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EX-99.1 - EX-99.1 - City Office REIT, Inc.d351446dex991.htm
8-K/A - FORM 8-K AMENDMENT NO. 1 - City Office REIT, Inc.d351446d8ka.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 December 15, 2016 that it had closed on the acquisition of the SanTan Corporate Center (“SanTan”) property in Phoenix, Arizona for a purchase price of $58.5 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, an November 30, 2016, the Company closed on the acquisition of the 5090 N 40th St property (“5090”) in Phoenix, Arizona for a purchase price of $42.6 million. On November 2, 2016, the Company closed on the acquisition of the Park Tower property (“Park Tower”) in Tampa, Florida for a purchase price of $79.8 million. On July 13, 2016, the Company closed on the acquisition of the FRP Collection property (“FRP Collection”) 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 SanTan 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, Park Tower, 5090 N 40th St and SanTan 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)
    SanTan
Corporate
Center
(B)
     5090 N 40th
Street

(C)
    Park Tower
(D)
    Company Pro
Forma
 

Assets

             

Real estate properties, net

   $ 398,591     $ —       $ 43,991      $ 38,819     $ 72,140     $ 553,541  

Cash and cash equivalents

     12,022       108,135       —          (41,383     (78,025     749  

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       —         10,283        3,616       8,324       60,830  

Prepaid expenses and other assets

     2,562       —         —          —         130       2,692  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total Assets

   $ 487,429     $ 108,135     $ 54,274      $ 1,052     $ 2,569     $ 653,459  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities and Equity

             

Liabilities:

             

Debt

   $ 302,769     $ —       $ 52,800      $ —       $ —       $ 355,569  

Accounts payable and accrued liabilities

     11,270       —         378        207       —         11,855  

Deferred rent

     4,873       —         16        72       66       5,027  

Tenant rent deposits

     2,120       —         150        169       230       2,669  

Acquired lease intangibles liability, net

     2,161       —         930        604       773       4,468  

Dividend distributions payable

     5,739       —         —          —         —         5,739  

Earn-out liability

     1,900       —         —          —         —         1,900  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total Liabilities

     330,832       —         54,274        1,052       1,069       387,227  

Equity

             

Stockholders’ Equity:

             

6.625% Series A Preferred stock, $0.01 par value per share; 100,000,000 shares authorized and 4,480,000 shares issued and outstanding

     —         112,000       —          —         —         112,000  

Common stock, $0.01 par value, 100,000,000 shares authorized, 24,382,226 shares issued and outstanding

     244       —         —          —         —         244  

Additional paid in capital

     198,792       (3,865     —          —         —         194,927  

Accumulated deficit

     (42,798     —         —          —         —         (42,798
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total Stockholders’ Equity

     156,238       108,135       —          —         —         264,373  

Operating Partnership unitholders’ non-controlling interests

     121       —         —          —         —         121  

Non-controlling interests in properties

     238       —         —          —         1,500       1,738  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total Equity

     156,597       108,135       —          —         1,500       266,232  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

   $ 487,429     $ 108,135     $ 54,274      $ 1,052     $ 2,569     $ 653,459  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 


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.
    SanTan
Corporate
Center
(AA)
    5090 N 40th
Street
(BB)
    Park Tower
(CC)
    FRP
Collection
(DD)
    Carillon
Point
(EE)
    Corporate
Parkway
(FF)
    Other Pro
Forma
Adjustments
    Company
Pro Forma
 

Revenue:

                 

Rental income

  $ 44,919     $ 4,702     $ 3,275     $ 7,105     $ 2,652     $ 1,024     $ (1,263   $ —       $ 62,414  

Expense reimbursement

    5,150       34       72       453       514       80       —         —         6,303  

Other

    1,089       98       185       689       3       2       —         —         2,066  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues

    51,158       4,834       3,532       8,247       3,169       1,106       (1,263     —         70,783  

Operating Expenses:

                 

Property operating expenses

    19,779       1,928       894       3,970       980       536       (8     —         28,079  

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       2,869       2,147       3,257       2,763       700       (1,123     —         31,447  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Expenses

    52,645       4,797       3,041       7,227       3,588       1,161       (1,131     —         71,328  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss)/income

    (1,487     37       491       1,020       (419     (55     (132     —         (545

Interest Expense:

                 

Contractual interest expense

    (10,205     (1,166     —         —         (805     (272     383       (561 ) (HH)      (12,626

Amortization of deferred financing costs

    (672     (81     —         —         (11     —         23       (34 ) (HH)      (775
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (10,877     (1,247     —         —         (816     (272     406       (595     (13,401

Change in fair value of earn-out

    —         —         —         —         —         —         —         —         —    

Net gain on sale of real estate property

    15,934       —         —         —         —         —         —         (15,934 ) (FF)      —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)

    3,570       (1,210     491       1,020       (1,235     (327     274       (16,529     (13,946

Less:

                 

Net (income)/loss attributable to noncontrolling interests in properties

    (243     —           (53     62       —         —         —         (234

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

    (871     295         (249     301       54       (45     2,730       2,215  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) attributable to stockholders

  $ 2,456     $ (915   $ 491     $ 718     $ (872   $ (273   $ 229     $ (13,799   $ (11,965

Less:

                 

Preferred stock distributions

    —         —         —         —         —         —         —         (5,570     (5,570
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) attributable to common stockholders

  $ 2,456     $ (915   $ 491     $ 718     $ (872   $ (273   $ 229     $ (19,369   $ (17,535

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                     (0.92

Diluted earnings per share

    0.11                     (0.92


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.
    SanTan
Corporate
Center
(AA)
    5090 N 40th
Street
(BB)
    Park Tower
(CC)
    FRP
Collection
(DD)
    Carillon
Point
(EE)
    Corporate
Parkway
(FF)
    2015
Acquisitions
(GG)
    Other Pro
Forma
Adjustments
    Company
Pro Forma
 

Revenue:

                   

Rental income

  $ 48,009     $ 5,592     $ 4,362     $ 8,946     $ 4,711     $ 3,150     $ (2,975   $ 11,286     $ —       $ 83,081  

Expense reimbursement

    5,808       35       96       492       1,165       186       —         1,617       —         9,399  

Other

    1,235       120       247       793       1       15       —         111       —         2,522  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues

    55,052       5,747       4,705       10,231       5,877       3,351       (2,975     13,014       —         95,002  

Operating Expenses:

                   

Property operating expenses

    20,420       2,446       1,190       4,944       1,930       1,176       (25     4,926       —         37,007  

Acquisition costs

    2,959       91       72       349       155       75       —         —         —         3,701  

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       3,825       2,860       4,343       5,073       1,437       (2,430     6,214       —         42,946  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Expenses

    50,525       6,362       4,122       9,636       7,158       2,688       (2,455     11,140       —         89,176  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income/(loss)

    4,527       (615     583       595       (1,281     663       (520     1,874       —         5,826  

Interest Expense:

                   

Contractual interest expense

    (10,607     (1,555     —         —         (322     (544     890       (2,437     (748 (HH)      (15,323

Amortization of deferred financing costs

    (746     (108     —         —         (21     —         51       (20     (43 (HH)      (887
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest Expense, net

    (11,353     (1,663     —         —         (343     (544     941       (2,457     (791     (16,210

Change in fair value of earn-out

    (841     —         —         —         —         —         —         —         —         (841

Net gain on sale of real estate property

    —         —         —         —         —         —         —         —         15,934  (FF)      15,934  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss)/income

    (7,667     (2,278     583       595       (1,624     119       421       (583     15,143       4,709  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less:

                   

Net (income)/loss attributable to noncontrolling interests in properties

    (500     —         —         (31     (81     —         —         —         —         (612

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

    1,576       377       (97     (93     282       (20     (70     388       (2,508     (165
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss)/income attributable to stockholders

  $ (6,591   $ (1,901   $ 486     $ 471     $ (1,423   $ 99     $ 351     $ (195   $ 12,635     $ 3,932  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less:

                   

Preferred stock distributions

    —         —         —         —         —         —         —         —         (7,420     (7,420
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) attributable to common stockholders

  $ (6,591   $ (1,901   $ 486     $ 471     $ (1,423   $ 99     $ 351     $ (195   $ 5,215     $ (3,488

Weighted average common shares outstanding - basic

    12,408,850                       12,408,850  

Weighted average common shares - outstanding diluted

    12,408,850                       12,408,850  

Basic earnings per share

    (0.53                     (0.28

Diluted earnings per share

    (0.53                     (0.28


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. The proceeds of the offering were used to purchase 5090 N 40th St and Park Tower.

(B) The acquisition of SanTan 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 borrowings under the Secured Credit Facility to be established upon the acquisition of SanTan.

(C) The acquisition of 5090 N 40th Street 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.

(D) 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.

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 SanTan 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. Interest expense related to the Company’s borrowings under the Secured Credit Facility are at a variable rate of LIBOR plus 2.25%.

(BB) Revenue and property expenses for the 5090 N 40th St 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.

(CC) 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 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.


(DD) 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%.

(EE) 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%.

(FF) 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.

(GG) 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.

(HH) 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.