,000       $ 338,374   

Accounts payable and accrued liabilities

     7,423        319         680         8,422   

Deferred rent

     1,197        —           —           1,197   

Tenant rent deposits

     2,078        2         39         2,119   

Acquired lease intangibles liability, net

     1,193        664         805         2,662   

Dividends payable

     3,601        —           —           3,601   

Earn-out liability

     8,600        —           —           8,600   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Liabilities

     265,187        47,264         52,524         364,975   

Equity

          

Stockholders’ Equity:

          

Common stock, $0.01 par value, 100,000,000 shares authorized, 12,365,240 shares issued and outstanding

     124        —           —           124   

Additional paid in capital

     92,270        —           —           92,270   

Accumulated deficit

     (19,664     —           —           (19,664
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Stockholders’ Equity

     72,730        —           —           72,730   

Operating Partnership noncontrolling interests

     9,866        —           —           9,866   

Noncontrolling interests in properties

     (706     —           —           (706
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Equity

     81,890        —           —           81,890   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Liabilities and Stockholder Equity

   $ 347,077      $ 47,264       $ 52,524       $ 446,865   
  

 

 

   

 

 

    

 

 

    

 

 

 


City Office REIT, Inc.

Pro Forma Consolidated Statement of Operations

For the Six Months Ended June 30, 2015

(Unaudited)

(In thousands, except share and per share data)

 

    City Office
REIT, Inc.
    Intellicenter
Acquisition
(AA)
    190 Office
Center
(BB)
    DTC
Crossroads
Acquisition
(CC)
    Superior
Pointe
Acquisition
(DD)
    Logan Tower
Acquisition
(EE)
    Company Pro
Forma
 

Revenue:

             

Rental income

  $ 20,237      $ 2,183      $ 2,439      $ 1,904      $ 1,666      $ 129      $ 28,558   

Expense reimbursement

    2,036        226        486        —          —          —          2,748   

Other

    621        2        5        —          —          19        647   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues

    22,894        2,411        2,930        1,904        1,666        148        31,953   

Operating Expenses:

             

Property operating expenses

    8,243        886        1,579        885        667        57        12,317   

Acquisition costs

    1,091        —          —          (85     (136     (99     771   

Stock based compensation

    916        —          —          —          —          —          916   

General and administrative

    902        —          —          —          —          —          902   

Base management fee

    659        —          —          —          —          —          659   

Depreciation and amortization

    8,900        869        1,499        984        982        64        13,298   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Expenses

    20,711        1,755        3,078        1,784        1,513        22        28,863   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income/ (loss)

    2,183        656        (148     120        153        126        3,090   

Interest Expense:

             

Contractual interest expense

    (4,112     (1,212     (1,147     (424     (23     —          (6,918

Amortization of deferred financing costs

    (354     (82     (11     —          —          —          (447
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (4,466     (1,294     (1,158     (424     (23     —          (7,365

Change in fair value of earn-out

    (600     —          —          —          —          —          (600

Gain on equity investment

    —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)

    (2,883     (638     (1,306     (304     130        126        (4,875

Less:

             

Net income/(loss) attributable to non-controlling interests in properties

    (255     —          —          —          —          —          (255

Net income/(loss) attributable to Operating Partnership unitholders’ noncontrolling interests

    598        122        249        58        (25     (24     978   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) attributable to stockholders

  $ (2,540   $ (516   $ (1,057   $ (246   $ 105      $ 102        (4,152

Pro forma weighted average common shares outstanding - basic and diluted

                12,365,240   

Pro forma basic and diluted loss per share

                (0.34


City Office REIT, Inc.

Pro Forma Consolidated Statement of Operations

For the Year Ended December 31, 2014

(Unaudited)

(In thousands, except share and per share data)

 

    City Office
REIT, Inc.
    Intellicenter
(AA)
    190 Office
Center (BB)
    DTC
Crossroads
Acquisition
(CC)
    Superior
Pointe
Acquisition
(DD)
    Logan Tower
Acquisition

(EE)
    Impact of 2014
Acquisitions
(FF)
    Other Pro
Forma
Adjustments
        Company Pro
Forma
 

Revenue:

                   

Rental income

  $ 33,236      $ 3,771      $ 4,858      $ 3,399      $ 1,819      $ 1,383      $ 4,585      $ —          $ 53,051   

Expense reimbursement

    2,869        436        924        86        1,359        —          983        —            6,657   

Other

    791        3        7        69        —          203        6        —            1,079   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total Revenues

    36,896        4,210        5,789        3,554        3,178        1,586        5,574        —            60,787   

Operating Expenses:

                   

Property operating expenses

    14,332        1,542        3,288        1,728        1,574        611        1,773        —            24,848   

Acquisition costs

    2,133        819        993        85        136        99        290        —            4,555   

Stock based compensation

    1,091        —          —          —          —          —          —          442      (GG)     1,533   

General and administrative

    1,314        —          —          —          —          —          —          476      (HH)     1,790   

Base management fee

    682        —          —          —          —          —          —          297      (II)     979   

Depreciation and amortization

    14,729        1,821        3,038        1,928        1,874        877        2,776        —            27,043   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total Operating Expenses

    34,281        4,182        7,319        3,741        3,584        1,587        4,839        1,215          60,748   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating Income/ (loss)

    2,615        28        (1,530     (187     (406     (1     735        (1,215       39   

Interest Expense:

                   

Contractual interest expense

    (7,854     (2,426     (2,294     (1,050     (90     —          —          (254   (JJ)     (13,968

Amortization of deferred financing costs

    (1,443     (164     (22     —          —          —          —          765      (JJ)     (864

Loss on early extinguishment of Predecessor debt

    (1,655     —          —          —          —          —          —          1,655      (JJ)     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 
    (10,952     (2,590     (2,316     (1,050     (90     —          —          2,166          (14,832

Change in fair value of earn-out

    (1,048     —          —          —          —          —          —          —            (1,048

Gain on equity investment

    4,475        —          —          —          —          —          —          (4,475   (KK)     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net (loss)/income

    (4,910     (2,562     (3,846     (1,237     (496     (1     735        (3,524       (15,841
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Less:

                   

Net (income)/loss attributable to non-controlling interests in properties

    (82     —          —          —          —          —          —          —            (82

Net income attributable to Predecessor

    (1,973     —          —          —          —          —          —          1,973      (LL)     —     

Net loss attributable to Operating Partnership unitholders’ noncontrolling interests

    1,955        —          —          —          —          —          —          2,517          4,472   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net (loss)/income attributable to stockholders

  $ (5,010   $ (2,562   $ (3,846   $ (1,237   $ (496   $ (1     735        966          (11,451
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Pro forma weighted average common shares outstanding - basic and diluted

                      8,475,697   

Pro forma basic and diluted loss per share

                      (1.35
                   

 

 

 


City Office REIT, Inc.

Notes and Management’s Assumption to Unaudited Pro Forma Consolidated Financial Statements

1. Notes to the Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2015

(A) The acquisition of Intellicenter was accounted for using preliminary estimates of the fair value of tangible and intangible assets to be acquired and liabilities to be assumed in connection with the acquisition and are therefore subject to change. The Pro Forma adjustment includes the estimated cash borrowings and mortgage loan established upon the acquisition of Intellicenter.

(B) The acquisition of 190 Office Center was accounted for using preliminary estimates of the fair value of tangible and intangible assets to be acquired and liabilities to be assumed in connection with the acquisition and are therefore subject to change. The Pro Forma adjustment includes the estimated cash borrowings and mortgage loan established upon the acquisition of 190 Office Center.

2. Notes to the Unaudited Pro Forma Consolidated Statement of Operations for the six months ended June 30, 2015 and the year ended December 31, 2014

(AA) Revenue and property expenses for the Intellicenter 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 expense related to the Company’s borrowings under the mortgage loan is at a fixed rate of 4.65% and borrowings under the term loan is at a variable rate of LIBOR plus 6%.

(BB) Revenue and property expenses for the 190 Office Center 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 expense related to the Company’s borrowings under the mortgage loan is at a fixed rate of 4.79% and borrowings under the Secured Credit Facility is at a variable rate of LIBOR plus 2.25%.

(CC) Financial results for DTC Crossroads are based on historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation 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.

(DD) Financial results for Superior Pointe are based on historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation 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.

(EE) Financial results for Logan Tower are based on historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation 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.


(FF) During the year ended December 31, 2014, the Company acquired Plaza 25, Lake Vista Pointe and Florida Research Park. The impact of these acquisitions on revenue and expenses has been presented as if they occurred on January 1, 2014. Revenue and property expenses prior to the acquisition of the Plaza 25 property purchased on June 4, 2014, the Lake Vista Pointe property purchased on July 18, 2014, and the Florida Research Park property purchased on November 18, 2014, are based on the historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation expense and interest expense.

(GG) Reflects a pro rata portion of the expense of stock-based compensation to be granted to the Advisor as part of the formation transactions for the periods presented. The expense will be amortized over the vesting period.

(HH) Reflects the estimated costs to operate the entity as a public company comprised of insurance, directors, public reporting and other miscellaneous costs.

(II) City Office will pay the advisor an advisory fee in accordance with the advisory agreement. The adjustment reflects the pro-forma impact as the IPO and related Formation Transactions are presented as if they occurred on January 1, 2014.

(JJ) Reflects the reduction of interest expense from the repayment of mortgage debt upon consummation of the IPO. Additionally, reflects the increase in interest expense for the periods presented on the $95 million and $23.5 million mortgage loans to be guaranteed by the OP as to certain “non-recourse covenants” and secured by a mortgage on the fee simple interest in the Cherry Creek Corporate Campus, City Center and Corporate Parkway properties and the AmberGlen properties. A secured revolving credit facility of $30 million authorized and available was obtained following the formation. Pro forma reflects the amortization of the associated financing costs on the mortgage loans and the secured revolving credit facility for the periods presented. Pro forma also reflects the increase in interest expense relating to presenting the acquisitions of Plaza 25, Lake Vista Pointe and Florida Research Park as if they occurred on January 1, 2014.

In connection with the prepayment of the mortgage loan secured by Cherry Creek Corporate Campus, City Centre, Corporate Parkway and Central Fairwinds, $1.1 million of deferred financing costs were written-off. Additionally prepayment costs of approximately $1.7 million were incurred.

(KK) Reflects reversal of gain on equity investment as the acquisition of the remaining 57.7% interest in Cherry Creek are presented as if it occurred on January 1, 2014.

(LL) Reflects reversal of net income attributable to the Predecessor as the IPO and related Formation Transactions are presented as if they occurred on January 1, 2014.