City Office REIT Reports Fourth Quarter and Full Year 2023 Results
Fourth Quarter Highlights
- Rental and other revenues were
$44.3 million . GAAP net loss attributable to common stockholders was approximately$4.5 million , or ($0.11 ) per fully diluted share; - Core FFO was approximately
$13.5 million , or$0.33 per fully diluted share; - AFFO was approximately
$9.3 million , or$0.23 per fully diluted share; - In-place occupancy was 84.5% as of quarter end;
- Executed approximately 134,000 square feet of new and renewal leases during the quarter;
- Declared a fourth quarter dividend of
$0.10 per share of common stock, paid onJanuary 24, 2024 ; and - Declared a fourth quarter dividend of
$0.4140625 per share of Series A Preferred Stock, paid onJanuary 24, 2024 .
"We are seeing positive signs that leasing activity is gathering momentum, especially across our premium properties and locations," commented
"Operationally, we completed 2023 in line with our expectations, having ended the year with a Core FFO per share within the initial guidance range provided at the start of 2023. Of note, Same Store Cash NOI increased 3.0% in 2023 as compared to the prior year. Our new 2024 guidance is reflective of positive leasing trends for our high-quality market segment but also the assumed continued challenging macro conditions impacting the office real estate industry."
A reconciliation of certain non-GAAP financial measures, including FFO, Core FFO, AFFO, NOI, Same Store NOI, Same Store Cash NOI and their equivalent per share measures, to the most directly comparable financial measure under
Portfolio Operations
The Company reported that its total portfolio as of
Same Store Cash NOI decreased 0.5% for the three months ended
During the fourth quarter, the Company wrote off a combined
During the fourth quarter, the Company recognized
Leasing Activity
The Company's total leasing activity during the fourth quarter of 2023 was approximately 134,000 square feet, which included 109,000 square feet of new leasing and 25,000 square feet of renewals. Approximately 112,000 square feet of leases signed within the quarter will commence subsequent to quarter end. The Company's total leasing activity during the twelve months ended
Capital Structure
As of
Dividends
On
On
2024 Outlook
For 2024, the Company expects Core FFO per fully diluted share to be in the range of
Further, while the Company expects higher overall portfolio occupancy levels by the end of 2024, the anticipated commencement dates for new leases are weighted towards the end of the year. As a result, 2024 is expected to capture only a portion of this new leasing revenue with the bulk of the expected benefit from this new leasing occurring in 2025.
The outlook includes the following assumptions:
|
|
|
|
Full Year 2024 Guidance |
Low |
High |
|
Acquisitions |
|
|
|
Dispositions |
|
|
|
Net Operating Income |
|
|
|
General & Administrative Expenses |
|
|
|
Interest Expense |
|
|
|
2024 Core FFO per fully diluted share |
|
|
|
Net Recurring Straight-Line Rent Adjustment |
|
|
|
Same Store Cash NOI Change |
(1.0 %) |
1.0 % |
|
|
84.5 % |
86.5 % |
|
Material Considerations:
- The General & Administrative Expenses guidance includes approximately
$4.3 million for stock-based compensation. Our Core FFO definition excludes stock-based compensation. Excluding stock-based compensation, General & Administrative Expenses guidance for Full Year 2024 would have been$10.2 million –$11.2 million . - Annual weighted average fully diluted shares of common stock outstanding are assumed to be approximately 41.3 million.
- 2024 guidance assumes no share issuances and no share repurchase activity.
The Company's guidance is based on current plans and assumptions and subject to the risks and uncertainties more fully described in the Company's filings with the
Webcast and Conference Call Details
City Office's management will hold a conference call at
The webcast will be available under the "Investor Relations" section of the Company's website at www.cioreit.com. The conference call can be accessed by dialing 1-833-470-1428 for domestic callers and 1-404-975-4839 for international callers. The passcode for the conference call is 577879.
A replay of the call will be available later in the day on
A supplemental financial information package to accompany the discussion of the results will be posted on www.cioreit.com under the "Investor Relations" section.
Non-GAAP Financial Measures
Funds from Operations ("FFO") –
The Company uses FFO as a supplemental performance measure because the Company believes that FFO is beneficial to investors as a starting point in measuring the Company's operational performance. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare the Company's operating performance with that of other REITs.
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the Company's properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of the Company's properties, all of which have real economic effects and could materially impact the Company's results from operations, the utility of FFO as a measure of the Company's performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the NAREIT definition as the Company does, and, accordingly, the Company's FFO may not be comparable to such other REITs' FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of the Company's performance.
Core Funds from Operations ("Core FFO") – We calculate Core FFO by using FFO as defined by NAREIT and adjusting for certain other non-core items. We also exclude from our Core FFO calculation acquisition costs, loss on early extinguishment of debt, changes in the fair value of earn-outs, changes in fair value of contingent consideration and the amortization of stock based compensation.
We believe Core FFO provides a useful metric in comparing operations between reporting periods and in assessing the sustainability of our ongoing operating performance. Other equity REITs may calculate Core FFO differently or not at all, and, accordingly, the Company's Core FFO may not be comparable to such other REITs' Core FFO.
Adjusted Funds from Operations ("AFFO") – We compute AFFO by adding to Core FFO the non-cash amortization of deferred financing fees and non-real estate depreciation, and then subtracting cash paid for recurring tenant improvements, leasing commissions, and capital expenditures, and eliminating the net effect of straight-line rent / expense, deferred market rent and debt fair value amortization. Recurring capital expenditures exclude development / redevelopment activities, capital expenditures planned at acquisition and costs to reposition a property. We exclude certain first generation leasing costs, which are generally to fill vacant space in properties we acquire or were planned at acquisition. We have further excluded all costs associated with tenant improvements, leasing commissions and capital expenditures which were funded by the entity contributing the properties at closing.
Along with FFO and Core FFO, we believe AFFO provides investors with appropriate supplemental information to evaluate the ongoing operations of the Company. Other equity REITs may calculate AFFO differently, and, accordingly, the Company's AFFO may not be comparable to such other REITs' AFFO.
Net Operating Income ("NOI") – We define NOI as rental and other revenues less property operating expenses.
We consider NOI to be an appropriate supplemental performance measure to net income because we believe it provides information useful in understanding the core operations and operating performance of our portfolio.
Same Store Net Operating Income ("Same Store NOI") and Same Store Cash Net Operating Income ("Same Store Cash NOI") – Same Store NOI is calculated as the NOI attributable to the properties continuously owned and operated for the entirety of the reporting periods presented, and Same Store Cash NOI is calculated as Same Store NOI less non-recurring other income, termination fee income, straight-line rent / expense, deferred market rent and the non-controlling interest's share of cash NOI. The Company's definitions of Same Store NOI and Same Store Cash NOI exclude properties that were not stabilized during both of the applicable reporting periods. These exclusions may include, but are not limited to, acquisitions, dispositions and properties undergoing repositioning or significant renovations.
We believe Same Store NOI and Same Store Cash NOI are important measures of comparison because each allows for comparison of operating results of stabilized properties owned and operated for the entirety of both applicable periods and therefore eliminates variations caused by acquisitions, dispositions or repositionings during such periods. Other REITs may calculate Same Store NOI and Same Store Cash NOI differently and our calculation should not be compared to that of other REITs.
Forward-looking Statements
This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company's current beliefs as to the outcome and timing of future events. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "approximately," "anticipate," "assume," "believe," "budget," "contemplate," "continue," "could," "estimate," "expect," "future," "hypothetical," "intend," "may," "outlook," "plan," "potential," "predict," "project," "seek," "should," "target," "will" or other similar words or expressions. There can be no assurance that actual forward-looking statements, including projected capital resources, projected profitability and portfolio performance, estimates or developments affecting the Company will be those anticipated by the Company. Examples of forward-looking statements include those pertaining to expectations regarding our financial performance, including under metrics such as NOI and FFO, market rental rates, national or local economic growth, including the impact of inflation, estimated replacement costs of our properties, the Company's expectations regarding tenant occupancy, re-leasing periods, the Company's ability to renew expiring leases, tenant compliance with contractual lease obligations, projected capital improvements, expected sources of financing and ability to service existing financing, expectations as to the likelihood and timing of closing of acquisitions, dispositions, or other transactions, the expected operating performance of the Company's current properties, anticipated near-term acquisitions and descriptions relating to these expectations, including, without limitation, the anticipated net operating income yield and cap rates, lower than expected yields, increased interest rates, operating costs and costs of capital, and changes in local, regional, national and international economic conditions, including as a result of the systemic and structural changes in the demand for commercial office space. Forward-looking statements presented in this press release are based on management's beliefs and assumptions made by, and information currently available to, management.
The forward-looking statements contained in this press release are based on historical performance and management's current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to the factors, risks and uncertainties described above, changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors described in our news releases and filings with the
City Office REIT, Inc.
(In thousands, except par value and share data) |
|||||
|
|||||
|
|||||
|
|
2023 |
|
|
2022 |
Assets |
|
|
|
|
|
Real estate properties |
|
|
|
|
|
Land |
$ |
193,524 |
|
$ |
199,537 |
Building and improvement |
|
1,194,819 |
|
|
1,215,000 |
Tenant improvement |
|
152,540 |
|
|
139,365 |
Furniture, fixtures and equipment |
|
820 |
|
|
689 |
|
|
1,541,703 |
|
|
1,554,591 |
Accumulated depreciation |
|
(218,628) |
|
|
(175,720) |
|
|
1,323,075 |
|
|
1,378,871 |
Cash and cash equivalents |
|
30,082 |
|
|
28,187 |
Restricted cash |
|
13,310 |
|
|
16,075 |
Rents receivable, net |
|
53,454 |
|
|
44,429 |
Deferred leasing costs, net |
|
21,046 |
|
|
21,989 |
Acquired lease intangible assets, net |
|
42,434 |
|
|
55,438 |
Other assets |
|
27,975 |
|
|
29,450 |
Total Assets |
$ |
1,511,376 |
|
$ |
1,574,439 |
Liabilities and Equity |
|
|
|
|
|
Liabilities: |
|
|
|
|
|
Debt |
$ |
669,510 |
|
$ |
690,099 |
Accounts payable and accrued liabilities |
|
29,070 |
|
|
35,753 |
Deferred rent |
|
7,672 |
|
|
9,147 |
Tenant rent deposits |
|
7,198 |
|
|
7,040 |
Acquired lease intangible liabilities, net |
|
7,736 |
|
|
9,150 |
Other liabilities |
|
17,557 |
|
|
20,076 |
Total Liabilities |
|
738,743 |
|
|
771,265 |
Commitments and Contingencies |
|
|
|
|
|
Equity: |
|
|
|
|
|
6.625% Series A Preferred stock, |
|
112,000 |
|
|
112,000 |
Common stock, |
|
399 |
|
|
397 |
Additional paid-in capital |
|
438,867 |
|
|
436,161 |
Retained earnings |
|
221,213 |
|
|
251,542 |
Accumulated other comprehensive (loss)/income |
|
(248) |
|
|
2,731 |
Total Stockholders' Equity |
|
772,231 |
|
|
802,831 |
Non-controlling interests in properties |
|
402 |
|
|
343 |
Total Equity |
|
772,633 |
|
|
803,174 |
Total Liabilities and Equity |
$ |
1,511,376 |
|
$ |
1,574,439 |
|
|
|
|
|
|
City Office REIT, Inc.
(In thousands, except per share data) |
|||||||
|
|||||||
|
Three Months Ended |
|
Years Ended |
||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
Rental and other revenues |
$ 44,321 |
|
$ 44,613 |
|
$ 179,096 |
|
$ 180,485 |
Operating expenses: |
|
|
|
|
|
|
|
Property operating expenses |
17,387 |
|
17,003 |
|
69,997 |
|
67,739 |
General and administrative |
3,878 |
|
3,207 |
|
14,841 |
|
13,782 |
Depreciation and amortization |
17,192 |
|
15,423 |
|
62,987 |
|
62,495 |
Impairment of real estate |
— |
|
13,444 |
|
— |
|
13,444 |
Total operating expenses |
38,457 |
|
49,077 |
|
147,825 |
|
157,460 |
|
|
|
|
|
|
|
|
Operating income/(loss) |
5,864 |
|
(4,464) |
|
31,271 |
|
23,025 |
Interest expense: |
|
|
|
|
|
|
|
Contractual interest expense |
(8,069) |
|
(7,473) |
|
(31,876) |
|
(25,784) |
Amortization of deferred financing costs and debt fair value |
(317) |
|
(301) |
|
(1,296) |
|
(1,218) |
|
(8,386) |
|
(7,774) |
|
(33,172) |
|
(27,002) |
Net (loss)/gain on disposition of real estate property |
— |
|
— |
|
(134) |
|
21,658 |
Net (loss)/income |
(2,522) |
|
(12,238) |
|
(2,035) |
|
17,681 |
Less: |
|
|
|
|
|
|
|
Net income attributable to non-controlling interests in properties |
(141) |
|
(181) |
|
(647) |
|
(691) |
Net (loss)/income attributable to the Company |
(2,663) |
|
(12,419) |
|
(2,682) |
|
16,990 |
Preferred stock distributions |
(1,855) |
|
(1,855) |
|
(7,420) |
|
(7,420) |
Net (loss)/income attributable to common stockholders |
$ (4,518) |
|
$ (14,274) |
|
$ (10,102) |
|
$ 9,570 |
Net (loss)/income per common share: |
|
|
|
|
|
|
|
Basic |
$ (0.11) |
|
$ (0.36) |
|
$ (0.25) |
|
$ 0.23 |
Diluted |
$ (0.11) |
|
$ (0.36) |
|
$ (0.25) |
|
$ 0.22 |
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
Basic |
39,938 |
|
39,719 |
|
39,922 |
|
42,052 |
Diluted |
39,938 |
|
39,719 |
|
39,922 |
|
42,866 |
|
|
|
|
|
|
|
|
Dividend distributions declared per common share |
$ 0.10 |
|
$ 0.20 |
|
$ 0.50 |
|
$ 0.80 |
|
|
|
|
|
|
|
|
City Office REIT, Inc.
(In thousands, except per share data) |
|
|
|
|
Three Months Ended
|
|
|
Net loss attributable to common stockholders |
$ (4,518) |
(+) Depreciation and amortization |
17,192 |
|
12,674 |
Non-controlling interests in properties: |
|
(+) Share of net income |
141 |
(-) Share of FFO |
(305) |
FFO attributable to common stockholders |
$ 12,510 |
(+) Stock based compensation |
1,023 |
Core FFO attributable to common stockholders |
$ 13,533 |
(-) Net recurring straight-line rent/expense adjustment |
(503) |
(+) Net amortization of above and below market leases |
1,002 |
(+) Net amortization of deferred financing costs and debt fair value |
315 |
(-) Net recurring tenant improvements and incentives |
(1,772) |
(-) Net recurring leasing commissions |
(1,219) |
(-) Net recurring capital expenditures |
(2,083) |
AFFO attributable to common stockholders |
$ 9,273 |
FFO per common share |
$ 0.31 |
Core FFO per common share |
$ 0.33 |
AFFO per common share |
$ 0.23 |
|
|
Dividends distributions declared per common share |
$ 0.10 |
FFO Payout Ratio |
33 % |
Core FFO Payout Ratio |
30 % |
AFFO Payout Ratio |
44 % |
|
|
Weighted average common shares outstanding - diluted |
40,813 |
City Office REIT, Inc.
(In thousands) |
|||||||
|
|||||||
|
Three Months Ended |
|
Years Ended |
||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
Rental and other revenues |
$ 44,321 |
|
$ 44,613 |
|
$ 179,096 |
|
$ 180,485 |
Property operating expenses |
17,387 |
|
17,003 |
|
69,997 |
|
67,739 |
Net operating income ("NOI") |
$ 26,934 |
|
$ 27,610 |
|
$ 109,099 |
|
$ 112,746 |
Less: NOI of properties not included in same store |
(617) |
|
(1,518) |
|
(2,676) |
|
(9,880) |
Same store NOI |
$ 26,317 |
|
$ 26,092 |
|
$ 106,423 |
|
$ 102,866 |
Less: |
|
|
|
|
|
|
|
Non-recurring other income |
(2,005) |
|
- |
|
(2,005) |
|
- |
Termination fee income |
(22) |
|
(26) |
|
(394) |
|
(953) |
Straight-line rent/expense adjustment |
(562) |
|
(1,226) |
|
(4,036) |
|
(3,972) |
Above and below market leases |
1,009 |
|
33 |
|
1,114 |
|
180 |
NCI in properties – share in cash NOI |
(434) |
|
(443) |
|
(1,764) |
|
(1,660) |
Same store cash NOI |
$ 24,303 |
|
$ 24,430 |
|
$ 99,338 |
|
$ 96,461 |
|
|
|
|
|
|
|
|
City Office REIT, Inc.
(In thousands, except per share data) |
||||
|
||||
|
Full Year 2024 Outlook |
|||
|
Low |
|
High |
|
|
|
|
|
|
Net loss attributable to common stockholders |
$ (15,150) |
|
$ (14,400) |
|
(+) Depreciation and amortization |
60,000 |
|
61,000 |
|
(+) Net loss on disposition of real estate property |
100 |
|
100 |
|
(-) Non-controlling interests in properties |
(500) |
|
(500) |
|
FFO attributable to common stockholders |
$ 44,450 |
|
$ 46,200 |
|
(+) Stock based compensation |
4,300 |
|
4,300 |
|
Core FFO attributable to common stockholders |
$ 48,750 |
|
$ 50,500 |
|
|
|
|
|
|
FFO per common share |
$ 1.08 |
|
$ 1.12 |
|
Core FFO per common share |
$ 1.18 |
|
$ 1.22 |
|
|
|
|
|
|
Weighted average shares of common stock |
41,300 |
|
41,300 |
Contact
+1-604-806-3366
investorrelations@cityofficereit.com
View original content to download multimedia:https://www.prnewswire.com/news-releases/city-office-reit-reports-fourth-quarter-and-full-year-2023-results-302068683.html
SOURCE