Attached files
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| EX-99.1 - EX-99.1 - City Office REIT, Inc. | d298626dex991.htm |
| 8-K/A - AMENDMENT NO. 1 TO FORM 8-K - City Office REIT, Inc. | d298626d8ka.htm |
Exhibit 99.2
City Office REIT, Inc.
Pro Forma Consolidated Financial Statements
(Unaudited)
City Office REIT, Inc. (the “Company,” “we,” “our” or “us”) was organized in the state of Maryland on November 26, 2013.
The Company announced on November 7, 2016 that it had closed on the acquisition of the Park Tower property in Tampa, Florida for a purchase price of $79.8 million. The Company does not have a material relationship with the seller of the Property and the acquisition is not an affiliated transaction. As previously announced, on July 13, 2016, the Company closed on the acquisition of the FRP Collection property in Orlando, Florida for a purchase price of $49.8 million. On June 29, 2016, the Company closed on the acquisition of a five-storey building in the Gateway submarket of Tampa, Florida (“Carillon Point”). The contract purchase price of the property was $26.3 million, exclusive of closing costs. On June 15, 2016, the Company closed on the sale of its Corporate Parkway property (“Corporate Parkway”) in Allentown, Pennsylvania for a gross sale price of $44.9 million before customary closing and transaction costs.
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 September 30, 2016 and the historical consolidated statement of operations for the nine months ended September 30, 2016 which includes the acquisition of Park Tower as if it had been completed on January 1, 2015. The accompanying unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2015 reflects the historical results of operations of the Company for the year ended December 31, 2015 and are presented as if the acquisitions of Logan Tower, Superior Pointe, DTC Crossroads, 190 Office Center, Intellicenter, Carillon Point, FRP Collection and Park Tower plus the disposition of Corporate Parkway were completed on January 1, 2015.
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 acquisitions and disposition had actually occurred on January 1, 2015. 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 and disposition of the properties 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 and disposition.
City Office REIT, Inc.
Pro Forma Consolidated Balance Sheet
As of September 30, 2016
(Unaudited)
(In thousands, except share and per share data)
| City Office REIT, Inc. |
Preferred Stock Offering (A) |
Park Tower (B) |
Company Pro Forma |
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| Assets |
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| Real estate properties, net |
$ | 398,591 | $ | — | $ | 72,140 | $ | 470,731 | ||||||||
| Cash and cash equivalents |
12,022 | 108,135 | (78,025 | ) | 42,132 | |||||||||||
| Restricted cash |
17,009 | — | — | 17,009 | ||||||||||||
| Rents receivable, net |
14,026 | — | — | 14,026 | ||||||||||||
| Deferred leasing costs, net of accumulated amortization |
4,612 | — | — | 4,612 | ||||||||||||
| Acquired lease intangibles, net |
38,607 | — | 8,324 | 46,931 | ||||||||||||
| Prepaid expenses and other assets |
2,562 | — | 130 | 2,692 | ||||||||||||
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| Total Assets |
$ | 487,429 | $ | 108,135 | $ | 2,569 | $ | 598,133 | ||||||||
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| Liabilities and Equity |
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| Liabilities: |
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| Debt |
$ | 302,769 | $ | — | $ | — | $ | 302,769 | ||||||||
| Accounts payable and accrued liabilities |
11,270 | — | — | 11,270 | ||||||||||||
| Deferred rent |
4,873 | — | 66 | 4,939 | ||||||||||||
| Tenant rent deposits |
2,120 | — | 230 | 2,350 | ||||||||||||
| Acquired lease intangibles liability, net |
2,161 | — | 773 | 2,934 | ||||||||||||
| Dividends payable |
5,739 | — | — | 5,739 | ||||||||||||
| Earn-out liability |
1,900 | — | — | 1,900 | ||||||||||||
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| Total Liabilities |
330,832 | — | 1,069 | 331,901 | ||||||||||||
| Equity |
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| Stockholders’ Equity: |
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| Common stock, $0.01 par value, 100,000,000 shares authorized, 24,382,226 and 12,517,777 shares issued and outstanding |
244 | — | — | 244 | ||||||||||||
| 6.625% Series A Preferred stock, $0.01 par value per share; 4,600,000 shares authorized and 4,480,000 shares issued and outstanding |
— | 45 | — | 45 | ||||||||||||
| Additional paid in capital |
198,792 | 108,090 | — | 306,882 | ||||||||||||
| Accumulated deficit |
(42,798 | ) | — | (42,798 | ) | |||||||||||
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| Total Stockholders’ Equity |
156,238 | 108,135 | — | 264,373 | ||||||||||||
| Operating Partnership noncontrolling interests |
121 | — | — | 121 | ||||||||||||
| Noncontrolling interests in properties |
238 | — | 1,500 | 1,738 | ||||||||||||
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| Total Equity |
156,597 | 108,135 | 1,500 | 266,232 | ||||||||||||
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| Total Liabilities and Stockholder Equity |
$ | 487,429 | $ | 108,135 | $ | 2,569 | $ | 598,133 | ||||||||
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City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 2016
(Unaudited)
(In thousands, except share and per share data)
| City Office REIT, Inc. |
Park Tower (AA) |
FRP Collection (BB) |
Carillon Point (CC) |
Corporate Parkway (DD) |
Other Pro Forma Adjustments |
Company Pro Forma |
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| Revenue: |
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| Rental income |
$ | 44,919 | $ | 7,105 | $ | 2,652 | $ | 1,024 | $ | (1,263 | ) | $ | — | $ | 54,437 | |||||||||||||
| Expense reimbursement |
5,150 | 453 | 514 | 80 | — | — | 6,197 | |||||||||||||||||||||
| Other |
1,089 | 689 | 3 | 2 | — | — | 1,783 | |||||||||||||||||||||
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| Total Revenues |
51,158 | 8,247 | 3,169 | 1,106 | (1,263 | ) | — | 62,417 | ||||||||||||||||||||
| Operating Expenses: |
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| Property operating expenses |
19,779 | 3,970 | 980 | 536 | (8 | ) | — | 25,257 | ||||||||||||||||||||
| Acquisition costs |
340 | — | (155 | ) | (75 | ) | — | — | 110 | |||||||||||||||||||
| Stock based compensation |
1,787 | — | — | — | — | — | 1,787 | |||||||||||||||||||||
| General and administrative |
2,751 | — | — | — | — | — | 2,751 | |||||||||||||||||||||
| Base management fee |
109 | — | — | — | — | — | 109 | |||||||||||||||||||||
| External advisor acquisition |
7,045 | — | — | — | — | 7,045 | ||||||||||||||||||||||
| Depreciation and amortization |
20,834 | 3,257 | 2,763 | 700 | (1,123 | ) | — | 26,431 | ||||||||||||||||||||
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| Total Operating Expenses |
52,645 | 7,227 | 3,588 | 1,161 | (1,131 | ) | — | 63,490 | ||||||||||||||||||||
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| Operating (loss)/income |
(1,487 | ) | 1,020 | (419 | ) | (55 | ) | (132 | ) | — | (1,073 | ) | ||||||||||||||||
| Interest Expense: |
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| Contractual interest expense |
(10,205 | ) | — | (805 | ) | (272 | ) | 383 | (561 | ) (FF) | (11,460 | ) | ||||||||||||||||
| Amortization of deferred financing costs |
(672 | ) | — | (11 | ) | — | 23 | (34 | ) (FF) | (693 | ) | |||||||||||||||||
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| (10,877 | ) | — | (816 | ) | (272 | ) | 406 | (595 | ) | (12,153 | ) | |||||||||||||||||
| Change in fair value of earn-out |
— | — | — | — | — | — | — | |||||||||||||||||||||
| Net gain on sale of real estate property |
15,934 | — | — | — | — | (15,934 | ) (CC) | — | ||||||||||||||||||||
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| Net income/(loss) |
3,570 | 1,020 | (1,234 | ) | (327 | ) | 274 | (16,529 | ) | (13,226 | ) | |||||||||||||||||
| Less: |
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| Net (income)/loss attributable to noncontrolling interests in properties |
(243 | ) | (53 | ) | 62 | — | — | — | (234 | ) | ||||||||||||||||||
| Net (income)/loss attributable to Operating Partnership unitholders’ noncontrolling interests |
(871 | ) | (249 | ) | 301 | 54 | (45 | ) | 2,730 | 1,920 | ||||||||||||||||||
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| Net income/(loss) attributable to stockholders |
$ | 2,456 | $ | 718 | $ | (872 | ) | $ | (273 | ) | $ | 229 | $ | (13,799 | ) | $ | (11,541 | ) | ||||||||||
| Weighted average common shares outstanding - basic |
19,142,736 | 19,142,736 | ||||||||||||||||||||||||||
| Weighted average common shares outstanding - diluted |
21,731,058 | 19,142,736 | ||||||||||||||||||||||||||
| Basic earnings per share |
0.13 | (0.60 | ) | |||||||||||||||||||||||||
| Diluted earnings per share |
0.11 | (0.60 | ) | |||||||||||||||||||||||||
City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2015
(Unaudited)
(In thousands, except share and per share data)
| City Office REIT, Inc. |
Park Tower (AA) |
FRP Collection (BB) |
Carillon Point (CC) |
Corporate Parkway (DD) |
2015 Acquisitions (EE) |
Other Pro Forma Adjustments |
Company Pro Forma |
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| Revenue: |
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| Rental income |
$ | 48,009 | $ | 8,946 | $ | 4,711 | $ | 3,150 | $ | (2,975 | ) | $ | 11,286 | $ | — | $ | 73,127 | |||||||||||||||
| Expense reimbursement |
5,808 | 492 | 1,165 | 186 | — | 1,617 | — | 9,268 | ||||||||||||||||||||||||
| Other |
1,235 | 793 | 1 | 15 | — | 111 | — | 2,155 | ||||||||||||||||||||||||
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| Total Revenues |
55,052 | 10,231 | 5,877 | 3,351 | (2,975 | ) | 13,014 | — | 84,550 | |||||||||||||||||||||||
| Operating Expenses: |
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| Property operating expenses |
20,420 | 4,944 | 1,930 | 1,176 | (25 | ) | 4,926 | — | 33,371 | |||||||||||||||||||||||
| Acquisition costs |
2,959 | 349 | 155 | 75 | — | — | — | 3,538 | ||||||||||||||||||||||||
| Stock based compensation |
1,907 | — | — | — | — | — | — | 1,907 | ||||||||||||||||||||||||
| General and administrative |
1,821 | — | — | — | — | — | — | 1,821 | ||||||||||||||||||||||||
| Base management fee |
1,302 | — | — | — | — | — | — | 1,302 | ||||||||||||||||||||||||
| External advisor acquisition |
492 | — | — | — | — | — | — | 492 | ||||||||||||||||||||||||
| Depreciation and amortization |
21,624 | 4,343 | 5,073 | 1,437 | (2,430 | ) | 6,214 | — | 36,261 | |||||||||||||||||||||||
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| Total Operating Expenses |
50,525 | 9,636 | 7,158 | 2,688 | (2,455 | ) | 11,140 | — | 78,692 | |||||||||||||||||||||||
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| Operating income/(loss) |
4,527 | 595 | (1,281 | ) | 663 | (520 | ) | 1,874 | — | 5,858 | ||||||||||||||||||||||
| Interest Expense: |
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| Contractual interest expense |
(10,607 | ) | — | (322 | ) | (544 | ) | 890 | (2,437 | ) | (748 | ) (FF) | (13,768 | ) | ||||||||||||||||||
| Amortization of deferred financing costs |
(746 | ) | — | (21 | ) | — | 51 | (20 | ) | (43 | ) (FF) | (779 | ) | |||||||||||||||||||
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| Interest Expense, net |
(11,353 | ) | — | (343 | ) | (544 | ) | 941 | (2,457 | ) | (791 | ) | (14,547 | ) | ||||||||||||||||||
| Change in fair value of earn-out |
(841 | ) | — | — | — | — | — | — | (841 | ) | ||||||||||||||||||||||
| Net gain on sale of real estate property |
— | — | — | — | — | — | 15,934 | (CC) | 15,934 | |||||||||||||||||||||||
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| Net (loss)/income |
(7,667 | ) | 595 | (1,624 | ) | 119 | 421 | (583 | ) | 15,143 | 6,404 | |||||||||||||||||||||
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| Less: |
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| Net (income)/loss attributable to non-controlling interests in properties |
(500 | ) | (31 | ) | (81 | ) | — | — | — | — | (612 | ) | ||||||||||||||||||||
| Net (income)/loss attributable to Operating Partnership unitholders’ noncontrolling interests |
1,576 | (93 | ) | 282 | (20 | ) | (70 | ) | 388 | 2,508 | 4,571 | |||||||||||||||||||||
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| Net loss/(income) attributable to stockholders |
$ | (6,591 | ) | $ | 471 | $ | (1,423 | ) | $ | 99 | $ | 351 | $ | (195 | ) | $ | 17,651 | $ | 10,363 | |||||||||||||
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| Weighted average common shares outstanding - basic |
12,408,850 | 12,408,850 | ||||||||||||||||||||||||||||||
| Weighted average common shares outstanding - diluted |
12,408,850 | 15,916,192 | ||||||||||||||||||||||||||||||
| Basic earnings per share |
(0.53 | ) | 0.84 | |||||||||||||||||||||||||||||
| Diluted earnings per share |
(0.53 | ) | 0.65 | |||||||||||||||||||||||||||||
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 September 30, 2016
(A) On October 4, 2016, the Company completed a public preferred stock offering pursuant to which we sold 4,000,000 shares of our 6.625% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (“Series A Preferred Stock”) to the public at a price of $25.00 per share. We raised $100.0 million in gross proceeds, resulting in net proceeds to us of approximately $96.5 million after deducting $3.5 million in underwriting discounts and expenses related to the offering. On October 28, 2016, we issued an additional 480,000 shares of Series A Preferred Stock pursuant to the partial exercise of the underwriters’ overallotment option, raising an additional $12.0 million in gross proceeds before underwriting discounts and expenses.
(B) The acquisition of Park Tower 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 borrowings which financed the acquisition of Park Tower. The acquisition of Park Tower was funded by a portion of the proceeds received from the Company’s completed public preferred stock offering that closed on October 4, 2016. As a result, the issuance of $108 million in preference shares in October 2016 has been reflected in the pro forma balance sheet.
2. Notes to the Unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2016 and the year ended December 31, 2015
(AA) Revenue and property expenses for the Park Tower acquisition are based on the historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation. Depreciation expense is based on the preliminary estimates of fair value for the tangible and intangible assets acquired and is therefore subject to change.
(BB) Revenue and property expenses for the FRP Collection 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 3.85% and borrowings under the Secured Credit Facility is at a variable rate of LIBOR plus 2.75%.
(CC) Revenue and property expenses for the Carillon Point 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 Secured Credit Facility is at a variable rate of LIBOR plus 2.75%.
(DD) The sale of Corporate Parkway is assumed to have taken place on January 1, 2015. Financial results for Corporate Parkway are based on historical operations, including interest expense under the Company’s ownership.
(EE) Revenue and property expenses for 2015 Acquisitions are based on the historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation expense and interest expense. The relevant properties are Intellicenter, 190 Office Center, DTC Crossroads, Superior Pointe and Logan Tower.
(FF) Reflects a pro rata portion of the interest expense and deferred financing costs assuming DTC Crossroads had been part of the Guggenheim loan since January 1, 2015 as DTC Crossroads was added as security to the Guggenheim loan upon the sale of Corporate Parkway.